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El Paso Electric Announces Fourth Quarter and Annual Financial Results

February 25, 2009

Overview

  • For the fourth quarter 2008, EE reported net income of $10.8 million, or $0.24 basic and diluted earnings per share. In the fourth quarter of 2007, EE had net income of $13.9 million, or $0.31 and $0.30 basic and diluted earnings per share, respectively.
  • For the twelve months ended December 31, 2008, EE reported net income of $77.6 million, or $1.73 basic and diluted earnings per share. Net income for the twelve months ended December 31, 2007 was $74.8 million, or $1.64 and $1.63 basic and diluted earnings per share, respectively.


Earnings Summary




Fourth Quarter 2008


  • Increased retail sales of deregulated Palo Verde Unit 3 power as the unit did not operate in the fourth quarter of 2007 due to its refueling and replacement of steam generators.
  • Higher retained margins on off-system sales as a result of higher margins per MWh along with a significant increase in MWh sales.

  • Increased interest expense on long-term debt as a result of the June 2008 issuance of $150 million of 7.5% Senior Notes and higher interest rates on auction rate pollution control bonds.
  • Lower retail non-fuel base revenues of $4.2 million or 3.7% in 2008 primarily due to two factors. One, non-fuel revenues to public authorities decreased $2.0 million largely as a result of a non-recurring revenue adjustment in the fourth quarter of 2007 and two, non-fuel base revenues to large commercial and industrial customers decreased $1.4 million as a result of a 24.7% decline in kilowatt-hour sales.
  • Increased Palo Verde non-fuel operations and maintenance expenses in 2008 due to higher operating costs at all three units.
Full Year 2008


  • Higher proxy market prices and increased sales of deregulated Palo Verde Unit 3 power to retail customers as the unit did not operate in the fourth quarter of 2007 due to its refueling and replacement of steam generators.
  • Higher retained margins on off-system sales primarily as a result of increased sales and margins from off-system sales to a wholesale customer.
  • Higher retail non-fuel base revenues in 2008 largely due to increased kilowatt-hour sales to small commercial and industrial customers and other public authorities.
  • Increased AFUDC and capitalized interest in 2008 due to higher balances of construction work in progress subject to AFUDC and nuclear fuel inventory subject to capitalized interest.
  • Increased revenues for transmission wheeling in 2008 largely due to increased wheeling of power in southern New Mexico and Arizona partially offset by the reversal of $2.5 million of 2006 wheeling revenues from Tucson Electric Power pursuant to an order of the Federal Energy Regulatory Commission.


  • Increased Palo Verde non-fuel operations and maintenance expenses in 2008 due to higher operating costs at all three units and higher maintenance costs during refueling outages in 2008 than during refueling outages in 2007.
  • Increased interest expense on long-term debt due to the June 2008 issuance of $150 million of 7.5% Senior Notes and higher interest rates on auction rate pollution control bonds.
  • Increased depreciation and amortization as a result of higher depreciable plant balances.
  • A decline in interest and investment income in 2008 due to impairments of equity securities in our Palo Verde decommissioning trust funds and a decrease in the fair value of our investments in auction rate securities.
  • Increased O&M costs at our fossil-fueled generating plants as planned major maintenance was performed at Newman Unit 3 and Four Corners Unit 5 in 2008. In 2007, no major maintenance was performed at our fossil-fueled generating units.
Retail Non-fuel Base Revenues




Palo Verde Operations




Off-system Sales











Capital and Liquidity










2009 Earnings Guidance



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