Creating High Performance June 2, 2005 A Presentation to the Energy Association of Pennsylvania Thom

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Creating High PerformanceJune 2, 2005A
Presentation to the Energy Association of
PennsylvaniaThomas R. Gardner,Vice President,
Controller and Chief Accounting Officer
Allegheny Energy
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Agenda

• Background and Recent History of Allegheny
  Energy, Inc.
• High Performance Organization
• Finances Support to Achieve High Performance

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Allegheny Energy
AlleghenyEnergy
Generation Marketing 46.2 million MWH
generated (2004)

• Delivery Services
• 47.2 million MWH sold (2004)

Long-term contracts
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Major Priorities First Year (2003)

• Increase liquidity
• Decrease risk and volatility of earnings, cash
  flow
• Re-establish financial reporting
• Re-focus on core business
• Rebuild senior management team

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The Road to Recovery
Stock Performance (100 Invested on July 1, 2003)
1st Qtr. Earnings
Closed OVEC, Lincoln sales
Completed tender offer
Announced Mountaineer sale
Completed convertible financing
Brought reporting up to date
Refinanced bank debt
Exited Western energy markets
PA rate proposal approved
Completed equity financing
Achieved 404 Compliance
5/13/2005
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Enhance Operating Performance
VISION To Be a Top Performing Utility by
Year-End 2007
Operational Excellence
Financial Performance
Customer Satisfaction
Environmental Stewardship
Shareholder Value
Engaged Employees
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High Performance Organization

• YEAR-END 2007 TARGETS
• Operational
• Plant availability 91 (1st quartile)
• Service unavailability 172 minutes/year
• Financial
• Credit rating Investment grade
• OM expense Reduce to 700-750M

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Improve Environmental Performance

• Complying with environmental laws
• Taking action to further reduce emissions

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• Controllers Vision

• Controllership will provide accurate and
  meaningful information to our customers
  (business, regulatory, internal) on a timely
  basis, with a continual focus on developing and
  sustaining best in class people, processes and
  technology.
• Our Guiding Principles

Transparency
Accuracy
Data provided represents the true picture of
performance
Management provides a line-of-sight view to
business drivers
Earnings
Information is provided rapidly following period
completion
Enhanced tracking of actual performance with
expectations
Timeliness
Predictability
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2003 - Data Rich, Information Poor
Web Portal (Cognos Upfront)
User Interface
Not Monitored for Accuracy
No Transparency
nVision Reports
Impromptu Reports
Reporting Layer
OLAP / Reporting (PowerPlay)
Not an Open Environment
Not an Open Environment
Owned But Not Used
Budgeting / Planning (Pillar)
Consolidation (Enterprise)
OLAP (Essbase)
Analytic Layer
Data Warehouse
EPM (PeopleSoft)
Other Legacy DataWarehouse
General Ledger (PeopleSoft)
Data Sources
Proj (PS)
Highly Customized
Automated/Manual Interfaces
IS Com
JPB
Cash
Fuel
MMS
Plat.
ASI
TPT
Primary Feeder Systems
Data Rich
PwrPlnt
PBS
P/R
CIS
Solo-mon
WMS
ROW VC
PTS
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Feeder SystemComplexity- Example
The data flow design driven by the Work
Management feeder system (WMS) is comparable to
the level of complexity the exists across all
feeder systems
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2005 Resurrecting Information Assets
Web Portal
Reporting/ Presentation Layers
Business Intelligence Layer
OneView (ArcPlans DynaSite) Standard Reporting
DynaViewer Ad Hoc
Security
Fuels
Financials
Time Collect
Safety
Analytic Layer (Essbase, SQL, Oracle)
Customer
Production
Plant Availa-bility
Projects
Purchasing Card
Budget
In Development
Vendor Fact
Transaction Layer
Power Plant (Fixed Assets)
Sub-ledgers (AP, Payroll, AR, Billing)
PeopleSoft (G/L)
Operational (Fuels, Availability,Safety,
Marketing)
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Enabling High Performance
Finance Leading the Way

• Improved Business Support Capability
• Improved Financial and Operational Controls
• Improve Analytical Capability

• Unlock Corporate Data Stores
• Improve Timeliness of Information
• Employee Development
• Achieve SOX Compliance
• Transactional Support and Modeling

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OneView Enabling Transparency
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OneView Enabling Transparency (continued)
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OneView Enabling Transparency (continued)
SAMPLE DATA
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OneView Enabling Transparency (continued)
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Future OneView Applications
Moving to Operational Reporting
SAMPLE DATA
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Improving Timeliness Reducing Closing and
Reporting Cycles
All tasks are due by 500 p.m. unless otherwise
noted
Closing Schedule

• Reduce Closing Timeline via Structure and
  Accountability
• Automate Creation and Delivery of Management
  Information

SAMPLE DATA
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Improve Employee Skills
Controllers employee development was made a
priority beginning in 2004 via policy and new
programs
Controllers Development Policy
Training Programs
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Transforming the Internal Control Environment
September 2003 Independent Auditors Report 150
Reportable Internal Control Weaknesses
February 2004 Company initiates SOX 404 effort
investing over 120,000 hours to document, test
and remediate internal controls
March 2005 PwC issues clean audit opinion on
Companys internal controls
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Transactional Research and Modeling
Ideas/Strategy
Accounting Policy Research and Setting
Hedge Fuel Exposure!
Install Scrubbers on Fort Martin!
Analyze
Model
Scenario 1
Scenario 2
Scenario 3
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Summary

• To drive the achievement of High Performance
• The Controllers house must be in order
• Accounting must capitalize on its role as the
  primary corporate scorekeeper to deliver
  meaningful business insights
• Accounting must be fully engaged in the
  development and enablement of business strategies