An annual review of 145 natural gas and power generators and marketers in 2001 — before the energy merchant sector collapsed — found that 41 of the largest companies reported a record $14.1 billion in earnings last year, including write-offs. Last year’s numbers, moving higher with increased sales and realization on both natural gas and electricity, were up more than one-third from 2000’s record $10.2 billion, and more than double the $5.5 billion posted in 1999, according to Energy Performance Review (EPR).

What is different about the 2001 annual survey, other than its numbers will in some ways be unreachable this year, is that the “recent breakdown of momentum for gas and power deregulation has generated a renewed interest in so-called ‘hard assets,’ including distribution networks, and a more balanced approach to different areas of the industry,” according to analyst John Gehman, who has published annual and quarterly EPR reports on the energy industry for 15 years. Gehman also found that last year’s natural gas and electricity sales both jumped more than 50% from 2000’s numbers. Realization for gas averaged $5.18/Mcf, up from $5.01, while power averaged 5.9 cents/kWh, up from 5.1 cents.

Overall, revenues for both gas and power marketers totaled a record $410 billion, a jump of close to 50% over 2000, and more than triple those in 1999, said EPR. Special items, including write-offs and write-downs, reported in 2001 totaled a net negative of $504 million, compared with a net negative of $330 million in 2000, and a net positive $52 million in 1999. Last year, the special items included a $188 million write-down and a $200 million charge related to contracts, both for CMS Independent Power; a $54 million write-off for Mirant Corp. on EDELNOR, a South American utility; a $35 million charge related to its Enron exposure for Aquila Wholesale Services; and a $26.9 million write-down for Edison Mission Energy.

Pre-tax operating income overall was $18.9 billion, and similar to earnings income, was up more than one-third from 2000 and more than double the 1999 numbers. Cash flow totaled $23 billion, also up substantially from earlier years. Earnings including special items last year were 5% of assets, totaling $252 billion, compared with 4% for 2000 and 5% for 1999, or 3 cents/Mcfe (unchanged from 2000). Meanwhile, capital expenditures totaled $33.9 billion, compared with $21.6 billion in 2000 and $13.4 billion in 1999.

For natural gas distributors, EPR found that 42 of the major ones reported a record $2.6 billion in earnings last year, including special items, which was up $2.4 billion from 2000 and $2.2 billion from 1999. The jump reflected “increased sales and transportation volumes partly offset by reduced margins on gas sales,” Gehman said. Revenues totaling $46 billion were up close to one-third from a year earlier, also reflecting higher average prices.

Gas distributors reported pre-tax operating income of $4.1 billion, up 6% from 2000 and up 17% from 1999, while cash flow was $6.6 billion, up 8% and 19% respectively. Special items totaled a net negative of $18 million last year, compared with a net negative of $92 million in 2000 and a negative of $18 million in 1999. Last year, special items included a $62 million restructuring charge for Michigan Consolidated Gas, which was partially offset by a $43.7 million gain on asset sales for Southern Union Gas.

Overall, EPR found that earnings were 4.4% of assets, which totaled $59 billion. The figure was up 4.2% from 2000, but down from 5% for both 2000 (32 cents/Mcf total throughput), and level with 1999-2000’s period. Capital expenditures totaled a record $4.2 billion, including major expenditures for Atmos Energy and Southern Union Gas.

Total gas throughput for the 42 companies was 8.2 Tcf for 2000, about half sales, 54%, and the rest transportation, 46%. Transportation volumes showed “continued growth, up more than 40% in the period since 1995,” according to EPR. Residential sales increased in line with recent historical periods as well. Average revenue rose more than $1/Mcf, to a record $8.92, compared with $7.78 in 2000 and $6.87 in 1999. Meanwhile, average sales per customer declined to 76.5 Mcf, while the average annual bill was up to a record $704.

Within the electricity distributor group, 52 reported earnings totaling $18.2 billion in 2001, before special items, up more than one-third from the $13.2 billion posted in 2000 and more than a quarter from 1999’s total of $14.1 billion. Most of the increase came from gains taken by a single company, Southern California Edison, following the California energy crisis in 2000, said EPR. However, the $2.5 billion special charge in 2000 was “largely reversed” by a $2.1 billion special gain taken last year. Revenues for the 52 companies totaled $154 billion in 2001, up 9% from 2000 and 24% from 1999.

Earnings for the power distributors, before write-downs, were 5% of assets, which totaled $358 billion, up from 4% in 2000 and 4.7% for 1999, or 84 cents/kWh of total deliveries. Capital expenditures for electricity distributors totaled a record $21.9 billion in 2001, up from $18.2 billion a year earlier and $15.5 billion in 1999.

Total electricity deliveries for the 52 companies declined in 2001, “reflecting reduced deliveries to both retail and wholesale companies,” said EPR. Average revenue on final deliveries was 7.2 cents/kWh, “largely unchanged from the recent historical period, while wholesale revenue declined from the prior year.” Deliveries to residential customers and revenues averaged 8.8 cents/kWh, which were flat from the year before. Average sales per customer and average annual bills also declined slightly.

For more information on EPR’s annual review, which details figures from 1996 through 2001, visit the web site at www.energyperformancereview.com.

©Copyright 2002 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.