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El Paso Electric
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Goldman Sachs Marketing Tour
June 2013
El Paso Electric
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El Paso Electric
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June 2013 2
Safe Harbor Statement This news release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This information may involve risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. 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
Recovery of capital investments and operating costs through rates in Texas and New Mexico
Uncertainties and instability in the general economy and the resulting impact on EE’s sales and profitability
Potential delays in our construction schedule due to legal challenges or other reasons
Unanticipated increased costs associated with scheduled and unscheduled outages of generating plant
The size of our construction program and our ability to complete construction on budget
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 IRS or state taxing authorities
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. Please refer to EE’s 2012 Form 10K and other 1934 Act Filings
El Paso Electric
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El Paso Electric
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3
ee 1 1,852
MW
1,714
MW
Approx
384,000 $2.37
S&P
BBB
Moody’s
Baa2
$1.06
Per
Share
$2.20
(Low)
$2.60 (High)
NYSE Ticker
Symbol
Net
Dependable
Generating
Capability
2011 Native
System Peak
Demand *
Retail
Customers 12 Months
Ended March
2013 EPS
(Basic)
Credit
Ratings
Annual
Dividend
2013 EPS
Guidance
(Basic)
* Did not set a new Native Peak record in 2012
June 2013
El Paso Electric Profile
El Paso Electric
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El Paso Electric
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4 June 2013
Service
Territory
Rate
Regulated
Growth
Potential
CAPEX
Financial
Environmental
Regional electric utility serving west Texas and
southern New Mexico
Rate regulated business – no retail competition
– fuel “pass through”
Above average customer and retail sales growth
Sizeable capital expenditures plan and resulting
rate base growth for the next several years
Financially strong utility with good credit metrics
Favorable environmental profile – low carbon
footprint
EE Overview
El Paso Electric
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El Paso Electric
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* Represents revenues with no related kWh sales
**Off-System Sales are sales made to power marketers and other utilities with the exception of the
Rio Grande Electric Cooperative which is a full requirements customer.
Effective July 1, 2010, 90% of off-system sales margins are shared with retail customers.
12 Months Ended 3/31/2013
Service
Territory Texas 6,075,989 77% $438,251 76%
New Mexico 1,706,681 22% 124,386 21%
FERC 64,459 1% 2,308 <1%
NM PV3 Stipulation 0 0% 10,291 2%
Total Native Load
Sales 7,847,129 100.00% $575,236 100%
Other * 0 28,313
Off-System Margins ** 2,581,380 1,434
Total 10,428,509 $604,983
Operating Revenues, Net of
Energy Expenses ($000)MWH Sales
June 2013
Service Territory
No interconnection with ERCOT
Interconnected with Mexico
Approximately 384,000 retail customers
EPE owns 1,820 miles of transmission and distribution lines
Clean dependable generating capability 1,852 MW (net) – nuclear (34%), natural gas (60%) and limited coal (6%)
El Paso Electric
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El Paso Electric
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Regulated in Texas by PUCT, in New Mexico by NMPRC and by FERC
No current plans for a Texas rate
case prior to 2015*
No current plans for a
New Mexico rate case prior
to 2015*
FERC rates are formula
based
6
* Texas and New Mexico rate cases are likely to be deferred until 2015
June 2013
Regulatory Overview
El Paso Electric
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El Paso Electric
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EE continues to have above average
growth as compared to the industry
7 June 2013
Above Average Customer and
Retail Sales Growth
El Paso Electric
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El Paso Electric
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June 2013 8
El Paso Growth Summary El Paso economy heavily influenced by growing Mexican
economy
El Paso’s economy provides services to the growing
Mexico economy
Fort Bliss build out nearing completion; hospital
construction has started
Customer growth & usage per customer growth
Quality of life projects adding to growth
El Paso Electric
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El Paso Electric
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June 2013 9
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
1.61%
-0.32%
EE Avg. Customer Growth
(2007-2012)
Industry Avg. Customer Growth (2007-2012)
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%4.30%
2.50%
-2.47%
EE Excluding Industrial
(2007-2012)
EE
(2007-2012)
Industry Avg. (2007-2012)
5 Year Retail Customer Growth 5 Year Retail KWh Sales Growth
Source: Industry data detailed in EEI-2012 Financial Review Report
Five Year Total Customer and
KWh Sales Growth
Source: Industry data detailed in EEI-2012 Financial Review Report
El Paso Electric
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El Paso Electric
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June 2013 10
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2,800
2007 2008 2009 2010 2011 2012
GW
H S
ale
s
GWH Sales by Class
Residential C & I Small C & I Large Public AuthoritiesCAGR 3.5% CAGR 1.3% CAGR -2.0% CAGR 3.2%
Sales Growth by Class
Above-average customer and retail kWh sales growth exceeds the industry
average; reflects the expansion at Fort Bliss and economic growth in the service
territory
Fort Bliss currently represents approximately 67 MW’s of load
Current active duty soldier population of approximately 34,000
El Paso Electric
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El Paso Electric
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Number of
Customers
Usage per
Customer
* Source EEI-2012 Financial Review Report
10 Year CAGR
EE Industry*
Usage per Customer 1.50% -0.36%
Customer Growth 2.01% 0.54%
June 2013
200,000 220,000 240,000 260,000 280,000 300,000 320,000 340,000 360,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
6,694 6,761 6,769 6,954 6,852 7,085 6,955
7,244 7,560
7,832 7,767 8,000
7,500
7,000
6,500
6,000
5,500
5,000
4,500
Residential customers at end of year Avg. annual kWh use per residential customer
Residential Customer and Usage per
Customer Growth
Refrigerated air conditioning is being installed in 99% of new homes; approximately 35% of El Paso residences have refrigerated air conditioning
Refrigerated air conditioning uses 85% less water and 3 times more electricity than evaporative coolers
El Paso Electric
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El Paso Electric
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June 2013 12
El Paso Economic Perspective Maquiladoras impact on El Paso
10 percent increase in maquiladora output in Ciudad Juarez
leads to an increase in El Paso employment as follows:
2.8 percent increase in total employment
5.3 percent in transportation employment
1.3 percent in retail trade employment
2.1 percent in finance, insurance and real estate (FIRE)
employment
1.8 percent in services employment
(-) 1.3 percent in manufacturing employment
For the 10 months ended October 31, 2012, the
maquiladoras added 22,335 new employees
El Paso Electric
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El Paso Electric
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June 2013 13
Fort Bliss El Paso Community College (2015)
New branch to be built on 250 acre site at Fort Bliss
Residential and Mixed Commercial Development
Anticipate 1,800 acres of public land will be sold to developers for mixed commercial and residential development
William Beaumont Army Medical Center (2017)
Total expected cost of $1 billion
Will include 135 private rooms, 30 specialty
clinics, and a four-story administration building
El Paso Electric
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El Paso Electric
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June 2013 14
New Baseball Franchise and 2012
Quality-of-Life Bond Projects A group of El Paso business leaders
recently entered into a partnership to
acquire a Triple-A baseball franchise from
the Tucson Padres
A new $50mm baseball stadium will be
constructed in the heart of downtown El
Paso, and is slated to open in time for the
start of the 2014 season
Approximately $473mm in Quality-of-Life bonds were approved by voters in
November 2012
Bond proceeds will be used for parks, pools, museums, libraries and
community center expansions and upgrades and the continued revitalization of
the zoo; also includes the construction of a new children’s museum and new
downtown multipurpose performing arts and entertainment facility
El Paso Electric
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El Paso Electric
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Capital requirements are being driven by the need to build infrastructure to meet customer
demand
15 June 2013
Expanding Rate Base
El Paso Electric
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El Paso Electric
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Newman
•Natural Gas
•732 MW
Palo Verde
•Nuclear
•633 MW
Rio Grande
• Natural Gas
• 316 MW *
Four Corners
• Coal
• 108 MW
Copper
•Natural Gas
•62 MW
Hueco Mountain
• Wind
• 1 MW
Solar Power
47 MW’s
Includes Purchases
Resource Purchases
•65 MW’s
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Company Owned Generation 1,852 MW’s Solar & Purchases
112 MW’s
2013 Total Energy Resources 1,964 MW’s
Record Native Peak 1,714 MW’s set in 2011
June 2013
* Rio Grande 9 (87 MW) placed into service May 2013
Load and Resources
El Paso Electric
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El Paso Electric
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June 2013 17
2013 2014 2015 2016 2017
1,852 1,852 1,983
2,071 2,055
Generating Capacity at Summer Peak (MW)
Existing Generation Generation Additions
Existing capacity 1,852 MW*
Additions
2014 MPS Unit 1 (88 MW) (a)
2015 MPS Unit 2 (88 MW)
2016 MPS Unit 3 (88 MW)
2017 MPS Unit 4 (88 MW)
Unit Retirements (b)
2014 Rio Grande 6 (45 MW)
2016 Four Corners 4 & 5 (104MW)
(a) Unit 1 expected to be commercially operational by
December 2014
(b) Unit retirements occur in December and impact capacity available in the following year
Generation Additions Schedule
* Includes Rio Grande Unit 9 which became
commercially operational in May 2013
Projected Peak
El Paso Electric
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El Paso Electric
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June 2013 18
Generation Additions Rio Grande 9 began commercial operation May 2013
The quick start General Electric LMS 100 aero-derivative
unit is capable of producing 87MW’s
El Paso Electric
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El Paso Electric
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June 2013 19
Generation Additions EE’s next investment to prepare for the region’s growing customer
demand is a new power station in east El Paso
The Montana Power Station will consist of four state of the art 88
megawatt simple-cycle LMS 100 aero-derivative combustion turbines
The plan calls for one unit per year to be placed into service annually
from 2014-2017
El Paso Electric
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El Paso Electric
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$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
2013 Est 2014 Est 2015 Est 2016 Est 2017 Est
EE Estimated Costs
Generation Transmission Distribution General
June 2013 20
$258mm
$326mm
$222mm $209mm
$179mm
($000’s)
Five Year Cash Capital Expenditures
El Paso Electric
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El Paso Electric
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Pro forma Rate Base Balances for Future Rate Case Filings ($000)
(1) Includes Palo Verde Unit 3 rate base of approximately $35mm for 2013 & 2014, $36mm for 2015 and $37mm for 2016 & 2017
(2) Rate Base totals exclude year end CWIP balances
(3) Represents a pro-forma rate base amount that EE would use in rate filings for test year ending, calendar year presented
Rio 9 MPS 1 MPS 2 MPS 3 MPS 4
2013 2014 2015 2016 2017
Beginning Rate Base (1)(2)$1,537 $1,676 $1,881 $2,100 $2,231
Plant Additions:
Excluding new generating units 175 188 238 158 172
New generating units:
Rio Grande U9 (expected in-service 2013) 93
Montana Site - Common Plant 57 8 5 2
Montana Site - U1 (expected in-service 2014) 71
Montana Site - U2 (expected in-service 2015) 72
Montana Site - U3 (expected in-service 2016) 77
Montana Site - U4 (expected in-service 2017) 79
Total 268 316 318 240 253
Depreciation Expense (83) (90) (96) (104) (110)
Change in Deferred Income Taxes & Other (46) (21) (3) (5) (6)
Total Rate Base (3)$1,676 $1,881 $2,100 $2,231 $2,368
Year End CWIP Balances ($ in millions) $274 $307 $229 $213 $149
June 2013
Projected Rate Base and CWIP
El Paso Electric
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El Paso Electric
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June 2013 22
December 2014
MPS Unit1 begins
Operation
December 2014
Historical Test Year End
April
2015
File Texas Rate Case
February 2016
New Rates in Effect
* Example of a potential rate case timeline assuming Montana Unit #1 is
placed into service in November 2014
Example Rate Case Timeline
El Paso Electric
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El Paso Electric
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EE has solid credit metrics, which should allow continued access to capital markets while at the same time providing cash for
common dividends and construction expenditures
23 June 2013
Financial Stability
El Paso Electric
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El Paso Electric
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June 2013 24
Capital Requirements and Liquidity
EE expended $55.4mm for additions to utility plant during
the first quarter
Capital expenditures for utility plant in 2013 are anticipated
to be approximately $258mm
EE dividend payments during the first quarter were
$10.1mm
In May, increased quarterly cash dividend by 6% to
$0.265 per share
EE had a cash balance of $43.7mm at March 31, 2013
At March 31, 2013, EE had liquidity of $318.2mm
including cash and the revolving credit facility
El Paso Electric
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El Paso Electric
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** Regulatory Capitalization excludes borrowings for NF by the Rio Grande Resources
Trust (RGRT), while book capitalization includes nuclear fuel borrowings in the debt
portion of capitalization.
* Capital structure includes current maturities and short-term
borrowings
As of 3/31/2013 * (thousands)
Capital Structure Regulatory Capitalization** Book Capitalization
Moody's S&P
EE (unsecured) Baa2 BBB
Stable Stable
Debt
55.3%
June 2013
Common Stock Equity $829,481
Long-term & short-term debt, net of RGRT 889,556
Total Capitalization Before RGRT $1,719,037
RGRT - LT & ST Debt 135,039
Total Capitalization After RGRT $1,854,076
Debt
55.3%
Equity
44.7%
Debt
51.7%
Equity
48.3%
Commitment to Credit Quality
Well positioned to finance planned investments
Investment grade credit ratings
S&P reaffirmed its BBB rating and Stable Outlook in October 2012
Moody’s reaffirmed its Baa2 rating and Stable Outlook in August 2012
El Paso Electric
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El Paso Electric
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MARKET PRICE PER SHARE
ANNUAL VALUE OF SHARE
REPURCHASES AND DIVIDENDS *
2012 – $31.91
2011 – $34.64
2010 – $27.53
2009 – $20.28
2012 – $38.9
2011 – $113.7
2010 – $33.7
2009 – $24.1
(in millions)
* EE Initiated a quarterly cash dividend in 2011 distributing a total of $27.2mm in 2011 and $38.9mm during 2012
June 2013
$0
$50
$100
$150
Dec. 31, 2007 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2010 Dec.31, 2011 Dec. 31, 2012
Total Return Comparison $100 Investment on December 31, 2007
EE EEI NYSE
EE $130
EEI $108
NYSE $87
Shareholder Return
El Paso Electric
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El Paso Electric
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June 2013 27
2013 Earnings Guidance range of $2.20 to $2.60 per basic share
$2.27
$2.40
($0.07) ($0.06)
($0.06) ($0.02) ($0.02)
$0.03
$1.50
$1.70
$1.90
$2.10
$2.30
$2.50
Depr & Amort Interest on LTdebt
TX rate casesettlement
Weather O&M Other Dereg. PV3,off-system
sales, & other
AFUDC &capitalized
interest
Underlyinggrowth
$0.05
$0.10
$0.18
2012
EPS
Actual
Mid-Point
2013 earnings
guidance
2013 Earnings Guidance
El Paso Electric
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El Paso Electric
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EE has a favorable environmental profile and is well-positioned to comply with proposed
environmental regulations
28 June 2013
Favorable Environmental Profile
El Paso Electric
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El Paso Electric
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EE vs. U.S. Carbon Footprint (Short tons CO2 equivalent emissions/MWH)
2009 National Average 0.61 2011 EE 0.32
2012 Energy Sources (by MWh’s)
Nuclear 46% Natural
Gas 32%
Purchased
Power 16%*
Coal
6%
*Renewable energy purchases represent 6% of total purchased power
June 2013
Diversified Energy Portfolio and
Low Carbon Footprint
El Paso Electric
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El Paso Electric
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30 June 2013
Environmental Regulations Recent Environmental Rulemaking
Cross State Air Pollution Rule (CSAPR) was vacated by the D.C. Circuit Court of Appeals on August 21, 2012
A request for a re-hearing by the EPA was denied on January 24, 2013
On March 29, 2013, EPA petitioned the Supreme Court to review the D.C. Circuit Court’s decision that vacated CSAPR
EE’s exposure to possible cross state air pollution rules are minimal due to natural gas-fired generation in Texas
Mercury and Air Toxics Standards (Utility MACT) requires significant reductions in emissions of mercury and other air toxics
EPA estimates the cost to U.S. utilities could reach $35 billion
EE will not have any costs associated with MACT requirement
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
El Paso Electric
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El Paso Electric
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31 June 2013
Renewable Energy Initiatives EE solar initiatives are designed to meet regulatory demands
as well as identify opportunities where solar or purchased
solar power make sound economic sense
A power-purchase agreement with First Solar for the total output
from the Macho Springs Solar Project (50MW), which is
expected to come online in 2014, was approved by the NMPRC
in May 2013
With the First Solar purchase power agreement, EE’s owned
solar energy projects and purchase power agreements represent
over 5.5% of the Company’s dedicated generating capacity,
which represents one of the largest percentages in the United
States for an investor-owned utility
EE partnered with El Paso Community College to install solar
panels that will be used in EPCC’s renewable energy education
curriculum
El Paso Electric
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El Paso Electric
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32 June 2013
Texas Renewables Requirements
EE must obtain approximately 2% of Texas energy sales from
renewables through renewable generation or purchase of Renewable
Energy Credits (REC’s)
Compliance EE primarily purchases REC’s
Cost Recovery REC costs recovered through base rates
EE capital investments included in rate base
Purchased energy costs (including REC’s) recovered through fuel
El Paso Electric
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El Paso Electric
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33 June 2013
New Mexico Renewables Requirements
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, 30% wind, 5% biomass and 1.5% renewable distributed generation (increases to 3% in 2015)
Compliance Purchase of wind RECs from Southwestern Public Service (SPS)
Purchase 47MW of solar PV energy as of July 2012
Cost Recovery Renewable energy with RECs recovered through fuel clause; RECs without
energy recovered through base rates
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El Paso Electric
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Appendix
June 2013
El Paso Electric
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El Paso Electric
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June 2013 35
First Quarter Key Earnings Drivers
Basic EPS Description
March 31, 2012 0.08$
Changes In:
Retail Non-Fuel Base Revenue 0.04Increased retail non-fuel base revenues mainly
due to colder weather in 2013 compared to 2012
Fossil Fuel Plant O&M 0.04
Decreased O&M at our fossil-fuel plants primarily
due to Q1 2012 planned maintenance at Rio
Grande Unit 8 and Newman Unit 1
Palo Verde O&M 0.02
Due to timing of outages in 2012 compared to
2013. 2012 outage began in mid-March and 2013
outage began at the end of March
Allowance for Funds Used During Construction 0.02 Increased due to higher construction balances
Administrative and General Expense (0.03)
Increased administrative and general expenses
due to information technology and other outside
services. Also due to forfeiture of stock awards in
2012
Other 0.02
March 31, 2013 0.19$
El Paso Electric
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El Paso Electric
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June 2013 36
1st Quarter Non-Fuel Base Revenues
Description
Amount
Percent
Change
Rate Decrease (2,463)$ (2.3%)
Weather 814 0.7%
Other (sales mix & growth) 4,004 3.8%
Total Retail Non-Fuel Base Revenues 2,355$ 2.2%
Q1 2013
vs.
Q1 2012
El Paso Electric
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El Paso Electric
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Public Utility Commission of Texas - Appointed by Governor
Name Position Term Ends Party
Donna L. Nelson Chair 08/31/2015 Republican
Kenneth W. Anderson Commissioner 08/31/2017 Republican
Vacant* Commissioner 08/31/2013
New Mexico Public Regulation Commission - Elected
Name District Term Ends Party
Karen Montoya 1 12/31/2016 Democrat
Patrick Lyons Chair 2 12/31/2014 Republican
Valerie Espinoza Commissioner 3 12/31/2016 Democrat
Theresa Bencenti-Aguilar
(Vice Chair) Commissioner 4 12/31/2014 Democrat
Ben Hall (Chair) Commissioner 5 12/31/2014 Republican
June 2013
*Commissioner Rolando Pablos resigned March 1, 2013
State Regulatory Commissioners
El Paso Electric
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El Paso Electric
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Tom Shockley El Paso Electric Headquarters
Chief Executive Officer Stanton Tower
(915) 521-5721 100 North Stanton
[email protected] El Paso, Texas 79901
(800) 592-1634
David G. Carpenter
Senior Vice President - Chief Financial Officer
(915) 543-5945 Richard S. Gonzalez
[email protected] Supervisor Investor Relations
(915) 543-2236
Steven P. Busser [email protected]
Vice President –Treasurer
(915) 543-5983
Lisa D. Budtke
Assistant Treasurer
(915) 543-5947
38 June 2013
EE Contact Information