Pepco Holdings Reports Third-Quarter 2007 Earnings; Conference Call Scheduled

Business Wire, Nov 1, 2007

WASHINGTON -- Pepco Holdings, Inc. (NYSE:POM) today reported third quarter 2007 consolidated earnings of $167.6 million, or 87 cents per share, compared to $104.0 million, or 54 cents per share, in the third quarter of 2006. Excluding the special items described below, earnings for the 2007 quarter would have been $129.9 million, or 68 cents per share, compared to $111.9 million, or 58 cents per share, for the 2006 quarter. The weighted average number of basic shares outstanding for the third quarter of 2007 was 193.3 million compared to 190.7 million for the third quarter of 2006.

The increase in earnings for the third quarter of 2007 as compared to the 2006 quarter, excluding special items, was primarily due to higher distribution revenue and lower depreciation driven by the Maryland rate orders for Pepco and Delmarva Power issued in June 2007 and higher network transmission revenue due to higher rates in effect. At Conectiv Energy, higher earnings were driven by Merchant Generation and Load Service, primarily due to higher generation output, higher capacity prices, and improved hedge results. At Pepco Energy Services, higher earnings were driven by the retail energy supply business primarily due to more favorable congestion costs and higher electric volumes. Partially offsetting these increases were higher operation and maintenance expenses at Power Delivery and lower Energy Marketing margins at Conectiv Energy.

"Our results for the quarter reflect continued progress in executing our strategic plan," said Dennis R. Wraase, Chairman, President and Chief Executive Officer. "While Power Delivery experienced higher operating expenses, we benefited from infrastructure investments and constructive regulatory outcomes. Conectiv Energy's generation output was up 30% over the 2006 quarter and Pepco Energy Services continues to steadily acquire load." He added, "We recently achieved another milestone in our infrastructure investment strategy with the approval of the 500 kV portion of our Mid-Atlantic Power Pathway project by the PJM Interconnection's board of managers. This approval is a major step forward for this billion dollar project, allowing an extensive permitting and environmental review process to begin. The project will enhance electric reliability and improve transmission capacity in one of the most heavily congested regions of the country."

For the nine months ended Sept. 30, 2007, consolidated earnings were $276.4 million, or $1.43 per share, compared to $212.0 million, or $1.11 per share, for the same period in the prior year. Excluding the special items described below, earnings for the nine months ended Sept. 30, 2007 would have been $238.7 million, or $1.24 per share, compared to $216.2 million, or $1.13 per share, for the first nine months of 2006. The weighted average number of basic shares outstanding for the nine months ended Sept. 30, 2007 was 192.8 million compared to 190.2 million for the same period in the prior year.

The increase in earnings for the nine months ended Sept. 30, 2007, compared to earnings excluding special items for the same period in the prior year, was driven primarily by higher weather-related kWh sales at Power Delivery, higher distribution revenue and lower depreciation at Power Delivery driven by the Maryland rate orders for Pepco and Delmarva Power issued in June 2007, and increased Merchant Generation and Load Service margins at Conectiv Energy due to higher generation output and higher capacity prices. Partially offsetting these increases were higher operation and maintenance expenses at Power Delivery.

Third-Quarter Highlights

Operations

* Power Delivery electric sales were 14,590 gigawatt hours (GWhs) in the third quarter of 2007 compared to 14,732 GWhs for the same period last year. Cooling degree days (electric service territory) increased by 3% for the three months ended Sept. 30, 2007, compared to the same period in 2006. Weather adjusted electric sales were 14,234 GWhs in the third quarter of 2007 compared to 14,426 GWhs for the same period last year.

* On Oct. 17, 2007, PJM Interconnection's board of managers approved PHI's proposal to build a 230-mile interstate power line. The board's approval to include the 500-kilovolt (kV) portion of the Mid-Atlantic Power Pathway (MAPP) in its regional transmission expansion plan allows PHI to begin an extensive multi-state permitting and environmental review process that must be completed prior to construction. The 500 kV portion of the MAPP line is expected to cost an estimated $1 billion and would be built in stages through 2014. PHI has proposed adding significant 230-kV support lines to connect with the new 500-kV line, bringing the estimated total cost of the project to $1.2 billion.

* Conectiv Energy's gross margin from Merchant Generation and Load Service was $99.2 million in the third quarter of 2007, compared to $69.0 million in the third quarter of 2006. The increase resulted primarily from higher generation output, higher capacity prices, and improved hedge results.