Pepco Holdings, Inc. (POM)
Q4 2009 Earnings Call Transcript
February 26, 2010 11:00 am ET
Donna Kinzel – Director, IR
Joe Rigby – Chairman, President and CEO
Tony Kamerick – SVP and CFO
Kevin McGowan – VP & Treasurer
Gary Morsches – President and CEO, Conectiv Energy
Paul Patterson – Glenrock Associates
Reza Hatefi – Decade Capital
Dan Eggers – Credit Suisse
Ali Agha – SunTrust Robinson
Jay Dobson – Wunderlich Securities
Maurice May – Power Insights
Previous Statements by POM
» Pepco Holdings, Inc. Q3 2009 Earnings Call Transcript
» Pepco Holdings Inc. Q2 2009 Earnings Call Transcript
» Pepco Holdings Inc. Q1 2009 Earnings Call Transcript
As a reminder, this conference is being recorded for replay purposes. I would like to turn the presentation over to your host, Donna Kinzel, Director of Investor Relations. Please proceed.
Thank you, Stephanie. Good morning, ladies and gentlemen. Welcome to the Pepco Holdings fourth quarter 2009 earnings conference call. The primary speakers on today's call are Joe Rigby, Chairman, President and Chief Executive Officer; and Tony Kamerick, Senior Vice President and Chief Financial Officer. Also available to answer your questions are Dave Velazquez, Executive Vice President, Power Delivery; Gary Morsches, President and Chief Executive Officer of Conectiv Energy; and John Huffman, President and Chief Executive Officer of Pepco Energy Services.
Before Joe begins, let me remind you that some of the comments made during today's conference call may be considered forward-looking statements. As such, they should be taken in the context of the risks and uncertainties discussed in the Safe Harbor disclosures contained in our Securities and Exchange Commission filings.
Also, please note that today's call will include a discussion of our results including certain items that we feel are not representative of the company's ongoing business operations. These special items and their financial impact are described in our earnings release dated today. The earnings release can be found at www.pepcoholdings.com/investors. Joe?
Thanks, Donna, and good morning, ladies and gentlemen. And thank you for joining us today. 2009 was a year of both successes and challenges. Our earnings were significantly driven by lower energy commodity prices and narrow generation spreads, pressuring Conectiv Energy's margin throughout the year.
Additionally, reduced demand for power resulted in lower run time for our generation fleet. At Power Delivery, as mentioned in prior calls, we incurred higher pension expenses as well as higher capital costs principally incurred to support growth in rate space not yet fully reflected in regulated rates. However, we made steady progress on our key growth initiatives most notably relating to our blueprint for the future and regulatory activities.
Consolidated earnings for the year were $235 million, compared to $300 million in 2008. In 2009, we realized after-tax gains of $24 million relating to the remaining balance of the proceeds from the Mirant bankruptcy settlement.
We also recognized an $11 Maryland state income tax benefit due to a change in the accounting – in the tax reporting for the disposition of certain assets in prior years. In 2008, we took charges to earnings totaling $93 million due to a change in our assessment of our tax position associated with our cross-border energy lease investments.
We view these items as not being representative of the company's ongoing business operations. Excluding these special items, earnings for 2009 would have been $200 million, compared to $393 million in 2008. Tony will discuss the financial results and our operating segment performance in more detail, including the results for the fourth quarter but first, I'll address some topics of interest.
Our vision of a smart grid is becoming a reality as we make great strides in implementing our blueprint for the future. Most notably in November, we began the full-scale installation of advanced meters for our Delaware electric and gas customers. The deployment has gone well and we expect to complete the meter exchanges for Delaware customers by the end of 2010.
The Delaware Public Service Commission has approved the creation of a regulatory asset to assure recovery of and a return on AMI related costs between rate cases. The U.S. Department of Energy announced in October that PHI had been awarded $168 million in federal stimulus funds to help finance the buildout of our smart grid projects in the District of Columbia, New Jersey and Pepco's Maryland service territory. The awards have allowed us to accelerate the building of advanced metering infrastructure, distribution automation and demand response technologies.
Late last year, the District of Columbia approved Pepco's request to implement AMI and to establish a regulatory asset to capture the costs related to the deployment. We expect meter deployment to begin during the third quarter of 2010 for our customer in the district.
Maryland has established an expedited process to address AMI, which we expect will conclude this spring. By accelerating the buildout of the smart grid, we can deliver the benefits of these technologies faster allowing our customers access to timely usage information and make firm choices on energy use, lower their energy bills and experience improved system reliability.
I'm also pleased that both the Maryland and District of Columbia Commissions have approved several demand side management and energy efficiency programs, which will help our customers reduce energy costs. The cost of these programs will be recovered through surcharge mechanisms.