ITC Holdings in Novi Reports Year-end 2010 net income of $145.7M, or $2.84 per diluted common share

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NOVI, Mich., February 23, 2011 — ITC Holdings Corp. (NYSE: ITC) today announced its fourth quarter and year-end results for the period ended December 31, 2010.  Net income for the quarter was $36.8 million, or $0.71 per diluted common share, compared to $33.6 million, or $0.66 per diluted common share for the fourth quarter of 2009.  Net income for the year ended December 31, 2010 was $145.7 million, or $2.84 per diluted common share, compared to $130.9 million, or $2.58 per diluted common share for the same period last year.
 
For the year ended December 31, 2010, ITC invested $454.6 million in capital projects at its operating companies, including $67.1 million, $137.7 million, $232.5 million and $17.3 million at ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.
 
“I am very pleased to conclude another successful quarter and year with solid operational and financial performance,” said Joseph L. Welch, chairman, president and CEO of ITC. “We made substantial progress during 2010 in furthering our strategy and delivering on the commitments to both our customers and shareholders outlined in our five-year plan.  Perhaps more importantly, we also made great strides in better positioning the company for continued successful execution of our strategic plan, which we expect will provide for long-term, sustainable growth in our business.” 
 
Reported net income for the fourth quarter of 2010 increased $3.2 million, or $0.05 per diluted common share, compared to the same period in 2009. For the year ended December 31, 2010, net income increased $14.8 million, or $0.26 per diluted common share, compared to the same period in 2009.  Results for the year-end 2009 period include $0.12 per diluted common share associated with the recognition of regulatory assets at ITC Great Plains; 2010 results do not include the recognition of any such regulatory assets.  In addition to this item, other key drivers that contributed to year-over-year variances include:
 
·   Fourth quarter and full year net income results increased due to higher rate base at all operating companies.
·   An increase in net income for the quarter and year-end period due to a lower consolidated effective income tax rate.
·   Increases in net income for the fourth quarter were partially offset by higher non-recoverable expenses.
·   Increases in net income for the fourth quarter and year-end periods were partially offset by higher interest expense resulting from our financing activities for ITC Holdings which were completed in late 2009.
 
EPS and Capital Expenditure Guidance
For 2011, ITC is reaffirming its full year earnings per share guidance of $3.20 to $3.30.  Capital investment guidance for 2011 is also being maintained at $560 to $640 million, which includes $60 to $75 million, $155 to $170 million, $225 to $250 million and $120 to $145 million for ITCTransmission, METC, ITC Midwest and ITC Great Plains, respectively.
 
Fourth Quarter 2010 Financial Results Detail
ITC’s operating revenues for the fourth quarter increased to $189.1 million from $156.5 million for the same period last year.  This increase was primarily due to higher network revenues attributable to higher rate base at our regulated operating subsidiaries and higher recoverable expenses associated with higher operation and maintenance expenses.  In addition, the increase resulted from higher regional cost sharing revenues in 2010, due to additional capital projects that have been identified by the Midwest ISO (MISO) and the Southwest Power Pool (SPP) as eligible for regional cost sharing, and due to higher point-to-point revenues resulting from an increase in scheduled transmission flow over our transmission systems.  Other revenues also increased largely due to revenue recognized at METC for utilization of its jointly-owned lines under its transmission ownership and operating agreements.
 
Operation and maintenance (O&M) expenses of $40.6 million were $12.6 million higher during the fourth quarter of 2010 compared to the same period in 2009.  This increase was primarily a result of higher vegetation management expenses, higher tower painting expenses, higher site maintenance expenses and higher equipment and structure maintenance. These increases were partially offset by lower vehicle and equipment expenses. The lower O&M expenses in 2009 were due in part to our expense mitigation efforts in 2009.
 
General and administrative (G&A) expenses of $24.7 million were $5.1 million higher during the fourth quarter of 2010 compared to the same period in 2009.  This increase was due in part to personnel additions, and higher professional advisory and consulting services. These increases were partially offset by lower general business expenses. G&A expenses for the fourth quarter of 2010 include a one-time, non-recoverable charge of $2.3 million associated with the organizational changes the company implemented in January 2011.
 
Depreciation and amortization expenses of $21.4 million increased by $7.8 million during the fourth quarter of 2010 compared to the same period in 2009.  This increase was primarily due to a higher depreciable asset base resulting from property, plant and equipment additions.  This increase was partially offset by lower depreciation expense at ITC Midwest due primarily to the Federal Energy Regulatory Commission (FERC) approval of a depreciation study for ITC Midwest which revised the depreciation rates used to calculate depreciation expense for the entire 2010 calendar year.
 
Interest expense of $36.1 million for the fourth quarter of 2010 increased by $2.6 million compared to the same period in 2009, due to higher borrowing levels to finance capital expenditures.  This increase was partially offset by lower interest expense on our revolving credit agreements as a result of lower interest rates.
 
The effective income tax rate for the fourth quarter of 2010 was 34.1 percent compared to 36.4 percent the same period last year.
 
Year-End 2010 Financial Results Detail
ITC’s operating revenues for the year ended December 31, 2010 increased to $696.8 million from $621.0 million for the same period last year.  This increase was primarily due to higher rate base at our regulated operating subsidiaries and higher recoverable expenses due primarily to higher operation and maintenance expenses.  In addition, the increase resulted from higher regional cost sharing revenues in 2010, due to additional capital projects that have been identified by MISO and SPP as eligible for regional cost sharing, and higher point-to-point revenues resulting from an increase in scheduled transmission flow over our transmission systems.  Other revenues also increased largely due to revenue recognized at METC for utilization of its jointly-owned lines under its transmission ownership and operating agreements.
 
O&M expenses of $126.5 million were $30.8 million higher for the year ended December 31, 2010 compared to the same period in 2009.  This increase was primarily a result of higher vegetation management expenses, higher equipment and structure maintenance expenses, higher tower painting expenses and higher substation facility maintenance expenses.  The lower O&M expenses in 2009 were due in part to the expense mitigation efforts in 2009.
 
G&A expenses of $78.1 million for the year ended December 31, 2010 were $8.9 million higher compared to the same period in 2009. This increase was largely a result of the reduction of expenses in 2009 in connection with the recognition of regulatory assets at ITC Great Plains which did not reoccur in 2010. In addition, G&A expenses increased due in part to personnel additions, higher stock compensation expenses and higher expense associated with development bonuses.  These increases were offset by lower professional advisory and consulting services as well as lower general business expenses.  G&A expenses for the year ended December 31, 2010 include a one-time, non-recoverable charge of $2.3 million associated with the organizational changes the company implemented in January 2011.
 
Depreciation and amortization expenses of $87.0 million increased by $1.0 million during the year ended December 31, 2010, compared to the same period in 2009.  This increase was due to a higher depreciable rate base resulting from property, plant and equipment additions.  This increase was partially offset by lower depreciation expense at ITC Midwest due primarily to the FERC approval of a depreciation study for ITC Midwest which revised the depreciation rates used to calculate depreciation expense for the entire 2010 calendar year.
 
Interest expense of $142.6 million increased $12.3 million in 2010, due to higher borrowing levels to finance capital expenditures.  This increase was partially offset by lower interest expense on our revolving credit agreements as a result of lower interest rates.
 
The effective income tax rate for the year ended December 31, 2010 was 36.1 percent compared to 37.2 percent in 2009.

About ITC Holdings Corp.
ITC Holdings Corp. (NYSE: ITC) invests in the electricity transmission grid to improve electric reliability, expand access to markets, lower the overall cost of delivered energy and allow new generating resources to interconnect to its transmission systems. The largest independent electricity transmission company in the country, ITC currently operates high-voltage transmission systems and assets in Michigan’s Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri and Kansas, serving a combined peak load in excess of 25,000 megawatts through its regulated operating subsidiaries, ITCTransmission, Michigan Electric Transmission Company (METC), ITC Midwest and ITC Great Plains.  ITC also focuses on further expansion in areas where significant transmission system improvements are needed through ITC Grid Development and its subsidiaries.  For more information, please visit: http://www.itc-holdings.com. (itc-ITC)
 
Safe Harbor Statement
This press release contains certain statements that describe our management’s beliefs concerning future business conditions, plans and prospects, growth opportunities and the outlook for our business and the electricity transmission industry based upon information currently available. Such statements are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Wherever possible, we have identified these forward-looking statements by words such as “will,” “may,” “anticipates,” “believes,” “intends,” “estimates,” “expects,” “projects” and similar phrases. These forward-looking statements are based upon assumptions our management believes are reasonable.  Such forward looking statements are subject to risks and uncertainties which could cause our actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including, among others, the risks and uncertainties disclosed in our annual report on Form 10-K and our quarterly reports on Form 10-Q filed with the Securities and Exchange Commission from time to time.
 
Because our forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different and any or all of our forward-looking statements may turn out to be wrong.  Forward-looking statements speak only as of the date made and can be affected by assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this release and in our annual and quarterly reports will be important in determining future results. Consequently, we cannot assure you that our expectations or forecasts expressed in such forward-looking statements will be achieved. Actual future results may vary materially. Except as required by law, we undertake no obligation to publicly update any of our forward-looking or other statements, whether as a result of new information, future events, or otherwise.

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