A $3m quarter-over-quarter increase in transmission revenue helped bolster 3Q13 earnings for Westar Energy (NYSE:WR), though third-quarter net income of $133m was a marked reduction from net earnings of $139m in 3Q12, according to the company’s 3Q13 earnings figures.
For the first nine months of the year, the overall picture was more positive, with year-to-date net income of $251.5m compared to $227.9m in 2012. Accordingly, despite the drop in net income for the quarter, company officials characterized performance as “strong,” in part due to the company’s transmission projects.
“Favorable price adjustments to investments we’ve made in air quality and transmission … including a decline in the estimated cost of the Prairie Wind transmission project,” are helping to drive growth, Tony Somma, senior vice president and chief financial officer, said during the earnings call Nov. 8.
Westar revised the cost estimate for Prairie Wind from $225 m to $180m in July 2012, a Westar spokesperson told TransmissionHub Nov. 8. Somma said the project is presently running $10m favorable to that estimate, resulting in a further revised buget figure of $170m.
Prairie Wind, a joint venture of Westar and Electric Transmission America, is constructing a 110-mile line, 345-kV double-circuit transmission line that will link a new 345-kV substation near Wichita, Kan., to a new 345-kV substation northeast of Medicine Lodge, Kan., near the new Flat Ridge Wind Farm jointly owned by Westar Energy and BP Alternative Energy. From there, the line will continue south to the Kansas/Oklahoma border. The project will enable wind resources in the western and southwestern part of Kansas to be delivered to customers throughout Kansas and the region at large when it is placed in service in 2014, according to TransmissionHub data.
Transmission revenues, which accounted for $52.4m in 3Q13 compared to $49.1m in 3Q12, are expected to continue to grow. The company’s transmission formula rate that became effective in January 2013 is expected to increase Westar’s annual transmission revenues by approximately $12.2m, the company said in its 10-K filed Nov. 7.
On the liability side of the ledger, Westar’s balance sheet included an increase of nearly $25m in operating and maintenance (O&M) expenses during the quarter, though Somma explained that approximately $9m of that increase had revenue offsets, including $3m in higher transmission investment that comes back to the company “as return on our growing transmission investment.”
A significant portion of the O&M increase came from approximately $6m more for unplanned outages at the company’s fossil fuel plants, which were higher than last year when the plants had record reliability and experienced very few unplanned outages, he said.
As a result of the strong performance, the company raised its 2013 earnings guidance $0.15 per share, from a range of $2.05 to $2.15 to a range of $2.20 to $2.30 per share.
Electric Transmission America is a joint venture between American Electric Power (NYSE:AEP) and MidAmerican Energy Holdings.