Pepco Holdings (POM)
Q4 2010 Earnings Call
February 25, 2011 10:00 am ET
Donna Kinzel - Director of Investor Relations and Assistant Treasurer
Previous Statements by POM
» Pepco Holdings CEO Discusses Q3 2010 Results – Earnings Call Transcript
» Pepco Holdings Inc.Q2 2010 Earnings Call Transcript
» Pepco Holdings Q1 2010 Earnings Call Transcript
Anthony Kamerick - Chief Financial Officer, Senior Vice President, Chief Financial Officer of Potomac Electric Power Company, Chief Financial Officer of Delmarva Power and Light Company, Chief Financial Officer of Atlantic City Electric Company, Senior Vice President of Potomac Electric Power Company and Senior Vice President of Delmarva Power and Light Company
Joseph Rigby - Chairman, Chief Executive Officer, President and Member of Executive Committee
Paul Ridzon - KeyBanc Capital Markets Inc.
Paul Patterson - Glenrock Associates
Ashar Khan - SAC Capital
Neil Kalton - Wells Fargo Securities, LLC
James Dobson - Wunderlich Securities Inc.
Ali Agha - SunTrust Robinson Humphrey, Inc.
Dan Jenkins - State of Wisconsin Investment Board
Daniel Ford - Barclays Capital
Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2010 Pepco Holdings Inc. Earnings Conference Call. My name is Larissa, and I'll be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today's call, Mrs. Donna Kinzel, the Director of Investor Relations. Please go ahead.
Thank you, operator, and good morning, ladies and gentlemen. Welcome to the Pepco Holdings Fourth Quarter 2010 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; and John Huffman, President and Chief Executive Officer of Pepco Energy Services.
On today’s call, we will be referring to slides which are available on the Investor Relations section of our website. 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 and found on Slide 2 of our presentation.
Also please note that today’s call will include a discussion of our results excluding certain items that we feel are not representative of the company’s ongoing business operations. These special items and their financial impacts are described in our earnings release dated today. The earnings release can be found on our website www.pepcoholdings.com/investors. Joe?
Thanks, Donna, and good morning, ladies and gentlemen, and thank you for joining us today. 2010 was a year of transformation for PHI. The sale of Conectiv Energy's generation assets and the exit from the merchant power business repositioned PHI as fundamentally a regulated utility company, a company focused on delivering reliable service and meeting customer expectations. The sale improved our business risk profile, lower capital and collateral requirements, strengthened our credit profile and reduced earnings volatility. The year was also marked by steady progress on our key initiatives for the regulated business. Our plans for our Smart Grid are moving forward as we continue with meter installations in Delaware and the District of Columbia.
Our build out of utility infrastructure is also progressing with $765 million in capital invested in the regulated business in 2010 including $226 million in transmission. Given this level of investment, we recognize the need to minimize regulatory lag and modified our approach to the rate case process with our most recent filing in Maryland. 2010 was a year in which we clarified our strategic vision as well as our value proposition for our customers and investors.
Earnings from continuing operations for 2010 were $0.62 per share compared with $1.01 per share in 2009. Excluding special items in both periods, earnings would've been $1.24 per share in 2010 compared to $0.85 per share in 2009. Our operating results were driven by Power Delivery earnings that reflect the positive impact of our infrastructure investments, regulatory outcome and higher sales and our non-decoupled service territories. Lower interest expense resulting from the pay down of parent company debt with Conectiv Energy's generation asset sale proceeds and income tax adjustments also boosted earnings. The results of the Conectiv Energy segment are accounted for as discontinued operations.
As seen on Slide 3, our 2010 earnings guidance was a range of $1 to $1.10 per share. Several factors contributed to our results being an excess of our own guidance. As we noted in our third quarter 2010 Earnings Conference Call, this range assumed a reversal of $0.07 of earnings per share from unbilled revenue related to Atlantic City Electric's basic generation service. In our results, only $0.04 per share reversed during the fourth quarter of 2010 leaving us with $0.03 per share in annual earnings related to Atlantic City Electric's basic generation service. Also in the fourth quarter of 2010, we recognized earnings of $0.07 per share related to a tax settlement with the Internal Revenue Service that was reached in the fourth quarter for the tax years 2001 and 2002. This tax settlement was not contemplated in the guidance range. Later during the call, Tony will address the settlement in more detail along with the financial results and our operating segment performance, but first I'll address some topics of interest.
In 2010, we made great strides in implementing the blueprint for the future. The status by jurisdiction can be seen on Slide 4. About 215,000 advanced meters have been installed in Delaware for our electric and gas customers and we expect to complete all of the meter exchanges in Delaware in the second quarter of 2011. We began activating meters in October and plan to have all Delaware meters activated in the third quarter. The initial functionality includes remote metering, billing and outage notification. In the District of Columbia, we began the deployment of advanced meters in October with a goal of having the installations completed by the end of 2011. As approved by the commissions in Delaware and the District of Columbia, regulatory assets have been created to assure recovery of and the return on AMI-related cost between rate cases.