20040220Avera_WrkPapers.pdf

DAVID J. MEYER
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
A VISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF A VISTA CORPORATION FOR THE )
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AND )
NATURAL GAS SERVICE TO ELECTRIC AND )
NATURAL GAS CUSTOMERS IN THE STATE )
�IDmo )
CASE NO. A VU-E-04-01
CASE NO. A VU-G-04-01
WORKPAPERS
WILLIAM E. A VERA
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)
(•)
'--'
( .)
I <:»
Center for Public Utilities Advisory Council
New Mexico State University
Presents
The Santa Fe Conference
"Current Issues 2003"
Remarks by
William L. Massey, Commissioner
Federal Energy Regulatory Commission
Santa Fe, New Mexico
March 17, 2003
Good morning. It is my honor to have the opportunity to address and interact with
the distinguished attendees at this highly respected conference.
I am on a Western swing of sorts. I have spent the last few days in the Pacific
Northwest meeting with market participants, state commissioners, and the Bonneville
Power Administration to discuss energy market and customer protection issues.
All over the country, producers and transporters of energy want policies that
encourage investment in critical infrastructure such as production wells, pipelines, high
voltage electric transmission capacity, electric generation, and demand resources.
Customers want the same things, plus assurances of reliability and reasonable prices. All
seem to want a level playing field where everyone gets fair treatment. State regulators
want their views respected. They want to be co-equal partners in regulatory policy, and
(·
'-- )
( J
2
they insist on being in charge of ensuring reasonable prices and fair treatment for end use
consumers of natural gas and electricity.
My fellow Commissioners and I at the Federal Energy Regulatory Commission
agree with all of these goals and are working to achieve them.
Broadly stated, the Commission's mission is to make electricity and natural gas
markets work for consumers. This has required a steady evolution of federal regulatory
policies. The issue is no longer - and has not been for quite a number of years - whether
to have wholesale markets for electricity and natural gas. The Reagan and first Bush
Administration championed wholesale markets. The Clinton Administration supported
markets, and President Bush named his Texas protege, Pat Wood, to continue the policy
evolution.
The issue now is this - will we tolerate poorly structured markets, or will we insist
on good markets, well structured markets that provide customer benefits?
This is an important question, because markets don't structure themselves and don't
fix themselves. They don't oversee and monitor themselves. They don't establish or
enforce the rules. These are the responsibilities of regulators.
()
3
Sadly, the tsunami of the western energy crisis, coupled with the collapse of
Enron, have left a devastating wake within the industry. Investor confidence has been
shaken by these events, by a declining national economy, indictments of energy traders,
accounting irregularities, downgrades by rating agencies, and continuing investigations
by the FERC, CFTC, the SEC and the Justice Department. These investigations are
certainly necessary, and must leave no stone unturned. Nevertheless, they do have an
impact on investor confidence and credit availability.
On January 16th the Commission heard a full day of testimony from Wall Street,
representatives of investment and commercial banks, hedge funds, financial analysts,
investment advisors and credit rating agencies. The conference was held to evaluate
capital availability for energy companies and for infrastructure projects.
The flight of capital from the industry has been severe since the collapse of Enron.
Witnesses pointed out that institutional lenders and investors have come under strong
pressure from their own shareholders and senior management to reduce exposure to both
the merchant and non merchant segments of the energy industry. Many sources of funds
have dried up, yet energy companies have billions in debt to refinance over the next two
years.
c)
4
Evan Silverstein, the President of an investment firm known as SILCAP, did not
mince words. He argued that cheap capital and greed in the late l 990's led to
undisciplined investment, over leveraged balance sheets and significant over capacity.
He said that the financial models used by some market participants were sharply out of
line with the actual business risk they faced: He called for clear market rules and
structure, reasonable and stable regulation, forceful market monitoring and oversight to
ferret out abuses, and patience. In general, the witnesses were optimistic that capital
would return over time, but not in the short term. No quick fixes were advocated.
Several testified that investor and lender confidence would be restored by transparent debt
disclosure and accounting practices, by prudent business models with strong balance
sheets, and by the elimination of corporate malfeasance.
What could FERC do? Virtually all of the witnesses commented favorably on
standard market design as a tool to create a more stable environment and more certainty
for energy companies and thus for investors and lenders. All favored respect for sanctity
of contracts. All urged the Commission to wrap up pending investigations of market
manipulation as soon as possible. None of these suggestions surprised me.
I was somewhat surprised, however, by the explicit recognition repeated by several
Wall Street representatives that a reasonable regulatory policy does not blindly trust
(_) unfettered market forces. In conttast, the tone of past conferences attended by Wall Street
5
representatives seemed to be "FERC should simply get out of the way and let the market
work its magic." The tone of this conference was markedly different. Speakers wanted
markets, yes, but markets with clear rules, with oversight, with effective monitoring,
markets that are hard to manipulate.
It was highly valuable to hear from Wall Street representatives. Not that we do
their bidding or value their views more than others, but they have a voice that ought to be
heard. It confirmed the wisdom of the Commission's current policy direction to achieve
markets that work for consumers. With the right set of policies in place, such markets
( should spur the necessary infrastructure investment as well. - )
Markets that work - that is the clarion call at the Commission. Yet, we still have
lost of old business to tend to. The Commission is now taking aggressive steps to take
care of some old business even as we press a number of initiatives aimed at better
markets.
The old business involves the herculean effort to resolve all of the pending issues
and investigations arising out of the western energy crisis of 2000 - 2001. Last year, we
charged our staff with getting to the bottom of all allegations of market manipulation and
abuse in both natural gas and electricity markets. Within the next few days, they will
(_) present to the Commission a comprehensive report with recommendations for further
( ' ) 6.
Commission action, including proposed remedies for any abuses they found. This may
spur additional Commission proceedings necessary to ensure that justice is done.
This report will also have a bearing on the level of refunds that are necessary to
make western customers whole for electricity prices during 2000 - 2001, that the
Commission has already found were unjust and unreasonable.
This staff investigative report may also have relevance in resolving the pending
Commission litigation over complaints about whether certain long term power contracts,
negotiated when spot electricity prices were out of control, should be set aside by the
Commission as either unjust and unreasonable or against the public interest.
The Commission must resolve these Western matters as soon as we can while
ensuring that our investigation is thorough and our remedies appropriate.
Resolving this important old business involves huge levels of Commission
resources. It provides a painful daily reminder that poorly structured markets can wreak
economic havoc and fail miserably. The unfortunate result is loss of faith in markets,
massive investigations, two year old refund cases, contract abrogation fights, and lots of
uncertainty for investors, lenders, market participants and consumers.
c, 7
There must be a better way. Why not insist that wholesale markets are well
structured from the start? By that I mean a market structure that relies primarily on long
term contracts negotiated in the context of a transparent spot market that is producing just
and reasonable prices and locational price signals. I mean independent grid and
independent market operation to create a level playing field on which all resources -
supply and demand resources, renewable resources, distributed generation - can compete;
where there is no tolerance for affiliate abuse; where clear rules define acceptable and
unacceptable behavior; where reasonable customer protections, reasonable price
mitigation measures, and solid market power screens are built in to the market design;
where there is potential for a robust demand response, and where there is a highly
professional and aggressive market monitoring unit on the ground to serve as an early
warning device should problems arise.
What a radical concept. Wholesale markets that spur investment, produce just and
reasonable prices, and provide substantial consumer benefits. After all, aren't these the
core values that define our role as federal regulators?
These market design elements do not, however, simply fall into place in some
Calvinistic fashion. As I've said, markets do not structure themselves, fix themselves or
monitor themselves. Wholesale market structure must be defined by federal regulators.
() "'-- - 8
For the first time, the FERC is shouting from the rooftops - no more bad markets,
no more California- type markets, no more runaway markets. We are insisting that
markets work. We took thousands of pages of testimony from experts from around the
country and the world before we proposed our standard market design last summer. Now,
it clearly needs some work, but that's what the comment period is for. We have received
thousands of pages of written comments. We have had scores of outreach sessions and
technical conferences. We have committed to publishing a white paper in April outlining
significant refinements to our proposal, there will be Congressional hearings on the white
paper, and additional comments from state commissions, market participants and
customers will be expected.
We are clearly moving toward greater regional flexibility, greater deference to
state regulators, and streamlining the rule to eliminate unnecessary detail.
Two other related areas of electricity policy evolution are also critical. The first is
the establishment of regional grid operation and market platforms we call RTOs. RTOs
will create a level playing field by operating without bias toward particular merchant
interests, and they will eliminate the multiple transmission rates over regions that can
make transactions uneconomic.
()
9
The second is our proposal to streamline the process and agreements associated
with generator interconnection. The thorniest issue in the interconnection arena seems to
be how to price the grid upgrades necessary for the new generator. Traditionally, our
policy has been to roll in most of the cost over time, but state commissions and some
utilities have argued that the upgrades should be paid for by the generator and the
customers or ratepayers who benefit from the upgrade. This concept of beneficiary pays,
often referred to as participant funding, has been proposed by the Commission in our
SMD, and the concept is also being debated in the comments to our interconnection
NOPR.
I realize that thus far I have spoken almost exclusively about wholesale electricity
markets, yet there are important natural gas issues pending as well. The wholesale natural
gas market is more mature, and the market structure more well defined and well
understood. Yet, the dramatic rise in the use of natural gas for electric generation, though
welcomed by the industry and by environmentalists, has placed some strains on the
production and delivery systems. The LDCs, the traditional customers of the pipelines,
have expressed strong concerns that any special treatment or flexibility given to
generators will erode the quality of service the LDCs have come to enjoy. I understand
that negotiations may have produced a generic agreement between LDCs and pipelines
that will be presented to the Commission soon.
c·)
10
The stresses and strains on the natural gas production, storage and delivery system
were dramatically displayed the last week of February when Henry Hub prices soared,
with some transactions as high as $19.00. It has been an unusually cold winter in the
Midwest, Mid Atlantic and Northeast, and the cold weather has lingered. National
storage levels are at the low end of a five year range. High production area prices and
low storage levels may signal underlying production issues. Moreover, there is a rather
large storage gap to fill this summer.
Was there price manipulation? The Commission is investigating the price spikes,
both on our own initiative and because we have been asked to do so by Senators Daschle,
Bingaman and Schumer.
The high prices are rippling through the economy, affecting consumers already
suffering from an economic downturn. The Commission has an obligation to understand
the causes of these rather dramatic price movements, and I feel certain we will make
public our findings in the near future.
Another critical issue that both the natural gas and electric industries have in
common is price discovery.
11
Market participants must have timely access to accurate information about
prevailing prices. Price discovery, the ability to access this price information, helps
customers determine the price they should pay for the service or commodity, helps sellers
determine and recover their investment, and allocates resources to the customers who
value them most. Over the last twenty years, the trade press has created price indices
through the polling of market participants. The quality of the indices depends on the
integrity of the information collected and the number of active traders who report.
Accurate and credible price indices for natural gas and electricity are the foundation for
natural gas and electric transactions nationwide. Unfortunately, the false reporting of
price and volume information has shaken confidence in these indices.
Accurate price indices are required by pipeline tariffs. At a January 15
Commission meeting, Commission staff pointed to three areas of pipeline tariffs that refer
to market price data: cash-out provisions, penalties and basis differentials. Most major
pipelines have cash-out mechanisms that allow them to resolve system imbalances.
Accurate price information is essential if cash-out mechanisms are to account for and
minimize pipeline imbalances. The Commission has approved some pipeline penalty
provisions based on market indices to deter shipper misconduct that can threaten system
reliability. Finally, many negotiated rate transactions peg the transportation rate to the
basis differentials between two or more price index trading points.
( ..
)
12
It is imperative that there be trustworthy indices. As a first step, the Commission
will probably adopt minimum standards for the price indices used in pipeline tariffs or
new contracts. There are of course other proposals as well. The Committee of Chief Risk
Officers (CCRO) has been grappling with this issue and has some standards for the
Commission to consider. Others have suggested that the Commission by rule require all
jurisdictional entities to report accurately all transactions, including counter party
information, to a designated data gathering entity - perhaps the Commission itself. The
Barton legislation in the House would require the Commission to gather, and make public
by electronic bulletin board, data with respect to electricity transactions.
So, there is a "whole lot of shakin going on" in the price discovery arena. We are
sponsoring a conference this spring to explore various price discovery issues and
proposed remedies. I have an open mind on what the appropriate Commission response
should be. We must have high confidence, however, in the accuracy of price indices.
So, this is our vision - markets that work, markets that spur investment, markets
that both investors and consumers trust. The elements are a level playing field, an
appropriate reliance on long term contracts, good price discovery and locational price
signals, clear behavior rules, transparent and well functioning spot markets, transmission
rights, mitigation rules and appropriate customer protections, competent oversight and
(_) monitoring. These are not radical ideas. Much of it is common sense. But it doesn't
13
happen because all of the stars and planets are aligned. Regulators must implement
policies to make it happen.
Thank you.
ST.I\ND,.\RD �- tJ-:::F:f.�0[]Tt��7�1¥�,�������;��:�� ��°':t��-s-����������c-�������:���-��---�� ,, POOR'S i . �- ·,: _._-:� _- _-::"--'. ::� _--_-'_:.:_:�-: :-�- ?_ .------,:-- --_.:::· -- : �,--:. ->-� '}t·-.--� _"· -�::!-:: -:-:·:·:-_ -· - - -: __ -
:- - - - - - - . � - - -- - - - : - - -- - -- - - -: :--- .- - - - - • ....:- - - - -: - - - . .= -- - - -
I r ca
Reprinted from RatingsDirect
Credit Quality for U.S. Utilities ·continues Negative Trend
Credit Analysts: Barbara A Eiseman, New York (1) 212-438-7666; John P Alli, New York
The U.S. utility industry (electric, gas, pipeline, and water companies)
continued with the downward credit trend--which was firmly established in
early 2000--in this year's turbulent first half. The pace of rating downgrades
actu.ally picked up in the first half of 2003 compared with the same period in .
2002. Since Jan. 1, 2003, Standard & Poor's Ratings Servic_es recorded 88
downgrades of U.S. utility holding companies and operating subsidiaries,
compared with just eight upgrades. In the second quarter alone, Standard &
Poor's downgraded 38 companies while upgrading only five. Standard &
Pear's also placed several companies on CreditWatch and revised many
rating outlooks in the first half of the year, most of which were negative. In
contrast to this year's first six months, there were 78 downgrades and six ·
upgrades during the same period in 2002.
( )
(1of18)
Credit Quality for U.S. Utilities Continues Negative Trend
Chatt 1
. Rating Actions
100
90
80
70
60
50
40
30
20
10
0
.r_) Upgrades
• First half 2002
• First half 2003
88
Oownqrades
The downward slope in the power industry's credit picture can be traced to
higher debt leverage and overall deterioration in financial profiles,
constrained access to capital markets as a result of investor skepticism over
accounting practices and disclosure, liquidity problems, financial insolvency.'.
and investments outside the traditional regulated utility business, principally
merchant generation facilities and related energy marketing and trading
activities.
Investments in unregulated businesses, principally the development of
merchant generation companies and the energy trading activities necessary
to support them, reflected companies' strategies to deal with an increasingly
competitive market while also seeking to enhance shareholder value. The
investments in merchant generation facilities and related energy marketing
and trading activities severely underperformed expectations, and, because
assets were typically financed substantially with debt, consolidated financial
profiles of utility holding companies with merchant exposure have suffered
significantly. Recently, several companies in this sector have refinanced their
bank facilities, thereby avoiding the prospect of imminent default.
Many companies, including Aquila Inc., TXU Corp., CMS Energy Corp., and
Dynegy Inc., that have diversified have elected to now dramatically temper,
or unwind in their entirety, those unregulated operations. In fact, "back to
basics" has become the industry's response to the damage to balance
sheets and to the drain on cash flows that so many companies experienced
as the result of their failed diversification efforts and to the consequent heavy
(2of18)
Credit Quality tor U.S. ununes Continues Negative Trend
/ )
/)
·-·� _,.-
()
(3of18)
blow to investor confidence that had long been a cornerstone of the power
industry. The repair work is substantial and, in fact, a few may have moved to
adjust too late, with bankruptcy a real possibility. The companies' refocused
business strategies entail disposing of nonperforming or habitually
underperforming degraded assets, seriously deleveraging, and eliminating
speculative trading positions. However, execution risk is substantial.
Generally, reinstalling the regulated business as the central focus of the
larger diversified corporation should be credit enhancing. Yet, today's very
low interest rate environment may lead state regulators to authorize lower
returns on equity. Justification on limiting returns on equity will also come
from the reduced rate on the taxation of dividends. Rising pension obligations
and health care costs will be new concerns for commissions that have to
address these upward rate pressures. It is important to note, however, that
few downgrades have occurred because of weakened financial profiles of
utilities themselves.
The ability of financially stressed firms to refinance imminent bank facility
maturities, coupled with a back-to-basics strategy for some companies, may
begin to gradually restore investor confidence. Nonetheless, the negative
credit momentum is expected to continue in 2003, as indicated.by the still
very large number of neqative credit outlooks and negative CreditWatch
listings, although Standard & Poor's expects that the pace of the negative
rating actions will moderate.
Industry Ratings Entrenched in 'BBB' Rating Category
As Standard & Poor's has reported, the average rating for the power industry
and energy sector as a whole has recently slipped out of the high 'BBB' ·
category into the mid-'BBB' area. Meanwhile, the number of companies rated
'BBB' and below continues to rise while the number of firms rated 'A' and
above declines.
Credit Quality for U.S. Utilities Continues Negative Trend
chart 2
)
,I)
(4 of 18)
Second Quarter 2003 Rating Distribution
CCC & lower
(2%) 1· AA.
A.
(36%)
(45%)
About 38% of the industry as a whole now carries ratings of 'A-' and above
versus 41 % one year ago. About 45% of the sector now falls into the 'BBB'
category, and 16% is rated speculative grade, including a several companies
that are rated 'D'. The percentage of companies now carrying mid-'BBB'
ratings is 23%--up from 18% in 2002--and the. percentage of 'BB' category
ratings has risen to nearly 5% from 3% as of June 30, 2003.
While downside risks to credit quality remain, as attested to by the
distribution of negative outlooks and negative CreditWatch listings, Standard
& Poor's does not expect that the U.S. power sector as a whole will fall below
the 'BBB' level. Notably, companies that continue to emphasize a more
traditional regulated structure, whether vertically integrated or not, should
remain firmly entrenched at a 'A-' average.
Notwithstanding the massivenumber of rating downgrades and ongoing
pressures on utility credit quality, the U.S. power sector remains relatively
highly rated, certainly compared with the average 'BB' category for U.S.
industrials. This is a function of the large percentage of companies (88%)
that have average or above-average business profiles.
Credit Quality for U.S. Utilities Continues Negative Trend
) Chart 3 . . . .
Second Quarter 2003 !Business Profile Distribution
(1 %)
8
6
(16%)
(18%)
7
(4%) .-, .;_
. (7%)
4.
(25%)
3
(
·.· .,)
(5 of 18)
· Capital Market Update
Financing activity has risen substantially in the past 12 months. The amount
of debt and preferred stock issued during the first half of this year was about
$60 billion, compared with about $38 billion issued during the six months of
2002. The increase in debt financing can be trace.d to lower interest rates,
depressed stock prices, acquisitions, and accelerating capital expenditures
that are primarily related to improvements and additions to existing facilities
and for environmental control projects.
)
Chart 4
Total Debt and Preferred Financing
E,0.2
=40+-------..:.:..i...:"----------,---�
:.a .. ...... 30 ..,._ _
20 -i------
10 -i------
0-+-----
YTD 2002 YTD 2003
/)
(6 of 18) ·
Freefall in Financial Measures Begins to Subside
Although still aggressively high, debt leverage appears to be leveling off.
Total debt, including hybrid preferred securities as cl percent of total
capitalization stood at 60.5% as of Dec. 31, 2002 (the latest period in which
comparable data are available) versus 55% at the end of 1998 (note that
hybrid preferreds were excluded from the latter ratio).
Credit Quality for U.S. Utilities Continues Negative Trend
Chart 5 .
) Average Sector Total Debt 0/o of Total Capital
r·- . )
._ .. I
(%)
61
60
59
58
57
56
55
54
53
52
1998 1999 2000 2001 ·.2002
/)
(7 of 18)
This debt level, while just one measure of financial health, is characteristic of
a '88-/8+' rating category credit with an average business position. However,
it is important to note that Standard & Poor's considers hybrid preferred
securities as having equity-like characteristics. Therefore, the 60.5%
overstates somewhat the amount of leverage that Standard & Poor's
considers the industry to have. Still, even without including hybrid preferred
securities in the calculation of total debt, leverage in the high 50% area is still
considered liberal.
Much of the increase in recent years is the result of the debt that a parent,
intermediate holding, or affiliate raised to fund unregulated activities or
acquisitions in the late 1990s. Accordingly, the funds from operations to total
debt ratio has also declined, falling to 17.5% in 2002 from 19.3% in 1998.
. /") Chart 6 .
Average Sector FFO% of Total Debt·
(%)
19.0%
18.S-:}S
18.0%
17.5%
17.0%
16.5%
16.0%
15.5%
1 s.o·=;'b
14.s<}.',
( ) 1998 1999
FFO--Funds from operations. ·
2000 2001 2002
()
(8 of 18)
This key financial ratio is typical of a 'BB' category company. Recently, higher
debt levels appear to have been covered by a strengthening in cash flows as
funds flow coverage of interest actually strengthened to the more historical
level of 3.6x. This level is suitable for companies in the low 'BBB' rating
group. Of course, there are several other financial and qualitative factors that
determine credit quality, but the overall erosion of financial parameters and
riskier business profiles has resulted in the median rating for the utility
industry slipping recently into the mid-'.BBB' category
Credit Quality for U.S. Utilities Continues NegativeTrend
Chart 7
Average Sector FFO Interest Coverage
(X)
(
···. ) .
1998 1999 2000 2001 2002
FFO--Funds from operations.
(9of18)
Developments in California
After months of discussion, the staff of the California Public Utilities
Commission (CPUC) and Pacific Gas & Electric Co. (PG&E) have hammered
out a compromise reorganization plan for the emergence of PG&E from
bankruptcy. Under the plan, PG&E would remain a vertically integrated utility,·
in sharp contrast to the utility's own plan. It would continue to own and
operate electric and gas transmission and distribution assets and electric
generation. Without hesitation, two of the CPU C's five commissioners, as
well as Gov. Gray Davis himself, condemned the plan as untenable because
the level of retail electric rates assumed would not be sufficiently reduced. If
the PG&E settlement is frustrated by political considerations, a cloud will
likely hang over the prospects for improved credit quality at California's
utilities until the state implements alternative solutions that are consistent
with sound credit quality. Nevertheless, the parties are confident that the
assent of the creditors will be obtained. Standard & Poor's considers the fact
that the parties have produced a reorganization plan that will yield an
integrated utility exhibiting investment-grade credit attributes as a positive
development. However, analysis of the proposal's financial projections must
still be performed.
PG&E now joins Southern California Edison Co. (SCE) in perhaps seeing a
glimmer of light at the end of a long, dark tunnel. SCE has benefited from its
/ )
(­ )
( )
(10 of 18)
own settlement agreement with the CPUC, which has permitted the utility to
recover past operating shortfalls through its PROACT, or deferred cost,
account. This account is expected to be fully recovered in July of this year.
Standard & Peer's must now address whether the utilities are on an upward
credit trajectory, and, if so, will prospects for improved credit quality
continue? Some significant issues remain, including whether the full
commission will adopt the compromise plan that its staff negotiated with
PG&E. Some additional challenges that are important to credit quality and
expected to be resolved or clarified in coming months include:
• Issues raised by The Utility Reform Network's (TURN) legal challenge
to the settlement agreement that SCE reached with the CPUC.
• The pending general rate cases.for SCE and PG&E , which will serve
as a barometer of the CPU C's commitment to long-term sound credit
quality for the state's investor-owned utilities.
• · The assignment of financial responsibility for the California
Department of Water Resources contracts to the utilities, which would
likely result in Standard & Poor's imputation of debt-like fixed
obligations to the utilities.
Looking Ahead
The percent ofstable utility rating outlooks has diminished, to about 55%
from 62% at the end of June 2002, reflecting a number of outlook revisions to
negative from stable. The percent of outlooks that are negative stood at 35%
at the end of second-quarter 2003, continuing to strongly overshadow ·
positive outlooks, which were under 2%.
Credit Quality for U.S. Utilities Continues Negative Trend
Stable
(55%)
Chart 8
Second Quarter 2003 Outlook Distribution
Watct1 Neg
(4%) l Watch Pos
(2%)
Negative
(35%)
)
· Positive
(2%),
() This negative bias results mostly from weakening financial conditions,
refinancing risk, weak competitive positioning, regulatory uncertainty,
execution risk associated with corporate restructuring efforts, and volatility in
the wholesale power market. Although the number of CreditWatch listings
has declined to about 6% from 21 % over the past 12 months, the bias
remains strongly negative. Of all companies on CreditWatch, 68% carry a
negative listing and 32% a positive listing.
The Recently Downgraded
Lower ratings on Duke Energy Corp. (BBB+/Negative/A-2), Duke Energy
Trading and Marketing LLC (BBB-/Negative/--), and other related
subsidiaries reflect concern regarding the company's ability to strengthen its
financial profile enough in the next 12 to 18 months to maintain former
ratings. Duke Energy's strategy to reduce debt with proceeds from asset
· sales had a good start in 2003, with about $1 billion in sales completed out of
a total of $1.5 billion. However, the plan leaves the company with little
capacity to absorb any further weakening in operating cash flows, while still
meeting its debt-reduction targets. Duke Energy's operating performance
may weaken even further, especially in the merchant generation operations.
Real stability in the consolidated financial profile may not occur until late
2004, when the conversion of equity units occurs.
( ) The negative outlook on Duke Energy reflects concern over execution of the
asset divestiture and debt-reduction strategy, including Duke Energy's ability
to effectively terminate the proprietary trading and marketing positions
without adversely affecting the consolidated financial profile.
(11 of 18)
Credit Quality for U.S. Utilities Continues Negative Trend
.-··)
()
( )
(12of18)
The ratings on SEMCO Energy Inc. (BB/Negative/--) were lowered two
notches, reflecting the company's announcement of lower cash flows to
levels that are not commensurate with the investment-grade threshold given
the company's risk profile. Furthermore, SEMCO's projections do not meet
Standard & Poor's expectations regarding cash flows or debt reduction. The
company's liquidity position is also strained. The negative outlook reflects
challenges SEMCO faces to reduce its debt burden over the near term, and,
to a lesser extent, the potential for continued deterioration of the company's.
nonregulated businesses. Failure to produce consistent cash flows from all
business segments, as well as reduce its debt will likely lead to lower ratings.
Conversely, the successful sale of Alaska Pipeline, followed by debt
reduction that would alleviate the April 2004 covenant hurdle, could lead to
ratings stability at the current levels.
The ratings on TECO Energy Inc. (BBB-/Watch Neg/A-3) and affiliates were · ·
lowered, reflecting continued exposure to power plant projects that are being
severely affected by a weak power price environment, ongoing asset sale .
execution risk, and the paramount importance of continuing to execute
planned strategic initiatives to arrest the company's weakening credit quality.
The company's attempt to refocus its business strategy to rationalize its
merchant power exposure and focus primarily on its utility (about 70% of
cash flow) and coal (about 20% of cash flow) businesses are the primary
drivers behind the company's maintaining its investment-grade corporate
credit rating. The power projects continue to be subject to weak power price
levels and may be subject to large write-downs in the future.
Subsequently, on July 10, 2003, the ratings on TECO and its affiliates were
placed on CreditWatch with negative implications as a result of an IRS
announcement creating potential complications related to the company's sale
of its interests in its synthetic fuel production facilities. The IRS
announcement stated it will suspend issuing new private letter rulings for
plants producing synthetic fuels. The CreditWatch listing for the TECO family
reflects the uncertainties regarding the company's ability to sell interests in its
synfuel production facilities to raise cash to halt the erosion of the company's
weakened financial profile.
The ratings on TECO are dependent on the company completing potential
asset sales (synfuel production facilities, TECO Transport, the Hardee power
station, Guatemalan assets, and other assets) to reduce debt leverage.
Absent such sales and the ability to achieve capital-spending reductions,
TECO may need to externally finance its obligations, which could further
negatively affect the company's credit quality.
The ratings on ONEOK Inc. (A-/Stable/A-2) were lowered owing to higher
debt leverage and the increasing scale of its higher-risk marketing and
trading group, which now accounts for nearly 50% of operating income.
Consequently, the business position was lowered to '6' (weak average) from
'5'. The revised ratings also reflect management's focus on deleveraging the
balance sheet and strengthening the overall financial profile. Over the past
four years, ONEOK has acquired a substantial portfolio of assets and built up
a formidable presence in the Mid-Continent market for gas transportation,
distribution, processing, gathering, and storage. While ONEOK funded many
of the acquisitions with equity and the proceeds of asset sales, the company
.................. x--···; •'-i• ._ - • ·-o •• · ....
also used debt, which weakened the financial profile. The outlook is stable.
The ratings on Consolidated Edison Inc. (CEI; A/Stable/A-1) and its
subsidiaries, Consolidated Edison Co. of New York Inc. (A/Stable/A-1 },
Orange and Rockland Utilities Inc. (A/Stable/A-1 ), and Rockland Electric Co.
(A/Stable/--), were lowered to reflect weaker-than-expected financial ratios in
2002. Also, the revised five-year forecast is weaker than the previous
forecast. Standard & Poor's also concluded that the risk factors for debt
equivalents associated with the purchased-power agreements should be
slightly higher, which placed some additional pressure on the ratings. In
addition, the $1.2 billion funding gap on pension and other postretirement
obligations (on a projected benefit obligation basis), caused by the decline in
the stock market, could place additional pressure on the ratings over the
forecast period. The outlook is stable.
(.
\ )
I )
(13 of 18)
The ratings on Allegheny Energy Inc. (B/Negative/--) and its subsidiaries
were lowered twice during the first six months of 2002 for a total of three
notches. The latest rating action can be traced to concerns about the
company's ability to sell enough assets or raise sufficient capital to meet the
aggressive amortization schedule as required by recently negotiated bank
loan agreements. The ratings also incorporate deteriorating operating
performance in 2002, concerns regarding management's ability to manage
the risks associated with discontinued operations and provide timely financial
disclosures--the company has notfiled a 1 OQ or 10K with the SEC in the
past 10 months due to accounting calculation errors. Standard & Poor's
assigned its 'BB-' and 'B' ratings to Allegheny Energy Supply Co. LLC's first- .
lien bank loan and second-lien bank loan, respectively. All the ratings were
removed from CreditWatch. The outlook is negative and reflects reliance on
asset sales under challenging industry conditions to bolster liquidity as well
as uncertainty associated with the company's financial profile.
The ratings on The Laclede Group Inc. (A/Stable/'."-) and subsidiary Laclede
Gas Co. (A/Stable/A-1) were lowered owing to subpar credit-protection
measurements and limited prospects for material improvement. The financial
weakness can be traced primarily to several successive warmer-than-normal
winters and higher debt leverage. The outlook is stable.
The ratings on Northwestern Corp. (B/Watch Neg/--) were lowered four
notches, reflecting very poor financial performance in the first quarter of 2003
and in 2002, the $890 million write-off associated with nonregulated
businesses, low forecast cash flow coverages, and constrained financial
flexibility. The utility operations are the primary source of dependable cash
flow and must shoulder the vast majority of the debt burden as well as fund
utility capital expenditures. Although the company intends to divest or
dispose of its noncore assets, concern exists with regard to management's
ability to execute this plan in a timely manner: Northwestern's preferred stock
is rated 'D' as a result of the company's failure to make dividend payments on
all its preferred stock issues.
The ratings on Aquila Inc. (B/Negative/--) were lowered and removed from
CreditWatch, where they were placed with negative implications Feb. 25,
2003. The rating action reflected concerns resulting from the company's
reliance on asset sales to reduce debt levels and projected weak cash flow
Credit Quality for U.S. Utilities Continues Negative Trend
from operations. Furthermore, cash flow generation relative to total debt is
likely to remain weak and not exceed 15% in the near term: At the same
time, Standard & Poor's assigned a 'B+' rating to Aquila's $430 million senior
credit facility. The negative outlook reflects the execution risks associated
with Aquila's future asset divestitures, the level of debt reduction from asset
sale proceeds, and the ability to restructure its tolling and gas prepay
commitments.
The ratings on Black Hills Corp. (BBB-/Stable/--) and Black Hills Power Inc.
(BBB-/Stable/--) were lowered owing to increasing investments in
unregulated activities that carry a riskier business profile than the vertically
integrated regulated electric utility operations. Unregulated businesses
contribute close to 60% to consolidated operating income, which is expected
to grow in the future. Projected consolidated financial measures are
adequate to weak for the revised ratings. Funds from operations to interest
expense at nearly 4x is adequate, but total debt to total capitalization of
about 58% and funds from operations to total debt of some 20% are subpar.
The outlook should remain stable as long as project development and
acquisitions are managed conservatively and do not materially increase the
business risk profile and harm financial measurements, Ratings stability
assumes current purchased-power contracts for the power generation
portfolio will remain in place.
( )
(14 of 18)
A Couple of Upgrades
The ratings on Panhandle Eastern Pipe Line Co .. (BBB/Stable/--) were raised
following its acquisition by Southern Union Co. (BBB/Stable/--). The ratings
were removed from CreditWatch with positive implications. The acquisition of
Panhandle Eastern Pipeline includes three gas pipelines, Panhandle Eastern
Pipeline, Trunkline Gas Co., and Sea Robin Pipeline, along with the
Trunkline liquefied natural gas facility. The $1 . .8 billion acquisition includes
the assumption of $1.2 billion of debt. The remainder was funded with 3
million shares of Southern Union's common stock and $584 million of cash.
The ratings are based on the credit profile of the pipelines and on the implicit
credit support of the parent, Southern Union. The ratings on Southern Union
reflect the company's highly leveraged balance sheet, offset by the relatively
strong business position and stable cash flows of its gas distribution
businesses and gas pipelines. The outlook is stable.
Texas Gas Transmission LLC's (BBB+/Stable/--) ratings were raised six
notches and removed from CreditWatch, where they were placed with.
positive implications April 14, 2003. At the same time, Standard & Poor's
assigned its 'BBB' corporate credit and senior unsecured rating to TGT
Pipeline LLC, a holding company for Texas Gas Transmission Corp. The
rating actions reflected the company's separation from The Williams Cos. Inc.
(B+/Negative/--), solid credit measures, and an above-average business
profile associated with its interstate gas transmission pipeline business.
On April 14, 2003, Loews Corp. (A/Stable/A-1) announced that it had agreed
to purchase the common stock of Texas Gas Transmission from Williams for
$1.045 billion ($795 million equity purchase price plus $250 million of
assumed debt). Loews wili initially finance the purchase price with $530
million of cash contributed by Loews and a $275 million bridge loan to Texas
Gas Transmission. TGT Pipeline, an indirect wholly owned subsidiary of
)
()
(15of18)
Loews, was formed to acquire Texas Gas Transmission. After its acquisition
by TGT Pipeline, Texas Gas Transmission was converted into a limited .
liability company and renamed Texas Gas Transmission LLC. Thus, TGT
Pipeline is a holding company and conducts all of its operations through
Texas Gas Transmission. Therefore, the unsecured debt at the holding
company level is subordinate to the unsecured debt at the operating
company level. The outlook is stable.
A New Negative CreditWatch Listing
The rating on TNP Enterprises Inc. (BBB-/Watch Neg/--) and subsidiary
Texas-New Mexico Power Co. (BBB-/Watch Neg/--) were placed on
CreditWatch with negative implications. The company's ability to achieve
investment-grade financial ratios by the end of 2005 as expected, is now
doubtful. The current rating was initially assigned at the time of the leveraged
buyout of the company in 2000 based on expectations that debt would be
significantly reduced with the proceeds from the sale of the company's only
generating plant, TNP ONE, and subsequently by the securitization of
stranded costs in 2005, which would pay down about $395 million.
However, in November 2002, TNP sold the plant for less than was originally
anticipated, which leaves a greater amount of debt to be paid down in 2005,
and a greater amount of interest expense to be paid over the interim.
Moreover, the business profile was expected to reflect that of an electricity
distribution business with stable earnings from fees collected from sellers of
electricity. However, First Choice, the retail electric provider associated with
Texas-New Mexico Power, incurred significant costs during the first quarter
gas price spike--a cost that will slow the financial recovery of TNP
Enterprises. The company is taking steps to protect First Choice from pricing
volatility in the future, but the business profile is not the above-average
profile of a fee-collecting distribution business. The CreditWatch listing will be
resolved in the near future after a review of management's plan for achieving
an investment-grade financial profile by the end of 2005.
CreditWatch Removals
The ratings on Reliant Resources Inc. (B/Negative/--) and its subsidiaries
Reliant Energy Mid-Atlantic Power Holdings LLC, Reliant Energy Capital
(Europe) Inc., and Orion Power Holdings Inc. were affirmed and removed .
from CreditWatch. The outlook. is negative. The wholesale operation is
characterized by high business risk including regulatory uncertainty and
volatile cash flows. Standard & Poor's wholesale price outlook suggests that
the wholesale operation will contribute about 38% of operating cash flow.
This segment, however, represents a significant investment by Reliant
Resources and will necessitate capital expenditures of about $850 million in
the next two years to complete assets currently under construction in the
Midwest and Western regions and other maintenance. The wholesale
operation is also a large user of liquidity as collateral calls may be significant
depending on market price fluctuations and negotiations with. various
counterparties that buy and sell power and fuel to and from Reliant
Resources.
Tempering the more volatile cash flows from the unregulated power sector is
Reliant Resources' investment in the Texas retail market. The retail operation
benefits from a relatively supportive regulatory regime in Texas for primarily
Credit Quality for U.S. Utilities Continues Negative Trend
.," )
(16 of 18)
residential and small commercial customers. The Texas retail operation gives
Reliant Resources a hedge against the currently low cash flow in the
wholesale operation because the company can procure the power it needs to
serve the retail operation at low prices. In high-price markets, Reliant
Resources will likely adjust the retail "price to beat" for cost increases to
maintain gross margins. In addition, the company may benefit from higher
gross margins in its wholesale portfolio.
The negative outlook reflects the continued weak wholesale power market
partially offset by its Texas retail business. Reliant Resources is exposed to a
possible negative outcome of the FERC proceedings related to the California
markets.
The ratings on Nicor Inc. (AA/Stable/A-1+) and subsidiary Nicor Gas Co.
(AA/Stable/A-1 +) were affirmed and removed from CreditWatch with negative
implications where they were placed July 22, 2002. The short-term corporate
credit and commercial paper ratings were not on CreditWatch. The
CreditWatch removal reflected Standard & Poor's assessment that resolution
of outstanding issues facing the company, including outstanding lawsuits and
allegations that Nicor Gas acted improperly in connection with its
performance-based rate plan, will have only a nominal effect, if any, on the
company's robust consolidated financial condition. The outlook is stable.
The ratings on The Williams Cos. Inc. (B+/Negative/--) and its subsidiaries
were removed from Creditvvatch with negative implications, where they were
placed July 23, 2002. The removal reflects the high likelihood that Williams
will have sufficient cash available to repay the $1.17 billion maturity due in
· July 2003 and that liquidity issues are no longer the primary credit concern. ·
In addition, Standard & Poor's raised its rating on Williams' senior unsecured
debt to 'B+' from 'B' because the senior debt at the Williams companies is no
longer materially subordinate to debt at the operating companies after the
recent asset sales. Priority debt to total assets is less than the 15% threshold
required for subordination for a speculative-grade company.
A significant credit concern is the company's ability-to stem the cash drain
from the energy marketing and trading business unit. This segment was
responsible for a $790 million cash drain in 2002 and for a $292 million cash
drain in the first quarter of 2003. However, because the marketing and
trading business performs all of Williams' commodity risk management, less
than 60% of the cash usage is actually for its trading operations. More than
40% is for its Canadian and domestic midstream fuel and gas shrink
requirements and for margin on hedged exploration and production gas
contracts in the $4 area. However, Williams must demonstrate that this
business unit will not be a significant user of cash in 2003. The negative
outlook reflects the company's weak financial ratios for 2002 and continued
expected weakness in 2003.
Another Negative Outlook
The credit outlook on Middlesex Water Co. (A/Negative/-) was revised to
negative from stable reflecting deterioration in the company's financial profile.
The weakening in Middlesex Water's financial parameters is mainly due to
the company's heavy capital spending program geared toward maintenance
in the New Jersey operations and growth in the Delaware operations. The
Credit Quality for U.S. Utilities Continues Negative Trend
)
· .. r)
( )
(17 of 18)
capital spending plan calls for about $30.5 million to be largely financed with
debt, pushing debt leverage close to 60% by the end of 2003 and funds from
operations to total debt below the current level of about 12%. In addition, an
increase in unregulated activities and unsupportive regulatory treatment
could also cause the company's business profile to deteriorate, necessitating
higher credit-protection measures.
Recent Credit Stability
The credit outlooks on NiSource Inc. (BBB/Stable/--) and its subsidiaries
were revised to stable from negative owing to meaningful actions that
NiSource has taken to strenqthen its aggressively leveraged balance sheet
and improve its overall financial profile. Notably, the company has sold
virtually all of its higher-risk, noncore assets, resulting in nearly 99% of
operating income and cash flow now being derived from regulated activities.
Net proceeds from these asset sales, in conjunction with a common equity
offering of $736 million in late 2002, has enabled NiSource to reduce its
onerous debt burden by nearly $1.6 billion since late 2001. Recent
agreements to sell its exploration and production subsidiary, and most of its
Primary Energy assets for a combined total of $665 million, coupled with a
20. 7% common dividend reduction to take effect with the November 2003
dividend, should help to bring the company's financial measures up to
appropriate levels. Ratings stability also reflects the expectation of sustained.
financial improvement, the significant actions taken to date to deleveraqe, as
well as the company's geographic diversity and significant scale, modestly .
growing service areas, favorable requlatory climate, and a competitive gas
distribution and transmission cost structure.
The outlook on Central Hudson Gas & Electric Corp. (A/Stable/--) was
revised to stable from positive owing to Standard & Poor's expectation that
the company will continue to maintain an adequate financial profile for the
current ratings, with funds from operations interest coverage of at least 5.5x
and funds from operations to total average debt of at least 20%. Standard &
Poor's expects that CH Energy, the parent company's unregulated venture,
will continue to grow modestly and be funded prudently, while not adversely
affecting the consolidated business and financial profiles. Finally, it is
expected that the consolidated financial profile will continue to mirror that of
the regulated utility.
Upward Credit Potential
The rating outlook on Public Service Co. of New Mexico (BBB-/Positive/--)
was revised to positive from stable. The positive outlook is based on
Standard & Poor's expectations that the company will achieve a more robust
financial profile as a result of higher earnings associated with the terms of its
global agreement for electric customers that sets a predictable rate path to
2008 and allows operating cost savings and earnings from sales to the
wholesale market to be retained by shareholders, a gas rate hike, ongoing
debt reduction, the continued strong increase in energy demand by
customers in New Mexico, arid a more stable and supportive regulatory
environment.
Credit Quality for U.S. Utilities Continues Negative Trend
Published by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. Executive
offices: 1221 Avenue of the Americas, New York, NY 10020. Editorial offices: 55 Water
Street, New York, NY '10041. Subscriber services: (1) 212-438-7280. Copyright 2003 by The
McGraw-Hill Companies, Inc. Reproduction in whole or in part prohibited excepi by
permission. All rights reserved. Information has been obtained by Standard & Poor's from
sources believed to be reliable. However, because of the possibility of human or mechanical
error by our sources, Standard & Poor's or others, Standard & Poor's does not guarantee the!
accuracy, adequacy, or completeness of any information and is not responsible for any
errors or omissions or the result obtained from the use of such information. Ratings are
statements of opinion, not statements of fact or recommendations to buy, hold, or sell any
securities. -
()
( )
(18 of 18)
--- ST\>� D:\RD LI T I L J T t E S
, 11( H m:.";
Reprinted from RatingsDirect
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third
Quarter
Credit Analysts: Barbara A Eiseman, New York (1) 212-438-7666; John P Alli, New York
The U.S. utility industry (electric, gas, pipeline, and water companies)
continued its downward credit slope that was firmly established in early 2000
in this year's third quarter. The actual number of rating changes, however,
actually diminished in recent months following a tumultuous first half. Since
July 1, 2003, there have been 21 rating downgrades of holding companies
and operating subsidiaries, compared with just one upgrade. For the same
period in 2002, there were 57 downgrades and eight upgrades. The third
quarter of 2003 also witnessed several new CreditWatch listings (most of
which were negative), a few CreditWatch removals with rating affirmations,
and one outlook revision to stable from negative.
) .:
(1 of 15)
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
Chart 1
Rating Actions
• First nine months 2002 • First nine months 2003
160
140
120
100
80
60
40
20
0
) Upgrades Downgrades
J
The downside rating actions in the power industry are attributable to
aggressively leveraged balance sheets and overall deterioration in credit­
protection measures; financial insolvency; and investments outside the
traditional regulated utility business, principally merchant generation facilities
and related energy marketing and trading activities.
Creditworthiness for the traditional, nondiversified, and regulated U.S.
investor-owned electric and gas industry remains relatively stable, with little
of the downward pressure experienced elsewhere in the energy industry.
Downside rating pressure on these companies typically results from the
challenges associated with their unregulated affiliates. With limited
exceptions, regulation has continued to remain reasonably supportive of
credit quality.
_)
.:'
(2 of 15)
As the fourth quarter opens, the future profile of a bankrupt utility in one of
the states with fractured regulatory relationships, California, has gained some
clarity. Pacific Gas & Electric Co. could emerge from bankruptcy in the first
quarter of next year, but as an integrated regulated utility in accordance with
a settlement agreement reached between the utility and the staff of the
California Public Utilities Commission. More than 97% of the voting creditors
supported the plan. This reorganization plan is in stark contrast to the
company's original plan to emerge as a disaggregated utility with greatly
reduced oversight by the state of California. But just as one utility begins to
climb out of bankruptcy, on Sept. 14, NorthWestern Corp. (D/--/--) filed its
utility operations into bankruptcy after the company's attempt to restructure
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
the company's debt (largely related to major acquisitions) out of court failed.
) . .J
)
_ __)
(3of15)
The Blackout
The power failure that affected 50 million people in the eastern U.S. and
Ontario in Canada on Aug. 14, 2003, did not precipitate any immediate rating
actions on electricity providers. However, there are certain to be
repercussions from the event on certain utilities, and a key consideration for
future rating actions will be their ability to recover costs related to repairing
any damaged generation plants and transmission facilities. Regulatory
recovery and/or insurance are likely to mitigate most credit concerns.
Standard & Poor's does not expect any penalties that may be levied by
federal or state authorities to be sufficiently punitive to harm the financial
profile of the offending utilities. The political fallout from the blackout will
clearly influence deliberations over the terms of the energy bill currently
under debate in Congress. Reliability of power supply is expected to take
precedence over the development of competitive power markets. The
massive outage should provide the necessary impetus for policymakers to
finally address significant long-term transmission concerns. Specifically, it
could spark additional investment in infrastructure, with appropriate economic
incentives, and ease siting restrictions.
Those companies with substantial nonregulated exposure, or with a
principally nonregulated focus, continued their long downward slope through
the third quarter of 2003. This trend can be traced principally to the difficult
pricing environment that investments, mainly in merchant generation facilities
and related energy marketing and trading activities, continue to face.
Because merchant assets were typically financed substantially with debt,
consolidated financial profiles of utility holding companies with merchant
exposure have suffered significantly. However, the immediacy of what could
have been a severe liquidity crunch that has bedeviled this sector eased
when Reliant Resources Inc. (B/Negative/--), Dynegy Inc. (B/Negative/--),
CMS Energy Corp. (BB/Negative/--), Allegheny Energy Inc. (B/Negative/--),
Aquila Inc. (B/Negative/--), and Xcel Energy Inc. (BBB/Watch Pos/A-2),
successfully refinanced their bank facilities earlier in the year. When
considered together with companies' decisions to unwind their nonregulated
strategies, the easing of concern over stressed companies' ability to access
the capital and bank markets appears to have supported a steady restoration
of shattered investor confidence. Still, Standard & Poor's is not seeing much
fundamental improvement in the companies' financial condition, as they are
still carrying significant leverage, facing overcapacity, an illiquid power
market, and uncertain asset valuations. Basically, the strategy of borrowers
and lenders appears to be to ride out this difficult period and wait for the
energy markets to improve.
Industry Ratings Still Hover Around 'BBB'
The average rating for the power industry and energy sector as a whole
remains entrenched in the 'BBB' rating category. The number of companies
rated 'BBB' and below continues to rise while the number of firms rated 'A'
and above declines. About 36% of the industry as a whole now carries
ratings of 'A-' and above versus about 40% one year ago. About 47% of the
sector falls into the 'BBB' category, and 17% is rated speculative grade,
including six companies that are rated 'D'. The percentage of companies now
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
)
I .. __,..
carrying mid-'BBB' ratings is about 24%--up from 19% at the end of
September 2002--and the percentage of 'BB' category ratings has risen to
nearly 5% from about 3% at Sept. 30, 2002. Although downside risks to
creditworthiness remain, as attested to by the distribution of negative
outlooks and negative CreditWatch listings, Standard & Poor's does not
expect that the U.S. power sector as a whole will fall below the 'BBB' level.
Notably, companies that continue to emphasize a more traditional regulated
structure, whether vertically integrated or not, should hang onto an 'A-'
average. Despite the substantial number of rating downgrades and ongoing
pressures on utility credit quality, the U.S power sector remains relatively
highly rated, certainly compared with the average 'BB' category for U.S.
industrials. This is a function of the large percentage of companies (88%)
that have average or above-average business profiles.
Chart 2
Third-Quarter 2003 Rating Distribution
CCC & lower
(3%)
)
.. _ __,/
)
(4 of 15)
B
(9%)
AA
(2%)
A
(34%)
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
Chart 3
Third-Quarter 2003 Outlook Distributions
CW-Dev
(0%)
CW-Neg
(7%)
)
)
..__,.,,,
(5 of 15)
Negative
(32%)
Positive
(2%)
Stable
(56%)
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
Chart 4
Third-Quarter 2003 Business Profile Distribution
9
(1 %)
8
(4%)
6
(15%)
5
(20%)
2
(7%)
4
(25%)
)
.J
(6 of 15)
Note: Business profiles are categorized from '1' (strong) to '1 O' (weak).
Capital Market Update
Financing activity has risen substantially in the past 12 months. The amount
of medium- to Jong-term debt and preferred stock issued during the first nine
months of 2003 was about $90 billion, compared with about $57 billion
issued during the nine months of 2002. The increase in debt financing can be
traced to lower interest rates, depressed stock prices, acquisitions, and
accelerating capital expenditures that are primarily related to improvements
and additions to existing facilities and for environmental-control projects.
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
Chart 5
Total Debt and Preferred Stock Financing
(Bil.$)
100
90
80
70
60
50
40
30
20
10
0
) Year-to-date 2002
.. J
Year-to-date 2003
Plummeting Financial Measures Begin to Level Off
As Standard & Poor's reported in July 2003, certain measures of bondholder
protection began to stabilize at the end of 2002. This may indicate that the
severity of the downward ratings slope across the energy sector may be
moderating. Although debt leverage remains aggressive at about 61 % the
ratio appears to be leveling off. Funds from operations to total debt is still
quite weak at 18%, but funds flow coverage of interest actually rebounded to
more historical levels of about 3.6x.
)
(7 of 15)
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
) Chart 6
Average Sector FFO o/o of Total Debt
)
. J
)
I -·---
(8 of 15)
(%)
20.0
19.5
19.0
18.5
18.0
17.5
17.0
16.5
16.0
15.5
15.0
14.5
1998 1999
FFO--Funds from operations .
2000 2001 2002
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
)
-J
Chart 7
Average Sector FFO Interest Coverage
)
i .. -.....-,,
(9 of 15)
(X)
3.7
3.6
3.5
3.4
3.3
3.2
3.1
3.0
1998 1999
FFO--Funds from operations.
2000 2001 2002
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
) Chart 8
Average Sector Total Debt o/o of Total Capital
(%)
61
60
59
58
57
56
55
54
53
52
) 1998 1999 2000 2001 2002
._)
Looking Ahead
At the end of September 2003, nearly 56% of all utility rating outlooks were
stable, which is comparable with the 55% recorded three months ago, but
significantly higher than the 48% reported one year ago. This is attributable
mainly to the substantial number of ratings that have been lowered.
Nevertheless, the percentage of outlooks that are negative (21 %) continues
to strongly overshadow positive outlooks, which were under 2%. This
negative bias results mostly from deteriorating financial profiles, weak
competitive positioning, refinancing risk, regulatory uncertainty, execution
risk regarding industry corporate restructuring initiatives, and volatility in the
wholesale power market. The number of CreditWatch listings has increased
slightly to about 21 % from 18% over the past 12 months, with the bias still
strongly negative. Of all companies on CreditWatch, a full 75% carry a
negative listing, with 21% positive and 4% developing (which indicates that a
rating may be raised, lowered, or maintained).
)
(10 of 15)
The Downgraded
The ratings on NUI Utilities Inc. (BBB-/Watch Dev/--) were lowered and
placed on CreditWatch with developing implications. The rating action
followed parent NUI Corp.'s announcement that the firm is being actively
offered for sale and that net income for the fiscal year ending Sept. 30, 2003
has been revised downward. The developing CreditWatch listing reflects the
potential for the ratings to be raised, lowered, or maintained depending on
the eventual buyer's credit quality.
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
I ---
)
(11 of 15)
Otter Tail Corp.'s (A-/Negative/--) ratings were lowered two notches,
reflecting the company's riskier business profile due to a higher dependence
on more volatile cash flows from nonregulated businesses, particularly in the
manufacturing .sector. In addition, Otter Tail's normally strong health care
business has underperformed for the first half of 2003. The negative outlook
can be traced to concern over the future financial performance of the
company's manufacturing and health care businesses.
Lower ratings on Progress Energy Inc. (BBB/Stable/A-2) and its utility
subsidiaries reflect weakened financial performance stemming from the
economic downturn affecting the regulated utilities, compounded by
overcapacity in the Southeast weakening the financial performance of the
unregulated generation portfolio, and high financial leverage. The company's
tax-advantaged synthetic fuel business also has the effect of reducing the
company's cash flow in the intermediate term. The outlook is stable and
reflects the steady nature of the regulated utilities and the reasonably
predictive financial performance of Progress Energy over the next several
years. Although the tax-driven synthetic fuel operations are expected to
somewhat weaken Progress Energy's cash flow protection measures over
the next few years, Standard & Poor's recognizes that there is a long-term
benefit to such investment.
The ratings on PSEG Energy Holdings Inc. (Energy Holdings; BB-/Stable/--),
a subsidiary of Public Service Enterprise Group Inc. (Enterprise;
BBB/Stable/A-2), were lowered several notches and the ratings on Enterprise
and subsidiaries, Public Service Electric & Gas Co. (PSE&G; BBB/Stable/A-
2) and PSEG Power LLC (BBB/Stable/--), were affirmed. Management had
invested heavily in Energy Holdings while the company was viewed as a
growth vehicle, but in recent years many of Energy Holdings' investments
stumbled badly as reflected by pretax write-offs of about $800 million in
2002. Consequently, Enterprise will not pursue new investments beyond
those required to complete projects under construction.
Standard & Poor's separated the ratings of Energy Holdings from the ratings
of other Enterprise corporate entities. This decision was based on a view that
management will not endlessly deploy cash generated at PSE&G and PSEG
Power to infuse capital into Energy Holdings; weaker ultimate recovery
prospects than other members of Enterprise; and a nonconsolidation opinion.
As a result, the ratings assigned to Enterprise, PSE&G, and PSEG Power do
not reflect the financial drag created by Energy Holdings. Similarly, Energy
Holdings' ratings do not reflect the benefits of affiliation with financially
stronger companies.
The ratings of LG&E Energy Corp. (BBB+/Stable/--) and its subsidiaries were
lowered due to weaker consolidated financial projections, and to a lesser
extent, the moderate credit deterioration at LG&E Energy's parent, E.ON AG
(AA-/Negative/ A-1 +). The implied support from E.ON is based on the
expectation that LG&E Energy will play an important and long-term role in
E.ON's strategy to expand its U.S. presence. LG&E Energy's stand-alone
credit quality is pressured by extremely weak cash flow relative to debt
obligations, significant external financing needs, and unregulated operations
with exposure to commodity, counterparty, and political risk. Although limited
downside remains from a political risk perspective, LG&E Energy's
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
)
/ <.:»:
)
)
J
(12 of 15)
nonregulated businesses remain vulnerable to escalating coal costs and
depressed wholesale power prices. These challenges are partially mitigated
by the implicit credit support provided by parent E.ON, a solid competitive
position, and a supportive regulatory environment. The outlook is stable.
The ratings on NorthWestern Corp. (0/--/--) were lowered on several
occasions during the quarter. The last rating action was to 'D' from 'CCC-' on
Sept. 15, 2003, in response to NorthWestern's decision to file for bankruptcy
protection after its attempt to restructure the company's debt out of court
failed. NorthWestern had $30 million of interest on unsecured bonds due on
Sept. 15, 2003, which was not paid. The company did not file its two
nonregulated subsidiaries, Expanets Inc. and Blue Dot Services Inc.,
because the company is in negotiation for their sale with interested third
parties.
CreditWatch Negative
The ratings on Sierra Pacific Resources (B+/Watch Neg/--) and its utility
subsidiaries, Nevada Power Co. (B+/Watch Neg/--) and Sierra Pacific Power
Co. (B+/Watch Neg/--), were placed on CreditWatch with negative
implications following the decision of a New York bankruptcy court to grant
Enron Power Marketing lnc.'s (EPMI) motion for summary judgment of its
claims against the two utilities. These claims relate to termination payments
arising from EPMl's termination of power-supply agreements with the utilities
following the downgrade of the utilities to below investment grade in May
2002. Enron asserted its rights to collect $305 million of marked-to-market
profits from these contracts, an action with which the bankruptcy court
concurred. The utilities have filed with the FERC for reconsideration of its
ruling that upheld the contracts' validity. In the interim, Nevada Power and
Sierra Pacific Power are proposing to offer EPMI secured bonds as collateral
against its claims.
The ratings on FirstEnergy Corp. (BBB/Watch Neg/--) and its subsidiaries
were placed on CreditWatch with negative implications reflecting Standard &
Poor's concern that the investigations into the massive power outages on
Aug. 14 in the U.S. and Canada will further distract management from
executing its deleveraging strategy. FirstEnergy is already confronting
significant challenges, including the extended Davis Besse nuclear outage,
poor reliability in the New Jersey Shore communities, and the consequent
credibility challenge with regulators and federal officials. Standard & Poor's
believes these issues will pose longer-term challenges for management and
the company's lagging credit profile is but one aspect in the rating. To the
extent that any culpability related to the blackout is ultimately determined to
rest with FirstEnergy, the financial consequences of such a conclusion will
weigh heavily on any potential Standard & Poor's rating action.
The ratings on PEPCO Holdings Inc. (BBB+/Watch Neg/A-2) and its
subsidiaries were placed on CreditWatch with negative implications in
response to the uncertain affect that the Mirant Corp. (D/--/--) bankruptcy
filing will have on PEPCO Holdings' power-supply position. In August 2003,
Mirant requested bankruptcy court approval to reject two above-market
purchased-power contracts with PEPCO Holding's utility subsidiary, Potomac
Electric Power Co. (BBB+/Watch Neg/A-2). PEPCO has since successfully
petitioned the Federal District Court to decide the contract dispute. If the
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
)
)
-.J
)
(13of15)
contract rejection is allowed, PEPCO will not be able to resell to a third party
the high-cost power it is obligated to purchase through 2021 and may be
exposed to $550 million in losses if it is unable to recover these higher power
costs from ratepayers. Mirant is also seeking to renegotiate two Transition
Power Agreements under which PEPCO purchases 100% of its standard
offer service obligation for Maryland and Washington, D.C. Any loss of
margin from the renegotiation of these below-market contracts will result in
lower future cash flow for the utility. It is unlikely that PEPCO's operations will
be negatively affected because the utility will continue to purchase power
from Mirant.
The ratings on TECO Energy Inc. (BBB-/Watch Neg/A-3) and affiliates were
placed on CreditWatch with negative implications as a result of an IRS
announcement creating potential complications related to the company's sale
of interests in its synthetic fuel production facilities. The IRS said that it will
suspend issuing new private letter rulings for plants producing synthetic
fuels. The CreditWatch listing for the TECO family reflects the uncertainties
regarding the company's ability to sell interests in its synfuel production
facilities to raise cash in order to halt the erosion of the company's weakened
financial profile.
Ratings are dependent on the company's completion of potential asset sales
to reduce debt leverage. Absent such sales and the ability to achieve capital
spending reductions, TECO may need to externally finance its obligations,
which could further negatively affect the company's credit quality.
The Sole Upgrade
The ratings upgrade for New Jersey Natural Gas Co. (NJNG; A+/Stable/A-1)
to 'A+' can be traced to management's successful efforts in managing the
company's balance sheet, debt maturities, and liquidity needs in a
conservative manner, while maintaining an above-average business profile.
The outlook is stable and reflects the expectation that NJNG's ultimate
parent, New Jersey Resources, will maintain its current financial profile,
continue to focus primarily on regulated investments, and refrain from
excessive use of debt leverage to finance growth projects.
Potential Credit Improvement
The ratings on Xcel Energy Inc. (BBB/Watch Pos/A-2) and its utility
subsidiaries were placed on CreditWatch with positive implications. The
'BBB' corporate credit rating on the company and its utility subsidiaries
continues to reflect Xcel Energy's ownership of bankrupt NRG Energy Inc.
(0/--/--). Once NRG's creditors agree to a final reorganization plan, which
Standard & Poor's expects to occur by year-end 2003, the ratings on Xcel
Energy and its regulated utility subsidiaries will be revised--potentially raised-­
to reflect the stand-alone consolidated credit profile of those companies.
Ratings Stability
The ratings on Pennsylvania Suburban Water Co (A+/Stable/--) were
affirmed and removed from CreditWatch with negative implications.
Pennsylvania Suburban's parent, Philadelphia Suburban Corp., recently
completed the purchase of AquaSource Utility Inc., a subsidiary of DQE Inc.
(BBB/Negative/A-3) for $195 million. The rating action is attributable to the
fact that this acquisition slightly improved the consolidated business profile
Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
)
I <:»:
)
... _ .. .,/
)
.J
(14 of 15)
and did not weaken the consolidated financial profile. The transaction was
financed with $105 million of long-term debt and $90 million of equity.
Ratings stability reflects Pennsylvania Suburban's supportive regulatory
environment, Standard & Peer's expectations of adequate rate relief to
recover capital investments, a strong competitive position, and good growth
prospects. Standard & Peer's expects that Pennsylvania Suburban will
continue to fund acquisitions in a manner that will not adversely affect the
financial profile.
Tucson Electric Power Co.'s (BB/Stable/--) ratings were affirmed and
removed from CreditWatch with negative implications, where they were
placed on Nov. 8, 2002, to reflect parent UniSource Energy Corp.'s
announcement of an agreement to purchase the Arizona electric and gas
transmission and distribution assets from Citizens Communications Co.
(BBB/Negative/--). The Aug. 11, 2003, acquisition of these relatively low-risk,
widely scattered regulated assets for $220 million, well below the book value
of about $425 million, in fact, bolsters the consolidated business profile of the
UniSource Energy family of companies, and does so with a financing
package that marginally improves the overall financial profile of UniSource
Energy. These assets are subject to regulation by the Arizona Corporation
Commission (ACC), as is Tucson Electric, and are structured as a wholly
owned subsidiary of Unisource Energy called Unisource Energy Services.
Ratings stability reflects Tucson Electric's focus on and expansion of stable
regulated operations. Standard & Poor's expects that management will
continue to apply free cash flow to debt and capital lease debt reductions, a
practice that is critical to maintaining the current ratings. While the acquisition
of the Citizens assets is largely debt-financed, the ratio of equity used to
complete the deal is greater than the current consolidated equity to
capitalization structure of Unisource Energy, and therefore marginally
improves the consolidated financial profile.
The credit outlook on Southwest Gas Corp.'s (888-/Stable/--) rating was
revised to stable from negative, reflecting expectations for steady gradual
financial improvement and a better-than-expected regulatory climate.
Standard & Poor's expects management to strengthen the company's
strained balance sheet through periodic equity infusions. As regulation
becomes somewhat more accommodating through favorable rate design
changes, credit measures for Southwest Gas should improve. Efforts to
minimize the costs of connecting new customers and reduce debt leverage
will be necessary to maintain current ratings.
- Downgrades Continue to Dominate U.S. Utility Rating Actions in Third Quarter
)
! ·.___,/
(15of15)
Published by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. Executive
offices: 1221 Avenue of the Americas, New York, NY 10020. Editorial offices: 55 Water
Street, New York, NY 10041. Subscriber services: (1) 212-438-7280. Copyright 2003 by The
McGraw-Hill Companies, Inc. Reproduction in whole or in part prohibited except by
permission. All rights reserved. Information has been obtained by Standard & Poor's from
sources believed to be reliable. However, because of the possibility of human or mechanical
error by our sources, Standard & Poor's or others, Standard & Poor's does not guarantee the
accuracy, adequacy, or completeness of any information and is not responsible for any
errors or omissions or the result obtained from the use of such information. Ratings are
statements of opinion, not statements of fact or recommendations to buy, hold, or sell any
securities.
Tile McGrm.v·Hill Companie5·
l ) redit arket verview
()
In conjunction with the previous drop in the 12-
month moving sum of high-yield downgrades from
its former zenith of 262 from the span-ended
February 1991 to its cycle bottom of 58 from the
span-ended February 1994. the US' high yield default
rate would ultimately sink from its record 13.0% of
the 12-months ended June 1991 to the cycle trough
of 1.4% for the 12-months ended March 1995.
Q2 2003's Primary Drivers Behind
High Yield Rating Changes
About 45% of Q2 2003's $52.8 billion of down­
graded htgh-yield corporate bonds and preferred
stock were linked to the troubled ·commercial
airline and related manufacturing industries. These
six downgrades generally followed from a loss of
business travel, terror concerns, and the SARS
epidemic. Elsewhere, mostly because of lingering
problems with merchant energy trading, or whole­
sale electric power, electric utilities also supplied six
high-yield downgrades affecting $11.9 billion of
bonds and preferred stock. Taken together, the
commercial aerospace and electric utility industries
accounted for 67% of Q2 2003's $52.8 billion of
high-yield downgrades, but supplied just 17% of
the 72 such credit rating reductions.
Mergers, acquisitions and divestitures (M&A)
figured in nine of the second-quarter's high-yield
downgrades and affected $4.29 billion of bonds.
The second quarter showed that acquisitions can
still increase high-yield debt by enough to prompt a
credit ratings reduction. Moreover, several of Q2
2003's M&A-linked downgrades stemmed from
earlier acquisitions that have since eroded a high­
yield company's debt repayment capacity.
Mergers, acquisitions and divestitures figured in
eight high-yield upgrades of $12.6 billion of bonds
and preferred stock. These upgrades were evenly
distributed between the successful integration of
earli�r acquisitions. asset sales than enhanced
liquidity, and the acquisition of a high-yield
company by a financially stronger entity.
Among Q2 2003's more prominent high yield
downgrades that were linked to a drop in air travel
were Delta Airlines, Continental Airlines, NWA,
Sequa and FeICor Lodging Trust. The difficulties of
merchant energy trading or wholesale electric
power figured in the second quarter downgrades of
the following high-yield energy companies: Mirant,
Edison Mission Energy. Aquila and Mission Energy
Holdings. Among the other prominent second­
quarter downgrades of high-yield companies were
Investment-Grade Rating Changes: US Corporations
($ Billions)
-----------Downgrades--------- Upgrades-----.--
--Financial-· --Industrial-' --Utility-- =-Iotal->- --Financial-- --Industrial-- --Utility-- ---Total---
Number Amount Number Amount Number Amcuil Number Amol.1-« Number Amount Ntniber Arnolrlt Number Amount lla.nber Arooln
( )
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Quarter:
02-02
03-02
04-02
01-03
02-03
July 14, 2003 Moody's Credit Perspectives 33
� .. )
( )
IMC Global. Fleming Companies. Sbarro, Paxon
Communications, United State Steel, Young
Broadcasting. Dole Food and Vishay
Intertechnology.
The second-quarter's prominent upgrades of US
high yield companies included Williams Companies,
Waste Management, Tyco, EchoStar Communications,
Rite Aid, Owens-Illinois/Owens-Brockway, Reliant
Resources. Prestolite Electric, America West Airlines.
Tenneco Automotive, Cablevision Systems.
Huntsman, And Dan River. Some of the aforemen­
tioned high yield upgrades were from industries that
have been struggling. Management matters.
High Yield Credit Trends Favor Mild
Capital Spending Upturn
The trend in high-yield credit rating revisions was
more favorable when an extended capital spending
recovery last materialized in the second quarter of
1992. As a percentage of the number of the US'
high-yield credit rating revisions, upgrades' share
was at 52%. 49%, and 48%, respectively, in the
first, second and third quarters of 1992. After
jumping up from Q4 2002's 17% to QI 2003's
40%, upgrades' share of high yield credit rating
changes slipped to 31 % in Q2 2003.
Moreover, the year-over-year decline of the 12-
month moving sum of the number of high-yield
downgrades deepened from the -35% of the span­
ended March 1992 to the -49% of the span-ended
June 1992. By contrast. the latest yearly decline of
the moving sum of high-yield downgrades, though
commendable, has been shallower - from the -
14 % of the span ended March 2003 to the -21 % of
the span-ended June 2003.
Lower Downgrade Ratios May Be
Needed For Thinner High Yield
Spreads
From the first to the second quarter of 2003. the
downgrade ratios of high-yield credit rating revi­
sions rose from 60% to 69% in terms of the count,
but fell from 81 % to 60% in terms of the par value
of adversely affected bonds and preferred stock.
Both high yield downgrade ratios compare favor­
ably with yearlong 2002's 80% regarding the count
and 93% In terms of par value. Nevertheless, an
extension of the narrowing of the speculative-grade
yield spread over Treasuries from the 971 basis
points of Q4 2002 to the 585 points of early July
will probably require a more decisive slide by the
downgrade ratios of both the number and par value
amount of high-yield credit rating revisions.
Speculative-Grade Rating Changes: US Corporations
($ Billions)
-----Upgrades
( )
1988
1989
1990
1991
1992
1993 1994
1995
1996
1997
1998
1999
2000
2001
2002
Quarter:
02-02
03-02
04-02
01-03
02-03
--Financial·· »lndustrlal« ··Utility·· ••• Total··· ··Financial-· --Industrial·· ··Utility-- ••· Total···
Nll11bef' Amount Number Amoln Number Amolrl Number Amolrl Number AmcuTt Number Amolrl Nirnber Amount Number Arnomt
34 Moody's Credit Perspectives July 14, 2003
( ) verview
()
The speculative-grade yield spread averaged just
387 basis points during 1993-1997, or when the
high-yield downgrade ratios were 44% in terms of
the count and 37% in terms of par value. Since
year-end 1997 and through Q 1 2003, the high-yield
downgrade ratios climbed up to 73% in terms of
the count and 72% in terms of par value. In
response. the speculative-grade yield spread has
averaged a much wider 666 basis points.
The high-yield bond and equity market rallies
should, at least, momentarily halt until the evidence
decisively favors renewed upturns by the annual
growth rates of business sales and profits.
Meek Forecasts Lend Caution To Optimism
High yield spreads will continue to narrow
provided that forecasts of a second-half quickening
of business sales are correct. Nevertheless. the latest
consensus forecasts looks for only a mild upturn by
the yearly increase of nominal GDP growth - from
Ql 2003's +3.6% to just +4.3% by Q4 2003.
where the latter does nothing more than match its
annual increase of Q4 2002. Not until Q2 2004 is
the yearly increase of nominal GDP expected to
break above +5.0%.
When a notable capital spending recovery last got
underway in Q2 1992, the yearly growth rates were
+2.7% for real GDP and +5.3% for nominal GDP.
After rising by merely +2.0% yearly in Q 1 2003.
real GDP is expected to gain only +2.2% annually
in the second quarter.
Very Easy Money Tends To Lead Lower
Default Rate
As shown by a recent real federal funds rate of -
0.4%. a still very easy monetary policy implies that
the us· high-yield default rate of 5.8% for June will
slide further. When the real fed funds rate previ­
ously bottomed at the -0.5% of April 1993. the
high yield default rate would then slide lower over
the next 23 months from the 5.3% of April 1993 to
March !995's cycle trough of 1.4%.
Ironically, the Fed allowed the real federal funds
rate to climb up to its latest high of +4 .1 % for July
2000 despite the presence of above-average read­
ings of 6.0% for the high yield default rate, 644
basis points for the speculative-grade yield spread
over Treasuries. and 232 points for the Baa-rated
industrial company bond yield spread over
Treasuries. Mid-2000's very tight monetary policy
Grand Total: US Corporate Issuers Excluding Structured Transactions
Number Of Actions And Billions Of Dollars Of Debt Affected By Rating Changes
-------Downgrades-------- --Upgrades-------
--Financial-- --Industrial-- --Utility-· ---Total--- --Financial-· --Industrial-- --Utility-- --Total--
( )
Number Amount Number Amount Number Amount Number Amount Number Amount N1.mber Amount Number Amount Number Amount --- 1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Quarter:
02-02
03-02
04-02
01-03
02-03
July 14, 2003 Moody's Credit Perspectives 35
2002 Power & Energy
Credit Conference:
Beyond the Crises
New York City - June 12, 2002
The Roosevelt Hotel
Madison Avenue at 45th Street
The last 24 months have witnessed extraordinary turmoil for power and energy debt, unprece­
dented since Samuel Insull's utility empire collapsed during the 1930s. Events ranging from.the
credit collapse of the California utilities, through the Enron bankruptcy and subsequent mar,t
ket disruptions for U.S. energy merchant companies have destroyed billions of dollars ofvalu'i:
for investors. Wall Street has virtually shut down new investment in this sector. Understandably
markets are concerned about near-term problems, but what about long-term prospects for the
industry? Standard & Poor's holds that the main significance of the past two years will be less
the events themselves than their influence on the future credit markets. The real question for
companies and their lenders in the wake of 2001 is what has changed and what hasn't?
••••
On June 12, Standard & Poor's annual power and energy credit conference will address the
question of change. Please join us as senior analysts from Standard & Poor's and our affiliate
company, Platts, present their perspectives at this critical time in the power and energy sector .
. Seminar Agenda
Events Marketing
55 Water Street
�ew York, NY 10041 ( 1 · phone [phone]
[phone]
www.standardandpoors.com
The McGraw·Hill Companies
7:45-8:15 AM
8: 15-8:30 AM
8:30-9:00 AM
Registration and Coffee Service
Welcome
Ronald Barone, Managing Director
Introduction: What Has Changed and What Hasn't
William Chew, Managing Director
The last year has tested credit across debt markets generally, particularly in power and energy.
Standard & Poor's expects that downward credit pressure will continue in 2002. But Standard
& Poor's does not expect that the sector will fall off a credit cliff. The market shaking events
have focused attention on what has changed. The challenge and opportunity for credit-oriented
borrowers, however, is to separate what has changed from what hasn't - not on a sector­
wide basis -but at the level of each individual company. When this is done. Standard &
Peer's expects that the credit outlook for the sector will look more nuanced than the events of
last year would suggest.
9:00-9:30 AM
r: r )
9:30-10:15AM
10: 1 5-10:30 AM
10:30-11 :00 AM
11 :00-11:30 AM
f 11:30-12:30 PM )
Energy Merchant Companies:
Using Standard & Poor's Expanded Analytic framework to Assess Credit Risk
Suzanne Smith. Director
Companies selling power and energy in competitive markets have become major borrowers in the generation sector as fewer utilities build
new generation. Almost one third of generation in the U.S. is now deregulated. As competitive generation and its attendant marketing and
trading activities continue to develop, the abilities of borrowers, lenders and trading counterparties to stay ahead of credit movements will
distinguish the investment grade companies from non-investment grade ones. Standard & Poor's rating approach for energy merchant compa­
nies provides an enhanced framework for identifying credit strengths and weaknesses of companies and facilitating comparisons across
often-disparate corporate structures.
Regulated Utilities, Municipals and Cooperatives After 2001
Richard Cortright. Director
What does the future hold for electricity distribution and vertically integrated utilities? Will public power and cooperative issuers continue to
be relatively sheltered from deregulation?What key credit concerns should borrowers and lenders be focusing on as deregulation and restruc­
turing continue in the U.S.? Will these entities be able to protect lenders and themselves from the problems that extreme volatility has
unleashed upon the industry? How are the credit profiles of these sectors likely to fare in the future?
Break
Electricity and Gas Market Risk Evaluation
Douglas Logan. Ph.D .• PE. Principal. Platts
Where are electricity and natural gas markets headed this year and what can we expect in the years to come? What are some of the evident
and not-so evident trends that buyers and sellers will need to watch as these competitive markets unfold? What are the prospects for adding
real incremental natural gas supply as new gas-fired generation comes online? And in a similar vein. will investment in gas transmission
infrastructure keep up with demand?
Unintended Consequences of Restructuring Power Markets
Peter Rigby, Director
Deregulation and restructuring should be improving the operation of our power markets. Yet. chaos seems to be order of the day. Today's
investment decisions, which increasingly reflect a growing uncertainty about how market price risk. political risk and regulatory risk, may be
exposing lenders to new and unintended consequences. In many respects credit risk in the power and energy industry has always existed; risk
is at once both more obvious and ambiguous than ever before.
Borrowers and Lenders Panel Discussion
Moderator, William Chew. Managing Director
Join this group of market participants to discuss their views on credit risk in the power and energy business and how their companies are far­
ing during these tumultuous times.
12:30-2:00 PM Lunch
2:00-2:45 PM
3:00-3:45 PM
4:00-4:45 PM
C'- '_( ) 4:45 PM
Company Credit Forums
In the afternoon sessions. Standard & Poor's will host several forums at which its utilities and energy analysts will discuss credit develop­
ments and outlooks for 12 high profile companies. Conference participants will have the opportunity to engage Standard & Poor's analysts
and each other in debate about how industry and market developments are driving credit in this sector. Will gas and electricity finally con­
verge on each other? How well are companies managing commodity and market price risk? Will nuclear energy play a greater role in restruc­
tured markets and what specific credit risks do nuclear power plants present to investors? What does the future hold for regulated utilities?
· Companies featured in the forums will include energy merchants. companies with nuclear generation and traditional utilities.
Session 1: Energy Merchant Companies
AES Corp., Calpine Corp., Mirant Corp.
Session 2: Natural Gas and Electricity Convergence
Dynegy Inc., El Paso Corp., The Williams Company
Session 3: Natural Gas and Electricity Convergence
Dynegy Inc .. El Paso Corp., The Williams Company
Session 4: The Players in Nuclear Power Generation
Dominion Resources. Duke Energy Corp., Entergy Corp.
Session 5: Energy Merchant Companies
AES Corp., Calpine Corp., Mirant Corp.
Session 6: Regulated or Not?
American Electric Power Company, Xcel Energy Inc., Aquila Inc.
Cocktails
The McGraw·Hill Companies
r>. ()
Events Marketing
55 Water Street
New York, NY 10041 .,..-----. / (·· 1 , ephone [phone]
[phone]
.standardandpoors.com
The McGraw·Hi/1 Companies
2002 Power & Energy
Credit Conference:
Beyond the Crises
New York City - June 12, 2002
The Roosevelt Hotel
Madison Avenue at 45th Street
REGISTRATION INFORMATION
Due to the level of interest in this conference, please make your reservations as soon as possible. Pre-pay­
ment is required for teleconference participation. All others will be billed after the seminar. All registra­
tions will be confirmed in writing.
New York City - June 12. 2002 - The Roosevelt Hotel
$499 (Non-Refundable) Per Person
O Seminar
O Teleconference (Pre-Payment Required)
(Telephone access not available in NYC and NJ)
COMPLETE FORM AND FAX TO [phone]
PLEASE PHOTOCOPY FORM FOR ADDITIONAL ATTENDEES.
(PLEASE TYPE/PRINT/USE BLACK INK)
Name
Title
Company
Department
Address
City State Zip
Telephone
Fax
E-mail
D I do not want to share my information outside The McGraw-Hill Companies.
,'·. ANDARD - UT; b l=-T"( Es -- - --- - __ : _- - -�---=:-<-:.-=-\:;:-'�����=?��--:;-i>�:��-�-=----0��f/JL�::�-;}-· �---:_-=-/-
·�·�-lilOOf{S ' - - - - - - - : - - : - --- _ - - - _-c_ - -- - - - '- - -----=�-��-:-->_-- · .:_- - - . - -== - . ; __ : -. --, _-
. -
.r' >)·tion date:.15-Jan-2003 ·
s, d from RatingsDirect ....... ,.s. Power Industry Experiences Precipitous Credit Decline In 2002;
legative Slope Likely to Continue
·edit Analysts: Barbara A. Eiseman, New York (1) 212-438-7666; Kevin Beicke, New York (1) 212-438-7847
Rating' activity in 2002 was exceptionally dynamic for the U.S. investor­
owned power industry (electric, gas, pipeline, and water companies). While
the negative momentum mirrored that of the previous two years, the actual
number of rating changes accelerated dramatically in 2002. Moreover, the
rating actions were overwhelmingly on the negative side, with an
unprecedented 182 downgrades among holding companies and operating
subsidiaries, compared with only 15 upgrades. Certain companies, such as
Dynegy Inc., Allegheny Energy Inc., and The Williams Companies lric.,
experienced multiple downward rating actions during the year. In the fourth
quarter alone, there were 48 downgrades and just one upgrade--a staggerin
number of rating actions for a three-month period. In contrast to 2002, there
were 110 rating changes (81 downgrades and 29 upgrades) in 2001 and 85
rating changes in 2000 (65 downgrades and 20 upgrades). Last year also
witnessed numerous outlook changes to negative from stable and many nev
CreditWatch listings, the bulk of which carried negative implications.
()
Chart 1
2002 Rating Actions
•Up •Down
200
180
f60
140
I 120
100
80
60
40
20
0
() 2001 2002
The general deterioration of creditworthiness in the industry can be traced tc
many familiar themes, including:
• Heightened business risk derived from growing, debt-financed
investments outside the traditional regulated utility business, mainly
unregulated generation and energy trading and marketing activities,
that have continued to severely underperform expectations;
• Substantial weakening of bondholder protection fundamentals and
refinancing risk;
• Increasingly constrained capital market access as a result of investo
skepticism over accounting practices and disclosure, more and more
federal and state investigations and subpoenas, audits, and failing
confidence in future financial performance that has created a liquidit'. ·
crisis;
· • Regulatory difficulties;
• Capital and corporate restructuring efforts; and
• Merger and acquisition activity, albeit diminishing.
( )
The investments in unregulated businesses, including the development of
merchant generation companies and the energy trading activities necessary
to support them, midstream operations by gas distributors and pipelines, am
international investments (despite several asset sales in Australia, Europe,
and Latin America), reflect companies' strategies to deal with an increaslnqr
competitive market, while also seeking to enhance shareholder value. Now,
some companies such as Aquila Inc, TXU Corp., CMS Energy Corp., and
/)
Dynegy are dramatically tempering and even unwinding in their entirety,
these very strategies. Nevertheless, the negative credit momentum is
expected to continue in 2003, as indicated by the still very large number of
negative credit outlooks and negative CreditWatch listings. However,
Standard & Poor's expects that the pace of the negative rating actions will
moderate but does not discount the possibility of additional bankruptcy
filings.
Industry Ratings Hovering Around 'BBB+'/'BBB'
In just 12 months, the number of companies rated 'A' and above has
significantly declined, while the number of firms rated 'BBB' and below has
risen substantially. About 38% of the industry as a whole now carries ratinqs
of 'A-' and above, compared with just 51 % one year ago. Nearly 44% of the
sector now falls into the 'BBB' category rating, and 18% is rated below
investment grade, including several companies that are rated 'D'. The rapid
credit erosion is evident from the growing level of mid-'BBB' and mid-'BB'
ratings. The percentage of companies now carrying 'BBB' ratings ts 19%--u�
from 14% in 2001--and the percentage of 'BB' ratings has risen to a full 8%
from just 1 % at year-end 2001. The average rating for the U.S. power sectoi
as a whole remains in the high 'BBB' area, but only by a slim margin. Given
expectations for continued negative pressure, the average rating is very like
to slip into the mid-'BBB' rating level in the near future. Companies that
continue to emphasize a vertically integrated structure should hang onto an
'A-' average, but utility holding companies that venture too far afield from
their core competencies will likely suffer a weakening of their market
capitalization, and in many instances, rating downgrades.
Notwithstanding the tremendous number of rating downgrades and ongoing
pressures on utility creditworthiness, the sector remains relatively highly .
rated, certainly compared with the average 'BB' cateqory for U.S. industrials
This is due to the large percentage of companies (87%) that have average c
above-average business profiles. A firm's business profile incorporates an
analysis of the qualitative factors of management, competitive positioning,
operations, markets, regulation (if appropriate), and with respect to energy
marketers and traders, commercial positioning and risk management.
Chart 3
Total Debt andPreferred Stock Issuance
) ,.
Bil.$
90
80
70
60
50
40
30
20
10
0
2001 2002
()
( )
Weakening Bondholder Protection
A rising incremental debt burden has driven down key measures of
bondholder protection in recent years. Total debt as a percentage of total
capital stood at an aggressive 59.8% as-of June 30, 2002 (the latest period
which comparable data is available) when compared with 54.9% almost foui
years earlier at year-end 1998. This debt level, while just one measure of.
financial health, is more characteristic of a 'BB' rating credit category with ar
average business position. Much of the increase in debt leverage can be
traced to debt raised at the parent or intermediate holding company level to
fund unregulated activities. The material increase in leverage has not been
offset by a strengthening in cash flows, and the funds from operations (FFO
to total debt ratio has accordingly steadily declined, falling below 16% in Jur
2002 from 21 % in 1998. This key financial ratio is also typical of a 'BB' ratin;
category. Funds flow interest coverage and pretax interest coverage have
also slipped, to 3.3x and 2.8x, respectively, for the rolling 12 months June
2002, from 3.9x and 3.1x, respectively, in 1998. These levels are just suitab
for companies in the 'BBB' rating category. However, the aforementioned
ratios actually rose, although very slightly, in 2001 and June 2002 because ,
lower interest rates. Of course, there are several other financial and
qualitative factors that determine credit quality, but given eroding financial
parameters and riskier business profiles, the median rating for the utility
industry will likely slip out of the high 'BBB' category.
Chart 4
Average Sector Pretax Interest Coverage
( )
/ )
Year-end 1998 Year-end 1999
*Indicates rolling 12 months.
Year-end 2000 Year-end 2001
%
June 2002*
\.)
Chart 5
Average Sector Total Debt as a% of Total
. Capitalization
*June 2002
%
61-.----------------------------�
60+-------------
59 +-----------------
58 �------------
57 +----------------
56+-------------
55 .
54
53
52
Year-end 1998 Year ... end1999 Year-end 2000 Year-end2001
(, .
. - )
*Indicates rolling 12 months.
I )
) -,
Chart 6
Average Sector FFO Interest Coverage
(X)
(. )
'/
()
Year-end 1998 Year-end 1999 Year-end 2000. Year-end 2001
*Indicates rolling 12 months.
June 2002�
Chatt 7
Average Sector FFO as% of Total Debt·
Year-end 1 998 Year-end 1999 Year-end 2000 Year-end 2001 June2002*
( )
( )
ttndicates rolling 1 2 months.
looking Ahead
As of Dec. 31, 2002, 54% of all utility rating outlooks were stable, which is
comparable with the 53% recorded at year-end 2001. This reiatively high
level of ratings stability is attributable mainly to the substantial number of
ratings that had carried a negative outlook or CreditWatch listing and have
since been downgraded. Nevertheless, the percentage of negative outlooks
(25%) continues to strongly overshadow positive outlooks, which are just 2�
This negative bias results mostly from a proliferation of higher-risk business
strategies, refinancing risk, weak competitive positioning; regulatory
uncertainty, industry restructuring, and volatility in the wholesale power
market. The remaining 19% of companies are on CreditWatch--78% carry a
negative listing, 8% positive, and 14% developing (which indicates that a
rating may be raised, lowered, or affirmed). These percentages indicate tha1
the negative ratings trend will continue. However, the swiftness of negative
rating actions is likely to moderate in 2003 from the extraordinary pace of
2002.
Standard & Poor's expects that most companies providing electricity and ga
service will continue to maintain financial profiles that warrant, at a minimurr
investment-grade ratings. This is because much of the energy industry (ovei
70%) still remains heavily regulated, with less and less near-term chance of
)
()
Liiii> l.,IICllltJllltJ, 1v1u1c;uvc;1, lllv IIIUIIIClllUIII UI lllC UlllllY 111uu;:,uy lU ;:,t:f.ldldlt:: Ill
its component parts appears, for now, to have stalled, as many companies
have revised their strategies to remain more vertically integrated. These
companies appear to have ready capital market access. For instance,
· despite NiSource lnc.'s (BBB/Negative/A-2) liberally leveraged balance sher
that resulted from debt-financed acquisitions of relatively low-risk regulated
utilities, its recent common equity offering was very successful, netting
proceeds of $7 40 million to pay down debt.
Other companies that have diversified modestly, such as Ameren Corp.'s
(A+/Watch Neg/A-1). Southern Co. (A/Stable/A-1), and DTE Energy Co.
(BBB+/Stable/A-2), have kept their managerial sights on the utility business
as their principal responsibility. While Ameren's ratings will be downgraded
due to the pending acquisition of lower-rated CILCORP Inc., its corporate
credit rating is expected to be 'A-'.
Where the regulated operations are the core strategy, the regulatory
environment is typically constructive. This is true of those utilities that opera
in Massachusetts, such as National Grid USA (A/Stable/A-1), in New York
such as Consolidated Edison Co. of New York Inc. (A+/Stable/A-1), and in
Idaho, such as Idaho Power Co (A-/Positive/A-1 ). Nevada and Missouri are
current exceptions to the generally supportive nature of regulation for
companies that have emphasized their age-old traditional competencies.
Unresponsive commission decisions led to downgrades for Nevada Power
Co. (B+/Watch Neg/--) and Empire District Electric Co. (BBB/Stable/A-2) in
2002.
Chart 8
- Outlook Distributions
Watch Neg
(14%)
Watch Pos
(2%)
Developing
(1%)
_ Stable
(54%)
f­ )
Positive
(2%)
The Downgraded
The ratings on El Paso Corp. (BB/Watch Neg/A-3) and its subsidiaries
remain on CreditWatch with negative implications, following two separate
fourth-quarter downgrades that led to a four-notch downgrade to 'BB' from
'BBB+'. The most recent action is attributable to a decline in the company's
liquidity position due to its need to draw down $1.5 billion from its $3 billion,
364-day credit facility to post cash or other collateral to satisfy certain_
existing contractual obligations, resultant increases in debt leverage which i:
already excessive, and the paramount importance of executing planned
strategic initiatives to arrest the company's weakened credit quality.
The ratings on Reliant Resources Inc. (B+/Watch Dev/--) and related entities
are on CreditWatch with developing implications, following several
downgrades in 2002.The latest action reflects the company's lack of ability t,
cite strong commitments from its banks before the maturity of the $2.9 billior
bank facility in February 2003.
Dynegy Inc. (B/Watch Neg/--) and its subsidiaries had their ratings lowered
three times in 2002, resulting in a five-notch downgrade to 'B'. The last
downgrade occurred on Nov. 26 and was attributable to Standard & Poor's
analysis of the firm's restructuring plan, financial condition, and available
liquidity to meet near-term obligations. Although Dynegy has taken concerte
steps to bolster its liquidity position and reduce debt by selling assets
throughout 2002, expected cash flow from Dynegy's reconstituted business
plan is insufficient to fully offset the massive amount of debt the company
retained from the previous failed business strategy. The negative
) ,.
VI OUllV V Qll.,II 11->Lll ll:J 11::llt::\.,l-> ll It: L;lldllt:11!:Jt:::S u ie L;UII IJJi:U ,y iace s regarrnng ltS
· ability to access capital markets for debt refinancing to preserve an adequat
liquidity position to meet obligations over the next 12 months.
Aquila lnc.'s (BB/Negative/A-3) ratings were lowered twice in 2002, resultin;
in a three-notch downgrade to 'BB' from 'BBB. The November rating action
can be traced to the slower-than-expected recovery of its credit quality, as
the company exits the merchant energy business. Recent financial results
revealed lower-than-expected-operating cash flows and higher debt leverag
numbers. The outlook is negative.
The ratings on Alliant Energy Corp. (BBB+/Negative/A-2) and its subsidiarie
were lowered due to weakness in the company's financial profile. Alliant's
. credit-protection measures have shown some improvement in 2002, but the
company still falls short of the measures that Standard & Poor's expected th
company to reach to maintain its previous rating. Weak performance is a
result of lower-than-expected returns from higher-risk nonregulated
businesses and timing of rate increases at its electric utilities in Iowa and
Wisconsin. The outlook is negative.
The ratings on Cleco Corp. (BBB/Watch Neg/A-3) and its utility subsidiary
Cleco Power LLC (BBB/Watch Neg/A-3) were lowered due to the worsening
credit quality of the company, resulting from its merchant energy operations
and doubts as to Cleco's ability to successfully manage the challenges
resulting from the faltering merchant strategy. The ratings remain on
CreditWatch with negative implications.
Arizona Public Service Co.'s (APS; BBB/Stable/A-2) corporate credit rating
was lowered to 'BBB' from 'BBB+' and its debt securities' ratings were
affirmed. The 'BBB' corporate credit rating of Pinnacle West Capital Corp.
was affirmed and its senior unsecured debt rating was lowered to 'BBB-'. Th
downgrade of the APS corporate credit rating is the result of Standard and
Poor's conclusion that the regulatory insulation standard is insufficient to
warrant a separation of the corporate credit ratings between APS and
Pinnacle West. The 'BBB' corporate credit rating at both entities reflects the
combined entity's consolidated rating.
This action also results in a change in the unsecured debt rating at Pinnacle
West because of the structural subordination of this debt compared with the
unsecured debt at APS, because the two are viewed as a single,
undifferentiated economic and credit entity. The senior secured rating of AP
was affirmed at 'A-' due to substantial overcollateralization of the first
mortgage bonds and, importantly, manaqernent's stated intent not to issue
significant, additional secured debt. The outlooks are stable.
Lower ratings for TXU Corp. (BBB/Negative/A-2) and its U.S. and Australian
subsidiaries and TXU Europe Ltd. and its European subsidiaries follow a
material deterioration in the company's credit quality in 2002, due primarily t
weak performance in the U.K. business, which has never provided any
dividends to the parent. In November, TXU Europe filed for administration
(bankruptcy). Management intends to shore up the company's financial
profile in the short term to avoid further downgrades. Standard & Poor's
notes that firms faced with similar challenges have cut or significantly
\_ ').
/)
reduced their common dividend, limited discretionary capital expenditures
significantly, and disposed of assets that are no longer considerecj strategic.
TXU Corp. intends to reduce debt by using cash flow and converting exlstin:
securities to common stock, as well as by securitizing $1.3 billion of
regulatory assets and converting additional debt to equity. The outlook on
TXU Corp., however, will remain negative until the company successfully
executes short-term steps to stabilize the financial profile at the current 'BBE
level.
At present, the 'BBB' corporate credit rating derives support from TXU
Corp.'s strong liquidity position. About $2 billion of annual FFO covers annu:
mandatory capital expenditures of $600 million to $700million, leaving a
significant amount of cash available for other uses, including debt reduction.
The ratings on Dominion Resources lnc.'s (BBB+/Stable/A-2) subsidiary
Virginia Electric & Power Co. (VEPCO; A-/Stable/A-2) were lowered due to ·
Standard & Poor's conclusion that Virginia regulatory insulation is not much
stronger than that of other states to warrant the previous two-notch
differential over the consolidated credit rating. It does, however, merit a one·
notch differential. The downgrade on VEPCO is not reflective of diminished
financial measures, as the utility's stand-alone credit profile remains strong.
The outlook is stable.
Allegheny Energy Inc. (BB/Watch Neg/--) and its subsidiaries saw their
ratings lowered several times in 2002, ending the year with 'BB' corporate
credit ratings. The last downgrade occurred on Oct. 9, 2002, and followed tr
company's announcement that its principal credit agreements are under
technical default. The ratings were placed on CreditWatch with negative
implications, pending the outcome of the company's negotiations with its
banks. In late 2002, Standard & Poor's noted that Allegheny Energy's
statement that it could file for bankruptcy if it is unable to refinance $1.3
billion in maturing credit facilities, will not affect the company's rating. Currer
ratings incorporate the risk that a bankruptcy may result if the company fails
to refinance its credit facilities. Standard & Poor's does not believe that the
refinancing risk has worsened since Oct. 9, 2002.
Lower ratings on CenterPoint Energy Inc (BBB/Watch Neg/A-2) and its
subsidiaries reflect Standard & Poor's concerns with the terms of its new
bank arrangements. Although the company was able to successfully
renegotiate its bank facilities, financing costs are higher than had been
expected, and mandatory prepayments with the possibility of acceleration
translate into ongoing refinancing risk through mid-2003. In addition, debt wi
remain high until its Texas generation assets are sold, and proceeds are
received from the securitization of stranded costs associated with the
generation assets. In addition to the high financing cost and fees which will
pressure already weak financial ratios, there is a schedule of significant,
mandatory prepayments extending through June 2003 which, if not
accomplished, could result in the acceleration of the debt facilities at
CenterPoint Energy and CenterPoint Energy Houston Electric LLC, its utility
subsidiary. The ratings will remain on CreditWatch with negative implication:
until the company can reduce its reliance on banks and demonstrate access
to the capital markets.
) -,
.r)
I I It: I dlll lY::i UI I vv r o r\t:::iVUI l.,;t;:::; I.JUI IJ. l vv r orv, /-\/vldUltl//-\- I) ell IU Lile parern
company Wisconsin Public Service Corp. (WPSC; AA-/Stable/A-1) were
. lowered, reflecting the heightened risk associated with the company's
unregulated operations and a weakening in consolidated financial measures
stemming from underperforming assets at unregulated subsidiary, WPS
Power Development Inc. WPSC'.s ratings were affirmed because it continue:
to have a strong credit profile characterized by stable cash flows, supportive
regulation, and a conservative capital structure. The outlooks are stable.
EOTT Energy Partners L.P. (0/-/--) experienced a several-notch downgrade
this year, with its corporate credit rating slipping to 'D' from 'B+'. The 'D'
reflects failure of the company to make a bond interest payment.
Lower ratings for The AES Corp. (B+/Negative/--) subsidiary IPALCO
Enterprises Inc. (BB+/Negative/--) and its subsidiary Indianapolis Power &
Light Co. (BB+/Negative/--) reflect their rating linkage to AES. The rating
action was directly attributable to the downgrade of AES' ratings; there were
no other events that in and of themselves would have caused a rating actior
on these subsidiaries. Subsequently, Standard & Poor's affirmed its ratings
on IPALCO and Indianapolis Power & Light and removed them from
CreditWatch. The latest action was due solely to the companies' connection
to AES, whose corporate credit rating was. also affirmed and removed from
Creditvvatch. The affirmations are related to AES' closing of its senior
secured bank facility and senior secured exchange notes maturing
December 2005. The closing lifts the immediate threat of insolvency, and
provides AES with the ability to focus on its goal of improving credit by sellin
assets and paying down parent-level debt to a more manageable level, and
by improving operations at its operating businesses. The outlooks are
negative ..
Lower ratings on Northwestern Corp. (BB+/Negative/--) and subsidiary
Northwestern Energy Montana (BB+/Negative/--) can be traced to several
challenges facing NorthWestern, including a deteriorating balance sheet,
continued poor performance in its Expanets and Blue Dot subsidiaries, and
management's inability to accurately project the performance of the
unregulated businesses. As a result, credit protection measures are
expected to be substantially weaker over the next two years. The outlook is
negative.
Lower ratings for National Fuel Gas Co. (BBB+/Stable/A-2) reflect weakenin
financial measures which Standard & Poor's determined are more
commensurate with a 'BBB+' rating. The outlook is stable.
The ratings on Duke Energy Corp. (A/Negative/A-1) and certain subsidiaries
were lowered on Aug.14, 2002, due to a reassessment of Duke Energy's
consolidated creditworthiness, given the increasing risk of energy trading an
merchant generation activities. Lower ratings also incorporate the financial
implications of the current decline in wholesale electricity prices. The outlool
was subsequently revised to negative from stable on Dec. 13, 2002,
reflecting continuous negative developments facing the company in both its
regulated and unregulated operations. Of particular concern is a weaker-tha
expected economic environment in its service territory.which is likely to
lessen the cash flow contribution from the regulated electric business and
) ,.
.l)
potentially further dampen cash flow from merchant generation.
Ratings on The Williams Cos. Inc. (B+/Watch Neg/--) and its subsidiaries
were lowered twice during July 2002, resulting in an aggregate five-notch
downgrade to. 'B+' from 'BBB'. The steep credit decline can be traced to the
company's deteriorating liquidity position, as well as rating triggers
associated with the Georgia EMC tolling agreement, which may require
Williams to provide letters of credit in 2003. In addition, Williams and its
subsidiaries have about $2.2 billion of debt that will mature in 2003. The
ramifications of these requirements create significant uncertainty in Williams
financial position and warrant a rating in the 'B' category. These liabilities
also add risk to Williams' ability to close on substantial assets sales in 2003
to meet liquidity needs. The ratings remain on CreditWatch with negative
implications.
On Nov. 21, 2002, Standard & Poor's withdrew its 'B+' rating on Willfams Ge
Pipelines Central Inc. (Central). The rating was placed on CreditWatch with
developing implications on Sept. 17, 2002. The action is based on the sale c
Central to Southern Star Central Corp., a subsidiary of AIG Highstar Capital
L.P., for $380 million in cash and the assumption of $175 million in debt.
Standard & Poor's does not have sufficient information on Central and its
new owner to maintain a rating on the company or its debt.
Kinder Morgan Energy Partners L.P. (KMP; BBB+/Stable/A-2) saw its rating
lowered due to a decline in its business risk profile as well as greater
interdependence between KMP and Kinder Morgan Inc. (BBB/Stable/A-2),
which holds a general partnership interest in KMP. The outlook is stable.
The ratings on CMS Energy Corp.'s (BB/Negative/--) subsidiaries Consume:
Energy Co. (BB/Negative/--) and CMS Panhandle Pipeline Cos.
(BB/Negative/--) were lowered to 'BB', in line with that of parent CMS Energ:
The downgrade reflects the company's use of the stock of subsidiary CMS
Enterprises, which includes CMS Panhandle Pipeline, as security in certain
bank facilities to obtain longer-term financing to weather its current liquidity
position. In Standard & Poor's view, CMS Energy's actions indicate that the
risk of default of CMS Energy and its affiliates is the same; sirice the
company relied on an operating subsidiary to meet its own financial
commitments during financial stress. The outlook is negative due to the
uncertainty posed by the SEC inquiry and CMS Energy's board of directors'
special committee investigation into "round-trip" trades. Additional challenge
for CMS Energy include execution risk in completing planned asset sales,
maintaining adequate liquidity over the near term, and generating cash flow
and reducing debt sufficient enough to produce financial measures suitable
for its current rating.
TECO Energy Inc. (BBB/Negative/A-3) and affiliates saw their ratings
lowered twice during the year, resulting in a three-notch downgrade to 'BBB'
from 'A'. The credit erosion reflects lower levels of consolidated cash flow,
higher debt balances associated with commitments related to its power unit,
and expected credit protection measures that are now commensurate with E ·
'BBB' corporate credit rating. The outlook for all entities is negative. Despite
TECO's action plan and previously issued equity, depressed profitability at
TECO Power Services (TPS) combined with the weak environment for pews
)
<,
<,
prices presents significant challenges for the firm, including weaker interest
coverages and execution risk. The outlook for all entities is negative
reflecting substantial execution risk that the company faces as it implements
its action plan, and significant challenges related to activity at TPS, includtn;
construction commitments. Still, timely completion of TECO's monetization
efforts combined with successful navigation of TPS risks could lead to rating
stability.
Lower ratings for SCANA Corp. (A-/Stable/--) and affiliates South Carolina
Electric & Gas Co. (A-/Stable/A-1) and Public Service Co. of North Carolina
Inc. (A-/Stable/A-1) reflect the parent's high debt leverage and the fact that
management's previous plan to strengthen the balance sheet is being
prolonged both by the company's accelerating capital program and the dela:
in its ability to monetize all of its Deutsche Telekom AG shares (currently at
lower price than expected). These factors greatly hinder the company's abili
to have its key financial ratios return to former levels of credit quality that
support an 'A' ratings profile. The outlook is stable.
The ratings on Peoples Energy Corp. (A-/Stable/A-2) and subsidiaries
Peoples Gas Light & Coke Co. (A-/Stable/A-2) and North Shore Gas Co. (A
/Stable/A-2) were lowered several notches due to deterioration in parent
company Peoples Energy's consolidated financial profile, coupled with
increasing business risk associated with the company's unregulated
activities.
UGI Corp.'s electric utility affiliate UGI Utilities Inc. (BBB+/Stable/--) saw its
ratings lowered due to the parent's increasing business risk. The stable
outlook mirrors that of parent UGI Corp. and reflects its ability to continue to
manage the challenges of a growing propane business while adequately
maintaining the financial condition of the utility.
Lower ratings for Empire District Electric Co. (BBB/Stable/A-2) reflect a
downward trend in the company's financial profile that was not adequately
stemmed in recent regulatory actions. The outlook is stable.
Lower ratings on Cinergy Corp. (BBB+/Stable/A-2) subsidiaries Cincinnati
Gas & Electric Co. (CG&E; BBB+/Stable/--) and PSI Energy Inc. (PSI;
BBB+/Stable/--) can be traced to Standard & Poor's assessment that defaut
risk is the same throughout the consolidated enterprise. The levelization
resulted in the downgrade of the of the regulated subsidiaries' corporate
credit ratings. However, the senior secured debt ratings at CG&E and PSI
were affirmed due to the significant asset value of the property underlying th ·.
first mortgage bonds. The outlook is stable.
PPL Corp.'s (BBB/Negative/--) ratings were lowered in May while those of
subsidiary PPL Energy Supply LLC (BBB/Negative/A-2) were affirmed base,
on the consolidated credit profile of the PPL group after deconsolidation of
PPL Electric Utilities Corp. (PPLEU; A-:/Stable/A-2) from the parent.
Furthermore, PPL Corp.'s credit profile has eroded due to setbacks faced in
international operations. PPLEU is structurally insulated from the rest of the
PPL group because of ring-fencing, and PPL Corp.'s ratings reflect only the
amount of dividend distributions expected to be made by PPLEU to PPL
Corp. In September 2002, PPL Corp. and its subsidiaries, except PPL
)
<,
()
/)
eiecmc uuuues, wrucn rs 1�gc111y nr1y-1t:11i.;t:u, 11c1u ureu uuuuul\:; 1,.;11c:1118t:u Lu
negative from stable, reflecting PPL's deteriorating credit profile that has
resulted primarily from declining wholesale electricity prices and also from
setbacks in its international operations, particularly in Brazil. PPL's
management will also have to balance the level of debt financing in its
capitalization with the pace of its growth strategy.·
The corporate credit rating of Public Service Enterprise Group Inc.
(Enterprise; BBB/Stable/A-2) subsidiary Public Service Electric & Gas Co.
(PSE&G; BBB/Stable/A-2) was lowered to 'BBB' from 'A�'. While the utility's
financial and operational profile present less credit risk than Enterprise's
unregulated businesses, the corporate credit rating, following the downqradi
recognizes that Enterprise's. unregulated subsidiaries are increasingly
important to Enterprise's strategic growth objectives, the utility's dividends
are critical to the accomplishment of those strategic goals, and Enterprise's
unregulated subsidiaries enjoy heightened access to the capital markets on
the strength of their PSE&G affiliation, in addition to PSE&G's contributions
to their development. PSE&G's dividends are significant both in absolute
terms and relative to the dividends paid to Enterprise by companies affiliate:
with PSE&G. The outlook is stable. . ·
Ratings for American Electric Power Co. Inc. (AEP; BBB+/Stable/--) and its
many subsidiaries were lowered, reflecting the expected restructuring of AE
into its two main lines of business. The restructuring will benefit AEP's
business profile through clearly defining the source of regulated and
unregulated earnings and cash flows, but the financial profile of the
restructured AEP is projected to support only a 'BBB+' corporate credit ratir»
The restructuring has received most of the required regulatory approvals an
is likely to be in effect by the third-quarter 2002. The outlook is stable.
The ratings on Potomac Electric Power Co .. (PEPCO; BBB+/Stable/A-2),
Delmarva Power and Light Co. (BBB+/Stable/A-2), and Atlantic City Electric
Co. (BBB+/Stable/A-2) were lowered and the ratings of Conectiv
(BBB+/Stable/A-2) were affirmed, reflecting the merger of Conectiv by
PEPCO. The outlook is stable.
Laclede Gas Co. (A+/Stable/--) saw its ratings lowered due to deterioration i
parent company Laclede Group lnc.'s consolidated financial profile.
Bondholder protection parameters have eroded due to several successive
warmer-than-normal winters and increasing debt leverage. The outlook is
stable.
The ratings on Sierra Pacific Resources (B+/Watch Neg/--) and its utility
subsidiaries Nevada Power Co. (B+/Watch Neg/--) and Sierra Pacific Power
Co. (B+/Watch Neg/--) were lowered and its CreditWatch implications were
revised to negative from developing. Reduced creditworthiness reflects
constrained liquidity and the considerable challenges that the company
faces.
Lower ratings for Sempra Energy (A-/Stable/A-2) and its utility subsidiaries
San Diego Gas & Electric Co. (A+/Stable/A-1) and Southern California Gas
Co. (A+/Stable/A-1) reflect rapid growth in unregulated ventures. In addition
) '-
( )
( _)
Sempra's consolidated financial profile no longer supports the increased
business risk of the enterprise at the level of the former ratings. The outlook
is stable.
Lower ratings for Kansas City Power & Light Co. (KCPL; BBB/Stable/A-2)
can be traced. to a continued decline in parent Great Plains Energy lnc.'s ·
(BBB/Stable/--) financial profile. Great Plains' financial measures are subpar
relative to its average business profile. Yet, financial improvement is
expected, given moderating construction activity, gradual debt paydown, ar»
greater profits from Great Plains' unregulated units. Within two years, the
company's financial profile is expected to be commensurate with its 'BBB'
corporate credit rating. This expectation, however, depends on the
magnitude of growth among the unregulated businesses and their financial
performance. The outlook is stable.
The ratings of DQE Inc. (BBB/Negative /A-2) and subsidiary Duquesne Ugh
Co. (BBB/Negative/A-2) were lowered due to weakness in DQE's financial
condition and higher leverage due to a convergence of impairment write-om
and stock repurchases; continuing asset rationalization at AquaSource,
DQE's water and wastewater management company; and limited customer
growth opportunities in Duquesne Light's native markets. The outlook is
negative.
The ratings on Xcel Energy Inc (BBB/Watch Dev/A-3) and subsidiaries
Northern States Power Co. (BBB/Watch Dev/A-3), Northern States Power
Wisconsin (BBB/Watch Dev/A-3), Public Service Co. of Colorado
(BBB/Watch Dev/A-3), and Southwestern Public Service Co. (BBB/Watch
Dev/A-3) were lowered on June 24, 2002, to reflect Xcel's decision to
repurchase the 26% of shares of NRG Energy Inc. (0/--/--) that Xcel had sol
to the public. Notwithstanding Xcel's plan to reintegrate NRG's business,
NRG's financial position worsened due to low wholesale prices and a heavy
debt burden. Exacerbating low operating cash flow was the uncertainty of th
timing and amount of asset sales, which were not occurring quickly enough.
NRG's own financial problems began to affect Xcel and its utility subsidiarie:
access to capital. Xcel management's support for NRG accordingly began tc
wane, and with it, Standard & Peer's perspective on the levelization of all
Xcel's corporate credit ratings. Accordingly, Standard & Poor's undertook a
series of negative rating actions on NRG alone, thereby separating the
ratings of this subsidiary from those of its parent and utility affiliates. The
ratings on Xcel and its utility subsidiaries remain on CreditWatch with
developing implications, reflecting the uncertainty surrounding the outcome
of NRG's creditor negotiations. If successful, the settlement will not impair
Xcel's credit profile and the outlook would be changed to stable. If the two
companies are separated entirely, then the ratings would again be based
solely on the merits of the regulated public utilities.
Constellation Energy Group lnc.'s (CEG; A-/Stable/A-2) corporate credit
rating was lowered one notch, to 'A-' from 'A', and its subsidiary Baltimore
Gas & Electric Co.'s (BGE; A-/Stable/A-2) corporate credit rating fell two
notches, to 'A-' from 'A+'. These actions reflect the heightened role that
merchant energy plays in CEG and the market volatility that CEG's merchar
energy businesses face. Despite the risks inherent in merchant energy,
ratings remain in the 'A' category because bondholder exposure is temperec
\_ )
()
( )
by expectations that the regulated uturty w111 produce strong and stable cash
flows, a portion of which will be available to support debt issued by the pare:
to finance the growth of the unregulated operations. Although BGE's cash
flows exhibit .considerable strength, the utility's ratings are constrained by its
affiliation·with the merchant energy business and CEG's support and growtt·
of unregulated operations. The outlook is stable.
IDACORP Inc (A-/Positive/A-2) and subsidiary Idaho Power Co. (A­
/Positive/A-2) saw their ratings fall, reflecting the increased business risk the
the company incurred as a result of the rapid growth of nonregulated tradinc
and marketing activities, as well as a financial profile that had been
weakened by the western power crisis. Subsequently, at the end of the
second quarter, the credit outlooks were changed to positive from negative 1
reflect management's decision to wind down the power marketing business
of its IDACORP Energy subsidiary
The ratings on Energy East Corp. (BBB+/Negative/--) and its operating
subsidiaries, Rochester Gas & Electric Corp. (888+/Negative/--), New York
State Electric & Gas Corp. (BBB+/ Negative /A-2), Central Maine Power Co.
(BBB+/Negative/A-2), Southern Connecticut Gas Co. (BBB+/Negative/--),
and Connecticut Natural Gas Corp. (BBB+/Negative/--), were lowered to
reflect weakened consolidated business and financial profiles, after
accounting for the acquisition of Rochester Gas & Electric. The outlook is
negative.
California Water Service Co.'s (A+/Stable/--) ratings were lowered, reflectinc
a downward trend in the company's financial profile that has been caused
primarily by declining regulatory support from the California Public Utilities
Commission. The outlook is stable.
Water utility Azurix Corp.'s (0/--/--) ratings were lowered to 'D' in light of the
completion of a tender offer on the company's debt for a price that is less
than par value.
RWE AG and subsidiary Elizabethtown Water Co. (A+/Stable/--) saw their
ratings lowered, reflecting deterioration in RWE's consolidated financial
profile. The outlook is stable.
The Few Upgrades
The corporate credit rating on Transwestern Pipeline Co. (BB/Watch Pos/--)
a subsidiary of Enron Corp., was raised, reflecting increased confidence tha
it will not be drawn into Enron's bankruptcy proceedings. Ratings are still no
based solely on the stand-alone credit quality of Transwestern because of
the uncertainty surrounding the company's future. Enron has started a
process that could lead to either the sale of Transwestern or to a reorganize
. holding company that concentrates on operating energy infrastructure asset
in the natural gas and electricity industries. Transwestern would be a natura
part of such a strategy, either at Enron or another company. The positive
CreditWatch listing on Transwestern is based on its stand-alone credit profil
and the possibility that the company will emerge from under Enron's
influence after the bankruptcy proceedings are resolved.
\ )
()
()
• ··- ._.. ... ,,.::,- :0-'' "'."'"--- -··-·;:::,J --,,..... ,----, � .. ·-"--·-· I ...... \,,A I\.V V\.AV�IUICIJIC�
were raised and removed from CreditWatch. The rating action follows the
July 1, 2002 acquisition of LG&E's parent company, Powergen PLC, by the
German utility company E.ON AG, and a review by Standard & Poor's of the
companies' operational and financial linkages. The ratings reflect LG&E's
lower stand-alone credit quality, offset by the benefit of being part of the
stronger E.ON group: The implied support from E.ON is based on the
expectation that LG&E will play an important and long-term role in E.ON's
strategy to expand its U.S. presence. The outlook is stable and reflects the
expectation that E.ON will support LG&E's funding requirements, including
the refinancing of E.ON's maturing debt.
Higher ratings for American Transmission Co. (NStable/A-2) can be traced
· to favorable FERC rate treatment, organizational efficiencies, and stronger
financial measures. The outlook is stable due to expectations for continued
reliable operations and supportive regulation. Also, it is expected that the
capital expenditure program will not stress the company's financials and tha
the member/owner. companies will continue to support credit quality.
The upgrade for Orion Power Holdings Inc (B+/Watch Dev/--) can be
attributable to the company's acquisition by Reliant Resources Inc .
. (B+/Watch Dev/--).
PSEG Energy' corporate credit rating was raised, reflecting the substantial
financial benefits that the company derives from its affiliation with other
members of the Public Service Enterprise Group Inc. (Enterprise) that exhib
significantly stronger stand-alone credit quality than PSEG Energy. The
corporate credit rating upgrade reflects expectations that the risk of paymen
. timeliness is equivalent throughout the several companies that comprise
Enterprise's family of companies. It is noteworthy that the 'BBB-' rating on
PSEG Energy's unsecured debt was affirmed based on the weaker, ultimate
recovery prospects at PSEG Energy resulting from inferior asset quality ..
Mixed Rating Actions
Northern Natural Gas Co. (NNG) experienced numerous rating actions this
quarter. On July 2, 2002, its ratings were raised to 'BBB-' from 'CC' due to
the expiration of Enron's option to repurchase NNG, which ensured that the
firm remained a wholly owned subsidiary of Dynegy, for the time being.
Subsequently, on July 25, 2002, NNG's ratinqs were lowered to 'B+'
reflecting Dynegy's inability to execute on asset sales, including the expecte
partial monetization of NNG. Since Standard & Poor's viewed the sale as
uncertain, NNG's creditworthiness was considered commensurate with the
consolidated credit rating of Dynegy. On Aug. 23, 2002, NNG's ratings were
raised back to 'BBB-' following MidAmerican Energy Holdings Co.'s (MEHC)
closing on the pipeline purchase from Dynegy. Lastly, on Sept. 25, 2002,
NNG's ratings were raised three notches to 'A-' following its change of
ownership. NNG is now a wholly owned subsidiary of NGC Acquisition LLC,
which in turn is a wholly owned subsidiary of MEHC. Because of a ring­
fencing structure that protects NNG from credit events at MEHC, the rating
on NNG is higher than that of its parent. The outlook is stable.
Recent CreditWatch Listings
The ratings on El Paso Energy Partners L.P. (EPN; BB+/Watch Neg/--) wen
\ )
( )
placed on CreditWatch with negative implications based on the most recent
downgrade of its general partner, El Paso Corp. (BB/Watch Neg/A-3), El
Paso's involvement as the general partner, with a 42% stake in EPN, •
influences the partnership's credit profile in several ways and effectively
tethers the ratings of the two .entities. EPN has played an important role in E
Paso's plan to deleverage its balance sheet by enabling it to transfer
qualifying midstream assets to EPN. El Paso continues to operate .EPN's
assets and provide administrative support. The erosion of El Paso's financia
profile pressures EPN's rating irrespective of the partnership's stand-alone
credit quality. In resolving the CreditWatch designation, Standard & Poor's
will assess the El Paso situation's effect on EPN and the degree to which ·
operational, legal, and strategic matters will affect any ratings separation
between the two entities.
Piedmont Natural Gas Co. lnc.'s (A/Watch Neg/--) ratings were placed on
CreditWatch with negative implications, following the company's announced
acquisition of North Carolina Natural Gas Co., a natural gas distribution
subsidiary of Progress Energy Inc., and Progress Energy's investment in
Eastern NC for about $425 million in cash. The proposed transaction, which
is expected to close by mid-2003, will initially be all debt-financed through
short-term debt. Although the acquisition is consistent with Piedmont's
growth strategy to increase its gas distribution presence in the southeastern
markets, the size and scope of the proposed acquisition, combined with the . . uncertainties regarding the its financial and operational implications, further
heightens Standard & Peer's concerns about Piedmont's ability to support a
'A' ratings profile. ,
The ratings on Tucson Electric Power Co. (TEP; BB/Watch Neg/--) were·
placed on CreditWatch with negative implications following parent UniSourc
Energy lnc.'s announcement of an agreement to purchase certain gas,
electric transmission, and distribution assets in Arizona from Citizens
Communications Co. for $230 million. The CreditWatch listing reflects currei
uncertainty about the effect on TEP's credit quality after the transaction, ..
including the ultimate financial structure of the acquisition, the cash­
generating capacity of the new properties, and ratemaking decisions by the
Arizona Corporation Commission.
The ratings on Westar Energy Inc (BB+/Watch Neg/--) and subsidiary
Kansas Gas & Electric Co. (BB+/Watch Neg/--) were placed on CreditWatcr
with negative implications following Westar's announcement that it will
restate its first- and second-quarter 2002 financial statements to reflect an
additional goodwill impairment at 88%-owned Protection One Alarm
Monitoring Inc. While the charge of $93 million, net of tax, is noncash,
relatively small compared with the previous $657 million impairment charge,
and will not affect Westar's liquidity or violate any covenants, Westar's lean
common equity cushion cannot withstand additional decimation. lndepender
of the impairment restatement, Westar's 2001 and 2000 financials are
required to be reaudited. Furthermore, uncertainty regarding the timing of,
and exact proceeds from, the sale of its ONEOK Inc. investment, with
continued deterioration of Westar's already frail capital structure, as well as
regulatory difficulties, investigations, and subpoenas, are significant credit
concerns. These concerns are further augmented in light of the company's
tenuous bondholder protection measurements. The CreditWatch listing is
expected to be resolved in the first half of 2003, following completion of
) '
()
pending audits and a full review with the new senior management team to
address these challenges, including progress on the ONEOK sale.
Recent CreditWatch Removals
The ratings on FPL Group Inc. (A/Negative/--) and subsidiary Florida Power
& Light Co. (A/ Negative /A-1) were affirmed and the negative CreditWatch
designations were removed. The action can be attributable to the financing
and closing of the acquisition of an 88% share of the 1, 161 MW Seabrook
nuclear facility that provided clarity regarding the company's capital structun
The negative outlook reflects the company's ability to secure construction
financing for a portion of its merchant portfolio, concerns over the ability to
meet forecasts that are more robust than historic performance, and
unregulated subsidiary FPL Group Capital lnc.'s exposure, because it is
bringing merchant plants on line in a depressed market.
Portland General Electric Co.'s (PGE; BBB+/Developing/A-2) 'BBB+'
corporate credit rating was affirmed and removed from CreditWatch with
negative implications, where it was placed Oct. 8, 2001 following Northwest
Natural Gas Co.'s (NWN; A/Watch Neg/A-1) PGE purchase agreement. ThE
rating outlook is developing due to the planned sale of the utility by bankrup
parent Enron and uncertainty over PGE's future financial profile. These ratin
actions reflect both the establishment of specific structural features that
satisfy Standard & Poor's ring-fencing criteria, along with evidence that
including PGE in Enron's bankruptcy would have severe economic
consequences for both. As a result, PGE is now rated primarily on its stand­
alone credit quality.
Published by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. Executive
offices: 1221 Avenue of the Americas, New York, NY 10020. Editorial offices: 55 Water
Street, New York, NY 10041. Subscriber services: (1) 212-438-7280. Copyright 2003 by Th
McGraw-Hill Companies, Inc. Reproduction in whole or in part prohibited except by
permission. All rights reserved. Information has been obtained by Standard & Poor's from
sources believed to be reliable. However, because of the possibility of human or mechanic,
error by our sources, Standard & Poor's or others, Standard & Poor's does not guarantee ti
accuracy, adequacy, or completeness of any information and is not responsible for any
errors or omissions or the result obtained from the use of such information. Ratings are
statements of opinion, not statements of fact or recommendations to buy, hold, or sell any
securities.
The M't:Graw·Hill Companies . . , · ·. ·7
.,J
) -
· . ...__,.1'
)
J
http://wwwl.standardandpoors.com/Resource ... eFinance/articles/011901 _ PublicPowcr.html
Publication date: 18-Jan-2001
Reprinted from RatingsDirect
Commentary
Public Power Companies in Northwest Increase Rates Due to Low Water,
Skyrocketing Power Prices
Analyst: Kathryn Mock, San Francisco (1) 415-371-5009; William Ferara, New York (1) 212-438-7667
SAN FRANCISCO (Standard & Poor's CreditWire) Jan. 18, 2001-Unrest in
Western power markets has not been confined to California. The Northwest
is experiencing a similar escalation in power prices that has, in turn, placed
pressure on public power entitles in the region that purchase some of their
power from the spot market. Utilities have also been burdened by a
below-average water year in the Northwest, which has reduced the output of
hydroelectric projects and caused many utilities to turn to the market for
more of their power needs precisely when market prices were reaching
record highs. Higher costs mean increased pressure on cash flow, resulting
in sizable rate increases at most of the large public power utilities in
Washington and Oregon.
The Northwest mainly depends on hydroelectric generation for power. As a
result, the region has historically enjoyed very low rates, with an average
residential rate in 1999 of 5.10 cents per kWh in Washington and 5. 75 cents
per kWh in Oregon. This compares with the national average of 8.14 cents
per kWh. The combined impact of low water conditions and high natural gas
prices in the Northwest, however, has led to a rise in fuel and
purchased-power costs and places significant financial pressure on municipal
utilities in Washington and Oregon.
The Northwest's five largest retail municipal electric utilities have approved
or proposed rate increases as a result of these factors as follows:
• Tacoma Power--50% rate surcharge was approved;
• Snohomish County Public Utility District-35% rate increase was
approved;
• Clark County Public Utility District--20% rate increase for residential
customers and 33% increase for industrial customers were approved;
• Seattle City Light-20% rate increase was recommended to City
Council in addition to the already approved 10% rate surcharge; and
• Eugene Water and Electric Board-A 15% rate increase was
recommended to the board.
In addition to these rate increases, Bonneville Power Administration (SPA), a
major wholesale provider of power to the above entities, has not yet finalized
its 2001 rate case, which will determine the wholesale rates it offers to
customers in the five years beginning Oct. 1, 2001, through Sept. 30, 2006.
Each of the above entities is likely to need additional rate increases based
on BPA's projections for its 2001 rate case (estimated at about 30% above
current rates), although BPA's final rates have not yet been determined.
Despite the rate increases, which indicate the pressure on cash flow,
Standard & Poor's views the outlook for these entities as stable, including the
outlook for Tacoma Power, which was revised to stable from positive given
current market volatility and the utility's exposure to purchased power costs.
In each case, the quick response to raise rates to avoid deterioration in their
respective financial positions is viewed as favorable for credit quality. In
addition, the utilities had the flexibility to pass such rate increases along to
; ) ·- ·'------"',
)
http://wwwl.standardandpoors.com/Resource ... eF mance/articles/01190 l _ PublicPower.html
customers. Even with the approved increases, municipal utilities remain
competitive with investor-owned utilities in the region, which have had mixed
results in the current market environment. Some, such as Portland General
Electric Co. and Puget Sound Energy Inc., have benefited from the sale of
excess power into the California and surrounding markets. Others, most
notably Avista Corp. (and its highly publicized trading losses) and PacifiCorp (due to its sheer size and scope in the West), have requested rate increases.
Municipal utilities likely will adjust existing rate structures and liquidity levels,
however, to reflect the new market volatility. Unlike their counterparts in
California, municipal utilities in Washington and Oregon did not increase
their historical liquidity levels of between 30 and 60 days' operating cash on
hand in the past few years, making it more difficult for them to absorb the
unprecedented run-up in wholesale power prices. As a result, rate increases
have occurred in Washington and Oregon, whereas municipal utilities in
California, such as Sacramento Municipal Utility District, have been able to
offset higher wholesale purchased-power costs through cash reserves.
Utilities in Washington and Oregon are reviewing their financial policies,
including cash reserve levels and rate structures necessary to compete in
today's volatile power markets.
Although most utilities plan to return to BPA in October 2001 for the power
they are now purchasing on the spot market, the risk of rising natural gas
prices and low water conditions remains. The five municipal utilities
mentioned above are all considering participating as "SLICE" customers of
BPA, which means they will guarantee to pay a certain percentage of BPA's
costs in return for that percentage of the system's output, based on critical
water years. The result is an increased exposure to reduced power supply
during low water years with the upside potential for additional revenues when
nonfirm power, produced in an above-average water year, is available for
sale.
Utilities with any degree of market purchase or natural gas exposure are
feeling financial strain, as evidenced by across-the-board rate increases. As
municipal utilities in Washington and Oregon reduce their exposure to
market purchases, risks associated with low water conditions and volatile
fuel costs remain. Utilities are expected to continue to reduce their exposure
to natural gas costs through long-term contracts, the construction of new
generation, and the use of financial hedges, while maintaining high levels of
liquidity in the face of the region's current power market. Standard & Poor's
expects that cash reserves particularly should be evaluated to determine
whether they are sufficient to cover each utility's outstanding risk. Although
Standard & Poor's views the short-term outlook for municipal utilities as
stable, continued escalation in power prices through the first nine months of
2001 could place even more short-term financial pressure on the municipal
utilities, which combined with BPA's anticipated rate increase, could result in
the need for additional rate increases. Any serious deterioration of a
municipal utility's financial position or a rate structure that is very high on a
comparative basis could result in a negative rating action, Standard & Poor's
said. - CreditWire
'
'(A) Diluted EPS. Excf;.nbnl'ecurring g�in (leas): dates:·1st ol Feli;, May, Auo., Nol(;·" Dlv'd � lowed on com. eq. (Sierra Pacilic ekic.) in NV •Company'• FJnan.clal Strength · '90,. (76t); '95, �- Neiq<eamings report due' Investment plan.availablei{C) lnctlntangibles. in '97: 12%; iri ·oA · in ,'96:, 1 t6%; Nevada . Stock'• Price Stability · early Feb. (B) Next �v'd meeting about Feb? In '99: $7&a.tl,nill.; $9.59/sh. (0) In miH,, a<l.- Power In '92: 12.5%; earned on avg. com. eq., Price Growth Persistence 23. Next ex date about Jan. 10. Dlv'd payment for spl�. (El Rate base: Net .orig. cost. Rate a(. '99: 4.7%, Regulatory Clima1e: Ave�ge.' · : . Earnings PredlctabUlty C 2000·.wiut,l.1114"-� · ts• ··· )factual ll)llerlat it olllalneci �onnources belieYed k> be reliable and Is priJVldedwtlloti wa111nlits of ariy kild. ..... ... !l!l!'-111!1 ,THE PUBLISHER IS NQT�$11 111fi . S QA OMISSIONS HEREIN. This publicalion Is stricttf lorsubscll>tr's own; non-omwneicial;intemaluse, No part •11-·u ,�, t • • :U llt:tctc!!IIH!til ol tt miy be teprodl.i:edr llcnd o,.'. *'i electronic or other lorm, or us«f lor ·generaling or ·JmrkelinQ any ponied or tledronic publi<:alion, .. rvice or product:
·s1ERRA::BAGIFIC .. RESJ:�vs·E�R;r'.'..J���: .·\I1s �NMF(:�t:)l��NMF. �0 s.3%··•)zss. t-T..;.IM_E.,.,.l:1-�E-.$$-,'.'""· .;.:-"'"'.·.'""�--- "'". =-IJJ:N'99--. r -H-lg-�"":., .;;.. . .:;-,,2�5.-9 r ·-f-25.;...8_,'.-:,-,22-_ ... 5-r_-\-24-.0-,:r·:-_· 2-6-.8+, - . .--24-,4-, ..... -'.·2'-2-.9.,.· -., -22-.9- r: -2-1.L.6.,.· -, -26-.9--r-.-_2-7-.0+--� 9-.-4 ,...--�- Target Price. Range .. · .. · 3 ·, , Low .. --i'19.3 · 20.0 .·16.6· . H.9, ,, '22.5 '17.8 · '19.1 ' 19.8 · 19.4 . 22.2. 16.9 12.1 · 2003 2004 2005
SAFETY · ' 'New8/2i'.V99 ... 'LEGENDS.:·,_.:;;;:.',.·: .,.,.- .. . . ... NovodaP,wor Sln•Pocllk: 80-'
TECHNICAL - �� "--;F�J!,. ( ,...._-------�+---+--->---<f-'--,-r--<f----+·---1·---+--- ----� 60 �,�,oo:��; ��:'.f,�::!� :-.:::_ .. :._,:, -�=-:,:=.�=: :,:,. :_,::::_::::::::::: .. :. = .. = __ ::::= .. = .. :, ::, ::::�::11:,::::::: __ ::::::::,:_ ::_:_:_:::_:_:_:: � •
High. 30 ·-J+90%l' . �1!' ... • .. - ·.·. , .. - ·.. I• •'hi''"'" , 11· .. •. ,.. II - ,l,- _ . _.;.. -··'-' 20 low 18 , +15% .. 9% .. , ,,.,,_'-:-"':+---'-f--:--'-l..,,.;.c-:-+:---,;,-t-:--+-:-'--l--t:-+-'-'tt:u..-,,,1-:1,,"-.---+:--+.....--+�-1- 16,
Insider Decisions , 12
, P.J F .. M .. A_M· J.: J A . -. _......, .. _ .. _.__....,,... - .. - .. +---+---+----<--+--+--+----+--+---+----+---+- 10
lo Buy 2 2 2 3 · 2 0 1 0 0 . ,._,.,, .. " . . .. 8 , Oplfons. 0 0 0. 0 !)'. .0 0. 0 0 .,.,,,. " •• 6. loSell O O 0-·0 0-0.0 0 0 ff.iii'.• .. .., %TOT.RETURN11l100 Institutional Decisions Tlfls ·vt ARITK _ . 4 - l0199! '1Q200CI 202000 i "· ! ,i,k ,,, · I I STOCK INDEX ·1oeuy . 76 67 ·:·79 Percent,:fl.O; ... ··r,,,,.,,;;,:lt ".I I ,,ll -1yr .. ·20.1 14.8 -
lo� 49 ·ss '. 48 �.�e; 1;:tg\, · : ;.s,,-; j • ::?· I· I , . , I " I I, •••••••• Ill . 3yr. - 30.0 - Hld'l(OOO) 36037 31163 30337 .. . >,,,.,,,;, · · "' u, •··· · 111111 1111 5 y(. - ·,-104,8
. Sierra Pacitic F\e�urces njerge.q;witlfNe· ,1990 11991 .1992 ;1;993 ·l994 1995 1996 1997 1998 1999 2000 .. 2001 cvALUEUNEPUB.INC. 03-05
vada Power in Julyot 1999. Stockholders of ':-:16.64 16.34 -: 1s:so : 15.70 · 16.84 : 15.94 16.51 15.86 17.04 16.69 '28.65 33.10 Revenuea per sh 39.50
the "old" Sierra Pacific re.eeived'1.44 shares ·;,2.13 .. ::2.1t -: .. 2.69 :3.00 ,3,15 2.93 2.97 .3.04 3.12 2.10 .• 1.90 3.60 "Cish Flow" per sh 4.50
of the new compaoy or $37.55 in cash for .' t54 . : rn1 , :1.« t·· 1.76 · 1.82 1.53 1.56 1.65 1.64 .83 d.20 1.4P Ealnlngs per sh A · . 2.00
each of their.shares., while-Nevada•Power .1.58 · 1.60 1.60 ... 1.60 1,60 1.60 1.60 1.60 1.45 1.11 1.00 1.00 Dlv'dDecl'dpershe• 1.10
stockholders received:oneshare orthe;new 5.39 '4.58 .·4.61 3.93 . •4.05 .· 3.60 3.64 4.41 · 6.31 .3.95 4.85 u511.1p1:;pendlngpersh . 3.75
company or $26,in,cash Jor each of their .,-14.05 ·.13.96 14,34 15.56 ·.16.12 16.25 16.40 16.54 16.86 18.83 17.60 ·18.05. BookValuepersh.c 20.50
shares. Data..through the second quarter of ·. 28.91 · · 32.98 ,_. 37,13 : 41,51 45.38 47.04 48.79 50.40 51.27 . 78.43 ·:· 78.50 . 78.50 ConvnonShs outst'g o 78.50 1999 reflect NeY.ada: Power.:Cin:,a:,stahd· '':14.5 :.19.4 .'14.1 ·.14.1 : 11.3 13.6 ·13.3 · 12.9 15,2 . 25.7 so/dllg1rwi«e·· AvgAnn'IPIERaUo 11.5
alone basis and are notcompareble with · 1.os ' , 1.24 ,86 .83 .74 .91 .83 .74 .79 1.47 v.iue t1ne . Relative PIE Ratio .75
Sierra Pacific data: , ,. ·, '., ' .. !-'. • 7.1% : 8.1% '·.7_9% ''6.5% i8% 7:7% ·7.7% .· 7.5% 5.8% 5.5% .. ,,.�,.. AvgAnn'I Div'd Yield 4.8%
CAPITAL STRUCTURE as of 6/3CVOO . c : :0�1.1 ,. 538.8 586.9 · 651.8 .7642 ·-750,0 805.4 '-799.2 · 873.7 · 1309.1 2250 2600 Revenues ($mill) 3100
Tota1Debt$2718,9,Q!ill.Dueif1Pr-t$756.3mill. •: •"46.5 '.-34.0 .: 56.8 '.)3.6 ,' 81.9 -·74.7 ·78.9 ':83.2 . 83.7 7U 7.0 135 NetProfll($mill) 180
LT �bt $2153.3:!Tii�.'. LT lri�,e�l$!,40 -. 0 mill,- . · :·25:1% · 32,2% '34:6% :33.6% 32.6% 31.5% 35.2% 35.2% 35.2% 27.8% 20.0% �-V% Income.Tax Rate 30,0% t!�::m:�:��x.Li�Ghl-tentals $1�.frtlill. ' ;22.3% •26.6% 22-0% ,21:3% ·13.4% 10.4% 9.0% 13.6% 18.0% 14.8% NMF 12.0% AFUOC % toNe1 Prolit 7.0%
i>eniionUabillt{Nilne\i,::.,.�J /·:'.·,.: ;::,.·, . ··s;i:7% :.53.5% 55:4% '51-.0% :.47:9% ;49.8% 50.0% 48.4% ·46.0% ··46.9% 56,5% 56.0% Long-Term Debt Ratio · 50,0%
Pfd.stock$287,4rnin, PfdDlv'd$23.2mill:•,J\\ ·· ·41.9% 42.6% .41,3% . 48.0% 49.2% 47.6% 47.5% '45.0% '44.2% 44.5% · 36.0% 36.5% CommonEitultvRaUo 42.5%
· 416,800 shs. $2,44;$3.90; i:iim:, $?<>'.par, 41lli'from · . 970.5 1081.5 .1290.4 . 1.404.8 1486.4 1606.2 1682.8 1�1.4 1956.7 3321.1 3835 . -�880 Total �pltal ($mtU) 3800
· $50.00-$51.95/sh)ncl. 2 Till. $�S. $1.95 (�� par) ' ·996.9 '1186.7 1328,7 · 1450.2 .1584.0 1701.1 · 1818.9 1960.7 2199.9 4073.5 , 4280. · 4550 Nit Plant ($miUi . · 5000
.. cum.,call. al�25.:9751sl\.-_after.9/1./Q?;:1,94p,ooo .,68°' ·'51" 61"' ···68" ·7·r.or ·. 6.1" ·6.1°' ·"5.9°' 57°' 34" ·2."" ·.5.541. RetumonT"'·ICap'I ·6 . ..,_ ShS.'8,60%; 4,754',860 8,2%;°$25 each; 2,8Q01QQQ .--: ' /0 .' :•: /0 : ' lO ' ' /0 ' ,U/0 /0 /0 70 · /0 • /0 .r. 'IO a, ""' �JII 7'Y,%Cum.,$25each. .' . .,,, · ·. -: .. , .. ,.,, · ·10.4, , 6.8% .9,9% 10.7% 10.6% 9.3% 9.4% 8.7% 7.'!'I. · 4.0% · · .5% '8.0% ReturncinShr.Equlty 9.5%
CommonStock78,442,58.J.shs'.'as·o1819/00 . .i· ''. 10.7% ···6.8% ,·-9:9% 10.8% 10.6% 92% 9.4% 9.0% 8.4% 3.5% NMF 8.0% Retu(TIQnConiEquity e 10.0% MARKETCAP:$1,3bllllon(t,41dCap) .··/ '!NMF •INMF '.NMF ' 1.0% · 1.4% NMF NMF .2% · 1.1% · NMF. · NMF 2.5% Retalned1oComEq 4.5%
ELECTRIC OPERATING STATISTICS , • .·,102% \'NM� ,·107% • ,91% , 88%' ·104% :102% . 98% , 88% NMF NMF 76%' ARDlv'dstoNetProf 61%
'loci,. Retai Siles� · . \�r �, ·,;t':.f BUSINESS: :Sie�a Pacific Resources � a.holding company lomied · .. commercial, 23%; industrial, 41 %; other, 4%. Generating sources, Avg.=Uie(Ml'lt!l· · , 4896 5418-; 4700'" .throilgh.the·7,'.99merger.olSierraPacificandNevadaPower.Sells '99: coal, 29%; gas & oil,.23%; hydro, 1%; purchased, 47%, Fuel �?�t:i:�.t,) .5.04· .. 5.36 ,!'5,28 ,electricity in:west'central & southemNevada & eastemcCaJttomia; ·,costs: 49%.ol revenues. Has 3,250 employees, 29,300 common �to'ad 5 �lw) . . ·. fJ� . ·19gJ. }j�� · \P_rovi�es oas &, wat� to Reno & S�, Nevada & environs, Reva-, stockholders. Chairman, President & CEO: Walter M. Higgins. Inc.: Amiail.oadra':(%} : · ·. · . 50.3 , 49.0 ·· 46.3 nues. NV, 97%, CA;.�%, Customers. 869,000 el�ric1110!000 gas,, Nevada. Address: P.O. Box 30150, Reno,_ Nevada 89520-3150,
%�Costme1sll'.f-erd):' · .. · _: +6.4> +5_9-,;:: +6.5. ·.70,000 .water. Electnc:Tevenue .breakdown, '99:· residential, 32%; . Tel.: ns-834>5400. Internet: www.s1errapac,t1c.com ·
FLiedetiuyeCw (%!: " 2�1: , 210, ;,; ��- 'Alag }fr the •recovery of 'sharply big�- ings in ·2001. The Oregon commis�ion has
ANNUAL'RATES ·. Past ·· , Past Est'd '$T,99 ·!r;,powei' :Cos�iJ'is hurt�g- S�eqa Pacif-. approv.ed the transaction. Assuming. two of change (per sh) 1ovrs: · svis.·, to'W05';' 11c ·Resources •. -Power pricesun .the West· other regulatory approvals· are· obtained, Revenues · NMF·" . NMF • , 'NMFi,i. have.' soared, since .the' second · quarter of we peg -the closing in the first quarter. . . ���ii�g�ow" . -t��:': -��� · ·xw: .!:2.0QO;<and-until-:.recent!Y, SPR's two/ utili- •· .• and its asset dtvestttuces. I� accord-.
Dividends : NMF · · NMF .·NMF', • rties ·lacked 'a": mechanism .for -recovermg ance with a regulatory agreement m Neva-
Book Value .NMF · NMF.(·;11 NMF' .theae-increases., The Nevada .commission -da, the company .is selling its generating
Cal·. · QUARTERLYREVENUES($mlll.) .··.Full ha_s_: tp"�nted one, �ut it won't ·solv,e .the. plant�, _whi!!h have· a book value of about endar Mar.31 J.un.30 'Sep.30 ·. ·0ec,31 -' Yeiir'' ,u�iht1es, ·· problem !Jghb away.: Thats be-: $1 bilhon. ·. So . far,. the· ·announced· sales
1997 '155.4 200.0. "285.0' 158.8 799_2 cause· the �echamsm tracks ,Power costs have fetc�ed. prices well above book .. (S?me
1998. 165.3 198.9· 327,8'' 't8l7-' '873:7 .-:ov:er,-a.;tra1ling _.12-month :penod anf:�e- plants !ire still on the bl?ck.) SPR will lilt.e- 1999 182.4 236:0 · 478.8 409.9'i 1309.1 , cause- _the· amount by whic� the,,ut1ht1es ly ·receive �he P.roceeds m the first haltof · ·2000 402.9' 490.7 .. :957,1 ·.:: 489.3·• 2250 •can·_.ra1se rates each' month 1s capped.··For·. 2001, ·and 1t. will probably use the money
2001 500 · 575 .,950, i. 575•.·:: 2600"" .ithei.S time •.being;·· the .:maximum ·monthly Ao retire debt, as .its. !eve.rage will increase•
Cal-.. EARNINGS PEil S.HARE A .. · , i'i:iif · ,t�riff hike:' does: not· provide, enough reve-. considerably once the __ PGE d�al .ha_s be�n: eridar Mar.31 ''Jilil.30' Seb.30 'Dec.31 t'year· '!1tle to. co�pensate _t4e. c<!mpany for, all- of complete� .. Separ:1tely, SPR 1s selling its 1997. : 1 � ·. .38 , , · 1.06 .OS , 1;65' ,its costs. All -told,- we: est1D1ate that .srR water utihty, -.y�1ch ha� � . book value of
1998' ' ,14 - · ··.20 ·: t:21· ... 09' :'i.64 ·.will record a fo�s-m 2000. In. addition,. ar?und·$250 million. This 1s .a good way. to '1999. ',09 : -":23 : :·,93 , dA2' , :-'.83 :we··have · sla,shed our•,2001 estim!l�e �y .. :raist: cash;: :as that operation has been 2000·' .··.23 ,, ,::d.26' , d.25 . ;,os: ·-:,d,2q :·${).35 ,a·,,share .. r'Note- t�at .. the volatihty m · eammg,low returns for many years. . · ..
2001 . · .20 wi:.20 ... :·;70·: ·; ;30 . · '. f.40, poweri,-.p:riiJes; makes· .our! estimates ,.highly: This st_ock's main attra(ltiOll is its high
ca� ' QUARTERLY. DIVIDENDS PAID a• , : , tfuU :,tentative;' . and : that · our ,.,figures ar� · based. · rield; , . De�pi te SPR'� ··. tci�ses; · .. the board
endar . Marc31 "Juri.30 Seii.30 De'c.31 ·' Year , on the; company's ;cur'reJ?,t configuration_;.:: , seems . mch�ed to : 11:unnta�n. the: payout �t
1996 .. 40 ,._40·_, , ·.4o · . :40 ·. "1.00' t_SPRis proc�eding with �ts .takeover of the current lE;vel a� long as it appears as _if
1997' .40 · · .40 ' AO · .40'·· ''1:60' ·:Portland General Electric •••. The -com- the bottom lme �111 be· back on tra.ck 1!1
1998 .40 ·i'.40 . :40 · ·· .. 25 · :-1;45, 'P��f,h�s· agreed:toi�uy, ·PGEJor over $2 200):. The· �tock 1s unranked for. Timeh· 1999 · .2$· :::25: .J,�5:, ·;25'' '-1:-00 :1>1lhow',m c�sh,-a.rpnce,�lwh1ch the deal, ness due to:,1ts short post-merger history.·. 2000 .25 ,,--:25 . ;,·,:25 :25\ " n:, ·-,would:J,e s_lightly' accretive to:share earn-· ;Paul E; Debbas, CFA November 17, 2000
B+ .. NMF NMF NMF
()
()
FEDERAL ENERGY REGULATORY
COMMISSION
( )
{)
WASHINGTON, D.C. 20426
AUGUST 15, 2003
STATEMENT OF PAT Woon, Ill
CHAIRMAN, FEDERAL ENERGY REGULATORY COMMISSION
ON THE POWER FAILURE IN THE U.S. AND CANADA
. "Today, while some areas unfortunately remain without electricity service, we owe a debt of gratitude
to the hard work of thousands who have worked long hours through the night to restore power to millions
of customers.
"The continued efforts to repair the situation underscore the importance of our multibillion-dollar
electricity infrastructure. The degree to which we take this complex, highly interconnected machine for
granted is a tribute to the past performance of the system.
"We at FERC and other government agencies are committed to understanding
precisely what caused this problem. In the interim, the cascading nature of this blackout offers an object
lesson of how the electricity grid requires regional coordination and planning, a challenge the nation is still
striving to meet. It is regional coordination and cooperation that is contributing to the grid restoration now
under way. Regional coordination and cooperation, with smart planning and investment, will be needed to
prevent any recurrences.
"If we draw any conclusions from this blackout, it is the urgent need for more investment in the
nation's transmission grid to serve broad regional needs. The Energy Department has projected that, over
the next decade, transmission investment will grow only 6 percent-as electricity demand grows 20
percent.
"Clearly, we need regulatory certainty and other incentives for investment.
"When Congress returns next month, a joint House and Senate conference committee will begin
deliberating crucial legislation on national energy policy. We stand ready to help lawmakers in any way
we can in the pending effort to craft a modern power-delivery system that best serves the public.
"Right now, there is no federal regulatory authority over reliability, but we can, as economic regulators,
continue to intensely monitor the grid and markets to ensure that they are operating soundly.
"The Department of Energy has an office (202/586-1411) set up to address infrastructure issues and
has developed a roadmap to create an ultra reliable and technologically advanced grid."
-- .�;L\�;D.\Rl) LIT I L J TI ES
.:,I\H_m:s
r\cation date: 10-May-2002
Jinted from RatingsDirect
Electricity Transmission at the Starting Gate
Analyst: Peter Otersen, New York (1) 212-438-7674; Deborah Kaylo, New York (1) 212-438-7668
r>. ()
(Editor's note: This is the first of a two-part series looking at credit
perspectives of electric transmission asset companies. This article
addresses strategy and regulation.)
-lh'e·FERC is in the process of ohal'llging every aspect ef the eleetric·
utility land�JafR •. with industry sages anticipating further transmission
and wholesale market development guidance, which could affect the
segment's credit prospects and quality.
While some states have facilitated transmission divestiture, others are
moving more cautiously. There could still be states' rights versus federal
government issues at hand. With this backdrop, the industry is anxiously
awaiting further FERG guidance for regional transmission organizations,
independent system operators, and further development of the
wholesale market. Independent system operators have been discussed
frequently, and much has been written about independent system
operators, such as the Midwest ISO. However, recent events have
brought transmission ownership entities (transcos) to the forefront. There
has been some activity relative to divesting transmission assets and
creating new transmission companies (Canada's Altalink, the U.S.'s
American Transmission Co., and a third, independent nonutility affiliated
entity, Trans-Elect Inc.).
Transmission Asset Company Strategies Are Taking
Shape
To date, there have been very few pure-play transmission companies
formed in the U.S. and Canada. Strategies reflect the needs of not only
current owners, but passive investors and previous owners. Company
strategies will affect credit quality, as will the regulatory environment in
which each company operates.
American Transmission Co.: First in the U.S.
American Transmission, the U.S.'s first transmission company, was
formed by the four-largest electric utilities and the largest public power
authority in Wisconsin. Each entity contributed transmission assets at
book value for a proportionate share in the ownership in ATC LLC. The
capital structure of ATC LLC is about the same as the utility companies'
capital structure, as is the rate of return under the FERC's incentive
rates, which was very similar to the rate of return allowed by the Public
Service Commission of Wisconsin. The credit strength of the sponsors
supports the 'A-' rating. The LLC structure allows rate and earnings
transparency for ratepayers and shareholders by avoiding double
taxation under a corporate structure. ATC's management consists of
former utility company executives familiar with the technical and
business aspects of the industry and this particular system. ATC has
contracted with each utility for line maintenance using the same work
force that maintained the system during utility ownership. This translates
to a degree of continuity from an operational perspective. When the
operational contracts expire, ATC may renew them or create its own
in-house maintenance organization. ATC is responsible for increasing
the internal reliability of the system, meeting new system demands, and
Electricity Transmission at the Starting Gate
increasing system import/export capability. All of these challenges
provide A TC with ample investment opportunities. However, ATC has
not ruled out acquisition of adjacent states' assets that would support the
company's basic responsibilities.
Trans-Elect: First Independent Nonutility Company
Trans-Elect, through the purchase of Consumers Energy Co. 's
transmission system Michigan Electric Transmission Systems LLC
(METC), represents the first acquisition of transmission assets in the
U.S. by an independent nonutility affiliated transmission company.
Consumers Energy was interested in disposing of the transmission
assets as part of a corporate restructuring program. Former utility
executives and strategic and financial investors formed Trans-Elect with
the intention of acquiring transmission systems in the U.S. and Canada.
In the acquisition structure, Trans-Elect created a limited liability
· company to hold a general partnership interest in a limited partnership
formed with a subsidiary of General Electric Capital Corp. This
partnership, in turn, holds 100% of the outstanding shares of METC.
Trans-Elect's ownership affords limited liability protection features at the
operating company level. General Electric Capital Corp. was a key
provider of equity capital to the Michigan transaction.
Consumers Energy is currently under a rate freeze in Michigan ending in
2006, with implications of this rate freeze reflected into transmission
rates. In addition, Consumers Energy is also providing maintenance and
capital construction under contract, with a potential for transition later.
This structure provides benefits to the buyers (limited operational risk)
and to the sellers (limited cost of service exposure).
Altalink: First in Canada
Altalink Investments l.P., Canada's first independent transmission
company, was formed by four sponsors. The sponsors can be divided
into two groups, passive financial investors (the Ontario Teachers'
Pension Plan (25%) and Australian Investment Bank unit Macquarie
North America (15%)) and technical sponsors, such as SNC-Lavalin
Group Inc .. Altalink was formed to acquire the transmission assets of
Transalta (formerly Calgary Power), an investor-owned utility. In addition,
Altalink Investments formed Atlalink LP., which will own the
transmission assets. Canadian regulators typically set rates using capital
structure guidelines. Currently, rates are based on cost of service.
However, over time, performance-based rates may be phased in and
could allow a higher return on equity predicated on efficient
management. The passive_investors might be interested in acquiring not
only the transmission assets but also the skilled work force. The front
line staff was included in the original sale agreement between AltaLink
and TransAlta. Core senior management was selected from Transalta.
Altalink is responsible for upgrading and expanding the existing system
with the potential to increase its service territory where it is economically
feasible.
Credit Considerations
Regulation remains key for credit quality no matter what strategy is
selected. Transmission will continue to be regulated. Support from
regulating bodies, especially in the transmission company's early years,
is highly important for the company's early success and continued
viability. The regulatory bodies include the FERC, as well those at the
state and local levels. Efforts related to wholesale market development
will shape functional and operational responsibilities for the transmisslon
company. Significant 1.mcer\ijjn.ty stHLexists tor transmission c9:mpaniesi
that may opemtEH:lntler an fttdor tSO structure, Whi.ch will significantly
Electricity Transmission at the Starting Gate
r>. ( )
�- ( )
r )
Formation of some of the early transmission companies has actually
been facilitated by state legislation, as was the case in Wisconsin. State
legislative and regulatory bodies have some influence over the ability to
obtain certificates of convenience and necessity, and actual siting of new
transmission assets. Environmental and consumer advocacy groups can
impose delays associated with siting new transmission lines, which can
affect execution of a company's strategy.
Reliability of cash flows.
The level of reliability produced by the cash flow from transmission
assets is a key credit determinant, Bec.ause transr:ais$ionp,Qli.cy.Js still in '."
the formative stages and will likely change over time, a degree of
uncertainty exists in financial projectiorcts,,,;Companies th.at can have
projected costs evaluated by the FERG and can approach the FERC for
higher expenses than originally anticipated are better positioned than
companies that need to absorb unexpected expenses ..
Timeliness and consistency.
Regulatory treatment that is timely, allows consistent performance from
period to period, and allows for the potential to recover unexpected costs
is favorable to credit quality because financial stability is important.
Conversely, historical rates, regulatory lag, delays in FERG rate relief
and the potential for increased costs to be disallowed are less favorable
to credit quality. In the case of performance-based rates, more variability
is imposed as the company must meet performance standards, which
could increase business risk. However, an analysis of the risks
(penalties) and rewards must be analyzed for each company.
Standard & Poor� '$::!
A DiNiott of'lTwM:G,w,,Hii,�
Published by Standard & Poor's, a Division ofThe McGraw-Hill Companies, Inc. Executive
offices: 1221 Avenue of the Americas, New York, NY 10020. Editorial offices: 55 Water Street,
New York, NY 10041. Subscriber services: (1) 212-438-7280. Copyright 2002 by The
McGraw-Hill Companies, Inc. Reproduction in whole or in part prohibited except by permission.
All rights reserved. Information has been obtained by Standard & Poor's from sources believed to
be reliable. However, because of the possibility of human or mechanical error by our sources, Standard & Poor's or others, Standard & Poor's does not guarantee the accuracy, adequacy, or
completeness of any information and is not responsible for any errors or omissions or the result
obtained from the use of such information. Ratings are statements of opinion, not statements of
fact or recommendations to buy, hold, or sell any securities.
( )
/
9TH ANNUAL SPRING CONFERENCE
FOR THE NEW ENGLAND ENERGY INDUSTRY
POWER MARKETS IN 2002
PRESENTED BY:
NORTHEAST ENERGY AND COMMERCE ASSOCIATION (NECA)
REMARKS BY
WILLIAM L. MASSEY
COMMISSIONER
FEDERAL ENERGY REGULATORY COMMISSION
"RESTORING CONFIDENCE IN ENERGY MARKETS"
BOXBOROUGH,MA
MAY 21, 2002
Good evening. I am honored to have the opportunity to address such a diverse and
distinguished gathering. You have an excellent program ahead of you. I wish I could
stay longer to participate for the full two days.
I have great respect for the progress New England has made in moving to
competitive markets for electricity. You have been first movers and are well ahead of
most of the nation. Market participants in New England are sophisticated, as are your
state regulators and law makers. You have been on the cutting edge, leading the country
toward reform and innovation.
In an effort to stay ahead of the FERC, the New England ISO has been in merger
negotiations with the New York ISO. I respect those efforts as well, though I realize that
.some in New England have serious reservation about the wisdom of a merger. I
understand that there is a new cost benefit study that questions whether a merger will
benefit New England. My general view is that larger RTOs provide a more. efficient and
reliable trading platform on which wholesale markets can thrive. The Commission has
reached no conclusions about this matter, however, and will take all views into account.
For the past two weeks, both California and Washington, DC have been abuzz
about the Enron memos. I am sure you know that the FERC has released documents from
Enron that revealed a strategy for exploiting California customers based on avarice
instead of responsible market participation. In the short time since, there have been
almost daily revelations of offensive market behavior by some major market participants.
()
()
( )
2
I am referring to so called round tripping and the like. I am deeply troubled by these
revelations, which have eroded market confidence. Thus, my theme for the evening is
restoring confidence in electricity markets.
I. How we got here
During my entire tenure as a FERC Commissioner, I have supported the move to a
competitive wholesale electricity market because I believed that it would benefit
consumers and the nation's economy. When I first came to the Commission in 1993, the
transmission grid was largely closed and controlled by entities who also had their own
generation to sell. Market participants were trapped by this system. Load serving entities
that were not part of a vertically integrated utility had limited choices to meet power
needs. For the most part, a customer couldn't buy from the cheapest supplier. The
Energy Policy Act of 1992 provided some relief, but it was a cumbersome case by case
process that allowed the incumbent transmission provider to litigate the access issue for
years.
I championed Order No. 888, a bold step in 1996 to open the grid and provide
customer choice. Order No. 888 moved sharply in the right direction, but unfortunately it
did not fully eliminate the self dealing incentive inherent in vertical integration. A
number of formal and informal complaints alleged that access to the grid continued to be
fraught with discrimination. TheCommission promulgated its Regional Transmission
Organization policy three years ago primarily to solve this fundamental problem. We
declared that interstate commerce required the grid to function absolutely without
favoritism to particular merchant interests. Independent grid man�gement is essential.
RTOs are the nondiscriminatory platform upon which electricity markets should be
structured. We are still working on getting RTOs in place in all regions. I might add that
New England has always been ahead of the curve on grid regionalization, and I commend
the efforts to grow your current ISO into even larger scope.
While we thought we were making strides toward a foundation for competitive
markets, and more and more states were moving in that direction on the retail side, the
California crisis hit. Wholesale prices soared in late 2000 and early 2001 in California
and the entire west. Firms went out of business and thousands lost jobs as a result. The
outrage over an out-of-control electricity markets was palpable. For 18 months, this was
the number one political issue west of the Rockies. The market finally settled down in
spring of 2001 when we imposed a west wide price cap and a must offer condition.
The causes of this crisis are still in debate. Some say it was a genuine supply
problem. Others allege that supply was deliberately withheld to drive up prices. Others,
() 3
including the FERC, declared that the California market design was dysfunctional. And
some say the high natural gas prices drove the electricity market.
There's probably an element of truth in all of those positions. But whatever the
cause, the California crisis made a major dent in public confidence in competitive
electricity markets. Many states backed away from their restructuring plans. And in my
visits overseas since then, from Japan to Argentina to Spain to Holland, the number one
energy policy concern is how they can avoid a California crisis in their country.
And now come the revelations of the last few weeks from Enron and other
marketers active in the Western markets - revelations of phantom transactions and
gaming the market to drive up prices. With the events of the last year, and now the still
unfolding confirmations of irresponsible market manipulation, sham transactions and
other similar activities, confidence in competitive electricity markets has substantially
eroded. That erosion is certainly evident in the political arena. Last week angry U.S.
Senators denounced power suppliers for market manipulation and FERC for failing to
uncover such activity until now. One Senator announced that he might vote to abolish
FERC. The erosion is also evident in financial markets. Several major power suppliers
that engaged in round tripping transactions have been hammered by investors who seem
to understand that this is not what electricity markets should be about, and key corporate
officials are resigning under pressure from concerned boards of directors.
II. What needs to be done
I still believe that competitive electricity markets can work if we are willing to
make tough decisions and nurture good markets with appropriate structure and rules.
This will take time. But right now, job one is restoring consumer and political confidence
in the markets and in our ability to oversee those markets. I call on all market participants
to help the FERC restore that confidence. Do your part by engaging in only ethical
business practices. Now is not the time for Fat Boy and Death Star strategies. Now is not
the time for phantom round tripping transactions. And now is not the time to jeopardize
grid reliability and regard it as nothing more than a public relations problem. Members
of Congress, policy makers at the state level, and consumers in general want to know
whether this kind of behavior is what markets are all about. If it is, they will want
nothing to do with electricity markets.
A. Stop the funny business
()
()
4
My message to all market participants is this: stop the funny business. Behave
responsibly and ethically. We need all market participants to act in ways that help restore
public confidence. At this point in time, the FERC simply won't tolerate anything less.
B. Get to the bottom of the Western market crisis
Beyond that, there are a number of things the FERC can do to restore confidence
and get us back on track. First, the Commission staff must complete its ongoing
investigation into what went on in the Western markets during 2000 and 2001. Staff must
leave no stone unturned. It must be crystal clear to everyone that this agency truly wants
to get to the bottom of this mess. We must learn exactly what occurred so we know how
to prevent it in the future.
C. Establish good markets
Second, we need to get on with facilitating markets that actually work for
customers. The transition to competitive wholesale markets in many regions drags on,
with no end in sight. This uncertainty is a cause of concern.
The Commission's Standard Market Design initiative has the promise of
promoting good markets. The fundamental feature of the standard market design is a
real-time or spot market with a bid-based, security constrained economic dispatch that
uses locational marginal prices, or LMP. The security constrained feature ensures that
only transactions that are physically feasible may be scheduled on the grid. And LMP
provides efficient price signals that reflect the time and locational value of electricity.
Another important feature is a bid-based, day ahead market. This market provides a day
ahead schedule for transmission and energy and results in financially binding settlements.
Again, all resources, including demand, may participate. This market provides market
participants with time to adjust their supply and consumption decisions based on price
signals, and thus enhances efficiency and market power mitigation.
Our standard market design embraces an active demand response in the market.
This is a critical feature. Demand side solutions will be considered on par with
transmission and generation solutions. This is important for a number or reasons. First,
demand responsiveness can be an important resource for ensuring adequacy and
reliability. Second, demand responsiveness can be a key factor in congestion
management. Reducing load frees up transmission capacity. And third, demand
responsiveness is an important tool for mitigating market power.
The standard market design will also facilitate the development of distributed
generation resources. These resources can substitute for large transmission or generation
5
investments, improve reliability, reduce pollution, improve customer choice, and can help
to limit market power. The standard market design will help distributed generation
development by providing truly non-discriminatory access to the grid through an RTO.
DG is also helped by an LMP price that shows the true cost of energy in congested areas.
And DG units can fetch the congestion price if they sell into the grid.
D. Market monitoring and mitigation
We also need good, aggressive market monitoring to help restore confidence in
electricity markets. We have to stay one step ahead of the market participants. This will
require team work between the Commission's new market oversight office headed by Bill
Hederman and the troops on the ground - the independent market monitors that our
standard market design requires. That team must be given the resources and the authority
to do their jobs in a thorough and professional manner that inspires confidence.
( ) E. Infrastructure and Interconnection
We also need effective up-front market mitigation measures if we are to restore
confidence in the market. As we have seen, electricity prices can soar quickly. The
market rules have to clearly define mitigation thresholds and put all participants on notice
that anomalous behavior will not be allowed to run up prices.
( )
There are two other points I want to make. First, the Commission is doing all it
can to shine a spotlight on infrastructure issues. Transmission investment in particular
has not kept pace with the needs of the market. Part of the problem is regulatory
uncertainty. The sooner the market structure and jurisdictional issues are settled, the
better. Also, the Commission is allowing more generous returns for transmission, in the
11-13% range. Perhaps this will spur investment. The Commission has also authorized
incentive rate treatment for several new merchant transmission proposals, many of which
are in the northeast. I know states have a difficult siting challenge. I don't envy them
when making these tough decisions. Yet, there are transmission investments that must be
made and must be sited for competitive wholesale markets to thrive and benefit
consumers.
My last point relates to generation interconnection. At my urging, over the past
two years, the Commission had begun a rulemaking to standardize the processes and
agreements of interconnection. We want to streamline the process and eliminate
legerdemain. Interconnection decisions should be based on economics rather than on
which utility or region has the easiest process. I am very proud of this initiative and
believe it will facilitate good markets and a more efficient hooking up to the grid.
( )
( )
6
III. Conclusion
Now, New England has been working toward many of these measures for some
time now. Non discriminatory transmission access is already a reality in New England, as
is a more standardized interconnection process. New England has an active market
monitoring unit. The New England state commissions, through NECPUC, have been
very active in shaping ISO and RTO policy. You are moving already toward the standard
market design. I commend all of you. The movement to competitive wholesale markets
in New England has been underway in a sophisticated way for years.
Let us redouble our efforts to achieve consumer benefits. Help us restore
nationwide confidence in a market-based approach for electricity. The nation for some
time has looked to the Northeast for innovation and sound electricity policy. Let's make
this work for consumers. The American people deserve electricity markets they can be
proud of. Electricity is surely too important to the social, economic, public health and
safety fabric of our society to settle for anything less.
Thank you.
energy.gov - Headquarters' Press Release (Print Version) http://www.energy.gov/H Q Press/releases02/maypr/pr02080 _ v .htm
·'.{)
I of2
Energy Secretary Abraham Announces Recommendations to Modernize
the Nation's Electric Transmission System '
National Trensmisslon Grid Study Released
WASHINGTON, DC - Secretary of Energy Spencer Abraham today recommended ways to facilitate
investment in the Nation's transmission infrastructure to improve reliability and reduce electricity
costs to consumers.
The recommendations-contained in the National Transmission Grid Study were developed in
response to the President's National Energy Policy directive to Secretary Abraham to study the
Nation's transmission system, identify transmission bottlenecks and identify measures to eliminate
those bottlenecks.
"Our objective is simple: to provide our citizens with a reliable supply of electricity at the lowest
possible cost," Secretary Abraham said in remarks before the Secretary of Energy Advisory Board
(SEAS) public meeting on Wednesday afternoon. "We will work to unleash innovation and
strengthen our markets to allow entrepreneurs to develop a more advanced and robust
transmission system that meets growing energy demand in the years ahead."
Over the past 10 years, competition has been introduced into wholesale electricity markets with the
goal of reducing costs to consumers. Today, wholesale electricity sales save consumers nearly $13
billion annually. However, the Nation's outdated transmission system was not designed to support
today's regional, competitive electricity markets. Investment in the transmission system has not
kept pace with the growth in generation and the increasing demand for electricity. Transmission
bottienecks threaten reliability and cost consumers hundreds of millions of dollars each year.
The National Transmission Grid Study contains 51 specific recommendations including:
• In an open public process, DOE will assess the nation's electricity system every two years to
identify national-interest transmission bottlenecks.
• Regional Transmission Organizations (RTOs) should be responsible for maintaining the
reliability of the grid and ensuring that transmission bottlenecks are addressed.
• DOE will work with the Federal Energy Regulatory Commission (FERC) and stakeholders to
develop objective standards for evaluating the performance of RTOs and will collect the
information necessary for this assessment.
• DOE will work with National Governors Association (NGA), regional governors' associations,
National Association of Regulatory Utility Commissioners (NARUC), and other appropriate
state-based organizations to promote innovative methods for recovering the costs of nevf
transmission-related investments. These methods should consider situations where rate
freezes are in effect and also examine incentive regulation approaches that reward
transmission investments in proportion to the improvements they provide to the system.
• Entrepreneurial efforts to build merchant transmission lines that pose no financial risk to
ratepayers and that provide overall system benefits should be encouraged.
• DOE, working with FERC, will continue to research and test market-based approaches for
transmission operations, including congestion management and pricing of transmission losses
and other transmission services.
5115102 5:34 PM
/ · ". _ "v.
) , I
( . )
• DOE will continue to work with NGA, regional governors' associations, and NARUC to remove
regulatory barriers to voluntary customer load-reduction programs, and targeted ·
enerqy-efficlency and distributed-generation programs that address transmission bottlenecks
and lower costs to consumers.
• Federal legislation should make compliance with reliability standards mandatory.
• Penalties for noncompliance with reliability rules should be commensurate with the costs and
risks imposed on the transmission system, generators, and end users by noncompliance.
Penalties collected should be used to reduce rates for consumers.
• DOE will work with FERC, state Public Utility Commission (PUC), and industry to ensure the
routine collection of consistent data on the frequency, duration, extent (number of customers
and amount .of load affected), and costs of reliability and power quality events, to better
assess the value of reliability to the nation's consumers.
• FERC and DOE should work with states, pertinent federal agencies, and Native American
tribes to form cooperative regional transmission siting forums to develop regional siting
protocols.
• DOE will work with NGA, regional governors' associations, NARUC, and other appropriate
state-based organizations to develop a list of "best practices" for transmission siting.
• All federal agencies with land management responsJbilities or responsibilities for oversight of
non-federal lands should assist FERC-approved RTOs in the development of transmission
plans.
• Congress should grant FERC limited federal siting authority that could only be used when
national-interest transmission bottlenecks are in jeopardy of not being addressed and where
regional bodies have determined that a transmission facility is preferred among all possible
alternatives. ,
• DOE will work with industry to develop innovative programs that fund transmission-related
research and development, with special attention to technologies that are critical to
addressing transmission bottlenecks.
• DOE and the national laboratories will continue to develop cost-effective technologies that
improve the security of, protect against, mitigate the impacts of, and improve the ability to
recover from disruptive incidents within the energy infrastructure.
• DOE will continue to provide training in critical infrastructure protection matters and energy
emergency operations to state government agencies and private industry.
• DOE will create an Office of Electric Transmission and Distribution.
\( )
2 of2
The National Transmission Grid Study Report and Issue Papers can be found on the Department of
Energy NTGS Web site http://www.ntqs.doe.gov and http://www.enerqy.gov/NTGS/reports.html
Media Contact: Jill Schroeder, 202/586-4940
Torri Welch, 202/586-5806
Release No. PR-02-080
Back to Previous Page>
5115/02 5:34 PM
U.S. Department
of Energy
May 2002
/ )
.r )
•• ••• J
National Transmission Grid Study
r ) Our nation's transmission systems must be modernized to ensure
their continued reliability and facilitate fair and efficient regional . . . .
wholesale electricity markets that lower costs to consumers. To
achieve these goals, we must complete the transition to a restruc­
tured industry ..
Relieving Transmission Bottlenecks
by Completing the Transition
to Competitive Regional Wholesale
Electricity Markets
.f)
The current upheavals and challenges facing
our nation's electricity transmission system
result, in part, from the incomplete transition
to fair and efficient competitive regional whole­
sale electricity markets. In the view of many,
the incomplete transition to a restructured
industry poses the greatest challenge facing
the electricity system today. Lack of clarity in
the regulatory structure inhibits effective plan­
ning .and needed investment. The transmission
system is too important to leave in an extend·
ed state of uncertainty. We must complete the
transiti.on soon.
Core elements of the transition include
establishing regional transmission organizations
(RTOs) and increasing regulatory certainty and
focus to stimulate investment in innovative
solutions to address transmission bottlenecks.
Completion of the transition will result in a
stable business environment that rewards those
who take action to improve the transmission
system. The economic rewards from improving
the transmission system must be greater than
the rewards from maintaining the status quo or
decreasing the system's ability to reliably support
fair and efficient competitive wholesale markets.
3--������������-
Establishing Regional Transmission
Organizations
FERC Order 2000 was a major milestone in the
movement toward fair and efficient competitive
regional wholesale electricity markets. Order
2000 calls for the formation of large RTOs to
coordinate markets and ensure the reliability of
the nation's transmission system.
FERC outlined four characteristics that RTOs
must, at 'a minimum, demonstrate:
Relieving Transmission Bottlenecks by Completing the Transition to Competitive Regional Wholesale Electricity Markets 24
() • Independence. RTOs must be independent • Market Monitoring. Each RTO must
of market participants; provide for objective monitoring of ·
• Scope and Regional Configuration. RTOs the markets it operates to identify
must serve a region of sufficient scope design flaws, market power abuses,
and configuration to permit each RTO to and opportunities for efficiency
effectively perform its functions; improvements and must propose
• Operational Authority. The RTO must coor- appropriate actions;
dinate security for its region; and • Planning and Expansion. Each RTO
• Short-term Reliability Authority. The RTO must plan and direct necessary trans-
must have exclusive authority for main· mission expansions and upgrades to
·taining short-term reliability of the grid enable it to provide efficient, reliable,
it operates. nondiscriminatory service and must
FERC also identified eight functions that RTOs coordinate such efforts with the appro-
must perform: priate state authorities; and
• Tariff Administration and Design. Each RTO • Interregional Coordination. RTOs must
must be the sole provider of transmission develop mechanisms to coordinate
service in its region and the sole adminis· their activities with other regions.
trator of its own open-access tariff; In the summer of 2001, FERC adopted
• Congestion Management. Each RTO must a more directive posture toward RTO forma-
ensure the development an,d operation of tion and began to use existing regulatory
() market mechanisms to manage congestion; authorities to accelerate the process. More ') • Parallel Path Flow. Each RTO must imple- recently, FER( has completed a .benefit-cost
ment procedures to address parallel path analysis of RTOs and concluded that savings
flow issues within its region and with other from RTO operation will save between $1-10
regions; billion annually.23
• Ancillary Services. Each RTO must be the RTOs are a means to an end. DOE sup·
provider of last resort of all ancillary servic- · ports the establishment of well-designed RTOs
es required by FERC Order No. 888 and as an effective way to address many of the
subsequent orders; market and reliability .coordination problems
• Open Access Same Time Information currently facing the nation's transmission sys·
System (OASIS) Administration. The RTO terns. Whether RTOs represent the appropriate
must be the single OASIS site administrator end-state for the evolution of the U.S. electric·
for all transmission facilities under its con- ity transmission system will depend on their
trol, with responsibility for independently ability to ensure reliability and secure the ben-
calculating Total Transfer Capability and efits of fair and efficient competitive regional
Available Transfer Capability; wholesale electricity markets.
23FERC. 2002. Economic Assessment of RTO Policy. Download from http://www.ferc.gov
( )Nalional Transmission Grid Study
l )
Much work remains to realize this vision.
The rules for RTO formation and operation
must be clear and rapidly adopted. They must
include stable market rules that stimulate the
supply and demand sides of markets, inter·
connection and reliability standards, and
transmission pricing mechanisms that reward
efficient operation and investment.24 RTOs
must be able to address transmission bottle·
necks in their regions. 21
fx
F!t
1.\\!
�
�
�
Ill
if!
00
�
�
� w.
�
W!
Ii
ill!
( �
) �
"*' ll!i
al
iii' ..
�
00
�
9;�
f�1
�
!;;\:i
!!!
I
�
!l'!f �
;()
24See Section 4, 'Relieving Transmission Bottlenecks Through Better Operations,' for specific recommendations to improve transmission system
operations.
21See Section 5, "Relieving Transmission Bottlenecks Through Effective Investments,' for specific recommendations on how RTOs should address
transmission bottlenecks.
Relieving Transmission Bottlenecks by Completing the Transition to Competulve Regional Wholesale Electricity Markets 26
, Effective operation of RTOs will be techni· different decision and policy makers. Each ) cally challenging. The tools and technologies transmission· owner has its own perspective and·
originally developed to support centrally responds to the incentives (or mandates) creat·
planned, vertically integrated operations are ed by the economic and legal environment in
inadequate to manage reliability in competitive, which it operates. In addition, many states and
region-wide electricity markets where power the federal government have laws that hinder
flows are driven by market participants whose transfer of the assets or operational control of
behavior cannot be predicted using only tradi· transmission systems to RTOs. These barriers
tional monitoring and dispatch concepts. DOE will need to be identified and addressed.
will work with industry to facilitate the develop·
ment of transmission enhancement and control
technologies that can help ensure reliable oper- Table 3.1
ations on a regional scale. 26
So far, there have been several proposals
for the organization and operation of RTOs (see
Table 3.1). As expected, there are substantial
differences in these proposals, in part because
of regional differences in the electricity indus-
try. It will be some time before the various RTO
business models can be fully evaluated and
() fine-tuned. DOE can contribute to this process ) by helping FERC, the states, industry, and other >'
stakeholders acquire appropriate tools to evalu-
ate the performance of RTOs in meeting func-
tional requirements, DOE can also help by
sponsoring forums to determine what econom-
ic and reliability data must be collected to con-
duct these evaluations, who should collect
them, and under what circumstances the infer-
mation should be made publicly available.
The movement toward RTO formation has
been slow because today's transmission facili·
ties are owned by many different companies
and agencies. Aligning and harmonizing the
incentives of these owners to form RTOs that
support regional markets involves many Source: Federal Energy Regulatory Commission, as of January 30, 2002.
16See Section 5, 'Relieving Transmission Bottlenecks Through Effective Investments," for additional discussion of advanced transmission technologies and specific recommendations.
( ) National Transmission Grid Study
l ) In some cases, tax laws may be a
. barrier to the formation of RTOs both in
transferring operational control of certain
transmission assets to an RTO and in trans·
ferring ownership of the assets.27 Federal
tax law restricts the use by private firms
of transmission facilities that are financed
with tax-exempt bonds, or that are owned
by certain cooperatives. Under existing
statutes and regu!ations, municipal utilities.
could lose some or all of their ability to
use tax-exempt financing, .and certain coop­
eratives could suffer adverse tax conse­
quences, if they turn operation of their
transmission facilities over to an RTO.
Temporary Treasury regulations, which
are scheduled to expire in 2004, address
some of the private use issues arising from
participation by municipal utilities in open
access. For example, the temporary regula·
tions specify certain open access transac­
tions that do not result in private use, or
otherwise do not adversely affect the tax
exemption of outstanding bonds. Final·
ization of the temporary regulations by the
Treasury Department, in a manner that
enables municipal utilities to transfer opera·
tional control of their transmission assets
to an RTO in appropriate circumstances,
will provide needed certainty in this area. In
addition, proposals to remedy this and
other tax obstacles are currently pending
before Congress.
DOE and the Administration can play a
significant role in advancing the formation
of effective RTOs. DOE's Power. Marketing
Adminlstrations (PMAs) have been supportive
of RTO formation and have been key partici·
pants in RTO discussions. Bonneville Power
Administration (BPA),Western Area Power ·
Administration 0NAPA), and the Southwestern
Power Administration (SWPA) all operate
extensive federal transmission systems.
However, some legal barriers may prevent
PMAs from shifting complete operational con·
trol over federal transmission lines to a non·
federal entity such as an RTO. PMAs also
have a unique relationship with their public
power utility customers. These issues need to
be evaluated carefully and appropriate meas·
ures must be taken to allow PMAs to become
full participants in RTOs.
The Tennessee Valley Authority (TVA)
is a large federal utility that operates federal
transmission as well as significant generation
facilities. TVA was originally formed to facili­
tate unified resource development in the
Tennessee Valley. Today, among other things,
it manages the Tennessee River system
and provides electricity to eight million cus­
tomers in the southern U.S. The unique
circumstances of its creation and its special
relationship to customers must be considered
as part of any plans for TVA to participate in
wholesale competitive markets, but should
not inhibit its full participation in an RTO.
( .. .)
11creater horizontal consolidation of transmission assets through the creation of independent transmission companies is described in the next sub·
section.
Relieving Transmission Bottlenecks by Completing the Transition to Competitive Regional Wholesale .£lectricity Markets 28
(
. )
( )
RECOMMENDATIONS
• RTOs should be responsible for maintaining the reliability of the grid and ensuring that trans­
mission bottlenecks are addressed.
• DOE, with industry, will assess current system monitoring and control technologies that sup­
port efficient, reliable, and secure operation of RTOs and coordinate development of a plan
for future research and development.
• DOE will work with FERC and stakeholders to develop objective standards for evaluating the
performance of RTOs and will collect the information necessary for this assessment.
• DOE will work with the Energy Information Administration (EIA), HRC, National Governors'
Association (NGA), the National Association of Regulatory Utility Commissioners (NARUC), the
National Association of State Energy Officials (NASEO), industry, and consumer representatives
to determine what economic and reliability data related to the transmission and the electricity
system should be collected at the federal level and under what circumstances these data
should be made publicly available.
- • NGA and NARUC should identify state laws that could hinder RTO development.
• DOE wil.1 review federal laws that may prevent PMAs from full participation in RTOs, direct
them to participate in the creation of RTOs, and take actions to facilitate their joining RTOs.
• DOE will work with TVA to help it address any issues that inhibit its participation in wholesale
competitive markets, including full participation in an RTO.
Jt--�����������-
lncreasing Regulatory Certainty
and Focus
Establishment of RTOs is an important step
toward a more stable business environment
for transmission system operations and
investment. In order to complete the transi­
tion to a more stable business environment,
additional efforts are necessary to increase
regulatory certainty and focus to ensure
investment in innovative solutions that will
address transmission bottlenecks.28 These
efforts require solving the problems that
emerge from:
• The current ways in which owners
profit from existing and new transmis­
sion investments;
28For additional background on this discussion, see the Issue Paper, "Alternative Business Models for Transmission System Investment and
Operations," by S. Oren, G. Gross, and F. Alvarado.
( _)National Transmission Grid Study
I )
r :
• Coordination of the tradeoffs between
transmission investments and opera·
tion when the organizations that own
the transmission system are not the
same as those that operate it; and,
finally,
• The interconnectedness of the AC
transmission system itself, which
means that investors in new transmis­
sion facilities cannot always charge
"rent" for unauthorized use of their
facilities because electricity flows over
all available paths. 29
Ensuring Beneficial Transmission
Investments Are Profitable
New generation facilities are being built in
significant numbers in almost every region
of the country while new transmission facili·
ties generally are not From a business per-
spective, the explanation is simple: new qener­
ation developers have figured out how to
produce power more efficiently and to make
an attractive return on investments in the
current market, while would-be new transmis­
sion developers have been frustrated in
their efforts to achieve similar goals because
their returns depend on regulatory policies
and tariffs.
DOE believes that uncertainty about
recovery of transmission system investments
is a major barrier to new investments in need­
ed transmission facilities. For investor-owned
utilities, the costs of transmission are recov-
. ered in rates authorized by federal and state
regulators. FERC authorizes rates for transmis­
sion service that are based on a target rate of
return on transmission investments. State reg­
ulators authorize rates for retail service, also
based primarily on a target rate of.return that
takes the costs of transmission
into account along with all the
remaining costs of providing
electricity service, including
generation, wholesale power
purchases, and distribution
costs. Recovering the cost of
transmission becomes a local
responsibility while the benefits
of increased market efficiency
and reliability are regional. The
key to spurring new transrnis­
sion investments lies in ensur­
ing that the rewards offered by
; ( )
19This phenomenon, called loop flow, is described in more detail in the subsection Loop Flow and the Emergence of Merchant Transmission, below.
Relieving Transmission Bottlenecks by Completing the Transition to Competitive Regional Wholesale Electricity Markets 30
l this system of regulation are commensurate the reasons for the rate· freeze against the
) with the risks of undertaking these investments need to stimulate adequate transmission
( )
and finding innovative approaches to align
costs and benefits.
Industry participants have asserted that
current rates of return for transmission system
investments are not high enough; Authorizing
higher rates of return is not the only approach
to stimulating needed investments in trans·
mission facilities over the long term. Reducing
regulatory uncertainty should also be a focus
of efforts to stimulate needed investments.
Because transmission assets are long lived,
regulatory uncertainty increases the risks to
investors and, therefore, increases the returns
they need to justify transmission system invest·
ments. Increasing regulatory certainty, there·
fore, should lower the returns needed to justify
these investments.
Reconciling conflicting regulatory signals
should be a core strategy for reducing regula·
tory uncertainty. In some states, rate freezes
may undermine the benefits that could be real·
ized by new transmission investment because
the costs of these investments might not be
fully recovered. In fact, rate freezes can create
strong incentives not to build transmission.
That is, utilities can increase profits under a
rate freeze (as the rate base depreciates, costs
decline, and load/revenue grows) by not mak­
ing significant new rate-based investments,
which would increase their net cost structure
relative to frozen assets. Hence, the utilities'
financial interest in avoiding new investment
. may conflict with the benefits that new invest·
ment might provide to the region as a whole.
In these cases, state regulators should balance
investment.
More closely aligning the incentives of
transmission owners with those of the public
and consumers should be another element of
eliminating regulatory uncertainty and sharpen·
ing the focus of regulatory decisions. For
example, one approach that needs to be con·
sidered is shifting some responsibility for con·
gestion {both its costs and the benefits from
investment to reduce these costs) to transmis­
sion owners so that they have an incentive to
address transmission bottlenecks. The current
form of rate-of-return regulation is based on
investment costs. Simply passing costs of con·
gestion through to consumers disconnects the
decision to invest from the benefit to the con·
sumer of the investment and thus provides no
. )
( ..
)Nalional Transmiss.ion Grid S1udy
( ) incentive to transmission owners to address
bottlenecks.
Rate-of-return regulation, therefore, may
be inconsistent with newer forms of regula·
tion that seek to emulate the role of competi·
tive market forces in eliciting efficient
behavior from regulated firms. A basic tenet
of competitive markets is that investors are
rewarded based on the value and innovative·
ness of their actions (not on the cost of their
investments, which is the basis for rewards
under rate-of-return regulation). A new Class
of regulatory approaches, called performance·
based regulation (PBR), offers greater promise
in offering incentives toward. this end.
Examples of PBR can be found in the telecom-.
munications industry in the U.S. and in requ­
lated utility industries around the world, most
notably in the UK.
PBR is attractive because it provides tar·
geted incentives to regulated firms to achieve
specific objectives (e.g., to increase market
efficiency, ensure reliability, and make timely
investments). In order to ensure that these
objectives are met, it is necessary to define
performance measures that directly relate to
the objectives and to ensure that firms have
adequate control over the means of meeting
the objectives. If the goal is to minimize the
cost of transmission service, a firm must be
able to balance improvements in operations
with investments in new transmission facilities,
including the deplovrnentof advanced tech·
nologies. Similarly, if the transmission owner
bears no responsibility for costs of congestion,
there is no incentive to reduce it.30 PBR in the.
UK has led to a substantial reduction in con·
gestion costs (see text box).
(. �
IE . ) tl1
Ii
iii
�
�
�
Ii m
i!l
fB1
if:
�
ill
fi
�
�
!.!!
�
)
i°For example, one way owners might, in turn, address increased responsibility for managing congestion costs is by pricing it explicitly, thus pro·
viding an incentive to market participants to reduce these costs through adjustments to their own actions to use the transmission system. This con·
cept is discussed further in Section 4, "Relieving Transmission Bottlenecks Through Better Operations.'
Relieving Transmission Bottlenecks by Completing the Transition 10 Competitive Regional Wholesale Eiectricity Markets 32
()
Coordinating Transmission ·
Investment and Operation
During the 1990s, many states passed
electricity industry restructuring legislation
to introduce wholesale and sometimes retail
competition. In addressing wholesale compe­
tition, state legislation typically reinforced
FERC Orders 888 and 889 by directing utili­
ties to accelerate the process of separating
transmission and generation functions, in­
cluding divesting generation assets, or by
providing strong incentives for divestiture.
States directed utilities to ensure that opera-.
tion of the transmission system would sup­
port the emergence of competitive wholesale
markets for generation. Insulating transmis­
sion and generation operations from each
other typically entailed allowing transmission
owners to retain possession of their transmis­
sion assets but transferring operational con­
trol of them to an independent entity.
Independent System Operators (ISOs),
the new institutional structures authorized by
FERC in recent years to operate transmission
assets, have led to a disconnection between
transmission investment and operational
needs. A major challenge to investment and
innovation when control and ownership of
transmission are separated is the creation of
a financial linkage between those who benefit
from the investment (the public) and those
who finance it (the owners). Today in the U.S.,
there are five ISOs operating transmission
systems: California, New England, PJM, New
York, and Texas. Although these entities oper­
ate the systems, they cannot ensure that need­
ed transmission is burlt." Unless managed
carefully, disconnections could lead to under­
investment and poor operations, which would
raise electricity costs and reduce reliability. As
recommended earlier, if we are to succeed in
completing the industry's transition to a fair,
efficient, and competitive market, RTOs must
be able to address transmission bottlenecks.
Independent transmission companies that
own and operate transmission assets are a new
development and offer perhaps the greatest
potential for improving the coordination of
transmission operation and investment. These
companies achieve a complete corporate sepa-
·:'\ ···j
/ Finally, it may be appropriate to consider
) other methods for increasing the profitability
of transmission investments, especially when
· investments address important regional or
national interests.
31Texas is building transmission in part because the state's utility commission regulates both the 150 and the transmission-owning utilities and sup-
ports the ISO's transmission planning efforts with expeditious regulatory review of proposed transmission expansion. ·
f .JNailonal Transmission Grid Study
ration between generation and transmission.
They are formed by divesting the transmission
assets from vertically integrated firms to
wholly independent firms that have no gener­
ation assets. Creation of these independent
companies is a reflection of private investors'
desire to separate and consolidate the very
different risks and rewards offered by genera­
tion and transmission businesses today.
It is imperative Jhat private-sector initia·
tives such as independent transmission com­
panies be allowed to flourish. Tax laws that
may encumber the economic transfer of trans­
mission assets must be reviewed.
Loop Flow and the Emergence of
Merchant Transmission
A unique feature of transmission facilities is
the existence of "externalities" associated with
interconnected AC net-
works. Loop flow, in partic­
ular, in which electricity·
passes over systems that
are not parties to its sale
and transmission, is an
unavoidable feature of
bulk-power AC transmis­
sion because electricity
takes the path of least ·
resistance and does not
follow prescribed routes.32
For developers of new
transmission lines, the sit·
uation is akin to building
a new road but then having no means to effec­
tively control (or charge for) the flow of traffic
over it.
RTOs are expected to better address loop
flow by internalizing it within the large geo­
graphic boundaries of each RTO. Greater hori·
· zontal consolidation of transmission assets,
as reflected in the formation of independent
transmission companies that combine the
assets of many individual transmission-owning
utilities (also leading to larger geographic
boundaries), is yet another approach for inter­
nalizing loop flow, in this case within the
boundaries of a single firm.
Merchant transmission, a new entrant in
the transmission market, has relied on a tech­
nological solution to the problem of loop flow.
To date, all merchant transmission projects
have relied on DC transmission technologies
,J)
32Flexible AC transmission system (FACTS) devices can control flows over transmission lines: however, these devices are expensive and have seen
limited application to date. See Section 5, Ensuring the Timely Introduction of Advanced Technologies, and the Issue Paper, 'Advanced Transmission
Technologies" by J. Hauer, T. Overbye, J. Dagle, and S. Widergren.
Relieving Transmission Bottlenecks by Completing rhe Transition to Competitive Regional Wholesale Electricity Markets 34
(e.g., Transenerqle's recently approved link
between Connecticut and Long Island, and
Neptune's proposed Regional Electric
Transmission System in the Northeast),
which permit facility owners to directly con·
trol flows over their investments and avoid
the problem of loop flow.
A merchant transmission project is one
that is financed by private investors with no
regulatory support (i.e., no regulator
ensures that the investor has the opportuni·
ty to earn a reasonable return on that in·
vestment). In return for lack of regulatory
protection, the owner of a merchant trans·
mission facility can, in principle, charge mar·
ket-based rates. Although merchant
f ) National Transmission Grid Study
transmission is a potentially powerful ap­
preach to resolving many of the difficulties
(including those related to planning, expan­
sion, and pricing) facing traditional transmis·
sion systems, we do not know to what extent
projects financed in this manner can meet
current and future needs for new transmission.
Nevertheless, merchant transmission projects
could introduce competition directly into an
aspect of the industry that has long been
regarded as a natural monopoly. And it seems
clear that when private investment in transmis­
sion can be undertaken in ways that avoid the
problems of loop flow, this investment may be
in the national interest.
. )
/' )
I)
RECOMMENDATIONS
• DOE will work with NGA, regional governors' associations, NARUC, and other appropriate
. state-based organizations to promote innovative methods for recovering the costs of new
transmission-related investments. These methods should consider situations where rate
freezes are in effect and also examine incentive regulation approaches that reward transmis·
sion investments in proportion to the improvements they provide to the system.
• DOE will research and identify performance metrics and evaluate designs for performance­
based regulation ..
• The Department of Treasury should evaluate tax law changes related to electricity moderniza­
tion. Treasury should review its current regulations regarding the application of pr.ivate use
limitations to facilities financed with tax exempt bonds in light of dynamics in the industry
and proceed to update and finalize its regulations. This will give greater certainty to public
power authorities providing open access to their transmission and distribution facilities.
• Entrepreneurial efforts to build merchant transmission lines that pose no financial risk to
ratepayers and that provide overall system benefits should. be encouraged.
• DOE and the Department of Treasury will evaluate whether tax law changes may be necessary
to provide appropriate treatment for the transfer of transmission assets to independent trans·
mission companies.
Relieving Transmission Bottlenecks by Completing the Transition to Competitive Regional Wholesale Electricity Markm 36
()
Draft Remarks of Kara M. Silva
Vice President, MBIA Insurance Corporation
Before the
NARUC Joint Committee on Electricity, Gas, and Finance and
Technology
February 26, 2003
Good morning. I am Kara Silva, a Vice President of MBIA Insurance
Corporation. MBIA is the premier financial guaranty insurance company in
the world. We are a Triple-A rated monoline financial guaranty insurance
company regulated primarily by the New York State Insurance Department.
As opposed to multiline insurance companies, monoline financial guaranty
insurance companies engage in only one line of insurance - financial
guaranty insurance. Our Triple-A ratings from Moody's Investors Service,
Standard & Poors and Fitch enable us to offer qualified issuers the ability to
borrow money in the public markets at the lowest possible interest rate.
Once these debt obligations are sold, MBIA guarantees - unconditionally
and irrevocably - the timely payment of principal and interest to
bondholders. We effectively step into the shoes of the bondholders and
represent their interests in the capital markets.
I am responsible for managing MBIA's global utility portfolio which
consists of over 1 ,300 issuers worldwide and which has a total par value of
over $63 billion. My primary responsibilities include monitoring this portfolio
to identify and mitigate credit decline of financially troubled obligors.
Because MBIA tracks the performance of utilities so closely; we are often
among the first to see problems within this sector. I am here because, as
state regulators, you stand as the "guardians at the gate."
The domestic electric investor-owned utility sector has undergone
profound changes in recent years. Many IOUs are experiencing financial
distress because of aggressive expansion sanctioned by recent
deregulation. The regulatory safety net has not performed as expected.
And the electric IOU sector has experienced several shocks due to ill­
conceived restructuring plans and instances of corporate malfeasance.
As a result, the risk profile of the electric IOU sector has changed
significantly. What formerly were "safe" utility credits are now performing
(. )
()
like corporate credits in other sectors. In order to understand the effects of
this change on the ability of IOUs to access the capital markets, it is
important to focus on the legislative, corporate, regulatory, business and
financial risk points. In each of these areas, exposure to risk has been
heightened.
From a legislative standpoint, the sector faces risk as states enact
inconsistent legislation and utility customers that are most at risk have open
access to choose alternative providers. The ability to recover stranded
costs and the sale of generating assets all increase risk exposure as
restructuring occurs.
On the corporate side, we carefully monitor mergers and acquisitions
- particularly as utilities expand into deregulated or international lines of
business. We have seen an unusually high number of distressed parent
companies, as well as heavy litigation and governmental investigations into
corporate activities.
Regulatory risk at the state level comes from rate caps combined with
the inability to pass through costs, as well as from differences in state
regulatory decision-making. On the federal level, regulatory risk comes
from the possible repeal of the Public Utility Holding Company Act and the
potential elimination of FERC's merger authority.
Finally, the sector faces business risks from capacity issues, a core
business highly impacted by weather and the economy, and a high cost
structure with impending competition - not to mention fuel supply and
environmental costs.
These factors combine to create significant financial risk in this
sector. Poor non-utility investment decisions have led to weak balance
sheets. Weak balance sheets have led to liquidity problems and
downgrades by the rating agencies. Downgrades have led to collateral
calls and other rating-related triggers that accelerate the liquidity problem.
Furthermore, overbuilt capacity reduces the value in planned asset sales
meant to reduce debt and improve liquidity.
Weak balance sheets, poor liquidity and uncertainty of restructuring
plans have made access to the capital markets very difficult and very
expensive. An overall theme has emerged from the current market
2
c· ) dynamics: it is difficult to have regulated and non-regulated activities in the
same corporate family. Moreover, some utilities do not want to diversify
into non-regulated business.
()
()
MBIA urges state commissions and other regulators to exercise their
full authority toward fashioning realistic solutions. The most difficult
dilemma for regulators is the jurisdictional context in which agencies must
operate to protect consumers. Jurisdiction over corporate structure,
finance, and governance is shared by FERC, the SEC, and state regulatory
commissions - and the jurisdictional split is not easily discernible. A single
corporate transaction might require authorizations from more than one
agency.
When a utility is financially troubled, there are several regulatory
"checkpoints" that can serve as warning signals to regulators and to the
public that requlatory intervention might be warranted. At least two of these
checkpoints are at FERC -- electric utility applications filed under Sections
203 and 204 of the Federal Power Act. Section 203 requires FERC's
approval of any sales or other dispositions of FERG-jurisdictional facilities
that exceed $50,000 in value. This includes mergers and acquisitions,
certain divestitures, and corporate reorganizations. Given that many
parent energy companies are seeking to shore up their balance sheets and
those of their non-regulated subsidiaries, these kinds of asset transfers
warrant careful monitoring.
Given that many parent companies may be looking to the regulated
utility to help improve balance sheets, questions arise whether Section 203
transactions will always be in the best interest of the regulated utility. At
this checkpoint, FERC may wish to consider whether the Section 203
transaction is in the best interest of the utility. lntervenors, such as state
commissions, may also add to FERC's deliberations.
FERC cannot approve proposed Section 203 transactions unless
they are "consistent with the public interest." In making this determination,
FERC currently considers three factors: the effect of the proposal on rates,
the effect on competition, and the effect on regulation. We believe it to be
in the public interest, and certainly consistent with the three factor test, for
FERC to consider the effect on the health of the regulated industry.
3
( ) Applications filed under Section 204 of the Federal Power Act also
serve as a regulatory checkpoint at FERC, where regulated utilities must
obtain FERC's approval for debt and equity offerings. FERC, in its recent
Westar order, has revised its criteria for approval of Section 204
applications. FERC's new policy attaches certain restrictions on all public
utility issuances of secured and unsecured debt authorized by FERC.
These conditions are aimed at protecting utilities from the cost and risk of
non-utility debt, and they will provide important safeguards - at least for
those issuances that come before FERC for approval.
In addition to FERC, the Securities and Exchange Commission
("SEC") is another federal venue that provides regulatory checkpoints for
troubled utilities. The proposals of multi-state holding companies, or holding
companies that are registered under the Public Utility Holding Company Act
of 1935 ("PUHCA"), may be of particular importance to state regulators
since states tend to have less regulatory authority over these multi-state
entities.
()
( )
One of the areas within the SE C's jurisdiction that state commissions
should particularly have on their "radar screens" is proposed investment in
non-core, non-utility businesses. The issuance and sale of securities for
non-utility investment is subject to SEC approval under Sections 6 and 7 of
PUHCA. Under PUHCA, the SEC must not allow a proposed financing of
non-utility investment if the terms of the financing are "detrimental to the
public interest, or the interests of investors or consumers." Consideration
of the potential impact on the regulated utilities in a holding company
system should fall squarely within this inquiry.
Proposed non-utility investment, itself, that is not subject to any
special exemption from SEC review must be reviewed under Sections 9
and 10 of PU HCA. Together, Sections 9 and 1 O require that acquisitions of
interests in businesses -- not just utility businesses -- must not be
detrimental to the public interest, the interests of investors or consumers, or
the proper functioning of the holding company. Here again, the impact of
proposed non-utility investment on the system's regulated utilities can be
considered.
The SEC also has jurisdiction over mergers and acquisitions and
certain affiliate transactions proposed by utility holding companies.
However, the SEC's regulation of non-utility investment is often an area
4
O where the SEC has exclusive jurisdiction, and poor non-utility investment
decisions have presented a risk factor in the electric utility industry. While
the SEC has routinely approved most applications filed under PUHCA,
hopefully the SEC will begin to more closely scrutinize these transactions.
As to regulatory opportunities for state commissions, MBIA has some
specific recommendations regarding how states can protect the financial
integrity of their utilities. First and foremost is to focus on states' authority
over utility structure and governance, reorganizations, and divestitures, with
the goal of protecting utility assets. Specifically, MBIA suggests that state
regulators consider requiring utilities to adopt appropriate "ringfencing"
provisions, which would insulate a regulated utility from a troubled parent
company or other subsidiaries.
Broadly speaking, ringfencing is simply an effort to wall off certain
assets or liabilities within a corporation. For example, this can be done by
creating a new subsidiary, or by limiting or prohibiting internal financing to
an existing subsidiary. Ringfencing has been a common practice among
businesses with large liability exposures, such as tobacco companies, to
protect less risky affiliates. But MBIA believes that thoughtfully applied .
ringfencing techniques can be effective tools for regulators to protect the
public interest by shielding core utility assets from affiliated non-utility
businesses.
Ringfencing is not a new concept for public utility regulators. In fact,
Standard & Poor's views the Oregon Public Utilities Commission (OPUC)
as being among the most supportive of utility credit quality in the country -
in large part because of the restrictive ringfencing conditions imposed on
Enron when it acquired Portland General Electric Company (PGE) in 1997.
In its decision-making process, the OPUC specifically considered the effect
of the acquisition on PGE's financial structure and utility assets.
Among the OPUC's conditions were the maintenance of a 48% equity
level at PGE and advance notification of special or large dividends to
Enron. In addition, PGE was required to maintain a separate accounting
system. As a result of these and other conditions, PGE was one of only a
handful of Enron assets to emerge intact after Enron's bankruptcy. While
PGE's future is still uncertain, its corporate credit rating is significantly
higher than would be expected as a result of the ring-fencing criteria.
5
(
)...__I
_______,... ______,!
Positioning the
Consumer· for the
Future:
A Roadmap to an Optimal
Electric Power System
(. ·. )
C E C A
CONSUMER ENERGY
COUNCIL OF AMERICA
A report of
The Consumer Energy Council of America
Electric Industry Restructuring Forum
April 2003
2000 L Street, NW, Suite 802Washington, DC 20036 Tel: [phone] www.cecarf.org
)
f)
education programs should be designed to reflect the "best practices" as identified in this report ..
The purpose of the consumer. education programs should be to raise awareness of consumer
rights and remedies and empower customers to make decisions about electricity programs and
services, including alternative pricing and metering technologies, which may allow customers to
reduce their overall electricity bill and reduce environmental impacts of energy production.
Consumers Benefits of a Robust Transmission System
. The electricity transmission system, connecting the generation assets with end users, is a vital
component of the electricity system. The transmission system allows electricity to reach far off retail
markets, and supports the growth in green power by allowing new and alternative resources to be
available to customers. Moving into the 21" Century, it will be even more important to maintain a
robust transmission system to support the needs of consumers.
Where once all utilities were vertically integrated, competitive markets ( wholesale and, in
some states, retail) have created a system where the transmission, generation and distribution
functions are now functionally separated. Regulatory uncertainty about the transmission system
further exacerbates questions over the future ownership and earnings power of those functionally
separated segments of the industry. The lack of market rules has contributed to a fear of instability
for the entire system. This report details how electricity services are both enabled and constrained
by the current transmission system, and how the system can be made more robust so that it allows
for greater innovation and customer choice.
With society in general and consumers in particular becoming more dependent on the
digital economy, investments and improvements in the transmission system are necessary to provide
the level of reliability, power quality, and security necessary to support the economy now and for
generations to come.
l)
•
•
•
Upgrades to and expansion of the transmission grid to assure reliable service and enhanced
national security are needed. Incentives to investment in the system have been lagging due to the
uncertainty of consumer benefits. This is particularly the case for new technologies where the
costs may be higher at the early stages of implementation and the actual consumer benefits
. difficult to project.
Transmission capacity upgrades and investment in technologies can be funded through a variety
of options including through the traditional utility rate base, through users of the system, and
through non-utility investment by merchant transmission companies. Any of these methods, or a
combination thereof, can meet the funding needs, but the regulatory "rules of the road" at both
the state and federal levels do not currently reflect a widespread consensus on whether one or all
of these methods should be relied upon.
States are unlikely to agree to allow federal preemption of traditional jurisdiction over siting and
planning for transmission projects. However, many states have encouraged the development of
regional transmission organizations (R TOs) or other regional entities to oversee or operate
transmission planning and operation. Cooperation among states, R TOs or other regional
XVII
( �, )
Aging Tra�;ipis�l�n Systems
And Chaotic Regulation
CreateRiskof Failures ··
'An Unstable Environment'
-.·-·-
By REBECC,\ SMITH
Last week's 'massive blackout coltld be the shock to · the : system. needed to ·
draw attention to critical flaws in the nation's powergrid .. ·.
It "".on't be clear for a while exactly what triggered the cascadtng collapse that removed enough. wwer from an eight· state, two countr)(system. of generating plants, substations M�tmgh-voltage power
lin:s to leave milll�nsi)fi>e.opl.e In the dark. FOi now, the leading theory lS that 1)0:Wer
li�es �ailed In theplevel@d area...,. perhaps coincidentally with plant shutdowns in the Midwest ...,.causing disniptlons thatrippled toward the Northeast. · ·. , · .
. But the, cry�!�·;;-Whic� , kpocked . out twice as much pew,e.r, as:ijw.J,ng the last big U.S. blackoufin.1996, and lasted far longer, high.lights weaknesses in the elec­ tricity system that could produce more
trau1:1atic events. That's particularly · true 1_f the economy picks up steam, in· creasing demand for power.
The main detects -are transmission systems .badly, in pe,�d of improvement
Out of.lllt. Darkness.
• The blackout shouldn't derail the
?ascent U.S. economy recovery, hut its cost could reach $6 billion, A6
• Congress faces new pressure to. act on energy legislation, but it. , isn't . clear the divide4;body.� agre�,-A6
• Proponents of;fdistrlbbted j'ttiita�
�ion' seek ways � ease-the 0ceritral­
lzed power grid's burden,' Bl .
• Cellular networks were overbur­ dened despite increased capacity, B4
and a chaotic combinatio1.1 of regulated ,ju1d deregulated markets. The unsteady :�¢ · .l'.Y;·, �it�iij}OJ!.i:. l!JR.'mg _oth�r (�C· nt · JM: U1Y.e.�t.rnAAt tna.t 1s. critl-
>.¢a. y .· .... ed to improve· transmission
· :. �qµ.ipment:. . · .
:: /-'. The'na.tion is stalled in the middle of a
:,¢as�ive' l:!uf Incomplete shift fr?rr. old­ . :;,fashioned) ;: state-regulated ullhties-:­ <'which generate their own power, move it ': over their own transmission lines, and ·· sell to local customers-to a system in ... which ownership of plants and transmts- , :- ston lines is broken: up among a variety · of players, and government oversight is
fractured. ·. · · "What we have created is an unstable
envircmment here for our energy infra· structure because some of it isregulated and some of it is deregulated," says An· drew Lundquist, a former Bush White House aide on energy policy, Clearer rules and penalties would· discipline
. power-company behavior and boost inves­ tor confidence in the capital-starved'in·
. dustry, he adds, But in the short term, the great Northeast blackout-the worst in U.S. history-will probably add more confu­ sion to the debate over how to ensure that the nation's electrical system, for · all its flaws. remains one of the world's most reliable. Opponents of deregula­
tion are blaming market forces run amok and demanding new government ·
oversight.·Those who praise markets ar­
gue a lack of investment is the culprit. Nuclear supporters are banging the drum that more nuclear plants would · stabilize the system. Fans of distrib­ uted generation -small, stand-alone
generators that operate off the' g1id­ see it as the. answer to reducing depen­ deuce on big power plants and big
power lines. The main problems date to a deregu­
latory movement that began in the
early 1990s, . but never completely took hold. In 2000, the deregulation drive · sputtered in the midst of a series of
electricity-related crises. First came the near meltdown of California's power market that' year and the next. Supply
Please Turn to Page A8, Column 1
r> ()
....i E-<
-e ::=:> z; 0 = ::i::: ;:) r>. w u ... -< ( ) � � � t>l � H
"" er.) :J) 0 ...: ...: 0 -e e-,:i :: � � ;: ::z:: E-<
"' �
:r.
( --, 'r: :.:, ) w ::::, < ,.. � � c z
:I
r> ()
( )
j
!
\
Utilities generally used to run. the!� plants according to predictable sched­ ules. In contrast, the Independent grid operators now order units turned on or orf, revved up or down, every aour o.! the day. These "dispatch Instructions orten are dictated by deregulated mar­ kets that ravor the cheapest sources of power .. The constantly changing mix of suppliers makes grid operations hugely complex and puts tremendous pressure on operators to prevent prob­ lems such as overloaded transmission lines. In addition to these operational Is­ sues, there are geographical ones as well. There are several places In the U.S. that are transmission choke points­ New York, San Francisco and San Di· ego, to name a rew-where demand tor power often outstrips what local genera­ tors can produce. That requires them to import Juice trom arar. In the case of New York, electricity coming rrom a vast network or hydroelectric plants In eastern Canada often gets bottled up in Quebec. Similarly, 'there are often prob­ lems moving electricity around the natu­ ral barriers created by the Great Lakes. These bottlenecks will become even more of a problem as the economy picks up.
Local Opposition
Easing the problem by building more transmission lines is difficult because getting state approval and public accep­ tance of this kind of investment is very hard. Few communities want unsightly transmission towers and humming lines anywhere near them. Many power com­ panies have simply stayed away from building new towers and high-power lines because they don't want the hassle or a public fight. Another concern is split jurisdiction: States control where lines can be built, but the federal government usually sets rates. Ail of these Issues came into play ear­ lier this year when a key transmission project known as Valley-Rainbow bit the dust In California. Residents near san
-·.:,- ··-�· ·•-t,"'- ... ,. <£66'"'�•Hl't: llllllU· year campaign to prevent its construe­ tlon. Susan Kennedy, a commissioner [or the Calilornia Public Utilities Comrnis­ slon, says that the lines are necessary to provide San Diego adequate power to meet Its vibrant growth. But shortly be· fore the commission voted to kill Valley­ Rainbow, she flew over the intended route by helicopter. "Entire communities were built In the path or the transmission route In the time it took to decide the case," she said. Ms. Kennedy points out that many or the companies that signaled their lnten­ lion to build power plants in the region before the California and Enron debacles · of 2000-01 now can't raise the money needed to plunge ahead, even if they wanted to. "I don't think our old models take into account the dynamic state of these markets," she says. Indeed, since 2001. dozens of proposed power plant projects have been can­ celled. Several of what had been the most aggressive merchant-power companies­ those that sell power to any big buyer, whether a utility or a factory-are now among the worst off financially. Some. including Mirant Corp., based in At· lanta, Ga., San Francisco-based PG&E Corp's National Energy Group unit, and Minneapolis-based Xcel Energy Inc's NRG unit have filed for Chapter nbanx­ ruptcy-court protection. Others. ranging from San Jose, Ca.-based Calpine Corp. and Houston's Reliant Resources Inc. and Dynegy Inc. are in the midst of dif!i­ cult financial restructurings that put debt-reduction first and new construclion second. In the short-term, though, much of the focus won't beon Capitol Hill, but on the North American Electric Reliability Council Investigators who will fan out starting this week to pinpoint how the problem got started and how it spread. They will gather data from thousands of locations-power plants, transmission lines, substations, grid-operator control rooms-and merge the information into vast data bases. While plane-crash lnves­ tigators look for the black-box recorder, analyzing a grid collapse requires gather­ ing the equivalent of thousands of black boxes. That task may be complicated by the multiplicity of jurisdictions involved. First EnergyCorp., an Akron, omo.com­ pany that owns seven utlllties, is be­ ileved to have suffered some of the first power-line failures that may have contrib­ uted to the cascading blackout. Part of Its system is run by the Midwest Indepen­ dent System Opetator and part by PJM .Interconnection, the grid operator that controls the mid-Atlantic region. Some of First Energy's utilities own their own power plants and some sold them off to others. First Energy reports to no fewer than three state commissions and the FERC. In 1996, it took two months for offi­ cials at the reliabllity council to com­ plete their report on a 30,000-megawatt outage that lasted up to five hours. But because last week's outage was twice as big, and lasted more than two days in some places, discovering the root cause could take longer. David Nevius, the council's senior vice president, says he wants to know "what information did grid officials have and what did they do with it." . Until the investigation Into the causes of the blackout Is completed, the only thing that's sure, says Branko Terzlc, a fonner FERC commissioner, is that "peo­ ple with a fixed agenda will try to find something in this tragedy to support their political positions."
)
FEDERAL ENERGY REGULATORY
COMMISSION
)
)
WASHINGTON, D.C. 20426
AUGUST 15, 2003
STATEMENT OF PAT WOOD, III
CHAIRMAN, FEDERAL ENERGY REGULATORY COMMISSION
ON THE POWER FAILURE IN THE U.S. AND CANADA
"Today, while some areas unfortunately remain without electricity service, we owe a debt of gratitude
to the hard work of thousands who have worked long hours through the night to restore power to millions
of customers.
"The continued efforts to repair the situation underscore the importance of our multibillion-dollar
electricity infrastructure. The degree to which we take this complex, highly interconnected machine for
granted is a tribute to the past performance of the system.
"We at FERC and other government agencies are committed to understanding
precisely what caused this problem. In the interim, the cascading nature of this blackout offers an object
lesson of how the electricity grid requires regional coordination and planning, a challenge the nation is still
striving to meet. It is regional coordination and cooperation that is contributing to the grid restoration now
under way. Regional coordination and cooperation, with smart planning and investment, will be needed to
prevent any recurrences.
"If we draw any conclusions from this blackout, it is the urgent need for more investment in the
nation's transmission grid to serve broad regional needs. The Energy Department has projected that, over
the next decade, transmission investment will grow only 6 percent as electricity demand grows 20
percent.
"Clearly, we need regulatory certainty and other incentives for investment.
"When Congress returns next month, a joint House and Senate conference committee will begin
deliberating crucial legislation on national energy policy. We stand ready to help lawmakers in any way
we can in the pending effort to craft a modern power-delivery system that best serves the public.
"Right now, there is no federal regulatory authority over reliability, but we can, as economic regulators,
continue to intensely monitor the grid and markets to ensure that they are operating soundly.
"The Department of Energy has an office (202/586-1411) set up to address infrastructure issues and
has developed a roadmap to create an ultra reliable and technologically advanced grid."
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
- . -- __ ---:_-- - --- - -- � -- . ---- - ---------:··:::::::- :.....::-:--_·:;---::-::-:..7::"""--:-.:-:;.::-=.::=.-::-=-�=-;.--_-=-=----:;::-----___; ----...:::::-=-..:.-:-=:-._ -::::�-
STitNDARD - U T-t LIT_! EB_ --;�_0-:f--:.::::-�--��-�i�':tt--:�f:lt:E-/[:-'.·"�-��-=� �i�: �2 - __ -;. .--. r,ooKs - - -- - -- - - - ----- ----- --� -:.- -°'- _ ,...,:�< -=:=----�, ::-_-,:-=-_.c ---�-- =:> : --�- --� :--- ---- _ - - _-_ - -
Publication date: 21-Aug-2003
Reprinted from RatingsDirect
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit
Risk
Credit Analyst: Peter Rigby, New York (1) 212-438-2085
Long after the engineers determine the physical cause of the blackout of
Aug. 14, 2003, which brought commerce to a grinding halt in several U.S.
states and Ontario, politicians, regulators, industry experts and the capital
providers will be debating not just who is to blame but more importantly who
must assume the responsibility and the costs for fixing the system. The
scope and magnitude of the power outage immediately triggered a cascade
of intense rhetoric about the state of the U.S. power industry and its
regulations. From the President and the halls of Congress to Cabinet
members and to industry experts, it appears that no one has failed to weigh
in on the reputed inadequacies of the nation's power infrastructure.
Widespread blackouts are costly. They disrupt commerce. They shut down
communications and water supplies. They threaten health and safety and
they inconvenience a highly electronically automated, "digital" economy. And,
they invite litigation in the aftermath. Various estimates reported by the press
put the cost of this blackout anywhere from $6 billion to $1 O billion. Fixing the
system so blackouts do not happen, according to estimates by the Electric·
Power Research Institute, could run as high as $100 billion.
Given the tone of urgency, it would s·eem that immediate change is inevitable
and that investors could expect an improved investment climate for utilities.
But addressing the problems of the nation's grid and indeed, the regulation of
the entire U.S. electricity industry, will be no simple matter. The politics of
power are divisive and little consensus exists about how (or whether) to
continue with regulatory reform. Clearly, the blackout has highlighted the
complexity of the system, the diversity of its many stakeholders and the
susceptibility of the industry to political and regulatory risk.
Investors should not expect that such risk will dissipate any time soon.
Instead, credit risk could actually intensify if the politically charged debate
over reform continues for years, as it might very well do. And even if policy
makers succeed in crafting a comprehensive solution to the problems of the
nation's electricity grid, the regulatory treatment of the costs needed to
upgrade the infrastructure remains uncertain.
Who to Hold Responsible?
What happened on August 14 and who should take responsibility? It may be
weeks, if not months, before anyone can make that determination.
Meanwhile, the blackout is raising questions about what worked correctly and
what did not work.
file://IEI/BusDev/329406/final/329406f. html ( 1 of 7) [8/22/2003 11: 13: 17 AM]
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
)
/)
August 14, a .not unusually hot day, did not stress the grid in the way that ·.
extraordinarily hot, humid day$historically have. Outside of FirstEnergy
Corp. 's Davis-Besse nuclear plant, which has been down for about a year,
there were no unusual plant outages. Transmission lines were not
overheating and sagging under intense summer heat and high air
conditioning loads, as they were during the massive nine-state blackout in
1996. The individual components that investigators appear to be focused on-­
a generating plant tripping in the Midwest, several transmission lines
becoming overloaded, unexpected power flows--should not have been
triggering events. Plants and transmission lines do occasionally trip, but
unused transmission capacity, which would exist in an unstressed operating
condition, typically pick up and transmit power to the load centers along
alternate routes. ·
None of these events should have been that remarkable. Investigations,
however, may later reveal something unique. What was so remarkable was
that within an hour of these initial events, power flows on the grid began
reversing and power plants began shutting down as the grid became
unbalanced. Most remarkable perhaps was the fact that so many safety
systems of so many utilities across so many states failed to detect the
warning signs--voltage spikes, power surges, and increased volatility in
operating frequencies-that typically disconnect a utility from the grid to
isolate the transmission disturbance and minimize loss of service to
customers.
The only company that has attracted headline attention in the early days
following the blackout is Ohio-based FirstEnergy. On August 18, Standard &
Poor's did place its 'BBB' corporate credit rating on Firs�Energy, which had
been on negative outlook for over a year, on CreditWatch with negative
implications. The CreditWatch listing was not due to potential liability or
culpability arising from the blackout, but rather because of the additional
stress that management faces as it copes with even more negative publicity
at a time when it is attempting to raise new equity and deal with other
problems, including the long-delayed restart of Davis-Besse and a recent ·
adverse U.S. District Court ruling concerning the failure to install antipollution
equipment.
Regulatory Reform Lags
One of the more intriguing events of the blackout of 2003 is that the blackout
did not affect adjacent states that have embraced reform and competition.
Moreover, they demonstrated that their systems do work and that they are
not antiquated, as some have suggested. Pennsylvania, Maryland,
Delaware, Virginia, the District of Columbia, New England, and.New Jersey
(except northern New Jersey) largely managed to keep the lights on. PJM,
the regional transmission operator (RTO) for principally Pennsylvania, New.
Jersey, and Maryland, as well as Virginia, West Virginia, and Washington
D.C., operates with a strict ability to directly control operations within its
jurisdiction; this likely helped PJM maintain system integrity. Similarly, ISO
New England, the independent system operator for New England maintained
power, except in southwestern Connecticut. Are PJM and ISO New England
examples of models of the future, or were they just lucky? Perhaps the
investigations will also answer these questions.
file:I//EI/Bus0ev/329406/final/329406f.html (2 of 7) [8/22/2003 11: 13: 17 AM]
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
.. .,,,. .. )
()
/)
A deeper inspection into the root cause of the blackouts may indicate that ·
efforts to introduce regulatory restructuring--not deregulation itself-may have
contributed to the blackout. As Standard & Poor's pointed out last year,
partial restructuring has created dysfunctional wholesale electricity markets
(see "Partial Restructuring of U.S. Power Markets: At What Cost to Credit"
published June 28, 2002). In particular, the U.S. transmission system was
not designed to operate in competitive markets, Which demands that vast
quantities of power be delivered over very great distances. During the first
half of the last century, power engineers designed transmission hub and
spoke systems for vertically integrated utilities that serviced their own
franchise territories. Interconnectivity and bulk power transfers between
regions were secondary concerns. Central coordination of generation and
transmission worked well in that environment where ratepayers could absorb
the costs of inefficient, albeit effective, operations. However, a competitive
wholesale power market, which increasingly dominates the industry (certainly
in the Northeast}, needs its transmission system to move power in varying
amounts and different directions throughout the day within and in between
regions. These patterns significantly differ from patterns contemplated when
transmission was built, and regulatory reform efforts have not addressed the
transmission needs, both physical and operational, of competitive wholesale
power.
Another aspect of the industry that electricity restructuring has not fully
addressed is that of system coordination. This involves which power plants
run during the course of the day, for how long and at what output level. It also
should address who may take power from the grid, when, and how much. In
other industries, output can be inventoried and the market itself seems to
match supply and demand. Yet in this regard electricity stands alone. At all ·
times, aggregate supply and demand must operate in equilibrium--a system
cannot generate more or less electricity than demand or else the system
shorts out, power lines overload, power plants trip, and the lights go out.
Utilities once closely coordinated their own generation and transmission
investment and operations through central dispatch and planning processes.
In a competitive market, utilities do not necessarily own all, or any, of the
generation or transmission assets that service their franchise areas. Now
various means and numerous market participants whose interests may not
always be aligned are managing the coordination and reliability task.
Standard & Poor's pointed out last year that if the transmission system does
not address the needs of a competitive generation market, financial and
business risks for the industry will likely remain high, which, .in turn, does not
bode well for the industry's credit ratings (see "Merchant Energy Survival
Hangs on FERC's Blueprint for Market Design" published March 3, 2003).
That will translate to a higher cost of capital as investors and lenders move to
protect themselves from uncertain credit risks. Markets will not fix a flawed
market design, but financial markets will move to limit their exposure to a ·
flawed market. Dysfunctional power markets can only invite an erosion of .
system reliability (read, further blackouts}, price volatility, reduced market
transparency, misplaced capital resources, endless political squabbles and,
consequently, credit risk. As long as dysfunctions exist between the highly
regulated and unregulated worlds of power, lenders will never have the
predictability and stability that credit providers demand from the utility
industry.
file:///EI/Bus0ev/329406/final/329406f.html (3 of 7) [8/22/2003 11: 13: 17 AM]
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
)
f)
Cost($)
On a related point, the introduction of competition into the electricity industry
has forced decisions about the tradeoff between reliability and costs (see
chart). Reliability increases (or the risk of a system outage decreases) as
investment iri redundancies and back-up systems increase. Historically, in
the former cost-of-service, rate-of-return world of U.S. electricity, ratepayers
absorbed the cost of system redundancies, such as peaking power plants
and excess transmission capacity, which only occasionally were called into
service during plant outages or periods of peak demand. Since the
introduction of competition, the U.S. landscape has changed in several ways.
First, competition forces a more efficient and productive use of assets--one of
the reasons for the rise of energy marketing and trading. Second, with a
reduced ability to pass costs on to ratepayers, utilities and their affiliates who
are exposed to competition have an increased incentive to maximize profits
from every asset. Few companies want to spend money on assets where the
return is low or uncertain, especially if the market is unwilling to compensate
for reliability. ·
Despite all these hurdles, it appears PJM and ISO New England have
successfully managed through these issues and have a system that prevents
a massive widespread system failure.
Reliability is a Trade.Off Between Coot and Outages
Risk of Outage (%}
file:///EI/BusDev/329406/final/329406f.html (4 of 7) (8/22/2003 11: 13: 17 AM]
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
Transmission Infrastructure Upgrade Barriers Persist
The investigations that are underway may indicate that extensive upgrades
to the infrastructure are needed and needed soon. They will certainly support
existing arguments that the national grid needs a better system of ·
coordination, regional planning, uniform operating standards, and better
enforcement of standards. The physical costs could be substantial, reaching
into the tens of billions of dollars. The question for investors is how will
regulators treat these costs and what will be the resulting credit implications?
If the upfront costs are large, which appears likely, and recovery through a
rate-based mechanism is unclear, credit-conscious utilities will be reluctant to
spend the money. If a utility is uncertain whether it can recover capital
expenditures needed to increase reliability, yet it chooses to make those
expenditures (or is forced to for whatever reason), Standard & Peer's would
likely treat the· expenditure and associated debt financing as a deterioration
in credit quality. ·
( )
f )
Still, it may be premature to talk about the cost of the upgrade and who will
pay for it. Although the blackout seems to command a certain urgency, the
political barriers to progress are substantial. The plethora of competing ·
interests may likely block progress for the foreseeable future. Gaining
consensus among industry participants and stakeholders looms as a
Herculean task. Unlike its counterparts in other countries, the U.S. electric
industry operates in a complicated regulatory setting, which has frustrated
the FERC's and other entities' efforts to bring widespread coordination,
standards, and enforcement of standards to the industry. If the FERC had
absolute jurisdiction, restructuring might be further advanced than it is ..
Consider the patchwork of the U.S. electricity regulation, which consists of 50
different state utility commissions, countless cooperatives, public power
authorities, the FERG, and federal power marketing organizations.
The extraordinarily difficult task of building new transmission lines has also
plagued reliability at a time when reliability is slipping. Few Americans will
tolerate transmission towers anywhere near their property or their children's
schools. Moreover, the FERG has little legal ability to site new transmission.
With the interstate natural gas industry, the FERG has authority of eminent
domain that greatly facilitates siting new pipe. However, the FERC does not
have that authority with electric transmission, even though electricity
transmission is clearly an interstate commerce issue as the blackout
demonstrated. States are also less willing to allow transmission lines to run
through their states if direct benefits do not accrue to them. Immediately
following the blackout, the state of Connecticut sought to block the activation
of Cross Sound Cable, ·the new underwater transmission line connecting
Connecticut to Long Island, which is in chronic need of new electricity
supplies--even though the cable is built, approved by the FERC and ready to
enter commercial service. The "national" grid indeed finds itself hostage to
the most parochial of interests.
· As has been well publicized, utilities claim that regulated returns on equity for
investment in new transmission are not commensurate with returns in other
infrastructure. Therefore, it is difficult to attract capital or invest capital in new
transmission, particularly given the opposition to new transmission and
potential for interveriers to strand investment, such as the Cross Sound
file:/IIEI/BusDev/329406/final/329406f.html (5 of 7) [8/22/2003 11: 13: 17 AM]
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
Cable ..
/" ).
()
Reform ofthe Public Utility Holding Company Actof 1935 (PUHCA) could
actually help improve investment in transmission infrastructure, according to
some. PUHCA currently restricts utility holding companies from acquiring
companies not related to the electric utility industry. Hence, it has
discouraged "new money" from entering the electric industry from other
sources, such as financial institutions and industrials, interested in acquiring
electric utilities. More importantly for purposes of regional coordination and
reliability, PUHCA has also restricted the ability of utilities to merge by
generally forcing them to operate in smaller geographic regions, as opposed
to large regional companies. Larger, regional companies presumably would
find it easier and more attractive to participate in RTOs, and make new
infrastructure investments, especially if they had greater certainty that the
benefits would accrue to them, instead of others.
From a credit perspective, however, repeal of PUHCA could invite greater
credit risk, as companies expand operations and escape from the various
security issuing constraints that PUHCA imposes. Typically, PUHCAhas
supported credit quality. However, greater credit risk under PUHCA repeal is
not a foregone conclusion and Standard & Poor's expects that most utilities
in the current credit environment will pay greater attention to credit given that
the average utility credit rating has fallen from the 'A' category to the 'BBB'
category over the past few years.
A New Energy Bill? .
It would seem that the vulnerability of the nation's electrical infrastructure
demonstrated by the August 14 blackout would pressure Congress to quickly
pass legislation upon which the Senate and the House can agree and which
President Bush will readily sign. But investors should not count on a speedy
or effective resolution to electricity reform. Comprehensive energy legislation
seems to provide more opportunities for disagreement than agreement or
compromise. That could be bad news for investors and lenders if it means
the state of partial restructuring of the nation's electricity industry persists
indefinitely. Political and regulatory risk will remain high and credit will have
to adjust to uncertainty for the foreseeable future.
Outlook for Electricity Regulatory and Political Credit Risk
Few will dispute the conclusion that the August 14 blackout represents a
wake-up call to the nation that its electricity infrastructure is at risk. The
blackout highlights the potential creditproblems that Standard & Poor's has
been discussing since 2001 about the risks of partial or incomplete electricity
restructuring. Cost-of-service, rate-of-return environments generally
supported credit quality, while the newer competitive environments have
heightened credit risk. Partial reform, however, invites dysfunctional markets
and credit surprises and that undoubtedly presents a worse situation.
Standard & Poor's warns that as long as political and regulatory
disagreements persist among policy makers, credit risk will remain elevated
and will discourage new capital, or least make it more expensive. Moreover,
if reform efforts, which could include infrastructure .investment, are delayed
further, credit risk arising from the costs of further blackouts, lost revenue
opportunities for generators, and potential lawsuits could increase. Finally, if
utilities do make, or are forced to make, large infrastructure investments in
file:///Ej/BusDev/329406/final/329406f.html (6 of 7) [8/22/2003 11: 13: 17 AM)
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
transmission upgrades without clear assurances about capital recovery,
credit quality will suffer. ·
)
.,()
Published by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. Executive
offices: 1221 Avenue of the Americas, New York, NY 10020. Editorial offices: 55 Water
Street, New York, NY 10041. Subscriber services: (1) 212-438-7280. Copyright 2003 by The
McGraw-Hill Companies, Inc. Reproduction in whole or in part prohibited except by
permission. All rights reserved. Information has been obtained by Standard & Poor's from
sources believed to be reliable. However, because of the possibility of human or mechanical
error by our sources, Standard & Poor's or others, Standard & Poor's does not guarantee the
accuracy, adequacy, or completeness of any information and is not responsible for any
errors or omissions or the result obtained from the use of such information. Ratings are
statements of opinion, not statements of fact or recommendations to buy, hold, or sell any
securities. ·
The McGraw·Hill Companies · -_. · v:
file:///E//Bus0ev/329406/final/329406f.html (7 of 7) [8/22/2003 11: 13: 17 AM)
»>: )
( .' . )
STANDARD & POOR'S • .
CORPORATE
RATINGS
CRITERIA
Dear Readers,
This Internet version of Corporate Ratings
Criteria is updated and modified for changes in·
criteria as they occur. Similarly, statistics such as
key ratio medians are brought up to date.
Standard & Poor's criteria publications repre­
sent our endeavor to convey the thought process­
es and methodologies employed in determining
Standard & Poor's ratings. They describe both
the quantitative and qualitative aspects of the
analysis. We believe that our rating product has
the most value if users appreciate all that has
gone into producing the letter symbols.
Bear in :mind, though, that a rating is, in the
end, an opinion. The rating experience is as much
an art as it is a science.
Solomon B. Samson
Chief Rating Officer, Corporate Ratings
� . ( · A DiviJion ofThcMcGraw·HillOm,panits )
Published by Standard & Poor's; a division ofThe McGraw-Hill Companies. Executive offices: n21 Avenue of the Americas, New York, N.Y. 10020. Editorial offices: 55 Water Street, New York, NY 10041. ISSN 1097-1025. Subscriberservices: ... 1212) 438-2000. Copyright 2001 by The McGraw-Hill Companies. All rights reserved. Officers of The McGraw-Hill Companies: Joseph l. Dionne, Chairman and Chief Executive Officer; Harold W. McGraw. flt, President and Chief Operating Officer; Kenneth M. Vittor, Senior Vice President and General Counsel: frank Penglase, SentOr Vice President. Treasuty Operations. lnlCN'lllation has been obtained by C-0,porate Rati11gs Criteria from sources befieved to be reliable. HmYevet. because o( lhe possibility of htlnan or mechanical errcr by our sou,ces, Corporate Ratings Crireria or others. CDlporare Ratings Ciireria does 001 guarantee the accuracy, adequacy, °' completeness of any information and is not responsible for any errors or omissions°' fo, lhe results ob1ained from the use of such informatipn.
Standard & Poor's
.,,,.. )
,{)
J)
• STANDARD & PDDR'S
tions than obligations in higher rated cate­
gories. However, the obligor's capacity to meet
its financial commitment on the obligation is
still strong.
'BBB' An obligation rated 'BBB' exhibits
adequate protection parameters. However,
adverse economic conditions or changing cir­
cumstances are more likely to lead to a weak­
ened capacity of the obligor to meetits finan­
cial commitment on the obligation.
Obligations rated 'BB', 'B', 'CCC', 'CC',·and
'C' are regarded as having significant specula­
tive characteristics. 'BB' indicates the least
degree of speculation and 'C' the highest.
While such obligations will likely have some
quality and protective characteristics, these
may be outweighed by large uncertainties or
major exposures to adverse conditions.
'BB' An obligation rated 'BB' is less vulnera­
ble to nonpayment than other speculative
issues. However, it faces major ongoing uncer­
tainties or exposure to adverse· business, finan­
cial, or economic conditions that could lead to
the obligor's inadequate capacity to meet its
financial commitment on the obligation.
'B' An obligation rated 'B' is more vulnera­
ble to nonpayment than obligations rated 'BB',
but the obligor currently has the capacity to
meet its financial commitment on the obliga­
tion. Adverse business, financial, or economic
conditions will likely impair the obligor's
capacity or willingness to meet its financial
commitment on the obligation. ·
'CCC' An obligation rated 'CCC' is current­
ly vulnerable to nonpayment, and is dependent
upon favorable business, financial, and eco­
nomic conditions for the obligor to meet its
financial commitment on the obligation. In the
event of adverse business, financial, or eco­
nomic conditions, the obliger is not likely to
have the capacity to meet its financial commit­
ment on the obligation.
'CC' An obligation rated 'CC' is currently
highly vulnerable to nonpayment.
'C' The 'C' rating may be used to cover a sit­
uation where a bankruptcy petition has been
filed or similar action has been taken but pay­
ments on this obligation are being continued.
'C' is also used for a preferred stock that is in
arrears (as well as for junior debt of issuers
rated 'CCC-' and 'CC').
'D'. The 'D' rating, unlike other ratings, is
not prospective; rather, it is used only where a
8 · INTRODUCTION • Corporate Ratings Criteria
default has actually occurred-and not where
a default is only expected. Standard & Poor's
changes ratings to 'D':
• On the day an interest arid/or principal
payment is due and is not paid. An excep­
tion is made if there is a grace period and
Standard & Poor's believes that a payment
will be made, in which case the rating can be
maintained;
• Upon voluntary bankruptcy filing or simi­
lar action. An exception is made if Standard
& Poor's expects that debt service payments
will continue to be made on a specific issue.
In the absence of a payment default or bank­
ruptcy filing, a technical default (i.e.,
covenant violation) is not sufficient for
assigning a 'D' rating;
• Upon the completion of. a · tender or
exchange offer, whereby some or all of an
issue is either repurchased for an amount of
cash or replaced by other securities having a
total value that is clearly less than par;
• In the case of preferred stock or deferrable
payment securities, upon nonpayment of the
.dividend or deferral of the interest payment.
With respect to issuer credit ratings (that is,
corporate credit ratings, counterparty ratings,
and sovereign ratings), failure to pay a financial
obligation-rated or unrated-leads to a rating
of either 'D' or 'SD'. In the ordinary case, an
issuer's distress leads to general default, and the
rating is 'D'. 'SD' is assigned when an issuer
can be expected to default selectively, that is,
continue . to pay certain issues or classes of
obligations while not paying others. In the cor­
porate context, selective default might apply
when a company conducts a coercive exchange
with respect to one or some issues, while
intending to honor its obligations with regard
to other issues. (In fact, it is not unusual for a
company to launch such an offer precisely with
such a strategy-to restructure part of its debt
in order to keep the company solvent.)
Nonpayment of a financial obligation subs
ject to a bona fide commercial dispute or a
missed preferred stock dividend does not cause
the issuer credit rating to be changed.
Plus (+) or minust-): The ratings from 'AN
to 'CCC' may be modified by the addition of a
plus or minus sign to show relative standing
within the major rating categories.
r Use of the "r" was largely discontinued as
of July 2000.
·/ )
.()
( )
Short-term credit ratings
'A-1' A short-term obligation rated 'A-1' is
rated in the highest category by Standard &
Poor's. The obligor's capaciry to meet its finan­
cial commitment on the obligation is strong.
Within this category, certain obligations are
designated with a plus sign (+). This indicates
that the obliger's capaciry to meet its financial
commitment on these obligations is extremely
strong.
'A-2' A short-term obligation rated 'A-2' 'is
somewhat more susceptible to the adverse
effects of changes in circumstances and eco­
nomic conditions than obligations in - higher
rating categories. However, the obligor's
capacity to meet its financial commitment on
the obligation is satisfactory.
'A-3' A short-term obligation rated 'A-3'
exhibits adequate protection parameters.
However, adverse economic conditions or
changing circumstances are more likely to lead
to a weakened capacity of the obliger to meet
its financial commitment on the obligation.
. 'B' A .short-terrn obligation rated 'B' is
regarded as having significant speculative
characteristics. The obligor currently has the
capacity to meet its financial commitment on
the obligation; however, it faces major ongoing
uncertainties that could lead to the obligor's
inadequate capaciry to meet its financial com­
mitment on the obligation.
'C' A short-term obligation rated 'C' is cur­
rently vulnerable to nonpayment and is depen­
dent upon favorable business, financial, and
economic conditions for the obligor to meet its ·
financial commitment on the obligation.
'D' See definition of 'D' under Long-term
Ratings.
Investment and speculative grades
The term "investment grade" was originally
used by various regulatory bodies to connote
obligations eligible for investment by institu­
tions such as banks, insurance companies, and
savings and loan associations. Over time, this
term gained widespread usage throughout the
investment community. Issues rated in the four
highest categories, 'AAA', 'AN, 'N, 'BBB', gen­
erally . are recognized as being investment
grade. Debt rated 'BB' or below generally is
referred to as speculative grade. The term
"junk bond" is merely a more irreverent
expression for this category of more risky debt.
Neither term indicates which secunnes
Standard & Poor's deems worthy of invest-
• STANDARD & POOR'S
ment, as an investor with a particular risk pref­
erence may appropriately invest in securities
that are not investment grade.
Ratings continue as a factor in many regula­
tions, both in the U.S. and abroad, notably in
Japan. For example, the Securities and
Exchange Commission (SEC) requires invest­
ment-grade status in order to register debt on
Form-3, which, in turn, is one way to offer
debt via a Rule 415 shelf registration. The
Federal Reserve Board allows members of the
Federal Reserve System to invest in securities
rated in -the four highest categories, just as the
Federal Home Loan Bank System permits fed­
erally chartered savings and loan associations
to invest in corporate debt with those ratings,
and the Department of Labor allows pension
funds to invest in commercial paper rated in
one of the three highest categories. In similar
fashion, California regulates investments of
municipalities and county treasurers; Illinois
limits collateral acceptable for public deposits;
and Vermont restricts investments of insurers
and banks. The New York and Philadelphia
Stock exchanges fix margin requirements for
mortgage securities depending on their ratings,
and the securities haircut for commercial
paper, debt securities, and preferred stock that
determines net capital requirements is also a ·
function_ of the ratings assigned.
In some countries, investment regulation
will refer to ratings on a national scale.
_(Standard & Poor's produces national scale
ratings in severai countries, including Mexico,
Brazil, and Argentina.) These ratings are
expressed with the traditional letter symbols,
but the ratings definitions do not conform to
those employed for the global scale. The rating
definitions of each national scale and its corre­
lation to global scale ratings are unique, so
there is no basis for comparability across
national scales.
CreditWatch and rating outlooks
A Standard & Poor's rating evaluates default
risk over the life of a debt issue, incorporating
an assessment of all future events to the extent
they are known or can be anticipated. But _
Standard & Poor's also recognizes the poten­
tial for future performance to differ from ini­
tial expectations. Rating outlooks and
CreditWatch listings address this possibility by
focusing on the scenarios that could result in a
rating change.
INTRODUCTION • Corporate Ratings Criteria 9
(
i )
/)
• STANDARD & POOR'S
Ratings appear on CreditWatch when an
event or deviation from an expected trend has
occurred or is expected and additional infor­
mation is necessary to take a rating action. For
example, an issue is placed under such special
surveillance as the result of mergers, recapital­
izations, regulatory actions, or unanticipated
operating developments. Such rating reviews
normally are completed within 90 days, unless
the outcome of a specific event is pending.
A listing does not mean a rating change is
inevitable. However, in some cases, it is certain
that a rating change will occur and only the
magnitude of the change is unclear. In those
instances-and generally wherever possible­
the range of alternative ratings that could
result is shown.
Rating changes can also occur without the
issues appearing beforehand on CreditWatch.
An issuer cannot automatically appeal a
Credit Watch listing, - but analysts are sensitive
to issuer concerns and the fairness of the
process.
10 INTRODUCTION • Corporate Ratings Criteria
A rating outlookis assigned to all long-term
debt issues-except for structured finance- -
and also assesses potential for change.
Outlooks have a longer · time frame - than
CreditWatch listings and incorporate trends or
risks with less certain implications for credit
quality. An outlook is not necessarily a precur- _
sor of a rating change or a CreditWatch listing.
CreditWa_tch designations and outlooks may
be "positive," which indicates a rating may be
raised, or "negative," which indicates a rating
may be lowered. "Developing" is used for
those unusual situations in which future events
are so unclear that the rating potentially may
be raised or lowered. "Stable" is the outlook
· assigned when ratings are not likely to be ·
changed, but it should not be confused with
expected stability of the company's financial
performance.
)
B STANDARD & POOR'S
Industrials and Utilities
/)
Standard & Poor's uses a format that divides
the analytical task into several categories, pro­
viding a framework that ensures all salient
issues are considered (see box). For corporates,
the first several categories are oriented to fun­
damental business analysis; the remainder
relate to financial analysis. As further analyti­
cal discipline, each category is scored in the
course _of the ratings process, and there are
also scores for the overall business risk profile
and the overall financial risk profile.
(Analytical groups choose various ways to
express these· scores: Some use letter symbols,
while others prefer to use numerical scoring
systems. For example, utilities scoring is from
1 to 10-with 1 representing the best.
Companies with a strong business profile­
typically, transmission/distribution utilities­
are scored 1 through 4; those facing greater
competitive threats-such as power genera­
tors-would wind up with an overall business
profile score of 7 to 10.)
There are no formulae for combining scores
to arrive at a rating conclusion. Bear in mind
that ratings represent an art as much as a sci­
ence. A rating is, in the end, an opinion. Indeed,
it is critical to understand that the rating process
is not limited to the examination of various
financial measures. Proper assessment of debt
protection levels requires a broader framework,
involving a thorough review of business funda­
mentals, including judgments about the compa­
ny's competitive position and evaluation of
management and its strategies. Clearly, such
judgments are highly subjective; indeed, subjec­
tivity is at the heart of every racing.
At times, a rating decision may be influenced
strongly by financial measures. At other times,
business risk factors may dominate. If a firm is
strong in one respect and weak in another, the
rating will balance the different factors.
Viewed differently, the degree of a firm's busi­
ness risk sets the expectations for the financial
risk it can afford at any rating level. The
analysis of industry characteristics and how a
firm ls positioned to succeed in that environ­
ment establish the financial benchmarks. used
in the quantitative part of the analysis (See
Ratio Guidelines on pages 56-58).
Industry risk
Each rating analysis begins with an assess­
ment .of the company's environment. To deter­
mine the degree of operating risk facing a par­
ticipant in a given business, Standard & Poor's
analyzes the dynamics of that business. This
analysis focuses on the strength of industry
prospects, as well as the competitive factors
affecting that industry.
The many factors assessed include industry
prospects for growth, stability, or decline, and
the pattern of business cycles (see Cyclicality,
page 41). It is critical to determine vulnerabili­
ty to technological change, labor unrest, or
regulatory interference. Industries that have
long lead times or that require a fixed plant of
a specialized nature face heightened risk. The
. RATING METHODOLOGY • Corporate Ratings.Criteria 17
)
/)
• STANDARD & POOR'S
implications of increasing compennon are
obviously crucial. Standard & Poor's knowl­
edge of investment plans of the major players
in any industry offers a unique vantage point
from which to assess competitive prospects.
While any particular profile category can be
the overriding rating consideration, the industry
risk assessment goes a long way toward setting
the upper limit on the .rating to which any par­
ticipant in the industry can aspire. Specifically, it
would be hard to imagine assigning 'AN and
'AAN debt ratings or 'A-1+' commercial paper
ratings to companies with extensive participa­
tion in industries of above-average risk, regard­
less of how conservative their financial posture.
Examples of these industries are integrated steel
makers, tire and rubber companies, home­
builders, and most of the mining sector.
Conversely, some industries are regarded
favorably. They are distinguished by such traits
as steady demand growth, ability to maintain
margins without impairing future prospects,
flexibility in the timing of capital outlays, and
moderate capital intensity. Industries possess­
ing one or more of these attributes include
manufacturers of branded consumer products,
drug firms, and publishing and broadcasting.
Again, high marks in this category do not
translate into high ratings for all industry par­
ticipants, but the cushion of strong industry
fundamentals provides helpful support.
The industry risk assessment also sets the
stage for analyzing specific company risk fac­
tors and establishing the priority of these fac­
tors in the overall evaluation. For example, if
an industry is determined to be highly compet­
itive, careful assessment of a firm's market ·
position is stressed. If the industry has large
capital requirements, examination of cash flow
adequacy assumes major importance.
Keys to success
As part of the industry analysis, key rating
factors are identified: the keys to success and
areas of vulnerability. A company's rating is
affected crucially by its ability to achieve suc­
cess and avoid pitfalls in its business.
The nature of competition is, obviously,
different for different industries. Competition
can be based on price, quality of product,
distribution capabilities, image, product differ­
entiation, service, or· some other factor.
Competition may be on a national basis, as is
the case with major appliances. In other indus­
tries, such as chemicals, competition is global,
and in still others, such as cement, competition
is strictly regional.
The basis for competition determines which
factors are analyzed for a given company. The
accompanying charts highlight factors that are
considered critical for airlines and .electricity
companies and the specific considerations that
determine a company's position in each.
For any particular company, one or more
factors can hold special significance, even if
that factor is not common to the industry. For
example, the fact that a company has only one
major production facility should certainly be
regarded as an area of vulnerability. Similarly,
reliance on one product creates risk, even if the
product is highly successful. For example, one
major pharmaceutical company has reaped a
financial bonanza frorri just two medications.
The firm's debt is reasonably highly rated,
given its exceptional profits and cash flow-.
but it would be viewed still more favorably
were it not for the dependence on only two
drugs (which are, after all, subject to competi­
tion and patent expiration).
Diversification factors
When a company participates in more than
one business; each segment is separately ana­
lyzed. A composite is formed from these build­
ing blocks, weighting each element according
to its importance to the overall organization.
The potential benefits of diversification, which
may not be apparent from the additive
approach, are then considered.
Obviously, the truly diversified company
will not have a single business segment that is
dominant. One major automobile company
received much attention for diversifying into
aerospace and computer processing. But it
never became a diversified firm, since its suc­
cess was still determined substantially by one
line of business.
Limited credit will be given if the various lines
of business react similarly to economic cycles. For
example, diversification from nickel into copper
cannot be expected to stabilize performance; sim­
ilar risk factors are associated with both metals.
Most critical is a company's ability to man­
age diverse operations. Skills and practices
needed to run a business differ greatly among
industries, not to mention the challenge posed
by participation in several different industries.
For example, a number of old-line industrial
firms rushed to diversify into financial ser­
vices, only to find themselves saddled with
18 RATING METHODOLOGY • Corporate Ratings Criteria - . .
.�- )
.{
: )
( )
unfamiliar businesses they had difficulty
managing.'
Some firms have adopted a portfolio
approach to their diverse holdings. The busi­
ness of buying and selling businesses is differ­
ent from running operations and is analyzed
differently. The ever-changing character of the
company's assets typically is viewed as a nega­
tive. On the other hand, there is often an off­
setting advantage: greater flexibility in raising
funds if each line of business is a discrete unit
that can be sold off.
Size considerations
Standard & Poor's has no minimum size cri­
terion for any given rating level. However, size
usually provides a measure of diversification
and often affects competitive issues:
Obviously, the need to have a broad product
line or a national marketing structure is a fac­
tor in many businesses and would be a rating
consideration. In this sense, sheer mass is not
important; demonstrable market advantage is.
Small companies also can possess the competi­
tive benefits of dominant market positions,
although that is not common.
Market share analysis often provides impor­
tant insights. However, large shares are not
always synonymous with competitive advan­
tage or industry dominance. For instance, if an
industry has a number of large but compara­
ble-size participants, none may have a particu­
lar advantage or disadvantage. Conversely, if
an industry is highly fragmented, even the
large firms may lack pricing leadership poten­
tial. The textile industry is an example.
Still, small companies are, almost by defini­
tion, more concentrated in terms of product,
number of customers, or geography. In effect,
they lack some elements of diversification that
can benefit larger firms. To the extent that
markets and regional economies change, a
broader scope of business affords protection.
This consideration is balanced against the per­
formance and prospects of a given business. In
addition, lack of financial flexibility is usually
an important negative factor in the case of very.
small firms. Adverse developments that would
simply be a setback for firms with greater
resources could spell the end for companies
with limited access to funds.
There is a controversial notion that small,
growth companies represent a better credit risk
than older, declining companies. While this is
intuitively appealing to some, it ignores some
important considerations. · Large firms have
substantial staying power, even if their busi­
nesses are troubled. Their constituencies­
including large numbers of employees-can
influence their fates. Banks' exposure to these
firms may be quite extensive, creating a reluc­
tance to abandon them. Moreover, such firms
often have accumulated a lot of peripheral
assets that can be sold. In contrast, the promise
of small firms can fade very quickly and their
minuscule equity bases will offer scant protec­
tion, · especially given the high debt burden
some companies deliberately assume.
Fast growth is often subject to poor execu­
tion, even if the idea is well conceived. There
is also the risk of overambitiousness.
Moreover, some firms tend to continue high­
risk financial policies as they aggressively pur­
sue ever greater objectives, limiting any cred­
it-quality improvement. There is little evi­
dence to suggest that growth companies ini­
tially receiving speculative-grade ratings have
particular upgrade potential. Many more
defaulted over time than achieved investment
grade. Oil exploration, retail, and high tech-·
nology firms have been especially vulnerable,
even though their great potential was touted
at the time they first came to market.
Management evaluation
Management is assessed for its role in deter­
mining operational success and also for its risk
tolerance. The first aspect is incorporated in
the competitive position analysis; the second is
weighed as a financial policy factor.
Subjective judgments help determine each
aspect of management evaluation. Opinions
formed during the meetings with senior man­
agement are as important _as rriartagement's
track record. While a track record may seem to
offer a more objective basis for evaluation, it
often is difficult to determine how results
should be attributed to management's skills.
The analyst must decide to what extent they
are the result of good management, devoid of
management influence, or achieved despite
management!
Plans and policies have to be judged for their
realism. How they are implemented deter­
mines the view of management consistency
and credibility. Stated policies often are not
followed, and the ratings will reflect skepti-
. cism unless management has established credi­
bility. Credibility can become a critical issue
when a company is faced with stress or
• STANDARD & POOR'S
· : . RATING METHODOLOGY • Corporate Ratings Criteria 19_
()
I )
. • STANDARD & PDDR'S
20 RATING METHODOLOG\' • Corporate Ratings Criteria . .
)
(.
:· )
• STANDARD & POOR'S . ·
, RATING METHODOLOGY · • Corporate Ratings Criteria 21
r ) • STANDARD & POOR'S
restructuring. and the analyst must decide
whether to rely on management to carry out
plans for restoring creditworthiness.
Organizational considerations
Standard & Poor's evaluation is sensitive to
potential organizational problems. These
include situations where:
• There is significant organizational reliance
on an individual, especially one who may be
close to retirement; ·
• The finance function and finance consid­
erations do not receive high organizational
recognition;
• The transition from entrepreneurial or family­
bound to professional management has yet
to be accomplished;
• A relatively large number of changes occur
within a short period;
• The relationship between organizational
structure and management strategy is
unclear;
• Shareholders impose con�traints on man­
agement prerogatives.
Measuring performance and risk
Having evaluated the issuer's competitive
position and operating environment, the
analysis proceeds to several financial cate­
gories. To reiterate. the company's business­
risk profile determines the level of financial
risk appropriate for any rating category.
Financial risk is portrayed largely through
quantitative means, particularly by using
financial ratios (guidelines and medians for
key · ratios for U.S. companies are found on
pages 54 and 57). Benchmarks vary greatly by
industry, and several analytical adjustments
typically are required to calculate ratios for an
individual company. Cross-border compar­
isons require additional care, given the differ­
ences in accounting conventions and local
financial systems (see discussion on interna­
tional rating issues starting on page 30).
Accounting quality
Ratings rely on audited data, and the rating
process does not entail auditing a company's
financial records. Analysis of the audited finan­
cials begins with a review of accounting quali­
ty. The purpose is to determine whether ratios
and statistics derived from financial statements
can be used accurately to measure a company's
performance and position relative to both its
peer group and the larger universe of industrial
or utility companies. The rating process is very
much one of comparisons, so it is important to
have a common frame of reference.
Accounting issues to be reviewed include:
• Consolidation basis. U.S. GAAP now
requires consolidation of even nonhornoge­
neous operations. For analytical purposes, it is
critical to separate these and evaluate each
type of business in its own right;
• Income recognition. For example, percent­
age of completion vs. completed contract in
the construction industry;
• Depreciation methods and asset lives;
• Inventory pricing methods;
• Impact of purchase accounting and treat­
ment of goodwill;
• Employee benefits (see discussion on page 105);
and
• Various off-balance-sheet liabilities, from
leases and project finance to defeasance arid.
receivable sales.
To the extent possible, analytical adjust­
ments are made to better portray reality.
Although it is not always possible to complete­
ly recast a company's financial statements, it is
useful to have some notion of the extent per­
formance or assets are overstated or understat­
ed. At the very least, the choice of accounting
alternatives can be characterized as generally
conservative or liberal.
Financial policy
Standard & Poor's attaches great impor­
tance to management's philosophies and poli­
cies involving financial risk. A surprising num­
ber of companies have not given this question
serious thought, much less reached strong con­
clusions. For many others, debt leverage (cal­
culated without any adjustment to reported .
figures) is the only focal point of such policy
considerations .. More sophisticated business
managers have thoughtful policies that recog­
nize cash-flow parameters and the interplay
between business and financial risk.
Many firms that have set goals do not have
the wherewithal, discipline, or management
commitment to achieve these objectives. A
company's leverage goals, for example, need to
be. viewed in the context of its past record and
the financial dynamics affecting the business. If
management states, as many do, that its goal is
to operate with 35% debt-to-capital, Standard
& Poor's factors that into its analysis only to
the extent it appears plausible. For example, if
a company has aggressive spending plans, that
22 ' RATING METHODOLOGY • Corporate Ratings Criteria . _
I'' )
()
35 % goal would carry little weight, unless
management has committed to a specific pro­
gram of asset sales, equity sales, or other
actions that in a given. time period would pro­
duce the desired results.
Standard & Poor's does not encourage com­
panies to manage themselves with an eye
toward a specific rating. The more appropriate
approach is to operate for the good of the busi­
ness as management sees it, and let the rating
follow. Certainly, prudence and credit quality
should be among the most important consider­
ations, but financial policy should be consis­
tent with the needs of the business rather than
an arbitrary constraint.
If opportunities are foregone merely to avoid
financial risk, the firm is making poor strategic
decisions. In fact, it may be sacrificing long­
term credit quality for the facade of low risk in
the near term. One financial article described a ·
company that curtailed spending expressly "to
become an 'A'-rated company." As a result,
" ... the company's business responded poorly
to an increase in market demand. Needless to
say, the sought-after 'A' rating continued to
elude the company."
In any event, pursuit of the highest rating
attainable is not necessarily in the company's
best interests. 'AAA' may be the highest rating,
but that does not suggest that it is the "best"
rating. Typically, a company with virtually no
financial risk is not optimal as far as meeting
the needs of its various constituencies. An
underleveraged firm is not minimizing its cost
of capital, thereby depriving its owners of
potentially greater value for their investment.
In this light, a corporate objective of having its
debt rated 'AAA' or 'AA' is at times suspect.
Whatever a company's financial track record,
an analyst must be skeptical if corporate goals
are implicitly irrational. A firm's "conservative
financial philosophy" must be consistent with
the firm's overall goals and needs.
Profitability and coverage
Profit potential is a critical determinant of
credit protection. A company that generates
higher operating margins and returns on capi­
tal has a greater ability to generate equity cap­
ital internally, attract capital externally, and
withstand business adversity. Earnings power
ultimately attests to the value of the firm's
assets as well.
The more significant measures of profitabil­
ity are:
• Pretax preinterest return on capital;
• Operating income as a percentage of sales;
and
• Earnings on business segment assets.
While the absolute levels of ratios are impor-
tant, it is equally important to focus on trends
and compare these ratios with those of com­
petitors. Various industries follow different
cycles and have different earnings characteris­
tics. Therefore, what may be considered favor­
able for one business may be relatively poor for
another. For example, the drug industry usual­
ly generates high operating margins and high
returns on capital. Defense contractors gener­
ate low operating margins, but high returns on
capital. The pipeline industry has high operat­
ing margins and low returns on capital.
Comparisons with a company's peers influence
Standard & Poor's perception of a firm's com­
petitive strengths and pricing flexibility.
The analysis proceeds from historical perfor­
mance to projected profitability. Because a rat­
ing is an assessment of the likelihood of timely
payments in the future, the evaluation empha­
sizes future performance. However, the rating
analysis does not attempt to forecast perfor­
mance precisely or to pinpoint economic cycles.
Rather, the forecast analysis considers variabil­
ity of expected future performance based on a
range of economic and competitive scenarios.
Particularly important today are manage­
ment's plans for achieving earnings growth.
Can existing businesses provide satisfactory
growth, especially in a low-inflation environ­
ment, and to what extent are acquisitions or
divestitures necessary to achieve corporate
goals? At first glance, a mature, cash-generat­
ing company offers a great deal of bondholder
protection, but Standard & Poor's assumes a
corporation's central focus is to augment share­
holder value over the long run. In this context,
a lack of indicated earnings growth potential is
considered a weakness. By itself this may hin­
der a company's ability to attract financial and
human resources. Moreover, limited internal
earnings growth opportunities may lead man­
agement to pursue growth externally, implying
greater business and financial risks.
Earnings are also viewed in relation to a
company's burden of fixed charges. Otherwise­
strong performance can be affected detrimen­
tally by aggressive debt financing, and the
opposite also is true. The two primary fixed­
charge coverage ratios are: .
• STANDARD & POOR'S
- RATING METHODOLOGY • Corporate Ratings Criteria 23
/ )
1( ") , ..
• STANDARD s PODR'S
• Earnings before interest and taxes (EBIT)
coverage of interest; and
• Earnings before interest and taxes and rent
(EBITR) coverage of interest plus total rents.
If preferred stock is outstanding and materi-
al, coverage ratios are calculated both includ­
ing and excluding preferred dividends, to
reflect the company's discretion over paying
the dividend when under stress. Similarly, if
interest payments can be deferred (as in zero
coupon debt, income bonds, or intercompany
debt supporting subsidiary preferred stock)
other adjustments to the calculation help cap­
ture the firm's flexibility in making payments.
To reflect more accurately the ongoing earn­
ings power of the firm, reported profit figures
are adjusted. These adjustments remove the
effect of
• LIFO liquidations,
• Foreign-exchange gains and losses,
• Litigation reserves,
• Writedowns and other nonrecurring or extra­
ordinary gains and losses, and
• Unremitted equity earnings of a subsidiary.
Similarly, there are numerous analytical
adjustments to ·the interest amounts. Interest
that has been capitalized is added back. An ·
interest component is computed for debt­
equivalents such as operating leases and receiv­
able sales. Amounts may be subtracted to rec­
ognize the impact of borrowings in hyperinfla­
tionary environments or borrowings to sup­
port cash investments as part of a tax arbitrage
strategy. And interest associated with finance
operations is segregated in accordance with the
methodology spelled out on page 103.
Capital structure/leverage and asset protection
· Ratios employed by Standard & Poor's to
capture the degree of leverage used by a com­
pany include:
• Total debt/total debt+ equity;
• Total debt + off-balance-sheet liabilities/total
debt+ off-balance-sheet liabilities + equity; and
• Total debt/total debt + market value of
equity.
Traditional measures focusing on long-term
debt have lost much of their significance, since
companies rely increasingly on short-term bor­
rowings. It is now commonplace to find per­
manent layers of short-term debt, which
finance not only seasonal working capital but
also an ongoing portion of the asset base.
What is considered "debt" 'and "equity" for
the purpose of ratio calculation is not always
so simple. In the case of hybrid securities, the
analysis is based on their features-not the
accounting or the nomenclature (see discussion
of "equity credit" on page 89). Pension and
retiree health obligations are similar todebt in
many respects. Their treatment is explained on
page 105.
Indeed, not all subtleties and complexities
lend themselves· to ratio analysis. Original
issue discount debt, such as zero coupon debt,
is included at the accreted value. However,
since there is no sinking fund provision, the
debt increases with time-creating a moving
target. (The need; eventually, to refinance this
growing amount represents another risk.) In
the case of convertible debt, it is somewhat
presumptuous to predict whether and when
conversion will occur, making it difficult to
reflect the real risk profile in ratio form.
A company's asset mix is a critical determi­
nant of the appropriate leverage for a given
level of risk. Assets with stable cash flow or
.. market values. justify greater use of debt
financing than those with clouded marketabil­
ity. For example, grain or tobacco inventory
would be viewed positively, compared with
. apparel or electronics inventory; transporta­
tion equipment is viewed more favorably than
other equipment, given its suitability for use by
other companies.
Accordingly, if a firm operates different busi­
nesses, Standard & Poor's believes it is critical
to analyze each type of business and asset class
in its own right. While FASB and IAS now
require consolidation of nonhomogenous busi­
ness units, Standard & Poor's analyzes each
separately. This is the basis for Standard &
Poor's methodology for analyzing captive
finance companies (see page 102). Similarly, if
a company holds significant amounts of excess
cash or investments, ratios may be calculated
on a "net debt" basis. This approach is used in
the case of cash-rich pharmaceutical firms that
enjoy tax arbitrage opportunities with respect
to these cash holdings.
Asset valuation
Knowing the true values to assign a company's
assets is key to the analysis. Leverage as report­
ed in the financial statements is meaningless if
assets are materially undervalued or overvalued
relative to book value. Standard & Poors con­
siders the profitability of an asset as an appro-
24 RATING METHODOLOGY • Corporate Ratings Criteria ,_ · _
/ )
( )
f)
priate basis for determining its economic value.
Market values of a company's assets or
independent asset appraisals can offer addition­
al insights. However, there are shortcomings in
these methods of valuation (just as there are with
historical cost accounting) that prevent reliance
on any single measure. Similarly, ratios using the
market value of a company's equity in calcula­
tions of leverage are given limited weight as ana­
lytical tools. The stock market emphasizes
growth prospects and has a short time horizon;
it is influenced by changes in alternative invest­
ment opportunities and can be very volatile. A
company's ability to service its debt is not affect­
ed directly by such factors.
The analytical challenge of which values to
use is especially evident in the case of merged
and acquired companies. Accounting stan­
dards allow the acquired company's assets and
equity to be written up to reflect the acquisi­
tion price, but the revalued assets have the
same earning power as before; they cannot
support more debt just because a different
number is used to record their value! Right
after the transaction, the analysis can take
these factors into account, but down the road
the picture becomes muddied. Standard &
Poor's attempts to normalize for purchase
accounting, bur the ability to relate to pre­
acquisition financial statements and to make
comparisons with peer companies is limited.
Presence of a material goodwill account
indicates the impact of acquisitions and pur­
chase accounting on a firm's equity base.
Intangible assets are no less "valuable" than
tangible ones. But comparisons are still dis­
torted, since other companies cannot record
their own valuable business intangibles, those
that have been developed instead of acquired.
This alone requires some analytical adjustment
when measuring leverage. In addition, analysts
are entitled to be more skeptical about earning
prospects that rely on turnaround strategies or
"synergistic" mergers.
Off-balance-sheet financing
Off-balance-sheet items factored into the
leverage analysis include the following:
• Operating leases;
• Debt of joint ventures and unconsolidated
subsidiaries;
• Guarantees;
• Take-or-pay contracts and obligations under
throughput and deficiency agreements;
• Receivables that have been factored, trans­
ferred, or securitized, and
• Contingent liabilities, such as potential legal
judgments or lawsuit settlements.
Various methodologies are used to deter­
mine the proper adjustment value for each off­
balance-sheet item. In some cases, the adjust­
ment is straightforward. For example, the
amount of guaranteed debt can simply be
added to the guarantor's liabilities. Other
adjustments are more complex or less precise.
Nonrecourse debt of a joint venture may be
attributed to the parent companies, especially if
they have a strategic tie to the operation. The
analysis may burden one parent with a dispro­
portionate amount of the debt if that parent has
the greater strategic interest or operating con­
trol or its ability to service the joint-venture debt
is greater. Other considerations that affect a
company's willingness to walk away from such
debt-and other nonrecourse debt-include
shared banking relationships and common -
country location. In some instances the debt
may be so large in relation to the owner's invest­
ment that the incentives-to support the debt are
minimized. In virtually all cases, though, the
parent would likely invest additional amounts
before deciding - to abandon the venture.
Accordingly, adjustments would be made to
reflect the owner's current and projected invest­
ment, even if the venture's debt were not added
to the parent's balance sheet. (See page 98.)
In the case of contingencies, estimates are
developed. Insurance coverage is estimated,
and a present value is calculated if the pay­
ments will stretch over many years. The result­
ing amount is viewed as a corporate liability
from an analytical perspective.
The sale or securitization of accounts
receivable represents a form of off-balance­
sheet financing. If used to supplant other
debt, the impact on c;edit quality is neutral.
(There can be some. incremental benefit to the
extent that the company has expanded access
to capital, and this financing may be lower in
cost. However, there may also be an offset in
the higher cost of unsecured financing.) For
ratio calculations, Standard & Poor's adds
back the amount of receivables and a like
amount of debt. This eliminates the distort­
ing, cosmetic effect of utilizing an off-bal­
ance-sheet technique and allows better corn­
parison with other firms that have chosen
other avenues of financing. Similarly, if a firm
• STANDARD & POOR'S
· RATING MEff!ODOLOGY • Corporate Ratings Criteria 25
··-� )
{
' )
I )
• STANDARD s PDDR'S
uses proceeds from receivables sales to invest
in riskier assets=-and not to reduce other
debt-the adjustment will reveal an increase
in financial risk.
The debt-equivalent value of operating leas­
es is determined by · calculating the present
value of minimum operating lease obligations
as reported in the annual report's footnotes.
The lease amount beyond five years is assumed
to mature at a rate approximating the· mini­
mum payment due in year five.
The variety of lease types may require the
analyst to obtain additional information or
use estimates to evaluate lease obligations.
This is needed whenever lease terms are short­
er than the assets' expected economic lives.
For example, retailers report only the first
period of a lease written with an initial period
and several renewal options over a long term.
Another limitation develops when a portion of
the lease payment is contingent, e.g., a per­
centage of sales, as is often the case in the
retailing ·industry.
(Traditionally, operating leases were recog­
nized by the "factor method": annual lease
expense is multiplied by a factor that reflects
the average life of the company's leased assets.
This method is an attempt to, capitalize the
asset, rather than just the use of the asset for
the lease period. However, the method can
overstate the asset to be capitalized· by failing
to recognize asset use over the course of the
lease. It also is too arbitrary to be realistic.)
Preferred stock
Preferred stocks can qualify for treatment as
equity or be viewed as debt--or something
between debt and equity--depending on their
features and the circumstances. The degree of
equity credit for various preferreds is discussed
on page 95. Preferred stocks that have a matu­
rity receive diminishing equity credit as they
progress toward maturity.
A preferred that the analyst believes will be
eventually refinanced with debt is viewed as a
debt-equivalent, not equity, all along. Auction
preferreds, for example, are "perpetual" on
the surface. However, they often represent
merely a temporary debt alternative for com­
panies that are not current taxpayers-until
they once again can benefit from tax
deductibility of interest expense. Moreover; the
holders of these preferreds would pressure for
a redemption in the event of a failed auction or
even a rating downgrade.
Redeemable preferred stock issues may also
be refinanced with debt once an issuer
becomes a taxpayer. Preferreds that can be
exchanged for debt at the company's option
also may be viewed as debt in anticipation of
the exchange. However, the analysis would
also take into account any offsetting positives
associated with the change in tax status. Often
the trigger prompting an exchange or redemp­
tion would be improved profitability. Then,
the added debt in the capital structure would
not necessarily imply lower credit quality. The
implications are different for many issuers that
do not pay taxes for various other reasons,
including availability of tax-loss carry-for­
wards or foreign tax credits. For them, a
change in taxpaying status is not associated
with better profitability, while the incentive to
turn the preferred into debt is identical.
In the same vein, sinking fund preferreds are
less equity-like. The sinking fund requirements
themselves are of a. fixed; debt-like nature.
Moreover, they are usually met through debt
issuance, which results in the sinking fund pre­
ferred being just the .precursor of debt. It
would be misleading to view sinking fund pre­
ferreds, particularly that portion coming due
in the near to intermediate term, as equity,
only to have each payment convert to debt on
the sinking fund payment date. Accordingly,
Standard & Poor's views at least the portion of
the issuer's sinking fund preferreds due within
the next five years as debt. ·
Cash flow adequacy
Interest or principal payments cannot be ser­
'viced out of earnings, which is just an account­
ing concept; payment has to be made with
cash. Although there is usually a strong rela­
tionship between cash flow and profitability,
many transactions and accounting entries
affect one and not the other. Analysis of cash
flow patterns can reveal a level of debt-servic­
ing capability that is either stronger or weaker
than might be apparent from earnings.
Cash flow analysis is the single most criti­
cal aspect of all credit rating decisions. It
takes on added importance for speculative­
grade issuers. While companies with invest­
ment-grade ratings generally have ready
access to external cash to cover temporary
shortfalls, junk-bond issuers lack this degree
of flexibility and have fewer alternatives to
internally generated cash for servicing debt.
26 RATING METHODOLOGY • Corporate Ratings Criteria . . . . . : .
,, )
Cash flow ratios
Ratios show the relationship of cash flow to
debt and debt service, and also to the firm's
needs. Since there are calls on cash other than
repaying debt, it is important to know the
extent to which those requirements will allow
cash to be used for debt service or, alternative­
ly, lead to greater need for borrowing.
Some of the specific ratios considered are:
• Funds from operations/total debt (adjusted
for off-balance-sheet liabilities); '
• EBITDNinterest;
• Free operating cash flow + interest/interest;
• Free operating cash flow + interest/interest
+ annual principal repayment obligation
(debt service coverage);
• Total debt/discretionary cash flow (debt
payback period);
• Funds from operations/capital spending
requirements, and
• Capital expenditures/capital maintenance.
Where long-term · viability is more assured ·
(i.e., higher in the rating spectrum) there can be
greater emphasis on the level of funds from
operations and its relation to total debt burden.
These measures clearly differentiate between
levels of protection over time. Focusing on debt
service coverage and free cash flow becomes
more critical in the analysis of a weaker com­
pany. Speculative-grade issuers typically face
near-term vulnerabilities, which are better mea­
sured by free cash flow ratios.
Interpretation of these ratios is not always
simple; higher values can sometimes indicate
problems rather than strength. A company
serving a low-growth or declining market may
exhibit relatively strong free cash flow, owing
to minimal fixed and working capital needs.
Growth companies, in comparison, often
exhibit thin or even negative free cash flow
because investment is needed to support
growth. For the low-growth company, credit
• STANDARD & POOR'S
,( (.-. ) '·
. RATING METI-IDDDLOGY • Corporate Ratings Criteria 27
,{)
/)
• STANDARD & POOR'S
analysis weighs the positives of strong current
cash flow against the danger that this high
level of protection might not be sustainable.
For the high-growth company, the problem is
just the opposite: weighing the negatives of a
current cash deficit against prospects of
enhanced protection once current investment
begins yielding cash benefits. There is no sim­
ple correlation between creditworthiness and
the level of current cash flow.
The need for capital
Analysis of cash flow in relation to capital
requirements begins with an examination of a
company's capital needs, including both work­
ing and fixed capital. While this analysis is per­
formed for all debt issuers, it is critically
important for fixed capital-intensive firms and
growth companies. Companies seeking work­
ing capital often are able to finance a signifi­
cant portion of current assets through trade
credit. However, rapidly growing companies
typically experience a build-up in receivables
and inventories that cannot be financed inter­
nally or through trade credit.
Improved working-capital management
techniques have greatly reduced the investment
that might otherwise have been required. This
makes it difficult to base expectations on
extrapolating recent trends. In any event,
improved turnover experience would not be a
reason to project continuation of such a trend
to yet better levels.
Because Standard & Poor's evaluates com­
panies as ongoing enterprises, the analysis
assumes that firms will provide funds continu­
ally to maintain capital investments as mod­
ern, efficient assets. Cash flow adequacy is
viewed from the standpoint of a company's
ability to finance capital-maintenance require­
ments internally, as well as its ability to finance
capital additions. It is difficult to quantify the
requirements for capital maintenance unless
data are provided by the company.
An important dimension of cash flow
adequacy is the extent of a company's flexibil­
ity to alter the timing of its capital require­
ments. Expansions are typically discretionary.
However, large plants with long lead times
usually involve, somewhere along the way, a
commitment to complete the project.
There are companies with cash flow
adequate to the needs of the existing business,
but that are known to be acquisition-minded.
Their choice of acquisition as an avenue- for
growth means that this activity must also be
anticipated in the credit analysis.
Management's stated acquisition goals and
past takeover bids, including those that were
not consummated, provide a basis for judging
prospects for future acquisitions.
Financial flexibility
The previous assessment of financial factors
(profitability, capital structure, cash flow) are
combined to arrive at an overall view of finan­
cial health. In addition, sundry considerations
that do not fit in other categories are exam­
ined, including serious legal problems, lack of
insurance coverage, or restrictive covenants in
loan agreements that place the firm at the
mercy of its bankers. -
An analytical task covered at this point is the
evaluation of a company's options under
stress. The potential impact of various contin­
gencies is considered, along with a firm's con­
tingency plans. Access to various capital mar­
kets, affiliations with other entities, and ability
to sell assets are important factors.
Flexibility can be jeopardized when a firm is
overly reliant on bank borrowings or commer­
cial paper. Reliance on commercial paper with­
out adequate backup facilities is a big negative.
An unusually short maturity schedule for long­
term debt and limited-life preferred stock also
is a negative. Access to various capital markets
can then become an important factor. In gen­
eral, a company's experience with different
financial instruments and capital markets gives
management alternatives if conditions in a par­
ticular financial market suddenly sour.
Company size and its financing needs can play
a role in whether it can raise funds in the pub­
lic debt markets. Similarly, a firm's role in the
national economy-and this is particularly
true outside the U.S.--can enhance its access to
bank and public funds.
Access to the common stock market may be
primarily a question of management's willing­
ness to accept dilution of earnings per share,
rather than a question of whether funds are
available. (However, in some countries,
including Japan and Germany, equity markets
may not be so accessible.) When a new com­
mon stock offering is projected as part of a
company's financing plan, Standard & Poor's
28 RATING METHODOLOGI' • Corporate Ratings Criteria . . . . . ,. . . ,· · .
,- )
(
. )
tries to measure management's commitment to
this plan, and its sensitivity to changes in
share price.
As going. concerns, companies should not be
expected to repay debt by liquidating opera­
tions. Clearly, there is little benefit in selling
natural resource properties or manufacturing
facilities if these must be replaced in a few
years. Nonetheless, a company's ability to gen­
erate cash through asset disposals enhances its
financial flexibility.
Pension obligations, environmental liabili­
ties, and serious legal problems restrict flexi­
bility, apart from the obligations' direct finan-
. cial implications. A large pension burden can
hinder a company's ability to sell .assets,
· because potential buyers will be reluctant to
assume the liability, or to close excess, ineffi­
cient, and costly manufacturing facilities,
which might require the immediate recognition
of future pension obligations and result in a
charge to equity.
When there is a major lawsuit against the
firm, suppliers or customers may be reluctant
to continue doing business, and the company's
access to capital may also be impaired, at least
temporarily.
• STANDARD & POOR'S
: ( )
. ' RATING METHODOLOGY •. ·corporate Ratings Criteria 29
• STANDARD & PDDR'S
Regulation
\')
:{ )
The regulatory relationship can be a benign
one--or it can be adversarial. It affects virtual­
ly all corporates to one extent or another, and
is obviously critical in the case of utilities­
where it is a factor in all assessments of
business risk.
Evaluation of governmental involvement/
regulation encompasses legislative, administra­
tive, and judicial processes at the local and
national levels. This evaluation considers the
current environment-and the potential for
change. For example, a system that requires
legislative action to modify regulations is more
stable-and is viewed more positively-than
one that is subject to ministerial whim, as
exists in some Asian countries. Similarly, a reg­
ulatory framework enacted with regard to a
recently privatized system is more prone to be
revisited by government regulators.
The impact of regulation runs the gamut­
from regulation's providing of direct, tangible
support to its being. a hindrance. For a utility
business profile to be considered "well above
average" usually requires strong evidence of
government support or regulatory sheltering.
Support can be explicit-such as in Canada and
in other locales where a government guarantees
a utility's obligations. Or it can take the form of
strong and obvious implicit support, such as in
Greece.
Japanese investor-owned utilities have his­
torically been insulated from competition and
been protected by a very cooperative, coordi­
nated, rate-setting process. Other governments
may facilitate the utility's access to external
sources of capital, especially where the utility
is a direct instrument of government policy. In
the U.S., municipally owned utilities have also
been sheltered-at least they have in the past.
(Deregulation has unleashed competitive pres­
sures, but politics makes it difficult to make
adjustments that would affect either residential
rates or the city's own general fund.)
Short of such outright support, regulatory
treatment should be transparent and. timely
and should allow for consistent performance­
if it is to be viewed positively in the ratings
context.
Aspects of Regulation.
The role of the regulator is evident in:
• Rate setting,
• Operational oversight, and
• Financial oversight.
Setting rates is obviously important. To sup­
port credit quality, a utility must be assured of
earning a fair-and consistent-rate of return.
Different regulators can be more-or less­
generous with respect to the levels allowed -
or with respect to which assets are included in
the "returns" calculations. They can choose to
overlook-or to penalize-a utility for any
service shortcomings in service.
Operational regulation pertains to technolo­
gy, to environmental protection considera­
tions, safety rules, facility siting, and service
levels-and the freedom a company has to pur­
sue initiatives involving each of these areas.
Regulatory inflexibility can hamstring the util­
ity in its attempt to be competitive. For exam­
ple, if a utility faces new competition for its
large users, it may want to lower the. rates it
charges its commercial/industrial customers­
and make up its lost revenues by raising the
rates at the expense of residential customers.
The regulators may object and insist that resi­
dential rates continue to be subsidized=-crear­
ing a problem for the company.
Financial oversight refers to the regulator's
ability to maintain-and interest in maintain­
ing-a particular level of credit quality at the
utility. This is a separate consideration from
how benign the relationship might be in other
respects. If the situation warrants it, the rating
evaluation may rely on the regulator to
enforce-or at least encourage-a certain level
of financial strength at the utility. In this
respect, the regulator's role can take different
forms:
, 44 RATING MErHDDOLOGY • . Corporate Ratings Criteria . ·
r )
{.
; ) ·•.
I_)
• Approval is the most basic element. That a
utility requires approval to sell debt or pay
dividends creates an obstacle with respect to
its. fiscal aggressiveness.
• Influence refers to the economic incentives
that a regulator can provide to maintain a
certain level of credit quality. In jurisdictions
with rate-of-return regulation, regulators can
effectively mandate their view of an "appro­
priate" balance sheet by specifying return on
equity. Even when regulation is not classic
"rate base rate of return"-such as with
price cap or banded rate of return-regula­
tors may still desire a minimum level of cred­
it quality. In past Standard & Poor's surveys,
regulators articulated a concern about credit
quality's falling below 'N. Now, however,
attitudes are changing about regulating with
an eye toward credit quality.
• Regulatory mandate-the explicit demand
of a specified level of credit quality-is rare
today. In the past, some regulators would
impose penalties if a company's credit rating
dropped below the desired minimum.
As competition intensifies, regulators have
focused on service quality, and are less con­
cerned with credit quality. (After all, even a
bankrupt utility can continue to deliver ser­
vices!) Of course, not all regulatory jurisdic­
tions will follow the trend in identical fashion.
In the U.S., there are currently few instances
where _ratings rely heavily on regulators to
maintain credit quality; outside the U.S., how­
ever, there is a greater basis for depending on
regulators in this regard.
Regulatory Separation
Utilities are often owned by companies that
own other, riskier businesses or that that are
saddled with an additional layer of debt at the
parent level. Corporate rating criteria would
rarely view the default risk of an unregulated
subsidiary as being substantially different from
the credit quality of the consolidated economic.
entity (which would fully take into account
parent-company obligations). Regulated sub­
sidiaries can be treated as exceptions to this
rule-if the specific regulators involved are
expected to create barriers that insulate a sub­
sidiary from its parent.
In those cases that benefit· from regulatory
insulation, the rating on the subsidiary is more
reflective of its "stand-alone" credit profile.
(As a corollary, the parent-company rating is
negatively affected-since it is deprived of full
access to the subsidiary's assets and cash flow.)
With utilities' competition and consolidation
increasing and with shifts to new forms of reg­
ulation that are coming into existence, howev­
er, there is less reason to expect such regulato­
ry intervention. Just as there is less and less
basis to rely generally on regulators to main­
tain a level of credit quality-as discussed
above-so, too, there is less basis for regulato­
ry separation.
Rating policy has evolved in tandem with
these trends. The bar has been raised with
respect to factoring in expectations that regu­
lators would interfere with transactions that
would impair credit quality. To achieve a rat­
ing differential for the subsidiary requires a
higher standard of evidence that such interven­
tion would be forthcoming. (See sidebar
"Telecommunications Ratings Policy
Revised.")
In the past, the mere existence of regulation
was given considerable weight when determin­
ing the adequacy of protection for the sub­
sidiary's assets and cash flow. Now Standard
& Poor's analyzes regulatory insulation on a
case-by-case basis. The key is a regulator's
demonstrated willingness to protect creditwor­
thiness. Some examples of U.S. state jurisdic­
tions where protective measures have been
implemented are Oregon, New York, Virginia,
and California.
The Oregon Public Utilities Commission
approved the Enron Corp./Portland General
Electric Co. merger, based on various restric­
tive conditions. Likewise, the New York Public
Service Commission, in approving the Keyspan
Energy/Long Island Lighting Co. merger,
required a cap on leverage, a prohibition of
certain types of loans, and a limit on holding­
company investment in nonutility operations.
Outside the U.S., regulators in many coun­
tries still play a more significant role in the
finances of utilities-making the case for reg­
ulatory separation in those countries.
Moreover, some recent transactions-notably
in the U.K.-have employed (or at least have
considered employing) structural insulation
techniques to achieve "ring-fencing" for the
acquired utility subsidiary. In these instances,
setting up independent directors, minority
ownership stakes, and so forth combine with
regulatory oversight to insulate the subsidiary
and achieve higher ratings.
• STANDARD & POOR'S
RATING METHODOLOGY • Corporate Ratings Criteria 45
( )
f)
a STANDARD & POOR'.S
46 RATING METHODOLOGY • Corporate Ratings Criteria .
,.,-, )
()
• STANDARD & POOR'S
. · RATING METHODOLOGY • Corporate Ratings Criteria 47
• STANDARD & POOR'S
Ratio Medians
()
:r )
Presented on the next pages are key .ratio
medians for U.S. corporates by rating category.
Definitions of- the ratios appear on page 55.
The ratio medians are purely statistical, and
are not inteded as a guide to achieving a given
rating level. Ratio Guidelines are presented on
page 56. They more faithfully represent the
role of ratios in the ratings process.
Ratios are helpful in broadly defining a com­
pany's position relative to rating categories. They
are not intended to be hurdles or prerequisites
that should be achieved to attain a specific debt
rating.
Caution should be exercised when using the
ratio medians for comparisons with specific com­
pany or industry data because of major differ­
ences in method of ratio computation, impor­
tance of industry or business risk, and impact of
mergers and acquisitions. Since ratings are
designed to be valid over the entire business cycle,
ratios of a particular firm at any point in the cycle
may not appear to be in line with its assigned
debt ratings. Particular caution should be used
when making cross-border comparisons, due to
differences in accounting principles, financial
practices, and business environments.
Financial ratio medians are adjusted for
unusual items and to capitalize operating leases.
Company data are adjusted for the following:
• Nonrecurring gains or losses are eliminat­
ed from earnings. This includes gains on asset
sales, significant transitory income items,
unusual losses, losses on asset sales, and
charges due to asset writedowns, plant shut­
downs, and retirement programs. These
adjustments chiefly affect interest coverage,
return, and operating margin ratios.
• Unusual cash flow items similar in origin
to the nonrecurring gains or losses are also
reversed.
• The operating lease adjustment is performed
for all companies. Companies that buy all plant
and equipment are put on a more comparable
basis with firms that lease part or all of their oper­
ating assets. The lease adjustment impacts all
ratios.
Still, several adjustments commonly made by
Standard & Poor's analyses are not incorporat­
ed in the adjusted medians. Omitted are alter­
ations reflecting net debt and the captive
finance company methodology. The net debt
adjustment would affect median ratios largely
for the 'A.AN rating category, which is almost
entirely composed of cash-rich pharmaceutical
companies. (If the net debt adjustment were
made, interest coverage, cash flow to debt,' and
debt ratios for the 'AAA' category would not be
meaningful, since many of these firms have no
net debt.) The captive finance adjustment has a
greater effect, mainly on automobile, depart­
ment store, and some capital goods companies.
The adjusted ratio median universe includes
about 500 companies. The data exclude com­
panies, such as the auto manufacturers and
cable television firms, that, even with adjust­
ments, have financial ratios that are not repre­
sentative of those used in the rating process.
The medians themselves are affected by
economic and environmental factors, as well
as mergers and acquisitions. The universe of
rated companies is constantly changing, and in
certain rating categories, adding or deleting a
few companies can materially change the
financial ratio medians.
Strengths and weaknesses in different areas
have to be balanced and qualitative factors
evaluated. There are many nonnumeric distin­
guishing characteristics that determine a
company's creditworthiness.
RATINGS AND RATIOS • Corporate Ratings Criteria 53
• STANDARD & POOR'S ,# )
ADJUSTED KEY INDUSTRIAL FINANCIAL RATIOS
U.S. Industrial long term debt
Three-year (1998 to 2000) medians AAA AA A BBB BB B CCC
EBIT int. cov. Ix) 21.4 10.1 6.1 3.7 2.1 0.8 0.1
EBITDA int. cov. Ix) 26.5 12.9 9.1 5.8 3.4 1.8 1.3 Free oper. cash flow/total debt(%) 84.2 25.2 15.0 8.5 2.6 (3.2) 112 9)
FFO/total debt 1%) 128.8 55.4 43.2 30.8 18.8 7.8 1.6 Return on capital (%) 34.9 21.7 19.4 13.6 11.6 6.6 1.0
Operating income/sales(%) 27.0 221 18.6 15.4 15.9 11.9 11.9
long-term debt/capital(%) 13.3 28.2 33.9 42.5 57.2 69.7 68.8
Total debt/capital (incl. STD)(%) 22.9 37.7 42.5 48.2 62.6 74.8 87.7
Companies 8 29 136 218 273 281 22
Data for earlier years and in greater detail are available by subscribing to Standard & Poor's CreditStats.
KEY UTILITY FINANCIAL RATIOS
U.S. Electric Utility long-term debt For 12 months ended Sept. 2001 AA A BBB BB
EBIT interest coverage (x) 4.2 3.4 2.8 1.9
Preferred dividend coverage (x) 4.1 . 3.3 2.7 1.8
Return on equity(%) 12.3 12.5 10.9 11.4
Common dividend payout 1%) 92.3 81.7 81.6 33.9
Short term debt/capital (%) 8.2 10.4 11.2 6.2
Total debt/capital (%) 51.7 55.92 58.78 73.3
Preferred stock/capital 1%) 2.3 3.0 2.7 4.5
( Common stock/capital(%) 50.9 43.2 39.6 26.1
Funds from operations interest coverage 5.1 4.0 3.5 2.4 ) Funds from operations/total debt(%) 35.5 23.76 20.42 12.47
Net cash flow/capital expenditures(%) 97.S 74.8 80.6 65.2
EBIT-Earnings before interest and taxes.
EBITDA-Earnings before interest, taxes, depreciation, and amortization.
( . )
54 RATINGS.AND RATIOS • Corporate Ratings' Criteria .
( ) • STANDARD & POOR'S
Ratio Guidelines
. ()
I )
Risk-adjusted ratio guidelines depict the role
that financial ratios play in Standard & Poor's
rating process, since financial ratios are viewed
in the context of a firm's business risk. A com­
pany with a stronger competitive position,
more favorable business prospects, and more
predictable cash flows can afford to undertake
added financial risk while maintaining the
same credit rating.
The guidelines displayed in the matrices
make explicit the · linkage between financial
ratios and levels of business risk. For example,
consider a U.S. industrial-which includes
manufacturing, service, and transportation
sectors-with an average business risk profile .
Cash flow coverage of 60% would indicate an
'A' rating. If a company were below average, it
would need about 85% cash flow coverage to
qualify for the same rating. Similarly, for the
'A' category, a firm that has an above-average
business risk profile could tolerate about 40%
leverage and an average firm only 30%. The
matrices also show that a company with only
an average business position could not aspire
to an 'AAA' rating, even if its financial ratios
were extremely conservative.
Ratio medians that Standard & Poor's has
been publishing for more than a decade are
merely statistical composites. They are not
rating benchmarks, precisely because they
gloss over the critical link between a compa­
ny's financial risk and its business risk.
Medians are based on historical performance,
while Standard & Poor's risk-adjusted guide­
lines refer to expected future performance.
Guidelines are not meant to be precise.
Rather, they are intended to convey ranges that
characterize levels of credit quality as repre­
sented by the rating categories. Obviously,
strengths evidenced in one financial measure
can offset, or balance, relative weakness in
another.
56 .RATINGS AND RATIOS • Corporate Ratings Criteria . · . . . ·.
r )
• STANDARD & POOR'S
U.S. INDUSTRIALS
Manufacturing, Service and Transportation Companies
Funds from Operations/Total Debt Guidelines (%) -Rating category--:
Company business risk profile AAA AA A· BBB · BB
Well above average business position 80 60 40 25 10
Above average 150 80 50 30 15
Average 105 60 35 20
Below average 85 40 25
Well below average 65 45
Total Debt/Capitalization Guidelines (%)
Company business risk profile AAA
Well above average business position 30
Above average 20
Average
Below average
Well below average
-Rating category-
AA A BBB
40 50 60
25 40 50
15 30 40
25 35
25
BB
70
60
55
45
35
· RATINGS AND RATIOS • Corporate Ratings Criteria 57
• STANDARD & POOR'S
)
U.S. UTILITIES
Funds from Operations{f otal Debt Guidelines (%)
-Rating category-
Company business
risk profile AAA AA A BBB BB B
Well-above-average 1 23 18 15 10 5
business position 2 29 23 19 14 9
Above average 3 35 29 23. 17 12 7
4 40 34 28 21 15 9
Average 5 46 37 30 24 18 11
6 53 43 35 27 19 13
Below average 7 63 52 42 31 21 14
8 75 61 49 35 23 15
Well below average 9 57 41 27 17
10 69 50 34 22
Total Debt/Capitalization (%)
-Rating category-
Company business
risk profile AAA AA A BBB BB B
Well-above-average 1 47 53 58 64 70
() business position 2 43 49 54 60 66
Above average 3 39 45 50 57 64 70
4 35 41 46 53 61 68
Average 5 33 39 44 51 59 67
6 30 36 43 50 57 65
Below average 7 27 .34 41 49 56 64
8 23 31 39 47 55 62
Well below average 9 35 43 51 58
10 29 37 43 50
58 , RATINGS AND RATIOS • Corporate Ratings Criteria . ·. , ,
• STANDARD &POOH'S
Equity- Credit: What Is It and How Do You Get It?
,f)
Standard & Poor's is regularly asked "Will
· the issuer of this hybrid security receive 'equi­
ty credit'?" In other words, has the issuer's
credit quality improved and has its debt capac­
ity expanded, as is ordinarily the case when
equity is added to the balance sheet?
The question of "equity credit" is not a
yes/no proposition. The notion of "partial
credit" is very appropriate. When it comes to
calculating ratios, a hybrid security may be
viewed as debt in some respects and as equity
in other respects.
What is equity?
What constitutes equity in the first place?
Traditional common stock-the paradigm
equity-sets the standard. But equity is not a
monolithic concept; rather, it has several
dimensions. Standard & Poor's looks for the
following positive characteristics in equity:
• It requires no ongoing payments that could
lead to default;
• It has no maturity or repayment requirement;
• It provides a cushion for creditors in the case
of a bankruptcy; and
• It is expected to remain as a permanent fea­
ture of the enterprise's capital structure.
If equity has these distinct defining attributes,
it should be apparent that a specific security can
have a mixed impact. For example, hybrid secu­
rities, by their very nature, will be equity-like in
some respects and debt-like in others. Standard
& Poor's analyzes the specific features of any
financing to determine the extent of financial
risks and benefits that apply to an issuer.
In any event; the security's perceived eco­
nomic impact is relevant, its nomenclature is
not. A transaction that is labeled debt for
accounting, tax, or regulatory purposes may
still be viewed as equity for rating purposes,
and vice versa.
Attributes of equity
Equity provides value for the enterprise.
When a company sells equity, it receives
money to invest in its business. It is able to do
research, buy equipment, or support inventory
and receivables growth-all to generate cash
· flow and keep the enterprise healthy. If issuing
a security allows the company to avoid a cash
outflow that would have been incurred in the
course of business, the beneficial impact is
identical. When shares are issued in lieu of
employee benefits that otherwise would be
paid in cash, for example, as part of an ESOP,
this aspect of equity is fulfilled. However, if
shares are issued as a new-perhaps .unneces­
sary-form of compensation, the benefit is
dubious: Has the enterprise received anything
of value? .
Soft capital, a commitment from a nonaffili­
ated provider of capital to inject equity capital
at a later date, offers another example of a
transaction that falls short in terms of this
basic attribute of equity. However valuable it
may be to have a call on funds in the future,
the business does not have the funds now.
Also, by making the funds available at the
company's discretion, there is the risk that a
delay in.the firm's exercising of its option may
lead to a situation of "too little, too late."
Equity requires no ongoing payments that
could lead to default.
Equity pays dividends, but has no fixed
requirements that could lead to default and
bankruptcy if these dividends are not paid.
Moreover, there are no fixed charges that
might, over time, drain the company of funds
that may be needed to bolster operations. A
company is under pressure to pay both pre­
ferred and common dividends, bur ultimately
retains the discretion to eliminate or defer pay­
ment when it faces a shortage of funds. Of
course, a firm's reluctance to 'pass on a pre­
ferred dividend is not identical to its reticence
to altering its common payout. Accordingly,
there is a difference in "equity credit" afforded
to common equity relative to preferred equity.
The longer a company can defer dividends
the better. An open-ended ability to defer until
, _ CRITERIA TOPICS • Corporate Ratings Criteria 91
, ' j , ( T • I " > ' �
• STANDARD & PDOR'S
financial health is restored is best. As a practi­
cal matter, the ability to defer dividend pay·
ments for five or six years is most critical in
helping to prevent default. If the company can­
not restore financial health in five years, it
probably never will. The ability to defer pay­
ments for shorter periods is also valuable, but
equity content diminishes quickly as con­
straints on the company's discretion increase.
Debt instruments can be devised to provide
flexibility with regard to debt service.
Deferrable payment debt issued directly to
investors-that is, without a trust structure­
legally affords the company flexibility regard­
ing the timing of payments that is analogous to
trust preferreds. Yet, by being identified as a
"debt security," the company's practical dis­
cretion to defer payments may be constrained,
which diminishes the equity credit attributed
to such hybrids vs. deferrable payment
preferred stock.
Income bonds, i.e., where the payment of
interest is contingent on achieving a certain
level of earnings, were designed with this in
mind. However, to the extent that cash flow
diverges from earnings measures, income
bonds tend to be imperfect instruments. A
recent variation on the theme is the cash flow
bond, which pegs the level of interest payments
to the firm's cash flow. The equity content of
such instruments is a function of the threshold
levels used to determine when payments are
diminished. If the level of cash flow that trig­
gers payment curtailment is relatively low, that
instrument is not supportive of high ratings.
Another straightforward concept entails ·
linking interest payments to the company's
dividend, creating an equity-mimicking bond.
A number of international financial institu­
tions issued such bonds in the late 1980s.
Equity has no maturity or repayment
requirement.
Obviously, the ability to retain the funds in
perpetuity offers the firm the greatest flexibili­
ty. Extremely long maturities are next best.
Accordingly, 100-year bonds possess an equity
feature in this respect (and only in this one
respect) until they get much nearer their matu­
rity. To illustrate the point, consider how
much, or how little, the company would have
to set aside today to defease or handle the
eventual maturity. However, cross-default
provisions would lead to these bonds being
accelerated.
Preferred equity often comes with a maturi­
ty, as a limited life or sinking fund preferred,
which would constitute a clear shortcoming in
terms of this aspect of equity. Limited credit
would be given for this type of preferred, even
if the security had a 10-year life or more. Even
if it could be assumed that the issue is success­
fully refinanced at maturity, the potential for
using debt in the refinancing would be a con­
cern (see following discussion on permanence
of equity).
Equity provides a cushion for creditors in
the event of default.
What happens in bankruptcy also pertains
to the risk of default, albeit indireccly.
Companies can continue to raise debt capital
only as long as the providers feel secure about
the ultimate recovery of their loans in the event
of a default. Debtholders' claims have priority
in bankruptcy, while equity holders are rele­
gated· to a residual claim on the assets. The
protective cushion created by such equity sub­
ordination allows the company access to capi­
tal, enabling it to stave off a default in the first
place.
Flexible payment bonds, of course, would
not qualify on this aspect of equity. Similarly,
convertible debt-even mandatorily convert­
ible debt-would not be much help in this
regard if the issuer were vulnerable to default
during the interim period prior to conversion.
Equity is expected to remain a permanent
feature of the enterprise's capital structure.
At any time, a company can choose either to
repurchase equity or to issue additional shares.
However, some securities are more prone to
being temporary than others. Standard &
Poor's analysis tries to be pragmatic, looking
for insights as to what may ultimately occur.
Preferred stock, in particular, is likely . to
have provisions for redemption or exchange, if
not an outright stated maturity. Auction or
remarketed preferred stock is designed for easy
redemption. Even though the terms of this type
of preferred provide for its being perpetual,
failed auctions or lowered ratings typically
prompt the issuer to repurchase the shares.
Standard & Poor's discussions with man­
agement regarding the firm's financial policies
provide insights into the company's plans for
the securities: whether a company will call or
repurchase an issue and what is likely to
replace it. Another important consideration is
the issuer's tax-paying posture. It is difficult
. . . 92 CRITERIA TOPICS • Corporate Ratings Criteria . .
)
( )
I )
for a non-taxpaying issuer to make the case
that the firm will continue to finance with
non-tax-deductible preferred stock once it
becomes a taxpayer and can lower its cost of
capital by replacing the preferred with debt.
Other clues can come from the nature of
investors in the issue (e.g., money market vs.
long-term fixed-income investors) and the
mode of financing that is typical of the com­
pany's peer group. For example, utilities tradi­
tionally finance with preferred stock, and
industry regulators are comfortable with it.
Therefore, the usual concern that limited-life
preferred stock will be refinanced with debt
does not generally apply in the case of utilities.
In the case of so-called "tax-deductible" pre·
ferreds, the issues are different. The risk here
is that their favorable tax status is overturned.
Especially with regard to new hybrids, that
risk may be substantial. This concern can be
mitigated by provisions in the transaction to
convert into another equity-like security in the
event of loss of tax-deductibility.
Rating methodology
While many· people focus on the leverage
ratio in thinking about equity credit, a compa­
ny's leverage is just one of many components
of a rating assessment. (In fact, cash flow ade­
quacy and financial flexibility have long sur­
passed balance-sheet considerations as impor­
tant rating factors.) Standard & Poor's
methodology of breaking all the analyses into
categories allows each of the several attributes
of hybrid securities to be considered separate·
ly and in the appropriate analytical category.
The aspect of ongoing payments is considered
in fixed-charge coverage and cash-flow adequa­
cy; equity cushion in leverage and asset protec­
tion; need to refinance upon maturity in finan­
cial flexibility; and potential for conversion in
financial policy. The before-tax and after-tax
cost of paying for the funds is also a component
of both earnings and cash flow analysis.
There is no uniform weighting of the analyt­
ical categories to arrive at a rating conclusion.
Accordingly, the relative importance of each
equity attribute can vary. The critical issues for
companies can differ. Moreover, the factors
that delineate an 'A' from an 'AA' rating tend
to differ from those factors that determine
whether a rating will be 'B' or 'BB'. Similarly,
the impact of a hybrid may depend on the spe·
cific needs of a given issuer or its place in the.
rating spectrum. Aspects affecting near-term
flexibility are usually of prime importance for
low-rated, troubled credits, while long-term
considerations are more germane when an
already highly rated credit is being reviewed
for an upgrade. To illustrate the point:
Replacing 20-year debt with 100-year debt is a
nonevent for a company that faces insolvency
in the next several quarters.
Standard & Poor's does not simply "hair­
cut" hybrid securities or assign fractional
"equity credit" when calculating financial
ratios. There is just no tidy way to adjust
financial ratios to reflect the nuances of com·
plex structures. Sometimes, the analyst _calcu­
lates alternative sets of ratios, reflecting that.
the "truth" lies in a gray area between two
perspectives.
There are no specific limitations with .respect
to the amount of hybrid preferred that receives
equity treatment. However, at some point, one
would question a company's creating a capital
structure with an unusually large proportion
of newfangled securities. The analytical com·
fort range depends on the seasoning of the type
of instrument, peer group comparisons, and
any potential negatives for the firm that might
prompt it to reevaluate and restructure.
• STANDARD & POOR:S
. ' - , CRITERIA TOPICS • Corporate Ratings Criteria 93
) B STANDARD & PDDR'S
Equity Credit:
Factoring Future Equity into Ratings
There are many ways to arrange for the cre­
ation of equity in the future. These methods
range from issuing traditional convertible
securities to entering forward purchase con­
tracts to establishing grantor trusts for future
issuance. The key considerations for receiving
credit today for the promise of a positive
development in the future are:
• How predictable the outcome is, and
• How soon it will occur.
If the analyst is reasonably assu�ed that an
equity infusion will occur over che next two to
three years, then that event can be incorporat­
ed into the financial analysis on a pro forma
basis. On the other hand, analyzing an equity
infusion in the distant future, even if one could
be certain about this eventuality, requires a dif­
ferent approach. It is not meaningful to over­
lay such an event on current financial mea­
sures. To do so would be ro isolate just one
transaction from the full picture of the compa­
ny's future, in effect, taking it out of context.
Yer a program of equity issuance can be a pow­
erful statement about the issuer's financial pol­
icy-an important rating consideration.
Predicting the outcome
The first dimension of the analysis is assess­
ing the potential for issuance of, or conversion
to, equity, and the likelihood of the company's
retaining that equity as permanent capital. The
risks vary by the type of instrument and its
"bells and whistles."
The following discussion is arranged in an
ascending order, based on the likelihood of a
positive outcome. The instruments discussed
convert into common stock, although conver­
sion into perpetual preferred stock is another
possibility that is now frequently considered.
Convertible debt usually turns into equity at
the option of the investor. The issuer can force
conversion, but only if the security is "in the
money."
The odds of any specific issue's converting is ·
a function of the conversion premium and the
likelihood of the company's ;cock price achiev­
ing chat level. Standard & Poor's has been
extremely conservative about relying on antic­
ipated stock price movements. Even when the
stock is trading very near the strike price and
the firm's future seems bright, the risk exists
that the stock will fall out of favor or that the
market as a whole may turn bearish. There are
mechanisms that can increase the odds of con­
version. For example, periodic adjustment of
the conversion premium is one means.
However, the difficulties in statistically assess­
ing the outcomes still would limit any equity
credit given for these issues. Conversely, dis­
count bonds, such as LYONs, have a built-in
mechanism for always "raising the bar" as the
debt value accreres, thereby making the odds
of conversion ever more remote.
In some securities, the issuer holds the
option to convert into equity. For example,
there may be a provision to pay with cash or
stock. This provides a modicum of flexibility.
However, there is no equity credit given. The
analyst is still concerned that the issuer might
not exercise irs prerogative except under dire
circumstances. After all, any firm can issue
equity-if it chooses to-at the prevailing mar­
ket price. The reality is that companies are
rarely satisfied with the market price and are
reluctant to add such an expensive form of
capital. Even if the share settlement is manda­
tory, a company that is disinclined to issue at
the market price would merely repurchase
those shares.
There is an analogous problem with "soft
capital" from a ratings perspective. The com­
pany has a contractual right to demand at any
time an equity infusion from some outside
provider of capital. But at what point will the
company make' this demand? Moreover, in the
interim, the company does not enjoy the use of
these funds to invest in maintaining the health
of its business. ·
Covenants offer another way to influence.
the outcome. One popular method is to require
94 CRITERIA TOPICS • Corporate Ratings Criteria , . . . . .
)
( . )
f
_)
that the repayment of principal upon maturity
must be made with funds. raised through the
issuance of equity. From Standard & Poor's
perspective, this method of providing equity is
flawed. For one thing, enforceability is dubi­
ous. Second, as discussed earlier, if the compa­
ny is not inclined to add equity at the market
price, it still can meet the legal requirement of
issuing equity while simultaneously repurchas­
ing its shares. (Banks have used this structure
to raise Tier 1 regulatory capital. Indeed, con­
sidering the regulatory impetus behind the
issuance, it is unlikely that a bank would cav­
alierly reverse such an equity issuance. But it
would be wrong to generalize for all corporate
issuers.)
A different covenant calls for automatic con­
version when a trigger event occurs-typically,
a rating downgrade or a defined financial set­
back. The debt would be eliminated at a time
when the firm might find it difficult to service
it: This represents an equity feature and helps
to place a floor under the company's rating if
the threshold for conversion is set high enough
(e.g., at the investment-grade level).
The most favorable rating consideration is
given to issues that are mandatorily convert­
ible at a fixed time and at a fixed price.
Preference equity redemption cumulative stock
(PERCS) and debt exchangeable for common
stock (DECS) offer two examples. Conversion
is a certainty. At the end of a very short period,
the investor receives one share of common
srock=-or a fractional share, if the price of the
common has appreciated beyond a certain
point. The company's decision to issue the
equity is based on the locked-in floor price for
the common stock. Regardless of the move­
ment in the stock price, there is little reason for
the company to reconsider its decision.
Synthetic mandatory equity securities can be
created by using forward purchase contracts
and related options contracts; the impact
would be equally positive from a ratings view­
point. (However, if there is a substantial mis­
match between the issuance of the equity and
the maturity of the debt, there is no assump­
tion that the debt will be cancelled by the equi­
ty proceeds. The burden of proof is on the
company with respect to the use of the equity
sums for debt reduction.)
Grantor trusts, ESOPs
. Apart from convertibles, granter trusts and
ESOPs offer avenues for future equity
issuance. Many companies have established
programs that commit them to issuing shares
periodically as a means of dealing with large,
unfunded, employee benefit liabilities. The
firm places shares in a granter trust or ESOP
to be used over a period of time for employee
benefits that otherwise would be paid in cash.
The vehicles for these programs differ with
respect to the range of benefits that. can be cov­
ered, the scheduling of issuance and releases of
shares, the degree of exposure to changes in
shareprice, and tax treatment. The creation of
new equity via such programs is highly pre­
dictable. However, the major drawback is the
extended period over which this will occur-·
seven to 10 years for many ESOPs and 10 to
15 years in the case of "rabbi trusts," such as
Flexitrusts, This limits the positive impact on
current credit quality, as explained below.
Timing the issuance
As important as knowing what will occur is
knowing its context. Events anticipated in the
short term are handled differently in the ana­
lytical process than those further out.
Anything expected to occur in the next two to
three years is factored into the projected finan­
cial statements and credit ratios that form a
basis for rating assessments. The analyst's pro­
jections cover this period, taking into account
all known aspects of an issuer's business envi­
ronment, strategy, · and financial plans.
Historical financials are relevant only as a
guide to what may occur in the future, since
ratings address the risks of the future.
Therefore, if equity is anticipated within two
to three years, the transaction can be fully ana­
lyzed and incorporated in the current ratings.
The rating review of a company making a
large, debt-financed acquisition offers a com­
mon example. The analysis would not focus on
a snapshot view of the issuer's financial condi­
tion; rather, the rating would take into account
the company's plan to restore financial health,
if such a plan exists. New equity is usually part
of such plans. The company might issue con-.
vertible securities or it might commit to issuing
specific amounts of common equity over the
short term. In any event, one would expect
that the company's timetable for accomplish­
ing its objectives not exceed two or three years.
When a positive or negative development is
anticipated farther out in che future, its ratings
impact is diminished. As a dynamic entity, the
issuer will be affected in many offsetting ways
• STANDARD & POOR'S
' ' . . · . ' CRITERIA TOPICS • Corporate Ratings Criteria ·9_5
; )
l)
• S1ANOARO & POOR'S
in the interim. To single out one expected event ·
is to take it out of context. To reflect its impact
in pro forma financial ratios would be a
distortion.
Still, the willingness to issue equity over time
to maintain credit quality can be an important
element of financial policy. Establishing a pro­
gram to do so represents tangible evidence that
adds credence to a stated commitment. From a
ratings perspective, the beneficial impact still
can be significant, even if the equity program is
not reflected in financial ratios. Indeed, when
focusing on the longer term, rating analysis
emphasizes the firm's fundamentals: its com­
petitive position and financial policies.
In this light, consider the case of a promi­
nent utility that decided to establish a "rabbi
crust" to fund a very substantial amount of
employee benefits over a 15-year period.
Historically, this firm had issued a combina­
tion of debt and equity to maintain its leverage
at 50% and its debt rating at 'N. Standard &
Poor's, relying on the firm's financial policies,
was confident that the future held more of the
same. Based on the legal commitment to add
more than $1 billion of equity via the trust, the
company lobbied for a rating upgrade'.
However, Standard & Poor's concluded that
the future equity added little in this instance.
The company still plans to issue debt alongside
the new equity issued by the trust. The divi­
dend reinvestment plan that was used to issue
equity in the past would now be discontinued.
In fact, leverage at all times will continue to be
50%. In short, nothing has changed. In this
case, the equity program enhances confidence
in the 'N rating, rather than suggesting that the
rating be upgraded.
Often, companies combine share issuance
programs with share repurchase transactions.
A company may incur debt to purchase shares
already outstanding that will be reissued
through a trust or an ESOP. Another option is
for the ESOP to borrow to buy shares in the
market, with the corporate sponsor
guaranteeing the debt. This is known as a
ieveraged ESOP.
The analyst separates the dual aspects of
these actions. The negative impact is identical
to any debt-financed share repurchase.
Separately, the promise of future equity is
taken into account, along the lines previously
discussed. The positive impact of future equity
issuance usually is sufficient to partially offset
the credit-harming effects of the share repur­
chase. The net result can be an affirmation or
a smaller downgrade than otherwise would
have occurred.
' ' 96 CRITERIA TOPICS • Corporate Ratings Criteria
)
• STANDARD & POOR'S
A Hierarchy of Hybrid Securities
()
Issuers and their advisers have requested' a
handy gauge of the equity credit that Standard
& Poor's attributes to specific securities, so
they can know what to expect when issuing
various hybrids and more easily compare
financing alternatives. The scale on the follow­
ing page is an attempt to convey the measure
of equity credit attributed to specific securities.
The main use of this scale should be to
appreciate whether and to what extent one
. security is better/worse than an alternative
financing. Securities are . placed on the scale
after taking into account the overall impact of
each security by balancing and weighing the
beneficial aspects and the drawbacks.
Equity credit of 50% means that the impact
of issuing that security is half as good as the
impact of issuing common stock. The notion
of partial credit can be illustrated as follows: If
issuing a certain amount of common equity
would lead to an upgrade of two notches for a
given company, then issuing a like amount of
an instrument with 50% equity content should
· translate into a one-notch upgrade.
Alternatively, doubling the amount of the.
hybrid with 50% equity content might be
needed to achieve the two-notch upgrade. (The
impact of issuing common stock for a given
company can be minimal or substantial,
depending on the materiality of the issue and
the credit factors specific to that company's
situation.)
Percentage equity credit has nothing to do
with ratio calculations! There is no way to
translate percentage equity credit into ratio
calculations; such calculations are determined
for each type of instrument-and each of its
features-separately. Never does the analyst
divide an instrument's amount into fractions
for ratio purposes.
There are many hybrids that are more debt­
like than equity-like. They don't appear on the
chart, because they have a damaging-or neg­
ative�impact on credit quality.
Some aspect or aspects of a debt security
may allow it to be differentiated from "plain
vanilla" debt. But that does not mean that the
security provides, on balance, a positive rating
impact.
For example, bonds with very long maturi­
ties are not as credit-harming as short-term
debt. In that sense, they may be said to have an
equity component-but, obviously, the equity
content is not very great! Their negative
impact is somewhat less than conventional
debt-but is still nearly as bad.
The scale conveys the relative impact of var­
ious securities, given a typical weighting of rat­
ing factors for investment-grade companies. As
mentioned above, the weighting could vary
with company-specific circumstances or with ·
the size of issuance relative to the existing cap­
ital structure. Less-than-investment-grade
companies are excluded because the analysis of
such firms does not lend itself easily to
standardization. In general, the rating implica­
tions for an existing rating would depend on
whether the financing replaces another that is
more/less equity-like, i.e., higher/lower on the
scale.
There can be minor variations for two issues
of a 'single type of security. For example, the
deferral period might be six years in one trans­
action and seven years in another. Obviously,
rhe longer the deferral option, the berter. But it
would be wrong to attach too much impor­
tance to fine gradations. The finer the distinc­
tion, the less meaningful ir is in the scheme of
things: Note, too, that the self-same security
changes as far as equity content over its life.
Remaining life is relevant, not the tenor at time
of issuance.
. . . CRITERIA TOPICS . • Corporate Ratings Criteria 97
( )
/)
( )
• STANDARD & POOR'S
Relative Equity Impact
100
90
80 Mandatory conversion pfd-within 3 years (PERCS*; PRIDES*)
70 Mandatory conversion debt-within 3 years
60, Convertible pfd=Perpetual tax-deductible pfd (U.k. MIPS*)
50 Conventional perpetual pfd. 5 year no call
40 Deferrable payment pfd (trust pfd)-25+ years�
30 Deferrable payment debt (MIDS*)-25+ years�
20 Convertible pfd-15+ years
10
0
Note: The scale presented here is intended as a communication device. It is not a substitute
. for analysis, nor should it be interpreted as a tool for quantification of hybrids with
respect to ratio calculations. (See pages 56-58.} Indeed, those seeking to reduce hybrid
analysis to formulas could be harboring a delusion regarding the nature of the credit­
rating process. The analytical complexity of hybrids reminds us once again that ratings
are an art. not a science!
* Trade name of specific banking firm product, for illustration purposes only. � Remaining life; initially issued with 30+ years' life.
, ' ' 98 CRITERIA TOPICS • Corporate Ratings Criteria . ·
r-. )
,()
()
8 STANDARD & POOR'S
_. - · _ . ' · CRITERIA TOPICS • Corporate Ratings Criteria . 99 -
Moody's Long-Term Corporate Bond Yield Averages
Based on Seasoned Bonds with Remaining Maturities of at Least 20 Years"
Yields(%)
12/4/2003 12/3/2003 12/2/2003 12/1/200.3
Avg. Corporate 6.28 6.31 6.28 6.29 6.26
Aaa 5.70 5.73 5.67 5.68 5.64
Aa 6.10 6.12 6.09 6.10 6.07
A 6.28 6.31 6.28 6.29 6.27
Baa 6.67 6.70 6.68 6.70 6.67
Avg. Industrial 6.12 6.15 6.11 6.13 6.09
Aaa 5.70 5.73 5.67 5.68 5.64
Aa 5.94 5.96 5.93 5.94 5.91
A 6.19 6.23 6.19 6.21 6.18
Baa 6.66 6.69 6.66 6.67 6.63
Avg. Public Utility 6.43 6.46 6.44 6.45 6.43
Aaa
Aa 6.25 6.28 6.25 6.26 6.23
A 6.36 6.39 6.36 6.37 6.35
Baa 6.67 6.70 6.70 6.72 6.70 ) .:» Spreads Above 10-Year Treasury (bp)
12/4/2003 12/3/2003 12/2/2003 12/1/2003 11/28/200
Avg. Corporate 191 191 192 189 193
Aaa 133 133 131 128 131
Aa 173 172 173 170 174
A 191 191 192 189 194
Baa 230 230 232 230 234
Avg. Industrial 175 175 175 173 176
Aaa 133 133 131 128 131
Aa 157 156 157 154 158
A 182 183 183 181 185
Baa 229 229 230 227 230
Avg. Public Utility 206 206 208 205 210
Aaa
Aa 188 188 189 186 190
A 199 199 200 197 202
Baa 230 230 234 232 237
• Moody's Long-Term Corporate Bond Yield Averages have been published daily since 1929. They are derived From pricing
data on a regularly-replenished population or nearly 7 5 seasoned corporate bonds in the US market, each with current
oulstandings over $100 million. The bonds have maturities as close as possible to 30 years: they are dropped From the list if
their remaining life falls below 20 years, if their ratings change. Bonds with deep discounts or steep premiums to par are
generally excluded. All yields are yield-to-maturity calculated on a semi-annual basis. Each observation is an unweighted
average, with Average Corporate Yields representing the unweighted average or the corresponding Average Industrial and
Average Public Utility observations.
•' Average of Daily Readings.
"' As or 12/10/01 the "Aaa" Utilities index will be discontinued indefinitely. As a result, there will be a pronounced drop
in the "Aaa" Corporate yields from the time of discontinuation forward, but the rest of the yield calculations should remain
comparable to their recent history.
56 Moody's Credit Perspectives December 8, 2003
Annual Energy Outlook with Projections to 2025-0verview http://www.eia.doe.gov/oiaf/aeo/index.html
)
)
)
�o �':foe.gov @c?J,�1•;•&•1•1•1t1·"&'1(i1·1·1•1:.e•t1111•1i,•11•-1·f"'·M•ffi•1111e•11t·•n•+•
Home> Forecasts> Overview •·••m1tr
)
... 0 N
"' ..... U'l M .... .N � "' 00 "'
V I.O ONO a>NNU>ui ""'"U') \0,... CD ("') N,... ,-
<') 0 N
... 0 �<') .... .N
OON ..., ..., 0
II) U) co <D ,-.: "' U') 00
O>-.:tNMV tOOci<DM
... Lt) U') - <O MN,- ,-
N 0 N
<D .... "' o�J O> 0 NM e- �
N<O<O..-m Ill O O CO N O'> <O O O ,-.... CO N N N N
........ ..., O> ({) co ""' I'- N M . .N
00 �� ... <D "'
m N 00 �
("')(")MN (") Vo:>al<ON M � �,... �
0 N
..., <D <DO
"' en
......... <')� M . . N �
0 N 00
CON CON M .,..:(D(O(O,...: M � � ,- �
0 0 N
� 0 00
�,... 0 sr-: � ����m MN�
O> 0 0 N
O> N ,n MI'- N "' en '° � �"'
� O> o:, N ({) O') "' <D <D O C\! N � "' 0 .,; "' � "' rsi "'
coco...-oo (J) ,....: ('") <D co O V 'VT""" U'> MN,- ,...
"' 0 0 N
�..., en..,. ({) O')
"'� MO N . ,N e-
... N .,;
.... �
..... 0 0 N
NO 0 <D ,..,: ai "' ... .,;
0 � 0 "'
(X) ..... ,-.: �
COO C:O,... N .,..:r-,..:com� 0 ("') ("') ,- I.O MN�
) <D 0 0 N
....... co <D ..., <D ,.._ en o, 0 0 /'- � �
NU') NO') 0 aJC:OVCO,..._ � a> co (") 0) ,..... ,... ,- ,- ,...
<D M "'� O> 00 .....
<') <D ,-.: �
Mll>COO><J> o m a a:> ,­ co NU">,... M I.() ...... 'V ,- (")
MU"> LOON a>V<O<DN CJ)(")(") -.-LI) N N,... ..-
<') 0
...,
0 0 N
c.o,-,-....u:,,q­ c.o r-, 0 (0 ti) Na>OlNCO ,..... ,- - - ,...
... "' No:, � ai
N O> ID o:, �,....:
<D ,-.: r-,
N <') ,-.:
cocn,-a,..- ((),...:Vu;O O'> ("')(")..-I.() N N,... ,-
.... 0 � O> "' .... � 0..., OM U'l 0 0 /'­ � �
N� MO ,....: 0 "' 0 .,;
0 <D r-,
NVC.O<ON v m,....: \() co mNM V N N,... T""'
(") 0 0 N
..... "' .... ..., 0 ... <D O N O> 0 ..... �
"' <D ... � ,....: 0 � "' 0 .,;
r-, m,....,... f.O .,..:(DQU)(O a, NM,- -.:t N N ..- ,...
N 0 0 N
0 0 N
O <D N st NM ........ 0 mo,,.._
..., (")"' e-- <') ... N st l'- 0> O> <D
<DO(") a,,...... r-, m,... LO v LI) LO,...... 0 LO U) ,... ,... "':-' ,...
..., <D ..., <') ,..,: cj
"' <') ID ,n ,....: 0
"' ..... "'
N 0 .....
O') ("') Ll) r-, T"' 0) ,q: 0 c.ri II) <ONMT""V N N -r- ,-
O') Ll) <D ,..... O') lll,....:,...:,....; M CXl NM,... V NN,- ,-
e .!!! 0 'C
ID O> O> � .. c g g
{! �
C) c 'iii :, 0 :c
� a:: c: ., E � a. E ., c :::>
�s �o II . -r II NN "'"' �;
.. ,; c ::, e rf 2� .. 0 . !:! c 'O 'O .5 .! " .c I ·i c;:: O c: iii 'ii 0 .c tu .. :!: :I OI 0 ... ... c :15§ �el.
)
)
'"' NN Oo �N
"#, "#, ;J!. 0 0) 0 ri N r'>
'# "if. '*' '#,. cf. Qcr)ll)l/)"""' ('") ..; ,...: (0 <D
'#. '#. '#. '#- '#. <OCIOCO<.DN N,...: N,...: M
'$. '#. #. '?ft -;ft eo 0) ...... 'I""" (1) o o..: q o
•o N­ Oo �N
'#, 'if. 'ii, NOO ("')MM
'#-'#--"#. '#'#. N N r-, 'I""' eo (")in,...: r-,.: l,O
� 0 a, 0
'#.#-cf!.#-'# II) en,..... <.0 o N,...: N,...: CW">
';f. cf. rf..-;J!. ';f.. m..-M,q"N 0,...:,...: q .
"' N 0 N
0 0 <D NNN
"' "' 0) ��� - "' N .... �("') N
.... .... -i
l()MtONCO r,..:..;a:,u,co V,..._<0,-,-.... MN T"" ...-
;;; 0 N
.... "' "' .... ui,...:
<D <D .... (") 0 . . (") N
N .... -i "' 0 0
..... a, 0 N
N N 0 N
0 0) 0 0 0 <"> "'"'"' ,.._ ,.._ N
- - e--
r a,
<D "' Lli.....:
"'(") ,.._N "' . . "'
"' - o- �M
"' ,,; "'
N cri a,
..... "' 0 N
.... 0 N
MN Lt> 'I""" r,,.. NOU')CDM v,.... tD 'I""',....
<".> N -
t,,..N..-OCO mco...,:u>N M(O(O..-,-... <".> N r
N 0 N
<D O ..... "' ui ,..; "'0 "'0 � ("') "' N 0 N
N N <D O ,- r..: f.O /N (O /N M(D(O,-,-... MN..- ,-
) 0 N 0 N
"' - 0 N
.... e­ "' a, LO ,....:
.... a, ,.._ 0) "'":N
"' a, - ,.._ ...... ,N
II) N 0 N
s 0 N
<OMNOM ..,;. -ci- ,...: CD ,...: MC.O<O._....,_ MN,- ,-
- ("'),.....'I""'"! N N oi CD o M (0 Ill...- t'-­ M NY- ..-
"' 0
N Ill C) "' a.
0) 0 N
a, N "' - lri «> "' a, "' <D �N
<D .... -i "' ,.; a,
N ..... ,,; r
LOV...-,-..- c,i ci aj <O Cl N(Oll)..-(0 MN,- 'I"""
,.._ e- 0 N
00 0 <D �N - N "' -i "' N "'
II) "' ,,;
O V V 'I""' 0 r--:o.:>wwco Nl,(')ll),-U) <".> N r
l z • ·� • 8
<D - 0 N
"' 0 N
<D O N IO CD cri
ON "'"' "' . ,N
a, ,,; "'
"' a, cri e-
t: cri r
(Oll)NMCO MOM...-,­ Lt)(00> VU"> ...... 'I""" II) ,- '¢
I.()\() 0) 'I""' T""" sq: <D ..,;. «; .....: N l.() ll) 'r' U>
MN -
(J)l()VNM ....; "It r'> <O <D Nll)ll)'l"""(O MN-
� "' 15 ..,
"' a, a, -
c: Ill E � a. E Ill c: ::>
8� .o
- 0 II , 'f 'ii NN "'"' �;
ii:' 0 0 0 � 0 ..,
<D "' "'
-- 11/19/03 11:43 FAX [phone] ECON DEV & TOURISM DIV �003
)
)
)
11/19/03 11:51 FAX [phone] ::i ... - •.
• • • , ••• # , ••• ,•) .� • .,.. .,. ••
. ECON ... DEV & TOURISM DIV
.,_, .. -·,,. .. .:.-.:;:: ...... : .. ·•- .. ··•· .•........
ill 006
2! � 9�1•r�::;� o .. a .. �· �Fi" pga� "' � "'"'"' �5!��!! ;::;; : g::1 g �� ;a f"i �on • .. ....... ... •...: - �- .. .s w:;,..:a; n N.,. P:
oc) ��ij;ifi;i' ;: ! �-., �"' Nn-a"r8Nij ;;
i .,.,., �i!?l�IHle ,i,; ��r: �;;g il:1 .. :., \II : ;:;- !"g J:J ....... OIDD�e "'a.:e,.: oici . ;:,; -- - .2 ..s,..:o; cl '6141,...,.:,..:.,.: l"I N ..-N � e .,.,., e;:!:�;:\�a lnr.li!?;i! e!;g I,� � .... ,..;:16�0?'"';� 1::2�!� oo:;,... ij��� a: c i !d�� Iii •• ,..: .... ,..:....: OulW<OS! •• ecd ... ;l·E��·i"';: • ::c !Z., aN'�" �i .,.,., �;!'.'!?t;.� 5!5S� !S1! ;gg :<;; .... 0111tNON�-:e .... O �.,r-" .. -11r-r·; i ......... ···�· .... a•;;;§a:a"' ::,.. N ·�n ;� i !ti NO ,OP,:;I y; ••...:,.:,..;.,..: � .t - N
��:S:��I .., ..... Nr,. :U�II ::: 11::inrr"'o "'�i"'l-i ;!i�--i�!!� ;: :�! ..- N ...... 0 .. a, .. .J c, ;N �"" ... ..,. .... l lo .. ••co,.;,.:,.:, yj' •• ll:i5!. D cii-ici ... Pl � ""';: N NN s i rum ��:ti·�� ; g,a�;; ��1.1� � l'l 1�;;;:1� ;� 1�;:1� ,;.;i"'" (��s= � "',..:."' w,.:co:i.c1 op,.,.: �ci4d1Cici CIO._CII ... • N ::: !� .. N
(.) �:J§;:;�:� :!�8��: ss;� .... ;;�1� w � 9�� �:��;�8 3!!5! �;:c.; !! vi d ul O"' .; ... ·..: ciG9'4 N .,. .- � � � .. � ....... :::.� � ... ::> �i'�r,. JD�!� ¥ ;5����: ����� ::;;JR ;s i�i5!:1�;� c,,otA,i OCI i ��� \OOCO\O '°' ••• ci .;tti jl"i �·i ori _... . ... ... N-
� 5�� ��i;;:2�� !!55: s:ss a; !:ta!::: ;:i NGlr,,.V\fl:'.,.._ �s1a� ft§�i� ui'W'61d..Och:i chri "" .... :. 2 i"l" a'" . ��� !;��5!3 �=� �:& g;;;� �:: i"" .... .n•o�,... .. � a:��1: l!1ft .... ��!i� � wilnO ui Iii ..; .;.;,o 0'4 "'i=a·�.d=N N N N-
5�5:�!3 U�III� �=:� N� e.-.-,-.N.-10 1"10 i�a�;: iE:i;-gna \!l"" aina:�·§...;=N � ca�� riviOuiOt •"' N-
0 B��!�iEZ�� . "'"" !S�S5:� �:Jlii� � �= t:: !:!!! ��==t!1:.;:::� 1:1i;�� :ZH: � ... � lnlolill':i<n • ,..:.sci� . _.. Njj'J �-:: E ... ... :::? ..... � ·! 2 .,;,o.,: � "'"" �5�;::: ;i&-;;J:� ;:!k� i� �:���:���� �:!��� ;a:::;'""" ;!SCI li ��: .,.,; .-ill'ilri. ..: •• W'i ... N - ;: � : � ......
c .i ... : .,, UH j . � I :I c • IJ � f Jri " . �, �rg h .. � i « A ! e 2 g
c � §':� • u � I I l nun l H � • !,:.. J u8 � i I :� r � ! �, iH l l�i�il. • F • • • ..,l -e 1e� 1 h !� �£ JI� U.l lHH di &U r:,ci:s I J tj! J f n cl .3 t.::ff f �l � e � i cl? i {lo if�� . nra 11n � ii =Ui n� H�· E HO::! !Hlil N" '& I:' �:! � ff f'""""' l!}""i � I! i�i .... H�HH �UUi r! 1: I , ! ! i 5s. j dj UUHI !UHf .. t�! CDS i hi '1 .,..,,,.�- ili �,:,� I JiiJo,. .. i.i:ss "z � .5 """' " �
f L------·-····---·--·
� t?f� ��9!��� �i�ti 5�5! :! ,., E�§�i:;�:;� .... ,rl ll'lfis:� ::�!��;::� wic:i. ll'i...::lviiri9' �" �,.;gro,51ri C: � ,.. .. � .. ���;5:3 ���5� s��! "'� §:E�j�j�;� "'" " ....... ,... :,;��� �1§"'1 � --�� -· ;: . :;..;;,..; .IQ .... ;� � .. IIOC$>9 .... N N �
" ::� ::;;;:as:�St::i ��ii ;x:e ;J'. .. Nr"I ;,: �:�&�:;::� �:;�a:; U*'1" ��=�� � .. o. "",d. lll"v;,tfviG cici i.n"iriirilOO ,..: cJci� .;.; ... ... 0-. : ... - N
N �s: 0,.. Cl ON�"' !�=�: :;;Qi; :i:::: ,�e;i;;;��� Q�s:�-� ��t:��ij�!�:1 2 :;J:i:�:: viviwionoi ,..;e...:ioi ,...:in - • :? .. �· �.., ,,.., -= N
� ��s 9��:��: :?�ii� :.��: S'o tr�aa�:s: :;� !�·�r 2�i:!" g:;::;�:: vilOIO ,n.,;..;l(>c,1 ...:t111"-'wi .:;..; ... z ... - °'�"' �..,.. ,.., .... ! �,... ....
0 ... �����:� :g !:Ii�:;; ::i�sg $� ��:;E:;:1�� �"':�0.�� ss��� �r��g ij ;;:: lri<liuivle ,..: It Diil ... .- CD :: - �di� ea'" "o
§ ;;; ��!�:�: ����� � Im� ll!;; !:J��1,;!��� !:�;!; �::!l!I;" �r,:i: ••. ,n,..; ,..:�r,,:...,; ..., - ,.. en- - •e,.. S - N -
i � ,iii i:i�::-�.;�� ��3!! S5�� :!i! G�;;�:�::� ��;,�� NI.O ,. .......... •NVI ,-.
l"i•ui t1,., ri "'IO w, IO - ..... - ... -· N �
:;�n� �aic�
i ::l .. ., .... ,.._ .. . ........... ... oaw, �- ....................... (!"'"' .......... $!�U� -asi�;; • oop-..,-..n .... f'll(t.,...CI"' f'i .. ,... .... ... ,��;�·�· ai• :: Ol w<i�d Nr'i "1 ...INN t'C.lri'l'I NNNN!b IO J.,;lff ,J,; w, �:u.:. ...
i ��� ;!\ii�.��!;� 5! R� !lit: ��53 i:!il "90,.._,._;,- ,-. 0\ M• !���e: Cl!;""'",-.NeOi• �N N.., ._..,..""' NNNNe ""' a·�• ..;I" .a:..: - p 2 ;;"fN.._ �au ... �
"' => ! :U3 ��5�S5! ��a1i 535� :s �lEat�i�:: ,�i:Ji� "'!28"t=��� 8 ..:,..,i.,,: ..: �Np,:--, �.. ��11'1�� ... = a: ·H �BS !55��!9· ! .... "'go., :::?�::":; �s �.,,a.� .... "'°'·� a�= ,l:::i a;ni'""" Ei�;a ;5 ."!...,"":"'! _ ....... ; ";"e....: ·.: N ,.: N ... V>,..:.;iti - Q . ,. - >, J_: "' zollo .... i.nn � �i: e: �;�: : C? ���$:�1�== ;�iz:; u11�e ��u� N �I �g: � w ..:r,i T ..: :;::'��;; � �....: �" Iii Ord··• W'iN �-- - r c l N c
>- xi ii: I �- 1 • -ll £ JI z .. • H c ii uij ! s � ! J ., ! .!I )i ,,; j I h ] � 5 -� g � �H �!fg 1 ,.� ,. I .. �11 l z: " uHj J ufH lhi '"" � ; I. i J ii 1 j1.J!.li i { ! �11 � �Jj � i 1w� Zi � .. 1H�J Jihli j i Jll I J�l • !
j!:� . � u� iihnl ! Jh- if 2>1 .., a: l i. fiaHh �iiiH {� �11 I "u £5 : f i;J i J H l!Hli1l!h " . " ·=-11Hht ��I �� r11111 ... �A ! H jlj�l .. l� �� 4 i - i if.:: gli ig aa.xa. ia. :I ... iS .5 ;n • .-.c...i.-..--J 2 - .,,
'stocks, :Bonds, Bills,
and I riflation ,
© lbbotsonAss�ciates, Inc. 2003 lbbotsonAssociates
Table 2-1
Basic Series: Summary Statistics of Annual Total Returns
from 1926 to 2002
The Long Run Perspective
Series
Geometric Arithmetic
Mean Mean
Standard
Deviation Distribution
Large Company
Stocks
Small Company
Stocks
Long-Term
Corporate Bonds
Long-Term
Government
Intermediate-Term
Government.
U.S. Treasury Bills
Inflation
10.2%
12.1
5.9
5.5
5.4
3.8
3.0
12.2%
16.9
6.2
5.8
5.6
3.8
3.1
20.5%
33.2
8.7
9.4
5.8
3.2
4.4
*
'The 1933 Small Company Stocks Total Return was 142.9 percent.
-90% 0% 90%
lbbotsonAssociates 33
c3�f Oi't= t.':ie
rnDER.AL, C?-rviM.Ut-'1t·CAI'IONS CO�LISSION
\V.�ihinr,,;;�m1 D.C. 20554-
Tal\-O"f1,)
FCC 95-134
In ilie Matter of
I I
Amendment of Pans 65 and 69 of
the Commission's Rules to Reform
the: Interstate Rate of Renen
Represcription and E�ul'C-!ro.ent Processes
)
)
)
\ I )
)
)
CC Docket No. 97.·133
REPORT AND OR5JER
Released: Ap!'"il 6, 1995
:···,·· ., ,·.'·.'
....... : .
. . . . . . . . . . . . . . . . . . . . . . 7 , .. :,
' ' ·�1 .... \······}:1,c.·9.-.·./ ··0· .. ·-� ·�·,,,wi�i···,.�.,on Fr-:;c�b.l�·s 't:f1 ,_... 1fi,;jl,.J1...:1:· "flo iJ.i .. > u .... ,..,,;"•c.,.,.-,\.�\- c,
l . Overall Prccedures
2. P�E�dpition
3. Di'�OVt'.ty
· 4. Requests for Individualized Rates of Return
V. Cost of Capiw Methodologies
A. Overview .
7
t 'l LJ
15
20
43
43
58
65
73
76
76
because the lives of these bonds are too short. According to Centel, the investment s
duration should be more comparable to the infinite maturity of common stock: Centel
recommends thirty-year Treasury bonds or Aa utility bond . .?..s5 MCI suggests thar the
Commission should require LECs to submit, at the outset of a represcription proceeding.
classic DCF data for each quartile of the S&P 400, without prespecifying any portion as a
possible benchmark. 2.56 SBA is indifferent to whether the DCF and the risk premium
methods are used, bur believes these methods will be accurate if properly specified. SBA
recommends, however, that in applying these methods, we use stock indices for companies that mirror the financial resources of small LECs, rather than relying on the S&P 400, the
largest 100 utilities, o_r other groupings from the New York Stock Exchange ("NYSE"). :r
87. Few commenters address two issues the Notice raised regarding the application
of the DCF formula: quarterly compounding of dividends and the inclusion of flotation costs
in the cost of equity. Centel and USTA maintain that quarterly compounding is not difficult
to apply with current spreadsheet software and that DCF computations should reflect the
quarterly payment of dividends. i.ss Rochester states that the Commission should not prejudge
quarterly compounding or flotation costs by adopting rules or methodologies that effectively
reject them. i.s9 UST A maintains that we should allow participants in represcription
proceedings to seek an adjustment for flotation costs, despite the lack of any separately
recorded, out-of-pocket costs for the issuance of equity shares. 260 FW A opposes an
allowance for flotation costs because small LECs do not sell additional stock through
offerings to the general public.?" MCI opposes as unnecessary both quarterly compounding
of dividends and an allowance for flotation costs.162
3. Discussion
88. Equity prices arc established in highly volatile and uncertain capital markets.
The theories and methodologies analysts use to forecast these prices represent a rapidly
expanding field of study. Different forecasting methodologies compete with each ocher for
eminence, only co be superseded by other methodologies as conditions change. In addition.
Z.SJ Ccntcl Comments at 12.
154 MCI Comm.ems a.c 27.
::.s7 SBA Commenu a.c 12-13.
UI Centel ComII1C1lt3 a.c 11; USTA Comments at 53-54.
i,, Rochester CommenLS a.c 31-32.
160 UST A Comment.s at 54.
() UI FW A Comments at 9.
,J
242 MCI Com.menu at 26.
42
( . ) ' ,
(· ___ )
..... __ ..
each methodology has a number of permutations. Besides the number of methodologies
available, there is the problem that each methodology assumes certain conditions that may, or
may not, persist over time. l63 In these circumstances, we should not restrict ourselves co one:
methodology, or even a series of methodologies, that would be applied mechanically.
Instead, we conclude that we should adopt a more accommodating and flexible position. To
the extent resources permit, the final cost of equity in a represcription proceeding should
, represent a judgment reached after considering a wide variety of data and methodologies.
I•
89. The flaw in the current rules governing determination of cost of equity is that
they ignore these basic principles. Although those rules do not require the Commission to
apply any particular methodology in estimating the cost of equity, they require the RH Cs to
apply two "historical" versions of the DCF formula and to submit the resulting data for
inclusion in the record in represcription proceedings. 264 In the two represcription
proceedings conducted under the Part 65 rules, we gave very linle or no weight to these
data. 265 Those rules also specify criteria for determining when firms have risks
characteristics comparable co those of interstate access services. 266 In the 1986 represcription
proceeding, we found significant problems with these. criteria and gave analyses relying on
them lictle weight. 267 In Docket 87-463, we proposed to improve the criteria by
incorporating a cluster analysis.™ In the 1990 represcription proceeding, we considered·
several cluster analyses presented by the panics and found them to be entitled to no weight
because the analyses had failed to identify firms for which risks were comparable co those of
interstate access service. 269
90. These experiences have made us acutely aware that any cost of equity
methodology we codify may not withstand the test of time. In these circumstances. we agree
with the majority of the commenters that our rules should specify no cost of equity
w �. U., Howard E. Thompson. Regulatory Finance: Financial Foundations of Return Regulation 8
(1991); Roger A. Morin. Regularory F�: Utilities' Cost of Capital 17 (1994).
164 47 C.F.R. §65.303.
w l 990 Reprnqipcion Order, S FCC Red at 7S 12. para. 48 (no weight); \ 986 Represcription 9roer ar
para. 36 (very little weii}lt).
266 47 C.F.R. §65.400.
247 1986 Repmcriptioo O,:der at paras. 19-23.
w See 1987 Notice, 2 FCC Red at 6493-94. paras. 18-28. Cluster analysis use� �riteru to separate
compan.i;-listed on the NYSE into discrete groups and to evaluate the risk: charactenmcs of _mcemate access
service. The group whose risk: characteristics appear closest to those of interstate access service are deemed
comparable to the entities uw provide u:w service, jg_
!69 \990 ReprescTiptioo Order, 5 FCC Red a1 7526. paras. 161-66.
43
r0030703-3026 Issued by FERC OSEC 07/03/2003 in Docket#, RP00-107-000
( )
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
104 FERC ,r 61,036
Before Commissioners: Pat Wood, III, Chairman;
William L. Massey, and Nora Mead Brownell
Williston Basin Interstate Pipeline Company Docket No. RP00-107-000
)
�)· . .
ORDER ON INITIAL DECISION
(Issued July 3, 2003)
1. On December 1, 1999, Williston Basin Interstate Pipeline Company (Williston),
pursuant to Section 4 ofthe Natural Gas Act, filed revised tariff sheets' which reflect a
general rate increase in annual jurisdictional revenue of approximately $13 .4 million,
when compared with the compliance rates filed on November 12, 1999, in Docket No.
RP92-236-000, et al.2 Williston proposed an effective date of January 1, 2000 for the
revised tariff sheets. On May 9, 2001, the Presiding Administrative Law Judge (ALJ),
after extensive hearings and briefing, issued an initial decision deciding the issues raised
in this case.3 Briefs on and opposing exceptions were filed by the parties. For the
reasons appearing below, the initial decision is affirmed in part and reversed in part as
discussed below. This order is in the public interest because it establishes just and
reasonable rates for Williston's services for the period its rates are in effect and provides
for refunds of amounts collected above the just and reasonable rate levels.
1The revised tariff sheets may be viewed on the Commission's web site at
http://www.ferc.gov, using the "FERRIS" link. Enter the docket number excluding the
last three digits in the docket number field to access the document. For assistance,
contact FERC Online Support at [e-mail] or toll-free at
[phone], or for TTY, contact [phone].
2See 89 FERC ,i 61,026 (1999). The rates in Docket No. RP92-236-000, et al.
are only applicable to the locked-in period from June 1, 1992, through
December 31, 1995. Those final rates in RP92-236-000, et al., were superseded by rates
filed and placed into effect in Docket No. RP95-364-000 on January 1, 1996, subject to
refund.
3Williston Basin Interstate Pipeline Company, 95 FERC ,i 63,008 (2001) .
J30703-3026 Issued by FERC OSEC 07/03/2003 in Docket#: RP00-107-000
) Docket No. RP00-107-000 - 14 -
)
32. Regarding the use of a truncated SSA growth estimate, we concur with the ALJ
that a 50-year growth horizon is appropriate. However, we agree with Staff that that 50-
year period should start in 2005 and end in 2055. This is consistent with the forecast
period utilized for the other three long-term forecasts of GDP growth, which all started at
2005. Based on the data in Staffs testimony,43 we conclude that the appropriate SSA
long-term forecast for nominal GDP is 4.87%.
33. We conclude that the appropriate long-term growth rate for the DCF model is
5.00%. This growth rate now replaces the 5.15% rate oflong-term growth that the ALJ
utilized in the ID. This adjustment lowers the ROE TO 12.48% from the 12.52% value
adopted by the ALJ. 44
3. Zone of Reasonableness (Establishment of Proxy Group)
34. An important aspect of the "Zone of Reasonableness" analysis is the determination
of the composition of the "proxy group" - i.e., a group of comparable companies used to
determine what the proper rate of return should be for the company under consideration.
Williston and Staff differ on what constitutes an appropriate proxy group. Appendix B
consists of the various proxy groups considered in this proceeding, discussed by the ALJ
in the initial decision.
35. Four companies comprised the proxy group that the Commission has used in the
past in determining an appropriate ROE: Coastal Corporation (Coastal), El Paso Energy
Corporation (El Paso), Enron Corporation (Enron), and Williams Companies, Inc.
(Williams).45 Early in 2000, El Paso announced its proposed merger with Coastal, which
was consummated in January 2001. Thus, for subsequent proceedings, the Commission
group is only three.46 Both Staff and Williston agreed that a proxy group of only three
43See Exhibit S-14 at p. 14.
44See the Rate of Return in Appendix A of this order.
45ID at 65,090-91.
46ID at 65 ,091. The Commission's criteria for selecting a proxy group for natural
gas pipelines were as follows: (1) the selected company had to be publicly-owned with
publicly-traded stock; (2) the selected company had to own one or more FERC-regulated
interstate gas pipeline; (3) the selected companies were considered by investors to be
reflective of the risks of natural gas pipelines as evidenced by their inclusion in such
) (continued ... )
)30703-3026 Issued by FERC OSEC 07/03/2003 in Docket#: RP00-107-000
,·
I
)
Docket No. RP00-107-000 - 15 -
companies presented problems because "a single company will have a magnified
influence on the group results."47 It was with those changing market dynamics in mind
that witnesses of both Staff and Williston proposed to expand the group of proxy
companies to determine a zone of reasonableness.
36. Staff proposed to expand the proxy group to 15 companies using the following
criteria for its proposed proxy group: (1) the company had to be publicly owned, with
publicly-traded stock; (2) the company had to own 100% of a "major " FERC-regulated
natural gas company; and (3) the company must derive at least 50% of its operating
earnings from a regulated energy-related line of business.48 Using these standards for
proxy group selection, Staff included several companies traditionally considered to be
electric utilities (e.g., Dominion Resources and Duke Energy).
37. In contrast, Williston proposed to expand the proxy group to nine companies
based upon an industry grouping by the Value Line Investment Survey of diversified
natural gas companies, all of which contain FERC-regulated natural gas pipelines. (See
Attachment A to the Rate of Return Exhibit for a complete listing of companies
comprising the proxy groups of the Commission, Staff and Williston.)
) 38. After examining the record in this instant proceeding, the ALJ adopted Williston's
selection of nine diversified natural gas companies from the Value Line Investment
Survey as the appropriate proxy group for establishing Williston's ROE. The ALJ
prefaced the decision to adopt Williston's proxy group with this caveat: "Because
mergers and acquisitions continue to eliminate gas pipelines from the proxy groups, it
may soon be necessary to revisit Staffs position that the number of gas pipeline
46( ... continued)
investor-oriented products as the analysis of diversified natural gas industry companies
that appear quarterly in the Value Line "Investment Survey" publication, the gas
transmission companies in Moody's natural gas industry averages, and S&P Natural Gas
Pipeline Index; and ( 4) the selected companies for which the transmission of natural gas
accounted for, on average, over the most recent three-year period for which data was
available, approximately 50 percent or more of the total dollars in at least one of the two
areas, operating income and total assets. See Exhibit No. S-13 at pp. 15-16.
47 ID at 65,091.
48ID at 65,091. _)
REFERENCE GROUP
) S&P 2002 2002 CaRltal Structure
Bus. Total Long-term Common
Electric Utility (West) SPR Profile Capital Debt Equity Other Beta
1 Black Hills Corp. BBB- 10 8 $ 1, 154 53.6% 45.9% 0.5% 0.85
2 Hawaiian Electric BBB 9 6 $ 2,251 52.0% 46.5% 1.5% 0.60
3 MDU Resources Group A- 7 6 $ 2,120 38.7% 60.6% 0.7% 0.80
4 PNM Resources Group BBB- 10 6 $ 1,967 49.8% 4.9.5% 0.7% 0.80
5 Pinnacle West Capital BBB 9 5 $ 5,568 51.8% 48.2% 0.0% 0.80
6 Puget Energy, Inc. BBB- 10 3 $ 4,077 60.1% 37.4% 2.5% 0.70
7 Sempra Energy BBB+ 8 6 $ 7,312 58.6% 38.6% 2.8% 0.85
8 Xcel Energy BBB 9 6 $11,815 59.6% 39.5% 0.9% 0.75
BBB 9 6 $ 4,533 53.0% 45.8% 1.2% 0.77
Sources
The Value Line Investment Survey (Nov. 14, 2003), Summary & Index (Dec. 26, 2003).
Standard & Poor's Utilities & Perspectives (Dec. 22, 2003).
)
)
December 26, 2003 SUMMARY AND INDEX • THE VALUE LINE INVESTMENT SURVEY Page 5
Recent Price
.·. :.; .': :·,: \
)
PAGE NUMBERS
Bold type refers to
Ratings and Reports;
italics to Selection
& Opinion
NAME OF STOCK
RANKS
Technical % Safetly I 3-5 year Esl'd
I Timeliness Target Price Range Current Yield Ticker J J and' % appreciation P/E next Symbol Beta potential Ratio 12 mos.
Est'd Earns. 12 mos. to 6·30·04
(f) Est'd Div'd next 12 mos.
Industry, Rank
LATEST
RESULTS'.'.'." ""w.��·1
Otr. Earns. Year Otr. Latest Yea( · ·T Ended Per st,. Ago : Ended Div'd, Ago
.44 39 9/30 .36 .35 12131 .11 · .10 .40 19·, 11/30 +.37 27 3131 .10 NIL YES NIL 5 9130 .08 :13 12131 NIL NIL NIL 14' 10/31 d.04 d.04 12131 NIL , NIL YES NIL 16 9/30 .74 .66 12131 Nil NIL- YES
.80 95 .52 16 .66 16 .80 29 NIL 22
896 Bassett Furnilure (NOOJ BSET '15.84 3 3 3 .90 11- 16 (N- N%) 30.5 5.1 189 Bausch & Lomb SOL 51.85 2 3 3 1.00 55· 80 (5- 55%) 22.2 1.0 190 Baxter ln!'I Inc. BAX 30.63 4 2 5 .65 45- 60 (45- 95%) 14.5 2.2 ** 1425 Bear Stearns SSC 76.60 3 3 3 1.35 85-130 (10- 70%) 9.3 1.0 2182 BearinqPoint BE 9.87 3 3 3 1.55 19· 30 (95-205%) 28.2 NIL
868 Beazer Homes USA BZH 100.20 1 3 4 1.20 100-145 (N· 45%) 7.2 0.4 191 Beckman Coulter SEC 49.32 · 2 3 4 .60 60· 90 (20· 60%) 16.8 0.9 192 Beclon, Dickinson BOX 40.34 3 2 5 .75 55· 75 (35- 85%) 17.2 1.5 2632 1711 Bed Bath & Beyond (NIXli BBBY 39.96 3 3 4 1.25 65· 95 (65· 140%) 31.0 NIL 1004 Belden Inc. BWC 20.15 3 3 3 1.30 19- 30 (N· 50%) . 38.8 1.0
725 BellSouth Corp. BLS 27.42 3 2 3 .95 35- 45 (30- 65%) 13.4 3.6 1863 Belo Corp. 'A' BLC 27.65 3 3 3 .95 25· 35 . (N· 25%) 23.2 1.4 928 Bemis Co. BMS 48.52 5 1 3 .95 65· 80 (35· 65%) 15.7 2.3 590 Berkley (W.R.) BER 32.11 3 3 4 .75 50- 70 (55·120%) 8.9 0.9 591 Berkshire Halhaway(j) BAKA 822.25 3 1 3 .85 1000-1220 (20- 50%) 22.4 NIL
1935 Berry Petroleum 'A' BAY 20.25 3 3 3 .65 20- 30 (N· 50%) 13.7 2.2 1712 Best Buy Co. BBY 51.50 1 3 3 1.25 85·125 (65-145%) 20.3 0.8 634 Beverly Enterprises BEV 8.08 2 4 1 1.30 .,7. 12 (N· 50%) 20.7 NIL 1671 Big Lots Inc. BLI 13.83 3 3 2 1.05 25· 35 (80-155%) 18.2 NIL 1794 193 Bio-Rad Labs. 'A' (ASE) BIO 49.10 3 3 5 .85 60· 90 (20- 85%) 13.9 NIL
.52 2.34 2.11 8.27.
.35
13.98 2.93 · 2.35 1.29 .52
2.05 1.19 3.10 3.60 36.72
1.48 2.54 .39 · .76 3.5-4·
.40' .44 .60 NIL .20
1.00 .38 1.12 .28 NIL
8131 .13 .01 1213'1 .20 .20 9/30 .60 .48 3131°. .13 .13 9130 .41 .51 3131 .. 502. :. .582 .11/30 +2.19 1.36 -12131 .. 20.. .17 ::9130 .OS .07 12131 . NIL ... Nil
1 . 9/30 4.18 3.03 12131 ., , 10. . NIL 16 9/30 .62 .49 12131 .... 11 . ·_09 16 9/30 .61 .50 3131 ,o,. .. 15 ' .20 19 11/30 +.33 .25 12131 .. NIL NIL 58 9130 .11 .11 :Y31 .. 05 ·. . .Q5.
33 . 9/30 .51 .35 3/31 • .25 .20 23 9/30 .27 .25 :Y31. . :09_5 . .o75 82 9130 .76 .81 12131 .28 .26 48 . 9/30 .84 .54 :Y31., .07 .06 48 9130 8.81 7.26 12131 Nil: NIL
YES YES YES YES
YES YES YES YES
YES
YES YES
1983 BiC1l)en Inc. SEE FINAL SUPPLEMENT · PAGE 1983 1983 1264 Biogen Idec Inc. (NDO) 8118 37.00 2 3 3 1.20 35· 55 . (N· 50%) 33.9 · NIL 1.09 NIL 42 9/30 .26 22 12131 NIL NIL YES 194 Biomet (NDO) SMET 36.87 2 2 3 .90 40· 60 (10· 65%) 28.4 0.4 1.30 .15 16 11/30 +.32 .27 12131 •NIL NIL YES 842 195 Biosite Inc. (NDQ) BSTE 25.34 3 4 3 1.05 55· 90 (115-255%) 15.6 NIL 1.62 NIL 16 9/30 .38 .24 12131 NIL NIL YES 2248 1252 Biovail Corp. BVF 19.62 5 3 5 1.25 40- 60 (105-205%) 12.5 NIL 1.57 NIL 42 9/30 .22 .47 12131 NIL NIL YES
841 2141 BISYS Group BSG 13.83 4 3 3 .95 25- 35 (80-155%) 16.9 NIL .82 NIL 30 9/30 .15 .20 12/31 NIL NIL YES 118 Black & Decker BDK 48.64 3 3 3 1.05 65· 95 (35- 95%l 11.8 1.7 4.13 .84 45 9/30 1.15 .95 12131 ... 21 .12.· YES 1616 752 Black Box (NDOJ BBOX 41.53 4 3 4 1.25 50- 75 (20- 80% 15.4 0.5 2.69 .20 6 9/30 .64 .74 3/31 .05 -.05 YES vm Black Hills BKH 28.21 Y5 3 3 .85 30- 40 15· 40%) 14.8 4.4 "1.90 1.24 86 9130 .60 .64 12131 .30 .29 1462 1713 Blair Corp. (ASE) BL 24.40 4 3 3 .75 25- 35 (N- 45%) 15.4 2.5 1.58 .60 19 9/30 .10 .03 · 12/31 .15 .15 ·
238 2142 Block (H&R) HRB 52.30 2 3 2 1.15 65- 95 (25· 80%) 14.3 1.5 3.65 .80 30 10/31 .06 d.05 3/31 .20 .18 YES 1461 1714 Blockbuster Inc. 881 17.64 2 3 4 .85 25- 40 (4Q-125%) 11.5 0.5 1.54 .08 19 9/30 .35 .28 12131 .02 .02 YES 399 942 Bly1h Inc. BTH 31.46 3 3 3 .75 40- 60 (25· 90%) 14.0 1.0 2.25 .30 72 10/31 .76 .65 12/31 ... 15 .11 295 Bob Evans Farms [NDO: BOBE 31.00 4 2 3 80 35- 50 (15· 60%) 14.8 1.6 2.09 .50 34 10/31 .51 .56 12131 .12_ .11 396 548 Boeing BA 40.86 4 3 3 1.05 50- 75 (20- 85%) 24.0 1.7 1.70 .68 68 913-0 .32 .46 :Y31 + .17 .17 YES
)
908 Boise Cascade sec 30.18 - 3 - 115 30· 45 (N· 50%) 27.7 2.0 1.09 .60 88 9/30 .43 .09 :Y31 •.1.5 · .15 YES 549 Bombardier Inc. 'B' (TSEIBBDB.TO 5.05b 3 3 2 1.25 10- 16 (100-215%) 20.2 1.8 .25 .09 68 10/31 .09(b) .12(b) 3131 .023(b) .04.S(b) YES 2247 1715 Bombay Co. SBA 7.67 3 3 2 .95 10- 15 (30- 95%) 18.7 NIL .41 NIL 19 . 10/31 NIL NIL 12131 NIL NIL. YES 1716 Borders Group BGP 21.45 3 3 2 .95 40- 55 (85-155%) 13.9 1.5 1.54 .32 19 10/31 .01 d.02 :Y31 :.:'.08 . NIL YES 799 BorgWarner BWA 83.33 3 3 3 1.20 75·115 (N· 40%) 12.7 1.2 6.56 1.00 36 9/30 1.30 1.18 :Y31 ., .25 .18. YES
2183 Borland Sol1ware (NOO) BOAL 8.30 4 4 4 1.20 11· 20 (35-140%) 63.8 NIL .13' NIL 22 9/30 NIL .08 , 12131 · NIL NIL YES 1539 Bosion Beer 'A' SAM 18.31 3 3 3 .50 14- 20 (N· 10%) 24.1 NIL .76. NIL 37 9/30 .28 .02 12131 NIL NIL 196 Boston Scientific BSX 35.78 3 3 3 .75 30· 45 (N· 25%) 38.5 NIL .93 NIL 16 .. 9130 .16 .12 12131 NIL NIL YES 909 Bowater Inc. BOW 44.96 4 3 3 .95 55- 85 (20- 90%) NMF 1.8 d.26 .80 88 9/30 d.96 d.57 :Y31 .20 .20 YES 1798 1897 Bowne & Co. BNE 13.93 4 3 2 .90 15- 25 (10- 80%) N_M_F __ 1c....1 .1_1 _..c.'2--'3_7_9-+--'-9/-'-30_d_._04 __ d_.10_+-1_21_3_1---, . .,...05_5 _ _,·.,...06,---+---
366 Brazil Fund BZF 22.20 2 5 3 .85 17· 30 (N· :JS%) NMF 1.6 NMF .35 13 6/30 17.91(q) 15.43(q) 9/30 NIL NIL 1337 Briggs & Stratton BGG 67.54 3 3 3 1.05 60- 90 (N· 35%) 16.5 2.0 410 1.33 67 9130 .18 d.32 3/31 .33 .32 YES 1586 Brighi Horizons Family (NOO, BFAM 39.71 2 3 3 .80 50- 75 (25· 90%) 24.8 NIL 1.60 NIL 3 9/30 .37 .29 12131 NIL NIL 296 Brinker Inn EAT 31.16 3 3 3 .90 45· 65 (45·110'.1) 14.5 NIL 2.15 NIL 34 9/30 .45 .45 12131 NIL NIL YES 1982 Brink's (The) Co. BCO 21.91 · 3 3 2 1.00 20- 30 '(N· 35%) 26.1 0.5 .84 .10 77 9/30 .21 .41 12131 .025 .025 YES -----�-�-------· 1253 Bristol-Myers Squibb BMY 26.96 3 3 4 1.05 30- 50 (10- 85%) 15.6 4.2 1.73 1.12 42 9/30 .47 .26 :Y31 .28 , .28 YES 256 British Airways ADR(g) BAB 40.31 3 3 2 1.50 30- 40 (N· N%) 22.1 NIL 1.82 NIL 31 · 9/30 2.22 3.21 12131 NIL NIL 1579 British Amer Tobacco ADR BTI 26.71 4 3 4 .45 20· 30 (N· 10%) 21.5 4.3 1.24 1.15 93 9/30 ;30 .37 12131 NIL NIL · YES 753 Broadcom Corp. 'A' (NOC) BRCM 32.33 2 3 3 2.05 20- 30 (N· N%) NMF NIL d.32 NIL 6 9/30 d.09 d.03 12131 NIL NIL YES 1110 Brocade Communic. (NOO) BRCD 5.59 3 4 2 1.65 10- 17 (80·205%) 62.1 NIL .09 . NIL 25 10/31 .02 .07 12131 NIL NIL YES
1338 BrocksAutomation (NOO) BRKS 20.31 2 4 1 1.95 40· 65 (95-220%) NMF NIL d.15 NIL 67 9/30 d.19 d.45 12/31 NIL NIL YES 2143 Brown & Brown BRO 32.42 3 3 3 .90 35· 55 . (10- 70%) 19.8 0.9 1.64 .28 30 . 9130 .38 .29 12/31 .07 .058 1540 Brown-Forman 'B' BFB 92.76 3 1 4 .65 95-115 (N· 25%) 21.7 1.8 4.28 1.70 37 -10/31 1.45 1.18 :Y31 ., .425 .375 YES 1693 Brown Shoe BWS 34.62 3 3 3 .95 35- 55 (N· 60%) 12.2 1.2 2.84 .40 40 10/31 .11 1.17 :Y31 .10 .10
__ 1-'-9-'--36-'-Br-'-ow_n-'('-To'-m,,_) _ln_c.________ TBI 31.46 3 3 5 .6.::_5 _4.::_0·_6:..:0 _ _,(2:..:5_· 90:.::__;,%)'---'-14c.:.9_-'--N...::IL _ __::.2.-'-11'---"-Nl.::.L_39..:..:...,,-.c9--'/3.c..O _.cc39'---'-d.-'-'05�,__1213_1 __ NI_L __ N_IL_-+--Ycc-ES,-
1843 Brunswick Corp. BC 30.82 4 3 3 1.20 . 35- 50 . (15· 60%) 17.6 1.6 1.75 .50 66 9/30 .41 .26 12131 .50. .50 · YES 1233 Brush Engineered SW 14.35 2 3 2 .85 18- 30 (25-110%) NMF NIL d.10 NIL 20 9/30 d.18 d.18 12131 NIL' NIL 327 Buckeye Partners L.P. BPL 44.38 4 2 3 · .60 35- 45 (N· N%) 16.8 5.8 2.64 2.59 76 9130 ,68 .74 12/31 .638 .. 625 1717 Buckle Inc BKE 21.05 3 3 3 .80 25- 35 (20- 651,) 13.5 1.9 1.56 .40 19 10/31 .56 .52 3131 •.10 · Nil YES
___ 8_82_8_ui_ld_in�g_M_a1_en_·a_ls __ lN_DO_·�i BMHC 14.83 S 3 3 .75 20- 35 (35·135%) 8.9 1.6 1.66 .24 35 9/30 .64 .73 3131 • .06 .. 05
1484 Bunge Ltd. BG 31.23 4 3 4 .45 50- 75 · (60-140%) 11.4 1.4 2.74 .44 70 ·9130 .88 .96 :Y31 +.11 .10 . YES 1718 Burtington Coat BCF 20.56 4 3 3 1.00 25· 35 (20- 70%) 12.5 0.1 1.65 .03 19 8131 d.38 d.36 12131 ... 03 .02· 286 Burlinglon Northern BNI 32.25 4 3 4 .90 35- 50 (10· 55%) 14.7 1.9 2.20 .60 so· 9/30 .55 · .51 :Y31 .15 .12 YES 1460 1937 Burlinglon Resources BR 54.83 3 3 5 .75 45- 70 (N· 30%l 13.1 1.1 4.20 .60 39 9/30 1.33 .27 :Y31 .15 .138 YES · 855 Buller Mtg. BBR 21.07 3 3 3 .65 17· 25 (N· 20% NMF NIL d.69 NIL 71 9/30 NIL .27 12131 "'NIL .18
2184 CACI lnt'I 'A' CAI 46.47 2 3 2 .80 55· BO (20· 70%l 24.5 NIL 1.90 NIL 22 9/30 .44 .32 12131 NIL NIL YES 550 CAE Inc. \TSE1 GAE.TO 5.38 5 3 3 .90 •tO· 15 (85·180% 12.8 2.2 .42 : .12 68. 9/30 .07(b) .11(b) 12/31 .03(b) .03(b) YES 297 CBRL Group iNDOJ CBRL 38.52 3 3 3 .95 45- 65 . (15- 70%) 15.7 1.1 2.45 .44 34 : 10/31 .56. .45 12131 ., .11 NIL YES 1291 COi Corp. COi 32.51 4 3 3 .90 25· 35 (N· 10%) 25.0 1.1 1.30. . .36 63 .. 9130 .30 .27 12131 .09 NIL 1719 CDW Corp. (NDOi CDWC 59.96 3 3 2 1.25 75-115 . (25· 90%) 25.0 0.5 2.40 .30 19 9130 .58 .63 .12131 +Nil NIL YES
2622 298 CEC Enlertainment CEC 49.10 1 3 2 .75 65· 95 (30- 95% 16.8 NIL 2.93 . NIL 34 9/30 .73 .59 12131 NIL· . NIL YES 1081 CEVA, Inc. (NOQ) CEVA' 9.31 - 5 - NMF 14· 25 (50-170% NMF NIL d.02. NIL 17 9/30 :01 .03 12131 NIL NIL 156 CH Ener9y Group CHG 45.10 5 1 3 .75 40- 50 (N· 10% 17.6 4.8 2.56 2.16 98 . 9/30 .30 .. 37 12131 ·· .54 .5-4 328 C.H. Robinson (NDOI CHAW 37.64 3 3 4 .80 45· 65 . (20- 75% 26.7 1.3 1.41 .. 48 76 9/30 .34 .30 :Y31 .... 12 .08 YES 2247 635 CIGNA Corp. Cl 55.26 3 3 5 .95 · 60- 90 (10- 65% 10.6 2.4 5.19: 1.32 5 9130 1.39 d6.18 3/31 .33 .33 YES -'---29_9_C�K_E_Rc-e-sl-'au-ra-n-ts C.,..K-R--5.,-80�-3-5_2_1--'.o'-o---'-'-9.-1'--'6---'(5...;.5_·17'-'-5-'%)'---'-'18-'-'.1----'N,-IL---'--.-'-'31---'-Nl,-L-34-+--'100--'--1-.,-04--'-_-01-1--1-21-31,-·-- . .,..,N7IL--N,-,-L-1-:-Y:=E:=-S
701 CMS Energy Corp. CMS 8.01 3 4 1 1.20 . 6- 11 (N· :JS%) 13.8 NIL .58 NIL 87,. 9/30 d.22 .08 12131 · :NIL .18 YES
To subscribe call 1-800-833·0046 .
(•I All data adjusted for announced stock split or stock dividend. See back page ol Ralings & Reports. • New figure this week. (bl Canadian Funds. d Deficit
(h) Esl'd Earnings & Est'd Dividends after conversion to U.S. (fl The eslimate may reflect a probable increase or decrease. dollars at Value Line estlma1ed translation rate. · It a divid�nd boost.or cut is possible but nol probable, O) · All Index data expressed·in hundreds .. · lwo ligures are shown, lhe first is the more likely. (p) 6 months · (q)' Asse1_Value (g) Dividends subject to· foreign withholding tax for U.S. residents. N=Negati\ie figure NA=Not available NMF=No m�ngful figure ------------------------------------------� IC 20Q3,.- Valu� Line Publishing, lnc .. All ·nghls reserved. Faclual material is oblained lrom:sources believed lo be reliable and is· provided wi1hou1 warranties ol any kind. .THE' PUBUSHER IS NOT RES�ONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publicalion .is striclly lor subscriber's own, non-commercial, inlemal usa. No part of a may be reproduced. 1esold. storedor transmined in any printed. el&lfonic or olher lorm. a, used _lor gen�rating or marketing any printed 01 electronic publication, service or product.
)
December 26, 2003 SUMMARY AND INDEX • THE VALUE LINE INVESTMENT SURVEY Page 11 HA�IN
YES
YES
.16
NIL
.-;f Do Optlons-.Trade? •
LATEST RESULTS
Industry Rank
% Est'd Yield· next 12 mos.
Current PIE Ratio
:5. 05 ,·.0.100 :o:;. 3.5 5· 10 50· 75
3-5 year Target Pnce Range and % appreciation potential
.'.)5
.so
Be,fa
1. :�
·1 l'J :.c10 : ::.:o i.bO
.} 1.0:1 � .c5 3 1.f,5 3 ;i!j 2 t .. !;(1
S 1 ·;c:
.ltJCl111::;,il
3 4 l .• 1
5 s
2 3 J
RANKS
46.54 69.96 29.45 4.51 40.88
ESI ITT
IDA
IONX IEX i:'IDC'
Recent Price Safe!y . · - · -··-·- - ··· , Timeliness Ticker ! Symbol NAME OF STOCK
759 Harmonic. Inc. 1883 Harrah's Enlertain. 1033 Harris Corp. 566 Harsco Corp. 1925 Harte-Hanks
1591 ITI Educanonal 1391 in lnduslnes 1781 IDACORP, Inc. 1118 ldentix Inc. 1351 IDEX Corp.
211 IDEXX Labs. (NGO. 111XX 45.77 1141 IKON Office Solution IKN 11.60 567 Illinois Tool Works ITW 81.81 212 lllumina Inc. 1'·IGC ILMN 6.97 1265 lmClone Systems \NDS; IMCL 39.24
1974 Imperial Chem. ADR(g) ICI 13.20 430 Imperial Oil Ltd. iASEi IMO 42.16 213 lnamed Corp. (Ni:'O! IMDC 48.52 1235 lnco Limited · N 36.89
666 lncyte Corp 1NOG: _1�1_{2�---··--�·�!'... .... 1168 Independence Cmnty :::&f. ICBC 35.10 2 1016 lnFocus Corp. ,IIW INFS 8.70 3 .\
967 Hancock (J) Patriot Div 240 1848 Handlernan Co. 1900 Harland (John H.) 1849 Harley-Davidson 1032 Harman lnl'I(•)
239
842
1305
1986
2246
2580
1307 1796
PAGE NUMBERS
Bold type refers to
Ratings and Reports; italics to Selection
& Opinion
2644
Es!'d E�l·d Earns. Div'd 12 mos. next to 12 Qtr. Earns. Year Otr. Latest Year 6·30-04 mos. Ended Per sh. Ago • Ended · Dlv'd.. . Ago
PDF 9.79 ·:;·--�;o----;�·1-: --i-N·--1-0'-,l-N_M_F--6.-6 __ N_M_F 6_5_5_3 +-9-/30--8-.8-2(-q)-8-.30(-q)..--1_2/3_1 -.2-3-2--.1-6-2-+-
HOL 19.70 4 ,01} '.!Q- �O iN· 50',) 14.0 1.4 1.41 .28 66 10/31 .34 .61 3/31 .07 NII:-. JH 27.51 3 70 3u· so 110- 80%) 15.8 1.5 1.74 .40 79 9130 .52 .53 12131 .10. .075 HDI 46 50 3 r.rc 30-140 (95·2CO'-o) 18.0 0.7 2.58 .32 66 9/30 .62 .54 12/31 • .08 .035 YES .... 1:0� _ .?_O.£_ __ 1 -- 3 i.: 5 • ��--� __ (N· N'i,) __ 33_.6 __ 0_.1 2_.1_0 __ ._05_4_1-+-' _9_13_0 __ .2_9 __ .1_5 __ t2!_3_t __ .o_t3 __ .0_1_3---+Y_E_S
HLIT 6.79 2 2.00 7- P i5- 75'.) NMF NIL d.37 NIL 6 9130 d.12 d.63 12131 NIL NIL YES HET 48.26 3 3 i.,•v ,,O- 85 i25· 75%) 16.5 2.5 2.93 1.20 46 · 9130 .93 .92 12/31 .30 NI( YES HRS 38.00 J 3 YO -10· 60 15· 60%) 24.7 1.1 1.54 .40 41 · 9130 .39 .30 12/31 .10 .08 YES HSC 43.C8 4 3 I.GO -10- 65 (N· 501,) 18.7 2.6 2.30 1.10 91 9130 .57 .62 3131 •.275 .263
••• ----��--21.3!!_ .3. .. ? �Q. __ 2�--3�-- -�1.?:-6_r;�). __ 2 __ 0_.2 __ 0_.6 __ 1._06 __ .1_2_64--+_913_0 __ .2_6 __ ._24_,___1_21_3_1 _._03 __ ._02_5_._Y_E_S
2156 Hartford Fin"I Svcs. HIG . 56.99 3 3 1.25 55· 85 !,. 50\;) 10.7 2.0 5.34 1.12 ·30 9130 1.20 1.15 3131 •.28 .27. YES 1850 Hasbro. Inc. HAS 20.29 3 .3 2 .'J5 /0- 3S N· 70%) 16.6 0.6 1.22 · .12 66 .9130 .48 .33 3/31 +.03 .03 · YES 1738 Haverty Furniture HVT 20.13 3 3 3 t .JS 25- 35 11:> 75',) 16.5 1.2 1.22 .25 19 9130 .33 .27 12/31 •.063 .058
1�:� �:::��e�:��c INOO __ }(D!!L Jt�� ----�J�. Jt Jt�L_1:.,;�::i 1t� Ji� f� 2Jit �; ' �:a ::i ·91 rn�: i[ i1t YES ---11_8_9_H.,..e...,al.,..th....,C,...a-re...,P,...rop-ert-y�- HCP 49.40 2 3 o5 50· 70 (N- 40-%)�-23-.6--6-.7--2-.0-9--3.-32�9....,7-+-._-9.,..13-0--.5-'-2--:�-'�-+-.,-12fc..,3'--1-·-.83---.83...c...·:-+y-E=-S
639 Health Mgmt. Assoc. HMA 23.10 J 3 80 40- 60 175-160%) 17.4 0.3 1.33 '.08 5 9/30 .28 .24 12/31 .02 · ,02.' YES 1190 Healthcare R'lty Trust HR 35.82 2 ,1 60 3'.i· 45 N· 25',) 18.5 7.1 1.94 2.54 97 · 9130 ,42 .44 12/31 •.625 .sos 270 Heartland Express !MOO HTLD 24.64 2 3 3 .BS 18· 25 N· N�,) 22.4 0.4 1.10 .10 38 9130 ,29 .22 3/31 .02 Nil YES 1294 Heidrick&S�•DO, ... _ ... HSII .. 22.02 3 3 1 11:i W- 30 _N· 35%) 75,9 N_IL 2_9 __ N_IL_6_3--+-_9_i3_0_._I0 .0_7-+_121_3_1 __ N_IL __ N_IL_+Y_E_S
1494 Heinz (H.J.) HIJZ 35.90 3 1 .$5 50- 60 14(). 65%) 16.0 3.0 2.24 1.08 70 10/31 .54 .50 3/31 .27 .405 YES 822 Helen ofTroy Ltd. ,NDO! HELE 22.56 .-2 3 .85 30- 50 :35·120%) 12.3 NIL 1.84 NIL 12 · 8131 .42 .30 12/31 Nil NIL. YES 1350 Helix Technology iNOC, HELX 19.40 3 4 1.55 25· 40 130·105%) NMF 0.8 .12 .16 67 9130 d.02 d.08 12/31 .04 .04" YES 1953 Helmerich & Payne 'HP 26.62 - 3 - Ni-,lF :15- !>5 i30·105�,) 32.1 1.2 .83 .32 85 9130 .15 .09 3/31 .08 08" YES
2199 Henry (Jack) & Assoc. iNDQ; ,IKHY 21.00 3 t 1r. '311· 40 14:5·. ��). 32'--.3 __ 0 __ . 7 __ ..c.6..:.5 __ ._14_2_2-+--'913-'-'-0_ . .c.15-'-·--'-.1-"-3-+-'-12/3c.c.c1_c.:·03c.:.5"------".03cc.:.5 _: +.:.-YE=-S
489 Hercules Inc. HPC 11.75 3 ;,o 13- 20 (10· 70',j 14.9 NIL .79 Nil 81 9i30 .21 d.32 i2/31 NIL NIL'. YES 1495 Hershey Foods HSY 76.98 i er; ;c0-125 (3�· 6�?·! 20.S 2.1 3.69 1.58 70 - '9130 1.15 1.01 12/31 • .395 .328 YES 1295 Hewitt Associates ·A' HEW 29.90 - 3 - Ml,iF 40- 55 13.1· 85<,1 23.2 NIL 1.29 NIL 63 . 9130 .33 .31 12131 NIL NIL" · YES 1117 Hewlell·Packard HPO 21.96 3 1 .,5 15- 50 (6[}130%1 16.1 1.5 1.36 .32 25 10/31 .36 .24 3/31 .08 .oa.: YES 2112 Hibernia Corp. 'A' Hl8 23.06 2 9�, 2_5_:_� .. (IQ._5_0'�;;j 1_3_.0 __ 3_.1 __ 1_.7_7 __ .7_2_5_9-+-_9_fJ_0_:_44 .4_4--+_121_3_1_•_.1_8 __ .1_5_· .--+Y_E_S
1389 Hillenbrand Inds. HB 58.40 2 ?,.1 85·115 1,5. 95',) 13.5 1.8 4.31 1.08 n 9/30 1.08 .85 12/31 •.27 .23· · YES
1884 Hillon Hotels HLT 16.45 3 : !C lil- 25 IN· 50'.,.) 35.6 0.5 .45 .08 46 9130 .09 .11 12/31 .02 .02 YES 835 Hispanic Broadc. 'A' Sff ;:;,JAL SUi'PLEMENT - PAGE 835 1564 Hitachi. ltd. ADR(g) HIT 58.45 1 OJ d0·120 !35-105�,) 41.8 0.9 1.40 .55 27 9/30 1.19 .51 12131 .276 .239 YES 1912 Hollinger lnt'I 'A' HLR 14.72 ... , 14· 20 IN· 35',) _ ��-6 1.4 .17 .20 62 . 6130 .27 d.02 3131 .05 .05 YES
414 Holly Corp. !ASE. HOC 27.42 Fi 30· 45 (10· 65%1 13.4 1.6 2.05 .44 50 ' 9130 1.09 NA 12/31 , .11 .11.' 884 Home Depot HD 35.14 1 JO 75·100 (115-185%) 18.2 0.8 1.93 .28 35 10/31 .50 .40 12/31 .07- .06 -: YES 899 HON Industries Inc. HNI 42.00 .85 30· 50 (�·. 20;�1 22.8 1.2 1.84 .52 95 · 9/30 .ss .46 12/31 .13 .125 YES 105 Honda Molor ADR(g) HMC 20.96 70 35· 50 /fo-,40,,) 8.7 0.7 2.41 .is 43 ':9130 .65 .38 12131 .086 '. .067· YES ** 1390 Honeywell lnt'I HON 30.26 1.25 . �2:�- .. (30·100'�) 20.0 2.5 1.51 .75 n · 9130 .40 .50 12131" · .188 .188 · YES
663 Hooper Holmes ;ASEi HH 6.10 3 3 05 -e- 12 (JO· 95%) 27.7 0.8 �.22 .05 28 9130 .05 .05 12131.· .013 .01· YES 1496 Hormel Foods HRL 25.95 3 I 3 .60 35· 40 (35· 55%) 16.4 1.7 1.58 .45 70 10/31 .50 .49 3/31 :o..113 .105 YES 870 Horton D.R. DHI 42.69 I 3 3 1.20 35- 55 (N· 20',) 10.0 0.7 4.27 .28 1 9130 1.46 .92 12/31 ·· .07 · .06 · YES 1191 Hospitality Properties HPT 41.22 5 3 3 .R(1 1!i- 50 IN· 20%) 19.7 7.0 2.09 2.90 97 · 9130 .49 .58 12/31 .72 .72 . YES
1739 Hol Topic, Inc. 1NDCi __ H02_� 3_8.J.�.- 1_ 3 2.. 1_0� _ . 30· 40 (�: 40':,) 28.8 NIL .98 NIL 19 10/31 .31 .21 12/31 NIL NIL YES
871 Hovnanian Enterpr. 'A' HOV 88.26 3 l.10 80-120 1N· 35�',} 9.8 NIL 9.04 NIL 1 10/31 2.79 1.67 12/31, NIL NIL. YES 1015 Hubbell Inc. 'B' HUBB 44.65 ? I.OS 45- 60 N· 35%) 22.1 3.0 2.02 1.32 58 9/30 .54 .49 3/31 .33 .33' 2113 Hudson Uniled Bancoro HU 36.17 J � J , .,io 45· 65 115· 80%) 13.1 3.5 2.77 1.26 59 '' 9130 .68 .60 12131 .30 .28 ·· YES 1679 Hudson's Bay Co. •iS:· Hl"C.TO 11.35 b 2 3 .:G ·, 7· 25 150·120',i 9.5 3.2 1.20 .36 14 10/31 .08(b) .07(b) 3/31 +.09(b) · .09(b) 398 1851 Huffy Corp. . •.•.... ·---��£... 5.19 4 3 1 i:00 8· __ 1_2 15.�130'·,l__NMF N,...1L .02 __ N=IL_· _6_6+-_913-0_._15 .1_4-+_121_3'--1--'N_IL __ N,...IL_· -r+r-r-e- 833 Hughes Electronics GMH 15.06 ·- 3 1 ?5 ·,o. 30 (35-100%) NMF NIL .07 NIL 32 9/30 d.02 d.01 12/31 NIL NIL· YES 885 Hughes Supply HUG 48.16 ,l 3 1.10 :15. 55 (N· 15%) 18.6 0.8 2.59 .40 35 10/31 .76 .84 12/31 .10 .085 YES 676 Human Genome !·'ii)Ci HGSI 12.62 4 4 1.50 •?5· 40 il00-215%) NMF NIL d1.72 NIL 56 9130 d.37 d.33 12/31 NIL NIL YES 640 Humana Inc. HUM 22.50 1 3 1.05 25- 40 (10· 80%) 14.5 NIL 1.55 NIL 5 9/30 .38 .31 12/31 NIL NIL' YES 271 Hunt (J.B.) (ND01 JBHT 26.27 Y2 3 1 30 25- 35 (N· 35%) 20.2 NIL 1.30 NI� 38 ·.·9130 040 .21 12/31. ·NIL NIL YES
622 Huntington Bancshs. 1Nao; HBAN 22.01 3 3 • �5 �5- 3� (15:-6-�)--13.3 3.2 1.65 .71 75 '9/30 .39 .38 3i31 .175 135 Hutchinson Techn. iNDOi HTCH 30.02 3 3 ,.,.5 . .,0. 4o (N· 50',) 14.6 NIL 2.06 NIL 65 ··9130 .51 .28 12/31 NIL ICN Pharmaceuticals tJ,,MC: CHANGED TO VALEANT PHARMACEUTICALS INT'L IDEC Pharmac. NAMf CHANGED TO BIOGEN !DEC INC. 732 IDT Cop. ---- _I_D_T�- !�,�s .. Y4 3 1.11) _2��-�? 13_5-_90 __ '�k)�N_M_F __ N_IL .1_0 __ N_I_L_33�-10/_3_t_•_d_.1_7 __ d_.1_1 __ 12/_3_1 __ N_IL __ N_IL __ Y_ES_
664 IDX Systems (NOG' IDXC 26.57 1 3 .!i:i 35- 55 130-105%) 32.0 NIL .83 NIL 28 9130 .19 .14 12/31 · NIL NIL YES 303 IHOP Corp. IHP 36.00 3 3 .85 25· 40 (N- 10%) 19.7 2.8 1.83 1.00 34 ·'9/30 .54 .46 12/31 .. 25 NIL-·. YES 136-11-VI Inc. (NOC: IIVI 22.84 3 4 .ro 25- 40 (10- 75%) 24.0 NIL .95 NIL 65 9/30 .21 .16 12/31 NIL NIL·:. 1973 IMC Global IGL 9.26 ·1 3 :. !5 13· 20 (40·115%) NMF NIL d.22 NIL 92 :·. ·9130 d.12 .07 12131 •NIL·. .02 YES 665 IMS HEALTH RX 24.20 3 :\•; ,,. 30 '15·_25'·,) 22 __ ._6 0_.3 __ 1_,0_7 __ ._08_2_8-+-·-9_13_0 __ .29 .2_7-+_121_3_1 __ .0_2 __ .0_2_.,__YE_S
[N- 40\1 34.7 NIL 1.34 NIL 3 9/30 ;34. .26 12131 NIL NIL. YES 115· 45".l 16.8 0.9 4.17 .64 77 9/30 .96 .94 3/31 .16 .15: YES N· 20'i,i 18.4 4.1 1.60 1.20 86 9/30 .96 .98 12131 •.30 .465 YES (10-120S,) NMF NIL d.22 NIL 25 9/30 d.05 d.08 12131 NIL NIL. YES
120· 85'{. __ 21_.2 __ 1.,...4 __ 1...c..9..:.3 --'·5_6 ., _67-+-_9/_30 __ .4_9��·4-'-5-+........:.3/..:.31_+_.1_4 __ ._14_. ·_, -+. _YE,,..:..S
JO- G5 IN· 40%1 26.3 NIL 1.74 NIL 16 · 9/30 .44. .36. 12/31 NIL NIL YES ii- 19 iN· 65%) 14.1 1.4 .82 .16 60 . 9/30 .18 .21 12/31 .04 .04· YES 90·120 (10· 45'i.) 23.1 1.2 3.54 . 1.00 91 9/30 .87 .79 3131 .24 .23·· YES .s- 25 1115-260'oi NMF NIL d.80 NIL 16 9/30 d.17 d.24 12/31 NIL NIL
'i5·100 . (s0-155'1) N...,M_F __ N.,..l"c-L __ d1,....9...,.4_...,N_IL,......,4...,.2+-...,.9/30,,..,--d_.2...,,2 __ d_.s,..,1-+_121...,3_1_N_l,..,L __ N.,..1L,..,.-+-,Y:c,ES,..
?.•l· �5 (50·1651;) 11.8 3.0 1.12 AO 92 ·· :9130 .39 .44 12/31 .183 .208 ·· YES
,tQ. 55 iN- 30%j 14.5 1.5 2.90 .65 84 · 9/30 .74 .58 3131 .163 .134 YES 40- 55 IN- 15%} 30.0 NIL 1.62 Nil: 16 9� .35 .29 12131 · .NIL NIL YES ,10- 60 110· 65%) 31.3 NIL 1.18 NIL' 20 . ·9130 .07 .24 · 12/31 NIL NIL YES 10- 16 (55·150%) NMF NIL •dl.73 NIL 28 · '9/30 d.60 d.45 12/31 NIL NIL YES
;15- 55 (N· 55%) 13.4 2.3 2.62 .80 73 9130 ;54 .59 12/31 ..i..20 .14. YES
7· 12 IN- 40%) NMF NIL dl.30 NIL 58 9/30 d.49 d.23 12/31 ·'.NIL NIL YES
1796 1462
)
)
)
(•) All data. adjusted !or announced stock split or stock oiv;der,d. See back page ol Ralings & Reports + New 1igure this week. (b) Canadian Funds. d Deficit.
ill ,I,,; ,!Slimnle may reflecl a probable increase or decrease. 11 ,1 ,:liv,dend boost or cut is possible but not probable, :wo figures are shown, the tirsl is 1he more likely. i41 t)ividancls subjecl to foreign wilhholding tax for U.S. residents.
To subscribe call 1-800-833-0046.
December 26, 2003 SUMMARY AND INDEX • THE VALUE LINE INVESTMENT SURVEY Page 13
•j) Qo Opli!ln• Trade?,. Industry Rank (1)1 _
% Est'd Est'd Est'd Earns. Olv'd . LA�EST RESULTS Yield 12 mos. next I -----------� next . to 12 J � Earns. Year Otr. Latest Year ·· 12 mos. 6-30-04 mos. I Ended Per sh. Ago ·Ended.·, Div'd. ,. Ago
RANKS
Recent Price
Technical
Safety I 3.5 year I Timellnesjs j I Target Price Range Current Ticker ana. l'o appreciation P/E· . NAME OF STOCK Symbol I Beta . potential flatlo
PAGE NUMBERS
Bold type refers to
Ratings and Reports;
italics to Selection
& Opimon )
YES YES YES
YES YES YES
YES YES
YES
YES YES YES
YES
YES YES
To subscribe call 1-800-833-0046.
.40 19 , 10/31 .04 NIL 5 .9,'30 .59 .64 67 , 9/30 .34 1.40 47 9/30 .87 .20 67 .8/31 .16
.24 17 '· 9/30 .22 Nit. 19 . 9/30 .e: . 23, 74 ; 9/30 .89 . .ss 68 9/30 .66 .. 60 30 9/30 ,39
.70 34 9/30 .15 NIL 91 . ' .9/30 d.51 .56 4 ·10/31 :14. NIL 88 . 7/31 NIL NIL 88 9.'30 .94
. 12 35 .10/31 .56
1i1t 81 ·: 9/30 .48 8 . 9/30 .02 . 24. 19 ·9130 .19 . .90 89 .· 9/30 d.27
1.26 59 · .9130 1.38 ,80 30 9130 1.31 M 30 9i30 .51 .50 1 ;9/30 2.16 . 69·. 86 : .9/30 .57 .
.40 53 •. 4/30 6.72(q) 1.35 87 , 9130 .56 .15 30 · '9/30 1.02 NIL 46 : .9.'30 .36 NIL 61 : 9/30 d.03
NIL 63 . 9/30 .05· .20 67 8131 .20
2.9 3.43 1.60 49 9130 .71 .66 12131 .40 .. .1.0 5.8 2.11 2.64 49 9/30 .49 .50 l?/31. •:66. · .61 . NIL 1.55 NIL 42 9/30 .41 .35 12i31 'NIL .. NlL NIL 1.84 NIL 11 .' 9/30 .46 .43 12131 . :' .f'IL . ,,NIL 1�2? __ !.}-06� � __:!?_:_ .67 12131 .: . :32 . . �7.
NIL .71 NIL 30 . 9/30 .20 d.01 12/31 NIL . NIL NIL 2.00 NIL 14 10/31 .35 ';39 12/31° ''.NIL.·. �IL
445 Kinder Morgan KMI 56.04 3 3 4 .80 75·110 (35- 95%) 16.3 446 Kinder Morgan Energy KMP 45.26 3 2 3 .65 45· 60 (N· 35%) 21.S 1614 1267 King Pharmac. KG 14.27 3 3 5 1.10 40- 65 (180.JSS;t'l 9.2 281 Kirby Corp. KEX 33.00 3 3 3 .85 35- 50 (5- 50% 17.9' 1913 Knighl Ridder KAI 74.50 3 2 3 .85 85-115 (fS- 55% 19.9
1154 2160 Knighl Trading Group (NOO;-Nlff- 13.47 1 3 1 1.60 · 17· 25 (25· 851\l 19.0 1680 Kohl's Corp. KSS 45.50 4 3 3 1.15 80·115 (75·155%) 22.8 Koninklijke PhiUps NV SEE PHILIPS ELECTRONICS NV , - 1303 Korea Electric ADR(g) SEE FINAL SUPPLEMENT· PAGE 1303 ' . I 371 Korea Fund KF 17.40 3 4 3 1.00 17.· 30 (N· 70%) NMF 1.1 NMF .20 13 6/30 17.62(q) 20.20(0) 9/30 ,. NIL 'iii(
534 1297 Korn/Ferry lnt'I KFY ·12.39232,:05 14· 20 (15- 60%) 47.6 -· NIL .26 NIL 63 10/31 .06 d.05 12i31 NIL . NIL 1500 Kratt Foods KFT . 31.49 3 1 4 .60 45· 60 (45- 90%) 15.7 2.3 2.01 .72 70 9130 .46 .50 3i31 .18. : .15 YES 305 Krispy Kreme KKD 36.34 3 3 2 1.20 65· 95 (S0-160'!,) 34.6 NIL 1.05 NIL 34 10/31 .23 .17 121'31 .. NIL' .:NIL YES 535 1522 Kroger Co. . KR 17.25 4 3 3 1.05 30· 45 (75-160'/,) 19.4 NIL .89 NIL 78 10/31 .15 .34 12131 NIL. NIL YES 339 Kroll Inc. (NOOI KROL 25.50 3 3 3 .60 55- 80 (115-215%) 19.9 N_IL __ 1.2_8_ NIL 76 9/30 .29 .18 12131 .NIL NIL YES
139 Kronos Inc. . (NCO) KRON 39.66 2 3 3 1.20 35· 55 (N· 40%) 30.7 NIL 1.29 NIL 65 . 9/30 .39 .35 12131 NIL . , NIL YES 2248 1098 Kulicke & Soffa INDO; KUC 13.66 . 3 5 1 1.85 7· 13 (N· N%) NMF NIL d.57 .NIL 61 '9/30 d.57 d.57 12/31 .·-. NIL NIL Y,ES 1565 Kyocera Corp. ADR(g) KYO 63.90 . 3 3 3 .95 100-150 (55·135%l 30.4 1.0 2.10 • .65 27 9/30 .77(p) .86(p) 9/30. . .25 .. ·.255 556 L-3 Communlc. Hldgs. LLL 47.80 2 3 3 .90 75-110 (55-130% 15.5 NIL 3.09 NIL 68 .• 9/30 :74 .62 J12121�11 · .. NNIILL ·.NIL YES 1071 LSI Logic · ---·- LSI 8.37 2 4 1 _ 1.95 25· 40 (200-380% 55.8 NIL .15 NIL 17 9/30 .04 NIL • . "ill YES
901 La-Z-Boy Inc. LZB 20.05 5 3 3 1.05 30· 40 (5(HOO%) 16.4 2.0 1.22 .40 95 10/31 .30 .50 12i31 .10 ,10 . YES 641 Laboratory Corp. LH 34.98 2 3 3 .95 SQ. 75 (45-115%) 14.6 NIL 2.39 NIL 5. . 9/30 .59 .46 '12131 NIL '. NIL YES 464 Laclede Group . LG . 28.43 . 4 2 3 .70 25· 30 !lN- 5%) 15.9 4.7 1.79 1.34 96 9/30 d.21 d.28 :J/31 .335 .335 891 Lafarge No. America LAF 39.58 4 3 3 1.00 40· 60 N· 50%) 11.9 2.0 3.32 .80 44 .9/30 1.99 1.94 12131. •20 .15 YES 1099 Lam Research (NDO! LRCX 30.76 2 3 3 1.90 30· 45 . N- 45%) NMF NIL .26 Nil 61 9/30 .04 .02 12131 NIL NIL YES
1927 Lamar Advertising (NDOJ LAMA 36.85 3 3 3 1.25 45· 70 (ZO. 90%) NMF--N-IL--d-.-16--N'iL 64 · · 9130 d.06 d.06 12131 NIL NIL YES 1017 Lamson & Sessions LMS 6.25. 3 4 1 1.10 10· 17 {60.170%) 14.9 NIL .42 NIL 58 .. 9/30. .11 .19 12131 .. NIL. · Nil 949 Lancaster Colony (NOQ\ LANC 43.00 4 2 3 .70 45· 60 (5- 40%) 16.4 2.1 2.62 .92 72 .• ��� .55 .56 12131 •.23 ' .. 20 YES 1501 Lance, Inc. (tIDO) LNCE 14.19 2 3 2 .60 12· 18 (N· 25%) 18.4 4.5 .77 .64 70 """" .26 .18. 12131 ... 16 16 306 Landiy's Reslautants LNY 24.46 2 3 3 .85 35· 55 (45·1?5%) 13.3 0.4 1.84 . .10 34 9130 .65 .55 12131 · .025 . ·, ,·02$. YES
1072 Lattice Semiconductor (NDQ\ LSCC 8.50 4 4 3 1.70 15· 25 (75-195%) NMF NIL .03 NIL 17 9/30 d.03 .06. 12131 NIL · ·.NIL YES 823 Lauder (Estee) EL 37.27 3 2 4 .90 50· 70 (35- 90%) 25.7 0.8 1.45 .30 12 9/30 .33 .28 . 3131 . o!> .. 30 .20 YES 569 Lawson Products INDOI LAWS 33.00 4 1 2 .60 45· 50 (35- 50%) 17 .. 2 2.2 1.92 .72 91 9/30 .46 .39 3131 :0:.'18 .16- 1855 LeapFrog Enterpr. 'A' . LF 25.83 - 3 - NMF 35· 55 (35-115\;) 18.6 NIL 1.39 NIL 66 . 9/30 .SS .50 12131 Nil. . Nit YES
__ B_O�Lear Corp. LEA 59.32 ��--65-100 _j10. 7�1 10.6 1.3 5.60 .80 36 .. 9.'30 1.10 .91 3/31 .•'.20 ·. .Nil YES
1592 Learning Tree lnt'I moo: LTRE 16.28 3 3 2 1.10 15· 25 IN· 55%! 49.3 NIL .33 NIL 3 9/30 .08 .07 12131 NIL . NIL· YES
1�n���11rpt:,s m ��:�� � � � 1:: �� �5 ,1n::) �t g i:i� :��- :� ·��� :!: :�� :ri ·:it :K m
2688 1428 Legg Mason. LM 75.65 1 3 3 1.40 70-105 (N· 40%) 21.3 0.8 3.55 .60. 29 , .. 9/30 ,83. .66 3i31 .)5.;: ··.11 . YES . 837 1429 Lehman Bros. Holdings_ LEH 73.39 T3 3 4 1.55 85· 130 -�� 11.5 0.7 6.38 __ .. 4_8_2_9_,_··1_113_0_•_1_.1_1 __ 1_.oo _ _,__121�3 .... 1 _,._ .. 1_2_·_·_._.09 _ _,_YE_S
873 Lennar Corp. LEN 93.80 1 3 3 1.15 80-120 (N· 30%) 10.2 1.1 9.23 1.00 1 11/30 •3.38 2.87 12/31. •.25 .012 YES 1355 Lennox lnrl Lil 16.50 3 3 3 .85 19· 30 (15- 80%i 13.4 2.3 1.23 .38 67 ir 9130 .46 .46 3131 •.095. .095 YES 733 Level 3 Communic. (NOO) LVLT 5.39 3 5 5 1.65 1· 13 (30-140%l NMF NIL d1.36 Nil 33 .,, 9/30 d.38 d.74 12131 ·'.. NIL NIL YES 1455 1142 Lexmark lnl'I 'A' LXK 74.68 3 3 4 1.15 65· 95 (N· 25% 22.5 NIL 3.32 NIL 60 ;::.9130 .79· .79 .12131 NIL .. °f,IIL YES 950 Libbey. Inc. •. LBY 28.22 4 3 2 .70 30· .5.9 (5· 75% 13.6 1.4 __ 2_.0_7 __ .4_0_· _12,..+'-'913_0_·._sa .6__,9-..t-·_1_2i,...':i1 · · .10 · ' .. 075
968 Liberty All·Star USA 9.22 2 2 3 1.05 8· 12 IN· 30%1 NMF 0.1 NMF .01 53 :9t30 8.12(q) 6.70(q) 12/31 NIL NIL 1867 Liberty Corp. LC 46.05 5 2 4 .75 40· 55 (N· 20'. 31.1 2.1 1.48 · .96 23 .'9/30 .32 .36 . 3i31 .. ·.24 .22 1868 Liberty Media 'A' L 11.07 3 3 3 1.60 18· 25 (65-125% NMF NIL d.33 · NIL 23 9/30 .02 .01 12/31 . NIL NIL 1193 Liberty Property LAY 37.65 4 2 3 .70 35· 45 (N· 20%) 18.4 6.6 2.05 2.48 97 '. 9/30 .SO .'52 ··12131 •.605 ... 60
__ 1268 Lilly (Eli) LLY 72.48 4 2 3 .80 75-100 15· 40%) 26.7 2.0 2.71 1.42 42 9130 .66 .63 .. 3131 .. ·;355 .335
1742 Limited Brands ----LTD 17.74 3 3 2 1.20 25· 35 '40- 95%) 16.1 2.3 1.10 .03 12131 .10 .075 642 Uncare Holdings (NDC! LNCR 30.88 3 3 2 .70 50· 75 lso.145%) 12.6 . NIL 2.45 .44 12/31 NIL .. NIL 1356 Lincoln Elec Hldgs. (NDO, LECO 24.75 5 2 3 .75 30· 40 120: 60%) 16.6 2.6 1.49 .43 3/31 .16 :16 1613 1211 Lincoln' Nat'I Corp. LNC 39.68 3 2 2 1.25 45· 60 15- 50%) 12.2 3.5 3.26 .40 3131 •.35 .335 1357 Lindsay Mfg. . LNN 25.10 4 3 2 .55 25· 40 (N· 60%) 20.6 0.8 1.22 .08 12131 .05 .035
1073 Linear Technology (NIXl) LLTC 39.40 3 3 3 1.60 55· 85 (40.115%) 41.S 0.6 .95 .17 12131 .06 . .os YES 1743 Linens 'n Things LIN 28.91 3 3 3 1.40 40· 60 (40:110%) 18.2 NIL 1.59 .41 12131 NIL. ·NIL YES 1656, Liz Claiborne LIZ 34.44 3 1 3 .95 SQ. 60 (45- 75%) 13.0 0.7 2.64 .78 12i31 •• 056. .058 YES 557 Lockheed Martin LMT 49.90 4 3 3 .. 60 60· 80 (20- 60%) 20.8 1.8 2.40 .66 12131 • .22 . .11 YES 2161 Loews Corp. LTR 45.48 4 3 4 1.00 60· 95 (30-110'k) 9.9 1.3 4.60 1.05 12/31 ,15 .is YES
307 Lone Star Steakhouse (NOQ) STAR 22.10 4 3 3 .75 30- 45 (35-105%) 23.5 3.2 .94 .35 12131 .165 . .15 YES 570 Lone Star Techn. LSS 15.54 5 3 5 1.25 •20- 30 (JO. 95%l NMF NIL .. d.80 d.37 12131. NIL. , NIL YES 790 Longs Drug Stores LOG 23.57 3 3 1 .75 16- 25 (N· 5% 25.1 2.4 .94 .08 3131 .14. . .14 YES 914 Longview Fibre LFB 11.33 3 3 3 .95 12, 17 (5- 50%i 70.8 NIL .16 .06 12/31 •NIL . NIL, 915 Louisiana-Pacific __ Li>X 17.34 - 4 - 1.20 16· 25 (N· 45%) 6.7 . NIL 2.59 d.05 12131' .'.NIL. NIL YES
886 Lowe's Cos. LOW 54.84 T2 3 3 1.15 85· 130 (55-135%) 22.3 0.2 2.46 .43 3131 .. 03 -: .025 . YES . 491 Lubrizol Corp. LZ 30.43 · 5 3 3 1.00 45· 65 /50·115%) 14.6 3.4 2.08 .71 3/31 ·•.26' ·:25 · 1461 761 Lucent Technologies LU 2.87 2 5 5 1.60 4· 8 41).180%) 31.9 NIL .09 d.64 · 12/31 . NIL Nil' .YES 1454 Luxotlica Group ADR(g) LUX 17.85 3 3 3 .80 14· 20 (N· 10°\) 22.6 1.3 .79 .19 12/31 NIL.. NIL YES 1242 Lyondell Chemical -·--· LYO 15.66 4 �-!..._L2_?_ 20· 30 (30· 90%) NM�- 5.7 d.75 .04 . 12/31 .225 .225 YES
2115 M&T Bank Corp.· MTS 94.63 3 1 3 .95 100·120 (5- 25%) 16.6 1.3 5.71 1.23 12131 .. 30 ., :30 YES 2162 .MBIA Inc. MBI 57.SO 2 2 3 1.15 60· 85 .(5- 50%) 11.S 1.4 5.01 1.11 :J/31. ·.20. .17, YES
2163 MBNA Corp. KRB 23.82 1 3 2 1.60 30- 45 (25- 90'/tl 12.2 1.8 .1.96 .43 · 3/31 •. 10.. , .07 YES 1156 874 M.D.C. Holdings MDC 64.03 1 3 3 1.15 60- 85 (N- 35% 8.8 0.8 7.31 1.43 12131 ;. ·.12� :<, .0'{3 YES 1782 MDU Resources MOU 23.77 3 1 4 .80 25· 30 (5- 25% 15.2 2.9 1.56 .50 .3131 · .17 ., .16. YES
969 MFS Multimarl<el MMT 625 . 3 4 4 .45 5· 8 (N· 30%) NMF 6.4 NMF 6.39(q) 12/31 • .. 101 .096 710 MGE Energy (NDOI MGEE 3125 4 1 3 .55 25· 30 (N· N'lo) 16.4 4.3 1.90 .60 12/31 .338 .• 336 2164 MGIC Investment MTG 55.07 4 3 3 1.20 70·110 (25-100%) 12.2 0.3. (50 1.41 12/31 . •.038 ... 025 1887 MGM Mirage MGG 37.05 4 3 2 1.10 45,' 65 (20- 75%) 22.7 . NIL 1.63 .51 12/31 ... NIL NIL 1100 MKS lnslrumen1s (NOO) MKSI 24.28 3 4 1 1.50 13,, ·20 (N· N%) NMF NIL d.02 NIL 12131 ·: :·NIL . NI�
1619 1298. MPS Group . MPS . 9.25 3 3 3 .95 10-15 110- 60%) 37.0 NIL .25 ... 05. 12/31 , ; NIL .. NIL 1358 MSC lndustrial.Direcl MSM 26.80 3 3 3 1.10 30· 45 10: 70'/,) 31.5 0.7 .. 85 ,13. , 12/31, .05 . NIL
(•) All data adjusted for announced slack split or slack dividend. See back page ol Ratings & Reports. . + , New. fi9ure !his week. (bi Canadian Funds., d Deficit.
(h) Est'd Earnings & Est'd Dividends after conversion to U.S. (fl The estimate. may reflect a prObable ncrease.or decrease. · dollars .at Value. line estimated IT�alion rate.· -, , . · . II a dividend boost.or cut is possible but not probable, 0) · All ·Index data �xpressed.in.hu!]dreds .. · .. . . . · two ligures.are shown, the first is.the more likely. .· · fp). 6 mJnths . .(q). ,Asset Vaiqe ., -, , . ,,., . , ."'
(g) Dividends subject to. foreign withholding tax for U,S. residents. . N=Nega1ive liQIJre NA=NQt available .,NMf=No meaninglu(fi,gure -,----,--�c-c-:"----,---.-��-'----,--,,-----=-�-,----'�-,-....._;;_..�-,-,...:..,....,.,.--,.,....,--,--,--,--::--:,-,--.:,-� O, 2003, Val.I! ll!>9 .. Pullll9hinQ. 'Irie.' I.J. 11ohts rff81Ved.· Factual material Is oblailed from sou,ces believed to be reliable 'ilrld Is. provided without wairanties cit. any kiiJd ... THE PUBLISHER IS'NOT:RES!'ONSIBLE �OR ANY.ERRORS OR OMISSIONS HEREIN. This publication Is str!clly for subsaiber's own, non-<:0mmeraal, lntama(.use. No.part cJl:K fniy be"IJflXluced, �-� « tran�mitted ln·.81\r p,tnled, electroolc or olller loon, or used to, ganersting or marketing any printed or elect(Onic publicatiop, se!Vice .or p�ct
)
_)
Page 16 SUMMARY AND INDEX • THE VALUE LINE INVESTMENT SURVEY . December 26; 2003
LATEST RESULTS
qEings and Reports; Technical (ll % Est'd Est'd . I? Selection ··" -r: Recent Price Safety 1· · .. 3-5 year . Est'd Earns. Dlv'd
'{JlntOn .• . : .. :·'.:', .. . . . . Tlcker · .. l Tlmellneaa l .... l ·:·Bela·. !� ::Ji:�rn . Cu�rt ;;!!� 12 �os. 1�x1 .. ;-:;'NAME'OF'STOCK, . ·Symbol.· 'potenttal Ratio 12 mos. S-30-04 mos.
1792: 2211 Novel\;lnc. · . · (NOO! NOVL ' 9.42 1 4 3 1.60 7- 12 (N- 25%) 52.3 NIL .18 : -: ·• 1101 Novelll.1$ Svs." : (NOQ • NVLS . 38.99 4 3 2 1.65 50· 70 l30- 80%) NMF NIL .04 . ·: 1277. Novo Nqrdiski\OR(g) .. NVO .38.22 3 3 4 .65 .55· 65 45·120%! .17.5 1.4 2.16 1et· NSTAR· , •; :·· · .. . , NST . '48.08 5 · 1 3 1 :70 . 45- 55 (N- 15% · 14.6 4.6 3.29 • . 824 Nu Sldtl'Enteri>rises · NUS . 1'8.85 .: 1 3 1 · .60 17· 25 (N- 50%1 18.7 -1.7 .. 90
309 O'Charleys Inc, · (1100) CHUX 18.14 · 5 3 3 .75 ·20- 30 (25· 65%). 18.1 NIL ··: 221 · Ocular Sciences· (1100) OCLR 27.55 2 3 3 .80 30' 50 (10- 80%) 15.7 NIL 2604 644. Odyssey Healthcare (NOO) ODSY 28.95 1 3 2 .. 55 .o.40- 60 (40-105,,) . 30.2 NIL . . 1148 Office Depot · · ODP 18.19 3 3 3 1.25 20- 30 .(25- 65%) 14.6 NIL 533 1147 OfficeMax • SEE FINAL SUPPLEMENT· PAGE 533 .
YES
YES YES
YES
NIL YES '.172 .106 YES ·.20 YES .023 YES
.20 YES Nil NIL YES .02 .155 YES
NIL YES Nil YES NIL YES Nil YES NIL· YES
Nil YES Nil YES .07 . NIL YES .265
.12· YES .15
Year 'Ago
NIL YES NIL YES NIL ,.53 YES .. 06
NIL .19 YES Nil .128 Nil YES
.333 Nil YES NIL NIL YES · .25 .YES
Nil NIL YES NIL YES Nil YES
Do Options Trade?
NIL Nil NIL NIL Nil
Nil Nil .11 NIL .27
Nil .· · .. 18 .113· , .20 · .023
•.20 NIL . Nil Nil • .16
12/31 · .09 .oa 12/31 Nil Nil
3/31 •.10 NIL· 12/31 · .105 .. .. 105 12/31 · Nil NIL· 12/31 NIL Nil 12/31 'Nil Nil
12/31 12/31 12/31 12/31 12/31
12/31 12/31 12/31 12/31 12131
12/31 Nil 3/31 .20 12/31 .NIL 9/30 .125 12/31 Nil'
3131 .333 12/31 . Nil 12131 . NIL 12/31 ... 14 3/31 .26
12/31 .NIL 12/31 Nil 12/31 . Nil 12/31 NIL·.
3131 12/31 12/31 12/31 12/31
12/31 -. • .13 12/31 .175 .·
12/31 '12/31 · .12/31 · 12/31 12/31
Otr. Lalest .. Ended. Dlv'd
12131 NIL 12/31 NIL 12/31. · NIL · 12/31 · .54 12131 ... 07
.13 d.51 d.09 .10 d.06
Year Ago
.45 .38 1.11 .06 .so
.30 .48 .15 .27
d.30 .50 .26 9.90(q) .06
.33 63
.04 .11 .41 1.38 .19
.68 .14 d.11 .10 .17
1.04 .30 .11 .25 .17
.49 d.10
d1.06 .40 .54 d.02 .36
1.24 d2.41 .04 .16 .87
Otr. Earns. Ended Per sh.
Industry Rank
Nil 22 .10131 .05 · NIL 61 9/30 d.23 .55 42 9/30 .52 2.22 , 98 '9/30 1.19 .28 12 9/30 .19
Nil 22 9/30 d.05 .88 83 9/30 .20 Nil 39 9/30 '.48 .45 53 4/30 9.99{q) Nil 17 10/31 .10
1.33 87 9/30 1 .. 22 'NIL 81 . 9/30 ,28 NIL 11 9/30 .14 .14 rt ·9/30 .20 1.04 50 9/30 1.14
NIL 34 :9130 .15 NIL 16 ·9130 .50 Nil 5 .9/30 .21 Nil 60 9/30 .29 . .
Nil 48 9/30 .22 .72 75 ·9130 .17 .47 48 9/30 .64 .60 89 9/30 .10 .09 4 9/30 .53
.80 64 ,9!30 .72 Nil 63 9/30 .01 NIL 2 9/30 d.08 NIL 72 10/31 d.13 .72 49 9/30 .01
Nil 9. -9/30 .12 Nil 15 9/30 d.23 NIL 58 9/30 d.14 NIL 22 ', 11/30 •.12 NIL 65 .9/30 .06
Nil 19 9/30 .54 NIL 5 9/30 .25 .44 74 9/30 .57 NIL 16 .9/30 .04 1.10 87 9130 .46
:53 34 9/30 .53 .70 11 9/30 .40
.36 16 :9/30 .34 Nil 82 , :9/30 .44
.40 5 9/30 1.19 .42 74 8/31 .42 Nil 19 9/30 .. 09 NIL 22 9/30 · .15 NIL 34 ·.'9/30 .. 25
.89 1.76 .96 1.11
4.30 2.17 .35 .71 1.17
2.34 2.07
3.90 .09 .35· d.16 1.97
1.46 1.56
2.02 ... 90 .95 .43 1.53
. 67 ·1.24
2.51 .30 2.30
.65 d.45 d.41 .47 .34
d.17 1.16 1.61 NMF .55
1.69
.96 .86 .57 :3.74
RANKS
600 Ohio Casualty (NOQ) OCAS 17.46 3 3 3 .75 17· 25 (N· 45%! 20.1 . NIL ... ' 626. Old Nat'! Bancorp(•) .ONB 21.10· 5 2 4 .65 30- 40 l40- 90%. 17.0 3.4 601 Old Republic(�) ORI 24.73 : 3 3 3 1.00 •30- 45 20- 80% 9.9 1.9 1244 Olin Corp. · OLN 19.73 4 3 3 .60 17-· 25 (N· 25% 65.8 4.1 792 Omnicare, Inc. OCR ·38.97 2 3 2.. .85 60· 65 (55-120'/oi 16.9 0.2
.r 310 OutbaCKSteakhouse • OSI• ·43,10 3 3 3· .90 45· 70 . (5-60%). 18.4 1.2 293 Overseas Shiphold,ng . , OSG · 33.15 2 3 2 .1.05 35- 50 ,(5- 50%) 16.0 2.1 , 1154 Overture Services SEE FINAL SUPPLEMEN'r • PAGE 1154. 223·0wens&'Minor.. OMI 21.40 3,34 .70 20,30 .(N;40%) 14.5 ··1.8 933, OweOS'IHinois .. , . 01 11.53 4 4 2 1.20 16- 25 (40-115%) 7.4 NIL
1447 Open Tex1 Corp. (NOO) OTEX 18.78 3 3 5 1.30 25· 35 (35- 65%) 28.9 NIL 517 Openwave Systems (N0000) OPWV 10.06 2 5 1 2.35 : 11· 20 (10·100%) NMF NIL 1020 Optimal Robotics. (II ) OPMR 7.79 . 3 4 5 .95 .12· 20 (55-155%) NMF NIL 22\!t Oracle Corp. iNOOi ORCL 13.25 .3 3 5 1.20 14·. 20 · (5- 50%) 28.2 NIL 144. Orbotech Ltd. · · ' INOO\ ORBK · 23.00 ' 3 3 3 1.30 25-' 35 (10- 50%) 67.6 NIL
1748 O'RemyAu\omotive. (NDO) ORLY · 39.00 Y2 3 2 1.00 45· 70 .(1$· 80%)· 19.3 NIL 645 Orthodontic Centers OCA 7.67 3 3 5 .90 Y1J. 20 (70-160%). 8:5 NIL 1657 Oshkosh B'Gosh 'A' (NOO) GOSHA 20.45 . 5 3 3 .75 20- 35 .(N· 70%) 21.5 2.2 ·se2 222 Osteotech, Inc.'. . ; (NDQ) OSTE 7.92· 4 4 5 .95 15· 25 . (90·215%) 18.4 NIL I 713 Otter Tail Com, itml OITA 26.91 · 5 2 3 .55 25- 30. '(N· 10%) 17.6 4.1
1929 Omnicom Group OMC ·83.30. . 3 3 3 1.20 100-145 . (20- 75%) 21.4 1.0 1300 OnAssignmenl lNNOOOO) ASGN .. 5;55 ' 3. 3 1.· 120 8· 12 (45-115%) 61.7 NIL 2240 1·800-FLOWERS.COM. ) FLWS · .10.63 1 3 3 .90 14· 20 (30- 90%) 30.4 NIL 953. One� uc.;: . OCOKQE en 5 3 5 .70 11· 16 (130-235%) NMF NIL 449 ONEOK Inc. · 20.90. · 3 3 3 .65 25· 40 . (20- 90%) 10.6 3.4
.. ' 22� NNuuaconee r CoCommu rp' ,· , . nic. (NOQ) NUAN &.86 2 5 5. 2.35 12· 25 · (80-275%) NMF NIL -., NUE , 55.29 4 3 4 1.15 •70-110 (25·100%) . 47.7 1.6 1940 Nuevo Energy . NEV 23.55 2 4 4 .. 90 16· 30 iN· 25%) 14.6 NIL •.. 970 Nuveen Munl.Value Fund· NUV .. 9.17 3 2 4 .35 . 6- 11 N· 20%) NMF 4.9 1798 1079 NVIDIACom. ./HOOi NVDA 20.30 3 3 4 1.65 65- 95 (220-370%) 36.9 NIL
64$· Oxford Health Plans OHP · 43.99 2 3 2 1.05 Y55· 60 (25- 80%) · 10.2 0.9 1658 Oxford lnds. . OXM 33.74 2 3 3 .65 40- 55· (20- 65%) 15.5 1.2 2246 1749· PC Connection·,· (NOO) PCCC 8.41 3 4 5 1.25 & 10 · (N- 20%) 24.0 NIL 2214. PEC Solutions ��DO,! PEGS 16.45 5 3 2 '.1.25 30- 45 . (80-175%) 23.2 Nil 311· P.F. Chana's '"' 11 PFCB 47.93 2 3 2· 1.10 .SO- 75 (5- 55%) 41.0 Nil
PAGE NUMBERS
Bold type refert'.ito
. . 712 OGE Energy:_: OGE 23.80 ·. 4 3 4 .65 16· 30 [' 25%) 14.1 5.6 : .. 49S OM G!Qup ,· :· OMG 24.56 2 4 3 .65 25· 40 . N- 65%! 25.6 NIL , .. ,, 282 OMI Corp .• r: OMM ·8.35 2 3 3 1.15 10- 15 ( 80% . 9.7 NIL 1397, Oakley Inc ..... ,· . 00 . 13.25 . 3 3 3 .. 95 17· 25 (3!)- 90% 23.2 1.1 419 Occidental Petroleum OXY 40.79 . 3 2 4 · .60 35- 50 '{N- 25% 10.9 2.5
647 PacifiCare Health ' PHS 65.43 . 1. 3 2 .1.20 .t.65·100 . (N- 55%) 11.5 NIL 934 Packaging Corp. PKG 21.34: 5 3 3 '. 80 25· 35 {15- 65%) 46.4 2.8 935 Pactiv CO{J).' PTV . 23.69 3 3 3 .. 65 25· 40 (5- 70%) 15.6 · NIL ·. 1979. Pall Corp. Pll 26.42;: 3 2 4 . 1.00 25· 35 {N· 30%) · 19.6 1.4 1620 518 oalmOne Inc .. · INOOI PLMO 13.85 , - 5 - NMF 11· 20 (N· 45%) NMF NIL
497. Par1< Electrochemical PKE 24.24 4 3 2 . 1.20 25- 35 (5- 45%) · NMF · 1.0 1985 1398 Par1<-Qhio. (NOO) PKOH 7.64 :. 3 4 2 ... 60 12· 20 (55-160%) 9.7 NIL 1891 Par1< Place Entertain. PPE '.10.39 · . 3 4 2 . 1.15 11 • 18 · (5- 75%) · 20.8 NIL 1957 Parl<er Drilling PKO 2.63. 3 4 5 .1.15 3· 6 (15-130%) . NMF ·· NIL .1399,Parl<er-Hannifin 'PH 57.74. 4 3 3 1.10 55·65 .IN-45%) 29.6 1.3
YES
YES
YES YES YES YES YES
YES YES YES
YES YES YES YES
YES
YES
YES YES YES YES
Nil Nil Nil .09 Nil
.06' Nil Nil Nil .16
.36 YES ,43 YES NIL YES .90 YES NIL YES
Nil ·.025 .46· ·.22
NIL ·· NIL Nil. Nil. NIL
'NIL NIL .. Nil Nil NIL
Nil .038 . ... 50 ' .23
.. 365 •.44 NIL ,
•1.425 NIL
12131, · Nil 3131 .... 15 12/31 Nil 12131 .es 12/31" NIL ..
12/31 12/31 12/31 12/31 12/31
3131' .06 12/31 NIL 12/31 · NIL 12/31 .. Nil 12/31 .. 19
12/31 . 3/31 12/31 12/31
3/31 12/31 12/31 · 3131 12/31
d.56 12/31 .31 .29 d.01 12/31 Nil NIL .40 · 12131 oc.06 :048 .40 12/31 Nil Nil
.25 •· 12/31 .' Nil Nil .20 12/31, •.12 '.11
d.05 .97 1.00 .45
1.20 .14 .37 .14 dl.20
d.03 .07 .16 d.09 .52
.14 .17 .53 d.03 .13
.95 .87 :17 1.11 .21
.07 Nil 17 9/30 NIL 3.41 .15 48 9/30 . 87 4.05 2.00 59 9/30 1.00 1.76 .95 86 9/30 .41
3.52 1.60 98 9/30 .97 3.10 1.76 92 9/30 .83 .14 Nil 76 ': '9/30 .01 4.74 2.10 43 '· 9/30 1.13 1.02 . Nil 19 10/31 .31
5.71 · Nil 5 . 9/30 1.72 .46 .60 82 9/30 .14 1.52 Nil 82 .9/30 .38 · .1.35 .36 92 10/31 .. 18 dl.10 NIL 15 . 8/31 d.58
.63 · Nil 33 . '9/30 .14 1.14 Nil 34 9/30 .23 1.94 Nil 34· -. 9/30 .36 d.26 Nil 22 9/30 d.08 .60 Nil 42 . 9/30 .18
. d.10 .24 81 .. 8131 d.05 .79 .NIL 77 . 9/30 .01 .50 .NIL 46 9/30 .16 d.15 Nil 85 . 9/30 d.07 1.95 .76 77 ' 9/30 .48
6.87 1.24 48 .9/30 ,1.75 .57 .NIL 78 10/31 .. 07 3.11 .32 49 . 9/30 ·,70 2.33 . NIL 16 10/31 .51 .
.76 '. NIL 41 .• 9/30 .18 .92 .46 22 ' 8/31 .21
NIL 0.4 3.8 3.4
PRE '55.98::. (NOO) PTMK 7.31:: ., w POG ,49,40�.;
POCO -, 85.74 i".
. (:', l'. PXR 12.ao·;.11 (NOO) .PAYX 38.15 r..
1783 PG&E Corp. SEE LATEST REPORT 1090 PMC-Sierra (NOO) PMCS · 18.73 · 2 5 2 2.15 16· 35 (N· 85%) NMF 602 PMI Group PMI 35.85 3 3 3 1.05 45· 65 (25· 80%) 10.5 2121 PNC Financial Serv. PNC 53.32 4 2 3 1.10 70- 95 (30- 80%) 13.2 1784 PNM Resources PNM 27.72 · 4 2 3 .60 25: 35 (N· 25%) 15.6
. 170 PPL Corp. PPL 42.08 4 3 4 .90 40- 60 (N· 45%) 12.0 3.8 1978 PPG Inds. PPG 83.23 4 2 3 1.05 65· 65 , (5- 35°/,) 20.4 2.8 343 PRG·Schultzlnt'I (1100) PRGX 4.66,., 4 4 3 1.15 8- 13 ,(70-180'/,) · 33.3 NIL 108 PACCAR Inc. ()ID()) PCAR 81.70 3 3 3 1.20 55- BO (N· N't.) 17.2 2.6 1750 Pacific Sunwear . .(NOO) PSUN 20.88 1 3 2 1.15 25· 35 (20- 70%) 20.5 · NIL
ParthusCeva NAME CHANGED TO CEVA, INC. 603 PartnerRe Ltd. 3 3 3 1.05 '70·105 (25- 90%) . 8.1 2.2 1523 Palhmar1< Stores 3 · 4 2 1.00 15- 25 (105-240%) 12.8 NIL 450 Patina Oil & Gas 1 3 5 · .90 50· 70 :. ,(5- 45%) 15.6 0.7 224 '. Patterson Dental · 1:- 2 2 .. 60 .70- 90 (5- 35%) 28.2 NIL
735 PanAmSat Corp. , (NOO) SPOT .. 20.89 3. 3 3 1.10 30- 45 1 (45·115%) 33.2 ·. NIL 1985 312 Panera Bread Co. (NO()) PNRA 36.72. 3 3 1 1.10 40- 65 . (10- 75%) 32.2 " NIL '1155 313 Papa John's lnfl {NOO) PZZA 31.68 ... 3 3 3 .65 25· 35 (N· 10%) 16.3 NIL 2215 Parametric Technology {NOO) PMTC .: 3.96 3 5 4 1.45 5· 9 (25-125%) NMF NIL 1278 PAREXEL lnl'I . iNOO) . PRXL 16.50 3 3 4 .80 20· 30 (20- 80%) 20.6 · NIL
To subscribe call 1-800-833-0046.
December 26, 2003 SUMMARY AND INDEX • THE VALUE LINE INVESTMENT SURVEY
.. ,,Oo Opllotw Tiide?
Ynr Ott. la!HI .Yt1r Ago E� Dlv'd ·. Ago
.43 .. 12!.!1 NIL · NIL YES d.15 12!.!1, .125 ·. ·: ,10' YES
.22 12131 NIL NIL YES .17 12131 .06 .06
.30 3131 •.125 .125 YES .49 12131 •.54 .51,. .75 12131. · .. 21. . : J.9'. YES .24 12131 · .39:' .36 .05 3131 .53 .52 YES
.14 12131 NIL , . Nit YES 28 3/31 . . 068 »: . 068 YES .88 12131 ,25 .25. YES .61 3131 .01 .. : YES . .33 12131 NIL
.55 3131 ; .16 ., . .30 YES .40 12131 NIL NIL YES. .08 3131, .07" �i YES .23 1213f ... 035 . YES .21 12131 NIL . NIL YES
.64 3131 .. 074 .068 YES .69 .12131 . NIL NIL. YES .14 12131 .i.,02 NIL YES .38 3131 4,17 'Jt YES .33 12131 Nil YES
d.26 12131 NIL NIL d.40 12131. . NIL NIL YES ' .25 ·12131 ... 12 .112 YES d.03 12131 NIL NIL YES .63 12/31 .038 .038 YES
d.08 12/31 NIL:. Nll. YES d.32 12J31 Nil . -: NIL YES d.36 . ' 3131. •.415' : ,40 .33 3131 .08 · · ' .06 YES d.13 12f.l1 .015 ,015
.07 12/31 NIL NIL YES 1.19 . 12/31 4 .45 .·: .425 YES .16 12/31 .NIL . NIL· YES .61 12J31 .30 .295 YES .87' 12131 .' .NIL NIL YES
.04 12131 .NIL . -. Nit. YES .08 12/31 . NIL' Nil . YES .24 12/31 :NIL .NIL' YES d.01 12J31 NIL , NIL YES .14 12/31 NIL NIL
.04 12131 NIL . NIL YES .38 12/31'' .35. ; .3$ YES .51 12/31 :;::':. .03 YES 1.57 .· 12/31 .28 YES .52 · 3/'JI' •:05 NIL' YES
.03 12/31 NIL 'NIL. YES d.23. 12/31 .08 .f5: .65 3131 ' .2i .20. YES .83(p) 12131. NIL NIL YES .28 3/'Jt .25 .25 YES
d.36 12/31 .15 .15 YES d.06 12/31 NIL '. NIL' YES .02 12/31 NIL' NIL YES .43 12131 ,:.135 :�· YES .79 . 12131 .. 03 ." YES
.34 ;l/31 4:19 .17 YES d.60 .• ·12131 ·,, t-!IL . .• f'!IL . YES .12' · 12131 4 .45 . .2S', YES .27 12/31 .· NIL . �IL, YES 1.12 12/31' ., .455 . 1 YES
1.53 3/'J1 •.575 .56 YES .87 12131 .025 .025 YES .30 12/31' ... 36 .. . 355 YES . .39 12131 ,· Nit NIL YES .65 12/31 :16' : :·1 .15' YES
d.09 12/31 . 'NIL . . NIL YES .15 12/31 ''.NIL . NIL: YES .54 12/31 &,50 .. .40 YES 1.01 1:>l.31 � .54 YES .07 12/31.' . .25 YES
.40 12/31' ':18. . .... ·, .17!1. 1.83 . 3131 ',.l;10 .. .. �;: YES .11 12131" Nil .28 12/31 : .. NIL, .. YES .45 . , 3131 · ': '2L' · :' 2r:
.32 3131 ' .07 · le NfL· YES .97 · 12131 ·.11· .16
To subscribe call 1-800-833-0046.
LATEST RESULTS
QIT. Elfflt. Ended Per ah.
1001 d.03 ·. 9/30 . .39
Industry Rank
NIL 21 . 9/30 .• 02 . 10 .54 9/30 05
NIL 41 ·-� 'zr NIL 79 -, 9/30 d.03 NIL' 12 ·'. 9/30 .05
NIL 28 9/30 d.09 NIL 20 '9/30 d.04 . .48 90 9/30 .26 .39 27 .:9/30 .12 .15 74 10/31 .43
NIL 78 ·. 9/30 .18 .24 81 !V31 .16
NIL 6 · 9/30 .04 .32. 88 .9/30 d.30 1.08 59 · 9/30 .96 .60 94 · .6130 2.29(p) 1.00 92 · � .30
.50 14 10/31 .27 2.20 97 '9/30 .47 .84 77 9/30 .77 1.56 73 . 9/30 .24 2.12 96 9/30 .04
NIL 65 . ; 9/30 d.12 NIL 61 .10/31 .10, . 1.66 96 : 10/3Ud.15 · .32 '19 '.11/30 •.35 · .06 70 . 9/30 .05
NIL 22 . 9/30 , .13 .27 19 . 10/31 .24 1.01 98 . 9/30 .66 . 04 18 · 9130 .• 67 .04 18 . 9130 .39
Nit 41 · 9/30 ,01 1.40 88 :� .21 .20 , 39 9/30 1.06 1:� ;: .: :_·� 1�
NIL 21 : 9/30 d.13 1: = '.� 1f. 1.21 60 ,9/30 .62 Nil 23 9/30 �
3.52 2.32 98 . 9/30 1.34 5.65 JO. 48 .9/30 1.46 1.14 . 1:55· 97 ·. �t!O .15 1.87 NIL 7 . 9130 .44 2:91 .64 47 ' 9/30 .70
.25 d.75 3.48 4.22 2.14
d.56 NIL 42 . 9/30 d.20 .. 68 · NIL 30 ' .. 9/30 .29
2.85 .50 47 \9/30 .70 3.61 2.20 .. 98 .. 9/30 .92 1.68 1.00 ee '/9/30 ,10
.12 .60 88 · 9/30 .n d.11 NIL 58 _ .9/30 d.04 d.10 NIL 15 ': :9/30 d.08 1.86 .54 81 . W30 .4& 2.70 .12 88 . 9/30 .64,
2.01 .76 30 • 9/30 .51 .. 69 Nil' 2 .: .9/30 .21
2.57 :45 30 '."9/30 ,83 1.24 NIL. 16 . 9/30 .28 4.50 ' 1:82 72 .., 9/30 1.28 .
1.36 .28. S .9/30 .35 2.75 .72 83 1001 .80
.34 .82 .1.43 1.70 1.05
.38 •.81
d.15 2.76 2.87 2.49 1.86
... 07 .·· .47
2.32 1.37 .61
3.45 .30 84 : 9/30 u, 4.56 •. 1.35 SO .. 9/30 1,67 1.00 .08 19 10/31 .20 2.02 .68 42 . 9/30 .47 1.67 NIL 42 . 9/30 .41
2.12 .66 18 . .'; 9/30 .62 . 1.82 NIL 26 ·. 9/30 .44 .54 . .28 . 65 : 9/30 .11 . 75 .14 42 . 9r.!O .23 1.20 NIL 19 . 10/31 .27
.22 .38 . 1.12
d.04 .42
.. d.08 . 90 .86 .1.03 1.05
1.39 1.87 . 3.05 .
1.09 2.79
2.02 .74. 62 · 9/30 .43. , 10.51 .40 1 '''913() 2.56 ;40 NIL 22 .10/31 .10 i .52 , NIL' 17 .9/30 . .37 1.75 · .86' 81. '' ll/30 .42
2.1 6.3. 1.9 4.8 5.0
0.7 4.9 0.3 2.0 . NIL
NIL NIL 2.3 1.4 0.9
NIL NIL 3.9 1.5 0.4
NIL 1.9 2.4 1.9 1.2
1.4 NIL 1.8 0.9 NIL
NIL o.� NIL NIL NIL
NIL 1.6
NIL .. .11 4.8 '1.24 0.4 3.42 1.8 5.06 0.7 1.95
NIL 1.3 5.4 ·0.2 0.2
1.7 NIL 1.4 NIL 1.1
1.8 NIL NIL 1.4 0.3
. 0.6 1.6
NIL NIL 1.2 s.i 4.3
1.4 0.4 . NIL
. NIL . 3.2
5.2 . 0.1 4.t NIL 2.0
. NIL 4.7 NIL 3.1 NIL
'lo Est'd E��'d Est'd Eame. Dtv'd Yield 12 mo,. nex1 nex1 to 12 12 mos. 6-30--04 mos.
NIL .30 NIL 19 1.2 1.82 .50 69
RANKS
Technical
Safety j 3·5;r:r I Tlmelln•sr ] T�et P Range · Current a % appreciation PIE Beta potential . Ratio
12.42 5 3 3 .85 13· 20 � 60'4! 41.4 40.15 3 3 4 .90 30· 50 ( 25'/o 22.1 SEE LATEST REPORT 10.24 4 4 4 1.20 17· 30 (65-195y 26.9 15.09 Y4 3 3 .95 20· 35 135·130% 18.6
24.19 ... 2 3 2 1.05 25· 35 � 45'1 17.4 . 34.90 4 2 3 .60 35· 45 ( 30% 18.7 45.22 4 3 4 1.10 SQ. 75 (10- 65'4! 14.8 32.64 4 3 3 .80 25· 40 (N· 25'/o 29.9 42.21 5 1 4 .75 45- 55 (5- 30%\ 15.1
21.60 - 3 - 1.50 20- 30 (N· 40%) 63.5 21.40 3 3 1 1.20 30· 40 (40- 85%! 26.1 18.72 - 3 - NMF 18· 25 (N- 35% 13:1 23.57 3 3 3 .60 45· 65 190-175%) 13.9 16.78 2 3 3 .75 20· 30 20- 80%) 16.0
47.15 3 1 3 .65 70· 85 (SO- 80%) 22.2 37.60 3 3 3 .65 5()... 75 (35-lll 20.7 15.92 3 3 3 1.05 25· 35 !55-120% 29.5 15.97 4 3 3 .70 18· 25 15- 55% 21.3 29.97 - 3 - NMF 30- 4S (N- 50% 25.0
45.35 - 2 - .65 45· 60
tN- 30%l 13.1 27.58 2 3 3 .80 45- 65 ( 5-135% 6.0 22.94 1 3 2 .95 30· 45 (30- 95% 22.9 34.35 2 1 3 . 90 65- 80 i�0-135% 17.0 25.16 3 3 4 .95 40- 60 S0-140%\ 15.1
12.12 3 4 3 1.30 15· 30 (25-150%! NMF 70.28 2 3 3 1.05 50· 70 (N· N% 78.1 21.18 3 3 4 .75 20· 30 (N- 40'/, 24.6 27.79 3 3 3 1.65 35· 50 i2s- 80'/,! 27.0 17.62 4 3 3 1.00 20- 35 15-100% 16.8
37.01 3 4 3 1.70 45· 80 (20-115% NMF 18.10 3 4 2 1.55 18- 30 (N· 65% 38.5 42.71 5 2 4 .70 45- 60 . (5- 40% 18.4 21.12 3 3 3 1.15 25- 40 (20- 90% 15.4 14.55 3 3 2 .60 14- 20 (N- 35% 23.9
8.34 ·s 4 2 1.15 12- 20 (45-140%) NMF 38.96 4 1 3 .80 40- 45 (5- 15%) 14.1 31.18 3 3 4 .95 35- 50 t60%) 10.9 38.80 4 2 3 .95 45-.60 15- 55%) 15.6 66.24 3 3 2 1.10 80-115 20- 75%) 35.6
10.28 3 4 S 1.55 14· 25 135-145%) 46.7 16.96 3 3 3 .40 20- 30 2Q- 75'/o 44.6 29.24 3 3 3 1.20 30- 50 (5- 70% 26.1 16.30 3 3 2 .95 13: 20 (N- 25% NMF 7.65 3 3 4 .75 11· 16 (45-110% 18.2
16.01 3 3 4 1.75 7· 11 (N- N% NMF 29.40 4 2 3 .70 35-' 50 (2Q- 70% 23.7.
47.65 3 3 5 .85 50· 70 (5- 45'/o 13.9 85.15 2 2 2 1.00 80-105 (N- 25% 16.8 27.76 4 3 3 1.00 30- 45 (10-'60'/, 14.2
20.87 2 3 3 1.45 13· 20 (N· N%! 83.5 16.75 3 3 3 .90 16- 25 (N- 50% NMF 45.83 2 3 3 .80 50· 75 (10- 65% 13.2 31.74 3 3 2 1.00 40- 60 (25- 90%) 7.5 82.85 4 2 3 .70 85-115 (5- 40%) 38.7
33.85 2 3 3 .90 35· 50 (5- 50%) 47.0 9.56 4 4 3 1.90 12: 20 (25-110'�! NMF 7.04 3 4 2 1.90 14- 25 (100,255% NMF 37.60 3 3 3 .95 40- 60 (5-�i· 20.2 44.62 4 3 3 1.20 35; 55 (N· 25% 16.5
43.72 3 3 2 1.45 50- 70 J1S- 60'!.! 21.8 17.89 2 4 4 2.25 55.· 95 ( 11)..435% 25.6 32.86 3 3 3 1.00 40-. 60 r85% 12.8 23.83 3 3 3 .70 35· 50 45-11�l 19.2 98.38 3 1 3 .60 115-140 15- 40'" 21.9
45.00 4 2 4 .80 45·'60 (N· 35%! 12.8 81.75 2 3 4 1.10 85-125 (5- 55% 14:S 31.60 4 2 3 .60 30-· 40 (N- 25%) 27.7 29:41 . 3 3 4 .90 45- 65 (55-120%) 15.7 32.29 3 3 3 .90 35- 55 (10- 70%i 11.1
16.22 4 4 4 1.40 30- 50 !85-210%) NMF 11.25 2 5 2 1.95 16- 30 40-165%l 18.5 41.30 3 3 3 1.10 SO- .70 20- 70% 14.5 42.29 5 3 4 .80 35- 55 !��l 11.7 23.10 4 3 3 .70 20- 30 13.8
52.50 3 2 3 .75 6Q- 80 (15- 50%! 26.0 90.52 1 3 3 1.10 80-120 (N-.35% 8.8 11.45 2 4 4 .95 12· 20 {5- 75% 28.6 49.12 1 3 3 1.90 55· 85 (10-75% 32.3 27.30 4 3 3 .75 25- 35 (N- 30%\ 15.8
49.32 2 3 2 1.20 55- .. 80 110- 60%) 38.3 44.86 5 3 3 .95 so- 80 10: 80%) 18.3
PSS BTU
PEGS PENX
PCLE PNW PXD PBI PIXR
PLXS PCL PPP PII AL
POLI PVN PRU PEG PSD
PEP PFGC PKI PAGO PETC
PHTN Pl.AB PNY PIA PPC
PGN PGA PLO POE PL
Ticker Symbol
PXLW PDG PLT PLA PYX
PCOP PD PSC PHG PVH
PLCM POP BPOP PKX POT
JCP PEI PNA PBCT PGL
PCZ PBA PETM PFE PPDI
PSFT PBY POM PBG PAS
PCH PWEA PWAV PX PCP
PTZ PHM QADI OLGC KWA
TROW PCLN PFG PHCC PG
OCOM NX
(NDO) (NDQ)
(NOO)
(NOQ)
iNIXl)
INIXJ)
(NOQ)
(NOO)
iNOO)
(NOO)
iNOOJ
INOO)
(NOO) (NOQ)
(NOOJ
Recent Price
NAME OF STOCK
1685 Penney (J.C.) 1196 Penn. R.E.I.T. 1400 Pentair, Inc. 1170 People's Bank 469 Peoples Enerqy
1553 PepsiCo, Inc. 1534 Perlormance Food 145 Per1<inElmer Inc. 1279 Perrigo Co. 1753 PETCO Animal
1605 Pinnacle Systems (NDO) 1785 Pinnacle West Capital 1941 Pioneer Natural Res. 1148 Pitney Bowes 1869 Pixar
1606 Pixelworks Inc. 1225 Placer Dome 1041 Plantronics Inc. 1903 Playboy Enterprises 'B' 825 Playtex Products
1042 Plexus Corp. 917. Plum Creek Timber 1942 Pogo Producing 1857 Polaris Inds. 1660 Polo Ralph Lauren 'A'
762 Polycom, Inc. (NOQ) 918 Pope & Talbot 2122 Popular Inc. 1418 POSCO ADA(g) 1980 Potash Corp.
172 Progress Energy 604 Progressive (Ohio) 1197 Prologls 394 ProOuest Co. 1214 Protective Life
1919 Pulitzer Inc. 876 Pulte Homes 2218 QADl111:. 1082 QLoglc Corp. 500 Quaker Chemical
1751 Payless ShoeSource 532 Peabody Energy 648 Pediatlix Medical 344 Pegasus Solutions ** 498 Penford Cop.
2217 PeopleSott 840 1752 Pep Boys 171 Pepco Holdings 1551 Pepsi Bol11ing Group 1552 PepsiAmericas Inc.
399 763 Qualcomm Inc. 581 Quanex Corp.
432 Petro-Canada 419 Petroleo Brasileiro ADA 1754 PETsMAAT Inc. (NOQ) 1280 Pfizer, Inc. 1281 Pharmac. Product (NOO)
1797 669 Phannacopela (NOO) 1237 Phelps Dodge 1423 Phila. Suburban 1307 1568 Philips Electronics NV(g) 1659 PhilllPS· van Heusen
146 Photon Dynamics (NOO) 1102 Photronics Inc. (NOO) 470 Piedmont Natural Gas 1755 Pier 1 lmpons 2248 1503 Pilgrim's Pride
1455 919 Potlatch Corp. 1021 Power-One (NOO) 396 519 Powerwave Techn. (NDQ) ' 499 Praxair Inc. 560 Precision Castparts
2166 Price (T. Rowe) Group (NOOJ 1793 2241 priceline.com (NDO) 2167 Principal Fin'I Group 2645 225 Priority Healthcare (NOO) 954 Procter & Gamble
397 1282 Protein Design 1617 2168 Providian Fin'I 121 S Prudential Fin'I 989 173 Public Serv. Enterprise 1786 Puget Energy Inc.
PAGE NUMBERS
Bold type refers to
Ratings and Reports; italics to Selection
& Opinion
(•) All data adjusted for announced stock split or stock dividend. . . . . . . .. (h) Est'd Eamngs & Est:d � .afte! .�ersion IO �.S. See back pa!19 of Ratings & Reports. (fl The estimate may ref1ecl a piobable lncresse or.decrease.·. . _ dollars at value Line .eetknited -� rate •. : : . .
(:) ��eF��s�eek. . �� ��a=���fi�%�i�·..
. ·. W2*L_:_�.N�.;. ,_.(_11l_.;;r.·.:_i·;tft_......;······
····'
...
:r.�.F:Nci_.�_;,i_.'.,·;.; m."��-\·" ' . .:. . _d�D_e�_·rt_·��������---�����·_(g_)_D_iv_id_ends�_su_�_ec1_1_0_1ore�1g_n_wtt_.h_hol_ding_·�1ax_1or�_·s_._reelden_:..,...1a_.,.....�-·�"""'�"·�·��� •·� ""'�¥�''11"!v
C 2003, Value lrlG Publl$lllna. Inc. All ri!i\t! reserved. Factual material Is obtained lrom sources befievvd to· be refiable and Is provided withoui wanantlts .of .. anv .. kild: THE PUBLISHEfl IS NOT F!ESl'ONSIBlE tOR ANY ERRORS OR OMISSIONS HEREIN. This p,i>llcalion is strictly lor .SlJbscriber's own, non,eommercial, Internal use. ·No. part of It may be reproda.,:ed, mold. Slorld or hnsmitted In any pt',nted, ale<:trcnic or other loon, or used for generallng or mar1<etlng iwiy prinled. or elactrcnlc pul>ii(:ation, sar'lice or product:
_)
)
)
December 26, ·2003 SUMMARY AND INDEX • THE VALUE LINE INVESTMENT .SURVEY Page 19 SA-SP
Po Option Trade?
To subscribe call 1-800-833-0046.
R A N K S Industry Rank
(•) All dala adjusted. for announced stock split or s1ock dividend. See back page of Ratings & Reports. · (f) t New· fi!llJre this week. (b) Canadian Funds; d Deficit.
PAGE NUMBERS
Bold type refers to :;CC; s Ratings and Reports; Technical % Est'd E��'d italics to Selection Recent Price Safety l 3-5 year Est'd Earns. Dlv'd LATEST RESULTS & Opinion I Timellnesr I Ta:/let Pnce Range Current Yleld 12 mos. next Ticktr an % appreciation PIE next to 12 Qtr. Earns. Year Qtr. Latest . Yetr NAME OF STOCK Symbol Beta potential Ratio 12 mos. 6-30--04 mos. Ended Par sh. Ago Ended' · Dlv'cr ··, Ago
1525 Safeway Inc. SWY 19.98 4 3 2 .90 35· 55 (75-175%) 9.7 NIL 2.05 NIL 78 9/30 .46 .60 12/31 . Nil Nil YES 878 St. Joe Corp. JOE ·36.09 3 1 3 .75 35· 45 (N· 25'4 48.8 1.3 .74 .48 1 9/30 .17 .40 12/31 .. 12 · NIL . YES 228 St. Jude Medk:al STJ 61.22 3 3 5 .80 65- 90 (5- 45% 31.6 NIL 1.94 NIL 16 '.9/30 .46 .39 .12/31 NIL NIL YES 2246 607 St. Paul Cos. SPC 38.15 3 3 3 1.20 55· 85 .(45-125%) 9.3 3.0 4.12 1.16 48 9/30 .96 .52 :J/31•'' ·,29 -. 29 ·, YES 1686 Saks Inc. SKS 14.42 2 3 1 1.15 10- 14 '(N· N%) 24.0 NIL .60 NIL 14 10/31 .es .03 12/31 NIL'· .'·- NIL YES
972 Salomon Bros. Fund SBF 11.58 3 2 3 1.05 13· 18 (10· 55%) NMF 0.9 NMF ·.10 53 . 6/30 12.28(q) 12.23(q) 9/30 -:t .025 955 Salton, Inc. SFP 12.98 4 3 3 1.40 20- 30 (55-130%! 10.4 NIL 1.25 NIL 72 9/30 .OS .26 12/31 NIL' YES
1305 1127 SanDisk Corp. (NOO) SNDK 56.79 1 4 1 1.70 60-100 (5- 75% 26;7 NIL 2.13 NIL 25 .9/30 . . 60 .13. 12/31 NIL. NIL YES
1045 Sanmina-SCI Corp. (NOO) SANM 11.95 3 4 1 1.75 12· 20 (N- 65%) NMF NIL .11 NIL 41 9130 .03 .12 12/31 ·NIL· NIL YES
1448 Sapient Corp. (NOO) SAPE ·.4.29 2 ·4 2 1.50 5· 8 (15- 85%) 61.3 NIL .07 NIL 9 9/30 .01 d.13 . 12131 NIL . NIL·
1986 1506 Sara Lee Corp. SLE 21.10 5 1 3 .60 25· 30 r- 40%) 13.6 3.6 1.55 .75 70 9/30 .29 .37 3131 .188 .155 YES 1366 Sauer ·Danfoss SHS 15.80 3 3 3 .80 18· 25 15- 60%) 26.8 1.8 .59 .28 67 . 9/30 d.05 d.01 3131 .07 .07 174 . SCANA Corp. SCG 33.61 4 2 4 .65 35· 45 (5- 35%) 13.4 4.3 2.50 1.44 98 9/30 .74 .74 3131 .345 .325 YES 229 Schein (Henry) iNOO) HSIC 66.58 2 3 2 .90 75-110 f 5- 65%) 20.1 NIL 3.31 NIL 16 . 9/30 1.03 .85 12/31 NIL' : Nil YES 1283 Schering-Plough SGP 16.80 4 2 3 1.00 20- 30 20- 80%) 64.6 1.3 .26 .22 42 ,· 9/30 .06 29 12131 ·· ... 055' . ·.17 YES
1959 Schlumberger Ltd. SLB . 50.40 2 3 5 1.05 61). 90 (20- 80%) 30.2 1.5 1.67 .75 85 · 9/30 .41 .30 . 3/31 .188 .. 188 YES 1907 Scholaslic Corp. (NOO) SCHL · 33.48 3 3 2 .85 45· 70 (35-110%) 15.2 NIL 2.20 NIL 79 11/30 •1.67 1.85 12/31 . NIL. NIL YES 503 Schulman (A.). iNOO) SHLM 20.24 3 3 3 .75 20- 30 t· 50%) 26.3 2.7 .77 .. 55 81 .8131 .. 02 .36 12/31 .. 135 ·..135 YES 1433 Schwab (Cha�es) SCH 11.08 3 3 1 1.85 8· 12 N- 10%) 25.8 0.5 .43 .06 29 9/30 .11 .07 12/31. '. 014. .011' YES 764 Scientitic·Atlanla SFA 27.02 2 3 2 1.25 25· 35 (N· 30%) 25.7 0.1 1.05 .04 6 : 9/30 • 28 .07 ·. 12131 . .01 ·.01 YES
956 Scotts Co. 'A' SMG 58.40 3 3 3 .95 80-120 !35-105%) '14.8 NIL 3.95 NIL n 9/30 d.10 d.43 12131 NIL NIL YES 1920 Scripps (E.W.) 'A' SSP 94.13 3 2 4 .90 110-145 . 15- 55%! 29.0 0.6 3.25 .60 62 · • 9/30 .64 .65 12/31 .15 •· .15.' YES 973 Scudder High Income KHI 7.30 3 4 4 .65 5· 8 It-+- 10% NMF 8.8 NMF . 64 53 5131 5.4�ql .· 5.53(ql 12131 •.159 ·.159 . 373 Scudder New Asia Fund SAF 13.00 2 3 2 .85 13·. 20 N- 55%) NMF ·. NIL NMF NIL 13 ', 6/30 10.7 q 11.02(q 913() NIL· · NIL
284 Sea Containers Ltd. 'A' SCRA 17.50 2 3 3 1.15 25· 40 (45-130%) · 5.8 0.6 3.00 .10 11 9/30 1.94 .85 12131 .025' NIL··
1607 Seacha,: lnt'I (NOQ) SEAC 14.40 2 4 3 1.15 12· 20 (N· 40%) 72.0 NIL .20 NIL 21 10/31 .05 d.02 12/31 NIL . . Nil YES 1457 1128 Seagate echnology STX 17.50 . - 3 - NMF 19- 30 (10- 70%! 10.9 0.9 1.60 .16 25 ; .. 9/30 .40 24 12/31 .04· NIL YES 937 Sealed Air SEE 53.37 3 4 3 .80 50- 80 (t-+- 50% 21.3 NIL 2.51 NIL 82 · 9/30 .68 .62 12/31 NIL· Nil YES
1310 1687 Sears.Boebuck s 44.80 2 3 1 1.30 60· 95 (35-110%) 9.2 2.1 4.85 .92 14 9/30 .84 .59 3131 .23 .23 YES
608 Selective Ins. Group (NOO) SIGI 31.57 3 3 3 .75 35· 50 (10- 60%) 12.5 2.2 2.53 .68 48 . 9/30 .53 .38 12/31 · .... 17 .15'
1103 Semitool, Inc. INDO) SMTL 10.34 3 3 3 1.85 8- 12 (N- 15%) NMF NIL d.16 NIL 61 9/30 d.07 d.10 12/31 . NIL .. NIL 1787 Sempra Energy SAE 28.30 3 2 3 .85 30- 40 (5- 40%) 8.6 3.5 3.29 1.00. 86 . 9/30 1.39 .73 3/31-·. .25 .25 YES 1084· Semlech Corp: · (NOO) SMTC 20.26 3 3 3 1.65 25· 40 !25- 95%) 39.7 NIL .51 NIL 17 10/31 .12 .11 12/31,. NIL .. NIL. YES 1507 Sensienl Techn. SXT 19.30. 5 2 4 .70 30· 40 55-105�! 10.7 3.1 1.81 .60 70 9130 .44 .42 12/31 .15 .' ·.:133. YES 1284 Seeracor, Inc. (NOO) SEPR 23.58 3 5 3 1.30 55· 100 (135-325% NMF NIL d2.02' NIL 42 .9/30 d.45 d.74 12/31 . Nil NIL YES
1403 Sequa Corp. 'A' SQAA 47.10 3 3 2 . 85 50· 80 . (5- 70%! NMF NIL .40 Nil n '. 9/30 .11 . .16. 12/31 ·NIL: Nil 1404 Servk:e Corp. lnt'I SRV . 5.15 3 4 4 1.15 15· 25 (190-385% 13.2 NIL .39 NIL 77 . 9/30 .03 .01 12131 Nil · Nil 348 ServiceMaster Co. SVM 11.53 3 3 3 .75 15- 25 (30-115%) 20.6 3.7 .56 A3 76 ., 9/30 .22 .22 •, 3/31 Jos·· .105 YES 1526 7-Eleven, Inc. SE 15.92 3 3 2 .85 16- 25 (N· 55%) 20.2 NIL .79 NIL 78 :9/30 .29 .26 12/31: . NIL. Nil- 1759 Sharper Image INDOJ SHRP 29.20 2 4 2 1.25 25· 40 (N· 35%) 19.0 NIL 1.54 NIL 19 10/31 .06 d.04 12131 '" · NIL NIL YES
834 Shaw Commun. 'B' [TSE) SJRB.TO 20.38b 3 .3 2 .95 25· 35 (25- 70%) NMF 0.6 d.03 .12 32 . &'31 d.03(b) d.35(b) 12/31 · '.03(b) .025(b) YES 572 Shaw Group SGR 13.06 3 3 3 1.30 •20- 35 (55-170%) 16.5 NIL ... 79 NIL 91 ·' ·&131 .. 24 .69 12/31 · NIL . NIL YES 433 Shell Canada [TSE) SHC.TO 59.36b 3 2 4 .55 55· 75 (N- 25%) 14.4 1.5 4.12 .88 84 '9/30 .85(b) .53(b) ' 12/31 · ... 22(b) • ;20(b)
423 Shell Tran� SC 42.77 3 1 3 .90 55· 70 (30- 65%) 15.9 4.0 2.69. 1.70 50 9/30 .. 66 .65. · 12/31 . NIL(p) Nlljp) YES 504 Sherwin·Wi Iiams SHW 34.06 3 2 3 1.00 45· 60 (30- 75%) 14.6 2.0 2.34 .68 81 9/30 .82 .73 12131 .155.· .. 15 . YES
1688 ShopKo· Slores SKO 16.13' 3 3 2 1.20 19· 30 (20- 85'4 . 11.0 NIL 1.47 NIL 14 '10/31 .03 .03 12131. .NIL·· ·, NIL·:• YES 1620 1285 SICOR Inc. (NOO) SCRI 27.15 - 3 - .80 25' 35 iN· 30% 27.2 NIL 1.00 , Nil 42 9/30 .24 .20 12/31 ·NIL . 'Nil YES 2222 Siebel Syslems (NOO) SEBL 13.93 3 3 4 1.75 13·.19 . N- 35%) 87.1 NIL .16 .NIL 22 /.9/30 .• 03 .03 12131 NIL,·,: NIL. YES
1788 Sierra Pacifk: Res. SAP 6.87 3 4 1 1.00 5- 9 (N- 30l NMF NIL d.03 NIL 86 . 9/30 ·. '.28 .78 12131 .. Nil .. NIL YES 505 Sioma-Aldrich (NOO) SIAL 56.71 3 2 3 .85 so, 80 . ls- 40% 20.7 1.1 2.74 .64 81 9/30 .66 .56 .12131 .16 . · NIL YES
938 Silgan Holdings (NOO) SLGN 37.79 3 4 3 .55 35· 60 (N· 60%) 11.5 NIL 3.28 NIL 82 9/30 1.70 1.34 12131 NIL NIL 1129 Silicon Storage INOO) SSTI 9.37 2 5 1 2.10 8· 15 (N· 60%) NMF NIL .03 NIL 25 9/30 d.01 d.01 12131 NIL · NIL YES 1199 Simon Property Group SPG 48.86 3 2 3 .65 45· 60 (N· 30%) 31.4 5.1 1.49 2.40 97 9/30 .29 .32 12131 .60 .55 YES
1871 Sinclair Broadcast INDO) SBGI 13.62 3 3 4 1.00 20· 30 (45-120%) 80.1 NIL :17 NIL 23 9/30 .08 d.29 12131 NIL NIL- YES
1859 Six Fla�. Inc. PKS 6.90 3 4 S 1.00 12· 19 (75-175%) NMF NIL d.68 NIL 66 9/30 1.32 1.31 12.131 NIL NIL YES
1700 Skechers U.S.A. SKX ·1.23 4 4 2 1.30 10· 16 \40·120%) NMF NIL d.86 NIL 40 9/30 d.15 .35 . 12131 Nil NIL YES 1594 SkillSott ADA · (NDQ) SKIL 7.91 - s - NMF 9· 17 15-115%) NMF NIL .07 NIL· 3 10/31 d.22 d.20 12131 ·NIL· Nil YES 1527 Smart & Final SMF 9.68 2 3 2 .80 9- 14 (N· 45%) 14.7 NIL .66 NIL 78 • ... 9/30 28 .12 12/31 NIL.- , NIL
836 1366 Smith (A.O.) AOS 32.90 5 3 3 .75 35, 55 (5- 65%) 16.5 1.9 2.00 .61' 67 ./9/30 .20 .34 12/31 ,:·.15,. .. 14
1960 Smith Int'! Inc. Sii 39.93 4 3 5 1.10 50· 75 (25· 90%) 25.9 NIL 1.54 NIL 85 ·,9130 .35 .20 12/31 · _Nit . Nit YES
1508 Smithfield Foods SFD 22.04 4 3 3 .75 30-. 50 · 135-125%) 13.4 NIL 1.65 Nil 70 10/31 .29 .04 12131 "_NIL NIL YES 1509 Smucker (J.M.) SJM 45.00 3 2 3 .60 55· 70 20- 55%) 18.8 2.0 2.39 .92 70 '10/31 . 68 .62 . 12/31 .23, , .. 20.- YES 939 · Smurtit·Stone Cont. INOO) sscc 17.80 4 3 3 1.20 20- 35 10- 95%) NMF NIL d.05 . NIL 82 ·• ·9130 d.04 .16 12/31 . NIL NIL YES 1367 Snap-on Inc. SNA 30.79 4 2 4 1.05 35· 50 . 15- 60%) . 18.7 3.2 1.65 1.00 67 , ·9130 .30 . 35 12131 • ,25 . .25 YES 230 Sola lnt'I SOL ·19.04 3 3 3 .95 15· 25 (t-+- 30%) 13.4 NIL 1.42 NIL 16. .. 9130 .30·· .. 25- 12/31 -Nit· NIL
1046 Solectron Corp. SLR 8.02 3 4 1 1.75 7•. 11 . (15- 85%) NMF NIL d.07 NIL 41 : &'31 d.21 d.Q.4· 12131 NIL. NIL· YES ** 1245 Solutia Inc, SEE FINAL SUPPLEMENT • PAG{: 687 317 · Sonic Corp. (NOQ) SONC 29.70 2 3 2 .80 35· 50 i20- 70%! 19;7 NIL 1.51 NIL' 34 · 8131 .44 .38 12/31 NIL NIL YES 940 Sonoco· Products SON 23.60 5 2 3 1.00 35· 45 50- 90% 17.9 3.6 1.32 .84 82 '9/30 .30 .34 .12131 .21 .- .21
1569 Sony Corp. ADR(g) SNE 33.35 4 3 2 .90 35- 50 ·· rs- so%i· 76.8 0.6 .44 .20 27 9/30 .30 .37 12/31 .· .114' .102· YES
1760 Sotheby's Holdings 'A' BID 13.13 2 3 2 1.35 11· 16 (t-+- 20%) NMF · NIL d.25 NIL 19 9/30 d.45 d.36 12131- NIL NIL , 349 Sourcecorp (NOO) SRCP 24.29 3 3 3 .90 45· 65 (85-170%) 14.0 NIL 1.74 NIL' 76 . 9/30 .40· .44 12131 NIL· :·NIL: YES 472 South ·Jersey Inds. SJI · 39.73 •4 2 4 .55 35· 50 iN- 25%l 14.6 4.1 2.73 1.62 96 '9/30 d.13 d.27 12131 . .a..79 .. 76 175 Southern Co. so 29.74 4 2 4 .60 30- 40 . N- 35% 15.7 4.8 1.90 1.42 · 98 9/30 .85 .82 12/31 •, .35 .. 343 YES 473 Soulhem Union SUG 17.92 3 3 3 .90 25- 40 (40-125% . 13.3 NIL 1.35 NIL 96 ,, 9/30 d.05 d.17 12/31 ·NIL, ..' ,NIL"-· YES
2124 SouthTrust Corp. (NOQ) SOTA 31.93 2 2 4 1.00 35· 50 110- 55%) . 14.6 2.9 2i18 .92 59 :·9!30 .53 .47 3/31.:-,- 21.· .• ,.17 YES 264 Southwesl Airlines LUY. 15.90 4 3 3 1.10 25· 35 55-120%) · . 32.4 · 0.1 .49 .02: 31 ·:9/30 .13 .06 3/31 :·:- .005 - :009 YES 452 Southwestern Energy SWN 22.91 2 3 3 .. 70 15- 25 (N- 10%) : 14.4. NIL 1.59 NIL 49 9/30 .25 .05 12/31-- NIL NIL::
474 Southwest Gas swx 22.30 4 3 3 .75 30- 45 (35-100'1l 14.8 3.7 1.51 .82. 96 ';9/30 d.51 d.49 12/31 i :205 : . :205·
1172 Sovereign Bancorp sov 22.97 3 3 3 1.10 20- 30 (N· 30% 15.2 0.4 1.51 .10.: 73 .·;Q/'30 .37 .33 •12/31 \ .025 · · :025 YES·
374 Spain Fund SNF 9.96 3 3 3 .90 6· 9 (N· N%! NMF · 7.5 NMF .75' 13. '· '1131 8.41(q) 6.81(q) :_12131 -, : .19 ;·· .18 ." 1860 , Speedway. Mo1orsports TAK 29.19 3 3 3 .65 35- 55 (20- 90% : 17 .6 .· 1.1 1.66 v .31 · 66 ,,:-9/30 .. 04 .02 · 12131 · .... .305 ·.;3()' : YES
(h) Est'd Earnings & Esl'd Dividends after converaion 10 U.S. The estimate 'may re"ect a probable Increase or decrease.·· , donars at Value Line estimated ·lranslation rate .. · ··
If a dividend boost or cut i� possible but not probable, .-.· Op))_ A6�� data �xpres$ed-:
,,, •. ·_,.)".��:,> ;_.· · .. · .. , , .. 1wo figures are shown; the firs1 is the mOl'e likely .. · . : · (1 "" """"' T . (g) Dividends subject 10 foreign withholding tax for U.S. residents. N=Negative figut11 ·NA=Not �s < NMF::N<i meanlngtul figure. ���-,-��-,--,-�-,-�-,--,--,-�-,--,--,--,-�-,-�-,--,-��-,--,--,--,--,-��-,--,-�-,--,--,--,-- c .2003. Value .' Line Publishi\Q, · me. All rights reserved.'Factuar material Is obtained from S011tes _baleved to be .retlable and Is provided wltho1.t-wananties at any kJnd:.­ THE PUBUSHEA tS·N01.AESPONSl8LE}OR ANY.ERRORS OR OMISSIONS HEREIN. This publication ill_stric1ty fer subscnber's own,.non-oommaltial, lntemal'u,e:.No.j)art at i may be reproduced, resold, stored or transmitted in any plinled, electronic or olher form, Of used for generating br martteting 3Trf plinted or electronic publication,. s8!Vica Cl j>roduct:
)
)
)
December 26, 2003 SUMMARY AND INDEX • THE VALUE LINE INVESTMENT SURVEY Page 23 WE-ZY
Do Options Trade'
latest Year I Dlv'd ' Ago I Ctr. Ended
LATEST RESULTS
Earns. Year Per sh, Ago
Industry Rank RANKS PAGE NUMBERS
Bold type refers to ..
Ratings and Reports; Technical (n % Est'd Eal'd italics to Selection . Recent Price Safety I 3.5 year Est'd Earns. Dlv'd & Opinion . --------1 Tlmeltness l Target Price Range Currant Yleld 12 mos. next Ticker j ancf % appreciation PIE next · to I 2 · Otr. NAME OF STOCK Symbol Beta potential · Ratio 12 mos. 6-30-04 mot. Endtd
NIL .15 NIL NIL
NIL NIL .30 NIL NIL
12131 12131 12131 12131
· 12131 12131 12/31 12/31 12131
.37 .65 .47 d.20
.43 .. 33
.71 .25 d.05
.44 3131 22 .205 YES · .47 12131 .23 .23 YES 1.61 12/31 .48 .47 YES d1.26 12131 NIL _NIL . YES .30 3/3.1. .01 .008 YES
.41 .. 3131 +.188 .188 YES .10 . 12131 NIL NIL YES .11 · 12131 NIL NIL - YES
.05 12131 NIL NIL YES 21 : 12131 , NIL NIL YES
NIL I YES
.15 i•YES NIL YES NIL YES
NIL. !'YES NIL YES .20 YES
NIL. ,YES NIL YES
.61 3131 ·.19 .30 I · .11 12/31 NIL. . NIL YES .34 3131 .05 :05 . i YES d20 12/31 NIL NIL I YES .25 12131 NIL NIL j YES
d.08 12131 NIL NIL I YES
20 12131 - .40 .40 I' YES 1.62 3/31 -· • .43 .34 YES .36 .. 3131 • .15 · NIL · YES .08 ·12131 NIL . NIL YES·
.36 3/31 •. 065 .os I · .d.46 12131 .01 .01 YES .13 '12131 · NIL NIL , YES .52 12131 .27 · .255 i YES d.09 12131 NIL NIL i YES
.25 12131 .05. '.05 I YES .87 3131 .10 .10 · YES .50 12131 .20 .20 YES .37 3131 .055 .045 i \'ES .24 12131 .16 .16 YES
.50 .65 .90 d1.12 .49
.69 .11 .16 .10 .26
.75 .68 .54 d.34 ,48· .43 1.05 .21 d.04
.84 .25 .56 d.02 : .26
d.25 .65 1.48 .38 d.03
.41 .01 .20 .52 d.05
.01 +1.01 .47 .40 •.20.
717 Westar Energy WR 19.96 2 4 5 .70 17· 30 (N· 50%) 11.8 :i.8 1.69 .76' 87 9/30 ** 1135 Western Digital woe 10.63 Y3 4 3 1.65 10· 17 (N· 60%) 11.2 NIL .95 · NIL' ·25 9/30 455 Weslern Gas Res WGR 46.01 3 3 4 .85 30- 50 (N· 10'4) 21.6 0.4 2.13 .20. 49 9/30 744 Western Wireless 'A' (NQO: WWCA 17.49 2 5 2 1.30 20· 35 (15-100%) NMF NIL .03 NIL 33 9/30 1875 Westwood One WON 33.05 3 3 4 1.30 50- 75 (50-125%) 31.8 NIL 1.04 NIL 23 9/30
1772 Wei Seal 'A' 1NDO: WTSLA 10.27 5 3 1 1.20 7- 11 (N· 5'1.l NMF NIL d.31 NIL 19 10/31 923 Weyerhaeuser Co. WY 60.90 4 3 3 1.10 75-110 (25- 80% 27.7 2.6 2.20 1.60 88 9/30 123 Whirlpool Corp. WHR 69.77 J.3 3 2 1.20 70-105 (N· 50% · 11.4 2.5 6.11 1.72 45 9/30 1529 Whole Foods Markel 11,001 WFMI 64.55 1.2 3 3 .95 55· 85 · (N· 30%) 33.6 ' 0.9 1.92 .60 78 9/30 1530 Wild Oats Mar1<els jNDCi OATS 11.49 4 5 3 .85 15· 30 (30·160%) 67.6 NIL .17 NIL 78 . 9/30
1908 Wiley (John) & Sons JWA 25.35 3 3 3 .80 30· 45 (20- 80%) 19.1 1.0 1.33 26 79 10/31 456 Williams Cos. . WMS 9.91 2 5 5 2.25 11· 20 (10-100%) 45.0 0.4 .22 .04 49 9/30 1773 Williams'Sonoma · WSM 33.79 2 3 :i 1.35 45· 65 (35· 90%) 25.2 NIL 1.34· NIL 19 10/31 2131 Wilmington Trust WL 34.68 4 1 2 .95 40· 50 (15· 45%) 16.2 3.1 2.14 1.08 59 9/30 525 Wind River Sys. llliXl) WIND 7.61 3 4 1 1.40 3· 5 (N· N%i NMF · NIL d.13 NIL. 15 10/31
1531 Winn-Dixie Stores WIN 8.81 4 3 3 .80 20· 35 (125·295%) 16.0 2.3 .55 .20 78. 9130 ** 1560 Winnebago WGO 65.23 1.2 3 3 1.10 55· 85 (N· 30%) 18.5 0.6 •3.53 .40 10 ·11130 718 Wisconsin Energy WEC 32.08 3 2 3 .65 30· 40 (N· 25%) 14.1 2.5 2.27 .80· 87 9/30 1703 Wolverine World Wide WWW 20.59 3 3 4 1.10 25· 40 (20- 95%) 16."0 1.1 1.29 .22 · 40 9/30
____ 584 Worth,nglon Inds. _... WOR 16.55 •3 3 4 .90 "25· 35 (50·110%) 25.5 3.9 .65 .64 83 11/30
1516 Wrigley (Wm.) Jr. WWY 55.59 3 1 3 .65 80-100 (45- 80%) 26.3 1.7 :.2.11 .92 70 .. 9/30 1288 Wyeth WYE 40.01 4 2 4 .85 55· 75 (35- 85%) 15.9 2.3 . '2.52 · .92 42_ 9/30 1308 612 XL Capital Ltd. XL 73.84 4 3 4 1.05 105-160 (40-115%) 10.7 2.6 6.89 - 1.92 · 48 ·· 9/30 1876 XM Satellite 'A' \NCill XMSR 22.61 2 5 3 1.80 16· 30 .(N· 35%) NMF NIL d4,11 · .. Nil 23· 9/30 457 XTO Energy __xTO .J!:1�._5_}0 30- 45 15- 60%) 14.7 0.1 1.91 .04 49' 9/30
2581 1790 Xcel Energy Inc. XEL 16.97 3 3 3 .75 14· 20 (N· 20%) 7.1 4.5 . 2.38. .n · 86 9/30 242 1153 Xerox Corp. XRX 12.42 3 4 4 1.45 11· 18 (N- 45%) 21.8 NIL .57 NIL. 60_ 9/30 1090 Xilinx Inc. ,NrJJ; XLNX 35.26 3 3 3 1.80 35· 55 (N· 55%) 26.7 NIL 1.32 NIL 17 9/30 2245 Yahoo! Inc. iliOQJ YHOO 40.73 2 3 2 1.85 40- 60 (N· 45%) 88.5 NIL .46 NIL 2 9/30 959 Yankee Candle YCC 25.80 1 3 3 .85 35- 55 [35·115%) 16.9 NIL J.53 NIL 72 i 9/30
Yellow Corp.------- - NAME CHANGED TO YELLOW ROADWAY CORP.
533 277 · Yellow Roadway iNDO) YELL 34.81 - 3 - NMF 40- 60 (15· 70%) 14.1 NIL 2.47 NIL 38 9i:lo ** 1376 York lnl'I YAK 33.65 Y3 3 2 1.00 45· 65 (35· 95%) 12.4 2.0 .2.72 .66 67 9/30 322 Yum1 Brands YUM 32.81 3 3 3 .60 40- 60 (20- 85%) 15.2 NIL 2.16 NIL 34 9/30 1774 Zale Corp. ZLC 52.74 3 3 1 1.25 55· 80 (5· 50%) 14.3 NIL 3.70 NIL 19 10/31
1136 Zebra Techn. 'A' 1N001 ZBRA 61.60 3 3 3 .90 50· 80 (N· 30%) 30.5 NIL 2.02 NIL 25 - 9/30 237 Zimmer Holdings ZMH 68.n 1 2 3 .70 80·110 (15· 60%) 37.4 .. NIL · 1.84 NIL '16 -,9/30 2132 Zions Bancorp. 11,00; ZION 61.84 2 3 3 1.05 65· 95 (5- 55%) 14.4 1.9 4.30 1.20 59. . 9/30 1610 Zeran Corp. 1:,00, ZRAN 16.92 3 4 3 2.00 35· 55 (105·225%) 31.3 NIL.. .54 NIL 21 , 9/30 1620 153 Zygo Corp. }!CO ZIGO 16.45 2 4 1 1.40 18· 30 (10· 80%) NMF NIL'.. .10 NIL· 65 9/30 )
To subscribe call 1-800-833-0046.
All data adjusted for announced stock sp1,1 or stock dividend. (h) Est'd Earnings & Est'd Dividends aftei -coriversion to U.S. See back page of Ratings & Reports. (0 The estimale may reflect a probable increase· or dflClease: ·· dollars at Value Line estima1ed translation rate. · · .. • New ligure this week. II a dividend boost or cut is possible but not probable, · U) All Index data expressed in hundreds. (bl Canadian Funds. two figures are shown, the lirst is the more likely. (p) 6 month& (q) Asset Value
_d�D_e_fiet_l __ · ---,---,.--------'-------(_g)_Di_·v_id_en_d_s _su_b_je_c1_1o_fo_rei_·g_n _w-'ith_ho_l_din_g_1_ax_.1_or_u_._s._r_esld_en_1_s._. _N_=_N_ega_Hv_.e_figure . NA=Nol ava�. NMF=No meaningful figure
© 2003, Value Line Publishlni! .. Inc. All righls reserved. Factua: matenat Is· oblained from sources believed to be reliable ·and � provided without warrantlea ot 81Y'/ kind. THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publicalion is strictly !or subscriber's own, non-commercial, Internal use. No pan of it may be reprodu1;i;d, re'iold. s!vred er trawr.i!tcrJ ir, r1n; p:1med, o!ectronic or other form, or used for gen�ra11ng or m3rketing any printed or electronlc pubticaOOO,·seMCa °' product.
_) (•)
.+u· ,, : +.9.'
174.4 178.5 .. 188.2
18.4 18.6 ·· 19.9
33.8% 34.5% �-1%
8.4% 7.0% iO'lo
50.1% 50.1% .49.7%. 42.9%. 42.9% 43.8%
338.9 352,8 , 364.0
363.2 376.0 39$.7
.7,7'/o . 7.4% 7.4%
10.9% 10.6% 10.9% µ 11.4%" 11.1% i1.5%
'2.4% 2.0% 2.5%
81%. 83% 80%
12.0 13:5 14.2
.77 ;82, · .. ;84·
'8.6% 8.1% 5'5%
Septe�ber 15jJ995_·· - ELECTRIC.:UTILIJ"f�(E:ASJ}lND�$TRY�{i .. ·: .�·/j/�'.\::·.:;./1$t.:::
. , ::AU of the.'maJol". utilities hi the i:lastern region'of I I .: INDUSTR¥TlMELlNESS: .1 ,;,'.g,r:·(of 9_'7)L;:['f: : the United States are reviewed in this Edition.. · · ·· · - ·· ·· - ·· ·· · · · ·· 1 •., ... ," · • ' • . j .. Th?se serytni the central regio1:t will be found 1n··:··JersiaL �eciaion thaf;-1i�lities: �. �h'e'', s�te do ,:?ot}/; .J.f )- · Edition five� • �I · of the western companies �re - -necessanlr,hav� '.exclusive franchisea' I� ��ni�d mot1ons,,C'··. ! 0- · covered In Edition U. - . -· ·• . . > . for reconsideration :;by Northeast Utilitierand;:.New ·· ·
' . . · -v Eriglctfu:fEltctric: The utili�ies had contended that the State electric utility regulators in the eastern exclusive franchise principle Jvas .w,elrestablished and. region ·are taking an active role in stimulating .. · that the .commission'ir-policy- was illegal.. They have: competition , in their .jurisdictions; Our report · · appealed the ruling to the 'courts. Meanwhile, Gove.rnor .: · discusses some of their divergent views. · Merrill signed a bill-authorising.retail ·wheeling (the use .· .. .. ,· of one utility's transmission lines by another for the sale." , · Some Regulatory Views On Competition. of power. to an. end user), The commission'.expects to: A year and a half ago, the California regulators initiatea retail wheeling pilotprogram by next April. ·· declared that the state's electricity prices were too high This would make New Hampshire one. of the first 'states ; :,: •. and that a tnajOi' restructuring of Utility operations.was <to meet-the .18SUe head on: . .'''' .. . : I '.; •: , ' .. · ... ; • . . ·..• . necessary to bring them. down ·to reasonable levels. It· . .. By •. c'ontriut,'. thi:l ;l'{o�i{':Carolina:· and· Maryland .. · · .
. . wasn't long: before .various state commissions· in the. regulators 'Ji.ave' rejee�d .retailwheeling -, :The:-North East recognized that they, too, must take a. hand jn ; Carolina commission .stated that its· territorial assign: .. . bringing down. rates. . _ . .. . ,, . • ment law divides . the. state into areaa to be. served by · In New York, for example, where Long Island - specific. utilities andthat ariy change :would be prohib7.
Lighting (LILCO) and .Consolidated Edison (CEC) have . Ited 'by, statute . .-:The: ;Maryland · regulators noted. that .. . · the unenviable distinction.of charging the highest rates · their industrial rates were sufficiently low, so therewas-. in the nation; Governor Pataki · is · under· pressure. to ., no immediate need for'a quick fix at .this time. . . . . . · propose a rate-reduction. plan; Three months ago, the _ · ·. In; :Rhod�. Island, an· understanding was reached ; Long Island 'Power Authority (LIPA) offered. to buy , between the'·iitate's utilities and business· arid consumer ? ; · LILCO for $9.2 billion and reduce the utility's rates ,byi l groups on general guidelines for an _openi�ner'gymar��t/::, 20% in .3 to 5, years. But. the Governor opposed the . The agreement called for � spot market(�r the put:�Jias�·< buyout, appointed a new LIPA chairman, and indicated · . and sale of power; retail wheeling, · and the recovery of· ·. he would do what was best (or the people of Long Island, •... stranded irivestrtj.ents):�y iCh�g�s. to -. ctistomets ''rat:h;�t'. '. ! His proposal is �xpected tohiclude tax-exempt financing· . than by.wheeliiig.fees; .The Jgree��rit hai!! such,,broad.:·,: of LILCO's $4:6 billion of.long-term debt and a possible. supp9J:1; .. that; it could Jay the groundwork, for-similar ->. sale ofthe utility's gas operations and its power plants.: : resttjlc(µririg in othe� New Engljln4 'i!itates. ... ·.. / , · _>: '.' Much of the burden would be. borne by the Federal ·. Nwnerous ;State; coµµnissions: in �he· eaeterif;,regiC)n: .
K:.: __ ). ·. Government,. and to. a lesser extent by the state, neither- have solicited input -on: competition . from interested· · · . of which . would collect taxes , on interest income! . The . · parties. Some' have established general guidelines/:ijut ··· · ; state hasnoimmediate plans ·to lower rates for CEC; A· ' conditions vary from' sta� to state, as evidenced by 'the: i · i reduction. might have. to wait.for a rollback in Jh_e gr�ss. ; d_iver�nc� \'cjf_yie.vis_;ffe_Qtnh�gateg�,to '. d�te; It is"'stilf foo-> i . receipts tax on electric bills, but the state's budget: . .-. early to predict what·adjuetiµents will be madein.the. _; · deficit 'will likely . delay. .action 'here; .Meanwhi\�; the_ · ·'fong-��dµ,1g :regµl�tory co�pact_'.natfoi:jwide .ari'cl,p9w, .. : Public , Service, Conµnissioh. is examining propo�als , to, : irid$viiNa1' ,j1tjlities/will;'. ije··.affected _by_;the ineyitabl� ·,: • _stimulate competition without jeopardizing ,the Jinan-.,'. sµrfacing;of.competition;,. i ;;> ,,' r , . :· : · , -: \, , cial integrity of the state's utilities. On the- issue· of •'Investment Advice,·."·.' : ·,. · · ·. · .: •· ' ·. · · : · . stranded investment, it stated that utilities should have' :.: ::;; The industry_is undergojng;ii period'ofradicar change.,• ,.:., ' . a reasonable opportunity to 'recover expenditures made �ei'e will besome winriets. and ·som¢1oseraJn the . .i)ew: •· ,:· _ . pursuant to their legal obligations. But that leaves open environment Before making· a utility purchase.dnves-: ·.··: . ·:t�:�:!:�:%1If��tJ!�::1:eu::i���}o�!���!���!iJ:�:!.':;1::fati�l�t"J:t!�,rir�t::r:�i�����t:t::;;;::'��--'.:::;
toabsorb,sonieoft�eburderi. ,:.,- ..... - ... ,, :,: •, .' ·.;.how,tbegrqup,�.awh.oleis,riottitnely., -,:-;: "/?"> ; In New-Hampshire, the eommission .issued acontro- .. · -,, ,, .... , ., ;,:-.,.,, '.,).::., �:,,<·. -·-·: : i ::Ar#i:�r ]!.;},fedalie .· :
Compo�te Statisti�-i �l�ctnc Utileylndusby' . •'::'.' .:; .. ;;_;�i;;i;A�tfs:,�ii�;i�:��i;;::··)rl .
1991 1192 1"3 19M .1995 1995 : ae.oo . \; ;/ '..':"; /t ;:h/} ; ii> 19�'. ,:·'./(1993,:' ···'.1)M: . .' :
_1::! - .. ::; _-:; ==�_:-:,.· ··.: /{::°o =::· ·;.�\�hat,�-��'� �(',:·,�!2'C ••· '\, . +1\fi;}-:\:.t���;£ ::· · +a1< \·;
36.0% .U.5'fo .U.5'fo lilcomiTuRllt '·' .'.' ,u.°" r.:: •'AVtrtjJeRitklentlalU-.(kwh)t -,; 1i484'; ,,.,. 9739., .,_-: 9825: ;, : �! ',:;: _,!:.::r!�:t'"\!!:; ;; '·:f;�,.-��,;:::�·-f��:�:��>.s:·::,·· :�-:11 ·· a:21 ---,.-'..-B.45 �-:
«.&% 45.s,(, ,,.�. Common Eaultv .Rlllo 47.5'(. i; i Capacity at Ptak (!11Whi •·" ,. :: ; , , ; , , · 695436 . , 694250 702985 -
369.9 .. 37f ,_.-3'7 fo111CaP,llal(Sbll1), __ ,.-.t, ::.;."'! .,·,i •:;, .. ·,.:': :., .. :,.;o,''.,.·:,�.,;··.·:•; .:, . : ,..- . •<... ,
.. -40'.l:9 . 410 ., '°' Net Pllllt ISbln .- . _ . ao ;"·· �k � Su.mmtr.(�WL: ,:- 1 i :i-i ��. ' 57�. . - 585320 1�:: '. ,�:: ,�:: : = :'w:>: : . ,�:� ''. t'. ln'�u_�··t1� Fi�i�r't�f;,:;::={ : .: : - 61.4 �1,o · 612
,1.1% ua """ % itmecf Conini'•• : 11."' : .. %.· .. c.h�se _c_o�ioin .... (yr.� · .· . :. : ... +i1 2.2% · '°" · .t"' %RllllnldtoCommEq · ��- ' - · , ... , ·' .. · · ·· ·· . , ., 82% "" _m. UH Dlv'dl to Nit Prci(. ""' . '. Flxecf C�lii'ge Coy«.ge {") '.':; : .; . ; :!fa 230 . 240 ; ·.'
12.0 ..,.,,,..,..._ AviA_M1PIERliilo __ · - . 11.0 .· .. . . . .- ·.• .: ' '' . . . ...
8.8� ·. , :; =. Relltl¥t Pit Rllld· · :_·· .. '_:.,·-! · : s4in:es\ An�a1 A��iL��ijte�;;Va1� u#{¢�ffs�)i:ism,ut• ·_• AVIIAnn'IDIY'd�ci .,. .. ,, ; ·. . · ,, •... ,.,._,.-·.:·,." • .. · ·:·:·,··,,·:·,·., ,,. : . A •• " ., ••••
To subscribe call 1-800-833-00�6
To subscribe call 1·800·833·0046.
• 681449· .; 678413
73348(•. 750771 · .. -: ,.: ... ::· .: .. NA
.. Nk
228.
4.91".
· NA
61_.2 ·, 58.9 .
,\ .,..-. )
t·:
()
(. )ICFA Continuing Education
°쑵]Finding Reality in Reported Earnings
Proceedings of the AIMR seminar Finding Reality in Reported Earnings
December 4, 1996
Philadelphia, Pennsylvania
E. Richard Brownlee Ill
Martin S. Fridson, CFA
Trevor S. Harris
David F. Hawkins
Edited by Jan R. Squires, CFA
() J
() .:»
Patricia A. McConnell
Fred H. Speece, Jr., CFA, Moderator
Kathryn F. Staley, CPA
Robert Willens
Finding Reality in Reported Earnings:
An Overview
Jan R. Squires, CFA
Professor of Finance
Southwest Missouri State University
(J
( ). :_;
\·1any and varied are the tools of modern investment
ma nagemenr=frorn elegant asset-pricing theories
and sophisticated computers to mammoth databases
and intricate optimizers. For many if not most
investment practitioners, however, the most perva­
sive tool is also one of the most traditional: a
company's financial statements. No single item on
those statements commands more attention, invites
more scrutiny, and attracts more controversy than
reported earnings.
REPORTED EARNINGS
· Reported earnings command our attention simply
because earnings, presumably, are the basis for the
investment benefits that we all seek. "Healthy
earnings equal healthy investment benefits" seems a
logical equation, but earnings are also a scorecard by
which we compctre companies, a filter through which
we assess management, and a crystal ball in which
we try to foretell future performance. A single value
that serves so many purposes invites our scrutiny.
Wh,1t are the components of a company's reported
earnings? Are the components, and the result, real or
illusory? Fleeting or permanent? Actual or desired?
Stable or volatile? What is the nature of the relation­
ship, if any, between reported earnings and stock
price? A value that must satisfy so many questions
inevitably attracts controversy. From the perspective
of economic reality, reported earnings are largely
fictional, some argue. Another oft-voiced critique is
that financial statements are subject to so many
manipulations that reported earnings, although not
fictional, are largely meaningless as a determinant, or
even a suggestion, of investment benefits.
This proceedings is the product of an AIMR
seminar intended to give participants an opportunity
to focus anew their attention on reported earnings­
to scrutinize the always complex and often subtle
composition of reported earnings and to weigh the
controversies inherent in relying on reported earn­
ings. The authors-a blend of astute academics and
seasoned practitioners-bring their considerable tal­
ents to a pragmatic and honest assessment of three
major influences on the nature and usefulness of
reported earnings.
Finding Reality in Reported Earnings
:.:r Accounting influences. How do prevailing
accounting standards, and the rule-making bodies
that promulgate those standards, influence reported
earnings? To what extent do accounting and report­
ing practices contribute to the subtleties of reported
earnings? What processes can be helpful in evaluat­
ing reported financial information?
'.%{ Global influences. What are the effects of mul­
tiple currencies on the financial statements of multi­
national companies? How do accounting practices
differ outside the United States? How are future
international accounting standards likely to evolve?
1M Specific influences. To what extent do reported
earnings reflect prevalent accounting guidelines and
practices in business combinations and restructur­
ings? What are the key differences between reported
earnings and taxable earnings, and what tax consid­
erations most influence reported earnings?
ACCOUNTING INFLUENCES
Reported earnings are generated in the context of
accounting rules and standards; understanding the
influence of those rules and standards helps prevent
misplaced reliance on the quality of reported earnings.
Richard Brownlee outlines key changes in the
financial reporting environment and details how
financial statement objectives and the Financial
Accounting Standards Board have responded to
those changes. Brownlee contends that accounting is
a necessary but not sufficient component of the effort
to communicate corporate value globally, pointing to
many examples of how accounting does not, and
perhaps cannot, convey fully a company's economic
reality and reminding us that the link between
reported earnings and stock price is tenuous at best.
He closes with an intriguing look at the future of
financial reporting, touching on reporting practices,
investor communications, and the emerging issue of
"global sustainability."
Building on the perhaps controversial assertion
that the purpose of a company's financial reporting
is to obtain cheap capital, Martin Fridson examines
many of the earnings subtleties with which invest­
ment professionals must contend on a daily basis. He
ranges across a variety of industries-from savings
( )
I -:>
and loan banks and restaurant franchises to invest­
ment banks and home supplies retailers-to provide
examples of manipulative accounting and question­
able reporting. Shuttling cash in place of earnings,
using questionable assumptions, and ignoring tim­
ing realities-all come under Fridson' s skeptical eye.
He also discusses several common earnings manage­
ment techniques and identifies those financial ratios,
all too familiar in nature but all too rarely calculated,
that he believes are most helpful in detecting typical
earnings distortions.
Kathryn Staley takes the perspective of a portfo­
lio manager who is attempting to find reality in
reported earnings while working on the "firing
line" -with too many stocks to follow and too little
time to do adequate research. Even in that daunting
environment, she contends, financial statements can
and do offer useful information. Staley discusses
practical interpretation of earnings announcements,
identifying many specific income statement and bal­
ance sheet items that are prone to manipulation and
providing particularly useful insights into the proper
use of conference calls. She also offers advice on key
components of effective portfolio maintenance and
closes with a discussion of computer databases and
spreadsheets, two helpful shortcuts to make the hard
work of earnings analysis more manageable.
GLOBAL INFLUENCES
Investment professionals must increasingly rely on
nondomestic reported earnings figures. The financial
statements of multinationals contain frequently mis­
interpreted nuances, which may or may not be
clarified by evolving international accounting stan­
dards.
Making economic sense of the reported earnings
of multinational companies is a difficult task, and
Trevor Harris provides a comprehensive look at the
extent to which foreign currency considerations fur­
ther complicate that task. He first illustrates the
important effects on a company's reported results of
foreign currency transactions and the currency trans­
lation process. He then addresses the importance of
the choice of functional currency for multinational
companies and examines the impact of currency
translation on company analysis and valuation, in the
latter regard emphasizing cash flow translation and
measurement of business activity. Throughout his
presentation, Harris emphasizes both the dangers of
aggregate analysis of multinational companies and
the importance of rigorous, fundamental analysis of
the real sources of a multinational company's perfor­
mance.
Recognizing that earnings analysis is increas­
ingly taking place in a global context, David Hawkins
2
traces the evolution of international accounting stan­
dards to their present state, focusing in particular on
that evolution as it is being played out in such specific
regions as the European Community and emerging
markets. He elaborates on a variety of financial
reporting problems that are being, or are likely to be,
addressed by these evolving standards; such prob­
lems range from interim statements and segment
reporting to provisions, contingencies, and disclo­
sures, from consolidation to pooling of interests.
Hawkins concludes that if the proper criteria are
consistency, transparency, timeliness, and confor­
mity, the world is indeed moving toward interna­
tional accounting standards that reflect economic
reality better than in the past and that, accordingly,
will better serve investors.
SPECIFIC INFLUENCES
Various specific influences leave their unique stamp
on reported earnings; of particular concern to
investment professionals are, first, the often arcane
realm of business combinations and restructurings
and, second, the ever-present effects of taxes.
Patricia McConnell addresses a variety of issues
involved in accounting for business combinations and
restructurings. She first presents a detailed look at the
criteria that a company must meet to use pooling-of­
interests accounting, focusing on particularly impor­
tant requirements relating to voting stock, autonomy,
independence, asset disposal, and treasury stock. She
then compares and contrasts the purchase and pool­
ing approaches, concluding that investors should not,
but apparently often do, care which method is used.
McConnell also discusses restructuring charges
within the context of generally accepted principles of
accounting income statement presentation. Discontin­
ued operations and extraordinary items are "below
the line" income statement items. Specific restructur­
ing charges, however, may be treated differently.
McConnell concludes by highlighting current require­
ments with respect to two common restructuring
charges: the costs related to employee termination and
the costs of exiting a business activity.
Taxes are an undeniable feature of whatever
reality exists in reported earnings, and Robert Wil­
lens details several important tax influences, with a
focus on three particularly important tasks. First, he
takes a step-by-step look, using Schedule M-1 of the
corporate income tax Form 1120, at the reconciliation
of accounting net income with taxable net income.
Second, with respect to accounting for income taxes,
he examines three issues-deductible temporary dif­
ferences, deferred tax assets, and the use of net oper­
ating losses for acquisition purposes-that have
great potential for manipulation by a company and
©Association for Investment Management and Research
( . )
( ) .:»
( )
J
that often result in lack of comparability among com­
panies. Third, Willens discusses the tax treatment,
current or proposed, for several typical corporate
capital transactions, including purchase accounting
and "recap" accounting.
CONCLUSION
Helping us recognize, as the authors in this proceed­
ings do, that the gap between economic reality and
reported earnings reflects varied influences is, in and
of itself, a notable contribution to our professional
practice. These authors know that recognition is one
thing and resolution quite another, and by virtue of
their experience, intellect, and conclusions, they
Finding Reality in Reported Earnings
challenge us further: How should analysts and
investors proceed to understand those influences
better and begin to narrow that gap? Clients deserve
the best we can muster; the best as defined by the
authors is clear indeed. There is no substitute for
rigorous fundamental analysis-of companies and
industries; of accounting rules, industry regulations,
and tax laws; of the relationships among economic,
financial, and valuation variables; of the practices
that increasingly cross national borders. Only by such
analysis, and by the hard work and persistence
required to do it well, are we in a position to find the
reality in reported earnings.
3
(�How To Use
The Value Line Investment Survey
A Subscriber's Guide
f)
·,J Arnold Bernhard & Co., Inc.
711 Third Avenue New York, N.Y. 10017 (212)' 687-3965
( ,j
r . ) J
)
J
Top 100
Next 300
Middle900
Next 300
Bottom 100
-Rank 1.
-Rank 2 -Rank 3
-Rank 4
-Rank 5
53
The critical factor in Value Line's 3- to 5-year model is the estimated future earnings rank. Here we take the estimate of earnings made by our
analysts for each company in the period 3 to 5
ye�rs hence and divide by the average. earnings estimated for all 1700 stocks. The resulting ratios are once again ranked from 1 to 10, based on their standing compared to each stock's past
earnings history.
These three variables-current earnings rank, current price . rank, and estimated future earn­ ings rank-were regressed against change in
relative rrice three to five years later. The cross­ sectiona regression analysis covered 12 overlap­
ping 3- to 5-year periods between 1965 and 1980 and included over 12,000 observations. The analysis, using a statistical technique known as
multi�l� regression analysis, results in a formula combining the three elements m such a way as to favor stocks that carry the highest future earn­ ings ranks relative to current earnings and price ranks. The future earnings rank accounts for approximately 65% in the determination of relative price change in the future; the other two variables explain 35%. Future relative price change is estimated from the· latest 52-week average price base.
In order to convert these estimated relative price changes into absolute price forecasts, it is necessary to hypothesize an overall stock market environment 3 to 5 years out. Value Line is projecting that overall stock prices will rise sub­
stantially by the 1985-87 period. Applying this market forecast to the model results· in absolute
price forecasts for the 1700 stocks covered in· the Survey.
Because the future estimated earnings rank carries two-thirds of the weight in the model, the success of the model projections will be heavily dependent upon the accuracy of future earnings forecasts made by Value Line analysts. The model expands price-earnings ratio projections on companies estimated to grow more rapidly than average over the next 3 to 5 years and con­ tracts those where earnings growth is expected to lag.
This. model is not meant to supplant the Timeliness Rank, which is geared to' discrimin­ ate over a 12-month period without dependence
upon earnings estimates. It can, however, be used in conjunction with the Timeliness Ranking System by favoring stocks with high apprecia­ tion potential that also carry favorable Timeli­ ness rankings. Because of the risks. in making accurate earnings forecasts 3 . to 5 years out,
Final Ranking
After all stocks have been classified on the basis of each of the above criteria, the individual ranks are summed and the composite numbers arranged into five categories as follows:
Test(ng Criteria-Value Line actively experi­ ments to find ways to improve the Timelmess Ranks. If additional criteria are added or any eliminated, they will be announced to subscribers.
3- To 5-Year Price Projections
Vaiue Line statisticians have developed a mathematical model for making 3- to 5-year
price projections for the 1700 stocks in The Value Line Investment Survey. The model is an out­ growth of the hi$hly successful model used to derive our Timehness rankings on stocks. But whereas the Timeliness Ranks are designed to discriminate among stocks on the basis of rela­ tive price rerformance over the next six to 12 months, this model is oriented toward the more distant future.
There are three components in the 3- to 5- year model, the first two of which are factors currently in the Timeliness ranking system:
1. Current earnings rank 2. Current price rank 3. Estimated future earnings rank
Current earnings ranks are determined by di­ viding the latest-12-months' reported earnings __ of each company by the average earnings of all 1700 companies within the Value Line universe, and by then comparing this ratio with a similarly derived ratio for each company's past 10-year history: If a company's latest relative earnings are the highest in its 10-year history, its current earnings rank is 10; if the lowest, 1.
In the same vein, current price ranks are determined by dividing the past-12-months' average price of each stock by the Value Line Composite Index and then the ratio thus derived is compared with similar price ratios over the past 10 years. If the latest relative price is the highest, its current price rank would be 10; if the lowest, 1.
. } J
A Study of Financial Analysts:
Practice and Theory
Stanley B. Block
The study reported here focused on determining what nnalytical technioues
financial analysts who are members of AIMR actually use. The study
achieved a response rate of 33.75 percent. Questions covered 16 areas,
including the use of present value analysis, the importance of quarterly
earnings' announcements in decision making, belief in efficient markets,
acceptance or rejection of market anomalies, and belie] in the importance o]
international diversification for risk reduction.
-------....--------
he exams, curriculum materials, and sem­
inars designed for the CFA ® (Chartered
Financial Analyst) Program are based on
knowing what is important to practicing
financial analysts. Yet, little documentation exists
about what financial analysts actually believe in
and do. The intent of this research was not neces­
sarily to identify the normative approaches but, .
rather, to identify the most widely used
approaches. Moreover, the results are not intended
to suggest that future analysts be directed to the
most commonly used approaches. The intention of
this article is to share knowledge about what goes
on in the day-to-day practice of financial analysts.
For example, use of present value analysis is
heavily stressed in the CFA curriculum and is a
major focus of textbooks on investments, but how
widely is present value analysis actually used and
by whom? Also, new techniques for analysis, such
as economic value added, have received relatively
less attention than traditional measures of analysis,
but little is known about how widely accepted EVA
is by practitioners. This survey addressed such
issues.
The Study
The participants in this study came from the mem­
bership of AIMR (the Association for Investment
Management and Research). Questionnaires were
mailed to a random sample of 900 AIMR members
in the United States in October 1998.1 Because of
address changes and other factors, 880 mailings
successfully arrived at their intended destinations.
Stanley B. Block, CFA, is professor of finance at Texas
Christian University.
Of that number, 297 usable responses were
received, for a return ratio of 33.75 percent. A
follow-up telephone survey of randomly selected
nonrespondents indicated no statistically signifi­
cant differences between those who initially
answered the questionnaire and those who did not.
The final questionnaire, which is reproduced
in Appendix A, had been previously tested in three
pilot group surveys.
The questionnaire materials made clear to par­
ticipants that the survey was sponsored by the
author and not by any business organization or
AIMR itself.�
The Respondent Group
The first three tables in this article reveal key char­
acteristics of those who responded to the question­
naire. In Table 1, the 297 respondents are delineated
by the type of firm for which they worked. The
·· largest number of responding financial analysts
were employed by brokerage firms and private
money management groups. Investment manage­
ment counseling firms, mutual funds, and bank
trust departments are also represented substan­
tially. Although no attempt was made in this study
to stratify the sample by industry classification in
advance, the composition of respondents does rea­
sonably represent the membership profile by
industry classification as reported by the more than .
32,000 AIMR members in the 1998 Membership
Oirecton/1
As -indicated in Table 2, 67.7 percent of the
respondents were CFA charterholders and 53.9
percent held M.B.A. degrees. The charterholder
number in this sample is slightly smaller than for
the total organization (70 percent), whereas the
M.B.A. degree number is slightly larger than for the
86 ©Association for Investment Management and Research
() ·...._;J,,·
()
<::
· .. ___,/·
Table 1. Respondent Breakdown by Industry
Classification
Industry Number Percent
Brokerage 77 2:i.9
Private rnoney management gnn1p 7� . 25.2
Investment management counseling .19 13.1
Mutual fund 39 13.1
Bank trust department :12 10.8
Investment banking 18 6.1
Other 12 4.1
Pension fund -5 _J_l
Total 297 100.0
total membership (47 percent). Note that the aver­
age experience of the respondents is 15.3 years.
Table 3 reports the undergraduate majors of
the respondents. A large percentage of the respon­
dents (and perhaps, inferentially, a large percent­
age of AIMR members, although no industrv data ,. ,
Table 2. Respondent Breakdown by Certifica­
tion, Education, and Experience
are available with which to compare these data)
had undergraduate degrees in business and eco­
nomics. The notion that the typical route to becom­
ing a financial analyst is for an individual to get a
liberal arts degree and then use that broad-based
background to concentrate later on financial anal­
ysis is not supported by these data.
The Results
This section contains discussion of the survey find­
ings regarding the variables ( or inputs to valuation)
July/August 1999
A Study nf F inancial Analysts
Table 3. Respondent Breakdown by Type of
Undergraduate Degree
Discipline Number Percent
Finance % 32.3
Economics 7(, 25.6
General business 38 12.8
Accounting 29 9.8
Liberal arts 28 9.4
Math. science, engineering 17 5.7
Other (psychology, public affairs, etc.) _JJ _ti
Total 297 100.0
and tools financial analysts use in equity valuation,
their attitudes toward issues important in portfolio
management, and their attitudes toward market
efficiency versus market anomalies.
valuation Inputs. Respondents were asked
about their use of several variables and tools in
analyzing securities. Among the most important
was present value (PY) analysis: others included
corporate earnings and cash flow.
" Present value. The use of PY analysis is a
central theme in valuation theory. There is proba­
bly not a CPA exam preparation course being
taught around the world or an investments course
being offered at a university that does not include
PV analysis techniques. But as Panel A of Table 4
indicates, only 15.2 percent of respondents always
use PY analysis and for 45.7 percent, it is not part
of their normal procedures. Apparently, practitio­
ners split about 50/50 in their use of PY tech­
niques.
Should this finding be taken as an indictment of
the profession? Hardly. When faced with the reality
of valuation in the marketplace, the task of project­
ing earnings, dividends, and a stock price into the
future and determining an appropriate discount rate
may be too fraught with uncertainty for analysts to
rely on discounted cash flow (DCF) analysis in the
determination of value. As noted financial econo­
mist Stewart Myers (1984) of the Massachusetts
Institute of Technology has suggested, "DCF is sen­
sible, and widely used, for valuing relatively safe
stocks paying regular dividends, but DCF is not as
helpful in valuing companies with significant
growth opportunities" (pp. 126-137).
Nevertheless, because PV analysis is part of the
foundation of finance, I decided to analyze its useby
various categories of participants. Shown in Panels
B and C of Table 4 are the use and nonuse of PV
analysis by CFA charterholders (hereafter, simply
"charterholders") versus noncharterholders and
M.B.A.s versus non-M.B.A.s. Although the charter­
holder group indicated a slightly larger tendency to
use PV analysis than the noncharterholder group,
the difference is not statistically significant at any
87
Characteristic Number Percent
A. Ccrtitication
Charterholder 20 I 67.7
Noncha rterholder _% .-1U
T(,till 2\)/ lllll.O
(), B. /-l(1;!1esl d,·,1;rcc -.._J
,..__/ :VI.IL\. li>O ;;:�.9
Master 4 u
Doctor pf Jurisprudence (LD.) � 0.7
Bachelor JJJ _±Ll
Total 297 I (10.0
C. E.rpcrimcc (vears)
0-5 ,1()
6-10 :-1
11-13 78
16-20 1(,
21-2:i 18
26-30 lS
More' than 3ll .. }�
Tot;il 29,
Averace 13.J Vt',11'�
Financial Analysts Journal
Table 4. Use of PV Techniques
Answer Numbers Percent
!( A. Overall sn111ph�
Always 45 15.2 --�
Sometimes 116 39.1
Never 136 --121 Total 297 100.0
B. Clutrterholders 1ws11s 11,,nc/Jarter/10/ders
Charterholders
Always 38 18.9
Sometimes 70 34.8
Never ...23 .....46.2
Total 201 100.0
Noncharterholders
Always 7 7.3
Sometimes 46 47.9
Never :Ll __:H..S
Total 96 100.0
C. M.B.A.s 11ers11s 11011-M.B.A.,;
M.B.A.s
Always 17 10.6
Sometimes 71 44.4
Never n .-15.Jl
Total 160 100.0
Non,M.B.A.s
Ahyays 28 20.4
Sometimes 44 32.1
Never -65 ....iZ.i
Total 137" 100.0
"Included 131 bachelor, .J master, and 2 J.D. degrees for a total of 137. ·
reasonable level of significance on the basis of a
chi-square independence of classification test
(reported in Appendix B). The same conclusion
applies in regard to the use of PV analysis by M.B.A.s
versus non-M.B.A.s. If anything, non-M.B.A.s
appear to be slightly higher users of PV analysis.
Table 5 shows the breakdown of the use of PV
analysis by respondents' industry classifications. In
this case, the chi-square test (see Appendix B) indi-
cated a statistically significant difference between
the categories. A null hypothesis of no relationship
between industry classification and the use of PV
analysis could be rejected at the 5 percent level of
significance. In this sample, individuals employed
by mutual funds and bank trust departments
appear to be relatively high users of PV analysis
whereas those working for brokerage firms, private
money management groups, and investment bank­
ing firms do not.4
:;" Other input«. The respondents were also
asked to determine the rela tive importance of other
inputs in analyzing securities. Table 6 shows how
the survey participants ranked the importance of
earnings, cash flow, book value, and dividends.
The average ranking for the input is shown in the
far right column. Earnings and cash flow are con­
sidered far more important than book value and
dividends.
The lack of importance these respondents
assigned to dividends is interesting. As reported in
Table 6, only 3 of the 297 respondents considered
dividends to be the most important variable in val­
uing a security. One hypothesis is that such conclu­
sions by analysts are linked to the irrelevance of
dividends theory initially postulated by Modigliani
and Miller (1961)-and debated ever since. But a far
more likely cause of the low dividends ranking is
that in the momentum-driven environment of 20-
30 percent annual returns of the mid-to-late 1990s,
dividends do not count for much in the minds of
analysts. Furthermore, the sharply lower capital
gains rates specified in the Taxpayer Relief Act of
1997 all but wiped out the equalization of taxing
investment dividends and capital gains that was an
essential element of the Reagan Tax Reform Act of
1986. Finally, the desire by corporations to buy back
shares rather than increase cash dividends appears
to be a distinctive feature of the 1990s.
Table 5. Industry Classification and Use of PV Techniques
Always Sometimes Never
Industry" Number Percent Number Percent Number Percent
Brokerage (77) 5 6.5 32 .+1.6 40 51.9
Private money management (75) 11 14.7 25 :n.3 39 52.0
Investment management counseling (39) 3 7.7 19 .+ti.7 17 43.6
Mutual fund (39) 12 30.8 16 .+1.0 11 28.2
Bank trust department (32) 10 31.2 R zs.o 1-+ 43.8
Investment banking (18) 0 0.0 J 16.7 15 63.3
() Other (12) 4 33.0 6 66.7 () 0.0
Pension fund (5) _Q 0.0 -5 ]()0.0 _J) 0.0
-::. Total 45 116 136
·..._/ •Total number in category in parentheses.
88 ©Association for Investment Management and Research
A Study of Financial Analysts
Table 6. Rank of Inputs in Importance
. Variable First Average Second Third Fourth Ranking
Earnings 156 118 23 0 l.55 Cash flow 133 HO lll 5 1.65
Book value 3 32 1.13 127 3.29
Dividends 3 7 122 165 3.51
Not all would agree with the lack of impor­
tance of dividends. Bernstein (1998) made a strong
case that management creates additional reinvest­
ment and earnings risk for shareholders when the
company retains a progressively larger percentage
of earnings. The unimportance of dividends to this
sample of analysts is further reflected, however, in
Table 7, in which the respondents ranked the most
significant inputs in determining a stock's P /E.
Only 3 of the 297 respondents ranked dividend
policy first among the five inputs listed; 276 ranked
it last. Although analysts might change the rank­
ings shown in Table 7 when valuing a real estate
investment trust or a company in the later stages of
its life cycle, the classification of d ividends as unirn­
portant is clear in Tables 6 and 7.
Also in Table 7, the growth potential for the
company has a strong #1 ranking as a determinant
of a stock's multiplier. The #2 ranking of quality of
earnings (above quality of management, risks, and
dividend policy) cippears to reaffirm the strong
concern that practicing analysts have for the legiti­
macy of reported earnings.
In another question related to valuation, I
asked the respondents to rank the importance of the
three inputs shown in Table 8 as part of the deter­
mination of whether a stock should be bought, sold,
or held. The long-term outlook for the company
and the current value of the stock versus its histor­
ical trading range received top rankings; next quar­
ter's EPS number was last by a large margin. This
response is somewhat surprising; a click on the
Internet will bring a deluge of under- and overper­
formance of quarterly earnings against expected
earnings. Perhaps the 15.3 years average experi­
ence of the respondents allows them to overcome
the hype of the moment.
Valuation Models. In addition to questions
about the inputs to stock evaluation, the question­
naire asked respondents about their use of three
valuation models. Panels A and B of Table 9 pro­
vide the results for two traditional models-the
dividend valuation (dividend discount) model and
the capital asset pricing model (CAPM). Neither
model fared well in the survey. The dividend
model was viewed as very important or moder­
ately important by 42 percent of the respondents,
and the same two opinions totaled 31.l percent for
the CAPM.
The model that received the highest number of
very or moderately important opinions, as indi­
cated in Panel C of Table 9; is the economic value
added (EV A) model developed by Stern Stewart
and Company. Strictly speaking, EVA is not a val­
uation model, but it does have implications for
describing stock price behavior. Based on these
survey results, EVA may take on increasing impor­
tance for analysts. Whether the respondents under­
stood that EV A is primarily a method for splitting
earnings between required returns and excess
returns is not evident from the questionnaire. Fur­
ther inquiry about how analysts use EVA would
thus be useful.
Portfolio Management
The issues discussed so far have dealt with valuing
individual securities. The three items tabulated in
Table 10-beliefs about market timing, the appeal
Table 7. Rank of Variables in Determining P/E
Average
Variable First Second Third Fourth Fifth Ranking
Growth potential 205 62 18 12 0 1.45
Quality oi earnings 43 104 115 35 0 2.48
Quality of management 31 74 112 71 9 2.84
Risks 15 56 44 170 12 3.36
Dividend policy 3 2 8 9 276 4.87
Variable
Current versus historical trading r,inge
Long-term outlook for the compnny
Next quarter's EPS
July/August 1999
First
216
76
5
Average
Second Third Ranking
67 14 1.32
171 50 1.91
59 233 2.77
89
Table 8. Rank of Variables in Determining Buy, Hold, and Sell Decisions
Fi11a11cia1 Analysts ]011r11al
Table 10. Beliefs about Portfolio Management
Table 9. Importance.of Models of Stock Price
Behavior
A. Docs 11111rkct li1ni11s cnhanc» JIN/ftJ/io return 1
Yes S:i 28.6 32.7%
No 175 58.9 67.3
Panel B of Table 10 deals with global investing.
A major phenomenon portfolio managers have wit­
nessed in the mid-to-late 1990s is the speed at which
international financial markets react to each other.
Market performance in the United States on a given
day appears to start a chain reaction in London,
Tokyo, and other major markets, The sequence may
also move in the other direction. The international­
ization of the world economy through reduced
trading barriers and the increased merger activity
between financial institutions in various countries
appears to add to this chain reaction. The responses
to Question 14 reported in Panel B give strong
support to the notion that global investing may
have lost some of its appeal in the closely linked
markets as a means to achieve better risk-return
outcomes through diversification. Slightly more
that 87 percent of respondents believed there has
been some loss or substantial loss of appeal.
Finally, Panel C of Table 10 addresses a ques­
tion that all portfolio managers and analysts appear
to be asking in the financial press-whether there
will be a reversion to the mean for P /Es and divi­
dend yields within the next decade. With the P /E
for the S&P 500 Index in the 24-28 range and divi­
dend yields in the 1.6-1.8 percent range in late 1998,
this question is timely and of great interest to the
profession and investors. Am.ong the respondents,
as indicated in Panel C, 57.6 percent expected a
reversion to the mean. This statistic suggests that
many believe equity values will be lower in the
future, but responses to Question 7 (not reported
here) indicate that respondents believe high values
may be sustainable as long as interest rates and
inflation remain low. The reversion is perhaps most
likely to come when these mitigating variables are
no longer in place.
The totality 'of information in Table 10 may
reveal an inconsistencv on the part of respondents.
The majority did not believe in market timing but
did believe in a coming reversion to the mean.
Presumably, a reversion to the mean has implica­
tions for the timing of decisions .
100.0%
-12.5
100.0
Among Those
Percent with Opinions
.si
297
Number Belief
No opinion
Total
Model Number Percent
A. Dh1ide11d ,,a/11atio11 mode!
Veryh11portant 34 11.8
Moderately important 87 30.2
Not very important 112 38.9
Unimportant ---55 -1.2J.
Total 288" 100.0
B. Capita! nssct prici11x 111t1.ld
Ver)' important 5 18
Moderately important 8" 29.3 ,,
Not very important 135 47.7
Unimportant _fill -2.12
Total 283b 100.0
C. Ecc1110111ic rah« added
Very important 41 14 . .J
Moderately important 151 53 2
Not \'ery important 62 21.9
Unimportant _JQ 10.5
Total 28.JC 100.0
"Nine participants chose not to answer.
bFourteen participants chose not to answer.
'Thirteen participants chose not to answer.
of global investing, and near-term reversion to the
mean-relate more to portfolio management.
Panel A of Table 10 indicates that only 28.6
percent of the respondents believed that attempts
at market timing are likely to enhance portfolio
returns (the value is 32.7 percent if only those wit/1
opinions are included). The consistency of this
response with the results shown in Panel C will be
discussed shortly.
-�.
"One participant chose not to answer.
8. Has sh>lml i11vc�ti11g lost appeal in 11wre c/osd11 linked nuirkets?
No 37 12.5
Market Efficiency
The respondents were asked to indicate their accep­
tance or rejection of the efficient market hypothesis
(EMH), which in its broadest (semistrong) form
suggests that public information is impounded in
the current price of the stock and that any addi­
tional analysis by an individual analyst is likely to
produce little or nothing in the ,•.,ay of added
value.5 The EMH was initially postulated in the
1960s, and it has been under severe attack ever since
as researchers claimed to identify anomalies in
71.6%
28.4
100.0%
57.6
22.9 �
100.0
171
68
_5B
297
Some loss 202 68.2
Substantial loss 57 .ua
Tot,11 2%'' 100.0
C. Will there J,e a nT,•r;i,111 to the 111c<111 i11 lilt• next dt'rnde.J<,r yields
and PIE:-?
Yes
No
No opinion
Total
90 ©Association for Investment Management and Research
almost every area of investments. As shown in
Table 11, close to 100 percent of practicing analysts
in this survey were neutral or strongly disagreed
with the EMH.
Table 11. Opinion of the Efficient Market
Hypothesis
Opinion Number Percent
Strongly agret> a 2.7
Neutral 101 34.2
Strongly Disagree ill .eai
Total 295'1 100.0
"Two participants chose not Ill answer this question.
A Study �f Financial Analysts
strategies, and in spite of research in this area, no
one answer can be assumed to be correct. The
answers are presented in Table 13.
· Table 13 shows that the low-P /E effect and the
small-firm effect received the greatest allegiance.
This response to the small-firm effect is of particu­
lar interest because the small-firm effect has been
called too time-period specific and overly depen­
dent on the month of January for high returns. As
an example of the time-period specificity, research
Table 13. Statements about Market Anomafles
with Which Respondents Agreed
( )/ <:> __ ,,,
..,__..,,.··
The responses to an allied topic are presented
in Table 12. In answering a question about the most
important variable in determining portfolio
returns, more than 60 percent of the respondents
chose the skill and training of the portfolio manager
as most important. Despite the emphasis on the risk
component often found in the academic literature,
risk in the portfolio came in at about half the per­
centage of skill and training. And the amount of
trading in the portfolio came in a poor third. These
responses are generally in line with the rejection of
the EMH reported in Table 11 but cit variance with
the responses to the usefulness of the CAPM shown
in Table 9.
Table 12. Most Important Variable in
Determining Portfolio Return
Variable Number Percent
The skill and training l>I the
portfolio 111,1ni\ger 17ll r,o.:i
The .1111,,unt 11f risk in the
portfolio Jl(, 39.1
The amount nf trnding in tlw
portfolio , ___QJi ... -b
Total �97 100.0
A number of respondents who indicated that
skill and training was the most important variable
in determining portfolio return suggested that ego
might have played a role in their opinion. Such a
suggestion would be consistent with the empirical
research in this area in the past decades (Fama 1991;
Kandel and Stambaugh 1996). Perhaps hope tri­
umphed over reality for the majority of respon­
dents.
To inquire into analysts' attitudes toward
anomalies that tend to disprove the EMH, the
respondents were given four market strategies
from which to choose (Question 12). These four
were by no means inclusive of all the possible
Statement
Low-P /E stocks tend to outperform the market
Small-cap stocks tend to outperform the market
High-P /E growth stocks tend to outperform the
market
Large-cap stocks tend to outperform the market
"Respondents could select more than one answer.
Number
Agreeing
184
165
39 �
418'
has found that between 1975 and 1983, small-capi­
talization stocks averaged a 35.3 percent annual
return, more than twice the 15.7 percent return of
large-cap stocks. During the same time period,
compounded total returns on small-cap stocks
exceeded 1,400 percent.6 However, from 1984 to
1997, small-cap stocks (as defined by Ibbotson and
Associates 1998) increased by 526.9 percent while
large-cap stocks (S&P 500) were up 902.8 percent.
When one strips the 1975-83 period out of the
Ibbotson and Associa tes da ta, srna ll-cap stocks fell
one-third below large-cap stocks from 1926
through 1997.
The intent here is not to castigate small-cap
stocks; clearly, such stocks as Microsoft, Intel, and
Horne Depot had to start as small-cap stocks. Fur­
thermore, for the particularly astute analyst, smaller
companies may represent especially good areas for
study, in that even the strongest advocates of the
EMH would admit that small companies provide
opportunities. The important point is that the strong
support for the small-firm (and low-PIE) anomaly
in this study may indicate that many practicing
financial analysts maintain a belief in these concepts
and a belief that a different market environment
may bring the opportunity for strong small-cap per­
formance to reappear. Also, the loyalty that some
investors have shown to large-cap high-P /E stocks
(such as Coca Cola and General Electric) is not nec­
essarily felt by respondents in this study, who
appear to be more value-stock than growth-stock
oriented.
July/ August 1999 91
(' .. J
() .::
Financial Analysts Jou ma!
Conclusions
The most important conclusion from this survey is
that PV techniques are not as widely used in prac­
tice as they are in theory. Only 54.3 percent of the
respondents said they use PV analysis as part of
their normal analytical process. The cause may be
that the difficulties of projecting future cash flows
and selecting an appropriate discount rate simply
make use of PY analysis appear to be too difficult
for real-life decisions. Although the length of fore­
casting periods was not specifically covered in the
questionnaire, my observation is that few analysts
project earnings or dividends more than two (or at
most three) years into the future because of uncer­
tainty. Also, they rarely project future P /Es. The
industry practice is to divide the current price by
future earnings to create a multiple of future earn­
ings. This approach is, of course, very different
from projecting a future PIE that can be used to
discount a future stock price back to the present.
Answers to a number of questions indicate that
Notes
1. The original database from which names were drawn was
the 1998 Mc111l>cr.ship Directon! of AIMR.
2. Although I am a CFA charterholder, I did not communicate
that information to participants because of the concern that
it could cause bias in answers.
3. The latest profile of AlivlR membership can be found on
A!MR's World Wide Web site: www.aimr.org.
4. Readers should not conclude anything beyond preliminary
observations from these data because some of the industry
References
Bernstein, Peter L. 1998. "The Hidden Risks in Low Payouts."
/011mnl ,1· Par(/c>/io Mn1111s,·111c111, ml. 25, no. 1 (Fallj.l.
Fama, Euguene F. 1991. "Efficient Capital Markets: II." /011mol
of Fi11n11cc, vol. 46, no. 5 (December):1576-1617.
Ibbotson and Associates. 1998. Stocks, Bonds, Bills, and /11j7ntio11.
Chicago, IL: Ibbotson & Associates.
Kandel, Samuel, and Robert Stambaugh. 1996. "On the
Predictability of Stock Returns: An Asset Allocation
Perspective." /011rnal ,>{ Fiw111cc, vol. 51, no. 2 (June):385-424.
the dividend-paying policy of a company is rela­
tively unimportant in the analytical process. This
attitude may be related to the current environment .
In addition, although quarterly earnings announce­
ments have received much attention in the financial
press, 292 of the 297 analysts said quarterly earn­
ings carry less weight than the long-term outlook
for the company or its current versus historical
trading range. The respondents gave high marks
for importance to the EVA approach to valuation
and low marks to the dividend valuation model
and CAPM.
The respondents adhere to the notion that the
most important variable in determining return on
a portfolio is the skill and training of the portfolio
manager and that this consideration overweights
theories about stock market efficiency. Finally,
respondents believe that global investing has lost
some appeal as a risk-return optimizer in a world
that appeors to be increasingly integrated.
classifications had relatively low numbers of respondents.
5. The sernistrong form of the EMH asserts that only public
information is impounded in the price. Some may suggest
that the EMH i� mcrelv ,111 unbiased estimator of current
value, but the major thrust of the scmistrong definition and
the definition in QuL'Stil111 5 is the same.
6. For more discussion of the small-firm effect, see Chapter 6
in Siegel (1998).
Myers, Stewart C. 198.J. "Financial Theory and Strategy."
l11te1fnces, vol. 14, no. 1 (j<1mi.1ry I Ft•brnMy): 126-137.
Modigliani, Franco, .md MNt0n !\·lili,'r. 1 % 1. "Dividend Policy,
Growth, and the Valuation of Shares." f,111mol cf 811si11ess, vol. 1,
no. 4 (Octnber):-111--11:l.
Siegel, Jeremy J. 1998. Sltlck, [or the Lmrs R1111. New York:
McGraw-Hill.
Stern, Joel M., C. Bennett Stewart Ill, and Donald H. Chew, Jr.
1995. "The EV A Financial System." f,>1m1,1/ <!/ lll'J>licd Ctlrptlm/1·
Fi11n11cc, vol. 8, no. 2 (Summer)::',2--16.
92 ©Association for Investment Management and Research
)
22 BHP-BLU Earnings Guide Standard & Poor's
)
)
• Prior Year 0111 Next Quarter 2003 2004 5-Yr Proj Net Month Next t Next Y11r Data Com. Strfft E1Umata1 ($/Shr) I ot 2002 Street EaUmatea ($/Shr) Street Estimates ($/Shr) EPS Annual Tangible Calllt End EPS Stock Actual #of # of Growlh Revs. Book Flow Price 2003 Rep! Name of l11ue Rank Fiscal Mean High Low Eats. EPS Mean High Low Eats. Mean High Low E1ts. Rat .. % (S Mil.) (SIShr) (S/Shr) Nov'03 P/f. Datt
:j: BHP Billiton Ltd ADA NA Je' ... ....... ..... ..... ... v0.62 0.84 0.90 0.78 4 1.041 1.09 0.96 3 10 15,608 3.86 ······· 16.45 20 . ......
BHP Billiton pie ADS NA Je ... ....... ....... . ...... ... v0.56 0.60 0.60 0.60 1 0.84t 0.84 0.84 1 9 17,778 ....... . ...... 15.33 26 .. ...
Biacore Intl ADS NA De ... ....... ....... ....... v0.94 1.251 1.64 0.85 2 0.961 0.96 0.96 1 20 70.6 6.49 ····· 23.00 18 . ....
Big 5 Sporting Goods NA De Q4 0.46 0.49 0.45 7 vo0.71 1.23 1.26 1.22 7 1.44 1.58 1.39 7 15 667 0.69 ...... 21.59 18. 2/13
Big Lots c Ja 04 0.66 0.68 0.64 9 v0.66 0.69 0.71 0.66 9 0.85 0.90 0.80 9 19 �.869 8.85 1.35 14.66 21 2/27
BindView Development c Dc2 04 O.Q7 0.07 0.07 1 vd0.49 d0.06 d0.06 d0.06 1 0.06 0.06 0.06 1 36 67.0 0.66 2.90 d 2/03
Bio-Imaging Tech 8- De ... ....... ....... v0.12 0.14 0.14 0.14 1 0.191 0.19 0.19 1 20.5 1.45 0.19 7.15 51 1/29
Bio-Rad Labs Cl' A' B De' Q4 0.74 0.74 0.74 1 :tv2.61 3.28 3.28 3.28 1 3.44 3.44 3.44 1 12 893 15.27 ....... 51.25 16 2/14
Bio-Reference Labs 9,... Qc 04 0.15 0.15 0.15 1 v0.39 0.41 0.41 0.41 1 0.52 0.52 0.52 1 .... 96.6 1.91 17.72 43 1/09
Bioanalytical Systems 8- So 04 0.11 0.11 0.11 1 v0.23 0.12 0.12 0.12 1 0.27 0.27 0.27 1 .... 26.5 3.36 ....... 4.44 37 .......
:j: Bloenvision Inc NA Je 02 d0.13 d0.13 d0.13 1 vd0.45 d0.37 d0.37 d0.37 1 d0.16 d0.16 d0.16 1 .... 0.50 Neg ....... 4.10 d .. .....
Biogen Idec B- De' 04 0.32 0.38 0.27 15 v0.85 1.19t 1.30 1.00 16 1.52t 1.61 1.44 16 20 404 8.10 0.88 38.18 32 1/31
Blojsct Medi Technologies C De' 04 d0.20 d0.20 d0.20 1 vld0.52 d0.85, d0.85 d0.85 ; d0.701 d0.70 d0.70 1 .... 5.22 0.27 d0.82 2.82 · d 2127
BIOLASE Technology c De 04 0.12 0.12 0.12 1 v0.12 0.331 0.33 0.33 1 0.541 0.54 0.54 1 29.2 0.44 d0.01 12.27 37 2/13
BioMarin Pharmaceutical NA De 04 d0.38 d0.32 d0.41 7 vd1.45 d1.20 d1.14 d1.23 7 dl.11 dl .01 d1.28 7 .... 13.9 2.22 d1.29 7.35 d 2/10 -e-
:j: Biomet, Inc A- My' 02 0.31 0.32 0.31 23 vr.io 1.28 1.31 1.26 23 1.48 1.52 1.45 16 15 1,390 4.46 1.27 35.78 28 12/18
Biopure Corp' A' NA Oc Q4 d0.26 d0.26 d0.26 I vdl.66 d1 .23t d1 .23 d1.23 1 ....... ....... . ... 1.99 1.63 .. ..... 3.19 d 12/13
BioReliance Corp NA De 04 0.42 0.43 0.41 2 v1 .21 1.44 1.45 1.43 2 1.9U 2 06 1.76 2 25 82.5 2.56 46.29 32 2/27
Biosante Pharmaceuticals NA De ... ....... ......... . .... vd0.51 d0.65 d0.65 d0.65 1 ....... . ...... ....... ... .... 2.83 0.76 4.15 d . ......
Biosite Inc 8- De 04 0.38 0.41 0.35 10 v0.86 1.56 1.59 1.53 10 1.84 1.98 1.74 10 20 105 8.92 1.25 26.85 17 1/28
BloSource Intl B- De 04 0.05 0.05 0.05 1 vo0.14 0.15l 0.15 0.15 1 0.30l 0.30 0.30 1 15 40.1 3.49 0.28 7.32 49 2/20
:j: BISYS Group B Je' 02 0.18 0.18 0.17 18 v0.92 0.791 0.85 0.74 18 0.921 1.04 0.85 15 16 958 Neg 1.32 14.92 19 1/22
:j: BJ Services B Sp' 01 0.38 0.41 0.36 23 vP1.17 1.60l 1.97 1.40 27 1.93l 2.40 1.59 10 13 2,143 4.47 1.68 31.89 20 1/21
BJ's Wholesale Club NA Ja' 04 0.64 0.71 0.62 16 vl.84 1.42 1.48 1.39 16 1.57 1.68 1.46 18 10 5,860 11.07 3.07 25.45 18 3/04
Black & Decker Corp B De 04 1.26 1.33 1.15 14 v2.84 3.93 4.00 3.82 15 4.29 4.50 4.10 15 12 4.394 Neg 4.49 46.39 12 1/30
Black Box Corp B+ Mr 03 0.63 0.66 0.61 6 v2.39 2.56 2.62 2.53 6 2.87 3.02 2.79 5 13 605 5.06 2.78 43.77 17 1/14
Black Hills Corp A De 04 0.55 0.55 0.55 1 c,v2.23 2.31 2.33 2.26 3 2.32 2.35 2.26 4 6 424 19.45 ....... 32.26 14 2/07
BlackRock Inc' A' NA De 04 0.63 0.63 0.62 5 v±2.04 2.36 2.36 2.35 5 2.79 2.85 2.75 5 16 577 7.85 2.35 50.95 22 1/15
:j: Block (H&R) A- Ap' 03 0.42 0.47 0.38 4 v3.15 3.70 3.82 3.50 5 3.98 4.21 3.65 4 14 3,780 3.38 4.03 54.29 15 2/25
Blockbuster Inc 'A' NA De 04 0.30 0.37. 0.26 13 vot.04 1.46 1.54 1.42 13 1.62 1.73 1.54 13 15 5,566 2.68 ....... 17.07 12 2/11
:j: Blue Coat Systems NA Ap1• 03 d0.03 d().03 d0.03 2 vdl.81 d0.19t d0.16 d0.22 2 0.26t 0.27 0.24 2 38 45.7 1.88 ······· 20.87 d 2/21
Blue Martini Software NA De" 04 d0.30 d0.30 d0.30 1 vd5.80 d1.5B ei.ss d1.58 1 d0.15 d0.15 d0.15 1 25 33.6 3.56 ······· 4.93 d 1/22
:j:Blue Rhino NA JI 02 0.05 0.06 0.05 5 v0.86 0.79 0.82 0.76 5 0.96 1.00 0.87 4 19 258 3.90 1.08 12.57 16 2/25
Stock Splits & Dividends - 1 2.0651-for-1,'01. 2 2-lor-1,'00. 3 2·for-1 ,'02. • z-ror-t ,'99:3-for· 1 ,'01. s l·for-5 REVERSE,'99. 6 3-for-2,'00,'01. 1 z-tor- 1 ,'00,'02. • 2-for-1 ,'01. .9 2-for-1 ,'99. 10 t-Ior-S REVERSE,'02. 111-for-7 REVERSE,'02.
) • Prior Year Dall * Next Year Data
Name of luue . ·
Com. Stock Rank Fiscal
Next Quarter
Street Estimates (S/Shr) 1 of
Mean High Low Eats.
Earnings Guide
2002 2003 2004 S-Yr ProJ
Actual Street Estimates (S/Shr) I of Street Estimates (S/Shr) I of G�� A;:��I
EPS Mean High Low Ests. Mean High Low Eats. Rate-% ($ Mii.)
HAR-HEA 57
Net Month Next
Tangible Cash End EPS Book Flow Prtco 2003 Ropt
(S/Shr) (S/Shr) Nov'03 PIE Date
5.55 47.87 16 2/05
....... 16.50 11 3110
5.99 39.66
Harrah's Entertainment B De 04 0.53 0.57 0.48 18
Harrington West Finl Grp NR De 04 0.38 0.38 0.38 1
:j: Harris Corp B- Je1 02 0.39 0.41 0.38 9
:j:Harris Interactive NR Je 02 0.05 0.05 0.05 1
Harsco Corp B+ De 04 0.57 0.60 0.56 3
vo2.87 2.94 2.98 2.90 19
v1 .39 1.45 1.49 1.40 2
v0.90 1.64 1.70 1.59 11
v0.20 0.231 0.23 0.23 1
v2.21 2.08 2.10 2.07 5
3.07 3.25 2.90 22
1.54 1.58 1.50 2
1.87 1.95 1.73 7
2.51 2.60 2.40 8
13 4,136 4.49
10 45.6 10.29
15 2,093 14.41
25 131 1.00
12 1,977 8.59
1.74 38.77
6.90
24 1/15
30 1/29
19 1/31
1.30 15 v3.97 d1.08t d0.94 d1.65 21
0.05 3 vo0.10 0.24 0.26 0.23 3
0.07 3 v0.03 0.25 0.25 0.24 3
0.07 1 v2.7B 0.15i 0.15 0.15 1 0.40 0.40 0.40 1
1.30 ·21.53
4.30 18 .
7.20 29 3104
7.41 49 2127
22 1/30
d 1/28 55.00
0.39
13 909 1.03
11 15,907 34.02
6 573 4.68
25 57.4 1.08
5 127 5.45
1.05 11
5.40 22
0.30 2
0.28 3
1.09 1.15
5.84 6.05
0.321 0.34
0.30 0.32
v0.96 0.98 0.99 0.97 11 0.27 11 0.29
1.50
0.10
0.08
0.07
0.28
1.38
0.07
0.07
0.07
De' 04
De 04
Nv 04
De 04
De 04
Harte-Hanks Inc B
Hartford Finl Svcs Gp B
Hartmarx Corp C
Harvard Bioscience NR
Harvest Natural Resources B-
Hasbro Inc B De' 04
Hastings Entertainment B- Ja 04
Havas NR De
0.50 12 vo0.43 1.09f 1.16 0.95 13
v0.16 0.31 0.31 0.31 1
1.241 1.40 1.10 13
0.41 0.41 0.41 1
5.27 24
21.36 20 2/14
46.09 16 1/21
1.81
0.94 22.11 20 2/13
....... 4.45 · 14 3126
11 2,816 0.43
12 495 6.85
25 2,106 Neg
1.31 1.36 1.20 7 12 704 10.80
3.11 3.45 2.85 5 3 1,654 25.76
0.22 1
1.06 8
2.80 5
0.221 0.22
1.09 1.13
2.91 3.00
Clvdl.12
0.91 1
0.41 7 v,1.10
0.74 2 v3.24
0.61
0.91
0.45
0.76
0.55
0.91
0.44
0.75
A De' 04
B+ De 04
Haverty Furniture
Hawaiian Elec Indus
3.41 26 2112
26.87 12 1/30
41.91 15 2/04 3.51
....... 31.11 14 2/21
1.01 19.08 12 1/22
0.13 1
2.22 5
2.65 16
0.13, 0.13
2.24 2.25
2.75 2.80
0.05 1 vOd0.14
o.55. 5 vo2.02
0.56 13 v:tl.59
0.25, 0.25 0.25 1 10 197 o.51
2.43 2.50 2.33 5 15 144 13.23
2.88 2.97 2.75 28 13 19,729 7.30
0.59 7 vl.68 2.20 2.22 2.15 8 2.59 2.65 2.50 8 15 669 10.38
0.26 4 vPl.30 1.55 1.56 1.54 4 1.83 1.89 1.80 3 23 388 NS!l
0.05
0.60
0.62
0.61
0.32
0.05
0.57
0.60
0.59
0.29
NR De 04
B De' 04
B De 04
B De 04
NR Sp 01
Hawk Corp 'A'
Hawthorne Finl
HCA Inc
HCC Insurance Hldgs
:j: Headwaters Inc
Stock Splits & Dividends • No adJ for stk dstr,'99. 2 3-for-2,'02. 3 3-for-2,'99. ' 2-for-1 ,'99. s 3-for-2,'03. s 5-lor-4,'01 :3.15-for-2,'02 .. 7 To splrt 3-lor-2,ex Dec 30.
16 . 29.01
2.28 24.55 26 2/07
1.67 24.27 23 1/22
..... 46.84 23 1/21
.... ... 34.92 20 2/03
1.15 15
1.13 12
1.95 2
1.46
1.21
2.00
1.28
1.17
1.98
0.86 11
1.02 12
1.80 2
0.98
1.05
1.80
0.93
1.04
1.80
v:t1.15
v0.86
v1 .91
0.27 11
0.26 12
0.42 1
0.38
0.29
0.42
0.33
0.27
0.42
De 04
Dc6 04
De' 04
Hearst-Argyle TeleviSion 'A' NR
Heartland Express B+
Heartland Financial USA NR
Health Care Prop Inv 8 De
Health Cara REIT A- De
:j: Health Management Assoc B+ Sp
Health Nat' A' B- De
04 0.56 0.56 0.56 1 v1 .93 2.08 2.22 1.93 4 2.29 2.39 2.21 3 5 360 18.62
04 0.45 0.48 0.42 3 v01.49 1.71 1.75 1.66 3 1.83 2.00 1.68 5 5 163 22.88
01 0.29 0.31 0.28 19 vP1.13 1.36 1.40 1.33 21 1.57 1.60 1.53 5 15 2,561 5.04 1.31 25.70 19 1/21
04 0.76 0.77 0.74 13 V01.89 2.69 2.71 2.68 14 3.07 3.13 2.95 14 14 10,202 3.90 2.44 32.70 12 2114
_H_ea_lt_h_ca_r_e_R_e_al�ttv_T_r __ A_- ....... _D�c __ 0_4 __ 0._4_4_0_._44_�0_.4_4 __ -'--2 ·�Y.!:??�_1.7_4�_1._75 __ )�-1�.8�3'----'1--'.8�4 __ 1..c.8_1.......c2c...... .. � .. ----'19�5-+--=2�1-=.2.c.8 __ ._ ... _ .. _. 34_ . .c..90'-----=2-'-0-1_/3�1
Healthcare Svcs Group B De 04 0.25 0.26 0.23 2 v0.74 0.93 0.95 0.91 2 1.07 1.08 1.05 2 · 15 329 10.56 0.95 19.79 21 2i12
HealthaTech Inc NR De vdl.29 dl.16 d1.16 d1.16 1 d0.78 d0.78 d0.78 1 35 13.5 0.60 0.84 d 2/20
HealthEX1ras Inc NR' De 04 0.09 0.10 0.09 3 v0.42 0.30 0.30 0.30 3 0.42 0.42 0.41 3 25 248 0.61 12.60 42 12/06
HealthStream Inc NR De 04 d0.02 d0.02 d0.02 1 vOd0.57 d0.17t d0.17 d0.17 1 d0.041 d0.04 d0.04 1 15.8 0.93 2.62 d 2/26
.....c...H.c..eaJt=-hT�ro""n"'ic.c.s .c.Su"'r""aiic""a"-1 S::..vccc::..s _N"-R.c+-=D..cc_Occ4 0c..;.0.c..7'----'0"-.0:.:9 -=o.:.:.O.:c5_::..3 + vO. 73 0.46 0.48 _0_.4_4 __ 3 ....... _0_.5_2 __ 0_.5_5 __ 0._49 __ 3 __ 2_0 __ 8_7_.2-+-_N�eg .. _ .. _ 5_.9_5 __ 13 __ 31_04_
14 721 Neg
13 341 6.27
133 11.60 )
)
)
Earnings Guide MCG-MEL 75
• Prior Year Data t Next Year Data
Name of Issue
Com. Stock Rank Fiscal
Next Quarter
Slreel Estimates ($/Shr) # of
Mean High Low Esls.
2002 ---· 2003 2004 S-Yr Pro) Net Cash
Actual ��et Estll!'_ates (S/Shr) I ot Slreet Estlmales ($/Shr) I of G�!t, �".;'.';'1 T��le Flow
EPS Mean High Low Ests. Mean High Low Esta. Rat•% ($ Mil.) (S/Stv) (S/Shr)
Month Next End EPS Price 2003 Rep! Nov"03 PIE D1te
3.30 d .
28.80 18 1/22
27.37 d 2112
2.62 65.88 29 1/22
2.13 36.43 21
12 1.80 19 2.00 1.86 1.61 19 1.66 1.64 vl .55 0.42 19 0.45 0.43 De' 04 A- Mellon Financial
McGrath AentCorp A- De 04 0.54 0.54 0.54 1 v1.00 1.81 1.81 1.81 1 2.40 2.40 2.40 1 12 145 11.44 2.41 27.33 15 2114
McGraw-Hill Companies NA De' 04 0.76 0.78 0.72 12 v2.96 3.21 3.23 3.18 13 3.50 3.65 3.40 13 11 4,788 3.87 3.42 68.50 21 1/28
McKesson Corp B- Mr 03 0.50 0.54 0.46 17 v1.88 2.21 2.28 2.16 17 2.54 2.64 2.43 16 16 57,121 11.64 2.64 29.20 13 1/22
McMoAan Exploration NA De 04 d0.77 d0.77 d0.77 1 v0.91 dl.871 d1.87 dl.87 1 d3.53t d1.64 d5.41 · 2 .... 43.8 Neg 17.96 d 1/22
---"M�.D�-�C�-�Hl�d�a,sc.- �A'--+-"D�c'_O.cc.4._2�-�04_�2�.1�3-�1�.9�2 __ 2.__�5.4�8�7-�6-�95�-6�-�75c.-�7-+_7�.5�2-�7-�8�0�_7�-�05c.-_7 __ 13'----'2�,3�1�9+-�3�2._16'----'6�.3�6_6�9�.3�6'--_10'--�1/�09
MDU Resources Group A Dc3 04 0.40 0.43 0.37 8 v1.38 1.61 1.67 1,55 10 1.65 1.80 1.53 11 7 2,032 8.93 23.68 15 ·1127
Meade Instruments NA Fb' 03 0.23 0.24 0.21 2 v0.07 0.17 0.18 0.15 2 0.25 0.25 0.24 2 14 111 2.70 0.19 .4.20 25 12119
MeadowbrooklnsuranceGrp C De 04 0.10 0.11 0.08 3 v0.08 0.35 0.37 0.34 3 0.41 0.42 0.40 3 12 198 · 4.31 4.00 .11 2124
MeadWestvaco Corp B- De 04 0.07 0.14 0.03 11 vcl0.19 d0.16t d0.09 d0.20 11 0.871 1.35 0.52 13 8 7.242 ·19.67 3.49 25.52 d 1/30
�M-'e-"'as�u�re�m_e�n_t �S�pe�c�ia�lti�es�B�--+-M __ r' __ o_;i 0.27 0.27 O 27- ....!_ --��<?. ?§ __ ��'---� �- 0�.9_6 __ 1 .....__1_.05_�_1_.0_5 __ 1_.0_5 __ 1 __ 2_5 10_8--+-_1_.9_1· __ ._ .. _ _. _1_3._6_9_1_4_21_1_3
Mechanical Technology C De' 04 ct0.03 ct0.03 ct0.03 1 v,10.20 d0.02 d0.02 d0.02 1 d0.03 d0.03 d0.03 1 6.94 1.45 5.00 d 3/06
Medallion Financial NA De 04 0.05 0.05 0.05 2 vd0.69 0.17 0.17 0.17 2 0.33 0.35 0.30 2 12 40.0 8.68 8.75 51 3/04
MedAmicus Inc B- De 04 0.09 0.09 0.09 2 v0.57 0.381 0.38 0.38 2 0.531 0.55 0.51 2 27 17.9 3.18 0.85 13.00 34 2112
Medarex Inc C De' 04 d0.46 d0.44 d0.52 5 .ez.os dt.64 ct1.60 er.es 5 d1.80 dl.60 dl.97 4 .... 39.5 3.41 d1.94 6.82 d 3131
±=M�ed�C""a"'th�C�om_._ c..N�R'-+-�S�o_O�l . d0.07 d0.07 d0.07 1 _ vPd3.35 __ 0.041 . 0. 11 __ d0.06 .. _3_ >--"·"... ----' '--_15'-----5�4-"3+-�9._75'--_··� .. �-9�.4�9'--�··'--· �21�06
Medco Health Solutions NA De 04 0.46 0.47 0.45 10 vl.34 1.75 1.76 1.55 11 2.02 2.06 1.80 13 16 32,959 Neg
Media Ganerai'A" B De 04 0.97 1.00 0.95 6 vo2.30 2.34 2.46 2.30 7 3.36 3.66 3.09 6 12 837 Neg 5.11 66.89 29 1/29
Mediacom Communic"A" NA De 04 d0.08 0.06 d0.45 13 v:td1.35 d0.68t d0.53 dl.04 14 d0.35t 0.22 d0.92 15 12 923 Neg 7.58 d 2124
Medical Action Industries B- Mr 03 0.22 0.22 0.22 1 v0.81 0.90 0.90 0.90 1 1.02 1.02 1.02 1 15 105 0.91 . 16.62 18 1/28
_M�ed_ic_al_S_la_ffi_·n�QN_ewt_o_rl<_H_l_d _N_A-+-_D_c __ 04_ 0.03 __ 0.04 . 0.01 __ 5 --� v0.62 _ 0.271 . 0.29 _QJL� _JY_9_! __ 0._3 __ 6 _0_._15 5�_15 4_84-+_0_._81 __ .. _ .. _ __ 9_.7_5 __ 36 __ 21_19
Medical Tech Systems NA Mr" 03 0.11 0.11 0.11 1 v0.23 0.32! 0.32 0.32 1 0.45! 0.45 0.45 1 .... 29.4 1.37 5.96 19 2112
Medicines Co NA De 04 0.03 O.D7 d0.01 6 vd1 .23 cJ0.38 d0.34 ct0.43 6 0.381 0.55 0.09 6 23 · 38.3 2.89
1:Medicis Pharmaceutical'A' B Je' 02 0.50 0.51 0.47 10 vt1 .82 2.27 2.29 2.19 1 i 2.96 3.13 2.68 9 20 248 6.33
MedicSight Inc NA De' vd0.92 ct0.24 d0.24 d0.24 1 d0.01 d0.01 d0.01 1 0.08 Neg
--'-'-M:.::e.:::dic:.::fa:::s.t'--'l'-'nc=------=B�-'-+-�D-'-c-0�4 _ 0.0� 006 0.04 2 v0.30 . 0.23 0.25 _ 0.21 -·-'2'-f·-'Oc.c.36=--=0�.3"'8--'-0"'.34-'--�2c.--'-··'------1�2'--.4-+---'1"'.2-'-8--0�.3�1--1�5.�20'---"66-'--"3/�0"'5
Medlmmune Inc C Dc9 04 0.32 0.42 0.25 27 vd4.40 0.76l 0.84 0.69 27 0.96! 1.12 0.80 27 20 786 6.10 d4.25 23.79 31 1/30
) 1:Mediware Information Sys NA Je 02 0.17 0.17 0.16 2 v0.56 0.69 0.71 0.67 2 0.91 0.92 0.89 2 25 33.0 2.54 15.75 23 1/28
MedQuist Inc B De 04 0.20 0.21 0.19 3 v1.16 0.98l 101 0.96 3 0.8H 0.99 0.63 3 14 486 6.32 1.63 15.39 16 2113
:f:MedSource Technologies NA Je 02 0.05 0.05 0.05 4 vd'l .28 0.25 0.26 0.25 4 0.31 0.32 0.30 3 22 177 1.96 4.60 18 1/24
±Medtronic, Inc A- Ap' 03 0.41 0.42 o '. �_:g__ _ v1.30 __ 1.63 1.65 __ 1_.6_1 __ 3_3-+- __ 1_.8_9 __ 1._92 __ 1_.8_5_3_1 __ 16 __ 7�,6_6_5+-_2_._44 __ 1_.6_3_4_5_.2_0_2_8 __ 21_13
1:Medwave Inc C Ap 02 d0.02 d0.02 d0.02 1 vd0.28 d0.05 d0.05 ct0.05 1 1.15 0.33 5.59 d .
4,737 3.39
Stock Splits & Dividends '2-for-1,'99. 2 10%,'01(twice),'03. 3 3-for-2."03. '2-for-1 :oo. s 3-for-2."99:3-for-1 ,'00. 61-for-2.5 REVEASE,'00. 7 3-for-2,'99. • 2-for-1,'01:1-for-3 REVERSE,'02. '2·for-1 .'99:3-for-1 ,'00.
)
PMI-PRA 93 Earnings Guide
• Prlor Year Data Nexl Quarter 2003 2004 !Hr Pro) Net Month Next i Nexl Y11r Data Com. 2002 Street Estimates lS/Shr) I of o:;:'!h Annual Tangible Cash End EPS Stock Street Estimates (S/Shr) lot Actual Street Estimates (S/Shr) lot Revs. Book Flow Pr lea 2003 Rept Name of tssuo Rank Flacat Mean High Low Ests. EPS Mean High Low Esta. Mean High Low Esta. Rat&-% (S Mii.) ($/Shr) · ($/Shr) Nov'03 PIE Date
PMI Group A De' Q4 0.82 0.87 0.74 8 v63.71 3.37 3.42 3.29 8 4.09 4.31 3.95 12 12 1,121 27.86 ....... 37.23 11 1/28
PNC Financial Se!Vices Group B+ De 04 0.99 1.02 0.95 12 v4.15 3.87 3.90 3.84 12 4.20 4.35 4.05 17 9 6,369 14.23 ....... 54.36 14 1/16
PNM Resources B De 04 0.35 0.35 0.35 1 vl.61 1.97 2.00 1.95 3 2.004 2.05 1.95 3 5 1,169 26.62 ....... 28.01 14 2112
Pocahontas Bancorp NA Sp 04 0.25 0.25 0.25 1 v0.96 1.02 1.02 1.02 t 1.10 1.10 1.10 1 .... 39.4 9.66 ....... 14.10 14 12/10
Poao Producina B+ De 04 0.83 0.97 0.65 13 vl.77 4.55 4.70 2.05 17 2.79 4.02 1.82 18 10 751 21.84 6.13 43.55 10 1/21
Point.360 NA De Q4 0.12 0.12 0.12 1 v0.30 0.37t 0.37 0.37 1 0.44t 0.44 0.44 1 15 68.4 1.00 ....... 4.95 13 2124
Polaris Indus A- De 04 1.66 1.68 1.63 8 v4.39 4.90 4.93 4.87 8 ·5.42 5.65 5.25 7 13 1,521 12.05 6.82 86.17 18 1/30
• Polaroid Corp D De ... ....... ....... ....... v0.84 '''"" ....... ... 0.05 0.05 0.05 1 . ... 1,856 3.67 3.36 0.04 ... ······-
Polo Ralph Lauren'A' NR Mr 03 0.47 0.49 0.45 7 v±l.76 1.81 1.85 1.80 7 2.40 2.60 2.25 7 11 2.439 9.38 2.54 29.68 16 2/06
Polvcom Inc NR Dc2 04 0.15 0.17 0.14 14 v0.27 0.381 0.40 0.29 16 0.60! 0.72 0.43 16 22 466 6.03 0.57 19.79 52 1/23
PolyMedica Corp B Mr' 03 0.48 0.48 0.48 2 vl.60 1.91 1.92 1.90 2 ·2.25 2.25 2.25 1 20 356 8.34 1.85 25.91 14 1/28
PolyOne Corp c De' 04 d0.07 Nil d0.09 6 vOd0.06 d0.184 d0.12 d0.20 6 0.204 0.26 0.15 6 7 2,498 0.63 0.72 5.95 d 1/31
Pomeroy IT Solutions B+ De 04 0.26 0.28 0.23 2 v1.18 0.75 0.77 0.73 2 1.01 1.12 0.90 2 .... 703 10.62 .. ..... 14.61 19 2/14
Poore Brothers NA De 04 d0.08 d0.07 d0.08 3 v0.15 0.06 0.07 0.05 3 0.21 0.25 . 0.19 3 20 59.4 0.84 0.22 3.46 58 2/13
Pooe & Talbot 8- De 04 d0.35 d0.25 d0.50 5 vdl.34 ei.ss d1.47 dt.72 6 0.444 0.75 0.18 5 5 546 9.31 0.92 13.55 d 1/23
Pope Resources LP. NR De 04 Nil Nil Nil 1 v0.74 0.79 0.79 0.79 1 0.85. 0.85 0.85 1 .... 32.2 10.26 ....... 1430 18 2/12
Popular Inc A+ De 04 0.82 0.84 0.80 3 v2.61 3.51 3.53 3.49 3 3.59 3.66 3.52 3 12 2,547 , 17.65 ....... 47.30 13 1/17
Portal Software NA Ja' 04 d0.18 d0.15 d0.25 6 vd2.05 d0.6H d0.57 d0.68 6 d0.384 d0.13 (l().57 6 33 121 0.95 ....... 7.46 d 2/21
Portfolio Recovery Assoc NA De 04 0.34 0.36 0.30 7 v0.94 1.31 1.33 1.27 7 1.56 1.61 1.52 7 19 55.9 7.45 ....... 27.55 21 2/11
Portuaal Telecom SGPS ADS NA Dc6 ... ....... ....... ..... ... v0.33 0.56 . 0.69. 0.49 3 0.74t 0.93 0.64 3 8 5,853 NeQ .. ..... 9.44 17 . ......
POSCO ADS NR De ....... ....... ······· v2.61 4.65 4.87 4.30 5 4.47 5.31 2.95 5 17 12,104 25.06 111##11# 29.85 6 ······· :I: Possis Medical B- JI 02 0.12 0.13 0.11 6 v0.68 0.55 0.57 0.54 6 0.76 0.77 0.74 4 33 57.4 3.44 1.06 17.01 31 2/12
Post Properties B+ De 04 0.13 0.13 0.13 1 VOl.33 1.044 1.04 0.11 2 1.13t 1.13 0.18 2 8 330 20.86 ······- 28.70 28 ······· Potlatch Corp 8- De 04 0.71 0.81 0.62 3 vd8.23 1.18t 1.30 0.73 5 0.851 1.45 d0.05 5 4 1,286 15.33 2.25 32.25 27 1/27
Powell Indus 8 Oc 04 0.11 0.12 0.10 2 vl.67 0.71 0.72 0.70 2 0.79 0.80 0.78 2 12 306 12.67 ....... 17.09 24 12/09
Power Integrations NA Dc7 04 0.17 0.18 0.16 13 v0.32 0.58 0.59 0.57 13 0.78 0.82 0.73 13 25 108 5.83 0.55 36.22 62 1124
Power-One NA Dc6 04 d0.06 d0.06 d0.07 7 vd2.62 d0.164 d0.15 d0.17 7 d0.074 0.03 d0.19 7 10 231 2.68 d2.36 8.37 d 1/31
Powerwave Technologies NR Dc9 04 d0.03 Nil d0.04 13 v0.06 d0.36 d0.32 (l().38 13 d0.02 0.12 d0.48 14 10 385 4.26 0.38 7.45 d 1/28
POZEN Inc NA De 04 d0.11 d0.08 d0.14 4 vd0.87 d0.56 d0.51 d0.60 4 0.14J 0.30 d0.04 4 .... Nil 1.33 ....... 11.76 d 2/03
PPG Indus B De 04 0.73 0.76 0.69 13 -oeo.ae 3.03 3.07 2.95 14 3.66 4.33 3.25 14 8 8,067 5.38 1.98 58.47 19 1116
PPL Corp B. De 04 0.86 0.87 0.84 2 v02.35 3.59 3.69 3.55 10 3.66 3.75 3.55 9 5 5,429 12.65 ....... 40.88 11 1/22
PRAECIS PHARMACEUTICALS NA De 04 d0.39 d0.32 d0.46 2 vd0.89 dl.17 d1.09 dl.24 2 d0.86 d0.68 d1.04 2 .... 1.03 3.57 ....... 7.60 d 1/31 )
Stock Splits & Dividends 1 3-for-2.'99:2-for-1 ,'02. 2 2-for-1 ,'00. 3 2-for-1 ,'03. 4 No adj for mgr w/Hanna(M.A.),dstr 1 sh,'00. s 2-for-1 ,'00:1-for-5 REVERSE,'03. 6 5-for-1 ,'99:Adj for 2%.'01.
1 2-for-1 ,'99. a 3-for-2.'00:2-for-1 ,'00. s 3-lor· 1 ,'00.
)
)
)
92 PHO-PMC Earnings Guide Standard & Poor's
)
)
·• Prior Y11r 01111 Next Quarter 2003 2004 5-Yr Proj Net Month Next * Next Year 01111 com. SlrNt E1Umatu (S/Shr} I ol 2002. Street EsUmates (S/Shr) Street Estimetes ($/Siu) , ol . EPS Annual Tangible Calh End EPS Stock Actual I ol Growth Reva. Book· Row Prlee 2003 Rep! Nameo11 ...... Rank Aaclll Mean High Low Ests. EPS· Mean High Low Ests. Mean High Low Ests. Rate-% ($ Mil.) (S/Shr) ($/Sh<) Nov'03 PIE 0..
i Photon Dynamics NR Sp 01 Nil 0.03 d0.02 8 vPd4.50 0.68t 0.85 0.53 9 1.27 1.56 1.04 5 22 67.2 8.50 d1.17 40.81 60 1/29
Photronics, Inc c Oc 04 0.12 0.13 0.10 12 vd0.16 d0.20 0.22 d0.23 13 0.73 0.97 0.60 12 17 387 4.90 2.41 18.41 d 12/11
Piedmont Natural Gas A- Oc 04 d0.18 d0.12 d0.24 2 vi .89 2.14 2.26 2.10 6 2.31 2.45 2.20 6 5 832 17.70 ....... 40.98 19 12/13
Pier 1 Imports A- Fb 03 0.34 0.36 0.33 16 v1.36 1.39 1.42 1.36 16 1.60 1.65 1.53 15 14 1,755 7.06 1.84 25.50 18 12117
iPilgrim's Pride 8 So' 01 0.18 0.19 0.16 3 v1.36 0.94t 1.08 0.75 3 1.46t 1.46 1.45 2 9 2,619 10.94 2.07 14.95 16 1/15
Pinnacle Data Systems NR Dc2 · ... ....... ....... ....... ... Nil o.oz, 0.07 0.07 1 0.10, 0.10 0.10 1 15.7 .0.71 . ...... 2.40 34 2/19
Pinnacle Entertainment NA De 04 d0.13 Nil d0.19 5 vod0.50 d0.19, d().06 d0.23 5 0.0lt 0.14 d0.13 6 13 514 6.39 0.80 9.13 d 2/21
Pinnacle Finl Partners NR De 04 0.21 0.22 0.20 5 v0.21 0.65 0.66 0.64 5 1.15 1.20 1.00 5 26 14.3 9.00 ....... 24.30 37 1/22 i Pinnacle Systems c Je' 02 d0.06 d0.04 d0.09 6 VOd0.04 d0.13, Nil d0.24 6 0.22, 0.28 0.13 3 17 331 2.15 0.30 8.33 d .......
Pinnacle West Cacttal A De 04 0.54 0.57 0.51 4 ..._..!'Q2?32:58 2.70 2.45. 12 .. �?Jl? 3.25 2.65 12 4 2,637 29.38 ······· 39.37 15 2/04
Pinnacor Inc NA De 04 0.02 0.02 0.02 1 -eo.ra 0.03 0.03 0.03 1 ....... ....... 34.6 1.14 . ...... 2.32 77 2/03
Pioneer Drilling NA Mr 03 d0.01 d0.01 d0.01 2 vd0.31 d0.00, d0.07 d0.08 2 0.26, 0.30 0.21 2 80.2 2.19 3.70 d 2/06
Pioneer Natural Resources 8- De 04 0.57 0.90 0.39 21 vo0.43 2.50 2.87 2.30 26 2.16, 3.84 1.15 27 tl 717 14.54 2.32 28.36 11 1131
Pitney Bowes A- De 04 0.66 0.67 0.65 7 v1 .97 2.41 2.42 2.40 7 2.55 2.66 2.47 8 11 4,410 0.25 2.98 39.75 16 1/29
Pixar NR De 04 1.15 1.31 1.06 12 vl.68 1.88t 2.05 t.76 14 1.31 1.68 1.02 14 23 202 15.27 1.83 70.10 37 2/10 ·-·-· -···-�-·--·
Pixelworks Inc NR De 04 0.07 0.07 0.06 4 vd0.48 0.171 0.18 0.17 4 0.30 0.35 0.26 6 25 103 2.84 ... 13.18 78 1/22
Plains All Amer Pipeline NA De 04 0.38 0.40 0.35 7 vl.34 1.61 1.64 1.60 7 1.59 1.65 1.54 7 5 8,384 11.81 ...... 31.14 19 2126
Plains Explor & Prod'n NR De 04 0.39 0.40 0.37 2 -t.os 1.5s, 1.61 1.50 3 1.29 1.35 1.15 4 189 5.15 ....... 14.01 9 2/20
Plains Resources 8- De ... ······· . ...... ....... ... v1.48 1.67 1.67 1.67 1 . ..... 18.7 3.98 0.51 15.52 9 2/27
iPlanar Systems B- Sp 01 0.28 0.30 0.25 9 vPl.04 1.22 1.27 1.09 9 - 1.44 1.52 1.40 3 17 252 5.74 0.48 23.80 20 1/16
Plantronics Inc 8 Mr' 03 0.28 0.29 0.27 6 v0.89 1.07 1.10 1.04 6 1.18 1.32 1.10 6 14 338 3.77 1.13 30.64 29 1/15
Platinum Underwriters Hldg NA De 04 0.66 0.67 0.62 8 lv0.15 2.64t 2.65 2.60 9 3.20 3.40 3.00 10 13 ······· 21.43 ....... 30.17 11 2/14
PLATO Leaming 8- Oc5 04 0.18 0.20 0.16 4 vd0.07 d0.121 d0.10 d0.14 4 0.281. 0.35 0.23 4 23 74.4 3.27 0.36 9.93 d 12/06
Playboy Enterprises Cl'B' C De 04 0.03 0.03 0.03 1 vid0.67 d0.06 0.01 d0.16 3 0.20, 0.25 0.16 3 25 278 Neg d0.52 16.21 d 2/19
· Plavtex Products 8 De 04 0.08 0.10 0.06 5 vol.04 0.39 0.41 0.38 5 0.50i 0.55 0.46 5 8 719 NeQ ······· 6.93 18 1/29
iPlexus Corp c Sp• 01 0.05 0.06 0.04 19 vPdl.61 0.261 0.37 0.13 20 0.57t 0.75 0.44 13 20 808 8.03 0.77 17.94 69 1/23
Plug Power NR De 04 d0.19 d0.18 d0.20 3 vd0.93 d0.85 d0.79 d0.89 5 d0.71 d0.47 d0.80 5 11.8 1.49 ······· 5.78 d 2125
Plum Creek Timber NR De 04 0.28 0.29 0.27 6 vl.26 1.08 1.10 1.03 7 1.27 1.47 1.12 8 4 1,137 11.62 1.82 26.63 25 1124
Plumtree Software NA De 04 0.02 0.02 0.02 3 v0.08 0.071 0.07 0.06 3 0.10 0.12 0.09 3 20 82.9 1.85 ....... 5.04 72 1/17
PLX Technolocv NA De 04 0.02 0.02 0.01 3 � vd0.10 ___ 0.011 0.01 __ Nil 3 __ 0.141 0.17 0.10 3 25 34.8 2.35 .. .... 9.38 1/23
PMA Capttal'A' B- De 04 0.26 0.36 0.17 4 v±dl.53 d0.89, 1.30 d2.39 5 1.11' 1.75 0.50 5 8 1,075 16.08 ....... 3.97 d 2/06
PMC-Sierra Inc c Dc3 04 0.02 0.02 O.Q1 15 vd0.38 d0.041 d0.03 d0.06 15 0.131 0.17 0.07 15 29 218 1.14 d0.13 20.36 d 1/24
Stock Splits & Dividends '3-for-2 10 Cl'A','99. 2 2-for-1 ,'OO(tw1ce). 3 2-for-1 ,'99,'00. '3-for· 1 ,'00. s 4-for-3,'01. 5 2-for-1 ,'00.
') Earnings Guide PRO-QLO 95
• Prior Year Data Next Quarter 2003 2004 5-Yr Pro) Net Month Next i Next Year Dita Com. A2:!1· Street Eatlmates !$1Shr) Strati E1tlmat11 (S/Shr) I of EPS Annual Tangible Cl1h End EPS Stock Street E1tlmatea (S/Shtl IOI IOI Growtfl · Reva. Book Flow Price 2003 Rtpl
Nome of l11ue Rank F11ca1 Mean High Low £111. EPS Mtan High Low E1t1. Meon High Low E1t1. RII•% · (S Mii.) (S/Shf) . (S/Shr) Nov'03 PIE Diie
Protective Life Corp A De 04 0.72 0.73 0.70 12 CJv2.54 2.73 2.75 2.70 13 3.02 3.10 2.97 13 10 1.921 27.84 ....... 32.85 12 · 2110
Protein Design Labs c De' 04 d0.22 d0.18 d0.24 12 vd0.16 d0.43 d0.38 d0.45 13 d0.42 d0.18 d0.72 13 .... 46.4 5.56 d0.10 13.86 d 2127
Pro1on Energy Sys NR De 04 d0.09 d0.05 d0.12 2 vd0.40 d0.44. d0.39 d0.49 2 d0.28• d0.10 d0.47 2 .... 4.71 3.41 ....... 2.62 d 3114
Providence Service NR De 04 0.13 0.13 0.13 4 vpd2.45 0.55t 0.55 0.54 4 0.74t 0.95 0.64 4 21 ....... 3.09 ....... 17.00 31 ·······
Provident Bankshares A Dc2 04 0.54 0.56 0.52 10 v1.88 2.03 2.05 2.01 11 2.22 2.26 2.19 10 9 366 12.54 ....... 29.06 14 1/15
Provident Financial Group B+ De 04 0.57 0.59 0.56 7 vt.88 2.16 2.18 2.15 7 2.45 2.52 2.40 7 8 1,649 16.39 ....... 30.93 14 1/15
Provident Financial Svcs NR De 04 0.15 0.15 0.14 3 nla o.sss 0.60 0.58 4 0.72 0.76 0.62 5 20 202 13.17 ....... 20.71 .35 . ......
Providian Financial NR De" 04 0.17 0.20 0.08 23 v0.75 0.60 0.65 0.45 25 0.90 1.25 0.51 25 · 13 4,073 7.78 ....... 11.30 19 1/31
Province Healthcare NR De' 04 0.22 0.23 0.19 18 v0.73 0.82 1.10 0.79 19 0.94 1.00 0.88 18 16 704 2.58. 1.44 15.33 19 2/27
Proxim Coro'A' NR De 04 d0.03 d0.03 d0.03 4 vd2.33 d0.13+ d0.12 dQ.13 4 d0.021 0.04 d0.09 4 18 145 Nea ....... 1.41 d · 1129
ProxyMed Inc c Dc5 04 0.02 0.04 Nil 4 v0.21 d0.50 d0.48 d0.52 4. 0.371 0.49 0.19 3 20 50.2 Neg ....... 16.40 d 2/20
Prudential Financial NR De 04 0.62 0.66 0.58 12 v1.25 2.52 2.56 2.35 15 3.21 3.35 2.65 16 14 26,675 39.72 ....... 39.11 16 2/12
Prudential pie ADS NR De ..... ····· ....... v0.72 t.OOt 1.01 1.00 2 1.25 1.25 1.24 2 5 21,207 3.32 ....... 15.68 16 .......
PSS World Medical NR Mr 03 0.10 0.11 0.09 6 vd0.71 0.40t 0.41 0.38 6 0.52t 0.55 0.50 4 16 1,178 2.61 d0.12 10.25 26 1/30
Psychemedics Coro 8 Dc6 04 0.07 0.07 0.07 1 v0.24 0.24 0.24 0.24 1 0.30 0.30 0.30 1 .... 16.1 1.13 . ...... 8.05 .34 2/14
Psychiatric Solutions NR De 04 0.21 0.22 0.19 5 v0.86 0.74 0.75 0.72 5 0.90 0.93 0.88 5 17 114 Neg ....... 15.20 21 3/14
P.T. Telekomunikasi ADS NR De' ....... ....... ....... .. . v1.85 1.42• 1.48 1.34 5 1.96 2.63 1.66 5 18 2.390 3.07 ....... 14.52 10 .......
PTEK Holdings c De 04 0.10 0.11 0.09 6 v0.03 0.44 0.45 0.43 6 0.50 0.57 0.47 6 22 341 Neg 0.83 8.72 20 2125
Public Storage 8+ De 04 0.31 0.31 0.31 1 v1.28 1.24t 1.32 1.15 2 1.25 1.32 1.21 3 6 641 17.02 ....... 44.40 36 3/14
Public Svc Enterorises B+ De 04 0.69 0.78 0.63 10 -cn.zs 3.70 3.79 3.65 18 3.71 3.85 3.50 18 4 8,390 14.76 ....... 41.02 11 1/2�
Publicis Groupe S.A ADS NR De ... ....... ....... ....... v1.02 1.76 1.87 1.65 2 1.94 2.07 1.80 2 13 3,080 Neg ....... 31.60 18 .. .....
Puget Energy B De 04 0.59 0.63 0.57 3 v1.24 1.35 1.40 1.30 B 1.80 1.90 1.70 8 6 2,392 14.96 ....... 23.25 17 2/13 t Pulaski Financial B+ Sp' ....... ....... vPl.01 1.00 1.00 1.00 1 ....... ....... ....... .. . .... 32.8 6.76 . ...... 15.99 16 1/29
Pulitzer Inc B+ De' 04 0.63 0.65 0.61 6 v1.62 1.96 1.99 1.95 6 2.25 2.47 2.15 6 11 416 Neg 2.49 53.00 27 1/28
Pulte Homes A- De 04 3.76 3.90 3.60 14 v7.35 9.69 9.83 9.53 14 11.151 11.85 8.00 14 12 7,472 43.55 7.68 95.54 10 1/28 t Pumatech Inc NR Jl3 02 O.Ql 0.01 Nil 2 vd0.17 0.04� 0.04 0.03 2 0.14 0.14 0.13 2 20 24.9 0.55 ....... 6.05 ... 2/20 t PVF Capilal Corp B+ Je" ... ....... ...... .. ..... ... vl.25 1.45! 1.45 1.45 1 ....... ....... ....... . .. .... 49.4 9.19 . ...... 14.91 10 1115
PW Eagle 8- De 04 d0.43 d0.43 d0.43 1 v0.06 di.OU d1.01 dl.01 1 0.50 0.50 0.50 1 .... ·251 1.76 ....... 3.99 d 2111
PXRE Group 8- De ... ....... ....... ....... . .. v3.28 3.581 4.00 3.15 2 4.50 4.50 4.50 2 .. .. 307 28.24 ······· 24.20 7 2/13
OAO Inc c Ja 04 0.15 0.15 0.15 1 vod0.19 0.41! 0.41 0.41 1 0.601 0.60 0.60 1 .... 195 0.95 ....... 12.33 30 3/07
):AGEN NV NR De" 04 0.08 0.09 0.08 5 v0.16 0.32 0.34 0.29 8 0.38 0.41 0.35 8 21 299 1.54 ....... 11.21 35 2/19
Logic Corp NR Mr12 03 0.37 0.38 0.34 21 vt.os 1.48 1.51 1.42 22 1.65 1.75 1.51 20 19 · 441 8.79 1.23 56.89 38 1/16
Stock Splits & Dividends • 2-for-1,'00,'01. 2 AdJ tor 5%,'01. 3 2-for-1,'00. • 3-for-2,'00,'02. s 1-for-15 REVERSE,'01. • 1-for-4 REVERSE,'02. 7 Adi for 8%,'99. s 2-for-1,'.03 ..
s No adj tor stk dstr,'99. "10%,'99,'00,'01,'02.'03. "2-for-1,'99:4-for-1,'00. 12 2-lor-1,'99(1wice),'OO.
)
)
104 SEL-SIE Earnings Guide Standard & Poor's
)
)
• Prior Yoar Dita, . Next Quam, 2003 2004 5-Yr Proj Net Month Next t Next Year Data Com. Street E,ttmatet {S/Shr) I ol 2002 EPS Annual Tangible C81h End .EPS Stock Actual Street Estimates (S/Shr) lot Street Estimates (S/Shr) #of Growth Revs. Book Flow Prlco 2003 Rep! Name of !taut Rank Fiscel Mein ·· High Low E1t1. EPS Mean High· Low Ests. Mean High Low Ests. Rate-% (S Mil.) (SIShr) ($/Shr) Nov'03 PIE Dale
Select Medical Corp NA De' 04 0.39 0.41 0.37 9 v0.90 1.41 1.43 1.38 9 1.90 2.00 1.85 9 18 1,127 1.27 ....... 35.85 25 2/06
Selectica Inc NA Mr 03 d0.09 d0.09 d0.09 2 vd0.61 dQ.35 d0.34 d0.35 2 ....... 10 35.6 3.49 ....... 4.64 d 1/24
Selective Insurance Gr B+ De 04 0.69 0.75 0.63 7 vl.56 2.04 2.10 1.95 9 2.98 3.30 2.71 9 19 1,179 24.70 ······· 32.62 16 2/06
SEMCO Energy B De 04 0.22 0.22 0.22 1 v0.48 0.20, 0.21. 0.20 3 o.aos 0.35 0.24 3 4 481 1.04 ....... 4.90 25 2/11
:j: Semitool Inc c so> QI d0.02 d0.01 d0.04 4 vPd0.74 0.26t 0.36 0.10 4 0.68 0.86 0.40 3 15 117 3.78 ······· 11.36 44 1/29
Sempra Energy B De 04 0.58 0.71 0.50 6 vo2.79 2.72 2.91 2.50 13 2.68 2.90 2.25 13 6 6,020 13.22 5.68 28.32 10 2/20
Semtech Corp 8 Ja• 04 0.14 0.15 0.14 15 v0.44 0.47t 0.48 0.42 16 0.65t 0.80 0.55 16 24 193 4.80 0.56 24.26 52 2/26
Sensient Technologies A- De 04 0.44 0:45 0.43 2 v1.69 1.69 1.70 1.68 2 1.80 1.80 1.80 2 8 940 2.48 2.55 18.85 11 2/14
Sensylech Inc NA Sp Q4 0.17 0.17 0.17 3 v0.52 0.63 0.65 0.61 3 0.79 0.80 0.78 3 23 32.3 5.31 ....... 14.40 23 12/20
Seoracor Inc c De' 04 d0.76 d0.44 d0.92 7 vd3.34 d1.94 dl.66 d2.13 10 d0.99, d0.20 d1.86 9 15 239 Nea d3.11 24.78 d 1/28
Sequenorn Inc NR De Q4 d0.25 d0.25 d0.25 2 VOd2.32 d0.94 d0.92 d0.95 2 d0.66 d0.62 <J0.70 2 .... 30.9 1.77 ..... , . 3.61 d 3.103
Serena Software NA Ja' 04 0.21 0.22 0.19 9 v0.57 0.73 0.74 0.73 9 0.84 0.88 0.80 9 15 95.8 3.72 0.71 19.19 26 2/21
Serologicals Corp 8 De . 04 0.20 0.24 0.17 3 v0.56 0.61 0.66 0.58 3 0.86 0.91 0.78 3 20 145 1.08 ....... 17.25 28 2121
serene S.A. ADS NA De ... ....... ....... ....... ... v0.50 0.63 0.64 0.60 4 0.76 0.79 0.73 4 18 1,547 98.90 ....... 17.28 27 . ......
Service Corp Intl c Da Q4 0.06 0.07 0.04 4 vd0.34 · 0.30 0.31 0.29 4 0.35 0.36 0.33 4 6 2,272 0.75 0.09 4.95 17 2129
ServiceMaster Co A+ De 04 0.08 0.09 0.07 6 vo0.55 0.54 0.54 0.52 6 0.60 0.62 0.58 6 10 3,589 Neg 1.19 11.20 21 3/25
7-Eleven Inc 8- Dc5 Q4 0.05 0.06 0.05 ·3 v00.38 0.77 0.78 0.76 3 0.85 0.88 0.83 3 15 10,213 0.21 3.17 16.40 21 1130
SFBC Intl NR De 04 0.43 0.44 0.41 2 vl.05 1.39 1.41 1.36 2 1.46' 1.49 1.42 2 20 64.7 5.72 ....... 25.91 19 2127
SGL Carbon AG ADS NA De ... ······· ....... ....... vd0.38 d0.07, d0.07 d0.07 1 0.47t 0.47 0.47 1 18 1,168 1.48 ....... 4.96 d .. .....
Sharper Image e� Ja 04 1.35 1.37 1.30 8 vl.21 1.56t 1.59 1.46 8 1.80 1.90 1.51 8 20 523 7.94 2.37 31.62 20 2/20
:!:Shaw Group B+ Au2 oi 0.17 0.22 0.14 6 v0.54 0.00, 1.15 0.70 10 1.00 1.30 0.85 5 11 3.307 3.99 1.71 13.02 18 1/13
Shell Transp/Trad ADA B+ De 04 0.70 0.81 0.56 5 v4.16 3.23 3.46 3.00 15 2.78 3.41 2.31 15 10 128,165 16.05 0.33 38.65 12 2/10
Shenandoah T elecommun N R Dc6 ... ....... ....... .. ..... ... vl.20 ....... ...... . ..... 2.58 2.58 2.58 1 93.0 26.85 ....... 49.01 .. . 2/25
Sherwin-Williams A De 04 0.45 0.47 0.42 10 vo2.04 2.22 2.25 2.20 11 2.43 2.60 2.34 11 9 5.185 4.33 2.86 32.43 15 2/06
Shire Pharmaceuticals ADS NA De 04 0.49 0.52 0.45 7 ·vl.47 1.63 1.66 1.59 10 1.87 2.00 1.75 9 18 1.037 2.18 ..... 25.00 15 2127
Shoe Carnival 8 Ja Q4 0.16 0.17 0.16 6 vl.22 1.09 1.10 1.09 6 1.33 1.36 1.29 6 18 520 10.87 ....... 18.08 17 3/13
Shapko Stores 8 Ja 04 1.20 1.20 1.20 1 vol.41 1.45 1.45 1.45 1 1.62 1.62 1.62 1 .... 3,240 18.37 1.41 16.65 11 3/13
· Shuffle Mas1er 8 Oc' 04 0.28 0.29 0.27 9 v0.77 0.98 0.99 0.97 9 1.21 1.26 1.17 9 23 56.1 2.45 1.16 29.91 31 12/16
Shurgard Storage Centers NR De ... ....... ....... ······· ... vol.45 1.05 1.05 1.05 1 1.16 1.16 1.16 1 264 16.07 . ...... 37.30 36 2/10
SI International NR De 04 0.24 0.25 0.24 5 v00.12 0.84 0.84 0.84 5 1.00 1.03 0.96 5 15 149 4.66 ....... 18.99 23 2/13
SICOR Inc B- De 04 0.27 0.28 0.26 5 vl.06 0.96 0.97 0.95 5 1.11 1.13 1.09 5 16 456 5.68 1.26 27.64 29 2/21
Siebel Systems NR De' 04 0.06 0.07 0.05 37 vd0.08 · 0.12 0.13 0.11 39 0.28 0.36 0.19 39 13 1,635 3.81 0.24 13.16 ... 1123
Stock Splits & Dividends 'To split·2-for-1,ex Dec 23. 2 2-for-1;00. '2-for-1,'99,'00. '3-far-2,'00. 5 1-for-5 REVERSE,'00. 6 To splil 2·for-1.ex Feb 23,'04. 1 3-for-2,'00,'01.
)
128 X-R�ZVM· Earnings Guide Standard & Poor's
)
)
• Prior Year 01111.· Next Quarter 2003 2004 S-Yr Proj Net Month Nut * Next YHr Dita Com. 2002 EPS Annual Tangible Cash End EPS Stock StrNI E1dmat11 jS/Shr) . ti of Actual Street Estimates ($/Shr) #of Street Estimates ($/Shr) #of Growth Revs. Book Flow Price 2003 Repl Nome of l11ue Rank Fl1c1I Mean High Low Esta. EPS Mean High Low Ests. Mean High Low Eats. Rote-'l', (S Mil.) ($/Shr) ($/Shr) Nov'03 PIE Dall
X-Aite Inc 8- De 04 0.20 0.20 0.20 1 vOd0.09 0.361 0.36 0.36 1 0.48 0.48 0.48 1 20 98.5 2.65 0.18 11.50 32 1/31
Xcel Energy 8- De 04 0.27 0.29 0.26 5 vd5.72 1.19 1.21 1.15 15 1.23 1.35 1.15 15 4 9,524 11.39 ..... 16.70 14 1/30
Xerox Corp B De' 04 0.15 0.16 0.13 10 -oo.to 0.53 0.54 0.51 11 0.71 0.80 0.67 11 44 15,849 Neg 1.38 12.18 23 1/28
Xleor Inc c De 04 0.02 0.02 0.02 5 vd0.55 dO.OU Nil c!0.02 6 0.15 0.20 0.14 6 30 38.5 0.73 ....... 13.03 d 1/22
XIiinx Inc .. · B Mr' 03 0.16 0.17 0.16 23 v0.36 0.65 0.68 0.62 23 .. 0.88 0.98 0.76 23 22 1,156 5.92 0.56 37.59 58 1/22
XL Capital Ltd' A' 8 De 04 1.93 2.23 0.85 15 v2.88 6.151 6.89 4.00 20 9.28 9.75 8.00 21 13 6,578 37.92 75.20 12 2/12
XM Satellite Aadio'A' NA De 04 d1.10 d0.95 d1.21 7 ·v±d5.95 d4.85 d4.70 d5.01 7 d3.70 d3.31 d3.91 6 ... 20.2 1.03 ..... 24.88 d .......
XOMA Ltd c De 04 d0.20 d0.11 d0.26 9 vd0.47 d0.74. d0.65 d0.80 9 d0.45 d0.18 d0.76 8 30.0 0.26 ....... 6.91 d 3112
XTO Energy B Dc3 04 0.45 0.53 0.38 28 v1.10 1.72 1.83 1.54 30 2.02 2.52 1.25 30 13 810 7.59 2.34 25.28 15 2/19
Yahoo Inc NA De' 04 0.10 0.11 0.08 17 vo0.18 0.36 0.38 0.33 18 .. 0.52 0.60 0.43 18 35 953 2.99 0.35 42.99 1/16
· Yankee Candle Inc NA De 04 0.91 0.91 0.90 4 vl.17 1.43 1.43 1.42 4 1.71 1.75 1.65 4 16 445 3.34 ······· 29.52 21 2/12
Yardville Natl Banc A- De' 04 0.30 0.30 0.30 1 v1.68 1.26 1.26 1.26 1 1.47 1.54 1.40 2 128 14.23 ....... 22.90 18 1/28
Yellow Corp 8- De' 04 o.n 0.79 0.75 4 vd3.31 2.23 2.25 2.20 4 2.78 3.00 2.60 4 11 2.624 11.26 3.64 30.58 14 1/24
York Intl B De 04 0.58 0.64 0.53 3 V02.04 2.48 2.55 2.43 3 3.15 3.30 2.75 3 11 3,843 4.29 3.60 39.95 16 2/19
York Water NA De' ... ....... ....... ..... . .. v0.60 0.69 0.69 0.69 1 0.76 0.76 0.76 1 7 19.6 7.93 18.23 26 3/11
· Youbet.com Inc NA De 04 d0.04 d0.04 d0.04 1 vd0.41 d0.16 d0.16 d0.16 1 0.07 0.07 0.07 1 .... 25.9 0.18 . ...... 2.00 d . ......
. Young Broadcasting'A' 8- De 04 d0.35 d0.18 d0.55 5 Ov±10.28 d2.1H d2.01 d2.37 5 d0.9H 0.90 d2.03 7 .... 225 Neg . ...... 19.74 d 2/18
'. Young Innovations B+ De' 04 0.38 0.38 0.38 1 v1.22 1.39 1.39 1.39 1 1.56 1.56 1.56 1 15 72.2 3.39 ....... 36.49 26 2/04
Yum Brands NA De' 04 0.62 0.63 0.62 16 vl.88 2.03 2.04 2.02 17 2.23 2.28 2.17 16 12 7,757 0.51 3.07 34.49 17 2/11
Z-Tel Technologies NA De 04 d0.18 d0.18 d0.18 1 vd1.01 d0.89t d0.89 d0.89 1 d0.3H d0.31 d0.31 1 .... 235 NeQ ....... 3.00 d 3103
:j:Zale Corp NA JI 02 3.60 3.72 3.55 9 vd1 .26 3.86 4.00 3.79 10 4.44t 4.72 4.21 7 13 2,212 20.65 0.48 54.15 14 2/18
Zebra Technologies'A' B+ De' 04 0.49 0.51 0.47 6 v±1.53 1.91 1.92 1.89 6 2.18 2.23 2.11 7 17 476 11.93 1.78 63.57 33 2/12
Zenith Natl Insurance 8- De ... ....... ....... . ...... ... v0.54 2.74t 2.74 2.74 1 3.50 3.50 3.50 1 602 18.10 . ...... 32.65 12 1/02
:j:Zila Inc c JI 01 d0.03 d0.02 d0.03 2 vo0.25 d0.07 d0.06 d0.07 2 d0.04 d0.04 d0.04 1 30 47.1 0.63 ....... 3.98 d 12/17
Zimmer Holdinas NA De 04 0.44 0.45 0.43 22 v1.31 1.73 1.74 1.71 2'!_ __ ?.:_QQ__ 2.06 1.94 24 17 1,372 3.72 1.43 65.92 38 1/30
Zindart Ltd ADA NA Mr ... ....... ....... ....... ... v0.28 0.57 0.57 0.57 I 0.85 0.85 0.85 1 25 121 2.74 ....... 7.99 14 ······· Zions Bancorp A De 04 1.07 1.11 1.04 16 vo3.13 4.11 4.18 4.08 16 4.52 4.79 4.29 17 12 1,833 18.66 ....... 61.81 15 1/24
:j:Zoll Medical B Sp o1 0.28 0.29 0.27 7 vP1 .40 1.68 1.74 1.61 7 2.06 2.18 2.00 5 22 185 16.72 33.92 20 1/16
Zomax Inc NA De' 04 0.0, 0.01 Nil 4 vd0.02 d0.11t d0.08 d0.12 4 o.os- 0.15 d0.05 4 15 186 3.96 ....... 5.39 d 3127
Zoran Corp c Dc8 04 0.08 0.09 0.07 6 v0.20 0.511 0.53 0.50 6 0.721 1.00 0.45 6 22 149 9.14 ....... 18.45 36 2/03
:j:Zygo Corp c Je 02 Nil 0.01 Nil 3 vd0.60 0.04• 0.12 Nil 3 0.21 0.31 0.10. 2 20 103 7.10 ....... 16.41 ... 1/31
ZymoG'enetics Inc NA De 04 d0.34 d0.34 d0.35 4 vd0.75 d1.26 d1.24 d1.32 6 d1.49 d1.39 d1.55 4 .... 52.8 5.34 ....... 13.31 d 2/13
Stock Splits & Dividends ' 2-for-1 ,'99. 2 2-for-1 ,'99(twice). 3 3-for-2,'00,'01 :4-for-3,'03. 4 2-for-1,'99,'00. 5 2-for-1 ,'98:Adj for 2.5%,'98. e No adj for stk dstr,SCS Transportalion,'02. '2-for-1 ,'02. s 3-for-2,'02. a 3-for-2,'03.
I 80 ' 60 50 40 . - .. .... 30 , .. 1" 25 ''('I 20
15
10
-7.5 % TOT. RETURN 10/03 ,.:'",· .. .. .... THIS Y\.ARlllt • STOCK INOEX 1 yr. 27.8 45.5 ....
11 fifffiim ---- 3 yr. 15.3 26.6 - 5 yr. 50.1 64.8
2 01 2002 2003 2004 c VAlUE llNE PUB. INC. 16-08
20,003 94 35 15915 1990
102003 78 45 12187 1989
402002
lo Buy 71 toStU 45 Hl�s{OOO) 11330
BLACK . HILL . s CORP .- IRECENT 3215 IP/E 151 (Trailing: 14.0\ RELATIVE O 80· jOIV'D 3 901 �·11n . , NYSE-._BK_H�..,_,.PR_ICE �-· ,--4-RATI_o �· _Med�ian_: 13.0-+1/ P_IE R�ATIO_, ,-L I Y_LD.,---, -,--IOJl!WII
TIMELINESS 4 lowered nn.�3 High: 21.s 1104 .. 86 'I 15.<' I 17.4 19.21 24.3 27.9 26.5 46.1 58.5 36.9 33.5 Target Price Range
3 Low: 15.9 118 ! 13.2 15.2 17.5 20.7 20.3 20.4 26.0 18.3 21.8 2006 2007 12008 SAFm lowered8115,ry) LEGENDS i I 4 - 1.38 11 Dividends r, sh -,1----+----,i---+--+--+ TECHNICAL Raised 11114,�3 �����e�r:'�'.�n���' �,· L
BETA .80 (I.OO=Marl<el) �:t�:�i:: t� :=.T----�--------1--·-·- .. ·- 2006-08 PROJECTIONS Opnons: No --- -·-·---- --· ior-'2'- .. --·- -·-·- Ann'I Total Shaded areas indicale recession "� I I , Price Gain Return ,.,,, --- 1-- --·r-O--+- r--rt!
High 40 (+25fo) gr,, i?; __.,. 1 ill'" '1(•1,0,1 1p1111 Low 30 (-5¥0) 3% ,,, 1i,1 ":J.. ""'"' Insider Decisions :�.1.L�JI 1 z-> 1 ···���.� .- i�i..t!� ··J.�>----+----+-·-- _ D J F II A M J J A 1,,i; - �I 1
lo Buy o o o o o o o o o '.'\. ···' •••• Oplions.010000000;/:l '•· . loSell 1 1 0 0 0 0 0 0 0 ,� .. ---+------------+--->---·_._ _.,._
Institutional Decisions ;!i\ ····· ···· -, .
Percent 18 -1----.-------·-"-'•·_.· .... _ .. _. ._.·_··..,.·-· --
snares 12 - --- ---- ----·-- ---- ------� -- -- traded 6 _.__ __ --- ---- r----
,, .� ••. 11 , .,., , , , ,I,, •••• ,1, h , I I 1 111111)111, •11111 l•il 1111111,11 1987 1988
B+ 70· 75 50
57.75.
6.00
2.75
1.36
8.50
26.50
33.25
12.5 .85
l'!f�.... . ,,:;·· ,--..
5.98 13.84 5.85 6.22 6.50 6.59 6.51 6.74 6.92 7.50 14.45 31.48 37.05 69.69 57.96 15.64 42.15 48.45 Revenues per sh
1.48 1.51 1.53 1.60 1.69 1.82 1.82 1.92 209 2.45 2.52 2.72 2.88 3.68 5.27 4.90 4.75 ·5.15 "CashFlow"persh
.97 1.02 1.07 1.12 1.11 1.15 1.11 1.11 1.19 1.40 1.49 1.60 1.70 2.37 3.42 2.33 2.20 2.30 Earnings per sh A
::; ::� ::: 1:�� 1:;: ,:; 1:r,i�t 8 2!� --1.�� :�� ::� !:: �:�� 1!:�� !:�� !:!� �::: :;���:1:r;�:; 5.38 5.86 6.21 6.60 6.92 726 785 813 843 891 9.46 9.58 10.14 11.95 18.95 19.54 21.40 22.55 BookValuepersh c
20.48 20.51 20.51 2o·sr-20.51 2055 21_�0- JTss ... .?.!.� 2168 21.70 21.58 21.37 23.30 26.89 27.10 32.25 32.50 Common ShsOutst'g D
10.5 11.4 11.3 ·11T14.4 162 153 124, 131 119 13.0 ·14_9 13.6 10.9 11.4 12.5 Boldligiresare AvgAM'IP/ERatlo .70 95 .86 .821· .92 98 90 81 ! 88 75 I .75 .77 .78 .71 .58 .68 Valu, Lint Relative PIE Ratlei
5.4% 5.3% 5.6% 5.9'., 1 4.9', i d 4% I 5 0'·, i Gd', , 5 8', l 5 5�, 4.9% 4.2% 1 4.5% 1 4.2% 2.9% 4.0% eslin ates Avg Ann'I Olv'd Yield 4.0%
CAPITAL STRUCTURE as of 6/30/03 T;j9 4 I 14� 4 I 149 8 1 IG;> 6 313.7 679.Jh 1791.9 1623.8 1558.6. 423.9 1360 1575 Revenues (Smill) 1920 Tota1Debt$851.4mill. Duein5YrsS3dJ.7mrll I '?.,9 · 23.8: 25.6 I 30.3 32.4 34.6 36.5 52.8 88.1 63.2 70.0 75.0 NetProflt(Smllll 90.0 LT Debt $825.5 mill. LT interest $40.6 mill. --,· ·-.,·+-1· ···,: ··;··· .... z . .i-.-..- ---:- i,--.:;-· ?-·., · '°.5.,0 ·�f-�...C..,C.+-'--""=...ic.,--<---+--�34cc.Oc'clc-i (LT· t t d: 4 0) .e.i., 1 .0.4.,. I 29.6, ! J1.0., 30.7�, .2.2., .9.8,, .JV 1, 36.5% 31.9% 35.0% 34.0% Income Tax Raie .• meres earne · · xN 3 2•; j 16 i% : 2? 9•; 1 1 20: 6" 7", 3 3% 3.8% 8.5% 18.2% 6.0% 5.0% AFUDC % to Net Profit· 4.0% �:�:ri� �:�:!��ii;i $3o;: mill. Oblig. $50.9 -3j)�;·1 ·:124ifl 47)tr·4to-.f 44 3;. �43¥.42:6;� 52.1% 44.7% 53.6% 56.0% 58.0% Long-Term Oebt RaUo 55.0%
mill. 66.3% i 07.6% ! 52.3% 54.0% 55.7% 56.1% 574% 47.2% 54.7% 45.9% 43.5% 42.0% Common Equity Ratio 45.0% Pfd Stock $5.5 mill. . Pfd Div'd 5.2 mill. ··2sf£ I. :iM}(34.f4 357'.9" -·36&.8 368.7 377.3 589.4 931.0 11154�1) -1585-1755 Total Capttal ($mill) 1965
5,.1!7.shs., ea. con�. ,nto 28.57 shs. 0.1 common. 268.r j 36:J.5 I 393.3 400.4 401.1 389ffl 6 · 464.2 794.3 1238.2 1476.3 1635 1860 �t Plant ($mill) 2440 Div d 1s based on 1 Y, rate plus equivalent of cum· ---· ··· - ····· ·· · · 1- ----·· -- ---� ·...-"·-r-,,..C.,..C-l-·=·'-c'-i---cc-c-c-+-�,..,-f--,..c,c.'-+=""-------'-'=-�-'=--cc--t--c=-i mcn div'ds cn a tully convertedoasis. 10.b''· ! 9.3%, 9.2% 10.4% 10.6% 11.2% 11.4% 10.6% 10.6% 6.6% 5.5% 6:0% ReturnonTotalCap'I 6.5%
CommonStock32.107,619shs 13.6', 1 13.6°, ! 140% ! 15.7% 15.8% 16.7% f16.8% 18.7% 17.1% 11.8% 10.0% 10.5% ReturnonShr.Equity 10.5%
asof7/31/03 13.6% 1 136°,, i 14.0% � 15.7°� 15.8% 16.7% 16.8% 19.0% 17.2% 11:9% 10.0% 10.5% ReturnonComEquitv E 10.5% MARKET CAP: Sl.O billion (Mid Cap). ·----- ,.... i1\ f'Is�,-; -f4°,i-i 5j�,--5.8'/�- ·-6.2% 6.4% 10.5% 11.6% 60% 4.5% 5.0% Retalntd to Com Eq 5.0%
ELECTRIC OPERATING STATISTICS 77"!, _L 7�� 66% 63% 63% I 62% 45% 33% 50% 54% 53% All Div'ds to Net Prol 51%
�.ChangeRel�ISai!siKWH) �0ig ��0J 20}� BUSINESS: Black Hills Corporation is a holding company for Black & gas. Black Hills FiberCom is a lelecom joinl venture. Acq'd Wick· Avg.lndlstUse(MV-.\l) 11335 11062 9516 Hills Power and Light, ·which provides electricity lo 60,000 custom- ford Energy Markeling· 7(97; Mallon Resources 3/03. Fuel costs: AV1J.lnoo�.fle'ls.peiKWHlcJ 4.75 4.72 ·1.93 ers in S0ulh Dakota, Wyoming, and Montana. Electtic revenue 15% of revs. '02 depr. rate: 3.6%. Has 840 employees, 16,000 �:����i�) 11� j�g ji� breakdown. '02: residemial, 23%; commercial, 29%; industrial, · com. stockholders. Chrmn. & CEO: Daniel P. Landgulh. Pres. & MIII.Gll load factor ii.) NA NA NA 12%; olher. 36%. Generating sources. '02: coal. 50%; oil & gas; COO: Everett E. Hoyt. Inc.: SD. Address: P.O. Box 1400, Rapid �. Change Cus10mers 1yr-er,j) + 1.5 +; .1 + 1.2 .�:•.:_!l_Utcha�'.'..'::.�.1 %. Mines coal and ex�oros lot & produces oil City. SD 57709. Tel.: 605·721-1700. Web: www.blackhillsco,p.com.
f�edChar9<!Coi('I) '176 ----�IB--241.. Black Hills has received a payment hy ' $0.07,. however. We haven't adjusted
ANNUAL RATES Past --P-a7t"" Est'd .00_.02 for terminating its contract with Al- our 2004 earnings estimate of $2.30 a
cfchange(persh) 10Yrs. 5 Yrs. to '06·'08 legheny Energy. Two years ago, Black share because the company expects that Revenues 22.0% :!8.0% 3.0% Hills built a gas-fired plant near Las share net for 2003 and 2004 will approxi- "Cash Flow" 10.5% 14.5% 4 5lJ;1 Vegas and signed a 15-year agreement . mate the 2002 tally. (Our 2003 estimate is 5f:i���Js t�ij, 1��:'.: a.S% with Allegheny, which was to supply the a bit lower because we've included some Book Value 9.5% 13.5', 8.0% fuel for the facility and market its output. charges that management has excluded
Cal· QUARTERLY REVENUES (S mill.) Full Si nee then. Allegheny has become finan- from its guidance.) Net income· is up in endar Mar.31 Jun.30 Sep.30 Dec.31 Year. cially weak and the pact became unattrac- 2003 thanks to higher gas production and
2000 247_9 337.0 453 � 585_7 1623_8 tivP. for Allegheny, so it benefited both · prices and a reduced loss at Black Hills'
2001 561.7 419_1 30?.4 275.4 1558_6 parties to end the deal. Black Hills is look- telecommunications joint venture. .
2002 95.8 105.4 112.6 110.1 423.9 ing for another counterparty, but. because The company. has been active with fi- 2003 290 290.6 410.3 .368.5 1360 future cash flows from the project are like- nancing moves r�ently. In April, Black 2004 375 375 425. 400 1575 ly to be lower under any new agreement, Hills sold $118 million (4.6 million shares) ·
Cal- EARNINGS PER SHARE A Full the company recorded a net impairment in common stock. In. May, it issued $250 ender Mar.31 Jun.30 ��p.30 Oec.31 Year charge of $0.06 a share ·in the September million of 10-year notes. In August, the
2000 _42 .38 71 .83 2.37 quarter. We have treated this as a nonre- company reached an agreement for a $215
2001 1.37 1.34 .61 .18 3.42 curring item. million, three-year revolving credit facility. 2002 .55 .54 .64 .60 2.33 Black Hills has completed the sale of Finances are adequate, but there is room
2003 .62 .48 .60 .50 2.20 its hydro assets. Because· these plants for improvement; for instance, the fixed- 2004 · .55 .60 .63 .52 2.30 are located in the East, they are not a good charge coverage is only average.
Cal· QUARTERLYDIVIDENDSPAIDB• Full fit geographically. The proceeds were $186 This untimely stock's yield is a bit be· ender Mar.31 Jun.30 seo.30 Dec.31 Year million, and Black Hills recorded a nonre- low the iit�ustry avera�e: For .the 3- to curring gain of $0.14 a share on the sale. 5-year penod, annual dividend · growth . 19: ·26 ·26 ·26 ·26 1.04 The company used $91 million to pay off should continue, but with the stock now ��1 :�� · :�� :�� :�� L�� related debt and interest-rate swaps, and trading. within our 200.6-2008 Target Price
2002 .29 .29 .29 .29 1.16 it might use the rest to retire additional, Range, total-return potential is unexciting.
2003 .30 .30 .30 debt. The sale will dilute annual share net Paul E. Debbas, CFA November 14, 2003
(A) Diluted EPS. Exel. nonrecurnng gam report due earty Feb (B) Dividends h1stoncally (D) In mill , adj for stock splits. (E) Rate base: Company'• Flna�lal Strength (losses): '98, (41¢); '99, 3c net, '02, (6¢) net; paid In early March, June, Sept .. and Dec. Net ong. cost Rate allowed on com. eq. In '99: Stock's Price $tablllty· '03, (3e) net. '00 & '01 EPS don't add due to • Div'd reinvestment plan available (C) Incl. None specified Earned on avg com eq, '02: Price Growth Perslttence change m shares outstanding Next earnings deferred charges. In '02. $111 8 m,11., $4.12/sh. 12.0% Regulatory Climate· Above Average. Earnings Prtdlctlbltlty .
© 200J: VallJeline. Publishing, Inc. All righls reserved. F,ctual malarial is obtained from sources believed 10 be reliable and is prov�ed withoul waoanlies of any kind. ••"-'l!IIIJI ... THE PUBLISHER IS NOT RESPONSIBLE FOAANY ERRORS OR OMISSIONS HEREIN. This poblication is slriclly for subscriber's own, non-commercial. internal use. No part ••1��· • �- •• , · 11•.,.llllHtl"'"'"'lll�lol ol it rM.y � reproduced.- resold. stoled or trans111itted in any prinled. electron:c or o!htr term, or used for generating or marketing any printed or electronic publication, service or product.
-7.5,
- < -·
16--0S" 2004 e VALUE LINE PUB., INC.
% TOT. R�RN 10/03 THIS VLARllll STOCK INDEX - _ 1 yr. 1.4 45.5 3 yr. 67.0 26.6 5 yr. 53.7 64.8
2002 2003
... +-�+--t--l---+---t----jl-10. . .. ··.
1--H_Aw_· A-': '.11.....;;..AN-': E.;.;..;..L-'-EC..;;_· T....c._R-,.::.IC--'-'-NY-c;..;.SE.:....;..�E�· ..L...,.1,�_�?_4_5_.9......,.5'1_:no�· 1_6._4(_i��1�:_1m-1-�-lLAJ�ib_0._87_._�_�0_5_.4�%-'1760
:OMEUNES$ • 5 'lowered6f20/03 High: .,44.6 . 38.9 36.5 39.8 39.5 41.5 42.6 40.5 37.9 41.3 49.0 46.6 Target Price Range
SAFETY , .• · 2 R�ised2l1o/02 ����N0;4.8 s1.o 29.9 32.1 33.3 32.9 36.4 28.1 21.1 33.6 34.6 38.2 2006 2007 2C!'OS
' TECHNICAL. 3 Aaiieii 11/14/03 - J:��0�1�"'!:J �. +---+----i---+---+--+---+-80 : ·. · • .': Relallve Price Strength • 60 BETA .55 (1.00=Marlcel) Options: No ;;�-�::::-·::::::::::::j::::·:-::::::::::t::::t::::t:so 2006•08 PROJECtlVN::i ·shadlld areas lnd'icate recession ;.,•c..''-'1'' f!!h"'ll"""'c.:'',c;•''-,'r----+---+-··-·-·_·+-· _· .• _._.+-40 . . ,.. .,. .. . -. Ann,I Total }ii•1i·•'·' , •• •_: __ _.. .. q,,··-,, --- ,,,, ... • ... ,,, , .• , i"""''1 l'lf,11, • , · Price · Gain Return· /:i ' '' ... +---+----i---+---+-,--+----+-30 High 45 , '(Nil)· 5% ""/li,;."_-.;+-�+'---+'---+--+---+---1---+--+---+- +---+'---+--+----+'-----+--+-25 Low 30 '(-35%) -3% i,;'�, .. ij-" •• '- •• -1'--"""-· -N+---+--1----1---+--+---+---,1---+ +--1----1----1--+--·-· '-+---+-20 '
Insider Decisions . 1,W ,
.. tJ_-t----t-··_ •• ·_···-··,i-,,.-=--;.,=-....,,;---1---+--+---t----+- +---t----,1----+---+--+---+-15 . . 0 J F M A M J J A[�� • ··• ••• . •.....• ·· •...•.•. to Buy O 2 0 0 2 0 0 2 0 1� ..• .,.'.'--t----+--+---+----ir----+,,-=--+-....,__+---+----+- Optiom 000002001�i! ••• •••••••••• •• •• to s.1 o, o: o;. o··.o · 2· .o o 2 r,;•lllliffi --+----+--+---+----i1----+---+--+.a.,,- •• ,-:. •• �. � •• - •• - ••• - .• +. : lnstltutlonal Decisions hi
«l2002 102003 202003 · Percent 9 ---------------....-..----+- ; toBuy. :,:94 . 86 82 shares ·s '' ' ,,,,
�:�� ,1;4�� 1j4� 113�� traded ' 3 · ·"'" Li, 111 '�1• I II
1 1 1 1111ll,llil�lllll1lill 111iiiiJ1il 1�.1•1ffi1�,m�m1m1�1m1�1m1�,m�oo
)
36.28 35.43 "41.57 46.12 · 45.41 · · 41.65
r • 5.04 4.78 · .. 5:29 4.43 4]4 5.02
,_, 2 86 · 2.90 · 3.06 2.02 2.40 2.54
· l.83 1.95 '2.07 . 2.17 2.21 2.25
5.78 5,88 · · 6.90 6.50 6.83 8.06
.' 19.59 2(95 .' 23.18 2329 24.36 "22.12
17.50 20.68 '21.27 21.92 23.87 24.76
10.3 10.3 • 10.9 · · 16:2 14.2 ··. 15.3
• • �- 1� � m 6.2% 6.5% · 6:2% . ' 6.6% 6.5o/; . 5.8%
41.27 4.1.48 43.53 45.72 · 45.90 46.24 47.29
4.46 5.05 5.45 5.62 6.01 6.46 6.70
2.38 2.60 2.66 2.60 2.76 2.96 2.89
2.29 2.33 2.37 2.41 2.44 2.48 2.48
8.11 7.00 6.54 6.66 4.62 5.19 4.17
2324 23.80 24.51 25.05 25.54 · 25.75 26.31
27.68 28.66 29.77 30.85 31.90 32.12 32.21
15.5 12.5 13.5 13.7 13.2 13.4 12.1
.92 .82 .90 .86 .76 .70 .69
6.2% 7.2% 6.6% 6.8% 6.7% 6.2% 7. 1 %
52.11
6.17
2.54
2.48
4.08
25.43
32.99
12.9
.84
7.5%
48.52
6.67
3.19
2.48
3.55 26.11
35.60
11.8
.60
6.6%
44.93
7.04
3.24
2.48
3.48
"28.43
36.81
13.5
.74
5.7%
46.85 49. 15 Revenues per sh
6.85 7.15 "Cash Flow". per sh 2.80 · 2.� Earnings per sh A
2.48 2.48 Div'd Decrd per sh e •
5.00 5.50 Cap'I Spending per sh
29. 15 30. 10 Book Value per sh c
38.00 38.25 t..0mmon Shs Outst'g O
Bold fig "" .,. Avg AM'I pi,; Ratio . v,i... line Relative PIE Ratio
••11• •les Avg Ann'I Olv'd Yield
54.75 . 7,75
3.00 2:4i
3.25 33.0ll 39,00
12.5
.85
6.7%
(A) Diluted EPS. Exel. gain (losses). from dis;·, Next'earnings report due late Jan. (B) Div'ds Orig. cost. Rate allowed on com. eq. in '95: , Company's Flnanclel Strength A . contops.; '92, 1$3.02);'93, (50e): ·.98, (31,1:.:':. historically paid In early Mar., June, Sept., and HECO, 11.4%; in '01: HELCO, 11.5%; in '99: . Stocil's Price Stability. 100 :· net;,'99, 12¢; 'OP, ($1:12!; '01 (11t); ·�;- .: }· • Qec. • DIY'd reinvest. plan avail. (Cl Incl. inlan· MECO, 10.94%; earned on avg. com .. eq., '02: Price Growth Perslstence 30 (l0¢l: 'POJ '.0,2 �.$!()!lt aii�l-dw .. to ro.� g. In '02: $5.52/sh. (D) lo mill. (E) Aate base: 12.0o/o. Regulalory Climate: Above Average. Earnings Predlctablllty 85 �1.2oo:i;\iuii iLiiii,Mlsiiici."iilcilll ilciNs':�.fv"ell:< ractuai' material is obtained from sources believed to be reliable ani1 is provided without wananties o1 any ijncf. •"-'•!!11!!'-'IIIW. iE PUBll§HER·.1$'NQ'.t)i:$'f:!QNSiaLnoAA1-!Y'.�RR!)AS OR OMISSIONS HEREIN. This l)Ublicatlon is Slriclly IOI subscriber's own, non-<:ommeftial, internal use. No part I ,�,, 1 � ..... • • :1mi,;tn: .. IJlf!!i1 a·may be reptoduc!d,"�."stOled or kan_sm11le<f·11_any pmled, etectron;c or other !tum, or used tor generating or marketing any pnnled or etectrooc p!Jtllicalion, S8fVIC8 or product.
2550
2050
3.0%
-�
37.0%,
. 4.0%
· 6.5% 9.0%·
9.0%
., 2135 120
. 48.0%. 50;5%
1780 188Q Revenues ($mlll)
105 110 Net Profit ($mill)
2360 2420 Total Capital ($mill)
2115 2160 Net Plant ($mill)
2.5% 3.0% Retained to� Eq
72% 70% All Dlv'ds to Net Prof
6.0% 6.5% Return on Total Cap'I
9.5% 9.5% Return on Shr. Equity ·
9.5% 9.5% Return on Com Equity e
36.0% 35.0% Income Tax Rate
6.0% 8.0% AFVDC 'Yo to Net Profit
51.5% 51.0% Long-Term Debt Ratio . 47.0% 47.5% Common Equity Ratio
4.3%
63%
52.0%
46.5%
34.6%
4.8%
7.3%
11.1%
11.3%·
2251.0
2079.3
1653.7
120.2
4.4%
63%
56.9% 41.6%
34.6%
5.9%
6.7%
11.4%
11.6%
2235.8
2067.5
1727.3
109.8
1.7%
84%
5.9%
9.7%
9.8%
41.6%
9.8%
58.4%
39.9%-
2101.2
2091.3
1719.0
84.6
3.0% 1.8% 1.5%
76.% 87% 88%
10.6% 11.4% 11.0% 9.6% 10.7% 10.6% 10.2%
6.4% 7.0% 7.0% 6.7% 7.0% 7.4% 6.8%
9.2% 10.3% 10.3% 9.9% 9.8% 10.7% 10.3% .
.. 4% 1.1% 1.1% 3.0%
96% 91% 90% 73%
48.6% 48.1% 48.1% 48.5% 43.4% 44.7% 47.2% 44.8% -45.7% 46.2% 46.3% 44.0o/, 43.1% 41.4%
40.8% 39.8% 39.8% · 39.2% 34.9% 33.5% 33.9%
15.9% 16.3% 18.1% 20.7% 16.5% 14.2% 6.1%
1435.9 1493.5 1578.1 16702 1851.3 1918.9 2049.5
1543.0 1677.8 1808.2 1941.8 2019.6 2093.4 2066.2
1142.2 1188.5 1295.9 1410.6 1464.0 1485.2 1523.3
. 68.2 80.2 84.4 85.2 103.3 113.2 · 111.1
'• Change Relail Sales (KWH) . A� IIX!lsL Use IMW!il . . Avg l!ilust Revs per KWH le) Capa:lly al Yearen<! (Mw) , Peak Load, Wmt111 jMw) • Annual Load Factol(i;) .· %ChilllQ!C�IOmefs(yi·m) '.
ELECTRIC OPERATING STATISTICS 20300 2 201°11 20092 t--BU-S-IN�E-S_S_: H-a�w-a-iia_n_E�le-ctr-ic-ln-d�us-tn-.e-s,-ln�c-. -is-th�e-p-ar-en-t�co_m_p-a-�i-n-·0-1 ..... E�lect-ric�re_v __ b-re-a�kdo-w-n,-'02�: -re-sid-e-nl-ial-.-34-%_:_c_o"""m�m-e�-ci-al--t , + . + . +1. . 6686 6679 6659 · ny ol Hawaiian Electric Company (HECO) & American Savings · 34%; large light & power, 31 %; olher, 1 %. Generating sources, '02: · 11.29 11.27· 10:70 Bank (ASB). HECO & tts suos., Maui Electric Co. (MECO) & Hawaii oil, 62"/,; purch., 38%. Fuel costs: 39% of revs. '02 reported depr. : f�t. }��1 fJgg Electric Light Co. (HELCO), supply electricity to 410,000 customers rate (utility): 3.9%. Has 3,200 empls., 38,400 com. stockholders.
73_7 . _72.6 -72,8 on Oahu, Maul, Molokai, Lanai, & Hawaii. Operating cos.' systems Pres. & CEO: Robert F. Clarke. Inc.: HI. Address: P:O. Box 730, . +1.3 + 1.3 + 1.1 · are not interconnected. Discontinued international power subsidiary Honolulu, HI 96808-0730. Tel.: 808·543-5662. Web: www.hel.com.
FiiedChargeCov.1�.J · · 234 259 •. 289 Hawaiian Electric Industries' earn· pacity continues to .be held up. So far,
.,,.A_N_N_U�AL_R_A�T�E5-,-Pa_s_t --. P-a-st-Es-t'-d�'00,-.-,0_,2 ings. will likely decline in 2003. The HELCO · has spent $83 million to add a-
olchangelpersh) 10Yrs. ,SYrs. to'06-'08 . single biggest reason for the sharp decline much-needed plant on the Big Island: But· Revenues' .... 1.0% · 1.5% ' 2.0% · · is a $16 million aftertax swing in pension. various intervenor groups have thwarted
"Cash'Flow" 3.5% · 3.0% ' 2.5% . costs, from $4 million in income in 2002 to, the utility's plan, so far. HELCO will pur- 6�i�i��Js ' rg� 2:�� . . · '!J/i a $12 million expense this year. In addi- sue various avenues to complete the facil-
Book Value 1.5% 1.5% 3.5%. tion, HEI's American Savings Bank (ASB) ity, including Iitigation.. talks with "inter-
1--C-al-· ..,: -,,-,<i-UA_R_TE_R_LV_R_EV-EN�U-ES_(_S m-i-lL)- .• -., -F-ul-t l subsidiary is incurring costs associated venors, and a request for· .rezoning.
endai Mar.31 ·Jun.30 Sep.30 oec.31 Year with its transformation from a traditional ASB is facing a .notice of tax' asseas-, thrift to a full-service commercial bank; ment from .the state Department of. 20DO. 4Q1.9 4.13·1 .. 445·9 458·1 1719·0 Also, its interest-rate spread has shrunk Taxation. It is being assessed $17.5 mil­ �:f ;�J !�l:ri m:� !�} Jm:� slightly: Not every trend is negative; ASB lion, including interest, for credits it
2003 424.6 · 448.8 453.7 . 452.9 1780 has lowered its loan-loss reserve and in- booked during the period : from · 1999 2004 · 455 '465 · 475 485 1880 creased its fee income. Nevertheless, the through mid-2003. If the ruling is unfavor-
Cal,. EA�_NINGSP.ER?HAREA, Full negative factors outweigh the positive able and the company can no longer record endar. Mar.31 Jun.30 ·seo.30 oec.31 Year ones, so we expect share net to decline · these credits, net income would be reduced 14% in 2003. HEI stock is ranked 5 by $4 million annually. Our estimates and �:� . :: ·· :�: ·Jt ·· 5� ·· ·· �:� '(Lowest) for Timeliness. projections will include the credits as Jong
2002 ' 75 "2,7 · 91 · 72 · 3 24 We estimate just a slight earnings in- · as ASB is still booking them.· · · . · · .
2003 · · · ·:66 '· · ·.69 :ar ·:64. '·\ iso · crease in 2004, based on 2.2% kilowatt- This stock's yield is more than one·
2004 ;67. · · · ;tO . .83 .65 ' 2.85 hour sales growth, flat pension costs, and percentage point above the average:
: Cal· QUARTERLYDIYIDENDSPAIOB• Full moderate growth at ASB. · Our estimate for electric utility stocks a, a -group. endar Mar.31° Jun:30 Seo.30 Oec.31 Year '. could prove optimistic if pension expense That has attracted income-oriented inves- · ·· · · worsens, as is possible under a range of tors to such an extent that the quotation is 1999 .62 •62 , ' ·62 ·62 · 2·48 scenarios that HEI presented in its 10-Q · now, higher than our 3- to 5-year Target 2000 . .62 .. 62 . , .62 .62 2.46 ti ti J aOth · p · R A u1 l 2001 ·· 62 62 62 62 2 48 arm or une . nee ange. s a res t, tota -return po-
2002. .:62 )2 . :62 :62 2:4a Hawaii Electric Light Company's tential over that time is poor. ·' 2003 .62 · ·. '.62 .62 (HELCO) plan to add generating ca- Paul E. Debbas, CFA November 14, 2003
CAPITAL STRUCTURE 'as of 6/30/03 Tota.I Debt $1277.0 mill. Due In 5 Yrs $163.6 mill. LT Debt $1263.5milL,. LT Interest $82,t mill. Incl. $200 mjlL 8% 9blig. pld secur .. of trust subsJq. (LT interest earned: 3.0x)". . . . . .. Pension Assets-12/02 $5S9. 1 mill. Obllg. Sn8.8 · mill.·' ·' .. ··.. · · Piel-Stock $34:4.mill. Pfd Div'd $2.0 mill. · ' 1 ;114,657 shs: 4'/,% 10 SY,%, $20 par. call. $20 to $21; 260,000 shs:8% to W!a%, $100 par. call: . $101; Sinking fund ends 29.1�.Excl. preferred. stock due within ·1 year. ' . . ,. . ..
Common Stock 37.470;715 shs. as of 8/1/03 MARKET CAP: $1,7 billion (Mid Cap) )
)
64 • 48 . 40 32
24 20 16
12
-- ,����T 22, 72·l:m14, 7(:�: 1::0 �rJ�b 0,78 ��D 3,0% .. _1_78_2--1 ·
· 9.5 10.3 10.4 14.9 .19.3 18.1 22.0 26.9 22.3 23.8 Target Price Range 7.5 7.6 8.8 9.3 12.6 12.5 11.8 14.9 .12.0 16.4 2006 2007 · 200�
MDU RESOURCES NYSE�M�U :
TIMELINESS <3 l.Qrl�red6fl0/03 High: · · 8.0 • '. 9.8 . . .,. Low: ·e:5 7.7 SAFETY . 1 Raised &117/01 LEGENDS
-· 1.39 x Dividends p sh I TECHNICAL 3 Lowered &11/03 .. .. *�:i/�J2!e���!�e .__
BETA .75 (1.9()•Mar1<etf·. J.ror·2 splrt 10/95 .. , t::t::::t:::::;t:::jt::::t::::t::::t
. 2006-08 rnvui." """" r.l�:� !�� , {�t . · · .· · 3/ r-2
Price . · G�ln · · AnRJ,��al om;�g�/:�as indicate recession · 0
•-- :l:l!±.,,...-;-·:r·""'r1r'---1·-'--+---t-· --t-·-.,--t-
Hlgh 30 1+30%) - 10% Ti\ ',111 ,I 1-...---1''-lttl'l'.!.'''---1--+�-+--+---l- hL�ow.r.:i;.l25�J;(;T.+;;;10;;;%;-",)'---5-%_1]:t)!}� _ _j__ �� ·• 1 -,.. 11 • ,. I·, · Insider Decisions ·:-;,,; ,,.;m,%
8 - o J F_ M A M J J A YM ---:::::--e .. c;- •.••• ", ••••••.••••• ·- li*ilfelii<;* --. to Buy O O O O O O O O O ·,1., , 11,1 , .••• ,..... ·-t----t---1�·-+---+---+---
0ptions O O 2. 0 0 0 0 0 6 t�I u,11 'I 6 10SeH o o 2 a ·a o a. a 6 ,,1 -- -· •
Institutional.Decisions '"··· .•• •••.•• • .• ,.-....... •• ••••••• •• •• 'lo TOT. �"�TUR�= �� � ;1 ;i;:·,;;,,��·i:·�"1�;:.:�:i;,;t:· ,�.:;�;;,. 3: !L.l1 �.
)
lA) Diluted EPS. Exel. -nonrecurring 9.ains .. , :' , -report due late Jan.' (BJ Dividends historically adj. for splits. (E) Rate base: vanes. Rates al· Company's Financial Strenglh A+ losses): '93, se: '98, (52e): '01; Se; '.D2;' 15¢;,,, paid-in early Jan . .-Apr., July, and Oct.• Div!· lowed on ut,L com. eq.: 11.4%·13 0%; earned Stock's Price Stablllty-:. 90 '03, (7e). '00 EPS don't add.due-to.change In. ·, dend reinvestment plan available. (Cl Incl. de· on avg. com. eq., '02: 11.2%. Regulatory Price Growth Peral8!ence 75 shares out.; '02 due to rounding. �ext earnings !erred charges: In '02: $3.31/sh. (D) In mill., Climate: ND, MT, Avg.; SD, Above Average. Earnings Predlctablll 70 0-2003.: Value line'PubfisNi1oilncn\tt"ngt,ts rjistriec(Fattual material Is obtained from sources believed to.be re/table and� provided wrthout warranties of any kind. 1!'-ll!l!l!!lf!l!l!II!. TliE P.l/B).1$HER IS NO!RESPQNSIBLEl'OR ANY,ER�ORS OR OMISSIONS HEREIN. This publication Is strictly for subscriber's own, non-commercial, internal use. No part Hi�lloL-..,.,,,.__.., :tlll�;tctcl"lllll'!Iill ot tt inay be "Produced;iesold,ttored -01.'lransmitted lri any printed, eleclronic or other lorm. or used tor generating or mar1<eting any printed or electronic publication, ser,lce or product.
85.56 97.54 104.67 111.06 114.00. 117.00 Common ShsOutst'g o 126.00
3225
240
3350 2625
6.5%
43%
8,0f.
11.0%
11.0%
35.0%
64.5%
36.0% 4,0%
November 14, 2003
2490 Revenues ($mill)
185 Net Profit ($mill)
2635 Total Capital ($mill)
2230 Net Plant($mllll
6.5% Retained to Com Eq
44% All Div'ds to Net Prof
36.5% Income Tax Rate
5.0% AFUDC % to Net Profit
8,0% Return on Total Cap'I
11.5% Return on Shr. Equity"
11.5% Returrron Com Eguliv e
39.0% Long-Tenn Debt Ratio
60.5% Common Eoultv Ratio
2310
180
2420
2070
7.5% 42%
40.0%
59.0%
36.5%
4.0%
8.5%
12.5%
12.5%
gas production, aggregates mining, construction materials produc· lion, utillty line construction & maintenance, indep, power produc­
lion. '02 deprec. rate: 5.2%. Has 7,000 employees, 14,000 stock· holders. Chainnan, President & CEO: Martin A. White. Inc.: DE.-Ad· dress: Schuchart Bldg., 918 East Divide Ave., P.O. Box 5650, Bis·
marck, ND 58506-5650. Tel.: 701·222-7900. Web: www.mdu.com.
lion (9.1%) electric rate increase in North Dakota and reached settlements for gas tariff hikes totaling $2.4 million in South Dakota and Minnesota. The gas transmis-, sion segment should see throughput rise 25% since a large pipeline project will · go into service in the fourth quarter of 2003. Finally, the utility-services division has had two consecutive tough years, but it is showing signs of improvement; The board of directors boosted the quarterly dividend by one cent a _­ share (6.215%) in August.. We had expect­ ed a slightly smaller increase. · The move. continued MDU's long track record of· an- · nual dividend increases, which it. should be able to maintain over the 3'- to 5-year period and beyond. "I'he company's fi. nances are in excellent -- shape, and earn· ings growth over that time-frame - should give it the wherewithal to. continue raising the disbursement. This high-quality stock's yield is com­ parable, with that of· most diversified utilities. At the current quotation, total­ return potential to 2006-2008 is a cut· above utility norms. Paul E. Debbas, CFA
15.1 13.2 13.8 14.4 Bold ns res are Avg Ann I PIE Ratio 13.0
.86 .86 .71 .79 Vatu, Lin• R�attve PIE Ratio .85
"11' <1tes Avg Ann'I Oiv'd Yield 3.2%
14.96 19.21 21.25 18.05 20.25 21.30 Revenues per sh 25.50
1.93 2.27 2.76 2.60 3.30 3.40 "Cash Flow" per sh 4.00
1.01 1.20 1.47 1.23 1.60 1.60 Earningspersh A 2.00
.55 .57 .60 .63 .66 . 70 Div'd �I'd per sh e • .82
1.94 1.26 2.03 2.49 3.00 3.20 Cap'! Spending per sh 3.25
7.82 9.03 10.60 11.56 12.55 13.6/J BookValuepersh c 17.25
3.6% 3.6% 3.0% 3.6%
1279.8 1873.7 2223.6 2004.1
84.1 111.0 149.6 131.8
37.0% 38.5% 38.6% 36.4%
2.1% 4.7% 4.4% 5.8%
45.1% 44.8% 41.0% 38.7%
53.6% 54.2% 58.1% 60.6%
1249.6 1625.6 1909.8 2119.5
1248.2 1601.0 1809.3 1924.9
8.2% ·, 8.4%. 9.2% 7.3%
12.3% 12.4% 13.3% 10.1%
12.4% 12.5% 13.4% 10.2%
5.7% 6.5%. 7.9% 5.0%
55% 49% 41% 52%
· 6.86 7.02 7.25 8.03 9.60 11.27
1.30 1.36 1.49 1.68 1.89 1.90
.59 .61 .64 .70 .83 .96
A4 .47 .48 .49 .50 ., .. 52
. 1.61 1.27 1.31 1.75 1.77 • 1.22 4.96 · 5.10 5.26 5.47 6.10 6.92
64.07 64.07 64.07 64:07 63.32 79.55
15.1 13.8 13.7 13.9 13.4 16.6
.89 .91 .92 .87 .77 .86
5.0% 5.6% 5.5% 5.1% 4.5% 3.3%
439.6 449.5 464.2 514.7 607.7 896.6
38.8. 39.8 41.6 45.5 54.6 74.0
34.0% 32.1% 35.6% 26.1% 36.0% 37.1% .. .. .. .8% .7% .4%
40.9% 38.7% 40.1% 43.3% 42.6% 42.1%
56.1% 58.2% 57.0% 54.1% 55.0% 56.2%
· 567.0 561.9 591.6 648.1 701.6 980.7
664.0 692.3 716.3 752.6 839.5 1084.7
8.7% 9.1% 8.6% 8.6% 9.4% 8.8%
11.6% 11.6% 11.8% 12.4% 13.6% 13.0%
12.0% H.9% 12.1% 12.7% 13.9% 13.3%
2.9% 2.8% 3.0% ·3.8% 5.5% 5.9%
76% 77" 76% 71% 61% 56% "
10.4 10.7- · 11.3 11.1 13.5
.86 .81 84 . 71 .82
5.37 • · 5.28 . 5.14 5.67 5.50
1.04 ,:Of·' 1.05 1.15 1.16
.54 .56 .53. .58 .54 .42 . ·: .44 ' .42 .43 .43
.69 , : .. 41 .ie-0 .10 1.11
· 4.37 · '.: i4.48 . 4.48 4.63' · ,. 4.74
· 64.07 · 64.07 · 64.07 64.07 , 64'.07
15.0
1.00
.32
-4:23
61.84
. 5.26
.92
.43
.42
· 6.5% 7.6% · 7.3% 7.0% 5.6% 5.9%
CAPITAL STRUCTURE as of 6/30/03 Total Debt $961.9 mill:·.·. Due ln-SYrs $553.5 mill. LT Debt $938.6 mill. : . LT inte_rest $56.3 mill._ (LT interest earned: 6.1x) ,. Pension Assets-12/0� $189.1 mill. Obllg. $22�.8 mm: · ·· ·
Pfd Stock $16.2 mill. . Pfd Dlv'd $. 7 mill. 15:000 shs. 5.1% cum. ($100 par), call. at $102; · 50,000 shs. 4.7% cum, {$100 par): call. at $102; 100,000 shs. 4.5% ($190 par), call. at $105. Common Stock 113,215.405 shs. as of 816/03 .': , · · · · · (Adjusted for 3-for'.2 split paid 10/30103.) MARKET CAP; $2.6 billion (Mid Cap)
.ELECTRIC OPERATING STATISTICS
1, Change R��I S11es IKWH) · 2+��? 2�0i ��O� BUSINESS: MDU Resources Group, Inc. is a diversified energy
Avg. lndiJst Use IMWH) 933 947 999 · company. Montana-Dakota l:Jtilrties · sells gas & electricity ·to Avg.lndust.Revs.,:KWH(c) ' 4.55 4.66 4.67 294,000 customers in North Dakota, Montana, South Dakota, Wyo- CapacrtyatPeak( � 500 501 501 · ming & Minnesota. Electric rev. breakdown, '02: residential, 37%; :�°t:l��;r1�/1 · 5\35 5".f.g 5�58 commercial, 38%; industrial, 10%; other, 15%. Generating sources, �.ChangeCustomers(avg.) ·+.9 +.2 +.4 '02: coal, 71%; oil & gas, 1%; purch., 28%. Also: gas pipeline, oil &
foedChargeCov.l'.)· ·· • 397 506 441 MDU- Resources is on track to post a
ANNUAL RATES Past Past Est'd ·oo-·o2 large earnings · increase in 2003. The
ofchange(persh) 10Yr1.· . SYrs. · to'06-'08 • biggest reason for the improvement is Revenues 13.5% 18.5% · 4.5% sharply higher oil and gas prices, along "Cash Flow" 8 5o/c 8.5% 8.0% with . a likely 10%-12% rise in production. Earnings ·9:0°i. 12.5% 7.5% B MDU · h · d Dividends 3.5% 4.0% 5.5% ut is more t an Just a commo ity Book Value 8.5% 13.0'lo· 9.0% play. The company's construction mate-
Cal· QUARTERLY REVENUES($ mUI.)' Full rials division is also faring well; thanks to
endar Mar.31 Jun,30 Sep.30 Dee,31 · Year the effects of a federal highway bill, a good
2000 372.0 363.0 530.8 607.9 1873.7 housing market, acquisitions, and favor·
2001 641.2 546.4 551.7 : 484.3 2223.6 able weather conditions. Our $1.60 share-
2002 354.5 480.2 612.4 557.0 2004.1 earnings estimate is near the high end of 2003 467.8, 548.2 716.1 5n,9 2310 MDU's target, which it raised moderately 2004 490 · 595 .. , 765 640 2490 in · September to $1.47-$1.63. (Note: All
Cal·· EARNINGS PER SHARE A F II per-share data have been adjusted for a 3-
endar Mar.31 Jun.30 Seo.30 Dee,31 · Y:ar for-2 stock split paid October 30th.)
2000 · 15 23 42 37 -· 1 20 · We · estimate flat earnings in 2004.
2001 · · · · " . 1 '47 '.!'hat's in line with MDU's guidance of -33 . ·37 -49. ·2a · 1.•23 _$1.50_-$1.63. We look for a decline in oil 2002 .07 .23 .50 .42 2003 .25 .39' .57 ,39 . 1.60 · .and gas profits, assuming that realized gas
,2004 ,20 .40 .60 ,40 · 1,60 · prices (while higher than historical levels)
, cal· ·, · QUARTERLY DIVIDENDS PAID e • ·. Full· are somewhat below the -lofty level ?f _2903.
endar Mar.31 Jun.30 seo,30 Dec.31 ' Year On the ot?er hand, the other· divisions
1999 .133 .l33 • .133 · _14 _54 o_ught to p1�k up t�e slack. The cons�ruc-
2000 .14 .14 .14 .147 .57 tion materials business sho�d continue
2001 147 . 147 147 153 59 · the momentum it gathered m 2003. The
2002 :153 :153' :153 :16 :62 utility operations should benefit from rate
2003 .16 .-16 .16 .17 · relief, as MDU has requested a $7.8 mil·
)
)
PNM RESOURCES NYSE.PNM\. ' .
)
l�tfJf 27.BSl�fro 15.7(:�:;iU} �iLAJ� 0.83l�[o0 3.4%Iiitl1784
TIMEL,INESf' 4'.�t�w.! 1--=r""��::.:.�_,:. _. _. 1"-'t;.:.l..__1_,·�"":�:...i......;Jtg 18.3 20.s 23.7 24.8 21.5 28.3 37.8 30.8 29.5 Target Price Range
SAFETY ... ·• 2 flaised 8/l6/02 LEGENDS -·
1-2-.1+--1-7 ._3+--15-.8-+--17-.4-+--1-4-.8+--1-4._6+ 22.9 "---17-.3-+--1-9-.0�----+--+-2-00_6_12_007 I 20080 8:
TECHNICAL 3 Rad1117/0.'l - �°4::Sr�te -- -r-' • · · · Relatiw �rice Strength. 60 · BETA .70 (1.00•Mmtll) �Yes t ·--50.
2006-08 r�;,,,v""'�·iT�I arm lnalcals recession - +----=·--"· .-+'----�--+---+-.-.-.- ...... >--.-.- •• -.-+-40
Prtc.. Gain Return �1:::;t:::::t::::r=:::::1==t:==t=�kf;:::::$::::::���t , .. , -� � H. · \�i�l � .. .. _,. .-;;-, .. _111 .• ,I I 'h,,I ,., 20 �· ,, o1,I ''.xr•'' 1,1' 111 ••. Iii' I ·1 Insider �lalona l�-�-'+-:s-· --f--+--+.-;;-;iY.-�IL'--+---+'"'---"l'='"'--h 15 . ·O .J F II A II J J A '4_'1. 11'1"• ,111 i'"l.,,j,, 11,.1'' / tiieu, o o o 1.·0 .. 0 o o o Ll:"!f"'"tr,· fl.'I'-' --l'111-•1..c:1'�' �-+--+_:-+--+--jf--+--+- t----,+-·---t---t---t--t---:--t-10 OplloclS · 0 0 ·O O O 2 3 0 2 1ll1 ·''111 · IDStl O. 0 0 1 0 ·2 4 0 2 l:l!�ill:.�.:-.,-':f . -_-.,......,,;t-.... -+--j'----t---+--1--+--t---t-; 'to TOT. RETURN.10/03 ... 7.5 lnstltutlonal Dtclalons ,>,m •••• • · · .:" •• ..·....... • •••••• :· •••• •••••• TH� VL ARmt . 4Q20IIZ 1Q2003 202003 Perce�t 24 -+--�--1---1---+.-''.::"...:+'...;'•.,;,'•;., .. _·.1-..,...-1--� 'STOCK IHO£X �
llooBuy .. 67 . 76 83 shares 16'-+---+--•---+----il·�-+--c--+u!!'.'.!. I ... 1_yr. 33.1 45.5 t iJ::ooo 334�: 33� 3391l traded' ::,e .. Ir- ••• II, ' .... 1111111,ill lliilllil'· 1.1: ...•. :, ,:111111,; 1i1iinl� +--111�1111 ... 1,�1111-1111-11111-111·t----; ��;: :::� �U: I- , ..
1987 1988 .1989 1990 1991 1992 .1993 1994 1995 1996 1997 1998 1999 2000 2 1 ""'2!,"!0""02-2�o'c'o3-2""'0�04-c""'v""':4L""'UE�U=N""E p=ue=- .• =1N"'"C • .,..06---08,,..._-i
1720
80,0
15.5
1.05
3.4%
40.30
3.45
29.40
·4�.70
5.05 2.00
t07
25.0%
21.15 27.18 26.15 28.44 41.19 '60.13 29.88
3.91 3.86 4.57 4.22 4.73 6.46 4.25
1.72 1.88 2.25 1.93 2.32 3.92 1.61
.36 .63 .77 .80 .80 .80 .86
· 2.13 3.07 3.08 2.34 3.75 sn 6.14 ... , 18.06 19.26 20.63 · 22.11 23.64 25.87 24.90
41.77 41.77 41.77 40.70 39.12 · 39.12 39.12
11.0· 10.0 9.8 9.5 8.5 7.3 15.1
.69 .58 .51 .54 .55 .37 .82
1.9% 3.3% 3.5% 4.4% 4.1% 2.8% 3.5%
883.4 1135.3 1092.4 1157.5 1611.3 2352.1 1169.0
72.6 79.3 105.2 79.9 92.7 156.3 64.3
35.2% 37.1% 34.9% 34.6% 44.5% 34.2% 24.5% -- ·- .. .. .. .. ..
48.2% 46.6% 53 .. 2% 52.0% 50.4% 48.2% 49.8%
50.9% 52.5% 45.4% 47.3% 48.9% 51.1% 49.5%
1481.0 1531.2 1896.4 1901.2 1891.3 .1978.7 1966.9
1552.7 1573.2 1593.8 1582.4 1617.3 1781.0 1867.3
6.6% 6.7% 6.9% 5.9% 6.6% 9.5% 4.7%
9.5% 9.7% 11.8% 8.8% 9.9% 15.3% 6.5%
9.5% 9.8% 12.1% 8.8% 10.0% 15.4% 6.5%
7.6% 6.5% 8.4% 5.2% 6.5% 12.3% 3.1%
21% 34% 31% 42% 35% 20% 53%
. 873.9 904.7 808.5 57.6 . 75.7 · 60.9
:j0.9% 36.9% 45.5%
.7% .4% --
60.0% 51.5% 50.5%
34.8%. 43.2% 48.7%
1596.4 1460.5 1444.5
1703.9 1696.7 1574.4
5.9% 7.4% 6.2%
9.0o/, 10.7% 8.5%
9.2% 11.0% 7.9% 9.2% 11.0% 7.9%
11% 8% 8%
2.24 2.07 . .JP 2.55 3.85 3.45 I cap'I Spndlng per sh
25.68 18.03 JS.02 16.83 25.75 26.65 Book Value per sh c
41.73 41.77 41.n 41.77 40.30 40.301commonShsOutst'g u
16.53 · 20.15 . 21.91 19.35 36.95 38.35 Revenuespenh
4.05 4.15 3.65 3.57 4.35 4.60 "Cash Flow" persh
22 .. ·0092 11 .. 9877_ .._ -, _t,3873 1.37 1.75 1.85 Earnings penh A '· ;91 .95 DiV'd Decl'd per sh B •
)
B++ 90 . 65 ·50
) (A) EPS diluted -. Next egs ,,�·t due late,�an. 21e; '01, (15¢); '03, 69¢. (B) �lv'ds historicil_lly base: net orig. cost. Elect. ROE all�. in '90: -r . Comp,any's Financial Strength l:xcl. nonrecur. gains�): 88, ($4.81); 90, paid In rnld-feb .• mld-May,.mid-Aug., and mid· 12.52"/,; earned. on avg. com. eq. 02: 6.6%. Stocks Price Stetilllty . . (55e); '92, ($3.42); '9�, (�.85); '94, 11 ¢; 'QS, Nov. ll()iv'd reinvest. plan avail. (C) Incl. in· Regul. Clim.: Avg. . Price Growth P,rsl$tence net: �; '97, 4¢; '98, �.{��); -'.99, Q�; '.(((), tang. In 'O;!: $9.34/sh. (0) In mill. (E) Rate . Earnings Predictability .
0 2003 -� .Uni P,ubtla_lq. lr!C,AII� r.11erved.·-F1ctual malarial Is obtained lrom sources believed to be reliable and Is provid�<f wilhO\it warranties ol any kind. , • l'ljE PiJai:\SllER",S. NO,T � ANY. l:ROORS OR.OMISSIONS HEREIN. This publicelion is stnctly lor sooscnl>e(s own, non-wnmercla� Jrtemal use. No part • • ,._" 1 • � • ,,.,,.� 1 I• e:UII !:!,io; 1u::i III l! ! ,J <t! A:maybe �-�,�Of. .. . . . In .'(It pmtod._llecvoric_or olher lonn, or used lor generating.or marl<eting any pooled or electronic PtJblication, service or product.
-7.5 % TOT. RETUR'4 10/03
• · THIS VLAAITll. . STOCK 1NOE.1 .,_ .___ 1 yr. : 35.0 45.5 ,__, � a yr. -4.9 26.6 ...:: 5 yr. '2.2 64.8-' .
2003 2004 e VALUE LINE PUB. INC. fi-08
........ , .· ...
,, t t:
001 2002
... -: ·····
4 . Raised :v28/03
1 Raised 5/1ol03 4 Raised 11/14/03
'PINNACLE· WEST NYSE-P�W 'RECENT.' 36 76 IP/t 13 a · (Trailing:19.2\ RELATIVE O 73 DIV'D 4 ·901.� 1·785 PRICE , RATIO , Median: 12.0} PltRATIO , YLD , 70� · ·
High. . 20.5 J 25.3 22.8 28.9 32.3 42.8 49.3 43.4 52.7 50.7 46.7 39.6 Target Price Range 1-=�"'-�;"-�"-N'-o-s1""'6"'i.8'-'-_,1�9.,..6..i........;16.o 19.6 26.3 27.6 39.4 30.2 25.7 37.7 21.1 �p ,. 2006 2007- aeoa
- �i�i�� Divl1�t��:sr ��te H--,--,--l---'-'-l--+--!,--+--'--1-80
· · · · Relative �rice Strength �_._:·'+-· ·_·_·_·+·----+--!--+--+- 60 · • t-B_ET_A=·7,...0 ,.,(1..,·00....,,• M,.,a_,rk..,et).,,.,,..,....--; 0EJ:� �r�as indicate recession t---+---+--+------.-f--+---1++ ,-...,..-,4---1---+--l--'---I---+- 50 2�8 ION:S ,,.,.,i, '" �··,r · -!,-,,c--.J---+--i-:·..:·.:·:.· "+��40 Ann'I Total /{ ,J...- '" "I ,1.i · '11 1-,,1".1• Price Gain Return f,'.l§\;-+--11--+----+--,.b, . .,,,.,..�"l ' �·· ....-.!:::.j.---!---..Ll4111J:....,-4 f-++-W11'+"'---I-�-+-'-'--!--.+,- o-30 . HI"" 45 !+20%) 10% ,',.),; �·{ft;,. I -25 W.l�o��·�40�Jt+1!_!0�0!c!Jo)!---a.J7�%!.._!'i!::§;d--f,;:::;;rm-fJ.!'�111......:J1'f''�'·:7:j'rf ' .,-:.:!:, �+---t--t---t--J--..:+· : )fC 20 Insider Decisions ;d::· 1'1'1'1 .luii' +--+--ll--+---+---1---1-15
to Buy . � t i � � � � � � iJb,,,/ , .. -, ,,,,•"', v +---+---,I---·-+· -'-+---+---1-10 Options o o o o 1 2 1 o o ,1# · • I ····. . . . ··.· ·... . · '°� 000000000· I
TIMELINESS
. SAFETY
TECHNICAL
Institutional Decisions ":·;,
I02002 102003 202003 Percent 15 -------------------------- to Buy 120 106 114 shares 10-�- �-- ..... ---1---1---4---+--1,�-+-1.-+-1-- ...... L;to;Sett�·�,�7ij6��e;s.,..z�7[31:tr:ad:e!d,-,-�5�j-�i4iiii(ii.itiililit:illililiITUillffiit[!Ii:jj[jijllfililltJillIJTI .. ID'�1111'" ... • HJ;llllM 69292 71686 74147 . ,. ll,l111ll1J° lhuu hll1ll11II ''' UlillllUll 1m1�1�1�1m1m1m1m1�1m1m1�1m.�oo
7.3% · 2.9% 2.5% 3.5% Retained to Com Eq 3.5% �1%. '64% 68% 61% l\il.Dlv'ds fo Net Prof 65%
7.6% · 5,4%. · 5.5% · · 6.0% Return on Total Cap'I . · 6.5%
12.5% ·a.O'lo 8.5% 9.5% RerumoriShr. Equity 9.5% 12.5% 8.0% 8.5% 9.5% ReturrionCom Equitv E . 9.5%'
51.7% 51.8% 53.0% 50.5% Long·Term Debt �atlo ·. :-41,5% • 48.3% . 48.2% 47.0% 49.5% Common Eaultv Ratio .... 52.5" . 5172.4 5567.9. ; 5860 · 5770 Total Capital ($mill) · . 6090
5907.3 6479.4 6780 6800 Net Plant(Sm�ll · 6930
19.66 19.28 19.08 20.77 23.52 25.12 28.57 43.50 5.25 5.09 5.16 5.90 7.12 7.34 7.73 . 7.99
1.95 1.99 2.22 2.47 2.76 •. 2.85 3.18 3.35 .20 .83 .93 1.03 1.13 1.23 1.33 : 1.43
2.69 2.92 3.38 2.95 3.63 3.76 4.05 7.76
18.87 20.32 21.49 22.51 23.90 25.50 26.00 28.09 87.42 87.43 87.52 87.52 84.83 84.83 · 84.83 84.83 11.5 9.6 10.8 11.8 11.8 15.2 11.9 11.3 .68 .63 .72 .74 .68 .79 .68 .73
.9% 4.3% 3.9% 3.5% 3.5% 2.8% 3.5% 3.8%
1718.5 1685.4 1669.8 1817.8 1995.0 2130.6 2423.4 3690.2
200.8 198.8 194.4 198.3 248.7 252.6 270.8 283.6 42.5'/, 38.2% 39.7°/, 39.3% 37.7% 39.5% 38.3% '44.1% 3.2% 4.7% 7.2% 7.4% 6.5% 7.4% 4.3% 7.6%
56.3% 55.9% 53.9% 52.0% 50.5% 47.6% 50.0% 45.1%
35.3% 38.3% 40.4% 43.2% 45.6% 50.2% 50.0% 54.9% 4674.3 4633.5 4660.4 4561.1 4442.9 4307.6 4411.8 4337.8 4601.3 4624.1 4647.1 4655.1 4677.6 4730.6 4n8.5 5133.2 6.9% 6.8% 6.4% 6.2% 7.4% 7.6% 7.9% 8.1% 9.8% 9.7% 9.0% 9.1% 11.3% 11.2% 12.3% 11.9%
12.2% 9.8% 9.3% 9.2% 11.6% 11.2% 12.2% 11.9% 11.1% 5.7% 5.0% 4.6% '6.9% 6.4% 7.1%. 6.8% 9% 49% 51% 54% 44% 45% 42% 43%
24.11 17.39 18.38 16.95 19.39 6.10 3.45 3.27 d1.39 4.70
2.15 1.44 .81 d3.90 1.73 · 3.20 :so .. .. ..
3.06 3.46 . 2.98 2.10 2.57
23.46 16.31 17.40 15.23 17.00 86.72 86.72 86.87 87.01 87.16 10.8 8.7 16.3 .. 10.8 .. 90 .66 1.21 .. .66
Pension Assets-12/02 $720.8 mill. Oblig. $1.07
bill.
Pfd Stock None
Common Stock 91,271,421 shs, as of 8/12/03 MARKET CAP: $3.4 billion (Mid Cap)
ELECTRIC OPERATING STATISTICS 2000 2001 2002 l----'---'----'--.l.---'----'---'---...i.....-..J...--.1.--1--�--'--------'---l
%Cllan.1eAetai1Sales(KWH) •6.6 +3.8 -, 2 BUSINESS: Pinnacle West Capital Corporation (parent of Arizona . 24%; nuclear, 18%; gas & other, er,: purch. power,.5Q%. Has Avg.lnd°ustUse{MWHI 1363 1354 1350 Public Service) supplies electricity Jo approx. 1,780,000 people in· 6,100 employees; 36,876 stockholders, Reported '02 depreciation·
Avg.llllllsl.Rl!'IS.:?WHlc) 5.82 5.49 5.57 11 of 15 Arizona coun1ies. Electric revenue sources: residenllal, rate: 3:6'/o. Est'd plant age:-8 years. Chainnan & CEO: William ·J. �=�riliwi ��j� ���� �:6g 49%; commercial, industrial, and other, 51%. Power costs: 30% of . Post. Pres.: Jack. E. · Davis. Inc.: Arizona. Address: 400. E: Van
Annu�LoadFactoti%) 54,o 53.2 52.6 electric revenues; labor costs: 13% of total revenues. Tlie mining _Buren st, Sutte 700, P.O. Box 52132; Phoenix, AZ 85072·2132.',
%ChangeC!Jstome�(yr·eOO) +3.7 +4. 1 +3.1 industry is the largest industrial customer. Energy 'sources: coal, Tel.: [phone]. lotemel: www.pinnaclewest.com. . ..
FlledCharoeCov.(%) 3a4 375 274 Pinnacle West has filed its first gener- , the'. common equity ratio, but. that ratio
ANNUAL RATES Past Past Est'd ·oo.·o2 al rate case in 13 years. It seeks a ·$175 , still exceeds the industry norm. Since .no
olehange(persh) 10Yrs. svrs. to'OS-'08 million increase in electric revenues, ·based · hew plant will 'be built for a while _after_ Revenues 8.5% 14.5% ·2.0% on. an allowed return on equity of 11.5%, completion of a. 425-m'w unit in 2004, con- "Cash Flow" · 13.5% · 5.5% 2.0% up from the current 11.25%. A major corn- . "structicn costs will soon be down· sharply, · Bt'f:i���s : : tg� 5:�� ponent of the request is inclusion in the · That. should help boost the common equity Book Value 6.0% 5.0% 3.0% rate base of five plants built since. 1999 by · ratio and make borrowing less costly. .
QUARTERLY REVENUES($ Ill) PNW's. unregulated Pinnacle West Energy :£arnings may show · �o '. pi'.ogress in .��;, �ar.31 Jun.30 Sep.30 ;ec.31 ::�� (PWE) subsidiary. If authorized,' these '2008 •.. Pluses "include the:. absence: ·of last facilities will be transferred from PWE to, year's charges of $0. 77 a share· for the .can�· 2ooo 488·1· 758·5 1607 836·6 3690·2 the regulated utility. The application also celation of two plants and a subsidiarv's �: . :u 1m.4 1��;:o ��:� ����:; asks for recovery of restructuring arid com-:' 'loss of two contracts for nuclear fuel. casks;
2003 604.0 758.5 946.6 700.9 3010 pliance costs associated with electric com- ' But. these· poaitivesvwill' 'be offset :by the: 2004 630 . 740 970 750 3090 · petition rules, $234 million written off in a 'dilutive eftect 'of a late 2002 offering oHi.6
Cal· EARNINGS PER SHARE A Full . settlement agreement, and inclusion in million �ommon shares' and· a lengthy lout- endar Mar.31 Jun.30 Sep.30 Dec.31 Year rates of 5,800 miles of recently built trans- . 'age at 'the, Cholla coal-fired sta.tion. In all,.
2000 _42 1.06 1_37 .SO 3.35 mishsion and dtistdributiodnHnbes.J . T1he1co2m0p0a4-_ ·whe .est1t.mh_ate nearAn�flat ·eadrnin!ifs ·tohf $2.55 at: 2001 .70 .79 1.77 .42 3.68 ny as reques e an or er y u y , · ; s are rs, year. · or er on e recen . 2002 .. 63 .89 1.19 d.18 .·. 2.53 the dl;Y a rate moratorium e:icpires.' ·.".' "ratarequest; pointa to iinproved,results ii:( 2003 .28 .61 1.20 .46 2.55 Despite heavy capital spending.cover ·,,20041 Currently, the,stQ(:;Jt is untimely.' .- ·:. 2004 .40 .70 1.35 .55 3.00 the last three years, finances remain Jl�vidends'.are growing··at- a healthy.
Cal· QUARTERLY DIVIDENDS PAID a. Full strong; Since 1999, P� h_as .added l;7po , ;:clip. 'A}9w paY.out rilt.�<Va1,1d'ou:r projection enclar Mar.31 Jun.30 Seo.30 Dec.31 Year. m�gaw�t�s (111w) ofgenerat1on at� �osto(· of,s��1Y !:!art'lmg11··gait.ur·.1!{);ri:t'.·their pres- . $1:4 billion. Because. cash flow did not ent. level , to » 2006-;2008{ indicate; above- = . :�5 ·j�5 :��5 . '.��5 ]:�� cover all of these outlays, i·the· company ·average'· !dividend <hikes.,,·; over that ·
2001 .375, .375 .375 .40 1.53 issued long-term debt a!),de?hity.� bridge, tirnefrl:\m'e_; Utility_.investors:mightconsid;; 2002 040 · .40 . .40 .425 1.63 the shortfall. The ratio o offermgs. re;;: ·Aer the!3e high-quahty sh�es. ·· ,.. · . · Y 2003 .425 .425 .425 suited in a six-percentage-point drop iri> '. ftliirt'H. Medalie - ':November 14; 20()3
3.96 · 12.27 9.81 8.10 5.20 1;ap'I spending per sh . 5.50
26.62 t9.46 29.44 30.25 31.40 Book Value per sh c 34.95
15.26 . 53.66 . 28.90 . 32.95 33.85 Revenue� per sh F 36.45 5.37 • 8.72 7.01, r 7.40 8.00 "cish Flow" per sh 8.80
3.21 , . 3.68 2.53 2.55 · 3.00 �lngs per sh A . . . .. 3.30 2.78 .: 1.53 1.63 1.73 1.83 Dlv'dDecl'dpersh a;,. ·. 2.13
CAPITAL STRUCTURE as of 6/30/03 4551.4. 2637.3 3010 .3090. �eveitues(Smlll) F 3330 Total Debt $3434.5 mill. Due In 5 Yrs $1366.4 mill. · 312.2 215.2 235 275' Net Prolil(SmllO . . .. . 3(»' LT Debi $3133. 1 mill. LT Interest $181.1 mill. r.:'=':+�'::"-j-=':'=:'+-:��-=':=o-+-=':�'+��-,.=.:�+-,�:;:+��f--7.�+=7::�c=�:.=c;;::c'---""-+--:-:'� (LTinleresteamed:l.9x) · 40.6% 39:1%. 39.0%· 39.0% lneomeTaxAate -, 39.0% 15.3% 20.5% 7.0% 5.0% AFUOC%Jo'NetProllt · · 5.0%·
9.4 12.0 14.4 Bold Ifs ,.. .,. Avg Ann'I P/Ulatio .' 12.5 . 63 .61 .79' v.i .. LIM Relative PIE Ratio .85
9.2% 13.7% 6.4% .. ·· ·· 3.5% 4.5% nthtH AvgAnn1Dlv'dYleld 5.1%
86.08 84.83 91.26 91.30 91.30 •=mon:.nsOutst'g D 91.30
(Al Diiuted egs. Excl..nonrecur.: '87, 19e; '88, ($1.97); '00 .. 22e. Next egs. rpt: due la!e Jan. (O)lninjl. (E) Rate base'i.Falr.'!�lue. f=!ate.all'.!f. CompanY'.iJ:Jlll!�lal,,�ngth ·. · ·· A (�. JO); '91, ($4_.�); '93, 2�e; '94, � 1 e; '95, ,ne1 B) Div'ds hlslorically paid in early Mar.: early on COii\· e�. In :96: 11.25%; ea�. on .IIVJI .. coin. Stock's Price, StablHty.; \ :. ' _ . ; 85 . 6¢, 99, ($1.20), 02, {n¢), excl. d1scon1.. 89, June, early Sept., and ear1y Dec.• Reinvest. eq. In 02. 8.3�,. RSQl!I. Clltll ... Avg,1fJ·.l;xcl, . P�Gr���-., ., ,. 85 ., ($7.80); -'.90, .�lJ; '91,.J1.76; '92, .7e; '99, plan avail. (C) Incl. def. chgs. In '02: $3.90/sti.' sales taic begin. '94. · · · · ·' · . ·,., · -Ea'mln Prildlctabln >:•_·:···. ··.-·· ,. 70. · 0.2003, Vilue··Une:�:l�All rights·res$rvld. Ficrual mal�rial is obtained from soun:es believed to be reltable.and Is provided�:� oi_i�kii;{ . . . . .. . . THE PUBLJ.SHER IS NOf RESPON�IBLE FOR ANY ERRORS .OR OMISSIONS HEREIN. This publication i.s slrlctly lor subscriber's own, �men:lal,,lnterri&J .• tise. �o part • t • :t11n1:••t:1lll�l:I of It may be reprodl.lCl!d, 111b!d;.-stored or 1r.1nsmitled ,n any printed. electronic or other form, _or used Jor gentra1,ng or marketing any printed or electronic Plfbllcatton. seMCe or p!WJci. .
),,,... ··"\.
"llr (1 \,
�-
) +---t---jf-�+---+-·- ---f-64
--'-+----+--+---+--·-+--+-48 ----------+---t-- ..... 40, .. --+----+--+--�. r .. �.� .. �.+c-.� •• �.�.+-32
���t=t::::=t=j:=t24 !4 · • .,,,. . . 20
--'-+----+--+---+---+--+-16 ·
6-08 •...
' Insider Decisions . . +--+--l--+---+--+--+.12
· · o· J F 11".4 11 J · J A \1H M, •• •• ••••• •• +--+---1--+---·-+---+--+-8 =. g n g g n i � l!l�ttg . -+--t--t--=+ ..... ..,.,=,, .. ;r._..,.. ••• +- ... - -, - .. - ... +-.- ..• - .. - .• -t··-
...
·--·.·- +---+--·- .__ ---'---�--f-6 .
loSell O O O O O O O O O }i,,t ... J %TOT .. RETURN10/03 · lnstltutlonal Decisions ·. . •JQ.;; I -:", · :· ..·. . .. I TH1s v, ARITH.
402002 · 1112C03 202003 Percent 12 ; STOCI< INDEX ,_ to Buj 99 . . 85 ·. 97 shares .. · · .. 8 · • · .. · · · ·· •. 1 yr 11 .6 45.5 ::o.s:IIIIGI 335� �:il� 366: traded . ;· 4 . 1,.. ,. . .. , 1., •••. ,.11 1111"1.;,; 1��/liritr mfiit,iri ·� , .. • • 111111l11r'== ;t: 1�; �t: · Puget· SQl!ncLEr),irgy (PSE) was . IOfTl1ed 1993 1994 1995 . 1996 1997 1998 1999 2000 2001 2002 2003 2004 � VALUE UNf PUB� INC. through the mer�r.of euget .Sound Power .',17.49 .. 18.76 ·18.53 .18.84 1983 ·· 22.56 2434· 40.06 38.n ?5.� 24.50 25.90 lleyenuespersli •· 32.75 & Light and Washihgton Energy effective 3.73 3.46 .3.58 3.60 3.19 3.81 3.98 4.52 3.78 3.80 3.90 · 4.50 "Cash Flow'.'.per sh s.oo February 11, 1997. $hareholders of Wash· 2.00 1.64 .1.89 1.89 1.28 1.85 1.91 2.16 1.22 1.24 1.35 1.75 Eamlngspersh A · 2.00 ington Energy received' .86 ot.a share of '1.83 1.84 1.84 1.84 1.84 : .1.84 1.84 1.84 1.84 1.21 1.00 1.00 Div'dDecl'dpershBo 1.12 Pugel Sound JJ&L �toe� for each Wash)ng- f-.-'-. 3�.so=+�3.=94-�.2�,12,,..+--.-.1�.9�0.-1-�3.·1·1c.+· �4.05 ��96'- ..... �.3�.5�6 +-�3.�11-+-�2�.67=-+-'-3�.oo=+�3.�40,+.,-Ca-p�'I s�pe-nct�l;-ng_pe_r_s�h -+-�3_00=-1
ton Energy share, Data prior lo' 1997 are for . 18.65 . 18.43 . 18.48 18.53 16.06 ts.eo 16.24 16.61 15.66 16.27 16.90 17.70 Book value pnh c . 20,50 Puget Souod P&L' and are not directly com- · 63.63 . 63.64 63.64 ,63.64 84.56 84.56 84.92 es.90 87.02 93.64 . 99.00 99.50 common Shs outat'g O .101.00 parable with P$E data: .PSE changed its , 13.6 .. 12.6 .11.7. . r 12.6 ',. ,204 14.6 12.3 1--1�0�.8+--1�9_-11--�17�.1+-B-ofd_!_ig+-,- •• -.,.--1�Av-g�A-nn�.,=p/E=Ra�tioc-"--_-+--1=2.�o
name to Pugel Enetgy"when it fi:irined 'a :' .80 .83 .78 .79 1.18 .76 .70 .70 .98 .93 Vafue Lin• ,, Relative PIE Ratio .80 holding company at t�e �Iii� of 200L, .. · .6.7% 8.9% 8)% . 7.7'/o 7.1% ,68% 7.8% 7.9% 7.9% 5.7% ••ti"etes Avg Ann'I Diid Yield 4.5%
1676.9 1907.3 2066.6 3441:7
125.7 169.6 .173.3 193.8
33.2% 40.0% 37.8% 39.5%
4.1%· 4.5% 6.1% 6.2%
4fiA�/, '47.6% 52.6% 59.5%
44.6%· 43.7% 40.7% 37.4%
3043.4 3095.7 3387.9 3815.6
'3250.5 3430.9 3750.9 3838.4
5.6% 7.1% 7.1% 7.0%
7.7% 10.5% 10.8% 12.5%
CAPITALSTRl,ICTURE1016/30/03 • ... . -1112i '1194.1' 1179.3 .11988 3374.0 2392.3 2425 . 25'15 Revenues(Smill) .. 3300
Totil Debt $2610.3'\nin:'O� In 5 Yrs $836.4 mill. 138.3 ,· 120.1 135.7 135.4 113.6 117.9 130 . 175, NetProftt (Sinilll' 20l1
LTDeb1$2287.3inHI.'. (Tlntetest$16J.3mill. 37"°' '01% 37''"" 383°' 40"°' 32.7°'• 340"' 38.0% Income Tax.Rate 380% Incl. $280.3 mill. tax-deductible preferred securities ,U,., • • ·•1•· • ·" .u,o " ' ,. I• l . wilh lnterest rates of8.?31 % anit 8.4%. : 6.7% 6.3% 4.8% 3.6% · 6.3% 3.9% 5.0% 4.0% AFUDC % to Nel Profit 4.0%
(LT interest earne(I: 2.1x) . . . . . 42.6% . 41.� 39.8% 37.1% ·62.2% 60.1% 59.5% 60.5% Long·Term Debt Ratio 55.5%
Leases, UnC!!pltallzed Ann�al renlals $18.2 mill. 48.8% 49.9% 50.9% 53.3% 34.9% 37.4% 40.5% 39.5% Common Equity Ratio· · 44.5%
Pension Assets-1�2 $344 mill. Obllg. $370 mill. 2430.7 2352.3 .2310.4 2212.5 3900.4 4076.7 4155 4460 Total Capital (Smill) 4625 Pkl Stock $95,6 mUI.: · Pld Dlv'd $7 2 mill. • · . · " ll 356,399 shares 4.70% to.,7!'!S%, $lOO P<!r, call· : 2153.2 2266.9 2282 .. 0 2291.1 3888.0 3916.2 3950 4015 Net Plant ,Smill .·, .4050
able $101 to $105.17; .2,400,000 shares 7.45%, 7,4%. 6.8% 7.5% 7.7% 5.2% 4.9% .5.5% 6.0% Return on Total Cap'I 6.5% $100 par. All shares cumulalive. · •· 9.9% 8.6% 9.8% 9.7% 7.7% 7.2% 8.0% 10.0% Return on Shr. Equity 9.5%
Common Stock 94,031,408 shs. 10.3% 8.9% · 10.2% 10.2% 7.9% 11.6% 11.6% 13.0% 7.7% 7.2% 7.5% 10.0% Return on Com Eauity E 9.5%
MARKET CAP: $2.1 bllllon (Mid Cap)'·· . .9%: .. NMF .3% : · .. 3% NMF .1% 1.0% 3.6% NMF 1.3% 2.0% 4.0% Ret.�ined to Com Eq 4.0%
ELECTRIC OPERATING STATISTICS .. , · 92% 111% 98% 98% NMF f 994, f 92% 74% 125% 83% 76% 58% All Div'ds to Net Prof 57%
. . . .. · ' . : · · 2000 • 2001 2002 BUSINESS P t E t · h Id' f P !rial, .7%; .other, 9%. Generallng sources, '02: coal, 17%; hydro, 5%; %0-RllaiS!fes(K'ffli). .. +2.0 .. ·7.0:, -3.3· ,_.· . : uge nergy, nc. ts a o. 1n� company or uge1 A�llwil.UsilMl'!ffl.· • 979; 633 .: 358 Sound Energy (PSE), which sells ·e1ec1ricit{and gas to 1.3 million -, oil & gas . .:4%; purch., 74%. Fuel costs: 42% of revs. '02 reported A�kwsl.Raw:peilMli(c) . 7.39 11.20 · 6.49 .customers In a 6,000-sq.·mi. region.in western Washington. Merged depr. rates: 2.9% electric, 3.3% gas. Has 4.700 employees, 45,200 �alYearerlll(Mw) ·4917 4970 45n with Washington Energy 2/97 ... Earnings' breakdown. '02: utility. stockholders. Chairman: Douglas Beighle. Presidenl & CEO:· Peilkload. Willar(Mwl 4294 4024 · 3817 ,811'.Yo·, t.nfrastruX (utilily consnucuon service. s ), 8°/,·, olher, 4%. Elec· .Stephen P. Reynolds. toc.:' WA. Address: P.O. Box 97034, Belle- · .lmla LoadFm-(% -. 62.2 59.8 61.6 %C!lange�ts 1-Elld). +1,8 +1.8 .+1.9 Irie rev. breakdown; '02: resjdential, 45%; commercial. 39%; i�dus· vue, WA98009·9734. Tel.: 425·454:6363. lnlemet www.pse.com.
,�ll!Cha!IJIC!N.(%) 244 178 , , .. 172 .. Pµget �nergy·Jia11 a;nnounced the first. cially for its fast-growing gas service area,
ANNUALRATES Past · ·.Past Est'd'00-'02 ·step inlts.plan .. to increase its generat-, and to raise its common-equity ratio to
ofchange(pe,sh) . 1ov11. svrs. to'o&-'08 .. ing capacity. Its utility has agreed to ac- · 45% from an imputed .40% currently.Tt ex-:
Revenues. . · 7.5% . 13.0% ·1.0% . quire just under, p0%, or 137 megawatts, of pects to seek an 11 % return on equity. The "Cash Flow" ·.5% 3.0% 3.5% the'. Frederickson. gas-fired plant for $80 , percentage rate increases 'to be requested 5:i���� · J�: Jg� . :i:3� . million: Puget Sound Energy (PSE) will fi. .are likely to wind up in the single digits! ..
Book Value · ·.5% ·2.0% 4.0% , · nance the deal· with short-term. debt and . Earnings should improve. signifi<;antly .
QUARTERLY REVENUES($mUL) has filed to. recover .the cost through its· . in 2004. In 2003, three factors hurt· the .� .Mar.31,Jun.30 Seo.30 Dec.31 ,:��� power-cost JiJijustmerit', mechanism. The .bottom line: the absorption of' higher
2000 647.2 538 8- 979.0 1276.7 3441.7 tr�nsaction is expected to .close hr the end �ower costs (which is capped at $40_ mil·.: 2001 1119.9 . 935:4 .'619;7 .. 699.0 3374.0 .of.�e, first 9.4art�r, of 20Q4, .conting�nt on h�n · under th_e p�wer-�ost mechanism); 2002 '.739,0 540.8• .458:5 654.0:. 2392.3 ,,11,,f�v!>r.a.ble ,.ordet:,ff�m,th� ,Washmgto9- �ld w�at�er m t�e firsr quarter; and·� 2003 676.0 . 557.8 .515.6 .; 675.6, · 2425. · comrmesion ... The. util.�ty will need. addi- .. disappointing showing from InfrastruX, a,' 2004 750 600 , .525 . 700 .: 2575,'. ,tio11at,cjipacity; 'so it ·intend� to acquire 50. utility-construction business, hurt by unfa-: c.1- , EARNINGS PER SHARE A ,_ FulF : ir?,egii.\yatts of wing. power ,and 300 .mega- . vorable weather con4tti�n,s: ;1114 weak de� endar Mar.31 , Jun.30 Sep:30 Dec.31 Year watts of,the�11l capacity i_n, _2�05. It plans mand, Power costs W11H5e passed through
2000 _89 •• 29 . .20 .78 2_16 to tJ.nance these purch'.1ses �th a com.bi- to customers next year, '.1nd we assu�E! 2001 98 .20 dQ3. 07 1.22 nation of debt and eqwty, .which could m- normal. weather. Talks. with· InfrastruX s
2002. :, ;2s. <,34 ,· . :01 :ss.· .1.24 . ch1�e permanent financin� for Fred,orick- c.ustomers suggest _that this'un_it should;. 2003 . , .45 , ,-.22 , .10. . .58; 1.35 son. I'S� w\>,Y·W. alsq ��ekJecovery .of the .. fare much . better m 2004., If 1t ·doesn]; 2004 ,7$ , .25 , .• 10 .6$ t.75. ;f98\S .. l)� ,thesE:, g:ener13:tin� ,�ssetf through re_bouq�, as expected, t��n fuget .. Ener�
Cef. QUARTERLYDIVIOENDSPAIDB�i • Fu� its:power�cost me·c_harusni, . · · . · . . will �l!C�de whether to (jiv!?st,ik , .. · .
endar Mar;31 ; Jun.30 . &.n.30 Dec.31 , Year Tli� '-tibty pJa.;ns �o file a genE!ral _rate , UntiJJ1ely, Puget E�ei.:gy; stoc� o��rs a
1999 .. 46 .-: ::46,,. 46,., . 46, . 184 cas.e,. The apphcqbon ,would. be for both decent yteld. We· proJect some diV1dend. ·
2000' · :46 .;: :46 ;46 . :46 \1:84 electricity and gas_ ang)vould be made. in grow.th by the 2006-�008 period. This .· 2001 ,,,.46.; ;.46 , .46' .- • .46 . ; 1.84 ,the:Jii:st quarter, iq time. for an order by .. s�o�d produce an an��al total return a: , 2002 .46. .' . .25 '° . ,25. . .25 ; . ).21 .t�e_J�a.rt Qf 2005 .. }!S� wants to place, addi�., bit above average by utihty standards. •. ·· .. J003 . ,,25 .• ,,,,. ;25. ,, •,;25 .25,!.: 1,: .• ,,. · tlo�l 1nves�rneI)t �ntp tlw r3;te bas.e, espe- l'aul If Debbas, CFA . : November 14, �Q0,3
(�l DHuted EP$. E�cl, 119"1:ecy(llng gain (�): (B) Dividends, hlstorlcaliy pal\f In �1�.-F�brµ�ry, . milt (El Ra!� base: Nel ori�inal cost Aale al- Compaoy's Financia,I Strength . . B+ ... W, 15¢; '01, (Se)�; IOS§;OI) !llscon11nued OI>,, May; A.ug\lSf; .and Nove�r: •,D1vlden!1.!e1n· lowed on.com. eq. ,n :02: 11.0%: .�amedon Stock's PrlctStabitlfy · ,.,',.. · • · 95 .: . eratlons: '97, 3¢. lncl.,fflt!flieccosJs: '97, 43¢,. vestment,.plan available: (CJ" incl. �eferred. avg. com. eq., ·•02: 7.6%.'·Regulatory Climate: Price Growth Perslste.nc, : , .. . . 25 •·. Next . earnings report >\flJ!l .... m1d·Feb,l\lary. C/larges: In '02: $690.4 mill:, $7.37/sh. (D) In ·Average.' · . ·· . ,· Earnings Pr�fclablnfy /: , · 45 .• c 2(io3' Vllut ·Une:��:lnt:, AA righla riwiei;I. factu.i matril .it-obtilned ftolli sources beiieved lo be reliable ano ';s pro�ded wilhoul warranties of any kind: ....... THE PUBUSliEfl tS NOT'AE$1'UflSJBU: FOR NI'( ERRORS OR OM,JSSIO�S HEREIN. Thls·publicepon is s:ric11y for subscriber's own, non-comtnercial, lnlemal use. No part •ua.-.utL'<"�II • :11111:1:11111:!llll'Hilt qi M may bl�\�'.·,�� 011!a�mitte<f.1n;111r.,prinled, � ()(01her Jorn,, o, used for generating or markeling any printed or electron� p�lfCelion, service or product •.. , ...
)
f- .-
% TOT. RETURN 10/03 � 7_·5
. . +---t---,f-'--t---+--+---t-10
+---t---,.----t---+--+---,-t-80
-t--�-t---t-�--,f-'-+-�-+---!r60 --+-'---+--t---..+----11---.--t-SO ---+---+--1----+-�--1,__�4-'40 . ',., +-.-:- .. -.-+--,,,r.'.,rt.l« �--t-�-1--,--+---+.-' �-.
--·1'+-'-"-+-·----+----lf----+----1-20·. �---l�'.1-+---1---..+----+---·-·-+---+-15
8.S(ll��'.1n) �i�r1b 0.45 ��0 .3.6%fll71_787
29.3 26.0 .. 24.9 28.6 26.3 · 30.9 Target Price R1oge 23.8 17.1 16.2 '17.3 15.5 22.3 2006 _2007 2_008
'RECENT 27 55 IPIE PRICE I RATIO . SEMPRAENERGYN���
TIMELINESS 3 Lowered 4W03 High: 25.0 27.8 25.0 23.9 25.0 27.1 · Low: 21.1 23.3 17.5 19.1 20.4 21.4 SAFffi . 2 LO'tlefetl 214.'00 LEGENDS
TECHNICAL 3 1 IQ3 - �:ed �4;,�;sr ��le �. VII Se ·-·- i::ne, Aa�e<J l! 14' .. · · · · Relative Pr�e Strenglh ---+--+--+-+-l--+---+ BETA .80 (1.00:Mari<etJ. 2-!or-1 spin 5192 . ->---- 2006·08 t'HUJI:.\; I IUNS 0�)�d� Yi,!as indicate recession ---+-'--"--· --:_-:_-_-:_-_---:- __ --++--_-- __ -+_--f�---+--_- _--1_ ---- -+
Price Gain . An�J�:al ,/'
High 40 (+45%1 12% l;tt:·,,=-:t-::-=;,.;, - ;;j:;:;;;;;;;:"!!4 ' t;;;t=,.�.,.d . ;,,:,; .1,=,.:+. ,;,,;,,.�f-�11�·¢1·.=,i.�;,. ,;!:=:;t:I Low 30 (+10% 5% ��··.p"="--f----+",,,.--'tn•Trl'.l.1.ll"-'-t-"-W"i:c...:f---+-1--l-W:'""..J"'-'tl':··=ai±!:!iµ 1-:l-ns-,id'7e-r-=o,..e...,ci""s,-lo-n-s�---r1�:::- •••• ·,_·t----+----+------·f--t----!11�''J'W"'"'--+
OJFMAMJJA •• •••• •• •••• •' •••••••••• lo Buy O O 1 0 0 0 0 0 0 1,,.....·· ---+---+--+-<-·--+----1---+---+--lf--+-----t-----l-
Options 000000001% �- ••••••• :�s�;itutf oia1° O�c�sl!n� 0 1 < J I -"' . ·· .... ······.... ..•. ··
I I I ••• •. I STl!lT,J. VLINA.!l,ITH.l .' 402002 100003 20200') P�rcenr 12 +---+- i--+---i--+---+--ii--+--""""......,._-r. ··· �� = '"' lo Buy 121 159 1f,2 shares 8 ----+: f. - --- ---------·----· I ,---- 1., t; :;". Ii·-- l yr. 30.4 45.5 toS.W • 107 86 95 traced 4 -� - ..... . . --- ----- ·• ·111:ii:l ·--·- ·3 yr. 51.8 . 26.6 Hld's(OOOl 103167 107379 110148 , , , ,,,;,.. • " , ,, ilihll,,tr, 11,l11!1tll1 ,fil liii-lllllliilll II Ullli 5 yr. 33.1 64.8 Sempra Energy was lormed through the 1993 1994 1995 1996 1997 1998 1999 2000 2002 2003 2004 evAlUELINEPUB.,INC. 6-08.
merger of Enova Corp. and Pacific Enter· 16.99 , 11.01 I 16.0S • 11.09 19.51 23.31 22.89 35.� 39.27 29.38 • 33.75 32.70 Revenues per sh 32.25 prises on June 26, 1998. Enova stock· 3.95 4.01 I 4.33 4.83 5.27 5.16 5.36 4.91 5.39 5•71 • ·5.65 · 5.50 ''CashAow"persh ·· 6.00· holders received one Sempra share for 1.81 1.75 1.94 1.98 2.20 1.24 1.66 2.06 - 2.55 2.79 ·. · 3.20 · 2.65 Eamingspersh ,._ 3.00 each Enova share, and Pacific Enterprises 1.48 1.52 · 1.56 1.56 1.56 1.56 t.ss 1.00 1.00 1.00 !·, 1.00 1.00 Dlv'dDecl'dpershe• 1.00 stockholders received 1.5038 Sempra 3.20 2.26 1.s'§,,-...,1"'.79.-i--:-1"'.7"4-t--.1.""BS,;-"2".48;M-""".3"'.7"'6-t-- .• 5_""22,,_ .• 5·_92;;-t--5"'.2--5-t----;5,""'70.-1=i;a1p'""I :;pe..-:-:1ne:l"dl;-ng,,..pe,,.,.r,....s·11-. -.,·5.·oo•.-1
shares for every Pacific Enterprises share. 13.01 12.65 1304 13.46 13.82 12.29 12.58 12.35 13.17 13.79 : l6.50 18.15 Book Value per sh c · 24.75 Data prior lei 1998 are for Enova and are not .116.52 115·541··"16"'5.,..4 �11·6."'63:-h1 .... 13".63:.+"'23""7_""00:-+,2""37""_40c.+--20"'1."90.t-:204...-.48=+"204=--_91:+-22=-9,oo=+-=22"'8'".00::-hC.-1om-m-o-n...,S�h$...,O.-uts.,..,..l'g=u:::2ss:"'.�oo:: directly comparable to Sempra Energy data. 14.3 11.8 11.2 11.3 10.8 21.1 12.8 -· 9.4 9.7 -. e.2 Bold 119 ,. •• ,. Avg Ann'I PIE Ratio - .·. 11.5
CAPITALSTRUCTUREasol6/30/03 .84 .77 .75 .71 .62 1.10 .73 : .61 .50 .45 Vatu, LIM. AelatlveP/ERatio o ·;75 · Total Debt $4929.0 mill. Due in 5 Yrs S244e:o mi!!. 5.7% . 7.4% 7.2% 7.0% 6.6% 6.0% 7.4% 5.2% 4.1% 4.4% ""' �18' Avg Ann'I Div'd Yield 2.9" LT Debt $4414.0 mill. LT Interest S2o3.0 mill. Incl. $200 mill. 8_9% Cumul. Qlrly. Income Pfd. Sec. 1980.1 1982.0 1870.7 1993.5 2217.0 5525.0 5435.0 7143.0 8029.0 6020.0 7700 7465015 RNetev�0uefit�}SmS"'.11111,� 82!_.
(LTinteres1earned:3.3x) 218.7 210.1. 233.5 237.5 258:2 306.0 405.0 440.0 534.0 586.0 685 n ,1• ,1 ,-
Leases,UncapitallzedAnnualren1als$94.0mill. 40.4% --36.8% 36.6% 38.5% 36.8% 31.1% 30.7% 38.0% 28.8% 19.9% 19.5% 20.0% incomeTaxR�te ,. .. �5.0% Pension Assets-12/02 $1.98 bill. Oblig. $2.29 bill. 10.1% J 4 3% 4.0% 3.9% 2.9% 3.6% 2.2% 3.0% 3.2% 10.8% 9.0% 10.0,, AFUDC % to Net Profit· ;7.0%
Pfd Stock $203.0 mill. Pfd Div'd $11.0 mill. 46 3�l, 45 7% 45 2'• 46.9% I 55.1% 47.3% 47.6% 56.2% 55.?o/; 58.6% 53.0% 52.0% Long·Term Debt Ratio.: · •39.0% 1,373,770 shs. 4.40%-5% cum .. J20 par. call. 498% I 503%, 509% ! 49.8% 42.1% 49.3% 49.0% 40.4% 4(2% 38.6% 45.0% 46.0% CommonEaultvRatlo. 59.5%· 20·25·24: 2.o4o.ooo_ shs. !1 ·70·Sl -8� curn., no par. 3046.71 2933.212988.6 3152.5 3730.9 5912.0 6092.0 1 6166.0 6532:0 7312.0 8390 9020 Total Capital (Smlll) 10600 ' call. 25.85-26. 1 mill. sh .. $1.7625 cum., no par, I . call. 25 & subj. 10 mand. reoem.: 800,000 shs. �J149.1 31002 3074.4 2936.1 5441.0 5394.0 5726.0 6217.0 6832.0 7565 -.8220 NetPlant($mi!!L_ 9950 $4.36·$4.75cum.,nopar.ca11.100-101.50;811,166 o.n, ! 8.8% r 9.4% 8.9% 8.1% 6.8% 8.3% · 9.0% 10.1% 9.8% 10.0% B.5% ReturnonTolalCap'I •· '9.0%
shs. 6% cum .. $25 par. 13.4% � 13.2% i 14.2% 14.2% 15.4% 9.8% 12.7% 16.3o/, 18.4% 19:3% .17.5% 14.0% Retuinon Shr. Equity . 12�. ; Common Stoc.k 208.714.412 shs. as ot 7131103 �j%_ .. '.�}% i 14 !?'J..14.7% 16.0% 10.1% 13.2% 17.2% 19.4% 20.4% 18.0% 14.5%-· Retumon Com Equity e· 12.5%· MARKETCAP.$5.Sbflllon(LargeCap)_ 25%. 1.8%, 3.0% I 3.1% 4.6% 1 'NMF .9% 7.4% 11.9% 13.1% 12.5% 9.0% RetalnedtoComEq 8.5%
ELECTRIC OPERATING STATISTICS 82% i 87% i 81% i' 79% ii 72% i 110% 94% . 58% . 40% '37% 33% 39% All Oiv'<ls to Net Prol 34% 2000 2001 2002 t----'�-�i--�-�--�-�-�--�-�-��---�------�---t %Ch&�R�alSales(K\\liJ +2.7 ·5.2 +1.6 BUSINESS: Sempra· Energy is a holding company for San Diego 41%; commercial,. 41%; industrial. 10%; other, 8%. Generaling A,·�.lrllusl.Use{MWrlJ 5676 5966 4347 Gas & Electric Co., which sells elec1ricity and gas mainly in San sources, '02: �uclear,-23%; purchased,:n%. Power costs: -28% of· Avg. lndust Rev;. per KWH (CJ - 11 86 11 64 8 50 · ?e���'.�;�,l�! . ��� ��l� ��� �e��s��t�ufh!r�u�:;�o���fob�:1i�!r;°;·,;���0�5:i��t;fi. 9:.f · ��:���s·::k��:�_ra6�a!���. H;!!� :¢�6:ee;t��!��
Ar,walloadfa..'1Cr(%i NMF NMF NMF million gas. Has divested its generarion. Has 6 nonutility subsidi· Baum. Inc.: CA.·Address: 101 Ash St., San Diego, CA 92101·3017. %C)ar.;eOJ���lt�'11 + 1 .6 • 1.6 + 1.6 aries (36% of '02 earnings). Elec. rev. breakdown, '02: residen1ial, Tel.: 619-696·2034: lnternet:·www.senipra.com.
,,,e,1ChargeCov.1�: 309 274 249. s;;;,_pra Energy sold some stock last Our 2003 earnings estimate requires
ANNUAL RATES - Past Past Est'd ·00-·02 month." The company issued 16.5 million'. an explanation. The, CPUC. has finally ofchange(persh) 10Yrs. SYrs. to'06-'08 shares at $28 each, shortly after a rating grantediSDG&E .permission to-record. $65 :�;z�;!��i" H� 12:f 1�f! fsg:fi�I ic?1fct1�cfn�!s��:�t;�d:.)·J�:�t� ili�li��e(a'e!i;:J:lt;rd��1�;s��te r:�!�e:
Dividends -3.5% -8.5°� Nil pany used most of the proceeds to retire power crisis in 2001. We have included Book Value 1.0% .5% 1/.0% short-term debt. The sale will have little this $0.31 a share in our September-
Cal· QUARTERLY REVENUES (S mill.) Full effect on earnings in 2003 because it came: quarter presentation and our full-year es- endar Mar.31 Jun.30 Sep.30 Dec.31 Year late in the year, but it will dilute 2004 re-- timate. On· the other hand;· we- have ex-
2000 1460 1530 1832 . 2321 7143.0 suits. Accordingly, we .have cut our 2004. eluded a'.$47 million aftertax writedown of- 2001 3242 1900 1510 1377 8029.C share-net estimate by $0.15, to· $2.65. assets· and a $37 million: aftertax charge 2002 1460 1488 1384 1688 6020:C That's near the low end of Sempra's target for litigation· and losses associated with a 2003 1923 1840 2058 1879 7700 of $2.60-$2.90. · · · sublease of part of. the . SoCalGas head-
2004 1850 .1750 2000 1850 .7450 Two rate cases are pending. San Diego> quartersbuilding, Finally, our estimate.re-
Cal· EARNINGS PER SHARE A Full Gas & Electric is requesting an electric fleets ;thei foll $40. million , <if income that
ender Mar.31 Jun.30 Sep.30 Dec.31 Year tariff hike of $59 million (2;5%) and a gas -Sempra expects .to book from-its synthetic a
2000 .49 .SS .55 .47 2.06 rate increase of $22 million. (9.1 %). fuels investments this year, although the .
2001 · .78 .66 .59 .52 2.55 Southern California Gas is seeking a rate IRS is auditing these projects. . 2002 .71 .70 .73 .65 2.79 hike of $130 million (8.5%). Between them,·- This stock. has fared well in. 2003. -The 2003 .56 .55 1.39 .70 3.20 the utilities also want to be grantedopera-. upholding; of Sempra's,:.,contract to sell 2004 .60 .60 .80 .65 2.65 tional incentive awards totaling $33.5 mil-: power to . .the :state; the 'good performance
Cal· QUARTERLY DIVIDENDS PAID 8 • Full lion. On the other hand; the. California of its nonutility operations, -and #s obtain-
endar Mar.31 Jun.30 Seo.30 - Dec.31 Year Public Utilities Commission's (CPUC) Of- • ing of· permits .for two liquefied. natural-gas
1999 ,39 .39 .39 .39 1.56 fice. of Ratepayer Advocates and two con- facilitiesihave .been well;;teceived by the 2000 .39 · · .25 · .. 25 .25 1.14 sumer groups are proposing rate decreases: market. .By utility standards, ,however, the
2001 .25 .25 .25 .25 1.00 'of $162 million. and $266 million, respec- · yield ·1s1 below average, -but : 3- to 5-year 2002 .25 ·· .25 .25 .25 . 1.00 tively. An order should come in the first total-return.potential is above average... , 2003 .25 .25 · .25 .25 quarter of 2004. · ; . . ,, .. ·Paul E.i:'D"ebbas, CFA }'f_ovem,ber 14, 2003
(A) Exel. nonrecurring gain (losses): '94. (58¢); I mid-Jan .. April, July. and Oct. • Dividend rein' cost. Rate aUowed on com. eq.: SDG&E 1n··03,- Company'• Flrilnclef Strength' ·· B++ '01, (3c) net; H? '03, (14ci: 30 '03, _(37�)- met. vestment plan available. (C) Ind. in1angibles. In 10.9%; SoCalGas In ··03, 10.82%; _earned on :stock's Pr)ce $ttbllllfi·'·-·· '. _ :: · ·· , 85' · merger costs: 98, _36�. Next earnings reP<?rt '02_: $1.3 bill .. $6.56/sh. (D) In mill., adj. (or avg. com. eq., ·02: 20.So/o. Regulatory_ Clim�!�:. -. Pr19• G_r�,�. '. · 25 _ due m,d-Feb. (Bl. DMdends historically paid m split. Exel. ESOP shs. (E) Rate base: Net ong. Below Average. · .· · • .: · :· -'· .. · • , : ·--·": ' Earning, Plldlctabll ·si•i ·: ·.·.•-' ;::·:) · 75· .. - · ·
!'> 2003, Value Une Publishing. Inc. 'All r�1ts reserved. Factual malarial is obtained lrom sources believed lo be reliable and Is provided wilhO)lt warranties of any. kin«t • THE PUBLISHER IS NOT RESPONSIBLE ,OR ANY ERRORS OR OMISSIONS HEREIN. Th� publication Is strict�· lor tubscriller's own, non-commercial, infernal use. No pan • I ,,,._.._., :II ll!ll!UU!lltf!!ill of it may be·reproduced. reSOld, stored or tn1.nsmiltA-:! 1n any prinled. electronic or other form, or used loi ge,:eraling or markijting any printed or electronic �Heation, se'Mce.or prockJcl. .
_)
-1-
-- ),.. •f -'(
)
)
)
_·x�C�EL�1E=N�E�R�G_Y_NY�SE_'�_EL�_',_.�-'-'���flr�1_6._37�l�_t,_o1_1_.t_(�_21:_r�_�o-�-��;_o_.5�9_t_0_4_.7,_%fi1iml1790
TIMELINESS .3 8aised3!7/03 High: · 22:7 23.9 23.5 24.8 26.7 29.4. 30.81 27.9 30.0 3t.8 28.5 I 16.6 I Target Price Range
SAFETv' . • 3 Aaised6/ll'03 ��;�NDS193 20.1 19.4 21.3 22.3 22.3 :�:1.'.,.91•�3 16.1 24.2 5.1 i 10 .. :., I �00612007 2008 �
TECHNICAL 4 l&Nered 10131/03 - �ii�� �v1:�sf tie •• ' ' - · · · 40 . . . . • . .. ·, ·, Aelalive �rice Slrenglh ·- -- ---1-- -:;:.:; �- ···-·····+-·-+·-··· -32 BETA .70 ((00=Mar1<et) 2·1or,1 sf)lrl 6198 · r � · ,,.. ,1 " 111 1 •• I i 24 2006-0ih n.w-v ' '""" 01,.�� ��as Indicate recessi�h' - ' · · • ·'" I , 1.i I • • • • l J · · · · · · · · · · Ann'I Total •. · •. " · 'I • • :r--+--�- '-- 16 Price· .. Gain Return 1 . ,r,1• J ••••••••• • I :.}L;��l ·m .. ... --- :::;:-�::::-::.:-:=------+---- - - - .::�,!' :·-1---· r ·rIT:i �i g gg g g g g g g �� --���---��-::..· :;-'--•.:.:. i:..1·.·�1,J111·- ---�,
.; -;;,.·T·o-t1.RET_U_R_NL.1_0J03 __ : 10Sen . o o o o o. o o o o :-�,; , 1, Institutional Decisions lt,1 · I 9 I ··!·. . si�. Y\ri'liH ... . 4Q20QI 102DU 2_02003 Percen1
lo Buy · · .. 130 : 139. 157 shares 6 - · · lh� r.flt: I fiit 1 yr. · 64.4 45·5 � · ���1;;1:g· 1;2J:; 183m traded · .. 3 --,Tiiiioirtlittiiliii1,1r1,;1ii111111ilrt,111111111:;i 1111111111111::,nmr11J1m· � llrrr--- ��:: . :f�:� ·. �::. r
XcelEnergywasformedthroughthemerger 1993 1994 1995 199619971998 1999 2000 2001 2002 2003 2004 cvALUELINEPUB.,INC.106-08 61 Northern States Power and New Century 17.97 18.58 18.84 1922 18.32 18.46 18.42 34.11 I 43.56 23.89 18.35 18.35 Revenues per sh ] 19.75 Energies on August 21, 2000. NSP stock· · 3.62 4.00 · 4.30 4.33 3.92 4.30 'j 4.13 4.12 . 5.09 3.14 3.40 3.30 "Cash Flow" per sh 3.50 holders received one share of Xcel for every 1.51 1.73 1.96 , 1.91 1.61 I 1.84 143 1.60 I 2.27 .42 1 1A5 I 1.25 Eamingsper�h A . 11 . 1.50 NSP shara.and NCE.stockholders received 1.28 1.31 · 1.34 1.37 -1--0.0 1.43 1 1.45 ! 1.48 i 1.50 I 1.131 .751 .n Div'dOecl'dpershe• .90 1.55 shares o!Xcel Jor each NCE share. 2.70 3.061 29�. 2.99 i 2.90 ....... 2.99 r138rfJ.63 7.40T 6.041 2.201 2.80 Cap'ISpendingpersh I 3.00 Data prior to 2900 reflect NSP oil a stand- 13.66 14.17 14.87 15.46 I 15.89 16.25 16.4�-h�t37 17_95 I 11.70, 12.55 i 13,1�BookValuepersh c L 74.75 alone basis and are no,t comparable with 133'.UE!ii-h1e.35 J38.1..Ll.��.7o 115573·t3392!::¥s.02139&iiT42S]ofm:oo Conlmo�ShsOutst'g 0-1443.00 Xcel data. , · · · ·.: . .· . · 1_4.9 f 12.3j 11.6 125 f 15.5 ls.fl 16€ 14.3. 12.41 NMF�ldligf'.es.re AvgAnnlP�Rat10 -�.
CAPITAL STRUCTURE 89 of 6/30/03 · .. 88 .81 I .78 .78 · .89 .79 I .95 ! .93 I .64 l NMF ! Val"j�1·.. •Relative PIE Hal10 , .80 · TotalDebt$6757.9mill.Dueln5Yrs$2680.0milL 5.7% 6.2% I 5.9% 5.71, 5.6% 5.1% ! €.1% ! 6.4% 1 5.3% · 66% I "'11"1"'"' AvgAnn'IOiv'dYield i 5.0%
LT Debt $5772,2 nliil. ' LT lnwest $381.0mill. 2404 O 2486.5 2568.6 2654.2 2733.7 28192 I 2869�J 11591 I 15028 9524.4 I 7800 I 7800 Revenues (Smill) ., 1 8775 Incl. 8,000,000 shares 7.875 10 _lax·deduclrble Trus • , , . . · , r Ne p . . � Originaled Preferred•Securilies, liquidation valuE ...'.!.!.:.?�- _275&_ 274.5 ,._Jmtt98.1_12,0.r 5454 7�'.'.2.�177.6; 605+-=550 t rom(Sm1i1) F.40 $25/share; 7,760,000 shares 7.60%; cumulative, $2! 38.2% 35.4% 35.6% 34.8% 27.8% 26.0�, 21.6% h5.8% , 282�:, 32P, ·, IJMF I 31.0% Income Tax Rate i 37.0% par; $1_00 mill.:7,85% tax-deductible Trust.Preterrec · 6.0% 5.1%' 6.2�, 6.9%_ ._6.6% ��, _?5%__ 4.41, 1 7.1% 46.7% ��it,� �!:Y�%to��tProfit _!�� Securilres. ·· · . · . · · · .• . . 38.5% 40.6% 40.5% 40.1% 40.4% I 39.9% 54.7% 58.8% 66.7% 59.6', I 54.0% 53.0% Long-Term Debt Ratio 49.0% (Interest not earned) · ' · · · 54 4o/. 5' 7°' 53 2" 53 8% 51 O'' 53 s•· 40 5" 40 5'" "2 8'!. 3� ee, 1 45 o•· j ' 46 5"' Common Eauity Raiio 50 5% ' Leases,UncilpttalizedAnnualrentals$66.0.mill. �· .!.�'" . ,O . 0 : ..• • ..'"c-.-· ., 't- -��-�-3.. J,� . 10. • "....= . ... � PenslonAssetsi12/02$2.64bill.Oblig.$2.Sl bill. 3359.8 3600�8 3810.1 3968.9 46J0.9 4631.7 6316.2 ! 13745 18911 11815 I 11850 11985 TotaiCapltal(Smrli) · I -�3;100 Pld Stock $1053 mill. Pld Dlv'd $4.2 mill. · 4214.1. 4273.7 4310.3 4337.9 4361.3 43952 ��]j_)...!.5171.�. ��� _ _1_2§1� J.3��- �t Plant(Smill) __ -L..!!_22! 1,049,800 shares $3.60 to $4.56, cumulative, $101�% 8.1% 8.7%. 8.4% 6.9% 8.1% 5.4% 60% 6.0% 5.4% l 7.M, t 6.5% RelumonTotalCap'i I 6.5% ,&i:,_ par,callab!e$102.00to$103.75. .. . 10.2% 11.4% 12.2% 11.6% _9.1% 10.7% 8.4% 9.6% 12.5% 3.7% 11.0% i 10.0% ReturnonShr.EquiHt. 9.5% .-- C:ommon Stock 398,75l,82l shs. as of7/3l/03 . 10.8% 12.2% 13.0% 12.3% 9.5% 11.2% 8.6% 9.7% 12.6% 3.7%- 11.0% j 10.0% Return on Com Equi e 9.5% �, MARKETCAP:$6.Sbllllon(LargeCap) 1.6% 3.0% 4.2% 3.6% 1.2% 2.5% NMF .9% 4.3% NMF1_-·5.5% 1' 4.0% RetalnedtoComEq .ta% . . ELECTRIC Ol'ERATING STATISTICS · 87% 77% 69% i2% 88% 79% 100% 91% 56% NMF 53% 60% Ail Dlv'ds to Net Prof 62% · .. 2000 2001 2002 l----'--�---- ...... _ _...... __ ...._ _ _,__�--�--- o/,ChanQe8elaJISaies!KWH) ·· , +6.0 +.1 +1.6 . BUSINESS: Xcel Energy Inc. is the parent of Northern States eraling sources, '02: coal, 50%: nuclear, 13%: gas & oil, 10%; Avg.c&IUse(MWHJ . · 151 1.49 147 Power, which supplies power to MN, WI. ND, SD, Ml. & gas 10 Ml,. other, 2%; purcbased. 25%. Fuel costs: 46% of revs. '02 reported --�:J�:r���r(c) · 4Jl :.ji� 4Jj WI, ND, Ml & Kl.; P.$. of Colorado, which supplies power & gas to ceprec. rate: 3.4%. Has 14,600 employees, 300,000 com. stock·
Peakload,Sm111MwJ . 7936 , 8344· ·0259 CO & WY; & Southwestern P.S., which supplies power to TX, OK, holders. Chairman & CEO: Wayne H. Brunetti. President & COO: AnnualloadFaclor(\'.)1 ' 60.5 · 52.2, NA NM. & KS. Cusiomers: 3.3 mill. elec., 1.7 mill. gas. Elec. rev. Richard C. Kelly. Inc.: MN. Address: 800 Nicollet Mall, Minneapolis, %ChangeCrrslOll1e�(r.�ndJ +1.8 +1.3 · +.7 breakdown, '02: res'f, 31%; comm'I & ind'I; 51%; other, 18%. Gen· MN 55402. Tel.: 612-330·5500. Internet www.xcelenergy.com.
Flle<lChargeCov.(%1 217 221 125 Xcel Energy is on track to have NRG since Xcel is almost entirely a regulated ANNUAL RATES Past Past Est'd '00·'02 Energy's Chapter. 11 bankruptcy re· electric and gas utility. ofchange(persh) .10Yrs. 5Yrs. to'06-'08: -solved by December 15th. Creditors The .board of directors plans to eval- f.lc5�;�i1;w'" £.-8� 1�:�;: Jj� were scheduled to vote on 'November 12th uate the dividend policy next June, . Earnings .5% -4.5% · .. 1.0%··. · on an agreement that would provide them assuming that the final payment to NRG's Dividends 1.5% · -· ''07.0% with $350 million in cash in late 2003, $50 creditors has been made by then. (Note: B_QOk v�,u� . · ., 2.0% .·,5% .. , million at the start of 2004, and $352 mil- The dividend planned for early in the
ca� QUARTERLYREVENUES(Smlll.) :·.,•Full .lion later in 2004 .from a tax refund that fourth quarter has been delayed because endar Mar.31- Jun.30 Sep.30 Dec.31 Year, Xcel expects to receive stemming from the . retained earnings are negative. The com· 2000 2322 ' 2460 3115 3694' · 11591 · 'write-off of its investment in NRG. (If the pany intends to resume payment in De- 2001. 4231. 3698. 3763 3336. · 15028 bankruptcy proceedings aren't concluded cember, when it expects retained earnings 2002 2371 .:-2227 2473 . 2453,. 9524.4 , by December 15th, then Xcel won't get its to return to the black.) The company's cur- 2003 2147 1771 2058 1824, 7800 refund until 2005; which is why the De· rent $0.75-a-share dividend would put the 2004 2000 1800 2100 1900 7800 cernber 15th date is significant.) The stock payout ratio at about 60% based on esti- Cal· EARNINGS PER SHARE� ., Full has risen gradually since the start of the mated 2004 earnings, so we believe there .ender Mar.31 Jun.30 Sep,30 Dec.31 : Year year as Xcel has .made progress in putting is room for dividend growth .. Thus, we 2000 .45 .46 .29 .�O, .. 1.60 the NRG mess behind it. NRG has already forecast a modest dividend hike at the 2001 .61 -,: .49 .79 · .38 i2,27 been -deconsolidated from Xcel's financiai board meeting next June. The move would .. 2002: .21:- , ,23. .41 . · d.42 ., .42 , statements. come less than two years after the direc-
2003 .30 · d.71 ° .69 N.4 .. 1,45 Operations earning power appears. to . tors halved the. dividend. We project that 2004 .... 135,/ ,20 .50 . .20 .1.25 ,·be,·in the .$1.15·$1.25 a -share range, dividend growth willcontinue through the
Cal·· QUARTERLYDIVIDENDSPAID8• ·full'• management's target for 2004. It assumes 2006-2008 period. . , · . , . ender. Mar,31- Jun.30 Sec.30 Dtc.�1 Year that NRG's . bankruptcy is • concluded in This stock's yield Is about. half a per- 1999·. .357 .357 · .363 .363 . > 1.44 2003, the utilities earn close to their al- centage point above the industry 2000 .363 · .,363 .368 .375 1.47 lowed returns on equity, and nonregulated average. Even assuming some dividend 2001 .375 .375 .375 .. 375:. ,1.50 operations (as a group) cut their modest growth through 2006-2008, total-return , 2002 375 . .375 . · .. 375 ··: 188 • . 1.31 , loss. ·Beyond. 2004, we project low-single· potential is just average for a utility. · t �
2003 .1�>,:, , .. 188 .188 · '· · ' · . digit 'average· annual earnings growth, · Paul E, Debbas, CFA November 14, 2003 �
(A) Diluted EP�,.,Excl. extraord. ·gain (losses): ings.1eporl'due lale Jan. (B) Div'ds historically I Rata allowed on com. eq.: MN '93, 11.47%; WI Company's Financial Strength B . '00, {6c); '01, 3c; '02, ($6.2i'); gain onosc. paid inmio-Jan., Apr., July, and Oct• Div'd '96. 11.3%; CO '03 (elec.), 10.75%; TX '86, Stock's Price Stability 50 · ops.: '03. Sc. ·02.EPS don't add due to chng. in re1nv. avail. (C) Incl. intang. In '02: $2,87/sh. 15.05%; earned on avg. com. eq., '07: 2.8%. Price Growth Persistence NMF shs.: '03 due to antidilulion in a qtr. Next eam- (0) In mill, adj. tor splil. (E) Rate base: Varies. I Reg. Clrm.: Avg. (F) NSP only. (G) Restated. Earnings Pr9!1ictablllty 35
. Q <003, 'Value"line·Publrshing)nc. All.rights reserved. Faclual maH,rial IS ob13lned lrorr sources bel,e·1ed lo l•a r;,,..,ble and is provided ·.v,1hout warranties of any kirld ."'"" .... · TiiE PUSLl$H:R IS NOT AES�ONSISLE:' FOR Af.!Y"EAROfiS OA OMrSSIONS HEREIN. Th:s publication is stll(.tly •or scoscnoer's own, IVlfr·comm•rcial. rn!srnn: use. No ;,>r. l(1-.--tll1}.'f1W� ;{11!:lclc!l]IH:t ol .it,tnaY 'be ;eproouced,·resb:d, .skJred er transmitt&d in any printed electronic or oner torm, or ust!d IN g,wemting CJ/ mdrKe:ing any pnnted or eie1.,�onic pubr!CatKn. se:rva or prodi.K.t
BKH: Analyst Estimates for BLACK HILLS CORP - Yahoo! Finance
This Year -11.8% 4.3% 4.2% 13.0%
Next Year 2.5% 5.1% 4.5% 12.9% ) Past 5 Years (per 14.4% N/A N/A NIA annum)
Next 5 Years (per 6.9% 4.64% 4.74% 10.29% annum)
Price/Earnings (avg.
for comparison 14.8 13.71 13.79 18.21
categories)
PEG Ratio (avg. for
comparison 2.14 2.95 2.91 1.77
categories)
ioa Add to Portfolio 'a' Set Alert [i2l Email to a Friend
Get Analyst Estimates for Another Symbol:�- Symbol Lookup
http://finance.yahoo.com/q/ae?s=BKH
• Upgrades & Downgrades • Conference Calls
)
_)
2 of2
Copyright© 2004 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service - Copyright Policy
Quotes delayed, except where indicated otherwise.
Delay times are 15 mins for NASDAQ, 20 mins for NYSE and Amex. See also delay times for other exchanges.
Quote data provided by Reuters.Analyst opinion data (recommendation summary, price targets, coverage list) are provided by Thomson Financial
Network, based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and In no way endorses the validity of
such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon.Analyst Summary Information (upgrades/downgrades
module) provided by Briefing.com.Data and information is provided for informational purposes only, and is not intended for trading purposes.
Neither Yahoo! nor any of its data or content providers (such as Reuters, CSI and exchanges) shall be liable for any errors or delays in the content,
or for any actions taken in reliance thereon. By accessing the Yahoo! site, a user agrees not to redistribute the information found therein.
1/lLl./(M.11·11 Al\,f
HE: Analyst Estimates for HAWAIIAN ELEC - Yahoo! Finance
Next Qtr. 12.1% 14.7% 13.1% 8.6%
This Year -9.3% 4.3% 4.2% 13.0%
) Next Year 5.5% 5.1% 4.5% 12.9%
Past 5 Years (per 0.3% NIA N/A NIA annum)
Next 5 Years (per 2.8% 4.64% 4.74% 10.29% annum)
Price/Earnings (avg.
for comparison 16.6 13.71 13.79 18.21
categories)
PEG Ratio (avg. for
comparison 5.93 2.95 2.91 1.77
categories)
I@'! Add to Portfolio '.st Set Alert ISi Email to a Friend
Get Analyst Estimates for Another Symbol: I ig Symbol Lookup
http://finance.yahoo.com/q/ae?s=HE
Upgrades & Downgrades • Conference Calls
)
)
2 of2
Copyright© 2004 Yahoo! Inc. All rights reserved. Privacy Policy· Terms of Service - Copyright Policy
Quotes delayed, except where indicated otherwise.
Delay times are 15 rnlns for NASDAQ, 20 mins for NYSE and Amex. See also delay times for other exchanges.
Quote data provided by Reuters.Analyst opinion data (recommendation summary, price targets, coverage list) are provided by Thomson Financial
Network, based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of
such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon.Analyst Summary Information (upgrades/downgrades
module) provided by Briefing.com.Data and information is provided for informational purposes only, and is not intended for trading purposes.
Neither Yahoo! nor any of its data or content providers (such as Reuters, CS! and exchanges) shall be liable for any errors or delays in the content,
or for any actions taken in reliance thereon. By accessing the Yahoo! site, a user agrees not to redistribute the information found therein.
1 /1 A /f\A 1 1. 1 C Al\ K
MDU: Analyst Estimates for MDU RESOURCES - Yahoo! Finance
Next Qtr. 16.0% 14.7% 13.1% 8.6%
This Year 32.0% 4.3% 4.2% 13.0%
) Next Year 3.7% 5.1% 4.5% 12.9%
Past 5 Years (per
annum) 2.3% N/A N/A N/A
Next 5 Years (per 8.0% 4.64% 4.74% 10.29% annum)
Price/Earnings (avg.
for comparison 15.0 13.71 13.79 18.21
categories)
PEG Ratio (avg. for
comparison 1.88 2.95 2.91 1.77
categories)
ra Add to Portfolio 'ill.' Set Alert G Email to a Friend
Get Analyst Estimates for Another Symbol: L . ., .... Jiii Symbol Lookup
http://finance.yahoo.com/q/ae?s=mdu
• Upgrades & Downgrades • Conference Calls
)
)
2 of2
Copyright© 2004 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service - Copyright Policy
Quotes delayed, except where Indicated otherwise.
Delay times are 15 mins for NASDAQ, 20 mlns for NYSE and Amex. See also delay times for other exchanges.
Quote data provided by Reuters.Analyst opinion data (recommendation summary, price targets, coverage list) are provided by Thomson Financial
Network, based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of
such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon.Analyst Summary Information (upgrades/downgrades
module) provided by Briefing.com.Data and information Is provided for informational purposes only, and is not intended for trading purposes.
Neither Yahoo! nor any of Its data or content providers (such as Reuters, CS! and exchanges) shall be liable for any errors or delays in the content,
or for any actions taken In reliance thereon. By accessing the Yahoo! site, a user agrees not to redistribute the information found therein.
1/14/04 11:15 AM
PNM: Analyst Estimates for PNM RESOURCES - Yahoo! Finance
This Year 8.8% 4.3% 4.2% 13.0%
Next Year 1.5% 5.1% 4.5% 12.9%
) Past 5 Years (per 5.9% N/A NIA NIA annum)
Next 5 Years (per 5.0% 4.64% 4.74% 10.29% annum)
Price/Earnings (avg.
for comparison 14.5 13.71 13.79 18.21
categories)
PEG Ratio (avg. for
comparison 2.90 2.95 2.91 1.77
categories)
� Add to Portfolio '.lil.' Set Alert t8l Email to a Friend
Get Analyst Estimates for Anothe; Symbol: L ... _j. Symbol Lookup
http://finance.yahoo.com/q/ae?s=pnm
Upgrades & Downgrades • Conference Calls
)
)
2of2
Copyright© 2004 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service - Copyright Policy
Quotes delayed, except where indicated otherwise.
Delay times are 15 mins for NASDAQ, 20 mins for NYSE and Amex. See also delay times for other exchanges.
Quote data provided by Reuters.Analyst opinion data (recommendation summary, price targets, coverage list) are provided by Thomson Financial
Network, based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of
such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon.Analyst Summary Information (upgrades/downgrades
module) provided by Briefing.com.Data and Information is provided for informational purposes only, and is not intended for trading purposes.
Neither Yahoo! nor any of its data or content providers (such as Reuters, CS! and exchanges) shall be liable for any errors or delays in the content,
or for any actions taken in reliance thereon. By accessing the Yahoo! site, a user agrees not to redistribute the information found therein.
1/1,1/(\,1 11.1, ,l.]1.,f
PNW: Analyst Estimates for PINNACL WEST CAP - Yahoo! Finance
This Year -27.0% 4.3% 4.3% 13.1%
Next Year 11.9% 5.1% 4.3% 12.8%
) Past 5 Years (per -0.1% N/A N/A NIA annum)
Next 5 Years (per 4.0% 4.64% 4.74% 10.28% annum)
Price/Earnings (avg.
for comparison 15.1 13.71 13.78 18.09
categories)
PEG Ratio (avg. for
comparison 3.77 2.95 2.91 1.76
categories)
� Add to Portfolio �, Set Alert [81 Email to a Friend
r--r,··-· Get Analyst Estimates for Another Symbol: I ··-·· t Symbol Lookup
http://finance.yahoo.com/q/ae?s=pnw
• Upgrades & Downgrades • Conference Calls
)
)
? of?.
Copyright© 2004 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service - Copyright Policy
Quotes delayed, except where indicated otherwise.
Delay times are 15 mlns for NASDAQ, 20 mins for NYSE and Amex. See also delay times for other exchanges.
Quote data provided by Reuters.Analyst opinion data (recommendation summary, price targets, coverage list) are provided by Thomson Financial
Network, based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of
such data. Yahoo! and ThomsonFN shall not be liable for any actions taken In reliance thereon.Analyst Summary Information (upgrades/downgrades
module) provided by Briefing.com.Data and information is provided for informational purposes only, and is not intended for trading purposes.
Neither Yahoo! nor any of its data or content providers (such as Reuters, CS! and exchanges) shall be liable for any errors or delays in the content,
or for any actions taken in reliance thereon. By accessing the Yahoo! site, a user agrees not to redistribute the information found therein.
1 /1 A If'\ A t 1 .1 r: .4 ll. I
PSD: Analyst Estimates for PUGET ENERGY - Yahoo! Finance
This Year 8.9% 4.3% 4.2% 13.0%
Next Year 34.8% 5.1% 4.5% 12.9%
) Past 5 Years (per -0.8% NIA NIA NIA annum)
Next 5 Years (per 5.0% 4.64% 4.74% 10.29% annum)
Price/Earnings (avg.
for comparison 17.5 13.71 13.79 18.21
categories)
PEG Ratio (avg. for
comparison 3.50 2.95 2.91 1.77
categories)
lo1! Add to Portfolio �, Set Alert El Email to a Friend
Get Analyst Estimates for Another Symbol: n• Symbol Lookup
http://finance.yahoo.com/q/ae?s=psd
Upgrades & Downgrades • Conference Calls
)
)
2 of2
Copyright© 2004 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service - Copyright Policy
Quotes delayed, except where indicated otherwise.
Delay times are 15 mins for NASDAQ, 20 mins for NYSE and Amex. See also delay times for other exchanges.
Quote data provided by Reuters.Analyst opinion data (recommendation summary, price targets, coverage list) are provided by Thomson Financial
Network, based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of
such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon.Analyst Summary Information (upgrades/downgrades·
module) provided by Briefing.com.Data and information is provided for informational purposes only, and is not Intended for trading purposes.
Neither Yahoo! nor any of its data or content providers (such as Reuters, CS! and exchanges) shall be liable for any errors or delays in the content,
or for any actions taken in reliance thereon. By accessing the Yahoo! site, a user agrees not to redistribute the information found therein.
1/14/04 11:16 AM
SRE: Analyst Estimates for SEMPRA ENERGY - Yahoo! Finance
This Year 1.5% 4.3% 4.2% 13.0%
Next Year -1.1% 5.1% 4.5% 12.9%
) Past 5 Years (per 1.6% N/A NIA N/A annum)
Next 5 Years (per 6.5% 4.64% 4.74% 10.29% annum)
Price/Earnings (avg.
for comparison 10.9 13.71 13.79 18.21
categories)
PEG Ratio (avg. for
comparison 1.68 2.95 2.91 1.77
categories)
l&l Add to Portfolio 'O.' Set Alert 8 Email to a Friend
Get Analyst Estimates for Another Symbol: r-.-1.1111 Symbol Lookup
http://finance.yahoo.com/q/ae?s=sre
• Upgrades & Downgrades • Conference Calls
_)
)
2of2
Copyright© 2004 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service - Copyright Policy
Quotes delayed, except where indicated otherwise.
Delay times are 15 mins for NASDAQ, 20 mins for NYSE and Amex. See also delay times for other exchanges.
Quote data provided by Reuters.Analyst opinion data (recommendation summary, price targets, coverage list) are provided by Thomson Financial
Network, based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of
such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon.Analyst Summary Information (upgrades/downgrades
module) provided by Briefing.com.Data and information is provided for informational purposes only, and is not intended for trading purposes.
Neither Yahoo! nor any of its data or content providers (such as Reuters, CS! and exchanges) shall be liable for any errors or delays in the content,
or for any actions taken in reliance thereon. By accessing the Yahoo! site, a user agrees not to redistribute the information found therein.
1 /1 ,1 /(\,1 1 1 • 1 '7 A 1\ If
XEL: Analyst Estimates for XCEL ENERGY - Yahoo! Finance
Next Qtr. 6.1% 14.7% 13.1% 8.6%
This Year -17.5% 4.3% 4.2% 13.0%
) Next Year 4.2% 5.1% 4.5% 12.9%
Past 5 Years (per
annum) NIA NIA NIA NIA
Next 5 Years (per 3.0% 4.64% 4.74% 10.29% annum)
Price/Earnings (avg.
for comparison 14.5 13.71 13.79 18.21
categories)
PEG Ratio (avg. for
comparison 4.83 2.95 2.91 1.77
categories)
i;;a Add to Portfolio '�' Set Alert ISJ Email to a Friend
Get Analyst Estimates for Another Symbol: L .. Jiii Symbol Lookup
http://finance.yahoo.com/q/ae?s=xel
• Upgrades & Downgrades • Conference Calls
)
)
,., ,..,f' ")
Copyright© 2004 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service - Copyright Policy
Quotes delayed, except where indicated otherwise.
Delay times are 15 mins for NASDAQ, 20 rnlns for NYSE and Amex. See also delay times for other exchanges.
Quote data provided by Reuters.Analyst opinion data (recommendation summary, price targets, coverage list) are provided by Thomson Financial
Network, based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of
such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon.Analyst Summary Information (upgrades/downgrades
module) provided by Briefing.com.Data and information is provided for Informational purposes only, and is not intended for trading purposes.
Neither Yahoo! nor any of its data or content providers (such as Reuters, CS! and exchanges) shall be liable for any errors or delays in the content,
or for any actions taken in reliance thereon. By accessing the Yahoo! site, a user agrees not to redistribute the information found therein.
1 / 1 !1 /f\11 1 1 · 1 Q A 1\,f
BKH EPS Estimates I Reuters Investor http://www.investor.reuters.com/MG.aspx?country=US&ticker=B ...
)
VOUKNOWWHATVOUWANT. ·,,·,:·: '.·: .• ;.·: Bl{O\\:\ICo
S5 trades I Low nmgi11 rates I
REUTERS =iD
KNOW.NOW.
Investor I (I) Help & Logout liJ My Profile • Free Offers I
Home Stocks Research Reports Investment Ideas Industries Screening Center Markets Funds Tools
Earnings Per Share Estimates
In US Dollar
#of Mean High Low Std. Proj-
Ests. Est. Est. Est. Dev. P/E
Quarter Ending 12/03 4 0.25 0.28 0.20 0.03
Quarter Ending 03/04 2 0.47 0.55 0.39 0.11
Year Ending 12/03 5 2.00 2.04 1.95 0.03 14.96
Year Ending 12/04 5 2.06 2.13 2.00 0.07 14.52
LT Growth Rate 4 6.18 8.00 3.00 2.38
/
powered by elibrary
,ii Show all for printing
in Earnings Estimates:
� EPS Estimates
II- Earnings Surprises
"' Estimate Revisions � Estimate Trends Industry: Electric U�i�lt�:�. ! Utilities
BKH Newspaper & Magazines Archives
BLACK HILLS CORPORATION (NYSE)
4> 7 Stocks to Buy Now!
� $7 Trades at Scottrade, No Fee IRAs
EPS Estimates
___. .... 111[-Medium-j
� View Risk Alert Tests � About Rating
• Learn about EPS Estimates
Earnings Estimates ·····-- __ , _
IBKH . m sponsored by
Advanced Search
I Risk Alert: BLACK HILLS CORPORATION L _. --·-·- .•..... ·-·-- -·- •.....••.... •.•.•...••. ••..•.• - ------- .. ·-------
'. 9 Last 12 Months
9 Full Archive Search
Quick Info
Stock Overview
Quote
Chart
Key Developments
News
Press Releases
Company Profile
Financial Info
Snapshot
Growth
Ratios
Financial Statements
Investment Profile
Market Sentiment
Performa nee
Shares Shorted
Insider Trading
) Institutional Holders
Risk Alerts NEW!
___J
Professional Analysis
Earnings Estimates
Recommendations
Research Reports
/ ' --
FREE Annual
Reports
Just a Click
Away
Click here for
info.
Find and
Download
Your Fund
Prospectus
Click here for
info.
More from Reuters Investor on BKH
Related data Research Reports
)
� EPS History II- Reuters Investor Profile for BKH
Complimentary Reports from
� Merrill Lynch Private Client _______________ ,..
Sponsor Links
• FREE Annual Reports Just a Click Away
1 /1 A IAA 1 r\ ,,.., A 11. K'
HE EPS Estimates I Reuters Investor http ://www. investor .reuters. com/MG .aspx?ticker=he&y=8 &target= ...
) . OVERALL COST BV G,lnwz- , ·.,t�llnmr\lCo
THE SITE . '.Ii " " ' . , ,· L0 FOR THE EXPERlrnCED TRAOER. \ . . { r :�· '. ," m -...... . \
REUTERS :it
KNOW. :NOW
Investor I (1) Help .t, Logout ii) My Profile • Free Offers I
Home Stocks Research Reports Investment Ideas Industries Screening Center Markets Funds Tools
EPS Estimates
• Learn about EPS Estimates
Do View Risk Alert Tests � About Rating
O S·SICOND
CiUAaA.NTH
O Command
Center Sc.reen
O lteal·Tlme
St,e.1mlng �ta
O No Share Llmlb
Enjoy:
O One Flat Rate:
$10.99 Internet Equity Trades
/
16.13
15.39
Proj­
P/E
j
powered by elibrary I - __ _]
in Earnings Estimates:
Do EPS Estimates � Earnings Surprises
� Estimate Revisions
� Estimate Trends
,ii Show all for printing Industry: Electric Utilities
sponsored by (B,.�@:
Utilities
� Last 12 Months
(f Full Archive Search
Sector:
HAWAIIAN ELECTRIC INDUSTRIES, INC.
(NYSE)
----� dJ .__I
_L_ow____,
Advanced Search
� 7 Stocks to Buy Now!
� $7 Trades at Scottrade, No Fee IRAs
Earnings Per Share Estimates
In US Dollar
# of Mean High Low Std.
Ests. Est. Est. Est. Dev.
Quarter Ending 12/03 3 0.76 0.76 0.75 0.01
Quarter Ending 03/04 2 0.74 0.78 0.69 0.06
Year Ending 12/03 6 3.00 3.50 2.80 0.26
Year Ending 12/04 6 3.14 3.75 2.85 0.33
LT Growth Rate 5 3.90 5.00 2.50 1.14
,·-···-"·--·-·-«---· --·· .. «·-- --·-·--- .. -------- --·---- .. --------- --·----·--] I Risk Alert: HAWAIIAN ELECTRIC INDUSTRIES, INC. !.-····--··-- .. ----
r : --- .. - , .. __ .·--·- .. - .. . --·---·1
, HE Newspaper & Magazines Archives i -· . _ __ .. .. .. .I
Earnings Estimates
·�rm
Find and
Download
Your Fund
Prospectus
Click here for
info.
Quick Info
Stock Overview
Quote
Chart
Key Developments
News
Press Releases
Company Profile
FREE Annual
Reports
Just a Click
Away
Click here for
info.
Professional Analysis
Earnings Estimates
Recommendations
Research Reports ____ . ,-'
Financial Info
Snapshot
Growth
Ratios
Financial Statements
Investment Profile ---------' Market Sentiment
Performance
Shares Shorted
Insider Trading
Institutional Holders
Risk Alerts NEW! )
More from Reuters Investor on HE
Related data Research Reports
)
� EPS History � Reuters Investor Profile for HE
Complimentary Reports from
Do Merrill Lynch Private Client
1 r.f"') 1 /1 A /f\A 1/\.'"'IA lo "It. I
MDU EPS Estimates I Reuters Investor http://www.investor.reuters.com/MG .aspx?ticker=mdu&y=8&targe ...
) . . OVERALL COST BY G,imcz · .. #/�l�HO\\"N \Co , ·�i , '•. •CL, \ ' . ' .. ' J
' � � �'· ..
<"""'.,..;I t
REUTERS
KNOW.NOW
::• ·Iii'
Investor I l1l Help .t. Logout � My Profile • Free Offers I
Home Stocks Research Reports Investment Ideas Industries Screening Center Markets Funds Tools
· MDU Newspaper & Magazines Archives I
� Last 12 Months
J
e Full Archive search powered by elibrary I
- -· ... -- ---·---- -- .. ,l
Earnings Per Share Estimates
In US Dollar
#of Mean High Low Std. Pro]-
Ests. Est. Est. Est. Dev. P/E
Quarter Ending 12/03 8 0.40 0.43 0.37 0.02
Quarter Ending 03/04 4 0.30 0.33 0.28 0.02
Year Ending 12/03 8 1.61 1.65 1.57 0.03 15.01
Year Ending 12/04 8 1.68 1.80 1.57 0.08 14.34
LT Growth Rate 6 8.00 10.00 7.00 1.10
in Earnings Estimates:
Do EPS Estimates
Do Earnings Surprises
Do Estimate Revisions
Do Estimate Trends __________ /
ii, Show all for printing
'Ct Learn about EPS Estimates
·-----------·--·----·-··--------�
l> View Risk Alert Tests l> About Rating
EPS Estimates
� $7 Trades at Scottrade, No Fee IRAs
r·-·-··········-· .. - --··----- .. ··---- .. ···----- _
I Risk Alert : MDU RESOURCES GROUP, INC. �·-· . . ---- -··-- ·-----
Earnings Estimates ;���-- :·w-·------ sp�s-;��-by i-1
, Advanced Search __ ....!...._ _i
'.
;;�_:_�_:_:�1���5--�;��;�_:;��r�l::;;�itie�-----1
c> 7 Stocks to Buy Now!
FREE Annual
Reports
Just a Click
Away
Click here for
info.
Find and
Download
Your Fund
Prospectus
Click here for
info.
Professional Analysis
Earnings Estimates
Recommendations
Research Reports
Quick Info
Stock Overview
Quote
Chart
Key Developments
News
Press Releases
Company Profile
. --·----------· /
Financial Info
Snapshot
Growth
Ratios
Financial Statements
Investment Profile ··----------------' Market Sentiment
Performance
Shares Shorted
Insider Trading
Institutional Holders
Risk Alerts NEW! )
More from Reuters Investor on MDU
Related data Research Reports
)
l> EPS History l> Reuters Investor Profile for MDU
Complimentary Reports from
l> Merrill Lynch Private Client
Sponsor Links
� FREE Annual Reports Just a Click Away
PNM EPS Estimates I Reuters Investor http://www.investor .reuters .corn/MG .aspx?ticker=pnm&y= l 2&targ ...
) Get Ken Fisher's Investment Kit Absolutely FREE of cost or obllgotlonl
Featuring:
> NEW Stock Market Outlook
> Video on Money Management
> Latest market research
> And much more ••.
REUTERS =iD
KNOW.NOW.
Investor
J (I) Help & Logout Iii! My Profile • Free Offers I
Home Stocks Research Reports Investment Ideas Industries Screening Center Markets Funds Tools
r --· - - - ·--·�--- - ··-- ······----·--·--·-- . --······-·· __ .. -----·-·-············-··-----·, ! Risk Alert : PNM RESOURCES, INC.
I ··--« ·- -·····--- -··--·---·- ·--·--- ·----·-··--- -···-- .. ·····- ---------·-··--····--·---···-'
Earnings Per Share Estimates
In US Dollar
#of Mean High Low Std. Pro]-
Ests. Est. Est. Est. Dev. P/E
Quarter Ending 12/03 2 0.36 0.36 0.35 0.01
Quarter Ending 03/04 0.55 0.55 0.55
Year Ending 12/03 4 1.95 2.00 1.90 0.04 14.64
Year Ending 12/04 4 2.02 2.06 1.95 0.05 14.17
LT Growth Rate 5.00 5.00 5.00
/
in Earnings Estimates:
I), EPS Estimates
I), Earnings Surprises
� Estimate Revisions
I), Estimate Trends
iii Show all for printing
• Learn about EPS Estimates
I --·- -··-· ··----- -·····-············-· ------1
powered by elibrary
I
4> Last 12 Months
4> Full Archive Search
� View Risk Alert Tests � About Rating
EPS Estimates
Earnings Estimates
r--· .. -- . ··-·-·-····-- --··--·····--··--··-·--·--·-··-·-·· -- ·········--··-·····-----] l !PNM . m sponsored by 1111111 : Advanced Search __ :..!.,.._ _
: PNM RESOURCES, INC. {NYSE). [
'Sector: ! L. _ __ __ .... �:l�I:�------·-·-·· ���:_t�-�l_:_c�i:�il���---_i
4> 7 Stocks to Buy Now!
4> $7 Trades at Scottrade, No Fee IRAs
i PNM Newspaper & Magazines Archives
Quick Info
Stock Overview
Quote
Chart
Key Developments
News
Press Releases
Company Profile
FREE Annual
Reports
Just a Click
Away Click here for
info.
Find and
Download
Your Fund
Prospectus
Click here for
info.
Financial Info
Snapshot
Growth
Ratios
Financial Statements
Investment Profile
___ ..l
Market Sentiment
Performance
Shares Shorted
Insider Trading
Institutional Holders
Risk Alerts NEW!
Professional Analysis
Earnings Estimates
Recommendations
Research Reports _____________ /
)
More from Reuters Investor on PNM
Related data Research Reports
Sponsor Links
--------------�" _)
� EPS History I), Reuters Investor Profile for PNM
Complimentary Reports from
� Merrill Lynch Private Client
� FREE Annual Reports Just a Click Away
1 of2 1/14/04 10:2:'i AM
PNW EPS Estimates I Reuters Investor http://www.investor.reuters.com/MG.aspx?ticker=pnw&y=6&targe ...
)
.I YOU DON'T NEED �----(Si,: BHOWi\lCo - '
�� .·'/-,
REUTERS =It
KNOW.NOW.
Investor I Ill Help & Logout iii My Profile .. Free Offers I
Home Stocks Research Reports Investment Ideas Industries Screening Center Markets Funds Tools
.. ,_ -- ------- -----·-- ------ ..... - ·-""l PNW Newspaper & Magazines Archives :
.. -.,--.. ... ---.--- .... ,_ -- .. -----·--·--------·---------------.---- .. --------- .. 1
• Last 12 Months i
� Full Archive Search po_w�r�d-��-elibr�_rv I
Earnings Per Share Estimates
In US Dollar
# of Mean High
Ests. Est. Est.
Quarter Ending 12/03 7 0.52 0.57
Quarter Ending 03/04 2 0.29 0.40
Year Ending 12/03 12 2.58 2.80
Year Ending 12/04 12 2.94 3.25
LT Growth Rate 8 5.50 10.00
Low Std. Proj-
Est. Dev. P/E
0.48 0.03
0.18 0.16
2.45 0.10 15.20
2.65 0.17 13.35
3.00 2.45
in Earnings Estimates:
I> EPS Estimates I> Earnings Surprises I> Estimate Revisions
I> Estimate Trends ���������-/ iii Show all for printing
'St Learn about EPS Estimates
I> View Risk Alert Tests I> About Rating
Risk Alert: PINNACLE WEST CAPITAL
EPS Estimates
• 7 Stocks to Buy Now!
• $7 Trades at Scottrade, No Fee IRAs
Earnings Estimates ��::=����·- ··------�����;ed--b� ..
PINNACLE WEST CAPITAL (NYSE) I Sector: Utilities Industry: Electric Utllltles ... _ .. ·-··-· . --- ···-- - - -- """' - --··· --------- -- - --- ··-- --·. - --- ----
Quick Info
Stock Overview
Quote
Chart
Key Developments
News
Press Releases
Company Profile
Financial Info
Snapshot
Growth
Ratios
Financial Statements
Investment Profile
Market Sentiment
Performance
Shares Shorted
Insider Trading
) Institutional Holders
Risk Alerts NEW!
Professional Analysis
Earnings Estimates
Recommendations
Research Reports
/ ' --·---··--·-···· --·--
$1 Trades
at Scottrade
Click here for
info.
Find and
Download
Your Fund
Prospectus
Click here for
info.
More from Reuters Investor on PNW
Related data Research Reports
)
I> EPS History
Sponsor Links
� Reuters Investor Profile for PNW
Complimentary Reports from
I> Merrill Lynch Private Client
• FREE Annual Reports Just a Click Away
I of2 1 /1 Ll/(),1 1 ().·,r; A l\lf
PSD EPS Estimates I Reuters Investor http://www.investor.reuters.com/M G .aspx?ticker=Psd&y= 1 O&targe ...
) • OVERALL COST BY G,lme,.. ' < .�-�f�lHO\\''IICO
.$5 , iii 1e 1'qu1:y 111a1 lu:t erders I $10 timit rnders I -, i. · ;J .. ,
. --� ·\
REUTERS =ID
KNOW.NOW.
Investor I 0 Help .t. Logout Iii My Profile • Free Offers I
Home Stocks Research Reports Investment Ideas Industries Screening Center Markets Funds Tools
"Ct Learn about EPS Estimates
/
I powered by elibrary ! -------------------------- --1
,II Show all for printing
in Earnings Estimates:
I) EPS Estimates
I) Earnings Surprises
I) Estimate Revisions
I) Estimate Trends
---------------·----- -----·----- --------------------
Earnings Per Share Estimates
In US Dollar
# of Mean High Low Std. Proj-
Ests. Est. Est. Est. Dev. P/E
Quarter Ending 12/03 3 0.59 0.63 0.57 0.03
Quarter Ending 03/04 1 0.56 0.56 0.56
Year Ending 12/03 8 1.36 1.40 1.30 0.03 17.34
Year Ending 12/04 8 1.82 1.90 1.76 0.04 12.96
LT Growth Rate 4 5.25 8.00 4.00 1.89
� View Risk Alert Tests ., About Rating
•·············----··-------«···------···"-- . --i
Ris�-����-��-�-UG!�!-�-�R��' __ INC. .. ------ J
EPS Estimates
Earnings Estimates '--··-·-··- .. --------·- - -----------------------------1 !� m sponsoredby·-
: Advanced Search __ ! __ ...!..... -
. PUGET ENERGY, INC. (NYSE) I
Sector: Utilities __ ----��-��X: __ �!�-���-��llit!=:. _j
4> 7 Stocks to Buy Now!
4> $7 Trades at Scottrade, No Fee. IRAs
' PSD Newspaper & Magazines Archives
i 4> Last 12 Months
: 4> Full Archive Search
Quick Info
Stock Overview
Quote
Chart
Key Developments
News
Press Releases
Company Profile
_j
Financial Info
Snapshot
Growth
Ratios
Financial Statements
Investment Profile ______ , __ J
Market Sentiment
Performance
Shares Shorted
Insider Trading ) Institutional Holders
Risk Alerts NEW!
Professional Analysis
Earnings Estimates
Recommendations
Research Reports ________ / .
FREE Annual
Reports
Just a Click
Away
Click here for
info.
Find and
Download
Your Fund
Prospectus
Click here for
info.
More from Reuters Investor on PSD
Related data Research Reports
)
I) EPS History
Sponsor Links
I) Reuters Investor Profile for PSD
Complimentary Reports from
., Merrill Lynch Private Client
4> FREE Annual Reports Just a Ciiek Away
I of2 1/14/04 11 :02 AM
SRE EPS Estimates I Reuters Investor http://www.investor.reuters.com/MG.aspx?ticker=sre&y=4&target. ..
) "It's time to take the bull by the horns."
-Kerl Fisher, f"Orbes cok.mniSt and rn.,ney manager
Find out why . .3,da,IUll.l:LUJloD.!IL...l,]ILIJlii.lo..Jl.M.l!ILJ..D.ls!le.ji!Ma,tD,.J;:UU.nsi:lt...M.llWllOI
REUTERS =iD
KNOW.NOW
Investor I (JJ Help :t, Logout Iii) My Profile Ifill Free Offers I
Home Stocks Research Reports Investment Ideas Industries Screening Center Markets Funds Tools
--------· --·-·--··---·--------······-----····-·--·---- .] Risk Alert : SEMPRA ENERGY - -- ·-- .. -··---------------------- --------- --- ·······-- .. ,.,_ ·----··········- - --··········"""'"'"---············
Earnings Per Share Estimates
In US Dollar
# of Mean High Low Std. Proj-
Ests. Est. Est. Est. Dev. P/E
Quarter Ending 12/03 9 0.59 0.71 0.50 0.07
Quarter Ending 03/04 3 0.65 0.74 0.60 0.08
Year Ending 12/03 13 2.70 2.91 2.50 0.10 11.01
Year Ending 12/04 12 2.66 2.80 2.25 0.14 11.17
LT Growth Rate 8 6.00 8.00 3.00 2.00
....... AMEIITRAOrA:
/
·················· ..... -1
I ·---·-- -- ···-··-··-- -----i
powered by elibrary I
jjj, Show all for printing
in Earnings Estimates:
Do EPS Estimates
� Earnings Surprises
� Estimate Revisions � Estimate Trends
'St Learn about EPS Estimates
SRE Newspaper & Magazines Archives
� View Risk Alert Tests � About Rating
EPS Estimates
a> 7 Stocks to Buy Now!
a> FREE Annual Reports
Earnings Estimates
I�.��-.: rm
, Advanced Search
j SEMPRA ENERGY (NYSE)
i ; Sector: Utilities Industry: Natural Gas Utilities ! _,._, - -·-·-···----- •••• -- ...•••••••.•••••• ,--····"- - - •• _
• Last 12 Months
; a> Full Archive Search
FREE Annual
Reports
Just a Click
Away
Click here for
info.
Find and
Download
Your Fund
Prospectus
Click here for
info.
Quick Info
Stock Overview
Quote
Chart
Key Developments
News
Press Releases
Company Profile
Financial Info
Snapshot
Growth
Ratios
Financial Statements
Investment Profile
____ , !
Market Sentiment
Performance
Shares Shorted
Insider Trading
Institutional Holders
Risk Alerts NEW! -------' Professional Analysis
Earnings Estimates
Recommendations
Research Reports
)
More from Reuters Investor on SRE
Related data Research Reports
)
� EPS History
Sponsor Links
� Reuters Investor Profile for SRE '
Complimentary Reports from
� Merrill Lynch Private Client
a> FREE Annual Reports Just a Click Away
1 of2 1 /14/04 11 ·O'l, AM
XEL EPS Estimates I Reuters Investor http://www.investor.reuters.com/MG.aspx?ticker=xel&y=8&target. ..
)
YOU KNOW · · : · · WHAT YOU WANT. _:' · , ;�_ �---·(1.�� ,, BBO\\·�IC:n
I � '
. ' . '� .>
REUTERS =ID
KNOW.NOW.
Investor I (1) Help & Logout � My Profile • Free Offers I
Home Stocks Research Reports Investment Ideas Industries Screening Center Markets Funds Tools
)
Quick Info
Stock Overview
Quote
Chart
Key Developments
News
Press Releases
Company Profile
Financial Info
Snapshot
Growth
Ratios
Financial Statements
Investment Profile ________________ )
Market Sentiment
Performance
Shares Shorted
Insider Trading
Institutional Holders
Risk Alerts NEW!
Professional Analysis
Earnings Estimates
Recommendations
Research Reports
_ .. /'
$7 Trades
at Scottrade
Click here for
info.
Risk Alert : XCEL ENERGY INC.
....... � I---- Low !
� View Risk Alert Tests • About Rating
EPS Estimates
in Earnings Estimates:
• EPS Estimates
• Earnings Surprises
• Estimate Revisions
• Estimate Trends a Show all for printing
...... ------ ---·-- . ·-·-· -- _l
......... .,. ...\
'Ct Learn about EPS Estimates
Earnings Per Share Estimates
In US Dollar
#of Mean High Low Std. Proj-
Ests. Est. Est. Est. Dev. P/E
Quarter Ending 12/03 5 0.27 0.29 0.26 0.02
Quarter Ending 03/04 1 0.31 0.31 0.31
Year Ending 12/03 13 1.18 1.21 1.15 0.02 14.44
Year Ending 12/04 13 1.23 1.30 1.15 0.04 13.92
LT Growth Rate 10 3.40 7.00 1.00 1.65
Earnings Estimates
. ··-··· ,, _ _ , _ .. ,::i I j�E� Im sponsored by 18Ulli • Advanced Search _. __ ...!....._ _! . f
; XCEL ENERGY INC. (NYSE) i , I l Sector: __ ... Utllltles ..... -· --- Industry:. _Electric Utilities _J
• 7 Stocks to Buy Now!
• $7 Trades at Scottrade, No Fee IRAs
)
1 of2
Join Ameritrade
For a FREE
Offer
Click here for
info.
! XEL Newspaper & Magazines Archives
i • Last 12 Months l � Full Archive Search
More from Reuters Investor on XEL
Related data
� EPS History
________________ .,.
Sponsor Links
� FREE Annual Reports Just a Click Away
·--�
i
.. _ . �owered by eUbr"._r�.I
Research Reports
• Reuters Investor Profile for XEL
Complimentary Reports from
� Merrill Lynch Private Client
1/14/04 11:04 AM
. ·,. � ; '. .'
� ""': ' . . / .
.. ·:-,
(
(
,, " "
I,_• iJ �-
., I
695 ·:·r·.·· . ..;, .. ,.:
'": .. (
ELECTRIC UTILITY (CENTRAL) INDUSTRY . . :' . '\·-�. . ' ' . . January 2; 2004 ·
Staying Close To Basics . Ameren is a classic case ofa company with a censer­ .. vative management; Noncore operations are· minimal, and new plants are built only to cover the rising demand Confronting The Problem of native customers: Over the past five y\:iars, its exten- With a number of new plants going on .line starting in . . sive borrowing power was applied to buying two utilities the' spring of 2001, electricity prices dropped sharply, in neighboring Illinois.t'I'he purchases have been inere­ and units selling to the wholesale market suffered a mental to earnings without undue risk�J�µrrehtly,: Iiego-, decline in value. Since a large portion of the financing of tiations are under way to acquire a- third. utility, coiitigu­ new plants .was funded with long-term debt, balance. ous to the other two. Vectren provides-an exampleofa sheets weakened, and. borrowing became more expen- small company engaged in nonutility activities. closely sive. A decline in the industry's average fixed charge related to core business. ProLiance, a natural gas mar­ coverage from 240% in 1999, to 185% in 2002, was keter and trader, inwhich it has a 50�)1take, services evidence of the. falloff. Though. energy demand is ex-. the company's twi>gas;utilities.':Arid:two'wholly'owiied . pected to' rise at more than a 2% annual rate for the coal mines not only provide fuel to the company's plants, balance of'the decade, there. will still be a surplus of but sell a million tohs yearly in' -the open market. available power for a while. To ease the condition, many Elsewhere, Consolidated Edison dfrriyes, �ostallI�f:ita companies. have taken steps to strengthen finances. · earnings from' the sale of power e>yer ail. :�zj;eji:Sfv.e· wires Alliant Energy, for one, sold assets in· Australia, an system. T4e' company has.a sn>:!fil' in�fesfiri ridnutility investment in affordable housing, and its interest in oil enterprises.jbut doesn't e�ect.the�>to produce mean­ and gas properties. It also issued common stock to ingful profits. All told-the entities that stuck to.basies in deleverage the capital structure, The bulk of the pro- · the recent downturn have largely generated steady but ceeds from the sales were applied to long-term· debt · unexciting results. That should appeal to conservative reduction. Aquila, for another, had-been a big player in accounts, but may notattract income-oriented investors, energy marketing and trading+that produced heavy · ·' · < ( ,,_·, · .. · ;. · · · ; > .. · losses. It exited as much of this business as possible, but : Investment Advice:· : . ;-·: ·;· :,: : .. , : -,::-.-:.· . remains burdened with. some unattractive contracts. · · · 'Companies tI?,at will likely fares· best in the current. Planned divestiture of' non utility assets and paring of : environment are those with strong finances and a low operating. and maintenance . expenses will enable the ',;: payout ratio that allows fol'. dividend growth. Our, re­ companyto retire substantial amounts oflong-term debt · .. ports on the following pagesshould behelpful in·s;elect;,: and help it become almost entirely a regulated electric 1 'irig utilities that meet these0requiretµe};lts:;,i;i';: , · : , .. : and gas utility. Cinergy, for its part, is not only exiting ' · ii · ', ,,,:, >.,.:', ·, ,;.,c '.,f,Aiihur,H;' Medii.lii � . . . . .. : . /: .;
All of the electric utilities in the central United I INDUSTRY TIMELINESS: 87 (of 98) States are reviewed in this Issue. Those serving · the western region may be found in Issue 11. The plant ownership abroad but. has c�nceled one. of two eastern companies are covered in Issue 1. · ·cogeneration facilities that were .l:>�ingibuilt with .BP. Global. It further. reduced exposure ;toJnex:,chant. opera- hi anticipation of.a rtse hi energy usage, electric tions by transferring two peaking 1.iirlts;from unregu­ utilities added almost 200,000 megawatts of new · · 1ated· to regulated status .. Too, plaimed;r,ajuctio�,-.jii capacity since 1999. But demand flattened out, construction spending willimprove.cashflow and allow, and the industry faces the prospect of excess long-term debt reduction. · ·-, :; \ · _ -· :; ··. '.',. ·. capacity for some time to come. A number of For many companies, 2003 was; a year of restructur­ companies that built new plants found themselves .. ing. But overcoming weaknesses resulting from expan­ with leveraged balance sheets, reduced earnings, sion and investments· in unsuccessful .noncore busi­ and stock price declines. Some will feel the. finan- nesses .takes.:time� So, it may be: a while before eompa­ cial impact for years. To cope with the problem;. niesthat were h� inthe recent downturn restore their . managements cut back construction programs · balance sheets to the level attained prior to the building and curtailed, or in some cases, canceled whole- . spree. sale operations outright. But not all utilities were affected equally. Those that invested in sectors related to core operations generally fared better;
• '• r , ·.;� :� e '
1
r':1 -·'.,,'
,Composite Statistics: Elect�c Utjlity Industry . ' ,· - '. '. , ' :, :,: 1
!· <''.. Ele9titc, LJ,tilltY,(� ;<? ;. ;;:· i- ii ..
RELATIVE STRENGTl-t (Ratio otJr'idustr,, to'Nal�''une: C-�t,,p�}: 1999 2000 2001 2002 2003 . 2004 06-08 . ,. . ' . . . ... . � :
260.9 374.1 494.2 286.1 310 315 Revenues ($bill) 350 •1·150· , .. ,,,:,, ;·,. ·.·,,.· .. 18.5 11.9 22.4 18.0 21.5 23.0 · Net Profit (Sblll) 28.0 120 ;•;.tr, .. . \f ! 32.7% 36.9% 34.7% 30.5% - 34.5% ', 34.5% Income Tax Rate ·35,0'J(, 90 2.5% 4.2% 3.3% 4.8% 3.0% 3.0% .AFUDC % to Net Profit 3.0% ...
51.7% 55.9°,4. 58.0% 57.8% 56.0% 54.0% Long-Term Debi Ratio 50.0% ·. 75
40:a%· ,,·,.,,, ·. :�.' I .: ·.1 A :: ..... 42.1% 38.9% 39.0% 42.0% 43.5% Common Equity Ratio 48.0% 60 � .. •· -t- � ··,..r, V Y;c ��-\,:.. ·'· 329,4 391.6 442.4 439.0 465 470 Total Capital ($bill) 515 .. :·:-· -:.:-r· ' 45. ·' 310.1 370.6 413,6 423.6 427 435 Net Plant ($bill) 455 "'-...! -·., ,, 1_/;�11� (--;; --::,;; 7.4% 4.9% 7.0% 6.1% .6.5% . 6.5% Return on Total Cap'I 7.0% ·11' • . � ... ,·.-_f• .. 11.6% 6.9"o 12.1% 9.7% 10.5% 10.5% Return on Shr. Equity . 11.0% jQ · ....
;; .. !-.·.· 12.6% 7.0% 12.5% 10.0% 11.0% · 11.0% Return on tom Equity · · 11.0% ':;::j, :•·.l, �,:,: .. .·,· 4.4% NMF. 5.6% 2.9% 4.5% . 5.(!% Retained to Com Eq . 5.5% i\.'. ; ',':' ·'.)', 67% 106% 57% 72.2%. .. ·mi 59"· All Dfv'd1 io Net Prof .. 55% ' . ...
12.9 23.0 13,5 · 16.3 Bold� ��· Avg AM'I t>/E Ratio . · 12.5. , 15 . ;,., � :,··,>.,. ;:::
.74 1.50 .,· .69 :89 Rellllve P� �atici: . .:·.:·-: c·� '; ,• ,.· _19.97.'· ·1'.?�8 · : . .1999.·,. ,2oqo ,: i�f.llU ,:;2uq2,. 20Q3, ·: -. : V.h ,,, .» .;':'-,-. 5.0% 4.6°(6. 4.1% 4.4% ntl �. Avg Ann'I Dlv'd Yield ,: 4.4% · ' ' ' Index· June ·• J96!.-!.I -JOO+ ,,"!· ,"· ,.. '·" '' ' : ,..., • I • �!� .�-.... • r.:.i' JJ-;'! I� ' ';It ir,k? .
. .: ·. 0 2004, Value ,Line. Nilishiio, Inc. AU rights reserved. Factual ma1e11al $ obtained from sources bel""ed · lo be relabie and is p111,lde<!. withoul ,,atranlles ol anr kind.• . ·· '. THE PUBUSHER'IS HOT RESPONSIBLE FOR mY ERRORS OR OMISSIONS HEREIN. This p!Jblicalion is slric!ly fo<.�'s.9Wn, noo-comme<cial, internal use., No pat of I may be 1eproduced, resold, slored 0< lransmitted;, any prinled, eleciroric or olllei form. 01 used la< gene,aling or marl<enng any prin:ed 0< e:ectron� publication. servica 0< product To subscribe call 1-800-833-0046 .
Moody's Long-Term Corporate Bond Yield Averages
Based on Seasoned Bonds with Remaining Maturities of at least 20 Years"
Yields(%)
1/8/04 1/7/04 1/6/04 1/5/04 1/2/04
Avg. Corporate 6.18 6.19 6.22 6.29 6.30
Aaa 5.63 5.61 5.63 5.70 5.73
Aa 6.01 6.02 6.04 6.10 6.11
A 6.18 6.19 6.22 6.28 6.29
Baa 6.53 6.57 6.61 6.68 6.70
Avg. Industrial 6.02 6.03 6.05 6.12 6.14
Aaa 5.63 5.61 5.63 5.70 5.73
Aa 5.84 5.85 5.87 5.93 5.94
A 6.10 6.11 6.14 6.20 6.21
Baa 6.50 6.53 6.56 6.64 6.66
Avg. Public Utility 6.33 6.35 6.39 6.45 6.45
Aaa
Aa 6.18 6.19 6.21 6.27 6.27
A 6.25 6.26 6.29 6.36 6.36
) Baa 6.56 6.60 6.66 6.72 6.73
.:> Spreads Above 10-Vear Treasury (hp)
1/8/04 1/7/04 1/6/04 1/5/04 1/2/04
Avg. Corporate 192 194 194 191 192
Aaa 137 136 135 132 135
Aa 175 177 176 172 173
A 192 194 194 190 191
Baa 227 232 233 230 232
Avg. Industrial 176 178 177 174 176
Aaa 137 136 135 132 135
Aa 158 160 159 155 156
A 184 186 186 182 183
Baa 224 228 228 226 228
Avg. Public Utility 207 210 211 207 207
Aaa
Aa 192 194 193 189 189
A 199 201 201 198 198
Baa 230 235 238 234 235
)
. J
• Moody's Long-Term Corporate Bond Yield Averages have been published daily since 1929. They are derived from pricing
data on a regularly-replenished population of nearly 7 5 seasoned corporate bonds in the US market, each with current
outstandings over $100 million. The bonds have maturities as close as possible to 30 years; they are dropped from the list if
their remaining life falls below 20 years, if their ratings change. Bonds with deep discounts or steep premiums to par are
gene'ralty excluded. Alt yields are yield-to-maturity calculated on a semi-annual basis. Each observation is an unweighted
average. with Average Corporate Yields representing the unweighted average of the corresponding Average Industrial and
Average Public Utility observations.
•• Average of Daily Readings.
••• As of 12/10/01 the "Aaa" Utilities index wilt be discontinued indefinitely. As a result. there will be a pronounced drop
in the "Aaa" Corporate yields from the time of discontinuation forward. but the rest of the yield calculations should remain
comparable to their recent history .
January 12, 2004 Moody's Credit Perspectives 39
MAR-04-2003 13:39 AP REGULATION AND RATES 301 790 6232 P.03/13
Average Equity Returns Authorized January 1992 • December 2002
(Return Percent - No. of Observations)
.L> Electric Gas Telephone
1:.§IiQQ Ublitles Uti@es _i.l1llilleL
1992 FuU Year 12.09 (48) 12.01 (29) 12.27 (7)
1993 Full Year 11.41 (32) 11.35 (45) 11.63 {12)
1994 Full Year 11.34 (31) 11.35 {28) 11.81 (11)
1995 Full Year 11.55 (33) 11.43 (16) 12.08 (8)
1996 1st Quarter 11.28 (2) 11.45 m 11 .70 (2)
2nd Quarter 11.46 (9) 10.BB (6) 11.30 (1)
3rd· Quarter 10.76 (3) 11.25 (2) 12.25 (1)
4th Quarter 11.58 (B) 11.32 (10} (0)
1996 Full Year 11.39 (22) 11.19 (20) 11.74 (4)
1997 1st Quarter 11.30 (4) 11.31 (7) 11.80 (1)
2nd Quarter 11.62 (3) 11.70 ( 1) 11.60 (1)
3rd Quarter 12.00 (1) 12.00 (1) 11.70 (1)
4th Quarter 11.11 (3) 10.99 (4) 11.35 (2)
1997 Full Year 11.40(11) 11.29 (13) 11.56 (5)
1998 tst Quarter 11.31 (4) (0) 11.30 (1)
2nd Quarter 12.20 (1) 11.37 (3) (0)
3rd Quarter 11.80 (2) 11.41, (3) {O)
4th Quarter 11.83 (3) 11.69 (4) (0)
1996 Full Year 11.66 {10) 11.51 {10) 11.30 (1)
( )1999 1st Quarter 10.58 (4) 10-.82 (3) 13.00 (1)
2nd Quarter 10.94 · (4) 10.62' (3) (0) .:__; 3rd Quarter 10.63 (6) (0) (0)
4th Quarter 11.08 (4) 10.33 (3) (0)
1999 Full Year 10.77(20) 10.66 (9) 13.00 (1)
2000 1st Quarter 11.06 (5) 10.71 (1) 11.50 (1)
2nd Quarter 11.11 (2) 11.08 (4) (0)
3rd Quarter 11.66 (2) 11.33 (5) 11.25 (1)
4th Quarter 12.06 (3) 12.50 (2) (0)
2000 full Year 11.43 (12) 11.39 (12) 11.38 (2)
2001 1st Quarter 11.38 (2) 11.16 (4) (0)
2nd Quarter 10.88 (2) 10.75 (1) (0)
3rd Quarter 10.78 (6) (0) (0)
4th Quarter 11.50 (6) 10.65 (2) (0)
j2001 Full Yeai 11.09(18) 10.95 (7) (0)
•
2002 1st Quarter 10.87 (5) 10.67 (3) (0) .
2nd Quarter 11.41 (6) 11.64 (4) -· {0)
3rd Quarter . 11.06 (4) 11.50 (3) (0) 4th Quarter 11.20 (7) 10.76(11) (0)
( )12002 Full Year 11.16 (22) 11.03 (21) co> •
• .. J
2. �
Avera�e E9ul� Returns Authorized January 1990. December 2000
.. · -- . ( ) . (Return Percent· No. of Observations)
� Electric Gas Telephone � Utilities Utilities Utilities
1990 Full Year 12.70 (44) 12.67 (31) 12.91 (9) 1991 Fun Year 12.55 (45) 12.46 (35) 12.89 (16) 1992 Full Year 12.09 (48) 12.01 (29) 12.27 (7) 1993 Full Year 11.41 (32) 11.35 (45) 11.83 (12)
1994 1st Quarter 11.20(10) 11.12 (5) 11.05 (3) 2nd Quarter 11.13 (5) 10.81 (5) 12.46 (3) 3rd Quarter 12.75 (1) 10.95 (2) - (0) 4th Quarter 11.41 (15) 11.64 (16) 11.88 (5)
1994 Full Year 11.34 (31) 11.35 (28) 11.81 (11)
1995 1st Quarter 11.96 (8) - (0) (0) 2nd Quarter 11.36 (9) 11.00 (1) 11.84 (4) 3rd Quarter -11.33 (6) 11.07 (3) 12.50 (1) 4th Quarter 11.53 (10) 11.56 (12) 12.25 (3)
1995 Full Year 11.55 (33) 11.43(16) 12.08 (8)
1996 1st Quarter 11.28 (2) 11.45 (2) 11.70 (2) 2nd Quarter 11.46 (9) 10.88 (6) 11.30 (1) 3rd Quarter 10.76 (3) 11.25 (2) 12.25 (1} ( ) 4th Quarter 11.58 (8) 11.32 (10) (0)
0 1996 Full Year 11.39 (22} 11.19 (20) 11.74 (4)
1997 1st Quarter 11.30 (4) 11.31 (7) 11.80 (1) 2nd Quarter 11.62 (3) 11.70 (1) 11.60 (1} 3rd Quarter 12.00 (1) 12.00 (1) 11.70 (1)
4th Quarter 11.11 (3) 10.99 (4) 11.35 (2)
1997 Full Year ·'\'. 11.40(11) 11.29 (13) 11.56 (5)
1998 1st Quarter 11.31 (4) (0) 11.30 (1)
2nd Quarter 12.20 (1) 11.37 (3) (0)
3rd Quarter 11.80 (2) 11.41 (3) (0)
4th Quarter 11.83 (3) 11.69 (4) - (0)
1998 Full Year 11.66 (10) 11.51 (10) 11.30 (1)
1999 1st Quarter 10.58 (4) 10.82 (3) 13.00 (1)
2nd Quarter 10.94 (4) 10.82 (3) (0)
3rd Quarter 10.63 (8) (0) (0)
4th Quarter 11.08 (4) 10.33 (3) (0)
1999 Full Year 10.77 (20) 10.66 (9) 13.00 (1)
2000 .1st Quarter 11.06 (5) 10.71 (1) 11.50 (1)
( ) 2nd Quarter 11.11 (2) 11.08 (4) (OJ
3rd Quarter 11.68 (2) 11.33 (5) 11.25 (1)
4th Quarter 12.08 (3) 12.50 (2) (0) -:::/
2000 Full Year 11.43(12) 11.39 (12) 11.38 (2)
...
Average Equity Returns Authorlzed January 1'980 - Deceaber 1989 -- ----------------------------------------------------------
( ) � Period IUectric Utilities Gas Utilities Telephone . UtUlt1•• ,.
R \..-
(Return Percent - No. o! Observationa)
1980 1st Quarter 13.97 !211 13.45 (13! 12.63 ''I --. 2nd Quarter 14.25 25 14.38 (9 12.63110 3rd Quarter 14.30 25 13.87 (12 12.N 12 4th Quarter 14.32 33 14.35 (23 13.32 12 -------------------------------------------------------------------------------------- 1980 Full Year 14.23(104) 14.05 (57) 12.9<t (40) ------------------- --- -------------------------------------------------------------- 1981 1st Quarter 14.87121) 14.69 (91 13,881131 2nd Quarter 15.03 401 14.61 110 14.18 13 3rd Quarter 15.31 26 14.86 18 14.37 18 4th Quarter 15. 58 36 15. 70 23 1•. '11 20 -------------------------------------------------------------------------------------- 1981 Full Year 15.22(123} 15.11 (60) 14.33 (S.) -------------------------------------------------------------------------------------· 1982 1st Quarter 15.71
li!!
15.55 l!U. 14.88
IHI 2nd Quarter 15.60 15.62 lS.09 3rd Quarter 15.83 15.72 15.81 4th Quarter 15.97 15.62 1�.03 -------------------------------------------------------------------------------------- 1982 Pull Year 15.78(125) 15.62 (83) 15.13. (M) ---------------------------------------------------------------------�--------------� 1983 1st Quarter 15.53
lHl
15.41 im 14.75 psi 2nd Quarter 15.10 14.84 U. TS 1'1 3rd Quarter 15.39 15.24 14,64' � 4th Quarter 15.35 15.41 14. '12 ( . -------------------------------------------------------------------------------------- 1983 Full Year 15.36 {95) 15.25 (65) 14.?3 (11) -------------------------------------------------------------------------------------� ( 1984 1st Quarter 15.08 !HI 15.39 1s1 u .111 ·uz I • .. ) 2nd Quarter 15.07 15.07 14.73 1' c: 3rd Quarter 15.38 15.37 ni 14.S9 ( 0 I
d 4th Quarter 15.69 15.33 14. '16 ('I ---·----------------------------------------------------------------------------------- 1984 Full Year 15.32 (75) 15.31 (39) 14.50 (3&) ------------------------------------------------------------------------------·-------·. 1985 1st Quarter 15.51 im 15.03 1=1 14.83 1101 2nd Quarter 15.27 15.44 . 14.80 10 3rd Quarter 14.91 14.64 14.58 1' 4th Quarter 15.11 14.44 o: 14.56 ( 4 -------------------------------------------------------------------------------------- 1985 Full Year 15.20 (58) 14.75 (34) 14.S9 (40) --------------------------------------------------------------------------------------
1986 �:jg�:��:� UJ� g;l �i:gi 1:i It: ··1;,. . 3rd Quarter 13.18 bo 13.09 5 13.88 2 · 4th Quarter 13.52 (9 13.62 7 13�55 : 3 .: --------------------------------------------------------------------------------------· 1986 Full Year 13.93 (49) 13.46 (25) 13.93 (11) · -------------------------------------------------------------------------------------- 1987 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
1987 Full .Year
12.92 !121 13.15 10 13.17 16 12.79 19
12.99 (57)
12.61 {7l 13.13 5 12.56 5 12.73 (12
12.74 (29}
12.3& 111· · 12.81 4 13.06, 4 · 12.80 · 4 ·
12.as (t3) _
-------------------------------------------------------------------------------------- ·1988 1st Quarter. 12 74 18! 12 94 15! 12. '10 121 2nd Quarter 12:10 7 12:,a 4 12.00 · 1 · . · 3rd Quarter 12.68 8 12.79 9 13.37 3 4th Quarter 12.98 (10 12.98 (13 13.30 7 -------------------------------------------------------------------------------------- ( ). 1988 Full Vear 1·2.79 (33) . .12.85 (31) 13.13 (13) --- -------------------------------------------------------. ------------. -------------- .....
· , 1 l89 1st Quarter 13.04 l9l 12.99 i"! 12•95 ·131 . !;.., -� . 2nd Quarter 13.22 7 13.25 2 12.'19·· 3 . ·..__./ · 3rd Quarter 12. 38 2 12. 66 · '1 13, 7G 2 · 4th Quarter 12. 84 9 12. 94 (18 12 ,83 '1 -------------------------------------------------------------------------------------- • 1989 Full Year 12.97 (27) 12.88 (31) 12.97 (15) -----------------------------------------------------· --------------------------------
( ) -'::::.:::7'
···, .
Special Research Study
. January 1986
( ) :-d
t 1111� ri1:h1 1'1Xci. ,•\ r.:ui; H�'ll�:1rl'l1 ( '11q111r:11iun
,.,, 111 h1· n•11rin1rd "l1h11t1l l·�1irr�, IH.'rmi�,11111
RETURNS AUTHORIZED
JULY 19 74 - DECEMBER 1985'
'r., ... . . . ' .t \ . .
- 3 -
0 \ -- 1974 1975
1976
1977 1978
1979
ROE
13.l 13.2 13. l
13.3 13.2
13.5
1980
1981
1982
1983 1984 1985
ROE
14.l
15.2
15.8
15.4 15.4 15.2
TABtE OF CONTENT
Commission
Alabama Arizona
Arkansas California
Colorado Connecticut
Delaware District of Columbia
(. _ Florida }�eorgia.
'::::} :wai i · - ··.rdaho
Illinois Indiana
Iowa Kansas
Kentucky. Louisiana
Maine Matyland
Massachus.et ts
Michigan . :
Min.nesota Mississippi Missouri
Page
4 6
8 lO
14
16
18
20
22
24
26
28
30
34
36 40
42 44
46
48
50 54
56
58
60
Commission
Montana Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York North Carolina
North Dakota Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee Texas
Utah Vermont
Virginia Washington
West Virginia
Wisconsin Wyoming
Page
64
66
68
70
72
74
76
8 :z
86
88
92
94
96 100
102
104
106
108
112 114
116 118
120
122
126
( )oTE: This Research Study has been prepared - our·clients and under no circumstance ��···· or disseminated to a party or parties ---../ organization.
solely for the use of is it to be duplicated outside your
!
( ) ':::J
Moody's Long· Term Corporate Bond Yield Averages
Based on Seasoned Bonds with Remaining Maturities of at Least 20 Years"
Yields(%)
1/2/03 12/31/02 12/30/02 12/27/02 12/26/02
Avg. Corporate 6.90 6.78 6.76 6.77 6.83
Aaa 6.23 6.09 6.07 6.08 6.15
Aa 6.63 6.52 6.49 6.51 6.56
A 6.82 6.69 6.66 6.68 6.73
Baa 7.44 7.31 7.30 7.32 7.38
Avg. Industrial 6.60 6.46 6.43 6.45 6.52
Aaa 6.23 6.09 6.07 6.08 6.15
Aa 6.35 6.22 6.19 6.21 6.27
A 6.52 6.38 6.35 6.37 6.45
Baa 7.30 7.15 7.12 7.14 7.21
Avg. Public Utility 7.20 7.09 7.08 7 09 7.14
Aaa
Aa 6.91 6.81 6.79 6.80 6.85
A 7.11 6.99 6.97 6.98 7.01 ( ) Baa 7.58 7.47 7.48 7.49 7.55
� Spreads Above 10- Vear Treasury (bp)
1/2/03 12/31/02 12/30/02 12/27/02 12/26/02
Avg. Corporate 285 296 296 295 293
Aaa 218 227 227 226 225
Aa 258 270 269 269 266
A 277 287 286 286 283
Baa 339 349 350 350 348
Avg. Industrial 255 264 263 263 262
Aaa 218 227 227 226 225
Aa 230 240 239 239 237
A 247 256 255 255 255
Baa 325 333 332 332 331
Avg. Public Utility 315 327 328 327 324
Aaa
Aa 286 299 299 298 295
A 306 317 317 316 311
Baa 353 365 368 367 365
( ) .. __)
• Moody's long-Term Corporate Bond Yield Averages have been published daily since 1929. They are derived from pricing
data on a regularly-replenished population of nearly 7 5 seasoned corporate bonds in the US market, each with current
outstandings over $100 million. The bonds have maturities as close as possible to 30 years; they are dropped from the list if
their remaining life falls below 20 years, if their ratings change. Bonds with deep discounts or steep premiums to par are
generally excluded. All yields are yield-to-maturity calculated on a semi-annual basis. Each observation is an unweighted
average, with Average Corporate Yields representing the unweighted average of the corresponding Average Industrial and
Average Public Utility observations.
•• Average of Daily Readings.
••• As of 12/10/01 the "Aaa" Utilities index will be discontinued indefinitely. As a result, there will be a pronounced drop
in the "Aaa" Corporate yields from the time of discontinuation forward, but the rest of the yield calculations should remain
comparable to their recent history.
January 6, 2003 Moody's Credit Perspectives
Moody's Long-Term Corporate Bond Yield Averages
Based on Seasoned Bonds with Remaining Maturities of at least 20 Years"
Yields(%)
11/21/0211/20/02 11/19/02 11/18/02 11/15/02
Avg. Corporate 7.02 6.97 6.91 6.95 6.98
Aaa 6.35 6.29 6.23 6.25 6.28
Aa 6.74 6.70 6.64 6.66 6.68
A 6.91 6.85 6.78 6.81 6.85
Baa 7.60 7.56 7.49 7.54 7.59
Avg. Industrial 6.72 6 66 6.60 6.63 6.66
Aaa 6.35 6.29 6.23 6.25 6.28
Aa 6.42 6.37 6.30 6.32 6.34
A 6.64 6.58 6.51 6.53 6.57
Baa 7.46 7 .41 7.34 7.40 7.46
Avg. Public Utility 7.32 7.28 7.22 7.26 7.29
Aaa
Aa 7.05 7.03 6.98 7.00 7.02
A 7.17 7 .11 7.05 7.09 7.12
) Baa 7.74 7.70 7.64 7.68 7.72 (
. '---"" Spreads Above 10-Year Treasury (bp)
11 /21/02 11/20/02 11/19/02 11/18/02 11/15/02
Avg. Corporate 287 290 293 295 295
Aaa 220 222 225 225 225
Aa 259 263 266 266 265
A 276 278 280 281 282
Baa 345 349 351 354 356
Avg. Industrial 257 259 262 263 263
Aaa 220 222 225 225 225
Aa 227 230 232 232 231
A 249 251 253 253 254
Baa 331 334 336 340 343
Avg. Public Utility 317 321 324 326 326
Aaa
Aa 290 296 300 300 299
A 302 304 307 309 309
Baa 359 363 366 368 369
( )
.____)
• Moody's Long-Term Corporate Bond Yield Averages have been published daily since 1929. They are derived from pricing
data on a regularly-replenished population of nearly 7 5 seasoned corporate bonds in the US market, each with current
outstandings over $100 million. The bonds have maturities as close as possible to 30 years; they are dropped rrorn the list if
their remaining life falls below 20 years, if their ratings change. Bonds with deep discounts or steep premiums to par are
generally excluded. All yields are yield-to-maturity calculated on a semi-annual basis. Each observation is an unweighted
average, with Average Corporate Yields representing the unweighted average or the corresponding Average Industrial and
Average Public Utility observations.
• • Average of Daily Readings.
••• As or 12/10/01 the "Aaa" Utilities index wilt be discontinued indefinitely. As a result, there will be a pronounced drop
. in the "Aaa" Corporate yields from the time of discontinuation forward, but the rest or the yteld calculations should remain
comparable to their recent history .
48 Moody's Credit Perspectives November 25, 2002
(J
Moody's Long- Term Corporate Bond Yield Averages
Based on Seasoned Bonds with Remaining Maturities of at Least 20 Years"
Yields(%)
9/12/02 9/11/02 9/10/02 9/9/02 9/6/02
Avg. Corporate 6.91 6.96 6.91 6.95 6.96
Aaa 6.19 6.24 6.23 6.25 6.26
Aa 6.68 6.73 6.68 6.71 6.74
A 6.79 6.86 6.80 6.84 6.84
Baa 7.43 7.49 7.43 7.46 7.47
Avg. Industrial 6.55 6.61 6.56 6.59 6.61
Aaa 6.19 6.24 6.23 6.25 6.26
Aa 6.33 6.38 6.32 6.35 6.41
A 6.46 6.53 6.47 6.50 6.51
Baa 7.22 7.29 7.23 7.26 7.27
Avg. Public Utility 7.26 7.31 7.26 7.30 7.30
Aaa
Aa 7.03 7.08 7.03 7,06 7.06
A 7.12 7.18 7.13 7.17 7.17
Baa 7.63 7.68 7.63 7.66 7.66 0 Spreads Above 10- Vear Treasury (hp)
9/12/20029/11/20029/10/2002 9/9/2002 9/6/2002
Avg. Corporate 294 290 291 290 294
Aaa 222 218 223 220 224
Aa 271 267 268 266 272
A 282 280 280 279 282
Baa 346 343 343 341 345
Avg. Industrial 258 255 256 254 259
Aaa 222 218 223 220 224
Aa 236 232 232 230 239
A 249 247 247 245 249
Baa 325 323 323 321 325
Avg. Public Utility 329 325 326 325 328
Aaa
Aa 306 302 303 301 304
A 315 312 313 312 315
Baa 366 362 363 361 364
( )
. ___)
• Moody's Long-Term Corporate Bond Yield Averages have been published daily since 1929. They are derived from pricing
data on a regularly-replenished population of nearly 7 5 seasoned corporate bonds in the US market. each with current
outstandings over $100 million. The bonds have maturities as close as possible to 30 years; they are dropped from the list ii
their remaining life rails below 20 years, ii their ratings change. Bonds with peep discounts or steep premiums to par are
generally excluded. All yields are yield-to-maturity calculated on a semi-annual basis. Each observation is an unweighted
average, with Average Corporate Yields representing the unweighted average of the corresponding Average Industrial and
Average Public Utillly observations.
•• Average of Daily Readings .
••• As of 12/10/01 the "Aaa" Utilities index will be discontinued indefinitely. As a result, there will be a pronounced drop
in the "Aaa" Corporate yields from the time of discontinuation forward, but the rest of lhe yield calculations should remain
comparable to their recent history .
44 Moody's Credit Perspectives September 16, 2002
onds
Moody's Long- Term Corporate Bond Yield Averages
Based on Seasoned Bonds with Remaining Maturities of at Least 20 Years"
Yields(%)
7/11/02 7/10/02 7/9/02 7/8/02 7/5/02
Avg. Corporate 7.25 7.26 7.32 7.38 7.38
Aaa 6.50 6.51 6.56 6.60 6.62
Aa 6.98 6.99 7.03 7.07 7.05
A 7.12 7.13 7.20 7.27 7.26
Baa 7.87 7.87 7.97 8.03 8.05
Avg. Industrial 6.95 6.96 7.01 7.07 7.09
Aaa 6.50 6.51 6.56 6.60 6.62
Aa 6.69 6.70 6.72 6.77 6.79
A 6.93 6.93 7.00 7.07 7.09
Baa 7.69 7.68 7.77 7.83 7.85
Avg. Public Utility 7.54 7.55 7.63 7.68 7.66
Aaa
Aa 7.26 7.27 7.33 7.36 7.31
A 7.31 7.32 7.39 7.46 7.43
) Baa 8.05 8.06 8.16 8.23 8.24 l
Spreads Above 10- Vear Treasury (hp)
7/11/20027/10/20027/9/2002 7/8/2002 7/5/2002
Avg. Corporate 260 263 261 258 252
Aaa 185 188 185 180 176
Aa 233 236 232 227 219
A 247 250 249 247 240
Baa 322 324 326 323 319
Avg. Industrial 230 233 230 227 223
Aaa 185 188 185 180 176
Aa 204 207 201 197 193
A 228 230 229 227 223
Baa 304 305 306 303 299
Avg. Public Utility 289 292 292 2BB 280
Aaa
Aa 261 264 262 256 245
A 266 269 266 266 257
Baa 340 343 345 343 338
/ ') . ,J
• Moody's Long-Term Corporate Bond Yield Averages have been published daily since 1929. They are derived rrom pricing
data on a regularly-replenished population of nearly 7 5 seasoned corporate bonds in the US market, each with current
outstandlngs over $100 million. The bonds have maturities as close as possible to 30 years; they are dropped from the list ir
their remaining life falls below 20 years. if their ratings change. Bonds wl!h deep discounts or steep premiums to par are
generally excluded. All yields are yield-to-maturity calculated on a semi-annual basis. Each observation Is an unweighted
average, with Average Corporate Yields representing the unweighted average of the corresponding Average Industrial and
Average Public Utility observations.
" Average of Daily Readings .
••• As of 12/10/01 the "Aaa" Utilities index will be discontinued indefinitely. As a result. there will be a pronounced drop
in the "Aaa" Corporate yields from the time or discontinuation forward. but the rest of the yield calculations should remain
comparable to their recent history .
July 15, 2002 Moody's Credit Perspectives 43
( ) <:.
Moody's Long-Term Corporate Bond Yield Averages
Based on Seasoned Bonds with Remaining Maturities of at least 20 Years"
Yields(%)
6/6/02 6/5/02 6/4/02 6/3/02 5/31/02
Avg. Corporate 7.44 7.47 7.44 7.44 7.45
Aaa 6.73 6.75 6.72 6.72 6.73
Aa 7.17 7.18 7.16 7.16 7.16
A 7.34 7.36 7.33 7.33 7.33
Baa 8.03 8.07 8.05 8.06 8.06
Avg. Industrial 7.13 7.16 7.14 7 .14 7.15
Aaa 6.73 6.75 6.72 6.72 6.73
Aa 6.93 6.94 6.92 6.92 6.92
A 7.17 7.19 7.16 7.17 7.17
Baa 7.70 7.76 7.74 7.76 7.77
Avg. Public Utility 7.75 7.77 7.74 7.74 7.74
Aaa 7.5
Aa 7.40 7.42 7.39 7.39 7.39
A 7.50 7.52 7.49 7.49 7.49
( ) Baa 8.35 8.37 8.35 8.35 8.35
<: Spreads Above 10-Year Treasury (hp)
6/6/02 6/5/02 6/4/02 6/3/02 5/31/02
Avg. Corporate 243 242 243 243 241
Aaa 172 170 171 171 169
Aa 216 213 215 215 212
A 233 231 ' 232 232 229
Baa 302 302 304 305 302
Avg. Industrial 212 211 213 213 211
Aaa 172 170 171 171 169
Aa 192 189 191 191 188
A 216 214 215 216 213
Baa 269 271 273 275 273
Avg. Public Utility 274 272 273 273 270
Aaa 291
Aa 239 237 238 238 235
A 249 247 248 248 245
Baa 334 332 334 334 331
()
.:»
• Moody's Long-Term Corporate Bond Yield Averages have been published daily since 1929. They are derived from pricing
data on a regularly-replenished population of nearly 7 5 seasoned corporate bonds in the US market, each with current
outstandings over $100 million. The bonds have maturities as close as possible to 30 years; they are dropped from the list if
their remaining life falls below 20 years, it their ratings change. Bonds with deep discounts or steep premiums to par are
generally excluded. All yields are yield-to-maturity calculated on a semi-annual basis. Each observation is an unweighted
average, with Average Corporate Yields representing the unweighted average of the corresponding Average Industrial and
Average Public Utility observations.
•• Average or Daily Readings.
••• As ot 12/10/01 the "Aaa" Utilities index will be discontinued indefinitely. As a result, there will be a pronounced drop
in the "Aaa" Corporate yields from lhe time of discontinuation forward. but the rest of the yield calculations should remain
comparable to their recent history.
June 10, 2002 Moody's Credit Perspectives 39
Moody's Long- Term Corporate Bond Yield Averages
Based on Seasoned Bonds with Remaining Maturities of at least 20 Years"
Yields(%)
4/4/02 4/3/02 4/2/02 4/1/02 3/28/02
Avg. Corporate 7.54 7.55 7.60 7.65 7.65
Aaa 6.80 6.81 6.86 6.90 6.90
Aa 7.18 7.19 7.24 7.28 7.28 A 7.56 7.57 7.63 7.67 7.68
Baa 8.12 8.13 8.17 8.22 8.23
Avg. Industrial 7.26 7.27 7.32 7.37 7.37
Aaa 6.80 6.81 6.86 6.90 6.90
Aa 6.95 6.96 7.01 7.05 7.05
A 7.44 7.45 7.51 7.55 7.56
Baa 7.85 7.87 7 .91 7.96 7.96
Avg. Public Utility 7.82 7.83 7.88 7.93 7.93
Aaa 7.61
Aa 7.41 7.42 7.47 7 .51 7.51 0 A 7.68 7.69 7.74 7.79 7.79
Baa 8.38 8.39 8.43 8.48 8.49
Spreads Above 10-Vear Treasury (bp)
4/4/02 4/3/02 4/2/02 4/1/02 3/28/02
Avg. Corporate 226 228 225 222 226
Aaa 152 154 151 147 151
Aa 190 192 189 185 189
A 228 230 228 224 229
Baa 284 286 282 279 284
Avg. Industrial 198 200 197 194 198
Aaa 152 154 151 147 151
Aa 167 169 166 162 166
A 216 218 216 212 217
Baa 257 260 256 253 257
Avg. Public Utility 254 256 253 250 254
Aaa
Aa 213 215 212 208 212
A 240 242 239 236 240
Baa 310 312 308 305 310
'Moody's Long-Term Corporate Bond Yield Averages have been published daily since 1929. They are derived from pricing
data on a regularly-replenished population of nearly 7 5 seasoned corporate bonds in the US market, each with current
outstanclnqs over $100 million. The bonds have maturities as close as possible to 30 years; they are dropped from the list if
their remaining life falls below 20 years. if their ratings change. Bonds with deep discounts or steep premiums to par are
generally excluded. All yields are yield-to-maturity calculated on a semi-annual basis. Each observation is an unweighted
average, with Average Corporate Yields representing the unweighted average of the corresponding Average Industrial and
Average Public Utility observations.
'• Average of Daily Readings.
••• As of 12/10/01 the "Aaa" Utilities index will be discontinued indefinitely. As a result, there will be a pronounced drop
In the "Aaa" Corporate yields from the time of discontinuation forward, but the rest of the yield calculations should remain
comparable to their recent history.
42 Moody's Credit Perspectives April 8, 2002
orporate
Moody's Long- Term Corporate Bond Yield Averages
Based on Seasoned Bonds with Remaining Maturities of at Least 20 Years"
Yields(%)
3/14/02 3/13/02 3/12/02 3/11/02 3/8/02
Avg. Corporate 7.67 7.58 7.58 7.59 7.59
Aaa 6.91 6.82 6.82 6.83 6.83
Aa 7.32 7.23 7.24 7.25 7.25
A 7.74 7.65 7.64 7.65 7.65
Baa 8.19 8.10 8.10 8.11 8.12
Avg. industrial 7.40 7.31 7.31 7.32 7.32
Aaa 6.91 6.82 6.82 6.83 6.83
Aa 7.11 7.02 7.04 7.05 7.05
A 7.58 7.49 7.47 7.48 7.48
Baa 8.00 7.92 7.89 7.90 7.91
Avg. Public Utility 7.93 7.84 7.85 7.86 7.86
Aaa
Aa 7.53 7.44 7.44 7.45 7.45
A 7.90 7.81 7.81 7.82 7.82 0 Baa 8.37 8.27 8.31 8.32 8.32
Spreads Above 1 O· Year Treasury (bp)
3/14/02 3/13/02 3/12/02 3/11/02 3/8/02
Avg. Corporate 228 231 227 229 227
Aaa 152 155 151 153 151
Aa 193 196 193 195 193
A 235 238 233 235 233
Baa 280 283 279 281 280
Avg. Industrial 201 204 200 202 200
Aaa 152 155 151 153 151
Aa 172 175 173 175 173
A 219 222 216 218 216
Baa 261 265 258 260 259
Avg. Public Utility 254 257 254 256 254
Aaa
Aa 214 217 213 215 213
A 251 254 250 252 250
Baa 298 300 300 302 300
)
. __)
• Moody's Long-Term Corporate Bond Yield Averages have been published daily since 1929. They are derived rrom pricing
data on a regularly-replenished population or nearly 7 5 seasoned corporate bonds in the US market, each with current
outstandings over $100 million. The bonds have maturities as close as possible to 30 years; they are dropped from the list ir
their remaining life falls below 20 years, if their ratings change. Bonds wilh deep discounts or steep premiums to par are
generally excluded. All yields are yield-to-maturity calculated on a semi-annual basis. Each observation is an unweighted
average, with Average Corporate Yields representing the unweighted average of the corresponding Average Industrial and
Average Public Utility observations.
•• Average or Daily Readings.
"' As of 12/10/01 the "Aaa" Utilities index will be discontinued indefinitely. As a result, there will be a pronounced drop
in the "Aaa" Corporate yields from the time of discontinuation forward. but the rest or the yield calculations should remain
comparable to their recent history .
March 1 B, 2002 Moody's Credit Perspectives 35
Jan-10-02 08:43am From-TXU FINANCIAL SERVICES 2148124882 T-735 P.07/10 F-230
0
Moody's Long- Term Corporate Bond Yield Averages
Based on Seasooed Bonds with Remaining Maturities of at teast 20 Years·
1/3/02 t/2/02 12/31/01 12/28/01 12/27/01
Spreads Above 1 O· Vear Treasury (bp)
;:fias1)�. Mo�i�s.:. ,Mri��!.:i ��·r�g•�";
•• : :1:Hieh11 · ·, �ow .. \:. P•c•rnb11r,i.l\ij.aris;
I�', ' ,· • ]lj •I ,: ., I•• ";. J' . • ·� ". � I ,• '' I ' . : :::�.0a, ::i. ·,t':IPfO::f,.rl25:1; :, ... .. ,.,,210. :,
'-2�9.·. 172,·:·;, 11172.. ,•236. :!H2so;lv1207;·.;,.:.·,.12is r! !:·:'z�g: ::J��f:tj}�·�!:F::\;���):: \..;!}��:. :: , ··,:26fii.::1:21{:;::.it{1�). :!/)jb,; ·_ -·2�1·. · ·1wr·· ·. -16r: .. 1ea; ··229 .]?9· 161· · -. :19.� Joo !2321 .. _ :252 : •. ,211
325 266 . 278 304 ·
. ·311 · : 2� ll•.: 282 ' , .2(19 : • 2,91'; . 22ii:.. .'27.2 I .. '.283.
,:293:i, .�:is1··: .' 2�a: ·. :. ·;.2sr ... :Jcie.,,.,: i2sa;,:.r1:.i:;·Pf1·:i •, .. ·29s·' : .'. J::148·�. ,:2,751(:;,;'1 :323·.r,: ::·:,::�3/:
244
155
208
259
293
212
155
178
244
271
275
238
274
314
241
277
313
245
158
210 261
292
213
158
179
245
270 277
12/28/01 12/27/01
7.55 7.52
6.68 6.63
7.20 7.16
7. 71 7 .67
8.02 9.01 7 .23 720
6.60 6.63
6.89 6.66
7.55 7.52 ,.00 7.79
7.87 7.83
7.51 7.46
7.87 7.82
8.23 8.22
243
159
206 260
290
212
169
174
246
269
274
238
273
312
238
154
201
255
286
207
154
168
241
264
269
233
268
307
1/2102 12131/01
7.54 7.45
6.70 6.61
7.17 7.08
7.71 7.62
8.02 7.92
7.23 7 14 no 6.61
6.84 6. 76
7.57 7.48 7.80 7. 70 7.85 7.76
7.49 7.40
7.84 7.75
8.23 8.14
Yields(%)
1/3/02
Avg. Corpor,11, 7.51
Aaa 6.69
Aa 7 .15
A 7 .67
Boa 7 .98
Avg. lndu1.1riat 7.20
Ailu 6.60
Aa 6.82
A 7 .51 Baa 7 .78
Avg. Public Ulili1y 7.82
All&
Aa '.4 7
A ,.02
eaa 8.18
Avg. Corporate 241
Aaa 159
Aa 205
A 257
BM 288
Avg. lndusllial 210
A&a 159
A& 172
A 241
Baa 268
Avg. Public U1ilily 272
Aaa
Aa 237
A 272
Baa 308
( )
• Moody'1 Long·Term Corporate Bond Yield Avaraga1 nava bean published daily sinco 1929. Thay a10 dorlvod from pricing
dala on a regularly-r1plani�h11d population of naarly 75 soasence corporete tionds in ltle US market, each wllh current
ouutandinqs ovor $100 million. The bonds hMC macurilies 8S ciose as ponltlM IO 30 ye1H$; !hey are crcppeo from tne !Isl If
their remaining Ille falls below 20 years, ii lhair ra1ing1 th.:ingo. Bonds with dt:Cp discountS or steep prcmiurm IO par aN:
generally axclud�d. All yields .3ro yicld-lo·malurily celcutatcd on o seml·anni.ml basis. Each ob1ervatloo Is an unweighted
iivcrage, with Averaoe Corporete Yleldl repre1en1ln9 ine unwaighled average ol 1he correspond;ng Average Industrial and
Average Public Ulility ob1ervc11ion1.
• • Average or Daily Readings .
••• A1 of 12/10/01 lho "Aua" Ulilicics index will be disconlin1.1ed lndetini1e1y. As a 1esu11, there will Ile a pronounced drop
in the "Aaa" Corpora1c yields r1om the ume or a1s">n1lnu111lon lo1wara, 0�1 tne rest of the yield catculaticns u·,ould rem.iin
comparable 10 their niconl history.
28 1\/loody'v Crodit Perapactlvos Janu:iry 7, 2002
U.S. Long-Term Corporate Bonds
·�
lili . r;;11.;;as;_ .. ,
�
' i .. ·-·-· ._ ·- . -- _ - .! [ii
Based on Bonds with Maturities 20 years and above*
5,yf_ sor:
?o-YL svr.
7.54
7.17
7.27
7.67
8.03
7.34
6.83
7.00
7.60
7.93
7.41
7.03
7.13
7.59
7.91
7.18
6.60
6.79
7.54
7.79
�:: �!! 1 260 256
305 1, 296 .
337 331 I 3. <3} I '-/.. u.
t; �J., � ti
219
175
205
239
258
25of 288
2521 249
3011 260 3361
305
I 337
7.1� 7.37
6.751 7.45 6.98
6.77 7.75 7.11
7.2� 8.09 7.48
7.611 8.28 7.84
I 6.841 7.76 I 7.16
6.291 7.19 6.60 �:�� :::; �:;�
7.471 8.31 7.74
7.35!
8.03 7.57 7.64 ! 7.73
7.2�1 7.71 7.31 7.45 i 7.52
7.lj 8.03 7.39 7.47 I 7.55
7.2� 8.11 7.59 I 7.63 7.75
7.741 8.25 7.85 I 8.02 I 8.12 ___ L_ __J __,lc___..,_l _
6. 776.8916.886.98 6.226.3�16.33,6.42
6.306.4�6.406.49
7.157.2817.287.38
7.417.53,7.527.61
• I I ' ,7 ,3417.4017 .39 7.48
7 .18 7 .23 7.23 7 .31
7.1 7.2�7.237.32
,7.277.3 7.337.42
7.72 7.797.787.86
__ L. ..
Yields(%)
S reads Above 10-Year Treasur :r- 251 253 249 253
255 256,253 257
302 305 302 306
338, 340 336 340
I I I
I ).
LJ.S. Long-Term Corporate Bonds http://129 .33 .64. l OO/moodys/cust/research/credittrends/2000900000343899 .asp ·
----------· CREDIT MARKET TRENDS SERv1:c�l
JJ'ields & Spreads
1C,ed1t' TnJnda �.s:1.ong-Term. Corporate Bonds .... -- .. ·······--·EJ [��J �!!i;lds &Spr�ad$
Based on Bonds with Maturities 20 years and above*
Yields(%)
I 7.31 7.38 7.39 7.27
I
7.98 7.37 7.37 7.5
\ ) 6.95 7.02 7.03 6.92 7.62 6.98 7.02 7.1
7.06 7.13 7.14 I 7.02 I 7.83 7.11 7.11 7.2 .. r 7.38 I � 7.42 7.42 7.49 7.50 I 8.13 7.48 7.48 7.6
7.79 , 7.80 I 7.87 7.87 7.75 I 8.35 7.85 7.85 7.9 I I 7.0917.09 7.16 7.17 7.04 I 7.82 7.16 7.16 7.3 I 6.59 1 6.59 6.66 6.67 6.55 I 7.29 6.64 6.67 6.8
6.7516.75 6.831 6.841 6.71 I 7;55 6.83 6.83 6.9
7.34 7.33 7.28 I 8.08 7.37 7.37 7.5 7.40 17.40
7.69 , 7.69 7.76 7.76 7.63 I 8.38 7.74 7.74 7.8 I I I I 7.50 7.52 7.59 7.60 7.49 8.16 7.57 7.57 7.7
7.31 7.38 7.39 7.28 7.95 7.31 7.36 7.4
7.36 7.43 7.�l( 8.11 7.39 7.39 7.5
7.50 7.58 7.59 7.47 8.23 7.59 7.59 7.7
7.90 7.97 7.98 7.87 8.32 7.95
J
7.9�8.0
--�-- ---
252 246 243 242 244 254 219 241 23
216 210 207 206 209 210 175 206 19
227 221 218 217 219 234 204 215 20
). 264 257 254 253 255 274 234 252 24
301 295 292 290 292 297 256 289 27
�-- 231 224 I 221 220 221 235 202 220 21·
181 174 I 171 170 172 176 148 171 16'
197 190 188 187 188 204 176 187 17'·
U.S. Long-Tenn Corporate Bonds http://www.moodys.com/moodys/cust/research/credittrends/2000900000343899.asp
Yields(%)
CREDIT MARKET TRENDS SERVtCEL J}i�!li�i,iiiis_______ ----------·---·---
· I Cred1t Trends r U.S. Long-Term.Corp�rate Bonds '""_ - .. -·--··El 1..��j J' Yhl� & Sp.1$•ds
rut./f a?O) Based on Bonds with Maturities 20 years and above* - _____________________ 5 - '/fL, � 7L.
L; s:c;
7.38 17.40 7.39 7.98 7.41 7.51 7.56
'- ).
7.04 7.04 7.06 7.05 7.62 6.98 7.13 7.18
7.13 7.13 7.12 17.1417.13 7.83 7.22 7.27 7.34
I 7.50 7.50 7.50 ' 7.51 i 7.50 8.13 7.61 7.65 7.73 -.....___,.,, 7.8817.87 7.86 7.86 7.86 8.35 7.84 7.97 7.97
7.17 7.17 7.1917.18 7.82 7.23 7.30 7.36
6.70 6.70 6.72 6.71 7.29 6.64 6.80 6.85
6.86 6.85 16.8716.86 7.55 6.92 I 6.99 7.05
7.38 7.38 7.39 7.38 8.08 7.52 7.52 7.60
7.75 7.75 7.75 ! 7.77 I 7.76 8.38 7.80 I 7.89 7.92 I ,
I 7.59 7.59 7.59 I 7.61 17.60 I 8.16 7.59 7.71 7.75 . I I 7.37 7.37 7.37 I 7.39 1 7.38 7.95 7.31 7.46 7.50
7.39 7.39 7.39f .41 7.40 8.11 7.51 l7.55 . 7.62
7.61 7.61 7.61 7.63 7.62 8.23 7.68 7.78 7.85
7.97 7.97 I 7.97 7.99 7.98 8.32 7.85 8.05 8.02 -----·----- - ·--- ____ l_____ _ ___ J ___ _L _____
2061-231 230
173 193 192
188 207 208
220 245 247
244 277 272
189 210 210
139 160 159
162 179 180
239 236 234 254
205 202 200 210
213 210 208 234
251 247 245 274
287 284 282 297
218
I
215 I 213 235
171 168 I 166 I 176
186 ! 183 181 204 I I
2422�,--
208 208
217 217
254 254 ) 290 290
-:> 221 221
174 174
190 190
Moody's - Economic Commentary -- Moody's Indices and Yield Averages http://www.moodys.com/moodys/cust/ecocomm/ averages_ ecocom.asp
ECONOMIC COMMENTARY � . ·----------------------·--- -- 1Moody's Indices and Yield AversP-s .
Moody's Long-term Corporate Bond Yield Averages
C-Slt Market Ovewiaw
Credit Marlret Orenlew A.tchln
�1Moady's l»dfcu and Yl+ld Avei'&gu
DellHllt Statla&a
M ---··--·--·---
c-to \
7.18 7.29
7.22 7.34 7.50
7.61 7.73 7.88
7.84 7.97 8.07
7.23 7.36 7.49
6.64 6.85 6.96
6.92 , 7.05 7.20
7.55 , 7.60 7.75
7.83 17.92 8.03
8.17 7.59 7.75 7.88
8.00 7.31 7.50 7.61
8.11 7.51 7.62 7.79
8.25 7.68 7.817.99
8.35 7.85 8.02 8.11 L_
7.82
7.30
7.55
8.08
8.38
7.53 7.55 7.59 7.57 7.60
7.15 7.16 7.217.197.22
7.31 7.32 7.37 7.35°?.38 7.83
7.68 7.70 7.74 7.72 7.75 8.13
7.98 8.01 8.05 8.03 8.06 8.35
7.33 7.35 7.39 7.37 7.40
6.81 6.83 6.88 6.86 6.891
7,03!7,0417.08 7.0717,09
I I 7.5517.57 7.61 7.5917.62
7.9117,94!7.98 7.96J7.98
i
7.73 7.75 7.79 7.7817.80
7.48 7.49 7.53 7.52 7.54
7.58 7.60 7.65 7.6317.66
7.80 7.82 7.87 7.85 7.88
8.05 8.07 8.118.108.13
�--
SPREADS ABOVE TREASURY b
231 231 231 229ifT,54 1::1230 232
193 192 193 191 188 210 161 192 192
209 208 209 207 204 234 177 208 213
246 246 246 244 241 274 207 247 251
276 277 277 275/272 297 231 272 271
I I J
210 ) 211 211 2091206 235 175 212
159 160 158 155 176 126 i 159 159
<:> 181 180 / 180 1791175, 204 147 J
180 I 184 I
2331233 233 231 228 268 193 ! 234 239
269 270 270 268 264 295 232
,.
266 266 I
Moody's - Economic Commentary -- Moody's Indices and Yield Averages http://www.moodys.com/moodys/ cust/ecocomm/averages _ ecocom. asp
EC.ONOMfC COMMENTARY
���s lndlcesandYleld Averages
Moody's Long-term Corporate Bond Yield Averages
C-11 Madret Ormrrlew
Credit Market 0116rw_.
A.n:hlve
• Moody's Indices and . Yield Avfff'BgH
Deh.Jult st.tlstk•
7.82
8.07
7.61
7.84
7.23 17.49 7.45
6.64 6.96 6.86
' 6.92 i7.2017.14 !
7.55 I 7,75 j 7.70 !
7.83 8.03 8.08
7.67
7.87
8.18
8.48
7.87
7.37
7.63
8.08
8.49
7.217.207.14 7.1617,16
7.37 7.36 7.30 7.31j7.32
7.76 7.74 7.69 7.7117.72
8.00 7.98 7.93 7.9517.95
I
7.40 7.39 7.31
7.33/7.33
6.90 6.89 6.81 6.8216.82 I I , 7.1017.0817.01 7.03J7,031
7.64 7.63 7.56 7.58 7.581
7.96 7.94 7.86 7.88 7:88
7.77 7.75 7.72 7.73 7.74 8.22 7.59 7.88 7.81
7.52 7.517.477.49 7.49 8.00 7.31 17.61 7.53
7.64 7.63 7.59 7.59 7.60 8.11 7.51 7.79 I 7,72
7.87 7.85 7.81 7.8317,851 8.36 7.68 i 7.9917,94
8.04 8.02 7.99 8.0118.01! 8.47 7.85 J 8.1118.06
·�-�1. L 1. .. __ 1_ __ , _J
( )
'-.....__.,,)
SPREADS ABOVE TREASURY b * 235 233 229 227f229�54 ·-r-1 194 232 250
197 196 191 1901191 210 158 I 192 207
( ) 213 212 207 205j207 234 177 i 213 230 I 252 250 246 2451247 274 207 I 251 269
·..._/ 276 274 270 269 270 297 231 j 271 i 294
I I
215 208,207 208 235 175 / 212 I 232
165 158 156 157 176 126 I 159 I 173
Moody's - Economic Commentary -- Moody's Indices and Yield Averages http://www.moodys.com/moodys/cust/ecoconnn/averages _ ecocom. asp
ECONOMIC COMMENTARYt
_{Moo�--�!1��es and __ rJ�J�--��!����
Moody's Long-term Corporate Bond Yield Averages
Cntd« Msrkftt Ovetvl�•
Credit Market Orarwew Ardllre
� Molldy's thd(c11a and field A.-ersgss
D6fault Statllitlca.
7.16 7.14 7.22 7.26 7.28 7.99 7.20
7.37 7.35 7.43 7.47 7.50 8.24 7.22 7.43 7.22
7.75 7.73 7.81 7.86 7.89 8.49 7.61 7.82 7.61 ) 7.94 7.92 8.01 8.05 8.08 8.90 7.84 8.07 I 7.84 \: _ _; I I . i I I : 7. 35:7-33 7 .42,7.46!7.481 8.25 7.23 I 7.45 I 7.23
7.76 6.64 ! 6.861 6.64 6.8216.80 6.88( 92,6. 94
7.0617.04 7. lTlT .191 8.03 6.92 : 7.14 I 6.92
7.637.617.697.74 7.761 8.28 7.55 i 7.70 7.55
7.87 7.85 7.97 8.0018.041 8.94 i 7.83 ! 8.08 7.80
7.8617.89 I 17.81 7.76 7.74 7.82 8.55 I 7.59 7.59
7.49 7.48 7.55 7.59 7.62 8.22 7.31 J 7.53 7.31
7.68 7.66 7.74 7.777.80 8.4� 7.72 7.51
7.87 7.85 7.9317 .98 8.01 8.70 7.68 7.94 7.68
8.00 7.98 8058°1"12 -��6 7 .85 _L06 7.85
)
I ·J
SPREADS ABOVE TRE;:7ri�;; 23sr236f 2_s4 T 194l2sa1254- 197l 194l 194 19811951 210 I 156 1207 ! 210 2rnj215/21s 21912171 234 1 177 J 230 I 234
256 253, 253 2s8 J 256 ! 274 207 : 269 i 274
275 272 273 277j 275 ! 297 231 I 294 J 297 , I , I
I I I
216 213 214 218 2151 235 175 ! 2321 235
163 160, 160 164 161 176 126 J 1131 176
187 184 184 189 186 j 204 147 I 201 j 204
244 241 241 246 243 268 185 II 25711 267
268 265 269 272 271 295 232 295 295 !
Moody's - Economic Conunentary •· Moody's Indices and Yield Averages http://www.moodys.corn/moodys/cust/ ecocomm/averages _ ecocom. asp
ECONOMIC COMMENTARY r.------- ·----------------·- - _1!Yfoody's lndlces __ �nd Yield Ave�s�
Moody's Long-term Corporate Bond Yield Averages
Cl9dl Matbt Owm•w
Crffdft Market e>11erwaw AffhlH
� Moody'l!I lndlCH and Ylftld AN1Sge11
"6hlolt St•tlstk•
7.87
7.32
7.69
7.10
7.84 7.84
7.22
7.61
6.98
7.74 7.64 7.69 7. 73 7.64\ I 7.307.217.257.297.201
7.537.447.487.537.441 8.24
7.93 7.83 7.877.9117.82! 8.49
8.188.098.148.188.09! 8.90
I i
7.56 7.477.51 7.55,7.461 8.25 7.23 1 7.23 I 7.30
I . I ' . 6.9716.8816.926.956.861 7.76 6.64 i 6.641 6.74
7.25,'7.15!7.19!7.24,7.15! 8.03 6.92 j 6.92 I 7.01
7.817.73,7.767.78J7.70! 8.28 7.55 7.55 I 7.64
8.2018.1r.188.2118.111 8.94 7.83 7.831 7.80
7.9117.8117.86 7.90j7.82j 8.55 7.59 7.59 i 7.69
7.63 7.53 7.57!7.62J7.54\ 8.22
1
7.31 ! 7.31 I 7.46
7.81 7.72,7.77,7.81,7.73! 8.44 I 7.51 i 7.51 j 7.62 . 8.04 7.9317,98 8.03 7.94\ 8.70 7.68 1 7.68 I 7.74 ,
I I . I I I I
8.15,8.06!8.10J8,15\8.06j 8.86 7.85 l 7.85 \ 7.94 j _i__J __ J __ L ! __l _J J_ ;
SPREADS ABOVE TR��1�1���1���1,
��: r ���----,r ::: __ 1 �:� r ��: 1
225 2321228, 226 228 234 177 ! 234 1 223 !
26s 211·2611264/266 274 I 207 ! 274 i 250
290 297 294,291_293 297 1' 231 297 i 279
228 235 2311228 230 235 175 235 221
169 17611721168 170 176 126 176 165
197 203 199 197 199 204 147 204 193
253 2611256, 251, 254 268 185 267 255
292 299 i 298, 294 I 295 295 232 295 271
i I .
Moody's· Economic Conunentary -· Moody's Indices and Yield Averages http://www. moodys. com/moodys/cust/ecocomm/a verages _ ecocom. asp
ECONOMIC COMMENTARY
(i[oody's Indices and Yield Averagss
Moody's Long-term Corporate Bond Yield Averages
CMlt MametOt'Bwlew
Cr""1t ltfflflfltt O'rMwl­ A.rdiln
� Moody'e ln«CN and Vltid AffUlgU
,,.,._ It St.tlaffc:a
7.10 7.10
8.24 7.32 7.32 7.38
8.49 7.69 7.69 7.75
\ ). 8.90 7.87 7.87 7.93
-J 8.25 7.30 7.34 7.30
7.76 6.74 6.74 6.76
8.03 7.01 7.01 7.02
7.67 7.65 7.66 8.28 7.64 7.64 7.70
7.76 7.73 7.74 8.94 7.80 7.80 7.86
7.65 7.63 7.63 8.55 7.69 7.69 7.76
7.35 7.34 7.34 8.22 7.46 7.46 7.53
8.44 7.62 7.62 7.73
8.70 7.74 7.74 7.80
8.86 7.94 7.94 7.99
242 1241 241
201 144 201 201
225 159 223 224
272 272 273 271 272 265 183 260 261
287 286 287 284 285 280 213 I 279 279
�) 228 159 221 220
170 170 171 169 169 168 124 165 162
J 194 142 193 188
268 161 255 256
281 210 271 272
Credit Survey
JANUARY 29, 2001
(i' Moody's® Yield Averages
<:: <c:»
Corporate Bond Yield Averages. Monthly-to-Date
2000 Corporate Industrial Public Utility
Month Ava Aaa Aa A Baa Ava Aaa Aa A Baa Ava Aaa Aa A Baa
January 8.06 7.78 7.96 8.15 8.33 7.89 7.60 7.74 7.94 8.26 8.22 7.95 8.17 8.35 8.40
Feoruarv 7.96 7.68 7.82 8.06 8.29 7.82 7.53 7.65 7.87 8.24 8.10 7.82 7.99 8.25 8.33
March 7.99 7.68 7.83 8.07 8.37 7.83 7.48 7.66 7.84 . 8.34 8.14 7.87 7.99 8.28 8.40
April 7.98 7.64 i 7.82 I 8.07 8.40 7.82 7.41 i 7.63 I 7.84 8.40 8.14 7.87 i 8.00 ! 8.29 8.40
Mav 8.41 7.99 i 8.24 l 8.49 8.90 8.25 7.76 i 8.03 I 8.28 8.94 8.55 8.22 ! 8.44 8.70 8.85
June 8.05 7.67 7.87 i 8.18 8.48 7.87 7.37 i 7.63 I 8.00 8.49 8.22 7.96 ' 8.10 i 8.36 8.47 .
Julv 7.98 7.65 ; 7.81 I 8.11 8.35 7.78 7.31 ! 7.53 ! 7.98 : 8.33 8.17 7.99 i 8.10 ' 8.25 8.33
Auaust 7.89 7.95 8.13 8.25 8.05 7.20 7.44 7.91 8.26 7.70 7.55 7.70 8.02 8.26 7.88
secrerroer 7.98 7.62 7.83 8.13 8.35 7.81 7.29 7.54 8.03 8.37 8.12 7.95 8.11 8.23 8.32
October 7.95 7.55 7.81 i 8.11 8.34 7.82 7.29 7.55 8.08 8.38 8.08 7.80 I 8.08 i 8.14 i 8.29
November 7.90 7.45 7.75 : 8.09 8.28 7.76 7.19 7.47 8.07 8.31 8.03 7.71 I 8.03 I 8.11 ! 8.25
December 7.65 7.21 7.48 7.88 8.02 7.50 6.90 7.16 7.90 8.03 7.79 7.51 7.79 I 7.84 i 8.01
2000 Corporate Industrial Public Utility
Weeklv Ava Aaa Aa A Baa Ava Asa Aa A Baa Avg Aaa Aa A Baa
Januarv 1 N.A.
2 7.50 7.08 7.31 7.70 7.91 7.33 6.73 6.96 7.72 7.90 7.67 7.43 7.65 7.68 7.91
3 7.55 7.11 7.35 7.76 7.97 7.38 6.76 7.00 7.77 7.97 7.72 7.46 7.70 7.75 7.96
y 4 7.52 7.09 7.33 7.73 7.94 7.35 6.74 6.98 7.73 7.94 7.70 7.44 7.68 7.72 7.94
5 7.50 7.08 7.31 7.70 7.92 7.33 6.72 6.96 7.70 7.93 7.67 7.43 7.66 7.69 7.91
-, 6 Sat.
---._::/ 7 Sun.
8 7.48 7.07 7.28 7.67 7.88 7.29 6.71 6.94 7.65 7.85 7.66 7.42 7.62 7.68' 7.90
9 7.49 7.08 7.30 7.69 7.90 7.31 6.73 6.96 7.67 7.87 7.67 7.43 7.64 7.70 7.92
10 7.53 7.11 7.34 7.73 7.93 7.32 6.75 6.97 7.69 7.97 7.73 7.47 7.70 7.76 7.97
11 7.59 7.17 7.40 7.79 7.99 7.39 6.82 7.03 7.76 7.95 7.78 7.51 7.77 7.82 8.03
12 7.65 7.23 7.47 7.85 8.05 7.45 6.89 7.10 7.80 8.01 7.85 7.57 7.84 7.90 8.09
13 Sat.
14 Sun.
15
16 7.61 7.19 7.44 7.82 7.97 7.39 6.82 7.07 7.77 7.90 7.82 7.55 7.81 7.86 8.04
17 7.54 7.13 7.37 7.74 7.91 7.32 6.75 7.00 7.69 7.83 7.75 7.50 7.73 7.78 7.98
18 7.48 7.09 7.31 7.69 7.84 7.26 6.70 6.94 7.64 7.75 7.70 7.47 7.68 7.73 7.93
19 7.55 7.15 7.39 7.75 7.89 7.31 6.78 7 01 7.69 7.77 7.77 7.52 7.76 7.81 8.00
20 Sat. I
21 Sun. -
22 7.61 7.20 7.46 7.80 7.96 7.37 6.78 7.09 7.73 7.87 7.84 7.61 7.82 7.87 8.05
23 7.63 7.24 7.48 7.84 7.97 7.40 6.82 7.13 7.76 7.89 7.86 7.65 7.82 7.91 8.05
24 7.61 7.22 7.45 7.81 7.94 7.36 6.79 7.10 7.72 7.84 7.85 7.65 7.79 7.90 8.04
25 7.57 7.19 7.40 7.76 7.92 7.32 7.19 7.05 7.67 7.80 7.81 7.62 7.75 7.84 8.03
26 7.59 7.21 7.41 7.78 7.94 7.34 6.78 7.07 7.69 7.83 7.82 7.64 7.74 7.86 8.04
Monthly-to· 7.56 7.15 7.38 7.76 7.94 7.35 6.79 7.02 7.71 7.88 7.76 7.52 7.73 7.79 7.99
Date Ava.
High 7.65 7.24 7.48 7.85 8.05 7.45 7.19 7.13 7.80 8.01 7.86 7.65 7.84 7.91 8.09
Low 7.48 7.07 7.28 7.67 7.84 7.26 6.70 6.94 7.64 7.75 7.66 7.42 7.62 7.68 7.90
Hole: MOOdy's.f Ratings are sutl!&Cl to cnange. Because of possible 1apse b&!Wffn Moody's! assignment 01 ctiange of a raong ano your use of mis weekly pubicaoon. wa suggest that',ou ,..rify Ille current rating of any sea,nty or ,ssuer in wtl4cti you are 1nteres1eo. CUSIPS ara 1nc1uoad whan available.
· 61 ·
MOODY'S1.PUBLIC UTILITY i"t'tANVAL
Y�:.1r ;.,n. h•ll \t,r. --'rr �1.-. Jun. Jul. .-\u�. Sep. (kl. So'".
IYbJ ..... � '"'" .:.\: .:,\) J J,\ �-3� J.J(I J.JO .;.J5 J.J5 J.56
IY62 ..... J.l>�S J.711 n5 J.ll 4.H Hl J.SI J.)5 J.J2 4.32
1%1 ..... J �·i J.J5 .i.'::t J,9(1 5.117 U2 J.90 UII JJ7 .. _r,o
r" 19nll ..... l..10 � Ill -1.l/:'( I. IJ .I I� .I.IX J,J.; J.N l.ikl J.•10
19l'I ..... ..I. 7� ·U1h -Ii"' 5.1 ! 5.t� 5.12 5.1,� 5.2'1
J 1\1000\"S :\ \'[RAGE Of YIELD Oi'i NEWLY ISSUED Da� PLIDL!C !JTILrTY BONDS l IN Pl:.:RCENTl
Yur fan. r<h M�,. ,\(>(. May Jun. Jul. ,\u�. Sep. 0.:1. No,·.
1998 ..... b.30 o.51 b.ij'I a.i� h.n b.'19 6.)6
1997 ..... 7.96 7.12 7.J4 7.2S 7.18 b.9)
1996 ..... 8.75 S.oJ
199S ..... 7.Ql 7.79 M.67 7.J) ,.19
i'l<JJ .... 1.5� 7.:Y 1.MY OJ �-ll X.l' Y.i?
1993 ..... K.bl H7 7.�J Un 1.5b 7.21 7A� 7.11 7.�7 6.9J
1992 ....• 8.69 X.4 I �.o5 8.6-1 SA! �.(,J 7.KI> �.In K.'l'I s.n
1'191 ..... 'IY> 4 l) '1.71 �-'� •l.3'1 �-h5 9.21 tU�!
i'i9<l.· .... 10.Ul "I 96 111..1.l l(!J() 10.01 10.,l 10.05 10.69 10.7J 9.9<1
1989 ..... 10.,5 9.6.1 9.9.1 9.�6 9.SI 9.61 9.�s
1988 ..... J0.7J JOJ_\ llJ.07 11.,x, 10.5 I 9.Kk 10.79 9.SX Jll.7.1 10.30
1987 9.27 '1.17 '}.11) 9.79 10.50 IOJ41 11.+I 11.14 12.111> I0.95
1980 ..... 11.!5 111 .. \J 'Ht!' q ,lY 10.61 10.UJ •J.�7 '1.9� I O.'J6 111.�o 9.71
1985 ..... ...... I I.SI 11.511 1!.\Xl 10.KJ 12.10 11.n
19K4 ..... IJJO 15.JJ lo.tlO l}.JII/ IJJ<l 13.1)
198) ..... 12.94 I l.l.1 13.Ul I 2.J I 12.l8 I l.28 ll.75 IJ.J5 I 3.13 13.50 13.59
1982 ..... 111<10 18.IK 16.98 16.40 16.20 15.ll 14.13 n.n
1981 ..... IS.OCl 16.20 17.lll 17.ll )b.1.1 17. 7J 18.75
1980 ..... 15.5<i IJ.6i ... 12.JH ! HlS IJHX 15.02 IJ.67
1979 ..... IU.15 Ill 511 111.47 10.iO lil.f,; 10.91/ n.os
197K .. 9.35 'I 45 9 .. 1.1 IJ."1 Y.6'1 111.tXl q s� Q.75
1977 ..... �.S.I �-�l x.•JJ v� s.59 X.98 '1.15
197(1 ..... 9.90 '1.hU ').lll 9.bl IU.lKI 9.92 IO.liJ y Jl 9.(Xl 9.10
1975 ... ... 11.Utl I0.7<J 11..17 11..10
1974 ..... 8.Y.1 �.711 1/.117 9.l) 9-4.1
197) ..... 7.625 K.llJ 7.97 K 20 K.2.1 uo
1972 . 7 7f1 7.�9 i.95 7.9S 7.85 7.'15 i.Kb
1971 ..... K.12 7.'10 �.J7 K.JI/ 06 �.94 H.67 7.97 7.91
1970 ....• 9.625 <1.57 Y.SJ Y..17 I0.47 9.53 Ill.OH 9.81 9.82 9.7l
1969 ..... 7.Jl t.n 1.85 �,52 8.95 8.1S 9.45
1968 .. 6,gJ 7.2l 7.50 7.lXl o.84 6.86 h.1/l 7.3-1
1967 ..... l 811 l.80 b.lXI e.su b.SO 6.63 6.75
1966. l.29 S.Jl l.83 HS 6.20 b.125 6.50 h.29
1%l ..... 4.94 J.96 4.95
191,.1 ..... UI J y7 UI UJ 4.71 J.02 4.80 J.65 J.75 -US
196). J.HO J Jl J J,l J.XI J.63 4.5J
1962 ..... 5.17 4.82 4.52 J.97 J.6J J.\Kl uo
1961 ..... 4.96 5.0� 5.10 5.Jl 5.W 5.10 .... 4.89
19(,0 ..... l.67 5.J.1 SA.I 5.61 5.JO 5.08 l.OJ 5.0-I
1959 ..... l.10 H2 5.25 5.15 5.05
Ike.
111
Ill·
•).
II • IS
1.1.- 1�
.. �-· 11.
s.,
s �-� �-'
J" �- I
.I J . i
- ..
!a'
�::
12.
rr :
. \_;.
·�·.:
Year 1999 .•.. 1998 . 1997 . 1996 . 1995 . 19_94 . 1993 . 1992 . 1991 . 1990 . 1989 . 1988 . 1987 . 1986 . 1985 .. ·.· 1984 . 1983 . 1982 . 1981 . 1980 . 1979 . 197R . 1977 . 1976 . 1975 . 1974 . 1973 . 1972 . 1971 . 1970 . 1'169 . 1%8 . 1967 ..•. 1966 .... 1965 ...• 1964 . 1963 . 1962 . 1961 . 1960 . 1959 . 1958 . 1957 . 1956 •... 1955 . 19SJ . 195} . 1952 . 1951 . 19lO . 1949 • , .. 1948 . 1947 . 19�6 . 19Jl . 19-1-1 . 1943 . 1942 . ll\11
l'vIOODY'S BOND YIELDS BY RATING GROUPS
��?DY'S ��?MPO���TE A ��RAG\_�F YIE��rs 0Nl�UBLI7,�TILI1i BON�� (IN_ ���CE��·_-
1.00 7.03 7.09 7.1) 7.12 7.t I 6.99 6.99 6.96 6.88 6.88 6.96 7.6) 7.79 7.6K 7.'I� 8.0K 7.9J 1.77 7.l2 7.57 7.St 7.37 7.2.S 7.74 7.20 7.37 7.72 7.88 7.99 . 8.07 R.02 7.8J 8.01 7.76 7.48 7.91 8.77 8.56 8.41 8.30 7.93 7.71 7.73 H6 7.62 7.J6 7.40 8.JO 7.31 7.4-1 7.M3 8.20 8.32 H.31 g.47 8.4 I 8.li.l 8.88 9.00 7.56 8.2) 8.00 7.85 7.76 7.1K 7.68 7.53 7.21 7.01 7.00 7JO S.57 8.b1 8.77 8.8J 8.79 8.72 8.� 8.-16 8.J..l 8.32 8.4-l 8.53 9.21 9.56 9.31 9.39 9.30 9.29 '1.44 9.40 9.111 9.0.l S.99 8.93 9.76 9.44 9.66 9.75 9.87 9.K9 Y.69 9.6b 9.SJ Ill.Ill 9.9J 9.76 9.66 10.02 10.02 10.16 10.IJ 9.92 9.49 9.34 9.37 Y.4.l 9.37 9.H I0.4S 10.75 I0.11 10.lt IU .. H 10.75 10.71 10.96 11.09 JO.S6 9.92 9.89 9.98 8.77 8.81 8.75 9.JO 9.82 9.87 10.01 10.33 11.lkl 11.32 10.82 9.46 10.66 10.16 9.33 9.02 9.52 9.S I 9.19 9.1 S 9.42 9.39 9. U 12.29 12.KH 13.IXI 13.61> 13.J2 12.89 11.'JI 11.�X ll.1J3 11.95 II.SJ 11.33 14.0J IJ.Ju n.su 14.0J 14.JO 14.95 15.10 14.n 14.29 14.� 13.68 11u IJ.31 13.46 IJ.6CJ 13.28 13.03 Jl.00 ll.17 ll.28 13.50 IDS 13.19 13.JJ 15.33 16.7.l 16.72 16.07 15.82 JS.60 16.IK 16.1µ 15.22 IJ.56 13.88 13.SK 15.6! 14.22 14.KJ !Un 15.32 IHJ 1.1.27 l·S.X7 16.33 16.89 16.76 15.50 13.15 12.12 13.48 10.1 13.SO 12.17 Jt.K7 12.12 12.82 13.29 13.Sl 14.07 10.39 9.8S 9.8J IO.U2 JO.OS 10.23 10.0J 9.911 9.97 10.19 11.IJ 11.73 9.22 8.87 K.IKI K.9) 9.05 9.19 •).)) 9.JK 9.21 1/.17 'I.J7 'I.SK 8.58 K.59 8.63 K.M H.bS 8.6-1 8.5.1 K.JK 8.47 H.4.l �-.I� H.nl 9.17 9.IIK 9.50 9.J.l •J.27 9.J I 9.-'C. 9.26 9.07 X.'JI -K.X.I 8.77 9.88 10. Ill 9.K.1 9.67 'I.HK 9.93 9.Kl 9.81 Y.93 9.'I� �-�J 9.83 9.17 8.27 8.3) 8.44 8.68 M.86 9.08 9.35 9.70 10.11 Ill.) I 10.12 7.8) 7.51 7.61 7.64 7.64 7.63 7M 7.8( K.06 8.ll'i K.llJ �-11 7.74 1.85 7.84 7.81 7.87 7.88 7.83 7.80 7.b9 7./IJ 7.6.1 7.55 8.13 8.17 7.94 8.0K 8.05 8.23 M.39 K.H UO 8.12 K.I� 7.96 8.bK U4 8.J7 8.34 H.37 K.72 •).(II> 9.01 8.K3 8.Kll 8.7J K.77 1.49 7.02 7.05 7.23 7.26 7.15 1)8 7A9 7.40 7.62 7.'11 7.9J
6A9 b.47 6.36 6.J9 6.54 MO 6.hO 6.5.l 1,.30 b.27 6.39 II.SH $.8 I 5.42 5.25 5.37 S.37 l .. 19 HII s_q I S.% Ii.II! 11.1 ! 6 .. 1<1 5.36 J.K.I 4.90 5.0K S.11 5.2.1 5.l2 S.31J S.l4 S.7S s.n 5.h-1 4.60 -1.52 J.51 4.S I 4.5 I 4.5) J.51i J.5H J.(�I 4.1>-l J.6 7 4. 71 4.53 4.S I J.51 4.S I 4.53 4.53 4 55 4..IJ 4.5-1 J.5.1 J.52 -1.53 J.J I U� J.37 -I.JR 4.39 4.W J.Jll 4.42 4.4? J.4-1 J.-1-1 J.4l -I.SI 4.61 4.62 J.60 -1.56 4.50 -1.J? 4.JK 4.511 J,J9 J.4C, J.42 4.57 4 .. 17 4.SI 4.4) J.Jf1 4.49 4.52 -1.W 4.1,7 4.1,7 J.hl1 •.l1J 4.69 J.9! J.89 4.79 4.70 4.71, n5 J.11 J.5.1 4.4M J.S1i J .. 11, 4.70 4.4J J.4t, J.JJ J.J'J -1.117 4.7i J,71J 4.77 4.H11 4.95 J.Hh 4.10 3.99 3.87 3.'15 J.YO J.H9 J.8X }.YJ J. Iii 4.41 J.41, 4.40 4. IS 3.9k ).97 3.9l ).9J .l.9X HK1 J. l'I 4 . .13 J.4.1 J.4� J.J9 ).54 3.18 3.)6 3.27 J..1K J.J.1 J.JJ 3.JK }.(�l J.7J .l.H1 .1.K(> 3.22 3.12 3.15 J.17 J.17 3.19 J.21 3.22 3.26 l.2'1 .1.27 3.2K 3.15 3.31 3.23 3.14 3.1) 3.13 ).IS J.I) 3.12 J.1.1 .1.11 J.IO 3.45 3.23 3.2') 3..13 3.4-1 3.57 3.62 3.56 3.SJ 3.58 J.-16 3.JK 3.20 J.23 3.19 J.21 3.19 11•1 no 1.20 1.20 nu .1.22 1.i9 3.09 2.85 ?.86 2.Yn J.07 3.IU .1.18 3.111 ).13 3.l�J 3.IJ 3 .• 1 2.82 2.711 2.78 2.7K 2.79 2.KI 2.81 2.83 2.KI) 2.84 2.85 2.86 2.90 2.9'1 2.911 2.97 2.96 2.95 2.93 2.89 2.811. 2.ft4 2.83 2.SI 3.0J 3.03 J.03 l.111 2.'17 2.'J5 2.% 3.02 l.07 3.07 3.07 ,l.(l\l 2.78 2.7) ?.72 2.73 2.71 2.71 2.72 2.72 2.72 :.78 2.H7 :.�3 2.71 2.71 2-6.1 2.6J 2.65 2.69 2.70 2.611 !.70 2.75 2.71> 2.77 2.S9 2.97 2.95 2.94 ?.94 2.93 2.811 2.S7 2.86 2.M5 �.MJ 2.8 I 2.97 2.99 2.9K 2.97 !.97 ?.97 2.% 2.95 2.9-1 2.9J 2.96 l.9K 2.99 3.05 ).02 .1.IXI ).OJ .l.�l 2.9K 2.95 2.96 2.96 2.96 2.98 r!! i-!J r!� �-'Z J.1i ).1.1 .1.1� J.1l'I J.09 ins 3.01 J.(l(,
D
. . 'i,. 1. 7. ,
K. 1. M. X. 9. 9. Ill. Ill. K. :11. 12. 13. I). 15. 14.- 11. �-· �-· � .. 'I.: Ill•
M. 7.- 7.' x. x .. 1>.I h: �-' J,l J.: -1.· J.- 4.1 ... .. • -I.I J •. -1·: \<
-' j .l.l I' j_i J.2 ? Ii r, .1.C J.(;
l' ri 2.9 ).0 .10
. �
A DD Q 7 •);;r,J.' L"i_. I ' I L· •. •\,
� l
/ ) ..
J
·.- .... ,,,;'.,.
·'
it } \3
L ,q
,I - s ] u
,!< � � .3 ;;:
f, :i:
�:gS:?��ro�i�o�!.o��o -i-'<iV'\V,viMr'lM�-.:ir'l�'Otvivi
��������s�;a���i -'<i-.i'<i...;<¢MMC-:MMMC"'\M-i«i
-V"IOOO.-a..oo-�t"\C""IV'IC"'\ .... O r-, t-- f ... , 00 V'1 OO·O'I - '<t - 0 ..... t"\ 00 M -i- .,; vi V'\ V\ ..;· M '<t M -ri ..; ..; '¢ vi �
�� �8��;8=8������� �i g�G���§��§���g� � 6
M��g;�;;;oGf.3��&;�: -.0 ,c '6 ,c ,,ei ,0 0 'D vi vi V'\ vi vi V\ vi
f ��������������� 6
I I
I I I I I
J
� � ·S; s s !: �-fc $ � f.;;:::: � � t; _; -i- ci M N '<:t r;i ...; M M r-i N e-i t"i <:,?
a:�::!�������$���� 00 C: <.' C: � '"' '6 vi vi .....; � ::: :::: 0: -C
h������!afo��g��� _.: «i- 0 r-.i ('i -i c--} � r� f"": N r-i MN '9
�;���g:!�t;����3C!� �������������d�� ------NNNN------
>, -� 6
I
N��--�Mt---�OOOOM�t--� o-•N•�MNWM�·-�MN � g !:: 8 � gi ��!a��;;;� ci� c9
·- ... ,
s.
,:_,j.J1·· .... ··, . r : ·-·:. .· .. ·.,.·,,· ... ··
\_ )J
: ) > \_. ,..r.r.i ;..I �c:c oz ;c:c
� 4-J
�
c: cu
� s cu
0 �
- 0...
�V') N 0... e 0 ::l ��- O V)
�
N >-. zO - ...c:: ...c::
��
�
u 4-J \...c c:
'�
CJj � 0
V') o<"j ��
( )1
(')
00
!� ��������������55 � K � ���f!� � � � � s :;; �� :0 !: c �2:����;�:::i�:::i:::ie:�e:� ,:!� ���!����i���!�!i ,,_ ;; - � 0
§ I- ���-Si:������� N � '1{c!��p������;: ;,:)
0 ..... ...,. ""V) V",,....."'"" ,..., ,..... �""' ..; 0 -------NNNN
� j ��t:j�������� ti! 5 ����::q���!:i� " � :!! "'lt"'lt'"'lt"ft..-t""'l!""l,..,l""'IMM ---------MN
>, >-
ii, �:J����;:���� -5. g;���������� :i: "f•irjv-;V";-.,itrl..;.l""i.,;� :i: -------NNNN
"' r c,. Ul g��g�gg���� w �$$�$qeq��a ] " s ooooooooooc .;! .2 s s 0 'o ti! ti! -g .. ���N�N�8f8�r€ � ] " �������:;;��N � 0 0 � I- -.OIC'C,,i..:i\Q,,t..:iiritriV": vi i .... Mr"\Mt"'\M�.,;.,;.,;.,j�
> g g 0 i5 e " " ..,
.:!' Nr--OOV)C,..V)O:t'"-Nl""':N-'Dr-- .:!' - -\OV'lr"-0'\\0 t---l.000 OOt0"11"- Q "!l.f'!V'?"')tf)�V'":�"'O'."':�""'!-.S:V': 00 00 00 00 00 00 CO N N - - N N V", .,.
8, & 0000000....;....;....;�....;...;....: "' � � c
� ��������q���� ���������;;;£:;�� e
0 s- 0 � 2 -� 0 ���������)!J��2 � 'i 0 �����������;;;2 j � "' "' � � !;::!:!���;;:;��r;.:� "' � � ������N�=�S� ,a
�
� .'l ] iriMN-=....:M-.:oooo"f:I"<:..; " � ���r!i�������� " ------NNNNl"'IN � e E u ii, ·c 'C XI c, � ������c����� ... <>. � :!�:S8��r:����� ... = 1l ·s 1l = ,....: -.:i �,...;I"'\,....: :i M.....;....;,....: ,ci s ���������t�� .,. :;;; E ______ ,....,,...,t""lr"'lNN .2 ;; "' :::, e " " i:S " i5 'a ·c ·i: c $�:!;;��8g;i�. e !!' 'i: ;;; ] ;; ',0,...:,..:,..:,...:,..:,...:-c,c..; t Iii ·� "' 0 Iii ;:�����=��� I- ;-t;a;:g��G�� c 000.:�c-:gc:-cV\......;.....: g ,..::2ooooS:!�::=�IC � CJ � c: " c: " ·� >, �M���:;ss�;:::ro$� .E .?:- loOOO-Ot'l"'l�OOr<"IO-.OOr-"1001'"- g �
V"JO--OOIOt'l"'I-C)\"'l:f°�'<CV'lC
w ,.-i...;N...:�ON�<lft�...:N� ui ...:...:N...;Nr-JNNMNN...:o
u u -� " .!! "' al "' "' NNOO-IOM-"'0,.C 'o IONt'l"'l'V'Vrr"IOOOr.v-.
ti! -c,..:,...:,..:,...:r...:,..:-.o\O..i
� ;; �������q�� 0 ����a����� I- I- c CCO-C'O-�C"IIOV'IV"JV"; e r-0000002�===--= a & � ... ������������� l:l, ... ��g���t::���::o�s .?:- .:!' c: & " & ] r<"I-N--.:t'CNN�f';-N� .E ...;_;N...;NNNNr'\N1"'i...;c
ui 1l -e " .;! .2 s s "' 0 ��NJ!:!S���0:8 I- =�2::�����t� � ..., ..; O' ::!: ... .;:.. -)l .?:- ����q������S:,r;; ..., & ��:::;�������,.�.� "' "' � � 00 "! a( ;;.- "' "' c:i iii iii
] ��8�$:;���;:���$�� � �8���8�����8£���
�u ;;��������������� 80 ���������������E
II ii � e( � � � 8 S !::G N;; �� N.:; � en�: e � � ��=�S8����:o���S! i!ii-3 �����!::S�gj��{a�;(� ·� u.:l ��§���������E§� "-w Q Q � 0 ..., !ot�a�8�i�S:o�;;:;t;� i, �;;;����&1������� ii, :c �s��::�g;��;;r!�r'!�� :f g��������i�����
:; &a&o s o&o&oao&::S& r'"l"""-Nr"l<tt-NM"tt'-Nl"""I..,._ " o o ocrocro o o cro o o o o !i g:g:�lg�§§§§§-888 !i �g:�g:��§§§§gg§§"' & ------NNNNN�NNN � ------NNNNNNNN� CY
·�
" E � I .,
0
..
" ...
•
' . ·---·--· .. --- .. ··-···-- .� __;_ ..._. __ --·-·. -··· - •' '··· �··. - - -·-····· ..• ····-
. .
•. r ,,
' . }
. '. �- .. r·��'..l·{:-�t· � . · . ,.: r··ti�Vi: : ..
�=�� "':io,..;,..; ��!�
00,... - "" ,.... ..... ,... . ""'�-"T ... .0 - ..... - - N N
l'""I IIO 00 - ,O..Ot""I- "".,;.,;..;
00 t""I .., .0 0 0 - r-­ V\ "'V\ V\
- ...... ,-, N - NMM
� � 'i � r-i,...; MM
- C""\ 0 ,0 - - N't""I r-i N NN
...., �,... '° .., (',I 00 "' r,ir,iNM
OOMOO� ,.... 0 0 - NM f"4 N
- - ""..., V\..,. - 1""'\ N NMM
... " ::
""(71 - "" ..,. ..., .., "' ,zi ..j � ..
V\ 00. N Y"I '°...: r-: � ,.... ...... ,...,. -
""., - . .,; a. .,;04 NNN-
$��& �i��
,..,. ... Y'\V\ ... t""lr"lr'\ .., .. � : "' ,_ ..;
G'I - Y'\ M V"IO-M ,,iV\V\V\
f""I - "f IO c,,:,..;.o � NN N r'\
• - e- '° vi vi '"'a,; NN,t"4 M
..... - °' - ����
.. "° V'\ V\ N N -0 a,. l:;; r: $
r\,.... 0 f""\ NMN- V'\ Yo\ in V\
"'° -·- 0,: M"'FN r-1 • Mt"'\
� s ::! 1 V\,...; c,.; r.: V'\ ... ,..,,,.,
�i�: d a: 80 r,: N---
l""loO - ..,. Q\ t"'\ N l""'l ........
,o 1111 ,-.. N vi'° ,..: (1\ MMMN
tiCIN.., 0 -a..:vi\Q l"'\r'\l'""I ......
: ., ::
"'
f""I r,- NV\ N "f \0 00 _; 0 C"4 d
NM-,.... 0\0,.Y"IN
V\ ""''O "°
V"l-0 - V\O\N'-0 ..: 01""\ d
0, NO \Cl •O'IV'\N
vi vi '° ,0
i ,ll . " .; • :� '"' ti
: wi .. ·� 6� "' ... .!::! >,. l � '"' :- .:
0,...0\ .. .0 - t'\ a. �I""\..:..;;
,... e- .... N eooo-r-- ..: ,..; Cl\ " NN C"lt"I
l"'\V\r"'I - - .... ,... "° r'\ r-'. M,...: "IF - ,.... 00 ����
..... """' °' r- V\ ,.... ..: ....:,..; r-,: 0:§2�
....... ,..."""" r- ,... V"I 00 � g::;::
_)
•,J . ._)
<:»
.. '·"""' f �
. ·, ..:..
�8
·:�· \:' .
\
) '·
)
CIJ w z < a. :l: 0 o o a: 1- o w ...J w
0 T"" II "' ..,,.
(j)
T"" ' T"" "" a)
T""
<n <I) >( <I) "O c
<I) 0 ·.::: a. .:.: 0 0 ui
0
<I)
0) co .. Q) > <
<ll > �
>(
<ll "O c
<ll 0 ·;: a. ..:.: 0 0 ui
2
"O Q) ui ::, � ct I co ro a
Q) .. co . .s::
(/) .. Cl) Cl.
'-.ON .... Otn
0 � "'1"' °' :O""""tn:IOQ l'f"l "'1'" ,:f° ,:f' Ill
..., r- "' '° ,:,, � ': ""!f' N 11'.1 � -r ltl vi ll'i
�-0\\0 .... ::,,.. M f"\ f'i _. �...,; si:; lf) 'Ii
����� .,. -,i .,; "' \0
-o-,Mr"ltn ..., M Ill"') '¢ � ..... lll �
"':T � """'r"')""
'° � � � � N ('°'•MM M
'XI tr) Q() e, i.n NM rt') 'o:!' ,:f' l"'"i l'f') rri C""i �
(""') ;io 0\ c::, N Xl ::7'; N lli r­ ..,: � Ill tri l/)
� •n � � � r,.i � ..-j
��1�� M r-.i MM M
����� -cooN�oo ......
� � � � :!; -c 00 \Q QO 0\ ...
:���� :.oollilO� ..
� : � � !::. � N M o vi �(""IM r"") <"")
,:,, ... r- "' r­ l""'l °' � \() ..-j � � ;'); � �
� � t fo � NNMNN
����� M N 0-: � Q\ .......
$���� Mi � r"l t"') ("')
0 '° \C) ......... """ M ll'1 <::> 0\ ,CIOIO�IO
����� � ..-j � ... M
s: a g � � ,-; ..; ,..; <'i,..;
!�Ri;igg 'JO <:> l.rl QO oci M !'\ !'\ <'\ !'\
oor-�r--c '° .... "' r-: � I:'� Q ........ ......... ��n�;:� � � "' g g
Nlf"QO'IQ� - "'l <=! "° � 00 0\ ;: d �
� � ;; � � C!)�\0-=�.e
r:; � � � � QOr,:\Oinll'i
����� � :io � r,,: 'C
"Cx:>t--,JCQO t'-"')C-"1M � .... r-,.'. � \Q ('f') t"""l MN N
� -.C t"l � M - r'1 lf1 II'! N to'. ..... �...,. t""l l,Q r-- I:' r- e--
;! � 0 � � NM ff"i r"') t">
�&:i�r!i �a\C':.000
� � '° � � -.:; � � � �
� � "1' :io ""'4 f"} r- U'"!'""" � ,.., C""i � tti ll1 QCIOO�X,00
gg��� r,-: r,-: "° r,-: r,-:
�$��� N N ("l NM
0...,. 't:r r-,. M N f"'} f'l"'l M ""'1 ,..; .., ..; ,..; ,..;
���s� � � � � r;i
a��i� r-:\0·,cr,-:a(
� �-&l � � lli-clli-c�
= � �-: � � � 'O � g
lf) � "° � .... .,. .,. M 00 "'). ���-��
����� ..O�MO\ll'l M � ,:t ""\0
����� t") rt"i � � �
:! � � �-;,; ll1Vl\O\O'.e
����� �..;..,..,..;
� ;,; � � � ,-i <'l,..;,..;..;
;Ji � � g � ����g
�=�o� 00 00 -.C r..: ,,-.
�i��� \l!)�\C\O,r.
�:��II"} '40 0 N f#', ,,, ........
��?g��
QO<:J\O\:r-�
�����
� � � � -0
\O:,O�OC:r--­ :J\ NM QC t"-: ���i�
;,; � � �:;; ""' ·r:i• � "1' -:,-
����� ......i�o0Cx5 ..... ...
O\lf'lf'O,..)O t-,.. 0,. ,:to�� tr)� ll') � -t
����� Q:, Q ::, OO�OOQCX
:z g � � � °' 0 0 a: = ......
� - l/'l r­ QC � �:,,,. ""') ff'> f'I· ff'l N rr,
��·�l� �villiVit.ri
;J; Cl�� �­ �;;: � � :g
t-- 00 0\ 0 oo,c�:,,.=-­ aii. ;,,.. c,,.. Ori :,,.. ,.... - �
g � � �· �- IO.,;� lrl.,;
�i::s;�� �vi�l""l� """" -of"""�
� " !a � � ""'� "1' "f:f �
����� 0 ::0: � C :P\ .... ...
� � � :g.:::: vill1lll\C�
1.1')::,,. 0 ti') r--, � M "') 00 l': � � � ;i··�
� Vl � :; � <'l,.;,..;..;...;
� ;·� �·:2 11},C\O\Or-:
� � :q::.:;..,
��&;��
� � �;: -.i-""' 111 �
::g..; � � ..; -,i ..; ..;
��a� i � � !;
���� � .,j. � �
r=: !::; � � -i- ll') ,,d ff")
=:�� � ....; \C ..... ... "'
i � :z � r-,:QOQOQ'\
' V)
N '
·� 8
,.... ... M
>, ;::: .. E .. g ,.... e- "' ' N '
'O (1) 'O :::, <) x (1)
'"' 0
'O <lJ 'O :::, ..... (.) i::: . ...
NOO ';j� t-:i �i��
ll"l0c:7) caoio
Nc-:JM
C.ONN <D Ill O
ll"l Ill (0 <O <a <O
'<t'O"<t'I t-: ": <:? I ....t�Ni
COM'<?' �LI:� ll"l ......... NNN
t-<OC.0 ..roc.o
0) 0) co MM'<?'
ll"l ca <a Nll"lt- • ..
NNll"l r:-: <:? C! NMM
LI") cri LI") <O eo eo
MMM
..... cri <O t-: <.L: � co <O c:7) ..... ..........
<O s:t' c­ .... cri co ...
c-:JNCO � ": ": co co Ol ..... ..........
MC- C- C7? <:? ';
"<!' '<t' <:!'
MOLl"l ,....OlM
"<t< ca <a ...............
ll"l.-4N NMM
"<!'Mll"l .......... (")
(")"'!'Cl MMM
Ill M CO Mlfl<O
"<!' "<!' <:!'
ai ca '<t' CO COM
"f''<t'lf)
co LI") LI") .-!MM
"l'"<!'M .-1 .-1 .....
�ON ": ""'. � U"lll"lll"l ...............
t-Nt­ U'l ca <O ..... .........
Ot-0 N .-1 (0
lf) lf) "<!'
lf"lOC- � ": ": I.O lf) I.O
..... ..........
OCON co co O'l
000
..... LI") lf) '<?''<?'N co (0 co
CO'<?' CO co c- lf)
OON ...............
ca MO CTl...., 0 . . .
NC-M a:": C': (OL()M ................
-.;< NL() 000 ... ...............
NOM cot-CO ...............
CO _.N ';�": -.;<'<?'ll"l
Mll"lM ';0:� ll"l L() L()
'"'0 (1) .... 0 8' � e":
ii ... .. I.
- -
e,
... ...
:.
.,. - - - ... . ...
� ... - ... - . ,.
- ... ::
� ... O" - I
... - ..., ... . ,. - .. ...
- ... ::
- -
L_)
l
I
I
I
I
Statistical Service
Reference to the December 2002 (Yellow)
Supplement is no longer necessary.
Reference to the January 2003 (White)
should be retained.
This issue should be retained.
Banking & Finance (6/96) 1-23
Production & Labor (2/99) 27-72
Pricelndexes(5/94) 73-90
Income & Trade (7/95) 95-125
Building(J/95) 131-144
Energy: Electric Power & Fuels (2/97) 155-170
Metals ( 10/97) 179-194
Transportation (6/98) 201-213
Textiles, Chemicals, Paper (8/91) 271-286
Agriculture Products (11/94) 300-314
Security Price Index Record 2002 Edition 1-355
f,.
Pages
1-40
Issue
Current Sta tisrics, dated January 2003
Your Statistical Service should contain ...
Basic Statistics:
l/'
;iJtl: ,' . .,i
',/
't2 A Division u/Th.:McGrmv-HillCr1111pani(S
Copyright © 2003 Standard & Pcor's. All rights reserved.
"-" ·.
The Standard & Poor's 500
This issue contains a complete twelve
month record of the Daily High, Low
and Close of the Standard & Poor's
Stock Price Indexes. Also a twelve
month record, by weeks of these
indexes by industrial groups.
} .. "Al i ..
CURRENT STATISTICS
··-··· ------ ··-·--·-····-·--· -------------· ·' .._ --·-·-
Page 27
CORPORATE YIELDS U.S. GOVERNMENT BONDS
---YIELDS--- -¥RICES---
Long Int,, Stiort long Inlet Shor\
2-Jan 5.87 5.10 3.75 131.16 117.91 113.84
9 5.77 4.98 3.57 132.61 116.73 114.48
16 5.59 4.73 3.30 135.29 120.47 115.44
13 5.73 4.91 3.50 133.20 119.21 114.73
30 5.66 4.88 3.48 134.24 119.42 114.80
AVG 5.72 4.92 3.52 133.30 119.15 114.66
6-Feb 5.62 4.86 3.39 134.84 119.56 115.11
13 5.71 4.96 3.45 133.50 118.87 114.91
20 5.62 4.86 3.35 134.84 119.56 115.26
27 5.59 4.80 3.31 135.29 119.98 115.41
AVG 5.64 4.87 3.38 134.61 119.49 115.18
6-Mar 5.76 5.02 3.56 132.76 118.45 1i4.52
13 5.96 5.25 3.80 129.87 116.89 113.67
20 6.04 5.37 3.99 128.74 116.08 113.00
27 5.98 5.32 3.95 129.58 116.41 113.14
AVG 5.94 5.24 3.83 130.24 116.96 113.58
3-Apr 5.91 5.23 3.82 130.58 117 .02 113.60
10 5.88 5.17 3.74 131.01 117.43 113.88
17 5.91 5.16 3.66 130.58 117.50 114.16
24 5.79 5.12 3.55 131.31 117.77 114.55
AVG 5.87 5.17 3.69 131.12 117.43 114.05
1-May 5.72 4.90 3.45 133 35 118.73 114.91
8 5.84 5.12 3.72 131.59 117.77 113.95
15 5.91 5.14 3.73 130.58 117.63 113.91
22 5.82 5.00 3.58 131.88 11&.59 114.45
29 5.79 4.93 3.55 132.32 119.07 1 i4.S5
AVG 5.82 5.03 3.61 131.94 118.36 114.35
S·Jun 5.81 4.9:l 3.47 132 03 119.28 1 i4 84
12 5.70 4.80 3.38 133 65 119.98 115.16
;9 5.54 4.57 3.13 136.05 121.60 116.06
26 5.57 4.57 3.10 135.59 121.60 116.16
AVG 5.66 4.71 3.27 134.33 120.62 115.56
3-Jul 5.58 4.56 3.04 135.44 121.61 116.38
10 5.51 4.47 2.89 136.51 122.31 116.93
17 5.57 4.49 2.88 135.59 122.17 116.96
24 5.46 4.24 2.58 137.27 123.97 118.06
31 5.44 4.22 2.48 137.SB . 124.11 118.43
AVG 5.51 4.40 V7 136.48 122.85 117.35
7-Aug 5.34 4.05 2.20 139.14 125.36 119.47
14 5.08 3.87 2.30 143.31 126.69 119. IO
21 5. 18 3.97 2.54 141.69 125.95 118.21
28 5.17 3.97 2.54 141 85 125.95 118.21
AVG 5.19 3.97 z.4v i4i 50 1,5.99 . 118.75
4-Sep 4.95 3.69 2.30 145.46 12804 119.10
11 5.04 3.81 2.47 143.97 127.14 118.47
18 4.88 3.60 2.31 146.64 128.73 119.06
25 4 84 3.50 2.2' 147.15 129.49 119.40
AVG 4.93 3.65 2.33 145.81 128.35 119.01
2-0ct 4.83 3.42 2.01 147.49 130.11 120.18
9 4.76 3.31 1.92 148.69 130.96 120.52
16 5.11 3.76 2.29 142.82 127.52 119.14
23 5.29 3.92 2.46 139.93 126.32 118.50
30 5.11 3.63 2.03 142.82 128.50 120.11
AVG 5.02 361 2.14 144.35 128.68 119.69
6-Nov 5.15 3.71 2.13 142.17 127.89 119.73
13 4.89 3.49 2.01 146.47 129.57 120.18
20 5.07 3.79 2.27 143.48 127.29 119.21
27 5.06 3.78 2.16 143.64 127.37 119.62
AVG 5.04 3.69 2.14 143.94 128.03 119.69
4-Doc 5.16 3.89 2.21 141.01 126.54 119.43
11 5.00 3.68 2.02 144.63 128.12 120.;5
18 5.08 3.68 1.99 143.31 128.12 120.79
23 4.97 3.55 1.86 145.09 128.97 121.lltl
31 4.83 3.38 1.72 147.49 130.48 122.51
AVG 5.01 3.64 1.96 144.51 128.45 120.94
2002
STANDARD & POOR'S WEEKLY BOND INDEXES
INDUSTRIAL BDHDS ELECTRIC BDNDS
ty TREASURY AAA AA A BBB BB+ 88/BB· B AA A BBB
1 2.04 3.10 302 3 37 4.37 6.42 8.72 7 34 6.85 3.47 4.00
5 4 29 5.37 S57 5.91 6.76 8.63 9.15 ·,o I� 7 42 6.34 6.70
0 4.98 6.06 6.39 6 73 7.51 9.31 9.06 11.00 7.38 7.29 7.59
5 5.51 6.60 & 99 7.34 8.08 9.83 NA NA 7.49 7.98 8.23
0 5.62 6.71 7.15 7.49 8.21 NA NA N.\ NA 8.20 NA
5 5.64 6.73 7.22 7.55 NA NA NA NA !iA NA NA
1 2.18 3.46 320 j 52 4.62 7.21 9.06 684 6.83 3.61 3.91
5 4.24 5.43 5.47 5.85 5.77 9.09 9.38 10 34 7.30 6 30 6.58
0 4.93 607 6.24 6.65 7.49 9.69 9.32 ;J 78 7.30 7.26 7.53
5 5.54 6.67 6.91 7.34 B.13 10.26 NA NA 7.52 804 8.30
0 5.64 6.75 7 04 7.48 B.25 NA NA NA NA 8.25 NA
5 5.66 6.76 7 09 i 54 NA NA NA NA NA NA NA
1 2.65 3.96 3.56 3 94 4.99 6.24 7.88 8.70 7.40 4 03 4.55
5 4.76 5.98 5.90 6.27 7.15 8.57 8.81 ·,o 35 778 6.71 7.07
0 5.34 6.53 6.58 6.94 7.76 9 24 8.88 10.75 7.62 7 54 7.84
5 5.89 7.05 7.19 7 54 8.32 9.84 NA NA , .. 7 73 823 8.49
0 5.96 7.11 7.31 7 66 8.41 NA NA NA NA 8.41 NA
5 5.98 7.12 7.36 7.70 NA NA NA NA ;NA NA NA
1 2.27 2.98 3.02 3.40 4.53 5.79 8.14 9.75 6.84 3.55 4.30
5 4.51 5.55 5.64 5.98 6.87 8.49 8.78 11.25 7.47 6.41 6.83
0 5.17 6.34 6.45 6.78 7.57 9.35 8.74 11.60 7.43 7 33 7.61
5 5.71 S.96 7.09 7.40 B.14 !0.00 NA NA 7.55 8 02 8.22
0 5.82 7.12 7.26 7.56 8.26 NA NA NA NA 8.23 Ni\
5 5.85 7.19 7.34 Hi� NA NA NA NA NA NA NA
1 2.27 2.84 2.96 3.39 4.51 5.72 8.22 9.0i 6.SS 3.47 4.68 s 4.45 5.40 552 5.87 6.79 8.40 8.67 1082 7.40 6.29 6.80
0 5.14 6.25 6.37 6.59 7.53 9.31 6.62 11 35 7.39 7.26 7.47
5 5.67 6.86 i.01 7.30 8.09 9.98 NA NA 7.52 7 96 7.99
0 5.80 7.08 7 20 748 8.24 NA 1;A NA NA 8.20 NA
5 5.84 7.17 7.30 7.57 NA NA NA NA NA NA NA
1 1.99 2.90 2 75 309 4.33 6.11 7.49 9.84 6.55 3.11 3 92
4.10 5.25 5 24 5.52 6.50 8.47 8.77 i 1.G9 7.05 5.81 6.44
4.84 6.10 6.14 5,1 7 28 9.32 9.16 11 BS 1.10 6.81 7.36
5.40 6.73 6.80 7.0€ 7.86 S.95 NA NA 7.25 7.52 8.03
5.57 6.93 7.03 . 7?8 8.03 NA NA NA NA 7.79 NA
5.64 7.04 7.15 7 40 NA NA NA NA NA NA NA
I 1.77 2.83 2.52 3.03 4.46 8.21 9.95 9.64 NA 2.88 3.67
3.61 4.93 ,.92 5.23 6.34 8.86 9.24 ro 98 NA 5.63 6.18
4.58 6.00 6.12 6.35 7.33 9.31 9.54 11.73 NA 6.98 7.43
5.26 6 75 6.94 7.12 8.02 9.69 NA NA NA 7.89 8.28
5.49 7.02 7.26 7.41 8.25 NA NA NA NA 8.27 NA
5.58 7.14 7.42 7 55 NA NA NA NA NA NA NA
1.74 2.78 2.60 3.10 4.46 7.96 9.17 10.48 NA 3.10 3.73
3.35 478 4.51 5 03 6.14 9.17 9.42 10.20 NA 5.31 6.21
4.28 5.88 5.57 6 10 7.09 9.92 9.76 10.31 NA 6.49 7.52
4.95 6.65 6.32 6.86 J.J) 10.50 NA NA NA 7.32 8.41
5.19 5.95 6.60 7 15 801 NA NA' 'NA NA 7.56 NA
5.25 7 06 6.70 7.25 NA NA NA NA NA NA NA
1.61 2.80 2.37 2.90 4.36. 8.86 8.62 9.32 NA 2.97 3.73
2.70 4.14 3.78 4.35 5.55 8.71 8.83 9.19 NA 4.66 5.82
3.65 5.33 4.86 545 6.54 9.11 9.39 9.60 NA 5.86 7.10
4.40 6.17 5.69 6.29 7.31 9.55 NA NA NA 6.77 B.20
4.71 6.54 6.06 6.66 7.64 NA NA NA NA 7.18 NA
4.79 6.67 618 6.79 NA NA NA NA NA NA NA
\ UIS' 2.05 2.06 2 BO 4.39 840 7.11 NA NA 2 94 6.91
2.87 3.83 3.89 4.52 6.08 9.48 9.84 NA NA 4.89 8.17
3.�7 5.13 5.22 �.79 7.34 10.48 11.54 NA NA 6.26 9.24
4.26 5.54 5.63 6.18 7.71 10.70 NA NA NA 6.71 9.50
4.55 5.90 601 6.54 6.06 NA NA NA NA 7.10 NA
4.83 6.26 6.37 688 NA NA NA NA NA NA NA
3.14 3.84 4.06 460 6.23 8.93 8.91 5 01 7.08 NA NA
4.08 4.96 5.17 5.69 7.13 9.72 10.47 6.19 7.91 NA NA
4.32 5.30 5.50 6 02 7.33 9.86 NA 6.57 8.07 NA NA
4.55 5.61 5.80 6.32 7.55 NA NA 6.90 NA NA NA
4.79 5.90 6.09 6.60 NA NA NA NA NA NA NA
2.77 3.55 3.67 4.16 5.59 8.80 8:85 4.4)' 6.10 NA NA
3.82 4.81 4.92 5.38 6.78 9.58 10.29 5.80 7.02 NA NA
4.08 5.20 5.31 5.74 7.13 9.69 NA 6.23 7.15 NA NA
4.35 5.56 5.66 6.07 7.46 NA NA 6.61 NA NA NA
4.61 5.89 5.99 6.39 NA NA NA NA NA NA NA
5 10 15 20 25
JO-Jul
Mlturi
5 10 15 20
25
25-Jun
28-May
23-Apr
26-Mar
2H�b
29-Jan
26-Nov 5
10 15
20
25
27-Aug 1
5 10 15
20
25
24-Sep 1 5 10 15 20
25
29-0ct 1 5 10 15
20 25
2002
31-Dec 5 10 15
20 25
r�) ;· - �
1 � '
Minimum SlOOMM outstanding. Source· Standard & Pear's foed Income Research · BondComp.
Statistical Service
The Standard & Poor's 500 Your Statistical Service should contain ...
., ....... �;,. ' .. � _,,.. - . . .
This issue contains a complete twelve
month record of the Daily High, Low
and Close of the Standard & Poor's
Stock Price Indexes. Also a twelve
month record, by weeks of these
indexes by industrial groups.
Basic Statistics:
Current Statistics, dared january 2002 1-51
Pages Issue
Banking & Finance (6/96) J-23
Production & Labor (2/99) 27-72
Price Indexes (5/94) 73-90
Income & Trade (7/95) 95-125
Building (3/95) 131-144
Energy: Electric Power & Fuels (2/97) 155-170
Metals (10/97) 179-194
Transportation (6/982) 201-213
Textiles, Chemicals, Paper ( 8/91) 271-286
Agriculture Products ( 11/94) 300-314
Security Price Record 2000 Edition 1-348
.:-� : • r- � - ":" "I ,"-'. ,, ... ; Li
.t ·�./ .•
-� � ,_ \, ·� -v ·:- �:. ""/
.: "· ;,- -;._. 1/ �-� j
r··. -:- t.,
Reference to the December 2001 (Yellow)
Supplement is no longer necessary.
This issue should be retained.
� A Division of The McGraw-Hill Companies
Copyright© 2002 Standard & Peer's. All rights reserved.
CURRENT STATISTICS Page 27
STANDARD & POOR'S WEEKLY BOND INDEXES
U.S. GOVERNMENT BONDS
---YIELDS--- ----PRICES----
Loni lnttr Short Lont lntH Short
3-Jan 5.64 5.19 5.05 134.54 117.29 109.37
10 5.61 5.05 4.90 134.99 118.25 109.88 17 5.64 5.11 4.96 134.54 117.84 109.68 24 5.78 5.21 5.00 132.47 117.16 109.54
31 5.62 5.04 4.80 134.84 118.32 110.22 AVG 5.66 . 5.12 4.94 134.28 117.77 109.74
Heb 5.60 5.11 4.93 135.14 117.84 109.78
14 5.52 5.09 5.01 136.35 117.97 109.51
21 5.70 5.14 4.94 133.65 117.63 109.74 28 5.48 4.87 4.66 136.97 119.49 110.69 AVG 5.58 5.05 4.89 135.53 118.23 109.93
7-Mar 5.50 4.89 4.68 136.66 . 119.35 110.62 14 5.43 4.81 4.56 137.74 119.91 111.03
21 5.41 4.71 4.43 138.05 120.61 111.48
28 5.62 4.89 4.60 134.84 119.35 110.90
AVG 5.49 4.83 4.57 136.82 119.81 111.01
4·Apr 5.62 4.76 4.42 134.84 120.26 111.51
11 5.76 4.92 4.59 132.76 119.14 110.53
18 5.77 4.92 4.57 132.61 119.14 111.00
25 5.91 5.00 4.63 130.58 118.59 110.79 AVG 5.77 4.90 4.55 132.70 119.28 111.06
2-May 5.85 5.05 4.69 131.45 118.25 110.59
9 5.77 4.89 4.49 132.61 119.35 111.27
16 6.00 5.16 4.74 129.30 117.50 110.42
23 5.95 5.14 4.79 130.01 117.63 110.25
30 5.98 5.20 4.86 129.58 117.22 110.01
AVG 5.91 5.09 4.71 130.59 117.99 110.51
6-Jun 5.89 5.07 4.69 130.87 118.11 110.59
13 5.82 4.98 4.59 131.88 118.73 110.93 20 5.80 4.88 4.47 132.17 119.42 111.34 27 5.77 4.94 4.57 132.61 119.00 111.00
AVG 5.82 4.97 4.58 131.88 118.82 110.97
4-Jul 5.89 5.05 4.87 130.87 118.25 109.98 11 5.84 4.96 4.56 131.59 118.87 111.03 18 5.66 4.77 4.40 134.24 120.19 111.58
25 5.71 4.84 4.43 133.50 119.70 111.48
AVG 5.78 4.91 4.57 132.55 119.25 111.02
1-Aug 5.64 4.70 4.26 134.5'1 120.68 112.06
8 5.62 4.65 4.20 134.84 121.03 112.27
15 5.63 4.67 4.21 134.69 120.89 112.24
22 5.55 4.59 4.17 135.90 121.45 112.38
29 5.45 4.47 4.06 137.43 122.31 112.76
AVG 5.58 4.62 4.18 135.48 121.27 112.34
5-Sep 5.58 4.64 4.18 135.44 121.10 112.34
12 5.52 4.46 3.94 136.35 122.38 113.18
19 5.61 4.33 3.37 134.99 123.31 115.19
26 5.53 4.30 3.34 136.20 123.53 115.30
AVG 5.56 4.43 3.71 135.75 122.58 114.00
3-0ct 5.38 4.43 3.27 138.51 122.59 115.55
10 5.42 4.50 3.27 137.89 122.09 115.55
17 5.37 4.45 3.25 138.67 122.45 115.62 24 5.36 4.48 3.21 138.83 122.24 115.77
31 5.07 4.15 · 2.91 143.48 124.62 116.85
AVG 5.32 4.40 3.18 139.48 122.80 115.87
7-Nov 4.99 4.08 2.79 144.80 125.14 117.29
14 5.22 4.43 3.16 141.04 122.59 115.95
21 5.53 4.80 3.45 136.20 119.98 114.91
28 5.65 4.87 3.57 134.39 119.49 114.46
AVG 5.35 4.55 3.24 139.11 121.80 115.66
5-0ec 5.64 4.84 3.55 134.54 119.70 114.55
12 5.77 4.92 3.52 132.61 119.14 114.66
19 5.76 4.96 3.67 132.76 118.52 114.13
26 5.85 5.13 3.82 131.45 117.70 113.60
AVG 5.76 4.96 3.64 132.84 118.77 114.24
2001 CORPORATE YIELDS
NDUSTR1Al 8DND. -ELECTRIC BONDS-
TREASURY AAA AA A BBB BB+ BB/8B· B AA A BBB
1 4.67 5.41 5.57 6.00 6.57 7.80 7.93 8.74 6.22 5.76 6.06
5 4.89 5.86 6.11 6.62 7.25 8.24 9.89 11.14 6.93 6.81 6.98
0 5.22 6.28 6.57 7.12 7.77 8.66 10.97 12.40 7.46 7.49 7.61
5.59 6.71 7.02 7.59 8.26 9.09 NA NA 7.96 8.07 8.16 5.69 6.85 7.17 7.76 8.43 NA NA NA NA 8.31 NA
5.70 6.89 7.22 7.82 NA NA NA NA NA NA NA
1 4.56 5.26 5.26 5.74 6.41 7.03 7.80 8.35 6.13 5.70 5.93
4.73 5.79 5.97 6.54 7.20 8.35 9.68 9.77 6.81 6.65 6.79
4.97 6.18 6.44 7.04 7.70 9.08 10.66 10.55 7.27 7.23 7.33 5 5.40 6.71 7.00 7.64 8.28 9.80 NA NA 7.83 7.86 7.93
5.51 6.88 7.21 7.86 B.50 NA NA NA NA 8.11 NA
5.53 695 7.31 7.97 NA NA NA NA NA NA NA
1 4.29 4.93 5.09 5.46 6.48 6.72 . 9.22 6.91 5.82 5.41 5.76
4.64 5.63 5.88 6.38 7.29 8.18 10.50 11.01 6.73 6.59 6.86
4.99 6.13 6.42 6.97 7.84 9.00 11.25 12.97 7.32 7.29 7.53
5.50 6.74 7.05 7.64 8.48 9.79 NA NA 7.98 8.01 8.24 • 5.61 6.90 7.23 7.84 8.67 NA NA NA NA 8.27 NA 5.63 6.97 7.31 7.94 NA NA NA NA NA NA NA
3.74 4.78 4.52 5.12 5.81 6.47 8.87 6.93 5.25 4.98 5.16
4.70 5.87 5.89 6.47 7.18 8.31 10.35 10.47 6.82 6.71 6.94
5.21 6.43 6.57 7.15 . 7.85 9.20 11.08 11.09 7.59 7.54 7.80 5.74 7.00 7.21 7.78 8.49 9.96 NA NA 8.28 8.27 8.54
5.88 7.16 7.43 7.99 8.70 NA NA NA NA 8.54 NA
5.89 7.19 7.49 8.05 NA NA NA NA NA NA NA
3.69 4.73 4.55 5.07 5.89 5.95 8.44 8.59 5.34 5.03 5.29
5.05 6.19 6.19 6.72 7.50 8.19 10.21 10.36 7.14 7.03 7.26
5.52 6.71 6.79 7.32 8.08 9.05 10.86 11.00 7.79 7.77 7.99
5.95 7.17 7.30 7.82 8.58 9.70 NA NA 8.33 8.36 8.58 6.04 7.28 7.44 7.97 8.72 NA NA NA NA 8.57 NA
6.04 7.29 7.48 8.01 NA NA NA NA NA NA NA
3.41 4.24 4.26 4.69 5.51 5.72 9.17 8.16 5.01 4.76 5.03 4.71 5.78 5.90 6.39 7.17 8.29 10.12 10.66 6.71 6.68 6.91
5.21 6.38 6.55 7.07 7.83 9.34 10.46 11.68 7.38 7.45 7.66 5.70 6.92 7.11 7.66 8.40 10.14 NA NA 7.97 8.09 8.28
5.79 7.05 7.26 7.82 8.56 NA NA NA NA 8.29 NA
5.81 7.11 7.33 7.90 NA NA NA NA NA NA NA
3.46 4.16 4.29 4.67 5.56 602 9.19 8.20 4.93 4.66 5.03
4.63 5.61 5.79 6.26 7.06 ·8.17 9.68 10.02 6.60 6.55 6.83
5.10 6.20 6.40 6.90 7.68 9.06 9.86 10.77 7.28 7.33 7.57
5.55 6.73 6.94 7.46 8.21 9.76 NA NA 7.86 7.97 8.18 5.65 6.87 7.10 7.63 8.37 NA NA NA NA 8.19 NA 5.67 6.93 7.16 7.71 NA NA NA NA NA NA NA
3.35 4.15 4.20 4.�7 5.50 6.15 9.50 8.68 4.78 4.40 4.79
4:41 5.48 5.59 6.05 6.87 7.88 9.61 10.39 . 6.40 6.25 6.49
4.85 6.03 6.16 6.66 7.43 8.60 9.63 11.10 7.07 7.02 7.20
5.39 6.64 6.79 7.31 8.05 9.31 NA NA 7.75 7.76 7.91
5.49 6.79 6.95 7.49 8.21 NA NA NA NA 8.00 NA
5.52 6.85 7.02 7.57 NA NA NA NA NA NA NA
2.63 3.64 3.49 4.04 4.73 6.47 11.25 9.23 4.22 3.73 4.21
3.87 5.30 5.25 5.80 6.42 8.55 10.14 11.16 5.99 5.84 6.11
4.72 6.33 6.32 6.86 7.46 9.76 9.97 12.30 7.06 7.06 7.24
5.43 7.15 7.16 7.70 8.28 10.67 NA NA 7.90 7.98 8.11
5.59 738 7.42 7.96 8.52 NA NA NA NA 8.30 NA
5.64 7.49 7.54 8.08 NA NA NA NA N.4 NA NA
2.01 3.04 3.12 3.42 4.35 6.19 8.92 9.07 4 13 .. 3.27 3.67
360 4.83 5.04 5.43 6.33 8.31 9.45 10.79 6.24 . 5.59 5.92 4.42 5.74 6.00 6.43 7.31 9.36 9.80 11.66 7.29 6.72 7.03
5.05 6.42 6.71 7.16 8.03 10.12 NA NA 8.05 7.53 7.82
5.20 6.61 6.92 7.38 8.25 NA NA NA NA 7.81 NA
5.27 6.71 7.04 7.52 NA NA NA NA NA NA NA
2.41 3.50 3.52 3.84 4.80 6.98 9.12 8.25 4.68 3.81 4.26
4.32 5.48 5.66 6.00 6.94 8.62 9.12 10.37 7.03 6.38 6.73
4.95 6.13 6.39 6.75 7.67 9.14 8.93 11.10 7.86 7.30 7.61
5.52 6.72 7.02 7.38 8.30 9.65 NA NA 8.54 804 8.32
5.60 6.82 7.15 7.51 8.43 NA NA NA NA 8.24 NA
5.62 6.84 7.20 7.57 NA NA NA NA NA NA NA
.2 24 3.48 3.23 3.66 459 7.13 7.70 8.15 7.25 3.85 3.99
4.52 5.75 5.83 6.18 7.07 8.97 9.85 10.73 7.76 6.66 6.91
5.19 6.4,· 6.64 6.96 7.82 9.45 1'0.47 11.53 7.66 7.56 7.85
5.79 7.02 7.32 7.62 8.47 9.94 NA NA 7.82 8.30 8.61
5.86 7.09 7.44 7.73 8.57 NA NA NA NA 8.46 NA
10
15
20
25
24-Jul
30-Jan
27-Jun 1
5 10
15 20 25
29-May 1 5 10 15
20
25
24-Apr 1
5 10
15 20 25
5
10 15 20
25
27-Mar
5
10
I
20
25
27-Feb
1
15
20
25
26-Dec 1 5 10 15 20
Maturity
29-Aug 1
5 10 15 20 25
25-Sep. 1
5 10 15 20 25
30-.0cl 1
5
10
15 20 25
2001
27-Nov 1
5
10
15
20 25
(__)
Minimum $100MM oulslanding. Source: Standard & Poor'S Fixed Income Research· 8ondComp.
Statistical Service .
Basic Statistics:
Your Statistical Service should contain ...
Current Sratistics, dared February 2001 1-40
Current Srarisrics, dared January 2001 1-40
Banking & Finance (6/96) 1-23 ·
Production & Labor (2/99) 27-72
Price Indexes (5/94) 73-90
Income & Trade (7/95) � 95-125
Building (3/95) 131-144
Energy: Electric Power & Fuels (2/97) 155-170
Metals ( 10/97) 179-194
Transportation. (6/98) 201-213
Textiles, Chemicals, Paper (8/91) 271-286
Agriculture Products (11/94) 300-314
Security Price Record 2000 Edition 1-348
Pages Issue
The Standard & Poor's 500
This issue contains a complete twelve
month record of the Daily High, Low
and Close of the Standard & Poor's
Srock Price Indexes. Also a twelve
month record, by weeks of these
indexes by industrial groups.
Reference co the January 2001 (Yellow)
Supplement is no longer necessary.
The Current Statistics dated January 2001 (White
should be retained.
CURRENT STATISTICS
STANDARD & POOR'S WEEKLY BOND INDEXES
Page 27
U.S. GOVERNMENT BONDS
---YIII.DS--- -Pllltls---- ..... ,_ S1lan ..... 1- - �Ju 6.'5 6.63 6.J.4 116.11 108.00 105.15
12 6.97 6.72 6.43 116.58 !OHS 101.86
19 6.94 6.71 6.11 116.!l' 107.51 11W.9l
26 6.81 6.6! 6.'3 111.S4 107.70 11W.I&
AVG 6.92 6.69 6.40 117.U 107.67 11W.95
H•b 6.58 6.76 6.59 121.72 107.21 11W.l5
9 6.56 6.80 6.6l 121.72 106.97 llW.22
16 6.57 6.76 6.57 121.SS 107.21 llW.41
23 6.'3 6.71 6.56 123.42 107.51 IIW.45
AVG 6.!>3 6.76 6.59 lU.11 107.23 IIW.36
l·MII 6.43 6.54 6.46 123.42 107.!l' IIW.71
8 6.LI 6.63 6.47 123.l! 108.00 IIW.73
15 6.39 6.54 6.46 123.'5 106.5.5 104.76
22 6.26 6.4,4 6.47 125.70 109.17 104.73
2' 6.32 6.49 6.S4 l2U5 Hll.86 1CI.S1
AVG 6.37 6.SS 6.48 124.25 106.30 104.70
S.Apr 6.12 6.19 6.30 127.62 110.H 10521
12 6.19 6.29 6.37 126.65 110.11 105.05
19 6.17 6.28 6.30 126.S3 110.17 10521
26 6.25 6.12 6.46 125.IJ 109.30 104.76
AVG 6.18 6.30 6.36 126.76 110.DI 105.09
l-M1y 6.4:l 6.61 9.67 123.42 107.70 104.10
10 6.5-1 8.74 6.78 11&J7 107.ll 10175
II 6.SS 6.79 6.86 121.85 107.03 IQJ.30
2, 6.56 6.76 8.11 121.n · 107.21 IQJ.61
ll 6.39 6.58 8.73 123.95 108.ll 1C3.91
AVG 6.49 6.71 6.77 121.46 107.52 1Q3.71
7-Jwn 6.21 6.41 8.56 125.97 109.38 104.45
11 s.21 6.32 6.49 125.'7 109.92 104.67
21 S.l! 6.37 6.19 125.29 109.61 104.67
21 6.30 6.36 6.13 125.16 109.67 104.10
AVG 6.27 6.37 6.51 125.60 109.6-1 104.62
S.Jul 6.19 6.19 6.36 126.65 110.74 1115.08
12 6.U 6.28 6.40 126.24 110.17 104.95
19 6.26 6.37 6.19 125.70 109.61 104.67
26 6.12 6.23 6.37 ll7.62 110.19 105.05
AVG 6.20 6.11 6.41 116.5.5 110.25 104.S4
2-Aug 6.06 6.13 6.37 128.18 111.12 105.05
9 6.01 6.04 6.13 129.16 111.SS 105.U
16 6.0l 6.1 6.22 129.0l 111.31 105.53
23 5.96 6 6.12 129.87 111.95 1as.as
30 6.0l 6.06 6.16 129.0l 111.57 105.72
AVG 6.0l 6.07 6.2 129.05 111.5.l 105.59
1-S,p 5.96 5.!l' 6.01 12'-17 · 112.33 lOll.21
13 5.99 5.'7 6.03 129.4-1 112.14 lOll.14
20 6.20 6.03 6.Ql 126.52 111.76 lOll.14
11 6.13 5.!l' 5.95 127.11 -+12.33 106.40
AVG a.en 5.97 6.01 128.ll 112.14 IOll.22.
4-0cl 6.19 5.99 5.98 126.65 112.01 lOll.31
11 6.05 5.17 5.19 121.60 112.7' IOll.60
18 5.99 S.75 5.76 129.4-C 113.57 1177.02
15 5.'7 5.77 5.n 129.73 lll.'3 106.&3
AVG 6.05 5.85 5.66 128.61 112.95 Ul&.69
1-Nov 5.98 5.61 5.82 129.51 113.17 106.&3
8 6.09 5.'4 5.95 121.04 112.33 106.40
15 5.95 5.78 5.6-4 130.01 113.17 106.76
ll S.S:J 5.74 5.80 130.30 113.&3 uu, a 5.&2 5.60 5.66 131.68 11t55 107.35
AVG us ,.,, 5.11 129.96 113.CI 101.15
I-Dec 5.66 5.38 5.12 lll.24 116.01 IOl.1'
ll 5.63 5.35 5.39 lll.6' 116.21 108.24
lO 5.!l 5.12 5.17 131.20 117.77 101.!7
11 5.51 5.1' S.14 135.4-1 117.50 10!.(17
AVG 5.60 5.15 S.28 135.14 Ill.I) 1CU1
2000 CORPORATE YIELDS
20 2
1
2
25
s 10
IS 20 25
10
15
20 25
NOUS'TRIAl !OHO- -fl!CTRIC IOHDS
"' TRUSURY UJ. u • Ill ••• 11111· I M A •••
I 6.10 6.66 6.61 6.96 7.5-1 ,.11 9.14 11.09 6.50 6.71 6.IJ
5 6.59 l.36 l.« l.H 1.28 U1 9.65 11.l6 7.65 1.71 7.89
10 6.lO l.SS l.75 7.97 ,.so 9.ll 9.l6 11.95 8.04 8.10 8.24
15 6.85 7.l6 l.01 1.20 1.72 ,.86 NA NA t.37 8.38 8.$4
20 6.&4 l.77 1.06 1.23 l.lS NA NA NA NA 8.45 NA
25 6.77 7.H 1.04 8.20 NA NA NA NA NA . NA NA
I 6.20 6.64 6.62 6.91 7.41 I.SS. 9.63 9.29 6.66 ua 6.99 s 6.57 7.38 I.SJ 7.l! t.26 9.37 9.77 11.60 7.63 7.69 7.81
10 6.37 7.33 7.56 7.)9 t.26 9.36 9.47 12.21 1.10 7.69 7.80
IS 6.50 I.SS ).82 6.03 I.SI 9.60 NA NA 7.98 7.,3 1.04
20 6.40 7.52 7.82 1.01 a.so NA NA NA NA 7.91 NA
25 6.JO ).« 7.80 7.98 NA NA NA NA NA NA NA
I 6.33 6.H 6.80 J.17 7.57 a.SI 9.59 9.03 6.66 6.91 J.11
5 6.'7 7.37 lS1 7.&3 I.JS 9.10 10.03 11.82 7.76 1.76 7.90
10 6.17 7.28 I.SJ 1.lS 1.31 9.H 9.15 12.66 7.SS 7.75 7.81
IS 6.40 7.63 J.91 1.10 1.70 u, NA NA 8.32 1.16 8.27
20 6.33 7.65 7.96 au 8.71 NA NA NA NA 8.22 NA
25 6.25 7.63 7.96 1.11 NA NA NA NA NA NA NA
I 6.12 6.58 6.62 7.06 7.58 I.JI 9.96 11.38 6.16 6.71 7.11 s 6.38 7.31 7.S6 1.86 1.47 9.75 10.43 1U2 7.71 7.6,1 t.08
10 6.11 7.28 7.63 7.85 I.SI 10.02 10.28 11.12 7.91 7.98 1.16
15 6.32 7.59 7.98 1.17 1.86 10.19 NA NA I.JI I.J9 1.52
20 6.26 7.61 1.04 t.20 1.92 NA NA NA NA 1.48 NA
25 6.20 ).61 1.08 1.22 NA NA NA NA NA NA NA.
I 6.18 6.77 6.95 7.19 7.H 11.26 10.29 11.04 I.JS 1.96 7.� s 6.62 7.67 1.98 8.25 8.33 10.50 11.05 12.20 1.19 1.22 I.Sol
10 6.37 7.62 7.98 1.27 l99 9.71 10.!l( 12.26 1.37 UJ t.57
IS 6.56 7.92 1.32 4.61 9.35 9.62 NA NA UI t.73 8.92
6.49 1.$1 I.Ji 8.65 9.41 NA NA NA NA I.Bl NA
5 6.42 7.92 1.36 1.66 NA NA NA NA NA NA NA
I 5.92 6.JO 6.61 6.81 7.38 I.SJ 9.0 9.60 6.64 6.54 7.11 s 6.29 7,28 7.61 7.88 8.46 10.0I 10.51 11.a.& 7.SJ ).!IC 8.23
0 6.09 1.35 7.66 7.95 1.5) 10.31 10.59 12.15 1.12 1.14 1.36 s 6.32 7.73 1.03 8.ll t.97 10.81 NA NA !.58 1.60 8.77
0 6.30 7.Sl 1.12 1.13 9.08 NA NA NA NA t.15 NA
6.23 7.84 1.13 a.is NA NA NA NA NA 'NA NA
1 6.05 6.57 6.89 7.11 7.S6 8.69 rn 9.58 6.85 6.82 w
5 6.16 7.17 7.46 7.77 8.30 9.57 10.48 11.81 ).76 7.79 l.01
•l 6.03 7:25 7.5-1 7.U us 9.71 10.85 12.61 1.'1 I.Ol 1.10
5 6.16 7.51 7.79 a.11 1.74 10.11 NA NA l30 8.38 1.36
0 6.13 7.57 7.M 8.21 1.83 NA NA NA NA I.SO NA
5 6.07 7.57 7.85 8.22 NA NA NA NA NA NA NA
I 6.28 6.79 7.03 7.24 7.84 8.69 9.65 10.62 6.95 7.10 7.39
6.07 7.11 7.39 7.68 8.31 9.10 10.52 11.73 7.70 7.71 7.B5
5.81 7.08 UI 7.71 I.J.4 9.5-1 10.73 12,05 7.86 7.11 7.88
6.07 7.47 7.77 8.17 1.77 10.03 NA NA 8.36 l.l7 8.30
6.04 7.SJ I.a.& 1.21 8.87 NA NA NA NA rn NA
5.98 7.55 7.86 rn NA NA NA NA NA NA NA
6.07 1.54 6.77 6.99 1.10 1.36 9.57 10.67 6.72 m 7.08
5.88 6.92 7.19 7.50 w 9.06 10.14 11.58 7.52 7.50 7.66
5.81 7.09 7.38 1.n 1.1,4 9.36 10.3' 11.9' 7.87 7.12 7.91
6.11 7.SJ 7.IJ 8.20 u, 9.18 NA NA l.'i 8.ll 8.11
6.11 7.6.l ).!IC 8.32 9.00 NA NA NA NA 8.50 NA
6.06 7.66 7.9£ 1.37 NA NA NA NA NA NA NA
5.91 6.50 6.81 7.QJ 7.58 9.10 U3 9.« 6.93 6.12 7.15
5.67 6.77 7.10 l.lS 7.93 9.47 10.61 11.50 7.47 7.38 7.48
S.63 6.97 7.31 ).72 8.16 9.72 11.00 12.48 7.79 7.71 7.71
5.89 7.31 1.72 1.17 8.59 10.16 NA NA 1.27 l19 1.14'
5.93 7.51 7.86 1.33 8.71 NA NA NA NA 8.38 NA
S.90 7.57 7.92 t.11 NA NA · NA NA NA NA NA
6.15 6.11 UZ 7.16 7.14 a.,2 9.40 9.!l' 7.11 7.03 7.26
S.57 · 6.69 6.91 7.39 7.17 9.11 10.31 IUl 7.33 1.32 7.«
5.59 6.95 7.21 7.75 1.20 9.49 11.07 13.04 7.69 7.71 1.79
5.12 7.32 7.61 t.19 1.61 9.92 NA NA 1.12 1.16 1.21 5.86 l.16 7.71 1.31 8.71 NA NA NA NA I.JS NA 5.14 7.51 7.15 1.48 NA NA NA NA NA NA NA
S.32 6.01 8.20 6.IS l.00 UI 9.J.4 10.03 6.21 7.32 U.4 4,90 6.03 6.22 1.71 7.32 8.51 10.13 11.16 6.76 I.JI UI 5.03 6.35 6.5-1 7.11 1.71 1.85 10.71 12.39 7.29 1.70 7.11
5.47' f.89 7.0, 1.1, 8.40 9.41 NA NA l.97 1.25 8.06 S.Sl '°' 7.23 1.U t.59 NA NA NA NA ,.,o NA
2000
n-Mar
2S-Apr
Z,.Au9
24-0cl I
2'-S1p I 5 10
15
20 25
J1·Mty /)
.__)
.,,.-. 27-Jun
·W
25-Jul
) 18-No• 1 s
10
J 15 20 u;
2'-010 1 r- 5 10 15
.rl 20
\.
CURREl'lf STATISTICS Page27
--PKICG- -TIElDS--
U.S. GOVERNMENT BONDS
lo•o lllltf Sboft lo"' '"'" ·s1on
2·01C S.27 4.53 4.44 140.25 121.84 111.4'
9 5.26 4.56 4.51 140.41 121.67 111.20
16 5.32 4.16 ,.so IJ9.48 121.67 111.24
23 5.53 4.86 4.74 138.20 119.56 110.42
30 S.39 4.71 4.64 138.36 120.61 110.16
AVG 5.35 4.64 4.57 138.94 121.08 111.01
6•JJft 5.45 4.75 4.n 137.43 120.33 110.49
13 SAT 4.16 UT 137.12 120.2! tt0.61
20 5.50 4.83 04 136.� 119.n 110.42
27 S.40 4.70 us 138.20 120.68 110.73
AVG S.45 4.75 4.69 137.35 120.26 110.sa
3-FID 5.54 4.87 4.17 136.05 119.49 110.32
10 S.59 4.92 4.84 135.29 119. 14 110.1)8
17 5.65 5.06 5.04 134.39 118.18 109A1
24 1.82 5.27 S.13 131.88 118.75 109.10
AVG 5.65 S.03 4.95 134.40 118.39 109.73
3·11111 S.93 S.43 S.28 130.30 115.&a 101.60
10 5.85 5.29 5.14 131.45 116.62 109.07
17 1.77 5.21 5.09 132.61 117.16 109.24
24 S.43 S.23 5.10 131.14 117.01 109.211
JI S.91 S.30 5.11 130.58 11!.59 109.17
AVG 5.86 5.29 5.14 131.34 116.61 109.06
7 Apt 5.80 S.19 5.00 132.17 117.29 109.54
14 5.78 S.18 5.01 132.47 117.SO 109.Sl
21 5.79 5.,a S.01 132.32 117.36 109.ll
28 S.85 S.25 S.06 131.45 116.89 109.27
AVG 5.81 5.20 5.03 132.10 117.25 109 . .:6
5 May i98 S.41 S.18 129.58 llS.41 108.9'
12 6.10 5.54 1.27 127.90 114.95 108.o4
19 6.06 5.69 5.42 lla.46 113.96 108.:4
26 ,.11 S.68 S.431127.76 114.02 108 . .t
AVG 5.06 5.58 5.33 128.43 114,69 108.46
2-Ju• 6.26 5.95 S.71 125.70 112.27 107.JS
9 6.32 5.98 S.70 124.89 112.08 10712
16 6.39 6.03 5.72 123.95 111.i& (07.!5
23 6.46 6.08 5.76 m.oJ 111.4' 107.!:'2
30 6.27 5.86 5.60 12S.56 112.85 107.�
AVG 6.34 5.98 S.10 124.63 112.08 10716
7·Jul 6.35 S.97 5.69 124.48 112.14 1011S
14 0.20 5.82 5.57 126.52 113.11 107.5-1
21 6.19 5.73 5.45 126.65 113.70 108.1).1
28 5.30 5.90 S.60 125.16 m.59 107.55
AVG 8.26 S.86 5.58 125.70 112.49 10H2
Hu; o.39 6.06 5.68 123.95 111.57 10715
ti 6.51 6.25 5.8-1 :n.37 110.36 10&.:6
18 o.39 6.02 5.69 123.9S 111.41 107 l5
25 6.28 5.87 5.5a :125.•J t12.i9 107.51
AVG S.J9 6.05 5.70 I 123.93 111.64 107.23
1·S•p 5.48 8.11 S.8-0 122.78 111.25 106.39
8 6.49 6.06 5.73 122.63 111.57 107.12
IS 6.55 6.05 5.n 121.85 111.63 10i.1S
22 6.53 6.06 5.10 122.11 111.57 107.2:2
29 6.53 6.08 5.76 122.11 111.4-4 101m
AVG 6.52 6.07 5.74 122.29 111.49 107.i,8
6·0c1 6.59 8.19 s.es 121.33 110.74 108.il
13 6.89 6.26 S.90 120.05 110.30 106�8
20 6.74 6.32 5.96 119.42 109.92 10837
27 6.71 6.]2 5.97 119.80 109.92 108.34
AVG 4.68 6.27 5.92 120.u 110.22 108.50
J•HOY 6.48 8.10 5.83 112.76 111.31 106.79
10 6.44 6.04 5.82 123.29 111.69 108.Sl
17 6.45 6.10 U8 123.16 111.31 106.63
24 6.49 6.17 S.93 122.63 110.47 10U7
AVG 6.47 6.10 5.87 122.96 111.30 108.54
-ruCTIIIC IOMllS- 1998
STANDARD & POOR'S WEEKLY BOND INDEXES
CORPORATE YIELDS
�NOUSTRIAl IONO$-
u1lty Tft!J.SURT AM M A Ill ••• j 11111, I M & Ill
1 HS 5. 12 5.19 5.44 6.01 S.341 i.&4 8.45 5.19 5.3<1 5.74
5 4.Sa �.JS 5.53 . 5.80 6.44 7.19 : l.ll 9.96 1.69 S.76 6.08
0 4.10 5.56 5.82 6.1.9 . 6.82 7.69 !.13 10.75 MS 6.08 6.37
5 5.06 6.03 6.30 6.58 7.32 8.27 NA NA 6.56 6.51 us
0 5.40 8.41 6.70 6.99 7.75 NA llA NA NA 7.00 liA s 5.39 6.45 6.76 7.05 NA NA tlA NA NA AA NA
I tSI 4.92 S.02 · 5.31 5.84 6.34 7.11 NA 5.06 5.22 S.63
5 t59 5.28 5.49 5.79 4.45 7.20 1.21 9.74 S.68 5.71 5.95
4.70 s.sz s.n 6.07 6.79 7.64 8.16 11.12 6.03 6.00 6.17
5.03 5.95 6.23 6.53 7.28 w /IA NA 6.52 5.46 6.SS
5.39 6.34 6.� 6.� 7.71 NA NA NA NA 6.S7 NA
5.41 6.39 6.71 7.01 NA NA NA NA NA NA NA
4.06 UT 5.05 5.35 5.96 U2 7.SI 7.11 5.13 S.31 5.56
5.04 5.64 5.85 6.15 6.80 7.70 7.99 9,40 6.09 6.18 8.39
5.09 5.87 6.09 6.39 7.05 7.97 8.08 10.27 6.40 6.H 6.6'1
5.49 6.37 6.59 6.89 7.57 8.10 NA NA 6.95 6.?3 7.15
5.73 6.69 6.91 7.21 7.89 NA NA NA NA 716 NA
5.71 6.72 6.95 7.25 NA NA NA NA NA tlA NA
4.62 4.87 S.04 S.32 5.86 6.69 U4 7.50 l.23 5.26 I.SO
5.14 5.77 S.99 6.26 6.51 7.89 8.44 9.58 6.29 6.23 6.47
S.63 6.43 8.67 6.92 7.48 8.67 9.12 10.74 7.01 6.91 7.16
5.60 6.50 6.75 1.00 156 8.81 NA NA 7.12 i.00 7.2S
S.47 6.84 7.10 7.35 7.91 NA NA NA NA 7.JS NA
S:47 6.89 7.15 7.40 NA NA w. NA NA NA NA
4.87 l.92 5.0S 5.32 5.83 5.91 1.20 5.23 S.22 l.34 5.82
5.10 S.15 S.93 6.19 6.69 7.79 1.33 . 9.49 6.28 a.19 8.38
5.22 6.03 6.24 6.49 6.99 8.11 8.74 9.96 &.66 6.47 6.63
5.54 6.44 6.67 6.91 7.41 8.S4 NA NA 7.13 us 7.03
6.80 6.18 7.01 7.26 7.TS NA PIA NA NA 7.22 NA
S.80 6.84 7.01 7.32 NA NA .. NA NA NA NA NA
4.87 5.14 S.25 5.S2 S.98 6.82 U4 7.84 S.42 l.57 l.70
5.44 6.17 6.33 6.59 7.02 8.00 I.SS 9.45 6.61 o.53 6.68
5.49 6.41 6.60 6.45 7.27 8.31 1.76 9.94 6.92 6.75 6.90
5.83 6.87 7.01 7.32 7.74 8.80 NA NA 7.42 1.19 7.35
6.05 7.17 7.38 7.62 8.04 NA NA NA HA 7.48 NA
6.01 7.19 7.41 7.65 NA NA NA NA NA NA NA
5.0S S.36 S.4S S.75 6.23 7.01 7.11 7.66 5.41 HS S.88
S.82 6.53 6.70 6.95 7.42 8.46 1.81 9.63 6.89 6.93 7.08
5.93 6.82 7.02 7.25 7.72 rn 9.06 10.26 7.31 7.26 7.38
6.26 7.25 7.47 7.69 8.18 9.3l NA NA 7.82 7.72 7.82
6.38 us 7.68 7.89 8.36 NA NA NA NA 7.93 NA
6.30 7.43 7.67. 7.87 NA NA NA NA NA NA NA
4.95 5.39 5.40 S.10 6.19 8.98 7.61 1.41 5.40 l.60 5.90
S.68 6.48 6.61 5.85 7.35 8.31 1.76 9.69 6.85 ti.82 6.98
5.81 8.76 6.94 7.16 7.66 8.70 9.06 10.47 7.29 7.16 7.26
8.18 7.22 7.43 7.64 8.14 9.23 NA NA ,.as 7.66 7.72
6.31 7.41 7.64 7.84 8.34 NA NA NA NA a1 NA
6.25 7.40 7.65 7.83 NA NA NA NA NA NA NA
S.15 S.54 Ht 6.02 6.ll 7.57 7.85 N.A. S.48 s.n 6.0S
S.68 6.51 6.68 6.96 7.46 8.18 8.92 10.0S 6.83 6.84 7.04
5.71 6.73 6.94 7.16 7.67 Ul 9.17 10.98 i.22 7.11 7.27
6.2S 7.J8 7.82 7.80 8.32 9.47 NA NA 7,97 ao 7.93
6.37 7.57 7.82 7.98 s.se NA NA NA NA Ml NA
6.28 7.54 7.81 7.95 NA NA NA NA NA NA NA
S.11 S.84 S.67 8.04 8.63 7.82 4.33 7.76 S.64 5.85 S.95
S.78 6.63 6.80 7.07 7.66 4.83 9.12 10.63 6.99 7.05 7.26
S.89 6.90 7.13 7.36 7.94 9.11 9.30 11.70 7.41 7AO 7.66
6.34 7.44 7.71 7.91 8.49 9.66 IIA NA 8.0S 1.00 8.29
. 8.49 7.88 7.96 1.14 8.71 NA NA NA NA 1.25 NA
6.42 7.64 7.95 8.12 NA NA NA NA NA NA NA
s.so 602 6.03 6.43 7.11 1.17 a.32 8.41 S.82 6.17 8.26
8.17 7.01 · 7.18 7.46 1.01 9.00 9.10 10.83 7.32 7.« 7.61
8.25 7.24 7.48 7.69 4.29 9.33 9.23 11.66 7.76 7.19 7.98
6.61 1.75 8.01 8.21 8.79 uo NA NA 1.40 a.37 4.59
6.77 7.91 8.20 8.37 8.94 NA NA NA NA 8.57 NA
6.69 7.47 8.18 1.31 NA NA NA NA NA NA !IA
S.62 6.20 8.16 6.56 7.27 7.79 9.01 9.27 6.08 8.33 6.46
6.02 6.82 &.99 7.27 7.90 U7 9.08 11.12 7.19 7.28 7.43
6.08 8.99 7.24 7.47 8.06 9.23 9.00 11.81 1.56 1.51 7.75
6.44 7.40 7.71 7.91 8.41 9.71 NA NA 8.12 8.08 4.25
8.51 7.51 7.85 8.03 8.58 NA NA NA NA 8.25 NA
� JJ 7.47 7.84 8.00 NA NA NA NA NA NA NA
10
15 20
25
25·May 1 s
10
15
20
!S
10
15
20 25
3a•MII I
5
10
15
20 25
24-FO 1 s 10
!S
20
25
1998
Z7·1an
1999
Mat
19-0IC
29-lun 1 s 10
IS 20
25
27·111 1 s
10 15
20
25
21-Au; t 5
10 15
20
ZS
21-SIP I
5 10 rs 20 ZS
25·0CI 1 5 10 IS 20 25
27-Apt
t'l·Ho, 1 s 10
15
20 ,.
)
-._)
)
·J
r
-...J' .· v
)1 ··-,,..'/
CURRENT STATISTICS
ST�NDARD & POOR'S WEEKLY BOND INDEXES
Page27
__ ,.,cu-- --Ymos--
U.S. GOVERNMENT BONDS
MUHIC1'Al IOHDI
Tlt'4 l'riu lot hUu Short ll"'I ,.,., Sbl�
5.14 i1.H6 6.97 6.19 6.22 116.56 101.25 10S.S3
5.71 ;:u6 7.00 UI 6.22 116.21 101.12 105.53
S.it 706 7.11 6.74 6.21 '" 19 107.Jl 105.3'
l.84 i8.l6 7.12 6.10 6.46 11U7 106.91 IOVO
5.71 79.09 7.0S UI e.19 115.11 107.67 105.21
5.19 71 9� 7.20 6.17 6.52 113.13 106.5' 104.51
S.19 Ii.Si 7.22 6.19 6.IJ IIJ.60 106.42 104.54
5.19 iH6 7.23 6.'2 6.60 11).ll 106.2• 10U2
SU t: lo 7.19 659 6.56 11391 106.<2 IOl.45 S.321 .•. · 1 7.04 6.iO. 6.36 us.n IOi 57 105.08 , ... co s.u 14.10 I 1.17 us 6.SI 114.12 106.64 104.$9 I
S.77 i9. IO 7.04 6.72 0.J2 115.IJ 101.45 1009
I.TO H31 5.91 6.61 ,; 32 116.58 101.94 IOS.21
5.&S tO.Ja 7.04 6.70 6.JI 115.IJ 107.57 105.24
S 70 :HT 7.11 5.,5 6.39 114.19 101.21 104.99
1.71 19.12 7.04 6.71 6.36 115.73 107.54 !OS.DI
I 5.61 I 50 JI 6.95 6.59 6.21 11612 101.25 105.CJ
560 80.90 6.90 6.ll 6.22 117.'3 IOI.SS 105.53
; SS �1..&? 6.17 O.·H 6.01 119.01 109.36 105.'8
S.60 !0.90 6.ao o.<2 6.09 111.67 109.JO 105.95
5.10 ID.90 . 6.16 6.49 6.16 117.99 101.17 105.72
5.60 10.90 6.79 6.•J 6.09 111.79 109.24 105.95
I.SO 11.94 6.62 6.25 S.94 120.!5 110.36 IOUJ
S.J7 IJ.jJ o.54 o.19 5.91 121.91 110.74 IOI.SJ
S.32 Ul1 6.49 ,.11 I.II 122.53 111.06 106.63
S.26 a,.SJ 6.39 6.04 5.76 12).95 111.69 107.02
5.H 12.91 U7 6.21 S.92 121.66 110.62 lDl.51
5.<1 52.90 6.54 6.22 5.94 121.91 110.SS 106.43
5.SI 91.!t 6.72 6.37 5.99 115.67 109.61 108.27
5.45 12.11 6.62 6.25 S.91 120.95 110.36 IOI.SJ
s.so 11.9' 6.13 6.40 6.02 119.SS 109.42 106.11
S.41 ll.29 us 6.31 5.96 120.54 109.91 106.35
S.41 62.41 6.11 6.Jl S.98 120.JI 109.10 106.Jl
s.,s I 32.JI· 6.12 6.11 6.00 119.67 109.61 !Ol.24
S.30 !J.09 6.•5 6.10 5.79 123. 16 111.31 106.92
I.JO 3<09 6.39 6.06 S.18 123.95 11 LSI 106.�
5.31 IJ.ll 6.56 6.ll 5.19 121.77 110.57 10U1
5.30 s,.c, 6.J9 MS S.76 123.95 111.13 107.02
S.35 us, 6.42 6.09 S.19 123.SS 111.37 10U2
1.10 SJ.01 6.45 6.12 S.14 123.16 111.11 106.72 s.,s 52.17 o . .i� 6.16 S.U 122.76 110.93 106.90
S.J5 aJ.54 us 6.0J 5.75 124.48 111.16 107.0S
5.37 13.JJ I 6.12 1.09 5.10 123.SI 111.ll 101.tl
5.40 SJ 01 6.JO S.91 5.14 125. 16 112.14 107.09 s.,o 13.01 , 6.21 S.91 5.70 126.31 112.53 107.22
5.36 !l.H 6.13 5.64 S.69 121.,1 112.91 107.25
5.34 !J.65 6.15 s.ae S.14 121.20 112.72 107.09
5.ll 13.24 6.20 S.90 S.72 121.� 112.59 101.11
5.29 IHO 6.10 S.81 5.76 127.90 112.12 107.02
l.l4 SJ.iS 6.17 5.93 1.75 126.93 112.40 107.05
5.ll IHI 6.09 S.14 5.71 121.0, IIUI 107.18
5.11 85.<1 S.91 S.74 S.69 129.SI IIHJ 107.25
S.11 IS.41 6.06 HI 5.71 121.J6 Ill. 17 107.11
S.!l IA.93 1.01 5.14 5.73 121.11 112.91 107.11
5.01 !6.54 S.87 s.s, S.44 131.16 IIOS 101.07
4.91 31.68 lei l.lS S.30 132.03 IIS.54 IOl.54
s.oJ 17.11 1.81 S S2 S.JI 131.01 115.01 101.31
5.17 a;.sz 6.02 S.17 S.SJ m.02 114.09 107.71
5.07 16.11 S.H S.55 S.'1 130.11 114.SI 101.11
5. 11 IS.52 Bl S.S3 S.31 130.30 111.01 101.27
5.14 15.51 S.9l S.56 5.4] 130.30 11'-11 IOI.II
5.12 16.01 S.90 5.S3 SAO IJ0.73 11$.01 101.21
522 14.91 1.98 5.66 S.SI 129.SI 11US 107.61
5.16 15.61 U4 S.S7 s.,s 130.23 1105 101.05
JULY?
9 11
23
JO
AVG
JAN I " 21
21
AVG
fUJ
II
II
25
AVG
APR 2
9
16
23
JO
AVG
AUG 6 13
20
21
AVO:
DEC J
10
11
23
30
AVG
MAYI 1,
?1
?I AVG
NOV 5
12
19
25
AVC
OCT 1
I
IS
22
29
AVC
MAR 5
12
19
26
AVG
SEPT J
10
17
24
AVG
JUHE l
II
11
ZS
AVG
1997 -!l!CTRIC IOMOS-
CORPORATE YIELDS
---<HOUSTRIAl IOMOS--
!ROSURY AM M A ••• ••• 11/11· I M A Ill
s.a, 5.99 5.99 6.01 1.21 1.ll us 7.l! 5.96 6.10 6.29
6.62 6.97 7.02 7.17 7.J9 7.11 1.70 9.93 7.1' 7.ZO 1.,,
6.71 1.17 7.24 U2 1.66 1.14 9.05 10.10 I.JZ us 1.17
6.19 731 7.41 1 65 1.91 l.4l NA NA 7.61 7.69 I.OJ
7.09 7.61 1.10 7.!1 !.II NA NA NA NA 7.95 NA
7.11 1.13 1.75 7.97 NA NA NA NA NA NA NA
S.10 1.90 5.90 6.0l i.10 6.SI 7.11 a.oz s.i2 6.01 6.11
6.64 6.91 I I.OJ 1 II u, 1.92 I.U 10.10 I.I) 7.11 l.l6
6.77 i.21 1.29 ,.,s TiO 1.16 9.32 10.i)
I U2 us 1.79
6.19 7..tO : ,s 1.65 ;_c;z !.12 NA NA 764 7.66 3.0l
7.09 16• 1:, i 91 Ill NA NA II,\ NA 7.92 NA
l I\ 1.69 I : so I is: UA i fl A II,\ IIA .�A NA IIA
I I I j
16.66
I I
I I S.11 116 ;i1 0.09 l!.15 702 7.�9 6.00 6 09 6.H
6.62 6 97 ;.oJ Ill j,11 I '90 I.II 10.0S i.13 1.11 1.42
6)9 ; z� :n ; l9 11:, 3.Zl 9.•1 10 71 l.46 r..aa 1.11
6.S6 ;_,17 i.56 i1J · a.Cl ,_;; II,\ NA :.n i.73 1.04
711 I 7.61 7.i6 i.9S a.ZJ !IA NA I NA NA 7.93 NA
7.12 i.il 7!1 !.01 IIA NA NA NA IIA NA NA
5.64 I l.7i 5.i8 1.19 6.0.& 6.11 1.19 1.27 5.90 s.a1 6.10
6.21 e.62 6.69 6.U 7.06 :.ss 1.47 9.11 6.77 &.19 1.06
6.32 6.71 6.H 1.01 1.:6 7.IJ 1.19 10.SJ 6.91 6.95 l.;4
6.61 1.10 7 20 1.)1 1.65 1.10 HA IIA 7.26 z.n 1.61
6.17 I.JO j 41 7.S9 1.sa NA NA IIA NA 7.52 NA
i.i3 i.JJ i,.t6 1.6• NA NA NA NA NA NA NA
I 1.40 I I.IS 5.56 S.62 1.11 6.27 1.02 7.01 S.6S 5.66 l.9J
6.00 6.H ,6.,11 6.S, 6.iS l.?2 a.21 9.5i 6.'S 6.50 6.19
6.10 I cl.12 ;.61 6.71 i.00 1.47 U2 10.10 6.64 6.70 U9
6.JO ! 6.ii UI 7.04 1.2! 1.16 NA NA 1.89 6.96 I lS
6.45 I 5.96 7.06 7.21 , 1.:9 NA NA NA NA 7.16 NA
5.'7 I 1.00 7 12 I.JI NA NA NA NA HA NA NA
S.S1 S.12 S.iJ S.19 5 91 6.19 7.14 7.11 S.81 5.81 6.02
6.2J UI 6.65 6.11 6.,a u, I.Ji 9.11 6.17 6.78 I/JI
&.JI Ul 6.91 1.06 711 7.91 I.IS 10.72 7.04 7.06 i.JI
6.59 1.01 7.19 I.JI 7.58 I.J2 IIA NA 7.33 I.JS 7.59
6.72 1.23 i.J6 I.SI 7.17 NA NA NA NA I.SJ NA
6.74 7.21 1.12 7.11 NA NA NA NA NA NA NA
5.67 5.83 5.87 S.92 6.09 6.42 I.OJ 1.26 S.90 S.98 6.22
S.98 6.32 6.12 6.14 6.H 1.26 1.11 9.31 6.45 6.50 6.19
6.10 6.Sl 6.64 6.19 7.01 7.60 8.iO 10.26 1.68 VI I.OJ
6.31. 6.il 6.90 1.oa 7.30 7.95 NA NA &.9S 6.91 I.JO
6.46 6.96 1.10 7.29 I.SI NA NA NA NA 1.16 NA
6.•9 1.02 7.16 7.J6 NA w. NA NA NA NA NA
5.JI S.Sl S.SJ S.65 S.i5 6.20 6.61 1.10 S.51 5.66 S.99 s.es 6.21 6.25 6.44 6.59 7.16 8.11 911 6.JO 6.JI UI
1.91 6.40 6.46 6.11 6.15 7.'7 ..,, 10.10 6.54 6.59 ua
&.19 6.67 6.1) 6.97 7 16 7.11 NA NA 6.13 6.16 7.15
6.34 us 6.92 7.18 7.37 NA NA NA NA 1.01 NA
6.36 6.90 6.91 7.24 NA NA NA NA NA NA NA
S.46 S.61 5.68 5.90 S.39 uo 7.09 7.61 5.1, S.61 I.IS
S.80 6.22 6.29 6.S2 6.60 7.28 a.u 9.51 6.39 6.H U9
S.84 6.J4 6.,s 8.18 6.81 7,1 UT 10.31 6.Sl 6.58 8.az
6.CJ 6.S6 8.11 6.94 7.18 1.14 NA NA I.SJ U4 7.06
6.14 6.73 6.17 7.10 7.JG NA NA NA NA 1.00 NA
6. II 6.78 6.94 I.II NA NA NA NA NA NA NA
S.SI S.71 S.19 5.92 6.01 &.II 7.ZJ 7.6S 5.84 5.91 6.19
5.71 6.21 6.36 6.51 6.72 7.26 I.JI UJ 6.4' 6.41 6.13
5.79 8.43 8.5l 6.70 e.ss 7.0 Ul 10.43 6.6l 1.66 6.19
S.96 6.66 6.11 6.96 7.25 7.11 NA NA 6.19 6.91 1.13
6.06 8.10 6.94 7.12 7.43 NA NA NA NA 1.07 NA
6.01 6.16 7.01 7.19 N� NA NA NA NA NA NA
5.32 S.15 5.90 6.01 6.09 6.11 I.II 1.67 1.99 6.02 1.36 s.ss 6.11 6.27 6.,2 6 62 ;,2J 1.21 ,.,s 6.35 G.Jt 6.65
S.69 6.JS 6.H UJ 6U 7.U I.II 10.ZS 6.55 6.St 6.11
5.81 s.57 6.70 u, ;.11 I.IS NA NA 1.77 UI 7.02
6.01 6.71 6.15 IOZ U3 NA NA NA NA U7 NA
6.03 6.75 u, 7.01 NA IIA NA NA NA NA NA
5.43 S.61 s.70 l.11 5.93 U3 7.01 1.49 5.65 5.74 6.11
5.64 6.01 6. II 6.J• 6.59 I.I) l.09 t.21 1.26 6.35 6.66
5.67 6.21 6.JZ 6.52 uz 7.29 U9 9.97 6.46 6.St a.a,
5.90 6.10 6.61 1.13 7.16 7 60 NA NA 6.79 6.19 7.16
6.03 UI 6.79 7.02 7.ll NA NA NA KA 7.09 NA
• n, 6.11 U4 7.07 NA NA NA HA NA II,\ NA
10
IS
20
JUKE 14 I . I
10 ,; zo
ZS
JULY 29 1 ;
10
IS zo
ZS
MAY 27 I ;
10
IS
20
21
AUG l& I s
10
11 zo 21
10
15
20
21
APR 19
10 IS 20
ZS
MAR 25 1 s 10
IS zo
21
OCT ZI
10
15
20
25
1997
Malurtry
10 IS
20
25
SEPT lO 1 s
10
15 zo
25
HOV 15 1 s
10
15
20
ZS
DEC 30
IEl 14
JAH 27
1998
-�
•'), ·......__,,
r=
() ,,.-._
CURRENT STATISTICS
STANDARD & POOR'S WEEKLY BOND INDEXES
Page-27
TftE.UURY w M A Ill 11, 11111· I M A Ill
I 4.98 S.2J 5.JJ S.35 5.60 Ml I.JI 7.S3 I.IS S.48 5.63 I 5.32 S.65 5.76 5.83 6,11 6.61 1.32 9.22 5.98 6.09 6.41
5.82 5.99 6.10 6.IS 6.43 7.06 1.91 NA 8.43 6.52 7.00
l.77 6.18 8.21 8.38 6.67 7.27 NA NA 6.67 6.74 7.21
6.09 6.18 6.59 6.70 7.01 NA NA NA NA 7.10 7.61
6.1' 8.55 6.66 8.71 NA NA NA NA NA 1.20 7.al
5.11 S.30 s.,o 5.43 5.!0 5.72 6.1' 7.22 5.37 S.51 5.92
5.63 6.0S 6.10 6.21 6.36 6.71 7.28 8.86 6.,2 8.49 8.93
8.0S 6.57 6.81 8.75 6.93 7.33 7.95 9.77 7.01 7.11 7.57
6.20 6.71 6.50 6.37 7.16 7.60 8.25 NA 7.31 7.37 7.84
8.57 7.11 7.20 7.39 7.59 I.OS NA NA NA 7.82 8.30
6.65 7.29 7.30 7.50 NA NA NA NA NA z.ss 8.,s
S.J7 5.63 5.63 S.72 5.90 6.37 7,22 1.64 5.89 5.70 6.21
6.00 6.41 8.51 6.66 6.97 7.42 uo 10.52 6.66 8.71 7.19
8.21 6.73 6.87 7.04 7.40 7.IS 9.45 NA 7.05 7.12 7.59
6,42 6.94 7.11 7.30 7.69 8.14 NA NA 7.32 7.39 7.65
6.72 7.27 7.48 7.65 8.07 NA NA NA NA 7.78 8.21
6.77 7.34 7.55 1.75 NA NA /IA �-� N.� 7.&6 1.31
5.62 5.90 5.87 5.92 6.15 8.42 7.49 8.53 s.ss 5.95 8.32
6.42 6.83 6.92 7.01 7.36 7.80 9.45 10.74 7.03 7.10 7.53
6.65 7.11 7.28 7.44 7.71 1.28 10.17 NA 7.42 7.48 7.93 us 7.36 7.54 7.7' 1.01 1.14 NA NA 7.76 7.11 8.28
7.08 7.60 1.10 8.02 8.38 NA NA NA NA 8.09 NA
7.11 7.65 1.17 8.10 NA NA NA NA NA 8.15 NA
5.67 5.84 5.96 5.94 6.24 6AO 1.36 8.01 5.85 5.90 6.31
6.43 6.81 6.92 7.04 1.36 1.79 9.51 10.38 6.91 1.04 7.45
6.66 7.13 7.24 7.42 7.74 1.30 10.34 NA 7.31 7.44 1.15
6.80 7.32 7.43 7.64 . 7.97 1.60 NA NA 7.62 1.69 8.10
7.02 7.51 7.61 7.92 1.26 NA NA NA NA 1.97 NA
1.04 7,83 7.13 7.99 NA NA NA NA NA 8.04 NA
5.18 5.91 6.00 6.01 6.27 6.51 7.21 8.21 5.91 6.03 6.40
6.69 7.06 7.16 7.21 7.59 1.02 9.63 10.67 1.27 7.32 7.72
6.90 7.37 7.17 7.13 7.96 8.41 10.46 NA 7.64 7,69 8.10
7.02 7.54 7.85 7.13 I.II 1.75 NA NA 7.15 7.9-0 8.31
7.20 7.16 1.a7 1.07 U3 NA NA NA NA 8.14 NA
1.22 7.81 7.92 8.13 NA NA NA NA NA 8.21 NA
5.82 S.99 6.04 6.10 6.33 6.SS 8.02 1.61 6.11 6.1, 6.41
8.65 7.02 7.10 7.24 7.53 7.95 9.60 10.87 7.22 7.26 7.65
8.e& 7.35 7.44 7.61 7.93 8.43 10.15 IU6 7.51 7,64 8.06
6.97 7.49 7.51 7.71 1.11 1.66 NA NA 7.74 1.11 1.26
7.1' 7.70 7.80 8.00 I.JS NA NA NA NA 1.04 NA
7.16 7.75 1.85 8.06 NA NA NA NA NA 8.10 NA
H9 5.84 5.87 5.94 6.17 6.31 7.57 8.13 5.94 5.97 5.28
6.54 6.92 6.99 7.13 7.40 7,86 9.50 10.22 7.12 7.19 7.57
8.71 7.25 1.33 7.51 7.10 8.37 10.19 10.98 1.49 7.57 1.00
6.18 7.11 7.50 7.70 1.00 1.63 NA NA 7.68 7.18 1.21
7.10 7.67 7.76 7.98 8.28 NA NA NA NA 8.05 NA
7.12 7.72 7.82 8.05 NA NA NA NA NA 8.12 NA
5.68 5.13 5.88 5.93 6.17 6,47 7.22 7.89 5.90 5.94 6.24
6.53 6.9-0 8.96 1.10 7.31 7,15 9.09 10.05 7.10 1.15 7.58
8.77 1.24 7.30 7.49 7.11 1.33 9.17 10.95 7,50 7.55 8.00
&.el 7.39 7.45 7.68 7.!o 1.56 NA NA 1.18 7.74 8.21
7.11 7.67 7.73 7.96 8.21 NA NA NA NA 8.04 NA
1.15 7.74 7.81 I.OS NA NA NA NA NA NA NA
5.39 S.49 5.59 5.67 5.88 6.26 7.24 1.32 5.64 8.71 5.99
6.13 6.48 6.56 6.70 6.99 7.SO 8.92 9.99 6.68 6.14 7.11
6.40 us 6.93 7.09 7.42 1.98 9,59 11.01 7.08 1.13 7.54
6.49 7.00 7.08 7.26 7.60 8.20 NA NA 7.24 7.29 7.73
6.15 7.31 7.31 7.57 1.93 NA NA NA NA 7.61 NA
6.79 7.38 7.46 7.15 NA NA NA NA NA NA NA
5.37 5.47 5.56 5.14 S.86 6.11 7.15 7.87 5.68 5.70 5.92
5.92 8.27 8.34 6.11 6 71 7.21 1.67 9.93 6.44 6.51 6.16
8.12 6.59 8.65 6.12 7.13 7.63 9.29 10.91 6.77 6.83 7.24
6.25 6.18 6.84 7.02 1.35 7.17 NA NA 6.98 7.02 7.46
8.54 7.11 7.17 7.37 7.71 NA NA NA NA 7.38 NA
6.51 7.19 7.24 7.45 NA NA NA NA NA NA NA
5.48 5.59 5.el 5.75 5.96 6.18 7.30 7.58 5.71 5.71 8.02
6.21 6.57 U4 6.71 7.07 1.11 1.79 9.99 6.11 6.10 1.15 8.41 6.87 8.94 7.11 7.43 7 93 9.JZ 10.90 7.10 7.13 7.53
6.51 7.03 7.10 1.28 7.62 I.II NA NA 7.27 7.30 7.13
6.73 7.19 1.38 7.55 7.91 NA NA NA NA 7.51 NA
6.77 7.36 7.43 1.64 NA NA NA NA HA NA NA
Tltld ,r1ce �·o; lat tr $htl. Lo .. lflMII .....
5.34 13.65 8.04 5.43 5,20 128.74 115.88 10U7
5.52 11.73 8.25 5.81 5.27 m.13 114.4. 10U4
5.42 12.79 6.08 5.39 5.08 121.18 115.94 109.27
5.42 82.79 8.11 5.43 5.10 127.78 115.81 109.20
S.40 83.01 8.10 5.38 4.98 127.90 118.01 10U1
5.42 U.79 8.12 5.45 5.13 127.11 115.541 181.12
5.37 83.33 8.20 5.41 1.91 128.52 115.11 109.71
5.32 83.87 6.18 5.32 4.84 128.79 118.0 110.08
5.53 81.63 6.50 5.70 5.21 122.50 113.19 108.6'
5.57 81.21 6.81 5.17 5.40 121.08 112.79 108.21
5.45 82.51 8.37 5.51 5.10 m.22 11,.13 10,.n
5.62 80.69 8.51 5.83 5.38 121.59. 113.04 108.3,t
5.68 78.28 6.85 6.18 5.73 118.05 110.80 107.12
5.91 77.78 6.70 6.19 5.77 119.93 110.1, 1011.99
5.87 78.18 8.88 8.22 5.81 117.92 110.55 108.88
5.82 . 71.72 8.75 8.11 5.87 119.37 111.ZI 107.33
5.84 78.18 8.81 6.17 5.77 118.54 110.17 108.99
6.00 78.89 7.10 6.55 8.07 115.01 108.49 106.01
5.94 77.H 7.00 8.41 5.93 118.21 109.38 106.47
5.93 77.57 7.02 6.42 5.93 115.97 109.30 106.17
5.93 77.80 8.98 8.39 5.93 111.43 109.51 10Ut
6.00. 76.69 7.09 6.49 5.99 115.13 108.M 106.27
6.14 75.55 7.20 6.65 8.14 11U3 107.H 105.79
5.95 77.37 7.04 8.16 5.96 115.13 109.0S 106.37
S.87 71.16 7.00 6.45 5.98 118.21 109.11 106.37
S.93 77.57 7.11 8.60 8.08 114.89 108.11 105.te
5.91 77.11 1.09 8.53 l.03 115.1' 10UZ lOl.11
5.98 77.08 7.14 us 8.17 114.54 107JI 105.89
6.10 TS.92 7.36 8.16 6.29 111.98 106.60 105.31
6.05 16.40 7.28 6.80 8.25 112.90 106.97 105.43
S.96 77.08 7.20 8.72 6.23 113.13 107.45 105.50
I.OJ 76.12 7.%5 e.11 8.2, m.31 107.23 105.«
5.93 11.57 1.07 6.59 6.14 115.37 108.25 105.79
6.00 76.89 1.2, 6.80 6.25 113.38 106.97 105.43
5.92 77.67 7.15 8.69 6.1' 114.42 107.63 105.19
S.86 78.26 7.16 8.12 6.18 114.30 107.'5 105.72
5.ae 78,26 7.09 6.65 8.10 115.13 107.88 105.92
5.91 77.73 7.14 U9 1.18 m.u 101.14 105.73
5.85 80.38 6.88 8.33 5.86 117.8' 109.18 106.70
5.69 79.97 6.92 6.42 5.88 117.19 109.30 106.70
5.73 79.56 6.91 6.45 5.18 118.45 09.311 106.70
5.11 78.76 7.14 e.e, e.ea 114.54 107 .94 106.14
5.72 79.67 8.91 M8 5.90 118.47 109.0S 106.51
5.95 77.57 1.21 8.81 8.22 113:13 108.90 105.53
5.91 77.76 7.27 8.74 8.21 113.01 107.33 105.58
5.11 78.76 7.18 6.64 6.11 114.30 107.94 105.81
5.77 79.16 7.06 8.54 8.04 115.49 108.SS 106.11
5.aa 11.28 7.19 6.68 1.15 113.U 107.81 105.77
5.88 80.07 6.96 8.44 5.93 116.70 109.17 106.17
5.61 80.07 8.94 8,40 5.84 118.94 109.42 108.78
5.13 79.56 8.97 6.12 S.19 118.51 109.30 108.60
5.75 79.36 8.94 8.39 5.88 118.94 1119.41 108.70
5.73 79.56 8.77 6.24 5.74 119.04 110.,2 107.09
5.71 79.72 8.92 8.38 5.15 117.24 109.51 108.72
s:6a 80.28 e.sr 6.12 5.87 120.31 111.11 107.32
5.60 80.90 8.59 8.05 5.81 121.33 111.63 107.51
5.56 11.31 6.54 5.99 5.58 121.91 112.01 107.61
5.52 81.13 8.53 5.98 5.58 122.11 112.01 107.81
5.59 81.08 e.51 1.113 5.81 121.43 111.73 107.51
5.50 81.94 U1 5.95 5.58 122.37 112.27 107.H
5.l6 51.31 a.74 e.u uo 119.42 110.72 107.22
5.70 79.17 6.12 6.21 5.IO 111.51 110.17 108.H
5.87 10.17 8.61 6.11 5.73 120.11 110.IO 107.12
5.18 80.13 6.JS 1.28 5.90 119.30 110.30 108.51
5.ll 10.12 6.70 9.17 5.73 111.M 110.11 101.11
--TlttDS--
U.S. GOVERNMENT BONDS
MUNICIP>J. IOHOS
APA 3
10
11 24
AVG
HOV 6
13
20 21 AVG
DEC 4 11 11 24 31 AVG
OCT 2
9 16
23 30
AVG
MA/16
13
20
27 AVG
SEPT 4
11 11
25
AVG
MAY I
I
IS
22
29
AVG
AUG 7
14
21
21 AVG
ffl 7
14
21
28 AVG
JUlYJ
10 11
24 31
AVG
JAN 3 10 17 24
31
AVG
JUNE 5
12
19 26
AVG
1996 -·HECTRIC IOHOS--
CORPORATE YIELDS
---INOUSTRl>J. IOHOS--
MAii 28 I
5 10
15
20 25
APR 30 I 5
10
15
20
25
10 15
20
25
FEI 27
MAY 28 1 5
10
15
20 25
JAN 30 :
5
1v 15 20
25
NOV 29 I s 10 rs
20
25
JUNE 25 1
5 10
15
20 25
JULY 30 1
5 10
15
20
25
AUG 27 1
5
10
15 20
25
DEC 31
OCT 29 1 5
10
15
20 25
10 15
20 25
1996
Maturity
SEPT?' 1 5
10
15
20
25
·J
( ,,)
( } -, /)
, -;;::-._
WEEKLY BOND INDEXES, BY RATING
\' leld to Maturity, In Per=it
PUBLIC UTILITIES A • · -, J
•· ).llllJ 3.001 2.9'0 l.90C 2.767 1'99 2.641 J.IXX) l.9U 1710 J.an 3,19S 3.� 3.119 JJ.S.I lJ26 4.071 ).SIO'/ 4-'63 4.6IO ·� UIS 4.351 UII 4.$29 $.l.lS HIJ 6Jl7
..... Fol,. Mor. IMI 3.102 J.109 3.0M 19'2 3.lll.S 3.017 3.019 19'3 1173 � 2.90 1!14,4 2923 1.916 1.902 19'$ WI UIO 2.167 1946 2..667 l.60II 1.613 1947 1665 16'9 2.661 l!MI 3.DJO J,011 J.IM9 1949 3.010 2971 1947 1950 1694 1690 169' 19.11 um 2.111 1917 lffl J.2'7 3.219 3.%23 l,Sl J.24] JJQS l.J63 1"'6 l.l.SS 3.179 3.IOS 19'5 3.162 l.211 3.239 1956 3J$1 3.2.90 3.343 lffl 4.192 4.all 4.044 ,,,. ssn l.U9 3.916 19'9 4JQ5 4.4'9 4.456 19'!0 UO 4.7IO 4.611 1961 U17 UIJ 4.567 11162 4.$4$ 4..'J.$4 4.$14 1963 UU 4JJO 4.l'17 1964 UN 4.424 4.<167 1!116J U39 .f.� 4.'12 1966 4J6' 4.960 s.ru 1967 S.301 $.2JO SJ$1 1 !l6I 6J9l 6J'7 U50
May
2.997 3.009 2.921 l.SIO? 171S 2.629 2.657 2.m 1910 1736 J.139 3.IM 3.6$7 3.16:2 3.320 3.m 4.117 3.16J 4.737 4.70' 4.634 4 . .I06 4.370 4.ru 4.$6!l .S.Jl\,i 5.612 6.646
Juac
2.� 3.010 2.909 l.919 2.719 2.646 2.667 l.9'41 l.t96 :z.m 3.lA7 3.214 3.700 3.16.l 3.294 3.552 4.Jl<I 3.164 4.H7 Oil 4.639 uoo 060 4..SM 4.m 5.34i '·'" 6.671
Jiiiy l.B4 2.9'9 2.197 2.910 2.794 2.634 2.6.13 1.913 2.m 1760 Jjj(l 3.207 3.601 3.1.ll 3.304 3.620 4-'43 '-Cnl 4.139 4.m 4.619 "'" 4.lS. 4 .. 531 Hll S.414 .l.16.! 6.6"
........ 1.9'3 1.m 1.m l.923 l.&:22 2.631 l.617 3.033 Ull 1717 J.1.14 3.ll'.2 JJ'6 3.114 3.Jn 3.714 4.644 4.210 4.720 4.509 "62' 4.423 4.357 4.493 ,.,en
3.616 5.961 6.422
Monthly Averages of Weekly Indexes
Sq,l. Ca. No•. Doc. A•I· J111. Feb. Mu. "9r.
2.nc l.911 1.!IOI 2.992· 2.995 1969 1.on 1.0,a 7.211 7.251 2.9'9 l.9IO 2.971 2.9&-I l.991 1970 1.4&9 1.491 IJOO 1.424 2.916 l.9(1) 2.92.J 2.936 1.927 1971 1.231 1.066 1.163 IJll 2.9:21 1.919 l.944 2.90 l.921 1912 7.730 7.740 7.73) 7.196 U40 }:m 2.766 1742 l.100 1973 7.762 7.114 7.119 7.&ll 1.697 l.746 l.7]j 1.662 1974 1.160 I.I� 1.291 l.4ll 2.74! 2.121 1.m l.995 2.110 1975 9.201 9.111 9.lll 9.43' ll.04799 3.a32 3.071 ren 3.020 1976 9.m 9.m 9.102 9.068 . 2.71$ 1.750 2.70') 1.167 1917 1..506 1603 1662 16j6 1749 rm 1.m l.117 2.m 19'71 1.9152 1·916 •. 9SO 9:0,1 33·!� l n1 Jl.231"9 JJ.290121 33.11� 19'79 9.734 9:714 9:m 9.� ..... ' · ' · "' 19SO IIJQJ !l.)01 !lJ11 ll.191 31-',H JJ.4,?! JJ.342 3.344 J.464 1981 il.m ii.on ,in "� '"' . .., .13$ ll36 3·149 1912 16136 1600 ll.290 Ill� JJ9l 3.345 3JJ1 3.393 3302 1913 im ,u11 ,1.�s 11:m ��t, tru H� u� i:r� 19'4 ,1.161 :t: :rn� ll.611
•. .., 4·"' .... ". "'4' U19 :ru :ijli 10.0, l1.4l0 4.90l 4.l&l 076 4.773 4.689 196 I 9.6& 9.63 4J 13 4Jl4 4.631 4.674 4.6.19 1987 . .91 1.92 9.45 ,.630 4.51.l Hill 4.627 4.611 1911 9.93 9.7, 10.00 10.29 ,Jn ou 4.329 ,Jll ,.,u 11919 10.01 10.10 10.36 10.ll 4 . .io, 4.400 4.4$7 4.503 4JH 990 9.51 9.12 9.86 9.91 4Jl9 4Jll 4.497 4.411 4.,01 1991 9.59 9.36 9.S7 9.49 4.749 4.731 4.117 4.172 4.631 1991 1.97 9.06 9.ll 9.16 ,.w J.6'2 ,.m .!.693 3.369 1993 a.63 u1 1.,s a.n 6.001 6.1,5 6.411 6.'47 l.804 1994 1.11 7.96 I.CC 1.11 6.412 6JlJ 6.615 6.939 6..5'6 1995 a.69 1.0 tu 1.10
May
7.30l 1.7?7 l.«3 7.UI 1.&36 1.529 9.492 9.370 1.671 9.170 10.020 11.lll ll.!16 14.191 IIJJ'I 14l97 11.991 9.56 9.91 10.$6 10.0l 9.95 9.54 9.12 IJI 1.:17 1.08
Juoe
7J04 1.98$ 1.4.!9 7.8.l I 1.896 1.589 9.'19 9.332 l.'49 9.269 s.m 10-949 1016 IUtl 11.ms IWI 11.lU 9.63 9."4 10.35 9.'2 9.71 9.70 9.09 1.19 l.ll 1.06
July
7.602 1.961 U08 7.869 7.977 1.773 9 • .S-U 9.267 "'" 9.421 9.666 11.349 IH>II ll� ll..39l IUO 11.ru 9J3 9.89 IOJ9 9.49 9.83 9.� 9.00 1.23 IJJ 1.15
Aui: 1.635 I.Im l.4<11 7.789 1.421 1.937 9.6" 9.070 1.496 9.111 9.661 ll!O! ll.46'.l IUII 11111 ll.$41 ll.s69 9.« 10.07 10.'4 �.46 10.12 9.JS 1.91 1.14 1.26 1.24
Sept. 7.IOI 1.1191 IJl6 7.1.U 1.386 9.262 9.691 1.731 Ull 9.0,9 9.970 12J'9 16.4ll ll.569 llJil ll.397 II.� 9.41 10.6.1 10.l' 9.44 10.27 9.19 I.SM 1.09 1.39 I.JO
Oct. 7.932 I.Ill 1.119 1.IUI 1.319 9.317 9.694 1.671 l..'J9S 9..302 tl.1)20 � 16.219 11.'69 ll..501 ll.1J6 11..l&l 9.47 10.ll 10.19 9.41 10.11 9.11 1.97 1.12 1.66 l,()j
Na•. 1.104 1.711 7.UO 7.721 1.2"9 9.240 9.632 1.665 1.63, 9.463 IIAOO !lJ1' 14.9'0 II.� U.691 ll.474 11."4 9.22 10.ll 10.25 9.30 ?.16 9.14 1.7$ 1.42 I.M 1.06
Doc. 1.3'79 l.ldS 7.IOI 7.691 I.C.O 9.263 9.67, 1.«9 1.110 9.6ll IIJlO IJJOO llA36 11.1n 11JCII 11434 10.!59 91l9 10..U JO.DJ 9Jl 9..56 9.0'l 1.66 1.69 1.70 1.01
A ..... 7J74 1.691 1.231 7.796 1.(134 1.741 9.499 9.04' U96 9.IPI 10.170 12.469 1010 MJ6l 12.111 UJD 11.rn 9.60 9.16 10.21 9.72 9.11 9.39 1.91 I.Cl 1.34 I.I�
Annual Range, and Close, of Weekly Indexes+
1993 Feb. Mar. Apr. May JIIIIC Jwy Alls. Sc9l, ()cl, Nov. Dec.
1.60 1 . .ll 1..51 9.0) IJl 1.lA 1.20 I.C9 1.14 1.21> l..'Jl 1.60 1..l.l 1.66 IJI I.JI 1.11 1.13 7.99 1.10 1.41 1.7:2 l . .ll 1..57 1.92 1.36 1.29 1.13 1.14 1.0, I.OI 1.47 Ut I.SS Ul 1.92 IJl 8.2J U.l 1.13 1.16 I.IS IJI 1.74 8jJ 1.2.l •......... 1.14 1.74 1.51 1.55 1.7.l IJI 1.29 1.23 8.14 I.C9 1.12 1.41 1.69
1993: Hlah, 9.0l, M.ay; Low, 7.99, Sq,c.cmbcr. A""ra,e. Ul
•
a-
1.93 1.64 1.74 1.61 UT
Low
1.93 1.63 1.99 7.11 7.U
Nov. Dec.
I.U 1.7:2 1.14 1.71 1.16 1.70 U7 1.61 1.76 --­ U4 1.70
l!lsh 9.1.l 9.24 9.00 1.17 i.n
Oi:t. Nov. Dec.
1.05" 1.01 · 1.00 1.06 1.00 I.OJ 1.0:S I.OS 1.04 1.02 I.U 1.91 l.ll'J . I.Cl$ 1.06 1.01
Yw 1991 1991 1993 1994 199S
Au1. Se!"-
1.20 l.ll'J 1.2'1 S.ll'J 8.ll a.OS SJ I I.IJ 1.16 a.l' a.to
ci­
ll.663 11..Xll ll..9j() 11.394 IOJJI 9.12 10.09 10.02 9.36 9.60
Lew
IJ.I� 11.111 11.100 um 10.411 9.0, 1.19 9.52 9.lll 9.39
HJ&b
11.006 14.311 11.144 14.111 11169 10.69 II.Tl 10.6.l 10.47 10�
1995· May June Jwy s.n 1.08 8.10 7.8.l 1.08 8.05 S.17 S,05 l.l4 1.16 S.03 1.ll 1.10 I.OI 1.06 S. l.l
Yu:
19tl 1911 1983 19'4 19tl 1916 1917 19U 1989 1990
C1o,c
7.704 7.736 1.104 9.254 9.62.l 1.366 1.110 !?�' ll..l94
Mar. Apr.
1.24 1.20 SJS 1.17 8.12 l.lA 1.24 I.II 1.16 1.22 1.20
1993: H11b. 1.72, Jan111ry; Low, 7.15, M.ay. AYCtalt, 1.19
Low
1.10' 7.6'9 7.724 I.Ill 9.1'4 1.366 I.JU l.&31 "9,'61 10.lSO
1994 Feb. M.u. Apr. May JIIDO lwy Aus. �pl. OcL
1.01 1.99 1.2'1 l.l.S l.ll 1.32 1.21 I.JI U7 7 .ll I.OJ l.lJ IJI 1.14 S.37 IJ2 1.36 1.4' 1.9, l.ll'J 1.34 1.22 l.l I 1.29 1.23 1.43 1.1'7 1.06 I.II 1.lA l..ll 1.12 1.33 1.27 1.44 Ul
7.96 1:� ""fii 1.21 rn .... rn rn 1.39 .. (,6
1994: Hl&b. U7, N=ml:,cr, Low, 7.12. f<!,niaty, A-.ce, 1.34
]&11,,
7.13 1.2.l 1.20 1.ll
1.12
J111. Fco.
8.71 I.H 1.71 1.4.l 1.61 1.-40 1.71 1.33
1.69 1.43
Yur Hi1b
1911 l.'42 1972 7.',47 1973 8.471 1974 9.363 197.l 9.&50 1976 9.S.ll tm u,o 1918 9.150 1919 11..!20 1980 14.lll
Wed JOA.
I 1.63 1 1.67 J 1.62 4 1.60 s ...... 1.63
Weck
I l 3 ' .l AVJ .
Wed
I 2 J 4 .l Av1,
Dee.
9.11 9.0, 9.04 1.91 1.93 9.02
Dec.
1.71 1.66 1.66 1.63 1.64 I.Ci6
Weekly Indexes
NOY.
1.1.l 1.7.l 1.63 1.70
1.75
Law Ooec
4Jll 4.663 4J05 4JJO 4 .. m 4.,10 Ull '-46.1 H:27 4.860 U.S4 5.606 l.160 6.497 6J)O 7.012 1.010 1.m l.lll 1.442
Hip
4.667 01'7 4Jll 4J97 4.9ll ,.m 6.$71- 7.0ll 1.433 9.019
Year
1961 1962 1963 1964 196.l 1966 1961 1961 1969 1970
aa.
3.314 3.247 3J31 3.1$l 3JSM 4.116 3.961 4..511 4.799 4.635
Lo.
2.71le 3.111 3.246 3.0l7 3.l« 3.:274 3.963 3.145 4.436 4.491
HJ,i.
3JlJ l.29:l 3.111 3.295 3.414 4.206 4.697 s.sn 4.9)9 4.&64
Yoar
1951 19'1 19'3 19S4 ,,,,
19'6 19'7 19'1 19'9 1960
eo.
3.039 l.ffl l.!134 l.9SJ 2.730 1119 3.Ql7 3.041 2.696 1114
1-
2.ffl l.� 2.113 1191 1730 1.514 2.636 2.930 2.696 16&S
1992 Ja Pllb. w.. Afil. M.ay ,_ Joly A.as. Sepe. Oi:t.
U4 UM 9.1-4 9.14 9.lO 9.10 9.04 1.95 l."4 1.97 U7 9.0IS 9.13 9.ll 9.09 9.10 9.00 1.91 1.93 1.9.l u, 9.0l 9.17 9.10 9.<11 9.0I 9.01 1.90 1.94 1.99 U9 9.10 9.14 9.11 9.JO 9.07 9.00 I.U 1.96 1.91 9.2' 1.9' us -1.97 ""9'.ii -9.j'; 9.16 9.11 9.D9 9.00 IJ I I.SM 1.97
1992: Hip. 9.24, Af,rll: Low, 1.63, Oocembcr. Affll,e, 1.91
0 1990 Wea: Ja Pd,, Mar. Apr. May J- Jtly Alla. Sep!. Ck!. Nov. Dec.
I 9J9 9.17 9.91 9.U ran 9.66 9.74 9.71 10.l! 10.10 9.11 9.64 2 9.44 9.70 9.116 9.l'l 10.06 '9.66 9.U 10.17 10.19 10.U 9.11 9.41 l 9J6 9-n-, 04 IO.Ol 9.16 9.7' 9.U 10.10 IOJO 10.14 9.69 9JI 4 9.69 9.71 9.74 10.19 9.ll 9.1'7 9.U 10.30 10� 10.0l 9.66 9.60 !.,.. ::Ji ·-9�12 "'°9:u '"rg; rn '"ii:'i"i -·rn 1rn "'io.n 18:?1 ... 9.76 ""9.56
1990: Hip. 10.36. Seplemba; Law, 9.39, J.-ry; A-.,e, 9.11
1991 Ja N>. Mar. Af,l. May J11111 hly A.as. Sept. Oi:t. Nov.
9JJ U3 9J3 9..'JI 9.4' 9..'J9 9.66 9.41 9.lJ 9.09 9.15 9-" 9.29 9Jl 9.49 9J3 9.71 9.74 9.34 9..2:2 s.n 9.10 t.70 9.29 9.66 ll.4$ 9.$9 9.7$ 9.61 9.29 9.14 9.ll 9.13 9J7 Ul 9J9 9..Sl 9..'JS 9.7l 9.66 9.l4 s.n 9.16 9.11 :J -,36 ,.n -,Ai ;� -rro ::: -·n; .... Hi • J.U 9.14
1991: Hip. 9.7.S, J-: Low, Ul, December. Awn,e, 9.39
Wcdt
I i J 4 ' ......
Wtdt
I 2 J 4 j .......
Y• Hip 1941 J.114 1942 3.QJI 194J 2.1113 1!14,4 19'3 IGH. 1194 f'\'� }i.('JJ(J 10.._._:;,3.QJl 19'0 1129 -7-
.�
i i I I ,.,--..
� -.._/
._/ ! I
/)
·J
·'?'
,,.
)
J
.. �· ..
Statistical
...... ------- -
:,,:·.
.··· ........ .,_
·. ,.,,.··:_·.
UTILITIES (ELECTRIC POWER COMPANIES) 91 u ('24 Stocka)
��U-1943 - 10 Monthly Averages of Weekly Indexes
Jan. P'eb. Mar. /.pr . May June July Ai.if. Sept o«, Nov. Dec. Av1. Jan. Feb. Mar. Apr. M•y Junt ·July ..... .. Sept. Oct Nov. Otc. Avs.
.d'12.11 13.111 IZ.34 12.14 10.85 11.03 10.H 9.H 9.11 9.12 a.n 1.io 10.SI 1915 25.15 26.98 21;011 25.33 21.19 28.99 28.95 21·.08 21.20 21.51 30.08 211.18 21.51 1.01 T.7& T.78 8.H 9.U 10.91 11.58 11.S<I 12.40 12.11 13.12 13.72 10.84 1976 32.22 31.58 30.51 30.86 30.23 30.12 31.39 32.26 33.53 33.35 33.46 34.63 32.01 14.84 15.12 IUI 14.115 14.18 15.41 18.U 17.08 18.90 17.41 IT.OB 17.15 11.00 1917 35.03 306 33.96 34.24 3U5 35.62 36.87 35.99 35.60 35.40 35.46 35.46 36.25 lt3T 17.71 17.20 15.117 U.04 14.28 13.ST 14.14 14.45 13.311 11.17 11.87 11.H IU7 1918 34.61 3U3 33.87 33.l'l 33.54 33.7? 34.04 34.H 33.94 33.39 31.90 31.99 33.64 IUI ll.3t 10.ea 10.11 JO.IT u.oe 11.24 r2.H 12.03 11.41 12.U 13.10 12.11 11.10 1979 32.67 l'l.78 32.<3 31.60 30.<5 31.82 31.86 31.71 30.51 29.06 23.77 28.94 31.05 1839 13.23 13.SS 13.81 12.78 13.41 13.75 14.10 U.23 13.38 13.47 14.04 14.03 13.41 1980 28.49 26.2J 25.21 28.13 29.99 30.29 30.19 28.71 23.62 27.72 28.86 211.47 28.08 1040 14.S5 14.56 14.40 14.52 ll.111 12.18 .13.21 13.19 13.15 ll.93 12.H IU1 ll.34 1981 27.14 26.62 21.16 27.69 27.« 29.05 29.08 29.86 28.� 28.76 30.82 29.711 23.SJ 1041 12 11 11.75 11.15 1u2 10.cs 10.s4 10.10 I0.54 10.5e 10.01 us 1.n 10.43 1982 29.39 30.16 31.H 32.3-1 32.66 31.73 31.71 33.18 34.72 36.81 JU8 36.fl :: 100 1:11 8.44 1.84 7.37 U7 8.21 8.14 7.87 8.06 1.11 11.111 9.08 8.111 1983 37.l6 37.12 38.00 38.30 38.96 37.66 51.68 37.51 38.28 -I0.27 -I0.39 38. 1943 9 TT 10.43 10.57 10,711 10.90 10.118 11.96 11.72 11.92 ll.77 11.48 11.28 11.13 1934 37.41 36.76 �.82 �.60 �.96 �.67 34.36 36.70 37.58 39.90 41.2-4 41.� 38.119 1944 l1°59 11.59 11.84 11.18 11.84 12.18 12.l3 IU9 12.41 12.70 12.80 12.80 12.19 198.S 42.18 42.81 42.59 44.81 46.63 47.96 '7.93 46.Je 4-4.10 +'-0'7 '6.� :: ::·1: 1045 ll:30 IJ.90 l1..8.1...1.LJ_5 14.75 1$.17 15.05 14.85 IUO 16.05 16.53 16.37 11.94 1966 48.� 6U9 6-uo 66.60 63.28 63.6-1 68.30 62.86 69.112 67.86 eo. . . 190 1U4 15.47 15.71 17.32 17.48 17.2J l&.99 ie.eo 14.93 l4.81 15.03 ti.IS 11.32 l�7 62.� 82:61 60.41 66.811 6-1.41 66.61 �.82 66.73 63.711 63.22 51.811 :·i: :� 1041 1$.32 U.32 lUS 14.41 13.117 14.10 14.53 14.Sl 14.30 14.01 ILJO 12.70 IU7 1041 IUI 12.51 12,55 12.93 JJ.36 1.l.ST 13.JI lJ.IJ l3 08 q,08 12.55 11.24 12.98 1988 52.03 1>3.M 61.38 49.96 48.82 ,2.32 61.78 61.Sl 62.00 63.154 63.66 •
!Ht 12.88 U,111 12.97 13.Zl 13.-rr-Tm. 13.i4 13.11 ll.94 14.16 IU5 !UO 13.11 1989 54.37 54.30 63.21 64.33 66.77 69.63 61.27 81.96 81.09 61.42 83.67 68.01 6U9
1950 IU2 tUO !S.39 15.43 IUO 15.49 14.00 li.03 11.14 11.31 IUO IUO 14.72 1990 M.09 63.04 61.88 60.49 61.04 8Ul 60.H 68.� 66.62 60.08 81.88 83.90 81.12
1051 1U9 IS.27 15.34 15.10 15.04 lS.04 15.23 IJ.58 15.75 15.16 1$.85 1'.03 15.42 1991 62.24 6-1.66 �.38 6.s.!14 66.23 63.61 �.92 68.10 83.66 71.19 72.58 7"71 87.19
1952 14.53 U.73 18.84 18.84 16.14 le.112 17.41 17.53 17.30 17.80 11.60 11.17 17.10 Annual Range, and Close, of Weekly Indexes 1053 18.23 18.34 19.50 17.99 11.93 17.09 lUJ 18.12 11.79 18.37 18.71 U.09 18.15 195-1 10.37 19.88 20.10 20.38 20.84 20.a& 21.68 22.14 21.94 21.48 21.?I 22.16 21.01 Year Hlih Low Clou Year High Low Cloae Yur HlJh Low CloH 1955 22.35 23.12 23.12 23.40 23.38 23.81 2U5 24.87 H.81 23.82 24 �9 n f 23.17 1934 13.86 1.53 7.53 1954 22.311 111.18 22.39 1974 34,17 20.U 22.03 1959 23.U 2U5 2US 2U5 23.88 23.85 24.43 24.58 23.96 ll.311 2J. 2 . 0 24.0l 1935 14.08 7.38 13.118 11155 25.05 22.27 24.08 11115 30.56 24.50 30.51 1957 23.12 23.04 24.20 24.U 25.14 24.60 24.19 23.67 23.26 2U3 23.08 H.53 Zl.98 1938 17.52 l3. 75 I T.02 1958 24.114 23. 25 23. 81 1976 35.17 29.4-4 35.17' 1058 25.78 28.31 28.00 27.41 28.10 28.54 28.94 28.54. 28.85 211.48 31.25 32.40 28.54 1937 18.10 10.93 10.83 19$7 25.H 22.29 24.1$. 1977 37.21 33.76 35.67 1950 33.J.4 33.04 34.15 34.24 33.80 32.21 33.18 33.87 32.91 Jl.08 l2.66 lJ.11 33.30 1938 13.83 9. 20 12. TO 1958 33.14 25.18 33.14 1978' 35.52 31.38 31.38 1980 33.08 33.10 33.85 34.33 34.74 38.l7 37.01 37.41 37.12 )8.16 36.44 31:37 35.68 'IV39 IU4 12.64 14.10 19511 34.43 H.114 33.42 1979 33.48 27.97 28.44 1981 JO.le 41.88 42.82 43.68 4$.05 H.50 45.02 14.58 4T.l8 411.39 52.08 50.25 45.70 !940 14. 7l 11.47 12.18 1980 311.35 32.87 39.35 1980 31.09 24.88 27.19 11162 47.U 0.00 49.90 411.111 45.TO Cl.Ill 42.91 H.87 45.08 H.ZII 18.04 41.H 44.18 1941 12.30 8.14 uo 11181 52.91 39.47 411.28 1981 31.37 26.28 29.33 li83 CUI 50.72 50.29 51.10 51.58 S0.93 50.87 S2.44 53.00 SI.SS SQ.81 51.39 51.H l.942 9.H 7.111 9.18 1982 50.39 39.00 Cl.GO 1982 36.62 29.16 3U5 1914 52.18 52.78 52.38 s2.H 52.55 52.14 ss.28 ss.it st.oo sa.os sus 58.0l 54.87 1943 IUO 9.H 11.34 11183 SJ.SI 48.86 St.97 1983 41.20 36.68 31.14 19415 59.38 80.45 80.12 80.28 80.58 5!.10 58.00 51.114 58.83 5U4 59.41 57.91 SUI 1944 12.811 11.47 12.84 11114 SUI 52.14 58.21 1964 42.36 3M2 4126 use 51.25 54.73 52.61 sui s2.34 51.21 si.so 48.12 u.21 so.se s2.09 53.02 s2.u 1945 18.58 13.09 104 ms 811.9.0. 5.7 .28 58.05 1985 49.93 41.9'7 48.82 1901 54.04 53.68 SU! 54.29 53.24 53.24 51.01 50.74 50.10 47.99 rr.n U.60 Sl.18 1944 17.60 14.22 15.53 11168 57.71 45.83 53.40 1986 66.2-4 '8.21 63.31 1981 50.11 0.39 47.04 47.65 48.80 48.77 '50.96 50.16 49.78 49.44 52.57 S2.46 411.64 1947 IS.SS 12.60 12.811 1967 55.0l (8.18 49.90 IHt 51.23 51.93 49.64 49.45 50.29 47.92 41.57 H.66 U.90 11.36 H.61 41.11 11.20 1948 tttt 12. l\ jLJ7 1968 Sl.92 46.00 51.95 1987 84.&3 49.71 '9.71 1910 42.17 41.55 44.31 43.04 38.33 36.12 31.87 38.37 39.63 38.72 40.08 44.12 40.39 IH9 . IH IUO 1969 5l.03 U .22 42.85 !ij88 64.84 48.46 63.87 11171 47.24 4U3 45.53 45.02 (2.88 42.22 (3.72 41.61 41.12 42.33 41.42 41.81 H.42 1950 15.73 13.64 IU9 1970 45.82 35.53 45.U 1989 66.56 62.93 68.66 1072 4•.29 41.97 42.03 40.H 39.88 38.74 38.117 311.48 39.90 40.93 44.10 (3.94 41.20 11151 18.13 14.72 18.07 1971 48.38 40.35 44.18 1990 66.61 56.88 63.(7 1973 42.81 40.87 39.88 39.55 39.18 39.(8 38.48 38.08 31.57 37.50 )3.19 31.79 38.10 1952 18.28 16.25 18.28 1972 45.39 38.53 43.50 1991 77.25 81.24 77.U. 1974 33.93 33.88 33.45 31.14 26.81 25.39 24.29 23.11 20.84 22.76 23.01 21.80 26.70 11153 19.14 18. TII 18.91 1973 4UI 30.89 32.85 ") Weekly Indexes
.:» 1982 1987
l Woek J.,., Feb. Mu. Apr. May June July Aue. Sept. Oct. Nov. Dec. w .. k J&n, Feb. Mu. Apr. May June Ju.ly Au,. S.pt. Oct. No•. o.c. -r> 29.41 29.94 31.39 31.76 32.93 32.41 31.26 31.69 34.5(1 35.04 36.28 34.63 l 61.50 64.24 81.7' 57.77 66.04 �.67 66.61 63.93 M.66 64.28 62.24 60.2'1 29.U 29.84 31.69 32.20 33.31 31.87 32.06 31.51 3-4.69 36.62 36.99 35.34 2 62.27 62.28 69.64 66.38 66.34 56.U 66.26 66.26 63.70 56.36 62.18 C.9.78 29.32 29.84 31.� 32.52 32.66 31.69 32.38 34.27 34.91 36.33 35.(6 36.23 3 63.36 82.04 69.'6 ·5-4,39 62.34 66.90 64.99 66.66 63.'1 62.31 51.88 (9.99 , 29.87 30.98 31.80 32.88 32.60 31.15 31.16 36.16 35.07 35.34 35.00 36.77 ( �.83 81.87 60.80 56.73 63.93 66.22 �.26 66.18 63.70 60.93 61.26 50.18 �J ........ 31.31 31.52 34.37 36.19 5 56.05 6-4.07 63.69 49.71 Avs, 29.39 30.16 31.41 32.34 32.86 31.73 31.71 33.16 34.72 35.81 36.88 35.47 Avt 62.99 62.61 80.41 56.86 64.41 56.61 6-4.82 66.73 63.79 63.22 61.SS 49.98
1982: Hlib. 36.62, October; Lo•, 29.15, Ja.auuy; A mac,, 32.87 M. 64.13 81.31 68.70 66.96 64.44 56.49 63.82 6M6 63.69 61.71 60.04 49.78 , ...
1983 1987: Hi,h, 6-1.83, Ja.auuy: Low, 49.71, 0-mber; A--.rqt, 66.92
1988 ... WHk J&n. Feb. Mu. Apr. May June July Aue. Sept Oct. Nov. Dtc.
I 36.58 37.44 38.22 37.54 38.92 38.30 36.86 37.74 37.80 40.73 41.20 38.64 WNk JLD, Feb. Mu. Apr. May June July Au,. S.pL Oct. Nov. Dec. 2 37.28 37.09 38.23 37.98 39.02 37.90 37.28 37.02 37.97 39.66 40.00 38.39 I 61.66 54.11 52.60 50.90 48.78 5l.S4 52.11 62.116 61.88 63.08 M.64 6Ul 3 37.48 36.90 38.� 38.96 39.08 37.73 38.26 37.72 38.43 39.74 I0.29 38.28 2 50.76 54.16 61.01 51.06 48.68 52.24 61.116 61.11 61.86 63.42 63.83 &3.62 • J7.26 37.06 38.04 38.71 38.8.'.l 37.22 37.91 37.56 38.90 41.04 40.50 37.« 3 52.00 63.07 51.87 48.45 48.71 52.52 51.64 60.96 52.00 63.60 62.86 53.64 5 37.49 36.63 37.50 39.95 4 53.68 53.23 61.15 49.38 49.21 52.90 61.U 51.71 52.26 64.U 53.11 63.86 Avl 37.15 37.12 38.00 38.30 38.!16 37.56 37.68 37.61 38.28 40.27 40.39 38.2, 5 50.05 52.08 61.63 63.66 M .. 37.51 37.61 37.35 38.94 38.60 36.70 37.49 37.60 38.87 41.29 39.95 37.14 Avt 52.03 53.6-4 51.38 49.95 48.82 62.32 61.78 51.61 52.00 63.64 63.66 63. 78
1983: Hl{h, 41.20, NoYemb.r: Low, 36.58, January: Averqo, 38.28 M .. 55.M 52.92 60.U 49.31 51.23 52.-10 52.64 51.83 52.77 64;66 63.56 63.87
1984 1988: Hich, 64.64, November: Lo•, 48.45, April: Averqe, 62.°'
WMk Jan. F,b. Mu. Apr .. May June July Aue, Stpt Oct. Nov. Doc. 1989
I 37.76 38.96 3UI 34.16 35.02 34.66 34.32 35.60 36.82 38.67 '1.52 41.06 WNk J111. Fob. Mu. Apr. May June July Au,. S.pL Oct. Nov. Dec.
2 38.22 36.97 34.85 3�.02 36.56 34.40 34.63 36.41 36.67 39.02 I0.94 40.94 I 53.00 54.88 52.93 53.75 66.40 59.24 59.72 62.81 80.93 61.38 63.28 6U2 3 3U4 36.20 36.08 36.°' 35.48 34.91 36.30 3UO 38.13 -I0.40 40.96 42.36 2 54.0'7 54.14 63.:lf 53.89 66.02 69.,9 6U4 62.49 60.88 61.88 63.66 M.23 ' 36.73 34.62 �.73 34.76 34.62 34.29 35.14 37.61 38.70 40.83 41.55 41.80 3 54.45 54.12 63.52 54.80 67.64 59.34 61.75 61.90 61.62 60.91 4,1.66 8Uo 5 35.06 34.09 37.10 40.56 ' 55.04 63.47 63.13 54.86 68.04 60.04 62.06 61.36 61.02 61.71 63.50 M.38 Av� 37.(l 35.76 34.82 34.� 3-4.96 34.57 34.36 36.70 37.58 39.90 0.24 41.64 5 63.09 57.76 61.18 63.67 M .. 36.92 35.06 34.31 34.59 34.21 34.26 35.25 37.13 38.96 40.56 41.61 42.26 Avt 5-4.37 64.30 53.21 54.33 56.77 59.53 61.27 61.96 61.09 61.42 63.67 86.01
1964: Hisb, 42.36. �mber: Lo•. 34.02, April; A•erqo, 36.99. M .. 65.26 63.36 53.48 55.38 67.75 69.53 63.24 61.41 61.28 62.72 64.12 88.66
1985 1989: Hisb, 66.55, Dt<.mber; Low, 62.93, Much; Averqe, 68.99
1990 Week Jill, Feb. Mu. Apr. Mey JWJe July AU{. Sept. Oct. Nov. Dec. w .. t J .... Fob. Mu. Apr. M.ty June Ju.ly Aur, S.pL Oct. Nov. Dec. 41.97 42.29 42.03 «.42 4-4.H ,1.46 48.83 «.39 45.60 42.64 '5.38 46.9, 66.61 63.42 62.26 81.43 68.82 62.21 60.89 62.19 66.91 67.86 81.441 83.88 42.19 42.90 ,2.12 «.46 ·«.96 47.50 49.50 45.23 «.06 .3.22 46.57 46.13 I
J 42.29 42.86 42.61 46.22 45.69 48.56 49.93 46.87 43.52 43.77 46.66 49.63 2 �-•O 63.49 81.8J 60.96 61.17 61.97 60.26 69.80 66.88 68.48 61.96 83.72
4 · ) 42.25 42.33 .3.61 '5.38 48.70 48.UI 4<1.09 46.96 43.22 «.90 46.46 48.2$ 3 63.29 62.37 61.74 60.U 62.5-4 60.76 69.8-4 .69.66 M.40 60.40 62.07 64.06 ,2.22 48.38 46.48 45.83 48.82 4 62.84 62.89 61.68 59.11 61.57 80.70 69.68 .56.87 66.88 61.63 62.03 83.94
. 42.18 42.61 42.69 �:ii1 46.63 ,1.95 41.93 46.36 «.10 «.07 46.24 48.36 5 63.29 e:i:� 61.04 641.39 w:62 62.14 si':iia ',�· 42.25 42.38 4-4.2.5 «.78 46.84 48.39 45.'8 45.91 12.73 45.45 46.37 48.82 �1. 64.09 81.88 60.49 61.04 61.41 60.14 58.!M 80.04 63.00 63.29 62.89 61.58 54.30 60.89 81.06 61.611 56.48 66.37 82.14 82.92 83.47 1986: Hich, 411.93. Ju.ly: Low, H.97, J,..,uary; Avor111. 45.16 1990: Hieb, 64.61, Janu.uy: Low, 66.N, S.ptu,t..r: Av1ro&(1, 81.12 1986 1991
WNk Jan. F'eb. Mu. Apr. May June July ""'· SopL Oct. Nov. Dec. w .. k J&n. l"tb. Mu. Apr. May June July All(. S.pt Oct. NO¥. Dec. v-,. 48.52 51.28 53.64 56.84 63.26 52.94 56.25 59.87 63.26 57.17 60.82 61.40 1 62.82 63.09 63.50 66.87 66.15 63.90 &-4.09 67.68 68.02 71.82 71.78 73.53 ,, 46.21 51.82 64.99 55.46 63.15 52.31 56.32 62.03 60.26 57.12 60.68 60.49 2 61.93 65.87 64.10 6U4 65.67 83.41 &-4.04 67.74 88.21 70.� 73.2.5 74.30 _J-31 53.08 53.82 57.17 52.38 5-4.18 58.46 65.24 57.64 57.45 !a.94 59.80 3 61.U 6-1.96 64.12 66.96 84.49 63.24 6-4.76 68.39 68.71 71.19 71.87 72.84 · .73 53.17 55.23 56.09 5-4.23 55.12 60.32 �.27 58.51 57.83 60.87 59.48 4 62.88 64.72 86.80 65.41 66.18 63.89 66.11 68.57 89.69 70.« 73.83 76.82 ..__/ ······· 52.92 60.14 59.75 ......•. 6".31 s 62.34 64.68 66.62 72.08 77.26 Av<. 48.97 52.,9 !.< . .W 55.50 53.26 63.6-4 58.30 62.85 59.92 57.Sli 60.33 59.90 A•r. 62.24 6-4.66 64.38 65.94 65.23 63.61 6"-92 sii:10 68.66 71.111 72.58 74.71
S&P Indices http://www2.standardandpoors.com/NASApp/cs/ContentServer?pag ...
The McGraw Hill Companies · . } . . _ � ,
I Credit Ratings ) Equity Research I S&P Indices j Funds f Products & Services
)
Adrien McKenzie
Sign In Logout International Sites j Global_/ English. ---···--�·· Events
About Us
Media
Contact Us
Careers
Help
Regulatory Disclosures Privacy Notice Terms of Use Disclaimers Site Map Site Feedback
Copyright (c) Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved.
==�=="="·-=- =·-=-- .. _
:1 Related Products & I Services
Index Alert
Emerging Markets
Database
S&P Australian Index Alert
More ...
News &
Analysis
10,286
20,573
9,108
90,008
311,066
902
36.995
28.79
1.63
% of Market Capitalization
83.5 %
16.3%
0.2%
% of Market Capitalization
11.3%
11.0%
5.8 %
20.7 %
13.3%
10.9 %
17.7 %
3.0 %
3.5%
2.8 %
74.9%
Index
Methodology
Number of Cos.
424
74
2
Number of Cos.
87
37
23
83
47
59
83
33
12
36
372
) Index
Changes
Index
'S&P 500 Industrials Sector is part of the Global Industry Classification Standard (GICS).
"S&P 500 Industrials Composite is a continuation of the Industrials that have been published
by Standard & Poor's for over 40 years, and is provided in recognition of the fact that it is
used by analysts and has a long history. It is not the same as the GICS Industrials Sector.
Consumer Discretionary
Consumer Staples
Energy
Financials
Hea)th Care
Industrials'
Information Technology
Materials
Telecommunication Services
Utilities
Industrials (Composite)"
S&P 500 Global Industry Classification Standard (GICS) Sectors
As of December 31, 2003
S&P 500 Statistics
As of December 31, 2003
S&P 500 Exchange Representation
As of December 31, 2003
At month-end, the S&P 500 Index represented approximately 77% and the S&P MidCap 400
represented 7% and the S&P SmallCap 600 represented 3% of the market value of S&P's
internal database of over 7,245 equities. Combined, the S&P Equity Indices represented
88%.
Total Market Value($ Billion)
Mean Market Value ($ Million)
Median Market Value ($ Million)
Weighted Ave. Market Value($ Million)
Largest Cos. Market Value ($ Million)
Smallest Cos. Market Value ($ Million)
Median Share Price ($)
PIE Ratio
Indicated Dividend Yield(%)
Results for: S&P 500
• Note: Calculated for the S&P 500 only.
NYSE
NASDAQ
AMEX
Search
Search Tips
j S&P Indices
• Real Time Values
• Index Changes
• Index Methodology
• News & Analysis
• Index Committee Policy
• Global Industry
Classification Standard
(GICS®)
I Browse By Index
• Equity
' S&P Global Indices
. S&P Global 1200
S&P 500
S&P Europe 350
S&PrTOPIX 150
S&PrTSX60
S&P/ASX50
S&PAsia 50
S&P Latin America 40
S&P 700
' S&PADR
' S&P Global 100
S&P/Citigroup
S&P US Indices
S&P European Indices
S&P Italian Indices
S&P Hong Kong Indices
S&P Japanese Indices
S&P Canadian Indices
S&P Australian Indices
S&P India Indices
S&P Russian Indices
S&P Emerging Markets
S&P Growth & Value
Indices
• S&P Commodity
• S&P Credit Indices
• S&P Hedge Fund Indices
• Structured Finance
• Standard & Poor's/lnvestor
Tools Municipal Bond Indices
l,s&P _Indices_.!
L · .. · :,.·· .. ·:;:-:::i::::a
(Keyword, Company Name,
etc.)
)
)
1 of 1 1/1'1/f\A 11.'lA A�A'
Standard & Poor's Earnings Guide (December 2003)
Source: www.standardandpoors.com (December 29, 2003).
) IBES
1 MMM 3M Company 12
2 ABT Abbott Labs. 12
3 ACE ACE Limited 13
4 ADCT ADC Telecommunications 12
5 ADBE Adobe Systems 12
6 AMO Advanced Micro Devices 14
7 AES AES Corp. 8
8 AET Aetna Inc. 17
9 AFL AFLAC Inc. 15
10 A Agilent Technologies 11
11 APO Air Products & Chem. 10
12 ACV Alberto Culver 'B' 11
13 ABS Albertson's, Inc. 7
14 AA Alcoa Inc. 18
15 AYE Allegheny Energy 4
16 ATI Allegheny Technologies 11
17 AGN Allergan, Inc. 23
18 AW Allied Waste Industries 13
19 ALL Allstate Corp. 11
20 AT ALLTEL Corp. 5
21 ALTR Altera Corp. 25
22 MO Altria Group 9
23 ABK Ambac Fin'I Group 14
24 AEP Amer. Elec. Power 4
) 25 AXP Amer. Express 12
26 AIG Amer. lnt'I Group 15
27 AHC Amerada Hess 5
28 AEE Ameren Corp. 3
29 AM American Greetings Class A 10
30 APCC American Power Conversion 16
31 ASD American Standard 12
32 ABC AmerisourceBergen 15
33 AMGN Amgen 21
34 ASO AmSouth Bancorp. 8
35 APC Anadarko Petroleum 11
36 ADJ Analog Devices 23
37 ANDW Andrew Corp. 18
38 BUD Anheuser-Busch 11
39 ATH Anthem, Inc. 15
40 AOL AOL Time Warner Inc. 10
41 AOC Aon Corp. 11
42 APA Apache Corp. 9
43 AIV Apartment Investment & Mgmt. 6
44 APOL Apollo Group 25
45 AAPL Apple Computer 12
46 ABI Applied Biosystems
47 AMAT Applied Materials 19
48 AMCC Applied Micro Circuits 30
) 49 ADM Archer Daniels Midl'd 9
50 ASH Ashland Inc. 8
51 T AT&T Corp. -11
52 AWE AT&T Wireless Services 17
53 ADSK Autodesk, Inc. 13
54 ADP Automatic Data Proc. 11
55 AN AutoNation, Inc. 11
56 /:,ZO AutoZone Inc. 16
57 AV Avaya Inc. 17
58 AVY Avery Dennison 11
) 59 AVP Avon Products 12
60 BHI Baker Hughes 15
61 BLL Ball Corp. 11
62 BAC Bank of America 10
63 BK Bank of New York 12
64 ONE Bank One Corp. 9
65 BCR Bard (C.R.) 12
66 BOL Bausch & Lomb 12
67 BAX Baxter lnt'I Inc. 12
68 BBT BB&T Corp. 10
69 BSC Bear Stearns 12
70 BOX Becton, Dickinson 13
71 BBBY Bed Bath & Beyond 22
72 BLS BellSouth Corp. 3
73 BMS Bemis Co. 9
74 BBY Best Buy Co., Inc. 15
75 BLI Big Lots, Inc. 19
76 BIIB Biogen IDEC 20
77 SMET Biomet 15
78 BJS BJ Services 13
79 BOK Black & Decker 12
80 HRS Block (H&R) 14
81 BMC BMC Software 13
82 BA Boeing 11
83 sec Boise Cascade 7
) 84 BSX Boston Scientific 22
85 BMY Bristol-Myers Squibb 6
86 BRCM Broadcom Corporation 25
87 BF.B Brown-Forman Corp. 9
88 BC Brunswick Corp. 13
89 BNI Burlington Northern 10
90 BR Burlington Resources 9
91 CPN Calpine Corp. 6
92 CPS Campbell Soup 6
93 COF Capital One Fin'I 16
94 CAH Cardinal Health 16
95 CCL Carnival Corp. 15
96 CAT Caterpillar Inc. 11
97 CD Cendant Corporation 14
98 CNP CenterPoint Energy 3
99 CTX Centex Corp. 18
100 CTL CenturyTel Inc. 4
101 CF Charter One Fin'I 11
102 cvx ChevronTexaco 7
103 CHIR Chiron Corp. 19
104 CB Chubb Corp. 12
105 CIEN CIENACorp. 12
106 Cl CIGNA Corp. 11
107 CINF Cincinnati Financial 10
108 CIN Cinergy Corp. 4 ) 109 CTAS Cintas Corp. 15
110 cc Circuit City Stores 14
111 csco Cisco Systems 16
112 C Citigroup Inc. 11
113 CZN Citizens Communications 11
114 CTXS Citrix Systems 12
115 CCU Clear Channel Communications 17
116 CLX Clorox Co. 10
117 CMS CMS Energy Corp. 4
) 118 KO Coca-Cola 11
119 CCE Coca-Cola Enterprises 13
120 CL Colgate-Palmolive 11
121 CMCSK Comcast Class A Special 13
122 CMA Comerica Inc. 8
123 CA Computer Associates 12
124 csc Computer Sciences Corp. 11
125 CPWR Compuware Corp. 12
126 CMVT Com verse Technology 16
127 CAG ConAgra Foods 8
128 CE Concord EFS Inc. 14
129 COP ConocoPhillips 6
130 ED Consol. Edison 3
131 CEG Constellation Energy 7
132 CVG Convergys Corp. 12
133 CSE Cooper Inds. 10
134 CTB Cooper Tire & Rubber 10
135 RKY Coors (Adolph) 'B' 9
136 GLW Corning Inc. 18
137 COST Costco Co. 12
138 CFC Countrywide Financial Corp. 12
139 CR Crane Co. 9
140 CSX CSX Corp. 12
141 CUM Cummins Inc. 9
142 CVS CVS Corp. 12
) 143 DCN Dana Corp. 10
144 OHR Danaher Corp. 16
145 ORI Darden Restaurants 14
146 DE Deere & Co. 9
147 DELL Dell Computer 17
148 DPH Delphi Corp. 9
149 DAL Delta Air Lines 7
150 DLX Deluxe Corp. 8
151 DVN Devon Energy 7
152 DDS Dillard's, Inc. 6
153 DIS Disney (Walt} 15
154 DG Dollar General Corp. 15
155 D Dominion Resources 5
156 DNY Donnelley (R.R) & Sons 10
157 DOV Dover Corp. 12
158 DOW Dow Chemical 6
159 DJ Dow Jones & Co. 14
160 DTE DTE Energy 5
161 DD Du Pont 8
162 DUK Duke Energy 4
163 DYN Dynegy Inc. (New) Class A 1
164 EMN Eastman Chemical 7
165 EK Eastman Kodak 2
166 ETN Eaton Corp. 11
167 EBAY eBay Inc. 40 ) 168 ECL Ecolab Inc. 12
169 EIX Edison lnt'I 4
170 EP El Paso Corp. 7
171 ERTS Electronic Arts 19
172 EDS Electronic Data Sys. 10
173 EMC EMC Corp. 25
174 EMR Emerson Electric 10
175 EC Engelhard Corp. 11
176 ETR Entergy Corp. 6
) 177 EOG EOG Resources 10
178 EFX Equifax Inc. 9
179 EOP Equity Office P'ptys 6
180 EQR Equity Residential 5
181 EXC Exelon Corp. 5
182 ESRX Express Scripts 20
183 XOM Exxon Mobil Corp. 8
184 FOO Family Dollar Stores 17
185 FNM Fannie Mae 13
186 FRE Federal Home Loan Mtg. 13
187 FD Federated Dept. Stores 9
188 Fii Federated Investors Inc. 13
189 FOX FedEx Corp. 13
190 FITB Fifth Third Bancorp 13
191 FDC First Data Corp. 15
192 FTN First Tenn. National 10
193 FE FirstEnergy Corp. 4
194 FISV Fiserv Inc. 17
195 FBF FleetBoston Fin'I 9
196 FLR Fluor Corp. 12
197 F Ford Motor 6
198 FRX Forest Laboratories 22
199 FO Fortune Brands 12
200 FPL FPL Group 5
201 BEN Franklin Resources 12
) 202 FCX Freeport-McMoran Cp & Gld 28
203 GCI Gannett Co. 10
204 GPS Gap (The), Inc. 16
205 GTW Gateway Inc. 9
206 GD Gen'I Dynamics 10
207 GE Gen'I Electric 10
208 GIS Gen'I Mills 10
209 GM Gen'I Motors 6
210 GPC Genuine Parts 6
211 GENZ Genzyme Corp. 20
212 GP Georgia-Pacific Group 6
213 G Gillette 10
214 GOW Golden West Fin'I 12
215 GS Goldman Sachs 13
216 GR Goodrich Corp. 11
217 GT Goodyear Tire 5
218 GWW Grainger (W.W.) 10
219 GLK G't Lakes Chemical 8
220 GOT Guidant Corp. 14
221 HAL Halliburton Co. 12
222 HDI Harley-Davidson 16
223 HET Harrah's Entertainment 13
224 HIG Hartford Fin'I Svcs. 11
225 HAS Hasbro, Inc. 11
226 HCA HCA Inc. 13 ) 227 HMA Health Management Assoc. 15
228 HNZ Heinz (H.J.) 8
229 HPC Hercules, Inc. 8
230 HSY Hershey Foods 9
231 HPQ Hewlett-Packard 10
232 HLT Hilton Hotels 14
233 HD Home Depot 13
234 HON Honeywell lnt'I 10
235 HUM Humana Inc. 13
) 236 HBAN Huntington Bancshs. 8
237 ITW Illinois Tool Works 13
238 RX IMS HEALTH 13
239 IR Ingersoll-Rand 19
240 INTC Intel Corp. 15
241 IGT International Game Technology 16
242 IPG Interpublic Group 13
243 IBM lnt'I Business Mach. 9
244 IFF lnt'I Flavors & Frag.
245 IP lnt'I Paper 7
246 INTU Intuit, Inc. 21
247 ITT ITT Industries 14
248 JPM J.P. Morgan Chase & Co. 10
249 JBL Jabil Circuit 22
250 JNS Janus Capital Group 10
251 JDSU JDS Uniphase Corp 16
252 JP Jefferson-Pilot Corp. 9
253 JHF John Hancock Fin'I 11
254 JNJ Johnson & Johnson 13
255 JCI Johnson Controls 13
256 JNY Jones Apparel Group 12
257 KBH KB Home 13
258 K Kellogg 9
259 KMG Kerr-McGee Corp. 5
260 KEY KeyCorp 7
) 261 KSE KeySpan Corp. 6
262 KMB Kimberly-Clark 8
263 KMI Kinder Morgan 10
264 KG King Pharmaceuticals 12
265 KLAC KLA-Tencor Corp. 20
266 KRI Knight Ridder 9
267 KSS Kohl's Corp. 21
268 KR Kroger Co. 7
269 LEG Leggett & Platt 13
270 LEH Lehman Bros. Holdings 11
271 LXK Lexmark lnt'I Inc 12
272 LLY Lilly (Eli} 13
273 LTD Limited Brands 12
274 LNC Lincoln Nat'I Corp. 12
275 LLTC Linear Technology 22
276 LIZ Liz Claiborne 12
277 LMT Lockheed Martin 10
278 LTR Loews Corp. 8
279 LPX Louisiana Pacific 7
280 LOW Lowe's Cos. 18
281 LSI LSI Logic 16
282 LU Lucent Technologies 9
283 HCR Manor Care Inc. 14
284 MRO Marathon Oil Corp. 6
285 MAR Marriott lnt'I 16 ) 286 MMC Marsh & Mclennan 14
287 Ml Marshall & Ilsley 10
288 MAS Masco Corp. 14
289 MAT Mattel, Inc. 11
290 MXIM Maxim Integrated Prod 24
291 MAY May Dept. Stores 7
292 MYG Maytag Corp. 7
293 MBI MBIA Inc. 13
294 KRB MBNA Corp. 14
) 295 MKC McCormick & Co. 11
296 MCD McDonald's Corp. 8
297 MHP McGraw-Hill 11
298 MCK McKesson Corp. 16
299 MWV MeadWestvaco Corporation 8
300 MHSwi Medco-Health Solutions 16
301 MEDI Medlmmune Inc. 20
302 MDT Medtronic, Inc. 16
303 MEL Mellon Financial Corp. 12
304 MRK Merck & Co. 7
305 MERO Mercury Interactive 22
306 MDP Meredith Corp. 10
307 MER Merrill Lynch & Co. 13
308 MET MetLife Inc. 11
309 MTG MGIC Investment 12
310 MU Micron Technology 17
311 MSFT Microsoft Corp. 11
312 MIL Millipore Corp. 14
313 MOLX Molex Inc. 13
314 MON Monsanto Co. 10
315 MNST Monster Worldwide 24
316 MCO Moody's Corp 16
317 MWD Morgan Stanley 13
318 MOT Motorola, Inc. 11
319 NYT N.Y. Times 11
) 320 NBR Nabors Industries Ltd. 19
321 NCC National City Corp. 7
322 NSM National Semiconductor 16
323 NAV Navistar International Corp. 11
324 NCR NCR Corp. 10
325 NTAP Network Appliance 26
326 NWL Newell Rubbermaid 11
327 NEM Newmont Mining 23
328 NXTL Nextel Communications 14
329 GAS NICOR Inc. 4
330 NKE NIKE, Inc. 'B' 13
331 NI NiSource Inc. 5
332 NE Noble Corporation 20
333 JWN Nordstrom, Inc. 11
334 NSC Norfolk Southern 11
335 NFB North Fork Bancorp 10
336 NTRS Northern Trust Corp. 12
337 NOC Northrop Grumman 10
338 NOVl Novell Inc. 32
339 NVLS Novellus Systems 20
340 NUE Nucor Corp. 14
341 NVDA NVIDIA Corp. 18
342 OXY Occidental Petroleum 7
343 ODP Office Depot 11
.) 344 OMC Omnicom Group 12
345 ORCL Oracle Corp. 11
346 PCAR PACCAR Inc. 9
347 PTV Pactiv Corp. 11
348 PLL Pall Corp. 10
349 PMTC Parametric Technology 12
350 PH Parker-Hannifin 12
351 PAYX Paychex, Inc. 18
352 JCP Penney (J.C.) 9
353 PGL Peoples Energy 5
) 354 PSFT PeopleSoft Inc. 11
355 PBG Pepsi Bottling Group 11
356 PEP PepsiCo, Inc. 11
357 PKI PerkinElmer Inc. 18
358 PFE Pfizer, Inc. 14
359 PCG PG&E Corp. 5
360 PD Phelps Dodge 0
361 PNW Pinnacle West Capital 4
362 PBL Pitney Bowes 11
363 PCL Plum Creek Timber 4
364 PMCS PMC-Sierra Inc. 29
365 PNC PNC Financial Serv. 9
366 PWER Power-One Inc. 10
367 PPG PPG Inds. 8
368 PPL PPL Corp. 5
369 PX Praxair Inc. 10
370 TROW Price (T. Rowe) Group 12
371 PFG Principal Financial Group 13
372 PG Procter & Gamble 10
373 PGN Progress Energy 4
374 PGR Progressive (Ohio) 15
375 PLO ProLogis 6
376 PVN Providian Financial Corp. 13
377 PRU Prudential Financial 14
378 PEG Public Serv. Enterprise 4
) 379 PHM Pulte Homes 12
380 QLGC QLogic Corp. 19
381 QCOM QUALCOMM Inc. 17
382 OGX Quest Diagnostics 18
383 Q Qwest Communic. -5
384 RJR R.J. Reynolds Tobacco 7
385 RSH RadioShack Corp. 11
386 RTN Raytheon Co. 12
387 RBK Reebok International 14
388 RF Regions Financial 8
389 RHI Robert Half International 18
390 ROK Rockwell Automation 15
391 COL Rockwell Collins 11
392 ROH Rohm and Haas 10
393 RDC Rowan Cos. 19
394 R Ryder System 12
395 SAFC SAFECO Corp. 12
396 SWY Safeway Inc. 8
397 SANM Sanmina-SCI Corp. 20
398 SLE Sara Lee Corp. 7
399 SBC SBC Communications 1
400 SGP Schering-Plough 7
401 SLB Schlumberger Ltd. 13
402 SCH Schwab (Charles) 16
403 SFA Scientific Atlanta 9 ) 404 SEE Sealed Air Corp.(New) 11
405 S Sears, Roebuck 7
406 SRE Sempra Energy 6
407 SHW Sherwin-Williams 9
408 SEBL Siebel Systems Inc 13
409 SIAL Sigma-Aldrich 11
410 SPG Simon Property Group, Inc 7
411 SLM SLM Corporation 14
412 SNA Snap-on Inc. 11
) 413 SLR Solectron 19
414 so Southern Co. 4
415 SOTR SouthTrust Corp. 11
416 LUV Southwest Airlines 21
417 FON Sprint Corp.
418 PCS Sprint Corp. PCS 18
419 STJ St Jude Medical 16
420 SPC St. Paul Cos. 10
421 SWK Stanley Works 10
422 SPLS Staples Inc. 17
423 SBUX Starbucks Corp. 20
424 HOT Starwood Hotels & Resorts 15
425 STT State Street Corp. 13
426 SYK Stryker Corp. 19
427 SUNW Sun Microsystems 13
428 sos SunGard Data Systems 18
429 SUN Sunoco, Inc. 12
430 STI SunTrust Banks 9
431 SVU SUPERVALU INC. 8
432 SYMC Symatec Corp. 17
433 SBL Symbol Technologies 20
434 SNV Synovus Financial 13
435 SYY Sysco Corp. 14
436 TGT Target Corp. 15
437 TE TECO Energy 4
) 438 TEK Tektronix Inc. 14
439 TLAB Tellabs, Inc. 12
440 TIN T emple-lnland 7
441 THC Tenet Healthcare Corp. 12
442 TER Teradyne Inc. 17
443 TXN Texas Instruments 20
444 TXT Textron, Inc. 12
445 TMO Thermo Electron 16
446 TNB Thomas & Betts 15
447 TIF Tiffany & Co. 17
448 TJX TJX Companies 15
449 TMK Torchmark Corp. 11
450 TOY Toys R Us, Inc. 9
451 RIG Transocean Inc. 20
452 TAP.B Travelers Property Casualty Corp. 12
453 TRB Tribune Co. 12
454 TRW TRW Inc.
455 TUP Tupperware Corp. 10
456 TXU TXU Corp. 4
457 TYC Tyco lnt'I Ltd. 13
458 USB U.S. Bancorp 10
459 X U.S. Steel Corp.
460 UNP Union Pacific 12
461 UPC Union Planters 8
462 UIS Unisys Corp. 12 _) 463 UNH United Health Group Inc. 17
464 UPS United Parcel Serv. 13
465 UTX United Technologies 12
466 UVN Univision Communications 25
467 UCL Unocal Corp. 5
468 UNM UNUMProvident Corp. 10
469 UST UST Inc. 6
470 VFC V.F. Corp. 12
471 VRTS Veritas Software 16
) 472 vz Verizon Communic. 1
473 VIA.B Viacom Inc. 16
474 vc Visteon Corp. 10
475 VMC Vulcan Materials 8
476 WB Wachovia Corp. 10
477 WAG Walgreen Co. 15
478 WMT Wal-Mart Stores 14
479 WM Washington Mutual 11
480 WMI Waste Management 13
481 WAT Waters Corporation 13
482 WPI Watson Pharmaceuticals 14
483 WLP WellPoint Health Networks 15
484 WFC Wells Fargo 11
485 WEN Wendy's lnt'I 13
486 WY Weyerhaeuser Co. 5
487 WHR Whirlpool Corp. 5
488 WMB Williams Cos. 7
489 WIN Winn-Dixie Stores 6
490 WOR Worthington Inds. 10
491 WWY Wrigley (Wm.) Jr. 11
492 WYE Wyeth 11
493 XEL Xcel Energy Inc. 4
494 XRX Xerox Corp. 44
495 XLNX Xilinx, Inc 22
496 XL XL Capital Ltd. 13
) 497 YHOO Yahoo Inc. 35
498 YUM Yum! Brands, Inc 12
499 ZMH Zimmer Holdings 17
500 ZION Zions Bancorp. 12
AVERAGE 12.1
)
U.S. Treasury- Daily Treasury Long-Term Rates http://www. treas. gov I offices/ domes tic-finance/ debt-management/inte ...
)
Daily Treasury Long-Term Rates --- ..••........ ·--·-----···-·····-·- .. ···· - •. ···---- ... ····· -· -- - ----- -• - - •••o H ·-- --··-· ---- =----- --------=
Historical Data Daily Treasury
Yield Curve Rates December 2003 Daily Treasury LT Composite LT Average Extrapolation .. Long-Term Rates Date (>10 yrs) (>25 years) Factor Daily Treasu!}'.
12/01/03 5.08% 5.25% 0.01% Real Yield Curve
Rates
12/02/03 5.06% 5.23% 0.01% Daily Treasu!}'.
Real Long-Term
12/03/03 5.09% 5.26% 0.01% Rates
Weekly Aa
12/04/03 5.06% 5.24% 0.01% Cor12orate Bond
Index
12/05/03 4.93% 5.13% 0.03%
12/08/03 4.99% 5.19% 0.03%
12/09/03 5.02% 5.21% 0.02%
12/10/03 5.00% 5.21% 0.03%
12/11/03 4.97% 5.19% 0.03% ) 12/12/03 4.96% 5.16% 0.03%
12/15/03 4.97% 5.17% 0.03%
12/16/03 4.94% 5.15% 0.03%
12/17/03 4.89% 5.09% 0.03%
12/18/03 4.83% 5.03% 0.03%
12/19/03 4.83% 5.04% 0.03%
12/22/03 4.86% 5.06% 0.03%
12/23/03 4.93% 5.13% 0.03%
12/24/03 4.87% 5.07% 0.03%
12/26/03 4.84% 5.05% 0.04%
12/29/03 4.92% 5.11% 0.03%
12/30/03 4.96% 5.16% 0.03%
12/31/03 4.94% 5.15% 0.03%
5. ,s /.
)
REGULATORY FINANCE:
UTILITIES' COST OF CAPITAL
Roger A. Morin, PhD
in collaboration with
Lisa Todd Hillman
1994
PUBLIC UTILITIES REPORTS, INC.
Arlington, Virginia
Regulatory Finance ------------------------··--·------------ --·------
common equity to obtain the final cost of equity financing.1 This incre­
mental return is referred to as the "flotation cost allowance," and is the
sum total of direct flotation expenses, market pressure, and market break.
To demonstrate the need for adjusting the market-determined return on
equity for flotation costs, consider the following simple example. Share­
holders invest $100 of capital on which they expect to earn a return of 10%,
or $10, but the company nets $95 because of issuance costs. It is obvious
that the company will have to earn more than 10% on its net book
investment (rate base) of $95 to provide investors with a $10 return on the
money actually invested. To provide the same earnings of $10 on a reduced
capital base of $95 clearly requires a return higher than the shareholder
expected return of 10%, namely $10/$95 = 10.53%. This is because only the
net proceeds from an equity issue are used to add to the rate base on which
the investor earns.
6.2 Magnitude of Flotation Costs
The flotation cost allowance requires an estimated adjustment to the
return on equity of approximately 5% to 10%, depending on the size and
risk of the issue. A more precise figure can be obtained by surveying
empirical studies on utility security offerings.
According to empirical studies by Borum and Malley ( 1986) and Logue and
Jarrow (1978), underwriting costs and expenses average 4% - 5.5% of gross
proceeds for utility stock offerings in the U.S. Eckbo and Masulis (1987)
found an average flotation cost of 4.175% for utility common stock offerings,
and found that flotation costs increased progressively for smaller size issues.
As far as the market pressure effect is concerned, empirical studies clearly
show that the market pressure effect is real, tangible, and measurable.
Appendix 6-A describes one method of measuring the market pressure
effect. Logue and Jarrow (1978) found that the absolute magnitude of the
relative price decline due to market pressure was less than 1.5%. Bowyer
and Yawitz (1980) examined 278 public utility stock issues and found an
average market pressure of 0.72%. In a classic and monumental study
published in the Journal of Financial Economics, which reviewed the
aggregate empirical evidence on market pressure from several studies,
Smith (1986) found a market pressure effect of 3.14% for industrial stock
1 An alternate way of stating this requirement is that the utility's stock must be
maintained at some minimum market-to-book ratio in such a way that the
proceeds from new stock issues will not decline below book value per share.
166
)
From: Falkner, Don <[e-mail]>
To: 'Adrien McKenzie' <[e-mail]>
Date: Wednesday, January 14, 2004 10:58 AM
Subject: RE: Schedule, assignments, etc. for Idaho Rate Case
Page 1
PROPOSED
CORPORATE
Capital ProForma
Component Structure Cost
LIT Debt 48.19% 8.70% 4.19%
SIT Debt 0.00% 0.00% 0.00%
Total 48.19% Debt
Pref Trust 5.79% 7.01% 0.41%
Pref Stock 1.72% 7.34% 0.13%
Total 7.51% Preferred
)common 44.30% 11.50% 5.09%
Total
)
100.00% 9.82%
Puget Sound Energy Investor Relations http://www.corporate-ir.net/ireye/ir _ site.zhtml ?ticker=p ...
)
About Us Your I Account I Your
Home I Your Business
Our News Investors I Hydro Licensing
Community I I I Find it fast here •
• PUGET E�ERG't
Corporate
Overview
Corporate
Governance
Stock Quote
Stock Chart
Advanced
Fundamentals
News Releases
Earnings
Estimates
) Analyst
Coverage
Financial Reports
SEC Filings
Presentations
Audio Archives
Dividend History
DRIP/Stock
Purchase
Shareholder
Services FAQ
Calendar of
Events
Email Alerts
Information
Request
)
�
1 of 2
Puget Energy (ticker: PSD, exchange: New York Stock Exchange) News
Release - October 31, 2003
Puget Energy Agrees to Sell 4.55 Million Shares of
Common Stock; $100 Million Sale to Fund Redemption of
High-Cost Preferred Stock; Nondilutive to Earnings Per
Share
BELLEVUE, Wash.--(BUSINESS WIRE)--Oct. 31, 2003--Puget Energy
(NYSE: PSD) announced today it has entered into an agreement for
the sale of 4.55 million shares of common stock directly to funds
managed by Franklin Advisers, Inc. of San Mateo, California at a
price of $22.00 per share, based on a discount from the Oct. 30,
2003, closing price.
"This sale of common stock demonstrates our on-going commitment
to improve our financial strength and credit quality," said Puget
Energy President and CEO Stephen P. Reynolds. "The sale will be
nondilutive to 2003 and 2004 expected earnings per share because
the common stock will replace high-cost preferred stock in our
regulated utility capital structure. With this stock sale, we expect our
utility year-end 2003 common equity ratio to exceed 40 percent,"
Reynolds added.
Net proceeds from the sale are expected to be approximately $100
million. Puget Energy will invest all of the net proceeds into its
regulated utility subsidiary Puget Sound Energy (PSE) to
permanently fund the redemption of $93. 75 million of high-cost
preferred stock. In the third quarter 2003, PSE redeemed its 7. 75%
Series Preferred stock and on Oct. 31, 2003, redeemed its 7.45%
Series II Preferred Stock. The remaining $6.25 million of net
proceeds will be used for general corporate purposes by PSE.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy these securities. The offering was made
to the purchasers by means of a prospectus, a copy of which may be
obtained from the Company. An electronic copy of the prospectus
will be available from the Securities and Exchange Commission's web
site at www.sec.gov.
CONTACT: Puget Energy Grant Ringel, 888-831- 7250 (Media) Durga
Waite, 425-462-3808 (Analysts)
SOURCE: Puget Energy
1/30/04 12:42 PM
Prospectus Supplement http://www.sec.gov/ Archives/edgar/data/1085392/0001 ...
)
)
)
1 of 4
42485 I d424b5 .htm PROSPECTUS SUPPLEMENT
Table of Contents
Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-82940
333-82940-01
333-82940-02
Prospectus supplement
(To prospectus dated July 24, 2003)
4,550,000 shares
[LOGO OF PUGET ENERGY]
Common stock
Puget Energy, Inc. is directly selling 4,550,000 shares of common stock with the related
preferred share purchase rights to certain purchasers. We will receive gross proceeds of
$100, 100,000 from the sale of our common stock before deducting offering expenses.
Our common stock is listed on the New York Stock Exchange under the symbol "PSD." On
October 31, 2003, the last sale price of the shares as reported on the New York Stock
Exchange was $22.73 per share.
Neither the Securities and Exchange Commission nor any state securities commission
has approved or disapproved of these securities or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The Company expects to deliver the shares to the purchasers on or about November 5,
2003.
October 31, 2003
1/30/04 12:37 PM
BHC lOQ 3rd Qtr 2003 http://www.sec.gov/ Archives/edgar/data/1130464/00011304640300 ...
Basic-
Continuing operations $ 0.55 $ 0.63 $ 1.57 $ 1.63
) Discontinued operations 0.15 0.02 0.29 0.03
Change in accounting principles (0.09) 0.03
Total $ 0.70 $ 0.65 $ 1.77 $ 1.69
Diluted-
Continuing operations $ 0.54 $ 0.62 $ 1.55 $ 1.62
Discontinued operations 0.15 0.02 0.29 0.03
Change in accounting principles (0.09) 0.03
Total $ 0.69 $ 0.64 $ 1.75 $ 1.68
Dividends paid per share of common stock $ 0.30 $ 0.29 $ 0.90 $ 0.87
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed
consolidated financial statements.
3
) BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30 December 31 September 30
2003 2002 2002
(in thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 269,784 $ 75,045 $ 69,519
Restricted cash 1,070 1,070
Receivables (net of allowance for doubtful accounts of
$4,156;
$3,860 and $3,361, respectively) 199,544 206,149 154,074
Notes receivable 555 34,085 272
Materials, supplies and fuel 46,692 24,139 24,328
Derivative assets 23,781 36,393 44,244
Deferred income taxes 4,913 5,995 2,355
Other assets 6,068 7,311 21,747
Assets of discontinued operations 4,668 178,468 178,661
) 557,075 568,655 495,200
Investments 24,774 18,707 19,920
4 of57 12/1/011·06 PM
BHC lOQ 3rd Qtr 2003 http://www.sec.gov/ Archives/edgar/data/1130464/00011304640300 ...
Property, plant and equipment
Less accumulated depreciation and depletion )
1,742,973
(423,715)
1,319,258
1,703,372
(380,580)
1,322,792
1,642,868
(366,033)
1,276,835
Other assets:
Derivative assets 552 2,406 2,244
Goodwill 24,112 23,913 19,851
Intangible assets (net of accumulated amortization of
$17,592,
$15,535 and $7,573, respectively) 40,901 78,089 79,369
Other 25,462 20,583 19,675
91,027 124,991 121,139
$1,992,134 $2,035,145 $1,913,094
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 203,730 $ 206,832 $ 141,499
Accrued income taxes 73,604 2,096
Accrued liabilities 74,848 51,034 47,478
Current maturities of long-term debt 18,075 15,324 17,306
) Notes payable 11 340,500 383,521
Derivative liabilities 25,307 42,316 43,585
Liabilities of discontinued operations 355 106,954 109,111
395,930 765,056 742,500
Long-term debt, net of current maturities 747,211 540,959 473,482
Deferred credits and other liabilities:
Deferred income taxes 87,156 132,257 104,855
Derivative liabilities 3,237 2,889 4,914
Other 59,956 58,821 42,294
150,349 193,967 152,063
Minority interest in subsidiaries 10,222
Stockholders' equity:
Preferred stock- no par Series 2000-A; 21,500 shares
authorized; Issued and outstanding: 5, 177 shares 5,549 5,549 5,549
) Common stock equity-
Common stock $1 par value; 100,000,000 shares
authorized;
5 of 57 12/1/03 1:06 PM
BHC 1 OQ 3rd Qtr 2003 http://www.sec.gov/ Archives/edgar/data/1130464/00011304640300 ...
)
Issued 32,293,220; 27,102,351 and 27,056,390 shares,
respectively
Additional paid-in capital
Retained earnings
Treasury stock, at cost
Accumulated other comprehensive loss
Total stockholders' equity
32,293 27,102 27,056
375,185 246,997 245,734
306,392 280,628 272,339
(3,788) (3,921) (3,891)
(16,987) (21,192) (11,960)
693,095 529,614 529,278
698,644 535,163 534,827
$1,992,134 $2,035,145 $1,913,094
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed
consolidated financial statements.
4
BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) )
)
6 of57
Operating activities:
Net income available for common
Adjustments to reconcile net income available for common to net
cash provided by operating activities:
Income from discontinued operations
Impairment of long-lived assets
Depreciation, depletion and amortization
Net change in derivative assets and liabilities
Deferred income taxes
Undistributed earnings in associated companies
Change in accounting principles
Change in operating assets and liabilities­
Accounts receivable and other current assets
Accounts payable and other current liabilities
Other operating activities
Investing activities:
Property, plant and equipment additions
Payment for acquisition of net assets, net of cash acquired
(77,912) (175,252)
(23,229)
12/1 /03 1 :06 PM
Nine Months Ended
September 30
2003 2002
(in thousands)
$ 53,110 $ 45,154
(8,693) (692)
117,207
59,263 47,604
(4,853) (7,218)
(40,037) 31,882
(5,758) (4,328)
2,680 (896)
(14,501) (49,132)
75,298 47,026
7,354 (3,340)
241,070 106,060
Form 10-Q
:.__, _
http://www.sec.gov/Archives/edgar/data/354707/000119312503079 ...
)
Financial statements
PART I-FINANCIAL INFORMATION
Hawaiian Electric Industries, Inc. and Subsidiaries
Consolidated balance sheets (unaudited)
(in thousands)
September 30,
2003
December 31,
2002
)
)
9of92
Assets
Cash and equivalents
Federal funds sold
Accounts receivable and unbilled revenues, net
Available-for-sale investment and mortgage-related securities
Available-for-sale mortgage-related securities pledged for repurchase agreements
Held-to-maturity investment securities
Loans receivable, net
Property, plant and equipment, net of accumulated depreciation of$1,521,098 and $1,437,366
Regulatory assets
Other
Goodwill and other intangibles
Liabilities and stockholders' equity
Liabilities
Accounts payable
Deposit liabilities
Securities sold under agreements to repurchase
Advances from Federal Home Loan Bank
Long-term debt, net
Deferred income taxes
Contributions in aid of construction
Other
Minority interests
HEI- and HECO-obligated preferred securities of trust subsidiaries
Preferred stock of subsidiaries-not subject to mandatory redemption
Stockholders' equity
Preferred stock, no par value, authorized 10,000 shares; issued: none
Common stock, no par value, authorized 100,000 shares; issued and outstanding: 37,690 shares
and 36,809 shares
Retained earnings
Accumulated other comprehensive income
See accompanying "Notes to consolidated financial statements."
$ 199,601 $ 244,525
34,677
174,608 176,327
l,800,552 l,960,288
937,337 784,362
93,447 89,545
3,142,148 2,993,989
2,083,812 2,079,325
105,565 105,568
360,689 345,002
95,271 97,572
$ 9,027,707 $ 8,876,503
$ 157,420 $ 134,416
3,952,662 3,800,772
787,585 667,247
1,037,052 1,176,252
1,063,790 1, 106,270
219,556 235,431
221,242 218,094
286,594 257,315
7,725,901 7,595,797
200,000 200,000
34,406 34,406
234,406 234,406
876,804 839,503
183,735 176,118
6,861 30,679
1,067,400 1,046,300
$ 9,027,707 $ 8,876,503
12/1 /o::\ 12:44 PM
http://www.sec.gov/ Archives/edgar/data/67716/00000677 l 6030000 ...
'1 )
Income before cumulative effect of
accounting change
Cumulative effect of accounting
change (Note 8)
Net income
Dividends on preferred stocks
65,521
65,521
172
53 I 931
53,931
189
136,691
(7,589)
129,102
547
102,506
102,506
567
Earnings on common stock $ 65,349 $ 53,742 $ 128,555 $ 101,939
Earnings per common share -- basic:
Earnings before cumulative effect
of accounting change
Cumulative effect of accounting
change
Earnings per common share -- basic
$
$
.58 $
.58 $
.51 $
.51 $
1.23 $
(. 07)
1.16 $
.97
.97
Earnings per common share -- diluted:
Earnings before cumulative effect of
accounting change Cumulative effect of accounting change
Earnings per common share -- diluted
Dividends per common share
Weighted average common shares
outstanding -- basic
Weighted average common shares
outstanding -- diluted
$ .58 $ .50 $ 1. 22 $ .96 (. 07)
$ .58 $ .50 $ 1.15 $ . 96
$ .1700 $ .1600 $ .4900 $ .4666
112,359 106,385 111, 100 105,432
113,368 107,017 111,921 106,134
) Proforma amounts assuming retroactive
application of accounting change:
Net income $ 65,521 $ 53,332 $ 136, 691 $ 100 I 713
Earnings per common share basic $ .58 $ .so $ 1.23 $ .95
Earnings per common share diluted $ .58 $ .50 $ 1. 22 $ . 94
The accompanying notes are an integral part of these consolidated statements.
MDU RESOURCES GROUP, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, September 30, December 31,
2003 2002 2002
(In thousands, except shares
and per share amount)
ASSETS
Current assets:
Cash and cash equivalents $ 91,900 $ 42,806 $ 67,556
Receivables, net 410,666 363,568 325,395
Inventories 127,717 102,130 93,123
Deferred income taxes 1,950 15,020 8,877
Prepayments and other current assets 47,202 39,482 42,597
679,435 563,006 537,548
Investments 40,626 43,339 42,864
Property, plant and equipment 3,312,747 2,844,935 2,961,808
) Less accumulated depreciation,
depletion and amortization 1,198,382 1,042,938 1,079,110
2,114,365 1,801,997 1,882,698
Deferred charges and other assets:
Goodwill 199,209 185,205 190,999
Other intangible assets, net 193,010 172,123 176,164
'i of 'i� 1 2/1 /01 1 :09 PM
http://www.sec.gov/ Archives/edgar/data/67716/0000067716030000 ...
)
Other
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
106, 723
498,942
$3,333,368
103,959
461,287
$2,869,629
106,976
474,139
$2,937,249
)
Short-term borrowings $
Long-term debt and preferred
stock due within one year
Accounts payable
Taxes payable
Dividends payable
Other accrued liabilities
Long-term debt
Deferred credits and other liabilities:
Deferred income taxes
Other liabilities
Preferred stock subject to mandatory
redemption (Note 8)
Commitments and contingencies
Stockholders' equity:
Preferred stocks
Common stockholders' equity:
Common stock (Note 3)
Shares issued -- $1.00 par value
113,583,312 at September 30, 2003,
71,681,396 at September 30, 2002
and 74,282,038
at December 31, 2002
Other paid-in capital
Retained earnings
Accumulated other comprehensive
loss
Treasury stock at cost - 359,281
shares at September 30, 2003 and
239,521 shares at September 30,
2002 and December 31, 2002
Total common stockholders' equity
Total stockholders' equity
7,892
183,506
27,852
19,436
113 I 463
352,149
988,804
403,540
170,138
573,678
15,000
113 I 583
752,276
548,506
(7,002)
$ 10,000
22,606
148,312
17,960
17,335
104,720
320,933
832,533
360,872
139,021
499,893
1,300
15,000
71, 681
690,139
446,820
(5, 044)
(3 I 626)
1,199,970
1,214,970
$2,869,629
$ 20,000
22,183
132 I 120
13,108
17,959
94,275
299,645
819,558
374,097
144,004
518,101
1,200
15,000
74,282
748,095
474,798
(9, 804)
( 3 I 626)
1,283,745
1,298,745
$2,937,249
(3,626)
1,403,737
1,418,737
$3,333,368
The accompanying notes are an integral part of these consolidated statements.
MDU RESOURCES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
)
6 of'i'.\
Operating activities:
Net income
Cumulative effect of accounting change
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, depletion and amortization
Deferred income taxes and investment tax credit
Changes in current assets and liabilities, net of
acquisitions:
Receivables
Inventories
Other current assets
Accounts payable
$129,102
7,589
$102,506
12/1/03 1 :09 PM
Nine Months Ended
September 30,
2003 2002
(In thousands)
138, 725 114, 536
24,426 12,686
(63,511) (64,437)
(25,233) (4,585)
(8,364) (2,743)
36,838 27,941
http://www.sec.gov/ Archives/edgar/data/1108426/00011084260300 ...
)
Other Property and Investments:
Investment in lessor notes .
Other investments .
Non-utility property, net of accumulated depreciation of
$1,754 and $1,750 .
Total other property and investments , .
Current Assets:
Cash and cash equivalents .
Accounts receivables, net of allowance for uncollectible
accounts of $9,866 and $15,575 .
Unbilled revenues .
Other receivables .
Inventories , .
Regulatory assets , .
Short-term investments .
Other current assets .
Total current assets .
Deferred Charges:
Regulatory assets .
Prepaid retirement costs .
Other deferred charges .
Total deferred charges .
330,798
106,795
1,524
439,117
12,338
56, 721
62,885
32, 715
41,706
5,422
46,885
258,672
223,025
86,583
134,391
443,999
350,479
92,225
1,528
444,232
3,702
46,914
65,472
53,052
37,230
24,027
79,630
32,753
342,780
196,283
39,665
129,063
365,011
)
</TABLE>
The accompanying notes are an integral part of these
financial statements.
6
<PAGE>
PNM RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
$3,081,656 $3,019,294
)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders' equity:
Common stock .
Accumulated other comprehensive loss, net of tax .
Retained earnings .
Total common stockholders• equity .
Minority interest .
Cumulative preferred stock without mandatory
redemption requirements .
Long-term debt .
Total capitalization .
Current Liabilities:
Short - term debt .
Accounts payable .
Accrued interest and taxes ; .
Other current liabilities , .
Total current liabilities , .
Deferred Credits:
Accumulated deferred income taxes .
Accumulated deferred investment tax credits .
Regulatory liabilities .
Regulatory liabilities related to accumulated deferred income tax .
Asset retirement obligations .
Minimum pension liability .
Accrued postretirement benefit costs .
Other deferred credits .. , .
Total deferred credits .
September 30,
2003
<C>
$645,585
(82,760)
508,747
1,071,572
10,348
12,800
987,296
2,082,016
132,885
50,908
68,216
77,353
329,362
174,524
39,242
79,149
14,137
44,892
141,175
18,389
158, 770
670,278
December 3 i •
2002
<C> $ 624, 119
(94, 721)
444,651
974,049
11, 760
12,800
980,092
1,978,701
150,000
90,355
46,189
99,019
385,563
125,595
41,583
52,019
14,137
141,175
17,335
263,186
655,030
12/1/03 1:12 PM
( In thousands)
)
http://www.sec.gov/Archives/edgar/data/1108426/00011084260300 ...
Commitments and contingencies (Note 5) .
$ 3,081,656 $ 3,019,294
</TABLE>
The accompanying notes are an integral part of these
financial statements.
7
<PAGE>
PNM RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2003 2002
)
)
Cash Flows From Operating Activities:
<8>
Net earnings .
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Depreciation and amortization .
Accumulated deferred income tax .
Transition costs write-off .
Loss on reacquired debt .
Cumulative effect of a change in accounting principle .
Net unrealized gains on energy and investing contracts .
Changes in certain assets and liabilities:
Accounts receivables .
Unbilled revenues .
Accrued post-retirement benefit costs .
Other assets .
Accounts payable .
Accrued interest and taxes .
Other liabilities .
Net cash flows provided by operating activities .
Cash Flows From Investing Activities:
Utility plant additions .
Redemption of short-term investments .
Combustion turbine payments .
Bond purchase .
Return of principal of PVNGS lessor notes .
Other , .
Net cash flows used for investing activities .
Cash Flows From Financing Activities:
Short-term borrowings (repayments), net .
Long-term debt borrowings .
Long-term debt repayments .
Premium on long-term debt refinancing .
Refund costs of pollution control bonds .
Exercise of employee stock options .
Dividends paid .
Other , , , .
Net cash flows (used for) provided by financing activities ...
Increase in Cash and Cash Equivalents .
Beginning of Period .
End of Period ........................•....................................
Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized .
Income taxes paid (refunded) , net .
<C>
$ 82,334
98,804
37,674
16, 720
16,576
(61,946)
(1, 111)
(9,807)
2,587
(16,913)
31,230
(39,447)
22,027
(16,448)
162,280
(129,334)
80,291
(11, 136)
(6, 675)
18,360
(3,607)
(52,101)
(17,115)
483,882
(476, 572)
(23,905)
(31,427)
(7, 355)
(27,298)
(1,753)
(101,543)
8,636
3,702
$ 12,338
$ 56,040
$(11,648)
<C>
$ 53,463
85,752
(1, 511)
(22, 107)
5,218
15,601
(21,086)
21, 140
11,390
(12,189)
(35, 100)
100,571
(166,640)
45,000
(19,425)
17,531
(11, 998)
(135,532)
65,000
(2, 909)
(25,475)
(72)
36,544
1,583
28,408
$ 29,991
$ 40,145
$ 43,534
( In thousands)
</TABLE>
Prepaid pension contribution of PNM Resources, Inc. common shares....... $ 28,950 $
6 of 59.
The accompanying notes are an integral part of these
financial statements.
12/1/03 1:1? PM
elOvq http://www.sec.gov/ Archives/edgar/data/764622/000095015303002 ...
Table of Contents
) PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
( dollars in thousands)
LIABILITIES AND EQUITY
September 30,
2003
December 31,
2002
$ 322,417 $ 354,218
229,696 71,107
50,673 53,018
90,011 102,183
448,980 280,888
50,338 42,190
28,855
86,095 111,329
56,972 64,443
1,335,182 1,108,231
2,840,900 2,869,241
Total current liabilities
Current Liabilities
Accounts payable
Accrued taxes
Accrued interest
Short-term borrowings
Current maturities of long-term debt
Customer deposits
Real estate liabilities held for sale
Liabilities from risk management and trading
activities (Note 10)
Other current liabilities
Long-Term Debt Less Current Maturities )
94,448 147,900
1,196,926 1,209,074
90,078 26,264
56,053 59,484
186,496 183,880
230,865
278,542 248,499
2,133,408 1,875,101 Total deferred credits and other
Deferred Credi ts and Other
Liabilities from risk management and trading
activities - long-term (Note 10)
Deferred income taxes
Regulatory liabilities
Unamortized gain - sale ofutility plant
Pension liability
Liability for asset retirement (Note 13)
Other
Commitments and Contingencies (Note 12)
Common Stock Equity
Common stock, no par value
Treasury stock
1,743,027
(3,753)
1,737,258
(4,358)
Total common stock 1,739,274 1,732,900
) Accumulated other comprehensive income (loss):
Minimum pension liability adjustment
Derivative instruments
(71,264)
15,688
(71,264)
(20,020)
16 of 106 12/l/03 l:18PM
elOvq http://www.sec.gov/Archives/edgar/data/764622/000095015303002 ...
Total accumulated other comprehensive loss (55,576) (91,284) )
Retained earnings 1,119,678 1,044,537
Total common stock equity 2,803,376 2,686,153
Total Liabilities and Equity $9,112,866 $8,538,726
See Notes to Condensed Consolidated Financial Statements.
7
)
)
17 of 106 12/1/03 I :18 PM
THIRD QUARTER 2003 FORM 10-Q http://www.sec.gov/ Archives/edgar/data/1085392/00010853920300 ...
2003 2002
) Utility Plant: (at original cost, including construction work in progress of
$152,123 and $108,658 respectively)
Electric
Gas
Common
Less: Accumulated depreciation and amortization
Net utility plant
$ 4,254,837
1,714,071
389,073
(2,406,507)
3,951,474
$ 4,229,352
1,645,865
378,844
(2,337,832)
3,916,229
)
Other Property and Investments:
Goodwill, net
Intangibles, net
Non-utility
Other assets
Total other property and investments
Current Assets:
Cash
Restricted cash
Accounts receivable, net
Unbilled revenue
Materials and supplies, at average cost
Current portion of unrealized gain on derivative instruments
Prepayments and other
Total current assets
Other Long-Term Assets:
Regulatory asset for deferred income taxes
Regulatory asset for PURP A contract buyout costs
Unrealized gain on derivative instruments
Power cost adjustment mechanism
Other
Total other long-term assets
Total Assets
134,692 125,555
17,813 18,652
91,432 80,855
161,297 153,068
405,234 378,130
28,086 176,669
3,811 18,871
238,465 279,623
69,459 112,115
91,070 70,402
3,957 3,741
25,076 11,323
459,924 672,744
158,655 167,058
233,558 243,584
8,910 9,870
4,129
309,547 269,876
714,799 690,388
$ 5,531,431 $ 5,657,491
)
9 of48
The accompanying notes are an integral part of the financial statements.
PUGET ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
CAPITALIZATION AND LIABILITIES
September
30,
December
31,
12/1/03 1:33 PM
THIRD QUARTER 2003 FORM 10-Q http://www.sec.gov/ Archives/edgar/data/1085392/00010853920300 ...
2003 2002
' ) Capitalization:
Common shareholders' investment:
Common stock $0.01 par value, 250,000,000 shares authorized, 94,221,064
and 93,642,659 shares outstanding, respectively $ 942 $ 936
Additional paid-in capital 1,496,872 1,484,615
Earnings reinvested in the business 38,435 36,396
Accumulated other comprehensive income 6,089 1,840
Preferred stock not subject to mandatory redemption 60,000 60,000
Total shareholders' equity 1,602,338 1,583,787
Redeemable securities and long term debt:
Preferred stock subject to mandatory redemption 1,889 43,162
Corporation obligated, mandatorily redeemable preferred securities of
subsidiary trust holding solely junior subordinated debentures of the corporation 280,250 300,000
Long-term debt 2,006,889 2,149,733
Total redeemable securities and long term debt 2,289,028 2,492,895
Total capitalization 3,891,366 4,076,682
Minority interest in equity of a consolidated subsidiary 11,616 10,629
) Current Liabilities:
Accounts payable 162,188 205,619
Short-term debt 26,513 47,295
Current maturities of long-term debt 247,278 73,206
Purchased gas liability 6,777 83,811
Accrued expenses:
Taxes 43,712 62,562
Salaries and wages 11,751 11,441
Interest 43,110 37,942
Other 50,172 50,171
Total current liabilities 591,501 572,047
Long-Term Liabilities:
Deferred income taxes 767,611 730,675
Other deferred credits 269,337 267,458
Total long-term liabilities 1,036,948 998,133
Total Capitalization and Liabilities $5,531,431 $5,657,491
)
10 of 48
The accompanying notes are an integral part of the financial statements.
PUGET ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30
12/1/03 1 :33 PM
)
http://www.sec.gov/ Archives/edgar/data/1032208/000008652 l 0300 ...
<table>
SEMPRA ENERGY
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
<caption>
)
<S>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt
Accounts payable - trade
Accounts payable - other
Income taxes payable
Trading liabilities
Dividends and interest payable
Regulatory balancing accounts - net
Fixed-price contracts and other derivatives
Current portion of long-term debt
Other
Total current liabilities
Long-term debt
Deferred credits and other liabilities:
Due to unconsolidated affiliate
Customer advances for construction
Post-retirement benefits other than pensions
Deferred income taxes
Deferred investment tax credits
Fixed-price contracts and other derivatives
Regulatory liabilities arising from asset
retirement obligations
Other regulatory liabilities
Asset retirement obligations
Mandatorily redeemable preferred securities
Deferred credits and other liabilities
Total deferred credits and other liabilities
Preferred stock of subsidiaries
Mandatorily redeemable trust preferred securities
Commitments and contingent liabilities (Note 3)
September 30,
2003
<C>
December 31,
2002
<C>
$ 639 $ 570
675 694
59 50
82 22
3,890 4,094
131 133
422 578
152 153
726 281
624 672 ------- -------
7,400 7,247 ------- -------
3,536 4,083 ------- -------
162 162
98 91
136 136
751 800
85 90
791 813
241
91 121
310
223
841 985 ------- -------
3,729 3,198 ------- -------
179 204 ------- -------
200 ------- -------
)
5 of39
SHAREHOLDERS' EQUITY
Preferred stock (50 million shares authorized,
none issued)
Common stock (750 million shares authorized;
212 million and 205 million shares outstanding at
September 30, 2003 and December 31, 2002, respectively)
Retained earnings
Deferred compensation relating to ESOP
Accumulated other comprehensive income {loss)
Total shareholders' equity
Total liabilities and shareholders' equity
See notes to Consolidated Financial Statements.
</table>
<table>
SEMPRA ENERGY
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
1,534 1,436
2,121 1,861
(31) (33)
(414) (439) ------- -------
3,210 2,825 ------- -------
$18,054 $17,757 ======= ========
12/1/03 l :38 PM
elOvq
)
http://www.sec.gov/ Archives/edgar/data/72903/0000950134030152 ...
Table of Contents
XCEL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Thousands of Dollars)
)
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt
Short-term debt
Accounts payable
Taxes accrued
Dividends payable
Derivative instruments valuation - at market
NRG losses in excess of investment
Other
Current liabilities held for sale
Total current liabilities
Deferred credits and other liabilities:
Deferred income taxes
Deferred investment tax credits
Regulatory liabilities
Derivative instruments valuation - at market
Benefit obligations and other
Asset retirement obligations (see Note 1)
Customer advances
Minimum pension liability
Noncurrent liabilities held for sale
Total deferred credits and other liabilities
Minority interest in subsidiaries
Commitments and contingent liabilities (see Note 8)
Capitalization:
Long-term debt
Mandatorily redeemable preferred securities of subsidiary trusts
Preferred stockholders' equity- authorized 7,000,000 shares of$100
par value; outstanding shares: 1,049,800
Common stockholders' equity- authorized 1,000,000,000 shares of
$2.50 par value; outstanding shares: 2003 - 398,779,232; 2002 -
398,714,039
Total liabilities and equity
Sept. 30,
2003
$ 240,982
148,989
684,360
355,106
47,563
927,414
389,348
2,793,762
1,660,279
159,922
597,426
26,768
352,376
l,008,534
201,488
128,053
4,134,846
5,433
6,411,736
100,000
104,260
4,714,330
$18,264,367
Dec. 31,
2002
$ 7,756,261
1,541,963
1,404,135
267,214
75,814
38,767
749,521
515,161
12,348,836
1,285,312
169,696
518,427
102,779
560,981
161,283
106,897
154,317
3,059,692
34,762
6,550,248
494,000
105,320
4,664,984
$27,257,842
)
10 of96
See Notes to Consolidated Financial Statements
5
12/1/03 l:43 PM
. . . . . .. . ·. .· .. :·,,Jc,��i��
C . , ... n·: .. •.. c·'· .'· .. · . : ·.'i':''"'.•,J'�r.f� redit rusk . ommentary
US Electric Utility Mergers May Generate
Credit Risk
·------------·------··----·-- ·-----------
.\ ..
Oct-95
Sep-95
Aug-95
May-95
Baltimore Gos & Electric
Potomac Electric
Nothem States Power
Wisconsin Electric & Power
Union Electric Company CIPSCO
Puget Sound Power & Light
Washington Energy
(Washington Natural Gas)
Western Resources
Utilicorp United
Kansas City Power & Light
IES Industries
lntersiate Power
Wisconsin Power & light
Texas Utilities Enserch .
Public Service of
Colorado
Southwestern Public
Service
Date
Utilities
Boo2(Sec)
Bcia2(Unsec)
Al
Ao2
Boal
A3 P-2
Bao2
Al
Al
A3
Al
Ao2
Al
Aol
A3
Boo3
Al
Ao2
Merging
Rating
(recently upgraded to Aa3), which used accelerated
depreciation to achieve savings rather than M&A
activity. By doing so, the utility also avoided M&A
expenditures.
The costs are part of the reason that the analysts
warn that mergers do not fully offset business risk.
They add that financial risk will only decline where
mergers succeed in increasing cash flow and where
utility managements use merger-related savings to
reduce leverage.
Disaggregation
The analysts say that M&A can also be a precursor
to disaggregation - that is the reorganization of the
merging firms followed by the separation or spin­
ning off of generation, transmission, or distribution
businesses.
Interstate Energy Corp.
Puget Sound Energy
New Century Energies
Primergy
Maxim Energies
Ameren Corp.
Constellation Energy Corp.
Recent US Electric Utility Mergers & AcquisitiQns
(All still pending}
Company
Texas Utilities
TBD
As they continue to adapt to the deregulating
marketplace, electric utilities in the US have gone
through a flurry of merger and acquisition activity.
Moody's utility analysts believe, however, that
"mergers do not totally offset the heightened busi­
ness risk" deregulation brings.
"The key issue," say the analysts in a recent
special comment, "is that competitive industries
have much lower operating and financial leverage,
a.nd tha.t utilities muss.streamline .both in order to
bejff�c;tjye compet(�q,11£;, A11aly�ts say the utilities ��·i�A9 t.�·is in9,,kr to . .po�t-sti:-��g�r financial inp\�3c{yJHI}cl maintain their current ratings level,
"·wHether they choose to merge or not."
Most utilities are hoping that the marriages will
bring opportunities for cost cutting, or asset sales,
that will better position them to
compete in a deregulated industry.
Many are also looking to increase
equity returns to benefit stockholders.
Currently, 19 electric utilities in the US
are pursuing some type of M&A (see
table).
Streamlining
While M&A does offer certain stream­
lining opportunities, analysts warn
that there are many difficulties as well,
especially for bondholders. As one
example, analysts say that the near­
term savings that M&A offers to elec­
tric utilities are limited to cuts in non·
fuel operation and maintenance, and
to interest expenses. On average, that
only accounts for 38 % of total gener­
ating costs for the industry as a whole.
Additionally, the savings to the
merging companies can be diminished
by regulatory provisions. Analysts
pointed to one rule that requires a divi­
sion of the benefits from any such
merger to he split between customers
and shareholders. Thus, bondholders
are third in line for any benefits from
M&A, analysts say.
Moreover, they state that many of the
savings currently sought through M&A
can be had h)' ocher means. Thev cite
thl' ,.1sc l)f llorida Power and Lighr
July 29, 1996 Moody's Credit Perspective:;
�<� ... , ·. ,,,.----,. ; ( )
.1 1(isk (�(.�n,,;,;, •
Moody's Ratings on British Utilities
Long- Short-
Term Term Rating Status
"Disaggrcg:iri,111 h.1., 111,,1T d11-ec:I r.uings impact
than !\-1&A," analysts write. ;\ company could
spin-uff its transmission or disrriburion assets, and
bondholders would IX' left with liens on generating
assets, which the analysts believe will carry more
risk in a deregulated marker.
REPORT: "Moody's Assesses Risk In Utility
Combinations and Spin-Offs," Moody's Special
Comment, July 1996.
ANALYSTS: A Tucker Hackett and Susan D. Abbott
in New York
( )not guaranteed by core water utility company.
water company. •
•
Cash-Ringfenced Regimes
The credit risk here is an increased
debt load. The water authorities have
set up "stronger cash-ringfenced
regimes" than those of electricity regu­
lators. As a result, the ratings for the
REC portion of the multi-utility will
likely approximate that of the holding
company. "The water service
company's rating, however, may be
enhanced by the regulatory cash ring­
fence," say analysts.
For the generating companies, the
retention of the government's special
share means somewhat better credit
quality than RECs. That special share
will lapse when "there is adequate
competition in the generation and
supply markets." Analysts believe that
Wriri11g i11 ,1 special comment last week, Moody's
energy analysts expect correctional rating changes
to continue for the British electricity and gas sector.
Falling energy prices and market liberalization have
caused several downgrades over the past year.
Further deregulation is likely to reinforce this
downward pressure.
As a result of privatization, there are a few
different groups of energy companies now in the
UK: regional electricity companies (RECs), gener­
ating companies, the National Grid
Company (NGC, a transmission
monopoly), and British Gas (the
natural gas monopoly that will break
up into two firms by March 1997).
Each of these has its own credit
concerns, but the analysts say that
under the deregulated. market due in
1998, "all UK energy companies are
likely ro face margin pressures."
For the RECs, the chief concern is
event risk. In April 1995, the British
government allowed its special share in
these firms lapse, and they became
targets for acquisition. One defense
has been the creation of "multi-utili­
ties," in which RECs unite with water
and sewage companies.
UK Energy Market:
Deregulation to Pressure
Credit Quality
Debt not guaranteed by the core
Prime-1 & lorig term roting .on
review for possible downgrade.
guaroniee.
Debt not guaranteed by the core
water company.
Guaranteed by Northern Electric pie.
Guaranteed by core water utility
company, roted A 1 without o
Under review for possible down
grade on account of agreed bid
by General Public Utilities and
Cinergy.
Guaranteed by Dwr Cymru.
P-1
P-1
P-1
P-2
P-1
P-1
P-1
P-1
P-2
P-1
P-1
P-1
P-2
P-1
P-1
P-1 P-2 P-2
P-1
P-1
P-1
Ao3
A3
Aa3
"103
A3
Ao2
Ao3
Ao3
A3
Ao2
Ao3
Ao3
Baal
A2
Ao3
Ao3
Baal
Al
Anglion Water pie
Notional Grid Company pie National Power pie
Northern Electric pie
Northern Electric Finance pie
Northumbrian Woier Group plc"
NORWEB pie
PowerGen pie
SEEBOARD pie
Severn Trent pie
Scottish Hydro-Electric pie.
Scottish Power pie.
Southern Electric pie
South Wales Electricity pie
South Western Electricity pie
Thomes Water plc"
Yorkshire Electricity Group pie Yorkshire Water plc"
British Gas pie �t Midlands Electricity pie ( )rn Group pie
Hyder pie
Welsh Water Utilities Fina�ce pie
London Electricity pie
Monweb pie
Midlands Electricity pie
4 Moody's Credit Perspectives July 29, 1996
} . Utility Credit Rankings ._.
U.S. Electric/Gas/Water Companies continued
Company Corporate Credit Rating Bus. Prof. Company Corporate Credit Rating Bus. Prof.
Cleco Corp. BBB/Negative/A-3 6 Consumers Energy Co. BB/Negative/- 6
CenterPoint Energy Inc BBB/Negative/- 5 CMS Energy Corp. · BB/Negative/- 6
CenterPoint Energy Houston Electric LLC BBB/Negative/- 5 Tucson Electric Power Co. BB/CW-Neg/- 6
CenterPoint Energy Resources Corp. BBB/Negative/- 5
Duquesne light Co. BBB/Negative/A-3 Ferrellgas Partners l.f' BB-/Stabte/- DOE Inc. BBB/Negative/ A-3 PSEG Energy Holdings. Inc. BB·/Stable/-
Noark Pipeline finance UC BBB/Negative/- SEMCO Energy Inc. BB·/Negative/-
PPL Corp BBS/Negative/-
PPL energy Supply LLC BBB/Neyative/A-2 NAG Energy Inc. B+/Stable 9
Potomac Capital Investment Corp. BBB/CW-Neg/- . Transcontinental Gas Pipe Line Corp. B+/Negative/- 3
Jersey Central Power & light Co. BBB/CW-Neg/- The Williams Companies Inc. B+/Negative/- 6
Pennsylvania Electric Co. BBB/CW-Neg/- Northwest Pipeline Corp. B+/Negative/- 3
Metropolitan Edison Co. BBB/CW-Neg/- Sierra Pacific Power Co. B+/Negative/- 5
Ohio Edison Co. BBB/CW-Neg/- Nevada Power Co. B+/Negative/- 6
Cleveland Electric Illuminating Co. BBB/CW-Neg/- Sierra Pacific Resources 8+/Negative/- 5
FirstEnergy Corp BBB/CW-Neg/-
'El Paso Natural Gas Co. B/Negative/-
Puget Sound Energy Inc. Bil8·iros1tive/A-3 'fennessee Gas Pipeline Co. 8/Negative/-
1Nashington Natural Gas Co. BBB-/Positive/- 'ANA Pipeline Co. B/Negative/-
Puget Energy Inc. BBB·/Positive/- 'Colorado Interstate Gas Co. 8/Negative/-
Public Service Co. of New Mexico BBB·/Positive/- 'El Paso CGP Co. B/Negative/-
Green Mountain Power Corp. BBB·/Stahle/- 4 'Southern Natural Gas Co. B/Negative/-
El Paso Electric Co. BBB·/Stable/- 6 "El Paso Corp. B/Negative/-
Entergy Gulf States Inc. 888-/Stahle/- 6 'El Paso Tennessee Pipeline Co. 8/Negativel-
System energy Resources Inc. BHB-/Stahle/-- 7 Reliant Energy Mid-Atlantic Power
Southwest Gas Corp. 988·/Stabte/- Holdings LLC 8/Negative/-
Central vermonr Public Service Corp. UUH·/Siahle/- Reliant Resources Inc. 8/Negative/-
NUI Utilities Inc. BBB-/Developing/- Orion Power Holdings Inc. B/Negative/-
) Uuke fnergy Trading and Marketing LLC B88-/Negative/- Aquila Inc. 8/Negative/-
'Black Hills Power Inc. BBB·/Negative/- Dynegy Holdings Inc. B/Negative/-
• Black Hills Corp. 888-/Negative/- Ill inova Corp. 8/Negativel-
fompa Electric Co. UBB·/Negative/A-3 Illinois Power Co. 8/Negative/-
TECO Energy Inc BBO-/Negative/A·3 Dynegy Inc. 8/Negative/-
·r.111erprise Product$ P;irtner::; l.P llUll /CW-Ne(J/-·· West Penn Power Co. 8/Negative/-
Potomac Edison Co. B/Negative/-
Ame1iGas Partners L.P 88+/Stable/- Monongahela Power Co. 8/Negative/-
Western Gas Resources Inc BA+/Stahlel- Allegheny Energy Inc. 8/Negative/-
Avista Corp. 88+/Stable/- Allegheny Generating Co. 8/Negative/-
Edison !ntemution;il BO+/Stahlel- Allegheny Energy Supply Co. LLC B/Negative/-
'Iexas-New Mexico Power Co. 88+/Stablel-
• TNP Enterprises 88+/Stahle/- PG&E Gas Transmission-Northwest CC/CW-Neg/-
Kansas Gas & Electnc Co. 88+ /Develop1ny/--
Westar Energy Inc. BB+/Developing/- Mirant Americas Generation Inc. DI-
l11d1anapolis Power & ligllt Co. 88+/Neglltive/- Mirant Corp. 0/-
lf'ALCO tnterpnses Inc. 88+/Negativel- Mirant Americas Energy Marl<eting l.P. 0/-
El Paso Energy Partners l P 88+/CW-Neg/- NorthWestern Corp. 01-1�
lranswestern Pipeline Co. 88/CW·Pos/- Pacific Gas & Electric Co. Di-
Dayton l'owe1 & light Co 88/Stable/A·2 PG&E Energy Trading Holdings Corp. DJ- on tnc 8B/Stable/A·2
) � Back to Table of Contents
Next Page� Page 21 December 22. 2003 Standard & Peer's Utilities & Perspectives
WEDNESDAY, DECEMBER 19, 2001 Cl
- r">:
A3 Baal Baa2 BaaJ Bal
Ba2 BaJ 81 82 B3 Caal Caa2 Caa3
Cal
Ca2
CaJ
Ca c Dec. Nov.
Source: Moody's Investors Service
Oct.
Dynegy
Dec.
now routinely asks companies, "Assume you're downgraded to below investment grade. Do you have sufficient liquidity to run your business?" It is equivalent to ask· Ing the average worker, assume you lose your job, do you have enough savings to · pay the mortgage? "Companies haven't fo­ cused on this possibility at all," he says.
· ·. ·. "ll ,1,,t;·<>•"·"·1�t . ·, �.\"! ....• � -�'fid.��JtN � a -:, ... , ·,f.f, .. ·, .... ' ··J· f • y;:.into ,the.�se.cUJJli
Nov. Oct.
Cal pine
Dec. Nov. Oct.
Enron
Slow to Weigh the Risks?
On the heels of its Dec. 3, 200 I, downgrade of Enron, Moody's Investors Service has
also lowered its ratings on Calpine and Dynegy. ·
Jon Ktause
The speed of Enron's collapse has caused the credit agencies to be more vigilant, reflecting criticism that they have both been slow to sense change and that they have permitted "ratings infla­ tion" during recent years. "I don't know If the problem was grade inflation as much as a willingness to downplay the exposure that was off balance sheet," says Jeffrey Holzschuh, an investment banker for the power industry at Morgan Stanley. "It's not just credit-rating agen­ cies. The whole market was overheated."
At Moody's, Mr. Diaz says his agency
CREDIT
MARKETS
The message� The market is more wor� ried about risk than it is excited by the prospect of profits from deregulated mar­ kets.
Underscoring this new reality, compa­ nies on negative credit watch from Stan·· dard & Poor's Ratings Group or Moody's include Allegheny Energy Supply, a unit of Allegheny Energy Inc.; Calpine; Duke En· ergy Trading and Marketing LLC, a unit of Duke Energy Corp.; Dynegy; NRG En­ ergy Inc. and Reliant Resources Inc. Moody's has said it will issue an opinion tomorrow on several of these companies, as well as AES Corp. and Edison Mission Energy, a unit of Edison International . . ,· ·;,, . . . '• ' . . . .. ::�!!�tt'.'
. hat is true for all companies. But a low credit rating can be especially troublesome for energy-trading compa­ nies because they often operate on slim margins, and a higher borrowing cost can wipe out profits. More important, most energy firms require trading partners to be credit-worthy in order to enter into contracts. A firm that slips can be re­ quired to post large amounts of cash col· lateral that can cause a liquidity "death spiral" Such as Enron experienced.
By REBECCA SMITH
Staff Reporter of THE WALL STREET JOURNAL
Credit-rating agencies were asleep when California's deregulated eqergy market imploded. They were slow to act
when �nro� Corp .. plu11:��<!.t.}o� .. !��� ?f hastening its. demise. ,�g:l¥f ?�l!i�;�rv�'.�Y.e · .·�:.:;�f:;,;:\:;::;�1;(�.;�;;�:;;;�i:t:��
tel\1:��,.1tl,ii,eaMJb$lash·.detit; Ot".:,else. Downgrades of Dynegy Inc. and Calpine Corp.-both coming as apparent surprises to the companies' chief execu­ tives-function as a shot over the bow of an entire industry that has been borrow­ ing like crazy. Companies involved in en· ergy marketing and trading have to recog­ nize they are in a "confidence-sensitive industry" that can create sudden needs for cash collateral, says John Diaz, en­ ergy analyst for Moody's Investors Ser· vice Inc. '.� .. · .. �-
( l Rating Age'{tcies Crack Down on Utilities
Hard Line on Debt · ·
]olt,s Pawer Industry
f)
r> ( )
r> ( )
Raters Spark Energy Industry to Rein in Borrowing
CREDIT
MARKETS
opment projects. If enough follow, it could put the nation in a tight spot when the recession ends and energy demand surges. It was a point made in a recent analyst call by Calpine Chairman Pete Cart­ wright. "We're building a portfolio of the best plants it's possible to build with a working life of 40 years or more," he said, with evident exasperation at souring in­ vestor perceptions of his company's health. "America needs this power."
It isn't the message energy companies were getting a few months ago. In fact, the ability to borrow heavily was touted as one of the central advantages of the na­ tional push toward deregulated power markets since the mid-1990s. Historically, regulated utilities were permitted to bor­ row only a dollar for every dollar or equity they invested because ratepayers ulti­ mately bore the risk of any failure. But so-called merchant generators of electric­ ity, often affiliated with utilities, could bor­ row as much as their credit ratings and banks would permit. Calpine, the fastest­ growing power-plant builder in the coun­ try, has borrowed two dollars from banks and bondholders for each dollar of equity; for in.�ta,pce. J� ;fr,e "Very fickle" now, �; · :,it!ttu:r:::��t����
il}e, ..... · e�ttemely, selective." . Nine months ago, the energy business was promoting itself as a colossal "growth story" that could pick up where the dot­ com meltdown left off. The price-to-earn­ ings ratios of the stocks of flashier compa­ nies in the sector. such as Enron and Calpine, were huge, signaling investor confidence in ever-rising earnings. ·,JlJar,te(\ .JQ diJTI eanly this titem�Jrj{Q;i,!ifQ�l)i�'.�·\J,er!!g­ . _;����l.P,l;lS�e<I tne state's .. . . feiuhhty; PG&E Corp.tsPa- �(h;\(ii�:i&< -�,�9�i'ic': ee; .tnto bankruptcy . · eg, · .· . ;;,.{t!Jte,11jiH¢n�1,tul'!lildt.il'lto ,panic· w.he11 ,,, ' "· · ·· · · \:a!��Mll:h\g'.:�.ili'·we�!(s, n.ies. s over its accounting prac-
Now, there is a heightened sense that "we 're the ultimate guardians of financial markets," says Mr. Spen of Fitch. "People are looking to us for a higher degree of guidance since we have special access to inside information about these compa­ nies." Their tougher line is having a big ef- fect. ·· ' · · ·· · ·,\r,!',�lp,g .
!!,�a. a1rptec., . pareft . equHy: Dynegy and gas-and-electricity seller El Paso Corp. both say they are willing to take lumps from common shareholders for diluting them rather than risk the wrath of the rating agencies. Executives of Mirant Corp., a recent power-genera­ tion spinoff of Atlanta's Southern Co., have been barricaded In their offices pre­ paring to unveil details on the company's capital restructuring later in the week. }�iilftirf'1MW�lllit�1tlng spells. bad news · fqte:��i'Jtl�)l,i;1tii\:l�v�»11.B:lentp6Naei.iiatlon is. �n.tr�.;,.;l,6}���l�l!�(f!.1;¢..., {!QJUl!!l-�J�s,, Jhat .. · ,.§;tt:etgb,,Uieir ,· ;,-,ca·11:-'bmlW ,,tno�ll·· · >Compa,nles that . . �Q.(\!lRl:@R:flQ\J'lty,, fi;' :IMil-Y In a bear mar­ ket .... can.· .\'PAlready, Dynegy, NRG and others have said they will slow devei-
f)
r> ( )
)
)
)
STANDARD & POOR'S •
CORPORATE RATINGS CRITERIA
Dear Readers,
Standard & Poor's criteria publications represent our endeavor
to convey the thought processes and methodologies employed in
determining Standard & Poor's ratings. They describe both the
quantitative and qualitative aspects of the analysis. We believe
our rating product has the most value if users appreciate all that
has gone into producing the letter symbols.
This Internet version of Corporate Ratings Criteria is updated
and modified for changes in criteria as they occur. Similarly,
statistics such as key ratio medians are brought up to date.
Bear in mind, though, that a rating is, in the end, an opinion.
The rating experience is as much an art as it is a science.
Solomon B. Samson
Chief Rating Officer, Corporate Ratings
Published by Standard & Poor's, a Division of The McGraw-Hill Companies. Inc. Executive offices: 1221 Avenue of the Americas. New Yori:. m 10020. Editorial offices:
55 Water Street, New Yor1<, NY 10041. Subscriber services: (II 212-438-7200. Copyright 2003 by The McGraw-Hill Companies. Inc. Aeproductioo in whole or in part prohibited except by permission. All rights reserved. Information has been obtained by Standard & Poors lrom sources believed lo be reliable. However. because of the
passibility of human or mechanical error by our sources, Standard & Poor's or others. Standard & Poor's does not guarantee the accuracy, adequacy. or completeness of any information and is not responsible for any errors or omissions or the result obtained from the use of such inlmmation. RalinlJS are statements of opinion, not
statements of tact Of recommendations to buy. hold. or sell any securities.
Standard & Poor's Credit Information Services uses billing and contact data collected from subscribers for billing and order fulfillment purposes, and occasionally
• 10 inform subscribers about products Of services from S1andard & Peer's and our parent, The McGraw-Hilt Companies. that may be of interest to them. All sub­
scriber billing and contact data collected is processed in the U.S. If you would prefer not to have your information used as outlined in this notice. or if you wish 10 review your information for accuracy, or for more information on our privacy practices. please call us at (1) 212-438·7280. Fo, more information about
The McGraw-Hill Companies Privacy Policy please visit www.mcgraw-hill.com/privacy.html.
Standard & Pool's receives compensation '°' 1ating obligations and other analytic activities. The lees generally va,y from US $5,000 to over USS 1,500.000. While
Standard & Poor's reserves the right to disseminate the rating it receives no payment for doing so, except for subscriptions to its publications. The Standard & Poor's ratings and other analytic services are performed as entirely separate activities in order to preserve the independence and objectivity of each
anatvtic pocess Each analytic service. including ratings. may be based on information that is not available to other analytic areas.
)
)
• SIANDARD & POOR'S
circumstances are more likely to lead to a
weakened capacity of the obligor to meet its
financial commitment on the obligation.
Obligations rated 'BB', 'B', 'CCC', 'CC', and
'C' are regarded as having significant specula­
tive characteristics. 'BB' indicates the least
degree of speculation, and 'C' the highest.
While such obligations will likely have some
quality and protective characteristics, these
may be outweighed by large uncertainties or
major exposure to adverse conditions.
'BB' An obligation rated 'BB' is less vulnera­
ble to nonpayment than other speculative
issues. However, it faces major ongoing uncer­
tainties or exposure to adverse business, finan­
cial, or economic conditions that could lead to
the obligor's inadequate capacity to meet its
financial commitment on the obligation.
'B' An obligation rated 'B' is more vulnera­
ble to nonpayment than obligations rated 'BB',
but the obligor currently has the capacity to
meet its financial commitment on the obliga­
tion. Adverse business, financial, or economic
conditions will likely impair the obliger's
capacity or willingness to meet its financial
commitment on the obligation.
'CCC' An obligation rated 'CCC' is current­
ly vulnerable to nonpayment and is dependent
on favorable business, financial, and economic
conditions for the obligor to meet its financial
commitment on the obligation. In the event of
adverse business, financial, or economic condi­
tions, the obligor is not likely to have the
capacity to meet· its financial commitment on
the obligation. ·cc An obligation rated 'CC' is currently
highly vulnerable to nonpayment.
'C' The 'C' rating may be used when a bank­
ruptcy petition has been filed or similar action
has been taken but payments on this obligation
are being continued. 'C' is also used for a pre­
ferred stock that is in arrears (as well as for
junior debt of issuers rated 'CCC-' and 'CC').
'IY The 'D' rating, unlike other ratings, is
not prospective; rather, it is used only when a
default has actually occurred-and not when a
default is only expected. Standard & Poor's
changes ratings to 'D':
• On the day an interest and/or principal
payment is due and is not paid. An excep­
tion is made if there is a grace period and
Standard & Poor's believes a payment will
be made, in which case the rating can be
maintained;
8 INTRODUCTION 8 Corporate Ratings Criteria
• Upon voluntary bankruptcy filing or simi­
lar action. An exception is made if Standard
& Poor's expects debt service payments will
continue to be made on a specific issue. In
the absence of a payment default or bank­
ruptcy filing, a technical default (i.e.,
covenant violation) is not sufficient for
assigning a 'D' rating;
• Upon the completion of a distressed
exchange offer, whereby some or all of an
issue is either repurchased for an amount of
cash or replaced by other securities having a
total value that is clearly less than par; or
• In the case of preferred stock or deferrable
payment securities, upon nonpayment of the
dividend or deferral of the interest payment.
With respect to issuer credit ratings (that is,
corporate credit ratings, counterparty ratings,
and sovereign ratings), failure to pay a financial
obligation-rated or unrated-leads to a rating
of either 'D' or 'SD'. Ordinarily, an issuer's dis­
tress leads to general default, and the rating is
'D'. 'SD' (selective default) is assigned when an
issuer can be expected to default selectively, that
is, continue to pay certain issues or classes of
obligations while not paying others. In the cor­
porate context, selective default might apply
when a company conducts a coercive exchange
with respect to one or some issues while intend­
ing to honor its obligations with regard to other
issues. (In fact, it is not unusual for a company
to launch such an offer precisely with such a
strategy-to restructure part of its debt to keep
the company solvent.)
Nonpayment of a financial obligation sub­
ject to a bona fide commercial dispute or a
missed preferred stock dividend does not cause
the issuer credit rating to be changed.
Plus(+) or minus(-) The ratings from 'AN
to 'CCC' may be modified by the addition of a
plus or minus sign to show relative standing
within the major rating categories.
r In 1994, Standard & Poor's initiated a sym­
bol to be added to an issue credit rating when the
instrument could have significant non-credit
risk. The symbol "r" was added to such instru­
ments as mortgage interest-only strips, inverse
floaters, and instruments that pay principal at
maturity based on a non-fixed source, such as a
currency or stock index. The symbol was intend­
ed to alert investors to non-credit risks and
emphasizes that an. issue credit rating addressed
only the credit quality of the obligation. Use of
the "r" was discontinued as of July 2000.
)
)
)
Short-term credit ratings
'A-l' A short-term obligation rated 'A-1' is
rated in the highest category by Standard &
Poor's. The obligor's capacity to meet its finan­
cial commitment on the obligation is strong.
Within this category, certain obligations are
designated with a plus sign (+). This indicates
that the obligor's capacity to meet its financial
commitment on these obligations is extremely
strong.
'A-2' A short-term obligation rated 'A-2' is
somewhat more susceptible to the adverse
effects of changes in circumstances and eco­
nomic conditions than obligations in higher
rating categories. However, the obligor's
capacity to meet its financial commitment on
the obligation is satisfactory.
'A-3' A short-term obligation rated 'A-3'
exhibits adequate protection parameters.
However, adverse economic conditions or
changing circumstances are more likely to lead
to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
'H' A short-term obligation rated 'B' is
regarded as having significant speculative
characteristics. The obligor currently has the
capacity to meet its financial commitment on
the obligation; however, it faces major ongoing
uncertainties that could lead to the obliger's
inadequate capacity to meet its financial com­
mitment on the obligation.
'C' A short-term obligation rated 'C' is cur­
rently vulnerable to nonpayment and is depen­
dent on favorable business, financial, and eco­
nomic conditions for the obligor to meet its
financial commitment on the obligation.
'D' See the definition of 'D' ratings under
"Long-term credit ratings."
Investment and speculative grades
The term "investment grade" was originally
used by various regulatory bodies to connote
obligations eligible for investment by institu­
tions .such as banks, insurance companies, and
savings and loan associations. Over time, this
term gained widespread usage throughout the
investment community. Issues rated in the four
highest categories, 'AAN, 'AA:, 'A:, 'BBB', gen­
erally are recognized as being investment
grade. Debt rated 'BB' or below generally is
referred to as "speculative grade." The term
"junk bond" is merely a more irreverent
expression for this category of more risky debt.
Neither term indicates which securities
Standard & Poor's deems worthy of invest-
• STANDARD s POOR'S
ment, as an investor with a particular risk
preference may appropriately invest in securi­
ties that are not investment grade.
Ratings continue as a factor in many regula­
tions, both in the U.S. and abroad, notably in
Japan. For example, the Securities & Exchange
Commission (SEC) requires investment-grade
status in order to register debt on Form-3,
which, in turn, is one way to offer debt via a
Rule 415 shelf registration. The Federal
Reserve Board allows members of the Federal
Reserve System to invest in securities rated in
the four highest categories, just as the Federal
Home Loan Bank System permits federally
chartered savings and loan associations to
invest in corporate debt with those ratings, and
the Department of Labor allows pension funds
to invest in commercial paper rated in one of
the three highest categories. In similar fashion,
California regulates investments of municipal­
ities and county treasurers; Illinois limits col­
lateral acceptable for public deposits; and
Vermont restricts investments of insurers and
banks. The New York and Philadelphia stock
exchanges fix margin requirements for mort­
gage securities depending on their ratings, and
the securities haircut for commercial paper,
debt securities, and preferred stock that deter­
mines net capital requirements is also a func­
tion of the ratings assigned.
In some countries, investment regulation
will refer to ratings on a national scale.
(Standard & Poor's produces national scale
ratings in several countries, including Mexico,
Brazil, and Argentina.) These ratings are
expressed with the traditional letter symbols,
but the rating definitions do not conform to
those employed for the global scale. The rating
definitions of each national scale and its corre­
lation to global scale ratings are unique, so
there is no basis for comparability across
national scales.
CreditWatch listings and rating outlooks
A Standard & Poor's rating evaluates default
risk over the life of a debt issue, incorporating
an assessment of all future events to the extent
they are known or can be anticipated. But
Standard & Poor's also recognizes the poten­
tial for future performance to differ from ini­
tial expectations. Rating outlooks and
CreditWatch listings address this possibility by
focusing on the scenarios that could result in a
rating change.
INTRODUCTION • Corporate Ratings Criteria 9
Special Comment
January 2004
New York
Jerome S. Fons 1.212.553.1653
Tracing the Origins of "Investment Grade"
Overview
A notable feature of modern credit markets is the distinction between bonds that are rated investment grade (or "high
grade") and those that are assigned to a speculative-grade (or "high yield") level. Because the distinction is so signifi­
cant to the international capital markets, a review of its origins may prove informative to investors.
The term "investment grade" has its roots in both regulatory usage and market convention. Although the term
appears to have taken hold as a result of financial regulations, it is now part of the fabric of today's bond market.
Portfolio governance and prudential investment regulation form two parallel uses of the investment-grade con­
cept. Many fiduciaries define their sole eligible investments as being those rated investment grade; moreover, major
bond indices, established to assess investment performance, are often defined by the distinction. Consequently, bond
funds are frequently characterized as having an investment grade orientation or guidelines.
Starting in the early 1930s, US banking and insurance regulations discouraged - and even prohibited - regu­ lated entities from holding non-investment-grade securities. But several years passed before regulators settled on a
precise definition of the term. The impact of the ruling on bond issuance is discussed below, followed by a discussion
of the appropriateness of the choice of the rating divide separating investment grade and speculative grade.
Grading Bonds
The modern bond-rating industry can trace its roots to the 1909 publication of Moody's Analyses of Railroad Invest­
rnents.i ] ohn Mood�'s bond rating system initially contained 14 rating categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C,
Daa, Da, D, and E. His Key to the Bond Ratings, found at the beginninf of each volume, described every rating cate­
gory in turn, often using the term "grade" to group the various ratings. [Please see the Appendix for a chronology of
Moody's rating definitions.]
In Moody's earliest hierarchy, bonds rated Aaa, Aa or A constituted the "first-grade" or "high-grade" group;
bonds rated Baa or Ba were described as "second-grade;" and bonds rated B or lower were considered "low grade."
Although obviously describing investment characteristics, Moody's did not use the phrase investment grade to describe
the groupings at this time.
During the 1920s and 1930s, Moody's grading system variously classified bonds rated A as being either "high
grade" or "medium grade." Despite being classified as "medium grade," bonds rated Baa contained a "speculative
tinge"; those bonds rated Ba occupied a limbo-like "halfway position between sound investments and speculations."
From 1909 onwards, bonds rated B were associated with the word "speculative," although the characterization "specu­
lative class" was reserved for issues rated Caa or lower. As Moody's competitors entered the ratings field, each followed
roughly the same characterizations.4
1. Gilbert Harold, Bond Ratings as an Investment Guide (1938), p. 12.
2. An F rating was added for bonds in 1914, but both the E and F rating categories were retired in 1923. In 1930, Moody's dropped the Oaa, Da and D categories as well, thereby imputing relatively greater risk to the remaining lowest categories. From its inception, Moody's Governments and Municipals rating scale terminated with
the Crating. 3. Moody's Key to the Bond Ratings sometimes differed across manuals for various sectors: Transportation, Industrials, Public Urnities and Governments.
4. Gilbert Harold, ibid., Table 1, p. 74 .
.4i'n Moody's Investors Service
��� Global Credit Research
)
Investment Securities
Rapid market acceptance of bond ratings was demonstrated by their adoption throughout the private sector. Harold
cites early uses by banks, investment houses, insurance companies, trust companies, investment trusts and individual
investors. 5 He lists several investment trusts that contained investment guidelines tied to Moody's ratings on underly­ ing instruments.
Official usage of bond ratings appears to have begun with a regulation issued by the US Comptroller of the Cur­
rency on September 11, I 931.6 It specified that bonds rated Baa/BBB or higher may be carried at cost, but defaulted
bonds and those of lower ratings had to be marked to market.
As defaults soared, the financial crisis of 193 0-31 saw sharp deteriorations in the market values of corporate bonds.
The exempt bonds became an attractive proposition because they spared banks from potential fluctuations (particu­ larly deteriorations) in earnings - and subsequently capital. The rule applied as well to all Federal Reserve member
banks, while state bank regulators adopted similar guidelines, thereby expanding the ruling to nearly all commercial
banks.
By 1931, Moody's had three competitors: Poor's Publishing Company (first ratings issued 1916); Standard Statis­
tics Company (first ratings issued 1922); and Fitch Publishing Company (first ratings issued 1924).7 The ratings of
each would have provided a basis for the exemption.
Yet, confusion around the associated rating categories that were eligible for exemption appears to have persisted
for several years, despite subsequent rulings by the Comptroller. From a footnote to the ratings key in the 193 8 edition
of Moody's Industrial Manual:
Effective Feb. 15, 1936, the Comptroller of the Currency issued further regulations governing National
Bank purchases of investment securities. Under the Federal Reserve Act, the same regulations will govern all
Federal Reserve member banks.
One of the regulations refers to the quality of securities which it is legal for such banks to buy. Section II,
paragraph (3), with its footnote, reads as follows:
"The purchase of 'investment securities' in which the investment characteristics are distinctly or predomi­ nantly speculative, or 'investment securities' of a lower designated standard than those which are distinctly or
predominantly speculative, is prohibited." The purchase of securities which are in default, either as to principal or interest, is also prohibited."
"*The terms employed herein may be found in recognized rating manuals, and where there is doubt as to
the eligibility of a security for purchase, such eligibility must be supported by not less than two rating manuals."
Reference to the definitions of Moody's Ratings will show that bonds rated Baa, while carrying some spec­
ulative elements, are not considered by Moody's to be "distinctly or predominantly" speculative. It will further
be seen that bonds rated below Baa are considered by Moody's to be "distinctly or predominantly" speculative.
Our understanding is that this ruling does not apply to U.S. Government and municipal obligations.
The American Banker interpreted the asterisked footnote somewhat differently, concluding that "bond investments
would have to be confined to issues rated A or higher."8 In any event, confusion spawned by the footnote led to its
deletion under a revision effective July l, 193 8.
To clarify matters, a joint statement of agreement, issued by the Secretary of the Treasury, the Board of Governors
of the Federal Reserve System, the Directors of the Federal Deposit Insurance Corporation, and the Comptroller of
the Currency on June 27, 193 8 created four classifications of securities: Group I through Group IV
The statement defined Group I securities as marketable obligationsTn which the investment characteristics are
not distinctly or predominantly speculative." Group II securities were those "in which the investment characteristics
are distinctly or predominantly speculative" and included "general market obligations in grades below the four highest,
and unrated securities of equivalent value." Group III securities were in default and Group IV applied to equities.
Moody's apparently succeeded in persuading regulators that bonds rated Baa are not "distinctly or predominantly
speculative." Harold (193 8) concurs, noting that the "recognition of bonds as 'investment grade' by the United States
Comptroller of the Currency (and by most of the state banking Superintendents) goes no lower than the Baa rating."9
Interestingly, this 1938 usage of the term investment grade suggests that it had gained currency within both regulatory
circles and the market at large by that time.
5. Gilbert Harold, ibid., p. 20.
6. Gilbert Harold, ibid., p. 27. See page 25 for discussion of an earlier 'desirability weighting" scheme created by a New York Fed bank examiner that was based on bond
ratings.
7. Gilbert Harold. ibid .• p. 12-13.
8. Gilbert Harold. ibid., p. 30, citing The American Banker. p. 2, col. 4 (March 4, 1936).
9. Gilbert Harold, ibid., p, 28.
2 Moody's Special Comment
)
___ )
Insurance Usage
Since its founding in 1871, the National Association of Insurance Commissioners (NAIC), in conjunction with the
state insurance departments, has monitored the investment activities of licensed insurance companies. Its valuation
arm (today the Securities Valuation Office) monitors ratings assigned by recognized bond-rating agencies and pub­ lishes its own rating assessments.
Since the early 1990s, the NAlC has employed a classification system spanning the numbers 1 through 6, each
corresponding to certain bond-rating equivalents.l'' NAIC classification 1 is defined as Highest Quality and corre­
sponds to Moody's Aaa to A3 ratings. Category 2 is referred to as High Quality and is equivalent to a Moody's Baa rat­
ing. Category 3, defined as Medium Quality, maps only to Moody's Ba ratings. The other NAIC categories span Low
Quality to In or Near Default. According to Mulligan and Stone (1997), "Investment-grade bonds are typically those
that are in the NAIC's Classifications 1 and 2."11
But usage of the investment-grade concept by the NAIC appears to have evolved over a long time. According to
Atkinson (1967): 12
A similar determination of "investment grade" for insurance companies has existed since the early 1930s
through ratings published by the National Association of Insurance Commissioners, although standards in terms
of published rating grades have changed; only since 1951 has the favored classification been equated to the first
four rating grades.
It is possible that insurance regulators adjusted their standards in order to conform to banking practices.
Consequence for Bond Issuance Uncertain
It seems reasonable to expect that the Comptroller's ruling would have had a severe market impact on the sub-invest­
ment-grade, or speculative-grade, sector. This should be observable as a decline in overall speculative-grade new issu­
ance, relative to investment-grade issuance. The chart below, compiled from a 1960 compendium to W. Braddock
Hickman's study (described in the next section), illustrates trends in annual new issuance from 1908-1943 by broad
investment-grade and speculative-grade market segments.13
Bond issuance growth for the investment grade sector grew steadily from 1908 before peaking in 1927 at $3 .2 bil­
lion.Speculative-grade bond issuance rose at a gentler pace until it peaked in 1928 at $784 million. The fall-off in issu­
ance thereafter mirrors the onset of the Great Depression, with investment-grade issuance falling to $135 million in
193 3. Although investment-grade issuance rebounded up to the onset of World War II, speculative-grade bond issu­
ance remained mired at relatively low levels, save for a small rally in 1939.
Because the timing of the Comptroller's ruling coincided with the on-set of the Great Depression, we cannot
determine with confidence its impact, if any, on speculative-grade bond issuance.
Figure 7 Annual Bond Issuance by Agency Rating Category, All Industries, 1908 -1943
$millions
3,500 --.--------------------------,
3,000
2,500
2,000
1,500
1,000
500
o�����::::.���-.-,-_;;::���.-)� �������$$����$##�� .._., ,� .._., ,� .._., ,� .._., .._., ,� .._., .._., .._., ,� ' ' ' ' '
Source: Hickman (1960)
10. Prior to this, the dassifications spanned just three categories.
11. Elizabeth A. MuKigan and Gene Stone, Accounting and Financial Reporting in Life and Heahh Insurance Companies, Lila Office Management Association (LOMA),
1997. 12. Thomas R. Atkinson, 'Trends in Corporate Bond Quality," National Bureau of Economic Research (1967), p. 53.
13. w. Braddock Hickman, Statistical Measures of Corporate Bond Financing since 1900, Princeton Univeraity Press (1960), Table 52, p. 82.
Moody's Special Comment 3
-ln\estment Grade
-Speculatl\e Grade
)
_)
Investment Grade
We showed above that Moody's did not characterize any particular rating category as belonging to an investment­
grade or speculative-grade grouping. Thus, it appears that the term investment grade arose through market convention
and then regulatory appropriation. We rum to perhaps the most authoritative historical study of the US corporate bond market for further guidance.
In 1946, the National Bureau of Economic Research initiated a comprehensive statistical study of the corporate bond market. Sponsored by the FDIC, the study examined financing and investment performance for the period cov­
ering January 1900 to January 1944. The primary author of the final project publications, W Braddock Hickman, offered the following observation:
The most popular measures of prospective bond quality are the ratings assigned by the four investment agencies: Moody's, Fitch, Standard Statistics, and Poor's (the latter two were merged in 1941 and issued a sin­
gle rating thereafter). Since there is a fair degree of uniformity among the ratings assigned by the investment agencies, it is possible to combine them into a single composite, which typifies the ratings assigned by the
individual agencies. The composite rating used in this report is a median of individual coded ratings, where the rating I was assigned to the best grade under each system (i.e., Moody's Aaa, Standard Statistics Al+, etc.); the rating II to the next best grade (Moody's Aa, Standard's Al, etc.); and so on. Issues having composite grades 1-N in this system are usually considered to be of investment grade; that is, they are eligible for com­
mercial bank investment, are fully "amortizable" for life insurance companies (are permitted to be carried on
the companies' books at full amortized book value), etc. The lower grades (V-I.X) are considered to be pre­ dominantly speculative by most investors.14
Hiclanan defined investment grade by referring to regulatory usage and defined lotuer grades by referring to investor
preferences. Interestingly, he borrowed the phrase "predominantly speculative" from the Comptroller's ruling and
thus avoided altogether the term speculative grade.
The Best Divide?
Hickman's published account of the investment performance of rating classifications was not finalized until the late
19 50s, well after the investment grade moniker had entered general usage. His results therefore could not have been
used to justify the choice of the Baa/Ba divide.15 But his findings help shed light on performance differentials between
rating groups. Table l below shows the fraction of par value of bonds that went into default on or before 1944, by year
of issuance and broad classification. Essentially, these are cumulative default rates with a time period that shortens
through successive issuance years. Group I-IV corresponds to bonds rated Aaa through Baa, or their equivalent, and
group V-IX corresponds to bonds rated Ba through C.
Table 7
14. W. Braddock Hickman, Corporate Bond Quality and Investor Experience, Princeton University Press (1958).
15. An early default study by George W. Edwards, "Control of the Security-Investment System" Harvard Business Review, October, 1933, pp. 1-11, provided aggregate
default rates by year of issuance.
4 Moody's Special Comment
)
)
)
<:>
Evident in Table 1 is the sharp drop in default rates for bonds issued during the 1934-1936 period. If we assume
that differences in seasoning effects are minimal between the two groupings, we can compare average cumulative
default rates across them. For the 1908 through 1935 period, the average cumulative default rate for group I-IV secu­
rities was 18.3%. Group V-IX's average cumulative default rate for the same period was 48.7%, or 2.7 times greater.16
Hickman's 1960 companion volume, Statistical Measures of Co-r;Porate Bond Financing since 1900, provided detail for
the performance of individual rating categories over this period.1 We reproduce in Table 2 below part of Hickman's
Table 186. For bonds issued between 1900 and 1919 that were assigned a rating of IV (Baa), the cumulative default
rate by 1931 was 10.0%. For bonds rated V (Ba), the default rate was 42.3 % . The difference in default rates for bonds
issued between 1920 and 1931 is not particularly discernable until well after 1932.
Table 2
To corroborate Hickman's results, we turn to Moody's default research. Moody's first study of corporate bond
defaults appeared in July, 1989.18 Covering the years 1970 through 1988, that report provided default rates by rating
category and by holding period. In 1996, coverage for the annual report card was extended back to 193 8, and by 1997,
it was extended back to 1920. Based on the earliest results, Table 3 below provides 1-year default rates, by rating cate­
gory, for the 1920 to 193 5 period, just as the turmoil from the Depression was easing.
Table 3
16. A I-statistic of 6.66 suggests a significant difference in means al the 0.5% level.
17. See W. Braddock Hickman (1960), ibid., p. 400.
18. Historical Default Rates of Corporate Bond Issuers 1970- 1988, Moody's Investors Service (July 1989).
Moody's Special Comment 5
)
) . .....:;/
The data presented in Table 3 provide some support for choosing Baa/Ba as a reasonable investment-grade/spec­
ulative-grade cutoff. Fortunately, the average one-year corporate bond default rate for this period increases monotoni­
cally as the rating falls, even though within-year results are not always consistently ordered.
Moreover, the average one-year default rate for issuers rated Ba, at.2.52%, was 3.49 times the average for issuers
rated Baa while the average Baa default rate, at 0.72%, was 2.58 times that for issuers rated A. Most striking is the
Baa/Ba default rate gap during the years 1932-1933.
The relative difference in default rates between the Baa and Ba categories persists even today: results for the 1920
through 2002 period show Ba default rates averaging 4.18 times those of Baa issuers; the figure rises to 5 .82 times for
the 1970 through 2002 period. But this may be an artifact of the wide-spread use of investment grade as an important
portfolio governance threshold.19 Indeed, investment-grade and speculative-grade bond markets have developed along
sharply distinct lines over the past two decades, leading to segmented investors, specialized intermediaries, and unique
practices. Whatever the reason, we leave for others to investigate this anomaly.
Summary
We assert that the term investment grade did not originate with Moody's bond rating classifications. The distinction
likely arose through private sector conventions and was later incorporated into regulations, first by banking and then
by insurance officials. The choice of the Baa/Ba divide may have arisen from historical differences in default risk. On
the other hand, the choice may have stemmed from expectations surrounding the diversification risks associated with
lower-rated bonds. In any event, the relative difference in default rates between speculative- and investment-grade
issuers has grown, and continues to persist, in part because of regulations and portfolio governance rules that now
hinge on the distinction.
19. Adverse selection may cause a default gap to persist if regulatory and portfolio governance rules push speculative-grade spreads so wide that only lhe riskiest firms
bother to seek such ratings.
6 Moody's Special Comment
)
)
,.)
Appendix
The Evolution of Moody's Bond Rating Definitions
Moody's Special Comment 7
)
,)
.)
8 Moody's Special Comment
)
)
__ )
Moody's Special Comment 9
)
)
·. I ...... __..,
)
10 Moody's Special Comment
)
)
'�_)
Moody's Special Comment 11
J redit ark et
J
The speculative-grade yield spread averaged just
387 basis points during 1993-1997, or when the
high-yield downgrade ratios were 44% in terms of
the count and 37% in terms of par value. Since
year-end 1997 and through QI 2003, the high-yield
downgrade ratios climbed up to 73% in terms of
the count and 72% in terms of par value. In
response, the speculative-grade yield spread has
averaged a much wider 666 basis points.
The high-yield bond and equity market rallies
should. at least, momentarily halt until the evidence
decisively favors renewed upturns by the annual
growth rates of business sales and profits.
Meek Forecasts Lend Caution To Optimism
High yield spreads will continue to narrow
provided that forecasts of a second-half quickening
of business sales are correct. Nevertheless, the latest
consensus forecasts looks for only a mild upturn by
the yearly increase of nominal GDP growth - from
QI 2003's +3.6% to just +4.3% by Q4 2003.
where the latter does nothing more than match its
annual increase of Q4 2002. Not until Q2 2004 is
the yearly increase of nominal CDP expected to
break above +5.0%.
When a notable capital spending recovery last got
underway in Q2 1992. the yearly growth rates were
+2.7% for real GDP and +5.3% for nominal GDP.
After rising by merely +2.0% yearly in Q 1 2003.
real GDP is expected to gain only +2.2% annually
in the second quarter.
Very Easy Money Tends To Lead Lower
Default Rate
As shown by a recent real federal funds rate of -
0.4%. a still very easy monetary policy implies that
the US' high-yield default rate of 5.8% for June will
slide further. When the real fed funds rate previ­
ously bottomed at the -0.5% of April 1993. the
high yield default rate would then slide lower over
the next 23 months from the 5.3% of April 1993 to
March 1995's cycle trough of 1.4%.
Ironically, the Fed allowed the real federal funds
rate to climb up to its latest high of +4.1 % for July
2000 despite the presence of above-average read­
ings of 6.0% for the high yield default rate, 644
basis points for the speculative-grade yield spread
over Treasuries, and 232 points for the Baa-rated
industrial company bond yield spread over
Treasuries. Mid-2000's very tight monetary policy
Grand Total: US Corporate Issuers Excluding Structured Transactions
Number Of Actions And Billions Of Dollars Of Debt Affected By Rating Changes
-----·--Downgrades,------ Upgrades-----
--Financial-- --Industrial-- ·-Utility·· ---Total--- --Financial-· --Industrial-· --Utility·· -Total---
Number Amount Number Amount Number Amount Number Amount Number Amount Number Amount Number Amount Number Amount
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Quarter:
Q2-02
Q3-02
Q4-02
Q1-03
Q2-03
July 14, 2003 Moody's Credit Perspectives 35
month in December, wherein the monthly increase of
retail sales excluding autodealership sales should rise
from November's +0.4% to December's +0.6%.
Core retail sales -- or retail sales excluding auto
dealers, gas stations and food stores -- may have
gained +0.9% monthly in December. In turn, the
annual increase of core retail sales could reach
+7.8% in December for the steepest such advance
since April 2000's + 7.9%.
Year-over-year core retail sales posted gains of +4.5%
in Q4 2002, +3.3% in Ql 2003, +3.5% in Q2 2003,
and +6.8% in Q3 2003. Fourth-quarter 2003's core
retail sales will probably advance by + 7.5°,{, yearly for
the steepest such annual advance since the +8.6% of Ql
2000. A very accommodative monetary policy favors
more in the way of brisk growth for core retail sales.
Will 2004 Be Another Year Of Fewer
Downgrades And More Upgrades?
Without the benefit of 2002's relatively low base, or
the fewest credit rating upgrades since 1992, it is
unlikely that 2004's expected increase in the number of
credit rating upgrades will match 2003's +49% surge,
which was the steepest such advance since 1984's
+77%. Nevertheless, a further enhancement of corpo­
rate financial condition via above-trend profits growth
and a plentiful supply of liquidity favors at least a
+ 15.0% annual increase for 2004's count of US­
company credit rating upgrades. A now ample supply
of liquidity owes much to the Fed's extended adherence
to an accommodative monetary policy. Coming out of
the previous credit cycle slump, the frequency of US­
company credit rating upgrades rose in each of the six
years ended 1996 by+ 19% annually, on average.
After growing in each of the six years ended 2002
by +26% annually, on average, the number of US­
company credit rating reductions sank by -30% in
2003. A -15% annual decline by downgrades seems
to be within reach for 2004. Coming out of the
previous credit cycle the number of US-company
credit rating downgrades fell in each of the three
years ended 1993 by -29% annually, on average.
Yield Spreads' 1 2·Month Moving
Averages Means Last Bottomed In 1997
The monthly average of the Baa industrial-company
bond yield spread over Treasuries most recently
peaked at the 254 basis points of October 2002 and
finished 2003 at a December mean of 151 points.
During the previous credit cycle upturn, the 12-
month moving average of the Baa-industrial corpo­
rate bond yield spread bottomed at the 116 basis
points of the 12-months-ended October 1997.
A composite of speculative-grade yield spreads
over Treasuries narrowed from October 2'002's
cycle peak of 1,064 basis points to the 403 points
of December 2003. Regarding the credit cycle
upturn of 1993-1997, the 12-month moving
average of the high-yield spread bottomed at the
328 basis points of calendar-year 1997.
Jobs Outlook Is Still
Sunshine And Lollipops
Komolesh Rao in New York
Few are expecting the upward momentum in the
labor market to reverse itself anytime soon. Though
weekly state unemployment claims climbed by more
than expected last week, and payrolls growth was
near nonexistent, the prognosis for jobs growth
remains optimistic. The upward turn still leaves
weekly claims numbers well below their recent
averages. And generally improving economic funda­
mentals continue to point to an acceleration of jobs
growth in the coming months.
Though the latest climb in weekly initial claims
hints that jobs growth may be occurring at a slower
pace than some would hope, such a reversal was
not entirely unexpected. Consensus forecasts were
looking more modest increase in weekly numbers to
follow the sudden drop in weekly claims the
previous week. Even with last week's gain, weekly
claims are still down by around 12K from their
reading at the beginning of December.
Claims continue to show evidence of the job
markets improvement over the past couple of quar­
ters. Three-month averages for weekly claims are
down by 9% from the previous three months, and
four-week averages are down by 13% from a year
ago. Plus, continuing claims are down by more than
6% from a year ago, their deepest year-to-year drop
since the middle of 2000. The volatile nature of
weekly claims numbers will tend to produce reversals,
but it will take a string of consistent increases to begin
to fill in the declines of the past several months.
Initial claims could post further gains in the
coming weeks. Our model for initial state unem­
ployment claims suggests that claims could climb to
361 K this week and to 369K to the following week.
But such a climb will still point to a further
recovery from the labor market. Now that the
market seems to have some momentum behind it,
weekly fluctuations in initial claims will not
demand as much attention as they once did.
Even with rainbows forecast, there could be quite a
bit of gloomy overhang in the labor market for some
while. Government data still suggests that payrolls
continue post deep losses since the beginning of the
32 Moody's Credit Perspectives January 12, 2004
)
)
)
I of3
IDAHO PUBLIC UTILITIES COMMISSION
For Immediate Release I May 13, 2002
Case No. IPC-E-02-2, IPC-E-02-3
Order No. 29026
Contact: Gene Fadness [phone]
Idaho Power granted $256 million def err al, but bond plan denied
BOISE- Declaring it refuses to mortgage Idaho Power ratepayers' future, the Idaho Public Utilities
Commission today denied the utility's request to spread the past year's power supply costs over three years by
issuing bonds.
Instead, the commission authorized recovery of nearly all the $255 .9 million in cost recovery allowed
in a one-year period. That will mean a slight increase for most residential customers, varying from 3 to 10
percent. However, residential customers who use more than 3,000 kWhs per month will notice a decrease
because of the commission's decision to discontinue the residential tiered-rate structure.
"We find it unreasonable and contrary to the public interest to mortgage the future of ratepayers
simply to achieve a small rate decrease this year," the commissioners said.
Uncertainties regarding water supply and market volatility led the commission to choose a one-year
recovery plan for all but about $11.5 million of the $255.9 million in power supply costs. Commissioners
rejected the three-year plan because of fears that another drought year or another period of high wholesale
prices could result in customers paying for new increases while still paying for the 2001-02 power supply
expenses. The commission is concerned about the potential volatility in Western power markets when the
price cap enacted by the Federal Energy Regulatory Commission last June expires on Sept. 30.
"The commission does not make this decision lightly. We understand the hardships that last year's
large rate increase is imposing on customers," the commissioners said. "However ... the commission is very
concerned about the unknown water and market conditions that lie ahead. We are also very reluctant to create
a situation where customers are required to continue paying costs from this year on top of whatever increases
may be required in future years."
Commissioners said passing through the majority of the costs in one year "will be unpleasant and
create a hardship for some customers, but it will clear the way for significant rate decreases in the future
barring any unforeseen circumstances."
A one-year recovery will take care of nearly all the deferred costs remaining from a sustained period
of extraordinarily high wholesale prices at the same time that hydro-dependent Idaho Power customers were
experiencing the second worst drought in 75 years. Ratepayers also avoid paying bond issuance and finance
costs of about $21 million with the commission's decision to deny Idaho Power's three-year bond plan.
Q/1 S</m 1 n.1,; "l\if
)
)
)
2 of3
"We certainly hope that this is the last year Idaho Power ratepayers will be faced with such
extraordinarily high" power supply costs, the commissioners said. "However, as we have learned over the past
two years, there are no guarantees about future stream flows or market prices. In short, the commission does
not want to spread large amounts for recovery over multiple years," commissioners said.
In its order issued today, the commission also authorized Idaho Power to implement a tariff to raise
about $2.6 million for conservation programs that can mitigate the impact of this rate increase as well as those
that may occur in the future. For example, a coupon program for compact fluorescent bulbs could offset the
increase and, in some cases, result in lower bills. The tariff will be a 30-cent per month charge to residential
customers.
The commission denied about $17.4 million of Idaho Power's total cost recovery request. Most of that
-- $15 .1 million - is money the utility sought to recover as revenue the company would have earned had it sold
power to irrigation customers who participated in the company's load reduction program. Another $1.2 million
the company spent installing mobile diesel generators was denied as was $1.1 million in costs associated with
construction of the utility's natural gas plant in Mountain Home. The commission also discounted, by $4.3
million, trading transactions from July 2001 through March of this year.
With the end of the tiered-rate structure, residential customers will pay a flat rate of 7.1 cents per
kWh. The result will be larger increases for residential customers who benefited from the tiered-rate now in
place. The monthly bill of a residential customer who uses 500 kWhs per month will increase from about
$33.34 per month to $36.85, about a 10.5 percent increase. The bill of a residential customer who uses 1,500
kWhs per month will increase from $100.62 per month to about $105.52, or a 4.7 percent increase. A customer
who uses 3,000 kWhs per month will see a decrease from $219.36 to about $208.23, about a 5 percent
decrease.
Tiered rates created unanticipated problems when Idaho Power's meter reading cycle extended beyond
30 days. A 32- or 33-day billing period sometimes pushed customers into a higher rate block, forcing them to
pay more than they would have had under a normal 30-day cycle.
The commission was also concerned about the public's perception of tiered rates. Many customers
blamed their high energy bills on the tiered rate rather than the primary cause: an average 31 percent
residential increase over the previous winter's rate. Bills of customers using about 2,000 kWhs per month were
about the same with the tiered rate as they would have been with a flat surcharge. The tiered rate was designed
to send a strong conservation signal and allocate a portion of less expensive electricity to all customers to
ensure a minimal amount of energy essential for customer health and safety.
"From the public comments we received, it was apparent many ratepayers did not understand the
purpose or actual dollar effect of tiered rates," commissioners said. Of the 274 written comments the
commission received about this case, 132 specifically mentioned opposition to the tiered rates while only nine
supported their continued use. More than 100 of those commenting mentioned they lived in all-electric homes
where it is difficult to drastically reduce consumption and fall into a lower-rate tier.
While the commission directed Idaho Power to recover nearly all the $255.9 million in approved
power supply costs in one year, it did allow the deferring of $11.5 million in costs allocated to customers in
the irrigation (Schedule 24) and small general service (Schedule 7) classes into a second year. Customers in
those classes will experience no increases as a result.
Many of the irrigators who testified at public hearings held last month in Twin Falls, Pocatello and
Idaho Fans were not aware that a 7 percent increase in irrigation rates was approved by the commission last
Q/1 S//1)1 11),1.<: AH"
)
)
)
3 of3
m,p.11 www .puc.siare.io.us/mternet/press/uo 1 JUL._ 1.1:'Co.l:'CA.htn
October, after most irrigators end their seasonal usage. "Thus, the irrigation class as a whole had very
little opportunity to adjust to the October rate increase," the commission said.
Small general service customers, which typically include outbuildings and small businesses, are the
only customers to have rates set in excess of 8 cents per kWh after last October's increase. Rather than raise
their rates above that already high rate, the commission elected to continue their current rate for this year and
allow recovery of the remainder of the costs allocated to this class - about $600,000 out of a total $5.2 million
- into next year.
Idaho Power was authorized to collect a 4 percent carrying charge on the deferred costs that will be
recovered in the first year and 6 percent on the $11.5 million carried into next year. The company requested
9 .2 percent.
HERE IS A SUMMARY OF THE RATES CUSTOMERS IN EACH OF THE MAJOR CUSTOMER
CLASSES WILL PAY AND THE PERCENT OF INCREASE. THE INCREASE BECOMES EFFECTIVE
ON MAY 16. • Residential. 299,321 customers 7.09 cents per kWh. 3 .1 percent. • Small general service 30,236 customers 8.02 cents per kWh 0.0 percent • Large general service 14,287 customers 5.49 cents per kWh 4.03 percent. • Irrigation service 12,343 customers 5.09 cents per kWh 0.0 percent • Special contract (Micron, FMC, Simplot, DOE) cents per kWh vary 5 .28 percent
) July, a,1 • a11s
�o_l'.. ,J?iNQ1:2-S.
Last Week's Rating
Reviews and Activity ..... 14
Did You Know?
Estimated U.S. Vehicle Fuel
) Consumption 1998 to 2002 .. 14
Last Week's
Financing Activity
TXU's $475 Million Notes
Are Rated 'BBB-' 15
Range Resources' Proposed
$100 Million Senior Notes
Are Rated 'B-' 15
Endesa Chile's $200 Million
Notes Are Rated 'BBB-' 16
Utility Credit Rankings
Electric/Gas/Water 17
Telecommunications 20
International 21
Key Contacts 22
) STANDARD
&POOR'S
Feature Article
Legal Developments Add to Utilities'
Disquiet in U.S. Northwest 2
Utility Spotlight
Credit FAO: Calpine Corp 4
Special Report
U.S. Sythetic Fuel Industry Developments
May Affect Credit 6
News Comments
Mirant's, Subs' Ratings Are Lowered to 'D' After Bankruptcy Filing 8
Ratings on PEPCO Holdings and Subs Are Placed on Watch Negative 8
TECO Energy Ratings Are Placed on Watch Neg Re: Synfuel Concerns 9
Newfield Exploration Outlook Revised to Stable 9
Chesapeake Energy Ratings Are Raised to '88-', Off Watch 10
National Rural Utilities Outlook Revised to Stable 10
Ratings on Frontier Oil Remain on Watch Until Merger Completion 11
Ratings on Pan American Energy Are Raised to '8' 11
American Water Capital Ratings Are Raised to 'A', Off Watch 12
Ratings on Pecom Energia Are Raised to '8-' 12
) Feature Article
Legal Developments Add to Utilities' Disquiet in U.S. Northwest
)
)
...1111 Back to
"Ill Table of Contents
Next Page�
Utilities in the Pacific Northwest continue to face a host
of challenges. If the western U.S. power crisis left a
large number of them. investor-owned as well as publicly
owned. in dire financial straits, weak economic conditions
and the uncertain hydro situation have hampered recovery
prospects. Oregon and Washington have the dubious dis­
tinction of having the highest unemployment rates in the
country of 8.54% and 7.64%. respectively, as of February
2003. The FERC's proposed restructuring of the nation's
transmission grid, which was embodied in the commis­
sion's Standard Market Design ISMD) structure. also had
the region's utilities on the warpath until the FERG sub­
stantially modified many of the original pronouncements in
its April 2003 white paper. In recent weeks. a few legal
developments. which could affect the financial fortunes of
many of the region's utilities. have added to the disquiet in
the Northwest.
"Illegal" BiOp Ruling Leads to
Dam-Breaching Rhetoric
In May, a federal judge ruled that the 2000 Biological
Opinion IBiOp). which forms the basis for fish-conservation
measures in the federal hydro system. was illegal because it
contained too many uncertain measures for recovering fish
listed under the Endangered Species Act. Specifically, the
judge ruled that the BiOp relies on offsite mitigation mea­
sures that are "not reasonably certain to occur."
Environmental groups have already issued a notice to sue
the government for operating under an "illegal" BiOp. Some
have gone as far as to advocate removing four dams (with a
total peak capacity of 2.303 MW) on the lower Snake River.
which has a significant concentration of endangered
species. to restore fish population. The judge has given the
government a year to fix the BiOp.
Although the judge last week refused to vacate the 2000
BiOp during the revision process as demanded by many
environmental groups. potential additional mitigation mea­
sures that arise from the revision could create an additional
cost burden for The Bonneville Power Administration (BPA)
and therefore its utility customers in the Northwest. Factors
considered in the revised BiOp may increase the forms and
extent of mitigation measures beyond those required in the
2000 BiOp, and potentially also affect other dams in the
Northwest as they come up for relicensing.
The dollars are considerable. BPA has spent an esti­
mated $6 billion over the past 20 years on fish and wildlife
protection measures, including the opportunity costs of
water spilled to meet fish requirements. BPA's customers
are already unhappy over rate hikes that have been pro­
posed by the agency to meet the financial shortfall created
by high-cost purchased-power contracts and low whole­
sale sales revenues.
Page 2 July 21, 2003
Stalemate Continues on IOU Exchange Benefits
Settlement Talks
One of the many options being considered by BPA to cut
costs and mitigate rate increases to its customers is a set·
tlement over the federal power benefits received by the
region's six investor-owned utilities (IOUs). These are bene­
fits that residential and farm customers of IOUs receive from
the federally owned hydro system in the Northwest. Public
power agencies have sued BPA over the legality of the new
10-year subscription contracts entered into with the IOUs.
an act which by itself increases annual benefits payable to
IOUs by $200 million.
Different proposals have been floated to reduce IOU
benefits now. in exchange for more benefits after 2006. with
the resulting cost savings used to offset BPA rate increases.
Although this would mean greater costs post-2006. BPA's own
cost structure would also be much lower at that time because
the load buyback and higher-priced purchased-power con·
tracts would have terminated. Total IOU benefits average over
$400 million per year for the 2002 to 2006 rate period.
A settlement would benefit most BPA customers given
that city councils and boards are challenged to provide rate
relief to customers without further weakening the utilities'
financial credit quality. BPA has announced that because of
cost reductions. improved water conditions. and higher
power prices. rates may increase only 5% for the three
years that begin Oct. 1. 2003 instead of the previously
expected 15.6%. Although this should come as a relief to
regional utilities. the fall in BPA's load-based Cost Recovery
Adjustment Clause (CRAG) has already been factored into
most utility rate structures and thus the increase from their
perspective would be higher than 5%. (This CRAC allows
BPA to recover the above-market costs associated with
about 3.000 MW of purchased power and load-buyback con­
tracts signed during the western U.S. power crisis) If a set­
tlement that defers IOU benefits can be achieved. it would
eliminate $200 million in costs and postpone other costs
beyond 2006, potentially lowering BPA's overall rates. rather
than the 5% increase as currently envisioned.
Did Bonneville Overcharge SLICE Customers?
Adding to BPA's litigation woes. the auditing firm KPMG
has concluded that BPA overcharged its SLICE customers
by tens of millions of dollars in the first year of SLICE oper­
ations. Earlier this year. BPA completed its calculation of
the SLICE true-up and determined that SLICE customers
owed BPA an additional $50 million. which has already
been paid. KMPG's calculations. on the other hand, show
that customers should actually have received a credit to
the tune of tens of millions of dollars. Customers have the
option to challenge BPA's calculations on the basis of the
audit through arbitration proceedings, an option that could
be exercised.
Standard & Peer's Utilities & Perspectives
) Feature Article
)
These findings certainly come at an inopportune time for
BPA. just as it is contemplating further rate increases to
make up for its cash shortfalls during the 2002 to 2006 rate
period. Because SLICE customers are essentially disputing
whether they should pay for certain costs incurred by BPA,
these costs may potentially be transferred to non-SLICE cus­
tamers. "SLICE" is one of BPA's two products under which
BPA sells the subscriber a fixed percentage of the genera·
lion from the federal system as opposed to a fixed MW of
capacity. The subscribers pay an equal percentage of the
costs. BPA has about 25 SLICE customers who account for
about 22% of the federal hydro system, or about 1,600
aMW. This includes such large customers as Seattle City
Light, Snohomish County Public Utility District, and Eugene
Water and Electric Board.
All the above issues can affect rates by creating new
costs or by hindering cost reductions. In addition, there is
dissatisfaction among retail customers over continued high
electric rates while market prices have fallen dramatically.
These customers, historically accustomed to some of the
lowest electric rates in the U.S., have faced rate increases
approaching 50% to 60% over the past few years.
However. the use of long-term contracts and hedging
mechanisms has meant that rates and market prices do not
always move in tandem.
Given this history and the weak economic environment
(Washington state could suffer further if Boeing moves pro·
duction elsewhere), further rate hikes may be politically dif­
ficult to implement. This puts regional utilities in a bind. Not
only is there tremendous unwillingness to raise retail rates.
there is also the inability on the part of the utilities to
absorb further SPA cost increases. although most utilities
have assumed a "safety-net CRAC" increase starting Oct. 1.
2003. (The safety-net CRAC is a catch-all mechanism that
allows SPA to raise rates if. for any reason, the probability
of making timely payments on the treasury debt falls below
50%.) Most utility downgrades over the past two years in
this region have been linked to the financial effect of the
western power crisis on the utilities rather than the effect
of nonregulated operations on the consolidated business
and financial profiles. Avista Corp. (BB+/Stable/-1.
IDACORP Inc. (A·/Positive/A-2). Puget Sound Energy
(BBB-/Stable/A-3), Seattle City Light (A/Negative/-),
Snohomish County PUD (At/Stable/-), and a host of small·
er utilities have all had their ratings or outlooks affected by
the financial pain inflicted by the power crisis.
Where Are Ratings Headed?
Standard & Poor's Ratings Services continues to expect a
return to credit stability for utilities in the Northwest.
However. managing hydro risk has assumed a critical impor­
tance to credit quality. How utilities manage their exposure
will determine how well they can maintain or improve their
ratings. Several factors contribute to the increased exposure
to hydrological conditions, with the most important being
subscription to BPA's SLICE product and volatile wholesale
market conditions, which was seen even in February and
March this year.
In analyzing hydro risk in a utility's forecast. Standard &
Peer's will closely monitor assumptions that underlie
resource planning, wholesale revenue forecasts. and the
reliance on wholesale revenues to meet coverage ratio tar·
gets. Utilities currently use different risk-management tech·
niques, including planning that assumes lower-than-average
water conditions or setting rates so as to meet debt service
without any reliance on wholesale revenues. However, given
the dual variables of water levels and power prices. and the
not-so-predictable correlation among the two owing to the
effect of natural gas prices and differential stream flows in
different rivers, Standard & Peer's encourages utilities to
perform simulations across these two variables that estab­
lish a probability distribution for the net revenues available
to meet debt service. considering surplus wholesale rev­
enues in high water years and power purchase costs in low
water years. This could be used to perform a sensitivity
analysis assuming various exceedence scenarios, such as
90% or 95%. •
Swami Venkataraman
San Francisco (11415-371-5071
) .,. Back to ..,. Table of Contents
Next Page� Page 3 July 21, 2003 Standard & Poor's Utilities & Perspectives
. FEATURES
The Future
Of Natural
Gas Burns
Brightly
T he dominance of natural gas as the
energy source for the new millenni­
um seems very secure, just as oil
dominated the 20th century. The
last year of this old millennium
finds the natural gas industry enjoying an almost
unprecedented run of favorable news: the com­
modity's price is at a remarkable level; demand
appears to be on an unbending upward trend,
mainly due to an insatiable electric market; and
its environmental advantages over other fossil
fuels look better and better as environmental
concerns continue to grow worldwide. As the
Cajun expression goes, "Laissez /es bon temps
roulerl" (Lee the good times roll.)
But will the good times last? On one hand, the
field of combatants for the title of energy-source­
of-the-future is littered with the remains of con­
tenders that once looked invincible. Coal was for
years the Jud of choice when utilities were build­
ing bigger and bigger central generating stations,
and "coal-by-wire" was the catchword of the
electric industry. Later, few would have dared to
bet against nuclear power as the rightful succes­
sor to coal, as huge uranium-fueled reactors were
poised to capture economies of scale on an
unparalleled scale to deliver electricity that
would be "too cheap to meter." Even back then,
those looking ahead past the reign of nuclear
power saw only the promise of solar energy, with
the almost limitless power of the sun as the logi­
cal endpoint of the search for cheap energy with
the fewest environmental consequences.
No one was paying much attention to natural
gas. It was originally believed that gas was not
conducive for powering large, centralized generat­
ing stations, so it occupied only a niche for peak­
ing capacity. Moreover, doubts about the supply
of natural gas were such that the U.S. Congress
banned the use of it for fueling new electric gener­
ation during the energy crisis in the 1970s. Gas
seemed destined to be used only for cooking and
Analytical Contact: Todd A. Shipman, CPA, New York (I) 212-438-7676
STANDARD & PooR's CREDITWEEK NOVEMBER 1. 2000
on
heating needs in cold climates and for a
small role in electricity generation.
However, that same legislative package
bore the seeds of natural gas' ascent. Gas
price deregulation and the introduction of
incentives for non-utility electric generation
was a powerful combination that led to the
pinnacle on which natural gas now sits.
THE FERC MAKES "INCREMENTAL" STRIDES
TOWARD FREER MARKETS .
The FERC showed in decisions in late
1999 and early 2000 that it is becoming
increasingly more comfortable with the
idea of letting free-market ideas replace
regulatory principles in the natural gas
arena. In the long run, the continued
move toward open competition and mar­
ket-based pricing for natural gas trans­
portation and the commodity itself is
probably healthy for the industry. But
from a credit quality perspective, the
trend away from regulation is, on bal-
Aice, not positive for ratings. 9 In a rate case decision handed down in
·· )te 1999, the FERC effected a major shift J its policy on the pricing of new pipeline
capacity. The commission will require new
projects to implement incremental pricing
for the new capacity, replacing the previ­
ous policy of allowing "rolled-in" rates as
long as the rate impact was minor. Rolled­
in rates need regulatory approval, while
incremental pricing is a move toward free­
market principles.
When setting rates for a new pipeline
project, the FERC generally preferred to
roll the costs of the new construction into
the overall rates of the entire pipeline sys­
tem, which in t.r' , spread the cost of the
new pipeline across all existing customers
as well as users of the new capacity. This is
how most regulated rates are established,
based on the principle that all customers
should share in the burden of supporting
new, higher-cost investment in the utility
system in addition to sharing in the benefit
of the older, lower, embedded costs. The
problem with a rolled-in pricing regime is
that it encourages the utility, with its natur­
al build-up-the-rate-base mentality, to llll:ild too much new. capacity because the
.
Jcing signals are distorted.
I ._,.I .
Incremental pricing, on the other hand,
is much more efficient in that it gives
pipelines an incentive to build new capacity
only when the company believes the mar­
ket will bear the full cost of adding that
capacity. Incremental pricing also provides
for a more level playing field for evaluating
competing pipeline proposals because each
project must rely on its own economics to
justify its bid to proceed.
Although more market-oriented solu­
tions in the pipeline industry may satisfy
public-policy goals of greater efficiency
and the like, for bondholders such policies
only expose pipeline companies to even
more market risk and thus to higher over­
all business risk. One way regulators can
counteract that higher risk is to raise
authorized returns on the new projects
commensurate with the risk. When rates
are rolled in, the company can mitigate
some of the volumetric shortfall risk for
the project, but incremental pricing forces
all of that risk to remain with the project.
Higher returns on the higher-risk projects
will not mitigate the risk, but they would
at least fairly compensate investors for
bearing the increased risk.
In February 2000, the FERC's Rule 637
eliminated the price caps on short-term
released pipeline capacity, while retaining
the caps on short-term pipeline transac­
tions and in the long-term market. The
FERC also allowed pipelines to offer
peak/nonpeak rates in the short-term mar­
ket and term-differentiated rates for
short- and long-term service. The lifting
of the short-term caps will be limited to a
two-year trial period, after which the
FERC will evaluate the effect of removing
the maximum rates on the market and the
companies. The commission believes that
freeing up the short-term capacity release
market and the other policy changes on
pipeline rates will result in more market
efficiency, more options for shippers, and
greater price transparency for the natural
r,s commodity. Standard & Poor's agrees
and, in this instance, sees a free-market
move by the FERC as being positive for
credit quality.
Although any increase in competition is
normally not credit-positive, a change
STANDARD & PDOR's CREDITWEEK NOVEMBER 1, 2000
31
such as this one that improves an already
competitive market and reduces regulato­
ry distortion is good for bondholders.
Here, the FERC's decision to lift the price
caps should lead to lower prices to con­
sumers by letting the market work.
The new FERC policy on short-term
capacity highlights the unique risks borne
by regulated companies that are in the
throes of a transition to competition.
Although the move to competition from
regu�ati�n is obviously ne�a�ve fo� ct�e: . quality m general, the transmon period' . ·
often be even worse for bondholders th
would a fully competitive industry. In the
interim, companies can be saddled wit¥
many of the disadvantages of being regu- ·
lated (e.g., limits on returns on capital aad
higher costs to comply with regulatofy
mandates) while simultaneously beijg
gradually exposed to marketplace risks. ,
The best way to minimize that risk of
being constantly whipsawed by the regu,la­
tors on one hand and market forces on the
other is to make the transition as quickly
and orderly as possible, and to establish 'll"\
the outset the rules and terms of the
restructuring and apply them fairly and
consistently. It is hoped that the experience
gained in the restructuring of the na rural
gas industry will be used to improve and
hasten the transition period of the electric
industry. Bondholders and all other stake­
holders would benefit.
PIPELINE PROPOSALS IGNITE COMPETITION
A perennial topic in the pipeline industrv
is the number of new pipeline proposals
and expansions to accommodate growing
gas demand. Natural gas remains the fuel
of choice, especially in the burgeoning
electric generation market, and that
means a greater demand for gas and the
need for more pipeline capacity to satisfy
that growth.
The table shows some of the more
prominent projects in areas where comperi­
tion is present or threatening.
Most projects are aimed at relieving the
two major bottlenecks in the North
American natural gas delivery system:
getting more gas from Canada into the
U.S., and getting more gas into the pri-
GJEATURES
Independence Pipeline 1,001
Atlantic Advantage 730
Duke Spectrum 300
Kinder Morgan Inc. 's (formerly K N
Energy) Natural Gas Pipeline of America
(NGPL) subsidiary announced in 1999
the proposed Horizon Pipeline, which
would transport gas from NGPL's hub
near Chicago to Wisconsin. Wisconsin
was one of the losers in the race between
Alliance and the Viking-Voyageur
pipeline. Although the Horizon project
has since been scaled back and may not
reach beyond northern Illinois, other pro­
posa Is such as the Guardian Pipeline
(which has now passed FERC's environ­
mental review stage) are attempting to
open the Wisconsin market to more com­
petition, to the detriment of ANR Pipeline
Co., the major pipeline subsidiary of
Coastal Corp. ANR enjoys a dominant
market position in Wisconsin, and any
new competition there could erode the
company's margins and profitability.
Credit measures could also. be affected.
ANR has responded by proposing capacity
expansions in the area. A,
Several proposals to enter the Flori�,·-;
market are plodding toward some sort of
conclusion, which would challenge the
position held by Florida Gas Transmission
Co. (jointly owned by Enron Corp. and El
Paso Energy Corp.) Coastai's Gulfstream
Natural Gas System and the Buccaneer
Pipeline project of The Williams Cos. Inc.
and Duke Energy Corp. (formerly the
sponsor of a rival proposal, the Sawgrass
Energy Transmission System) would start
in Alabama and run to eastern and southern
Florida along almost identical routes
through the Gulf of Mexico and land on
Florida's west coast. The offshore tack
helps avoid some environmental issues, but
there's always the problem of where to
come ashore. Florida Gas Transmission's
response has been similar to ANR 's in Wis­
consin: propose lower-cost expansion of
the existing system to try to keep the
intruders at bay.
Looking farther into the future, the excit­
ing area for new pipeline construction may
be in Alaska and the northern tier of Cana -
da. The frontier area "north of 60" (the
60th Parallel, that is) contains plenty of.
natural gas that will likely become ec.j
nomical to produce if prices can be su.,
Ohio to Pennsylvania
Chicago to New York City
Alabama to Florida
Chicago to New Yor'k City.
:Chicago to Ontario · .
Alabama to Florida
Ca�da to Northeast
PeMsylvania to New York City
Florida
Canada to Massachusetts
lennium Pipeline and the Supplylink and
Independence projects. These were in regu­
latory limbo for some time, but the situa­
tion in the Midwest has recently become
clearer. For Millennium, the in-service date
has been pushed back to 2001 due to new
opposition by several federal agencies to
the pipeline's route because of environmen­
tal concerns, but most observers believe the
project is now all but defunct. The reason
for the drop in Millennium's fortunes was
the FERC's approval of certificates for the
SupplyLink and Independence projects.
The FERC initially gave only conditional
approval for the pipelines, with so many
conditions and such stringent time con­
straints that the success of the projects
appeared to be problematic. However, con­
cerns about rising prices in the Northeast
and the political response to those concerns
eventually prevailed at the FERC.
Standard & Poor's expects some of the
west-to-east projects to succeed alone or in
tandem, given the powerful economic
incentives to relieve the bottleneck at Chica­
go when more Canadian gas begins to flow.
700
700
360
950
1,100
Various
· ,-· ·750
Northeast
Marketlink ·
Millennium Pipeline
Maritimes and Northeast Pipeline
Aoride
FGT [several phasesl
Gulfstream Natural Gas System
VectorPipeline 1,000
raary gas markets in the northeastern ,.s. Other proposals have targeted Wis­
;onsin and Florida, where dominant
pipelines enjoy a significant market share
shat others would like to cut into.
, The Canada-to-U.S. front has been 'quiet since the major projects moved
�com the regulatory approval stage to
ctu a l construction. The Alliance
Pipeline, which stretches from western
Canada to the Chicago area, is expected
to be completed and on line by the end
of 2000. The Vector Pipeline, which will
move gas from Chicago through
Ontario, should also be on line by the
end of 2000. The Maritimes and North­
east Pipeline, which began operating at
the beginning of 2000, brings gas to
New England from the Sable Island gas
fields off Canada's east coast,
With the influx of new supply into the
already saturated Chicago market, many
companies have been exploring ways to
move that gas east, mostly toward the
more lucrative northeastern markets.
Among the proposed pipelines are the Mil-
� t Buccaneer Pipeline
mmcf/o-Million cubic feet per day.
STANDARD & PooR's CREDrrWEEK NOVEMBER 1. 2000
'l?
• ( )
tained at their currently high levels. When
that time arrives, there will certainly be
numerous pipeline proposals to bring that
gas where it is needed. Although it is too
early to predict exactly which companies
will be fighting for a role, it is a fairly good
bet that TransCanada Pipelines Ltd. will
try to participate, if only to avoid having
another Alliance on its hands.
The credit implications of these and
other pipeline proposals will vary from
project to project and from company to
company. What remains clear to Standard &
Poor's is that the gas industry is being dri­
ven increasingly by market forces, and the
influence of regulators over the operations
and financial performance of the pipeline
companies continue to wane. From a credit
perspective, regulators have traditionally
offered some protection to bondholders by
giving the companies stability and pre­
dictability by shielding them from the
demanding prerogatives of competitive
•forces. As competition in the gas industry
expands and matures, Standard & Poor's
(·1··· I be spend_ing less time a_nalyzing �he
· ators' acnons and more tune following
e competitive market.
NEW PIPELINE SAFETY RULES
COULD HIKE COSTS
The safety of natural gas pipelines was
already garnering a lot of attention this
year when things took a dramatic and
sobering turn in August with an unfortu­
nate pipeline accident in New Mexico that
claimed almost a doz.en victims. The
tragedy raises the prospect of congressional
action that could significantly increase
pipeline costs. From a credit perspective,
new and increased safety-related regulatory
burdens on the industry that lead to
greater capital expenditures and ongoing
operations and maintenance costs could
affect natural gas companies' credit quality
if the financial implications are as great as
some projections.
No one argues against the need for
pipeline safety. Natural gas is obviously a
volatile and combustible commodity, and
pipeline safety has therefore always been
lthe industry's highest priority. Safety issues
Joften a central part of regulatory pro- .( . .
ceedings when new pipelines or expansions
of existing systems are proposed. The
growth of natural gas demand and its pre­
eminent position as the fuel of the future
have come from the marketplace's accep­
tance of natural gas as a safe and reliable
energy source that consumers will literally
allow into their homes and businesses. This
acceptance is the result, in part, of the
industry's commitment to safety and the
excellent track record that has been com­
piled by natural gas companies. As is fre­
quently pointed out, a person is more likely
to die from a bee sting or a lightning strike
than from a natural gas pipeline accident.
Safety measures include the use of
prominent above-ground markers that
indicate the presence of an underground
pipeline; visual inspections inside the pipe
(with so-called "smart pigs"), at ground
level, and by air to ensure the integrity of
the pipes; and stringent standards for con­
struction that help avoid problems before
the pipe is buried. Research and develop­
ment dollars are also being targeted at safety
improvements.
Despite the enviable safety record, natur­
al gas pipeline companies are facing greater
scrutiny at the federal level. On the regula­
tory front, the U.S. Department of Trans­
portation's Office of Pipeline Safety (OPS)
is proposing a number of changes to its
pipeline safety regulations to recognize the
latest technical standards and to address
other "integrity management" issues. On a
positive note, the OPS has often adopted
the consensus standards developed by a
group of industry and regulatory represen­
tatives in its regulations. Although the
changes are mostly innocuous, the increas­
ing complexity of pipeline safety regula­
tions could, in the long term, erode
pipeline safety or, at the very least, result in
some unnecessary spending.
Less encouraging from both a safety and
cost standpoint is the attention from the
U.S. Congress. Federal lawmakers have
been addressing pipeline safety programs in
thi. year's legislative session, and the topic
has drawn more scrutiny than usual
because of a liquids pipeline explosion in
the state of Washington in 1999 that caught
the attention of the state's two senators, one
STANDARD & PooR's CIIEOITWEEK NOVEMBER 1. 2000
33
FEATURES
of whom is running for re-election. The
accident in New Mexico, coming just
before the politicians were due to return
from their summer recess, is sure to bring
safety issues even more to the forefront.
Proposals progressing through the leg­
islative process would, if made into law,
mandate certain safety procedures. With
less flexibility in choosing how to assess
pipeline integrity, costs are sure to rise for
pipeline operators with no real assurance
that the congressional mandates will result
in increased safety. Industry representatives j have identified tens of billions of extra
costs that could be imposed by some of the .
proposals before Congress.
Some in Congress also want to allow f
states the freedom to impose their own'
standards on pipeline operations. State�
versus federal jurisdictional issues arej important to interstate pipeline compa-s
nies, for any regulatory regime that
exposes the interstate systems to numer­
ous and inconsistent state standards;
instead of one set of nationwide sran-
d ar ds, would have the potential for.+
greater costs and diminished safery. • -,
A higher level of safety costs are almost
certainly going to issue from the congres­
sional review. Pipeline credit quality
would not necessarily suffer if safety reg­
ulations become more onerous and costly,
as long as the money goes toward actually
improving the safety and reliability of
the pipelines. The increased costs would
likely be reflected in rates, and so the
effect on credit ratings in the near term
would be slight despite the extra burden
on gas consumers. New standards might
even be credit-positive if they led to
higher consumer confidence in the safety
of natural gas.
However, in the long run, natural gas
companies will be financially stronger
and better able to economically serve
their customers if unnecessary costs are
kept out from their cost structures. Any
move toward making safety requirements
and oversight unduly rigid and complex
while adding layers of governmental
bureaucracy that do little to enhance
safety would likely lead to a deterioration
in pipeline credit quality. ©
THE WALL STREET JOURNAL'FRIDAY, NOVEMBER 30, 2001
r>.
( )
r> ().
f )
Shock Waves
Enron' s Swoon Leaves
A Grand Experiment
In ·a State of Disarray
Electricity Policy May Be Left
: To Lurch Between Poles
Of Regulation, FreeRein
Power Shortages on Path 15'
By REBECCA SMITH
S[11// Reporter of TH& WALL STREET JOURNAL . It was one of the great fantasies of Amert­ can business: a deregulated power market that would send cheaper and more reliable supplies of electricity coursing into homes and offices across the nation. But look what's happened instead. En­ rcm Corp., the vast energy trader at the center of the new. freewheeling U.S. power markets, now faces collapse amid a blizzard of · questionable financial deals. And California, the first big state to deregulate its electricity market, has watched its experiment turn into a deba­ cle, with intermittent blackouts and re­ tail power rates as much as. 40% higher than they were a year ago. .
i :?��f"''i��sv��f'ltp;,'.itit?��R�vd�: . 11111;,,,,�a�a,ill'&.,.,��,W.ll,Jli,,.�g,j[! a.tP. •. ", .·. 1;.eg:u:l<1,(ipn·; .. it faces · the prospeet of a.
The Fallout
. • Enron and its lawyers work to mount a successful reorganization plan, AS.
• SEC's inquiry expands to actions of En· ron's accountant, Arthur Andersen, A3.
• The energy-trading giant's financial tra· vails reverberated around the globe, A6. - market that combines the worst features ot'QOth:,,.:;;1. te�µ1;n.to .governrnent restric­ lions; ··inbieq'.•with. volatility and price �g!;:�l�!:ii!�r��s�:::e.:0b;:: twJfu·t$p�eter.sfot. California · and' Eriron, have become less likely to commltcapi-
··;};1rJRµ.Y1�:r;��!t'P:a:erpr;:N�!'s:tf�'1�
u:s:··wllf fetfulfe' oig additions to its power production and distribution capac­ ity . w·hen' it emerges from the current reces�.\g�:"'.":i)llt,: .for,now, · the nation's capt­ tat- mar��t§,;i!{e. reluctant . to· provide the necessal'.Y' fonds .. Responding to the dramatic decline In their stock prices and the recession, energy companies are retrenching. Calpine Corp., one of :the most aggres­ sive players in the deregulated market, Is waffling on previously announced plans to build billions of dollars iii new power plants. Virginia-based AES Corp., which has missed its recent earnings targets, has scaled back its expansion goals and is selling· some of Its foreign assets, says Ray Niles, an energy ana­ lyst at Salomon Smith Barney. Northeast utilities is curtailing .plans to build a 30-mile undersea transmission line from Connecticut to Long Island.
.Ere�ting Guardrails·
· Meanwhile, regulators are racing to put new guardrails on the nation's power market. The federal government ts trying to beef up its market surveil­ lance activities. It is also trying to bro· ker deals between states that might make interstate energy transmission faster, cheaper and easier.
· · The power market is in "the midst of an ugly adolescence that we cannot allow
to last much longer," says Nora Brownell, a member of the Federal Energy Regula· tory Comission. Enron's sudden evaporation will deal 'a heavy blow to the broader energy mar· ketplace that sat at the center of electric· tty deregulation-providing a place for utilities and power plants to buy energy they needed in a hurry, or to unload their excess supplies. The company's En­ ronOnline · trading system, which, was shut down Wednesday, accounted .foi::J.l quarter ()f ail wholesale energy tr�d�$ :among ,utilities; independent power pro­ .ducers and other players. The trading system's shutdown came :in the wake of disclosures that Enron' s 'directors and top officers approved 'a se­ ries of partnerships that moved debts off ·the company's balance sheet. In several .cases, those partnerships enriched com·
pany officers but later produced huge tosses for Enron.
'Balance-Sheet Abuse'
That kind of "balance-sheet abuse" says Goldman Sachs analyst Jonathan Ra· leigh, might now "reduce overall liquidity and cause lenders to tighten credit stan­ dards" for the entire energy-trading in· dustry, The result could be the kind of supply squeezes that Jed to six days of blackouts in California earlier this year. California's supply problems didn't spread beyond the Pacific North· west-but that's largely because of the sharp economic downturn. As spot-mar· ket power prices in California shot up to an average of $317 per megawatt in De· cember 2000 from $32 per megawatt hour in the preceding April, energy compa­ nies were making enormous amounts of money. Investors drove up the price of their stock-Enron at one point traded at 60 times its. projected next year's earnings. New funding was flooding in . from debt and equity. markets. Under • pressure from regulators worried about a. repeat of the California debacle, en· ergy companies got busy building power plants, drawing up plans to fix the na­ lion's antiquated electric-transmission
Please Turn to Page AB, Column I
250
125
500
375
$625
Source: ThOmson flnancial/Datastteam; WSJ !i,larl<et Data Group
i A S O . N; D . J 'f M A M J J A S O .N . 0 · J · F M A M J J A S O N D O
1999 · 2000 2001
•The Dow Jones Palo Verde Electricity Price Index is a volume-weighted average of wholesale, physical , transacUons from both Palo Verde and Westwlng In Atlzona. It reflect changes In California electricity .prtees.
Continued From First Page· Power.Index, · · · · , · prices.
systems and plotting new natural gas· To.':·glve some idea of how radically · Under its new chairman, Pat Wood,
pipelines. · the.landscape has shif\ed, take the case . · the Federal Energy Regulatory Commis- . However that golden moment turned of pow.efyonglomerat.e.UtiliCorp United sion has been .pressing companies to • . , Corp,: cit Kansas:Cicy, Mo. In April, tak- takesteps Itbelleves will create power out to be short-lived. Early this year, . Ing 'advantage of· the general. enthusl- markets : that are less susceptible to federal energy re�lators placed caps . asm •joward deregulated markets, It . -such: shenanigans. · Chief among them on the Wholesale price of powe� �old In.:, sp11n oft its Aquila Corp. trading unit at '.°.Is ror utilities to surrender control. of the. we�tern u._s. as Callfor�ta s two :. ,a p):lc� ,of $�4. a share, raising $480 mil- . )belr hlgh·v�Ifage power lines t� lnde­ main investor owned utlll_ties wer� i :,_ l!o!J;·:"W.e S\IW an opportunity to crystal- :�--Pe.!ldent operators that would give all pushed. to the �rink of insolvency. -itze .the· value'' of the trading company, · market participants fair access and Then, (n the spring, natural-gas .and·:. ·.;�aisJUliliCQ�p··,:fllief.J executtve Bob. ·wHJ operatespot markets for power. electrlcity prices collapsed around the, . (}reen·�·!>.;,' ;.,:, ,-·�1.•:,�··: -1;_': · ,; . , •.. • . • ,.,. Earlier this month,. the. commission country as the economy · suddenly . · l · · ·•' -. " ' · f · · · · • b' · t t d slowed to a crawl. Even before Enron : ·.,Aq1,1.Ji.s stqc�.�o(lred. �o.$35 be ore it J°'ld three of the nation s 1g m egra e /' ,:• '"• \I • I I , 1, � e '. , ' ( •: ' • got into trouble, the big energy compa- · nies began to see their. stock prices. .. · !,· i(, · ·· .: , . i . ,,;.:-,; :. ,\: · · ·
sink and investors cast a-more critical: . iPast Their Peaks eye on their expanston'plans In the ' · · · · · wake of the California. debacle and the ·• Enrpn'a dc)lly share price '(left axis). and ttie OJ Pal.o Verde. Index• of firm on-peak prices
resulting multi billion-dollar .. electrlcity. · for,ele.ctrtcity ((liht axis) · · · ·
payment crisls, . . .. . . . • ·.x· \f12f i':.": . . , . .
One or. the first signs that 'a sea '. · change was 'under way came a few months ago when demand -for. power· generation turbines began to soften. Be­ cause there are only three domestic suppliers of. · such multimlllion-dollar turbines, the most expensive pieces of machinery used by commercialelectric­ ity producers, they must. be ordered well in advance of their. deployment. A year ago, says David Sokol. chief · executive of Iowa-based utility owner Mid-American Energy Holdings Co., "you had to pay a premium to get a turbine." Companies with lots of tur­ bines on order, such as San Jose, Ca­ lif.-based Calpine, boasted that they would clean up. In newly deregulated markets such as the West, the Northeast and New York, where electricity sup- . plies were tight. "But now," Mr, Sokol says. "I know of at least 100 [turbines) · that are for sale. People want you to take their place in line." .. While· most companies .are pressing ahead with projects they have started, they have become more cautious about breaking ground on new ones. Just a few months ago Calpine boldly claimed it would have 70,000 megawatts of generat­ ing capacity, the equivalent of 35 to 45 big power plants, In operation ·by 2005. Now it's backing away from that claim made �ust a few short months ago. The company currently has only a fraction of
An early sign that a
sea. change was under
way was the softening
demand for turbines.
began slipping at the end of May. Since utilities-American Electric Power Co., then, it has tumbled hy half. Today, with Entergy Corp. and Southern Co.-that a price/earnings ratio of eight-less . If they didn't relinquish their lines to than most utilities--the "equity mar- · an· independent operator, FERC might kets are closed", to Aquila, Mr. Green. . intervene to limit the prices they could says. . · charge for their power, The companies . Now, UtiliCorp is planning to buy are appealing the FERC mandate, back all the publicly traded Aquila The commission has also stepped up shares. By taking shelter under UtiliCor- efforts to settle pesky but important tech- p's umbrella, Aquila should be able to nical issues, too, such as how indepen- . use its parent's strong credit rating and dent power producers can hook up new healthy balance sheets ·as well as Utili- plants to the lines of nearby utilities and . Carp's regulated utility units in order to how transmission services can best be keep trading and to buy more power priced. plants: . Still, even a more aggressive FERC The regulated utillty, once consid- hasn't been able to solve some lingering ered a homely wallflower, is looking problems. A good example is the contin- more alluring these days as trading ued existence. of one of the nation's flrnis, such as Aquila and Enron, have worst transmission. bottlenecks. Known fallen from favor. That could portend a as. "Path 15," the line interconnects the reduction in the huge trading volumes, populous southern· part of California and accompanying price volatility that with more abundant energy resources in marked. the early stages of·energy dereg- . the. north. The Department of Energy ulation. · has pledged to help expand Path 15, that capacity, 11,000 megawatts, in ac- But that won't help consumers unless which was.Implicated as a key cause of tual o erat).on. . , new power plants and transmission lines the: blackouts in California earlier this " · · · · · ··· · .· .· · :M��JP,f:Q\li�,m I� a. lack off come on line in time for the economy's re- year. . e.atnmgs>Wh1le energy surgence and new rules are put in place . But actually getting the work done co· ies routinely beat their own bull- :. thatguarantee a more. transparent mar- may require PG&E Corp.'s Pacific Gas & ish quarterly profit estimates 'Iast' year,'. .ket. The latter won't be an easy task, be- ,· · Electric· unit, which owns. the 90-mile many of them have lately indicated that · · cause mostpower trading Is done off pub- .stretch of line, to get approval for the they will miss earnings projections. lie exchanges, with traders darting in and expansion from the state Public Utilities With electricity and natural-gas prices out to take advantage of price discrepan- Commission. But · Pacific Gas, which down, energy sales are less profitable, cies. . placed itself under the protection of the Hence, investors 'haven't been willing to Lately, there's been growing evi- federal bankruptcy courts amid the Cali- pay the same price-earnings multiples dence that some power .companies have : Iornla. power crisis; is 'at loggerheads for energy company stocks. . . found lucrative ways to exploit this sys- with the PUC. The upshot is that there Bankers also want to be more certain 'tern-at consumers'_ expense. Their tac- may be significant delays iri upgrading. that future· power prices w!lf be high · tics lrtcludemanJpulatlng wholesale elec- · ·. Path 1�-Tne··itnplicatlan: whe!l the econs enough to Justify new projects. That's trlclty auctions, taking juice from trans- omy 1;ran;ks;1ia:t1GiUJ).';S'oi�llrttte·�oss,l., far from guaranteed In deregulated mar- :, mission systems when they aren't sup- · ollltY gf' mqr�t,,§l!PP1Y,: s�ortages and kets. In fact, national electridty· prices, -. posed to and denying weaker competl- · hlgl)er prices. says Terry Winter, chief',' which hit -a 52-week peak of · $216 .per ·. tors .access to transmission lines. Regu- execunve: of'' C!fllforrlia''s ihcfoperideni megawatt, now are being quoted at · lators believe that this behavior has con- System :·operato11, which o.perates the $23.45, according to the Mirant National tributed to supply glitches and inflated state's electricity grid.
•
'r'·
( )
:)f) MQNTCC:MF.AY STACH Jf::ASEY CITY, Nf:W JERSE:Y 0730?.
Sp¥.dal Report
( zo 11 433-5507
Fehrnary 2R, 200 l
RECOVF.RY OF :FUEL ANO WHOLESALE POWER COSTS:
WHO lS AT RISK, AND WHO IS NOT?
The potential for volatility in wholesale electricity markets, as highlighted by tbe temporary price
sprkes experienced in the Midwest in June 1999 and, more recently, by the ongoing severe capacity
.�hortiige/pricing crisis in California, has raised investors' level of awareness and concern with regard to
I he ability of electric utilities to recover increased wholesale power costs and fuel expenses from ·
customers. A number of utilities nationwide arc currently subjectto price caps orrate freezes
implemented as part of multi-year competition transition plans. In adopting these plans, state ·
commissions and utilities assumed that competition would produce wholesale power prices that were _
below the power costs embedded in the capped rates. It was, therefore, widely projected that the utilities
would have an opportunity to recover their stranded investment during an initial transition period, afle_r
which customers' bills would be adjusted downward to reflect the presumably lower generation prices ·
produced in the competitive market.
In California, however, this plan flat out backfired. In the Spring of 2000, wholesale power
prices began to rise in response to several factors, including: highcr-than-forecasred demand tor
electricity within the state; poor hydro conditions in the Northwest, which reduced the available supply
from that region; the lack of new capacity; rising natural gas prices; and, the provisions of the stetc's
electric industry restructuring law, which prohibit the utilities from entering into long-term purchased
power contracts and hedging arrangements. The wholesale price rise and the legislatively mandated
price cap in CaJifornia have brought PCG Corporation (PCG) subsidiary Pacific Gas and Electric and
Edison International (EIX) subsidiary Southern California Edison to the brink' of bankruptcy. °This··· ·
pricing instability has raised the specter of unrecoverable wholesale power costs nationwide, and thus
has piqued investor interest in the existence of purchased power and fuel cost recovery mechanisms ..
In the 1970' s, increasing oil prices gave rise to regulators' adoption of the "fuel adjustmcut
clause" (F AC), which enabled electric utilities to quickly implement fuel-related rate :i.djustme�ts
outside of the traditional rate case process. As the reliance on purchased power grew due to competition,
i11 the wholesale power markets, the FACs were expanded to include purchased power costs. More
recently. the number of jurisdictions that permit fuel/purchased power costs to be recovered through
r'ACs has diminished as the retail generation market transitions to competition. As part of the
restructuring proce:u, some companies have chosen, or were required, to eliminate their F;tf.Cs, and ore
auempting to manage their supply risk through long-term purchased power contracts, power trading
activities, and/or the retention of their former regulated generating facilities {AZ, Cl; DC, MD, Nil. M1:
NJ. OH, and PA). The majority of the utllities operating in AZ, MD, NJ, Ml, OH. and PA, have chosen
to retain their generating assets, thereby mitigating their exposure to wholesale market price volatility,
However. the companies in CT. DC. and MT. and some of the iailittes in NJ and PA. have chosen to · ·
divest their generation assets, and have entered into purchased power contracts and/or hedxing . ·
arrangements in an at/empt to mitigate such exposure. In PA, GPU, Inc. (GPU) subsidiary GPU
Energy unsuccessfully attempted to auction off its provider-of-last-resort (POLR) obligntion. and <1s o
GO 'd l££69P£G19 'ON X�3 OON�NI.:f 01:vt 03M 10-LO-AON
RR t\-lJ.�·.giilnrory Focus
o-ze- 1 · 11 ·u::llllYI C.\.,VllVllJI\., tu:.LILUII IUl'I-'
·2- February 2�. 100 i
. result, their hedging arrangements have been in�ftcient. In MT. a de/cry in industry restn,cluringmay·
result in Mantana Power (MTP) being required to continue to serve generation customers beyond the
term of.tts existing power contracts. Cleoriy, the 'Califomta electric utilitus, which must procuu <ill ""P.'�" requirements through the state 's Power Exchange, are subject to the highest degree ofexposure ·r,, i,w�·iici:,;trig wholesale prices. · '. · · · -: ·
Other utilities in ME, MA. Nii, NY, RI. 1'.¥. have been authorized lo implement new power cost
N'NlW1J• mechanisms that flow through wholesale price adjustments on a timely basis, and essentially
leave the utility risk fret! with respect to wholesale power purchases. Yet, other companies, mostly those
·. f/mf continue to operate under traditional regulation, have maintained their traditional FA Cs (Al, CO, rt: !i.·I. HI. ID. !L. IN. IA. KS. KY, l.A, MN, MS. NC, ND, OK, SC, SD, TN, VA, WI, rm. Finally. there
,,,.,, ,.1 Jrm,df,,J ct states (}v!O, U1: VT, and WA) in which FA Cs are prohibited. Utilities r,p�mring in ,1,,.,.,_, turisdictions have always been, and continue to be, at risk for fluctuations in fuel and purchased
1,owP1· ,:(l.�t.r between rare cases.
In this study, we indicate the current policy in each jurisdiction ;ith respect to supply cost and
fot>I expense recovery. The table below provides a summary of each state's progress towards electric
industrv restructuring as indicated by our "Tier Classification," as defined in our 11/29(00 �cial
tt.q)WJ entitled t}ecfric Industry Restructuring Update; e.g., Tier I includes those states where retail
a•"ct>�,� i.� in place, and Tier 5 includes the states where no substantive restructuring activity is underway.
(That report is revised weekly on our website www."a-focus.com.) The table also indicates whether the: .
utilities operate under rate cRps, and ifan energy-cost pass-through mechanism is in place . .In the text
. th�l follows. we include a state-by-state discussion that expands upon the information provided in this
( )
j�- Rr.��in� I Co,t Pass:-
. S!a!e _Jier Rate Can Th�UJ:�.- . AL 4 • ,-·-- ····--'----+--.---·---·-- . 1\l I I ./
1 ·�+--:-········-· _ " - ---7·-
- co _j 5 -,_..... .... .. •. � ·-- TT ' ., - f;I! ... L. 1 ./ .... · ..( ·
. DC I J .- ·�··,-- :. i··· FL __ -�,._ 4 ·----·- ., . GE 4 +---.-./--i ;--·-m-'"" 4 7�-.·
I 10 5 ..f r .,L . , 1 �--·· •••• •• .r ., r rt,·----" __ ,_l. ·,t
�--IA L.. 4 .........•. .. ---r-··--··1 ·
� KS _J 5 ·-·- ·-·--- .. �· ..... ---< · f ft· I � ��-- ---7 :
___ M.E __ ; J . --- ."!_ ..• ·-
. �� ·-�--· -· � --·-- .. - . J ./
1. ••. Ml i I .£ :MN: 4 ../ f·--..:.-� -·-1----+---../--- �" 1',,l."1 __ t--· .s i •.. -�iY- 4 __ _.__ J _
J\c.1tn1c:turiug Cost P11:11- State Tier lute Cap Throu2h Mt 1 .f ·-+--=.:..:;..:..=;;;�
NV 2
NH l .r: 'NJ ..... --. l :.....,.. "'-""T"'"'----
NM 2
NY J NC-· 4 1 ,._.._. - --- ' ·- ND 4 , OH l -t --r·----1
OK 2 ..,..__ I
OR 2
PA l ./ RI l -1-----t-----7-·-
SC ,___ 4 ./
SD 5 ! .f l TN �- . 5 - - - ' 7
TX l ..... :r·----
U'I' .s i -- vr 4 I ·-
VA 2 I 7···--
WA .5 -·wv 2 � --wr--·�-4--�-t----�--1---��. �-i _WY______ s �-----�··
../
{)
table The discussions provide details regarding any rate freezes or caps, and specific recovery/pnss
thrr:iugh mechanism outside of a general rate cue for energy costs that differ from those reflected in base
rates. We note if a state has been through the restructuring process, and discuss, where applicable, how
cost recovery may be affected by: divestiture of generation assets; the extent lo which the utilities
.,,�;.,h;,.. ,.,,_ nhlic,ntinn tn h,, th .. ""f'""" l)()l ll · th,. rPrl"\Vf'T::llhilit,, nt tht": ,.nl':r(l.V r.n�h fnr Pnr ."R �qnnlv·
£0 'd OON1;1Nl:l �t:Pt 03M 10-LO-AON
:,.
.. · ... RRA-Regulatory Focus
o- ,o- l , ll · 0uAITJ , C\.,Vl'Wlll IL, Kt:lll'Lf\ I I VI� ....
-)· February 28, 200 I
and. the efforts of the utiiities' to hedge wholesale market risk by securing long-term power at
contracted prices, or other means. · . .
J)
Alnb:imu
(!QJeral Policy:--The state's only major investor-owned electric utility, Southern Company (SO) subsidiary Alabama Po-.y_�r; utilizes an Energy Cost Recovery System, known as rate ECR. Rate liCR
generally may not be changed more than once every three months and then generally only after hearing�
have been conducted. Rate ECR. is established on the basis of estimates of sales, fuel. and net purchased
energy costs for three future months, and reflects accumulated over- or under-recovered amo\ints The
P c;c has authorized Alabama Power 10 recover through Rate ECR the costs assoclated with the buyout
nf long-torm coal-supply agreements if the cumulative savings resulting from the buyouts exceed the
cumulative buyout costs. As a result ofa 3/10/00 PSC decision, Alabama Power may recover the fixed
\·,,.�t, associated with future, PSC-certifi�d. long-term purchased power contracts thr.ough its Certificated
N ... w Plant adjustment clause (Rate CNP). Prior to this action; Rate CNP only provided for recovery of
P SC.certified plant additions. . -
Arizona
G�w;ral Polic.:'i··The Arizona Corporation Commission (ACC) eliminated ArizoD.�1L<:._S.n_v_l<;���
(APS') and Tucson Electric Pow�!_'.! (TEP's) purchased power and fuel adjustment clauses (PPFJ\Cs) in
I 989 APS is a subsidiary of Pinnacle West Capital (PNW) and TE� is a subsidiary of Uni Source
Energy (UNS). As per the ACC's electric industry restructuring rules, all customers became eligible for
retail competition on 1/ 1/0 I. Utilities are to transfer generation assets to a11 affiliate or an unrelated
entity The utility distribution companies are to make standard offer service available :it capped rates,
and are to continue to have the POLR obligation for the foreseeable future. The distribution companies
are to purchase power at wholesale to supply standard-offer customers. ·
. Sp_ecific Com12.qnyDis,yssio1J.--APS' plan includes specified price reductions through 7/1/0J, and
expires 711/04. The plan provides for the company to file for a new rate plan in 2003 for ·
implementation 7/1/04. The company intends to propose a mechanism that would permit deferral and
recovery of energy costs to serve standard offer customers beginning 7/1/04. TEP's agreement provides
for I% price reductions for all customers to be implemented effective 7 / l /99 and 7 /1/QIJ. folio wed by a
price freeze through 2008. The plan may be reviewed as early as 2004. Both companies have chosen to
retain their generation, thus providing a hedge against wholesale price volatility
Arkansas
�i.e111r_ral Policy-The electric utilities are permitted to use an automatic monthly fuel and purchased
pnwer adjustment clause (F AC): however, compliance audits are conducted for all costs subject to the
automatic adjustment. Feel cost changes are subject 10 a two-month lag.
�Q..�fific {;_9-.m[}ony Discussio,1--A!i part of a "Transition to Competition Plan" adopted by the Arkao:;;1!!
Public Service Commission following a settlement in 1997, Entergy (ETR) subsidiary fuiter�.:!mm.\�
1.F.A) was authorized to replace the FAC with a fuel and purchased power recovery mechanism referred
to ns the Energy Cost Recovery Rider (Rider ECR). Rider ECR is calculated on art annual basis, and ls
designed to recover all fuel and purchased power costs (no fuel costs are included in base rates). Rider
. FCR rates are set annually on 4/1, reflecting the actual cost experience in the previous calendar year.
California
Genera! Policy-� The California restructuring framework was established by the PUC in 1995 and by the
I<)% enactment of Assembly Dill (AB) 1890. The FERC-approved California Power Exchange (PX)
and (m:lependcnt System Operator (ISO) became operational 3/31/98, at which time all customers
VO 'd LE£69v£Zl9 'ON Xijj OJNijN U vl :vt Q3M lO-LO-AON
... •, . .:,., ,_,,
RR.:\-R.�i,,:11latory Focus
V LV .l • l: l • "'tUl"\1'1· L-\.·VI ,v,,11 \..., l\L.UL1l.....i\ I I vr,- -:, I. <'.,HtJiJ,Ju ·, • I• "' 4.l
February 28, 200 I
··/ )
'. ( )
became eligible for direct access. The state's utilities must purchase �II their power requirements from,
A,1<l all incumbent utility generation must be bid into; the PX for the first five years of reti\il competition.
fh<": incumbent utilities must procure power from the P.X (on a day-ahead basis) for customers who have
1101 switched generation suppliers, which is the large majority of customers. Utilities generally must
nnrriplt'l.e transition cost recovery by 12/31/01, and customers' total rates arc to be frozen at 1996 levels
1mtil , h� earlier of 12/31/01 or until transition cost recovery is completed. While each utility' s Energy ·
ro�t Adjustment Clause andElectric Revenue Adjustment Mechanism were eliminated in 1/98, a
Trnn�it.11H1 Revenue Account (TRA) essentially performs the same accounting functions. The
,·mnp:,nie� were required to divest to a non-affiliated entity at least 50% of their fossil generating assets;
ho"'A,,�r. the utilities have sold almost all of their fossil generating assets.
siss i/7c(..)n@nv Dtscussi 011�·
P!lcific. G:�La..o_d Electric .C.J:Q&Erand Southern Californi\l_Edi�.Qn (S.G�}--As a result ot'
exrrernelv high prices in the PX, the rate freeze, and· the companies' sale of almost all of their fossil-fired
w�oprnti1111. PG&E Corporation (PCG) subsidiary PG&E and Edison International (EI:X) subsidiary SCE
. have accumulated over $IO billion in purchased power cost deferrals. These deferrals and the ·
· �!.'.'.wnparwing cash shortage have caused PG&E And SCE to default on certain interest payments and
p11sh�d the utilities to the brink ofbankruptcy. While the companies received approximate l0% interim
l"'mt'rgencv rate increases on l /4101, the increases have had little positive effect en the companies
tin:ince�, since the utilities are still operating under the rate freeze and PX prices remain extremely high.
Thi" cri sis i� receiving considerable attention from Gov. Gray Davis (D) and the Legislature. 011 2/l/01,
(�nv D;iV\� signed AB l X, which authorizes the California Department of Water Resources (D\VR) to
enter into contracts through i/1/03 to purchase electric power and to resell the power to public: utilities at
no more than its acquisition cost. The legislation establishes DWR Electric Fower Fund (DWR-EPF) in
the State Treasury, and transfers $500 million from the state's General Fund to the DWR-EPF to finance
its acrlvtties The PUC has ruled that the DVvR would be responsible for any shortfall between the price
a1 which the OWR purchases power for the utilities and amounts collected from customers (FN 2/23/0 I).
Legrslation. Senate Bill 33X, is currently being considered to allow the state to purchase the utilities'
transmission assets (FN 2/16/01). On 2/16/01, Gov. Davis announced thllt the state was in negotiations
with the utilities to formulate plans for the state to purchase the companies' transmission facilities and
· prnvirle the. utilities a method to address their excess power costs. A tentative agreement hes been
ni"•:hetl between the Governor and SCE, and it appears that any above-book proceeds from the sale of
1rn11�n·i�sior1 assets are to be used to offset purchased power deferrals.
'.i�11..Qj�Q_Ql!.�.J�l.�ctric (SDG@--Sempra Energy (SRE) subsidiary SDG&E completed its
trll.11�it inn cost recovery and its rate freeze was terminated effective 7/1/99. On 8/3/00, the PUC
ini:.tit11ted n number of measures to alleviate the substantial increase in the price of electricity for ·
. -SOGkF's customers caused by the high PX power prices (FN 8/4/00). On 9/7/00, the PUC
implemented AB 265. which caps the electric commodity portion of rates for SDG&E's residential, and
srnal! and medium business customers, including schools and hospitals, at 6.5¢ per lcWh through
11r; I /02. retroactive to 6/30/00. The legislation effectively caps a residential customer' s monthly hill
for '.)<)!) m \V of usage at $68 The legislation also authorizes the PUC to extend the cap for an additional
vear through 12/J I/OJ. AB 265 requires the PlJC to authorize SDG&E to establish a Transition Cost
Bal:111cit1g Account to track revenues and expenses related to its wholesale purchases of electricity The
balancing account would indicate whether SDG&E has any revenue shortfall at the end of the rate
smbilizerion period. AB 265 requires the PUC to investigate the prudence and reasonableness of sr,l;,�·- E · s wholesale energy procurement practices since 6/00 (FN 9/8/00). On 1124/01, SDG&E
pe-tit.if>nr.d the PUC to authorize implementation of a 2.3 ¢ per kWh electric surcharge, beginning 3/ l/O I,
· m at least partially offset the growth of the company's uncollected wholesale power costs and to
p,:,ssibly begin amortization of these costs. As of l 2/31/00, SDG&E's uncollected wholesale power CO!-;t
h1il:111c:c was $447 million, and based on current forecasts the uncollected balance is expected to growth
to ·� I billion by the end of 2001. $1.3 billion by the end of 2002, and $1.45 billion by the end of 200).
90 'd LSS69P£Gl9 'ON X�j OON�Nlj Ll:vl G3M IO-LO-AON
Sf;'H f\Y:
RRA-Regulatory Focus
8-28- l :11:41AM ECONOMIC REGLl.ATJoN�
-5- . February 2�, 20()1 ·
}
(}
Colorado
(,i..encral Policy--The Colorado Public· Service Commission (PSC) had adopted semi-at1tomatic- .
:Jdjustment clauses, including incentives, for the recovery of fuel and certain purchased power costs,
Sp_ecitk Comoany Discussion
Public Service Ccilora<lo. (PSCO)--PSCO's fuel and purchased energy costs are recovered
through an Incentive Cost Adjustment (ICA), initially approved as part of a performance-based
regulatory plan adopted in conjunction with PSC approval of the PS CO/Southwestern Public Service
merger to create New Century Energies. PSCO agreed to continue the ICA through l ?./31102, :J.S part of
the PU C's subsequent approval of the New Century Energies/Northern States Power merger to create
Xcel Energy (XEL). Under !he ICA, an annual energy cost benchmark is established. Variations
between the benchmark and actual ener�y costs are shared equally by ratepayers and thP. company.
Wc�tPlains Energy (WPE)--WPE, a division ofUtilJCorp United (UCU), has a similar ICA:
. Capacity costs associated with purchased power are recovered through base rates, except for capacity costs associated with now qualifying facilities (QF). Incremental QF capacity costs are recovered
through a QF capacity cost adjustment clause. ·
Connecticut
(,energJ Polic}(--Prior to electric industry restructuring, United Illuminating (Ul) and Northeast Utilities
(NU) subsidiary Couuecticut Light & Power (CL&P) utilized adjustment clauses toreflect changes in
fuel and purchased power costs between rate cases. Following enactment of House Bill {HB) SOOS in
· 1998, fiill retail competition was phased in over the l/1/00-to-7/1/00 period. Divestiture of generation·
was not mandatory; however, recovery of stranded costs is conditioned upon generation assets being auctioned off Under HR :5005, from 1/1/00 to 12/31/0'3, each electric utility is required to provide
standard offer service (SOS) at a rate I QG/o below 12/3 t/96 base rate levels. The law provides for
adjustments to the SOS rate to reflect legislative or accounting changes, or if"an electric distribution
company incurs extraordinary and unanticipated expenses required for the provision of safe and reliable
electric service." Both CL&P and UI have contracted with third-party suppliers for SOS power supply
i\t rates that meet the law's pricing requirements. Beginning 12/3 l/0.3, each distribution company is to
provide competitively-bid default, service to those customers who have not chosen an alternative
supplier. Until an independent system operator implements procedures for the provision of back-up
service, each distribution company must also provide back-up services to any customer whose supplier
has failed to deliver electricity. The presumption is that the cost of such service will he fully
recoverable from customers. Until 12/31/03, the power for back-up service may be procured through
competitive bid or through the utility's licensed affiliates. Thereafter, back-up service is tu he acquired.
through competitive bid.
Delaware
General I'olicy--Concct.iv (CIV) subsidiary !8tl!:ngrva Power & Ligi.ll (OP&L) is the only major
investor-owned utility operating in the state. Historically, DP&L was permitted to recover fu.el costs as
well as the demand charges associated with purchased power through the Electric Fuel Adjustment ·
(EF A) Electric: restructuring legislation enacted in 1999, which required the phase-in of retail .
competition over the 10/1/99-10/l/OO period, eliminated the F.FA and capped rates for customers who do
not select an alternative supplier through 9/30/03. The capped rates reflect actual fuel costs for the
l2 months ended 12/3 l/99. DP&L may file for a rate increase if fuel/purchased power costs exceed
l \ 5% of those reflected in the capped rates. Prior to 9/J0/03, the Delaware Public Service Commission
is to conduct a competitive bid to select an alternative provider(s) for standard offer service DP&L has
entered into agreements to divest its base load generation facilities, while retaining certain poaking a111t
intermediate plants. For the most part, DP&.L has entered into long-term contracts to purchase the
90 'd OONldNl.'.I 6t:vl 03M 10-LO-AON
i;!,t\-Rc�11!at0t-y Focus
o-L.o- 1 •ll·'i!Alll ; C.L-V1Wlllll... !tt.\.JULATIVI',... ·JU;jqtitJ�j;:j/;;a: 1!'2!
. . -6- Feoruary 2�. 200 I
/. )
(
. )
:( )
divested plants' output from the new owners to serve its POLR requirements. OP&L's partial .
divestiture plan is unique in th.at it allowed the company to. realize the market.value of its base load
generation assets and deploy that capital elsewhere, while insulating the company from the price
vnl11tili1v that ma.y occur during peak demand.
District of Columbia
(;�v�.r..c1l Po/ic;·--Potomac Electri.&.J>ower (POM) is the only major investor-owned utility operating in
the District, Historically, POM was permitted to recover fuel costs as well as the demand charges
associated with purchased power through the fuel adjustment clause (FAC); however, the PSC has
:,doptcd an 'electric industry restrucmring implementation plan that calls for POM to divest its generation :,��""t�. with rates to be reduced following completion of the sales and remain capped (including the
r: /\() ::\t that reduced level for four years .. Electric restructuring legislation enacted in 2000 calls for
· r�tnil ncccss Lo be phased in over the 1/l/02-1/1/04 period. POM is to retain the_POLR obligation until a
defo111t supplier is selected by theD.C. Public Service Commission through a. competitive bidding
prnc.:e�s, In 1/01, l>OM completed the sale ofits generation assets as permitted by the plan. However,
the sales agreements included contracts under which POM may purchase power to supply POLR service
1�1r four yens nt rates that are below POM's cost of production prior to the divestiture. The restructuring
· plan permits POM to retain a portion of the benefits if the cost of power acquired to meet P.OLR. needs is
lesx than that reflected in the capped rates .
. Florida
Q_t?_l'J...€_!_[_1_!£9/icy--Florida' s Fuel and Purchased Power Cost Recovery Clause provides. for recovery of
prudently incurred fuel and purchased power costs (energy only) through levelized monthly billing
charges. Since 1/99, the clause has been based upon 12-month projections of fuel costs and sales, and is
reviewed annually. Prior to 1999, the clause was based upon six-month projections and was reviewed
semi -annually. Intermediate adjustments are permitted if substantial differences develop between. ·
projected and actual costs. Interest is accrued on both over- and under-recovered balances. The
capacity component of purchased power costs is included in base rates, and is recovered on a demand
b11'<is, a, opposed to a kWh-usage-basis.
Georgia
U<:/l#t.Qi..P...Q/iCJ!·-The state's major investor-owned electric utilities, Southern Company (SO) subsidiaries
GeorgiaJ�mver and Savannah Electric and Power, utilize a non-automatic fuel adjustment mechanism,
Hearings are required before increases are implemented. Electric fuel rates are based on estimated sales
and fuel costs, and any balance of previously unrecovered fuel costs is considered in setting new rates.
The en�rgv portion of purchased power transactions is permitted to be included in the mechanism; the
canacitv component is recovered through base rates.
Hawaii
Genaal Pof;q:--Automatic fuel adjustment clauses are in place for the state's electric utilities. The
clauses are adjusted monthly for changes in fuel and the fuel component of purchased energy, and for
variations from the forecasted generation mix. Purchased power capacity costs and the operation and
maintenance expense component of energy costs are recoverable through base rates. The PUC may
impose a surcharge on utility rates for recovery of capacity costs under purchased power contracts with
· non·fo�!!il fuel producers (geothermal. wind).
Idaho.
G,meral I:oli.fy--The Idaho Public Utilities Commission (PUC) has the authority lo implement automatic
electric power cost adjustments (PCAs).
LO 'd LSE69vEcl9 'ON X�3 OONldNl3 zz:vt G3M tO-LO-/\ON
.)l'..!�I 1\1 · o-zo- 1 • ll ·'+.u\\l! • C.L·Vl'Ml!IL l'Ct.l.Jl'LAI IV:'r'
RR A-Regulatory Focus • 7- February 28, 200 I
)
.() -: ..
:;:.:, .. ,.
/ .. )
Svedfic o,mpa,rv Di.sCU.\'j'lMI
. . .· . . . . . .
Avist11 Corporation (A Vl'tl--AV A's PCA enables Lh1:1 company to defer, in a balancing account, .
the difference between actual power costs and costs based on normalized stream flow conditions. If the
10rnl balancing account reaches $2.2 million above or below normal, a surcharge or rebate is
implemented. A VA does business as Avista Utilities. ·
Jditho Power OJ..Q--lPC's PCA mechanism provides for annual rate adjustments to reflect 90%
· of the cost variations associated with water supply for hydro-electric production. Adjustments are based
on annual federal government river flow forecasts, with a true-up in each subsequent year. I.PC is a
subsidiary of ldaCorp (IDA). On 2/2J/01, [PC filed an application with the PUC proposing to
implement a one-year emergency energy charge due to extraordinarily high purchased power expenses. If approved. IPC's proposal would provide for a$ l6 l million revenue increase, which would offaet the
increase in purchased power expenses accrued through l/0 I. TPC proposes the charge become effo::tiv-:.
V?fi/0 I, subject to refund pending a PUC determination of the company's annual 2000-200 l PCA tliat
will go into effect 5/ 16/0 I.
· ��ifi.�Q!I!--The company does not operate under a PCA: however, on 2/12/01, the PUC
approved the company's request to defer (without interest), for later review and possible recovcrv,
purchased power costs associated with increases in wholesale market prices The deferral period iii tn
begin 11 I I /00, and continue until the earlier of l0/31/0 I, or until new rates are implemented providing for recovery The PUC directed PacifiCorp, the Staff, and any other interested parties to engage in ·
discussions to develop a recovery mechanism (FN 2/ 16/01 ). PacifiCorp, a subsidiary of ScottishPower,
· pie (SPl). is doing business in Idaho as Utah Power_& Light.
Illinois
('il:.t1.e.1.·(l]. PQ/icv--Historically, electric utilities have been permitted to recover fossil and nuclear fue]
costs, as well as the demand component of purchased power costs through the fuel adjustment. clause
(F AC} The F AC is automatically adjusted monthly based on fully-forecasred rt.1el and purchased power costs for the prospective month, and to correct for over-funder-recoveries the second prior month, with
no carrying charges on the unamortized amounts. The ICC conducts annual investigations to e:rnmioe
the prudence of each utility's fuel procurement practices, with refunds required of any imprudently . incurred costs. Electric industry restructuring legislation enacted in 1997, which requires the phase-in ()f
-retai] generation supplier choice over the 10/ l/99-5/1/02 period, permits the utilities to elect to
discontinue their F AC, with a representative amount of fuel/purchased power costs to be rolled into base
rates, as determined by the ICC. If the representative amount determined by the ICC is unacceptable to
the company, the utility may opt to retain the FAC. The 1997 law requires the incumbent utility to
retain POLR obligations through 2006, the end of the competition transition period, with rates subject to
a cap during that period. However, each utility is subject to ao earnings collar, under which rate
increases arc permissible if the utility's equity return falls below a certain level. To date, Exelon (EXC)
subsidiary Commonwealth Ediso!!, Dynegy (DYN) subsidiary [llioois..Power, and Ameren (AEE)
subsidiaries AmcrenUE and �nCIPS. have elected to eliminate their FACs. MidAmeri��n..J�f!J!J/:.'Y,
which is owned by a private consortium, and AES C..m.ration (AES) subsidiary CenttaWfa1...9is Ligtu;
have elected to retain their FACs.
·(ndiana
G.{tJIT.CJ.t...folic't.·-Electric utilities may adjust rates for changes in fuel and the fuel cornponen! of
purchased power costs every three months, following hearings, through the fuel adjustment daHSe
(FAC). By statute. the Indiana Utility Regulatory Commission (URC) may not approve a revised FAC
if it will result in a utility earning a return in excess of that authorized. The "relevant period" for the
earrnng s test i� the longer of the preceding live-year period or, the time that has elapsed since the
company's lust base rate case. The f AC ls based on estimated costs of fuel and purchased power for I\
go 'd OONIJNl.:l vG:vt G3M tO-LO-AON
..:r .11· Ill.·
RRt\·Regulatory Focus
v ,u J. , 1 1 · -,vn,•1 1 • LVVJ 1v1,1, � l\.l-U1..J\-io\ l I VI.,._
-8- . February 28, 2001
/ )
( .
_)
( )
. . .
fi1111ri' three-month period, with an additional factor to provide for the reconciliation of over- or under­
recoveries caused by variances between estimated and actual costs in the previous three-month period.
No carrying charges accrue on either over- or under-recoveries. The adjustment factor mlly be modified
more fr�uendy than every three months under emergency circumstances.'
SP'!.!-:Wc_Cumpa11v D.iscu.\'.'iion--On 5/31/00, the URC authorized Cinergy (CJN) subsidiary PSI �11es_gy (P.ST'l to implement a tracker to recover purchased-power capacity/demand charges incurred over the.
. period 6/00 through 9/00. Demand charges were recovered through the tracker, with the foe!
· «omponent of purchased power recovered through the FAC. PSI included a "mitigation credit" in its
tracker that was calculated on an "after-the-fact basis" and reflected "profits from off-system sales made
from PSl generation that has been 'freed up' as a result of tracked power purchases" (FN 619/00). In
I 'J.'M. nst proposed to extend the tracker for the summers of 200 I, 2002, and 2003.
Iowa
lie11a11/ Poli(J)--Energy adjustment clauses (EACs) are modified monthly based on forecastcd �nerg,y
costs ( iuel and purchased power) for two months. C nder- or over-recoveries are deferred and are
charued/credited to customers in the succeeding month.
l\{is;JA.merican Eoe.rgy_(!\1la--As part of an alternative regulation plan, ME's EAC was
eliminated effective 7/I/97, at which time a "representative" EAC revenue level was rolled into base
rare� In 1/99. ME filed data identifying the level of costs that would have been reflected under the
Cr\<..: In J/99. base rates were reduced by approximately $1 million to reflect ME's dernonsrrated cost
,,;irit1-.ti<'" below 15% from the representative level established in 1997. ME is a subsidiary of
· Micl.<\merican Energy Holdings, which is privately owned.
ms Util.iti�..s.1IfS)[(nterstate Power (IPC)--On 1119/01, the Iowa Utilities Board (IUB) initiated
an investigation into the fuel and power purchasing practices of IES' and IPC's parent, Alliant F.neq"ry
(LNT). after reviewing the companies' EAC filings. The IUB indicated that increases in gas prices and
wholesale power purchases will "likely result in significant increases" in the costs passed through the
EAC s, The TUB noted that because of the size of the increases, and what appears to be LNT' s increased
· reliance on short-term power purchases, the Board will require LNT lo disclosecertain fuel .procurement
cuntracl iofor mation forlES and IPC by 5/15/0l. The Information is to include: (1) purchased power
contracts (including all transactions in the short-term wholesale.market) that have or will be entered into
nr exercised during the preceding and prospective 12-month period; (2) long-term (two or more years)
purchnsed power contracts that have or will expire in the preceding and prospective l 24month period-­
for each contract, t .NT is to identify the dollar amount of capacity charges included in base rates and
hnw I he company intends to replace this contracted supply; and, (3) an updated list of purchased power
· contracts that Me or will become subject to renegotiation. extension, or termination in the next live years
(FN lUl'i/D\). .
K�JlS:11 ·
Ci!,nercrl I'alicy--Energ']· cost (fuel and purchased power) adjustment (ECA.s) clauses arc permitted by
law "111 arc no longer in effect for Kfil!�as.f:i1t.Power & Light (KLT). Westerr:LR.�so'!rce� (WR dlb/a
Kansas Power & Light), WR subsidiary Kigisas Gas & Electric (KGE). and Empite District �1.k
(LUE l Recovery of fuel and purchased power costs for these companies is addressed in the context or
rate cases. An ECA remains in effect (or UtiliCorp United (UCU) subsidiary WestPlains Enrn
K1m$,\S. but may be eliminated as part of a pending rate allocation proceeding. The ECA is calculated
,n,;int.hls based on projected fuel and purchased power costs for thac month, with any under-rover­
rr:r.nv�ri�� reflected io the subsequent month. Penalties may be imposed if actual costs exceed
proiecucns for three consecutive months.
.. ,
60 'd 08N�Nl.'.l 9G:vl 03M 10-LO-AON
�1 .. ;� I fl I •
RRA-Regulatory Focus -9- February 28, 200 l
)
;r)
()
Kentucky
. �1.1111-�ral Po/icv--Fuel and purchased power (energy portion onl�) coses are recovered through automatic
adj\lstment clauses. Fuel and purchased power adjustments are implemented monthly based 011 actual
costs for the second preceding month (producing a two-month lag); with an under- or over-recovery mechanism included in the clause. Incremental replacement power cost increases resulting from forced
"utages cannot be recovered through the clause. Public hearings are held every six months to examine
· procurement and other practices related to fuel and purchased power cost recovery, with adjustments to
correct for any costs that the Kentucky rublk Service Commission determines are unjustifled. . Additional proceedings are conducted every two years to evaluate the operation of the clause and to s<:t
the level of such charges to be included in base rates.
Louisiana
c;eneral Po/icv--F11el and purchased power (energy portion only) expenses are recovered through the
fuel adjustment clause (f. AC). The demand component of purchased power costs related to econurny
purchases ( entered into by a company when the price of the purchased power is below the cost of the
company' sown generation) may also be recovered through the FAC; Monthly filings arc rl:!'lllired for
implementation of changes in the adjustment factor. The major utilities accrue over- or under­
recoveries, with the bulk of the accumulated balances amortized over subsequent 12-month periods.
The lag for the calculation of the FAC is approximately two months. For certain utilities theLouisiana
Public Service Commission (PSC) requires that revenues related to off-system sales be recognized
through the fAC.
Specific Company Discuss�rm--On 12/ 13/00, following a settlement, the PSC ordered ?ntei:gyJ,.,oui11inn�
· (EL), a subsidiary of Entergy (ETR), to refund $72 million to customers to resolve issues arising fi:0111.
the company's FAC filings from l/1/75 through 12/31/99. The settlement resolves cases pending before
the PSC and a state court in which ratepayers charged that EL manipulated its system agreement with
other ETR operating companies to buy higher-cost power, and misused the F AC to increase charges to
ratepayers EL agreed to use a formula to calculate future fuel costs associated with a long-term gas · •
contract extending to 2013. EL forecasts that thi� formula may result in a calculation of actual costs that.
results in an under collection and an annual earnings lO$S in the rangt: of $4-9 million (pre-tax)
(FN t 2/22/00). . .
I\-foine
(1..;.r1eral Pohcv--Automatic fuel cost adjustment mechanisms had been permitted, but were eliminated
as part of the alternative regulation plans adopted for Energy East Corporation (EAS) subsidiary Centr<1l
tV[ain�J:.ower (CMP), Bangor Hydro-EJ�ctric (.BGR), and Ma.in.� Public Servi�� (MAP). With the ·
enactment of electric industry legislation in 1997, fuel adjustment clauses are no longer stl\tutmily
permitted. Under the law, retail choice for all electric consumers began in 3/00. Md the utilities were
required to divest generation by 3/1/00. Standard offer service is to be available until At least 1/l/t)S,
with power providers lo be selected through a bidding process. ln the event that no bids for standard
otfer service are accepted by the �UC, the Commission may direct the transmission and distribution
(T&D) utility to secure supply and provide default service. In such circumstances the PUC would
establish the standard offer rates for each customer class. which reflect the costs of the supply
arrangements made by the utilities. The l'lJC, through full reconciliation, would ensure recovery of all
costs of providing standard offer service. After an appropriate period, not to exceed one year, the PUC
would make adjustmems in standard offer rates charged by the T&D utility to allow recovery of any difference between the actual costs incurred by the utility to provide standard offer service and the
actual revenue from standard offer service in that period. ·
01 'd OJNl;!Nl..-1 sz:vl G3M 10-LO-AON
)
,J)
RRARegulnrnry. focus.
l\lanlamJ ·
(�m,:rq£1JJ.li0-�Historically, electric utilities were permitted to recover fud and the energy portion of
purchased power costs through the electric fuel rate (EFR) . The EFR was eliminated effective 7/l/00 .
coincident with the legislatively mandated implementation of competition in the provision of electric '
· supplv In accordance with the law, the PSC approved competition transition plans for each
invesror-owned utility which require the companies to provide POLR service for a certain period under
c�pp+>d rares The PSC is to conduct a competitive bid to designate a supplierts) of POLR service after
e:nd, ·.'11TI1nany-specific transition period has expired, unless the PSC determines that the incumbent
utilitv should retain the obligation to supply those customers.
:\lleg_f)env Power (A,e}--Thc restructuring-plan approved for Allegheny Energy (A YE) subsidiary
:\P �llnw�d the company to transfer its generation assets to a non-regulated affiliate effective 7/ 1/00.
AYE i!l t•> retain its POLR obligation for residential customers through 2008, and for non-residential
customers through 2004. Through 7/J l/03, AP may acquire the power to supply its POLR customers at. ·
1t� nwn rliscretiou, after 7/J 1/03, the power must be acquired through competitive bid.
U_aJtimorc G_lb� & Electric (BG&E)--The plan approved for Constellation Energy (CEG)
suhsidiarv BG&E also allowed the company to transfer its generation assets to a non-regulated affiliate.
f.\(,�F is to retain its POLR responsibility through 6/30/06.
Q.�l!.M!:Ya Power� Light CDU.11--Concctiv (CIV) subsidiary DP&L was authorized to divest
its base load generation assets, but retained certain intermediate and peaking units. For the most part,
DP& l. has entered into Jong-term contracts to purchase the divested plants' output from the new owners
ti.1 serve its POLR requirements. DP&L's POLR responsibility runs through 6/30/04 for.residential .
customers and 6/30/03 for non-residential customers. DP&L's partial divestiture plan is unique in that it �llnw�d the company to realize the market value of its base load generation assets and deploy th:1t
capital elsewhere, while insulating the company from the price volatility that may occur at peak demand.
f'oto.m.i!u.lectric Power (POM)--Under its restructuring plan, POM is to retain POLR
responsibility through 7/l/03. As permitted by the plan, POM has completed the sale of its generation
assets However, the sales agreements included contracts under which .POM may purchase power to
supply l'OLR service for fouryears at prices that are below POM's previous cost of production, and the
restructuring plan permits POM to retain a portion of the benefit if the cost of power acquired to meet
POLP- needs is less than that reflected in the capped rates.
Massachusetts
(iareral Po/ic,l!-·Pursuant to I 997 electric industry restructuring legislation, quarterly fuel and purchased
prvwer adiustrnents were eliminated beginning 3/1/98, coincident with the Stan of retail competition. By
11\w, :-t,1n1fard nlTer service (SOS) is to be available until 12/31/04, at rates that will increase over time, to
customers that did not select a competitive supplier as ofJ/l/98. New customers (service starting after
1/1/98) arc placed on "default service" until they select a competitive supplier. In general, once a ·
customer selects a competitive supplier, the customer is no longer eligible to return to SOS. Divestiture
nf non-nuclear generation facilities was not mandated, but most generation was sold, given the strong
regulatory incentives for companies to do so. Restructuring orders adopted by the Department of
Teleeornmunications and Energy (DTE) for most of the state's utilities provide for SOS prices to include
i1 standard off er service fuel adjustment (SOSF A) to reflect substantial increases in the market prices of
oil and natural gas. The DTE's default service pricing guidelines require electric utilities to charge
market-hnsed rates for default service beginning 1/1/01.
SPl!:.fij}!:_ C:1�.�/.!Il!!J!_{Jjro_1ss1011--011 12/4/00, the DTE approved SOS F As, under which Masll£!.H,1$l!.�
, ... f"T""' n ... , ... r.....a: .... """.,...., r-. .. ,_, __ .J .. ,-, .. ".' -r: ., ... ,r.,..,, -···JI"" .. -4 .. , .... ,,_,, • .,_,.,. ,..-, .... , •• :.
' . \
�to- Febn.my28; 2001
l l 'd L£E69P£ZlS 'ON X\3.:1 . 08N\3NI .:1 lE:Pl G3M lO-LO-AON
�""!I;,' I I' I ·
R RA-Regulatory focus
u--'u- L • 11 · 't'ti\l'l • C:.\ . ..VlWl'I I\.· ltC.\JL1L.'\ I I Vl'r'
. - l l - February 28, 200 I
)
( )
·r )
Company (CRC). were permitted lo adjust their SOS rates to reflect increased fuel costs effective 111/01.
ME is a subsidiary of National Grid USA, which is a subsidiary of'Natlonal Grid Group (NGG). BE, . ·
CEL. an<l CEC are subsidiaries ofNST AR (NST), and do business as NSTAR Electric. In the I 214ioo
order, the DTE noted that: due to recent steep increases in natural gas and oil prices, "the Comp,mi4»s are
under-collecting standard offer service costs, that the Companies have properly documented these costs and the Companies are accruing deferrals at a significant and highly problematic rate. The results of lhi�
investigation preclude ignoring these substantial increases in fuel costs as recoverable expens�s incident
to serving consumers. The inescapable fact is that if rates do not presently recover cons incurred for
power provided, then serious adverse financial consequences are risked." J\s part ofNortheast Ur.iii ties
( NU) subsidiary Western Massachusetts Electric Company's (WMECO's) restructuring order. the VTF.;
directed the company to set its SOS price for each year at the wholesale supply price identified thro11gh ·
the standard offer solicitation. Effective t/t/00, the DTE approved new SOS rates effective l/1101, th�t
reflect increased fuel costs to supply SQS service; ·
Mkhie:an
(im_graL f.oli.fl(··Eleclric industry restructuring legislation, Public Act 141, was enacted on 6/J/00. The
legislation provides for all customers to have their choice of electric supplier beginning I/ l /02
vtandatory utility divestiture of generation, except where market power is found lo exist (see below), ;.�
11ot required. Residential rates, including the fuel and purchased power cost recovery [Power' Supply
Cost Recovery [PSCRJ) clause, were reduced by 5% from rates authorized or in effect on .5/ 1/00, and the
reduced rates are to remain in effect until 12/31/03. AI_I other retail electric rates, including the PSCR ·
clause, authorized or in effect as of 5/1/00, are also to be frozen until 12/31/0). On and after 12/31/01.
overall residential rates are not to be increased until the earlier of 12/3 I/ I J, or until the P SC determines
rhal thi, utility meets a market power test and has participated in a 2,000 mW, multi-utility statewide
transmission expansion. In no event are.residential rates to be increased before I/J/06. Commercialand
industrial rates for customers with annual peak demands of less than 15 kW are not to be increased
before 1/5/05, It is anticipated that once the rate freeze ends for a customer class, rates for customers
who remain traditional; fully-bundled customers of the utility will revert to cost of service regulation.
Minnesota
0..!.m�rg{ I'o/(q,Y.··Automatic electric fuel adjustment clauses are utilized. The electric fuel clause is
adjusted monthly with a two-month fag and no provision for deferred accounting. Both the capacity and
P.t1ergy components of purchased power are generally flowed through the fuel clause, except in instances
where the two components are priced separately, in which case the energy component is flowed through the fuel clause and the capacity component through base rates.
IVlississippi
(-:r_gnercrl Po/icv--Mississippi Pubic Service Commission (PSC) rules provide for automatic fuel
adjustment clauses, with the energy component of purchased power recovered through the clause, and
the capacity component recovered in base rates. Both Entergy (£TR) subsidiary Enter_gy_Mi_�fil_gp_pj
and Southern Company (SO) subsidiary Missisfil}2pi Power have a lcvelized fuel adjustment that is set
for a 12-month period based upon projected 1uel use and cost for the ensuing 12 months, with a
provision for the reconciliation of over- and under-recoveries. The PSC must conduct an ennual audit of
all fuel purchases and interchange contracts and submit an annual report to the Legislature. Both
companies may recover emissions allowance expenses through their fuel clauses.
Zl 'd LEE69PE�t9 'ON Xijj OONijNJj EE:vr 03M 10-LO-AON
I lV y _yM1 _. V _J._, l"H. .... U 1 VI U I r I l�Mll\JU rH� NU OlijQb�jj( C\..-vt�Vi¥1 I 1., Kt\.JULAT I 0N""' P. 01 5123469337:#13(2l
()
{)
RRA-Re�ulatory Focus
Missouri
'G,me,:qJ. Poli(J!--By statute, the Missouri Public Service Commission is not authorized to allow electric ·
fiJe! adjustment clauses. Electric utilities file full rate cases in order to recover increases in fuel and purchased power costs.
Montana
0f!'1!U:JTf .f.YJifX--Fuel and/or purchased power adjustment clauses-are prohibited. Electric restructuring le�i�l;irion. enacted in 1997. required retail access for all customers ofMoruana Power (MTP) to be
ph3sP.d in by 7/1/02. MDU Resources (lvIDU) subsidiary MM,tiµla-:R.�ota Utilities may defer
r.ompliance with the legislation until the utility implements customerchoice in its primary service
territnrv (North Dakota), but no later than 7/1/06. MTP has been designated the default supplier for
,rnr1II customers. and is operating under a power cost rate cap through 7/l/02. Although the company
li:i� l'Pld iu; generation assets, it has contracted for supply to serve default customers through thl\t date,
and does not appear to be at risk. However, as permitted by the law, the Montana Public Service
Commission has ordered implementation to be delayed until 7/l/04 for MTP. Issues related to the
rf'nJVery of power costs for the two-year extension (7/1/02-7/l/04) to the transition period have yet to be
�ddres,.cd. On I /12/0 I. legislation was introduced to further delay the implementation of full electric
rf'tail competition lo.7(1/07. Under the legislation, the incumbent distribution utilities WO\Jld be required
rn �nt�,· �1n1ply contracts for standard offer/default customers during the extended transition period ..
NevadJ!
�![lrnr,1J.EuliQ'.-Bistorically, tho utilities were permitted to defer increases in energy com (fuel and
purchased power), on an annual basis with deferrals permitted to be recovered over a subsequent period.
t\� ran of a global settlement approved on 7/20/00 by the Nevada Public Utilities Commission (PUC)
for Sierra Pacific Resources (SRP) subsidiaries Nevada 'Power (NPC) and Sierra Pacific Powe.t (SPP)
the deferred energy procedure was discontinued and a fuel and purchased power (F&PP) rider was .
established for the period 9/l /00 through 2/1/03 for NPC, and 11/1/00 through 2/l/OJ for SPP. The rider
is based on the incremental increase in F&PP costs between two historic 12-month periods, subject to
certain caps. Under the stipulations, filings arc to he made each month by the companies, with the last
filinl!� to be made l 2/15/02, for rates effective 2/1/03.
0,1 ?./23/01, the PUC voted to approve, on an interim basis, the recovery of further energy cost
increases through company-proposed Comprehensive Energy Plan (CEP) Riders beginning 3/1/01,
�uhi�i;:1 to refund pending fort her hearings. The CEP Riders provide for recovery of the companies'
t!nt!rgy costs through 3/03 that are above the caps on recoverable expenses included in the F&PP. The
CFP Riders are designed to generate $208 million and $102 million in annual revenues, or 17% average
rnte increases for NPC and SPP. respectively. The 'Riders are to be adjusted in 3/02, 9/02, nnd 3/03 for
over .. nr under-recoveries. On 2/15/0 I, the Bureau of Consumer Protection (BCP) filed a motion for the
PU<.· to dismiss the CEP Rider proceeding. Briefs are to be tiled 3/16/01, and a preheating conference is
scheduled 3/23/0 I, to consider the BCP's motion to dismiss. Electric restructuring legislation in Nevada
called for retai l access to begin 311 /00 or some other date as determined by the Governor. On 2/22/0 I,
Gm· Kenny Guinn (R) delayed electric restructuring indefinitely.
New Hampshire
�.;�1�tll! Pol!.£1:'.--HistoricalJy, fuel and purchased power adjustment clauses (FPP AC) have been. . . .
nermitted. As part of an electric industry restructuring agreement adopted by the New Hampshire Pub he
l.ltilitie� Commission (PUC) in accordance with electric industry restructuring legislation enacted in
2000. Northeast. Utilities (!\1J) subsidiary Public Service New Hampshire (PSNH) is to eliminate the
F PPAC upon the implementation of competition. Any deferrals associated with ,he FPPAC, are to be
February 28, 200 l
RRA-Regulatory Focus
�AX NU, bl�j4H8j31 tCONOMIC K�GULATION--
-IJ-
P. 02 5123469�37:il4/21
F�bruary 28. 201) I
)
: ( ).
( )
recovered from ratepayers. Under the plan, retail competition in PSNH's service territory is expected to· begin around 4/01. The law calls for transition (standard offer) service to be available for customers
who have not yet chosen a competitive electricity supplier. PSNH is to provide transition for the first· nine months, after which transition service is to be procured through a PUC-administen:d comp�tltive ·
hid process The price of transition service is to increase over time to encourage customers to choose ii competitive electricity supplier during the transition period. Default service for customers �ho choose � competitive provider, but subsequently return to the Incumbent default service, is to he provided by ·
• PSNH for the first nine months, after which default service is to be acquired through bid. The Jaw
establishes a 21/.-year transition service period for residential and small commercial customers during ·
which the price of transition service is to be capped 11.t: $4.4¢/lcWh for the first nine months: the lesser of
\4 .4i/k Wh or a competitively bid price for the next 12 months; and, the lesser of $4,6t/kWh or 11 ·
competitively bid price for the last t 2 months. Transition service is to be available for large commercial
nnd industrial customers for I_'!. years ac a price of $4.4¢/kWh for the first nine months, A.ni.t a
competitively bid price for the final 12 months. Under the restructuring plan, if the price P�NH pavs tor
energy exceeds the capped prices described above, the company is to absorb the first 'S.7 million of the· ·
difference and the remainder would be deferred for recovery. PSNH, an affiliate, or any proposed ·
meracr partner or affiliate, is precluded from bidding to provide transition or default service. The sale or
PSNT·:rs fossil generation must occur prior to 7/l/01_;
New Jersey
General Policv--Historically, the utilities were permitted to reflect variations in Hid and purchased
rower costs through the Levelized Energy Adjustment Clause (LEAC), following approval by the New
Jersey Board of Public tTtilitie:1 (BPU). Following legislation enacted in 1999, retail competition was
implemented in 11/99, and the LEAC was eliminated. The legislation requires each utility- to offer basic .
generation service (BGS), to customers who do not select an alternative supplier, at capped rates through 7/] i/02. By l/l/02, the BPU is to determine whether BGS service may be offered by alternative
suppliers selected through a competitive bidding process. These provisions have varying implications,
depending upon the electric utilities' decisions regardingplant divestiture. ·
Specific_CQtnpany Di,>·<-�a
Public Service Electric & Gas (PSE�Q)--PSE&G's restructuring plan permitted the company lo
transfer its generation assets to an unregulated subsidiary of parent Public Service Enterprise Group
(PEG). PSE&G has retained the ability to acquire the power to meet its BGS obligations from the
alfiliate at a fixed price, which is reflected in its BOS rate cap.
Jersey Central Power & Light (JCP&�)--GPU, Inc. (GPU) subsidiary JCP&L. d/b/a. GPU
Energy, has divested its generation capacity, but has entered into agreements under which the company . may 1;�1rchase the power to meet ds BGS requirements from the new plant owners at a fixed price
through 7/3 l/02.
Atlantic City Electric (ACE)--Conectiv (CJV) subsidiary ACE has divested its base loud
!!t:n�ration. and retained certain peaking and intermediate facilities. As pact of the sales agre�ml!nls
entered into by ACE. the company has retained the right to purchase the output from the sold plants at n
set price for five years. CTV's partial divestiture plan is unique in that it allowed the company to realize
the market value of its base load generation assets and deploy that capital elsewhere, while insulating the
company from the price volatility that may occur at peak demand. ·
New Mexico
General Policv--Commission rules provide for automatic fuel and purchased power adjustment clauses;
however, the major utilities in the state no longer use the clause. Legislation enacted in 1999 required ·
retail choice to begin t/l/01 (letter revised to lfl/02) for schools, residential, and small commercial
tlNHNLlU fAX NU bl�34HH331 8-28- 1 :ll:46AM ECONOMIC REGl�ATION�
P. 03
512346�337;�15/21
rW.A-Rt>'!,ulatory Focus -14- February 28, 2001 .
)
/ )
cusrnrnera, and by 1/1/02 (later revised to 7/1/01.) for all other electricity consumers. However • .·
l�pi.qlatiQn was recently passed by the Senate, a..nd is being considered by a House Committee that would
d�l.ty I he mm of retail competition by five years to I /1/07, for small-use customers, and by six years to
7, 1 /08. for a.II other customers. The issues related to utilities' standard offer and POLR obligations were
to !1e discussed in the context of the utilities' pending transition proceedings, but with the already- ·
;\ppr<w�d and potential for further delays in retail access implementation, these proceedings are
presentlv on hold. The state's largest utility, Public Servicej;.Q.mpany of New Mex,jco (PNM). has
rf'1aim�d its generation and is generally a net seller ofpower.
f'lew York
(1ff.ll.ft£.Hlhlii-'J:--All utilities had used a semi-automatic fuel adjustment clause (FAC), through which ·
v:1ri;1ti(.)n� in fuel charges and purchased power requirements were passed along to customers. With
"Jrqri(· industry restructuring, however, generation was, for the most part, divested, and most. of the
rnmp;mics are in the process of transitioning from the F AC to a Market Power Adjustment Clause
(i\JAO. The MAC allows the distribution utilities to Oow through the costs of power procured to serve
customers who have not selected an alternative supplier. Changes in the MAC are recognized in each
G1morn"r hill (i.e., monthly, bimonthly, etc.) With the incumbent distributors having to retain the
POLR obligation for the foreseeable future, the operation of the MAC should leave the distributor
!ar�elv insulated from any financial effects associated with changes in market prices. Price stability in
New York should be maximized by the fact that the distribution utilities can enter into contracts for their
POLR requirements, and most have hedging arrangements .
.'·Jm:,;{t.ir;j,),moany_Qiscussion
<,.:;entral Hudson O.as & Ele�uic (CHG&E)--On l/26/0 t, the PSC approved implementation of :111
Energy Supply Charge (similar co the MAC), under which changes in the company's electricity costs,
n':'t of benefits from wholesale sales and wheeling revenues, wilt be reflected in customers' bimonthly
hill� CHG&E is a subsidiary of CH Energy Group (CNH) .
. C.@solidated Edison of New York (Con Ed)--Con Ed utilizes an MAC that is adjusted each
mo•ilh. The comp1rny was perhaps the first electric utility in the U.S. to utilize a flow through
mechanism that leaves shareholders largely risk-free with respect to changes in market prices. Con Ed
rP.rm1.in, subject to political risk, i.c -. , if there is a hot summer, and prices spike at peak demand, Con Ed
i'- likelv to hear the brunt of blame for passing through the price increase. There were many articles and
n�w� reports about the projected price of power in New York City last year, but, with a fairly cool
�11111mer, those price spikes did not materialize. Con Ed is a subsidiary of Consolidated Edison (ED)
FP subsidiary, Qrnnge & Rockland Ulliill�,� utilizes a Market Supply Charge, which is similar to Con
Eil"� l'vlAC. .
N�w Y...9rk SlaJe Electric & Gas (NYSEG}--NYSEG eliminated its FAC and has not pursued the
implementation an MAC. The company has indicated that it is well hedged through the end of its
electric restructuring transition period, which extends to 8/03, to provide power to customers who do not
choose Ml alternative supplier. NYSEG is a subsidiary of Energy East (NEG).
NiJJgi!.rn Mohawk PoweJ (NMP)--On 1 /17/0 I, NMP proposed a ten-year electric rate plan, in.
coniunction with its request for New York Public Service Commission (PSC) approval of the proposed
merger of parent company Niagara Mohawk Holdings (Nrv(K) and National Grid Group pie (NGG):
The nropnsnl includes an initial delivery rate reduction, following which delivery rates would be fixed .
for :�n vcnrs. With regard to generation pricing, customers would be offered standard offer service from
!'IMP under which commodity prices would be levelized over the first four years, reflecting the
companvs current purchased power contracts and hedging activities. Monrhly commodiry price
variations with respect Lo non-hedged commodity costs would flow through to customers via 11
Commodity Adjust1ncnt Clause.
i. ·,
NUv-u,-u1 WtU 1�: JU �t.\ I 1�1.
�INANUU fAX NO. 5123468337 8-28- 1 :11=47AM ECONOMIC REGULATION-
P. 01
5123469337:�1612\
RR A-Regulatory Focus -15- February 2R. 200 I
./
.l )
. Rochester Gas & Electric CRG&E)--RG&E eliminated its F AC and has not pursued an MAC' .
. however, the company is somewhat protected from variations in power costs given its retention of it�
Ginna (l 00%-owned) and Nine Mile 2 (14%-owned) nuclear generating facilities. RG&E is a · subsidiary of RGS Energy (RGS).
North Carolina
General Po/icy--The North Carolina Utilities Commission (NCUC) adjusts electric rates annually to allow for the recovery or refund of the past yC'ilr's under- or over-collected fuel costs and the fuel
component of purchase power costs. The NCUC's true-up procedure provides for such costs to be
lnrgely established utilizing the methods and procedures approved in a. company's last general rate case. The fuel cost is then further modified through an Experience Modification Factor (EMF),· which reflects
the "difference between actual reasonable and prudently incurred fuel costs and the fuel-related revenues
that were realized during the test year underthe fuel cost component of rates then in effect." F.ach utility has an nnnual hearing to review fue! costs, with a uniform test period determined by the NCUC for each ·
company The EMF is to account for loo% of over- or under-collections, with interest included only for
over-collections. NCUC rules link: the allowed level of fuel-cost recovery to achieved nuclear unit
capacity factors A target capacity factor is set during annual fuel adjustment proceedings Failuro 10 meet the target results in a shift of'the burden of proof as to the presumption or pmdence to lhe utiiity. ·
Unless it can successfully sustain the burden, the utility is required to forego recovery of a portion of the
fuel costs incurred during the period under review. There is no reward provision.
North Dakota
General Po/icy--Automatic fuel and purchased power (energy portion only) adjustments are permitted. · Fuel and purchased power cost adjustments are implemented monthly, and there is generally a two­
month lag for recovery.
Ohio
General Policv·-As a result of 1999 legislation, retail access was implemented for all customers 1/ I /01. ri;e utilities no longer use the Electric Fuel Component that had traditionally provided for foe! rate
adjustments outside of a full rate case.
S�c Company Discusfi2t1.--Each utility is now operating under a multi-year restructuring plan that
specifies a transition period, the length of which varies by company: through 2003, for DPL, Inc.
subsidiary Dayt:on Power & Light; through 2005 for Allegheny Energy (A YE) subsidiary MonOrl[l.a:hela
Powe..r, and American Electric Power (AEP) subsidiaries G.QJu.�.b.us Southern Power and Phi_q_ PQ.filr;
and Cinergy (CIN) subsidiary Cincinna!i G!lS & Electric; and; through 2007 for Firstfinergy (FE) subsidiaries Qhio' Edison, Toledo Edison, and Cleveland g.)em;ris; Tlluminating. During the transltion
periods. the companies will operate under fixed rates (including fuel and power costs). and will continue
to retain their POLR obligations. As a result, the companies will be at risk for variations in-foe! prices .:ind purchased power needs: As a hedge against this uncertainty, the utilities have retained their in;.
house generation. Following each transition period, generation is to be competitively priced. and it is
�xpec:ted that each company will utilize some type of power cost pass through mechanism. It is unclear
iis to where POLR responsibility will reside.
Oklahoma
General Po/icv--By law, the OCC must review a company's fuel and purchased power costs every t.2 months, at which time differences versus the levels reflected in base rates are trued-up, with no
carrying charges. However, if objections are filed by the OCC Staff, a fully-litigated proceeding is
initiated. Legislation enacted in 1997 and 1998 requires implementation of fi.tll retail customer choice
-·• •,-..,"" A. ···--··:,: •• ----� ... I: ........ l...- -··�-1..c ... 1� .... ,1 t... ... rt ... " nrf*' -"··-:-, ..... L;,..t. ··"'"'''' ··-·· ,_ l. � C'-··-···! ....
11vv-v, -u I l'lC.U 1 � • ot: ... :1 .• :11 111'
r mrnwv r nl\ J'IV, 0 l CJ'iOOJJ I ECONOMIC REGULATION�
r, Ul
5123469337:#17/21
ll RA-Regulatory Focus -16- February 28. 200 I.
)
j)
current levels; presumably the above mechanism would cease to function. However, the det11ils of the· transition have yet to be established. . · . · . .
SP.�.fi.fi.�_C..ompanyDiscus.rion-Qklahoma Gas&. Electric, a subsidiary.of OGE Energy (OGE), is unique . "'. that its �el/purchased power costs ore calculated semi-annually based on the average cost of fuel, ·
with Hny differences from the average monthly fuel costs reflected in base rates debited/credited to· customers semi-annually on an annualized perkWh basis.
Qre.l!Q!!
.G<:.f.W/I�l:2/Jf:t.--Power cost adjustment (PCA) clauses, while not statutorily prohibited, are not currently ·
rn pl;ic:-e tn Oregon. Consequently, the utilities are generally at risk for fluctuations in fuel and
purchased power costs between rate cases. However, the Oregon Public Utilities Commission (PUC) Im tn.ken steps to mitigate this risk during periods of price volatility. .
SR�f_ifl.c Company Discussion
l:o.rtland General El�ctric (PQfil-�Enron (ENE) subsidiary PGE operated under a PCA from 1979
to l9H7_ when it was eliminated by the PUC following a finding that "the original need for the [PCA],
volatility of power costs, no longer exists." On 2/20/01, the PUC approved a PGE request to defer net
variable power costs that differ from a $176 million power-expense target for the l/l/01-th'rough-
0!10/111 period. Recovery of the deferral is expected to occur after 10/1/01 (FN 2/23/01)_
P.acj_fi_Corp--On 2120/0 I, the PUC approved a S22.8 million (3%) rate increase for PacifiCorp.
effective 2/21/01, for the recovery of increases in purchased power costs. PacifiCorp, a subsidiary of
Scottish Power, pie (SPI), is doing business in Oregon as Pacific Power & Light. The increase is subject
to refund pending Commission review (FN V23/Ql).
Pennsylvania
G.W�Lqi Po/icy--Historically, electric utilities were permitted to recover fuel and purchased poW'!r costs
through a semi-automatic adjustment mechanism, the Energy Cost Rate (ECR). Electric industry
restructuring legislation enacted in t 997 required rates to be capped beginning 1/1/97, and as. a result,
the ECR was eliminated, and the utilities were required to roll into base rates a representative amount of
foel and purchased power expenses. The law require the utilities to offer POLR service at capped rares
for thr:- duration of the competition transition period, which varies from company to company. After the
transition period, the Pennsylvania Public Utility Commission (PUC) is to select an alternative
prnvirierts) of POLR service for each utility's service territory through a competitive bidding process.
Specific Company Discussion
h,ll�_;;heny Power (AP)--Allegheny Energy (AYE) subsidiary AP's POLR obligation extends
throuzh 12/J 1/08. AP has transferred its generation assets to a non-regulated affiliate, but retains the
right 10 purchase the power necessary to supply its POLR.load at the prices reflected in the capped rntt!:1
approved by the PUC. During 2001, 20% of AP's residential POLR load is to be assigned by the PUC
�0 :in alternative supplier selected through a competitive bidding process.
_Q�_g.!J.�Sn�_td.&hLillQID--DQE, Inc. (DQE) subsidiary DQU's restructuring plan initially called
for the transition period to· extend through 12/31/05_ Following DQU's divestiture of its generation
assets at· above-book prices, the company notified the PUC that it. would complete its stranded cost
recovery by 2/02. By law, DQU would then be relieved of its POLR obligation; however, DQU entered
into an agreement with Constellation Energy Group (CEG) subsidiary Orion Power Holding, under
wbid1 Orion would supply DQU with the power to serve its former POLR load, at a fixed price. The
POC hM; approved the agreement and bas permitted recovery by DQU of the power costs contained in
·,1,n , . ..," ... .,,.. (t:'1'.T l/1'1/r.l\
'"' ,.,... 1 1111111vv u··,u- 1 • 11 ·'iOAM ;
RRA-R.1:gtilacury focus
rnA nu. ottJ40�JJt �CONOMIC REGULATION-
·17-
r, Ut
5123469337:#lA/21
February 28, 2001
)
:< )
()
. Exelon Company {�2.<C) •• EXC. formerly PECO En�rgy, is to retain its POLR obligl'llion through .
12/3 I /10 In accordance_ w1ththe PUC-approved restructuring plan and the PUC' s order approving the . merger of PECO and Unicom to form EXC, PECO' s generation assets have been transferred to a nun- ·.
regulated affiliate, with the .utility to retain the right to purchase the power necessary to supply its POLR load at the pnces reflected in the cappe� rates appr�ved by the PUC.
Metr..p_p,9litan Edison (MetE..d.)/Pennsylv.�nia.�lectric (Penel�£)--For' GPU, Inc. (GPU) subsidiaries MetEd and Pcnelec (d/b/a GPU Energy [GPUEJ), rates arc capped through 2010 nnd ?.()09
respectively. Their respective restructuring plans call for the POLR obligation to be auctioned off i"
annual increments of 20% of load beginning in 2000, with 80% of load to be auctioned off by 2003. ·
!\-letE<l/Penelec are to retain the POLR obligation for the remaining 20% of load through their respective rate cap/transition periods. As part of the plan, the PUC approved GPUE's proposal to divest its ·
generntion assets. The sales were completed in early 2000. For the most part, the sales agrr.P.mcnt�
1:.;illed for GPUE to purchase a portion of the power from their former Pennsylvania�juri�dictiomd
facilities through 2002, sufficient to meet the projected declining POLR load requirements. Jo l /00,
GPCE solicited bids for capacity to serve the initial 20% POLR load increment, but received no bids.
A�!\ consequence, MetEd/Penelec have retained' the obligation to serve those custorners, and have I.H�t!n
forced to purchase a larger-than-anticipated amount of power in the wholesale market 1.0 serve that lond.
The parties are in the progress of negotiating a frnmcwork for proceeding with the l>OLR auction. On
12/6/00, GPU filed for PUC approval to defer purchased power costs associated with the provi:;ion of
POJ..R service, to the extent these costs exceed the levels reflected in its current capped rates, and on
1/23/0l, the PUC consolidated the request with the pending GPU/First Energy (FE) merger proceeding.
GPUE estimates that its 200 I POLR-related revenue shortfalls will amount to $14 5 million
(FN l/26/0 l)
PPL Electric; Utilities (PPL-E}--PPL Corporation (PPL) subsidiary PPL-E (formerly
Pennsylvania Power & Light) is to retain the POLR obligation through 12/31/09. In 2002, the PUC is to
select an alternative supplier(s) to serve 20% of PPT..-F.'s l.10LR load, through a competitive bidding
proce!I� .
. Rhode Island
Cremra/.Polic,J!.--Prior to the implementation of electric industry restructuring in J /98, electric fuel
adjustment clauses (FA Cs) were utilized by the utilities. Electric industry restructuring legislation
enacted in 1996 required the offering of lull retail access. While the law required electric utilities to
spin-off cir sell 15% of their generating assets in order to estimate market value, the companies divested . .:
100% of their generating assets, and therefore, no longer utilize the FAC. In accordance with the law
and PUC-approved restructuring plans, standard offer service is to be available throogh 2009 at pn:- .
established prices. However, a fuel index benchmark is utilized to adjust standard offer prices to reflect
increases in energy costs. Once a customer purchases electricity from another supplier, the utility i$ not
required to make standard offer service available for that customer. However, such customers would bff
provided "last resort service." The capacity to meet standard offer and last resort service requirements is
procured through competitive bid. To the extent bid prices exceed the ?UC approved fH:mcll\td offer
rates. utilities have been permitted to recover the excess.
South Carolina
General Po/icy-�Non-automatic electric fuel adjustment clauses arc utilized for the state's electric .
utilities. Each electric utility is required to furnish the PSC an estimate of its fuel costs, including the
cost of purchased power, for a projected 12-month period. The PSC then determines the fuel and
purchased power costs to be included in base rates for the l 2 months, including an adjustment for over - ·. ·
or under-recovery from the preceding 12-month period. Electric utilities are required to account.
rnnnthly for the liitference between fuel costs recovered through base rares and actual fuel cQst.�.
llV y U I U l l"H:.LJ l �' J I ·-·· ,·1 ••• . .
R.RA·R<.'11.ulntory Focus -18-
rH� NU, OlcjqQ�jj/
ECONOMIC REGLO...AT I ON-
r, U::5
5123469337:tl8/2l
February 28, 2001
;( )
��uth Dnkotu
. D.!�!_1.![ql.f9}..!£)!··Autom·atic fuel and purchased power clauses are permitted. The South Dakota ·Public
[ ltilitv Co_mmission .ill�ws utilities to collect actual fuel and purchased power (energy portion only) expenses incurred, subject to a two-month lag. · .
.Tennessee
<J.1;,rer(1I &..li.0:'.--The only investor-owned utility in Tennessee i:i American Electric Power-Tennessee
(,\ET'· T). A EP-T has a Purchased Power Adjustment Rider to facilitate the implementation of.
wholesalr,, non-fuel-related rate changes by the company's power supplier, affiliate American Electric
Pnwrr-Virginia. The Tennessee Valley Authority, a federal agency that is not regulated by the
T,•.n11�,,;�e Regulatory Authority, is the major power provider in the state.
Texas.·
0_Q.J.(}_ral Policy�-Electric utilities are permitted to recover fuel and purchased power costs (including
f:apocitv) through the semi-automatic Power Cost Recovery Factor (PCRF). The PC.RF is adjusted.
f<:1ilnwing a filing by the utility and hearings by the Texas Public Utility Commission (PVC) based on
projected fuel costs for the period the PCRF will be in effect, subject to true-up. Under- or over­
recoveries are deferred, with interest, for recovery over a subsequent 12-month period. Electric. industry
restructuring legislation enacted in 1999 freezes base rates at 9/1/99 levels until the advent of
· competition, but allows the PCRF to continue to operate. The law requires retail electric competition to
he r,h11srrl in beginning 111/02, with each existing integrated utility to be functionally separated into a ·
· regulaterl electric transmission and distribution company, an affiliated power generation compRny, and
an affiliated retail electric provider (REP): Under the law all customers of the former integrated utility
thr11 do not select an alternative provider of electric generation service are to be assigned to the RE?
nfliliated with that utility. (Therefore, the POLR obligation essentially rests with the affiliated REP).
U pon implementation of competition, the utility-affiliated REPs are to reduce prices to their existing
residential and small commercial customers by 6%. Rates for those customers are to be capped at that
lP.vcl until 1/1/07. PUC rules allow the REPs to petition for increases in the PTB no more than twice per
vear if .ti 1�1 and/or purchased power costs rise above certain PUC,designated benchmarks .. Prices for
larze commercial and industrial customers are not regulated.
Utah
<,;_rnqal e.0/i.H--The Utah Public Service Commission (PSC) does not have authority to establish
automatic fuel and purchased power adjustment clauses, but may adopt expedited recovery procedures
for electric fuel com in volatile markets. On 2/2/0 I, the PSC granted �dfiCQ.02 a S70 million (9%)
im�rim electric base rate increase, subject to refund, pending the completion of a general rate case in
which the company seeks a $142 2 million permanent electric rate increase. Roughly $95 million of the
proposed permanent increase is related to increases in purchased power expenses (FN 2/9/0 l ).
PacifiCorp. :,. suhsidiarv of Scottish Power, pie (SPI), is doing business in Utah as Utah Power & Light.
V�Lmont
Q..l,!jJ,gal Policv--Dne to a 1984 Vermont Supreme Court ruling, fuel adjustment clauses are not
permitted. · rue! and purchased power costs are recovered through base rates.
Virginia
fo:ne.rf.l'I.Polic�--Semi-automatic:; electric fuel/purchased power adjustments are permitted. Under the
Virgini<'I Slat'! Corporation Commission's (SCC's) fuel factor procedure, in the context of a general rate
prncP.�rling, electric rates are set based on projected annual fuel/purchased power usage and costs. The
... I
,.
, i nnnvv r HI\ l'IU, o I C:j40tljj I n-�ij- 1 :11:suAM: ECONOMIC REGllATION-
RRA-Regulatory Focus · -19-
r', U4
5123469337;#20/21
Febmary 2.8, 200 (
J lV, U I V l nL..U 1 V 1 .JV .....-,., ... , ..
)
( )
()
amount reflected in rates is known as the fueJ factor. The utilities maintain baJapcing accounts for anv ·
under-zover-recoveries. These accounts are reconciled annually, with any under-Z over-n�coverii,� ,
co�lected frornlret�rned to ra!epayers over the subsequent 12 months. The SCC may require, an . adjustment to the fuel factor 1f an over-recovery of 5% or more occurs. Legislation enacted in l 999 calls for the implementation of retail competition in the electric supply market over the 2002-2004 '
period, with the incumbent utilities to retain POLR responsibility through 7/ !/07. BRSe rates are to be· capped at initial levels for the duration of the.PO LR period; however, the fuel factor may continue to . operate. ,
&2.e:..<AJ.c ,Wl!!JJ2gJJY •. lli1f.t.!J.§ion--As part of corporate separation plans Approved by the SCC in l\ccordt1n<:e . with the 1999 restructuring law, Conectiv (CIV) subsidiary Relmarva Po�er & Light and Allegheny Energy (AYE) subsidiary �!leghenyj'ower fixed theirfuel factors at an agreed-upon level, and agreed to discontinue the periodic adjustment mechanism effective with 8/00 bills. Dominion Re�ources (D) subsidiary Virginia Power's (VP'.s) fuel adjustment clause continues to operate. On l l/11(00. yP filed
for SCC authorization to increase its annual_ fuel factor coJlections by S 158 million, effective 1/1101. ·
According to VP, $10 million of the increase is designed to recover increased fuel expenses not
recovered over the period 2/99-1/()0 under the existing fuel factor, and the remaining S l 48 million
reflects an estimated 211% annual increase in fuel expenses over the 2/00-1 /0 I period. SCC action is
awaited. .
Washineton
��e_l'!§..ral Po/icy--Power cost adjustment clauses are not permitted, and therefore the utilities are at risk
for fluctuations in fuel, hydro, and purchased power costs between rate cases. · However, tho Wl\shingtori. Utilities and Transportation Commission (WUTC) has approved deferral of such expenses in certain ·
Cl\SCS.
Specific CompanvDiscussion--On 8/9/00, the WUTC granted Avista Corporation'� (AVA'g) request t1}
defer. for later review and possible recovery, purchased power costs associated with increases in short­
term wholesale market prices. The deferral period began 7/1/00 and \S to conclude 6/30/0 I. AVA i:o;
doing business as Avista Utilities. In approving the company's deferral request, the WUTC ordered
AV A to include in its financial statements a footnote stating that "regulatory approval of their recovery.
will not be received until the showing of prudence, including a demonstration that Compiiny-Qwned . resources were optimized to the benefit of retail ratepayers."
As part A VA' s last rate ease (a decision was rendered in 9/00), the company proposed to
implement a power cost adiustment mechanism (PCA). under which AV A would be permitted to
automatically change rates via surcharges or rebates to reflect the level of hydroelectric generation,
secondary energy prices, related changes in thermal generation, and PURI' A contract power costs, .
During the course of the proceeding, in response to the objections raised by the Staff arid of.her parties, A VA modified the proposed PCA to reflect only variations In hydro production and short-term market
rates for power. The WUTC rejected the PCA, determining that collaborative meetings or AVA 's 200 l
power supply proceeding would be an appropriate forum to address a PCA. The WUTC noted that it is ·
"willing to explore proposals that provide greater incentives than the traditional rate base/rare of return
paradigm thot we currently employ to regulate Avista .... [S)uch proposals must include an equitable ·
balancing of risk between ratepayers and shareholders. Mechanisms that simply shift risk from
�hAreholdcrs to ratepayers without compensating benefits do not meet this objective."
· \Vest ViD?lnia
�era/_fplic)!--Electric fuel and purchased power costs are recovered through theexpanded net energy cost (ENEC) cost factor. The ENEC is set annually based on actual data for the prior 12-month period
and projected data for the prospective 12 months. Any over- or under-recoveries are deferred for
reconciliation as part of the next ENEC proceeding, with no carrying charges on the over-Amder-
f. 1V 1' V I V 4 "'""''"" ! V • , J. .._ .... , .. I J.JIJU1VV
·20-
I 1111 nv, v I C..v'tVi.Jvv I l ' U:.J ECONOMIC REGULATION..,. 512,3t69�37: i¥.�!l/2l
February 28, 200 l
()
t;nlh�t11d balance. An electric restructuring plan that was developed by the West Virginia Public Service
Commission (PSC) in accordance with I 999 legislatioo, and adopted by the Legislature in 2000, calls
for the imnlementatiou of retail competition in the electric generation market following enactment of tax
reform legislation (not likely to occur until 2002). Under the plan, the.utilitiee will be required to
provide default service at capped rates for six years, after which the PSC may select an alternative
pn1Vidrr of default service through competitive bid. The utilities will be permitted to seek price
inr.re;:is,i� related to environmental compliance expenditures only, for seven years following
implementation of retail access. In accordance with a succession of settlement agreements, the ENEC
for American Electric Power (AEP} subsidiary American Electric Power W�st Virginia has been
sos;ppndf'd since 1996 (see the 6/00 West Virginia Annual Revjev,!).
Wisconsin
(j,,ne.,:al f'o/J/v--Electric foe! and purchasedpower adjustment clauses are utilized, and each utilit.y
prr.,•,ir\i:<: monthly and annual ranges of fud and purchased power costs on I\ prospective basis. If a .
cr'1npn11y' � actual fuel and purchased power costs are outside the range established in its last base rate
case. plus or minus 2% or J% (depending on the company) for three consecutive months and are
rrnjPc1P11 �o be so for a 12-mooth period, the company is required to file an application to adjust rates on
a prospective basis. Emergency rules passed in 12/00 and which expire in 6/01, allow a company to file
for a rate change if its costs are projected to be outside the plus-or-minus 2%-or-3% range on an annual
basis. !:1 addition, the state's electric utilities are required to file base rate cases every two years, and
h.,�1 and purchased power costs arc updated in these proceedings as well.
·wyomhm
GEneral I'9£icv--Although electric utilities are not statutorily barred from requesting Wyoming Public
Service Commission (PSC) approval of a fuel adjustment clause, historically, recovery of fuel and
purchased power costs has been addressed in rue cases.
' ;>P.¢..f�fo: ... :Companv Discussion-An 11/00, the PSC authorized PagjfiCofl), a subsidiary of Scottish Power,
pie (SPf), to defer fuel costs and required the company to submit a filing suggesting a recovery method
for rhe deferrals. The PSC indicated that it might conduct an audit to determine the prudence of the
deterred fuel costs. CheyeIU)c: Light Fuel & Power (CLF&P) and Montana-Dakota Utilities {M�DU).
which do not own generation in Wyoming, are permitted to implement purchased power adjustments on
n monthlv basis following hearings. CLF&.P is a subsidiary of Xcel Energy (EXL) and M-DU is a
g,1b�i<iiAry of MDU Resources (MDl)).
Rubert Schain
Li\li:rn f edcrico Lisa f.le<.�e�>rgc
Gerrir Iepsen
Dennis <::prrdurn
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
-- .S'I,\ND:\RD UT I L l TI ES
· -, I''"lC1n·1.-· ! I... _ _,J\. ,)
_.., cat on date. ug O
Reprinted from RatingsDirect
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit
Risk
Credit Analyst: Peter Rigby, New York (1) 212-438-2085
Long after the engineers determine the physical cause of the blackout of
Aug. 14, 2003, which brought commerce to a grinding halt in several U.S.
states and Ontario, politicians, regulators, industry experts and the capital
providers will be debating not just who is to blame but more importantly who
must assume the responsibility and the costs for fixing the system. The
scope and magnitude of the power outage immediately triggered a cascade
of intense rhetoric about the state of the U.S. power industry and its
regulations. From the President and the halls of Congress to Cabinet
members and to industry experts, it appears that no one has failed to weigh
in on the reputed inadequacies of the nation's power infrastructure.
Widespread blackouts are costly. They disrupt commerce. They shut down
communications and water supplies. They threaten health and safety and
they inconvenience a highly electronically automated, "digital" economy. And,
they invite litigation in the aftermath. Various estimates reported by the press
put the cost of this blackout anywhere from $6 billion to $1 O billion. Fixing the
system so blackouts do not happen, according to estimates by the Electric
Power Research Institute, could run as high as $100 billion.
Given the tone of urgency, it would seem that immediate change is inevitable
and that investors could expect an improved investment climate for utilities.
But addressing the problems of the nation's grid and indeed, the regulation of
the entire U.S. electricity industry, will be no simple matter. The politics of
power are divisive and little consensus exists about how (or whether) to
continue with regulatory reform. Clearly, the blackout has highlighted the
complexity of the system, the diversity of its many stakeholders and the
susceptibility of the industry to political and regulatory risk.
Investors should not expect that such risk will dissipate any time soon.
Instead, credit risk could actually intensify if the politically charged debate
over reform continues for years, as it might very well do. And even if policy
makers succeed in crafting a comprehensive solution to the problems of the
nation's electricity grid, the regulatory treatment of the costs needed to
upgrade the infrastructure remains uncertain.
Who to Hold Responsible?
What happened on August 14 and who should take responsibility? It may be
weeks, if not months, before anyone can make that determination.
Meanwhile, the blackout is raising questions about what worked correctly and
what did not work.
file:///EI/BusDev/329406/final/329406f.html ( 1 of 7) (8/22/2003 11: 13: 17 AM)
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
)
r")
'�)
August 14, a not unusually hot day, did not stress the grid in the way that
extraordinarily hot, humid days historically have. Outside of FirstEnergy
Corp.'s Davis-Besse nuclear plant, which has been down for about a year,
there were no unusual plant outages. Transmission lines were not
overheating and sagging under intense summer heat and high air
conditioning loads, as they were during the massive nine-state blackout in
1996. The individual components that investigators appear to be focused on-­
a generating plant tripping in the Midwest, several transmission lines
becoming overloaded, unexpected power flows--should not have been
triggering events. Plants and transmission lines do occasionally trip, but
unused transmission capacity, which would exist in an unstressed operating
condition, typically pick up and transmit power to the load centers along
alternate routes.
None of these events should have been that remarkable. Investigations,
however, may later reveal something unique. What was so remarkable was
that within an hour of these initial events, power flows on the grid began
reversing and power plants began shutting down as the grid became
unbalanced. Most remarkable perhaps was the fact that so many safety
systems of so many utilities across so many states failed to detect the
warning signs--voltage spikes, power surges, and increased volatility in
operating frequencies--that typically disconnect a utility from the grid to
isolate the transmission disturbance and minimize loss of service to
customers.
The only company that has attracted headline attention in the early days
following the blackout is Ohio-based FirstEnergy. On August 18, Standard &
Poor's did place its 'BBB' corporate credit rating on FirstEnergy, which had
been on negative outlook for over a year, on CreditWatch with negative
implications. The CreditWatch listing was not due to potential liability or
culpability arising from the blackout, but rather because of the additional
stress that management faces as it copes with even more negative publicity
at a time when it is attempting to raise new equity and deal with other
problems, including the long-delayed restart of Davis-Besse and a recent
adverse U.S. District Court ruling concerning the failure to install antipollution
equipment.
Regulatory Reform Lags
One of the more intriguing events of the blackout of 2003 is that the blackout
did not affect adjacent states that have embraced reform and competition.
Moreover, they demonstrated that their systems do work and that they are
not antiquated, as some have suggested. Pennsylvania, Maryland,
Delaware, Virginia, the District of Columbia, New England, and New Jersey
(except northern New Jersey) largely managed to keep the lights on. PJM,
the regional transmission operator (RTO) for principally Pennsylvania, New
Jersey, and Maryland, as well as Virginia, West Virginia, and Washington
D.C., operates with a strict ability to directly control operations within its
jurisdiction; this likely helped PJM maintain system integrity. Similarly, ISO
New England, the independent system operator for New England maintained
power, except in southwestern Connecticut. Are PJM and ISO New England
examples of models of the future, or were they just lucky? Perhaps the
investigations will also answer these questions.
file:/!/EI/BusDev/329406/final/329406f.html (2 of 7) [8/22/2003 11: 13: 17 AM]
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
A deeper inspection into the root cause of the blackouts may indicate that
efforts to introduce regulatory restructuring--not deregulation itself--may have
contributed to the blackout. As Standard & Poor's pointed out last year,
partial restructuring has created dysfunctional wholesale electricity markets
(see "Partial Restructuring of U.S. Power Markets: At What Cost to Credit"
published June 28, 2002). In particular, the U.S. transmission system was
not designed to operate in competitive markets, which demands that vast
quantities of power be delivered over very great distances. During the first
half of the last century, power engineers designed transmission hub and
spoke systems for vertically integrated utilities that serviced their own
franchise territories. Interconnectivity and bulk power transfers between
regions were secondary concerns. Central coordination of generation and
transmission worked well in that environment where ratepayers could absorb
the costs of inefficient, albeit effective, operations. However, a competitive
·' wholesale power market, which increasingly dominates the industry (certainly
in the Northeast), needs its transmission system to move power in varying
amounts and different directions throughout the day within and in between
regions. These patterns significantly differ from patterns contemplated when
transmission was built, and regulatory reform efforts have not addressed the
transmission needs, both physical and operational, of competitive wholesale
power.
Another aspect of the industry that electricity restructuring has not fully
addressed is that of system coordination. This involves which power plants
run during the course of the day, for how long and at what output level. It also
should address who may take power from the grid, when, and how much. In
other industries, output can be inventoried and the market itself seems to
match supply and demand. Yet in this regard electricity stands alone. At all
times, aggregate supply and demand must operate in equilibrium--a system
cannot generate more or less electricity than demand or else the system
shorts out, power lines overload, power plants trip, and the lights go out.
Utilities once closely coordinated their own generation and transmission
investment and operations through central dispatch and planning processes.
In a competitive market, utilities do not necessarily own all, or any, of the
generation or transmission assets that service their franchise areas. Now
various means and numerous market participants whose interests may not
always be aligned are managing the coordination and reliability task.
�)
Standard & Pear's pointed out last year that if the transmission system does
not address the needs of a competitive generation market, financial and
business risks for the industry will likely remain high, which, in turn, does not
bode well for the industry's credit ratings (see "Merchant Energy Survival
Hangs on FERC's Blueprint for Market Design" published March 3, 2003).
That will translate to a higher cost of capital as investors and lenders move to
protect themselves from uncertain credit risks. Markets will not fix a flawed
market design, but financial markets will move to limit their exposure to a
flawed market. Dysfunctional power markets can only invite an erosion of
system reliability (read, further blackouts), price volatility, reduced market
transparency, misplaced capital resources, endless political squabbles and,
consequently, credit risk. As long as dysfunctions exist between the highly
regulated and unregulated worlds of power, lenders will never have the
predictability and stability that credit providers demand from the utility
industry.
file:///EI/BusDev/329406/final/329406f.html (3 of 7) [8/22/2003 11: 13: 17 AM]
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
.................. ,
)
C�($)
On a related point, the introduction of competition into the electricity industry
has forced decisions about the tradeoff between reliability and costs (see
chart). Reliability increases (or the risk of a system outage decreases) as
investment in redundancies and back-up systems increase. Historically, in
the former cost-of-service, rate-of-return world of U.S. electricity, ratepayers
absorbed the cost of system redundancies, such as peaking power plants
and excess transmission capacity, which only occasionally were called into
service during plant outages or periods of peak demand. Since the
introduction of competition, the U.S. landscape has changed in several ways.
First, competition forces a more efficient and productive use of assets--one of
the reasons for the rise of energy marketing and trading. Second, with a
reduced ability to pass costs on to ratepayers, utilities and their affiliates who
are exposed to competition have an increased incentive to maximize profits
from every asset. Few companies want to spend money on assets where the
return is low or uncertain, especially if the market is unwilling to compensate
for reliability.
Despite all these hurdles, it appears PJM and ISO New England have
successfully managed through these issues and have a system that prevents
a massive widespread system failure.
Reliabllity Is a Trade-Off Between Cost and OJtages
: r1 •I' I ,I I 1 ' ..- 1'!'•·1tl I 1:1 1t·; • 1
, , "I r ,.1 • 1' 1 ·! : .. i 1 , r"
_)
Risk ofO�age (%)
file:///EI/BusDev/329406/final/329406f.html ( 4 of 7) [8/22/2003 11: 13: 17 AM]
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
r=-,
)
Transmission Infrastructure Upgrade Barriers Persist
The investigations that are under way may indicate that extensive upgrades
to the infrastructure are needed and needed soon. They will certainly support
existing arguments that the national grid needs a better system of
coordination, regional planning, uniform operating standards, and better
enforcement of standards. The physical costs could be substantial, reaching
into the tens of billions of dollars. The question for investors is how will
regulators treat these costs and what will be the resulting credit implications?
If the upfront costs are large, which appears likely, and recovery through a
rate-based mechanism is unclear, credit-conscious utilities will be reluctant to
spend the money. If a utility is uncertain whether it can recover capital
expenditures needed to increase reliability, yet it chooses to make those
expenditures (or is forced to for whatever reason), Standard & Pear's would
likely treat the expenditure and associated debt financing as a deterioration
in credit quality.
Still, it may be premature to talk about the cost of the upgrade and who will
pay for it. Although the blackout seems to command a certain urgency, the
political barriers to progress are substantial. The plethora of competing
interests may likely block progress for the foreseeable future. Gaining
consensus among industry participants and stakeholders looms as a
Herculean task. Unlike its counterparts in other countries, the U.S. electric
industry operates in a complicated regulatory setting, which has frustrated
the FERC's and other entities' efforts to bring widespread coordination,
standards, and enforcement of standards to the industry. If the FERC had
absolute jurisdiction, restructuring might be further advanced than it is.
Consider the patchwork of the U.S. electricity regulation, which consists of 50
different state utility commissions, countless cooperatives, public power
authorities, the FERC, and federal power marketing organizations.
The extraordinarily difficult task of building new transmission lines has also
plagued reliability at a time when reliability is slipping. Few Americans will
tolerate transmission towers anywhere near their property or their children's
schools. Moreover, the FERC has little legal ability to site new transmission.
With the interstate natural gas industry, the FERG has authority of eminent
domain that greatly facilitates siting new pipe. However, the FERC does not
have that authority with electric transmission, even though electricity
transmission is clearly an interstate commerce issue as the blackout
demonstrated. States are also less willing to allow transmission lines to run
through their states if direct benefits do not accrue to them. Immediately
following the blackout, the state of Connecticut sought to block the activatiori
of Cross Sound Cable, the new underwater transmission line connecting
Connecticut to Long Island, which is in chronic need of new electricity
supplies--even though the cable is built, approved by the FERC and ready to
enter commercial service. The "national" grid indeed finds itself hostage to
the most parochial of interests.
As has been well publicized, utilities claim that regulated returns on equity for
investment in new transmission are not commensurate with returns in other
infrastructure. Therefore, it is difficult to attract capital or invest capital in new
transmission, particularly given the opposition to new transmission and
potential for interveners to strand investment, such as the Cross Sound
file:/I/EI/BusDev/329406/final/329406f.html (5 of 7) (8/22/2003 11 :13: 17 AM]
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
Cable.
Reform of the Public Utility Holding Company Act of 1935 (PU HCA) could
actually help improve investment in transmission infrastructure, according to
some. PUHCA currently restricts utility holding companies from acquiring
companies not related to the electric utility industry. Hence, it has
discouraged "new money" from entering the electric industry from other
sources, such as financial institutions and industrials, interested in acquiring
electric utilities. More importantly for purposes of regional coordination and
reliability, PUHCA has also restricted the ability of utilities to merge by
generally forcing them to operate in smaller geographic regions, as opposed
to large regional companies. Larger, regional companies presumably would
find it easier and more attractive to participate in RTOs, and make new
infrastructure investments, especially if they had greater certainty that the
benefits would accrue to them, instead of others.
From a credit perspective, however, repeal of PUHCA could invite greater
credit risk, as companies expand operations and escape from the various
security issuing constraints that PUHCA imposes. Typically, PUHCA has
supported credit quality. However, greater credit risk under PUHCA repeal is
not a foregone conclusion and Standard & Poor's expects that most utilities
in the current credit environment will pay greater attention to credit given that
the average utility credit rating has fallen from the 'A' category to the 'BBB'
category over the past few years.
A New Energy Bill?
It would seem that the vulnerability of the nation's electrical infrastructure
demonstrated by the August 14 blackout would pressure Congress to quickly
pass legislation upon which the Senate and the House can agree and which
President Bush will readily sign. But investors should not count on a speedy
or effective resolution to electricity reform. Comprehensive energy legislation
seems to provide more opportunities for disagreement than agreement or
compromise. That could be bad news for investors and lenders it'it means
the state of partial restructuring of the nation's electricity industry persists
indefinitely. Political and regulatory risk will remain high and credit will have
to adjust to uncertainty for the foreseeable future.
/) .
Outlook for Electricity Regulatory and Political Credit Risk
Few will dispute the conclusion that the August 14 blackout represents a
wake-up call to the nation that its electricity infrastructure is at risk. The
blackout highlights the potential credit problems that Standard & Poor's has
been discussing since 2001 about the risks of partial or incomplete electricity
restructuring. Cost-of-service, rate-of-return environments generally
supported credit quality, while the newer competitive environments have
heightened credit risk. Partial reform, however, invites dysfunctional markets
and credit surprises and that undoubtedly presents a worse situation.
Standard & Poor's warns that as long as political and regulatory
disagreements persist among policy makers, credit risk will remain elevated
and will discourage new capital, or least make it more expensive. Moreover,
if reform efforts, which could include infrastructure investment, are delayed
further, credit risk arising from the costs of further blackouts, lost revenue
opportunities for generators, and potential lawsuits could increase. Finally, if
utilities do make, or are forced to make, large infrastructure investments in
file:///EI/BusDev/329406/final/329406f.html (6 of 7) [8/22/2003 11: 13: 17 AM]
Electric Utility Blackouts Put Spotlight on Political and Regulatory Credit Risk
transmission upgrades without clear assurances about capital recovery,
credit quality will suffer.
Published by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. Executive
offices: 1221 Avenue of the Americas, New York, NY 10020. Editorial offices: 55 Water
Street, New York, NY 10041. Subscriber services: (1) 212-438-7280. Copyright 2003 by The
McGraw-Hill Companies, Inc. Reproduction in whole or in part prohibited except by
permission. All rights reserved. Information has been obtained by Standard & Poor's from
sources believed to be reliable. However, because of the possibility of human or mechanical
error by our sources, Standard & Poor's or others, Standard & Poor's does not guarantee the
accuracy, adequacy, or compieteness of any information and is not responsible for any
errors or omissions or the result obtained from the use of such information. Ratings are
statements of opinion, not statements of fact or recommendations to buy, hold, or sell any
securities.
r>
' )
./ _)
The McGraw·Hill Companies.
file:///EI/BusDev/329406/final/329406f. html (7 of 7) (8/22/2003 11: 13: 17 AM]
.: �
" '··
, .:
458
INDUSTRY TIMELINESS: 96 (of 98)
The dividend yield and stable prices of these stocks cater to conservative investors. It is noteworthy, how­ ever, that the business profile of gas utilities is changing
as they expand into unregulated areas. Investors should consider how much exposure a company has to nonregu­ lated activities before making an investment decision here. Unregulated operations usually add 'more volatil­
ity to the share price, but increase total-return possibili­ ties. Companies that stay focused on distribution have greater earnings predictability and may be more likely
to increase the dividend consistently overtime. . . M. h l P. Ml
Current Operating Environme�t·
Gas utilities generated strong earnings in the first two calendar quarters of 2003. Distribution operations ben­ efited from colder-than-normal weather last winter and spring, which increased gas volume. Some utilities have also enjoyed profits in their nonregitlated businesses, as high commodity prices boosted profits for gas marketing and E&P operations. In the third quarter, earnings from
utilities were down due to a seasonal decline in gas demand. Profits for the fourth quarter and into next year will largely depend on temperatures this winter heating."
season. The weather was colder than expected over Thanksgiving, and the Northeast encountered its first major snowstorm of the season in early December, which . · drove up gas prices. Still, it is too early to tell how this winter will pan out. .,
Investment Considerations
and were fully regulated by state public utility commis­
sions. But the federal government began to open certain aspects of the business to competition ·in the 1980s. In . 1992, the Federal Energy Regulatory Commiseioninsti- . tuted Order 636, which required pipeline operators to· unbundle certain transportation and storage services;
along with guaranteeing gas marketers access to their distribution networks. Meanwhile, this eriabled LDCs to· engage in nonregulated activities outside of their regu- . ·
lated distribution operations. To varying degrees, LDCs today are also involved in oil and gas exploration and·
production.inatural gas gathering and processing, stor­ age> energy trading, natural gas marketing, and even some power generation and telecommunications.
;.:: _: NATURAL GAS (DISTRIBUTION)
; .. , •. ·. ; : \' 'Comp¢slte 'Statistics: 'Natura!Gas (Distribution) . zc ae a oney
" (Distrlbution) -:,::..1· ',.,:-· i.·. -, .. ,· •,., .:i ', ,::;. Natural Gas \ : ··� ..
' 1999 2Q00 2001 ·2002 2003 2004 06-08 . RELATIVE STRENGTH (Ratio of Industry to Value Line Comp.) ,'16271 . 20717 '.�3() 24180 37500 39000 Revenues (Smlll)' 44000 500 ' '995.5 'f140.0 . )182:1 1312.5 1500 ' 1650 Net Proilt (Smlll) 2000
35.2% 37.1%, �M� 34.9% 38.0% 38.0% Income Tax Rate 38.0% 400 ,, ' 6.1'i� \·. S:s%. .: i9o/, ·s.4%. 04.0% " 4.2.% Net Profit Margin 4.5%
47.4% 53.5% 57.1% 57.7% 52..0% .�2.� Long·Term Debt Ratio 50.0% ,, / .. /'i ' 50,7,-; .45.0% : 41,8% 41.6% .44.0% .44.0% ·Common Equity Ratio · 45.0% 300 �-- IJ· '"\.. ·1�· ·22691 ,,25969. 26899' , 32000 · ,35000 . Total Capital ($mlll) ··.·1 37500 ·) •20877' 24213 ,;26113 ,27503' .. 33000 , 36000 Net Plant ($mlll) ,., . 38500 ,A . ·"·7.IY'!. '' 6.6'. , s.2'.,r 6.5, · 6.5ri 4.5%, Return on Total Cap'I .. ·6,0% ·200 /\' . ...
10.0% 10:s-1; '10.4% 1t:5% '11.0% '10.5% Reiu·m on Shr. Equttr · •·: f1.5% "-/. <:» "\./" -. .... · -)o.oi· ':10.� '10.6°/o 'i1.6o/, • 11.� "11.0% . Reiurn im Com Equity . , tt:5% .. , ..
' ..
,1.s•+ 3,:� '\ 2.S,-, ·t1 ;;,·_·:� :J.H" . Jlitiln� to Com Eq : 5.0% .. ' ' -, 'j:w,. ·An Div'ds to Nei Proi ., . "55" 85% 73o/o .-.f5.%i ·, ;,63" '' " ..
14.3 ,·.,JM- ,,.Ai,8 12.6 Bol�'rf ,,,,.;.,, -Avg •Ann'I PIE Rado: '· , 13.0
.93 .:,:_,·,�. ;:;:,;�1 : .. ';!l4, ·;:Vik �:::-' RelaUve PIE Rado " .85 100 li.:.:..Jnt 4.3% 1997 1998 1999 2000 2001'. 2_002 2003' 5.0% 4.4% .. .4.4% :.-6.3% .. i;''. . Avg Ann'I Yield ·
271% 274%' /�4�. ' 240% : �35% 230% Fixed Charge Coverage ·· 225% Index: June. 1967 = 100
;·,O 2Q03; :Yaiufk��i�i':l11ol';A1rro,,�- Factual malarial � obtained from.sour<:es balieved 10 be reliab� and ls provided willoul wa11anlies of any kro., -THE PUSLfSHEF! '. ·:!l: PONSIBLE. OR� EflAOAS OR OMISSIONS HEREIN. This plE!icalion � str�tty for su!Jscriber's own. non-commercial -. �lemal_use. No part !J'JJ'l't11Jl'jfflllP•\'1'5*§5'f151 ' of a. may be raproducecl;-. ltored or lransmfll6d ii-any p<Jrled, electron• or olher form, or usad tor generalillg or markel�g any printed or •�clronic pubhcaliOn. service or product.
•)·f(:
r ; ... '1 Th�· Naiural Gas Distribu.tion· sector is ranked
· near the bottom of the Value Line industry uni­ . verse for. Timeliness: 96 (of 98). The group's cur­ rent r�g marks a decline .of 12 notches since our last' report in September and a decline of 51 notches since March 'of this year. The large pull- • back should not come as 'a great surprise. Stock market weakness and uncertainties created by the ' war in Iraq drew � array of investors toward . stable, dividend-paying gas stocks earlier in 2003. But many:r'investors have . exited · the sector in search of•greater opportunities .since the end of full�scale, •mil,Uary action in Iraq and the advent of .. ' a bettel".inacr<>economic outlook�iThe main fea­
: j tures. <>f 'gd utilities are their safety arid yield, not ·,. price performance or capital appreciation poten­ . tial. Thus, we would '�xpect the Natural Gas Dis­ '·: tributiorr indµstry to hold a low Timeliness rank- . ing'u.iidetnorinal conditions •. ··. "... : . ,, l .. ,. ",'.' •'i, il)\:' • ,.. � .. :. . .• ,. •
. ,,\
. · Initially,' gas. utili�ies\had exclusive rights to deliver
' . , g�: �n;� �rP'1.dr ,other, g�s; Jervi�es_ t? specified regions,
... · '·•·,., . ···•Partial Industry Deregulation
j.;
Local tif���µ�;n C�mpaµi.es
·�';' _.· -. �-�;: :·{'( ,'. ' .. · •. Natural..Gas Distribution has historically been a regu- . lated-industry, .Gas utilities are natural monopolies at . _,;;::the locallevel, since itis cheaper and more efficient for ' ". a single provider to supply gas to an individual state or · »: region 'than for -multiple companies to build competing ' networks- As: a result, each area is serviced by a sole · supplier, '°referred · to as · a local distribution company
:. (LDC). These entities are regulated at the state level, . 0, with, capp¢� Jetum�on-equity (ROE) potential, in order
v .: · to keep th,;�µi_ from using their monopolistic situation to . overcharge gas customers. On the other hand, LDCs ,;,:.generating profits below their allowed ROE can petition ; ': regulators for gas rate. increases or file to recover costs.
:·:, For· instance/many LDCs lost money in the winter of · 2000-2001 when the price.of gas.they purchased soared to unprecedented levels;' yet they had to distribute the gas to consumers at much, lower fixed rates. Regulators -. allowed m.any utjlities to recover these costs over a 3- to
5-year period. In short, regulation limits the potential · . , profitability for LDOs, but also reduces volatility in their. share prices,". ' ' ; ' . '. . . ' '
)
)
) :;,J
JULY I 8, 2 0 0 3 VALUE LINE SELECTION&: OPINION PAGE 2857
Fiscal Full Year QUARTEl<l Y SALES ($hill.) Fiscal
Begins Qtr. I Qtr. II Qtr.111 Qtr. IV Year
2000 1022 1092 1098 1144 4357 2001 1095 1126 1089 1167 4477 2002 1066 1145 1142 994 4346
2003 1075 1125 1115 1135 4450 2004 1135 1190 1175 1200 470f)
Fiscal Full Year EARNINGS PER SHARE Fiscal
Begins Qtr.l Qtr.11 Qtr.111 Qtr.lV Year
2000 0.36 0.42 0.40 0.40 1.57 2001 0.33 0.29 0.24 0.33 1.18 2002 0.24 0.28 0.30 0.44 1.26
2003 0.28 0.31 0.29 0.37 1.25 2004 0.32 0.34 0.33 0.41 1.40
Year QUARTERLY DIVIDENDS PAID Full
Begins Qtr.1 Qtr. II Qtr.111 Qtr. IV Year
(_ ) 1999 0.100 0.100 0.105 0.105 0.41 2000 0.110 0.110 0.110 0.110 0.44
2001 0.110 0.110 0.115 0.115 0.45 2002 0.115 0.115 0.115 0.115 0.46
2003 0.115 0.115 0.120 0.120 0.47
C:\J�}r�{t��;i . . . 4}�1i::J. .:· ·.
(A) Company fiscal years end between 711 of year shown and 6/30 of next year. Years for about 80",1, of
companies end 12/31. (B) Primary earnings per share through 1997, diluted thereafter: Excludes non­
recurring charges: '9/, dS0. /2; '92, dS0.44; '93, dS0.23; '94, dS0.06; '95, dS0.09; '96, dS0.02; '97, dS0.08;
'98, dS0.04; '99, d;0.03; '00, dS0.08; 'Of, dS0./9;'02. dS().56. (C) Includes intangibles. In '02: $4./8 per
share. (D) In billions. (E) (Net profit+ 112 Long-Term lnterest)l(Long-Term Debt+ Share Equity). (F) (Net
Profit-All Div'd)/Common Equity.
Quarttrs may not sum to annual figures due to rounding. Bold flgurts are Va/11e Line ntimatts.
. . . . . The Industrial' Composite consists of 696 industrial, retail, and transportation companies. Financial data
and stock market vaiues for these companies have been pooled as if they belong to one large conglomerate.
The Composite includes 7 5 of Value Lines 98 industry groups; excluded sectors are financial services
(ban/cs, thrifts, insurance, real estate, securities brokerage, and investment companies), utilities {electric,
· natural gas distribution, and water services), and non-North American companies. Estimates for 2003 and
2004 and projections for 2006-2008 use Value Lines economic forecast, which was last published in Selec­
tion & Opinion on May 30, 2003, as a foundation. Except for earnings, all per-share figures were com­
puted using the sum of shares outstanding at yearend for all included companies.
In 2002, the high-tech, oil, and consumer staples sectors-totaling 165 (23. 7%). of the 696 companies
comprising the Industrial Composite--accountedfor.38% of net profits (excluding nonrecurring and ex­
traordinary items), compared li,ith 46% in 200/.
Est'd '00-'02
to'06·'08 5.5% 5.5% 7.5%
6.5% 6.0%
0
05 oe 07 08
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 06-08 16.02 16.94 iB.10 16.86 20.53 22.12 22.36 21.95 22.45 23.60 Sales per Sh (A) 28.90
1.68 1.82 2.07 2.12 2.35 · 2.68 2.41 2.37 2.45 2.60 •cash Flow" per sh 3.25
0.98 1.07 1.22 1.22 1.36 1.57 1.18 1.26 1.25 1.40 Earnings per sh (AB) 1.90 0.31 0.34 0.37 0.38 0.41 0.43 0.43 0.44 0.46 0.47 Div' ds Deel' d per sh · 0.60
1.00 1.08 1.20 1.27 1.28 1.40 1.40 1.19 1.25 1.35 Cap'I Spending per sh 1.60
4.94 5.50 5.93 6.30 7.41 8.50 8.57 8.53 8.80 9.30 · Book Value per sh (CJ 11.40
177.46 179.66 181.50· 184.00 189.50 196.99 200.22 197.99 198.00 199.00 Common shs Outst'g (OJ 200.00
15.7 17.9 20.2 25.2 27.4 26.9 31.8 25.2 Avg Ann'I PIE Ratio · 22.0 1.05 1.12 1.17 1.31 1.57 1.78 1.63 1.37 Relative PIE Ratio 1.45 2.0% 1.8% 1.5% 1.2% 1.1% 1.0%· 1.1% 1.4% Avg Ann'I Div'd Yield 1.5% 2843 3044 3303 3469 3891 4357 4477 4346 4450 4700 Sales ($bill) (A) 5750
15.8% 16.0% 16.8% 16.4% 16.7% 17.5% 15.5% 15.5% 15.5% 16.0% Operating Margin 16.5%
127.4 137.1 156.3 i66.2 188.6 · 218.6 246.2 220.S 230 240 · Depreciation ($bill) 270
173.7 191.4 221.6 224.7 257.4 309.7 236.9 249.1 250 275 Net Profit 375 35.2% 34.8% 34.9% 33.6% 34.1% 34.8% 34.8% 32.4% 34.0% 34.0% Income Tax Rate 34.0%
6.1% 6.3% 10.4% 6.5% 6.6% 7.1% 5.3% 5.7% 5.7% 5.8% Net Profit Margin 6.5%
337.5 384.8 395.1 355.6 332.4 372.9 461.9 564.3 SSS SIS Working Cap'l ($bill) 560
541.0 580.0 646.0 722.4 846.7 1005.0 1185.9 1277.5 1430 1505 Long-Term Debt ($bill) 1730 902.4 1014.6 1102.2 1180.5 1428.9 1692.4 1735.2 1701.1 1785 1890 5hr. Equity ($bill) 2315
13.4% 13.3% 14.0% 13.1% 12.5% 12.8% 9.4% 9.6% 9.0% 9.5% Return on Total Cap (E) 10.5%
19.2% 18.9% 20.1% 19.0% 18.0% 18.3% 13.7% 14.6% 14.0% 14.5% Return on 5hr. Equity 16.0%
13.3% 13.1% 14.2% 13.2% 12.7% 13.3% 8.7% 9.5% 9.0% 9.5% Retained to Com Eq (F) 11.0%
33% 32% 31% 32% 31% 28% 37% 35% 36% 34% All Div'ds to Net Prof 32%
·.\ ' ., <>:,::.,..,./�, :,., ... -'-.-�·>.) ·<.L P J��th:J��<��J;;,(;fft1ii(i. ' 12.1 13. 1 13.7 14.2 18.7 22.7 29.4 37.4 47.0 49.9 44:3 ,33,5 33.2
8.0 10.9 11.5 11.9 12.8 16.4 20.5 25.7 33.0 35.4 28.1 24.2 25.0
4
2
20
10 8
6
High
Low
100
80
60
40
1991 1992 1993 1994
12.66 13.13 13.56 14.81
1.08 1.19 1.31 1.52 0.47 0.56 0.68 0.84
0.26 0.28 0.27 0.29
0.87 0.84 0.84 0.90
4.10 3.83 3.93 4.46
167.20 1 &9.73 172.84 174.67
21.7 21.0 18.4 15.6
t.39 1.27 1.09 1.02
2.6% 2.4% 2.2% 2.2%
2117 2229 2344 2587
( 13.2% 13.3% 14.2% 15.1% ) 103.4 109.1 112.5 121.6
79.1 94.8 116.9 146.9
37.4% 35.2% 34.0% 35.2%
3.7% 4.3% 5.0% 5.7%
282.2 283.0 296.5 332.0
450.3 452.7 463.6 504.6
703.3 673.6 710.S 809.8
8.7% 10.lo/o 11.5% 12.6%
11.J% 14.1% 16.5% 18.1%
4.9% 7.1% 9.9% 12.1%
57% 51% 42% 36%
ANNUAL RA TES Past Past of change (per sh) 10Yrs. 5 Yrs.
Sales 5.4% 5.4% "Cash Flow" 7.6% 6.0%
Earnings 8.9% 4.2%
Dividends 4.9% 5.3% Book Value 8.0% 9.3%
( )
0 2003, value U1e Publlslllng, Inc. An rights reserved. Factual material Is oblained from swces beliMd to be reliable and is provided without warranlies ol lll'f kild. THE PUSUSHEA IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication Is Slric1ly lor IU!Jecribel'1 own, IIOIKOfflffl8lt, lnlemal use. No pert ol l may be llplllduced, resold, stored or transmitted In any printed, electronic OI other IOfm, or used for genereting or markellng any printed or electronic publlcalton; 141rvlce or product. To subscribe call 1 ·800·833·0046.
AVISTA GORP. NYSE-AVA t. !RECENT 11··63 IP/E 1 · 7·.1 (.Trailing:19.2) RELATIVE O 90�01V'O . 2.9o'o·Bl!!lll 1_776 , : .PRICE . 1 . RATIO '.. . , • , Med"ian: 14.0 PIE RATIO .• , . ; I I YLO /CIIIILWII
,,;·:- • • • •• 24
Target Price Range 2006 2007 2008
-r-.
-1--, 1 ........ ,. '"-.11-1-_-_,-til"'. '..:,....·--������:·:·-·'--·�-�-:--_-�--=--�-:Jg
+-'----''-1-''--',f--'--+----l-'--l-----l-'8
TIMELINESS· 2 Raised!V1&'03 High: 18.4 21.0 18.9 18.1 19.9 24.8 24.9 19.6 68.0 24.0 16.6 17.7 ·). . 3 · · Low: 15.9 17.4 13.6 13.5 17.1 17.4 16.1 14.6 14.6 10.6 8.8 9.8
$AFETY i. _:,. �--· .· �1� __ 1 .. · LEGENDS · '\'J". -"·1·.10 x Oividends'p sh ' . ' ' TECHNICAL. 3 laweled10/17!03 · divid� by 1n1erest Aa1e .: ��--+----i.--1,.. .. - .. -�--.-11--1- 4---.· -+�---+·-·-+---+-----1-----1-40 . • • •. Aela1,ve Price Slre�h · · 1-+...:....-+--,-+-,-;__-+-,.,,...,--,-,f---,-1ftHr-:-t- 32 BETA .. 75 (1.00�Marl<et) · , 2-for·1 ��U119;l .. I. . , i,: '. : I'll I ' "' ,
. : •. � . 11um:.'"",, :�:l:;i,�asindicati,'recessidn . •''" ''U,, "1 '11 ·': .. er•.,,;? f� �::11r:or1Ann�ITotal···,:. ••··• ., ... 11 ••• �1�1111.11!"11,1 :-· ll•�, 11.,11, 111 Min(;,":r.-:c�f!}�J":t: � ·,'; ·• . 1 : ''.' ''.,i ',.. . , ' \ ,,
i.:oi,'f, 15:' i '(-15%) 1,:.1 .. "_i: -{ .... ·1o·· .• •••• . . : ,. . ;> ..
.. ·.,
;· I
)
(A) Diluted EPS. Excl;'nonrec. losses: '00, 27i· report due late Jari. (BJ Dlv'ds historically paid base: Net orig. cost. Rate allowed on com. eq. Company's Financial Strength 8 net; '02, 9e; '03, �¢; qain !losses) on disc. ops.: in mid-March, June, Sept., and Dec. • Drv'd re- (elec.) in WA in '02: l 1.16%; in ID in '99: ·: · . Stock's Price Stability · 50 '01, ($1,90)., '.02,2¢;,.!)31 1�). '00 EPS don\, invE1stmentplan avail. (C) Incl. def'd chgs. In 10.75%; eamed on avg. com. eq., '02: 4.5%: · Price Growth P�lstence 10 add due to anlidllutiOh In a. qtt;"Next earnings '02: $9'89fsh. (D) In mill., adj. tor split. (E) Rate Reglilat. Climate: Avg. (F) Summer peak in '02. Earnings Predictability 10
0 �. 'liJue Line f'ulii1s1r1ag;.�·AII rights .(eHIVed. Factual. material Is oblained from sources believed 10 be rellabie and �· pro�ded without warranlies ot any kind. �"-111!11!1"'-"' T'i�PUeLJSHER'IS NOTRE�Sl8l£ fOA ANY ERRORS OR OMISSIONS f1EREIN. This publicalion is stricily tor subscribers own, nor-commercial, intemal use. No part. •1t-�"'' •M••oT·•o>: :1111�:11111:1ll11!1t1 ot N_!i!W: 1/1, � .. �-�'QIJ}ll:!l*ll�;ln,� ��· electronic or _olher_ form, or used tor genera ling or markeling any printed or electronic pubicalion, service or product.
Avista Corp. - Newsroom http://www.avistacorp.com/news/default.asp?prid=903
)
Home
> About Avista ...... ...
Stock Ticker Turn On
> Avista Companies 9Newsroom
Welcome to Avista, providing energy and energy-relat&d s ervice s
>Careers > Community > Investors
> Site Map > Contact Us fuEl��c�
::P' -
f - ,,
I �
> News Archives
> Search Archives
> Media Contacts
> Resource Center
Newsroom
FOR IMMEDIATE RELEASE Thursday, January 08, 2004
Avista Utilities Announces Plans for Improving
Transmission Reliability
Spokane, Wash.: Spokane, Wash.: Avista Utilities, an
operating division of Avista Corp. (NYSE:AVA), today
announced it has completed site-selection plans for its
Palouse-area transmission project, which is part of the
company's overall plan to upgrade transmission lines
throughout its service area. The site selection follows six
months of public meetings and input gathering from citizens,
community groups and local officials.
"The Palouse project will greatly improve the reliability of both
the regional and local transmission system and allow us to
better serve all of our customers," said David James, Avista Utilities project manager.
Two-Phase Project
.. Avista Utilities
Announces Plans for
Improving
Transmission
Reliability
.. Avista Names New
Chief Electrical
Engineer
.. Avista Foundation
Awards Fourth
Quarter Grants
Totaling over
$40,000
.. Avista Utilities
Coordinates with
National Guard to
Help Families of On-Duty Soldiers
Featured Stories
)
)
Phase One will upgrade and increase the capacity of the existing SO-year-old, 35-mile transmission line between
Avista's Shawnee and Rosalia substations. In addition, all wood
poles will be replaced with stronger steel poles. Planning is
underway now to ensure there will be no service disruptions
and minimal inconvenience to farm operators and property owners during this project. Construction of this transmission
line is scheduled to begin in 2005.
Phase Two will build an east-west link between the
Shawnee-Rosalia line and the parallel Benewah-Moscow line.
Connecting these two lines will help ensure electric
transmission reliability, and the additional connection will serve
as a backup between the Benewah and Shawnee substations.
"These types of improvement projects are essential to
maintaining the reliability of the Northwest's power grid," said
Brian Silverstein, manager of transmission network planning
for the Bonneville Power Administration.
The Evaluation Process
During the past two months, five alternate routes for the new
transmission corridor for the east-to-west link were carefully
evaluated. The planning and discussions were centered on the
five key criteria Avista applies to transmission line projects.
These criteria are to:
. ensure the project benefits both system reliability and
customer needs;
. use existing transmission corridors and line combinations
whenever practical;
. ensure the cost of the project does not outweigh customer
benefits;
. minimize impacts to farming and other landowner property
uses;
. avoid, when possible, routes next to towns, housing, schools
Meet Bruce
Howard, Spokane
River
license
manager.
1 of2 1/15/04 1:33 PM
Avista Corp. - Newsroom
)
)
2 of2
http://www.avistacorp.com/news/default.asp?prid=903
and airports.
The majority of the five routes evaluated did not meet these five key criteria. One route was rejected because it would have
been too close to the community of Waverly. Another route
was rejected because it would not have met the reliability standards established by the North American Electric Reliability
Council and Western Electricity Coordinating Council.
The New East-West Transmission Corridor
After reviewing all of the options, as well as considering
community input and project criteria, Avista has identified the
area for the proposed east-west corridor. To connect the Shawnee-Rosalia and the Benewah-Moscow parallel lines,
Avista is planning to:
. rebuild the existing transmission line from the Benewah
Substation west and south along 11 miles of existingllS kV
transmission line to the Spokane and Whitman counties'
border;
. build a new transmission line for approximately 14 miles
along the Spokane/Whitman County boundary to the
intersection of the Shawnee-Rosalia line.
In the coming weeks, Avista will meet with landowners along
this east-west line corridor, as well as with stakeholder groups
in Spokane and Whitman Counties.
"Reliable electricity is crucial to our region's economic
development, and we support Avista's efforts to improve their
system," said Whitman County Commissioner Greg Partch.
Additional details and updates on the project will be available
on the Avista Web site:
www. a vista utilities. com/tra nsmi ssi on/ pa louse.
Avista Corp. is an energy company involved in the production,
transmission and distribution of energy as well as other
energy-related businesses. Avista Utilities is a company
operating division that provides electric and natural gas service
to customers in four western states. Avista's non-regulated
subsidiaries include Avista Advantage and Avista Energy.
Avista Corp.'s stock is traded under the ticker symbol "AVA"
and its Internet address is www.avistacorp.com.
Avista Corp. and the Avista Corp. logo aretrademarks of
Avista Corporation. All other trademarks mentioned in this
document are the property of their respective owners.
NOTE: A route map is attached and will be available for
download from the Web address listed above.
--0403--
Copyright © 2004. All Rights Reserved. Privacy Policy.
1/15/04 1:33 PM
IDAHO PUBLIC UTILITIES COMMISSION
- IDAHO PUBLIC UTILITIES COMMISSION
For Immediate Release
Case No. AVU-E-03-6, Order No. 29377
November 20, 2003
Contact: Gene Fadness [phone]
Website: www.puc.state.id.us
h�://www.puc.state.id.us/intemet/press/l 12003 _ A VUsurcharge.htm
)
)
1 of2
Avista surcharge continued, but fuel transactions questioned
Boise - A 19.4 percent surcharge that is added to Avista Utilities' base rate has been
extended by the Idaho Public Utilities Commission for another 12 months.
However, the commission may yet decide to deny the company authority to collect from
customers nearly $12 million in expenses resulting from two fuel purchase transactions
entered into by the company during the energy crisis of 2000-01.
The fuel purchased by Avista was not used and ultimately sold back into the market.
The fuel was intended for use at Avista's Coyote Springs II gas-fired generating plant.
The plant wasn't operational at the time and keeping the gas was no longer economical.
In order to allow the company an opportunity to defend the fuel purchases, the
commission agreed to treat the matter in a rate case that Avista expects to file early
next year. An adjustment to rates will be made at the time to reflect the commission's
decision regarding the gas purchases.
The 19.4 percent surcharge was implemented in October 2001. At that time, the
company sought a 27-month surcharge to recover $78 million in extraordinary power
supply costs incurred during the 2000-01 energy crisis. The commission agreed to
implement the surcharge for only 12 months so it could annually review how Avista was
handling the deferred account. After commission adjustments, the account reflects a
balance of $16.5 million as of June 30 of this year. Last year on June 30, the deferral
balance was $45 million.
The commission also increased the deferral amount by $256, 727 as the result of an
interest adjustment.
Commission staff had earlier recommended denying the company recovery for a single
transaction that included $5.93 million in fuel and interest costs for the Coyote Springs
plant. In this week's order, the commissioners expand staff findings, proposing that yet
another transaction that included $6 million in gas and interest costs also be considered
for denial.
In both transactions, Avista locked in its price for gas for well beyond the 18-month
time period allowed by the company's risk management policy, according to commission
staff. One transaction locked in the price for two and a half years and the other for three
and a half years.
1/15/04 4:31 PM
IDAHO PUBLIC UTILITIES COMMISSION http://www.puc.state.id.us/internet/press/l 12003 _ A VUsurcharge.htm
)
)
)
2 of2
Avista anticipated that Coyote would be operational and more economical to operate
than buying energy from the wholesale market. As it turned out, Coyote Springs was
neither operational nor was it economical to use the gas purchased for Coyote at
Avista's other facilities. Instead, Avista simply purchased its needs on the wholesale
market and sold the gas back into the market at a loss.
According to staff, work papers from the transactions indicated the gas purchases were
entered into for the sole purpose of securing financing for the Coyote Springs project.
Commission staff contends the transactions were made to meet Avista's cash flow
requirements and were not necessarily associated with utility operations. To be able to
recover power supply costs, utilities have to demonstrate to the commission that the
costs were incurred strictly to provide power for customers and not for other benefits
such as, in this instance, improving the utility's cash flow.
Avista contends the transactions were made at a time when wholesale electric prices
were at unprecedented highs, federal regulators were continuing to refuse to intervene
and the utility was facing the worst hydroelectric conditions in its history. The company
believes that a careful review of the information available at the time the transactions
were made will show the company's decisions were reasonable given the circumstances.
A complete copy of the commission's order is available on the commission website at
www.puc.state.id.us. Click on "File Room," and then on "Recent Orders and Notices,"
and scroll down to Order No. 29377. Interested parties have until Dec. 9 to petition the
commission for reconsideration of this order.
1/15/04 4:31 PM
)
)
)
Global Credit Research
Summary Opinion
12 Dec 2003
Moody's Investors Service
Summary Opinion: Avista Corp.
Credit Strengths
Credit Strengths for Avista are:
- Back to basics strategy with principal focus on core utility operations and restoring financial health
- Favorable regulatory settlements in Washington in 2002 and in Oregon in 2003 are contributing to improving financiai performance and
debt reduction
- Reasonably competitive power supply costs, especially when good hydro periods prevail
- Scaling back on nonutility investments
Credit Challenges
Credit Challenges for Avista are:
- Maintaining support of regulators in Washington and Idaho to help Avista further strengthen its credit profile
- Lingering below-normal hydro conditions and unfavorable weather conditions are having a dampening effect on results in 2003
- Managing risks associated with Avista Energy operations
- Higher costs associated with pension funding and insurance premiums
Rating Rationale
Avista's Baa3 senior secured rating reflects the improving financial performance of its utility division resulting from favorable regulatory
settlements in 2002 and 2003, offset by the lingering financial effects of debt added to fund sizable energy cost deferrals and below normal
hydro conditions, as well as increased operating expenses. The rating also reflects management's more conservative business strategy and
focus on restoring Avista to financial health.
Avista's utility operations benefit from low-cost hydro capacity and competitive thermal generation, augmented by secure long-term
supply agreements. Also, its investment in thermal capacity at Coyote Springs 2, which began commercial operation 7/1103, enables Avista
to be long in energy production and less reliant on purchased power. The additional capacity combined with an Energy Recovery Mechanism ·
(ERM) approved by regulators in Washington should reduce earnings volatility associated with variability in hydro conditions. We also note
strengthened regulatory relations in Washington, evidenced by support for substantial recovery of deferred energy costs and an effective
19.3% base rate increase approved with the ERM.
Avista continues to carefully manage its investments in non-regulated businesses, including the July 2003 partnership arranged at its
Avista Labs unit, which reduced its ownership to less than 20%. As a result, Avista has no further capex requirements for Avista Labs and
that business should not be a drain on consolidated results as it completes its growth phase.
Rating Outlook
Avista's negative rating outlook primarily reflects lingering uncertainty about the FERG investigations. If Avista is cleared of wrongdoing,
then we would consider a stable outlook because such action by FERG would reduce the possibility that Avista would have to make refunds,
pay fines, and/or have its market-based rate authority revoked. It should also have positive implications for a CFTC investigation.
What Could Change the Rating - UP
Avista's continued focus -on debt reduction, lowering its cost of capital, and a more disciplined approach toward nonutility operations
should enable steady improvements in credit quality. Further progress with respect to this strategy and removing uncertainty related to the
federal investigations should help stabilize the outlook and pave the way for potentially higher ratings.
What Could Change the Rating • DOWN
)
)
)
Any unexpected move away from the back to basics strategy, especially if it involves expanding Avista Energy's operations and or
significant incremental debt. Any material change in the regulatory arena that represents a shift towards less supportive treatment for
recovery of and return on core utility investments might pressure the ratings.
Recent Developments
Avista issued $45MM of FMBs to term out short-term debt. Upon reconsideration, a FERC judge certified an agreement in resolution with
the trial staff and forwarded it to the FERC for its final approval. FERC approval would clear Avista of alleged price manipulation. Meanwhile,
Avista replaced its former $225MM secured bank facility by signing a $245MM 364-day secured, committed facility in May 2003 and
renegotiated Avista Energy's $110MM bank facility in July 2003, making it a committed facility. On 11/18/03, Idaho regulators approved
Avista's request to continue the existing 19.4% PCA electric surcharge through October 2004. In doing so, the Idaho regulators also ordered
Avista to file a PCA status report with the general rate case to be filed in 01-2004 and 60 days before the PCA expires. As part of the Idaho
rate case, Avista will also address certain deferred power costs and risk management policies related to long-term fuel supply contracts as
directed by the regulators. Lastly, Avista expects to make about $15MM in additional contributions to its pension plan over the next 12
months and it continues to regularly review the need for price increases in other jurisdictions.
© Copyright 2002 by Moody's Investors Service, 99 Church Street, New York, NY 10007. All rights reserved.
Copyright 2003, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc. (together, "MOODY'S"). All
rights reserved.
)
Avista Corp.
Summary Opinion: Avista Corp.
Avista Corp.
Spokane, Washington, United States
Ratings and Contacts
Category Issuer Rating
First Mortgage Bonds
Senior Secured
Senior Unsecured
Preferred Stock
Avista Corp. Capital I
Bkd Preferred Stock
Avista Corp. Capital II
Bkd Preferred Stock
Avista Corp. Capital Ill
Bkd Subordinate Shelf
Bkd Preferred Shelf
Analyst
Kevin G. Rose/New York
A.J. Sabatelle/New York
Daniel Gates/New York
Operating Statistics
Moody's Rating
Ba1
Baa3
Baa3
Ba1
Ba3
Ba2
Ba2
(P)Ba2
(P)Ba2
Phone
1.212.553.1653
Page 1 of 3
Global Credit Research
Summary Opinion
15 SEP 2003
Avista Corp. (Statistics in bold type) Peer Group Median (Statistics in light type)
(1 ]2003 2002
Revenue (US$ mil.)
Assets (US$ mil.)
Com. Equity (US$ mil.)
Op. Margin (%)
ROA(%)
ROE(%)
Pretax Int. Cov. (X)
FFO Int. Cov. (X)
FFO % Total Debt
RCF % Gross CAPEX
Total Cap. (US$ mil.)
TD% Cap.
Pfd. Stk. % Cap.
Common % Cap.
2001 2000 1999 [2]5-Yr.Avg
(3]3.8 (3]-5.5
(3]2.5 [3]8.4
[3] 1.3 [3]-1.0
1,705.6 13.5 14.8 11.6 12.1 12.6 1.6 16.0 0.4 13.8 6.7
1.1 3.6 0.8 3.5 0.7 3.7 0.8 3.8 0.1 3.7 1.0
5.2 12.0 4.5 12.1 7.9 12.4 12.2 12.6 1.1 12.3 7.4
1.7 3.4 1.5 3.4 1.8 3.5 3.4 3.4 1.7 3.4 2.2
2.4 4.5 3.1 4.0 1.3 4.4 1.2 4.3 2.0 4.3 2.5
13.4 25.1 22.0 21.6 2.6 24.9 1.4 24.5 9.2 24.3 14.5
124.2 98.6 234.2 82.7 2.5 103.0 -7.8 92.9 30.2 97.7 96.9
1,838.7 2,039.81,850.6 2,025.4 2,107.71,880.7 1,791.2 2,012.31,520.0 (3]-0.4 [3]2.1
53.2 51.5 54.3 51.2 59.4 51.8 52.0 50.1 47.2 50.8 51.5
7.2 2.9 7.2 3.1 6.4 3.9 7.5 4.7 26.9 4.0 14.7
39.7 44.8 38.5 45.2 34.2 44.6 40.4 44.4 25.9 44.7 33.8
9.3 1,388.0 980.4 1,659.4 1,395.3 1,340.9 7,911.5 1,273.3 7,905.0
3,517.5 3, 163.3 3,614.1 3,014.4 4,037.2 3, 104.7 12,563.9 3, 153.5 3,713.5
n9.5 923.3 112.8 890.7 120.1 813.7 724.2 sos.i 393.5
) (1] For the 12 months ended June 30; Balance sheet items are as of June 30. [2] Five year average 2002-1998. [3]
Five year compound annual growth rate.
httn·//www rnoorivs r.nm/mnnclv<:/r.11<:t/rP.<:P.�rr.h/vP.nm:/Oninion/Summarv%200oinion/810... 10-29-2003
)
A vista Corp.
Opinion
Rating Rationale
Page 2 of 3
)
)
Avista's Baa3 senior secured rating reflects the improving financial performance of its utility division resulting from
favorable regulatory settlements in 2002, offset by the lingering financial effects of debt added to fund sizable
energy cost deferrals and below normal hydro conditions, as well as increased operating expenses. The rating also
reflects management's more conservative business strategy and focus on restoring the company to financial
health.
Avista's utility operations benefit from low-cost hydro capacity and competitive thermal generation, augmented by
secure long-term supply agreements. Also, its investment in thermal capacity at Coyote Springs 2, which began
commercial operation 7/1/03, enables Avista to be long in energy production and less reliant on purchased power.
The additional capacity combined with an Energy Recovery Mechanism (ERM) approved by regulators in
Washington should reduce earnings volatility associated with variability in hydro conditions. We also note
strengthened regulatory relations in Washington, evidenced by support for substantial recovery of deferred energy
costs and an effective 19.3% base rate increase approved with the ERM.
Avista continues to carefully manage its investments in non-regulated businesses, including the July 2003
partnership arrangement at its Avista Labs unit, which reduced its ownership to less than 20%. Meanwhile, Avista's
focus on debt reduction, lowering its cost of capital, and a more disciplined approach toward nonutility operations
should enable steady improvements in credit quality.
Recent Developments
Avista issued $45MM of FMBs to term out short-term debt. Upon reconsideration, a FERC judge certified an
agreement in resolution with the trial staff and forwarded it to the FERC for its final approval. FERC approval would
clear Avista of alleged price manipulation. Meanwhile, Avista recently replaced its former $225MM secured bank
facility by signing a $245MM 364-day secured, committed facility and renegotiated Avista Energy's $110MM bank
facility, making it a committed facility. Avista awaits response to a stipulated agreement that allows for a $6.3MM
rate increase versus $7.SMM originally requested in its Oregon rate case, filed a request in Idaho during August to
continue the existing 19.4% PCA electric surcharge for another 12 months, and continues to regularly review the
need for price increases in other jurisdictions.
Rating Outlook - Negative
The outlook reflects lingering uncertainty about the FERC investigations. If Avista is cleared of wrongdoing, then
we would consider a stable outlook because such action by FERC would reduce the possibility that Avista would
have to make refunds, pay fines, and/or have its market-based rate authority revoked. It should alsc:i have positive
implications for a CFTC investigation.
© Copyright 2003, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc.
(together, MOODY'S). All rights reserved.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE
COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED,
REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY
FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITIEN CONSENT. All
information contained herein Is obtained by MOODY'S from sources believed by It to be accurate and reliable. Because of the
possibility of human or mechanical error as well as other factors, however, such information Is provided "as Is" without warranty
of any kind and MOODY'S, in particular, makes no representation or warranty, express or Implied, as to the accuracy, timeliness,
completeness, merchantability or fitness for any particular purpose of any such Information. Under no circumstances shall
MOODY'S have any liability to any person or entity for (a) any loss or damage In whole or in part caused by, resulting from, or
relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or
any of Its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis,
Interpretation, communication, publication or delivery of any such information, or (b) any direct, Indirect, special, consequential, compensatory or incidental damages whatsoever (Including without !Imitation, lost profits), even if MOODY'S Is advised in
atlvance of the possiblllty of such damages, resulting from the use of or inability to use, any such information. The credit ratings,
if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not
statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH
RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each
rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the
http://www.moodys.com/moodys/cust/research/venus/Opinion/S ummary% 200pinion/810... 10-29-2003
A vista Corp. Page 3 of 3
)
)
_)
Information contained herein, and each such user must accordingly make Its own study and evaluation of each security and of
each Issuer and guarantor of, and each provider of credit support for, each security that It may consider purchasing, holding or
selling. MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to
MOODY'S for appraisal and rating services rendered by It fees ranging from $1,500 to $1,800,000.
httn· //www mnnriv.<: r.nm/mnnrlv�/r.rn:t/rP:�P:�rr.h/venns/Oninion/Summarv% 200ninion/810... 10-29-2003
)
)
A vista Corp.
Opinion Update: Avista Corp.
Avista Corp.
Spokane, Washington, United States
Ratings
Category
Issuer Rating
First Mortgage Bonds
Senior Secured
Senior Unsecured
Preferred Stock
Avista Corp. Capital I
Bkd Preferred Stock
Avista Corp. Capital II
Bkd Preferred Stock
Avista Corp. Capital Ill
Bkd Subordinate Shelf
Bkd Preferred Shelf
Contacts
Analyst
Kevin G. Rose/New York
A.J. Sabatelle/New York
Daniel Gates/New York
Opinion
Rating Rationale
Moody's Rating
Ba1
Baa3
Baa3
Ba1
Ba3
Ba2
Ba2
(P)Ba2
(P)Ba2
Phone
1.212.553.1653
Page 1 of 2
Global Credit Research
Opinion Update
5 SEP 2003
.)
Avista's Baa3 senior secured rating reflects the improving financial performance of its utility division resulting from
favorable regulatory settlements in 2002, offset by the lingering financial effects of debt added to fund sizable
energy cost deferrals and below normal hydro conditions, as well as increased operating expenses. The rating also
reflects management's more conservative business strategy and focus on restoring the company to financial
health.
Avista's utility operations benefit from low-cost hydro capacity and competitive thermal generation, augmented by
secure long-term supply agreements. Also, its investment in thermal capacity at Coyote Springs 2, which began
commercial operation 7/1/03, enables Avista to be long in energy production and less reliant on purchased power.
The additional capacity combined with an Energy Recovery Mechanism (ERM) approved by regulators in
Washington should reduce earnings volatility associated with variability in hydro conditions. We also note
strengthened regulatory relations in Washington, evidenced by support for substantial recovery of deferred energy
costs and an effective 19.3% base rate increase approved with the ERM.
Avista continues to carefully manage its investments in non-regulated businesses, including the July 2003
partnership arrangement at its Avista Labs unit, which reduced its ownership to less than 20%. Meanwhile, Avista's
focus on debt reduction, lowering its cost of capital, and a more disciplined approach toward nonutility operations
should enable steady improvements in credit quality.
Recent Developments
htto://www .mood vs .com/mood vs/ cust/research/venus/Opinion/Opinion % 20Update/8 l 025... 10-29-2003
A vista Corp. Page 2 of 2
)
. )
Avista issued $45MM of FMBs to term out short-term debt. Upon reconsideration, a FEAC judge certified an
agreement in resolution with the trial staff and forwarded it to the FEAC for its final approval. FEAC approval would
clear Avista of alleged price manipulation. Meanwhile, Avista recently replaced its former $225MM secured bank
facility by signing a $245MM 364-day secured, committed facility and renegotiated Avista Energy's $11 OMM bank
facility, making it a committed facility. Avista awaits response to a stipulated agreement that allows for a $6.3MM
rate increase versus $7.SMM originally requested in its Oregon rate case, filed a request in Idaho during August to
continue the existing 19.4% PCA electric surcharge for another 12 months, and continues to regularly review the
need for price increases in other jurisdictions.
Rating Outlook - Negative
The outlook reflects lingering uncertainty about the FEAC investigations. If Avista is cleared of wrongdoing, then
we would consider a stable outlook because such action by FERC would reduce the possibility that Avista would
have to make refunds, pay fines, and/or have its market-based rate authority revoked. It should also have positive
implications for a CFTC investigation.
© Copyright 2003, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc.
(together, MOODY'S). All rights reserved.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE
COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED,
REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY
FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All
information contained herein Is obtained by MOODY'S from sources believed by It to be accurate and reliable. Because of the
possibility of human or mechanical error as well as other factors, however, such Information Is provided "as is" without warranty
of any kind and MOODY'S, in particular, makes no representation or warranty, express or Implied, as to the accuracy, timeliness,
completeness, merchantability or fitness for any particular purpose of any such Information. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage In whole or In part caused by, resulting from, or
relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of Its directors, officers, employees or agents In connection with the procurement, collection, compilation, analysis,
Interpretation, communication, publication or delivery of any such Information, or (b) any direct, Indirect, special, consequential,
compensatory or incidental damages whatsoever (Including without limitation, lost profits), even if MOODY'S Is advised in
advance of the possibility of such damages, resulting from the use of or inability to use, any such Information. The credit ratings,
If any, constituting part of the Information contained herein are, and must be construed solely as, statements of opinion and not
statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPUED, AS TO
THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each
rating or other opinion must be weighed solely as one factor In any investment decision made by or on behalf of any user of the
Information contained herein, and each such user must accordingly make Its own study and evaluation of each security and of each Issuer and guarantor of, and each provider of credit support for, each security that It may consider purchasing, holding or
selling. MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures,
notes and commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to
MOODY'S for appraisal and rating services rendered by It fees ranging from $1,500 to $1,800,000 .
httn:/ /www .moodvs.com/moodvs/cust/research/venus/Opinion/Opinion%20Update/81025. .. 10-29-2003
Avista Corp
Thoren, Diane
') From: [e-mail]
Sent: Monday, September 08, 2003 10:13 AM
To: [e-mail]
Subject: Avista Corp.'s Proposed $45 Million First Mortgage Bonds Rated 'BBB-'
0 Standard and Poor's RatingsDirect
Page r ot o
This report was reproduced from Standard & Poor's RatingsDirect, the premier source of real-time,
Web-based credit ratings and research from an organization that has been a leader in objective credit
analysis for more than 140 years. To preview this dynamic on-line product, visit our RatingsDirect Web
site at www .standardandpoors.com/ratingsdirect. Click here to apply for a FREE 30-day trial!
Your Connection to Standard & Poor's
Utilities Ratings Team
Standard & Poor's is pleased to provide ongoing service to the investment
community.
) A vista Corp. 's Proposed $45 Million First Mortgage Bonds Rated
'BBB-'
Publication date:
Analyst(s):
08-Sep-2003
Swami Venkataraman, San Francisco (1) 415-371-5071
Credit Rating: BB+/Stable/--
Rationale
On Sept. 8, 2003, Standard & Poor's Ratings Services assigned its
'BBB-' rating to the proposed $45 million first mortgage bond issue
at Avista Corp. The outlook is stable.
Washington-based Avista had $978 million in debt as of June 30,
2003.
The first mortgage bonds are rated 'BBB-', one notch above the
corporate credit rating, reflecting overcollateralization of these
bonds by utility property. The proceeds will be used to refund the .) 9.125% unsecured notes that matured on Sept. l, 2003, and which were
paid out from bank lines.
The 'BB+' rating on Avista reflects the consolidated credit
09-08-2003
Avista Corp Page 2 ot S
profile of Avista's utility business, its energy trading subsidiary
Avista Energy Inc. and other small, nonregulated subsidiaries. The
) rating reflects a much improved regulatory environment in Washington
state, low-cost, hydroelectric generation, competitive rates, and
operating and regulatory diversity in Washington, Idaho, and parts of
Montana, Oregon, and California. These factors are offset by a
financial profile that is weak for the rating. During 2000 and 2001,
the energy marketing and trading (EM&T} business at Avista Energy
provided significant support to the company's consolidated financial
profile. The size of these operations has tapered off over the last
18 months as the strategy shifts toward marketing activities focused
on physical assets managed by Avista Energy. Nonetheless, continued
involvement in riskier EM&T activities, in addition to other
unprofitable nonregulated businesses, continues to contribute to a
weaker consolidated business risk profile than the stand-alone
utility.
Avista's financial profile remains weak, though steadily
improving as a result primarily of debt reduction;
Avista Utilities serves 313,000 electric customers in eastern
Washington and northern Idaho, and 279,000 natural gas customers in
Washington, Idaho, Oregon, and California. The company enjoys a
measure of operating and regulatory diversification, with Washington
accounting for 66% of electric revenues and 50% of gas revenues.
Industrial revenues constitute less than 11% of retail utility
revenues, which provides some stability to revenues and cash flow.
Avista has significantly improved its relationship with the
regulators in Washington over the past year. In June 2002, the
Washington Utilities and Transportation Commission (WUTC} concluded a
general rate case that will allow Avista to recover substantial
power-cost deferrals incurred during 2000 and 2001. The power-cost
deferrals exceeded $270 million at their peak in 2001, of which $199
million was incurred in the state of Washington. The WUTC also
approved an Energy Recovery Mechanism (ERM} designed to allow Avista
to pass excess power costs through to customers and avoid significant
deferred costs in the future. This mechanism, similar to the Power
Cost Adjustment mechanism in Idaho, is a significant boost to
Avista's credit profile.
The company's base load generation resources are generally efficient
and low cost. However, 65% of Avista's owned generation and long-term
hydro contracts are exposed to variations in rainfall. This exposure
highlights the importance of the ERM introduced in Washington as part
of the latest general rate case.
In July 2003, Avista commissioned the 50%-owned Coyote Springs
2, a combined-cycle, gas-fired combustion turbine with a capacity of
280 MW for $216 million. Avista now expects to be self-sufficient in
generation through 2007 under average water conditions. It also has
about 274 MW of gas-fired peaking capacity to rely on in the event of
a hydro shortfall. However, Avista does not typically fuel these
plants until hydro levels for the year are known. The sale of 50% of
the plant to Mirant Corp. also let Avista bolster its financial
09-08-2003
)
_)
Avista Corp Page :.:s or o
profile, which had eroded significantly as a result of deferred power
costs during the western U.S. power crisis.
) In July 2003, Avista announced that it was divesting a majority
stake in Avista Labs, its fuel-cell business, retaining only 19.9%.
This is positive for credit quality, because Avista Labs has been an
unprofitable business and a cash drain on Avista, though a small one.
By its actions, Avista not only eliminates a need for additional cash
investments in the business, except for $1.5 million under certain
conditions, but also brings in investors whose risk appetite is more
in line with that inherent in the fuel-cell business. Finally, the
sale also demonstrates Avista's commitment to focus on its core
utility business. Avista Advantage Inc., an unregulated business that
offers utility bill processing services, is expected to break-even on
a cash basis in 2003.
Avista's financial position has improved substantially over the
last two years on account of deferred cost recovery. However, ratios
remain weak for the rating, with adjusted debt to capital of about
56% and cash flow coverage of interest at about 2.44x for the six
months ended June 2003. Standard & Poor's expects that the recovery
of deferred costs and the aggressive pay down of debt will improve
Avista's financial ratios over the intermediate term to levels
commensurate with the rating .
. ) Liquidity.
Avista's liquidity position is comfortable. A $245 million line of
credit for Avista Utilities and a $110 million committed line for
Avista Energy, both maturing in May 2004, are the sources of external
liquidity available to Avista. The Avista Energy bank line was
uncommitted until the recent round of negotiations in May 2003,
reflecting improved market confidence in the company, specifically in
its trading operations. Avista has $25 million and $37 million
outstanding under these two lines as of Aug. 27, 2003. Avista
Utilities can also sell up to $90 million of receivables through a
wholly owned, bankruptcy-remote subsidiary.
Liquidity for the trading business is provided by cash on hand,
which totals a strong $219.5 million as of June 30, 2003 and the $110
million bank line. This compares favorably with Standard & Poor's
computed capital adequacy requirement of $106 million for Avista's
energy trading business.
Avista had $205 million of long-term debt maturing in 2003, the
bulk of which the company retired in 2002. This year, Avista has
retired $53 million of debt maturing next year. Over the next few
years, Avista is expected to use cash from operations and deferred
cost recovery to repurchase debt and strengthen its balance sheet.
Maturities in future years are small, averaging about $30 million per
year, and the company foresees no need to access the capital markets
over the next 12 to 18 months.
A default on Avista Utilities' bank line could cross-default to
trading agreements and could require the company to post collateral.
09-08-2003
)
Avista Corp Page 4 or o
The bank line has standard covenants such as a maximum debt to
capital ratio of 65% and an EBITDA to interest coverage ratio of 1.6 ) to 1. Avista is comfortably in compliance with the covenants, with
the above ratios at 54.3% and 2.04x, respectively.
Outlook
The stable outlook reflects Standard & Poor's expectation that Avista
will continue to aggressively pay down debt and minimize further
capital investments in unregulated businesses. Ratios are currently
weak for the rating and any slippage in expected ratios is likely to
have an adverse effect on the ratings.
Ratings list:
Avista Corp.
Corp. Credit rating
Senior secured debt
Senior unsecured debt
BB+/Stable/-­
BBB-
BB+
Complete ratings information is available to subscribers of
RatingsDirect, Standard & Poor's Web-based credit analysis system, at
www.ratingsdirect.com. All ratings affected by this rating action can
be found on Standard & Poor's Web site at www.standardandpoors.com;
) under Credit Ratings in the left navigation bar, select Credit
Ratings Actions.
For a complete list of ratings, please click the hyperlink provided here
http://www2.standardandpoors.com/NASApp/cs/ContentServer?
pagename=sp/Page!FixedlncomeRatingActionsPg
RatingsDirect Link is a FREE service provided by Standard & Poor's. If you do not wish to receive
further E-mails related to this topic only, please click here or send a blank E-mail to leave­
[e-mail].
If you do not wish to receive further E-mails on any topic, please click here or send an E-mail with the
subject "Unsubscribe" to [e-mail].
If you would like to be added to this list, please click here or send a blank E-mail to join­
[e-mail] You will be asked to confirm your request.
For additional information on Standard & Poor's visit our web site at http://www.standardandpoors.com.
) Published by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. Executive offices:
·· 1221 A venue of the Americas, New York, N. Y. 10020. Editorial offices: 55 Water Street, New York,
NY 10041. Subscriber services: (1) 212-438-7280. Copyright 2003 by The McGraw-Hill Companies,
Inc. Reproduction in whole or in part prohibited except by permission. All rights reserved. Information
Avista Corp Page 5 of 5
has been obtained by Standard & Poor's from sources believed to be reliable. However, because of the
possibility of human or mechanical error by our sources, Standard & Poor's or others, Standard & Poor's ) does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible
for any errors or omissions or the result obtained from the use of such information. Ratings are
statements of opinion, not statements of fact or recommendations to buy, hold, or sell any securities.
Standard & Poor's receives compensation for rating obligations from issuers of the rated securities or the
underwriters participating in the distribution thereof. The fees generally vary from US$5,000 to over
US$1,000,000. While Standard & Poor's reserves the right to disseminate the rating, it receives no
payment for doing so, except for subscriptions to its publications. Ratings are statements of opinion, not
statements of fact or recommendations to buy, hold, or sell any securities. Ratings are based on
information received by Ratings Services. Other divisions of Standard & Poor's may have information
that is not available to Ratings Services.
Standard & Poor's uses web usage, billing, and contact data from subscribers for billing and order
fulfillment purposes, for new product development and occasionally to inform subscribers about
products or services from Standard & Poor's and The McGraw-Hill Companies. If you have any
questions about our privacy practices or would like to review the accuracy of the information you've
provided, please contact Edward Tyburczy at edward [e-mail] or refer to The
McGraw-Hill Companies Customer Privacy Policy at http://www.mcgraw-hill.com/privacy.html.
)
)
09-08-2001
BULLETIN: Avista Reduces Exposure to Non-Core Business
Thoren, Diane
) From: [e-mail]
Sent: Tuesday, July 22, 2003 5:03 AM
To: [e-mail]
Subject: BULLETIN: Avista Reduces Exposure to Non-Core Business
0 Standard and Poor's RatlngsDirect
Page 1 of 2
This report was reproduced from Standard & Poor's RatingsDirect, the premier source of real-time,
Web-based credit ratings and research from an organization that has been a leader in objective credit
analysis for more than 140 years. To preview this dynamic on-line product, visit our RatingsDirect Web
site at www.standardandpoors.com/ratingsdirect. Click here to apply for a FREE 30-day trial!
Your Connection to Standard & Poor's
Utilities Ratings Team
Standard & Poor's is pleased to provide ongoing service to the investment
community.
) BULLETIN: Avista Reduces Exposure to Non-Core Business
Swami Venkataraman, San Francisco (1) 415-371-5071
SAN FRANCISCO (Standard & Poor's) July 22, 2003--Standard & Poor's
Ratings Services said today that Avista Corp's (BB+/Stable/--)
announcement that it was divesting a majority stake in its fuel-cell
business, retaining only 19.9%, was positive for credit quality,
although it would not affect ratings at present.
Avista Labs is an unprofitable business and a cash drain on
Avista, though a small one. By its actions, Avista not only
eliminates a need for additional cash investments in the business,
except for $1.5 million under certain conditions, but it also brings
in investors whose risk appetite is more in line with that of the
fuel cell business. Finally, the divestiture also demonstrates
Avista's commitment to focus on its core utility business. Avista's
credit profile has stabilized since the establishment of the Energy
Cost Recovery Mechanism by the Washington Utilities & Transportation
Commission in 2002 and its order allowing the recovery of deferred
costs incurred during the western U.S. power crisis. While financial
ratios are still weak for the current rating, Standard & Poor's
expects that Avista will continue to aggressively pay down debt and _) minimize further capital investments in unregulated businesses.
07-22-2003
BULLETIN: Avista Reduces Exposure to Non-Core Business Page 2 of 2
)
)
)
For a complete list of ratings, please click the hyperlink provided here
http://www2.standardandpoors.com/NASApp/cs/ContentServer?pagename=sp/Page/FixedlncomeRatingActionsPg
RatingsDirect Link is a FREE service provided by Standard & Poor's. If you do not wish to receive further E-mails related to this topic only, please click m or send
a blank E-mail 10 [e-mail].
If you do not wish to receive further E-mails on any topic, please click hm or send an E-mail with the subject "Unsubscribe" to
[e-mail].
If you would like to be added to this list, please click l!m or send a blank E-mail to [e-mail];mdpoors.com You will be asked to confirm your
request.
For additional information on Standard & Poor's visit our web site at http://www.standardandpoors.com.
Published by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. Executive offices: 1221 Avenue of the Americas, New York, N.Y.10020. Editorial
offices: 55 Water Street, New York, NY I 0041. Subscriber services: (I) 212-438- 7280. Copyright 2003 by The McGraw-Hill Companies, Inc. Reproduction in whole
or in part prohibited except by permission. All rights reserved. Information has been obtained by Standard & Poor's from sources believed to be reliable. However,
because of the possibility of human or mechanical error by our sources, Standard & Poor's or others, Standard & Poor's does not guarantee the accuracy, adequacy, or
completeness of any information and is not responsible for any errors or omissions or the result obtained from the use of such information. Ratings are statements of
opinion, not statements of fact or recommendations to buy, hold, or sell any securities.
Standard & Poor's receives compensation for rating obligations from issuers of the rated securities or the underwriters participating in the distribution thereof. The
fees generally vary from US$5,000 to over USSl ,000,000. While Standard & Poor's reserves the right to disseminate the rating, it receives no payment for doing so,
except for subscriptions to its publications. Ratings are statements of opinion, not statements of fact or recommendations to buy, hold, or sell any securities. Ratings
are based on informationreceived by Ratings Services. Other divisions of Standard & Poor's may have information that is not available toRatiags Services.
Standard & Poor's uses web usage, billing, and contact data from subscribers for billing and order fulftllmeot purposes, for new product development and occasionally to inform subscribers about products or services from Standard & Poor's and The McGraw-Hill Companies. If you have any questions about our privacy practices or
would like to review the accuracy of the information you've provided, please contact Edward Tyburczy at edward [e-mail] or refer to The
McGraw-Hill Companies Customer Privacy Policy at http://www.mceraw-hill.com/privacy.html.
07 - ?.?.-?.001
)
)
�'\ vista Corp.
Opinion Update: Avista Corp.
Avista Corp.
Spokane, Washington, United States
Ratings
Category
Issuer Rating
First Mortgage Bonds
Senior Secured
Senior Unsecured
Preferred Stock
Avista Corp. Capital I
Bkd Preferred Stock
Avista Corp. Capital II
Bkd Preferred Stock
Avista Corp. Capital Ill
Bkd Subordinate Shelf
Bkd Preferred Shelf
Contacts
Analyst
Kevin G. Rose/New York
A.J. Sabatelle/New York
Daniel Gates/New York
Opinion
Rating Rationale
Moody's Rating
Ba1
Baa3
Baa3
Ba1
Ba3
Ba2
Ba2
(P)Ba2
(P)Ba2
Phone
1.212.553.1653
Page 1 of 2
Global Credit Research
Opinion Update
21 JUL 2003
)
Avista's Baa3 senior secured rating reflects the improving financial performance of its utility division resulting from
favorable regulatory settlements in 2002, offset by the lingering financial effects of debt added to fund sizable
energy cost deferrals and below normal hydro conditions, increased operating expenses, and reduced cash flow
from nonutility operations. The rating also reflects management's more conservative business strategy and focus
on restoring the company to financial health.
Avista's utility operations benefit from low-cost hydro capacity and competitive thermal generation, augmented by
secure long-term supply agreements. Also, its investment in thermal capacity at Coyote Springs 2, which began
commercial operation 7/1/03, enables Avista to be long in energy production and less reliant on purchased power.
The additional capacity combined with an Energy Recovery Mechanism (ERM) approved by regulators in
Washington should reduce earnings volatility associated with variability in hydro conditions. We also note
strengthened regulatory relations in Washington, evidenced by support for substantial recovery of deferred energy
costs and an effective 19.3% base rate increase approved with the ERM.
Avista continues to carefully manage its investments in non-regulated businesses, including the July 2003
partnership arrangement at its Avista Labs unit, which reduced its ownership to less than 20%. Meanwhile, Avista's
focus on debt reduction, lowering its cost of capital, and a more disciplined approach toward nonutility operations
should enable steady improvements in credit quality.
Recent Developments
filp·//(:·\TFMP\A VTST A-1 _HTM 07-21-2003
A vista Corp. Page 2 of 2
)
)
_)
In June, a FERG judge ruled not to certify an agreement in principle with the trial staff, which would clear Avista of
alleged price manipulation. Instead, more hearings are set for October with a final decision earmarked for January
2004. It is worth noting, however, that Avista and FERG staff have subsequently initiated efforts to speed up this
process. Meanwhile, Avista replaced its former $225MM secured bank facility in May by signing a $245MM 364·
day secured, committed facility. Lastly, it filed in Oregon for a $7.5MM price increase in April and continues to
regularly review the need for price increases in other jurisdictions to address higher costs of service not in current
rates.
Rating Outlook - Negative
Avista's negative rating outlook reflects lingering uncertainty about investigations into power price manipulation. If
the FERG clears the company of wrongdoing, then Moody's would consider changing the outlook to stable
because such action by FERG would reduce the possibility that Avista would have to make refunds, pay fines,
and/or have its market-based rate authority revoked. It would also likely have positive implications for a parallel
investigation being led by the CFTC.
© Copyright 2003, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc.
(together, MOODY'S). All rights reserved. ·
All INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE
COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMmED, TRANSFERRED, DISSEMINATED,
REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY
FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All
information contained herein Is obtained by MOODY'S from sources believed by It to be accurate and reliable. Because of the
possibility of human or mechanical error as well as other factors, however, such information Is provided "as is" without warranty
of any kind and MOODY'S, in particular, makes no representation or warranty, express or Implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such Information. Under no circumstances shall
MOODY'S have any liability to any person or entity for (a) any loss or damage In whole or In part caused by, resulting from, or
relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or
any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis,
Interpretation, communication, publication or delivery of any such Information, or (b) any direct, Indirect, special, consequential,
compensatory or incidental damages whatsoever (Including without limitation, lost profits), even if MOODY'S is advised In
advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings,
if any, constituting part of the Information contained herein are, and must be construed solely as, statements of opinion and not
statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO
THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH
RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each
rating or other opinion must be weighed solely as one factor In any investment decision made by or on behalf of any user of the
information contained herein, and each such user must accordingly make Its own study and evaluation of each security and of
each Issuer and guarantor of, and each provider of credit support for, each security that It may consider purchasing, holding or
selling. Pursuant to Section 17(b) of the Securities Act of 1933, MOODY'S hereby discloses that most Issuers of debt securities
(including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODY'S
have, prior to assignment of any rating, agreed to pay to MOODY'S for appraisal and rating services rendered by It fees ranging
from $1,500 to $1,500,000.
file://r.:\TRMP\AVTSTA-1.HTM 07-21-2003
[18-Dec-2002] A vista Corp. 's i.)utlook Revised to Stable on Greater Regulatory Support Page 1 of 1
) STANDARD
&:POOirS
RAT'ING,SDlRECT
)
Research:
Avista Corp.'s Outlook Revised to Stable on Greater Regulatory
Support
Publication date: 18-Dec-2002
Credit Analyst: Swami Venkataraman, San Francisco (1) 415-371-5071
SAN FRANCISCO (Standard & Poor's) Dec. 18, 2002--Standard & Poor's Ratings
Services said today that it revised its outlook to stable from negative on
Avista Corp. based on improvement in the State of Washington's regulatory
environment.
In addition, Standard & Poor's affirmed the company's 'BB+' corporate
credit rating and the 'BBB-' rating on the company's first mortgage bonds,
which reflects overcollateralization of these bonds by the pledged assets.
"The outlook revision reflects the substantial improvement in the
regulatory environment in the state of Washington, and Avista's
conclusion of a favorable general rate case in the state," said credit
analyst Swami Venkataraman. "Avista will now be able to recover its
deferred power costs from the Western U.S. power crisis. The rate case
also implemented an energy recovery mechanism, designed to avoid the
build-up of deferred energy costs in the future," he added.
The 'BB+' rating on Avista Corp. reflects the company's average business
position, characterized by low-cost, hydroelectric generation; competitive
rates; operating and regulatory diversity in Washington, Idaho, Montana
and Oregon; and a much-improved regulatory environment, offset by a
financial profile that is weak for the rating. During 2000 and 2001,
energy trading and marketing provided significant support to the company's
consolidated financial profile. The size of these operations has tapered
off over the last year as its strategy shifts toward marketing activities
focused on the physical assets it manages. Nonetheless, continued
involvement in riskier energy trading and marketing activities in
addition to other unprofitable non-regulated businesses continue to
contribute to a weaker consolidated business risk profile than that of the
stand-alone utility.
Spokane-based Avista Corp. serves about 6001000 electric and gas
customers in Washington, Idaho, Montana, Oregon and the Lake Tahoe region
of California. The company has $1.08 billion in debt outstanding as of
Sept. 30, 2002.
Return lo Regular Format
)
Copyright© 1994-2003 Standard & Poor's, a division of The McGraw-Hill Companies.
All Rights Reserved. Privacy Policy
"' "' ... "
�i 8 ! ..e !l "' � �-,, ";' "' w � 0 E 9 -� "' "' U1 ·:, o. 00 �� "' .,, "' 0 "' u s "Cl 0 8 '-! .. � � � 001;; .:3 ·;; " ] " � "G � j ,;;;- .:3 " ti :;,; � " l!3 .c g, �g :.: 0 �] .; " !l "" i > ·= ·5 _g = ""' " 0 .c � i ! "' � fr� -� a .; -;; ] "" = .s ':' s � ·o" "' � -s § ... .. o ·c -< -� Ii :.: � .. " Cl. l;l .... � i 0 0 .... 1 j " !! 8 � �.5 � s Ltl
:!
D
:§: :§: �
0
V)
.... �� ,,. et: ....
I o..,
M 0\ z M� z;;::
0 "'
z"" oO
t
00 p f-
I � j
- f- "' uU
�
ti u 0 w<
c
w< 0
VJ w
�
-� "' VJ l.t.l 0 O c, O c, "' f- z s 0 .s f- z � � :2
I
r-- "Cl ";' "
f- :2 1 0 � --,:U � ·u �u i :i x " �
:i x VJ w 1
�
VJ l.t.l "' �� 8 = � 1 0 " ;;
et: VJ � .£
:i :!l " � ] � 0 g
c. f- " 0 � ;;;i s ·t �� "8
08 8. 's u Ou ·5 c. l.t.l s -� �
Cl. � VJ
c. l.t.l >, .,,
� "
� VJ 1 6� -� 0 � ;,. !il g u
" ;;l f- ll p"" " rJJ. '(;
er .. ui O -:3
><
W"' " 5 > e:.
f- 0 -:3 z et: 5
�
.... < c,
< 5
...; 8 "' 0 � 0 � 00 0 c I � � j z l 0 -e ti] 1 i :.a � g ;;: � u °' � r:r., � .... 0 v, I � c = I""' "' I z '-! = "" � < � jg- = Q
�
.c r:r., .. Q u Cl >< '6'JJ � � = � ...... Q i z .. z � :;;) < o: � ..... I""'
� u � r:r.,
!1 = � = e u = -0: e " ·= ;s i .. .... 8 a ·;:: < (
...;
� 0 "' 0 � 8 0 52 � "' -e 0 � "' "' 8 .:: N go.
0 I M et: :s w e i:!l ::; ::E > � � e, � w r/J i 0 w l � .c
et: w
� :i o 9' 0
� � g .c C' > 0 .; ( 00 00 00 M e- > = e 9' ·c e � � c u ll -� -c
(
(
" 0 .,, ! 5 -� <
N 8 N
D
" " .. " la .. .. -e la la � .c, 0
� "fl �i 0 .c, B "' u "' Ill><
0 ! "i' ti tti'bO .,.. Ill
0 'E.!l �1 "' < " e�
r-,
00 -;! <>:
;1; e ·c 'f .. .. .d rllB
� Ill 1l � � "' : �i -"'"'
'ii' . <a � ...
��
"i' C'?·.:,.
0 la 0:, il "' El
c,
e � s ,: .. .d C:.g
0 � .. 0..
u
u � z z
.;!
-g � " 0
.a ! u o ·.:: .. 5 Ji
1l
""' .a 'vi' ti!·,; "' .d " .. "! £
·.:; � u
,s
� ;;: IS .s � i: ·::; 'o§' 0 ] � .. "' .r " E ti!!!
.. =·::: :;J ;, -�1 -s 'fil,
i, .g -� ·::: = 8. s Q. i;:,2
t �! .. u.,, � 9 0 s
·&l. >< 1!i " "' .. � .a �
" B § 6 .; .; ·.;; � "'
� .. = .e- ".,, a - u ,s
... .8 ·:- a � l §� ·Qi
g! s -
0 1 "" e � P.. f;
� �.g < ... -& 0 Q. " il
;;: � ; s ... " :1 � s Jl �
" 0 ] .:: u B fr 1 lil ·.:: i= .:,; � 8:
"' 5 0 " j s g �"'
>< �.e I .. � l "' en "" ·a i J: " :": <>:
0 o
� ... 0 "'
� ... 0
(
t' .. El El :s "' ,i!j
" 0 ·.c " :s .,, e .s
,...; " ·.ll �
.... o--('f"l"1'"1:f'lr'IO\O\O\O\-N -------"""---NM t-OM "'..,..,
.,; '::: ,o i·a :� e
-� -� � i �'o ! � � :i -" gJ = gJ.,, �
"� iii: -� iE � g g .s .;; i:ll i "'
(