LAS VEGAS, May 15, 2002 — Sierra Pacific Resources Tuesday reported consolidated net losses of $303.9 million, or $2.98 net loss per share, for its first quarter ended March 31, 2002, compared with consolidated net losses of $83.5 million or $1.06 net loss per share, in the year-earlier period.
Most of the losses for the first-quarter of 2002 were attributable to an after-tax write-off of deferred energy costs and other rate case related write-offs of $310.7 million at Nevada Power Company, one of Sierra Pacific’s two electric utilities. Excluding the one-time write-offs, net income would have been $6.8 million in the first quarter of 2002.
“While our retail operations remain solid, the decision by the Public Utilities Commission of Nevada (PUCN) in late March 2002 denying recovery of costs incurred during the 2001 energy crisis has had a very negative impact,” said Walt Higgins, chairman, president and chief executive officer of Sierra Pacific.
The PUCN disallowed $434 million of pre-tax costs needed to reimburse Nevada Power Company for costs it incurred purchasing power during last year’s energy crisis. That decision resulted in a downgrading of the Company’s credit rating, which in turn has resulted in a serious liquidity problem.
Following the PUCN’s decision, a bank syndicate headed by Union Bank of California determined that a material adverse change had occurred at Nevada Power. However, the syndicate agreed to waive the limitations on its credit line. As a result, Nevada Power retained its $200 million credit facility and Sierra Pacific’s other utility, Sierra Pacific Power, retained its $150 million credit facility. The syndicate’s $75 million credit line with Sierra Pacific Resources was terminated. Subsequently, both Nevada Power and Sierra Pacific Power have borrowed the full amount available under each credit facility and retired all outstanding commercial paper.
Nevada Power Company has filed a financing application with the PUCN to issue secured debt of up to $450 million if market acceptance is available.
Last week, Sierra Pacific Resources announced that it had approached its energy suppliers with a program designed to help Nevada Power meet its liquidity needs during this summer’s peak power-delivery period. The program is designed to ensure continuation of deliveries under existing power-supply contracts and to reduce near-term cash outlays for power.
Both Nevada Power and Sierra Pacific Power are finding it difficult to secure additional power to meet peak summer needs and to replace power contracts terminated by suppliers because of the weakened financial position and credit agencies’ downgrades occasioned by the disallowance of previously incurred power and fuel costs at Nevada Power. The Company is actively working with a number of power marketers to fill the summer needs. The key to success in this endeavor is overcoming supplier credit concerns.
Separately, hearings before the PUCN concluded May 9 on Sierra Pacific Power’s request to recover $205 million in energy costs incurred last year. The PUCN’s decision on that case is expected by June 1.
In addition, the Company noted that a settlement hearing is scheduled for May 15 in its Section 206 complaint proceeding before the Federal Energy Regulatory Commission (FERC). The complaint challenges the price of power contracts entered into during a dysfunctional market period.
Headquartered in Nevada, Sierra Pacific Resources is a holding company whose principal subsidiaries are Nevada Power, the electric utility for most of southern Nevada, and Sierra Pacific Power, the electric utility for most of northern Nevada and the Lake Tahoe area of California. Sierra Pacific Power also distributes natural gas in the Reno-Sparks area of northern Nevada. Other subsidiaries include the Tuscarora Gas Pipeline Company, which owns a 50 percent interest in an interstate natural gas transmission partnership, and several unregulated energy services companies.