WGL Holdings, Inc. Reports Increased First Quarter Fiscal Year 2006 Earnings and Updates Earnings Guidance

WASHINGTON, Feb. 7 /PRNewswire-FirstCall/ -- WGL Holdings, Inc. (the Company), the parent company of Washington Gas Light Company and other energy-related subsidiaries, today reported net income of $44.4 million, or $0.91 per share, for the three months ended December 31, 2005, the first quarter of its fiscal year 2006. This represents a $1.3 million, or $0.03 per share, increase over net income reported of $43.1 million, or $0.88 per share, for the three months ended December 31, 2004. Unless otherwise noted, earnings per share amounts are presented in this news release on a diluted basis, and are based on weighted average common and common equivalent shares outstanding.

Commenting on first quarter results and the outlook for the year, WGL Holdings' Chairman and CEO James H. DeGraffenreidt, Jr. said, "We continue to produce solid results. Our utility customer growth remains strong, and the implementation in the first quarter of our new revenue normalization adjustment in Maryland contributed favorably to our reported results. This mechanism, along with weather insurance in the District of Columbia and a weather derivative in Virginia, is providing us with protection against the effects of warmer-than-normal weather that we have experienced so far in the second fiscal quarter."

Results from Normal Operations

The Company reviews its financial results from normal operations (based on normal weather, and uninfluenced by unique transactions) to monitor its progress towards achieving its five-year financial objectives. Excluding the effects of colder-than-normal weather described below, the Company's consolidated earnings from normal operations for the first quarter of fiscal year 2006 were $0.84 per share as compared to earnings from normal operations of $0.88 per share reported for the same quarter of fiscal year 2005. There were no unique transactions in the current or prior year's first quarter. Earnings from normal operations for the current quarter, when compared to the same quarter of the prior fiscal year, reflect lower earnings from the Company's retail energy-marketing business which more than offset improved earnings of the Company's regulated utility segment. Items that favorably affected earnings from normal operations during the current period include: (i) continued utility customer growth; (ii) the favorable impact of a Revenue Normalization Adjustment (RNA) mechanism that was implemented in Maryland on October 1, 2005; (iii) increased earnings from carrying costs on higher balances of storage gas inventory at the regulated utility; and (iv) lower costs, as well as accrued benefits, associated with managing weather risk. Reducing earnings in the current quarter in relation to the same quarter of the prior fiscal year were higher operation and maintenance, depreciation and interest expenses.

As discussed above, earnings from normal operations exclude the effect of variations from normal weather. The Company's regulated operations are weather sensitive, with a significant portion of its revenue coming from deliveries of natural gas to residential and commercial heating customers. Weather, when measured by heating degree days, was 10.1 percent colder than normal for the three months ended December 31, 2005, enhancing net income in relation to normal by an estimated $4 million, or $0.07 per share. Weather was 2.2 percent colder than normal for the three months ended December 31, 2004; however, the deviation in the weather pattern from normal levels did not have any effect on operating results during that period. Accordingly, results from normal operations for the first quarter of fiscal year 2005 do not exclude any effects of weather.

Reconciliations of the Company's and the regulated utility segment's earnings per share reported in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP) to earnings per share from normal operations are included with this press release.

Three Months Ended December 31, 2005 Regulated Utility Operations

The operating results of the Company's core regulated utility segment are the primary influence on overall consolidated operating results. For the first three months of fiscal year 2006, the regulated utility segment reported net income of $44.8 million, or $0.92 per share, an increase of $5.0 million, or $0.11 per share, over net income of $39.8 million, or $0.81 per share, reported for the same quarter of the prior fiscal year. The 12 percent improvement in earnings for this segment primarily reflects a $14.8 million (pre-tax), or $0.19 per share, increase in utility net revenues during the first quarter of fiscal year 2006 when compared to the same quarter of the prior fiscal year, tempered by increased operation and maintenance expenses, depreciation and amortization expense, general taxes and interest expense.

Higher utility net revenues for the current quarter reflect a 35.1 million therm, or 8.9 percent, increase in total gas deliveries to firm customers that grew to 429.6 million therms during the current quarter. Driving this growth in therm deliveries was 7.9 percent colder weather in the first three months of fiscal year 2006, when compared to the same quarter of the prior fiscal year. Increased utility net revenues also reflect the addition of more than 23,200 active customer meters, an increase of 2.3 percent from the end of the same quarter of the prior fiscal year, as well as $2.2 million (pre-tax) of increased earnings from carrying costs on a higher balance of storage gas inventory that was primarily the result of higher natural gas prices.

Net revenues of the regulated utility segment also benefited in the first quarter of fiscal year 2006 from the effects of the RNA mechanism that was implemented in Maryland on October 1, 2005. The RNA is a billing mechanism that is designed to stabilize the level of net revenues collected from Maryland customers by eliminating the effect of deviations in customer usage caused by variations in weather from normal levels and certain other factors such as customer conservation.

First quarter fiscal year 2006 earnings for the regulated utility segment were reduced by a $4.4 million (pre-tax), or $0.06 per share, increase in operation and maintenance expenses. Contributing to the increase in these pre-tax expenses were $2.8 million of higher expenses for uncollectible accounts primarily due to the effects of higher natural gas costs and greater volumes delivered. Other drivers of the increased operation and maintenance expenses were information technology projects and higher accruals for equity- based compensation pursuant to a new accounting standard that became effective on October 1, 2005. Results from the regulated utility segment also reflect higher depreciation and amortization expense, higher general taxes and increased interest expense that, together, reduced net income by $2.4 million (pre-tax), or $0.03 per share, partially offset by $1.2 million (pre-tax), or $0.02 per share, of greater net benefits associated with weather protection products.

Non-Utility Operations

The Company's non-utility operations, principally comprised of the results of the Company's unregulated energy-marketing and commercial heating, ventilating and air conditioning (HVAC) segments, reported a net loss of $384,000, or $0.01 per share, for the three months ended December 31, 2005, as compared to net income of $3.3 million, or $0.07 per share, reported for the same three-month period of the prior fiscal year. The current quarter reflects $0.08 per share of reduced earnings from the Company's retail energy- marketing segment.

The retail energy-marketing segment reported net income of $423,000, or $0.01 per share, for the first quarter of fiscal year 2006, as compared to net income of $4.1 million, or $0.09 per share, reported for the same quarter in fiscal year 2005. The year-over-year decline in earnings primarily reflects lower gross margins from the sale of natural gas and electricity. Lower gross margins from natural gas sales reflect lower gross margins per therm, partially offset by a 9.4 percent increase in natural gas sales volumes. The lower gross margins per therm resulted, in part, from a larger number of commercial customers entering into long-term, fixed-price contracts during the later part of the first quarter of fiscal year 2006 compared to the same period in the prior year. Gas costs for these contracts in the current quarter were relatively high in relation to the sales prices, which caused compression in gross margins in the current quarter in relation to the prior year. Higher natural gas purchase costs stemmed from a sharp rise in natural gas prices during the current quarter due to the natural gas supply shortage in the Gulf of Mexico region that occurred in the aftermath of the fall 2005 hurricane season.

Lower gross margins from natural gas sales for the current quarter also reflect the realization of increased mark-to-market losses associated with certain contracts used to hedge risks associated with the volatility in the price of natural gas and with fluctuations in weather and customer usage. The increase in these mark-to-market losses in the current quarter decreased net income by $1.2 million (after-tax), or $0.02 per share. Lower gross margins from electric sales reflect a decline in both sales volumes and the margin per kilowatt hour sold.

The Company's commercial HVAC segment reported a net loss of $431,000, or $0.01 per share, for the first quarter of fiscal year 2006, unchanged from the same quarter in fiscal year 2005.

Earnings Outlook

The Company is lowering its consolidated earnings estimate for the full fiscal year 2006 to a range of $1.81 to $1.91 per share from its previous guidance of $1.85 to $1.95 per share. This updated estimate includes a decrease in projected full fiscal year 2006 earnings from its unregulated businesses to a range of $0.10 to $0.14 per share from the previous range of $0.15 to $0.19 per share. The annual guidance for the consolidated entity includes estimated earnings for the second quarter of fiscal year 2006 of $1.17 to $1.23 per share, which reflects a projected loss from the Company's unregulated businesses of $(0.03) to $(0.01) per share.

This guidance reflects the estimated effect of actual weather through January 31, 2006, and assumes normal weather thereafter. The guidance also includes assumptions related to estimated conservation for reduced customer usage driven by high natural gas prices. This guidance incorporates assumptions related to income from weather insurance and weather derivatives that reflect the effect of 23 percent warmer-than-normal weather during the month of January 2006, and normal weather thereafter. This weather pattern is 3 percent warmer-than-normal weather for the fiscal year-to-date period through January 31, 2006. The guidance also assumes no effect that may result from performing earnings tests on a quarterly basis pursuant to a December 18, 2003 rate order issued by the State Corporation Commission of Virginia, and excludes the effect of unusual items that could arise in the future. This guidance has been determined as of January 31, 2006, and the Company assumes no obligation to update this guidance. The absence of any statement by the Company in the future should not be presumed to represent an affirmation of the earnings guidance given herein.

Other Information

The Company will hold a conference call at 10:30 a.m. Eastern time on February 8, 2006, to discuss its first quarter financial results. The live conference call will be available to the public via a link located on the WGL Holdings Web site, http://www.wglholdings.com/. To hear the live Webcast, click on the "Live Webcast" link located on the home page of the referenced

site. The Webcast will be archived for replay on the WGL Holdings Web site through March 8, 2006.

Headquartered in Washington, D.C., WGL Holdings is the parent company of Washington Gas Light Company, a natural gas utility that serves over one million customers throughout metropolitan Washington, D.C., and the surrounding region. In addition, it holds a group of energy-related retail businesses that focus primarily on retail energy-marketing and commercial heating, ventilating and air conditioning services.

Additional information about WGL Holdings is available on its Web site, http://www.wglholdings.com/.

Note: This news release and other statements by the Company include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the outlook for earnings, revenues and other future financial business performance or strategies and expectations. Forward-looking statements are typically identified by words such as, but not limited to, "estimates," "expects," "anticipates," "intends," "believes," "plans," and similar expressions, or future or conditional verbs such as "will," "should," "would," and "could." Although the Company believes such forward-looking statements are based on reasonable assumptions, it cannot give assurance that every objective will be achieved. Forward-looking statements speak only as of today, and the Company assumes no duty to update them.

As previously disclosed in the Company's filings with the Securities and Exchange Commission, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the level and rate at which costs and expenses are incurred in connection with constructing, operating and maintaining the Company's natural gas distribution system; the ability to implement successful approaches to modify the current or future composition of gas used to supply customers as a result of the introduction of Cove Point gas into the Company's natural gas distribution system; variations in weather conditions from normal levels; the availability of natural gas supply and interstate pipeline transportation and storage capacity; the ability of natural gas producers, pipeline gatherers and natural gas processors to deliver natural gas into interstate pipelines for delivery by those interstate pipelines to the entrance points of the regulated utility's natural gas distribution system as a result of factors beyond the control of the Company or its subsidiaries; changes in economic, competitive, political and regulatory conditions and developments; changes in capital and energy commodity market conditions; changes in credit ratings of debt securities of WGL Holdings, Inc. or Washington Gas Light Company that may affect access to capital or the cost of debt; changes in credit market conditions and creditworthiness of customers and suppliers; changes in laws and regulations, including tax, environmental and employment laws and regulations; legislative, regulatory and judicial mandates and decisions affecting business operations or the timing of recovery of costs and expenses; the timing and success of business and product development efforts and technological improvements; the pace of deregulation efforts and the availability of other competitive alternatives; changes in accounting principles; terrorist activities; and other uncertainties. The outcome of negotiations and discussions the Company may hold with other parties from time to time regarding utility and energy-related investments and strategic transactions that are both recurring and non-recurring may also affect future performance. For a further discussion of the risks and uncertainties, see the Company's most recent annual report on Form 10-K, and other reports filed with the Securities and Exchange Commission.

Please see the following comparative statements for additional information. Also included are reconciliations of the Company's and regulated utility segment's earnings per share reported in accordance with GAAP to earnings per share from normal operations.

WGL Holdings, Inc. Consolidated Statements of Income For Periods Ended December 31, 2005 and 2004 (Unaudited) Three Months Ended Twelve Months Ended (In thousands, except per December 31, December 31, share data) 2005 2004 2005 2004 UTILITY OPERATIONS Operating Revenues $601,337 $408,951 $1,571,776 $1,301,585 Less: Cost of gas 406,586 228,611 950,873 698,801 Revenue taxes 16,693 17,095 57,768 53,405 Utility Net Revenues 178,058 163,245 563,135 549,379 Other Operating Expenses Operation and maintenance 60,411 55,998 241,745 227,541 Depreciation and amortization 22,960 22,196 90,623 88,501 General taxes 10,039 9,057 41,460 35,730 Income taxes 28,088 24,037 53,233 57,742 Utility Other Operating Expenses 121,498 111,288 427,061 409,514 Utility Operating Income 56,560 51,957 136,074 139,865 NON-UTILITY OPERATIONS Operating Revenues Retail energy-marketing 296,785 205,288 864,543 792,889 Heating, ventilating and air conditioning (HVAC) 11,074 8,859 34,656 31,448 Other non-utility activities 130 294 1,261 1,784 Non-Utility Operating Revenues 307,989 214,441 900,460 826,121 Other Operating Expenses Operating expenses 308,679 208,667 875,725 823,547 Income tax expense (benefit) (545) 2,239 10,676 1,890 Non-Utility Operating Expenses 308,134 210,906 886,401 825,437 Non-Utility Operating Income (Loss) (145) 3,535 14,059 684 TOTAL OPERATING INCOME 56,415 55,492 150,133 140,549 Other Income (Expenses) - Net Income (expenses) - net 199 (1,645) (126) 4,368 Income tax benefit 84 646 462 214 Other Income (Expenses) - Net 283 (999) 336 4,582 INCOME BEFORE INTEREST EXPENSE 56,698 54,493 150,469 145,131 Interest expense 11,982 11,031 44,402 43,585 Dividends on Washington Gas preferred stock 330 330 1,320 1,320 NET INCOME (APPLICABLE TO COMMON STOCK) $ 44,386 $ 43,132 $ 104,747 $ 100,226 AVERAGE COMMON SHARES OUTSTANDING Basic 48,741 48,669 48,708 48,653 Diluted 48,894 48,936 48,999 48,879 EARNINGS PER AVERAGE COMMON SHARE Basic $ 0.91 $ 0.89 $ 2.15 $ 2.06 Diluted $ 0.91 $ 0.88 $ 2.14 $ 2.05 Net Income Applicable To Common Stock -- By Segment ($000): Regulated utility $ 44,770 $ 39,803 $ 92,459 $ 94,075 Non-utility operations: Retail energy-marketing 423 4,108 18,609 7,578 Commercial HVAC (431) (432) (3,892) (5,330) Total major non-utility (8) 3,676 14,717 2,248 Other, principally non- utility activities (376) (347) (2,429) 3,903 Total non-utility (384) 3,329 12,288 6,151 NET INCOME $ 44,386 $ 43,132 $ 104,747 $ 100,226 WGL Holdings, Inc. Consolidated Balance Sheets December 31, 2005 and 2004 (Unaudited) December 31, (In thousands) 2005 2004 ASSETS Property, Plant and Equipment At original cost $ 2,809,551 $ 2,690,018 Accumulated depreciation and amortization (829,272) (767,771) Net property, plant and equipment 1,980,279 1,922,247 Current Assets Cash and cash equivalents 25,818 10,725 Accounts receivable, net 561,475 374,120 Storage gas--at cost (first-in, first-out) 286,116 198,673 Other 88,942 47,659 Total current assets 962,351 631,177 Deferred Charges and Other Assets 288,971 216,487 Total Assets $ 3,231,601 $ 2,769,911 CAPITALIZATION AND LIABILITIES Capitalization Common shareholders' equity $ 921,759 $ 881,344 Washington Gas Light Company preferred stock 28,173 28,173 Long-term debt 560,414 573,721 Total capitalization 1,510,346 1,483,238 Current Liabilities Notes payable and current maturities of long-term debt 385,805 221,181 Accounts payable and other accrued liabilities 351,407 236,516 Other 255,105 169,497 Total current liabilities 992,317 627,194 Deferred Credits 728,938 659,479 Total Capitalization and Liabilities $ 3,231,601 $ 2,769,911 WGL Holdings, Inc. Consolidated Financial and Operating Statistics For Periods Ended December 31, 2005 and 2004 (Unaudited) COMMON STOCK DATA December 31, 2005 52 Week Closing Price Price Range $ 30.06 $34.79 - $28.85 Earnings Per Share Twelve Months Ended Annualized December 31, P/E Dividend Yield 2005 2004 Basic $2.15 $2.06 14.0 $1.33 4.4% Diluted $2.14 $2.05 FINANCIAL STATISTICS Twelve Months Ended December 31, December 31, 2005 2004 Return on Average Common Equity 11.6 % 11.6 % Total Interest Coverage (times) 4.7 4.6 Book Value Per Share (end of period) $18.91 $18.11 Common Shares Outstanding-end of period (thousands) 48,754 48,674 UTILITY GAS STATISTICS Three Months Ended Twelve Months Ended December 31, December 31, (In thousands) 2005 2004 2005 2004 Operating Revenues Gas Sold and Delivered Residential - Firm $398,864 $252,237 $1,019,932 $ 807,559 Commercial and Industrial - Firm 133,669 90,634 324,115 263,100 Commercial and Industrial - Interruptible 2,330 2,342 8,812 7,127 Electric Generation 408 275 1,233 1,100 535,271 345,488 1,354,092 1,078,886 Gas Delivered for Others Firm 41,906 43,357 139,323 148,536 Interruptible 10,952 10,020 38,049 33,754 Electric Generation 91 54 565 253 52,949 53,431 177,937 182,543 588,220 398,919 1,532,029 1,261,429 Other 13,117 10,032 39,747 40,156 Total $601,337 $408,951 $1,571,776 $1,301,585 Three Months Ended Twelve Months Ended December 31, December 31, (In thousands of therms) 2005 2004 2005 2004 Gas Sales and Deliveries Gas Sold and Delivered Residential - Firm 216,830 183,626 658,455 615,967 Commercial and Industrial - Firm 77,554 73,188 226,953 230,339 Commercial and Industrial - Interruptible 1,676 2,156 7,329 6,760 296,060 258,970 892,737 853,066 Gas Delivered for Others Firm 135,263 137,719 431,643 456,844 Interruptible 72,794 77,498 275,220 264,087 Electric Generation 15,920 9,307 80,487 39,791 223,977 224,524 787,350 760,722 Total 520,037 483,494 1,680,087 1,613,788 WASHINGTON GAS ENERGY SERVICES Natural Gas Sales Therm Sales (thousands of therms) 223,475 204,364 732,787 713,171 Number of Customers (end of period) 144,300 147,100 144,300 147,100 Electricity Sales Electricity Sales (thousands of kWhs) 492,371 776,828 2,396,012 5,721,639 Number of Accounts (end of period) 35,100 41,600 35,100 41,600 UTILITY GAS PURCHASED EXPENSE (excluding off system) 136.86 c 88.57 c 106.26 c 80.97 c HEATING DEGREE DAYS Actual 1,499 1,389 4,133 4,025 Normal 1,362 1,359 3,801 3,789 Percent Colder than Normal 10.1 % 2.2 % 8.7 % 6.2 % Number of Active Customer Meters (end of period) 1,029,430 1,006,227 1,029,430 1,006,227 WGL HOLDINGS, INC. (CONSOLIDATED) RECONCILIATION OF REPORTED GAAP EARNINGS PER SHARE AND ADJUSTED EARNINGS PER SHARE (Unaudited) February 7, 2006

The reconciliation below is provided to demonstrate management's utilization of historical earnings per share, as derived in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), and adjusted earnings per share from normal operations, a non-GAAP measure. This reconciliation is provided to more clearly identify the results from normal operations for WGL Holdings, Inc. and its consolidated subsidiaries (the Company), and identify certain unique transactions that are not expected to repeat. This information should assist investors and analysts to track progress towards achieving the Company's five-year financial objectives, which are based on normal weather and uninfluenced by single, one- time, non-repeating transactions.

Utilization of normal weather is an industry standard, and it is the practice of the Company to provide estimates and guidance on the basis of normal weather. Actual performance and results may vary from normal weather projections and the Company consistently identifies and explains this variation to assist users in the analysis of actual results versus the guidance. There may be other uses for the data, and the Company does not imply that this is the only use or the best use of this data for purposes of this analysis.

WGL Holdings, Inc. (Consolidated) Reconciliation of Reported GAAP Earnings Per Share to Adjusted Earnings Per Share from Normal Operations Fiscal Year 2006 By Quarter (1) Fiscal Year 2006 Results Quarter Ended Year- To- Dec. 31 Mar. 31 Jun. 30 Sept. 30 Date GAAP diluted earnings per share $ 0.91 $ 0.91 Adjustments for: Colder-than-normal weather (0.07) (0.07) Adjusted diluted earnings per share from normal operations $ 0.84 $ 0.84 WGL Holdings, Inc. (Consolidated) Reconciliation of Reported GAAP Earnings Per Share to Adjusted Earnings Per Share from Normal Operations Fiscal Year 2005 By Quarter (1) Fiscal Year 2005 Results Quarter Ended Year- To- Dec. 31 Mar. 31 Jun. 30 Sept. 30 Date GAAP diluted earnings per share $ 0.88 $ 0.88 Adjustments - - Adjusted diluted earnings per share from normal operations $ 0.88 $ 0.88 (1) Quarterly earnings (loss) per share may not sum to year-to-date or annual earnings (loss) per share as quarterly calculations are based on weighted average common shares outstanding which may vary for each of those periods. WGL HOLDINGS, INC. (REGULATED UTILITY SEGMENT) RECONCILIATION OF REPORTED GAAP EARNINGS PER SHARE AND ADJUSTED EARNINGS PER SHARE (Unaudited) February 7, 2006

The reconciliation below is provided to demonstrate management's utilization of historical earnings per share, as derived in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), and adjusted earnings per share from normal operations, a non-GAAP measure. This reconciliation is provided to more clearly identify the results from normal operations for the Company's regulated utility segment, and identify certain unique transactions that are not expected to repeat. This information should assist investors and analysts to track progress towards achieving the Company's five-year financial objectives, which are based on normal weather and uninfluenced by single, one-time, non-repeating transactions.

Utilization of normal weather is an industry standard, and it is the practice of the Company to provide estimates and guidance on the basis of normal weather. Actual performance and results may vary from normal weather projections, and the Company consistently identifies and explains this variation to assist users in the analysis of actual results versus the guidance. There may be other uses for the data, and the Company does not imply that this is the only use or the best use of this data for purposes of this analysis.

WGL Holdings, Inc. (Regulated Utility Segment) Reconciliation of Reported GAAP Earnings Per Share to Adjusted Earnings Per Share from Normal Operations Fiscal Year 2006 By Quarter (1) Fiscal Year 2006 Results Quarter Ended Year- To- Dec. 31 Mar. 31 Jun. 30 Sept. 30 Date GAAP diluted earnings per share $ 0.92 $ 0.92 Adjustments for: Colder-than-normal weather (0.07) (0.07) Adjusted diluted earnings per share from normal operations $ 0.85 $ 0.85 WGL Holdings, Inc. (Regulated Utility Segment) Reconciliation of Reported GAAP Earnings Per Share to Adjusted Earnings Per Share from Normal Operations Fiscal Year 2005 By Quarter (1) Fiscal Year 2005 Results Quarter Ended Year- To- Dec. 31 Mar. 31 Jun. 30 Sept. 30 Date GAAP diluted earnings per share $ 0.81 $ 0.81 Adjustments - - Adjusted diluted earnings per share from normal operations $ 0.81 $ 0.81 (1) Quarterly earnings per share may not sum to year-to-date or annual earnings per share as quarterly calculations are based on weighted average common shares outstanding which may vary for each of those periods.

First Call Analyst: FCMN Contact: