DPL Reports Solid 2004 Results

    Business Editors

    DAYTON, Ohio--(BUSINESS WIRE)--Feb. 16, 2005--DPL Inc. (NYSE:DPL) today announced unaudited 2004 year end results of $1.81 basic earnings per share for the year ended December 31, 2004 compared to $1.10 basic earnings per share for year ended December 31, 2003. (2004 utility only earnings were $0.99 per share which reflects DPL Inc. net income, less after tax financial asset portfolio income, net of fees.) All earnings per share are basic earnings before the cumulative effect of any accounting change.
    "In spite of significant distractions, we maintained our focus on our electric utility business underscoring our ongoing commitment to operational excellence and reliability," stated James Mahoney, DPL President and Chief Executive Officer.
    DPL reported earnings per share of $0.23 for the quarter ended December 31, 2004 compared to a loss of ($0.13) earnings per share for the fourth quarter 2003, with the difference due primarily to a $76.7 million (pretax) 2003 shareholder litigation settlement expense.

    2004 Results

    Revenues: Retail revenues were higher in 2004 by $29.6 million or 3% resulting from higher sales volume and ancillary revenues associated with participation in PJM, a regional transmission operating organization. Wholesale revenues were below 2003 levels by $20.8 million or 13% primarily resulting from lower sales volume, partially offset by higher average market rates.
    Fuel and Purchased Power: Fuel costs were $28.5 million or 12% above the prior year as the result of increased coal prices. Purchased power costs were above 2003 by $25.2 million or 29% due to increased market rates and additional PJM-related costs.
    Operation and Maintenance: Operation and maintenance expense was $37.3 million or 19% higher in 2004 as a result of the following increases: legal and special investigations costs of approximately $12.5 million; planned outage costs of $8.4 million; pension and benefits costs of $7.8 million; Sarbanes-Oxley project costs and increased audit fees of $6.4 million; director and officer insurance premiums of $5.3 million; generation production related costs of $6.3 million; and meter reading, line clearance, and PJM administrative costs of $4.9 million. Partially offsetting these increases were lower executive compensation expenses of $10.6 million and lower incentive compensation of $3.2 million.
    Amortization of Regulatory Assets: Amortization of regulatory assets was $48.3 million less than 2003 primarily reflecting the completion of a three year transition period for cost recovery related to deregulation.
    Investment Income: Investment income increased $109.1 million or 144% over the prior year primarily resulting from improvement in the financial asset portfolio performance, offset by a 2003 gain of $21.2 million on interest rate hedges that did not recur in 2004.
    Other Income: Other income decreased $44 million compared to 2003 primarily reflecting the 2003 release of $39.7 million of insurance reserves associated with termination of DP&L's business interruption risk insurance policy.
    Interest Expense: Interest expense decreased by $21.5 million due to a combination of a reduction in outstanding debt of $335 million and overall lower interest rates.

    Liquidity

    DPL's cash and temporary cash investments totaled $202.1 million at December 31, 2004 compared to $337.6 at December 31, 2003. DPL also had $86.9 million in public securities at December 31, 2004 compared to $140.3 for year end 2003.

    Financial Assets

    As of December 31, 2004, DPL had $826.3 million of private securities in its financial asset portfolio compared to $844.6 at year end 2003. The value at cost of the private equity interests as of December 31, 2004 was $754 million (total financial assets of $913 million plus related prepaid fees of $8 million less $87 million of public securities, $41 million bank account balances held in foreign currencies, and $39 million of other comprehensive income.)
    On February 14, 2005, DPL announced that it had entered into an agreement to sell the private equity portfolio to AlpInvest/Lexington 2005, LLC, a joint venture of AlpInvest Partners and Lexington Partners Inc. The sale price of $1,011 million will be adjusted for capital calls, which the buyer has assumed, and distributions after June 30, 2004. Based on the net distributions subsequent to June 30, 2004 and expenses related to the transaction, the sale is expected to generate estimated proceeds (pretax) of $850 million.

    Utility Only Outlook

    Capital Expenditures: DPL expects to spend approximately $800 million in capital expenditures in the utility business over the next four years. Included in this total amount are costs associated with meeting environmental compliance requirements across its fleet of generation units. Capital expenditures are estimated to be $175 million in 2005.
    Revenues: Weather adjusted revenues are expected to increase approximately 3% in 2005, with approximately half of this increase from organic growth.
    Fuel and Purchased Power: DPL is currently maintaining approximately a 20-day inventory across its generation plants. Based on expected output of these plants and available information from co-owners of the facilities, the Company has long term fuel supply agreements that provide for 83% of fuel supply in 2005 and 60% in 2006. DPL operated plants are 73% hedged for estimated output in 2007. Fuel and purchased power costs in 2005 are estimated to increase 7% to 10% compared to 2004.
    Operating and Maintenance Costs: DPL expects its total 2005 operating and maintenance costs to be similar to 2004. Increased pressure on its generating and operating expenses are expected to be offset by lower corporate costs due primarily to reduced legal and auditing fees, and lower director and officer insurance costs.
    Interest Expense: Interest expense in 2005 is expected to decrease by approximately 7% compared to 2004 as a result of reductions in overall debt levels and improved interest rates on outstanding debt.
    Utility Earnings: Utility only earnings for 2005 are estimated to be $0.95 to $1.05 per share. Utility only earnings per share reflect DPL Inc. net income, less after tax financial portfolio income, net of fees. The estimate does not include any impacts expected from the sale of its private equity interests.

    Conference Call/Webcast

    DPL will conduct a webcast conference call with financial analysts Thursday, February 17, 2005, at 8:30 a.m. Eastern Time to discuss 2004 year end results and the sale of the private equity investments. Interested parties, including investors and the media, can access the webcast conference call real-time on DPL's website at www.dplinc.com in the Company's investor relations section. Please go to the website at least fifteen minutes prior to the start of the event to register, download and install any necessary audio software to listen to the webcast. For those who are unable to listen to the live webcast, it will be archived on the DPL Inc. website.

    About DPL

    DPL Inc. is a diversified, regional energy company. DPL's principal subsidiaries include The Dayton Power & Light Company (DP&L) and DPL Energy. DP&L provides electric services to over 500,000 retail customers in West Central Ohio. DPL Energy markets over 4,400 megawatts of generation capacity throughout the eastern United States. DPL Inc., through its subsidiaries, ranks among the top energy companies in generation efficiency and productivity. Further information on DPL Inc. can be found at www.dplinc.com.
    Certain statements contained in this release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Matters presented which relate to events or developments that are expected to occur in the future, including management's expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters constitute forward-looking statements. Forward-looking statements are based on management's beliefs, assumptions and expectation of the Company's future economic performance, taking into account the information currently available to management. These statements are not statements of historical fact. Such forward-looking statements are subject to risks and uncertainties and investors are cautioned that outcomes and results may vary materially from those projected due to many factors beyond DPL's control. Forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based.

DPL Inc. FINANCIAL DATA (in millions, except per share amounts)

Three Months Ended December 31, ----------------------- 2004 2003 ----------- ----------- (unaudited) -----------------------

Earnings Per Share of Common Stock - Basic: $0.23 $(0.13) Earnings Per Share of Common Stock - Diluted: $0.22 $(0.13) Earnings $27.5 $(15.5) Average Number of Common Stocks Outstanding: Basic 120.3 119.9 Diluted 124.5 119.9

Twelve Months Ended December 31, ----------------------- 2004 2003 ----------- ----------- (unaudited) -----------------------

Earnings Per Share of Common Stock - Basic: $1.81 $1.24 Earnings Per Share of Common Stock - Diluted: $1.78 $1.22 Earnings $217.3 $148.5 Average Number of Common Stocks Outstanding: Basic 120.1 119.8 Diluted 122.2 121.7

DPL Inc. CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS

Three Months Ended Twelve Months Ended December 31, December 31, 2004 2003 2004 2003 ------- --------- --------- --------- $ in millions except per (unaudited) (unaudited) share amounts ----------------------------------------------------------------------

Revenues Electric revenues $298.1 $292.4 $1,189.8 $1,181.0 Other revenues, net of fuel costs 2.4 2.2 10.1 10.0 -------- -------- --------- ---------

Total revenues 300.5 294.6 1,199.9 1,191.0 -------- -------- --------- ---------

Operating Expenses Fuel 71.1 61.3 263.1 234.6 Purchased power 31.3 16.1 113.1 87.9 Operation and maintenance 70.9 64.8 237.1 199.8 Depreciation and amortization 39.7 33.4 144.1 138.9 General taxes 25.8 26.0 105.3 108.9 Amortization of regulatory assets, net 0.4 13.7 0.7 49.0 -------- -------- --------- ---------

Total operating expenses 239.2 215.3 863.4 819.1 -------- -------- --------- ---------

Operating Income 61.3 79.3 336.5 371.9

Investment Income 8.3 27.2 184.9 75.8 Shareholder litigation - (76.7) - (76.7) Other Income (Deductions) (2.7) (2.6) (18.3) 25.7 -------- -------- --------- ---------

Income Before Interest Charges 66.9 27.2 503.1 396.7

Interest expense 40.1 45.2 160.2 181.7 -------- -------- --------- ---------

Income Before Income Taxes and Cumulative Effect of Accounting Change 26.8 (18.0) 342.9 215.0

Income tax expense (benefit) (0.7) (2.5) 125.6 83.5 -------- -------- --------- ---------

Income Before Cumulative Effect of Accounting Change 27.5 (15.5) 217.3 131.5

Cumulative effect of accounting change, net of tax - - - 17.0 -------- -------- --------- ---------

Net Income $27.5 $(15.5) $217.3 $148.5 ======== ======== ========= =========

Average Number of Common Shares Outstanding (millions) Basic 120.3 119.9 120.1 119.8 Diluted 124.5 119.9 122.2 121.7

Earnings Per Share - Basic Income Before Cumulative Effect of Accounting Change $0.23 $(0.13) $1.81 $1.10 Net Income $0.23 $(0.13) $1.81 $1.24

Earnings Per Share - Diluted Income Before Cumulative Effect of Accounting Change $0.22 $(0.13) $1.78 $1.08 Net Income $0.22 $(0.13) $1.78 $1.22

Dividends Paid Per Share $0.720 $0.235 $0.96 $0.94

Book Value Per Share $8.67 $7.52 $8.67 $7.52

DPL Inc. CONSOLIDATED STATEMENT OF CASH FLOWS

Twelve Months Ended December 31, --------------------- 2004 2003 $ in millions (unaudited) ----------------------------------------------------------------------

Operating Activities: Net income $217.3 $148.5 Adjustments: Depreciation and amortization 144.1 138.9 Amortization of regulatory assets, net 0.7 49.0 Deferred income taxes 36.7 18.2 Captive insurance provision (1.1) (46.8) Shareholder litigation (70.0) 66.6 Investment income (181.8) (47.7) Income from interest rate hedges - (21.2) Gain on sale of property (1.8) - Cumulative effect of accounting change, net of tax - (17.0) Changes in working capital (28.0) 50.3 Deferred compensation assets 12.6 49.0 Deferred compensation obligations 5.2 (47.0) Other (1.1) 9.5 ---------- ---------- Net Cash Provided by (Used for) Operating Activities 132.8 350.3

Investing Activities: Capital expenditures (87.9) (120.9) Settlement of interest rate hedges - 51.4 Proceeds from sale of property 2.3 - Purchases of fixed income and equity securities (220.3) (164.0) Sales of fixed income and equity securities 488.1 298.9 ---------- ---------- Net Cash Provided by (Used for) Investing Activities 182.2 65.4

Financing Activities: Dividends paid on common stock (114.8) (112.1) Retirement of long-term debt (510.4) (471.9) Issuance of long-term debt, net of issue costs 174.7 465.1 ---------- ---------- Net Cash Provided by (Used for) Financing Activities (450.5) (118.9)

Cash and Temporary Cash Investments: Net change (135.5) 296.8 Balance at beginning of period 337.6 40.8 ---------- ----------

Balance at end of period $202.1 $337.6 ========== ==========

Cash Paid During the Period For: Interest $162.1 $184.0 Income taxes $107.9 $15.2

DPL Inc. CONSOLIDATED BALANCE SHEET

At At December 31, December 31, 2004 2003 $ in millions (unaudited) ---------------------------------------------------------------------- Assets Property Property, plant and equipment $4,495.0 $4,420.8 Less: Accumulated depreciation and amortization (1,964.9) (1,846.9) ------------ ------------- Net property 2,530.1 2,573.9

Current assets Cash and temporary cash investments 202.1 337.6 Accounts receivable, less provision for uncollectible accounts of $1.1 and $6.0, respectively 175.7 176.0 Inventories, at average cost 72.1 52.1 Prepaid taxes 46.4 46.4 Other 34.3 60.1 ------------ ------------- Total current assets 530.6 672.2

Other assets Financial assets 913.2 984.9 Income taxes recoverable through future revenues 32.5 43.3 Other regulatory assets 41.5 36.1 Other 117.6 134.3 ------------ ------------- Total other assets 1,104.8 1,198.6 ------------ -------------

Total Assets $4,165.5 $4,444.7 ============ =============

Capitalization and Liabilities

Capitalization Common shareholders' equity Common stock $1.3 $1.3 Other paid-in capital, net of treasury stock 15.8 12.0 Warrants 50.0 50.0 Common stock held by employee plans (85.7) (84.4) Accumulated other comprehensive income 65.5 57.7 Earnings reinvested in the business 997.1 865.7 ------------ ------------- Total common shareholders' equity 1,044.0 902.3

Preferred stock 23.0 23.0

Long-term debt First mortgage bonds 572.8 573.0 Other long-term obligations 1,544.5 1,381.7 ------------ ------------- Total long-term debt 2,117.3 1,954.7 ------------ ------------- Total capitalization 3,184.3 2,880.0

Current Liabilities Current portion - long-term debt 13.5 511.1 Accounts payable 113.4 95.6 Shareholder litigation - 70.0 Accrued taxes 137.2 148.7 Accrued interest 42.1 50.1 Other 20.7 51.8 ------------ ------------- Total current liabilities 326.9 927.3

Deferred Credits and Other Deferred taxes 384.8 374.0 Unamortized investment tax credit 49.3 52.2 Insurance and claims costs 24.9 26.0 Other 195.3 185.2 ------------ ------------- Total deferred credits and other 654.3 637.4 ------------ -------------

Total Capitalization and Liabilities $4,165.5 $4,444.7 ============ =============

DPL Inc. OPERATING STATISTICS

Three Months Ended Twelve Months Ended December 31, December 31, ------------------- --------------------- 2004 2003 2004 2003 (unaudited) (unaudited) ----------------------------------------------------------------------

Electric Sales (millions of kWh): Residential 1,218 1,220 5,140 5,071 Commercial 921 895 3,777 3,699 Industrial 1,055 1,049 4,393 4,330 Other Retail 352 367 1,407 1,409 ---------- -------- ---------- ---------- Total Retail 3,546 3,531 14,717 14,509 Wholesale 770 1,436 3,748 4,836 ---------- -------- ---------- ----------

Total 4,316 4,967 18,465 19,345

Electric Revenues (thousands of dollars): Residential 107,555 107,047 449,411 442,239 Commercial 67,853 66,424 267,831 264,067 Industrial 54,207 54,055 223,335 221,961 Other Retail 37,954 24,766 110,772 93,478 ---------- -------- ---------- ---------- Total Retail 267,569 252,292 1,051,349 1,021,745 Wholesale 30,594 40,154 138,495 159,250 ---------- -------- ---------- ----------

Total 298,163 292,446 1,189,844 1,180,995

Other Statistics: Average price per kWh - retail (cents) 7.05 7.05 6.94 6.95 Fuel cost per net kWh generated (cents) 1.59 1.32 1.53 1.33 Electric customers - end of period 510,013 506,396 510,013 506,396 Average kWh use per residential customer 2,691 2,708 11,371 11,276 Peak demand - maximum one- hour use (mw) 2,628 2,452 2,896 2,981

Degree Days Heating 1,994 1,925 5,500 5,790 Cooling 4 7 771 687

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Inquiries concerning this report should be directed to:

Arthur Meyer Vice President Telephone (937) 259-7208

The information contained herein is submitted for general information and not in connection with any sale or offer for sale of, or solicitation of any offer to buy, any securities.

--30--DJL/cl*

CONTACT: DPL Medialine, 937-224-5940

KEYWORD: OHIO INDUSTRY KEYWORD: ENERGY UTILITIES EARNINGS CONFERENCE CALLS SOURCE: DPL Inc.

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