Peoples Energy Corp. anticipates annual growth in earnings ofmore than 7% by 2002, about 1% above its competitors, with agreater share of earnings — at least 25% — coming fromdiversified businesses and less from its LDC segment, companyofficials said yesterday.
The Chicago-based company has targeted earnings per share in therange of $2.65 to $2.75 for this fiscal year, $2.85 to $2.95 infiscal 2001 and $3.05 to $3.15 in fiscal 2002, management said atthe American Gas Association’s Financial Analysts Conference inTucson, AZ, Monday. It anticipates the contribution of itsdiversified businesses to total earnings could more than double to27% in 2002 from a low of 12% this year.
Peoples Energy said its three-part strategy for the future callsfor further growth of its diversified businesses, enhancement ofits energy utilities and a continuation of its pursuit of strategicalliances or acquisitions
Peoples’ gas distribution subsidiaries — Peoples Gas Light& Coke and North Shore Gas — remain its core business,accounting for about 75% of the annual profits this year. Thecompany anticipates earnings before income taxes (EBIT) for thissegment in 2000 will range from $175 million to $185 million. In2001, the gas distribution group’s EBIT performance will remainfairly steady — in the neighborhood of $180 million to $190million, it told the security analysts. The information also wasfiled in an 8-K report with the Securities and Exchange Commission.
Peoples Gas Light’s share of the new housing market has risensteadily during the past four years, reaching 3,944 units in 1999compared to 1,833 in 1996. Conversely, North Shore’s share of thatmarket has tapered off considerably, falling to 2,475 units lastyear from 3,221 in 1996, it noted. The company believes the futureopportunities for its gas utilities lie with microturbines, fuelcells and new products and services.
Peoples Energy’s diversified businesses include its midstreamoperations, oil and natural gas production, power generation,retail energy services and other (such as its natural gas vehicleprogram).
Of these businesses, the company’s power generation segment isexpected to have the greatest upswing in earnings, with its EBITincreasing to between $15-$20 million in 2001 from $6.9 million in1999. This largely will be fueled by the Peoples Energy’s projectedgrowth in ownership of generation facilities, rising to about1,000-1,200 MW in 2002 from 300 MW last year, according to the 8-Kreport.
It anticipates its midstream services will finish a strongsecond, with the EBIT jumping to about $10-$12 million in 2001 from$9 million last year. Peoples Energy is counting on thepartnerships it has formed with other companies to spur earnings inthis area. It recently joined Enron North America, an Enron Corp.subsidiary, in announcing the formation of the Midwest Energy HubL.L.C., which would replace Peoples’ existing hub and provide gasmarketing, transportation and storage services to the 1.1 TcfChicago market.
Also, Peoples Energy and The Coastal Corp. have signed amemorandum of understanding to pursue as equal partners thedevelopment of a 130-mile, 1.4 Bcf/d gas pipeline between Indianaand Wisconsin to serve the growing gas-fired generation markets innorthern Illinois, northwestern Indiana and Wisconsin by 2002. APeoples Energy spokesman said the partners plan to file a projectapplication at FERC this summer.
The EBIT for Peoples Energy’s oil and gas production operationsis projected to rise to around $7 million to $10 million in 2001from $2.2 million in 1999, but about half of the growth ($4 millionto $5 million) will come from one-time Section 29 tax credits,according to the 8-K filing. The company estimated it had 91.5 Bcfequivalent of domestic proved reserves as of Dec. 31, 1999. Itsgoal is to increase that to 350-400 Bcfe within a couple of years.
It also anticipates some earnings’ improvement for its troubledretail gas and electric services, with the EBIT increasing to asmuch as $1 million in 2001 from a loss of $3.6 million in 1999.This projection depends on “continued growth” in retail gasmarkets, and the company capturing a “significant” market share ofeligible electric customers.
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