August 4, 2010

El Paso Electric Announces Second Quarter Financial Results

EL PASO, Texas, Aug 04, 2010 (BUSINESS WIRE) -- El Paso Electric (NYSE:EE):

Overview

  • For the second quarter 2010, EE reported net income of $21.5 million, or $0.49 basic and diluted earnings per share. In the second quarter of 2009, EE reported net income of $15.4 million, or $0.34 basic and diluted earnings per share.
  • For the six months ended June 30, 2010, EE reported net income of $33.0 million, or $0.75 basic and diluted earnings per share. Net income for the six months ended June 30, 2009 was $25.0 million, or $0.56 basic and diluted earnings per share.

"The second quarter of 2010 was another strong quarter for El Paso Electric Company, both financially and operationally," said David W. Stevens, Chief Executive Officer. "We continue to experience significant growth in non-fuel base retail revenues and we reached a new native system peak of 1,615 MW in July 2010."

Earnings Summary

The table and explanations below present the major factors affecting 2010 net income relative to 2009 net income.

Quarter Ended Six Months Ended
After-Tax After-Tax
Pre-Tax Net Basic Pre-Tax Net Basic
Effect Income EPS Effect Income EPS
June 30, 2009 $ 15,431 $ 0.34 $ 25,040 $ 0.56
Changes in:
Retail non-fuel base revenue $ 6,721 4,235 0.10 $ 14,846 9,353 0.21
Deregulated Palo Verde Unit 3
revenues 2,869 1,808 0.04 2,356 1,484 0.03
Interest and investment income 1,991 1,665 0.04 3,575 3,079 0.07
Palo Verde O&M 1,599

1,007 0.02 929 585 0.01
Depreciation and amortization (1,461 ) (921 ) (0.02 ) (3,066 ) (1,932 ) (0.04 )
Pension and benefits expense (1,194 ) (752 ) (0.02 ) (1,344 ) (847 ) (0.02 )
Interest on long-term debt (45 ) (28 ) -- 1,678 1,058 0.02
Elimination of Medicare Part D tax
benefit -- -- -- -- (4,787 ) (0.11 )
Other (938 ) (0.02 ) (77 ) --
June 30, 2010 $ 21,507 0.48 $ 32,956 0.73
Change in weighted average
number of shares 0.01 0.02
June 30, 2010 $ 0.49 $ 0.75

Second Quarter 2010

Earnings for the quarter ended June 30, 2010 when compared to the same period last year, were positively affected by:

  • Higher retail non-fuel base revenues in 2010 primarily due to a 4.2% increase in kWh sales to retail customers as a result of a 1.7% growth in customers served, increased sales to large commercial and industrial customers, and new non-fuel base rates in our New Mexico jurisdiction effective beginning January 2010.
  • Increased revenues from retail sales of deregulated Palo Verde Unit 3 power due to increased generation at Palo Verde Unit 3 in 2010. In 2009 Palo Verde Unit 3 had a scheduled refueling and maintenance outage through most of April and May.
  • Increased interest and investment income primarily due to a decline in impairment losses on investments in our Palo Verde decommissioning trusts of $2.4 million in 2010 when compared to the same period in 2009.
  • Decreased Palo Verde operations and maintenance costs primarily due to decreased operations costs at all three units.

Earnings for the quarter ended June 30, 2010 when compared to the same period last year were negatively affected by:

  • Increased depreciation and amortization expense due to increased depreciable plant balances.
  • Increased pension and benefits expense primarily due to changes in actuarial assumptions for our pension plan and increased costs associated with our medical and dental plans.

Year to Date

Earnings for the six months ended June 30, 2010 when compared to the same period last year, were positively affected by:

  • Higher retail non-fuel base revenues in 2010 primarily due to a 5.3% increase in kWh sales to retail customers as a result of colder winter weather, increased sales to large commercial and industrial customers, a 1.8% growth in customers served, and new non-fuel base rates in our New Mexico jurisdiction effective beginning January 2010.
  • Increased interest and investment income primarily due to a decline in impairment losses on investments in our Palo Verde decommissioning trusts of $4.9 million in 2010 when compared to the same period in 2009.
  • Increased revenues from retail sales of deregulated Palo Verde Unit 3 power due to increased generation at Palo Verde Unit 3 in 2010. In 2009, Palo Verde Unit 3 had a scheduled refueling and maintenance outage through most of April and May.
  • Decreased interest expense on long-term debt primarily as the result of lower interest rates on pollution control bonds. Two series of pollution control bonds were refunded in March 2009 at a fixed 7.25% interest rate which was lower than the variable interest rates applied to these bonds before the refunding.
  • Decreased Palo Verde operations and maintenance costs primarily due to decreased operations costs at all three units.

Earnings for the six months ended June 30, 2010 when compared to the same period last year were negatively affected by:

  • A one-time increase in tax expense to recognize a change in tax law enacted in the Patient Protection and Affordable Care Act to eliminate the tax benefit related to the Medicare Part D subsidies.
  • Increased depreciation and amortization expense due to increased depreciable plant balances.
  • Increased pension and benefits expense primarily due to changes in actuarial assumptions for our pension plan.

Retail Non-fuel Base Revenues

Retail non-fuel base revenues increased by $6.7 million, pre-tax, or 5.4% in the second quarter of 2010 compared to the same period in 2009 primarily due to (i) a 32.5 % increase in retail non-fuel base revenues received from large commercial and industrial customers attributable to an increase of 13.3% in kWh sales and the implementation of higher rates in new contracts with several large customers whose contracts had expired; (ii) a 2.5% increase in kWh sales to residential customers reflecting 1.7% growth in the average number of customers served; and (iii) a 2.6% increase in kWh sales to small commercial and industrial customers primarily due to a 2.4% increase in the average number of small commercial and industrial customers served. Revenues to public authorities increased 2.1% primarily reflecting increased kWh sales of 2.9% largely due to increased sales from military bases. Revenues in all customer classes also reflect increased non-fuel base rates in New Mexico which were effective beginning January 2010. Non-fuel base revenues and kilowatt-hour sales are provided by customer class on page 11 of the Release.

For the six months ended June 30, 2010, retail non-fuel base revenues increased by $14.8 million, pre-tax, or 6.6% compared to the same period in 2009 primarily due to a 7.6% increase in kWh sales to residential customers reflecting colder winter weather in 2010 and 1.8% growth in the average number of customers served. During the six months ended June 30, 2010, heating degree days were 33% above the same period in 2009 and 13% above the 10-year average. Retail non-fuel base revenues from large commercial and industrial customers increased 25.7% due to an increase of 9.9% in kWh sales and the implementation of higher rates in new contracts with several large customers whose contracts had expired. Retail non-fuel base revenues also increased due to a 2.5% increase in kWh sales to small commercial and industrial customers primarily as a result of a 2.2% increase in the average number of small commercial and industrial customers served. Revenues to public authorities increased 2.7% primarily reflecting increased kWh sales of 3.1% largely due to increased sales from military bases. Revenues in all customer classes also reflect increased non-fuel base rates in New Mexico which were effective beginning January 2010. Non-fuel base revenues and kilowatt-hour sales are provided by customer class on page 13 of the Release.

2009 Texas Retail Rate Case

On July 30, 2010, the Public Utility Commission of Texas (PUCT) approved a settlement in the 2009 Texas retail rate case in PUCT Docket No. 37690. The settlement calls for an annual non-fuel base rate increase of $17.15 million effective for usage beginning July 1, 2010. Interim rates were placed in effect July 1, 2010 pending final approval by the PUCT. All additions to electric plant in service since June 30, 1993 through June 30, 2009 were deemed to be reasonable and necessary with the exception of one small addition. In addition, our new customer information system completed in April 2010 was also included in base rates with a ten-year amortization. The settlement provides for the reconciliation of fuel costs incurred through June 30, 2009 except for the recovery of final coal reclamation costs which will be litigated separately. The fuel reconciliation was bifurcated from the rate case (Docket No. 38361) to allow for litigation of the final coal reclamation costs. The PUCT also approved the use of a formula-based fuel factor which provides for more timely recovery of fuel costs. Consistent with a prior rate agreement, effective July 1, 2010, we will share 90% of off-system sales margins with customers and retain 10% of such margins. Previously, we retained 75% of off-system sales margins. The PUCT approved a $19.7 million or 11% reduction in our fixed fuel factor as the initial rate under the approved fuel factor formula. The PUCT also approved an energy efficiency cost-recovery factor that includes the recovery of deferred energy efficiency costs over a three-year period.

Patient Protection and Affordable Care Act

On March 23, 2010, the Patient Protection and Affordable Care Act was signed into law. A major provision of the law is that, beginning in 2013, the income tax deductions for the cost of providing certain prescription drug coverage will be reduced by the amount of the Medicare Part D subsidies received. We were required to recognize the impacts of the tax law change at the time of enactment and recorded a one-time non-cash charge to income tax expense of approximately $4.8 million in the first quarter of 2010.

Palo Verde Operations

We own approximately 633 MW (undivided interest) of generating capacity in the three generating units at the Palo Verde Nuclear Generating Station, operated by Arizona Public Service Company. The operation of Palo Verde not only affects our ability to make off-system sales but also impacts fuel costs to native load customers and represents a significant portion of our non-fuel operation and maintenance expenses. Palo Verde generation accounted for approximately 54% of total Company generation in the second quarter of 2010. Palo Verde had a capacity factor of 80.4% in the second quarter of 2010 compared to 80.6% for the same period last year. A scheduled spring refueling outage at Palo Verde Unit 1 began April 3, 2010 and was completed May 23, 2010. The 2009 scheduled spring refueling outage at Palo Verde Unit 3 began April 3, 2009 and was completed May 28, 2009.

Off-system Sales

We make off-system sales in the wholesale power markets when competitively priced excess power is available from our generating plants and purchased power contracts. The Company shared 25% of off-system sales margins with customers and retained 75% of off-system sales margins through June 30, 2010 pursuant to rate agreements in prior years. Effective July 1, 2010, the Company will share 90% of off-system sales margins with customers and retain 10% of off-system sales margins. The table below shows off-system sales in MWh and the pre-tax margins realized and retained by us from sales during the quarter and six months ended June 30, 2010 and 2009:

Quarter Ended Six Months Ended
June 30, June 30,
2010 2009 2010 2009
MWh sales 511,470 634,078 1,359,208 1,692,481
Total margins (in thousands) $ 1,049 $ 1,143 $ 6,890 $ 7,865
Retained margins (in thousands) $ 787 $ 857 $ 5,169 $ 5,900

For the quarter ended June 30, 2010, retained margins from off-system sales decreased approximately $0.1 million, pre-tax, over the corresponding period in 2009 due primarily to a 19.3% decrease in MWh sales partially offset by a slight increase in margins per MWh. The table below shows on a per MWh basis, pre-tax revenues, costs and margins from off-system sales for 2010 and 2009.

Average Average Pre-Sharing
Revenue Cost of Energy Average Margin
Quarter Ended Per MWh Per MWh Per MWh
March 31, 2009 $ 36.49 $ 30.13 $ 6.36
June 30, 2009 $ 35.43 $ 33.63 $ 1.80
March 31, 2010 $ 45.65 $ 38.76 $ 6.89
June 30, 2010 $ 34.63 $ 32.57 $ 2.06

Capital and Liquidity

We continue to maintain a strong capital structure to ensure access to capital markets at reasonable rates. At June 30, 2010, common stock equity represented 46.3% of our capitalization (common stock equity, long-term debt and the current portion of long-term debt, and financing obligations). At June 30, 2010, we had a balance of $29.4 million in cash and cash equivalents, most of which was in funds invested in United States Treasury securities.

Cash flows from operations for the six months ended June 30, 2010 were $59.5 million compared to $111.3 million in the corresponding period in 2009. The primary factor affecting the decreased cash flow was reduced collection of deferred fuel revenues in 2010. The difference between fuel revenues and fuel expense is deferred to be refunded (over-recoveries) or surcharged (under-recoveries) to customers in the future. The collection of deferred fuel revenues included the over-recovery of fuel costs by $12.1 million in 2010 compared to an over-recovery of fuel costs of $36.6 million in 2009. During the first six months of 2010, we refunded $11.8 million of over-recoveries to Texas customers compared to recovering through a surcharge of $16.3 million of under-recoveries from Texas customers in the first six months of 2009. Over-recoveries in New Mexico and from our FERC customer are refunded through fuel adjustment clauses with a two month lag. At June 30, 2010, we had a net fuel over-recovery balance of $18.4 million, including $17.9 million in Texas, $0.6 million in New Mexico, and an under-recovery balance of $0.1 million from our FERC customer. On July 15, 2010, the PUCT approved our request to refund to our Texas customers $11.1 million of over-recoveries in July and August 2010.

During the six months ended June 30, 2010, our primary capital requirements were for the construction and purchase of electric utility plant, purchases of nuclear fuel, and the repurchase of common stock. Capital requirements for new electric plant were $90.6 million for the six months ended June 30, 2010 compared to $99.8 million for the six months ended June 30, 2009.

We maintain a $200 million revolving credit facility to provide liquidity to the Company. Up to $120 million under the revolving credit facility is available through direct borrowings to a trust that is used to finance our nuclear fuel inventory. Nuclear fuel financing requirements exceeded the trust borrowing capacity in June 2010 and as a result, the Company itself borrowed under the facility to finance nuclear fuel that could not be financed by the trust. Amounts due under the revolving credit facility by both the trust and the Company for nuclear fuel were $122.8 million as of June 30, 2010, including accrued interest and fees. Borrowings by the trust for nuclear fuel were $103.5 million as of June 30, 2009, including accrued interest and fees. The revolving credit facility is scheduled to expire in April 2011.

On February 19, 2010, the Board of Directors authorized repurchases of up to 2 million additional shares of the Company's outstanding common stock. During the six months ended June 30, 2010, we repurchased 502,492 shares of common stock in the open market at an aggregate cost of $10.0 million under both the previously authorized program and under the recently authorized program. As of June 30, 2010, 1,698,490 shares remain available for repurchase under the recently authorized program. The Company currently intends to continue to repurchase shares in the open market from time to time.

We believe that we will have adequate liquidity through our current cash balances, cash from operations, and our revolving credit facility which terminates in April 2011 to meet all of our anticipated cash requirements through 2010 based on current projections. In June 2010, we received approval from the FERC and the New Mexico Public Regulatory Commission to refinance our revolving credit facility and to issue in a private placement up to $110 million of senior notes from the Rio Grande Resource Trust II (the RGRT), guaranteed by the Company, to finance nuclear fuel. We currently expect to complete the notes financing by RGRT during the third quarter and to use the proceeds to repay amounts borrowed under the revolving credit facility for nuclear fuel. This would enable the future nuclear fuel financing requirements by RGRT to be met with the senior notes with any additional amounts borrowed from the revolving credit facility.

2010 Earnings Guidance

We are providing earnings guidance for 2010 of a range of $1.65 to $2.10 per basic share excluding any one-time impacts of the 2009 Texas retail rate case.

Conference Call

A conference call to discuss second quarter 2010 earnings is scheduled for 10:30 a.m. Eastern Time, August 4, 2010. The dial-in number is 866-818-1393 with a conference ID of 1468302. The conference leader will be Steven P. Busser, Vice President - Treasurer and Chief Risk Officer of EE. A replay will run through August 18, 2010 with a dial-in number of 866-837-8032 and a conference ID of 1468302. The conference call and presentation slides will be webcast live on EE'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 may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This information may involve risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Factors that could cause or contribute to such differences include, but are 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) fluctuations in off-system sales margins due to uncertainty in the economy power market and the availability of generating units; (iii) recovery of capital investments and operating costs through rates in Texas and New Mexico; (iv) recovery of franchise fees and taxes through tax surcharges in New Mexico; (v) uncertainties and instability in the general economy and the resulting impact of EE's sales and profitability; (vi) unanticipated increased costs associated with scheduled and unscheduled outages; (vii) the size of our construction program and our ability to complete construction on budget and on time; (viii) costs at Palo Verde; (ix) deregulation and competition in the electric utility industry; (x) possible increased costs of compliance with environmental or other laws, regulations and policies; (xi) possible income tax and interest payments as a result of audit adjustments proposed by the IRS; (xii) uncertainties and instability in the financial markets and the resulting impact on EE's ability to access the capital and credit markets; and (xiii) other factors detailed by EE in its public filings with the Securities and Exchange Commission. EE's filings are available from the Securities and Exchange Commission 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. EE does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of EE except as required by law.

El Paso Electric Company and Subsidiary
Consolidated Statements of Operations
Quarter Ended June 30, 2010 and 2009
(In thousands except for per share data)
(Unaudited)
2010 2009 Variance
Operating revenues, net of energy expenses:
Base revenues $ 130,752 $ 124,039 $ 6,713 (a)
Off-system sales margins, net of sharing 787 857 (70 )
Deregulated Palo Verde Unit 3 revenues 4,268 1,399 2,869
Other 5,286 5,176 110
Operating Revenues Net of Energy Expenses 141,093 131,471 9,622
Other operating expenses:
Other operations and maintenance 41,684 39,844 1,840
Palo Verde operations and maintenance 25,595 27,194 (1,599 )
Taxes other than income taxes 13,170 12,511 659
Other income (deductions) 462 (1,327 ) 1,789
Earnings Before Interest, Taxes, Depreciation
and Amortization 61,106 50,595 10,511 (b)
Depreciation and amortization 20,167 18,706 1,461
Interest on long-term debt 12,241 12,196 45
AFUDC and capitalized interest 4,499 4,560 (61 )
Other interest expense 25 82 (57 )
Income Before Income Taxes 33,172 24,171 9,001
Income tax expense 11,665 8,740 2,925
Net Income $ 21,507 $ 15,431 $ 6,076
Basic Earnings per Share $ 0.49 $ 0.34 $ 0.15
Diluted Earnings per Share $ 0.49 $ 0.34 $ 0.15
Weighted average number of shares outstanding 43,460 44,783 (1,323 )
Weighted average number of shares and dilutive
potential shares outstanding 43,558 44,792 (1,234 )
(a) Base revenues exclude fuel recovered through New Mexico base rates of $17.8 million and $16.4 million, respectively.
(b)

EBITDA is a non-GAAP financial measure and is not a substitute for net income or other measures of financial performance in accordance with GAAP.

El Paso Electric Company and Subsidiary
Consolidated Statements of Operations
Six Months Ended June 30, 2010 and 2009
(In thousands except for per share data)
(Unaudited)
2010 2009 Variance
Operating revenues, net of energy expenses:
Base revenues $ 241,222 $ 226,384 $ 14,838
Off-system sales margins, net of sharing 5,169 5,900 (731 )
Deregulated Palo Verde Unit 3 revenues 9,349 6,993 2,356
Other 11,581 10,939 642
Operating Revenues Net of Energy Expenses 267,321 250,216 17,105
Other operating expenses:
Other operations and maintenance 83,875 80,782 3,093
Palo Verde operations and maintenance 48,002 48,931 (929 )
Taxes other than income taxes 24,913 25,028 (115 )
Other income (deductions) 1,203 (2,916 ) 4,119
Earnings Before Interest, Taxes, Depreciation
and Amortization 111,734 92,559 19,175
Depreciation and amortization 39,451 36,385 3,066
Interest on long-term debt 24,442 26,120 (1,678 )
AFUDC and capitalized interest 8,834 9,081 (247 )
Other interest expense 65 252 (187 )
Income Before Income Taxes 56,610 38,883 17,727
Income tax expense (c) 23,654 13,843 9,811
Net Income $ 32,956 $ 25,040 $ 7,916
Basic Earnings per Share $ 0.75 $ 0.56 $ 0.19
Diluted Earnings per Share $ 0.75 $ 0.56 $ 0.19
Weighted average number of shares outstanding 43,599 44,770 (1,171 )
Weighted average number of shares and dilutive
potential shares outstanding 43,710 44,791 (1,081 )
(a) Base revenues exclude fuel recovered through New Mexico base rates of $33.6 million and $31.8 million, respectively.
(b)

EBITDA is a non-GAAP financial measure and is not a substitute for net income or other measures of financial performance in accordance with GAAP.

(c)

Income tax expense for the six months ended June 30, 2010 includes a charge of $4,787 related to the Patient Protection and Affordable Care Act which required the elimination of the tax benefit associated with the Medicare Part D subsidies beginning in 2013.

El Paso Electric Company and Subsidiary
Cash Flow Summary
Six Months Ended June 30, 2010 and 2009
(In thousands and Unaudited)
2010 2009

Cash flows from operating activities:

Net income $ 32,956 $ 25,040
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization of electric plant in service 39,451 36,385
Deferred income taxes, net 14,206 (4,186 )
Other 15,815 16,635
Change in working capital items:
Net recovery of fuel revenues 420 51,618
Accounts receivable (26,175 ) 3,499
Other (17,148 ) (17,680 )

Net cash provided by operating activities

59,525 111,311

Cash flows from investing activities:

Cash additions to utility property, plant and equipment (90,603 ) (99,795 )
Cash additions to nuclear fuel (26,981 ) (20,199 )
Decommissioning trust funds (5,604 ) (3,903 )
Other (4,454 ) (3,405 )
Net cash used for investing activities (127,642 ) (127,302 )
Cash flows from financing activities:
Repurchase of common stock (9,988 ) -
Financing obligations 15,829 9,840
Other (104 ) (1,782 )
Net cash provided by financing activities 5,737 8,058
Net decrease in cash and cash equivalents (62,380 ) (7,933 )
Cash and cash equivalents at beginning of period 91,790 91,642
Cash and cash equivalents at end of period $ 29,410 $ 83,709
Cash interest payments $ 23,825 $ 23,526
El Paso Electric Company and Subsidiary
Quarter Ended June 30, 2010 and 2009
Sales and Revenues Statistics
Increase (Decrease)
2010 2009 Amount Percentage

MWh sales:

Retail:
Residential 583,096 569,004 14,092 2.5 %
Commercial and industrial, small 601,048 585,678 15,370 2.6 %
Commercial and industrial, large 289,095 255,178 33,917 13.3 %
Sales to public authorities 403,770 392,328 11,442 2.9 %

Total retail sales

1,877,009 1,802,188 74,821 4.2 %
Wholesale:
Sales for resale 17,335 18,564 (1,229 ) (6.6 %)
Off-system sales 511,470 634,078 (122,608 ) (19.3 %)
Total wholesale sales 528,805 652,642 (123,837 ) (19.0 %)
Total MWh sales 2,405,814 2,454,830 (49,016 ) (2.0 %)

Operating revenues (in thousands):

Non-fuel base revenues:
Retail:
Residential $ 50,153 $ 48,073 $ 2,080 4.3 %
Commercial and industrial, small 47,238 45,888 1,350 2.9 %
Commercial and industrial, large 11,608 8,762 2,846 32.5 %
Sales to public authorities 21,186 20,741 445 2.1 %
Total retail non-fuel base revenues 130,185 123,464 6,721 5.4 %
Wholesale:
Sales for resale 567 575 (8 ) (1.4 %)
Total non-fuel base revenues 130,752 124,039 6,713 5.4 %
Fuel revenues:
Recovered from customers during
the period (a) 45,248 47,447 (2,199 ) (4.6 %)
Over collection of fuel (6,402 ) (13,285 ) 6,883 (51.8 %)
New Mexico fuel in base rates 17,753 16,444 1,309 8.0 %
Total fuel revenues 56,599 50,606 5,993 11.8 %
Off-system sales 17,710 22,464 (4,754 ) (21.2 %)
Other 6,336 6,540 (204 ) (3.1 %)
Total operating revenues $ 211,397 $ 203,649 $ 7,748 3.8 %

Off-system sales (in thousands):

Gross margins $ 1,049 $ 1,143 $ (94 ) (8.2 %)
Retained margins 787 857 (70 ) (8.2 %)

Average number of retail customers:

Residential 330,976 325,302 5,674 1.7 %
Commercial and industrial, small 36,740 35,892 848 2.4 %
Commercial and industrial, large 49 49 - -
Sales to public authorities 4,701 4,929 (228 ) (4.6 %)

Total

372,466 366,172 6,294 1.7 %

Number of retail customers (end of period):

Residential

331,050 325,707 5,343 1.6 %
Commercial and industrial, small 36,713 35,964 749 2.1 %
Commercial and industrial, large 49 50 (1 ) (2.0 %)
Sales to public authorities 4,795 4,925 (130 ) (2.6 %)

Total

372,607 366,646 5,961 1.6 %

Weather statistics

10 Yr Average

Heating degree days 82 82 69
Cooling degree days 995 1,013 988

(a) Excludes $4.0 million in 2009 of prior periods deferred fuel revenues recovered through Texas fuel surcharge.

El Paso Electric Company and Subsidiary
Quarter Ended June 30, 2010 and 2009
Generation and Purchased Power Statistics
Increase (Decrease)
2010 2009 Amount Percentage
Generation and purchased power (MWh):
Palo Verde 1,091,969 1,093,069 (1,100 ) (0.1 %)
Four Corners 167,625 186,566 (18,941 ) (10.2 %)
Gas plants 766,575 581,947 184,628 31.7 %
Total generation 2,026,169 1,861,582 164,587 8.8 %
Purchased power 545,720 729,839 (184,119 ) (25.2 %)
Total available energy 2,571,889 2,591,421 (19,532 ) (0.8 %)
Line losses and Company use 166,075 136,591 29,484 21.6 %
Total 2,405,814 2,454,830 (49,016 ) (2.0 %)
Palo Verde capacity factor 80.4 % 80.6 % (0.2 %)
Four Corners capacity factor 76.9 % 84.9 % (8.0 %)
El Paso Electric Company and Subsidiary
Six Months Ended June 30, 2010 and 2009
Sales and Revenues Statistics

Increase (Decrease)

2010 2009 Amount Percentage

MWh sales:

Retail:
Residential 1,139,376 1,058,633 80,743 7.6 %
Commercial and industrial, small 1,085,330 1,058,965 26,365 2.5 %
Commercial and industrial, large 525,708 478,175 47,533 9.9 %
Sales to public authorities 729,327 707,377 21,950 3.1 %
Total retail sales 3,479,741 3,303,150 176,591 5.3 %
Wholesale:
Sales for resale 26,515 28,958 (2,443 ) (8.4 %)
Off-system sales 1,359,208 1,692,481 (333,273 ) (19.7 %)
Total wholesale sales 1,385,723 1,721,439 (335,716 ) (19.5 %)
Total MWh sales 4,865,464 5,024,589 (159,125 ) (3.2 %)

Operating revenues (in thousands):

Non-fuel base revenues:
Retail:
Residential $ 94,988 $ 88,264 $ 6,724 7.6 %
Commercial and industrial, small 86,437 83,552 2,885 3.5 %
Commercial and industrial, large 20,821 16,568 4,253 25.7 %
Sales to public authorities 38,102 37,118 984 2.7 %
Total retail non-fuel base revenues 240,348 225,502 14,846 6.6 %
Wholesale:
Sales for resale 874 882 (8 ) (0.9 %)

Total non-fuel base revenues

241,222 226,384 14,838 6.6 %
Fuel revenues:
Recovered from customers during
the period (a) 83,281 97,908 (14,627 ) (14.9 %)
Over collection of fuel (12,092 ) (36,641 ) 24,549 (67.0 %)
New Mexico fuel in base rates 33,582 31,804 1,778 5.6 %
Total fuel revenues 104,771 93,071 11,700 12.6 %
Off-system sales 56,413 61,081 (4,668 ) (7.6 %)
Other 13,159 13,549 (390 ) (2.9 %)
Total operating revenues $ 415,565 $ 394,085 $ 21,480 5.5 %

Off-system sales (in thousands):

Gross margins $ 6,890 $ 7,865 $ (975 ) (12.4 %)
Retained margins 5,169 5,900 (731 ) (12.4 %)

Average number of retail customers:

Residential 330,356 324,542 5,814 1.8 %
Commercial and industrial, small 36,644 35,839 805 2.2 %
Commercial and industrial, large 48 49 (1 ) (2.0 %)
Sales to public authorities 4,833 4,934 (101 ) (2.0 %)
Total 371,881 365,364 6,517 1.8 %

Number of retail customers (end of period):

Residential 331,050 325,707 5,343 1.6 %
Commercial and industrial, small 36,713 35,964 749 2.1 %
Commercial and industrial, large 49 50 (1 ) (2.0 %)
Sales to public authorities 4,795 4,925 (130 ) (2.6 %)

Total

372,607 366,646 5,961 1.6 %

Weather statistics

10 Yr Average

Heating degree days 1,478 1,112 1,305
Cooling degree days 1,004 1,050 1,006

(a) Excludes $11.8 million refund in 2010 and a $16.3 million surcharge in 2009 related to prior periods Texas deferred fuel revenues.

El Paso Electric Company & Subsidiary
Six Months Ended June 30, 2010 and 2009
Generation and Purchased Power Statistics
Increase (Decrease)
2010 2009 Amount Percentage
Generation and purchased power (MWh):
Palo Verde 2,372,281 2,446,153 (73,872 ) (3.0 %)
Four Corners 288,034 385,956 (97,922 ) (25.4 %)
Gas plants 1,319,377 1,013,471 305,906 30.2 %
Total generation 3,979,692 3,845,580 134,112 3.5 %
Purchased power 1,155,743 1,442,013 (286,270 ) (19.9 %)
Total available energy 5,135,435 5,287,593 (152,158 ) (2.9 %)
Line losses and Company use 269,971 263,004 6,967 2.6 %
Total 4,865,464 5,024,589 (159,125 ) (3.2 %)
Palo Verde capacity factor 87.9 % 90.6 % (2.7 %)
Four Corners capactiy factor 66.0 % 86.9 % (20.9 %)
El Paso Electric Company and Subsidiary
Financial Statistics
At June 30, 2010 and 2009
(In thousands, except number of shares, book value per share, and ratios)
Balance Sheet 2010 2009
Cash and cash equivalents $ 29,410 $ 83,709
Common stock equity $ 744,163 $ 726,175
Long-term debt, net of current portion 739,721 739,674
Financing obligations, net of current portion - 69,464
Total capitalization $ 1,483,884 $ 1,535,313
Current portion of long-term debt and
financing obligations $ 122,826 $ 34,029
Number of shares - end of period 43,515,310 44,966,307
Book value per common share $ 17.10 $ 16.15
Common equity ratio 46.3% 46.3%
Debt ratio 53.7% 53.7%

SOURCE: El Paso Electric

El Paso Electric
Media:
Henry Quintana, Jr., 915-543-5824
or
Analysts:
Rachelle Williams, 915-543-2257

Copyright Business Wire 2010


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