The Way Energy Works
PRODUCING SUPERIOR RETURNS
From November 2001-the start of our competitive strategy-through the end of 2004, our stock price appreciated 102 percent. With dividends, that's a 27 percent average annual return to shareholders.
In 2004, total return to shareholders-with dividends reinvested-was 14.8 percent. Our stock price appreciated 11.6 percent. Our earnings excluding special items grew 17.4 percent to a record $3.24 per share-well above our goal of 10 percent and well above the industry average.
We have kept our promises to Wall Street. Fourth quarter 2004 was the 13th consecutive quarter we have met or exceeded our earnings guidance. That's a solid track record of proven performance, and we expect to continue the trend.
We also expect to continue increasing our dividend in line with our earnings growth. In January 2005, we announced a 17.5 percent quarterly dividend increase, from 28.5 cents per share to 33.5 cents per share-equivalent to a new annual rate of $1.34 per share.
COMPETITIVE MARKETS ARE THE FUTURE
Competitive markets are good for customers, for the economy and for companies that value efficiency. Competition in energy markets has done what it is supposed to do-it has improved efficiency and lowered costs.
In all, there are now 22 states and three Canadian provinces where customers are benefiting from competitive energy markets. More customers have more options in choosing their energy supplier, a trend we believe will continue.
We are a leading advocate for competitive markets, speaking out on Capitol Hill and supporting public policy efforts in states that have opened their markets to competition and in states that are considering further restructuring.
Our earnings growth projections are based on the existing competitive energy market structure. Over time, however, we believe customers in other states will demand the freedom to choose suppliers in order to reap the benefits of competition. We're well positioned to serve those new markets.
Mayo A. Shattuck III
Chairmain, President and CEO
March 11, 2005
WE HAVE WHAT IT TAKES
Over the last couple of years, we have seen oil and natural gas price volatility and coal prices driven by increased demand from countries like China.
We minimize the effect of price fluctuations by managing toward price neutrality. Because we use a conservative hedging strategy that balances fuel and power price risk, our earnings growth will be driven by our focus on customers and operational excellence-rather than commodity price volatility.
Being a competitive entity that operates in an industry with shifting regulatory rules presents challenges ranging from evolving environmental requirements to more rigorous financial reporting standards mandated by the Sarbanes-Oxley Act.
We have what it takes to meet these challenges-a great strategy, strong assets and employees who consistently excel at executing our plan. In the end, our shareholders benefit from this combination.
WHERE WE'RE HEADED
I am proud of what we have accomplished, and I am excited about our future. We are increasing our share in existing electricity markets and expanding our presence in natural gas and coal markets. At the same time, we are running our businesses more efficiently, leveraging our scale in competitive energy supply and achieving productivity gains in generation and staff activities.
I like where we are headed-continued growth and ongoing superior returns to shareholders.
We've shown the way energy should work. Our customers and employees benefit. Our company grows and prospers. And our shareholders are rewarded.
I am glad you are a part of it.
