Rate increase, summer sizzle boost NV Energy

The local power utility on Friday reported markedly improved quarterly results, and executives predicted an emerging period of steady electric rates, stable earnings and solid cash flow.

The company posted net income of $17.2 million, 7 cents a share, in the quarter that ended Dec. 31. That compares with a loss of $25.2 million, 11 cents a share, in the fourth quarter of 2011. Quarterly revenue fell to $600.6 million, down from $609.6 million in the same period a year earlier.

The biggest income assist came from a 2.7 percent rate increase in January 2012. The hike, which the Public Utilities Commission of Nevada approved so NV Energy could recover costs of building its new Harry Allen plant in Apex, added 11 cents per share in the fourth quarter compared with a year earlier.

Customer growth of 1.1 percent, combined with higher power use among existing ratepayers independent of weather, contributed 2 cents per share. It was the 11th straight quarter of customer gains.

NV Energy also slashed its debt by more than $120 million and refinanced rates on outstanding debt, for a per-share gain of 3 cents. Another 6 cents a share came from fewer regulatory adjustments and reserves year over year in the quarter.

Quarterly revenue dropped because of milder weather in the last three months of 2012.

But Southern Nevada endured its second-hottest summer on record last year, and that helped push up net income for the year to $322.9 million, $1.35 per share, compared with net income of $163.4 million, 69 cents a share, in 2011. Revenue increased from $2.94 billion in 2011 to $2.98 billion in 2012.

Above-average temperatures contributed 7 cents per share to 2012’s income, while the rate increase added 42 cents per share. Use and customer growth aided earnings by 8 cents per share, while lower interest costs improved per-share income by 7 cents.

Jonathan Halkyard, executive vice president and chief financial officer, said recent data suggested Nevada’s economy is continuing a slow, steady recovery. Unemployment fell to 10.2 percent in December, down from 13 percent in December 2011, and new-home permits rose modestly year to year. The company’s low-use customer accounts, which mostly represent vacant homes, dropped to 7 percent in Southern Nevada, down from a peak of roughly 9 percent in mid-2010. Low-use accounts fell to their lowest rates since 2008.

NV Energy slightly lowered its operating and maintenance costs in 2012 to $17.38 per megawatt hour from $17.71 in 2011.

The company forecasted normal weather and 1.2 percent customer growth in 2013, for expected earnings per share of $1.25 to $1.35. Its next general rate case won’t be filed until mid-2014, with any rate changes scheduled to take effect in January 2015. Company officials didn’t sound in their Friday morning earnings call like they anticipated a big rate jump.

“Based on our forecast of demand growth, capital expenditures and other factors, we believe we are now in a period of reduced need for major rate relief, stable earnings and sustained free cash flow,” Halkyard said.

NV Energy had free cash flow, or cash minus expenses, of nearly $380 million in 2012, up from $38 million in 2011. Halkyard said the cash would go to increasing dividends to bring the company’s payout ratio closer to that of its utility peers. Executives also expect to use cash to pay down more debt and look at potential capital investments.

“We’ve come a long way over the last decade, and I’m excited about our future and the opportunities we will have to serve our customers and provide a competitive return for our investors,” CEO Michael Yackira said.

Company officials also plan to file a June request with the Public Utilities Commission of Nevada and the Federal Energy Regulatory Commission to merge northern and southern operations once the One Nevada transmission line (ONLine) is complete at the end of 2013.

ONLine will connect the state’s northern and southern grids for the first time, and NV Energy officials have said they want to merge the two operations for more efficiencies.

NV Energy’s shares gained 27 cents, or 1.39 percent, Friday to close at $19.71 on the New York Stock Exchange.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512. Follow @J_Robison1 on Twitter.