8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 5, 2009

El Paso Electric Company

(Exact name of registrant as specified in its charter)

Texas	0-296	74-0607870
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

Stanton Tower, 100 North Stanton, El Paso, Texas	79901
(Address of principal executive offices)	(Zip Code)

(915) 543-5711

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On May 5, 2009, the Company announced its financial results for the quarter ended March 31, 2009. A copy of the press release containing the announcement is included as Exhibit 99.01 to this Current Report and is incorporated herein by reference. The Company does not intend for this exhibit to be incorporated by reference into future filings under the Securities Exchange Act of 1934.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

99.01 Earnings Press Release, dated May 5, 2009

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EL PASO ELECTRIC COMPANY
By:	/s/  SCOTT D. WILSON
	Scott D. Wilson Executive Vice President, Chief Financial and Chief Administrative Officer (Duly Authorized Officer)

Dated: May 5, 2009

EX-99.01

Exhibit 99.01

El Paso Electric

NEWS RELEASE

For Immediate Release Date: May 5, 2009 Contact: Media Teresa Souza 915/543-5823 Investor Relations: Steve Busser 915/543-5983 Rachelle Williams 915/543-2257

El Paso Electric Announces First Quarter Financial Results

Overview

For the first quarter 2009, EE reported net income of $9.6 million, or $0.21 basic and diluted earnings per share. In the first quarter of 2008, EE reported net income of $14.5 million, or $0.32 basic and diluted earnings per share.

“A significant reduction in margins from off-system sales and an increase in interest expense were the primary factors that resulted in a 34% decline in first quarter 2009 earnings” said David W. Stevens, Chief Executive Officer. “From an operational perspective, we are pleased to see that due to Palo Verde’s improved performance the NRC returned all three units of the plant to routine inspection and oversight.”

Earnings Summary

The table and explanations below present the major factors affecting 2009 net income relative to 2008 net income.

	Quarter Ended
	Pre-Tax Effect			After-Tax Net Income			Basic EPS
March 31, 2008				$	14,488		$	0.32
Changes in:
Deregulated Palo Verde Unit 3 proxy market pricing	$	1,340			844			0.02
Fossil fuel plant O&M		1,193			752			0.02
Transmission wheeling revenues		1,028			648			0.01
Depreciation and amortization		938			590			0.01
Retained margins on off-system sales		(6,220	)		(3,918	)		(0.09	)
Interest on long-term debt		(3,819	)		(2,406	)		(0.05	)
Impairments of equity securities in nuclear decommissioning trusts		(1,768	)		(1,414	)		(0.03	)
Retail non-fuel base revenue		(1,773	)		(1,117	)		(0.02	)
Other					1,142			0.02
March 31, 2009				$	9,609		$	0.21

First Quarter 2009

Earnings for the quarter ended March 31, 2009 when compared to the same period last year, were positively affected by:

• Increased retail sales of deregulated Palo Verde Unit 3 power as the unit did not operate for three weeks in January 2008 due to its refueling and replacement of steam generators.

• Lower O&M costs at our fossil-fueled generating plants as more planned major maintenance was performed in the first quarter 2008 (Newman Unit 3, Four Corners Unit 5, and Copper generating units) than was performed in the first quarter 2009 (Rio Grande Unit 8 and Newman Unit 4 generating units).

• Increased revenues for transmission wheeling in 2009 largely due to increased wheeling of power in Arizona.

• Lower depreciation and amortization due to completing the amortization of certain fair value adjustments in December 2008.

Earnings for the quarter ended March 31, 2009 when compared to the same period last year were negatively affected by:

• Lower retained margins on off-system sales, primarily due to reduced margins per MWh. Retained margins were also affected by a 4.9% decrease in MWh sales.

• Increased interest expense on long-term debt as a result of the June 2008 issuance of $150 million of 7.5% Senior Notes and higher interest rates on auction rate pollution control bonds partially offset by lower interest rates on the revolving credit facility. The auction rate pollution control bonds were refunded and reissued at a fixed interest rate of 7.25% on March 26, 2009.

• Increase in impairments of equity securities in our Palo Verde decommissioning trust funds.

• Lower retail non-fuel base revenues resulting from declines in sales to residential and large commercial and industrial customers.

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El Paso Electric • P.O. Box 982 • El Paso, Texas  79960

Retail Non-fuel Base Revenues

Retail non-fuel base revenues decreased by $1.8 million, pre-tax, or 1.7% in the first quarter of 2009 compared to the same period in 2008 reflecting a weather-related decline in sales to residential and small commercial and industrial customers and a recession-related decline in sales to large commercial and industrial customers. Kilowatt-hour sales to large commercial and industrial customers in the first quarter of 2009 decreased approximately 18% compared to the same quarter in 2008, reflecting the impact of the recession on our service territory economy. Kilowatt-hour sales for residential and small commercial and industrial customers declined relative to 2008, primarily as a result of milder winter weather in 2009, partially offset by increased kWh sales and revenues from a 1.6% increase in the average number of customers served. Heating degree days in 2009 were 14% below 2008 and the 10-year average. Non-fuel base revenues and kilowatt-hour sales are provided by customer class on page 8 of the Release.

Palo Verde Operations

We own approximately 633 MW (undivided interest) of generating capacity in the three generating units at the Palo Verde Nuclear Generating Station. The operation of Palo Verde not only affects our ability to make off-system sales but also impacts fuel costs to native load customers and represents a significant portion of our non-fuel operation and maintenance expenses. Palo Verde generation accounted for over 68% of total Company generation in the first quarter of 2009 and 64% of total Company generation in the first quarter of 2008. Megawatt-hours (MWh) generated by Palo Verde increased 7.3% in the first quarter of 2009 compared to the same period in 2008. In the first quarter of 2009, Palo Verde operation and maintenance expenses decreased $0.4 million, pre-tax, or 2.0% compared to the first quarter of 2008.

In February 2007, the Nuclear Regulatory Commission (NRC) placed Palo Verde Unit 3 in the “multiple/repetitive degraded cornerstone” column of the NRC’s action matrix which resulted in an enhanced NRC inspection regimen for the entire plant. Operating costs at all three units increased in response to the enhanced inspection regimen by the NRC and associated corrective actions. On March 24, 2009, the NRC announced that it is removing Palo Verde Unit 3 from the “multiple/repetitive degraded cornerstone” column and returning all three units of the plant to routine inspection and oversight. This notification follows the NRC’s completion of its inspections of the corrective actions taken by Palo Verde to address performance deficiencies. The NRC also closed the confirmatory action letter that outlined the performance deficiencies and associated corrective actions.

Off-system Sales

We make off-system sales in the wholesale power markets when competitively priced excess power is available from our generating plants and purchased power contracts. The table below shows off-system sales in MWh and the pre-tax margins realized and retained by us from sales for the quarter ended March 31, 2009 and 2008:

	Quarter Ended March 31,
	2009		2008
MWh sales		1,058,403		1,112,686
Total margins (in thousands)	$	6,722	$	14,983
Retained margins (in thousands)	$	5,043	$	11,263

For the quarter ended March 31, 2009, retained margins from off-system sales decreased approximately $6.2 million, pre-tax, over the corresponding period in 2008 due primarily to reduced margins per MWh as a result of lower average market prices for power and a 4.9% decrease in MWh sales. The table below shows on a per MWh basis, pre-tax revenues, costs and margins from off-system sales for 2009 and 2008.

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El Paso Electric • P.O. Box 982 • El Paso, Texas  79960

Quarter Ended	Average Revenue Per MWh		Average Cost of Energy Per MWh		Pre-Sharing Average Margin Per MWh
March 31, 2008	$	66.07	$	52.60	$	13.47
March 31, 2009	$	36.49	$	30.13	$	6.36

Capital and Liquidity

We continue to maintain a strong capital structure. At March 31, 2009, common stock equity represented 45.5% of our permanent capitalization (common stock equity, long-term debt, financing obligations, and the current portion of long-term debt and financing obligations). At March 31, 2009, we had a balance of $102.0 million in cash and cash equivalents, most of which was invested in federally insured accounts.

Cash flows from operations for the three months ended March 31, 2009 increased $25.1 million to $67.6 million from $42.5 million in the corresponding period in 2008. The primary factor affecting the increased cash flow was the collection of deferred fuel revenues in 2009. The collection of deferred fuel revenues included the over-recovery of fuel costs by $23.4 million in 2009 and the collection of $12.3 million of deferred fuel revenues, including interest, through two fuel surcharges implemented in 2008. At March 31, 2009, we had a fuel under-recovery balance of $12.2 million, including $10.5 million in Texas and $1.7 million in New Mexico. At December 31, 2008, we had a fuel under-recovery balance of $46.9 million, including $39.2 million in Texas and $7.7 million in New Mexico. The current period fuel over-recoveries in Texas are the result of a significant decline in natural gas prices since the current Texas fixed fuel factor was implemented in October 2008. At current gas prices, we expect to continue to over-recover fuel costs until the Texas fixed fuel factor is revised. As a result, on April 23, 2009, we received approval from the Public Utility Commission of Texas to terminate our remaining fuel surcharge effective May 2009 as the remaining balance of fuel under-recoveries are expected to be recovered through current period fuel over-recoveries assuming current natural gas price levels.

During the three months ended March 31, 2009, our primary capital requirements were for the construction and purchase of electric utility plant and purchases of nuclear fuel. Capital requirements for new electric plant were $47.3 million for the three months ended March 31, 2009 compared to $44.0 million for the three months ended March 31, 2008. Cash flows from operations funded all of our capital requirements through the first quarter of 2009.

On March 26, 2009, we completed a refunding of our $100.6 million auction rate pollution control bonds by issuing two new pollution control bonds totalling $100.6 million at a fixed interest rate of 7.25%. The bonds are unsecured and will mature in 2040.

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 $102.7 million as of March 31, 2009 and $95.6 million as of March 31, 2008. Up to $120 million of the credit facility may be used to finance nuclear fuel. Amounts not drawn for nuclear fuel are available for general corporate purposes. We believe that we will have adequate liquidity through our current cash balances, cash from operations, and our credit facility to meet all of our anticipated cash requirements through 2009 based on current projections.

No shares of common stock were repurchased during the first quarter of 2009. As of March 31, 2009, approximately 1,521,366 shares remain available for repurchase under the currently authorized program.

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El Paso Electric • P.O. Box 982 • El Paso, Texas  79960

2009 Earnings Guidance

We have revised our earnings guidance for 2009 to a range of $1.00 to $1.50 per basic share from the previous guidance of $1.00 to $1.60 per basic share. The upper end of guidance was revised down to reflect lower revenue growth associated with the continuing effects of the economic downturn on our service territory.

Conference Call

A conference call to discuss first quarter 2009 earnings is scheduled for 10:30 a.m. Eastern Time, May 5, 2009. The dial-in number is 866-282-2803 with a conference ID of 1351097. The conference leader will be Scott Wilson, Executive Vice President, Chief Financial and Administrative Officer of EE. A replay will run through May 19, 2009 with a dial-in number of 866-837-8032 and a conference ID of 1351097. 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.

Safe Harbor

This news release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This information may involve risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: (i) increased prices for fuel and purchased power and the possibility that regulators may not permit EE to pass through all such increased costs to customers or to recover previously incurred fuel costs in rates; (ii) fluctuations in off-system sales margins due to uncertainty in the economy power market and the availability of generating units; (iii) unanticipated increased costs associated with scheduled and unscheduled outages; (iv) the size of our construction program and our ability to complete construction on budget and on a timely basis; (v) costs at Palo Verde; (vi) deregulation of the electric utility industry; (vii) possible increased costs of compliance with environmental or other laws, regulations and policies; (viii) possible income tax and interest payments as a result of audit adjustments proposed by the IRS; (ix) uncertainties and instability in the financial markets and the resulting impact on EE’s ability to access the capital and credit markets; (x) uncertainties and instability in the general economy and the resulting impact of EE’s sales and profitability; and (xi) other factors detailed by EE in its public filings with the Securities and Exchange Commission. EE’s filings are available from the Securities and Exchange Commission or may be obtained through EE’s website, http://www.epelectric.com. Any such forward-looking statement is qualified by reference to these risks and factors. EE cautions that these risks and factors are not exclusive. EE does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of EE except as required by law.

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El Paso Electric • P.O. Box 982 • El Paso, Texas  79960

El Paso Electric Company and Subsidiary

Consolidated Statements of Operations

Quarter Ended March 31, 2009 and 2008

(In thousands except for per share data)

(Unaudited)

	2009			2008			Variance
Operating revenues, net of energy expenses:
Base revenues	$	102,345		$	104,205		$	(1,860	)  (a)
Off-system sales margins, net of sharing		5,043			11,263			(6,220	)
Deregulated Palo Verde Unit 3 proxy market pricing		5,594			4,254			1,340
Other		5,763			4,229			1,534
Operating Revenues Net of Energy Expenses		118,745			123,951			(5,206	)
Other operating expenses:
Other operations and maintenance		40,938			42,188			(1,250	)
Palo Verde operations and maintenance		21,737			22,142			(405	)
Taxes other than income taxes		12,517			11,778			739
Other income (deductions)		(1,589	)		(1,142	)		(447	)
Earnings Before Interest, Taxes, Depreciation and Amortization		41,964			46,701			(4,737	)  (b)
Depreciation and amortization		17,679			18,617			(938	)
Interest on long-term debt		13,924			10,105			3,819
AFUDC and capitalized interest		4,521			3,963			558
Other interest expense		170			212			(42	)
Income Before Income Taxes		14,712			21,730			(7,018	)
Income tax expense		5,103			7,242			(2,139	)
Net Income	$	9,609		$	14,488		$	(4,879	)
Basic Earnings per Share	$	0.21		$	0.32		$	(0.11	)
Diluted Earnings per Share	$	0.21		$	0.32		$	(0.11	)
Weighted average number of shares outstanding		44,904			45,074			(170	)
Weighted average number of shares and dilutive potential shares outstanding		44,938			45,304			(366	)

(a) Base revenues exclude fuel recovered through New Mexico base rates of $15.4 million and $16.1 million in 2009 and 2008, respectively.

(b) EBITDA is a non-GAAP financial measure and is not a substitute for net income or other measures of financial performance in accordance with GAAP.

Page 6 of 10

El Paso Electric Company and Subsidiary

Cash Flow Summary

Three Months Ended March 31, 2009 and 2008

(In thousands and Unaudited)

	2009			2008
Cash flows from operating activities:
Net income	$	9,609		$	14,488
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization of electric plant in service		17,679			18,617
Deferred income taxes, net		(4,222	)		4,281
Other		8,717			8,413
Change in working capital items:
Net recovery (deferral) of fuel revenues		34,679			(2,035	)
Other		1,163			(1,248	)
Net cash provided by operating activities		67,625			42,516
Cash flows from investing activities:
Cash additions to utility property, plant and equipment		(47,262	)		(43,966	)
Cash additions to nuclear fuel		(13,631	)		(15,048	)
Proceeds from sale of investments in debt securities		—			16,000
Decommissioning trust funds		(1,782	)		(3,139	)
Other		(2,368	)		(5,177	)
Net cash used for investing activities		(65,043	)		(51,330	)
Cash flows from financing activities:
Proceeds from exercise of stock options		—			238
Repurchase of treasury stock		—			(9,892	)
Financing obligations		9,019			25,582
Other		(1,281	)		(365	)
Net cash provided by (used for) financing activities		7,738			15,563
Net increase in cash and cash equivalents		10,320			6,749
Cash and cash equivalents at beginning of period		91,642			4,976
Cash and cash equivalents at end of period	$	101,962		$	11,725
Cash interest payments	$	10,536		$	3,839

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El Paso Electric Company and Subsidiary

Quarter Ended March 31, 2009 and 2008

Sales and Revenues Statistics

						Increase (Decrease)
	2009			2008		Amount			Percentage
MWh sales:
Retail:
Residential		489,629			505,448		(15,819	)	(3.1	%)
Commercial and industrial, small		473,287			478,259		(4,972	)	(1.0	%)
Commercial and industrial, large		222,997			273,406		(50,409	)	(18.4	%)
Public authorities		315,049			314,474		575		0.2	%
Total retail sales		1,500,962			1,571,587		(70,625	)	(4.5	%)
Wholesale:
Sales for resale		10,394			9,879		515		5.2	%
Off-system sales		1,058,403			1,112,686		(54,283	)	(4.9	%)
Total wholesale sales		1,068,797			1,122,565		(53,768	)	(4.8	%)
Total MWh sales		2,569,759			2,694,152		(124,393	)	(4.6	%)
Operating revenues (in thousands):
Non-fuel base revenues:
Retail:
Residential	$	40,191		$	41,110	$	(919	)	(2.2	%)
Commercial and industrial, small		37,664			37,604		60		0.2	%
Commercial and industrial, large		7,806			8,669		(863	)	(10.0	%)
Public authorities		16,377			16,428		(51	)	(0.3	%)
Total retail non-fuel base revenues		102,038			103,811		(1,773	)	(1.7	%)
Wholesale:
Sales for resale		307			394		(87	)	(22.1	%)
Total non-fuel base revenues		102,345			104,205		(1,860	)	(1.8	%)
Fuel revenues:
Recovered from customers during the period (a)		50,461			38,614		11,847		30.7	%
Under (over) collection of fuel		(23,356	)		2,035		(25,391	)	—
New Mexico fuel in base rates		15,360			16,094		(734	)	(4.6	%)
Total fuel revenues		42,465			56,743		(14,278	)	(25.2	%)
Off-system sales		38,617			73,517		(34,900	)	(47.5	%)
Other		7,009			5,775		1,234		21.4	%
Total operating revenues	$	190,436		$	240,240	$	(49,804	)	(20.7	%)
Off-system sales (in thousands):
Gross margins	$	6,722		$	14,983	$	(8,261	)	(55.1	%)
Retained margins		5,043			11,263		(6,220	)	(55.2	%)
Average number of retail customers:
Residential		323,781			318,358		5,423		1.7	%
Commercial and industrial, small		35,785			35,390		395		1.1	%
Commercial and industrial, large		48			53		(5	)	(9.4	%)
Public authorities		4,938			4,864		74		1.5	%
Total		364,552			358,665		5,887		1.6	%
Number of retail customers (end of period):
Residential		324,487			319,014		5,473		1.7	%
Commercial and industrial, small		35,823			35,594		229		0.6	%
Commercial and industrial, large		48			53		(5	)	(9.4	%)
Public authorities		4,933			4,876		57		1.2	%
Total		365,291			359,537		5,754		1.6	%
Weather statistics						10 Yr Average
Heating degree days		1,030			1,191		1,199
Cooling degree days		37			24		17

(a) Excludes $12.3 million for 2009 of prior periods deferred fuel revenues recovered through Texas fuel surcharges.

Page 8 of 10

El Paso Electric Company and Subsidiary

Quarter Ended March 31, 2009 and 2008

Generation and Purchased Power Statistics

					Increase (Decrease)
	2009		2008		Amount		Percentage
Generation and purchased power (MWh):
Palo Verde	1,353,084		1,261,528		91,556		7.3	%
Four Corners	199,390		151,983		47,407		31.2	%
Gas plants	431,524		573,076		(141,552	)	(24.7	%)
Total generation	1,983,998		1,986,587		(2,589	)	(0.1	%)
Purchased power	712,174		848,383		(136,209	)	(16.1	%)
Total available energy	2,696,172		2,834,970		(138,798	)	(4.9	%)
Line losses and Company use	126,413		140,818		(14,405	)	(10.2	%)
Total MWh sold	2,569,759		2,694,152		(124,393	)	(4.6	%)
Palo Verde capacity factor	100.7	%	92.4	%	8.3	%
Four Corners capacity factor	89.0	%	66.5	%	22.5	%

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El Paso Electric Company and Subsidiary

Financial Statistics

At March 31, 2009 and 2008

(In thousands, except number of shares, book value per share, and ratios)

Balance Sheet	2009			2008
Cash and cash equivalents	$	101,962		$	11,725
Common stock equity	$	702,094		$	665,716
Long-term debt, net of current portion		739,663			590,901
Financing obligations, net of current portion		71,728			76,372
Total capitalization	$	1,513,485		$	1,332,989
Current portion of long-term debt and financing obligations	$	30,943		$	19,225
Number of shares—end of period		44,923,710			44,718,653
Book value per common share	$	15.63		$	14.89
Common equity ratio		45.46	%		49.23	%
Debt ratio		54.54	%		50.77	%

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