ConEdison Lowers '03 Earnings Guidance on Share Offering
New York City-based Consolidated Edison lowered its 2003 earnings guidance on Monday by 8 cents/share to a range of $2.82 to $2.97 a share in response to adjustments made because of a proposed public offering of 8.7 million common shares, which is expected to raise $345 million. The company's previous forecast of 2003 earnings was $2.90 to $3.05/share.
Con Edison plans to invest the net proceeds from the stock sale into its regulated utility subsidiary, Con Edison of New York, for funding of construction expenditures and for other general corporate purposes.
"At Con Edison, we manage our business and our finances for the long-term -- not just for the next quarter. As part of our long-term focus, we recognize the importance of maintaining the company's financial strength and flexibility," CFO Joan S. Freilich said a the company's annual meeting on Monday.
ConEdison also announced Monday that a class action lawsuit filed against it last Friday by shareholders of Northeast Utilities seeks damages "believed to be substantially duplicative of those sought by Northeast Utilities, on behalf of its shareholders, in its counter-claim in the previously reported litigation."
In 2001, Con Edison sued Northeast Utilities to recover damages for breach of their merger agreement (see Daily GPI, March 7, 2001). Northeast Utilities filed a counterclaim alleging that Con Edison breached the merger agreement and seeking damages in excess of $1.2 billion, and now Northeast Utilities' shareholders have joined in the litigation, filing their own class action lawsuit. Con Edison said it is unable to predict whether or not the lawsuits will have a material adverse effect on its financial position, results of operations or liquidity.
Citing weaker financial ratios in 2002 compared with the forecast provided in 2001, Standard & Poor's lowered the long-term issuer credit ratings on ConEdison and its subsidiaries Consolidated Edison Co. of New York Inc., Orange and Rockland Utilities Inc. and Rockland Electric Co. to "A" from "A+." The senior debt ratings also were lowered by one notch. The short-term ratings were affirmed, and S&P said the outlook is stable. ConEdison and its subsidiaries have about $6.6 billion in debt outstanding.
However, S&P also said the ratings reflect the company's strong business profile, which stems from a supportive regulatory environment and a conservative strategic pursuit as a transmission and distribution company. Also supporting the ratings ConEdison of New York's exit from the nuclear business. Although the parent company is pursuing nonregulated business opportunities, most significantly in power generation in the Northeast, "these activities should be funded conservatively, and they will continue to account for a small percentage of consolidated cash flows and capital commitments," S&P noted.
The utility's financial profile remains weak for the revised ratings, but Standard & Poor's expects debt levels to be back in line by 2005 through equity issuances and regulatory rate relief. The company's leverage levels have increased due to large capital expenditures in 2002 and 2003 and about $6 billion in planned capital expenditures over the next five years, averaging about $1.2 billion per year.
©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.