0000031978-18-000007.txt : 20180227 0000031978-18-000007.hdr.sgml : 20180227 20180227070136 ACCESSION NUMBER: 0000031978-18-000007 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 20180227 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20180227 DATE AS OF CHANGE: 20180227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EL PASO ELECTRIC CO /TX/ CENTRAL INDEX KEY: 0000031978 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 740607870 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14206 FILM NUMBER: 18642895 BUSINESS ADDRESS: STREET 1: 100 NORTH STANTON CITY: EL PASO STATE: TX ZIP: 79901 BUSINESS PHONE: 9155435711 MAIL ADDRESS: STREET 1: 100 NORTH STANTON CITY: EL PASO STATE: TX ZIP: 79901 8-K 1 form8k12-31x17.htm FORM 8-K Document




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 27, 2018
 
El Paso Electric Company
(Exact name of registrant as specified in its charter)
Texas
001-14206
74-0607870
(State or other jurisdiction of
incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
 
 
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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act (§230.405 of this chapter) or Rule 12b-2 of the Exchange Act (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨






ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On February 27, 2018, the Company announced its financial results for the quarter ended December 31, 2017. A copy of the press release containing the announcement and a copy of the presentation at the Company's 4th Quarter 2017 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

(d)
Exhibits



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 27, 2018






EXHIBIT INDEX




EX-99.01 2 exh990112-31x2017.htm EARNINGS PRESS RELEASE Exhibit


Exhibit 99.01
theelectriccompanyelpasoele.jpg
 
 
 
www.epelectric.com
 
 
 
 
 
News Release
For Immediate Release
 
Date: February 27, 2018
 
 





El Paso Electric Announces Fourth Quarter and Annual 2017 Financial Results



Overview

For the fourth quarter of 2017, El Paso Electric Company ("EE" or the "Company") reported net income of $6.5 million, or $0.16 basic and diluted earnings per share. In the fourth quarter of 2016, EE reported net income of $5.7 million, or $0.14 basic and diluted earnings per share.

For the twelve months ended December 31, 2017, EE reported net income of $98.3 million, or $2.42 basic and diluted earnings per share. Net income for the twelve months ended December 31, 2016 was $96.8 million, or $2.39 basic and diluted earnings per share.






"We reached an important milestone in the fourth quarter when the Public Utility Commission of Texas approved the unopposed settlement in our 2017 Texas rate case," said Mary Kipp, President and Chief Executive Officer of El Paso Electric Company. "The settlement is the culmination of several years of dedicated effort and incorporates into our Texas rates over $1 billion of infrastructure investments, including Montana Power Station Units 1 through 4. Among other things, the settlement has a provision to pass through to our Texas customers the tax savings from the reduction in the federal statutory income tax rate that was recently enacted. We expect to begin issuing credits to our Texas customers in the first half of 2018."



 
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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 fourth quarter and twelve months ended December 31, 2017 net income relative to fourth quarter and twelve months ended December 31, 2016 net income, respectively, (in thousands except per share data):
 
 
Quarter Ended
 
Twelve Months Ended
 
 
Pre-Tax
Effect
 
After-Tax
Effect
 
Basic EPS
 
Pre-Tax
Effect
 
After-Tax
Effect
 
Basic EPS
December 31, 2016
 
 
$
5,656

 
$
0.14

 
 
 
$
96,768

 
$
2.39

Changes in:
 
 
 
 
 
 
 
 
 
 
 
 
Retail non-fuel base revenues
8,793

 
5,716

 
0.14

 
13,309

 
8,651

 
0.21

 
Effective tax rate

 
1,339

 
0.03

 

 
3,379

 
0.08

 
Palo Verde performance rewards, net

 

 

 
5,005

 
3,253

 
0.08

 
Depreciation and amortization
(2,629
)
 
(1,708
)
 
(0.04
)
 
(6,526
)
 
(4,242
)
 
(0.10
)
 
Palo Verde O&M
(1,984
)
 
(1,290
)
 
(0.03
)
 
(2,450
)
 
(1,592
)
 
(0.04
)
 
Taxes other than income taxes
(1,419
)
 
(922
)
 
(0.02
)
 
(5,330
)
 
(3,465
)
 
(0.09
)
 
Wheeling revenues
(906
)
 
(589
)
 
(0.02
)
 
(3,852
)
 
(2,504
)
 
(0.06
)
 
Allowance for funds used during construction
(357
)
 
(350
)
 
(0.01
)
 
(6,006
)
 
(5,303
)
 
(0.13
)
 
Investment and interest income
(520
)
 
(278
)
 
(0.01
)
 
3,674

 
2,825

 
0.07

 
Other


 
(1,074
)
 
(0.02
)
 


 
491

 
0.01

December 31, 2017


 
$
6,500

 
$
0.16

 
 
 
$
98,261

 
$
2.42

Fourth Quarter 2017
Income for the quarter ended December 31, 2017, when compared to the quarter ended December 31, 2016, was positively affected by (presented on a pre-tax basis):
Increased retail non-fuel base revenues primarily due to the non-fuel base rate increase approved by the Public Utility Commission of Texas ("PUCT") in its final order in the Company's 2017 Texas retail rate case in Docket No. 46831 (the "2017 PUCT Final Order"). The fourth quarter of 2017 included approximately $8.8 million of retail non-fuel base revenues for the period from July 18, 2017 through December 31, 2017, which was recognized when the 2017 PUCT Final Order was approved in December 2017. Excluding the rate relief impact, retail non-fuel base revenues were relatively unchanged. Overall, milder weather offset the impacts of customer growth of 1.7%.
Decreased effective tax rate primarily due to a reduction in Texas margin taxes resulting from a settlement with the Texas Comptroller of Public Accounts.

Income for the quarter ended December 31, 2017, when compared to the quarter ended December 31, 2016, was negatively affected by (presented on a pre-tax basis):
Increased depreciation and amortization primarily due to increases in plant and increased depreciation and amortization of approximately $0.7 million associated with the 2017 PUCT Final Order.
Increased Palo Verde Generating Station ("Palo Verde") operations and maintenance ("O&M") expense primarily due to reduced employee pension and benefit expenses by Palo Verde in 2016.
Increased taxes other than income taxes primarily due to increased property taxes in Texas and Arizona and increased revenue related taxes in Texas.

 
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El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960
 



Decreased wheeling revenues primarily due to the expiration of a contract.
Decreased allowance for funds used during construction ("AFUDC") primarily due to a reduction in the AFUDC rate effective January 2017.
Increased other primarily due to (i) O&M expenses related to the Company's fossil-fuel generating plants and (ii) employee incentive compensation and payroll costs compared to the three months ended December 31, 2016.


Year to Date 2017
Income for the twelve months ended December 31, 2017, when compared to the twelve months ended December 31, 2016, was positively affected by (presented on a pre-tax basis):
Increased retail non-fuel base revenues primarily due to the non-fuel base rate increase approved in the 2017 PUCT Final Order. The fourth quarter of 2017 included approximately $8.8 million of retail non-fuel base revenues for the period from July 18, 2017 through December 31, 2017, which were recognized when the 2017 PUCT Final Order was approved in December 2017. Excluding the $8.8 million 2017 PUCT Final Order impact, for the twelve months ended December 31, 2017, retail non-fuel base revenues increased $4.5 million, or 0.7%, compared to the twelve months ended December 31, 2016. See "Retail Non-fuel Base Revenues" section below for further details.
Decreased effective tax rate primarily due to a reduction in state income taxes primarily due to audit settlements.
Palo Verde performance rewards, associated with the 2013 to 2015 performance periods, net of disallowed fuel and purchased power costs related to the resolution of the Texas fuel reconciliation proceeding designated as PUCT Docket No. 46308 for the period from April 2013 through March 2016. These rewards were recorded in June 2017 with no comparable amount during the twelve months ended December 31, 2016.
Increased investment and interest income primarily due to higher realized gains on securities sold from the Company’s Palo Verde decommissioning trust during the twelve months ended December 31, 2017 compared to the twelve months ended December 31, 2016.

Income for the twelve months ended December 31, 2017, when compared to the twelve months ended December 31, 2016, was negatively affected by (presented on a pre-tax basis):
Decreased AFUDC due to lower balances of construction work in progress, primarily due to Montana Power Station ("MPS") Units 3 and 4 being placed in service in May and September 2016, respectively, and a reduction in the AFUDC rate effective January 2017.
Increased depreciation and amortization primarily due to increases in plant, including MPS Units 3 and 4, which were placed in service in 2016. These increases were partially offset by the sale of the Company's interest in the coal-fired Four Corners Generating Station ("Four Corners") in July 2016.
Increased taxes other than income taxes primarily due to increased property valuations in Texas as a result of MPS Units 3 and 4 being placed in service in 2016 and increased revenue related taxes in Texas.
Decreased wheeling revenues primarily due to the expiration of a contract.
Increased Palo Verde O&M primarily due to higher administrative and general expenses.


Retail Non-fuel Base Revenues

Excluding the $8.8 million 2017 PUCT Final Order impact recognized in the fourth quarter of 2017, retail non-fuel base revenues for the three months ended December 31, 2017 were relatively unchanged compared to the three months ended December 31, 2016.  Overall, milder weather offset the impact of customer growth of 1.7%.

 
Page 3 of 17
 
 
El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960
 



Cooling degree days decreased 9.7% in the three months ended December 31, 2017, when compared to the three months ended December 31, 2016. Heating degree days decreased 7.0% in the three months ended December 31, 2017, when compared to the three months ended December 31, 2016. Non-fuel base revenues and kilowatt-hour ("kWh") sales for the three months ended December 31, 2017 are provided by customer class on page 12 of this news release.

Excluding the $8.8 million 2017 PUCT Final Order impact, for the twelve months ended December 31, 2017, retail non-fuel base revenues increased $4.5 million, or 0.7%, compared to the twelve months ended December 31, 2016. This increase primarily includes (i) a $2.5 million increase in revenues from residential customers driven by a 1.6% increase in the average number of residential customers served and (ii) a $2.1 million increase in revenues from small commercial and industrial customers driven by a 2.4% increase in the average number of small commercial and industrial customers served. The Company experienced an overall 1.7% increase in the average number of customers served and its impact on revenues was partially offset by milder weather when compared to the twelve months ended December 31, 2016. Heating degree days decreased 17.8% in the twelve months ended December 31, 2017, when compared to the twelve months ended December 31, 2016. During our peak summer cooling season, cooling degree days in 2017 were comparable to the same period in 2016. Non-fuel base revenues and kWh sales for the twelve months ended December 31, 2017 are provided by customer class on page 14 of this news release.

Rate Case
2017 Texas Retail Rate Case
On February 13, 2017, the Company filed with the City of El Paso, other municipalities incorporated in the Company's Texas service territory and the PUCT in Docket No. 46831, a request for an increase in non-fuel base revenues. On November 2, 2017, the Company filed the Joint Motion to Implement Uncontested Stipulation and Agreement with the Administrative Law Judges for the Company's rate case.
On December 18, 2017, the PUCT approved the 2017 PUCT Final Order for the Company's rate case pending in Docket No. 46831, which provides, among other things, for the following: (i) an annual non-fuel base rate increase of $14.5 million; (ii) a return on equity of 9.65%; (iii) all new plant in service as filed in the Company's rate filing package was prudent and used and useful and therefore is included in rate base; (iv) recovery of the costs of decommissioning Four Corners in the amount of $5.5 million over a seven year period beginning August 1, 2017; (v) the Company to recover reasonable rate case expenses of approximately $3.4 million through a separate surcharge over a three year period; and (vi) a requirement that the Company file a refund tariff if the federal statutory income tax rate, as it relates to the Company, is decreased before the Company files its next rate case. The 2017 PUCT Final Order also establishes baseline revenue requirements for recovery of future transmission and distribution investment costs, and includes a minimum monthly bill of $30.00 for new residential customers with distributed generation, such as private rooftop solar. Additionally, the 2017 PUCT Final Order allows for the annual recovery of $2.1 million of nuclear decommissioning funding and establishes annual depreciation expense that is approximately $1.9 million lower than the annual amount requested by the Company in its initial filing. Finally, the 2017 PUCT Final Order allows for the Company to recover revenues associated with the relate back of rates to consumption on and after July 18, 2017 through a separate surcharge.
New base rates, including additional surcharges associated with rate case expenses and the relate back of rates to consumption on and after July 18, 2017 through December 31, 2017 were implemented in January 2018.
For financial reporting purposes, the Company deferred any recognition of the Company's request in its 2017
Texas retail rate case until it received the 2017 PUCT Final Order on December 18, 2017. Accordingly, it reported in the fourth quarter of 2017 the cumulative effect of the 2017 PUCT Final Order, which related back to July 18, 2017. Details of the impacts of the 2017 PUCT Final Order are provided on page 17 of this news release.

 
Page 4 of 17
 
 
El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960
 




Corporate Tax Reform
On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act of 2017 ("TCJA"), which made widespread changes to the Internal Revenue Code, including a reduction in the federal corporate income tax rate from 35% to 21% effective January 1, 2018, and discontinuance of bonus depreciation for regulated utilities for assets placed in service after September 27, 2017. Accordingly, the Company reduced its accumulated deferred income taxes (“ADIT”) liability to reflect the $298.9 million impact due to the reduction in the federal corporate tax rate and other changes to the tax law on its December 31, 2017 balance sheet.  The Company offset this reduction by recording a regulatory liability to reflect the future refund of such amounts related to changes in ADIT to ratepayers in its Texas, New Mexico and Federal Energy Regulatory Commission (the "FERC") jurisdictions. The new tax law change had a minimal impact on the Company’s Statements of Operations for the three and twelve months ended December 31, 2017.
As noted earlier in this news release under "Rate Case - 2017 Texas Retail Rate Case," the Company agreed to file a refund tariff if the federal statutory income tax rate, as it relates to the Company, is decreased before the Company files its next rate case. Accordingly, the Company will recognize reduced Texas jurisdictional revenues beginning January 1, 2018, to approximate the tax savings resulting from the TCJA and will file a refund tariff which the Company will ask to be implemented in the first half of 2018. The refund tariff will be updated annually until new base rates are implemented pursuant to the Company's next rate case filing.

The Company is required to make its next rate case filing in New Mexico, which will reflect the Company's new corporate income tax rate, no later than July 31, 2019. However, the New Mexico Public Regulation Commission ("NMPRC") has initiated an investigation into the impact of the TCJA on utility customers that may require earlier action by the Company. The Company is evaluating possible approaches to begin providing a refund credit for the income tax rate decrease to New Mexico customers.

Capital and Liquidity
We continue to maintain a strong capital structure in which common stock equity represented 45.5% of our capitalization (common stock equity, long-term debt, current maturities of long-term debt and short-term borrowings under our Revolving Credit Facility (the "RCF")) as of December 31, 2017. At December 31, 2017, we had a balance of $7.0 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 the RCF to meet all of our anticipated cash requirements for the next twelve months.
Cash flows from operations for the twelve months ended December 31, 2017 were $288.6 million, compared to $231.2 million for the twelve months ended December 31, 2016. The primary factors contributing to the increase in cash flows from operations were the change in net over-collection and under-collection of fuel revenues and accounts receivable. 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, 2017, we had fuel over-recoveries of $17.1 million compared to under-recoveries of fuel costs of $14.9 million during the twelve months ended December 31, 2016. At December 31, 2017, we had a net fuel over-recovery balance of $6.2 million, including an over-recovery of $5.8 million in Texas and an over-recovery of $0.4 million in New Mexico. On October 13, 2017, we filed a request to decrease our Texas fixed fuel factor by approximately 19% to reflect decreased fuel expenses primarily related to a decrease in the price of natural gas used to generate power. The decrease in our Texas fixed fuel factor became effective beginning with the November 2017 billing month and will continue thereafter until changed by the PUCT.

 
Page 5 of 17
 
 
El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960
 



During the twelve months ended December 31, 2017, our primary capital requirements were for the construction and purchase of our electric utility plant, debt retirements, payments of common stock dividends, and purchases of nuclear fuel. Capital expenditures for new electric utility plant were $190.3 million, net of insurance proceeds, for the twelve months ended December 31, 2017 and $225.4 million for the twelve months ended December 31, 2016. Capital expenditures for 2018 are expected to be approximately $236 million. Capital requirements for purchases of nuclear fuel were $38.5 million for the twelve months ended December 31, 2017, and $42.4 million for the twelve months ended December 31, 2016.
On February 1, 2018, the Board of Directors declared a quarterly cash dividend of $0.335 per share payable on March 30, 2018 to shareholders of record as of the close of business on March 16, 2018. On December 29, 2017, we paid a quarterly cash dividend of $0.335 per share, or $13.6 million, to shareholders of record as of the close of business on December 15, 2017. We paid a total of $53.3 million in cash dividends during the twelve months ended December 31, 2017. We expect to continue paying quarterly cash dividends in 2018.
No shares of common stock were repurchased during the twelve months ended December 31, 2017. As of December 31, 2017, a total of 393,816 shares remain available for repurchase under our currently authorized stock repurchase program. We may in the future make purchases of our common stock in open market transactions at prevailing prices and may engage in private transactions where appropriate.
Our cash requirements for federal and state income taxes vary from year to year based on taxable income, which is influenced by the timing of revenues and expenses recognized for income tax purposes. The following summary describes the major impacts of the TCJA on our liquidity. We continue to evaluate the TCJA and have made assumptions based on information currently available.
The TCJA discontinued bonus depreciation for regulated utilities which reduced tax deductions previously available to us for 2017, 2018 and 2019.  The decrease in tax deductions results in the utilization of our net operating loss carryforwards (“NOL carryforwards”) approximately two years earlier than anticipated and is expected to result in higher income tax payments beginning in 2019, after the full utilization of NOL carryforwards.  However, due to the lower corporate income tax rate enacted by the TCJA, our future tax payments will be made at the reduced rate of 21% beginning in 2018.  Due to NOL carryforwards, minimal tax payments are expected for 2018, which are mostly related to state income taxes. 
However, we expect that the effect of the TCJA on our rates will be beneficial to our customers. Following the enactment of the TCJA and the reduction of the federal income tax rate, revenues collected from our customers in 2018 will be reduced in an amount that approximates the savings in tax expense. This reduction in revenues is expected to negatively impact our cash flows by approximately $26 million to $31 million during 2018.
We maintain the RCF for working capital and general corporate purposes and financing of nuclear fuel through the Rio Grande Resources Trust ("RGRT"). The RGRT, the trust through which we finance our portion of nuclear fuel for Palo Verde, is consolidated in our financial statements. On January 9, 2017, we exercised the option to extend the maturity of the RCF by one year to January 14, 2020 and to increase the size of the facility by $50 million to $350 million. We still have the option to extend the facility by one additional year to January 2021 and to increase the RCF by up to $50 million (up to a total of $400 million) 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 2017, RGRT's $50.0 million Series B 4.47% Senior Notes matured and were paid utilizing funds borrowed under the RCF. The total amount borrowed for nuclear fuel by the RGRT, excluding debt issuance costs, was $133.5 million at December 31, 2017, of which $88.5 million had been borrowed under the RCF, and $45.0 million was borrowed through the issuance of senior notes. Borrowings by the RGRT for nuclear fuel, excluding debt issuance costs, were $132.6 million as of December 31, 2016, of which $37.6 million had been borrowed under the RCF and $95.0 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. In September 2017, the $33.3 million 2012 Series A 1.875%

 
Page 6 of 17
 
 
El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960
 



Pollution Control Bonds which were subject to mandatory tender for purchase were redeemed and retired utilizing funds borrowed under the RCF. At December 31, 2017, $85.0 million was outstanding under the RCF for working capital and general corporate purposes, which may include funding capital expenditures. At December 31, 2016, $44.0 million was outstanding under the RCF for working capital and general corporate purposes. Total aggregate borrowings under the RCF at December 31, 2017 were $173.5 million with an additional $176.4 million available to borrow.
We received approval from the NMPRC on October 7, 2015, to guarantee the issuance of up to $65.0 million of long-term debt by the RGRT to finance future purchases of nuclear fuel and to refinance existing nuclear fuel debt obligations, which remains effective. We received additional approval from the NMPRC on October 4, 2017 to amend and extend the RCF, issue up to $350.0 million in long-term debt and to redeem and refinance the $63.5 million 2009 Series A 7.25% Pollution Control Bonds and the $37.1 million 2009 Series B 7.25% Pollution Control Bonds, which have optional redemptions in 2019. The NMPRC approval to issue up to $350.0 million in long-term debt supersedes prior approval. We requested similar approval from the FERC on September 1, 2017 and received approval on October 31, 2017. The approval requested from the FERC also includes requests to guarantee the issuance of up to $65.0 million of long-term debt by the RGRT and to continue to utilize our existing RCF with the ability to amend and extend the RCF at a future date. The authorization approved by the FERC is effective from November 15, 2017 through November 14, 2019 and supersedes prior approvals.
2018 Earnings Guidance
The Company is providing earnings guidance for 2018 with a range of $2.30 to $2.65 per basic share. The guidance assumes normal operations and considers significant variables that may impact earnings, such as weather, expenses, capital expenditures, nuclear decommissioning trust gains/losses, and the impact of the TCJA. The mid-point of the guidance range assumes 10 year average weather (cooling and heating degree days).
Conference Call
A conference call to discuss fourth quarter and year to date 2017 financial results is scheduled for 11:30 A.M. Eastern Time, on February 27, 2018. The dial-in number is 888-600-4863 with a conference ID number of 9726561. The international dial-in number is 719-457-2644. The conference leader will be Lisa Budtke, Director-Treasury Services and Investor Relations. A replay will run through March 13, 2018 with a dial-in number of 888-203-1112 and a conference ID number of 9726561. 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, including statements regarding the impact of the TCJA; statements regarding expected capital expenditures; and statements regarding expected dividends. This information may involve risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those expressed in forward-looking statements is contained in EE's most recently filed periodic reports and in other filings made by EE with the U.S. Securities and Exchange Commission ("SEC"), and include, but is not limited to: (i) the impact of the TCJA and other U.S. tax reform legislation; (ii) 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; (iii) full and timely recovery of capital investments and operating costs through rates in Texas and New Mexico; (iv) uncertainties and instability in the general economy and the resulting impact on EE's sales and profitability; (v) changes in customers' demand for electricity as a result of

 
Page 7 of 17
 
 
El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960
 



energy efficiency initiatives and emerging competing services and technologies, including distributed generation; (vi) unanticipated increased costs associated with scheduled and unscheduled outages of generating plant; (vii) unanticipated maintenance, repair, or replacement costs for generation, transmission, or distribution facilities and the recovery of proceeds from insurance policies providing coverage for such costs; (viii) the size of our construction program and our ability to complete construction on budget and on time; (ix) potential delays in our construction schedule due to legal challenges or other reasons; (x) costs at Palo Verde; (xi) deregulation and competition in the electric utility industry; (xii) possible increased costs of compliance with environmental or other laws, regulations and policies; (xiii) possible income tax and interest payments as a result of audit adjustments proposed by the Internal Revenue Service ("IRS") or state taxing authorities; (xiv) uncertainties and instability in the financial markets and the resulting impact on EE's ability to access the capital and credit markets; (xv) actions by credit rating agencies; (xvi) possible physical or cyber attacks, intrusions or other catastrophic events; and (xvii) 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.


Media Contacts
Investor Relations
Eddie Gutierrez
Lisa Budtke
915.543.5763
915.543.5947
eduardo.gutierrez@epelectric.com
lisa.budtke@epelectric.com

 
Page 8 of 17
 
 
El Paso Electric Ÿ P.O.Box 982 Ÿ El Paso, Texas 79960
 



El Paso Electric Company
Statements of Operations
Quarter Ended December 31, 2017 and 2016
 (In thousands except for per share data)
 (Unaudited)
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
Variance
 
 
 
 
 
 
 
 
 
Operating revenues
$
196,149

 
$
188,037

 
$
8,112


Energy expenses:


 


 

 
 
Fuel
41,401

 
41,921

 
(520
)
 
 
Purchased and interchanged power
11,858

 
12,012

 
(154
)
 
 
53,259

 
53,933

 
(674
)
 
Operating revenues net of energy expenses
142,890

 
134,104

 
8,786

 
Other operating expenses:
 
 
 
 
 
 
 
Other operations
65,978

 
62,437

 
3,541

 
 
Maintenance
16,109

 
14,741

 
1,368

 
 
Depreciation and amortization
23,849

 
21,220

 
2,629

 
 
Taxes other than income taxes
16,655

 
15,236

 
1,419

 
 
 
122,591

 
113,634

 
8,957

 
Operating income
20,299

 
20,470

 
(171
)

Other income (deductions):
 
 
 
 
 
 
 
Allowance for equity funds used during construction
816

 
1,156

 
(340
)
 
 
Investment and interest income, net
3,270

 
3,790

 
(520
)
 
 
Miscellaneous non-operating income
349

 
219

 
130

 
 
Miscellaneous non-operating deductions
(788
)
 
(1,031
)
 
243

 
 
 
3,647

 
4,134

 
(487
)
 
Interest charges (credits):
 
 
 
 
 
 
 
Interest on long-term debt and revolving credit facility
17,981

 
18,323

 
(342
)
 
 
Other interest
478

 
201

 
277

 
 
Capitalized interest
(1,191
)
 
(1,252
)
 
61

 
 
Allowance for borrowed funds used during construction
(802
)
 
(819
)
 
17

 
 
 
16,466

 
16,453

 
13

 
Income before income taxes
7,480

 
8,151

 
(671
)
 
Income tax expense
980

 
2,495

 
(1,515
)
 
              Net income
$
6,500

 
$
5,656

 
$
844

 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.16

 
$
0.14

 
$
0.02

 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.16

 
$
0.14

 
$
0.02

 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
$
0.335

 
$
0.310

 
$
0.025

 
Weighted average number of shares outstanding
40,434

 
40,368

 
66

 
Weighted average number of shares and dilutive
 
 
 
 
 
 
 
potential shares outstanding
40,590

 
40,445

 
145

 
 
 
 
 
 
 
 
 



Page 9 of 17



El Paso Electric Company
Statements of Operations
Twelve Months Ended December 31, 2017 and 2016
 (In thousands except for per share data)
 (Unaudited)
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
Variance
 
 
 
 
 
 
 
 
 
Operating revenues
$
916,797

 
$
886,936

 
$
29,861


Energy expenses
 
 
 
 
 
 
 
Fuel
185,069

 
173,738

 
11,331

 
 
Purchased and interchanged power
59,682

 
59,727

 
(45
)
 
 
 
244,751

 
233,465

 
11,286

 
Operating revenues net of energy expenses
672,046

 
653,471

 
18,575

 
Other operating expenses:
 
 
 
 
 
 
 
Other operations
242,628

 
242,014

 
614

 
 
Maintenance
69,458

 
66,746

 
2,712

 
 
Depreciation and amortization
90,843

 
84,317

 
6,526

 
 
Taxes other than income taxes
70,863

 
65,533

 
5,330

 

473,792

 
458,610

 
15,182

 
Operating income
198,254

 
194,861

 
3,393

 
Other income (deductions):
 
 
 
 
 
 
 
Allowance for equity funds used during construction
3,025

 
7,023

 
(3,998
)
 
 
Investment and interest income, net
17,757

 
14,083

 
3,674

 
 
Miscellaneous non-operating income
715

 
1,292

 
(577
)
 
 
Miscellaneous non-operating deductions
(3,125
)
 
(3,699
)
 
574

 
 
18,372

 
18,699

 
(327
)

Interest charges (credits):
 
 
 
 
 
 
 
Interest on long-term debt and revolving credit facility
72,970

 
71,544

 
1,426

 
 
Other interest
2,388

 
1,303

 
1,085

 
 
Capitalized interest
(5,022
)
 
(4,990
)
 
(32
)
 
 
Allowance for borrowed funds used during construction
(2,975
)
 
(4,983
)
 
2,008

 
 
 
67,361

 
62,874

 
4,487

 
Income before income taxes
149,265

 
150,686

 
(1,421
)
 
Income tax expense
51,004

 
53,918

 
(2,914
)
 
             Net income
$
98,261

 
$
96,768

 
$
1,493

 
 
 
 
 
 
 
 
 
Basic earnings per share
$
2.42

 
$
2.39

 
$
0.03

 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
2.42

 
$
2.39

 
$
0.03

 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
$
1.315

 
$
1.225

 
$
0.090

 
Weighted average number of shares outstanding
40,415

 
40,351

 
64

 
Weighted average number of shares and dilutive
 
 
 
 
 
 
 
potential shares outstanding
40,535

 
40,408

 
127

 


Page 10 of 17





El Paso Electric Company
Cash Flow Summary
Twelve Months Ended December 31, 2017 and 2016
 (In thousands and Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
Cash flows from operating activities:
 
 
 
 
 
Net income
$
98,261

 
$
96,768

 
 
Adjustments to reconcile net income to net cash provided by operations:
 
 
 
 
 
 
Depreciation and amortization of electric plant in service
90,843

 
84,317

 
 
 
Amortization of nuclear fuel
42,476

 
43,748

 
 
 
Deferred income taxes, net
49,394

 
50,510

 
 
 
Net gains on sale of decommissioning trust funds
(10,626
)
 
(7,640
)
 
 
 
Other
15,237

 
11,006

 
 
Change in:
 
 
 
 
 
 
Accounts receivable
(138
)
 
(17,511
)
 
 
 
Net over-collection (under-collection) of fuel revenues
17,093

 
(14,891
)
 
 
 
Accounts payable
1,407

 
(2,140
)
 
 
 
Regulatory assets
(5,729
)
 
(8,741
)
 
 
 
Other
(9,657
)
 
(4,276
)
 
 
 
 
Net cash provided by operating activities
288,561

 
231,150

 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
Cash additions to utility property, plant and equipment
(190,305
)
 
(225,361
)
 
 
Cash additions to nuclear fuel
(38,481
)
 
(42,383
)
 
 
Decommissioning trust funds
(5,883
)
 
(8,229
)
 
 
Other
(9,275
)
 
241

 
 
 
 
Net cash used for investing activities
(243,944
)
 
(275,732
)
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
Dividends paid
(53,337
)
 
(49,603
)
 
 
Borrowings (repayments) under the revolving credit facility, net
91,959

 
(60,164
)
 
 
Payment on maturing RGRT senior notes
(50,000
)
 

 
 
Payment on maturing pollution control bonds
(33,300
)
 

 
 
Proceeds from issuance of senior notes

 
157,052

 
 
Other
(1,369
)
 
(2,432
)
 
 
 
 
Net cash provided by (used for) financing activities
(46,047
)
 
44,853

 
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(1,430
)
 
271

 
 
 
 
 
 
 
 
 
Cash and cash equivalents at beginning of period
8,420

 
8,149

 
 
 
 
 
 
 
 
 
Cash and cash equivalents at end of period
$
6,990

 
$
8,420

 
 
 
 
 
 
 
 
 

Page 11 of 17




El Paso Electric Company
Quarter Ended December 31, 2017 and 2016
Sales and Revenues Statistics
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (Decrease)
 
 
 
 
 
 
 
2017
 
2016
 
Amount
 
Percentage
 
kWh sales (in thousands):
 
 
 
 
 
 
 
 
 
Retail:
 
 
 
 
 
 
 
 
 
 
Residential
566,229

 
566,680

 
(451
)
 
(0.1
)%
 
 
 
Commercial and industrial, small
559,314

 
553,829

 
5,485

 
1.0
 %
 
 
 
Commercial and industrial, large
250,747

 
261,320

 
(10,573
)
 
(4.0
)%
 
 
 
Sales to public authorities
365,807

 
372,643

 
(6,836
)
 
(1.8
)%
 
 
 
 
Total retail sales
1,742,097

 
1,754,472

 
(12,375
)
 
(0.7
)%
 
 
Wholesale:
 
 
 
 
 
 
 
 
 
 
Sales for resale
10,101

 
9,716

 
385

 
4.0
 %
 
 
 
Off-system sales
563,943

 
475,789

 
88,154

 
18.5
 %
 
 
 
 
Total wholesale sales
574,044

 
485,505

 
88,539

 
18.2
 %
 
 
 
 
 
Total kWh sales
2,316,141

 
2,239,977

 
76,164

 
3.4
 %
 
Operating revenues (in thousands):
 
 
 
 
 
 
 
 
 
Non-fuel base revenues:
 
 
 
 
 
 
 
 
 
 
Retail:
 
 
 
 
 
 
 
 
 
 
 
Residential
$
61,326

 
$
54,756

 
$
6,570

 
12.0
 %
 
 
 
 
Commercial and industrial, small
42,615

 
40,285

 
2,330

 
5.8
 %
 
 
 
 
Commercial and industrial, large
7,700

 
8,451

 
(751
)
 
(8.9
)%
 
 
 
 
Sales to public authorities
20,668

 
20,024

 
644

 
3.2
 %
 
 
 
 
 
Total retail non-fuel base revenues (a)
132,309

 
123,516

 
8,793

 
7.1
 %
 
 
 
Wholesale:
 
 
 
 
 
 
 
 
 
 
 
Sales for resale
451

 
421

 
30

 
7.1
 %
 
 
 
 
 
Total non-fuel base revenues
132,760

 
123,937

 
8,823

 
7.1
 %
 
 
Fuel revenues:
 
 
 
 
 
 
 
 
 
 
Recovered from customers during the period
43,240

 
41,030

 
2,210

 
5.4
 %
 
 
 
(Over) Under collection of fuel
(3,202
)
 
3,125

 
(6,327
)
 

 
 
 
 
Total fuel revenues (b)
40,038

 
44,155

 
(4,117
)
 
(9.3
)%
 
 
Off-system sales:
 
 
 
 
 
 
 
 
 
 
Fuel cost
11,387

 
9,754

 
1,633

 
16.7
 %
 
 
 
Shared margins
3,817

 
1,952

 
1,865

 
95.5
 %
 
 
 
Retained margins
241

 
277

 
(36
)
 
(13.0
)%
 
 
 
 
Total off-system sales
15,445

 
11,983

 
3,462

 
28.9
 %
 
 
Other: (c)
 
 
 
 
 
 
 
 
 
 
Wheeling revenues
4,403

 
5,309

 
(906
)
 
(17.1
)%
 
 
 
Miscellaneous service revenues and other (d)
3,503

 
2,653

 
850

 
32.0
 %
 
 
 
 
Total other
7,906

 
7,962

 
(56
)
 
(0.7
)%
 
 
 
 
 
Total operating revenues
$
196,149

 
$
188,037

 
$
8,112

 
4.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
2017 includes $8.8 million of relate back revenues in Texas from July 18, 2017 through December 31, 2017, which was recorded in the fourth quarter of 2017 related to the 2017 PUCT Final Order.
(b)
Includes deregulated Palo Verde Unit 3 revenues for the New Mexico jurisdiction of $2.3 million and $2.1 million in 2017 and 2016, respectively.
(c)
Represents revenues with no related kWh sales.
(d)
2017 includes energy efficiency bonus of $0.8 million.

Page 12 of 17



El Paso Electric Company
Quarter Ended December 31, 2017 and 2016
Other Statistical Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (Decrease)
 
 
 
2017
 
2016
 
Amount
 
Percentage
 
 
 
 
 
 
 
 
 
 
Average number of retail customers: (a)
 
 
 
 
 
 
 
 
Residential
369,949

 
363,699

 
6,250

 
1.7
 %
 
Commercial and industrial, small
42,135

 
41,567

 
568

 
1.4
 %
 
Commercial and industrial, large
48

 
49

 
(1
)
 
(2.0
)%
 
Sales to public authorities
5,507

 
5,288

 
219

 
4.1
 %
 
 
Total
417,639

 
410,603

 
7,036

 
1.7
 %
 
 
 
 
 
 
 
 
 
 
Number of retail customers (end of period): (a)
 
 
 
 
 
 
 
 
Residential
370,054

 
363,987

 
6,067

 
1.7
 %
 
Commercial and industrial, small
42,291

 
41,741

 
550

 
1.3
 %
 
Commercial and industrial, large
48

 
49

 
(1
)
 
(2.0
)%
 
Sales to public authorities
5,500

 
5,285

 
215

 
4.1
 %
 
 
Total
417,893

 
411,062

 
6,831

 
1.7
 %
 
 
 
 
 
 
 
 
 
 
Weather statistics: (b)
 
 
 
 
10-Yr Average
 
 
 
Cooling degree days
205

 
227

 
144

 
 
 
Heating degree days
667

 
717

 
877

 
 
 
 
 
 
 
 
 
 
 
 
Generation and purchased power (kWh, in thousands):
 
 
 
 
Increase (Decrease)
 
 
 
2017
 
2016
 
Amount
 
Percentage
 
 
 
 
 
 
 
 
 
 
 
Palo Verde
1,228,652

 
1,235,538

 
(6,886
)
 
(0.6
)%
 
Gas plants
893,559

 
765,847

 
127,712

 
16.7
 %
 
 
Total generation
2,122,211

 
2,001,385

 
120,826

 
6.0
 %
 
Purchased power:
 
 
 
 
 
 
 
 
 
Photovoltaic
57,986

 
54,859

 
3,127

 
5.7
 %
 
 
Other
252,421

 
303,509

 
(51,088
)
 
(16.8
)%
 
 
Total purchased power
310,407

 
358,368

 
(47,961
)
 
(13.4
)%
 
 
Total available energy
2,432,618

 
2,359,753

 
72,865

 
3.1
 %
 
Line losses and Company use
116,477

 
119,776

 
(3,299
)
 
(2.8
)%
 
 
Total kWh sold
2,316,141

 
2,239,977

 
76,164

 
3.4
 %
 
 
 
 
 
 
 
 
 
 
 
Palo Verde capacity factor
89.5
%
 
90.0
%
 
(0.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Palo Verde O&M expenses (c)
$
31,384
 
$
29,400
 
$
1,984
 
 
 
 
 
 
 
 
 
 
 
 
(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.
 
 
 
 
 
 
 
 
 
 
(c)
Represents the Company's 15.8% interest in Palo Verde.

Page 13 of 17



El Paso Electric Company
Twelve Months Ended December 31, 2017 and 2016
Sales and Revenues Statistics
(Unaudited)
 
 
 
 
 
 
 
 
 
 
Increase (Decrease)
 
 
 
 
 
 
 
2017
 
2016
 
Amount
 
Percentage
 
kWh sales (in thousands):
 
 
 
 
 
 
 
 
 
Retail:
 
 
 
 
 
 
 
 
 
 
Residential
2,823,260

 
2,805,789

 
17,471

 
0.6
 %
 
 
 
Commercial and industrial, small
2,410,710

 
2,403,447

 
7,263

 
0.3
 %
 
 
 
Commercial and industrial, large
1,045,319

 
1,030,745

 
14,574

 
1.4
 %
 
 
 
Sales to public authorities
1,564,670

 
1,572,510

 
(7,840
)
 
(0.5
)%
 
 
 
 
Total retail sales
7,843,959

 
7,812,491

 
31,468

 
0.4
 %
 
 
Wholesale:
 
 
 
 
 
 
 
 
 
 
Sales for resale
62,887

 
62,086

 
801

 
1.3
 %
 
 
 
Off-system sales
2,042,884

 
1,927,508

 
115,376

 
6.0
 %
 
 
 
 
Total wholesale sales
2,105,771

 
1,989,594

 
116,177

 
5.8
 %
 
 
 
 
 
Total kWh sales
9,949,730

 
9,802,085

 
147,645

 
1.5
 %
 
Operating revenues (in thousands):
 
 
 
 
 
 
 
 
 
Non-fuel base revenues:
 
 
 
 
 
 
 
 
 
 
Retail:
 
 
 
 
 
 
 
 
 
 
 
Residential
$
287,884

 
$
278,774

 
$
9,110

 
3.3
 %
 
 
 
 
Commercial and industrial, small
198,799

 
194,942

 
3,857

 
2.0
 %
 
 
 
 
Commercial and industrial, large
38,403

 
39,070

 
(667
)
 
(1.7
)%
 
 
 
 
Sales to public authorities
97,890

 
96,881

 
1,009

 
1.0
 %
 
 
 
 
 
Total retail non-fuel base revenues (a)
622,976

 
609,667

 
13,309

 
2.2
 %
 
 
 
Wholesale:
 
 
 
 
 
 
 
 
 
 
 
Sales for resale
2,730

 
2,407

 
323

 
13.4
 %
 
 
 
 
 
Total non-fuel base revenues
625,706

 
612,074

 
13,632

 
2.2
 %
 
 
Fuel revenues:
 
 
 
 
 
 
 
 
 
 
Recovered from customers during the period
218,380

 
148,397

 
69,983

 
47.2
 %
 
 
 
(Over) under collection of fuel (b) (c)
(17,133
)
 
14,893

 
(32,026
)
 

 
 
 
New Mexico fuel in base rates (d)

 
33,279

 
(33,279
)
 

 
 
 
 
Total fuel revenues (e)
201,247

 
196,569

 
4,678

 
2.4
 %
 
 
Off-system sales:
 
 
 
 
 
 
 
 
 
 
Fuel cost
46,258

 
38,933

 
7,325

 
18.8
 %
 
 
 
Shared margins
11,055

 
5,632

 
5,423

 
96.3
 %
 
 
 
Retained margins
1,673

 
1,137

 
536

 
47.1
 %
 
 
 
 
Total off-system sales
58,986

 
45,702

 
13,284

 
29.1
 %
 
 
Other: (f)
 
 
 
 
 
 
 
 
 
 
Wheeling revenues
18,114

 
21,966

 
(3,852
)
 
(17.5
)%
 
 
 
Miscellaneous service revenues and other (g)
12,744

 
10,625

 
2,119

 
19.9
 %
 
 
 
 
Total other
30,858

 
32,591

 
(1,733
)
 
(5.3
)%
 
 
 
 
 
Total operating revenues
$
916,797

 
$
886,936

 
$
29,861

 
3.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
2017 includes $8.8 million of relate back revenues in Texas from July 18, 2017 through December 31, 2017, which was recorded in the fourth quarter of 2017 related to the 2017 PUCT Final Order.
(b)
Includes the portion of the U.S. Department of Energy refunds related to spent fuel storage of $1.4 million and $1.6 million in 2017 and 2016, respectively, that were credited to customers through the applicable fuel adjustment clauses.
(c)
2017 includes $5.0 million related to the Palo Verde performance rewards, net.
(d)
Historically, fuel and purchased power costs in the New Mexico jurisdiction were recorded through base rates and the Fuel and Purchased Power Cost Adjustment Clause ("FPPCAC") that accounts for the changes in the costs of fuel relative to the amount included in base rates. Effective July 1, 2016, with the implementation of the NMPRC's final order in the Company's 2015 New Mexico retail rate case, Case No. 15-00127-UT, these costs are no longer recovered through base rates but are recovered through the FPPCAC.
(e)
Includes deregulated Palo Verde Unit 3 revenues for the New Mexico jurisdiction of $9.8 million and $8.7 million in 2017 and 2016, respectively.
(f)
Represents revenue with no related kWh sales.
(g)
Includes energy efficiency bonus of $1.5 million and $0.5 million in 2017 and 2016, respectively.

Page 14 of 17



El Paso Electric Company
Twelve Months Ended December 31, 2017 and 2016
Other Statistical Data
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (Decrease)
 
 
 
2017
 
2016
 
Amount
 
Percentage
 
 
 
 
 
 
 
 
 
 
Average number of retail customers: (a)
 
 
 
 
 
 
 
 
Residential
368,044

 
362,138

 
5,906

 
1.6
 %
 
Commercial and industrial, small
41,978

 
41,014

 
964

 
2.4
 %
 
Commercial and industrial, large
48

 
49

 
(1
)
 
(2.0
)%
 
Sales to public authorities
5,532

 
5,303

 
229

 
4.3
 %
 
 
Total
415,602

 
408,504

 
7,098

 
1.7
 %
 
 
 
 
 
 
 
 
 
 
Number of retail customers (end of period): (a)
 
 
 
 
 
 
 
 
Residential
370,054

 
363,987

 
6,067

 
1.7
 %
 
Commercial and industrial, small
42,291

 
41,741

 
550

 
1.3
 %
 
Commercial and industrial, large
48

 
49

 
(1
)
 
(2.0
)%
 
Sales to public authorities
5,500

 
5,285

 
215

 
4.1
 %
 
 
Total
417,893

 
411,062

 
6,831

 
1.7
 %
 
 
 
 
 
 
 
 
 
 
Weather statistics: (b)
 
 
 
 
10-Year Average
 
 
 
Cooling degree days
2,917

 
2,811

 
2,773

 
 
 
Heating degree days
1,522

 
1,851

 
2,081

 
 
 
 
 
 
 
 
 
 
 
 
Generation and purchased power (kWh, in thousands):
 
 
 
 
Increase (Decrease)
 
 
 
2017
 
2016
 
Amount
 
Percentage
 
 
 
 
 
 
 
 
 
 
 
Palo Verde
5,109,325

 
5,093,844

 
15,481

 
0.3
 %
 
Four Corners (c)

 
175,258

 
(175,258
)
 

 
Gas plants
3,841,550

 
3,550,904

 
290,646

 
8.2
 %
 
 
Total generation
8,950,875

 
8,820,006

 
130,869

 
1.5
 %
 
Purchased power:
 
 
 
 
 
 
 
 
Photovoltaic
292,157

 
289,800

 
2,357

 
0.8
 %
 
Other
1,248,684

 
1,262,451

 
(13,767
)
 
(1.1
)%
 
 
Total purchased power
1,540,841

 
1,552,251

 
(11,410
)
 
(0.7
)%
 
 
Total available energy
10,491,716

 
10,372,257

 
119,459

 
1.2
 %
 
Line losses and Company use
541,986

 
570,172

 
(28,186
)
 
(4.9
)%
 
Total kWh sold
9,949,730

 
9,802,085

 
147,645

 
1.5
 %
 
Palo Verde capacity factor
93.8
%
 
93.2
%
 
0.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Palo Verde O&M expenses (d)
$
99,364
 
$
96,914
 
$
2,450
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.
 
 
 
 
 
 
 
 
 
 
 
 
(c)
The Company sold its interest in Four Corners on July 6, 2016.
 
 
 
 
 
 
 
 
 
 
 
 
(d)
Represents the Company's 15.8% interest in Palo Verde.
 

Page 15 of 17



El Paso Electric Company
Financial Statistics
At December 31, 2017 and 2016
(In thousands, except number of shares, book value per common share, and ratios)
(Unaudited)
 
 
 
 
 
 
Balance Sheet
 
2017
 
2016
 
 
 
 
 
 
Cash and cash equivalents
 
$
6,990

 
$
8,420

 
 
 
 
 
 
Common stock equity
 
$
1,142,165

 
$
1,074,396

Long-term debt
 
1,195,988

 
1,195,513

 
Total capitalization
 
$
2,338,153

 
$
2,269,909

 
 
 
 
 
 
Current maturities of long-term debt
 
$

 
$
83,143

 
 
 
 
 
 
Short-term borrowings under the revolving credit facility
 
$
173,533

 
$
81,574

 
 
 
 
 
 
Number of shares - end of period
 
40,584,338

 
40,517,718

 
 
 
 
 
 
Book value per common share
 
$
28.14

 
$
26.52

 
 
 
 
 
 
Common equity ratio (a)
 
45.5
%
 
44.1
%
Debt ratio
 
54.5
%
 
55.9
%
 
 
 
 
 
 
(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.
 
 
 
 
 
 
 
 
 
 
 
 


Page 16 of 17



El Paso Electric Company
Twelve Months Ended December 31, 2017
2017 PUCT Final Order
 
 
 
On December 18, 2017, the PUCT issued the 2017 PUCT Final Order. See "Rate Case- 2017 Texas Retail Rate Case Filing" for a discussion of the 2017 PUCT Final Order.
 
 
 
 
 
 
 
 
 
 
 
 
 
The increase (decrease) on operations resulting from the 2017 PUCT Final Order is categorized in the following periods based on consumption (in thousands):
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
Category
 
 March 31, 2017
 
June 30, 2017
 
September 30, 2017
 
December 31, 2017
 
 December 31, 2017
 
Retail non-fuel base rate increase:
 
 
 
 
 
 
 
 
 
 
 
Relate back
 
$

 
$

 
$
4,753

 
$
4,023

 
$
8,776

 
Depreciation and amortization expense
 

 

 
(278
)
 
(435
)
 
(713
)
 
Rate case expense
 

 

 

 
(58
)
 
(58
)
 
Pre-tax increase
 
$

 
$

 
$
4,475

 
$
3,530

 
$
8,005

 
Income tax expense
 

 

 
1,566

 
1,236

 
2,802

 
After-tax increase
 
$


$

 
$
2,909

 
$
2,294

 
$
5,203

 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 17 of 17
EX-99.02 3 ee4q2017earningspresenta.htm PRESENTATION AT THE FOURTH QUARTER 2017 EARNINGS CONFERENCE CALL ee4q2017earningspresenta