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CH Energy Group (CHG)

Q4 2010 Earnings Call

February 11, 2011 10:00 am ET

Executives

Steven Lant - Chairman, President & CEO

Stacey Renner - Treasurer

Kim Wright - VP, Accounting & Controller

Chris Capone - EVP & CFO

Analysts

John Hanson - Praesidis Asset Management

Gordon Howald - East Shore Partners, Inc

Daniel Fidell - Brean Murray, Carret & Co

[Peter Hart] - Unidentified Company

Maurice May - Power Insights

[Neil Stein] - Unidentified Company

Presentation

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Operator

Compare to:
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(Operator Instructions). As a reminder, today's conference is being recorded. I would now like to turn the call over to our host, Mr. Steven Lant. Please go ahead, Mr. Lant.

Steven Lant

Good morning and welcome to our call. With me today are Chris Capone, Executive Vice President and CFO; Kim Wright, Vice President of Accounting and Controller; and Stacey Renner, our Treasurer.

Following my introductory remarks, Kim Wright will cover the quarter and full calendar year by business unit in detail. Then Chris Capone will discuss the status of our renewable energy portfolio divestiture process and our business prospects for 2011. Following Chris's remarks, we'll answer your questions.

Before we begin, I'd like Stacey Renner to read our cautionary statement regarding undue reliance on forward-looking statements.

Stacey Renner

Thanks, Steve. I'd like to first remind listeners that the presentation slides for this conference call and our supplemental year ended 2010 financial information are available in the Investor Relations section of our website at www.chenergygroup.com.

I refer you now to the paragraph on forward-looking statements at the bottom of this morning's press release. If you are following along with the presentation slides, please reference page three.

During this conference call presentation and in the question-and-answer session to follow, CH Energy Group participants may discuss management's intentions, beliefs, expectations, projections or make other statements that are not historical in nature.

Please note these forward-looking statements are subject to assumptions, risks and uncertainties that could cause actual results to differ materially from the forward-looking statement.

These risks are discussed in more detail in our filing on form 10-K for the year ended December 31, 2010, under the section labeled Risk Factors. The 10-K was filed yesterday and is available in the Investor Relations section of our website at the link for SEC Filings.

I'll now return the call to Steven Lant.

Steven Lant

Thank you, Stacey. CH Energy Group's earnings for the fourth quarter of 2010 were $0.60 versus $1.04 for the fourth quarter of 2009. For the full calendar year, earnings per share was $2.44 versus $2.76 in 2009, a decline of $0.32.

However, each year had at least one significant unusual item which bears mention. Kim Wright will discuss these items in detail, but three relate to the transition of our business, which I will now mention.

In 2009, we had a one-time gain of $0.34 related to the partial divestiture of Griffith Energy Services. In 2010, we had an impairment charge of $0.44 related to our ethanol project investment and $0.08 related to our biomass investment.

Normalizing for these three unusual items produces earnings per share of $2.96 in 2010 versus $2.42 in 2009. While this is a bit of an oversimplification because other factors also affected each year, these adjustments provide a better indicator of our performance.

2010 was overall a successful year at CH Energy Group, with the notable exception of the impairments I just mentioned. Some of our accomplishments at Central Hudson included an excellent response to our worst-in-history storm event in February, approval by the PSC of a three-year rate settlement in June and the launching of a business transformation effort we are calling the bridge to excellence.

CHEC also had some notable accomplishments, including successful construction of the Shirley Wind project. At Griffith Energy Services, our achievements included a corporate right-sizing effort, expansion of our HVAC services and launching a parallel business transformation effort.

Both Central Hudson and Griffith did a very good job operationally managing expenses well and providing excellent service to our customers. In 2010, Central Hudson met all of its PSC quality targets, and our customer satisfaction and call center metrics improved. Likewise, Griffith did an excellent job serving its customers and achieving high customer satisfaction.

Last quarter, we discussed our new strategy, which focuses on Central Hudson and Griffith and entailed divestiture of our renewable energy projects, with proceeds going toward a share repurchase program.

The divestiture process is underway, as Chris Capone will discuss. Due to our strong cash position, we've already initiated share repurchases. So the accretive effect will begin immediately.

By all accounts, our new strategy has been well received by our investors, and we're working hard to execute our strategies successfully in 2011 and beyond.

Now I would like to turn the presentation over to Kim Wright who will cover fourth quarter results by business unit in more detail. Kim?

Kim Wright

Thanks, Steve. Good morning, everyone. As Steve mentioned, I'll be reviewing our results for the year. We'll be covering pages five through eight of the PowerPoint presentation for those of you who are following along online.

Beginning with our consolidated results, you see on page five that we earned $2.44 in 2010, a $0.32 decrease from 2009's earnings of $2.76. As Steve noted, this decrease was primarily due to $0.52 of impairments recorded related to our ethanol and biomass investments in 2010 and the $0.34 gain in 2009 from Griffith partial divestiture. Absent these events, our results would have increased $0.54 due to improved earnings at Central Hudson.

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