Wed, May 7, 11:19 AM (5 days ago)
**Tucson Electric Power Company (TEP) Q1 2025 Financial Summary** **Financial Health and Performance:** - **Revenue:** TEP reported $365.7 million in operating revenues for Q1 2025, down 19.2% from $452.8 million in Q1 2024. The decrease was primarily due to lower wholesale revenues, retail revenue, and Springerville Units 3 and 4 participant billings. - **Profit Margins:** Net income decreased by 14% to $44.4 million in Q1 2025 from $51.2 million in Q1 2024. This was primarily due to lower margins from wholesale transactions, higher interest expenses, and increased depreciation. - **Cash Flow:** Net cash flows from operating activities decreased by 32.1% to $128.4 million in Q1 2025 from $190.1 million in Q1 2024. This was primarily due to higher PPFAC recoveries in 2024. - **Earnings Changes:** TEP's earnings were affected by lower wholesale revenues, higher interest expenses, and increased depreciation. However, higher AFUDC and lower base operations and maintenance expenses partially offset these decreases. **Quarterly Performance Discussion:** - **Operating Revenues:** The decrease in operating revenues was primarily due to lower short-term wholesale revenues, retail revenue, and Springerville Units 3 and 4 participant billings. - **Operating Expenses:** Fuel and purchased power expenses decreased by 36% due to lower PPFAC recoveries and fuel expenses. Operations and maintenance expenses decreased by 16% due to lower reimbursable maintenance expenses and generation facility expenses. - **Cash Flows:** The decrease in cash flows from operating activities was primarily due to higher PPFAC recoveries in 2024. Cash flows from investing activities increased due to higher capital expenditures, while cash flows from financing activities increased due to higher debt issuance. **Trends and Uncertainties:** - **Regulatory Matters:** TEP is subject to comprehensive regulation, with recent developments including the 2023 Rate Order, Roadrunner Reserve I Accounting Order, and the ACC Formula Rate Plan Policy. - **Generation Resource Strategy:** TEP is transitioning to a less carbon-intensive energy portfolio, with plans to achieve net zero direct GHG emissions by 2050 and reduce carbon emissions by 80% by 2035. - **Sales Growth and Seasonality:** TEP has experienced interest from potential new large retail customers, which could result in significant increases in retail sales growth. However, weather patterns and other factors cause seasonal fluctuations in sales. - **Future Operations Impact:** TEP's financial performance and outlook are affected by various factors, including economic conditions, environmental laws, and regulatory actions. The company is focused on promoting economic development, achieving constructive regulatory outcomes, and maintaining a strong community presence. **Future Outlook:** - TEP plans to file a rate case in 2025 that includes a formula rate plan, which is expected to improve rate stability for customers and reduce regulatory lag. - The company is also planning to join Southwest Power Pool Markets+ in 2027, which is expected to provide benefits for TEP's retail customers. - TEP is continuing to monitor government policy on foreign trade and the potential impacts of new or increased tariffs on its capital projects. **Ticker:** TEP **Full Name:** Tucson Electric Power Company