Six months after going public, Orion Power Holdings Inc. announced yesterday that its first-quarter earnings soared 82 percent, mostly due to the energy company's significant advances in building power plants across the country.
In the three months that ended March 31, Orion, an independent power generating company, posted net income of $15.1 million compared with $8.3 million in the first quarter a year ago, when it was privately held.
Earnings per share were 15 cents compared with 22 cents a year ago, a drop attributed to the company issuing 60.2 million more shares after its initial public offering in November.
Analysts had expected earnings of 14 cents a share, according to Thomson Financial/First Call.
Revenue in the quarter increased 160 percent to $274.3 million. Company officials said during a conference call with analysts yesterday that Orion is on track to meet its estimated earnings growth of 86 percent for the year.
"It's their second quarter after going public of above-expectation earnings, and I think a lot of that is due to having a really solid management team that's really running this company well," said Neil J. Stein, an independent power analyst with Credit Suisse First Boston. "There is a lot of upside to their earnings prospects because they own power plants in New York City, where there aren't enough of them.
"This is a great industry and, within the sector, this company is poised to become one of the leaders."
Despite the gains, shares of Orion dropped $2.90 on the New York Stock Exchange yesterday to close at $29.30. Analysts said investors were unhappy that the Baltimore company didn't increase its earnings projection of $1.15 per share for the year.
Also, Orion officials announced during the conference call that "they were raising additional equity, so that didn't help matters," said Jonathan Mogil, a research analyst with CIBC World Markets who has a "strong buy" rating on the utility's shares.
Company officials pointed to recent achievements that will help add to earnings in the future:
A three-year extension of a contract with Niagara Mohawk Power Corp., an upstate New York utility, to supply Orion with the output of 68 hydroelectric plants in central and northern New York.
The sale of over 2,000 megawatts in the New York City market for the summer.
Federal approval of a supply contract with Duquesne Light Co., in which Orion supplies the subsidiary of Pennsylvania-based DQE Inc. with all of its energy requirements as the default provider in its service territory.
Completion of the Ceredo Generating Station in Wayne County, W.Va., which will begin supplying the Midwest with 500 megawatts of peaking capacity at the end of the month.
"A primary focus this quarter has been on preparing our power plants to ensure that we will be the most reliable provider of energy to New York City, Pittsburgh, Cleveland and all markets we will serve this summer," said Jack Fusco, Orion's chief executive and president. "We have also made progress on our promise to deliver growth to our shareholders by reaching our goal of owning at least 20,000 megawatts of capacity by 2005."
Orion currently owns 5,396 megawatts of capacity. In addition, the company has 2,850 megawatts' capacity under construction, including its Kelson Ridge Generating Station in Charles County. Construction of the 1,650-megawatt gas-fired facility is more than a year ahead of schedule. Start-up is scheduled in 2003.
The company was formed in March 1998 by Goldman Sachs Group Inc. and Constellation Energy Group Inc. of Baltimore.