IntercontinentalExchange, Inc. announced a 42% pre-tax profit of $52.3 million on revenues of $125.5 million for 2002, its second full year of operations.

The majority of the company’s consolidated revenues, profits and cash generation were derived from its over-the-counter (OTC) digital trading platform, which contributed 70% of total revenues, 67% of total pre-tax profits, and 73% of cash flow from operations of $50.7 million. This profitability was achieved despite the costs borne by its OTC business to develop the new electronic futures trading infrastructure for the International Petroleum Exchange of London (IPE), its wholly owned subsidiary.

Capital expenditures in 2002 totaled $20.8 million, and included the technology provided to the IPE, disaster recovery enhancements, the development of OTC cleared products, and systems for the collection and dissemination of market data. Earnings before interest, taxes, depreciation and amortization were $65.3 million, and Intercontinental ended the year with no outstanding long-term debt, having paid down all of its long-term debt in 2002.

For the fourth quarter of 2002, revenues were $26.1 million, with pre-tax profits of $6.7 million, with the number of OTC transactions flat versus 2001’s fourth quarter when Intercontinental’s volumes surged following the collapse of Enron.

“In a difficult year for the broader economy and merchant energy trading as a whole, Intercontinental made substantial gains in market share in the OTC markets,” said Chairman Jeffrey Sprecher. “Revenue from the OTC business grew by 72% compared to 2001. More than 780 firms accessed our digital platform in 2002, for an increase in participant firms of 50% over the prior year.”

Sprecher said the company has become “an important source of liquidity in energy trading. While many of the initial order flow agreements that seeded and helped to establish liquidity on Intercontinental’s platform expired in 2002, we have not seen a material change in the trading of those participants. While a small number of dealers continue to have order flow agreements for natural gas and power, today 85% of Intercontinental’s business originates from the hundreds of customers that do not have trading obligations.”

The number of North American product and global oil transactions on the company’s OTC platform increased 150% in 2002 compared to 2001, to approximately 1.9 million commission-based transactions. In European power and gas, the number of OTC transactions was 20 times greater in 2002 compared to 2001. Cleared trades represent a growing part of Intercontinental’s volume, with over 8,400 cleared transactions in the North American natural gas market in the fourth quarter.

The IPE recently announced that 2002 marked its fifth consecutive record year for trading volume. Volumes rose in all futures contracts, with IPE Brent Crude futures volumes up 17% and Gas Oil futures volumes up 13% over the previous year. IPE Natural Gas futures volumes saw the highest growth at 21% over the previous year.

In the first quarter of 2003, Intercontinental will deliver an after-hours trading platform to the IPE, allowing it to provide digital equivalents of all of its floor-traded futures contracts.

IntercontinentalExchange, formed in 2000, is privately held and not required to disclose financial results. The results are subject to audit, the company said.

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