Summary
Northern States Power Company (NSP) reported its third quarter and nine-month results for 1999, highlighting a significant increase in utility operating revenues driven by higher electric retail sales and, for the nine-month period, increased sales for resale. While overall revenues improved, a key concern for investors is the decline in utility operating income for the third quarter, primarily due to substantial increases in purchased and interchange power costs, which were not fully recoverable through existing rate structures. The company is actively navigating a transformative period, with a proposed merger with New Century Energies (NCE) to form Xcel Energy Inc., expected to close by mid-2000. This strategic move aims to create a larger, more diversified energy company. Simultaneously, NSP's non-regulated subsidiary, NRG Energy, Inc., is aggressively expanding its independent power production portfolio through significant acquisitions, contributing positively to non-regulated segment income. Investors should monitor the integration of these businesses and the impact of ongoing regulatory reviews and potential rate adjustments.
Key Highlights
- 1Total utility operating revenues increased for both the three and nine months ended September 30, 1999, compared to the prior year, driven by higher electric retail sales.
- 2Utility operating income decreased in the third quarter of 1999 compared to the same period in 1998, largely due to a significant increase in purchased power costs that outpaced fuel cost recovery mechanisms.
- 3The proposed merger with New Century Energies (NCE) to form Xcel Energy Inc. is progressing, with shareholder approval obtained and regulatory reviews ongoing, expected completion by mid-2000.
- 4NRG Energy, a non-regulated subsidiary, continued its aggressive acquisition strategy in the independent power production sector, contributing positively to segment income.
- 5NSP recorded a $35 million charge (approximately $0.14 per share) in the second quarter of 1999 due to a potential disallowance of rate recovery for 1998 conservation program incentives, with ongoing regulatory review for 1999 incentives.
- 6Earnings per diluted common share for the nine months ended September 30, 1999, were $1.12, a decrease from $1.26 in the same period of 1998.
- 7Non-regulated businesses, primarily driven by NRG's acquisitions, showed a substantial increase in operating revenues and a positive swing from a net loss in Q3 1998 to net income in Q3 1999.