Highlight of Business Operations:Upon evaluation of the factors above, the Company has reduced cash requirements for capital expenditures by approximately $120 million to $145 million for 2009 for total estimated cash requirements of $800 million to $775 million for the current year. The current recession, as well as recent volatility in the global credit and financial markets, has created an unprecedented level of uncertainty regarding future business conditions. While management expects to maintain this process of continual reevaluation for the foreseeable future, it is not possible to predict how long the economic recession will continue or what its long-term effect will be on the economy in general or on our financial position, cash flows or results of operations in particular.
As of March 31, 2009, NVE, NPC and SPPC had cash on hand of approximately $2.6 million, $81.6 million, $28.9 million, respectively. NVE and the Utilities attempt to maintain their cash and cash equivalents in highly liquid investments, such as U.S. treasury bills. In addition to cash on hand, NVE and the Utilities may issue debt up to $281.5 million, on a consolidated basis, which includes the use of approximately $268.0 million of the Utilities revolving credit facilities. See Factors Affecting Liquidity, Ability to Issue Debt, below. NVE and the Utilities anticipate with the reduction in cash requirements for capital expenditures, as discussed earlier, and decreasing commodity prices, that cash on hand, internally generated funds and the ability to issue debt, which includes the use of the Utilities revolving credit facility, will be sufficient to meet short-term operating costs. However, if energy costs rise at a rapid rate and the Utilities do not recover the cost of fuel and purchased power in a timely manner, if operating costs are not recovered in a timely manner or the Utilities were to experience a credit rating downgrade resulting in the posting of collateral as discussed below under Gas Supplier Matters and Financial Gas Hedges, the amount of liquidity available to the Utilities could be significantly less. In order to maintain sufficient liquidity, NVE and the Utilities may be required to further delay capital expenditures, re-finance debt or issue equity.
As of March 31, 2009, NVE (on a stand-alone basis) had outstanding debt and other obligations including, but not limited to: $63.7 million of its unsecured 7.803% Senior Notes due 2012; $191.5 million of its unsecured 6.75% Senior Notes due 2017; and $230 million of its unsecured 8.625% Senior Notes due 2014.
As of March 31, 2009, NVE, NPC, SPPC and their subsidiaries had approximately $5.5 billion of debt and other obligations outstanding, consisting of approximately $3.6 billion of debt at NPC, approximately $1.4 billion of debt at SPPC and approximately $485 million of debt at the holding company and other subsidiaries. Although NVE and the Utilities are parties to agreements that limit the amount of additional indebtedness they may incur, NVE and the Utilities retain the ability to incur substantial additional indebtedness and other liabilities.
In the first quarter of 2009, NPC and SPPC paid dividends to NVE of $22 million and $108.8 million, respectively. On April 30, 2009, NPC and SPPC declared a $40 million and $20 million dividend, respectively, to NVE.
Additionally, under the terms of the debt, NPC and SPPC are permitted to incur a combined total of up to $500 million in indebtedness and letters of credit under their respective revolving credit facilities. As of March 31, 2009, NPC had $15.3 million of letters of credit outstanding and SPPC had approximately $200 million borrowed and $17.1 million of letters of credit outstanding against its revolving credit facility; therefore, the remaining combined availability is $268 million. If however, the Utilities were to receive a credit rating downgrade and were required to post collateral, as discussed below under Gas Supplier Matters and Financial Gas Hedges, the amount of availability under the revolving credit facilities would be further reduced.
Read the The complete ReportNVE is in the portfolios of David Dreman of Dreman Value Management, Charles Brandes of Brandes Investment, PRIMECAP Management.