El Paso Electric Company (NYSE:EE):
Overview
- For the second quarter of 2016, El Paso
Electric Company ("EE" or the "Company") reported net income of
$22.3 million, or $0.55 basic and diluted earnings per share. In
the second quarter of 2015, EE reported net income of $21.1
million, or $0.52 basic and diluted earnings per share.
- For the six months ended June 30, 2016,
EE reported net income of $16.5 million, or $0.41 basic and diluted
earnings per share. Net income for the six months ended June 30,
2015 was $24.5 million, or $0.61 basic and diluted earnings per
share.
“We are pleased with our second quarter results and the progress
that we have made. Although the impact of regulatory lag continues
to adversely affect our operating results, our performance for the
second quarter exceeded last year’s performance,” said Mary Kipp,
Chief Executive Officer. “Our region continues to experience solid
growth, and we set a new native system peak of 1,892 MW on July 14,
2016, which is 5.5%, or 98 MW, higher than the peak established in
2015. In fact, we have already experienced eight days this summer
in which our peak exceeded last year’s peak. In addition, the
recent sale of our interest in Four Corners means the Company no
longer owns any coal-fired generation, and we expect to have final
resolution of our pending Texas rate case soon."
Earnings Summary
The table and explanations below present the major factors
affecting 2016 net income relative to 2015 net income (in thousands
except per share data):
Quarter Ended Six
Months Ended
Pre-TaxEffect
After-TaxEffect
BasicEPS
Pre-TaxEffect
After-TaxEffect
BasicEPS
June 30, 2015 $ 21,072 $ 0.52 $ 24,530 $ 0.61 Changes in: Retail
non-fuel base revenues $ 3,065 1,992 0.05 $ 4,024 2,616 0.06
Investment and interest income 2,193 1,769 0.04 (132 ) (95 ) —
O&M at fossil-fuel generating plants 69 45 — (3,103 ) (2,016 )
(0.05 ) Interest on long-term debt (1,803 ) (1,171 ) (0.03 ) (1,919
) (1,247 ) (0.03 ) Depreciation and amortization (717 ) (466 )
(0.01 ) (2,445 ) (1,590 ) (0.04 ) Allowance for funds used during
construction (151 ) (148 ) — (3,053 ) (2,712 ) (0.07 ) Deregulated
Palo Verde Unit 3 (17 ) (12 ) — (978 ) (636 ) (0.02 ) Other 257 167
— (2,312 ) (1,503 ) (0.03 ) Changes in the effective tax rate (964
) (0.02 ) (871 ) (0.02 ) June 30, 2016 $ 22,284 $ 0.55
$ 16,476 $ 0.41
Regulatory Lag
The completion of Montana Power Station ("MPS") Units 1 & 2
(including common plant, transmission lines and substation) and the
Eastside Operations Center ("EOC") continues to have a negative
impact on the Company's financial results through June 30, 2016,
due to regulatory lag associated with the placement in service of
these assets without a corresponding increase in revenues. The
placement in service of MPS Unit 3 in May 2016 and the anticipated
completion of MPS Unit 4 in September 2016 will continue the
negative impact of regulatory lag until new and higher rates become
effective. As discussed in "2015 Texas Retail Case Filing"
below, interim rates subject to refund or surcharge were
implemented on April 1, 2016 in Texas. However, due to the
uncertainties surrounding the rate case, the Company did not
recognize the effects of the increased interim rates in our
Statements of Operations. The Company believes rates reflecting the
recovery of the investment in and related costs of MPS Units 1
& 2 and the EOC will be in place in the second half of 2016 in
Texas and New Mexico. The Company anticipates filing new rate cases
in Texas and New Mexico in early 2017 to reflect MPS Units 3 &
4 in rate base. The primary impact from these assets being placed
in service include a reduction in amounts capitalized for allowance
for funds used during construction ("AFUDC"), and increases in
depreciation, operations and maintenance ("O&M") expense,
property taxes and interest cost.
Second Quarter 2016
Income for the quarter ended June 30, 2016, when compared to the
quarter ended June 30, 2015, was positively affected by:
- Increased retail non-fuel base
revenues, primarily resulting from a 5.9% and 1.1% increase in kWh
sales from residential and small commercial and industrial
customers, respectively. These increases were driven principally by
a 1.5% increase in the average number of customers served and
warmer weather. Partially offsetting the increases were decreased
revenues from sales to public authorities and large commercial and
industrial customers reflecting a 3.5% and 2.8% decrease in kWh
sales, respectively.
- Increased investment and interest
income due to higher realized gains on securities sold from the
Company’s Palo Verde decommissioning trust in the second quarter of
2016 compared to the second quarter of 2015.
Income for the quarter ended June 30, 2016, when compared to the
quarter ended June 30, 2015, was negatively affected by:
- Increased interest on long-term debt
due to the interest accrued on $150 million aggregate principal
amount of senior notes issued in March 2016.
- Increased depreciation and amortization
related to an increase in depreciable plant, including MPS Unit 3,
which was placed in service on May 3, 2016, partially offset by a
change in the estimated useful life of certain intangible software
assets.
- Decreased AFUDC due to a reduction in
the AFUDC rate effective January 2016, partially offset by AFUDC
earned on construction costs related to MPS Units 3 and 4 in
2016.
- Change in the effective tax rate
largely due to the reduction of the domestic production
manufacturing deduction and changes in state taxes.
First Six Months of 2016
Income for the six months ended June 30, 2016, when compared to
the six months ended June 30, 2015, was negatively affected by:
- Decreased AFUDC due to a reduction in
the AFUDC rate effective January 2016 and lower balances of
construction work in progress ("CWIP"), primarily due to MPS Units
1 & 2 and the EOC being placed in service in March 2015,
partially offset by AFUDC earned on construction costs related to
MPS Units 3 & 4 in 2016.
- Increased O&M expenses related to
our fossil-fuel generating plants, primarily due to maintenance
outages on Four Corners Units 4 & 5 and Rio Grande Unit 7
during the first six months of 2016. These increases were partially
offset by a maintenance outage at Newman Unit 5 in 2015, with no
comparable expense in the same period in 2016.
- Increased depreciation and amortization
related to an increase in depreciable plant, primarily due to MPS
Units 1 & 2 and the EOC being placed in service in March 2015
and MPS Unit 3 being placed in service on May 3, 2016, partially
offset by a change in the estimated useful life of certain
intangible software assets.
- Increased interest on long-term debt
due to the interest accrued on $150 million aggregate principal
amount of senior notes issued in March 2016.
- Decreased deregulated Palo Verde Unit 3
revenues, primarily due to a 21.8% decrease in proxy market prices
reflecting a decline in the price of natural gas, partially offset
by increased generation due in part to a Palo Verde Unit 3 planned
2015 spring refueling outage that was completed in May 2015 with no
comparable outage in 2016.
- Change in the effective tax rate
largely due to the reduction of the domestic production
manufacturing deduction and changes in state taxes.
Income for the six months ended June 30, 2016, when compared to
the six months ended June 30, 2015, was positively affected by:
- Increased retail non-fuel revenues,
primarily resulting from a 3.8% and 1.5% increase in kWh sales from
our residential and small commercial and industrial customers,
respectively. These increases are driven principally by a 1.5% and
1.4%, respectively, increase in the average number of customers
served and warmer weather. Partially offsetting the increases were
decreased revenues from our large commercial and industrial
customers and sales to public authorities reflecting a 3.0% and
1.5% decrease in kWh sales, respectively.
Retail Non-fuel Base Revenues
Retail non-fuel base revenues increased $3.1 million, pre-tax,
or 2.1%, in the second quarter of 2016, compared to the second
quarter of 2015. This increase includes a $3.3 million increase in
revenues from residential customers and a $0.8 million increase in
revenues from small commercial and industrial customers reflecting
increases of 1.5% in the average number of customers served and
warmer weather. Cooling degree days increased 3.9% for the second
quarter of 2016, when compared to the second quarter of 2015. KWh
sales to residential customers and small commercial and industrial
customers increased by 5.9% and 1.1%, respectively, during the
second quarter of 2016, when compared to the second quarter of
2015. Retail non-fuel base revenues from sales to public
authorities and large commercial and industrial customers decreased
$0.6 million and $0.4 million, respectively, reflecting a 3.5% and
2.8%, respectively, decrease in kWh sales during the second quarter
of 2016, when compared to the second quarter of 2015. Non-fuel base
revenues and kWh sales for the second quarter of 2016 and 2015 are
provided by customer class on page 12 of this release.
For the six months ended June 30, 2016, retail non-fuel revenues
increased $4.0 million, pre-tax, or 1.6%, compared to the six
months ended June 30, 2015. This increase includes a $4.0 million
increase in revenues from residential customers and a $1.0 million
increase in revenues from small commercial and industrial customers
reflecting increases of 1.5% and 1.4%, respectively, in the average
number of customers served and warmer weather. KWh sales to
residential customers and small commercial and industrial customers
increased by 3.8% and 1.5%, respectively, during the first half of
2016, when compared to the first half of 2015. Retail non-fuel base
revenues from large commercial and industrial customers and sales
to public authorities each decreased by $0.5 million reflecting a
3.0% and 1.5%, respectively, decrease in kWh sales during the first
half of 2016, when compared to the first half of 2015. Non-fuel
base revenues and kWh sales for the first half of 2016 and 2015 are
provided by customer class on page 14 of this release.
2015 Rate Cases
2015 New Mexico Rate Case Filing
On May 11, 2015, the Company filed with the New Mexico Public
Regulation Commission ("NMPRC") in Case No. 15-00127-UT, for an
annual increase in non-fuel base rates of approximately $8.6
million or 7.1%. The filing also requested an annual reduction of
$15.4 million, or 21.5%, for fuel and purchased power costs.
Subsequently, the Company reduced its requested increase in
non-fuel base rates to approximately $6.4 million. On June 8, 2016,
the NMPRC issued its final order approving an annual increase in
non-fuel base rates of approximately $1.1 million and a decrease in
the Company's allowed return on equity to 9.48%. The final order
concludes that all of the Company's new plant in service was
reasonable and necessary and therefore would be recoverable in rate
base. The Company's rates were approved by the NMPRC effective July
1, 2016.
2015 Texas Retail Case Filing
On August 10, 2015, the Company filed with the City of El Paso,
other municipalities incorporated in its Texas service territory
and the Public Utility Commission of Texas ("PUCT") in Docket No.
44941, a request for an annual increase in non-fuel base revenues
of approximately $71.5 million. On January 15, 2016, the Company
filed its rebuttal testimony modifying the requested increase to
$63.3 million. The Company invoked its statutory right to have its
new rates relate back for consumption on and after January 12,
2016, which is the 155th day after the filing. 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. 44941. The
PUCT has the authority to require the Company to surcharge or
refund such difference over a period not to exceed 18 months. On
January 21, 2016, the Company, the City of El Paso, the PUCT Staff,
the Office of Public Utility Counsel and Texas Industrial Energy
Consumers filed a joint motion to abate the procedural schedule to
facilitate settlement talks. This motion was granted.
On March 29, 2016, the Company and other settling parties to
PUCT Docket No. 44941 filed a Non-Unanimous Stipulation and
Agreement and motion to approve interim rates (the "Non-Unanimous
Settlement") with the PUCT. Four parties to the rate case opposed
the Non-Unanimous Settlement. Interim rates reflecting an annual
non-fuel base rate increase of $37 million were approved by the
PUCT effective April 1, 2016 subject to refund or surcharge.
Subsequent to filing the Non-Unanimous Settlement, the rate case
was subject to numerous procedural matters, including a May 19,
2016 ruling by the PUCT that the Company’s initial notice did not
adequately contemplate the treatment of residential customers with
solar generation contained in the Non-Unanimous Settlement.
At a June 10, 2016 pre-hearing conference, all parties to the
case renewed discussions to attempt to reach a unanimous settlement
of all issues and avoid further litigation. On July 21, 2016, the
Company filed a Joint Motion to Implement Uncontested Amended and
Restated Stipulation and Agreement with the PUCT, which was
unopposed by parties to the rate case in Docket No. 44941 (the
"Unopposed Settlement").
The terms of the Unopposed Settlement include: (i) an annual
non-fuel base rate increase of $37 million, lower annual
depreciation expense of approximately $8.5 million, a return on
equity of 9.7% for AFUDC purposes, and including substantially all
new plant in service in rate base; (ii) an additional annual
non-fuel base rate increase of $3.7 million related to Four Corners
Generating Station costs; (iii) removing the separate treatment for
residential customers with solar generation; and (iv) allowing the
Company to recover most of the rate case expenses up to a date
certain. The Unopposed Settlement is subject to approval by the
PUCT. The settlement documents were filed with ALJs assigned to
oversee the Company's Texas Rate case, who have returned the
settled case to the PUCT for approval. It is anticipated that the
Unopposed Settlement will be considered by the PUCT at its meeting
scheduled for August 18, 2016. The costs of serving residential
customers with solar generation will be addressed in a future
proceeding.
Given the uncertainties regarding the ultimate resolution of
this rate case, the Company did not recognize the impacts of the
Unopposed Settlement in the Statements of Operations for the second
quarter of 2016. At this time, the Company believes the revenue and
other impacts of the Unopposed Settlement for financial reporting
purposes will be recognized during the second half of 2016.
Regardless of the ultimate timing and amounts, new rates will
relate back to consumption on and after January 12, 2016.
Commercial Operation of Montana Power Station Unit 3 and
Construction of Unit 4
On May 3, 2016, the Company placed into commercial operation the
third generating unit at MPS and the related common facilities and
transmission systems at a cost of approximately $81.3 million. The
88-MW simple cycle aero-derivative combustion turbine is powered by
natural gas and has quick start capabilities which allows the unit
to go from off-line to full output in less than 10 minutes, thus
increasing overall power grid stability, and work in concert with
the Company's renewable energy sources. This unit will generate
enough energy to power more than 40,000 homes in the Company's
growing service territory. MPS Unit 4, identical to the other three
MPS units, is expected to reach commercial operation September
2016.
Completion of the Sale of Four Corners
On February 17, 2015, the Company and Arizona Public Service
Company ("APS") entered into an asset purchase agreement, providing
for the purchase by APS of the Company's interests in Units 4 &
5 of the Four Corners Power Plant. On July 6, 2016, the closing of
the transaction occurred, after which the Company no longer owns
any coal-fired generation. At the closing, the Company received
approximately $4.2 million in cash, subject to post-closing
adjustments. No significant gain or loss was recorded upon the
closing of the sale.
Quarterly Cash Dividend
On May 26, 2016, the Board of Directors approved an increase to
the quarterly cash dividend to $0.31 per share of common stock from
our previous quarterly rate of $0.295 per share. This represents an
increase in the annualized cash dividend from $1.18 to $1.24 per
share. The dividend increase commenced with the June 30, 2016
dividend payment. On July 21, 2016, the Board of Directors declared
a quarterly cash dividend of $0.31 per share payable on September
30, 2016 to shareholders of record as of the close of business on
September 14, 2016.
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
("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 42.3% of our capitalization (common stock equity,
long-term debt, current maturities of long-term debt and short-term
borrowings under the RCF). At June 30, 2016, we had a balance of
$9.6 million in cash and cash equivalents. Based on current
projections, we believe that we will have adequate liquidity
through our current cash balances, cash from operations and
available borrowings under our RCF to meet all of our anticipated
cash requirements for the next 12 months.
Cash flows from operations for the six months ended June 30,
2016 were $40.7 million, compared to $60.4 million for the six
months ended June 30, 2015. The primary factors affecting the
decrease in cash flows from operations were a reduction in earnings
arising from regulatory lag and decreases in the net
over-collection of fuel revenues. The growth in accounts
receivable, primarily reflecting the implementation of interim
rates in Texas, is offset by the deferral of the related revenues.
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 six months ended June 30, 2016, the Company had a fuel
under-recovery of $2.0 million compared to an over-recovery of fuel
costs of $10.8 million during the six months ended June 30, 2015.
At June 30, 2016, we had a net fuel over-recovery balance of $2.0
million, including an over-recovery of $1.1 million in New Mexico
and an over-recovery of $1.0 million in Texas and an under-recovery
of $0.1 million in the Federal Energy Regulatory Commission
("FERC") jurisdiction.
During the six months ended June 30, 2016, our primary capital
requirements were for the construction and purchase of electric
utility plant, payment of common stock dividends, and purchases of
nuclear fuel. Capital requirements for new electric utility plant
were $102.8 million for the six months ended June 30, 2016 and
$147.0 million for the six months ended June 30, 2015. Capital
expenditures for 2016 are expected to be approximately $234
million. Capital requirements for purchases of nuclear fuel were
$20.5 million for the six months ended June 30, 2016, and
$22.4 million for the six months ended June 30, 2015.
On June 30, 2016, we paid a quarterly cash dividend of $0.31 per
share, or $12.5 million, to shareholders of record as of the close
of business on June 15, 2016. We paid a total of $24.5 million in
cash dividends during the six months ended June 30, 2016. At the
current dividend rate, we expect to pay cash dividends of
approximately $49.6 million during 2016.
No shares of common stock were repurchased during the six months
ended June 30, 2016. As of June 30, 2016, a total of 393,816 shares
remain available for repurchase under the Company's currently
authorized stock repurchase program. The Company may in the future
make purchases of its 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 the Company's financial statements. The RCF has a term ending
January 14, 2019. The maximum aggregate unsecured borrowing
currently available under the RCF is $300 million. We may increase
the RCF by up to $100 million (up to a total of $400 million)
during the term of the agreement, upon the satisfaction of certain
conditions, more fully set forth in the agreement, including
obtaining commitments from lenders or third party financial
institutions. The total amount borrowed for nuclear fuel by the
RGRT, excluding debt issuance costs, was $129.6 million at June 30,
2016, of which $34.6 million had been borrowed under the RCF, and
$95.0 million was borrowed through the issuance of senior notes.
Borrowings by the RGRT for nuclear fuel, excluding debt issuance
costs, were $128.1 million as of June 30, 2015, of which $18.1
million had been borrowed under the RCF and $110.0 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. At June 30, 2016, $67.0 million was outstanding
under the RCF for working capital and general corporate purposes,
which may include funding capital expenditures. At June 30, 2015,
$110.0 million was outstanding under the RCF for working capital
and general corporate purposes. Total aggregate borrowings under
the RCF at June 30, 2016 were $101.6 million with an additional
$197.9 million available to borrow.
We received approval from the NMPRC on October 7, 2015, and from
the FERC on October 19, 2015, to issue up to $310 million in new
long-term debt and to guarantee the issuance of up to $65 million
of new debt by the RGRT to finance future purchases of nuclear fuel
and to refinance existing nuclear fuel debt obligations. We
also requested approval from the FERC to continue to utilize our
existing RCF without change from the FERC’s previously approved
authorization. The FERC authorization is effective from November
15, 2015 through November 15, 2017. The approvals granted in these
cases supersede prior approvals. Under this authorization, on March
24, 2016, the Company issued $150 million in aggregate principal
amount of 5.00% Senior Notes due December 1, 2044. The proceeds
from the issuance of these senior notes, after deducting the
underwriters' commission, were $158.1 million. These proceeds
include accrued interest of $2.4 million and a $7.1 million premium
before expenses. The effective interest rate is approximately
4.77%. The net proceeds from the sale of these senior notes were
used to repay outstanding short-term borrowings under the RCF.
These senior notes constitute an additional issuance of the
Company’s 5.00% Senior Notes due 2044, of which $150 million was
previously issued on December 1, 2014, for a total principal amount
outstanding of $300 million.
2016 Earnings Guidance
As discussed above, the Company filed rate cases in New Mexico
and Texas on May 11, 2015 and August 10, 2015, respectively. The
Company received a final order in the New Mexico rate case on June
8, 2016 and filed the Unopposed Settlement with the PUCT on July
21, 2016 for the Texas rate case. Therefore, the Company has
decided to provide earnings guidance for 2016 with a range of $2.20
to $2.50 per basic share. The middle of the range assumes normal
weather for the remainder of the year and that the PUCT approves
the Unopposed Settlement during the second half of 2016.
The Company's guidance assumes normal operating conditions for
the remainder of 2016. Other key factors and assumptions underlying
the guidance can be found in the second quarter 2016 earnings
presentation slides on the Company's website at http://www.epelectric.com.
Conference Call
A conference call to discuss the second quarter 2016 financial
results is scheduled for 10:30 A.M. Eastern Time, on August 3,
2016. The dial-in number is 888-337-8198 with a conference ID
number of 6337142. The international dial-in number is
719-325-2494. The conference leader will be Lisa Budtke, Director
Treasury Services and Investor Relations. A replay will run through
August 17, 2016 with a dial-in number of 888-203-1112 and a
conference ID number of 6337142. 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. 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 (the "SEC"), and include, but is
not limited to: (i) uncertainty regarding the actions and timing of
matters in the Company's Texas rate case pending before the PUCT;
(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) 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 June 30, 2016 and 2015 (In
thousands except for per share data) (Unaudited)
2016 2015
Variance Operating revenues $ 217,865 $
219,508 $ (1,643 )
Energy expenses: Fuel 43,143
49,813 (6,670 ) Purchased and interchanged power 13,610
11,742 1,868 56,753 61,555 (4,802 )
Operating revenues net of energy expenses 161,112
157,953 3,159
Other operating expenses: Other
operations 56,817 57,656 (839 ) Maintenance 20,426 19,857 569
Depreciation and amortization 23,852 23,135 717 Taxes other than
income taxes 15,320 15,433 (113 ) 116,415
116,081 334
Operating income 44,697
41,872 2,825
Other income (deductions):
Allowance for equity funds used during construction 2,133 2,268
(135 ) Investment and interest income, net 3,591 1,398 2,193
Miscellaneous non-operating income 145 507 (362 ) Miscellaneous
non-operating deductions (890 ) (1,271 ) 381 4,979
2,902 2,077
Interest charges (credits):
Interest on long-term debt and revolving credit facility 18,298
16,495 1,803 Other interest 272 354 (82 ) Capitalized interest
(1,253 ) (1,261 ) 8 Allowance for borrowed funds used during
construction (1,375 ) (1,391 ) 16 15,942 14,197
1,745
Income before income taxes 33,734 30,577
3,157
Income tax expense 11,450 9,505 1,945
Net income $ 22,284 $
21,072 $ 1,212 Basic
earnings per share $ 0.55 $
0.52 $ 0.03 Diluted
earnings per share $ 0.55 $
0.52 $ 0.03 Dividends
declared per share of common stock $ 0.310 $ 0.295
$ 0.015
Weighted average number of shares
outstanding 40,345 40,270 75
Weighted average number of
shares and dilutivepotential shares outstanding
40,399 40,303 96
El Paso
Electric Company Statements of Operations Six Months
Ended June 30, 2016 and 2015 (In thousands except for per
share data) (Unaudited)
2016 2015 Variance
Operating revenues $ 375,674 $ 383,254 $ (7,580 )
Energy
expenses Fuel 77,462 87,542 (10,080 ) Purchased and
interchanged power 23,256 22,917 339 100,718
110,459 (9,741 )
Operating revenues net of energy
expenses 274,956 272,795 2,161
Other
operating expenses: Other operations 115,204 113,255 1,949
Maintenance 37,941 35,417 2,524 Depreciation and amortization
47,145 44,700 2,445 Taxes other than income taxes 30,132
29,591 541 230,422 222,963 7,459
Operating income 44,534 49,832 (5,298 )
Other income (deductions): Allowance for equity funds used
during construction 4,469 6,543 (2,074 ) Investment and interest
income, net 6,520 6,652 (132 ) Miscellaneous non-operating income
801 687 114 Miscellaneous non-operating deductions (1,356 ) (1,762
) 406 10,434 12,120 (1,686 )
Interest charges
(credits): Interest on long-term debt and revolving credit
facility 34,897 32,978 1,919 Other interest 834 517 317 Capitalized
interest (2,495 ) (2,550 ) 55 Allowance for borrowed funds used
during construction (3,033 ) (4,012 ) 979 30,203
26,933 3,270
Income before income
taxes 24,765 35,019 (10,254 )
Income tax expense 8,289
10,489 (2,200 )
Net income $
16,476 $ 24,530 $
(8,054 ) Basic earnings per share
$ 0.41 $ 0.61 $
(0.20 ) Diluted earnings per share
$ 0.41 $ 0.61 $
(0.20 ) Dividends declared per share of
common stock $ 0.605 $ 0.575 $ 0.030
Weighted average number of shares outstanding 40,335
40,257 78
Weighted average number of shares and
dilutive potential shares outstanding
40,381 40,285 96
El Paso
Electric Company Cash Flow Summary Six Months Ended
June 30, 2016 and 2015 (In thousands and Unaudited)
2016
2015 Cash flows from operating activities: Net income
$ 16,476 $ 24,530 Adjustments to reconcile net income to net cash
provided by operations: Depreciation and amortization of electric
plant in service 47,145 44,700 Amortization of nuclear fuel 21,957
21,379 Deferred income taxes, net 6,695 8,789 Net gains on sale of
decommissioning trust funds (3,498 ) (3,563 ) Other 4,422 2,588
Change in: Accounts receivable (39,117 ) (20,782 ) Net
over-collection (under-collection) of fuel revenues (1,990 ) 10,833
Accounts payable (9,345 ) (15,528 ) Other (2,052 ) (12,571 )
Net
cash provided by operating activities 40,693
60,375 Cash flows from investing
activities: Cash additions to utility property, plant and
equipment (102,785 ) (147,040 ) Cash additions to nuclear fuel
(20,478 ) (22,424 ) Decommissioning trust funds (4,225 ) (3,871 )
Other (2,161 ) (6,480 )
Net cash used for investing
activities (129,649 ) (179,815 )
Cash flows from financing activities: Dividends paid
(24,474 ) (23,220 ) Borrowings under the revolving credit facility,
net (40,124 ) 113,540 Proceeds from issuance of senior notes
157,052 — Other (2,040 ) (1,020 )
Net cash provided by financing
activities 90,414 89,300
Net increase (decrease) in cash and cash equivalents
1,458 (30,140 ) Cash and cash
equivalents at beginning of period 8,149
40,504 Cash and cash equivalents at end of
period $ 9,607 $ 10,364
El Paso Electric Company Quarter
Ended June 30, 2016 and 2015 Sales and Revenues
Statistics
Increase (Decrease) 2016 2015 Amount
Percentage
kWh sales (in
thousands):
Retail: Residential 679,035 640,940 38,095 5.9 % Commercial and
industrial, small 633,714 626,968 6,746 1.1 % Commercial and
industrial, large 270,908 278,822 (7,914 ) (2.8 )% Public
authorities 405,277 419,882 (14,605 ) (3.5 )% Total
retail sales 1,988,934 1,966,612 22,322 1.1 %
Wholesale: Sales for resale 20,668 20,504 164 0.8 % Off-system
sales 450,801 517,752 (66,951 ) (12.9 )% Total
wholesale sales 471,469 538,256 (66,787 ) (12.4 )%
Total kWh sales 2,460,403 2,504,868 (44,465 ) (1.8 )%
Operating
revenues (in thousands):
Non-fuel base revenues: Retail: Residential $ 62,679 $ 59,422 $
3,257 5.5 % Commercial and industrial, small 54,707 53,864 843 1.6
% Commercial and industrial, large 9,489 9,879 (390 ) (3.9 )%
Public authorities 24,672 25,317 (645 ) (2.5 )% Total
retail non-fuel base revenues 151,547 148,482 3,065 2.1 %
Wholesale: Sales for resale 826 689 137 19.9 %
Total non-fuel base revenues 152,373 149,171 3,202
2.1 % Fuel revenues: Recovered from customers during
the period 26,219 28,949 (2,730 ) (9.4 )% Under collection of fuel
6,096 4,855 1,241 25.6 % New Mexico fuel in base rates 16,602
16,437 165 1.0 % Total fuel revenues (a)
48,917 50,241 (1,324 ) (2.6 )% Off-system
sales: Fuel cost 8,398 10,419 (2,021 ) (19.4 )% Shared margins 852
2,316 (1,464 ) (63.2 )% Retained margins 213 164 49
29.9 % Total off-system sales 9,463 12,899 (3,436 ) (26.6 )%
Other (b) 7,112 7,197 (85 ) (1.2 )% Total operating
revenues $ 217,865 $ 219,508 $ (1,643 ) (0.7 )%
(a) Includes deregulated Palo Verde Unit 3 revenues for the
New Mexico jurisdiction of $1.9 million in each period. (b)
Represents revenues with no related kWh sales.
El
Paso Electric Company Quarter Ended June 30, 2016 and
2015 Other Statistical Data
Increase (Decrease)
2016 2015 Amount Percentage
Average number of
retail customers: (a)
Residential 361,812 356,495 5,317 1.5 % Commercial and industrial,
small 40,832 40,213 619 1.5 % Commercial and industrial, large 49
50 (1 ) (2.0 )% Public authorities 5,274 5,273 1
— Total 407,967 402,031 5,936 1.5 %
Number of retail
customers (end of period): (a)
Residential 362,417 356,932 5,485 1.5 % Commercial and industrial,
small 40,901 40,356 545 1.4 % Commercial and industrial, large 49
49 — — Public authorities 5,251 5,298 (47 ) (0.9 )%
Total 408,618 402,635 5,983 1.5 %
Weather
statistics: (b)
10-Yr Average Cooling degree days 965 929 1,031 Heating
degree days 75 53 72
Generation and
purchased power (kWh, in thousands):
Increase (Decrease) 2016 2015 Amount
Percentage Palo Verde 1,165,459 1,203,902 (38,443 )
(3.2 )% Four Corners 82,143 173,427 (91,284 ) (52.6 )% Gas plants
1,032,440 1,025,980 6,460 0.6 % Total
generation 2,280,042 2,403,309 (123,267 ) (5.1 )% Purchased power:
Photovoltaic 88,765 87,655 1,110 1.3 % Other 239,329 164,194
75,135 45.8 % Total purchased power 328,094
251,849 76,245 30.3 % Total available energy
2,608,136 2,655,158 (47,022 ) (1.8 )% Line losses and Company use
147,733 150,290 (2,557 ) (1.7 )% Total kWh sold
2,460,403 2,504,868 (44,465 ) (1.8 )%
Palo Verde capacity factor
85.8
%
88.6
%
(2.8
)%
(a)
The number of retail customers 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.
El Paso Electric Company Six Months Ended
June 30, 2016 and 2015 Sales and Revenues Statistics
Increase (Decrease) 2016
2015 Amount Percentage
kWh sales (in
thousands):
Retail: Residential 1,248,120 1,202,593 45,527 3.8 % Commercial and
industrial, small 1,133,940 1,117,034 16,906 1.5 % Commercial and
industrial, large 515,834 531,942 (16,108 ) (3.0 )% Public
authorities 751,512 762,975 (11,463 ) (1.5 )% Total
retail sales 3,649,406 3,614,544 34,862 1.0 %
Wholesale: Sales for resale 32,509 32,449 60 0.2 % Off-system sales
1,029,474 1,201,281 (171,807 ) (14.3 )% Total
wholesale sales 1,061,983 1,233,730 (171,747 ) (13.9
)% Total kWh sales 4,711,389 4,848,274 (136,885 )
(2.8 )%
Operating
revenues (in thousands):
Non-fuel base revenues: Retail: Residential $ 110,422 $ 106,362 $
4,060 3.8 % Commercial and industrial, small 86,847 85,834 1,013
1.2 % Commercial and industrial, large 17,582 18,128 (546 ) (3.0 )%
Public authorities 42,072 42,575 (503 ) (1.2 )% Total
retail non-fuel base revenues 256,923 252,899 4,024 1.6 %
Wholesale: Sales for resale 1,195 1,129 66 5.8
% Total non-fuel base revenues 258,118 254,028 4,090
1.6 % Fuel revenues: Recovered from customers during
the period 48,753 63,371 (14,618 ) (23.1 )% Under (over) collection
of fuel (a) 1,993 (10,832 ) 12,825 — New Mexico fuel in base rates
32,828 32,550 278 0.9 % Total fuel revenues
(b) 83,574 85,089 (1,515 ) (1.8 )% Off-system
sales: Fuel cost 16,890 23,284 (6,394 ) (27.5 )% Shared margins
3,407 6,252 (2,845 ) (45.5 )% Retained margins 573 520
53 10.2 % Total off-system sales 20,870 30,056 (9,186
) (30.6 )% Other (c) 13,112 14,081 (969 ) (6.9 )%
Total operating revenues $ 375,674 $ 383,254 $ (7,580
) (2.0 )% (a) Includes Department of Energy refunds related
to spent fuel storage of $1.6 million and $5.8 million,
respectively. (b) Includes deregulated Palo Verde Unit 3 revenues
for the New Mexico jurisdiction of $4.0 million and $5.0 million,
respectively. (c) Represents revenues with no related kWh sales.
El Paso Electric Company Six Months Ended
June 30, 2016 and 2015 Other Statistical Data
Increase
(Decrease) 2016 2015 Amount
Percentage
Average number of
retail customers: (a)
Residential 360,929 355,625 5,304 1.5 % Commercial and industrial,
small 40,684 40,127 557 1.4 % Commercial and industrial, large 49
50 (1 ) (2.0 )% Public authorities 5,324 5,245 79
1.5 % Total 406,986 401,047 5,939 1.5 %
Number of retail
customers (end of period): (a)
Residential 362,417 356,932 5,485 1.5 % Commercial and industrial,
small 40,901 40,356 545 1.4 % Commercial and industrial, large 49
49 — — Public authorities 5,251 5,298 (47 ) (0.9 )%
Total 408,618 402,635 5,983 1.5 %
Weather
statistics: (b)
10-Year Average Cooling degree days 988 963 1,061 Heating
degree days 1,129 1,206 1,255
Generation and
purchased power (kWh, in thousands):
Increase (Decrease) 2016 2015 Amount
Percentage Palo Verde 2,545,956 2,566,096 (20,140 )
(0.8 )% Four Corners 163,149 310,645 (147,496 ) (47.5 )% Gas plants
1,669,870 1,694,555 (24,685 ) (1.5 )% Total
generation 4,378,975 4,571,296 (192,321 ) (4.2 )% Purchased power:
Photovoltaic 156,529 146,714 9,815 6.7 % Other 444,486
405,907 38,579 9.5 % Total purchased power 601,015
552,621 48,394 8.8 % Total available energy
4,979,990 5,123,917 (143,927 ) (2.8 )% Line losses and Company use
268,601 275,643 (7,042 ) (2.6 )% Total kWh sold
4,711,389 4,848,274 (136,885 ) (2.8 )%
Palo Verde capacity factor
93.7
%
95.0
%
(1.3
)%
(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.
El Paso Electric Company Financial
Statistics At June 30, 2016 and 2015 (In thousands,
except number of shares, book value per common share, and
ratios) Balance Sheet
2016 2015 Cash and cash equivalents $ 9,607
$ 10,364 Common stock equity $ 1,010,940 $
984,678 Long-term debt (a) 1,278,301 1,122,264 Total
capitalization $ 2,289,241 $ 2,106,942 Current
maturities of long-term debt $ — $ 15,000
Short-term borrowings under the revolving credit facility $ 101,614
$ 128,072 Number of shares - end of period
40,520,871 40,425,884 Book value per common
share $ 24.95 $ 24.36 Common equity ratio (b)
42.3 % 43.8 % Debt ratio 57.7 % 56.2 % (a)
In accordance with ASU 2015-03 (Subtopic
835-30), Interest - Imputation of Interest, debt issuance costs
related to a recognized debt liability are presented in the balance
sheet as a direct deduction from the carrying amount of that debt
liability. The Company implemented ASU 2015-03 in the first quarter
of 2016, and retrospectively to all periods presented.
(b) 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/20160803005541/en/
El Paso Electric CompanyMedia ContactsEddie Gutierrez,
915-543-5763eduardo.gutierrez@epelectric.comorInvestor
RelationsLisa Budtke, 915-543-5947lisa.budtke@epelectric.com
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