EL PASO ELECTRIC. Jefferies Marketing Tour June 2012

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Transcription:

EL PASO ELECTIC Jefferies Marketing Tour June 2012

Safe Harbor Statement Statements in this presentation, other than statements of historical information, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation eform Act of 1995 (the act ). Such statements are intended to be made as of the date of this presentation, and the company does not undertake to update any such forward-looking statement. Forward-looking statements involve known and unknown risks and other factors that may cause actual results to differ materially from those expressed in this presentation. In connection with the safe-harbor provisions of the act, the company has set forth below a number of important risks and factors that could cause actual results to differ materially from forward-looking information. Factors that could cause or contribute to such differences include, but are not limited to: Increased prices for fuel and purchased power and the possibility that regulators may not permit EE to pass through all such increased costs to customers or to recover previously incurred fuel costs in rates The ability to increase rates to recover capital investments and operating costs in Texas and New Mexico Uncertainties and instability in the general economy and the resulting impact on EE s sales and profitability Unanticipated increased costs associated with scheduled and unscheduled outages The size of our construction program and our ability to complete construction on budget and on time Costs at Palo Verde Deregulation and competition in the electric utility industry Possible increased costs of compliance with environmental or other laws, regulations and policies Possible income tax and interest payments as a result of audit adjustments proposed by the IS Uncertainties and instability in the financial markets and the resulting impact on EE s ability to access the capital and credit markets Other factors detailed by EE in its public filings with the Securities and Exchange Commission. EE s filings are available from the Securities and Exchange Commission or may be obtained through EE s website, http://www.epelectric.com Any such forward-looking statement is qualified by reference to these risks and factors. EE cautions that these risks and factors are not exclusive. EE does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of EE except as required by law. June 2012 2

Profile NYSE Ticker Symbol Net Dependable Generating Capability 2011 Native System Peak Demand etail Customers 12 Months Ended March 2012 EPS (Basic) Credit atings Estimated 2012 Dividend Yield 2012 EPS Guidance (Basic) EE 1,785 MW 1,711 MW Approx 380,000 $2.45 S&P BBB Moody s Baa2 3.27% $2.05 (Low) $2.40 (High) June 2012 3

EE Overview egional electric utility serving west Texas and southern New Mexico ate regulated business no retail competition fuel pass through Above average customer and retail sales growth Favorable environmental profile Sizable capital expenditure plan and resulting rate base growth for the next several years Financially strong utility with good credit metrics June 2012 4

Service Territory New WECC Mexico Service Territory Texas SEC No interconnection with ECOT Interconnected with Mexico 12 Months Ended 03/31/2012 Operating evenues, Net of Energy Expenses MWh Sales ($000) Texas 6,003,806 77% $448,418 76% New Mexico 1,710,078 22% 123,663 21% FEC 62,810 1% 1,970 <1% NM PV3 Stipulation 0 13,473 2% Approximately 380,000 retail customers Clean dependable generating capability 1,785 MW (net) - nuclear (36%), gas (58%) and limited coal (6%) Total Native Load Sales 7,776,694 100% $587,524 100% Other * 0 33,898 Off-System ** 2,628,690 (359 ) Total 10,405,384 $621,063 * epresents revenues with no related kwh sales **Off-System Sales are sales made to power marketers and other utilities with the exception of the io Grande Electric Cooperative which is a full requirements customer. Effective July 1, 2010, 90% of off-system sales margins are shared with retail customers. June 2012 5

egulatory Overview egulated in Texas by PUCT (~75%), in New Mexico by NMPC (~25%) and by FEC (<1%) No current plans for a Texas rate case prior to 2013 No current plans for a New Mexico rate case prior to 2013 FEC rates are formula based June 2012 6

ecap of Texas 2012 ate eduction Settlement approved by the El Paso City Council on April 17, 2012 Public Utility Commission of Texas issued a Final Order approving the settlement on May 23, 2012 esolves the City of El Paso s show cause resolution of October 4, 2011 Implements new rates within the city limits of El Paso commencing with bills rendered on and after May 1, 2012 educes non-fuel base rates for Texas customers by $15 million annually Lowers depreciation expense by $4.1 million annually for gas generating units and transmission and distribution plant The Company will be allowed to file its next fuel reconciliation request covering the period starting July 1, 2009 and ending no later than June 30, 2013 by December 31, 2013 or in a rate case filing, if earlier June 2012 7

Above Average Customer and etail Sales Growth EE continues to have above average growth as compared to the industry June 2012 8

etail Customer & kwh Sales Growth 5-Year etail Customer Growth 5-Year etail kwh Sales Growth 2.00% 1.80% 1.82% 4.50% 4.00% 4.04% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% EE Avg. Customer Growth (2006-2011) 1.07% Industry Avg. Customer Growth (2005-2010) 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Excluding Industrial (2006-2011) 2.35% 0.41% EE (2006-2011) Industry (2006-2011) Source: Industry customer data detailed in EEI-2010 Financial eview eport. Source: Industry retail kwh sales data obtained from the Energy Information Administration website: http://www.eia.doe.gov June 2012 9

GWH Sales Sales Growth by Class 2,900 2,700 2,500 2,300 2,100 1,900 1,700 1,500 1,300 1,100 900 700 500 2,216 2,255 2,233 2,228 2,362 1,384 1,449 GWH Sales by Class 2,251 2,509 2,296 1,482 1,542 2,633 2,352 1,580 1,195 1,102 1,024 1,087 1,096 2007 2008 2009 2010 2011 esidential C&I Small C&I Large Other Public Authorities CAG 4.21% CAG 1.50% CAG -2.14% CAG 3.37% Above-average customer and retail kwh sales growth exceeds the industry average, reflecting the expansion at Fort Bliss and economic growth in the service territory Fort Bliss currently represents approximately 70 MW s of load Current active duty soldier population of approximately 30,000 Single-family building permits a leading indicator for the housing sector increased 10% in 2011 over 2010 June 2012 10

esidential Customer and Usage per Customer Growth Number of Customers 360,000 340,000 320,000 6,529 300,000 6,694 6,761 6,769 6,936 6,852 7,085 6,955 7,244 7,560 7,641* Usage per Customer 8,000 7,500 7,000 6,500 6,000 280,000 260,000 240,000 220,000 5,500 5,000 4,500 4,000 3,500 10-Year CAG kwh Usage 1.59% Customers 2.03% 200,000 3,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 esidential customers at end of year Avg annual kwh use per residential customer *2011 annualized data has been weather normalized efrigerated air conditioning is being installed in 99% of new homes; approximately 35% of El Paso residences have refrigerated air conditioning efrigerated air conditioning uses 15% less water and 3 times more electricity than evaporative coolers June 2012 11

Expanding ate Base Capital requirements are being driven by the need to build infrastructure to meet customer demand June 2012 12

Load and esources Company Owned Generation 1,785 MW s Solar & Purchases 114 MW s Newman Natural Gas 752 MW Palo Verde Nuclear 633 MW io Grande Natural Gas 229 MW Four Corners Coal 108 MW Copper Natural Gas 62 MW Hueco Mountain Wind 1 MW Solar Power 47 MW s esource Purchases 67 MW s 2012 Total Energy esources 1,899 MW s 2012 Projected Native Peak 1,658 MW s (excludes Interruptible equirement) June 2012 13

Capacity Additions Above average customer growth is driving EE s need to modernize its power plant and replace its aging units Approximately 440 MWs of new generation additions and 229 MWs of retirements from 2012-2016 New Generating Plant Additions io Grande Unit 9 peaking unit (87MWs) under construction for commercial operation by May 2013 Four Additional LMS 100 units to come on line before end of 2016 Initial construction of two CCGT s to come on line in 2018 & 2019 io Grande Unit 9 endering June 2012 14

Generation Additions Schedule Generating Capacity (MW) 2,104 2,004 1,961 1,873 1,786 Existing Capacity 1785 MW Additions 2012 Newman Solar (1 MW) 2013 io Grande 9 (87 MW) 2014 LMS Unit 1 (88 MW) 2015 LMS Unit 2 (88 MW) 2016 LMS Units 3 & 4 (88MW each, total 176 MW) Unit etirements (a) 2014 io Grande 6 (45 MW) 2012 2013 2014 2015 2016 2015 Newman 2 (76 MW) 2016 Four Corners 4 & 5 (108 MW) Existing Generation Generation Additions (a) Unit retirements occur in December, and impact capacity available in the following year June 2012 15

Cash Capital Expenditures Construction work in progress of $189mm at March 31, 2012 Primary additions to rate base through 2016 include: New Generating Plant additions - $691mm T&D construction necessary to meet customer growth - $401mm Capex at Palo Verde - $154mm $350 $300 $250 $200 $150 $100 $50 $0 EE Actual and Estimated Costs ($ in millions) $337 $311 $267 $240 $227 $178 2011 2012 Est 2013 Est 2014 Est 2015 Est 2016 Est Production Transmission Distribution General June 2012 16

ate Base and CWIP Projected ate Base Balances for Future ate Case Filings ($ in millions) Adjusted Dec. 2012 Adjusted Dec. 2013 Adjusted Dec. 2014 Beginning ate Base (1) $1,524 $1,621 $1,747 Plant Additions: Excluding New Generating Units 162 138 137 Adjustment for New Generating Units: io Grande Unit 9 (expected in-service May 2013) 79 Montana Plant- LMS Unit 1 (expected in-service May 2014) 113 Montana Plant- LMS Unit 2 (expected in-service May 2015) 95 Total Plant Additions 241 251 232 Depreciation Expense (84) (89) (95) Change in Deferred Income Taxes & Other (60) (36) 2 Total ate Base (2) $1,621 $1,747 $1,886 Year End CWIP Balances ($ in millions) $260 $289 $324 (1) Includes Palo Verde Unit 3 rate base of approximately $35mm. (2) Total rate base balances represent end of the previous year balances rolled forward to the middle of the next year based on the closing of new generating units. June 2012 17

Financial Stability EE has solid credit metrics, which should allow continued access to capital markets, while at the same time providing for cash and non-cash returns to investors June 2012 18

Capital Allocation and Liquidity At March 31, 2012, EE had liquidity of $213.1mm including a cash balance of $6.1mm and the revolving credit facility which was upsized to $300 million early in 2012 Capital expenditures in 2012 are anticipated to be $227mm (previously $242mm) EE dividend payments were $27.2mm in 2011 Increased the quarterly cash dividend from $0.22 per share to $0.25 per share in the 2 nd Quarter of 2012 June 2012 19

Commitment to Credit Quality Capital Structure Book Capitalization egulatory Capitalization** As of 03/31/2012 * (thousands) Common Stock Equity $ 760,157 Long-term & short-term debt, net of GT 792,840 Total Capitalization Before GT $1,552,997 Debt 55.4% Equity 44.6% Debt 51.1% Equity 48.9% GT - LT & ST Debt - Excluding working 149,540 capital borrowings for the CF Total Capitalization After GT $1,702,537 *Capital structure includes current maturities and short-term borrowings Well positioned to finance planned investments Investment grade credit ratings S&P reaffirmed its BBB rating and Stable Outlook in September 2011 Moody s reaffirmed its A3 rating and Stable Outlook in October 2011 Moody's S&P EE (unsecured) Baa2 BBB Stable Stable **egulatory Capitalization excludes borrowings for NF by the io Grande esources Trust (GT), while book capitalization includes nuclear fuel borrowings in the debt portion of capitalization. June 2012 20

2012 Earnings Guidance Current earnings guidance range is $2.05 to $2.40 per basic share Includes effects of Texas rate case settlement June 2012 21

Favorable Environmental Profile EE has a favorable environmental profile and is well-positioned to comply with proposed environmental regulations June 2012 22

Diversified Energy Portfolio and Low Carbon Footprint 2011 Energy Sources EE vs. U.S. Carbon Footprint (Short tons CO 2 equivalent emissions/mwh) Coal, 6% Natural Gas, 30% Purchased Power, 19% Nuclear, 45% 2007 National Average 0.65 2010 EE 0.31 enewable energy purchases represent 1% of total purchased power June 2012 23

Environmental egulations ecent Environmental ulemaking Cross State Air Pollution ule (CSAP) reduces interstate transport of ozone and fine particle air pollution Only EE s Texas jurisdiction must comply, Four Corners is excluded These were to become effective January 1, 2012, but the rule was stayed on December 30, 2011 and is in litigation Minimal impact to EE due to natural gas-fired generation in Texas Anticipate compliance through a combination of the purchase of NOx allowances, unit retirements, and new additions Mercury and Air Toxics Standards (Utility MACT) requires significant reductions in emissions of mercury and other air toxics EPA finalized standards December 2011; final rule effective April 16, 2012 This rule will not apply to EE s local generation due to natural gas-fired units; fuel oil for back-up/emergency usage will be below rule applicability levels No modifications expected at Four Corners due to this rule Must comply with new standards in 3-5 years June 2012 24

2012 Initiatives Settle Texas ate Case Done Prepare to begin construction of next LMS 100 generation addition at the Montana Power Station Work with El Paso community leaders to improve regulatory relations and promote economic development Earn a fair return for shareholders Continue construction of io Grande 9 Assist Fort Bliss in achieving Net Zero initiatives Fair and equitable treatment for solar initiatives June 2012 25

Appendix June 2012 26

Texas enewables equirements Texas mandates EE to obtain renewable energy proportionate to its market share of Texas energy sales or approximately 2% of Texas energy sales; renewable energy requirement can be met through renewable generation or purchase of enewable Energy Credits (EC s) Compliance EE primarily purchases EC s Cost ecovery EC costs recovered through base rates EE capital investments included in rate base Purchased energy costs (including EC s) recovered through fuel June 2012 27

New Mexico enewables equirements EE is required to meet 10% of its current retail energy sales in New Mexico via renewables; escalates to 15% in 2015 and to 20% in 2020 Must be from diverse sources at least 20% solar, 20% wind, 10% other and 1.5% renewable distributed generation (increases to 3% in 2015) Compliance Historically met requirement via purchasing wind ECs from PNM esources (PNM) and Southwestern Public Service (SPS) EE began purchasing 25MW of solar energy in mid 2011 and will purchase an additional 22MWs of solar photovoltaic energy in 2012 Cost ecovery enewable energy with ECs recovered through fuel clause; ECs without energy recovered through base rates June 2012 28

State egulatory Commissioners Public Utility Commission of Texas - Appointed by Governor Name Position Term Ends Party Donna L. Nelson Chair 08/31/2015 epublican Kenneth W. Anderson Commissioner 08/31/2017 epublican olando Pablos Commissioner 08/31/2013 epublican New Mexico Public egulation Commission - Elected Name Position Term Ends Party Patrick Lyons Chair 12/31/2014 epublican Theresa Bencenti-Aguilar Commissioner 12/31/2014 Democrat Jason Marks Commissioner 12/31/2012 Democrat Ben Hall Commissioner 12/31/2014 epublican Dr. Doug Howe Commissioner 12/31/2012 Independent June 2012 29

EE Contact Information Tom Shockley Headquarters Chief Executive Officer Stanton Tower (915) 521-5721 100 North Stanton tom.shockley@epelectric.com El Paso, Texas 79901 (800) 592-1634 David G. Carpenter Senior Vice President - Chief Financial Officer (915) 543-5945 david.carpenter@epelectric.com Steven P. Busser Vice President -Treasurer (915) 543-5983 steve.busser@epelectric.com June 2012 30