NV Energy, Inc. Q4 2009 Earnings Call Transcript

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NV Energy, Inc. (NVE)

Q4 2009 Earnings Call Transcript

February 8, 2009 10:00 am ET

Executives

Britta Carlson - Manager, Investor and Shareholder Relations

Michael Yackira -- President and CEO

Kevin Bethel -- Interim CFO, Chief Accounting Officer & Controller

Analysts

Dan Eggers -- Credit Suisse

Lasan Johong -- RBC Capital Markets

Greg Gordon -- Morgan Stanley

Paul Patterson -- Glenrock Associates

Brian Russo -- Ladenburg Thalmann

Maurice May -- Power Insights

Jay Dobson -- Wunderlich Securities

Michael Lapides -- Goldman Sachs

Robert Howard -- Prospector Partners

Nitin Dahiya -- Nomura Securities

Phyllis Gray -- Dwight Asset Management

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the NV Energy full year 2009 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this conference is being recorded.

And I would now like to turn the conference over to our host, Ms. Britta Carlson. Please go ahead.

Britta Carlson

Thank you and good morning. Today, we are going to review NV Energy’s results for the fourth quarter and full-year 2009. In addition to the press release that was issued over the news wire earlier today, we expect to file our 2009 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 periods ended March 31, 2009, June 30, 2009, and September 30, 2009, and the Form 10-K for the year ended December 31, 2008. I would also like to mention 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 web site at www.nvenergy.com.

With me this morning are Michael Yackira, President and Chief Executive Officer, and Kevin Bethel, interim Chief Financial Officer. Michael will begin with a brief introduction of Kevin, who will follow with his review of our 2009 financial results and discuss key financial drivers and trends. Michael will then provide an update on the corporate strategy, including recent industry developments.

I will now turn the call over to Michael Yackira.

Michael Yackira

Thank you, Britta; and good morning, everyone. Thanks for joining us. I am sure many of you were on the call last Thursday and I wanted to make just a few comments in that regard for those of you might not have been able to join us.

We have initiated a search for a successor to Bill Rogers, who resigned last week, and expect to accomplish this in the very near future. In the meantime, we are very pleased that Kevin Bethel, our Chief Accounting Officer and Controller, will serve as the interim CFO. As the former CFO of our company, I am very confident in Kevin’s ability to lead this area and I will continue to work closely with him. Kevin joined NV Energy in December 2007. Prior to that, he was Assistant Controller at American Electric Power. He also has held key accounting positions at the Williams Company, Central & Southwest, and Public Service Company of Oklahoma.

I will now turn the call over to Kevin.

Kevin Bethel

Thank you, Michael. Good morning and thank you for joining us today. I look forward to meeting many of you in the months ahead.

In our earnings press release, we included our company’s income statements, certain financial highlights from our balance sheet, and selected operating data. Rather than repeat our financials, I will begin with a review of our earnings, gross margin, and revenue drivers on a year-to-year basis. Following this review, I will briefly discuss forward-looking load forecasts and our capital expenditure plans.

As released this morning, NV Energy reported net income of $183 million or $0.78 per share in 2009, as compared with earnings of $209 million or $0.89 per share in 2008. As described in earlier calls, the earnings decrease in 2009 versus 2008 was primarily due to an increase in other operating and maintenance expenses, depreciation and interest charges, some of which are costs related to the Higgins generating station and acquired peaking units which were not included in rates prior to July 1, 2009. The impact of not recovering these assets and expenses in rates was approximately $0.20 per share in 2009.

In addition, higher pension expenses reduced earnings by approximately $0.08 per share for the year. A fourth-quarter charge related to severance payments of $0.04 per share and lower AFUDC we see as a result of decreased construction activity also contributed to the reduced earnings, partially offset by higher revenues.

In the fourth quarter of 2009, we reported net income of $4.2 million or $0.02 per share, compared with a loss of $2.1 million or $0.01 per share in 2008. The improvement in the fourth quarter of 2009 earnings was primarily a result of higher general rates in southern Nevada, partially offset by the severance payments mentioned earlier, and lower customer usage.

With respect to our revenue, we are pleased that consolidated gross margin increased approximately $148 million or 11%. Improvements in our gross margin was a result of higher revenues collected from general rates in both southern and northern Nevada, effective July 1, 2009 and July 1, 2008 respectively. Offsetting this $0.51 per share increase in revenue was lower use per customer of $0.10 per share. It is unlikely that gross margin will increase outside of general rate cases, without an increase in customers or an upward trend in customer usage patterns.

Our retail electric volume sales in southern Nevada were down 2% for the full year 2009 compared with 2008. Northern Nevada retail electric volume sales declined 4.6% in 2009 compared to 2008. Residential customer growth is essentially flat on a year on year basis, offset by modest growth in commercial and industrial customers. More importantly, unlike most utilities, our industrial customers are mainly hotels, gaming, and mining. We have not, and looking ahead, do not anticipate any loss in industrial customers. Weather was not materially different year-over-year. Therefore, the volume sales decline was a result of changes in customer usage patterns not directly attributable to weather.

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