EXHIBIT INDEX
Item No. Description
99.1 Press release of Southern Energy, Inc. announcing its 2000 third
quarter earnings, dated October 23, 2000.
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Exhibits. 99.1
News
Oct. 23, 2000
Southern Energy Inc. announces strong third quarter
in first earnings report since initial public offering
ATLANTA - Southern Energy Inc. (NYSE: SOE) announced a 59 percent
increase in third quarter earnings from operations, reflecting strong
performance from its North American business, President and Chief Executive
Officer Marce Fuller announced today in the company's first earnings report
since its record-setting initial public offering.
Southern Energy earned $119 million from operations for the quarter,
compared with $75 million for the same period in 1999. Southern Energy's
reported net income for the quarter was $98 million, which includes $7 million
from SE Finance, a business that will be transferred out of Southern Energy, and
costs of about $28 million related to Southern Energy's transition to a
separate, publicly traded company. Reported net income for the third quarter of
1999 was $156 million, which includes a one-time gain of $78 million from sale
of the U.K. supply business.
On a pro forma basis, assuming 338.7 million shares outstanding after
the completion of the initial public offering, this quarter's reported net
income equates to 29 cents per share. Reported net income equates to 36 cents
per share based on 272 million shares outstanding on September 30, 2000, prior
to the initial public offering.
"We are obviously very pleased with our third-quarter performance and
with our highly successful IPO in September," Fuller said. Southern Energy's
initial public offering on Sept. 26 of about 20 percent of the company's shares,
combined with convertible preferred securities, is the largest IPO to date in
the U.S. power sector, raising $1.8 billion. Southern Company, Southern Energy's
parent firm, has announced plans to distribute the remaining shares to its
shareholders within the next year. Southern Energy's stock initially was priced
at $22 per share and has since traded substantially higher.
Fuller also noted several of Southern Energy's other important
accomplishments during the quarter.
"First, we have made significant progress toward completing our pending
acquisition of power plants totaling about 5,000 megawatts from Potomac Electric
Power Co. (PEPCO), expected later this year," she said. "This transaction will
give the company approximately 14,000 megawatts of generation under ownership or
control in key markets throughout the United States, clearly placing us in a
more favorable position with respect to the size, regional diversity and
strategic location of our assets."
Southern Energy also recently completed the $250 million purchase of
Vastar Resources Inc.'s 40 percent interest in Southern Company Energy
Marketing, the company's energy marketing and risk management business, which
had been a joint venture of Southern Energy and Vastar.
"Having 100-percent ownership of Southern Company Energy Marketing
will greatly enhance our ability to integrate marketing and risk management with
our generating asset ownership and operations in North America," Fuller said,
noting Southern Energy's strategy of combining energy marketing activities with
the operation of its U.S. power plants to make the overall integrated business
more profitable.
Southern Energy also has acquired an interest in Hyder plc, an
electricity and water company in the United Kingdom. The transaction will allow
Southern Energy to combine operations of its U.K. distribution company, Western
Power Distribution, with Hyder's electric distribution company, known as SWALEC.
Fuller said the Hyder transaction is expected to be "accretive to earnings per
share and return on equity." Southern Energy will own Hyder and Western Power
Distribution in partnership with PP&L Resources.
Southern Energy's Americas business unit, which includes the United
States, Canada, South America and the Caribbean, reported $113 million in
earnings for the third quarter, up from $34 million from the same period last
year.
"We had a terrific quarter in North America, due primarily to strong
performance from our integrated assets and trading in the West and in New York,"
Fuller said. "We also benefited from the operation of 600 megawatts of new
capacity near major load centers in Dallas and Chicago."
These results were reduced by reserves taken to fully reflect an
unfavorable initial decision by an administrative law judge in a regulatory
proceeding in California, where Southern Energy owns 3,065 megawatts in the San
Francisco area.
Southern Energy's European business unit saw third-quarter earnings
increase from $17 million - excluding the $78 million gain on the sale of the
U.K. electricity supply business in September 1999 - to $19 million. European
results reflect slightly higher earnings from the company's German operations,
offset by a smaller contribution from the U.K. operations after the supply
business sale.
Southern Energy's Asian business unit, which includes operations in
China and the Philippines, reported earnings of $33 million, down from $45
million a year ago, primarily due to a change in tax deferral strategy.
"Our international operations continue to perform well, keeping
Southern Energy in a position to pursue selected growth opportunities in both
Europe and Asia," Fuller said, noting that Asian results reflect the October
1999 addition of the Sual generating plant in the Philippines and additional
taxes recognized this quarter on earnings from the company's Philippine
investments.
Looking ahead, Fuller said she believes Southern Energy is on track to
achieve an average annual earnings-per-share growth rate over the next four
years in excess of 20 percent.
Chief Financial Officer Raymond D. Hill noted that in the near term,
continued strong performance from Southern Energy's North American operations
should allow the company to exceed its earlier expectations for the full year.
"We are currently targeting a range of 91 cents to 93 cents per share
for 2000, assuming the 338.7 million shares outstanding after the initial public
offering," Hill said. "Although we can't expect a repeat of the weather-related
pricing we experienced this summer, we are confident that our overall business
performance next year should allow us to achieve annual earnings per share for
2001 in the range of $1.07 to $1.12. Much of the growth in our earnings per
share will come from the inclusion of the PEPCO assets in our operations."
Hill also noted that the company would be using the approximately $1.8
billion in proceeds from the company's recent common and convertible preferred
offerings to reduce short-term borrowings and fund growth.
Further financial information on Southern Energy can be found on the
Internet at www.southernenergy.com. The company will use this site to "webcast"
its first conference call with securities analysts since its IPO, beginning at
11:30 a.m. EST today.
Southern Energy Inc. is a global independent power producer and a
leading energy marketing and risk-management company, with extensive operations
in North America, Europe and Asia. Southern Energy owns more than 12,600
megawatts of electric generating capacity around the world, including about
7,400 megawatts in the United States, with another 11,200 megawatts under
advanced development. Southern Energy is 80 percent owned by Southern Company
(NYSE: SO).
Special note regarding forward-looking statements:
The information presented above includes forward-looking statements, in
addition to historical information. These statements involve known and unknown
risks and relate to future events, Southern Energy's future financial
performance, or projected business results. In some cases, forward-looking
statements by terminology may be identified by statements such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates," "
predicts," "targets," "potential" or "continue" or the negative of these terms
or other comparable terminology.
Forward-looking statements are only predictions. Actual events or
results may differ materially from any forward-looking statement as a result of
various factors, which include: (i) legislative and regulatory initiatives
regarding deregulation and restructuring of the electric utility industry; (ii)
the extent and timing of the entry of additional competition in the markets of
Southern Energy's subsidiaries and affiliates; (iii) Southern Energy's pursuit
of potential business strategies, including acquisitions or dispositions of
assets or internal restructuring; (iv) state, federal and other rate regulations
in the United States and in foreign countries in which Southern Energy's
subsidiaries and affiliates operate; (v) changes in or application of
environmental and other laws and regulations to which Southern Energy and its
subsidiaries and affiliates are subject; (vi) political, legal and economic
conditions and developments in the United States and in foreign countries in
which Southern Energy's subsidiaries and affiliates operate; (vii) financial
market conditions and the results of Southern Energy's financing efforts;
changes in commodity prices and interest rates; weather and other natural
phenomena; (viii) performance of Southern Energy's projects undertaken and the
success of efforts to invest in and develop new opportunities; and (ix) other
factors, including the risks outlined under "Risk Factors" in filings with the
SEC.
Although Southern Energy believes that the expectations reflected in
the forward-looking statements are reasonable, Southern Energy cannot guarantee
future results, events, levels of activity, performance or achievements.
Southern Energy does not undertake a duty to update any of the forward-looking
statements.
# # # #
News Media Contact:
David Mould, 770-821-7531
Chuck Griffin, 770-821-7814
Investor Contact:
John Robinson, 770-821-7782
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<CAPTION>
SOUTHERN ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- ----------------------
2000 1999 2000 1999
------- ------ ------ ------
(in millions) (in millions)
Operating Revenues:
<S> <C> <C> <C> <C>
Generation and energy marketing $4,159 $394 $5,065 $715
Distribution & integrated utilities 114 284 389 979
Other 8 8 19 17
------ ----- ------ ------
Total Operating Revenues: 4,281 686 5,473 1,711
Operating Expenses:
Cost of fuel, electricity and other products 3,569 309 3,965 805
Maintenance 36 32 104 81
Depreciation and amortization 89 67 244 178
Selling, general, and administrative 292 88 438 197
Write-down of assets 5 15 19 20
Other 73 46 175 127
------ ----- ------ ------
Total operating expenses 4,064 557 4,945 1,408
------ ----- ------ ------
Operating Income (Loss) 217 129 528 303
Other Income (Expense):
Interest income 42 38 123 118
Interest expense (162) (118) (462) (349)
Net Gain on sales of assets 18 284 18 293
Equity in income of affiliates 69 11 132 158
Receivables recovery - - - 12
Other, net 9 2 49 23
------ ----- ------ ------
Total other income (expense) (24) 217 (140) 255
------ ----- ------ ------
Income From Continuing Operations Before
Income Taxes and Minority Interest 193 346 388 558
Provision (benefit) for income taxes 85 74 56 108
Minority interest 17 119 60 155
------ ----- ------ ------
Income From Continuing Operations 91 153 272 295
Income from Discontinued Operations After
Income Taxes and Minority Interest 7 3 20 10
Net Income $98 $156 $292 $305
====== ===== ===== ======
Notes:
(1) Financial data reflects various non-operating items. See pages 6 and 7 for details. Certain prior-year data has been
reclassified to conform with the current-year presentation.
(2) Basic Earnings Per Share for the three months and nine months ended September 30, 2000 was $.36 and $1.07 based on
272 million shares of common stock outstanding as of September 30, 2000, prior to the initial public offering.
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<CAPTION>
SOUTHERN ENERGY, INC. AND SUBSIDIARIES
PRO FORMA EARNINGS PER SHARE (UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------------- ---------------------------------
2000 1999 % Change 2000 1999 % Change
-------- ------ ------- ----- ------- --------
Consolidated Earnings- (in millions)
------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As Reported $98 $156 -37% $292 $305 -4%
As Reported from Continuing Operations 91 153 -41% 272 295 -8%
Adjustments (page 7) 28 (78) -136% 28 (78) -136%
------ ------ ------- ------ ------ ------
From Operations $119 $75 59% $300 $217 38%
====== ====== ====== ====== ====== ======
Pro-forma Basic Earnings Per Share:
Number of shares of common stock as if
complete offering outstanding (in millions) 338.7 338.7 338.7 338.7
Pro Forma Basic Earnings Per Share
Based on Consolidated Earnings
As Reported $ 0.29 $ 0.46 -37% $ 0.86 $ 0.90 -4%
As Reported from Continuing Operations 0.27 0.45 -40% 0.80 0.87 -8%
Adjustments (page 7) 0.08 (0.23) -135% 0.08 (0.23) -135%
------ ------ ------- ------ ------ ------
From Operations $ 0.35 $ 0.22 59% $ 0.88 $ 0.64 38%
====== ======== ====== ====== ======= ======
By Group
--------
Asia-Pacific $ 0.10 $ 0.13 -23% $ 0.53 $ 0.38 39%
Europe 0.06 0.28 -79% 0.18 0.48 -63%
Americas 0.33 0.10 230% 0.42 0.17 147%
Corporate (0.22) (0.06) 267% (0.33) (0.16) 106%
Total Adjustments from above 0.08 (0.23) -135% 0.08 (0.23) -135%
------ ------ ------- ------ ------- ------
From Operations $ 0.35 $ 0.22 59% $ 0.88 $ 0.64 38%
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SE Finance (Discontinued Operations) $ 0.02 $ 0.01 100% $ 0.06 $ 0.03 100%
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<CAPTION>
SOUTHERN ENERGY, INC. AND SUBSIDIARIES
Earnings and Pro Forma Earnings Per Share as Reported and from Operations (Unaudited)
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
--------- --------- --------- --------- ---------
2000
----
Consolidated Earnings- (in millions)
<S> <C> <C> <C> <C> <C>
As Reported $101 $93 $98 N/A $292
Discontinued Operations (6) (7) (7) (20)
As Reported from Continuing Operations 95 86 91 272
Adjustments for:
Costs Related to Transitioning to a Public Company - - 28 - 28
---- --- ---- ---- ----
From Operations $95 $86 $119 N/A $300
==== === ==== ==== ====
1999
----
Consolidated Earnings- (in millions)
As Reported $80 $69 $156 $67 $372
Discontinued Operations (4) (3) (3) - (10)
As Reported from Continuing Operations 76 66 153 67 362
Adjustments for:
Gain on Sale of SWEB Supply Business - - (78) (78)
State Line Insurance Settlement - - - (14) (14)
---- --- ---- ---- ----
From Operations $76 $66 $75 $53 $270
==== === === === ====
Pro Forma Basic Earnings Per Share:
Number of shares of common stock as if
complete offering outstanding (in millions) 338.7 338.7 338.7 338.7 338.7
2000
Pro Forma Basic Earnings Per Share Based on
Consolidated Earnings
As Reported $0.30 $0.27 $0.29 N/A $0.86
Discontinued Operations (0.02) (0.02) (0.02) (0.06)
As Reported from Continuing Operations 0.28 0.25 0.27 0.80
Adjustments for:
Costs Related to Transitioning to a Public Company 0.00 0.00 0.08 0.08
----- ----- ----- ---- -----
From Operations $0.28 $0.25 $0.35 N/A $0.88
===== ===== ===== ==== =====
1999
Pro Forma Basic Earnings Per Share Based on
Consolidated Earnings
As Reported $0.24 $0.20 $0.46 $0.20 $1.10
Discontinued Operations (0.01) (0.01) (0.01) 0.00 (0.02)
As Reported from Continuing Operations 0.23 0.19 0.45 0.20 1.08
Adjustments for:
Gain on Sale of SWEB Supply Business 0.00 0.00 (0.23) 0.00 (0.23)
State Line Insurance Settlement 0.00 0.00 0.00 (0.04) (0.04)
----- ----- ----- ---- -----
From Operations $0.23 $0.19 $0.22 $0.16 $0.81
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<CAPTION>
SOUTHERN ENERGY, INC. AND SUBSIDIARIES
Financial Data by Group (Unaudited)
For the Three Months Ended September 30, 1999 and 2000
Corporate and
Americas Europe Asia-Pacific SE Finance Eliminations
2000 1999 2000 1999 2000 1999 2000 1999 2000 1999
------- ------ ------ ------ ------- ------ ------ ------ ------ -----
(in millions)
Operating Revenues:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Generation and energy marketing $4,036 $ 319 $ - $ - $ 123 $ 75 $ - $ - $ - $ -
Distribution & integrated utilities 43 42 71 242 - - - - - -
Other - - - - 4 3 - - 4 5
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total operating revenues 4,079 361 71 242 127 78 - - 4 5
Operating Expenses:
Cost of fuel, electricity and
other products 3,562 185 7 124 - - - - - -
Other operating expenses 296 100 28 37 30 40 - - 52 4
Depreciation and amortization 38 23 17 21 32 21 - - 2 2
------ ------ ------ ------ ------ ------ ------- ------ ------ ------
Total operating expenses 3,896 308 52 182 62 61 - - 54 6
Operating income (loss) 183 53 19 60 65 17 - - (50) (1)
Other Income (Expense):
Interest income (expense) (28) (17) (25) (28) (27) (3) (8) (3) (40) (32)
Net gain on sale of assets 10 16 9 266 - 1 - - (1) 1
Equity in income of affiliates 23 3 28 (2) 18 10 (6) (3) - -
Other 4 (6) (3) (2) (4) 3 15 6 12 7
------ ------ ------ ------ ------ ------ ------- ------ ------ ------
Income (Loss) From Continuing
Operations Before Income Taxes
and Minority Interest 192 49 28 294 52 28 1 - (79) (25)
Provision (benefit) for income taxes 75 15 6 86 9 (22) (6) (3) (5) (5)
Minority interest 4 - 3 113 10 5 - - 1
------ ------ ------ ------ ------ ------ ------- ------ ------ ------
Income (Loss) From Continuing
Operations 113 34 19 95 33 45 - - (74) (21)
Income From Discontinued Operations,
Net of Tax Benefit - - - - - - 7 3 - -
------ ------ ------ ------ ------ ------ ------- ------ ------ ------
Net Income (Loss) $ 113 $ 34 $ 19 $ 95 $ 33 $ 45 $ 7 $ 3 $ (74) $ (21)
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<CAPTION>
SOUTHERN ENERGY, INC. AND SUBSIDIARIES
Financial Data by Group (Unaudited)
For the Nine Months Ended September 30, 1999 and 2000
Corporate and
Americas Europe Asia-Pacific SE Finance Eliminations
2000 1999 2000 1999 2000 1999 2000 1999 2000 1999
------ ------ ------ ------ ------ ----- ------ ----- ----- -----
(in millions)
Operating Revenues:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Generation and energy marketing $4,698 $ 513 $ (2) $ - $ 369 $ 202 $ - $ - $ - $ -
Distribution & integrated utilities 126 123 263 856 - - - - - -
Other - - - - 10 9 - - 9 8
------ ----- ------ ------ ------ ----- ----- ----- ----- -----
Total operating revenues 4,824 636 261 856 379 211 - - 9 8
Operating Expenses:
Cost of fuel, electricity and other
products 3,942 314 23 491 - - - - - -
Other operating expenses 496 190 99 119 60 94 - 1 81 22
Depreciation and amortization 87 48 58 64 97 64 - - 2 2
----- ----- ------ ------ ------ ----- ------ ----- ----- ------
Total operating expenses 4,525 552 180 674 157 158 - 1 83 24
----- ----- ------ ------ ------ ----- ------ ----- ----- ------
Operating income (loss) 299 84 81 182 222 53 - (1) (74) (16)
Other Income (Expense):
Interest income (expense) (98) (47) (79) (88) (79) (29) (23) (12) (83) (67)
Net gain on sale of assets 11 20 9 272 (1) - - - (1) 1
Equity in income of affiliates 27 19 56 36 49 103 (17) (7) - -
Other 12 7 5 5 16 18 45 20 16 5
------ ----- ------ ------ ------ ----- ------ ----- ----- -----
Income (Loss) From Continuing Operations
Before Income Taxes and
Minority Interest 251 83 72 407 207 145 5 - (142) (77)
Provision (benefit) for income taxes 105 34 (16) 102 (1) (4) (15) (10) (32) (24)
Minority interest 5 (7) 26 143 28 19 - - 1 -
------ ------ ------ ------ ------ ----- ------ ----- ----- -----
Income (Loss) From Continuing Operations 141 56 62 162 180 130 - - (111) (53)
Income From Discontinued Operations,
Net of Tax Benefit - - - - - - 20 10 - -
------ ----- ------- ------ ------ ----- ------ ----- ----- ------
Net Income (Loss) $ 141 $ 56 $ 62 $ 162 $ 180 $ 130 $ 20 $ 10 $(111) $ (53)
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