Friday, October 28, 2016
Empire District Electric declares 26 cent per share quarterly dividend
At the Board of Directors meeting of The Empire District Electric Company (NYSE:EDE) (the Company) held today, the Directors declared a quarterly dividend of $0.26 per share.
The dividend is payable December 15, 2016, to holders of record as of December 1, 2016.
The Company, an operator of regulated electric, gas and water utilities, announced today the results for the quarter and twelve months ended September 30, 2016.
Consolidated earnings for the third quarter ended September 30, 2016 were $27.5 million, or $0.62 per share, inclusive of $0.3 million of pre-tax merger costs. Earnings for the same quarter 2015 were $25.3 million, or $0.58 per share.
Consolidated earnings for the twelve months ended September 30, 2016, including $8.7 million of pre-tax merger-related costs, were $60.6 million, or $1.38 per share. Absent merger-related costs, twelve months ended tax-adjusted earnings would have been $66.0 million, or $1.50 per share. Earnings for the twelve months ended September 30, 2015 were $57.8 million, or $1.33 per share ($1.32 diluted).
Earnings for the third quarter 2016 were higher than the respective 2015 period primarily as a result of increased Missouri electric rates that became effective in late July 2015. New Missouri rates effective on September 14, 2016 and higher sales from more favorable weather also had a positive impact. Lower operating and maintenance expenses were also a positive driver, but were more than offset by higher depreciation expenses discussed below.
The July 2015 Missouri rate increase was also a positive driver of the September 2016 twelve month ended results, however this positive effect was offset in the 2016 twelve-month period by mild winter heating season weather.
On September 9, 2016, the Missouri Public Service Commission (MPSC) approved the Unanimous Stipulation and Agreement for changes in Missouri customer rates. The approval provided for an annual increase in base revenues of approximately $20.4 million, or 4.46%, to be effective, as mentioned above, on September 14, 2016. Base revenues established by the agreement are lower than the originally requested level of $33.4 million due primarily to lower fuel and purchased power costs than those built into current customer rates. The offsetting effect of reduced revenues and reduced fuel costs results in little impact to gross margin.
On September 7, 2016, the Company announced the MPSCs approval of the Companys merger with Liberty Utilities (Central) Co., an indirect subsidiary of Algonquin Power & Utilities Corp. The Arkansas Public Service Commission also approved the merger on September 29, 2016. And most recently on October 6, 2016, the Company announced the filing of a joint motion with the Kansas Corporation Commission (KCC) for approval of a Unanimous Settlement Agreement to approve the merger. Approval of the Settlement Agreement is pending before the KCC, and an order is due no later than January 10, 2017.
According to Brad Beecher, Empires President and CEO,
Our third quarter results, adjusted for weather and the merger-related costs incurred during the period, continue to meet our expectations.
Taking these results into account and considering the Missouri electric rate case outcome, our earnings guidance communicated on February 26, 2016 remains unchanged.
With the expiration of the waiting period under the Hart-Scott Rodino Act, receipt of approvals from the Federal Energy Regulatory Commission, the Federal Communications Commission, the Committee on Foreign Investments in the United States, the Public Service Commissions of Arkansas and Missouri and the Oklahoma Corporation Commission and a settlement agreement filed in Kansas, we are awaiting only approval from the Kansas Corporation Commission to close our merger with Algonquin Power & Utilities Corp.
We continue to expect closing in the first quarter of 2017.
Third Quarter 2016 Results
Electric segment gross margin (electric revenue less cost of fuel and purchased power) increased $6.7 million, or 5.7%, during the third quarter 2016 compared to the third quarter 2015. Quarter over quarter electric segment gross margin impacts include:
Increased customer rates, net of a $1.1 million decrease in Missouri base fuel recovery, increased revenues by an estimated $3.9 million.
Weather and other volumetric factors increased revenues by an estimated $3.0 million, and
Improved customer counts added an estimated $1.2 million to revenues.
Fuel expense changes reflective of the timing of the deferral and recovery of non-Missouri fuel and consumable costs had a negligible impact on electric segment gross margin when compared to the 2015 quarter.
Gas segment gross margin (gas revenues less cost of gas sold and transported) was relatively flat when compared to third quarter 2015 results.
Consolidated third quarter 2016 earnings were favorably impacted by decreased operating and maintenance costs of approximately $2.4 million, primarily driven by lower transmission expense, while unfavorable impacts included the following:
Depreciation and amortization expense increases of approximately $3.7 million, reflecting a one-time $2.6 million adjustment for the 2016 Missouri electric rate case and higher depreciation due to the completion of our Riverton combined cycle facility,
Interest expense increases of approximately $0.3 million,
Changes in AFUDC, which decreased earnings by approximately $1.6 million, and
Merger-related costs of approximately $0.3 million.
Consolidated net income increased approximately $2.2 million, or 8.8%, for the third quarter of 2016 compared to the third quarter of 2015. Absent the aforementioned merger-related costs, adjusted for taxes, consolidated earnings for the third quarter 2016 would have been $27.7 million, or $0.63 per share, a 9.4% increase over the 2015 third quarter.
Twelve Months Ended September 30, 2016 Results
Electric segment gross margin increased approximately $18.9 million, or 4.9%, during the twelve month period ended September 30, 2016 compared to the prior year period. Year over year electric segment gross margin impacts include:
Increased customer rates, net of a decrease in Missouri base fuel recovery of $5.4 million, increased revenues an estimated $18.3 million,
Improved customer counts added an estimated $3.2 million to revenues, and
Weather and other volumetric factors decreased revenues an estimated $13.7 million.
Fuel expense changes reflective of the timing of the deferral and recovery of non-Missouri fuel and consumable costs contributed positively to electric segment gross margin when compared to the 2015 period.
Gas segment gross margin was approximately $2.3 million, or 10.1%, below the twelve month period ended September 30, 2015, as mild weather during the current period winter heating season drove a 13.8% decline in overall sales.
Twelve month ended consolidated earnings were favorably impacted by lower maintenance expenses of approximately $5.8 million, primarily driven by lower transmission and distribution maintenance costs and the timing of a plant outage in 2015 at our State Line Combined Cycle plant. Unfavorable impacts included the following:
Depreciation and amortization expense increases of approximately $6.6 million, reflecting a one-time $2.6 million adjustment for the 2016 Missouri electric rate case and higher depreciation due to the completion of our Riverton combined cycle facility,
Interest expense increase of approximately $2.3 million resulting from the issuance of long-term debt in August 2015 which had a full-year impact in the current period ,
Changes in AFUDC, which decreased earnings by approximately $1.3 million, and
Merger-related costs of approximately $8.7 million.
Consolidated net income increased approximately $2.8 million, or 4.9%, for the twelve month period ended September 30, 2016 compared to the prior year period. As noted above, absent the aforementioned merger-related costs, adjusted for taxes, consolidated earnings for the twelve month period ended September 30, 2016 would have been approximately $66.0 million, or $1.50 per share, a 14.1% increase over the 2015 period.