-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VO+3mRTdeio2ORkrrY+Rp92WTbCqGbv3XmBmrgQPFKj6di/qKM5+Piudl35TvLZ7 4x50u6Lf3GlgKJJRcFFXWg== 0000893220-02-000092.txt : 20020414 0000893220-02-000092.hdr.sgml : 20020414 ACCESSION NUMBER: 0000893220-02-000092 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020131 ITEM INFORMATION: Other events FILED AS OF DATE: 20020131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONECTIV CENTRAL INDEX KEY: 0001029590 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 510377417 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13895 FILM NUMBER: 02523576 BUSINESS ADDRESS: STREET 1: 800 KING ST STREET 2: P O BOX 231 CITY: WILMINGTON STATE: DE ZIP: 19899 BUSINESS PHONE: 3024293114 MAIL ADDRESS: STREET 1: 800 KING ST STREET 2: P O BOX 231 CITY: WILMINGTON STATE: DE ZIP: 19899 8-K 1 w55138e8-k.txt 8-K FOR CONECTIV DATED 1/31/2002 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 31, 2002 COMMISSION FILE NUMBER REGISTRANT, STATE OF I.R.S. EMPLOYER INCORPORATION, ADDRESS AND IDENTIFICATION NUMBER TELEPHONE NUMBER 1-13895 Conectiv 51-0377417 (a Delaware Corporation) 800 King Street P. O. Box 231 Wilmington, Delaware 19899 Telephone: (302) 429-3114 ITEM 5. OTHER EVENTS 2001 EARNINGS ANNOUNCEMENT Conectiv has announced its earnings, as set forth in the press release attached as Exhibit 99 hereto. MID-MERIT ELECTRIC GENERATION PLANTS Conectiv has been increasing its "mid-merit" electric generating capacity by building combined cycle units, which are constructed with combustion turbines, waste heat recovery boilers and a steam turbine. Mid-merit electric generating plants can quickly change their kWh output level on an economic basis and generally are operated during times when demand for electricity rises and prices are higher. In contrast, baseload electric generating plants run almost continuously to supply the base level of demand for electricity, or the minimum demand level that generally always exists on an electrical system. In 2000, Conectiv ordered 21 combustion turbines, which, with additional equipment, could be configured into eight combined cycle plants. Conectiv has previously stated that the number of combined cycle plants ultimately built as part of this construction program and the timing of construction will depend on various factors, including: growth in demand for electricity; construction of generating units by competitors; energy prices; the availability and price of fuel; the availability of suitable financing; possible construction delays; and the timing and ability to obtain required permits and licenses. In light of continuing declines in wholesale energy prices, further analysis of energy markets and projections of future demand for electricity, among other factors, Conectiv has adjusted its mid-merit plans. Accordingly, in order to optimize the use of capital resources, Conectiv has taken steps to extend construction schedules and reduce equipment orders, with no material financial exposure resulting from those changes. Conectiv has 13 combustion turbines currently on order (excluding the three Hay Road combustion turbines discussed below), which, with additional equipment, could be configured into up to five combined cycle plants. Each proposed combined cycle plant would have approximately 550 MW of capacity and, as revised, the total construction program would allow Conectiv to add up to 2,750 MW of electric generating capacity, representing a potential total investment of about $2.0 billion (reduced from the previously announced potential investment of about $2.6 billion). Under a revised extended schedule, construction would occur in phases and would be completed by the end of 2006, with delivery of combustion turbines occurring in phases through 2003. Conectiv is actively developing sites for combined cycle plants within the region of the PJM Interconnection, L.L.C. (PJM) and, as discussed below, is currently constructing new plants at the Hay Road site and at a new site in Bethlehem, Pennsylvania. The final permits for the Bethlehem site were received in mid-January 2002. Three new combustion turbines at the Hay Road site became operational during June and July of 2001, adding approximately 350 MW of capacity. The waste heat recovery boiler and steam turbine needed for the new combined cycle operation at Hay Road are expected to be completed by the second quarter of 2002. After completion, this combined cycle plant will have approximately 550 MW of capacity. In January 2002, Conectiv began construction at a new site in Bethlehem, Pennsylvania. This site is expected to be the location for up to six combustion turbines and up to two sets of waste heat recovery boilers and steam turbines capable of generating 1,100 2 MW of capacity. Three combustion turbines are expected to be in service by the end of 2002, the remaining three are expected to be operational by the second quarter of 2003. The waste heat recovery boilers and related steam turbines are expected to be operational in phases, the first in the second quarter of 2003, the second in the fourth quarter of 2003. Conectiv's Board of Directors has authorized cumulative expenditures of approximately $1.2 billion for new mid-merit construction, including (i) $953 million of expenditures expected to be required to complete construction of three combined cycle plants (one at the Hay Road site and two at the Bethlehem site, utilizing a total of nine combustion turbines), and (ii) $250 million of expenditures related to building up to three additional combined cycle plants, including payments on seven combustion turbines (which represent total contractual commitments of $234 million), other equipment, and sites necessary for construction of these three combined cycle plants. Management expects to fund these and all other future capital requirements from internally generated funds, leasing, external financings (including securitization of stranded costs), and proceeds from the sales of electric generating units. In addition to the factors described above, the construction program could potentially be affected in the event the new holding company resulting from completion of the merger of Conectiv and Potomac Electric Power Company were to determine to further alter the program. Should Conectiv choose not to build all five of the combined cycle plants in its current plan (excluding the plants on the Hay Road site), then Conectiv would attempt to sell some or all of its related investment, including combustion turbines, other equipment and site development. The ability to find a buyer and the amount of the proceeds from such a sale would be determined by market conditions. The current market for combustion turbines is uncertain due to a weaker economy that has reduced demand for combustion turbines in the region served by the PJM and other regions throughout the United States. The units would be portable to other markets. Should Conectiv cancel additional combustion turbine orders, substantial penalties could be assessed under the contracts with suppliers, which could result in a material write-off. Through December 31, 2001, Conectiv had invested approximately $131 million in the seven combustion turbines, other equipment, and sites needed to build up to three combined cycle plants, in addition to one combined cycle plant at the Hay Road site and two at the Bethlehem site, for which full funding has been approved. ENRON BANKRUPTCY IMPACT After a review of contracts entered into by Conectiv's subsidiaries, Conectiv Energy Supply, Inc. and, to a much lesser extent, Delmarva Power & Light Company, with Enron and its subsidiaries (collectively referred to as "Enron"), the Company does not believe that it has material financial exposure related to the Enron bankruptcy. This conclusion is based, among other factors, on the specific provisions in the contracts of the Conectiv subsidiaries with Enron and applicable legal principles. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 (the "Litigation Reform Act") provides a "safe harbor" for forward-looking statements to encourage such disclosures without the threat of litigation, provide those statements are identified as forward-looking and are accompanied by meaningful, cautionary statements identifying important factors that could cause the actual results to differ materially from those projected in the statements. Forward-looking statements have been made in this Report. Such statements are based on beliefs of Conectiv's management ("Management") as 3 well as assumptions made by and information currently available to Management. When used herein, the words "will," "anticipate," "estimate," "expect," "objective," and similar expressions are intended to identify forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause actual results to differ materially from those contemplated in any forward-looking statements include, among others, the following: deregulation of energy supply; the unbundling of delivery services; and increasingly competitive and volatile energy marketplace; results of any asset dispositions; sales retention and growth; the effects of weather; federal and state regulatory actions; future litigation results; cost of construction; operating restrictions; increased costs and construction delays attributable to environmental regulations; and credit market concerns. Conectiv undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing list of factors pursuant to the Litigation Reform Act should not be construed as exhaustive or as admission regarding the adequacy of disclosures made prior to the effective date of the Litigation Reform Act. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Conectiv By: ------------------------------------ John C. van Roden Senior Vice President & Chief Financial Officer Date: January 31, 2002 4 EXHIBIT INDEX
EXHIBIT NO. - ----------- 99 Press release dated January 31, 2002, distributed in connection with the announcement of Conectiv's year-end 2001 earnings
5 EX-99 3 w55138ex99.txt PRESS RELEASE DATED 1/31/2002 EXHIBIT 99 NEWS RELEASE FOR IMMEDIATE RELEASE JANUARY 31, 2002 Investor Contact: Bob Marshall, Conectiv (302) 429-3164 Media Contact: Tim Brown, Conectiv (302) 283-5803 CONECTIV ANNOUNCES 2001 EARNINGS FOCUSED ENERGY STRATEGY DELIVERING SOLID FINANCIAL PERFORMANCE WILMINGTON, Del. - Conectiv (NYSE:CIV) today reported consolidated earnings for the three and twelve months periods ended December 31, 2001. Earnings per Common Share for 2001 were $4.43, compared with $2.36 per Common Share for calendar year 2000. Earnings per Common Share for 2001 reflect the effects of higher regulated energy throughput, one-time gains on nonstrategic plant sales and lower capital costs, offset by generally mild weather, lower energy gross margins and adjustments to the company's investment portfolio. The components of earnings per Common Share for the three and twelve months periods ended December 31, 2001 and 2000, respectively, are shown in the table below.
Three Months Twelve Ended Months Ended December 31 December 31 ------------------------- ------------------------- 2001 2000 2001 2000 ---------- ----------- ----------- ---------- Energy/Power Delivery/Other $0.28 $0.43 $2.04 $2.36 Gain on Sale of Power Plants -- 0.15 2.12 0.15 Gain on contract termination -- -- 0.50 -- Investment (losses)/gains (0.14) (0.12) (0.10) 0.13 Loss on Sale of HVAC/Other businesses -- --- -- (0.28) Merger Costs (0.02) -- (0.13) -- ---------- ----------- ----------- ---------- Total from continuing operations $0.12 $0.46 $4.43 $2.36 ========== =========== =========== ==========
"2001 was a year of significant accomplishments for our company," said Howard E. Cosgrove, Chairman and CEO of Conectiv. "The sale of base load units and nuclear interests, the growth of our mid-merit merchant energy business, and our improved customer satisfaction ratings in our regulated business all serve to reinforce our strategic decision to focus on our core energy business." Cosgrove stated that "2001 earnings from our core energy businesses were essentially on target, but below last year, due to the effects of the sale of our base load plants in late June. We continue to focus, grow and build on our strengths, which are our asset-backed merchant energy business integrated with our regulated transmission and distribution business. Conectiv Power Delivery, our regulated utility business, contributed strong financial results in 2001, as a result of productivity gains, process-oriented improvements and a well-balanced regional economy." Cosgrove noted that "despite the effects of mild weather and tighter gross margins, Conectiv Energy was able to meet its earnings targets." Cosgrove indicated that Conectiv's growth will continue to be driven by the addition of mid-merit plants in PJM. "That growth is already underway, with one project, a 550 megawatt gas-fired combined cycle unit here in Delaware, expected to be fully completed by mid-year 2002. Another mid-merit project in Bethlehem, Pennsylvania received its final permits earlier this month and construction of the first phase has begun." said Cosgrove. Currently Conectiv has approximately 2,200 megawatts of mid-merit and peaking generation in the mid Atlantic PJM power pool. Conectiv's mid-merit power plants come on line quickly in order to produce electricity when demand is high, and can be stopped quickly when demand drops. "However, the timing of future plant additions will be affected by current market factors. Our approach has always been to be flexible and add more mid merit assets as warranted by regional market conditions. In light of continuing declines in wholesale energy prices, and our goal of optimizing capital resources, we have adjusted our plans and have taken steps to stretch schedules and reduce equipment orders with no material financial exposure resulting from those changes. We are taking a long-term view for both our shareholders and our customers, and remain committed to being a leading player in the mid-merit generation segment of the PJM market" said Cosgrove. Noting that 2001 financial results were in line with investor expectations, Cosgrove said, "looking ahead to 2002, we see earnings being affected by base load asset sales, timing of new plant additions, lower pension credits as well as regional economic conditions. Taking these factors into account, our 2002 earnings goals are comparable to 2001," said Cosgrove. Cosgrove stated that the merger involving Potomac Electric Power Company (Pepco) remained on track, with settlement agreements pending in Maryland and Delaware. The merger has already been cleared by the Federal Energy Regulatory Commission, the Pennsylvania Public Utility Commission, the Virginia State Corporation Commission, the Federal Trade Commission and the U.S. Justice Department. Approvals are also being sought in the District of Columbia, New Jersey, and from the U.S. Securities and Exchange Commission. The current year results include a gain of $2.62 per share for the sale of base load power plants and contract termination and $0.13 per Common Share for costs associated with its proposed merger with Pepco. During 2001, the company completed the sale of approximately 1,464 megawatts of base-load coal-fired and nuclear generation and the sale of an interest in a cogeneration plant. In addition, in June 2001, Conectiv announced the sale of its telecommunications subsidiary and those financial results are presented in the consolidated financial statements as discontinued operations. Reported results for 2000 include a loss of $0.28 per share for the sale of HVAC and other businesses. FOURTH QUARTER RESULTS Earnings per Common Share from continuing operations for the three months ended December 31, 2001 were $0.12 compared with $0.46 for the same period last year. Excluding investment losses and merger costs, earnings from the core energy businesses were $0.28 per Common Share compared with $0.43 per Common Share for the same period last year, reflecting the effects of milder weather, power plant sales, and higher utility purchased power costs. CLASS A COMMON STOCK Earnings per share of Class A Common Stock (NYSE:CIVA) for the twelve months ended December 31, 2001 were $1.94, compared with $1.06 for the same period last year, reflecting increased electric throughput. Earnings per share of Class A Common Stock for the three months ended December 31, 2001 were $0.17, compared with $0.24 in the same period of 2000, due to milder weather in the current period. EARNINGS CONFERENCE CALL Conectiv will host a conference call to discuss its fourth quarter 2001 financial results on Thursday, January 31, 2002 at 10 AM EST. U.S. investors may telephone 1-800-298-0487 five minutes before the scheduled start of the conference call. International callers should dial 1-913-981-5518. The call will also be webcast live via the Internet at that time. The webcast can be accessed via HTTP://WWW.SHAREHOLDER.COM/CIV/MEDIALIST.CFM. Conectiv, a Fortune 500 company headquartered in Wilmington, DE, is focused on two core energy businesses. Conectiv Power Delivery provides safe, reliable, and affordable energy delivery service to more than one million customers in New Jersey, Delaware, Maryland, and Virginia. Conectiv Energy uses a sophisticated power-trading unit to optimize the value of a growing portfolio of "mid-merit" power plants that can start and stop quickly in response to changes in the demand for power within the PJM [Pennsylvania-New Jersey-Maryland] power pool. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 (the "Litigation Reform Act") provides a "safe harbor" for forward-looking statements to encourage such disclosures without the threat of litigation, provided those statements are identified as forward-looking and are accompanied by meaningful, cautionary statements identifying important factors that could cause the actual results to differ materially from those projected in the statements. Forward-looking statements have been made in this Press Release. Such statements are based on beliefs of Conectiv's management ("Management") as well as assumptions made by and information currently available to Management. When used herein, the words "will," "anticipate," "estimate," "expect," "objective," and similar expressions are intended to identify forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause actual results to differ materially from those contemplated in any forward-looking statements include, among others, the following: deregulation of energy supply; the unbundling of delivery services; an increasingly competitive and volatile energy marketplace; results of any asset dispositions; sales retention and growth; the effects of weather; federal and state regulatory actions; future litigation results; cost of construction; operating restrictions; increased costs and construction delays attributable to environmental regulations; and credit market concerns. Conectiv undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing list of factors pursuant to the Litigation Reform Act should not be construed as exhaustive or as admission regarding the adequacy of disclosures made prior to the effective date of the Litigation Reform Act. (more) CONECTIV (Dollars in Thousands, except per share amounts) (Unaudited)
THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, ---------------------------- ---------------------------- 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Operating Revenues (1) $ 953,398 $ 1,280,006 $ 5,790,055 $ 4,987,677 ----------- ----------- ----------- ----------- Operating Income (1), (2) $ 65,102 $ 132,353 $ 759,215 $ 539,201 ----------- ----------- ----------- ----------- Income from Continuing Operations, Net of Income Taxes (3) $ 10,980 $ 39,430 $ 377,522 $ 203,815 ----------- ----------- ----------- ----------- Discontinued Telecommunications Operations Loss From Operations, Net of Income Taxes -- $ (9,114) $ (7,696) $ (32,985) ----------- ----------- ----------- ----------- Loss From Disposal, Net of Income Taxes -- -- $ (118,788) -- ----------- ----------- ----------- ----------- Income Before Extraordinary Item $ 10,980 $ 30,316 $ 251,038 $ 170,830 ----------- ----------- ----------- ----------- Extraordinary item--loss on extinguishment of debt -- -- $ (2,790) -- ----------- ----------- ----------- ----------- Net Income $ 10,980 $ 30,316 $ 248,248 $ 170,830 ----------- ----------- ----------- ----------- Earnings (Loss) Applicable to Common Stock Common stock Continuing operations (3) $ 10,035 $ 38,073 $ 366,400 $ 197,704 Discontinued telecommunication operations Loss from operations -- (9,114) (7,696) (32,985) Loss from disposal -- -- (118,788) -- Extraordinary item-loss on extinguishment of debt -- -- (2,790) Class A common stock 945 1,357 11,122 6,111 ----------- ----------- ----------- ----------- $ 10,980 $ 30,316 $ 248,248 $ 170,830 ----------- ----------- ----------- ----------- Average shares outstanding (000) Common stock 82,704 82,699 82,704 83,686 Class A common stock 5,742 5,742 5,742 5,742 Earnings per average share--basic Common stock Continuing operations Energy/Power Delivery/Other $ 0.28 $ 0.43 $ 2.04 $ 2.36 Investment (losses) / gains (0.14) (0.12) (0.10) 0.13 Loss on sale of HVAC and other businesses -- -- -- (0.28) Gain on sale of power plants -- 0.15 2.12 0.15 Gain on contract termination -- -- 0.50 -- Merger related costs (0.02) -- (0.13) -- ----------- ----------- ----------- ----------- Total continuing operations (4) $ 0.12 $ 0.46 $ 4.43 $ 2.36 ----------- ----------- ----------- ----------- Discontinued telecommunication operations Loss from operations -- $ (0.11) $ (0.09) $ (0.39) Loss from disposal -- -- $ (1.44) -- Extraordinary item-loss on extinguishment of debt -- -- $ (0.03) $ -- Class A common stock $ 0.17 $ 0.24 $ 1.94 $ 1.06 Dividends declared per share Common stock $ 0.22 $ 0.22 $ 0.88 $ 0.88 Class A common stock $ 0.25 $ 0.80 $ 1.55 $ 3.20
NOTES (1) Operating revenues and operating income include pre-tax gains from the sales of electric generating plants of $297.1 million for 2001, $16.6 million for the fourth quarter of 2000, and $16.6 million for 2000. (2) Operating income includes pre-tax merger costs of $2.4 million for the fourth quarter of 2001 and $17.0 million for 2001. Operating income for 2000 includes a $25.2 million pre-tax loss on the sales of HVAC and other businesses. (3) The fourth quarter of 2001 includes $1.5 million of after-tax merger costs ($2.4 million pre-tax) and an $11.5 million after-tax loss on investments. The fourth quarter of 2000 includes a $12.8 million after-tax gain ($16.6 million pre-tax) from the sale of power plants, and a $9.8 million after-tax loss on investments. 2001 includes a $175.0 million after-tax gain ($297.1 million pre-tax) from the sale of power plants, a $41.4 million after-tax gain ($73.0 million pre-tax) from a contract termination with a non-utility co-generation partnership, merger costs of $11.0 million after-taxes ($17.0 million pre-tax), and a $7.9 million after-tax loss on investments. 2000 reflects a $23.4 million after-tax loss ($25.2 million pre-tax) on the sales of HVAC and other businesses, a $12.8 million after-tax gain ($16.6 million pre-tax) from the sale of power plants, and $11.1 million of after-tax gains on investments. (4) Diluted earnings per share were $4.41 for 2001. For the other periods shown, diluted earnings per share were the same as basic earnings per share. -----END PRIVACY-ENHANCED MESSAGE-----