Stock Performance Q FINANCIAL UPDATE QUARTERLY REPORT OF THE U.S. SHAREHOLDER-OWNED ELECTRIC UTILITY INDUSTRY

Transcription

1 Stock Performance Q3 FINANCIAL UPDATE QUARTERLY REPORT OF THE U.S. SHAREHOLDER-OWNED ELECTRIC UTILITY INDUSTRY

2 About EEI The Edison Electric Institute is the association of U.S. shareholderowned electric companies. Our members serve 95% of the ultimate customers in the shareholder-owned segment of the industry, and represent approximately 70% of the U.S. electric power industry. We also have 79 international electric companies as Affiliate members and more than 190 industry suppliers and related organizations as Associate members. About EEI s Quarterly Financial Updates EEI s quarterly financial updates present industry trend analyses and financial data covering 69 U.S. shareholder-owned electric utility companies. These 69 companies include 59 electric utility holding companies whose stocks are traded on major U.S. stock exchanges and ten electric utilities who are subsidiaries of nonutility or foreign companies. Financial updates are published for the following topics: We Welcome Your Feedback EEI is interested in ensuring that our financial publications and industry data sets best address the needs of member companies and the financial community. We welcome your comments, suggestions and inquiries. Contact: Mark Agnew Manager, Financial Analysis (202) , magnew@eei.org Future EEI Finance Meetings 43rd EEI Financial Conference November 9-12, Marriott Desert Ridge Phoenix, Arizona Dividends Stock Performance Credit Ratings Construction Rate Case Summary Fuel Income Statement Balance Sheet Cash Flow Statement Business Segmentation EEI International Utility Conference March 15-17, 2009 London Hilton on Park Lane London, United Kingdom For EEI Member Companies The EEI Finance and Accounting Division is developing current year and historical data sets that cover a wide range of industry financial and operating metrics. We look forward to serving as a resource for member companies who wish to produce customized industry financial data and trend analyses for use in: For more information about EEI Finance Meetings, please contact Debra Henry, (202) , dhenry@eei.org Investor relations studies and presentations Internal company presentations Performance benchmarking Peer group analyses Annual and quarterly reports to shareholders Edison Electric Institute 701 Pennsylvania Avenue, N.W. Washington, D.C

3 The 69 U.S. Shareholder-Owned Electric Utilities The companies listed below all serve a regulated distribution territory. Other utilities, such as transmission provider ITC Holdings, are not shown below because they do not serve a regulated distribution territory. However, their financial information is included in relevant EEI data sets, such as transmission-related construction spending. Allegheny Energy, Inc. (AYE) ALLETE, Inc. (ALE) Alliant Energy Corporation (LNT) Ameren Corporation (AEE) American Electric Power Company, Inc. (AEP) Avista Corporation (AVA) Black Hills Corporation (BKH) CenterPoint Energy, Inc. (CNP) Central Vermont Public Service Corporation (CV) CH Energy Group, Inc. (CHG) Cleco Corporation (CNL) CMS Energy Corporation (CMS) Consolidated Edison, Inc. (ED) Constellation Energy Group, Inc. (CEG) Dominion Resources, Inc. (D) DPL, Inc. (DPL) DTE Energy Company (DTE) Duke Energy Corporation (DUK) Duquesne Light Holdings, Inc. Edison International (EIX) El Paso Electric Company (EE) Empire District Electric Company (EDE) Energy East Corporation Energy Future Holdings Corp. (formerly TXU Corp.)^ Entergy Corporation (ETR) Exelon Corporation (EXC) FirstEnergy Corp. (FE) FPL Group, Inc. (FPL) Great Plains Energy Incorporated (GXP) Green Mountain Power Corporation Hawaiian Electric Industries, Inc. (HE) IDACORP, Inc. (IDA) Ipalco Enterprises, Inc. Integrys Energy Group, Inc. (TEG) Kentucky Utilities ** KeySpan Corporation (KSE) Louisville Gas and Electric ** Maine & Maritimes Corporation (MAM) MDU Resources Group, Inc. (MDU) MGE Energy, Inc. (MGEE) MidAmerican Energy Company Niagra Mohawk Power Corporation NiSource Inc. (NI) Northeast Utilities (NU) NorthWestern Corporation (NWEC) NSTAR (NST) OGE Energy Corp. (OGE) Otter Tail Corporation (OTTR) Pepco Holdings, Inc. (POM) PG&E Corporation (PCG) Pinnacle West Capital Corporation (PNW) PNM Resources, Inc. (PNM) Portland General Electric Company (POR)* PPL Corporation (PPL) Progress Energy (PGN) Public Service Enterprise Group Inc. (PEG) Puget Energy, Inc. (PSD) SCANA Corporation (SCG) Sempra Energy (SRE) Sierra Pacific Resources (SRP) Southern Company (SO) TECO Energy, Inc. (TE) UIL Holdings Corporation (UIL) UniSource Energy Corporation (UNS) Unitil Corporation (UTL) Vectren Corporation (VVC) Westar Energy, Inc. (WR) Wisconsin Energy Corporation (WEC) Xcel Energy, Inc. (XEL) Note: Includes the 59 shareholder-owned electric utility holding companies plus an additional 10 electric utilities (shown in italics) that are not listed on U.S. stock exchanges for one of the following reasons i. they are a subsidiary of an independent power producer, ii. they are a subsidiary of a foreignowned company, or iii. they were acquired by an investment firm. Stock symbols are shown in parentheses. *Portland General transitioned from private ownership to become a publicly traded company on April 3, The EEI Index includes Portland General beginning on January 1, 20. **Kentucky Utilities and Louisville Gas and Electric, both subsidiaries of E.ON AG, were added to the EEI coverage universe effective January 1, 20. EEI s historical industry financial data now includes their results. ^TXU (now Energy Future Holdings Corp.) was acquired by the Texas Energy Future Holdings Limited Partnership (TEF) on 10/10/20. TEF was formed by a group of investors led by Kohlberg Kravis Roberts and Texas Pacific Group to facilitate the merger.

4 Companies Listed by Category (as of 12/31/) Please refer to the Quarterly Financial Updates webpage for previous years lists. iven the diversity of utility holding company corporate G strategies, no single company categorization approach will be useful for all EEI members and utility industry analysts. Never-theless, we believe the following classification provides an informative framework for tracking financial trends and the capital markets response to business strategies as companies depart from the traditional regulated utility model. Regulated Mostly Regulated Diversified 80%+ of total assets are regulated 50% to 80% of total assets are regulated Less than 50% of total assets are regulated Categorization of the 59 publicly traded utility holding companies is based on year-end business segmentation data presented in 10Ks, supplemented by discussions with company IR departments. Categorization of the 10 non-publicly traded companies (shown in italics) is based on estimates derived from FERC Form 1 data and information provided by parent company IR departments. The EEI Finance and Accounting Division continues to evaluate our approach to company categorization and business segmentation. In addition, we can produce customized categorization and peer group analyses in response to member company requests. We welcome comments, suggestions and feedback from EEI member companies and the financial community. Regulated (43 of 69) ALLETE, Inc. Ameren Corporation American Electric Power Company, Inc. Avista Corporation Central Vermont Public Service Corporation CH Energy Group, Inc. Cleco Corporation CMS Energy Corporation Consolidated Edison, Inc. DPL, Inc. Duquesne Light Holdings, Inc. El Paso Electric Company Empire District Electric Company Energy East Corporation Great Plains Energy Incorporated Green Mountain Power Corporation IDACORP, Inc. IPALCO Enterprises, Inc. Kentucky Utilities KeySpan Corporation Louisville Gas and Electric Maine & Maritimes Corporation MGE Energy, Inc. Niagara Mohawk Power Corporation Northeast Utilities NorthWestern Energy NSTAR PG&E Corporation Pinnacle West Capital Corporation PNM Resources, Inc. Portland General Electric Company Progress Energy Puget Energy, Inc. Sierra Pacific Resources Southern Company TECO Energy, Inc. UIL Holdings Corporation UniSource Energy Corporation Unitil Corporation Vectren Corporation Westar Energy, Inc. Wisconsin Energy Corporation Xcel Energy, Inc. Mostly Regulated (19 of 69) Alliant Energy Corporation CenterPoint Energy, Inc. Dominion Resources, Inc. DTE Energy Company Duke Energy Corporation Edison International Entergy Corporation Exelon Corporation First Energy Corp. FPL Group, Inc. Integrys Energy Group MidAmerican Energy Holdings NiSource Inc. OGE Energy Corp. Otter Tail Corporation Pepco Holdings, Inc. PPL Corporation Public Service Enterprise Group, Inc. SCANA Corporation Diversified (7 of 69) Allegheny Energy, Inc. Black Hills Corporation Constellation Energy Group, Inc. Energy Future Holdings * Hawaiian Electric Industries, Inc. MDU Resources Group, Inc. Sempra Energy Note: Based on assets at 12/31/ * TXU (now Energy Future Holdings Corp.) was acquired by the Texas Energy Future Holdings Limited Partnership (TEF) on 10/10/20. TEF was formed by a group of investors led by Kohlberg Kravis Roberts and Texas Pacific Group to facilitate the merger.

5 Q3 Stock Performance HIGHLIGHTS The EEI Index produced a 14.3% return for the third quarter substantially below both the Dow Jones Industrials 3.7% return and the S&P 500 s 8.4% return. as Q2 s surge in energy related stocks and commodities sharply reversed in Q3. EEI s Regulated group posted an average 0.3% return and strongly outperformed the Mostly Regulated and Diversified groups as well as the broad market. Regulated utilities are often viewed as a safe haven investment in times of market turmoil given their dependable dividend yields and slow but steady growth. This benefitted the group during the third quarter. Tightening power markets and the prospects for relatively strong rate base growth by regulated companies continue to offer a healthy longer-term outlook for the industry. Yet the severity of the credit crisis that erupted in early October is a concern given the industry s rising capital spending and associated capital needs. I. Index Comparison (% Return) Index * EEI Index Dow Jones Inds S&P Nasdaq Comp.^ * Nine-month period ending September 30,. ^Price gain/loss only. Other indices show total return. Note: Full year, except where noted. Source: EEI Finance Department II. Category Comparison (% Return) Index * All Companies Regulated Mostly Regulated Diversified *Nine-month period ending September 30,. Note: Returns shown here are unweighted averages of constituent company returns. The EEI Index return shown in Table I above is cap-weighted. Source: EEI Finance Department, SNL Financial and company annual reports. III. Total Return Comparison COMMENTARY The second quarter s surge in energy-related stocks and commodities sharply reversed in the third quarter, and the EEI Index posted a 14.3% total return strongly underforming the Dow Jones Industrials 3.7% return and the S&P 500 s 8.4% return (see Table VIII). The third quarter s weakness was most evident in the Mostly Regulated and Diversified categories, which returned 13.9% and 15.5%, respectively, on a non-capitalization weighted basis (an average of constituent company returns) Value of $100 invested at 12/31/02 close, dividends reinvested. EEI Index S&P 500 Index DJIA * * Through September 30. Source: EEI Finance Department 1 EEI Q3 Financial Update

6 2 STOCK PERFORMANCE % V. 10-Year Treasury Yield Daily % Daily Yield, 1/1/ through 9/30/ /3/2005 IV. 10-Year Treasury Yield Monthly 5/3/2005 Apr- 9/3/2005 Source: U.S. Federal Reserve Average Monthly Yield, 1/1/00 through 9/30/08 Source: U.S. Federal Reserve $/mmbtu Source: SNL Financial $/mmbtu Jul- 1/3/2006 5/3/2006 Oct- 9/3/ Nov- Nov-2009 Nov-2010 Nov-2011 Nov /3/20 5/3/20 Apr-08 VI. Natural Gas Spot Prices 9/3/20 1/3/ Jul-08 1/1/05 through 9/30/08, Henry Hub VII. NYMEX Natural Gas Futures August through December 2012 Sep 30, Jun 30, Dec 31, /3/ Oct-08 9/3/ VIII. Returns by Quarter Index Q2 Q3 Q4 Q1 Q2 Q3 Q4 EEI Index Dow Jones Ind S&P Nasdaq Comp.^ ^Price gain/loss only. Other indices show total return. Source: EEI Finance Department Category* Q2 Q3 Q4 Q1 Q2 Q3 Q4 All Companies Regulated Mostly Regulated Diversified Q Q Q Q Q Q * Returns shown here are unweighted averages of constituent company returns. The EEI Index return shown above is cap-weighted. Source: EEI Finance Department, SNL Financial and company annual reports. IX. Sector Comparison, Trailing 12 mo. Total Return Sector For the twelve-month period ending 9/30/08 Total Return Consumer Goods -8.1% EEI Index -10.4% Health Care -10.7% Oil & Gas -13.6% Utilities -15.3% Consumer Services -20.4% Basic Materials -21.1% Aggregate Index -21.4% Industrials -22.5% Technology -23.7% Telecommunications -34.4% Financials -35.1% * As defined by WSJ Market Data Group, includes electric, gas, water utilities. Source: EEI and WSJ Market Data Group. X. Sector Comparison, Q3 Total Return For the three-month period ending 9/30/08 Sector Total Return Consumer Goods 4.6% Financials 2.3% Health Care 1.2% Consumer Services -2.6% Aggregate Index -9.0% Industrials -10.1% Technology -12.1% EEI Index -14.3% Telecommunications -15.0% Utilities -19.0% Oil & Gas -25.3% Basic Materials -31.6% * As defined by WSJ Market Data Group, includes electric, gas, water utilities. Source: EEI and WSJ Market Data Group. Source: SNL Financial EEI Q3 Financial Update

7 STOCK PERFORMANCE 3 Company Stock Symbol Market Cap % of Total Exelon Corp. EXC 41, % Southern Co. SO 28, % Dominion Resources Inc. D 24, % Duke Energy Corp. DUK 22, % FirstEnergy Corp. FE 20, % FPL Group Inc. FPL 20, % Entergy Corp. ETR 17, % Public Service Enterprise Group PEG 16, % American Electric Power Co. AEP 14, % PPL Corp. PPL 13, % PG&E Corp. PCG 13, % Edison International EIX 13, % Sempra Energy SRE 12, % Consolidated Edison Inc. ED 11, % Progress Energy Inc. PGN 11, % Xcel Energy Inc. XEL 8, % Ameren Corp. AEE 8, % DTE Energy Co. DTE 6, % Allegheny Energy Inc. AYE 6, % MDU Resources Group Inc. MDU 5, % Wisconsin Energy Corp. WEC 5, % CenterPoint Energy Inc. CNP 4, % Pepco Holdings Inc. POM 4, % SCANA Corp. SCG 4, % Constellation Energy Group Inc. CEG 4, % Nisource Inc. NI 4, % Northeast Utilities NU 3, % Integrys Energy Group TEG 3, % NSTAR NST 3, % Alliant Energy Corp. LNT 3, % Pinnacle West Capital Corp. PNW 3, % Source: EEI Finance Department and Wall Street Journal XI. Market Capitalization at September 30, (in $ Mil.) U.S. Shareholder-Owned Electric Utilities Company Stock Symbol Market Cap % of Total Puget Energy Inc. PSD 3, % TECO Energy Corp. TE 3, % OGE Energy Corp. OGE 2, % CMS Energy Corp. CMS 2, % DPL Inc. DPL 2, % Hawaiian Electric Industries Inc. HE 2, % Westar Energy Inc. WR 2, % Sierra Pacific Resources SRP 2, % Vectren Corp VVC 2, % Great Plains Energy Inc. GXP 1, % Cleco Corp. CNL 1, % Portland General Electric Co. POR 1, % IDACORP Inc. IDA 1, % ALLETE Inc. ALE 1, % Black Hills Corp. BKH 1, % Avista Corp. AVA 1, % Unisource Energy Group UNS 1, % NorthWestern Corp. NWEC % El Paso Electric Co. EE % Otter Tail Corp. OTTR % UIL Holdings Corp. UIL % PNM Resources Inc. PNM % MGE Energy Inc. MGEE % Empire District Electric Co. EDE % CH Energy Group Inc. CHG % Centrl Vt. Public Service Corp. CV % Unitil Corp. UTL % Maine and Maritimes Corp. MAM % Total Industry $4, % XII. EEI Index Market Capitalization (at Period End) $ Billions Q4-00 Q4-01 Q4-02 Q4-03 Q4- U.S. Shareholder-Owned Electric Utilities Q4-05 Q4-06 Q4- Note: Change in EEI Index market capitalization reflects the impact of buyout and spin-off activity in addition to stock market performance. Source: EEI Finance Department and Wall Street Journal EEI Index Market Cap (in $Billions) Q ,808 Q ,484 Q ,546 Q ,035 Q ,200 Q ,668 Q ,238 Q ,331 Q ,553 Q ,598 Q ,454 Q ,3 Q ,324 Q1-329,601 Q2-323,193 Q3-342,460 Q4-380,305 Q ,663 Q ,989 Q ,727 Q ,825 Q ,899 Q ,848 Q ,281 Q ,858 Q1-525,088 Q2-515,565 Q3-514,946 Q4-514,486 Q ,711 Q ,024 Q3-08 4,472 EEI Q3 Financial Update

8 4 STOCK PERFORMANCE XIII. Comparative Category Total Annual Returns U.S. Shareholder-Owned Electric Utilities, Value of $100 invested at close on 12/31/2002 EEI Index Regulated Mostly Regulated Diversified /31/ /31/20 12/31/ /31/ /31/20 9/30/ Annual Returns * EEI Index Annual Return (%) (12.8) EEI Index Cumulative Return ($) Regulated EEI Index Annual Return (10.3) Regulated EEI Index Cumulative Return Mostly Regulated EEI Index Annual Return (15.2) Mostly Regulated EEI Index Cumulative Return Diversified EEI Index Annual Return (20.4) DiversifiedEEI Index Cumulative Return Note: Returns shown above are unweighted averages of constituent company returns. / *Through September 30. By contrast, the Regulated group offered something of a safe harbor with a 0.3% return. Given their dependable dividend yields and slow but steady growth, regulated utilities are often viewed as a safe haven investment in times of market turmoil a status that certainly benefitted the category during the third quarter. Commodity Surge Sharply Reverses The bull market in global energy commodity prices that had powered the EEI Index higher in Q2 (despite the weakness in the broader market) suddenly reversed in Q3. As indicated in Chart VI, Henry Hub natural gas spot prices sharply declined from a high of $13.32/mmBTU on July 3 to $7.11/mmBTU on September 30 completely erasing the strength of the first half of. As shown in Chart VII, the natural gas forward curve also shifted markedly lower, losing $4 at the 2009 point and approximately $2.00 to $2.50 from 2010 through XIV. EEI Index Top Ten Performers For the nine-month period ending 9/30/08 Company Category % Return Hawaiian Electric Industries Inc. D 32.5 ALLETE Inc. R 16.0 MDU Resources Group Inc. D 6.7 MGE Energy Inc. R 3.4 Avista Corp. R 3.3 CH Energy Group Inc. R 1.9 Southern Co. R 0.7 Integrys Energy Group MR 0.6 Puget Energy Inc. R 0.2 Vectren Corp. R -0.7 Source: EEI Finance Department Note: Return figures include capital gains and dividends. R = Regulated, MR = Mostly Regulated, D = Diversified EEI Q3 Financial Update

9 STOCK PERFORMANCE 5 Interest Rates Remain Low Historically, long-term interest rate trends have also been a key driver of regulated utility stocks, which are often seen as bond substitutes with dividend growth potential. The 10- year Treasury yield has traded in the 4% to 5% range since 2002, and was little changed during the first nine months of. These generally low interest rates by historical standards have supported share values. Fundamental Trends Remain in Place Despite the evident slowdown of the U.S. economy in the third quarter and the rising likelihood given the credit crisis in early October that shook markets worldwide of a recession and prolonged period of economic weakness, the longterm fundamental outlook for companies across the industry appears to be healthy. Electricity is not an optional consumer product but a necessity for nearly every aspect of our personal and professional lives. And despite the differing points of view on optimal U.S. energy policy and ideal power market structure, there is virtual unanimity across the political and regulatory spectrum on the need for healthy and effective electric utilities, and affordable, reliable electric power for American families and businesses. This should translate into Wall Street confidence that loans and equity investments in support of new industry infrastructure will produce a return of and on capital provided investors receive fair treatment from state politicians and regulators. The prospects for relatively strong rate base growth by regulated companies offer potential for high single-digit earnings growth, a welcome prospect for investors concerned about recession and earnings declines in other areas of the economy. However, given rising capex spending by most companies, and the industry s substantial need for debt and equity capital in the years ahead, the severity of the current credit market upheaval is a source of concern across the industry. While there are no signs as yet that companies cannot raise capital for infrastructure upgrades and expansions, M&A activity has certainly been constrained. Funding a TXUsized buyout or other large debt-financed acquisition of a utility by financial buyers will probably not be possible until a stronger appetite for risk returns to the capital markets. Sharply rising construction costs, environmental concerns and the longer-term cost of carbon emissions have stopped coal plant construction in many states, despite the great strides made in recent years in making coal a cleaner source of baseload power. This trend, however, has boosted the value of existing plants in the many power markets nationwide with relatively tight and shrinking reserve margins, in some cases supporting select companies shares. XV. Share Ownership by Investor Category (% of total) U.S. Shareholder-Owned Electric Utilities Institutional Insider Retail Dec- Mar Dec- 03 Mar- Dec- Mar Dec- Mar Dec- 06 Mar- Dec- Mar Dec-02 Mar Dec-03 Mar- Dec- Mar Institutional Insider Retail Total Dec-05 Mar Dec-06 Mar- Dec- Mar-08 Institutional Insider Retail Total Source: SNL Financial and EEI Finance Department. Note: Institutional figures represent end-of-quarter, unweighted average of the 61 publicly traded EEI Index companies. Insider data reported annually. Retail data defined as 100% - (Institutional data % + Insider %). Totals may not add to 100 due to rounding. EEI Q3 Financial Update