Pepco Holdings Reports Third-Quarter 2004 Results; Conference Call Scheduled

Monday, November 08, 2004

Pepco Holdings, Inc. (NYSE: POM) today reported third-quarter 2004 consolidated earnings of $111.0 million, or 64 cents per share, compared to $157.3 million, or 92 cents per share, for the third quarter 2003. Adjusted earnings for the third quarter of 2004 were $118.7 million, or 68 cents per share, compared to $121.3 million, or 71 cents per share, for the third quarter 2003.

Adjusted earnings is a non-GAAP financial measure. Adjusted earnings for the third quarter 2004 do not include after-tax charges of $7.7 million, or 4 cents per share, related to the early payment of ConectivEnergy''s Bethlehem debt. Adjusted earnings for the third quarter 2003 do not include after-tax charges of $8.7 million, or 5 cents per share, related to the reserve of a portion of a pre-bankruptcy receivable from Mirant or after-tax earnings of $44.7 million, or 26 cents per share, related to the gain on the Edison Place office building sale.

"Overall we are satisfied with our performance for the quarter given the challenge of mild summer weather," said Dennis R. Wraase, Chairman, President and Chief Executive Officer, adding "cooling degree days were down 9 percent as compared to the third quarter of 2003. In addition to the mild summer weather,the Power Delivery business was negatively impacted by lower Standard Offer Service gross margins at Pepco. These negative impacts were partially offset by lower Power Delivery operations and maintenance expense compared to the same period last year, driven by the absence of Hurricane Isabel expenses incurred inthe third quarter of 2003.

"On a positive note, despite the mild summer weather, we continued to see profitable performance from our non-regulated energy businesses. Conectiv Energy was able to more than offset the impact of lowerg eneration output due to the mild weather and higher depreciation and capital costs due to the completion of
the Bethlehem generating station with increased wholesale margins and the recognition of an adjustment related to fuel supply contracts. As for our year-to-date results, we continue to be pleased with our performance, especially the performance of our non-regulated energy businesses," Wraase added.

For the nine months ended Sept. 30, 2004, Pepco Holdings reported consolidated earnings of $252.6million, or $1.46 per share, compared to $175.5 million, or $1.03 per share, for the nine months ended Sept.30, 2003.

Adjusted earnings for the nine months ended Sept. 30, 2004 were $239.3 million, or $1.38 per share,compared to $207.7 million, or $1.22 per share, for the nine months ended Sept. 30, 2003. Adjusted earningsis a non-GAAP financial measure. Adjusted earnings for the nine months ended Sept. 30, 2004 do not include:

  • After-tax earnings of $13.1 million, or 7 cents per share, related to the impact of changes in local tax regulations that were retroactive to 2001.
  • After-tax earnings of $6.6 million, or 4 cents per share, related to the disposition of a joint venture associated with the Vineland co-generation facility.
  • After-tax earnings of $8.6 million, or 5 cents per share, related to a gain on the condemnation settlement associated with the transfer of Vineland distribution assets.
  • After-tax charges of $7.3 million, or 4 cents per share, related to the impairment of the Starpower investment.
  • After-tax charges of $7.7 million, or 4 cents per share, related to the early payment of ConectivEnergy''s Bethlehem debt.

Adjusted earnings for the nine months ended Sept. 30, 2003 do not include:

  • After-tax charges of $26.7 million, or 16 cents per share, related to net energy trading losses prior tothe cessation of proprietary energy trading.
  • After-tax charges of $31.1 million, or 18 cents per share, related to Conectiv Energy's cancellation of acontract for the delivery of four combustion turbines.
  • After-tax charges of $16.3 million, or 9 cents per share, related to Atlantic City Electric Company's New Jersey deferral disallowance.
  • After-tax earnings of $5.9 million, or 3 cents per share, related to an Atlantic City Electric Company(BL England) accrual reversal.
  • After-tax charges of $8.7 million, or 5 cents per share, related to the reserve of a portion of a pre bankruptcy receivable from Mirant.
  • After-tax earnings of $44.7 million, or 26 cents per share, related to the gain on the Edison Place officebuilding sale.

For further details regarding the change in consolidated earnings between 2004 and 2003, please see the schedules that follow and refer to the Pepco Holdings, Inc. Form 10-Q for the quarter ended Sept. 30, 2004,filed today with the Securities and Exchange Commission.

CONFERENCE CALL FOR INVESTORS
PHI will host a conference call to discuss third-quarter results on Wednesday, Nov. 10 at 9:00 a.m.E.S.T. Individual investors, members of the media and other interested persons may access the conference call on the Internet at www.pepcoholdings.com/investors or by telephone at (800) 638-4817. A taped on-demand replay of the conference call will also be available for seven days following the call. To hear there play, call (888) 286-8010 and enter pass code 62486963. An audio archive will also be available on the PHIWeb site, www.pepcoholdings.com/investors/index_financialrelease.html.

Note: If any non-GAAP financial information (as defined by the Securities and Exchange Commissionin Regulation G) is used during the quarterly earnings conference call, a presentation of the most directly comparable GAAP measure and a reconciliation of the differences will be available atwww.pepcoholdings.com/investors/index_financialrelease.html.

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About PHI: Pepco Holdings, Inc. is a diversified energy company with headquarters in Washington, D.C. Its principal operations consist of PHI Power Delivery, which delivers 50,000 gigawatt-hours of power to more than 1.7 million customers in Washington, D.C., Delaware, Maryland, New Jersey and Virginia. PHI engages in regulated utility operations by delivering electricity and natural gas, and provides competitive energy and energy products and services to residential and commercial customers.

Forward-Looking Statements: Except for historical statements and discussions, the statements in this news release constitute "forward-looking statements" within the meaning of federal securities law. These statements contain management's beliefs based oninformation currently available to management and on various assumptions concerning future events. Forward-looking statementsare not a guarantee of future performance or events. They are subject to a number of uncertainties and other factors, many of whichare outside the company's control. Factors that could cause actual results to differ materially from those in the forward-lookingstatements herein include general economic, business and financing conditions; availability and cost of capital; changes in laws, regulations or regulatory policies; weather conditions; competition; governmental actions; and other presently unknown or unforeseen factors. These uncertainties and factors could cause actual results to differ materially from such statements. PHI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This information is presented solely to provide additional information to further understand the results and prospects of PHI.