Westar Energy, Inc. (Westar Energy), a US based service provider of electric generation, transmission and distribution, has reported sales of $1.83 billion for the year-end of 2008, compared with the sales of $1.72 billion in the previous year-end. It has also reported a net income of $178.1 million, or $1.70 per basic share, for the year-end of 2008, compared with the net income of $168.3 million, or $1.85 per basic share, in the previous year-end.
The company reported fourth quarter 2008 earnings of $22.6 million, or $0.21 per share, compared with fourth quarter 2007 earnings of $13.5 million, or $0.15 per share.
The per share results for both the full year and quarter reflect an increase in the number of shares outstanding, of around 15% and 17%, respectively, as a result of the company having issued additional shares to fund capital investments.
2008 Full Year Results Compared with 2007 Full Year Results
Retail sales increased by $102 million, or 9%, due primarily to recovery in prices of higher fuel and purchased power costs, offset in part by a 2% decrease in sales volumes attributable primarily to cooler weather and refunds to retail customers.
Wholesale sales increased $33 million, or 9%, due primarily to higher average prices, which offset a 6% decline in wholesale sales volumes. Energy marketing decreased $23 million, or 61%, due to several factors, including: the effects of extended plant outages; more transactions being completed through regional transmission organization real-time markets rather than negotiated transactions between individual parties; and the impact of customer refunds and reserves related to prior period transactions.
Operating expenses increased $165 million, due primarily to increased fuel and purchased power expense and higher depreciation expense. Fuel and purchased power expense increased $150 million due principally to the higher unit cost of fuel and purchased power. Higher fuel and purchased power expenses are largely recovered through timely adjustments to the company’s prices. Depreciation expense increased $11 million due primarily to higher plant balances.
Other income for 2008 was $4 million compared with other expense of $1 million in 2007, an increase of $5 million, due primarily to higher equity AFUDC and higher income from corporate-owned life insurance.
Income tax expense decreased $60 million, due primarily to a $29 million reversal of unrecognized income tax benefits due to the completion of the federal income tax audit for 1995 through 2002, lower taxable income and the recognition of $15 million in state tax incentives related to investments and jobs creation within Kansas.
2008 Fourth Quarter Results Compared with 2007 Fourth Quarter Results
Westar Energy reported revenues of $406 million for the fourth quarter 2008, an increase of $13 million compared with revenues of $393 million in 2007. Retail revenues increased by $16 million, or 6%, due primarily to recovery in prices of higher fuel and purchased power costs. Wholesale sales increased $6 million, or 6%, due primarily to higher average prices. Energy marketing decreased $6 million due principally to less favorable market conditions and recording a reserve for a $3 million claim by an independent system operator related to prior period transactions.
Operating expenses increased $8 million, reflecting primarily higher fuel and purchased power expense and higher depreciation expense. Fuel and purchased power expense increased $9 million due primarily to the higher unit cost of fuel and recovery this year of previously deferred fuel and purchased power expense.
Other expense for 2008 was $5 million compared with other income of $1 million in 2007, a decrease of $6 million due primarily to the recording of losses on investments held in a trust for retirement benefits. The loss on investments was partially offset by an increase in equity AFUDC. Interest expense increased $14 million due primarily to the interest on additional debt issued to fund the company’s capital investments and the reversal in 2007 of $9 million in interest expense associated with unrecognized tax benefits.
Income taxes decreased $24 million due primarily to the recognition of $15 million in state tax incentives related to investments and jobs creation within Kansas and lower taxable income.
2009 Earnings Guidance
The company announced earnings guidance for 2009 of $1.65 to $1.90 per share. The 2009 earnings guidance excludes an estimated $0.30 per share benefit related to a tax settlement that will permit the company toutilize operating losses from its former non-regulated businesses. The company posted to its Web site a summary of the principal earningsdrivers and adjustments used in arriving at 2009 earnings guidance.