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NV Energy, Inc. (NVE)

Q4 2008 Earnings Call Transcript

February 11, 2009 10:00 am ET

Executives

Britta Carlson – Manager, Investor and Shareholder Relations

Michael Yackira – President and Chief Executive Officer

Bill Rogers – Corporate Senior Vice President, Chief Financial Officer and Corporate Treasurer

Analysts

Daniel Eggers – Credit Suisse

Brian Russo – Ladenburg Thalmann

Steve Fleishman – Catapult Capital

Sam Brothwell – Wachovia

Emily Christensen [ph] – RBC Capital Markets

Tom O’Neil [ph] – Green Arrow [ph]

Reza Hatefi – Decade Capital

Rick Shobin – GLG

Chris Ellinghaus – Shields and Company

Eric McCarthy [ph] – Praesidis Asset Management

Wen-Wen Lindroth – PIMCO Capital

Raymond Long [ph] – Goldman Sachs

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the NV Energy 2008 full year earnings call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session; instructions will be given at that time. (Operator instructions). As a reminder, this conference is being recorded.

I would now like to turn the conference over to the Manager of Investor and Shareholder Relations, Britta Carlson. Please go ahead.

Britta Carlson

Good morning. Thank you for joining us this morning to review NV Energy’s results for the fourth quarter and full year 2008. In addition to the press release that was issued over the Newswire earlier today, we expect to file our 2008 Form 10-K with the SEC later this month.

I would like to remind you that comments we make during this call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the future performance of NV Energy Inc., and its subsidiaries, Nevada Power Company and Sierra Pacific Power Company, both doing business as NV Energy.

These statements are current expectations and as such are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. These risks and uncertainties include the factors discussed in the company's Form 10-Q for the quarters ended March 31, June 30, and September 30, 2008, and Form 10-K for the year ended December 31, 2007. I would also like to mention that reconciliations of certain non-GAAP financial information presented during today's call can be found in our earnings press release, which was posted on our company website at www.nvenergy.com.

With me this morning are Michael Yackira, President and Chief Executive Officer, and Bill Rogers, Corporate Senior Vice President and Chief Financial Officer. Bill will begin this morning by reviewing our 2008 results and discussing key financial drivers and trends. Michael will then provide an update on the corporate strategy, including an update on recent industry developments.

I will now turn the call over to Bill Rogers.

Bill Rogers

Thanks, Britta. Good morning everyone and thank you for joining us.

In our earnings press release, we included certain financial highlights from our company's income statements and balance sheets. Rather than repeat our financials, I will discuss key drivers and trends that affect our earnings. As released this morning, NV Energy earned $209 million or approximately 6% higher than net income of $198 million in 2007. On an earnings per share basis, NV Energy earned $0.89 per share in 2008 compared to $0.89 per share in 2007. The dilution in the per share earnings was a result of the common stock offering in December 2007.

In the fourth quarter of 2008, NV Energy lost $2 million or $0.01 per share compared with earnings of $3.7 million or $0.02 per share in the same period last year. The reductions in earnings in the fourth quarter of 2008 versus the fourth quarter of 2007 was largely due to higher depreciation and maintenance expense, higher interest expense and lower AFUDC earnings. The majority of these expense dollars as well as some of the increase in operating expenses are associated with the completed construction of the Clark peakers for $400 million and the purchase of the Walter M. Higgins generating station for $510 million, both in the fourth quarter of 2008.

Although these assets are now serving our customers and are expected to be in rates in July 2009, they are not currently in rates. The after-tax impact of not recovering in rates the increased cost of capital, depreciation, operating and maintenance expenses associated with these capital additions is approximately $0.07 per share. The after-tax impact of these investments is expected to continue through the first half of 2009 and until rates become effective.

In addition, we had several one-time items in the fourth quarter with other income and deductions, including impairment charge for SPcom [ph] and expenses associated with our name change to NV Energy. These were partially offset by gains from the repurchase of holding company debt. These three items netted to an after-tax loss of $0.01 per share. With respect to our revenue, our retail electric sales decreased throughout the state by 1.5% in 2008 compared to 2007. The reduction in megawatt hour sales was primarily due to more comfortable summer weather in 2008 and more specifically July 2008 relative to July 2007. As we stated in our third quarter call, the extremely and abnormally hot weather in July 2007 added approximately $0.10 per share to the full 2007 year earnings.

We are pleased that gross margin increased approximately $100 million or 8% from the $1.25 billion in 2007 to $1.35 billion in 2008. Our NV energy southern territory contributed 66% of consolidated gross margin and the electric and gas business as of NV Energy’s northern service territory contributed 31% and 3% respectively. Due to our investment actions, we anticipate this growth trend in gross margin to continue. On the expense side, our consolidated operations and maintenance expenses increased by only 2% in 2008 when compared with 2007. This expense discipline helped to drive improvements to our bottom line.

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