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For Immediate Release

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PEPCO Announces Dividend and Reports 1998 Earnings

FOR IMMEDIATE RELEASE

Jan. 28, 1999

Dividend Action

Pepco's Board of Directors today declared a quarterly dividend on common stock of 41.5 cents per share payable March 31, 1999, to shareholders of record on March 10, 1999. Dividends on preferred stock were declared payable March 1, 1999, to shareholders of record on Feb. 8, 1999.

Results of Operations

The Company reported consolidated earnings per share of $1.76 for the 12 months ended Dec. 31, 1998, compared with earnings per share of $1.39 for the same period in 1997. Consolidated earnings per share for the three months ended Dec. 31, 1998, reflect a loss of 2 cents per share, compared with a loss of 27 cents for the same period in 1997. Consolidated 1997 earnings per share for both the three- and 12-month periods include the effects of a one-time write-off of 28 cents per share for costs related to the proposed merger with Baltimore Gas and Electric Company that was canceled in December 1997.

Consolidated earnings per share for the 12-month period include a 4 cent per share reduction associated with the Company's targeted employee severance plan and a 6 cent per share reduction for premiums paid in connection with the June 1, 1998, redemption of 2.3 million shares of serial preferred stock. The redemption was funded through issuance of Trust Originated Preferred Securities that will result in an annual after-tax cost reduction of approximately $3 million (3 cents per share).

Utility Results

Utility results for the 12 months ended Dec. 31, 1998, were affected by a 2.3 percent increase in kilowatt-hour sales compared with the corresponding period in 1997. Although temperatures in the second and third quarters of 1998, as measured in cooling degree hours, were 18 percent hotter than the corresponding periods in 1997, they were still 7 percent cooler than the 20-year average. The temperature in the fourth quarter of 1998, as measured in heating degree days, was 20 percent milder than the corresponding 1997 period and 14 percent milder than the 20-year average. The fourth quarter of 1998 also includes a reduction of 1 cent per share associated with the Company's targeted employee severance plan.

PCI Results

Consolidated earnings for the 12 months ended Dec. 31, 1998, reflect a contribution of 13 cents per share from Pepco's wholly owned, nonutility subsidiary, Potomac Capital Investment Corporation (PCI). In the corresponding 1997 period, PCI contributed 14 cents per share. For the three months ended Dec. 31, 1998, PCI's earnings were down 2 cents per share compared with the same period in 1997. Most of the difference was related to the timing of transactions.

1999 Annual Meeting

In other action, Pepco's Board of Directors set 10 a.m., Wednesday, April 28, 1999, as the time and day for the 1999 Annual Meeting of Shareholders to be held at The International Trade Building (Ronald Reagan Building), Atrium Ballroom, 1300 Pennsylvania Ave., N.W., Washington, D.C.

Results from operations were:

Three Months Ended

Dec. 31

Twelve Months Ended

Dec. 31

1998
1997
1998
1997
Basic Earnings (Loss) Per Share
Utility Operations
$ -
$ -
$ 1.73
$1.53
Preferred Stock Redemption Premium
-
-
(0.06)
-
Severence Costs
(0.01)
-
(0.04)
-
Write-off of Merger Costs
-
(0.28)
-
(0.28)
 
--------
-------
-------
-------
Net Utility Operations
(0.01)
(0.28)
1.63
1.25
Nonutility Subsidiary
(0.01)
0.01
0.13
0.14
Consolidated
($0.02)
($0.27)
$1.76
$1.39
 
Diluted Earnings (Loss) Per Share:
Consolidated
($0.02)
($0.27)
$1.73
$1.38
 
Average Commom Shares Outstanding
Basic
118,527,000
118,501,000
118,523,000
118,500,000
Diluted
118,527,000
118,501,000
124,244,000
124,291,000
 
Operating Revenue
$366,672,000
$378,570,000
$1,886,080,000
$1,810,829,000
 

Total Revenue

$404,244,000
$390,437,000
$2,063,928,000
$1,863,510,000
 
Operating Income
$36,669,000
$36,041,000
$354,282,000
$325,383,000
 
Net Earnings (Loss) from
Nonutility Subsidiary
($1,109,000)
$1,300,000
$15,130,000
$17,081,000
 

Net Income (Loss)

($254,000)
($27,261,000)
$226,347,000
$181,830,000
 
Earnings (Loss) for Common Stock
($2,212,000)
($31,401,000)
$208,267,000
$165,251,000

Point of Contact:
Camille Smith

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