Allegheny Energy Reports Second Quarter 2008 Results.GREENSBURG, Pa. -- Allegheny Energy Allegheny Energy (NYSE: AYE) is a traditional public utility based in the Pittsburgh suburb of Greensburg. It services communities in Western Pennsylvania, Western Maryland, Northern West Virginia, Northwest Virginia. , Inc. (NYSE NYSE See: New York Stock Exchange : AYE) today reported financial results for the three months and six months ended June 30, 2008. [TABLE OMITTED] Adjusted net income for the second quarter of 2008 excludes unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. of $196.6 million associated with an increase in the fair value of financial transmission rights, partially offset by $56.2 million of unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. related to the mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. effect of power hedges and a $13.1 million unrealized loss associated with hedges of a natural gas transportation contract. All of these unrealized gains and losses relate to effective economic hedges that do not qualify for hedge accounting Why is hedge accounting necessary? Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). . There were no adjustments to net income for the second quarter of 2007. "We benefited from higher market prices and increased generation rates in the second quarter. However, these factors were offset by increased coal costs and lower generation output," said Paul J. Evanson, Chairman, President and Chief Executive Officer of Allegheny Energy. "The outlook for continued growth in 2008 and beyond remains strong. Transmission expansion and the transition to market-based rates will remain key drivers of long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. earnings growth." Second Quarter Consolidated Results Adjusted net income for the second quarter of 2008 decreased by $0.5 million compared with the same period in 2007. Key factors contributing to the results include: * Adjusted operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. decreased by $0.3 million compared to the second quarter of 2007, reflecting decreased generation output, primarily offset by higher market prices for power and higher generation rates. * Fuel expense increased by $13.9 million due to higher costs for coal partially offset by lower gas costs. * Purchased power and transmission expense decreased by $9.2 million, primarily due to the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of an Ohio power sales contract Sales Contract Contract between a seller and buyer for the sale of goods, services, or both. in place during 2007. * Deferred energy costs increased expenses by $9.4 million due to fuel and energy cost recovery clauses in West Virginia West Virginia, E central state of the United States. It is bordered by Pennsylvania and Maryland (N), Virginia (E and S), and Kentucky and, across the Ohio R., Ohio (W). Facts and Figures Area, 24,181 sq mi (62,629 sq km). Pop. and Maryland Maryland (mâr`ələnd), one of the Middle Atlantic states of the United States. It is bounded by Delaware and the Atlantic Ocean (E), the District of Columbia (S), Virginia and West Virginia (S, W), and Pennsylvania (N). . * Operations and maintenance expense decreased by $0.6 million due to lower special maintenance expenses at power plants, partially offset by higher storm-related costs. * Taxes other than income taxes increased by $4.0 million due to a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. state tax settlement in 2007 and increased gross receipts tax A gross receipts tax, sometimes referred to as a gross excise tax, is a tax on the total gross revenues of a company, regardless of their source. It is similar to a sales tax, but it is levied on the seller of goods or services rather than the consumer. in Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York . * Interest expense decreased by $4.5 million due to an increase in capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. and lower interest rates. * Adjusted income taxes decreased by $12.8 million, largely due to a change in the effective tax rate and lower pre-tax income. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become for the second quarter of 2008 was $244.1 million, a decrease of $19.7 million compared to the same quarter of the prior year. EBITDA and adjusted EBITDA are non-GAAP financial measures. Details on the calculation of these figures and a reconciliation of EBITDA to net income are attached to this release. Second Quarter Segment Results
Three Months Ended June 30 > > > > > >
($ millions) > > > > > >
> > > > > >
> > > > > >
2008
2007
Generation and Marketing: > > > > > >
Net income - GAAP > > > > > >
$149.6
$43.6
Adjusted net income > > > > > >
72.0
43.6
> > > > > >
Delivery and Services: > > > > > >
Net income- GAAP > > > > > >
$4.5
$33.4
Adjusted net income > > > > > >
4.5
33.4
Adjusted net income for the Generation and Marketing segment in the second quarter of 2008 excludes the unrealized gains and losses previously discussed. There were no adjustments in the Delivery and Services segment for the second quarter of 2008, or in either segment for the second quarter of 2007. Generation and Marketing: Adjusted net income for the quarter increased $28.4 million compared to the same period a year earlier. Key factors contributing to the improved results were increased market prices, higher generation rates, lower O&M expenses and lower interest expense. These benefits were partially offset by lower generation output, higher coal costs and higher income taxes. Delivery and Services: Adjusted net income for the quarter decreased by $28.9 million compared to the same quarter of the prior year. Key factors contributing to the results were higher costs for purchasing power Purchasing Power 1. The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you'd be able to purchase. 2. to serve Virginia Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). customers, decreased rates in West Virginia, and higher storm-related costs. These increased costs were partially offset by revenues from transmission expansion projects and lower income taxes. Six-Month Segment Results
Six Months Ended June 30 > > > > > > >
($ millions) > > > > > > >
> > > > > > >
> > > > > > >
2008
2007
Generation and Marketing: > > > > > > >
Net income - GAAP > > > > > > >
$252.1
$107.9
Adjusted net income > > > > > > >
174.5
107.9
> > > > > > >
Delivery and Services: > > > > > > >
Net income- GAAP > > > > > > >
$38.2
$78.9
Adjusted net income > > > > > > >
38.2
78.9
Adjusted net income for the Generation and Marketing segment in the six-month period of 2008 excludes the unrealized gains and losses previously discussed. There were no adjustments in the Delivery and Services segment for the six-month period of 2008, or in either segment for the six-month period of 2007. Reconciliation of Non-GAAP Financial Measures This news release and the attached tables include non-GAAP financial measures as defined in the Securities and Exchange Commission's Regulation G. Where noted, we present financial information on an adjusted basis to exclude the effect of certain items as described herein. By presenting adjusted results, management intends to provide investors with a more complete understanding of the core results and underlying trends from which to consider past performance and prospects for the future. We also present EBITDA as an additional measure of our operating performance. Users of this financial information should consider the types of events and transactions for which adjustments have been made. Neither the adjusted information, nor EBITDA, should be considered in isolation or viewed as substitutes for, or superior to, net income or other data prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). as measures of our operating performance or liquidity. In addition, neither the adjusted information, nor EBITDA, is necessarily comparable to similarly titled measures provided by other companies. Pursuant to the requirements of Regulation G, we have attached tables that reconcile non-GAAP financial measures, including those presented in this release, to the most directly comparable GAAP measures. Investor Conference Call Allegheny Energy will discuss these results in a live Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the broadcast at 8:30 a.m. Eastern Daylight Time on Thursday, July 31, 2008. To listen to the broadcast, visit www.alleghenyenergy.com. A taped replay will be available after the live broadcast. Allegheny Energy Headquartered in Greensburg, Pa., Allegheny Energy is an investor-owned electric utility with total annual revenues of over $3 billion and more than 4,000 employees. The company owns and operates generating facilities and delivers low-cost, reliable electric service to 1.6 million customers in Pennsylvania, West Virginia, Maryland and Virginia. For more information, visit our Web site at www.alleghenyenergy.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. In addition to historical information, this release may contain a number of "forward-looking statements" as defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Words such as anticipate, expect, project, intend, plan, believe, and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. These include statements with respect to: rate regulation and the status of retail generation service supply competition in states served by Allegheny Energy's distribution business, Allegheny Power; financing plans; demand for energy and the cost and availability of raw materials, including coal; provider-of-last-resort and power supply contracts; results of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; results of operations; internal controls and procedures; capital expenditures; status and condition of plants and equipment; capacity purchase commitments; regulatory matters; and accounting issues. Forward-looking statements involve estimates, expectations and projections and, as a result, are subject to risks and uncertainties. There can be no assurance that actual results will not materially differ from expectations. Actual results have varied materially and unpredictably from past expectations. Factors that could cause actual results to differ materially include, among others, the following: plant performance and unplanned outages; changes in the price of power and fuel for electric generation; general economic and business conditions; changes in access to capital markets; complications or other factors that render it difficult or impossible to obtain necessary lender consents or regulatory authorizations on a timely basis; environmental regulations; the results of regulatory proceedings, including proceedings related to rates; changes in industry capacity, development and other activities by Allegheny Energy's competitors; changes in the weather and other natural phenomena; changes in customer switching behavior and their resulting effects on existing and future load requirements; changes in the underlying inputs and assumptions, including market conditions used to estimate the fair values of commodity contracts; changes in laws and regulations applicable to Allegheny Energy, its markets or its activities; the loss of any significant customers or suppliers; dependence on other electric transmission and gas transportation systems and their constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. or availability; changes in PJM PJM Pacific Journal of Mathematics PJM Project Manager PJM Puerto Jimenez, Costa Rica (Airport code) PJM Pennsylvania New Jersey Maryland Interconnection LLC (Mid-Atlantic region power pool) , including changes to participant rules and tariffs This is a list of tariffs and trade legislation:
[TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] Note to Reconciliation of Non-GAAP Financial Measures: (1) Represents unrealized gains of $196.6 million associated with an increase in the fair value of financial transmission rights, partially offset by $56.2 million of unrealized losses related to the mark-to-market effect of power hedges, and a $13.1 million unrealized loss associated with a recently implemented hedging strategy pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to a natural gas transportation contract. These unrealized gains and losses were included in operating revenue on the Consolidated Statements of Operations. [TABLE OMITTED] [TABLE OMITTED] |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion