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| Kevin Burke Chairman, President, and Chief Executive Officer |
In 2005, our focus on the core business of delivering energy allowed Con Edison to meet the power needs of the world's most demanding marketplace — and to achieve solid results for our shareholders.
As the New York region's economy continued to expand at a healthy rate, our program of infrastructure investments — more than $1.6 billion in 2005 alone — provided the operational strength necessary to meet the rising demand for energy. The company's long-standing financial strategy of making careful investments and maintaining a strong balance sheet and stable credit ratings enabled us to increase the dividend we pay to shareholders for the 32nd consecutive year.
Focused on Delivering Energy
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| Laura Feeney (l), chief construction inspector, and Brian Yee-Chan (r), chief construction inspector, review plans for the new Mott Haven substation. |
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.
The growth in both electricity and gas deliveries — our core businesses — is connected to the economic growth in our service area. The economy of our region is remarkably diverse and vibrant. And last year, factors such as the growth in housing and corporate expansions fueled the robust economy in New York City, in Westchester County, and in the seven counties west of the Hudson River in O&R's service territory.
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| Luis Mendoza III, mechanic A, and Joseph Eckett, mechanic A, connect the fitting on a new transformer. |
As a result of these trends, demand for both electricity and gas continues to rise. Last summer, which was warmer than usual, both Con Edison of New York and O&R experienced a number of record peaks in customer usage of electricity. In addition, both utilities set new cold-weather electric peaks during the winter of 2004-2005, despite the fact that the season as a whole was relatively mild. Over the next five years, we expect that Con Edison of New York's electricity peak usage will grow about 1.5 percent per year and that O&R's peak customer usage will grow about 2.7 percent annually.
In Con Edison's vision, the delivery of energy demands an unwavering commitment to reliability, and to excellent environmental, health, and safety performance. Last year, we saw continued improvement in our efforts to conserve natural resources; provide a safe, healthy workplace; and minimize the environmental impact of our operations.
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| Con Edison's steam system is the largest district steam system in the world. Senior designer Emilio Frederick confirms that the installation matches specifications. |
Our operating performance and a healthy local economy produced solid results in 2005 for our shareholders. Net income in 2005 was $719 million, or $2.95 per share, compared with $537 million, or $2.28 per share, in 2004. Earnings from continuing operations were $732 million, or $3.00 per share, compared with $549 million, or $2.33 per share, in 2004.
Including reinvested dividends, total return to Con Edison shareholders in 2005 was 11.4 percent, compared with 17.7 percent for the S&P electric utilities index, and 4.9 percent for the S&P 500. Over the past five years, Con Edison's stock has returned 57.4 percent, compared with 30.6 percent for the S&P electric utilities index, and 2.8 percent for the S&P 500. Con Edison is the only utility in the S&P 500 with 25 or more consecutive years of dividend increases. In January 2006, for the 32nd straight year, we increased our dividend. Raising our dividend to an annualized $2.30 per share is a tangible measure of our commitment to shareholder value.
We work constructively with regulatory agencies and other constituents to communicate the importance of Con Edison having the necessary resources to continue investing in the region's energy infrastructure. Last year, Con Edison of New York's new electric rate plan went into effect.
Competitive Businesses
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| In 2005, growth in housing and corporate expansions helped fuel the region's robust economy. |
Following a comprehensive review, we concluded that the fiber optic network constructed by our telecommunications subsidiary, Consolidated Edison Communications, would have greater value and serve its customers more effectively within a broader telecommunications business environment. Consequently, in December 2005, an agreement was reached to sell the company to RCN Corporation for $32 million, subject to certain adjustments at closing.
The Next Generation
Con Edison's energy infrastructure has always played a crucial role in supporting the economic prosperity of metropolitan New York and sustaining the quality of life that people living and working in the region have come to expect. To carry out this vital mission, we expect to invest more than $5.3 billion in our infrastructure over the next three years.
Planning for the future requires us to do more than simply adhere to existing plans. The energy industry, by its very nature, is one of evolving challenges. At present, for example, the combination of tight supplies and increased demand for natural gas in the United States has increased the cost of electricity, gas, and steam dramatically.
As a result, national attention is once again focused on energy. In advance of winter 2005-2006, Con Edison took steps to secure adequate supplies of natural gas and introduced an education campaign that provided customers with information on energy conservation, budget programs, and fuel-assistance programs.
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| In 2005, Con Edison continued its long and steady record of supplying the energy that powers New York. |
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| General utility workers John Keenan and Vishnu Gopaulsammy working on a gas excavation project; part of the $150 million Con Edison of New York invested in its gas distribution system in 2005. |
For more than 180 years, Con Edison has remained dedicated to continuity — in service to our customers, in fiscal strength, in leadership, and in partnerships with our vibrant communities. At Con Edison, 2005 was in some ways a year of transition, with a number of changes in top leadership. But it was also a year in which we remained true to our core mission — delivering energy to a demanding, dynamic marketplace. Every day, our team arrived at work focused on providing excellent service. But our plans and efforts also revolve around how Con Edison can build and serve the next generation of New Yorkers. We're confident that by intently preparing for the future, by continually improving operations, and by managing our finances soundly, we will position our company to meet the energy needs of generations of New Yorkers to come — and continue to deliver solid returns to you, our shareholders. We appreciate the support you have shown for Con Edison and we pledge to work hard in the coming years to continue to earn your trust.
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Leadership Transition
Con Edison places a high value on stability and continuity in all its endeavors, and particularly in the realm of management succession. In February 2006, the board of directors of Consolidated Edison, Inc. elected Kevin Burke, president and chief executive officer, as chairman of the board. Mr. Burke succeeds Eugene R. McGrath, who retired effective February 28, 2006. Mr. McGrath, who has served as Con Edison's chairman since 1990, will remain on the company's board of directors.
Mr. McGrath, a 43-year veteran of Con Edison, guided the company through major changes in the energy industry, most notably deregulation and the company's entrance into competitive energy markets through the establishment of several competitive businesses. He also oversaw the company's largest investment program to meet the energy needs of New Yorkers. During his tenure, Con Edison maintained its position as the most reliable electric utility in the United States.
On September 1, 2005, Mr. Burke became president and chief executive officer of Consolidated Edison, Inc. Since joining the company in 1973, he has held senior operating positions at Con Edison of New York and Orange and Rockland Utilities (O&R), and, beginning in September 2000, served as president and chief operating officer of Con Edison of New York. As part of an orderly transition, veteran executive Louis Rana succeeded Mr. Burke as president and chief operating officer of Con Edison of New York. Robert Hoglund, our former senior vice president of finance, was appointed chief financial officer. Joan Freilich, formerly chief financial officer, was named vice chairman.
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Financial Highlights
Consolidated Edison, Inc. Financial Team
| Consolidated Edison,
Inc. 4 Irving Place New York, NY 10003 1-212-460-4600 http://www.conedison.com/ | ||||
| Kevin Burke Chairman, President and Chief Executive Officer |
Joan S. Freilich Vice Chairman |
Robert N. Hoglund Senior Vice President and Chief Financial Officer |
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 Corporate Finance 1-212-460-3807 |
Jan C. Childress Director, Investor Relations 1-212-460-6611 childressj@coned.com |
Ellen K. Socolow Manager Investor Relations 1-212-460-4986 Toll-free: 1-888-811-4992 socolowe@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/ |
| COMPETITIVE ENERGY BUSINESSES | |||
| 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. is one of the nation's largest investor-owned energy companies, with approximately $12 billion in annual revenues and $25 billion in assets. The company provides a wide range of energy-related products and services to its customers through the following 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 supply and services company; Con Edison Energy, a wholesale energy supply company; Con Edison Development, a company that owns and operates generating plants and participates in other infrastructure projects; and Con Edison Communications, a telecommunications infrastructure company and service provider. For additional financial, operations, and customer service information, visit Consolidated Edison, Inc.'s Web site at http://www.conedison.com/.
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