|
|
 | | | |
- close
- close
- close
- close
Suggest other news sources for this topic
WIKI ANALYSIS
NV Energy, Inc. (NYSE: NVEC) is an investor-owned holding corporation that owns five primary, wholly-owned subsidiaries. The company's main operations include the generation, transmission and distribution of electric energy, providing power to Las Vegas and surrounding Clark County, and to northern Nevada and the Lake Tahoe area of California. Natural gas service is also provided in the Reno/Sparks area of Nevada.[1] As NV Energy's main costumers include the gaming/recreation industry, customer usage patterns are highly dependent upon macroeconomic factors.
Business Growth
NV Energy is majorly comprised of utilities operations, which operates under three business segments: NPC electric, SPPC electric and SPPC natural gas. Electric service is provided by NPC to Las Vegas and the surrounding Clark County, whereas SPPC provides electric service to northern Nevada, as well as natural gas service in the Reno-Sparks area. These segment's revenues and operating income is subject to fluctuations throughout the year due to the impacts that seasonal weather, rate changes and customer usage patterns have on demand for electric energy and services.[2] NPC for example is a summer peaking utility, experiencing its highest retail energy sales in response to increased demand for air conditioning. SPPC’s electric system peak also occurs in the summer, with a slightly lower peak demand in the winter. SPPC’s gas business typically peaks in the winter months due to heating demands.
Business growth in recent years has began to center toward Renewable Energy. For example, NV Energy signed a power purchase agreement (PPA) with Us Geothermal Inc (GTH) for an undisclosed amount in June 2011.[3] The 25-year PPA allows for NV Energy to purchase an annual average of up to 19.9 net megawatts of clean, renewable energy from the San Emidio Geothermal project in Washoe County, Nevada, owned by U.S. Geothermal.[4] With revenues growing at -8.5% and 1.6% last year, it has become more and more important for NV Energy to diversify its sources of power.[5]
Trends and Forces
Gas and Electricity Segments Smooth NVE's Income
Typically, a largely desert region like Nevada experiences more extreme temperatures than coastal regions. As such, air conditioning is heavily used in the summer time (requiring electricity), and heating is heavily used in the winter (requiring natural gas). Because NVE is heavily invested in both natural gas and electricity, the combination of two operating segments tend to smooth out earnings better than companies that focus solely on one or the other. Regardless, both sources are heavily dependent upon several key inputs such as Natural Gas, Coal and Oil. The price at which NVE may acquire these inputs determine how much the company may charge to its customers.
Heavily Dependent Upon Retail/Gaming, NVE's Profitability is Impacted by Discretionary Spending
As a large part of NVE's business is centered in electricity generation for Las Vegas, customer growth and tourism heavily influences the amount of demand required tor those regions. A lower level of economic activity that changes discretionary spending, increases conservation efforts by customers, and decreases tourism activity results in a decline in energy consumption. When customers are affected by increased unemployment, the ensuing customer bankruptcies or inability to pay on a timely basis poses as risks to NVE.
Competition
NVE does not compete with any other parties in its business of electricity generation, as the company operates under franchise agreements in their respective operating areas. Only commercial customers with an average annual load of 1 MW or more may file a letter of intent and application to acquire electric energy from another provider.[6]
In NVE's gas business though, SPPC’s natural gas LDC business is subject to competition from other suppliers and other forms of energy available to its customers. These alternative energy sources include Solar Power, Wind Energy and Geothermal energy. Key makers include:
- First Solar (FSLR) is engaged in the manufacture and sale of solar modules with an advanced thin film semiconductor technology, and it designs, constructs and sells photovoltaic (PV) solar power systems.[7]
- SunPower (SPWRA) is a vertically integrated solar products and services company that designs, manufactures and delivers solar electric systems worldwide for residential, commercial and utility-scale power plant customers.[8]
References
- ↑ NVE Form 10-K FY2010, Pg 8
- ↑ NVE Form 10-K FY2010, Pg 11
- ↑ US Geothermal wins expanded NV Energy PPA for San Emidio
- ↑ U.S. Geothermal announces 25-year power purchase contract with NV Energy
- ↑ NV Energy, Inc. Earnings Call Transcript
- ↑ NVE Form 10-K FY2010, Pg 9
- ↑ Form 10-K, FSLR Business Description
- ↑ Form 10-K SPWRA Business Description
| |||||||
