<PAGE>
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1994 Commission File No.1-4698
Nevada Power Company
(Exact name of registrant as specified in its charter)
Nevada 88-0045330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6226 West Sahara Avenue, Las Vegas, Nevada 89102
(Address of principal executive offices) (Zip Code)
(702) 367-5000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
Common Stock outstanding April 30 ,1994, 42,048,151 shares.
----------
1
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
1994 1993
-------- --------
ELECTRIC REVENUES........................................ $144,658 $132,814
-------- --------
OPERATING EXPENSES AND TAXES:
Fuel ............................................... 20,559 24,593
Purchased and interchanged power ................... 52,491 47,473
Deferred energy cost adjustments, net .............. 5,138 (5,894)
-------- --------
Net energy costs................................... 78,188 66,172
Other production operations ........................ 4,071 4,229
Other operations ................................... 23,080 18,851
Maintenance and repairs ............................ 9,744 9,369
Provision for depreciation ......................... 11,712 10,271
General taxes ...................................... 4,285 3,756
Federal income taxes ............................... 1,382 3,545
-------- --------
132,462 116,193
-------- --------
OPERATING INCOME ........................................ 12,196 16,621
-------- --------
OTHER INCOME (EXPENSES):
Allowance for other funds used during
construction ...................................... 2,227 2,444
Miscellaneous, net ................................. 238 (694)
-------- --------
2,465 1,750
-------- --------
INCOME BEFORE INTEREST DEDUCTIONS ....................... 14,661 18,371
-------- --------
INTEREST DEDUCTIONS:
Interest on long-term debt ......................... 10,783 11,043
Other interest ..................................... 477 385
Allowance for borrowed funds used
during construction ............................... (1,291) (1,436)
-------- --------
9,969 9,992
-------- --------
NET INCOME .............................................. 4,692 8,379
DIVIDEND REQUIREMENTS ON PREFERRED STOCK ................ 995 997
-------- --------
EARNINGS AVAILABLE FOR COMMON STOCK ..................... $ 3,697 $ 7,382
======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING ............................................ 41,793 37,382
======== ========
EARNINGS PER AVERAGE COMMON SHARE ....................... $ 0.09 $ 0.20
======== ========
DIVIDENDS PER COMMON SHARE .............................. $ 0.40 $ 0.40
======== ========
See Notes to Financial Statements.
2
<PAGE>
<PAGE>
BALANCE SHEETS
ASSETS
March 31, December 31,
1994 1993
(Unaudited)
---------- ----------
(In Thousands)
ELECTRIC PLANT:
Original cost ................................... $1,742,097 $1,638,560
Less accumulated depreciation ................... 461,396 451,302
---------- ----------
Net plant in service .......................... 1,280,701 1,187,258
Construction work in progress ................... 97,216 167,652
Other plant, net ................................ 93,898 95,236
---------- ----------
1,471,815 1,450,146
---------- ----------
INVESTMENTS ....................................... 22,296 21,822
---------- ----------
CURRENT ASSETS:
Cash and temporary cash investments ............. 185 145
Customer receivables ............................ 43,034 49,145
Other receivables ............................... 18,382 15,465
Fuel stock and materials and supplies ........... 39,487 40,327
Deferred energy costs ........................... 55,072 58,783
Prepayments ..................................... 6,731 8,313
---------- ----------
162,891 172,178
---------- ----------
DEFERRED CHARGES .................................. 162,352 165,191
---------- ----------
$1,819,354 $1,809,337
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholders' equity:
Common stock, 41,944,428 and 41,505,195
shares issued, respectively .................. $ 45,149 $ 44,709
Premium and unamortized expense on capital stock 501,706 491,856
Retained earnings ............................. 95,895 109,359
---------- ----------
642,750 645,924
---------- ----------
Cumulative preferred stock ...................... 42,184 42,264
---------- ----------
Long-term debt .................................. 731,181 716,589
---------- ----------
1,416,115 1,404,777
---------- ----------
CURRENT LIABILITIES:
Notes payable ................................... 31,311 25,000
Current maturities and sinking fund requirements 7,418 7,496
Accounts payable, including salaries and wages .. 54,681 70,098
Accrued taxes ................................... 1,140 (1,131)
Accrued interest ................................ 9,654 6,212
Accumulated deferred taxes on deferred energy costs 19,275 20,574
Customers' service deposits and other ........... 33,922 31,441
---------- ----------
157,401 159,690
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred investment tax credits ..... 35,019 35,384
Accumulated deferred taxes on income ............ 126,343 126,133
Customers' advances for construction and other .. 84,476 83,353
---------- ----------
245,838 244,870
---------- ----------
$1,819,354 $1,809,337
========== ==========
See Notes to Financial Statements.
3
<PAGE>
<PAGE>
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------
1994 1993
------- -------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................ $ 4,692 $ 8,379
Adjustments to reconcile net income to net cash provided-
Depreciation and amortization ........................ 15,150 13,057
Deferred income taxes and investment tax credits ..... 88 3,827
Allowance for other funds used during construction ... (2,227) (2,444)
Changes in-
Receivables .......................................... 3,351 6,580
Fuel stock and materials and supplies ................ 839 3,406
Accounts payable and other current liabilities ....... (14,036) 9,843
Deferred energy costs ................................ 3,866 (6,442)
Accrued taxes and interest ........................... 5,712 2,251
Other assets and liabilities .......................... 1,750 (4,352)
------- -------
Net cash provided by operating activities ............ 19,185 34,105
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures and gross additions ......... (32,587) (30,561)
Investment in subsidiaries and other................... (559) (602)
Salvage net of removal cost ........................... (206) 194
------- -------
Net cash used in investing activities ................ (33,352) (30,969)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of capital stock ................................. 9,760 9,510
Sale of long-term debt ................................ - 45,000
Change in funds held in trust ......................... 17,482 (100)
Retirement of preferred stock and long-term debt ...... (2,425) (54,417)
Change in short-term borrowing ........................ 6,000 20,000
Cash dividends ........................................ (17,632) (16,152)
Other financing activities ............................ 1,022 (288)
------- -------
Net cash provided by financing activities ............ 14,207 3,553
------- -------
CASH AND TEMPORARY CASH INVESTMENTS:
Net increase during the period ........................ 40 6,689
Beginning of period ................................... 145 160
------- -------
End of period ......................................... $ 185 $ 6,849
======= =======
CASH PAID DURING THE PERIOD FOR:
Interest, net of amounts capitalized .................. $ 9,729 $11,689
======= =======
Income taxes .......................................... $ - $ 1
======= =======
See Notes to Financial Statements.
4
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by
the registrant, pursuant to the rules and regulations of the Securities and
Exchange Commission, and reflect all adjustments which, in the opinion of
management are necessary for a fair presentation. Certain information and
footnote disclosures have been condensed in accordance with generally accepted
accounting principles and pursuant to such rules and regulations. The
registrant believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements and notes thereto be read in conjunction with the financial
statements and the notes thereto included in the registrant's latest annual
report. Certain prior period amounts have been reclassified, with no effect on
income or common shareholders' equity, to conform with the current period
presentation.
(1) FEDERAL INCOME TAXES:
For interim financial reporting purposes, Nevada Power Company (Company)
reflects in its computation of the federal income tax provision liberalized
depreciation based upon the expected annual percentage relationship of book
and tax depreciation and reflects the allowance for funds used during
construction on an actual basis. The total federal income tax expense as set
forth in the accompanying statements of income results in an effective federal
income tax rate different than the statutory federal income tax rate. The
table below shows the effects of those transactions which created this
difference.
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
1994 1993
-------- --------
(In Thousands)
Federal income tax at statutory rate ................... $ 2,590 $ 4,302
Investment tax credit amortization ..................... (365) (208)
Other .................................................. 484 181
-------- --------
Recorded federal income taxes .......................... $ 2,709 $ 4,275
======== ========
Federal income taxes included in-
Operating expenses ................................... $ 1,382 $ 3,545
Other income, net .................................... 1,327 730
-------- --------
Recorded federal income taxes .......................... $ 2,709 $ 4,275
======== ========
(2) COMMITMENTS AND CONTINGENCIES:
In 1985 the Company incurred $15.8 million in increased fuel and purchased
power expenses after a ruptured steam line at the jointly owned Mohave
Generating Station resulted in a loss of the plant for six months. The Public
Service Commission of Nevada (PSC) allowed the Company to recover one half of
the increased expenses subject to refund. Fourth quarter 1990 earnings
reflected a $12.9 million charge to record a subsequent proposed order issued
by the PSC which stated that the Company shall not recover any of the increased
costs. The Company has fully reserved for any negative financial effect
related to the proposed order. In 1991 the PSC set aside the proposed order
and ordered the parties to participate in joint hearings before the California
Public Utilities Commission (CPUC). The CPUC hearings are now concluded, and
the PSC will prepare its own opinion based on the record created in the CPUC
hearings. The CPUC issued its opinion and order in March 1994 finding Southern
California Edison (SCE) was imprudent in not inspecting the pipe prior to the
explosion, and indicated SCE may not recover from ratepayers its incremental
purchased power costs in excess
5
<PAGE>
<PAGE>
of the costs if it had inspected and undertaken repairs.
On February 28, 1994, the Company filed requests with the PSC to recover
additional fuel and purchased power costs of $38.5 million and resource
planning costs of $1 million. The energy rate request included $28.7 million
of deferred energy costs for the test period ended November 30, 1993, and $9.8
million to adjust the base energy rate. Hearings on these requests will
commence in October 1994.
On July 11, 1991, Nevada Electric Investment Company (NEICO), the
Company's unregulated subsidiary, entered into an agreement to sell a 50
percent undivided ownership interest in certain coal mining assets to the
Intermountain Power Agency (IPA). NEICO and IPA will continue the coal mining
operations as joint venturers under the name of the Crandall Canyon Project.
Additionally, IPA has executed a continuing coal purchase agreement. This
transaction has been inquired into by the PSC, and no gain on the transaction
has been recorded pending regulatory review which is expected in 1994.
The Federal Clean Air Act Amendments of 1990 include provisions which will
affect the Company's existing steam generating facilities and all new fossil
fuel fired facilities. Title IV of the Amendments provides a national cap on
sulfur dioxide emissions by mandating emissions reductions for many electric
steam generating facilities. The sulfur dioxide provisions of the Amendments
will not adversely affect the Company because the Company's steam units burn
low sulfur fuels or have sulfur dioxide control equipment. Title IV of the
Amendments also provides for reduction of emissions of oxides of nitrogen by
establishing new emission limits for coal-fired generating units. This Title
will require the installation of additional pollution-control technology at
some of the Reid Gardner Station generating units before 2000 at an estimated
cost to the Company of no more than $6 million. Other provisions of the
Amendments will require the Company to install or upgrade Continuous Emission
Monitoring systems at all steam generating units before 1995 at an expected
cost of up to $3.3 million.
The United States Congress authorized $2 million for the Environmental
Protection Agency (EPA) to study the potential impact the Mohave Generating
Station (MGS) may have on visibility in the Grand Canyon. The EPA report is
expected to be finalized in late 1995, with a follow-up report from the Grand
Canyon Visibility Transport Commission in late 1996. Also, the Nevada Division
of Environmental Protection has imposed more stringent stack opacity limits
for the MGS. This change may affect the Company's utilization of resources,
but, until more experience is gained by operating at the new opacity levels,
any effect cannot be determined. As a 14 percent owner of the MGS, the Company
will be required to fund any plant improvements that may result from the EPA
study and operation at the new opacity levels. The cost of any potential
improvements cannot be estimated at this time.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On February 28, 1994, the Company filed requests with the PSC to recover
fuel and purchased power costs of $38.5 million and resource planning costs of
$1 million. (See Note 2 to Financial Statements included in this quarterly
report.)
On November 19, 1993, the PSC Staff filed a petition with the PSC alleging
that the Company may be overearning as much as $17 million annually because
business conditions have changed substantially since the Company received its
last general rate case decision in July 1992. On January 10, 1994, the PSC
voted to open an investigation into the Company's earnings. On April 15, 1994,
6
<PAGE>
<PAGE>
the PSC Staff filed the results of their investigation alleging $22.4 million
in overearnings. Management believes the Company's earnings are within the
authorized rate of return granted to the Company in July 1992. Hearings on
this proceeding are scheduled to commence in June 1994.
The Company has fully reserved for any negative financial effect related
to a February 6, 1991, proposed order by the PSC which, if adopted, would
require the Company to bear the full cost of replacement power and related
expenses resulting from a 1985 accident at the Mohave Generating Station. (See
Note 2 to Financial Statements included in this quarterly report.)
The Company's customer growth rate during 1993 and 1992 was 5.4 and 4.6
percent, respectively. The increase in customers for the first three months of
1994 was at an annual rate of 5.7 percent. At March 31, 1994, the Company
provided electric service to 409,622 customers.
Every three years Nevada law requires the Company to file with the PSC a
forecast of electricity demands for the next 20 years and the Company's plans
to meet those demands. On September 16, 1991, the PSC approved the Company's
1991 Resource Plan, and during 1992 and 1993, the PSC approved the first
through fourth amendments to the Resource Plan. The Resource Plan, as amended
and approved in 1992 and 1993, includes the following major projects:
(1) two 90 megawatt (MW) combined-cycle generating units at
the Clark Generating Station, one added in 1993 and one to be
added in 1994;
(2) the construction of two 70 MW combustion turbine
generating units at the Harry Allen Project site, one unit in
1995 and one unit in 1996. The 1996 Allen combustion turbine
will be subject to a cost comparison of purchased power
resources that are being competitively bid with the least
expensive resource taken as the Company's supply choice;
(3) a total of 305 MW in purchased power from four qualifying
facilities, with 175 MW and 85 MW received beginning in 1992
and 1993, respectively, and 45 MW expected to be received
beginning in 1994;
(4) planning costs for a 500 kilovolt (KV) transmission
system from the Harry Allen Substation, located north of the
Las Vegas Valley, to Marketplace, a future 500 KV switching
station located near the McCullough Substation south of the
Las Vegas Valley. The Company must present final plans on
this system for PSC approval. If PSC approval is received,
the transmission system could be operational by 1998;
(5) installation of additional emissions reduction equipment
at the Navajo Generating Station;
(6) firm purchased power of 75 MW;
(7) the construction of a 230 KV transmission line from Arden
Substation, located southwest of Las Vegas, to Northwest
Substation, located northwest of Las Vegas; and
(8) several demand-side pilot projects.
7
<PAGE>
<PAGE>
On September 29, 1993, a fifth amendment to the Company's 20-year Resource
Plan was filed with the PSC. On February 25, 1994, the PSC approved a
stipulation among the Company, PSC Staff, Office of the Consumer Advocate and
other interveners granting the Company's request. The amendment calls for
three purchase power contracts with Southern California Edison, the City of
Glendale and the Salt River Project totaling 160 MWs for the years 1996 to
2000. These purchase power contracts are a result of the Company's 1996
Request for Proposal for supply-side resources. The stipulation also approved
a 50 MW purchase power contract with Arizona Public Service for the years 1995
to 1997.
To meet capital expenditure requirements through 1994, the Company plans
to utilize internally generated cash, the proceeds from industrial development
revenue bonds (IDBs), first mortgage bonds and common stock issues through
public offerings and the Stock Purchase and Dividend Reinvestment Plan (SPP).
The Company has the option of issuing new shares or using open market
purchases of its common stock to meet the requirements of the SPP. Under the
SPP the Company issued 1,640,326 and 431,218 shares, respectively, of its
common stock in 1993 and the first three months of 1994.
On June 24, 1992, Clark County, Nevada issued $105 million 6.70% fixed
rate 30-year IDBs (Nevada Power Company Project) Series 1992A. Net proceeds
from the sale of the IDBs were placed on deposit with a trustee and are being
used to finance the construction of certain facilities which qualify for tax-
exempt financing. At March 31, 1994, $41.6 million remained on deposit with
the trustee.
OPERATING RESULTS OF FIRST THREE MONTHS OF 1994
COMPARED TO FIRST THREE MONTHS OF 1993
Earnings per average common share were nine cents for the first three
months of 1994, compared to twenty cents for the same period in 1993. While
the average number of customers increased 5.9 percent over the first quarter
of 1993, kilowatthour sales, excluding sales for resale, were up only 2.6
percent, as compared to the first three months of 1993, due mainly to milder
weather in 1994.
The increase in revenues was due to increases in rates to recover costs
for fuel and purchased power.
Fuel expenses decreased by $4 million due to lower average fuel rates and
decreased Company generated kilowatthours.
The cost of purchased power increased $5 million primarily due to charges
for energy and capacity purchased from a qualifying facility under contract
with Nevada Cogeneration Associates No. 2 which became operational February
1993.
Other operations expense increased $4.2 million mainly as a result of an
increase in employee benefit costs and the provision for uncollectible
accounts. Employee benefit costs were higher primarily due to increased group
medical insurance costs, amortization of reorganization and early retirement
costs and pension costs. The provision for uncollectible accounts was
increased to three percent of accounts receivable to allow better coverage of
write-offs. Depreciation expense increased $1.4 million because of a growing
asset base.
Average common shares increased because of the sale of additional common
shares through public offerings and the SPP to partially provide funds for the
construction of facilities necessary to meet increased customer demand for
electricity.
8
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 5. None.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
None.
b. Reports on Form 8-K.
None.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Nevada Power Company
(Registrant)
STEVEN W. RIGAZIO
_____________________________________
(Signature)
Date: May 3, 1994 Steven W. Rigazio
Vice President, Finance and Planning,
Treasurer, Chief Financial Officer
9
<PAGE>
