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NV Energy, Inc. (NVE)

Q3 2012 Earnings Call

November 2, 2012 10:00 am ET

Executives

Max Kuniansky – Investor Relations

Jonathan S. Halkyard – Executive Vice President and Chief Financial Officer

Michael W. Yackira – President and Chief Executive Officer

Analysts

Kevin Cole – Credit Suisse

Neil Mehta – Goldman Sachs

Greg Gordon – ISI Group

Leslie Rich – JPMorgan

Kit Konolige – BGC Partners LP

Paul T. Ridzon – KeyBanc Capital Markets

Brian J. Russo – Ladenburg Thalmann Securities

James L. Dobson – Wunderlich Securities

Sarah E. Akers – Wells Fargo Advisors LLC

Andrew Bischof – Morningstar Research

Paul Patterson – Glenrock Associates LLC

John Alli – Decade Capital Management LLC

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the NV Energy’s Third Quarter 2012 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-answer-session. Instructions will be given at that time. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Max Kuniansky. Please go ahead.

Max Kuniansky

Good morning, everyone, and thank you for joining us. By now you’ve probably seen the financial results we announced in the press release issued earlier today and the slides on our website.

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 the company and its subsidiaries, Nevada Power and Sierra Pacific Power Company.

Forward-looking statements include earnings guidance and statements or forecast of operating and financial metrics. These statements reflect current expectations of future conditions and events and as such are subject to a variety of risks, uncertainties and assumptions that could cause actual results to differ materially from current expectation.

Slide 2 gives you more information on the assumptions and factors we consider in making those forward-looking statements and where to go to get more information on our risk factors. You’ll also find reconciliations of certain non-GAAP financial information on our website at www.nvenergy.com.

With us this morning are Michael Yackira, President and Chief Executive Officer, and Jonathan Halkyard, Executive Vice President and Chief Financial Officer.

I will now turn the call over to Jonathan.

Jonathan S. Halkyard

Thanks very much, Max, and good morning, everyone. We had strong financial results in the third quarter. NV Energy earned $0.94 per diluted share in the three months ended September 30, 2012, compared to $0.73 per share in the same period a year ago.

If you look at Slide 3, you will see that our earnings growth was largely due to higher gross margin. The biggest contributor to higher margin was the general rate increase we’ve discuss previously, which became effective on January 1 of this year. It benefited quarterly earnings by $0.13 per share compared to the same period last year. Retail megawatt hour sales increased about 3% driven by increased usage, customer growth and weather. I’ll take a moment to discuss each of those components.

Higher usage by existing customers, independent of weather effects, together with growth in the number of customers increased earnings per share by $0.03 compared to last year. The increased usage by existing customers appears to be largely driven by expansion of operations and new facilities in Las Vegas such as a new passenger terminal at the Las Vegas airport and our New Performing Arts Center.

While we’re pleased with the increased sales, it’s probably too early to view this as a broad-based resurgence in the local economy. Generally the economy in Southern Nevada is on much the same course we described in our last earnings call, gradual and still slow recovery.

You can see this in our customer growth numbers, the number of accounts increased 1.1% in the third quarter, in line with the trend we’ve been reporting for some time. We’ve now have 10 consecutive quarters of growth in our customer base. The number of low-use customer accounts continues to decrease slowly, a favorable trend as shown in Slides 4 and 5. This metric, which is a proxy for Bacon Homes has now improved to levels we’ve not seen since 2008 throughout Nevada.

Favorable weather added about $0.01 per share to third quarter earnings compared to the same period last year. We had a hotter than normal weather in the third quarter, especially in Northern Nevada. However, the third quarter of last year was also hotter than normal.

As you can see in Slide 6 compared to historically normal conditions, weather benefited EPS by approximately $0.04 in the quarter just ended and by about $0.03 in the third of quarter last year. You’ll find cooling degree days in the operating specific section of our news release.

Turning now to items below the gross margin line, I’m pleased to report that our cost control efforts are on track. O&M expenses this quarter are down nearly $5 million from last year excluding an expense reversal in the third quarter of last year, which we previously disclosed. That reversal in 2011 benefited last year’s earnings by $0.02 per share and of course did not recur this year.

Lower interest expense added $0.02 to the third quarter earnings compared to the third quarter of 2011. This is the result of refinancing activities which reduced the rate on debt outstanding. A gain on the sale of telecommunications powers increased earnings by $0.02 per share in the third quarter and we also recorded a $0.01 benefit from trust investments in the quarter.

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