Diversified energy utility, DPL Inc. (DPL) reported second quarter 2010 results of earnings per share of 53 cents, beating the Zacks Consensus Estimate of 49 cents. Earnings also rose markedly from 37 cents per share in the year-ago quarter, driven by higher average shares outstanding of 116.2 million in the quarter compared to 113.2 million in the year-ago quarter.
Earnings in the reported quarter were also boosted by higher retail sales, the implementation of fuel rider and the continued recovery of environmental costs; increased generation output; and increased wholesale revenues due to higher wholesale sales and market prices. This was partially offset by lower gains realized on coal sales; higher purchased power expenses and higher operations and maintenance expenses.
Revenues
DPL registered revenues of $445.5 million, 23% higher year-over-year, driven primarily by higher average retail and wholesale rates, higher retail and wholesale sales volume, and increased RTO capacity revenues partially offset by lower other RTO revenues. Average price of electricity per kWh rose to 10.07 cents from 8.87 cents in the year-ago quarter.
Retail revenues grew 21% million due to the implementation of the fuel rider, continued recovery of transmission, capacity and environmental costs, and a 7% increase in retail sales volume. Wholesale revenues boasted a 98% increase on account of a 40% increase in average wholesale sales prices and a 42% increase in wholesale sales volumes.
RTO capacity revenues and other revenues increased $4.4 million primarily due to a $5.7 million increase in PJM capacity revenue partially offset by a decrease in PJM transmission and congestion revenues of $1.3 million.
Electricity volume sales rose 31.2% to 4.2 billion kWh from 3.7 billion kWh in the year-ago quarter, driven by improvements in all sections. The upside came mainly from residential, industrial and wholesale sales which rose 9%, 15% and 42%, respectively; while the company witnessed a marginal rise in commercial (0.2%) and other retail (0.6%) sales.
Margins and Costs
Gross margin increased 19% to $263.7 million compared to $222.0 million in the year-ago quarter. Fuel costs increased 20% to $90.9 million primarily due to a $14.1 million decrease in gains realized from coal and emission allowance sales and a 8% increase in generation volume, partially offset by a 7% reduction in average fuel prices.
Purchased Power costs in the quarter increased 44% from the year-ago quarter. This increase was driven by an increase in average market prices, increase in RTO capacity and other RTO charges and net impact of the deferral and recovery of RTO related charges partially offset by a 37% reduction in purchased power volume.
Financial Condition
DPL’s cash and cash equivalents totaled $87.4 million as on June 30, 2010 compared to $74.9 million as on December 31, 2009. In addition, DPL had $47 million in short-term investments as on June 30, 2010.
The increase in cash and cash equivalents can be primarily attributed to $204.9 million of cash generated from operating activities partially offset by $75.1 million of capital expenditures, $69.9 million of dividends paid, and $47 million in purchases of short-term investments.
Construction additions were $62.4 million and $72.5 million during the six-month periods ended June 30, 2010 and June 30, 2009, respectively and are expected to approximate $210 million in 2010.
Outlook
DPL retained its fiscal 2010 earnings guidance of $2.35 – $2.55. The company’s fiscal 2010 EPS as per the Zacks Consensus Estimate is presently $2.42.
Earnings in the reported quarter were also boosted by higher retail sales, the implementation of fuel rider and the continued recovery of environmental costs; increased generation output; and increased wholesale revenues due to higher wholesale sales and market prices. This was partially offset by lower gains realized on coal sales; higher purchased power expenses and higher operations and maintenance expenses.
Revenues
DPL registered revenues of $445.5 million, 23% higher year-over-year, driven primarily by higher average retail and wholesale rates, higher retail and wholesale sales volume, and increased RTO capacity revenues partially offset by lower other RTO revenues. Average price of electricity per kWh rose to 10.07 cents from 8.87 cents in the year-ago quarter.
Retail revenues grew 21% million due to the implementation of the fuel rider, continued recovery of transmission, capacity and environmental costs, and a 7% increase in retail sales volume. Wholesale revenues boasted a 98% increase on account of a 40% increase in average wholesale sales prices and a 42% increase in wholesale sales volumes.
RTO capacity revenues and other revenues increased $4.4 million primarily due to a $5.7 million increase in PJM capacity revenue partially offset by a decrease in PJM transmission and congestion revenues of $1.3 million.
Electricity volume sales rose 31.2% to 4.2 billion kWh from 3.7 billion kWh in the year-ago quarter, driven by improvements in all sections. The upside came mainly from residential, industrial and wholesale sales which rose 9%, 15% and 42%, respectively; while the company witnessed a marginal rise in commercial (0.2%) and other retail (0.6%) sales.
Margins and Costs
Gross margin increased 19% to $263.7 million compared to $222.0 million in the year-ago quarter. Fuel costs increased 20% to $90.9 million primarily due to a $14.1 million decrease in gains realized from coal and emission allowance sales and a 8% increase in generation volume, partially offset by a 7% reduction in average fuel prices.
Purchased Power costs in the quarter increased 44% from the year-ago quarter. This increase was driven by an increase in average market prices, increase in RTO capacity and other RTO charges and net impact of the deferral and recovery of RTO related charges partially offset by a 37% reduction in purchased power volume.
Financial Condition
DPL’s cash and cash equivalents totaled $87.4 million as on June 30, 2010 compared to $74.9 million as on December 31, 2009. In addition, DPL had $47 million in short-term investments as on June 30, 2010.
The increase in cash and cash equivalents can be primarily attributed to $204.9 million of cash generated from operating activities partially offset by $75.1 million of capital expenditures, $69.9 million of dividends paid, and $47 million in purchases of short-term investments.
Construction additions were $62.4 million and $72.5 million during the six-month periods ended June 30, 2010 and June 30, 2009, respectively and are expected to approximate $210 million in 2010.
Outlook
DPL retained its fiscal 2010 earnings guidance of $2.35 – $2.55. The company’s fiscal 2010 EPS as per the Zacks Consensus Estimate is presently $2.42.
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