CMP Group Shares Earn $0.87 in First Quarter - Company Financial Information

Edge: Work-Group Computing Report, May 1, 2000

CMP Group, Inc., has reported earnings of 87 cents per share of common stock for the first quarter of 2000.

CMP Group is a Maine holding company established Sept. 1, 1998. Its principal subsidiary is the Central Maine Power electric utility, which provided 96 percent of CMP Group's revenues in 1999. CMP Group is awaiting federal Securities and Exchange Commission approval to complete a merger with Energy East Corp. (NYSE: NEG), the parent company of New York State Electric & Gas Corp. and various other businesses.

CMP Group reported revenues of $269.4 million for the quarter ended March 31, 2000, and net income of $28.4 million. Per-share earnings were 15 percent below the level of a year ago.

Central Maine Power provided $263.3 million in revenue, $33.8 million in net income, and $33.2 million in common-equity earnings after paying dividends on CMP preferred stock. Other CMP Group subsidiaries collectively accounted for $6.1 million of revenue and $4.7 million of net losses in the Group results.

Energy sales in Central Maine Power's service-area were 2.35 billion kilowatt-hours in the first quarter, compared to 2.31 billion kwh a year ago. Contributing factors included the economy and customer growth.

Service-area residential sales for the first quarter were 820.6 million kwh, up 3.9 percent from a year ago. Commercial sales were up 7 percent to 689 million kwh. Industrial sales were up 0.3 percent to 833.6 million kwh. Total energy sales for the 12 months ending March 31 were 9.2 billion kwh.

Fundamental aspects of CMP's business changed March 1, when Maine's law on retail customer choice took full effect. As of that date, CMP became a transmission-and-distribution utility whose rates no longer include charges for electrical energy. CMP bills now distinguish between charges for its distribution service and for energy from the customer's chosen competitive provider or the default Standard Offer Service.

As of March 1, CMP no longer receives revenues from direct retail sales of electric energy. It does record energy revenues related to its state-requested role as intermediary in arranging Standard Offer Service for medium and large business customers. The Maine Public Utilities Commission has formally approved CMP's contractual arrangement for this energy service. The PUC authorized revenues at levels intended to cover the costs of obtaining the energy; differences are fully reconcilable in future regulatory proceedings. Residential and small-business customers receive Standard Offer Service from an independent provider, Energy Atlantic.

Part of the transition to retail choice was the state-mandated sale of CMP's power plants and energy entitlements. The $846 million power-plant sale to FPL Energy closed on April 7, 1999, creating nearly half a billion dollars of accounting value in excess of book value in the units. The Maine PUC has ordered that value to be recorded as an asset-sale gain account on CMP's books, to be used over several years to reduce or mitigate stranded costs that would otherwise be charged to CMP customers.

The asset-sale gain account was drawn down on March 1 by CMP's writing off $161.8 million of deferred regulatory assets relating to non-utility-power contract restructurings and other assets, $65.7 million of CMP's interest in the Millstone Unit 3 power plant in Connecticut, and $75.4 million in regulatory tax liability.

The reduction in stranded costs allowed reductions in retail rates on March 1 that are expected to produce total-bill savings averaging 10 percent for residential and small-business customers. Those customer groups comprise more than 90 percent of CMP's accounts.

CMP has advised medium and large business accounts that securing comparable savings may require arranging a competitive energy supply rather than accepting the Standard Offer Service.

The only material, non-recurring item in CMP's first-quarter results was a $4 million after-tax gain involving regulatory decisions on treatment of unamortized investment tax credits and excess deferred income taxes associated with the Millstone Unit 3 investment.

Besides Central Maine Power, CMP Group subsidiaries include MaineCom, telecommunications services; CNEX, consulting; and Union Water-Power, utility services, real estate, and energy-efficiency contracting.

CMP Group subsidiaries also include the New England Business Trust, holder of approximately 37 percent of the common equity of NorthEast Optic Network, or NEON (NASDAQ symbol: NOPT). Equity losses in NEON were $4.4 million for the quarter ended 3/31/2000. NEON also operated at a loss in 1999.

On Feb. 15, 2000, CMP Group announced that New England Business Trust intended to sell a substantial portion of its then 6.177-million-share NEON common-stock holding via an underwritten public offering in the second quarter of 2000. The April 6, 2000, registration statement filed with the SEC indicated as many as 3.4 million shares could be offered. CMP Group cannot predict the proceeds of the planned offering.