Earnings Report to the Financial Community First Quarter 2013 Table of Contents Conference call slides.................................................. Quarterly EPS............................................................... Regulatory matters fact sheet.................................... Financial statements and operating statistics.......... Non-GAAP financial measures.................................... Exhibit 99.2 Page No. 2 -11 12 13 14-21 22-23 |
First Quarter 2013 Financial Results May 3, 2013 |
3 Safe Harbor Statement IR Contacts Max Kuniansky Jessica Lucero Executive, Investor Relations Financial Analyst (702) 402-5627 (702) 402-5612 mkuniansky@nvenergy.com jlucero@nvenergy.com This presentation may contain 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 d/b/a NV Energy. Forward-looking statements include earnings guidance and estimates or forecasts 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 expectations. These risks, uncertainties and assumptions include, but are not limited to, NV Energy Inc.'s ability to maintain access to the capital markets, NV Energy Inc.'s ability to receive dividends from its subsidiaries, the financial performance of NV Energy Inc.'s subsidiaries, particularly Nevada Power Company and Sierra Pacific Power Company both d/b/a NV Energy, and the discretion of NV Energy Inc.'s Board of Directors with respect to the payment of future dividends based on its periodic review of factors that ordinarily affect dividend policy, such as current and prospective financial condition, earnings and liquidity, prospective business conditions, regulatory factors, and dividend restrictions in NV Energy Inc.'s and its subsidiaries' financing agreements. For Nevada Power Company and Sierra Pacific Power Company both d/b/a NV Energy, these risks and uncertainties include, but are not limited to, future economic conditions, changes in the rate of industrial, commercial and residential growth in their service territories, their ability to procure sufficient renewable energy sources in each compliance year to satisfy the Nevada Renewable Energy Portfolio Standard, the effect of existing or future Nevada or federal laws or regulations affecting the electric industry, changes in environmental laws and regulations, construction risks, including but not limited to those associated with the ON Line project, their ability to maintain access to the capital markets for general corporate purposes and to finance construction projects, employee workforce factors, unseasonable weather, drought, wildfire and other natural phenomena, explosions, fires, accidents, vandalism, or mechanical breakdowns that may occur while operating and maintaining an electric and natural gas system, their ability to purchase sufficient fuel, natural gas and power to meet their power demands and natural gas demands for Sierra Pacific Power Company d/b/a NV Energy, financial market conditions, and unfavorable rulings, penalties or findings in their rate or other cases. Further risks, uncertainties and assumptions that may cause actual results to differ from current expectations pertain to weather conditions, customer and sales growth, plant outages, operations and maintenance expense, depreciation and allowance for funds used during construction, interest rates and expense, cash flow and regulatory matters. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of NV Energy, Inc., Nevada Power Company and Sierra Pacific Power Company both d/b/a NV Energy are contained in their Annual Reports on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission. NV Energy Inc., Nevada Power Company and Sierra Pacific Power Company both d/b/a NV Energy undertake no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. |
4 First Quarter Financial Results Major Drivers Q1 2013 vs. Q1 2012 NV Energy Consolidated Net Income $ millions EPS diluted Gross Margin $ millions Pre-Tax Total After Tax Gross Margin: ($ millions) EPS Impact Weather $ 0.02 Customer growth - Usage and other - Other: O&M expense 0.02 Depreciation (0.01) Interest expense 0.02 7.6 $ 2.7 (1.0) 6.0 6.5 (5.1) |
5 Change in Average Customers % change, quarter vs. prior year, retail |
6 Declining Low-use Customer Accounts Low-use accounts, a proxy for vacant homes, continue to decline. % of residential customers |
7 EPS Impact of Weather: Actual vs. Normal Weather was close to normal for Q1 2013, but adversely affected the same period last year by $0.02/share. 2012 Estimates; normal = 20-year average 2013 No Impact |
8 Nevada Economy Slow, Steady Recovery New Housing Permits Southern Nevada Unemployment |
9 Southern Nevada Economy Slow, Steady Recovery * February 2013 except Total Employment, Active Residential Electric Meters and New Residents (March 2013). Year Ago Most Current* Increase (Decrease) New Home Sales Median Existing Home Price Median New Home Price Total Employment (thousands) Active Residential Electric Meters New Residents (Drivers License Count) Existing Home Sales 193,900 105,000 310 817.9 746,166 5,886 4,132 3,433 5,430 753,478 834.2 510 234,467 137,500 65% 31% 21% 2% 1% (8%) (17%) $ $ $ $ |
10 2013 Earnings Guidance EPS: $1.25 - $1.35 Guidance is based on ongoing, normalized EPS for Q2 – Q4 2013, excluding unexpected events. For further information see forward –looking statements and risk factors in 2012 SEC Form 10-K Assumptions Weather Q1 actual; Q2-Q4 normal Customers 1.2% increase Gross margin Down; customer growth offset by normal weather O&M expense Flat; Reid Gardner costs, NV Energize savings Depreciation Increase; Reid Gardner costs, capital expenditures Interest expense Decrease; 2012 refinancings, debt reduction Interest expense - regulatory Decrease as reduce over-collections |
11 Gross capital expenditures, including contributions in aid of construction, debt AFUDC, and net salvage. Capacity needs do not reflect NVision legislation. Capital Expenditures and Capacity Needs $ millions MWs |
12 Third Quarter is Key to 12-Month Results Summer weather in southern Nevada can significantly affect financial results. Earnings Per Share (diluted) 2008 2009 2010 2011 2012 2013 0.10 0.15 0.08 0.16 0.05 0.29 0.05 0.01 (0.01) (0.09) 0.09 (0.11) (0.01) 0.02 0.06 0.07 1.35 0.69 0.96 0.78 0.89 0.78 0.75 0.73 0.94 Q1 Q2 Q3 Q4 Year 0.64 |
13 Regulatory Matters Fact Sheet April 30, 2013 Issue Timeline Docket FERC Rate Case • October 31, 2012: filed for new transmission and ancillary rates. • Requested revenue increase: $14.5 million. • Certain new rates suspended by FERC order to June 1. SPPC = ER13-247-000 NPC = ER13-255-000 Annual DEAA, REPR, EEIR, EEPR and TRED Adjustment • March 1, 2013: made annual filings. • Hearings to review costs for prudency and reasonableness scheduled August 7-9, 2013. • New rates effective October 1, 2013. NPC = 13-03003 SPPC (electric) = 13-03004 SPPC (gas) = 13-03005 NVE-North General Rate Case • To be filed in early June. • Rates effective January 1, 2014. TBD Merger Filing • To be filed about six months prior to completion of ON Line. TBD For more information, contact Investor Relations: Max Kuniansky: 702.402.5627 or mkuniansky@nvenergy.com Jessica Lucero: 702.402.5612 or jlucero@nvenergy.com |
NV ENERGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands, Except Share Amounts)
(Unaudited)
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
OPERATING REVENUES | $ | 584,222 | $ | 611,420 | ||||
OPERATING EXPENSES: | ||||||||
Fuel for power generation | 147,248 | 117,035 | ||||||
Purchased power | 121,310 | 117,116 | ||||||
Gas purchased for resale | 37,620 | 31,617 | ||||||
Deferred energy | (79,065 | ) | (11,739 | ) | ||||
Energy efficiency program costs | 9,845 | 19,425 | ||||||
Other operating expenses | 104,672 | 103,601 | ||||||
Maintenance | 24,906 | 32,526 | ||||||
Depreciation and amortization | 96,002 | 90,862 | ||||||
Taxes other than income | 16,476 | 14,509 | ||||||
|
|
|
| |||||
Total Operating Expenses | 479,014 | 514,952 | ||||||
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|
|
| |||||
OPERATING INCOME | 105,208 | 96,468 | ||||||
OTHER INCOME (EXPENSE): | ||||||||
Interest expense (net of AFUDC-debt: $2,131 and $1,595) | (73,337 | ) | (77,931 | ) | ||||
Interest expense on regulatory items | (827 | ) | (2,202 | ) | ||||
AFUDC-equity | 2,889 | 1,932 | ||||||
Other income | 3,820 | 4,194 | ||||||
Other expense | (4,251 | ) | (3,060 | ) | ||||
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|
|
| |||||
Total Other Income (Expense) | (71,706 | ) | (77,067 | ) | ||||
|
|
|
| |||||
Income Before Income Tax Expense | 33,502 | 19,401 | ||||||
Income tax expense | 12,027 | 7,228 | ||||||
|
|
|
| |||||
NET INCOME | 21,475 | 12,173 | ||||||
Other comprehensive income (loss): | ||||||||
Change in compensation retirement benefits liability and amortization (Net of taxes $(136) and $(89) in 2013 and 2012, respectively) | 246 | 155 | ||||||
Change in market value of risk management assets and liabilities (Net of taxes $(110) and $141 in 2013 and 2012, respectively) | 199 | (246 | ) | |||||
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|
| |||||
OTHER COMPREHENSIVE INCOME (LOSS) | 445 | (91 | ) | |||||
COMPREHENSIVE INCOME | $ | 21,920 | $ | 12,082 | ||||
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| |||||
Amount per share basic and diluted | ||||||||
Net income per share - basic and diluted | $ | 0.09 | $ | 0.05 | ||||
Weighted Average Shares of Common Stock Outstanding - basic | 235,193,702 | 235,999,750 | ||||||
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|
| |||||
Weighted Average Shares of Common Stock Outstanding - diluted | 237,005,888 | 237,526,863 | ||||||
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| |||||
Dividends Declared Per Share of Common Stock | $ | 0.19 | $ | 0.13 | ||||
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14
NV ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share Amounts)
(Unaudited)
March 31, 2013 | December 31, 2012 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 250,953 | $ | 298,271 | ||||
Accounts receivable less allowance for uncollectible accounts: | ||||||||
2013 - $6,533; 2012 - $8,748 | 317,191 | 373,099 | ||||||
Materials, supplies and fuel, at average cost | 133,613 | 138,337 | ||||||
Deferred income taxes | 88,648 | 60,592 | ||||||
Other current assets | 54,397 | 40,750 | ||||||
|
|
|
| |||||
Total Current Assets | 844,802 | 911,049 | ||||||
|
|
|
| |||||
Utility Property: | ||||||||
Plant in service | 12,077,001 | 12,031,053 | ||||||
Construction work-in-progress | 730,262 | 708,109 | ||||||
|
|
|
| |||||
Total | 12,807,263 | 12,739,162 | ||||||
Less accumulated provision for depreciation | 3,378,468 | 3,313,188 | ||||||
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|
|
| |||||
Total Utility Property, Net | 9,428,795 | 9,425,974 | ||||||
Investments and other property, net | 58,389 | 56,660 | ||||||
Deferred Charges and Other Assets: | ||||||||
Deferred energy | 84,120 | 87,072 | ||||||
Regulatory assets | 1,102,348 | 1,132,768 | ||||||
Regulatory asset for pension plans | 277,836 | 281,195 | ||||||
Other deferred charges and assets | 82,343 | 89,418 | ||||||
|
|
|
| |||||
Total Deferred Charges and Other Assets | 1,546,647 | 1,590,453 | ||||||
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|
| |||||
TOTAL ASSETS | $ | 11,878,633 | $ | 11,984,136 | ||||
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| |||||
(Continued) |
15
NV ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share Amounts)
(Unaudited)
March 31, 2013 | December 31, 2012 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Current maturities of long-term debt | $ | 481,342 | $ | 356,283 | ||||
Accounts payable | 280,206 | 332,245 | ||||||
Accrued expenses | 95,080 | 127,693 | ||||||
Deferred energy | 56,336 | 136,865 | ||||||
Other current liabilities | 69,306 | 66,221 | ||||||
|
|
|
| |||||
Total Current Liabilities | 982,270 | 1,019,307 | ||||||
|
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|
| |||||
Long-term debt | 4,541,241 | 4,669,798 | ||||||
Commitments and Contingencies | ||||||||
Deferred Credits and Other Liabilities: | ||||||||
Deferred income taxes | 1,510,369 | 1,470,973 | ||||||
Deferred investment tax credit | 12,984 | 13,538 | ||||||
Accrued retirement benefits | 164,315 | 162,260 | ||||||
Regulatory liabilities | 558,692 | 550,687 | ||||||
Other deferred credits and liabilities | 564,911 | 540,202 | ||||||
|
|
|
| |||||
Total Deferred Credits and Other Liabilities | 2,811,271 | 2,737,660 | ||||||
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| |||||
Shareholders’ Equity: | ||||||||
Common stock, $1.00 par value; 350 million shares authorized; 235,999,750 issued for 2013 and 2012; 235,526,514 and 235,079,156 outstanding for 2013 and 2012, respectively | 236,000 | 236,000 | ||||||
Treasury stock at cost, 473,236 shares and 920,594 shares for 2013 and 2012, respectively | (8,660 | ) | (16,804 | ) | ||||
Other paid-in capital | 2,714,107 | 2,712,943 | ||||||
Retained earnings | 612,030 | 635,303 | ||||||
Accumulated other comprehensive loss | (9,626 | ) | (10,071 | ) | ||||
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|
|
| |||||
Total Shareholders’ Equity | 3,543,851 | 3,557,371 | ||||||
|
|
|
| |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 11,878,633 | $ | 11,984,136 | ||||
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|
|
(Concluded)
16
NV ENERGY, INC.
FREE CASH FLOW AND CONSOLIDATED OPERATING STATISTICS
(Unaudited)
FREE CASH FLOW
(dollars in thousands)
Three Months Ended March 31, | ||||||||||||
2013 | 2012 | Change from Prior Year | ||||||||||
Free Cash Flow* | $ | (9,054 | ) | $ | (48,501 | ) | 81.3 | % |
* | Free cash flow is a non-GAAP financial measure as defined by the SEC. See the “Non-GAAP Financial Measures” section for additional information and GAAP reconciliation. |
ELECTRIC SALES - MWh’s
(in thousands)
Three Months Ended March 31, | ||||||||||||||||
2013 | 2012 | Change from Prior Year | Change in Average Customers | |||||||||||||
Residential | 2,240 | 2,136 | 4.9 | % | 0.6 | % | ||||||||||
Commercial | 1,566 | 1,616 | (3.1 | )% | 1.0 | % | ||||||||||
Industrial | 2,303 | 2,285 | 0.8 | % | 1.0 | % | ||||||||||
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| |||||||||||||
TOTAL RETAIL | 6,109 | 6,037 | 1.2 | % | 0.6 | % | ||||||||||
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GAS SALES - Dth
(in thousands)
Three Months Ended March 31, | ||||||||||||
2013 | 2012 | Change from Prior Year | ||||||||||
Residential | 4,136 | 3,708 | 11.5 | % | ||||||||
Commercial | 2,076 | 1,879 | 10.5 | % | ||||||||
Industrial | 533 | 476 | 12.0 | % | ||||||||
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| |||||||||
TOTAL RETAIL | 6,745 | 6,063 | 11.2 | % | ||||||||
|
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|
|
ELECTRIC SOURCES - MWh’s
(in thousands)
Three Months Ended March 31, | ||||||||||||
2013 | 2012 | Change from Prior Year | ||||||||||
Generated | 4,822 | 4,465 | 8.0 | % | ||||||||
Purchased | 1,748 | 2,037 | (14.2 | )% | ||||||||
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|
| |||||||||
TOTAL | 6,570 | 6,502 | 1.0 | % | ||||||||
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|
DEGREE DAYS
Three Months Ended March 31, | ||||||||||||||||||||
% Change From | ||||||||||||||||||||
2013 | 2012 | Normal* | Prior Year | Normal | ||||||||||||||||
SOUTH | ||||||||||||||||||||
Heating | 1,050 | 924 | 1,025 | 13.6 | % | 2.4 | % | |||||||||||||
Cooling | 86 | 41 | 30 | 109.8 | % | 186.7 | % | |||||||||||||
NORTH | ||||||||||||||||||||
Heating | 2,285 | 2,128 | 2,227 | 7.4 | % | 2.6 | % | |||||||||||||
Cooling | — | — | — | N/A | N/A |
* | Normal = 20-year average |
17
NEVADA POWER COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in Thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
OPERATING REVENUES | $ | 371,863 | $ | 395,688 | ||||
OPERATING EXPENSES: | ||||||||
Fuel for power generation | 105,531 | 80,549 | ||||||
Purchased power | 81,408 | 81,531 | ||||||
Deferred energy | (45,355 | ) | 2,171 | |||||
Energy efficiency program costs | 7,967 | 15,774 | ||||||
Other operating expenses | 67,392 | 66,462 | ||||||
Maintenance | 18,075 | 23,073 | ||||||
Depreciation and amortization | 68,661 | 64,990 | ||||||
Taxes other than income | 9,959 | 8,454 | ||||||
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| |||||
Total Operating Expenses | 313,638 | 343,004 | ||||||
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| |||||
OPERATING INCOME | 58,225 | 52,684 | ||||||
OTHER INCOME (EXPENSE): | ||||||||
Interest expense (net of AFUDC-debt: $1,837 and $1,179) | (51,259 | ) | (54,405 | ) | ||||
Interest income (expense) on regulatory items | (802 | ) | (2,016 | ) | ||||
AFUDC-equity | 2,366 | 1,413 | ||||||
Other income | 2,404 | 1,709 | ||||||
Other expense | (2,401 | ) | (1,346 | ) | ||||
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| |||||
Total Other Income (Expense) | (49,692 | ) | (54,645 | ) | ||||
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Income Before Income Tax Expense | 8,533 | (1,961 | ) | |||||
Income tax expense | 3,088 | (645 | ) | |||||
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| |||||
NET INCOME (LOSS) | 5,445 | (1,316 | ) | |||||
Other comprehensive income: | ||||||||
Change in compensation retirement benefits liability and amortization (Net of taxes $(54) and $(32) in 2013 and 2012, respectively) | 97 | 63 | ||||||
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| |||||
COMPREHENSIVE INCOME (LOSS) | $ | 5,542 | $ | (1,253 | ) | |||
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18
NEVADA POWER COMPANY
CONSOLIDATED OPERATING STATISTICS
(Unaudited)
ELECTRIC SALES - MWh’s
(in thousands)
Three Months Ended March 31, | ||||||||||||||||
2013 | 2012 | Change from Prior Year | Change in Average Customers | |||||||||||||
Residential | 1,611 | 1,536 | 4.9 | % | 0.6 | % | ||||||||||
Commercial | 916 | 957 | (4.3 | )% | 1.1 | % | ||||||||||
Industrial | 1,635 | 1,652 | (1.0 | ) % | 0.7 | % | ||||||||||
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| |||||||||||||
TOTAL RETAIL | 4,162 | 4,145 | 0.4 | % | 0.6 | % | ||||||||||
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ELECTRIC SOURCES - MWh’s
(in thousands)
Three Months Ended March 31, | ||||||||||||
2013 | 2012 | Change from Prior Year | ||||||||||
Generated | 3,675 | 3,287 | 11.8 | % | ||||||||
Purchased | 643 | 1,026 | (37.3 | )% | ||||||||
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| |||||||||
TOTAL | 4,318 | 4,313 | 0.1 | % | ||||||||
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19
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
OPERATING REVENUES: | ||||||||
Electric | $ | 172,627 | $ | 169,806 | ||||
Gas | 39,729 | 45,922 | ||||||
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| |||||
Total Operating Revenues | 212,356 | 215,728 | ||||||
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OPERATING EXPENSES: | ||||||||
Fuel for power generation | 41,717 | 36,486 | ||||||
Purchased power | 39,902 | 35,585 | ||||||
Gas purchased for resale | 37,620 | 31,617 | ||||||
Deferral of energy - electric - net | (19,335 | ) | (12,670 | ) | ||||
Deferral of energy - gas - net | (14,375 | ) | (1,240 | ) | ||||
Energy efficiency program costs | 1,878 | 3,651 | ||||||
Other operating expenses | 35,805 | 36,432 | ||||||
Maintenance | 6,831 | 9,453 | ||||||
Depreciation and amortization | 27,341 | 25,872 | ||||||
Taxes other than income | 6,295 | 5,863 | ||||||
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|
| |||||
Total Operating Expenses | 163,679 | 171,049 | ||||||
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| |||||
OPERATING INCOME | 48,677 | 44,679 | ||||||
OTHER INCOME (EXPENSE): | ||||||||
Interest expense (net of AFUDC-debt: $294 and $416) | (15,525 | ) | (16,973 | ) | ||||
Interest expense on regulatory items | (25 | ) | (186 | ) | ||||
AFUDC-equity | 523 | 519 | ||||||
Other income | 1,140 | 2,183 | ||||||
Other expense | (1,248 | ) | (1,335 | ) | ||||
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| |||||
Total Other Income (Expense) | (15,135 | ) | (15,792 | ) | ||||
|
|
|
| |||||
Income Before Income Tax Expense | 33,542 | 28,887 | ||||||
Income tax expense | 11,638 | 10,243 | ||||||
|
|
|
| |||||
NET INCOME | 21,904 | 18,644 | ||||||
Other comprehensive income: | ||||||||
Change in compensation retirement benefits liability and amortization (Net of taxes $(31) and $(23) in 2013 and 2012, respectively) | 59 | 42 | ||||||
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| |||||
COMPREHENSIVE INCOME | $ | 21,963 | $ | 18,686 | ||||
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20
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED OPERATING STATISTICS
(Unaudited)
ELECTRIC SALES - MWh’s
(in thousands)
Three Months Ended March 31, | ||||||||||||||||
2013 | 2012 | Change from Prior Year | Change in Average Customers | |||||||||||||
Residential | 629 | 600 | 4.8 | % | 0.6 | % | ||||||||||
Commercial | 650 | 659 | (1.4 | )% | 0.7 | % | ||||||||||
Industrial | 668 | 633 | 5.5 | % | 4.8 | % | ||||||||||
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| |||||||||||||
TOTAL RETAIL | 1,947 | 1,892 | 2.9 | % | 0.6 | % | ||||||||||
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GAS SALES - Dth
(in thousands)
Three Months Ended March 31, | ||||||||||||
2013 | 2012 | Change from Prior Year | ||||||||||
Residential | 4,136 | 3,708 | 11.5 | % | ||||||||
Commercial | 2,076 | 1,879 | 10.5 | % | ||||||||
Industrial | 533 | 476 | 12.0 | % | ||||||||
|
|
|
| |||||||||
TOTAL RETAIL | 6,745 | 6,063 | 11.2 | % | ||||||||
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ELECTRIC SOURCES - MWh’s
(in thousands)
Three Months Ended March 31, | ||||||||||||
2013 | 2012 | Change from Prior Year | ||||||||||
Generated | 1,147 | 1,178 | (2.6 | )% | ||||||||
Purchased | 1,105 | 1,011 | 9.3 | % | ||||||||
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|
|
| |||||||||
TOTAL | 2,252 | 2,189 | 2.9 | % | ||||||||
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21
Non-GAAP Financial Measures
Free Cash Flow
“Free cash flow” meets the definition of a non-GAAP financial measure. NV Energy, Inc. defines free cash flow as net cash from operating activities less additions to utility plant (excluding AFUDC-equity). Since free cash flow is not a measure of liquidity calculated in accordance with GAAP, it should be considered in addition to, but not as a substitute for, the GAAP measure net cash from operating activities.
NV Energy, Inc. considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated from operations after capital expenditures that may be available for increasing its common stock dividend payout ratio, strengthening its capital structure, and considering new investment opportunities.
NV Energy, Inc.’s definition of free cash flow is limited, in that it does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations. The table below provides a reconciliation between GAAP net cash from operating activities and non-GAAP free cash flow (dollars in thousands).
Three Months Ended March 31, | ||||||||||||
2013 | 2012 | Change from Prior Year | ||||||||||
Net Cash from Operating Activities | $ | 88,894 | $ | 67,316 | 32.1 | % | ||||||
Less Additions to Utility Plant (Excluding AFUDC-Equity) | (97,948 | ) | (115,817 | ) | (15.4 | )% | ||||||
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| |||||||||
Free Cash Flow | $ | (9,054 | ) | $ | (48,501 | ) | 81.3 | % | ||||
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Gross Margin
NV Energy, Inc. presents gross margin in order to aid the reader in determining how profitable the utilities’ electric and gas businesses are at the most fundamental level. Gross margin, which is a “non-GAAP financial measure” as defined in accordance with SEC rules, provides a measure of income available to support the other operating expenses of the business and is utilized by management in its analysis of its business.
NV Energy, Inc. believes presenting gross margin allows the reader to assess the impact of the utilities’ regulatory treatment and their overall regulatory environment on a consistent basis. Gross margin, as a percentage of revenue, is primarily impacted by the fluctuations in regulated utility electric and natural gas supply costs versus the fixed rates collected from utility customers. While these fluctuating costs impact gross margin as a percentage of revenue, they only impact gross margin amounts if the costs cannot be passed through to utility customers. Gross margin, which NV Energy, Inc. calculates as operating revenues less energy and energy efficiency program costs, provides a measure of income available to support the other operating expenses of the utilities. Gross margin changes are based primarily on the utilities’ general base rate adjustments (which are required to be filed by statute every three years). These non-GAAP measures should not be considered as substitutes for the GAAP measures. Reconciliations between GAAP operating income and gross margin are provided in the table below (dollars in thousands).
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NV Energy, Inc.
Consolidated Gross Margin
(dollars in thousands)
Three Months Ended March 31, | ||||||||||||
2013 | 2012 | Change from Prior Year % | ||||||||||
Operating Revenues: | $ | 584,222 | $ | 611,420 | (4.4 | )% | ||||||
Energy Costs: | ||||||||||||
Fuel for power generation | 147,248 | 117,035 | 25.8 | % | ||||||||
Purchased power | 121,310 | 117,116 | 3.6 | % | ||||||||
Gas purchased for resale | 37,620 | 31,617 | 19.0 | % | ||||||||
Deferred energy | (79,065 | ) | (11,739 | ) | 573.5 | % | ||||||
Energy efficiency program costs | 9,845 | 19,425 | (49.3 | )% | ||||||||
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Total Costs | $ | 236,958 | $ | 273,454 | (13.3 | )% | ||||||
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Gross Margin | $ | 347,264 | $ | 337,966 | 2.8 | % | ||||||
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Other operating expenses | 104,672 | 103,601 | ||||||||||
Maintenance | 24,906 | 32,526 | ||||||||||
Depreciation and amortization | 96,002 | 90,862 | ||||||||||
Taxes other than income | 16,476 | 14,509 | ||||||||||
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Operating Income | $ | 105,208 | $ | 96,468 | 9.1 | % | ||||||
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