Cinergy Reports 2004 Results; Finishes with Strong Fourth Quarter

Cinergy Reports 2004 Results; Finishes with Strong Fourth Quarter

    Business Editors

    CINCINNATI--(BUSINESS WIRE)--Jan. 27, 2005--Cinergy Corp. (NYSE:CIN) today reported fourth quarter 2004 earnings of $0.79 per share on a diluted basis. This represents a 34 percent improvement over last year's $0.59 per share for the same quarter.
    For the full year 2004, Cinergy's earnings were $2.18 per share on a diluted basis, after net charges totaling $0.26 per share primarily for write-downs of certain investments, implementation of the company's continuous improvement initiative and a gain from the sale of certain technology assets. Excluding the impact of such charges, ongoing earnings for 2004 of $2.44 per share compared favorably to the consensus forecast of equity analysts of $2.42 per share.
    The $2.18 per share for 2004 compares with earnings of $2.63 per share on a diluted basis in 2003, which included gains of $0.20 per share from the cumulative effect of changes in accounting principles and discontinued operations and other previously reported charges totaling $0.11 per share.
    The $0.79 per share for the fourth quarter of 2004 includes a $0.07 per share gain from the sale of certain technology assets, which was partially offset by a $0.05 per share charge for certain items including write-downs of investments and costs relating to the implementation of the company's continuous improvement initiative. The $0.59 per share for the same period in 2003 included a previously reported charge of $0.01 per share.
    "We faced many challenges through 2004 and are very pleased to finish the year with a strong fourth quarter," said James E. Rogers, chairman, president and chief executive officer. "While we certainly felt the effect of mild weather and rising emission allowance costs during the year, we have taken a number of constructive steps to hedge future emission allowance risk exposure."
    "Actions taken during the year have positioned us well for the future," said James L. Turner, executive vice president and chief financial officer. "Gaining approval of the Ohio rate stabilization plan allows us to be compensated for committing our low-cost generation to Ohio's electric customers for the next several years."
    Fourth quarter earnings from the Regulated Businesses segment were $0.41 per share, as compared with $0.26 per share in last year's fourth quarter. Contributing to the increase were improved electric gross margins resulting from higher electric retail sales volumes during the quarter and the electric rate increase for PSI Energy, Inc., approved earlier in the year. Higher retail electric sales volumes were driven by an increase in non-weather related demand of approximately 2 percent as compared with the fourth quarter of 2003.
    Commercial Businesses' earnings for the fourth quarter were $0.33 per share compared with $0.34 per share for the fourth quarter of last year. Higher costs and lower margins from the wholesale power and generation businesses were substantially offset by increased margins in the wholesale gas business.
    The Power Technology and Infrastructure Services segment reported earnings of $0.05 per share in the fourth quarter of 2004, including a $0.07 per share gain from the sale of certain technology assets and a $0.01 per share charge relating to the write-down of a technology investment. Excluding the gain and the write-down during the quarter, the on-going loss from the segment equaled the $0.01 per share loss in fourth quarter of 2003.
    Earlier this month, Cinergy increased its annual common stock dividend for the third consecutive year. The new annual rate of $1.92 per share represents a 2.1 percent increase over the previous rate of $1.88 per share.
    In November 2004, the Public Utilities Commission of Ohio approved a rate stabilization plan for The Cincinnati Gas & Electric Co. that permits non-residential electric rates to increase in 2005 and residential electric rates to increase in 2006. The plan provides compensation for CG&E's commitment of low-cost generation to serve Ohio customers, as well as recovery of costs related to environmental compliance, homeland security, taxes, fuel and emission allowances.
    The company also released its report on the potential impact of regulation of greenhouse gas (GHG) emissions on the operation of its electric generating system. The Air Issues Report to Stakeholders was prepared in collaboration with the Committee on Mission Responsibility through Investment of the Presbyterian Church (USA). Although passage of GHG emission controls does not appear to be imminent, Cinergy said it plans to work proactively with its shareholders and other interested parties in shaping the climate change debate. Its goal is the development of a reasonable long-term reduction strategy that can be managed effectively by the company and by the larger economy in which it operates.
    PSI Energy signed a letter of intent with General Electric and Bechtel Corporation to study the feasibility of constructing a commercial, integrated gasification combined cycle (IGCC) generating station, the first plant of its kind announced under the recently proposed GE-Bechtel alliance. The study will result in site-specific data for assessing the economic feasibility of the project, plant performance and output, emissions, and the potential plant footprint. The companies also will work together during this period to develop public and government support for the project and a preliminary project execution plan. The plant would use coal to produce 500 to 600 megawatts of electricity to help meet increased electrical demand over the next decade with significantly lower environmental emissions than a traditional pulverized coal facility.

    Other major achievements in 2004 included:

--	Being named to the Dow Jones World Sustainability Indexes, an international benchmark for excellence in social, economic and environmental leadership for the second straight year
--	Being selected as Power Company of the Year in the 2004 Platts Global Energy Awards
--	Receiving approval from the Indiana Utility Regulatory Commission for an increase in electric rates for PSI Energy of $140 million, reflecting increased environmental compliance costs, additional capacity to meet customers' energy demands and investments in the transmission and distribution system
--	Implementing the "CIN-10" continuous improvement initiative which is on course to deliver $50 million in pre-tax earnings for 2005 through targeted productivity improvements and revenue enhancements.

    Cinergy Corp. has a balanced, integrated portfolio consisting of two core businesses: regulated operations and commercial businesses. Cinergy's regulated public utilities in Ohio, Indiana, and Kentucky serve 1.5 million electric customers and about 500,000 gas customers. In addition, its Indiana regulated company owns 7,000 megawatts of generation. Cinergy's competitive commercial businesses have 6,300 megawatts of generating capacity with a profitable balance of stable existing customer portfolios, new customer origination, marketing and trading, and industrial-site cogeneration. Cinergy's integrated businesses make it a Midwest leader in providing both low-cost generation and reliable electric and gas service.

    This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management's beliefs and assumptions. These forward-looking statements are identified by terms and phrases such as "anticipate", "believe", "intend", "estimate", "expect", "continue", "should", "could", "may", "plan", "project", "predict", "will", and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to, unanticipated weather conditions; unscheduled generation outages; unusual maintenance or repairs; unanticipated changes in costs; environmental incidents, including costs of compliance with existing and future environmental requirements; electric transmission or gas pipeline system constraints; legislative and regulatory initiatives; additional competition in electric or gas markets and continued industry consolidation; financial or regulatory accounting principles; political, legal, and economic conditions and developments in the countries in which we have a presence; changing market conditions and other factors related to physical energy and financial trading activities; the performance of projects undertaken by our non-regulated businesses and the success of efforts to invest in and develop new opportunities; availability of, or cost of, capital; employee workforce factors; delays and other obstacles associated with mergers, acquisitions, and investments in joint ventures; and costs and effects of legal and administrative proceedings, settlements, investigations, and claims. Please refer to the company's SEC filings for additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements. The Company undertakes no obligation to update the information contained herein.
    Following are summaries of Cinergy's unaudited consolidated financial information for the fourth quarter and year 2003.

CINERGY CORP. CONSOLIDATED STATEMENTS OF INCOME For the Periods Ended December 31, 2004 and 2003 (unaudited) (dollars in thousands, except per share amounts) ----------------------------------------------------------------------

Quarter Ended Year To Date --------------------- ----------------------- 2004 2003 2004 2003 ---------- ---------- ----------- -----------

Operating Revenues Electric $855,571 $853,556 $3,536,649 $3,320,256 Gas 259,090 197,129 783,316 835,507 Other 102,311 71,335 367,985 260,114 ---------- ---------- ----------- ----------- Total Operating Revenues 1,216,972 1,122,020 4,687,950 4,415,877

Operating Expenses Fuel, emission allowances, and purchased power 310,163 316,332 1,244,027 1,136,950 Gas purchased 137,359 134,938 428,087 503,834 Costs of fuel resold 77,450 51,691 280,891 196,974 Operation and maintenance 313,297 258,721 1,282,278 1,118,680 Depreciation 126,533 98,726 460,389 398,871 Taxes other than income taxes 49,625 49,211 253,945 249,746 ---------- ---------- ----------- ----------- Total Operating Expenses 1,014,427 909,619 3,949,617 3,605,055

Operating Income 202,545 212,401 738,333 810,822

Equity in Earnings of Unconsolidated Subsidiaries 30,154 3,549 48,249 15,201 Miscellaneous Income (Expense) - Net 8,206 10,478 (3,213) 38,156 Interest Expense 65,792 77,140 275,238 270,874 Preferred Dividend Requirement of Subsidiary Trust - - - 11,940 Preferred Dividend Requirements of Subsidiaries 858 859 3,432 3,433 ---------- ---------- ----------- -----------

Income Before Taxes 174,255 148,429 504,699 577,932

Income Taxes 27,829 41,387 103,831 143,508 ---------- ---------- ----------- -----------

Income Before Discontinued Operations and Cumulative Effect of a Change in Accounting Principles $146,426 $107,042 $400,868 $434,424 Discontinued operations, net of tax - 11 - 8,886 Cumulative Effect of a change in accounting principles, net of tax - - - 26,462 ---------- ---------- ----------- ----------- Net Income $146,426 $107,053 $400,868 $469,772

Average Common Shares Outstanding 183,455 178,288 180,965 176,535

Earnings Per Common Share - Basic Income before discontinued operations and cumulative effect of changes in accounting principles $0.81 $0.60 $2.22 $2.46 Discontinued operations, net of tax - - - 0.05 Cumulative effect of changes in accounting principles, net of tax - - - 0.15 ---------- ---------- ----------- ----------- Net Income $0.81 $0.60 $2.22 $2.66

Earnings Per Common Share - Diluted Income before discontinued operations and cumulative effect of changes in accounting principles $0.79 $0.59 $2.18 $2.43 Discontinued operations, net of tax - - - 0.05 Cumulative effect of changes in accounting principles, net of tax - - - 0.15 ---------- ---------- ----------- ----------- Net Income $0.79 $0.59 $2.18 $2.63

Cash Dividends Declared Per Common Share $0.47 $0.46 $1.88 $1.84

Note: Prior year data has been reclassified to conform with current year presentation.

CINERGY CORP. CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands) ---------------------------------------------------------------------- December 31 December 31 2004 2003 ------------ ------------

ASSETS Current Assets Cash and cash equivalents $164,541 $169,120 Notes receivable, current 214,513 189,854 Accounts receivable less accumulated provision for doubtful accounts of $5,514 at December 31, 2004, and $7,884 at December 31, 2003 1,061,140 1,074,518 Fuel, emission allowances, and supplies 444,750 357,625 Energy risk management current assets 381,146 305,058 Prepayments and other 174,624 146,422 ------------ ------------ Total current assets 2,440,714 2,242,597

Property, Plant, and Equipment - at Cost Utility plant in service 10,076,468 9,732,123 Construction work in progress 333,687 275,459 ------------ ------------ Total utility plant 10,410,155 10,007,582 Non-regulated property, plant, and equipment 4,700,009 4,527,943 Accumulated depreciation 5,180,699 4,908,019 ------------ ------------ Net property, plant, and equipment 9,929,465 9,627,506

Other Assets Regulatory assets 1,030,333 1,029,242 Investments in unconsolidated subsidiaries 513,675 494,520 Energy risk management non-current assets 138,787 97,334 Notes receivable, non-current 193,857 213,853 Other investments 125,367 184,044 Goodwill and intangible assets 60,502 45,349 Restricted funds held in trust 358,006 - Other 191,611 180,260 ------------ ------------ Total other assets 2,612,138 2,244,602

Assets of Discontinued Operations - 4,501

Total Assets $14,982,317 $14,119,206

LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $1,348,576 $1,240,423 Accrued taxes 216,804 217,993 Accrued interest 54,473 68,952 Notes payable and other short-term obligations 958,910 351,412 Long-term debt due within one year 219,967 839,103 Energy risk management current liabilities 310,741 296,122 Other 171,188 107,438 ------------ ------------ Total current liabilities 3,280,659 3,121,443

Non-current Liabilities Long-term debt 4,227,741 4,131,909 Deferred income taxes 1,597,120 1,557,981 Unamortized investment tax credits 99,723 108,884 Accrued pension and other post- retirement benefit costs 688,277 662,834 Regulatory liabilities 557,419 490,856 Energy risk management non-current liabilities 127,340 64,861 Other 225,298 205,344 ------------ ------------ Total non-current liabilities 7,522,918 7,222,669

Liabilities of Discontinued Operations - 11,594

Total Liabilities 10,803,577 10,355,706

Cumulative Preferred Stock of Subsidiaries Not subject to mandatory redemption 62,818 62,818

Common Stock Equity Common stock - $0.01 par value; authorized shares - 600,000,000; issued shares - 187,653,506 at December 31, 2004, and 178,438,369 at December 31, 2003; outstanding shares - 187,524,229 at December 31, 2004, and 178,336,854 at December 31, 2003 1,877 1,784 Treasury shares at cost - 129,277 shares at December 31, 2004, and 101,515 shares at December 31, 2003 (4,336) (3,255) Paid-in capital 2,559,715 2,195,985 Retained earnings 1,613,340 1,551,003 Accumulated other comprehensive income (loss) (54,674) (44,835) ------------ ------------ Total common stock equity 4,115,922 3,700,682

Total Liabilities and Equity $14,982,317 $14,119,206

Note: Prior year data has been reclassified to conform with current year presentation.

CINERGY CORP. BUSINESS SEGMENT SUMMARY INFORMATION For the Quarter Ended December 31 (unaudited) (dollars in thousands, except per share amounts) ----------------------------------------------------------------------

2004 2003 ----------- ----------- Commercial Businesses ---------------------

Net Income $61,140 $61,606

Earnings Per Share - diluted $0.33 $0.34

Electricity Trading Volumes (MWhs) 48,780,860 33,070,229 Physical and Financial Gas Trading Volumes (Bcf/d) 53.9 46.8

Regulated Businesses --------------------

Net Income $76,352 $47,941

Earnings Per Share - diluted $0.41 $0.26

Electric Retail MWh Sales and Transportation 12,546,022 12,345,073 Gas Retail Mcf Sales and Transportation 26,195,228 27,425,124 Electric Customers (End of Period) 1,566,693 1,535,913 Gas Customers (End of Period) 511,123 504,637

Power Technology & Infrastructure Services ------------------------------------------

Net Income $8,934 $(2,494)

Earnings Per Share - diluted $0.05 $(0.01)

CINERGY CORP. BUSINESS SEGMENT EARNINGS DRIVER ANALYSIS For the Quarter Ended December 31, 2004 (unaudited) ----------------------------------------------------------------------

Commercial Businesses ---------------------

Earnings Per Share - diluted - 2003 $0.34

Employee retirement/severance and other charges (0.04) Electric sales volumes 0.02 Power marketing, trading and origination (0.04) Gas marketing, trading and origination 0.20 Fuel costs (0.01) Emissions allowances (0.05) Transmission expenses (0.01) Operating and administrative expenses (0.05) Maintenance expense (0.02) Financing and dilution (0.01)

Earnings Per Share - diluted - 2004 $0.33

Regulated Businesses --------------------

Earnings Per Share - diluted - 2003 $0.26

Employee retirement/severance and other charges 0.01 Electric sales volumes 0.02 Price increases 0.11 Other electric revenues 0.04 Regulatory deferrals 0.04 Operating and administrative expenses (0.04) Maintenance expense (0.01) Depreciation (0.07) Financing and dilution 0.02 Other - net 0.03

Earnings Per Share - diluted - 2004 $0.41

Power Technology & Infrastructure Services ------------------------------------------

Earnings Per Share - diluted - 2003 ($0.01)

Employee retirement/severance and other charges 0.06

Earnings Per Share - diluted - 2004 $0.05

CINERGY CORP. BUSINESS SEGMENT SUMMARY INFORMATION For the Year to Date December 31 (unaudited) (dollars in thousands, except per share amounts) ----------------------------------------------------------------------

2004 2003 ------------ ------------ Commercial Businesses ---------------------

Net Income $178,777 $275,247

Earnings Per Share - diluted $0.97 $1.54

Electricity Trading Volumes (MWhs) 185,148,553 147,461,653 Physical and Financial Gas Trading Volumes (Bcf/d) 51.6 53.2

Regulated Businesses --------------------

Net Income $253,138 $210,929

Earnings Per Share - diluted $1.38 $1.18

Electric Retail MWh Sales and Transportation 52,655,549 51,333,190 Gas Retail Mcf Sales and Transportation 91,012,963 95,394,249 Electric Customers (End of Period) 1,566,693 1,535,913 Gas Customers (End of Period) 511,123 504,637

Power Technology & Infrastructure Services ------------------------------------------

Net Income $(31,047) $(16,404)

Earnings Per Share - diluted $(0.17) $(0.09)

CINERGY CORP. BUSINESS SEGMENT EARNINGS DRIVER ANALYSIS For the Year to Date December 31, 2004 (unaudited) ----------------------------------------------------------------------

Commercial Businesses ---------------------

Earnings Per Share - diluted - 2003 $1.54

Cumulative effect of a change in accounting principles (0.15) Discontinued operations (0.05) Employee retirement/severance and other charges (0.04) Electric sales volumes 0.05 Power marketing, trading and origination 0.08 Gas marketing, trading and origination 0.02 Energy services 0.07 Fuel costs (0.09) Emissions allowances (0.20) Transmission expenses (0.04) Operating and administrative expenses (0.09) Maintenance expense (0.04) Depreciation 0.02 Financing and dilution (0.04) Other - net (0.07)

Earnings Per Share - diluted - 2004 $0.97

Regulated Businesses --------------------

Earnings Per Share - diluted - 2003 $1.18

Weather (0.02) Electric sales volumes 0.13 Price increases 0.28 Other electric revenues 0.09 Regulatory deferrals 0.04 Operating and administrative expenses (0.08) Maintenance expense (0.05) Depreciation (0.22) Other - net 0.03

Earnings Per Share - diluted - 2004 $1.38

Power Technology & Infrastructure Services ------------------------------------------

Earnings Per Share - diluted - 2003 ($0.09)

Employee retirement/severance and other charges (0.11) Results of investments 0.03

Earnings Per Share - diluted - 2004 ($0.17)

--30--DJL/cl*

CONTACT: Cinergy Corp., Cincinnati News contact: Steve Brash, 513-287-2226 Angeline Protogere, 317-838-1338 Investor contact: Brad Arnett, 513-287-3024 Website: www.cinergy.com

KEYWORD: KENTUCKY INDIANA OHIO INDUSTRY KEYWORD: UTILITIES EARNINGS SOURCE: Cinergy Corp.

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