El Paso Electric Company (NYSE:EE):
Overview
- For the third quarter of 2017, El Paso
Electric Company ("EE" or the "Company") reported net income of
$59.7 million, or $1.47 basic and diluted earnings per share. In
the third quarter of 2016, EE reported net income of $74.6 million,
or $1.84 basic and diluted earnings per share, including
approximately $12.6 million, or $0.31 per share, from the financial
impacts of the 2015 Texas rate case relating back to January 12,
2016 through June 30, 2016.
- For the nine months ended September 30,
2017, EE reported net income of $91.8 million, or $2.26 basic and
diluted earnings per share. Net income for the nine months ended
September 30, 2016 was $91.1 million, or $2.25 basic and diluted
earnings per share.
"As we anticipated, earnings were higher in the third quarter of
2016 compared to third quarter of 2017 because we recognized the
financial impacts of the 2015 Texas rate case relating back to the
period January 12, 2016 through June 30, 2016, in the third quarter
of last year," said Mary Kipp, President and Chief Executive
Officer at El Paso Electric Company. "We are pleased to have
reached a settlement in principle in our 2017 Texas rate case with
all intervenors. We expect to have a final order from the Public
Utility Commission of Texas during the fourth quarter of this year.
At that time, we anticipate recognizing the impacts of the rate
case settlement, including revenues relating back to July 18, 2017.
As we continue to see an increase in customers and electricity
demand, we remain committed to meeting the growing energy needs of
our region in a safe, smart, environmentally responsible and
cost-effective manner."
Earnings Summary
The table and explanations below present the major factors
affecting third quarter and nine months ended September 30, 2017
net income relative to third quarter and nine months ended
September 30, 2016 net income, respectively, (in thousands except
per share data):
Quarter Ended Nine Months
Ended
Pre-TaxEffect
After-TaxEffect
Basic EPS Pre-TaxEffect
After-TaxEffect Basic EPS
September 30, 2016 $ 74,636 $ 1.84 $ 91,112 $ 2.25 Changes in:
Retail non-fuel base revenues (19,210 ) (12,486 ) (0.31 ) 4,516
2,935 0.07 Depreciation and amortization (6,613 ) (4,299 ) (0.10 )
(3,897 ) (2,533 ) (0.06 ) Other revenues (3,187 ) (2,072 ) (0.05 )
(1,677 ) (1,090 ) (0.03 ) Allowance for funds used during
construction (1,190 ) (1,029 ) (0.03 ) (5,649 ) (4,952 ) (0.12 )
Taxes other than income taxes (1,048 ) (682 ) (0.02 ) (3,911 )
(2,543 ) (0.06 ) Investment and interest income (58 ) (186 ) —
4,194 3,103 0.07 Palo Verde performance rewards, net — — — 5,005
3,253 0.08 Effective tax rate 2,063 0.05 2,040 0.05 Administrative
and general expense 3,013 1,958 0.05 1,446 939 0.03 O&M at
fossil-fuel generating plants 2,388 1,553 0.04 906 589 0.01
Interest on long-term debt 109 71 — (1,768 ) (1,149 ) (0.03 ) Other
157 — 57 —
September 30, 2017 $ 59,684 $ 1.47 $ 91,761 $
2.26
Financial Effect of the Public Utility Commission of Texas
("PUCT") Final Order in the 2015 Texas Retail Rate Case
On August 25, 2016, the PUCT issued its final order in the
Company's 2015 Texas retail rate case in Docket No. 44941 (the
"2016 PUCT Final Order"). The 2016 PUCT Final Order had a
significant effect on the Company's three months ended September
30, 2016 financial results, the impacts of which are reflected in
the table above and discussed below. For financial reporting
purposes, the Company deferred any recognition of the Company's
request in its 2015 Texas retail rate case until it received the
2016 PUCT Final Order in August 2016. Accordingly, it recorded in
the third quarter of 2016 the cumulative effect of the 2016 PUCT
Final Order that related back to January 12, 2016. The impact of
the 2016 PUCT Final Order from January 12, 2016 through June 30,
2016, recorded in August 2016, increased net income for the three
months ended September 30, 2016 by approximately $12.6 million, or
$0.31 per share.
In addition, the financial results for the three and nine months
ended September 30, 2017 do not include the potential effects of
any relate back revenues beginning July 18, 2017 associated with
the 2017 Texas retail rate case filing. Such amounts, if any, are
pending the PUCT's determination in its final order in Docket No.
46831, which is expected to be issued by the PUCT in the fourth
quarter of 2017. Refer to further details in "Rate Case-2017 Texas
Retail Rate Case" section below.
Third Quarter 2017
Income for the quarter ended September 30, 2017, when compared
to the quarter ended September 30, 2016, was negatively affected by
(presented on a pre-tax basis):
- Decreased retail non-fuel base revenues
primarily due to the non-fuel base rate increase approved in the
2016 PUCT Final Order. The third quarter of 2016 included
approximately $17.2 million of retail non-fuel base revenues for
the period from January 12, 2016 through June 30, 2016, which were
recognized when the 2016 PUCT Final Order was approved in August
2016.
- Increased depreciation and amortization
primarily due to (i) reductions in 2016 of approximately $5.0
million resulting from changes in depreciation rates from January
12, 2016 through June 30, 2016 as approved in the 2016 PUCT Final
Order, and (ii) increases in plant, including Montana Power Station
("MPS") Unit 4, which was placed in service in September 2016.
- Decreased other revenues primarily due
to (i) decreased wheeling revenues and (ii) a decrease in
miscellaneous revenues as a result of the relate back impact of the
2016 PUCT Final Order, which was recorded in August 2016.
- Decreased allowance for funds used
during construction ("AFUDC") due to lower balances of construction
work in progress ("CWIP"), primarily due to MPS Unit 4 being placed
in service in September 2016, and a reduction in the AFUDC rate
effective January 2017.
- Increased taxes other than income taxes
primarily due to increased revenue related taxes and increased
property valuations in Texas as a result of MPS Unit 4 being placed
in service in September 2016.
Income for the quarter ended September 30, 2017, when compared
to the quarter ended September 30, 2016, was positively affected by
(presented on a pre-tax basis):
- Decrease in effective tax rate
primarily due to the change to normalize state income taxes in
accordance with the 2016 PUCT Final Order, which was recorded in
August 2016, a reduction in tax reserves due to the settlement of
state income tax audits, and a reduction in state income tax
rates.
- Decreased administrative and general
("A&G") expenses primarily due to lower employee incentive
compensation when compared to the three months ended September 30,
2016.
- Decreased operations and maintenance
("O&M") expenses related to the Company's fossil-fuel
generating plants primarily due to outages at Newman Units 4 &
5 in the three months ended September 30, 2016.
First Nine Months of 2017
Income for the nine months ended September 30, 2017, when
compared to the nine months ended September 30, 2016, was
positively affected by (presented on a pre-tax basis):
- Palo Verde Nuclear Generating Station
("Palo Verde") performance rewards, associated with the 2013 to
2015 performance periods, net of disallowed fuel and purchased
power costs related to the resolution of the Texas fuel
reconciliation proceeding designated as PUCT Docket No. 46308 for
the period from April 2013 through March 2016, were recorded in
June 2017 with no comparable amount during the nine months ended
September 30, 2016.
- Increased investment and interest
income primarily due to higher realized gains on securities sold
from the Company’s Palo Verde decommissioning trust during the nine
months ended September 30, 2017 compared to the nine months ended
September 30, 2016.
- Increased retail non-fuel base revenues
primarily due to increased revenues from (i) residential customers
of $2.5 million due to a 0.8% increase in kWh sales which were
driven by a 1.6% increase in the average number of residential
customers and (ii) small commercial and industrial customers of
$1.5 million driven by a 2.7% increase in the average number of
small commercial and industrial customers.
- Decrease in effective tax rate
primarily due to a reduction in state income tax rates and a
reduction in tax reserves due to the settlement of state income tax
audits.
- Decreased A&G expenses primarily
due to (i) lower employee incentive compensation when compared to
the nine months ended September 30, 2016, and (ii) decreased
pension and benefit expenses as a result of an adjustment related
to the sale of the Company's interest in Units 4 and 5 of Four
Corners Generating Station ("Four Corners"), and the result of a
plan amendment and changes in actuarial assumptions used to
calculate retirement benefit plans, partially offset by an increase
in costs for medical claims and other employee benefits.
- Decreased O&M expenses related to
the Company's fossil-fuel generating plants primarily due to the
sale of the Company's interest in Units 4 and 5 of Four Corners in
July 2016 and the related adjustment in 2017, and an outage at Rio
Grande Power Station ("Rio Grande") Unit 7 in the nine months ended
September 30, 2016. These decreases were partially offset by
increased maintenance expense for outages at Newman Units 1, 3 and
5, and routine maintenance at MPS, Rio Grande and Newman.
Income for the nine months ended September 30, 2017, when
compared to the nine months ended September 30, 2016, was
negatively affected by (presented on a pre-tax basis):
- Decreased AFUDC due to lower balances
of CWIP, primarily due to MPS Units 3 and 4 being placed in service
in May and September 2016, respectively, and a reduction in the
AFUDC rate effective January 2017.
- Increased taxes other than income taxes
primarily due to increased revenue related taxes and increased
property valuations in Texas as a result of MPS Units 3 and 4 being
placed in service in 2016.
- Increased depreciation and amortization
primarily due to increases in plant, including MPS Units 3 and 4,
which were placed in service in 2016. These increases were
partially offset by the sale of the Company's interest in Units 4
and 5 of Four Corners in July 2016.
- Increased interest on long-term debt
primarily due to the $150 million principal amount of senior notes
issued in March 2016.
- Decreased other revenues primarily due
to decreased wheeling revenues, partially offset by an increase in
Texas miscellaneous service revenues.
Retail Non-fuel Base Revenues
Excluding the $17.2 million 2016 PUCT Final Order impact
recognized in the third quarter of 2016, retail non-fuel base
revenues for the three months ended September 30, 2017 decreased
$2.0 million pre-tax, or 0.9%, compared to the three months ended
September 30, 2016. This decrease primarily includes (i) a $0.9
million decrease in revenues from residential customers primarily
due to a 0.4% decrease in kWh sales, and (ii) a $0.6 million
decrease in revenues from small commercial and industrial customers
primarily due to a 1.7% decrease in kWh sales. The decrease in kWh
sales resulted from overall milder weather, partially offset by
customer growth of 1.8%. Cooling degree days decreased 4.0% in the
three months ended September 30, 2017, when compared to the three
months ended September 30, 2016. Non-fuel base revenues and kWh
sales for the three months ended September 30, 2017 are provided by
customer class on page 12 of this news release.
For the nine months ended September 30, 2017, retail non-fuel
base revenues increased $4.5 million pre-tax, or 0.9%, compared to
the nine months ended September 30, 2016. This increase primarily
includes (i) a $2.5 million increase in revenues from residential
customers due to a 0.8% increase in kWh sales which were driven by
a 1.6% increase in the average number of residential customers
served and (ii) a $1.5 million increase in revenues from small
commercial and industrial customers driven by a 2.7% increase in
the average number of small commercial and industrial customers
served. The Company experienced an overall 1.7% increase in the
average number of customers served. Non-fuel base revenues and kWh
sales for the nine months ended September 30, 2017 are provided by
customer class on page 14 of this news release.
Rate Case
2017 Texas Retail Rate Case
On February 13, 2017, the Company filed with the City of El
Paso, other municipalities incorporated in the Company's Texas
service territory and the PUCT in Docket No. 46831, a request for
an increase in non-fuel base revenues of approximately $42.5
million. On July 21, 2017, the Company filed its rebuttal testimony
modifying the requested increase to $39.2 million. The decrease
from the original request related primarily to the transfer of the
recovery of $3.0 million of the rate case expenses to a separate
proceeding. The Company requested, pursuant to its statutory right,
to have its new rates relate back for consumption on and after July
18, 2017, which is the 155th day after the filing of the rate case.
The difference in rates that would have been billed will be
surcharged or refunded to customers after the PUCT's final order in
Docket No. 46831. The PUCT has the authority to require the Company
to surcharge or refund such difference over a period not to exceed
18 months.
On September 19, 2017, the City of El Paso approved, in
principle, the settlement terms for the Company's rate case pending
in Docket No. 46831. Key terms of the proposed settlement include:
(i) an annual non-fuel base rate increase of $14.5 million; (ii) a
return on equity of 9.65%; (iii) a determination that all new plant
in service was prudent and used and useful and therefore is
included in rate base; and (iv) allowing the Company to recover
reasonable rate case expenses, subject to PUCT Staff's review and
currently estimated to be approximately $3.4 million, through a
separate surcharge over a three year period. The settlement also
establishes baseline revenue requirements for recovery of future
transmission and distribution investment costs and includes a
minimum monthly bill of $30.00 for new residential customers with
distributed generation, such as private rooftop solar.
Additionally, the proposed settlement allows for the annual
recovery of $2.1 million of nuclear decommissioning funding and
establishes annual depreciation expense that is approximately $1.9
million lower than the annual amount requested by the Company in
its initial filing.
Once the parties have agreed formally to support or not to
oppose the terms of the settlement, the settlement documents are
expected to be executed and filed with the Administrative Law
Judges, along with a request that they return the case to the PUCT
for approval. A final PUCT order ("Final Order") in the 2017 Texas
retail rate case is expected to be issued in the fourth quarter of
2017.
The Company did not recognize the impacts of the settlement in
principle in the Statements of Operations for the third quarter of
2017 because the Final Order has not yet been issued by the PUCT.
At this time, the Company believes the revenue and other impacts of
the settlement for financial reporting purposes will be recognized
during the fourth quarter of 2017 when the Final Order is expected
to be issued by the PUCT. Regardless of when the Final Order is
issued by the PUCT, the new rates will relate back to consumption
on or after July 18, 2017.
Capital and Liquidity
In March 2016, we issued $150 million in aggregate principal
amount of 5.00% Senior Notes due December 1, 2044 to repay
outstanding short-term borrowings on our Revolving Credit Facility
(the "RCF") used for working capital and general corporate
purposes, which may include funding capital expenditures. We
continue to maintain a strong capital structure in which common
stock equity represented 45.4% of our capitalization (common stock
equity, long-term debt, current maturities of long-term debt and
short-term borrowings under the RCF) as of September 30, 2017. At
September 30, 2017, we had a balance of $7.1 million in cash and
cash equivalents. Based on current projections, we believe that we
will have adequate liquidity through the issuance of long-term
debt, our current cash balances, cash from operations and available
borrowings under the RCF to meet all of our anticipated cash
requirements for the next twelve months.
Cash flows from operations for the nine months ended September
30, 2017 were $218.7 million, compared to $176.8 million for
the nine months ended September 30, 2016. The primary factors
contributing to the increase in cash flows from operations were (i)
the change in net over-collection and under-collection of fuel
revenues and (ii) the collection of relate back surcharges. A
component of cash flows from operations is the change in net
over-collection and under-collection of fuel revenues. The
difference between fuel revenues collected and fuel expense
incurred is deferred to be either refunded (over-recoveries) or
surcharged (under-recoveries) to customers in the future. During
the nine months ended September 30, 2017, we had fuel
over-recoveries of $13.9 million compared to under-recoveries of
fuel costs of $11.8 million during the nine months ended September
30, 2016. At September 30, 2017, we had a net fuel over-recovery
balance of $3.0 million, including an over-recovery of $1.1 million
in Texas and an over-recovery of $1.9 million in New Mexico. On
October 13, 2017, we filed a request to decrease our Texas fixed
fuel factor by approximately 19% to reflect decreased fuel expenses
primarily related to a decrease in the price of natural gas used to
generate power. The decrease in our Texas fixed fuel factor became
effective beginning with the November 2017 billing month and will
continue thereafter until changed by the PUCT.
During the nine months ended September 30, 2017, our primary
capital requirements were for the construction and purchase of our
electric utility plant, debt retirements, payments of common stock
dividends, and purchases of nuclear fuel. Capital requirements for
new electric utility plant were $140.4 million, net of insurance
proceeds, for the nine months ended September 30, 2017 and $168.8
million for the nine months ended September 30, 2016. Capital
expenditures for 2017 are expected to be approximately $223.3
million, net of insurance proceeds. Capital requirements for
purchases of nuclear fuel were $31.6 million for the nine months
ended September 30, 2017, and $29.9 million for the nine
months ended September 30, 2016.
On September 29, 2017, we paid a quarterly cash dividend of
$0.335 per share, or $13.6 million, to shareholders of record as of
the close of business on September 15, 2017. We paid a total of
$39.7 million in cash dividends during the nine months ended
September 30, 2017. At the current dividend rate, we expect to pay
cash dividends of approximately $53.3 million during 2017. On
October 26, 2017, the Board of Directors declared a quarterly cash
dividend of $0.335 per share payable on December 29, 2017 to
shareholders of record as of the close of business on December 15,
2017.
No shares of common stock were repurchased during the nine
months ended September 30, 2017. As of September 30, 2017, a total
of 393,816 shares remain available for repurchase under our
currently authorized stock repurchase program. We may in the future
make purchases of our common stock in open market transactions at
prevailing prices and may engage in private transactions where
appropriate.
We maintain the RCF for working capital and general corporate
purposes and financing of nuclear fuel through the Rio Grande
Resources Trust (the "RGRT"). The RGRT, the trust through which we
finance our portion of nuclear fuel for Palo Verde, is consolidated
in our financial statements. On January 9, 2017, we exercised the
option to extend the maturity of the RCF by one year to January 14,
2020 and to increase the size of the facility by $50 million to
$350 million. We still have the option to extend the facility by
one additional year to January 2021 and to increase the RCF by up
to $50 million (up to a total of $400 million) upon the
satisfaction of certain conditions, more fully set forth in the
agreement, including obtaining commitments from lenders or third
party financial institutions. In August 2017, RGRT's $50.0 million
Series B 4.47% Senior Notes matured and were paid utilizing funds
borrowed under the RCF. The total amount borrowed for nuclear fuel
by the RGRT, excluding debt issuance costs, was $135.9 million at
September 30, 2017, of which $90.9 million had been borrowed under
the RCF, and $45.0 million was borrowed through the issuance of
senior notes. Borrowings by the RGRT for nuclear fuel, excluding
debt issuance costs, were $131.2 million as of September 30, 2016,
of which $36.2 million had been borrowed under the RCF and $95.0
million was borrowed through the issuance of senior notes. Interest
costs on borrowings to finance nuclear fuel are accumulated by the
RGRT and charged to us as fuel is consumed and recovered through
fuel recovery charges. In September 2017, the $33.3 million 2012
Series A 1.875% Pollution Control Bonds which were subject to
mandatory tender for purchase were redeemed and retired utilizing
funds borrowed under the RCF. At September 30, 2017, $77.0 million
was outstanding under the RCF for working capital and general
corporate purposes, which may include funding capital expenditures.
At September 30, 2016, $19.0 million was outstanding under the RCF
for working capital and general corporate purposes. Total aggregate
borrowings under the RCF at September 30, 2017 were $167.9 million
with an additional $182.0 million available to borrow.
We received approval from the New Mexico Public Regulation
Commission ("NMPRC") on October 7, 2015, to guarantee the issuance
of up to $65.0 million of long-term debt by the RGRT to finance
future purchases of nuclear fuel and to refinance existing nuclear
fuel debt obligations, which remains effective. We received
additional approval from the NMPRC on October 4, 2017 to amend and
extend the RCF, issue up to $350.0 million in long-term debt and to
redeem and refinance the $63.5 million 2009 Series A 7.25%
Pollution Control Bonds and the $37.1 million 2009 Series B 7.25%
Pollution Control Bonds, which have optional redemptions in 2019.
The NMPRC approval to issue up to $350.0 million in long-term debt
supersedes prior approval. We requested similar approval from the
Federal Energy Regulatory Commission ("FERC") on September 1, 2017
and received approval on October 31, 2017. The approval requested
from the FERC also includes requests to guarantee the issuance of
up to $65.0 million of long-term debt by the RGRT and to continue
to utilize our existing RCF with the ability to amend and extend
the RCF at a future date. The authorization approved by the FERC is
effective from November 15, 2017 through November 14, 2019 and
supersedes prior approvals.
2017 Earnings Guidance
A final order in the 2017 Texas retail rate case is expected to
be issued by the PUCT in the fourth quarter of 2017. Therefore, the
Company has decided to provide earnings guidance for 2017 with a
range of $2.30 to $2.50 per basic share. The guidance range
considers performance to date and significant variables that may
impact earnings, such as weather, expenses, and capital
expenditures. This range also assumes normal operations and the
financial impacts of the issuance of a final order in the 2017
Texas retail rate case, including new rates relating back to
consumption on or after July 18, 2017.
Conference Call
A conference call to discuss our financial results for the third
quarter of 2017 is scheduled for 11:30 A.M. Eastern Time, on
November 1, 2017. The dial-in number is 877-329-7568 with a
conference ID number of 2606376. The international dial-in number
is 719-325-2111. The conference leader will be Lisa Budtke,
Director-Treasury Services and Investor Relations. A replay will
run through November 15, 2017 with a dial-in number of 888-203-1112
and a conference ID number of 2606376. The replay international
dial-in number is 719-457-0820. The conference call and
presentation slides will be webcast live on the Company's website
found at http://www.epelectric.com. A
replay of the webcast will be available shortly after the call.
Safe Harbor
This news release includes statements that are forward-looking
statements made pursuant to the safe harbor provisions of the
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, including
statements regarding the issuance of a final order by the PUCT in
the 2017 Texas retail rate case; statements regarding expected
capital expenditures; and statements regarding expected dividends.
This information may involve risks and uncertainties that could
cause actual results to differ materially from such forward-looking
statements. Additional information concerning factors that could
cause actual results to differ materially from those expressed in
forward-looking statements is contained in EE's most recently filed
periodic reports and in other filings made by EE with the U.S.
Securities and Exchange Commission ("SEC"), and include, but is not
limited to: (i) increased prices for fuel and purchased power and
the possibility that regulators may not permit EE to pass through
all such increased costs to customers or to recover previously
incurred fuel costs in rates; (ii) full and timely recovery of
capital investments and operating costs through rates in Texas and
New Mexico; (iii) uncertainties and instability in the general
economy and the resulting impact on EE's sales and profitability;
(iv) changes in customers' demand for electricity as a result of
energy efficiency initiatives and emerging competing services and
technologies, including distributed generation; (v) unanticipated
increased costs associated with scheduled and unscheduled outages
of generating plant; (vi) unanticipated maintenance, repair, or
replacement costs for generation, transmission, or distribution
facilities and the recovery of proceeds from insurance policies
providing coverage for such costs; (vii) the size of our
construction program and our ability to complete construction on
budget and on time; (viii) potential delays in our construction
schedule due to legal challenges or other reasons; (ix) costs at
Palo Verde; (x) deregulation and competition in the
electric utility industry; (xi) possible increased costs of
compliance with environmental or other laws, regulations and
policies; (xii) possible income tax and interest payments as a
result of audit adjustments proposed by the IRS or state taxing
authorities; (xiii) uncertainties and instability in the
financial markets and the resulting impact on EE's ability to
access the capital and credit markets; (xiv) possible physical or
cyber attacks, intrusions or other catastrophic events; and
(xv) other factors of which we are currently unaware or deem
immaterial. EE's filings are available from the SEC or may be
obtained through EE's website, http://www.epelectric.com. Any such
forward-looking statement is qualified by reference to these risks
and factors. EE cautions that these risks and factors are not
exclusive. Management cautions against putting undue reliance on
forward-looking statements or projecting any future results based
on such statements or present or prior earnings levels.
Forward-looking statements speak only as of the date of this news
release, and EE does not undertake to update any forward-looking
statement contained herein.
El Paso Electric Company Statements of
Operations Quarter Ended September 30, 2017 and 2016
(In thousands except for per share data) (Unaudited)
2017 2016
Variance Operating revenues $ 297,470 $
323,225 $ (25,755 )
Energy expenses: Fuel 57,889
54,355 3,534 Purchased and interchanged power 17,430
24,459 (7,029 ) 75,319
78,814 (3,495 )
Operating revenues net of energy
expenses 222,151 244,411
(22,260 )
Other operating expenses: Other operations 60,692
64,373 (3,681 ) Maintenance 11,944 14,064 (2,120 ) Depreciation and
amortization 22,565 15,952 6,613 Taxes other than income taxes
21,213 20,165 1,048
116,414 114,554 1,860
Operating income 105,737 129,857
(24,120 )
Other income (deductions): Allowance for
equity funds used during construction 668 1,398 (730 ) Investment
and interest income, net 3,715 3,773 (58 ) Miscellaneous
non-operating income 242 272 (30 ) Miscellaneous non-operating
deductions (1,067 ) (1,312 ) 245
3,558 4,131 (573 )
Interest charges
(credits): Interest on long-term debt and revolving credit
facility 18,215 18,324 (109 ) Other interest 728 268 460
Capitalized interest (1,193 ) (1,243 ) 50 Allowance for borrowed
funds used during construction (671 ) (1,131 )
460 17,079 16,218 861
Income before income taxes 92,216 117,770 (25,554 )
Income tax expense 32,532 43,134
(10,602 )
Net income $ 59,684
$ 74,636 $ (14,952 )
Basic earnings per share $ 1.47
$ 1.84 $ (0.37 )
Diluted earnings per share $ 1.47
$ 1.84 $ (0.37 )
Dividends declared per share of common stock $ 0.335
$ 0.310 $ 0.025
Weighted average number of shares
outstanding 40,428 40,364 64
Weighted average number of shares and
dilutive potential shares outstanding
40,551 40,426 125
El Paso Electric Company Statements of
Operations Nine Months Ended September 30, 2017 and 2016
(In thousands except for per share data) (Unaudited)
2017 2016
Variance Operating revenues $ 720,648 $
698,899 $ 21,749
Energy expenses Fuel 143,668 131,817 11,851
Purchased and interchanged power 47,824 47,715
109 191,492 179,532
11,960
Operating revenues net of energy
expenses 529,156 519,367
9,789
Other operating expenses: Other operations
176,650 179,577 (2,927 ) Maintenance 53,349 52,005 1,344
Depreciation and amortization 66,994 63,097 3,897 Taxes other than
income taxes 54,208 50,297 3,911
351,201 344,976 6,225
Operating income 177,955 174,391
3,564
Other income (deductions):
Allowance for equity funds used during construction 2,209 5,867
(3,658 ) Investment and interest income, net 14,487 10,293 4,194
Miscellaneous non-operating income 366 1,073 (707 ) Miscellaneous
non-operating deductions (2,337 ) (2,668 ) 331
14,725 14,565 160
Interest charges (credits):
Interest on long-term debt and revolving credit facility 54,989
53,221 1,768 Other interest 1,910 1,102 808 Capitalized interest
(3,831 ) (3,738 ) (93 ) Allowance for borrowed funds used during
construction (2,173 ) (4,164 ) 1,991
50,895 46,421 4,474
Income before income taxes 141,785 142,535 (750 )
Income
tax expense 50,024 51,423
(1,399 )
Net income $ 91,761 $
91,112 $ 649 Basic
earnings per share $ 2.26 $
2.25 $ 0.01 Diluted
earnings per share $ 2.26 $
2.25 $ 0.01 Dividends
declared per share of common stock $ 0.980 $ 0.915
$ 0.065
Weighted average number of shares
outstanding 40,408 40,345 63
Weighted average number of shares and
dilutive potential shares outstanding
40,517 40,396 121
El Paso Electric Company Cash Flow Summary
Nine Months Ended September 30, 2017 and 2016 (In
thousands and Unaudited)
2017 2016 Cash flows from operating
activities: Net income $ 91,761 $ 91,112 Adjustments to
reconcile net income to net cash provided by operations:
Depreciation and amortization of electric plant in service 66,994
63,097 Amortization of nuclear fuel 32,494 33,088 Deferred income
taxes, net 47,457 48,457 Net gains on sale of decommissioning trust
funds (9,122 ) (5,570 ) Other 11,963 6,561 Change in: Accounts
receivable (39,298 ) (46,371 ) Net under/over-collection of fuel
revenues 13,888 (11,766 ) Accounts payable 525 6,994 Other
2,084 (8,822 )
Net cash provided by operating
activities 218,746 176,780
Cash flows from investing activities: Cash
additions to utility property, plant and equipment (140,367 )
(168,830 ) Cash additions to nuclear fuel (31,618 ) (29,929 )
Decommissioning trust funds (4,287 ) (6,298 ) Other (6,208 )
(1,268 )
Net cash used for investing activities
(182,480 ) (206,325 )
Cash flows from financing activities: Dividends paid
(39,747 ) (37,021 ) Borrowings (repayments) under the revolving
credit facility, net 86,327 (86,546 ) Payment on maturing RGRT
senior notes (50,000 ) — Payment on maturing pollution control bond
(33,300 ) — Proceeds from issuance of senior notes — 157,052 Other
(906 ) (2,045 )
Net cash provided by (used for)
financing activities (37,626 )
31,440 Net increase (decrease) in cash and
cash equivalents (1,360 ) 1,895
Cash and cash equivalents at beginning of period
8,420 8,149 Cash and
cash equivalents at end of period $ 7,060
$ 10,044 El Paso Electric
Company Quarter Ended September 30, 2017 and 2016
Sales and Revenues Statistics
Increase (Decrease) 2017 2016
Amount Percentage
kWh sales (in
thousands):
Retail: Residential 987,247 990,989 (3,742 ) (0.4 )% Commercial and
industrial, small 703,429 715,678 (12,249 ) (1.7 )% Commercial and
industrial, large 265,183 253,591 11,592 4.6 % Sales to public
authorities 439,926 448,355 (8,429 )
(1.9 )% Total retail sales 2,395,785 2,408,613
(12,828 ) (0.5 )% Wholesale: Sales for resale 20,147 19,861
286 1.4 % Off-system sales 507,318 422,245
85,073 20.1 % Total wholesale sales 527,465
442,106 85,359 19.3 % Total kWh sales
2,923,250 2,850,719 72,531 2.5 %
Operating
revenues (in thousands):
Non-fuel base revenues: Retail: Residential $ 100,221 $ 113,596 $
(13,375 ) (11.8 )% Commercial and industrial, small 65,309 67,810
(2,501 ) (3.7 )% Commercial and industrial, large 12,360 13,037
(677 ) (5.2 )% Sales to public authorities 32,128
34,785 (2,657 ) (7.6 )% Total retail non-fuel base
revenues (a) 210,018 229,228 (19,210 ) (8.4 )% Wholesale: Sales for
resale 957 791 166 21.0 % Total
non-fuel base revenues 210,975 230,019
(19,044 ) (8.3 )% Fuel revenues: Recovered from customers
during the period 70,372 58,614 11,758 20.1 % (Over) Under
collection of fuel (11,223 ) 9,775 (20,998 ) — New Mexico fuel in
base rates (b) — 451 (451 ) — Total
fuel revenues (c) 59,149 68,840 (9,691
) (14.1 )% Off-system sales: Fuel cost 14,510 12,289 2,221
18.1 % Shared margins 3,936 273 3,663 — Retained margins 570
287 283 98.6 % Total off-system sales
19,016 12,849 6,167 48.0 % Other (d) (e) (f) 8,330
11,517 (3,187 ) (27.7 )% Total operating revenues $
297,470 $ 323,225 $ (25,755 ) (8.0 )% (a) 2016
includes $17.2 million of relate back revenues in Texas from
January 12, 2016 through June 2016 which were recorded in August
2016. (b) Historically, fuel and purchased power costs in the New
Mexico jurisdiction were recorded through base rates and a Fuel and
Purchased Power Cost Adjustment Clause (the "FPPCAC") that accounts
for the changes in the costs of fuel relative to the amount
included in base rates. Effective July 1, 2016, with the
implementation of the NMPRC Final Order, these costs are no longer
recovered through base rates but are recovered through the FPPCAC.
(c) Includes deregulated Palo Verde Unit 3 revenues for the New
Mexico jurisdiction of $2.4 million and $2.6 million in 2017 and
2016, respectively. (d) Includes energy efficiency bonus of $0.4
million and $0.5 million in 2017 and 2016, respectively. (e)
Includes $0.8 million increase resulting from the 2016 PUCT Final
Order. (f) Represents revenues with no related kWh sales.
El Paso Electric Company Quarter Ended September
30, 2017 and 2016 Other Statistical Data
Increase
(Decrease) 2017 2016 Amount
Percentage
Average number of
retail customers: (a)
Residential 369,233 362,992 6,241 1.7 % Commercial and industrial,
small 41,840 41,121 719 1.7 % Commercial and industrial, large 48
49 (1 ) (2.0 )% Sales to public authorities 5,563
5,279 284 5.4 % Total 416,684
409,441 7,243 1.8 %
Number of retail
customers (end of period): (a)
Residential 369,516 363,247 6,269 1.7 % Commercial and industrial,
small 41,911 41,162 749 1.8 % Commercial and industrial, large 48
49 (1 ) (2.0 )% Sales to public authorities 5,511
5,264 247 4.7 % Total 416,986
409,722 7,264 1.8 %
Weather
statistics: (b)
10-Yr Average Cooling degree days 1,532 1,596 1,535 Heating
degree days — 5 1
Generation and
purchased power (kWh, in thousands):
Increase (Decrease) 2017 2016 Amount
Percentage Palo Verde 1,365,616 1,312,350 53,266 4.1
% Four Corners (c) — 12,109 (12,109 ) — Gas plants 1,321,255
1,115,188 206,067 18.5 % Total
generation 2,686,871 2,439,647 247,224 10.1 % Purchased power:
Photovoltaic 77,515 78,412 (897 ) (1.1 )% Other 324,984
514,456 (189,472 ) (36.8 )% Total
purchased power 402,499 592,868
(190,369 ) (32.1 )% Total available energy 3,089,370 3,032,515
56,855 1.9 % Line losses and Company use 166,120
181,796 (15,676 ) (8.6 )% Total kWh sold
2,923,250 2,850,719 72,531
2.5 % Palo Verde capacity factor 99.4 % 95.4 % 4.0 %
Palo Verde O&M expenses (d) $ 20,441 $ 21,123 $ (682 )
(a) The number of retail customers presented is based on the
number of service locations. (b) A degree day is recorded
for each degree that the average outdoor temperature varies from a
standard of 65 degrees Fahrenheit. (c) The Company sold its
interest in Four Corners on July 6, 2016. (d) Represents the
Company's 15.8% interest in Palo Verde.
El Paso
Electric Company Nine Months Ended September 30, 2017 and
2016 Sales and Revenues Statistics
Increase (Decrease)
2017 2016 Amount Percentage
kWh sales (in
thousands):
Retail: Residential 2,257,031 2,239,109 17,922 0.8 % Commercial and
industrial, small 1,851,396 1,849,618 1,778 0.1 % Commercial and
industrial, large 794,572 769,425 25,147 3.3 % Sales to public
authorities 1,198,863 1,199,867 (1,004
) (0.1 )% Total retail sales 6,101,862
6,058,019 43,843 0.7 % Wholesale: Sales for resale
52,786 52,370 416 0.8 % Off-system sales 1,478,941
1,451,719 27,222 1.9 % Total wholesale sales
1,531,727 1,504,089 27,638 1.8 %
Total kWh sales 7,633,589 7,562,108
71,481 0.9 %
Operating
revenues (in thousands):
Non-fuel base revenues: Retail: Residential $ 226,558 $ 224,018 $
2,540 1.1 % Commercial and industrial, small 156,184 154,657 1,527
1.0 % Commercial and industrial, large 30,703 30,619 84 0.3 % Sales
to public authorities 77,222 76,857 365
0.5 % Total retail non-fuel base revenues 490,667 486,151
4,516 0.9 % Wholesale: Sales for resale 2,279
1,986 293 14.8 % Total non-fuel base revenues
492,946 488,137 4,809 1.0 % Fuel
revenues: Recovered from customers during the period 175,140
107,367 67,773 63.1 % (Over) under collection of fuel (a) (b)
(13,931 ) 11,768 (25,699 ) — New Mexico fuel in base rates (c)
— 33,279 (33,279 ) — Total fuel
revenues (d) 161,209 152,414 8,795
5.8 % Off-system sales: Fuel cost 34,871 29,179 5,692
19.5 % Shared margins 7,238 3,680 3,558 96.7 % Retained margins
1,432 860 572 66.5 % Total
off-system sales 43,541 33,719 9,822 29.1 % Other (e) (f)
22,952 24,629 (1,677 ) (6.8 )% Total operating
revenues $ 720,648 $ 698,899 $ 21,749 3.1 %
(a) Includes the portion of the Department of Energy refunds
related to spent fuel storage of $1.4 million and $1.6 million in
2017 and 2016, respectively, that were credited to customers
through the applicable fuel adjustment clauses. (b) 2017 includes
$5.0 million related to the Palo Verde performance rewards, net.
(c) Historically, fuel and purchased power costs in the New Mexico
jurisdiction were recorded through base rates and the FPPCAC that
accounts for the changes in the costs of fuel relative to the
amount included in base rates. Effective July 1, 2016, with the
implementation of the NMPRC Final Order, these costs are no longer
recovered through base rates but are recovered through the FPPCAC.
(d) Includes deregulated Palo Verde Unit 3 revenues for the New
Mexico jurisdiction of $7.4 million and $6.6 million in 2017 and
2016, respectively. (e) Includes energy efficiency bonus of $0.7
million and $0.5 million in 2017 and 2016, respectively. (f)
Represents revenue with no related kWh sales.
El Paso Electric Company Nine Months
Ended September 30, 2017 and 2016 Other Statistical Data
Increase (Decrease) 2017 2016
Amount Percentage
Average number of
retail customers: (a)
Residential 367,409 361,617 5,792 1.6 % Commercial and industrial,
small 41,925 40,830 1,095 2.7 % Commercial and industrial, large 48
49 (1 ) (2.0 )% Sales to public authorities 5,540
5,309 231 4.4 % Total 414,922
407,805 7,117 1.7 %
Number of retail
customers (end of period): (a)
Residential 369,516 363,247 6,269 1.7 % Commercial and industrial,
small 41,911 41,162 749 1.8 % Commercial and industrial, large 48
49 (1 ) (2.0 )% Sales to public authorities 5,511
5,264 247 4.7 % Total 416,986
409,722 7,264 1.8 %
Weather
statistics: (b)
10-Year Average Cooling degree days 2,712 2,584 2,629
Heating degree days 855 1,134 1,204
Generation and
purchased power (kWh, in thousands):
Increase (Decrease) 2017 2016 Amount
Percentage Palo Verde 3,880,673 3,858,306 22,367 0.6
% Four Corners (c) — 175,258 (175,258 ) — Gas plants
2,947,991 2,785,057 162,934 5.9
% Total generation 6,828,664 6,818,621 10,043 0.1 % Purchased
power: Photovoltaic 234,171 234,941 (770 ) (0.3 )% Other
996,263 958,942 37,321 3.9 %
Total purchased power 1,230,434 1,193,883
36,551 3.1 % Total available energy 8,059,098
8,012,504 46,594 0.6 % Line losses and Company use 425,509
450,396 (24,887 ) (5.5 )% Total kWh
sold 7,633,589 7,562,108 71,481
0.9 % Palo Verde capacity factor
95.2
%
94.4 % 0.8 % Palo Verde O&M expenses (d)
$
67,980
$ 67,514 $ 466 (a) The number of retail customers presented
is based on the number of service locations. (b) A degree
day is recorded for each degree that the average outdoor
temperature varies from a standard of 65 degrees Fahrenheit.
(c) The Company sold its interest in Four Corners on July 6, 2016.
(d) Represents the Company's 15.8% interest in Palo Verde.
El Paso Electric Company Financial
Statistics At September 30, 2017 and 2016 (In
thousands, except number of shares, book value per common share,
and ratios) Balance Sheet
2017 2016 Cash and cash equivalents $ 7,060
$ 10,044 Common stock equity $ 1,135,980 $
1,075,075 Long-term debt 1,195,868 1,195,397
Total capitalization $ 2,331,848 $ 2,270,472
Current maturities of long-term debt $ — $ 83,081
Short-term borrowings under the revolving credit
facility $ 167,901 $ 55,192 Number of shares -
end of period 40,591,794 40,522,246
Book value per common share $ 27.99 $ 26.53
Common equity ratio (a) 45.4 % 44.6 % Debt ratio 54.6 % 55.4
% (a) The capitalization component includes common stock
equity, long-term debt and the current maturities of long-term
debt, and short-term borrowings under the RCF.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171101005543/en/
El Paso Electric CompanyMedia ContactEddie Gutierrez,
915-543-5763eduardo.gutierrez@epelectric.comorInvestor
RelationsLisa Budtke,
915-543-5947lisa.budtke@epelectric.com
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