Allegheny Power 2013 Annual Report Download - page 3

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1
We took a number of aggressive steps in 2013 to position your
company for future growth.
We reduced the size and shifted the mix of our competitive generating
assets, ultimately creating a fleet that is more cost-effective, efficient
and environmentally sound. We also decreased operating expenses
and the size of our workforce by nearly 800 employees. And, we
considerably lowered the capital requirements for environmental
compliance.
More important, we refocused our business to pursue more predictable
and sustainable growth in our regulated operations. We expect much
of this growth over the next several years to come from investments
to upgrade and expand our transmission system, which comprises
approximately 24,000 miles of lines.
While these and other significant actions are helping us meet the
challenges of a difficult economy, they have not been sufficient to
offset the cumulative impact the recession has had on our balance
sheet or earnings. For example, our distribution utility sales in 2013
were still lower than sales in 2007, the year before the economic
downturn. This loss of sales over the past six years has reduced
distribution revenues by approximately $1 billion. In addition, our
utilities have yet to recover more than $1 billion in costs related to
their response to unprecedented storm activity in 2011 and 2012.
The recession also negatively impacted our competitive operations.
Market prices for competitive generation in the past three years
alone have dropped more than $20 per megawatt-hour (MWH), with
85 percent of that drop – the equivalent of over $2 billion in revenues –
occurring since the end of 2011.
The sustained and long-term effect of the recession, and its direct
impact on our operations, undermined our ability to maintain the
dividend at its previous level. As a result, in January of this year, your
Board declared a quarterly dividend of $0.36 per share of outstanding
stock – an annual dividend equivalent of $1.44 per share. This level
better reflects the economic realities we are now facing. The dividend
change is expected to preserve a solid payment for our shareholders
and provide the company with additional financial flexibility to pursue
regulated growth opportunities.
MESSAGE
TO OUR
SHAREHOLDERS