Executives
Britta Carlson - Manager of Investor and Shareholder Relations
Michael W. Yackira - President and CEO
William D. Rogers - Corporate Sr. VP and CFO
Analysts
Dan Eggers - Credit Suisse
Gregory Gordon - Citigroup
Lasan Johong - RBC Capital Markets
John Kiani - Deutsche Bank Securities Including
Paul Pederson - Glenrock Associates
Jonathan Arnold - Merrill Lynch
Michael Lapides - Goldman Sachs
Brian Russo - Ladenburg Thalmann
Sierra Pacific Resources Corporation (SRP) Q3 FY08 Earnings Call November 3, 2008 10:00 AM ET
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the Sierra Pacific Resources Third Quarter Earnings Call to Investors. At this time, all participants are in a listen-only mode, and later we will conduct a question-and-answer session. The instructions will be given at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I'd now like to turn the conference over to Ms. Britta Carlson. Please go ahead.
Britta Carlson - Manager of Investor and Shareholder Relations
Good morning. This is Britta Carlson, Manager of Investor and Shareholder Relations. Thank you for joining us this morning to review Sierra Pacific Resources results for the third quarter 2008. In addition to the press release that was issued over the Newswire earlier today, we expect to file our 2008 third quarter Form 10-Q with the SEC this week.
I would like to remind you that comments we make during this call, may include forward-looking statements within the meaning of the Private Securities Litigation Reforms Act of 1995. Regarding the future performance of Sierra Pacific Resources and its subsidiaries, Nevada Power Company, and Sierra Pacific Power Company both doing business as NV Energy.
These statements are current expectations and as such are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. These risks and uncertainties include the factors discussed in the Company's Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008, and Form 10-K for the year ended December 31, 2007.
I would like to mention that reconciliation of certain non-GAAP financial information presented during today's call can be found in our earnings press release, which is posted on our Company website at www.nvenergy.com.
With me this morning, are Michael Yackira, President and Chief Executive Officer, and Bill Rogers, Corporate Senior Vice President and Chief Financial Officer. Michael will begin our call this morning.
Michael W. Yackira - President and Chief Executive Officer
Thanks Britta. Good morning everyone. Thank you for joining us this morning. Before Bill reviews the third quarter financial results, I've like to offer a few comments on our decision to re-brand the two utilities that have been serving Nevada for over 100 years.
In September, we announced that the company's utilities Nevada Power Company and Sierra Pacific Power Company will now be doing business as NV Energy. The new name provides a better description of who we are, and it's a better fit for our long... with our long-term energy strategy.
We have scheduled a special Shareholders Meeting on November 19th at our offices in Las Vegas to seek shareholder approval, to change the name of the holding company from Sierra Pacific Resources to NV Energy, Inc. If the name change is approved by shareholders, our stock will be traded on the New York Stock Exchange under the Symbol NVE.
Our decision to change the name to NV Energy was down after much thought and research. In 1999 Sierra Pacific Resource and Nevada Power Company merged, and since then, we have consolidated many of the functions of the two companies, in order to reduce operating costs, but until now the two utilities have pertained their separate identities.
The new name underscores the fact, that we are first and foremost a Nevada company providing energy products and services for Nevadans. This name change and new logo, signals our commitment to our customers, employees, and investors to become the premier provider of energy products and services for Nevada.
I'm also pleased to announce that last week, the Sierra Pacific Resource Board of Directors, declared a cash dividend of $0.10 per share, payable on December 17, 2008 to common shareholders of record on December 2, 2008. This is a 25% increase from our prior quarterly dividend of $0.08 per share. As you are aware, we reinstated the dividend during the third quarter of 2007. In that reinstatement, we took the balance few of pay-out to shareholders and retained earnings for our substantial investment opportunities, with more weighting to the latter. We continue to have that balanced and relative weighting philosophy.
Although we do not have a stated dividend policy, our methodology when setting the pay-out analysis our current year earnings and visibility for next year's earnings. We view the third quarter as providing the best visibility of current and future year earnings. Therefore our Board is comfortable with increasing the pay-out per share, to a level that reflects the view of our earnings.
I'll now turn the call over to Bill Rogers, and I'll later address some of the other key developments for our company.
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
Thank you Michael and Good morning everyone. In our earnings press release, we included certain financial highlights from our company's income statements and balance sheets. So rather than repeat our financials; I will discuss key drivers and trends that affect our earnings.
As released this morning, Sierra Pacific Resources earned a $151 million or $0.64 per share in the third quarter 2008, compared to a $152 million, or $0.69 per share in the same 2007 quarter. In the first nine months of 2008, Sierra Pacific earned $211 million, or $0.90 per share, an increase of 9% compared with the $194 million or $0.87 per share in the same period last year.
We are very pleased with our 2008 consolidated earnings year-to-date. With respect to revenue, our retail electric sales decreased for the third quarter throughout the state, with megawatt hour sales decreasing 1.5% in the third quarter, compared to the same period in 2007. The reduction in sales was primarily due to decreased usage in 2008 and that lower usage was largely a result of cooler summer weather, and more specifically July, 2008 relative to July, 2007.
As we have stated in other presentations, the extremely and abnormally hot weather in July, 2007 added approximately $0.10 per share to the full 2007 year earnings. Gross margins increased to $479 million in third quarter 2008 from $477 million when compared with 2007. For the first nine months of 2008, the rate of growth in our gross margin was nearly 6%, our NV Energy southern territory contributed 68% of the consolidated gross margin, and the electric and gas businesses that NV Energy's northern service area contributed 29% and 3% respectively. Over the last two year period our compound annual growth rate for gross margin was well over 8%. Due to our investment plans, and the growth in our energy demand we anticipate this growth trend and gross margin to continue.
On the expense side our consolidated operations and maintenance expenses increased only 2%, in the first nine months of 2008, when compared to 2007. This helped to drive revenue margin improvements to our bottom-line, which grew 9% year-to-date in 2008. This example of our continued cost discipline is a result of both the process redesign and the investments we have made in personnel, our power plant fleet, and the transmission and distribution assets.
If I could, please let me put our growth in perspective. First and foremost our communities continue to have a growth in population and our company continues to have a growth in customers. For the first nine months of this year and the energy southern service territory average residential customer count increased 0.9%, when compared to the average customer counts for the same period last year.
Moreover, commercial and industrial electric customer count increased 2.9% and 3.9% respectively. This same growth trend is true for NV Energy's Northern service area; average residential customer count increased 0.7%, while commercial and industrial electric customer count increased 2.0% and 4.5% respectively, during the first nine months of 2008.
The cyclical nature of the Las Vegas home building market has resulted in lower current year residential customer growth, but we expect that to change. According to local demographers, sometime in 2009 or 2010, Southern Nevada is likely to work through its current housing and apartment inventory. In turn, we expect our company to return to its historic growth rate in residential customers.
While we've experienced a slower rate of growth, future employment opportunities remain healthy. In September, year-over-year total employment was unchanged in Las Vegas. And although the unemployment rate is higher, we believe the unemployment rate moved higher because people moved here in advance of employment opportunities. Let's provide some examples.
Many gaming properties are in the process of hiring for openings later this year, including Wynn's Encore, which is hiring 5000 people, for approximately 2000 hotel rooms and the Alienta Hotel and Casino property which is hiring 1200 employees for opening this month in November. Further MGM recently announced that it will soon open its employment office in order to hire 12,000 employees in 2009 for its City Center property. As we have mentioned in the past, hotel room growth drives job and population growth which in turn drives our customer growth.
Now I would like to turn your attention to our investment and capital formation plans. As a result of the completion of projects under budget and the management of our growth capital, we are reducing our 2008 estimated cash construction requirements by a minimum of $200 million. Therefore, with the recent acquisition the Bighorn Generating Station, cash requirements for investment in 2008 will total approximately $1.4 billion.
Further, upon review and approval of the 2009 investments, our cash construction requirements for 2009 will be reduced by $350 million to $400 million. Our capital investment plan for 2009 is now estimated to be approximately $950 million. Our recently approved Harry Allen plant accounts for approximately one-third of that investment and base capital expenditures account for approximately $375 million.
As we expect the higher growth to return, we are positioned to dynamically react to higher growth environment in which base capital could increase to levels experienced recently, namely $475 million to $525 million annually. As a result of our updated estimates, our cash requirements for the years 2009 through 2012 will be approximately $3 billion. This excludes the $2.4 billion in spending for the Ely Energy Center over the same four year period.
These changes in our capital investments will allow us to reduce the size of a secondary offering of common equity in our near term capital formation plans and also to be more flexible in the timing of that equity offering. More specifically, the capital investment plan for 2009 will be funded largely with internally generated cash flow, augmented by external financing and the debt or debt and equity markets of approximately $400 million.
I will now focus on our balance sheet and financial liquidity as of this point in time. Our balance sheet remains strong, as evidenced by the quarter and equity the total capitalization of 40%, 47%, and 44% for the parent company and the Southern and Northern NV Energy companies respectively. We remain committed to strengthening our balance sheet through disciplined investments; risk mitigation, and when and as appropriate secondary offerings of common equity. As an update, since quarter end, NV Energy purchased Bighorn through cash on hand and borrowing it under its revolving credit facility. Therefore, leverage did increase after the end of the third quarter.
Today, we have approximately $600 million of liquidity between the two NV Energy companies and our forecast assuming no external financing, indicate a year end liquidity position of approximately $500 million if not greater. With that re-cap of our trends and our financials, I'll now turn the call over to Michael Yackira who will discuss other more important matters that impact our company.
Michael W. Yackira - President and Chief Executive Officer
Thanks Bill. As Bill stated while Nevada like the rest of the nation is in the midst of a challenging economy, our state is still experiencing growth although at a more modest rate. However, we expect to see continued growth in the demand for energy particularly in Southern Nevada where several major resorts are scheduled to open over the next two years.
Our tourism revenues are down state wide, the new resort projects should help improve the economic conditions. Wynn Resort's new $2.2 billion Encore hotel casino will be opening in December of this year and the MGM Mirage City Center project is scheduled for completion late next year. These two projects alone are expected to require nearly 100 megawatts of electricity demand.
To serve the growth and demand that has already occurred and to ensure that we can adequately serve future growth, we continue to pursue our three part energy supply strategy that emphasis efficiency and conservation programs, renewable energy projects, and the addition of Nevada based generating capacity using traditional fuels. I'll be discussing these in reversed order.
Two weeks ago we completed the acquisition of the 598 megawatt Bighorn Generating plant South of Las Vegas from a subsidiary of Relied Energy. As Bill mentioned, the investment of approximately $510 million was funded by a combination of cash on hand and borrowings under our revolving credit facility.
Bighorn is a natural gas-fire combined cycle generating facility that was commissioned in 2004. The plant uses dry cooling technology to greatly reduce the water requirements, compared with a water cooled facility. This is a major benefit for our customers in Southern Nevada's desert environment. And, I am pleased to announce that we will rename the plant to Walter M. Higgins Generating Station in honor our former Chairman and CEO.
In August, we completed the installation of natural gas fire combustion turbines at the Clark Generating Station in Las Vegas that could generate 600 megawatts to serve peak-load demands. These investments in the new peaking units as well as the Bighorn acquisition will be included in an upcoming general rate case for our Southern Nevada utility.
Last month, we also received approval from the Public Utilities Commission of Nevada, to move forward with the construction of a new 500 megawatt natural gas fire, combined cycle generating plant, at our Harry Allen Generating Station, North of Las Vegas. We expect this plant to begin serving our customers by December of 2011. Similar to the Bighorn facility this is a low wire used air-cooled generating plant. The estimated cost of this project is $682 million and a portion of the cost associated with this project will be included in the upcoming general rate case for our Southern Nevada utility.
To sum up, in January 2006 our company owned approximately 2500 megawatts of generating capacity. Since, then with the additions of, Lenzie, Silverhawk, Tracy, Bighorn, and almost 700 megawatts of peaking capacity we now own nearly 6000 megawatts.
Turning to renewable energy, we are continuing to make solid progress with initiatives to expand our portfolio. In July we received approval from the PUCN to pursue the development of a 30 megawatt geothermal project in Northern Nevada with ORMAT Technologies. We are continuing work on the proposed 200 megawatt wind-farm in Northeast Nevada with Renewable Energy Systems, Americas, and we are about to begin construction of a 6 megawatt project that we will own using waste heat from the current river pipeline compressor station to produce electricity.
On September 29th, we issued a request for proposals for renewable energy resources, including Solar, Wynn, Geothermal, and Biomass. We expect to begin evaluating the responses by the middle of this month.
The economic rescue package passed by Congress last month includes an eight year extension of investment tax credits for Solar and for the first time allows utilities such as NV Energy to benefit from these tax credits. We believe this along with extension of the production tax credits for Wynn and Geothermal will foster even more renewable energy development in our state and provide opportunities for our company to invest further in these projects.
Turning to our energy efficiency and conservation initiatives; up to 25% of Nevada's portfolio standard can be fulfilled with savings obtained from energy efficiency programs. During the first three quarters of 2008, these programs have saved about 285 million kilowatt hours of electricity at our utilities compared with over 250 kilowatt hours for the 12 month period ended December 31, 2007. Put in perspective, our investments in these programs were approximately $2 million in 2002. This year we will likely to invest $60 million and next year even more. Our state allows these investments to be included in rate base on which we earn a return.
Among our initiatives is a successful program to encourage customers to install photovoltaic panels on their homes and businesses. Since the start of the program in 2003, Nevadans have installed almost 2 megawatts of solar energy and received approximately $7 million in rebates to help offset installation costs. At the direction of the Nevada State Legislature, this year we have expanded the small renewables program to include wind turbines and micro hydroelectric projects.
As Bill and I said earlier, growth in Nevada has slowed but it hasn't stopped, and we are planning accordingly with infrastructure investments needed to serve new customers and anticipated load growth. We've taken a disciplined approach to our capital investment process and we are constantly looking for ways to hold down operating costs. We are cognizant of the serious challenges facing capital markets nationwide and we have worked hard to strengthen and simplify our balance sheet.
Finally, our Board elected a new Director last week. She is Susan Clark, a highly respected attorney, energy expert, and former Chairman of the Florida Public Service commission. Susan brings a wealth of regulatory and legal expertise to our company. She was an FPSC Commissioner for nine years serving as Chairman in 1995 and 1996. She is a share holder of the law firm of Radey Thomas Yon & Clark with a practice concentrating on energy and telecommunications law and utility regulation. Susan is a valuable addition to our Board.
We look forward to seeing you at our upcoming Analyst Meeting in Las Vegas later this week on November 6th and next week at EEI Fall Financial Conference starting on November 9th.
Now Bill and I are ready to take your questions.
Question And Answer
Operator
[Operator Instructions]. And our first question comes from the line of Dan Eggers with Credit Suisse, please go ahead.
Dan Eggers - Credit Suisse
Hey good morning. Michael I was wondering if you could just give a little more color on what you guys are seeing as far as your customer disconnects, late payments, bad debt exposure, and anything about other telling signals as far as consumption patterns?
Michael W. Yackira - President and Chief Executive Officer
Well, I'll turn it over to Bill to give some of the numbers but by and large I don't think we are experiencing anything different from what a lot of company's are experiencing of late with the economy issues. We've have had some increases but not extremely significant. Bill?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
Thanks Michael. Dan with respect to customer usage, the decline in usages last quarter was largely attributable to weather. With respect to payment and maybe referring to today's Wall Street Journal article, couple of ways to put in perspective. Our receivables days on hand is up maybe two days in the third quarter of this year compared with the third quarter of 2007. And our age receivables is unchanged on a year-on-year basis. Having said that we have increased our reserves for that and we did that... flow through that through the income this quarter and that number was approximately $5 million.
Dan Eggers - Credit Suisse
Last quarter Bill I think you talked about usage being a pretty big determinant in the under... the downside of volumes in the second quarter, I think it was about half what you said was couple of 3% if I remember correctly, Are you guys not seeing that sort of customer response again this quarter or are you guys able to fine tune that analysis a little bit more?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
The answer to that is both. We have been able to fine tune it and more of it is due to weather, when compared to a weather normal year in 2008 to weather normal year in 2007.
Dan Eggers - Credit Suisse
On the '09 CapEx, you kind of rattled that off real quickly, can you just go back through what the pieces are that you guys are keeping or what pieces are not going to get spent out of that $350 million to $400 million cut?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
We didn't discuss specific pieces of that Dan, but the... of the $950 million in 2009 which is $350 million to $400 million is less than what we previously shared. A third of that is associated with the Harry Allen plan which is recently approved, and $375 million of that is base capital. So base capital as been reduced by about a $150 million, and then we've further refined our estimates with respect to capital expenditures, and plant and transmission assets, as well as certain renewable recourses.
Dan Eggers - Credit Suisse
Okay. And then on the equity issue and to the external funding perspective, kind of the $400 million that you guys are targeting for next year. If you guys were to go all debt with that number rather than issuing any equity, is that going to keep you guys in decent shape with the regulators as far as your lot equity ratios are concerned?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
Well the leverage will increase on a margin if it were entirely debt. I really can't speak for being in good shape with the regulators. I have no reason to believe that they have understood the capital markets, so they would accept a slightly more leverage with the... our intent to decrease that leverage in forward years if that were the case. Michael?
Michael W. Yackira - President and Chief Executive Officer
Yes, I think that's accurate, Dan.
Dan Eggers - Credit Suisse
Okay. Thank you guys.
Michael W. Yackira - President and Chief Executive Officer
Thanks, Dan.
Operator
Our next question from the line of Greg Gordon with Citigroup. Please go ahead.
Gregory Gordon - Citigroup
He basically asked my question. Thank you.
Operator
Alright. We will go next to the line of Lasan Johong with RBC Capital Markets. Please go ahead.
Lasan Johong - RBC Capital Markets
Thank you. Couple of questions, is Ashland play still happening, do you guys know it?
Michael W. Yackira - President and Chief Executive Officer
Ashland place, I believe about a week plus ago announced that it would not start construction until at least the end of 2009.
Lasan Johong - RBC Capital Markets
Okay. And the base capital reduction of a $150 million, what's that attributable to demographics?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
Just slowdown in our growth rate for especially residential customers.
Lasan Johong - RBC Capital Markets
Right. And is the current situation putting... taking a lot of pressure off of the plants what you lead, and is there any kind of revised schedule for getting early on under construction?
Michael W. Yackira - President and Chief Executive Officer
Lasan, the situation as it existed for the past, at least six months or so is unchanged. We have the approval of our public service... public utilities commission to continue to spend money on yearly while the permitting process is going on. We're expecting that the Bureau of Land Management will be issuing its draft, environmental impact statement within the next month; if not sooner, we're certainly hoping. And the air permit is still in draft form and we're expecting some movement on that. But the in service states which we had before our public utilities commission hasn't changed and we're still expecting that our best case scenario would bring it in the first unit in 2015 and the second unit in 2016.
Lasan Johong - RBC Capital Markets
I see. There's also been discussion of putting in the transmission portion of it earlier for renewable energy and so on and so forth, or it maybe bifurcating the two projects. Any thoughts on how you might handle that?
Michael W. Yackira - President and Chief Executive Officer
Well Lasan, we have... as we've said before Ely and the transmission line liked together in the BLM process and until the BLM issues their draft, EIS will have to determine at that point whether or not we could accelerate but at this stage they're tied together.
Lasan Johong - RBC Capital Markets
Understood. Last question, in terms of the housing situation and just the general demographics, you have said a lot of newcomers are coming into the city and your expectations for housing is still '09 maybe 2010, but are we talking about a turn about in construction projects or are we just talking about the excess being soaked up, I mean can you give us a little bit more color and detail on the situation?
Michael W. Yackira - President and Chief Executive Officer
Lasan, we think it's the excess that should be continued to be absorbed. We're seeing some change, some movement in that, not significant as you can imagine as the housing prices come down they become bargains and they are being, some are being snapped up. But I think the residential market likely won't pickup again until as Bill said in his comment 2009 and 2010.
Lasan Johong - RBC Capital Markets
So you are saying that the excess will kind of dissipate by '09, 2010. Doesn't mean necessarily new construction is coming in?
Michael W. Yackira - President and Chief Executive Officer
Well, new construction would have to come in once they dissipate as long as the employment growth as we see it as these new projects come on-line continues to be there. But we still have a fairly significant inventory to get through.
Lasan Johong - RBC Capital Markets
I see. Thank you very much.
Michael W. Yackira - President and Chief Executive Officer
Thanks Lasan.
Operator
And our next question from the line John Kiani with Deutsche Bank. Please go ahead.
John Kiani - Deutsche Bank Securities Including
Good morning.
Michael W. Yackira - President and Chief Executive Officer
Good morning John.
John Kiani - Deutsche Bank Securities Including
Can you talk about the potential, I don't know if you touched on this already or not, I jumped off the call for a minute, the potential to look at just the transmission line portion of Ely separate and distinct from what happens with the rest of that project?
Michael W. Yackira - President and Chief Executive Officer
Yes, we did address that just in the last question John, and what we said was that the BLM process includes both the transmission line and the Ely Energy Centre. And while we believe that the transmission line is imperative for us and we hope that we can bring it in earlier, we need that draft to EIS first before we can find out what the next steps are.
John Kiani - Deutsche Bank Securities Including
Got you. Thank you.
Michael W. Yackira - President and Chief Executive Officer
Thank you John.
Operator
And we go next to the line of Paul Patterson with Glenrock Associates, please go ahead.
Paul Pederson - Glenrock Associates
Morning, how you're doing?
Michael W. Yackira - President and Chief Executive Officer
Morning, Paul.
Paul Pederson - Glenrock Associates
I wanted to simply touch base with you on the $400 million you mentioned debt in equity and or debt and equity, I guess. So, I'm just wondering what you think that might... breakdown might be. Obviously you have this peers you have lot more flexibility and stuff, what's your actual thoughts about that?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
Paul I think we've been as specific as we can at this point in time which is merely to say we expect to meet $400 million of external financing next year and depending upon a number of factors including our actual investments that will drive our thinking as to whether equity is a piece of that.
Paul Pederson - Glenrock Associates
Okay. When are you... was listening to your response to Dan's question, it sounded like you guys have a flexibility not to issue equity I guess in the near term if... if in fact the markets aren't there, is that in adequate, am I my understanding that correctly or would you like to elaborate a little bit on that or is that pretty much just... I want to understand that correctly again.
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
I think that's correct. We have that flexibility from our perspective.
Paul Pederson - Glenrock Associates
Okay. I appreciate that.
Michael W. Yackira - President and Chief Executive Officer
Thanks Paul.
Operator
We have a question from the line of Jonathan Arnold with Merrill Lynch. Please go ahead.
Jonathan Arnold - Merrill Lynch
Morning.
Michael W. Yackira - President and Chief Executive Officer
Morning, Jonathan.
Jonathan Arnold - Merrill Lynch
I'd just like to ask a question on pension if can you give us any insight in the sense of where the firm stand and likelihood of contributions as you look at next year, or do you think its still not in the funding zone.
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
Jonathan, it's Bill. I will maybe speak to it with reference to the PPA minimums. And I think as you're aware we contributed $100 million to both our defined benefit plan and our OPEB plans in 2007 and we contributed another $30 million in this last quarter.
So based upon current estimates, we remain well funded relative to the PPA minimums. That's not to say that we won't look at contributing more whether that be in the 2008 or 2009 years but based upon where we currently are with our investments and based upon estimates and discount rates we have substantial margin above the PPA minimums, as a result of the moves we took last year.
Jonathan Arnold - Merrill Lynch
Thank you. If I could just follow-up on the equity and debt or just debt sort of dynamic that you outlined, what point in the year would you expect to have a clearer view of where you are headed with that and I want to just maybe clear, is it just... is it really a market decision or what else is going to drive your outcome in terms of what you end up doing?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
I think there is a number of factors that go in to that including our investment plans beyond 2009, and making sure we have the right balance sheet in place in advance of that. Our market factors are certainly a part of the consideration, as well as the investment what we actually put in place in the year 2009.
Jonathan Arnold - Merrill Lynch
Alright, then. I guess based off your current plans for investment in 2009, where do you sit on that sort of decision per process?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
I think we have shared about as much as we can there, Jonathan.
Jonathan Arnold - Merrill Lynch
Okay. Thanks a lot.
Operator
And our next question from the line of Michael Lapides with Goldman Sachs. Please go ahead.
Michael Lapides - Goldman Sachs
Hey guys, congrats on a good quarter. I want to change track a little bit, and I apologize if I am asking for a little bit of history less than here. When we think about how large kind of industrial users which are obviously the casinos; what happened to them in some of the last major downturns, was it simply a reduction in demand, a reduction in growth, or did you see whether it was 2001-2002 or '87 or '91, or even the late '70s. Did you actually see shut downs of existing casinos?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
Well, you are at... the people who are sitting around this table; I think that one or two of us were here at that time. The downturn as I understand, it was again primarily residential. And we didn't see much in terms of slowdown in large commercial or large industrial customers which would be the casino business. So we know this is a territory that we haven't seen since the 1980s basically other than the left that we had after 9/11. So, that's about as much as I can tell you right now, pretty much as I know.
Michael Lapides - Goldman Sachs
Okay. And when we think about some of the renewable projects and you talked about this, and I apologize if I didn't catch it. Are you still doing China Mountain?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
Yes.
Michael Lapides - Goldman Sachs
Okay, great. I just wanted to kind of make sure that we had that in our numbers or whether that was one of the projects that was part of the stuff getting pushed out?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
No, it isn't.
Michael Lapides - Goldman Sachs
Great. Thank you, guys.
Michael W. Yackira - President and Chief Executive Officer
Thank you.
Operator
We have a question from the line of Brian Russo with Ladenburg Thalmann. Please go ahead.
Brian Russo - Ladenburg Thalmann
Hi, good morning.
Michael W. Yackira - President and Chief Executive Officer
Good morning.
Brian Russo - Ladenburg Thalmann
Most of my questions have been asked and answered. Just to clarify, did you say that you increased pension expense $30 million in this last third quarter?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
No, Brian to clarify it, I apologize if I misstated. We didn't increase the expense, but we made a contribution to our pension and OPEB investments of $30 million.
Brian Russo - Ladenburg Thalmann
Okay, great and then when can we expect you to file your next GRC for Southern Nevada?
Michael W. Yackira - President and Chief Executive Officer
Brian, its Michael, on December 1st.
Brian Russo - Ladenburg Thalmann
So, I guess you've got quite a bit flexibility on the debt and equity capital markets activities up until second half '09?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
Brian, the capital structure for the GRC, for our Southern NV Energy company would either be set based upon a historic basis which will be June 30th or on a certification date, if we do certification filing on December 1st. Along with that the rate base additions would also be set on those dates.
So that's the dynamic that we are working through and which you'll see when we file on December1st. But in no event do they really relate to what our prospective balance sheet might be on June 30th of next year.
Brian Russo - Ladenburg Thalmann
Okay. Thank you very much.
Operator
And we have a question from the line of Greg Gordon with Citigroup Please go ahead.
Michael W. Yackira - President and Chief Executive Officer
You have come back
Gregory Gordon - Citigroup
I'm back. When it comes to FAS 87 expense given market condition as they stand today, how much of an increase would you expect there and should we expect that to be even though you are filing on December 1st, should we expect the majority of the increase in regular expenses to be captured in the next rate decision, so how much of regulatory lag would you have to manage?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
Greg that's unclear and will not be clear until we have the numbers from December 31st, and those includes both the value of the investments in the plan as well as the discount rate at that point in time. In any event I don't think it's a material loading with respect to our overheads and that's how we think of it as loading on our overheads for our employees and then we'd like to take a look at the balance between what is expensed and what is capitalized due to our healthy capital investment program.
Gregory Gordon - Citigroup
You'd be able to get an adjustment into the base re-filing for that or would it... because it's in a strong test year would you have to manage the differential?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
We would have to manage the differential.
Gregory Gordon - Citigroup
Yeah.
Michael W. Yackira - President and Chief Executive Officer
Since we all know as Bill said until the December 31st results it will be beyond the timeframe for the inclusion and cost to service.
Gregory Gordon - Citigroup
Okay, thank you.
Michael W. Yackira - President and Chief Executive Officer
But it shouldn't be material.
Operator
And we have a follow-up from the line of Michael Lapides with Goldman Sachs. Please go ahead.
Michael Lapides - Goldman Sachs
Hi, just a little bit a modeling question, on the balance sheet right now, what is the differed energy total level and how much of that if you have already gotten approval to recover and what's left for you to file for to get future recovery?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
One second Michael. Michael, it's a $175 million.
Michael Lapides - Goldman Sachs
And how much of that has already been recovered versus you have to file for and get future recovery?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
The $175 million is at NV Energy, the Southern company and another $29 million at their Northern subsidiary and that's yet to be recovered.
Michael Lapides - Goldman Sachs
Okay and that's yet to be recovered, how much of that has actually you probably gone through the process and the regulators said, okay, you can start recovering now?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
We haven't filed for it.
Michael Lapides - Goldman Sachs
Okay. So we should think that... I mean just over $200 million of cash will be coming in the door over the next two years or so, as traditional process?
William D. Rogers - Corporate Senior Vice President and Chief Financial Officer
Yes, I would be the traditional process and that would depend upon how that deferred energy balance moves between now and year end. And where the base energy rate is reset which overtime should diminish the size of that deferred energy balance.
Michael Lapides - Goldman Sachs
Understood. Okay, thanks guys.
Operator
And I'll turn it back to our speakers for any closing remarks?
Michael W. Yackira - President and Chief Executive Officer
Well, thank you Laurie and thanks everybody for joining us at this early part of the morning, at least West Coast time. And as I said, we look forward to seeing you either later next week or later this week, early next week or both. Thanks for joining.
Operator
Thank you and ladies and gentlemen, this conference call will be made available for replay starting today at 9:30 AM Pacific Time running for one month until the date of December 3rd, at midnight Pacific.
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