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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1997 Commission File No. 1-4698
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Nevada Power Company
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(Exact name of registrant as specified in its charter)
Nevada 88-0045330
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6226 West Sahara Avenue, Las Vegas, Nevada 89102
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(Address of principal executive offices) (Zip Code)
(702) 367-5000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
Common Stock outstanding October 29, 1997, 50,100,323 shares.
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PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
FOR THE FOR THE
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
ELECTRIC REVENUES ..................... $284,994 $293,536 $640,318 $640,132
OPERATING EXPENSES AND TAXES:
Fuel ............................. 49,712 40,759 105,272 84,897
Purchased and interchanged power . 96,821 91,627 225,342 208,451
Deferred energy cost
adjustments, net ................ (24,797) (1,120) (46,397) 5,271
-------- -------- -------- --------
Net energy costs ................ 121,736 131,266 284,217 298,619
Other production operations ...... 6,168 4,848 15,154 12,447
Other operations ................. 27,079 26,807 75,330 74,717
Maintenance and repairs .......... 13,610 9,937 41,213 32,753
Provision for depreciation ....... 16,747 15,536 48,933 45,769
General taxes .................... 5,282 5,078 15,740 15,007
Federal income taxes ............. 27,889 30,792 41,510 43,631
-------- -------- -------- --------
218,511 224,264 522,097 522,943
-------- -------- -------- --------
OPERATING INCOME ...................... 66,483 69,272 118,221 117,189
-------- -------- -------- --------
OTHER INCOME (EXPENSES):
Allowance for other funds used
during construction ............. 2,116 1,849 6,270 5,300
Miscellaneous, net ............... (1,046) (1,406) (2,742) (3,614)
-------- -------- -------- --------
1,070 443 3,528 1,686
-------- -------- -------- --------
INCOME BEFORE INTEREST DEDUCTIONS ..... 67,553 69,715 121,749 118,875
-------- -------- -------- --------
INTEREST DEDUCTIONS:
Interest on long-term debt ....... 12,583 11,919 37,546 35,597
Other interest ................... 407 796 1,155 2,253
Allowance for borrowed funds used
during construction ............. (621) (435) (1,960) (1,110)
-------- -------- -------- --------
12,369 12,280 36,741 36,740
-------- -------- -------- --------
INCOME BEFORE DISTRIBUTION REQUIREMENTS
ON PREFERRED SECURITIES .............. 55,184 57,435 85,008 82,135
-------- -------- -------- --------
Distribution requirements
on company-obligated mandatorily
redeemable preferred securities
of subsidiary trust ............. 2,437 - 4,820 -
-------- -------- -------- --------
NET INCOME ............................ 52,747 57,435 80,188 82,135
-------- -------- -------- --------
DIVIDEND REQUIREMENTS ON PREFERRED
STOCK ................................ 46 989 1,080 2,968
-------- -------- -------- --------
EARNINGS AVAILABLE FOR COMMON STOCK ... $ 52,701 $ 56,446 $ 79,108 $ 79,167
======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING .......................... 49,902 48,209 49,499 47,757
======== ======== ======== ========
EARNINGS PER AVERAGE COMMON SHARE ..... $ 1.06 $ 1.17 $ 1.60 $ 1.66
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE ............ $ 0.40 $ 0.40 $ 1.20 $ 1.20
======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
September 30, December 31,
1997 1996
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(In Thousands)
ELECTRIC PLANT:
Original cost ..................................... $2,301,822 $2,194,947
Less accumulated depreciation ..................... 633,400 592,571
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Net plant in service ............................ 1,668,422 1,602,376
Construction work in progress ..................... 157,369 140,420
Other plant, net .................................. 73,016 76,134
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1,898,807 1,818,930
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INVESTMENTS ......................................... 12,937 10,734
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CURRENT ASSETS:
Cash and temporary cash investments ............... 372 2,544
Customer receivables .............................. 108,585 66,682
Other receivables ................................. 18,850 6,472
Fuel stock and materials and supplies ............. 46,904 36,605
Deferred energy asset ............................. 17,279 -
Deferred taxes on deferred energy liability ....... - 10,139
Prepayments ....................................... 8,334 8,203
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200,324 130,645
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DEFERRED CHARGES .................................... 204,865 202,515
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$2,316,933 $2,162,824
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholders' equity:
Common stock, 50,027,808 and 48,785,846
shares issued and outstanding, respectively .... $ 53,232 $ 51,990
Premium and unamortized expense on capital stock 656,127 630,804
Retained earnings ............................... 134,077 117,360
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843,436 800,154
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Cumulative preferred stock ........................ 3,464 41,663
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Company-obligated mandatorily redeemable preferred
securities of the Company's subsidiary trust, NVP
Capital I, holding solely $122.6 million principal
amount of 8.2% junior subordinated debentures of
the Company, due 2037 ............................ 118,872 -
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Long-term debt .................................... 821,323 840,964
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1,787,095 1,682,781
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CURRENT LIABILITIES:
Current maturities and sinking fund requirements .. 20,175 5,714
Accounts payable .................................. 83,890 58,289
Accrued taxes ..................................... 28,605 6,372
Accrued interest .................................. 9,928 6,039
Deferred energy liability ......................... - 28,725
Deferred taxes on deferred energy asset ........... 6,048 -
Customers' service deposits and other ............. 34,581 36,151
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183,227 141,290
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DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred investment tax credits ................... 29,909 31,004
Deferred taxes on income .......................... 240,948 234,209
Customers' advances for construction and other .... 75,754 73,540
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346,611 338,753
---------- ----------
$2,316,933 $2,162,824
========== ==========
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
--------------------
1997 1996
--------------------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................... $ 80,188 $ 82,135
Adjustments to reconcile net income to net cash
provided-
Depreciation and amortization ...................... 56,392 52,316
Deferred income taxes and investment tax credits ... 15,944 4,112
Allowance for other funds used during construction . (6,270) (5,300)
Changes in-
Receivables ........................................ (54,704) (43,550)
Fuel stock and materials and supplies .............. (3,978) 4,307
Accounts payable and other current liabilities ..... 24,771 3,061
Deferred energy costs .............................. (45,098) 6,968
Accrued taxes and interest ......................... 26,122 16,783
Other assets and liabilities ........................ (1,163) 7,610
-------- --------
Net cash provided by operating activities ......... 92,204 128,442
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures and gross additions ....... (135,076) (135,250)
Investment in subsidiaries and other ................ (137) 479
-------- --------
Net cash used in investing activities ............. (135,213) (134,771)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of capital stock ........................... 25,221 27,879
Issuance of company-obligated mandatorily
redeemable preferred securities ................... 118,872 -
Deposit of funds held in trust ...................... (1,592) (2,197)
Withdrawal of funds held in trust ................... - 7,675
Retirement of long-term debt ........................ (3,864) (3,963)
Retirement of preferred stock ....................... (38,200) (200)
Change in short-term borrowing ...................... - 7,000
Cash dividends ...................................... (61,204) (60,026)
Other financing activities .......................... 1,604 5,518
-------- --------
Net cash provided by (used in) financing activities 40,837 (18,314)
-------- --------
CASH AND TEMPORARY CASH INVESTMENTS:
Net decrease during the period ...................... (2,172) (24,643)
Beginning of period ................................. 2,544 25,507
-------- --------
End of period ....................................... $ 372 $ 864
======== ========
CASH PAID DURING THE PERIOD FOR:
Interest, net of amounts capitalized ................ $ 45,335 $ 41,144
======== ========
Income taxes ........................................ $ 3,520 $ 26,225
======== ========
See Notes to Condensed Consolidated Financial Statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by the registrant, pursuant to the rules and regulations of the
Securities and Exchange Commission, and reflect all adjustments which, in the
opinion of management are necessary for a fair presentation and are of a
normally recurring nature. Certain information and footnote disclosures have
been condensed in accordance with generally accepted accounting principles and
pursuant to such rules and regulations. The registrant believes that the
disclosures are adequate to make the information presented not misleading. It
is suggested that these condensed consolidated financial statements and notes
thereto be read in conjunction with the financial statements and the notes
thereto included in the registrant's latest annual report. Certain prior period
amounts have been reclassified, with no effect on income or common shareholders'
equity, to conform with the current period presentation.
(1) CONSOLIDATION POLICY
The condensed consolidated financial statements include the accounts of
Nevada Power Company (Company) and its wholly-owned subsidiary, NVP Capital I.
All significant intercompany transactions and balances have been eliminated in
consolidation.
(2) RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 128 (FASB 128), Earnings Per Share, which is
effective for fiscal years beginning after December 15, 1997. FASB 128
establishes standards for computing and presenting earnings per share to make
them comparable to international earnings per share standards and requires dual
presentation of basic and diluted earnings per share for entities with complex
capital structures. After adoption, the Company expects there will be no
material effect on the presentation or computation of its earnings per share.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 130 (FASB 130), Reporting Comprehensive
Income, which is effective for fiscal years beginning after December 15, 1997.
FASB 130 establishes standards for reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. After
adoption, the Company expects there will be no material effect on the
disclosures in its condensed consolidated financial statements.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 131 (FASB 131), Disclosures about Segments of
an Enterprise and Related Information, which is effective for financial
statements for periods beginning after December 15, 1997. FASB 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. Due to recent legislation enacted in Nevada for restructuring the
electric utility industry, the Company cannot predict the effect adoption of
FASB 131 will have on disclosures in its condensed consolidated financial
statements.
(3) FEDERAL INCOME TAXES:
For interim financial reporting purposes, the Company reflects in the
computation of the federal income tax provision liberalized depreciation based
upon the expected annual percentage relationship of book and tax depreciation
and reflects the allowance for funds used during construction on an actual
basis. The total federal income tax expense as set forth in the accompanying
consolidated statements of income results in an effective
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federal income tax rate different than the statutory federal income tax rate.
The table below shows the effects of those transactions which created this
difference.
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
(In Thousands)
Federal income tax at statutory rate ... $28,439 $30,963 $43,287 $44,336
Investment tax credit amortization ..... (365) (365) (1,095) (1,095)
Other .................................. 433 433 1,299 1,299
------- ------- ------- -------
Recorded federal income taxes .......... $28,507 $31,031 $43,491 $44,540
======= ======= ======= =======
Federal income taxes included in-
Operating expenses ................... $27,889 $30,792 $41,510 $43,631
Other income, net .................... 618 239 1,981 909
------- ------- ------- -------
Recorded federal income taxes .......... $28,507 $31,031 $43,491 $44,540
======= ======= ======= =======
(4) COMMITMENTS AND CONTINGENCIES:
On February 6, 1997, the Public Service Commission of Nevada (PSC) issued
its opinion and order 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 the use of coal reserves in an unregulated
subsidiary company. The PSC order resulted in a fourth quarter 1996 charge of
$5.5 million, net of tax, for amounts disallowed by the PSC.
On May 7, 1997, the Company filed a Petition for Judicial Review in the
First District Court in Carson City, Nevada challenging the PSC's findings which
resulted in disallowances.
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 total, $3 million has been spent to date.
Related to visibility, the United States Congress authorized the
Environmental Protection Agency (EPA) to study the potential impact the Mohave
Generating Station may have on visibility in the Grand Canyon area. Results of
this study are expected in 1997 or 1998. The cost of any improvements that may
be required cannot be determined at this time.
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 $50.9 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 $37.5 million through June 1997 on the scrubbers'
construction. In 1992, the Company received resource planning approval from the
PSC for its share of the cost of the scrubbers.
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(5) PREFERRED SECURITIES:
On April 1, 1997, the Company redeemed all 1.9 million shares of its $20
par value, 9.9 percent redeemable cumulative preferred stock at $21 per share
for a total of $39.9 million.
On March 26, 1997, NVP Capital I (Trust), a wholly-owned subsidiary of the
Company, sold 4,754,860 8.20% Cumulative Quarterly Income Preferred Securities,
Series A (QUIPS) at $25 per security. The proceeds of $118.9 million were
received at closing on April 2, 1997. The Company owns all the Series A common
securities, 147,058 shares totaling $3.7 million issued by the Trust. The QUIPS
and the common securities represent undivided beneficial ownership interests in
the assets of the Trust, a statutory business trust formed under the laws of the
state of Delaware. The existence of the Trust is for the sole purpose of
issuing the QUIPS and the common securities and using the proceeds thereof to
purchase from the Company its 8.20% Junior Subordinated Deferrable Interest
Debentures (QUIDS) due March 31, 2037, extendible to March 31, 2046 under
certain conditions, in a principal amount of $122.6 million. The sole asset of
the Trust is the QUIDS. The Company's obligations under the guarantee agreement
entered into in connection with the QUIPS when taken together with the Company's
obligation to make interest and other payments on the QUIDS issued to the Trust,
and the Company's obligations under the Indenture pursuant to which the QUIDS
are issued and its obligations under the Declaration, including its liabilities
to pay costs, expenses, debts and liabilities of the Trust, provides a full and
unconditional guarantee by the Company of the Trust's obligations under the
QUIPS. Financial statements of the Trust are consolidated with the Company's.
Separate financial statements are not filed because the Trust is wholly-owned by
the Company and essentially has no independent operations, and the Company's
guarantee of the Trust's obligations is full and unconditional. The $118.9
million in net proceeds to the Company was used for general corporate utility
purposes and the repayment of short-term debt incurred to redeem the Company's
$38 million, 9.9 percent Redeemable Cumulative Preferred Stock on April 1, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INDUSTRY RESTRUCTURING
On July 16, 1997 the Governor of the state of Nevada signed into law
Assembly Bill 366 (AB 366). The following summarizes the key points and aspects
of AB 366. The PSC was reduced from five members to three and reorganized on
October 1, 1997 as the Public Utilities Commission (PUC) and will authorize
customers to obtain competitive and potentially competitive services from
alternative sellers starting no later than December 31, 1999 unless the PUC
determines that another date better serves the public interest. It is expected
that the generation, aggregation (buying and reselling electricity to customers)
and marketing of electricity and some other utility services will be deemed
competitive or potentially competitive while transmission and distribution will
be deemed noncompetitive and will continue to be regulated. The Company is
required to submit a plan to the PUC to unbundle rates to be charged for
noncompetitive and potentially competitive services. A provider of a
noncompetitive service will be prohibited from providing a potentially
competitive service except through an affiliate which the PUC has determined
after a hearing has an arm's length relationship with the provider of the
noncompetitive service. Each provider of a noncompetitive service that is
necessary to the provision of a potentially competitive service is required to
make its facilities or services available to all alternative sellers on equal
and nondiscriminatory terms and conditions. Alternative sellers of electricity
must be licensed under rules yet to be determined by the PUC. AB 366 allows the
PUC to authorize full recovery of costs which they determine to be stranded but
does not guarantee full recovery of those costs. The Company believes it will
remain obligated to serve customers who do not choose a new service provider.
No pilot program is mandated by AB 366 before the effective date for competition
but the PUC may authorize the right to buy from alternative sellers in gradual
phases. The rate charged for residential service for customers who are unable to
obtain
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electric service from an alternative seller or who fail to select an alternative
seller must not exceed the rate charged for that service on July 1, 1997,
however, the PUC may approve an increase in residential rates in an amount
necessary to ensure recovery by the Company of its just and reasonable costs.
The residential rate restriction will remain in place until 2003. Two-tenths of
one percent of all electric energy sold must come from a renewable resource
produced in Nevada by January 1, 2001. Fifty percent of this energy must be
derived from solar power. Every two years the standard increases by two-tenths
of one percent until a total of one percent of all electricity consumed comes
from renewable resources.
In August 1997, the PSC opened an investigatory docket of the issues to be
considered as a result of restructuring of the electric industry. The docket
sets forth the issues to be addressed as well as the steps the PUC will take to
address them. Issues to be addressed include the following:
(1) Identification of all cost components in utility service and
establishment of allocation methods necessary for later pricing of
noncompetitive services;
(2) Designation of services as potentially competitive or noncompetitive;
(3) Determination of rate design and non-price terms and conditions for
noncompetitive services;
(4) Establishment of licensing requirements for alternative sellers of
potentially competitive services;
(5) Past (stranded) costs;
(6) Criteria and standards by which the PUC will apply the legislative
requirements concerning affiliate relations;
(7) Criteria and process by which the PUC will appoint providers of bundled
electric service;
(8) Consumer protection;
(9) Anti-competitive behavior codes of conduct and enforcement;
(10) Price regulation for potentially competitive services in immature
markets;
(11) Compliance plans in accordance with regulation;
(12) Options for complying with legislative mandates for integrated resource
planning and portfolio standards;
(13) Innovative pricing for noncompetitive services.
The Company received Procedural Order Number One on September 2, 1997 which
directed the Company to file testimony to identify each distinct component of
the electric service the Company currently provides by September 12, 1997.
Hearings on this order were held October 10, 1997. The parties participating in
the docket reached a consensus on proposed service components and their
respective definitions.
CONTINUING APPLICABILITY OF FASB 71
The Company's rates are currently subject to approval by the PUC and are
designed to recover the Company's costs of providing services to its customers.
A primary difference between a rate regulated entity and an unregulated entity
is the timing of recognizing certain assets and expenses for financial reporting
purposes. The Statement of Financial
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Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (FASB 71), prescribes the method to be used to record the financial
transactions of a regulated entity. The criteria for applying FASB 71 include
the following: (i) rates are set by an independent third party regulator, (ii)
approved rates are intended to recover the specific costs of the regulated
products or services, (iii) rates set at levels that will recover costs, can be
charged to and collected from customers. If the Company determines as a result
of competitive changes in Nevada, PUC orders or otherwise that its business, or
a portion of its business, fails to meet any of these three criteria of FASB 71,
it may have to eliminate from its financial statements the related transactions
prescribed by the regulators that would not have been recognized if it had been
a non-regulated company, which could result in an impairment of or write-off of
utility assets. The Company believes, however, that it continues to meet the
criteria for operating as a rate regulated entity, as prescribed by FASB 71.
LIQUIDITY AND CAPITAL RESOURCES
Overall net cash flows increased during the first nine months of 1997, as
compared to 1996, primarily due to more cash being provided by financing
activities offset partially by less cash being provided by operating activities.
Increased costs for natural gas and purchased power and operations and
maintenance partially offset by timing differences in federal income tax
payments contributed to the decrease in cash being provided by operating
activities. The increase in net cash provided by financing activities is due to
the issuance of the QUIPS. (See Note 5 to Condensed Consolidated Financial
Statements included in this quarterly report.)
On July 15, 1997, the Company filed a request with the PSC for
authorization to increase energy rates by approximately $54 million under the
state's deferred energy accounting procedures. Commercial customers' rates
would increase by approximately $40 million and residential customers' rates
would increase by approximately $14 million under the proposal. The Company is
requesting the increase to cover higher costs for natural gas and purchased
power. If approved, the proposed increase will be effective on January 1, 1998.
A prehearing conference was held on September 25, 1997. Formal hearings are
scheduled for November 24, 1997.
The Company's customer growth rate during 1996 and 1995 was 7.2 and 6.0
percent, respectively. The increase in customers for the first nine months of
1997 was at an annualized rate of 6.3 percent. At September 30, 1997, the
Company provided electric service to 510,204 customers.
Pursuant to Nevada law, every three years the Company is required to file
with the PUC a forecast of electricity demands for the next 20 years and the
Company's plans to meet those demands. The Company filed its 1997 Resource Plan
on June 3, 1997. On October 20, 1997, the PUC rendered a decision on this plan.
Among the major items in the Company's 1997 Resource Plan which were approved by
the PUC are the following:
(1) the Company will proceed to build a 500 kV transmission project known as
the Crystal Transmission Project (CTP), with an in-service date of June
1, 1999;
(2) the Company will continue to pursue a strategy of relying on bulk
power purchases to meet near-term incremental increases in load;
(3) the Company will proceed with a joint 230 kV transmission project with
the Colorado River Commission with costs subject to prudency review in a
future rate case;
(4) the Company received approval for only pre-development costs to build
two 144 megawatt (MW) combustion turbines in 2002 and 2003 which would
be converted to a 410 MW combined cycle plant in 2004. An amendment to
the 1997 Resource Plan will need to be filed by September 1999 for full
approval if the Company wants to
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proceed with building the turbines.
In the event the in-service date of the above CTP is delayed, a new back-up
plan will need to be filed with the PUC for approval.
To meet capital expenditure requirements through 1998, the Company plans 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).
On August 21, 1997, the Company received approval from the PSC to issue and
sell up to $213 million of preferred stock, tax advantaged preferred stock
and/or common stock through public or private offerings, the Company's SPP, the
Company's 401(k) plan or any other method deemed appropriate. Approval was also
received to issue and sell $487 million of tax-exempt, taxable, tax advantaged
and/or any other type of debt the Company determines to be appropriate at the
time. The Company also received approval to secure any of the debt through the
issuance and pledge of first mortgage bonds only if it cannot, at the time of
issuance, economically and effectively issue investment grade unsecured debt.
The financing approval expires on December 31, 1999. Approval was also given to
issue up to $225 million of unsecured promissory notes through December 31,
1999.
The Company has the option of issuing new shares or using open market
purchases of its common stock to meet the requirements of the SPP. Under the
SPP the Company issued 1,659,764 and 1,166,703 shares, respectively, of its
common stock in 1996 and the first nine months of 1997.
On October 12, 1995, Clark County, Nevada issued $76.75 million Series
1995A IDBs (Nevada Power Company Project) due 2030. Net proceeds from the sale
of the IDBs were placed on deposit with a trustee and are being used to finance
the construction of certain facilities which qualify for tax-exempt financing.
At September 30, 1997, $54.3 million remained on deposit with the trustee.
On March 26, 1997, the Company sold 4,754,860 8.20% Cumulative Quarterly
Income Preferred Securities, Series A (QUIPS) at $25 per security. The proceeds
of $118.9 million were received at closing on April 2, 1997. The QUIPS were
issued through NVP Capital I, a statutory business trust of the Company. The
proceeds were used for general corporate utility purposes and to repay short-
term debt incurred to redeem the Company's 9.9 percent Redeemable Cumulative
Preferred Stock on April 1, 1997. (See Note 5 to Condensed Consolidated
Financial Statements included in this quarterly report.)
In November 1997 if approved by the appropriate authorities, Clark County,
Nevada will issue $52.3 million IDBs Series 1997A (Nevada Power Company Project)
due 2032 and Coconino County, Arizona will issue $20 million Pollution Control
Revenue Bonds (PCRBs) Series 1997B (Nevada Power Company Project) due 2032. Net
proceeds from the sale of the IDBs will be placed on deposit with a trustee and
will be used to finance the construction of certain facilities which qualify for
tax-exempt financing. Net proceeds from the sale of the PCRBs will be placed on
deposit with a trustee and will be used to finance the construction of the
Navajo scrubber facilities which qualify for tax-exempt financing.
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OPERATING RESULTS OF FIRST NINE MONTHS OF 1997
COMPARED TO FIRST NINE MONTHS OF 1996
Earnings per average common share were $1.60 for the first nine months of
1997, compared to $1.66 for the same period in 1996. The decrease in earnings
per average common share was due to the sale of additional shares through the
SPP. Although kilowatthour sales increased, revenues were flat primarily due to
an energy rate decrease effective February 1, 1997. In addition, effective
February 1, 1997, capacity costs associated with purchased power were included
in general rates rather than the deferred energy cost accounting mechanism. The
average number of customers increased 6.82 percent and kilowatthour sales,
excluding sales for resale, were up 5.55 percent, as compared to the first nine
months of 1996.
Fuel expense increased $20.4 million due to increased generation and higher
average fuel rates. Purchased power increased $16.9 million due to increased
power purchases and higher average purchased power costs. Maintenance and
repairs increased $8.5 million due mainly to increased maintenance expense at
Reid Gardner Generating Station. Depreciation expense increased $3.2 million
because of a growing asset base. Distribution requirements on company-obligated
preferred securities of subsidiary trust increased by $4.8 million due to the
issuance of the QUIPS (see Note 5 to Condensed Consolidated Financial Statements
included in this quarterly report.)
Average common shares increased because of the sale of additional common
shares through the SPP to partially provide funds for the construction of
facilities necessary to meet increased customer demand for electricity.
OPERATING RESULTS OF THIRD QUARTER OF 1997
COMPARED TO THIRD QUARTER OF 1996
Earnings per average common share were $1.06 for the third quarter of 1997,
compared to $1.17 for the same period in 1996. The decrease in earnings was due
primarily to increased maintenance and repairs and the distribution requirements
on the QUIPS. Revenues decreased due primarily to an energy rate decrease
effective February 1, 1997. In addition, effective February 1, 1997, capacity
costs associated with purchased power were included in general rates rather than
the deferred energy cost accounting mechanism. The average number of customers
increased 6.63 percent and kilowatthour sales, excluding sales for resale, were
up 3.21 percent, as compared to the third quarter of 1996.
Fuel expense increased by $9.0 million due to increased generation and
higher average fuel rates. Purchased power increased $5.2 million due to higher
average purchased power costs. Maintenance and repairs increased $3.7 million
due to increased maintenance expense at Reid Gardner Generating Station.
Distribution requirements on company-obligated preferred securities of
subsidiary trust increased by $2.4 million due to the issuance of QUIPS (see
Note 5 to Condensed Consolidated financial Statements included in this quarterly
report.)
Average common shares increased because of the sale of additional common
shares through the SPP to partially provide funds for the construction of
facilities necessary to meet increased customer demand for electricity.
11
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 5. None.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibits Filed Description
-------------- -----------
27 Financial Data Schedule
b. Reports on Form 8-K.
None.
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Nevada Power Company
--------------------
(Registrant)
STEVEN W. RIGAZIO
--------------------------------------
(Signature)
Date: October 30, 1997 Steven W. Rigazio
----------------
Vice President, Finance and Planning,
Treasurer, Chief Financial Officer
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET OF NEVADA POWER COMPANY AS OF SEPTEMBER 30,
1997 AND THE RELATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $1,898,807
<OTHER-PROPERTY-AND-INVEST> 12,937
<TOTAL-CURRENT-ASSETS> 200,324
<TOTAL-DEFERRED-CHARGES> 204,865
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,316,933
<COMMON> 53,232
<CAPITAL-SURPLUS-PAID-IN> 656,127
<RETAINED-EARNINGS> 134,077
<TOTAL-COMMON-STOCKHOLDERS-EQ> 843,436
118,872
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<LONG-TERM-DEBT-NET> 731,960
<SHORT-TERM-NOTES> 0
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<CAPITAL-LEASE-OBLIGATIONS> 89,363
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<OPERATING-INCOME-LOSS> 118,221
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<EARNINGS-AVAILABLE-FOR-COMM> 79,108
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