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Pepco Holdings Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 7, 2010 07:17AM
Pepco Holdings Inc. (POM) filed Quarterly Report for the period ended 2010-03-31.
Highlight of Business Operations:
PHI currently estimates that the sale of the Generation Assets on the terms set forth in the Purchase Agreement and the liquidation of the remaining Conectiv Energy assets will result in a loss through the completion of the liquidation for financial reporting purposes ranging from $60 million to $90 million, after tax. The loss to be recognized in the second quarter of 2010 could exceed this range due to unrealized losses required to be recorded in earnings related to derivative instruments no longer qualifying for cash flow hedge accounting. PHI currently estimates that these unrealized losses will be offset by gains from the liquidation of load service supply contracts over the liquidation period.
The estimated after-tax proceeds from the sale of the Generation Assets and the liquidation of the remaining Conectiv Energy assets and contracts, combined with the return of collateral posted under the contracts, are expected to total approximately $1.75 billion. Taxes on the sale and liquidation of the assets are currently estimated to be approximately $300 million.
On December 7, 2009, PHI announced that it will wind down the retail electric and natural gas supply business, which it conducts through its subsidiary Pepco Energy Services. The retail energy supply business historically has generated a substantial portion of the operating revenues and net income of PHIs Pepco Energy Services operating segment. Operating revenues related to the retail energy supply business for the three months ended March 31, 2010 and 2009 were $497 million and $630 million, respectively,
while operating income for the same periods was $21 million and $22 million, respectively. In connection with the operation of the retail energy supply business, as of March 31, 2010, Pepco Energy Services provided letters of credit of $181 million and posted net cash collateral of $192 million. These collateral requirements, which are based on existing wholesale energy purchase and sale contracts and current market prices, will decrease as the contracts expire and are expected to be fully released over time by June 1, 2014. The remaining Energy Services business will not be affected by the wind down of the retail energy supply business.
PHIs net income for the three months ended March 31, 2010 was $36 million, or $0.16 per share, compared to $45 million, or $0.21 per share, for the three months ended March 31, 2009.