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Allegheny Energy, Inc – ‘8-K’ for 10/26/00

On:  Friday, 10/27/00, at 8:40am ET   ·   For:  10/26/00   ·   Accession #:  3673-0-133   ·   File #:  1-00267

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  As Of                Filer                Filing    For·On·As Docs:Size

10/27/00  Allegheny Energy, Inc             8-K:5,7,9  10/26/00    2:24K

Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                        13     49K 
 2: EX-12       Statement re: Computation of Ratios                    1      5K 


8-K   —   Current Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Item 1 - 4. Not Applicable
"Item 5. Other Events
6Item 7. Exhibits
"Item 7 (c). Ex. 12 - Statement re computation of ratio of earnings to fixed charges
"Item 9. Regulation FD Disclosure
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FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 26, 2000 Allegheny Energy, Inc. (Exact name of registrant as specified in its charter) Maryland 1-267 13-5531602 (State or other (Commission File (IRS Employer jurisdiction of Number) Identification incorporation) Number) 10435 Downsville Pike Hagerstown, Maryland 21740-1766 (Address of principal executive offices) Registrant's telephone number, Including area code: (301) 790-3400
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Item 1 - 4. Not Applicable Item 5. Other Events Earnings Release On October October 26, 2000 Allegheny Energy, Inc. reported record third quarter operating earnings of, $76.1 million ($.69 per share), compared to 1999 third quarter earnings of $71.3 million ($.63 per share), an increase of 9.5 percent in earnings per share. The increase in operating earnings was driven by improved performance by the Company's regulated business and its recent acquisition of two energy distribution companies. Earnings for the nine months ended September 30, 2000, were $233.9 million ($2.12 per share), excluding the first quarter extraordinary charge of $70.5 million ($.64 per share). The earnings for the nine months ended September 30, 1999, were $233.6 million ($1.98 per share). The increase in the year- to-date earnings per share reflects higher net revenue in the regulated operations business and a lower number of average shares of common stock outstanding as a result of the Company's 1999 stock repurchase program. Excluding the extraordinary charges and other transactions as shown on the following chart, earnings for the twelve months ended September 30, 2000, were $305.7 million ($2.77 per share), compared to $305.5 million ($2.56 per share) for the twelve months ended September 30, 1999. The increase in earnings per share is primarily attributed to the Company's 1999 stock repurchase program. Per share earnings for comparable 2000 and 1999 periods are: [Enlarge/Download Table] 9 Months 9 Months Third Quarter Ended Sept. Ended Sept. 2000 1999 2000 1999 2000 1999 Earnings before extraordinary and $.69 $.63 $2.12 $1.98 $2.77 $2.56 Other transactions Extraordinary charges for West Virginia,) Maryland, Pennsylvania restructuring (.64) (.79) (.08) Extraordinary charge for call premiums (.09) Merger-related costs (.11) Cancelled pumped-storage project costs (.07) Pennsylvania settlement costs (.20) Reported earnings $.69 $.63 $1.48 $1.98 $1.71 $2.28
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The 2000 extraordinary charge reflects write- offs by the Company's subsidiaries, Monongahela Power Company and The Potomac Edison Company, as a result of Maryland and West Virginia restructuring legislation. The 1999 extraordinary charge and the Pennsylvania settlement costs reflect write- offs by the Company's subsidiary, West Penn Power Company, of costs determined to be unrecoverable due to deregulation proceedings in Pennsylvania. Derivative Instruments and Hedging Activities In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (FAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." FAS 133 was subsequently amended by FAS 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 - an amendment of FASB Statement No. 133" and FAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities an amendment of FASB Statement No. 133." Effective January 1, 2001, the Company will implement the requirements of these accounting standards. These Statements establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Statements require that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement or other comprehensive income, and requires that a company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. The Company has organized a cross-functional project team for implementing FAS 133. The team has substantially completed the Company's inventory of financial instruments, commodity contracts and other commitments for the purpose of identifying and assessing all of the Company's derivatives. The team is in the process of estimating the fair value of the derivatives, designating certain derivatives as hedges and assessing the effectiveness of those derivatives as hedges.
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Although an assessment of all the effects of FAS 133 has not been completed, it is expected to increase the volatility in reported earnings and other comprehensive income. The Company has certain forward and option contracts for the future purchase or sale of electricity that meet the derivative criteria in FAS 133. The Company also has entered into option contracts for emission allowances that qualify as derivatives. The Company will record an asset or liability on its balance sheet based on the fair value of the contracts at the adoption date. The fair values of these contracts will fluctuate over time due to changes in the underlying commodity prices which are influenced by various market factors, including weather and availability of regional electric generation and transmission capacity. The Company intends to designate a portion of the electricity contracts as cash flow hedges of the exposure to variability in expected future cash flows relating to a forecasted transaction. The effective portion of the change in fair value of these contracts will be recorded in other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of these contracts, as well as the change in fair value of all other derivatives, will be recognized in earnings in the period of change. The Company has identified a significant contract that will require mark-to-market accounting under the Statement. The terms of this three year contract entered into on January 1, 1999, provides a counterparty with the right to purchase, at a fixed price, 270 megawatts of electricity per hour until December 31, 2001. Based on the September 30, 2000 forward prices for electricity, the Company estimates that the fair value of this contract will represent a liability of approximately $33 million ($21 million, net of tax) on January 1, 2001. However, the fair value of this contract will fluctuate during 2001 with changes in the underlying commodity prices which are influenced by various market factors, including weather and availability of regional electric generation and transmission capacity. But the liability will reduce to zero at December 31, 2001, with the expiration of the contract. In accordance with FAS 133, the Company expects to record a charge against earnings net of the related tax effect for this contract as a change in accounting principle as of January 1, 2001.
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[Enlarge/Download Table] ALLEGHENY ENERGY EARNINGS THIRD QUARTER 2000 Three months ended September 30, 2000 2000 1999 Sales to regular utility customers, gigawatt-hours (Note 1) 11,097 11,150 Revenues ($000) (Note 2) Regular Utility Customers $559,406 $556,824 Other Utility Revenues 34,655 26,873 Gas Revenues 12,328 _ Unregulated Generation 450,445 156,393 Allegheny Ventures 1,624 1,269 Total ($000) $1,058,458 $741,359 Consolidated income ($000) $76,095 $71,332 Basic and diluted earnings per average share (Note 3) Consolidated earnings per share $0.69 $0.63 Average common shares outstanding (000) 110,436 114,120 Year to date September 30, 2000 2000 1999 Sales to regular utility customers, gigawatt-hours (Note 1) 33,753 32,794 Revenues ($000) (Note 2) Regular Utility Customers $1,710,499 $1,646,000 Other Utility Revenues 66,956 64,480 Gas Revenues 25,447 - Unregulated Generation 977,998 358,927 Allegheny Ventures 9,671 5,343 Total ($000) $2,790,571 $2,074,750 Consolidated income before extraordinary and other transactions ($000) $233,946 $233,621 West Virginia extraordinary charge (Note 4) (70,505) - Consolidated net income ($000) $163,441 $233,621 Basic and diluted earnings per average share (Note 3) Before extraordinary and other transactions $2.12 $1.98 West Virginia extraordinary charge (Note 4) (0.64) - Consolidated earnings per share $1.48 $1.98 Average common shares outstanding (000) 110,436 118,192 Twelve months ended September 30, 2000 2000 1999 Sales to regular utility customers, gigawatt-hours (Note 1) 44,803 43,401 Revenues ($000) (Note 2) Regular Utility Customers $2,258,014 $2,177,135 Other Utility Revenues 82,685 82,158 Gas Revenues 25,447 - Unregulated Generation 1,139,441 379,253 Allegheny Ventures 18,675 12,911 Total ($000) $3,524,262 $2,651,457 Consolidated income before extraordinary and other transactions ($000) $305,677 $305,511 West Virginia, Maryland and Pennsylvania extraordinary charges (Note 4) (87,455) (9,980) Reacquired debt extraordinary charge (10,018) - Merger-related costs (11,801) - Davis pumped-storage generation project costs (8,160) - Pennsylvania settlement costs - (23,748) Consolidated net income ($000) $188,243 $271,783 Basic and diluted earnings per average share (Note 3) Before extraordinary and other transactions $2.77 $2.56 West Virginia, Maryland, and Pennsylvania extraordinary charges (Note 4) (0.79) (0.08) Reacquired debt extraordinary charge (0.09) - Merger-related costs (0.11) - Davis pumped-storage generation project costs (0.07) - Pennsylvania settlement costs - (0.20) Consolidated earnings per share $1.71 $2.28 Average common shares outstanding (000) 110,436 119,262 Note 1: Excludes bulk power transaction sales. Note 2: Excludes intercompany sales between nonutility and utility. Note 3: Basic and diluted earnings per share are the same. Note 4: Costs after taxes determined to be unrecoverable as a result of deregulation proceedings in West Virginia, Maryland, and Pennsylvania.
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Item 6. Not Applicable Item 7. Exhibits Item 7 (a) - (b) Not Applicable Item 7 (c) Ex. 12 - Statement re computation of ratio of earnings to fixed charges Item 8. Not Applicable Item 9. Regulation FD Disclosure In addition to the information filed herewith under the subheading Earnings Release under Item 5, the Company's October 26, 2000 Earnings News Release stated as follows: According to Michael P. Morrell, Senior Vice President and Chief Financial Officer, the Company remains well-positioned to take advantage of changes in the energy marketplace. "Allegheny Energy continues to execute its growth strategy. Our recent acquisitions of Mountaineer Gas and West Virginia Power are helping to deliver stable earnings growth, while our unregulated businesses--Allegheny Energy Supply and Allegheny Ventures-- continue to perform well in the competitive marketplace. Although their performance for the quarter lagged that of the previous third quarter, our unregulated businesses posted year-to-date earnings per share that were more than 26 percent higher than the same period last year. Our supply business, in particular, achieved strong year-to-date earnings growth despite one of the mildest summers on record in our region," added Morrell. "Our Company continues to make progress toward our goal of growing earnings from operations by more than 10 percent per year over the 2000-2004 time frame," he said. "With our solid third quarter results, we believe we are well-positioned to meet our earnings target for the year." Allegheny Energy remained active during the third quarter on a variety of fronts aimed at increasing revenue and adding to shareholder value. Some of the highlights of the quarter include: Allegheny Will Lead the Formation of PJM West Allegheny Power and the Pennsylvania-New Jersey-Maryland (PJM) Interconnection, LLC, announced the execution of an agreement in principle to develop a new electric transmission system affiliation which will expand the Mid-Atlantic energy market, enabling the Company to take advantage of
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opportunities in one of the country's most liquid and active competitive energy markets. We will lead development of the new initiative, known as PJM West, which will provide transmission service to all market participants in accordance with the requirements of the Federal Energy Regulatory Commission (FERC) Order 2000, while simultaneously expanding the PJM market. Allegheny Plans to Build New Power Plant in Arizona Allegheny Energy Supply Company, LLC, plans to construct a 1,080-megawatt (MW) natural gas-fired merchant generating facility in La Paz County, Arizona, approximately 75 miles west of Phoenix. Development of this new power plant marks a major step forward in our corporate strategy that includes becoming a national energy supplier. Construction is expected to begin on the $540 million combined-cycle facility in 2002. When completed in 2005, the facility will boost Allegheny's generating fleet to about 11,000 MW. Mountaineer Gas Joins the Allegheny Energy Family, Adding 200,000 New Customers We have successfully completed our $323 million purchase of Mountaineer Gas Company-- West Virginia's largest natural gas provider- -from Energy Corporation of America. The addition of Mountaineer Gas to the Allegheny Energy family is another step in our strategy of diversifying our energy business and growing through acquisitions, broadening our reach into new markets. This acquisition expands Allegheny's service territory to more than 31,000 square miles and our customer base to 1.6 million customers. It also provides us with 11.7 billion cubic feet of gas storage and 200,000 new natural gas customers in a region where we already provide energy services. New Director Elected to Allegheny Energy Board Lewis B. Campbell, Chairman and Chief Executive Officer of Textron, Inc. (NYSE: TXT), has been elected to the Allegheny Energy Board of Directors. Throughout his career, Campbell has held a number of leadership positions at Textron, as well as at General Motors. His extensive experience and background in market-driven businesses will be a real asset for Allegheny Energy as we move forward with our growth initiatives in competitive markets. Allegheny Energy invites investors, the news media, and others to listen to a live internet broadcast of the Company's analyst conference call to discuss third quarter earnings on October 27 at 11 a.m. (EST). The
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call will be available by visiting www.alleghenyenergy.com or www.streetevents.com and clicking on an available audio link. The call will also be archived on both web sites for replay purposes for 10 working days after the live broadcast. Certain statements above constitute forward- looking statements with respect to Allegheny Energy, Inc. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of Allegheny Energy to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors may affect Allegheny Energy's operations, markets, products, services, and prices. Such factors include, among others, the following: general and economic and business conditions; industry capacity; changes in technology; changes in political, social, and economic conditions; regulatory matters; integration of the operations of Allegheny Energy; regulatory conditions applicable to the transaction; the loss of any significant customers; and changes in business strategy or business plans.
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[Enlarge/Download Table] ALLEGHENY ENERGY HIGHLIGHTS September 30, 2000 Third Quarter 2000 1999 Incr. (Decr.) Revenue from Regular Utility Customers ($ millions) Residential $220 $238 -7.6% Commercial 135 130 3.8% Industrial 188 177 6.2% Wholesale and Other 16 12 33.3% Total Regular Utility Transactions $559 $557 0.4% Revenue from Other Utility Transactions ($ millions) (Note 1) $35 $27 29.6% Gas Revenues ($ millions) $12 $0 Unregulated Generation ($ millions) (Note 1) $450 $156 188.5% Allegheny Ventures ($ millions) (Note 1) $2 $1 100.0% Sales to Regular Utility Customers (gigawatt-hours) Residential 3,227 3,497 -7.7% Commercial 2,467 2,380 3.7% Industrial 5,027 4,877 3.1% Wholesale and Other 376 396 -5.1% Total Regular Utility Transactions 11,097 11,150 -0.5% Other Operation and Maintenance ($ millions) * $140 $144 -2.8% Year to Date Revenue from Regular Utility Customers ($ millions) Residential $713 $705 1.0% Commercial 396 376 5.3% Industrial 555 533 4.1% Wholesale and Other 47 32 46.9% Total Regular Utility Transactions $1,711 $1,646 3.9% Revenue from Other Utility Transactions ($ millions) (Note 1) $67 $64 4.7% Gas Revenues ($ millions) $25 $0 Unregulated Generation ($ millions) (Note 1) $978 $359 172.4% Allegheny Ventures ($ millions) (Note 1) $10 $5 100.0% Sales to Regular Utility Customers (gigawatt-hours) Residential 10,300 10,313 -0.1% Commercial 7,104 6,729 5.6% Industrial 15,213 14,638 3.9% Wholesale and Other 1,136 1,114 2.0% Total Regular Utility Transactions 33,753 32,794 2.9% Other Operation and Maintenance ($ millions) * $430 $425 1.2% Twelve Months Ended Revenue from Regular Utility Customers ($ millions) Residential $938 $918 2.2% Commercial 521 496 5.1% Industrial 742 717 3.5% Wholesale and Other 57 47 21.3% Total Regular Utility Transactions $2,258 $2,178 3.7% Revenue from Other Utility Transactions ($ millions) (Note 1) $83 $82 1.2% Gas Revenues ($ millions) $25 $0 Unregulated Generation ($ millions) (Note 1) $1,139 $379 200.5% Allegheny Ventures ($ millions) (Note 1) $19 $13 46.2% Sales to Regular Utility Customers (gigawatt-hours) Residential 13,549 13,541 0.1% Commercial 9,332 8,849 5.5% Industrial 20,422 19,556 4.4% Wholesale and Other 1,500 1,455 3.1% Total Regular Utility Transactions 44,803 43,401 3.2% Other Operation and Maintenance ($ millions) * $616 $583 5.7% * Other operation and maintenance excludes fuel, purchased power costs, and transmission by others. Amounts for the twelve months ended September 2000 include $19.7 million merger-related costs and $16.2 million related to the Davis pumped-storage generation project. Amounts for year to date September 1999 include $5.0 million for MidAtlantic Energy litigation settlement costs. Amounts for the twelve months ended September 1999 include $21.3 million for Pennsylvania settlement costs and MidAtlantic Energy litigation settlement costs. Note 1: Excludes intercompany sales between nonutility and utility.
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[Download Table] ALLEGHENY ENERGY EARNINGS COMPARISON (Dollars per Share) September 2000 versus September 1999 Quarter Year-to-Date 2000 Utility EPS $0.571 $1.724 Nonutility EPS: Unregulated Generation 0.113 0.379 Allegheny Ventures 0.005 0.015 Extraordinary Charge (0.000) (0.638) Reported EPS 0.689 1.480 1999 Utility EPS 0.461 1.665 Nonutility EPS: Unregulated Generation 0.161 0.322 Allegheny Ventures (AYP Capital) 0.003 (0.010) Extraordinary Charge 0.000 0.000 Reported EPS 0.625 1.977 Variance (2000 Reported EPS less 1999 Reported EPS) $0.064 ($0.497) Variance Reconciliation * Net Revenues: Sales and Deliveries: Number of Customers $0.023 $0.039 Weather (0.050) (0.045) Usage/Cost of Energy 0.024 0.082 Pennsylvania CTC True-Up Accrued 0.020 (0.040) West Virginia Power Acquisition 0.025 0.094 Mountaineer Gas Acquisition 0.031 0.031 Other Revenues (0.004) 0.006 Total Net Revenues Variance ** 0.069 0.167 Operation & Maintenance: Production 0.009 (0.013) Transmission and Distribution (0.027) (0.025) Customer Accounting and Services (0.005) 0.010 Administrative and General 0.015 (0.034) Total Operation & Maintenance Variance (0.008) (0.062) Other: Depreciation 0.036 0.039 Taxes other than Income Taxes (0.051) (0.088) Other Income 0.009 0.052 Interest Costs (0.080) (0.208) Preferred Dividends of Subsidiaries 0.031 0.016 Redemption Premium on Preferred Stock 0.004 0.032 Repurchase of Shares 0.022 0.139 Income Tax 0.049 0.055 All Other (0.019) (0.026) Total Other Variance 0.001 0.011 Allegheny Ventures Variance 0.002 0.025 Total EPS Variance before Extraordinary Charge 0.064 0.141 Extraordinary Charge 0.000 (0.638) Total EPS Variance $0.064 ($0.497) * For comparative purposes, unregulated generation is reflected in the various categories. ** Revenues less fuel, purchased power costs and transmission by others.
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[Enlarge/Download Table] ALLEGHENY ENERGY SALES COMPARISON Gigawatt-Hours September 2000 versus September 1999 Third Third Year-to Year-to Quarter Quarter Date Date 2000 1999 % Change 2000 1999 % Change Monongahela Power 2,942 2,836 3.7% 8,791 8,189 7.4% Potomac Edison 3,404 3,472 -2.0% 10,500 10,372 1.2% West Penn Power 4,751 4,842 -1.9% 14,462 14,233 1.6% Regular Utility Transact 11,097 11,150 -0.5% 33,753 32,794 2.9% Unregulated Generation 10,257 3,344 206.7% 27,588 9,588 187.7%
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SIGNATURES 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 thereunto duly authorized. Allegheny Energy, Inc. /s/ THOMAS K. HENDERSON Name: Thomas K. Henderson Title: Vice President Dated: October 27, 2000
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EXHIBIT INDEX Exhibit Ex. 12 Statement re computation of ratio of earnings to fixed charges

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘8-K’ Filing    Date First  Last      Other Filings
12/31/01410-K,  10-K/A,  8-K,  U-1/A,  U-9C-3,  U5S
1/1/0134
Filed on:10/27/0012
For Period End:10/26/00168-K
9/30/002910-Q,  U-9C-3/A
9/30/99210-Q
1/1/994
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