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CH Energy Group, Inc. (



Q4 2011 Earnings Conference Call

February 16, 2012 2:00 PM ET


Steven Lant – Chairman, President and Chief Executive Officer

Chris Capone – Executive Vice President and Chief Financial Officer

Kim Wright – Vice President of Accounting and Controller

Stacey Renner – Treasurer


Nicholas Yuelys – Gabelli Company

Michael Gaugler – Brean Murray, Carret



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Ladies and gentlemen, standing for standing by, and welcome to the CH Energy Group conference call.

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At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Mr. Steven Lant. Please go ahead.

Steven Lant

Thank you. Good afternoon and welcome to our quarterly conference call. With me on today’s call are Chris Capone, Executive Vice President and CFO of CH Energy Group and President of CHEC; Kim Wright, Vice President of Accounting and Controller; and, Stacey Renner, our Treasuer.

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

Stacey Renner

Thanks, Steve. I would like to first remind listeners that the presentation slides for this conference call and our supplemental yearend 2011 financial information are available in the Investor Relations section of our website at

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 risks that could cause actual results to differ materially from the forward-looking statements. These risks are discussed in more detail in our filing on Form 10-K for the year ended December 31, 2011 under the section labeled risk factors. We expect to post the 10-K this afternoon in the Invest Relations section of our website at the link for SEC filings.

I will now return the call to Steve Lant.

Steve Lant

Thank you, Stacey. On today’s call, we will address both the fourth quarter of 2011 and our results for the full calendar year. Following my introductory remarks, Kim Wright will discuss our results by business unit in detail. Following Kim, Chris Capone will discuss our business environment and our prospects for 2012. Then we look forward to taking your questions.

CH Energy Group’s consolidated earnings for the fourth quarter of 2011 were $0.95 per share versus $0.60 per share for the fourth quarter of 2010. For the calendar year, earnings-per-share was $2.97 for 2011 versus $2.44 in 2010. Both years were impacted by significant events that masked the trend in core earnings, which forms the basis for our expectations for the future.

We’ll attempt to identify those items and illuminate the underlying trend on today’s call. Our slides were also prepared with this goal in mind.

2011 was a very challenging and rewarding year for CH Energy Group both strategically and operationally. Relative to strategy during 2011, we executed the divestitures of our four largest components of our renewable energy portfolio and recognize an impairment for a fifth investment. This effectively completed our strategic transition. We expect no material financial impacts going forward.

We have promptly used the proceeds of divestitures to pay down holding company debt related to the projects and to repurchase about 6% of our outstanding shares, which has produced immediate earnings per share accretions. But the effect will not be fully evident until mid 2012.

The transition has produced the company that has more focused, has higher earnings per share, a higher dividend, and a lower risk profile. I’m pleased to say that the shift in strategic direction that we announced in October of 2010 has proven out.

On the operational side, it was a very successful year as well. Central Hudson faced the worst-weather year in our long history, notably Tropical Storm Irene, and the unusual late October snowstorm. We did an excellent job restoring service as efficiently and promptly as was reasonably possible in each case. I’m very proud of how our employees responded and I feel we really came through for our customers.

However, our storm response had a significant price. Despite our ability to defer much of the cost of storm restoration under the PSC’s deferred accounting policy, we absorbed $0.31 per share of incremental expenses during 2011 as the result of all of the storms we experienced in aggregate. So, while our earnings growth was strong, it could have been much better than it was had the weather been normal.

Despite being thrown off stride repeatedly by the storms, Central Hudson did an excellent job executing its capital investment plan and managing expenses. Central Hudson also did an excellent job on its customer service and quality metrics, meaning all of the PSC’s targets for customer service, electric reliability, and gas safety, and showing especially good improvement in its electric reliability metrics.

We attribute this to the benefits of our capital investments in our system into our enhanced tree trimming program. We also did a superb job on energy efficiency, earning revenue incentives for delivering effective programs to our customers.

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