2nd Quarter 2005 Earnings Release
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549


FORM 8-K


CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): August 2, 2005

 
Exact name of registrant as specified
I.R.S.
 
in its charter, state of incorporation,
Employer
Commission
address of principal executive offices,
Identification
File Number
telephone number
Number

1-16305
PUGET ENERGY, INC.
91-1969407
 
A Washington Corporation.
 
 
10885 - N.E. 4th Street, Suite 1200
 
 
Bellevue, Washington 98004-5591
 
 
(425) 454-6363
 

1-4393
PUGET SOUND ENERGY, INC.
91-0374630
 
A Washington Corporation
 
 
10885 - N.E. 4th Street, Suite 1200
 
 
Bellevue, Washington 98004-5591
 
 
(425) 454-6363
 
 
______________
 
Check the appropriate box below if the Form 8−K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 

 
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
 
Soliciting material pursuant to Rule 14a−12 under the Exchange Act (17 CFR 240.14a−12)
 
o
 
Pre−commencement communications pursuant to Rule 14d−2(b) under the Exchange Act (17 CFR 240.14d−2(b))
 
o
 
Pre−commencement communications pursuant to Rule 13e−4(c) under the Exchange Act (17 CFR 240.13e−4(c))
 
 
Item 2.02 Results of Operations and Financial Condition
On August 2, 2005 the Company issued the following press release.

Puget Energy reports second quarter 2005 earnings
Company’s financial results on target

  Bellevue, Wash. (August 2, 2005) —Puget Energy (NYSE: PSD) today reported second quarter 2005 net income of $13.9 million, or 14 cents per diluted share.

Puget Energy's core electric and gas utility business, Puget Sound Energy (PSE), reported second quarter 2005 net income of $12.2 million, or 12 cents per share. PSE's higher sales volumes and an increase in customer rates, effective March 4, 2005, were offset by a one-time true-up of previously reported gas costs as well as higher utility operations, maintenance and depreciation expense. PSE's second quarter 2005 earnings were 15 cents per share excluding the one-time 3 cent true-up of previously reported gas costs. In the second quarter 2004, PSE generated a loss of 10 cents per share as a result of a $24.5 million or 25 cent per share after-tax regulatory disallowance. PSE's second quarter 2004 earnings were 15 cents per share excluding the 25 cent disallowance.
 
“The second and third quarters are traditionally lower earnings quarters for us.” said Puget Energy Chairman, President and Chief Executive Officer Stephen P. Reynolds. “I am pleased we continue to meet our financial and operating objectives,” added Reynolds. “I am also pleased with the progress on the construction of our Hopkins Ridge wind power generating facility. This plant will provide our customers with environmentally-friendly, low-cost energy by year-end.”

Puget Energy reported net income of $1.9 million or 2 cents per share in the second quarter 2005 for its utility construction services subsidiary, InfrastruX Group (InfrastruX), which has been reflected as discontinued operations.
 

Puget Energy Summary
(in millions except per share data)
Second Quarter ended June 30,
 
2005    
2004    
Revenues
$510.1
$423.1
Operating Income
     51.9
    30.6
Income (loss) from Continuing Operations
     12.0
    (9.7)
Income from Discontinued Operations
        1.9
      2.9
Net Income (loss)
    $13.9
    $(6.8)
     
Puget Energy earnings (loss) per diluted share
        $0.14
  $(0.07)*
     
* Includes a $0.25 after-tax regulatory disallowance
    
 
 

Second Quarter 2005 Summary for Puget Sound Energy (PSE)
 
PSE’s second quarter 2005 net income of $12.2 million or 12 cents per share was largely the result of:
 
·  
Electric and gas customer growth of 1.9 and 3.2 percent, respectively. As of June 30, 2005, PSE provides service to approximately 1,011,000 electric customers and 682,200 natural gas customers.

·  
Higher energy sales volumes resulting from cooler temperatures in the Pacific Northwest during the second quarter 2005 compared to the same period in 2004. However, second quarter 2005 temperatures were warmer than historic averages.

·  
A 4.9 percent increase in retail kilowatt-hour sales during the second quarter of 2005 and the impact of a 4.1 percent electric rate increase which took effect on March 4, 2005. Electric margin increased by $4.9 million, net of adjustments for the regulatory disallowance recorded during the second quarter 2004 related to gas supply costs for the Tenaska generating project.

·  
A $4.0 million increase in gas margin compared to the second quarter 2004 primarily due to a 10 percent rise in therm sales volumes and the impact of a 3.5 percent natural gas rate increase which took effect on March 4, 2005. PSE's second quarter 2005 gas margin was adversely impacted by a one-time true-up of previously reported gas costs for a 31-month period from September 1, 2002 through March 31, 2005. This results in a $5.0 million decrease in gas margin and a $3.3 million after-tax charge to net income (3 cents per share) in the second quarter of 2005.
 
·  
An increase in operations and maintenance expense of $9.9 million primarily resulting from planned maintenance on company-owned energy production facilities and delivery infrastructure.

·  
A $3.1 million increase in PSE’s depreciation and amortization expense as a result of investment in utility operations. This trend is likely to continue in 2005 and beyond as PSE invests in energy delivery and generation infrastructure to support service territory growth.
 

Puget Sound Energy Second Quarter 2005 Earnings Reconciliation:
 
Per Fully Diluted Share
PSE Q2 2004 Reported Earnings
      $(0.10)
Add: Q2 2004 Regulatory disallowance
  0.25
PSE Q2 2004 Earnings adjusted for regulatory disallowance
$0.15
   
Increase in Electric Margin
  0.03
Increase in Gas Margin before one-time PGA adjustment
  0.06
One-time PGA mechanism adjustment
(0.03)
Increase in Utility Operations & Maintenance Expense
(0.06)
Increase in Depreciation and Amortization Expense
(0.02)
Other and rounding
(0.01)
   
PSE Q2 2005 Reported Earnings
$0.12


InfrastruX Group (InfrastruX)

Puget Energy reported second quarter 2005 net income of $1.9 million or 2 cents per share for its utility construction services subsidiary, InfrastruX. Puget Energy’s equity investment in InfrastruX at June 30, 2005 was $34.3 million.
As disclosed in a Form 8-K filing with the SEC on February 8, 2005, Puget Energy intends to monetize its interest in InfrastruX through a sale in 2005. Puget Energy recorded second quarter 2005 financial results of InfrastruX as discontinued operations.

2005 Outlook
 
    Puget Energy anticipates its 2005 financial results from continuing operations to be within the range of $1.30 to $1.40 per share, which is unchanged from previous earnings guidance provided on March 10, 2005 and April 28, 2005.
         
Second Quarter 2005 Earnings Analyst Teleconference
 
A conference call for analysts to discuss with management the second quarter results and the outlook for future performance is scheduled at 10:00 a.m. EDT (7:00 a.m. PDT), August 3, 2005. The conference call will be broadcast live through a Web cast at www.pse.com by accessing the Investors section of the Web site. The Web cast will be archived and available for replay following the live conference call. A recorded replay of the conference call also will be available two hours after completion on August 3 through midnight (EDT) August 17, 2005. To access the recording, dial 1-888-286-8010, and enter the conference I.D. number 42886467.
 
Puget Energy is an energy services holding company that conducts all of its operations through its subsidiaries, PSE and InfrastruX Group. PSE is a regulated utility company that generates, purchases and sells electricity; and purchases, transports and sells natural gas. The service territory of PSE covers approximately 6,000 square miles, principally in the Puget Sound region of Washington state. InfrastruX specializes in contracting services to other gas and electric utilities primarily in the Midwest, Texas, and the south-central and eastern United States regions.
 
CAUTIONARY STATEMENT: Certain statements contained in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, among which include Puget Energy’s plans with respect to InfrastruX and any proceeds from its possible sale or monetization and Puget Energy's anticipated 2005 financial results, including its earnings guidance. Forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could affect actual results include, among others, governmental policies and regulatory actions, including those of the WUTC, and weather conditions. More information about these and other factors that potentially could affect the company’s financial results is included in Puget Energy's and PSE's most recent annual report on Form 10-K, quarterly report on Form 10-Q and in their other public filings filed with the Securities and Exchange Commission. Except as required by law, Puget Energy and PSE undertake no obligation to update any forward-looking statements.
 

 
PUGET ENERGY -- SUMMARY INCOME STATEMENT
                 
(In thousands, except per-share amounts)
                 
 
Unaudited
  
 Unaudited
  
 
Three months ended 6/301
  
 Six months ended 6/30
 
2005
  
2004
  
 2005
  
2004
                  
Operating revenues
                        
Electric
$
345,420
  
$
303,091
  
$
765,511
  
$
695,587
  
Gas
  
162,567
   
119,479
   
483,695
   
395,170
 
Other
  
2,127
   
553
   
2,561
   
1,080
 
Total operating revenues
  
510,114
   
423,123
   
1,251,767
   
1,091,837
 
Operating expenses
                        
Purchased electricity
  
178,943
   
173,847
   
387,122
   
370,214
 
Electric generation fuel
  
12,894
   
21,014
   
33,342
   
35,002
 
Residential exchange
  
(37,105
)
  
(35,362
)
  
(92,151
)
  
(89,785
)
Purchased gas
  
98,142
   
63,703
   
299,887
   
226,109
 
Unrealized (gain) loss on derivative instruments
  
(591
)
  
(2,849
)
  
(82
)
  
(2,936
)
Utility operations & maintenance
  
83,132
   
73,201
   
158,654
   
147,056
 
Other operations & maintenance
  
558
   
500
   
1,299
   
983
 
Depreciation & amortization
  
59,657
   
56,569
   
117,734
   
112,439
 
Conservation amortization
  
5,951
   
4,809
   
11,113
   
12,999
 
Taxes other than income taxes
  
50,521
   
42,550
   
120,221
   
106,774
 
Income taxes
  
6,093
   
(5,434
)
  
52,175
   
33,665
 
Total operating expenses
  
458,195
   
392,548
   
1,089,314
   
952,520
 
Operating income
  
51,919
   
30,575
   
162,453
   
139,317
 
Other income (deductions):
                        
Other income
  
1,598
   
1,570
   
2,762
   
1,638
 
Interest Charges:
                        
AFUDC
  
2,041
   
1,079
   
3,503
   
2,157
 
Interest expense
  
(43,568
)
  
(42,921
)
  
(84,611
)
  
(86,042
)
Mandatorily redeemable securities interest expense
  
(23
)
  
(23
)
  
(45
)
  
(45
)
Income (loss) from continuing operations
  
11,967
   
(9,720
)
  
84,062
   
57,025
 
Income from discontinued operations, net of tax
  
1,928
   
2,940
   
909
   
2,560
 
Net Income (loss)
$
13,895
  
$
(6,780
)
$
84,971
  
$
59,585
  
                         
Common shares outstanding
 
100,157
   
99,371
   
100,058
   
99,271
 
Diluted shares outstanding
 
100,690
   
99,371
   
100,590
   
99,786
 
Basic earnings per common share from
                        
continuing operations
$
0.12
  
$
(0.10
)
$
0.84
  
$
0.57
  
Basic earnings from discontinued operations
  
0.02
   
0.03
   
0.01
   
0.03
 
Basic earnings per common share
$
0.14
  
$
(0.07
)
$
0.85
  
$
0.60
  
                         
Diluted earnings per common share from
                        
continuing operations
$
0.12
  
$
(0.10
)
$
0.83
  
$
0.57
  
Diluted earnings from discontinued operations
  
0.02
   
0.03
   
0.01
   
0.03
 
Diluted earnings per common share2
$
0.14
  
$
(0.07
)
$
0.84
  
$
0.60
  
 
 
1 Partial-year results may not accurately predict full-year performance, as earnings are significantly affected by weather.
2 Diluted earnings per common share include the dilutive effect of securities related to employee compensation plans.

 
 

PUGET SOUND ENERGY -- UTILITY OPERATING DATA
                 
 
Three months ended 6/30
  
 Six months ended 6/30
  
 
2005
  
2004
  
 2005
  
2004
  
Energy sales revenues ($ in thousands; unaudited)
                        
Electricity
                        
Residential
$
152,959
  
$
132,263
  
$
364,799
  
$
336,661
  
Commercial
  
150,043
   
131,559
   
307,935
   
285,166
 
Industrial
 
23,156
   
20,780
   
45,235
   
43,154
 
Other retail sales, including change in unbilled
 
(9,627
)
  
(3,697
)
  
(14,394
)
  
(16,579
)
Subtotal, retail sales
  
316,531
   
280,905
   
703,575
   
648,402
 
Transportation, including change in unbilled
  
2,419
   
2,361
   
5,087
   
4,614
 
Sales to other utilities & marketers
  
16,870
   
10,748
   
33,191
   
22,235
 
Other1
  
9,600
   
9,077
   
23,658
   
20,336
 
Total electricity sales
  
345,420
   
303,091
   
765,511
   
695,587
 
Gas
                        
Residential
  
94,744
   
67,520
   
303,400
   
248,281
 
Commercial
  
50,378
   
37,646
   
141,626
   
115,108
 
Industrial
 
10,033
   
7,446
   
23,026
   
18,573
 
Subtotal, retail sales
  
155,155
   
112,612
   
468,052
   
381,962
 
Transportation
  
3,215
   
3,115
   
6,612
   
6,546
 
Other
  
4,197
   
3,752
   
9,031
   
6,662
 
Total gas sales
  
162,567
   
119,479
   
483,695
   
395,170
 
Total energy sales revenues
$
507,987
  
$
422,570
  
$
1,249,206
  
$
1,090,757
  
Energy sales volumes (Unaudited)
                        
Electricity (in mWh)
                        
Residential
 
2,277,739
   
2,147,955
   
5,558,632
   
5,437,146
 
Commercial
 
2,082,006
   
1,973,204
   
4,263,613
   
4,168,494
 
Industrial
 
337,971
   
329,598
   
662,140
   
657,623
 
Other, including change in unbilled
  
(124,653
)
  
(92,868
)
  
(280,994
)
  
(303,378
)
Subtotal, retail sales
  
4,573,063
   
4,357,889
   
10,203,391
   
9,959,885
 
Transportation, including change in unbilled
  
477,906
   
459,713
   
999,931
   
943,415
 
Sales to other utilities & marketers
  
447,150
   
281,680
   
792,934
   
551,290
 
Total mWh
 
5,498,119
   
5,099,282
   
11,996,256
   
11,454,590
 
Gas (in 000's of therms)
                        
Residential
 
79,991
   
67,976
   
279,042
   
271,725
 
Commercial
 
51,220
   
47,941
   
146,461
   
147,682
 
Industrial
 
10,934
   
10,087
   
24,845
   
24,936
 
Transportation
 
48,438
   
47,415
   
101,563
   
103,596
 
Total gas volumes
  
190,583
   
173,419
   
551,911
   
547,939
 
Margins2 ($ in thousands; unaudited)
                        
Electric
$
151,269
  
$
108,593
  
$
352,788
  
$
302,728
  
Gas
  
45,561
   
41,562
   
133,178
   
128,686
 
Customers served3 (Unaudited)
                        
Electricity
                       
Residential
 
891,632
   
875,587
   
889,798
   
873,498
 
Commercial
  
111,646
   
108,934
   
111,227
   
108,519
 
Industrial
 
3,912
   
3,999
   
3,920
   
4,011
 
Other
  
2,414
   
2,173
   
2,378
   
2,145
 
Transportation
 
17
   
17
   
17
   
17
 
Total electricity customers
  
1,009,621
   
990,710
   
1,007,340
   
988,190
 
Gas
                        
Residential
 
627,657
   
607,725
   
625,702
   
605,714
 
Commercial
 
50,612
   
49,455
   
50,528
   
49,391
 
Industrial
 
2,693
   
2,724
   
2,699
   
2,732
 
Transportation
 
130
   
130
   
130
   
130
 
Total gas customers
  
681,092
   
660,034
   
679,059
   
657,967
 
Weather (Unaudited)
                        
Actual heating degree days
  
788
   
684
   
2,599
   
2,560
 
Normal heating degree days4
  
888
   
888
   
2,830
   
2,851
 
 
 
1 Includes sales of non-core gas supplies.
2 Electric margin is electric sales to retail and transportation customers less the cost of generating and purchasing electric energy sold to customers, including transmission costs, to   bring electric energy to PSE's service territory. Gas margin is gas sales to retail and transportation customers less the cost of gas purchased, including gas transportation costs, to bring gas to PSE's service territory.
3 Customers represents average served during the period.
4 Seattle-Tacoma Airport statistics reported by NOAA which are based on a 30-year average, 1971-2000. Heating degree days measure how far the daily average temperature falls below 65 degrees. Heating degree days in 2004 are adjusted for leap year by adding the February 28th heating degree day amount.
 
 

 
SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants has duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.

 
PUGET ENERGY, INC.



 
/s/ James W. Eldredge
  
 
James W. Eldredge
  
 
Vice President, Corporate Secretary and
 
 
Chief Accounting Officer
  
 
 
  
 
Date: August 2, 2005