NMPRC Case No. 15-00127-UT 5/11/15 - Rate

Transcription

33.08
CMS ENERGY CORP.
T,0,4",, (Trailin’:190
High: 10.6 16.8 I 17.O 19.5 17.5 I 16.1 19.3 22.4
25.0 30.0 36.9 38.7
Low: 7.8 9.7I 12.1 15.0
0.O 14.1 17.0 21.1 24.6 26.0 32.9
LEGENDS
~ 0.80 x Dividends p sh
divided by Interest Rate
Relative Price S~ength
Options: Yes
Shaded area indicates recession
TIMELINESS Lowered 12/5/14
SAFETY 2 Raised 3/21/14
TECHNICAL 3 Raised 3/20/15
BETA .75 (1.00 = Market)
2018-20 PROJECTIONS
Ann’l Total
LOW.High
30 40Gain
L.IO%
Pdce
Return
"+20%I(
2% 9%
Insider Decisions
AMJJAS0ND
’llqI ,
I’1~, ,11’ ,,,
d’~l’
’ ’""h’"
’"’
~’I1~’ ~’’l;l’i
RELATIVE~Media,:
Target Price Range
2018 20t9 12020
L64
-46
-40
-32
-24
-20
-12
I .. Ilhl
-8
toBuy
toSell 1 O 00 40 1 O O
Institutional Decisions
I
2Q20t4 302014 4Q2014 Percent 30
to BW
177
174
197 shares
20 IIIhin..ll Idlh.I . Ihlllhl~ m I!111 IIIIIII IIII IIIIhlllh IIII1.1, I~ .,Ihll,llll I,.lln.=i.,
3 yr. 83.3
60.8
to Sell
187
196
184 traded
10
svr. ~78.6 .0.1
HkI’o(N0)234703 237560 237611
IIIIIIIIIIIIIIIIIIIIIIII IIIIIIIIII =lmm IIIIIII IIII IIIIIIIIIII IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
1999 2000 2OO1 2002 2003 2004 2005 2006 200712008 2009 2010 2Oll 2012 12013 2014 2015 2016 ©VALUE LINE PUB, LLC S-20
52.59 74.24 72.16 60.28 34.21 28.06 28.52 30.57 28.95 30.13 27.23 25.77 25.59 23.90 24.68 26.09 25.65 26.00 Revenues persh
28.50
7.87
7.61
5.24
d.09
2.39
2.87
3.43
3.22
4.22
4.40
4.65 "Cash Flow" per sh
5.50
3.08
3.88
3.47
3.70
3.65
3.82
4.06
2.85
2.53
1.27 d2.99
d.29
2.00 Earningspersh A
2.25
.74
1.10
.64
.64
1.23
.93
1.33
1.45
1.53
1.66
1.74
1.88
1.39
1.46
1.46
1.09 ........
.20
.36
.84
.g6
1.02
1.08
t.t6
1.24 Div’d Decl’d per sh B"
1.50
.50
.66
9.69
8.51
9.49
5.18
5.60 Cap’l Spending per sh
3.32
2.69
2.69
3.01
6.61
3.50
3.59
3.29
3.47
4.65
4.98
5.73
5.75
5,50
21.17 19.48 14.21
7.86
9.84 10.63 10.53 10.03
9.46 10.88 11.42 11.19 11.92 12.09 12.98 13.34 14.15 15.05 BookValuepersh c
17.75
116.54 121.20 132.99 144.10 161.13 195.00 220.50 222.78 225.15 226.41 227.89 249.60 254.10 264.10 266.10 275.20 277.00 279.00 CommonShsOutst’g°
13.9
9.6
20.8 ....
12.4
12.6
22.2
26.8
10.9
13.6
13.6
15.1
16.3
17.3 Boldfiel res are Ave Ann’l PIE Ratio
15.0
12.5
Value Une
.79
.62
1.07 ....
.66
.67
1.20
1.42
.66
.91
.80
.85
.96
.92
.92
Relative PIE Ratio
.95
es~i~
,*es
3.5% 6.0%
5.5% 7.5% ........
12% 2.7% 4.0%
3.8% 3.6%
Ave Ann’l Oiv’d Yield
4.5%
4.0% 4.3% 4.2%
CAPITAL STRUCTURE as of12/31/14
6288.0 6810.0 6519.0 6821.0 6205.0 6432.0 6503.0 6312.0 6566.0 7179.0 7100 7250 Revenues ($mill)
0100
Total Debt $8739 mill. Due in 5 Yra $4047 mill.
690
247.0 158.0 168.0 300.0 231.0 356.0 384.0 413.0 454.0 479.0
530
570 Net Profit ($mill)
LT Debt $8!39 mill. LT Interest $371 mill.
25.6%
39.5%
-- 37.6% 31.0% 34.6% 38.1% 36.8% 39.4% 39.9% 34.3% 39,5% 39.5% Income Tax Rate
Ind. $123 mill. capitalized leases.
15.4% 6.3% 3.6% 1.3% 13.0% 2.2% 2.6% 2.9% 2.0% 2.3% 2.0% Z0% AFUDC % to Net Profit
1.0%
(LTinteresteamed:2.Sx)
73.5% 71.7% 70.5% 69.4% 67.9% 70.1% 66.9% 67.9% 67.5% 68.7% 68.0% 6T0% Long-Term Debt Ratio
65.5%
Leases, Uncapitalized Annual rentals $25 mill.
Pension Aseets-12/14 $1979 mill.
23.4% 24.9% 25.9% 27.4% 29.0% 29.0% 32.6% 31.0% 32.2% 31.0% 32.0% 32..5% Common Equity Ratio
24.5%
Obllg. $2647 mill. 9913.0 8961.0 8212.0 8993.0 8977.0 9473.0 9279.0 10101 10730 11846 12300 12825 TotalCapital($mill)
14~00
Pfd Stock $37 mill. PfdDiv’d$2mill.
17400
Ind. 373,148 shs. $4.50 $100 par, cure., callable at 7845.0 7976.0 8728.0 i9190.0 9682.0 10069 10633 11551 12246 13412 14325 15150 Net Plant ($mill)
5.0% 4.5% 4.5%o 5.4% 4.7% 5.8% 6.3% 5.9%
6,0%
6.0% 5.7% 6.0% 6.0% Return on Total Cap’l
$110.00.
9.4% 6.2% 6.9% 10.9% 8.0% 12.5% 12.5% 12.8% 13.0% 12.9% 13.5% 13.5% Return on Shr. Equity
13.5%
Common Stock 275,200,000 shs.
9.9% 6.4% 7.2% 11.7% 8.5% 12.5% 12.6% 12.9% 13.1% 13.0% 13.5% 13.5% Return on Com Equity E 13.5%
MARKET CAP: $9.1 billion (Large Cap)
9.9% 6.4% 5.1% 8.4% 4.1% 6.9% 5.6% 5.0%
5.2% 5.0% 5.5% 5.5% Retained to Corn Eq
5.0%
ELECTRIC OPERATING STATISTICS
6% 10%
35%
31%
54%
46%
55%
61%
60%
62%
61% 61% All Div’ds to Net Prof
62%
2012 2013 2014 BUSINESS: CMS Energy Corporation is a holding company for 7%. Generating sources: coal. 44%; gas, 6%; other, I%; pur~/aChangeReta~Salua(KWH)
+.6 -3.1 +1.9
chased, 49%. Fuel costs: 54% of revenues. ’14 reported deprec.
~vg.lnd~st.Use(MWH)
1113 1000
NA Consumers Energy, which supplies electricity and gas to lower
~Av~.lndust.f~e~s.pet
8.06KWH(C)
8.93 8.79 Michigan (excluding Detroit). Has 1.8 million electric, 1.7 million gas rates: 3.5% electric 2.8% gas, 7.7% other. Has 7,700 employees.
Capa~atPeak(M~
8607 8603
NA customers. Has 1,034 megawatts of nonregulated generating capa- Chairman: David W. Joos. President & CEO: John G. Russell. InPeakLoad Surnmer(Mw)
9006 8509
NA city. Sold Palisades nuclear plant in ’07. Electric revenue break- corporated: Michigan. Address: One Energy Plaza, Jackson, MichiAnnual Load Fact= (%)
48.7 52.5
NA
.. down: residential, 43%; commercial, 31%; industrial, 19%; other,
%C~angeCust0mers(yr.~nd)
-+.1
gan 49201. Tel.: 517-788-0550. Intemet: www.cmsenergy.com.
narrow range of $1.86-$1.89 a share. CMS’
F=edCt~v.(%)
268
282
278 CMS Energy’s utility subsidiary has
a gas rate increase. Congoal is for annual earnings growth of 5%ANNUAL RATES Past Past Est’d ’12-’14 received
7%, and our 2016 forecast of $2.00 a share
of chenge (per sh) 10 Yrs.
5 Yrs. to ’t8-’20 sumers Energy had filed for a tariff hike of
Revenues
-5.0% -3.0%
$88 million, based on a return on equity of
2.5%
would produce an increase within this
"Cash Flovi’
9.0% 3.0% 5.5%
10.7%. The utility reached a settlement
range.
Earnings
-- 12.0%
5.5%
calling for a $45 million raise, based on a
The board of directors raised the diviDividends
23.5%
6.5%
Book Value
3.0~,~ 4.0%
5.5%
10.3% ROE. The Michigan Public Service
dend in the first quarter. The board
boosted the quarterly payout by $0.02 a
QUARTERLY REVENUES ($ mill.) Full Commission (MPSC) approved the settleCalshare (7.4%). We project continued good
endar Mar.31 Jun.30 Sep.30 Dec.31 Year ment in late January.
dividend growth through the 2018-2020
2012 1802 1333 1507 1670 6312.0 An electric rate case is pending. Conperiod. CMS Energy is targeting a payout
2013 1979 1406 1445 1736 6566,0 sumers Energy is seeking an increase of
ratio of 60%-70%.
2014 2523 1468 1430 1758 7179.0 $163 million, based on a 10.7% ROE. UnFinances are adequate. Consistent
2015 2300 1500 1500 1800 7100 der Michigan regulatory law, the utility
earnings growth is a plus. The company’s
2016 2300 1550 1550 1850 7250 will self-implement a rate hike in midand the MPSC’s final order is due in
cash flow is stronger than our "cash flow"
EARNINGS PER SHARE k
CalFull 2015,
figures (which do not include deferred
endar Mar.31 Jun.30 Sep.30 Dec.31 Year late 2015. This will enable Consumers Entaxes) suggest. On the other hand, the
2012
.36
.37
.55
.25
1.53 ergy to place a 540-megawatt gas-fired
common-equity ratio is subpar due to debt
2013
.53
.29
.46
.37
1.66 generating plant, which it has agreed to
that is held at the parent level, and the
2014
.75
.30
.34
.35
1.74 purchase for $155 million, in the rate base.
fixed-charge coverage is a bit below the in2015
.68
.40
.45
.35
1.88 The transaction is scheduled to close in
2016
.50
.45
.55
.40
2.00 late 2015.
dustry norm. CMS Energy merits a Financial Strength r, ating of B++.
Cal- QUARTERLY DNIDENDS PAID s ¯ Full We expect CMS Energy to continue to
CMS Energy s strengths are adequateendar Mar.31 Jun.30 Sep.30 Dec. 31 Year produce steady earnings growth in
and 2016. The company should bely reflected in the stock’s quotation.
2011
.21
.21
.21
.21
.84 Z015
This issue does not stand out among utili2012
.24
.24
.24
.24
.96 nefit from rate relief, reductions in operatties for its dividend yield. Its 3- to 5-year
2013
.255 .255 .255 .255 1.02 ing and maintenance expenses, and roodtotal return potential is unspectacular.
2014
.27
.27
.27
.27
1.08 crate volume growth. Our 2015 profit estimate is within management’s typically
Paul E. Debbas, CFA
March20, 2015
2015
.29
(A) Diluted EPS. Exd. nonrec, gains (losses): 10, (8¢); ’11, 1¢; ’12, 3. ’13 EPS don’t add
B++
(C) Incl. intang. In ’14:$7.1 l/sh. (D) In mill. (E) Company’s Financial Strength
Stock’s Price Stability
’05, ($1.61); ’06, ($1.08); ’07, ($1.26); ’09, (7¢); :lue to rounding. Next earnings report due late Rate base: Net orig. cost. Rate allowed on
100
’10, 3¢; ’11, 12¢; ’12, (14); gains (losses) on
~pr. (B) DiVds historically paid late Feb., May, com. eq. in ’15: 10.3%; earned on avg. com.
Price Growth Persistence
90
disc. ops.: ’05, 7¢; ’06, 3¢; ’07, (40¢); ’09, 8¢; ~,ug., & Nov. ¯ Div’d reinvestment plan avail,
75
eq., ’14: 13.4%. Regulatory Climate: Average.
Earnings Predictability
© 2015 Value Line Publishing LLC. All rights resoled. Factual ii~a~;,s; is ubt~i.ed from sources believed to be reliable and is provided without w..~,.t;~ of any kind.
THE PUBLISHER IS NOT RESPONSIBLEFOR ANY ERRORS OR OMISSIONS HEREIN. ThispublicatJon is strictly for subscriber’s own, non-commercial, internal use.No part
of =t may be reproduced, resold, stored or transm~ed in any printed, electronic or other form, or usedfor goneralthg or marketing any printed or efec~onic publicalJon, service or product,
15
RECENT
PRICE .0u,
DUKE
ENERGY,vs
4
PIE 4~ ,’~(Trailing:20.3~RELATIVE
RATIO l ~,g ~Median:NMF/
TIMEUNESS
Lowered 12~5/14
SAFETY
New6/1/07
LEGENDS
~ 0.56 x Dividendsp sh
divided ~ tnte~es~ Rate
TECHNICAL 5 Lowered~5
Relative Price Strength
1-for-3 Rev split 7112
Options: Yes
2018-20 PROJECTIONS
Ann’l Total
Price Gain
Return
(+5%)
6%
thigh
ow 90
65 (-25%) -1%
Insider Decisions
MAM J JA SON
toBw
to Sell 2 1 6 1 1 3 0 0
102014 2Q2014 30~014 Percent 15 435
434
431 shares
10tboL~
470
441
423
5
1379686 386233 392694 traded
2
6~
;5.21 46.41 5C
1.1
).6
75.5
64.2
DN’D
87.3
67.1
3.8%
90.0
82.2
2020
128
96
i 48
~ 4U
we,~B r
; 24
o,,o,, o° o° ,° o°
Duke Energy Corporation, in its current configuration, began trading on January 3,
2007, the day after it spun off its midstream
gas operations into a new company, Spectra Energy (NYSE: SE). Duke Energy shareholders received half a share of Spectra Energy for each Duke share held. In July of
2012, Duke acquired Progress Energy and
effected a 1-for-3 reverse split. Data for the
"old" Duke are not shown because they are
not comparable.
~nlS
L15 I 32.22
r.58 I 8.49
L39 I 4.02
!.52 I 2.91
-16
--141
CAPITAL STRUCTURE as of 9/30114
Total Debt $41645 mill. Due in 5Yrs $14077 mill.
LT Debt $38702 mill. LT Interest $1684 mill.
Ind. $1516 mill. capitalized leases. Ind. $1265 mill.
nonrecourse LT debt of variable interest entities.
Uncapitalized Annual rentals $175 mill.
Pension Asseta-12/13 $8142 mill.
Oblig. $7361 mill.
Pfd Stock None
Common Stock 707,290,608 she.
as of 1114/14
MARKET CAP: $60 billion (Largo Cap)
2011 2012
% Change Retail Sales
-2.1 KWH
-2.8 +1.3
Avg. lndust. Use MWH)
3062 2675 2687
Avg. Indust Rove. per ~
4.89 5.84 5.89
Capacity at Peak (Mw)
NA
NA
NA
Peak Lead, Summer NA
(Mw) NA
NA
~nnual Load Factor (%)
NA
NA
NA
% Change Customers
+.3(avg.)
+.8
+.8
% TOT. RE’nJRN 1/15
--I 4
--I 4
--I 4
32.
8.’
4.
2.
51.
445.
13.3 I 12.7
1~
.89 I .81
.
5.2
731 I 14272 I45
31.3
23.2
45.1
54.9
414
426,
5.6
8.1
7% I 7.8%
8.1
1% I 2.1% 2.2
;4% I 73% 72
12 2013
.88 34.84
.80
8.56
.71
3.98
.03
3.09
.81
7.83
.04 58.54
.00 706.00
7.5
17.4
¯ 11 .98
i’% 4.4%
~24 24598
8,0 2813.0
.~% 32.6%
~% 8.8%
)% 48.0%
)% 52.0%
107 79482
i58 69490
~% 4.6%
.~% 8.8%
.~% 8.8%
)% 1.5%
.~% 75%
2014
33.95
8.85
4.15
3.15
8.45
58.25
707.00
17.8
.05
4,3%
24000
2955
32.5%
?.0%
49.5%
58.0%
81500
70775
4.5%
T0%
7.0%
2.0°/=
75%
VLARnH.*
1 yr.
28.8
6.9
3 yr.
55.9
57.1
5yr. 124.3 107~2
2015 2016 © VALUE LINE PUB, LLC
]4.45 36.85 Revenues per sh
9.25
4.50
4.75 Earnings per sh A
3.21
3.27 Div’d Decl’d per she ¯
f0.58 11.55 Cap’l Spending per sh
~9.50 60.95 Book Value per sh c
708.00 709.00 Common She Outet’g o
Boldfie fres are Ave Ann’l P/E Ratio
value Line
Relative P/E Ratio
esee ares
Ave Ann’l Div’d Yield
24400 25400 Revenues ($mill)
3205 3390 Net Prot’~ ($mill)
34.5% 34.5% Income Tax Rate
9.0% 0.0% AFUDC % to Net Profit
50.5% 51.0% Long-Term Debt Ratio
49.5% 49.0% Common Equity Ratio
84900 88475 Total Capital ($mill)
74875 79600 Net Plant ($mill)
5.0% 5.0% Return on Total Cap’l
?.5% 8.0% Return on Shr, Equity
T0% 0.0% Return on Corn Equi~ s
2.0% 2.5% Retained to Com Eq
71%
68’/o All Div’ds to Net Prof
8-20
40.50
10.75
5.50
3,55
11.25
60.00
7t2.00
14.5
.90
4.5%
28800
3870
34.5%
53.0%
4?.0%
!OOfO0
02700
8.0%
3.0%
05%
BUSINESS: Duke Energy Corporation is a holding company for util- tial, 43%; commerdal, 31%; industrial, 15%; other, 11%. Generatities with 7.1 mill. elec. customers in North Carolina, Florida, Indiing sources: coal, 36%; nuclear, 29%; gas, 21%; other, 1%; purana, South Carolina, Ohio, & Kentucky, and over 500,000 gas cus- chased, 13%. Fuel costs: 37% of reva. ’13 reported deprec, rates:
tomers in Ohio & Kentucky. Owns independent power plants & has 2.4%-3.3%. Has 27,900 empls. Chairman: Ann Gray. Pres. & CEO:
international ops. Acq’d Cinergy 4/06; spun off midstream gas ops. Lynn J. Good. Inc.: DE. Address: 550 South Tryon St, Charlotte,
1/07; acq’d Progress Energy 7/12. Elec. rev. breakdown: residerP NC 28202-1803. Tel.: 704-382-3853. Web: www.duke-energy.com.
Fm~l Charge Coy, (%)
292 263 327 The sale of Duke Energy’s nonregu- uprate an existing facility to add 220 mw,
ANNUAL RATES Past
Past Est’d ’11-’13 lated generating assets has been de- and build or buy another plant. In South
layed. The transaction would enable the Carolina, the utility is adding 650 mw of
of change (per sh)
10 Yrs,
5 Yrs.
to ’18-’20
Revenues
-2.0%
3.5%
company to receive $2.8 billion in cash for gas-fired capacity at a cost of $600 million.
"Cash Flow"
-.5%
4.5%
its ownership interests in 11 plants in the In Indiana, the company is asking the
Earnings
-4.5%
5.0%
Midwest and its retail energy marketing state commission to approve a seven-year,
Dividends
- - 11.5%
2. 5%
Book Value
-.5%
2.5%
business in Ohio. This operation is now $1.9 billion system modernization plan.
treated as discontinued. However, the Fed- And Duke has a 40% stake in a proposed
..... QUARTERLY REVENUES ($ mill.)
=ull eral Energy Regulatory Commission $4.5 billion-S5.0 billion pipeline to transenoar ~Mar.31 Jun.30 Sop.30 Dec.31 Year
2012 I 3630 3577 6722 5695 19624 (FERC) has asked for additional informa- port gas from West Virginia to North
2013 I 5898 5879 6709 6112 24598 tion about the transaction, which will de- Carolina, begin.nin.g in 2018.
2014 I 11971F 6395 5634 24000 lay the closing beyond the current quarter. Duke is revzewzng its international
2015 I 5900 5600 6800 6100 2440O If the deal goes through, Duke will use the operations. This began before oil prices
2016 I 6100 5850 7100 6350
proceeds for capital spending, offsetting plummeted and the dollar strengthened.
debt financing, or repurchasing stock. We These factors will hurt this segment’s prof..... EARNINGS PER SHAREA
:ull will
not reflect this until the deal closes.
itability, so we have cut our 2015 earnings
enoar ;Mar.31 Jun.30 Sop.30 Dec.31 Year
2012 I .86
.99 1,01
.59
3.71 FERC approved an asset purchase. estimate by $0.15 a share. We expect mod2013 I .89
.74 1.40
.95
3.98 Duke agreed to pay $1.2 billion for another est profit growth in 2016. Note that our es2014 I
2.08F 1,25
.02
4,16 utility’s 700-megawatt stake in nuclear timates and projections lnclude the inter2015 I 1.15
.85 1.55
.05
4.50 and coal-fired units in North Carolina. The national businesses, as well as costs that
2016 I 1.20
.90 1.65
1.00
4.75 transaction still requires the approval of Duke is incurring to integrate Progress
..... QUARTERLY DMDENDS PAID B ¯
:ull state regulators and the Nuclear Regula- Energy, which it acquired in 2012.
Year tory Commission. It has a year-end 2016 This untimely stock’s dividend yield is
enoar JMar.31 Jun.30 Sop.30 Dec.31
deadline for completion.
somewhat above average for a utility.
2Oll I ,735 ¯735
.75
.75
:L97
2012 I .75
,75
.765
¯765 3.03 Some other large capital projects are With the recent price near the upper end
2013 I ¯765
.765 .78
.78
3.09 in various stages of development. In of our 2018-2020 Target Price Range, total
2014 I .78
.78
.795
¯795 3.15 Florida, Duke plans to build a 1,685-mw return potential is unappealing.
gas-fired plant at a cost of $1.5 billion, PauI E. Debbas, CFA February 20, 2015
2015 I
(A) Dil. ~:PS. Exd. nonrec, losses: ’12, 70¢; eady May. (B) Div’ds paid mid-Mar., June, on com. eq. in ’13 in NC/SC: 10.2%; in ’09 in Company’s Financial Strength
A
’13, 24¢; gains (loss) on disc. ops.: ’12, 6¢; ’13, Sept., & Dec. n DiVd reinv, avail. (C) Ind. in- I OH: 10.63%; in ’04 in IN: 10.3%; earned avg. Stock’s Price Stability
100
2¢; ’14, (81). ’12 EPS don’t add due to chg. in tang. In ’13: $36.42/sh. (D) In mill., adj. for rev. com. eq., ’13: 6.8%. Reg. Clim.: NC Avg.;
55 J
shs., ’13 due to rounding. Next egs. report due split. (E) Rate base: Net orig. cost. Rates alrd OH, IN Above Avg. (F) Restated 6-month tote.
/ Earnings Predictability
75
© 2015 Value Line Publishing LLC. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind.
THE PUBt,ISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. ~is publication is ~ictly for subscriber’s own, non-cornmerdal, internal use.No part
of li may be reproduced, resold, stored or transmitted in any printed, electronic or Other form, or used for generating or marketing any printed or electronic publicath~, service or product.
1
68.17
EDISON INTERNAT’LNYsE.
,x 0.97
47.2 60.3 55.7 36.7 39.4 41.6 48.0 54.2 68.7
TIBEUNE~ 3 L~llfl’~4 High:
49.2
/ 32.51~30.4
Low:[/ 22.1
10.~L
37.9 42.8 26.7 23.1
30.4 32.6 39.6 ~.3 44.7
LEGENDS
SAFE~ 2 Rais~ 5/3113
~
~ 1.20 x Di~dmds p ~
L
dMd~ by Im~Rate
TECHNICAL 3 Rai~ 1~15
.... Rd~e ~ce S~en~
~
BETA .75 (1.~ = Ma~e~
Op~ons: Yes
~~L
S~d~areai~i~tes~e~
2017-19PR E ~ON
~
~
~
I IIIIII1~
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2017 2018 2019
-120
-100
-80
-64
48
-32
-16
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~
t~4 2~14 ~014 Paint 15
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2~ ~00 ao~ s.~ ~0
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221
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5
HId’s(000)260616 258418 260974
8yr. 117.8 107.3
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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ©VALUEUNEPUB, LLC 7-19
29.12 27.85 35.96 35.10 35.26 37.25 31.30 36.38 38.74 40.25 43.31 37.98 38.09 39.16 36.41 38.61 40,80 42.95 Ravenuespersh
51.50
9.20 "Cash Flow" per sh 11,25
6.65
7.20
d.52
4.35
4.79
5.88
3.79
6.99
7.25
7.60
8.08
7.96
8.41
9.03
9.63
8.80
9.10
1.86
2.03 d5.84
1.30
1.82
2.38
.69
3.78
4.00
4.50
3.34
3.28
3.32
3.68
3.24
3.35
3.23
4.55
1.04
1.08
.83 ......
.80
1.02
1.10
1.18
1.23
1.25
1.27
1.29
1.31
1.37
1.48
1.7t Div’dDecl’dpersh a=
2.25
2.75
3.55
4.57
2.86
4.88
3.95
5.32
5.73
7.78
13.50
8.67
8.67 10.07 13.94 14.76 12.73 11.05 12.70 13.70 Cap’lSpendingpersh
14.55 15.01
41.50
7.43 10.04 13.62 16.52 18.57 20.30 23.66 25.92 29.21 30.20 32.44 30.86 28.95 30.50 33.35 35,30 Book Value per sh c
350.55 347.21 325.81 325.81 325.81 325.81 325.81 325.81 325.81 325.81 325.81 325.81 325.81 325.81 325.81 325.81 325.81 325.81 Common Shs Outst’g O 325.81
15.1
12.9
-10.0
7.8
7.0 NMF
11.7
13.0
16.0
12.4
9.7
10.3
11.8
9.7
12.7
14.1
Avg Ann’l P/E Ratio
14.5
.79
.74
-.51
.43
.40
.71
.75
Relative P/E Ratio
.50
NMF
.62
.70
.85
.75
.65
.66
.74
.62
3.7% 4.1% 3.9% ......
3.1% 2.6% 2.6% 2.2% 2.7% i 4.0% 3.7% 3.4%
3.0% 2.8% 2.6%
Avg Ann’l Oiv’d Yield
3.5%
CAPITAL STRUCTURE as of glJ0114
10199 11852 12622 13113 14112! 12374 12409 12760 11862 12581 13300 14000 Revenues ($mill)
16750
Total Debt $12186 mill. Due in S Yrs $2809 mill.
220.0 1132.0 1134.0 1151.0 1266.0 1115.0 1153.0 1112.0 1594.0 1344.0 1435 1365 Nat Profit ($mill)
1615
30.0%
-26.0%
31.4%
27.3%
30.7%
33.0%
32.1%
25.7%
14.3%
25.2%
20.0%
30.0%
Income
Tax
Rate
(LT interest earned: 4.8x)
11.4% 4.9% 5.1% 8.2% 8.9% 10.5% 16.9% 14.8%
8.5% 7.8%
8.0% 10,0% AFUDC % to Net ProFd
7.0%
44.5%
Pens. Aseats.12/13 $3477 mill. Oblig. $4178 mill.
60.5% 54.6% 51.3% 49.1% 51.2% 49.3% 51.8% 55.3% 45.2% 45.7% 44.5% 45.0% Long-Term Debt Ratio
Pfd Stock $2022 mill. Pfd Div’d $115 mill.
37.8% 40.9% 43.5% 46.0% 44.5% 46.5% 44.3% 40.6% 46.2% 46.2% 47.0% 46.5% Common Equity Ratio
4~.0%
4,800,198 sh. 4.08%-4.78%, $25 par, call. $25.5028300
15995 16167 17725 18375 21374 21185 23861 24773 20422 21516 23225 24725 Total Capital ($mill)
$28.75/sh.; 3,250,000 sh. 5.07%, noncum., call.
13475 14469 15913 17403 18969 ! 21966 24778 32116 30273 30455 32050 35675 Net Plant ($mill)
43250
$100; 1,250,000 sh. 6.5%, cum., $100 liq. value;
7,0%
4.2% 9.4%
8.6% 8.3% 7.4% 6.9% 6.3% 6.0%
8.9% 7.3%
350,000 sh. 6.25%, $1000 liq. value; 460,012 sh.
3.5% 15.4% 13.1% 12.3% 12.1% 10.4% 10.0% 10.0% 14.2% 11.5% 11,0% 10.0% Return on Shr. Equity
10,5%
5.1%-5.75%, $2500 liq. value.
Common Stock 325,811,206 shs. as of 10/24/14
3.5% 16.7% 14.0% 13.0% 12.8% 10.8% 10.4% 10.5% 15.9% 12.5% 12.0% 1t.0% Return on Corn Equity E 11,0%
MARKET CAP: $22 billion (Large Cap)
NMF 12.2% 10.1% 9.2% 8.6% 6.7% 6.5%
6.3% 11.4% 8.1%
7.5% 6.0% Retained to Corn Eq
5.5%
121% 29%
41%
50% All Div’ds to Net Prof
53%
31%
33%
35%
41%
40%
43%
32%
40%
2011 2012 2013 BUSINESS: Edison International (formerly SCECoq~) is a holding commerdal, 42%; industrial, 5%; other, 13%. Generating sources:
%ChangeRetaiSales(KWH)
+.9 +2.6
-.3
gas, 7%; nuclear, 6%; coal, 5%; hydro, 3%; purchased, 79%. Fuel
~vg.lndi~st.Use(M~)
736
763
791 company for Southern California Edison Company (SCE), which
A~.lndust.Revs.perKWH(¢)
7.09 7.50 8.00 supplies electricity to 4.9 mill. customers in a 50,000 sq. mi. area in costs: 35% of revs. ’13 reported deprec, rate: 4.2%. Has 13,700
Capa~atPeak(Mw)
NA
NA
NA
coastal, and southern California (exd. Los Angeles and
employees. Chairman, President & CEO: Theodore F. Craver, Jr.
22374 21981 22534 central
PeakLo~d Summer(Mw)
50.7 52.7 52.1 San Diego). Discontinued Edison Mission Energy (independent Inc.: CA. Address: 2244 Walnut Grove Ave., P.O. Box 976, RoseAnnualL~dFact0r(°,~)
%ChangeCust0mers(yr.end)
+.4
mead, CA 91770. Tel.: 626-302-2222. Intemet: www.edison.com.
+.4
+.6 power producer) in ’12. Elec. revenue breakdown: residential, 40%;
Edison
International’s
board
of
direc9% annually through 2017.
FixedChargeC0v.(%)
209
308
295
The California commission approved
ANNUAL RATES Past
Past Est’d’11-’13 tots rewarded the compan~,’s stockholders with a large divzdend ina regulatory settlement concerning
ofchange(persh)
tOYrs.
5Yrs.
to’17-’t9
Revenues
.5% -1.5%
5.0%
crease. The board raised the annual divithe San Onofre nuclear plant. SCE
"Cash Flow"
6.0%
3.5%
3.5%
dend by $0.25 a share (17.6%), payable at
shut the two units in 2013 due to damage
Earnings
7.5%
2.5%
2.5%
the end of January. The company is tarstemming from the replacement of the
Dividends
2.5%
9.5%
BookValue
8.5;,~
3.0%
5.5%
geting a payout ratio of 45%-55% of the
steam generators, and took a writedown.
of its utility subsidiary, Southern
The utility will retain 5% of any insurance
Cal- QUARTERLY REVENUES ($ milI.)
Full profits
recoveries and 50% of any monies it gets
endar Mar.31 Jun.30 Sep.30 Dec.31
Year California Edison.
from the manufacturer of the steam gener201t
2782
2983 3981 3014 12760 SCE’s general rate case is pending,
ators. SCE is involved in a dispute, which
2012 2415 2653 3734 3060 11862 The utility is asking for rate hikes of $82
2013 2632 3046 3960 2943 12581 million in 2015, $295 million in 2016, and won’t likely be resolved anytime soon, with
2014 2926 3016 4356 3002 13300 $313 million in 2017. On the other hand, the manufacturer.
Edison International was one of the
2015 3100 3400 4300 3200 14000 the state’s Office of Ratepayer Advocates
an intervenor group are proposing a
top-performing electric utility stocks
CalEARNINGS PER SHAREA
Full and
in 2014. The share price rose nearly 50%,
Year decrease of $680 million this year, followed
increases of $98 million in 2016 and
as investors responded favorably to the
2011
.62
.54
1.31
.76
3.23 by
resolution of the uncertainties surround2012
.54
.55
1.09
2.39
4.55 $116 million in 2017. The ruling will be
ing San Onofre. The dividend hike helped,
2013
.78
.78
1.41
.81
3.78 retroactive to the start of 2015. No matter
2014
.61
1.07
too. However, even though we have raised
1.52
.80
4.00 what happens with the rate order..,
2015
.75
.75
1.50
.75
3.75 Earnings will probably decline in
our sights for the 3- to 5-year period, with
QUARTERLY DIVlDENOS PAID
the recent price above the midpoint of our
CalFull 2015. Edison International recorded some
2017-2019 Target Price Range, total re,
endar Mar.31 Jun.30 Sap.30 0ec.31
Year tax benefits in 2014, thereby making the
comparison difficult. The tax rate
turn potential (like that of most utility is2011
.32
.32
.32
.32
1.28 profit
sues) is low. The stock’s dividend yield is
2012
.325
.325
.325
.325
1.30 will probably be higher this year. We exalso about a percentage point below the in2013
.3375 .3375 .3375 .3375
1.35 pect earnings growth to resume in 2016.
dustry average.
2014
.355
.355
.355
.355
1.42 The utility is benefiting from its rising
rate base, which is expected to climb 7%Paul ~. Debbas, CFA
January 30, 2015
2015 .4175
(A) Diluted EPS. Excl. nonrec, gains (losses): 44. ’12 EPS don’t add due to Pounding. Next 1’13: $22.22/sh. (D) In mill. (E) Rate base: net Company’s Financial Strength
A
’02. $1.48; ’03, (12); ’04, $2.12; ’09, (64¢); earnings report due late Feb. (B) Div’ds paid orig. cost. Rate allowed on com. eq. in ’13:
100
’10, 54¢; ’11, ($3.33); ’13, ($1.12); gains (loss) late Jan., Apr., July, & Oct. ¯ DiVd reinvest- 10.45%; earned on avg. com. eq., ’13: 12.5%.
PdceGrowth Persistence
45
from discont, ops.: ’12, ($5.11); ’13, 11¢; ’14, ment plan avail. (C) ncl. deferred charges. In Reguatory C mate: Above Average.
65
© 2015 Value Line Publishing LLC. All rights reserved. Factual matedal is obtained from sources believed to be reliable and is provided without warranties of any kind.
THE PUBLISHER IS NOT RESPON$1BLEFOR ANY ERRORS OR OMISSIONS HEREIN. This publicelJon is strictly for subscriber’s own non-cemmercial internal use. No part
o it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generaling or marketing any printed or electronic pub[~:ation, service or geduct.
26.09
GREAT PLAINS EN’GYNYs
. x,
|4~,.,=~[Trailing:16’7~RELATlVE~Median: 15.0~
’2.8 33.4 I 29.3 I 20.5 19.9 22.1 22.8 24.9 29.5 ~.3
~MEUNESS 3 Lo~,~ ~io~:
Low:~
I 35.7
27.9~
I 32.8
27.1
Z7.1
16.6 16.3
19.5 20.4 23.8 25.6
26.91 15.61 10.2
SAFE~ 3 Lo~ 1~6~ LEGENDS
~ 0.70 x DMdends p ~
~
dMd~ by Int~est Rate
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Target PHce Range
2018 2019 2020
-64
-48
-40
-32
-24
-20
-~6
-12
-8
J
-6
%TOT. RETURN~5
4~014
18
1yr.
5.1
8.2
B ,I.Ih I I z, ~ ,,Ih,,JIIII
132 Pe~nt
12 ,. z . ,, .h.hll,
- ~1,.
~
3yr. 51.0
60.8
125 Sha~es
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14.50 18.02 23.61 26.91 31.~ 33.13 ~.85 33.30 37.89 14.00 14.51 16.62 17.03 15.05 15.90 16.65 IT50 f8.40 Revenuespersh
19.~
3.63
4.63
4.70
4.40
4.69
4.75
4.~
3.~
4.24
3.09
327
4.12
3.51
3.45
4.01
4.0~
4.10
4.65 "Cash Flow" ~r sh 5.50
1.~
2.05
1.59
2.~
227
1.75 Earnings~rsh A
2.~
2.18
1.62
1.86
1.16
1.03
1.53
125
1.35
1.62
1.57
1.45
2.~
1.66
1.~
1.66
1.66
1.66
1.~
1.~
1.~
1.66
1.66
.83
.83
.~
.86
.88
.~ 1.~
1.06 D~’d D~l’d ~r sh B ~
1.20
2.97
6.67
4.38
1.91
2.19
2.~
4.49
6.05
3.90 Cap’l S~nding per sh
3.75
6.15
8.86
6.49
4.76
3.40
4.01
4.42
5.10
5.35
13.97 14.88 12.59 13.58 13.82 15.35 16.37 16.70 18.18 21.39 20.62 21.~ 21.74 21.75 ~.58 23.25 23.70 ~.40 B~kValue~rsh c
26.75
61.91 61.91 61.91 69.20 6926 74.37 74.74 80.35 8623 1926135.42135.71 136.14153.53 153.87 I~.~ I~.501~.75 C~mon Shs Ou~g D 155.~
20.0
12.4
15.9
11.1
12.2
12.6
14.0
18.3
16.3
20.5
16.0
12.1
16.1
15.5
14.2
16.5 eold~e,reuare AvgAnn’lPIERatio
13.5
Value Line
1.14
.81
.81
.61
.70
.67
.75
.99
.87
Relative PIE Ratio
.65
.87
123
1.07
.77
1.01
.99
.80
es~n
ms
6.6% 6.5% 6.6% 7.3% 6.0% 5.4% 5.5%
5.6% 5.5%
7.0% 5.0% 4.5% 4.1% 4.1%
3.8% 3.6%
Avg Ann’l Div’d Yield
4.6%
2604.9 2675.3 3267.1 870.1 1~5.0 2255.5 2318.0 2309.9 2446.31 2568.2
3200
Total Debt $3899.2 mill. Due in 5 Yrs $1339.1 mill. 164.2 127.6 159.2 119.5 135.6 211.7 174.4 199.9 250.2 242.8
230
270 Net Profd ($mill)
315
LT Debt $3488.1 mill. LT Interest $180.3 mill.
18.7% 27.0% 30.7% 4.5% 25.0% 31.7% 32.7% 34.3% 34.0% 32.3% 35.0% 35.0./= Income Tax Rate
35.0%
2.1% 8.4% 10.6% 6.8% 57.0% 252% 3.9% 3.3% 10.4% IZ6% 6.0% 2.0% AFUDC % to Net Profit
2.6%
Leases, Uncapitalized Annual rentals $15.3 mill.
48.6%
Pension Aseats-12/13 $703.0 mill.
50.9% 67.5% 57.9% 9.6% ~.2% 49.2% 51.6% 54.4% 49A% 50.5% 5t.0% 54.6% Common Equity Ratio 54.0%
Oblig. $1007.4 mill. 2403.3 1988.4 2709.8 1~.2 6~.5 5867.6 5741.2 6135.8 7029.1
7725
7115 7190 6920 TotalCapital($mill)
Pfd Stock $39.0 mill. Pfd Div’d $1.6 mill.
2765.6 3066.2 3444.5 D81.3 ~51.1 6892.3 7053.5 7402.1 7746.4 8279.6 6680 8835 Net Plant ($mill)
9000
390,000 shs. 3.80% to 4.50% (all $100 par &
8.2% 7.9%
7.5% 3.5%
3.9% 5.3% 5.0% 5.0%
5:0% 4,5% 4.5% 5.0% Return on Total Cap’l
5.0%
cure.), callable from $101 to $103.70.
13.0% 9.2%
9.9% 4.6% 4.8% 7.2% 5.8% 5.9%
7.1% 6.5% 6.0/= 7.0./= Raturn on Shr. Equity
7,5%
Common Stock 154.124,361 shs.
as of 1113/14
13.3% 9.4% 10.1% 4.6% 4.8% 7,3% 5.8% 5.9%
7.2% 6.5% 6.0% 7.6% Return on Corn Equity E 7,5%
MARKET CAP: $4.6 billion (Mid Cap)
3.2% NMF
.9%
NMF
3.0’/=
.9% 3.4% 2.0% 2.2%
76% 104%
91%
NMF 81%
54%
66%
63%
55%
66%
68%
62°/=
2011 2012 2013 BUSINESS: Great Plains Energy Incorporated is a holding compaother, 9%. Generating sources: coal, 75%; nuclear, 11%; wind, 1%;
% Change Rata~ Sales
-1.7 (KWH)
-1.8
+.2
gas & oil, 1%; purchased, 12%. Fuel costs: 27% of revs. ’!3 reAvgAnd[JsL Uea (M~d~
1463 1443 1424 ny for Kansas City Power & Light and two other subsidiaries, which
Avg, Indust. Revs.per
6.11KWH
6.23
() 6.80 supply electricity to 831,000 customers in western Missouri (71% of
ported deprec, rate (utility): 3.0%. Has 3,000 employees. Chairman:
Capacity at Peak(Mw)
6697 6719
NA revenues) and eastern Kansas (29%). Acq’d Aquila 7/08. Sold Stra- Michael J. Chesser. President & CEO: Terry Basaham. Inc.: Mis5690 5653
Peak Load Sun’ener(Mw)
NA tegic Energy (energy-marketing subsidiary) in ’08. Electric revenue
souri. Address: 1200 Main St., Kansas City, Missouri 64105. Tel.:
Annual Load Factor50.5
%} 49.6
NA
% Change Cust0mers- -lav~.+.2
816-556-2200. Internet: www.greatplainsenergy.com.
+.7 breakdown: residential, 42%; commercial, 40%; industrial, 9%;
~ BW
~1
2~14
125
117
PIE,~O
~014
124
122
Fixed Charge C0v.(%)
211 235 267 Great Plains Energy’s largest utility nificant amount of regulatory lag for the
ANNUAL RATES Past Past Est’d ’11-’13 subsidiary has rate cases pending in company in 2015--even more than we had
of change (per
10 Yrs. sh)5 Yrs. to ’18:20 Missouri and Kansas. In Missouri, Kan- expected in our December report. Thus, we
Revenues
-5.0% -11.0% 3.5%
sas City Power & Light is seeking an in- have cut our share-earnings estimate by
"Cash Flow"
-2.5%
-.5% 6.5%
crease of $120.9 million (15.8%), based on $0.15, to $1.45. Our revised estimate is
Earnings
-3.5% -2.0% 5.0%
a 10.3% return on a 50.36% common- within the company’s targeted (and wide)
Dividends
-6.5% -12.5% 5.5%
Book Value
5.0% 3.5% 3.0%
equity ratio. In Kansas, the utility is re- range of $1.35-$1.60. Despite our expectaQUARTERLY REVENUES ($ mill,) Full questing a hike of $67.3 million (12.5%), tion of lower profits, the payout ratio is
Calendar Mar.31 Jun.30 Sup.30 Dec.31 Year based on a 10.3% return on a 50.48% still low enough to allow for a dividend in2012 479,7 603.6 746.2 480.4 2309.9 common-equity ratio. The filings are crease this year. Note that Great Plains
2013 542.2 600.3 765,0 538.8 2446.3 driven by a need to place environmental Energy benefits from tax-loss carryfor2014 585.1 648.4 782.5 552.2 2568.2 spending at the La Cygne coal-fired plant wards that aren’t reflected in our "cash
2015 600
650 850
500 2700 and upgrades to the Wolf Creek nuclear flow" figures.
2016 625
700 900
625 2850 unit in the rate base. KCP&L also wants Regulatory lag is nothing new for
Great Plains Energy. This problem has
EARNINGS PER SHARE A
CalFull to recover higher transmission costs and persisted
for the past several years. That’s
endar Mar.31 Jun.30 Sup.30 Dec.31 Year property taxes. In Missouri, the utility is
2012 d.07
.41
.95
.03
1.35 asking for a fuel-adjustment clause that why returns on equity have been mediocre
2013
.17
.41
,93
.11
1.62 would include transmission expenses, since 2008.
2014
.15
.34
,95
.12
1.57 along with a regulatory mechanism to We forecast significant bottom-line
2015
.15
.90
.30
.10
1.45 track property taxes. New tariffs should go improvement in 2016. We assume rea2016
.20
.40 1.50
.15
1.75 into effect around the start of the fourth sonable regulatory treatment in our estiCat- QUARTERLY DNIDENDS PAID B, Full quarter. Because that is a seasonally weak mate of $1.75 a share, which would result
endar Mar.31 Jun.30 Sep.30 Dec.31 Year period for the company, any rate relief in an increase of more than 20%.
2011 .2075 .2075 .2075 .2125
.64 KCP&L obtains won’t have a large effect The dividend yield and 3- to 5-year total return potential for Great Plains
2012 .2125 .2125 .2125 .2175
36 on profits this year. In fact ..
2013 .2175 .2175 .2175 .23
.66 Earnings will probably decline this Energy stock are about average, com2014 23 23 .23 .245
.94 year. Unrecovered property taxes and pared with most utility issues.
March 20, 2015
2015 .245
transmission costs will result in a sig- Paul E. Debbas, CFA
(A) Dil. EPS. Excl. nonrec, gains (losses): ’00. due to change in shs., ’14 due to rounding. ’13: $6.62/sh. (D) In mill. (E) Rate base: Fair
Company’s Financial Strength
B+
49; ’01, ($2.01); ’02, (5¢); ’03, 29¢; ’04, (7¢); Next earnings report due eady May. (B) DiVds I value. Rate all’d on com. eq. in MO in ’t 3:
95
’09, 12; gain (losses) on disc. ops.: ’03, (13¢); historically paid in mid-Mar., June, Sept, & Dec. 1 9.7%; in KS in ’13: 9.5%; earned on avg. com.
5
’04, 10; ’05, (3¢); ’08, 35¢. ’12 EPS don’t add ¯ DiVd reinvest, plan avail. (C) Ind. intang. In I eq., ’13: 7.3%. Regulatory Climate: Average.
70
© 2015 Value Line Put~ishing LLC. All fights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind.
THE PUBLISHER IS NOT RESPONSIBLEFOR ANY ERRORS OR OMISSIONS HEREIN. ~his publication is ~rictly for subscriber’s own, non-commerdal, in
of it may be reproduced, resold, stored or ~’ansmitted in any ~ntnd, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product.
68.20 10., Median: 14.0}O
IDACORP,
INC, NVSE,0,
3
High:I 30.2 32.9 32.1 40.2 39.2
Low:I 20.6 25.3 26.2 29.0 30.1
LEGENDS
~ 1,00 x Dividends p sh
divided byh,t~,~tRate
TECHNICAL 3 Raised1/2/15
Relative Price Sb’ength
______
Options: Yes
~ Shaded area indicates recession
Ann’l Total
-Pdce Gain Return ’,’11~-- ~ .....
, .....
High 70
(5%)
3%
Low 50 (-25%) -4%
Ilhh. ,i,,,,l’ "~,,;"" "~;;"J3~~"" ~h’h’l’l
Insider Decisions
~ ’p U’ "
F M AM J J A SO ~’"
toBuy 0 0 0 0 1 0 0 0 0
"%’’*’..
Op~ons 2 0 0 0 0 0 0 0 0
"-"toSell 2 3 0 2 2 0 4 1 1
"%°’°’°"
" "’~ "
TIMEUNESS
LoweredlZ/l~4
35.1 I 32.8
21.91 20.9
m~
m! ’
~
~
~
~
37.8
30.0
42.7
33.9
45.7
38.2
54.7
43.1
70.1
50.2
~
-- ~
.~
~~
..,.I ""1=lid"
~./’11
o
I
.....
’1~ ......
.’~. -*" ....
~[Trailing’,18.3~ RELATIVEpIERAl10
Targel Price Range
2017 2018 2019
-120
-100
_80
-48-64
-24-32
-20
-16
-12
I
%TOT. RETURN12/14 -8
shares
3 yr. 71.7 73.7
toSell
84 1~01~
106 traded
150
5yr. 143.3 107.3
~ 36553 36655
19981 19991 ~ 2001 2002 2003 2004 2005 2006 2007 2008
2010 2011 2012 2013 2014 2015 ©VALUELINEPUB.LLC 7-19
29.83 17.50 27.10 150.10 24.43 20.41 20.00 20.15 21.23 19.51 20.47 21.92 20.97 20.55 21.55 24.81 24.50 25.10 Revenuespersh
27.10
4.69
4.50
5.63
5.63
4.08
3.50
4.12
3.87
4.58
5.23
5.74
5.84
6.21
6.25
0.90
4.11
4.27
5.07
2.37
2.43
3.50
3.35
1.63
3.78
3.60 Eamingspersh A
3.75
.96
1.90
1.75
2.35
1.86
2.18
2.64
2.95
3.36
3.37
3.64
1.86
1.86
1.86
1.86
1.86
1.70
1.20
1.20
1.20
1 20
1.20
1.20
1.37
1.57
1.76
1.90 Div’d Decl’d per sh st ¯
2,20
1.20
1.20
2.37
2.95
3.73
4.78
3.53
12.95
3.89
4.73
4.53
5.16
6.39
5.19
5.26
6.85
6.76
4.78
4.68
5.70
19.42 20.02 21.82 23.15 23.01 22.54 23.88 24.04 25.77 26.79 27.76 29.17 31.01 33.19 35.07 36.84 38.60 40.30 BookValuepersh c
44.90
37.61 37.61 37.61 37.63 38.02 38.34 42.22 42.66 43.63 45.06 46.92 47.90 49.41 49.95 50.16 50.23 50.20 50.20 Common Shs Outat’g D 50.20
14.4
12.7
10.9
11.4
18.9
26.5
15.5
16.7
15.1
18.2
13.9
10.2
11.8
11.5
12.4
13.4
15.1
Avg Ann’l PIE Ratio
10.0
.75
.72
.71
.58
1.03
1.51
.79
.75
.79
Relative PIE Ratio
1.00
.82
.89
.82
.97
.84
.68
.75
.72
5.4%
6.0% 4.9°/ 4.9% 6.0% 6.7% 4.1% 4.1% 3.4% 3.5% 4.0% 4.5% 3.4% 3.1%
3.3%
3.2% 3.1%
P, vg Ann’i Div’d Yield
3.6%
CAPITAL STRUCTURE as of g130/14
844.5 859.5 926.3 879.4 960.4 1049.8 1036.0 1026.8 1080.7 1246.2 1250
1260 Revenuse($mill)
1360
Total Debt $1615.4 mill. Due in 5 Yrs $124.3 mill.
77.8
63.7 100.1
180
82.3
98.4 124,4 142.5 166.9 168.9 182,4
180 Net Profit ($mm)
-- 16.9% 13.3% 14.3% 16.3% 15.2% ....
13.4% 28.3% 24.0% 25.0% Income Tax Rate
30.0%
(LTinterestea.iHed:6.3x)
3.9% 4.7% 4.0%
7.1% 4.2°/0 7.5%
8.3% AFUDC % to Net Profit
0.5%
9.7% 10.2% 10.5% 19.7% 22.8%
49.3% 50.0% 45.2% 48.9% 47.6% 50.2% 49.3% 45.6% 45.5% 46,6% 48.0% 40.5% Long-Term Debt Ratio
48.8%
Pension Assets-12/13 5545.1 mill.
Obtig. $695.1 mill. 50.7% 50.0% 54.8% 51.1% 52.4% 49.8% 50.7% 54.4% 64.5% 53.4°/0 52.0% 52"0%, Common Equit~ Ratio
51.6%
4415
1987.8 2048.8 2052.8 2364.2 2485.9 2807.1 3020.4 3045.2 3225.4 3465.9
3715 3890 TotalCapital($mill)
Pfd Stock None
2209.5 2314.3 2419.1 2616.6 2758.2 2917.0 3161.4 3406.6 3536,0 3665.0 3900 4005 Net Plant ($mill)
4740
5.0%
5.3%
4.5% 6.2%
4.7°/
5.3% 5.7%
6.0% 6.7%
6.5% 6.4°/0 0.0% 5.5% i Return on Total Cap’l
7.7% 6.2°/0 8.9%
9.6% 9.9% 9.0% 9,0% Return on Shr. Equity
8.5%
as of 10124114
6.8% 7.6°/0 8.9°/0 9.3% 10.1%
7.2% 6,2% 8.9%
6.8% 7.6% 8.9°/0 9.3% 10.1%
9.6% 9.9% 9.0% 9.0% RetarnonComEquity ¯ 8.5%
2.7% 1.3% 4.3% 2.4% 3.4°/0 4.8%
5.5% 6.5%
3.5%
65°’0 80°/0
51%
64%
55%
46°’0 41%
36%
41%
43%
51%
53% ~,11Div’ds to Net Prof
50%
2011 2012 2013 BUSINESS: IDACORP, Inc. is the holding company for Idaho enue breakdown: residential, 40%; commerdal, 22%; industrial,
% Change Retai Sales
+1.6(KWH)
+2.6 +3.8
A~j.lndud.U~e(MW)
N/A
N/A
N/A Power, a utility that operates 17 hydroelectric generation develop14%; other, 24%. Fuel sources: hydro, 45%; thermal, 34%; purAvg. lnd~. Revs. per4.54
KWH4.63
(¢) 5.21 ments, 3 natural gas-fired plants, and partly owns three coal plants chased power, 21%. ’13 depr rate: 2.4%. Has 2,067 employees.
N/A
N/A
C.apadtyatPeak(Mw)
NIA across Idaho, Oregon, Wyoming, and Nevada. Service territory Chairman: Robert A. Tinstman, President & CEO: Darrel T. Ander2973 3245 3407 covers 24,000 square miles, serving 501,000 business customers,
~’eak Load Summer(Mw)
son. Incorp: Idaho. Address: 1221 W. Idaho St., Boise, ID 83702.
N/A
~¢nu~lL0adFa~r(%)
N/A
N/A
%ChangeCust~ners(yr-end)
+.7 +1.1
+1.5 Sells electhcity in Idaho (95% of revenues) and Oregon (5%). Rev- Telephone: 208-388-2200. Intemet: www.idacorpinc.com.
F=edChargeC0v.(%)
194
283
329 We are raising our 2014 share-net es- its ~O15 Tntegrated Resource Plan. The
plan is expected to indicate a modest inANNUAL RATES Past
Past Est’d’11-’13 timate for IDACORP, Third-quarter resuits were above our expectations. Better
crease in the average and peak load
0fchange(persh)
to’17-’Ig
10Y~.
5Y~.
Revenues
-I0.0%
2.0%
than expected results were due to slightly
growth from the company’s earlier IRP in
3.5%
"Cash FIow"
3.0%
6.5%
2.5%
improved weather in the September peri2013. The completed Integrated Resource
Earnings
5.5% 10.0%
1.5%
Plan is expected to be filed with the Idaho
od. Customer growth has also aided sales
Dividends
-2.5%
3.0%
8.0%
BookValue
4.5%
5.5%
4.0%
volume, as it has helped to offset lower
Public Utility Commission by June 2015.
among the company’s residential
A dividend hike is likely in 2015. The
QUARIERLYREVENUES($milI.)
CalFull usage
to
company’s dividend policy seeks
Year and irrigation customer categories. Howo
maintain a payout ratio between 50% and
2011 251.5 235.0 309.6 230.7 1026.8 ever, earnings in the September period
60%. The board of directors recently in2012 241.1 254.7 334.0 250.9 1080.7 were primarily impacted by lower income
creased the dividend payout in September,
2013 2~4.9 303.9 381.1 296.3 1246.2 tax expense. This was due to a tax method
change related to Idaho Power’s capital2014 by 9.3%. The dividend should contin2014 292.7 317.7 382.2 257.4 1250
ized repairs reduction. IDACORP recently
ue to see an improvement until IDACORP
2015 200
305
365
260
1260
raised its guidance for 2014 to reflect the
reaches the upper end of the payout range.
CalEARNINGSPERSHARE~
Full lower tax expense. The company expects
These shares do not stand out at this
Year
juncture. Based on the stock’s current
2011
.60
.42
2.16
.18
3.36 2014 earnings to be in the range of $3.70
Timeliness rank, it is expected to be an
2012
.50
.71
1.84
.33
3.37 to $3.80 per share, higher than the preaverage performer over the next six to 12
2013
.70
.93
1.46
.55
3.64 vious guidance of $3.50 to $3.65 per share,
months. However, appreciation potential
2014
.55
.89
1.73
.58
3.75 In accordance, we have raised our 2014 es2015
.80
.75
1.85
.40
3.06 timate to $3.75 per share. Looking ahead,
over the next 3- to 5-year period is limited,
as the stock price is already at the top of
QUARTERLY DIVlDENDSPAID
CalFull the method change is expected to result in
our three- to five-year Target Price Range.
endar Mar.31 Jun.30 Sep.30
Dec.31 Year a small amount of continued benefit,
on the nature of annual capital
Additionally, although further dividend in2011 .30
.30
.30
.30
1.20 depending
creases are likely, the company’s current
2012
.33
.33
.33
.38
1.37 additions at Idaho Power. IDACORP exdividend yield is presently below the aver2013
.38
.38
.38
.43
1.57 pects more clarity on this in the next
age yield of 3.3% for electric utilities.
2014
.43
.43
.43
.47
1.76 quarter,
January
30, 2015
2015
Idaho
Power
working
Ajila
nonrecurring gains Div’ds
historically
paid inis
latecurrently
Feb., May, Aug.
(E) Rate on
Base: NetSaumya
original cost.
Rate allowed[ IC°mpany’s
Financial
Strength
(A) EPS diluted. Excl.
B++
(Ioss):’00,22¢;’03,26;’05,(24);’06, 17. and late Nov. = DiVd roinvestment plan avail. ~ on com. eq. in Idaho in ’11: 9.5%-10.5%;
Stock’sPdceStabtllty
95
Egs. may not sum to total due to rounding. Shareholder investment plan avail. (C) Incl. earned on avg. system com. eq., ’13: 9.6%.
80
Next earnings report due in late February. (B) deferred debits. In ’13: $21.06/sh. (D) In mill. Regulatory Climate: Above Average.
90
© 2015 Value Line Publishing LLC. All fights reserved. Factual material is obtained from sources believed to be reliable and is provided without warran~es of any kind.
THE PUBLISHER IS NOT RESPONSIBLEFOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for subscriber’s own, non-commercial, internal use.No pan
of it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product.
,,, ,...,,., ,
1.0
RECENT
0,98o=v’o 3.3o/oli Fj
58,02 40 n(Trai,nrZO.,~RELATn/E
NORTHWEI
;TERN
29.7 I
TIMELINESS 2 ~i~9,,,,,4
|U,I~,Median:NMF]P/ERAT’O
35.8 36.7
26.8 30.6 36.6 38.0 47.2 58.7
Low:
24.8
25.5
30.1 24.5 16.51 18.5 23.8 27.4 33.0 35.1 42.6
[
,i9~:
26.2
32.5
I
SAFETY
NewS14/12 ~ LEGENDS
0.78 x Dividends p sh
d~ded bylntereat Rate
TECHNICAL 3 Raised 12/5/14
.... Relative Price S~ength
BETA .70 (1.00 = MarkeO
Opdens:
ShadedYes
area indicates recession
2017-19 PROJECTIONS
Ann’l Total
Pdco Gain
~ ~ ~illl .....
High ~4~
.ll ’!,’1"’’1 ,,,I ............
1÷5%) Return
4%
LOW
(:30%) -4%
..,..,,
I"’" ~
Insider Declslons
FMAM J JASO
toBuy 0 0 0 0 0 0 0 0 0
Options 0 0 0 0 0 0 0 0 0
tosell 1 0 00 00 0 0 0
3
Target Price Range
2019
2017 2018-8O
-60
-50
-40
-30
-25
-20
-15
-10
I
-7.5
% TOT. RETURN 12/14
THiS
VL ARIrH,*
1 yr.
35.0
6.9
20
3 yr.
76.8
73.7
I[
Illal I IIII. I I
L
J,
10
5yr. 167.4 107.3
Hid’s(000} 37582 38301 38766
,Ihllhll .lllllllllllllllllllll llllll ’I- IIIIII IIIII IIIlilliill MIIIIII ihllhllll
NorthWestern Corporation filed for protec- 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ©VALUEUNEPUB.LLC 7.19
tion under Chapter 11 of the Federal Bank- 29.18 32.57 31.49 30.79 35.09 31.72 30.66 30.80 28.76 29.80 25.55 29.25 Revenues per sh 32.25
: ruptcy Code on September 14, 2003. On 3.20
6.45 "Cash FIow"persh 7,25
4.00
3.62
3.70
4.40
4.62
4.76
5.42
5.18
5.45
8.20
=November 1, 2004, the company emerged d14.32 1.71 1.31 1.44 1.77 2.02 2.14 2.53 2.26 2.46 2.95 3,20 Eamingspersh A
3.50
from a bankruptcy reorganization. All old
1.00
1.24
1.28
1.32
1.34
1.36
1.44
1.48
1.52
1.60
1.92 Div’d Decl’dpersh e¯1’
2,t5
common shares were canceled and 2.i~ J 2.26
2.81
3.00
3.47
5.26
5.89
5.95
5.80
6,50 Cap’l Spending per sh
5,50
6.30
5.20
35,500,000 new shares (along with 19.92 j 20.60 20.65 21,12 21.25 21.86 22.64 23.68 25.09 26.60 31.75 33.00 Book Value per sh c
37,50
4,620,333 warrants) were issued. The stock 35.60, 35.79 35.97 38.97 35.93 36.00 36.23 36.28 37.22 38.75 47.50 47.00 Common Shs Outst’g o 47.00
initially traded on NASDAQ under the sym-- i 17.1
26.0
21.7
13.9
11.5
12.9
12.6
15.7
16.9
16.5
14.5
bol NWEC and moved to the NYSE under - .91
1.40
.84
.95
Relative P/E Ratio
.90
1.15
.77
.82
.79
1.00
.85
the symbol NWE in May of 2008.
-- = 3.4% 3.6% 4.1% 5.4% 5.7%
4.9% 4.5%
4.2% 3.7% 3.3%
4.3%
1039.0 1165.8 1132.7 1200.1 1260.8 1141.9 1110.7 1117.3 1070.3 1154.5
t5t5
Total Debt $1382.3 mill. Due in 5 Yrs 5384.2 mill.
41.1
61.5
49.2
94.0
115
170
53.2
67.6
73.4
77.4
92.6
83.7
-- 38.5% 40.3% 37.8% 37.3% 17.2°,6 25.0% 9.8%
9.6% 13.2% NMF 17.0% Income Tax Rata
20.0%
Ind. $28.6 mill. capitalized leases.
2.9% 2.1%
3.3% 2.5% 2.3% 7.2% 22.7% 5.4% 15.2% 14,1% 13.0% 10.0% AFUDC%toNetProflt
6.0%
LT interest earned: 2.4x)
51.8% 44.3% 49.9% 50.1% 46.8% 56.4% 57.2% 52.2% 53.8% 53.5% 53.0% 50.0% Long-Term DeM Ratio
45.5%
48.2% 55.7% 50.1% 49.9% 53.2% 43.6% 42.8% 47.8% 46.2% 46.5% 47.0% 50.0% Common Equity Ratio
54.5%
Pension Assets-12113 $516.4 mill.
1472.9 1324.0 1482.2 1648.4 1434.3 1803.9 1916.4 1797.1 2020.7 2215.7 3185 3095 Total Capital($mill)
3175
Oblig. $567.9 milL 1379.1 1409.2 1491.9 1770.9 1839.7 1864.1 2118.0 2213.3 2435.6 2690.1
4225
3705 3855 Net Plant ($mill)
Pfd Stock None
5.7% 7.0%
5.2% 5.0%
7.0% 6.0% 6.0% 7.1%
5.5% 5.5% 5.0% 6.0% Return on Total Cap’l 8.5%
5.8% 8.3% 6.6% 6.5% 8.9% 9.3% 9.4% 10.8%
9.0% 9.1% 8.0% 9.5% RetumonShr.Equity 9.5%
Common Stock 39.143.732 shs.
as of 10/17/14
5.8% 8.3% 6.6% 6.5% 8.9% 9.3% 9.4% 10.8%
9.0% 9.1% 8.0% 9.8% Return on Corn Equity ¯
9.5%
5.8% 3.5%
.7%
.7% 2.3% 3.2% 3.5%
4.7%
3.2% 3.5% 3.0% 4.0% Retained to Corn Eq 4.0%
-58%
90%
89%
74%
66%
63%
56%
65%
61%
59%
~ All Div’ds to Net Prof
60%
2011 2012 2013 BUSINESS: NorthWestern Corporation (doing business as North- 5%; other, 4%. Generating sources are not provided by company.
+2.3 (kWH)
+.3 + 1.3
39347 38865 39486 Westem Energy) supplies electhcity & gas in the Upper Midwest Fuel costs: 42% of revenues. ’13 reported depreciation rate: 3.2%.
,~vg.lnduat.Use(MW~,..
_Av~. Indust. Revs. per
()
NA ~wNA
NA and Northwest, serving 407~000 electric customers in Montana and
Has 1,600 employees. Chairman: Dr. E. Linn Draper Jr. President &
NA
NA
NA
Dakota and 272,000 gas customers in Montana (83% of CEO: Robert C. Rowe. Incorporated: Delaware. Address: 3010
PeakL0ad,~inter(Mw)
2014 2108 2056 South
West 69th Street Sioux Falls, South Dakota 57108. Telephone:
Annual Load Fact0r (%)
NA
NA
NA gross margin), South Dakota (15%), and Nebraska (2%). Electric
605-978-2900. Intamet: www.northwestemenergy.com.
% Change Customers
+.6(yr-end)
+.8
+.7 revenue breakdown: residential, 41%; commercial, 50%; industrial,
toguy
to Sell
87
92
88
84
79 shares
93 traded
Western filed for an increase of $26.5 milFixed Change C0v. (%)
237 210 217 NorthWestern has completed the putANNUAL RATES Past Past Est’d ’11-’13 chase of some hydro assets. The compa- lion (20.2%), based on a 10% return on a
ny paid $903 million for 633 megawatts of 53.6% common-equity ratio. The requested
of change (per sh)
10Ym.
5Yrs.
to’17-’19
Revenues
-- -1.5%
1.5%
hydro capacity. NorthWestern wants to inrate boost is large, but the utility hasn’t
"Cash Flow"
-6.5%
5.0%
crease the proportion of its power that had a base rate hike in 35 years. New tarEarnings
-- 10.0%
6.5%
comes from its own generating assets (in- iffs are expected to take effect in mid-2015.
Dividends
-3.0%
6.5%
Book Value
stead of being purchased). The transaction NorthWestern is involved in a disput~
-3.5%
6.5%
completed in mid-November. A rate with the Federal Energy Regulator3
QUARTERLY REVENUES ($ mill.)
CalFull was
endar Mar.31 Jun.30 Sep.30 Dec.31 Year increase of $117 million took effect at that Commission (FERC). The company be.
2011 338.3 251.8 244.0 283.2 1117.3 time in order to place the newly purchased lieves that 80% of the costs associate([
2012 309.1 244.6 235.8 280.8 1070.3 assets in the rate base. NorthWestern with one of its gas-fired plants should be
2013 313.0 260.2 262.2 319.1 1154.5 issued $400 million of common stock and allocated to its customers in Montana,
$450 million of long-term debt to finance with the remainder allocated to its FERC20t4 369.7 270.3 251.9 308.1 1200
regulated wholesale customers. FERC says
2015 400
310
305
360
1375 the deal.
CalFull Thanks to the purchase, earnings will only 4% should be allocated to wholesale
Year likely rise significantly in 2015. This users, and ordered NorthWestern to make
2011
.89
.30
.41
33
2.53 should occur even though the company a refund to customers. The company al2012
.88
.31
.30
.78
2.26 booked $0.43 a share of tax benefits in the ready took a $0.12-a-share charge in the
2013
1.01
.37
.40
.68
2.46 third quarter of 2014. NorthWestern’s pre- June quarter of 2012. FERC has agreed to
2014
1.17
.20
.77
.81
2.95 ]iminary 2015 earnings guidance is $3.07- a rehearing, but when this matter will be
.45
resolved is not known.
2015
1.20
.55
1.00
3.20 $3.32 a share,
Cal- QUARTERLY DMDENDS PAID ~" Full Shareholders can expect a sizable div- This timely stock’s dividend yield (reendar Mar.31 Jun.30 Sep.30 Dec.31
Year idend increase soon. NorthWestern is flecting the estimated increase) is
targeting a 60% payout ratio. We estimate average for a utility. With the recent
2011
.36
.36
.36
.36
1.44 that
the board of directors will raise the price near the upper end of our 2017-2019
2012
.37
.37
.37
.37
1.48
Target Price Range, total return potential
2013
.38
.38
.38
.38
1.52 quarterly payout by $0.08 a share (20%).
2014
.40
.40
.40
.40
t.60 The company is seeking an electric is nonexistent.
rate hike in South Dakota, North- Paul E. Debbas, CFA
2015
January30, 2015
(A) Diluted EPS. Excl. gain (loss) on disc. ops.: J paid in late Mar., June Sept. & Dec. ¯ DiVd m- I cost, Rate allowed on com. eq. in MT in ’14 Company’s Financial Strength
B+
’05. (6¢); ’06, 1¢; nonrec, gain: ’12, 39¢ net. I investment plan avail. ~" Shareholder invest- I (elec,): 9.8%" in ’13 (gas): 9.8%’ in SD in ’11:
Stock’s Pdca Stability
100
’12 EPS don’t add due to rounding. Next earn- ment plan avail. (C) Incl. defd charges. In ’13: I none specifiC; in NE in ’07: 10.:~% earned on Price Growth Persistence
70
ings report due mid-Feb. (B) Div’ds historically I $17.34/sh. (D) In mill. (E) Rate base: Net orig. I avg. com. eq,, ’13: 9.6%. Regul. Climate: Avg.
95
© 2015 Value Line Publishing LLC. All rights reserved. Faatual material is obtained ~rom sources believed to be reliabte and is provided wiSlent w=~u.[;~ ol any kind.
THE PUBLISHER IS NOT RESPONSIBLEFOR ANY ERRORS OR OMISSIONS HEREIN. "llqis publication is stdctly for subscriber’s own. non-cemmercial, internal use.No part
of it may be reproduced, resold, stored or transmitted in an)’ printed, electronic or other form, or used for generating or marketing any printed or electronic publication, sen/i:e or pmducL
u.oo " on 3.4%
31.38
0GE ENERGY CORP,
High: 13.5 15.3 20.3 20.7 18.1 i 18.9 23.1
TIMEBNESS 3 RaisedS/9/14
Low: 11.4
12.2 13.2
14.69.81
9.9 16.9
SAFETY
Raised 9/19/14
LEGENDS
~
TECHNICAL
Raised 2/27/15 divided
bllnterest
Rate
RelalJve
Price S~’ength
~
BETA .90 (1.00=Market)
24or-1 split 7113
~
Options:
~
2018-20 PROJECTIONS
ShadedYes
Ann’l Total
I
Price Gain Return
~ ....
Low.High 34~1+10%)~+25%) 10%7%
.~
iUll’’ ’h’~ll=l
iiiiI ,,’-i"~"
Insider Decisions
1
3
AMJJA
oo° o" o
to Buy
/
020020030
20~014 3(~014 402014
134
147
171
HId’s10N)116179 117222 122042
Percent
shares
30.1
25.1
~
40.0
27.7
39.3
32.8
36.5
31.4
Target Price Range
2018 2019 2020
-80
-60
-50
-40
-30
_-2520
-15
2-[u=V
i.j~,,lh~d~ ,I’"L’L’I.’I I’-" ....-
~""l"’~’l .,,.,,"
-.--..-----/ ~1
Options on on ~ on on O O O O ,,I
to~ell
28.6
20.3
18 "°"
12
1999~ 2000 2OO1 2002 2OO3; 2004
13.95 21.17 20.40 19,26 21.62 27.37
2.03
2.07
1.81
1.87
1.82 1.87
.97
.95
.65
.72
.87 ;
.89
.67
.67
.67
.67
.67=
.67
1.16
1.15
1.44
1.49
1.04
1.51
6.55
6.83
6.67
6.27
6.87 7:14
155.73 155.84 155.98 157.00 174.80! 180.00
11.8i 14.1
12.1 ] 10.6
17.4
14.1
.69
.69
.89
.77
.67 i
.74
5.7% 6.6%
5.9% 6.6%
6.5%i 5.3%
CAPITALSTRUCTUREasofg130114
(LT interest earned: 4,8x)
%TOT. RETURN2/15 -7.5
~"
hillllllil IIIIIIIIIIIIIIIIIIIIIII
IIIIIIIIIIII IIIIIIIIIII IIIIIIIIII IIIIIIIIIIIIIIIIIIIIIII
syr. 104.8 110.f
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 © VALUE LINE PUB. LLC 1-20
15.00
32.83 21.96 20.68 21.77 14.79 19.04 19.96 18.58 14.45 12.30 12.75 13.45 Ravenuespersh
1.94
2.23
2.39
2.40
3.46
3,40
3.40
4.00
2.69
3.01
3.31
3.69
~
2.00 Earnings per sh
2.25
.92
1.23
1.32
1.25
1.33
1.50
1.73
1.79
1.94
1.98
1.85
.67
.67
.68
.70
.71
.76
.80
.85
.95
1.05
1.16 Div’d Decl’d per sh s =
1.55
.73
1.65
2.67
3.04
4.01
4.37
4.36
6.48
5.85
4.99
2.85
2.75
2.50
7.59
8.79
9.16 10.14 10.52 11.73 13.06 14.00 15.30 16.25 tT10 1T95 Book Value per sh c
20.25
n
181.20 182.40 183.60 187.00 194.00 195.20 196.20 197.60 198.50 199.50 200.00 200.50 CommonShsOutat’g 202.00
14.9
13.7
13.8
t2.4
10,8
14.4
15.2
17.7
18.3 Boldf/g~resare AvgAnn’lPIERatio
17,0
13.3
Vame Line
.79
.74
.73
.75
.72
.85
.90
.97
.99
.97
Relative P/E Ratio
1.05
estimztes
4.9%
4.0%
3.8% 4.5% 5.0%
’AvgAnn’|Div’dYield
4.1%
3.7% 3.1% 2.9%J 2.5% 2.6%
5948.2 4005.6 3797.6 4070.7 2869.7 3716.9 3915.9 3671.2 2867.7 2453.1
2550 2750 Ravenues($mill)
3050
166.1 226.1 244.2 231.4 258.3 295.3 342.9 355.0 387.6 395.8
375
460
30.2% 34.8% 32.3% 30.4% 31.7% 34.9% 30.7% 26.0% 24.9% 30.4% 30.0% 30,0% Income Tax Rata
30.0%
1.3% 3.8%
1.6%
1.7% 9,1% 5.7%
9.0% 2.7%
2.6%
1.7% 4.0% 3.0% AFUDC % to Net Profit
2.0%
48.5%
50.5% 54.4% 55,6% 46.7% 49.4% 49.2% 48.4% 49.3% 56.9% 54.0% 55.5% 65.0% Common Equity Ratio51.5%
2726.6 2950.1 3025.5 4058.6 4129.7 4652.5 5300.4 5615.8 5337,2 6000 6175 6505 TotalCapital($mill)
7975
Oblig.$658.1 mill. 3567.4 3867.5 4246.3 5249.8 5911.6 6464.4 7474.0 8344,8 6672,8 6979.9
7220 7465 Net Plant($mill)
0300
Pfd Stock None
8.6% 0.0% 7.5% T5% Ratum on Total Cap’l 7.0%
12.8% 12.0% 11.0% 11.0% Return on Shr, Equity 11.0%
12.8% IZ0% 11.0% tt.0% Return on Com Equity e ti,0%
3.5%
47% 56% 58% All Div’ds to Net Prof
68%
43%
2011 2012 2013
other,
13%.
Generating
sources:
coal,
42%;
gas,
32%;
wind,
5%;
% Change Retal Sales
+3.4(KWH)
-1.8 + 1.1
Avg. Ingust. Use (MWH)
752
purchased, 21%. Fuel costs: 50% of revenues. ’13 reported depre776 779
Avg. Indust. Revs. per
5.37ICNH
5.07() 5.44
clarion rate (utility): 2.8%. Has 2,400 employees. Chairman & CEO:
Capacity at Poak (Mw)
7115 7139
NA
Peter B. Delaney. President: Sean Treuschke. Inc.: Oklahoma. AdPeak Load, Summer7057
(Mw)7000 6341
dress: 321 North Harvey, P.O. Box 321, Oklahoma City, Oklahoma
~nnual Load Factor 52.2
(%) 51.6
NA
73101-0321. Tel.: 405-553-3000. Intemet: www.oge.com.
% Change Customers
+.6~y~-~ng)
+1.1 +1.1
New tariffs would take effect six months
F~xed Charge C0v. (%)
427
404
367
later, meaning that any rate relief the
ANNUAL RATES Past
Past Est’d ’11-’13
company gets this year will come too late
of change (per sh)
10 Yrs.
5 Yrs.
to ’t8-’20
Revenues
-1.5% -4.0%
NMF
to help lift profits much in 2015. OG&E is
"Cash Flow"
6.5%
8.5%
2.0%
also planning a rate case in Arkansas, posEarnings
9.5%
7.5%
3.0%
sibly by the end of the current quarter.
Dividends
2.0%
3.0% 10.0%
Book Value
8.0%
8.5%
5.5%
We look for earnings to recover next
year. We assume reasonable regulatory
CalFull
treatment and that the contribution from
endar Mar.31 Jun,30 Sep.30 Dec,31 Year
Enable will be greater than in 2015 (but
2012 840.7 855.0 1113.4 862.1 3671.2
not back to the 2014 level).
2013 901.4 734.2 723.2 508.9 2867.7
OGE still intends to increase the divi2014 560.4 611.8 754.7 526.2 2453.1
dend at an annual rate of 10% through
2015 575
625
800
2550
550
~.019. We note that the percentage decline
2016 600 675 850 575
2700
in expected distributions from Enable isn’t
Cal- EARNINGSPERSHAREA
Full
nearly as large as that of expected equity
endar Man31 Jun,30 Sep.30 Dec.31 Year
income. In addition, OGE’s low payout
2012
.19
.48
.94
.20
1.79
ratio and solid finances give the board of
2013
.12
.46 1.08
.29
1.94
directors the wherewithal to increase the
2014
.25
.50
.94
.29
1.98
disbursement rapidly.
2015
.20
.50
.95
.20
1.85
2016
.20
.55
1.05
.20
2.00
This high-quality stock is suitable for
investors seeking dividend growth.
QUARTERLYDIVIDENDSPAIDn- Full
CalThe quotation has fallen 12% so far in
endar Man31 Jun.30 Sep.30 Dec,31 Year
2015, which has been a weak year for most
2011 ,1875 .1875 .1875 ,1875
.75
utility issues. Even after the pullback,
2012 .19675 .19675 .19675 .1967:
.79
though, the dividend yield is a cut below
2013 .20875 20875 20875 ,2087E
.84
the utility average.
2014 .225
.225 .225 .25
.93
2015 .25
Paul E. Debbas, CFA
March 20, 2015
(A) Diluted EPS. Exd. nonrecurring losses: ’02, due eady May, (B) DiCds historically paid in I (E) Rate base: Net odginal cost. Rate allowed Company’s Financial Strength
A+
20¢; ’03, 7¢; ’04, 3¢; gains on discontinued op- late Jan., Apr., July, & Oct. ¯ Div’d reinvest- I on com. eq. in Oklahoma in ’12: 10.2%; in
90
eretions: ’02, 6¢; ’05, 25¢; ’06, 20¢. ’13 EPS ment plan available. (C) Ind. deferred charges, i Arkansas in ’11: 9.95%’ eamed on avg. com.
90
don’t add due to rounding. Next earnings report In ’13: $1.91/sh. (D) In millions, adj. for split. I eq., ’13: 13.2%. Regul~’tory Climate: Average. Earnings Predictability
96
7.6% 9.1% 9.5% 7.0% 7.9% 7.8% 7.8% 7.7%
12.1% 14.1% 14.5% 12.2% 12.7% 12.9% 13.4% 12.8%
12.1% 14.1% 14.5% 12.2% 12.7% 12.9% 13.4% 12.8%
3.4% 6.6% 7.1% 5.4% 6,0% 6.7% 7.7% 7.2%
72% 53% 51%
55% 53% 48% 43% 44%
BUSINESS: OGE Energy Corp. is a holding company for Oklahoma Gas and Electric Company (OG&E), which supplies electricity to
815,000 customers in Oklahoma (88% of electric revenues) and
western Arkansas (9%); wholesale is (3%). Owns 26.3% of Enable
Midstream Pa~nere. Acquired Transok 6/99. Electric revenue
breakdown: residential, 42%; commercial 26%; industrial, 19%;
OGE Energ3,’s earnings are likely to
decline this year. One reason is a probable falloff in equity income from the company’s 26.3% stake in Enable Midstream
Partners, an oil and gas master limited
partnership. Enable has seen a decline in
the rig count in its operating area, and although most of its business is fee-based,
the drop in commodity prices is another
negative factor. Another reason is regulatory lag at Oklahoma Gas and Electric,
due to higher depreciation, unrecovered
transmission costs, and the ending of a
wholesale power contract. We have
slashed our earnings estimate by $0.25 a
share, to $1.85. Our revised estimate is
within OGE’sguidance of $1.76-$1.89.
The utility is awaiting a ruling from
the Oklahoma Corporation Commission (OCC) on its environmental cornpliance plan. OG&E plans to spend $1.1
billion through 2019 to comply with EPA
mandates. The utility would recover these
costs through riders on customers’ bills.
After the OCC has issued its decision,
OG&E will file a general rate case (probably in the June quarter) to address the
aforementioned reasons for regulatory lag.
© 2015 Value Line Publishing LLC. All hghts reserved. Factual material is ol~;.~d from sources believed to be reliable and is provided without wnrran~es of any kind.
THE PUBLISHER IS NOT RESPONSIBLEFOR ANY ERRORS OR OMISSIONS HEREIN. ~is publicalJon is strictly for subscriber’s own. non-commercial, internal use. No par
of it may be reproduced, resold, stored or transmitted in any printed, electronic or other f~rn. or used for generating or marketing any printed or dectronic publication, se~ce or preducL
P/E
Trailing: 21.0 P/E RATIO
I’CcEENT
RA,,o 20.0(Median:16.O)REL~T~/E
30,59
1.09
PNM RESOURCES
NYSE-PNM
TIMEUNESS 2 Lo~e~g/19/14
High:I 19.6I 26,1 30,5 32,1 34,3
Low:I 12.61 18.7
23,8 22.5 21.0
SAFETY
Lowe~ 5/9~8 ~LEGENDS
1.30 x Dividends p sh
TECHNICAL 3 Raised12/5/14
Relative Price Sb’ength
3-for-2 split 6~04
Options:
Yes
2017-19 PROJECTIONS
Shaded area jr~,~ recession i, i
Ann’l Total
,,,~ ,
h .....
,~"=’ ,~ ......~
Pdce Gain Return
"
....
f
I1:= ~
3
~
9% I=lllz.~ ~""’"’
LOW’High
40301+30~
’ (Ni.,
3"~ -i1~1,,,~,,,
Insider Decisions
J
S
F MA M 0 oJA 0 00 ,,,,
’ * ~*~ ~’~" ...." "*’~""
to Buy O O O O
0
o~o~ OlOooo oooo .....
fossil 0 6 0 0 0 0 0 0 0
102014
20~0~4 30/014 Percent
toBuy
91
102
86 shares
14,O 19.2 22,5 24,5 31.6
10,8 12,8 17.3 20,1 23.5
~
~~
¯,
~’H’I=d’i"
/~
.,, ,111 ,-~
~~ ....... ,,L, .,,,,’""1~
I=1=1
=’=ll=li"
--20
-16
-12
~1"11 ........
¯
"" ~,,,,,,-t
,*..--’J"
24
I I.
~ . ~ , ,I, I1!
,~"t~,., ~t,’li III
16
IIIII, I. hlhhl .11III~d,lll
I1! mdllll IIl.llllllliIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
3dlllllll 3 ........
Lh L. ,. ~,~ .,.! I
8 Jilllll"l IIIIIIIIIlilllllllllllllllllll
mllllllllllllllllllllllllllllll
traded
69780907~291101
to$sllHid,sl0~0)
69601101
TargeI Price Range
2017 2018 2019
--64
-48
-40
. .......... -32
-24
%TOT, RETURN12/14
Tilts VL ARrrlU
STOCK ~N~EX
t yr.
26.3
6.9
3 yr.
76.8
73.7
,yr, 17~,5107.3
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ©VALUELINEPUB.LLC 7-19
17.43 18.96 27.46 40.09 19.92 24.11 26.54 30.19 32.25 24.92 22.65 19.01 19.31 21.35 16,85 17.42 17.90 18.25 Revenues per sh
19.80
3.04
2.82
3.16
4.31
2.83
3.05
3.14
3.56
3.57
2.54
1.76
2.32
2.67
3.18
3.38
3.51
3.65
3.70 "Cash Flow" persh 4.60
1.50
1.29
1.55
2.61
1.07
1.15
1.43
1.56
1.50
1.55 Eamingspersh A
2.35
1.72
.76
.11
.58
.87
t.08
1.31
1.41
.51
.53 ’
.53
.53
1.15
.57
.61
.63
.79
.86
.91
.61
.50
.50
.50
.58
.68
.74
.80 Div’d Decl’d per shs =-j2.06
1.56 I 2.50
4.51
4.09
2.78
2.25
3.07
4.04
3.88
4.37
4.25
4,75 Cap’l Spending per sh
4.15
5.94
3.99
3.32
3.25
4.10
13.75 14.74 15.76 17.25 16.60 17.84 18.19 18.70 22.09 22.03 18.89 18.90 17.60 19.62 20.05 20.87 21.50 22,10 BookValuepersh c
24,50
62.66 6125 58.68 58.68 58.68 60.39 60.46 68.79 76.65 76.81 86.53 86.67 86.67 79.65 79.65 79.65 50.00 80.50 Common Shs Outst’g n
80.00
9.8
9.5
8.5
7.3
15.1
15.0
14.7
15.0
17.4
15.6
35.6
NMF
18.1
14.0
14.5
15.0
16.1
t8.1
.54
.51
.55
.37
.82
.84
.79
.93
.84
1.89 NMF
1.21
.89
.91
.95
.90
.94
Relative P/E Ratio
.95
3.5% 4.4% 4.1% 2.8% 3.5%
3.6% 2.9% 2.9% 3.2%
3.3%
3.4% 4.9% 4.8% 4.1% 3.2%
3.0% 3.0% 2.7%
CAPITAL STRUCTURE as of 9/30/14
1604.8 2076.8 2471.7 1914.0 1959.5 1647.7 1673.5 1700.6 1342.4 1387.9 1430 1450 Revenues ($mill)
1585
Total Debt $1624.1 mill. Due in 5 Yre $740.1 mill.
88.3 106.6 122.1
59.9
8.1
53.5
80.0
96.6 105.6 113.5
t20
t25 Net Profit ($mill)
100
LT Debt $1542.1 mill. LT Interest $120 mill.
28.2% 31.1% 24.7% 5.1% 40.4% 30.4% 32.6% 38.8% 31.4% 31.6% 33.0~ 35.0% Income Tax Rate
35.0%
5.6% 15.6% 4.1% ....
6.4% 7.1% 8.8%
7.2% 1.3% 1.5% 2.5% AFUDC % to Net Profit
5.0%
Pension Assets-12/13 $556.4 mill.
53,5%
Oblig.$599.Smill. 47.1% 57.4% 50.9% 42.0% 45.6% 48.7% 50.4% 51.5% 50.9% 50.0% 51.5% 52.0% Long-Term Debt Ratio
52.4% 42.3% 48.8% 57.6% 54.0% 51.0% 49.2%o 48.1% 48.7% 49.7% 48.5% 48.0% Common Equity Ratio
46.5%
Pfd Stock $11.5 milL PfdDiv’d$.5mill.
2098.9 3044.4 3470.7 2935.8 3025.4 3214.9 3100.3 3245.6 3277.9 3344.0 3560 3695 TotelCapital($mill)
4195
115,293shs. 4.58%, $100 parw/o mandatory
2324.6 2984.1 3761.9 2935.4 3192.0 3332.4 3444.4 3627.1 3746.5 3933.9 4130 4335 Net Plant ($mill)
5020
redemption. Sinking fund began 211184.
6.0~
5.3% 4.7% 4.9%
3.4% 1.9% 3.1% 4.2% 4.5%
7.9% 8.2% 7.2%
3.5%
.5%
32% 5.2%
6.1%
6.6% 6.8% 7,0% 7.0% Return on Shr. Equity
0.5%
as of 10/24/14
8.0% 8.2% 7.2%
3.5%
.5%
3.2% 5.2%
63%
6.6% 6.8% 7.0% 7.0% Return on Corn Equity E
9.5%
4.5% 4.3% 3.7%
.4% 2.2% 3.3%
5.0%
NMF NMF
44%
48%
49% 117% NMF 86%
58%
47%
43%
45%
49%
ELECTRIC OPERATING STATISTICSF
2011 2012 2013 BUSINESS: PNM Resources is an investor-owned holding compa- breakdown ’13: residential, 37%; commercial, 37%; industrial, 7%;
% Change Retag Sales
+3.4 (KWH)
-1.6 -2.9
Avg.lndust.Use(MWH)
other, 19%. Fuels: coal, 56.8%; nuclear, 30.4%; gas/oil, 12.2%;
N/A
N/A
N/A ny of energy and energy related businesses. Primary subsidiaries
Avg.lndust.Re~.perKWH(¢)
N/A
N/A
N/A include Public Service Company of New Mexico (PNM) and Texas- solar, .5%. Fuel costs: 49% of revs. ’13 dept. rate: 3.0%. Has 1,924
Ca~d,/atPeak(Mw)
2547 2537 2572 New Mexico Power Company (TNMP), which generate, transmit, employees. Chrmn., Pres. & CEO: Patricia K. Collawn. Inc.: NM.
Peak Load, Summer1938
(l~w)1948 2008 and distribute electricity in New Mexico and Texas. Sold First Address: 414 Silver Ave. SW, Albuquerque, NM. 87102. Tel.: 505Annual Load Fac~ (%)
N/A
N/A
N/A
% Cha~geCu~0me~s(y~.end)
+.4
+.4
+.7 Choice Energy (9/11) and gas utility operations (1/09). Electric rev. 241-2700. Intemet: www.pnmrasources.com.
share, bringing the annualized dividend to
F=edCta~eC0v.(%)
204
225
241 PNM Resources has flied a general
$0.80 an increase of appro~mhtely 8%.
ANNUAL RATES Past
Past Est’d’11-’13 rate case in New Mexico for rates to
be effective January l, 2016, The rate
PNM is targeting a payout ratio of 50%0fchange(persh)
10Yrs.
5Yrs.
to’t7-’19
Revenues
-4.0% -7.0%
1.0%
request, which is based on a future test
60% over the long term.
year of 2016, seeks a revenue increase of
Our 2015 share-net call is at the midEarnings"Cash Flovi’
5.0%8.0%
11.0%5"5%
.2.5-o~
$107.4 million along with a ROE of 10.5%.
point of the company’s guidance. We
Dividends
0.5% -6.0% 12.0%
BookVaiue
1.5% -1.0%
3.5%
PNM Resources is filing the increase to
expect earnings to increase modestly in
QUARTERLY REVENUES ($ miII.)
the investments the company has
2015. The company’s Texas New Mexico
CalFull address
Power Company continues to perform well,
Year made to reduce its reliance on coal and adfunds needed to maintain dependfueled by strong economic growth within
2011 387.7 415.5 549.5 347.9 1700.6 ditional
its service territory. Sales advanced by
2012 305.4 323.9 390.4 322.7 1342.4 able service to its retail customers. It also
3.2%, driven by an increase in residential
2013 317.7 347.6 399.7 322.9 1387.9 seeks to highlight the declining sales
growth within the company’s service terriand commercial categories. Although load
2014 328.9 346.2 413.9 341
14~0
tory. The rate base of $2.4 billion includes
growth in the area has been of concern
2015 3~5
~55
440
~0
14~0
recently, results in New Mexico were betCalEARNINGS PER SHAREA
Full the costs for 40 mw of solar facilities, the
ter than expected as residential sales inendar Mar.31 Jun.30 Sep.30 Dec.31
Year 40 mw natural gas-fired La Luz plant,
creased by 1.7%. Further, PNM Resources
2011
.04
.20
.61
.22
1.08 emission-control technology at units 1 and
met a significant regulatory milestone ear2012
.17
.33
.69
.13
1.31 4 of the San Juan generating station, the
lier in October, with the approval of the
2013
.18
.38
.64
21
1.41 purchase of the Rio Bravo generating sta2014
.18
revised state implementation plan for the
.39
.68
.25
1.50 tion natural gas plant, and the purchase of
2015
,25
.35
,70
.25
1.55 Palo Verde Unit 2 leases. The company is
San Juan generating station. The New
Mexico Public Regulation Commission is
Cal- QUARTERLY DIVIDENDS PAID a~
Full also recommending changes to rate design
expected to issue a final order in the first
Year to create fair distribution of costs. If apquarter of 2015.
2011
.125
.125
.125
.125
.50 proved, the rate increase is expected to afThis stock retains a favorable Timeli2012
.145
.145
.145
.145
.58 fect customers by an average increase of
hess rank (~.). However, the current yield
2013
.145
.165
.165
.165
.64 7.7% across rate classes,
is below the utility average of 3.3%
2014
.185
.185
.185
.185
.74 The board of directors recently raised
the dividend. The hike was $0.015 a
2015
.20
Saum.yaAjlla
JanuarJ/30, 2015
(A) EPS dil. Exd. n/r gains (losses): ’98, (24¢); Egs. may not sum due to rounding. Next egs. 1’13: $3.4918h. (D) In mill., adjusL for spill (E) Company’s Financial Strength
B
’99, 8¢; ’00, 21; ’01, (15); ’03, 67¢;
’05, rpt. due late Feb. (B) DiVds hist. pd. in Feb.,
(56¢); ’08, ($3.77); ’10, ($1.36); ’11, 88¢. May, Aug., Nov. ¯ DiVd reinvest, plan avail. "j" 10.0%; earned on avg. com. eq., ’13: 10.0%. I PdceGrowth Persistence
25
’13,(16); Excl. disc. ops.: ’08, 42¢; ’09, 78. Shareholder invest, plan avail. (C) Incl. intang. I Reg. Climate: Avg. (F) Excl. First Choice. learnings Predictability
25
/
© 2015 Value Line Publishing LLC. All fights reserved. Factual matedal is obtained from sources believed to b~ reliable and is provided without wawanties of any kind. /
1
THE PUBLISHER IS NOT RESPONS/BLEFOR ANY ERRORS OR OMISSIONS HEREIN. lhis publicalJon is strictly for subscr{~’s own, non-cemmemial internal use.No pa~t ! I !
i" ,
:-I i ~ ~ |
o it may be reproduced, resold, stored or ~ansmitted in any printed, electronic or other fean, or used for generating or marketing any printed or elec~onic publication, service ~ pr(xluct.
PINNACLE WEST
, c ,,PRCE 71.96
15.0J1_ o/40D,Q()
.02 3.4%
[Trailing:lg.2~,Median:
RELATIVEp~ ~TIO
40,5 45,8 I 46,7 51.0 51,7 I ~2,9 ~ 38.0 42.7 48,9 ~,7 61.9 71,1
TIMELINE~ 3 Lowe~ 10110/14 High:
Low: 28.3 36.3I 39.8 38.3 36.8/ ~6.3~ 22,3
32,3 37.3 45.9 51.5 51.2
SAFE~ 1 Raised~13
LEGENDS
~ 0.74 x Di~d~ds p sh
di~ded by I~ Rate
TECHNICAL
Raised 1~14
R~e Pfi~ S~en~
BETA .70 (1.~ = Ma~e0
O~s: Y~
S~ area iMica~s ~=,
2017-19 PR~EC~ONS
Ann’l To~l ~ I’ ~
¯ ’ .,,,"’h, ,,,,,i, , .- ~
,1’’’’’1’’’’ ~
Price Gain
R~urn
~ ,m =’i,, "’"’~ld"
I
.,rl,,
,.
High 65 (-10%)
1%
~~
L~ 55
~"
(-25%) -2%
/
Insider Decisions
F M A M J J A S O ~" "-""
~,,
3
lOBW
to~ll000000000
"~’~ " ~"~"
" -.."-" "***’*~****.*
*~’
**%
"" ....
III i
I ~II n ,lhlllllllml,.llllllllllllh .I hl IIIII..~II. I. III.,IIII lllhlllh
Target Price Range
20t712018I--12012019
-100
-80
~64
.-48
-32
~24
-20
,--16
-12
% TOT. RETURN 12/14 -8
THIS VL ARITN.’
I yr. 34.5
6.9
II I
yr.
60.0
73.7
~llt°Bw
160177
171169
163171 ~adedshares ~ iIlll,d,.,l lllhnllll lllhlllll 35lllllllllllm,
I lllllllll lfll
yr. 133.7 I 107.3
Hid’s(000) 87519 87807 88791
IIIIIIIIIIII IIIIIIIIIII IIIIIIIIII IIIIIIIII~I
lllllllll llllll
1998 t999 2000 2001 2002 2003 2004 2005 2006 2007 008 :OOfl 2010 2011 2012 2013 2014 2015 ©VALUEUNEPUB.LLC r.19
25.12 28.57 43.50 53.66 28.90 30.87 31.59 30.16 34.03 35.07 33,37 32.50 30.01 29.67 30.09 31.35 31.40 32.35 Revenues per sh
35.25
7.34
7.73
8.72
7.99
7.01
7.33
6.93
5.76
9.70
9.29
8.13
8.08
6.85
7.52
7.92
8.15
8.35
8,75 "Cash Flow" per sh 9.75
2.85
3.18
3.35
3.68
2.53
2.52
2.58
2.24~ 3.17
2.96
3.50
3.66
3.70
4.25
2.12
2.26
3.08
2.99
1.23
1.33
1.43
1.53
1.63
2.44 Div’d Ded’d per sh a ¯
2.80
1.73
1.83
1.93
2.03
2.10
2.10
2.10
2.10
2.10
2.67
2.23
2.33
3.76
4.05
7.76 12.27
9.81
7.60
5.86
6.39
7.59
9.37
9.46
7.64
7.03
8.26
8.24
9.36
9.10
9.55 Cap’l Spending per sh 9,25
25.50 26.00 28.09 29.46 29.44 31.00 32.14 34.57 34.48 35.15 34.16 32.69 33.86 34.98 36.20 38.07 39.45 40.85 Book Value per sh c
45.50
84.83 84.83 84.83 84.83 91.26 91.29 91.79 99.08 99.96 100.49 00.89 )1.43 108.77 109.25 109.74 110.18 110.75 111.25 CommonShsOutat’g o 117.50
15.2
11.9
11.3 12.0
14.4
14.0
15.8
192.
13.7
142
152
15.4
13.5
14.9
16.1
13.7
12.6
14,6
.79
.61
.68
.73
.79
.80
.83
1.02
.74
.79
.97
.91
.80
.92
.91
.86
.80
Relative P/E Ratio
.55
2.8% 3.5% 3.8%
3.5% 4.5% 4.9% 4.5% 4.5%
4.7% 4.8%
5.3% 4.0% 4.1%
4.5%
6.2%
3.8% 5.4% 4.8%
2899.7 2988.0 3401.7 3523.6 367.1 297.1 3263.6 3241.4 3301.8 3454.6 3475 3600 Revenues ($mill)
4150
Total Debt $3525.8 mill. Due in 5 Yrs $1528.1 mill. 235.2 223.2 3t7.1 298.8 213.6 ~29.2 330.4 328.2 387.4 406.1
415
555
35.4% 36.2% 33.0% 33.6% 3.4%
35.0%
8.9°/0 31.9% 34.0% 36.2% 34.4% 34.0% 35.0% Income Tax Rate
Incl. $13.4 mill. Palo Verde sale leaseback lessor
6.9% 10.4% 11.1% 14.8% 7.5% 1.2% 11.7% 12.8%
9.7% 10.0% 10.0% 9,0% AFUDC % to Nat Profit
0.0%
notes.
46.7% 43.2°/0 48.4% 47.0°/0 6.8% 0.4% 45.3% 44.1% 44.6% 40.0% 42.0% 46.5% Long.Term Debt Ratio
41.0%
53.3% 56.8% 51,6% 53.0% 3.2%
9.6% 54.7°/0 55.9% 55.4% 60.0% 58.0% 53.5% Common Equity Ratio
59.0%
Pension Assets-12/1352264.1 mill.
5535.2 6033.4 6678.7 6658.7 477.6 386.6 6729.1 6840.9 7171.9 6990.9 79/5 8465 Total Capital ($mill)
9100
Oblig. $2646.5 mill. 7535.5 7577.1
7881.9 8436.4 916.7 .>57.8 9578.8 9962.3 10396 10889 11385 11910 Net Plant ($mill)
13575
Pfd Stock None
6.5%
5.6%
5.0% 6,2%
5.9% 4.7% 4.8% 6.5% 6.4%
6.8% 7.1% 6.5% 6.5% Ratum on Total Cap’l
6.5% 9.2%
9.8°/0 9.7% 9.5% 9.5% Return on Shr, Equity
9.5%
8,0%
8.5% 6.2% 5.9% 9.0% 8.6%
as of 10/24/14
8.0% 6.5% 9.2%
8.5% 6.2% 5.9% 9.0% 8.6%
9.8% 9,7% 9.5% 9.5% Raturn on Corn Equity s
9.5%
2.3% 1.0% 3.4% 2.5%
4.1°/0 4.1% 3.5% 3.5% Retained to Com Eq
3.5%
.3%
.7% 3.1% 2.8%
71%
85%
63%
70%
96%
89%
66%
68%
58%
58%
62% 63% All Div’ds to Nat Prof
65%
2011 2012 2013 BUSINESS: Pinnacle West Capital Corporation is a holding compa- commercial, 39% industrial, 5%; other, 7%. Generating sources:
% Change Retail Sal~
+ 1.8~(KWH)
-.2
-.2 ny for Arizona Public Service Company (APS), which supplies elec- coal, 33%; nuclear’ 27%; gas & other, 18%; purchased, 22%. Fuel
632
647
644
A~.
IMusLRevs.
Use (M~~/~H
(i)
A~. Indust
pe
7.78 7.86 8.21 tricity to 1.1 million customers in most of Arizona, except about half costs: 32% of revenues. Has 6,400 employees. ’13 reported
8577 8864 8398 of the Phoenix metro area, the Tucson metro area, and Mohave deprec, rate: 3.0%. Chairman, President & CEO: Donald E. Brandt.
CapacityatPeak(l~
PeakL0ad, Surnmer~
7087 7207 6927
in northwestern Arizona. Discontinued SunCor real estate
Inc.: AZ. Address: 400 North Fifth St., P.O. Box 53999, Phoenix, AZ
Mnual L0ad Factor(<=)’~ 50.0 48.8 50.0 County
% Change Customer!(yr-end)
+.8 +1.3 +1.4 subsidiary in ’10. Electric revenue breakdown: residential, 49%;
85072-3999. Tel.: 602-250-1000. Intemet: www.pinnadewesLcom.
F=ed Charge C0v, (%)
308
397
419 Pinnacle West’s utility subsidiary the real estate collapse that occurred
ANNUAL RATES Past
Past Est’d ’11-’13 received a rate increase that took el- several years ago. Our 2015 sharefect at the start of the new year. Ari- earnings estimate is at the midpoint of
of change (per sh)
10 Yrs.
3 Yrs.
to ’t7-’19
Revenues
-2.0% -2.5%
2.5%
zona Public Service paid $182 million for a Pinnacle West’s targeted range of $3.75"Cash Flow"
-3.0%
3,5%
739-megawatt stake in Units 4 and 5 of $3.95.
Earnings
1.5~/~
4.0%
4.0%
the Four Corners coal-fired plant. (It re- The utility is planning to add some
Dividends
3.5%
2,5%
3.0%
Book Value
1.0%
tired Units 1, 2, and 3.) In order to place gas-fired generating capacity. APS in2.0%
4.0%
assets into the rate base, the utility’s tends to build 510 mw and retire 220 row,
Cat- QUARTERLY REVENUES ($ mill,) Full these
endar Mar.31 Jun.30 Sep.30 Dec.31 Y~r tariffs were raised by $57.1 million (2.0%). for net incremental capacity of 290 mw.
2011 648.9 799,8 1124,8 667,9 3241.4 The increase was below the $65.4 million The ACC has approved the project. The
company expects the project to be com2012 620.6 878.6 1109,5 693,1 3301,8 that APS had sought,
2013 686.6 915,8 1152.4 699,8 3454,6 The utility will put forth a regulatory pleted in the second quarter of 2018 at a
filing this year to address rate design, cost of $60 million-S70 million.
2014 686.3 906,3 1172.7 709.7 3475
Like many utilities, APS believes custom- Finances are strong. The l~Lxed-charge
2015 700
950 1200
750 3600
that have installed solar panels on coverage and common-equity ratio are well
CalFull ers
endar Mar.31 Jun.30 Sep.30 Dec.31 Year their buildings are not paying for their use above the utility norms. Earned returns on
2011
d.15
.78 2.24
.11
2.99 of the electric grid. The Arizona Corpora- equity have improved in recent years, too.
2012 d.07
1,12 2.21
.24
3.50 tion Commission (ACC) has opened a gen- The dividend yield of Pinnacle West
2013
.22 1.18 2.04
.22
3.66 eric docket to address this matter. The stock is about average for a utility. We
2014
,14 1.19 2.20
.17
3.70 ACC has two new members, but this isn’t project that, for at least the next few
2015
.20
1.25 2.20
.20
3.85 likely to slow the regulatory process,
years, the company will maintain the 5%
QUARTERLY DIVIDENDS PND a ¯ Full We estimate that earnings will inannual dividend growth rate that was esCalendar Mar.31 Jun.30 Sap.30 Dec.31 Year crease 4% this year. The aforementioned tablished last fall. However, like several
increase should help. APS also re- other electric utility equities, the recent
2011 .525
.525
.525 .525
2.10 rate
2012 .525 .525
.525 .545
2.12 ceives rate relief annually for certain price is above our 2017-2019 Target Price
2013 .545 .645
.645 .5675 2.20 kinds of capital spending, such as for Range. Accordingly, total return potential
2014 .5675 .5675 .5675 .595
2.30 transmission. Customer growth is improv- is negative.
2015
ing as the state’s economy recovers from Paul E. Debbas, CFA
January 30, 2015
(A) Diluted EPS. Excl. nonrec, losses: ’02, 77¢; don’t add due to rounding. Next earnings report (C) Incl. deferred charges. In ’13: $7.71/sh.
A+
’09, $1.45; excl. gains (losses) from disc. ops.: I due late Feb. (B) DiVds historically paid in ear- (D) In mill. (E) Rate base: Fair value. Rate al- Stock’s Pdoe Stability
100
’00, 22¢; ’05, (36¢); ’06, 10¢; ’08, 28¢; ’09, I ly Mar., June, Sept., & Dec. There were 5 dec- lowed on com. e~q; in ’12: 10%; earned on avg.
55
Pdca Growth Persistence
(13¢); ’10, 18¢; ’11, 10; ’12, (5¢). ’11 EPS I larations in ’12. ¯ DiVd reinvestment plan avail, com. eq., ’13: 9.9Yo. Regulatory Climate: Avg.
65
© 2o15 Value Line Publishing LLC. All rights reserved. Factual material is obtained [mm sources Ec!icw~ to be reliable and is provided without warranties of any kind.
THE PUBLISHER IS NOT RESPONSIBLEFOR ANY ERRORS OR OMISSIONS HEREIN. This pubticedo~ is strictly for subscriber’s own non-cornrnerdal, internal use. No part
of it may be reproduced, reso d, stored or transmitted in any printed, electronic or other form, or used for generating or marketing an), ~nted or electronic pubicatiofl, service or product.
SAFETY
2 Rai~edS/4/12 LEGENDsl I I
TECHNICAL
Raised 1/9115
.... RelativePrice Sb’ength
Options:
ShadedYes
ow: 24.2 25.5 ~3.5, 17.5 21.3 24.3 27.4 29.0
3
Price Gain Return
¯ow
2S (-35%) -7%
Insider Decisions
FMAM J JASO
toBuy
tosell 0 0 0 1 0 0 0 0 0
~
~
~
r~
S
2017 2018 2019
-64
-48
--40
-"" ......
/" ~
.
-12
-8
,,*~, ,
|
"~
THIS
VL ARITH."
29.4
6.9 "
-- 1yr. 3 yr.
65.6
73.7
122.5
107.3
--- 5 yr.
On April 3, 2006, Portland General Electric’s 2004:!005G 2006 2007 2008 2009 2010
2011 2012 2013 2014 2015 ©VALUELINEPUB.LLC 7-19
existing stock (which was owned by Enron)
-- 23.14 24.32 27.87 27.89 23.99 23.87 24.06 23.89 23.18 24.30 22.20 Revenues per sh 24.25
was canceled, and 62.5 million shares were
5.75 "Cash Flow" persh 8.~0
-4.75
4.~4
5.21
4.71
4.07
4.82
4.96
5.15
4.93
6.00
issued to Enron’s creditors or the Disputed
-1.02
1.14
2.33
1.31
1.66
1.95
1.87
1.77
2.15
2.25 Eamingspersh A
2.50
1.39
Claims Reserve (DCR). The stock began ....
1.06
.68
.93
.97
1.01
1.04
1.08
1.10
1.12
1.14 Div’d Decl’dpersh e,l" f.40
trading on a when-issued basis that day,
.4.08
5.94
7.28
6.12
9.25
5.97
3.98
4.01
8.40 13.20
6.88 Cap’lSpending persh 3.25
and regular trading began on April 10, 2006. -- 19.15 19.58 21.05 21.64 20.50 21.14 22.07 22.87 23.30 24.30 25.60 Book Value per sh c
Shares issued to the DCR were released
-- 62.50 62.50 62.53 62.58 75.21 75.32 75.36 75.56 78.09 78.25 09.00 Common Shs Outst’g D 89.75
over time to Enron’s creditors until all of the ....
23.4
16.9
15.5
t2.5
11.9
16.3
14.4
12.0
12.4
14.0
remaining shares were released in June .... 1.26
.63
.98
.96
.76
.78
.89
.95
.80
Relative P/ERatio
.80
2007 .....
4.4%
2.5%
3.3% 4.3% 5.4%
52% 4.4%
4.1% 3.7%
3.4%
CAPITAL STRUCTURE as of g130114
1454.0 1446.0 1520.0 1743.0 1745.0 1804.0 1783.0 1813.0 1805.0 1810.0
2175
Total Debt $2321 mill. Due in 5 Yrs $270 mill.
92.0
64.0
71.0 145.0
87.0
95.0 125.0 147.0 141.0 137.0
170
195 Nat Profit ($mill)
228
37.0% 40.2% 33.6% 33.8% 28.7% 28.8% 30.5% 28.3% 31.4% 23.2% 26.0% 24.0% Income Tax Rate
24.0%
9.8% 18.8% 33.8% 17.9% 17.2% 31.6% 17.6% 5.4%
4.0%
45.5%
Pension Asseta-12/13 5596 mill.
58.9% 57.7% 56.6% 50.1% 53.8% 49.7% 47.0% 50.4% 52.9% 48.7% 46.5% 55.0% Common Equit~ Ratio
Oblig. $705 mill. 2171.0 2076.0 2161.0 2629.0 2518.0 3100.0 3390.0 3298.0 3264.0 3735.0 4110 4140 TotalCapital($mill)
4775
Pfd Stock None
2275.0 2436.0 2718.0 3066.0 3301.0 3858.0 4133.0 4285.0 4392.0 4880.0 5610 5900 Nat Plant ($mill)
5875
5.6% 4.6%
4.7% 6.9% 5.0% 4.5% 5.4% 6.2%
5.9% 5.1%
6.0%
Common Stock 78.209.672 shs.
as of 10123114
7.2% 5.3%
5.8% 11.0% 6.4% 6.2% 7.9% 8.8%
8.2% 7.5%
9.0% 8.5% Ratum on Shr. Equity
9.0%
7.2% 5.3%
5.8% 11.0% 6.4% 6.2% 7.9% 8.8%
8.2% 7.5%
9.0% 8.5% Ratum on Com Equ~ s 9.0%
7.2% 5.3% 3.5% 6.6% 2.0% 1.5% 3.0% 4,1%
4.0%
ELECTRIC OPERATING STATISTICS .... 39%
40% 69%
76% 62%
54%
57%
61% 81% 49% All Div’ds to Net Prof
55%
2011 2012 2013 BUSINESS: Portland General Electric Company (PGE) provides 19%; gas, 16%; hydro. 16%; wind, 6%; purchased. 43%. Fuel
%ChangeRetailSales(KWH)
+3.3 -.8 +1.2
Avg.lndust.Use MWH)
16573 16409 16258 electricity to 843,000 customers in 52 titles in a 4,000-square-mile costs: 42% of revenues. ’13 reported depreciation rate: 3.7%. Has
5.44 5.26
4.84 area of Oregon, including Portland and Salem. The company is in 2,600 employees. Chairman: Jack E. Davis. President and Chief
~Av(J.Indust.Revs.perK~H
)
~;apa~tPeak(Mw)
4162 4173 4398 the process of decommissioning the Trojan nuclear plant, which it
Officer: James J. Piro. Incoq~orated: Oregon. Address:
Peak Load I~inter ~ F
3558 3597 3869 dosed in 1993. Electric revenue breakdown: residential, 48%; com- Executive
121 SW Salmon Street, Portland, Oregon 97204. Telephone: 503AnnualLo~d Factof(%I
NA
NA
NA
o
o
%ChangeCust0r~rs(yr-end)
merdal,
34%;
industrial,
13~/o;
other,
5Yo.
Generating
sources:
coal,
+.2
+.7
+.9
464-8000. Intemet: www.porttandgeneral.cem.
Following what was almost certainly
I FixadChargeC0v.(%)
273
270
239 A rate increase for Portland General
its much-improved earnings tally in
ANNUAL RATES Past
Past Est’d’11.’13 ~..lectric Company took effect at the
start of 2OI5. Tariffs were raised by $15
ofchange(persh)
~-O14, we estimate earnings will climb
10Yrs.
5Yrs.
to’17-’19
Revenues
-- -2.5%
.5%
million (about 1%), based on a return of
at a mid-single-digit pace this year.
"Cash Flow"
-.5%
4,5%
9.68% on a common-equity ratio of 50%.
Our 2014 estimate is at the midpoint of
Earnings
-3.0%
5.0%
The new allowed return on equity is
PGE’s targeted range of $2.10-$2.20 a
Dividends
-4.5%
4.5%
BookValue
-2.0%
4.0%
slightly below the previous one of 9.75%.
share. This year, the aforementioned rate
order will help boost the company’s profits.
QUARTERLY REVENUES ($ milI.)
CalFull The rate order enabled PGE to place two
In addition PGE’s service territory is exendar Mar.31 Jun.30 Sep.30 Dec.31
Year projects, which began commercial operation in late 2014, in the rate base. A 267periencing load growth, despite the effects
2011 484
411
439
479
1813
megawatt wind farm was completed at a
of energy efficiency measures. The indus2012 479
413
450
463
1805
cost that was expected to be $500 million,
trial sector is increasing its electricity
2013 473
403
435
499
1810
2014 493
484
and a 220-mw gas-fired peaking plant was
usage. Our 2015 earnings estimate is
423
~00
1900
20t5 525
445
485
~20
1975
built at a cost expected to be $296 million.
$2.25 a share.
The share count will rise significantly
CalEARNINGS PER SHAREA
Full The rate hike was small because cost rethis year. PGE expects to settle a forward
ender Mar.31 Jun.30 Sep.30 Dec.31
Year ductions and customer credits offset most
equity sale for $278 million in the second
20tl
.92
.29
.36
1.95 of what would have been a much larger in.38
quarter. The company intends to use the
2012
.34
.65
.50
.38
1.87 crease,
proceeds to pay down borrowings from its
2013
.65
.13
.40
1.77 Another generating plant is under
.59
credit facilities.
2014
.73
.43
.47
.52
2.t5 construction. The 440-row base-load gas2015
.75
.45
.50
.55
2.25 fired facility is expected to begin commerThis stock’s dividend yield is somewhat below the industry average. The
Cal- QgARTERLY0ffIDENOSPAID
~
Full cial operation in mid-2016 at a cost of $450
share price has already risen 5% this year.
endar Mar.31 Jun.30 Sep.30 Dec.31 Year million. PGE will file a rate application
month in order to receive rate relief
Like several other utility equities, the
2011
.26
.26
.265
.265
t.05 next
recent price is above our 2017-2019 Target
2012 .265
.265 .27
.27
1.07 in 2016, Part of the increase will take efPrice Range. Thus, total return potential
2013
.27
.27
.275
.275
1.09 fect at the start of the year, with the reis negative.
2014 .275
.275 .28
.28
1.11 mainder coming when the new plant is
2015 .28
completed.
Paul E. Debbas, CFA
January 30, 2015
(A) Diluted EPS. Exd. nonrecurring loss: ’13, [Shareholder investment plan avail. (C) Incl. eq., ’13: 7.6%. Regulatory Climate: Below Company’s Financial Strength
B++
42¢. Next earnings report due mid-Feb, deferred charges. In ’13: $6.94/sh. (D) In mill. [ Average. (F) Summer peak in ’12. (G) ’05 perStock’s Price Stability
100
(B) Dividends paid mid-Jan., Apr., July, and (E) Rate base: Net original cost Rate allowed [ share data are pro forma, based on shares outPrice Growth Persistence
50
Oct. ¯ Dividend reinvestment plan avail. 1" ] on com. eq. in ’15: 9.68%; earnest on avg. com. [ standing when stock began trading in ’06.
65
© 2015 Value Line Publishing LLC. All rights reserved Factual material is obtained from sources believed to be reliable and is piovided wi~out w,.~.ties of any kind.
T,H.E PUBLISHER IS NOT RESPONSIBLEFOR ANY ERRORS OR OMISSIONS HEREIN. ]his publication is strictly fer subscriber’s own non-commerciel internal use. No par
of i may be reproduced, resold, stored or transmtted in any pdnted, electronic or other ferm, or used for generating or marketing any p~’~ted or electronic publication, service or product.
toBW
to Sell
~4
121
116
127
123 shares
107
116 traded
82449 83632
147-
SCANA
C0RP.. s.c
TIMELINESS 3 Lo~e= 10/lO/14
SAFETY 2 Lowered 9/10~9
TECHNICAL 4 Lowe~]2/13115
BETA 35 (1.00 = Market)
2018-20 ~
Ann’l Total
Price Gain Retum
’+5%
iHoigh
65 (;25% I 5%
w 45
-3%
Insicler Derisions
LEGENDS
divided by Intcrest Rate
.... Relative Pdce $~’ength
Optiens: Yes
RECENT
45.5
32.9
~[Trailing:16.2~
61,27 T,O
4=RELATIVE
14.0)
| U,L ~aedian:
1.6 I 42.0 45.5 50.3
;.0 ! 34.2 34.6 43.3
54.4
44.7
DIV’D
3.5%
63.,
45:
Range
2020
128
96
-80
-64
48
4O
32
24
MAM J JASON
to Buy0 0 0 0 0 0 0 0 0
Ol~ioas 0 0 0 0 0 0 0 0 0
to~ll 0 1 1 0 00 0 0 0
102014
2Q2014
3Q2014
12
toBuy
194
192
197 Percent
shares
8 -to Sell
153
140
154
7517.~_7 7779,5
~
1999 I 2000 2001 2002 200312004
15.93 I 32.78 32.95 26.65 30.85 I 34.53 41.66 I 3
3.15 I 4,43
4.55
4.56
4.95 I 5.28
7.43
1.44 I 2.12
2.15
2.50 I 2.67
2.38
2.78
1.32 I 1.15
1.20
1.30
1.38 I 1.46
1.56
2.37 I 3.28
4.99
6.41
6.94 I 4.86
3.38
20.27 I 19.40 20.95 t9.64 20.82 I 21.78 23.35 I 2
103.57 I 104.73 104.73 110.83 110.74 I 112.52 114.67 I 11
17.5 I 12.5
13,0 I 13.6
12.6
12,2
14.4
1.00 I
.81
.65
.67
.74 I
.72
.77
5.2% I 4.3% 4.4%
4.5% 4"2% ! 4.0% 3.9% J 4
Total Debt $6220 mill. Due in 6 Yre $1568 mill.
323.0 1 3
% TOT. RETURN 1115
THiS
16
-12
VL ARI11L’
~
1 yr.
40.4
6.9
61.1
57.1
3 yr.
5 yr. 123.6 107.2
~ ©VALUE LINE PUB, LLC
~0.70 31.95 I Revenues per sh
7.15
7.45 I"Cash Flow" per sh
4.00 learnings persh A
3.85
2.16
2.22 IDiv’d Ded’d persh B=
3.201 10.~0 Icap’l Spending persh
’7.00 50,00 IBookValuepersh c
5.001 147.00 tCommonShsOutst’g o
2007
2011 2012 2013 201,
~-20
39.61
33.95 31.63 3t 38 34,2
36.50
5.73
6.01
6.30
6.53
7,1
8.75
2.74
2.97
3.15
3.39
3.8
4.75
1.76
1.94
1.98
2.03
2.1
2.40
9.75
6.21
411 6.87 6.81
8.16
7.84 10.3
25.37
29.94 31.47 33.08 35.0
45.5O
t49.00
116.67
129.88 132.01 141.00 143.0
~d,ol, re, ,,~ IAvg Ann’l PIE Ratio
15.0
.6 I 12.9
13.7
14.8
14.4
13.
11.5
va~uelune I Relative P/E Ratio
.80
.86
.94
.81
.7
.70
4.3°/o
4.8% 4,2%
4.2% 4.1°, es~r~a~es IAvg Ann’l Div’d Yield
4.3%
4621.0
4409.0 4176,0 4495.0 490
1450 4700 1 Revenues ($mi]l)
545O
54
7O5
327.0
387.0 420.0 471.0
560 595 Net Profit ($mill)
29.2%
30.3% 30.2% 32.1% 32,~
LO% I 31.0% Income Tax Rate
~2.0%
4.6%
5.4% 7.6%
8.7%
9.~
LO% 13,0% IAFUDC % to Net Profit
3.0%
48.4%
L3% I 55.5% ILong-Term Debt Ratio
54.3% 54,4% 53.6% 54.5~
Pension Assets-12/13 $870.1 mill.
49.7%
45.7% 45.6% 46.4% 45.5~
LO% 44.3% Common Equity Ratio
¢6.0%
Oblig. $823.0 mill.
5952.0
~t501 12875 Total Capital ($mill)
14750
.0 17854,0 8511.0 9103.0 10059 11o0
Pfd Stock None
7538.0
10047 10896 11043
1265 ~875
14750 Net Plant ($mill)
17575
7.4% I
6.0%
7,3%
% I 6.5% 6.2% 6.3%
6.2% 6.5~
LO%J 6.0% Return on Tota Cap
11.6% I 1¢
10.6%
% 110.2% 10.0% 10.1%
t0.6% IRaturn on Shr. Equity
t0.5%
as of 10131114
11.8% I
10.8%
10.0% 10.1%
10.5% IRaturn on Cam Equity e 10.5%
5.3% I
4.0%
3.6%
3.9%
4.1% 5.0=, L5% i 4.5% IRatained to Cam Eq
5.0%
56% I
55% IAII Div’ds to Net Prof
51%
64%
64%
61%
60%
54=, ~,%
2011 2012 2013 BUSINESS: SCANA Corporation is a holding company for South dustrial, 18%; other, 5%. ’Generating sources: coal, 48%; oil & gas,
% Change Retail Sales (1~)
-3.4
-3.9
+.3
A~. IndusL Use (1~)
8129 8055 8180 Carolina Electric & Gas Company, which supplies electricity to 28%; nuclear, 19%; hydro, 3%; purchased, 2%. Fuel costs: 51% of
Avg. IndusL Revs. per ~
6.87 7.09 7.27 675,000 customers in South Carolina. Supplies gas and transmis- revenues. ’13 reported deprec, rate: 2.9%. Has 6,000 employees.
CapacityatYemnd(Mw)
5642 5533 5237 sion service to 1.3 million customers in North and South Carolina Chairman, CEO & President: Kevin B. Marsh. Incorporated: South
PeakL0ad Summer(Mw)
4885 4761 4574 and Georgia. Owns gas pipelines. Acquired PSNC Energy 2/00. Carolina. Address: 100 SCANA Parkway, Cayce, South Carolina
Annual Load Factor %)
57.3 56,8 58.8
% Change Customers
29033. Tel.: 803-217-9000. Intemet: www.scana.com.
+.5(yr-en~
+.9 +1.2 Elect~c revenue breakdown: residential, 44%; commercial, 33%;
SCANA
has
announced
the
sale
of
two
to ask the South Carolina regulators to upFixed Charge C0v. (%)
279 281 293
date their previous order, which was based
ANNUAL RATES Past
Past Est’d ’11-’13 noncore subsidiaries. The company has
sold its interstate gas pipeline and is sellon a shorter construction schedule.
of change (per sh)
10 Yrs.
5 Yrs.
to ’18:20
Revenues
ing its telecommunications business for a
.5% -4.5%
1.5%
We estimate that earnings will in"Cash Flow"
3.0%
2.0%
5.0%
total of about $650 million. After taxes,
crease in 2015 and 2016. Last year, faEarnings
3.0%
3,0%
6.0%
the proceeds are expected to amount to
vorable weather conditions made the comDividends
4.5%
2.5%
3.0%
Book Value
4.5%
4.5%
5.5%
more than $400 million. SCANA would use
parisons difficult. However, we think a
cash in place of part of its planned
sharp rise in the Allowance for Funds
~ull the
Used During Construction, a noncash
enoar I Mar.31 Jun.30 Sep.30 0ec.31
ear equity issuances in 2015 and 2016. The
credit to earnings, will outweigh the ef2012 I 1107 908 1038 1123
4176.0 company expects to record a gain on the
fects of an assumed return to normal
2013 I 1311 1016 1051 1117
4495.0 asset sales. The telecommunications sale
is likely to be completed in the current
weather. Also, each year SCE&G earns a
2014 I 1590 1026 1121 1103 4900
quarter.
return on its additional nuclear construc2015 I 1250 1025 1025 1150 4450
Some delays and cost overruns are af2016 I 1325 1075 1075 1225 4700
tion work in progress.
the two nuclear units South
We think the directors raised the divi..... EARNINGS PER SHARE A
:ull fecting
enoar ~Mar.31 Jun.30 Sep,30 Dec.31
dend shortly after this report went to
ear Carolina Electric & Gas is building.
will provide 1,340 megawatts of capress. We estimate that the annual pay2o121 .91
.54
.91
.79
;.15 This
out was boosted by $0.06 a share (2.9%).
2013 I 1.11
.60
.94
.74
;.39 pacity. The cost was estimated at $6.1 bitThe
uncertainty
surrounding
2014 I 1.37
.68
1.01
.74
1.80 lion, but the contractors expect each unit
SCE&G’s nuclear construction has not
2015 I 1.30
.70
1.05
.80
L05 to be delayed about a year. The conhurt SCANA stock. The share price
2016 t 1.40
.70
1.05
.05
L00 tractors’ schedule would have the first unit
climbed 29% last year, and has risen an..... QUARTERLY DIVIDENDS PAID a = :ull coming on line in late 2018 or early 2019,
other 1% so far in 2015. The dividend yield
enoar i Mar.31 Jun.30 Sep.30 Dec.31
ear the second 12 months later. The delay will
raise the cost by more than 10%.
is only about average for a utility. The re2Oll 1.475 .485 .485 .485
.93 probably
cent quotation is near the top of our 20182012 1.485 ,495
.495 .495
.97 However, SCE&G has not accepted the re2020 Target Price Range, making this is2013 1.495 .5075 .5075 .5075
L02 vised schedule or costs, and is in talks
sue’s total return potential negligible.
2014 1.5075 .525
.525 .525
L08 with the contractors. Once the company
has
accepted
a
new
schedule,
it
will
have
2015 1.525
Paul E. Debbas, CFA February 20, 2015
due late April. (B) Div’ds historically paid in
IA) Diluted egs. Excl. nonrec, gains (losses):
cost. Rate allowed on com. eq. in SC: 10.25% Company’s Financial Strength
B++
99, 29¢; ’00, 28¢; ’01, $3.00; ’02, ($3.72); ’03, eady Jan., Apr., July, & Oct. ¯ DiVd reinvestelec. in ’13. 10.25% gas in ’05; in NC: 10.6% in Stock’s Price Stability
31¢; ’04, (23¢); ’05, 3¢; ’06, 9¢. ’12 & ’13 EPS ment plan avail. (C) Incl. intangibles. In ’13:
’08; eamed on avg. com. eq., ’13: 10.7%.
don’t add due to rounding. Next earnings report $9.65/sh. (D) In mill. (E) Rate base: Net orig. Regu atory C mate: Above Average.
© 2015 Vaue Lne Pul~ishing LLC. Ati rights resenred. Factual material is obtained from sources believed to be refiable and is
kind.
THE
provided wi~out internal
warrantiesu~ea.n~
of
PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. Tnispublicadon is strictly for subscriber’s own. non-commercial,
pan
of it may be reproduced, resold, stored or ~ransmitted in any printed, electronic or o~er form, or usedfor generating or marketing any pdnted or electronic publicalfon, service or product.
,RCE 113,67
/-~,~) ~Median:
SEMPRA ENERGYN
sE
, 12,0) P/E RATIO1.32
RECENT
3
TIMEUNESS Raised9/5/14
SAFETY 2 Lowered 2J4~00
TECHNICAL 3 Raised12J19/14
BETA 35 (1.00 = Market)
2017-19 PROJECTIONS
Ann’l Total
Pdce Gain Return
(-10%)
1%
LHoigh
w 105
80 (-30%) -5%
Insider Decisions
FM
2.4%i
RATP/EIo e)’4 ~ (Trailing: 24,8~ RELATIVE
YLDD~D
High: 30.9 37.9 47.9 57.3 66.4 63.0 I 57.2 57.2 56.0 72.9 93.0 116.3
Low:
22.3 29.5 35.5 42.9 50.9 34.3 I 36.4 43.9 44.8 54.7 70.6 86.7
LEGENDS
~ 1.00divided
x Dividends
p sh
by Interest
Rate
Rela~ve Price S~ength
Shaded area h~/;~/~s recession
" "~
J
...,d" ’
Target Price Range
2017 2018 2019
-160
-120
............ _100
-80
-60
-50
-40
-30
~
Options ~ 60 0 11~ ~ 10 1 1
to Sell
030260111
% TOT. RETURN 12/14 -15
’..,-’."" --’~.....
tQ2014 2Q2014
3Q2014
24
to BW 234
232
239 Percent
shares 16
to Sdl
205
222
220 traded
~173962
1998119991 20001 2-~~ 2002 2003
23.31 22.89 35.38 39.27 29.38 34.81
5.16
5.36
4.91
5.39
5.71
5.56
1.24
1.66
2.56
2.55
2.79
3.01
1.56
1.56
1.00
1.00
1.00
1.00
1.85
2.48
3.76
5.22
5.92
4.63
12.29 12.58 12.35 13.17 13.79 17.17
237.00 237.40 201.90 204.48 204.91 226.60
12.8
21.1
9.4
9.7
8.2
9.0
1.10
.73
.61
.50
.45
.51
6.0% 7.4% 5.2% 4.1%
4.4% 3.7%
Total Debt $13934 mill Due in 5 Yre $5706 mill.
Incl. $236 mill. capitalized leases.
THIS
SI"O~K
2004 2005 2006 2007 2008
2010 2011
40.18 45.64 44.89 43.79 44.21 32.88 37.44 41.83
6.58
5.96
6.74
6.93
7.40
7.94
7.76
8.58
3.93
3.52
4.23
4.26
4.43
4.78
4.02
4.47
1.00
1.16
1.20
1.24
1.56
1.56
1.92
1.37
4.62
5.46
7.28
7.70
8.47
7.76
8.58 11.85
20.78 23.95 28.66 31.87 32.75 56.54 37.54 41.00
234.18 257.19 262.01 261.21 24332 246.51 240.45 239.93
8.6
11.8
11.5
14.01 11.8
10.1
12.6
11.8
.45
.63
.62
.74
.71
.67
.80
.74
2.9% 2.8% 2.5% 2.1% 2.6% 3.2% 3.1%
3.6%
9410.0 11737 11761 11438 10758 8106.0 9003.0 10036
930.0 898.0 1118.0 1135.0 1123.0 1193.0 1008.0 1088.0
17.2%
-- 31.3% 33.6% 29.2% 30.5% 26.5% 25.3%
2.9%
5.3% 7.2% 11.5% 13.2% 10.6% 11.3% 15.2%
45.3% 43.1% 37.0% 34.8% 44.5% 44.8% 49.4% 50.4%
52.6% 55.1% 61.4% 63.7% 54.2% 54.1% 49.6% 49.2%
Pension Assets-12/13 $2789 mill.
9255.0 11178
13071 14692 16646 18186 20015
Oblig. $3459 mill. 11086 12101 12229
13175 14854 16865 18281 19876 23572
Pfd Stock $20 mill. Pfd Div’d $1.2 mill.
11.3% 9.2% 10.3% 9.6% 8.5% 8.3%
6.8% 6.7%
811,073 shs. 6% cum., $25 par.
18.4% 14.1% 14.5% 13.3% 13.8% 13.0% 10,9% 10.9%
as of 10/31114
18.9% 14.4% 14.8% 13.5% 14.0% 13.1% 11.1% 11.0%
14.9% 10.1% 11.0% 9,7%
7.0% 6.5%
9.7% 9.3%
22%
31%
41%
26%
29%
31%
29%
37%
2011 2012 2013 BUSINESS: Sempra Energy is a holding co. for San Diego Gas &
% Change Retai Sales
+.1 KW~
+2.6
-1.3
Avg.lndust, Use(M~)
4157 4335 4279 Electdc Company, which sells electricity & gas mainly in San Diego
Avg.lndosLRevs.perl0~
12.13 12.19 13.10 County, & Southern California Gas Company, which distributes gas
Capadty at Peek (Mw)
NMF NMF NMF to most of Southern California. Customers: 1.4 mill. electric, 6.6
Peak L0ad SummerNMF
(Mw) NMF NMF
~nnu~l Load FactorNMF
(%) NMF NMF mill. gas. Elec. rev. breakdown: residential, 46%; commercial, 38%;
% Change Customers
+.6(yr-end)
+.5
+.5 industrial, 9%; other, 7%. Purchases most of its power, the rest is
2012 2013 2014
39.80 43.18 45.25
8.92
8.87
9.44
4.35
4.22
4.55
2.40
2.52
2.~4
12.20 10.52 13.00
42.42 45.03 40.80
242.37 244.46 246.50
14.9
19.7
22.3
.95
1.11
1,15
3.7°/o 3.0%
2.6°/o
~o47.0 10557 11150
1079.0 1060.0
t245
18.2% 26.5% 28.0%
172% 11.2% 12.0%
52.8% 50.5% 51,0%
46.7% 49.4% 49.0%
22002 22281 23525
25191 25460 27475
6.1% 6.0% 6.5%
10.4% 9.6% 10.0%
10.4% 9.6% 10.0%
5.1% 4.1% 4.5%
58%
57%
52%
VL ARfflU
INDEX
1 yr.
27.3
6.9
3 yr. 120.3
73.7
5 yr. 131.5 107.3
2015 ©VALUEUREPUB, LLC
47.30 Revenues per sh
9.95 "Cash FIow" per sh
4.75 Eamingspersh A
2.76 Div’d Ded’d per sh B ¯
48.70 Book Value per sh c
248.50 Common Shs Outst’g e
Relative P/E Ratio
Av9 Ann’l Div’d Yield
11750 Revenues ($mill)
1305 Wet Profd ($mill)
32.0% Income Tax Rate
12.0°/; ~,FUDC % to Net Profit
51.0% Long.Term Debt Ratio
48.5% Common Equity Ratio
24825 I"etal Capital ($mill)
29225 Net Plant ($mill)
6.5% Return on Total Cap’l
10.0% Return on Shr. Equity
10.0% Retum on Com Equity e
4.5% ~etained to Com Eq
57% I AII Div’ds to Net Prof
T-19
53.50
12.50
6.25
3.20
12.00
50.50
252.00
14,5
.95
3.5%
13550
1725
31.0%
9.0%
51.5%
48.5%
29500
33400
7.0%
11.5%
tt.5%
5.5°/;
50°/;
gas. Has subs. in gas pipeline & storage, power generation, & liqueried natural gas. Sold commodities business in ’10. Power
costs: 38% of revs. ’13 reported deprec, rates: 1.6%-7.6%. Has
17,100 employees. Chairman and CEO: Debra L. Reed. President:
Mark A. Snell. Inc.: CA. Address: 101 Ash St., San Diego, CA
92101-3017. Tel.: 619-696-2034. Intemet: www.sempra.com.
Sempra
Energy
has
begun
construcMexico.
Fb~ed Charge C0v.(%)
319
262
307
of a large project. The company is An asset sale is expected to close soon.
ANNUAL RATES Past
Past Est’d ’11-’13 tion
converting its Cameron liquefied natural Sempra has agreed to sell its 50% stake in
of change (per sh)
t0 Yrs.
5 Yrs.
to ’17-’19
aS terminal from an import to an export a nonregulated gas-fired power plant. The
Revenues
2.0% -1.0%
4.5%
"Cash Flow"
4.5%
4.5%
6.0%
cility. Sempra has a 50.2% stake in the company expects to book an undisclosed
Earnings
4.5%
6.0%
project, which is expected to cost $9 gain on the sale, which we will exclude
Dividends
8.5% 12.5~/~
6.0%
Book Value
11.5%
6.5%
4.5%
billion-S10 billion. It is expected to be com- from our earnings presentation as a nonpleted in 2018 and should provide Sempra recurring item.
CalQUARTERLY REVENUES ($ mill.)
Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year with net profit of $325 million-S350 mil- A new corporate structure might be in
2011 2434 2422 2576 2604 10036 lion annually. The project might be ex- Sempra’s future. The company is evalu2012 2383 2089 2507 2668 9647 panded, too; the company will file a re- ating changes such as the formation of a
2013 2650 2651 2551 2705 10557 quest with the Federal Energy Regulatory "yieldco" that NRG Energy formed in 2013
or a master limited partnership and Next2014 2795 2678 2815 2862 11150 Commission this year.
2015 2950 2050 2950 3000 11750 Sempra’s utilities have filed general Era Energy formed in 2014. Sempra exEARNINGS PER SHARE A
CaiFull rate cases. Southern California Gas re- pects to make an announcement around
endar Mar.31 Jun.30 Sep.30 Dec.31 Year quested a $256 million increase, and San the end of the current quarter. Our estiGas & Electric asked for a total mates and projections are based on the
2011
1.07
.97
1.22
1.21
4.47 Diego
2012
.97
.98 1.33
1.08
4.35 (electric and gas) hike of $133 million. An company’s current configuration.
2013
.54
1.46 1,09
1.13
4.22 order from the California regulators is ex- This stock is expensively priced. Like
2014
.99
1.08 1.39
t.09
4.55 pected by yearend, but even if it slips into several other utility equities, it is trading
2015 1.05
1.15 1.40
1.15
4.75 2016, it will be retroactive to the start of above our 2017-2019 Target Price Range.
Perhaps Wall Street is anticipating some
QUARTERLY DMDENDS PAID ¯, Full next year.
Calendar Mar.31 Jun,30 Sep.30 Dec,31 Year Earnings should improve in 2015. In- kind of corporate structure move. The
investments are a particular stock doesn’t stand out among utilities for
2011 .39
.48
.48
.48
1.83 ternational
of focus for Sempra. The company has its dividend yield, even though we esti2012 .48
.60
.60
.60
2.28 area
2013 .60
.63
.63
.63
2.49 a lot of projects in various stages of devel- mate a sizable increase in the payout in
2014 .63
.66
.66
.66
2.61 opment in Latin America and South Amer- the current quarter.
ica,’12especially
gas pipelines
PauI
E. Debbas,
CFA
January
30,Strength
2015
2015 .66
’07, (10).
EPS don’t addnatural
due to rounding.
$16.35/sh. (D)in
In mill.
(E) Rate
base: Net orig.I
.C°mpany’s
Financial
pa
(A) Dil. EPS. Exd. nonrec, gains (losses): ’05,
17; ’06, (6); ’09, (26¢); ’10, ($1.05); ’11,
Next egs. report due late Feb. (B) Div’ds histor, cost. Rate allowed on com. eq.: SDG&E in ’13:
$1.15; ’12, (98¢); ’13, (30¢! net; gain (losses) paid mid-Jan., Apr., July & Oct. ¯ DiVd rein10.3%; SoCalGas in ’13: 10.1%; earn. on avg. Price Growth Persistence
from disc. ops.: ’04, (10); 05, (4¢); ’06, $1.21;
vest. plan avail. (C) Incl. intang. In ’13:
com. eq., ’13: 9.6%. Reg. Climate: Above Avg. Earnings Predictability
© 2015 Value Line Publishing LLC. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of an)’ kind. L
~,.~,,=.,,,.,.,,~
THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publicaSon is stdctly for subscn~er’s own, non-commerciel, internal use. No part
of it may be reproduced, resold, stored or transmitted in any printed, eleclre~ or other form, or used for generating or marketing an}’ printed or electronic pabliceden, service or preducL
,,, ,.. ,,,., ,
A
100
85
95
48.68 NYSE-so
T,0,4"/,.L [Trailing:173 Medi
SOUTHERN
COMPANY
4
RECENTpRcE
High:
34.0 36.5 I 37.4
39.3 40.6 I 37.6 38.6 46.7 48.6 48.7 51.3 53 2
Target Price Range
TIMEUNESS Lowe~ 1/30/15
Low:
27.4 31.1I 30.5
33.2 29.8 ~ 26.5 30.8 35.7 41.8 40.0 40.3 47.6 !
2018 2019 12020
LEGENDS
SAFETY 2 Lowere~ 2/21/14
TECHNICAL 5 Lowere~2J13/15 .... Relative
Price Strength
ded Yes
area indicates re~es~;~
O~thaiOns:
2018-20 PROJECTIONS
-40
Ann’l Total
-30
Price Gain
Return ,,,:’;,,~. .,..-25
.High
(+15%)
7%
LOW ~1~ (-20%)
Nil
-20
Insider Decisions
"..
-15
MAMJJ ASON
"°.., .........,
to Buy
"
"’~"", .... ~"
- 10
..., "...
’,.°
-7.5
toSell 0 1 2 0 2 1 1 3 1
% TOT, RETURN 1118
,nstitutionalDecisions
THIS
VL ARIm."
1(~014 2~14 3Q2014 Percent 69
1 yr. 27.3
6.9
toBuy
423
485
454 ; shams
3 yr. 27.4
57.1
to Sell
377
342
370 traded 3
97.4
107.2
5
yr.
~4;50922
_L~]]]
1999t20001200112-’~’~ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ©VALUELINEPUB. LLC $-20
24.00
17.40 14.78 14.54 14.73 15.31 16.05 18.28 19.24 20.12 22.04 19.21 20.70 20.41 19.06 19.26 20.35 20.40 21.20 Revenues per sh
4.17
3.89
3.55
3.46
3.53
5.60
6.75
3.65
4.03
4.01
4.22
4.43
4.43
4.51
4.91
5.18
5.27
5.35
1.83
2.01
1.61
1.85
1.97
2.06
2.13
2.10
2.28
2.25
2.32
2.36
2.55
2.67
2,70
2.80
2.65
3.50
1.34
1.34
1.34
1.36
1.39
1.42
1.48
1.94
2.01
2.08
2.15
2.22 Div’d Decl’d per sh B" t
2.43
1.54
1.60
1.66
1.73
1.80
1.87
5.50
3.85
3.27
3.75
3.79
2.72
2.85
3.20
4.01
4.65
5.10
5.70
4.85
5.23
5.54
6.16
7.90
T45
13.82 15.69 11.43 12.16 13.13 13.86 14.42 15.24 16.23 17.08 18.15 19.21 20.32 21.09 21.43 21,50 22.60 23.30 BookValuepersh c
26.50
665.80 681.16 698.34 716.40 734.83 741.50 741.45 746.27 763.10 777.19 819.65 843.34 865.13 867.77 887.09 909.50 911.50 913.00 CommonShsOutst’g°
919.00
14.3
13.2
14.6
14.6
14.8
14.7
16.2
15.9 Boldfig~resare AvgAnn’lPIERatio
13.5
15.9
16.2
16.0
16.1
13.5
14.9
15.8
17.0
value une
.82
.86
.75
.80
.84
.78
.85
.87
.85
.97
.90
.95
.99
1.08
.91
.83
Relative P/E Ratio
.85
estire
~tes
5.1%
5.0% 5.7% 5.0%
4.7% 4.7% 4.4% 4.5% 4.4% 4.6% 5.5%
5.2%
5.1% 4.6% 4.3%
4.6% 4.7%
CAPITALSTRUCTUREasofg130/14
13554 14356 15353 17127 15743 17456 17657 16537 17087 18499 18600 19350 Revenues ($mill)
22000
Total Debt $24458 mill. Due in 5 Yrs $7650 mill.
1621.0 1608.0 1782.0 1807.0 1910.0 2040.0 2268.0 2415.0 2439.0 2584.0 2690 2795 Net Profit ($mill)
3320
33.0%
26.9% 32.7% 31.9% 33.6% 31.9% 33.5% 35.0% 35.6% 34.8% 33.8% 33.0% 33.0% Income Tax Rate
4.4% 4.8% 9.5% 12.3% 14.9%o 13.7% 10.2% 9.4% 11.6% 13.0% 12.0% 11.0°/; AFUDC % to Net Profit
10.0%
58.5%
Pension Assets-12/13 $8733 mill. Obl. $8863 mill. 53.2% 50.8% 51.2% 53.9% 53.2% 51.2% 50.0% 49.9% 51.5% 53.0°/; 55.5% 50.0% Long-Term Debt Ratio
Pfd Stock $1131 mill. Pfd Div’d $68 mill.
44.3% 46.2% 44.9% 42.6% 43.6% 45.7% 47.1% 47.3% 45.8% 44.5% 42.5% 4t.5% Common Equity Ratio 39.5%
Incl. 1 mill. shs. 4.2%-5.44% cum. pfd. ($100 par);
60500
12 mill. shs. 5.2%-5.83% cure. pfd. ($1 par); 2 mill.
29480 31092 33327 35878 39230 42002 45010 48390 51208 56050 60375 63300 Net Plant ($mill)
70400
shs. 6.0% noncum, pfd. ($25 par); 4 mill. shs.
6.5%
8.2% 8.2%
7.9% 7.1%
6.9% 7.0%
7.2% 7.3%
5.6%-6.5% noncom, pfd. ($100 par}; 14 mill. shs.
14.4% 13.3% 13.2% 12.6% 12.0% 11.8% 12.2% 12.5% 12.1% 12.5% 12.5% t2.5% Return on Shr. Equity
13.0%
5.63%-6.5% noncum, pfd. ($1 par).
13.5%
14.9% 13.8% 14.09 13.1% 12.4% 12.2% 12.5% 12.8% 12.5% 13.0% 12.5% 13.0% Return on Com Equity
4.6% 3.8%
4.3% 3.5%
3.2% 3.0%
3.4% 3.6%
4.5%
70%0 73%
69%
70%
74%
75%
77%
73%
73%
75%
75% 75%
2011 2012 2013 BUSINESS: The Southern Company, through its subsidiaries, sup- sippi, 7%. Generating sources: oil & gas, 37%; coal, 37%; nuclear,
% Change Reta~ S~es
-2.7 (K1/~)
-2.3
+.3
Avg.lndust. Use(MWH~
3438 3445 3495 plies electhdty to 4.5 million customers in about 120,000 square 16%; hydro, 4%; purchased, 6%. Fuel costs: 35% of revenues. ’13
Avg. Indost. Revs. per
6.37KWH
5.94 6.08 miles of Georgia, Alabama, Florida, and Mississippi. Also has com- reported deprec, rate (utility): 3,3%. Has 26,300 employees. ChairCapecityatYeatend(Mw)
43555 45750 45502 petitive generation business. Electric revenue breakdown: residenPresident and CEO: Thomas A. Fanning. Inc.: Delaware. AdPeakL0ad, Summer(Ib~
36956 35479 33557 tial, 37%; commercial, 32%; industrial, 19%; other, 12%. Retail rev- man,
dress: 30 Ivan Allen Jr. Blvd., N.W., Atlanta, Georgia 30308. Tel.:
~nnual L0ad Factor(%)
59.0 " 59.5 63.2
enues
by
state:
Georgia,
50%;
Alabama,
34%;
Florida,
9%;
Missis404-506-5000.
Intemet: www.southemcompany.com.
% Change Cust~ners-.10r-end)
+.5
+.7
Southern
Company
is
experiencing
30%
median
for this industry. However,
F~xed Charge C0v. (%)
397 416 423
the equity has declined slightly so far in
ANNUAL RATES Past
Past Est’d ’11-’13 delays and cost overruns in two subsidiaries’ large capital projects. Missis2015, a performance that is in line with
of change (per sh)
t0 Yrs.
5Yrs.
to ’18-’20
Revenues
3.0% -1.0%
3.0%
sippi Power’s coal gasification plant was
most other electric utilities.
"Cash Flow’’
4.0%
4.0%
4.0%
originally expected to be in service in May
Little (if any) earnings growth is likeEarnings
4.0%
3.5%
4.0%
of 2014. Now, the expected time frame for
ly this year. Southern Company’s guidDividends
3.5%
4.0%
3.5%
Book Value
5.5%
5.5%
completion is the first half of 2016. The
3.0%
ance is for $2.76-$2.88 a share, and our eshas already booked nonrecurring
timate is within this range. The firstCat- QUARTERLY REVENUES (mill,)
Full company
quarter comparison is tough due to favorendar Mar.31 Jun.30 Sep.30 Dec.31
Year aftertax losses totaling more than $1.2 bilin the past two years. Separately, the
able weather patterns in early 2014.
2012 3604 4181 5049 3703 16537 lion
We forecast an earnings increase in
2013 3897 4246 5017 3927 17087 contractor building two nuclear units at
line with Southern Company’s 3%-4%
2014 4644 4467 5339 4049 18499 the Vogtle station has informed Georgia
target next year. The company should
2015 4250 4650 ~0 4150 18600 Power that each unit will be delayed by 18
2016 4400 4850 5800 4300 19350 months, to the second quarters of 2019
benefit from rate relief, modest kilowattand 2020, respectively. However, the utilihour sales growth, and increased income
CatFull ty has not accepted the revised schedule,
at the Southern Power nonutility business.
Year
Dividend growth is likely to continue
2012
.42
.71
1.11
.43
2.67 and believes the contractor has not done
at the same pace. Southern Company’s
2013
.47
.66 1.08
.49
2.70 everything possible to mitigate the delay.
board of directors has been raising the an2014
.66
.68 1.09
.38
2.80 Even if the contractor is ultimately resnual payout by $0.07 a share, and man2015
.55
.75 1.15
.48
2.05 ponsible for the added construction costs
2016
.50
.80 1.20
agement has stated that it wants to
2.95 (which have not been quantified), Georgia
maintain this consistency. We expect a
Cat- QUARTERLY DIVIDENDS PAID e ¯1" Full Power will incur related costs of $40 mildividend hike in the second quarter.
Year lion for every month of delay.
bad news has affected the stock
This untimely stock has one of the
2011 .455 .4725 .4725 .4725
1.87 The
not lately. Southern Compahighest dividend yields of any electric
2012 .4725 .49 ,49 .49
1,94 price--just
company. Total return potential to 20182013
.49 .5075 .5075 .5075 2.01 ny was one of the poorest-performing utili2020 is only modest, however.
2014 .5075 .525 .525 .525
2.08 ty issues in 2013. In 2014, it produced a
25% total return, which was below the
Paul E. Debbas, CFA February 20, 2015
2015
cally paid in eady Mar., June, Sept., and Dec. ¯ t MS, fair value; FL, CA, orig. cost. Allowed re(A) Diluted earnings. Excl. non~=curfing gain
(losses): ’03, 6¢; ’09, (25¢); ’13, (83¢); ’14,
DiVd reinvestme~t plan avail. 1" Shareholder in- t turn on com. eq. (blended): 12.5%; earned on
1A
(59¢!. ’14 EPS don’t add due to rounding. Nextvestment plan avaiL(C) Ind. deferred charges, avg. com. eq., ’13: 12.5%. Regulatory Climate:
earnings report due late Apr. (B) Div’ds histori- In ’13: $5.59/sh. (D) In mill. (E) Rate base: AL, CA, AL Above Average; MS, FL Average.
lOO
© 2015 Value Line Publishing LLC. All fights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any Pied.
THE PUBLISHER IS NOT REBPONSIBLEFOR ANY ERRORS OR OMISSIONS HEREIN. "Ibis publication is strictly for subscriber’s own, non-commerdal internal uso.No part
o it m~y be reproduced, resold, stored or transmitted ~ any pr nted, eectmnc or other o~, or used for generating or marketing any printed or electronic pubicatJce, service or product.
°
---
,,, ,.. ,,,,., .
20.79
13,0
TEC0 ENERGY, INC.
NYS
.,,
TIMELINESS 3Lowe~J10/3/14 High: 15.5 19.3 17.7 18.6 22.OI
RECENTpRcE
I
114.9 14.4 14.8 1051
Low:I 11.31
LEGENDS
~ 0.71 x Dividonds p sh
divided by InterestRate
RelativePfire ~ongth
Options: Yes
Shaded area indica~s ~eces~
2018-20 PROJECTIONS
Ann’l Total
..d’hP ,,II~’’
...., ,,’,,.,, ~ ~"’llip
Price Gain Return’11" r, "~".11,, ~ ..,d’ ""
SAFETY 2 Rais~ 2/24/12
TECHNICAL 5 Lowered 2/20/15
¯ ow,High 2519 ~+20%
"(-10% I ~/~
]~1~
Insider Decisions
M AM J J A SO N
toSuy 0 0 0 0 0 0 0 0 0
Op~ons 010010004
t0Sell
OO0000005
,ll
tQ2014
2Q2014
3Q2014
toBuy
166
155
200 Percent
shares
toSell
140
144
101 traded
Hid’s(000) 130939 134541 144601
16.7
8.4
~ O [Trailing:21.9’~Median: 15.0) RELATIVEpiERATI01.08
18.1 19.7 19.4 19.2 21.3 22.0
14.5 15.8 16.1 16.2 16.1 20.1
Target PdceRange
2018 2019 2020
-40
-32
........... -24
,,,~,,,,
-16
-12
-10
-8
-6
"’
¯
~
18
,
12 ,I,I1,~ i, dhh
6
lgg9 2000 2001 2002 2003 2004
15.01 18.17 18.97 15.22 14.59 13.37
3.28
4.11
4.31
3.20
1.96
2.14
1.53
1.97
2.24
1.95
d.08
.71
1.29
1.33
1.37
1.41
.93
.76
3.23
5.45
6.92
6.06
3.14
1.37
10.73 11.93 14.12 14.86
8.93
6.43
132.10 126.30 139.60 175.80 187.80 199.70
14.2
11.9
12.9
11.0
-19.3
.81
.77
.66
.60
-1.02
5.9%
5.7% 4.8% 6.6% 7.4%
5.5%
CAPITALSTRUCTUREasofD/30114
Total Debt $3701.3 mill.Due in 5 Yrs NA
" "" "-’-’,
""
II
I
I, I
III
, .1"~171’ ~t.~
,11 II ~1,=11 II.llJ hl, lll.h. III hhhll,II 11111111IIIII
.,dlllll --IIIII IIIIII IIIIIIIIIII i111 IIIIIIIIIII
IIIIIIIIIIIIIII
IIIIIIIIII IIIIIIIIIIII IIIIIIIIIII ~mlmllllll IIIIII IIII IIIIIII IIII IIIIIIIIIIIIIIII
IIIIIIIIII
% TOT. RETURN 1/15
mm VLARnN."
STOCK
INOEX
1 yr. 36.9
6.9
3yr.
37.2
57.1
6 yr. 76.3
107.2
2005 2006 2007 2008 200g 2010 2011 2012 2013 2014 2015 2016 ©VALUEUNEPUB, LLC 8-20
t4.75
14.46 16.46 16.77 15.85 15.48 16.23 15.49 13.83 13.12 10.95 12.15 12.65 Revenues per sh
2.37
2.51
2.51
2.77
2.69
2.43
2.35
2.60
2.70 "Cash Flow" per sh 3.25
2.01
2.35
2.59
1.t5 Earnings per sh A
1.45
1.00
1.17
1.27
.77
1.00
1.13
1.27
1.14
.92
.95
1.10
.76
.76
.78
.85
.88
.88
.88
.90
.92 Div’d Decl’d per sh B a
1.05
.80
.80
.82
3.00
2.35 Cap’l Sponding per sh
2.00
1.42
2.18
2.34
2.77
2.99
2.28
2.10
2.33
2.45
3.05
7.65
8.25
9.56
9.43
9.75 10.10 10.50 10.58 10.74 10.95 11.10 11.30 BookValuepersh c
12.25
208.20 209.50 210.90 212.90 213.90 ~214.90 215.80 216.60 217.30 234.90 235.00 235.00 CommonShsOutst’go 235.00
17.1
13.8
13.3
21.2
12.6
14.6
14.4
15.5
18.9
18.8 Boldfig, rmsare AvgAnn’lPIERatio
15.0
vame Line
Relative PIE Ratio
.91
.75
.71
1.28
.84
.93
.90
.99
1.06
.98
.95
esun ~s
4.4% 4.7°/0 4.6% 4.9% 6.3% 4.9% 4.6°/0 5.0°/0
5.1% 4.9%
4.8%
3010.1 3448.1 3536.1 3375.3 3310.5 3487.9 3343.4 2996.6 2851.3 2566.4 2850 2975 Revenues ($mill)
3450
340
211.0 244.4 265.8 162.4 213.9 242.9 272.6 246.0 197.8 213.1
260
45.1% 40.4% 40.7% 36.8% 31.6% 34.8% 36.1% 35.9°/0 35.5°/0 38.3°/0 38.5% 38.5% Income Tax Rate
30.5%
.0% 1.6% 2.3% 5.4% 6.5% 1.2%
.6% 1.7%
1.0%
58.0%
70.0% 65.0% 61.0% 61.5% 60.6% 59.2°/0 54.2% 56.5% 54.9% 56.6°/0 57,5% 58.0% Long-Term Debt Ratio
30.0% 35.0% 39.0% 38.5% 39.4% = 40.8% 45.8% 43.5% 45.1% 43.4°/0 42.5% 42.0% Common Equity Ratio 42.0%
0025
4941.6 5175.4 5214.3 5287.0 5317.8 4953.9 5264.5 5171.5 5928.7 5170 6310 TotalCapital($mill)
Oblig. $666.0 mill. 5300.9
4566.9 4756.9 4888.2 5221.3 5544.1 564i.0 5967.8 5990.1 6170.1 7088.2 7440 7630 NetPIont($mi[I)
7725
Pfd Stock None
8.5%
6.5°/0 7.3% 7.3%
5.1% 6.0% 6.4% 7.4% 6.1%
5.4°/0 5.0% 5.5% 5.5% Return on Total Cap’l
13.3% 14.1% 132% 8.1% 10.3% 11.2% 12.0% 10.7%
8.5% 8.3°/0 I0,0% 10.0% Return on Shr. Equity
12.0%
as of 10/27/14
13.3% 14.1% 13.2% 8.1% 10.3% 11.2% 12.0°/0 10.7%
8.5% 8.3% I0.0% t0.0% Return on Com Equity e 12.0%
3.3% 5.0% 5.1%
NMF 2.1% 3.1% 3.9% 2.4%
.3%
.5% 2.0% 2.0% Retained to Com Eq
3.0%
75%
65%
61% 104%
77%
97%
93°/0
73%
80%
72%
67°/o
2011 2012 2013 BUSINESS: TECO Energy, Inc. is a holding company for Tampa down: residential, 49%; commemial, 31%; industrial, 9%; other,
%ChangeRetail~ales ~
-3.4
-.8
Avg. lndist. Use Mw) IdA
11%. Generating soumes: coal, 56%; gas, 36%; pumhased, 8%.
NA
I~.~ Electric, which serves 700,000 customers in west central Florida,
Avg. lndust. Revs. per
8.94KWH
8.84(¢) 8.50 and Peoples Gas, which serves 350,000 customers in Florida.
Fuel costs: 31% of revs. ’13 reported deprec, rate (utility): 3,7%.
CapadtyatPeak(Mw)
4684 4668 4668 Acq’d New Mexico Gas (513,000 customers) 9/14. Sold TECO
Has 3,900 employees. Chairman: Sherrill W. Hudson. Pres. & CEO:
Peak Load,
(Mw)
NA
NA
NA
Annual
Load~oler
Fact0r
%)
John
B. RamiL Inc.: FL. Address: TECO Plaza, 702 N. Franklin St.,
NA
NA
NA Transport 12107; discontinued generation investments in Guate% Change Cust0mers(avg.
+.7 +1.3 +1.5 main in ’12; discontinued TECO Coal in ’14. Electric revenue break- Tampa, FL 33602. Tel.: 813-228-1111. Web: www.tecoenergy.com.
This range is narrow because TECO is a
F~ed Cha~Cov.(%)
302 301 272 The sale of TECO Energy’s coalpure utility, now that its coal-mining operANNUAL RATES Past Past Est’d ’11-’13 mining subsidiary has had a setback,
When the company reached a deal to sell
ation is reported as discontinued.
of change (per sh)
t0 Yrs.
5 Yrs.
to ’t8.’20
Revenues
-1.5% -3.0%
.5%
TECO Coal last year, the buyer agreed to
We forecast a more-moderate profit
"Cash Flow"
-2.0%
2.5%
3.0%
pay $120 million in cash (plus contingent
increase in Z016. We figure that the cusEarnings
-2.0%
.5%
4.0%
payments of up to $50 million if coal prices
tomer growth trends mentioned above will
Dividends
-3.5%
2.5%
2.5%
Book Value
-1.5%
3.0%
2.0%
rise), and the deal was expected to close by
continue into next year. Also, the company
the end of 2014. However, the closing has
should reap increased cost reductions
CalQUARTERLY REVENUES ($ mill,)
Full
stemming from the New Mexico acquisiendar Mar.31 Jun.30 Sep.30 Dec.31
Year been delayed, and coal prices have contintion. TECO is targeting $20 million in the
2012 697.1 752.5 858.6 688,4 2996,6 ued to weaken. The revised transaction
first three years, half of which will be
2013 661,1 735.9 765.9 688,4 2851.3 calls for TECO to receive just $80 million
shared with customers. Our earnings esti2014 578.0 605.7 687.2 695,5 2566.4 (plus a contingency of up to $60 million),
Either party can walk away if the sale is
mate is $1.15 a share.
2015 700
700
750
700 2850
not completed by March 13th.
The board of directors raised the divi2016 750
725
775
725 2975
dend. The increase was small, at $0.02 a
CalFull We estimate significant earnings
share (2.3%) annually, but was still signifiendar Mar.31 Jun.30 Sep.30 Dec.31
Year growth in 2015. The acquisition of New
cant because this was the first hike in the
2012
.20
.30
.42
.22
1.14 Mexico Gas last September should boost
disbursement in three years. The payout
2013
.19
.24
.29
.20
,92 comparisons, especially since mergerratio is high (even by utility standards),
2014
.22
.27
.28
.18
,95 related costs hurt earnings by $0.08 a
but TECO is benefiting from tax-loss car2015
.27
.28
.32
.23
t.10 share in 2014. In addition, Tampa Electric
ryforwards that make its cash flow higher
2016
.29
.29
.33
.24
1.15 and Peoples Gas are experiencing solid
than our "cash flow" figures suggest.
QUARTERLY DIVIDENDS PAIDBm
catFull customer growth, and Tampa Electric is
This stock’s dividend yield is a perendar Mar.31 Jun.30 Sep.30 Dec.31
Year benefiting from modest rate relief. Each
is likely to earn a return on equity
centage point above the utility mean.
2011 .205
.215
,215 .215
.85 utility
the upper half of its allowed range.
Total return potential to 2018-2020 is
2012 .22
.22
.22
.22
.88 in
modest, but still better than most other
2013 .22
.22
,22
.22
,88 TECO plans to refinance high-cost debt,
utility issues.
2014 .22
.22
,22
.22
,88 too. Our earnings estimate is within management’s guidance of $1.08-$1.11 a share.
PaulE. Debbas, CFA
February20, 2015
2015 .225
(A) Diluted earnings. Excl. nonrecurring gain
’14, (34). Next eamings report due eady May. J orig. cost. Rate allowed on com. eq. in ’13 B++
(losses): ’99, (11); ’03, ($4.97); ’07, 63¢; ’10,
(B) Div’ds paid in late Feb., May, Aug., & Nov. J (elec,): 10.25%-12.25%; in ’09 (gas): 9.75°/o
Stock’s Prise SteblllW
(2¢) net; ’14, (3¢); gains (losses) on disc. ops.:
DiVd reinv, plan avail. (C) Ind. defd chgs. In ] 11.75%; in NM in ’12:10 ’/o (implied); earned on Price Growth Persistence
’04, (77¢); ’05, 31; ’06, 1; ’07, 7¢; ’12, (15);
’13: $1.93/sh. (D) In mill. (E) Rate base: Net I avg. com. eq., ’13: 8.6%. Regul. Climate: Avg.1751Earnings Predictability
75
© 2015 Value Line Publishing LLC. All rights reserved. Factual material is obtained from sources believed to be rofiable and is provided without warranties of any kind. ~L~(i].l~l~_||llZe|h11.~
°
THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS
OR OMISSIONS HEREIN. Thispublice~’o~ is strictly for subscriber’s own, non-(:ommerdal, internal use. No pa~t
j
of it may be reprnducnd, resold, sternd or transmitt~ in any printed, electronic or other form, or usedfu generating or marketing any printed or eL~t~onic pubiceiJon, sen/ice or proo~ct.
4.4%B
RECENTpRcE
4/ ~,U~Median:
~ tl [Traging:14.0,/
15.8~PIE
RELATIVE
tl O~ ~DD 3.9%|
37.20s .w,
WESTAR ENERGY,
RATI0 U,U/
22.9 25.0 27.2 28.6 25.9 I 22.3 25.9 29.0 33.0 35.O 43.2 44.0
TIMEUNESS 3 Lowered12/12/14 High:
Low: 18.1 21.1 20.1 22.816.O14.9
20.6 22.6 26.8 28.6 31.7 36.6
LEGENDS
divided by lnterest Rate
TECHNICAL 3 Raised 3/20115
Relative Price S~’ength
Options: Yes
2018-20 PROJECTIONS
Target Price Range
2018 2019 2020
Shaded ar~a i.~a~s
Ann’l Total
Price Gain Return
High
(+35%) 11%
LOW 4~ 1*10%)
6%
Insider Decisions
AM J JA SOND
toBuy 0 0 0 0 0 0 0 0 0 __
~
~
-
__
Options 0 0 0 0 0 0 0 0 0
202014 302014 402014 Percent 24 - ~
toBuy
161
155
157 shares
16 to,Sell
116
117
136 traded
8T
~ 96912
2
19991 20001 2001 I 2002 ~ 2004 2005
30.21 33.80 31.20 24.77 20.06 17.02 18.23 18.37
.
.
.
1727
7.51
6.96
5.32
4.77
3.77
3.12
3.28
3.94
3.77
3.14
3.59
4.24
3.97
4.30
1.48
.89
d.58
1.00
1.48
1.17
1.55
1.88
1.84
1.31
1.28
1.80
1.79
2.15
2.14
1.44
1.20
1.20
.87
.80
.92
.98
1.08
1.t6
1.20
1.24
1.28
1.32
4.09
4.40
3.37
1.89
2.06
2.19
2.45
3.95
7.84
8.65
5.26
4.82
5.55
6.40
27.83 27.20 25.97 13.68 14.23 16.13 16.31 17.62 19.14 20.18 20.59 21.25 22.03 22.89
67.40 70.08 70.08 71.51 72.84 86.03 86.84 87.39 95.46 108.31 109.07 112.13 125.70 126.50
17.2
20.6
-14.0
10.8
17.4
14.8
12.2
14.1
17.0
14.9
13.0
14.8
13.4
.98
1.34
-.76
.62
.92
.79
.66
.85
.75
1.02
.99
.83
.93
8.4°/; 7.9% 5.8% 8.6%
5.5% 3.9% 4.0% 4.3% 4.2% 5.2% 6.3%
5.3% 4.8% 4.6%
CAPITAL STRUCTURE as of12/31114
1583.3 1605.7 1726.8 1839.0 1858.2 2056.2 2171.0 2261.5
134.9 165.3 168.4 136.8 141.3 203.9 214.0 275.1
31.0% 25.4% 27.5% 24.8% 29.4% 29.0% 35.2% 30.9%
....
10.4% ..........
Pension Assefa12114 5661 milI.Oblig.$914mill. 52.1% 50.0% 50.6% 49.8% 53.4% 53.6% 49.5% 512%
47.2% 49.3% 48.9% 49.7% 46.1% 46.0% 50.1% 48.8%
3000.4 3124.2 3738.3 4400.1 4866.8 5180.9 5531.0 5938.2
Pfd Stock None
3947.7 4071.6 4803.7 5533.5 5771.7 6309.5 6745.4 7335.7
6.2% 6.7% 5.8% 4.2%0 4.4% 5.5%
5.3% 6.0%
9.4% 10.6% 9.1% 6.2% 6.2% 8.5%
7.7% 9.5%
9.5% 10.7% 9.2% 6.2% 6.3% 8.5%
7.7% 9.4%
4.3% 5.5% 4.3%
1.2%
.8% 3.1%
2.7% 4.0%
2012 2013 2014 55%
49%
53%
80%
87%
63%
65%
57%
-1.5 (KW)
+3.6 +1.5
Avg.lnd-uaL Use(MWH)
5588 5407 5747 BUSINESS: Westar Energy, Inc., formerly Westam Resources, is
A~. I~luaL Revs, per k’~
6.60 6.47 6.72 the parent of Kansas Gas & Electric Company. Westar supplies
Capecity at Peak (Mw)
6557 6671 6698 electricity to 700,000 customers in Kansas. Electric revenue
Peak Load, Summer5411
(Mw)5489 5226
Annual Load Factor(%)
56.0 55.9 56.2 sources: residential and mrel, 34%; commercial, 38%; industrial,
% Change Customers
+.2{yr,end)
+.2
+.2 28%. Sold investment in ONEOK in 2003 and 85% ownership in
I,~ I,,.,,, ,w’ ,H’
L
""
-8O
-60
-50
-40
-30
-25
-20
-15
-10
1 yr. 18.0
6.2
3yr.
60.4
60.8
5yr. 128.6 110.1
2013 2014 2015 2016 ©VALUELINEPUB, LLC S-2~
18.48 19.76 19.85 19.75 Ravenuespersh
20.75
4.41
4.55
4.70 4.95 "Cash Flow" per sh 5.25
3.00
2.27
2.35
2.35
2.55 Earnings per sh ,~
1.40
t.44
1.50 Div’dDecrdpersh a=l"
1.65
1.36
6.08
6.47
7.00
8.15
29.25
23.88 25.02 25.60 26.35 Book Value per shc
128.25 131.69 130.00 135.00 CommonShsOutst’g’: 140.00
15.0
14.0
15.4 Bo/dfirl~msare AvgAnn’lPIERatio
va~,,~ U,e
.79
.81
Relative P/E Ratio
.95
esti~
~tes
3.7%
4.3% 3.9%
~.vg Ann’l Div’d Yield
2370.7 2601.7 2580 2866 Revenues ($mill)
2000
292.5 313.3
305
345 Net Profd ($mill)
420
30.0%
33.1% 31.9% 30.0% 30.0% Income Tax Rate
10.4% 10.0% 10.0% 10.0% ~,FUDC%toNetProtit 10.0%
50.0% 50.0% 50.0% ~0,0% Long-TerntDeMRatio
50.0%
50.0% 50.0% 50.0% 50.0% Common Equity Ratio 50.0%
7500
6131.1 6596.2 6650 6800 TotalCapital($mill)
7848.5 8441.5 8500 0500 Net Plant($mill)
9000
6.0%
9.6% 9.5% 9.5% 9.5% Return on Shr. Equity
9.5%
9.6% 9.5% 9.5% 9.5% Return on Corn Equity O 9.5%
4.0%
56%
55%
61% 59% edl Div’ds to Net Prof
55%
plant age: 15 years. Fuels: coal, 52%; nuclear, 8%; gas, 40%. Has
2,302 employees. BlackRock Inc owns 7.0% of common; The
Vanguard Group owns 5.8%; JP Morgan owns 5.2% (3/14 proxy).
CEO and Pres.: Mark A. Ruelle. Inc.: Kansas. Addr.: 818 South
Kansas Avenue, Topeka, Kansas 66612. Telephone: 785-575Protection One in 2004. 2013 depreciation rate: 3.8%. Estimated 6300. Interact: www.westarenergy.com.
F=ed Charge Coy.(%)
319
323
332
Westar Energy announced ~.014 re- business environment. Our 2016 forecast
ANNUAL RATES Past
Past Est’d ’12-’14 sults. The Topeka, Kansas-based utility
is based on the expectation of reasonable
of change (per sh)
10 Yrs.
5 Yrs,
to ’18-’20
posted profits of $2.35 a share for the year treatment from regulators, pending the
Revenues
-1.0%
1.5%
2.5%
"Cash Flow"
1.5%
5.0%
4.5%
just ended. Higher net income was driven submitted rate request.
Earnings
6.5%
9.0%
6.0%
by greater pricing power, resulting from The board of directors authorized a
Dividends
3.5%
3.5%
3.0%
investments in air quality controls and dividend increase. The quarterly distriBook Value
5.0%
3.5%
5.0%
transmission infrastructure. An increase
was raised $0.01 a share, to an anCalQUARTERLY REVENUES ($ mill,) Full in retail sales, led by industrial customers, bution
nualized rate of $1.44. The yield of 3.9% is
endar Mar.31 Jun.30 Sep.30 Dec.31 Year
also contributed to the underlying results, slightly above the median yield for the
2012 475,7 566,3 695.8 523.7 2261,5 The company filed a report to in- electric utility industry. Westar Energy is
2013 546,2 569,6 695.0 559.9 2370.7
2014 628,6 612,7 764.0 596.4 2601,7 crease rates. The request was submitted targeting a payout ratio of 50%-60%.
2015 630
620
750
580 2580 in early February. Management believes Capital expenditures could total $3.5
2016 650
645
775
595 2665 that the magnitude of the investments it billion over the next five years. Transhas made over the past few years justifies mission investments, the largest comEARNINGS
PER
SHARE
A
CalFull
endar Mar.31 Jun.30 Sep.30 Dec.31 Year a meaningful rate increase in the upper ponent, will likely exceed $1 billion. That
allow Westar to more efficiently
2012
,21
,48 1.09
,37
2,15 single-digit percent range. If granted, the should
calls for an adjustment to prices deliver electricity to customers.
20t3
.40
,52 1.04
.31
2.27 .schedule
November of this year, allowing the This neutrally ranked issue is a
2014
.52
.40 1.10
.33
2.35 zn
2015
.50
.40
1.10
.35
2.35 utility to take full advantage of the rate decent choice for income-oriented investors. Although future capital appreci20t6
.55
.45
1.15
.40
2.56 hike in 2016.
QUARTERLY DIVIDENDS PAID e~- Full We expect the bottom line to be flat in ation is muted, we think income-focused
Calendar Mar.31 Jun.30 Sep.30 Dec.31 Year ~-015, followed by a strong up-tick in accounts would do well owning this stock
~-016. Our profit forecast for the current for its decent dividend yield. And, the
201t
.31
.32
.32
.32
1.27 year matches the midpoint of manage- stock’s lower-than-market Beta, combined
2012
.32
.33
.33
.33
1.31 ment’s share-net guidance of $2.25-$2.45. with its good marks for Price Stability and
2013
.33
.34
.34
.34
1.35 Westar Energy should continue to benefit
Earnings Predictability, provides some
2014
.34
.35
.35
.35
1,40
from higher electric retail sales, driven by added peace of mind.
2015
.36
increasing demand from an improving DanlelHenlgson
March20, 2015
(A) EPS diluted from 2010 onward. ExcL non- to rounding. Next egs. rep’t due eady May.
B++
$6.48/sh. (D) Rate base determined: fair value;
recur, gains (losses): ’98, ($1.45); ’99, ($1.31); (B) DiVds paid in eady Jan., April, July, and Rate allowed on common equity in ’14: 10.0%;
100
’00, $1.07; ’01, 27¢; ’02, ($12.06); ’03, 77¢; Oct. ¯ Div’d reinvest, plan avail. 1" Shareholder earned on avg. com. eq., ’14: 9.5%. Regul. Price Growth Persistence
75
’08, 39¢; ’11, 14. Earnings may not sum due
invest, plan avail. (C) Ind. reg. assets. In 2014: Clim.: Avg. (E) In mill.
80
© 2015 Value Line Publishing LLC. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of an
THE PUBLISHER IS NOT RESPONSIBLEFOR ANY ERRORS OR OMISSIONS HEREIN. ~is publication is s~ictly for subscriber’s own, r~n-~ ommercial, internal use.
of it may be reproduced, resold, stored or transm~ed in any printed, eleomnic or other fonn, or used for generaling er marketing any printed or e[ectranic pubication, service or
3.4%
XCEL ENERGY, sE.x
37.27|O.O ,edian:14.0140
O[Trailing:lg.2~RELATIVEPIERATI01.02
3
High: 17.4 18,8 I 20.2! 23,6
TIMEUNESS Raised12/27/13
Low: 10,4
15.5 16,5 17,8
LEGENDS
divided bylntereat Rate
TECHNICAL 3 Lowered 1/30/15
Relative Price Strength
BETA .6S (1,00 = N;=kui)
Options: Yes
Shaded
area indice~es recession
2017-19 PROJECTIONS
Ann’l Total
Price Gain
Return "l
High 35
(-5%)
2%
Low 25 (-35%) -5%
!
, ’" ~ ----.....
25,0
19.6
22.9 I 21.9 24.4 27,8 29.9 31.8 37,6
6,0 19,8 21.2 25.8 26,8 27.3
15"31 1
Target Price Range
2017 2018-642019
-48
-40
.......... -32
.......... -24
-20
-16
-12
InsiderFM
J A $oDecisi°ns
AM J
i "-.. h
toBuy 0 0 0 0 0 0 0 0 0
Options
102014 2Q2014 3Q2014 Percent 15
toBuy
226
239
233 shares
10 I., .....
toSdl
212
181
189 traded
5
IIl.l’l
.
% TOT. RETURN 12/14
THIS
STOCK
VL ARBa."
INDEX
-8
-6
1 yr.
33.5
6.9 _"
3 yr.
43.1
73.7
, ....... I.tdllllll II
IIIIIIIIIIII.hlhlllllllllllhl II IIIIIIIIII IIIIIllllll
5yr.
100.7
107.3
Hbl’,(.0)342817 351963 351~72
IIIIIIIIIIII IIIIIIIIII IIIItlIIIIIIIIIIIIIIL
IIIII IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII IIIIIIIIII IIIIIIIIIII
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 ’2Oll 2012 2013,2014 2015 ~VALUELINEPUB.LLC 7-19
18.46 18.42 34.11 43.56 23.89 19.90 20.84 23.86 24.16 23.40 24.69 21.08 21.38 21.90 20.76 21.921 22.85 23.60 Revenues per sh
26.25
4.30
4,13
4.12 5.09
3.14
3.35
3,27
3.28
3.61
3.45
3.48
3.51
3.79
4.00
4.10
4.20 4.60 "Cash Flow" per sh 5.25
3.50
1.84
1.43
1.60
2.27
.42
1.23
1.27
1,20
2.50
1.35
1,35
1.48
1.49
1.56
1.72
1,85
1.91
1,95
1.43
1.45
1.48 i 1.50
1.13
.75
.81
.85
.88
.91
.94
.97
1.00
1.03
1.07
1.11
1.20
1.26 Div’d Ded’d per sh B ¯
1.43
2.99 13.87
3.63
7.40
624
2.49
3.19
3.25
4.00
4.66
4.53
5.27
6.82
5.70
6.65 Cap’lSpendingpersh 5.25
4.89
3.91
4.60
16.25 I6.42 16.37 17.95 11.70 12.95 12.99 13.37 14.28 14.70 15.35 15.92 16.76 17.44 18.19 19.21 20.05 25.90 BookValuepersh c
24.00
152.70 155.73 339.79J 345.02 398.71 398.86 400.46 403.39 407.30 428.78 453.79 457.51 482.33 486.49 487.96 497.97 ~06.00 505.00 CommonShsOutst’ge 514.00
15.2
I6.6
14.3
12.4 NMF
11.6
13.6
15.4
14.8
16.7
13.7
12.7
14.1
14.2
14.8
15.0
t6.1
Avg Ann’l PiE Ratio
12.5
.79
.95
.93
.64 NMF
.66
.80
.72
.82
.80
.89
.82
.85
.90
.89
.94
.84
.56
Relative P/E Ratio
5.1% 6.1% 6.4% 5.3% 6.6% 5.2% 4.7% 4.6%
4.4% 4.0% 4.7% 5.1% 4.5% 4.2%
3.9%
3.9% 3.8%
4.7%
CAPITAL STRUCTURE as of g130/14
8345.3 9625.5 9840.3 10034 11203 9644.3 10311 10655 10128 10915 11550 12000 Revenues ($mill)
13500
Total Debt $12456 mill. Due in 5 Yrs $3564.6 mill. 526.9 499.0 568.7 575.9 645.7 685.5 727.0 841.4 905.2 948.2
955 1045 Net Profd ($mill)
t250
LT Debt $11502 mill. LT Interest $551.8 mill.
23.2% 25.8% 24.2% 33.8% 34.4% 35.1% 37.5% 35.8% 332% 33.8% 35.0% 35.0% Income Tax Rate
35.0%
Ind. $179.4 mill. capitalized leases.
10.9% 8.5% 9.8% 12.5% 15.9% 16.8% 11.7% 9.4% 10.8% 13.4% 14.0% 10.0% AFUDC % to Net Profit
10.0%
52.5%
44.1% 47.3% 472% 49.4% 47.1% 47.7% 46.3% 48.9% 46.7% 46.7% 47.0% 46.5% Common Equity Ratio
47.5%
Pension Asseta-12/13 $3010.1 mill.
25800
Oblig. $3440,7 mill. 14096 14896 15549 16676 17689 18508 20663 22353 23809 26122 27875 29950 Net Plant ($mill)
34000
Pfd Stock None
6.2% 6.2% 6.2% 6.3% 6.0% 6.2% 5.7% 6.5%
6.1% 6,0% 6.0% 6.0% Retum on Total Cap’l
6.0%
9.9%
9.1% 9.6% 9.0% 9.1% 9.3%
10.0%
8.9% 9.9% 10.2% 9.9% 9.5% 10.0% Return on Shr. Equity
as of 10/24/14
10.0% 9.2% 9.7% 9,1% 9.2% 9.4% 8.9% 9.9% 10.2% 9.9% 9.5% 10.0% Return on Com Equity ¯ t0.0%
3.9% 2.9% 3.6% 3.1% 3.8% 3.7% 3.6% 4.3%
4.0%
4.7% 4.5% 4.0% 4.0% Retained to Com Eq
62%
69%
63%
66%
59%
61%
59%
56%
54%
54%
51%
59%
2011 2012 2013 BUSINESS: Xcel Energy Inc. is the parent of Northern States mill. electric, 1.9 mill. gas. Elec. rev. breakdown: residential, 32%;
%ChangeRetaISales KWH)
+.4 -.3 +.3
sin. comm’l & ind’l, 36%; Ig. comm’l & ind’l, 19%; other, 13%. GenLargeC-&lUse(MWH)
24286 24074 23875 Power, which supplies electricity to Minnesota, Wisconsin, North
LargeC&lRevs.perKWH(¢)
5.90 5.60 6.23 Dakota, South Dakota & Michigan & gas to Minnesota, Wisconsin, erating sources not available. Fuel costs: 47% of revs: ’13 reported
NA
NA
NA North Dakota & Michigan; Public Se~ca of Colorado, which sup- depr. rate: 2.9%. Has 11,600 employees. Chairman, Pres. & CEO:
PeakL~ad Summer(Mw)
21898 21429 21258 plies electricity & gas to Colorado; & Southwestern Public Service,
Fowke. Inc.: MN. Address: 414 Nicollet Mall, Minneapolis, MN
Annual Load Factor %)
NA
NA
NA which supplies electricity to Texas & New Mexico. Customers: 3.5 Ben
55401. Tel.: 612.330-5500. Intemet: www.xcelenergy.com.
%ChangeCust0mers(yr.end
+.4
+.7
+.8
posing rate decreases. NSP filed for $15.6
FixedChargeC0v.(%)
298
303
321 Xcel EnerR~’s utility subsidiary in
million in South Dakota, based on a
ANNUAL RATES Past
Past Est’d’11-’13 Minnesota is awaiting an order on its
multiyear rate application. Northern 10.25% return on a 53.86% common-equity
of change (per sh)
10 Yrs,
5 Yrs.
to ’17-’19
Revenues
-3.0% -2.0%
3.5%
States Power (NSP) is seeking rate hikes
ratio. Southwestern Public Service asked
"CashFIow"
,5%
2.5%
5.0%
of $142.2 million for 2014 and $106.0 milthe Texas commission for a $64.8 million
Earnings
3.5%
5.5%
5.5%
lion for 2015, based on a return of 10.25%
boost, based on a 10.25% return on a
Dividends
-.5%
3.5%
5.0%
BookValue
2.5%
4.5%
4.5%
on a 52.5% common-equity ratio. (NSP is
53.97% common-equity ratio. Orders on
collecting an interim tariff hike of
each of these filings are expected in 2015.
QUARTERLY REVENUES ($ milI.)
CalFull now
The company received electric rate
Year $127 million.) An administrative law judge
hikes in Wisconsin and Texas. NSP
2011 2817 2438 2832 2568 10655 has recommended increases of $73.6 milwas granted $14.2 million in Wisconsin
2012 2578
2275 2724 2551 10128 lion in 2014 and $122.4 million in 2015,
and $37.0 million in Texas.
2013 2783
2579 2822
2731 10915 based on a 9.77% return on a 52.5%
Rate relief is a significant driver of
2014 3203
2685 2870 2792 11550 common-equity ratio. The commission’s or2015 ~250 2750 3150 2950 12000 der is expected in the second quarter.
Xcel’s profit growth. Our 2015 earnings
Minnesota commission is examinestimate of $2.05 a share is within the
CalFull The
company’s targeted range of $2.00-$2.15 a
endar Mar.31 Jun.30 Sep,30 Dec.31 Year ing the prudence of an uprate and life
for a nuclear plant. The origshare.
2011
.42
.33
.69
.29
1.72 extension
We look for a dividend increase this
2012
.38
.38
.81
.29
1.85 inal estimate of this project was $320 mil2013
.48
.40
.73
.30
1.91 lion; the final cost was $665 million. If any quarter. We estimate that the annual
2014
payout will be raised $0.06 a share (5%),
.52
.39
.73
.31
1.95 portion of this spending is disallowed, Xce]
2015
.50
.44
,78
which is within Xcel’s dividend growth
.33
2.05 would have to take a writedown,
goal of 4%-6% a year.
Cal.
QUARTERLY DMDENDS PAIDn~
Full The company is seeking electric rate
The dividend yield of Xcel stock is
Year hikes in other states. Public Service of
about average for a utility. Like several
2011 .253
.253 .26
.26
1.03 Colorado is asking for an electric increase
other utility issues, the recent price is
2012 .26
.26
.27
.27
1.06 of $107.2 million, based on a return of
above our 2017-2019 Target Price Range,
2013 .27
.27
.28
.28
1.10 10.25% on a common-equity ratio of 56%.
so total return potential is negative.
2014 .28
.30
.30
.30
1.18 On the other hand, the commission’s staff
and Office of Consumer Counsel are proPaul E. Debbas, CFA
20t5 .30
January 30, 2015
(A) Diluted EPS. ExcL nonrec, gain (loss): ’02, ing. Next egs. report due late Apr. (B) DiVds
Vades. Rate all’d on com. eq.: MN ’13 9.83%
B++
($6.27); ’10, 5¢; gains (losses) on disc, ops,:
histor, paid mid-Jan., Apr., July, and Oct.
VVI ’15 10.2%; CO ’14 (elec,) 9.72%; CO ’07
100
’03, 27; ’04, (30¢); ’05, 3¢; ’06, 1; ’09, (1);
¯ DiVd reinvestment plan avail. (C) Incl. intang. (gas) 10.25%; TX ’14 10.4%; earned on avg.
60
’I0, 1¢. ’11 & ’12 EPS don’t add due to round- In ’13: $5.04/sh. (D) In mill. (E) Rate base:
cam. eq., ’13: 10.3%. Regulatory Climate: Avg. Earnings Predictability
100
© 2015 Value Line Publishing LLC. All dghts reserved. Fac~Jal matedal is obtained horn sources believed to be reliable and is provided wi~out w~.a.tles of arPj bled.
THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. ]~is pablicaSon is strictly for subscriber’s own, non-commerdal, internal use.No part
of it may be reproduced, resobl, stored or transmitted in any pinted, ek~tronic or other form, or used for generating or marketing an)’ printed or electronic pubicaiion, service or product.
..... I, L
AUS
UTILITY REPORT
"the investor’s edge"
AUS MONTHLY UTILITY REPORT
- Index -
EDITOR & PUBLISHER:
SELB Y JONES, CRRA
Financial Data
10 Year Dividend Yield &
P/E Trends
Pages
1-2
20 Current Financial Statistics
on Common Stock
- Electric Companies ( 16 )
- Comb. Elec. & Gas Cos. ( 37 )
- Gas Distribution, Integrated &
Transmission Cos. ( 18 )
-Water Companies ( 9 )
3-6
7 - 10
11 - 14
15- 18
Industry Rankings
PUBLISHED BY
AUS CONSULTANTS
155 GAITHER DRIVE, SUITE A
MOUNT LAUREL, NJ 08054
(856) 242-3028
FAX: (856) 234-8371
www.ausconsultants.com
- Electric Companies
- Combination Elec. & Gas Cos.
- Gas Dist. Int. & Trans Companies
- Water Companies
Glossary of Terms
Important Business
Numbers and Addresses
21 - 22
23 - 24
25 - 26
27 - 28
29 - 30
33
THIS PAGE INTENTIONALLY LEFT BLANK
This publication covers all companies which have common stock
available for public ~radmg with the exception of a few companies
which are omitted because of the small percentage in the hands of
the public or the small size of the company.
The material set forth here has been compiled from sources believed
by the publisher to be reliable, but the accuracy is not guaranteed.
It contains condensed, therefore incomplete, data which are intended
for record and for reference only and not as representation. No portion
of this Report may be copied or duplicated without the express written
consent of the publisher.
NATURAL GAS
DISTRIBUTION
TRANSM.&INTEGRATED
COMPANIES
ELECTRIC COMPANIES [
DIVIDEND
YIELD
PRICE
EARNINGS
MULTIPLE
DIVIDEND
YIELD
PRICE
EARNINGS
MULTIPLE
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR TO DATE
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
4.1
3.8
3.4
3.9
4.8
4.3
4.2
4.0
3.8
3.7
3.5
20.9
20.8
18.5
16.1
14.1
18.1
18.1
17.8
17.5
18.9
19.4
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR TO DATE
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
3.1
3.1
2.9
13.1
3.8
3.2
3.0
3.3
3.3
3.2
3.1
19.8
17.2
19.5
17.4
14.4
18.6
20.2
28.8
20.5
21.1
20.0
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
2014
2014
2014
2014
2014
2014
2014
2014
2014
2015
2015
2015
3.7
3.6
3.7
3.5
3.6
3.6
3.7
3.5
3.7
3.6
3.3
3.5
19.3
19.9
19.0
20.1
19.7
18.0
17.9
18.9
18.6
18.9
20.4
18.8
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
2014
2014
2014
2014
2014
2014
2014
2014
2014
2015
2015
2015
3.3
3.3
3.3
3.2
3.1
3.1
3.3
3.2
3.2
3.1
3.0
3.2
23.9
24.1
18.9
19.6
19.5
18.7
18.1
19.2
19.4
19.7
20.9
19.5
COMBINED ELECTRIC &
GAS DISTRIBUTION
COMPANIES
WATER COMPANIES
DIVIDEND
YIELD
PRICE
EARNINGS
MULTIPLE
DIVIDEND
YIELD
PRICE
EARNINGS
MULTIPLE
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR TO DATE
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
3.3
3.2
3.3
4.0
5.2
4.5
4.4
4.2
4.0
3.7
3.4
18.9
18.7
18.3
15.7
12.8
16.2
17.9
18.2
19.1
19.3
19.9
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR
YEAR TO DATE
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2.8
2.8
2.8
3.1
3.5
3.4
3.3
3.3
3.0
3.0
2.8
28.7
30.9
28A
23.1
21.3
23.7
21.7
21.2
21.0
22.2
21.8
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
2014
2014
2014
2014
2014
2014
2014
2014
2014
2015
2015
2015
3.9
3.7
3.8
3.6
3.6
3.7
3.7
3.5
3.5
3.5
3.2
3.5
19.6
20.5
18.9
19.8
19.6
18.7
18.3
19.7
19.4
19.4
21. I
19.3
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
2014
2014
2014
2014
2014
2014
2014
2014
2014
2015
2015
2015
2.9
2.9
3.1
2.9
3.0
3.0
3.1
2.8
2.9
2.9
2.7
2.8
22.6
22.5
21.7
22.9
22.5
21.9
21.8
23.7
21.0
20.8
22.9
21.8
COMPANIES
ELECTRIC
PER SHARE
COMPANY
ALLETE, Inc. (NYSE-ALE)
American Electric Power Co. (NYSE-AEP)
Cleco Corporation (NYSE-CNL)
Edison International (’NYSE-EIX)
E1 Paso Electric Company 0NYSE-EE)
FirstEnergy Corporation (ASE-FE)
Great Plains Energy Incorporated (NYSE-GXP)
Hawaiian Electric Industries, Inc. (NYSE-HE)
IDACORP, Inc. (NYSE-IDA)
Nextera Energy (NYSE-NEE)
OGE Energy Corp. (-NYSE-OGE)
Otter Tail Corporation ONDQ-OTTR)
Pinnacle West Capital Corp. (NYSE-PNW)
PNM Resources, Inc. (NYSE-PNM)
Portland General Electric Company (NYSE-POR)
PPL Corporation (NYSE-PPL)
Southern Company (NYSE-SO)
Westar Energy, Inc. (NYSE-WR)
AVERAGE
LATEST
12 MONTHS
CURP.ENT
EARNINGS
ANNUAL
AVAILABLE EARNINGS DIVIDEND
DATA~$)
PERCI~,"T (2)
BOOK STOCK COMMON
D1V/
VALUE PRICE SHARES DIV
DIV MKT/ BOOK
(2)
(1) 02/13/15 O/SMILL PAYOWI’ YIELD BOOK
34.36
33.07
27.14
32.95
25.26
23.38
17.56
38.77
43.14
15.31
40.67
21.63
24.15
22.90
24.99
PRICE
COMPANIES
ELECTRIC
COMPANY
Edison International (NYSE-EIX)
El Paso Elect~c Company (NYSE-EE)
OGE Energy Corp. (NYSE-OGE)
Otter Tail Corporation (NDQ-OTTR)
PNM Resources. Inc. (NYSE-PNM)
AVERAGE
TOTAL
REV
$ MILL
(1)
%
PEG
ELEC
PEV
NET
PLANT
$ MILL
NET
PLANT
PER $
REV
(1)
2.80
2.57
2.56
2.41
2.08
2.29
3.18
1.24
2.93
3.44
2.84
1.31
3.14
2.93
2.92
3.31
2.89
3.13
S&P
BOND
RAT~G
MOODY’S
BOND
RATING
~ON
EQUITY"
RATIO
(3)
%REIURNON
BOOKVALUE
COMMON TOTAL
EQUITY(4) CAPITAL
REGULhaX~
ALLOWED
(TP-,DER
ROE
DATE
COMBINATION ELECTRIC
COMPANY
Alliant Energy Corporation (NYSE-LNT)
Ameren Corporation (NYSE-AEE)
Avista Corporation (NYSE-AVA)
Black Hills Corporation (NYSE-BKH)
CenterPomt Energy (NYSE-CNP)
Chesapeake Utilities Corporation (NYSE-CPK)
CMS Energy Corporation (NYSE-CMS)
Consolidated Edison, Inc. (NYSE-ED)
Dominion Resources, Inc. (NYSE-D)
DTE Energy Company (NYSE-DTE)
Duke Energy Corporation (NYSE-DUK)
Empire District Electric Co. (NYSE-EDE)
Entergy Corporation (NYSE-ETR)
Exelon Corporation (NYSE-EXC)
Integrys Energy Group (NYSE-TEG)
MDU Resources Group, Inc. (NYSE-MDU)
MGE Energy, Inc. (NYSE-MGEE)
NiSource Inc. (NYSE-NI)
Northeast Utilities (NYSE-NU)
NorthWestern Corporation (NYSE-NWE)
Pepco Holdings, Inc. (NYSE-POM)
PG&E Corporation (NYSE-PCG)
Public Service Enterprise Group (NYSE-PEG)
SCANA Corporation (NYSE-SCG)
SEMPRA Energy (NYSE-SRE)
TECO Energy, Inc. (NYSE-TE)
UIL Holdings Corporation (NYSE-UIL)
Unitil Corporation (ASE-UTL)
Vectxen Corporation (NYSE-VVC)
Wisconsin Energy Corporation (NYSE-WEC)
Xeel Energy Inc. (NYSE-XEL)
AVERAGE
PER SI-LARE
LATEST
12 MOIqTHS
CURRENT
EARNINGS
ANNUAL
COMBINED ELECTRIC/COMBINATION ELECTRIC & GAS AVERAGES
& GAS COMPANIES
PI~CENT ~2)
BOOK STOCK COMMON
DIV/ PRICE
DIV
D1V MKT/ BOOK EARN
VALUE PPdCE SHARES
MULT
(1) 02/13/15 O/SIVflLL PAYOUT YIELD BOOK
(2)
36.02
27.92
23.75
30.40
10.41
2032
13.34
43.39
1982
46.15
5857
18.00
57.02
28.87
42.69
15.81
18.86
19.03
31.24
27.63
17.32
33.25
23.89
34.80
45.99
11.09
24.03
19.25
19.16
19.64
20.09
3.5
6.2
10
COMPANY
CenterPoint Energy (NYSE-CNP)
Exelan Corporation (NYSE-EXC)
NiSource lnc (NYSE-NI)
Pepco Holdmgs, Inc. (NYSE-POM)
PG&E Corporation (NYSE-PCG)
UIL Holdings Corporation (’NYSE-UIL)
Unttil Corporation (ASE-UTL)
Vectren Corporation (NYSE-VVC)
Xcel Energy Inc. (NYSE-XEL)
AVERAGE
TOTAL
REV
$ MILL
(1)
%
%
REG PEG
ELEC GAS
PEV REV
NET
PLANT
$ MILL
& GAS COMPANIES
NET
PLANT
PER $
REV
(1)
2.59
2.83
2.28
2.30
1.13
1.36
1.82
2.23
2.75
1.40
2.77
2.86
2.29
1.96
0.92
1.14
1.90
2.44
2.39
2.31
2.11
2.58
2.19
2.51
2.40
2.50
1.95
1.70
1.28
2.25
2.41
COMBINED ELECTR!C/COMBINATION ELECTRIC & GAS AVERAGES
S&P
BOND
RAT.SqG
MOODY’S
BOND
RAT~’G
%~13N
COMMON
BOOKVALUE
EQUITY
RATIO
TOTAL
COI~MON
(3)
EQUITY(4) CAPITAL
~
RI3{~tJLA~I
ORDER
DATE
ROE
12
11
NATURAL GAS DISTRIBUTION
COMPANY
AGL Resources Inc. (NYSE-GAS)
Atmos Energy Corporation (NYSE-ATO)
Delta Natural Gas Company (NDQ-DGAS)
Gas Natural, lrte. (NDQ-EGAS)
Laclede Group, Inc. (NYSE-LG)
National Fuel Gas Company (NYSE-NFG)
New Jersey Resources Corp. (NYSE-NJR)
Northwest Natural Gas Co. (NYSE-NWN)
Piedmont Natural Gas Co., Inc (NYSE-PNY)
Questar Corporation (NYSE-STR)
RGC Resources, Inc. (NDQ-RGCO)
South Jersey Industries, Inc. (NYSE-SJI)
Southwest Gas Corporation (NYSE-SWX)
UGI Corporation (NYSE-UGI)
WGL Holdings, Inc. (NYSE-WGL)
AVERAGE
PER SHARE
LATEST
12 MONTHS
CURREF4T
EARNINGS
ANNUAL
& INTEGRATED NAT. GAS COMPANIES
DATA(S)
PERCEm" (2)
DIV/
BOOK STOCK COMMON
VALUE PRICE SHARES DIV
DIV MKT/ BOOK
(1) 02/13/15 O/S MILL PAYOUT YIELD BOOK
(2)
31.45
30.74
10.53
9.12
34.93
28.64
22.91
27.65
16.66
7.30
11.02
25.99
31.26
15.42
24.61
PRICE
EARN
MULT
14
13
NATURAL GAS DISTRIBUTION
COMPANY
AGL Resources Ine (NYSE-GAS)
Gas Natural, Inc. (NDQ-EGAS)
New Jersey Resources Corp (NYSE-NJR)
Piedmom Natural Gas Co., Inc. (NYSE-PNY)
RG-C Resources, Inc (NDQ-RGCO)
AVERAGE
TOTAL
REV
$ MILL
(1)
%
REG
GAS
REV
NET
PLANT
$ MILL
NET
PLANT
PER $
REV
(1)
1 66
1.36
1.43
098
1.70
272
0.50
2.72
271
3.02
1 45
Z42
1.78
055
1.19
& INTEGRATED NAT. GAS COMPANIES
%REIUI~ON
COMMON
BOOKVALL~
MOODY’S EQUITY
BOND
RATIO COMMON
TOTAL
RATING
(3)
EQUITY (4) CAPITAL
REGULATION
ORDER
ALLOWt]3
DATE
ROE
15
16
WATER
COMPANY
American States Water Co. (NYSE-AWR)
American Water Works Co, Inc (NYSE-AWK)
Aqua America, Inc. (NYSE-WTR)
Artesian Resources Corp. (NDQ-ARTNA)
California Water Service Group (NYSE-CWT)
Connecticut Water Service, Inc. (NDQ-CTWS)
Middlesex Water Company (NDQ-MSEX)
SJW Corporation (NYSE-SJW)
York Water Company (NDQ-YORW)
AVERAGE
PER SHARE
LATEST
12 MONTHS
CURRENT
EARNINGS
ANNUAL
COMPANIES
DATA(S)
PERCENT (2)
BOOK STOCK COMMON
DIV/ PRICE
VALUE PRICE SHARES DIV ~ D1V MKT/ BOOK EARN
(1) 02/13/15 OiS MILL PAYOU1 ~
BOOK
(2)
MULT
13.29
27.44
9.15
15.36
13.02
18.98
12.18
17.62
8.02
18
17
WATER
COMPANY
American Water Works Co., Inc. (NYSE-AWK)
AVERAGE
TOTAL
ILEV
$ MILL
(I)
%
KEG
WATER
KEV
COMPANIES
NET
PLANT
NET PER $
PLANT REV
$ MILL
(1)
%REIURNON
COIV~ION
BOGKVALUE
MOODY’S EQUITY
RATIO COMMON TOTAL
BOb~
RAT~qG
(3)
EQUITY (4) CAPITAL
REGULATION
ALLOWED ORD[~
ROE
DATE
19
20
AUS
INDUSTRY
RANKINGS
Dividend Yield
Market/Book Ratio
Price Earnings Multiple
Return on Book Value
of Common Equity
Industry rankings are based on the financial
statistics reported in the preceding pages.
These rankings are organized and presented
for the reader’s convenience. They do not
represent a recommendation to buy or sell
shares of common stock.
22
21
ELECTRIC
DIVIDEND
HIGH
Somhem Company (NYSEoSO)
4.5
4.3
4.0
3.9
3.7
3.7
3.7
3.7
3.7
3.6
MARKET/BOOK
HIGH
Southem Company (NYSE-SO)
Edison Intemational (NYSE-EIX)
240.2
204.9
204.2
200.3
198.2
190.9
188.7
174.9
165.0
160.1
PRICE/EARNINGS
HIGH
Nextem Energy (NYSE-NEE)
Pinnacle West Capital Corp. (-NYSE-PNW)
RETURN ON BOOK
HIGH
Somhem Company (NYSE-SO)
Cle¢o Corporation (NYSE-CNL)
24.4
23.8
22.9
21.5
21.0
20.5
19.4
19.0
18.0
17.9
VALUE
14.6
12.7
11.0
11.0
10.5
10.4
I0.1
10.0
9.9
9.9
COMPANIES
YIELD
LOW
El Paso Electric Company (NYSE-EE)
2.7
2.8
3.0
3.0
3.0
3.0
3.1
3.1
3.6
3.7
RATIO
LOW
E1 Paso Electric Company (NYSE-EE)
114.5
123.3
130.2
148.5
151.8
156.1
157.7
158.8
160.1
165.0
MULTIPLE
LOW
13.9
15.8
16.2
16.5
16.9
16.9
17.1
17.3
17.9
18.0
OF COMMON EQUITY
LOW
PPL Corporation 0qYSE-PPL)
5.9
6.2
6.7
7.2
8.9
9.3
9.5
9.7
9.9
9.9
23
24
DIVIDEND
HIGH
UIL Holdings Corporation (NYSE-UIL)
Unitil Corporation (ASE-UTL)
4.6
4.5
4.2
4.2
4.1
4.1
4.1
4.0
4.0
4.0
MARKET/BOOK
HIGH
367.9
259.7
259.5
235.0
233.6
229.5
228.0
223.4
209.0
194.0
PRICE/EARNINGS
HIGH
U1L Holdings Corporation (NYSE-UIL)
27.9
27.5
26.5
25.5
25.3
23.1
23.0
22.9
20.9
20.3
RETURN ON BOOK VALUE
HIGH
14.1
13.8
13.7
13.1
12.6
12.5
12.5
11.3
11.2
10.9
& GAS COMPANIES
YIELD
LOW
0.0
2.3
2.4
2.5
2.6
3.3
3.3
3.3
3.3
3.4
RATIO
LOW
116.1
136.3
136.4
137.9
138.8
142.9
147.3
148.8
156.2
161.2
MULTIPLE
LOW
10.7
13.7
13.8
14.7
15.1
15.1
15.3
16.1
16.3
17.1
OF COMMON EQUITY
LOW
6.0
6.1
6.6
8.0
8.5
8.7
9.0
9.1
9.2
9.3
26
25
NATURAL GAS DIST.
DIVIDEND
HIGH
Somh Jersey Industries, Inc. (NYSE-SJI)
Piedmont Natural Gas Co., Inc. (NYSE-PNY)
4.1
3.9
3.9
3.6
3.5
3.5
3.5
3.5
3.4
3.0
MARKET/BOOK
HIGH
330.0
277.3
227.5
226.4
223.8
219.2
216.1
199.7
195.9
184.3
PRICE/EARNINGS
HIGH
RETURN ON BOOK
HIGH
Piedmont Natural Gas Co., Inc. (NYSE-PNY)
25.9
22.0
21.7
21.6
20.4
19.8
19.3
19.1
18.6
18.5
VALUE
19.9
15.3
13.1
13.0
11.8
11.5
11.4
11.0
10.1
9.9
& INT GAS COMPANIES
YIELD
LOW
Gas Natural, Inc. (NIX~-EGAS)
2.0
2.3
2.5
2.6
2.8
3.0
3.4
3.5
3.5
3.5
RATIO
LOW
110.2
147.7
159.2
170.9
172.2
184.3
195.9
199.7
216.1
219.2
MULTIPLE
LOW
13.9
17.6
17.8
18.3
18.4
18.5
18.6
19.1
19.3
19.8
OF COMMON EQUITY
LOW
5.6
6.6
8.0
8.4
9.3
9.9
10.1
11.0
11.4
11.5
28
27
WATER
DIVIDEND
HIGH
4.1
3.4
2.8
2.8
MARKET/BOOK
HIGH
293.8
286.8
282.5
196.9
PRICE/EARNINGS
HIGH
York Water Company (NIX~YORW)
RETURN
HIGH
28.0
25.9
24.3
22.3
ON
BOOK VALUE
15.0
14.4
11.9
10.3
COMPANIES
YIELD
LOW
York Water Company (NIX~-YORW)
2.2
2.3
2.4
2.6
RATIO
LOW
Middlesex Water Company 0qDQ-MSEX)
140.7
182.4
183.6
185.6
MULTIPLE
LOW
Connecticm Water Service, Inc. (NDQ-CTWS)
13.1
20.0
20.0
20.7
OF COlVlMON EQUITY
LOW
7.3
8.2
8.3
9.2
29
30
GLOSSARY OF TERMS
Latest 12 Month Earnings Available Earnings per share as reported, based upon the latest 12 months
ending as of the last day of the month reported in this column.
Earnings per share as reported before extraordinary items for the latest
12 months ending on the date reported.
Current Annual Dividend Latest quarterly dividend per share annualized.
Book ValueCommon equity divided by Common Shares Outstanding for the latest
end figures available.
Price ~
Closing market price per share of common stock on the date cited at
the head of the column.
Common Shares Outstanding Common shares Outstanding for the latest quarter end figures available.
Dividend PayoutAnnualized Dividend per share divided by the reported Earnings per
Share, multiplied by 100.
% Return on Book Value -- Cominon Equity Income Available for Common Equity divided by Average Common
Equity, multiplied by 100. Average common equity based upon the
most recent beginning and ending moving 12 month period available.
% Return on Book Value -- Total Capital From Continuim, Onerations Income before Interest Charges (inclusive of taxes) divided by Average
Total Capitalization, multiplied by 100. Average total capitalization
based upon the most recent beginning and ending four quarter
values available.
Allowed R O E Most recent reported state-level allowed return rate on common equity
(ROE). ROE for companias operating in multiple jurisdictions are
averages. Various companies have received incentive-base ROE
authorizations that are not reported upon in this report.
Order Date The date of the commission order authorizing reported ROE. For
companies operating in multiple jurisdictions, no date is given because
the reported ROE is an average derived from multiple commission
orders issued at different times.
(NYSE) - New York Stock Exchange.
(ASE) - American Stock Exchange.
(NDQ) - NASDAQ.
Dividend YieldAnnualized Dividend per share divided by the market price per share
of common stock reported, multiplied by 100.
NM - Not Meaningful.
Market/Book Ratio Market price per share of common stock reported, divided
by the reported Book Value per share multiplied by 100.
Additional Notes -
Dividend/Book RatioAnnualized Dividend per share divided by the reported Book Value per
share, multiplied by 100.
(2) Based on per share value.
Price-Earnings Multiple Ratio Market price per share of common stock reported divided by the
reported earnings per share.
Total Revenue - This is the total operating revenue for the latest
12 months as available. It includes regulated and non-regulated revenue.
% Electric / Gas / Water / Telephone Revenue Percentage of regulated revenues attributable to Elec./Gas/Water/Tele.
operations relative to total Operating Revenue. Company groupings
are based on revenue percentages and SIC classification criteria.
Net Plant Total Property, Plant and Equipment less Depreciation and Contributions
in Aid of Construction for the latest quarter end figures available.
Net Plant Per Revenue Net Plant as reported divided by Operating Revenue as reported.
Standard & Poor’s and Moodv’s Bond Ratings Ratings for each company’s most senior long term debt security.
For holding companies, ratings are based on an average of the bond
ratings available for the regulated subsidiaries.
Common Eouity Ratio Common Equity capital for the latest quarter divided by total
capital as reported, multiplied by 100. Total capital is equal to the
sum of long-term debt, current maturities, short-term debt, preferred
stock and corrtmon equity for the latest quarter end figures available.
NA - Not Available.
(1) Balance sheet values are the latest quarter end figures as available
Income statement figures are for the latest 12 month available
(3) Based on total capital. (The sum of long-term debt, current maturities,
short term debt, preferred stock and common equity capital.)
(4) In many instances, available information require that Per
Share and % Return on Book Value of Common Equity/Total
Capital derived from figures that represent financial activity
from different 12 month periods.
32
31
33
IMPORTANT NUMBERS
GOVERNMENT AGENCIES
Federal Communications Commission (FCC)
445 12th Street S.W.
Washington D.C. 20554
(202) 418-0200
http://www.fcc.gov
Federal Energy Regulatory Commission (FERC)
888 First Street, N.E.
(202) 208-0200
http://www, ferc. fed.ns
Nuclear Regulatory Commission (NRC)
One White Flint North
11555 Rockville Pike
Rockville, MD 20852
(301) 415-7000
http://www.nrc.gov
INTRODUCE A FRIEND TO AUS UTILITY REPORTS
Securities & Exchange Commission (SEC)
450 Fifth Street, N.W.
(202) 942-7040
http://www.sec.gov
For those people who would prefer to receive an electronic
version of the report. It is available in Microsoft Excel, which
you will receive on a monthly basis via e-mail.
TRADE ASSOCIATIONS
American Gas Association (AGA)
400 N. Capitol Slreet, N.W.
(202) 824-7000
http://www.aga.org
Edison Electric Institute (EEI)
701 Pennsylvania Ave., N.W.
(202) 508-5000
http://www.eei.org
National Association of Water Companies (NAWC)
1725 K Street, N.W.
Suite 1212
(202) 833-8383
http://www.nawc.org
United States Telecom Association (U STA)
1401 H. Street, N.W.
Suite 600
(202) 326-7300
http://www.usta.org
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AUS Monthly Utility Reports
Exhibit SCH-3
Economic Data
INTEREST RATES AND COST OF CAPITAL RELATIONSHIPS
5
6
7
8
9
10
11
12
13
14
15
16
2012
Electric Risk
Gas Risk 30-year 10-Year Jtility Bond Rate - Government Ratq Avg Utility Monthly Rates Double-A Single-A Triple-B Util Avg ROE* Premium ROE Premium T-Bonds T-Bonds Double-A Single-A Tdple-B Util Avg Gov Rate
Jan-12
4.03
4.34
5.06
1.00
1.31
2.03
1,45
2.51
4.48
3.03
1.97
Feb-12
4.02
4.36
5,02
4,47
3,11
1.97
0.91
1.25
1.91
1.36
2.50
Mar-12
4.16
4.48
5.13
4.59 10.30
5.79 9.63
5.12
3.28
2.17
0.88
1.20
1.85
1.31
2.43
Apr-12
4.10
4.40
5.11
4.54
3.18
2.05
0.92
1.22
1.93
1.36
2.49
May-12
3.92
4.20
4.97
4.36
2.93
1.80
0.99
1.27
2,04
1.43
2.56
Jun-12
3.79
4,08
4.91
4.26
9.92
5.53 9.83
5.44
2.70
1.62
1.09
1.38
2.21
1.56
2.64
Jul-12
3.58
3.93
4,85
4.12
2.59
1.53
0,99
1.34
2.26
1.53
2.59
Aug-12
3.65
4.00
4.88
4.18
2.77
1,68
0.88
1.23
2.11
1.41
2.50
Sep-12
3.69
4.02
4.81
0.81
1.14
1.93
1.29
2.45
4.17 9.78
5.62 9.75
5.59
2.88
1.72
Oct-12
3.68
3.91
4.54
4.0~
2.90
1.75
0.78
1.01
1.64
1.14
2.29
Nov-12
3,60
3.84
4.42
3.95
2.80
1.65
0.80
1.04
1.62
1.15
2.30
Dec-12
3.75
4.00
4.56
4.10 10.05
2.88
1.71
0,87
1,12
1.68
1.22
2.39
6.02 10.06
6,03
2012 Average
3,83
4.13
5,67 2.92 1.80
0.91 1.21 1.93 1.35
2.47
4.86
4.27 10.15
5.88 9.94
Last 3-mo Avg
3,68
3.92
4.51
4.03
2.86 1.70
0.82 1.06 1.65
1,17
2.33
Qtrly Electdc Qtrly
Gas
30-Year Spread
10-Year Spr¢
2013
Electdc Risk
Gas
Risk 30-year 10-Year Jtility Bond Rate - Government Rat~Avg UtilityMonthly Rates Double-A Single-A Triple-B Util Avg ROE* Premium ROE Premium T-Bonds T-Bonds ~)ouble-A Single-A Triple-B Util Avg Gov Rate
Jan-13
3.90
4.15
4.66
4.24
3.08
1.91
0.82
1.07
1.58
1.16
2.33
Feb-13
3.95
4.18
4.74
4,29
3.17
1.98
0.78
1.01
1.57
1.12
2.31
Mar-13
3.95
4.20
4.72
4.29
9.83
5.56 9.57
5,30
3.16
1.96
0.79
1.04
1.56
1.13
2.33
Apt-13
3.74
4.00
4.49
4.08
2,93
1.76
0.81
1.07
1,56
1.15
2.32
May-13
3,91
4.17
4.65
4.24
3.11
1.93
0.80
1.06
1.54
1.13
2.31
Jun-13
4.27
4.53
5.08
0.87
1.13
1.68
1.23
2.33
4,63
9.86
5.54 9.47
5.15
3.40
2.30
Jul-13
4,44
4.68
5.21
1.17
4.78
3.61
2.58
0.83
1.07
1.60
2.20
Aug-13
4.53
4.73
5.28
4.85
3.76
2.74
0.77
0.97
1.52
1.09
2.11
Sep-13
4.58
4.80
5.31
4.90 10.12
6.28 9.60
4.76
3.79
2.81
0.79
1.01
1.52
1.11
2.09
Oct-13
4.48
4,70
5.17
4.78
3.68
2.62
0,80
1.02
1.49
1.1(~
2.16
NOV-13
4.56
4,77
5.24
4.86
3.80
2.72
0.76
0.97
1.44
1.08
2.14
Dec-13
4.59
4.81
5.25
1.36
1.0(~
1.99
4.89
9.95
5.17
9.83
4.99
3.89
2.90
0.70
0.92
2013 Average
4.24
4.48
4.98
4.57
9.93
5.36 9.68
5.11
3.45
2.35
0.79
1.03
1.54
1.12
2.22
Last 3-mo Avg
4.54
4.76
5,22
4.84 9.95
5.11
9.83
4.99
3.79
2.75
0.75 0.97 1.43
1.05
2.10
Qtrly Electdc Qtrly
30-Year Spread
10-Year Sprc
Gas
2014
Electric Risk
Gas
Risk 30-year 10-Year Jtility Bond Rate - Government Ral Avg UtilityMonthly Rates Double-A Single-A Triple-B Util Avg ROE* Premium ROE Premium T-Bonds T-Bonds Double-A Single-#. Triple-B Util Av~ Gov Rate
Jan-14
4.44
4.63
5.09
4.72
3.77
2.86
0,67
0.86
1.32
0.95
1.86
Feb-14
4.38
4.53
5.01
4.64
3.66
2.71
0.72
0,87
1.35
0.98
1.93
Mar-14
4,40
4.51
5.00
4,63
9.86
4.88
3.62
2.72
0.78
0.89
1.38
1.01
1.91
5.20 9.54
Apt-14
4.30
4.41
4.85
0.89
1.33
1.00
1.83
4.52
3.52
2.69
0.78
May-14
4.16
4.26
4.69
4.37
3.39
2.56
0.77
0.87
1.30
0.98
1.81
Jun-14
4.23
4.29
4.73
4.42 10.10
5.40
3.42
2.59
0.81
0.87
1.31
1.00
1.83
5.66 9.84
Jul-14
4,16
4.23
4.66
4.35
3.33
2.53
0.83
0.90
1.33
1.02
1.82
Aug-14
4.07
4.13
4.65
4.29
3.20
2.41
0.87
0.93
1.45
1.09
1.88
Sep-14
4.18
4.24
4.79
4.40
9.88
5.53 9.45
5,10
3.26
2.53
0.92
0.98
1.53
1.14
1.87
Oct-14
3.98
4,06
4.67
4.24
3.03
2.29
0.95
1.03
1.64
1.21
1.95
Nov-14
4.03
4.09
4.75
4.29
3.04
2.32
0.99
1.05
1.71
1.25
1.97
Dec-14
3.90
3.95
4.70
1.351
4.18
5,56
5,26
2.83
2.20
1.07
1.12
1.87
1.98
2014 Average
4.19
4.28
4.80
4.42
9.92
5.50 9.63
5.21
3.34
2.53
0.85
0.94
1.46
1.08
1.89
Last 3-mo Avg
3.97
4.03
4.71
4.24
9.80
5.56 9.50
5.26
2.97
2.27
1.00
1.07
1.74
1.27
1.97
10-Year Spr¢
Qtrly Electdc Qtrly
30-Year Spread
Gas
Jul-05
Electric Risk
Gas
Risk 30-year 10-Year Jtility Bond Rate - Government Ral Avg Utility Monthly Rates Double-A Single-A Triple-B Util Avg ROE* Premium ROE Premium T-Bonds T-Bonds Double-A Single-A Triple-B Util Avg Gov Rate
Jan-15
3.52
3.58
4.39
1.13
1.94
1.38
1.96
3.83
2.45
1.87
1.07
Feb-15
3,62
3.67
1.34
4.44
3.91
2.57
1.97
1.05
1.10
1.87
1.94
Mar-15
3.67
3.74
4.51
3.97
2.63
2.04
1.04
1,11
1.88
1.34
1.93
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec- 15
2015 Average 3.60
3.66
4.45
3.90
9.92
6.02 9.63
5,73 2.55
1.96
1.05
1.11
1.90
1.35
Last 3-mo Avg
3.60
3.66
4.45
3.90
2.55
1.96
1.05
1,11
1.90
1.35
*Integrated Electrics only for Ist Qtr 2012 and 2013-2014.
Sources: Moodys (Mergent) Bond Record (Corporate Bond Yield Averages), Federal Reserve System website (Government rates),
Regulatory Research Associates, Major Rate Case Decisions (Allowed ROEs).
Equity Risk Premium (Column 7) = Column 6 minus Column 5.
1
2
3
4
Exhibit SCH-6
DCF Analysis
Zacks Growth Extractor
Comparable Co
1 ALLETE, Inc.
ALE
2 Alliant Energy Corp.
LNT
3 Ameren Corp.
AEE
4 American Electric Power Co. AEP
5 Avista Corp.
AVA
6 Black Hills Corp.
BKH
7 CMS Energy Corp.
CMS
8 Duke Energy Corp.
DUK
9 Edison International
EIX
10 Great Plains Energy Inc.
GXP
11 IDACORP, Inc.
IDA
12 NorthWestern Corp.
NWE
13 OGE Energy Corp.
OGE
14 PNM Resources
PNM
15 Pinnacle West Capital Corp. PNW
16 Portland General Electric Co. POR
17 SCANA Corp.
SCG
18 Sempra Energy
SRE
19 Southern Company
SO
20 Teco Energy, Inc.
TE
21 Westar Energy, Inc.
WR
22 Xcel Energy Inc.
XEL
Zacks g
NA
5.27%
7.35%
4.82%
NA
NA
6.17%
4.68%
7.13%
4.75%
3.00%
7.63%
5.50%
8.87%
4.00%
5.92%
4.20%
7.86%
3.70%
7.10%
3.78%
4.72%
ALE Analyst Estimates I Allete, Inc. Stock - Yahoo! Finance
3/10/2015
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i Enter Symbol i~
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Add to Portfolio
ALLETE, Inc. (ALE) - NYSE "~" Watchltst
Like
52.12 ¯ 0.02(0.04%) 4:0,PM EDT
Earni~ Est
Current Qb’.
Mar 15
N~t QV.
Jun 15
Curm~ Year
D~ 15
Next
D~ 16
Avg. E~ma~
0.87
0.~
323
3.46
No, of ~alys~
4,00
3.00
5.00
6.00
Low Estate
0.83
0.52
3.13
3.35
High Es~
0.90
0.56
3.50
3.60
Year Ago EPS
0.83
0A6
2.99
3.23
Current Qty.
Mar 15
314.90M
1
314.90M
314.90M
296.50M
6.20%
Next Qtr.
Jun 15
277.00M
1
277.00M
277.00M
260,70M
6.30%
Current Year
Den 15
1.12B
4
1.05B
121B
1.14B
-1.10%
Next Year
Dec 16
1.21 B
4
1.14B
1.28B
1.12B
7,90%
Mar 14
0,86
0.83
-0.03
-3.50%
Jun 14
0.45
0A6
0.01
2.20%
Sap 14
0.72
0.97
0.25
34.70%
Dec 14
0,68
0.73
0.05
7A0%
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Current Estimate
0.87
0.54
3.23
3.46
7 Days Ago
0.87
0.54
323
3.46
30 Days Ago
0.86
0.56
3.21
3.47
60 Days Ago
0.90
0.49
3.14
90 Days Ago
0.90
0.49
3.14
3.43
3.43
EPS Revisions
Current Qtr,
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last 7 Days
0
0
0
0
Up Last 30 Days
0
0
0
0
Down Last 30 Days
0
0
0
0
Down Last 90 Days
NIA
N/A
N/A
N/A
Growth Est
ALE
Indusby
Sector
S&P 500
Current Qb’.
4.80%
0.70%
257.00%
9.10%
Next Q~’.
This Year
17.40%
8.00%
7.40%
10.20%
134.10%
0.50%
14.70%
3.00%
Next Year
7.10%
6.60%
6.60%
13.’i0%
Past 5 Years (per annum)
6.01%
NIA
NIA
N/A
Next 5 Years (per annum)
6,00%
2.30%
7.46%
7.74%
Price/Earnings (avg. for
comparison categories)
16.45
16.69
18.12
19,14
PEG Ratio (avg. for
2.74
4.83
4.28
1.95
Revenue Est
Avg. Estimate
No. of A~alyst~
Low Estimate
High F_s~mate
Year Ago Sales
Sales Grow~ (yearlest)
Earnings History
EPS Est
EPS Actual
Difference
Surprise %
EPS Trends
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Tue, Mar 10 201S, 4:34.10~ F..DT- US Markets are c~sed Report ,, I=,ue
Alliant Energy Corporation (LNT) - NYSE ~’ Wstchlist
60.67 ,o.o3(o.os% )4:o7P, Eo,
o~t An=y= E=t=matea for. i ............ i iiii~ii.~
Analyst Estimates
Current Qtr.
Mar 15
0,85
3,00
0.76
1.00
0.97
Next Qtr.
Jun 15
0,57
3,00
0.52
0.60
0.56
Current Year
Dec 15
3.61
8,00
3.56
3.66
3A8
Naxt Year
Dec 16
3.82
9.00
3.74
3.90
3.61
Current Qtr,
Mar 15
834.43M
2
749.86M
919.00M
952.80M
-12.40%
Next Qtr.
Jun 15
691,91M
2
601.83M
782.00M
750.30M
-7.80%
Current Year
Dec 15
3.40B
5
3.31B
3,50B
3.35B
1.40%
Next Year
De~ 16
3.50B
6
3.39B
3.66B
3.40B
3.20%
Mar 14
0.78
0.97
0.19
24.40%
Jun 14
0.61
0.56
-0.05
-8.20%
Sep 14
1.39
1,40
0,01
0.70%
Dec 14
0.55
0.54
-0.01
-1.80%
Current Qtr.
Mar 15
Next Qtt,
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Current Estimate
0.85
0 .57
3.61
3.82
7 Days Ago
0.57
3.63
3.82
30 Days Ago
0.85
0.76
0.52
3.64
3,84
60 Days Ago
0.76
0.52
3.64
3.84
90 Days Ago
0.76
0.52
3.63
3.83
EPS Revisions
Current Qtr.
Mar 15
Next Qtt.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last 7 Days
0
0
0
0
Up Last 30 Days
0
0
0
0
0
NIA
0
NIA
1
0
NIA
N/A
Grow~ Est
LNT
Industry
Sector
S&P 500
Current QI=’.
Next Q~.
-12.40%
0.70%
257.00%
9.10%
7.40%
10.20%
134.10%
14.70%
This Year
1.80%
3,70%
0.50%
3.00%
Next Year
5.80%
6.60%
6.60%
13.10%
8.10%
N/A
NIA
N/A
5.40%
2.30%
7.46%
7.74%
16.69
16.69
18.12
19.14
PEG Rat~o (avg. ~or
comparison cetegodes)
3.09
4.83
4.28
1.95
Earnings F_st
Avg, E~mate
No. of Analys~s
Low Estimate
High Esl~mate
Year Ago EPS
Revenue Est
Avg. Estimate
No. of Analysts
Low Estimate
High Estimate
Year Ago Sales
Sales Growth (yearlest)
Earnings History
EPS Est
EPS Actual
Difference
Surpdso %
EPS Trends
Down Last 30 Days
Down Last90 Days
http://finance.yahoo.com/q/ae?s=lnt&ql= 1
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AEE Analyst Estimates J Ameren Corporation Common Stock Stock - Yahoo! Finance
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Ameren Corporation (AEE) - NYSE ~" Wat©hllst
41.47 10.35(0.85%) 4:05PM EDT
AtterHours:41.46 0,01 (O.02%)4:14PMEDT
Analyst Estimates
Earnings Est
Avg. Estimate
No. of Analysts
Low Estimate
High Estimate
Year Ago EP8
Revenue Est
Avg. Es~mate
No. of Analysts
Low Estimate
High E~mate
Year Ago Sales
Sales Growfh (year/est)
Current Qtr.
Mar 15
0,32
3.00
0.28
0.40
0A0
Next Qtr.
Jun 15
0.65
2.00
0.64
0.65
0.62
Current Year
Dec 15
2.55
t2.00
2.48
2.61
2.40
Next Year
Dec 16
2.71
9.00
2.65
2.81
2.55
Current Qtr.
Mar 15
1.53B
2
1.50B
1.55B
1 o59B
-4.10%
Next Qtr.
Jun 15
1.45B
2
1.43B
1.47B
1,42B
2.00%
Current Year
Dec 15
6.22B
9
6.1 IB
6,35B
6.05B
2.70%
Next Year
Dec 16
6.42B
7
629B
6.56B
622B
3,20%
Mar 14
Jun 14
Sap 14
Dec 14
E~PS Est
0.31
0.58
1.22
0.14
EPS Actual
0.40
0.62
1.20
0.19
0.09
2g.00%
0.04
-0.02
0.05
6.90%
-1.60%
35.70%
Current Qlr,
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Earnings History
Difference
Suq~dse %
EPS Trends
Current Estimate
0.32
0.65
2.55
2.71
7 Days Ago
0.32
0.65
2.55
2.69
30 Days Ago
60 Days Ago
90 Days Ago
0.29
0.29
0.29
0.64
0.65
0.65
2.56
2.56
2.56
2.70
2.71
2.71
Current Qlr.
Mar 15
0
0
0
N/A
Next Q~.
J~ 15
0
0
0
NIA
Current Year
Dec 15
1
1
2
NIA
Next Year
Dec 16
0
2
0
N/A
Growth Eat
AEE
Industry
Sector
Current Qlr.
-20.00%
4.80%
0.70%
7,40%
257,00%
This Year
6.20%
10,20%
0.50%
Next Year
6.30%
6,60%
6.60%
-2,54%
N/A
NIA
6,85%
2.3~%
7 A6%
8&P 5OO
9.t 0%
14.70%
3.00%
13.10%
N/A
7.74%
16.13
16.69
18.12
19.14
2,35
4.83
4.28
1.95
EP$ Revisions
Up Last 7 Days
Up Last 30 Days
Down Last 30 Days
Down Last 90 Days
Next Q~’.
Prica/Eamings (avg. for
PEG Ra6o (avg. for
http://financ&yahoo.com/q/ae?s= aee&ql= 1
134.10%
112
AEP Analyst Estimates I American Electric Power Company Stock - Yahoo! Finance
3/10/2015
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"rue, Mar 10, 2015, 4:34pm ED]- - US Markets are Closed Report an Issue
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American Electric Power Co., Inc. (AEP) - NYSE ~" Watohllst
55.26,0.08(0.14%) ,:07P, EDT
After Hours : 55.25 0.01 (0.02%) 4:14PM EDT
Analyst Estimates
Get Analyst Estimates
Earnings F.st
Curr~nt Q~’.
Mar 15
Next Qtr.
Jun 15
Avg. Es~mate
1.02
0.81
3.51
3.69
No. of Analysts
8.00
8.00
19.00
19.00
Low Estimate
0.79
0.75
3A0
3.51
High Estimate
1.20
0.95
3.57
Year Ago EPS
1.15
0.80
3 A3
3.78
3.51
Revent~e Est
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
17.29B
Current Year
Dec 15
Next Year
Dec 16
4.68B
4.30B
17.40B
No. of Analysts
5
5
12
13
Low Estimate
4,39B
4.03B
16.10B
15.62B
High Estimate
4.94B
4.93B
19.86B
20.93B
Year Ago Sales
4.65B
4.04B
17,00B
sales Growth (year/est)
0.70%
6.40%
2.30%
17.40e
-0.60%
Earnings History
Mar 14
Jun 14
Sep 14
Dec 14
EPS Est
0.93
0.75
1.01
0.50
EPS Actual
1.15
0.80
1.01
0.48
Difference
0.22
0.05
0,00
-0.02
23.70%
6.70%
0.00%
-4.00%
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Current Estimate
1.02
0.81
3.51
3.69
7 Days Ago
1.02
0.81
3.51
3,69
30 Days Ago
60 Days Ago
90 Days Ago
1.02
0.98
0.96
0.81
0.84
0.82
3.52
3.54
3.55
3.70
3.72
3.73
EPS Revisions
Current Qtt.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last 7 Days
0
0
0
0
Up Last 30 Days
0
0
0
Down Last 30 Days
0
0
0
0
0
Down Last 90 Days
NIA
N/A
N/A
N/A
Growth Est
AEP
Industry
Sector
S&P 500
Current Qtr.
-11.30%
0.70%
257.00%
9.10%
Next Qtr,
1.20%
7.40%
134.10%
14.70%
31~is Year
2.30%
102.0%
0.50%
3.00%
Next Year
5,10%
6.60%
6.60%
13,10%
3.45%
NIA
N/A
N/A
5,21%
2.30%
7.46%
7.74%
15.72
16.69
18.12
19.14
3.02
4.83
42.8
1.95
Surprise %
EPS Trends
PEG Ratio (avg. for
http://finance.yahoo.comfqfae?s= aep&ql= 1
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AVA Analyst Estimates I Avista Corporation Common Stock Stock - Yahoo! Finance
3/10/2015
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Finance Home My Portfolio My Quotes News Market Data Yahoo Originals Business & Finance Personal Finance CNBC Contributom
Tue, Mot 10. 2015, 5:50~ EDT-US Msr,e~ ar~ oreae~ .epo... Iss.o
-E,~;;~~;oT-i [-~’~’;;-]
Dew 41,1.85% N
Add to Portfolio
Avista Corp. {AVA) - NYSE ’~t Wetehllst
Like
32.67,0.0 (o.03%) 4:06 , 0T
After Hours : 32.67 0.00 (0.00%) 4:05PM EDT
Analyst Estimates
Get Analyst Estimates for:.
Earnings F.st
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Avg. Estimate
0.87
0.37
1,98
2.02
No. of Analysts
1.00
1,00
3.00
4.00
Low Esl~mate
0.87
0.37
1.96
2,00
High Estimate
0.87
0.37
2.00
2.03
Year Ago EP$
0.81
0.52
2,00
1.98
Current Qtr.
Mar 15
459.30M
1
459.30M
459.30M
490.96 M
-6.40%
Next Qtr.
Jun 15
304.56M
1
304.56M
304.56M
312.58M
-2.60%
Current Year
Dec 15
1.71 B
2
1.68B
1.73B
1.47B
16.10%
Next Year
Dec 16
1.71 B
3
1.64B
1.77B
1.71 B
0.00%
Revenue Est
Avg. Estimate
No. of Analysts
Low Estimate
High Estimate
Year Ago Sates
Earnings History
Next Year
Dec 16
Mar 14
Jor114
Sep 14
Dec 14
EPS Est
0.77
0.44
0.23
0.55
EPS Actual
0.81
0,52
0.16
0,51
Difference
0,04
0.08
-0.07
-0.04
5,20%
182.0%
-30.40%
-7.30%
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Current Estimate
0.87
0.37
1.98
2.02
7 Days Ago
0.87
0.37
1.98
2.02
30 DaysAgo
0.85
0.35
1.98
2.02
60 DaysAgo
0.85
0.41
1.97
2.03
90 Days Ago
0.86
0.41
1.98
2.03
EP8 Revisions
Current QI~.
Mar 15
Next Qtr,
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last7 Days
1
0
1
1
1
0
Up Last 30 Days
1
0
Down Last 30 Days
0
0
0
1
Down Last 90 Days
N/A
NIA
N/A
N/A
AVA
7.40%
-28.80%
-1.00%
2.00%
-I .11%
5.00%
Industry
0.70%
7A0%
10.20%
6.60%
N/A
2.30%
Sector
257.00%
134.10%
0.50%
6.60%
N/A
7A6%
S&P 500
9.10%
14.70%
3.00%
13.10%
N/A
7.74%
16.51
16.69
18.12
19.14
3.30
4.83
4.28
1.95
Surpdse %
EPS Trends
Growth Est
Current Qtr.
Next Qtr.
This Year
Next Year
Next 5 Yea~s (per annum)
PdcelEamings (avg. for
PEG Ratio (avg. for
hltpJ/finance.yahoo.com/q/ae?s= ava&ql= 1
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BKH Analyst Estimates J Black Hills Corporation Common Stock - Yahoo! Finance
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Black Hills Corporation (BKH) - NYSE 1~" Watchl|st
Like
48.22 ,~0.24(0.50%)4:02PMEDT
Analyst Estimates
Get Analyst Estlmete~ for:. i ....
Current Qtr,
Mar 15
Next QIz.
Jun 15
Current Year
Dec 15
Avg. Estimate
1.05
0.48
2.88
3.07
No. of Analysts
2,00
1.00
6.00
7.00
Low E~mate
1.04
0.48
2.84
2.95
High Eslimate
1.05
0.48
2.91
3.19
Year Ago EPS
1.08
0.44
2.89
2.88
Revenue Est
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
1.52B
Earnings Eet
Next Year
Dec 16
413.89M
333.84M
1.46B
No. of Analysts
1
1
6
6
Low Es~mate
413,89M
333.84M
1 .~,OB
1,44B
High Estimate
413.89M
333.84M
1.52B
1.59B
Year Ago Sales
460.10M
-10.00%
283.30M
1.39B
1.46B
17,80%
4.50%
4.30%
Mar 14
Jun 14
Sep 14
Dec 14
EPS Est
0.92
0.48
0.52
0.77
EPS Actual
1.08
0.44
0.60
0.76
Difference
0.16
-0.04
0,08
-0,01
17.40%
-,8.30%
15 A0%
-1.30%
Current Qtr.
Met 15
Next Q~’.
Jun 15
Next Year
Dec 16
Current EslJrnate
1.05
0,48
Current Year
Dec 15
2.88
7 Days Ago
1.05
0.48
2.88
3.07
30 Days Ago
1.03
0.51
2,89
3.07
60 Days Ago
0.99
0,53
3.01
3.15
90 Days Ago
0.99
0.53
3.01
3.15
Current Qtr.
Mar 15
Next Qk.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last 7 Days
0
0
0
0
Up Last 30 Days
0
0
0
1
Down Last 30 Days
0
0
0
0
Down Last 90 Days
NIA
NIA
NIA
NIA
Growth Est
BKI-I
Industry
Sector
$&P 500
Current Qtr.
-2.80%
0.70%
257.00%
9.10%
Next Q~’.
3"his Year
Next Year
9.10%
-0.30%
7.40%
10.20%
134.10%
0.50%
14.70%
3.00%
6.60%
6.60%
6.60%
13.10%
8.40%
N/A
N/A
N/A
7.00%
2.30%
7.46%
7.74%
Pdce/Ea mings (avg, for
16.90
16.69
18.12
19.14
PEG Ra~o (avg. for
Comparison ~ategories)
2A1
4.83
4.28
1.95
Earnings History
Surprise %
EPS Trends
EPS Revisions
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CMS Analyst Estimates ] CMS Energy Corporation Common S Stock - Yahoo! Finance
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CMS Energy Corp. (CMS) - NYSE ~" Watch.st
33.08 , 0.04(0.12%)4:01PMEDT
After Hours : 33.26 0.18 (0,54%) 4:45PM EDT
Analyst Estimates
Earnings Est
Current Qtr.
Mar 15
Next Qtr.
Ju~ 15
Avg. EslJmate
0.65
037
1.88
2.01
No. of Analysts
5.00
5.00
17,00
14.00
Low Estimate
0.53
0.30
1.86
1.97
High Estimate
Year Ago EPS
0.78
0.53
1.90
2.04
0.75
0.30
1.77
1.88
Current Qtt,
Mar 15
2.26B
4
2,08B
2.54B
2.52B
-10.4o%
Next Q~,
Jun 15
1.49B
4
1.38B
1,64B
1,47B
1.80%
Current Year
Dec 15
7.10B
14
6.58B
7.79B
7,18B
-1,10%
Next Year
Dec 16
7.25B
12
6.68B
7,84B
7.10B
2.10%
Revenue Est
Avg. Estimate
No. of Analysts
Low Estimate
High Estimate
Year Ago Sales
Sates Growth (year/est)
Current Year
Oec 15
Next Year
Dec 16
Mar 14
Jun 14
Sep t4
Dec 14
EPS Est
0.72
0~27
0.38
0.36
EPS Actual
0.75
0.30
0.37
0.35
Difference
Surprise %
0.03
4.20%
0.03
-0,01
-0.01
11.10%
-2.60%
-2.80%
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Current Estimate
0.85
0,37
1.88
2.01
7 Days Ago
0,65
0.37
1.88
2.01
30 Days Ago
0.66
0.37
1.88
2.01
60 Days Ago
0.74
0.74
0.31
1.88
2.00
0.31
1.88
2,00
EP$ Revisions
Current Qtr.
Mar 15
Next Qlr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last7 Days
0
0
0
0
UP Last 30 Days
0
1
2
Earnings Hi~tory
EPS TrendS
90 Days Ago
Down Last 30 Days
0
0
0
0
Down Last 90 Days
N/A
N/A
N/A
NIA
CMS
- 13.30%
23.30%
6.20%
6.90%
3.82%
6.73%
Industry
0.70%
7.40%
10.20%
6.60%
N/A
2,30%
Sector
257,00%
134.10%
0.50%
6.60%
NIA
7.46%
S&P 500
9.10%
14.70%
3,00%
13.10%
N/A
7.74%
17.62
16.69
18.12
19.14
2.62
4.83
4.28
1.95
Growth F_st
Current Qtr.
Next Qtr.
This Year
Next Year
PEG Ratio (avg, for
httpJ/finance, yahoo.com/q/ae?s=cms&q~= 1
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3/10/2015
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Duke Energy Corporation (DUK) - NYSE ~r Watchllst
Like
74.70 .o.oelo.os ) 4:OlPMEoT
A~er Hours : 74.61 4,0.0S 10.12°/=) 4:45PM EDT
Analyst Estimates
Current Qtr.
Mar 15
Next Qty.
Jun 15
Avg, Estimate
1.13
1.07
4,68
4.95
No. of Analysts
6.00
5.00
16.00
15.00
Low Estimate
1.08
1.03
4.62
4.86
High Eslimate
1.18
1.11
4.80
5.05
Year Ago EPS
1.17
1,11
4.55
4.68
Revenue Esl~
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg, Esl~mate
6.42B
6.19B
25,59B
26.17B
No. of Analysts
3
3
13
11
Low Estimate
6,24B
5.86B
24.50B
24.83B
High Esl~mate
6.65B
6,38B
26.77B
27.37B
Year Ago Sales
6,62B
5.95B
23.92B
25.59B
-3.10%
4.10%
7.00%
2,30%
Earnings Eat
Sales Growth (ysar/est)
Current Year
Dec 15
Next Year
Dec 16
Mar 14
Jun 14
Sep 14
Dec 14
EPS Est
1.12
0.98
1.52
0.88
EPS Actual
1.17
1.11
1A0
0.86
Difference
0.05
0.13
-0,12
-0,02
4,50%
13.30%
-7~90%
-2.30%
Current Qtr.
Mar 15
1.13
1.15
Next Qty.
Jun 15
1.07
1.09
Currer~ Year
Dec 15
Next Year
Dec 16
1.14
1.12
1.13
EPS Revisions
Earnings History
Surprise %
EPS Trends
Current Estimate
7 Days Ago
4.68
4.95
4.68
4.94
1.07
1.05
1.03
4.76
4.76
4.76
4.96
4.97
4.97
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last 7 Days
0
0
0
0
Up Last 30 Days
1
2
1
1
Down Last 30 Days
0
0
1
1
Down Last 90 Days
N/A
N/A
N/A
N/A
DUK
-3.40%
-3.60%
2.90%
5.80%
1.98%
4.52%
Industry
0,70%
7A0%
10.20%
6.60%
N/A
2.30%
,~=ctor
257.00%
134.10%
0,50%
6.60%
NIA
7,46%
~ 500
9.10%
14.70%
3.00%
13.10%
N/A
7.74%
15.97
16.69
18.12
19.14
3.53
4.83
4.28
1.95
30 Days Ago
60 Days Ago
90 Days Ago
Growth Est
Current Qlr.
Next Qtt.
This Year
Next Year
Next 5 Years {per annum)
comparison categories}
PEG Ra~o (avg, for
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3/10/2015
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Tue, Mar 10, 2015, 5:51pm EDT- US Markets ~re c~sed Repolt an Issue
Dow ~.1.85% I’ .......................... ...........
Edison International (EIX) - NYSF: ,~r Watchlist
62.07 ~, 0.28 (0.45% ) 4:01PMEDT
After Hours : 62.22 0.15 (0,24%) 4:45PM EDT
Analyst Estimates
Earnings Est
Current Qb’.
Mar 15
Next Q~.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
0.77
0,75
3,63
3.96
No. of Analysts
6.00
6.00
15,00
15.00
Low Estimate
0.68
0.38
3.45
3.83
High Estimate
0.85
0.92
4.40
4.50
Year Ago EPS
0,90
1,07
4.59
3.63
Revenue Est
Current Qtr.
Mar 15
Ne~t Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
13.87B
2.99B
3.07B
13.36B
No. of Analysts
5
5
13
11
Low Estimate
2.93B
3,02B
11.94B
High Estimate
3,06B
3,16B
14.03B
12.51 B
14,63B
Year Ago Sales
2.93B
3.02B
13,41 B
13.36B
~ales Grow~ (year/est)
2.20%
1.90%
-0A0%
3.80%
Earnings History
Mar 14
Jun 14
Sep 14
Dec 14
EPS Est
0.81
0.83
1.34
0.83
EPS Actual
0.90
1,07
1,52
1.08
D{f~rence
0.09
0.24
0.25
11.10%
28.90%
0,18
13.40%
30.10%
Current Qty.
Mar 15
Current Year
Dec 15
Next Year
Dec 16
Surpdse %
Current Estirsate
0.77
Next Qtr.
Jun 15
0.75
3.63
3.96
7 Days Ago
0.76
0.74
3.61
3.92
30 Days Ago
0.80
0.85
3.60
3.92
60 Days Ago
0.80
0.86
3.61
3.91
90 Days Ago
0.80
0.86
3.61
3.92
EPS Revisions
Current Q~r.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last 7 Days
0
0
1
1
Up Last 30 Days
Down Last 30 Days
1
0
3
3
1
0
NIA
1
N/A
0
Down Last 90 Days
NtA
N/A
Growth Est
EIX
Industry
Sector
S&P 500
Current Q~’,
0.70%
Next Q~.
-14.40%
-29.90%
7,40%
257.00%
134.10%
9.10%
14.70%
This Year
-20.90%
10o20%
0.50%
3.00%
Next Year
9.10%
6.60%
6.60%
13.10%
EPS Trends
Past 5 Years (per annurs)
t 1.59%
N/A
NIA
N/A
Next 5 Years (per annurs)
3.53%
2.30%
7.46%
7,74%
17.02
16.69
18.12
19.14
4.82
4.83
4.28
1.95
Price/Ea mings (avg. for
corsparison categories)
PEG Ratio (avg. for
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GXP Analyst Estimates ! Great Rair’~s Energy Incorporate Stock - Yahoo! Finance
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Dow t.85% N ................ ~ ...........
EJJ~T~
Great Plains Energy Incorporated (GXP) - NYSE ~" Watchltst
26.09 0.12(0.46%) 4:04PMEOT
,after Hours : 26.22 0.13 (0.51%) 4:50PM EDT
Analyst Estimates
Get Analyst Estimate~ f°r: i .................................
Avg. Estimate
No. of Analysts
Low Estimate
High Estimate
Year Ago EPS
Current Qtr.
Mar 15
0.12
4.00
0.10
0.15
0.15
Next Q~.
Jun 15
0.34
3,00
0.29
0.38
0.34
Current Year
Dec 15
1.55
11.00
1.48
1.77
1.57
Next Year
Dec 16
1.82
10.00
1.70
1.91
1.55
Revenue Est
Current Qtr.
Mar 15
Next Qk.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
2.70B
Earnings Est
577.04M
660.03M
2.58B
No. of Analysts
3
3
9
7
Low Estimate
548.75M
634.79M
2.49B
2~56B
High Estimate
601.00M
679.30M
2.71B
2.80B
Year Ago Sales
585.10M
648.40M
2.57B
2.58B
-1.40%
1.80%
0~0%
4A0%
Sales Growth (year,’est)
Earnings History
Mar 14
Jun 14
Sep 14
Dec 14
EPS Est
0.19
0A1
0.97
0.13
EPS Actual
0.15
0.34
0.95
0.12
Difference
-0.04
-0.07
-0.02
-0.01
-21.10%
-17.10%
-2.10%
-7.70%
Current Qtr.
Mar 15
Next Qtt.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Current Estimate
0.12
0.34
1.55
1.82
7 Days Ago
0.14
0.37
1.58
1.83
30 Days Ago
0.16
0.38
1.68
1.85
60 Days Ago
0.17
0.39
1.69
1.85
90 Days Ago
0.17
0.37
1.69
1.86
Current Qtr.
Mar 15
0
0
0
N/A
Next Qtr.
Jun 15
0
0
0
NIA
Current Year
Dec 15
0
0
1
NIA
Next Year
Dec 16
0
1
0
N/A
Growth Est
GXP
In~us~y
Sector
S&P 500
Current cr¢.
-20.00%
0.70%
257.00%
9.10%
0.00%
7A0%
134.10%
14.70%
This Year
-1.30%
10.20%
0.50%
3.00%
Next Year
17.40%
6.60%
13.10%
15.73%
N/A
6.60%
NIA
4.60%
2.30%
7.46%
7.74%
16.75
16.69
18.12
19.14
3.64
4.83
4.28
1.95
Surprise %
EPS Trends
EPS Revisions
Up Last 7 Days
Up Last 30 Days
Down Last 30 Days
Down Last 90 Days
Next Q~’.
Price~arnings (avg. for
comparison cetegodes)
PEG RalJo (avg. for
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IDA An~yst Estimates I IDACORP, Inc. Common Stock Stock - Yaho(Y. Finance
3/10/2015
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E½~E
ldaCorp, Inc. (IDA) - NYSF ’~" Watehlist
60.35,0.02(0.03% )4:ooP, EoT
Analyst Estimates
Earnings Eat
Current Qtr,
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
0,62
0.90
3,72
3.81
1.00
1.00
3.00
3.00
0.62
0.90
3.70
3.75
0.62
0.55
0.90
3.73
3.87
0.89
3.85
3.72
Current Qtr.
Mar 15
NaN
Next Qtr.
Jun 15
NaN
NaN
NaN
NaN
N/A
NaN
NaN
NaN
N/A
Current Year
Dec 15
1.27B
2
1.25B
1.29B
1,28B
-1.00%
Next Year
Dec 16
1.29B
2
1.26B
1.31 B
1.27B
1.30%
Avg. Estimate
No. of Analysts
Low Estimate
High Estimate
Year Ago EPS
Revenue Est
Avg. Esl~mate
No. of Analysts
LOW Estimate
High Estimate
Year Ago Sales
Sales Grewlh (year/est)
Earnings History
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Mar 14
Jun 14
Sap 14
Dec 14
EPS Est
0.65
0.84
1,57
0.58
EPS Actual
0.55
0.89
1,73
0.69
:
Difference
-0,10
0.05
0.16
0.11
ii .........................
-15,40%
6.00%
10.20%
19.00%
Current QIr.
Mar 15
Next Qtr,
Jurt 15
Current Year
Dec 15
Next Year
Dec 16
Current Estimate
7 Days Ago
30 Days Ago
0.62
0.90
3.72
3.81
0.62
0.90
3.72
3.81
N/A
N/A
3.65
3.76
60 Days Ago
g0 Days Ago
N/A
N/A
3.65
3.74
N/A
N/A
3.65
3.74
Current Qlr.
Mar 15
0
0
0
N/A
Next Qtr.
Jun 15
0
0
0
NIA
Current Year
Dec 15
0
2
0
N/A
Next Year
Dec 16
0
2
0
N/A
Growth Est
IDA
Industry
Sector
S&P 500
Current QIt.
12.70%
0.70%
257,00%
9.10%
Next Qtr.
1.10%
7 .40%
134.10%
"[his Year
-3.40%
10,20%
0~50%
14.70%
3.00%
Next Year
2,40%
6.60%
6.60%
13.10%
12,52%
N/A
N/A
NIA
3.00%
2.30%
7.46%
7.74%
16.52
16.69
18.12
19.14
PEG RaSo (avg, for
5,51
4.83
4.28
1o95
Surpdse %
EPS Trends
EPS Revisions
Up Last 7 Days
Up Last 30 Days
Down Last 30 Days
Down Last 90 Days
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NWE Analyst Estimates I NorthWestern Corporation Common Stock - Yahoo! Finance
3/10/2015
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Like
Northwestern Corporation (NWE) - NYSE
51.76 o.3o(o.s8 ) ,. sPMEoT
Analyst Estimates
Get Analyst Estimates for.
Earnings Eat
Current Otr.
Mar 15
Next Qty.
Jun 15
Currer~t Year
Dec 15
Next Year
Dec 16
Avg. Estimate
No. of Anah/sts
Low Estimate
High Esf~mate
Year Ago EPS
1.30
0.44
3.22
3.41
4.00
4.00
6.00
7.00
1.28
0.38
32.0
3.34
1.31
0.51
3.25
3.51
1,17
020
2.46
322
Current Qtr.
Mar 15
416.17M
3
380.10M
450.34M
369.72M
12.60%
Next (~.
Jun 15
319.52M
3
282.50M
338.41M
270.28M
18.20%
Currant Year
Dec 15
1.35B
5
1.22B
1.48B
1.20B
12.20%
Next Year
Dec 16
1.39B
5
"~.24B
1.54B
1.35B
2.70%
Revenue Est
Avg. Estimate
No. of Analysts
Low Estimate
High Esf~mate
Year Ago Sales
Sales Growth (year/est)
Earnings History
Mar 14
Jun 14
Sep 14
Dec 14
EPS Est
1.08
0.38
0.43
0.67
EPS Actual
1,17
0,20
0.34
0.75
Difference
0,09
-0.18
-0.09
-0.12
8,30%
-47.40%
-20.90%
-13.80%
Current Qtr,
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Current Estimate
1.30
0.44
3.22
3.41
7 Days Ago
1.30
0.44
3,22
3.41
30 Days Ago
1.29
0.44
3.22
3.41
60 Days Ago
g0 Days Ago
1.29
1.29
0.44
0.46
3.22
3.22
3.41
3.46
EPS Revisions
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last 7 Days
0
0
0
0
Up Last 30 Days
Down Last 30 Days
0
0
0
0
0
N/A
0
NIA
0
0
N/A
N/A
Growth Est
NWE
Industry
Sector
S&P 500
Current (~’.
11.10%
0.70%
257.00%
9.10%
Next Q~’.
120.00%
7.40%
134.10%
14.70%
"Fhis Year
30.90%
’~ 0.20%
0,50%
3.00%
Next Year
5.90%
6.60%
6.60%
13,10%
Surpdse %
EPS Trends
Down Last 90 Days
-2,26%
N/A
N/A
N/A
Next5 Years (per annum)
7.60%
2.30%
7,46%
7.74%
16.65
16.69
18.12
19,14
PEG Ratio (avg. for
2.19
4.83
4.28
1,95
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OGE Analyst Estimates I OGE Energy Corporation Common S Stock - Yahoo~ Finance
3/10/2015
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Dow ~1,1,85% ~,
OGE Energy Corp. (OGE) - NYSE ~t Watchlist
31.38 ¯ 0.29(0.92%)
4:04PM EDT
After Houm : 31.79 0.41 (1.29%) 4:50PM EDT
Analyst Estimates
Get Analyst Estimates for:. .....
Earnings Est
Current Qtr.
Mar 15
Next QI~,
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
0.17
0.48
1,93
No. of Analysts
3.00
2.00
9.00
2.08
8.00
Low Estimate
0.15
0A6
1,83
1.95
High Estimate
0,2.0
0,50
2,15
222
Year Ago EPS
0.25
0.50
1.98
1.93
Revenue Est
Current Qtr.
Mar 15
Next Qtr,
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Eslimate
NaN
NaN
2.43B
2.53B
NaN
5
2.33B
5
2.38B
2.61B
No, of Analysts
Low Estimate
NaN
High Estimate
NaN
NaN
2.50B
Year Ago Sales
NaN
NaN
2.45B
2A3B
Sates Grow~ (year,~st)
N/A
N/A
,0.80%
4.00%
Mar 14
0.24
025
0.01
4.20%
Jun 14
0.51
0.50
-0.01
-2.00%
Sop 14
0.95
0.94
-0.01
-1.10%
Dec 14
0.27
029
0.02
7.40%
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
~ 15
Next Year
Dec 16
Current Es~mate
0.17
0.48
1,93
2.08
7 Days Ago
0.18
0.51
1.94
2.08
30 Days Ago
60 Days Ago
90 Days Ago
0.20
020
021
0.56
0.56
0.59
2.06
2.11
2.12
2.17
2.26
2.28
Current QV.
Mar 15
Next Qlr.
Jun 15
Current Year
Dec 15
Up Last7 Days
Up Last 30 Days
0
0
0
Next Year
Dec 16
0
0
0
0
0
Down Last 30 Days
0
0
0
4
Down Last 90 Days
N/A
N/A
N/A
N/A
OGE
-32.00%
J,.00%
*2.50%
7.80%
12.94%
4.00%
Industry
0.70%
7A0%
10.20%
6.60%
N/A
2.30%
Sector
257.00%
134.10%
0.50%
6.60%
N/A
7.46%
S&P 500
9,10%
14,70%
3,00%
13,10%
NIA
7,74%
16.41
16.69
18.12
19.14
4.10
4,83
4.28
1.95
Earnings History
EPS Est
EPS Actual
Difference
Surpdse %
EPS Trends
EPS Re~sion~
Growth Est
Current Qtr.
Next Q~’.
This Year
Next Year
PEG RaSo (avg. for
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PNM Analyst Estimates I PNM Resot~’ces, Inc. (Holding Co Stock - Yahoo! Finance
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PNM Resources, Inc. (PNM) - NYSE ~ Watchlist
27.41 0.07(0.25%)4:OSPM~D~
A~er Hours : 27.58 0.1710.61%) 4:50PM EDT
Analyst Estimates
Get Anatyst Estimates for:.
Earn/ngs Est
Current Qtr.
Mar 15
Next Qtt.
Jun 15
Current Year
Dec 15
Next Year
Dec ~6
Avg. Estimate
0.18
0.39
1.56
1.85
No. of Analysts
4.00
4.00
9,00
8.00 .....................
Low Estimate
0.15
0.35
1.55
1.70
High Estimate
Year Ago EPS
0.20
0A1
1.60
1.94
0.18
0.39
1A9
1.56
Revenue Est
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
335,00M
346,00M
1.45B
1.53B
No, of Analysts
2
2
4
Low Estimate
334.00M
341.00M
1 A3B
5
1AgB
High Estimate
336.00M
351.00M
1.48B
1.55B
Year Ago Sales
328.90M
346.16M
1 A4B
1 A5B
Sales Grow~ (yearlest)
1.90%
0.00%
1.20%
5A0%
Earnings History
Mar 14
Jun 14
Sep 14
De(; 14
EPS Est
0~.0
0.38
0.66
0.23
EPS Actual
0.18
0.39
0.68
0,24
-0.02
0.01
0.02
0.01
-10.00%
2.60%
3.00%
4.30%
Current Q~-.
Mar 15
0.18
0,18
Next Qtr.
Jun 15
0,39
0.39
Current Year
Dec 15
1.56
1.56
Next Year
Dec 16
1,85
1.85
0.19
0.19
0.19
0A0
0A0
OA2
1.57
1.57
1.56
1.85
1.84
1.81
Currem Qtr.
Mar 15
0
0
0
N/A
Next Qtr.
Ju~ 15
0
0
0
NIA
Current Year
Dec 15
0
0
0
N/A
Next Year
Dec 16
0
0
0
N/A
Growth Est
PNM
IndusW
Sector
S&P 500
Current Olt.
0.00%
0.00%
0.70%
7.40%
257.00%
9.10%
14.70%
This Year
4.70%
10.20%
0.50%
3.00%
Next Year
18.60%
6,60%
6.60%
13.10%
13.19%
NIA
N/A
N/A
Next 5 Years (per annum}
9.86%
2.30%
7.46%
7,74%
17.62
16.69
18.12
19.’~4
1.79
4.83
4.28
1.95
Difference
Surprise %
EP$ Trends
Current Estimate
7 Days Ago
30 Days Ago
60 Days Ago
90 Days Ago
EPS Revisions
Up Last 7 Days
Up Last 30 Days
Down Last 30 Days
Down Last 90 Days
Next Q’¢.
Price/Earnings (avg, for
PEG Ratio (evg, for
http://~nanc&yahoo.com/q/ae?s= pnm &qi= 1
134.10%
,
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3/10/2015
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Tue, Mar 10, 2015, 5:58PM EDT - U.S. ,M~e~s ck~se~ Repo~ an Issue
Dow 1.85% Na
Pinnacle West Capital Corporation (PNW) - NYSE
62.26 0.1 (0.26 ) 4:o5p.EoT
After Hours : 62.37 0.11 (0.18%14:45PM EDT
Analyst Estimates
Get Analyst Estimates for:=.
Avg. Estimate
No, of Analysts
Low Estimate
High Estimate
Year Ago EPS
Current Qtr.
Mar 15
0,17
5.00
0.13
0,24
0.14
Next Qlt.
Jun 15
1.25
5,00
122
129
1.19
Current Year
Dec 15
3.86
14.00
3,80
3.93
3.58
Next Year
Dec 16
4.03
14.00
3,94
4.10
3.86
Revenue Est
Current Qtr.
Mar 15
Next Q~’.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Es~mate
3.74B
Earnings Est
721.53M
943.25M
3.64B
No, of Analysts
3
3
11
11
Low Estimate
714.00M
935.91M
3.51B
3.58B
High Estimate
732.76M
949.85M
3.91B
4.06B
Year Ago Sales
686.25M
906.26M
3.49B
3.64B
5.10%
4.10%
4,20%
2.70%
Earnings History
Mar 14
Jun 14
Sep 14
Dec 14
EPS Est
0.13
1.15
2.14
0.18
EPS Actual
0.14
1.19
2.20
0.05
Dfffemnce
0.01
0.04
0.06
-0.13
7.70%
3.50%
2.80%
-72,20%
Current Qtr.
Mar 15
Next QV.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
3.86
4.03
3.85
4.02
Surprise %
EPS Trends
Current Estimate
0.17
1.25
7 Days Ago
0.17
125
30 Days Ago
0,18
125
3,86
4.02
60 Days Ago
0.18
124
3.86
4.01
90 Days Ago
0.18
1.24
3.86
4.01
Current Qtr.
Mar 15
0
0
0
NIA
Next Qb’.
Jun 15
0
0
0
NIA
Current Year
Dec 15
0
2
0
N/A
Next Year
Dec 16
0
3
0
N/A
S&P 500
EPS Revisions
Up Last 7 Days
Up Last 30 Days
Down Last 30 Days
Down Last 90 Days
.
Growth Est
PNW
Industry
Sect~-
Current Q~.
0.70%
257.00%
9.10%
Next Q~,
21.40%
5.00%
7.40%
134.10%
14.70%
This Year
7.80%
10.20%
0.50%
3.00%
Next Year
4.40%
6.60%
6.60%
13.10%
3.39%
NIA
N/A
NIA
4.20%
2.30%
7.46%
7.74%
Price/Earnings (avg, for
16.09
16.69
18.12
19.14
3.83
4.83
4.28
1.95
PEG Ratio (avg. for
htlp://finance.yahoo.com/q/ae .?s=pnw&ql= 1
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POR Analyst Estimates I Portland General Electric Co Co Stock - Yahoo! Finance
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Dow ~’1.85% I’
Portland General Electric Company (POR) - NYSE ~1" Wetchllst
35.27
Analyst Estimates
Get Analyst Estimates for:."
Current Qtr.
Mar 15
0.87
4.00
0.77
0.95
0.73
Next Qtr.
Jun 15
0 A0
4.00
0.38
0.44
0.43
Current Year
Dec 15
2.29
12.00
2.25
2.34
2.18
Next Year
Dec 16
2.39
10.00
2.33
2A7
2.29
Revenue Est
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
2.09B
Earnings Eat
Avg. Estimate
No. of Analysts
Low Estimate
High Estimate
Year Ago EPS
565.31 M
421.56M
2.01B
No. of Analysts
3
3
9
7
Low Estimate
490.76M
382.86M
1.96B
2.06B
High Estimate
687.51 M
443.77M
2.11B
2.18B
Year Ago Sales
493.00M
423.00M
1.90B
2.01B
14.70%
-0,30%
5.60%
4.00%
Mar 14
Jun 14
Sep 14
Dec 14
EPS Est
0.75
0.34
EPS Actual
0.73
0.43
0.48
0.47
0.52
0.55
-0.02
0,09
26.50%
-0.01
0.03
-2.70%
-2.10%
5.80%
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Current Estimals
0.87
0.40
2.29
2,39
7 Days Ago
0.86
2.29
2.39
30 Days Ago
0.88
0.39
0.39
2.28
2.39
60 Days Ago
0.88
0.39
2.28
2.38
90 Days Ago
0.88
0.39
2.28
2.38
EP$ Revisions
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last 7 Days
0
0
0
0
Up Last 30 Days
Down Last 30 Days
0
1
4
3
0
0
Down Last 90 Days
N/A
N/A
0
N/A
0
N/A
Growth Eat
POR
Industry
Sector
S&P 500
Current Qtr.
19.20%
0.70%
257,00%
9.10%
Next Qtr.
This Year
-7.00%
5.00%
7.40%
10.20%
134.10%
14.70%
0.50%
3.00%
Next Year
4,40%
6.60%
6,60%
13.10%
Earnings History
Difference
Surprise %
EPS Trends
11.43%
N/A
N/A
N/A
5.26%
2.30%
7A6%
7.74%
comparison eategofles)
15.45
16.69
18.12
19.14
PEG Ratio (avg. for
2.94
4.83
4.28
http:llfinance, yahoo.comlqlae?s=por &ql= 1
1
112
SCG Analyst Estimates I SCANA Corporation Common Stock Stock - Yahoo! Finance
3/10/2015
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Dow ~1" 1,85% I’ .......
SCANA Corp. (SCG) - NYSE ~" Watehltst
53.28 .~ 0.28 (0.52%1 4:03PMEDT
ARer Hours : 53.28 0.00 (0.00%) 4:27PM EDT
Get Analyst Estimates fo~ i .........
Analyst Estimates
Next Qty.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
No. of Analysts
Low Estimate
High Est~mats
Year Ago EPS
Current Qtr.
Mar 15
1.20
3.00
1.15
123
1.37
0.66
3.69
3.89
3.00
8.00
9.00
0,61
3,64
3.69
0.70
3.71
4,01
0.68
3.79
3,69
Revenu~ Eat
Current Qtr.
Mar 15
Next Q~.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
4.97B
Earnings Est
1.38B
950.27M
4.80B
No. of Analysts
2
2
8
8
Low Estimate
1.34B
894,39M
4.47B
4.61 B
High Estimate
1,41 B
1.01B
5.17B
5.38B
Year Ago Sales
1.59B
1,03B
4.95B
4.80B
-13.40%
-7.40%
-3,00%
3.50%
Earnings History
Mar 14
Jun 14
Sep 14
Dec 14
EPS Est
1.15
0.63
0.96
0.73
EPS Actual
1.37
0.68
1.01
0.73
Difference
0.22
0.05
0.05
0.00
19.10%
7.90%
5,20%
0.00%
Current Qtr.
Mar 15
Next Q~’.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Current Estimate
1.20
0.66
3.69
7 Days Ago
1.20
0.66
3.69
3.89
3.91
30 Days Ago
60 Days Ago
90 Days Ago
1.34
1.34
1.35
0.63
0.63
0.63
3.73
3.71
3.71
3.92
3.88
3.86
Current Qtr.
Mar 15
Next Qk,
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last 7 Days
1
1
0
0
Up Last 30 Days
2
3
1
0
Down Last 30 Days
0
0
1
Down Last 90 Days
NIA
NIA
N/A
1
N/A
Growth Est
SCG
Industry
Sector
S&P 500
Current Q~.
Next Q~’.
-12.40%
0.70%
257.00%
-2,90%
7.40%
134.10%
9.10%
14.70%
This Year
-2.60%
10.20%
0.50%
3.00%
Next Year
5.40%
6.60%
6.60%
13.10%
5.55%
N/A
N/A
NIA
4,30%
2.30%
7.46%
7.74%
14.51
16.69
18.12
19.14
3.37
4.83
4.28
1.95
Surpdse %
EPS Trends
EPS Revisk:ms
PEG Ratio (avg. ~or
http:/~ nance.yahoo.com/q/ae?s=scg&ql= 1
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112
SRE Analyst Estimates I Sempra Energy Common Stock Stock - Yahoo! Finance
3/10/2015
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Tue, ~.~r 10, 2015, 5:59pm EDT- US Matke~ are c~sed Report an Issue
Dow ~1,1,85% Nai~
Sempra Energy (SRE) - NYSE ~" Watchlist
106.80,1.2011.11%) 4:02PM Era"
Atter Hours : 108.06 1.26 (1.18%) 4:50PM EDT
Analyst Estimates
Get Analyst Estimates for:
Earnings Est
Current Q~’.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
1.11
1,16
5.27
No. of Analysts
5.00
14.00
Low EslJmate
6.00
1.05
4,84
14,00
4,78
4.95
High Estimate
1.17
1,11
1.20
4.89
5.70
Year Ago EPS
1.03
1.08
4.71
4.84
Revenue Est
Current Qtr,
Mar 15
Next Qtr.
Jun 15
Currant Year
Dec 15
Next Year
Dec 16
Avg. Estimate
11.71 B
2.85B
2.77B
11.58B
No. of Analysts
1
1
8
10
Low Estimate
2.85B
2,77B
11.27B
9.62B
High Estimate
2.85B
2,77B
12.29B
13.08B
Year Ago Sales
2.80B
2,68B
11.04B
11 ~8B
1.90%
3.30%
4.90%
1.10%
Earnings History
EPS Est
EPS Actual
Difference
Surprise %
Mar 14
0.95
1.03
0.08
8.40%
Jun 14
1.13
1.08
-0.05
-4.40%
8ep 14
1.24
1.39
0,15
12.10%
Dec 14
1.08
1.23
0.15
13.90%
Current Qtr.
Mar 15
Next Qtr.
Jm 15
Current Year
Dec 15
Next Year
Dec 16
EP8 Trends
Current Estimate
1.11
1.16
1.11
1.16
4.84
4.83
5.27
7 Days Ago
30 Days Ago
60 Days ,~go
90 Days Ago
1.10
1.12
1.11
1.15
1.15
1.15
4.84
4,83
4,86
528
5.26
5.27
Current Qtt.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Up Last 7 Days
0
0
Up Last 30 Days
Down Last 30 Days
0
0
0
1
0
2
0
0
1
Down Last 90 Days
NIA
N/A
N/A
NIA
Growth Est
SRE
Induslw
Secter
S&P 500
Current Q~.
Next ~’.
7.80%
257.00%
7A0%
0.70%
7A0%
9.10%
14.70%
This Year
2.80%
102.0%
0.50%
3.00%
Next Year
8.90%
6.60%
6.60%
13.10%
Past 5 Years (per annum}
3,19%
N/A
N/A
NIA
7,60%
2.30%
7.46%
7.74%
22.31
16.69
18.12
19.14
2.94
4.83
4.28
1.95
EPS Revisions
PEG RalJo (avg. for
htlp:llfinance.yahoc.comlo/ae?s=sre&ql= 1
134.10%
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112
SO Analyst Estimates I Southern Company (The) Common S Stock - Yahoo! Finance
3/10/2015
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Tue, ~r 10, 2015, 5:59PM EDT - U.S. Markets c!osed Report an Is=ue
Dow 1.85% Nas
Southern Company (SO) - NYSE
43.93 o.o8(o.18%) ,-o2pMEo,
After Hours : 44.39 046 !1.05%) 4:50PM EDT
Analyst Estimates
Earnln~)s Est
Avg, Estimate
No. of Analysts
Low Estimate
High Estimate
Year Ago EPS
Revenue Est
Avg. Estimate
No. of Analysts
Low Estimate
High Estimate
Year Ago Sales
Sales Gmw~ (year/est)
Get Analyst Estimates for. i
Current Qtr.
Mar 15
0~57
7.00
0.51
0.67
0.66
Next QIr.
Jun 15
0.70
7.00
0.63
0.75
0.68
Current Year
Dec 15
2.84
19.00
2.77
2.87
2.80
Next Year
Dec 16
2,93
15‘00
2.83
2.96
2.84
Currertt Qb’.
Mar 15
4.41B
5
3.66B
4,87B
4,64B
-5,00%
Next Q~’.
Jun 15
4.64B
5
4 A6B
4.95B
4.47B
3.g0%
Current Year
Dec 15
!8.89B
14
17.97B
20,25B
18,50B
2.10%
Next Year
Dec 16
Earnings History
Mar 14
Jun 14
Sep 14
Dec 14
0.56
0.66
1,07
0.38
EPS Actual
0.66
0.68
1.09
0.38
Difference
0.10
0.02
17.90%
3.00%
0.02
1.90%
0.00%
Current Qtt.
Mar 15
0.57
0.58
Next Qt]’.
Jun15
0.70
0.70
Current Year
Dec 15
2.84
2.84
Next Year
Dec 16
2.93
2.94
30 Days Ago
0,58
0.70
2.85
2.95
60 Days Ago
0.60
0.70
2.87
2.98
90 Days Ago
0.60
0.70
2.87
2.98
EPS Revisions
Currertt Qb.
Mar 15
Next Qtr.
Jun 15
Currer~t Year
Dec 15
Next Year
Dec 16
Up Last 7 Days
0
1
0
0
Up Last 30 Days
Down Last 30 Days
0
1
0
0
1
0
1
0
Down Last 90 Days
NIA
N/A
N/A
N/A
SO
-13.69%
2.90%
1,40%
3,20%
7.80%
2.28%
Industry
0.70%
7.40%
10.20%
6.60%
NIA
2.30%
Sector
257.00%
134.10%
0.50%
6.60%
N/A
7A6%
S&P 500
9,10%
14.70%
3.00%
13.10%
N/A
7.74%
15.50
16.69
18.12
19.14
6.80
4.83
4.28
1.95
EPS Trends
Current Estimate
7 Days Ago
Growth Est
Current Qtr.
Next Qtr.
"~nis Year
Next Year
PEG RaOo (avg. for
htip~’R nance.yahoo.com/q/ae?s=so&ql= 1
,
i’~0~i .....
1
18,39B
20.68B
18,89B
2.90%
EPS Est
Surprise %
.
0‘00
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3/10/2015
TE AJ~alyst Estimates I TECO Energy, Inc. Common Stock Stock - Yahoo! Finance
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Tue. Mar 10, 2015. 5:59pm EDT- US Markets are closed Report an Issue
Dow "~1.85%/~ ..........................
E-)~TRADE
TECO Energy, Inc. (’rE) - NYSE ~" Watehli~t
18.91 4:o2PMED,
After Hours : 19.00 0.09 10.50%) 4:45PM EDT
Analyst Estimates
Get Analyst Estimates fort
Earnings Est
Current Qtt.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec !5
Next Year
Dec 16
Avg. Estimate
0.29
0.27
1.10
1.19
No. of Anatysts
4.00
4.00
14.00
13.00
Low Estimate
02.6
0.24
1.08
1.09
High Estimate
0.38
0.29
1,15
1.30
Year Ago EPS
0.23
0.28
1.03
1.10
Revenue F.st
Current Qtr.
Mar 15
Current Year
Dec 15
Next Year
Dec 16
Avg, Estimate
2.72B
2.80B
8
2.49B
3.10B
625.07M
Next Qtr.
Jun 15
642.36M
No. of Analysts
3
3
Low Estimate
600.67M
621.53M
9
2.45B
High Estimate
650.00M
681.00M
2.97B
Year Ago Sales
684.10M
726.30M
2.57B
2.72B
-6.60%
-11.60%
6,10%
2.80%
Sales Growth (yeadest)
Earnings History
Mar 14
Jun 14
Sep 14
Dec 14
EPS lest
0.23
0.27
0.32
0.21
EPS Actual
023
0.28
0.32
0.19
Difference
0.00
0.01
0.00
-0.02
0.00%
3.70%
0.00%
-9.50%
Current Qtr.
Mar 15
0.29
0.28
Next Qtr.
Jun 15
027
0.29
Current Year
Dec 15
1.10
1.11
Next Year
Dec 16
1.19
1.19
0.28
0.28
0.28
0.29
0.29
0.29
1.12
1.12
1.11
1.19
1.18
1.17
Current Qtr.
Mar 15
1
1
0
N/A
Next Qtr.
Jun 15
0
0
1
N/A
Current Year
Dec 15
1
1
1
N/A
Next Year
Dec 16
1
1
0
N/A
TE
26,10%
-3.60%
6.80%
8.20%
-6.00%
7.08%
Industry
0.70%
7A0%
10.20%
6.60%
N/A
2.30%
Sector
257.00%
134.10%
0.50%
6.60%
N/A
7A6%
~&P 5~0
9.10%
14.70%
3.00%
13.10%
N/A
7.74%
172.4
16.69
18.12
19.14
2.44
4.83
4.28
1.95
Surprise %
EPS Trends
Current Estimate
7 Days Ago
30 Days Ago
60 Days Ago
90 Days Ago
EPS Revisions
Up Last 7 Days
Up Last 30 Days
Down Last 30 Days
Down Last 90 Days
Growth Est
Current Qtr.
Next Qtr.
This Year
Next Year
PEG Ratio (avg. for
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WR Analyst Estimates I Westar Energy, Inc. Common Stoc Stock - Yahoo] Finance
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Westar Energy, Inc. (WR) - NYSE
37.20 o.3olo.81 o) 4:olP EoT
Analyst Estimates
Get Analyst Estimates for:
Earnings Est
Current Qtr.
Mar 15
Next QI~-.
Jun 15
Avg. Estimate
0A2
No. of Analysts
3.00
Low Estimate
Current Year
Dec 15
Next Year
Dec 16
0.49
2.38
2.51
3.00
10.00
9.00
0.35
0.46
2,35
2.46
High Estimate
0A7
0.52
2.45
2.60
Year Ago EPS
0.52
0.40
2.35
2.38
Revenue Eat
Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Avg. Estimate
609.79M
638.25M
2.61B
2.73B
No. of Analysts
3
Low Estimate
High Estimate
573.52M
3
628.28M
8
2,45B
8
2.56B
636.37M
646.57M
2.72B
2.89B
Year Ago Sales
628.56M
612.67M
2.60B
2.61B
-3.00%
4.20%
0.50%
4.50%
Earnings History
EPS Est
EPS Actual
Difference
Surprise %
Mar 14
0.45
0,52
0,07
15.60%
Jun 14
0.51
0.40
-0,11
-21.60%
Sep 14
1.07
1,10
0,03
2.80%
Dec 14
0.35
0.32
-0.03
-8.60%
Current Qtr.
Mar 15
OA2
0.42
0.45
Next Qtr.
Jun 15
0.49
0.49
0.47
Currant Year
Dec 15
2.38
2,39
2.42
Next Year
Dec 16
2.51
2.51
2.54
0.46
0.46
0.46
0.46
2.43
2.43
2.53
2.54
Current Qtr.
Mar 15
1
1
0
NIA
Next Qtr.
Jun 15
1
1
0
N/A
Current Year
Dec 15
0
0
0
N/A
Next Year
Dec 16
0
0
4
N/A
S&P 500
EPS Trends
Current Estimate
7 Days Ago
30 Days Ago
60 Days Ago
90 Days Ago
EPS Revisions
Up Last 7 Days
Up Last 30 Days
Down Last 30 Days
Dawn Last 90 Days
-
Growth Eat
WR
Industry
Sector
Current Qtr.
-19,20%
0,70%
257.00%
9.10%
Next Qtr.
22.50%
7,40%
134,10%
14.70%
This Year
1.30%
10.20%
0.50%
3.00%
Next Year
5.50%
22.67%
6,60%
13.t0%
N/A
3.37%
N/A
2.30%
6.60%
N/A
7.46%
7.74%
Pdce/Eamings (avg. for
t 5.50
16.69
18.12
19.14
PEG Ratio (avg, for
4.60
4.83
4.28
1.95
htlp://fi nance.yahoo.com/q/ae?s=wr&ql= 1
1/2
3/10/2015
Home
XEL Analyst Estimates I Xcel Energy Inc. Common Stock Stock - Yahoo! Finance
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Tue, Mar 10, 2(~15 6:00~ EDT - US Markets are ~,tosed Re~ort an Issue
Dow~!,85% ~
Add to Portfolio :
Xcel Energy Inc. (XEL) - NYSE li" Watchl|st
Lik~
34.16 ~’0.08(0.23%)4:0,PMEDT
After Hours :34.31 0.15 (0.45%) 4:45PM EDT
Analyst Estimates
Next Q~’.
Jun 15
0.40
8.00
0.33
0.44
0,39
Current Year
De(: 15
2.09
17.00
2.01
2,10
2,03
Next Year
Dec 16
Avg. E~mate
No. of AnalySts
Low Estimate
High Estimate
Year Ago EPS
Curre~ Qk.
Mar 15
0,53
9.00
0.50
0,55
0.52
Revenue Eat
Current Qtr,
Mar 15
Next Qtr,
Jun 15
Avg. Estimate
3.26B
2.94B
Currant Year
Dec 15
11,94B
Next Year
Dec 16
12.31B
Earnings F.st
2.21
17.00
2.16
2 .27
2.09
No. of Analysts
4
4
13
Low Estimate
3.14B
2.33B
11.35B
11.69B
High Estimate
3.36B
3.87B
12.52B
12.94B
Year Ago Sales
3,20B
2.69B
11.69B
11.94B
1.70%
9.60%
220%
3.10%
Earnings History
EPS Eat
EPS Actual
Difference
Surprise %
Mar 14
0.51
0.52
0.01
2.00%
Jun 14
0.41
0.39
-0.02
-4.90%
Sep 14
0.75
0.73
-0,02
-2.70%
Dec 14
14.70%
Current Qtr.
Mar 15
Next QIr.
Jun 15
Current Year
Dec 15
Next Year
Dec 16
Current Estimate
0,53
0.40
2.09
2.21
7 Days Ago
0.53
0.40
2.09
2,21
30 Days Ago
60 Days Ago
90 Days Ago
0.53
0.53
0.51
0.41
0.41
0.40
2.09
2,09
2.09
22.1
Current Qk.
Mar 15
0
0
0
NIA
Next Qlr,
Jun 15
0
0
0
NIA
Current Year
Dec 15
0
0
0
NIA
Next Year
Dec 16
0
0
0
NIA
XEL
1.90%
2.60%
3.00%
5.70%
5.48%
4.51%
Industry
0.70%
7.40%
10.20%
6.60%
N/A
2.30%
Sector
257.00%
134,10%
0,50%
6,60%
N/A
7 A6%
$&P 500
g.10%
14.70%
3,00%
13.10%
N/A
7.74%
16.31
16.69
18.12
19.14
3.62
4.83
4.28
1.95
EPS Trend~
EPS Revteions
Up Last 7 Days
Up Last 30 Days
Down Last 30 Days
Down Last 90 Days
Gro~,~h Eat
Current Qtr.
Next Qtr.
This Year
Next Year
PEG RaSo (avg. for
hltFJffinance.yahoo.com/q/ae?s= xel &ql = 1
I3
Winter
Warrior
0.34
0.39
0.05
2.22
~HE~LTHY
ESSENTIALS
2.21
112
Exhibit SCH-8
CAPM Analysis
Ibbotson® SBBI’*
2014ClassicYearbook
Market Results for
Stocks, Bonds, Bills, and Inflation
1926-2013
Table 6-5 presents annual cross-correlations and serial
correlations for the inflation-adjusted asset return series. It
is interesting to observe how the relationship between the
asset returns are substantially different when these returns
are expressed in inflation-adjusted terms (as compared
with nominal terms). In general, the cross-correlations
between asset classes are higher when one accounts for
inflation-(i.e., subtracts inflation from the nominal returns.)
trends, while highly negative (near -1} serial correlations
indicate cy’ctes. There is strong evidence that both inflation rates and real riskless rates follow trends. Serial
correlations near zero suggest no patterns (i.e., random
behavior); equity risk premia and bond horizon premia are
random variables. Small stock premia and bond default
premia fall into a middle range where it cannot be determined that they either follow a trend or behave randomly.
Table r~4: Risl~ Premia and I~ation:
Serial and Cross Corretations of Historical Annual Returns
Table 6-6: Interpretation of the Annual Serial Co~re/at~ons
~u..
Series ~..R.!.s.Lp.r.~.~!.o
Serial Corretarion
" ....................................
s~es
~,~,,~,
s~,
e..a,n.p.~ .............
o.:~ ...........................
Risk Stock Default Horizon
Likely Trend
Sroall Stock Preroia
0.37
~m~a
P~ Prem~a
P,~a ~o~tio~ ~’n’;i’~;i;~;i~’i~’i~
:~i§’~..............................
..........................
Horizon Preroia
Inflation
Sedal Correlations
0.01
-0.07
0.02
-0.08
0.11
0.37
-0.50
-0.01
-0.33
1.00
-0.26 1.00
-0.13 0.64
Data from 1928-2013.
Table 6-5: Inflation-Adjusted Series:
Serial and Cross Correlations of Historical Annual Returns
Large Small LT- LT- Inter-
IMaz~Adjuste~Ser~es
Co Co Carp Gov’t Gov’t TS~est~ Stocks Bonds Bonds ~s Billa* I~ation
~e Co ~s
1.00
Small Co ~ks
0.80 I.~
Summan/Statistics for Basic and InflationAdjusted Series
Table 6-7 presents summary statistics of annual total
returns, and where applicable, income and capital appreciation, for each asset class. The summary statistics
presented here are arithmetic mean, geometric mean;
standard deviation, and serial correlation. Table 6-8
presents summary statistics for the six inflation-adjusted
total return series.
LT-Co~ Bonds
0.21 0.~ 1.~
LT-Go~Bonds
0,07-0.05 0.92 1.~
~’~’~ ..................... ~’~’~’...~,~----~:~,.--..~.~ ...........................
Table 6-7: T~I R~ums, I~me ~ms, and ~p[~l A~eciadon
.......................................................................................................................................
T-Bills*
0.09 -0.07 0.54 0.52 ~.70 1.~
Basic Ass~ Classes: Summaw ~ti=i~ of Annual Re.ms
6~m~ ~mic ~
SerialCorrelations
~rgeCompanySt~ks
0.01 0.~ 0.19-0.02 021 0.~ 0.~
~ ~ ~.
",,~ ~,~ ~,
~.L ~....~ ................................. ~:~. ............
~.~. ,~:~
..........
...........
~:~. ~ .....
~.~P~ ...................................................
~:~ ..............
~:7, .............
~:~ ...........
~:~.~ ......
Serial Correlation in ~e Derived Series: Trends or
5.8
Capital Appreciation
Small ~ S~e~(T~I R~urns) 12.3
LT-Co~ ~n~ (To~I Re~rns) 6.0
Raodom Behavio~
LT-G~t Bonds
The fisWretum relationships in ~e historical da~ are rep
resented in the equi~ risk prom!a, the small stock premia,
¯ e bond horizon premia, and the bond default premia. The
~al/nomina~ historical relationships are repr~ented in the
inflation rates and the real interest rates. ~e obje~ive is
to un~ver whether ~ch series is random or is subject to
any trends, c~les, or other palms.
~.(.~.~.~ ........................................ ~:~ ..............
~:~ .............
~:~ .........
:.~:~.~ ......
5.1
In,me
5.1
2.6 0.~
~’:~ ..............
~[
.............~ .........~ .....
~,,o,,v~,=~,o,,~-’~;L;~’~:~:’~
..........................
t~medi~e-Tem ~v’t Bonds
To~l Re, ms
5.3 5.4 5.7 0.~3
~p.~ .................................................... ~:~ ..............
~:.~ .............
~:~ ..........
~:~ .....
~pi~l Apprecia~on
0.6
0.7
4.5 ~.18
3.1 0.91
T~suW 8ills (T~I Returns) 3.5
3.5
I~aBon
3.0
3.0
4.1
The one-year serial correlation coefficients measure the
degree of correlation between returns from each year
and the previous year for the same series, as seen in Table
6-6. Highly positive (near 1) serial correlation~ indicate
2014 Ibbotson® SBBI Classic Yearbook
7.7
16.9
6.3
19.5 0.01
32.3
8.4 0.~
Total return is equal to the sum of three component retums; income return, capital
appreciation return, and reinvestment return. Annual reinvestment returns for select
asset classes are provided in Table 2-2.
Morningslar
91
Table 11-4 illustrates the equity risk premium calculation The Market Benchmark and Firm Size
using several different market indices and the income Although not restricted to include only the 500 largest comreturn on three government bonds of different horizons. panies, the S&P 500 is considered a large company index.
Table 11-4: Equity Risk Premium with Different Market Indices
LongHorizon (%}
S&P 500
6.96
Total Value-Weighted NYSE 6.76
NYSE Deciles~1-2
6.23
btarmedi~Horizon (%)
7.52
7.32
6.79
ShortHorizon (%)
8.51
8.31
7.78
D~ta from 1926-2013.
The equity risk premium is calculated by subtracting the
arithmetic mean of the government .bond income return
from the arithmetic mean of the stock market total return.
Table 11-5 demonstrates this calculation for the longhorizon equity risk premium.
The returns of the S&P 500 are capitalization weighted,
which means that the weight of each stock in the index, for
a given month, is proportionate to its market capitalization
(price times number of shares outstanding) at the beginning
of that month. The larger companies in the index therefore
receive the majority of the weight. The use of the NYSE
"Deciles 1-2" series results in an even purer large company
index. However, if using a large stock index to calculate
the equity risk premium, an adjustment is usually needed
to account for the different risk and return characteristics
of small stocks. This was discussed further in Chapter 7 on
the size premium.
The Risk-Free Asset
The equity risk premium can be calculated for a variety of
time horizons when given the choice of risk-free asset to
Table 11-5: Long-Horizon Equity Risk Premium Calculation
A~ithmetic Mean
be used in the calculation. Chapter 3 provides equity risk
Market Total
Risk-Free Equit~ Risk
premia calculations for short-, intermediate-; and long-term
Long-Horizon
Return (%)
Rate (%) Premium (%)
horizons. The short-, intermediate-, and
long-horizon equity
.~..P..~ ................................................
~:.o.~........,-........~:..o.~........~......6.:~.6.
......
risk
premia
am
calculated
using
the
income
return from a
~.o..=..!.~!~.~..w..~Lo..~.~.y~
~.!.:~..s.
.-..........s:..o.s..........=.......~:7.~.
.........
............
......
~
NYSE Deciles 1-2
11.32 - 5.09 = 6.23
30-day Treasury bill, a 5-year Treasury bond, and a 20-year
Treasury bond, respectively.
Data from 1926-2013.’
Data for the New York Stock Exchange is obtained from
Momingstar and the Center for Research in Security Prices
(CBSP) at the University of Chicago’s Graduate School of
Business. The "Total" series is a capitalization-weighted
index and includes all stocks traded on the New York Stock
Exchange except closed-end mutual funds, real estate
investment trusts, foreign stocks, and Americus Trusts.
Capitalization-weighted means that the weight of each
stock in the index, for a given month, is proportionate to
its market capitalization (price times number of shares
outstanding) at the beginning of that month. The "Decile
1-2" series includes all stocks with capitalizations that
rank within the upper 20 percent of companies traded on
the New York Stock Exchange, and it is therefore a largecapitalization index. For more information on the Center
for Research in Security Pricing data methodology, see
Chapter 7.
152
Cllapler 11: Using Historical Data in Forecasting and Optimization
20-Year versus 3g-Year Treasuries
Our methodology for estimating the long-horizon equity
risk premium makes use of the income return on a 20-year
Treasury bond; however, the Treasury currently does not
issue a 20-year bond. The 30-year.bond that the Treasury
recently began issuing again is theoretically more correct
when dealing with to the long-term nature of business
valuation, yet Ibbotson Associates instead creates a series
of returns using bonds on the market with approximately 20
years to maturity. The mason for the use of a 20-year maturity bond is that 30-year Treasury securities have only been
issued over the relatively recent past, starting in February
of 1977, and were not issued at all through the early 2000s.
The same reason exists for why we do not use the 10-year
Treasury bondwa long history pf mariner data is not available for 10-year bonds. We have persisted in using a 20-year
bond to keep the basis of the time series consistent.
Testimony References:
Federal Reserve Policy Statement; Interest
Rates; Value Line Page; Brigham Chapter; Chan
Article
5/1/2015
Prinler Vers4~n - Board of Gov~rn~ ~f~e Federal Reser~ System
Press Release
FEDERAL RESERVE
Release Date: March 18, 2015
For immediate release
Information received since the Federal Open Market Committee met in January
suggests that economic growth has moderated somewhat. Labor market
conditions have improved further, with strong job gains and a lower
unemployment rate. A range of labor market indicators suggests that
underutilization of labor resources continues to diminish. Household spending is
rising moderately; declines in energy prices have boosted household purchasing
power. Business fixed investment is advancing, while the recovery in the
housing sector remains slow and export growth has weakened. Inflation has
declined further below the Committee’s longer-run objective, largely reflecting
declines in energy prices. Market-based measures of inflation compensation
remain low; survey-based measures of longer-term inflation expectations have
remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum
employment and price stability. The Committee expects that, with appropriate
policy accommodation, economic activity will expand at a moderate pace, with
labor market indicators continuing to move toward levels the Committee judges
consistent with its dual mandate. The Committee continues to see the risks to
the outlook for economic activity and the labor market as nearly balanced.
Inflation is anticipated to remain near its recent low level in the near term, but
the Committee expects inflation to rise gradually toward 2 percent over the
medium term as the labor market improves further and the transitory effects of
energy price declines and other factors dissipate. The Committee continues to
monitor inflation developments closely.
To support continued progress toward maximum employment and price
stability, the Committee today reaffirmed its view that the current 0 to 1/4
percent target range for the federal funds rate remains appropriate. In
5/1/2015
Prirler Version- Board otGovernors ~f R~e Fed~al Reserve ~/sl~n
determining how long to maintain this target range, the Committee will assess
progress--both realized and expected--toward its objectives of maximum
employment and 2 percent inflation. This assessment will take into account a
wide range of information, including measures of labor market conditions,
indicators of inflation pressures and inflation expectations, and readings on
financial and international developments. Consistent with its previous
statement, the Committee judges that an increase in the target range for the
federal funds rate remains unlikely at the April FOMC meeting. The Committee
anticipates that it will be appropriate to raise the target range for the federal
funds rate when it has seen further improvement in the labor market and is
reasonably confident that inflation will move back to its 2 percent objective
over the medium term. This change in the forward guidance does not indicate
that the Committee has decided on the timing of the initial increase in the target
range.
The Committee is maintaining its existing policy of reinvesting principal
payments from its holdings of agency debt and agency mortgage-backed
securities in agency mortgage-backed securities and of rolling over maturing
Treasury securities at auction. This policy, by keeping the Committee’s holdings
of longer-term securities at sizable levels, should help maintain accommodative
financial conditions.
When the Committee decides to begin to remove policy accommodation, it will
take a balanced approach consistent with its longer-run goals of maximum
employment and inflation of 2 percent. The Committee currently anticipates
that, even after employment and inflation are near mandate-consistent levels,
economic conditions may, for some time, warrant keeping the target federal
funds rate below levels the Committee views as normal in the longer run.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair;
William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley
Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K.
Tarullo; and John C. Williams.
FEDERAL RESERVE statistical release
H.15 (519) SELECTED INTEREST RATES
Yields in percent per annum
2015 I 2015
For use at 2:30 p.m. Eastern Time
April 27, 2015
Week Ending 2015
2015
Apr 24 Apr 24 Apr 17 Mar
Instruments
2015
Apr 20
2015
Apr 21
1 23
-’ederal funds (effective)
;ommercial Paper~ 45 s
Nonfinancial
1-month
2-month
3-month
Financial
1-month
2-month
3-month
-’urodollar deposits (London)
1 -month
3-month
6-month
}ank prime loan2 3 8
)iscount window primary credit
J.S. government securities
Treasury bills (secondary market)~ 4
4-week
3-month
6-month
1 -year
Treasury constant
maturities
NominaPo
1 -month
3-month
6-month
1 -year
2-year
3-year
5-year
7-year
10-year
20-year
30-year
Inflation indexed~
5-year
7-year
10-year
20-year
30-year
Inflation-indexed long-term average12
nterest rate swaps1~
1 -year
2-year
3-year
4-year
5-year
7-year
10-year
30-year
;orporate bonds
Moody’s~4seasoned
Aaa
Baa
;tate & local bondsIs ~6
;onventional mortgages
0.13
0.13
0.13
0.13
0.13
0.13
0.12
0.11
0.07
0.08
0.11
0.07
0.08
0.10
0.07
0.09
0.11
0.05
0.08
0.10
0.08
0.07
0.09
0.07
0.08
0.10
0.08
0.08
0.10
0.08
0.09
0.11
0.10
0.13
0.15
n.a.
n.a.
0.13
0.07
0.09
0.12
0.09
0.10
0.13
0.10
n.a.
0.12
0.09
0.11
0.13
0.08
0.09
0.12
0.09
0.12
0.14
0.19
0.30
0.43
3.25
0.75
0.19
0.30
0.43
3.25
0.75
0.19
0.30
0.43
3.25
0.75
0.19
0.30
0.43
3.25
0.75
0.19
0.30
0.43
3.25
0.75
0.19
0.30
0.43
3.25
0.75
0.19
0.30
0.43
3.25
0.75
0.19
0.30
0.39
3.25
0.75
0.03
0.03
0.10
0.22
0.02
0.03
0.09
0.21
0.01
0.03
0.10
0.21
0.01
0.03
0.09
0.22
0.03
0.03
0.10
0.22
0.02
0.03
0.10
0.22
0.02
0.02
0.09
0.21
0.02
0.03
0.11
0.24
0.03
0.03
0.10
0.24
0.55
0.86
1.33
1.65
1.90
2.31
2.56
0.02
0.03
0.09
0.23
0.55
0.86
1.35
1.67
1.92
2.33
2.58
0.01
0.03
0.10
0.23
0.57
0.91
1.41
1.75
1.99
2.42
2.66
0.01
0.03
0.09
0.24
0.55
0.87
1.37
1.70
1.96
2.38
2.63
0.03
0.03
0.10
0.24
0.54
0.84
1.34
1.68
1.93
2.36
2.62
0.02
0.03
0.10
0.24
0.55
0.87
1.36
1.69
1.94
2.36
2.61
0.02
0.02
0.09
0.23
0.52
0.85
1.33
1,66
1.90
2.30
2.55
0.02
0.03
0.11
0.25
0.64
1.02
1.52
1.84
2.04
2.41
2.63
-0.27
-0.05
0.01
0.36
0.59
0.41
-0.24
-0.02
0.06
0.40
0.63
0.45
-0.19
0.04
0.12
0.48
0.70
0.52
-0.33
-0.01
0.07
0.43
0.66
0.48
-0.37
0.00
0.04
0.40
0.64
0.46
-0.28
-0.01
0.06
0.41
0.64
0.46
-0.25
-0.02
0.07
0.41
0.63
0.46
0.04
0.23
0.28
0.55
0.73
0.58
0.46
0.78
1.07
1.30
1.48
1.73
1.96
2.35
0.47
0.80
1.10
1.32
1.50
1.75
1.98
2.35
0.47
0.81
1.12
1.36
1.54
1.80
2.03
2.40
0.47
0.80
1.11
1.35
1.53
1.80
2.03
2.39
0.46
0.78
1.07
1.30
1.48
1.75
1.99
2.37
0.46
0.80
1.09
1.32
1.50
1.76
2.00
2.37
0.45
0.78
1.08
1.31
1.49
1.75
1.99
2.38
0.50
0.89
1.23
1.49
1.67
1.92
2.15
2.49
3.50
4.45
3.51
4.46
3.58
4.52
3.56
4.50
3.52
3.65
3.55
4.49
3.54
4.48
3.52
3.65
3.47
4.44
3.45
3.67
3.64
4.54
3.59
3.77
See overleaf for footnotes.
n.a. Not available.
Apr 22 Apr 23 I
Footnotes
1. The daily effective federal funds rate is a weighted average of rates on brokered trades.
2. Weekly figures are averages of 7 calendar days ending on Wednesday of the current week; monthly figures include each calendar day
in the month.
3. Annualized using a 360-day year or bank interest.
4. On a discount basis.
5. Interest rates interpolated from data on certain commercial paper trades settled by The Depository Trust Company. The trades
represent sales of commercial paper by dealers or direct issuers to investors (that is, the offer side). The 1-, 2-, and 3-month rates are
equivalent to the 30-, 60-, and 90-day dates reported on the Board’s Commercial Paper Web page (www.federalreserve.gov/releases/cp/).
6. Financial paper thatis insured by the FDIC’s Temporary Liquidity Guarantee Program is not excluded from relevant indexes, nor is any
financial or nonfinancial commercial paper that may be directly or indirectly affected by one or more of the Federal Reserve’s liquidity
facilities. Thus the rates published after September 19, 2008, likely reflect the direct or indirect effects of the new temporary programs and,
accordingly, likely are not comparable for some purposes to rates published prior to that period.
7. Source: Bloomberg and CTRB ICAP Fixed Income & Money Market Products.
8. Rate posted by a majority of top 25 (by assets in domestic offices) insured U.S.-chartered commercial banks. Prime is one of several
base rates used by banks to price short-term business loans.
9. The rate charged for discounts made and advances extended under the Federal Reserve’s primary credit discount window program,
which became effective January 9, 2003. This rate replaces that for adjustment credit, which was discontinued after January 8, 2003. For
further information, see www.federalreserve.gov/boarddocs/press/bcreg/2002/200210312/default.htm. The rate reported is that for the
Federal Reserve Bank of New York. Historical series for the rate on adjustment credit as well as the rate on primary credit are available at
www.federalreserve.gov/releases/h 15/data.htm.
10. Yields on actively traded non-inflation-indexed issues adjusted to constant maturities. The 30-year Treasury constant maturity series
was discontinued on February 18, 2002, and reintroduced on February 9, 2006. From February 18, 2002, to February 9, 2006, the U.S.
Treasury published a factor for adjusting the daily nominal 20-year constant maturity in order to estimate a 30-year nominal rate. The
historical adjustment factor can be found at www.treasury.gov/resource-centeddata-chart-center/interest-rates/. Source: U.S. Treasury.
11. Yields on Treasury inflation protected securities (TIPS) adjusted to constant maturities. Source: U.S. Treasury. Additional information
on both nominal and inflation-indexed yields may be found at www.treasury.gov/resource-center/data-chart-center/interest-rates/.
12. Based on the unweighted average bid yields for all TIPS with remaining terms to maturity of more than 10 years.
13. International Swaps and Derivatives Association (ISDA®) mid-market par swap rates. Rates are for a Fixed Rate Payer in return for
receiving three month LIBOR, and are based on rates collected at 11:00 a.m. Eastern time by Thomson Reuters and published on
Thomson Reuters Page ISDAFIX®I. ISDAFIX is a registered service mark of ISDA®. Source: Thomson Reuters.
14. Moody’s Aaa rates through December 6, 2001, are averages of Aaa utility and Aaa industrial bond rates. As of December 7, 2001,
these rates are averages of Aaa industrial bonds only. Data obtained from Bloomberg Finance L.P.
15. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations. Data obtained from Bloomberg
Finance L.P.
16. Contract interest rates on commitments for 30-year fixed-rate first mortgages. Source: Primary Mortgage Market Survey(~ data
provided by Freddie Mac.
Note: Weekly and monthly figures on this release, as well as annual figures available on the Board’s historical H.15 web site (see below),
are averages of business days unless otherwise noted.
Current and historical H.15 data are available on the Federal Reserve Board’s web site (www.federalreserve.gov/). For information about
individual copies or subscriptions, contact Publications Services at the Federal Reserve Board (phone 202-452-3244, fax 202-728-5886).
Description of the Treasury Nominal and Inflation-Indexed Constant Maturity Series
Yields on Treasury nominal securities at "constant maturity" are interpolated by the U.S. Treasury from the daily yield curve for
non-inflation-indexed Treasury securities. This curve, which relates the yield on a security to its time to maturity, is based on the closing
market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites
of quotations obtained by the Federal Reserve Bank of New York. The constant maturity yield values are read from the yield curve at fixed
maturities, currently 1,3, and 6 months and 1,2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a 10-year maturity, for
example, even if no outstanding security has exactly 10 years remaining to maturity. Similarly, yields on inflation-indexed securities at
"constant maturity" are interpolated from the daily yield curve for Treasury inflation protected securities in the over-the-counter market. The
inflation-indexed constant maturity yields are read from this yield curve at fixed maturities, currently 5, 7, 10, 20, and 30 years.
March 20, 2015
ELECTRIC UTILITY (CENTRAL)INDUSTRY
901
All of the major electric utilities located in the
INDUSTRY TIMELINESS: 54 (of 9?)
western region of the United States are reviewed
in this Issue; eastern electrics, in Issue 1; and the a utility is holding back profit growth. OGE is facing this
remaining utilities, in Issue 5.
problem this year. So is Great Plains Energy. Sometimes, the year-ago tally provides for a difficult compariElectric utility stocks, as a group, have declined son. In the first quarter of 2014, Entergybenefited from
sharply in value so far in ~-015. We discuss why this a spike in power prices in New England, since it had
has happened.
nonregulated generating assets that were well positioned to take advantage of the favorable market condiThe earnings of some electric utilities are likely tions. Because the comparison is tough, the company’s
to decline this year.
profits will probably decrease in 2015. DTE Energy faces
a tough comparison, as well, because weather patterns
Even after the falloff so far this year, electricwere favorable for its gas utility in 2014. Another probutility equities are not cheap.
lem facing utilities (or any company that has pensions)
is higher pension expense. Beginning this year, the
calculations are based on increased life expectancy. The
Up In 2014, Down In 2015
decline in interest rates at the end of 2014 means that
Last year was outstanding for electric utility stocks, as future pension benefits will be discounted at a lower
a whole. According to an index provided by the Edison rate. Entergy expects higher pension expense this year.
Electric Institute (a group representing investor-owned There are exceptions: A few companies, such as Ameren
electric companies), electric utility equities produced a in Missouri and Eversource (formerly Northeast Utilitotal return of 28.9%. Moreover, this followed a solid ties) in Massachusetts, have regulatory mechanisms to
(though less spectacular) showing in 2013, which saw a track pension costs. Finally, subscribers should note that
13.0% total return. Electric utility stocks benefited from we lnclude mark-to-market accounting gains or losses in
investors who are reaching for dividend yields in an our earnings presentation because they are an ongoing
environment of very low interest rates. The decline in part of quarterly and annual results. This was another
interest rates helped, too. The yield on 10-year U.S. positive factor for DTEs profits in 2014.
Treasury notes fell more than three-quarters of a percentage point. A few stocks (including Integrys Energy Conclusion
and Cleco) were boosted by takeover agreements.
With the decline in the price of most electric utility
stocks so far this year, the average dividend yield for the
This year has been a different story. The price of industry has risen. From a low of 3.2%, this figure rose
almost every electric utility issue has declined in 2015, to 3.7% in the week we went to press. This is well above
and several have fallen by more than 10%. This is in the median for dividend-paying stocks under our coversharp contrast to the broader market averages, which age, but still low by historical standards (a reflection of
are near where they were at the start of the year. current interest rates). Nevertheless, this doesn’t mean
Investors are worried about the possibility that the that electric utility equities are cheap. We recommend
Federal Reserve will raise interest rates later this year. that readers look at our projections for interest rates in
Indeed, the yield on the 10-year Treasury note, which the Quarterly Economic Review in Selection & Opinion,
declined in early 2015, has risen to the point where it is or in each issue of Ratings & Reports. We estimate that
higher than at the end of 2014. Even if interest rates had the rate on the 10-year Treasury note--which is used to
remained stable, though, it would not have been surpris- calculate the dividend line in the price charts of utility
ing to see a reversion to the mean after two years of stocks--will climb by more than a percentage point in
significant outperformance.
2016, and still more by 2018-2020. Such a move would
likely hurt the prices of electric utility equities, which
There are also company-specific reasons why some remain sensitive to interest rates.
utility stocks have weakened. For instance, the decline
Paul E. Debbas, CFA
in oil prices since mid-2014 has hurt CenterPolnt Energy
and OGEEnergy. Each of these companies has a stake in
Enable Midstream Partners, an oil and gas master
limited partnership. The decline in oil prices has reElectric Utility
duced rig activity where Enable operates. Even in 2014, RELATIVE STRENGTH (Ratio of Industry to Value Line Comp.)
CenterPoint and OGE were outliers among utility issues,
10
and the underperformance has continued this year.
10
For Some Companies, Lower Earnings
Electric utilities normally aren’t fast-growing companies, but at least they post year-to-year earnings increases more often than not. For instance, Wisconsin
Energy has seen its earnings rise for 10 consecutive
years, and we expect the streak to continue in 2015 and
2016. CMS Energy has a five-year streak going. This
year, however, there are more exceptions than usual.
The profits of CenterPoint and OGE, mentioned above,
will probably wind up lower in 2015 due to the industrywide conditions affecting Enable. In some cases, regulatory lag (higher costs that aren’t reflected in rates) at
5
2009 2010 2011 2012 2013 2014 2015
Index: June, 1967 = 100
© 2015 Value Line Pe~li~hi.~l LLC. All rights Peserved. Factual m~tendl is 0b~iii~d from sources believed to be reliable and is provided
~HE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. Thispublication is stricl~ for subscriber’s own,
of it may be reproduced, resold, stored or transmitted in any printed, electronic or o(her fort.q, or usedlur g",merating or marketing any
Fundamentals of
Financial Management
Eleventh Edition
Instructor’s Edition
Eugene F. Brigham
University of Florida
Joel F. Houston
University oq Florida
THOMSON
STOCKS AND THEIR VALUATION
Searching for the Right Stock
recent study by the securities industry found that roughly half of all U.S.
have invested in common stocks. As noted in Chapter 8, the longperformance of the U.S. stock market has been quite good. Indeed, during
the past 75 years the market’s average annual return has exceeded 12 percent.
However, there is no guarantee that stocks will perform in the future as well as
have in the past. The stock market doesn’t always go up, and investors can
imake or lose a lot of money in a short period of time. For example, in 2004,
Apple Computer’s stock more than tripled following sizzling sales of its iPod
products. On the other hand, Merck’s stock fell more than 30 percent in 2004,
when it was forced to withdraw one of its best-selling drugs, Vioxx.
The broader market as represented by the D)ow Jones Industrial Average
declined 2.6 percent during the first quarter of 2005. The triggers here were
concerns about rising interest rates, higher oil prices, and declining consumer
confidence. [)uring this quarter, several well-respected companies experienced
much larger declines--for example, Microsoft fell 9.5 percent, Home Depot
10.5 percent, and General Motors 26.6 percent. This shows, first, that diversification is important, and second, that when it comes to picking stocks, it is not
enough to simply pick a good company--the stock must also be "fairly" priced.
To determine if a stock is fairly priced, you ~irst need to estimate the stock’s
true or "intrinsic value," a concept first discussed in Chapter !. With this objective in mind, this chapter describes some models that analysts have used to
estimate a stock’s intrinsic value. As you will see, it is difficult to predict future
stock prices, but we are not completely in the dark. After studying this chapter,
you should have a reasonably good understanding of the factors that influence
stock prices, and with that knowledge--plus a little luck--you should be able to
successfully navigate the stock market’s often treacherous ups and downs.
.~ource: Justin Lahart, "Last Year’s Winners Had Little in Common," The Wall Street Journal, January
3, 2005, p. R8.
Part 3 Financial Assets
Key trends in the
securities industry are
listed and explained at
http’~/www.sia.com/
research/html/key_
industry_trends_.html,
In Chapter 7 we examined bonds. We now turn to common and preferred
stocks, beginnin9 with some important background material that helps
establish a framework for valuin9 these securities.
While it is generally easy to predict the cash flows received from bonds,
forecasting the cash flows on common stocks is much more difficult. However, two fairly straightforward models can be used to help estimate the
"true," or intrinsic, value of a common stock: (1) the dividend growth model
and (2) the total corporate value model. A stock should be bought if its
estimated intrinsic value exceeds its market price but sold if the price
exceeds its intrinsic value. The same valuation concepts and models are
also used in Chapter 10, where we estimate the cost of capital, a critical
element in corporate investment decisions.
9.1 LEGAL RIGHTS AND PRIVILEGES
OF COMMON STOCKHOLDERS
Its common stockholders are the owners of a corporation, and as such they have
certain rights and privileges, as discussed in this section.
Control of the Firm
P~oxy
A document giving
one person the authority to act for another,
typically the power to
vote shares of common
stock,
A firm’s common stockholders have the right to elect its directors, who, in turn,
elect the officers who manage the business. In a small firm, the major stockholder typically is also the president and chair of the board of directors. In large,
publicly owned firms, the managers typically have some stock, but their personal holdings are generally insufficient to give them voting control. Thus, the
managements of most publicly owned firms can be removed by the stockholders
if the management team is not effective.
State and federal laws s, tipulate how stockholder control is to be exercised.
First, corporations must hold elections of directors periodically, usually once a
year, with the vote taken at the annual meeting. Frequently, one-third of the
directors are elected each year for a three-year term. Each share of stock has one
vote; thus, the owner of 1,000 shares has 1,000 votes for each director.1 Stockholders can appear at the annual meeting and vote in person, but typica|ly they
transfer their right to vote to another person by means of a proxy. Management
always solicits stockholders’ proxies and usually gets them. However, if earnings are poor and stockholders are dissatisfied, an outside group may solicit the
t In the situation described, a l,O00-share stockholder could cast 1,000 votes for each of three
directors if there were three contested seats ol~ the board. A, alteruative pn)cedure that may be
pres,cribed in the o.~porate charter calls for cumolative voting. There the 10000-share stockholder
would get 3,00(.) votes if there were three vacancies, and he or she could cast all of them for one
director. Cumulative voti=’tg helps small groups obtain representation on the board.
Chapter 9 Stocks and Their Valuation
proxies in an effort tu ow,,rthrow management and take contrnl of the b~siness.
This is known as a proxy fight,
The question of control has become a central issue in finance in recent years.
The freqnency of proxy fights has increased, as have attempts by one corporation to tnke over another by purchasing a majority of the outstanding stock.
These actions arc cal]ed takeovers. Some well-known examples of takeover batties include KKR’s acquisition of RJR Nabisco, Chevron’s acqnisifion of Gulf Oil,
and the QVC]Viacom fight to take over Paramount.
Managers withont majority control (more than 50 percent of their firms’
stock) are very much concerned about proxy fights and takeovers, and many of
them have attempted to obtain stockholder approve[ for changes in their corporate charters that would make takeovers more difficult. For example, a number
of companies have gotten their stockholders to agree (l) to elect only one-third
of the directors each year (rather than electing all directors each year), (2) to
require 75 percent of the stockholders (rather than 50 percent) to approve a
merger, and (3) to vote in a "poi,~’m pill" provision that would allow the stockholde~ of a firm that is taken river by another firm to buy shares in the second
firm at a reduced price. The poison pill makes the acqnisition unattractive and,
thus, wards off hostile takeover attempts. Managements seeking such changes
generally cite a fear that the firm will be picked up at a bargaia price, but it often
appears that management’s concern about its own position is an even more
important consideration.
Management moves to make takeovers more difficult have been countered
by stockholders, especially large institutional stockholders, who do not like barriers erected to protect incompetent managers. To illustrate, the California Public
Employees Retirement System (Calpers), which is one of the largest institutional
investors, has led proxy fights with several corporations whose financial performances were poor in Calpers’ judgment. Calpers wants companies to give
outside (nonmanagement) directors more clout and to force managers to be
more responsive to stockholder complaints.
Prior to 1~93, SEC rules prohibited large investors snch as Calpers from
getting together to force corporate managers to institute policy changes. However,
the SEC chatxg~.x’l its rules in 1993, and now large investors can work together to
’-force management changes. This ruling has helped keep managers focused on
stockholder concerns, which means the maximization of stock prices.
,An attempt by a person or group to gain
control of a ~rm by
getting its stockholders
to grant that person or
group the authority to
vote their shares to
replace the current
management.
An action whereby a
person or group
succeeds in ousting a
firm’s management and
taking control o{ the
company.
The Preemptive Right
Commou stockholders often have the right, called the preemptive right, to purchase any additional shares sold by the firm. In some states, the preemptive
right is automatically included in every corporate charter; in others, it mnst be
specifically inserted into the charter.
The pnrpose of the preemptive right is twofold. First, it prevents the management of a corporation from issning a large number of additional shares and
purchasing these shares itself. Management could thereby seize control of the
corporation and frustrate the will of the current stockholders. The second, and
far more important, reason for the preemptive right is to protect stockholders
against a dilution of value. For example, suppose 1,000 shares of common stock,
each with a price of $100, were outstanding, making the total market value of
the firm $100,000. If an additional 1,000 shares were sold at $50 a share, or for
$50,000, this would raise the total market value to $150,000. When the new total
market value is divided by new total shares outstanding, a value of $75 a share
is obtained. The old stockholders would thus lose $25 per share, and the new
stockholders would have an instant profit of $25 per share. Thns, selling common stock at a price below the market value would dilute its price and transfer
A provision in the
corporate charter or
bylaws that gives
common stockholders
the right to purchase
on a pro rata basis new
issues of common
stock (or convertible
securities),
Part :3 Financia$ Assets
wealth from the present stockholders to those who were allowed to purchase the
new shares. The preemptive right prevents this.
Identify some actions that companies have taken to make takeovers
more difficult.
What is the preemptive right, and what are the two primary reasons
for its existence?
9.2 TYPES OF COMMON STOCK
Classified Stock
Common stock that is
given a special designation, such as Class A,
Class B, and so forth,
to meet special needs
ot" the company.
Founders’ Shares
Stock owned by the
firm’s founders that has
sole voting rights but
res~ncted dividends for
a specified number of
yoars,
Although most firms have only one type of common stock, in some instances
classified stock is used to meet special needs. Generally, when special classifications are used, one type is designated Class A, another Class B, and so on. Small,
new companies seeking funds from outside sources frequently use different
types of common stock. For example, when Genetic Concepts went public
recently, its Class A stock was sold to the public and paid a dividend, but this
stock had .~o voting rights for five years. Its Class B stock, which was retained
by the organizers of the company, had full voting rights for five years, but the
legal terms stated that dividends could not be paid on the Class B stock until the
company had established its earning power by building up retained earnings to
a designated level. The use of classified stock thus enabled the public to take a
position in a couservatively financed growth company without sacrificing
income, while the founders retained absolute control during the crucial early
stages of the firm’s development. At the same time, outside investors were protected against excessive withdrawals of funds by the original owners. As is often
the case in such situations, the Class B stock was also called founders’ shares.
Note that "Class A," "Class B," and so on, have no standard meanings. Most
firms have no classified shares, but a firm that does could designate its Class B
shares as founders’ shares and its Class A shares as those sold to the public,
while another could reverse these designations. Still other firms could use stock
classifications for entirely different purposes. For example, when General Motors
acquired Hughes Aircraft for $5 billion, it paid in part with a new Class H common, GMH, which had limited voting rights and whose dividends were tied to
Hughes’s performance as a GM subsidiary. The reasons for the new stock were
that (I) GM wanted to limit voting privileges on the new classified stock because
of management’s concern about a possible takeover and (2) Hughes employees
wanted to be rewarded more directly on Hughes’s own performance than would
have been possible through regular GM stock. These Class H shares disappeared
in 2003 when GM decided to sell off the Hughes unit.
What are some reasons why a company might use classified stock?
9.3 COMMON STOCK VALUATION
Common stock represents an ownership interest in a corporation, but to the typical investor, a share of common stock is simply a piece of paper characterized
by two features:
I. It qntitles its owner to dividends, but only if the company has earnings out
of which dividends can be paid and management chooses to pay dividends
rather than retaining and reinvesting all the earnings. Whereas a bond con-
rains a promise to pay interest, common stock provides no such promise--if
you own a stock, you may expect a dividend, but your expectations may not
in fact be met. To illustrate, Long Island Lightin8 Company (LILCO) had
paid dividends on its common stock for more than 50 years, and people
expected those dividends to continue. However, when the company encountered severe problems a few years ago, it stopped paying dividends. Note,
though, that LILCO continued to pay interest on its bonds, because if it had
not, then it would have been declared bankrupt and the bondholders could
have taken over the company.
Stock can be sold, hopefully at a price greater than the purchase price. If the
stock is actually sold at a price above its purchase price, the investor will
receive a capital gain. Generally, when people buy common stock they expect
to receive capital gains; otherwise, they would not buy the stock. However,
after the fact, they can end up with capital losses rather than capital gains.
LILCO’s stock price dropped from $17.50 to $3.75 in one year, so the expected
capital gain on that stock turned out to be a huge actual capital loss.
leflnitions of Terms Used in Stock Valuation Models
~ommon stocks provide an expected future cash flow stream, and a stock’s
value is found as the present value of the expected future cash flows, which consist of two elements: (1) the dividends expected in each year and (2) the price
investors expect to receive when they sell the stock. The final price includes the
return of the original investment plus an expected capital gain.
We saw in Chapter I that managers should seek to maximize the value of
their firms’ stock. Therefore, managers need to know how alternative actions are
likely to affect stock prices, and we develop some models to help show how the
value of a share of stock is determined. We begin by defining the following terms:
D~ = dividend the stockholder expects to receive at the end of
each Year t. DO is the most recent dividend, wl’dch has
already been paid; D~ is the first dividend expected, and
it will be paid at the end of this year; D2 is the dividend
expected at the end of two years; and so forth. D~ represanta the first cash ~ow a new purchaser o~ the stock will
receive. Note that Do, the dividend that has just been
paid, is known with certainty. However, all future, dividends are expected values, those expectations differ somewhat from investor to investor, and those differences lead
to differences in estimates of the stock’s intrinsic value.2
P0 = actual market price of the stock today.
~ expected price of the sto~k at the end of each Year t (pronounced "P hat t’). 1~ is the intrinsic value of the stock
tod~y as seen by the particular investor doing the analysis; I~ is the price expected at the end of one
on. Note that ~0 is the intrinsic value of the stork todaty
based on a particular investor’s estimate of
expected dividend stream and the risklne~ ~ t~t
stream. Hence, whereas the market price P0 is fixed and
Markat Price, P0
The price at which a
stock sells in the
market.
intrinsic Value,
The value of an asset
that, in the mind of a
particular investor, is
justified by the facts;
~o may be different
from the asset’s current
market price.
z Stocks generally pay dividends quarterly, so theoretically we should evaluate them on a quarterly
basis. However, in stock valuation, most analysts work on an anntm[ basis because the data generally are not precise enough to warrant refinement to a quarterly model. For additional information
on the quarterly model, see Charles M. Linke and .I. Kenton Zumwalt, "Estimation Biases in Discounted Cash Flow Analysis of Equity Capital Cost in Rate Regulation," Financial Management,
Autumn 1984o pp. 15-21.
Part 3 Financia~ Assets
9.4 CONSTANT GROWTH STOCKS
Equation 9-1 is a generalized stock valuation model in the sense that the time
pattern of O~ can be anything: O~ can be rising, falling, fluctuating randomly, or
it can even be zero for several years and Equation 9-1 will still hold. With a computer spreadsheet we can easily use this equation to find a stock’s intrinsic value
for any pattern of dividends. [n practice, the hard part is obtaining an accurate
forecast of the future dividends.
In many cases, the stream of dividends is expected to grow at a constant
rate. if this is the case, Equation 9-1 may be rewritten as follows:
Do (1 + 9)~
Do(1 + 9)~
÷...+
§o= Do (1 + g)’
-~
~
2
(1 + r,)
(1 + r,)
(1 + r,)=
_ DO (1 + g)
r~ - g
Constant Growth
(Gordon) Model
Used to find the value
of a constant growth
stock.
DI
r~ - g
(9-2)
The last term of Equation 9-2 is called the constant growth model, or the Gordon model, after Myron J. Gordon, who did much to develop and popularize it.4
Illustration of a Constant Growth Stock
Assume that Allied Food Products just paid a dividend of $1.15 (that is, DO =
$1.15). Its stock has a required rate of return, r~, of 13.4 percent, and investors
expect the dividend to grow at a constant 8 percent rate in the future. The estimated dividend one year hence would be D~ = $1.15(1.08) = $1.24; D2 would be
$1.34; and the estimated dividend five years hence would be $1.69:
Ds = Do(1 + g)S = $1.15(1.08)s = $1.69
We could use this procedure to estimate all future dividends, then use Equation
9-I to determine the current stock value, P0. [n other words, we could find each
expected future dividend, calculate its present value, and then sum all the present values to find the intrinsic value of the stock.
Such a process would be time consuming, but we can take a short cut--just
insert the illustrative data into Equation 9-2 to find the stock’s intrinsic value, $23:
$1.15(1.08) $1.242
~o 0.134 - 0.08 0.054 = $23.00
Note that a necessary condition for the derivation of Equation 9-2 is that the
required rate of return, rs, be greater than the long-run growth rate, g. If the equation is used in situations where r~ is not greater than g, the results will be wrong,
ingless, and possibly misleading.
The concept underlying the valuation process for a constant growth stock
graphed in Figure 9-1. Dividends are growing at the rate g = 8 percent,
because rs > g, the present value of each future dividend is declining. For
pie, the dividend in Year 1 is Dt = D0(l + g)t = $1.15(1.08) = $1.242.
the present value of this dividend, discounted at 13.4 percent, is PV(Dt)
$1.242/(1.134)~ = $1.095. The dividend expected in Year 2 grows to
(1.08) = $1.341, but the present value of this dividend falls to $
4 The last term in Equation 9-2 is derived in the Web/CD Extension of Chapter 5 of Eugene F.
Brigham and Phillip R. Dares, Intermediate Financial Management, 8th ed. (Mason, OH: Thomson/
South-Western, 2004). In essence, Equalion 9-2 is the sum of a geometric progression, and the final
result is the solution value of the progression.
Present Values of Dividends o{ a Constant Growth
Stock where DO = $1.15, 9 = 8%, rs = 13.4%
Dividend
($I
Dollar Amount of Each Dlvlder~l r-J
1.15
PV O~ = 1.10
~
PV of Each Dividend - O° (1 + g)~
~o = ~PV O, = Area un~ PV Cu~e
=~3.~
5
10
15
20
Yaal’s
D~ = $l.449 and PV(D~) = $0.993, and so on. Thus, the expected dividends are
growing, but the present value of each successive dividend is declining, because
the dividend growth rate (8’percent) is less than the rate used for discounting
the dividends to the presenl (13.4 percent).
if we summed the pres nt values of each future dividend, this summation
would be the value of the stock, ~). When g is a constant, this summation is
equal to D~/(r~ - g), as sl ~wn in Equation 9-2. Therefore, if we extended the
lower step-function curve ~ Figure 9-1 on out to infinity and added up the present values of each future dividend, the summation would be identical to the
value given by Equation 9-Z, ~23.00.
Note that if the grow,t rate exceeded the required return, the PV ol~ each
future dividend would exceed that of the prior year. If this situation were
graphed in Figure 9-l, both step-function curves would be increasing, suggesting an infinitely high stock price. Moreover, the stock price as calculated using
Equation 9-2 would be n~ative. Obviously, stock prices can be neither infinite
nor negative, and this illustrates why Equation 9-2 cannot be used unless r~ > g.
We will return to this point later in the chapter.
Dividend and Earnings Growth
Growth in dividends occurs primarily as a result of growth in earning.~ per share
(EPS). Earnings growth, in turn, results from a number of factors, including
(1) the amount of earnings the company retains and reinvests, (2) the rate of
return the company earns on its equity (ROE), and (3) iuflation. Regarding inflation, if output (in units) is stable but both sales prices and input costs rise at the
inflation rate, then EPS will also grow at the inflation rate. Even without
inflation, EPS will also grow as a result of the reinvestment, or plowback, of
earnings, if the firm’s earnings are not all paid out as dividends (that is, if some
fraction of earnings is retained), the dollars of investment behind each share will
rise over time, which should lead to growth in earnings and dividends.
Even though a stock’s value is derived from expected dividends, this does
not necessarily mean that corporations can increase their stock prices by simply
raising the current dividend. Shareholders care about all dividends, both current
and those expected in the future. Moreover, there is a trade-off between current
dividends, and future dividends. Companies that pay most of their current earnings out as dividend, s are obviously not retaining and rei~westing much i~ the
business, and that reduces future earnings and dividends. So, the issue is this:
Do shareholders prefer higher current dividends at the cost of lower future dividends, lower current dividends, and more growth, or are they indifferent
between growth and dividends? As we wilt see in the chapter on distributions to
shareholders, there is no simple answer to this question. Shareholders should
prefer to have the company retain earnings, hence pay less current dividends, if
it has highly profitable investment opportunities, but they should prefer to have
the company pay earnings out if investment opportunities are poor. Taxes also
play a role--since capital gains are tax deferred while dividends are taxed
immediately, this might lead to a preference for retention and growth over
current dividends. We will consider dividend policy in detail later in Part 5 of
this text.
When Can the Constant Growth Model Be Used?
Zero Growth $~o¢k
A common stock
whose future dividends
are not expec~’ed
grow at all,, that is,
The constant growth model is most appropriate for mature companies with a
stable history of growth and stable future expectations. Expected growth rates
vary somewhat among companies, but dividends for mature firms are often
expected to grow in the future at about the same rate as nominal gross domestic
product (real GDP plus iqflation). On this basis, one raight expect the dividends
of an average, or "normal," company to grow at a rate of 5 to 8 Percent a year.
Note too that Equation 9-2 is sufficiently general to handle the case of a zero
growth stock, where the dividend is expected to remain constant over time. If
g - 0, Equation 9-2 reduces to Equation 9-3:
ISo = ~
(9-3)
rs
This is conceptually the same equation as the oue we developed in Chapter 2
for a perpetuity, and it is simply the current dividend divided by the discount
rate.
Write out and explain the valuation formula for a constant growth
stock.
Explain how the formula for a zero growth stock is related to that
for a constant growth stock.
A stock is expected to pay a dividend of $1 at the eqd of the year.
The required rate of return is r, -- 11%. What would the stock’s
price be if the growth rate were 5 percent? What would the price be
ifg = 0%? ($16.67; $9.09)
9.5 EXPECTED RATE OF RETURN ON A’
CONSTANT GROWTH STOCK
We can solve Equation 9-2 for rs, again using the hat to indicate that we are dealing with an expected rate of return:,~
Expected rate = Expected + Expected growth rate, or
of return dividend yield
capital gains yield
D1 + g
F, = ~-o
(9-4)
Thus, if you buy a stock for a price P0 = $23, and if you expect the stock to
pay a dividend D~ = $1.242 one year from now and to grow at a constant rate g
= 8% in the future, then your expected rate of return will be 13.4 percent:
$1.242
?’ = $2--~ + 8% = 5.4% + 8% = 13.4%
In this form, we see that k is the expected total return and that it consists of an
expected dividend yield, Dt/P(~ = 5.4%, plus an expected growth rate or capital gains
yield, g = 8%.
Suppo~ this analysis had been conducted on January 1, 2006, so P0 = $23 is
the January 1, 2006, stock price, and D~ = $1.242 is the dividend expected at the
end of 2006. What is the expected stock price at the end of 2006? We would
again apply Equation 9-2, but this time we would use the year-end dividend,
Dz = D=(l + g) = $1.242(1.08) = $1.3414:
~lZi3V06 =D2007
rs - g 0.134
-- 0.08= $24.84
= $1.3414
Notice that $24.84 is 8 percent greater than P0, the $23 price on January 1, 2006:
$23(1.08) = $24.84
Thus, we would expect to make a capital gain of $24.84 - $23.00 = $1.84 during
2006, which would provide a capital gains yield of 8 percent:
Capital gain
Capital gains yieid2oo6
Beginning price
$1.84 0.08 = 8%
$23.00
We could extend the az~alysis on out, and in each future year the expected
capital gai,~s yield would always equal g, the expected dividend growth rate.
For example, the dividend yield in 2007 could be estimated as follows:
Dividend yield2o07 = ~ =~$1"3414 = 0.054
P~am/o6 $24.84
= 5,4%
The dividend yield for 2008 could also be calculated, and again it would be 5.4
percent. Thus, for a constant growth stock, the following conditions must hold:
1. The expected dividend yield is a constant.
2. The dividend is expected to grow forever at a constant rate, g.
5 The r~ valtte in Equation 9-2 is a required rate of return, but when we transform to obtain Equation
9-4, we are fin~ling an expected rate o~ rett.~rn. Obviously; the transformation requires that r~ = ~.
This equality ho|ds if the stock market is in equilibrium, a condition that we discussed in Chapter 5.
The popular Motley
Fool Web site, http://
www.fool.eom/~chaol/
introductiontovaluation
.htm, provides a good
description of some of
the benefits and
drawbacks of a few of
the more commonly
used valuation
procedures.
3. The stock price is expected to grow at this same rate.
4. The expected capital gains yield is also a constant, and it is equal to g.
The term expected should be clarified--it means expected in a probabilistic sense,
as the "statistically expected" outcome. Thus, when vce say that the growth rate
is expected to remain constant at 8 percent, we mean that the best prediction for
the growth rate in any future year is 8 percent, not that we literally expect the
growth rate to be exactly 8 percent in each future year. In this sense, the constant
growth assumption is reasonable for many large, mature companies.
What conditions must hold if a stock is to be evaluated using the
constant growth model?
What does the term "expected" mean when we say expected growth
rate?
Suppose an analyst says that she values GE based on a forecasted
growth rate of 6 pe~’ent for earnings, dividends, and the stock price.
ff the growth rate next year turns out to be 5 or 7 percent, would
this mean that the analyst’s forecast was faulty? Explain.
9.6 VALUING STOCKS EXPECTED TO GROW
AT A NONCONSTANT RATE
Supernormal
(Nonconstant) Growth
The part of the firm’s
life cycle in which it
grows much faster than
the economy as a
whole.
For many companies, it is not appropriate to assume that dividends will grow at
a constant rate because firms typically go through life cyc/es with different
growth rates at different parts of the cycle. During their early years, they
generally grow much faster than the economy as a whole; then they match the
economy’s growth; and finally they grow at a slower rate than the economy.~
Automobile manufacturers in the 1920s, computer software firms such as
Microsoft in the 1980s, and wireless firms in the early 2000s are examples of
firms in the early part of the cycle; these firms are called superno~mal, or
nonconstant, growth firms. Figure 9-2 illustrates nonconstant growth and also
compares it with normal growth, zero growth, and negative growth7
~ The concept of life cyck~ could be broadened to product eyrie, which would include both small
start-up companies and large companies like Microsoft and Procter & Gamble, whicl~ periodic~[ly
introduce oew product$ that give sales and earnings a boost, We sEoLdd al~ mention business
which alternately depres~ and ~ost sales and profits. The gmwfl~ rate just after a major new product has ~n intmdu~d, or just aher a firm emerges ~mm the depths of a m~ion, Is likely ~
much higher than the "expected long-run averaRe g~wth rate," which is the p~r number for
~F analysis.
: A n~ative growth rate indicates a declining company. A mining company wh~e profits a~ ~allin8
because of a d~lining am [~y is an example. Someone buying such a company would expel its
earoings, and consequently its dividends and stock price, to d~iine each year, and ~h~ would lead
to capital [~ses rather than capital gai~. Obviously, a dL~linlng company’s st~k pd~ will ~
tively low, and its dividend yield must be high em~ugh to offset the ex~k~ capital lo~ and still
produce a competitive t~al return. Students sometimes argue that they would never be willing to
buy a st~k who~ price was exp~ted to d~line. However, if the p~ent value of the exp~t~ dividends ex~s the st~k price, the st~k would still be a g~d inv~tment that would pmvMe a
good return.
Illustrative Dividend Growth Rates
Dividend
($)
~
Normal Growth, 8%
i ~ ~ Supernormal Growth, 30%
Normal Growth, 8%
~
1.15~~~"~ I
i
I Zero Growth, 0%
~ Declining Growth, -8%
0
1
2
3
4
5
Years
In the figure, the dividends of the supernormal growth firm are expected to
grow at a 30 percent rate for three years, after which the growth rate is expected
to fall to 8 percent, the assumed average for the economy. The value of this
firm’s stock, like any other asset, is the present value of its expected future dividends as determined by Equation 9-I. When Dt is growing at a constant rate, we
can simplify Equation 9-I to P0 = D~/(r, - g). In the supernormal case, however,
the expected growth rate is not a constant--it declines at the end of the period of
supernormal growth.
Because Equation 9-2 requires a constant growth rate, we obviously cannot
use it to value stocks that have l~onconstant growth. However, assuming that a
company currently enjoying supernorma[ growth will eventually slow down
and become a constant growth stock, we can combine Equations 9-I and 9-2 to
form a new formula, Equation 9-5, for valuing it.
First, we assume that the dividend will grow at a nonconstant rate (generally a relatively high rate) for N periods, after which it will grow at a constant
rate, g. N is often called the terminal date, or horizon date. Second, we can use
the constant ?,,rowth formu|a, Equation 9-Z, to determine what the stock’s
~ot~zo~, or term~.tta\, ,~\~e w~\\ be b~ periods tram today:
The stock’s intrinsic value today, P0, is the present value of the dividends during
the nonconstant growth period plus the present value of the horizon value:
Terminal Date
(Horizon Date)
The date when the
growth rate becomes
constant. At this date
it is no longer necessan/to forecast the
individual dividends.
The vatue at ~e
horizon date of
dividends expected
therea{ter
D1
DN+1
Dz
DN
D. =
N*I ÷ "’° ÷ (1
~0 = (1 -~r,)~÷ (1 ~-r,)= + "’" ÷ (1 ÷ r,)N ÷ (1 + r$)
+ r,)
PV of dividends during the
nonconstant growth
period, t = 1, ¯ ¯ ¯ N
Horizon value = PV of dividends
during the constant growth
period, t = N + 1, ¯ ¯ ¯ 0o
(9-S)
PV of dividends during the
nonconstant growth period
t = 1,-,. N
PV of horizon
value, PN:
[(DN+1)/(rs --
(1 + r,)~
TO implement Equation 9-5, we go through the following three steps:
1. Find the PV of each dividend during the period of nonconstant growth and
sum them.
2. Find the expected price of the stock at the end of the nonconstant growth
period, at which point it has become a constant growth stock so it can be
valued with the constant growth model, and discount bhis price back to the
present.
3. Add these two components to find the intrinsic value of the stock, ~.
Figure 9-3 can be used to illustrate the process for valuing nonconstant
growth stocks. Here we assume the following five facts exist:
The valuation process as diagrammed in Figure 9-3 is explained in the steps set
forth below the time line. The value of the nonconstant growth stock is calculated to be $39.21.
Note that in this example we have assumed a relatively short three-year
horizon ,to keep things simple. When evaluating stocks, most analysts would use
a much longer horizon (for example, 10 years) to estimate intrinsic values. This
Chapter 9 Stocks and T~eir Valuation
Process for Finding the Value of a Nonconstant’
Growth Stock
0
I
; g, - 30~ I
Dt - 1,4950
3o%
2 3o%
I ’
Da - 1,9435
1.$113 =
13,4%
13.4%
36,3838 =
39.2134 = $39.21 - ~o
3
I ~ln" ~(’
14
03 - 2,5266
D4 - 2,7287
~3- S0.5310
53.0576
Notes to Figure 9 3:
Step 1. Calculate the dividends expected at the end of each year during the nonconstant
growth period. Calculate the first dividend, DI = D~(t + gs) = $1.15(1.30) = $1.4950.
Here gs is the g~owth rate during the three-year nonconstant growth oeriod, 30 percent.
Show the $1,4950 on the time line as the cash flow at Time 1. Then, calculate Dz =
O~(1 t- g~) = $1.4950(1.30) = $1,9435, and then D3 = D~(1 + g~ = $1.9435(1.30) =
$23266, Show these values on the time line as the cash flows at Time 2 and Time 3,
Note that DO is used only to calculate
Step 2. The price of the stock is the PV of dividends from Time 1 to infinity, so in theory we
could project each future dividend, with the normal growth rate, 9. = 8%, used to calculate D4 and subsequent dividends. However, we know that after D3 has been paid.
which is at Time 3, the stock becomes a constant growth stock. Therefore, we can t.~se
the constant growth formula to find ~3, which is the PV of the dividends from Time 4 to
infln~ty as evaluated at Time 3.
First, we determine D~ = $2.5266(1.08) = $2.7287 for use in the formu)a, and then
we calculate ~ as follows:
$2.7287
We show this $50,5310 on the time line as a second cash flow at Time 3, The $50,5310
is a Time 3 cash flow in the sense that the stockholder could sell it for $50,5310 at Time
3 and also in the sense that $50.$310 is the present value of the dividend cash flows
from T, ime 4 to infinity, Note that the total cash flow at Time 3 consists of the sum of
D~ 4. F~ ~ $2,526~ + $50.5310 ~ $53.0576,
Step 3. Now that the cash flows have been placed on the time line. we can discount each cash
flow at the reauired rate of return, r~ = 13,4% We could discount each cash flow by
dividing by (1.134)~, where t = 1 for Time 1, t - 2 for Time Z. and t " 3 for Time 3. This
produces the PVs shown to the left below the time llne, and the sum of the PVs is the
value of the nonconstant growth stock, $39,21.
With a financial calculator, you can find the PV of the cash flows as shown on the
time llne with the cash flow (CFLO) register of your calculator. Enter 0 for CF0 because
you receive no cash flow at Time O. CF~ = ~.49S, CF~ = 1.9435, and CF3 = 2.5266 +
.505310 = 53.0576. Then enter I/YR = 13.4, and press the NPV key to fincJ the value of
the stock,
requires a few more calculations, but analysts use spreadsheets so the arithmetic
is not a problem. In practice, the real limitation is obtaining reliable forecasts for
future growth.
Explain how one would find the value of a nonconstant growth stock.
Explain what is meant by "terminal (horizon) date" and "horizon
(terminal) value."
Evaluating Stocks That Don’t
Pay Dividends
The dividend growth model assumes that the firm is
currently paying a dividend. However, many firms,
even highly profitable ones, including Cisco, Dell.
and Apple, have never paid a dividend. If a firm is
expected to begin paying dividends in the future, we
can modify the equations presented in the chapter
and use them to determine the value of the stock.
A new business often expects to have low sales
during its first few years of operation as it develops its
product. Then, if the product catches on, sales will
grow rapidly for several years. Sales growth brings
with it the need for additional assets--a firm cannot
increase sales without also increasing its asse~s, and
asset growth requires an increase in liability and!or
equity accounts. Small firms can generally obtain
some bank credit, but they must maintain a reason.
able balance between debt and equity. Thus, additional bank borrowings require increases in equity, and
getting the equity capital needed to suppor~ growth
can be difficult for small firms. They have limited
access to the capital markets, and, even when they
can sell common stock, their owners are reluctant to
do so for fear of losing voting control. Therefore, the
best source of equi~ for most small businesses is
retained earnings, and for this reason most small firms
pay no dividends during their rapid growth years.
Eventually, though, successful small firms do pay dividends, and those dividends generally grow rapidly at
first but slow down to a sustainable constant rate once
the firm reaches maturity.
If a firm currently pays no dividends but is
expected to pay dividends in the future, the value of
its stock can be found as follows:
1.
Estimate when dividends wilt be paid, the amount
of the first dividend, the growth rate during the
supemormal growth period, the length of the
supemormal period, the long-run (constant) growth
rate, and the rate of return required by investors.
2. Use the constant growth model to determine the
price of the stock after the firm reaches a stable
growth situation.
3. Set out on a time line the cash flows (dividends
during the supemormal growth period and the
stock price once the constant growth state is
reached), and then find the present value of
these cash flows. That present value represents
the value of the stock today.
To illustrate this process, consider the situation
for MarvelLure Inc., a company that was set up in
2004 to produce and market a new high-tech fishing
lure. MarvelLure’s sales are currently growing at a
rate of 200 percent per year. The company expects
to experience a high but declining rate of growth in
sales and earnings during the next 10 years, after
which analysts estimate that it will grow at a steady
10 percent per year. The firm’s management has
announced that it will pay no dividends for five years,
but if earnings materialize as forecasted, it will pay a
dividend of $0.20 per share at the end of Year 6,
$0.30 in Year 7, $0,40 in Year 8, $0.45 in Year 9, and
$0.50 in Year 10. After Year 100 current plans are to
increase dividends by 10 percent per year.
MarvelLure’s investment bankers estimate that
investors require a 15 percent return on similar
stocks. Therefore, we find the value of a share of
MarvelLure’s stock as follows:
$0
$0.30
(1.15)’
+ $0.45
$0
$0.20
(1.15)6
$0.40
(1.1S)s
SO.SO
($o.so(~.~o)’~(
= $3.30
The last term finds the expected price of the stock in
Year 10 and then finds the present value of that
price. Thus, we see that the dividend growth model
can be applied to firms that currently pay no dividends, provided we can estimate future dividends
with a fair degree of confidence. However, in many
cases we can have more confidence in the forecasts
of free cash flows, and in these situations it is better
to use the corporate valuation mode! as discussed in
the next section.
~.7 VALUING THE ENTIRE CORPORATIONs‘
hus far we have discussed the discounted dividend approach to valuing a
rm’s common stock. This procedure is widely used, but it is based on the
ssumption that the analyst can forecast future dividends reasonably well. This
~ often true for matttre companies that have a history of steady dividend payaents. The model can be applied to firms that are not paying dividends, but as
ve show in the preceding box, this requires forecasting the time at which the
irm will commence paying dividends, the amount of the initial dividend, and
he growth rate of dividends once they commence. This suggests that a reliable
lividend h)recast must be based on forecasts of the firm’s future sales, costs, and
:apital requirements.
An alternative approach, the total company, or corporate valuation, model,
:an be used to value firms in situations where future dividends are not easily
~redictable. Consider a start-up formed to develop and market a new product,
~uch companies generally expect to have low sales during their first few years
~s they develop and begin to market their products. Then, if the products catch
vn, sales will grow rapidly for several years. For example, eE.ay’s sales were $48
million in 1998, the year it first went public, but in 1999 sales grew by nearly 400
percent and they hit $4.5 billion in 2005. Obviously, eBay has been more successful than most new businesses, but growth rates of 100, 500, or even 1,000 percent
are not uncommon during a firm’s early years.
Growing sales require additional assets~aud eBay could not have grown
without increasing its assets. Over the five-year period 1999-2004, its sales grew
by 658 perceut, and that growth required a 583 percent increase in assets. The
increase in assets had to be financed, so eBay’s liability and equity accouuts also
grew by 583 percent as was required to keep the balance sheet in balance.
Small firms can generally borrow some funds from their bank, but banks
insist that the debt/equity ratio be kept at a reasonable level, which means that
equity mttst also be raised. However, small firms have little or no access to the
stock market, so they generally obtain new eqttity by retaining earnings, which
means that they pay little or no dividends during their rapid growth years.
Eventually, though, most successful firms do pay dividends, and those dividends grow rapidly at first but then slow down as the firm approaches maturity.
It is difficult to forecast the f~tture dividend stream of any firm that is expected
to go through such a transition, and even in the case of large firms such as Cisco,
Dell, and Apple that have never paid a dividend, it’s hard to forecast when dividends will commence and how large they will be.
Another problem arises when it is necessary to find the value of a division
as opposed to an entire firm. For example, in 2005 Kerr-McGee, a large oil and
chemical company, decided to sell its chemical division, The parent company
had been paying dividends for many years, so the discounted dividend model
could be applied to it. However, the chemical division had no history of dividends, and it would likely be bought by another chemical company and folded
into the purchaser’s other operations. How could Kerr-McGee’s chemical division be valued? The answer is, "Use the corporate valuation model as discussed
in this section."
~ The corporate valuation moctel presented in this section is widely used by analysts, and it is in
reany respects superior to the discounted dividend model. However, it is rather involved as it
requires the ~tirnafion of sales, costs, and cash flows on out into the future before beginning the
discounting process. Therefore, soree lnstn~ctor~ n~ay prefer to oreit Section 9.7 and skip ~o ?,ecllon
9.8 in the introductory course.
Total Company or
Corporate Valuation
Model
A valuation model
used as an alternative
to the dividend 9rowth
model to determine
the value of a Firm,
especially one with no
history of dividends or
a division o{ a larger
Firm. This model First
calculates the Firm’s
free cash flows and
then finds their present
value to determine the
firm’s value.
The Corporate Valuation Model
In Chapter 3 we explained that a firm’s value is determined by its ability to generate cash flow, both now and in the future. Therefore, market value can be
expressed as follows:
Market=
value Vc°~nPan~’ = PV of expected future free cash flows of company
FCF=
FCF1
FCF2
= (1+ WACC)1 ~ (I +WACC)z +’’" + (1 +WACC)~ (9-6)
Here FCF~ is the free cash flow in Year t and WACC is the weighted average cost
of the firm’s capital.
Recall from Chapter 3 that free cash flow is the cash inflow during a given
year less the cash needed to finance required asset additions. Inflows are equal
to net after-tax operating income (also called NOPAT) plus noncash charges
(depreciation and amortization), which were deducted when calculating
NOPAT, while the required asset additions are the capital expenditures plus the
net addition to working capital. This was discussed in Chapter 3, where we
developed the following equation:
L
and amortizationJ
.
expenditures
+ working J
capital J
Depreciation and amortization can be shifted from the first bracketed term to the
second term (and given a minus sign). Then the first term becomes EBIT(1 - T),
also called NOPAT, and the second term becomes the net (rather than grass) new
inw’stment in operating capital. The result is Equation 9-7, which shows that free
cash flow is equal to after-tax operating income (NOPAT) h.~s the net new
investment in operating capital:
FCF = NOPAT - Net new investment in operating capital (9-7)
Turning to the discount rate, WACC, note first that free cash flow is the cash
generated before making any payments to any investors---the common stockholders,
preferred stockholders, and bondholders--and that cash flow must prtroide a return to all
these investors. Each of these investor groups has a required rate of return that
depends on the risk of the particular security, and as we discuss in Chapter 10,
the average of those required returns is the WACC.
With this background, we can summarize the steps used to implement the
corporate valuation model. This type of analysis is performed both internally by
the firm’s financial staff and also by external security analysts, who are generally
experts on the industry and quite familiar with the firm’s history and future
plans. For illustrative purposes, we discuss an analysis conducted by Susaa
Buskirk, senior food analyst for the investment banking firm Morton Staley and
Company. Her analysis is summarized in Table 9-1, which was reproduced from
the chapter Excel model.
Based on Allied’s history and her knowledge of the firm’s business plan,
Susan estimated sales, costs, and cash flows on an annual basis for five
years. Growth will vary during those years, but she assumes that things will
stabilize and growth will be constant after the fifth year. She could have projected variability for more years if she thought it would take longer to reach
a steady-state, constant growth situation.
Allied Food Products: Free Cash Flow Valuatio~
Part 1. Key Inputs
c
Sales growth rate
Operating costs as a % of sales
Growth in operating capital
Depr’n as a % of operating capital
Tax rate
WACC
Long-run FCF grow~, g~
p
I
E
I
F
I
(~
I
H
2006
2O07
ZOOe
Z009’
2010
10.0%
87.0%
8-0%
6.0%
40%
10%
6.0~A
9.0%
87.0%
8.0%
8.0%
9.0%
86.0%
8.0%
7.0%
9.0%
85.0%
8.0%
7.0%
8.0%
85.O%
8.0%
7.0%
Part Z, Forecast of C~sh Rows During Partnd of Nonconstant Growth
~
Salea
OperatIng costs
EBn.~Predatlon
NOPAT - EB|T x (l-T)
$3,000,0
2,616.2
100.0
32a3.8
$170.3
$3,300.0
2,871.0
116.6
$312.4
$!87,4
$3,387.0
3,129,4
168.0
$299.6
$179.8
$3,920,7
3,371,8
158.7
$390.2
$234.1
$4,273.6
3o832,6
171.4
$469.6
$281.8
$4,61S.S
3,823.2
185.1
$S07.2
$304.3
Total operating capital
Net new operating cap
Free Cash Row, FCF
PV Of FCF$
$ t,800,O
28(;
-$109.7
N.A.
31,944.0
144.0
$43.4
, $3£5
32,099.5
15S.S
$Z4.3
$20. !
$2,267,5
168,0
$66.1
$4£7
$Z,448,9
181,4
$100,4
$~.~
$Z,644.8
195.6
$108.4
SdZ3
Part 3. TermInal Value and Intriosic Value Estimation
Estimated VMue at the Horizon, 20 I0
FCFzo~o( I
Free Cash Row (2011)
$~ 14.9
FCFzozt
TVzo~o
Tem~al Value at 2010, 1~/
$2,872.7 ~---~-"--’~
WACC - g
PV of the 2010 TV
~
$1,783.7
1V / (I+WACC)
Celcul~tion of Firm’s Intrinsic Value
~um of PV$ of FCFs, 2006-2010
PV of 2010 TV
~Total corporate value
=Less: market value of debt and pM
Intrinsic value of common equity
Shares outstanding (miglons)
$245.1
$1,783.7
$860.0
$10168.8
Intdnsin Value Per share
¯
Susan next calculat,:~.’l the expected free cash flows (FCFs) for each of the five
nonconstant growth years, and she found the PV of those cash flows, discounted at the WACC.
= After Year 5 she assumed that FCF growth would be constant, hence the
constant growth model could be used to find Allied’s total market value at
Year 5. Thi~ "horizon, or terminal, value" is the sum of the PVs of the FCFs
from Year 6 on out into the future, discounted back to Year 5 at the WACC.
¯ Next, she discounted the Year 5 terminal value back to the present to find its
PV at Year 0.
¯ She then summed all the PVs, the annual cash flows during the nonconstant
period plus the PV of the horizon value, to find the firm’s estimated total
market value.
¯ She then subtracted the vab.~e of the debt and preferred stock to find the
value of the common equity.
Other Approaches to Valuing
Common Stocks
While the dividend growth and the corporate value
models presented in this chapter are the most widely
used methods for valuing common stocks, they are
by no means the only approaches, Analysts often use
a number of different techniques to value stocks, Two
of these alternative approaches are described here,
The P/E Multiple Approach
Investors have long looked for simple rules of thumb
to determine whether a stock is fairly valued. One
such approach is to look at the stock’s price-toearnings (P/E) ratio. Recall from Chapter 4 that a
company’s P/E ratio shows how much investors are
willing to pay for each dollar of reported earnings. As
a starting point, you might conclude that stocks with
low P/E ratios are undervalued, since their price is
"low" given current earnings, whiJe stocks with high
P/E ratios are overvalued.
Unfortunately, however, valuing stocks is not that
simple. We should not expect all companies to have
the same P/E ratio. P/E ratios are affected by risk-investors discount the earnings of riskier stocks at a
higher rate. Thus, all else equal, riskier stocks should
have lower PIE ratios. In addition, when you buy a
stock, you not only have a claim on current earn-
ingsmyou also have a claim on all future earnings. All
else equal, companies with stronger growth opportunities will generate larger future earnings and thus
should trade at higher PIE ratios, Therefore, eBay is
not necessarily overvalued just because its P/E ratio
is 52.8 at a time when the median firm has a PIE of
20.1. Investors believe that eBay’s growth potential is
well above average. Whether the stock’s future prospects justify its PIE ratio remains to be seen, but in
and of itself a high P/E ratio does not mean that a
stock is overvalued.
Nevertheless, P/E ratios can provide a useful starting point in stock valuation. If a stock’s PIE ratio is well
above its industry average, and if the stock’s growth
potential and risk are similar to other firms in the industry, this may indicate that the stock’s price is too high.
Likewise, if a company’s P/E ratio fatts well below its
historical average, this may signal that the stock is
undervaluec~particularly if the company’s growth
prospects and risk are unchanged, and if the overall
P/E for the market has remained constant or increased.
One obvious drawback of the P/E approach is
that it depends on reported eccountin9 earnings; For
this reason, some analysts choose to rely on other
multiples to value stocks, For example, some analysts
Finally, she divided the equity value by the number of shares outstanding,
and the result was her estimate of Allied’s intrinsic value per share, This value
was quite close to the stock’s market price, so she concluded that Allled’s
stock is priced at its equilibrium level. Consequently, she issued a "Hold" recommendation on the stock. If the estimated intrinsic value had been significantly below the market price, she woold have issued a "Sell" recommendatlon, and had it been well above, she would have called the stock a "Buy."
Comparing the Total Company
and Dividend Growth Models
Analysts use both the discounted dividend model and the corporate model
when valuing mature, dividend-paying firms, and they generally use the corporate model when valuing firms that do not pay dividends and divisions. In principle, we should find the same intriz~sic value using either model, but differences
are often observed. When a conflict exists, then the assumptions embedded in
the corporate model can be reexamined, and once the analyst is convinced they
are reasonable, then the results of that model are used. In our Allied example,
the estimates were extremely close--the dividend growth model predicted a
price of $23,00 per share versus $23.38 using the total company model, and both
are essentially equal to Allied’s actual $23 price.
look at a company’s price-to-cash-flow ratio, while
others look at the price-to-sales ratio.
The EVA Approach
In recent years, analysts have looked for more rigorous alternatives to the dividend growth model. More
than a quarter of all stocks listed on the NYSE pay no
dividends. This proportion is even higher on Nasdaq.
While the dividend growth model can still be used
for these stocks (see box, "Evaluating Stocks That
Don’t Pay Dividends"), this approach requires that
analysts forecast when the stock will begin paying
dividends, what the dividend will be once it is established, and the future dividend growth rate. In many
cases, these forecasts contain considerable errors.
An alternative approach is based on the concept
of Economic Value Added (EVA), which we discussed
back in Chapter 3. Also, recall from the box in Chapter
4 entitled, "EVA and ROE" that EVA can be writ’ten as
(Equity capitalXROE - Cost of equity capital)
This equation suggests that companies can increase
their EVA by investing in projects that provide
shareholders with returns that are above their cost of
capital, which is the return they could expect to earn
on alternative investments with the same level of risk.
VVhen you buy stock in a company, you receive more
than just the book value of equity--you also receive
a claim on all future value that is created by the firm’s
managers (the present value of all future EVAs). It follows that a company’s market value of equity can be
written as
Market value = Book + PV of all
of equity
value future EVAs
We can find the "fundamental" value of the
stock, P0, by simply dividing the above expression by
the number of shares outstanding.
As is the case with the dividend growth model,
we can simplify the above expression by assuming
that at some point in time annual EVA becomes a
perpetuity, or grows at some constant rate over time.a
* What we have presented hera is a simplified version of
what is often referred to as ~he Edwards-BelI-Ohlson (EBO)
modal. For a more complete description of this technique
and an excellent summs~t of how it can be used in practice,
take a look at the article "Measuring Wealth," by Chadas
M, C Lee, }n CA Magazine, April 1~6, pp. 32-37.
In practice, intrinsic value estimates based on the two models normally
deviate both from one another and from actual stock prices, leading different
analysts to reach different conclusions about the attractiveness of a given stock.
The better the analyst, the more often his or her valuations will turn out to be
correct, but no one can make perfect predictions because too many things can
change randomly and unpredictably in ti~e future. Given all this, does it matter
whether you use the total company model or the dividend growth model to
value stocks? We would argue that it does. If we had to value, say, 100 mature
companies whose dividends were expected to grow steadily in the future, we
would probably use the dividend growth model. Here we would only need to
estimate the growth rate in dividends, not the entire set of pro forma financial
statements, hence it would be more feasible to use the dividend model.
However, if we were studying just one or a few companies, especially companies still in the high-growth stage of their life cycles, we would want to project future financial statements before estimating future dividends. Then,
because we wou~.d already have proiected tuture fiaancia~, statements, we wou~d
go ahead ~nd apply the total company model Inter, which pays a quarterly dividend of 8 cents versus quarterly earnings of about $1.24, is an example of a company where either model could be used, but we think the corporate model
would be better.
Now suppose you were trying to estimate the value of a company that has
never paid a dividend, such as eBa); or a new firm that is about to go public, or
Kerr-McGee’s chemical division that it plans to sell. In all of these situations, you
would be much better off using the corporate valuation model. Actually, even if
a company is paying steady dividends, much can be learned from the corporate
valuation model, so analysts today use it for all types of valuations. The process
of projecting future financial statements can reveal a great deal about the company’s operations and financing needs. Also, such an analysis can provide
insights into actions that might be taken to increase the company’s value, and
for this reason it is integral to the planning and forecasting process, as we discuss in a later chapter.
Write out the equation for free cash flows, and explain it.
Why might someone use the corporate valuation model even for
companies that have a history of paying dividends?
What steps are taken to find a stock price as based on the firm’s total
value?
Why might the calculated intrinsic stock value differ from the
stock’s current market price? Which would be "correct," and what
does "correct" mean?
9.8 STOCK MARKET EQUILIBRIUM
Recall that rx, the required return on Stock X, can be found using the Security
Market Line (SML) equation from the Capital Asset Pricing Model (CAPM) as
discussed back in Chapter 8:
rx = r.~ + (rM -- r~)bx = r.~ + (RPM)bx
If the risk-free rate is 6 percent, the market risk premium is 5 percent, and Stock
X has a beta of 2, then the marginal investor would require a return of 16 percent
on the stock:
rx = 6% + (5%)2.0
= 16%
Marginal Investor
A representative
investor whose actions
reflect the beliefs of
those people who
are currently trading a
stock. It is the marginal
investor who
determines a stock’s
price.
This 16 percent required return is shown as the point on the SML in Figure 9-4
associated with beta = 2.0.
A marsinal investor will buy Stock X if its expected return is more than
16 percent, will sell it if the expected return is less than 16 percent, and will be
indifferent, hence will hold but not buy or sell, if the expected return is exactly
16 percent. Now suppose the investor’s portfolio contains Stock X, and he or she
analyzes its prospects and concludes that its earnings, dividends, and price can
be expected to grow at a constant rate of 5 percent per year. The last dividend
was Do = $2.8571, so the next expected dividend is
D1 = $2.8571(1.05) = $3
The investor observes that the present price of the stock, P0, is $30. Should he or
she buy more of Stock X, sell the stock, or maintain the present position?
The investor can calculate Stock X’s t,xpected rate of return as follows:
$3
+s% = ls%
Expected and Required Returns on Stock X
Rate of Return
(%)
SML: ri = rRF+ (rM- t~) bi
rx= 16
ix= 15
r~,~= 11
1.0
2.0 Risk, bi
This value is plotted on Figure 9-4 as Point X, which is below the SML. Because
the expected rate of return is less than the required return, be or she, and many
other investors, would want to sell the stock. However, few F~.~ple would want
to buy at the $30 price, so the present owners would be unable to find buyers
unless they cut the price of the stock. Thus, the price would decline, and the
decline would continue until the price hit $27.27. At that point the stock would
be in equilibrium, defined as the price at which the expected rate of return,
1.6 percent, is equal to the required rate of return:
$3
Fx $27.27 + 5%-- 11% + 5% = 16% = rx
Had the stock initially sold for less than $27.27, say, $25, events would have
been reversed, hwestors would have wanted to purchase the stock because its
expected rate of return would have exceeded its required rate of return, buy
orclers would have come in, and the stock’s price would be driven up to $27.27.
To summarize, in equilibrium two related conditions must hold:
1. A stock’s expected rate of return as seen by the marginal investor must equal
its required rate of return: ~. = ri.
2. The actual market price of the stock must equal its intrinsic value as estimated by the marginal investor: Pu = l~.
Of course, some individual investers may believe that ~i > r~ a.~d ~0 > Pn, hence
they would invest most of their funds in the stock, while other investors might
have an opposite view and thus sell all of their shares. However, investors at the
margin establish the actual market price, and for these investors, we must have
~i = r~ and ~ = P~. If these conditions do not hold, trading will occur until they do.
Changes in Equilibrium Stock Prices
Stock prices are not constaot~they uudergo violent changes at times. For example, on October 27, 1997, the Dew Jones Industrials fell 554 points, a 7.18 percent
Equilibrium
The condition under
which the expected
return on a security is
just equal to its
require~d return, ~ = r.
Also, P= Po, and the
price is stable.
drop in value. Even worse, on October 19, 1987, the Dew lost 508 points, causing
an average stock to lose 23 percent of its value on that one day, and some individual stocks lost more than 70 percent. To see what could cause such changes to
occur, assume that Stock X is in equilibrium, selling at a price of $27.27 per
share. If all expectations were exactly met, during the next year th.e price would
gradually rise to $28.63, or by 5 percent. However, suppose conditions changed
as indicated in the second column of the following table:
VARIABLE VALUE
Risk-free rate, rR~
Market risk premium, rM - rR~
Stock X’s beta coefficient, bx
Stock X’s expected growth rate, gx
D~
Price of Stock X
Original
New
6%
5%
2.0
5%
$2.8571
’1;27.27
5%
4%
1.25
6%
$2.8571
?
Now give yourself a test: How would the change in each variable, by itself,
affect the price, and what new price would result?
Eve,’y change, taken alone, would lead to an increase in the price. The first
three changes all lower r×, which declines from 16 to 10 perce=at:
Original rx = 6% + 5%(2.0) = 16%
Newrx = 5% + 4%(1.251 = 10%
Using these values, together with the new g, we find that I~0 rises from $27.27 to
$75.71, or by 178 percent:v
$2.8571 (1.05) $3
Original I~0 0.16 - 0.05 0.11 $27.27
$2.8571 (1.06)
New 15o - 0.10 - 0.06
$3.0285
0.04 = $75.71
Note too that at the new price, the expected and required rates of return will be
equal:~0
$3.0285
$75.7~ + 6% = 10% -- rx
Evidence suggests that stocks, especially those of large companies, adjust
rapidly when their fundamental positions change. Such stocks are followed
closely by a number of security a~alysts, so as soon as things change, so does the
stock price. Consequently, equilibrium ordinarily exists for any given stock, and
required and expected returns are generally close to equal. Stock prices certainly
~ A price change of this magnitt~de is by no means rare. The prices of .tony stocks double or halve
during a year. For example, d~=rint~ 2004, Storbucks (~orporation, which operates." a ch,~in of retail
stores that sell whole bean coffees, iocreasecl in value by 88,~ percent. Novellus Systems, a semiconductor equipme~t manufacturer, fell by 33,3
to It should be obvious by now that actual r~liz~,d rates of return are ~ot ~ecessari[y e~luai to
expected and required returns. Thus° an investor might have expected to r~’oive a ret~lrt~ of 15 perce~=t if he or she hacl bought Novellus or Starbucks stock in 2004, b~lt, after the fact, the realixed
=’eturn on Starhu~ks was f,~r ,~l~.~ve 15 percent, whereas tht’,t o~’~ Novellus was far below.
change, sometimes violently and rapidly, but this simply reflects changing conditions and expectations. There are, of course, times when a stock will continue
to react for several months to unfolding favorable or unfavorable developments.
However, this does not signify a long adjustment period; rather, it simply indicat~.~ that as more new information about the situation becomes available, the
market adiusts to it.
For a stock to be in equilibrium, what two conditions must hold?
If a stock is not in equilibrium, explain how financial markets adjust
to bring it into equilibrium.
9.9 INVESTING IN INTERNATIONAL
STOCKS
As noted in Chapter 8, the U.S. stock market amounts to only 40 percent of the
world stock market, and as a result many U.S. investors hold at least some foreign stock. Analysts have long touted the benefits of investing overseas, arguing
that foreign stocks both improve diversification and provide good growth
opportunities. [:or example, after the U.S. stock market rose an average of 17.5
percent a year dvring the 1980s, many analysts thought that the U.S. market in
the 1990s was due for a correction, and they suggested that investors should
increase their holdings of foreign stocks.
To the surprise of many, however, U.S. stocks outperformed foreign stocks in
the 19’40s~they gained about 15 percent a year versus only 3 percent for foreign
stocks. However, the Dow Jones STOXX Index (which tracks 600 European companies) outperformed the $&P 500 from 2002 through 2004. Table 9-2 shows how
stocks in different countries performed iq 2004. Column 2 indicates how stocks
in each country perfor,’aed in terms of the U.S. dollar, while Column 3 shows
how the country’s stocks performed in terms of its local currency. For example,
in 2004 Brazilian stocks rose by 25.12 percent, but the Brazilian real increased
over 11 percent versus the U.S. dollar. Therefore, if U.S. investors had bought
Brazilian stocks, they would have made 25.12 percent in Brazilian real terms, but
those Brazilian reals would have bought 11.1 percent more U.S. dollars, so the
effective return would have been 36.22 percent. Thus, the results of foreign
investments depend in part on what happens to the exchange rate. Indeed,
when you invest overseas, you are making two bets: (1) that foreign stocks will
increase in their local markets, and (2) that the currencies in which you will be
paid wilt rise relative to the dollar. For Brazil and most of the other countries
shown in Table 9-2, both of these situations occurred during 2004.
Although U.S. stocks have generally outperformed foreig.a stocks in recent
years, this by no means suggests that investors should avoid foreign stocks.
Holding some foreign investments still improves diversification, and it is inevitable that there will be years when foreign stocks outperform domestic stocks,
such as the period from 2002-2004. When this occurs, U.S. investors will be glad
they put some of their money into overseas markets.
What are the key benefits of adding foreign stocks to a portfolio?
When a U.S. investor purchases foreign stocks, what two things is
he or she hoping will happen?
I
I 314
~
Dew Jones Global Stock Indexes in 2004 (Ranked
by Performance in U.S,-Dollar Terms)
Country
U,S. Dolla~
Local Curreno~
Austria
+67.96%
+ 55,61%
South Africa
+52.17
+28.12
Mexico
+46.53
+46.47
+45.45
-; 32.96
Norway
Belgium
’+43.07
+ 32.SS
Greece
+ 40,02
+ 29,72
Ireland
+37.91
*27.77
Brazil
+ 36.22
~ 25, !2
Sweden
Indonesia
+ 33.50
+ 31,84
,- 23.15
+ 45.30
Philippines
+ 30.09
÷ 31.46
New Zealand
+ 30,03
+ 17.87
Denmark
÷28,75
~ 19.01
Australia
Italy
+ 28.69
+ 27.59
+ 23.38
- 18.21
Spain
+26.07
* 16,80
Chile
+ 25.59
+ ) 7.68
South Korea
+23.99
~7.63
Canada
+21,98
~ 12,61
Portugal
+21,24
~ 12.32
Singapore
+ 19,09
.~ 14,49
Hong Kong
+ 17,99
"~18,13
France
+ 17,07
-~8,47
United Kingdom
+ 16,93
~-8,92
Japan
Germany
+ 16.62
+ 14.29
-11,27
Switzerland
+ 14.18
Netherlands
+ 11.84
+4.78
+ 3.62
Malaysia
United States
+11.11
+10.16
~-11.12
4 10.16
Taiwan
+ 10,03
Finland
~ 5.84
~2,68
- 1.94
~- S,89
- 8.77
-. 10.55
Venezuela
-18,83
~31.12
World
+ 14,47
World ex. U,S.
+19,23
Thailand
Source; Craig Karmin, "Currency Effect Enhances Overseas Returns." The Wall Street Journal,
January 3, 2005, p. R6,
19.10 PREFERRED STOCK
iPmferred stock is a hybrid--it is similar to bonds i,s some respects and to common stock in othe~. This hybrid nature becomes apparent when we try to classify preferred in relation to bonds and common stock. Like bonds, preferred
stock has a par value a,~d a fixed dividend that must be paid before dividends
can be paid ou the common stock. However, the directors can omit (or "pass")
the preferred dividend without throwing the company into bankruptcy. So,
although preferred stock calls for a fixed payment like bonds, not making the
payment will not lead to bankruptcy.
As noted earlier, a preferred stock entitles its owners to regular, fixed dividend payments. Jf the payments last forever, the issue is a perpetuity whose
value, Vw is found as follows:
Dp
Vp = --
(9-8)
Vp is tile value of the preferred stock, Dp is the prefern.:~.’l dividend, and rp is the
required rate of return on the preferred. Allied Food has no preferred outstanding, but suppose it did, and this stock paid a dividend of $10 per year. If its
required return were 10.3 percent, then the preferred’s value would be $97.09,
found as follows:
$10.00
Vp 0.103 - $97.09
in equilibrium, the expected return, ~p, must be equal to the required return,
Thus, if we know the preferred’s corrent price and dividend, we can solve for
the expected rate of return as follows:
Some preferrc~’ls have a stated maturity, often 50 years. Assume that our
illustrative preferred matured iu 50 years, paid a $10 annual dividend, and had a
required return of 8 percent. We could then find its price as follows: Enter N =
50, I/YR = 8, PMT = 10, and FV = 100. Then press PV to find the price, Vp =
$124.47. If rt, -- 10 percent, change I/YR to 10, in which case Vp = PV = $100. If
you know tile price of a share of preferred stock, you can solve for I/YR to find
the expected rate of return,
Explain the following state.nent: "Preferred stock is a hybrid
security."
Is the equation used to value preferred stock more like the one used
to evaluate a bond or the one used to evaluate a "normal," constant
growth common stock? Explain.
Investing in Emerging Markets
Given the possibilities of better diversification and
higher returns, U.S. investors have been putting more
and more money into foreign stocks. While most
investors limit their foreign holdings to developed
countries such as Japan, Germany, Canada, and the
United Kingdom, some have broadened their portfolios to include emerging markets such as South
Korea, Mexico, Singapore, Taiwan, and Russia.
Emerging markets provide opportunities for larget returns, but they also entail greater risks, For example, Russian stocks rose more than 150 percent in the
first half of 1996, as it became apparent that Boris
Yeltsin would be reelected president. By contrast, if
you had invested in Taiwanese stocks, you would
have lost 30 percent in 1995--a year in which most
stock markets performed extremely well. Rapidly
declining currency values caused many Asian markets
to fall by more than 30 percent in 1997; however,
more recently most Asian markets have recovered,
and they ended 2004 on a positive note. Factors that
helped these markets rise included peaceful elections, inflows of foreign capital, economic growth,
and the positive expectations for China’s economy.
During 2004, only Thai and Chinese stocks in the
Asian region posted negative returns.
Stocks in emerging markets are intriguing for
two reasons. First, developing nations have the
greatest potential for growth. Second, while stock
returns in developed countries often move in sync
w~th one another, stocks in emerging markets generatly march to their own drummers. Therefore. the
relations between U.S. stocks and those in emergin9
markets are generally lower than between U,S, stocks
and those of other developed countries. Thus, corre.
lations suggest that emerging markets improve the
diversification of U.S, investors’ portfolios. (Recall
from Chapter 8 that the lower the correlation, the
greater the benefit of diversification,)
On the other hand, stocks in emerging markets
are often extremely risky, illiquid, and involve higher
transactions costs, and most U,S. investors do not
have ready access to information on the companies
involved. To reduce these problems, mutual funds
focused on specific countries have been created-they are called "country funds." Country funds help
investors avoid the problem of picking individual
stocks, but they do little to protect you when entire
regions decline.
Sources: "World Stock Markets Gamble--and Win," The
Wall Street Journal, January 3, 2005, p. R6; and Mary Kissel,
"Asian Markets Post Gains on Solid Economic Growth:
China IPOs May Be ’05 Hit," The W~II Street Journal,
January 3, 2005, p. R6.
Corporate decisions should be analyzed in terms of how alternative courses
of action are likely to affect a firm’s value, However, it Is necessary to know
how stock prices are establishad before attempting to measure how a given
decision will affect a specific firm’s value, This chapter discussed the rights
and privileges of common stockholders, showed how stock values are
determined, and explained how investors estimate stocks’ intrinsic values
and expected rates of return.
Two types of stock valuation models were discussed: the discounted
dividend model and the corporate valuation model. The dividend model is
useful for mature, stable companies, and it is easier to use, but the corporate model is more flexible and better for use with companies that do not
pay dividends or whose dividends would be especially hard to predict.
We also discussed preferred stock, which is a hybrid security’that has
some characteristics of a common stock and some of a bond. Preferreds are
valued using models similar to those for perpetual and "regular" bonds.
We also discussed market equilibrium, noting that for a stock to be in
equilibrium its price must be equal to its intrinsic value as estimated by a
marginal investor, and its expected and required returns as seen by such
investors must also be equal. Finally, we noted that stocks are traded
worldwide, that U.S. markets account for less than half of the value of all
stocks, that U.S. investors can benefit from global diversification, but also
that international investing can be risky and for most individuals should be
done through mutual funds whose managers have specialized knowledge of
foreign markets.
SELF-TEST QUESTIONS AND PROBLEMS
(Solutions Appear in Appendix A)
ST.1
Key terms Define each of the following terms:
a. Proxy; proxy fight; takeover
b. Preemptive right
c. Classified stock; founders’ shares
d. Intrinsic value (l~0); market price (P0)
e. Required rate of return, r,,; expected rate of return, ~; actual, or realized, rate of
return, t’~
f. Capital gains yield; dividend yield; expected total return; growth rate, g
g. Zero growth stock
h. Normal, or constant, growth; supernormai (nonconstant) growth
i. Total company (corporate valuation) model
j. Terminal (horizon) date; horizon (terminal) value
k. Marginal investor
I. Equilibrium
m. Preferred stock
ST-2
Stock growth rates and valuation You are considering buying the stocks of two companies that operate in the same industry. They have very similar characteristics except for
their dividend payout policies. Both companies are expected to earn $3 per share this
year, but Company D (for "dividend") is expected to pay out all of its earnings as dividends, while Company G (for "growth") is expected to pay out only one-third of its
earnings, or $1 per share. D’s stock price is $25. G and D are equally risky. Which of the
following statements is most likely to be true?
a. Company G will have a faster growth rate than Company D. Therefore, G’s stock
price should be greater than $25.
Although G’s growth rate should exceed D’s, D’s current dividend exceeds that of
G, and this should cause D’s price to exceed G’s.
c. A long-term investor in Stock D willget his or her money back faster because D
pays out more of its earnings as dividends. Thus, in a sense, D is like a short-term
bond, and G is llke a long-term bond. Therefore, if economic shifts cause ra and r= to
increase, and if the expected streams of dividends from D and G remain constant,
both Stocks D and G will decline, but D’s price should decline further.
d. D’s expected and required rate of return is ~s = r~ = 12%. G’s expected return will
be higher because of its higher expected growth rate.
e. If we observe that G’s price is also $25, the best estimate of G’s growth rate is
8 percent.
THE JOURNAL OF FINANCE ¯ VOL. LVIII, N~I 2 - APRIL
The Level and Persistence of Growth Rates
LOUIS K. C. CHAN, JASON KARCESKI, and JOSEF LAKONISHOK*
ABSTRACT
Expectations about long-term earnings growth are crucial to valuation models and cost of capital estimates. We analyze historical long-term growth rates
across a broad cross section of stocks using several indicators of operating
performance. We test for persistence and predictability in growth.While some
firms have grown at high rates historically, they are relatively rare instances.
There is no persistence in long-term earnings growth beyond chance, and
there is low predictability even with a wide variety of predictor variables. Specifically, IBES growth forecasts are overly optimistic and add little predictive
power.Valuation ratios also have limited ability to predict future growth.
THE EXPECTED RATE of growth in future cash flows (usually proxied by accounting
earnings) plays a pivotal role in financial management and investment analysis.
In the context of aggregate market valuation, for example, projections about future growth are instrumental in predicting the equity risk premium. Much current controversy surrounds the appropriate level of the equity risk premium, as
well as whether recent market valuation levels (at least as of year-end 1999) can
be justified (Asness (2000), Welch (2000), ~’hma and French (2002)). Debate also
revolves around how much of the performance of equity asset classes, such as
large glamour stocks, can be attributed to changes in profitability growth (E~ma
and French (1995), Chan, Karceski, and Lakonishok (2000)).When applied to the
valuation of individual stocks, projected growth rates have implications for the
cross-sectional distribution of cost of capital estimates (Farna and French (1997),
Claus and Thomas (2001), Gebhardt, Lee, and Swaminathan (2001)), as well as
widely followed valuation ratios like price-to-earnings and price-to-book ratios.
Common measures of expected growth in future earnings, such as valuation
ratios and analysts’ growth forecasts, vary greatly across stocks. In the case of
price-to-earnings multiples for the IBES universe of U.S. firms, for example, at
*Chan is with the Department of Finance, College of Commerce and Business Administration, University of Illinois at Urbana-Champaign; Karceski is with the Department of
Finance, Warrington College of Business Administration, University of Florida; and Lakonishok is with the Department of Finance, College of Commerce and Business Administration, University of Illinois at Urbana-Champaign, and NBER. We thank the editor, Rick
Green; Cliff Asness; Kent Daniel; Ken French; an anonymous referee; and seminar participants at Dartmouth, Duke University, the London School of Economics Financial Markets
Group, the NBER Behavioral Finance Fall 2000 workshop, the University of Illinois, Washington University, and the Western Finance Association 2001 meetings.
643
644
The Journal of Finance
year-end 1999, the distribution of the stock price relative to the consensus forecast of the following year’s earnings has a 90th percentile of 53.9, while the 10th
percentile is 7.4, yielding a difference of 46.5. Firms with a record of sustained,
strong past growth in earnings are heavily represented among those trading at
high multiples. Security analysts issue positive recommendations for these
stocks and forecast buoyant future prospects. Other stocks with a history of disappointing past growth are shunned by the investment community. They are
priced at low multiples and analysts are unexcited about their outlook. Putting
aside the possibility of mispricing, one reason for the disparity in multiples is
differences in risk. At the level of individual stocks, however, the relation between risk and expected return is weak (Fama and French (1992)). It is thus unlikely that the large dispersion is driven primarily by risk (the evidence in Beaver
and Morse (1978) also supports this view). Rather, if the pricing is rational, most
of the cross-sectional variation reflects differences in expected growth rates. A
more direct measure of the market’s expectations, security analysts’ forecasts of
long-term growth in earnings, also displays large differences across stocks. For
example, the 90th percentile of the distribution of IBES five-year forecasts is 40
percent as of year-end 1999, compared to the 10th percentile of 8.9 percent. If analysts and investors do not believe that future earnings growth is forecastable,
they would predict the same growth rate (the unconditional mean of the distribution) for all companies, and it is unlikely that the dispersion in forecasts or priceearnings ratios would be as large as it actually is.
Based on market valuations and analysts’ forecasts, then, there is a widespread
belief among market participants that future earnings growth is highly predictable. However, economic intuition suggests that there should not be much consistency in a firm’s profitability growth. Following superior growth in profits,
competitive pressures should ultimately tend to dilute future growth. Exit from
an unprofitable line of business should tend to raise the remaining firms’ future
growth rates. Some support for this logic comes from Fama and French (2002).
Their evidence for the aggregate market suggests that while there is some
short-term forecastability, earnings growth is in general unpredictable.
In short, there may be a sharp discrepancy between share valuations along
with analysts’ predictions on the one hand, and realized operating performance
growth on the other. The discrepancy may reflect investors’ judgmental biases or
agency distortions in analysts’ behavior. In any event, the divergence is potentially large, judging from current market conditions. For instance, take a firm
with a ratio of price to forecasted earnings of 100. Such cases are by no means
minor irregularities: based on values at year-end 1999, they represent about 11.9
percent of total market capitalization. To infer the growth expectations implicit
in such a price earnings ratio, we adopt a number of conservative assumptions. In
particular, suppose the multiple reverts to a more representative value of 20 in 10
years, during which time investors are content to accept a rate of return on the
stock of zero (assume there are no dividends). A multiple of 20 is conservative,
since Siegel (1999) argues that a ratio of 14 may not be an unreasonable long-term
value. Further, an adjustment period of 10 years is not short, in light of the fact
that many of the largest firms at year-end 1999 did not exist 10 years ago. These
645
assumptions imply that earnings must grow by a factor of five, or at a rate of
about 17.5 percent per year, for the next 10 years. Alternatively, suppose investors
put up with a paltry 10 percent rate of return (Welch (2000), reports that financial
economists’ consensus expected return is considerably higher). Then earnings
must grow at an even more stellar rate (29.2 percent per year) over 10 years to
justify the current multiple.
The above example highlights the two questions we tackle in this paper. How
plausible are investors’and analysts’expectations that many stocks will be able to
sustain high growth rates over prolonged periods? Are firms that can consistently achieve such high growth rates identifiable ex ante? We begin by document~
ing the distribution of growth rates realized over horizons of 1, 5, and 10 years.
This evidence lets us evaluate the likelihood of living up to the expectations of
growth that are implicit in market valuation ratios. To justify rich valuations, investors must believe that high growth persists over many years. Accordingly, we
also examine whether there is persistence in operating performance growth. Individual firms’ earnings and incomes can be very erratic, so a robust empirical
design is a crucial consideration. We employ nonparametric tests on multiple indicators of operating performance across a large cross section of stocks over relatively long horizons. In addition, we focus our tests for persistence by
examining subsets of firms where future growth is more likely to be predictable
(e.g., stocks in the technology sector and stocks which have displayed persistence
in past growth). To give the benefit of the doubt to the possibility of persistence,
we relax the definition of consistency in growth and redo our tests. Finally, we
expand the list of variables to forecast growth beyond past growth rates. We examine whether valuation measures, such as earnings yields and ratios of book-tomarket equity and sales-to-price, are associated with growth on an ex ante as
well as ex post basis. Security analysts’ earnings forecasts are also widely used
as measures of the markeffs expectations of growth in future earnings. As a check
on the quality of analysts’ predictions, we evaluate how well realized growth
rates align with IBES consensus forecasts.
Our main findings are as follows. Our median estimate of the growth rate of
operating performance corresponds closely to the growth rate of gross domestic
product over the sample period. Although there are instances where firms
achieve spectacular growth, they are fairly rare. For instance, only about 10 percent of firms grow at a rate in excess of 18 percent per year over 10 years. Sales
growth shows some persistence, but there is essentially no persistence or predict.
ability in growth of earnings across all firms. Even in cases that are popularly
associated with phenomenal growth (pharmaceutical and technology stocks,
growth stocks, and firms that have experienced persistently high past growth),
signs of persistent growth in earnings are slim. Security analysts’ long-term
growth estimates tend to be overoptimistic and contribute very little to predicting realized growth over longer horizons. Market valuation ratios have little ability to discriminate between firms with high or low future earnings growth. An
expanded set of forecasting variables also has scant success in predicting future
earnings growth. All in all, our evidence on the limited predictability of earnings
growth suggests that investors should be wary of stocks that trade at very high
646
multiples. Very few firms are able to live up to the high hopes for consistent
growth that are built into such rich valuations.
Related prior research in the financial literature on the behavior of earnings
growth is meager. Little (1962) and Little and Rayner (1966) examine the growth
in earnings of a limited sample of U.K. firms in the 1950s. Early evidence for U.S.
firms is provided by Lintner and Glauber (1967) and Brealey (1983). Beaver (1970)
and Ball and Watts (1972) start a long line of papers that apply time-series models
to earnings. However, few firms have sufficiently long earnings histories to allow
precise estimation of model parameters, and the emphasis in this line of work has
been on short-term forecasting. More recently, Fama and French (2002) examine
the time-series predictability of aggregate earnings for the market. Our work is
closest in spirit to that of Fama and French (2000), who look at the cross-sectional
predictability of firms’ earnings, but even they focus on one-year horizons.
A much larger number of studies by academics and practitioners rely on estimates of expected long-term earnings growth for stock valuation, or for estimat.
ing firms’ cost of capital. A selective list includes Bakshi and Chen (1998), Lee,
Myers, and Swaminathan (1999), Claus and Thomas (2001), and Gebhardt et al.
(2001). In particular, many studies use long-term consensus IBES forecasts for
expected growth rates (see, e.g., Mezrich et al. (2001)). Given the widespread use
of IBES long-term estimates, it is important to evaluate their correspondence
with realized growth rates.
The rest of the paper is organized as follows. Section I discusses our sample
and some basics of the methodology. The cross-sectional distribution of firms’
growth rates is reported in Section H. Section III presents the results of runs
tests for consistency in growth of operating performance. Section IV takes up
the issue of survivorship bias. Although our main focus is not on the determinants of valuation multiples, Section V examines the relation between growth
and valuation ratios such as earnings yields and book-to-market ratios, on both
an ex ante and ex post basis.We compare IBES long-term forecasts with realized
growth rates in SectionVI. SectionVII uses cross-sectional, regressions to forecast future growth using variables including past growth, valuation ratios, and
IBES estimates. A final section concludes.
I. Sample and Methodology
Our sample of firms comprises all domestic common stocks with data on the
Compustat Active and Research files. Firms are selected at the end of each calendar year from 1951 to 1997. The earlier years are included for the sake of completeness, even though there is a backfill bias in the earlier part of the sample period
(see Chan, Jegadeesh, and Lakonishok (1996)), which may impart an upward bias
to growth rates in the beginning of the sample.The number of eligible firms grows
from 359 in the first sample selection year to about 6,825 in the last year; on average, the sample comprises about 2,900 firms.
We consider three indicators of operating performance: net sales (Compustat
annual item number 12), operating income before depreciation (item 13), and
647
income before extraordinary items available for common equity (item 237).While
researchers and practitioners tend to focus exclusively on income before extraordinary items, measuring growth in this variable is beset with pitfalls. In many
cases, earnings before extraordinary items is negative, so prospective growth
rates are undefined (for our sample, in an average year, 29 percent of firms have
negative values for earnings before extraordinary items). In other cases, firms
grow from low positive values of base-year net income, introducing large outliers.1 These include such disparate cases as beaten-down companies with depressed earnings and growing startup companies that are beginning to
generate profits. To avoid hanging all our inferences on such a noisy variable,
therefore, we also consider growth in net sales and growth in operating income
before depreciation. These are relatively better-behaved measures of operating
performance.
Researchers have adopted different conventions for calculating growth rates.
Given our focus on the predictability of growth rates, we measure growth on a per
share basis so as to strip out any predictability due to changes in the scale of the
firm’s operations. This also corresponds to the measurement convention in the
investment industry.~
Thus, we take the perspective of an investor who buys and holds one share of a
stock over some horizon and track the growth in sales or income that accrues to
one share, after adjusting for stock splits and dividends. Moreover, two firms can
offer the same expected return, but have different earnings growth rates because
of their dividend payout policies. From an investor’s standpoint, these two stocks
would be considered equivalent. To put firms with different dividend policies on
an equal footing, therefore, all cash dividends as well as any special distributions
(such as when a firm spins offassets) are reinvested in the stock.
II. The Distribution of Growth Rates of Operating Performance
This section documents the distribution of historical growth rates over relatively long horizons (5 and 10 years). For the sake of completeness, results are also
provided for 1-year horizons. At each calendar year.end over the sample period,
we measure rates of growth in future operating performance for all eligible
I Some of these complications may be alleviated by averaging earnings over a number of
years and measuring growth in these averages. Since our focus is on point-in-time growth
rates, we do not explore this alternative procedure. In unreported work, we also experiment
with other ways to calculate growth rates. These include value-weighted growth rates for
portfolios, estimated growth rates from least-squares fits of linear and quadratic time trends
through sales and income, and growth rates without dividend reinvestment. Generally speaking, the results are robust to how we measure growth rates.
2 Lakonishok, Shleifer, and Vishny (1994) calculate growth in a firm’s overall sales and earnings, while Daniel and Titman (2001) calculate growth on a per share basis. These studies
focus on the impact of investor sentiment on stock returns. The hypothesis is that investors
tend to favor companies with strong past performance, those in a glamorous line of business,
or those which are perceived to be well managed. From this standpoint, it might be argued
that it is the performance of the overall company that is relevant, and not just the profits
earned per share.
648
stocks. Percentiles are calculated for the distribution obtained at each year-end.
Table I reports the percentiles averaged across years in the sample period, as well
as the most recent distribution corresponding to the last selection year of the
sample period.
Several points are important as background to the results in Table I. First,
since we include reinvestment of dividends and special distributions, the growth
rates we report are typically higher than conventionally measured growth rates.
The median dividend yield for our sample (averaged across all years) is about 2.5
percent. A second caveat is that the tabulated growth rates are based only on
firms who survive for the following 1, 5, or 10 years. The survivorship bias may
induce an upward bias in our reported growth rates. Moreover, we follow the conventional approach and do not calculate growth rates for operating income be.
fore depreciation or income before extraordinary items when the base-year
value is negative.3 To illustrate the potential magnitude of these complications,
on average there are about 2,900 firms available for inclusion in the sample at
each year-end. Of these, 2,782 firms survive at the end of the next year and have
a reported value for income before extraordinary items. The calculations for 1year growth in earnings before extraordinary items are based on 1994 of these
firms; the remaining 788 firms have negative values for income in the base year.
At the 5-year horizon, there are on average 1884 surviving firms. Growth rates
are calculated for 1,398 of these; 486 have negative base-year values. At the 10year horizon, there are 1,265 surviving firms: 1,002 and 263 with positive and negative base-year values, respectively. In a subsequent section, we examine the
performance of nonsurviving firms.
Since negative base-year values are quite common for income before extraordinary items, valid growth rates are unavailable in many cases. These observations are symptomatic of another problem. In particular, the high frequency of
cases with negative base values suggests that the neighboring portion of the distribution (with low, positive base-year values) contains a large fraction of the ob.
servations as well. These instances give rise to some very high growth rates. For
growth over five years, for example, the 98th percentile value for growth in income before extraordinary items averages 62.4 percent per year. Hence, while
growth in income before extraordinary items captures much of the investment
community’s interest, its behavior is the most questionable. While the same problem applies to operating income before depreciation, the frequency of negative
base-year values is comparatively lower and growth in this variable is less problematic.4 For growth in this variable, the 98th percentile is 51.2 percent on average.
In comparison, sales growth is relatively well behaved, with a 98th percentile
value of 40.5 percent on average. These comparisons suggest that looking at
s Note, however, that even if we are unable to calculate growth i~ income before extraordin.
ary items in such a case, we still get a reading on a firm’s operating performance growth from
sales (or operating income before depreciation if it is positive).
4 For example, of the firms surviving after one year and with a reported value for income
before depreciation, about 14 percent on average have negative base-year values. The corresponding percentage for income before extraordinary items is 29 percent.
649
other indicators beyond income before extraordinary items helps to give a more
robust picture of growth in operating performance.
The results in Table I serve as cautionary flags to analysts and investors who
pursue stocks with rich price-earnings multiples. Take our original example of a
stock with a current price-earnings multiple of 100, which declines to 20 in 10
years’ time with an expected return of 10 percent per year. Earnings must grow
at 29.2 percent per year over 10 years to justify the current multiple.This is a tall
order by historical standards. In particular, the required growth rate corresponds to about the 95th percentile of the distribution of 10-year growth rates,
even putting aside the inclusion of dividends. Put differently, suppose earnings
grow at a historically more representative, but still healthy, annual rate of 14.7
percent (the 75th percentile of the distribution from Part I). Then the current
ratio of 100 would be justified if the time it takes for the multiple to fall to 20 is
stretched out to 38 years.
Small firms start from a smaller scale of operations and so have more room for
potential growth, possibly justifying a high current multiple. However, high multiples also apply to many large, well-known firms. To see whether large firms in
general can also achieve high growth, Table II reports the distribution of growth
rates for large firms (companies ranked in the top two deciles of year-end equity
market capitalization, based on NYSE breakpoints). Bigger firms have a larger
scale of operations and, hence, are more likely to face limits on their growth, so
extremely high growth rates are less prevalent in Table II compared to Table I. For
example, the 90th percentiles of growth rates over 10 years for income before
extraordinary items, operating income before depreciation, and sales are all
close to 16 percent per year. Also, note that dividend yields are generally higher
for large firms.
Our estimated median growth rate is reasonable when compared to the
overall economy’s growth rate. On average over the sample period, the
median growth rate over 10 years for income before extraordinary items is
about 10 percent for all firms. The behavior over the last 10-year period in the
sample roughly matches the overall average. Growth in the other two indicators
also exhibit comparable medians. After deducting the dividend yield (the median
yield is 2.5 percent), as well as inflation (which averages 4 percent per year over
the sample period), the growth in real income before extraordinary items is
roughly 3.5 percent per year. This is consistent with the historical growth rate
in real gross domestic product, which has averaged about 3.4 percent per year
over the period 1950 to 1998. It is difficult to see how the profitability of the business sector over the long term can grow much faster than overall gross domestic
product.
Looking forward, if we project future growth using the median of the distribution of historical growth rates, the implication is that the expected future return
on stocks is not very high. For example, in a simple dividend discount model with
constant growth rates and constant payout ratio, the expected return is equal to
the dividend yield plus the expected future growth rate of earnings. Given the
low level of current dividend yields (below 1.5 percent) and expected inflation of
2.5 percent, the expected return is only about 7.5 pecent. This is lower than the
650
II II II
li
II
II
651
Table II
Distribution of Growth Rates of Operating Performance over 1, 5 and 10
Years: Large Firms
At every calendar year-end over the sample period, growth rates in operating performance are
calculated over each of the following one, five, and ten years for large firms (in the top two deciles of year-end equity market capitalization~ based on NYSE breakpoints).The sample period is
1951 to 1998, and the sample includes all domestic firms listed on the New York, American, and
Nasdaq markets with data on the Compustat files. Operating performance is measured as sales,
operating income before depreciation, or income before extraordinary items available to common equity. Growth in each variable is measured on a per share basis as of the sample formation
date, with the number of shares outstanding adjusted to reflect stock splits and dividends; cash
dividends ~nd special distributions are also reinvested. Percentiles of the distribution are calculated each year-end; the simple average over the entire sample period of the percentiles is
reported, along with the distribution of growth rates over horizons ending in the last year of
the sample period.
Percentile
Sample period
2%
10%
25% 40% 50% 60% 75%
90%
98%
16.3
15,0
22.0
21,5
16.1
16.3
22.6
21.4
16.6
18.5
23.8
36.4
18.1
19.6
27.9
32.5
19.3
19.9
32.1
32.0
21.3
30.4
37.2
57.4
25.2
29,1
47.7
53.0
33.7
33.4
82.3
73.1
45,9
56.7
216.6
213.6
Part I: Annualized Growth Rate over 10 Years
(A) Sales
Average
Ending 1998
- 3.4
- 7.7
Average
Ending 1998
- 8.3
- 11,6
Average
Ending 1998
- 12,8
- 25.6
2.5
- 0.2
6.8
9,4
10.7 11.7 13.3
4A
6.7 8.5 9.5 11.1
(B) Operating Income before Depreciation
0,6
5A
8,1
9.5 10.8 12.9
- 1.7
4.3
7.4
8.7
10.4 11.8
(C) Income before Extraordinary Itern~
- 0.9
4.5
7.5
9.3 10.8 13.1
- 3.8
1.7
6.1 8.2 9.9 13.3
Part II: Annualized Growth Rate over 5 Years
(A) Sales
Average
Ending 1998
- 9.7
- 13.6
Average
Ending 1998
- 16.9
- 13.6
Average
Ending 1998
- 26.4
- 39.5
- 0.6
- 3.0
6.9
9,4 10.8 11.9 14.1
10,2
4.0
8.8
11.5
13.7
- 3.5
4.3
7.9
9.8 11.5 14.3
- 6.6
4.5
7.5
10,8 12.7 15,6
(C) Income before Extraordinary Items
- 6.4
2.8
7.6
9.8 12.0
15.3
- 10.1
11.8
14.4
4.3
9.5
19.6
Fart HI: 1-Year Growth Rate
Average
Ending 1998
- 36.4
- 49.8
Average
Ending 1998
- 52.3
- 60.0
Average
Ending 1998
- 67.5
- 80.0
(A) Sales
5.7
9,3 11,3 13,3
17.0
1.5
6.6
8.9
11.8
18.1
(B) Operating Itwome before Depreciation
- 15.2 0.2
7.1 10,6 13.8 19.8
- 30.3
- 1.9
6.6
11.1
14.0 20,8
(C) Income before Exiraordinary Items
- 25.3 - 2.8
6.9
11.0 14.9 23,1
- 46.9 - 13.5
4.7
11.5 15.5 27.1
- 2.4
- 14,7
653
consensus forecast of professional economists (see Welch (2000)), but is in line
with Fama and French (2002).
III. Persistence in Growth
Differences in valuations indicate a pervasive belief that stocks with high or
low future growth are easily identifiable ex ante. For example, analysts and investors seem to believe that a firm that has grown rapidly in the past for several
years in a row is highly likely to repeat this performance in the future. Conversely, stocks that have done poorly over prolonged periods are shunned and trade
at low multiples. This section checks whether there is consistency in growth. We
examine whether past growth or other characteristics, such as industry affiliation or firm size, help to predict future growth.
A. Consistency across All F~rms
Tables I and II suggest that year.to-year growth in income can take on quite
extreme values. As a result, multiyear growth rate levels may look impressive because of one or two isolated years of sharp growth, although growth in other
years may be unremarkable. However, many of the firms with lofty multiples grow
rapidly every year for several years. Accordingly, we test for consistency in
growth using a design that does not rely heavily on the level of growth rates.5 In
our first set of tests, we define consistency as achieving a growth rate above the
median for a consecutive number of years: Such cases are labeled as runs.6
At each year-end over the sample period, we calculate how many firms achieve
runs over horizons of 1 to 10 years in the future. A run over 5 years, for example,
denotes a case where in each of the subsequent 5 years, a firm’s growth rate exceeds the median growth rate that year. Eachyear’s median is calculated over all
growth rate observations available in that year. Again, note that survivorship
bias affects our runs tests.To see how many firms achieve runs above the median
for 5 years in a row, we necessarily look at firms that survive over the full 5 years.
In each of these years, we compare the survivors to a median which is based on all
available firms that year, including those that do not survive for the full 5 years,
5 Brealey (1983) uses a similar procedure.
s We want to avoid discarding an entire sequence of observations because one year’s growth
rate cannot be calculated when earnings are negative. Instead, we handle such cases as follows, taking growth in operating income per share Ol~ as an example. In addition to calculat.
ing the perce~utage growth rate of operating income as (01~÷1 - OIt)/Ol~ for each firm, we also
scale the change in operating income by the stock price as of the base year t, (01~÷1 - O]~)[P~.
All firms in a given year are ranked by their values of change in income relative to stock
price. For any firm with negative income in a base year, we find its percentile rank based on
income change relative to price.We then look up the corresponding percentile value from the
distribution of growth rates of income (based on firms with positive base-year values) for that
year. This growth rate is then assigned to the firm with negative base-year income. At the
same time, however, it would be dangerous to pin our estimates of growth over a 5- or 10-year
horizon in Tables I and IT on some imputed value of base-year earnings. Accordingly, we do
not impute growth rates in those tables for cases with negative base-year values.
654
Table III
Persistence in Growth Rates of Operating Performance: All Firms
calculated over each of the following one to ten years (or until delisting) for all firms in the
sample.The sample period is 1951 to 1998, and the sample includes all domestic firms listed on
the NewYork, American, and Nasdaq markets with data on the Compustat files. Operating performance is measured as sales (pane] A), operating income before depreciation (panel B), or
income before extraordinary items available to common equity (panel C). Growth in each variable is measured on a per share basis as of the sample formation date, with the number of shares
outstanding adjusted to reflect stock splits and dividends; cash dividends and special distributions are also reinvested. For each of the following ten years, the number of firms with valid
growth rates, the number of firms whose growth rate exceeds the median growth rate eachyear
for the indicated number of years, the percentage these firms represent relative to the number of
valid firms, and the percentage expected under the hypothesis of independence across years, are
reported. Statistics are provided for the entire sample period, and for the ten-year horizon corresponding to the last sample formation year.
Firms with Above-Median Growth each year for Number of Years
Variable
1
2
3
4
5
Average Number of
Valid Firms
Average Number
above Median
Percent above Median
1989-1998
2771
2500
2263
2058
1878
1386
721
382
209
118
50.0
50.0
28.8
30.0
Average Number of
Valid Firms
Average Number
above Median
Percent above Median
1989-1998
2730
Average Number of
Valid Firms
Average Number
above Median
Percent above
Median
1989-1998
Expected Percent
above Median
6
7
8
9
10
1722
1590
1471
1364
1265
70
42
26
17
11
1.3
1.5
0.9
1.2
2456
16.9
10.2
6.3
4.0
2.7
1.8
18.6
11.9
7.8
5.6
3.4
2.4
2219
2014
1833
1678 1546 1428
1322
1223
1365
628
290
10
6
4
50.0
50.0
25.6
25.0
0.5
0.5
0.3
0.5
2782
2509
13.0
6~8
3.6
2.0
1.2
0.7
13~1
7.0
4.0
2.1
1.3
0.8
(C) Income before Extraordinary Items
2271
2065
1884 1727 1593
1473
1365
1265
1391
625
277
125
57
28
14
7
4
2
50.0
24.9
12.2
6.0
3.0
1.6
0.9
0.5
0.3
0.2
50.0
50.0
24.8
25.0
12:2
12.5
5.7
6.3
2.8
3.1
1.3
1.6
0.8
0.8
0.5
0.4
0.2
0.2
0.0
0.1
(A)Sa&s
136
67
34
18
and newly listed firms. Since the survivors are likely to have better performance
than the population, they tend to have a greater chance of being above the median. Section IVexamines differences between the growth rates of surviving and
nonsurviving firms.
Table III reports the counts of runs, averaged across the year-ends. For growth
in sales (Panel A), for example, out of an average number of 2,900 firms available
for sample selection at each year-end, 2,771 firms on average survive until the end
655
of the folIowing year. Over the following 10 years, there are on average 1,265 surviving firms. Of these, 11 have sales growth rates that exceed the median in each
of the 10 years, representing 0.9 percent of the eligible firms. If sales growth is
independent over time, we should expect to see 0.51° (about 0.1 percent) of the surviving firms achieve runs above the median over 10 years (see the last row of the
table). To give a flavor of what happens in the more recent years, we also report
the percentage of firms with runs over the 10-year period ending in the last year
of our sample period.
There is a great deal of persistence in sales growth. Over a five-year horizon,
for example, on average 118 firms, or 6.3 percent of the 1878 firms who exist over
the full five years, turn in runs above the median.The number expected under the
hypothesis of independence over time is about 59 (3.1 percent of 1,878), so roughly
twice more than expected achieve runs over five years.
The persistence in sales growth may reflect shifts in customer demand, which
are likely to be fairly long-lasting. A firm can also sustain momentum in sales by
expanding into new markets and opening new stores, by rolling out new or improved products, or by granting increasingly favorable credit terms. Persistence
in sales may also arise from managers’ "empire-building"efforts, such as expanding market share regardless of profitability. In all these cases, however, profit
margins are likely to be shrinking as well, so growth in profits may not show as
much persistence as sales growth.
While it may be relatively easy for a firm to generate growth in sales
(by selling at a steep discount, for example), it is more difficult to generate
growth in profits. The recent experience of Internet companies, where sales
grew at the same time losses were accumulating, provides a stark example.
Panel B confirms that there is less persistence in operating income before
depreciation compared to sales. On average, 67 firms a year, or 3.6 percent of
1,833 surviving firms, have above-median runs for 5 consecutive years. The expected frequency of runs is 3.1 percent or 57 firms. There are, thus, 10 firms more
than expected out of 1,833, so the difference is unremarkable. An average of 4
firms a year (or 0.3 percent ofl,223 survivors), which is only 3 more than expected,
pull off above-median growth for 10 years in a row. The patterns in the more recent years do not deviate markedly from the averages across the entire sample
period.
Any sign of persistence vanishes as we get closer to the bottom line (Panel C).
On average, the number of firms who grow faster than the median for several
years in a row is not different from what is expected by chance. An average of 57
firms out ofl,884 survivors (3 percent) beat the median for 5 years in a row, while
59 (3.1 percent) are expected to do so. Runs above the median for 10 years occur in
0.2 percent of 1,265 cases (or 2 firms), roughly matching the expected frequency
(0.1 percent, or 1 firm). To sum up, analysts and investors seem to believe that
many firms’ earnings can consistently grow at high rates for quite a few years.
The evidence suggests instead that the number of such occurrences is not much
different from what might be expected from sheer luck.The lack of consistency in
earnings growth agrees with the notion that in competitive markets, abnormal
profits tend to be dissipated over time.
656
Table IV
Persistence in Growth Rates of Operating Performance: Selected Equity
Classes
calculated over each of the following one to ten years (or until delisting) for all firms in the
sample.The sample period is 1951 to 1998, and the underlying sample includes all domestic firms
listed on the NewYork, American, and Nasdaq market~ with data on the Compustat files. Operating performance is measured as sales, operating income before depreciation, or income before
extraordinary items available to common equity. Growth in each variable is measured on a per
share basis as of(the sample formation date, with the number of shares outstanding adjusted to
reflect stock splits and dividends; cash dividends and special distributions are also reinvested.
For each of the following ten years, the number of firms whose growth rate exceeds the median
growth rate each year for the indicated number of years is expressed as a percentage of the
number of firms with valid growth rates. Statistics are provided for the following sets of stocks:
technology stocks (panel A), comprising stocks whose SIC codes begin with 283,357, 366, 38, 48,
or 737; value stocks (panel B), comprising stocks ranked in the top three deciles by book-to-market value of equity; glamour stocks (panel C), comprising an equivalent number as in panel B of
the lowest-ranked stocks by book-to-market value of equity; large stocks (panel D), comprising
stocks ranked in the top 2 deciles by equity market value; mid-cap stocks (panel E), comprising
stocks ranked in the third through seventh deciles by equity market value; and small stocks
(panel F), comprising stocks ranked in the bottom three deciles by equity market value. All
decile breakpoints are based on domestic NYSE stocks only.
Percent of Firms with AboveMedian Growth eachYear for Number of Years
Variable
1
2
3
Sales
Operating Income
Income before Extraordinary Items
51.6
51.0
50.9
30.7
27.2
25.9
19.1
14.9
13.5
Sales
Operating Income
50.6
49.3
48.3
30.0
25.3
23.8
18.2
13.2
11.4
Sales
Operating Income
48.3
50.1
50.7
26.6
25.2
25.2
15.1
11.9
12.0
Sales
Operating Income
53.2
49.4
46.7
31.3
25.2
21.9
18.9
13.0
10.0
Sales
Operating Income
53.9
50.5
49.4
32.4
26.6
24.9
19.8
13.9
12.4
Sales
47.0
Operating Income
50.1
Income before Extraordinary Items 51.0
Expected Percent above Median
50.0
26.1
25.2
25.5
25.0
14.7
12.6
12.6
12.5
4
5
6
7
(A) Technology Stocks
12.5 8.5 5.9 4.2
8.7
5.3 3.3 2.2
7.3
4.1 2.5 1.5
(B) Value Stocks
11.1
6.9 4.3 2.8
6.8
3.5 1.8 0.9
5.4
2.5 1.2 0.7
(C) Gla.,nour Stocks
4.7 2.7 1.7
8.5
5.9
3.3 1.7 1.0
2.9 1.6 0.9
5.8
(D) Large Stocks
11,7 7.5 4.8 3.2
6.9
3.7 2.0 1.1
4.7
2.2 1.2 0.7
(E) Mid-cap Stocks
12.1 7.6 4.9 3.3
7.5
4.2 2.4 1.5
6.2
3.1 1.6 0.9
(E) Small Stocks
8.6 5.2 3.2 2.1
6.4
3.3
1.8 1.0
6.3
3.2 1.7 0.9
6.3
3.1 1.6 0.8
8
9
10
3.0
1.4
0.9
2.3
1.0
0.5
1.7
0.7
0.4
1.9
0.5
0.4
1.3
0.3
0.3
0.9
0.2
0.2
1.0 0.8
0.6 0.4
0A 0.2
0.6
0.3
02
2.2
0.6
0.4
1.6
0.4
0.3
1.1
0.3
0.2
2.2
1.0
0.5
1.5
0.7
0.3
1.0
0.4
0.2
1.4
0.6
0.4
0.4
1.0
0.4
0.2
0.2
0.7
0.2
0.1
0.1
657
B. Consistency for Subsets of Firms
While Table III suggests that there may not be much consistency in growth
across all firms, it is possible that consistency may show up more strongly in subsets of firms.Table IV focuses our tests by looking at the performance of subsamples of firms. For a subsarnple such as small stocks, we consider a"ruff’ as a case
where the firm’s growth rate exceeds the median for a consecutive number of
years, where eachyear the median is calculated across all firms in the entire sample, not just small stocks. This explains why the percentage of runs is not identically 50 percent in the first year.
Many observers single out technology and pharmaceutical firms as
instances of consistently high growth over long horizons. Such firms may be
able to maintain high growth rates because of their intangible assets,
such as specialized technological innovations or drug patents. Panel A examines
firms in these sectors. Specifically, the sample comprises firms that are
relatively heavily engaged in research and development activity, and are predominantly drawn from the computer equipment, software, electrical equipment,
communications, and pharmaceutical industries.7 Growth in sales and operating
income for the set of technology firms both display strong persistence. However,
the percentage of runs in income before extraordinary items does not differ
markedly from the expected frequency. For example, over a five-year horizon, 14
firms (or 4.1 percent of the 331 surviving technology stocks) have above-median
runs. This is only 4 more than the expected number of runs (10 firms, or 3.1 percent). The recent experience of Internet companies provides numerous examples
where sales grow rapidly for several years, at the same time that losses are
mounting.
Panel A may exaggerate the degree of persistence in growth for technology
stocks on two accounts. First, the technology stocks are evaluated against the
median growth rate of the entire sample of firms, which would include, for example, utility stocks with relatively unexciting growth rates. Second, technology
stocks are relatively more volatile, so survivorship bias may be a particularly
acute problem in this subsample.
Technology stocks that are intensive in research and development also tend to
be glamour stocks with low ratios of book-to-market value of equity. The popular
sentiment regarding persistence in growth applies to glamour stocks generally.
These stocks typically enjoy higher past growth in operating performance than
value stocks with high book-to-market ratios (see Lakonishok et al. (1994)). The
evidence from psychology suggests that individuals tend to use simple heuristics
in decision making. As LaPorta et al. (1997) argue, investors may think that there
is more consistency in growth than actually exists, so they extrapolate glamour
stocks’ past good fortunes (and value stocks’ past disappointments) too far into
the future. Panels B and C of Table IV test for consistency in growth for value
and glamour stocks, respectively. Value stocks comprise stocks that are ranked
7 Specifically, the sample includes all firms whose SIC codes begin with 283, 357, 366, 38, 48,
or 737. See Chan, Lakonlshok, and Sougiannis (2001).
658
The Journal of ~nance
in the top three deciles by book-to-market ratio based on NYSE breakpoints,
while glamour stocks represent an equivalent number of stocks with the lowest
positive book-to-market ratios. Growth in sales is persistent for both sets of
stocks. The results for the other measures of operating performance, however,
are not markedly different across the two sets of stocks.
The remaining panels perform our runs tests for large, midcapitalization, and
small stocks. Large stocks include stocks in the top two deciles of market capitalization based on NYSE breakpoints as of June in the sample selection year, midcapitalization stocks fall in the next five deciles, and small stocks include the
bottom three deciles. While sales growth tends to be more persistent for large
firms, it does not translate into persistent growth in income. Of the large stocks,
2.2 percent achieve five-year runs in growth of income before extraordinary
items, while 3.2 percent of small stocks achieve the same result (the expected
fraction is 3.1 percent).
C. Runs Tests Conditional on Past Growth
It might be expected that firms that have demonstrated consistently superior
past growth would be able to maintain their growth in the future. In the case of
firms such as Microsoft and EMC, their valuations at year-end 1999 reflected investors’ bets that these firms will beat the odds and continue the streak.TableV
checks whether firms that have demonstrated consistently high (or low) past
growth have continued success in the future.
Part I of Table V applies runs tests to those firms that have achieved superior
past growth. In Panel A, at every year-end, we select those firms with above-median growth in each of the prior five years (or three years), and examine their subsequent growth.
Superior past growth in sales carries over into the future. In Panel A1, out of
all firms whose sales grow above the median rate each year over the prior three
years, on average 305 firms survive over the three years following sample selection. Of these, 70 firms have above-median growth rates in each of the three post.
selection years. They represent 22.8 percent of the survivors, compared to the 12.5
percent that is expected by chance. Growth in income, on the other hand, is an
entirely different matter (Panels A2 and A3). For example, there are 222 firms
with the impressive track record of above-median growth in income before extraordinary items in each of the three prior years and that survive over the following three years. Yet over the postselection period, only 28 or 12.5 percent manage
to repeat and beat the median over all available firms each year. This matches the
number expected under the null hypothesis of independence. Although sample
sizes become much smaller in the case of firms with favorable growth over the
past five years, the findings are similar. Starting out with roughly 2,900 eligible
firms on average, 43 firms enjoy a run over the preceding five years for growth in
income before extraordinary items and survive over the subsequent five years. In
these five years, the percentage of firms who manage to repeat the run is 5.1 percent, while the percentage expected by chance is 3.1 percent. This corresponds to
only one run more than expected, however, so the difference is not outstanding.
659
660
661
662
The Journal of F~nance
The results caution against extrapolating past success in income growth into the
future.
A firm may have extraordinary past growth even though it slips below the median for one or two years, as long as growth in the other years is very high. To include such cases of successful past growth, we use a different criterion for what
qualifies as superior past growth. In particular, we also classify firms by their
average growth ranks. At every calendar year-end over the sample period, we assign each firm a score based on its past growth. The score is obtained by looking
back over each of the preceding five (or three) years, ranking the firm’s growth
rate each year relative to all available firms (where the firms with the highest
growth rate and the lowest growth rate get ranks of one and zero, respectively),
and then averaging the ranks over five (or three) years. Firms whose average
ranks fall in the top quartile are classified as firms with superior past growth in
Panel B. While high past sales growth foretells high future sales growth, there
are still no signs of persistence in growth of income before extraordinary items
in Panel B3. Out of the firms who survive for three years following sample selection, 103 firms have an average rank based on growth over the preceding three
years falling in the top quartile. Only 11 or 10.4 percent of them have above-median runs in the three postselection years, amounting to 2 less than the expected
number.
In Part II of TableV, Panel C performs the same analysis for firms with belowmedian growth over each of the past five or past three years. However, survivorship bias is a particularly grave concern here. After a long period of lackluster
performance, the firms that are left standing at the end of the following period
are particularly likely to be those who post relatively high growth rates. From
Panel C1, future sales growth is persistently low. The fraction of above-median
runs in sales growth is notably lower than the expected percentage. On the other
hand, they are not less likely to achieve favorable above-median runs with regard
to future growth in income. For example, looking at firms with a below-median
run for the past three years, over the following three- and five-year horizons, the
actual (expected) proportions of above-median runs are 15.3 (12.5) and 3.4 (3.1)
percent for growth in income before extraordinary items.While survivorship bias
makes it difficult to draw a definitive conclusion, it does not appear that, going
forward, the firms with disappointing past growth differ notably from the more
successful firms with respect to growth in income.
D. Alternative Criteria for Consistency in Growth
Given the large transitory component of earnings, investors may consider a
firm to show persistent growth even if its growth fades for a few years, as tong
as there is rapid growth for the rest of the time. Even a celebrated example of a
growth stock such as Microsoft, for example, falls short of delivering above-mediau growth in income before extraordinary items for 10 years in a row.s
Sin the lO-year period preceding the latest sample selection date, Microsoft’s growth rank
of 0.49 in 1994 narrowly misses the median that year.
663
In TableVI, we adopt more relaxed criteria for defining consistency in growth.
In particular, we check whether a firm beats the median for most years over the
horizon, but allow it to fall short of the median for one or two years. For example,
looking forward from a sample selection date, 269 firms on average have sales
growth rates that exceed the median in five out of the following six years. These
firms represent 15.6 percent of the surviving firms, more than the expected value
of 9.4 percent. In the case of income before extraordinary items, the departures
from what is expected under independence are slender, especially over longer
horizons. For instance, an average of 9.9 percent have income before extraordinary items growing at a rate above the median for five out of six years, which is
close to the expectation of 9.4 percent. Similarly, if we let a firm falter for two
years, 4.8 percent of the surviving firms have growth in income before extraordinary items that exceeds the median in 8 out of 10 years, compared to an expected
value of 4.4 percent.
As another way to single out cases of sustained high growth while allowing for
some slack, we require a firm to post an average annual growth rank over the
subsequent five years that falls in the top quartile (where in any year a growth
rank of one denotes the highest realized growth rate that year, and zero denotes
the lowest rate). The results for this definition of consistency are provided in the
last column of Table VI. On average, 1A percent of the surviving firms (27 firms)
pass this criterion with respect to growth of income before extraordinary items.
Assuming independence, the expected value is 2.5 percent.
In summary, analysts’ forecasts as well as investors’ valuations reflect a widespread belief in the investment community that many firms can achieve streaks
of high growth in earnings. Perhaps this belief is akin to the notion that there are
"hot hands" in basketball or mutual funds (see Camerer (1989) and Hendricks,
Patel, and Zeckhauser (1993)). While there is Persistence in sales growth, there
is no evidence of persistence in terms of growth in the bottom line as reflected
by operating income before depreciation and income before extraordinary items.
Instead, the number of firms delivering sustained high growth in profits is not
much different from what is expected by chance. The results for subsets of firms,
and under a variety of definitions of what constitutes consistently superior
growth, deliver the same verdict. Put more bluntly, the chances of being able to
identify the next Microsoft are about the same as the odds of winning the lottery.
This finding is what would be expected from economic theory: Competitive pressures ultimately dissipate excess earnings, so profitability growth reverts to a
normal rate.
IV. The Behavior of Nonsurvivors
Survivorship bias is a serious concern in our tests. By necessity, we condition
on surviving into the future in order to calculate growth rates and to carry out
our runs tests. Moreover, in our runs tests, the survivors are compared eachyear
to all firms (survivors and nonsurvivors) available that year. To gauge the poten-
664
665
tial magnitude of the problem, in this section, we replicate some of our tests on
firms who do not survive over the entire future horizon.
Specifically, we examine two sets of stocks. Given our focus on long-horizon
growth, we first select at each year-end a sample of firms who survive over the full
10-year following period. The behavior of these (the survivors) is compared to a
second set (the nonsurvivors) that also includes firms who do not last for the full
period. To strike a balance between the mix of survivors and nonsurvivors in this
second set, we require firms to survive for the first five years after sample selection,
but they may drop out between the 6th to 10thyear of the postselection period.
The results are reported in Panels A and B of Table VII. The survivors have a
higher chance than expected for achieving runs above the median in growth of
income before extraordinary items. Conversely, the fraction of runs is lower for
the set of nonsurvivors. Of the survivors, for example, 3.4 percent sustain runs for
five years of growth in income before extraordinary items above the median
(where the expected proportion is 3.1 percent). The corresponding percentage
for nonsurvivors is 2.3 percent. Nonetheless, the differences across the two sets
are generally not substantial. Panels C and D apply the same procedure to the
technology stocks considered inTable IV. Here the differences across the two sets
are more notable. At the five-year horizon, for example, 5.2 percent of the survivors achieve runs above the median for growth in income before extraordinary
items, compared to 3.2 percent of the nonsurvivors.
Finally, Panels A and B of Part II of TableVII give the distribution of one-year
growth rates for the two sets of firms (where the percentiles are averaged across
all sample selection years). The results confirm that survivors realize higher
growth rates than nonsurvivors. For example, the median growth in income before extraordinary items for the survivors averages 10.6 percent, compared to 8.2
percent for nonsurvivors.
V. The Predictability of Growth: Valuation Ratios
Based on the historical record, it is not out of the question for a firm to enjoy
strong growth in excess of 20 percent a year for prolonged periods.The issue, however, is whether such firms are identifiable ex ante. Our attempts in the previous
sections to uncover cases of persistently high future growth using information
such as past growth, industry affiliation, value-glamour orientation, and firm
size have limited success. In this section, we expand our search for predictability
by investigating whether valuation indicators such as earnings-to-price, book-tomarket, and sales-to-price ratios distinguish between firms with high or low future growth. Further, several studies suggest that investors are prone to judgmental biases, so they respond to past growth by extrapolating performance too
far into the future (see, e.g., La Por~a (1996) and La Porta et al. (1997)). Consequently, after a period of above- or below-average growth, the valuations of firms
with high (low) realized growth may be pushed too high (or too low).
In Table VIII, stocks are sorted into deciles at each year-end on the basis of
their growth rate in income before extraordinary items over the following five
years (Panel A) or over the following 10 years (Panel B). Within each decile, we
666
TIt
Ill
667
668
669
67O
calculate the median realized growth rate, as well as median characteristics
such as size decile rank and valuation ratios. This is done at the beginning of
the 5- or 10-year growth horizon and also at the end of the horizon. We report
results averaged across all sample selection years, as well as results for the most
recent 5-year or 10-year growth horizon in our sample period.
We focus the discussion on Panel A of the table (the results are similar for the
10-year horizon). In line with the results from Tables I and II, the stocks in the
extreme growth deciles tend to be smaller firms. The median firm in the top decile
(with a growth rate of 41.7 percent a year) falls in the third size decile, while the
median firm in the bottom decile (with a growth rate of - 18.9 percent) ranks in
the fourth size decile. Over the following 5 years, however, the high-growth firms
perform relatively well, resulting in a surge in their market values. Conversely,
the market values of the low-growth firms show a relative slump.
Sorting by realized future growth induces a mechanical association between
growth rates and the level of earnings at the beginning and end of the growth
horizon.To weaken this link, we measure earnings one year prior to the base year
(or one year before the final year) of the growth horizon.The price is measured at
the start or end of the horizon, so the numbers correspond to the conventional
measure of trailing earnings yield that is widely used in practice and research.
There is reason to be wary about relying too heavily on the earnings yield vari.
able, however, because net income is the most problematic of our measures of operating performance. For example, a firm may have a low earnings yield because
its price impounds investors’expectations of high growth in future earnings, but
another reason may be its recent performance has been poor and its earnings are
currently depressed. On this account, earnings-to-price ratios are not generally
used in academic research, or investment industry analysis, to classify firms as
"value" or "glamour" stocks. Instead other, better-behaved, indicators such as the
book-to-market ratio, are favored.
The top decile of growth firms at the beginning of the growth horizon has a
median earnings-price ratio (0.068) that is much lower than the others (which
cluster around 0.08). The low earnings yield for this group is consistent with the
notion that the market’s valuation accurately incorporates future growth. On the
other hand, decile portfolios 8 and 9, which also show relatively strong growth, do
not have notably low earnings yields. Rather, the association for the highestgrowth decile may reflect cases where firms grow from a depressed level of income. At the end of the growth horizon, only the earnings-price ratio of the bottom decile of firms is eye-catching. Contrary to intuition, however, these firms
have comparatively low earnings yields so they appear to be relatively ’~xpensive:’ Instead, the explanation here may also lie in their low earnings levels, since
they have gone through a period of disappointing growth.
Given the shortcomings of the earnings yield variable, we also look at valuation
measures that tend to be better-behaved. Table VIII provides median ratios of
book-to-market and sales-to-price at the beginning and end of the growth horizon
for each decile. Firms which are ranked in the highest decile by earnings growth
have relatively high sales-to-price and book-to-market ratios at the beginning.
For example, their median book-to-market ratio is 0.880 (compared to 0.690
671
averaged across the other groups) and the median sales-to-price multiple is 2.323
(compared to 1.486 for the other groups). The modest ex ante valuations suggest
that the market fails to anticipate their subsequent growth.
On the other hand, ex post valuations closely track prior growth.The top decile
of high-growth firms have ending book-to-market and sales-to-price ratios of
0.560 and 1.503, respectively. These are substantially lower than the averages
across all the other groups. This finding fits in with earlier evidence on the existence of extrapolative biases in investors’ expectations about future growth (see
La Porta (1996) and La Porta et al. (1997)).
The last column in Panel A of Table VIII provides corresponding statistics for
firms whose income before extraordinary items grows above the median rate for
five consecutive years. The difference between these firms’ valuation ratios at the
beginning and end of the growth horizon is striking. At the beginning, their
book-to-market and sales-to-price ratios are not too far out of line from the average, suggesting that their future performance is not foreseen by the market. However, at the end of the growth horizon, the median book-to-market and sales-toprice ratios of this group are the lowestin Table VIII. The rich ending multiples
such firms command highlight the importance investors attach to consistently
superior growth, and not just high growth per se. Investors handsomely reward
firms that have achieved several consecutive years of strong growth, and believe
they will continue the streak (counterfactually, as the results inTableV indicate).
In summary, the results suggest that market valuation ratios have little ability
to sort out firms with high future growth from firms with low growth. Instead, in
line with the extrapolative expectations hypothesis, investors tend to key on past
growth. Firms that have achieved high growth in the past fetch high valuations,
while firms with low past growth are penalized with poor valuations.
VI. Comparisons with IBES Consensus Forecasts
Security analysts’ estimates of near-term earnings are widely disseminated
and receive much attention. Dramatic movements in a stock’s price can arise
when an influential analyst issues a revised earnings estimate. Possibly, therefore, analysts’estimates of long-term earnings growth may also be useful in forecasting future growth over longer horizons. Analysts are not shy about making
aggressive growth forecasts either (the dispersion between the top and bottom
decile of IBES long-term forecasts is about 31 percent), so they apparently are
confident in their own ability to pick the future success stories.
The current dividend yield on a stock may also have predictive power for future
growth in earnings per share. Standard textbook analysis suggests that, given a
firm’s investment policy and ignoring tax effects, it is a matter of indifference to a
shareholder whether earnings are paid out as current dividends or retained for
growth in future dividends. For example, a firm may choose to raise the amount
paid out from earnings as dividends to current shareholders. To maintain investment, however, it must use external financing, thereby diluting current shareholders’ claims to future profits. In other words, high current dividends come
at the expense of low future growth per share. To use a simple constant-growth
672
dividend discount model as an illustration, given investors’ required rate of return, there is a one-to-one trade-offbetween future growth per share and the dividend yield. Furthermore, a firm’s dividend payout may signal whether it has
attractive investment projects available to fuel future growth.
To allow a cleaner comparison with analysts’ forecasts, which do not include
dividends, in the remainder of the paper, we drop our convention of reinvesting
dividends when we calculate growth rates. Analysts’ predictions refer to growth
in income before extraordinary items, but realized growth in this variable is
highly prone to measurement problems (such as the exclusion of cases with negative base-year values for income). For this reason, we also report realized growth
in sales and operating income before depreciation. Growth rates in these variables are correlated with growth in income before extraordinary items, but are
better behaved and are available for a much larger fraction of the sample.
A. Individual Firm Growth.Rates
Table IX relates IBES consensus long-term growth forecasts to realized future
growth. At each year-end, we rank all domestic firms with available IBES longterm forecasts and sort them into quintiles. IBES long-term estimates do not become available until 1982, so the sample period inTable IX runs from 1982 to 1998.
The breakpoints for the sort use all NYSE firms available as of the sample selection date (regardless of whether they survive in the future). In Table IX, we track
the subsequent growth rates of firms who survive over the next one, three, or five
years in each quintile. The median realized growth rate over firms in each quintile is then averaged across all sample selection dates.
The dispersion in IBES consensus growth forecasts is large, so analysts are
boldly distinguishing between firms with high and low growth prospects. The
median estimate in quintile i averages 6 percent, while the median estimate in
quintile 5 is 22.4 percent on average.9 Notably, analysts’ estimates are quite optimistic. Over the period 1982 to 1998, the median of the distribution of IBES
growth forecasts is about 14.5 percent, a far cry from the median realized fiveyear growth rate of about 9 percent for income before extraordinary items,l°
Near-term realized growth tends to line up closely with the IBES estimate (Panel A). In the first postranking year, the median growth rate in income before
extraordinary items is 18.3 percent on average for quintile 5, and 5.1 percent on
average for quintile 1. The difference between the growth rates for the other quintile portfolios is much milder, however. Comparing quintiles 4 and 2, median
growth rates in income before extraordinary items are apart by only 2.5 percent.
A naive model for predicting future growth uses the dividend yield, and is
based on the trade-off between current dividends and future growth. Suppose,
~ Note that since the breakpolnts are based on NYSE stocks only, the number of stocks differs across the quintilas. In particular, many firms penetrate the top quintile.
1°To sharpen the point, note that the median realized growth rate of nine percent (without
dividends reinvested) is based on all firms, including smaller firms that tend to be associated
with somewhat higher growth rates. IBES forecasts, on the other hand, predominantly cover
larger firms.
673
Table IX
Realized Median Growth Rates of Operating Performance for Stocks
Cla~sified by IBES Long-Term Growth Forecasts
At every calendar year-end t over the sample period, stocks are ranked and classified to one of
five groups based on IBES forecasts of long-term earnings growth. Results are reported for individual stocks and for portfolios, l~br individual stocks, growth rates in operating performance
are calculated over each of the five subsequent years (years t+lto t+5) for all firms in the sample
with available data.The sample period is 1982 to 1998, and all domestic firms listed on the New
York, American, and Nasdaq markets with data on the Compustat files are eligible. Operating
performance is measured as sales, operating income before depreciation, or income before extraordinary items available to common equity. Growth in each variable is measured on a per share
basis as of the sample formation date, with the number of shares outstanding adjusted to reflect
stock splits and dividends. The median realized growth over all stocks in each classification is
calculated each year, and the simple average over the entire sample period is reported. For portfolios, a value-welghted portfolio is formed at each year-end from all the stocks in each quintile
sorted by IBES forecasts. The purtfolio’s income before extraordinary items is calculated over
each of the subsequent five years, with the proceeds from liquidating delisted stocks reinvested
in the surviving stocks. Growth rates for each portfolio are calculated in each formation year,
and the simple average over the entire sample period of the growth rates is reported. Also reported are the ratios of the prior year’s income before extraordinary items per share to current
price, and the prior year’s cumulative regular dividends per share to current price.
Quintile Based on IBES Forecast:
Growth in:
1 (Low)
2
(A) Growth Rate in Year t+ l
Sales
1.4
4.5
Operating Income before Depreciation
3.6
6.8
9.5
5,1
Portfolio Income before Extraordinary Items
12.6
4.2
No. with Positive Base & Survive 1 year
256
242
No. with Negative Base & Survive 1 year
71
78
(B) Growth Rate in Year t+ 2
Sales
1.7
4.5
3.2
7.0
4.7
9.9
6.9
7.5
No. with Positive Base & Survive 2 years
225
235
No. with Negative Base & Survive 2 years
62
75
(C) Annualized Growth Ra~e over 3 Years
Sales
1.1
4.0
2.5
5.2
3.1
7.4
9.0
7.3
202
209
No. with Negative Base & Survive 3 years
67
70
(D) Annualized Growth Rate owr 5 Years
Sales
1.2
3.4
2.2
5.1
2.0
6.5
8.0
10.7
182
179
No, with Negative Base & Survive 5 years
57
63
Median IBES Forecast
6.0
10.2
Median Stock DividendYmld, %
6.0
3.4
Portfolio DividendYleld, %
6.9
4.6
Median Stock Earnings to Price Ratio, %
10.0
8.9
3
4
5 (High)
6.3
7.6
10.1
4.5
266
60
8.3
10.3
12.0
7.2
318
88
13.7
16.0
18.3
13.6
584
265
6.4
8.4
10.5
6.1
244
59
7.8
9.9
12.2
9.1
296
85
11.6
14.0
16.4
10.6
497
252
5.6
6,8
7,0
5.2
230
56
7.3
8.1
9.0
7.1
263
82
11.3
10,9
11.5
11.4
439
217
51
6.8
6.5
7.2
201
50
12.3
2.7
3.3
7.9
6,9
7.3
8.0
7.7
233
68
15.1
1.6
2.5
7.2
9.9
9.2
9.5
11.3
356
170
22.4
0.1
1.3
5.6
674
as a first approximation, that all stocks have the same long-term expected return.
Given this, the naive model forecasts a spread in future growth across stocks that
is identical to the spread in their current dividend yields (but in the opposite direction). The naive forecast is quite successful at picking up differences in growth
across the intermediate quintiles. Over the first postranking year, the difference
between the dividend yields of quintiles 2 and 4 (3.4 and 1.5 percent, respectively)
corresponds roughly to the difference in their growth rates. Once differences in
the dividend yield are taken into account, then, IBES estimates have forecast
power for realized growth over the first year only at the extremes.
In general, IBES long-term forecasts refer to a three- to five-year horizon, so the
behavior of realized growth over these horizons is more interesting. Median realized growth rates over three years and over five years are reported in Panels C
and D.These panels highlight the upward bias in analysts’ long-term growth estimates. In every quintile, median forecasts exceed median realized growth rates,
with the most pronounced bias in quintile 5. For five-year growth in income before
extraordinary items, for example, the median forecast in the top quintile is 22.4
percent, much higher than the median realized growth rate, which is only 9.5 percent. Furthermore, the realized growth rate for the firms in the top quintile should
be taken with a grain of salt. In the highest-ranked quintile, the percentage of
firms who survive for the full five postranking years is lower than for any of the
other quintiles. For example, there are 849 firms on average who survive in the
first postranking year in quintile 5, but this drops to 526 by the fifth year, so about
38 percent of the firms drop out between the first and fifthyears. For quintile 3, the
corresponding counts are 326 and 251, respectively, so 23 percent disappear from
the sample. The upshot is that realized growth in income before extraordinary
items is likely to be somewhat overstated for firms in the top quintile.
Over longer horizons, analysts’growth estimates still do not add much information beyond what is contained in the dividend yield. For example, the median realized five-year growth rate is 9.5 percent for the highest-ranked quintile by IBES
forecasts, compared to 2 percent for the lowest-ranked quintile.The difference of
7.5 percent is not much higher than the spread in their dividend yields. The yields
are 02 percent and 6 percent for the highest and lowest ranked quintiles, respectively, so the dividend yield spread is 5.9 percent.The results for growth in operating income before depreciation yield similar conclusions.
To sum up, analysts forecast that long-term earnings growth for the top quirttile outperforms the bottom quintile by 16.4 percent. The realized gap in five-year
growth rates, however, is only 7.5 percent. Much of the spread in realized growth
reflects differences in dividendyields, and some is due to survivorship bias in the
top quintile. After accounting for these influences, analyst forecasts add information only over shorter horizons.
B. Portfolio Growth Rates
Issues of survivorship bias and low or negative base-year values for income before extraordinary items are major concerns. Table IX takes another approach to
measuring growth rates that tries to work around these concerns. Specifically,
675
after ranking stocks by IBES long-term forecasts at each year-end, we form a value-weighted portfolio of the stocks in each quintile. Value-weighting affords
some degree of robustness to our measures, to the extent that problems in measuring growth are less severe for large companies.We then track over the postformation period the income before extraordinary items of the portfolio as a whole.
If a stock is delisted in a year after portfolio formation, we assume it generates
the average income of the remaining firms in that year. Then, at the end of the
year, we take the proceeds from liquidating nonsurviving firms and reallocate
them proportionally across the surviving stocks. As a result, we are able to use
all eligible companies to calculate growth rates, regardless of whether they survive over the full growth horizon, or whether they have positive earnings in the
base year.n The portfolio approach, however, is not without its drawbacks. As
firms drop out of the sample and the funds from their liquidation are reinvested
in the remaining firms, over time, the portfolio can build up large stakes in a
relatively small number of surviving firms who tend to have relatively high
growth rates. The implication is that long-term portfolio growth rates for cases
where survivorship bias is acute, such as the fastest~growing firms in the top
quintile by IBES forecasts as noted above, should be interpreted with caution.
The results for the portfolios’ long-term growth rates are in line with our earlier findings. IBES long-term forecasts are essentially unrelated to realized
growth in income before extraordinary items beyond one or two years out. For
example, over the five postformatlon years (Panel D), the bottom and top quintile
portfolios on average experience growth rates of 8 and 11.3 percent per year, respectively.The spread of 3.3 percent in the portfolios’growth rates is smaller than
the gap between their dividend yields (5.6 percent).
One difference between our results for individual stocks’growth rates and the
portfolios’ growth rate concerns the performance of the bottom quintile in the
first postranking year. In the year immediately following portfolio formation,
the bottom quintile portfolio experiences a strong recovery. Its short-term
growth rate (12.6 percent) falls slightly short of the top quintile portfolio’s growth
rate (13.6 percent). This difference from the earlier results based on individual
stocks reflects several methodological details, specifically the use of valueweights, the inclusion in the portfolios of nonsurviving firms as well as firms with
negative income, and the use of a time-series average of the yearly portfolio
growth rates rather than the cross-sectional medians. In particular, since firms
with low IBES forecasts generally tend to start with low or negative values of
income before extraordinary items at the portfolio formation date, the growth
rate over the following year is likely to be high.12
Analysts’ forecasts substantially overstate realized long-term growth in the
top three quintile portfolios. In the top-ranked quintile, for example, the median
projected future growth rate is about 22.4 percent, but the portfolio’s realized
nThe portfolio approach to measuring growth rates is described further in Chan et al.
(2000, 2001).
12 Our results parallel the findings for the prospective earnings growth of beaten-down value stocks documented in Lakonishok et al. (1994),
676
growth is only 11A percent over three years and 11.3 percent over five ysars.These
results suggest that, in general, caution should be exercised before relying too
heavily on IBES long-term forecasts as estimates of expected growth in valuation
studies. The bottom quintile portfolios by IBES forecasts predominantly comprise firms in mature industries whose growth prospects are relatively unexciting, so analysts’ estimates come closer to the mark here. For instance, about 25
percent of the firms in the first quintile are utilities.
The long-term estimates of analysts may be overly optimistic for several
reasons. One explanation draws on evidence from studies in psychology that
individuals’ forecasts are susceptible to cognitive biases.18 For example, the confirmation bias suggests that individuals tend to focus on evidence that supports
their beliefs, while downplaying other information that is inconsistent. In this
regard, analysts’ estimates will be particularly bullish for glamour stocks that
have shown strong past growth and which enjoy favorable investor sentiment.
In addition, an analyst is employed by a brokerage firm and is expected to make
contributions beyond predicting earnings. Up-beat forecasts may encourage
trading by investors and thereby raise commission income, as well as generate
investment banking business from firms that receive favorable coverage. The general perception is that these aspects of the brokerage and investment banking
business are larger, and their links to analysts closer, in the U.S. market than
overseas. As one piece of evidence that such considerations may lead to inflated
forecasts, IBES estimates as of mid-2001 for U.S. companies project long-term
growth of about 18 percent on average. At the same time, in non-U.S, markets,
analysts are forecasting long-term growth for companies of roughly the same size
to average 11 percent. Perhaps the close ties that exist in practice between the
brokerage and investment banking businesses in the U.S. market foster an environment where analysts tend to be less impartial and err on the side of optimism.
VII. Regression Models
We close out our analysis by gathering all the variables we have previously considered individually into one model in order to take our best shot at forecasting
growth. Table X reports the results from cross-sectional regressions to predict
future growth in operating profits. The model is
The dependent variable, Yit+j, is the rate of growth for firm i over year t+j in
sales (SALES), operating income before depreciation (OIBD), or income before
extraordinary items available to common equity (IBEI). We forecast growth over
the first year following sample selection, over the three and five years subsequent
to sample selection, and over the second to fifth subsequent years.
lSThe evidence is discussed in Kahnemann and Riepe (1998) and Fisher and Statman
(2OOO).
677
679
To see whether high past growth is a precursor to future growth, we use
PASTGS5, the growth rate in sales over the five years prior to the sample selection date. Sales growth is correlated with earnings growth, but is much less erratic and so should yield a relatively more reliable verdict on whether past growth
helps to predict future growth.14
Simple theoretical models of earnings growth suggest one set of variables that,
in principle, should help to predict growth. For instance, a firm’s earnings-toprice ratio, EP, is widely interpreted as impounding the market’s expectations
of future growth.We measure this as the firm’s income before extraordinary items
in the year prior to the sample selection date, relative to its price at the sample
selection date. Similarly, in the standard constant-growth valuation model, a
firm’s sustainable growth rate is given by the product of its return on equity and
its plowback ratio. Our proxy for this measure is G, where return on equity is
measured as the firm’s earnings before extraordinary items in the year prior to
sample selection, divided by book equity in the preceding year; plowback is one
minus the ratio in the prior year of dividends to income before extraordinary
items,is Finally, to capture the firm’s investment opportunities, we use the ratio
of research and development expenditures to sales, RDSALES. The intensity of
R&D relative to sales is widely used in practice as an indicator of how much resources a firm is investing in future growth opportunities (see, e.g., Chan et al.
(2001)).When a firm has no R&D spending, we set this variable to zero, so all firms
are eligible for the regression.
The forecast equation also incorporates variables that are popularly thought to
connote high growth. Firms in technologically innovative industries, or more
generally, growth stocks as measured bylow book-to-market ratios, are popularly
associated with high growth. High past returns for a stock may signal upward
revisions in investors’ expectations of future growth. Analysts’ long-term forecasts are another proxy for the market’s expectations of future growth. Finally,
the dividend yield may provide information on the firm’s investment opportunities and hence ability to grow future earnings. Correspondingly, the other forecasting variables are TECH, a dummy variable with a value of one for a stock in
the pharmaceutical and technology sectors (defined as in Panel A of Table IV)
and zero otherwise; BM, the firm’s book-to-market value of equity; PASTR6, the
stock’s prior six-month compound rate of return; IBESLTG, the IBES consensus
forecast of long-term growth; and DP, the ratio of dividends per share cumulated
over the previous 12 months to current price. To be eligible for inclusion in the
regression at a given horizon, a firm must have nonmissing values for all the predictors. In addition it must have a positive base-year value for the operating performance indicator in question, so as to calculate a growth rate. To screen out
14 Results using past five-year growth in OIBD or IBEI as predictor variables indicate that
these variables do a worse job in capturing any persistence in growth.
is Firms with negative value of book equity are dropped from the sample for the regression.
In cases where the measure for sustainable growth is negative (when income is negative, or
when dividends to common exceed income so the plowback ratio is negative), we set the sustainable growth rate variable G to zero.
68O
outliers due to low values in the base year, we exclude cases where the ratio of the
price to the operating performance variable exceeds 100 in the base year.
The model is estimated each year-end, yielding a time series of estimated coefficients and the adjusted R2. Means for the time series, and ~-statistics based on the
standard error from the time series, are reported in Table X. Standard errors
from the overlapping regressions in Panels B to D use the Hansen-Hodrick
(1980) correction for serial correlation.
The results in Table X deliver a clear verdict on the amount of predictability in
growth rates. In line with our earlier results, it is much easier to forecast growth
in sales than growth in variables such as OIBD and IBEI, which focus more on
the bottom line. For example, the forecasting model that has the highest adjusted
R~ in Table X is the equation for five-year growth in sales (11.75 percent; Panel C).
By comparison, the adjusted R~ in the equations for OIBD and IBEI barely exceed 3 percent, so there is relatively little predictability for growth in these variables. If anything, our results may be overstating the predictability in growth.
Our cross-sectional regressions are reestimated monthly, so we let the coefficients in the model change over time. As a check on the robustness of our results,
we also replicated the regressions in the table using growth rate ranks (ranging
from zero for the firm with the lowest growth rate in that year to one for the firm
with the highest growth rate). The results from the growth rank regressions echo
the findings in Table X.
Our full model includes a total of nine predictors, and the correlations between
some of them are quite high. As a result, sorting out the relative importance of
each variable is not straightforward. Focusing on the models for OIBD and IBEI,
no variable has coefficients that are statistically significant across all forecasting
horizons.The coefficient of past sales growth PASTGS5 is generally negative, suggesting that there are reversals in growth rates. When past sales have been declining, income levels tend to be low in the base year, resulting in relatively
higher future growth rates.16
At least over longer horizons (Panels B to D), R&D intensity, RDSALES, has
the strongest forecast power. In accordance with economic intuition, firms that
are investing heavily in R&D, and thereby building up their intangible capital
base, on average tend to be associated with elevated future growth. Specifically,
a firm that spends 10 percent of its sales on R&D tends to have higher five-year
growth in IBEIby about 2.5 percent, compared to a firm with no R&D (Panel C).
However, the high correlation between RDSALES and variables like TECHor DP
suggests caution is warranted in interpreting this result.
The variable IBESLTG is provided by supposed experts, and is widely used as a
proxy for expected future growth. Its coefficient has the expected positive sign,
but it is not statistically significant in the equations for IBEI. This variable does
somewhat better in the equations for OIBD, especially over shorter horizons. In
general, however, IBESLTG does not have higher forecast power than the divi.
~SThe effect of extremely low base-year values is mitigated to some extent because we drop
from the regression cases where the ratio of the price to operating performance indicator exceeds 100 in the base year. However, this is only a partial solution.
681
dend yield, DP, which can be viewed as another proxy for the firm’s investment
opportunities.17 In terms of predicting long-term growth, the forecasts of highly
paid security analysts are about as helpful as the dividend yield, a piece of information that is readily available in the stock listings of most newspapers.
In line with the results inTableVIII, a low earnings yield EP is associated with
higher future growth rates, especially for I~BE]. However, the association is driven by a relatively small number of cases with unusually low base-year earnings.
Low values of the earnings base result in a low earnings yield, and given that the
firm survives, in an unusually high future growth rate. This explanation agrees
with the results in TableVIII, where the relation between EPand future growth is
confined to companies with the highest growth rates. As further confirmation of
this line of reasoning, when we use growth in a variable such as OIBD, which is
less prone to the problem of a low base level, EP does a poor job of forecasting in
Table X.
The coefficient of the technology dummy TECH is highly significant in many
cases, but it generally has an unexpected sign. This may be due to the high correlation between TECHand RDSALES. For example, dropping RDSALES from the
model substantially reduces the t-statistics for TECH (although its coefficient retains a negative sign).
Neither the book-to-market ratio nor our proxy for sustainable growth G reliably predicts growth in OIBD and IBEI. Contrary to the conventional notion that
high past returns signal high future growth, the coefficient of PASTR6 is negative. The explanation for this result echoes our explanation for our findings with
respect to EP. When a firm’s near-term prospects sour and current earnings are
poor, stock returns tend to be disappointing as well. Once again, these cases of
low base levels of earnings may induce a negative association between past return and future growth.
Panels Cand D also provide results that are based on a simple textbook model
for predicting growth. Here the predictor variables are earnings yield, sustainable growth, and R&D intensity. The textbook model has weak forecast power.
For example, over a five-year horizon, the adjusted R2 from the equation for IBEI
is only 1.48 percent.
VIII. Summary and Conclusions
We analyze historical long-term growth rates across a broad cross section of
stocks using a variety of indicators of operating performance. All the indicators
yield a median growth rate of about 10 percent per year (with dividends reinvested) over the 1951 to 1998 period. With dividends taken out, the median estimate is the same magnitude as the growth rate of gross domestic product over
this period, between 3 and 3.5 percent in real terms. Given the survivorship bias
underlying the growth rate calculations, the expected growth rate is likely to be
lower. Based on these historical values and the low level of the current dividend
1~ Forecasting models with IBESLTG and DP as the only predictors yield qualitatively similar conclusions. In particular, the dividend yield does at least as well as the consensus forecast in forecasting growth.
682
yield, looking forward, the expected return on stocks in general does not appear
to be high. In particular, the expected return using a constant-growth dividend
valuation model is about 7.5 percent, assuming there is no mispricing.
Expectations about long-term growth are also crucial inputs in the valuation
of individual stocks and for estimating firms’ cost of capital. At year-end 1999, a
sizeable portion of the market commanded price-earnings multiples in excess of
100. Justifying such a multiple under some relatively generous assumptions requires that earnings grow at a rate of about 29 percent per year for 10 years or
more. Historically, some firms have achieved such dazzling growth. These in.
stances are quite rare, however. Going by the historical record, only about 5 percent of surviving firms do better than a growth rate of 29 percent per year over 10
years. In the case of large firms, even fewer cases (less than 1 percent) would meet
this cutoff. On this basis, historical patterns raise strong doubts about the sustainability of such valuations.
Nonetheless, market valuation ratios reflect a pervasive belief among market
participants that firms who can consistently achieve high earnings growth over
many years are identifiable ex ante. The long-term growth expectations of one
influential segment of the market, security analysts, boldly distinguish between
firms with strong and weak growth prospects. To see whether this belief that
many firms can achieve persistently high growth holds up in reality, we use an
experimental design that singles out cases where a firm consistently delivers favorable growth for several years in a row. Our results suggest that there is some
persistence in sales revenue growth. The persistence in sales does not translate
into persistence of earnings, however. Even though we measure consistency
against a hurdle that is not particularly challenging (the median growth rate),
there are few traces of persistence in growth of operating income before depreciation, or in income before extraordinary items. For example, on average three percent of the available firms manage to have streaks in growth above the median for
five years in a row. This matches what is expected by chance. The evidence for
persistence is still slim under more relaxed criteria for consistency in growth.
All in all, the evidence suggests that the odds of an investor successfully uncovering the next stellar growth stock are about the same as correctly calling coin
tosses.
A skeptic might argue that while there is little persistence for the population at
large, specific segments of the market are able to improve earnings steadily over
long periods. In particular, popular sentiment views firms in the pharmaceutical
and technology sectors, along with glamour stocks, as being able to maintain consistently high growth rates. To accommodate this argument, we narrow our
search to these subsets of firms. While there is persistence in sales growth, when
it comes to growth in bottom-line income, over long horizons, the likelihood of
achieving streaks is not much different from sheer luck. Conversely, value firms
who are out of favor do not seem to do much worse, altho~lgh survivorship bias
makes it difficult to deliver a definitive verdict. To narrow the search even more,
we check whether firms with consistently high past growth manage to maintain
their performance going forward. While past growth carries over to future sales
growth, the income variables do not display strong persistence.
683
There is a widespread belief that earnings-to-price ratios signal future growth
rates. However, the cross-sectional relation between earnings yields and future
growth is weak, except possibly in the cases of firms ranked highest by realized
growth. For these firms, an inverse association between ex ante earnings yields
and growth may arise because they start from a battered level of earnings in the
base year, so future growth is high. In light of the noisiness of the earnings yield
measure, academic and practitioner research mainly focuses on other valuation
ratios such as book-to-market and sales-to-price. These multiples, which are better behaved, show little evidence of anticipating future growth. On the other
hand, firms that enjoy a period of above-average growth are subsequently rewarded by investors with relatively high ratios of sales-to-price and book-to-market. Conversely, investors tend to penalize firms that have experienced poor
growth. These results are consistent with the extrapolation hypothesis of La Porta (1996) and La Porta et al. (1997).
Additionally, it is commonly suggested that one group of informed participants, security analysts, may have some ability to predict growth. The dispersion
in analysts’ forecasts indicates their willingness to distinguish boldly between
high- and low-growth prospects. IBES long-term growth estimates are associated
with realized growth in the immediate short-term future. Over long horizons,
however, there is little forecastability in earnings, and analysts’ estimates tend
to be overly optimistic. The spread in predicted growth between the top and bottom quintiles by IBES forecasts is 16.4 percent, but the dispersion in realized fiveyear growth rates is only 7.5 percent. On the basis of earnings growth for portfolios formed from stocks sorted by IBES forecasts, the spread in realized five-year
growth rates is even smaller (3.3 percent). In any event, analysts’ forecasts do not
do much better than a naive model that predicts a one-for-one tradeoff between
current dividend yield and future growth per share.
A regression forecasting model which brings to bear a battery of predictor
variables confirms that there is some predictability in sales growth, but meager
predictability in long-term growth of earnings. Only about three percent of the
variation in five-year earnings growth rates is captured by the model. One variable that stands out is the level of research and development intensity, suggesting
that a firm’s intangible assets may have an important influence on its future performance. On the whole, the absence of predictability in growth fits in with the
economic intuition that competitive pressures ultimately work to correct excessively high or excessively low profitability growth.
REFERENCES
Asness, Clifford, 2000, Bubble logic,Worklng paper, AQR Capital Management.
Bakshi, Guxdip, and Zhiwu Chen, 1998, Stock valuation in dynamic economies. Working paper, University of Maryland.
Ball, Ray, and Ross Watts, 1972, Some time-series properties of accounting income, Journal of Finance
27, 663-682.
Beaver, William H., 1970, The time series behavior of earnings, Journal of Accounting Research 8
(Suppl.), 62-99.
684
Beaver, William H., and Dale Morse, 1978,What determines price-earnings ratios?, F~nancial Analysts
Journal 34, 65-76.
Brealey, Richard A., 1983, An Introduction to Risk and Return from Common Stocks (2nd edition) (MIT
Press, Cambridge, MA).
Camerer, Colin, 1989, Does the basketball market believe in the"hot hand"? American Economic Review
79,1257-1261.
Chan, Louis K. C., Naresimhan Jegadeesh, and Josef Lakonishok, 1995, Evaluating the performance of
value versus glamour stocks: The impact of selection bias, Journal ofa~tncialEc~nomics 38, 269-296.
Chan, Louis K. C., Jason Karceski, and Josef Lakonishok, 2000, New paradigm or same old hype in
equity investing? Financial Analysts Journal 56, 23-36.
Chart, Louis K. C., Jesef Lakonishok, and Theodore Sougiannis, 2001, The stock market valuation of
research and development expenditures, Journal of Finance 56, 2431-2456.
Claus, James, and Jacob Thomas, 2001, Equity premia as low as three percent? Evidence from analysts’
earnings forecasts for domestic and international stocks, Journal of Finance 56,1629-1666.
Daniel, Kent, and Sheridan Titman, 2001, Market reactions to tangible and intangible information,
Working paper, Kellogg School of Management, Northwestern University.
Fama, Eugene E, and Kenneth R. French, 1992,The cross section of expected stock returns, Journal of
Finance 47, 427--465.
Fama, Eugene F., and Kenneth R. French, 1995, Size and book-to-market factors in earnings and returns, Journal of Finance 50,131-155.
Fama, Eugene, F., and Kenneth R. French, 1997, Industry costs of equity, Journal of Financial Econom.
ics 43,153-193.
Fama, Eugene E, and Kenneth R. French, 2000, Forecasting profitability and earnings, Journal
heSS 73,161-175.
Yama, Eugene E, and Kenneth R. French, 2002,The equity premium, Journal of Finance 57, 637--659.
Fisher, Kenneth L., and Meir Statman, 2000, Cognitive biases in market forecasts, Journal of Portfolio
Management 27, 72-81.
Gebhardt,William R., Charles M. C. Lee, and Bhaskaran Swaminathan, 2001, Toward an implied cost
of capital, Journal of Aocoanting Research 39,135-176.
Hansen, Lars, and Robert Hodrick, 1980, Forward exchange rates as optimal predictors of future spot
rates: An econometric analysis, Journal of Political Economy 88, 829-853.
Hendricks, Darryll, Jayendu Patel, and Richard Zeckhauser, 1993, Hot hands in mutual funds: Shortrun persistence of relative performance, 1974-1988, Journal of Finance 48, 93-130.
Kahnsman, Daniel, and Mark W. Riepe, 1998, Aspects of investor psychology, Journal of Portfolio Management 24, 52-65.
La Porta, Rafael, 1996, Expectations and the cross section of stock returns, Journal of Finance 51,17151742.
La Porta, Rafael, Josef Lakonishok, Andrei Shleifer, and Robert "~shny, 1997, Good news for value
stocks: Further evidence on market efficiency, Journal of Finance 52, 859-874.
Lakonlshok, Josef, Andrei Shleifer, and Robert W.~shny, 1994, Contrarian investment, extrapolation,
and risk, Journal of Finance 49,1541-1578.
Lee, Charles M. C., James Myers, and Bhaskaran Swaminathan, 1999,What is the intrinsic value of the
Dew? Journal of Finance 54,1693-1741.
Lintner, John, and Robert Glauber, 1967, Higgledy piggledy growth in America, reprinted in James
Lorie and Richard Brealey, eds., Modern Developments in Investment Management (Dryden Press,
Hinsdale, IL).
Little, I. M. D., 1962, Higgledy piggledy growth, Bulletin of the Oxford University Institute of Economics
and Statistics 4, 387-412.
Little, 1. M. D., and Arthur C. Rayner, 1966, Higgl~y Piggledy Growth Again (Basil Blackwell, Oxford).
Mezrich, Joseph, Qi Zeng, David Nordquist, and Lakshmi Seshadxi, 2001, Rebroadcast: Changing of
the guard, Equity Research Quantitative Strategy (Morgan Stanley, New York, NY).
Siegel, Jeremy J., 1999,The shrinking equity premium, Journal of Portfolio Management 26,10-17.
Welch, Ire, 2000,Views of financial economists on the equity premium and on professional controversies, Journal of Business 73, 501-537.
EL PASO ELECTRIC
ADVICE NOTICE
PAGE 1 OF 2
NEW MEXICO PUBLIC RE6ULATION COMMISSION
OF THE STATE OF NEW MEXICO
El Paso Electric Company (EPE) hereby gives notice to the public and the Commission of the
filing and publishing of the following changes in its Rates, which are attached hereto:
RATES
Rate
Number
1 lth Revised
Rate No. 01
ORIGINAL
Rate No. 02
13th Revised
Rate No. 03
13th Revised
Rate No. 04
14th Revised
Rate No. 05
CANCELLED
Rate No. 07
1 lth Revised
Rate No. 08
1 lth Revised
Rate No. 09
13th Revised
Rate No. 10
1 lth Revised
Rate No. 11
12th Revised
Rate No. 12
8th Revised
Rate No. 15
19th Revised
Rate No. 18
10th Revised
Rate No. 19
Title of Rate
Cancelling
Rate Number
Date
Effective
Residential Service Rate
10th Revised Rate No. 01
x
Residential Service Rate Partial
Requirements
Not Applicable
x
Small General Service Rate
x
General Service Rate
x
Irrigation Service Rate
X
City and County Service Rate
Water, Sewage, Storm Sewage
Pumping and Sewage Disposal Rate
X
X
Large Power Service Rate
Military Research and Development
Power Rate
x
X
Municipal Street Lighting Rate
X
Private Area Lighting Rate
1 l th Revised Rate No. 12
X
Miscellaneous Service Charges
X
Fixed Fuel Factor
Seasonal Agriculture Processing
Service Rate
x
X
Advice Notice No.
236
Signature/Title
Mic’hae] D. Blanchard
Vice President - Regulatory Affairs
EL PASO ELECTRIC COMPANY
ADVICE NOTICE NO. 236
PAGE 2 OF 2
Supplementary Power Service
10th Revised Cogeneration and Small Power
Rate No. 21
Production Facilities
Backup Power Service Cogeneration
10th Revised and Small Power Production
Rate No. 22 Facilities
Maintenance Power Service
Rate No. 23 Production Facilities
Curtailable Power Service
Rate No. 24
7th Revised
Outdoor Recreational Lighting
Rate No. 25
Service Rate
7th Revised
Rate No. 26
State University Service Rate
CANCELLED Instantaneous Interruptible Service
Rate for Large Power Service
Rate No. 28
5th Revised
Noticed Interruptible Service Rate for
Rate No. 29
Large Power Service
6th Revised
Rate No. 30
Load Retention Rate
3rd Revised
Rate No. 32 Voluntary Renewable Energy Rate
Advice Notice No.
X
X
X
X
X
X
Original Rate No. 28
X
X
X
2nd Revised Rate No. 32
X
236
Signature/Title
Micl~a’el I~. Blanchard
Vice President - Regulato~ Affairs
EL PASO ELECTRIC COMPANY, J
REVISED TABLE OF CONTENT~
RATE SCHEDULES
Rate Schedule
Number
11th Revised Rate 01
Title of Rate Schedule
Residential Service Rate
X
Residential Service Rate Partial Requirements
X
Small General Service Rate
X
General Service Rate
X
Irrigation Service Rate
X
1 lt" Revised Rate 08
Water, Sewage, Storm Sewage Pumping or Sewage Disposal RateX
11t~ Revised Rate 09
Large Power Service Rate
X
Military Research and Development Power Rate
X
1 lt" Revised Rate 11
Street Lighting Service Rate
X
Private Area Lighting Rate
X
8th Revised Rate 15
Miscellaneous Service Charges
X
Purchased Power Service
7th Revised Rate 17
Efficient Use of Energy Recovery Factor (EUERF)
Fuel and Purchased Power Cost Adjustment Clause (FPPCAC)
Original Rate 02
X
10t" Revised Rate 19 Seasonal Agriculture Processing Service Rate
X
10t" Revised Rate 21
Supplementary Power Service Cogeneration and Small Power
X
Backup Power Service Cogeneration and Small Power Production X
Facilities
Maintenance Power Service Cogeneration and Small Power
Advice Notice No.
236
SignaturelTitle .~.~ .~,t~’_~~,,/!
Michael D. Blanchard
X
REVISED TABLE OF CONTENTS
RATE SCHEDULES
PAGE 2 OF 2
Curtailable Power Service Cogeneration and Small Power
X
7th
Revised Rate 25
Outdoor Recreational Lighting Service Rate
X
7th
Revised Rate 26
State University Service Rate
X
1st Revised Rate 28
Instantaneous Interruptible Service Rate for Large Power Service
X
5t" Revised Rate 29
Noticed Interruptible Service for Rate Large Power Service
x
6th Revised Rate 30
Load Retention Rate
x
3rd Revised Rate 32
Voluntary Renewable Energy Rate
X
4th
Small System Renewable Energy Certificate Purchase
Revised Rate 33
3rd Revised Rate 34
Medium System Renewable Energy Certificate Purchase
1st Revised Rate 35
Large System Renewable Energy Certificate Purchase
Advice Notice No.
236
Signature/Title /~/////~ ,~/~2¢~z=y"~y~t_~/
MiChael D. Blanchard ~
X
X
ELEVENTH REVISED RATE NO. 01
CANCELLING TENTH REVISED RATE NO. 01
RESIDENTIAL SERVICE RATE
Page 1 of 4
APPLICABILITY:
This rate schedule is available for electric service used in single family residences, individually X
metered apartments, and other non-commercial uses located on the same property and used X
through an extension from and in connection with the main residence.
X
X
TERRITORY:
Areas served by the Company in Dona Ana, Sierra, Otero and Luna Counties.
TYPE OF SERVICE:
Service available under this rate schedule will normally be single phase 120/240 volt, supplied X
at a single point of delivery designated by the Company.
X
Single phase 120/240 volt motor operation is permitted where the size of the individual motor
does not exceed 5 horse power (HP). Three phase 120/240 volt service may be provided for
motors over 5 HP if determined by the Company to be economically feasible. Single or three
phase motors shall not exceed 10 HP individual capacity without the written approval of the
Company.
X
X
x
X
MONTHLY RATES:
X
STANDARD SERVICE MONTHLY RATE:
X
I Customer Charge (per meter per month):
Energy Charges *
Summer (May through October): 0 - 600 kWh
Summer (May through October): All Other kWh
Winter (November through April): All kWh
$10.00
IX
PerkWh
$0.11438
$0.13827
$0.10438
X
X
IXX
Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No.18 (FPPCAC). X
Advice Notice No.
236
Signature/Title ~./~., ~ .~~2~’_ ~,~,’~/
Michael D, Blanchard /
X
X
Page 2 of 4
OPTIONAL TIME OF USE (TOU) MONTHLY RATE:
Customer Charge (per meter per month):
X
$10.00
I
Energy Charges *
Energy Charge: On-Peak
Energy Charge: Off-Peak
Per kWh
$0.18542
$0.09847
I
X
X
X
The On-Peak period shall be from 12:00 P.M. to 8:00 P.M., Mountain Daylight Time, Monday
through Friday, for the months of May through October.
X
The Off-Peak period shall be all other hours not covered in the On-Peak period.
x
The TOU rate is subject to the provisions found under the Terms and Conditions section.
X
¯ Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No.18 (FPPCAC). X
MONTHLY MINIMUM CHARGE:
x
The monthly minimum charge under this rate schedule is the Customer Charge.
x
FUEL AND PURCHASED POWER COST ADJUSTMENT CLAUSE (FPPCAC):
X
All service taken under this rate schedule is subject to the provisions of the Company’s Rate
Schedule No. 18 (FPPCAC).
X
X
EFFICIENT USE OF ENERGY RECOVERY FACTOR (EUERF):
Schedule No. 17 (EUERF).
X
X
TAX ADJUSTMENT:
Billings under this rate schedule may be increased by an amount equal to the sum of taxes
payable under the Gross Receipts and Compensating Tax Act and of all other taxes, fees or
charges (exclusive of ad valorem, state and federal income taxes) payable by the utility and
Advice Notice No.
236
Signature/Title
101ic~a~l D. Blanchard ~/
X
X
X
Page 3 of 4
levied or assessed by any governmental authority on the public utility service rendered, or on
the right or privilege of rendering the service, or on any object or event incidental to the
rendition of the service.
VOLUNTARY RENEWABLE ENERGY (VRE):
X
This rate schedule is subject to the provisions of the Company’s Rate Schedule No. 32 (VRE). X
TERMS OF PAYMENT:
All bills under this rate schedule are due and payable when rendered and become delinquent X
twenty (20) calendar days thereafter. If the twentieth day falls on a holiday or weekend, the next
X
Company business day will apply.
X
TERMS AND CONDITIONS:
Service supplied under this rate schedule is subject to the Company’s Rules and Regulations X
on file with the New Mexico Public Regulation Commission and available for inspection at
X
Company offices.
X
This rate is available under the following conditions:
For a single household or single family for primarily domestic purposes in individual private
residences, individually metered apartments, or other non-commercial uses located on the
same property and used through an extension from and in connection with the main
residence.
X
X
X
X
When it is evident, both visually and/or electrically, that activity of a business or professional
character is being conducted in the residence, service will be supplied on the appropriate
non-residential rate schedule; however, the portion used as living quarters may be wired X
and metered separately and served on this rate schedule.
X
For separately metered living quarters recognized as single-family living quarters for
domestic home use.
3. Service under this rate schedule shall include home lighting and residential power for
Advice Notice No.
236
Signature/Title ~ ,/D ~,~.--,~ F_.4//~//~’
Mi~haeJ ~).~ Blanc~hard
X
X
X
Page 4 of 4
operation of household appliances.
4. Single-phase motors for domestic use may not exceed 10 horsepower (HP) without the
written approval of the Company. The use of all single or three-phase motors over 5 HP X
must be approved by the Company concerning the motor’s lock rotor amperes.
5. If three-phase service is supplied, motor size and other loads will be subject to Company X
approval. Three-phase service is only available from lines existing at the location or if the X
Company determines it is economically feasible to bring service to the location.
X
6. Wiring may be extended from the residence circuit to private garages, barns and similar
structures and/or wells which are located on the same property as the residence and used
exclusively for domestic purposes in connection with the residence.
7. For residences where rooms are rented or meals served to boarders if this is incidental to X
the maintenance of a private residence.
In addition to the above, the TOU rate is available under the following conditions:
X
Under TOU, a meter will be installed at the Customer’s service point that allows the
X
Customer to pay for electricity based on the time of day it is used. The meter will record the
amount of electricity used during two mutually-exclusive time periods. These periods are an
On-Peak period of 12:00 P.M. to 8:00 P.M., Mountain Daylight Time, Monday through
X
Friday, for the months of May through October, and an Off-Peak period that includes all X
other hours not covered in the On-Peak period.
X
2. The Customer agrees to remain on the TOU rate for a minimum of twelve (12) consecutive X
months, unless service is disconnected by the Customer. At any time after the initial twelveX
(12) consecutive months, the Customer may request removal from the TOU rate.
X
3. The Customer agrees that TOU billing will become effective with the first complete billing
cycle following installation of the TOU meter.
Advice Notice No.
236
Signature/Title .~_~_~ ~~~~
ORIGINAL RATE NO. 02
RESIDENTIAL PARTIAL REQUIREMENTS SERVICE
X
Page 1 of 4
APPLICABILITY:
This rate schedule is applicable to residential distributed renewable generation customers
taking service under an executed Standard Interconnection Agreement with a renewable
generation Interconnection Facility that is interconnected and operating in parallel and in phase
with the Company’s existing electrical distribution system at a Point of Common Coupling.
TERRITORY:
TYPE OF SERVICE:
Service available under this rate schedule will be determined by the Company and will be single
or three phase 120/240 volt, supplied at a single point of delivery designated by the Company.
Single phase 120/240 volt motor operation is permitted where the size of the individual motor
does not exceed 5 horse power (HP). Three phase 120/240 volt service may be provided for
motors over 5 HP if determined by the Company to be economical. Single or three phase
motors shall not exceed 10 HP individual capacity without the written approval of the Company.
DEFINITIONS:
"Generating Facility" means the Interconnection Customer’s renewable facility including all
generators, equipment, wires, and other facilities provided by the Interconnection Customer for
producing renewable electric power.
"Generator" means any device producing renewable electrical energy, including rotating winddriven generators, solar panels, fuel cells, or any other renewable electric producing device.
"lnterconnection Customer" is the person or entity, as defined in the Standard Interconnection
Agreement, operating the Interconnection Facility.
"lnterconnection Facility" means the collective Company and Interconnection Customer facilities
and equipment between the Generating Facility and the Point of Common Coupling, including
any modification, additions or upgrades that are necessary to physically and electrically
interconnect the Generating Facility to the Company’s distribution system. Interconnection
Facilities are sole use facilities and do not include distribution system upgrades.
Advice Notice No.
236
Signature/Title . ~/~ _ .
X
Page 2 of 4
"Parallel Operation" means operation of the Interconnection Facilities in parallel and in phase
between the Interconnection Customer and the Company, with operations measured through
one meter capable of measuring Customer Purchases and Customer Supply.
"Partial Requirements Service" is the electric service provided to a Customer operating an
Interconnection Facility when the Customer’s Interconnection Facility cannot supply the
Customer’s load requirements, where the energy from the Interconnection Facility first serves
the Customer’s energy requirements and any excess energy is provided to the Company.
"Point of Common Coupling" is the point where the Interconnection Facilities connect with the
Company’s distribution system and include a metering device.
"Standard Interconnection Agreement" provides the terms and conditions under which the
Interconnection Customer may interconnect and operate the renewable Generating Facility in
parallel with the Company’s distribution system, and are found in either the Standard
Interconnection Agreement for Qualifying Facilities 10 kW or Less, or the Interconnection
Agreement for Generating Facilities with a Rated Capacity No Greater than 10 MW" and
includes a description of the Generating Facility, location, and the Point of Common Coupling.
MONTHLY RATES:
Customer Charge
$10.00
Energy Charge 0 - 600 kWh Summer *
Energy Charge All Other kWh Summer *
Energy Charge All kWh Winter *
$0.11563
$0.13952
$0.1O563
Customer Charge
$10.00
Energy Charge - On-Peak (S/kWh) *
Energy Charge - Off-Peak (S/kWh) *
$0.1881O
$O.1O115
Advice Notice No.
236
Signature/Title .~..~ ~m~’~’~t-~/
X
Page 3 of 4
through Friday, for the months of May through October.
* Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No. 18 (FPPCAC)
The Customer Charge plus applicable Demand Charge plus Tax Adjustment.
DETERMINATION OF BILLING ENERGY (KWH):
The Customer’s billing energy will be the net kilowatt-hour (kWh) energy for the billing period,
defined as the net of energy received by the Customer from the Company and energy delivered
by the Customer to the Company, where energy received by the Customer exceeds energy
delivered by the Customer, as measured by a hi-directional meter.
Where energy delivered by the Customer exceeds energy received by the Customer over the
billing period, billing energy is zero (0).
TAX ADJUSTMENT:
Advice Notice No.
236
Signatu re lTitle ~j~,,//~
Michael" ~). Blanchard
X
Page 4 of 4
TERMS OF PAYMENT:
All bills under this rate schedule are due and payable when rendered and become delinquent
twenty (20) calendar days thereafter. If the twentieth day falls on a holiday or weekend, the
next Company business day will apply.
Advice Notice No.
236
Signature/Title /P~/~ ~
Michael D, Blanchard ~
THIRTEENTH REVISED RATE NO. 03
CANCELLING "rWELFTH REVISED RATE NO. 03
SMALL GENERAL SERVICE RATE
Page 1 of 5
APPLICABILITY:
This rate schedule is available to all customers for electric lighting, power, and heating service
where facilities of adequate capacity and suitable voltage are adjacent to the premises to be
served. The Customer and the Company will determine whether a new Customer qualifies for
this rate. Service under this rate shall be limited to customers whose maximum 30 minute
kilowatt (kW) load does not exceed 50 kW.
X
X
X
X
X
If the Customer’s monthly maximum demand exceeds 50 kW for two (2) consecutive months,
the Customer shall no longer be eligible for service under the Small General Service Rate, but X
shall immediately become eligible for service under the General Service Rate or Large Power
Service Rate, as applicable. The Customer shall not be eligible for service under the Small
General Service Rate for a period of twelve (12) consecutive months thereafter.
X
TERRITORY:
TYPE OF SERVICE:
Service available under this rate schedule will be determined by the Company and will normallyX
be single or three phase 120/240 volt at the option of the Company and at a standard
X
Company-approved voltage. All service will be taken at a single point of delivery designated byX
the Company.
X
MONTHLY RATES:
X
X
$15.oo
Customer Charge (per meter per month)
Demand and Ener,qy Charges *
Demand Charge per Billing kW
Energy Charge per kWh
Summer
(May through October)
$16.91
$0.06942
IX
Winter
X
(November through April)
$14.66
X
$0.05932
X
Advice Notice No.
236
Signature/Title ~. ~,/0 _/~- ~,Jx¢?~,~./
CANCELLING TWELFTH REVISED RATE NO. 03
X
X
X
Page 2 of 5
ALTERNATIVE SERVICE MONTHLY RATE
X
Customer Charge (per meter per month):
Ener,qy Charges *
Summer
$0.13371
$15.00
Winter
X
$0.12361
X
,~ Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No.18 (FPPCAC).X
If a Customer on the Alternative Monthly Rate meets or exceeds 7,000 kWh or 15 kW during
any billing month, the Customer will immediately be transferred to and remain in the Standard
Service Monthly Rate.
X
OPTIONAL TIME OF USE (TOU) SERVICE MONTHLY RATE
X
This optional rate is available to any customer that does not own distributed generation facilitiesX
at the premise served under this rate schedule.
X
x
I Customer Charge (per meter per month):
Demand and Energy Char,qes *
Energy Charge per kWh: On-Peak
Energy Charge per kWh: Off-Peak
Summer
$12.18
$0.13426
$0.07697
$15.00
iX
Winter
X
(November through April) X
$10.56
X
$0.07697
X
X
The On-Peak period shall be from 12:00 P.M. to 6:00 P.M., Mountain Daylight Time, Monday X
through Friday, for the months of June through September.
X
X
~, Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No.18 (FPPCAC).X
X
The Customer Charge plus the applicable Demand Charge and Tax Adjustment.
X
Advice Notice No.
236
Signature/Title ~/~/~ ~~--~’~:~z::~z.~.~’J
MiChael "~. Blanchard ~
x
X
X
Page 3 of 5
DETERMINATION OF BILLING DEMAND:
Maximum demand will be defined as the highest thirty (30) minute average kilowatt load
determined by measurement.
X
The billing demand will be the highest of:
(a) the maximum measured demand, or
(b) 60 percent of the highest measured demand established during the billing months in the
twelve (12) month period ending with the current month, or
(c) a minimum demand of 15 kW.
X
Schedule No. 18(FPPCAC).
All service taken under this rate schedule is subject to the provisions of the Company’s Rate X
X
TAX ADJUSTMENT:
Billings under this rate schedule may be increased by an amount equal to the sum of taxes X
X
X
Advice Notice No.
236
Signature/Title ~0~,~) ~.~,~;~’~/
Michael D. Blanchard ~
X
X
X
Page 4 of 5
X
TERMS OF PAYMENT:
twenty (20) calendar days thereafter. If the twentieth day falls on a holiday or weekend, the x
X
X
Company offices.
X
The Company at its option shall install metering equipment to measure the customer’s thirty
(30) minute average kilowatt-demand for purposes of determining the applicable rate schedule. X
In addition to the above, the Optional TOU Monthly Rate is available under the following
conditions:
X
Under TOU, a meter will be installed at the Customer’s location that allows the Customer to
pay for electricity based on the time of day it is used. The meter will record the amount of
electricity used during two mutually-exclusive time periods. These periods are an On-Peak X
period of 12:00 P.M. to 6:00 P.M., Mountain Daylight Time, Monday through Friday, for the
months of June through September, and an Off-Peak period that includes all other hours not
x
covered in the On-Peak period.
x
months. At any time after the initial twelve (12) consecutive months, the Customer may X
request removal from the TOU rate.
CHURCH RIDER:
This rider is applicable only to the place of worship such as a church, synagogue or sanctuary.
The rider is not applicable to separate offices, meeting halls, schools or other ancillary buildings
which may be associated with the religious orgaDization. Only "religious organizations" as
Advice Notice No.
236
Signature/Title /q~/_~ ~)~
X
X
X
Page 5 of 5
defined by the Charitable Solicitations Act (§57-22, 2010 NMSA 1078) qualify under this rider.
This rider is not available to any customer that owns distributed generation facilities at the
premise served under this rate schedule.
This rider provides a credit on the Customer’s monthly bill when the average rate per kWh for aX
billing month within a calendar year from the table below exceeds the applicable maximum rate X
per kWh for the same calendar year. The credit is calculated based only on the demand and X
energy charge components of the bill and is equal to the demand plus energy charges minus
the energy consumed times the maximum rate per kWh using the formula:
CR = (BD + BE) - (EC x MR), where
CR = Credit Amount
BD = Billed Demand Charge
BE = Billed Energy Charge
EC = Energy Consumed (kWh)
MR = Maximum Rate per kWh
Maximum Rate per kWh for Calendar Year 2015:
$0.17
$0.18
$0.19
$0.20
X
X
X
X
X
This Rider will remain in effect until the effective date of a change to this rate schedule as a
result of a general rate case, but will terminate no later than the end of the December 2018
billing month.
Advice Notice No.
236
Signature/Title
Mi’cl~ael D. Blanchard
x
X
GENERAL SERVICE RATE
Page 1 of 6
APPLICABILITY:
This rate schedule is available to all Customers for electric lighting, power, and heating service X
where facilities of adequate capacity and suitable voltage are adjacent to the premises to be X
served. The Customer and the Company will determine whether a new Customer qualifies for X
this rate. Service under this rate schedule shall be limited to customers whose highest thirty X
(30) minute average kilowatt (kW) load is not less than fifty (50) kW and does not exceed sevenX
hundred ninety-nine (799) kW.
X
If the Customer’s monthly maximum demand exceeds 799 kW for two (2) consecutive months,
the Customer shall no longer be eligible for service under this rate schedule, but shall
X
immediately become eligible for the Large Power Service Rate.
X
A Customer who qualifies for service under this rate schedule must remain on this rate
schedule for twelve (12) consecutive months. If the CustomeCs demand falls below 50 kW
during the current month and previous eleven (11) month period, the Customer shall
immediately become eligible for the Small General Service Rate.
X
X
X
X
TERRITORY:
TYPE OF SERVICE:
be single or three phase at the option of the Company and at a standard Company approved
voltage. All service will be taken at a single point of delivery designated by the Company.
X
MONTHLY RATES:
X
STANDARD SERVICE MONTHLY RATE
X
Demand and Energy Char.qes *
Secondary Voltage
$26.00
Summer
$18.48
$0.05381
Advice Notice No.
Ix
Winter
X
$15.73
X
$0.04681
X
236
Signature/Title ~’~ i@~,~d/N-~
Vice President- Regulatory Affairs
X
x
Page 2 of 6
Demand and Ener.qy Charges *
Primary Voltage
Summer
$17.42
$0.05301
Winter
X
$14.67
X
$O.04601
X
Demand and Energy Charges *
Transmission Voltage
Energy Charge per kWh *
Summer
$12.99
$0.05219
Winter
$10.24
$0.04519
X
X
X
X
X
OPTIONAL TIME OF USE (TOU) SERVICE MONTHLY RATE:
$26.00
Secondary Voltage
Summer
$17.56
$0.14605
$0.06736
Winter
X
$14.95
X
X
$0.06736
X
Demand and Ener,qy Char,qes *
Primary Voltage
Summer
$16.55
$0.14525
$0.06656
Winter
X
$13.94
X
X
$0.06656
X
Summer
$12.99
$0.14443
$0.06574
Winter
X
$10.24
X
$0.06574
X
X
X
Advice Notice No.
236
Signature/Title /~
X
X
Page 3 of 6
X
* Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No.18 (FPPCAC).X
X
X
(a) the maximum measured demand, adjusted by the Meter Voltage Adjustment, if
applicable, or
(b) 65 percent of the highest measured demand established during the twelve (12) month
period ending with the current month, or
(c) minimum demand of 50 kW.
POWER FACTOR ADJUSTMENT:
If the power factor at the time of the highest thirty (30) minute interval kilowatt demand for the
entire load is below 90% lagging, a power factor adjustment shall be calculated as follows:
ADJ = ((kW x .95 / PF) kW) x DC, where
ADJ = Increase to applicable Demand Charge,
kW = Monthly Billing Demand,
PF = Monthly measured Power Factor, and
DC = Demand Charge.
METER VOLTAGE ADJUSTMENT:
If electric service is delivered on the high voltage side of a Customer-supplied transformer, but
metered on the low voltage side of the transformer, the following meter adjustments shall be
made:
Advice Notice No.
236
Signature/Title
Michael D. Blanchard Vice President- Regulatory Affairs
X
X
X
X
X
X
X
Page 4 of 6
Adjusted Maximum kW Demand = Metered Maximum kilowatts multiplied by 1.014
Billing kilowatt-hours = Metered kilowatt-hours multiplied by 1.020
X
X
If electric service is delivered on the low voltage side of a Company-owned transformer and
metered on the high voltage side of the transformer, the following meter adjustments shall be
made:
Adjusted Maximum kW Demand = Metered Maximum kilowatts divided by 1.014
Billing kilowatt-hours = Metered kilowatt-hours divided by 1.020
X
X
x
X
X
X
X
TAX ADJUSTMENT:
X
X
X
TERMS OF PAYMENT:
Advice Notice No.
236
Signature/Title
Michael I~. Blanchard
X
X
Page 5 of 6
X
X
X
Company offices.
X
In addition to the above, the TOU rate is available under the following conditions:
X
period of 12:00 P.M. to 6:00 P.M., Mountain Daylight Time, Monday through Friday, for the X
X
X
months. At any time after the initial twelve (12) consecutive months, the Customer may X
request removal from the TOU rate.
THERMAL ENERGY STORAGE (TES) RIDER
X
This rider is available to customers with separately metered TES Systems whose maximum
X
demand does not exceed the maximum demand of the building after completion of the
necessary contract arrangements and installation of the necessary metering equipment. The X
billing demand for this separately metered load will be the highest measured thirty (30) minute
average kilowatt load established during the On-Peak period.
X
The On-Peak period shall be from 11:00 A.M. to 5:00 P.M., Mountain Standard Time, Monday X
through Friday, or 12:00 P.M. to 6:00 P.M., Mountain Daylight Time, Monday through Friday, asX
applicable. The Off-Peak period shall be all other hours not covered in the On-Peak period. X
There are no other options or riders applicable to consumption covered under this rider. Both
Advice Notice No.
236
Signature/Title ~ ~(¢.~2.~,°.~(’
M~h~I-D. Blanchard
X
X
Page 6 of 6
separately metered TES systems and total building loads must be served under this rate
schedule.
The Company reserves the right to close this rider to additional customers if, in the Company’s
judgment, system load characteristics no longer warrant such a rider.
Advice Notice No.
236
Signature/Title
FOURTEENTH REVISED RATE NO. 05
CANCELLING THIRTEENTH REVISED RATE NO. 05
IRRIGATION SERVICE RATE
Page 1 of 3
APPLICABILITY:
This rate schedule is available to irrigation water pumps dedicated solely to irrigation water
X
pumping. Only pumps of seven and one-half (7-1/2) horsepower or over will be served under
this rate schedule.
x
TERRITORY:
TYPE OF SERVICE:
X
MONTHLY RATES:
X
X
The Standard Service Monthly Rate is closed to new customers upon the effective date of
X
Advice Notice No. 236. New customers will be required to take service under the TOU option. X
Customer Char,qe
$240.00 per twelve (12) month period from service initiation, to be billed at $20.00 per month. X
In the event an existing Customer terminates service prior to the end of the current twelve (12)X
month period, the remaining portion of the unpaid monthly Customer Charges will be assessed
and due with the final bill.
Ener.qy Char.qe *
Summer
$0.11584
Winter
$0.09583
X
X
* Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No.18 (FPPCAC).X
Advice Notice No.
236
Signature/Title }/~/~ ~F’~ ~
Michael D~ B|anc’~ard v ~
X
X
Page 2 of 3
X
The Optional TOU Monthly Rate will be required for all new customers upon the effective date X
of Advice Notice No. 236. The Standard Monthly Rate will remain open to existing customers. X
Customer Charge
$240.00 per twelve (12) month period from service initiation, to be billed at $20.00 per month. X
In the event an existing Customer terminates service prior to the end of the current twelve (12)X
month period, the remaining portion of the unpaid monthly Customer Charges will be assessed
and due with the final bill.
Energy Char,qes *
Summer
Winter
(Junethrough September) (October through May)
$0.27579
$0.09979
$0.09979
X
X
X
X
X
X
* Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No.18 (FPPCAC).
X
X
The Customer Charge plus the Tax Adjustment.
X
FUEL AND PURCHASE POWER COST ADJUSTMENT CLAUSE (FPPCAC):
X
x
X
Advice Notice No.
236
Signature/Title /~/~/~/~)~.-~ ,,t~/~Fpx~/
MJctia~l b.~Blanch’~rd ’~/
X
X
Page 3 of 3
TAX ADJUSTMENT:
TERMS OF PAYMENT:
twenty (20) calendar days thereafter. If the twentieth day falls on a holiday or weekend, the X
X
X
Company offices.
X
In addition to the above, the Optional TOU rate schedule is available under the following
conditions:
X
period of 1:00 P.M. to 5:00 P.M., Mountain Daylight Time, Monday through Friday, for the
X
X
The Customer agrees to remain on the TOU rate schedule for a minimum of twelve (12)
consecutive months. At any time after the initial twelve (12) consecutive months, the
Customer may request removal from the TOU rate schedule.
The Customer agrees that TOU billing will become effective with the first complete billing
Advice Notice No.
236
Signature/Title .~/~ _/~ ~,~~~/
X
X
X
WATER, SEWAGE, STORM SEWAGE PUMPING
OR SEWAGE DISPOSAL RATE
Page 1 of 3
APPLICABILITY:
This rate schedule is available for service to an incorporated village, town, city, or municipality X
or any other public authority which provides for water pumping, sewage pumping, storm sewageX
pumping, or sewage disposal plant usage only.
X
TERRITORY:
TYPE OF SERVICE:
Service available under this rate schedule will be determined by the Company and will normally
MONTHLY RATES:
Energy Char.qe *
$20.00
Summer
(Junethrough September)
$0.09392
$0.09073
Secondary Voltage per kWh
Primary Voltage per kWh
Winter
(Octoberthrough May)
$0.08692
$0.08373
* Energy charges include a Fuel in Base Factor ($.kWh) from Rate Schedule No.18 (FPPCAC).
OPTIONAL TIME OF USE (TOU) MONTHLY RATE
Energy Char,qes *
Secondary Voltage
$20.00
Summer
(Maythrough O~ober)
$0.25482
$0.07882
Advice Notice No.
Winter
(Novemberthrough April)
$0.07882
236
Signature/Title
MiChael D. Blancl~ard Vice President - Regulatory Affairs
X
X
Page 2 of 3
Ener,qy Char,qes *
Primary Voltage
Summer
(Maythrough O~ober)
$0.25402
$0.07802
Winter
X
$0.07802
X
X
x
X
~, Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No. 18 (FPPCAC). X
X
The Customer Charge plus the Tax Adjustment.
X
metered on the low voltage side of the transformer, the following meter adjustments shall be
made:
X
metered on the high voltage side of the transformer, the following meter adjustments shall be
made:
X
X
Advice Notice No.
236
Signature/Title /f~//j(~ i~.F~’F~’~,~J
a~c’h~el £~, Blanc-har~ ~
X
X
X
Page 3 of 3
X
TAX ADJUSTMENT:
X
X
TERMS OF PAYMENT:
X
Service supplied under this rate schedule is subject to the Company’s Rules and Regulations, X
X
Company offices.
X
The term of service under this rate schedule shall not be less than one (1) year.
Advice Notice No.
236
Signature/Title ~/],~ ~
M~(~l~a’el D. Blanchard ’
X
LARGE POWER SERVICE RATE
Page 1 of 5
APPLICABILITY:
This rate schedule is available to all Customers for electric lighting, power, and heating service X
where facilities of adequate capacity and suitable voltage are adjacent to the premises to be X
served. The Customer and the Company will determine whether a new Customer qualifies for X
this rate schedule. Service under this rate schedule shall be limited to Customers whose
X
expected monthly demand will exceed eight hundred (800) kilowatts (kW). A Customer who X
qualifies for the Large Power Service Rate must remain on this rate schedule for a minimum of X
twelve (12) consecutive months.
X
If the Customer’s monthly maximum demand is below 800 kW during the current month and X
previous (11) month period, and the Customer’s load is expected to remain at that level of
X
demand, the Customer shall no longer be eligible for service under the Large Power Service
Rate, but shall immediately become eligible for the General Service Rate or Small General
X
Service Rate, as applicable.
X
TERRITORY:
TYPE OF SERVICE:
X
MONTHLY RATES:
X
STANDARD SERVICE MONTHLY RATE
X
Secondary Voltage
$127.00
Summer
$22.96
$0.12212
$0.03936
Advice Notice No.
Winter
×
(November through April) ×
$15.10
×
×
$0.03936
×
236
Signature/Title
Mich~l D.-Bi~nch~rd
x
X
Page 2 of 5
Primary Voltage
Summer
$22.56
$0.12132
$0.03856
Winter
X
14.70
X
Summer
(Maythrough O~obeO
$20.02
$0.12050
$0.03774
Winter
X
$12.16
X
$0.03856
$0.03774
X
x
X
x
through Friday, during the months of June through September.
X
X
X
The Customer Charge plus the Demand Charge plus the Tax Adjustment.
X
(a) the maximum measured demand, adjusted by the Meter Voltage Adjustment, if
X
applicable, or
(b) 65 percent of the highest measured demand established during the twelve (12) month
(c) a minimum demand of 800 kW.
X
Advice Notice No.
236
Signature/Title
Michae-] D,-Bla~cha~d
X
X
Page 3 of 5
ADJ = ((kW x .95 / PF) - kW) x DC, where
ADJ - Increase to applicable Demand Charge,
DC = Demand Charge.
service is metered on the low voltage side of the transformer, the following meter adjustments
shall be made:
X
X
metered on the high voltage side of the transformer, the following meter adjustments shall be X
made:
x
X
X
X
X
Advice Notice No.
236
Signature/Title ~ ~.~.,’~_~/
Michael D. Blanc-hard
X
X
X
X
Page 4 of 5
TAX ADJUSTMENT:
X
TERMS OF PAYMENT:
X
X
Company offices. Any contract provisions shall also apply to service under this rate schedule. X
THERMAL ENERGY STORAGE RIDER
This rider is available to customers with separately metered Thermal Energy Storage (TES)
X
Systems whose maximum demand does not exceed the maximum demand of the building after
completion of the necessary contract arrangements and installation of the necessary metering X
equipment. The billing demand for this separately metered load will be the highest measured
thirty (30) minute average kilowatt load established during the Off-Peak period.
X
The On-Peak period shall be from 11:00 A.M. to 5:00 P.M., Mountain Standard Time, Monday X
through Friday, or 12:00 P.M. to 6:00 P.M., Mountain Daylight Time, Monday through Friday, asX
applicable. The Off-Peak period shall be all other hours not covered in the On-Peak period. X
There are no other options or riders applicable to consumption covered under this rider. Both
separately metered TES systems and total building loads must be served under this rate
schedule.
Advice Notice No.
236
Signature/Title ’/~ ~_(~_.~,~flz’?¢.~ C~t!
Michael D. Blanc~ard ’ .
X
X
Page 5 of 5
The Company reserves the right to close this rider to additional customers if, in the Company’s
judgment, system load characteristics no longer warrant such a rider.
Advice Notice No.
236
Signature/Title ~Jj~ i~/-:~>~.~-~J
Michael D.-Blanchard ~./
MILITARY RESEARCH AND DEVELOPMENT POWER RATE
Page 1 of 4
APPLICABILITY:
This rate schedule is available only to military installations whose primary mission is research X
and development, and who contract for a minimum billing demand of 6,000 kilowatts (kW) for a
period of not less than ten (10) years.
If the Customer’s monthly maximum demand is below 6,000 kW during the current month and X
previous eleven (11) month period and the Customer’s load is expected to remain at that level X
of demand, the Customer shall no longer be eligible for service under this rate, but shall
X
immediately become eligible for the Large Power Service Rate or the General Service Rate, as X
applicable.
X
TERRITORY:
Areas served by the Company in Dona Aria, Sierra, Otero and Luna Counties.
TYPE OF SERVICE:
X
Service available under this rate schedule will be determined by the Company. All service will X
be taken at a single point of delivery designated by the Company.
X
MONTHLY RATES:
X
X
TIME OF USE (TOU) MONTHLY RATE:
X
$220.00
Summer
$19.43
$0.12015
$0.03741
Ix
Winter
X
$11.57
X
X
$0.03741
X
through Friday, during the months of June through September.
Advice Notice No.
236
SignaturelTitle ~//’)
Micl~’el D. Blanc~ard
X
X
Page 2 of 4
X
Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No. 18 (FPPCAC). X
X
The Customer Meter Charge plus the applicable Demand Charge.
X
Maximum demand will be defined as the highest thirty (30) minute integrated kW load. In the
event that a military installation service is taken at more than one point, it shall be determined
conjunctively.
(a) the maximum measured demand, adjusted by the Metering Adjustment, if applicable, orX
(b) 65% of the highest measured demand established in the twelve (12) month period
X
ending with the current month, or
X
(c) a minimum demand of 6,000 kW
X
TEMPORARY OFF-PEAK DEMAND:
If customer requires a demand above the current annual peak for the installation, and if,
(1) The increase in demand (defined as the amount the required demand exceeds the
current annual demand peak) is coordinated with the Company, and
The
increase in demand is for a short term only (not to exceed ten (10) days in any one
(2)
billing period), and
(3) The increase in demand does not exceed the Company’s capabilities or require changes
in the Company’s service facilities, and
(4) The required increase in demand will fall outside of the Company’s daily peak load
period of 11:00 A.M. to 6:00 P.M. during the months of June through September, unlessX
mutually agreeable otherwise, and
(5) The Company is given reasonable advance written notice Of the required increase in
demand, then
That portion of the increase in demand that does not exceed twenty-five percent of the previous X
Advice Notice No.
236
SignaturelTitle
Micli~;$1 D. Blancha-rd - ~ \
X
X
Page 3 of 4
annual demand peak shall be waived by the Company for billing purposes. However, any
demand above one hundred twenty-five percent of the current annual demand peak shall be X
included in the bill for the appropriate billing period. In no case will the demand established by
the short-term increase be used by the Company in applying the demand ratchet. As used
herein, "annual demand peak" is the highest thirty (30) minute kilowatt average load established
by the Customer over the past twelve (12) months, ending with the current month.
METERING ADJUSTMENT:
The Company may, at its option, meter the Customer’s electrical usage on the low side of the
substation transformer, in which case the metered quantities will be increased for each meter
location as follows:
Post Area
AMRAD
MAR
ALA-5
Communications
Support Facility
EMRLD
Holloman
kW 1.001423 kWh 18608 + (metered kWh x 1.001423)
kW 1.000307 kWh 12253 + (metered.kWh x 1.000307)
Primary Metering
Primary Metering
Adjusted as required for scheduled delivery WAPA energy and demand
PROTECTIVE EQUIPMENT:
Customer shall provide, at the Customer’s expense, suitable relaying equipment and devices as
specified by the Company so as to protect the Company’s system and its service to other
electric users from disturbance or faults that may occur on Customer’s system and equipment.
X
Advice Notice No.
236
Signature/Title ~ _./’]. ~~/~ ~ _~,~J
X
X
X
X
Page 4 of 4
X
X
TERMS OF PAYMENT:
X
X
Company offices. The contract provisions shall also apply to service under this rate schedule. X
In addition to the above, the TOU Monthly Rate is available under the following conditions:
X
period of 12:00 P.M. to 6:00 P.M, Mountain Daylight Time, Monday through Friday, for the X
X
X
2. The Customer agrees to remain on the TOU rate schedule for a minimum of twelve (12)
consecutive months. At any time after the initial twelve (12) consecutive months, the
Customer may request removal from the TOU rate schedule.
X
X
X
The Customer agrees that TOU billing will become effective with the first complete billing
cycle following installation of the TOU meter. Removal from TOU billing will become
X
effective with the first complete billing cycle following the request for removal from the TOUX
¯ rate schedule.
X
Advice Notice No.
236
Signature/Title ~Y~ //~.~ ~/~’¢
M~cl~a~l D. B~anc~ard - "
STREET LIGHTING SERVICE RATE
Page 1 of 7
APPLICABILITY:
This rate schedule is available to any village, town, city, county, state governmental agency, or X
private subdivision for street lighting purposes only.
X
TERRITORY:
MONTHLY RATES:
Customer Charge
X
$ 15.00
Monthly Rate Company-Owned
OVERHEAD WIRING SYSTEM ON WOOD POLES
175W - MV*
7,000 Lumen - 195 Watts
250W- MV* 11,000 Lumen - 275 Watts
400W- MV* 20,000 Lumen - 450 Watts
150W - HPS - 14,400 Lumen - 193 Watts
250W - HPS - 23,200 Lumen - 313 Watts
400W - HPS - 45,000 Lumen - 485 Watts
OVERHEAD WIRING SYSTEM ON METAL POLES
150W- HPS - 14,400 Lumen - 193 Watts
250W - HPS - 23,200 Lumen - 313 Watts
400W - HPS - 45,000 Lumen - 485 Watts
UNDERGROUND WIRING SYSTEM ON METAL POLES
150W - HPS - t4,400 Lumen - 193 Watts
250W - HPS - 23,200 Lumen - 313 Watts
I 400W - HPS - 45,000 Lumen - 485 Watts
Advice Notice No.
Single Fixture Charge
Per Month
$ 21.80
$ 25.66
$ 33.99
$ 21.84
$ 27.45
$ 36.28
Per Month
$ 30.92
$ 36.83
$ 51.56
Per Month
$ 38.95
$ 44.40
$ 54.84
236
Signature/Title ]~/~,~ ~__~:z~.,~,"~,.-,~~.~.//
MJc’h~l D. Blanchard- Vice President - Regulatory Affairs
X
X
X
X
X
x
X
l
X
X
X
X
X
X
Page 2 of 7
UNDERGROUND WIRING SYSTEM ON WOOD POLES
150W-HPS - 14,400 Lumen- 193 Watts
250W- HPS - 23,200 Lumen - 313 Watts
400W - HPS - 45,000 Lumen - 485 Watts
Per Month
$ 25.57
$ 33.17
$ 42.49
X
X
X
X
Charge Per Fixture
Per Month
$ 10.37
$ 26.01
$ 9.33
$ 13.92
$ 15.71
$ 20.14
$ 24.45
X
X
X
X
X
X
X
x
Monthly Rate City-Owned
MUNICIPAL WIRING SYSTEM
175W - MV* 7,000 Lumen - 195 Watts
400W- MV* 20,000 Lumen - 450 Watts
150W- HPS - 14,400 Lumen - 175 Watts
180W- HPS - 19,800 Lumen - 250 Watts
250W- HPS - 23,200 Lumen - 313 Watts
250W- HPS - 33,000 Lumen - 365 Watts
400W - HPS - 45,000 Lumen - 485 Watts
Refer to the Mercury Vapor Closed to New Installations and Mercury Vapor Fixture
Replacement Schedule sections of this rate schedule.
X
Note: First Wattage represents the lamp only, second Wattage includes the lamp and ballast. x
*
LIGHT EMITTING DIODE (LED)
Total Wattage Range:
31 Watt through 40 Watts
Advice Notice No.
Charge Per Fixture
Per Month
$ 2.02
$2.60
$ 3.17
$ 3.75
$ 4.33
$ 4.91
$ 5.49
$ 6.07
$ 6.93
236
Signature/Title
D. Blanchard
X
X
X
X
X
X
X
X
X
X
X
X
X
Page 3 of 7
Total Wattage Range: 131 Watt through 150Watts
Total Wattage Range: 151 Watts through 170 Watts
METERED INSTALLATIONS
$8.10
$ 9.24
$10.41
$11.55
$12,72
$13.87
X
X
X
X
X
X
Charge per kWh
X
$0.09146
X
¯ Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No.18 (FPPCAC).
X
MINIMUM CHARGE:
X
The Monthly Lamp Charge and Tax Adjustment.
x
X
All service taken under this rate schedule is subject to the provisions of the Company’s RateX
X
TAX ADJUSTMENT:
X
X
SPECIAL CONDITIONS:
Advice Notice No.
236
Signature/Title ~/~./~ _!~2...~¢.~,,~w~,~J
Mi~:l~e’l D. Blanch~rd " ~,
X
X
Page 4 of 7
The maximum mounting height of fixtures of less than 45,000 lumens shall not exceed 30 feet;
the maximum mounting height of fixtures of 45,000 lumens shall not exceed 40 feet; and the
maximum mounting height of fixtures of 60,000 lumens shall not exceed 50 feet. The charges
listed are for standard fixtures. Charges for ornamental fixtures will be negotiated. Sizes
shown are nominal lumen rating.
A. Installation and Ownership of Facilities:
Street lighting systems are installed, owned and maintained by the Company. The service
to each location is not to exceed 150 feet. For service to any location in excess of 150 feet,
the Customer shall pay the Company the cost of the additional installation. Only Company
specified standard street lighting components are used in the installations. In areas with
overhead electric distribution lines, street lights are installed on existing wood poles.
Alternatively, the Company will install one additional pole for each street light. The
Company will install street lighting standards which are served underground only on main
thoroughfares that are paved and have curbs and gutters:
Street lighting facilities will be relocated for the benefit or convenience of a Customer only X
when written approval of the new location is received from proper county or municipal
authority, and the Customer making the request bears all relocation costs. In franchised X
areas, the Company may contract with the city, town or village to operate and maintain
street lighting installed and owned by the State. In some cases, the Company may contract
with a county for Interstate Highway lighting only. In the absence of such a contract, electric
service for state-owned street lighting systems shall be provided under the Company’s
standard practice for metered services and billed under the applicable rate schedule.
X
B. Operation and Maintenance:
Company-owned system: The Company will perform normal operation and maintenance of
the lighting system which includes routine maintenance, periodic lamp replacement and
fixture servicing.
It shall be the duty of the Customer to report to the Company the failure of any lamp to burn,
or to burn adequately, and it shall thereafter be the obligation of the Company to restore
such lamp to service. Any lamp so reported as failing to burn, or to burn adequately, shall
be replaced or repaired (refer to the Mercury Vapor Replacement Schedule) and returned to
regular operation within a reasonable period of time after notice of such failure to the
Company.
Advice Notice No.
236
Signature/Title /~Y~,
I~ichael D’~Blanchard - ’
X
X
Page 5 of 7
C. Conversions:
Conversions of Mercury Vapor to High Pressure Sodium Vapor Street Lighting Service
(refer to the Mercury Vapor Fixture Replacement Schedule):
Upon request by customer that Company-owned mercury vapor street lighting be converted
to high pressure sodium street lighting, the following conditions will prevail:
The Customer will be advised by the Company that under such conversions where the
lights have not reached their normal expected average service life (24 years) the
Customer will be expected to pay the losses sustained by the Company due to the
conversion, including current labor, engineering, transportation, supervision and fringe
benefits for converting.
2. These charges will be a one-time lump sum charge to the Customer to be paid in
advance and therefore will not be included in the rate structure for the new lights
installed.
When conversions are performed and the Company-owned pole does not have to be
replaced or moved, the monthly charge for the pole only is included in the total fixture cost
per month. If poles have to be replaced or moved, new fixture costs will apply.
4. Mercury Vapor Closed To New Installations
Mercury Vapor lamp categories are closed to new installations. Customers with existing
fixtures which are non-repairable and must be replaced will have the option to convert
their service to high pressure sodium vapor lamps or may cancel their service.
However, a Customer request for conversion or replacement of existing, non-defective
mercury vapor fixtures will be subject to all applicable costs of such conversion or
replacement.
5. Mercury Vapor Fixture Replacement Schedule
For Company owned lights, when existing mercury vapor fixtures require replacement,
the Company will make such replacements with comparable high pressure sodium
vapor lighting at no cost, as specified below.
Advice Notice No.
236
Signature/Title ~}Ai~~-~’7~ ,,~.~f/
Mi~ael’D. Blanchard - t
ELEVENTH REVISED RATE NO. tl
X
X
Page 6 of 7
OVERHEAD WIRING SYSTEM ON WOOD POLES
Existing Mercury Vapor Lighting
Wattage
Lumens
kWh
195
7,000
70
275
11,000
98
450
20,000
160
Sodium Vapor Replacement
Wa~age
Lumens
kWh
175
14,400
62
175
62
14,400
250
89
19,800
MUNICIPAL WIRING SYSTEM
Existing Mercu~ VaporLighting
Wattage
Lumens
kWh
195
7,000
70
450
20,000
160
Wa~age
Lumens
kWh
175
14,400
62
250
19,800
89
At the time of the replacement, the Customer will be billed at the applicable rate schedule
charge and associated kWh usage for the high pressure sodium vapor replacement lighting.
X
D. Services and Other Appurtenances
All lamps to be installed under the Company-owned rate schedule shall be installed by the X
Company on a block-to-block basis; provided, however, that in the event the Customer
wants the Company to install a lamp or lamps, in an isolated area which cannot follow the
block-to-block pattern, and such extension will involve a departure from such pattern, then
and in such event the Customer shall be obligated to pay the Company the cost and
expense coincident to the construction of the additional extension.
E. Termination
Service to any lamp installed hereunder shall be terminated by the Company upon receipt of
thirty (30) days notice and, coincident with such notice, payment of the Company’s
depreciated investment per fixture.
TERMS OF PAYMENT:
Advice Notice No.
236
Signature/Title
Michael D. Blanchard ~"(
X
X
Page 7 of 7
X
X
Company offices.
X
Advice Notice No.
236
Signature/Title
¯ " ’- D~-B~nchard
-~
TWELFTH REVISED RATE NO. 12
CANCELLING ELEVENTH REVISED RATE NO. 12
PRIVATE AREA LIGHTING RATE
Page 1 of 4
APPLICABILITY:
This rate schedule is available to all customers with overhead outdoor lighting service under the
X
conditions specified herein.
TERRITORY:
TYPE OF SERVICE:
X
Available for outdoor all-night lighting service contracted for by the Customer for overhead
X
service, automatically controlled, standard mercury vapor (refer to the Mercury Vapor Closed toX
New Installations and Mercury Vapor Fixture Replacement Schedule section of this rate
X
schedule) or high pressure sodium vapor luminaire units mounted on Company-owned wood X
poles.
MONTHLY RATES:
X
OVERHEAD WOOD POLE
175W - MV*
250W - MV*
400W - MV* 20,000 Lumen - 460 Watts
100W- HPSV - 8,500 Lumen - 124 Watts
250W - HPSV - 23,200 Lumen - 313 Watts
Single Fixture
Charge
Per Each
Per Month
New Pole
$ 18.10
$ 23,58
$ 33.47
$ 13.36
$ 25.97
$ 16.83
$ 35.46
Single Fixture
Charge
Per Each
Per Month
Existing Pole
$ 14.25
$ 19.27
$ 29.55
$ 9.87
$ 22.56
$ 13.49
$ 29.08
* Refer to the Mercury Vapor Closed to New Installations and Mercury Vapor Fixture
Replacement Schedule sections of this rate schedule.
Advice Notice No.
236
Signature/Title
Michael D. Blanchard - t
X
X
X
X
X
X
X
X
X
X
Page 2 of 4
FLOODLIGHT SERVICE
With Company Supplied Poles
100W- HPS - FL 8,500 Lumen 137 Watts - 35 ft. Pole
1000W - HPS - FL 119,500 Lumen 1103 Watts - 40 ft. Pole
1000W- HPS - FL 119,500 Lumen 1103 Watts- 50 ft. Pole
Charge Per Fixture
Per Month
$ 14.23
$ 26.66
$ 35.69
$ 79.49
$ 84.94
X
X
X
x
x
FLOODLIGHT SERVICE
Without Company Supplied Poles
1000W - HPS - FL 119,500 Lumen 1103 Watts
Per Month
$ 11.53
$ 22.95
$ 34.25
$ 77,39
X
X
x
X
X
FLOODLIGHT SERVICE
Metal Halide With Poles *
400W - MH - FL 38,000 Lumen 476 Watts - 35 ft. Pole
¯ The 400W-MH lamp is closed to new customers.
Per Month
$ 36.43
$ 83.54
$ 84.89
X
X
X
x
FLOODLIGHT SERVICE
Metal Halide Without Poles *
400W- MH - FL 38,000 Lumen 476 Watt
1000W-MH- FL 115,000 Lumen 1100Watt
¯ The 400W-MH lamp is closed to new customers.
Per Month
$ 34.99
$ 81.42
X
X
X
Note: First Wattage represents the lamp only, second Wattage includes the lamp and ballast. X
MONTHLY MINIMUM:
X
The Monthly Lamp Charge plus tax adjustment.
X
X
X
Advice Notice No.
236
Signature/Title M ~]~h a~l
Vice President -Regulatory Affairs
X
X
Page 3 of 4
TAX ADJUSTMENT:
X
X
X
X
FACILITIES PROVIDED:
The Company will install the appropriate pole, luminaire or other lighting fixture, and necessary
equipment and extend overhead secondary wiring up to 125 feet where necessary and the
Company will own, operate and maintain the installation. Underground service for area lighting
is available at a cost equal to the differential between supplied overhead facilities and the actual
cost of underground facilities. Facilities necessary in addition to above will be paid for by the
Customer. All facilities installed by the Company will remain the property of the Company. The
Company has the option not to install poles and luminaries inaccessible to trucks.
MERCURY VAPOR CLOSED TO NEW INSTALLATIONS
Mercury Vapor lamp categories are closed to new installations. Customers with existing fixtures
which are non-repairable and must be replaced will have the option to convert their service to
high pressure sodium vapor lamps or may cancel their service. However, a Customer request
for conversion or replacement of existing, non-defective mercury vapor fixtures will be subject to
all applicable costs of such conversion or replacement.
Advice Notice No.
236
SignaturelTitle /~//~ ~ J~-~P.~_,~:2L~!
X
x
Page 4 of 4
MERCURY FIXTURE REPLACEMENT SCHEDULE
For Company owned lights, when existing mercury vapor fixtures require replacement, the
Company will make such replacements with comparable high pressure sodium vapor lighting at
no cost, as specified below.
Existing Mercu~ Vapor Lighting
WaRage
Lumens
KWh
195
7,000
70
275
11,000
98
430
20,000
153
Wattage
Lumens
kWh
124
44
8,500
44
124
8,500
313
23,200
112
At the time of the replacement, the Customer will be billed at the applicable rate schedule
charge and associated kWh usage for the high pressure sodium vapor replacement lighting.
X
TERMS OF PAYMENT:
X
X
Company offices.
X
The initial term of contract for service under this rate schedule shall not be less than two (2) X
years. The Company reserves the right to remove all equipment furnished under this rate
schedule and void the contract if, in the opinion of the Company, there is excessive breakage or X
vandalism of its facilities.
X
Advice Notice No.
236
Signature/Title ////~,~) L~ ~,,_..~-~ _..~//~
EIGHTH REVISED RATE NO. 15
CANCELLING SEVENTH REVISED RATE NO. 15
MISCELLANEOUS SERVICE CHARGES
Page 1 of 8
APPLICABILITY:
Service charges under this rate schedule are applicable to all customers served by the
Company. The Company will not charge for services or functions that are a normal utility
service except as provided for in the rate schedules of the Company.
X
X
X
TERRITORY:
SERVICE CHARGES:
Description of Charge
New Service Start - No Meter Reading Required
New Service Start - Meter Reading Required
New Service Start - No Existing Meter (Standard Rate)
New Service Start - No Existing Meter (Non-Standard Rate)
Energy Diversion Charge
Meter Seal Replacement Charge
No Access To Meter Charge
"No Light" Service Call Charge (Standard Rate)
"No Light" Service Call Charge (Non-Standard Rate)
Non-Pay Reconnect Charge @ Meter- Next Day
Non-Pay Reconnect Charge @ Meter- Same Day
Non-Pay Reconnect Charge @ Pole
Pulse Metering Equipment Installation
Pulse Metering Equipment Repair
Returned Payment Charge
Requested Meter Test Charge (Single Phase)
Requested Meter Test Charge (Three Phase)
Temporary Overhead Connection Charge
Temporary Underground Connection Charge
Unable to Connect Requested New Underground/Overhead Svc
Facilities Rental Charge
Maintenance of Customer Dedicated Facility Charge
Maintenance of Customer Owned Facility Charge
Advice Notice No.
Rate
13.25
26.75
$ 55.75
$ 300.00
$ 325.00
9.75
13.50
30.50
285.00
40,00
$ 158.00
$ 157.75
$ 248.50
77.50
31.25
67.50
147.50
167.50
$167.50
$ 83.50
0.9620% of cost
0.6804% of cost
2.7940% of cost
236
Signature/Title /t~.~[~.~..,,v,/~,,-,~.,, ,,W/
Micha’elD. Blan~hard " f
x
X
X
X
X
x
X
X
X
X
X
x
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Page 2 of 8
Special Bill Analysis Charge
Special Bill History Charge
Non-Routine Miscellaneous Charge
Out of Cycle Meter Reading Charge
Greater of $ 75.00 or cost
Greater of $ 25.00 or cost
2.7940% of cost
$ 21.00
X
X
X
X
MISCELLANEOUS CHARGE DESCRIPTIONS
X
NEW SERVICE START - NO METER READING REQUIRED:
X
The charge will be made for a new account setup and name change on a service location with
an existing meter due to a change of responsible party, tenant or owner and no meter reading isX
required.
x
X
X
NEW SERVICE START - METER READING REQUIRED:
The charge will be made when a Customer requests a new account setup and name change on
X
a service location with an existing meter due to a change of responsible party, tenant or ownerX
and/or the Company determines a meter reading is required and/or the meter must be
X
reconnected.
X
NEW SERVICE START - NO EXISTING METER (STANDARD RATE):
X
The Standard Rate will be charged when a Customer requests a new account setup and
X
service is scheduled to run service wires for the first time to a new premise or new point of
X
service, set a meter, and do the other work necessary to initiate a new electric service account. X
X
X
X
X
NEW SERVICE START - NO EXISTING METER (NON-STANDARD RATE)
X
The Non-Standard Rate will be charged when-f the Customer requests a new account setup X
and service as a same-day connection, or any connection after Company business hours, or X
on Saturdays, Sundays and Holidays, and the Company calls out Company service personnel X
to provide the unscheduled service.
X
Advice Notice No.
236
Signature/Title //4~..~.
Michael D, Blanchard
X
X
Page 3 of 8
ENERGY DIVERSION CHARGE:
The charge will be made for the detection and confirmation of any incidence of tampering or X
interference with the meter installation, or by other means preventing the proper working
X
thereof, to include any theft of service by any person on the Customer’s premises, or evidence X
of such tampering, interfering, or theft of service (energy diversion). The Company will maintainX
evidence as required and a notice will be left at the Customer premises when possible.
X
In addition, the Customer will pay the disconnect charge, the expense of damage to and/or X
replacement of the Company’s equipment, and the estimated cost of power and energy not
recorded on the meter by reason of energy diversion at the applicable rate using the Company’sX
best estimated data.
X
METER SEAL REPLACEMENT CHARGE:
The charge will be made for replacement of the Company’s meter seal on the meter at the
X
Customer’s premises when the seal has been broken or removed. The charge will be made forX
each seal replacement after the first replacement within a twelve (12) month period and a
warning letter has been sent by the Company to the Customer after that first replacement.
NO ACCESS TO METER CHARGE:
X
The charge will be made when estimation of the meter reading is not an option and the
Customer fails to provide access to read the meter and Company service personnel must be
sent back to the premise to obtain a physical meter reading.
X
X
X
"NO LIGHT" SERVICE CALL CHARGE (STANDARD RATE):
X
The Standard Rate will be charged when a Customer calls the Company to report "No Lights" X
and requests Company service personnel be dispatched to Customer premises and it is
X
determined that the "No Light" condition was caused by a problem in the Customer-owned
X
wiring or equipment on the Customer’s side of the point of delivery.
"NO LIGHT" SERVICE CALL CHARGE (NON-STANDARD RATE):
X
The Non-Standard Rate will be charged when a Customer calls the Company to report "No
X
Advice Notice No.
236
Signature/Title /~/~0 ~(~J~
X
X
Page 4 of 8
Lights" and requests Company service personnel be dispatched to Customer premises after
X
Company business hours, or on Saturdays, Sundays and Holidays, and it is determined that the
X
"No Light" condition was caused by a problem in the Customer-owned wiring or equipment on X
the Customer’s side of the point of delivery.
X
NON-PAY RECONNECT CHARGE @ METER - NEXT DAY:
X
The Rate will be charged when the Customer requests reconnection of electric service followingX
a disconnection of service because of non-payment of bill and reconnection is requested for X
the next regular Company business day.
X
NON-PAY RECONNECT CHARGE @ METER - SAME DAY
X
The Rate will be charged when the Customer requests reconnection of electric service followingX
a disconnection of service because of non-payment of bill and the reconnection is requested forX
the same Company business day as payment is received, and Company personnel must be X
rescheduled to complete the same-day request.
X
¯ NON-PAY RECONNECT CHARGE @ POLE:
X
The charge will be made for reconnection of electric service when the requesting Customer wasX
disconnected at the pole or riser for nonpayment of bills when Company service personnel wereX
unable to gain access to the meter for disconnection due to a problem at the Customer’s
X
premise (i.e., locked gate, dog, blocked meter, fence, etc.). Reconnection will be made on a
X
next-day or scheduled basis.
X
PULSE METERING EQUIPMENT INSTALLATION:
The charge will be made when the Customer requests the Company to install an isolation relayX
and output wiring to provide output electric pulses for the purpose of load management and
energy conservation.
PULSE METERING EQUIPMENT REPAIR:
The charge will be made when the Customer requests the Company to repair pulse metering
equipment due to loss of pulse and it is determined that the cause is due to a problem in
Customer-owned wiring or equipment on the Customer’s side of the point of delivery.
Advice Notice No.
236
Signature/Title //~ ~) ./~.~j,/~/l~.,~, ~Y/
Michael ~. B~anchard
X
X
X
Page 5 of 8
RETURNED PAYMENT CHARGE:
X
The charge will be made for each payment made by check, bank draft, credit card, debit card, X
or other electronic means that is returned to the Company without payment.
X
REQUESTED METER TEST (SINGLE PHASE):
Upon request by a Customer, the Company will test the accuracy of the meter serving that
X
Customer. If requested at the time of the initial request, the Customer or their representative X
may be present during the meter test. The Company will provide reasonable advance
X
notification of the date, time, and location of the test. A report of the test results will be made toX
the Customer within a reasonable time after completion of the test.
X
The charge will be made if the meter has been previously tested by the Company or by an
X
authorized agency within a period of eighteen (18) months from the date of the requested test. X
The charge reflects the Company’s cost to test the meter in accordance with 17.9.560.14
X
NMAC (Inspection and Tests)..If the meter is found to be more than two percent (2%) in errorX
pursuant to 17.9.560.14 NMAC, the charge will be refunded in accordance with 17.9.560.11
NMAC (Customer Relations).
X
X
X
X
REQUESTED METER TEST (THREE PHASE ):
Upon request by a Customer, the Company will test the accuracy of the meter serving that
X
Customer. If requested at the time of the initial request, the Customer or their representative X
may be present during the meter test. The Company will provide reasonable advance
X
notification of the date, time, and location of the test. A re port of the test results will be made toX
the Customer within a reasonable time after completion of the test.
X
The charge will be made if the meter has been previously tested by the Company or by an
X
authorized agency within a period of eighteen (18) months from the date of the requested test. X
The charge reflects the Company’s cost to test the meter and is made in accordance with
X
17.9.560.1 NMAC 4 (Inspection and Tests). If any meter is found to be more than two percent X
Advice Notice No.
236
Signature/Title
X
X
Page 6 of 8
(2%) in error pursuant to 17.9.560.14 NMAC, the charge will be refunded in accordance with
17.9.560.11 NMAC (Customer Relations).
X
X
X
TEMPORARY OVERHEAD CONNECTION CHARGE:
The charge will be made when a Customer requests temporary overhead service and, single orX
three phase 120/240 volt service is not more than ninety (90) feet from the Customer’s point ofX
delivery.
If the desired type of service is not single or three phase 120/240 volt service and/or is over
X
ninety (90) feet from the Customer’s point of delivery, temporary service will be provided only X
when the Customer pays in advance to the Company the entire cost of installing and removing
the necessary overhead facilities.
TEMPORARY UNDERGROUND CONNECTION CHARGE:
The charge will be made when a Customer requests temporary underground service, and whenX
single or three phase 120/240 volt service is available at the Customer’s point of delivery.
X
If the desired type of service is not single or three phase 120/240 volt, service and/or is not
available at the Customer’s point of delivery, temporary service will be provided only when the x
Customer pays in advance to the Company the entire cost of installing and removing the
X
necessary facilities to provide the temporary service.
UNABLE TO CONNECT REQUESTED NEW UNDERGROUNDIOVERHEAD SERVICE:
The charge will be made when the Customer or Customer’s electrical contractor applies for a X
new underground/overhead connection and the Company is unable to connect the service due
to a broken duct, incomplete Customer-owned electrical service entrance installation, the
X
absence of a permanently marked address, or the absence of required permitting
X
documentation.
X
Advice Notice No.
236
SignaturelTitle ~p ,_/~7,~-~.~~/~
X
X
Page 7 of 8
X
X
FACILITIES RENTAL CHARGE:
The charge will be calculated and assessed on the replacement cost of equipment or facilities X
owned and maintained by the Company (excluding substation facilities) when the Customer X
elects to rent from the Company rather than own the equipment or facilities.
X
MAINTENANCE OF CUSTOMER DEDICATED FACILITY CHARGE
X
The charge will be calculated and assessed to the Customer for the Company investment in X
facilities and maintenance cost dedicated to serve an individual Customer and covered by a
X
Customer Advance for Construction (CAFC) or a Contribution in Aid of Construction .(CIAOC). X
The monthly charge will continue for the term of the CAFC, or five (5) years for ClAOC, with theX
monthly charge applicable to either the remaining CAFC balance or the Customer’s CIAOC
X
balance to the Company, when a Customer requests and the Company agrees to provide
X
Company-owned facilities and equipment dedicated to a single Customer.
X
MAINTENANCE OF CUSTOMER OWNED FACILITY CHARGE
X
The charge will be calculated and assessed to the Customer in addition to the reasonable
maintenance costs to the Company when a Customer requests and the Company agrees to
provide maintenance for Customer-owned facilities and equipment.
X
X
X
SPECIAL BILLING ANALYSIS CHARGE:
X
The charge will be made each time a Customer requests and the Company provides a manuallyX
prepared special billing analysis or rate comparison for a period exceeding the most recent
X
twelve (12) month period. The charge will equal the Company’s cost of fulfilling the request, X
including but not limited to labor, overheads, materials, and data processing expenses, or the X
minimum charge, whichever is greater.
X
SPECIAL BILLING HISTORY CHARGE:
X
The charge will be made for each instance where a Customer requests and the Company
X
provides a billing or usage history or analysis for a premise that exceeds the most recent twelveX
Advice Notice No.
236
Signature/Title [~’]~
M icl~a~l"D, Blanchard
Vice President -Regulatory Affairs
X
X
Page 8 of 8
(12) month period. The charge will equal the Company’s cost of fulfilling the request, including X
but not limited to labor, overheads, materials, and data processing expenses, or the minimum X
charge, whichever is greater.
X
X
NON-ROUTINE MISCELLANEOUS CHARGE:
The charge will be made in addition to the costs for services performed by the Company at the X
request of the Customer and upon acceptance of the request by the Company and which are X
not covered by a specific rate schedule or service charge. The Customer will be charged the X
reasonable costs incurred in performing the requested service including but not limited to labor,X
materials, parts, special equipment, transportation, meter testing and related overhead costs. X
OUT OF CYCLE METER READING CHARGE:
X
The charge will be made when a Customer requests a re-read of their meter outside the
Company’s scheduled reading cycle for the Customer’s meter, and the Company determines
the out of cycle reading to be within acceptable parameters pursuant to.17.9.560.14 NMAC
(Inspection and Tests).
X
X
X
X
Advice Notice No.
236
Signature/Title
Michael "D-. Blanch~d Vice President - Regulatory Affairs
NINETEENTH REVISED RATE NO. 18
CANCELLING EIGHTEENTH REVISED RATE
FUEL AND PURCHASED POWER COST ADJUSTMENT CLAUSE (FPPCAC)
X
Page 1 of 1
APPLICABILITY:
Electric service shall be subject to a Fuel and Purchased Power Cost Adjustment Clause
(FPPCAC) pursuant to 17.9.550 NMAC (Fuel and Purchased Power Cost Adjustment Clauses
X
for Electric Utilities).
X
TERRITORY:
FPPCAC:
The FPPCAC recognizes loss adjustments due to different voltage levels of service:
A. New Mexico System
Line
Losses
7.9501%
Voltage
Factor
100.0000%
Fuel in Base
(S/kWh) (1)
$0.034224
X
X
X
3.5160%
95.8925%
$0.032818
X
6.1160%
98.3010%
$0.033643
X
8.6450%
100.6437%
$0.034444
X
B. Transmission Voltage
(If Customer takes service and is
metered at 69,000 volts and higher)
C. Primary Voltage
metered at 2,400 volts or higher but
less than 69,000 volts)
D. Secondary Voltage
metered at 480 volts and below)
(1) Fuel in Base represents voltage level fuel factors (S/kWh) embedded in base energy rates inX
all applicable rate schedules. A monthly adjustment (positive or negative) pursuant to the X
FPPCAC provides a true-up of these factors to actual monthly fuel expense.
X
Advice Notice No.
235
Signature/Title
.
Mi~’h~el D. Blanch’ar~ Vice President - Regulatory Affairs
TENTH REVISED RATE NO. 19
CANCELLING NINTH REVISED RATE NO. 19
SEASONAL AGRICULTURE PROCESSING SERVICE RATE
Page 1 of 2
APPLICABILITY:
This rate schedule is available to customers whose seasonal service is for processing
agricultural products. The Customer’s service requirements must be distinctly of a recurring
seasonal nature. The Company and Customer will determine whether a new Customer
qualifies for this rate. This rate is subject to the following provisions:
X
X
X
This rate is not applicable for temporary, breakdown, standby or supplementary resale service. X
Where that portion of the Customer’s service, such as lighting and miscellaneous office load, is
on a continuous year-round basis, such service must be separately metered and billed under X
the applicable rate schedule.
TERRITORY:
TYPE OF SERVICE:
Service available under this rate schedule will be determined by the Company and will normally X
X
MONTHLY RATE:
I Customer Charge (per meter per month)
Ener.qy Char.qe *
$20.00
Summer
(June through September)
$0.15642
Winter
(October through May)
$0.13643
X
Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No. 18 (FPPCAC).X
SPECIAL CONDITIONS:
When a line extension is required, a written contract with an annual minimum charge for an
initial term of three (3) years will be required to support the cost of the line extension.
Advice Notice No.
236
Signature/Title
Michael D. Blanch~rd "(
X
X
SEASONAL AGRICULTURE PROCESSING SERVICE RATE
Page 2 of 2
X
The Customer Charge plus Tax Adjustment.
X
X
All service taken under this rate schedule is subject to the provisions of the Company’s RateX
X
X
TAX ADJUSTMENT:
X
TERMS OF PAYMENT:
X
X
Company offices.
X
The Company, at its option, may install metering equipment to measure the customer’s thirty X
(30) minute average kilowatt-demand for purposes of determining the applicable rate schedule. X
Advice Notice No.
236
Signature/Title ~Pl/~ ~]"~ ~d~,.~-j@
Michael" D; ~lahchar~!
FILED
X
X
SUPPLEMENTARY POWER SERVICE
COGENERATION AND SMALL POWER PRODUCTION FACILITIES
Page 1 of 3
APPLICABILITY:
This rate schedule is applicable to qualifying facilities and to third party Customers of the
X
qualifying facility who qualify as small power production and cogeneration facilities as defined in
18 CFR, Part 292, Subpart B, of the final rules issued by the Federal Energy Regulatory
Commission to implement Sections 201 and 210 of the Public Utility Regulatory Policies Act of
1978.
DEFINITION - SUPPLEMENTARY POWER:
Supplementary power means electric energy and/or capacity regularly used by a Customer of
the Company in addition to the energy and capacity supplied by a qualifying facility.
TERRITORY:
SUPPLEMENTARY POWER SERVICE RATE:
The Supplementary Power Service rate for all qualifying facilities and third party Customers
X
shall be the retail rate schedule currently in effect and applicable to the Customer having powerX
requirements equal to the supplementary power requirements of the qualifying facility.
COMMON PROVISIONS:
Interconnection Charge:
Customers in this rate schedule shall be subject to a charge for interconnection costs.
X
Interconnection costs are the reasonable costs of connection, switching, metering,
transmission, distribution, safety provisions, engineering, and administrative costs incurred by
the Company related to the installation of the physical facilities necessary to permit
interconnected operations with a qualifying facility, to the extent such costs are in excess of the
costs that the Company would have incurred if it had not engaged in interconnected operations,
but instead generated an equivalent amount of electric energy or capacity itself or purchased an
equivalent amount of electric energy or capacity from other sources.
In conformance with 17.9.570 NMAC, the Company shall provide a detailed estimate of the cost X
Advice Notice No.
236
Signature/Title
X
X
Page 2 of 3
of interconnection within thirty (30) days of receipt of the approved written application for
interconnection. The Customer shall pay the full amount of the estimated interconnection costs
at the time notice to interconnect is provided to the Company. Upon completion of the
interconnection the actual costs shall be computed and reimbursements to the appropriate party
shall be made for any differences between the actual and estimated cost of interconnection. In
addition, Customers with a design capacity greater than 100 kW shall pay an annual charge of
4.6135 percent of the capital costs of interconnection to provide for the recovery of property
X
taxes, revenue related taxes, depreciation expense, and operation and maintenance expenses.
The annual charge of 4.6135 percent is payable by the Customer in monthly installments at theX
rate of one-twelfth (1/12) of the annual Charge per month,
X
x
METERING FACILITIES:
The Company will install, own and maintain all meters and metering equipment. The Customer
will install Company approved meter sockets and metering cabinets.
The Company may install, at its expense, on the Customer’s premises, load research metering.
The Customer shall supply, at no expense to the Company, a suitable location for meters and
associated equipment used for billing and for load research purposes.
X
TERMS OF PAYMENT:
X
Company offices. The provisions of any contract associated with service under this rate
schedule are also applicable.
Advice Notice No.
236
Signature/Title ~ ~ (~,~-,~~/f/
aich~e’l D~-Blancha~d ~ f
X
X
Page 3 of 3
This rate schedule shall be binding upon the Company and the Customer for a period
X
coterminous with the interconnection agreement; provided, however, that the Customer may
terminate service provided under this rate schedule at any time during such term by providing X
the Company with written notice at least one (1) year prior to the effective date of such
termination, and the Company may terminate in accordance with regulatory regulations. Any
change in this rate schedule approved by a regulatory authority with the requisite jurisdiction X
shall become effective upon such approval and remain in force until the expiration of the term of
this rate schedule or the termination by Customer in accordance with the requirements herein X
contained, whichever event occurs first in time. The service supplied hereunder is to be used
exclusively within the premises of the Customer, as defined in the Customer’s application for X
service.
Advice Notice No.
236
Signature/Title . ..~,/}- ~--_~.,,~,,t./- ,~ ,~,o,/~
Michael D,’l~lanchar~ - ~ ~
BACKUP POWER SERVICE
COGENERATION AND SMALL POWER PRODUCTION FAC!~!T!E~
Page 1 of 3
APPLICABILITY:
This rate schedule is applicable to qualifying facilities and to third party Customers of qualifying X
facilities who qualify as small power production and cogeneration facilities as defined in 18 CFR
Part 292, Subpart B, of the final rules issued by the Federal Energy Regulatory Commission to
implement Sections 201 and 210 of the Public Utility Regulatory Policies Act of 1978.
This rate schedule is applicable to use of service for backup power service for energy and/or X
capacity supplied by the Company during an unscheduled outage at a facility qualifying as a
"Small Power Production Facility" or as a "Cogeneration Facility" as defined in 292.203 (a) and
(b), respectively, of Title 18 of the Code of Federal Regulations (CFR).
DEFINITION - BACKUP POWER:
Backup power means electric energy or capacity supplied by the Company during an
unscheduled outage of the qualifying facility to replace energy or capacity ordinarily supplied by
the qualifying facility.
TERRITORY:
BACKUP POWER SERVICE RATE:
The Backup Power Service rate for all qualifying facilities shall be the retail rate schedule
X
currently in effect and applicable to the Customer absent its qualifying facility generation.
Neither a billing demand based on a percentage of the highest measured demand established
over a period of time (ratchet) nor a power factor adjustment will apply to this service.
MONTHLY RESERVATION FEE:
A monthly reservation fee will be charged in the months that backup power is not utilized by the
qualifying facility. The reservation fee will be the retail rates currently in effect and applicable to
the Customer absent its qualifying facility generation times the greater of 10 percent of the
monthly contracted capacity demand or the experienced annual Forced Outage Rate (FOR) of
the Customer expressed in percentage terms of the qualifying facility for the most recent twelve
month period ending with the current month times the monthly contracted capacity demand.
Advice Notice No.
236
Signature/Title
Mlcha~l D’. Blanchar~ /
X
X
Page 2 of 3
DELIVERY SERVICE CHARGE:
A delivery service charge will be billed to the Customer for any month that backup power is not
X
utilized by the qualifying facility. The delivery service charge shall be:
I
Primary Voltage Delivery Service Charge: I $4.43 per kW of contracted capacity
Secondary Voltage Delivery Service Charge:I $5.49 per kW of contracted capacity
X
X
COMMON PROVISIONS:
X
the Company directly related to the installation of the physical facilities necessary to permit
corresponding costs that the Company would have incurred if it had not engaged in
interconnected operations, but instead generated an equivalent amount of electric energy itself
or purchased an equivalent amount of electric energy or capacity from other sources.
In conformance with 17.9.570 NMAC, the Company shall provide a detailed estimate of the costX
of interconnection within thirty (30) days of receipt of written application for interconnection.
The Customer shall pay the full amount of the estimated interconnection costs at the time notice
to interconnect is provided to the Company. Upon completion of the interconnection the actual
costs shall be computed and reimbursements to the appropriate party shall be made for any
differences between the actual and estimated cost of interconnection. In addition, Customers
with design capacity greater than 100 kW shall pay an annual charge of 4.6009 percent of theX
capital costs of interconnection to provide for the recovery of property taxes, revenue related
taxes, depreciation expense, and operation and maintenance expenses. The annual charge of
4.6009 percent is payable by the Customer in monthly installments at the rate of one-twelfth X
(1/12) of the annual charge per month.
DETERMINATION OF CONTRACT CAPACITY:
The contract capacity for the purpose of this rate schedule shall be the amount of capacity,
expressed in kilowatts, requested by the Customer or the measured kilowatt output of the
Advice Notice No.
236
Sig natu relTitle M i~’c~ .a~el.~ a~rd~~
X
X
X
Page 3 of 3
Customer’s qualifying facilities that the Customer requests the Company to provide for Backup
Power Service. When a higher kilowatt load for Backup Power Service is established, the
higher kilowatt load shall become the new contract capacity for that month and for each month
thereafter, unless and until exceeded by a still higher kilowatt load which in turn shall be subject
to the foregoing conditions.
X
TERMS OF PAYMENT:
X
Service supplied under this rate schedule is subject to the Company’s Rules and Regulations
X
X
X
X
X
termination, and the Company may terminate in accordance with regulatory regulations. Any
change in this rate schedule approved by a regulatory authority with the requisite jurisdiction, X
exclusively within the premises of the Customer, as defined in the Customer’s application for X
service.
Advice Notice No.
236
Signature/Title
X
MAINTENANCE POWER SERVICE
COGENERATION AND SMALL POWER PRODUCTION
Page 1 of 4
APPLICABILITY:
This rate schedule is applicable to qualifying facilities and to third party Customers of qualifying X
facilities who qualify as small power production and cogeneration facilities as defined in 18 CFR
Part 292, Subpart B, of the final rules issued by the Federal Energy Regulatory Commission to
implement Sections 201 and 210 of the Public Utility Regulatory Policies Act of 1978.
Maintenance power shall be available to qualifying facilities for a minimum period of thirty (30)
days per year, coordinated with the Company and scheduled outside of the designated peak X
months of the Company.
This rate schedule is applicable to use of service for maintenance power service for energy
X
and/or capacity supplied by the Company on a scheduled basis to qualifying facilities during an
outage scheduled by the Customer for the purpose of performing maintenance to its qualifying
facilities, subject to the special provisions of this rate schedule.
X
DEFINITION - MAINTENANCE POWER:
Maintenance power means electric energy or capacity supplied by the Company during
scheduled outages of the qualifying facility to replace energy and/or capacity ordinarily supplied
by the qualifying facility.
A Customer qualifying for this rate schedule shall schedule maintenance of its qualifying facilityX
by giving the Company advance written notice as to the length of the outage as follows:
Length of Outa.qe
1 day or less
2 to 5 days
6 to 30 days
Advance Notice
¯ 5 calendar days
30 calendar days
90 calendar days
TERRITORY:
Areas served by the Company in Dona Ana, Luna, Otero and Sierra Counties.
MAINTENANCE POWER SERVICE RATE:
The Maintenance Power Service rate for Customers with qualifying facilities served under this X
rate schedule shall be the retail rate schedule currently in effect and applicable to the CustomerX
Advice Notice No.
236
Signature/Title ~,~ .Z~~~,~.~LF-j~
Michael D. Blanch~rd - v(
X
X
Page 2 of 4
absent its qualifying facility generation. Neither billing demand based on a percentage of the X
highest measured demand established over a period of time (ratchet) nor a power factor
X
adjustment will apply to this service.
x
A delivery service charge will be billed to the Customer during the months that neither
maintenance power service nor backup power service is utilized by the qualifying facility. The
delivery service charge shall be:
I
Primary Voltage Delivery Service Charge
Secondary Voltage Delivery Service Charge
54.43 per kW of contract capacity **
. $5.49 per kW of contract capacity **
X
x
** minus any Delivery Service Charges applied pursuant to the provisions of Rate Schedule X
No. 22, Backup Power Service or Rate Schedule No. 24, Curtailable Power Service, but notX
less than zero (0).
X
DETERMINATION OF DEMAND CHARGE:
The maintenance power demand charge shall be determined by multiplying the applicable retail
demand charge by the ratio of the number of weekdays in which the maintenance power was
taken to the number of weekdays in the month.
COMMON PROVISIONS:
X
the Company directly related to the installation of the physical facilities necessary to permit
In conformance with 17.9.570 NMAC, the Company shall provide a detailed estimate of the cost X
Advice Notice No.
236
Signature/Title
Michae| I~,~la~cha~d "
X
X
Page 3 of 4
of interconnection within thirty (30) days of receipt of the approved written application for
interconnection. The Customer shall pay the full amount of the estimated interconnection costs
at the time notice to interconnect is provided to the Company.
Upon completion of the interconnection, the actual costs of interconnection shall be computed X
and reimbursements to the appropriate party shall be made for any differences between the
actual and estimated cost of interconnection. In addition, Customers with a design capacity
greater than 100 kW shall pay an annual charge of 4.6009 percent of the capital costs of
X
interconnection to provide for the recovery of property taxes, revenue related taxes,
depreciation expense, and operation and maintenance expenses. The annual charge of 4.6009X
percent is payable by the Customer in monthly installments at the rate of one-twelfth (1/12) of
the annual charge per month.
DETERMINATION OF CONTRACT CAPACITY:
The contract capacity for the purpose of this rate schedule shall be the amount of capacity,
X
expressed in kilowatts, requested by Customer or the measured kilowatt output of the
Customer’s qualifying facilities that the Customer requests the Company to provide for Backup
Power Service. When a higher kilowatt load for Backup Power Service is established, the
higher kilowatt load shall become the new contract capacity for that month and for each month
thereafter, unless and until exceeded by a still higher kilowatt load which in turn shall be subject
to the foregoing conditions.
X
TERMS OF PAYMENT:
X
X
Advice Notice No.
236
Signature/Title
X
X
Page 4 of 4
the Company with written notice at least one (1) year pdor to the effective date of such
termination and the Company may terminate in accordance with regulatory regulations. Any
change in this rate schedule approved by a regulatory authority with the requisite jurisdiction, X
exclusively within the premises of the Customer, as defined in his application for service.
SPECIAL PROVISIONS:
All maintenance power service supplied by the Company that has not been scheduled with the
Company and confirmed with prior written approval from the Company shall be considered
backup power service.
Advice Notice No.
236
S i g n at u re/Title M i~c~a~el~_Z~’~/~
x
X
X
X
X
X
CURTAILABLE POWER SERVICE ~!i~ ~;’~ ~
Page 1 of 4
APPLICABILITY:
This rate schedule is applicable to qualifying facilities that qualify as small power production andX
cogeneration facilities as defined in 18 CFR, Part 292, Subpart B, of the final rules issued by the
Federal Energy Regulatory Commission to implement Sections 201 and 210 of the Public Utility
Regulatory Policies Act of 1978.
DEFINITION - CURTAILABLE POWER:
Curtailable power means electric energy and/or capacity supplied by the Company subject to
curtailment by the Company under specified conditions.
TERRITORY:
Areas served by the Company in Dona Ana, Luna, Otero and Sierra Counties.
CURTAILABLE POWER SERVICE RATE:
The Curtailable Power Service Rate for all Customers with qualifying facilities shall be the retail
rate schedule currently in effect and that would be applicable to the Customer in the absence ofX
its qualifying generation.
MONTHLY RESERVATION FEE:
A monthly reservation fee will be charged in the months that backup power is not utilized by the
qualifying facility. The reservation fee will be the retail rate schedule currently in effect and thatX
would be applicable to the Customer in the absence of its qualifying generation times ten
X
percent of the monthly contracted capacity demand.
A delivery service charge will be billed to the Customer during the months that neither
maintenance power service nor backup power service is utilized by the qualifying facility. The X
delivery service charge shall be:
X
Primary Voltage Delivery Service Charge
Secondary Voltage Delivery Service Charge
54.43 per kW of contract capacity **
. $5.49 per kW of contract capacity **
Advice Notice No.
236
Signature/Title
Mi~.h~ei~l~. Blanch~r~
x
X
X
X
CURTAILABLE POWER SERVICE
Page 2 of 4
** Minus any Delivery Service Charges applied pursuant to the provisions of Rate Schedule X
No. 22, Backup Power Service or Rate Schedule No. 23, Maintenance Power Service, but X
not less than zero (0).
X
COMMON PROVISIONS:
X
the Company related to the installation of the physical facilities necessary to permit
In conformance with 17.9.570 NMAC, the Company shall provide a detailed estimate of the costX
of interconnection within thirty (30) days of receipt of written application for interconnection.
The Customer shall pay the full amount of the estimated interconnection costs at the time notice
to interconnect is provided to the Company. Upon completion of the interconnection, the actual
costs shall be computed and reimbursements to the appropriate party shall be made for any
differences between the actual and estimated cost of interconnection. In addition, Customers
with a design capacity greater than 100 kW shall pay an annual charge of 4.6009 percent of the
capital costs of interconnection to provide for the recovery of property taxes, revenue related X
taxes, depreciation expense, and operation and maintenance expenses. The annual charge of
4.6009 percent is payable by the Customer in monthly installments at the rate of one-twelfth X
(1/12) of the annual charge per month.
X
All service taken under this rate schedule is subject to the provisions of the Company’s tariff
Rate No. 18, entitled Fuel and Purchased Power Cost Adjustment Clause (FPPCAC).
X
X
TERMS OF PAYMENT:
Advice Notice No.
236
Signature/Title
Michael D. Blanchard ~’~
X
X
Page 3 of 4
X
X
X
X
X
X
X
termination and the Company may terminate in accordance with regulatory regulations.
Any change in this rate schedule approved by a regulatory authority with the requisite
X
jurisdiction, shall become effective upon such approval and remain in force until the expiration
of the term of this rate schedule or the termination by Customer in accordance with the
X
requirements herein contained, whichever event occurs first in time. The service supplied
hereunder is to be used exclusively within the premises of the Customer, as defined in his
application for service.
Curtailable power service is provided to the Customer with the explicit knowledge and
understanding that such service shall be subject to curtailment by the Customer with notice
from the Company. Failure to comply with the Company’s request to curtail shall result in the
following adjustments to Customer billings and service:
(1) during a calendar year, the first occasion in which the Customer fails to comply with a
request for curtailment shall result in the Customer being billed for the entire month at the
retail rate schedule currently in effect and applicable to the Customer absent its qualifying X
facility generation; and
(2) during the calendar year, the second occasion in which the Customer fails to comply with a
request for curtailment shall result in the Customer being billed or re-billed for each month of
X
the current calendar year through the second non-compliance month at the retail rate
X
schedule currently in effect and applicable to the Customer absent its qualifying facility
X
generation; and
Advice Notice No.
236
Signature/Title /~/:~’~ ~~.~/
Michael b~-Blanch~rd " /
x
X
Page 4 of 4
(3) during the calendar year, the third occasion in which the Customer fails to comply with a
X
the current calendar year through the third non-compliance month at the retail rate schedule
X
currently in effect and applicable to the Customer absent its qualifying facility generation, X
and the Customer shall for a period of not less than one (1) year be served and billed underX
the otherwise applicable standard retail rate schedule.
X
If it is determined at any time by the Company that the Customer has not acted appropriately toX
maintain compliance with the provisions of this rate schedulel then the Customer will be
"X
immediately billed on the standard rate schedule for firm power for the period since service wasX
first commenced under this rate schedule.
X
Advice Notice No.
236
Signature/Title i~iD i~’~.~~-J
Micha~el’~, Blanc-hard "(
SEVENTH REVISED RATE NO. 25
CANCELLING SIXTH REVISED RATE NO. 25
OUTDOOR RECREATIONAL LIGHTING SERVICE RATE
Page 1 of 2
APPLICABILITY:
This rate schedule is available to Customers with outdoor recreational lighting installations.
X
This rate schedule is not available for any service other than for lighting of recreational activities
X
such as athletic fields, race tracks, and other sport and recreational facilities.
X
TERRITORY:
TYPE OF SERVICE:
be single or three phase at the option of the Company and at a standard Company approved X
voltage. All service will be taken at one delivery point designated by the Company and. will be X
separately metered from any additional service that may be provided to the Customer under X
other rate schedules.
X
MONTHLY RATE:
I
$18.00
IX
I
$0.14623
IX
¯ Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No.18 (FPPCAC).X
X
The Customer Charge plus Tax Adjustment.
X
X
X
TAX ADJUSTMENT:
Advice Notice No.
236
Signature/Title ~# ~~z~/~Z
Mlch~el D. Blanc~a-rd ~/
X
X
X
OUTDOOR RECREATIONAL LIGHTING SERVICE RATE
Page 2 of 2
TERMS OF PAYMENT:
twenty (20) calendar days thereafter. If the twentieth day falls on a holiday or weekend, the x
X
X
Company offices.
x
Advice Notice No.
236
Signature/Title ~/~,/.’.~
ai~;[~-I I~.~Bl~n~ha~d -" ~’/
STATE UNIVERSITY SERVICE RATE
Page 1 of 3
APPLICABILITY:
This rate schedule is available to any public college or university’s main campus for lighting, X
power and heating service. The Customer and the Company will determine whether a
Customer qualifies for this rate. A Customer qualifies for this rate if the expected monthly
demand will exceed 9,000 kilowatts (kW). A contract may be required in order to take service X
under this rate schedule.
TERRITORY:
TYPE OF SERVICE:
Service available under this rate schedule will be determined by the Company.and will be three X
phase at a standard Company approved voltage. All service will be taken at a single point of X
delivery designated by the Company.
X
MONTHLY RATES:
X
I Customer Charge (per meter per month)
Energy Charge per kWh: Off Peak
$135.00
Summer
$16.91
$0.12528
$0.03828
IX
Winter
X
$9.05
X
X
$0.03828
X
The On-Peak Period shall be from 12:00 P.M. to 6:00 P.M, Mountain Daylight Time, Monday
X
X
The Off-Peak Period shall be all other hours of the week not covered in the On-Peak Period.
X
X
X
Advice Notice No.
236
Signature/Title /~/2 /~i~,~,Z~’~/
Mic’h’~el ~.. Blanc-hard - /
X
X
Page 2 of 3
(a) the maximum demand, adjusted by the Meter Voltage Adjustment, if applicable, or
X
(b) 65 percent of the highest measured demand established during the twelve (12) month X
(c) a minimum of 9,000 kW.
X
entire plant is below 90% lagging, a power factor adjustment shall be calculated as follows:
ADJ = ((kW x .95 / PF) - kW) x DC, where
ADJ = Increase to applicable Demand Charge,
DC = Demand Charge.
If the power factor measurement is greater than or equal to 90%, then no power factor
adjustment will be made.
X
X
If electric service is delivered on the high voltage side of a Customer-supplied transformer, but X
metered on the low voltage side of the transformer, the following meter adjustments shall be X
made:
X
Billing kilowatt-hours = Metered kilowatt,hours multiplied by 1.020
X
X
X
Advice Notice No.
236
Signature/Title ~A,/~,’//~.~_.~’~;~ ~,~.,~’/
Mich~’elD~Blancl~ard - /
X
X
Page 3 of 3
made:
X
X
X
X
All service taken under this rate schedule is subject to the provisions of the Company,s Rate X
x
TAX ADJUSTMENT:
X
X
TERMS OF PAYMENT:
X
X
Company offices.
X
Advice Notice No.
236
Signature/Title ~,JD
Micl~ael I~.-Blanchard - !
FIFTH REVISED RATE NO. 29
CANCELLING FOURTH REVISED RATE NO. 29
NOTICED INTERRUPTIBLE SERVICE RATE
FOR LARGE POWER SERVICE
Page 1 of 6
APPLICABILITY:
This rate schedule is closed to new customers. This rate schedule is available to current
X
Customers with total connected capacity requirements of at least 1,000 kilowatts (kW) and not
served at a transmission voltage level, and at the sole discretion of the Company. The
X
minimum level of firm demand to be required from qualifying Customers is 500 kW. Service is X
available under this schedule only if the utilization of this service is of such character that the X
service is capable of being interrupted at any time upon Company request without damage to X
property or persons and without adversely affecting the public health, safety and welfare. This
rate schedule is available only in conjunction with firm service under other applicable rate
X
schedules.
X
At Customer’s expense, Customer will install all necessary communication, relay and breaker
equipment to qualify for service under this rate schedule, subject to Company approval, and willX
pay for associated hardware costs.
TERRITORY:
TYPE OF SERVICE:
X
The type of service available under this rate schedule will be determined by the Company and X
will normally be single or three phase at the option of the Company and.at a standard CompanyX
approved voltage. All service will be taken at a single point of delivery designated by the
X
Company.
X
MONTHLY RATES:
Secondary
$5.05
$ 0.04671
Primary
$4.75
$0.04591
X
X
X
,~ Energy charges include a Fuel in Base Factor (S/kWh) from Rate Schedule No.18 (FPPCAC).X
Maximum demand will consist of both firm and interruptible demand, and will be defined as the
Advice Notice No.
236
Signature/Title //~ ~~._~/’
MiChael I~ Bla~;har~- " [
X
x
Page 2 of 6
highest thirty (30) minute average kilowatt load determined by measurement. The measured
demand will be adjusted for billing when the Meter Voltage Adjustment clause is applicable.
X
The Total Billing Demand will be the maximum measured demand. In no event shall Total
Billing Demand be less than the Minimum Firm Contract Capacity specified in the Contract for
Power Service.
Firm Power Billing Demand shall be the lesser of (1) the Total Billing Demand or (2) the
Contract Firm Power Demand established in the Contract for Power Service, but not less than
the Minimum Firm Contract Capacity specified in the Contract for Power Service.
Firm Power Billing Demand as defined herein shall constitute the "demand used for billing"
under the Customer’s firm service rate schedule, and shall be billed in accordance with the rate
schedule applicable to Customer’s firm service.
INTERRUPTIBLE-TO-FIRM SERVICE LEVEL CAP:
A Cap on Interruptible Demand shall be applied. The customer’s maximum interruptible load to
be billed under this Interruptible rate will be no more than four (4) times the Firm Contracted X
Demand. All Interruptible Demand and associated Energy in excess of the Cap shall be billed
in accordance with the rate schedule applicable to the Customer’s firm service. A Customer
exceeding the Cap may elect to redefine the Firm Power Demand specified in the Contract for
Power Service.
The Cap for Interruptible Power Billing Demand shall be determined as the Firm Power Billing
Demand multiplied by four (4).
Excess Interruptible Demand shall be defined as any metered demand greater than (1) the Firm
Power Billing Demand plus (2) the Cap for Interruptible Power Billing Demand, and shall be
billed in accordance with the rate schedule applicable to the Customer,s firm service.
Firm Energy shall be determined by multiplying the ratio of the Firm Power Billing Demand to
the Total Billing Demand times the metered kilowatt-hours. Firm Energy shall be billed in
accordance with the rate schedule applicable to Customer’s firm service~
Interruptible Energy shall be determined by multiplying the ratio of the Cap for Interruptible
Power Billing Demand to the Total Billing Demand times the metered kilowatt-hours.
Interruptible Energy shall be billed in accordance with this rate schedule.
Advice Notice No.
236
Signature/Title
Michael D.~Blancl~rd- /
X
X
Page 3 of 6
Excess Interruptible Energy shall be defined as any metered energy greater than (1) the Firm
Energy plus (2) the Interruptible Energy. The Excess Interruptible Energy shall be billed in
accordance with the rate schedule applicable to Customer’s Firm Service.
Customers with contracts in effect on or before January 1, 2004 shall be exempt from the
provisions of the Interruptible-To-Firm Service Level Cap.
X
If the power factor at the time of the highest thirty (30) minute interval kilowatt demand for the X
X
ADJ
ADJ
kW
PF
DC
= ((kW x .95 / PF) - kW) x DC, where
= Increase to applicable Demand Charge,
= Monthly Billing Demand,
= Monthly measured Power Factor, and
= Demand Charge.
X
X
X
X
X
X
If electric service is delivered on the high voltage side of a Customer-supplied transformer, but X
metered on the low voltage side of the transformer, the following meter adjustments shall be X
made:
X
x
X
If electric service is delivered on the low voltage side of a Company-owned transformer, and x
made:
X
X
X
X
x
X
Advice Notice No.
236
Signature/Title /~/~//~~~/;~J
MiChael D, Blan~hard =’1~=
X
X
Page 4 of 6
X
TAX ADJUSTMENT:
CONTRACT FOR SERVICE:
A Contract for Power Service (Contract) must be executed between the Company and the
Customer prior to taking service under this rate schedule. The Contract shall define the amount
of the Customer’s demand that shall be served as firm demand as further defined in the
X
Applicability Section in this rate schedule. All demand in excess of the amount of firm demand X
specified in the Contract shall constitute interruptible demand and shall be served and billed on
that basis. The Contract term shall be for an initial period of three (3) years, and shall continue
year-to-year thereafter until canceled by either party upon one (1) year prior written notice. The
amount of Contract Firm Power Demand and Minimum Firm Contract Capacity specified in the
Contract will supersede and control over any inconsistent level of demand specified in any pre-X
existing agreement between the Company and the Customer.
SCHEDULING PROCEDURES:
The Company and the Customer shall agree upon detailed procedures for requesting, providing
notice of, and implementing interruptions, and shall set forth the same in the Contract for Power
Service.
GENERAL CONDITIONS:
The Company may make intentional interruptions at any time and from time to time, at the
Company’s sole discretion, for up to one hundred (100) hours in any calendar year. However,X
Advice Notice No.
236
SignaturelTitle ~.--"~’)
MiCh’a~l I~ Blanch~rd - ~"/
X
X
Page 5 of 6
the Company may not interrupt the Customer (1) due solely to differences in the Company’s
marginal cost of energy and the energy-related charges for Interruptible Power Service, or (2) to
continue or make non-firm off-system sales. In the event of an interruption, the Company will
provide a minimum thirty (30) minute notice prior to the interruption. Emergency conditions are X
deemed to exist at any time, in the judgment of the Company, that system demands for
X
electricity exceed or are expected to be likely to exceed the Company’s available electric supply
for whatever reasons including, but not limited to, breakdown of generating units, distribution
equipment or other critical facilities, short or long term shortages of fuel or generation,
distribution, and other facilities, and requirements or orders of governmental agencies.
An hour of interruption shall be any clock-hour or part thereof during which the Company
invokes an intentional interruption. The number of hours of interruption remaining in a calendar
year shall be reduced by each interruption occasion. The Company will limit interruptions to sixX
(6) hours per interruption and to no more than two (2) interruptions per week.
x
Interruptions will be controlled by the Company’s system operator with the appropriate notice
provided to Customer.
TERMS OF PAYMENT:
X
X
X
X
X
During the term of the Customers’ Contract for Power Service, Customer may not engage in
self-generation other than periodic operation of any existing self-generation facilities.
Noticed Interruptible Power Service is provided to the Customer with the explicit knowledge and
understanding that such service shall be subject to curtailment by the customer with notice from
the Company. Failure to comply with the Company’s request to curtail shall result in the
following adjustments to Customer billings and service:
Advice Notice No.
236
Signature/Title //~///}
Mi~l~a~e~’D. Blancha~d - " (
x
X
Page 6 of 6
during a calendar year, the first occasion in which the Customer fails to comply with a
request for curtailment shall result in the customer being billed for the entire non-compliance
X
month at the retail rates currently in effect and applicable to the Customer absent its
qualifying facility generation; and
(2) during the calendar year, the second occasion in which the Customer fails to comply with a
X
the current calendar year through the second non-compliance month at the retail rates
X
currently in effect and applicable tothe customer absent its qualifying facility generation;
and
(3) during the calendar year, the third occasion in which the Customer fails to comply with a
X
the current calendar year through the third non-compliance month at the retail rates
X
currently in effect and applicable to the Customer absent its qualifying facility generation,
and the Customer shall for a period of not less than one (1) year be served and billed underX
the otherwise applicable standard retail rate.
If it is determined at any time by the Company that the Customer has not acted appropriately to
maintain compliance with the provisions of this rate schedule, then the Customer will be
X
immediately billed on the standard rate schedule for firm power for the period since service was
first commenced under this rate schedule.
X
Advice Notice No.
236
Signature/Title ~//~-/~~F/~’~//
Michael D~lancha~d v r
SIXTH REVISED RATE NO. 30
CANCELLING FIFTH REVISED RATE NO. 30
LOAD RETENTION RATE
Page 1 of 3
APPLICABILITY:
This rate schedule is applicable to all commercial and industrial customers of the Company thatX
have taken service from the Company for a period of at least twelve (12) consecutive months,
and have a minimum monthly demand of at least 1,500 kilowatts (kW).
TERRITORY:
AVAILABILITY:
The Load Retention Rate is available to Customers which meet the following criteria:
1. The Customer must provide notice to the Company that they will request termination of
electrical service for either a portion or all of their electrical power and energy requirements
due to an alternative generation source, or
2. The Customer must demonstrate that they will leave the Company’s system, or discontinue
or curtail service for financial reasons, and
3. The Customer must submit a notarized affidavit that attests to the fact that but for the Load
Retention Rate contained herein, the Customer will leave the Company’s system.
MONTHLY RATE:
The Company may enter into negotiations to establish a lower rate not less than the Company’s
incremental cost of power and energy as estimated over the term of the contract. Sufficient
documentation of the cost estimates used in determining the economic feasibility of an
alternative generation source shall be provided to the Company for their review. The negotiated
rate shall be subject to the review and final approval of the New Mexico Public Regulation
Commission (NMPRC).
The Company, at its option, will annually review its incremental cost of providing service to a
contracted Load Retention Customer to determine if such costs exceed the Customer’s
contracted charges. Should the incremental costs exceed the Customer’s contracted rate, the
Company will adjust the charge to be above or equal to the incremental cost.
Advice Notice No.
236
Signature/Title
X
X
LOAD RETENTION RATE
Page 2 of 3
REQUIRED INFORMATION:
The Company shall obtain the following information from the Customer, and file that information
with the NMPRC:
1. The Customer shall provide detailed engineering and economic studies and/or related
information that clearly demonstrate the Customer’s ability to displace load;
2. The Customer shall provide a sworn affidavit which states that the Customer is ready,
willing, and able to leave the Company’s system should this Load Retention Rate not be
offered;
3. The Customer shall provide a signed statement from a qualified professional engineer that
the Customer’s potential alternative energy source meets all environmental standards set by
applicable governmental entities including the Federal Clean Air Act, and all amendments;
4. An agreement as to the limit placed on the maximum number of kWh that can be taken by
the Customer under this rate, per year.
X
All service taken under this rate schedule is subject to the provisions of the Company’s Rate x
X
X
TAX ADJUSTMENT:
Advice Notice No.
236
SignaturelTitle ~~~o~Z
10hci~a~l D. Blanchard~/
X
X
LOAD RETENTION RATE
Page 3 of 3
TERMS OF PAYMENT:
X
Advice Notice No,
236
Signature/Title ~-~J~(~/~~ .,~("~.~,~/
Michael ~. Bianchard
X
x
X
X
THIRD REVISED RATE NO. 32
CANCELLING SECOND REVISED RATE
X
X
VOLUNTARY RENEWABLE ENERGY
Page 1 of 4
APPLICABILITY:
This rate schedule is available to Customers taking service under Rates 01, 03, and 04 for theX
purchase of all or a portion of a Customer’s energy requirements.
TERRITORY:
TYPE OF SERVICE:
Service will be provided to those Customers who volunteer to receive all or a portion of their
energy requirements from Renewable Energy Resources. "Renewable Energy" is defined as
electrical energy generated by means of a low- or zero-emissions generation technology that
has substantial long-term production potential and may include, without limitation, solar, wind,
hydropower, geothermal, landfill gas, anaerobically digested waste biomass or fuel cells that
are not fossil fueled. Renewable Energy does not include fossil fuel or nuclear energy.
The amount of power subscribed to by the Customer shall be set out in an Application for
Voluntary Renewable Energy Rate.
CALCULATION OF BILL:
The Rates and Terms specific to the Company’s New Mexico rates shall apply except for Rate X
17 (EUERF) and Rate 18 (FPPCAC), which shall not apply to energy taken under this rate
X
schedule. Additionally, the Voluntary Renewable Energy Rate shall apply for the kWh elected X
by the Customer to be served by Renewable Energy Resources as stated in the Application for
Voluntary Renewable Energy Rate. The amount of energy billed under this rate schedule shall X
be deducted from the energy billed under the otherwise applicable standard rate, provided
however, that the amount of energy billed under the otherwise applicable standard rate
schedule shall not be less than zero. The Voluntary Renewable Energy Rate for each
X
applicable class is as follows:
Rate No. 01, Residential Service Rate
Summer (May through October) 0 - 600 kWh
Summer (May through October) All Other kWh
Winter (November through April)
Advice Notice No.
$0.17595
$0.19984
$0.16595
236
Signature/Title f~///~ i’~l~.-a~," ~,,~’
Mic~el~. Blan~i~a~’d "~ /
X
X
X
X
X
X
CANCELLING SECOND REVISED RATE NO. 32
VOLUNTARY RENEWABLE ENERGY RATE
Page 2 of 4
Rate No. 01, Residential Service Rate (TOU)
On-Peak (S/kWh)
Off-Peak (S/kWh)
$0.24699
$0.16004
Rate No. 02, Partial Requirements Service
Standard Rate
Summer (May through October) 0-600 kWh
Summer (May through October) All Other kWh
Winter (November through April) All kwh
$0.18796
$0.21185
$0.17796
Rate No. 02, Partial Requirements Service
Time-Of-Use Rate
On-Peak (S/kWh)
Off-Peak (S/kWh)
Energy Charge perkWh
$0,26043
$0.17348
Rate No. 03, Small General Service Rate
Standard Rate
Summer (May through October)
$0.12290
$0.11280
Standard Rate (TOU Option)
On-Peak (S/kWh)
Off-Peak (S/kWh)
$0.18719
$O.13O45
Ix
X
X
X
Ix
X
X
X
X
X
X
Alternative Rate
$0.18719
$0.17709
Rate No. 04, General Service Rate
Secondary Voltage
$0.11544
$0.10844
Advice Notice No.
X
X
X
X
X
X
236
Signature/Title
Michael]~. Blan~hard "!
X
X
X
X
Page 3 of 4
Secondary Voltage (TOU Option)
On-Peak (S/kWh)
Off-Peak (S/kWh)
Primary Voltage
X
$0.20768
$0.12899
$0.11326
$0.10626
Primary Voltage (TOU) Option
On-Peak (S/kWh)
Off-Peak (S/kWh)
$O.2O55O
$0.12681
X
X
X
X
X
MONTHLY MINIMUM:
Service under this rate shall be provided in increments of 100 kWh and the Customer may
select the number of 100 kWh increment blocks subject to this rate.
X
The Voluntary Renewable Energy Rate is not subject to the Company’s Rate Schedule No. 18
(FPPCAC).
The Voluntary Renewable Energy Rate is not subject to the Company’s Rate Schedule No. 17
X
(EUERF).
X
X
Company offices.
X
Service will be offered to Customers as it is available for sale by the Company.
Advice Notice No.
236
SignaturelTitle
THIRD REVISED RATE NO, 32
x
X
Page 4 of 4
The total monthly blocks available under this program for all rate classes shall not exceed 1680.
The minimum monthly blocks reserved under this program for each applicable rate class will be:
Residential Service
500
Small Commercial Service
100
General Service
200
Customers electing to take all or a portion of their service under this rate schedule will be
X
required to take service under this rate schedule for a minimum term of one (1) year. Service
under this rate schedule will automatically be renewed on an annual basis absent thirty (30) X
days prior written notification to the Company of cancellation.
X
The Company retains the right to deny or terminate service under this rate schedule to any
Customer in arrears with the Company.
X
X
The Company will retire the Renewable Energy Certificates, as defined in 17.9.572.13 NMAC,
associated with the energy sold under this rate schedule.
X
X
Advice Notice No.
236
Signature/Title /~ S~P-~’~z--~ f
Michael D. Blanchard ~" /

NMPRC Case No. 15-00127-UT 5/11/15 - Rate

Transcription

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