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| Eugene R. McGrath Chairman, President, and Chief Executive Officer |
Accomplishments in 2004 included the opening of three major substations, just one element of the far-reaching infrastructure investment program for our electric, gas, and steam businesses. We worked with public officials and consumer groups to reach constructive agreements on new rate plans. We remained active in communities in metropolitan New York, supporting educational programs for young people and sponsoring initiatives that promote conservation and environmental protection. To foster the continuing improvement of our workforce, we further strengthened employee-training and leadership programs, primarily through The Learning Center, our utility university.
Our two regulated subsidiaries are Con Edison of New York, which serves New York City and Westchester County, and Orange and Rockland Utilities (O&R), which delivers electricity and gas to Orange, Rockland, and Sullivan counties in southeastern New York State and adjacent sections of New Jersey and Pennsylvania. Together, our team of more than 13,000 employees delivers electricity to 3.4 million customers, and serves 1.2 million gas customers and more than 1,800 steam customers. In addition, our competitive energy and telecommunications businesses serve wholesale and retail markets in the northeastern and mid-Atlantic states.
Growth and Opportunity
From Broadway, which has never shone brighter, to Lower Manhattan, which is in the midst of an impressive rebirth, to the Hudson Valley, which has become the state's fastest growing region, Con Edison's service area is marked by dynamic growth and unrivaled opportunity. Forty million tourists visited New York City last year, a new record. New construction permits were at an all-time high. The past year also saw a diversification of the area's economy as a number of industries, including film and television production, expanded in our service area. The metropolitan New York City area continues to benefit from its highly skilled workforce, and remains a vital center for service industries such as finance, media, law, and design. The region's transportation infrastructure makes it a hub of international trade.
At Con Edison, we support growth by delivering energy reliably, safely, and efficiently. To achieve this goal, we have pursued a strategy that continually expands the capacity of our infrastructure and improves its performance; broadens and deepens our expertise; and invests in our technological and human resources.
At Work in New York
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| The complex, demanding task of building a new substation at the 7 World Trade Center site was led by a team that included (l-r) Jacques Charles, senior substation operator; Robert Sanchez, area manager; Milovan Blair, section manager; Robert Saya, senior vice president, Central Operations; Patrick Murphy, project manager; Jill Anderson, associate engineer A; James Mooney, project engineer, and Frantz Rene, technical supervisor. |
We operate the most complex electric, gas, and steam delivery systems in the nation. Maintaining, strengthening, and expanding these systems poses unique logistical, engineering, and financial challenges. Energy infrastructure has to be built where the demand for energy is growing, not where it is easiest to build. Every building project and there are hundreds being planned in our service area requires the construction of new energy delivery and transmission infrastructure. But digging, boring, installing, and repairing under the busy streets of New York is both expensive and very complicated. Our power lines and gas and steam mains co-exist with the city's extensive subterranean water, telephone, communications, and transportation infrastructure. Every day, Con Edison's professionals work on ambitious timetables, in limited workspaces, and amid the bustle of New York.
The new substations we opened in the service areas of Con Edison of New York and O&R during 2004 will help us meet present electric needs while adding capacity for the future needs of our customers. Each new substation represents the collaborative work of hundreds of dedicated employees engineers, splicers, mechanics, planners, and managers among them. In addition, during this past year, we made significant progress in gaining community and customer understanding of the challenges we face when locating, designing, and planning the 13 substations that need to be constructed in our service areas by 2010. The opening of the substation at 7 World Trade Center was particularly noteworthy because it not only replaces a facility lost on September 11, but is also large enough to accommodate the area's future need for electricity.
To meet the increase in demand for natural gas, in 2004 we made significant investments to expand and strengthen our gas delivery system, including the replacement of more than 51 miles of gas mains.
We are also nearing completion of our single largest construction project in decades, the installation of two new steam electric generation units at our East River station in Manhattan. When completed, these new units will provide 125 megawatts of additional electric supply in the summer months and enhance the reliability of our steam system.
Our energy transmission and delivery systems like bridges, subways, tunnels, ports, and airports are vital to the area's well-being and growth. The system investments we are making will provide earnings growth for our shareholders in the next few years. We are confident that both customers and investors will share in the benefits of Con Edison's investments.
Stable Financial Performance
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| When hurricanes left homes and businesses without power in several southeastern states, crews of Con Edison employees including Lawrence Varricchio of Central Field Services helped restore power. |
Con Edison common stock ended the year at $43.75, up 1.7 percent for the year. Including dividends, total return to Con Edison shareholders in 2004 was 7.3 percent.
We know that our investors value and have come to expect consistency and low volatility. Returns to Con Edison shareholders have been remarkably steady over the longer term, thanks in part to our strong dividend record. In January 2005, we increased our dividend for the 31st consecutive year to an annualized $2.28 per share. That represents a 5.2 percent yield to investors, based on January's average stock price. Con Edison is the only utility in the S&P 500 to be included in Standard & Poor's Dividend Aristocrats list, a group of 58 companies in the index that have increased dividends in each of the past 25 years.
Over the past five years, Con Edison shareholders have enjoyed an average annualized return of 11 percent, including dividends, compared with 11.3 percent for the S&P Electric Utilities Index and -2.3 percent for the S&P 500. Over the past 10 years, Con Edison shareholders received an average annualized return of 11.8 percent, compared with 10.6 percent for the S&P Electric Utilities Index and 12.1 percent for the S&P 500.
These steady returns are made possible by stringent oversight that places a priority on managing finances prudently and maintaining the strength of our balance sheet, which affords us access to the capital markets on favorable terms. To help us achieve these goals, in May 2004 we issued $512 million of new equity through the sale of 14 million shares of common stock. We also continue to issue new equity through our dividend reinvestment and employee stock plans.
At year-end 2004, our equity ratio was 51 percent. We were one of just a few electric utilities rated in the "A" range by both Standard & Poor's and Moody's for both our holding company and our regulated utilities. Moody's also raised its outlook on the companies from negative to stable.
New Rate Plans
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| Senior engineer Dr. Yingli Wen helps direct the efforts of an interdisciplinary corps of engineers and technicians at Con Edisons Cable and Splice Center for Excellence. |
Rate requests for Con Edison of New York's gas and steam services were filed with the New York State Public Service Commission (PSC) in November 2003. An agreement was reached among major parties to the cases in mid-2004. The new gas and steam rate plans became effective on October 1, 2004, and will be in effect through October 2007 and October 2006, respectively. The new rates are expected to add $126.3 million in net revenues in the first year.
In April 2004, we filed a rate increase request for Con Edison of New York's electric service. Working with many parties, we developed a joint proposal for a new three-year electric rate plan, which is to take effect on April 1, 2005. This proposal, which is subject to approval by the PSC, provides for rate increases in April 2005 and April 2007, and will represent the first time electric delivery rates have been raised in more than a decade.
Our communities will benefit from a number of provisions in the new rate plans, including rate discounts for low-income customers and incentive rates to attract and retain commercial businesses. New initiatives will also seek ways to grow our steam business in order to take advantage of existing capacity and relieve pressure on our electric system.
Overall, the new rate plans will allow us to fund necessary capital programs while providing safe and reliable service, and enable us to earn a reasonable return for our investors.
Competitive Businesses
In 2004, we continued our disciplined participation in the evolving competitive marketplace. Our competitive energy businesses Con Edison Development, Con Edison Energy, and Con Edison Solutions provide wholesale and retail electric supply and related energy services, and can operate in concert.
Following a comprehensive review, we concluded that the state-of-the-art fiber optic network constructed by our telecommunications subsidiary, Con Edison Communications, would have greater value within a broader telecommunications business model. In December 2004, we entered into an agreement to sell the company to FiberNet Telecom Group, Inc., for $37 million.
2005 and Beyond
Looking forward, our strategy is to lead the way for growth for our customers, for our communities, and for our shareholders by continuing to focus on our core business.We will lead by staying ahead of demand. We will continue to invest in the region's transmission and distribution systems planning, building, and assessing future needs so that we'll be able to deliver energy to our customers wherever and whenever they need it. Today, every customer, whether it is a family in Astoria, Queens; a new apartment/hotel complex in White Plains; a shopping mall in Orange County; or the New York Stock Exchange, can count on a reliable supply of energy. Our investment program will help us serve not only existing customers, but also the new businesses and families taking root in New York.
We will lead by making our system run more effectively and efficiently. Our broad program of research and development will continue to develop tools and technologies to improve the performance, safety, and reliability of our system.
We will lead by investing in our people. Skilled, dedicated employees are essential to our success. We will take full advantage of the rich diversity of our workforce by continuing to offer opportunities for professional development to employees at every level of the company.
We will lead by remaining focused on disciplined investment, strong financial metrics, and sound corporate governance.
And we will lead by continuing to play an active role in the larger context in which we operate. By its nature, the energy business is a highly interconnected one. As the industry continues to evolve and face challenges, we will share our experiences and build and deepen our relationships with state and regional organizations, industry counterparts, all levels of government, and business groups. Whether the subject is renewable energy, industry restructuring, national reliability standards, or the need for new generation and infrastructure investment, Con Edison will add its voice and experience to the dialogue.
Working Together
Con Edison recognizes and appreciates dedication, intelligence, and vision at all levels of the company from our field forces to our line supervisors to our board of directors.
"Family" has long been a word used to describe Con Edison. We are proud that in 2004 many members of our team were recognized as leaders by outside organizations. Equally noteworthy are our many colleagues and coworkers serving in the armed forces.
We are proud of the many employees who every day make it possible for us to provide energy services safely, reliably, and efficiently. Our trained, thoughtful employees are doing their best in every endeavor they undertake at work, in our communities, and in their support for environmental excellence.This document features many of our leaders, including Robert Saya and the team that built the 7 World Trade Center substation in record time; Dr. Yingli Wen, senior engineer at Con Edison's Cable and Splice Center for Excellence, who helps lead the advanced and collaborative research now being conducted at the center; and Lawrence Varricchio, a member of the Con Edison crews who helped restore power following the hurricanes that devastated several southeastern states.
The accomplishments of our company and our people in 2004 give me confidence in our future. Through the leadership abilities and expertise of our employees and a steadfast, strategic focus on our core business, we are building the energy infrastructure needed to meet the region's present and future needs and to ensure the company's continued financial strength. We face exacting challenges, but in those challenges lie opportunities. In meeting them, Con Edison will continue to lead the way.
Eugene R. McGrath
Chairman, President and Chief Executive Officer
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Dividend Information
Financial Information
Consolidated Edison, Inc. Financial Team
| Consolidated Edison,
Inc. 4 Irving Place New York, NY 10003 1-212-460-4600 http://www.conedison.com/ | ||||
| Eugene R. McGrath Chairman, President and Chief Executive Officer |
Joan S. Freilich Executive Vice President and Chief Financial Officer |
Robert N. Hoglund Senior Vice President Finance |
Edward J. Rasmussen Vice President, Controller and Chief Accounting Officer |
Joseph P. Oates Vice President and Treasurer |
| Hyman Schoenblum Vice President, Corporate Planning |
John E. Perkins Director, Financial Administration 1-212-460-3807 |
Jan C. Childress Director, Investor Relations 1-212-460-6611 childressj@coned.com |
Krista L. Price Manager, Investor Relations 1-212-460-6131 Toll-free: 1-888-811-4992 pricekr@coned.com | |
| REGULATED UTILITIES | |
| Consolidated Edison Company of New York, Inc. 4 Irving Place New York, NY 10003 1-212-460-4600 http://www.coned.com/ |
Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, NY 10965 1-845-352-6000 http://www.oru.com/ |
| UNREGULATED ENERGY SUBSIDIARIES | |||
| Consolidated Edison Solutions, Inc. 701 Westchester Avenue, Suite 300 East White Plains, NY 10604 1-914-286-7000 http://www.conedsolutions.com/ |
Consolidated Edison Development, Inc. 111 Broadway, 16th Floor New York, NY 10006 1-212-393-9242 http://www.coneddev.com/ |
Consolidated Edison Energy, Inc. 701 Westchester Avenue, Suite 201 West White Plains, NY 10604 1-914-993-2189 http://www.conedenergy.com/ | |
Consolidated Edison, Inc. [NYSE: ED] is one of the nation's largest investor-owned energy companies, with $10 billion in annual revenues and approximately $21 billion in assets. The company provides a wide range of energy-related products and services to its customers through the following six subsidiaries: Consolidated Edison Company of New York, Inc., a regulated utility providing electric, gas, and steam service in New York City and Westchester County, New York; Orange and Rockland Utilities, Inc., a regulated utility serving customers in a 1,350 square mile area in southeastern New York state and adjacent sections of northern New Jersey and northeastern Pennsylvania; Con Edison Solutions, a retail energy services company; Con Edison Energy, a wholesale energy supply company; Con Edison Development, an infrastructure development company; and Con Edison Communications, a telecommunications infrastructure company and service provider. For additional financial, operations, and customer service information, visit the Consolidated Edison, Inc. Web site at http://www.conedison.com/.
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