DPL, Inc. (DPL)

Q2 2010 Earnings Call

July 30, 2010

Executives

Fred Boyle - SVP, CFO and Treasurer

Paul Barbas - President and CEO

Analysts

Paul Ridzon - KeyBanc

Edward Heyn - Catapult

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the second quarter DPL Inc. earnings conference call. With us today are Paul Barbas, President and Chief Executive Officer, and Fred Boyle, Senior Vice President, Chief Financial Officer and Treasurer. My name is Crystal and I 'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)As a reminder, today 's conference is being recorded for replay purposes.

I would now like to turn the conference over to Mr. Fred Boyle. Please proceed.

Fred Boyle

Thank you. Good morning, and welcome to DPL 's second quarter 2010 earnings conference call. I am 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 second quarter of 2010.

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

Now I 'll 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 both operationally and financially. Diluted earnings for the quarter were $0.53 per share, compared to $0.37 per share for the same period in 2009. And we remained on track to achieve our yearend earnings range of $2.35 per share to $2.55 per share. Fred will discuss the key drivers of earnings during his review of the quarterly financial results. Before Fred provides his review I 'd like to provide an update on key operating matters.

First, building on what we experienced during the first quarter of the year, we continue to see signs of recovery with regards to our retail sales. For the first time since the end of 2008 we realized that increase in quarterly retail sales. Now for adjusting to weather total retail sales for the quarter increased approximately 5% compared to the second quarter of 2009. This improvement was driven by industrial sales which increased by approximately 15%. We experienced higher sales across multiple industries including automotive, metals, plastics and food.

This positive trend in retail sales began during the first quarter of 2010 and we anticipate it to continue as we move forward through the year. As we discussed during our first quarter earnings call, we are expecting to see future load and employment growth in our service territory from new distribution facilities such as Caterpillar and increase in usage as industrial customers start adding shifts and returning to more robust production levels and from Wright-Patterson Air Force Base as new missions continue to transition to the base.

Although it will take time to realize the full benefit from this load growth, we believe it is an indication that the recent economy has stabilized and is beginning to recover. As you know retail competition within the State of Ohio has increased over the past year to the depressed power prices. As you can see on the slide approximately 25% of the DP&L 's retail load through the second quarter this year has been supplied by CRES providers; of this 25% of switch load, 99% was provided by DPL Energy Resources, which is our retail marketing subsidiary.

Based on annualizing the volumes associated with switched accounts to-date, we estimate 35% of DP&L 's load is being supplied by CRES providers; of this 35%, we estimated that DPL Energy Resources is serving approximately 96% of the total switch load.

The impacts of switching on second quarter gross margin was approximately $3 million and for the calendar year 2010, we now estimate the impact will be approximately $15 million.

Turning to plant operations, combination of improved plant performance has seen through our lower forced outages rates and increased wholesale power pricing, results in higher generation output for the quarter. As you may recall, Zimmer and (inaudible) stations had extended outages during the second quarter of 2009. With both units operating as expected during the second quarter of 2010, we realized an 8% increase in output from our generation fleet.

Additionally, average on peak power prices during the second quarter of 2010 were $5 per megawatt higher than during the second quarter of 2009, mostly due to warmer than normal weather across the PJM footprint. Because of our improved plant performance, we were able to capitalize on the higher power prices resulting in an increase in wholesales volumes and revenues and the reduction in purchase power volumes. We remain committed to excellent plant performance and strive to continually improve our operationally efficiency.

With that, I will turn the presentation over to Fred for review of the quarterly financial results.

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