Duquesne Light — EEI Financial Conference 2004
27 slides from Duquesne Light's conference presentation, Oct 25, 2004
Slide 1: EEI Financial Conference
Exhibit 99.1 EEI Financial Conference October 2004
Slide 2: Safe Harbor Statement
Safe Harbor Statement The following presentation contains forward-looking statements, the results of which may materially differ from those implied due to known and unknown risks and uncertainties, some of which are discussed below. Projected cash flow, earnings, earnings growth, capital expenditure
Slide 3: Company Representatives
Company Representatives Bill Fields VP and Treasurer Susan Mullins Controller Quynh McGuire Sr. Manager, Investor Relations
Slide 4: Agenda
Agenda Overview PUC Update Unregulated Businesses Financing Review Summary
Slide 5: Overview
OVERVIEW
Slide 6: Made Substantial Progress
Made Substantial Progress Removed uncertainty and volatility Resolved major legacy issues Divested non-core businesses Enhanced customer satisfaction at core utility Produced solid financial & operational results Strengthened balance sheet No long-term debt maturities until 2008 Improved liquidity
Slide 7: Continuing To Deliver Value
Continuing To Deliver Value Providing low risk, stable cash flow Supports dividend, capex and debt service requirements Focusing strategically on core traditional utility Provides reliable earnings stream Evaluating prudent growth initiatives Reaffirming 2004 earnings guidance of $80M to $85M from c
Slide 8: 2005 Planning Process
2005 Planning Process Strategic Planning Process Oct / Nov Complete small customer supply plan Complete large customer supply plan Finalize RFP process Finalize EGS marketing & supply strategy Evaluate growth plans for complementary businesses Review Plan with Rating Agencies & Financial Community D
Slide 9: PUC Update
PUC UPDATE
Slide 10: Electric Utility Operations
Electric Utility Operations Duquesne Light Service Territory Pittsburgh Location: Southwestern Pennsylvania Electric Utility Customers: Approximately 588,000 Service Territory: 800 square miles Transmission & Distribution Network: 592 circuit miles 9 transmission substations 556 distribution substat
Slide 11: POLR Regulatory Outcome
POLR Regulatory Outcome Proposed PUC Decision Small Customers 2005–2010 Fixed Rates Approved 2005-2007 Fixed Rates 3-year Distribution Rate Freeze No Rate Freeze Renewable Energy Portfolio Renewables Not Required Large Customers Fixed Price Default Service Fixed Price Service Approved through 5/31/0
Slide 12: Termination Notice for Sunbury Purchase
Termination Notice for Sunbury Purchase Conditioned on reasonably satisfactory approval from PUC of Duquesne’s POLR plan 2005 – 2010 energy supply plan for residential & small commercial customers Notified WPS of termination of sale agreement for Sunbury on 9/30 Disputing release of $4.4M escrow dep
Slide 13: Average Residential POLR Rates $ per MWh
Average Residential POLR Rates $ per MWh $54.50 $62.40 }14% $50 $55 $60 $65 $70
Slide 14: Average Small Commercial POLR Rates $ per MWh
Average Small Commercial POLR Rates $ per MWh $58.20 $64.50 }11% $50 $55 $60 $65 $70
Slide 15: POLR Retention Small Customers
POLR Retention Small Customers 73% 72% 73% 50% 60% 70% 80% 90% 100% Q1 2002 Q2 Q3 Q4 Q1 2003 Q2 Q3 Q4 Q1 2004 Q2 Q3
Slide 16: Risk Mitigation Small Customers
Risk Mitigation Small Customers Board-approved risk management policies Energy risk management committee Hedged approximately 70% of expected 2005-2007 load Contracts for energy & capacity Multiple investment-grade counterparties Evaluating options for remaining 30% May replace expected Sunbury plan
Slide 17: 2005 POLR Suppliers Small Customers
2005 POLR Suppliers Small Customers Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 5X16 7X24 7X24 Supplier 1 Contracts/Other Assumes 71% customer retention
Slide 18: Large Customer Supply Options
Large Customer Supply Options Hourly price default service Provided by Duquesne Light Sourced from PJM market Fixed price service Provided by Duquesne Light Approved 17-month initial period; potential for additional 12 months Sourced by wholesale RFP Competitive supplier (EGS) Duquesne Light Energy
Slide 19: Large Customer Supply Timeline
Large Customer Supply Timeline Executed contracts with 2 suppliers on Oct. 18, subject to PUC approval Suppliers have investment grade credit ratings Submitted summary of RFP process & proposed retail rates to PUC on Oct. 19 Will notify customers beginning Nov. 1 of rates and options Will implement
Slide 20: Unregulated Businesses
UNREGULATED BUSINESSES DQE Financial Landfill gas & alternative energy Duquesne Energy Solutions Operations & maintenance of synthetic fuel and other facilities DQE Communications High-speed, fiber optic based network
Slide 21: Unregulated Businesses
Unregulated Businesses Restructured businesses into one energy operation Significant cost reductions Lease investments provide low risk, predictable earnings and cash flows Landfill gas investments 3 sites selling pipeline quality gas Benefiting from high gas prices Synthetic fuel investment 8.3% in
Slide 22: Financing Review
FINANCING REVIEW
Slide 23: Financing Activities
Financing Activities Reduced $215M of debt in 2003 Retired $21M of debt from Fresh Kills settlement in February 2004 Recapitalized balance sheet in 2004 Redeemed $150M of 8 3/8% MIPS during first-half of 2004 Issued $75M of 6.5% preferreds in April; $200M of 5.7% FMB in May Retired DQE Capital’s $10
Slide 24: Debt Maturities
Debt Maturities ($ in Millions) $300 $250 $200 $150 $100 $50 $0 No Debt Maturities Until 2008 $40 $48 $200 $50 $200 $14 $65 $223 $100 $18 2026-2030 2033+ DLC FMB DLC Tax-Exempt
Slide 25: Current Ratings
Current Ratings Moody’s S&P Fitch First Mortgage Bonds Baa1 BBB+ BBB Holdings Senior Unsecured Baa3 BBB- BBB-
Slide 26: Summary
SUMMARY
Slide 27: Summary
Summary Focusing on operational excellence at core traditional utility Strengthening balance sheet Delivering value Goal of providing top-tier total return Expect to review strategic plan with financial community Dec/Jan