Pepco Holdings Inc (POM) today reported first quarter 2010 earnings from continuing operations of 16 cents per share, below the Zacks Consensus Estimate of 19 cents and a penny below last year’s 17 cents. The year-over-year decline in earnings was driven by the higher Power Delivery operation and maintenance expenses.
Pepco’s net revenue declined 6.4% year over year to $2.4 billion in the quarter. By segment, operating revenues in the quarter declined 8% at the Power Delivery segment and 5% at the Competitive Energy segment, while Other segment revenues improved 11%.
In the first quarter, Power Delivery electric sales declined 1.5% to 12,146 gigawatt hours (GWh), due to 5% lower heating degree days. Weather-adjusted electric sales were 12,091 GWh, compared with 12,116 GWh a year ago.
On April 20, 2010, Pepco Holdings agreed to sell Conectiv Energy’s power generation assets to Calpine Corporation (CPN) for $1.7 billion. The sale, expected to close by the end of June 2010, does not include Conectiv’s load service supply contracts, energy hedging portfolio, certain tolling agreements and several other non-core assets. These remaining assets and contracts of the Conectiv Energy segment are expected to be liquidated within the next 12 months. Pepco Holdings expects to use $2.05 billion ($1.75 billion net of taxes) from the sale and liquidation, primarily for parent company debt reduction.
Pepco is making progress through its value creation initiatives that position it for long-term growth. It currently has two rate case filings underway and has recently received approval for $20 million annual increase in Pepco’s electric distribution base rates based on a 9.625% return on equity. The new rates were effective from March 23, 2010.
Recently, Pepco Holdings entered into a $450 million unsecured bridge loan facility. Under the facility, Pepco is entitled to make up to two draws at any time on or before June 1, 2010. The proceeds of loans drawn under the facility may be used solely to repay Pepco Holdings’ $200 million of 4% notes due May 15, 2010 and $250 million of floating rate notes due June 1, 2010. Loans under the facility mature on April 19, 2011.
As of March 31, 2010, Pepco Holdings had cash and cash equivalents of $38 million and long-term debt of $4.5 billion. Total long-term liabilities at quarter end were $4.96 billion compared with $4.94 billion at year-end 2009.
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