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CH Energy Group Issues Third-Quarter Earnings Results And Update on Future Strategic Direction

^{Published on 2010-10-28 05:16:37 - Market Wire}
 

POUGHKEEPSIE, N.Y.--([ BUSINESS WIRE ])--CH Energy Group, Inc. (NYSE:CHG) earned 11 cents per share for the third quarter of 2010, as compared to 34 cents per share posted during the same period of 2009.Earnings year-to-date total $1.84 per share, compared to the $1.71 per share earned during the same period of 2009.

"Wea™re excited about the available opportunities in our business and our plans to deliver consistent and tangible shareholder value in the future."

Third-quarter results include a 44-cents-per-share non-cash impact from impairment charges related to the Companya™s ethanol investment, but were also highlighted by continued improvement of earnings within the core utility subsidiary, Central Hudson Gas & Electric Corporation.

aWe believe the full impairment of our ethanol investment is necessary in light of current market conditions,a said Chairman of the Board, President and C.E.O. Steven V. Lant. aAbsent that charge, earnings per share for the quarter would have been 55 cents, an improvement of 21 cents per share as compared to the third quarter of 2009, indicating the strength of our core business.a

CH Energy Group released the following earnings results by business unit:

Central Hudson Gas & Electric Corporation

Central Hudson earned 60 cents per share during the third quarter of 2010, up from 55 cents per share posted during the same period of 2009. For the first nine months of 2010, the utility earned $2.26 per share, as compared to $1.39 per share posted during the first three quarters of 2009.

aWe are pleased with these results, as they demonstrate that our delivery rates now better reflect the actual cost of providing service to our utility customers, while giving the Company a better opportunity to earn an appropriate return,a Lant said.

aThe costs of running our business, for such items as tree trimming, property taxes and depreciation, were higher. But on the whole, it was a good, strong quarter for Central Hudson a" its fifth consecutive quarter of improved results a" and that demonstrates, we believe, a strong foundation for sustained improvement in future periods,a he said.

Griffith Energy Services

Griffith Energy Services posted a loss of 14 cents per share during the third quarter of 2010, improved results from the 22-cent loss that occurred during 2009a™s third quarter. aOwing to the seasonal nature of Griffitha™s fuel oil business, we fully anticipated a loss during the period and we were encouraged to see progress as compared to a year ago,a Lant said. He said that 6 cents of the improvement was due to the 2009 partial divestiture of non-core divisions that accounted for approximately 40 percent of the business. That divestiture was aimed at reducing volatility in cash flow and produced a gain of 34 cents in the fourth quarter of 2009.

Year-to-date in 2010, the reduced-scale Griffith has posted earnings of 1 cent per share, down from the 28 cents per share earned during the first nine months of 2009. Excluding the divestiture, earnings were 8 cents per share lower, due primarily to warmer weather and lower sales volume.

Other Businesses and Investments

The other businesses and investments of CH Energy Group posted a loss of 35 cents per share during the third quarter, as compared to a gain of 1 cent per share during the same period of 2009. A loss of 44-cents-per-share is attributable to the impairment of the full value of CH Energy Groupa™s ethanol investment. These charges were partially offset by lower taxes at the holding company. Year-to-date, the other businesses and investments have posted a non-cash loss of 43 cents per share, which would have been a 1-cent favorable contribution were it not for the one-time impairment charge.

Update on Future Strategic Direction

aWe have updated our strategic plan, and going forward CH Energy Group will focus its efforts and capital resources on the energy distribution operations of Central Hudson and Griffith,a said Lant. aWe have concluded that we should focus exclusively on what we do very well, which is energy delivery. We believe by doing so we can, with reduced risk and volatility, produce an attractive trend of growing earnings per share and dividends during the next five years, as well as improve service quality and customer satisfaction,a he said.

Lant explained that Central Hudson represents approximately 90 percent of corporate assets, and is positioned as the core business unit of CH Energy Group. aCentral Hudson possesses strong competencies in key areas for long-term success, such as consistently providing and satisfying customers with safe, efficient and reasonably priced electric and natural gas delivery services; a track record of successful financial and risk management; positive regulatory relationships; a committed and talented employee base; a culture of continuous improvement; a service territory with good growth prospects; and opportunities to invest in the electric and gas distribution and transmission infrastructure,a he said. He further explained that the utility is currently in the first year of a three-year rate plan that effectively reduces financial uncertainty and risk, and demonstrates support by New York State regulators of the utilitya™s continued infrastructure investments to improve the quality of service for customers while allowing stable and predictable returns for shareholders.

aGriffith is similarly positioned to increase value by delivering premium service to fuel distribution customers in the Mid-Atlantic region,a said Lant. aGriffith has right-sized its cost structure following the divestiture of non-core divisions in December 2009 and continues to focus on continuous improvement of its operations.a Lant described Griffitha™s service area as possessing a relatively strong and stable economy with an attractive customer base that values quality service at a fair price. aGriffith presents a strong brand name in its markets. Our experienced and skilled management team and committed employees are focused on enhancing our quality of service, expanding our HVAC service offerings, and providing growth opportunities through select tuck-in acquisitions. We believe Griffith will contribute increasing levels of earnings and cash flow to support CH Energy Groupa™s financial objectives in the future,a he said.

aWhile our updated strategic plan confirms our commitment to energy distribution, we have concluded that we do not possess the same strong competencies and competitive advantages in renewable energy,a said Lant. aThese investments do not typically display the risk and return profiles that are consistent with our financial objectives, requiring higher levels of leverage and more volatility than we are comfortable with. As we announced last quarter, we have discontinued development efforts in this area, and we will now begin to unwind the existing investment portfolio in an orderly manner,a he said.

aCH Energy Groupa™s updated strategy targets steadily growing and predictable earnings flowing from a growing utility rate base, limited exposure to commodity risk, and a supportive utility regulatory environment,a said Lant. aWe believe this strategy provides an attractive combination of earnings and dividend growth potential, and creates value for shareholders while their capital is employed to provide valuable services to our customers.a Lant explained that using 2009 earnings of $2.76 per share as a base, growth from the operating companies, excluding any gains or losses from the sale of renewable assets, is expected to produce average annual earnings growth of at least 5 percent through 2015, placing CH Energy Group in a better position to increase dividends at a level consistent with a target payout ratio of 65 percent to 70 percent.

aWe believe that our new strategic direction, which is focused on our demonstrated core strength in energy delivery, will provide maximum value for our customers and our shareholders in the long term,a Lant said. aWea™re excited about the available opportunities in our business and our plans to deliver consistent and tangible shareholder value in the future.a

About CH Energy Group, Inc.: CH Energy Group, Inc. is predominantly a regulated transmission and distribution company, headquartered in Poughkeepsie, New York. Regulated utility Central Hudson Gas & Electric Corporation serves approximately 300,000 electric and 74,000 natural gas customers in eight counties of New York Statea™s Mid-Hudson River Valley, delivering natural gas and electricity in a 2,600-square-mile service territory that extends north from the suburbs of metropolitan New York City to the Capital District at Albany. CH Energy Group also operates Central Hudson Enterprises Corporation (CHEC), a non-regulated subsidiary composed of Griffith Energy Services, which supplies energy products and services to approximately 56,000 customers in the Mid-Atlantic Region, as well as several renewable energy investments.

Conference Call: Mr. Lant will conduct a conference call with investors to review financial results at 2:00 p.m. (ET) today, October 28, 2010. Dial-in: 1-800-288-8968; Conference Name aCH Energy Group.a Supplemental materials will be posted to the Companya™s Web site at [ www.CHEnergyGroup.com ] to assist participants in following the Conference Call presentation. A digitized replay of the call will be available from 4:30 p.m. (ET) on October 28, 2010, until 11:59 p.m. (ET) on November 4, 2010, by dialing 1-800-475-6701 and entering access code 175039. In addition, the call will be webcast live in listen-only mode and available for replay for approximately 30 days within the Investor Relations section of the Companya™s Web site at [ www.CHEnergyGroup.com ]

Forward-Looking Statements a"

Statements included in this News Release and any documents incorporated by reference which are not historical in nature are intended to be, and are hereby identified as, aforward-looking statementsa for purposes of the safe harbor provided by Section21E of the Exchange Act. Forward-looking statements may be identified by words including aanticipates,a aintends,a aestimates,a abelieves,a aprojects,a aexpects,a aplans,a aassumes,a aseeks,a and similar expressions. Forward-looking statements including, without limitation, those relating to CH Energy Groupa™s and Central Hudsona™s future business prospects, revenues, proceeds, working capital, investment valuations, liquidity, income, and margins, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements, due to several important factors, including those identified from time-to-time in the forward-looking statements. Those factors include, but are not limited to: deviations from normal seasonal weather and storm activity; fuel prices; plant capacity factors; energy supply and demand; potential future acquisitions; the result of plans to divest non-core investments in an orderly manner; legislative, regulatory, and competitive developments; interest rates; access to capital; market risks; corn and ethanol prices; electric and natural gas industry restructuring and cost recovery; the ability to obtain adequate and timely rate relief; changes in fuel supply or costs including future market prices for energy, capacity, and ancillary services; the success of strategies to satisfy electricity, natural gas, fuel oil, and propane requirements; the outcome of pending litigation and certain environmental matters, particularly the status of inactive hazardous waste disposal sites and waste site remediation requirements; and certain presently unknown or unforeseen factors, including, but not limited to, acts of terrorism. CH Energy Group and Central Hudson undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Given these uncertainties, undue reliance should not be placed on the forward-looking statements.