While unemployment has improved, it is still higher than the national average, so the Nevada economy continues to limp along and likely will do so through next year, the CEO of NV Energy Inc. told financial analysts Monday on a second quarter conference call in which he reported greatly reduced profits quarter over quarter.
NV Energy, which includes Sierra Pacific Power Co. in the north and Nevada Power Co. in the once fast-growing southern Nevada area, reported second quarter net income of $12.9 million (5 cents/share), compared with $36.9 million (16 cents/share) for the same period last year.
Calling it a challenging quarter made more problematic by milder-than-normal weather and some one-time financial adjustments, CEO Michael Yackira said growth in Nevada is expected to remain flat, although the state’s economy continues to show signs of what he called “stabilization.” Unemployment has dropped 2.5 percentage points since December, but is still high at 12.4%, Yackira said.
“Job creation is critical for the long-term growth of the state’s economy,” according to Yackira, who said he expects the recovery to continue to be very slow, being measured in years — not months.
At the center of NV Energy’s growth and some of its earnings problem is a new 484 MW natural gas combined-cycle generating plant at its existing Harry Allen site. The plant came online in May, but it is not currently covered in rates and is awaiting the outcome for the utility’s $245 million general rate case, which is expected to be resolved before the end of the year.
Yackira lauded the project for being completed ahead of schedule and under budget. The plant is air — not water — cooled with air emissions that the CEO said are among the lowest in the nation.
The lag in getting rate coverage for the plant included about $7 million for depreciation and other charges accumulated in recent months. The lack of those rates, combined with milder weather and a one-time charge of $8.6 million for past energy efficiency programs, and another $7.6 million pre-tax charge for a gain-on-sale of some existing assets, left NV Energy with 2Q2010 earnings down by two-thirds on a quarter over quarter basis.
Even with the depressed results and the prospects for slow growth, Yackira and CFO Dilek Samil talked about the prospect for Nevada becoming an “energy hub” in the years ahead, particularly for renewable energy. Yackira said he and Nevada Gov. Brian Sandoval have talked and share this vision, and Samil predicted that the utility’s financial profile will be “much improved” next year once the rate case and lag over the gas-fired power plant are resolved.
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