NV Energy reports increase in net income

Local power utility NV Energy managed to boost its income in the fourth quarter even as its revenue fell, and the performance seems to have found favor with equities analysts who track the company's financial results.

The power utility's net income finished the quarter at $14.2 million, or 6 cents a share. That's up from $4.2 million, or 2 cents a share, in the same quarter of 2009. But revenue slumped in the quarter, falling to $655 million from $772.9 million a year earlier.

The earnings beat analysts' expectations, which Thomson Reuters pegged at 4 cents a share. Revenue fell below consensus forecasts, which set the sales line at $739.8 million.

For the year, NV Energy reported net income of $227 million, or 97 cents a share, compared with net income of $182.9 million, or 78 cents a share, for the same period in 2009. Revenue dipped, from $3.6 billion in 2009 to $3.3 billion in 2010.

NV Energy executives said Friday that some of those income gains came from higher rates in Southern Nevada, as 2010 brought the first full year of operations since the Public Utilities Commission of Nevada's 2009 approval of a 6.1 percent increase in the rates that cover the company's maintenance, labor, debt interest, taxes and investor returns.

Also helping the bottom line was the utility's "continued spending discipline," said Dilek Samil, senior vice president of finance, chief financial officer and treasurer.

NV Energy's fourth-quarter operating expenses dropped to $551.6 million, compared with $687.3 million in the same quarter of 2009. For all of 2010, operating expenses fell to $2.6 billion, down from $3 billion in 2009.

But overall revenue also slid.

Part of the drop-off came from slumping kilowatt-hour sales, which dropped 1.5 percent in the south and 1 percent in the north from 2009 to 2010. That decline happened even as customers grew 0.4 percent in the south, to 835,019 ratepayers, and 0.2 percent in the north, to 367,198 ratepayers. The diverging trends mean consumers used less power in 2010. To explain the dichotomy, NV Energy officials pointed in part to warmer weather: The utility's Southern Nevada region had 4 percent fewer cooling-degree days in 2010 when compared with 2009, while the north had 14 percent fewer such days year to year. Cooling-degree days measure average temperatures and how those temperatures spur air-conditioning demands.

Ratepayers also used less power because of energy-efficiency programs and "a difficult local economy," Samil said.

Overall, though, the utility's indicators hint at potential improvements in the area's economy, she said.

"Our takeaway, based on sales and other statistics, is that the Nevada economy does appear to be showing some signs of stabilization, and could be set for a slow recovery," Samil said, adding that the state's revival will likely "be measured in years, as opposed to months."

Nor do equities analysts who follow the utility seem too concerned about whether NV Energy's revenue slide will affect its long-term financial prospects.

Analyst consensus from Thomson Reuters calls for investors to hold the stock, rather than to sell it, and their forecasts say the company should trend toward outperforming typical market returns. And analysts reporting through DailyFinance.com now recommend buying the stock, an improvement from just three months ago, when they advised investors to hold the line on buying shares. Of the 12 equities researchers tracking NV Energy through the website, none recommended selling positions in NV Energy or said they expected the utility to underperform against broader markets.

NV Energy executives said they'd continue to match flat sales in 2011 with operational tweaks to keep expenses even in the year.

Michael Yackira, NV Energy's president and chief executive officer, said such adjustments have positioned the company to handle whatever the local economy throws its way.

"Many in Nevada believe that Nevada's economy is beginning to show signs of stability, setting the stage for a recovery, albeit a slow one," Yackira said. "I believe we have appropriately planned for this slowdown through capital and expense discipline, and we'll be ready to shift our resources if the economy rebounds more rapidly than we currently expect."

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