El Paso Electric Announces First Quarter Financial Results

Business Wire, May 6, 2008

In Texas, fuel costs including purchased power energy costs are recovered through a fixed fuel factor which may be adjusted twice a year. We record deferred fuel revenues for the under-recovery of fuel costs until they can be recovered from Texas customers. In January 2007 and September 2007, we completed the recovery of two fuel surcharges to collect under-recovered fuel costs through November 2005. In New Mexico, we collect under-recoveries of fuel costs and refund over-recoveries of fuel costs through a fuel and purchased power adjustment clause with a two month lag. At March 31, 2008, we had a total company fuel under-recovery balance of $29.7 million including a fuel under-recovery balance of $28.8 million in Texas and $0.9 million in New Mexico. In April 2008, the Texas Commission approved a fuel surcharge to recover approximately $30.1 million of under-recovered fuel costs through November 2007, including interest, over a twelve-month period beginning in May 2008.

During the three months ended March 31, 2008, our primary capital requirements were for construction of electric utility plant, purchases of nuclear fuel, and the repurchase of common stock. Capital requirements for new electric plant were $44.0 million for the three-month period ended March 31, 2008 compared to $25.3 million for the three-month period ended March 31, 2007. During the first quarter of 2008, we repurchased $9.9 million of common stock compared to common stock repurchases of $14.0 million in the first quarter of 2007. We financed over 75% of our capital requirements for electric plant and common stock repurchases with cash flows from operations. In addition, during the first quarter of 2008, we liquidated $16.0 million of temporary investments and drew $13.0 million from our $200 million credit facility to finance our capital requirements. At March 31, 2008, we had a balance of $11.7 million in cash and cash equivalents.

Our capital requirements for nuclear fuel increased substantially in 2007 and 2008 as a result of increases in prices for uranium concentrates and an increase in our inventory of nuclear fuel feedstock. We finance our nuclear fuel inventory through a trust that borrows under our $200 million credit facility to acquire and process the nuclear fuel. Borrowings under the credit facility for nuclear fuel were $95.6 million as of March 31, 2008 and $52.0 million as of March 31, 2007. The balance of the credit facility available for nuclear fuel and capital requirements is $91.4 million.

During the first quarter of 2008, we repurchased 478,634 shares of common stock in the open market at an aggregate cost of $9.9 million. As of March 31, 2008, approximately 1,521,000 shares remain available for repurchase under the currently authorized program.

2008 Earnings Guidance

We are reiterating our earnings guidance for 2008 of $1.50 to $1.90 per basic share.

Conference Call

A conference call to discuss first quarter 2008 earnings is scheduled for 4 p.m. Eastern Time, May 6, 2008. The dial-in number is 800-857-6553 with a passcode of 2008. The conference leader will be Scott Wilson, Executive Vice President, Chief Financial and Administrative Officer of EE. A replay will run through May 21, 2008. The dial-in number is 800-839-2325 and a passcode is not required for the replay. The conference call and presentation slides will be webcast live on EE's website found at http://www.epelectric.com. A replay of the webcast will be available shortly after the call.