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PRELIMINARY
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 10, 1996
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Nevada Power Company will be held
at the Stardust Resort & Casino, Conference Center, 3000 Las Vegas Boulevard
South, Las Vegas, Nevada, on Friday, May 10, 1996, at 2:00 P.M. for the
following purposes:
1. To elect three directors to three-year terms.
2. To consider and vote upon a shareholder recommendation to the Board of
Directors concerning the Retirement Plan for Outside Directors.
3. To consider and act upon any other business that may properly be brought
before the meeting.
For easy access to the Annual Meeting room, entry from the Industrial
Road entrance is recommended. Please see accompanying map.
Guest rooms have been reserved at the Stardust Resort & Casino at a
special rate for those Nevada Power Company Shareholders who wish to stay any
day(s) between Thursday, May 9, and Saturday, May 11, 1996. To obtain this
special rate, reservations must be made by April 19, 1996 by calling the
Stardust Resort & Casino at (800) 634-6757 or (702) 732-6111, asking for the
Convention Desk and identifying yourself with the Group Code NEV 0509.
The close of business on March 13, 1996 has been fixed as the record
date for determining the shareholders entitled to receive notice of and to
vote at the Annual Meeting.
March 13, l996
Richard L. Hinckley
Secretary
EVEN IF YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE
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LOCATION OF 1996
ANNUAL MEETING OF SHAREHOLDERS
A map of the locaion of the 1996 Annual Meeting of Shareholders to be held at
the Stardust Resort & Casino, Conference Center, is included in this space. The
map shows the area of Las Vegas, Nevada including Sahara Avenue to the North,
Tropicana Avenue to the South, Interstate 15 to the West and Paradise Road to
the East, as well as the relative location of McCarran Airport and the roads
that immediately surround the Stardust Resort & Casino.
<PAGE>
PRELIMINARY
NEVADA POWER COMPANY
6226 West Sahara Avenue
P.O. Box 230
Las Vegas, Nevada 89151
_______________________
PROXY STATEMENT
The enclosed proxy for the 1996 Annual Meeting of Shareholders is
solicited by the Board of Directors of Nevada Power Company (the "Company") and
it may be revoked by written notice to the Secretary of the Company at any time
prior to its use. All shares represented by valid proxies on the enclosed
form, timely received by the Company, will be voted at the meeting or any
adjourned session in the manner directed by the shareholder. If no direction
is made, the proxy will be voted "FOR" the nominees for Director and "YES" with
respect to the shareholder recommendation.
As of the close of business on March 13, 1996, there were outstanding and
entitled to vote __________ shares of Common Stock. Only holders of Common
Stock of record at the close of business on March 13, 1996 will be entitled to
vote at the meeting.
Each share of the Company's Common Stock is entitled to one vote. The
total number of shares represented by individual proxies includes shares, if
any, owned by shareholders and credited to their accounts under the Company's
Stock Purchase and Dividend Reinvestment Plan. An affirmative vote of a
majority of the shares present and voting at the meeting is required for
approval of all items being submitted to the shareholders for their
consideration. An automated system administered by the Company tabulates the
votes. Abstentions are included in the determination of the number of shares
present and voting, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved. The first mailing of the
proxy and proxy statement to common shareholders will be on or about March 25,
1996.
The cost of soliciting proxies in the enclosed form is being borne by the
Company. In addition to solicitation by mail, arrangements have been made with
brokerage houses, nominees and other custodians and fiduciaries to send proxy
material to their principals and the Company will reimburse them for their
reasonable expenses in doing so. Proxies also may be solicited personally or
by telephone or telegraph by directors, officers, and a few regular employees
of the Company in addition to their usual duties, but they will not be
specially compensated for these services. The Company has retained Beacon Hill
Partners, Inc., 90 Broad Street, New York, New York 10004 to aid in the
solicitation of proxies by similar methods, for which Beacon Hill Partners,
Inc. will receive a fee of $3,500, out-of-pocket expenses limited to a total of
$1,500 and brokerage forwarding charges.
1
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ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation currently provide for a
classified board consisting of between three and twelve directors. At present,
the Board of Directors (sometimes referred to herein as the "Board") consists
of ten members divided into three classes of three, four and three directors,
respectively. One class of directors is elected at each Annual Meeting to
serve a three-year term. A brief biography of each nominee up for election at
the 1996 Annual Meeting is presented below. Management recommends that
shareholders vote "FOR" these nominees.
The proxies solicited by and on behalf of the Board of Directors of the
Company will be voted "FOR" the election of the nominees, unless authority to
do so is withheld as provided in the enclosed proxy. Although it is not
contemplated that any of the nominees will be unable to serve, in the event any
nominee should not be available as a candidate for director at the time of the
Annual Meeting, the persons named in the proxy will vote for a substitute who
will be designated by the present Board of Directors to fill such vacancy.
The following table sets forth biographical information for the three
nominees for director and the other directors of the Company.
Principal Occupation and Year First
Employment for the Past Five Became Director
Name Age Years and Other Information /Term Expires
- --------------------- ----- --------------------------------- ---------------
Nominees for Director:
MARY LEE COLEMAN 59 President of Coleman Enterprises 1980/1996
(developer of shopping centers and
industrial parks). Mrs. Coleman
is a graduate of the University of
Southern California. She is a
member of the Audit Committee and
Pension Fund Committee.
2
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Principal Occupation and Year First
Employment for the Past Five Became Director
Name Age Years and Other Information /Term Expires
- --------------------- ----- ---------------------------------- ---------------
CHARLES A. LENZIE 58 Chairman of the Board and Chief 1983/1996
Executive Officer of the Company.
Mr. Lenzie joined the Company in
1974 as Vice President-Finance.
He was elected Senior Vice
President-Finance and Accounting
Services in December 1979;
President on February l, l983 and
Chairman of the Board and Chief
Executive Officer on May l, l989.
On August 10, 1995, Mr. Lenzie
also assumed the position of
President and Chief Operating
Officer. Mr. Lenzie is a director
of Bank of America Nevada and
Stewart Title Company of Nevada.
Mr. Lenzie is a graduate of the
University of Illinois and a
Certified Public Accountant. He
is Chairman of the Executive
Committee.
JOHN F. O'REILLY 50 President of the law firm of 1995/1996
Keefer, O'Reilly, Ferrario and
Lubbers. Mr. O'Reilly is Chairman
and Chief Executive Officer of the
O'Reilly Gaming Group and is a
Director of First Interstate Bank
of Nevada, N.A. He is the Chairman
of the Las Vegas Chamber of
Commerce. Mr. O'Reilly is a
graduate of St. Louis University
and has his MBA from the
University of Nevada, Las Vegas.
He is a member of the Audit
Committee and Nominating
Committee.
3
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Principal Occupation and Year First
Employment for the Past Five Became Director
Name Age Years and Other Information /Term Expires
- --------------------- ----- ---------------------------------- ---------------
Other Directors:
JOHN L. GOOLSBY 54 President, Chief Executive Officer 1991/1997
and a director of each of The
Hughes Corporation and The Howard
Hughes Corporation (real estate
investment and land development
companies), the principal
operating companies of the Howard
Hughes Estate. Mr. Goolsby became
affiliated with The Howard Hughes
Corporation in l980, and since
that time has held various
positions with the operating
companies of the Howard Hughes
Estate. Mr. Goolsby is a director
of Bank of America Nevada and
America West Airlines. Mr. Goolsby
is a graduate of the University of
Texas at Arlington and a Certified
Public Accountant. He is a member
of the Executive Committee,
Compensation Committee, Nominating
Committee and Audit Committee.
JERRY E. HERBST 58 Chief Executive Officer of each of 1990/1997
Terrible Herbst, Inc. (gas
station, car wash, convenience
store chain) and Herbst Supply
Co., Inc. (wholesale fuel
distribution), family-owned
businesses for which he has worked
since l959. Mr. Herbst is a
general partner of the Gold Coast
Hotel & Casino and a director of
Bank of America Nevada. Mr. Herbst
is a graduate of the University of
Southern California. He is
Chairman of the Nominating
Committee and a member of the
Compensation Committee and Pension
Fund Committee.
4
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Principal Occupation and Year First
Employment for the Past Five Became Director
Name Age Years and Other Information /Term Expires
- --------------------- ----- ---------------------------------- ---------------
FRANK E. SCOTT 76 Chairman of the Board and Chief 1972/1997
Executive Officer of First Western
Financial Corporation (holding
company of a savings and loan
association) until his retirement
in 1988. Mr. Scott is Chairman of
the Board of Sports Media Network
and until recently, was chairman
of the Board of American
Wollastonite Mining Corporation.
Previously he was also Chairman of
the Board and CEO of the Scott
Corporation, Developer and
Operator of the Union Plaza Hotel.
He is a member of the Audit
Committee, Compensation Committee
and Pension Fund Committee.
JELINDO A. TIBERTI 76 Chairman of the Board of J. A. 1963/1997
Tiberti Construction Company, Inc.
Mr. Tiberti is a Registered
Professional Engineer. He is
Chairman of the Pension Fund
Committee and a member of the
Executive Committee and
Compensation Committee.
FRED D. GIBSON, JR. 68 Chairman, President, Chief 1978/1998
Executive Officer and a director
of American Pacific Corporation
(manufacture of chemicals and
pollution abatement equipment;
real estate development). Mr.
Gibson has been affiliated with
American Pacific Corporation and
its predecessor, Pacific
Engineering & Production Co.,
since l956. Mr. Gibson is a
graduate of the University of
Nevada and holds a degree in
Metallurgical Engineering. He is
Chairman of the Audit Committee
and a member of the Executive
Committee, Compensation Committee,
and Nominating Committee.
5
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Principal Occupation and Year First
Employment for the Past Five Became Director
Name Age Years and Other Information /Term Expires
- --------------------- ----- ---------------------------------- ---------------
CONRAD L. RYAN 71 Elected President of the Company 1978/1998
in 1978, Chief Executive Officer
of the Company in l979 and
Chairman of the Board in l982. Mr.
Ryan retired from the Company and
from the positions of Chief
Executive Officer and Chairman of
the Board in l989. Mr. Ryan is a
graduate of the University of Utah
and is a Registered Professional
Engineer. He is a member of the
Executive Committee and Pension
Fund Committee.
ARTHUR M. SMITH 73 Prior to his retirement in 1984, 1959/1998
Chairman of the Board of First
Interstate Bank of Nevada, N.A.
Mr. Smith is a director of Circus
Circus Enterprises (hotel and
casino), John Deere Insurance
Group and the W. M. Keck
Foundation. He is Chairman of the
Compensation Committee and a
member of the Audit Committee and
Pension Fund Committee.
6
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COMMITTEES OF THE BOARD OF DIRECTORS
The Committees of the Board of Directors are the Executive Committee, the
Audit Committee, the Compensation Committee, the Nominating Committee and the
Pension Fund Committee. The major functions of these Committees are described
briefly below.
EXECUTIVE COMMITTEE
Except for certain powers which, under Nevada law, may only be exercised
by the full Board of Directors, the Executive Committee may exercise all
powers and authority of the Board of Directors in the management of the
business and affairs of the Company.
AUDIT COMMITTEE
The Audit Committee recommends to the Board of Directors the appointment
of the independent public accountants. The Audit Committee reviews and
considers the comments from the independent public accountants with respect
to internal accounting controls and the consideration given or corrective
action taken by management to weaknesses, if any, in internal controls. The
Audit Committee discusses matters of concern to the Committee, the independent
public accountants or management relating to the Company's financial statements
or other results of the audit. It also meets with the Company's Director of
Internal Audit regarding internal auditing matters and controls.
COMPENSATION COMMITTEE
The Compensation Committee reviews and recommends to the Board
compensation for officers.
NOMINATING COMMITTEE
The Nominating Committee is empowered to consider and review the
qualifications of potential nominees for directors and to recommend to the
Board of Directors a slate of nominees for election as directors at the Annual
Meeting of Shareholders and, when vacancies occur, candidates for election by
the Board of Directors. The Committee will consider nominees recommended by
shareholders; written recommendations must be received by the Secretary of the
Company not less than thirty days nor more than sixty days prior to the meeting
at which directors are to be elected.
PENSION FUND COMMITTEE
The Pension Fund Committee oversees the investment of the assets of the
Company's Qualified Retirement Plan.
7
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MEETINGS AND ATTENDANCE
During 1995, the Company's Board of Directors met 12 times, the Executive
Committee met 9 times, the Audit Committee, the Compensation Committee, the
Pension Fund Committee and the Nominating Committee each met twice.
During 1995, no director attended less than 75% of the aggregate meetings
of the Board of Directors and Committees on which he or she served.
DIRECTOR COMPENSATION
No director who receives a salary from the Company is paid any fees to
serve as a director or as a member of any committee of the Board of Directors.
Those directors not receiving salaries from the Company (the "Outside
Directors") are paid an annual fee of $20,000 plus $1,000 for each
directors' meeting attended; an annual fee of $10,000 for serving on the
Executive Committee; $1,000 per meeting attended for serving on the Audit
Committee, the Compensation Committee, the Nominating Committee, or the Pension
Fund Committee and an additional $400 per meeting for serving as Committee
Chairman. In addition, the Company provides a $20,000 term life insurance
benefit for each of the Outside Directors.
SECURITY OWNERSHIP OF MANAGEMENT
The following table presents certain information regarding the Company's
Common Stock beneficially owned by each director, the Chief Executive Officer
and the four other most highly compensated executive officers of the Company
for the year 1995, and all directors and executive officers of the Company as
a group as of December 31, 1995:
Amount and
Nature of
Beneficial Percent of
Name Ownership Class
---- --------- ----------
Mary Lee Coleman ......................... 321,752(1) .684%
Fred D. Gibson, Jr. ...................... 7,024(2) .015%
John L. Goolsby........................... 2,356(3) .005%
Jerry E. Herbst........................... 5,000(4) .011%
Charles A. Lenzie ........................ 11,229(5)(15) .024%
John F. O'Reilly.......................... 1,000(6) .002%
Conrad L. Ryan ........................... 12,278(7) .026%
Frank E. Scott ........................... 5,893(4) .013%
Arthur M. Smith .......................... 1,200(8) .003%
Jelindo A. Tiberti ....................... 2,000(9) .004%
David G. Barneby ......................... 3,975(10)(15) .008%
Cynthia K. Gilliam ....................... 2,761(11)(15) .006%
Richard L. Hinckley ...................... 2,227(12)(15) .005%
Steven W. Rigazio......................... 5,934(13)(15) .013%
All Directors & Executive Officers as a
Group (15 individuals)(16).............. 387,271(14)(15) .823%
8
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(1) 157,857 shares held in shareholder's name; balance held in family trust.
(2) 4,600 shares held in street name; balance held in shareholder's name.
(3) 2,000 shares held in street name; balance held in shareholder's name.
(4) Held in shareholder's name.
(5) 6,980 shares held in street name; balance held in shareholder's name.
(6) Held in street name.
(7) 400 shares held in street name; balance held in shareholder's name.
(8) 1,000 shares held in street name; balance held in family trust.
(9) 1,250 shares held in street name; balance held in name of controlled
corporation.
(10) 1,136 shares held in street name; 1,377 shares held in shareholder's name;
balance held in trust.
(11) 1,478 shares held in street name; balance held in shareholder's name.
(12) 1,218 shares held in shareholder's name; balance held in custodial trust.
(13) 1,081 shares held in shareholder's name; balance held in family trust.
(14) Includes 750 shares held in the name of controlled corporation; 19,844
shares held in street name; 171,419 shares held in trust and 195,258
shares held in shareholders' names.
(15) Of the shares shown, 1,948 shares beneficially owned by Mr. Lenzie, 1,377
shares beneficially owned by Mr. Barneby, 1,283 shares beneficially owned
by Mrs. Gilliam, 1,211 shares beneficially owned by Mr. Hinckley, 1,081
shares beneficially owned by Mr. Rigazio, and 9,542 of the shares
beneficially owned by all directors and executive officers as a group are
held in the Company's 401(k) Plan for the benefit of such shareholders.
These shares are fully vested. All shares of Company Common Stock held
in the Company's 401(k) Plan are subject to shared voting power with the
trustee of the 401(k) Plan.
(16) None of the directors or executive officers own any of the Company's
outstanding Cumulative Preferred Stock or Preference Stock.
The management of the Company does not know of any shareholder holding
more than 5% of the Company's Common Stock.
9
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EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the Chief
Executive Officer and the five other most highly compensated executive officers
of the Company for the year 1995, as well as the total compensation paid to
each such individual for the Company's two previous years.
Summary Compensation Table (7)
Annual Compensation
----------------------------------
Name and Principal Other Annual All Other
Position(6) Year Salary(1) Bonus(2) Compensation(3) Compensation(4)
- ------------------ ---- --------- -------- --------------- ---------------
Charles A. Lenzie 1995 $405,991 $ -0- $ 7,252 $ 4,500
Chairman of the 1994 372,750 109,030 7,666 4,500
Board and Chief 1993 311,923 98,256 5,917 7,075
Executive Officer,
Director
James C. Holcombe 1995 197,617 -0- 6,882 537,500
President and 1994 273,368 79,960 9,809 4,500
Chief Operating 1993 247,160 77,855 11,686 7,075
Officer, Director (5)
Steven W. Rigazio 1995 184,000 -0- 10,571 4,500
Vice President, 1994 166,121 31,978 8,646 4,500
Finance and Plan- 1993 127,374 23,947 8,384 3,744
ning, Treasurer,
Chief Financial
Officer
Cynthia K. Gilliam 1995 179,000 -0- 8,310 4,500
Vice President, 1994 162,125 31,868 11,116 4,500
Retail Customer 1993 130,548 24,021 8,955 3,964
Operations
David G. Barneby 1995 174,318 -0- 8,143 4,500
Vice President, 1994 153,632 30,342 9,559 4,327
Power Delivery 1993 134,958 25,373 7,985 3,868
Richard L. Hinckley 1995 151,000 -0- 9,017 3,445
Vice President, 1994 139,163 27,485 8,458 3,395
Secretary and 1993 119,081 21,911 8,403 3,415
General Counsel
(1) Includes lump sum payments, in 1995, of $16,000 for Mr. Lenzie; $11,000
for Mr. Holcombe; $7,000 for Mr. Rigazio; $7,000 for Mrs. Gilliam; $7,000
for Mr. Barneby and $6,000 for Mr. Hinckley.
10
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(2) Amounts awarded under the Executive Performance Incentive Plan for the
respective fiscal years.
(3) These amounts represent the personal use of Company automobiles and
reimbursement for payment of taxes thereon.
(4) These amounts represent the Company's contribution to the Company's 401(k)
Plan except for the 1995 amount for James C. Holcombe which includes
$4,500 for the Company's contribution to the 401(k) Plan and $533,000 for
the payments made and to be made pursuant to a Separation Agreement.
Since May, 1989, James C. Holcombe was the Company's President and Chief
Operating Officer, a director and one of its highest paid employees. As a
part of his resignation as an officer and member of the Board of Directors
of the Company, a Separation Agreement and Release was entered into on
September 6, 1995. The following are the material details of the
Separation Agreement.
Mr. Holcombe is, following his departure, to cooperate with the Company as
to those matters which were under his control. The Company will contribute
$15,000 towards Mr. Holcombe's office overhead so as to facilitate the
rendering of these services. Mr. Holcombe was given some of the personal
property which he used while an employee, valued for income tax purposes
at $23,000. In addition, Mr. Holcombe will continue to participate in the
Company's medical plans for two years or until he is eligible for such
benefits from any other source and participate in the Company's $300,000
life insurance plan for a period of two years. The Company has also agreed
to pay to Mr. Holcombe severance payments of $115,000 following execution
of the Separation Agreement, $325,000 in 1996 and $25,000 in 1997. Mr.
Holcombe will also participate in the Company's supplemental executive
retirement plan with credited service of nine years and five months and
based upon compensation earned through July 31, 1995. The Company has
also agreed to pay $7,500 to Mr. Holcombe's attorneys and $30,000 for
employment placement assistance to or for the benefit of Mr. Holcombe.
The Separation Agreement also provides that the Company and Mr. Holcombe
release each other from all claims or potential claims. In addition, the
Company has promised to indemnify Mr. Holcombe for all liabilities which
may incur as the result of his having served as an officer and director of
the Company.
(5) Resigned effective August 1, 1995.
(6) Current positions reflect new organizational structure approved by the
Board of Directors on October 14, 1993.
(7) The number and value of the aggregate performance restricted shares under
the Company's Long-Term Incentive Plan as of December 31, 1995, are 14,539
shares and $323,493 for Mr. Lenzie; 3,986 shares and $88,689 for
Mr. Rigazio; 3,906 shares and $86,909 for Mrs. Gilliam; 3,760 shares and
$83,660 for Mr. Barneby; and 3,403 shares and $75,717 for Mr. Hinckley,
respectively.
11
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LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts under
Performance Non-Stock Price-Based Plans
or Other Period ----------------------------------------
Until Maturation Threshold Target Maximum
Name or Payout (#) (#) (#)
- ------------------- ---------------- ------------ ------------ ------------
Charles A. Lenzie Three Years 3,828 shares 7,656 shares 9,570 shares
Steven W. Rigazio Three Years 1,086 shares 2,172 shares 2,715 shares
Cynthia K. Gilliam Three Years 1,055 shares 2,110 shares 2,638 shares
David G. Barneby Three Years 982 shares 1,963 shares 2,454 shares
Richard C. Hinckley Three Years 890 shares 1,779 shares 2,224 shares
The Company's Long-Term Incentive Plan (the "LTIP") gives participants
the opportunity to earn awards based on the Company's performance over a
three-year performance period. The performance period for the 1995 LTIP
awards (the "Awards") began January 1, 1995 and ends December 31, 1997. The
Awards of LTIP incentive compensation units (the "Units") earned by the named
executive officers will be determined at the end of the three-year
performance period based on the ranking of the Company's total shareholder
return (i.e., stock price appreciation plus reinvested dividends) in
comparison to the Salomon Electric Utilities Index (the "Index"). Common
stock of the Company at the rate of one share per Unit earned will be paid to
LTIP participants at the end of the performance period. Participants would
earn a percentage of the Award based on the percentile rank of the Company's
total shareholder return in comparison to the Index, as follows:
Percentage of
Percentile Rank of Company Award Earned
-------------------------- -------------
Less than 40th....................... 0%
40th....................... 50%
50th....................... 75%
60th....................... 90%
75th....................... 100%
90th....................... 125%
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COMPENSATION COMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
is responsible for establishing the philosophy for compensating the Company's
executives and ensuring that all aspects of the Executive Compensation Program
are administered consistent with the philosophy. During 1995, the Committee
met two times. This report describes the Committee's decisions during 1995
in determining the compensation earned by the Chief Executive Officer (the
"CEO"), and all other officers as a group.
The Omnibus Budget Reconciliation Act of 1993 contained provisions on the
deductibility of executive compensation. All compensation paid to the CEO and
other proxy - named executives for 1995 is fully deductible. It is the
Committee's intention to maintain the complete deductibility in the future,
however, we reserve the right to deviate from this policy when and if we
determine it is in the best interests of the Company and its shareholders to do
so.
The Company has retained the services of Towers Perrin, a compensation
consulting firm, to assist the Committee in connection with the performance
of its various duties. Towers Perrin has been retained in this capacity
since 1990. Towers Perrin provides advice to the Committee with respect to
the reasonableness of compensation paid to the officers of the Company.
Overall Objectives
The primary objective of the Executive Compensation Program is to
motivate the officers to achieve the Company's goals of providing the
Company's shareholders with a competitive return on their investment while at
the same time providing its customers with high quality service at a
competitive price. The compensation philosophy, therefore, bases a
significant portion of each officer's total compensation on the achievement
of these goals.
Compensation Philosophy
The Executive Compensation Program is reviewed on an annual basis to
ensure its alignment with the Company's compensation philosophy. To retain
and attract an experienced results-oriented team, the Company's compensation
philosophy is to provide a total compensation opportunity between the median
and 75th percentile in comparison to both regulated and nonregulated
businesses. Each year, the Committee reviews data from the Edison Electric
Institute (the "EEI") Executive Compensation Survey of electric utilities and
Towers Perrin's annual management compensation survey. In the following
performance graph on page 16, the Company's total return to shareholders is
compared to that of the electric utilities comprising the Salomon Electric
Utilities Index and the S&P 500 Stock Index. The overwhelming majority of
the companies in the Salomon Electric Utilities Index participate in the EEI
survey database. The companies in the Towers Perrin survey parallel the type
and mix of companies comprising the S&P 500 Stock Index.
13
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The Executive Compensation Program for the officers of the Company is
comprised of base salary, annual performance-related awards and a long-term
incentive plan. Annual base salary increases reflect the individual's
performance and contribution over several years. Annual incentive awards
vary directly with annual corporate performance for the CEO. Corporate
performance is weighted 60% and individual goal achievement is weighted 40%
for all other officers. Individual officer goals are established annually in
support of the corporate performance goals. The long-term incentive plan
approved by the Company's shareholders in 1993 provides officers with the
opportunity to earn shares of common stock based on the Company's total
return to shareholders compared to a peer group of electric utilities.
The remainder of this report discusses the administration of the 1995
Executive Compensation Program with respect to the CEO and the other officers
as a group.
1995 Base Salary
The CEO received no increase to base salary in 1995. His salary, as set
on April 1, 1994, remained at the same rate throughout 1995. All officers
received similar treatment except Mr. Barneby, Vice-President Power Delivery,
who received a $10,000 salary increase. The 1994 salary data reported in the
Summary Compensation Table is a combination of salary rates in effect before
and after April 1, 1994. For 1995, the CEO's salary and salaries for all
other officers as a group were between the 50th and 75th percentile of
salaries for comparable positions within the electric utility industry. A
lump-sum cash award of 4% was made to each officer.
1995 Incentive Awards
The corporate component of the 1995 incentive awards was based on three
corporate performance goals weighted as follows _ corporate earnings, 50%;
customer satisfaction, 30%; and cost control, 20%. Specific corporate
performance goals were established at the beginning of the year. The CEO's
1995 annual incentive award is based entirely on the three corporate goals.
Achievement of the corporate performance goals and individual goals were
evaluated and taken into consideration in determining 1995 annual incentive
awards for all other officers. There were no incentive awards earned by the
CEO and all other officers in 1995.
No awards were earned in 1995 under the Company's Long-Term Incentive
Plan as total shareholder return performance relative to peer companies was
below the standing required to provide long-term awards.
14
<PAGE>
Under the provisions of the Company's Long-Term Incentive Plan, the
officers of the Company were granted a total number of 17,459 stock units.
The CEO's grant of 7,656 stock units and the grant to all other officers as a
group was based on the Company's philosophy of providing the opportunity to
earn total compensation between the 50th and 75th percentile of regulated and
nonregulated businesses. The actual number of stock units earned by the CEO
and all officers as a group will be determined in 1998 based on the Company's
total shareholders return as compared to a peer group of electric utilities
for the period 1995-1997 or such other measure as the Committee deems
appropriate.
Separation Agreement
The Chief Operating Officer received compensation in 1995 pursuant to a
Separation Agreement entered into as part of his resignation on August 1,
1995. See Footnote 4 to the Summary Compensation Table for the material
details of the Separation Agreement.
COMPENSATION COMMITTEE
Arthur M. Smith
Fred D. Gibson, Jr.
John L. Goolsby
Jerry E. Herbst
Frank E. Scott
Jelindo A. Tiberti
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PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
returns for the Company's common stock, the S&P 500 Stock Index and the
Salomon Electric Utilities Index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
NEVADA POWER COMPANY COMMON STOCK (NPC),
S&P 500 STOCK INDEX (S&P 500) AND
SALOMON ELECTRIC UTILITIES INDEX (SALOMON)
Measurement Period
(Fiscal Year Covered) NPC S&P 500 Salomon
- --------------------- ------- ------- -------
Measurement Pt. - 12/31/90 $100 $100 $100
Fiscal Year Ended - 12/31/91 $ 96 $130 $130
Fiscal Year Ended - 12/31/92 $127 $140 $139
Fiscal Year Ended - 12/31/93 $138 $155 $155
Fiscal Year Ended - 12/31/94 $126 $157 $136
Fiscal Year Ended - 12/31/95 $148 $215 $179
Assumes $100 invested on 12/31/90 in Nevada Power Company common stock,
S&P 500 Stock Index and Salomon Electric Utilities Index with dividend
reinvestment over the period.
RETIREMENT BENEFITS
The Company's Qualified Retirement Plan (the "Retirement Plan") for
salaried employees provides noncontributory benefits based upon both years of
service and the employee's highest consecutive 5-year average annual
compensation. Annual compensation includes salary and bonus amounts paid as
shown in the Summary Compensation Table. The credited years of service under
the Retirement Plan at December 31, 1995 for each of the individuals listed
in the Summary Compensation Table are as follows: Charles A. Lenzie, 20
years; James C. Holcombe, 6 years; Steven W. Rigazio, 10 years; Cynthia K.
Gilliam, 20 years; David G. Barneby, 28 years; and Richard L. Hinckley, 9
years. The Retirement Plan includes an early retirement option under which a
covered employee may receive a reduced benefit upon early retirement between
ages 55 and 62. Benefits payable upon retirement after age 62 are unreduced.
Benefits payable under the Retirement Plan must be in compliance with
applicable guidelines or maximums prescribed in the Employees Retirement
Income Security Act of 1974 as currently stated or as adjusted from time to
time.
16
<PAGE>
The following table sets forth, by example, maximum annual benefits upon
retirement on or after age 62 from the Retirement Plan. The amounts shown
below represent the application of the Retirement Plan formula to the highest
consecutive 5-year average annual earnings and years of service shown.
Maximum Annual Benefit for Specific
Highest Years of Credited Service at Retirement
Consecutive 5-Year ----------------------------------------------------------
Average Earnings 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
- ------------------ -------- -------- -------- -------- -------- --------
$150,000 ......... $38,700 $51,500 $64,400 $77,300 $90,200 $100,100
200,000 ......... 38,700 51,500 64,400 77,300 90,200 100,100
250,000 ......... 38,700 51,500 64,400 77,300 90,200 100,100
300,000 ......... 38,700 51,500 64,400 77,300 90,200 100,100
350,000 and over. 38,700 51,500 64,400 77,300 90,200 100,100
The Company has adopted a Supplemental Executive Retirement Plan (the
"SERP") in addition to the Retirement Plan. Participation is limited to such
officers as the Board of Directors may select. Presently, 27 active or
retired designated officers, managers and beneficiaries including the six
highest paid officers of the Company, participate in the SERP. Each selected
participant who retires on or after age 62 with 25 years of service will
receive a SERP retirement benefit equivalent to 60% of his/her highest
consecutive 3-year average annual earnings reduced by the Retirement Plan
benefit. Annual earnings include wages, salary, bonus earned and the value of
all other compensation amounts as shown in the Summary Compensation Table.
Reduced benefits apply to participants who retire with less than 25 years of
service or before age 62. Participants with more than 25 years of service at
retirement receive an additional benefit equal to 1.5% of their highest
consecutive 3-year average annual earnings for each year of service beyond 25
years. The credited years of service under the SERP at December 31, 1995 for
each of the individuals listed in the Summary Compensation Table are as
follows: Charles A. Lenzie, 21 years; James C. Holcombe, 9 years and 5
months; Steven W. Rigazio, 11 years; Cynthia K. Gilliam, 21 years; David G.
Barneby, 29 years and Richard L. Hinckley, 10 years.
17
<PAGE>
The following table sets forth, by example, maximum annual benefits upon
retirement on or after age 62 under the combined regular Retirement Plan and
the SERP. The amounts shown below represent the application of the SERP
formula to the highest consecutive 3-year average annual earnings and years
of service shown. The amounts shown do not include Social Security benefits
payable upon retirement.
Maximum Annual Benefit for Specific
Highest Years of Credited Service at Retirement
Consecutive 3-Year ----------------------------------------------------------
Average Earnings 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
- ------------------ -------- -------- -------- -------- -------- --------
$150,000 ......... $ 67,500 $ 78,750 $ 90,000 $101,250 $112,500 $123,750
200,000 ......... 90,000 105,000 120,000 135,000 150,000 165,000
250,000 ......... 112,500 131,250 150,000 168,750 187,500 206,250
300,000 ......... 135,000 157,500 180,000 202,500 225,000 247,500
350,000 ......... 157,500 183,750 210,000 236,250 262,500 288,750
400,000 ......... 180,000 210,000 240,000 270,000 300,000 330,000
450,000 ......... 202,500 236,250 270,000 303,750 337,500 371,250
500,000 ......... 225,000 262,500 300,000 337,500 375,000 412,500
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
The Company has established a Retirement Plan for the Outside Directors
(the "RPOD"). The RPOD provides a maximum annual life benefit equivalent to
the annual fee being paid to the Outside Director at the date of retirement.
With respect to an Outside Director first elected after May 11, 1990, receipt
of the maximum annual life benefit under the RPOD is subject to (a) minimum
service for 5 years as an Outside Director and (b) retirement on or before
the first day of the month following such Outside Director's 72nd birthday.
The annual benefit received by an Outside Director elected after May 11,
1990, who has met the minimum 5-year service requirement, will be reduced by
$500 for each year such Outside Director retires after their 65th birthday
but prior to their 72nd birthday.
18
<PAGE>
SHAREHOLDER RECOMMENDATION
A shareholder, holding a total of 100 shares of the Company's Common
Stock, has submitted a recommendation to the Board of Directors for
consideration by the shareholders at the 1996 Annual Meeting. The name and
address of the shareholder will be furnished by the Company to any person
promptly upon receipt of an oral or written request therefor. The
shareholder's recommendation is as follows:
"Should Nevada Power Company establish a retirement plan for outside
Directors ("RPOD") after only five years of service?"
The Board of Directors recommends a vote of "YES".
In 1990, the Board adopted a retirement plan for outside members of the
Board that provides for an annual pension in the amount of the annual board
fee at the time of retirement of the board member. There is one retired board
member receiving benefits under the plan. All presently sitting board members
are eligible at this time for the pension benefit with the exception of Mr.
O'Reilly who joined the Board in 1995. The five year period is a reasonable
minimum service requirement considering the duties performed and qualifications
for board members.
The 1995 Edison Electric Institute Executive Compensation Survey reported
that "the typical retirement plan provides that after five years of board
service, an outside director receives a pension benefit equal to 100% of the
annual retainer at the time of retirement".
The survey shows that 63% of the companies studied provide director's
retirement plans and that 65% provide a benefit of 100% of the annual
retainer at retirement.
The Board believes the present pension plan with the minimum service
requirement of five years is reasonable and appropriate in the overall
compensation package to board members. The Board of Directors recommends a
"YES" vote on the shareholder recommendation.
19
<PAGE>
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Deloitte & Touche as the Company's
independent public accountants for 1996 at the recommendation of the Audit
Committee. Representatives of Deloitte & Touche will be present at the 1996
Annual Meeting. They will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal intended for
consideration at the 1997 Annual Meeting must be received by the Company on
or before November 13, 1996 to be included in the proxy materials for the
1997 Annual Meeting. It is recommended that shareholders submitting proposals
direct them to the Secretary of the Company and utilize Certified Mail-Return
Receipt Requested.
ANNUAL REPORT
For further information with respect to the Company, reference is made to
the 1995 Annual Report of the Company, a copy of which has been mailed to all
shareholders of the Company.
OTHER MATTERS
The management knows of no matters to be presented at the meeting other
than those mentioned above. However, if any other matters do properly come
before the meeting, it is intended that the shares represented by proxies will
be voted with respect thereto in accordance with the judgment of the persons
voting thereon.
Richard L. Hinckley
Secretary
Las Vegas, Nevada
March 13, l996
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1995 ANNUAL MEETING MINUTES
Copies of the minutes of the Company's 1995 Annual Meeting of
Shareholders and/or the Company's 1995 Annual Report on Form 10-K, including
the financial statements and the schedules thereto filed with the Securities
and Exchange Commission for the Company's most recent fiscal year, will be
furnished upon written request to shareholders without charge. A copy may be
obtained by writing to Shareholder Services, Nevada Power Company, P.O. Box
230, Las Vegas, Nevada 89151.
21
<PAGE>
PRELIMINARY
March 13, l996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Nevada Power Company to be held at 2:00 P.M. on May 10, 1996, at the
Stardust Resort & Casino, Conference Center, 3000 Las Vegas Boulevard South,
Las Vegas, Nevada. Your Board of Directors looks forward to greeting
personally those shareholders able to attend.
At the meeting, in addition to electing three directors to three-year terms,
you will be asked to consider and vote upon a shareholder recommendation to
the Board of Directors concerning the Retirement Plan for Outside Directors.
Whether or not you plan to attend, it is important that your shares are
represented at the meeting. Accordingly, you are requested to promptly
vote, sign, date and mail the attached proxy in the envelope provided.
Thank you for your consideration and continued support.
Very truly yours,
Charles A. Lenzie
Chairman of the Board and
Chief Executive Officer
- ----------------------------------------------------------------------------
PROXY CARD
<PAGE>
- -------------------------------------------------------------------------------
(Proxy Card - front) DETACH HERE
Date:_________________________, 1996
___________________________________
(Signature)
___________________________________
(Signature)
(Joint owners must EACH
sign.Please sign EXACTLY as your
name(s) appear(s) on this card.
When signing as attorney, trustee,
executor, administrator, guardian
or corporate officer, please give
FULL title.)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE SIGNING SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" PROPOSAL 1 AND "YES" WITH RESPECT TO THE SHAREHOLDER RECOMMENDATION.
(TO BE VOTED ON REVERSE SIDE)
- -------------------------------------------------------------------------------
(Proxy Card - back)
NEVADA POWER COMPANY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
May 10, 1996
The signing shareholder hereby appoints Conrad L. Ryan, Arthur M. Smith
and Jelindo A. Tiberti, or any one of them, with full power of substitution,
the attorneys and proxies of the signing shareholder to vote all shares of
Common Stock of the Company which the signing shareholder is entitled to vote
at the annual meeting of Nevada Power Company to be held on May 10, 1996, at
2:00 p.m. and at any and all adjournments of such meeting.
(1) ELECTION OF DIRECTORS FOR all nominees listed WITHHOLD AUTHORITY___
to three-year terms below ___ (except as marked to vote for all
to the contrary below) nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual
nominee strike a line through the nominee's name in the list below.)
Mary Lee Coleman, Charles A. Lenzie, John F. O'Reilly
(2) SHAREHOLDER RECOMMENDATION: Should Nevada Power Company establish a
retirement plan for outside Directors ("RPOD") after only five years of
service?
YES___ NO___
______________________________________________________________________________
(3) IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
(TO BE SIGNED ON REVERSE SIDE)
<PAGE>
