Marking the fifth year in a row that it has met or exceeded its earnings growth commitments to Wall Street, UtiliCorp United reported Thursday full-year 2001 operating earnings of $2.44 per diluted share, a 17% increase over the previous year’s operating earnings per diluted share of $2.08. Earnings before interest and taxes (EBIT) for 2001 were $704.7 million, up 31% from $540 million a year earlier. The company also reported that sales for the year were up 39%, from $29 billion in 2000 to $40.4 billion for 2001.
Following the company’s earnings conference call early Thursday morning, UtiliCorp’s stock spiked to $22.90. By closing time on the New York Stock Exchange Thursday, the company’s shares had settled down some. Despite the afternoon fall-off, the stock closed 18 cents up on the day at $22.42.
“Our diverse portfolio of businesses, consisting of the Merchant Group and the Global Networks Group, has again proven successful in meeting our earnings targets during a year of unprecedented market challenges,” said Robert K. Green, UtiliCorp CEO. “Execution and client focus were critical to our success in this environment. Our global network businesses should continue to provide stable core earnings while our merchant businesses continue providing high value-added products and services that help our clients manage their business risk. This combination gives us confidence in our ability to meet or exceed our target of 10% earnings growth in 2002.” During UtiliCorp’s conference call, Green said that he expects earnings to grow at 10-15% per year after 2002.
Despite the strong full-year results, UtiliCorp recorded an after tax loss for the fourth quarter 2001. The company posted EBIT of $40.5 million for the 2001 quarter, compared to $141.1 million during the fourth quarter 2000. After tax, the company recorded an earnings loss of $6.2 million ($0.05 per share loss) for the fourth quarter 2001, compared to a $48.2 million ($0.50 per share) gain during the similar quarter a year earlier.
Including non-recurring items, UtiliCorp reported full-year 2001 earnings of $2.42 per diluted share compared to $2.21 per diluted share in 2000. Full-year 2000 non-recurring items included an after-tax gain of $29 million ($0.30 per share) from the initial public offering of Uecomm Ltd. in Australia and $16.3 million ($0.17 per share) of after-tax impairments and other charges.
UtiliCorp said its non-recurring items in 2001 include:
Based on operating EBIT, which excludes non-recurring items, UtiliCorp’s Merchant Group posted an increase of 90% from $201.9 million in 2000 to $383.8 million in 2001. The record performance from the Aquila subsidiary was based on strong performances from wholesale and capacity services. The company’s wholesale services segment benefited from a volatile pricing environment in the first half of the year, combined with strong client demand, which provided increased opportunity to deliver products and services. UtiliCorp said that continued growth in the structured finance portfolio and new businesses such as hourly gas and global liquids also contributed to the increase in earnings. During the year, Aquila’s power volumes increased 84% to 350 million MWh in 2001 and gas volumes increased 13% to 13.5 Bcf/d.
Aquila also closed more than 1,850 structured transactions in 2001, marking a 28% increase over 2000. The subsidiary has developed seven partnerships with reinsurance companies to create a global weather portfolio spanning 10 countries. This is evidenced in the new products introduced in 2001, which include GuaranteedWindSpeed(SM), GuaranteedBill(SM), GuaranteedYield(SM), Load Following(SM), Risk180(SM) and Credit Services.
Capacity services benefited primarily from the December 2000 acquisition of interests in six power plants through the purchase of GPU International, which continues to provide stronger than expected operating results. The Aries power plant in Missouri came on line as scheduled and was in operation for the summer cooling season. The company added that during the year construction began on four power plants that will add a total of 1,770 MW to Aquila’s capacity. Aquila said the work is largely ahead of schedule and below budget and three of the plants are expected to be on line for the 2002 cooling season.
UtiliCorp’s international and domestic networks recorded a combined operating EBIT of $299.2 million in 2001, representing a $34.4 million decline from the $333.6 million posted in 2000. Despite the addition of Alberta electric properties in Canada and AlintaGas properties in Australia, the elimination of the management fee from Quanta Services Inc. and the downturn in the telecom sector forced EBIT lower.
UtiliCorp hedged its fuel costs for the 2002 winter season (January-March) using weather products. While it is impossible to hedge 100% of the company’s weather risk, UtiliCorp expects that variations in its future earnings due to weather will be significantly reduced. It will explore the best methods to limit weather-related variance in summer earnings later this year.
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