UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
February 24, 2016
El Paso Electric Company
(Exact name of registrant as specified in its charter)
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Texas | 001-14206 | 74-0607870 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
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Stanton Tower, 100 North Stanton, El Paso, Texas | | 79901 |
(Address of principal executive offices) | | (Zip Code) |
(915) 543-5711
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 24, 2016, the Company announced its financial results for the quarter ended December 31, 2015. A copy of the press release containing the announcement and a copy of the presentation at the Company's 4th Quarter 2015 Earnings Conference Call is included as Exhibit 99.01 and Exhibit 99.02 to this Current Report and is incorporated herein by reference. The Company does not intend for this exhibit to be incorporated by reference into future filings under the Securities Exchange Act of 1934.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
99.01 Earnings Press Release, dated February 24, 2016
99.02 Presentation at the 4th Quarter 2015 Earnings Conference Call
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
EL PASO ELECTRIC COMPANY
(Registrant)
By: /s/ NATHAN T. HIRSCHI
Name: Nathan T. Hirschi
Title: Senior Vice President - Chief Financial Officer
Dated: February 24, 2016
EXHIBIT INDEX
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Exhibit Number | Description of Exhibit | |
99.01 | Earnings Press Release, dated February 24, 2016 | |
99.02 | Presentation at the 4th Quarter 2015 Earnings Conference Call | |
Exhibit 99.01 |
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| | News Release |
For Immediate Release | |
Date: February 24, 2016 | | |
El Paso Electric Announces Fourth Quarter and Annual Financial Results
Overview
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• | For the fourth quarter of 2015, El Paso Electric Company ("EE" or the "Company") reported net income of $0.6 million, or $0.02 basic and diluted earnings per share. Net income for the fourth quarter of 2014 was $4.2 million, or $0.10 basic and diluted earnings per share. |
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• | For the twelve months ended December 31, 2015, EE reported net income of $81.9 million, or $2.03 basic and diluted earnings per share. Net income for the twelve months ended December 31, 2014 was $91.4 million, or $2.27 basic and diluted earnings per share. |
“Despite the continued impact of regulatory lag on earnings, we are reporting net income of $0.6 million for the three months ended December 31, 2015,” said Mary Kipp, Chief Executive Officer of the Company. “Reflecting back on last year, we accomplished a number of critical objectives, including the completion of the first two generating units at the Montana Power Station along with our Eastside Operations Center. We have also continued construction of Units 3 & 4 at the Montana Power Station and filed for increases in base rates in both our Texas and New Mexico service territories. Our region continues to grow as evidenced by an increase in customers and reaching a new native system peak in August 2015. We remain on-track and are now focused on key objectives for 2016.”
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| El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960 | |
Earnings Summary
The table and explanations below present the major factors affecting 2015 net income relative to 2014 net income (in thousands except per share data):
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| | Quarter Ended | | Twelve Months Ended |
| | Pre-Tax Effect | | After-Tax Net Income | | Basic EPS | | Pre-Tax
Effect | | After-Tax
Net Income | | Basic EPS |
December 31, 2014 | | | $ | 4,241 |
| | $ | 0.10 |
| | | | $ | 91,428 |
| | $ | 2.27 |
|
Changes in: | | | | | | | | | | | |
| Allowance for funds used during construction | $ | (3,180 | ) | | (2,846 | ) | | (0.07 | ) | | $ | (5,454 | ) | | (4,953 | ) | | (0.12 | ) |
| Administrative and general expense | (2,877 | ) | | (1,870 | ) | | (0.04 | ) | | (2,543 | ) | | (1,653 | ) | | (0.04 | ) |
| Depreciation and amortization | (1,738 | ) | | (1,130 | ) | | (0.03 | ) | | (6,482 | ) | | (4,214 | ) | | (0.10 | ) |
| Interest on long-term debt | (1,183 | ) | | (768 | ) | | (0.02 | ) | | (6,823 | ) | | (4,435 | ) | | (0.11 | ) |
| Deregulated Palo Verde Unit 3 | (990 | ) | | (644 | ) | | (0.02 | ) | | (5,352 | ) | | (3,479 | ) | | (0.09 | ) |
| Investment and interest income | (152 | ) | | (148 | ) | | — |
| | 3,875 |
| | 3,084 |
| | 0.07 |
|
| O&M at fossil-fuel generating plants | 3,853 |
| | 2,506 |
| | 0.06 |
| | (452 | ) | | (294 | ) | | — |
|
| Retail non-fuel base revenues | 1,423 |
| | 925 |
| | 0.02 |
| | 14,292 |
| | 9,290 |
| | 0.23 |
|
| Palo Verde performance rewards, net | — |
| | — |
| | — |
| | (2,143 | ) | | (1,415 | ) | | (0.04 | ) |
| Other | | | 382 |
| | 0.02 |
| | | | (1,441 | ) | | (0.04 | ) |
December 31, 2015
| | | $ | 648 |
| | $ | 0.02 |
| | | | $ | 81,918 |
| | $ | 2.03 |
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Regulatory Lag
The completion of Montana Power Station ("MPS") Units 1 & 2 (including common plant, transmission lines and substation) and the Eastside Operations Center ("EOC") continues to have a negative impact on the Company's financial results due to regulatory lag associated with the placement in service of these assets without a corresponding increase in revenues. This trend will continue until new and higher rates become effective. The primary impact from these assets being placed in service include a reduction in amounts capitalized for allowance for funds used during construction ("AFUDC"), and increases in depreciation, operations and maintenance expense, property taxes and interest cost.
Fourth Quarter 2015
Income for the quarter ended December 31, 2015, when compared to the quarter ended December 31, 2014, was negatively affected by:
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• | Decreased AFUDC due to lower balances of construction work in progress (“CWIP”), primarily due to MPS Units 1 & 2 and the EOC being placed in service during the first quarter of 2015 and a reduction in the AFUDC rate. |
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• | Increased administrative and general expenses primarily due to (i) increased payroll costs and employee incentive compensation, and (ii) increased pension and benefits costs due to changes in actuarial assumptions used to calculate expenses for the post-retirement employee benefit plan and increased medical claims paid. |
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| El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960 | |
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• | Increased depreciation and amortization related to an increase in depreciable plant, primarily due to MPS Units 1 & 2 and the EOC being placed in service during the first quarter of 2015, partially offset by a change in the estimated useful life of certain large intangible software packages. |
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• | Increased interest on long-term debt due to the interest accrued on $150 million aggregate principal amount of senior notes issued in December 2014. |
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• | Decreased deregulated Palo Verde Unit 3 revenues, primarily due to a 27.5% decrease in proxy market prices reflecting a decline in the price of natural gas. |
Income for the quarter ended December 31, 2015, when compared to the quarter ended December 31, 2014, was positively affected by:
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• | Decreased operations and maintenance expense related to our fossil-fuel generating plants, primarily due to decreased maintenance related to Four Corners Unit 5 and Newman Unit 4 in 2015. These decreases were partially offset by operations and maintenance expense at MPS in 2015, with no comparable expense during 2014. |
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• | Increased retail non-fuel base revenues, primarily due to increased revenues from our residential customers resulting from favorable weather and a 1.4% increase in the average number of customers. |
Year to Date
Income for the twelve months ended December 31, 2015, when compared to the twelve months ended December 31, 2014, was negatively affected by:
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• | Decreased amounts of AFUDC capitalized due to lower balances of construction work in process primarily due to MPS Units 1 & 2, and the EOC being placed in service during the first quarter of 2015 and a reduction in the AFUDC rate. |
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• | Increased interest on long-term debt due to the interest accrued on $150 million aggregate principal amount of senior notes issued in December 2014. |
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• | Increased depreciation and amortization related to an increase in depreciable plant, primarily due to MPS Units 1 & 2 and the EOC being placed in service during the first quarter of 2015, partially offset by a change in the estimated useful life of certain large intangible software packages. |
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• | Decreased deregulated Palo Verde Unit 3 revenues, primarily due to a 25.6% decrease in proxy market prices, reflecting a decline in the price of natural gas and a 9.3% decrease in generation due primarily to a Unit 3 planned spring refueling outage that was completed in May 2015 with no comparable outage in 2014. |
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• | Increased administrative and general expense primarily due to (i) an increase in employee incentive compensation and (ii) increased pension and benefits costs due to changes in actuarial assumptions used to calculate expenses for the post-retirement employee benefit plan. These increases were partially offset by decreased outside services in 2015 compared to 2014. |
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• | Recognition of Palo Verde performance rewards associated with the 2009 to 2012 performance periods, net of disallowed fuel and purchased power costs related to the resolution of the Texas fuel reconciliation proceeding designated as Public Utility Commission of Texas ("PUCT") Docket No. 41852 recorded in June 2014 with no comparable amount in 2015. |
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| El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960 | |
Income for the twelve months ended December 31, 2015, when compared to the twelve months ended December 31, 2014, was positively affected by:
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• | Increased retail non-fuel base revenues, primarily due to (i) increased revenues of $11.9 million from our residential customers due to hotter weather in the third quarter of 2015 contributing to a 4.9% increase in kWh sales; (ii) increased revenues of $2.0 million from small commercial and industrial customers due to a 1.1% increase in kWh sales resulting from hotter weather and a 1.6% increase in the average number of customers; and (iii) a $1.2 million increase from large commercial and industrial customers. These increases were partially offset by a $0.8 million decrease from sales to public authorities due to a military installation moving a portion of their load to an interruptible rate. |
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• | Increased investment and interest income due to further diversification and re-balancing of the Company’s Palo Verde decommissioning trust fund portfolio. |
Retail Non-fuel Base Revenues
Retail non-fuel base revenues increased $1.4 million, pre-tax, or 1.2%, in the fourth quarter of 2015, compared to the fourth quarter of 2014. This increase includes a $1.4 million increase in revenues from residential customers and a $0.2 million increase in revenues from our small commercial and industrial customers reflecting favorable weather and a 1.4% increase in the average number of customers served. Cooling degree days increased 5.9% for the fourth quarter of 2015, when compared to the fourth quarter of 2014, and were 17.1% over the 10-year average. Heating degree days increased 3.6% for the three months ended December 31, 2015, when compared to the fourth quarter of 2014, and were 4.1% below the 10-year average. Retail non-fuel base revenues from large commercial and industrial customers and sales to public authorities decreased less than 1.0% compared to the fourth quarter of 2014. Non-fuel base revenues and kWh sales are provided by customer class on page 11 of this release.
For the twelve months ended December 31, 2015, retail non-fuel base revenues increased $14.3 million, or 2.6%, compared to 2014. This increase includes an $11.9 million increase in revenues from residential customers and a $2.0 million increase in revenues from small commercial and industrial customers reflecting hotter summer weather and increases of 1.3% and 1.6%, respectively, in the average number of customers. Retail non-fuel revenues from large commercial and industrial customers increased $1.2 million. KWh sales to public authorities increased 1.5% while revenue declined by $0.8 million due to a military installation moving a portion of their load to an interruptible rate. Cooling degree days increased 6.3% in 2015, when compared to 2014, and were 5.3% over the 10-year average. Heating degree days increased 10.3% in 2015, compared to 2014, and were 3.6% below the 10-year average. Non-fuel base revenues and kWh sales are provided by customer class on page 13 of this release.
2015 Rate Cases
On May 11, 2015, the Company filed with the New Mexico Public Regulation Commission ("NMPRC"), NMPRC Case No. 15-00127-UT, for an annual increase in non-fuel base rates of approximately $8.6 million or 7.1%. The filing also requests an annual reduction of $15.4 million, or 21.5%, for fuel and purchased power costs recovered in base rates. Subsequently, the Company reduced its requested increase in non-fuel base rates to approximately $6.4 million. On February 16, 2016, the Hearing Examiner issued a Recommended Decision to the NMPRC proposing an annual increase in non-fuel base rates of approximately $640 thousand. On February 17, 2016, the NMPRC issued an order extending the suspension period in the rate case from March 10, 2016 until April 8, 2016, by which time the NMPRC is expected to either issue a final order with new rates to go into effect in the second quarter of 2016 or again extend the suspension period further to as late as June 10, 2016. All parties will be allowed to file exceptions before the NMPRC ultimately rules on the issues by final order. The Company cannot predict the outcome of the rate case at this time.
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| El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960 | |
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 increase in non-fuel base revenues of approximately $71.5 million. On January 15, 2016, the Company filed its rebuttal testimony modifying the requested increase to $63.3 million. The Company has invoked its statutory right to have its new rates relate back for consumption on and after January 12, 2016, which is the 155th day after the filing. The difference in rates that would have been collected will be surcharged or refunded to customers beginning after the PUCT's final order in Docket No. 44941, which is expected to be in the second quarter of 2016. The PUCT has the authority to require the Company to surcharge or refund such difference over a period not to exceed 18 months. On January 21, 2016, the Company, the City of El Paso, the PUCT staff, the Office of Public Utility Counsel and the Texas Industrial Energy Consumers filed a joint motion to abate the procedural schedule to facilitate settlement talks. This motion was granted. The Company cannot predict the outcome of the rate case at this time.
Capital and Liquidity
We continue to maintain a strong capital structure in which common stock equity represented 44.3% of our capitalization (common stock equity, long-term debt, current maturities of long-term debt and short-term borrowings under the revolving credit facility). At December 31, 2015, we had a balance of $8.1 million in cash and cash equivalents. Based on current projections, we believe that we will have adequate liquidity through the issuance of long-term debt, our current cash balances, cash from operations and available borrowings under our Revolving Credit Facility ("RCF") to meet all of our anticipated cash requirements for the next 12 months.
Cash flows from operations for the twelve months ended December 31, 2015 were $246.7 million, compared to $243.3 million for the twelve months ended December 31, 2014. 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, 2015, the Company had a fuel over-recovery of $13.3 million compared to an under-recovery of fuel costs of $3.1 million during the twelve months ended December 31, 2014. At December 31, 2015, we had a net fuel over-recovery balance of $4.0 million, including an over-recovery of $0.1 million in Texas, $3.8 million in the New Mexico and $0.1 million in the Federal Energy Regulatory Commission ("FERC") jurisdiction. On April 15, 2015, we filed a request to lower our Texas fixed fuel factor by approximately 24% to reflect a change in fuel costs primarily related to a reduction in natural gas prices. This decrease was effective with May 2015 billings.
During the twelve months ended December 31, 2015, 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 $281.5 million for the twelve months ended December 31, 2015 and $277.1 million for the twelve months ended December 31, 2014. Capital expenditures for 2016 are expected to be $231.1 million. Capital requirements for purchases of nuclear fuel were $42.0 million for the twelve months ended December 31, 2015, and $37.9 million for the twelve months ended December 31, 2014.
On January 28, 2016, the Board of Directors declared a quarterly cash dividend of $0.295 per share payable on March 31, 2016 to shareholders of record as of the close of business on March 15, 2016. On December 30, 2015, we paid a quarterly cash dividend of $0.295 per share, or $11.9 million, to shareholders of record as of the close of business on December 15, 2015. We paid a total of $47.1 million in cash dividends during the twelve months ended December 31, 2015. We expect to continue paying quarterly cash dividends during 2016.
No shares of common stock were repurchased during the twelve months ended December 31, 2015. As of December 31, 2015, a total of 393,816 shares remain available for repurchase under the Company's currently authorized stock repurchase program. The Company 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.
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| El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960 | |
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 the Company's financial statements. The RCF has a term ending January 14, 2019. The aggregate unsecured borrowing available under the RCF is $300 million. We may increase the RCF by up to $100 million (up to a total of $400 million) during the term of the agreement, upon the satisfaction of certain conditions, more fully set forth in the agreement, including obtaining commitments from lenders or third party financial institutions. In August 2015, the RGRT $15.0 million Series A 3.67% Senior Notes matured and were paid utilizing funds borrowed under the RCF. The total amount borrowed for nuclear fuel by the RGRT was $128.7 million at 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. Borrowings by the RGRT for nuclear fuel were $124.5 million as of December 31, 2014, of which $14.5 million had been borrowed under the RCF and $110.0 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, 2015, $108.0 million was outstanding under the RCF for working capital and general corporate purposes. No borrowings were outstanding at December 31, 2014 under the RCF for working capital and general corporate purposes. Total aggregate borrowings under the RCF at December 31, 2015 were $141.7 million with an additional $157.8 million available to borrow.
We received approval from the New Mexico Public Regulation Commission 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.
2016 Earnings Guidance
On May 11, 2015 and August 10, 2015, the Company filed rate cases in New Mexico and Texas, respectively, as discussed above. The outcome of these cases are expected to have a significant impact on the Company's results of operations in 2016. Since we cannot predict the outcome of these rate cases, the Company has decided not to provide earnings guidance at this time. However, we will continue to provide management's outlook on key earnings drivers on the Company's February 24, 2016 conference call.
Conference Call
A conference call to discuss 2015 financial results is scheduled for 10:30 A.M. Eastern Time, on February 24, 2016. The dial-in number is 888-430-8694 with a conference ID number of 7522946. The international dial-in number is 719-457-1035. The conference leader will be Lisa Budtke, Director Treasury Services and Investor Relations. A replay will run through March 9, 2016 with a dial-in number of 888-203-1112 and a conference ID number of 7522946. 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
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| El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960 | |
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) the size of our construction program and our ability to complete construction on budget and on time; (vii) potential delays in our construction schedule due to legal challenges or other reasons; (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 or state taxing authorities; (xii) uncertainties and instability in the financial markets and the resulting impact on EE's ability to access the capital and credit markets; (xiii) possible physical or cyber attacks, intrusions or other catastrophic events; and (xiv) 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.
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Media Contacts | |
Eddie Gutierrez | |
915.543.5763 | |
eduardo.gutierrez@epelectric.com | |
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Investor Relations | |
Lisa Budtke | |
915.543.5947 | |
lisa.budtke@epelectric.com | |
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| Page 7 of 15 | |
| El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960 | |
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El Paso Electric Company |
Statements of Operations |
Three Months Ended December 31, 2015 and 2014 |
(In thousands except for per share data) |
(Unaudited) |
| | | | | | | |
| | 2015 | | 2014 | | Variance | |
| | | | | | | |
Operating revenues, net of energy expenses: | | | | | | |
| Base revenues | $ | 116,163 |
| | $ | 114,728 |
| | $ | 1,435 |
| (a) |
| Deregulated Palo Verde Unit 3 revenues | 2,119 |
| | 3,109 |
| | (990 | ) | |
| Other | 7,452 |
| | 8,812 |
| | (1,360 | ) | |
Operating Revenues Net of Energy Expenses | 125,734 |
| | 126,649 |
| | (915 | ) | |
| | | | | | | |
Other operating expenses: | | | | | | |
| Other operations and maintenance | 49,849 |
| | 51,722 |
| | (1,873 | ) | |
| Palo Verde operations and maintenance | 29,937 |
| | 31,183 |
| | (1,246 | ) | |
Taxes other than income taxes | 14,892 |
| | 13,867 |
| | 1,025 |
| |
Other income | 3,918 |
| | 4,867 |
| | (949 | ) | |
Earnings Before Interest, Taxes, Depreciation and Amortization | 34,974 |
| | 34,744 |
| | 230 |
| (b) |
| | | | | | | |
Depreciation and amortization | 22,744 |
| | 21,006 |
| | 1,738 |
| |
Interest on long-term debt | 16,408 |
| | 15,225 |
| | 1,183 |
| |
AFUDC and capitalized interest | 5,004 |
| | 8,269 |
| | (3,265 | ) | |
Other interest expense | 372 |
| | 351 |
| | 21 |
| |
Income Before Income Taxes | 454 |
| | 6,431 |
| | (5,977 | ) | |
| | | | | | | |
Income tax expense (benefit) | (194 | ) | | 2,190 |
| | (2,384 | ) | |
| | | | | | | |
Net Income | $ | 648 |
| | $ | 4,241 |
| | $ | (3,593 | ) | |
| | | | | | | |
Basic Earnings per Share | $ | 0.02 |
| | $ | 0.10 |
| | $ | (0.08 | ) | |
| | | | | | | |
Diluted Earnings per Share | $ | 0.02 |
| | $ | 0.10 |
| | $ | (0.08 | ) | |
| | | | | | | |
Dividends declared per share of common stock | $ | 0.295 |
| | $ | 0.280 |
| | $ | 0.015 |
| |
| | | | | | | |
Weighted average number of shares outstanding | 40,297 |
| | 40,220 |
| | 77 |
| |
| | | | | | | |
Weighted average number of shares and dilutive | | | | | | |
| potential shares outstanding | 40,335 |
| | 40,220 |
| | 115 |
| |
| | | | | | | |
(a) | Base revenues exclude fuel recovered through New Mexico base rates of $16.4 million and $16.0 million, respectively. |
(b) | Earnings before interest, taxes, depreciation and amortization ("EBITDA") is a non-generally accepted accounting principles ("GAAP") financial measure and is not a substitute for net income or other measures of financial performance in accordance with GAAP. |
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El Paso Electric Company |
Statements of Operations |
Twelve Months Ended December 31, 2015 and 2014 |
(In thousands except for per share data) |
(Unaudited) |
| | | | | | | |
| | 2015 | | 2014 | | Variance | |
| | | | | | | |
Operating revenues, net of energy expenses: | | | | | | |
| Base revenues | $ | 567,811 |
| | $ | 553,341 |
| | $ | 14,470 |
| (a) |
| Deregulated Palo Verde Unit 3 revenues | 9,660 |
| | 15,012 |
| | (5,352 | ) | |
| Palo Verde performance rewards, net | — |
| | 2,220 |
| | (2,220 | ) | |
| Other | 30,453 |
| | 31,143 |
| | (690 | ) | |
Operating Revenues Net of Energy Expenses | 607,924 |
| | 601,716 |
| | 6,208 |
| |
| | | | | | | |
Other operating expenses: | | | | | | |
| Other operations and maintenance | 210,534 |
| | 205,237 |
| | 5,297 |
| |
| Palo Verde operations and maintenance | 97,639 |
| | 99,224 |
| | (1,585 | ) | |
Taxes other than income taxes | 63,736 |
| | 62,750 |
| | 986 |
| |
Other income | 15,242 |
| | 13,509 |
| | 1,733 |
| |
Earnings Before Interest, Taxes, Depreciation and Amortization | 251,257 |
| | 248,014 |
| | 3,243 |
| (b) |
| | | | | | | |
Depreciation and amortization | 89,824 |
| | 83,342 |
| | 6,482 |
| |
Interest on long-term debt | 65,851 |
| | 59,028 |
| | 6,823 |
| |
AFUDC and capitalized interest | 22,544 |
| | 28,122 |
| | (5,578 | ) | |
Other interest expense | 1,313 |
| | 1,250 |
| | 63 |
| |
Income Before Income Taxes | 116,813 |
| | 132,516 |
| | (15,703 | ) | |
| | | | | | | |
Income tax expense | 34,895 |
| | 41,088 |
| | (6,193 | ) | |
| | | | | | | |
Net Income | $ | 81,918 |
| | $ | 91,428 |
| | $ | (9,510 | ) | |
| | | | | | | |
Basic Earnings per Share | $ | 2.03 |
| | $ | 2.27 |
| | $ | (0.24 | ) | |
| | | | | | | |
Diluted Earnings per Share | $ | 2.03 |
| | $ | 2.27 |
| | $ | (0.24 | ) | |
| | | | | | | |
Dividends declared per share of common stock | $ | 1.165 |
| | $ | 1.105 |
| | $ | 0.060 |
| |
| | | | | | | |
Weighted average number of shares outstanding | 40,275 |
| | 40,191 |
| | 84 |
| |
| | | | | | | |
Weighted average number of shares and dilutive | | | | | | |
| potential shares outstanding | 40,309 |
| | 40,212 |
| | 97 |
| |
| | | | | | | |
(a) | Base revenues exclude fuel recovered through New Mexico base rates of $72.1 million and $71.6 million, respectively. |
(b) | Earnings before interest, taxes, depreciation and amortization ("EBITDA") is a non-generally accepted accounting principles ("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 |
Cash Flow Summary |
Twelve Months Ended December 31, 2015 and 2014 |
(In thousands and Unaudited) |
| | | | | | | |
| | | | 2015 | | 2014 | |
Cash flows from operating activities: | | | | |
| Net income | $ | 81,918 |
| | $ | 91,428 |
| |
| Adjustments to reconcile net income to net cash provided by operations: | | | | |
| | Depreciation and amortization of electric plant in service | 89,824 |
| | 83,342 |
| |
| | Amortization of nuclear fuel
| 43,099 |
| | 43,864 |
| |
| | Deferred income taxes, net | 30,846 |
| | 39,129 |
| |
| | Net gains on sale of decommissioning trust funds | (11,114 | ) | | (7,350 | ) | |
| | Other | 6,927 |
| | 1,533 |
| |
| Change in: | | | | |
| | Accounts receivable | 4,839 |
| | (5,815 | ) | |
| | Net over-collection (under-collection) of fuel revenues | 13,344 |
| | (3,121 | ) | |
| | Accounts payable | (11,235 | ) | | 9,684 |
| |
| | Other | (1,777 | ) | | (9,354 | ) | |
| | | Net cash provided by operating activities | 246,671 |
| | 243,340 |
| |
| | | | | | | |
Cash flows from investing activities: | | | | |
| Cash additions to utility property, plant and equipment | (281,458 | ) | | (277,078 | ) | |
| Cash additions to nuclear fuel | (41,966 | ) | | (37,877 | ) | |
| Decommissioning trust funds | (7,656 | ) | | (9,364 | ) | |
| Other | (11,654 | ) | | (6,873 | ) | |
| | | Net cash used for investing activities | (342,734 | ) | | (331,192 | ) | |
| | | | | | | |
Cash flows from financing activities: | | | | |
| Dividends paid | (47,059 | ) | | (44,556 | ) | |
| Borrowings under the revolving credit facility, net | 127,206 |
| | 180 |
| |
| Payment on maturing RGRT senior notes | (15,000 | ) | | — |
| |
| Proceeds from issuance of senior notes | — |
| | 149,468 |
| |
| Other | (1,439 | ) | | (2,328 | ) | |
| | | Net cash provided by financing activities | 63,708 |
| | 102,764 |
| |
| | | | | | | |
Net increase (decrease) in cash and cash equivalents | (32,355 | ) | | 14,912 |
| |
| | | | | | | |
Cash and cash equivalents at beginning of period | 40,504 |
| | 25,592 |
| |
| | | | | | | |
Cash and cash equivalents at end of period | $ | 8,149 |
| | $ | 40,504 |
| |
| | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
El Paso Electric Company |
Three Months Ended December 31, 2015 and 2014 |
Sales and Revenues Statistics |
| | | | | | | | | | | |
| | | | | | | | | | Increase (Decrease) | |
| | | | | | 2015 | | 2014 | | Amount | | Percentage | |
kWh sales (in thousands): | | | | | | | | |
| Retail: | | | | | | | | |
| | Residential | 567,548 |
| | 552,977 |
| | 14,571 |
| | 2.6 | % | |
| | Commercial and industrial, small | 548,583 |
| | 548,369 |
| | 214 |
| | — |
| |
| | Commercial and industrial, large | 260,480 |
| | 269,584 |
| | (9,104 | ) | | (3.4 | )% | |
| | Public authorities | 363,381 |
| | 360,381 |
| | 3,000 |
| | 0.8 | % | |
| | | Total retail sales | 1,739,992 |
| | 1,731,311 |
| | 8,681 |
| | 0.5 | % | |
| Wholesale: | | | | | | | | |
| | Sales for resale | 8,772 |
| | 9,798 |
| | (1,026 | ) | | (10.5 | )% | |
| | Off-system sales | 587,732 |
| | 606,749 |
| | (19,017 | ) | | (3.1 | )% | |
| | | Total wholesale sales | 596,504 |
| | 616,547 |
| | (20,043 | ) | | (3.3 | )% | |
| | | | Total kWh sales | 2,336,496 |
| | 2,347,858 |
| | (11,362 | ) | | (0.5 | )% | |
Operating revenues (in thousands): | | | | | | | | |
| Non-fuel base revenues: | | | | | | | | |
| | Retail: | | | | | | | | |
| | | Residential | $ | 49,100 |
| | $ | 47,653 |
| | $ | 1,447 |
| | 3.0 | % | |
| | | Commercial and industrial, small | 38,636 |
| | 38,449 |
| | 187 |
| | 0.5 | % | |
| | | Commercial and industrial, large | 8,956 |
| | 9,019 |
| | (63 | ) | | (0.7 | )% | |
| | | Public authorities | 19,081 |
| | 19,229 |
| | (148 | ) | | (0.8 | )% | |
| | | | Total retail non-fuel base revenues | 115,773 |
| | 114,350 |
| | 1,423 |
| | 1.2 | % | |
| | Wholesale: | | | | | | | | |
| | | Sales for resale | 390 |
| | 378 |
| | 12 |
| | 3.2 | % | |
| | | | Total non-fuel base revenues | 116,163 |
| | 114,728 |
| | 1,435 |
| | 1.3 | % | |
| Fuel revenues: | | | | | | | | |
| | Recovered from customers during the period | 24,780 |
| | 34,945 |
| | (10,165 | ) | | (29.1 | )% | |
| | Under (over) collection of fuel | (2,409 | ) | | 1,887 |
| | (4,296 | ) | | — |
| |
| | New Mexico fuel in base rates | 16,364 |
| | 15,971 |
| | 393 |
| | 2.5 | % | |
| | | Total fuel revenues (a) | 38,735 |
| | 52,803 |
| | (14,068 | ) | | (26.6 | )% | |
| Off-system sales: | | | | | | | | |
| | Fuel cost | 11,202 |
| | 13,246 |
| | (2,044 | ) | | (15.4 | )% | |
| | Shared margins | 2,350 |
| | 6,602 |
| | (4,252 | ) | | (64.4 | )% | |
| | Retained margins | 407 |
| | 418 |
| | (11 | ) | | (2.6 | )% | |
| | | Total off-system sales | 13,959 |
| | 20,266 |
| | (6,307 | ) | | (31.1 | )% | |
| Other (b) (c) | 8,045 |
| | 8,766 |
| | (721 | ) | | (8.2 | )% | |
| | | Total operating revenues | $ | 176,902 |
| | $ | 196,563 |
| | $ | (19,661 | ) | | (10.0 | )% | |
| | | | | | | | | | | | | |
(a) | Includes deregulated Palo Verde Unit 3 revenues for the New Mexico jurisdiction of $2.1 million and $3.1 million, respectively. |
(b) | Includes energy efficiency bonuses of $1.3 million and $2.0 million, respectively. |
(c) | Represents revenues with no related kWh sales. |
|
| | | | | | | | | | | | | |
El Paso Electric Company |
Three Months Ended December 31, 2015 and 2014 |
Other Statistical Data |
| | | | | | | | | |
| | | | | Increase (Decrease) |
| | | 2015 | | 2014 | | Amount | | Percentage |
| | | | | | | | | |
Average number of retail customers: (a) | | | | | | | |
| Residential | 358,712 |
| | 353,657 |
| | 5,055 |
| | 1.4 | % |
| Commercial and industrial, small | 40,380 |
| | 39,969 |
| | 411 |
| | 1.0 | % |
| Commercial and industrial, large | 48 |
| | 49 |
| | (1 | ) | | (2.0 | )% |
| Public authorities | 5,270 |
| | 5,090 |
| | 180 |
| | 3.5 | % |
| | Total | 404,410 |
| | 398,765 |
| | 5,645 |
| | 1.4 | % |
| | | | | | | | | |
Number of retail customers (end of period): (a) | | | | | | | |
| Residential | 358,819 |
| | 353,885 |
| | 4,934 |
| | 1.4 | % |
| Commercial and industrial, small | 40,367 |
| | 40,038 |
| | 329 |
| | 0.8 | % |
| Commercial and industrial, large | 49 |
| | 49 |
| | — |
| | — |
|
| Public authorities | 5,261 |
| | 5,017 |
| | 244 |
| | 4.9 | % |
| | Total | 404,496 |
| | 398,989 |
| | 5,507 |
| | 1.4 | % |
| | | | | | | | | |
Weather statistics: (b) | | | | | 10-Yr Average | | |
| Cooling degree days | 144 |
| | 136 |
| | 123 |
| | |
| Heating degree days | 889 |
| | 858 |
| | 927 |
| | |
| | | | | | | | | |
Generation and purchased power (kWh, in thousands): | | | | | Increase (Decrease) |
| | | 2015 | | 2014 | | Amount | | Percentage |
| | | | | | | | | |
| Palo Verde | 1,196,316 |
| | 1,180,602 |
| | 15,714 |
| | 1.3 | % |
| Four Corners | 184,328 |
| | 159,363 |
| | 24,965 |
| | 15.7 | % |
| Gas plants | 744,329 |
| | 889,502 |
| | (145,173 | ) | | (16.3 | )% |
| | Total generation | 2,124,973 |
| | 2,229,467 |
| | (104,494 | ) | | (4.7 | )% |
| Purchased power: | | | | | | | |
| | Photovoltaic | 53,423 |
| | 53,941 |
| | (518 | ) | | (1.0 | )% |
| | Other | 286,227 |
| | 188,194 |
| | 98,033 |
| | 52.1 | % |
| | Total purchased power | 339,650 |
| | 242,135 |
| | 97,515 |
| | 40.3 | % |
| | Total available energy | 2,464,623 |
| | 2,471,602 |
| | (6,979 | ) | | (0.3 | )% |
| Line losses and Company use | 128,127 |
| | 123,744 |
| | 4,383 |
| | 3.5 | % |
| | Total kWh sold | 2,336,496 |
| | 2,347,858 |
| | (11,362 | ) | | (0.5 | )% |
| | | | | | | | | |
|
| | | | | | | | | | | | |
| Palo Verde capacity factor | 87.0 | % | | 85.9 | % | | 1.1 | % | | |
| | | | | | | | | |
(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. |
|
| | | | | | | | | | | | | | | | | | | | |
El Paso Electric Company |
Twelve Months Ended December 31, 2015 and 2014 |
Sales and Revenues Statistics |
| | | | | | | | | | | | | |
| | | | | | | | | | Increase (Decrease) | |
| | | | | | 2015 | | 2014 | | Amount | | Percentage | |
kWh sales (in thousands): | | | | | | | | |
| Retail: | | | | | | | | |
| | Residential | 2,771,138 |
| | 2,640,535 |
| | 130,603 |
| | 4.9 | % | |
| | Commercial and industrial, small | 2,384,514 |
| | 2,357,846 |
| | 26,668 |
| | 1.1 | % | |
| | Commercial and industrial, large | 1,062,662 |
| | 1,064,475 |
| | (1,813 | ) | | (0.2 | )% | |
| | Public authorities | 1,585,568 |
| | 1,562,784 |
| | 22,784 |
| | 1.5 | % | |
| | | Total retail sales | 7,803,882 |
| | 7,625,640 |
| | 178,242 |
| | 2.3 | % | |
| Wholesale: | | | | | | | | |
| | Sales for resale | 63,347 |
| | 61,729 |
| | 1,618 |
| | 2.6 | % | |
| | Off-system sales | 2,500,947 |
| | 2,609,769 |
| | (108,822 | ) | | (4.2 | )% | |
| | | Total wholesale sales | 2,564,294 |
| | 2,671,498 |
| | (107,204 | ) | | (4.0 | )% | |
| | | | Total kWh sales | 10,368,176 |
| | 10,297,138 |
| | 71,038 |
| | 0.7 | % | |
Operating revenues (in thousands): | | | | | | | | |
| Non-fuel base revenues: | | | | | | | | |
| | Retail: | | | | | | | | |
| | | Residential | $ | 246,265 |
| | $ | 234,371 |
| | $ | 11,894 |
| | 5.1 | % | |
| | | Commercial and industrial, small | 187,436 |
| | 185,388 |
| | 2,048 |
| | 1.1 | % | |
| | | Commercial and industrial, large | 40,411 |
| | 39,239 |
| | 1,172 |
| | 3.0 | % | |
| | | Public authorities | 91,244 |
| | 92,066 |
| | (822 | ) | | (0.9 | )% | |
| | | | Total retail non-fuel base revenues | 565,356 |
| | 551,064 |
| | 14,292 |
| | 2.6 | % | |
| | Wholesale: | | | | | | | | |
| | | Sales for resale | 2,455 |
| | 2,277 |
| | 178 |
| | 7.8 | % | |
| | | | Total non-fuel base revenues | 567,811 |
| | 553,341 |
| | 14,470 |
| | 2.6 | % | |
| | | | | | | | | | | | | |
| Fuel revenues: | | | | | | | | |
| | Recovered from customers during the period | 127,765 |
| | 161,052 |
| | (33,287 | ) | | (20.7 | )% | |
| | Under (over) collection of fuel (a) | (13,342 | ) | | 3,110 |
| | (16,452 | ) | | — |
| |
| | New Mexico fuel in base rates | 72,129 |
| | 71,614 |
| | 515 |
| | 0.7 | % | |
| | | Total fuel revenues (b) | 186,552 |
| | 235,776 |
| | (49,224 | ) | | (20.9 | )% | |
| | | | | | | | | | | | | |
| Off-system sales: | | | | | | | | |
| | Fuel cost | 52,406 |
| | 74,716 |
| | (22,310 | ) | | (29.9 | )% | |
| | Shared margins | 11,048 |
| | 21,117 |
| | (10,069 | ) | | (47.7 | )% | |
| | Retained margins | 1,362 |
| | 2,147 |
| | (785 | ) | | (36.6 | )% | |
| | | Total off-system sales | 64,816 |
| | 97,980 |
| | (33,164 | ) | | (33.8 | )% | |
| Other (c) (d) | 30,690 |
| | 30,428 |
| | 262 |
| | 0.9 | % | |
| | | Total operating revenues | $ | 849,869 |
| | $ | 917,525 |
| | $ | (67,656 | ) | | (7.4 | )% | |
| | | | | | | | | | | | | |
(a) | Includes Department of Energy refunds related to spent fuel storage of $5.8 million and $7.9 million, respectively. 2014 includes $2.2 million related to Palo Verde performance rewards, net. |
(b) | Includes deregulated Palo Verde Unit 3 revenues for the New Mexico jurisdiction of $9.7 million and $15.0 million, respectively. |
(c) | Includes energy efficiency bonuses of $1.3 million and $2.0 million, respectively. |
(d) | Represents revenues with no related kWh sales. |
|
| | | | | | | | | | | | | |
El Paso Electric Company |
Twelve Months Ended December 31, 2015 and 2014 |
Other Statistical Data |
| | | | | | | |
| | | | | Increase (Decrease) |
| | | 2015 | | 2014 | | Amount | | Percentage |
| | | | | | | | | |
Average number of retail customers: (a) | | | | | | | |
| Residential | 356,969 |
| | 352,277 |
| | 4,692 |
| | 1.3 | % |
| Commercial and industrial, small | 40,250 |
| | 39,600 |
| | 650 |
| | 1.6 | % |
| Commercial and industrial, large | 49 |
| | 49 |
| | — |
| | — |
|
| Public authorities | 5,250 |
| | 5,088 |
| | 162 |
| | 3.2 | % |
| | Total | 402,518 |
| | 397,014 |
| | 5,504 |
| | 1.4 | % |
| | | | | | | | | |
Number of retail customers (end of period): (a) | | | | | | | |
| Residential | 358,819 |
| | 353,885 |
| | 4,934 |
| | 1.4 | % |
| Commercial and industrial, small | 40,367 |
| | 40,038 |
| | 329 |
| | 0.8 | % |
| Commercial and industrial, large | 49 |
| | 49 |
| | — |
| | — |
|
| Public authorities | 5,261 |
| | 5,017 |
| | 244 |
| | 4.9 | % |
| | Total | 404,496 |
| | 398,989 |
| | 5,507 |
| | 1.4 | % |
| | | | | | | | | |
Weather statistics: (b) | | | | | 10-Yr Average | | |
| Cooling degree days | 2,839 |
| | 2,671 |
| | 2,696 |
| | |
| Heating degree days | 2,095 |
| | 1,900 |
| | 2,174 |
| | |
| | | | | | | | | |
Generation and purchased power (kWh, in thousands): | | | | | Increase (Decrease) |
| | | 2015 | | 2014 | | Amount | | Percentage |
| | | | | | | | | |
| Palo Verde | 5,136,686 |
| | 5,106,668 |
| | 30,018 |
| | 0.6 | % |
| Four Corners | 657,744 |
| | 596,252 |
| | 61,492 |
| | 10.3 | % |
| Gas plants | 3,790,659 |
| | 3,774,209 |
| | 16,450 |
| | 0.4 | % |
| | Total generation | 9,585,089 |
| | 9,477,129 |
| | 107,960 |
| | 1.1 | % |
| Purchased power: | | | | | | | |
| Photovoltaic | 277,241 |
| | 227,979 |
| | 49,262 |
| | 21.6 | % |
| Other | 1,113,705 |
| | 1,162,511 |
| | (48,806 | ) | | (4.2 | )% |
| | Total purchased power | 1,390,946 |
| | 1,390,490 |
| | 456 |
| | — |
|
| | Total available energy | 10,976,035 |
| | 10,867,619 |
| | 108,416 |
| | 1.0 | % |
| Line losses and Company use | 607,859 |
| | 570,481 |
| | 37,378 |
| | 6.6 | % |
| Total kWh sold | 10,368,176 |
| | 10,297,138 |
| | 71,038 |
| | 0.7 | % |
|
| | | | | | | | | | | | |
| Palo Verde capacity factor | 94.3 | % | | 93.7 | % | | 0.6 | % | | |
| | | | | | | | | |
(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. |
|
| | | | | | | | | |
El Paso Electric Company |
Financial Statistics |
At December 31, 2015 and 2014 |
(In thousands, except number of shares, book value per common share, and ratios) |
| | | | | |
Balance Sheet | | 2015 | | 2014 |
| | | | | |
Cash and cash equivalents | | $ | 8,149 |
| | $ | 40,504 |
|
| | | | | |
Common stock equity | | $ | 1,016,538 |
| | $ | 984,254 |
|
Long-term debt | | 1,134,284 |
| | 1,134,179 |
|
| Total capitalization | | $ | 2,150,822 |
| | $ | 2,118,433 |
|
| | | | | |
Current maturities of long-term debt | | $ | — |
| | $ | 15,000 |
|
| | | | | |
Short-term borrowings under the revolving credit facility | | $ | 141,738 |
| | $ | 14,532 |
|
| | | | | |
Number of shares - end of period | | 40,443,819 |
| | 40,356,624 |
|
| | | | | |
Book value per common share | | $ | 25.13 |
| | $ | 24.39 |
|
| | | | | |
Common equity ratio (a) | | 44.3 | % | | 45.8 | % |
Debt ratio | | 55.7 | % | | 54.2 | % |
| | | | | |
(a) | 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. |
| | | | | |
Fourth Quarter 2015 Earnings Conference Call February 24, 2016
A A A A Safe Harbor Statement This presentation includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. This information often involves risks and uncertainties that could cause actual results to differ materially from such forward- looking statements. The statements in this presentation that are not historical statements and any other statements regarding EE's future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts, are forward-looking statements within the meaning of the federal securities laws. 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 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 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 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. 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. 2
Financial Overview 3 Maintained positive earnings of $0.02 per share in 4th quarter of 2015 despite regulatory lag Reported annual net income of $81.9 million or $2.03 per share for 2015 Declared a quarterly cash dividend of $0.295 per share on January 28, 2016 payable on March 31, 2016 to shareholders of record as of March 15, 2016
A A a 4 2015 Highlights Completed construction and started commercial operation of Montana Power Station (MPS) Units 1 and 2 Completed construction and placed into service the Eastside Operations Center (EOC) Filed rate cases in both Texas and New Mexico Commenced construction of MPS Units 3 and 4 Achieved two separate native system peak records Palo Verde achieved highest output in its history Implemented management transition strategy Maintained high customer satisfaction ratings EE employees contributed approximately 10,000 volunteer hours to the local community during the year
2016 Objectives Complete construction and start commercial operation of MPS Units 3 & 4 Become a coal-free utility by selling our 7% ownership interest in Units 4 & 5 and common facilities of the Four Corners plant Work collaboratively with our union to negotiate a new collective bargaining agreement Continue to expand affordable large scale solar capabilities Continue to improve safety, reliability and customer satisfaction measures Continue to improve relationships with stakeholders Prepare for the next round of rate case filings in both Texas and New Mexico 5
A A a A A a A A a Texas Rate Case Update (Docket No. 44941) Originally filed for a non-fuel base rate increase of $71.5mm, which was later revised to $63.3mm Filed joint motion to abate procedural schedule on January 21, 2016 Settlement discussions continue and we file weekly updates with the PUCT regarding progress New rates will relate back to January 12, 2016 6
A A a A A a New Mexico Regulatory Updates New Mexico Rate Case (Case No. 15-00127-UT) Originally filed for a non-fuel base rate increase of $8.6mm, which was later revised to $6.4mm Hearing Examiner recommended a $640 thousand increase in non- fuel base rates which includes: Treating a significant portion of the pension & benefits liability as a rate base offset Recommended ROE of 9.6% rather than requested ROE of 9.95% Disallowance of several smaller cost of service items Substantially all plant in service deemed reasonable and necessary Extended suspension period to April 8, 2016, by which time the Commission is expected to issue a final order or to extend the period Four Corners (Case No. 15-00109-UT) Filed unopposed joint stipulation reflecting settlement agreement in the New Mexico abandonment/sale proceeding seeking approval of the sale of our 7% ownership interest in Units 4 & 5 and common facilities 7
Potential Timeline - Next Rate Cases 8 (1) NM Rate Case filing would use a historical test year ended September 2016 and via a “post test year adjustment” include MPS units 3 & 4 in requested rate base. (2) TX House Bill 1535 allows for the TX Rate Case filing to reflect a historical test year ended September 2016 and include MPS units 3 & 4 in requested rate base. (3) TX House Bill 1535 allows for rates to relate back to the 155th day after a rate case is filed. New Mexico Texas 2016 May Jul Sep Nov Jan 2017 Mar May Jul Sep Nov Jan 2018 2018 Final Order Q1 2018 Final Order 4Q 2017 Effective Date of Rates(3) 3Q 2017 File Rate Case(1) 1Q 2017 File Rate Case 1Q 2017 MPS Unit 4 In-Service Dec 2016 MPS Unit 4 In-Service Dec 2016 Historical Test Year End Sep 2016 Historical Test Year End(2) Sep 2016 MPS Unit 3 In-Service May 2016 MPS Unit 3 In-Service May 2016
A A A A 9 4Q & YTD Key Earnings Drivers 4Q Basic EPS YTD Basic EPS Description December 31, 2014 0.10$ 2.27$ Changes In: Allowance for funds used during construction (AFUDC) (0.07) (0.12) Decreased primarily due to lower construction work in progress balances due to MPS Units 1 & 2 and the EOC being placed in service during the first quarter of 2015 Administrative and general expense (0.04) (0.04) Increased due to higher payroll costs and increased pension and benefits costs Depreciation and amortization (0.03) (0.10) Increased primarily due to MPS Units 1 & 2 and the EOC being placed in service during the first quarter of 2015 Interest on long-term debt (0.02) (0.11) Increased due to interest accrued on $150 million aggregate principal amount of senior notes issued in December 2014 Deregulated Palo Verde Unit 3 (0.02) (0.09) Decreased primarily due to a decrease in proxy market prices reflecting a decline in natural gas prices Investment and interest income - 0.07 Increased for the year due to further diversification and re- balancing of the Palo Verde decommissioning trust fund portfolio O&M at fossil-fuel generating plants 0.06 - Decreased in the fourth quarter primarily due to decreased level of maintenance activity at Four Corners Unit 5 and Newman Unit 4 Retail non-fuel base revenues 0.02 0.23 Increased primarily due to hotter weather and an increase in the number of customers served Palo Verde performance rewards, net - (0.04) Decreased for the year due to the rewards associated with the 2009 to 2012 performance periods being recorded in June 2014 with no comparable activity in 2015 Other 0.02 (0.04) December 31, 2015 0.02$ 2.03$
Historical Weather Summary 10 *Chart illustrates HDD’s for El Paso, Texas as reported by NOAA 2,020 2,286 2,188 2,144 2,273 2,402 2,009 2,426 1,900 2,095 2,457 2,512 2,272 2,768 2,738 3,141 2,876 2,695 2,671 2,839 0 500 1,000 1,500 2,000 2,500 3,000 3,500 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 December YTD HDD & CDD HDD CDD 10-Yr HDD Average – 2,174 10-Yr CDD Average – 2,696 December YTD 2015 CDDs 5.3% Above 10-Yr Average 6.3% Above December YTD 2014 December YTD 2015 HDDs 3.6% Below 10-Yr Average 10.3% Above December YTD 2014
Non-Fuel Base Revenues (000's) Percent Change * MWH Percent Change * Residential 49,100$ 3.0% 567,548 2.6% C&I Small 38,636 0.5% 548,583 - C&I Large 8,956 (0.7%) 260,480 (3.4%) Public Authorities 19,081 (0.8%) 363,381 0.8% Total Retail 115,773$ 1.2% 1,739,992 0.5% Cooling Degree Days (CDD's) 144 5.9% Heating Degree Days (HDD's) 889 3.6% Average Retail Customers 404,410 1.4% * Percent Change expressed as change from Q4 2015 over Q4 2014 4th Quarter Retail Revenues and Sales 11
Non-Fuel Base Revenues (000's) Percent Change * MWH Percent Change * Residential 246,265$ 5.1% 2,771,138 4.9% C&I Small 187,436 1.1% 2,384,514 1.1% C&I Large 40,411 3.0% 1,062,662 (0.2%) Public Authorities 91,244 (0.9%) 1,585,568 1.5% Total Retail 565,356$ 2.6% 7,803,882 2.3% Cooling Degree Days (CDD's) 2,839 6.3% Heating Degree Days (HDD's) 2,095 10.3% Average Retail Customers 402,518 1.4% * Percent Change expressed as change from YTD 2015 over YTD 2014 Year to Date Retail Revenues and Sales 12
Capital Requirements & Liquidity Expended $281.5mm for additions to utility plant for the twelve months ended December 31, 2015 EE made $47.1mm in dividend payments for the twelve months ended December 31, 2015 At December 31, 2015, EE had liquidity of $165.9mm including a cash balance of $8.1mm and unused capacity under the revolving credit facility Capital expenditures for utility plant in 2016 are anticipated to be approximately $231mm 13
Five Year Cash Capital Expenditures 14 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 2016E 2017E 2018E 2019E 2020E Generation Transmission Distribution General $231mm $156mm $182mm $232mm $283mm
15 Projected Rate Base & CWIP YE 2015 Including MPS 1 & 2 YE 2016 Including MPS 3 & 4 Beginning Rate Base (1)(2) $1,632 $1,940 Plant Additions: MPS Transmission and Substations 18 8 New Eastside Operations Center 41 - Other 144 144 New Generating Units: Montana Common Plant 57 6 Montana Unit 1 79 - Montana Unit 2 75 - Montana Unit 3 - 74 Montana Unit 4 - 74 Total 414 306 Depreciation Expense (93) (83) Change in Deferred Income Taxes & Other (3) (13) (28) Total Rate Base (4) $1,940 $2,135 2015 2016 Ending CWIP Balances ($ in millions) $294 $200 (1) Includes NM Palo Verde Unit 3 rate base of approximately $26mm and $27mm for each pro-forma filing in 2015 and 2016, respectively. (2) Beginning rate base is December 31, 2014 (does not include a $29.5mm reduction recommended by the NM Hearing Examiner) and year end balances exclude CWIP. (3) 2016 rate base includes the impact of approximately $30mm of bonus depreciation. (4) Represents a pro-forma rate base projection that is subject to change based on actual rate filings. Pro forma Rate Base Balances ($000)
A A a 16 2016 Earnings Drivers Given the pendency of our rate case filings in Texas and New Mexico and the magnitude of the effect it could have on our Company at this time, we have decided to forego a defined range of guidance for 2016 YOY Impact on EPS Driver Effective Tax Rate Return to normal weather Property Taxes (1) Investment and interest income Interest expense (1) O&M (1) AFUDC (1) Rate relief Customer growth Depreciation (1) Other (1) Mainly related to regulatory lag ; Q1 will be a challenge due to regulatory lag and no rate relief
Q & A 17
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