KANSAS CITY, Mo., Feb. 5, 2004 — Great Plains Energy Inc. has announced earnings for 2003 of $143.3 million, a 15% increase over 2002 earnings of $124.5 million.
Earnings per share increased from $1.99 in 2002 to $2.07 in 2003 on 6.9 million more shares outstanding. The Company also announced the decision to exit KLT Gas Inc., a subsidiary specializing in coal bed methane exploration and development.
“This decision is based on the fact that the amount of capital required and the earnings volatility associated with the gas exploration business are no longer compatible with the Company’s strategic vision. Exiting the business will be implemented appropriately to maximize shareholder value,” said Michael Chesser, Chairman.
The Company experienced a fourth-quarter loss of $4.7 million, or ($0.07) per share, compared to earnings of $26.8 million, or $0.41 per share for the same period in 2002. The fourth-quarter 2003 earnings reflect a $0.40 impairment charge relating to the Company’s plan to divest KLT Gas Inc.
Full-year 2003 ongoing earnings, defined as Generally Accepted Accounting Principles (GAAP) earnings adjusted for certain unusual items, were $146.1 million, or $2.11 per share, compared to $141.6 million, or $2.26 per share in 2002. Revenues increased 19% to a record $2.1 billion. The difference in ongoing earnings compared to 2002 was driven primarily by a 46% increase in wholesale revenues at KCP&L, a 33% increase in earnings at Strategic Energy and lower interest expense.
These factors were partially offset by an unfavorable weather comparison that affected revenues by approximately $13.3 million, higher pension expenses of approximately $11.9 million, increased operating losses from KLT Gas of $3.4 million, increased plant maintenance expenses of $6.7 million, and a net $2.9 million earnings impact from the 2003 Kansas rate reduction.
Fourth-quarter ongoing earnings were $20.6 million, or $0.29 per share, compared to $28.3 million, or $0.43 per share in the same quarter last year. The difference in ongoing earnings when compared to the fourth quarter of 2002 was primarily driven by a $6.7 million or a 15% decrease in wholesale revenues at KCP&L.
This difference resulted from the Wolf Creek refueling outage that reduced the MWhs available to sell in the wholesale market. Increased plant maintenance expenses and pension costs also contributed to lower fourth-quarter results. These items were partially offset by an 18% increase in earnings at Strategic Energy and lower interest expense.
Unusual items in the fourth quarter that affected earnings consisted of a $28.0 million after-tax impairment of the KLT Gas properties, $0.5 million in additional litigation settlement recovery from the 1999 Hawthorn incident, and a $2.2 million increase in the DTI bankruptcy settlement recovery due to receipt of escrow proceeds and refinements to DTI related tax amount. There also are a number of previously disclosed unusual items that occurred in prior quarters. Attachments B and C reconcile GAAP and ongoing earnings and EPS figures for the fourth quarter and full year.
For 2004, the Company’s ongoing earnings guidance is $2.20 to $2.32 per share, excluding KLT Gas operations and divestiture costs estimated at $0.05 to $0.08 per share. Details of this guidance by business segment are included in Attachment F.
— Great Plains Energy reported record revenues of $2.1 billion, a 19% increase.
— Kansas City Power & Light reported record wholesale revenues of $157.5 million, a 46% increase.
— KCP&L also reported record generation, an increase of 3% with a record coal base load capacity factor of 77%.
— Strategic Energy MWh sales increased 41% and earnings increased 33%.
Chesser commented: “Great Plains Energy delivered outstanding results in 2003 with both major business units performing well. The strong operating performance of our low-cost generating fleet allowed us to benefit from the robust market for wholesale power. Strategic Energy continued to increase its contribution to earnings through disciplined growth. Our 2004 guidance reflects EPS growth of approximately 5% and combined with our dividend, we are positioned to continue delivering an attractive total return for our shareholders.”
Kansas City Power & Light
KCP&L’s full-year earnings were $127.2 million, or $1.84 per share, compared to $102.9 million, or $1.64 per share in 2002. Full-year ongoing earnings were $115.9 million, or $1.68 per share, compared to $113.0 million, or $1.80 per share in 2002. Full-year total revenues were approximately $1.1 billion, up 4% over 2002. Retail revenues, normalized for the negative weather comparison with last year and adjusted for the 2003 Kansas rate decrease, grew by approximately 2% over 2002.
Wholesale revenues were a record $157.5 million, up 46% over 2002. This gain in wholesale revenues was due to higher prices and increased MWhs achieved through a strong fleet performance and focused power-marketing efforts. The coal base load fleet achieved a record level of generation for the year of over 15 million MWhs, up 6% over 2002. The capacity factor for the coal base load fleet also set a record of 77% this year. The increased revenues were partially offset by an unfavorable weather comparison, higher pension expenses, and increased plant maintenance expenses.
Earnings in the fourth quarter were $12.6 million, or $0.18 per share, compared to $18.8 million, or $0.29 per share in 2002. KCP&L ongoing earnings for the quarter were $12.1 million, or $0.17 per share, compared to $18.8 million, or $0.29 per share for the same period in 2002.
Fourth-quarter revenues were $223.1 million, off 3% from $229.2 million in the fourth quarter of 2002. The lower ongoing earnings for the fourth quarter were driven by several primary factors: an unfavorable weather-related revenue impact of $2.4 million, higher pension expenses of $2.6 million compared to last year, and the lower wholesale MWh sales and higher expenses related to plant outages, including the refueling outage at our Wolf Creek plant. Average wholesale prices increased during the quarter 15% over the same period last year partially offsetting the 11% lower MWh generation.
On a per share basis, the Company’s 2002 equity offering diluted the quarter and 2003 earnings per share by $0.02 per share and $0.20 per share, respectively.
Strategic Energy, one of the nation’s largest competitive suppliers of electricity to commercial and institutional customers, continued its strong performance and annual profitable growth with 2003 earnings of $39.6 million, up 33% versus $29.7 million in 2002. Revenues were up 38% over 2002 to $1.1 billion for the year.
In the fourth quarter, earnings were $9.4 million, an increase of 18% compared to $7.9 million in the same period last year. Revenues in the quarter were up 42% over 2002 to $296.5 million.
The primary factors for the increased earnings in both periods compared to 2002 were increased MWhs delivered of 41% and 37% for the year and quarter, respectively, and market entry into Michigan and New Jersey that contributed to an increase in new customers during 2003 of 31% and during the quarter of 25%. Also contributing to the increases were a strong customer re-sign rate of approximately 80% and recognition of the 6% increase in the Company’s ownership in Strategic Energy. These factors were offset slightly by a decrease in the gross margin per MWh delivered during the year from $8.70 in 2002 to $7.34 in 2003 and a fourth-quarter decrease from $8.96 in 2002 to $6.83 in 2003. The decrease continues to be driven primarily by older, higher margin contract expirations. Margins on new business continue to remain in the $5.00 to $6.00 per MWh range.
On a per share basis, the Company’s November 2002 equity offering diluted the quarter and year-to-date 2003 earnings per share by $0.01 per share and $0.07 per share, respectively.
Non-GAAP Financial Measure
Great Plains Energy provides in its quarterly earnings releases descriptions of “ongoing earnings” in addition to earnings calculated in accordance with GAAP. Great Plains Energy also provides its earnings guidance in terms of ongoing earnings. Ongoing earnings are a non-GAAP financial measure that differs from GAAP earnings because it excludes the effect of certain unusual items. Ongoing earnings for historical periods are reconciled to GAAP earnings for the same periods in the tables on Attachments B and C. Great Plains Energy is unable to reconcile its ongoing earnings guidance to GAAP earnings per share because we do not predict the future impact of unusual items.
We believe ongoing earnings provide to investors a useful indicator of our results that are comparable among periods because it excludes the effects of unusual items, which may occur on an irregular basis. Investors should note that this non-GAAP measure involves judgments by management including whether an item is classified as an unusual item. We use ongoing earnings internally to measure performance against budget and in reports for management.
Great Plains Energy Incorporated (NYSE:GXP), headquartered in Kansas City, Mo., is the holding company for three business units: Kansas City Power & Light Company, a leading regulated provider of electricity in the Midwest; Strategic Energy LLC, an energy management company providing load aggregation and power supply coordination; and KLT Gas Inc., a subsidiary specializing in coal bed methane exploration and development. The Company’s web site is www.greatplainsenergy.com.