Pepco Holdings' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Pepco Holdings (POM)

Q1 2012 Earnings Call

May 04, 2012 11:00 am ET


Donna J. Kinzel - Vice President of Investor Relations

Joseph M. Rigby - Chairman, Chief Executive Officer, President and Member of Executive Committee

Frederick J. Boyle - Chief Financial Officer and Senior Vice President

Anthony J. Kamerick - Chief Regulatory Officer and Executive Vice President

Kirk J. Emge - Senior Vice President and General Counsel

David M. Velazquez - Executive Vice President of Power Delivery


Paul Patterson - Glenrock Associates LLC

Matthew Davis - Crédit Suisse AG, Research Division

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division

Maury May



Good day, ladies and gentlemen, and welcome to the First Quarter 2012 Pepco Holdings Incorporated Earnings Conference Call. My name is Pam, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Ms. Donna Kinzel, Vice President of Investor Relations. Please proceed.

Donna J. Kinzel

Thank you, Pam, and good morning, ladies and gentlemen. Welcome to the Pepco Holdings' First Quarter 2012 Earnings Conference Call. The primary speakers on today's call are Joe Rigby, Chairman, President and Chief Executive Officer; and Fred Boyle, Senior Vice President and Chief Financial Officer. Also available to answer your questions are Tony Kamerick, Executive Vice President and Chief Regulatory Officer; 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 an item that we feel is not representative of the company's ongoing business operations. The item and the associated financial impact are described in our earnings release dated today. The earnings release can be found on our website at Joe?

Joseph M. Rigby

Thanks, Donna, and good morning, ladies and gentlemen, and thanks for joining us today. Before I get into the earnings discussion, I'd like to take this opportunity to introduce to you Fred Boyle, who joined us as Senior Vice President and Chief Financial Officer in early April. We're really pleased to have Fred on the team. He brings a strong background as an experienced financial leader in the utility industry. He most recently served as Chief Financial Officer of DPL Incorporated, which is the holding company of Dayton Power and Light. Also effective in April, Tony Kamerick was promoted to Executive Vice President and Chief Regulatory officer for PHI. And Tony will continue to report to me and he'll lead our regulatory process through the current cycle of rate cases until his retirement in early 2013.

As you would expect, executive succession planning is a key responsibility for both myself and our Board of Directors, and we're very pleased that these appointments carryout that responsibility in a way that we think effectively aligns and strengthens our senior management team as we move forward. So with that, let me turn to our financial results.

As seen on Slide 3, earnings from continuing operations for the first quarter of 2012 were $68 million compared to $62 million for the first quarter of 2011. The 2011 earnings include $2 million of mark-to-market losses resulting from economic hedging activities associated with the Retail Energy Supply business of Pepco Energy Services. Excluding the impact of the mark-to-market losses, earnings in the first quarter of 2011 would have been $64 million. Mark-to-market losses in the 2012 quarter were less than $1 million.

Our earnings from continuing operations reflect our investment in utility infrastructure, as well as the positive impact of tax adjustments which more than mitigated the effects of the mild winter weather we experienced in our service area. Later on the call, Fred will address the financial results in our operating segment performance in more detail, but first, I'd like to address some topics of interest.

Improving system reliability was a top priority for our company last year and it remains so in 2012. Our reliability enhancements efforts, which initially focused primarily in the Pepco region, have now been extended across the service territories of Atlantic City Electric and Delmarva Power. We continue to make good progress in advancing infrastructure improvements and performing system maintenance.

As shown on Slide 4, during the first quarter of 2012, our utilities invested $280 million in the Power Delivery business. These investments were aimed at enhancing the distribution and transmission systems and providing new services to our customers. Our efforts to improve system reliability are yielding meaningful results, as we continue to see positive trends in the operating performance of our electric system.

We've also seen improvement in customer satisfaction. A recent survey by the American Customer Satisfaction Index showed a 28% improvement in our customer satisfaction score compared to the survey results from one year ago. Our customer satisfaction ratings as measured by the most recent surveys conducted by J.D. Power and Market Strategies International have also shown improvement. And on March 21, the Edison Electric Institute presented Pepco Holdings with the Emergency Recovery Award for the restoration efforts of all of our 3 utilities following Hurricane Irene in August of last year. While we realize there is still more work to be done, we're pleased that these indicators point to our customers' experience in improved level of service.

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