Diversified energy utility DPL Inc. (DPL) reported first-quarter 2009 results with earnings per share of 61 cents, beating the Zacks Consensus Estimate of 58 cents. Despite higher average shares outstanding of 116.2 million for the first quarter 2010 compared to 112.7 million in the year-ago quarter, earnings were in line with 61 cents in the year-ago quarter.
Earnings in the reported quarter were also boosted by the implementation of fuel, capacity and transmission riders and the continued recovery of environmental costs; and increased wholesale revenues due to higher wholesale sales. This was partially offset by lower gains realized on coal and emission allowance sales; and deferral of RTO-related costs in the first quarter 2009.
Operational Performance
DPL registered revenues of $36.2 million or 9% higher quarterly revenues year-over-year, which increased to $451.2 million. The upside comes from higher average retail rates and increased wholesale sales volumes. Average price of electricity per kWh rose to 9.76 cents from 8.81 cents in the year-ago quarter. Fuel cost also improved to 2.31 cents per kWh in the reported quarter from 2.53 cents in the year-ago quarter.
Retail revenues increased $34.3 million resulting primarily from the implementation of fuel, transmission and capacity riders and the continued recovery of environmental costs. Retail sales volumes were relatively flat compared to the same period in 2009. Wholesale revenues increased $9.3 million, primarily as a result of a 33% increase in wholesale volumes, partially offset by a 2% decrease in average wholesale sales prices.
Electricity volume sales rose 4.6% to 4.4 billion kWh from 4.2 billion kWh in the year-ago quarter. The upside came only from industrial sales which rose 5.4% year-over-year and wholesale 32.9%. However, this was partially offset by lower residential (0.4%), commercial (3.3%), and other retail (0.3%).
Gross margin increased $2.6 million, or 1%, to $276.5 million compared to $273.9 million in the year-ago quarter. Fuel Costs increased $20.5 million, or 25%, year-over-year. The increase was primarily due to a $22.5 million decrease in gains realized from coal and emission allowance sales and a 4% increase in generation volume, partially offset by a 5% reduction in average fuel prices.
Purchased Power costs increased $13.1 million year-over-year. The increase in purchased power costs primarily reflected a $20.8 million reduction related to Regional Transmission Organization cost deferrals. Also contributing to higher purchased power costs was an increase of $4.2 million relating to higher average market prices. These increases were partially offset by $6.2 million, or a 40% reduction in purchased power volumes and a $5.7 million decrease in net Regional Transmission Organization and capacity charges.
Financial Condition
DPL’s cash and cash equivalents totaled $88.9 million as on March 31, 2010 compared to $74.9 million as on December 31, 2009. In addition, DPL had $33.7 million in short-term investments as on March 31, 2010.
The increase in cash and cash equivalents can be primarily attributed to $122.6 million of cash generated from operating activities partially offset by $39.8 million of capital expenditures, $35.0 million of dividends paid on common stock, and $33.7 million in purchases of short-term investments. Total debt of approximately $1.2 billion is in the form of fixed-rate instruments.
Construction additions were $30.2 million and $29.8 million during the three-month periods ended March 31, 2010 and March 31, 2009 respectively and are expected to approximate $210 million in 2010.
Outlook
DPL has revised the upper-end of its fiscal 2010 earnings guidance of $2.35 – $2.60 to $2.35 – $2.55. The company’s fiscal 2010 EPS as per the Zacks Consensus Estimate is presently $2.45.
Dayton, Ohio-based DPL was nominated among the 100 most trustworthy companies by Forbes based on accounting and governance practices. The company sells electricity through its principal subsidiary, The Dayton Power and Light Company.
DPL owns approximately 900MW of natural gas and diesel peaking generation capacity and 2,800MW of coal-fired generation capacity.
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