EX-99 2 ex-99.htm NEWS RELEASE ex-99.htm
 
NEWS RELEASE
 
701 Ninth Street NW
Washington, DC 20068
www.pepcoholdings.com
NYSE: POM
 
FOR IMMEDIATE RELEASE
August 6, 2010
Media Contact:  Robert Hainey
202-872-2680
Investor Contact:  Donna Kinzel
302-429-3004

Pepco Holdings Reports Second-Quarter 2010 Financial Results;
Reaffirms Full-Year 2010 Earnings Guidance
 
Pepco Holdings, Inc. (NYSE: POM) today reported second quarter 2010 earnings from continuing operations of $76 million, or 34 cents per share, compared to $39 million, or 18 cents per share, in the second quarter of 2009.  The weighted average number of basic shares outstanding for the second quarter of 2010 was 223 million compared to 220 million for the second quarter of 2009.
 
The increase in earnings from continuing operations in the second quarter of 2010, as compared to the 2009 quarter, was driven by higher distribution revenue (primarily due to higher sales caused by warmer weather as well as higher distribution rates in certain jurisdictions), higher transmission revenue (primarily due to the accrual of true-ups for the prior rate year), higher unbilled revenue associated with Atlantic City Electric basic generation service, lower operation and maintenance expenses, and a favorable income tax adjustment.
 
      “Our earnings from continuing operations for the quarter reflect the positive impacts of our infrastructure investments and constructive regulatory outcomes,” said Joseph M. Rigby, Chairman, President and Chief Executive Officer.  “We also continue to make significant progress in executing our business plan.  We have completed the sale of Conectiv Energy’s wholesale generation business, used the sale proceeds to pay down parent company debt, and filed a natural gas base rate case for Delmarva Power.”  Rigby added, “As we continue with our infrastructure build out, we will maintain our focus on customer satisfaction and earning our authorized rates of return.”
 
For the six months ended June 30, 2010, earnings from continuing operations were $104 million, or 47 cents per share, compared to $80 million, or 37 cents per share, for the same period in the prior year.  There were no special items in the 2010 period.  Excluding a special item (as described below under the heading “Special Item”), earnings from continuing operations for the six months ended June 30, 2009, would have been $72 million, or 33 cents per share.  The weighted average number of basic shares outstanding for the six months ended June 30, 2010 was 223 million compared to 220 million for the same period in the prior year.
 
The increase in earnings from continuing operations for the six months ended June 30, 2010, compared to earnings for the same period in the prior year, excluding the special item, was driven by higher distribution revenue
 


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(primarily due to higher distribution rates in certain jurisdictions as well as growth in the number of customers), higher transmission revenue (primarily due to the accrual of true-ups for the prior rate year), and higher unbilled revenue associated with Atlantic City Electric basic generation service.
 

 
Discontinued Operations
 
On April 20, 2010, the Board of Directors of Pepco Holdings approved a plan for the disposition of Conectiv Energy.  The plan consists of the sale of the wholesale generation business, which was completed on July 1, 2010 (as further discussed below under the heading “Recent Events - Conectiv Energy Sale”), and the liquidation of all of Conectiv Energy’s remaining assets and businesses.  As a result of the plan of disposition, Conectiv Energy’s results of operations for the 2010 and 2009 quarterly and year-to-date periods are reported as discontinued operations.
 
Year-to-date, Pepco Holdings has incurred an after-tax loss of $122 million from discontinued operations.  Included in this loss is a $67 million after-tax write-down of the wholesale generation assets included in the Calpine sale.  The year-to-date loss also includes $50 million of after-tax unrealized losses on derivative instruments associated with Conectiv Energy’s load service business previously recorded in accumulated other comprehensive income that have been reclassified into income as a result of the intention to liquidate the load service supply contracts and related hedges.  Pepco Holdings expects these unrealized losses will be partially offset over the remainder of the year by gains from the liquidation of the load service supply contracts and other remaining assets.  Upon completion of the liquidation of Conectiv Energy’s remaining contracts and assets, Pepco Holdings currently expects the overall after-tax loss on the Conectiv Energy disposition will be in the range of $75 million to $100 million.
 

 
Earnings Guidance
 
Pepco Holdings reaffirms its 2010 earnings guidance range of $0.80 to $0.95 per share.  The guidance range excludes the results of discontinued operations and the impact of any special, unusual, or extraordinary items.
 

 
Recent Events
 
Conectiv Energy Sale
 
 
·
On July 1, 2010, Pepco Holdings completed the sale of Conectiv Energy’s wholesale power generation business to Calpine Corporation from which Pepco Holdings received proceeds of approximately $1.63 billion.  The proceeds were used to reduce Pepco Holdings debt (see debt redemptions listed below under the heading “Financing”).


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Financing
 
 
·
On July 1, 2010, Pepco Holdings repaid a $450 million bridge credit facility entered into on April 20, 2010.  The funds borrowed under this facility were used to repay $200 million in principal amount of 4% Notes due May 2010 and $250 million in principal amount of Floating Rate Notes due June 2010.
 
 
·
On July 2, 2010, Pepco Holdings repurchased $640 million in principal amount of 6.45% Notes due 2012 at an aggregate purchase price of $713 million, pursuant to a cash tender offer.
 
 
·
On July 8, 2010, Pepco Holdings redeemed the remaining $110 million balance of the outstanding 6.45% Notes due 2012 at an aggregate redemption price of $122 million.
 
 
·
On July 20, 2010, Pepco Holdings repurchased $129 million in principal amount of 6.125% Notes due 2017 at an aggregate purchase price of $145 million and $65 million in principal amount of 7.45% Notes due 2032 at an aggregate purchase price of $78 million, pursuant to a cash tender offer.
 

Power Delivery
 
 
·
Power Delivery electric sales were 12,056 gigawatt hours (GWhs) in the second quarter of 2010 compared to 11,323 GWhs for the same period last year.  Cooling degree days (electric service territory) increased by 77% for the three months ended June 30, 2010, compared to the same period in 2009.  Weather-adjusted electric sales of 11,457 GWhs in the second quarter of 2010 were essentially flat as compared to 11,439 GWhs for the same period last year.  Due to the adoption of distribution revenue decoupling mechanisms in Maryland and the District of Columbia, approximately 66% of forecasted 2010 electric distribution revenue is not affected by weather.

Regulatory Matters
 
 
·
On July 2, 2010, Delmarva Power filed a natural gas delivery base rate case in Delaware.  The filing seeks approval of an annual rate increase of $12 million, based on a requested return on equity of 11.00% (assuming approval of the implementation of revenue decoupling).  A decision by the Delaware Public Service Commission is expected in early 2011.
 

 
Pepco Energy Services
 
 
·
On July 22, 2010, Pepco Energy Services signed a fourth comprehensive energy savings performance contract with Prince George’s County Maryland Public Schools.  Under the contract, Pepco Energy Services will provide 103 county school system facilities with approximately $35 million in new energy infrastructure, including heating and cooling equipment, lighting and building improvements, as well as water conservation, energy controls, and renewable energy systems.
 

 
 

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Other
 
 
·
On July 25, 2010, the service territories of Pepco, Delmarva Power, and Atlantic City Electric were impacted by a severe storm with extremely high winds and lightning.  The storm caused significant damage to the electric system, predominantly in Pepco’s service territory.  The cost of system restoration is currently estimated to range between $10 million and $13 million.  A portion of the restoration cost will be expensed with the balance being charged to capital.  The actual cost of system restoration may vary from this estimate because a large portion of the cost relates to services provided by outside contractors and other utilities that have not yet submitted bills.
 
Further details regarding changes in consolidated earnings between 2010 and 2009 can be found in the following schedules.  Additional information regarding financial results and recent regulatory events can be found in the Pepco Holdings, Inc. Form 10-Q for the quarter ended June 30, 2010 as filed with the Securities and Exchange Commission, which is available at www.pepcoholdings.com/investors.

Special Item
 
Management believes the special item shown below is not representative of the company’s ongoing business operations.

 
Reconciliation of GAAP Earnings to Earnings Excluding Special Item
 
Net Earnings from Continuing Operations – Millions of dollars
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
2010
2009
  
2010
2009
Reported (GAAP) Net Earnings from Continuing Operations
$76
$39
  
$104
$80 
Special Item:
          
·
Mirant bankruptcy settlement (net of customer sharing)
-
-
  
-
(8)
           
Net Earnings from Continuing Operations, Excluding Special Item
$76
$39
  
$104
$72 

Earnings per Share from Continuing Operations
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
2010
2009
  
2010
2009
Reported (GAAP) Earnings per Share from Continuing Operations
$0.34
$0.18
  
$0.47
$0.37 
Special Item:
          
·
Mirant bankruptcy settlement (net of customer sharing)
-
-
  
-
(0.04)
           
Earnings per Share from Continuing Operations, Excluding Special Item
$0.34
$0.18
  
$0.47
$0.33 



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Conference Call for Investors
 
Pepco Holdings Inc. will host a conference call to discuss second quarter results on Friday, Aug. 6 at 11 a.m. E.T.  Investors, members of the media and other interested persons may access the conference call on the Internet at http://www.pepcoholdings.com/investors or by calling 1-866-356-4281 before 10:55 a.m.  The pass code for the call is 67137875.  International callers may access the call by dialing 1-617-597-5395, using the same pass code, 67137875.  An on-demand replay will be available for seven days following the call.  To hear the replay, dial 1-888-286-8010 and enter pass code 85742855.  International callers may access the replay by dialing 1-617-801-6888 and entering the same pass code 85742855.  An audio archive will be available at PHI's Web site, http://www.pepcoholdings.com/investors.
 
 
        Note:  If any non-GAAP financial information (as defined by the Securities and Exchange Commission in Regulation G) is used during the quarterly earnings conference call, a presentation of the most directly comparable GAAP measure and a reconciliation of the differences will be available at http://www.pepcoholdings.com/investors.

 

 
About PHI: Pepco Holdings, Inc. (NYSE: POM) is one of the largest energy delivery companies in the Mid-Atlantic region, serving about 1.9 million customers in Delaware, the District of Columbia, Maryland and New Jersey. PHI subsidiaries Pepco, Delmarva Power and Atlantic City Electric provide regulated electricity service; Delmarva Power also provides natural gas service.  PHI also provides retail energy saving products and sustainable services through Pepco Energy Services.
 
Forward-Looking Statements: Except for historical statements and discussions, the statements in this news release constitute "forward-looking statements" within the meaning of federal securities law.  These statements contain management's beliefs based on information currently available to management and on various assumptions concerning future events.  Forward-looking statements are not a guarantee of future performance or events.  They are subject to a number of uncertainties and other factors, many of which are outside the company's control.  Factors that could cause actual results to differ materially from those in the forward-looking statements herein include general economic, business and financing conditions; availability and cost of capital; changes in laws, regulations or regulatory policies; weather conditions; competition; governmental actions; and other presently unknown or unforeseen factors.  These uncertainties and factors could cause actual results to differ materially from such statements.  PHI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  This information is presented solely to provide additional information to understand further the results and prospects of PHI.


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Pepco Holdings, Inc.
 
Earnings Per Share Variance
2010 / 2009
         
       
2nd Quarter
       
Power Delivery
  
Pepco Energy Services
  
Other Non Regulated
  
Corporate and Other
  
Total
PHI
2009 Net Income/(Loss) (GAAP) – Continuing Operations 1/
$
0.14 
  
$
0.05 
  
$
0.04 
  
$
(0.05)
  
$
0.18 
                         
Change from 2009 Net Income/(Loss)
                  
 
Regulated Operations
                  
   
·
Distribution Revenue
                  
     
-
Weather (estimate) 2/
0.03 
  
- 
  
- 
  
- 
  
0.03 
     
-
Rate Increases (Pepco/DC, DPL/MD & DE and ACE)
0.02 
  
- 
  
- 
  
- 
  
0.02 
     
-
Other Distribution Revenue (primarily customer growth/rate mix)
0.02 
  
- 
  
- 
  
- 
  
0.02 
   
·
Network Transmission (primarily true-up resulting from 2009-10 formula rate year)
0.04 
  
- 
  
- 
  
- 
  
0.04 
   
·
ACE Basic Generation Service (primarily unbilled revenue)
0.04 
  
- 
  
- 
  
- 
  
0.04 
   
·
Operation & Maintenance
0.02 
  
- 
  
- 
  
- 
  
0.02 
   
·
Depreciation
(0.01)
  
- 
  
- 
  
- 
  
(0.01)
 
Pepco Energy Services
                  
   
·
Retail Energy Supply
- 
  
(0.01)
  
- 
  
- 
  
(0.01)
   
·
Energy Services
- 
  
- 
  
- 
  
- 
  
- 
 
Other Non-Regulated
                  
   
·
Financial investment portfolio
- 
  
- 
  
(0.01)
  
- 
  
(0.01)
 
Corporate and Other
                  
   
·
Other, net
- 
  
- 
  
- 
  
0.01 
  
0.01 
 
Capital Costs
- 
  
0.01  
  
- 
  
(0.03)
  
(0.02)
 
Income Tax Adjustments
(0.01)
  
- 
  
- 
  
0.04 
  
0.03 
                     
2010 Net Income/(Loss) (GAAP) – Continuing Operations 3/
$
0.29 
  
$
0.05 
  
$
0.03 
  
$
(0.03)
  
$
0.34 
                         
Discontinued Operations:
                  
 
Conectiv Energy
- 
  
- 
  
- 
  
(0.58)
  
(0.58)
                     
Total PHI 2010 Net Income
$
0.29 
  
$
0.05 
  
$
0.03 
  
$
(0.61)
  
$
(0.24)



 
1/
The 2009 weighted average number of basic shares outstanding was 220 million.

 
2/
The impact of 20-year average weather on earnings would have been an increase in earnings of $.01 per share.

 
3/
The 2010 weighted average number of basic shares outstanding was 223 million.



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Pepco Holdings, Inc.
 
Earnings Per Share Variance
2010 / 2009
         
       
Year-to-Date
       
Power Delivery
  
Pepco Energy Services
  
Other Non Regulated
  
Corporate and Other
  
Total
PHI
2009 Net Income/(Loss) (GAAP) – Continuing Operations 1/
$
0.33 
  
$
0.08 
  
$
0.06 
  
$
(0.10)
  
$
0.37 
                             
2009 Special Item 2/
                            
   
·
Mirant Settlement, net of customer sharing – DC jurisdiction
(0.04)
  
- 
  
- 
  
- 
  
(0.04)
                   
2009 Net Income/(Loss) excluding Special Item
0.29 
  
0.08 
  
0.06 
  
(0.10)
  
0.33 
                   
                         
Change from 2009 Net Income/(Loss)
                  
 
Regulated Operations
                  
   
·
Distribution Revenue
                  
     
-
Weather (estimate) 3/
0.01 
  
- 
  
- 
  
- 
  
0.01 
     
-
Rate Increases (Pepco/DC, DPL/MD & DE and ACE)
0.04 
  
- 
  
- 
  
- 
  
0.04 
     
-
Other Distribution Revenue (primarily customer growth/rate mix)
0.04 
  
- 
  
- 
  
- 
  
0.04 
   
·
Network Transmission (primarily true-up resulting from 2009-10 formula rate year)
0.04 
  
- 
  
- 
  
- 
  
0.04 
   
·
ACE Basic Generation Service (primarily unbilled revenue)
0.05 
  
- 
  
- 
  
- 
  
0.05 
   
·
Operation & Maintenance
(0.02)
  
- 
  
- 
  
- 
  
(0.02)
   
·
Depreciation
(0.02)
  
- 
  
- 
  
- 
  
(0.02)
   
·
Other, net
0.01 
  
- 
  
- 
  
- 
  
0.01 
 
Pepco Energy Services
                  
   
·
Retail Energy Supply
- 
  
0.02 
  
- 
  
- 
  
0.02 
   
·
Energy Services
- 
  
- 
  
- 
  
- 
  
- 
 
Other Non-Regulated
                  
   
·
Financial investment portfolio
- 
  
- 
  
(0.01)
  
- 
  
(0.01)
 
Corporate and Other
                  
   
·
Other, net
- 
  
- 
  
- 
  
0.01 
  
0.01 
 
Capital Costs
- 
  
0.01 
  
- 
  
(0.03)
  
(0.02)
 
Income Tax Adjustments
(0.06)
  
- 
  
- 
  
0.05 
  
(0.01)
                     
2010 Net Income/(Loss) (GAAP) – Continuing Operations 4/
$
0.38 
  
$
0.11 
  
$
0.05 
  
$
(0.07)
  
$
0.47 
                         
Discontinued Operations:
                  
 
Conectiv Energy
- 
  
- 
  
- 
  
(0.55)
  
(0.55)
                     
Total PHI 2010 Net Income
$
0.38 
  
$
0.11 
  
$
0.05 
  
$
(0.62)
  
$
(0.08)
 
 
1/
The 2009 weighted average number of basic shares outstanding was 220 million.

 
2/
Management believes the special item is not representative of the company’s ongoing business operations.

 
3/
The impact of 20-year average weather on earnings would have been zero.

 
4/
The 2010 weighted average number of basic shares outstanding was 223 million.

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SEGMENT INFORMATION

 
Three Months Ended June 30,  2010
 
(millions of dollars)
   
 
Power
Delivery
    
Pepco
Energy
Services
  
Other
Non-
Regulated
  
Corporate and
 Other (a)
  
PHI
Consolidated
Operating Revenue
$
1,149
    
$
476
  
$
13
  
$
(2)
  
$
1,636
Operating Expense (b) 
  
996
      
453
    
2
    
(8)
    
1,443
Operating Income
  
153
      
23
    
11
    
6 
    
193
Interest Income
  
1
      
-
    
1
    
(2)
    
-
Interest Expense
  
53
      
5
    
3
    
28 
    
89
Other Income
  
5
      
-
    
-
    
- 
    
5
Income Tax Expense (Benefit)
  
41
      
8
    
3
    
(19)
(c)
  
33
Net Income (Loss) from Continuing Operations
  
65
      
10
    
6
    
(5)
    
76
Total Assets (excluding Assets Held for Sale)
  
10,429
      
653
    
1,462
    
1,442 
    
13,986
Construction Expenditures
$
194
    
$
-
  
$
-
  
$
12 
  
$
206

(a)
Total Assets line item in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, substantially all of which is allocated to the Power Delivery segment for purposes of assessing impairment.  Additionally, Corporate and Other includes intercompany amounts of $(2) million for Operating Revenue, $(1) million for Operating Expense, $(13) million for Interest Income and $(13) million for Interest Expense.
   
(b)
Includes depreciation and amortization expense of $93 million, consisting of $85 million for Power Delivery, $5 million for Pepco Energy Services, $1 million for Other Non-Regulated and $2 million for Corporate and Other.
   
(c)
Includes $8 million state tax benefit from changed apportionment arising from the restructuring of certain PHI subsidiaries.




 
Three Months Ended June 30,  2009
 
(millions of dollars)
   
 
Power
Delivery
    
Pepco
Energy
Services
  
Other
Non-
Regulated
  
Corporate and
 Other (a)
  
PHI
Consolidated
Operating Revenue
$
1,095
    
$
560
  
$
14  
  
$
(3)
  
$
1,666
Operating Expense (b) 
  
995
      
531
    
1  
    
(5)
    
1,522
Operating Income
  
100
      
29
    
13  
    
2 
    
144
Interest Income
  
1
      
1
    
1  
    
(2)
    
1
Interest Expense
  
53
      
12
    
3  
    
19 
    
87
Other Income
  
3
      
-
    
1  
    
1 
    
5
Income Tax Expense (Benefit)
  
20
      
8
    
4  
    
(8)
    
24
Net Income (Loss) from Continuing Operations
  
31
      
10
    
8  
    
(10)
    
39
Total Assets (excluding Assets Held for Sale)
  
10,254
      
743
    
1,526  
    
1,593 
    
14,116
Construction Expenditures
$
149
    
$
3
  
$
-
  
$
6 
  
$
158

(a)
Total Assets line item in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, substantially all of which is allocated to the Power Delivery segment for purposes of assessing impairment.  Additionally, Corporate and Other includes intercompany amounts of $(3) million for Operating Revenue, $(1) million for Operating Expense, $(22) million for Interest Income, and $(21) million for Interest Expense.
   
(b)
Includes depreciation and amortization of $85 million, consisting of $79 million for Power Delivery, $5 million for Pepco Energy Services, and $1 million for Corporate and Other.



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Six Months Ended June 30,  2010
 
(millions of dollars)
   
 
Power
Delivery
    
Pepco
Energy
Services
  
Other
Non-
Regulated
  
Corporate and
 Other (a)
  
PHI
Consolidated
Operating Revenue
$
2,411
    
$
1,023
  
$
26 
  
$
(5)
  
$
3,455
Operating Expense (b) 
  
2,165
      
975
    
3 
    
(12) 
    
3,131
Operating Income
  
246
      
48
    
23 
    
7 
    
324
Interest Income
  
1
      
-
    
2 
    
(3)
    
-
Interest Expense
  
104
      
10
    
7 
    
51 
    
172
Other Income
  
9
      
1
    
(1)
    
1 
    
10
Preferred Stock Dividends
  
-
      
-
    
1 
    
(1)
    
-
Income Tax Expense (Benefit)
  
67
(c)
    
16
    
6 
    
(31)
(d)
  
58
Net Income (Loss) from Continuing Operations
  
85
      
23
    
10 
    
(14)
    
104
Total Assets (excluding Assets Held for Sale)
  
10,429
      
653
    
1,462 
    
1,442 
    
13,986
Construction Expenditures
$
345
    
$
1
  
$
- 
  
$
18 
  
$
364

     (a)
Total Assets line item in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, substantially all of which is allocated to the Power Delivery segment for purposes of assessing impairment.  Additionally, Corporate and Other includes intercompany amounts of $(5) million for Operating Revenue, $(5) million for Operating Expense, $(25) million for Interest Income, $(25) million for Interest Expense, and $(1) million for Preferred Stock Dividends.
   
     (b)
Includes depreciation and amortization of $182 million, consisting of $167 million for Power Delivery, $9 million for Pepco Energy Services, $1 million for Other Non-Regulated and $5 million for Corporate and Other.
   
     (c)
Includes $8 million reversal of accrued interest income on uncertain and effectively settled state income tax positions.
   
     (d)
Includes $8 million state tax benefit from changed apportionment arising from the restructuring of certain PHI subsidiaries and the release of $8 million of valuation allowances on deferred tax assets related to state net operating losses partially offset by a charge of $4 million to write off a deferred tax asset related to the Medicare Part D subsidy.
 

 
Six Months Ended June 30,  2009
 
(millions of dollars)
   
 
Power
Delivery
    
Pepco
Energy
Services
  
Other
Non-
Regulated
  
Corporate and
 Other (a)
  
PHI
Consolidated
Operating Revenue
$
2,467
    
$
1,217
  
$
27
  
$
(8)
  
$
3,703
Operating Expense (b) 
  
2,253
(c)
    
1,173
    
2
    
(10)
    
3,418
Operating Income
  
214
      
44
    
25
    
2 
    
285
Interest Income
  
2
      
1
    
2
    
(3)
    
2
Interest Expense
  
106
      
16
    
7
    
40 
    
169
Other Income
  
6
      
1
    
1
    
- 
    
8
Preferred Stock Dividends
  
-
      
-
    
1
    
(1)
    
-
Income Tax Expense (Benefit)
  
43
      
12
    
5
    
(14)
    
46
Net Income (Loss) from Continuing Operations
  
73
      
18
    
15
    
(26)
    
80
Total Assets (excluding Assets Held for Sale)
  
10,254
      
743
    
1,526
    
1,593 
    
14,116
Construction Expenditures
$
281
    
$
6
  
$
-
  
$
10 
  
$
297

      (a)
Total Assets line item in this column includes Pepco Holdings’ goodwill balance of $1.4 billion, substantially all of which is allocated to the Power Delivery segment for purposes of assessing impairment.  Additionally, Corporate and Other includes intercompany amounts of $(8) million for Operating Revenue, $(3) million for Operating Expense, $(44) million for Interest Income, $(44) million for Interest Expense, and $(1) million for Preferred Stock Dividends.
   
      (b)
Includes depreciation and amortization of $172 million, consisting of $158 million for Power Delivery, $9 million for Pepco Energy Services, $1 million for Other Non-Regulated and $4 million for Corporate and Other.
   
      (c)
Includes $14 million ($8 million after-tax) gain related to settlement of Mirant bankruptcy claims.
 
9
(more)
 
 
 
 
PEPCO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
  
   
2010
    
2009
    
2010
2009
 
(millions of dollars, except per share data)
  
Operating Revenue
                    
  Power Delivery
$    
1,149     
$     
1,095  
$    
$
2,411  
$    
2,467  
  
  Pepco Energy Services
  
476     
  
560  
    
1,023  
  
1,217  
  
  Other
  
11     
  
11  
    
21  
  
19  
  
                     
     Total Operating Revenue
  
1,636     
  
1,666  
    
3,455  
  
3,703  
  
                     
Operating Expenses
                    
  Fuel and purchased energy
  
1,077     
  
1,186  
    
2,377  
  
2,725  
  
  Other services cost of sales
  
35     
  
18  
    
47  
  
35  
  
  Other operation and maintenance
  
196     
  
201  
    
410  
  
405  
  
  Depreciation and amortization
  
93     
  
85  
    
182  
  
172  
  
  Other taxes
  
105     
  
89  
    
197  
  
179  
  
  Deferred electric service costs
  
(63)    
  
(57) 
    
(82) 
  
(84) 
  
  Effect of settlement of Mirant bankruptcy claims
  
-      
  
-   
    
-   
  
(14) 
  
                     
     Total Operating Expenses
  
1,443     
  
1,522  
    
3,131  
  
3,418  
  
                     
Operating Income
  
193     
  
144  
    
324  
  
285  
  
                     
Other Income (Expenses)
                    
  Interest and dividend income
  
-      
  
1  
    
-  
  
2  
  
  Interest expense
  
(89)    
  
(87) 
    
(172) 
  
(169) 
  
  Gain (loss) from equity investments
  
-      
  
2  
    
(1) 
  
1  
  
  Other income
  
5      
  
4  
    
11  
  
8  
  
  Other expenses
  
-      
  
(1) 
    
-   
  
(1) 
  
                     
     Total Other Expenses
  
(84)     
  
(81) 
    
(162) 
  
(159) 
  
                     
Income from Continuing Operations Before Income Tax Expense
  
109      
  
63  
    
162  
  
126  
  
                     
Income Tax Expense related to Continuing Operations
  
33      
  
24  
    
58  
  
46  
  
                     
Net Income from Continuing Operations
  
76      
  
39  
    
104  
  
80  
  
                     
Loss from Discontinued Operations, net of Income Taxes
  
(130)    
  
(14) 
    
(122) 
  
(10) 
  
                     
Net (Loss) Income
  
(54)    
  
25  
    
(18) 
  
70  
  
                     
Retained Earnings at Beginning of Period
  
1,244     
  
1,257  
    
1,268  
  
1,271  
  
                     
Dividends paid on common stock
  
(60)    
  
(60) 
    
(120) 
  
(119) 
  
                     
Retained Earnings at End of Period
$    
1,130     
$    
1,222  
$    
$
1,130  
$    
1,222  
  
                     
Basic and Diluted Share Information
                    
  Weighted average shares outstanding (millions)
  
223     
  
220  
    
223  
  
220  
  
                     
  Earnings per share of common stock from Continuing  Operations
$    
.34     
$  
.18     
$ 
 
.47  
$ 
.37  
  
                     
  Loss per share of common stock from Discontinued Operations
  
(.58)   
  
(.07)   
    
(.55) 
  
(.05) 
  
 
                    
  Basic and diluted (loss) earnings per share
$    
(.24)   
$    
.11    
$    
 
(.08) 
$    
.32  
  
10
(more)
 
 
 


 
PEPCO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 

 
June 30,
2010
  
December 31,
2009
 
(millions of dollars)
ASSETS
  
           
CURRENT ASSETS
          
Cash and cash equivalents
$
34  
  
$
44  
Restricted cash equivalents
  
9  
    
11  
Accounts receivable, less allowance for uncollectible accounts of $49 million and $44 million, respectively
  
1,034  
    
1,019  
Inventories
  
129  
    
124  
Derivative assets
  
30  
    
22  
Prepayments of income taxes
  
154  
    
167  
Deferred income tax assets, net
  
109  
    
126  
Prepaid expenses and other
  
84  
    
67  
Conectiv Energy assets held for sale
  
281  
    
346  
           
Total Current Assets
  
1,864   
    
1,926  
           
           
INVESTMENTS AND OTHER ASSETS
          
Goodwill
  
1,407  
    
1,407  
Regulatory assets
  
1,804  
    
1,801  
Investment in finance leases held in trust
  
1,396  
    
1,386  
Income taxes receivable
  
134  
    
141  
Restricted cash equivalents
  
3  
    
4  
Assets and accrued interest related to uncertain tax positions
  
14  
    
12  
Derivative assets
  
10  
    
16  
Other
  
193  
    
194  
Conectiv Energy assets held for sale
  
19  
    
29  
           
Total Investments and Other Assets
  
4,980  
    
4,990  
           
           
PROPERTY, PLANT AND EQUIPMENT
          
Property, plant and equipment
  
11,745  
    
11,431  
Accumulated depreciation
  
(4,303) 
    
(4,190) 
           
Net Property, Plant and Equipment
  
7,442  
    
7,241  
           
Conectiv Energy assets held for sale
  
1,587  
    
1,622  
           
Total Property, Plant and Equipment 
  
9,029  
    
8,863  
           
           
TOTAL ASSETS
$
15,873  
  
$
15,779  
           
 
 
11
(more)
 
 
 

 
PEPCO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
June 30,
2010
  
December 31,
2009
 
(millions of dollars, except shares)
LIABILITIES AND EQUITY
          
           
CURRENT LIABILITIES
          
Short-term debt                                                                                 
$
988 
  
$
530  
Current portion of long-term debt and project funding
  
1,051 
    
536  
Accounts payable and accrued liabilities                                                                                 
  
649 
    
574  
Capital lease obligations due within one year                                                                                 
  
7 
    
7  
Taxes accrued                                                                                 
  
99 
    
47  
Interest accrued                                                                                 
  
68 
    
68  
Derivative liabilities                                                                                 
  
73 
    
67  
Other                                                                                 
  
302 
    
282  
Liabilities associated with Conectiv Energy assets held for sale
  
164 
    
191  
           
Total Current Liabilities                                                                           
  
3,401 
    
2,302  
           
DEFERRED CREDITS
          
Regulatory liabilities                                                                                 
  
536 
    
613  
Deferred income taxes, net                                                                                 
  
2,604 
    
2,600  
Investment tax credits                                                                                 
  
33 
    
35  
Pension benefit obligation                                                                                 
  
283 
    
290  
Other postretirement benefit obligations                                                                                 
  
416 
    
409  
Income taxes payable                                                                                 
  
7 
    
5  
Liabilities and accrued interest related to uncertain tax positions
  
94 
    
96  
Derivative liabilities                                                                                 
  
41 
    
54  
Other                                                                                 
  
156 
    
147  
Liabilities associated with Conectiv Energy assets held for sale
  
23 
    
19  
           
Total Deferred Credits                                                                           
  
4,193 
    
4,268  
           
LONG-TERM LIABILITIES
          
Long-term debt                                                                                 
  
3,595 
    
4,470  
Transition bonds issued by ACE Funding                                                                                 
  
351 
    
368  
Long-term project funding                                                                                 
  
16 
    
17  
Capital lease obligations                                                                                 
  
89 
    
92  
           
Total Long-Term Liabilities                                                                           
  
4,051 
    
4,947  
           
COMMITMENTS AND CONTINGENCIES
          
           
EQUITY
          
Common stock, $.01 par value – authorized 400,000,000 shares, 223,889,619 and 222,269,895 shares outstanding, respectively
  
2 
    
2  
Premium on stock and other capital contributions                                                                                 
  
3,251 
    
3,227  
Accumulated other comprehensive loss                                                                                 
  
(161)
    
(241) 
Retained earnings                                                                                 
  
1,130 
    
1,268  
           
Total Shareholders’ Equity                                                                           
  
4,222 
    
4,256  
Non-controlling interest                                                                                 
  
6 
    
6  
           
Total Equity                                                                           
  
4,228 
    
4,262  
           
TOTAL LIABILITIES AND EQUITY                                                                       
$
15,873 
  
$
15,779  
 

12
(more)
 
 
 
 
POWER DELIVERY - SALES AND REVENUES
 
Three Months Ended
June 30,
Six Months Ended
June 30,
  
Power Delivery Sales (Gigawatt Hours)
  
2010
    
2009
    
2010
    
2009
    
Regulated T&D Electric Sales
                          
  Residential
  
3,773
    
3,448
    
8,650
    
8,222
    
  Commercial and industrial
  
8,227
    
7,819
    
15,428
    
15,312
    
  Other
  
56
    
56
    
124
    
126
    
Total Regulated T&D Electric Sales
  
12,056
    
11,323
    
24,202
    
23,660
    
                           
Default Electricity Supply Sales
                          
  Residential
  
3,586
    
3,328
    
8,266
    
7,966
    
  Commercial and industrial
  
1,749
    
2,148
    
3,504
    
4,620
    
  Other
  
23
    
21
    
48
    
48
    
Total Default Electricity Supply Sales
  
5,358
    
5,497
    
11,818
    
12,634
    
                           
                           
 
Three Months Ended
June 30,
Six Months Ended
June 30,
  
Power Delivery Electric Revenue (Millions of dollars)
  
2010
    
2009
    
2010
    
2009
    
Regulated T&D Electric Revenue
                          
  Residential
$
149
  
$
130
  
$
298
  
$
274
    
  Commercial and industrial
  
224
    
202
    
407
    
382
    
  Other
  
76
    
62
    
141
    
125
    
Total Regulated T&D Electric Revenue
$
449
  
$
394
  
$
846
  
$
781
    
                           
Default Electricity Supply Revenue
                          
  Residential
$
418
  
$
383
  
$
939
  
$
900
    
  Commercial and industrial
  
188
    
232
    
367
    
492
    
  Other
  
40
    
27
    
95
    
86
    
Total Default Electricity Supply Revenue
$
646
  
$
642
  
$
1,401
  
$
1,478
    
                           
Other Electric Revenue
$
18
  
$
19
  
$
33
  
$
37
    
                           
Total Electric Operating Revenue
$
1,113
  
$
1,055
  
$
2,280
  
$
2,296
    


 
Three Months Ended
June 30,
Six Months Ended
June 30,
  
Power Delivery Gas Sales and Revenue
  
2010
    
2009
    
2010
    
2009
    
Regulated Gas Sales (Bcf)
                          
  Residential
  
1
    
1
    
5
    
5
    
  Commercial and industrial
  
1
    
-
    
3
    
3
    
  Transportation and other
  
1
    
1
    
3
    
3
    
Total Regulated Gas Sales
  
3
    
2
    
11
    
11
    
                           
Regulated Gas Revenue (Millions of dollars)
                          
  Residential
$
14
  
$
17
  
$
69
  
$
92
    
  Commercial and industrial
  
8
    
11
    
38
    
53
    
  Transportation and other
  
2
    
2
    
4
    
4
    
Total Regulated Gas Revenue
$
24
  
$
30
  
$
111
  
$
149
    
Other Gas Revenue
$
12
  
$
10
  
$
            20
  
$
22
    
                           
Total Gas Operating Revenue
$
36
  
$
40
  
$
131
  
$
171
    
                           
Total Power Delivery Operating Revenue
$
1,149
  
$
1,095
  
$
2,411
  
$
2,467
    

13
(more)
 
 
 




POWER DELIVERY – CUSTOMERS
  
 
June 30, 2010
  
June 30, 2009
       
Regulated T&D Electric Customers (in thousands)
      
  Residential
1,628
  
1,614
  Commercial and industrial
198
  
197
  Other
2
  
2
Total Regulated T&D Electric Customers
1,828
  
1,813
       
       
Regulated Gas Customers (in thousands)
      
  Residential
113
  
113
  Commercial and industrial
9
  
9
  Transportation and other
-
  
-
Total Regulated Gas Customers
122
  
122



WEATHER DATA - CONSOLIDATED ELECTRIC SERVICE TERRITORY
 
Three Months Ended
June 30,
  
Six Months Ended
June 30,
 
2010
  
2009
  
2010
  
2009
               
Heating Degree Days
286
  
410
  
2,593
  
2,846
20 Year Average
433
  
437
  
2,698
  
2,695
Percentage Difference from Average
-34%
  
-6%
  
-4%
  
6%
Percentage Difference from Prior Year
-30%
      
-9%
    
               
Cooling Degree Days
611
  
346
  
611
  
346
20 Year Average
351
  
353
  
353
  
356
Percentage Difference from Average
74%
  
-2%
  
73%
  
-3%
Percentage Difference from Prior Year
77%
      
77%
    




14
(more)
 
 
 


PEPCO ENERGY SERVICES
 
            
Operating Summary
 
(Millions of dollars)
  
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2010
    
2009
    
2010
    
2009
  
                         
Retail Electric Sales (GWh)
  
3,116
(3)
  
4,594
    
6,417
(3)
  
9,388
  
                         
Retail Energy Supply (1)
                        
Operating Revenue (2)
$
442
  
$
530
  
$
951
  
$
1,156
  
Cost of Goods Sold (2)
  
406
    
489
    
878
    
1,085
  
    Gross Margin
  
36
(4)
  
41
    
73
(5)
  
71
  
                         
Operation and Maintenance Expenses
  
12
    
12
    
23
    
28
  
Depreciation
  
3
    
3
    
6
    
5
  
    Operating Expenses
  
15
    
15
    
29
    
33
  
                         
Operating Income
  
21
    
26
    
44
    
38
  
                         
Energy Services
                        
Operating Revenue (2)
$
39
  
$
35
  
$
84
  
$
72
  
Cost of Goods Sold (2)
  
26
    
21
    
57
    
45
  
    Gross Margin
  
13
    
14
    
27
    
27
  
                         
Operation and Maintenance Expenses
  
8
    
8
    
16
    
14
  
Depreciation
  
2
    
2
    
4
    
4
  
    Operating Expenses
  
10
    
10
    
20
    
18
  
                         
Operating Income
  
3
    
4
    
7
    
9
  
                         
Overhead Unallocated Cost
  
1
    
1
    
3
    
3
  
                         
Operating Income
$
23
  
$
29
  
$
48
  
$
44
  

Notes:

 
(1)
Includes power generation.
 
(2)
Certain transactions among Pepco Energy Service businesses are not eliminated.
 
(3)
Retail electric sales decreased due to the continuing expiration of existing contracts in connection with the wind down of the retail electric and natural gas supply business.
 
(4)
Retail Energy Supply gross margin decreased due to lower retail electric customer loads due to the continuing expiration of existing retail supply contracts, partially offset by higher generation output due to warmer than normal weather.
 
(5)
Retail Energy Supply gross margin increased due to higher generation output due to warmer than normal weather, partially offset by lower retail electric customer loads due to the continuing expiration of existing retail supply contracts.
 


15
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