El Paso Electric Company (NYSE:EE):
Overview
- For the fourth quarter of 2017, El Paso
Electric Company ("EE" or the "Company") reported net income of
$6.5 million, or $0.16 basic and diluted earnings per share. In the
fourth quarter of 2016, EE reported net income of $5.7 million, or
$0.14 basic and diluted earnings per share.
- For the twelve months ended December
31, 2017, EE reported net income of $98.3 million, or $2.42 basic
and diluted earnings per share. Net income for the twelve months
ended December 31, 2016 was $96.8 million, or $2.39 basic and
diluted earnings per share.
"We reached an important milestone in the fourth quarter when
the Public Utility Commission of Texas approved the unopposed
settlement in our 2017 Texas rate case," said Mary Kipp, President
and Chief Executive Officer of El Paso Electric Company. "The
settlement is the culmination of several years of dedicated effort
and incorporates into our Texas rates over $1 billion of
infrastructure investments, including Montana Power Station Units 1
through 4. Among other things, the settlement has a provision to
pass through to our Texas customers the tax savings from the
reduction in the federal statutory income tax rate that was
recently enacted. We expect to begin issuing credits to our Texas
customers in the first half of 2018."
Earnings Summary
The table and explanations below present the major factors
affecting fourth quarter and twelve months ended December 31, 2017
net income relative to fourth quarter and twelve months ended
December 31, 2016 net income, respectively, (in thousands except
per share data):
Quarter Ended Twelve
Months Ended
Pre-TaxEffect
After-TaxEffect
BasicEPS
Pre-TaxEffect
After-TaxEffect
BasicEPS
December 31, 2016 $ 5,656 $ 0.14 $ 96,768 $ 2.39 Changes in: Retail
non-fuel base revenues 8,793 5,716 0.14 13,309 8,651 0.21 Effective
tax rate — 1,339 0.03 — 3,379 0.08 Palo Verde performance rewards,
net — — — 5,005 3,253 0.08 Depreciation and amortization (2,629 )
(1,708 ) (0.04 ) (6,526 ) (4,242 ) (0.10 ) Palo Verde O&M
(1,984 ) (1,290 ) (0.03 ) (2,450 ) (1,592 ) (0.04 ) Taxes other
than income taxes (1,419 ) (922 ) (0.02 ) (5,330 ) (3,465 ) (0.09 )
Wheeling revenues (906 ) (589 ) (0.02 ) (3,852 ) (2,504 ) (0.06 )
Allowance for funds used during construction (357 ) (350 ) (0.01 )
(6,006 ) (5,303 ) (0.13 ) Investment and interest income (520 )
(278 ) (0.01 ) 3,674 2,825 0.07 Other (1,074 ) (0.02 ) 491
0.01 December 31, 2017 $ 6,500 $ 0.16 $ 98,261
$ 2.42
Fourth Quarter 2017
Income for the quarter ended December 31, 2017, when compared to
the quarter ended December 31, 2016, was positively affected by
(presented on a pre-tax basis):
- Increased retail non-fuel base revenues
primarily due to the non-fuel base rate increase approved by the
Public Utility Commission of Texas ("PUCT") in its final order in
the Company's 2017 Texas retail rate case in Docket No. 46831 (the
"2017 PUCT Final Order"). The fourth quarter of 2017 included
approximately $8.8 million of retail non-fuel base revenues for the
period from July 18, 2017 through December 31, 2017, which was
recognized when the 2017 PUCT Final Order was approved in December
2017. Excluding the rate relief impact, retail non-fuel base
revenues were relatively unchanged. Overall, milder weather offset
the impacts of customer growth of 1.7%.
- Decreased effective tax rate primarily
due to a reduction in Texas margin taxes resulting from a
settlement with the Texas Comptroller of Public Accounts.
Income for the quarter ended December 31, 2017, when compared to
the quarter ended December 31, 2016, was negatively affected by
(presented on a pre-tax basis):
- Increased depreciation and amortization
primarily due to increases in plant and increased depreciation and
amortization of approximately $0.7 million associated with the 2017
PUCT Final Order.
- Increased Palo Verde Generating Station
("Palo Verde") operations and maintenance ("O&M") expense
primarily due to reduced employee pension and benefit expenses by
Palo Verde in 2016.
- Increased taxes other than income taxes
primarily due to increased property taxes in Texas and Arizona and
increased revenue related taxes in Texas.
- Decreased wheeling revenues primarily
due to the expiration of a contract.
- Decreased allowance for funds used
during construction ("AFUDC") primarily due to a reduction in the
AFUDC rate effective January 2017.
- Increased other primarily due to (i)
O&M expenses related to the Company's fossil-fuel generating
plants and (ii) employee incentive compensation and payroll costs
compared to the three months ended December 31, 2016.
Year to Date 2017
Income for the twelve months ended December 31, 2017, when
compared to the twelve months ended December 31, 2016, was
positively affected by (presented on a pre-tax basis):
- Increased retail non-fuel base revenues
primarily due to the non-fuel base rate increase approved in the
2017 PUCT Final Order. The fourth quarter of 2017 included
approximately $8.8 million of retail non-fuel base revenues for the
period from July 18, 2017 through December 31, 2017, which were
recognized when the 2017 PUCT Final Order was approved in December
2017. Excluding the $8.8 million 2017 PUCT Final Order impact, for
the twelve months ended December 31, 2017, retail non-fuel base
revenues increased $4.5 million, or 0.7%, compared to the twelve
months ended December 31, 2016. See "Retail Non-fuel Base Revenues"
section below for further details.
- Decreased effective tax rate primarily
due to a reduction in state income taxes primarily due to audit
settlements.
- 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.
These rewards were recorded in June 2017 with no comparable amount
during the twelve months ended December 31, 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
twelve months ended December 31, 2017 compared to the twelve months
ended December 31, 2016.
Income for the twelve months ended December 31, 2017, when
compared to the twelve months ended December 31, 2016, was
negatively affected by (presented on a pre-tax basis):
- Decreased AFUDC due to lower balances
of construction work in progress, primarily due to Montana Power
Station ("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 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 the
coal-fired Four Corners Generating Station ("Four Corners") in July
2016.
- Increased taxes other than income taxes
primarily due to increased property valuations in Texas as a result
of MPS Units 3 and 4 being placed in service in 2016 and increased
revenue related taxes in Texas.
- Decreased wheeling revenues primarily
due to the expiration of a contract.
- Increased Palo Verde O&M primarily
due to higher administrative and general expenses.
Retail Non-fuel Base Revenues
Excluding the $8.8 million 2017 PUCT Final Order impact
recognized in the fourth quarter of 2017, retail non-fuel base
revenues for the three months ended December 31, 2017 were
relatively unchanged compared to the three months ended December
31, 2016. Overall, milder weather offset the impact of customer
growth of 1.7%. Cooling degree days decreased 9.7% in the three
months ended December 31, 2017, when compared to the three months
ended December 31, 2016. Heating degree days decreased 7.0% in the
three months ended December 31, 2017, when compared to the three
months ended December 31, 2016. Non-fuel base revenues and
kilowatt-hour ("kWh") sales for the three months ended December 31,
2017 are provided by customer class on page 12 of this news
release.
Excluding the $8.8 million 2017 PUCT Final Order impact, for the
twelve months ended December 31, 2017, retail non-fuel base
revenues increased $4.5 million, or 0.7%, compared to the twelve
months ended December 31, 2016. This increase primarily includes
(i) a $2.5 million increase in revenues from residential customers
driven by a 1.6% increase in the average number of residential
customers served and (ii) a $2.1 million increase in revenues from
small commercial and industrial customers driven by a 2.4% 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 and its impact on revenues was
partially offset by milder weather when compared to the twelve
months ended December 31, 2016. Heating degree days decreased 17.8%
in the twelve months ended December 31, 2017, when compared to the
twelve months ended December 31, 2016. During our peak summer
cooling season, cooling degree days in 2017 were comparable to the
same period in 2016. Non-fuel base revenues and kWh sales for the
twelve months ended December 31, 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. On November 2, 2017, the
Company filed the Joint Motion to Implement Uncontested Stipulation
and Agreement with the Administrative Law Judges for the Company's
rate case.
On December 18, 2017, the PUCT approved the 2017 PUCT Final
Order for the Company's rate case pending in Docket No. 46831,
which provides, among other things, for the following: (i) an
annual non-fuel base rate increase of $14.5 million; (ii) a return
on equity of 9.65%; (iii) all new plant in service as filed in the
Company's rate filing package was prudent and used and useful and
therefore is included in rate base; (iv) recovery of the costs of
decommissioning Four Corners in the amount of $5.5 million over a
seven year period beginning August 1, 2017; (v) the Company to
recover reasonable rate case expenses of approximately $3.4 million
through a separate surcharge over a three year period; and (vi) a
requirement that the Company file a refund tariff if the federal
statutory income tax rate, as it relates to the Company, is
decreased before the Company files its next rate case. The 2017
PUCT Final Order 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 2017 PUCT Final Order 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. Finally, the 2017 PUCT Final Order allows
for the Company to recover revenues associated with the relate back
of rates to consumption on and after July 18, 2017 through a
separate surcharge.
New base rates, including additional surcharges associated with
rate case expenses and the relate back of rates to consumption on
and after July 18, 2017 through December 31, 2017 were implemented
in January 2018.
For financial reporting purposes, the Company deferred any
recognition of the Company's request in its 2017
Texas retail rate case until it received the 2017 PUCT Final
Order on December 18, 2017. Accordingly, it reported in the fourth
quarter of 2017 the cumulative effect of the 2017 PUCT Final Order,
which related back to July 18, 2017. Details of the impacts of the
2017 PUCT Final Order are provided on page 17 of this news
release.
Corporate Tax Reform
On December 22, 2017, the President signed into law the Tax Cuts
and Jobs Act of 2017 ("TCJA"), which made widespread changes to the
Internal Revenue Code, including a reduction in the federal
corporate income tax rate from 35% to 21% effective January 1,
2018, and discontinuance of bonus depreciation for regulated
utilities for assets placed in service after September 27, 2017.
Accordingly, the Company reduced its accumulated deferred income
taxes (“ADIT”) liability to reflect the $298.9 million impact due
to the reduction in the federal corporate tax rate and other
changes to the tax law on its December 31, 2017 balance sheet. The
Company offset this reduction by recording a regulatory liability
to reflect the future refund of such amounts related to changes in
ADIT to ratepayers in its Texas, New Mexico and Federal Energy
Regulatory Commission (the "FERC") jurisdictions. The new tax law
change had a minimal impact on the Company’s Statements of
Operations for the three and twelve months ended December 31,
2017.
As noted earlier in this news release under "Rate Case - 2017
Texas Retail Rate Case," the Company agreed to file a refund tariff
if the federal statutory income tax rate, as it relates to the
Company, is decreased before the Company files its next rate case.
Accordingly, the Company will recognize reduced Texas
jurisdictional revenues beginning January 1, 2018, to approximate
the tax savings resulting from the TCJA and will file a refund
tariff which the Company will ask to be implemented in the first
half of 2018. The refund tariff will be updated annually until new
base rates are implemented pursuant to the Company's next rate case
filing.
The Company is required to make its next rate case filing in New
Mexico, which will reflect the Company's new corporate income tax
rate, no later than July 31, 2019. However, the New Mexico Public
Regulation Commission ("NMPRC") has initiated an investigation into
the impact of the TCJA on utility customers that may require
earlier action by the Company. The Company is evaluating possible
approaches to begin providing a refund credit for the income tax
rate decrease to New Mexico customers.
Capital and Liquidity
We continue to maintain a strong capital structure in which
common stock equity represented 45.5% of our capitalization (common
stock equity, long-term debt, current maturities of long-term debt
and short-term borrowings under our Revolving Credit Facility (the
"RCF")) as of December 31, 2017. At December 31, 2017, we had a
balance of $7.0 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 twelve months ended December
31, 2017 were $288.6 million, compared to $231.2 million for
the twelve months ended December 31, 2016. The primary factors
contributing to the increase in cash flows from operations were the
change in net over-collection and under-collection of fuel revenues
and accounts receivable. 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 twelve months ended December 31, 2017, we
had fuel over-recoveries of $17.1 million compared to
under-recoveries of fuel costs of $14.9 million during the twelve
months ended December 31, 2016. At December 31, 2017, we had a net
fuel over-recovery balance of $6.2 million, including an
over-recovery of $5.8 million in Texas and an over-recovery of $0.4
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 twelve months ended December 31, 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 expenditures for
new electric utility plant were $190.3 million, net of insurance
proceeds, for the twelve months ended December 31, 2017 and $225.4
million for the twelve months ended December 31, 2016. Capital
expenditures for 2018 are expected to be approximately $236
million. Capital requirements for purchases of nuclear fuel were
$38.5 million for the twelve months ended December 31, 2017, and
$42.4 million for the twelve months ended December 31,
2016.
On February 1, 2018, the Board of Directors declared a quarterly
cash dividend of $0.335 per share payable on March 30, 2018 to
shareholders of record as of the close of business on March 16,
2018. On December 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 December 15, 2017. We paid a total of
$53.3 million in cash dividends during the twelve months ended
December 31, 2017. We expect to continue paying quarterly cash
dividends in 2018.
No shares of common stock were repurchased during the twelve
months ended December 31, 2017. As of December 31, 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.
Our cash requirements for federal and state income taxes vary
from year to year based on taxable income, which is influenced by
the timing of revenues and expenses recognized for income tax
purposes. The following summary describes the major impacts of the
TCJA on our liquidity. We continue to evaluate the TCJA and have
made assumptions based on information currently available.
The TCJA discontinued bonus depreciation for regulated utilities
which reduced tax deductions previously available to us for 2017,
2018 and 2019. The decrease in tax deductions results in the
utilization of our net operating loss carryforwards (“NOL
carryforwards”) approximately two years earlier than anticipated
and is expected to result in higher income tax payments beginning
in 2019, after the full utilization of NOL carryforwards. However,
due to the lower corporate income tax rate enacted by the TCJA, our
future tax payments will be made at the reduced rate of 21%
beginning in 2018. Due to NOL carryforwards, minimal tax payments
are expected for 2018, which are mostly related to state income
taxes.
However, we expect that the effect of the TCJA on our rates will
be beneficial to our customers. Following the enactment of the TCJA
and the reduction of the federal income tax rate, revenues
collected from our customers in 2018 will be reduced in an amount
that approximates the savings in tax expense. This reduction in
revenues is expected to negatively impact our cash flows by
approximately $26 million to $31 million during 2018.
We maintain the RCF for working capital and general corporate
purposes and financing of nuclear fuel through the Rio Grande
Resources Trust ("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 $133.5 million at
December 31, 2017, of which $88.5 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 $132.6 million as of December 31, 2016,
of which $37.6 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 December 31, 2017, $85.0 million
was outstanding under the RCF for working capital and general
corporate purposes, which may include funding capital expenditures.
At December 31, 2016, $44.0 million was outstanding under the RCF
for working capital and general corporate purposes. Total aggregate
borrowings under the RCF at December 31, 2017 were $173.5 million
with an additional $176.4 million available to borrow.
We received approval from the 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 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.
2018 Earnings Guidance
The Company is providing earnings guidance for 2018 with a range
of $2.30 to $2.65 per basic share. The guidance assumes normal
operations and considers significant variables that may impact
earnings, such as weather, expenses, capital expenditures, nuclear
decommissioning trust gains/losses, and the impact of the TCJA. The
mid-point of the guidance range assumes 10 year average weather
(cooling and heating degree days).
Conference Call
A conference call to discuss fourth quarter and year to date
2017 financial results is scheduled for 11:30 A.M. Eastern
Time, on February 27, 2018. The dial-in number is 888-600-4863 with
a conference ID number of 9726561. The international dial-in number
is 719-457-2644. The conference leader will be Lisa Budtke,
Director-Treasury Services and Investor Relations. A replay will
run through March 13, 2018 with a dial-in number of 888-203-1112
and a conference ID number of 9726561. 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 impact of the TCJA; 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) the impact of the TCJA and
other U.S. tax reform legislation; (ii) 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; (iii) full
and timely recovery of capital investments and operating costs
through rates in Texas and New Mexico; (iv) uncertainties and
instability in the general economy and the resulting impact on EE's
sales and profitability; (v) changes in customers' demand for
electricity as a result of energy efficiency initiatives and
emerging competing services and technologies, including distributed
generation; (vi) unanticipated increased costs associated with
scheduled and unscheduled outages of generating plant; (vii)
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; (viii) the size of our construction program and our
ability to complete construction on budget and on time; (ix)
potential delays in our construction schedule due to legal
challenges or other reasons; (x) costs at Palo Verde;
(xi) deregulation and competition in the electric utility
industry; (xii) possible increased costs of compliance with
environmental or other laws, regulations and policies;
(xiii) possible income tax and interest payments as a result
of audit adjustments proposed by the Internal Revenue Service
("IRS") or state taxing authorities; (xiv) uncertainties and
instability in the financial markets and the resulting impact on
EE's ability to access the capital and credit markets; (xv) actions
by credit rating agencies; (xvi) possible physical or cyber
attacks, intrusions or other catastrophic events; and
(xvii) 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 December 31, 2017 and 2016
(In thousands except for per share data) (Unaudited)
2017 2016
Variance Operating revenues $ 196,149 $
188,037 $ 8,112
Energy expenses: Fuel 41,401
41,921 (520 ) Purchased and interchanged power 11,858 12,012
(154 ) 53,259 53,933 (674 )
Operating
revenues net of energy expenses 142,890 134,104
8,786
Other operating expenses: Other operations
65,978 62,437 3,541 Maintenance 16,109 14,741 1,368 Depreciation
and amortization 23,849 21,220 2,629 Taxes other than income taxes
16,655 15,236 1,419 122,591 113,634
8,957
Operating income 20,299 20,470
(171 )
Other income (deductions): Allowance for
equity funds used during construction 816 1,156 (340 ) Investment
and interest income, net 3,270 3,790 (520 ) Miscellaneous
non-operating income 349 219 130 Miscellaneous non-operating
deductions (788 ) (1,031 ) 243 3,647 4,134
(487 )
Interest charges (credits): Interest on long-term
debt and revolving credit facility 17,981 18,323 (342 ) Other
interest 478 201 277 Capitalized interest (1,191 ) (1,252 ) 61
Allowance for borrowed funds used during construction (802 ) (819 )
17 16,466 16,453 13
Income before
income taxes 7,480 8,151 (671 )
Income tax expense 980
2,495 (1,515 )
Net income $
6,500 $ 5,656 $
844 Basic earnings per share $
0.16 $ 0.14 $ 0.02
Diluted earnings per share $
0.16 $ 0.14 $ 0.02
Dividends declared per share of common stock $
0.335 $ 0.310 $ 0.025
Weighted average
number of shares outstanding 40,434 40,368 66
Weighted average number of shares and
dilutive potential shares outstanding
40,590 40,445 145
El Paso
Electric Company Statements of Operations Twelve
Months Ended December 31, 2017 and 2016 (In thousands except
for per share data) (Unaudited)
2017 2016 Variance
Operating revenues $ 916,797 $ 886,936 $ 29,861
Energy
expenses Fuel 185,069 173,738 11,331 Purchased and interchanged
power 59,682 59,727 (45 ) 244,751 233,465
11,286
Operating revenues net of energy
expenses 672,046 653,471 18,575
Other
operating expenses: Other operations 242,628 242,014 614
Maintenance 69,458 66,746 2,712 Depreciation and amortization
90,843 84,317 6,526 Taxes other than income taxes 70,863
65,533 5,330 473,792 458,610 15,182
Operating income 198,254 194,861 3,393
Other income (deductions): Allowance for equity funds
used during construction 3,025 7,023 (3,998 ) Investment and
interest income, net 17,757 14,083 3,674 Miscellaneous
non-operating income 715 1,292 (577 ) Miscellaneous non-operating
deductions (3,125 ) (3,699 ) 574 18,372 18,699 (327 )
Interest charges (credits): Interest on long-term debt and
revolving credit facility 72,970 71,544 1,426 Other interest 2,388
1,303 1,085 Capitalized interest (5,022 ) (4,990 ) (32 ) Allowance
for borrowed funds used during construction (2,975 ) (4,983 ) 2,008
67,361 62,874 4,487
Income before
income taxes 149,265 150,686 (1,421 )
Income tax expense
51,004 53,918 (2,914 )
Net income $
98,261 $ 96,768 $
1,493 Basic earnings per share $
2.42 $ 2.39 $ 0.03
Diluted earnings per share $
2.42 $ 2.39 $ 0.03
Dividends declared per share of common stock $
1.315 $ 1.225 $ 0.090
Weighted average
number of shares outstanding 40,415 40,351 64
Weighted average number of shares and
dilutive potential shares outstanding
40,535 40,408 127
El Paso
Electric Company Cash Flow Summary Twelve Months
Ended December 31, 2017 and 2016 (In thousands and
Unaudited) 2017 2016
Cash flows from operating activities: Net income $ 98,261 $
96,768 Adjustments to reconcile net income to net cash provided by
operations: Depreciation and amortization of electric plant in
service 90,843 84,317 Amortization of nuclear fuel 42,476 43,748
Deferred income taxes, net 49,394 50,510 Net gains on sale of
decommissioning trust funds (10,626 ) (7,640 ) Other 15,237 11,006
Change in: Accounts receivable (138 ) (17,511 ) Net over-collection
(under-collection) of fuel revenues 17,093 (14,891 ) Accounts
payable 1,407 (2,140 ) Regulatory assets (5,729 ) (8,741 ) Other
(9,657 ) (4,276 )
Net cash provided by operating activities
288,561 231,150 Cash flows
from investing activities: Cash additions to utility property,
plant and equipment (190,305 ) (225,361 ) Cash additions to nuclear
fuel (38,481 ) (42,383 ) Decommissioning trust funds (5,883 )
(8,229 ) Other (9,275 ) 241
Net cash used for investing
activities (243,944 ) (275,732 )
Cash flows from financing activities: Dividends paid
(53,337 ) (49,603 ) Borrowings (repayments) under the revolving
credit facility, net 91,959 (60,164 ) Payment on maturing RGRT
senior notes (50,000 ) — Payment on maturing pollution control
bonds (33,300 ) — Proceeds from issuance of senior notes — 157,052
Other (1,369 ) (2,432 )
Net cash provided by (used for)
financing activities (46,047 ) 44,853
Net increase (decrease) in cash and cash
equivalents (1,430 ) 271 Cash
and cash equivalents at beginning of period 8,420
8,149 Cash and cash equivalents at end of
period $ 6,990 $ 8,420
El Paso Electric Company Quarter
Ended December 31, 2017 and 2016 Sales and Revenues
Statistics (Unaudited)
Increase (Decrease) 2017
2016 Amount Percentage
kWh sales (in
thousands):
Retail: Residential 566,229 566,680 (451 ) (0.1 )% Commercial and
industrial, small 559,314 553,829 5,485 1.0 % Commercial and
industrial, large 250,747 261,320 (10,573 ) (4.0 )% Sales to public
authorities 365,807 372,643 (6,836 ) (1.8 )% Total retail
sales 1,742,097 1,754,472 (12,375 ) (0.7 )% Wholesale: Sales
for resale 10,101 9,716 385 4.0 % Off-system sales 563,943
475,789 88,154 18.5 % Total wholesale sales 574,044
485,505 88,539 18.2 % Total kWh sales 2,316,141
2,239,977 76,164 3.4 %
Operating
revenues (in thousands):
Non-fuel base revenues: Retail: Residential $ 61,326 $ 54,756 $
6,570 12.0 % Commercial and industrial, small 42,615 40,285 2,330
5.8 % Commercial and industrial, large 7,700 8,451 (751 ) (8.9 )%
Sales to public authorities 20,668 20,024 644 3.2 %
Total retail non-fuel base revenues (a) 132,309 123,516 8,793 7.1 %
Wholesale: Sales for resale 451 421 30 7.1 % Total
non-fuel base revenues 132,760 123,937 8,823 7.1 %
Fuel revenues: Recovered from customers during the period 43,240
41,030 2,210 5.4 % (Over) Under collection of fuel (3,202 ) 3,125
(6,327 ) — Total fuel revenues (b) 40,038 44,155 (4,117 )
(9.3 )% Off-system sales: Fuel cost 11,387 9,754 1,633 16.7 %
Shared margins 3,817 1,952 1,865 95.5 % Retained margins 241
277 (36 ) (13.0 )% Total off-system sales 15,445 11,983 3,462 28.9
% Other: (c) Wheeling revenues 4,403 5,309 (906 ) (17.1 )%
Miscellaneous service revenues and other (d) 3,503 2,653 850
32.0 % Total other 7,906 7,962 (56 ) (0.7 )% Total
operating revenues $ 196,149 $ 188,037 $ 8,112 4.3 %
(a) 2017 includes $8.8 million of relate back revenues in
Texas from July 18, 2017 through December 31, 2017, which was
recorded in the fourth quarter of 2017 related to the 2017 PUCT
Final Order. (b) Includes deregulated Palo Verde Unit 3 revenues
for the New Mexico jurisdiction of $2.3 million and $2.1 million in
2017 and 2016, respectively. (c) Represents revenues with no
related kWh sales. (d) 2017 includes energy efficiency bonus of
$0.8 million.
El Paso Electric Company Quarter Ended
December 31, 2017 and 2016 Other Statistical Data
Increase (Decrease) 2017 2016 Amount
Percentage
Average number of
retail customers: (a)
Residential 369,949 363,699 6,250 1.7 % Commercial and industrial,
small 42,135 41,567 568 1.4 % Commercial and industrial, large 48
49 (1 ) (2.0 )% Sales to public authorities 5,507 5,288
219 4.1 % Total 417,639 410,603
7,036 1.7 %
Number of retail
customers (end of period): (a)
Residential 370,054 363,987 6,067 1.7 % Commercial and industrial,
small 42,291 41,741 550 1.3 % Commercial and industrial, large 48
49 (1 ) (2.0 )% Sales to public authorities 5,500 5,285
215 4.1 % Total 417,893 411,062
6,831 1.7 %
Weather
statistics: (b)
10-Yr Average Cooling degree days 205 227 144 Heating degree
days 667 717 877
Generation and
purchased power (kWh, in thousands):
Increase (Decrease) 2017 2016 Amount
Percentage Palo Verde 1,228,652 1,235,538 (6,886 )
(0.6 )% Gas plants 893,559 765,847 127,712
16.7 % Total generation 2,122,211 2,001,385 120,826 6.0 %
Purchased power: Photovoltaic 57,986 54,859 3,127 5.7 % Other
252,421 303,509 (51,088 ) (16.8 )% Total
purchased power 310,407 358,368 (47,961 )
(13.4 )% Total available energy 2,432,618 2,359,753 72,865 3.1 %
Line losses and Company use 116,477 119,776
(3,299 ) (2.8 )% Total kWh sold 2,316,141 2,239,977
76,164 3.4 % Palo Verde capacity factor 89.5 %
90.0 % (0.5 )% Palo Verde O&M expenses (c) $ 31,384 $
29,400 $ 1,984 (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) Represents the Company's 15.8% interest in Palo Verde.
El Paso Electric Company Twelve Months Ended
December 31, 2017 and 2016 Sales and Revenues Statistics
(Unaudited)
Increase (Decrease) 2017 2016 Amount
Percentage
kWh sales (in
thousands):
Retail: Residential 2,823,260 2,805,789 17,471 0.6 % Commercial and
industrial, small 2,410,710 2,403,447 7,263 0.3 % Commercial and
industrial, large 1,045,319 1,030,745 14,574 1.4 % Sales to public
authorities 1,564,670 1,572,510 (7,840 ) (0.5 )% Total
retail sales 7,843,959 7,812,491 31,468 0.4 %
Wholesale: Sales for resale 62,887 62,086 801 1.3 % Off-system
sales 2,042,884 1,927,508 115,376 6.0 % Total
wholesale sales 2,105,771 1,989,594 116,177 5.8 %
Total kWh sales 9,949,730 9,802,085 147,645 1.5 %
Operating
revenues (in thousands):
Non-fuel base revenues: Retail: Residential $ 287,884 $ 278,774 $
9,110 3.3 % Commercial and industrial, small 198,799 194,942 3,857
2.0 % Commercial and industrial, large 38,403 39,070 (667 ) (1.7 )%
Sales to public authorities 97,890 96,881 1,009 1.0 %
Total retail non-fuel base revenues (a) 622,976 609,667 13,309 2.2
% Wholesale: Sales for resale 2,730 2,407 323 13.4 %
Total non-fuel base revenues 625,706 612,074 13,632
2.2 % Fuel revenues: Recovered from customers during the period
218,380 148,397 69,983 47.2 % (Over) under collection of fuel (b)
(c) (17,133 ) 14,893 (32,026 ) — New Mexico fuel in base rates (d)
— 33,279 (33,279 ) — Total fuel revenues (e) 201,247
196,569 4,678 2.4 % Off-system sales: Fuel cost 46,258
38,933 7,325 18.8 % Shared margins 11,055 5,632 5,423 96.3 %
Retained margins 1,673 1,137 536 47.1 %
Total off-system sales
58,986 45,702 13,284 29.1 % Other: (f) Wheeling revenues 18,114
21,966 (3,852 ) (17.5 )% Miscellaneous service revenues and other
(g) 12,744 10,625 2,119 19.9 % Total other 30,858
32,591 (1,733 ) (5.3 )% Total operating revenues $ 916,797
$ 886,936 $ 29,861 3.4 % (a) 2017 includes
$8.8 million of relate back revenues in Texas from July 18, 2017
through December 31, 2017, which was recorded in the fourth quarter
of 2017 related to the 2017 PUCT Final Order. (b) Includes the
portion of the U.S. 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. (c) 2017 includes $5.0 million
related to the Palo Verde performance rewards, net. (d)
Historically, fuel and purchased power costs in the New Mexico
jurisdiction were recorded through base rates and the Fuel and
Purchased Power Cost Adjustment Clause ("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's final order in the Company's 2015 New Mexico retail rate
case, Case No. 15-00127-UT, these costs are no longer recovered
through base rates but are recovered through the FPPCAC. (e)
Includes deregulated Palo Verde Unit 3 revenues for the New Mexico
jurisdiction of $9.8 million and $8.7 million in 2017 and 2016,
respectively. (f) Represents revenue with no related kWh sales. (g)
Includes energy efficiency bonus of $1.5 million and $0.5 million
in 2017 and 2016, respectively.
El Paso Electric
Company Twelve Months Ended December 31, 2017 and 2016
Other Statistical Data
Increase (Decrease) 2017
2016 Amount Percentage
Average number of
retail customers: (a)
Residential 368,044 362,138 5,906 1.6 % Commercial and industrial,
small 41,978 41,014 964 2.4 % Commercial and industrial, large 48
49 (1 ) (2.0 )% Sales to public authorities 5,532
5,303 229 4.3 % Total 415,602
408,504 7,098 1.7 %
Number of retail
customers (end of period): (a)
Residential 370,054 363,987 6,067 1.7 % Commercial and industrial,
small 42,291 41,741 550 1.3 % Commercial and industrial, large 48
49 (1 ) (2.0 )% Sales to public authorities 5,500
5,285 215 4.1 % Total 417,893
411,062 6,831 1.7 %
Weather
statistics: (b)
10-Year Average Cooling degree days 2,917 2,811 2,773
Heating degree days 1,522 1,851 2,081
Generation and
purchased power (kWh, in thousands):
Increase (Decrease) 2017 2016 Amount
Percentage Palo Verde 5,109,325 5,093,844 15,481 0.3
% Four Corners (c) — 175,258
(175,258
)
— Gas plants 3,841,550 3,550,904
290,646 8.2 % Total generation 8,950,875 8,820,006 130,869
1.5 % Purchased power: Photovoltaic 292,157 289,800 2,357 0.8 %
Other 1,248,684 1,262,451
(13,767 ) (1.1 )% Total purchased power 1,540,841
1,552,251 (11,410 ) (0.7 )% Total available
energy 10,491,716 10,372,257 119,459 1.2 % Line losses and Company
use 541,986 570,172 (28,186 )
(4.9 )% Total kWh sold 9,949,730 9,802,085
147,645 1.5 % Palo Verde capacity
factor
93.8
%
93.2 % 0.6 % Palo Verde O&M expenses (d) $ 99,364 $
96,914 $ 2,450 (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 December 31, 2017 and 2016 (In
thousands, except number of shares, book value per common share,
and ratios) (Unaudited)
Balance Sheet 2017 2016 Cash and
cash equivalents $ 6,990 $ 8,420 Common stock
equity $ 1,142,165 $ 1,074,396 Long-term debt 1,195,988
1,195,513 Total capitalization $ 2,338,153 $
2,269,909 Current maturities of long-term debt $ —
$ 83,143 Short-term borrowings under the
revolving credit facility $ 173,533 $ 81,574
Number of shares - end of period 40,584,338 40,517,718
Book value per common share $ 28.14 $ 26.52
Common equity ratio (a) 45.5 % 44.1 % Debt ratio 54.5
% 55.9 % (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.
El Paso Electric Company Twelve Months Ended
December 31, 2017 2017 PUCT Final Order On
December 18, 2017, the PUCT issued the 2017 PUCT Final Order. See
"Rate Case- 2017 Texas Retail Rate Case Filing" for a discussion of
the 2017 PUCT Final Order.
The increase (decrease) on operations
resulting from the 2017 PUCT Final Order is categorized in the
following periods based on consumption (in thousands):
Three Months Ended Twelve Months Ended
Category March 31, 2017 June 30,
2017 September 30, 2017
December 31, 2017 December 31, 2017 Retail non-fuel
base rate increase: Relate back $ — $ — $ 4,753 $ 4,023 $ 8,776
Depreciation and amortization expense — — (278 ) (435 ) (713 ) Rate
case expense — — — (58 ) (58 ) Pre-tax
increase $ — $ — $ 4,475 $ 3,530 $ 8,005 Income tax expense —
— 1,566
1,236 2,802 After-tax increase $
— $ — $ 2,909
$ 2,294 $ 5,203
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180227005525/en/
El Paso Electric CompanyMedia Eddie Gutierrez,
915-543-5763eduardo.gutierrez@epelectric.comorInvestor
RelationsLisa Budtke,
915-543-5947lisa.budtke@epelectric.com
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