UIL Holdings reports Q1’12 results, revises 2012 earnings guidance

UIL Holdings Corp. reported consolidated net income of $47.1 million, or $0.92 per diluted share for the first quarter of 2012, compared to $52 million or $1.02 per diluted share for the same period of 2011.

“The extremely warm weather in the first quarter of 2012 had a significant impact on the earnings from the gas companies. Heating degree days were 20% below normal for the first quarter 2012 and 23% below the first quarter 2011,” said James P. Torgerson, UIL’s president and chief executive officer. “A full revenue decoupling mechanism is in place for electric distribution, so the weather did not have an impact on its earnings,” Torgerson added.

“We will continue to focus our efforts on controlling costs, converting customers to natural gas heating and executing on our capital expenditure program,” concluded Torgerson.

Electric distribution, CTA & other

Earnings from the electric distribution business for the first quarter in 2012 were $14.2 million, or $0.28 per diluted share, compared to $10.7 million, or $0.21 per diluted share, for the same period in 2011. The increase in earnings was primarily attributable to increased income from the investment in GenConn.

Pre-tax earnings from the equity investment in GenConn were $4.5 million, compared to pre-tax earnings of $2.1 million for the same period in 2011. Both GenConn plants are now operating in the ISO-NE markets. GenConn Devon became operational in the summer of 2010 and GenConn Middletown became operational in June of 2011.

Electric transmission

Earnings from the electric transmission business for the first quarter in 2012 were $7.4 million, or $0.15 per diluted share, compared to $7.7 million, or $0.15 per diluted share, for the same period in 2011. The decrease in earnings was primarily attributable to a decrease in the allowance for funds used during construction partially offset by income earned on an increase in rate base.

Gas distribution

Earnings from the gas distribution businesses for the first quarter in 2012 were $28.5 million, or $0.55 per diluted share, compared to $37.4 million, or $0.73 per diluted share for the same period in 2011. Earnings for the first quarter of 2012 were negatively impacted by warmer weather during the winter heating season, which were partially offset by weather insurance. The warmer weather decreased margin by $14.6 million compared to the same period in 2011. The decrease in margin was partially offset by weather insurance of $3.5 million, resulting in a pre-tax weather impact of $11.1 million in the first quarter of 2012.

Corporate

UIL Holdings retains certain costs, primarily interest expense, at the holding company, or “corporate” level, which are not allocated to the various subsidiaries. UIL Corporate incurred net after-tax costs of $3.0 million, or $0.06 per diluted share, in the first quarter of 2012, compared to net after-tax costs of $3.8 million, or $0.07 per diluted share, in the same period of 2011. The reduction in costs was primarily attributable to a decrease in interest expense resulting from lower short-term borrowings.

Looking Forward

UIL Holdings is revising the high end of its earnings guidance. UIL’s revised consolidated earnings estimate for 2012 is $2.00-$2.15 per diluted share compared to the previous guidance of $2.00-$2.20 per diluted share. The revision is due to warmer than normal weather during the winter heating season, which significantly impacted gas distribution earnings. Accordingly, guidance for the gas distribution companies has been decreased to a range of $0.70-$0.80 per diluted share from the previous guidance of $0.75-$0.90 per diluted share.

In addition, UIL is increasing the low end of the range for electric distribution, CTA & other to $0.90-$1.00 per diluted share from the previous guidance of $0.85-$1.00 per diluted share and increasing electric transmission guidance to $0.55-$0.65 per diluted share from $0.52-$0.62 per diluted share. The revised total earnings guidance for the electric company is $1.50-$1.65 per diluted share from the previous guidance of $1.40-$1.60 per diluted share.