Attached files
| file | filename |
|---|---|
| EX-99.01 - EARNINGS PRESS RELEASE - EL PASO ELECTRIC CO /TX/ | exh99019-30x2017.htm |
| 8-K - FORM 8-K - EL PASO ELECTRIC CO /TX/ | form8k9-30x17.htm |
Third Quarter 2017
Earnings Conference Call
November 1, 2017
2
Safe Harbor Statement
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, including statements regarding
the issuance of a final order by the Public Utility Commission of Texas in the 2017 Texas retail rate case; statements regarding expected
capital expenditures; and statements regarding expected dividends. This information may involve risks and uncertainties that could cause
actual results to differ materially from such forward-looking statements. Additional information concerning factors that could cause actual
results to differ materially from those expressed in forward-looking statements is contained in EE's most recently filed periodic reports and in
other filings made by made by EE with the U.S. Securities and Exchange Commission (the "SEC"), and includes, 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 Nuclear Generating Station
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.
3
Recent Highlights
In November 2017, EE anticipates filing the 2017 Texas rate
case settlement documents with the Administrative Law
Judges, along with a request that they return the case to the
Public Utility Commission of Texas (PUCT) for approval
A final order is expected in the fourth quarter of 2017(1)
On October 13, 2017, EE filed for a 19 percent reduction in
the Texas fixed fuel factor effective November 1, 2017
Construction of the Holloman Air Force Base Solar Project
(5MW) will begin this month and is expected to be
commercially operational in July 2018
(1) New rates will relate back to consumption on
or after July 18, 2017
4
Future Power Generation Needs
Issued an all-source request for proposal (RFP) on June
30, 2017
In October, received proposals for various resource options
for 370 MW of new generation resources by 2023
Approximately 50 MW of capacity is expected to be needed
by 2022 and an additional capacity of 320 MW by 2023
Anticipate decision by the end of Q2 2018
Will seek regulatory approval as necessary with the PUCT
and the New Mexico Public Regulatory Commission
Capital expenditures plan may vary until a final decision is
rendered and regulatory approvals are obtained
5
Q3 & YTD Financial Results
Reported Q3 2017 net income of $59.7 million (or $1.47 per
share), compared to Q3 2016 net income of $74.6 million
(or $1.84 per share) (1)
Reported YTD 2017 net income of $91.8 million (or $2.26
per share), compared to YTD 2016 net income of $91.1
million (or $2.25 per share)
(1) Q3 2016 includes approximately $12.6 million, or $0.31 per
share, from the financial impacts of the 2015 Texas rate case
relating back to January 12, 2016 through June 30, 2016.
6
2017 Texas Rate Case Update
On September 19, 2017, the City of El Paso approved, in
principle, the terms of a settlement agreement
In November 2017, EE anticipates filing the settlement
documents with the Administrative Law Judges, along with a
request that they return the case to the PUCT for approval
A final order is expected in the fourth quarter of 2017(1)
(1) New rates will relate back to consumption on
or after July 18, 2017
7
2017 Texas Rate Case Update Cont’d
Key terms of the settlement include(1) :
Annual non-fuel base rate increase of $14.5 million
Return on equity of 9.65 percent
A determination that all new plant in service was prudent and used
and useful and therefore is included in rate base
Recovery of reasonable rate case expenses, subject to PUCT Staff’s
review and currently estimated to be approximately $3.4 million,
through a separate surcharge over a three year period
Establishment of baseline revenue requirements for transmission
and distribution investment costs
Minimum monthly bill of $30.00 for new residential customers with
distributed generation, such as private rooftop solar
(1) A final order is expected to be issued in the fourth quarter of
2017 and final rates will relate back to July 18, 2017
8
Q3 Key Earnings Drivers
Q3 Basic EPS Description
September 30, 2016 1.84$
Changes In:
Retail non-fuel base revenues (0.31)
Decreased primarily due to $17.2 million of retail non-fuel base revenues for
the period from January 12, 2016 through June 30, 2016, which were
recognized when the 2016 PUCT Final Order was approved in August 2016.
Depreciation and amortization (0.10)
Increased primarily due to (i) reductions in 2016 of approximately $5.0 million
resulting from changes in depreciation rates from January 12, 2016 through
June 30, 2016 as approved in the 2016 PUCT Final Order and (ii) increases in
plant, including Montana Power Station (MPS) Unit 4, which was placed in
service in September 2016.
Other revenues (0.05)
Decreased primarily due to (i) decreased wheeling revenues and (ii) a
decrease in miscellaneous revenues as a result of the relate back impact of
the 2016 PUCT Final Order.
AFUDC (0.03)
Decreased primarily due to lower balances of construction work in progress,
primarily due to MPS Unit 4 being placed in service in September 2016, and a
reduction in the AFUDC rate effective January 2017.
Taxes other than income taxes (0.02)
Increased primarily due to increased revenue related taxes and increased
property valuations in Texas as a result of MPS Unit 4 being placed in service
in September 2016.
Effective tax rate 0.05
Decrease in effective tax rate primarily due to the change to normalize state
income taxes in accordance with the 2016 PUCT Final Order, a reduction in
tax reserves due to the settlement of state income tax audits, and a reduction
in state income tax rates.
Administrative and general expense 0.05 Decreased primarily due to lower employee incentive compensation.
O&M at fossil-fuel generating plants 0.04 Decreased primarily due to outages at Newman Units 4 & 5 in the three months ended September 30, 2016.
September 30, 2017 1.47$
9
Q3 Customers and Retail Sales
Average No.
of Customers
Percent
Change (1)
MWH
Percent
Change (1)
Residential 369,233 1.7% 987,247 (0.4)%
C&I Small 41,840 1.7% 703,429 (1.7)%
C&I Large 48 (2.0)% 265,183 4.6%
Public Authorities 5,563 5.4% 439,926 (1.9)%
Total Retail 416,684 1.8% 2,395,785 (0.5)%
Cooling Degree Days 1,532 (4.0)%
(1) Percent change expressed as change in Q3 2017 from Q3 2016
10
Q3 Weather Summary
10-YR CDD
Average – 1,535
Q3 2017 CDD’s
• 0.2% Below 10-YR Average
• 4.0% Below Q3 2016
1,147
1,601 1,603
1,787
1,497
1,444 1,415
1,732
1,596
1,532
700
900
1,100
1,300
1,500
1,700
1,900
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Q3 CDD's 10-YR Average
11
Capital Requirements and Liquidity
On September 30, 2017, EE had liquidity of $189.1 million, including
cash and cash equivalents of $7.1 million and unused capacity under
the Revolving Credit Facility (RCF)
Expended $140.4 million for additions to utility plant, net of insurance
proceeds, for the nine months ended September 30, 2017
Capital expenditures for utility plant in 2017 are expected to be
approximately $223.3 million, net of insurance proceeds
On October 26, 2017, the Board declared a quarterly cash dividend of
$0.335 per share of common stock payable on December 29, 2017 to
shareholders of record as of December 15, 2017
EE used funds borrowed under the RCF to repay two tranches of debt
that matured or was subject to mandatory tender for purchase on
August 15, 2017 and September 1, 2017 for $50 million and $33.3
million, respectively
(1) The guidance range considers performance to date and significant
variables that may impact earnings such as weather, expenses,
and capital expenditures
(2) Assumes the issuance of a final order in the fourth quarter of 2017
and that rates will relate back to July 18, 201712
2017 Earnings Guidance
2016 EPS Actual 2017 Earnings Guidance
Earnings Guidance
$2.39
$2.50
$2.30
The guidance range assumes
normal operations and the
financial impacts of a final order
in the 2017 Texas rate case
(Docket No. 46831) (2)
$14.5 million non-fuel base rate
increase
(1)
Initiating an earnings guidance range of $2.30 to $2.50 per share
13
Q & A