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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission file number 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 89102
Las Vegas, Nevada (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (702) 367-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
-------------------------- ---------------------
Common Stock, $1 Par Value New York Stock Exchange
Pacific Stock Exchange
Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Cumulative Preferred Stock, $20 Par Value, 5.40% Series
(Title of class)
Cumulative Preferred Stock, $20 Par Value, 5.20% Series
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K. X
---
49,226,593 shares of Common Stock were outstanding as of March 14, 1997.
The aggregate market value of Common Stock, which is the only voting
stock, held by non-affiliates as of March 14, 1997, was $990,685,184.
(Computed by reference to the closing price on March 14, 1997, as reported by
the Wall Street Journal as New York Stock Exchange Composite Transactions.)
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Shareholders for the
year ended December 31, 1996 are incorporated by reference into Parts II and
IV hereof.
(2) Portions of the Registrant's definitive Proxy Statement dated March
13, 1997 for the Company's annual meeting of shareholders on May 9, 1997, are
incorporated by reference into Part III hereof.
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TABLE OF CONTENTS
Page
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PART I
Item 1. Business ...................................... 1
Item 2. Properties .................................... 7
Item 3. Legal Proceedings ............................. 8
Item 4. Submission of Matters to a Vote of Security
Holders........................................ 8
Supplemental Item.
Executive Officers of Registrant .............. 8
PART II
Item 5. Market for the Registrant's Common Stock and
Related Security Holder Matters ............... 9
Item 6. Selected Financial Data ....................... 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation... 9
Item 8. Financial Statements and Supplementary Data ... 9
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ........ 10
PART III
Item 10. Directors and Executive Officers of the
Registrant .................................... 10
Item 11. Executive Compensation ........................ 10
Item 12. Security Ownership of Certain Beneficial Owners
and Management ................................ 10
Item 13. Certain Relationships and Related Transactions. 10
PART IV
Item 14. Exhibits, Financial Statement Schedule, and
Reports on Form 8-K ........................... 11
SIGNATURES .................................................. 23
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PART I
ITEM 1. BUSINESS
THE COMPANY
Nevada Power Company (Company), incorporated in 1929 under the laws of
Nevada, is an operating public utility engaged in the electric utility
business in the City of Las Vegas and vicinity in southern Nevada. Most of
the Company's operations are conducted in Clark County, Nevada (with an
estimated service area population of 1,211,000 at December 31, 1996) where
the Company furnishes electric service in the communities of Las Vegas,
North Las Vegas, Henderson, Searchlight, Laughlin and adjoining areas and to
Nellis Air Force Base (a permanent military installation northeast of Las
Vegas and the USAF Tactical Fighter Weapons Center). Electric service is
also supplied to the Department of Energy at Mercury and Jackass Flats in
Nye County, where the Nevada Test Site is located. Nevada Power will supply
40 percent of the Nevada Test Site's future electrical power according to a
settlement agreement still to be approved by the Public Service Commission
of Nevada (PSC.) See the "Competition" section in this Form 10-K.
SOURCES OF ELECTRIC ENERGY SUPPLY
The electric energy obtained from the Company's own generating
facilities will be produced at the following plants:
Number Net Capacity
Plant of Units (Megawatts)
----- -------- ------------
Coal Fuel:
Reid Gardner (Steam).............. 3 330
Reid Gardner Unit No. 4 (Steam)... 1 275(1)
Mohave (Steam).................... 2 196(2)
Navajo (Steam).................... 3 255(3)
Natural Gas and Oil Fuel:
Clark (Steam)..................... 3 175
Clark (Gas Turbine)............... 1 50
Clark (Combined Cycle)............ 2 462
Sunrise (Steam)................... 1 80
Sunrise (Gas Turbine)............. 1 69
Harry Allen (Gas Turbine)......... 1 72
-----
1,964
=====
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(1) This represents 25 megawatts of base load capacity, 235 megawatts of
peaking capacity and 15 megawatts (MW) upgrade capacity accomplished in
1990. Reid Gardner Unit No. 4, placed in service July 25, 1983, is a
coal-fired unit which is owned 32.2% by the Company and 67.8% by the
Department of Water Resources of the State of California. The Company
is entitled to use 100% of the unit's capacity for 1,500 hours each
year but the Company has agreed to reduce its allocation of such
peaking capacity by 20 MW from 1993 through 1997. The Company is
entitled to 9.6% of the first 260 megawatts of capacity and associated
energy and is entitled to all of the 1990 15 megawatt upgrade. The
Company had options for the use of increasing amounts of energy from
the unit beginning in 1998 so that the Company would have been entitled
to use all of the unit's output 15 years from that date. However, the
1998 through 2001 options for 10.17 MW per year were not exercised by
the Company and have expired.
(2) This represents the Company's 14% undivided interest in the Mohave
Generating Station as tenant in common without right of partition with
three other non-affiliated utilities, less operating restrictions.
(3) This represents the Company's 11.3% undivided interest in the Navajo
Generating Station as tenant in common without right of partition with
five other non-affiliated utilities.
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The Company purchases Hoover Dam power pursuant to a contract with the
State of Nevada which became effective June 1, 1987 and will continue
through September 30, 2017. The Company's allocation of capacity is 235 MW.
The peak electric demand experienced by the Company was 3,332 megawatts
on July 23, 1996. This demand plus a reserve margin was served by a
combination of Company owned generation, and firm and short-term power
purchases.
For 1997, the Company has contracts to purchase power from an
independent power producer (IPP) and four qualifying facilities (QF) (also
known as cogenerators) as follows:
Contract Term Net Capacity
---------------------
From To (Megawatts)
-------- -------- -------------
Independent Power Producer:
---------------------------
Nevada Sun-Peak Limited
Partnership ............. 06/08/91 05/31/16 210
Qualifying Facilities:
----------------------
Saguaro Power Company .... 10/17/91 04/30/22 90
Nevada Cogeneration
Associates #1 ........... 06/18/92 04/30/23 85
Nevada Cogeneration
Associates #2 ........... 02/01/93 04/30/23 85
Las Vegas Cogeneration
Limited Partnership ..... 05/10/94 05/31/24 45
----
515
====
The Company has total generating capacity of 2,714 megawatts, including
235 megawatts of Hoover Dam power, 210 megawatts of IPP power and 305
megawatts of QF power. This along with agreements with other suppliers to
purchase 775 megawatts of firm capacity and associated energy, for the
summer of 1997, will not be sufficient to meet the 1997 anticipated peak
load demand and reserve margin needs. Accordingly, the Company is utilizing
a competitive bidding process to obtain resources from other suppliers for
additional firm capacity and associated energy to meet the projected peak
needs for 1997.
FUEL SUPPLIES
The fuels used to provide energy for the Company's generating
facilities are coal, natural gas and oil. Its other sources of electricity
are hydroelectric (Hoover Dam) and purchased power.
The Company's primary fuel source for generation is coal. The
following table shows the actual sources of fuel for generation for 1996 and
anticipated sources of fuel for generation in 1997 and 1998.
1996 1997 1998
---- ---- ----
Coal........................ 76% 73% 70%
Natural Gas................. 24 27 30
--- --- ---
100% 100% 100%
=== === ===
The Company's average delivered cost per ton of coal burned was as
follows: 1994 - $32.96; 1995 - $30.37; 1996 - $29.02.
Coal for both the Mohave and Navajo Stations is obtained from surface
mining operations conducted by Peabody Coal Company (Peabody) on portions of
the Black Mesa in Arizona within the Navajo and Hopi Indian reservations.
The supply contracts with Peabody extend to December 31, 2005 for Mohave and
to June 1, 2011 for Navajo, each contract having an option to extend for an
additional 15 years.
Partial requirements for coal at the Reid Gardner Generating Station
are presently under contract through the year 2007. Although the Company
can not predict how the coal market may fluctuate in the future, the Company
anticipates no major
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difficulties in purchasing the remainder of its coal requirements based upon
current coal market conditions in the Western United States. All coal for
Reid Gardner presently comes from underground mines in Utah and Colorado.
The Company's natural gas supply is subject to curtailment due to
limited pipeline capacity, until May 1997, when a pipeline expansion project
with Southwest Gas Corporation is completed. All the Company's plants using
natural gas also have the capability of burning oil on a sustained basis.
CONSTRUCTION AND FINANCING PROGRAMS
The Company carries on a continuing program to extend and enlarge its
facilities to meet current and future loads on its system. Gross plant
additions and retirements for the five years ended December 31, 1996
amounted to $913,617,000 and $64,607,000, respectively.
Excluding Allowance for Funds Used During Construction, the Company's
actual construction expenditures for 1996 were $180 million, and currently
estimated construction expenditures for 1997 and 1998 are $242 million and
$275 million, respectively.
The Company's construction program and estimated expenditures are
subject to continuing review and are revised from time to time due to
various factors, including the rate of load growth, escalation of
construction costs, availability of fuel types, changes in environmental
regulations, adequacy of rate relief and the Company's ability to raise
necessary capital.
To meet capital expenditure requirements through 1998, the Company
intends to utilize internally generated cash, the proceeds from industrial
development revenue bonds (IDBs), first mortgage bonds (FMBs), unsecured
borrowings, 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. The
Company issued 1,659,764 shares of its common stock in 1996 under the SPP.
At the end of 1996, common equity represented 47.5% of total capitalization.
On October 18, 1996, Coconino County, Arizona issued $20 million Series
1996 pollution control revenue bonds (PCRBs) (Nevada Power Company Project)
due 2036. Net proceeds from the sale of the PCRBs were used to finance the
construction of the Navajo Generating Station (Navajo) scrubber facilities
which qualify for tax-exempt financing.
On October 12, 1995, Clark County, Nevada issued $76.75 million in
floating rate revenue bonds (Nevada Power Company Project) Series 1995A IDBs
due 2030. Net proceeds from the sale of the Series 1995A IDBs were placed on
deposit with a trustee and will be used to finance the construction of
certain facilities which qualify for tax-exempt financing. At December 31,
1996, $52.7 million remained on deposit with the trustee.
The Indenture under which the Company's first mortgage bonds are issued
provides that no additional bonds may be issued unless earnings as defined
equal at least two and one-half times the interest requirements on all bonds
to be outstanding after the new issue. Based on its earnings through
December 31, 1996 and assuming an 8 percent interest rate on new bonds, the
Company would be able to issue approximately $481 million of additional
first mortgage bonds. The Company's ability to issue additional debt is
also limited by the need to maintain a reasonable ratio of debt to equity.
The Company's ability to sell additional preferred stock is limited by
the necessity to meet required dividend coverages. At December 31, 1996,
the applicable dividend coverage test would permit the issuance of $374
million of additional preferred stock at a dividend rate of 8 percent.
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RESOURCE PLANNING
The Company's rate of customer growth, especially in recent years, has
been among the highest in the nation. The annual customer growth rate was
7.2 percent, 6.0 percent, and 6.0 percent in 1996, 1995 and 1994,
respectively.
The peak demand for electricity by the Company's customers increased
from 3,066 megawatts in 1995 to 3,332 megawatts in 1996. The Company's 1996
energy sales reached 13,697,059 megawatthours, an increase of 13.1 percent
over 1995.
Pursuant to Nevada law, every three years the Company files with the
PSC a forecast of electricity demands for the next 20 years and the
Company's plans to meet those demands. The Company is required to file its
next resource plan by July 1, 1997. 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
upon 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.
REGULATION AND RATES
The Company is subject to regulation by the PSC which has regulatory
powers with respect to rates, facilities, services, reports, issuance of
securities and other matters.
Following is a summary of the rate increases and decreases that have
been granted the Company during the past three years.
Amount in
Effective Millions
Date Nature of Increase (Decrease) of Dollars
------------- ----------------------------- ----------
February 1, 1994 Energy rate increase $ 23.6
October 1, 1994 General rate decrease (6.3)
October 1, 1995 Energy rate decrease (20.1)
December 1, 1995 Energy and resource plan
net rate decrease (17.6)
All amounts are on an annual basis.
On July 15, 1996, the Company filed a request with the PSC for
authorization to decrease energy rates by approximately $41 million under
the state's deferred energy accounting procedures. Prior to hearing, the
parties agreed to increase the proposed rate decrease to approximately $45
million. On December 12, 1996, an agreement was
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reached with parties as to the rate design allocation. Pursuant to the
agreement public entities received a rate reduction of $11 million and other
large customers and medium-size commercial customers received $27 million.
Residential and small commercial customers received a reduction of $7
million. On January 23, 1997, the PSC approved the stipulation which took
effect on February 1, 1997.
On January 23, 1997, the PSC also rendered its decision in the last
phase of the 1995 deferred energy case and ordered a disallowance of $5.5
million, net of tax, which was recorded in the fourth quarter of 1996
regarding various coal contracting matters. The PSC Staff and Consumer
Advocate Office initially filed testimony seeking disallowance from recovery
and credit to the Company's customers in excess of $25 million.
As permitted by state statute, the Company defers differences between
the current cost of fuel plus net purchased power and base energy costs as
defined. Under regulations adopted by the PSC, the balance in the deferred
energy account at the end of twelve months should be cleared over a
subsequent period. Recovery of increased costs is permitted to the extent
that the Company has not realized its authorized overall rate of return. If
the Company has exceeded the authorized rate of return, the portion of
deferred energy costs represented in such excess is transferred to the next
deferred energy recovery period. The energy costs deferred are included as
a current item in determining taxable income for federal income tax
purposes. However, for financial statement purposes, the federal income tax
effect is deferred and amortized to income as the deferred energy account is
cleared. PSC regulations allow the fuel base portion of the Company's
general rates to be changed at the time of a hearing to clear the balance in
the deferred energy account. This permits the recovery of fuel expenses on
a deferred basis, but, recovery will have no effect on the Company's
earnings. Effective February 1, 1997, capacity costs associated with
purchased power were included in general rates rather than the deferred
energy cost accounting mechanism.
Starting in February 1997, the Company will be allowed to recover the
costs of developing its 20-year resource plan in general rates. In the
past, the recovery of these costs was administered under the state's
deferred accounting procedures. Also, by an order of the PSC in June 1988,
the Company is allowed to capitalize certain costs associated with
Commission approved conservation programs.
ENVIRONMENTAL MATTERS
The Company is subject to regulation by federal, state and local
authorities with regard to air and water quality control and other
environmental matters.
Environmental expenditures made by the Company are currently being
recovered through customer rates. Management believes environmental
expenditures will increase over time and the increased costs will also be
recovered as necessary utility expenses. The following is a discussion of
pending environmental matters:
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 (Commission) to work toward the goal of visibility
improvement in the Grand Canyon and other national parks of the Colorado
Plateau. The Commission completed its report and recommendations to the
Environmental Protection Agency (EPA) in June 1996. The Commission's study
anticipates emissions from stationary sources, including power plants, to be
reduced over the next 40 years as a result of other provisions of the
Amendments. Additional power plant controls could become necessary if
expected emission reductions do not occur. The EPA will develop regulations
to implement the Commission's recommendations. The new regulations are
expected to be promulgated in 1997.
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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 1997. The cost of any improvements that may be required cannot be
determined at this time.
In 1991, the EPA published an order requiring Navajo to install
scrubbers to remove 90 percent of sulfur dioxide emissions beginning in
1997. As an 11.3 percent owner of Navajo, the Company will be required to
fund an estimated $53.1 million for installation of the scrubbers. The
first of three scrubber units is expected to be on line in November 1997.
At that point, the project will be approximately 50 percent complete. The
first of the other two units is expected to be on line in 1998 and the last
unit in 1999. The Company has spent $30.4 million on the scrubbers'
construction through 1996. In 1992, the Company received resource planning
approval from the PSC for its share of the cost of the scrubbers.
COMPETITION
On September 21, 1992, Valley Electric Association, Inc. (Valley
Electric) filed a complaint with the PSC alleging that the Company was
unlawfully providing service to the Nevada Test Site and requesting damages
and a cease and desist order. In an Opinion and Order issued on May 13,
1994, the PSC found that based on a 1963 territorial agreement (Agreement)
between Valley Electric and the Company, each of these two electric
suppliers have a non-exclusive right to provide service to the Test Site's
discretion. On an appeal brought by Valley Electric, the Eighth Judicial
District Court for Clark County Nevada (District Court) vacated the PSC's
Opinion and Order and ordered the PSC to issue an order requiring the
Company to cease and desist from any activity that violates the Agreement.
The District Court's Order is the subject of a pending appeal brought by the
United States Department of Energy (DOE) on behalf of the Test Site.
In July 1996, Valley Electric, the Company, the PSC Regulatory
Operations Staff and Lincoln County Power District No. 1 (Lincoln Power)(a
governmental electric supplier that holds itself out as providing electric
service in Lincoln County, Nevada, where a portion of the Test Site is
located), entered into a Stipulation, Settlement Agreement and Release
(Settlement Agreement.) The term of the Settlement Agreement is three
years, commencing with the date it is approved by the PSC. Under the
Settlement Agreement, the Test Site's electrical usage would be split among
Valley Electric (40 percent), the Company (40 percent) and Lincoln Power (20
percent), and each of the three electric suppliers unconditionally released
and forever discharged each other from any and all claims for damages based
directly or indirectly on the geographic scope of the service provided to
the Test Site before and during the term of the Settlement Agreement. On
July 30, 1996, the parties to the Settlement Agreement jointly requested PSC
approval of the Settlement Agreement, the DOE has opposed approval, and the
approval proceedings are currently pending before the PSC. Regardless of the
outcome of this matter, the Company believes there will not be a material
impact on its operations, or upon its competitive position generally.
The electric utility industry is in the midst of change. With the
Federal Energy Regulatory Commission's (FERC) recent rulings and several
states considering and passing legislation to increase competition by
allowing customers a choice in their electric supplier ("retail wheeling"),
Company management believes the electric utility industry of the future will
be very different from that of the past.
In April 1996, the FERC issued a ruling that opens wholesale power
sales to competition by requiring public utilities owning, controlling, or
operating transmission lines to file non-discriminatory open access tariffs.
In another ruling, the FERC requires public utilities to implement standards
of conduct and an Open Access Same-time Information System (OASIS) so that
utilities obtain information about their transmission through the OASIS the
same way their competitors do. The Company has made organizational changes
which were necessary to ensure compliance with the recent rulings.
The FERC also found that if costs are stranded by retail wheeling, the
states should make decisions regarding recovery with the FERC only becoming
involved if state regulators lack authority under state law.
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In September 1995, the PSC opened a docket to examine electric industry
restructuring issues. The docket was intended to supplement the
subcommittee established by the Nevada Legislature during the 1995
legislative session to study the effects of competition in the generation,
sale and transmission of electric energy. In January 1997, the legislative
subcommittee approved a bill draft request recommending the legislature
thoroughly study the industry restructuring issues in the 1997 legislative
session to determine the direction that the state of Nevada should take with
respect to retail wheeling. The subcommittee's proposed bill would
establish a legislative oversight committee to ensure that the regulatory
agency implementing retail wheeling complies with the legislative intent.
The PSC issued a report in June of 1996 and concluded if the legislature
chooses to authorize retail wheeling, it can be done in a manner which
benefits Nevada. Implementation would be complicated but achievable. In
February 1997, the PSC requested legislation that would give the PSC the
authority to prepare regulations that would allow retail wheeling in Nevada.
The retail wheeling debate and discussion will continue in the 1997
session of the Nevada Legislature and the PSC's investigatory docket. The
United States Congress will also consider proposals to restructure the
electric utility industry in order to introduce retail wheeling. The
Company will continue to actively participate in these debates and
discussions.
EMPLOYEES
The Company had 1,792 employees at December 31, 1996.
ITEM 2. PROPERTIES
The Company's generating facilities are described under "Item 1.
Business, Sources of Electric Energy Supply".
The Company shares ownership in a 59-mile, 500 kilovolt line and two
15-mile, 230 kilovolt lines that transmit power from the Mohave Generating
Station near Davis Dam on the Colorado River via Eldorado Substation to Mead
Substation located near Boulder City, Nevada. The Company has 32 miles of
230 kilovolt line from Mead Substation to Las Vegas. This line, together
with two Company-owned 230 kilovolt lines presently connected to the Bureau
of Reclamation lines between Mead Substation and Henderson, Nevada, transmit
the Mohave Generating Station power to the Las Vegas area. A 25-mile, 230
kilovolt line between the Mead Substation and the Company's Winterwood
Substation was energized in 1988. This line brings the additional Hoover
energy to the Las Vegas Area and increases the Company's interconnected
transmission capabilities. The Company shares ownership in 76 miles of 500
kilovolt transmission line from the Navajo Generating Station to the
Moenkopi Switchyard in Coconino County, Arizona (the Southern Transmission
System) and 274 miles of 500 kilovolt transmission line from the Navajo
Generating Station to the McCullough Substation in Clark County, Nevada (the
Western Transmission System). Power is transmitted from the McCullough
Substation to the Las Vegas area via three 230 kilovolt lines of 23 miles,
25 miles and 32 miles in length, respectively. The 25-mile line was
energized in May 1992. Two 230 kilovolt lines transmit power from the Reid
Gardner Station located near Glendale, Nevada. One is a 39 mile line to the
Pecos Substation and the other a 25 mile line to the Harry Allen Substation.
In 1994, 20 miles of a 230 kilovolt line from the Harry Allen Substation to
the Pecos Substation was energized. One 39-mile, 230 kilovolt line
transmits power from the Reid Gardner Station located near Glendale, Nevada
to the Pecos Substation near North Las Vegas. A 7 mile, 230 kilovolt line
between Westside and Decatur Substations, both located in Las Vegas, was
energized in 1991. In addition to the above, the Company has 294 miles of
138 kilovolt and 488 miles of 69 kilovolt transmission lines in service.
In 1990 the Company added a new transmission interconnection consisting
of a 345 kilovolt line from Harry Allen Substation in Southern Nevada to the
Nevada-Utah border where it connects with a PacifiCorp line to Red Butte
Substation in Southern Utah near the City of St. George and a 230 kilovolt
line from Harry Allen Substation to Westside Substation which is located in
Las Vegas. The Company owns the 50-mile, 230 kilovolt line and the 69 miles
of the 345 kilovolt line from Harry Allen
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Substation to the Nevada-Utah border; PacifiCorp owns the portion of the
345 kilovolt line from the Nevada-Utah border to Red Butte Substation.
At December 31, 1996, the Company owned 106 transmission and
distribution substations with a total installed transformer capacity of
10,908,783 kilovolt-amperes. In addition it co-owns with others the above
mentioned Eldorado Substation with installed transformer capacity of
1,000,000 kilovolt-amperes, the McCullough Substation with installed
transformer capacity of 1,250,000 kilovolt-amperes, the Reid Gardner Unit
No. 4 Substation with installed capacity of 318,000 kilovolt-amperes and
Mead Substation with 250,000 kilovolt-amperes.
At Harry Allen Substation, the Company has a 336,000 kilovolt-ampere
transformer and two 336,000 kilovolt-ampere 345 kilovolt phase shifting
transformers which are used for necessary voltage transformations and to
control flows on the interconnection.
As of December 31, 1996, there were approximately 3,142 miles of pole
line together with approximately 8,058 cable miles of underground in the
Company's distribution system with a total installed distribution
transformer capacity of 6,472,112 kilovolt-amperes.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in litigation arising in the normal course of
business. While the results of such litigation cannot be predicted with
certainty, management, based upon advice of counsel, believes that the final
outcome will not have a material adverse effect on the Company's financial
position, results of operations and net cash flow.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report, through the solicitation
of proxies or otherwise.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF REGISTRANT
The Company's executive officers are as follows:
Age as of
Name December 31, 1996 Position
---- ----------------- --------
Charles A. Lenzie 59 Chairman of the Board, President and Chief
Executive Officer
David G. Barneby 51 Vice President, Power Delivery
Cynthia K. Gilliam 48 Vice President, Retail Customer Operations
Richard L. Hinckley 41 Vice President, Secretary and General Counsel
Steven W. Rigazio 42 Vice President, Finance and Planning,
Treasurer, Chief Financial Officer
Gloria T. Banks Weddle 47 Vice President, Corporate Services
Sally L. Galati 35 Vice President, Distribution
Each of the executive officers has been actively engaged in the
business of the Company for more than five years.
Charles A. Lenzie was elected Chairman of the Board and Chief Executive
Officer on May 1, 1989. Prior to that time he was President of the Company.
Due to the resignation of James C. Holcombe as President and Chief Operating
Officer on August 1, 1995, Mr. Lenzie was appointed President of the Company
effective August 10, 1995.
David G. Barneby was elected Vice President, Power Delivery effective
October 14, 1993. He joined the Company in 1965 as a Student Engineer and
was made a Junior Engineer in 1967. He was promoted to Superintendent of
the Reid Gardner Generating Station in 1976; Project Manager - Reid Gardner
Unit 4 in 1979 and in 1985 appointed Manager - Generation Engineering and
Construction. He was elected Vice President -
8
<PAGE>
<PAGE>
Generation in 1989. His title was changed to Vice President - Power Supply
later that year.
Cynthia K. Gilliam was elected Vice President, Retail Customer
Operations effective October 14, 1993. She joined the Company in 1974 as a
Rate Analyst and was promoted to Rates Administrator in 1979 and to Manager
of Financial Planning in 1983. In 1987, she was appointed Manager of Human
Resource Planning. She was elected Vice President - Personnel in 1988 and
her title was changed to Vice President - Human Resources in 1989. In 1992,
she was elected Vice President - Customer Service.
Richard L. Hinckley was elected Vice President, Secretary and General
Counsel on May 15, 1991. He joined the Company as Staff Counsel in 1985 and
was promoted to Assistant Secretary and Chief Counsel in 1989. Prior to
joining the Company, he served as Staff Attorney with the PSC and as
Assistant Attorney General in Utah.
Steven W. Rigazio was elected Vice President, Finance and Planning,
Treasurer, Chief Financial Officer effective October 14, 1993. He joined
the Company in 1984 as a Rates Administrator and was promoted to Supervisor
of Rates and Regulations in 1985, Manager of Rates and Regulatory Affairs in
1986, Director of System Planning in 1990, Vice President - Planning in 1991
and Vice President and Treasurer, Chief Financial Officer in 1992.
Gloria T. Banks Weddle was named Vice President, Corporate Services
effective January 1, 1996. She first joined the Company in 1973, was
promoted to Manager of Compensation and Benefits in 1988 and Director of
Human Resources in 1991. She was elected Vice President - Human Resources
in 1992. On October 14, 1993, she was elected Vice President, Human
Resources and Corporate Services. Her title was changed to Vice President -
Corporate Services in 1996.
Sally L. Galati was named Vice President, Distribution on March 13,
1997. She first joined the Company in 1984 as a Distribution and
Transmission Engineer and was promoted to Supervisor, Major Projects in
1992, Acting Manager, Builder Services in 1993, Director, Distribution
System Services in 1994 and Division Director, Distribution Operations &
Construction in 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
Information with respect to the principal market for the Company's
common stock, securities exchange, shareholders of record, quarterly high
and low sales prices and quarterly dividend payments for 1996 and 1995 are
hereby incorporated by reference from page 34 of the Company's Annual Report
to Shareholders for the year ended December 31, 1996, which is filed
herewith as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 6 is hereby incorporated by reference
from page 36 of the Company's Annual Report to Shareholders for the year
ended December 31, 1996, which is filed herewith as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The information required by Item 7 is hereby incorporated by reference
from pages 16 to 19 of the Company's Annual Report to Shareholders for the
year ended December 31, 1996, which are filed herewith as Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements for the years ended December 31,
1996, 1995 and 1994 together with the auditors' report thereon required by
Item 8 are incorporated by reference from the following pages of the
Company's Annual Report to
9
<PAGE>
<PAGE>
Shareholders for the year ended December 31, 1996, which are filed herewith
as Exhibit 13.
Annual
Report
Page
------
Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994...................... 20
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994...................... 21
Balance Sheets - December 31, 1996 and 1995............ 22-23
Schedules of Capitalization -
December 31, 1996 and 1995............................ 24
Schedules of Long-Term Debt -
December 31, 1996 and 1995............................ 25
Statements of Retained Earnings for the Years
Ended December 31, 1996, 1995 and 1994................ 26
Notes to Financial Statements.......................... 27-34
Independent Auditors' Report........................... 35
Report of Management................................... 35
See Note 11 of Notes to Financial Statements in the Company's Annual
Report to Shareholders for the unaudited selected quarterly financial data
required to be presented in this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no Report on Form 8-K filed within the twenty-four
months prior to the date of the most recent financial statements, December
31, 1996, reporting a change of accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by Item 10 with respect to the Company's executive
officers is set forth in Part I, Item 4., under the preceding heading
"Supplemental Item. Executive Officers of Registrant." The other
information required by Item 10 is hereby incorporated by reference from the
Company's definitive Proxy Statement dated March 13, 1997 and heretofore
filed with the Securities and Exchange Commission (SEC.) (See the heading
therein "Election of Directors.")
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is hereby incorporated by reference
from the Company's definitive Proxy Statement dated March 13, 1997 and
heretofore filed with the SEC. (See the heading therein "Executive
Compensation.")
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is hereby incorporated by reference
from the Company's definitive Proxy Statement dated March 13, 1997 and
heretofore filed with the SEC. (See the heading therein "Security Ownership
of Management.")
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Management of the Company has no knowledge of any transaction,
relationship or indebtedness which is required to be disclosed by Item 13.
10
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
The Company's financial statements for the years ended December 31,
1996, 1995 and 1994 together with the auditors' report appearing on pages 20
to 35 of Nevada Power Company's 1996 Annual Report to Shareholders are
incorporated herein by reference and filed as Exhibit 13.
FINANCIAL STATEMENT SCHEDULE FOR THE
Years Ended December 31, 1996, 1995 and 1994 Page
- -------------------------------------------- ----
Independent Auditors' Consent and Report on Schedule.............. 21
Schedule VIII - Valuation and Qualifying Accounts................. 22
All other schedules are omitted because they are not applicable, not
required, or because the information is included in the financial statements
or notes thereto.
EXHIBITS
Filed Description
- -------- -----------
10.82 Financing Agreement between Coconino County, Arizona
Pollution Control Corporation and Nevada Power Company
dated October 1, 1996
13 Pages 16 to 36 of Nevada Power Company's Annual Report to
Shareholders for the Year Ended December 31, 1996
(incorporated by reference in Parts II and IV hereof)
23 Independent Auditors' Consent and Report on Schedule
27 Financial Data Schedule - December 31, 1996
11
<PAGE>
<PAGE>
In addition to those Exhibits shown above, the Company hereby
incorporates the following Exhibits pursuant to Exchange Act Rule 12B-32 and
Regulation #201.24 by reference to the filings set forth below:
EXHIBIT ORIGINALLY FILED
No. Description as Exhibit File No.
- ------- ----------- ---------------- --------
3.1 Restated Articles of Incorporation 3.8 to Form 10-K 1-4698
filed June 10, 1988 Year 1988
3.2 Amendment to Restated Articles of 4.7 to Form S-8 33-32372
Incorporation filed May 23, 1989
3.3 Amendment to Restated Articles of 4.8 to Form S-3 33-55698
Incorporation filed June 8, 1992
3.4 Restated Bylaws, as amended 3.4 to Form 10-K 1-4698
March 9, 1995 Year 1995
4.1 Certificate of Designation of Cumulative
Preferred Stock as follows:
5.40% Series 2.1 to Form S-1 2-16968
5.20% Series 2.1 to Form S-1 2-20618
4.70% Series 3.2 to Form 8-K 1-4698
July 1965
8% Series 2.1 to Form S-7 2-44513
8.70% Series 2.1 to Form S-7 2-49622
11.50% Series 2.1 to Form S-7 2-52238
9.75% Series 2.1 to Form S-7 2-56788
Auction Series A 4.6 to Form S-3 33-15554
Auction Series A as amended
November 14, 1991 4.9 to Form S-3 33-44460
Auction Series A as amended
December 12, 1991 4.1 to Form 10-K 1-4698
Year 1992
9.90% Series 4.1 to Form 10-K 1-4698
Year 1992
4.2 Indenture of Mortgage and Deed of 4.2 to Form S-1 2-10932
Trust Providing for First Mortgage
Bonds, dated October 1, 1953 and
Twenty-Six Supplemental Indentures
as follows:
First Supplemental Indenture, 4.2 to Form S-1 2-11440
dated August 1, 1954
Second Supplemental Indenture, 4.9 to Form S-1 2-12566
dated September 1, 1956
Third Supplemental Indenture, 4.13 to Form S-1 2-14949
dated May 1, 1959
Fourth Supplemental Indenture, 4.5 to Form S-1 2-16968
dated October 1, 1960
Fifth Supplemental Indenture, 4.6 to Form S-16 2-74929
dated December 1, 1961
Sixth Supplemental Indenture, 4.6A to Form S-1 2-21689
dated October 1, 1963
Seventh Supplemental Indenture, 4.6B to Form S-1 2-22560
dated August 1, 1964
Eighth Supplemental Indenture, 4.6C to Form S-9 2-28348
dated April 1, 1968
Ninth Supplemental Indenture, 4.6D to Form S-1 2-34588
dated October 1, 1969
Tenth Supplemental Indenture, 4.6E to Form S-7 2-38314
dated October 1, 1970
Eleventh Supplemental Indenture, 2.12 to Form S-7 2-45728
dated November 1, 1972
12
<PAGE>
<PAGE>
EXHIBIT ORIGINALLY FILED
No. Description as Exhibit File No.
- ------- ----------- ----------------- --------
Twelfth Supplemental Indenture, 2.13 to Form S-7 2-52350
dated December 1, 1974
Thirteenth Supplemental 4.14 to Form S-16 2-74929
Indenture, dated October 1,
1976
Fourteenth Supplemental 4.15 to Form S-16 2-74929
Indenture, dated May 1, 1977
Fifteenth Supplemental 4.16 to Form S-16 2-74929
Indenture dated September 1,
1978
Sixteenth Supplemental Indenture, 4.17 to Form S-16 2-74929
dated December 1, 1981
Seventeenth Supplemental 4.2 to Form 10-K 1-4698
Indenture, dated August 1, 1982 Year 1982
Eighteenth Supplemental Indenture, 4.6 to Form S-3 33-9537
dated November 1, 1986
Nineteenth Supplemental Indenture, 4.2 to Form 10-K 1-4698
dated October 1, 1989 Year 1989
Twentieth Supplemental Indenture, 4.21 to Form S-3 33-53034
dated May 1, 1992
Twenty-First Supplemental 4.22 to Form S-3 33-53034
Indenture, dated June 1, 1992
Twenty-Second Supplemental 4.23 to Form S-3 33-53034
Indenture, dated June 1, 1992
Twenty-Third Supplemental 4.23 to Form S-3 33-53034
Indenture, dated October 1, 1992
Twenty-Fourth Supplemental 4.23 to Form S-3 33-53034
Indenture, dated October 1, 1992
Twenty-Fifth Supplemental 4.23 to Form S-3 33-53034
Indenture, dated January 1, 1993
Twenty-Sixth Supplemental 4.2 to Form 10-K 1-4698
Indenture, dated May 1, 1995 Year 1995
4.3 Instrument of Further Assurance 4.8 to Form S-1 2-12566
dated April 1, 1956 to Indenture
of Mortgage and Deed of Trust
dated October 1, 1953
4.4 Rights Agreement dated October 15, 4.1 to Form 8-A 1-4698
1990 between Manufacturers Hanover Year 1990
Trust Company and Nevada Power
Company
10.1 Contract for Sale of Electrical 13.9A to Form S-1 2-10932
Energy between State of Nevada
and the Company, dated October
10, 1941
10.2 Amendment dated June 30, 1953 to 13.9A to Form S-1 2-10932
Exhibit 10.1
10.3 Contract for Sale of Electrical 13.10 to Form S-1 2-10932
Energy between State of Nevada
and the Company, dated June 1,
1951
10.4 Agreement dated November 10, 1948 13.18 to Form S-1 2-12697
between the Company and Lincoln
County Power District No. 1 and
Overton Power District No. 5
13
<PAGE>
<PAGE>
EXHIBIT ORIGINALLY FILED
No. Description as Exhibit File No.
- ------- ----------- ----------------- --------
10.5 Agreement dated October 21, 1949 13.19 to Form S-9 2-12697
between the Company and Lincoln
County Power District No. 1 and
Overton Power District No. 5
10.6 Mohave Project Plant Site 13.27 to Form S-9 2-28348
Conveyance and Co-tenancy
Agreement dated May 29, 1967
between the Company and Salt
River Project Agricultural
Improvement and Power District
Southern California Edison
Company
10.7 Eldorado System Conveyance and 13.30 to Form S-9 2-28348
Co-tenancy Agreement dated
December 20, 1967 between the
Company and Salt River Project
Agricultural Improvement and
Power District and Southern
California Edison Company
10.8 Mohave Operating Agreement dated 13.26F to Form S-1 2-38314
July 6, 1970 between the Company,
Salt River Project Agricultural
Improvement and Power District,
Southern California Edison
Company and Department of Water
and Power of the City of Los
Angeles
10.9 Navajo Project Participation 13.27A to Form S-1 2-38314
Agreement dated September 30,
1969 between the Company, the
United States of America,
Arizona Public Service Company,
Department of Water and Power of
the City of Los Angeles, Salt
River Project Agricultural
Improvement and Power District
and Tucson Gas & Electric
Company
10.10 Navajo Project Coal Supply 13.27B to Form S-1 2-38314
Agreement dated June 1, 1970
between the Company, the United
States of America, Arizona
Public Service Company,
Department of Water and Power
of the City of Los Angeles,
Salt River Project Agricultural
District, Tucson Gas & Electric
Company and the Peabody Coal
Company
10.11 Contract dated January 1, 1968 13.32 to Form S-1 2-34588
between the Company and United
States Bureau of Reclamation for
interconnections at Mead Station
10.12 Note Agreement dated December 11, 5.35 to Form S-7 2-49622
1973 relating to $25,000,000
8-1/2% Promissory Notes due 1998
14
<PAGE>
<PAGE>
EXHIBIT ORIGINALLY FILED
No. Description as Exhibit File No.
- ------- ----------- ----------------- --------
10.13 Reclaimed Wastewater Purchase 5.36 to Form S-7 2-52238
Agreement dated June 21, 1974
among City of Las Vegas, Nevada,
Clark County Sanitation District
No. 1, County of Clark, Nevada
and Nevada Power Company
10.14 Equipment Lease dated as of 5.37 to Form 8-K 1-4698
March 1, 1974 between Nevada Power April 1974
Company, Lessor, and Clark County,
Nevada, Lessee
10.15 Sublease Agreement dated as of 5.38 to Form 8-K 1-4698
March 1, 1974 between Clark April 1974
County, Nevada, Sublessor,
and Nevada Power Company,
Sublessee
10.16 Guaranty Agreement dated as of 5.39 to Form 8-K 1-4698
March 1, 1974 between Nevada April 1974
Power Company and Commerce
Union Bank as Trustee
10.17 Navajo Project Co-tenancy 5.31 to Form 8-K 1-4698
Agreement dated March 23, 1976 April 1974
between the Company, Arizona
Public Service Company,
Department of Water and
Power of the City of Los Angeles,
Salt River Project Agricultural
Improvement and Power District,
Tucson Gas & Electric Company
and the United States of America
10.18 Amended Mohave Project Coal Supply 5.35 to Form S-7 2-56356
Agreement dated May 26, 1976
between the Company and Southern
California Edison Company,
Department of Water and Power of
the City of Los Angeles, Salt
River Project Agricultural
Improvement and Power District
and the Peabody Coal Company
10.19 Amended Mohave Project Coal Slurry 5.36 to Form S-7 2-56356
Pipeline Agreement dated May 26,
1976 between Peabody Coal Company
and Black Mesa Pipeline, Inc.
(Exhibit B to Exhibit 10.18)
10.20 Coal Supply Agreement dated October 5.38 to Form S-7 2-56356
15, 1975 between the Company and
United States Fuel Company
10.21 Amendment dated November 19, 1976 5.30 to Form S-7 2-62105
to Exhibit 10.20
10.22 Participation Agreement Reid 5.34 to Form S-7 2-65097
Gardner Unit No. 4 dated July
11, 1979 between the Company
and California Department of
Water Resources
15
<PAGE>
<PAGE>
EXHIBIT ORIGINALLY FILED
No. Description as Exhibit File No.
- ------- ----------- ---------------- --------
10.23 Coal Supply Agreement dated 5.37 to Form S-7 2-62509
March 1, 1980 between the
Company and Beaver Creek
Coal Company
10.24 Coal Supply Agreement dated 5.38 to Form S-7 2-62509
March 1, 1980 between the
Company and Trail Mountain
Coal Company
10.25 Coal Supply Agreement dated 10.26 to Form 10-K 1-4698
December 8, 1980 between the Year 1981
Company and Plateau Mining
Company
10.26 Coal Supply Agreement dated 10.26 to Form 10-K 1-4698
August 31, 1982 between Year 1982
the Company and CO-OP
Mining Company
10.27 Coal Supply Agreement dated 10.27 to Form 10-K 1-4698
September 8, 1982 between the Year 1982
Company and Getty Mining
Company
10.28 Coal Supply Agreement dated 10.28 to Form 10-K 1-4698
September 8, 1982 between the Year 1982
Company and Tower Resources,
Inc.
10.29 Coal Supply Agreement dated 10.29 to Form 10-K 1-4698
September 22, 1982 between the Year 1982
Company and Beaver Creek Coal
Company
10.30 Memorandum of Understanding 10.30 to Form 10-K 1-4698
Concerning Interconnection Year 1983
between Utah Power & Light
Company and Nevada Power
Company dated February 2, 1984
10.31 Sublease Agreement between Powveg 10.31 to Form 10-K 1-4698
Leasing Corp., as Lessor and Year 1983
Nevada Power Company as Lessee,
dated January 11, 1984 for
lease of administrative
headquarters
10.32 Participation Agreement between 10.32 to Form 10-K 1-4698
Utah Power & Light Company and Year 1985
the Company dated December 19,
1985
10.33 Sale and Purchase Agreement dated 10.33 to Form 10-K 1-4698
as of December 23, 1985 by and Year 1985
between Nevada Power Company and
CP National Corporation
10.34 Restated Coal Sales Agreement as 10.34 to Form 10-K 1-4698
of July 1, 1985 by and between Year 1985
Nevada Power Company and Trail
Mountain Coal Company
10.35 Summary of Supplemental Executive 10.35 to Form 10-K 1-4698
Retirement Plan as approved Year 1985
November 14, 1985
16
<PAGE>
<PAGE>
EXHIBIT ORIGINALLY FILED
No. Description as Exhibit File No.
- ------- ----------- ---------------- --------
10.36 Financing Agreement dated as of 10.36 to Form 10-K 1-4698
February 1, 1983 between Clark Year 1985
County, Nevada and Nevada Power
Company
10.37 Financing Agreement between Clark 10.37 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1985
Company dated as of December 1,
1985
10.38 Reimbursement Agreement dated 10.38 to Form 10-K 1-4698
as of December 1, 1985 between Year 1986
The Fuji Bank, Limited and
Nevada Power Company
10.39 Contract for Sale of Electrical 10.39 to Form 10-K 1-4698
Energy between the State of Year 1987
Nevada and the Company, dated
July 8, 1987
10.40 Power Sales Agreement between 10.40 to Form 10-K 1-4698
Utah Power & Light Company and Year 1987
the Company, dated August 17,
1987
10.41 Transmission Facilities Agreement 10.41 to Form 10-K 1-4698
between Utah Power & Light Year 1987
Company and the Company, dated
August 17, 1987
10.42 Financing Agreement between Clark 10.42 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1988
Company dated as of November 1,
1988
10.43 Reimbursement Agreement dated 10.43 to Form 10-K 1-4698
as of November 1, 1988 between Year 1988
The Fuji Bank, Limited and
Nevada Power Company
10.44 Power Purchase Contract dated 10.45 to Form 10-K 1-4698
February 15, 1990 between Year 1989
Mission Energy Company and
Nevada Power Company
10.45 Contact for Long-Term Power 10.46 to Form 10-K 1-4698
Purchases from Qualifying Year 1989
Facilities dated May 1, 1989
between Oxford Energy of Nevada
and Nevada Power Company
10.46 Contract A for Long-Term Power 10.47 to Form 10-K 1-4698
Purchases from Qualifying Year 1989
Facilities dated May 2, 1989
between Bonneville Nevada
Corporation and Nevada Power
Company
10.47 Contract for Long-Term Power 10.48 to Form 10-K 1-4698
Purchases from Qualifying Year 1989
Facilities dated April 10, 1989
between Magna Energy Systems,
Eastern Sierra Energy Company
and Nevada Power Company
17
<PAGE>
<PAGE>
EXHIBIT ORIGINALLY FILED
No. Description as Exhibit File No.
- ------- ----------- ----------------- --------
10.48 Contract B for Long-Term Power 10.49 to Form 10-K 1-4698
Purchases from a Qualifying Year 1989
Facility dated October 27, 1989
between Bonneville Nevada
Corporation and Nevada Power
Company
10.49 Contract for Long-Term Power 10.50 to Form 10-K 1-4698
Purchases from Qualified Year 1989
Facilities dated February 12,
1990 between Las Vegas
Co-generation, Inc. and Nevada
Power Company
10.50 Agreement for Transmission 10.51 to Form 10-K 1-4698
Service dated March 29, 1989 Year 1989
between Overton Power District
No. 5 , Lincoln County Power
District No. 1 and Nevada Power
Company
10.51 Contract dated June 30, 1988 10.52 to Form 10-K 1-4698
between United States Department Year 1989
of Energy Western Area Power
Administration and Nevada Power
Company
10.52 Executive Performance Incentive 10.53 to Form 10-K 1-4698
Plan dated as of January 1, 1989 Year 1989
10.53 Severance Allowance Plan 10.54 to Form 10-K 1-4698
adopted September 14, 1989 Year 1989
10.54 Power Purchase Contract dated 10.55 to Form 10-K 1-4698
July 5, 1990 between Year 1990
Mission Energy Company and
Nevada Power Company
10.55 Contract B for Long-Term Power 10.56 to Form 10-K 1-4698
Purchases from a Qualifying Year 1990
Facility dated May 24, 1990
between Bonneville Nevada
Corporation and Nevada Power
Company
10.56 Amendment dated June 15, 1989 to 10.57 to Form 10-K 1-4698
Exhibit 10.45 Year 1990
10.57 Amendment dated August 23, 1989 10.58 to Form 10-K 1-4698
to Exhibit 10.45 Year 1990
10.58 Amendment dated April 23, 1990 10.59 to Form 10-K 1-4698
to Exhibit 10.45 Year 1990
10.59 Exhibit H dated August 13, 1990 10.60 to Form 10-K 1-4698
to Exhibit 10.45 Year 1990
10.60 Western Systems Power Pool 10.61 to Form 10-K 1-4698
Agreement (Agreement) dated Year 1990
January 2, 1991 between
thirty-nine other Western
Systems Power Pool members as
listed on pages 1 and 2 of the
Agreement and Nevada Power
Company
10.61 Financing Agreement between Clark 10.62 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1990
Company dated June 1, 1990
18
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<PAGE>
EXHIBIT ORIGINALLY FILED
No. Description as Exhibit File No.
- ------- ----------- ----------------- --------
10.62 Restated Power Sales Agreement 10.63 to Form 10-K 1-4698
dated March 25, 1991 between Year 1991
Pacificorp and Nevada Power
Company
10.63 Amendment dated July 17, 1990 to 10.64 to Form 10-K 1-4698
Exhibit 10.54 Year 1991
10.64 Financing Agreement between Clark 10.65 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1992
Company dated June 1, 1992
(Series 1992A)
10.65 Financing Agreement between Clark 10.66 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1992
Company dated June 1, 1992
(Series 1992B)
10.66 Financing Agreement between Clark 10.67 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1992
Company dated October 1, 1992
10.67 Power Sales Agreement dated 10.68 to Form 10-K 1-4698
October 19, 1992 between the Year 1992
Department of Water and Power
of the City of Los Angeles
and Nevada Power Company
10.68 Long-Term Incentive Plan dated 10.69 to Form 10-K 1-4698
as of January 1, 1993 Year 1993
10.69 Contract for Long-Term Power 10.70 to Form 10-K 1-4698
Purchases from Qualifying Year 1993
Facilities dated May 27, 1992
between Las Vegas Co-generation,
Inc. and Nevada Power Company
Replaces Exhibit 10.49
10.70 Settlement Agreement and Promissory 10.71 to Form 10-K 1-4698
Note between Mountain Coal Company Year 1993
and Atlantic Richfield Company and
Nevada Power Company dated
March 9, 1994
10.71 401(k) Savings Plan, as amended 99.1 to Form S-8 33-50809
and restated January 1, 1990
10.72 Amendment dated January 1, 1991 99.2 to Form S-8 33-50809
to Exhibit 10.71
10.73 Letter of Credit and Reimbursement 10.72 to Form 10-K 1-4698
Agreement dated as of April 12, Year 1994
1994 between Nevada Power Company
and Societe Generale, Los Angeles
Branch and Amendment No. 1 thereto
dated as of May 3, 1994
10.74 Loan Agreement dated as of November 10.73 to Form 10-K 1-4698
21, 1994 between Nevada Power Year 1994
Company, certain banks, and First
Interstate Bank of Nevada, N.A. as
the Administrative Agent
10.75 Financing Agreement between Clark 10.75 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1995
Company dated October 1, 1995
(Series 1995A)
19
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<PAGE>
EXHIBIT ORIGINALLY FILED
No. Description as Exhibit File No.
- ------- ----------- ----------------- --------
10.76 Financing Agreement between Clark 10.76 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1995
Company dated October 1, 1995
(Series 1995B)
10.77 Financing Agreement between Clark 10.77 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1995
Company dated October 1, 1995
(Series 1995C)
10.78 Financing Agreement between Clark 10.78 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1995
Company dated October 1, 1995
(Series 1995D)
10.79 Financing Agreement between 10.79 to Form 10-K 1-4698
Coconino County, Arizona Pollution Year 1995
Control Corporation and Nevada Power
Company dated October 1, 1995
(Series 1995E)
10.80 Letter of Credit and Reimbursement 10.80 to Form 10-K 1-4698
Agreement dated as of October 1, Year 1995
1995 among Nevada Power Company,
The Banks Named Herein, and Societe
Generale, Los Angeles Branch
10.81 Letter of Credit and Reimbursement 10.81 to Form 10-K 1-4698
Agreement dated as of October 1, Year 1995
1995 among Nevada Power Company,
The Banks Named Herein, and Barclays
Bank PLC, New York Branch
REPORTS ON FORM 8-K
The Company filed no current report on Form 8-K during the quarter
ended December 31, 1996.
20
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<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
We consent to the incorporation by reference in Registration Statements
No. 33-62691 and No. 333-21091 on Form S-3 and in Registration Statement No.
33-61365 on Form S-8 of Nevada Power Company of our report dated February
14, 1997 incorporated by reference in this Annual Report on Form 10-K of
Nevada Power Company for the year ended December 31, 1996.
Our audits of the financial statements referred to in our
aforementioned report also included the financial statement schedule of
Nevada Power Company, listed in Item 14. This financial statement schedule
is the responsibility of Nevada Power Company's management. Our
responsibility is to express an opinion based on our audits. In our
opinion, such financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
March 17, 1997
21
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<PAGE>
NEVADA POWER COMPANY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS OF DOLLARS)
RESERVE FOR
DOUBTFUL
ACCOUNTS
---------
BALANCE AT DECEMBER 31, 1993............................. $ 1,125
Provision charged to income............................. 4,302
Amounts written off, less recoveries.................... (4,032)
-------
BALANCE AT DECEMBER 31, 1994............................. $ 1,395
Provision charged to income............................. 3,590
Amounts written off, less recoveries.................... (3,658)
-------
BALANCE AT DECEMBER 31, 1995............................. $ 1,327
Provision charged to income............................. 3,829
Amounts written off, less recoveries.................... (2,264)
-------
BALANCE AT DECEMBER 31, 1996............................. $ 2,892
=======
22
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
March 18, 1997 By CHARLES A. LENZIE
-------------------------------------
Charles A. Lenzie
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
March 18, 1997 By CHARLES A. LENZIE
-------------------------------------
Charles A. Lenzie, Chairman of
the Board, President and Chief Executive
Officer and Director
(Principal Executive Officer)
March 18, 1997 By STEVEN W. RIGAZIO
-------------------------------------
Steven W. Rigazio, Vice President,
Finance and Planning, Treasurer,
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
March 18, 1997 By MARY KAYE CASHMAN
-------------------------------------
Mary Kaye Cashman, Director
March 18, 1997 By MARY LEE COLEMAN
-------------------------------------
Mary Lee Coleman, Director
March 18, 1997 By FRED D. GIBSON JR.
-------------------------------------
Fred D. Gibson Jr., Director
March 18, 1997 By JOHN L. GOOLSBY
-------------------------------------
John L. Goolsby, Director
March 18, 1997 By JERRY E. HERBST
-------------------------------------
Jerry E. Herbst, Director
March 18, 1997 By JOHN F. O'REILLY
-------------------------------------
John F. O'Reilly, Director
March 18, 1997 By CONRAD L. RYAN
-------------------------------------
Conrad L. Ryan, Director
March 18, 1997 By FRANK E. SCOTT
-------------------------------------
Frank E. Scott, Director
By
-------------------------------------
Arthur M. Smith, Director
March 18, 1997 By JELINDO A. TIBERTI
-------------------------------------
Jelindo A. Tiberti, Director
23
<PAGE>
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
| RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
GENERAL - In 1996, earnings were only slightly higher and earnings per share
decreased, as compared to 1995, due primarily to a fourth quarter write-off
resulting from the PSCN order in the 1995 deferred energy case. (See Note 8 of
"Notes to Financial Statements.") An increase in average shares of common stock
outstanding, as compared to 1995, also contributed to the decrease in earnings
per share.
In 1995, earnings decreased, as compared to 1994, due to milder weather and
the 1994 recording of the settlement of the replacement power case from the 1985
Mohave Generating Station accident.
Average shares of common stock outstanding for 1996 increased by 1.7 million
shares compared to 1995, as a result of the sale of shares through the Stock
Purchase and Dividend Reinvestment Plan (SPP).
Average shares of common stock outstanding for 1995 increased by 3.5 million
shares compared to 1994, as a result of a public offering of 2 million shares in
November of 1994 as well as the sale of shares through the SPP.
REVENUES - Revenues during 1996, 1995 and 1994 were $805 million, $750 million
and $764 million, respectively.
The 7.4 percent increase in 1996, as compared to 1995, was a result of warmer
weather and continued customer growth.
The 1.9 percent decrease in 1995, as compared to 1994, was a result of milder
weather, energy rate decreases effective October 1 and December 1, 1995, and a
general rate decrease effective October 1, 1994.
INCREASE (DECREASE) IN REVENUE FROM PRIOR YEAR
Nature of Increase (Decrease) (In millions) 1996 1995 1994
- ------------------------------------------------------------------------------
Kilowatthour sales | $ 86.2 $ (5.5) $ 73.5
General rate changes | - (5.2) (1.4)
Deferred energy adjustments | (27.1) (3.9) 8.7
Fuel cost base rate changes | (4.5) .1 33.3
Resource plan cost changes and other | .8 .3 (1.7)
- ---------------------------------------------------|--------------------------
Total increase (decrease) | $ 55.4 $(14.2) $112.4
- --------------------------------------------------------======================
FUEL AND PURCHASED POWER - Fuel expense increased $8.7 million in 1996, as
compared with 1995, primarily due to higher average natural gas prices.
In 1996, as compared to 1995, purchased power expense increased 14.5 percent
due to increased power purchases offset in part by lower average purchased power
prices.
Fuel expense decreased $2.5 million in 1995, as compared with 1994, primarily
due to lower average fuel rates.
In 1995, as compared to 1994, purchased power expense decreased 10.4 percent
due to reduced power purchases.
Effective October 1 and December 1, 1995, the PSCN granted Nevada Power
Company (Company) decreases of $20.1 million and $17.1 million, respectively, in
energy rates. Effective February 1, 1994, the PSCN granted the Company an
increase of $23.6 million in the energy portion of customer rates.
In 1996, the Company deferred $14.5 million of decreased energy costs for
refund in a later period and refunded $5.7 million of energy cost decreases
which had been previously deferred. In 1995, the Company deferred $19.8 million
of decreased energy costs for refund in a later period and collected $22.9
million of energy cost increases which had been previously deferred. During
1994, the Company deferred $16.8 million of increased energy costs for
collection in a later period and collected $44.7 million of energy cost
increases which had previously been deferred. Recovery of fuel expenses is
administered under the state's deferred energy cost accounting procedures. (See
Note 1 of "Notes to Financial Statements.") Under the deferred energy procedure,
changes in the costs of fuel and purchased power are reflected in customer rates
through annual rate adjustments and do not affect earnings.
The following tables summarize kilowatthour data.
1996 1995 1994
- -------------------------------------------------------------------------
SOURCE OF KILOWATTHOURS SOLD |
Company generation | 50% 56% 51%
Hoover Dam hydroelectric | 4 4 4
Purchased power | 46 40 45
- ------------------------------------------|------------------------------
| 100% 100% 100%
- -------------------------------------------==============================
COMPANY GENERATED KILOWATTHOURS BY FUEL |
SOURCE |
Coal | 76% 77% 85%
Natural Gas | 24 23 15
- ------------------------------------------|------------------------------
| 100% 100% 100%
- -------------------------------------------==============================
FUEL COSTS PER KILOWATTHOUR |
Coal | 1.39 cents 1.44 cents 1.55 cents
Natural Gas | 1.95 1.51 2.01
- -------------------------------------------------------------------------
OTHER OPERATING EXPENSES AND TAXES - Other operations expense increased $3.8
million in 1996 due primarily to increased administrative and general expenses
and transmission expenses resulting from increased labor costs.
PAGE 16
<PAGE>
<PAGE>
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
The level of maintenance and repair expenses depends primarily upon the
scheduling, magnitude and number of unit overhauls at the Company's generating
stations. In 1996, these expenses increased by $10.9 million due primarily to
increased maintenance expense at the Reid Gardner and Navajo Generating
Stations. During 1995 these expenses decreased by $5.2 million due primarily to
lower maintenance costs at the Mohave, Navajo and Reid Gardner 4 Generating
Stations.
Depreciation expense increased $6.5 million in 1996 and $4.9 million in 1995
because of a growing electric plant asset base.
OTHER INCOME AND EXPENSES - Other miscellaneous, net decreased by $11.1 million
in 1996 due primarily to the $2.3 million, net of tax, gain recorded in the
first quarter of 1995 for the sale of mining property by the Company's
unregulated subsidiary, the $5.5 million, net of tax, write-off recorded in the
fourth quarter of 1996 resulting from the PSCN order in the 1995 deferred energy
case (see Note 8 of "Notes to Financial Statements") and $2.1 million, net of
tax, in decreased carrying charges on deferred energy costs.
Other miscellaneous, net includes income of $4.2 million net of tax in 1994
for the resolution of the Mohave accident replacement power case.
INTEREST DEDUCTIONS - Interest on long-term debt in 1995 increased $3.1 million
as compared to 1994 due primarily to interest expense for the 7.06% Series AA
first mortgage bonds (FMBs) issued in May 1995 and higher interest rates on the
Company's floating rate industrial development revenue bonds (IDBs).
| LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------------------------------------------------------
CASH FLOWS - Overall net cash flows decreased during 1996, as compared to 1995,
as a result of less cash being provided by operating activities and more cash
being used in investing activities. Energy rate decreases effective October 1
and December 1, 1995 were the main cause of the reduction in cash provided by
operating activities. The increase in net cash used in investing activities in
1996 over 1995 resulted primarily from the 1995 transfer of cash from the sale
of mining property by the Company's unregulated subsidiary. The change in cash
flows from 1995 to 1996 related to long-term debt and the associated funds held
in trust resulted mainly from the 1995 issuance of the $85 million Series AA
FMBs and $239.05 million in floating rate revenue bonds. The net proceeds from
the floating rate revenue bonds were placed on deposit with a trustee and $162.3
million of those proceeds were then withdrawn from trust in 1995 for the
redemption of various series of revenue bonds. A portion of the proceeds from
the Series AA FMBs were used to redeem the $50 million Series U FMBs in 1995.
RESOURCE DEVELOPMENT AND CONSTRUCTION PROGRAMS - Pursuant to Nevada law, every
three years the Company files with the PSCN a forecast of electricity demands
for the next 20 years and the Company's plans to meet those demands. The Company
is required to file its next resource plan by July 1, 1997. Among the major
items in the Company's 1994 Resource Plan, as refiled and amended, which were
approved by the PSCN in 1994 and 1995 are the following:
(1) the Company will continue to pursue a strategy of relying upon 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.
Budgeted construction expenditures for 1997 and 1998 are $242 million and $275
million, respectively, excluding allowance for funds used during construction.
For the next five years customer growth is estimated to average 5.7 percent
per year while demand for electricity is estimated to increase by an average of
6.6 percent per year.
In order to assemble the resource plan and budget construction expenditures
and also estimate customer growth and demand for electricity, the Company is
required to make assumptions. The assumptions include but are not limited to
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices, and other factors.
If actual events differ from any of these assumptions, the resource plan and
predictions of future expenditures, growth and demand may change.
PAGE 17
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
FINANCIAL STRATEGIES - The Company's customer growth averaged over 6.4 percent
annually during the three years ended December 31, 1996. To meet the growth
forecasted for the Company's service territory for the late 1990s, the Company
will continue to rely upon the financial markets to provide a substantial
portion of the funds to build necessary Company-owned facilities.
During this period of continued rapid growth, the Company is committed to
maintaining shareholder value by utilizing a balanced financing approach using
low cost financing whenever possible, reducing costs and seeking legislative
and regulatory support as needed.
CAPITALIZATION - To meet capital expenditure requirements through 1998, the
Company will utilize internally generated cash, the proceeds from IDBs, FMBs,
unsecured borrowings, preferred securities and common stock issues through
public offerings and the SPP.
NEW FINANCING CAPACITY - Under the tests required by the Company's FMBs and the
terms of its preferred stock issues, as of December 31, 1996, the Company could
issue up to $481 million of additional FMBs at an assumed interest rate of 8.0
percent and up to $374 million of additional preferred stock at an assumed
dividend of 8.0 percent.
In September 1996, the Company received PSCN approval to issue up to 7 million
additional shares of common stock through public offerings or the SPP, up to $80
million of new taxable debt, up to $45 million of preferred securities for the
purpose of refinancing existing preferred securities and up to $80 million of
preferred securities as an alternative to an equal amount of new taxable debt
with such authorization to expire on December 31, 1997. Approval to issue
preferred securities was given with the condition that future tax risks
associated with the securities be borne by shareholders.
In January 1997, the Company received approval from the PSCN to issue up to
$38.5 million of IDBs.
EARNINGS TO INTEREST AND PREFERRED DIVIDENDS COVERAGE - For the year 1996, the
ratio of earnings to interest charges was 2.92 times compared to 2.84 times in
1995. The ratio of earnings to interest charges plus preferred dividends was
2.66 times in 1996 compared to 2.60 times in 1995.
COMMON EQUITY - The Company has the option to issue new common shares or
purchase shares on the open market to satisfy the needs of the SPP. During 1996,
the Company issued $34.5 million of common stock under the SPP. (See Note 5 of
"Notes to Financial Statements.") At year end, common equity represented 47.5
percent of total capitalization.
CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES - In February 1997, the Company
registered with the Securities and Exchange Commission $125 million of
Cumulative Quarterly Income Preferred Securities (QUIPS.) The proceeds of the
QUIPS would be used for general utility purposes which may include purchase or
redemption of one or more series of the Company's preferred stock, capital
expenditures, reduction of short-term borrowings and working capital. The
securities may be issued from time to time as one or more series of QUIPS.
SHORT-TERM DEBT - The Company has PSCN approval for authority to issue short-
term unsecured promissory notes not to exceed $150 million with such
authorization to expire on December 31, 1999 and has a committed bank line for
$125 million which expires on November 21, 1997. The short-term financing is
expected to be utilized to fund some of the Company's construction expenditures
until long-term financing is secured. At December 31, 1996, the Company had no
balance outstanding on this line.
LONG-TERM DEBT - On October 18, 1996, Coconino County, Arizona issued $20
million Series 1996 pollution control revenue bonds (PCRBs) (Nevada Power
Company Project) due 2036. Net proceeds from the sale of the PCRBs were used to
finance the construction of the Navajo Generating Station scrubber facilities
which qualify for tax-exempt financing.
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
Series 1995A 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 December 31, 1996, $52.7 million remained on deposit with the
trustee.
A discussion of long-term debt maturities, including sinking fund
requirements, is contained in Note 6 of "Notes to Financial Statements."
REGULATION - The PSCN allows recovery of costs on an historical basis in setting
rates charged to customers for electrical service.
Environmental expenditures made by the Company are currently being recovered
through customer rates. Management believes environmental expenditures will
increase over time and the increased costs will also be recovered as necessary
utility expenses. A discussion of pending environmental matters is contained in
Note 8 of "Notes to Financial Statements."
PAGE 18
<PAGE>
<PAGE>
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
CONCLUDED RATE MATTERS - On July 15, 1996, the Company filed a request with the
PSCN for authorization to decrease energy rates by approximately $41 million
under the state's deferred energy accounting procedures. Prior to hearing, the
parties agreed to increase the proposed rate decrease to approximately $45
million. On December 12, 1996 an agreement was reached with parties as to the
rate design allocation. Pursuant to the agreement the public entities received
a rate reduction of $11 million and other large customers and medium-size
commercial customers received $27 million. Residential and small commercial
customers received a reduction of $7 million. On January 23, 1997, the PSCN
approved the stipulation which took effect on February 1, 1997.
On January 23, 1997, the PSCN also rendered its decision in the last phase of
the 1995 deferred energy case and ordered a disallowance of $5.5 million, net of
tax, which was recorded in the fourth quarter of 1996 regarding various coal
contracting matters. The PSCN Staff and Consumer Advocate Office initially filed
testimony seeking disallowance from recovery and credit to the Company's
customers in excess of $25 million. Starting in February 1997, purchased power
capacity costs and resource planning expenses were included in general rates. In
the past, recovery of these costs was administered under the state's deferred
accounting procedures. (See Note 8 of "Notes to Financial Statements.")
The table below summarizes the rate adjustments that have been granted to the
Company during the past three years.
SUMMARY OF RATE ADJUSTMENTS 1994 THROUGH 1996
Effective Date Nature of Increase (Decrease) Amount (In millions)
- -----------------------------------------------------------------------------
February 1, 1994 Energy rate increase $ 23.6
October 1, 1994 General rate decrease (6.3)
October 1, 1995 Energy rate decrease (20.1)
December 1, 1995 Energy and resource plan net rate decrease (17.6)
- -----------------------------------------------------------------------------
INDUSTRY RESTRUCTURING - The electric utility industry is in the midst of
change. With the Federal Energy Regulatory Commission's (FERC) recent rulings
and several states considering and passing legislation to increase competition
by allowing customers a choice in their electric supplier ("retail wheeling"),
Company management believes the electric utility industry of the future will be
very different from that of the past.
In April 1996, the FERC issued a ruling that opens wholesale power sales to
competition by requiring public utilities owning, controlling or operating
transmission lines to file non-discriminatory open access tariffs. In another
ruling, the FERC requires public utilities to implement standards of conduct and
an Open Access Same-time Information System (OASIS) so that utilities obtain
information about their own transmission through the OASIS the same way their
competitors do. The Company has made organizational changes which were necessary
to ensure compliance with the recent rulings.
The FERC also found that if costs are stranded by retail wheeling, the states
should make decisions regarding recovery with the FERC only becoming involved if
state regulators lack authority under state law.
In September 1995 the PSCN opened a docket to examine electric industry
restructuring issues. The docket was intended to supplement the subcommittee
established by the Nevada Legislature during the 1995 legislative session to
study the effects of competition in the generation, sale and transmission of
electric energy. In January 1997, the legislative subcommittee approved a bill
draft request recommending the legislature thoroughly study the industry
restructuring issues in the 1997 legislative session to determine the direction
that the state of Nevada should take with respect to retail wheeling. The
subcommittee's proposed bill would establish a legislative oversight committee
to ensure that the regulatory agency implementing retail wheeling complies with
the legislative intent. The PSCN issued a report in June of 1996 and concluded
if the legislature chooses to authorize retail wheeling, it can be done in a
manner which benefits Nevada. Implementation would be complicated but
achievable. In February 1997, the PSCN requested legislation that would give the
PSCN the authority to prepare regulations that would allow retail wheeling in
Nevada.
The retail wheeling debate and discussion will continue in the 1997 session of
the Nevada Legislature and the PSCN's investigatory docket. The United States
Congress will also consider proposals to restructure the electric utility
industry in order to introduce retail wheeling. The Company will continue to
actively participate in these debates and discussions.
PAGE 19
<PAGE>
<PAGE>
STATEMENTS OF INCOME
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
For the Years Ended December 31,
(In thousands, except per share amounts) 1996 1995 1994
- -------------------------------------------------------------------------------
ELECTRIC REVENUES (Note 1) | $805,374 $749,981 $764,158
- ----------------------------------------------|--------------------------------
OPERATING EXPENSES AND TAXES: |
Fuel | 112,321 103,582 106,040
Purchased and interchanged power | 264,143 230,694 257,517
Deferred energy cost adjustments, net |
(Note 1) | 8,817 42,658 27,849
- ----------------------------------------------|--------------------------------
Net energy costs | 385,281 376,934 391,406
Other production operations | 17,834 17,813 17,128
Other operations | 99,266 95,458 96,251
Maintenance and repairs | 44,464 33,598 38,765
Provision for depreciation (Note 1) | 61,771 55,302 50,357
General taxes | 19,558 18,946 17,051
Federal income taxes (Notes 1 and 2) | 44,970 34,372 39,403
- ----------------------------------------------|--------------------------------
| 673,144 632,423 650,361
- ----------------------------------------------|--------------------------------
OPERATING INCOME | 132,230 117,558 113,797
- ----------------------------------------------|--------------------------------
OTHER INCOME (EXPENSES): |
Allowance for other funds used |
during construction (Note 1) | 6,240 5,353 6,771
Other miscellaneous, net (Note 8) | (10,116) 996 4,317
- ----------------------------------------------|--------------------------------
| (3,876) 6,349 11,088
- ----------------------------------------------|--------------------------------
INCOME BEFORE INTEREST DEDUCTIONS | 128,354 123,907 124,885
- ----------------------------------------------|--------------------------------
INTEREST DEDUCTIONS: |
Interest on long-term debt | 47,792 47,745 44,625
Other interest | 2,584 1,566 2,572
Allowance for borrowed funds |
used during construction (Note 1) | (890) (2,375) (4,182)
- ----------------------------------------------|--------------------------------
| 49,486 46,936 43,015
- ----------------------------------------------|--------------------------------
NET INCOME | 78,868 76,971 81,870
- ----------------------------------------------|--------------------------------
DIVIDEND REQUIREMENTS ON PREFERRED STOCK | 3,956 3,966 3,976
- ----------------------------------------------|--------------------------------
EARNINGS AVAILABLE FOR COMMON STOCK | $ 74,912 $ 73,005 $ 77,894
- ----------------------------------------------|================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | 47,976 46,288 42,784
- ----------------------------------------------|================================
EARNINGS PER AVERAGE COMMON SHARE | $ 1.56 $ 1.58 $ 1.82
- -----------------------------------------------================================
See Notes to Financial Statements.
PAGE 20
<PAGE>
<PAGE>
STATEMENTS OF CASH FLOWS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
For the Years Ended December 31,
(In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net income |$ 78,868 $ 76,971 $ 81,870
Adjustments to reconcile net income to net |
cash provided by operating activities - |
Depreciation and amortization | 69,876 66,950 65,064
Deferred income taxes and investment |
tax credits | 5,679 (15,975) 5,474
Allowance for other funds used |
during construction | (6,240) (5,353) (6,771)
Changes in - |
Receivables | (1,754) 5,099 (21,516)
Fuel stock and materials and supplies | 2,105 (2,053) 2,689
Accounts payable and other current |
liabilities | (6,257) (1,526) 1,485
Deferred energy costs | 12,093 42,624 23,980
Accrued taxes and interest | (13,105) 16,784 3,801
Other assets and liabilities | 13,725 2,398 (11,806)
- -----------------------------------------------|-------------------------------
Net cash provided by operating |
activities | 154,990 185,919 144,270
- -----------------------------------------------|-------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES: |
Construction expenditures and gross additions |(180,871) (178,770) (183,856)
Investment in subsidiaries and other | 70 17,942 (493)
- -----------------------------------------------|-------------------------------
Net cash used in investing activities |(180,801) (160,828) (184,349)
- -----------------------------------------------|-------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES: |
Issuance of capital stock | 37,395 33,339 75,818
Issuance of long-term debt | 20,000 324,050 -
Deposit of funds held in trust | (22,814) (240,690) (1,016)
Withdrawal of funds held in trust | 47,581 170,381 52,910
Coal contract buy-out | - - (15,440)
Retirement of long-term debt | (5,418) (219,351) (7,241)
Retirement of preferred stock | (200) (200) (200)
Cash dividends | (80,370) (77,699) (71,688)
Other financing activities | 6,674 10,463 6,914
- -----------------------------------------------|-------------------------------
Net cash provided by financing |
activities | 2,848 293 40,057
- -----------------------------------------------|-------------------------------
CASH AND TEMPORARY CASH INVESTMENTS (Note 1): |
Net increase (decrease) during the year | (22,963) 25,384 (22)
Beginning of year | 25,507 123 145
- -----------------------------------------------|-------------------------------
End of year |$ 2,544 $ 25,507 $ 123
- -----------------------------------------------|===============================
CASH PAID DURING THE YEAR FOR: |
Interest, net of amounts capitalized |$ 59,052 $ 56,644 $ 52,074
- -----------------------------------------------|===============================
Income taxes |$ 51,282 $ 32,885 $ 32,500
- ------------------------------------------------===============================
See Notes to Financial Statements.
PAGE 21
<PAGE>
<PAGE>
BALANCE SHEETS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
December 31, (In thousands) 1996 1995
- -------------------------------------------------------------------------------
ASSETS |
Electrical Plant, at Original Cost |
(Notes 1, 6, 8 and 10): |
Production |$ 854,386 $ 845,142
Transmission | 321,041 300,690
Distribution | 873,998 763,103
General | 145,522 127,840
- -------------------------------------------------|-----------------------------
| 2,194,947 2,036,775
Less accumulated depreciation | 592,571 546,803
- -------------------------------------------------|-----------------------------
Net plant in service | 1,602,376 1,489,972
Construction work in progress | 140,420 129,255
Property under capital leases | 73,803 79,562
Plant held for future use | 2,331 2,331
- -------------------------------------------------|-----------------------------
| 1,818,930 1,701,120
- -------------------------------------------------|-----------------------------
Investments (Note 1) | 10,734 9,989
- -------------------------------------------------|-----------------------------
Current Assets: |
Cash and temporary cash investments (Note 1)| 2,544 25,507
Customer receivables - |
Billed | 45,885 44,296
Unbilled (Note 1) | 23,689 22,110
Reserve for doubtful accounts | (2,892) (1,327)
Other receivables | 6,472 6,321
Fuel stock, at average cost | 9,104 10,281
Materials and supplies, at average cost | 27,501 28,429
Deferred taxes on deferred |
energy liability (Note 2) | 10,139 6,595
Prepayments | 8,203 8,144
- -------------------------------------------------|-----------------------------
| 130,645 150,356
- -------------------------------------------------|-----------------------------
Deferred Charges: |
Debt expense, being amortized | 27,050 28,373
Other (Note 9) | 175,465 183,212
- -------------------------------------------------|-----------------------------
| 202,515 211,585
- -------------------------------------------------|-----------------------------
|$2,162,824 $2,073,050
- --------------------------------------------------=============================
See Notes to Financial Statements.
PAGE 22
<PAGE>
<PAGE>
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
December 31, (In thousands) 1996 1995
- -------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES |
Capitalization (See Schedules of Capitalization |
and Long-Term Debt): |
Common shareholders' equity |$ 800,154 $ 764,361
Redeemable cumulative preferred stock | 38,000 38,000
Cumulative preferred stock with |
mandatory sinking funds | 3,663 3,863
Long-term debt | 840,964 799,999
- -------------------------------------------------|-----------------------------
| 1,682,781 1,606,223
- -------------------------------------------------|-----------------------------
Current Liabilities: |
Current maturities and sinking fund |
requirements (See Schedules of |
Capitalization and Long-Term Debt) | 5,714 5,809
Accounts payable | 58,289 64,518
Accrued taxes | 6,372 19,457
Accrued interest | 6,039 6,059
Customers' service deposits | 14,540 12,964
Deferred energy liability (Notes 1 and 8) | 28,725 18,844
Other | 21,611 21,641
- -------------------------------------------------|-----------------------------
| 141,290 149,292
- -------------------------------------------------|-----------------------------
Commitments and Contingencies (Note 8) |
|
Deferred Credits and Other Liabilities: |
Deferred investment tax credits |
(Notes 1 and 2) | 31,004 32,464
Deferred taxes on income (Notes 1 and 2) | 234,209 215,315
Customers' advances for construction | 51,123 44,903
Other (Note 9) | 22,417 24,853
- -------------------------------------------------|-----------------------------
| 338,753 317,535
- -------------------------------------------------|-----------------------------
|$2,162,824 $2,073,050
- --------------------------------------------------=============================
See Notes to Financial Statements.
PAGE 23
<PAGE>
<PAGE>
SCHEDULES OF CAPITALIZATION
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
December 31, (Dollars in thousands) 1996 1995
- -------------------------------------------------------------------------------
COMMON SHAREHOLDERS' EQUITY (Note 5): |
Common stock, $1 par value, authorized |
70,000,000 shares; issued and |
outstanding 48,785,846 and 47,038,193|
shares at December 31, 1996 and 1995;|
stated at |$ 51,990 $ 50,243
Premium on capital stock | 635,420 600,238
Unamortized capital stock expense | (4,616) (4,980)
Retained earnings | 117,360 118,860
- ------------------------------------------|------------------------------------
Total common shareholders' equity | 800,154 47.5% 764,361 47.6%
- ------------------------------------------|------------------------------------
REDEEMABLE CUMULATIVE PREFERRED STOCK |
(Notes 5 and 7): |
$20 par value, authorized 4,500,000 shares|
for all series; outstanding at |
December 31, 1996 and 1995: |
9.90% Series, 1,900,000 shares | 38,000 38,000
- ------------------------------------------|------------------------------------
Total | 38,000 2.3 38,000 2.4
- ------------------------------------------|------------------------------------
CUMULATIVE PREFERRED STOCK WITH MANDATORY |
SINKING FUNDS (Note 5): |
Outstanding at December 31, 1996 and 1995:|
5.40% Series, 40,669 and 42,669 |
shares | 813 853
5.20% Series, 38,507 and 40,507 |
shares | 770 810
4.70% Series, 114,006 and 120,000 |
shares | 2,280 2,400
- ------------------------------------------|------------------------------------
| 3,863 4,063
Current sinking fund requirement | (200) (200)
- ------------------------------------------|------------------------------------
Total | 3,663 .2 3,863 .2
- ------------------------------------------|------------------------------------
LONG-TERM DEBT |
(See Schedules of Long-Term Debt) | 840,964 50.0 799,999 49.8
- ------------------------------------------|------------------------------------
Total capitalization |$1,682,781 100.0% $1,606,223 100.0%
- -------------------------------------------====================================
See Notes to Financial Statements.
PAGE 24
<PAGE>
<PAGE>
SCHEDULES OF LONG-TERM DEBT
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
December 31, (In thousands) 1996 1995
- -------------------------------------------------------------------------------
LONG-TERM DEBT (Notes 6, 7 and 8): |
First mortgage bonds: |
7 1/8% Series I due 1998 |$ 15,000 $ 15,000
7 5/8% Series L due 2002 | 15,000 15,000
7.80% Series T due 2009 | 15,000 15,000
6.70% Series V due 2022 | 105,000 105,000
6.60% Series W due 2019 | 39,500 39,500
7.20% Series X due 2022 | 78,000 78,000
6.93% Series Y due 1999 | 45,000 45,000
8.50% Series Z due 2023 | 45,000 45,000
7.06% Series AA due 2000 | 85,000 85,000
- ---------------------------------------------------------|---------------------
| 442,500 442,500
|
Industrial development revenue bonds: |
7.80% due 2020 | 100,000 100,000
Floating rate - |
Series 1995A due 2030 | 76,750 76,750
Series 1995B due 2030 | 85,000 85,000
Series 1995C due 2030 | 44,000 44,000
Pollution control revenue bonds: |
6 3/8% due 2036 | 20,000 -
Floating rate - |
Series 1995D due 2011 | 14,000 14,000
Series 1995D due 2023 | 6,300 6,300
Series 1995E due 2022 | 13,000 13,000
Less funds held in trust | (52,700) (77,467)
Obligations under capital leases | 97,629 101,533
- ---------------------------------------------------------|---------------------
| 846,479 805,616
|
Debt premium and discount, being amortized | (1) (8)
Current maturities and sinking fund requirements | (5,514) (5,609)
- ---------------------------------------------------------|---------------------
Total long-term debt |$840,964 $799,999
- ----------------------------------------------------------======================
See Notes to Financial Statements.
PAGE 25
<PAGE>
<PAGE>
STATEMENTS OF RETAINED EARNINGS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
For the Years Ended December 31, (In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------
BALANCE AT BEGINNING OF YEAR |$118,860 $119,600 $109,359
Add - Net Income | 78,868 76,971 81,870
- -----------------------------------------------|-------------------------------
| 197,728 196,571 191,229
- -----------------------------------------------|-------------------------------
Deduct: |
Dividends paid in cash: |
Cumulative preferred stock - |
5.40%, 5.20% and 4.70% Series | 194 204 214
9.90% Series (Note 5) | 3,762 3,762 3,762
Common stock | 76,412 73,745 67,653
- -----------------------------------------------|-------------------------------
| 80,368 77,711 71,629
- -----------------------------------------------|-------------------------------
BALANCE AT END OF YEAR |$117,360 $118,860 $119,600
- ------------------------------------------------===============================
See Notes to Financial Statements.
PAGE 26
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
For ratemaking and other purposes, the Company is subject to the jurisdiction of
the PSCN and the FERC. The accounting records of the Company are maintained in
accordance with the uniform system of accounts prescribed by the FERC and
adopted by the PSCN.
The Company is subject to the provisions of Statement of Financial Accounting
Standards No. 71, Accounting for the Effects of Certain Types of Regulation,
which require the Company to record certain regulatory assets and liabilities.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
ELECTRIC REVENUES- The Company bills its customers monthly on a cycle basis and
recognizes the estimated amount of revenue applicable to kilowatthours of energy
sold but not yet billed at the end of an accounting period.
DEFERRED ENERGY COST ADJUSTMENTS - As permitted by state statute, the Company
defers differences between the current cost of fuel plus net purchased power and
base energy costs as defined. Any over or under recoveries are deferred in the
balance sheet as a current asset or current liability. Under regulations adopted
by the PSCN, deferred energy rates are revised at least every 12 months to clear
the accumulated deferred balance over a future period. Effective February 1,
1997, capacity costs associated with purchased power were included in general
rates rather than the deferred energy cost accounting mechanism.
ELECTRIC PLANT - The costs of betterments and additions to electric plant and
replacements of retirement units of property are capitalized. Such costs include
labor, payroll taxes, material, transportation, an allowance for funds used
during construction and, where applicable, property taxes. Maintenance is
charged with the cost of repairs and minor replacements. Accumulated
depreciation is charged for the cost of plant retired, less net salvage.
Depreciation has been provided for financial statement purposes on a straight-
line basis at rates based upon the estimated useful lives of the various classes
of plant. The provisions for depreciation during 1996, 1995 and 1994 were
equivalent to an annual rate of approximately 2.9 percent of the average gross
investment in depreciable plant.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION - The allowance for funds used
during construction (AFUDC) represents the estimated costs of borrowed and
equity funds applicable to electric plant construction.
The FERC has prescribed a specific computational method for determining the
AFUDC rate. The PSCN has authorized the AFUDC rate to be the lesser of the rate
determined under the FERC computational method or the rate equivalent to the
overall rate of return authorized by the PSCN. The overall rate of return
authorized by the PSCN was 10.02 percent for the period January 1994 through
June 1994 and 9.66 percent beginning July 1994. The Company's actual AFUDC
rate averaged 9.66 percent for 1996 and 1995 and 9.73 percent for 1994.
FEDERAL INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 (FAS 109), Accounting for
Income Taxes. FAS 109 requires recognition of deferred tax liabilities and
assets for the future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. The
Company's December 31, 1996 balance sheet contains a net regulatory asset of $84
million related to federal income taxes. (See Note 9 of "Notes to Financial
Statements.")
In November 1991, the PSCN issued an order which allows the Company to recover
the previously flowed through tax benefits ratably over the estimated remaining
book life of the plant. Calculated at current rates, approximately $34 million
of income taxes will be allowed in future rates.
Investment tax credits earned have been deferred and are being amortized to
income ratably over the estimated service lives of the related property.
CASH FLOW INFORMATION - Cash equivalents, which generally are convertible to
cash at par on short notice and mature three months or less from the date of
acquisition, are reported as temporary cash investments.
The Company had no material noncash investing or financing transactions
during 1996, 1995 or 1994.
OTHER ACCOUNTING POLICIES - The Company uses the equity method of accounting to
report immaterial investments in subsidiaries.
Certain amounts in prior periods have been reclassified to conform to the
financial statement presentation for December 31, 1996.
PAGE 27
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
2 | FEDERAL INCOME AND OTHER TAXES
- -------------------------------------------------------------------------------
The total federal income tax expense as set forth in the accompanying Statements
of Income results in an effective federal income tax rate different from the
statutory federal income tax rate for the following reasons:
For the Years Ended December 31,
(Dollars in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------
Federal income tax at statutory |
rate |$42,613 35.0% $40,167 35.0% $44,305 35.0%
Adjustments: |
Investment tax credit |
amortization | (1,460) (1.2) (1,460) (1.3) (1,460) (1.2)
Other items | 1,731 1.4 (916) (.8) 1,871 1.5
- ----------------------------------|--------------------------------------------
Total recorded federal income tax |$42,884 35.2% $37,791 32.9% $44,716 35.3%
- ----------------------------------|============================================
Federal income taxes included in: |
Operating expenses |$44,970 $34,372 $39,403
Other miscellaneous, net | (2,086) 3,419 5,313
- ----------------------------------|--------------------------------------------
|$42,884 $37,791 $44,716
- -----------------------------------============================================
The current and deferred components of federal income taxes included in
operating expenses are as follows:
For the Years Ended December 31, (In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------
Current federal income taxes |$39,312 $ 50,367 $ 35,516
- -----------------------------------------------|-------------------------------
Deferred federal income taxes: |
Depreciation differences | 16,427 8,323 13,134
Deferred energy costs | (3,544) (15,595) (11,574)
Contributions in aid of |
construction | (7,720) (4,510) (3,028)
Coal contract buyout | 1,752 (1,039) (1,039)
Other - net | 203 (1,714) 7,854
- -----------------------------------------------|-------------------------------
| 7,118 (14,535) 5,347
- -----------------------------------------------|-------------------------------
Investment tax credit amortization | (1,460) (1,460) (1,460)
- -----------------------------------------------|-------------------------------
Total |$44,970 $ 34,372 $ 39,403
- ------------------------------------------------===============================
The regulatory asset for temporary differences related to liberalized
depreciation will continue to be amortized using the average rate assumption
method required by the Tax Reform Act of 1986. The regulatory liability for
temporary differences caused by investment tax credits will be amortized ratably
in the same fashion as the deferred investment tax credit under former Internal
Revenue Code Section 46(f)(2).
The net deferred federal income tax liability consists of deferred federal
income tax liabilities less deferred federal income tax assets related to:
December 31, (In thousands) 1996 1995
- -------------------------------------------------------------------------------
DEFERRED FEDERAL INCOME TAX |
LIABILITIES: |
Temporary basis differences - plant | $(101,596) $(101,256)
Investment tax credits | (31,004) (32,464)
Excess of tax depreciation over book |
depreciation | (121,822) (105,487)
Coal contract buyout | (1,925) (173)
Accrued taxes | (3,326) (2,654)
Demand-side program costs | (2,353) (3,440)
Debt reacquisition costs | (2,663) (2,906)
Other | (524) 776
- --------------------------------------------------|----------------------------
Total | (265,213) (247,604)
- --------------------------------------------------|----------------------------
DEFERRED FEDERAL INCOME TAX |
ASSETS: |
Unamortized investment tax credits | 16,694 17,481
Refundable customer advances | 17,295 15,160
Deferred energy | 10,139 6,595
Nonrefundable contributions in aid of |
construction | 10,339 4,852
Capitalized expenses | (231) 418
Supplemental executive retirement plan | 1,601 2,272
Other | 2,281 1,017
- --------------------------------------------------|----------------------------
Total | 58,118 47,795
- --------------------------------------------------|----------------------------
Net deferred tax liability | $(207,095) $(199,809)
- ----------------------------------------------------===========================
PAGE 28
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
3 | EMPLOYEE BENEFITS
- -------------------------------------------------------------------------------
DEFINED CONTRIBUTION RETIREMENT PLAN - The Company maintains an employee
investment plan (401(k) Plan) which was established January 1, 1990, under
Section 401(k) of the Internal Revenue Code. Employees who are at least 21 years
old and who have completed one month of service may become "participants" in the
401(k) Plan. The Company matches 50 percent of a participant's contributions to
the 401(k) Plan not to exceed 3 percent of the participant's annual
compensation. All Company contributions are invested in common stock of the
Company. The amounts expensed for Company matching contributions to the 401(k)
Plan were $1,821,000 for 1996, $1,533,000 for 1995 and $1,276,000 for 1994.
DEFINED BENEFIT RETIREMENT PLAN - The Company has a non-contributory defined
benefit retirement plan (PLAN) designed to meet the provisions of the Employee
Retirement Income Security Act of 1974. All employees age 21 and over with one
year of service and at least 1,000 hours worked are covered by the PLAN.
Benefits under the PLAN are dependent upon each participant's salary
for the highest consecutive 60 months of service and length of service.
The Company also has a Supplemental Executive Retirement Plan (SERP) in
addition to the regular PLAN. Participation is limited to such officers as the
Board of Directors may select. Presently, 26 active or retired designated
officers and employees participate in the SERP. The SERP will be funded as
benefits are disbursed.
The table below sets forth the funded status and amounts recognized in the
Company's financial statements at December 31, 1996, 1995 and 1994 for both the
PLAN and SERP.
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligations for
both the PLAN and SERP were 8 percent and 4.5 percent in 1996, 7.25 percent and
4.5 percent in 1995, and 8.75 percent and 4.5 percent in 1994, respectively. The
expected rate of return on PLAN assets was 8.5 percent in 1996, 1995 and 1994.
PLAN assets are primarily invested in listed stocks, fixed income securities and
federal agencies securities.
RECONCILIATION OF FUNDED STATUS
PLAN SERP
---------------------------------------------------------
For the Years Ended | |
December 31, | 1996 1995 1994 | 1996 1995 1994
(In thousands) | |
- ----------------------|------------------------------|-------------------------
Actuarial present | |
value of: | |
Vested benefit | |
obligation | $ 69,822 $ 72,412 $ 54,713 |$ 5,123 $ 5,038 $ 3,202
Nonvested benefit | |
obligation | 4,228 4,702 5,235 | 319 838 2,106
- ----------------------|------------------------------|-------------------------
Accumulated benefit | |
obligation | $ 74,050 $ 77,114 $ 59,948 |$ 5,442 $ 5,876 $ 5,308
- ----------------------|==============================|=========================
Projected benefit | |
obligation | $ 96,592 $103,973 $ 77,601 |$ 6,662 $ 7,063 $ 6,253
Plan assets at fair | |
value | 81,564 74,628 57,966 | - - -
- ----------------------|------------------------------|-------------------------
Plan assets less than | |
projected benefit | |
obligation | (15,028) (29,345) (19,635)| (6,662) (7,063) (6,253)
Unrecognized prior | |
service costs | 6,386 7,147 7,792 | 495 594 692
Unrecognized net loss | 2,712 16,000 3,763 | 1,692 2,492 1,895
4th quarter contri- | |
butions/benefits | 800 - - | 110 - -
- ----------------------|------------------------------|-------------------------
Pension liability| $ (5,130) $ (6,198) $ (8,080)|$(4,365) $(3,977) $(3,666)
- ----------------------|==============================|=========================
Net pension expense | |
comprised the | |
following: | |
Service cost | $ 4,843 $ 3,351 $ 3,928 |$ 102 $ 96 $ 175
Interest cost on | |
projected benefit | |
obligation | 7,642 6,947 6,576 | 517 502 498
Return on plan | |
assets | (3,897) (14,049) 183 | - - -
Net amortization and| |
deferral | (2,060) 9,125 (4,433)| 235 160 409
- ----------------------|------------------------------|-------------------------
Net periodic pension| |
cost | $ 6,528 $ 5,374 $ 6,254 |$ 854 $ 758 $ 1,082
- ----------------------|==============================|=========================
PAGE 29
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - The Company accounts for
postretirement benefits other than pensions in accordance with Statement of
Financial Accounting Standards No. 106 (FAS 106), Employers' Accounting for
Postretirement Benefits Other Than Pensions. In July 1994, the PSCN authorized
the Company to recognize benefit costs using the accrual method. The Company has
elected to amortize its transition obligation at January 1, 1993 over a period
of 20 years.
The Company provides postretirement medical, dental and vision benefits to
employees who have retired or will retire and are eligible for an immediate
pension benefit. The postretirement health care plan is contributory, and
retirees' contributions can be adjusted annually for increases in the cost of
providing the benefits. The postretirement health care plan is being funded in
amounts not to exceed the lesser of amounts collected from customers through
rates or amounts allowable under the Internal Revenue Code as amended from time
to time.
Net periodic postretirement benefit cost for the years ended December 31,
1996, 1995 and 1994 included the following components:
(In thousands) 1996 1995 1994
- ------------------------------------------------------------------
Service cost |$ 406 $ 293 $ 617
Interest cost on projected benefit |
obligation | 1,223 1,881 1,837
Return on assets | (543) (303) -
Amortization of transition |
obligation | 713 1,198 1,139
- -----------------------------------|------------------------------
Net periodic postretirement |
benefit cost |$1,799 $3,069 $3,593
- ------------------------------------==============================
A reconciliation of the funded status of the plan to the amounts recognized in
the Balance Sheets as of December 31, 1996 and 1995 is as follows:
(In thousands) 1996 1995
- ------------------------------------------------------------------
Retirees | $(11,331) $(21,936)
Fully eligible active employees | (182) (108)
Other active employees | (4,552) (5,050)
- --------------------------------------------|---------------------
Accumulated postretirement |
benefit obligation | (16,065) (27,094)
Fair value of assets | 7,075 4,884
- --------------------------------------------|---------------------
Accumulated postretirement benefit |
obligation in excess of assets | (8,990) (22,210)
Unrecognized transition obligation | 15,498 19,817
Unrecognized gain | (9,667) (1,281)
4th quarter contributions/benefits | 174 -
- --------------------------------------------|---------------------
Accrued postretirement benefit liability| $ (2,985) $ (3,674)
- ----------------------------------------------====================
The medical cost trend rate assumed for 1997 was 8 percent, grading down to 4.75
percent in 2001 and remaining at that level thereafter. The health care cost
trend rate has a significant effect on the accumulated postretirement benefit
obligation and net periodic cost. A one-percentage-point increase in the assumed
health care cost trend rate would increase the accumulated postretirement
benefit obligation at December 31, 1996 by $982,000 and would increase the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for 1996 by $75,000. The weighted-average discount
rate used in determining the accumulated postretirement benefit obligation at
December 31, 1996 was 8 percent. The expected rate of return on assets was 8.5
percent in 1996. Assets are primarily invested in listed stocks, fixed income
securities and federal agencies securities.
4 | SHORT-TERM BORROWINGS
- -------------------------------------------------------------------------------
The Company has a $125 million bank revolving credit facility which expires on
November 21, 1997, and pays commitment fees based on both the unused amount of
the facility and the Company's first mortgage bond ratings. Borrowing rates
under the bank line are determined by both current market rates and the
Company's first mortgage bond ratings. There were no short-term borrowings
outstanding on the bank line at December 31, 1996 and 1995.
5 | CAPITAL STOCK
- -------------------------------------------------------------------------------
The changes in common stock shares for 1994, 1995 and 1996 are as follows:
Shares
- -------------------------------------------------------------------------------
Outstanding, December 31, 1993 | 41,505,195
Issued through public offering | 2,000,000
Issued under 401(k) Savings Plan | 52,055
Issued under Stock Purchase and Dividend Reinvestment Plan | 1,825,120
- ------------------------------------------------------------------|------------
Outstanding, December 31, 1994 | 45,382,370
Issued under 401(k) Savings Plan | 77,846
Issued under Stock Purchase and Dividend Reinvestment Plan | 1,577,977
- ------------------------------------------------------------------|------------
Outstanding, December 31, 1995 | 47,038,193
Issued under 401(k) Savings Plan | 87,889
Issued under Stock Purchase and Dividend Reinvestment Plan | 1,659,764
- ------------------------------------------------------------------|------------
Outstanding, December 31, 1996 | 48,785,846
- -------------------------------------------------------------------============
Premium on capital stock increased $35.2 million, $31.9 million and $72 million
during 1996, 1995 and 1994, respectively, due to issuances of common stock. Cash
dividends paid per share on common stock were $1.60 each year during 1996, 1995
and 1994.
On April 30, 1992, the Company issued shares of Redeemable Cumulative
Preferred Stock, 9.90% Series with a 10-year dividend period requiring mandatory
redemption April 1, 2002. This preferred stock is redeemable at the option of
the Company, as a whole or in part, on April 1, 1997.
Under the provisions of the 4.70%, 5.20% and 5.40% series cumulative preferred
stock with mandatory sinking funds, the
PAGE 30
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
Company is obligated to use its best efforts to purchase, each year, up to an
aggregate of 6,000, 2,000 and 2,000 shares, respectively, at prices not in
excess of $20.00 per share. The obligations are not cumulative. The 5.20% series
and 5.40% series are presently redeemable at the option of the Company at $21.00
per share and the 4.70% series at $20.25 per share.
In October 1990, the Company adopted a Stockholder Rights Plan and issued
through dividend to its common shareholders one stock purchase right for each
outstanding share of common stock. The rights expire in October 2000. The rights
to purchase junior preference shares, common shares or shares of a successor
corporation are not exercisable unless certain events occur and are intended to
assure fair shareholder treatment in any takeover of the Company and to guard
against abusive takeover tactics.
6 | LONG-TERM DEBT
- -------------------------------------------------------------------------------
None of the long-term debt is held by or for the account of the Company.
The amounts of long-term debt maturities, including sinking fund requirements,
are $5.5 million in 1997, $19.6 million in 1998, $50.1 million in 1999, $90.3
million in 2000 and $3.6 million in 2001, including $5.2 million, $4.5 million,
$4.9 million, $5.2 million and $3.5 million for obligations under capital
leases, respectively.
Generally, electric plant is subject to the first mortgage lien. It is the
Company's intention to meet the sinking fund requirements for its series I and L
first mortgage bonds by pledging property additions in lieu of cash payments.
The series T, V, W and X first mortgage bonds correspond with respect to their
terms to two series of collateralized pollution control revenue bonds and two
series of industrial development revenue bonds issued by Clark County, Nevada.
The indentures under which the Company's first mortgage bonds were issued
provide for an immaterial restriction as to distributions to shareholders at
December 31, 1996.
The industrial development revenue bonds and pollution control revenue bonds
were issued by various municipal authorities and are guaranteed as to payment of
principal and interest by the Company.
7 | FAIR VALUE OF FINANCIAL INSTRUMENTS
- -------------------------------------------------------------------------------
Disclosure by the Company of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial Accounting
Standards No. 107 (FAS 107), Disclosures about Fair Value of Financial
Instruments. At December 31, 1996 and 1995, the provisions of FAS 107 apply only
to the Company's long-term debt and redeemable cumulative preferred stock.
In accordance with FAS 107, the Company estimates the fair value of its
redeemable cumulative preferred stock based on the per share closing price times
the number of shares outstanding and its long-term debt based on quoted market
prices for the same or similar issues or on current interest rates available to
the Company for debt with similar terms and maturity. The book value and
estimated fair value of the redeemable cumulative preferred stock were $38
million and $40.4 million at December 31, 1996 and $38 million and $41.6 million
at December 31, 1995, respectively. The book value and estimated fair value of
the Company's long-term debt, including current maturities and sinking fund
requirements and excluding obligations under capital leases, were $749 million
and $782 million at December 31, 1996, and $704 million and $757 million at
December 31, 1995, respectively. The estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have an effect on the estimated fair value amounts.
8 | COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
RATE MATTERS - The PSCN rendered its decision on January 23, 1997 in the last
phase of the 1995 deferred energy case concerning 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 PSCN order resulted in a
fourth quarter 1996 charge of $5.5 million, net of tax, for amounts disallowed
by the PSCN. This charge is included in other miscellaneous, net in the
Statements of Income.
LEGAL MATTERS - The Company is involved in litigation arising in the normal
course of business. While the results of such litigation cannot be predicted
with certainty, management, based upon advice of counsel, believes that the
final outcome will not have a material adverse effect on the Company's financial
position, results of operations and net cash flow.
ENVIRONMENTAL MATTERS - 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 (Commission) to work toward the goal of visibility improvement in the
Grand Canyon and other national parks of the Colorado Plateau. The Commission
completed its report and recommendations to the Environmental Protection Agency
(EPA) in June, 1996. The Commission's study anticipates emissions from
stationary sources, including power plants, to be reduced over the next 40 years
as a result of other provisions of the Amendments. Additional power plant
controls could become necessary if expected emission reductions do not occur.
The EPA will develop regulations to implement the Commission's recommendations.
The new regulations are expected to be promulgated in 1997.
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 1997.
The cost of any improvements that may be required cannot be determined at this
time. PAGE 31
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
In 1991, the EPA published an order requiring the Navajo Generating Station
(Navajo) to install scrubbers to remove 90 percent of sulfur dioxide emissions
beginning in 1997. As an 11.3 percent owner of Navajo, the Company will be
required to fund an estimated $53.1 million for installation of the scrubbers.
The first of three scrubber units is expected to be on line in November 1997. At
that point, the project will be approximately 50 percent complete. The first of
the other two units is expected to be on line in 1998 and the last unit in 1999.
The Company has spent $30.4 million on the scrubbers' construction through 1996.
In 1992, the Company received resource planning approval from the PSCN for its
share of the cost of the scrubbers.
LEASES - In 1984, the Company sold its administrative headquarters facility,
less furniture and fixtures, for $27 million and entered into a 30-year capital
lease of that facility with five-year renewal options beginning in year 31. The
fixed rental obligation for the first 30 years is $5.1 million per year. Future
cash rental payments as of December 31, 1996, are as follows:
(In thousands)
- ----------------------------------------------------
1997 |$ 3,604
1998 | 3,605
1999 | 4,880
2000 | 6,156
2001 | 6,156
Thereafter | 92,745
- -------------------------------------------|--------
|$117,146
- --------------------------------------------========
The amount of imputed interest necessary to reduce the future cash rental
payments to present value is $71 million as of December 31, 1996.
Total interest expense on the lease obligation was $5.3 million and total
amortization of the leased facility was $151,000 for the year ended December 31,
1996. The total accumulated amortization of the leased facility on December 31,
1996, was $9.9 million.
At December 31, 1996, the Company has certain long-term noncancelable
operating lease agreements for which the future minimum lease payments are
immaterial.
FUEL AND PURCHASED POWER OBLIGATIONS - The Company has eight long-term contracts
for the purchase of electric energy and/or capacity. The contracts expire in
years ranging from 1997 to 2016.
Total payments under these contracts were $50.1 million, $41.6 million and
$45.4 million in 1996, 1995 and 1994, respectively. The cost of power obtained
under these contracts is included in purchased and interchanged power expense in
the Statements of Income.
At December 31, 1996, the estimated future payments for capacity and energy
that the Company is obligated to purchase under these contracts, subject in part
to certain conditions, are as follows:
Accounted for
as Long-Term Accounted for
Executory as Long-Term
(In thousands) Contracts Capital Lease
- ---------------------------------------------------------------------
1997 |$ 38,037 $ 12,902
1998 | 37,611 12,373
1999 | 19,653 11,844
2000 | 11,236 11,315
2001 | - 10,786
Thereafter | - 111,686
- ------------------------------------------|--------------------------
Total minimum payment |$106,537 170,906
- ------------------------------------------|========
Less amount representing estimated |
executory costs included in total |
minimum payment | (89,292)
- ------------------------------------------|--------------------------
Net minimum payments | 81,614
Less amount representing interest | (30,087)
- ------------------------------------------|--------------------------
Present value of net minimum payments | $ 51,527
- -------------------------------------------------------------========
Total interest expense on the purchase power obligation accounted for as a
capital lease was $5.1 million and total amortization was $5.3 million in 1996.
Total accumulated amortization was $31.5 million as of December 31, 1996.
The Company has contracted with various coal suppliers to provide coal to the
Reid Gardner Generating Station. The contracts expire in years ranging from 1999
to 2007.
Costs of approximately $25.9 million, $25.0 million and $25.9 million were
incurred under the long-term coal contracts in 1996, 1995 and 1994,
respectively.
In addition, the Company has long-term transportation arrangements with
railway companies to transport coal to the Reid Gardner Generating Station and a
coal railcar lease. The contracts expire in 1999, 2000 and 2011.
Costs of approximately $18.5 million, $20.9 million and $1.7 million were
incurred under the coal transportation contracts in 1996, 1995 and 1994,
respectively.
At December 31, 1996, the estimated future payments for purchase and
transportation of coal that the Company is obligated to purchase under these
contracts are as follows:
(In thousands) Coal Transportation Coal Use
- ---------------------------------------------------------------------
1997 $15,990 $ 16,374
1998 16,516 16,702
1999 17,061 17,035
2000 14,485 14,555
2001 1,012 14,856
Thereafter 10,038 87,069
- ---------------------------------------------------------------------
$75,102 $166,591
- -------------------------------------------==========================
CONSTRUCTION - Certain commitments have been incurred at December 31, 1996, in
connection with the 1997 construction budget. Construction expenditures are
estimated at $242 million, excluding AFUDC, for 1997.
PAGE 32
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
9 | OTHER DEFERRED CHARGES AND CREDITS
- -------------------------------------------------------------------------------
OTHER DEFERRED CHARGES - At December 31, 1996, as a result of the Company
adopting FAS 109 effective January 1, 1993, other deferred charges include a
regulatory asset of $101.6 million and a deferred tax asset of $17.6 million.
The regulatory asset represents future revenue to be received from customers due
to the flow-through of tax benefits of temporary differences in prior years and
the deferred tax asset is from temporary differences caused by investment tax
credits.
At December 31, 1996, organizational study, early retirement and severance
costs of $5 million are included in other deferred charges as a regulatory asset
and are being amortized over an eight-year period effective February 1994 as
approved in an order issued by the PSCN in 1994. These costs are a result of the
completion of a comprehensive organizational study started in 1993.
Other deferred charges as of December 31, 1996, also include $27.6 million for
deferred federal income taxes on customer advances for construction and $5.2
million for conservation programs.
OTHER DEFERRED CREDITS - Other deferred credits as of December 31, 1996, include
a regulatory liability of $17.6 million representing amounts to be refunded to
customers in the future as a result of the Company adopting FAS 109.
10 | INTERESTS IN JOINTLY OWNED ELECTRIC UTILITY FACILITIES
- -------------------------------------------------------------------------------
At December 31, 1996, the Company owned the following undivided interests in
jointly owned electric utility facilities:
Company's Share of
- -------------------------------------------------------------------------------
Construction
Percent Owned Plant Accumulated Net Plant Work In
by Company In Service Depreciation In Service Progress
(In thousands)
- -------------------------------------------------------------------------------
FACILITY |
Navajo Generating |
Station 11.3 | $137,936 $ 70,706 $ 67,230 $41,636
Mohave Generating |
Station 14.0 | 76,098 31,135 44,963 1,677
Reid Gardner Unit |
No. 4 Generating |
Station 32.2 | 139,770 41,003 98,767 827
- -------------------------------------------------------------------------------
Total $353,804 $142,844 $210,960 $44,140
- -------------------------------================================================
The amounts above for Navajo and Mohave include the Company's share of
transmission systems and general plant equipment and, in the case of Navajo, the
Company's share of the jointly owned railroad which delivers coal to the plant.
Each participant provides its own financing for all of these jointly owned
facilities. The Company's share of operating expenses for these facilities is
included in the corresponding operating expenses in the Statements of Income.
PAGE 33
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
11| QUARTERLY FINANCIAL DATA (UNAUDITED)
- -------------------------------------------------------------------------------
(In thousands, except per share amounts)
March 31 June 30 September 30 December 31
- -------------------------------------------------------------------------------
1996: |
Electric Revenues | $147,128 $199,468 $293,536 $165,242
Operating Income | 14,678 33,239 69,272 15,041
Net Income (Loss) | 3,518 21,182 57,435 (3,267)
Earnings (Loss) Available |
for Common Stock | 2,529 20,192 56,446 (4,255)
Earnings (Loss) per Average |
Common Share | .05 .42 1.17 (.09)
Dividends per Common Share | .40 .40 .40 .40
Common Stock Price per Share: |
High | 22 7/8 22 21 3/4 20 7/8
Low | 21 1/8 19 3/4 19 7/8 20
- --------------------------------|-----------------------------------------------
1995: |
Electric Revenues | $145,184 $173,348 $280,135 $151,314
Operating Income | 11,642 23,761 64,261 17,894
Net Income | 4,554 13,410 53,059 5,948
Earnings Available |
for Common Stock | 3,562 12,418 52,068 4,957
Earnings per Average |
Common Share | .08 .27 1.12 .11
Dividends per Common Share | .40 .40 .40 .40
Common Stock Price per Share: |
High | 21 3/8 21 1/4 22 1/2 22 7/8
Low | 19 1/4 19 5/8 19 1/8 20 7/8
- --------------------------------------------------------------------------------
The business of the Company is seasonal in nature and it is management's opinion
that comparisons of earnings for the quarters do not give a true indication of
overall trends and changes in the Company's operations.
The fourth quarter of 1996 reflects a write-off of $5.5 million, net of tax,
or 11 cents per average common share resulting from the PSCN order in the 1995
deferred energy case.
High and low common stock prices shown are as reported by the Wall Street
Journal as New York Stock Exchange Composite Transactions. The common stock is
also listed on the Pacific Stock Exchange.
Holders of common stock are entitled to dividends as are declared by the Board
of Directors, subject to the rights of the cumulative preferred stock and the
preference stock of the Company to quarterly cumulative dividends as declared
by the Board of Directors. The Company has paid quarterly dividends on its
common stock since August 1954.
The Company had 50,114 shareholders of record of common stock at December 31,
1996.
PAGE 34
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Nevada Power Company:
We have audited the balance sheets of Nevada Power Company as of December 31,
1996 and 1995, and the related statements of income, retained earnings and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Las Vegas, Nevada
February 14, 1997
REPORT OF MANAGEMENT
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------
The management of Nevada Power Company is responsible for the financial
statements presented in this report. Management prepared the financial
statements in conformity with generally accepted accounting principles
applicable to public utilities which are consistent in all material respects
with the accounting prescribed by the Public Service Commission of Nevada and
the Federal Energy Regulatory Commission. In preparing the financial statements,
management made informed judgments and estimates relating to events and
transactions being reported.
The Company has a system of internal accounting and financial controls and
procedures in place to insure that the financial records reflect the
transactions of the Company and that assets are safeguarded. This system is
examined by management on a continuing basis for effectiveness and efficiency
and is reviewed on a regular basis by an internal audit staff that reports
directly to the Audit Committee of the Board of Directors.
The financial statements have been audited by Deloitte & Touche LLP,
independent auditors. The auditors provide an objective, independent review as
to management's discharge of its responsibilities as they relate to the fairness
of reported operating results and financial condition. Their audit includes
procedures which provide them reasonable assurance that the financial statements
are not misleading and includes a review of the Company's system of internal
accounting and financial controls and a test of transactions.
The Board of Directors has oversight responsibility for determining that
management has fulfilled its obligation in the preparation of financial
statements and the ongoing examination of the Company's system of internal
accounting controls. The Audit Committee, which is composed solely of outside
directors, meets regularly with management, Deloitte & Touche LLP and the
internal audit staff to discuss accounting, auditing and financial reporting
matters. The Audit Committee reviews the program of audit work performed by the
internal audit staff. To insure auditor independence, both Deloitte & Touche LLP
and the internal audit staff have complete and free access to the Audit
Committee.
PAGE 35
<PAGE>
<PAGE>
<TABLE>
STATISTICAL SUMMARY 1996-1992
| NEVADA POWER COMPANY 1996 ANNUAL REPORT
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS |
(In thousands, except per share amounts):|
Electric Revenues: |
Residential | $ 354,883 $ 319,373 $ 331,671 $ 267,941 $ 245,160
Commercial and industrial | 394,743 383,080 380,223 326,006 305,707
Other electric sales | 45,683 38,700 43,732 48,504 42,011
Miscellaneous | 10,065 8,828 8,532 9,321 8,037
- -------------------------------------------|-----------------------------------------------------------------------
| 805,374 749,981 764,158 651,772 600,915
- -------------------------------------------|-----------------------------------------------------------------------
Net Income (a) | 78,868 76,971 81,870 73,548 56,780
Dividend Requirements on Preferred Stock | 3,956 3,966 3,976 3,986 4,262
Earnings Available for Common Stock (a) | $ 74,912 $ 73,005 $ 77,894 $ 69,562 $ 52,518
Weighted Average Number of Common |
Shares Outstanding | 47,976 46,288 42,784 39,482 35,652
Earnings per Average Common Share (a) | $ 1.56 $ 1.58 $ 1.82 $ 1.76 $ 1.47
Dividends per Common Share | $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60
|
CAPITALIZATION |
(In thousands, except per share amounts):|
Long-Term Debt | $ 840,964 $ 799,999 $ 712,571 $ 716,589 $ 715,451
Cumulative Preferred Stock | 38,000 38,000 38,000 38,000 38,000
Cumulative Preferred Stock with |
Mandatory Sinking Funds | 3,663 3,863 4,064 4,264 4,464
Common Shareholders' Equity | 800,154 764,361 731,749 645,924 532,473
Book Value per Common Share | $ 16.40 $ 16.25 $ 16.12 $ 15.56 $ 14.34
RETURN ON COMMON SHAREHOLDERS' EQUITY | 9.36% 9.55% 10.64% 10.77% 9.86%
|
ELECTRIC PLANT INVESTMENT (In thousands): |
Gross | $2,411,501 $2,247,923 $2,079,694 $1,901,448 $1,739,633
Depreciated | 1,818,930 1,701,120 1,584,003 1,450,146 1,328,670
TOTAL ASSETS (In thousands) | $2,162,824 $2,073,050 $1,907,389 $1,809,337 $1,557,040
CONSTRUCTION EXPENDITURES EXCLUDING |
AFUDC (In thousands) | $ 179,981 $ 176,395 $ 179,674 $ 157,458 $ 167,233
|
OPERATING AND SALES DATA: |
Generating Capacity and Firm |
Purchases (Megawatts) | 3,858 3,525 3,462 3,488 2,989
Peak Load (Megawatts) | 3,332 3,066 2,920 2,681 2,501
Electric Sales (Megawatthours) | 13,697,059 12,109,355 11,942,724 11,155,270 10,541,204
Number of Customers (Year-End) | 487,064 454,166 428,286 403,875 383,036
Average Annual Kilowatthour Sales |
per Residential Customer | 13,199 12,367 13,605 13,008 13,343
NUMBER OF EMPLOYEES (Year-End) | 1,792 1,761 1,759 1,741 1,734
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Amount for 1993 includes write-offs for deferred energy costs and
preliminary study costs for a cancelled coal-fired generating station
project. Amount for 1994 includes other income from the resolution
of a regulatory investigation of replacement power costs resulting
from a 1985 generating station accident. Amount for 1996 includes
a write-off resulting from the PSCN order in the 1995 deferred energy
case.
PAGE 36
<PAGE>
<PAGE>
<PAGE>
================================================================================
FINANCING AGREEMENT
Dated as of October 1, 1996
By and Between
COCONINO COUNTY, ARIZONA POLLUTION CONTROL CORPORATION
and
NEVADA POWER COMPANY
Relating to
$20,000,000
COCONINO COUNTY, ARIZONA POLLUTION CONTROL CORPORATION
POLLUTION CONTROL REVENUE BONDS
(NEVADA POWER COMPANY PROJECT)
SERIES 1996
================================================================================
The amounts payable to the Issuer (except for amounts payable to, and
certain rights and privileges of, the Issuer under Sections 4.2(d), 4.2(e), 5.3
and 6.4 hereof and any rights of the Issuer to receive any notices,
certificates, requests, requisitions or communications hereunder) and certain
other rights of the Issuer under this Financing Agreement have been pledged and
assigned under the Indenture of Trust dated as of October 1, 1996, between the
Issuer and United States Trust Company of New York, as Trustee.
<PAGE>
<PAGE>
FINANCING AGREEMENT
TABLE OF CONTENTS
(This Table of Contents is not a part of this Agreement
and is only for convenience of reference).
SECTION HEADING PAGE
Parties........................................................................1
Preambles......................................................................1
ARTICLE I Definitions.....................................................1
ARTICLE II Representations.................................................4
Section 2.1. Representations and Covenants by the Issuer...............4
Section 2.2. Representations by the Company............................5
ARTICLE III Completion of the Project; Issuance of the Bonds................5
Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds....5
Section 3.2. Agreement to Construct the Project; Amendment of
Description of the Project................................6
Section 3.3. Disbursements from the Construction Fund..................6
Section 3.4. Establishment of Completion Date; Obligation of Company
to Complete...............................................7
Section 3.5. Investment of Moneys in Funds.............................9
Section 3.6. Tax Exempt Status of Bonds...............................10
ARTICLE IV Loan and Provisions for Repayment..............................10
Section 4.1. Loan of Bond Proceeds....................................10
Section 4.2. Loan Repayments and Other Amounts Payable................10
Section 4.3. No Defense or Set-Off....................................12
Section 4.4. Payments Pledged and Assigned............................12
Section 4.5. Payment of the Bonds and Other Amounts...................12
ARTICLE V Special Covenants and Agreements...............................13
Section 5.1. Company to Maintain its Corporate Existence; Conditions
Under Which Exceptions Permitted.........................13
Section 5.2. Annual Statement.........................................13
Section 5.3. Maintenance and Repair; Insurance; Taxes; Etc............14
Section 5.4. Recordation and Other Instruments........................14
Section 5.5. No Warranty by the Issuer................................14
-i-
<PAGE>
Section 5.6. Agreement as to Ownership and Use of the Project.........14
Section 5.7. Information Reporting, Etc...............................14
Section 5.8. Limited Liability of Issuer..............................14
Section 5.9. Inspection of Project....................................15
ARTICLE VI Events of Default and Remedies.................................15
Section 6.1. Events of Default Defined................................15
Section 6.2. Remedies on Default......................................17
Section 6.3. No Remedy Exclusive......................................17
Section 6.4. Agreement to Pay Fees and Expenses of Counsel............18
Section 6.5. No Additional Waiver Implied by One Waiver; Consents to
Waivers..................................................18
ARTICLE VII Options and Obligations of Company; Prepayments;
Redemption of Bonds............................................19
Section 7.1. Option to Prepay.........................................19
Section 7.2. Obligation to Prepay.....................................19
Section 7.3. Notice of Prepayment.....................................19
ARTICLE VIII Miscellaneous..................................................19
Section 8.1. Notices..................................................19
Section 8.2. Assignments..............................................20
Section 8.3. Severability.............................................20
Section 8.4. Execution of Counterparts................................20
Section 8.5. Amounts Remaining in Bond Fund...........................20
Section 8.6. Amendments, Changes and Modifications....................20
Section 8.7. Governing Law............................................20
Section 8.8. Authorized Issuer and Company Representatives............21
Section 8.9. Term of the Agreement....................................21
Section 8.10. Cancellation at Expiration of Term.......................21
Section 8.11. Notice Regarding Cancellation of Contracts...............21
Signatures and Seals..........................................................22
EXHIBIT A -- Project Description
-ii-
<PAGE>
<PAGE>
This Financing Agreement made and entered into as of October 1, 1996, by
and between Coconino County, Arizona Pollution Control Corporation, an Arizona
nonprofit corporation and political subdivision of the State of Arizona, party
of the first part (hereinafter referred to as the "Issuer"), and Nevada Power
Company, a corporation duly organized and existing under the laws of the State
of Nevada, party of the second part (hereinafter referred to as the "Company").
WITNESSETH:
In consideration of the respective representations and agreements
hereinafter contained, the parties hereto agree as follows (provided, that in
the performance of the agreements of the party of the first part herein
contained, any obligation it may thereby incur shall not constitute or give rise
to a pecuniary liability or a charge upon its general credit or against its
taxing powers but shall be payable solely out of the Revenues (as hereinafter
defined) derived from this Financing Agreement and the Bonds, as hereinafter
defined):
ARTICLE I
DEFINITIONS
The following terms shall have the meanings specified in this Article
unless the context clearly requires otherwise. The singular shall include the
plural and the masculine shall include the feminine.
"Act" means Title 35, Chapter 6, Arizona Revised Statutes, and all acts
supplemental thereto or amendatory thereof.
"Administrative Expenses" means the reasonable expenses (including, without
limitation, the reasonable value of employee services and fees of Counsel)
incurred by the Issuer in connection with the Bonds, this Agreement, the
Indenture and any transaction or event contemplated by this Agreement or the
Indenture.
"Agreement" means this Financing Agreement between the Issuer and the
Company and all amendments and supplements hereto.
"Authorized Company Representative" means any person who, at the time,
shall have been designated as such by a written certificate furnished to the
Issuer and the Trustee containing the specimen signature of such person and
signed on behalf of the Company by any officer of the Company. Such certificate
may designate an alternate or alternates.
"Authorized Issuer Representative" means any person at the time designated
to act on behalf of the Issuer by a written certificate furnished to the Company
and the Trustee containing the specimen signature of such person and signed on
behalf of the Issuer by the
<PAGE>
<PAGE>
President, Vice President or Secretary. Such certificate may designate an
alternate or alternates.
"Bond" or "Bonds" means the Issuer's bonds identified in Section 2.02 of
the Indenture.
"Bond Counsel" means the counsel who renders the opinion as to the tax
exempt status of interest on the Bonds or such other nationally recognized
municipal bond counsel of recognized expertise with respect to such matters as
may be mutually acceptable to the Issuer, the Trustee and the Company.
"Bond Fund" means the fund created by Section 5.02 of the Indenture.
"Code" means the United States Internal Revenue Code of 1986, as amended,
and regulations promulgated or proposed thereunder.
"Company" means Nevada Power Company, a Nevada corporation, and its
successors and assigns and any surviving, resulting or transferee corporation as
permitted under Section 5.1 hereof.
"Completion Date" means the date of completion of the acquisition and
construction of the Project as that date shall be certified as provided in
Section 3.4 hereof.
"Construction Period" means the period between the beginning of
construction and equipping of the Project or the date on which the Bonds are
first delivered to the purchasers thereof, whichever is earlier, and the
Completion Date.
"Cost of the Project" means the sum of the items, or any such items,
authorized to be paid from the Construction Fund pursuant to the provisions of
Section 3.3 hereof.
"Counsel" means an attorney at law or a firm of attorneys (who may be an
employee of or counsel to the Issuer or the Company or the Trustee) duly
admitted to the practice of law before the highest court of any state of the
United States of America or of the District of Columbia.
"Extraordinary Services" and "Extraordinary Expenses" mean all services
rendered and all expenses (including fees and expenses of Counsel) incurred
under the Indenture and the Tax Agreement other than Ordinary Services and
Ordinary Expenses.
"Force Majeure" means acts of God, strikes, lockouts or other industrial
disturbances; acts of public enemies; orders or restraints of any kind of the
governments of the United States or of the State of Nevada or of the State, or
any of their departments, agencies or officials, or any civil or military
authority; insurrections; riots; landslides; lightning; earthquakes; fires;
tornadoes; volcanoes; storms; droughts; floods; explosions, breakage, or
malfunction or accident to machinery, transmission lines, pipes or canals, even
if resulting
-2-
<PAGE>
<PAGE>
from negligence; civil disturbances; or any other cause not reasonably within
the control of the Company.
"Governing Body" means the Board of Directors of the Issuer.
"Hereof", "herein", "hereunder" and other words of similar import refer to
this Agreement as a whole.
"Indenture" means the Indenture of Trust relating to this Agreement between
the Issuer and United States Trust Company of New York, as Trustee, of even date
herewith, pursuant to which the Bonds are authorized to be issued, including any
indentures supplemental thereto or amendatory thereof.
"Issuer" means Coconino County, Arizona Pollution Control Corporation and
any successor body to the duties or functions of the Issuer.
"Ordinary Services" and "Ordinary Expenses" mean those services normally
rendered and those expenses (including fees and expenses of Counsel) normally
incurred by a trustee under instruments similar to the Indenture and the Tax
Agreement.
"Owner" or "owner of Bonds" means the Person or Persons in whose name or
names a Bond shall be registered on books of the Issuer kept by the Bond
Registrar for that purpose in accordance with the terms of the Indenture.
"Person" means natural persons, firms, partnerships, associations,
corporations, trusts and public bodies.
"Project" means the Company's undivided interest in those facilities
described in Exhibit A to this Agreement.
"Project Certificate" means the Company's Project Certificate, delivered
concurrently with the issuance of the Bonds, with respect to certain facts which
are within the knowledge of the Company and certain reasonable assumptions of
the Company, to enable Chapman and Cutler, as Bond Counsel, to determine that
interest on the Bonds is not includable in the gross income of the Owners of the
Bonds for federal income taxes purposes.
"Rebate Fund" means the Rebate Fund, if any, created and established
pursuant to the Tax Agreement.
"State" means the State of Arizona.
"Tax Agreement" means the Tax Exemption Certificate and Agreement with
respect to the Bonds, dated the date of delivery of the Bonds, among the
Company, the Issuer and the Trustee, as from time to time amended and
supplemented.
-3-
<PAGE>
<PAGE>
"Tax-Exempt" means, with respect to interest on any obligations of a state
or local government, including the Bonds, that such interest is excluded from
the gross income of the holders thereof (other than any holder who is a
"substantial user" of facilities financed with such obligations or a "related
person" within the meaning of Section 103(b)(13) of the 1954 Code or Section
147(a) of the Code) for federal income tax purposes, whether or not such
interest is includable as an item of tax preference or otherwise includable
directly or indirectly for purposes of calculating other tax liabilities,
including any alternative minimum tax or environmental tax under the 1954 Code
or the Code.
"Trust Estate" means the property conveyed to the Trustee pursuant to the
Granting Clauses of the Indenture.
"Trustee" means United States Trust Company of New York, as Trustee under
the Indenture, and any successor Trustee appointed pursuant to the Indenture at
the time serving as Trustee thereunder, and any co-trustee serving as such
thereunder.
All other terms used herein which are defined in the Indenture shall have
the same meanings assigned them in the Indenture unless the context otherwise
requires.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS AND COVENANTS BY THE ISSUER. The Issuer
makes the following representations and covenants as the basis for the
undertakings on its part herein contained:
(a) The Issuer is a duly organized and existing nonprofit corporation
and political subdivision of the State. Under the provisions of the Act,
the Issuer is authorized to enter into the transactions contemplated by
this Agreement, the Indenture and the Tax Agreement and to carry out its
obligations hereunder and thereunder. The Issuer has duly authorized the
execution and delivery of this Agreement, the Indenture and the Tax
Agreement.
(b) The Bonds are to be issued under and secured by the Indenture,
pursuant to which certain of the Issuer's interests in this Agreement and
the Revenues derived by the Issuer pursuant to this Agreement will be
pledged and assigned as security for payment of the principal of, premium,
if any, and interest on, the Bonds.
(c) The Governing Body of the Issuer has found that the issuance of
the Bonds will further the public purposes of the Act.
(d) The Issuer has not assigned and will not assign any of its
interests in this Agreement other than pursuant to the Indenture.
-4-
<PAGE>
<PAGE>
(e) No member of the Governing Body of the Issuer, nor any other
officer of the Issuer, has any interest, financial, employment or other, in
the Company or in the transactions contemplated hereby.
SECTION 2.2. REPRESENTATIONS BY THE COMPANY. The Company makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Company is a corporation duly incorporated under the laws of
the State of Nevada and is in good standing in the State of Nevada, is
qualified to do business as a foreign corporation in the State and in all
other states and jurisdictions wherein the nature of the business
transacted by the Company or the nature of the property owned or leased by
it makes such licensing or qualification necessary, has power to enter into
and by proper corporate action has been duly authorized to execute and
deliver this Agreement and the Tax Agreement.
(b) Neither the execution and delivery of this Agreement or the Tax
Agreement, the consummation of the transactions contemplated hereby and
thereby, nor the fulfillment of or compliance with the terms and conditions
of this Agreement and the Tax Agreement, conflicts with or results in a
breach of any of the terms, conditions or provisions of any corporate
restriction or any agreement or instrument to which the Company is now a
party or by which it is bound, or constitutes a default under any of the
foregoing, or results in the creation or imposition of any lien, charge or
encumbrance whatsoever upon any of the property or assets of the Company
under the terms of any instrument or agreement other than the Indenture.
(c) The statements, information and descriptions contained in the
Project Certificate and the Tax Agreement, as of the date hereof and at the
time of the delivery of the Bonds to the Original Purchasers, are and will
be true, correct and complete, do not and will not contain any untrue
statement or misleading statement of a material fact, and do not and will
not omit to state a material fact required to be stated therein or
necessary to make the statements, information and descriptions contained
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE III
COMPLETION OF THE PROJECT; ISSUANCE OF THE BONDS
SECTION 3.1. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS. To
provide funds to finance the Cost of the Project, the Issuer agrees that it will
issue under the Indenture, sell and cause to be delivered to the purchasers
thereof, the Bonds. The Issuer will thereupon apply the proceeds received from
the sale of the Bonds as provided in the Indenture.
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SECTION 3.2. AGREEMENT TO CONSTRUCT THE PROJECT, AMENDMENT OF DESCRIPTION
OF THE PROJECT. The Company agrees that it will acquire, construct and
install, or complete the acquisition, construction and installation of, the
Project, and will acquire, construct and install all other facilities and real
and personal property deemed necessary for the operation of the Project,
substantially in accordance with the description of the Project as set forth in
Exhibit A hereto, subject to the provisions set forth in the Project
Certificate.
In the event that the Company desires to amend or supplement the
description of the Project as described in Exhibit A hereto, and the Issuer
approves of such amendment or supplement, the Issuer will enter into, and will
instruct the Trustee to consent to, such amendment or supplement upon receipt
of:
(i) a certificate of an Authorized Company Representative describing
in detail the proposed changes and stating that they will not have the
effect of disqualifying any component of the Project as a facility that may
be financed pursuant to the Act;
(ii) a copy of the proposed form of amended or supplemented Exhibit A
hereto, and
(iii) an opinion of Bond Counsel to the effect that such proposed
changes will not adversely affect the Tax-Exempt status of interest on the
Bonds.
SECTION 3.3. DISBURSEMENTS FROM THE CONSTRUCTION FUND. The Company will
authorize and direct the Trustee, upon compliance with Section 5.14 of the
Indenture, to disburse the moneys in the Construction Fund to or on behalf of
the Company only for the following purposes, subject to the provisions of
Section 3.6 hereof and the Project Certificate:
(a) Payment to the Company of such amounts, if any, as shall be
necessary to reimburse the Company in full for all advances and payments
made by it, at any time prior to or after the delivery of the Bonds, in
connection with (i) the preparation of plans and specifications for the
Project (including any preliminary study or planning of the Project or any
aspect thereof) and (ii) the acquisition, construction and installation of
the Project.
(b) Payment of the initial or acceptance fee of the Trustee, the fees
of the Trustee and any paying agent incurred during the Construction
Period, legal, underwriting, financial consulting, accounting and rating
agency fees and expenses and printing and engraving costs incurred in
connection with the authorization, sale and issuance of the Bonds, the
execution of the Indenture and the preparation of all other documents in
connection therewith; and payment of all fees, costs and expenses incurred
with respect to the preparation of this Agreement, the Indenture and the
Bonds, and all other documents in connection therewith.
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(c) Payment for labor, services, materials and supplies used by or
furnished to the Company to improve the site and to acquire and construct
the Project, as provided in the plans, specifications and work orders
therefor; payment of the costs of acquiring, constructing, and installing
utility services or other related facilities; payment of the costs of
acquiring all real and personal property deemed necessary to construct the
Project; and payment of the miscellaneous expenses incidental to any of the
foregoing items.
(d) Payment of the fees, if any, of architects, engineers, legal
counsel and supervisors expended in connection with the acquisition,
construction or installation of the Project.
(e) Payment of the taxes, assessments and other charges, if any, that
are incurred during the Construction Period with respect to the Project, or
reimbursement thereof, if paid by the Company.
(f) Payment of expenses incurred in seeking to enforce any remedy
against any contractor or subcontractor in respect of any default under a
contract relating to the acquisition, construction or installation of the
Project.
(g) Payment of interest on the Bonds during the construction of the
Project, but only to the extent provided by the Project Certificate.
(h) Payment of any other costs which constitute a part of the Cost of
the Project in accordance with generally accepted applicable accounting
principles, which are permitted by the Act and which will not adversely
affect the exemption from federal income taxes of interest on any of the
Bonds.
All moneys remaining in the Construction Fund after the Completion Date and
after payment or provision for payment of all other items provided for in the
preceding subsections (a) to (h), inclusive, of this Section, shall be used in
accordance with Section 5.14 of the Indenture.
SECTION 3.4. ESTABLISHMENT OF COMPLETION DATE; OBLIGATION OF COMPANY TO
COMPLETE. As soon as the Project is completed, the Company shall evidence the
Completion Date by providing to the Trustee and the Issuer a certificate of an
Authorized Company Representative stating the Cost of the Project and further
stating that (i) construction of the Project has been completed substantially in
accordance with the plans, specifications and work orders therefor, and all
labor, services, materials and supplies used in construction have been paid for,
and (ii) all other facilities necessary in connection with the Project have been
acquired, constructed and installed in accordance with the plans and
specifications and work orders therefor and all costs and expenses incurred in
connection therewith have been paid. Notwithstanding the foregoing, such
certificate may state that it is given without prejudice to any rights of the
Company against third parties for the payment of any amount not then due and
payable which exist at the date of such certificate or which may subsequently
exist.
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Moneys (including investment proceeds) remaining in the Construction Fund
on the date of such certificate may be used, at the direction of an Authorized
Company Representative, to the extent indicated, for transfer to the Bond Fund,
but only if, and to the extent that, the Trustee has been furnished with an
opinion of Bond Counsel to the effect that such transfer is permitted by the Act
and does not adversely affect the exemption from federal income taxes of
interest on any of the Bonds.
Any moneys (including investment proceeds) remaining in the Construction
Fund on the date of the aforesaid certificate and not transferred to the Bond
Fund shall on such date be placed by the Trustee in a separate escrow account in
the Construction Fund and used to pay all or part of the redemption price of
Bonds on the redemption date or dates selected by the Company; provided that,
until so used such moneys may also be used, at the direction of the Company, for
one or more of the following purposes:
(a) for the payment of the cost of any additional pollution control
facilities, provided that prior to such use this Agreement is amended in
accordance with Section 3.1 hereof to include such additional facilities
within the definition of Project as used herein;
(b) for any other purpose;
provided that, no moneys on deposit in such escrow account may be used for any
of the purposes specified in this paragraph unless and until the Company, at the
Company's expense, causes Bond Counsel to deliver to the Trustee an opinion of
Bond Counsel upon which the Trustee may rely to the effect that such use is
permitted by the Act and does not adversely affect the exemption from federal
income taxes of interest on any of the Bonds; and provided further that, until
used for one or more of the foregoing purposes, moneys on deposit in the escrow
account may be invested in investments authorized by Section 3.5 of this
Agreement, but may not be invested to produce a yield on such moneys (computed
from the Completion Date and taking into account any investment of such moneys
during the period from the Completion Date until such moneys were deposited in
such escrow account) greater than the yield on the Bonds, all as such terms are
used in and determined in accordance with relevant provisions of the Code and
regulations promulgated or proposed thereunder. In the event moneys remaining
in the Construction Fund at the Completion Date are used for the purpose
specified in (a) above, the provisions of this Agreement relating to and in
effect during the acquisition, construction and equipping of the Project shall
apply to such additional facilities.
In the event the moneys in the Construction Fund available for payment of
the Cost of the Project should be insufficient to pay the costs thereof in full,
the Company agrees to pay directly, or to deposit in the Construction Fund
moneys sufficient to pay, any costs of completing the Project in excess of the
moneys available for such purpose in the Construction Fund. The Issuer makes no
express or implied warranty that the moneys deposited in the Construction Fund
and available for payment of the Cost of the Project, under the provisions of
this Agreement, will be sufficient to pay all the amounts which may be incurred
for such Cost of the Project. The Company agrees that if, after exhaustion of
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the moneys in the provisions of this Section, it shall not be entitled to any
reimbursement therefor from the Issuer, from the Trustee or from the holders of
any of the Bonds, nor shall it be entitled to any diminution of the amounts
payable under Section 4.2 hereof.
SECTION 3.5. INVESTMENT OF MONEYS IN FUNDS. Except as otherwise herein
provided, any moneys held as a part of the Bond Fund or the Construction Fund
shall be invested or reinvested by the Trustee at the written direction, or the
oral direction promptly confirmed in writing, of an Authorized Company
Representative as to specific investments, to the extent permitted by law, in:
(a) bonds or other obligations of the United States of America;
(b) bonds or other obligations, the payment of the principal of and
interest on which is unconditionally guaranteed by the United States of
America;
(c) obligations issued or guaranteed as to principal and interest by
any agency or person controlled or supervised by and acting as an
instrumentality of the United States of America pursuant to authority
granted by the Congress of the United States of America;
(d) obligations issued or guaranteed by any state of the United
States of America, or any political subdivision of any such state, or in
funds consisting of such obligations to the extent described in Treasury
Regulation 1.148-8(e)(3)(iii);
(e) prime commercial paper;
(f) prime finance company paper;
(g) bankers' acceptances drawn on and accepted by commercial banks;
(h) repurchase agreements fully secured by obligations issued or
guaranteed as to principal and interest by the United States of America or
by any person controlled or supervised by and acting as an instrumentality
of the United States of America pursuant to authority granted by the
Congress of the United States of America;
(i) certificates of deposit issued by commercial banks, including
banks domiciled outside of the United States of America; and
(j) units of taxable government money market portfolios composed of
obligations guaranteed as to principal and interest by the United States of
America or repurchase agreements fully collateralized by such obligations.
The investments so purchased shall be held by the Trustee and shall be
deemed at all times a part of the Bond Fund or Construction Fund, as the case
may be, and the interest accruing thereon and any profit realized therefrom
shall be credited to such fund, subject to
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the provisions of the Tax Agreement. The Company agrees that to the extent any
moneys in the Bond Fund represent moneys held for the payment of the principal
of Bonds which have become due at maturity or on a redemption date and the
premium, if any, on such Bonds or interest due on Bonds in all cases where Bonds
have not been presented for payment and paid or such interest is unclaimed, such
moneys shall not be invested.
SECTION 3.6. TAX EXEMPT STATUS OF BONDS. The Company covenants and agrees
that it has not taken or permitted and will not take or permit any action which
results in interest paid on the Bonds being included in gross income of the
holders or beneficial owners of the Bonds for purposes of federal income
taxation (other than a holder or beneficial owner who is a "substantial user" of
the Project or a "related person" within the meaning of Section 147(a) of the
Code). The Company covenants that none of the proceeds of the Bonds or the
payments to be made under this Agreement, or any other funds which may be deemed
to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be
invested or used in such a way, and that no actions will be taken or not taken,
as to cause the Bonds to be treated as "arbitrage bonds" within the meaning of
Section 148(a) of the Code. Without limiting the generality of the foregoing,
the Company covenants and agrees that it will comply with the provisions of the
Tax Agreement and the Project Certificate.
ARTICLE IV
LOAN AND PROVISIONS FOR REPAYMENT
SECTION 4.1. LOAN OF BOND PROCEEDS. (a) The Issuer agrees, upon the terms
and conditions in this Agreement, to lend to the Company the proceeds (exclusive
of accrued interest, if any) received by the Issuer from the sale of the Bonds
in order to finance the Project and the Company agrees to apply the gross
proceeds of such loan to the financing of the Cost of the Project.
(b) The Issuer and the Company expressly reserve the right to enter into,
to the extent permitted by law, an agreement or agreements other than this
Agreement, with respect to the issuance by the Issuer, under an indenture or
indentures other than the Indenture, of obligations to provide additional funds
to refund all or any principal amount of the Bonds.
SECTION 4.2. LOAN REPAYMENTS AND OTHER AMOUNTS PAYABLE. (a) On each date
provided in or pursuant to the Indenture for the payment (whether at maturity or
upon redemption or acceleration) of principal of, and premium, if any, and
interest on, the Bonds, until the principal of, and premium, if any, and
interest on, the Bonds shall have been fully paid or provision for the payment
thereof shall have been made in accordance with the Indenture, the Company shall
pay to the Trustee in immediately available funds, for deposit in the Bond Fund,
as a repayment installment of the loan of the proceeds of the Bonds pursuant to
SectionE4.1 hereof, a sum equal to the amount payable on such date (whether at
maturity or upon redemption or acceleration) as principal of, and premium, if
any, and interest on, the Bonds as provided in the Indenture; and provided
further, that the obligation
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of the Company to make any such repayment installment shall be reduced by the
amount of any moneys then on deposit in the Bond Fund and available for such
payment.
(b) The Company agrees to pay to the Trustee (i) the fees of the Trustee
for the Ordinary Services rendered by it and an amount equal to the Ordinary
Expenses incurred by it under the Indenture and the Tax Agreement, as and when
the same become due, and (ii) the reasonable fees, charges and expenses of the
Trustee for reasonable Extraordinary Services and Extraordinary Expenses, as and
when the same become due, incurred under the Indenture and the Tax Agreement.
The Company agrees that the Trustee, its officers, agents, servants and
employees, shall not be liable for, and agrees that it will at all times
indemnify and hold harmless the Trustee, its officers, agents, servants and
employees against, and pay all expenses of the Trustee, its officers, agents,
servants and employees, relating to any lawsuit, proceeding or claim and
resulting from any action or omission taken or made by or on behalf of the
Trustee, its officers, agents, servants and employees pursuant to this
Agreement, the Indenture or the Tax Agreement, that may be occasioned by any
cause (other than the negligence or willful misconduct of the Trustee, its
officers, agents, servants and employees). In case any action shall be brought
against the Trustee in respect of which indemnity may be sought against the
Company, the Trustee shall promptly notify the Company in writing and the
Company shall be entitled to assume control of the defense thereof, including
the employment of Counsel and the payment of all expenses. The Trustee shall
have the right to employ separate Counsel in any such action and participate in
the defense thereof, but the fees and expenses of such Counsel shall be paid by
the Trustee unless the employment of such Counsel has been authorized by the
Company. The Company shall not be liable for any settlement of any such action
without its consent, but if any such action is settled with the consent of the
Company or if there be final judgment for the plaintiff in any such action, the
Company agrees to indemnify and hold harmless the Trustee from and against any
loss or liability by reason of such settlement or final judgment. The Company
agrees that the indemnification provided herein shall survive the termination of
this Agreement or the Indenture or the resignation of the Trustee.
(c) The Company agrees to pay all costs incurred in connection with the
issuance of the Bonds and the Issuer shall have no obligation with respect to
such costs.
(d) The Company agrees to indemnify and hold harmless the Issuer and any
member, officer, official or employee of the Issuer against any and all losses,
costs, charges, expenses, judgments and liabilities created by or arising out of
this Agreement, the Indenture or the Tax Agreement or otherwise incurred in
connection with the issuance of the Bonds. The Issuer may submit to the Company
periodic statements, not more frequently than monthly, for its Administrative
Expenses and the Company shall make payment to the Issuer of the full amount of
each such statement within 30 days after the Company receives such statement.
(e) In the event the Company shall fail to make any of the payments
required by (a) of this Section 4.2, the payment so in default shall continue as
an obligation of the Company until the amount in default shall have been fully
paid and the Company will pay interest to the extent permitted by law, on any
overdue amount at the rate of interest borne by the
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Bonds on the date on which such amount became due and payable until paid. In
the event that the Company shall fail to make any of the payments required by
(b), (c) or (d) of this Section 4.2, the payment so in default shall continue as
an obligation of the Company until the amount in default shall have been fully
paid, and the Company agrees to pay the same with interest thereon to the extent
permitted by law at a rate 1% above the rate of interest then charged by the
Trustee on 90-day commercial loans to its prime commercial borrowers until paid.
(f) In the event that moneys are not available for transfer from the Bond
Fund to the Rebate Fund as required by the Tax Agreement, the Company agrees to
pay any such amount required to be so transferred and not available for such
purpose in the Bond Fund by paying such amount to the Trustee for deposit
directly into the Rebate Fund. The obligation of the Company set forth in this
Section 4.2(f) shall survive the termination of this Agreement.
SECTION 4.3. NO DEFENSE OR SET-OFF. The obligation of the Company to make
the payments pursuant to this Agreement shall be absolute and unconditional
without defense or set-off by reason of any default by the Issuer under this
Agreement or under any other agreement between the Company and the Issuer or for
any other reason, it being the intention of the parties that the payments
required hereunder will be paid in full when due without any delay or diminution
whatsoever.
SECTION 4.4. PAYMENTS PLEDGED AND ASSIGNED. It is understood and agreed
that all payments required to be made by the Company pursuant to Section 4.2
hereof (except payments made to the Trustee pursuant to Section 4.2(b) hereof,
to the Issuer pursuant to Section 4.2(d) hereof and to either or both of the
foregoing pursuant to Section 4.2(e) hereof) and certain rights of the Issuer
hereunder are pledged and assigned by the Indenture. The Company consents to
such pledge and assignment. The Issuer hereby directs the Company and the
Company hereby agrees to pay or cause to be paid to the Trustee all said
amounts. The Project will not constitute any part of the security for the
Bonds.
SECTION 4.5. PAYMENT OF THE BONDS AND OTHER AMOUNTS. The Bonds and
interest and premium, if any, thereon shall be payable solely from (i) payments
made by the Company to the Trustee under Section 4.2(a) hereof, and (ii) other
moneys on deposit in the Bond Fund and available therefor.
Payments of principal of, and premium, if any, or interest on, the Bonds
with moneys in the Bond Fund constituting proceeds from the sale of the Bonds or
earnings on investments made under the provisions of the Indenture shall be
credited against the obligation to pay required by Section 4.2(a) hereof.
Whenever any Bonds are redeemable in whole or in part at the option of the
Company, the Trustee, on behalf of the Issuer, shall redeem the same upon the
request of the Company and such redemption (unless conditional) shall be made
from payments made by
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the Company to the Trustee under Section 4.2(a) hereof equal to the redemption
price of such Bonds.
Whenever payment or provision therefor has been made in respect of the
principal of, or premium, if any, or interest on, all or any portion of the
Bonds in accordance with the Indenture (whether at maturity or upon redemption
or acceleration or upon provision for payment in accordance with Article VII of
the Indenture), payments shall be deemed paid to the extent such payment or
provision therefor has been made and is considered to be a payment of principal
of, or premium, if any, or interest on, such Bonds. If such Bonds are thereby
deemed paid in full, the Trustee shall notify the Company and the Issuer that
such payment requirement has been satisfied. Subject to the foregoing, or
unless the Company is entitled to a credit under this Agreement or the
Indenture, all payments shall be in the full amount required by Section 4.2(a)
hereof.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. COMPANY TO MAINTAIN ITS CORPORATE EXISTENCE; CONDITIONS UNDER
WHICH EXCEPTIONS PERMITTED. The Company agrees that during the term of this
Agreement, it will maintain its corporate existence and its good standing in the
State of Nevada, will be qualified to do business as a foreign corporation in
the State, will not dissolve or otherwise dispose of all or substantially all of
its assets and will not consolidate with or merge into another corporation
unless the acquirer of its assets or the corporation with which it shall
consolidate or into which it shall merge shall (i) be a corporation organized
under the laws of one of the states of the United States of America, (ii) be
qualified to do business in the State, and (iii) assume in writing all of the
obligations of the Company under this Agreement and the Tax Agreement.
Any transfer of all or substantially all of the Company's assets to any of
its wholly owned subsidiaries shall not be deemed to constitute a "disposition
of all or substantially all of the Company's assets" within the meaning of the
preceding paragraph. Any such transfer of the Company's assets shall not
relieve the Company of any of its obligations under this Agreement.
SECTION 5.2. ANNUAL STATEMENT. The Company agrees to have an annual audit
made by its regular independent certified public accountants and to furnish the
Trustee (within thirty days after receipt by the Company) with a balance sheet
and statement of income and surplus showing the financial condition of the
Company and its consolidated subsidiaries, if any, at the close of each fiscal
year and the results of operations of the Company and its consolidated
subsidiaries, if any, for each fiscal year, accompanied by a report of said
accountants that such statements have been prepared in accordance with generally
accepted accounting principles. The Company's obligations under this Section
5.2 may be satisfied by delivering a copy of the Company's Annual Report to the
Trustee at the same time that it is mailed to stockholders.
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SECTION 5.3. MAINTENANCE AND REPAIR; INSURANCE; TAXES; ETC.. The Company
shall maintain or cause to be maintained the Project in good repair and keep it
properly insured and shall promptly pay or cause to be paid all costs thereof.
The Company shall promptly pay or cause to be paid all installments of taxes,
installments of special assessments, and all governmental, utility and other
charges with respect to the Project, when due. The Company may, at its own
expense and in its own name in good faith contest or appeal any such taxes,
assessments or other charges, or installments thereof, but shall not permit any
such taxes, assessments or other charges, or installments thereof, to remain
unpaid if such nonpayment shall subject the Project or any part thereof to loss
or forfeiture.
SECTION 5.4. RECORDATION AND OTHER INSTRUMENTS. The Company shall cause
such security agreements, financing statements and all supplements thereto and
other instruments as may be required from time to time to be kept, to be
recorded and filed in such manner and in such places as may be required by law
in order to fully preserve, protect and perfect the security of the Owners of
the Bonds and the rights of the Trustee, and to perfect the security interest
created by the Indenture. The Company agrees to abide by the provisions of
Section 4.04 of the Indenture to the extent applicable to the Company.
SECTION 5.5. NO WARRANTY BY THE ISSUER. The Issuer makes no warranty,
either express or implied, as to the Project or that it will be suitable for the
purposes of the Company or needs of the Company.
SECTION 5.6. AGREEMENT AS TO OWNERSHIP AND USE OF THE PROJECT. The Issuer
and the Company agree that title to the Project shall be in and remain in the
Company, and that the Project shall be the sole property of the Company in which
the Issuer shall have no interest.
SECTION 5.7. INFORMATION REPORTING, ETC.. The Issuer covenants and agrees
that, upon the direction of the Company or Bond Counsel, it will mail or cause
to be mailed to the Secretary of the Treasury (or his designee as prescribed by
regulation, currently the Internal Revenue Service Center, Philadelphia, PA
19255) a statement setting forth the information required by Section 149(e) of
the Code, which statement shall be in the form of the Information Return for Tax
- -Exempt Private Activity Bond Issues (Form 8038) of the Internal Revenue Service
(or any successor form) and which shall be completed based in
part upon information supplied by the Company and Bond Counsel.
SECTION 5.8. LIMITED LIABILITY OF ISSUER. Any obligation or liability of
the Issuer created by or arising out of this Agreement or otherwise incurred in
connection with the issuance of the Bonds (including without limitation any
liability created by or arising out of the representations, warranties or
covenants set forth herein or otherwise) shall not impose a debt or pecuniary
liability upon the Issuer or the State or any political subdivision thereof, or
a charge upon the general credit or taxing powers of any of the foregoing, but
shall be payable solely out of the Revenues or other amounts payable by the
Company to the Issuer hereunder or otherwise.
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Neither the issuance of the Bonds nor the delivery of this Agreement shall,
directly or indirectly or contingently, obligate the Issuer or the State or any
political subdivision thereof to levy any form of taxation therefor or to make
any appropriation for their payment. Nothing in the Bonds or in the Indenture
or this Agreement or the proceedings of the Issuer authorizing the Bonds or in
the Act or in any other related document shall be construed to authorize the
Issuer to create a debt of the Issuer or the State or any political subdivision
thereof within the meaning of any constitutional or statutory provision of the
State. The principal of, and premium, if any, and interest on, the Bonds shall
be payable solely from the funds pledged for their payment in accordance with
the Indenture and available therefor under this Agreement. Neither the State
nor any political subdivision thereof shall in any event be liable for the
payment of the principal of, premium, if any, or interest on, the Bonds or for
the performance of any pledge, obligation or agreement of any kind whatsoever
which may be undertaken by the Issuer. No breach of any such pledge, obligation
or agreement may impose any pecuniary liability upon the Issuer or the State or
any political subdivision thereof, or any charge upon the general credit or
against the taxing power of the Issuer or the State or any political subdivision
thereof.
SECTION 5.9. INSPECTION OF PROJECT. The Company agrees that the Issuer
and the Trustee and their duly authorized representatives shall have the right
at all reasonable times to enter upon and examine and inspect the Project
property and shall also be permitted, at all reasonable times, to examine the
books and records of the Company insofar as they relate to the Project.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT DEFINED. The following shall be "events of
default" under this Agreement and the terms "event of default" or "default"
shall mean, whenever they are used in this Agreement, any one or more of the
following events:
(a) Failure by the Company to pay when due any amounts required to be
paid under Section 4.2(a) hereof, which failure results in an event of
default under subparagraph (a) or (b) of Section 8.01 of the Indenture; or
(b) Failure by the Company to observe and perform any covenant,
condition or agreement on its part to be observed or performed in this
Agreement, other than as referred to in (a) above, for a period of 90 days
after written notice, or in the case of failure by the Company to observe
and perform any covenant, condition or agreement on its part to be observed
or performed in Section 4.2(f) hereof, for a period of 30 days after
written notice, specifying such failure and requesting that it be remedied
and stating that such notice is a "Notice of Default" hereunder, given to
the Company by the Trustee or to the Company and the Trustee by the Issuer,
unless the Issuer and the Trustee shall agree in writing to an extension of
such time prior to its expiration; provided, however, if the failure stated
in the notice cannot be corrected within the
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applicable period, the Issuer and the Trustee will not unreasonably
withhold their consent to an extension of such time if corrective action is
instituted within the applicable period and diligently pursued until the
failure is corrected and such corrective action or diligent pursuit is
evidenced to the Trustee by a certificate of an Authorized Company
Representative; or
(c) A proceeding or case shall be commenced, without the application
or consent of the Company, in any court of competent jurisdiction seeking
(i) liquidation, reorganization, dissolution, winding-up or composition or
adjustment of debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company or of all or any
substantial part of its assets, or (iii) similar relief under any law
relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, and such proceeding or cause shall
continue undismissed, or an order, judgment, or decree approving or
ordering any of the foregoing shall be entered and shall continue in effect
for a period of 90 days; or an order for relief against the Company shall
be entered against the Company in an involuntary case under the United
States Bankruptcy Code (as now or hereafter in effect) or other applicable
law; or
(d) The Company shall admit in writing its inability to pay its debts
generally as they become due or shall file a petition in voluntary
bankruptcy or shall make any general assignment for the benefit of its
creditors, or shall consent to the appointment of a receiver or trustee of
all or substantially all of its property, or shall commence a voluntary
case under the United States Bankruptcy Code (as now or hereafter in
effect), or shall file in any court of competent jurisdiction a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of
debts, or shall fail to controvert in a timely or appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary
case under such United States Bankruptcy Code or other applicable law; or
(e) Dissolution or liquidation of the Company; provided that the term
"dissolution or liquidation of the Company" shall not be construed to
include the cessation of the corporate existence of the Company resulting
either from a merger or consolidation of the Company into or with another
corporation or a dissolution or liquidation of the Company following a
transfer of all or substantially all of its assets as an entirety, under
the conditions permitting such actions contained in Section 5.1 hereof; or
(f) The occurrence of an "event of default" under the Indenture.
The foregoing provisions of Section 6.1(b) are subject to the following
limitations: If by reason of Force Majeure the Company is unable in whole or in
part to carry out its agreements on its part herein contained, other than the
obligations on the part of the Company contained in Article IV and Sections 5.3
and 6.4 hereof, the Company shall not be deemed in default during the
continuance of such inability. The Company agrees, however,
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<PAGE>
<PAGE>
to remedy with all reasonable dispatch the cause or causes preventing the
Company from carrying out its agreements; provided that the settlement of
strikes, lockouts and other industrial disturbances shall be entirely within the
discretion of the Company and the Company shall not be required to make
settlement of strikes, lockouts and other industrial disturbances by acceding to
the demands of the opposing party or parties when such course is in the sole
judgment of the Company unfavorable to the Company.
SECTION 6.2. REMEDIES ON DEFAULT. Whenever any event of default referred
to in Section 6.1 hereof shall have happened and be continuing, the Trustee, as
assignee of the Issuer:
(a) shall, by notice in writing to the Company, declare the unpaid
indebtedness under Section 4.2(a) hereof to be due and payable immediately,
if concurrently with or prior to such notice the unpaid principal amount of
the Bonds shall have been declared to be due and payable, and upon any such
declaration the same (being an amount sufficient, together with other
moneys available therefor in the Bond Fund, to pay the unpaid principal of,
premium, if any, and interest accrued on, the Bonds) shall become and shall
be immediately due and payable as liquidated damages; and
(b) may take whatever action at law or in equity as may appear
necessary or desirable to collect the payments and other amounts then due
and thereafter to become due hereunder or to enforce performance and
observance of any obligation, agreement or covenant of the Company under
this Agreement.
Any amounts collected pursuant to action taken under this Section 6.2 shall
be paid into the Bond Fund (unless otherwise provided in this Agreement) and
applied in accordance with the provisions of the Indenture. No action taken
pursuant to this Section 6.2 shall relieve the Company from the Company's
obligations pursuant to Section 4.2 hereof.
No recourse shall be had for any claim based on this Agreement against any
officer, director or stockholder, past, present or future, of the Company as
such, either directly or through the Company, under any constitutional
provision, statute or rule of law, or by the enforcement of any assessment or by
any legal or equitable proceeding or otherwise.
Nothing herein contained shall be construed to prevent the Issuer from
enforcing directly any of its rights under the Sections 4.2(d), 4.2(e), 5.3 and
6.4 hereof.
SECTION 6.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Issuer is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement or now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise
any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Issuer or the Trustee to exercise any remedy reserved to it
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<PAGE>
<PAGE>
in this Article, it shall not be necessary to give any notice, other than such
notice as may be herein expressly required. Subject to the provisions of the
Indenture and hereof, such rights and remedies as are given the Issuer hereunder
shall also extend to the Trustee. The Owners of the Bonds, subject to the
provisions of the Indenture, shall be entitled to the benefit of all covenants
and agreements herein contained.
SECTION 6.4. AGREEMENT TO PAY FEES AND EXPENSES OF COUNSEL. In the event
the Company should default under any of the provisions of this Agreement and the
Issuer or the Trustee should employ Counsel or incur other expenses for the
collection of the indebtedness hereunder or the enforcement of performance or
observance of any obligation or agreement on the part of the Company herein
contained, the Company agrees that it will on demand therefor pay to the
Trustee, the Issuer or, if so directed by the Issuer, to the Counsel for the
Issuer, the reasonable fees of such Counsel and such other expenses so incurred
by or on behalf of the Issuer or the Trustee.
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER; CONSENTS TO
WAIVERS. In the event any agreement contained in this Agreement should be
breached by either party and thereafter waived by the other party, such waiver
shall be limited to the particular breach so waived and shall not be deemed to
waive any other breach hereunder. No waiver shall be effective unless in
writing and signed by the party making the waiver. The Issuer shall have no
power to waive any default hereunder by the Company without the consent of the
Trustee to such waiver. The Trustee shall have the power to waive any default
by the Company hereunder, except a default under Section 3.6, 4.2(d), 5.3 or 6.4
hereof, or under Section 4.2(e) hereof in so far as it pertains to the Issuer,
without the prior written concurrence of the Issuer. Notwithstanding the
foregoing, if, after the acceleration of the maturity of the outstanding Bonds
by the Trustee pursuant to Section 8.02 of the Indenture, (i) all arrears of
principal of and interest on the outstanding Bonds and interest on overdue
principal and (to the extent permitted by law) on overdue installments of
interest at the rate of interest borne by the Bonds on the date on which such
principal or interest became due and payable and the premium, if any, on all
Bonds then Outstanding which have become due and payable otherwise than by
acceleration, and all other sums payable under the Indenture, except the
principal of and the interest on such Bonds which by such acceleration shall
have become due and payable, shall have been paid, (ii) all other things shall
have been performed in respect of which there was a default, (iii) there shall
have been paid the reasonable fees and expenses of the Trustee and of the Owners
of such Bonds, including reasonable attorneys' fees paid or incurred and (iv)
such event of default under the Indenture shall be waived in accordance with
Section 8.09 of the Indenture with the consequence that such acceleration under
Section 8.02 of the Indenture is rescinded, then the Company's default hereunder
shall be deemed to have been waived and its consequences rescinded and no
further action or consent by the Trustee or the Issuer shall be required;
provided that there has been furnished an opinion of Bond Counsel to the effect
that such waiver will not adversely affect the exemption from federal income
taxes of interest on the Bonds.
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<PAGE>
<PAGE>
ARTICLE VII
OPTIONS AND OBLIGATIONS OF COMPANY;
PREPAYMENTS; REDEMPTION OF BONDS
SECTION 7.1. OPTION TO PREPAY. The Company shall have, and is hereby
granted, the option to prepay the payments due hereunder in whole or in part at
any time or from time to time (a) to provide for the redemption of Bonds
pursuant to the provisions of Section 3.01 or 3.02 of the Indenture or (b) to
provide for the defeasance of the Bonds pursuant to Article VII of the
Indenture. In the event the Company elects to provide for the redemption of
Bonds as permitted by this Section, the Company shall notify and instruct the
Trustee in accordance with Section 7.3 hereof to redeem all or any portion of
the Bonds in advance of maturity. If the Company so elects, any redemption of
Bonds pursuant to Section 3.01 or 3.02 of the Indenture may be made conditional.
SECTION 7.2. OBLIGATION TO PREPAY. The Company covenants and agrees that
if all or any part of the Bonds are unconditionally called for redemption in
accordance with the Indenture or become subject to mandatory redemption, it will
prepay the indebtedness hereunder in whole or in part, prior to the date on
which notice of such redemption is given to the owners of such Bonds, in an
amount sufficient to redeem such Bonds on the date fixed for the redemption of
the Bonds.
SECTION 7.3. NOTICE OF PREPAYMENT. Upon the exercise of the option
granted to the Company in Section 7.1 hereof, or upon the Company having
knowledge of the occurrence of any event requiring mandatory redemption of the
Bonds in accordance with Section 3.03 of the Indenture, the Company shall give
written notice to the Issuer and the Trustee. The notice shall provide for the
date of the application of the prepayment made by the Company hereunder to the
retirement of the Bonds in whole or in part pursuant to call for redemption and
shall be given by the Company not less than 45 days prior to the date of the
redemption which is to occur as a result of such prepayment (or such later date
as is acceptable to the Trustee and the Issuer), and in the case of a redemption
of Bonds pursuant to Section 3.03 of the Indenture shall be given on a date
which will permit the redemption of the Bonds within the time required by
Section 3.03 of the Indenture.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. NOTICES. Except as otherwise expressly provided herein, all
notices, certificates or other communications hereunder shall be sufficiently
given and shall be deemed given on the day on which the same have been mailed by
first class mail postage prepaid, or delivered by hand, or sent by telecopy or
similar facsimile transmission, as follows: if to the Issuer, c/o Mangum, Wall,
Stoops, & Warden, P.L.L.C., 222 East Birch Avenue, Flagstaff, Arizona 86001, or
to telecopy number (520) 773-1312, if to the Company, at P.O. Box 230, 6226 West
Sahara Avenue, Las Vegas, Nevada 89151, or to
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<PAGE>
<PAGE>
telecopy number (702) 367-5864, Attention: Treasurer; if to the Trustee, at 114
West 47th Street, New York, New York 10036-1532, or to telecopy number (212)
852-1625, Attention: Corporate Trust Administration; provided, however, that
notice to the Trustee shall be deemed given when received by the Trustee. A
duplicate copy of each notice, certificate or other communication given
hereunder by either the Issuer or the Trustee to the other shall also be
given to the Company. The Issuer, the Company and the Trustee may, by
notice given hereunder, designate any further or different addresses to
which subsequent notices, certificates or other communications shall be sent.
SECTION 8.2. ASSIGNMENTS. This Agreement may not be assigned by either
party without consent of the other, except that the Issuer shall assign to the
Trustee its rights under this Agreement (except under Sections 4.2(d), 4.2(e),
5.3, and 6.4 hereof) as provided by Section 4.4 hereof, and the Company may
assign its rights under this Agreement to any transferee or any surviving or
resulting corporation as provided by Section 5.1 hereof.
SECTION 8.3. SEVERABILITY. If any provision of this Agreement shall be
held or deemed to be or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative, or unenforceable to
any extent whatever.
SECTION 8.4. EXECUTION OF COUNTERPARTS. This Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
SECTION 8.5. AMOUNTS REMAINING IN BOND FUND. It is agreed by the parties
hereto that after payment in full of (i) the Bonds (or provision for payment
thereof having been made in accordance with the provisions of the Indenture),
(ii) the fees, charges and expenses of the Trustee in accordance with the
Indenture, (iii) the Administrative Expenses, (iv) the fees and expenses of the
Issuer and (v) all other amounts required to be paid under this Agreement and
the Indenture, any amounts remaining in the Bond Fund shall belong to and be
paid to the Company by the Trustee.
SECTION 8.6. AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement may be
amended, changed, modified, altered or terminated only by written instrument
executed by the Issuer and the Company as provided in Section 11.01 and Section
11.02 of the Indenture, and, under either such Section, only if the written
consent of the Trustee to the amendment, change or modification is obtained and
provided, however, that the Issuer shall not thereby incur any monetary
obligation or liability (except only to the extent that the same shall be
payable solely and only out of funds provided or to be provided by the Company)
or surrender or abdicate in whole or in part any of its essential governmental
functions or powers or any of its discretion in exercising the same.
SECTION 8.7. GOVERNING LAW. This Agreement shall be governed exclusively
by and construed in accordance with the applicable laws of the State.
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<PAGE>
<PAGE>
SECTION 8.8. AUTHORIZED ISSUER AND COMPANY REPRESENTATIVES. Whenever
under the provisions of this Agreement the approval of the Issuer or the Company
is required to take some action at the request of the other, such approval of
such request shall be given for the Issuer by the Authorized Issuer
Representative and for the Company by the Authorized Company Representative, and
the other party hereto and the Trustee shall be authorized to act on any such
approval or request and neither party hereto shall have any complaint against
the other or against the Trustee as a result of any such action taken.
SECTION 8.9. TERM OF THE AGREEMENT. This Agreement shall be in full force
and effect from its date to and including such date as all of the Bonds issued
under the Indenture shall have been fully paid or retired (or provision for such
payment shall have been made as provided in the Indenture), provided that all
representations and certifications by the Company as to all matters affecting
the tax-exempt status of the Bonds and the covenants of the Company in Sections
4.2(b), 4.2(c), 4.2(d), 4.2(e) and 4.2(f) hereof shall survive the termination
of this Agreement.
SECTION 8.10. CANCELLATION AT EXPIRATION OF TERM. At the acceleration,
termination or expiration of the term of this Agreement and following full
payment of the Bonds or provision for payment thereof and of all other fees and
charges having been made in accordance with the provisions of this Agreement and
the Indenture, the Issuer shall deliver to the Company any documents and take or
cause the Trustee to take such actions as may be necessary to effectuate the
cancellation and evidence the termination of this Agreement.
SECTION 8.11. NOTICE REGARDING CANCELLATION OF CONTRACTS. As required by
the provisions of Section 38-511, Arizona Revised Statutes, as amended, notice
is hereby given that political subdivisions of the State of Arizona or any of
their departments or agencies may, within three (3) years of its execution,
cancel any contract, without penalty or further obligation, made by the
political subdivisions or any of their departments or agencies on or after
September 30, 1988, if any person significantly involved in initiating,
negotiating, securing, drafting or creating the contract on behalf of the
political subdivisions or any of their departments or agencies is, at any time
while the contract or any extension of the contract is in effect, an employee or
agent of any other party to the contract in any capacity or a consultant to any
other party of the contract with respect to the subject matter of the contract.
The cancellation shall be effective when written notice from the chief executive
officer or governing body of the political subdivision is received by all other
parties to the contract unless the notice specifies a later time.
The Company covenants and agrees not to employ as an employee, agent or,
with respect to the subject matter of the Agreement, a consultant, any person
significantly involved in initiating, negotiating, securing, drafting or
creating this Agreement on behalf of the Issuer within three (3) years from the
execution hereof, unless a waiver is provided by the Issuer.
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<PAGE>
<PAGE>
IN WITNESS WHEREOF, Issuer has caused these presents to be signed in its
name and behalf by its Vice President and attested by its Secretary, and the
----
Company has caused these presents to be signed in its name and behalf by one
of its Vice President/CFO and its official seal to be hereunto affixed, and
------------------
the same to be attested by one of its Vice President/Secretary, all as of the
------------------------
date first above written.
COCONINO COUNTY, ARIZONA POLLUTION
CONTROL CORPORATION
JOSEPH R. GEE
By--------------------------
VICE President
----
Attest:
TERRANCE J. RICE
- ---------------------------------
Secretary
NEVADA POWER COMPANY
By STEVEN W. RIGAZIO
------------------------
VICE PRESIDENT/CFO
Its -------------------------
(Seal)
Attest:
RICHARD L. HINCKLEY
- ---------------------------------
Its VICE PRESIDENT/SECRETARY
-----------------------------
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<PAGE>
<PAGE>
EXHIBIT A
PROJECT DESCRIPTION
The Project consists of the undivided interest of Nevada Power Company in
the flue gas desulfurization system, including functionally related and
subordinate facilities, being installed for the removal of sulfur dioxide from
combustion gases prior to discharge into the atmosphere, at the Navajo
Generating Station owned by Nevada Power Company and others and located in
Coconino County, Arizona.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF NEVADA POWER COMPANY AS OF DECEMBER 31, 1996 AND THE RELATED STATEMENTS
OF INCOME, CASH FLOWS AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $1,818,930
<OTHER-PROPERTY-AND-INVEST> 10,734
<TOTAL-CURRENT-ASSETS> 130,645
<TOTAL-DEFERRED-CHARGES> 202,515
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,162,824
<COMMON> 51,990
<CAPITAL-SURPLUS-PAID-IN> 630,804
<RETAINED-EARNINGS> 117,360
<TOTAL-COMMON-STOCKHOLDERS-EQ> 800,154
38,000
3,663
<LONG-TERM-DEBT-NET> 748,549
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 300
200
<CAPITAL-LEASE-OBLIGATIONS> 92,415
<LEASES-CURRENT> 5,214
<OTHER-ITEMS-CAPITAL-AND-LIAB> 474,329
<TOT-CAPITALIZATION-AND-LIAB> 2,162,824
<GROSS-OPERATING-REVENUE> 805,374
<INCOME-TAX-EXPENSE> 44,970
<OTHER-OPERATING-EXPENSES> 628,174
<TOTAL-OPERATING-EXPENSES> 673,144
<OPERATING-INCOME-LOSS> 132,230
<OTHER-INCOME-NET> (3,876)
<INCOME-BEFORE-INTEREST-EXPEN> 128,354
<TOTAL-INTEREST-EXPENSE> 49,486
<NET-INCOME> 78,868
3,956
<EARNINGS-AVAILABLE-FOR-COMM> 74,912
<COMMON-STOCK-DIVIDENDS> 76,412
<TOTAL-INTEREST-ON-BONDS> 47,792
<CASH-FLOW-OPERATIONS> 154,990
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 0<F1>
<FN>
<F1>INAPPLICABLE
</FN>
<PAGE>
</TABLE>
