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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, 1996 Commission File No. 1-4698
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Nevada Power Company
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(Exact name of registrant as specified in its charter)
Nevada 88-0045330
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(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
6226 West Sahara Avenue, Las Vegas, Nevada 89102
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(Address of principal executive offices) (Zip Code)
(702) 367-5000
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(Registrant's telephone number, including area code)
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(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 .
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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, 1996, 47,549,674 shares.
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PART I. FINANCIAL INFORMATION
STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
FOR THE
THREE MONTHS
ENDED MARCH 31,
---------------
1996 1995
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ELECTRIC REVENUES .......................................... $147,128 $145,184
OPERATING EXPENSES AND TAXES:
Fuel .................................................. 18,699 22,675
Purchased and interchanged power ...................... 51,097 45,040
Deferred energy cost adjustments, net ................. 3,990 10,100
-------- --------
Net energy costs ..................................... 73,786 77,815
Other production operations ........................... 3,864 4,835
Other operations ...................................... 23,577 22,753
Maintenance and repairs ............................... 9,811 9,943
Provision for depreciation ............................ 14,979 13,066
General taxes ......................................... 4,837 4,577
Federal income taxes .................................. 1,596 553
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132,450 133,542
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OPERATING INCOME ........................................... 14,678 11,642
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OTHER INCOME (EXPENSES):
Allowance for other funds used
during construction .................................. 1,517 1,695
Miscellaneous, net .................................... (769) 2,052
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748 3,747
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INCOME BEFORE INTEREST DEDUCTIONS .......................... 15,426 15,389
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INTEREST DEDUCTIONS:
Interest on long-term debt ............................ 11,641 11,549
Other interest ........................................ 407 340
Allowance for borrowed funds used
during construction .................................. (140) (1,054)
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11,908 10,835
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NET INCOME ................................................. 3,518 4,554
DIVIDEND REQUIREMENTS ON PREFERRED STOCK ................... 989 992
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EARNINGS AVAILABLE FOR COMMON STOCK ........................ $ 2,529 $ 3,562
======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING ............................................... 47,298 45,637
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EARNINGS PER AVERAGE COMMON SHARE .......................... $ 0.05 $ 0.08
======== ========
DIVIDENDS PER COMMON SHARE ................................. $ 0.40 $ 0.40
======== ========
See Notes to Financial Statements.
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BALANCE SHEETS
ASSETS
(Unaudited)
March 31, December 31,
1996 1995
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(In Thousands)
ELECTRIC PLANT:
Original cost ...................................... $2,076,368 $2,036,775
Less accumulated depreciation ...................... 561,343 546,803
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Net plant in service ............................. 1,515,025 1,489,972
Construction work in progress ...................... 139,701 129,255
Other plant, net ................................... 80,466 81,893
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1,735,192 1,701,120
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INVESTMENTS .......................................... 10,250 9,989
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CURRENT ASSETS:
Cash and temporary cash investments ................ 1,720 25,507
Customer receivables ............................... 55,992 65,079
Other receivables .................................. 3,589 6,321
Fuel stock and materials and supplies .............. 42,681 38,710
Deferred energy costs .............................. (23,403) (18,844)
Prepayments ........................................ 9,443 8,144
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90,022 124,917
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DEFERRED CHARGES ..................................... 217,480 211,585
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$2,052,944 $2,047,611
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CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholders' equity:
Common stock, 47,456,763 and 47,038,193
shares issued and outstanding, respectively ..... $ 50,661 $ 50,243
Premium and unamortized expense on capital stock . 604,225 595,258
Retained earnings ................................ 102,543 118,860
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757,429 764,361
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Cumulative preferred stock ......................... 41,783 41,863
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Long-term debt ..................................... 797,351 799,999
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1,596,563 1,606,223
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CURRENT LIABILITIES:
Notes Payable ...................................... 20,000 -
Current maturities and sinking fund requirements ... 5,786 5,809
Accounts payable ................................... 59,765 64,518
Accrued taxes ...................................... 7,024 19,457
Accrued interest ................................... 10,374 6,059
Deferred taxes on deferred energy costs ............ (8,191) (6,595)
Customers' service deposits and other .............. 32,672 34,605
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127,430 123,853
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DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred investment tax credits .................... 32,099 32,464
Deferred taxes on income ........................... 223,724 215,315
Customers' advances for construction and other ..... 73,128 69,756
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328,951 317,535
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$2,052,944 $2,047,611
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See Notes to Financial Statements.
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STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE THREE MONTHS
ENDED MARCH 31,
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1996 1995
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(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................. $ 3,518 $ 4,554
Adjustments to reconcile net income to net cash provided-
Depreciation and amortization .......................... 17,498 15,708
Deferred income taxes and investment tax credits ....... 3,755 (2,683)
Allowance for other funds used during construction ..... (1,517) (1,695)
Changes in-
Receivables ............................................ 11,818 13,143
Fuel stock and materials and supplies .................. (3,971) 1,159
Accounts payable and other current liabilities ......... (7,093) (15,136)
Deferred energy costs .................................. 4,560 9,653
Accrued taxes and interest ............................. (8,118) 7,035
Other assets and liabilities ............................ (6,263) (1,725)
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Net cash provided by operating activities ............. 14,187 30,013
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CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures and gross additions ........... (49,626) (37,960)
Investment in subsidiaries and other .................... 54 9,857
Salvage net of removal cost ............................. 411 104
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Net cash used in investing activities ................. (49,161) (27,999)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of capital stock ............................... 9,406 9,826
Change in funds held in trust ........................... (808) 7,302
Retirement of preferred stock and long-term debt ........ (1,389) (2,347)
Change in short-term borrowing .......................... 20,000 -
Cash dividends .......................................... (19,821) (19,165)
Other financing activities .............................. 3,799 3,365
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Net cash provided by (used in) financing activities ... 11,187 (1,019)
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CASH AND TEMPORARY CASH INVESTMENTS:
Net increase (decrease) during the period ............... (23,787) 995
Beginning of period ..................................... 25,507 123
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End of period ........................................... $ 1,720 $ 1,118
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CASH PAID DURING THE PERIOD FOR:
Interest, net of amounts capitalized .................... $ 11,203 $ 10,483
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Income taxes ............................................ $ 11,092 $ 205
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See Notes to Financial Statements.
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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 the 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.
THREE MONTHS
ENDED MARCH 31,
----------------
1996 1995
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(In Thousands)
Federal income tax at statutory rate ......................... $ 1,931 $ 2,494
Investment tax credit amortization ........................... (365) (365)
Other ........................................................ 433 442
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Recorded federal income taxes ................................ $ 1,999 $ 2,571
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Federal income taxes included in-
Operating expenses ......................................... $ 1,596 $ 553
Other income, net .......................................... 403 2,018
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Recorded federal income taxes ................................ $ 1,999 $ 2,571
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(2) COMMITMENTS AND CONTINGENCIES:
Hearings began March 11, 1996 for the last phase of the 1995 deferred
energy case to consider the prudency of the Company's fuel and purchased
power expenditures during the period June 1993 to May 1995, a buyout of a
coal supply agreement and a credit to customers related to use of coal
reserves in an unregulated subsidiary company. The PSC Staff and Consumer
Advocate Office have filed testimony seeking disallowance from recovery and
credit to the Company's customers of approximately $19 million. The
Company believes its expenditures and use of coal reserves are prudent and
reasonable and will vigorously defend against the proposed disallowances.
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Saguaro Power Company (Saguaro), a cogeneration power producer, and
the Company are parties to a 30-year power purchase contract (Contract)
wherein the Company agreed to purchase power from Saguaro's plant near
Henderson, Nevada. On July 22, 1995, Saguaro filed a lawsuit in
District Court, Clark County, Nevada, seeking damages and injunctive relief
as a result of being curtailed in its power deliveries during periods of
low load conditions on the Company's system. The lawsuit alleges that
the Company refused to accept and pay for approximately $2 million of
electric energy and capacity, and that the Company should reimburse
Saguaro for $2 million related to the construction of the interconnection
line. Saguaro also alleges that the Company has refused to pay Saguaro for
excess capacity. Lastly, Saguaro alleges that the Company has
committed fraud and anticipatory breach of the Contract and requests
punitive damages of $75 million. The Company believes its actions are
consistent with the Contract, federal and state regulations, and state
administrative directives, and will vigorously defend against these
claims. Further, the Company contends it has paid Saguaro all amounts
due it under the terms of the Contract.
The Nevada District Court denied the Company's request that the
issues regarding low load conditions and the lawsuit for curtailment
damages be heard before the Public Service Commission of Nevada based on
the arbitration clause of the Contract. The Nevada District Court ordered
all the parties to arbitrate the above issues with the exception of
Saguaro's claim concerning the interconnection line. The Company has
appealed these decisions.
The Federal Clean Air Act Amendments of 1990 (Amendments) include
provisions for reduction of emissions of oxides of nitrogen by establishing
new emission limits for coal-fired generating units. This 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.
The Amendments also mandated creation of the Grand Canyon Visibility
Transport Commission to work toward the goal of visibility improvement in
the Grand Canyon and other national parks of the Colorado Plateau. The
Commission is expected to make recommendations to the U.S. Environmental
Protection Agency (EPA) in June 1996, regarding ways to improve visibility.
A variety of actions could be considered including imposition of more
pollution controls or emissions limitations upon large sources of pollution
in the West and Southwest. The potential affect on the Company cannot be
determined at this time.
Related to visibility, the United States Congress authorized the EPA
to study the potential impact the Mohave Generating Station (Mohave) may
have on visibility in the Grand Canyon area. Results of this study are
expected in 1996. The cost of any improvements that may be required cannot
be determined at this time.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's customer growth rate during 1995 and 1994 was 6.0
percent. The increase in customers for the first three months of 1996 was
at an annualized rate of 7.2 percent. At March 31, 1996, the Company
provided electric service to 462,391 customers.
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Pursuant to Nevada law, every three years the Company is required to
file with the Public Service Commission of Nevada (PSC) a forecast of
electricity demands for the next 20 years and the Company's plans to meet
those demands. Among the major items in the Company's 1994 Resource Plan,
as refiled and amended, which were approved by the PSC in 1994 and 1995 are
the following:
(1) the Company will continue to pursue a strategy of relying on short-
term power purchases to meet the forecasted increases in load;
(2) the Company will maintain sufficient flexibility to implement an
efficient cost-effective resource acquisition process where
appropriate, noting that the competitive solicitation process remains
the preferred method for comparing resource options;
(3) the Company will proceed with the installation of the initial 230 kV
circuit and associated substation and communication facilities on the
previously approved Arden-Northwest 230 kV Transmission Line;
(4) the Company will proceed with the rerouting of a portion of the #2
Arden-McCullough 230 kV Transmission Line;
(5) the Company will proceed with limited resource planning approval to
seek the necessary UEPA and other permitting approvals, and to
acquire necessary sites and rights-of-way for two 230 kV switching
stations;
(6) the Company will proceed with a Renewable Energy Program for the
Company to utilize all appropriate incentives, resources, and
expertise to foster the development of economically competitive
renewable energy systems with the intent to provide Southern Nevada
customers with 20 megawatts of solar-generated electricity by the
year 2002.
On April 1, 1996, the Company filed a status report on the results of
transmission studies along with an amendment requesting approval of three
energy service company contracts.
To meet capital expenditure requirements through 1997, the Company
plans to utilize internally generated cash, the proceeds from industrial
development revenue bonds (IDBs), first mortgage bonds (FMBs), preferred
securities 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 1,577,977 and 399,836 shares, respectively, of
its common stock in 1995 and the first three months of 1996.
On October 12, 1995, Clark County, Nevada issued $76.75 million
Series 1995A IDBs (Nevada Power Company Project) due 2030. 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, 1996, $78.3 million remained on
deposit with the trustee.
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OPERATING RESULTS OF FIRST THREE MONTHS OF 1996
COMPARED TO FIRST THREE MONTHS OF 1995
Earnings per average common share were five cents for the first three
months of 1996, compared to eight cents for the same period in 1995. The
decrease in earnings was due to the first quarter 1995 recording of a gain
reported by the Company's unregulated subsidiary, Nevada Electric
Investment Company (NEICO), due to the sale of coal mining assets. The
average number of customers increased 6.5 percent and kilowatthour sales,
excluding sales for resale, were up 5.9 percent, as compared to the first
three months of 1995. Revenues increased due to customer growth but were
partially offset by fuel rate decreases effective October 1 and December 1,
1995.
Fuel expense decreased by $4.0 million due to reduced generation.
Purchased power increased $6.1 million due to increased power purchases.
Depreciation expense increased $1.9 million because of a growing asset
base. Other income miscellaneous, net decreased $2.8 million due primarily
to the first quarter 1995 recording of the sale of mining property by
NEICO.
Average common shares increased because of the sale of additional
common shares through the SPP to partially provide funds for the
construction of facilities necessary to meet increased customer demand for
electricity.
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PART II. OTHER INFORMATION
Items 1 through 5. None.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibits Filed Description
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27 Financial Data Schedule
b. Reports on Form 8-K.
None.
Signatures
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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
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(Registrant)
STEVEN W.RIGAZIO
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(Signature)
Date: May 2, 1996 Steven W. Rigazio
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Vice President, Finance and Planning,
Treasurer, Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF NEVADA POWER COMPANY AS OF MARCH 31, 1996, AND THE RELATED STATEMENTS
OF INCOME AND CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $1,735,192
<OTHER-PROPERTY-AND-INVEST> 10,250
<TOTAL-CURRENT-ASSETS> 90,022
<TOTAL-DEFERRED-CHARGES> 217,480
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,052,944
<COMMON> 50,661
<CAPITAL-SURPLUS-PAID-IN> 604,225
<RETAINED-EARNINGS> 102,543
<TOTAL-COMMON-STOCKHOLDERS-EQ> 757,429
38,000
3,783
<LONG-TERM-DEBT-NET> 702,969
<SHORT-TERM-NOTES> 20,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 300
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<CAPITAL-LEASE-OBLIGATIONS> 94,382
<LEASES-CURRENT> 5,286
<OTHER-ITEMS-CAPITAL-AND-LIAB> 430,595
<TOT-CAPITALIZATION-AND-LIAB> 2,052,944
<GROSS-OPERATING-REVENUE> 147,128
<INCOME-TAX-EXPENSE> 1,596
<OTHER-OPERATING-EXPENSES> 130,854
<TOTAL-OPERATING-EXPENSES> 132,450
<OPERATING-INCOME-LOSS> 14,678
<OTHER-INCOME-NET> 748
<INCOME-BEFORE-INTEREST-EXPEN> 15,426
<TOTAL-INTEREST-EXPENSE> 11,908
<NET-INCOME> 3,518
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<EARNINGS-AVAILABLE-FOR-COMM> 2,529
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