El Paso Electric Company (NYSE:EE):
Overview
- For the fourth quarter of 2016, El Paso
Electric Company ("EE" or the "Company") reported net income of
$5.7 million, or $0.14 basic and diluted earnings per share. Net
income in the fourth quarter of 2015 was $0.6 million, or $0.02
basic and diluted earnings per share.
- For the twelve months ended December
31, 2016, EE reported net income of $96.8 million, or $2.39 basic
and diluted earnings per share. Net income for the twelve months
ended December 31, 2015 was $81.9 million, or $2.03 basic and
diluted earnings per share.
"We have made significant investments to meet growth in our
region and to replace aging infrastructure, some of which is almost
60 years old. This modern infrastructure will benefit our customers
well into the future," said Mary Kipp, Chief Executive Officer. "We
are pleased that we have started to recover and earn a return on
some of those investments. Our improved overall financial results
are largely due to the rate relief we received in 2016, which
helped to partially mitigate regulatory lag. Including Montana
Power Station Units 3 and 4 and other plant additions, we have now
completed $444 million of capital projects since the end of the
test year in our 2015 rate cases. As a result, we filed a new rate
case in Texas on February 13, 2017 to allow us to begin to recover
and earn a return on these most recent investments."
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 Twelve
Months Ended
Pre-TaxEffect
After-TaxEffect
BasicEPS
Pre-TaxEffect
After-TaxEffect
BasicEPS
December 31, 2015 $ 648 $ 0.02 $ 81,918 $ 2.03 Changes in: Retail
non-fuel base revenues $ 7,743 5,032 0.12 $ 44,311 28,802 0.71
Depreciation and amortization 1,524 991 0.02 5,507 3,580 0.08
Effective tax rate 559 0.02 (5,343 ) (0.13 ) Other revenues 728 473
0.01 1,742 1,132 0.03 Allowance for funds used during construction
(1,819 ) (1,557 ) (0.04 ) (5,570 ) (4,887 ) (0.12 ) Interest on
long-term debt (1,915 ) (1,245 ) (0.03 ) (5,693 ) (3,700 ) (0.09 )
Investment and interest income (1,154 ) (930 ) (0.02 ) (3,425 )
(2,784 ) (0.07 ) Taxes other than income taxes (344 ) (223 ) —
(1,797 ) (1,168 ) (0.03 ) Other 2,934 1,908 0.04
(1,202 ) (782 ) (0.02 ) December 31, 2016 $ 5,656 $ 0.14
$ 96,768 $ 2.39
Financial Effect of the Public Utility Commission of Texas
("PUCT") Final Order
On August 25, 2016, the PUCT issued its final order in the
Company's rate case in Docket No. 44941 (the "PUCT Final Order").
The PUCT Final Order had a significant effect on the Company's 2016
financial results, the impacts of which are reflected in the table
above. See "Rate Cases- 2015 Texas Retail Rate Case Filing" for a
discussion of the PUCT Final Order.
Fourth Quarter 2016
Income for the quarter ended December 31, 2016, when compared to
the quarter ended December 31, 2015, was positively affected by
(presented on a pre-tax basis):
- Increased retail non-fuel base revenues
primarily due to the recognition of $7.2 million related to the
PUCT Final Order.
- Decreased depreciation and amortization
primarily due to (i) reductions of approximately $3.1 million
resulting from changes in depreciation rates as approved by the
PUCT and the New Mexico Public Regulation Commission ("NMPRC") in
the PUCT Final Order and the final order of the NMPRC in Case No.
15-00127-UT issued on June 8, 2016 (the "NMPRC Final Order"),
respectively, and (ii) the sale of the Company's interest in Units
4 and 5 of the Four Corners Power Plant. These decreases were
partially offset by an increase in plant, including Montana Power
Station ("MPS") Units 3 and 4, which were placed in service in May
and September 2016, respectively.
- Decrease in the effective tax rate due
to the loss of the domestic production activities deduction in the
fourth quarter of 2015 offset by an increase in the effective tax
rate due to the change in 2016 to normalize state income taxes in
accordance with the PUCT Final Order and the NMPRC Final
Order.
- Increased other revenues primarily due
to the recognition of miscellaneous service charges of $0.4 million
related to the PUCT Final Order.
- Other includes primarily decreases in
(i) pension and benefit expenses and (ii) other operations and
maintenance costs.
Income for the quarter ended December 31, 2016, when compared to
the quarter ended December 31, 2015, was negatively affected by
(presented on a pre-tax basis):
- Decreased allowance for funds used
during construction ("AFUDC") due to lower balances of construction
work in progress ("CWIP"), primarily due to MPS Units 3 and 4 being
placed in service in May and September 2016, respectively.
- Increased interest on long-term debt
due to the $150 million principal amount of senior notes issued in
March 2016.
- Decreased investment and interest
income primarily due to lower realized gains on securities sold
from the Company’s Palo Verde decommissioning trust in the fourth
quarter of 2016 compared to the fourth quarter of 2015.
Year to Date 2016
Income for the twelve months ended December 31, 2016, when
compared to the twelve months ended December 31, 2015, was
positively affected by (presented on a pre-tax basis):
- Increased retail non-fuel base revenues
primarily due to the recognition of $40.9 million related to the
PUCT Final Order.
- Decreased depreciation and amortization
primarily due to (i) reductions of approximately $10.9 million
resulting from changes in depreciation rates approved in the PUCT
Final Order and the NMPRC Final Order, and (ii) the sale of the
Company's interest in Units 4 and 5 of Four Corners. These
decreases were partially offset by an increase in plant, primarily
due to MPS Units 1 and 2 and the Eastside Operations Center ("EOC")
being placed in service in March 2015, and MPS Units 3 and 4 being
placed in service in May and September 2016, respectively.
- Increased other revenues primarily due
to rate increases in miscellaneous service charges of $1.5 million
related to the PUCT Final Order.
Income for the twelve months ended December 31, 2016, when
compared to the twelve months ended December 31, 2015, was
negatively affected by (presented on a pre-tax basis):
- Increase in the effective tax rate
primarily due to the change to normalize state income taxes in
accordance with the PUCT Final Order and the NMPRC Final
Order.
- Decreased AFUDC due to lower balances
of CWIP, primarily due to the MPS units and the EOC being placed in
service in 2015 and 2016, and a reduction in the AFUDC rate
effective January 2016 as a result of the PUCT Final Order.
- Increased interest on long-term debt
due to the $150 million principal amount of senior notes issued in
March 2016.
- Decreased investment and interest
income primarily due to lower realized gains on securities sold
from the Company’s Palo Verde decommissioning trust in 2016
compared to 2015. The net gains reported in 2016 and 2015 are
primarily the result of the Company's efforts to re-balance and
further diversify its Palo Verde decommissioning trust fund
investments.
- Increased taxes other than income taxes
primarily due to increased property tax rates and valuations in
Texas as a result of MPS Units 1 and 2 and the EOC being placed in
service during the first quarter of 2015 and increased billed
revenues for Texas revenue related taxes. These increases were
partially offset by decreased property taxes in Arizona due to
decreased property values.
Retail Non-fuel Base Revenues
Excluding the $7.2 million PUCT Final Order impact, for the
fourth quarter of 2016, retail non-fuel base revenues increased
$0.6 million, pre-tax or 0.5% compared to the fourth quarter of
2015. This increase was primarily due to increased revenues from
small commercial and industrial customers of $0.7 million due to a
1.0% increase in kWh sales which were driven by a 2.9% increase in
the average number of customers. This increase was partially offset
by a decrease of $0.1 million in revenues from residential
customers due to a 0.2% decrease in kWh sales. While the Company
experienced a 1.4% increase in the average number of residential
customers served, milder weather particularly in the second half of
the 2016 fourth quarter resulted in lower kWh sales compared to the
2015 fourth quarter. Non-fuel base revenues and kWh sales for the
fourth quarter of 2016 and 2015 are provided by customer class on
page 12 of this news release.
Excluding the $40.9 million PUCT Final Order impact, for the
twelve months ended December 31, 2016, retail non-fuel base
revenues increased $3.4 million, pre-tax or 0.6% compared to the
twelve months ended December 31, 2015. This increase was primarily
due to increased revenues from residential customers of $3.5
million due to a 1.3% increase in kWh sales and increased revenues
from small commercial and industrial customers of $2.5 million due
to a 0.8% increase in kWh sales. Increased kWh sales from
residential customers and small commercial and industrial customers
were driven by a 1.4% and 1.9% increase in the average number of
customers, respectively, offset in part by milder weather during
the twelve months ended December 31, 2016 compared to the twelve
months ended December 31, 2015. Revenues decreased $2.4 million
from large commercial and industrial customers during the twelve
months ended December 31, 2016 compared to the twelve months ended
December 31, 2015 due to a 3.0% decrease in kWh sales, due
primarily to reduced demand by the steel manufacturing industry,
and a decrease in surcharges billed to a large customer in 2016
compared to 2015. Non-fuel base revenues and kWh sales for the
twelve months ended December 31, 2016 and 2015 are provided by
customer class on page 14 of this news release.
Rate Cases
2015 Texas Retail Rate 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 PUCT in Docket No. 44941, a request for an annual increase
in non-fuel base revenues.
On August 25, 2016, the PUCT issued the PUCT Final Order, which
provided for: (i) an annual non-fuel rate increase, lower annual
depreciation expense, a revised return on equity for AFUDC
purposes, and the inclusion of substantially all new plant in
service in rate base, all as specified in the uncontested
Stipulation and Agreement filed with the PUCT; (ii) an additional
annual non-fuel base rate increase of $3.7 million related to Four
Corners Generating Station costs, which will be collected through a
surcharge terminating on July 12, 2017; (iii) removing the separate
treatment for residential customers with solar systems; (iv)
allowing the Company to recover $3.1 million in rate case expenses
through a separate surcharge; and (v) allowing the Company to
recover revenues associated with the relate back of rates to
consumption on and after January 12, 2016 through March 31, 2016
through a separate surcharge.
Interim rates, associated with the annual non-fuel rate
increase, became effective on April 1, 2016. The additional
surcharges associated with the incremental Four Corners Generating
Station costs, rate case expenses and the relate back of rates to
consumption on and after January 12, 2016 through March 31, 2016
were implemented on October 1, 2016.
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 PUCT Final Order on August 25, 2016.
Accordingly, it reported in the third quarter of 2016 the
cumulative effect of the PUCT Final Order which related back to
January 12, 2016. Details of the impacts of the PUCT Final Order
are provided on page 17 of this news release.
2015 New Mexico Rate Case Filing
On May 11, 2015, the Company filed with the NMPRC in Case No.
15-00127-UT, for an annual increase in non-fuel base rates. On June
8, 2016, the NMPRC issued the NMPRC Final Order which provided for
an annual increase in non-fuel base rates of approximately $0.6
million, an increase of approximately $0.5 million in other service
fees, and a decrease in the Company's allowed return on equity to
9.48%. The NMPRC Final Order concluded 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 and implemented at
such time.
2017 Texas Retail Rate Case Filing
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. The Company invoked 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. 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. The Company
cannot predict the outcome or the timing of the rate case at this
time.
Commercial Operation of Montana Power Station Unit 3 and Unit
4
The Company has completed construction of the MPS placing into
service Units 3 and 4 on May 3, 2016 and September 15, 2016,
respectively, and the related common facilities and transmission
systems at a cost of approximately $160.5 million, including AFUDC,
for the two units. Each unit is an 89-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. Each of the four MPS units will work
in concert with the Company's renewable energy sources and will
generate enough energy to power more than 40,000 homes in the
Company's growing service territory.
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 and 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. No significant gain or loss was recorded
upon the closing of the sale.
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 44.1% of our capitalization (common stock equity,
long-term debt, current maturities of long-term debt and short-term
borrowings under the RCF) as of December 31, 2016. At December 31,
2016, we had a balance of $8.4 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 twelve months
including the maturity of $50.0 million aggregate principal amount
of our Series B 4.47% Senior Notes (due August 2017) and $33.3
million aggregate principal amount of 2012 Series A 1.875%
Pollution Control Bonds which are subject to mandatory tender for
purchase in September 2017.
Cash flows from operations for the twelve months ended December
31, 2016 were $231.2 million, compared to $246.7 million for
the twelve months ended December 31, 2015. The primary factors
contributing to the reduction in cash flows from operation were
increases in net under-collection of fuel revenues and accounts
receivable. Offsetting the decreases in cash flows were increased
revenues due to the PUCT Final Order and the NMPRC Final Order and
increases in deferred income taxes. 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, 2016, we had fuel under-recoveries of $14.9 million compared to
over-recoveries of fuel costs of $13.3 million during the twelve
months ended December 31, 2015. At December 31, 2016, we had a net
fuel under-recovery balance of $10.9 million, including an
under-recovery of $11.1 million in Texas offset by an over-recovery
of $0.2 million in New Mexico. On November 30, 2016, we filed a
request to increase our Texas fixed fuel factor by approximately
28.8% to reflect increasing natural gas costs. This requested
increase was approved by the PUCT and was effective with our
January 2017 billings.
During the twelve months ended December 31, 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 $225.4 million for the twelve months ended
December 31, 2016 and $281.5 million for the twelve months ended
December 31, 2015. Capital expenditures for 2017 are expected to be
approximately $215 million. Capital requirements for purchases of
nuclear fuel were $42.4 million for the twelve months ended
December 31, 2016, and $42.0 million for the twelve months
ended December 31, 2015.
On January 26, 2017, the Board of Directors declared a quarterly
dividend of $0.31 per share payable on March 31, 2017 to
shareholders of record as of the close of business on March 17,
2017. On December 30, 2016, we paid a quarterly cash dividend of
$0.31 per share, or $12.6 million, to shareholders of record as of
the close of business on December 14, 2016. We paid a total of
$49.6 million in cash dividends during the twelve months ended
December 31, 2016. We expect to continue paying quarterly cash
dividends in 2017.
No shares of common stock were repurchased during the twelve
months ended December 31, 2016. As of December 31, 2016, 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 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 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. The total amount borrowed for nuclear
fuel by the RGRT, excluding debt issuance costs, was $132.6 million
at 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. Borrowings by the RGRT for nuclear fuel, excluding
debt issuance costs, were $128.7 million as of December 31, 2015,
of which $33.7 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. At December 31, 2016, $44.0 million was
outstanding under the RCF for working capital and general corporate
purposes, which may include funding capital expenditures. At
December 31, 2015, $108.0 million was outstanding under the RCF for
working capital and general corporate purposes. Total aggregate
borrowings under the RCF at December 31, 2016 were $81.6 million
with an additional $267.9 million available to borrow, after giving
consideration to the $50 million increase on January 9, 2017.
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, we 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 included accrued
interest of $2.4 million and a $7.1 million premium before
expenses. The effective interest rate for these senior notes 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
our 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.
2017 Earnings Guidance
On February 13, 2017, the Company filed a rate case in Texas as
discussed above. The outcome of this case could have a significant
impact on the Company's results of operations in 2017. Since we
cannot predict the outcome of this rate case, the Company has
decided not to provide earnings guidance at this time. However, we
will provide management's outlook on key drivers on the Company's
February 23, 2017 conference call.
Conference Call
A conference call to discuss 2016 financial results is scheduled
for 10:30 A.M. Eastern Time, on February 23, 2017. The dial-in
number is 888-503-8163 with a conference ID number of 1144948. The
international dial-in number is 719-325-2405. The conference leader
will be Lisa Budtke, Director Treasury Services and Investor
Relations. A replay will run through March 9, 2017 with a dial-in
number of 888-203-1112 and a conference ID number of 1144948. 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) 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 December 31, 2016 and 2015
(In thousands except for per share data) (Unaudited)
2016
2015 Variance Operating revenues $
188,037 $ 176,902 $ 11,135
Energy
expenses: Fuel 41,921 40,060 1,861 Purchased and interchanged
power 12,012 11,108 904
53,933 51,168 2,765
Operating revenues net of energy expenses 134,104
125,734 8,370
Other operating
expenses: Other operations 62,437 64,335 (1,898 ) Maintenance
14,741 15,451 (710 ) Depreciation and amortization 21,220 22,744
(1,524 ) Taxes other than income taxes 15,236
14,892 344 113,634
117,422 (3,788 )
Operating income
20,470 8,312 12,158
Other
income (deductions): Allowance for equity funds used during
construction 1,156 2,222 (1,066 ) Investment and interest income,
net 3,790 4,944 (1,154 ) Miscellaneous non-operating income 219 525
(306 ) Miscellaneous non-operating deductions (1,031 )
(1,551 ) 520 4,134 6,140
(2,006 )
Interest charges (credits): Interest
on long-term debt and revolving credit facility 18,323 16,408 1,915
Other interest 201 372 (171 ) Capitalized interest (1,252 ) (1,210
) (42 ) Allowance for borrowed funds used during construction
(819 ) (1,572 ) 753 16,453
13,998 2,455
Income before
income taxes 8,151 454 7,697
Income tax expense
(benefit) 2,495 (194 ) 2,689
Net income $ 5,656 $ 648
$ 5,008 Basic earnings per
share $ 0.14 $ 0.02
$ 0.12 Diluted earnings per
share $ 0.14 $ 0.02
$ 0.12 Dividends declared per share
of common stock $ 0.310 $ 0.295 $ 0.015
Weighted average number of shares outstanding 40,368
40,297 71
Weighted average number of shares and
dilutive potential shares outstanding
40,445 40,335 110
El Paso Electric Company Statements of
Operations Twelve Months Ended December 31, 2016 and
2015 (In thousands except for per share data)
(Unaudited) 2016
2015 Variance Operating revenues $
886,936 $ 849,869 $ 37,067
Energy expenses Fuel 173,738
188,400 (14,662 ) Purchased and interchanged power 59,727
53,545 6,182 233,465
241,945 (8,480 )
Operating revenues
net of energy expenses 653,471 607,924
45,547
Other operating expenses: Other
operations 242,014 242,950 (936 ) Maintenance 66,746 65,223 1,523
Depreciation and amortization 84,317 89,824 (5,507 ) Taxes other
than income taxes 65,533 63,736
1,797 458,610 461,733
(3,123 )
Operating income 194,861
146,191 48,670
Other income
(deductions): Allowance for equity funds used during
construction 7,023 10,639 (3,616 ) Investment and interest income,
net 14,083 17,508 (3,425 ) Miscellaneous non-operating income 1,292
2,062 (770 ) Miscellaneous non-operating deductions (3,699 )
(4,328 ) 629 18,699 25,881 (7,182 )
Interest charges (credits): Interest on long-term debt and
revolving credit facility 71,544 65,851 5,693 Other interest 1,303
1,313 (10 ) Capitalized interest (4,990 ) (4,968 ) (22 ) Allowance
for borrowed funds used during construction (4,983 )
(6,937 ) 1,954 62,874 55,259
7,615
Income before income taxes
150,686 116,813 33,873
Income tax expense 53,918
34,895 19,023
Net income
$ 96,768 $ 81,918
$ 14,850 Basic earnings per
share $ 2.39 $ 2.03
$ 0.36 Diluted earnings per
share $ 2.39 $ 2.03
$ 0.36 Dividends declared per share
of common stock $ 1.225 $ 1.165 $ 0.060
Weighted average number of shares outstanding 40,351
40,275 76
Weighted average number of shares and
dilutive potential shares outstanding
40,408 40,309 99
El Paso Electric Company Cash Flow Summary Twelve
Months Ended December 31, 2016 and 2015 (In thousands and
Unaudited) 2016
2015 Cash flows from operating activities: Net income
$ 96,768 $ 81,918 Adjustments to reconcile net income to net cash
provided by operations: Depreciation and amortization of electric
plant in service 84,317 89,824 Amortization of nuclear fuel 43,748
43,099 Deferred income taxes, net 50,510 30,846 Net gains on sale
of decommissioning trust funds (7,640 ) (11,114 ) Other 11,006
6,927 Change in: Accounts receivable (17,511 ) 4,839 Net
over-collection (under-collection) of fuel revenues (14,891 )
13,344 Accounts payable (2,140 ) (11,235 ) Regulatory assets (8,741
) (3,303 ) Other (4,276 ) 1,526
Net cash provided by
operating activities 231,150 246,671
Cash flows from investing activities: Cash
additions to utility property, plant and equipment (225,361 )
(281,458 ) Cash additions to nuclear fuel (42,383 ) (41,966 )
Decommissioning trust funds (8,229 ) (7,656 ) Other 241
(11,654 )
Net cash used for investing activities
(275,732 ) (342,734 ) Cash
flows from financing activities: Dividends paid (49,603 )
(47,059 ) Borrowings (repayments) under the revolving credit
facility, net (60,164 ) 127,206 Payment on maturing RGRT senior
notes — (15,000 ) Proceeds from issuance of senior notes 157,052 —
Other (2,432 ) (1,439 )
Net cash provided by financing
activities 44,853 63,708
Net increase (decrease) in cash and cash equivalents
271 (32,355 ) Cash and cash
equivalents at beginning of period 8,149
40,504 Cash and cash equivalents at end of
period $ 8,420 $ 8,149
El Paso Electric Company Quarter
Ended December 31, 2016 and 2015 Sales and Revenues
Statistics
Increase (Decrease) 2016 2015 Amount
Percentage
kWh sales (in
thousands):
Retail: Residential 566,680 567,548 (868 ) (0.2 )% Commercial and
industrial, small 553,829 548,583 5,246 1.0 % Commercial and
industrial, large 261,320 260,480 840 0.3 % Public authorities
372,643 363,381 9,262 2.5 % Total retail sales
1,754,472 1,739,992 14,480 0.8 % Wholesale:
Sales for resale 9,716 8,772 944 10.8 % Off-system sales 475,789
587,732 (111,943 ) (19.0 )% Total wholesale sales
485,505 596,504 (110,999 ) (18.6 )% Total kWh sales
2,239,977 2,336,496 (96,519 ) (4.1 )%
Operating
revenues (in thousands):
Non-fuel base revenues: Retail: Residential $ 54,756 $ 49,100 $
5,656 11.5 % Commercial and industrial, small 40,285 38,636 1,649
4.3 % Commercial and industrial, large 8,451 8,956 (505 ) (5.6 )%
Public authorities 20,024 19,081 943 4.9 %
Total retail non-fuel base revenues (a) 123,516 115,773 7,743 6.7 %
Wholesale: Sales for resale 421 390 31 7.9 %
Total non-fuel base revenues 123,937 116,163 7,774
6.7 % Fuel revenues: Recovered from customers during
the period 41,030 24,780 16,250 65.6 % Under (over) collection of
fuel 3,125 (2,409 ) 5,534 — New Mexico fuel in base rates —
16,364 (16,364 ) — Total fuel revenues (b) 44,155
38,735 5,420 14.0 % Off-system sales: Fuel
cost 9,754 11,202 (1,448 ) (12.9 )% Shared margins 1,952 2,350 (398
) (16.9 )% Retained margins 277 407 (130 ) (31.9 )%
Total off-system sales 11,983 13,959 (1,976 ) (14.2 )% Other (c)
(d) 7,962 8,045 (83 ) (1.0 )% Total operating
revenues $ 188,037 $ 176,902 $ 11,135 6.3 %
(a) Includes $7.2 million increase resulting from the PUCT
Final Order in 2016. (b) Includes deregulated Palo Verde Unit 3
revenues for the New Mexico jurisdiction of $2.1 million in 2016
and 2015. (c) Represents revenues with no related kWh sales and
includes $0.4 million increase resulting from the PUCT Final Order
in 2016. (d) Includes energy efficiency bonus of $1.3 million in
2015.
El Paso Electric Company Quarter
Ended December 31, 2016 and 2015 Other Statistical Data
Increase (Decrease) 2016 2015 Amount
Percentage
Average number of
retail customers: (a)
Residential 363,699 358,712 4,987 1.4 % Commercial and industrial,
small 41,567 40,380 1,187 2.9 % Commercial and industrial, large 49
48 1 2.1 % Public authorities 5,288 5,270
18 0.3 % Total 410,603
404,410 6,193 1.5 %
Number of retail
customers (end of period): (a)
Residential 363,987 358,819 5,168 1.4 % Commercial and industrial,
small 41,741 40,367 1,374 3.4 % Commercial and industrial, large 49
49 — — Public authorities 5,285 5,261
24 0.5 % Total 411,062 404,496
6,566 1.6 %
Weather
statistics: (b)
10-Yr Average
Cooling degree days 227 144 138 Heating degree days 717 889 901
Generation and
purchased power (kWh, in thousands):
Increase (Decrease) 2016 2015 Amount
Percentage Palo Verde 1,235,538 1,196,316 39,222 3.3
% Four Corners (c) — 184,328 (184,328 ) — Gas plants 765,847
744,329 21,518 2.9 % Total
generation 2,001,385 2,124,973 (123,588 ) (5.8 )% Purchased power:
Photovoltaic 54,859 53,423 1,436 2.7 % Other 303,509
286,227 17,282 6.0 % Total purchased
power 358,368 339,650 18,718
5.5 % Total available energy 2,359,753 2,464,623 (104,870 )
(4.3 )% Line losses and Company use 119,776
128,127 (8,351 ) (6.5 )% Total kWh sold
2,239,977 2,336,496 (96,519 ) (4.1 )%
Palo Verde capacity factor
90.0%
87.0%
3.0%
Palo Verde O&M expenses
$
29,400
$
29,937
$
(537)
(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. (c) The Company sold its interest in Four
Corners on July 6, 2016.
El Paso Electric
Company Twelve Months Ended December 31, 2016 and 2015
Sales and Revenues Statistics
Increase (Decrease)
2016 2015 Amount Percentage
kWh sales (in
thousands):
Retail: Residential 2,805,789 2,771,138 34,651 1.3 % Commercial and
industrial, small 2,403,447 2,384,514 18,933 0.8 % Commercial and
industrial, large 1,030,745 1,062,662 (31,917 ) (3.0 )% Public
authorities 1,572,510 1,585,568 (13,058 ) (0.8 )%
Total retail sales 7,812,491 7,803,882 8,609
0.1 % Wholesale: Sales for resale 62,086 63,347 (1,261 ) (2.0 )%
Off-system sales 1,927,508 2,500,947 (573,439 ) (22.9
)% Total wholesale sales 1,989,594 2,564,294 (574,700
) (22.4 )% Total kWh sales 9,802,085 10,368,176
(566,091 ) (5.5 )%
Operating
revenues (in thousands):
Non-fuel base revenues: Retail: Residential $ 278,774 $ 246,265 $
32,509 13.2 % Commercial and industrial, small 194,942 187,436
7,506 4.0 % Commercial and industrial, large 39,070 40,411 (1,341 )
(3.3 )% Public authorities 96,881 91,244 5,637
6.2 % Total retail non-fuel base revenues (a) 609,667 565,356
44,311 7.8 % Wholesale: Sales for resale 2,407 2,455
(48 ) (2.0 )% Total non-fuel base revenues 612,074 567,811
44,263 7.8 % Fuel revenues: Recovered from
customers during the period 148,397 127,765 20,632 16.1 % Under
(over) collection of fuel (b) 14,893 (13,342 ) 28,235 — New Mexico
fuel in base rates 33,279 72,129 (38,850 ) (53.9 )%
Total fuel revenues (c) 196,569 186,552 10,017
5.4 % Off-system sales: Fuel cost 38,933 52,406 (13,473 )
(25.7 )% Shared margins 5,632 11,048 (5,416 ) (49.0 )% Retained
margins 1,137 1,362 (225 ) (16.5 )% Total off-system
sales 45,702 64,816 (19,114 ) (29.5 )% Other (d) (e) 32,591
30,690 1,901 6.2 % Total operating revenues $ 886,936
$ 849,869 $ 37,067 4.4 % (a) Includes
$40.9 million increase resulting from the PUCT Final Order in 2016.
(b) Includes Department of Energy refunds related to spent fuel
storage of $1.6 million and $5.8 million in 2016 and 2015,
respectively. (c) Includes deregulated Palo Verde Unit 3 revenues
for the New Mexico jurisdiction of $8.7 million and $9.7 million in
2016 and 2015, respectively. (d) Represents revenues with no
related kWh sales and includes $1.5 million increase resulting from
the PUCT Final Order in 2016. (e) Includes energy efficiency bonus
of $0.5 million and $1.3 million in 2016 and 2015, respectively.
El Paso Electric Company Twelve Months
Ended December 31, 2016 and 2015 Other Statistical Data
Increase
(Decrease) 2016 2015 Amount
Percentage
Average number of
retail customers: (a)
Residential 362,138 356,969 5,169 1.4 % Commercial and industrial,
small 41,014 40,250 764 1.9 % Commercial and industrial, large 49
49 — — % Public authorities 5,303 5,250
53 1.0 % Total 408,504 402,518
5,986 1.5 %
Number of retail
customers (end of period): (a)
Residential 363,987 358,819 5,168 1.4 % Commercial and industrial,
small 41,741 40,367 1,374 3.4 % Commercial and industrial, large 49
49 — — Public authorities 5,285 5,261
24 0.5 % Total 411,062 404,496
6,566 1.6 %
Weather
statistics: (b)
10-YearAverage
Cooling degree days 2,811 2,839 2,732 Heating degree days 1,851
2,095 2,157
Generation and
purchased power (kWh, in thousands):
Increase (Decrease) 2016 2015 Amount
Percentage Palo Verde 5,093,844 5,136,686 (42,842 )
(0.8 )% Four Corners (c) 175,258 657,744 (482,486 ) (73.4 )% Gas
plants 3,550,904 3,790,659 (239,755 )
(6.3 )% Total generation 8,820,006 9,585,089 (765,083 ) (8.0 )%
Purchased power: Photovoltaic 289,800 277,241 12,559 4.5 % Other
1,262,451 1,113,705 148,746 13.4
% Total purchased power 1,552,251 1,390,946
161,305 11.6 % Total available energy 10,372,257
10,976,035 (603,778 ) (5.5 )% Line losses and Company use
570,172 607,859 (37,687 ) (6.2 )% Total kWh
sold 9,802,085 10,368,176 (566,091 )
(5.5 )%
Palo Verde capacity factor
93.2%
94.3%
(1.1)%
Palo Verde O&M expenses
$
96,914
$
97,639
(725)
(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.
El Paso Electric
Company Financial Statistics At December 31, 2016 and
2015 (In thousands, except number of shares, book value per
common share, and ratios)
Balance Sheet 2016 2015 Cash and cash
equivalents $ 8,420 $ 8,149 Common stock
equity $ 1,074,396 $ 1,016,538 Long-term debt (a) 1,195,513
1,122,660 Total capitalization $ 2,269,909 $
2,139,198 Current maturities of long-term debt $
83,143 $ — Short-term borrowings under the
revolving credit facility $ 81,574 $ 141,738
Number of shares - end of period 40,517,718 40,443,819
Book value per common share $ 26.52 $ 25.13
Common equity ratio (b) 44.1 % 44.6 % Debt ratio 55.9
% 55.4 % (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.
El Paso Electric
Company Twelve Months Ended December 31, 2016 PUCT
Final Order On August 25, 2016, the PUCT issued
its final order in the Company's rate case in Docket No. 44941 (the
"PUCT Final Order"). See "Rate Cases- 2015 Texas Retail Rate Case
Filing" for a discussion of the PUCT Final Order.
The
increase (decrease) on operations resulting from the PUCT Final
Order is categorized in the following periods based on consumption
(in thousands):
Three Months Ended
TwelveMonthsEnded
Category
March 31,2016
June 30,2016
September30, 2016
December31, 2016
December31, 2016
Retail non-fuel base rate increase: Relate back $ 4,782 $ — $ — $ —
$ 4,782 Interim rates 457 10,417 15,138 — 26,012 Additional
non-fuel base rate increase for Four Corners 708 867 1,328 853
3,756 Base rate increase — — — 6,321
6,321 Retail non-fuel base rate increase, total $ 5,947 $
11,284 $ 16,466 $ 7,174 $ 40,871 Miscellaneous service revenues 353
400 390 379 1,522 Revenue taxes (19 ) (436 ) (643 ) (238 ) (1,336 )
Depreciation 2,491 2,510 2,412 2,849 10,262 Rate case expense — —
(600 ) (395 ) (995 ) AFUDC (106 ) (87 )
(72 ) (52 ) (317 ) Pre-tax increase $ 8,666 $ 13,671
$ 17,953 $ 9,717 $ 50,007 Income tax expense (a) 4,104
5,677 7,221 5,714
22,716 After-tax increase $ 4,562
$ 7,994 $ 10,732 $
4,003 $ 27,291 (a) In the third quarter of
2016, the Company changed its accounting for state income taxes
from the flow-through method to the normalization method in
accordance with the PUCT Final Order and the NMPRC Final Order. The
impact of the change was additional income tax expense of $5.1
million for the twelve months ended December 31, 2016.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170223005450/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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