El Paso Electric Co. (NYSE:EE) (2.1%) (EE – $50.13 – NYSE) is a vertically integrated electric utility serving ~411,000 customers in and around El Paso, Texas and Las Cruces, New Mexico. Roughly 70% of capacity is natural gas and 30% nuclear. We consider El Paso Electric to be a well-managed, low risk, traditional utility investment, with solid earnings growth potential. We expect above average annual customer and sales growth, driven by military base expansion, increased cross border trade, customer additions, as well as an increased use of refrigerated air conditioning. Only 35% of El Paso residences have refrigerated air conditioning, but 99% of new residences install central air conditioning. We expect EE to file a New Mexico rate case sometime in early 2019. In 2020, we expect EE to achieve full earnings power of $2.70 per share, which reflects rate recognition of the new peaking Units 3 and 4 and a stronger cash flow position.
From Mario Gabelli (Trades, Portfolio)'s Gabelli Utilities Fund fourth-quarter 2018 commentary.
