DPL CEO Discusses Q3 Results - Earnings Call Transcript

DPL CEO Discusses Q3 Results - Earnings Call Transcript
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DPL, Inc. (

DPL

)

Q3 2010 Earnings Call

October 29, 2010 9:00 am ET

Executives

Paul Barbas - President and CEO

Fred Boyle - SVP, CFO and Treasurer

Analysts

Paul Ridzon - KeyBanc

Alex Kania - Banc of America

Oper

a

tor

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Previous Statements by DPL
» DPL, Inc. Q2 2010 Earnings Call Transcript
» DPL Inc. Q1 2010 Earnings Call Transcript
» DPL Inc. Q4 2009 Earnings Call Transcript
» DPL Inc. Q4 2008 Earnings Call Transcript

Welcome to the Third Quarter 2010 DPL Inc., Earnings Conference Call. My name is Shantale and I will be your facilitator for today’s call. At this time all participants are in a listen-only mode. We will be facilitation a question-and-answer session towards the end of today’s conference. (Operator Instructions) As a reminder this conference is being recorded for replay purposes.

On today’s call we Mr. Paul Barbas, President and Chief Executive Officer and Mr. Frederick Boyle, Senior Vice President, Chief Financial Officer and Treasurer. Please proceed.

John Gillen

Good morning and welcome to DPL's third quarter 2010 earnings conference call. I'm Fred Boyle, Senior Vice President, Chief Financial Officer and Treasurer.

Before we begin today, I would like to remind everyone that all references to earnings per share are diluted, unless otherwise noted. And that this call may contain certain forward-looking statements regarding plans and expectations for the future.

Investors are cautioned that actual outcomes and results may vary materially from those projected due to various factors beyond DPL's control. Such matters are described in our 2009 Annual Report on Form 10-K and Form 10-Q for the third quarter of 2009.

With me today is Paul Barbas, DPL's President and Chief Executive Officer. Paul will provide an overview of DPL's performance during the third quarter and an update on key operating matters. Following Paul’s comments I will review the third quarter financial results, discuss our 2010 and 2011 earnings guidance and then open it for questions.

Now I would turn the presentation over to Paul Barbas.

Paul

Barbas

Thanks Fred. Good morning everyone and thank you for joining us today. I am pleased to report that DPL had a solid quarter driven by the warmer than normal weather. Diluted earnings for the quarter was $0.74 per share compared to $0.59 per share for the same period in 2009. And we remain on track to achieve our 2010 year-end earnings range of $2.35 per share to $2.55 per share. For 2011 we are projecting earnings to be between $2.30 per share and $2.55 per share.

During his financial review Fred will discuss the components of third quarter earnings, our year-end 2010 earnings expectations and the key assumptions supporting our 2011 earnings guidance.

Before Fred provides his review, I would like to provide an update on key regulatory and operating matters.

First, we filed a motion with PUCO last week requesting to withdraw our AMI and Smart Grid filings. As you may recall, during August 2009 as agreed to in our ESP settlement agreement we filed an amended AMI and Smart Grid plan with PUCO.

Although the plan demonstrated positive benefits to defer the cost, various factors since that time have led us to the decision to withdraw the filings. These factors include challenging economic conditions, DP&L not being awarded federal stimulus dollars and concerns raised by interested parties over the implementation and value related to AMI’s programs.

We will continue to monitor the efforts of other utilities, pilot projects being implemented here in Ohio and across the country. If the outcomes of these pilots are successful, we anticipate deploying AMI and Smart Grid technologies at some point in the future. We expect the commission will rule on our motion to withdraw by the end of this year.

Now, that we have requested the withdrawal of our AMI and Smart Grid filings we are ready to move forward with cash deployment opportunities. Fred will discuss the details during his financial reviews.

On the regulatory front, we plan to file our next electric security plan during the first quarter of 2012. In regards to the fee process, there hasn’t been any activity with respect to DP&L, as this process doesn’t applied to us until 2013 looking back at 2012 earnings. We will continue to monitor the key proceeding of the other Ohio utilities all of which are ongoing.

Moving on to operating matters, we are continuing to experience retail competition within our service territory. As you can see on the slide, the annualized amount of DP&L’s retail load being supplied by CRES providers has increased from our previously reported estimate of 35% to nearly 40%.

However, similar to our previous updates, DPL Energy Resources which is our retail marketing subsidiary is supplying 95% of the switch load. The impact of retail switching on third quarter gross margin was approximately $6 million. And for the calendar year, 2010 we estimates the impact will be approximately $15 million.

As we look forward to 2011, we anticipate to reduce gross margin from retail switching to be approximately $20 million to $25 million.

Concerning our sales volumes, we continue to see evidence of the economy stabilizing. Through year-to-date September, you can see that our total retail sales volumes are up three tenths of a percent on a weather adjusted basis and 7% overall compared to 2009.

This positive trend on weather adjusted sales has been driven by strong industrial sales which are up almost 8% for the year. The increase has been spread across multiple industries continuing what we had seen through the second quarter.

Residential commercial sales while up significantly on an actual basis, are still below 2009 on a weather adjusted basis. We had anticipated more improvement in these classes and will continue to monitor them closely. We now expect full year 2010 weather normalized sales to be 0.5% to 1% above 2009.

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