Expansion costs, slump in revenue cited in NV Energy first-quarter loss

Higher costs and temperatures hampered first-quarter earnings for the local power utility, according to financial results released Wednesday.

NV Energy reported a loss of $22.2 million, or 9 cents per share, for the quarter that ended March 31, compared with net income of $24.1 million, or 10 cents a share, in the same quarter a year earlier.

First-quarter revenue fell from $805.1 million to $755.3 million year over year.

NV Energy's earnings fell short of analysts' expectations, which Thomson Reuters had pegged at 3 cents a share on revenue of $726 million.

Bill Rogers, NV Energy's chief financial officer, said in a Wednesday morning conference call that the loss came from three areas: higher costs associated mostly with investments in new generating capacity, slumping revenue and the disappearance of other income specific to the first quarter of 2008.

First, the company has spent more than $1 billion buying or expanding power-generating stations in Southern Nevada in recent years, and investments in two of those plants -- the Walter M. Higgins generating station in Primm and the Clark station in Las Vegas -- cost the company 10 cents a share in the first quarter, Rogers said. Nor has the utility recouped the expansion costs through higher rates. Its general rate case is pending before the state's Public Utilities Commission, with a decision scheduled for June 24. The utility wants an overall rate increase of 13.6 percent. Until then, the new plants' costs will continue to hurt earnings, Rogers said.

Higher pension expenses also ate into earnings, to the tune of 2 cents a share, Rogers said.

On the revenue side, the utility did improve its gross margin from $276.2 million to $283.9 million year over year in the first quarter. Company officials credited the gain to a general rate case for its Northern Nevada subsidiary; the new rates went into effect July 1.

But milder weather hampered wintertime sales of power to consumers, and that affected quarter-to-quarter earnings by 5 cents a share, Rogers said.

Finally, the first quarter of 2008 brought a handful of one-time cash infusions that didn't happen in the most recent quarter, including the reinstatement of disallowed expenses for the utility's Piñon Pine power plant near Reno and the reversal of previous provisions for bad-debt allowance. That additional income equaled $7.5 million, or 3 cents a share, in the first quarter of 2008, Rogers said.

Michael Yackira, NV Energy's president and chief executive officer, said in the conference call that Nevada's economy has both troubles and bright spots. Northern Nevada's mining industry remains robust thanks to a sustained demand for gold, though a slowdown in the Silver State's growth and potential building delays among megaresorts under construction on the Strip could affect earnings in the near term, Yackira said.

NV Energy's average number of residential customers in Southern Nevada grew 0.6 percent year over year in the first quarter, while the company's Northern Nevada subsidiary reported no expansion in its residential customer base. The number of commercial customers rose 0.4 percent in the south and 1.7 percent in the north. That's down from a year earlier, when the company's number of residential customers increased 1.5 percent in the south and 1.2 percent in the north, and the number of commercial customers rose 3.7 percent in the south and 2.5 percent in the north.

Yackira also said NV Energy would continue to seek operating efficiencies. The utility's customer base has burgeoned by 30 percent since 2000, even as its number of full-time employees rose just 5 percent, he said.

"Our work force is doing more with less, using new technologies and working smarter to keep up with customer growth," Yackira said.

At least one group of investment analysts saw mostly upsides in the utility's financials.

Vermont-based KDP Investment Advisors wrote that NV Energy's earnings per share "appeared disappointing at first glance," but the firm's report noted that the drop in earnings seemed to come mostly from "regulatory lag," as NV Energy continued to absorb the costs of adding generating power without a rate increase to offset those expenses.

KDP doesn't forecast the outcome of rate requests, but the company's analysis said the ongoing case should be key to boosting NV Energy's credit profile and earnings.

"We currently believe that (NV Energy) is well-positioned to be cash-flow positive in 2010," the firm's statement said.

NV Energy's shares rose 22 cents, or 2.26 percent, Wednesday to close at $9.95 on the New York Stock Exchange.

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