- The Washington Times - Monday, November 3, 2003

Colder weather and higher rates helped push up income for Washington utility company WGL Holdings Inc. despite a loss in its fourth fiscal quarter.

The parent company of Washington Gas Light Co., which supplies natural gas to 960,000 customers in the metropolitan area, yesterday announced a smaller loss for what is generally a slower demand period for heating gas.

WGL posted a loss in the quarter ended Sept. 30 to $17.6 million (36 cents per diluted share) from $22.7 million (47 cents) a year ago. Diluted earnings per share reflect the value of convertible warrants and stock options.

The smaller loss and colder winter this year, on top of increased rates in Maryland and Virginia, helped more than double profits for the fiscal year to $112.3 million ($2.30) from $39.1 million (80 cents) for fiscal 2002.

WGL spokesman Timothy Sargeant said the company would not comment on the company until Friday’s conference call.

Shares of WGL advanced on the New York Stock Exchange to close yesterday at $28.16, up 1 percent from a week earlier at $27.86. The stock was trading at $26.50 six months earlier.

Most analysts remained cautious about the utility company, pointing to profits that tend to be “weather sensitive.”

“While this quarter was good, we’re concerned that there might be a drop in earnings next year,” said Michael Heim, a securities analyst.

Mr. Heim, who advised investors to hold their stock, noted 51 cents of the $2.30 per share earned this fiscal year were from the colder winter in the Mid-Atlantic, about 38 percent colder than normal.

A warm October and unseasonably warm start of November, up to 76 degrees in the District yesterday, may affect profits in the 2004 fiscal year, he said.

“That earnings volatility increases the company’s risk profile a little bit,” said Mr. Heim with A.G. Edwards & Sons Inc., a St. Louis investment firm.

Mr. Heim does not own any shares of WGL but A.G. Edwards is seeking an investment-banking business with the company.

Utility analyst David Schanzer said he would need to see more flexible policies from the D.C. Public Service Commission, the agency that oversees Washington’s utilities, before he would upgrade his hold rating.

The agency “is not an easy commission to get your arms around. There have been quite a few rules in the past that have not made sense to the financial community,” said Mr. Schanzer with Philadelphia brokerage firm Janney Montgomery Scott LLC.

Mr. Schanzer does not own any stock and his company does not have business with WGL.

But the company’s customer service territory is expanding by 4 percent, twice the national average, because of a strong local economy, said Brian Youngberg, an analyst with St. Louis investment firm Edward Jones, in his most recent report.

Mr. Youngberg, who rated WGL as a “buy,” added that while he is cautious of stocks in the utility sector, “we feel the fundamentals are in place for continued growth in the natural gas industry.”

While Mr. Youngberg does not own any WGL stock, Edward Jones expects a banking relationship with the utility in the next three months.

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