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Boosted by rate hike, NV Energy reports profit

A mid-year rate increase helped local power utility NV Energy transform a quarterly loss into a profit, though it wasn’t enough to boost the company’s overall annual earnings.

In a Monday conference call that included talk of slower growth in years to come, NV Energy executives revealed that the company’s net income was $4.2 million, or 2 cents a share, in the quarter that ended Dec. 31. That’s an improvement on a loss of $2.1 million, or 1 cent a share, in the same quarter a year earlier. Quarterly revenue came in at $772.9 million, up from $766.1 million a year ago.

Company executives credited the better results to a 6.1 percent increase in Southern Nevada’s general rates. About half the boost took effect July 1, with the rest kicking in on Jan. 1.

First Call’s analyst forecasts had projected earnings of 7 cents a share on $701.6 million in revenue.

For all of 2009, NV Energy posted net income of $182.9 million, or 78 cents a share, down from $208.9 million, or 89 cents a share, in 2008. Revenue was $3.6 billion, up from $3.5 billion.

The decline in yearly earnings came mostly from costs related to the Higgins Generating Station and the Clark Peaking Units, executives said. Those expenses weren’t included in rates until after July 1.

Kevin Bethel, NV Energy’s acting chief financial officer, said the gap between expenses and rates dragged down annual earnings by 20 cents a share. Higher pension expenses cost the company 8 cents a share, and a charge on severance payments in the fourth quarter cost 4 cents a share.

Bethel also noted that the utility’s retail electric sales fell 2 percent in Southern Nevada and 4.6 percent in Northern Nevada in 2009. Because the weather was essentially unchanged from 2008 to 2009, NV Energy executives attributed the decline in retail sales to changes in customer-use patterns.

Residential-customer growth was flat from 2008 to 2009, though the company’s customer base grew modestly in the commercial and industrial sectors, which include hotels and mines. It would take improved employment and the return of the state’s construction sector for energy use to tick upward, Bethel said. He added that the utility’s gross margin — the portion of revenue that doesn’t include fuel and purchased power — likely won’t improve independent of general rate cases unless the customer base increases or consumers begin to use more power.

In their conference call, executives also discussed a significant decline in capital expenditures for the construction of new plants and upgrades to existing generating stations. Based on current forecasts and regulatory approvals, NV Energy’s capital-expenditure budget will total $1.4 billion from 2010 through 2012, compared with $1.5 billion invested in 2008 alone. Work on NV Energy’s one ongoing major construction project, the Harry Allen Combined Cycle Plant near Apex, is scheduled to wrap up in 2011.

Michael Yackira, NV Energy’s president and chief executive officer, said he was satisfied with the utility’s results, given the nation’s and Nevada’s economic conditions. The company worked hard to control expenses, he said, including reducing its work force by about 5 percent to around 3,000 employees. Yackira called the cuts “painful,” but he said the reductions would help the utility keep its operating and maintenance expenses flat in 2010.

Yackira also noted that earlier investments in making existing generating stations more efficient, combined with decreases in the cost of the natural gas that powers the company’s plants, have meant four consecutive quarterly decreases in the rates that cover the cost of fuel in Northern Nevada. Similar decreases are happening in Southern Nevada, he said, and those drops should help offset the recent increase in the general rates that cover the utility’s operating expenses.

NV Energy’s shares fell 19 cents, or 1.67 percent, to close Monday at $11.17 on the New York Stock Exchange.

Contact reporter Jennifer Robison at jrobison @reviewjournal.com or 702-380-4512.

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