April 25, 2002 — Cinergy Corp. on Thursday reported first quarter 2002 earnings of $0.58 per share on a diluted basis, compared with earnings of $0.75 per share on a diluted basis in the first quarter 2001.
First quarter results include a one-time charge of $0.02 per share for unrecoverable costs from a gas distribution rate order. The quarter ended with Cinergy’s common stock price closing at $35.75, a new 52-week high.
Results for the first quarter 2002 from the Regulated Operations segment were $0.44 per share, compared with $0.51 per share a year earlier. Gross margins from regulated sales were down $0.05 per share mainly attributable to the mild winter and the economy. Regulated service territory heating degree-days were more than ten percent lower than the same period last year causing retail gas sales to decrease by almost six percent.
The economy appears to be slowly improving, but industrial electric sales for the quarter were still down 1.3 percent from last year. In addition, the business segment took a one-time charge of $0.02 per share related to unrecoverable costs related to the ULH&P gas distribution rate order.
Energy Merchant segment earnings were $0.17 per share for the quarter compared with $0.27 in the same period in 2001. Gross margins were down $0.03 per share from existing contracts with retail regulated franchises due to the weather and the economy. Origination, marketing and trading gross margins were down only $0.03 per share even though quarterly average on-peak electricity power prices at the “into Cinergy” trading hub were 45 percent lower and natural gas commodity prices were 63 percent lower than in the first quarter of 2001.
In the first quarter, the company continued efforts to strengthen its balance sheet with a common stock offering of 6.5 million shares. This offering raised over $200 million and was used to reduce short-term debt. The increase in shares lowered first quarter earnings per share by $0.02 compared with 2001. On April 19th, Moody’s Investor Service removed the company from credit watch, assigned an outlook of stable, and reaffirmed the current credit ratings of Cinergy Corp. and its subsidiaries.
As part of its on-going cost control program, the company offered a voluntary early retirement program to approximately 280 employees. Actual results will depend on the number of employees accepting the offer and will be reflected in second quarter results.
In March, Cinergy received Federal Energy Regulatory Commission approval to jointly dispatch its regulated and unregulated generation. The approval allowed the company to drop its plan to transfer its CG&E generation to a separate unregulated affiliate.
Cinergy’s Northern Kentucky affiliate, The Union Light, Heat and Power Co., received approval from the Kentucky Public Service Commission to increase rates for natural gas service by $2.8 million. The order included a provision allowing the company to increase rates annually to reflect the costs of a program to upgrade the ULH&P gas system.
In March, Cinergy’s Indiana affiliate, PSI Energy, filed testimony in support of a certificate of need with the Indiana Utility Regulatory Commission (IURC) to add up to 800 megawatts of capacity to its generating fleet. The filing proposed moving two operational gas-fired peaking plants from its unregulated affiliates to PSI. PSI also filed a petition with the IURC to extend a rate tracker for recovery of purchased power costs, expiring this year, to 2006.
Cinergy Corp. has a balanced, integrated portfolio consisting of two core businesses: Regulated Operations and Energy Merchant. Cinergy owns regulated delivery operations in Ohio, Indiana, and Kentucky that serve 1.5 million electric customers and about 500,000 gas customers. In addition, its Indiana regulated operations own 6,000 megawatts of generation.
Cinergy’s Energy Merchant business is a Midwest leader in low-cost generation owning 7,000 megawatts of capacity with a profitable balance of stable existing customer portfolios, new customer origination, marketing and trading, and industrial-site cogeneration. The “into Cinergy” power-trading hub is the most liquid trading hub in the nation.