Attached files
| file | filename |
|---|---|
| EX-99.01 - EARNINGS PRESS RELEASE - EL PASO ELECTRIC CO /TX/ | exh990112-31x2016.htm |
| 8-K - FORM 8-K - EL PASO ELECTRIC CO /TX/ | form8k12-31x16.htm |
Fourth Quarter 2016
Earnings Conference Call
February 23, 2017
2
A
A
a
This presentation 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:
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
Full and timely recovery of capital investments and operating costs through rates in Texas and New Mexico
Uncertainties and instability in the general economy and the resulting impact on EE’s sales and profitability
Changes in customers’ demand for electricity as a result of energy efficiency initiatives and emerging competing services and
technologies, including distributed generation
Unanticipated increased costs associated with scheduled and unscheduled outages of generating plant
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
The size of our construction program and our ability to complete construction on budget and on time
Potential delays in our construction schedule due to legal challenges or other reasons
Costs at Palo Verde
Deregulation and competition in the electric utility industry
Possible increased costs of compliance with environmental or other laws, regulations and policies
Possible income tax and interest payments as a result of audit adjustments proposed by the IRS or state taxing authorities
Uncertainties and instability in the financial markets and the resulting impact on EE’s ability to access the capital and credit markets
Possible physical or cyber attacks, intrusions or other catastrophic events
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.
Safe Harbor Statement
3
Financial Overview
Reported 4th Quarter net income of $5.7 million or $0.14 per
share, compared to 4th Quarter 2015 net income of $0.6
million or $0.02 per share
Reported annual net income of $96.8 million or $2.39 per
share, compared to YTD 2015 net income of $81.9 million or
$2.03 per share
42016/Recent Accomplishments
Obtained Final Orders in Texas and New Mexico 2015 Rate Cases and
recognized financial impact
Became a coal-free utility by selling interest in the Four Corners Plant
Received regulatory approvals for large-scale solar projects
Voluntary Texas Community Solar Pilot Program- 3 MW
Holloman Air Force Base- 5 MW
Completed construction and started commercial operation of Montana
Power Station (MPS) Units 3 & 4
Set multiple new native system peaks with the highest being 1,892 MW
on July 14, 2016
Refined the dividend policy to include achieving an annual 55% to 65%
payout ratio by 2020
Reopened and issued $150 million of the 5.00% Senior Notes
Extended the revolving credit facility by one year to 2020 and
increased the size to $350 million
52016/Recent Accomplishments (cont.)
Palo Verde Unit 3 recorded shortest refueling outage in its history
Ranked #1 in reliability by the Public Utility Commission of Texas
(PUCT) for the System Average Interruption Duration Index (SAIDI)
and the System Average Interruption Frequency Index (SAIFI)
Finalized a new collective bargaining agreement on September 3,
2016 with IBEW Local 960, which represents 38% of EE’s workforce
Achieved above target customer satisfaction and call center
performance
Employees contributed 9,500 hours to various volunteer organizations
through the Volunteers in Action Program
Combined employee/company contributions to the United Way
Campaign totaled more than $235,000
62017 Objectives
File general rate cases in Texas and New Mexico
In Q2 2017, initiate the first annual dividend increase (beyond
the historical $0.06 annual increase per share) to move
towards achieving an annual 55% to 65% payout ratio by 2020
Complete construction and implement large-scale solar
projects
Voluntary Texas Community Solar Pilot Program (3 MW)
Holloman Air Force Base (5 MW)
Implement 3 year pilot project for demand response
Issue an all-source Request for Proposal (RFP) for generation
resources
Continue to support the economic growth in our community by
delivering clean, safe, reliable and affordable service
7Economic Conditions
$24
$25
$26
2013 2014 2015
$24.9 $25.0
$25.9
El Paso Economic Output
(Billions U.S. Dollars)
Gross Metropolitan Product Published by BEA.Gov
El Paso’s economy is
strong and expanding
Almost $1 billion increase in
economic output from 2014 to
2015
Over $200 million increase in
Home Sales Volume from 2014
to 2016
El Paso County added over
6,000 jobs to the workforce
during 2016
Source: Texas Workforce Commission
$500
$700
$900
$1,100
$1,300
2014 2015 2016
$941
$1,072
$1,144
El Paso Home Sales
Dollar Volume (Millions)
Home Sales Volume (Tx. A&M Real Estate Center)
8Summary of 2017 Rate Cases
Filed a general rate case in Texas on February 13, 2017
Requested a non-fuel base revenue increase of $42.5 million
Anticipate a final order in Q4 2017 with rates relating back to July
18, 2017
Case No. 15-00109-UT requires EE to make a rate filing in
New Mexico in Q2 2017 using a historical test year ended
December 31, 2016
9
Q4 & YTD Key Earnings Drivers
Q4 Basic EPS YTD Basic EPS Description
December 31, 2015 0.02$ 2.03$
Changes In:
Retail non-fuel base revenues 0.12 0.71
Increased primarily due to the recognition of non-fuel rate increase related to
the final order in the Texas 2015 rate case
Depreciation and amortization 0.02 0.08
Decreased primarily due to reductions resulting from changes in rates as
approved by the PUCT and NMPRC commissions in the 2015 rate cases and
the sale of EE's interest in Four Corners. These decreases were offset by an
increase in plant including new generating units being placed in service
Effective tax rate 0.02 (0.13)
YTD increased due to the change to normalize state income taxes in
accordance with 2015 Texas and New Mexico rate case final orders
Other revenues 0.01 0.03
Increased primarily due to rate increases in miscellaneous service charges
related to the final order in the Texas 2015 rate case
Allowance for funds used during
construction (AFUDC)
(0.04) (0.12)
YTD decreased due to lower construction work in progress balances, primarily
due to MPS units and Eastside Operation Center (EOC) being placed in
service in 2015 and 2016, and a reduction in the AFUDC rate as a result of the
final order in the Texas 2015 rate case
Interest on long-term debt (0.03) (0.09)
Increased due to the $150 million principal amount of senior notes issued in
March 2016
Investment and interest income (0.02) (0.07)
Decreased primarily due to lower realized gains on securities sold from EE's
Palo Verde decommissioning trusts
Taxes other than income taxes 0.00 (0.03)
Increased primarily due to increased property tax rates and valuations in Texas
as a result of MPS Units 1 & 2 and the EOC being placed in service in March
2015 and increased billed revenues for Texas revenue related taxes. These
were partially offset by decreased property taxes in Arizona
Other 0.04 (0.02)
December 31, 2016 0.14$ 2.39$
10
Historical Weather Analysis
2,286
2,188 2,144
2,273
2,402
2,009
2,426
1,900
2,095
1,851
2,512
2,272
2,768 2,738
3,141
2,876
2,695
2,671
2,839 2,811
1,000
1,500
2,000
2,500
3,000
3,500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Calendar Year 2016 HDD’s & CDD’s
10-Yr HDD
Average – 2,157
10-Yr CDD
Average – 2,732
Calendar Year 2016 HDDs
14.2% Below 10-Yr Average
11.6% Below Calendar Year 2015
Calendar Year 2016 CDDs
2.9% Above 10-Yr Average
1.0% Below Calendar Year 2015
11
Q4 Retail Sales and Customers
(1) Percent Change expressed as change in Q4 2016 from Q4 2015
Average No.
of Customers
Percent
Change (1)
MWH
Percent
Change (1)
Residential 363,699 1.4% 566,680 (0.2%)
C&I Small 41,567 2.9% 553,829 1.0%
C&I Large 49 2.1% 261,320 0.3%
Public Authorities 5,288 0.3% 372,643 2.5%
Total Retail 410,603 1.5% 1,754,472 0.8%
Cooling Degree Days 227 57.6%
Heating Degree Days 717 (19.3%)
12
YTD Retail Sales and Customers
(1) Percent Change expressed as change in calendar year 2016 from calendar year 2015
Average No.
of Customers
Percent
Change (1)
MWH
Percent
Change (1)
Residential 362,138 1.4% 2,805,789 1.3%
C&I Small 41,014 1.9% 2,403,447 0.8%
C&I Large 49 - % 1,030,745 (3.0%)
Public Authorities 5,303 1.0% 1,572,510 (0.8%)
Total Retail 408,504 1.5% 7,812,491 0.1%
Cooling Degree Days 2,811 (1.0%)
Heating Degree Days 1,851 (11.6%)
13Five Year Cash Capital Expenditures
$0
$50,000
$100,000
$150,000
$200,000
$250,000
2017E 2018E 2019E 2020E 2021E
Estimated Costs of ~ $1.1 billion *
Generation Transmission Distribution General
$215mm
$185mm
$203mm
$240mm $242mm
($000s)
* Anticipate issuing an all-source RFP for generation resources in 2017; therefore,
estimates are subject to change including the acceleration and/or postponement of
projects. As a placeholder, the current estimate includes early construction costs for a
320 MW generating resource, to be placed in service in 2023, although the results of the
RFP will not be known for some time. Includes approximately $20mm of large scale
solar (5 MW for HAFB and 3 MW for TX community).
142017 Earnings Drivers
We will provide 2017
guidance after the final
outcome of our rate
cases is more certain.
In Texas, we anticipate
that new rates will relate
back to July 18, 2017 and
revenues will be
recognized in Q4 2017.
YOY Impact
on EPS
Driver
AFUDC (1)
O&M (1)
Property Taxes (1)
Investment and interest income
Depreciation (1)
Interest expenses (1)
Texas Rate relief
Customer growth
Weather
Other
(1) Regulatory lag will impact these drivers
15
Appendix
16Texas Rate Case Summary
Filed Texas Rate Case on February 13, 2017, Docket No.
46831, based on a historical test year ended September 30,
2016
Rate case request includes:
Non-fuel base revenue increase of $42.5 million
Investment in new plant of approximately $444.3 million since the
2015 Texas rate case
Return on Equity of 10.50% with an equity ratio of 48.35%
Baseline revenue requirements for transmission and distribution to
enable future application of cost recovery factors
New three part rate structure for residential and small commercial
distributed generation (DG) customers
Propose separate rate class for residential DG customers
Final rates relating back to July 18, 2017*
* 155 days after the rate case was filed on February 13, 2017
17
Illustrative Timeline – 2017 Rate Cases*
New Mexico
Texas
May Jul Sep Nov
Jan
2017
Mar May Jul Sep Nov
Jan
2018 2018
Final Order
Q2 2018
Final Order
Q4 2017
Relate Back Date for
Rates
July 18, 2017
File Rate Case
Q2 2017
File Rate Case
Feb 13 ,2017MPS Unit 4 In-Service
MPS Unit 4 In-Service
Historical Test Year End
Dec 2016
Historical Test Year End
Sep 2016
MPS Unit 3 In-Service
May 2016
MPS Unit 3 In-Service
May 2016
2016
• Case No. 15-00109-UT requires EE to make a rate filing in New Mexico in Q2 2017 using a historical test year ended December 31,
2016
• Texas Rate Case filing uses a historical test year ended September 2016
• Section 36.211 of the Texas Utilities Code, which was added in 2015, allows for rates to relate back to the 155th day after a rate
case is filed. For financial reporting purposes, the revenues and other impacts will be recognized when a resolution is reached in
the Texas Rate Case.
May
* Assuming EE receives a favorable outcome, additional rate cases may not be
needed in the near term.
Mar