NV Energy, Inc.
At EEI Fall Financial Conference
November 2010
Safe Harbor Statement
This presentation may contain forward-looking statements regarding the
future performance of NV Energy and its subsidiaries, Nevada Power
Company and Sierra Pacific Power Company both d/b/a NV Energy, within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements are subject to a variety of risks and uncertainties that could
cause actual results to differ materially from current expectations.
Cautionary statements regarding other risk factors that could have an effect
on the future performance of NV Energy, Nevada Power Company and
Sierra Pacific Power Company are contained in their Quarterly Reports on
Form 10-Q for the periods ending March 31, 2010, June 30, 2010, and
September 30, 2010 and Annual Reports on Form 10-K and Form 10-KA
for the year ended December 31, 2009 (the “2009 Form 10-K”) filed with the
SEC. NV Energy, 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.
IR Contact:
Britta Carlson
Manager, Investor and Shareholder Relations
(702) 402-5624
[email protected]
2
NV Energy at a Glance
Serves 2.4 million Nevadans and
40 million tourists annually
54,500-square-mile territory
4,045 line miles of transmission
7,215 MW consolidated peak in 2010
5,581 MW summer generation capacity
Self generation capacity (2010 peak)
– NVE-S
71 %
– NVE-N
98 %
3
Our Key Goals Drive Value
• Continue to implement our three-part strategy
– Provide customers with clean, safe, reliable energy at
predictable prices
• Strong customer and regulatory focus
• Manage investments, capital formation, and
energy risk in the context of the current
economy
• Improve the environment while reducing
customers’ energy bills through conservation
and energy efficiency
4
NV Energy’s Three-Part
Energy Supply Strategy
Increasing Energy
Efficiency and Conservation
Expanding Renewable Energy
Initiatives and Investments
Add New Efficient Power Plants
and Transmission Lines
5
Increasing Energy
Efficiency and Conservation
• Energy Efficiency and Conservation Investments
– $110 million approved for investment in 2010 - 2012
– Investments count up to 25% of the Portfolio Standard
• Rulemaking on Energy Efficiency and
Conservation Approved
– Recover both the costs and financial disincentives related to
energy efficiency and conservation programs
• NV Energize
–
–
–
–
–
–
$139 million American Recovery & Reinvestment Act grant
Approximately $300 million total project cost
1.45 million smart meters by 2012
Improve management of energy resources statewide
Customers will have an active role in managing their energy use
Reduce operating costs
6
Expanding Renewable Energy
Initiatives and Investments
• Portfolio Standard based on kWh sales
– 12% in 2009 – 2010
– 25% by 2025
• Announced renewable investments
– 200 MW China Mountain Wind Project
– 6 MW Waste Heat Recovery on the Kern River Pipeline
• 1,240 MWs of renewable energy under contract
– 7 new PPAs approved in IRP for more than 440 MWs
We are Balancing Investment
Opportunities with Risk
7
Add New Efficient Power Plants
and Transmission Lines
• 2,423 MWs owned on 1/1/06
5,581 MWs owned on 12/31/09
More than 6,000 MWs owned by
Summer 2011
– Harry Allen Combined Cycle,
mid 2011 in-service date
• One Nevada Transmission Line
(ON Line) in-service in late 2012
– JV with Great Basin Transmission, LLC
– Approximately $500 million total cost;
$127 million is NVE’s ownership portion
– Increase system reliability, sharing of generation
resources, key for renewable energy development
– Additional transmission projects will follow
8
Our Investments Drive More
$s per kWh to the Bottom Line
120%
$3.5
Revenues in billions
100%
$3.0
80%
61%
66%
61% 60%
60% 60%
54%
42% 46%
59%
$2.5
60%
Revenues in Billions
Rates that Earn a Return Compared with
Rates that are Passed-Through by Utility
NVE-S Passthrough Rates
NVE-S Earning
Rates
$2.0
40%
20%
39%
34%
39% 40%
40% 40%
46%
58% 54%
$1.5
41%
$1.0
0%
2006
2007
2008
NVE-N Passthrough Rates
2009
NVE-N Earning
Rates
2010
The revenues on which we earn a return has
steadily increased through investments
in company owned generation
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Our Investments Increase Self Sufficiency While
Reducing the MWh Cost to Customers
75
Percentage of Self Generated MWhs
74%
from a highly efficient fleet of
power plants
70%
70
Energy Costs per MWh are significantly
lower due to decreases in natural gas
prices and investments in efficient
power plants
68%
63%
63%
$/MWh
80%
65
$64.8
$63.3
$62.9
$62.8
60
60%
54%
$58.8
55
51%
$55.7
$54.9
50%
50
43%
40%
2006
$47.9
43%
2007
Southern Nevada
2008
2009
Northern Nevada
45
2006
2007
Southern Nevada
2008
2009
Northern Nevada
10
Our Capital Expenditures Outlook Reflect
the Current Needs of Nevada
Consolidated Capital Expenditures
1,536
$1,500
$1,000
843
550
500
500
2011
2012
$500
$0
2008
$ in millions
Base CapX
2009
2010
Renewable
All Other (Approved in IRP)
Based upon Integrated Resource Plan (IRP) approved
projects and forecasted base capital expenditures
Numbers exclude AFUDC
Source: 2009 Form 10-K, 2010 Earnings Calls, NVE-S’s Feb. 2010 IRP final order, and NVE-S Energy Supply Plan
11
NV Energy’s Load Forecast
Our load is expected to remain flat over the next few years
Actual and Forecasted GWh Sales
50,000
45,000
40,000
35,000
30,189
29,376
28,801
28,337
28,595
8,576
8,179
8,007
7,599
7,721
21,613
21,197
20,794
20,738
20,873
2008
2009
2010 **
2011 ***
2012 ***
30,000
25,000
20,000
15,000
10,000
5,000
-
NVE-S
NVE-N *
* Nevada Only - excludes California Load in 2011 and 2012
** 2010 is YTD actual load plus Q4 weather adjusted load
*** Weather adjusted load
Sources: 2009 Form 10-K, 2010 NVE-S Energy Supply Plan and 2010 NVE-N IRP
Figures exclude wholesale sales and line losses
12
Approximate Rate Base Changes
Increase NVE’s Earnings Trajectory
(Figures in millions)
NVE-S (2009 GRC approved Regulatory Rate Base)(1)
$ 4,700
~
$
300
Harry Allen (CapX + AFUDC – CWIP added in last GRC)(3) ~
$
650
Less Deferred Taxes (4)
$
200
Net Plant in service added since 2009 NVE-S GRC(2)
NVE-N (2010 pending GRC Electric & Gas Rate Base)(5)
~
$ 1,800
$ 7,250
Sources:
(1) Docket # 08-12002
(2) Changes in net plant in service from 2008 to Sept 2010
(3) Harry Allen total approved costs $682 (excluding AFUDC)
(4) Change in deferred taxes from 2008 to Sept 2010
(5) Docket #’s 10-06001 and 10-06002
13
2009 Legislative Changes
•
•
•
Portfolio Standard
– 20% remains in effect from 2015 to 2019
– From 20% to 22% in 2020
– From 20% to 25% in 2025
– One quarter can be met with energy efficiency & conservation
– Solar requirements from 5% to 6% of the total portfolio standard
beginning in 2016.
General Rate Cases
– Filed every three years
• NVE-N – 2010
• NVE-S – 2011
– Filed first Monday in June
– Rates effective January 1
Energy Efficiency & Conservation Costs and Lost Sales Recovery
– Allows the company to collect revenues that are reduced as a result
of our energy efficiency programs plus more timely collection of
program costs
14
NV Energy’s Financial and Risk Profile
•
Population growth rates have declined but the long-term forecast
remains positive
•
NVE has not seen losses in industrial customers
– Hotels & casinos in the South and Mining in North
•
Fuel & purchase power cost recovery rate reset quarterly
•
Owned-generation offers greater flexibility to deliver least-cost options to
customers
•
Goal: O&M expense growth not to exceed load growth
•
Capital expenditures reduced
•
NVE has limited external financing needs through 2012
– Key bank credit facilities refinancing completed in April 2010
In the wake of the economic downturn,
NVE has actively responded to mitigate risk
15
2012 Earnings Drivers
• Significant investments as part of the Three-Part
Strategy are expected to be included in rate base
and earning a return for full-year 2012
• Customer growth has leveled out
• NVE working to mitigate regulatory lag
– Major projects that are deemed “Critical” receive special treatment
to mitigate the impacts of regulatory lag
– Hybrid test year
– Collect revenues that are reduced as a result of our energy
efficiency programs
These Efforts Will Drive More Stable
Earnings in 2012 and Beyond
16
Conclusion
• The Three-Part Energy Strategy supports
long-term Shareholder value
• Strong operating performance and improved
profit margins
• Increased financial flexibility
• Remain focused on strong working
relationships with regulators and legislators
17
Appendices
18
NVE Regulatory Calendar
2010
June 1, 2010 – NVE-N General Rate Case for the Electric and Gas
businesses; hearings September – November; final order in
December with rates effective January 1, 2011
July 1, 2010 – NVE-N Triennial Integrated Resource Plan filing,
hearings November – December, order expected by year-end 2010
October 15, 2010 – Lost Revenue and Energy Efficiency Cost
Recovery filing to set rates, rates effective April 1, 2011
2011
March 1, 2011 – DEAA filings, rates effective October 1, 2011
June 1, 2011 - NVE-S General Rate Case. Rates effective January
1, 2012
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NV Energy North 2010
General Rate Case Filing
Electric
– Nevada Electric Rate Base $1.6 billion
– Electric Revenue Requirement increase of $29.3 million
– Capital structure: 44% Equity / 56% Debt
– ROE: 10.75% ROR: 8.35%
Gas
– Gas Rate Base $186 million
– Gas Revenue Requirement increase of $4.3 million
– ROE: 10.75% ROR: 5.51%
Hearings September – November 2010
Rates effective January 1, 2011
20
NV Energy South
Regulatory Update
• 2010 Integrated Resource Plan Filing:
– Order approved in August 2010
– Obtained approval for:
• ON-Line – NVE’s 25% ownership position (1) – Deemed “critical
facility” and will receive special rate treatment to mitigate
regulatory lag
• NV Energize
• Demand Side Management programs
• Various Renewable energy contracts
• 2010 DEAA Stipulation on GRC Offset
– 2009 over collection will offset regulatory asset of deferred
general rates from NVE-S’s 2009 GRC
(1) NVE-S’s 95% portion only
21
NV Energy South
Regulatory Update
• 2008 General Rate Case Filing:
– Rate Base of $4.6 billion
– Revenue Requirement increase $222.7 million (9.3% rate
increase)
– Capital structure: 44% Equity / 56% Debt
– ROE: 10.5% ROR: 8.53%
– Rates effective July 1, 2009
• Next effective scheduled change in general rates
January 1, 2012
22
Rate Case Filings Calendar
23
Nevada’s Regulatory Construct
Rate Base
General Rate Case (GRC)
provides a forward looking
210 days for known and
measurable costs or historic
test year with certification
NV Energy North filled a
General Rate Case on June
1, 2010; NV Energy South
will file it’s next rate case no
later than the first Monday in
June 2011
Rates effective January 1 of
the following year
10.5% return on common
equity approved at NV
Energy South entity and
10.6% at NV Energy North
Integrated Resource
Plans
Filed every three years and
approves capital projects in
advance of construction
"Critical Facility"
designation provides
incentives for investments
in generation, transmission,
energy efficiency and
renewables. Incentives
are: up to 5% ROE adder,
CWIP in rate base, and/or
special accounting
treatment
Energy Cost Adjustment
Quarterly Base Tariff Energy
Rate (BTER) update - based
on the three prior months
costs; effective Jan, April,
July, and Oct
Energy Cost
True-Up
Filed Annually to adjust any
over/under collection of fuel
and Purchased Power Costs
Energy Efficiency Rate
Adjustment
Collect revenues that are
reduced as a result of our
energy efficiency programs
and recover program costs
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Portfolio Standard
Current
Standard
2009-2010
12.0%
2011-2012
15.0%
2013-2014
18.0%
2015-2019
20.0%
2020-2024
22.0%
2025 and after
25.0%
One quarter of the total standard can be obtained through
energy efficiency and conservation efforts.
The amount of electricity that must be generated or acquired from solar
energy renewable systems increases from 5% to 6% of the Portfolio
Standard beginning in 2016.
25
New Renewable Contracts Signed in 2009
2009 New Supplies
Project Name
NGP Faulkner 1
Enel Salt Wells, LLC
Enel Stillwater, LLC
Type
Projected declared C.O.D.
Geothermal
Geothermal
Geothermal
MWs
Expected
Commercial
Operation
49.5
23.6
47.2
Q4 2009
Q3 2009
Q4 2009
Long-term PPAs signed and approved by PUCN
American Capital Energy, Searchlight
Solar, LLC
Photovoltaic
17.5
Fotowatio Nevada Solar, LLC, RV
Apex Solar Power
Photovoltaic
20.5
CC Landfill Energy, LLC, CC Landfill
Energy
Landfill Gas
10.67
SolarReserve, LLC, Tonopah Solar
Energy
CSP w/storage
110
ORNI 39, LLC, McGinness Hills
Geothermal
51
Spring Valley Wind Project
Wind
150
ORNI 42, LLC, Hot Sulphur Springs
Geothermal
25
RAM Power, Clayton Valley
Geothermal Project 1
Geothermal
53.5
NextLight Renewable Power, Silver
State Solar
Photovoltaic
50
WMRE, LLC, Lockwood Renewable
Energy Facility
Landfill Gas
3.2
Pacific Corp
Idaho Power
Short-term Renewable energy PPA's
Geo/Wind/Hydro
Hydro
Q3 2010
Q1 2011
Q4 2011
Q3
Q2
Q4
Q2
2014
2014
2011
2013
Q3 2014
Q4 2011
Q4 2011
Q4 2009
Q2 2010
26
Credit Ratings Continue to Improve
Moody's
NV Energy, Inc.
Senior unsecured debt
Ba2
Outlook
Stable
Nevada Power Company
Senior secured debt
Baa3
Senior unsecured debt
Outlook
Stable
Sierra Pacific Power Company
Senior secured debt
Baa3
Outlook
Stable
Standard & Poor's
Fitch
BB
Stable
BB
Stable
BBB
BB+
Stable
BBB
BB+
Stable
BBB
Stable
BBB
Stable
•
S&P reaffirmed ratings in May 2009 on stable outlook
•
Fitch upgraded ratings on May 13, 2010 on stable outlook
•
Moody’s upgraded NPC and SPPC’s issuer ratings on
September 9, 2010 on stable outlook
27