Peoples Energy earnings soared compared to year-ago results, which were negatively impacted by one-time charges for uncollectible accounts in its Chicago gas distribution business. Net income for its fiscal 2003 third quarter ended June 30 was $8 million, or $0.22/share, compared with $1.3 million, or $0.04/share, for the prior year third quarter. Wall Street analysts had been expecting 26 cents/share, according to Thomson Financial’s First Call.

“For the full fiscal year, each of our business units is expected to report higher operating income compared to a year ago. Despite a number of earnings challenges in our gas distribution business, Peoples Energy remains on track to report a solid year of earnings and cash flow, and we continue to estimate that fiscal 2003 earnings will be in the range of $2.85 to $2.95 per share,” said CEO Thomas M. Patrick.

Gas distribution operating income more than doubled to $19.1 million compared to $8.4 million in the year-ago period. The year-ago quarter included a $17 million charge to the reserve for uncollectible accounts related to the winter of fiscal 2001, which favorably impacts the comparison.

Power generation operating income rose to $1.7 million for the third quarter, a $1.5 million increase over the same period last year. The improvement was primarily due to equity investment income generated from the Southeast Chicago Energy Plant (SCEP), a 350 MW plant owned in partnership with Exelon, which began commercial operations in July of 2002.

Peoples’ midstream operating results declined in the current quarter to a loss of $0.8 million, compared to operating income of $2.8 million in the year-ago quarter. The reduction was primarily due to lower wholesale marketing results, as well as income in the year-ago period associated with the termination of the equity investment in enovate L.L.C. On a fiscal year- to-date basis, operating income was up slightly to $9.8 million compared to $9.4 million last year. Despite a third quarter loss, the midstream business remains on track to meet its targeted operating income for fiscal 2003 of $13-14 million, the company said.

Operating income results from retail services increased $0.4 million for the third quarter and $3.4 million fiscal year-to-date. And oil and gas production operating income improved to $10.2 million and $23.8 million on a quarter and fiscal year-to-date basis, respectively, compared to $4.1 million and $13.9 million in the same periods a year ago because of a 50% increase in gas production and a 36% increase in realized gas prices.

Net realized gas prices for the third quarter rose from $3.18/Mcf to $4.31/Mcf and rose 34% fiscal year-to-date. Likewise, net realized oil prices rose 16% for the quarter to $22.72 per barrel and 18% fiscal year-to-date to $22.53 per barrel. Third quarter gas production volumes increased from 43 MMcf/d to 64.4 MMcf/d.

Peoples’s gas distribution business serves about one million retail customers in Chicago and northeastern Illinois.

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