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ITC Holdings Revenue, Earnings Rise; Earnings Guidance Narrowed

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NOVI (WWJ) – The Novi power grid owner ITC Holdings Corp. (NYSE: ITC) Thursday reported net income of $59 million or $1.12 a share in the third quarter ended Sept. 30, up from $51.2 million or 98 cents a share in the third quarter of 2012.

Revenue was $238.8 million, up from $214.8 million a year earlier.

For the nine months, net income was $156.6 million or $2.96 a share, up from $139.6 million or $2.68 a share in the first nine months of 2012.

The company also reported operating earnings of $66.5 million or $1.26 a share in the quarter, up from $56.1 million or $1.07 a share a year earlier. For the nine months, operating earnings were $188.6 million or $3.57 a share, up from $159.5 million or $3.05 a share in the first nine months of 2012.

ITC invested $648.9 million in capital projects at its operating companies during the first nine months of 2013, including $170.7 million at ITCTransmission, $127.8 million at Michigan Electric Transmission Co., $245.8 million at ITC Midwest and $104.6 million at ITC Great Plains.

“Thus far, 2013 has proven to be a demanding year for us as we seek to continue to execute on our stand-alone initiatives while also advancing the Entergy transaction towards a successful close,” said Joseph L. Welch, chairman, president and CEO of ITC. “I am very pleased with how the organization has risen to meet this challenge and believe that we are well-positioned to meet our operational and financial objectives for the year. We are also continuing to navigate the complex regulatory approval process for the Entergy transaction and hope to make meaningful progress with these efforts by year-end.”

For 2013, ITC is updating its full year operating earnings per share guidance to a range of $4.84 to $4.92, from the previous range of $4.80 to $5. Capital investment guidance for 2013 has also been updated to a range of $810 million to $860 million, from the prior range of $760 million to $860 million. The updated guidance range includes capital forecasts at our regulated operating subsidiaries of $215 million to $230 million for ITCTransmission, $170 million to $180 million for METC, $285 million to $300 million for ITC Midwest and $140 million to $150 million for ITC Great Plains.

ITC said the third quarter revenue increase was primarily due to higher revenue requirements attributable to higher rate base at our regulated operating subsidiaries. In addition, regional cost sharing revenues increased due to additional capital projects being placed in-service that have been identified as eligible for regional cost sharing.

Operation and maintenance expenses of $29.7 million decreased by $1.8 million compared to the same period in 2012. This decrease was primarily due to lower vegetation management requirements and lower NERC compliance activities associated with surveying overhead transmission lines.

General and administrative expenses of $22.9 million were $2.4 million higher compared to the same period in 2012. The amounts for the third quarter 2013 and 2012 exclude approximately $9.0 million and $7.4 million, respectively, associated with adjustments to operating earnings relating to Entergy transaction costs noted previously. This increase was primarily due to higher general business expenses, including an increase in information technology expenses and higher labor related expenses associated with personnel increases. These increases were partially offset by lower outside legal fees.

Depreciation and amortization expenses of $29.8 million increased by $2.3 million compared to the same period in 2012 due to a higher depreciable base resulting from property, plant and equipment additions.

Taxes other than income taxes of $16.7 million were $2 million higher than the same period in 2012. This increase was due to 2012 capital additions at regulated operating subsidiaries, which are included in the tax base for 2013 personal property taxes.

Interest expense of $43 million increased by $4.3 million compared to the same period in 2012. The amounts for the third quarter 2013 and 2012 exclude approximately $1.1 million and $200,000 million, respectively, associated with adjustments to operating earnings noted previously. This increase was due primarily to higher borrowing levels to finance capital investments.

The effective income tax rate for the third quarter of 2013 was 35.9 percent compared to 35.7 percent for the same period last year. The amounts for the third quarter 2013 and 2012 exclude approximately $2.6 million and $2.7 million, respectively, associated with adjustments to operating earnings noted previously.

For the year to date, the revenue was primarily due to higher network revenues attributable to higher rate base at all of our regulated operating subsidiaries. In addition, the increase resulted from higher regional cost sharing revenues primarily due to additional capital projects being placed into service that have been identified as eligible for regional cost sharing.

Operating and maintenance expenses of $83.9 million were $6.4 million lower for the nine months ended Sept. 30 compared to the same period in 2012. This decrease was primarily due to lower vegetation management requirements and lower NERC compliance activities associated with surveying overhead transmission lines.

General and administrative expenses of $68.9 million were $7.5 million higher compared to the same period in 2012. The amounts for 2013 and 2012 exclude approximately $41.9 million and $17.4 million, respectively, associated with adjustments to operating earnings relating to Entergy transaction costs. This increase was due to higher labor related expenses associated with personnel increases and higher professional services associated with legal, advisory and financial service fees.

Depreciation and amortization expenses of $87.6 million increased by $9.1 million for the nine months ended Sept. 30, compared to the same period in 2012. This increase was primarily due to a higher depreciable base resulting from property, plant and equipment additions.

Taxes other than income taxes of $49.5 million were $5.3 million higher compared to the same period in 2012. This increase was due to 2012 capital additions at regulated operating subsidiaries, which are included in the tax base for 2013 personal property taxes.

Interest expense of $121.8 million increased by $6.3 million compared to the same period in 2012. The amounts for year-to-date 2013 and 2012 exclude approximately $1.7 million and $1.4 million, respectively, associated with adjustments to operating earnings noted previously. This increase was due primarily to higher borrowing levels to finance capital investments.

The effective income tax rate for the nine months ended Sept. 30 was 36.2 percent compared to 35.4 percent for the same period in 2012. The amounts for year-to-date 2013 and 2012 exclude approximately $11.6 million and $10.8 million, respectively, associated with adjustments to operating earnings noted previously.

To listen to a conference call discussing these results, call (855) 859-2056 in the United States or (404) 537-3406 elsewhere, using pass code 82749220. The webcast will also be archived at http://www.itc-holdings.com.

ITC’s regulated operating subsidiaries include ITCTransmission, Michigan Electric Transmission Co., ITC Midwest and ITC Great Plains. Through these subsidiaries, ITC owns and operates high-voltage transmission lines and towers in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma, serving a combined peak load exceeding 26,000 megawatts along 15,000 circuit miles of transmission line.

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