NV ENERGY, INC. - FORM 8-K - EX-99.2 - November 1, 2013

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Earnings Report to the
Financial Community
Third Quarter 2013
Table of Contents
Page No.
Conference call slides
4 -7
Financial statements and operating statistics
8-15
Non-GAAP financial measures
16-17
Exhibit 99.2

Third Quarter 2013
Financial Results
November 1, 2013

3
Safe Harbor Statement
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
doing
business
as
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,
the
risk
that
the
transaction
between
NV
Energy,
Inc.
and
MidAmerican
will
not
be
consummated
due
to
a
failure
to
satisfy
the
remaining
closing
conditions
to
the
transaction,
including
the
receipt
of
regulatory
approvals
from
the
PUCN
and
FERC
on
the
terms
and
schedules
contemplated
by
the
parties;
the
risk
that
an
event,
effect
or
change
occurs
that
gives
rise
to
a
termination
of
the
definitive
agreement
entered
into
with
MidAmerican;
the
risk
that
NV
Energy
Inc.
or
MidAmerican
will
be
unable
to
perform
certain
obligations
under
the
transaction
agreements;
the
risk
relating
to
unanticipated
difficulties
and/or
expenditures
relating
to
the
transaction;
the
risk
that
legal
proceedings
against
NV
Energy,
Inc.
and
others
related
to
the
definitive
agreement
entered
into
with
MidAmerican
will
be
successful;
the
risk
that
the
proposed
transaction
disrupts
current
plans
and
operations
and
creates
potential
difficulties
in
employee
retention;
and
the
impact
of
delay
or
failure
to
complete
the
merger
with
MidAmerican
on
NV
Energy,
Inc.’s
common
stock
price.
Additional
risks
and
uncertainties
relating
to
NV
Energy,
Inc.
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
doing
business
as
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
doing
business
as
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
future
or
existing
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
and
natural
gas
demands
for
Sierra
Pacific
Power
Company
doing
business
as
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
doing
business
as
NV
Energy
are
contained
in
their
Annual
Reports
on
Form
10-K
for
the
year
ended
December
31,
2012,
and
Quarterly
Reports
on
Form
10-Q
for
the
period
ended
March
31,
2013
and
June
30,
2013,
as
filed
with
the
Securities
and
Exchange
Commission.
NV
Energy,
Inc.,
Nevada
Power
Company
and
Sierra
Pacific
Power
Company
both
doing
business
as
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.
IR Contacts
Max Kuniansky
Jessica Lucero
Executive, Investor Relations
Financial Analyst II
(702) 402-5627
(702) 402-5612
mkuniansky@nvenergy.com
jlucero@nvenergy.com

4
Third Quarter Financial Results
Major Drivers
Q3 2013 vs. Q3 2012
NV Energy Consolidated
Pre-Tax Total
After Tax
Gross Margin:
($ millions)
EPS Impact
Regulatory disallowance &
reserves*
$      (32.4)
$        (0.09)
Weather
(20.4)
(0.05)
Customer growth & other
15.9
0.04
Other:
Merger -
related costs
(7.9)
(0.02)
O&M expense
(4.1)
(0.01)
Depreciation
(2.3)
(0.01)
Gain on asset sale (2012)
(5.5)
(0.01)
* Primarily related to base energy efficiency implementation rates

5
Nine Month Financial Results
Major Drivers
2013 vs. 2012
NV Energy Consolidated
Pre-Tax Total
After Tax
Gross Margin:
($ millions)
EPS Impact
Regulatory disallowance &
reserves*
$      (32.4)
$       (0.09)
Weather
(14.8)
(0.04)
Customer growth & other
28.8
0.08
Other:
Merger -
related costs
(21.4)
(0.06)
O&M expense
(0.4)
-
Depreciation
(10.0)
(0.02)
* Primarily related to base energy efficiency implementation rates

6
EPS Impact of Weather: Actual vs. Normal
Weather was cooler than normal in southern Nevada in the third
quarter of 2013, adversely impacting consolidated EPS by $0.01.
Estimates; normal = 20-year average

7
2013 Earnings Guidance
EPS: $1.18-
$1.22
Guidance is based on ongoing, normalized EPS for Q4
2013, excluding unexpected events.
For further information see forward –looking statements and risk factors in 2012 SEC Form 10-K, March 31,
2013 Form 10-Q, and June 30, 2013 Form 10-Q.
Assumptions
Weather
Q1-Q3 actual; Q4 normal
Customers
1.2% increase
Gross margin
Q1-Q3 actual; Q4 forecast
Regulatory disallowance and
reserves, Q3 2013
Included
Merger-related costs
Included
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 due to under-collections

NV ENERGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands, Except Share Amounts)

(Unaudited)

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
     2013     2012     2013     2012  

OPERATING REVENUES

    $ 1,013,151      $ 1,026,488      $ 2,329,011      $ 2,378,606   

OPERATING EXPENSES:

         

Fuel for power generation

      217,954        171,316        554,181        400,936   

Purchased power

      205,970        205,686        498,141        486,894   

Gas purchased for resale

      7,383        5,382        62,277        46,491   

Deferred energy

      (55,270 )      (29,036 )      (221,022 )      (30,285 ) 

Energy efficiency program costs

      16,042        32,584        38,486        76,609   

Regulatory disallowance

      17,335        —          17,335        —     

Merger-related costs

      7,857        —          21,409        —     

Other operating expenses

      106,068        100,108        317,538        307,080   

Maintenance

      17,176        19,014        66,128        76,190   

Depreciation and amortization

      96,801        94,512        291,687        281,690   

Taxes other than income

      14,214        15,682        46,536        44,457   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Operating Expenses

      651,530        615,248        1,692,696        1,690,062   
  

 

 

    

 

 

    

 

 

    

 

 

  

OPERATING INCOME

      361,621        411,240        636,315        688,544   

OTHER INCOME (EXPENSE):

         

Interest expense
(net of AFUDC-debt: $1,957, $1,976, $5,770 and $5,479)

      (74,438 )      (73,667 )      (221,305 )      (226,162 ) 

Interest expense on regulatory items

      (281 )      (2,024 )      (1,124 )      (6,203 ) 

AFUDC-equity

      2,591        2,415        7,730        6,666   

Other income

      3,239        8,827        10,872        19,312   

Other expense

      (3,829 )      (4,209 )      (12,116 )      (11,909 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Other Income (Expense)

      (72,718 )      (68,658 )      (215,943 )      (218,296 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income Before Income Tax Expense

      288,903        342,582        420,372        470,248   

Income tax expense

      101,669        119,412        148,430        165,466   
  

 

 

    

 

 

    

 

 

    

 

 

  

NET INCOME

      187,234        223,170        271,942        304,782   

Other comprehensive income (loss)

         

Change in compensation retirement benefits liability and amortization
(Net of taxes $(133), $(74), $(398) and $(246))

      246        155        738        464   

Change in market value of risk management assets and liabilities
(Net of taxes $(154), $91, $(261) and $355)

      (11 )      (193 )      485        (668 ) 

Unrealized net gain/(loss) on investment
(Net of taxes $(49), $0, $(18) and $0)

      98        —          33        —     
  

 

 

    

 

 

    

 

 

    

 

 

  

OTHER COMPREHENSIVE INCOME(LOSS)

      333        (38 )      1,256        (204 ) 

COMPREHENSIVE INCOME

    $ 187,567      $ 223,132      $ 273,198      $ 304,578   
  

 

 

    

 

 

    

 

 

    

 

 

  

Amount per share basic and diluted

         

Net income per share—basic

    $ 0.79      $ 0.95      $ 1.16      $ 1.29   

Net income per share—diluted

    $ 0.79      $ 0.94      $ 1.15      $ 1.28   

Weighted Average Shares of Common Stock Outstanding—basic

      235,578,310        235,961,402        235,421,933        235,986,874   
  

 

 

    

 

 

    

 

 

    

 

 

  

Weighted Average Shares of Common Stock Outstanding—diluted

      237,605,514        238,121,732        237,339,039        237,850,530   
  

 

 

    

 

 

    

 

 

    

 

 

  

Dividends Declared Per Share of Common Stock

    $ 0.19      $ 0.17      $ 0.57      $ 0.47   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

8

NV ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Share Amounts)

(Unaudited)

 

     September 30,
2013		      December 31,
2012		  

ASSETS

      

Current Assets:

      

Cash and cash equivalents

    $ 373,026       $ 298,271   

Accounts receivable less allowance for uncollectible accounts:
2013—$9,643; 2012—$8,748

      483,178         373,099   

Materials, supplies and fuel, at average cost

      121,699         138,337   

Deferred energy costs

      82,235         —     

Deferred income taxes

      120,186         60,592   

Other current assets

      49,041         40,750   
  

 

 

     

 

 

  

Total Current Assets

      1,229,365         911,049   
  

 

 

     

 

 

  

Utility Property:

      

Plant in service

      12,195,312         12,031,053   

Construction work-in-progress

      821,430         708,109   
  

 

 

     

 

 

  

Total

      13,016,742         12,739,162   

Less accumulated provision for depreciation

      3,526,824         3,313,188   
  

 

 

     

 

 

  

Total Utility Property, Net

      9,489,918         9,425,974   

Investments and other property, net

      65,354         56,660   

Deferred Charges and Other Assets:

      

Deferred energy

      85,055         87,072   

Regulatory assets

      1,048,204         1,132,768   

Regulatory asset for pension plans

      270,565         281,195   

Other deferred charges and assets

      76,705         89,418   
  

 

 

     

 

 

  

Total Deferred Charges and Other Assets

      1,480,529         1,590,453   
  

 

 

     

 

 

  

TOTAL ASSETS

    $ 12,265,166       $ 11,984,136   
  

 

 

     

 

 

  

 

(Continued)

 

9

NV ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Share Amounts)

(Unaudited)

 

     September 30,
2013		     December 31,
2012		  

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

Current Liabilities:

     

Current maturities of long-term debt

    $ 129,457      $ 356,283   

Accounts payable

      316,681        332,245   

Accrued expenses

      104,781        127,693   

Deferred energy

      —          136,865   

Other current liabilities

      88,299        66,221   
  

 

 

    

 

 

  

Total Current Liabilities

      639,218        1,019,307   
  

 

 

    

 

 

  

Long-term debt

      4,791,809        4,669,798   

Commitments and Contingencies

     

Deferred Credits and Other Liabilities:

     

Deferred income taxes

      1,680,896        1,470,973   

Deferred investment tax credit

      11,623        13,538   

Accrued retirement benefits

      144,696        162,260   

Regulatory liabilities

      631,368        550,687   

Other deferred credits and liabilities

      656,963        540,202   
  

 

 

    

 

 

  

Total Deferred Credits and Other Liabilities

      3,125,546        2,737,660   
  

 

 

    

 

 

  

Shareholders’ Equity:

     

Common stock, $1.00 par value; 350 million shares authorized; 235,999,750 issued for 2013 and 2012; 235,581,074 and 235,079,156 outstanding for 2013 and 2012, respectively

      236,000        236,000   

Treasury stock at cost, 418,675 shares and 920,594 shares for 2013 and 2012, respectively

      (7,898 )      (16,804 ) 

Other paid-in capital

      2,716,311        2,712,943   

Retained earnings

      772,995        635,303   

Accumulated other comprehensive loss

      (8,815 )      (10,071 ) 
  

 

 

    

 

 

  

Total Shareholders’ Equity

      3,708,593        3,557,371   
  

 

 

    

 

 

  

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

    $ 12,265,166      $ 11,984,136   
  

 

 

    

 

 

  

 

(Concluded)

 

10

NV ENERGY, INC.

FREE CASH FLOW AND CONSOLIDATED OPERATING STATISTICS

(Unaudited)

FREE CASH FLOW

(dollars in thousands)

 

     Nine Months Ended September 30,  
     2013      2012      Change from
Prior Year		  

Free Cash Flow*

    $ 285,908       $ 256,404         11.5 % 

 

* 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 September 30,     Nine Months Ended September 30,  
     2013      2012      Change from
Prior Year		     Change in
Average
Customers		     2013      2012      Change from
Prior Year		     Change in
Average
Customers		  

Residential

      4,298         4,419         (2.7 )%      1.1 %      9,386         9,356         0.3 %      0.9 % 

Commercial

      2,180         2,223         (1.9 )%      1.9 %      5,691         5,713         (0.4 )%      1.8 % 

Industrial

      2,779         2,831         (1.8 )%      (0.6 )%      7,848         7,841         0.1 %      0.1 % 
  

 

 

     

 

 

         

 

 

     

 

 

       

TOTAL RETAIL

      9,257         9,473         (2.3 )%      1.2 %      22,925         22,910         0.1 %      1.0 % 
  

 

 

     

 

 

         

 

 

     

 

 

       

GAS SALES—Dth

(in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2013      2012      Change from
Prior Year		     2013      2012      Change from
Prior Year		  

Residential

      698         642         8.7 %      6,039         5,613         7.6 % 

Commercial

      400         374         7.0 %      3,086         2,939         5.0 % 

Industrial

      190         153         24.2 %      986         876         12.6 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

TOTAL RETAIL

      1,288         1,169         10.2 %      10,111         9,428         7.2 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

ELECTRIC SOURCES—MWh’s

(in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2013      2012      Change from
Prior Year		     2013      2012      Change from
Prior Year		  

Generated

      6,822         6,617         3.1 %      17,139         16,093         6.5 % 

Purchased

      2,993         3,363         (11.0 )%      7,394         8,446         (12.5 )% 
  

 

 

     

 

 

       

 

 

     

 

 

     

TOTAL

      9,815         9,980         (1.7 )%      24,533         24,539         — % 
  

 

 

     

 

 

       

 

 

     

 

 

     

DEGREE DAYS

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
                          % Change From                          % Change From  
     2013      2012      Normal*      Prior Year     Normal     2013      2012      Normal*      Prior Year     Normal  

SOUTH

                           

Heating

      —           —           —           N/A        N/A        1,084         986         1,105         9.9 %      (1.9 )% 

Cooling

      2,164         2,313         2,222         (6.4 )%      (2.6 )%      3,658         3,771         3,419         (3.0 )%      7.0 % 

NORTH

                           

Heating

      85         1         66         N/A        28.8 %      2,859         2,677         3,014         6.8 %      (5.1 )% 

Cooling

      914         1,020         725         (10.4 )%      26.1 %      1,177         1,255         905         (6.2 )%      30.1 % 

 

* Normal = 20-year average

 

11

NEVADA POWER COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands)

(Unaudited)

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
     2013     2012     2013     2012  

OPERATING REVENUES

    $ 786,142      $ 802,334      $ 1,695,129      $ 1,751,165   

OPERATING EXPENSES:

         

Fuel for power generation

      163,127        123,992        412,904        285,799   

Purchased power

      172,582        171,687        383,386        388,494   

Deferred energy

      (45,381 )      (22,685 )      (154,484 )      (15,461 ) 

Energy efficiency program costs

      13,998        28,492        32,807        65,466   

Regulatory disallowance

      11,866        —          11,866        —     

Merger-related costs

      5,620        —          14,487        —     

Other operating expenses

      70,844        65,372        208,336        200,484   

Maintenance

      11,208        12,533        45,172        52,594   

Depreciation and amortization

      68,849        66,975        207,915        201,096   

Taxes other than income

      8,213        9,743        27,804        26,793   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Operating Expenses

      480,926        456,109        1,190,193        1,205,265   
  

 

 

    

 

 

    

 

 

    

 

 

  

OPERATING INCOME

      305,216        346,225        504,936        545,900   

OTHER INCOME (EXPENSE):

         

Interest expense
(net of AFUDC-debt: $1,520, $1,528, $4,763 and $4,021)

      (52,856 )      (51,784 )      (155,758 )      (158,791 ) 

Interest income (expense) on regulatory items

      (194 )      (1,623 )      (1,177 )      (5,488 ) 

AFUDC-equity

      1,959        1,833        6,151        4,823   

Other income

      1,948        7,096        5,330        14,197   

Other expense

      (1,966 )      (2,823 )      (6,200 )      (7,162 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Other Income (Expense)

      (51,109 )      (47,301 )      (151,654 )      (152,421 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income Before Income Tax Expense

      254,107        298,924        353,282        393,479   

Income tax expense

      89,665        103,754        124,730        137,328   
  

 

 

    

 

 

    

 

 

    

 

 

  

NET INCOME

      164,442        195,170        228,552        256,151   

Other comprehensive income

         

Change in compensation retirement benefits liability and amortization
(Net of taxes $(52), $(33), $(156) and $(103))

      96        65        290        192   
  

 

 

    

 

 

    

 

 

    

 

 

  

COMPREHENSIVE INCOME

    $ 164,538      $ 195,235      $ 228,842      $ 256,343   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

12

NEVADA POWER COMPANY

CONSOLIDATED OPERATING STATISTICS

(Unaudited)

ELECTRIC SALES—MWh’s

(in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2013      2012      Change from
Prior Year		     Change in
Average
Customers		     2013      2012      Change from
Prior Year		     Change in
Average
Customers		  

Residential

      3,627         3,752         (3.3 )%      1.3 %      7,592         7,619         (0.4 )%      1.0 % 

Commercial

      1,329         1,374         (3.3 )%      1.7 %      3,423         3,480         (1.6 )%      1.6 % 

Industrial

      2,078         2,145         (3.1 )%      (0.6 )%      5,756         5,836         (1.4 )%      (0.1 )% 
  

 

 

     

 

 

         

 

 

     

 

 

       

TOTAL RETAIL

      7,034         7,271         (3.3 )%      1.3 %      16,771         16,935         (1.0 )%      1.0 % 
  

 

 

     

 

 

         

 

 

     

 

 

       

ELECTRIC SOURCES—MWh’s

(in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2013      2012      Change from
Prior Year		     2013      2012      Change from
Prior Year		  

Generated

      5,242         5,105         2.7 %      13,310         12,264         8.5 % 

Purchased

      2,077         2,392         (13.2 )%      4,225         5,415         (22.0 )% 
  

 

 

     

 

 

       

 

 

     

 

 

     

TOTAL

      7,319         7,497         (2.4 )%      17,535         17,679         (0.8 )% 
  

 

 

     

 

 

       

 

 

     

 

 

     

 

13

SIERRA PACIFIC POWER COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands)

(Unaudited)

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
     2013     2012     2013     2012  

OPERATING REVENUES:

         

Electric

    $ 213,463      $ 212,073      $ 560,392      $ 549,886   

Gas

      13,543        12,077        73,480        77,543   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Operating Revenues

      227,006        224,150        633,872        627,429   
  

 

 

    

 

 

    

 

 

    

 

 

  

OPERATING EXPENSES:

         

Fuel for power generation

      54,827        47,324        141,277        115,137   

Purchased power

      33,388        33,999        114,755        98,400   

Gas purchased for resale

      7,383        5,382        62,277        46,491   

Deferral of energy—electric—net

      (7,925 )      (5,498 )      (44,223 )      (13,854 ) 

Deferral of energy—gas—net

      (1,964 )      (853 )      (22,315 )      (970 ) 

Energy efficiency program costs

      2,044        4,092        5,679        11,143   

Regulatory disallowance

      5,469        —          5,469        —     

Merger-related costs

      2,008        —          5,528        —     

Other operating expenses

      34,394        34,128        106,455        104,214   

Maintenance

      5,968        6,481        20,956        23,596   

Depreciation and amortization

      27,952        27,537        83,772        80,594   

Taxes other than income

      5,944        5,894        18,414        17,382   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Operating Expenses

      169,488        158,486        498,044        482,133   
  

 

 

    

 

 

    

 

 

    

 

 

  

OPERATING INCOME

      57,518        65,664        135,828        145,296   

OTHER INCOME (EXPENSE):

         

Interest expense
(net of AFUDC-debt: $437, $448, $1,007 and $1,458)

      (15,122 )      (15,298 )      (46,020 )      (47,650 ) 

Interest expense on regulatory items

      (87 )      (401 )      53        (715 ) 

AFUDC-equity

      632        582        1,579        1,843   

Other income

      983        1,399        4,641        4,181   

Other expense

      (982 )      (998 )      (3,803 )      (3,609 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total Other Income (Expense)

      (14,576 )      (14,716 )      (43,550 )      (45,950 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income Before Income Tax Expense

      42,942        50,948        92,278        99,346   

Income tax expense

      13,691        16,521        30,347        33,596   
  

 

 

    

 

 

    

 

 

    

 

 

  

NET INCOME

      29,251        34,427        61,931        65,750   

Other comprehensive income

         

Change in compensation retirement benefits liability and amortization
(Net of taxes $(32), $(22), $(95) and $(68))

      59        42        176        127   
  

 

 

    

 

 

    

 

 

    

 

 

  

COMPREHENSIVE INCOME

    $ 29,310      $ 34,469      $ 62,107      $ 65,877   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

14

SIERRA PACIFIC POWER COMPANY

CONSOLIDATED OPERATING STATISTICS

(Unaudited)

ELECTRIC SALES—MWh’s

(in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2013      2012      Change from
Prior Year		     Change in
Average
Customers		     2013      2012      Change from
Prior Year		     Change in
Average
Customers		  

Residential

      671         667         0.6 %      0.7 %      1,794         1,737         3.3 %      0.7 % 

Commercial

      851         849         0.2 %      2.5 %      2,268         2,233         1.6 %      2.1 % 

Industrial

      701         686         2.2 %      — %      2,092         2,005         4.3 %      1.8 % 
  

 

 

     

 

 

         

 

 

     

 

 

       

TOTAL RETAIL

      2,223         2,202         1.0 %      1.0 %      6,154         5,975         3.0 %      0.9 % 
  

 

 

     

 

 

         

 

 

     

 

 

       

GAS SALES—Dth

(in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2013      2012      Change from
Prior Year		     2013      2012      Change from
Prior Year		  

Residential

      698         642         8.7 %      6,039         5,613         7.6 % 

Commercial

      400         374         7.0 %      3,086         2,939         5.0 % 

Industrial

      190         153         24.2 %      986         876         12.6 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

TOTAL RETAIL

      1,288         1,169         10.2 %      10,111         9,428         7.2 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

ELECTRIC SOURCES—MWh’s

(in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2013      2012      Change from
Prior Year		     2013      2012      Change from
Prior Year		  

Generated

      1,580         1,512         4.5 %      3,829         3,829         — % 

Purchased

      916         971         (5.7 )%      3,169         3,031         4.6 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

TOTAL

      2,496         2,483         0.5 %      6,998         6,860         2.0 % 
  

 

 

     

 

 

       

 

 

     

 

 

     

 

15

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).

 

     Nine Months Ended September 30,  
     2013     2012     Change from
Prior Year		  

Net Cash from Operating Activities

    $ 553,706      $ 644,194        (14.0 )% 

Less Additions to Utility Plant (Excluding AFUDC-Equity)

      (267,798 )      (387,790 )      (30.9 )% 
  

 

 

    

 

 

    

Free Cash Flow

    $ 285,908      $ 256,404        11.5 % 
  

 

 

    

 

 

    

Gross Margin

NV Energy, Inc. presents gross margin in order to aid the reader in determining how profitable Nevada Power Company’s and Sierra Pacific Power Company’s (collectively, “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 costs, energy efficiency program costs and regulatory disallowances, 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 and regulatory disallowances (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.

 

16

NV Energy, Inc.

Consolidated Gross Margin

(dollars in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2013     2012     Change from
Prior Year		     2013     2012     Change from
Prior Year		  

Operating Revenues:

    $ 1,013,151      $ 1,026,488        (1.3 )%    $ 2,329,011      $ 2,378,606        (2.1 )% 

Energy Costs:

       

Fuel for power generation

      217,954        171,316        27.2 %      554,181        400,936        38.2 % 

Purchased power

      205,970        205,686        0.1 %      498,141        486,894        2.3 % 

Gas purchased for resale

      7,383        5,382        37.2 %      62,277        46,491        34.0 % 

Deferred energy

      (55,270 )      (29,036 )      90.3 %      (221,022 )      (30,285 )      629.8 % 

Energy efficiency program costs

      16,042        32,584        (50.8 )%      38,486        76,609        (49.8 )% 

Regulatory disallowance

      17,335        —          N/A        17,335        —          N/A   
  

 

 

    

 

 

      

 

 

    

 

 

    

Total Costs

    $ 409,414      $ 385,932        6.1 %    $ 949,398      $ 980,645        (3.2 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

Gross Margin

    $ 603,737      $ 640,556        (5.7 )%    $ 1,379,613      $ 1,397,961        (1.3 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

Merger-related costs

      7,857        —            21,409        —       

Other operating expenses

      106,068        100,108          317,538        307,080     

Maintenance

      17,176        19,014          66,128        76,190     

Depreciation and amortization

      96,801        94,512          291,687        281,690     

Taxes other than income

      14,214        15,682          46,536        44,457     
  

 

 

    

 

 

      

 

 

    

 

 

    

Operating Income

    $ 361,621      $ 411,240        (12.1 )%    $ 636,315      $ 688,544        (7.6 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

 

17