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UNITED STATES FORM 10-Q |
[X] | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 OR |
[_] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the Transition period from ________ to _________ |
Commission File Number 1-4393PUGET SOUND ENERGY,
INC. |
Washington (State or other jurisdiction of incorporation or organization) |
91-0374630 (IRS Employer Identification No.) |
411 - 108th Avenue
N.E., Bellevue, Washington 98004-5515 (425) 454-6363 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) or the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file for such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ____ The number of shares of registrants common stock outstanding at June 30, 2000 was 85,364,349. |
Table of Contents |
2000 |
1999 | ||||
---|---|---|---|---|---|
OPERATING REVENUES: | |||||
Electric | $437,491 | $336,895 | |||
Gas | 98,017 | 94,173 | |||
Other | 3,293 | 4,996 | |||
Total operating revenue | 538,801 | 436,064 | |||
OPERATING EXPENSES: | |||||
Energy costs: | |||||
Purchased electricity | 238,105 | 176,116 | |||
Purchased gas | 46,184 | 38,822 | |||
Electric generation fuel | 29,904 | 11,178 | |||
Residential Exchange | (9,073 | ) | (8,631 | ) | |
Utility operations and maintenance | 58,395 | 58,363 | |||
Other operations and maintenance | 4,045 | 9,624 | |||
Depreciation and amortization | 49,316 | 42,899 | |||
Conservation amortization | 1,380 | 1,934 | |||
Taxes other than federal income taxes | 43,914 | 41,982 | |||
Federal income taxes | 13,512 | 11,157 | |||
Total operating expenses | 475,682 | 383,444 | |||
OPERATING INCOME | 63,119 | 52,620 | |||
OTHER INCOME | 6,878 | 15,379 | |||
INCOME BEFORE INTEREST CHARGES | 69,997 | 67,999 | |||
INTEREST CHARGES, net of AFUDC | 42,628 | 36,934 | |||
NET INCOME | 27,369 | 31,065 | |||
Less: Preferred stock dividends accrual | 2,229 | 3,013 | |||
INCOME FOR COMMON STOCK | $ 25,140 | $ 28,052 | |||
COMMON SHARES OUTSTANDING - WEIGHTED AVERAGE | 85,295 | 84,561 | |||
BASIC & DILUTED EARNINGS PER COMMON SHARE | $ 0.29 | $ 0.33 | |||
The accompanying notes are an integral part of the financial statements. |
PUGET SOUND ENERGY, INC |
2000 |
1999 | ||||
---|---|---|---|---|---|
OPERATING REVENUES: | |||||
Electric | $ 875,847 | $ 737,709 | |||
Gas | 303,487 | 265,017 | |||
Other | 6,690 | 8,724 | |||
Total operating revenue | 1,186,024 | 1,011,450 | |||
OPERATING EXPENSES: | |||||
Energy costs: | |||||
Purchased electricity | 434,308 | 361,272 | |||
Purchased gas | 154,388 | 117,079 | |||
Electric generation fuel | 50,653 | 21,055 | |||
Residential Exchange | (21,272 | ) | (20,315 | ) | |
Utility operations and maintenance | 113,245 | 119,192 | |||
Other operations and maintenance | 7,819 | 17,372 | |||
Depreciation and amortization | 95,201 | 85,520 | |||
Conservation amortization | 3,999 | 3,655 | |||
Taxes other than federal income taxes | 102,429 | 92,598 | |||
Federal income taxes | 66,250 | 59,478 | |||
Total operating expenses | 1,007,020 | 856,906 | |||
OPERATING INCOME | 179,004 | 154,544 | |||
OTHER INCOME | 11,268 | 19,132 | |||
INCOME BEFORE INTEREST CHARGES | 190,272 | 173,676 | |||
INTEREST CHARGES, net of AFUDC | 84,711 | 72,855 | |||
NET INCOME | 105,561 | 100,821 | |||
Less: Preferred stock dividends accrual | 4,532 | 5,889 | |||
INCOME FOR COMMON STOCK | $ 101,029 | $ 94,932 | |||
COMMON SHARES OUTSTANDING - WEIGHTED AVERAGE | 85,178 | 84,561 | |||
BASIC EARNINGS PER COMMON SHARE | $ 1.19 | $ 1.12 | |||
DILUTED EARNINGS PER COMMON SHARE | $ 1.18 | $ 1.12 | |||
The accompanying notes are an integral part of the financial statements. |
PUGET SOUND ENERGY,
INC. |
2000 |
1999 | ||||
---|---|---|---|---|---|
Net Income | $ 27,369 | $ 31,065 | |||
Other comprehensive income (loss), net of tax: | |||||
Unrealized holding gains (losses) arising during period | (1,580 | ) | 4,262 | ||
Reclassification adjustment for gains included in net income | (2,477 | ) | (12,284 | ) | |
Other comprehensive income | (4,057 | ) | (8,022 | ) | |
Comprehensive Income | $ 23,312 | $ 23,043 | |||
PUGET SOUND ENERGY,
INC. |
2000 |
1999 | ||||
---|---|---|---|---|---|
Net Income | $ 105,561 | $ 100,821 | |||
Other comprehensive income (loss), net of tax: | |||||
Unrealized holding gains arising during period | 2,265 | 3,482 | |||
Reclassification adjustment for gains included in net income | (3,160 | ) | (12,284 | ) | |
Other comprehensive income | (895 | ) | (8,802 | ) | |
Comprehensive Income | $ 104,666 | $ 92,019 | |||
The accompanying notes are an integral part of the financial statements. |
PUGET SOUND ENERGY,
INC. ASSETS |
June 30, 2000 |
December 31, 1999 | ||||
---|---|---|---|---|---|
UTILITY PLANT: (at original cost, including construction | |||||
work in progress of $214,191 and $311,317 respectively) | |||||
Electric | $3,997,417 | $3,966,220 | |||
Gas | 1,413,524 | 1,371,589 | |||
Common | 342,471 | 314,770 | |||
Less: Accumulated depreciation and amortization | 1,963,152 | 1,901,658 | |||
Net utility plant | 3,790,260 | 3,750,921 | |||
OTHER PROPERTY AND INVESTMENTS | 214,019 | 264,160 | |||
CURRENT ASSETS: | |||||
Cash | 108,640 | 65,707 | |||
Accounts receivable | 197,584 | 213,020 | |||
Unbilled revenue | 86,637 | 121,303 | |||
Materials and supplies, at average cost | 65,853 | 69,241 | |||
Purchased gas receivable | 35,842 | 33,700 | |||
Prepayments and other | 9,502 | 9,866 | |||
Total current assets | 504,058 | 512,837 | |||
LONG-TERM ASSETS: | |||||
Regulatory asset for deferred income taxes | 220,514 | 228,454 | |||
Regulatory asset for PURPA buyout costs | 241,196 | 238,734 | |||
Other | 162,867 | 150,500 | |||
Total long-term assets | 624,577 | 617,688 | |||
TOTAL ASSETS | $5,132,914 | $5,145,606 | |||
The accompanying notes are an integral part of the financial statements. |
PUGET SOUND ENERGY,
INC. CAPITALIZATION AND LIABILITIES |
June 30, 2000 |
December 31, 1999 | ||||
---|---|---|---|---|---|
CAPITALIZATION: | |||||
Common shareholders investment: | |||||
Common stock, $10 stated value, | |||||
150,000,000 shares authorized, | |||||
85,364,349 and 84,922,405 shares outstanding | $ 853,643 | $ 849,224 | |||
Additional paid-in capital | 461,617 | 454,982 | |||
Earnings reinvested in the business | 88,059 | 66,019 | |||
Accumulated other comprehensive income | 7,953 | 8,848 | |||
Preferred stock not subject to | |||||
mandatory redemption | 60,000 | 60,000 | |||
Preferred stock subject to | |||||
mandatory redemption | 58,162 | 65,662 | |||
Corporation obligated, mandatorily redeemable | |||||
preferred securities of subsidiary | |||||
trust holding solely junior subordinated | |||||
debentures of the corporation | 100,000 | 100,000 | |||
Long-term debt | 1,914,788 | 1,783,139 | |||
Total capitalization | 3,544,222 | 3,387,874 | |||
CURRENT LIABILITIES: | |||||
Accounts Payable | 153,811 | 178,218 | |||
Short-term debt | 458,287 | 604,712 | |||
Current maturities of long-term debt | 25,000 | 47,620 | |||
Accrued expenses: | |||||
Taxes | 93,419 | 72,688 | |||
Salaries and wages | 18,039 | 18,023 | |||
Interest | 40,807 | 43,955 | |||
Other | 23,940 | 24,259 | |||
Total current liabilities | 813,303 | 989,475 | |||
DEFERRED INCOME TAXES | 623,669 | 636,735 | |||
OTHER DEFERRED CREDITS | 151,720 | 131,522 | |||
TOTAL CAPITALIZATION AND LIABILITIES | $5,132,914 | $5,145,606 | |||
The accompanying notes are an integral part of the financial statements. |
PUGET SOUND ENERGY,
INC. |
2000 |
1999 | ||||
---|---|---|---|---|---|
OPERATING ACTIVITIES: | |||||
Net Income | $ 105,561 | $ 100,821 | |||
Adjustments to reconcile net income | |||||
to net cash provided by operating activities: | |||||
Depreciation and amortization | 95,201 | 85,520 | |||
Deferred income taxes and tax credits - net | (5,126 | ) | 7,053 | ||
Gain from sale of investment in Cabot stock | | (18,899 | ) | ||
Gain from sale of securities | (6,476 | ) | | ||
Other | 3,918 | 363 | |||
Change in certain current assets | |||||
and liabilities (Note 3) | 44,584 | 57,321 | |||
Net Cash Provided by Operating Activities | 237,662 | 232,179 | |||
INVESTING ACTIVITIES: | |||||
Construction expenditures - excluding equity AFUDC | (151,483 | ) | (163,013 | ) | |
Additions to energy conservation program | (2,732 | ) | (2,755 | ) | |
Proceeds from sale of Centralia Plant | 24,828 | | |||
Proceeds from sale of investment in Cabot stock | 51,463 | 37,353 | |||
Loans to Cellnet Data Services | (1,325 | ) | (20,500 | ) | |
Proceeds from sale of securities | 6,757 | | |||
Other | (3,499 | ) | 5,170 | ||
Net Cash Used by Investing Activities | (75,991 | ) | (143,745 | ) | |
FINANCING ACTIVITIES: | |||||
Change in short-term debt, net | (146,425 | ) | (214,412 | ) | |
Dividends paid | (72,828 | ) | (83,777 | ) | |
Redemption of preferred stock | (7,500 | ) | (12,575 | ) | |
Issuance of bonds | 225,000 | 250,000 | |||
Redemption of bonds and notes | (115,980 | ) | (10,358 | ) | |
Issue costs of bonds and stock | (1,005 | ) | (2,045 | ) | |
Net Cash Used by Financing Activities | (118,738 | ) | (73,167 | ) | |
Net Increase in cash | 42,933 | 15,267 | |||
Cash at Beginning of year | 65,707 | 28,216 | |||
Cash at End of Period | $ 108,640 | $ 43,483 | |||
The accompanying notes are an integral part of the financial statements. |
Six Months Ended June 30 |
2000 |
1999 | |||
---|---|---|---|---|---|
Changes in current asset and current liabilities: | |||||
Accounts receivable and unbilled revenue | $ 50,102 | $ 70,871 | |||
Materials and supplies | 3,388 | 6,757 | |||
Prepayments and other | 364 | (1,178 | ) | ||
Purchased gas receivable | (2,143 | ) | (10,672 | ) | |
Accounts payable | (24,406 | ) | (31,910 | ) | |
Accrued expenses and Other | 17,279 | 23,453 | |||
Net change in current assets and current liabilities | $ 44,584 | $ 57,321 | |||
Cash payments: | |||||
Interest (net of capitalized interest) | $ 91,028 | $ 71,987 | |||
Income taxes | $ 48,100 | $ 39,750 | |||
(4) Segment InformationThe Company primarily operates in one business segment, Regulated Utility Operations. The Companys regulated utility operation generates, purchases and sells electricity and purchases, transports and sells natural gas. The Companys service territory covers approximately 6,000 square miles in the state of Washington. Principal non-utility lines of business include development and marketing of customer information and billing system software, specialized contracting services to utilities and telecommunications companies (See Other below), real estate investment and development and small hydro-electric project development. Reconciling items between segments are not material. Financial data for business segments are as follows: |
(Dollars in Thousands) | |||||||
Three Months Ended June 30, 2000 | Regulated Utility |
Other | Total | ||||
Revenues | $ 535,508 | $ 3,293 | $ 538,801 | ||||
Net Income | 25,952 | 1,417 | 27,369 | ||||
Total Assets | 4,982,452 | 150,462 | 5,132,914 | ||||
Three Months Ended June 30, 1999 | Regulated Utility |
Other | Total | ||||
Revenues | $ 431,068 | $ 4,996 | $ 436,064 | ||||
Net Income | 22,357 | 8,708 | 31,065 | ||||
Total Assets | 4,611,971 | 111,818 | 4,723,789 | ||||
Six Months Ended June 30, 2000 | Regulated Utility |
Other | Total | ||||
Revenues | $1,179,334 | $ 6,690 | $1,186,024 | ||||
Net Income | 103,871 | 1,690 | 105,561 | ||||
Total Assets | 4,982,452 | 150,462 | 5,132,914 | ||||
Six Months Ended June 30, 1999 | Regulated Utility |
Other | Total | ||||
Revenues | $1,002,726 | $ 8,724 | $1,011,450 | ||||
Net Income | 94,917 | 5,904 | 100,821 | ||||
Total Assets | 4,611,971 | 111,818 | 4,723,789 | ||||
(5) Other InvestmentsIn the second quarter of 2000, the Company sold all of its 1,134,000 shares of 6% convertible redeemable preferred stock in Cabot Oil & Gas Corporation for $51.4 million, after expenses. There was no significant gain or loss for accounting purposes on the transaction. The sale resulted in approximately $40.8 million in after-tax cash proceeds. In the second quarter of 1999, the Company sold all of its investment in common stock of Cabot Oil & Gas Corporation for $37.4 million, resulting in a one-time after tax gain of $12.3 million. As a result of these two transactions, the Company no longer holds any securities of Cabot Oil & Gas. |
(6) OtherIn September 1998, the Company filed a shelf-registration statement with the Securities and Exchange Commission for the offering, on a delayed or continuous basis, of up to $500 million principal amount of Senior Notes secured by a pledge of First Mortgage Bonds. On March 9, 1999, the Company issued $250 million principal amount of Senior Medium-Term Notes, Series B, which consisted of $150 million principal amount due March 9, 2009 at an interest rate of 6.46% and $100 million principal amount due March 9, 2029 at an interest rate of 7.0%. On February 22, 2000, the Company issued $225 million principal amount of 7.96% Senior Medium-Term Notes, Series B due February 22, 2010. Proceeds were used to redeem the Encogen project debt of approximately $112 million assumed by the Company on November 1, 1999 upon the purchase of the Encogen project and pay down a portion of the Companys short-term debt. Premiums and related expenses of approximately $4.7 million associated with the redemption of the Encogen debt were capitalized and will be amortized over nine years in conformance with an order issued by the Washington Commission. On August 1, 2000, InfrastruX Group Inc., a wholly-owned subsidiary of the Company, purchased 88% of the outstanding shares of UTILX Corporation pursuant to a cash tender offer. The remaining shares are expected to be acquired through a merger to be effected in the third quarter. The total price for all the outstanding shares of UTILX is approximately $50 million. UTILX is a provider of infrastructure construction services to utilities and telecommunications providers in the United States and around the world. Its primary business is installing, replacing and restoring underground cables and pipes. The acquisition marks the Companys entry into the business of providing design, construction and engineering services to the utility industry. |
The Company meets its forecasted electric and natural gas supply needs throughout the year through company-owned electric generation and gas storage and by obtaining power through long-term contracts, annual contracts and short-term markets. The Company also performs risk management activities to optimize the value of energy supply assets and to ensure that physical energy supply is available to meet the customer demand loads. The Company also purchases energy when demand exceeds available supplies in its portfolio; likewise the Company makes sales to other utilities and marketers when surplus energy is available. These transactions are part of the Companys normal operations to meet retail load. Electric sales to other utilities and marketers vary by quarter and year depending principally upon water conditions for the generation of hydroelectric power, retail customer usage, the energy requirements of other utilities and energy market conditions in the Pacific Northwest. Temperatures based on heating-degree-days measured at Seattle-Tacoma airport during the three and six month periods ended June 30, 2000 were near normal and 18% and 5% warmer than the comparable periods in the prior year. |
Results of Operations |
Three Month Period |
Six Month Period | ||||
---|---|---|---|---|---|
(In Millions) | |||||
Operating revenue changes | |||||
General rate tariff increase - electric | $ 3.8 | $ 7.9 | |||
BPA Residential Purchase & Sale Agreement | (0.2 | ) | (0.5 | ) | |
Electric sales to wholesale customers | 73.4 | 88.4 | |||
Electric load and other changes | 23.6 | 42.3 | |||
Gas revenue change | 3.8 | 38.5 | |||
Other revenue changes | (1.7 | ) | (2.0 | ) | |
Total operating revenue change | 102.7 | 174.6 | |||
Operating expense changes | |||||
Energy costs: | |||||
Purchased electricity | 62.0 | 73.0 | |||
Purchased gas | 7.4 | 37.3 | |||
Electric generation fuel | 18.7 | 29.6 | |||
Residential exchange credit | (0.4 | ) | (1.0 | ) | |
Utility operations and maintenance | 0.0 | (5.9 | ) | ||
Other operations and maintenance | (5.6 | ) | (9.5 | ) | |
Depreciation and amortization | 6.4 | 9.7 | |||
Conservation amortization | (0.6 | ) | 0.3 | ||
Taxes other than federal income taxes | 1.9 | 9.8 | |||
Federal income taxes | 2.4 | 6.8 | |||
Total operating expense change | 92.2 | 150.1 | |||
Other income | (8.5 | ) | (7.9 | ) | |
Interest charges | 5.7 | 11.9 | |||
Net income change | $ (3.7 | ) | $ 4.7 | ||
The following is additional information pertaining to the changes outlined in the above table. |
Operating Revenues - ElectricElectric revenues for the quarter ended June 30, 2000 were $437.5 million, up $100.6 million or 30.0% over the same period in 1999. Revenues in the second quarter of 2000 increased $3.8 million compared to the second quarter of 1999 due to an average 1.2% general electric rate increase effective January 1, 2000. A 1.8% increase in the number of electric customers served and favorable electric wholesale prices also contributed to the increase in revenues. Electric revenues for the six months ended June 30, 2000, were $875.8 million, up $138.1 million or 18.7% over the same period in 1999. Revenues in the first half of 2000 increased $7.9 million compared to the first half of 1999 due to a general electric rate increase that averaged 1.2% effective January 1, 2000. A 1.8% increase in the number of electric customers served and favorable electric wholesale prices also contributed to the increase in revenues. Revenues in 2000 and 1999 were reduced because of the credit that the Company received through the Residential Purchase and Sale Agreement with the Bonneville Power Administration (BPA). The agreement enables the Companys residential and small farm customers to receive the benefits of lower-cost federal power. On January 29, 1997, the Company and BPA signed a Residential Exchange Termination Agreement. The Agreement ends the Companys participation in the Residential Purchase and Sale agreement with BPA. As part of the Termination Agreement, the Company will receive payments by the BPA of approximately $235 million over an approximately five-year period ending June 2001. These payments are recorded as a reduction of purchased electricity expenses. Under the rate plan approved by the Washington Commission in its merger order, the Company will continue to reflect in customers bills, the level of Residential Exchange benefits in place at the time of the merger. Over the remainder of the Residential Exchange Termination Agreement from July 2000 through June 2001, it is projected that the Company will credit customers approximately $65.3 million more than it will receive from BPA during the following periods: |
Period |
Credit to Customers |
Received from BPA (in Millions) |
Excess Credits | ||||
---|---|---|---|---|---|---|---|
July - December 2000 | $ 48.4 | $19.7 | $28.7 | ||||
January - June 2001 | 63.6 | 27.0 | 36.6 | ||||
$112.0 | $46.7 | $65.3 |
The BPA published a record of decision on the allocation of future benefits of low-cost federal power, for the five-year BPA rate plan period 2002 to 2006 in May 2000. BPA allocated 1900 aMW among the investor-owned utilities in the Pacific Northwest. The Companys share of these benefits is 700 aMW. The Company is working with BPA to bring those benefits to the Companys residential and small farm customers. In a letter to customers dated August 1, 2000, the BPA announced it will continue to negotiate contract terms with customers but temporarily suspended signing additional subscription contracts because of volatility and an upward trend in prices in the wholesale electricity market. BPA is considering its options and intends to announce a proposed response in the third quarter of 2000. Electric sales to other utilities and marketers increased $73.4 million and $88.4 million in the quarter and six months ended June 30, 2000, respectively, over the same periods in 1999 due primarily to higher wholesale energy and capacity prices. |
Operating Revenues - GasGas operating revenues for the quarter ended June 30, 2000 increased by $3.8 million from the prior year quarter. Total gas volumes decreased 10.6% from 228.2 million therms in 1999 to 204.1 million therms in 2000. Gas margin decreased by $3.9 million, or 8.7% in the second quarter of 2000 as compared to the second quarter of 1999. The primary reason for the increase in gas sales revenue, was higher natural gas prices which are passed through to customers in the Purchased Gas Adjustment (PGA) that became effective November 1, 1999. As a result of the PGA, gas rates to all sales customers increased by an average of 16.3 %, while rates for gas transportation service as well as gas margins remained unchanged. Partially offsetting the increase in revenue from higher gas prices were lower sales volumes due to warmer temperatures in the three months ended June 30, 2000, compared to the three month period ended June 30, 1999. For the six months ended June 30, 2000, gas operating revenues increased $38.5 million or 14.5% from $265.0 million in the six months ended June 30, 1999, to $303.5 million in the six months ended June 30, 2000, while total gas volumes decreased 2.2%. The increase in revenues in the period was primarily due to higher natural gas prices as previously mentioned. Operating ExpensesPurchased electricity expenses increased $62.0 million and $73.0 million for the three and six month periods ended June 30, 2000 compared to the same periods in 1999. The increases were due primarily to higher prices for non-firm power purchases from other utilities and marketers. The increases were partially offset by a reduction in purchased electricity expenses related to the purchase of the Encogen electric cogeneration plant in November 1999. This reduction in purchased electricity expenses was offset in part by increases in fuel, operations and maintenance, depreciation and interest expenses related to Encogen. Prior to the purchase, the Company was obligated to purchase the net output of the plant under a 1990 power purchase contract. Purchased gas expenses increased $7.4 million and $37.3 million for the three and six month periods ending June 30, 2000, respectively, compared to the same periods in 1999. The increases were due primarily to the impact of increased gas costs which are passed through to customers through the PGA. Fuel expense increased $18.7 million and $29.6 million for the three and six month periods ending June 30, 2000, respectively, compared to the same period in 1999 as a result of Encogen fuel expenses of $8.9 million in the second quarter of 2000 and $18.3 million in the six month period ended June 30, 2000. The Companys acquisition of the 160 megawatt Encogen natural gas-fired cogeneration plant was completed on November 1, 1999. In addition, fuel expense in the second quarter of 2000 was approximately $13.4 million higher than the comparable period in 1999 due to the Company generating more electricity at Company-owned combustion turbines. Utility operations and maintenance expenses of $58.4 million were essentially flat in the second quarter of 2000 compared to the same period a year ago. In the six month period ended June 30, 2000, utility operations and maintenance expenses decreased $5.9 million due primarily to storm-repair costs which were approximately $7.6 million less in the six months ended June 30, 2000 compared to the same period last year. Other operations and maintenance expenses decreased $5.6 million and $9.5 million in the three and six month period ended June 30, 2000, primarily as a result of a wholly-owned subsidiary exiting certain product lines in the second quarter of 1999, thereby eliminating operations and maintenance expenses related to these activities. |
Depreciation and amortization expense increased $6.4 million and $9.7 million for the three and six month periods ended June 30, 2000, compared to the same periods last year due primarily to the effects of new plant placed into service during the past year, including the Encogen plant purchased in November 1999, and the Companys ConsumerlinX customer information and billing system in April 2000. Taxes other than federal income taxes increased $1.9 million and $9.8 million for the three and six month periods ended June 30, 2000, respectively, compared to the same periods last year primarily due to increases in municipal and state excise taxes which are revenue based and increased state property taxes. Federal income taxes increased $2.4 million and $6.8 million for the three and six month periods ended June 30, 2000, respectively, primarily due to higher pre-tax operating income for the periods. Other IncomeOther income, net of federal income tax, decreased $8.5 million and $7.9 million in the three and six month periods ended June 30, 2000, respectively, compared to the same periods in 1999. The decrease was primarily due to the $12.3 after-tax gain from the sale of Cabot common stock reported in the second quarter of 1999 which was partially offset by costs associated with a wholly-owned subsidiarys exiting certain product lines. Interest ChargesInterest charges, which consist of interest and amortization on long-term debt and other interest, increased $5.7 million and $11.9 million for the three and six month periods ended June 30, 2000 compared to the same periods in 1999 primarily as a result of the issuance of $225 million Senior Medium-Term Notes, Series B, in February 2000. These increases were partially offset by the repayment of $107 million in Secured Medium-Term Notes since September 1999. Other interest expense increased $3.5 million and $5.9 million for the three and six month periods ended June 30, 2000 compared to the same periods in 1999 as a result of higher weighted average interest rates and higher average daily short-term borrowings. Capital Expenditures, Capital Resources and LiquidityCapital expenditures which include energy conservation expenditures and exclude AFUDC for the second quarter of 2000 were $74.3 million, compared to $70.8 million, for the second quarter of 1999. Year to date capital expenditures were $148.5 million compared to $161.1 million for the same period in 1999. Capital expenditures for 2000 and 2001 are expected to be $269 million and $250 million, respectively. Cash provided by operations (net of dividends and AFUDC) as a percentage of capital expenditures (excluding AFUDC) was 9% and 51% for the second quarters of 2000 and 1999, respectively. Cash provided by operations (net of dividends and AFUDC) as a percentage of capital expenditures (excluding AFUDC) was 108% and 89% for the six month periods ended June 30, 2000 and 1999, respectively. Capital expenditure estimates are subject to periodic review and adjustment. The Company issued common stock for the Companys Dividend Reinvestment Plan of $6,720,000 and $10,045,000 in the three and six months ended June 30, 2000, respectively. No new Company stock was issued for the Dividend Reinvestment Plan for the comparable periods in 1999. |
On June 30, 2000, the Company had available $375 million in lines of credit with various banks, which provide credit support for outstanding bank loans and commercial paper of $267 million, effectively reducing the available borrowing capacity under these lines of credit to $108 million. In addition, the Company has agreements with several banks to borrow on an uncommitted, as available, basis at money-market rates quoted by the banks. There are no costs, other than interest, for these arrangements. There was $191.3 million outstanding under these arrangements at June 30, 2000. OtherOn May 5, 2000, the Company sold its 7% interest in the 1,340 MW Centralia coal-fired generating project to TECWA Power, Inc., a subsidiary of TransAlta Corporation of Calgary, Canada. The sales price of approximately $31.7 million is subject to certain adjustments and will be finalized in the third quarter of 2000. Under the order issued by the Washington Commission, the Companys shareholders and customers will divide a net after-tax gain of approximately $13.5 million on the Companys 7 percent interest in the Centralia plant. Approximately $1.2 million of this gain will go to Company shareholders and $12.3 million will be deferred for pass through to electric customers. The deferred gain will accrue interest at 7.16% until refunded to customers. The Companys share of proceeds, approximately $11.0 million after taxes and the allocation of the gain to electric customers, will be used to pay down utility debt. The Company did not record a gain in the second quarter of 2000 as the computation and allocation of any gain between electric customers and shareholders is subject to final approval of the Washington Commission. On July 20, 2000, the Company and PPL Global, LLC (formerly PP&LGlobal, Inc.) terminated an Asset Purchase Agreement dated as of November 1, 1998, under which PPL Global, LLC had proposed purchasing the Companys 735 megawatt interest in the four-unit Colstrip power plants and associated transmission capacity across Montana. As a result, the Company will retain its 50 percent interest in Colstrip Units 1 & 2 and 25 percent interest in Colstrip Units 3 & 4. On June 28, 2000, the Company filed a request with the Washington Commission to pass through the rising costs of natural gas purchased for customers under terms of the long established purchased gas adjustment (PGA) mechanism. The PGA mechanism passes through to customers increases or decreases in the gas supply portion of the natural gas service rates based upon changes in the price of natural gas purchased from producers and wholesale marketers or changes in gas pipeline transportation costs. The Company does not profit from changes under the PGA. The PGA is separate from the Companys general gas service rates that have been under a rate stability plan since 1997. On July 31, 2000, the Washington Commission approved the Companys request to increase rates by an overall average of 28% to all natural gas customers effective August 1, 2000. |
(i) | Ensure that physical energy supplies are available to serve retail customer requirements; |
(ii) | Manage portfolio risks to limit undesired impacts on Company financial results; and |
(iii) | Optimize the value of the Companys energy supply assets. |
The portfolio is subject to major sources of variability (e.g., hydro generation, temperature-sensitive retail sales, and market prices for gas and power). At certain times, these sources of variability can mitigate portfolio imbalances; at other times they can exacerbate portfolio imbalances. Hedging strategies for the Companys energy supply portfolio interact with portfolio optimization activities. Some hedges can be implemented in ways that retain the Companys ability to use its energy supply portfolio to produce additional value; other hedges can only be achieved by forgoing optimization opportunities. The prices of energy commodities and transportation services are subject to fluctuations due to unpredictable factors including weather, generation outages, transportation congestion and other factors which impact supply and demand. This commodity price risk is a consequence of purchasing energy at fixed and variable prices and providing deliveries at different tariff and variable prices. Costs associated with ownership and operation of production facilities are another component of this risk. The Company may use forward delivery agreements, swaps and option contracts for the purpose of hedging commodity price risk. The aggregate fair market value of these derivative commodity instruments at June 30, 2000 was approximately $260,000. Approximately $130,000 of this amount relates to the Companys core gas supplies (the cost of which is passed through to customers through the PGA). Unrealized changes in the market value of these derivatives are generally deferred and recognized upon settlement along with the underlying hedged transaction. In addition, the Company believes its current rate design, including its Optional Large Power Sales Rate, various special contracts and the PGA mechanism mitigate a portion of this risk. Market risk is managed subject to parameters established by the Board of Directors. A Risk Management Committee separate from the units that manage these risks monitors compliance with the Companys policies and procedures. In addition, the Audit Committee of the Companys Board of Directors has oversight of the Risk Management Committee. Interest rate riskThe Company believes interest rate risk of the Company primarily relates to the use of short-term debt instruments and new long-term debt financing needed to fund capital requirements. The Company manages its interest rate risk through the issuance of mostly fixed-rate debt of various maturities. The Company does utilize bank borrowings, commercial paper and line of credit facilities to meet short-term cash requirements. These short-term obligations are commonly refinanced with fixed rate bonds or notes when needed and when interest rates are considered favorable. The Company may enter into swap instruments to manage the interest rate risk associated with these debts. |
Number of Shares | |||||||
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For |
Withheld | ||||||
Douglas P. Beighle | 71,967,287 | 1,124,656 | |||||
Tomio Moriguchi | 71,931,978 | 1,159,965 | |||||
Craig W. Cole | 71,887,320 | 1,204,623 |
There were no broker non-votes. Item 6 Exhibits and Reports on Form 8-K |
(a) | The following exhibits are filed herewith: |
12-a | Statement setting forth computation of ratios of earnings to fixed charges (1995 through 1999 and 12 months ended June 30, 2000) |
12-b | Statement setting forth computation of ratios of earnings to combined fixed charges and preferred stock dividends (1995 through 1999 and 12 months ended June 30, 2000) |
27 | Financial Data Schedule |
(b) | Reports on Form 8-K |
Form 8-K dated June 29, 2000, Item 5 Other Events, related to InfrastruX, a wholly-owned subsidiary of the Company, acquiring UTILX Corporation. |
Form 8-K dated May 25, 2000, Item 5 Other Events, related to the Company selling Cabot Oil & Gas preferred stock. |
SIGNATURESPursuant 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. |
PUGET SOUND ENERGY, INC. | |
Richard L. Hawley Richard L. Hawley Vice President & Chief Financial Officer | |
Date: August 14, 2000 | Prinicipal financial officer and officer duly authorized to sign this report on behalf of the registrant |
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