Allegheny Energy Inc. said Monday that third-quarter profit fell 23 percent on higher costs for coal, the primary fuel for its power plants, and on milder weather.
Net income fell to $89 million, or 52 cents a share, from $115 million, or 67 cents, a year earlier, the Greensburg-based company said. Sales rose less than 1 percent to $849.6 million.
Coal accounts for 93 percent of the output of Allegheny's generating plants. The average price of coal delivered to the plants will rise 18 percent this year to $47 a ton, Allegheny Energy said in an August investor presentation.
"A lot of it has to do with weather, and their fuel costs rose while sales were flat," said Gordon Howald, an analyst in New York for Calyon Securities USA who rates the stock "buy" and doesn't own any.
Fuel costs rose 22 percent to $299.2 million, mostly for coal, Allegheny Energy said. The benchmark power price in PJM Interconnection LLC, the market for Allegheny Energy's plants, rose 25 percent from a year earlier to average $94.87 a megawatt-hour during the third quarter, according to data from IntercontinentalExchange Inc. compiled by Bloomberg.
Profit fell to 54 cents a share excluding quarterly adjustments to the value of contracts used to lock in commodity prices, Allegheny Energy said. That missed by 13 cents the average estimate of six analysts compiled by Bloomberg.
Net income from power generation and marketing fell 17 percent to $834.7 million on coal costs and reduced output, which dropped 1.1 percent from a year earlier, the company said. The combined capacity of its plants is about 9,700 megawatts. One megawatt is enough power for about 800 average U.S. homes, according to the Energy Department in Washington.
Profit from delivering power fell 66 percent to $4.3 million on milder weather that reduced energy demand for heating and air conditioning and on higher prices for power purchased to supply Virginia customers. Net income from the segment also dropped as the company lost the ability to recover the lower value of plants after market deregulation.
The average residence used 5.7 percent less electricity in the third quarter than a year earlier, Allegheny Energy said. Weather-driven demand for air conditioning fell 22 percent from a year earlier, the company said.
Allegheny Energy cut this year's capital spending budget by $200 million to $1.1 billion because the installation of some pollution-control equipment will be delayed to next year, Chief Financial Officer Kirk Oliver said yesterday on a conference call.
Allegheny Energy's stock dropped 76 cents, or 2.5 percent, to $29.39 yesterday. It has fallen 53 percent this year.
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