NV Energy reports improved earnings

NV Energy detailed strong earnings growth in the third quarter, but company officials discussing the results Monday focused less on the past and more on trends that could curb rates and boost efficiencies in the years to come.

NV Energy posted net income of $182.6 million, or 78 cents a share, on revenue of $1.2 billion in the quarter that ended Sept. 30. That’s up from $150.8 million, or 64 cents a share, on revenue of $1.1 billion in the same quarter a year ago.

The utility’s earnings beat analysts’ forecasts, which Thomson Reuters pegged at 71 cents a share.

The increase in year-over-year income came mostly from a July 1 increase in Southern Nevada’s general rates, which cover operations, maintenance, investor returns and other business costs. The 6.9 percent rate boost added nearly $40 million in revenue year over year in the third quarter.

But NV Energy officials said big improvements in plant efficiencies also helped. The utility added 1,200 megawatts of power capacity in Southern Nevada, and the extra generation supply let the company schedule maintenance outages more conveniently and spread fixed operating costs across more stations. Plus, more-efficient plants allowed the utility to cut expenses for purchased power and fuel in the third quarter. Fuel and power expenses were $563.9 million in the quarter, down from $716.2 million a year earlier.

The sustained drop in expenses will mean smaller electric bills in 2010, as the law requires the utility to pass savings on purchased power and fuel directly to customers, with no profit to the business. The Public Utilities Commission already approved one decrease, a 2.7 percent local cut that took effect Oct. 1. Michael Yackira, NV Energy’s president and chief executive officer, said consumers can expect more rate declines in 2010, as the utility continues to account for steadily dropping prices on purchased power and the natural gas that fuels the company’s generating plants.

NV Energy officials also said they expect smaller increases in general rates in coming years, because NV Energy will spend less money on expansions. Chief Financial Officer Bill Rogers said the utility’s budget for capital expenditures in 2010, 2011 and 2012 will come in at $1.54 billion – about what it spent in 2008 alone. That will mean less need for higher rates, Yackira noted.

NV Energy has agressively reduced debt as well, paying down $131 million in borrowed funds since June 30. It has only $10 million borrowed against revolving credit lines, and its liquidity rests at $1 billion.

Rogers said the company forecasts continued improvements in its balance sheet in quarters to come.

Officials also expect continued growth in sales in coming quarters. Its residential customer base was essentially flat year over year in the third quarter, but its commercial and industrial segments expanded. The commercial growth translated into a 1.5 percent jump in the Southern Nevada system peak, which rose from 5,504 megawatts to 5,586 megawatts year over year despite no changes in summer weather.

Rogers pointed to “signs of a modestly improved local economy” in which unemployment continues to rise but home sales and prices are improving. The utility will add major new commercial customers in coming months with CityCenter and the Cosmopolitan. And once employment and housing numbers stabilize, company executives said they do expect to see a rebound in the construction market, though they added such an improvement will take some time.

Yackira said NV Energy is looking to cut still more costs. It offered voluntary buyouts to all 3,100 of its employees, though officials won’t discuss how many workers will take the severance until the program closes toward the end of 2009. Yackira did say the company has slashed the number of employees required to operate its plants by 10 percent since the end of 2005, even as it more than doubled its generating capacity.

He also said the company is earning an investor return of about 5 percent to 6 percent, below the 10.6 percent that the Public Utilities Commission has authorized it to make.

The company’s shares rose 10 cents, or 0.89 percent, Monday to close at $11.38 on the New York Stock Exchange.

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