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NEVADA POWER COMPANY
- ---------------------------------------------------------------------NP---------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 8, 1998
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Nevada Power Company will be held at
the Stardust Resort & Casino, Conference Center, 3000 Las Vegas Boulevard South,
Las Vegas, Nevada, on Friday, May 8, 1998, at 2:00 P.M. for the following
purposes:
1. To elect three directors to three-year terms.
2. To consider and act upon any other business that may properly be brought
before the meeting.
For easy access to the Annual Meeting room, entry from the Industrial Road
entrance is recommended. Please see accompanying map.
Guest rooms have been reserved at the Stardust Resort & Casino at a special
rate for those Nevada Power Company Shareholders who wish to stay any day(s)
between Thursday, May 7, and Saturday, May 9, 1998. To obtain this special rate,
reservations must be made by APRIL 17, 1998 by calling the Stardust Resort &
Casino at (800) 634-6757 or (702) 732-6111, asking for the Convention Desk and
identifying yourself with the Group Code NEV598.
The close of business on March 12, 1998 has been fixed as the record date
for determining the shareholders entitled to receive notice of and to vote at
the Annual Meeting.
March 12, l998
Richard L. Hinckley
Richard L. Hinckley
Secretary
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| EVEN IF YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE |
| SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT |
| PROMPTLY IN THE ACCOMPANYING ENVELOPE |
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LOCATION OF 1998
ANNUAL MEETING OF SHAREHOLDERS
A map of the location of the 1998 Annual Meeting of Shareholders to be held at
the Stardust Resort & Casino, Conference Center, is included in this
space. The map shows the area of Las Vegas, Nevada including Sahara Avenue to
the North, Tropicana Avenue to the South, Interstate 15 to the West and
Paradise Road to the East, as well as the relative location of McCarran
Airport and the roads that immediately surround the Stardust Resort and
Casino.
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NEVADA POWER COMPANY
6226 WEST SAHARA AVENUE
P.O. BOX 230
LAS VEGAS, NEVADA 89151
_________________________
PROXY STATEMENT
The enclosed proxy for the 1998 Annual Meeting of Shareholders is solicited
by the Board of Directors of Nevada Power Company (the "Company") and it may be
revoked by written notice to the Secretary of the Company at any time prior to
its use. All shares represented by valid proxies on the enclosed form, timely
received by the Company, will be voted at the meeting or any adjourned session
in the manner directed by the shareholder. If no direction is made, the proxy
will be voted "FOR" the nominees for Director.
As of the close of business on March 12, 1998, there were outstanding and
entitled to vote 50,671,655 shares of Common Stock. Only holders of Common
Stock of record at the close of business on March 12, 1998 will be entitled to
vote at the meeting.
Each share of the Company's Common Stock is entitled to one vote. The
total number of shares represented by individual proxies includes shares, if
any, owned by shareholders and credited to their accounts under the Company's
Stock Purchase and Dividend Reinvestment Plan. An affirmative vote of a
majority of the shares present and voting at the meeting is required for
approval of all items being submitted to the shareholders for their
consideration. An automated system administered by the Company tabulates the
votes. Broker non-votes are not counted for purposes of determining whether a
proposal has been approved. The first mailing of the proxy and proxy statement
to common shareholders will be on or about March 30, 1998.
The cost of soliciting proxies in the enclosed form is being borne by the
Company. In addition to solicitation by mail, arrangements have been made with
brokerage houses, nominees and other custodians and fiduciaries to send proxy
material to their principals and the Company will reimburse them for their
reasonable expenses in doing so. Proxies also may be solicited personally or by
telephone or telegraph by directors, officers, and a few regular employees of
the Company in addition to their usual duties, but they will not be specially
compensated for these services. The Company has retained Beacon Hill Partners,
Inc., 90 Broad Street, New York, New York 10004 to aid in the solicitation of
proxies by similar methods, for which Beacon Hill Partners, Inc. will receive a
fee of $3,500, out-of-pocket expenses limited to a total of $2,000 and brokerage
forwarding charges.
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ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation currently provide for a
classified board consisting of between three and twelve directors. At present,
the Board of Directors (sometimes referred to herein as the "Board") consists of
eleven members divided into three classes of three, four and four directors,
respectively. One class of directors is elected at each Annual Meeting to serve
a three-year term. A brief biography of each nominee for election at the 1998
Annual Meeting is presented below. Management recommends that shareholders vote
"FOR" these nominees.
The proxies solicited by and on behalf of the Board of Directors of the
Company will be voted "FOR" the election of the nominees, unless authority to do
so is withheld as provided in the enclosed proxy. Although it is not
contemplated that any of the nominees will be unable to serve, in the event any
nominee should not be available as a candidate for director at the time of the
Annual Meeting, the persons named in the proxy will vote for a substitute who
will be designated by the present Board of Directors to fill such vacancy.
The following table sets forth biographical information for the three
nominees for director and the other directors of the Company.
PRINCIPAL OCCUPATION AND YEAR FIRST
EMPLOYMENT FOR THE PAST FIVE BECAME DIRECTOR
NAME AGE YEARS AND OTHER INFORMATION /TERM EXPIRES
- --------------------- --- ------------------------------ ---------------
NOMINEES FOR DIRECTOR:
FRED D. GIBSON, JR. 70 Retired in 1997 as President and 1978/1998
Chief Executive Officer and in 1998 as
Chairman but remains as a director of
American Pacific Corporation
(manufacturer of chemicals and
pollution abatement equipment; real
estate development). Mr. Gibson has
been affiliated with American Pacific
Corporation and its predecessor,
Pacific Engineering & Production Co.,
since l956. Mr. Gibson is a graduate
of the University of Nevada and holds
a degree in Metallurgical Engineering.
He is Chairman of the Audit Committee
and a member of the Executive
Committee and the Nominating
Committee.
2
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PRINCIPAL OCCUPATION AND YEAR FIRST
EMPLOYMENT FOR THE PAST FIVE BECAME DIRECTOR
NAME AGE YEARS AND OTHER INFORMATION /TERM EXPIRES
- --------------------- --- ------------------------------ --------------
MICHAEL R. NIGGLI 48 President and Chief Operating Officer 1998/1998
of the Company effective February
1998. Prior to joining the Company, he
was Senior Vice President of the
Custom Accounts Market Unit for
Entergy, a New Orleans-based global
energy company. Since 1988, he has
also served at Entergy as Senior Vice
President of Marketing and in Vice
President positions for areas
including fuels, strategic planning
and customer service. Mr. Niggli has
a bachelor's degree in electrical
engineering from California State
University at Long Beach and a
master's degree in electrical
engineering from San Diego State
University. He is also a graduate of
the Harvard Advanced Management
Program. He is a member of the
Executive Committee.
ARTHUR M. SMITH 75 Prior to his retirement in 1984, 1959/1998
Chairman of the Board of First
Interstate Bank of Nevada, N.A. Mr.
Smith is a director of John Deere
Insurance Group and the W. M. Keck
Foundation. He is Chairman of the
Compensation Committee and a member of
the Audit Committee and the Pension
Fund Committee.
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PRINCIPAL OCCUPATION AND YEAR FIRST
EMPLOYMENT FOR THE PAST FIVE BECAME DIRECTOR
NAME AGE YEARS AND OTHER INFORMATION /TERM EXPIRES
- --------------------- --- ------------------------------ --------------
OTHER DIRECTORS:
MARY LEE COLEMAN 61 President of Coleman Enterprises 1980/1999
(developer of shopping centers and
industrial parks). Mrs. Coleman is a
graduate of the University of Southern
California. She is a member of the
Audit Committee and the Pension Fund
Committee.
CHARLES A. LENZIE 60 Chairman of the Board and Chief 1983/1999
Executive Officer of the Company. Mr.
Lenzie joined the Company in 1974 as
Vice President-Finance. He was
elected Senior Vice President-Finance
and Accounting Services in December
1979; President on February l, l983
and Chairman of the Board and Chief
Executive Officer on May l, l989. On
August 10, 1995, Mr. Lenzie also
assumed the position of President
until February 1998. Mr. Lenzie is
a graduate of the University of
Illinois and a Certified Public
Accountant. He is Chairman of the
Executive Committee.
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PRINCIPAL OCCUPATION AND YEAR FIRST
EMPLOYMENT FOR THE PAST FIVE BECAME DIRECTOR
NAME AGE YEARS AND OTHER INFORMATION /TERM EXPIRES
- --------------------- --- ------------------------------ --------------
JOHN F. O'REILLY 52 Chairman/CEO of the law firm of 1995/1999
Keefer, O'Reilly, Ferrario and
Lubbers. Mr. O'Reilly is also
Chairman and Chief Executive Officer
of the O'Reilly Gaming Group and is
Chairman of the Las Vegas Chamber of
Commerce Foundation. Mr. O'Reilly
received his Juris Doctorate and
accounting degrees from St. Louis
University and his MBA from the
University of Nevada, Las Vegas. He
is a member of the Audit Committee and
the Nominating Committee.
MARY KAYE CASHMAN 46 Chief Executive Officer and Vice 1997/1999
Chairman of the Board of Cashman
Equipment Company (one of the oldest
and largest Caterpillar dealers in
North America). Mrs. Cashman has been
involved with Cashman Equipment
Company since 1970, becoming a
director in 1982 and CEO in 1995. She
holds a degree in nursing from the
University of Nevada, Las Vegas and
worked as a registered nurse at
University Medical Center from 1982-
1987 and Sunrise Hospital from 1988-
1995. She serves on the boards of
the Nevada Test Site Development
Corporation; Mackay School of Mines
Advisory Board at the University of
Nevada, Reno; Bishop Gorman High
School Endowment Foundation; and McCaw
Elementary School of Mines Foundation.
She is a member of the Nominating
Committee and the Pension Fund
Committee.
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PRINCIPAL OCCUPATION AND YEAR FIRST
EMPLOYMENT FOR THE PAST FIVE BECAME DIRECTOR
NAME AGE YEARS AND OTHER INFORMATION /TERM EXPIRES
- --------------------- --- ------------------------------ --------------
JOHN L. GOOLSBY 56 President and Chief Executive Officer 1991/2000
of The Howard Hughes Corporation (real
estate investment and land development
companies). Mr. Goolsby became
affiliated with The Howard Hughes
Corporation in l980 and became
President in 1988. Mr. Goolsby is a
director of America West Holdings
Corporation. Mr. Goolsby is a
graduate of the University of Texas at
Arlington and a Certified Public
Accountant. He is a member of the
Executive Committee, the Compensation
Committee and the Audit Committee.
JERRY E. HERBST 60 Chief Executive Officer of Terrible 1990/2000
Herbst, Inc. (gas station, car wash,
convenience store chain) and Herbst
Supply Co., Inc. (wholesale fuel
distribution), family-owned businesses
for which he has worked since l959.
Mr. Herbst is a partner of the Coast
Resorts(hotel and casino industry).
Mr. Herbst is a graduate of the
University of Southern California. He
is Chairman of the Nominating
Committee and a member of the
Compensation Committee.
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PRINCIPAL OCCUPATION AND YEAR FIRST
EMPLOYMENT FOR THE PAST FIVE BECAME DIRECTOR
NAME AGE YEARS AND OTHER INFORMATION /TERM EXPIRES
- --------------------- --- ------------------------------ --------------
FRANK E. SCOTT 78 Retired in 1988 as Chairman of the 1972/2000
Board and Chief Executive Officer of
First Western Financial Corporation
(holding company of a savings and loan
association). Mr. Scott is Chairman
of the Board of Sports Media Network
and was previously Chairman of the
Board of American Wollastonite Mining
Corporation. He was also Chairman of
the Board and CEO of the Scott
Corporation, developer and operator of
the Union Plaza Hotel. He is a
member of the Compensation Committee
and the Pension Fund Committee.
JELINDO A. TIBERTI 78 Chairman of the Board of J. A. 1963/2000
Tiberti Construction Company, Inc.
Mr. Tiberti is a Registered
Professional Engineer. He is Chairman
of the Pension Fund Committee and a
member of the Executive Committee and
the Compensation Committee.
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COMMITTEES OF THE BOARD OF DIRECTORS
The Committees of the Board of Directors are the Executive Committee, the
Audit Committee, the Compensation Committee, the Nominating Committee and the
Pension Fund Committee. The major functions of these Committees are described
briefly below.
EXECUTIVE COMMITTEE
Except for certain powers which, under Nevada law, may only be exercised by
the full Board of Directors, the Executive Committee may exercise all powers and
authority of the Board of Directors in the management of the business and
affairs of the Company.
AUDIT COMMITTEE
The Audit Committee recommends to the Board of Directors the appointment
of the independent public accountants. The Audit Committee reviews and considers
the comments from the independent public accountants with respect to internal
accounting controls and the consideration given or corrective action taken by
management to weaknesses, if any, in internal controls. The Audit Committee
discusses matters of concern to the Committee, the independent public
accountants or management relating to the Company's financial statements or
other results of the audit. It also meets with the Company's Director of
Internal Audit regarding internal auditing matters and controls.
COMPENSATION COMMITTEE
The Compensation Committee reviews and recommends to the Board compensation
for officers.
NOMINATING COMMITTEE
The Nominating Committee is empowered to consider and review the
qualifications of potential nominees for directors and to recommend to the Board
of Directors a slate of nominees for election as directors at the Annual Meeting
of Shareholders and, when vacancies occur, candidates for election by the Board
of Directors. The Committee will consider nominees recommended by shareholders;
written recommendations must be received by the Secretary of the Company not
less than thirty days nor more than sixty days prior to the meeting at which
directors are to be elected.
PENSION FUND COMMITTEE
The Pension Fund Committee oversees the investment of the assets of the
Company's Qualified Retirement Plan and the Company's 401(k) Plan.
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MEETINGS AND ATTENDANCE
During 1997, the Company's Board of Directors met 11 times, the Executive
Committee met 9 times, the Compensation Committee met 3 times while the Audit
Committee, the Pension Fund Committee and the Nominating Committee each met
twice.
During 1997, Arthur M. Smith attended 61% of the aggregate meetings of the
Board of Directors and Committees on which he served. All other directors
attended at least 75% of these meetings.
DIRECTOR COMPENSATION
No director who receives a salary from the Company is paid any fees to
serve as a director or as a member of any committee of the Board of Directors.
Those directors not receiving salaries from the Company (the "Outside
Directors") are paid an annual fee of $20,000 plus $1,000 for each directors'
meeting attended; an annual fee of $10,000 for serving on the Executive
Committee; $1,000 per meeting attended for serving on the Audit Committee, the
Compensation Committee, the Nominating Committee, or the Pension Fund Committee
and an additional $400 per meeting for serving as Committee Chairman. In
addition, the Company provides a $20,000 term life insurance benefit for each of
the Outside Directors.
SECURITY OWNERSHIP OF MANAGEMENT
The following table presents certain information regarding the Company's
Common Stock beneficially owned by each director, the Chief Executive Officer
and the four other most highly compensated executive officers of the Company for
the year 1997, and all directors and executive officers of the Company as a
group as of December 31, 1997:
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OWNERSHIP CLASS
------ ----------- ----------
Mary Kaye Cashman ........................ 8,015(1) .016%
Mary Lee Coleman ......................... 325,683(2) .646%
Fred D. Gibson, Jr. ...................... 7,423(3) .015%
John L. Goolsby........................... 2,415(4) .005%
Jerry E. Herbst........................... 5,100(5) .010%
Charles A. Lenzie ........................ 13,270(6) (16) .026%
John F. O'Reilly.......................... 2,000(7) .004%
Conrad L. Ryan ........................... 6,738(8) .013%
Frank E. Scott ........................... 3,910(5) .008%
Arthur M. Smith .......................... 1,200(9) .002%
Jelindo A. Tiberti ....................... 2,000(10) .004%
David G. Barneby ......................... 4,834(11)(16) .010%
Cynthia K. Gilliam ....................... 3,462(12)(16) .007%
Richard L. Hinckley ...................... 3,446(13)(16) .007%
Steven W. Rigazio......................... 5,365(14)(16) .011%
All Directors & Executive Officers as a Group
(18 individuals)(17)...................... 397,404(15)(16) .806%
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(1) 6,300 shares held in street name; balance held in shareholder's name.
(2) 158,696 shares held in shareholder's name; balance held in family trust.
(3) 4,600 shares held in street name; balance held in shareholder's name.
(4) 2,000 shares held in street name; balance held in shareholder's name.
(5) Held in shareholder's name.
(6) 7,830 shares held in street name; balance held in shareholder's name.
(7) Held in street name.
(8) Resigned from the Board of Directors January 1, 1998.
200 shares held in street name; balance held in shareholder's name.
(9) 1,000 shares held in street name; balance held in family trust.
(10) 1,250 shares held in street name; balance held in name of controlled
corporation.
(11) 1,136 shares held in street name; 2,088 shares held in shareholder's name;
balance held in trust.
(12) 1,478 shares held in street name; balance held in shareholder's name.
(13) 1,861 shares held in shareholder's name; balance held in custodial trust.
(14) 1,750 shares held in shareholder's name; balance held in family trust.
(15) Includes 750 shares held in the name of controlled corporation; 27,794
shares held in street name; 173,997 shares held in trust and 194,863 shares
held in shareholders' names.
(16) Of the shares shown, 2,761 shares beneficially owned by Mr. Lenzie, 2,088
shares beneficially owned by Mr. Barneby, 1,984 shares beneficially owned
by Mrs. Gilliam, 1,853 shares beneficially owned by Mr. Hinckley, 1,750
shares beneficially owned by Mr. Rigazio, and 12,591 of the shares
beneficially owned by all directors and executive officers as a group are
held in the Company's 401(k) Plan for the benefit of such shareholders.
These shares are fully vested. All shares of Company Common Stock held in
the Company's 401(k) Plan are subject to shared voting power with the
trustee of the 401(k) Plan.
(17) None of the directors or executive officers own any of the Company's
outstanding Cumulative Preferred Stock or Preference Stock.
The management of the Company does not know of any shareholder holding more
than 5% of the Company's Common Stock.
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EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the Chief
Executive Officer and the four other most highly compensated executive officers
of the Company for the year 1997, as well as the total compensation paid to each
such individual for the Company's two previous years.
SUMMARY COMPENSATION TABLE (6)
ANNUAL COMPENSATION
---------------------------------
OTHER ANNUAL LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION PAYOUTS COMPENSATION
POSITION YEAR (1) (2) (3) (4) (5)
- ------------------ ---- ------- ----- ------------- ------- ------------
Charles A. Lenzie 1997 $420,904 $ 89,250 $ 7,196 $127,976 $4,750
Chairman of the 1996 404,616 143,500 6,866 -0- 4,500
Board and Chief 1995 405,991 -0- 7,252 -0- 4,500
Executive Officer,
Director
Steven W. Rigazio 1997 202,269 30,750 13,712 36,337 4,800
Vice President, 1996 190,154 48,750 11,736 -0- 4,500
Finance and Plan- 1995 184,000 8,000 10,571 -0- 4,500
ning, Treasurer,
Chief Financial
Officer
Cynthia K. Gilliam 1997 182,269 27,750 8,232 35,288 4,800
Vice President, 1996 181,192 43,750 14,555 -0- 4,500
Retail Customer 1995 179,000 8,000 8,310 -0- 4,500
Services
David G. Barneby 1997 180,908 27,750 10,831 32,818 4,800
Vice President, 1996 180,014 42,504 11,739 -0- 4,500
Power Delivery 1995 174,318 8,000 8,143 -0- 4,500
Richard L. Hinckley 1997 175,904 27,000 9,524 29,736 4,800
Vice President, 1996 159,616 41,250 9,481 -0- 3,609
Secretary and 1995 151,000 8,000 9,017 -0- 3,445
General Counsel
(1) Includes lump sum payments, in 1996, of $7,000 for Mrs. Gilliam and $10,000
for Mr. Barneby. Also includes lump sum payments, in 1995, of $16,000 for
Mr. Lenzie; $7,000 for Mr. Rigazio; $7,000 for Mrs. Gilliam; $7,000 for Mr.
Barneby and $6,000 for Mr. Hinckley.
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(2) Amounts awarded under the Short-Term Incentive Plan for the respective
fiscal years.
(3) These amounts represent the personal use of Company automobiles and
reimbursement for payment of taxes thereon.
(4) The amounts for 1997 represent 50% of the LTIP target awards for the 1995-
1997 performance period. The dollar amounts for these awards are estimates
of the payouts using the Company's common stock price as of December 31,
1997. The actual dollar amounts are expected to be determined as of March
31, 1998. See Incentive Awards in the Compensation Committee Report on
Executive Compensation for a discussion of LTIP Awards.
(5) These amounts represent the Company's contribution to the Company's 401(k)
Plan.
(6) The number and value of the aggregate performance restricted shares under
the Company's Long-Term Incentive Plan as of December 31, 1997, are 16,797
shares and $446,159 for Mr. Lenzie; 4,882 shares and $129,673 for Mr.
Rigazio; 4,553 shares and $120,945 for Mrs. Gilliam; 4,462 shares and
$118,514 for Mr. Barneby; and 4,068 shares and $108,065 for Mr. Hinckley,
respectively.
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
OR OTHER PERIOD NON-STOCK PRICE-BASED PLANS
UNTIL MATURATION -----------------------------------------
NAME OR PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ---- ---------------- ------------- ----------- --------------
Charles A. Lenzie.. Three Years 4,000 shares 8,000 shares 10,000 shares
Steven W. Rigazio.. Three Years 1,189 shares 2,378 shares 2,973 shares
Cynthia K. Gilliam. Three Years 1,067 shares 2,134 shares 2,668 shares
David G. Barneby... Three Years 1,037 shares 2,073 shares 2,591 shares
Richard L. Hinckley Three Years 1,006 shares 2,012 shares 2,515 shares
The Company's Long-Term Incentive Plan (the "LTIP") gives participants the
opportunity to earn awards based on the Company's performance over a three-year
performance period. The performance period for the 1997 LTIP awards (the
"Awards") began January 1, 1997 and ends December 31, 1999. The Awards of LTIP
incentive compensation units (the "Units") earned by the named executive
officers will be determined at the end of the three-year performance period
based on the ranking of the Company's total shareholder
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return (i.e., stock price appreciation plus reinvested dividends) in comparison
to the Peer Group Companies Index (the "Index"). Common stock of the Company at
the rate of one share per Unit earned will be paid to LTIP participants at the
end of the performance period. Participants would earn a percentage of the Award
based on the percentile rank of the Company's total shareholder return in
comparison to the Index, as follows:
PERCENTAGE OF
PERCENTILE RANK OF COMPANY AWARD EARNED
-------------------------- -------------
Less than 40th....................... 0%
40th....................... 50%
50th....................... 75%
60th....................... 90%
75th....................... 100%
90th....................... 125%
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for establishing the philosophy for compensating the Company's
executives and ensuring that all aspects of the Executive Compensation Program
are administered consistent with the philosophy. During 1997, the Committee met
three times. This report describes the Committee's decisions during 1997 in
determining the compensation earned by the Chief Executive Officer (the "CEO"),
and all other officers as a group.
The Omnibus Budget Reconciliation Act of 1993 contained provisions on the
deductibility of executive compensation. All compensation paid to the CEO and
other proxy-named executives for 1997 is fully deductible. It is the
Committee's intention to maintain the complete deductibility in the future;
however, we reserve the right to deviate from this policy when and if we
determine it is in the best interests of the Company and its shareholders to do
so.
The Company has retained the services of Towers Perrin, a compensation
consulting firm, to assist the Committee in connection with the performance of
its various duties. Towers Perrin has been retained in this capacity since
1990. Towers Perrin provides advice to the Committee with respect to the
reasonableness of compensation paid to the officers of the Company.
Overall Objectives
The primary objective of the Executive Compensation Program is to motivate
the officers to achieve the Company's goals of providing the Company's
shareholders with a competitive return on their investment while at the same
time providing its customers with high quality service at a competitive price.
The compensation philosophy, therefore, bases a significant portion of each
officer's total compensation on the achievement of these goals.
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Compensation Philosophy
The Executive Compensation Program is reviewed on an annual basis to ensure
its alignment with the Company's compensation philosophy. To retain and attract
an experienced results-oriented team, the Company's compensation philosophy is
to provide a total compensation opportunity between the median and 75th
percentile in comparison to both regulated and nonregulated businesses. Each
year, the Committee reviews data from the Edison Electric Institute (the "EEI")
Executive Compensation Survey of electric utilities and Towers Perrin's annual
management compensation survey. In the following performance graph on page 16,
the Company's total return to shareholders is compared to that of the electric
utilities comprising the Peer Group Companies Index and the S&P 500 Stock Index.
The Salomon Electric Utilities Index has been discontinued, however, the
companies which comprised the Salomon Electric Utility Index, adjusted for
mergers and restructurings, have been used to create the Peer Group Companies
Index. The overwhelming majority of the companies in the Peer Group Companies
Index participate in the EEI survey database. The companies in the Towers
Perrin survey parallel the type and mix of companies comprising the S&P 500
Stock Index.
The Executive Compensation Program for the officers of the Company is
comprised of base salary, annual performance-related awards and a long-term
incentive plan. Annual base salary increases reflect the individual's
performance and contribution over several years. Annual incentive awards vary
directly with annual corporate performance for all officers. The long-term
incentive plan approved by the Company's shareholders in 1993 provides officers
with the opportunity to earn shares of common stock based on the Company's total
return to shareholders compared to a peer group of electric utilities.
The remainder of this report discusses the administration of the 1997
Executive Compensation Program with respect to the CEO and the other officers as
a group.
1997 Base Salary
The CEO received a salary increase of 3.7% in 1997. All other officers
received increases of between 5.1% and 13.3%. For 1997, the CEO's salary and
salaries for all other officers as a group were between the 50th and 75th
percentile of salaries for comparable positions within the electric utility
industry.
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1997 Incentive Awards
Awards under the Company's Short-Term Incentive Plan for 1997 were based on
two corporate performance goals weighted as follows - corporate earnings, 60%;
and customer satisfaction, 40%. Specific corporate performance goals were
established at the beginning of the year. Achievement of the corporate
performance goals were evaluated and taken into consideration in determining
1997 annual incentive awards for all officers.
The 1997 incentive award earned by the CEO was 21% of salary. The
incentive awards for all other officers were 15% of salary. These awards
reflected the Company surpassing the targeted earnings goal but not the targeted
levels of customer satisfaction.
Under the Company's LTIP all officers earned 50% of the target awards for
the 1995-1997 performance period. The percentile rank of the Company's total
shareholder return for 1995-1997 in comparison to the Peer Group Companies Index
was 39.2%. Although this standing was just below the 40% threshold specified by
the LTIP for a 50% payout, the LTIP leaves final determination of the payout
amount to the discretion of the Committee. Due to a trend of marked improvement
in the Company's ranking over the last two years, the Committee determined a
payout was appropriate. The Company's percentile ranking has trended upwards
from 7% in 1995 to 42% in 1996 and to 81% in 1997.
Under the provisions of the Company's LTIP, the officers of the Company
were granted a total number of 20,173 stock units for the 1997-1999 period. The
CEO's grant of 8,000 stock units and the grant to all other officers as a group
was based on the Company's philosophy of providing the opportunity to earn total
compensation between the 50th and 75th percentile of regulated and nonregulated
businesses. The actual number of stock units earned by the CEO and all officers
as a group will be determined in 2000 based on the Company's total shareholders
return as compared to a peer group of electric utilities for the period
1997-1999 or such other measure as the Committee deems appropriate.
COMPENSATION COMMITTEE
Arthur M. Smith
John L. Goolsby
Jerry E. Herbst
Frank E. Scott
Jelindo A. Tiberti
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PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
returns for the Company's common stock, the S&P 500 Stock Index, and the Peer
Group Companies Index. The Salomon Electric Utilities Index, which was the
industry comparison index used by the Company last year, has been discontinued.
Therefore, going forward, the Company has chosen to compare itself to the Peer
Group Companies Index which includes substantially the same companies as the
Salomon Electric Utilities Index. The companies that make up the Peer Group
Companies Index are listed below.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
NEVADA POWER COMPANY COMMON STOCK (NPC),
S&P 500 STOCK INDEX (S&P 500) AND
PEER GROUP COMPANIES INDEX (PEER)
Measurement Period
(Fiscal Year Covered) NPC S&P 500 PEER
- --------------------- --- ------- -------
Measurement Pt. -12/31/92 $100 $100 $100
Fiscal Year Ended -12/31/93 $109 $110 $111
Fiscal Year Ended -12/31/94 $ 99 $112 $ 98
Fiscal Year Ended -12/31/95 $117 $153 $129
Fiscal Year Ended -12/31/96 $116 $189 $131
Fiscal Year Ended -12/31/97 $163 $252 $166
Assumes $100 invested on 12/31/92 in Nevada Power Company common stock, S&P
500 Stock Index and Peer Group Companies Index with dividend reinvestment over
the period.
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The Companies included in the Peer Group Companies Index are the following.
ALLEGHENY ENERGY INC AMEREN CORP
AMERICAN ELECTRIC POWER ATLANTIC ENERGY INC
BALTIMORE GAS & ELECTRIC BOSTON EDISON CO
CAROLINA POWER & LIGHT CENTERIOR ENERGY CORP
CENTRAL & SOUTHWEST CORP CINERGY CORP
CIPSCO INC CMS ENERGY CORP
CONSOLIDATED EDISON OF NY DELMARVA POWER & LIGHT
DOMINION RESOURCES INC DPL INC
DQE INC DTE ENERGY CO
DUKE ENERGY CORP EASTERN UTILITIES ASSOC
EDISON INTERNATIONAL ENOVA CORP
ENTERGY CORP FIRSTENERGY CORP
FLORIDA PROGRESS CORP FPL GROUP INC
GPU INC HOUSTON INDUSTRIES INC
IDAHO POWER CO ILLINOVA CORP
IPALCO ENTERPRISES INC KANSAS CITY POWER & LIGHT
KU ENERGY CORP LG&E ENERGY CORP
LONG ISLAND LIGHTING MONTANA POWER CO
NEW CENTURY ENERGIES INC NEW ENGLAND ELECTRIC SYSTEM
NEW YORK STATE ELEC & GAS NIAGARA MOHAWK POWER
NIPSCO INDUSTRIES INC NORTHEAST UTILITIES
NORTHERN STATES POWER/MIN OGE ENERGY CORP
PACIFICORP PECO ENERGY CO
PG&E CORP PINNACLE WEST CAPITAL
PORTLAND GENERAL CORP POTOMAC ELECTRIC POWER
PP&L RESOURCES INC PUBLIC SERVICE CO OF NEW MEXICO
PUBLIC SERVICE ENTRP PUGET SOUND ENERGY INC
ROCHESTER GAS & ELECTRIC SCANA CORP
SIERRA PACIFIC RES SOUTHERN CO
TECO ENERGY INC TEXAS UTILITES CO
UNICOM CORP WESTERN RESOURCES INC
WISCONSIN ENERGY CORP
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RETIREMENT BENEFITS
The Company's Qualified Retirement Plan (the "Retirement Plan") for
salaried employees provides noncontributory benefits based upon both years of
service and the employee's highest consecutive 5-year average annual
compensation. Annual compensation includes salary and bonus amounts paid as
shown in the Summary Compensation Table. The credited years of service under
the Retirement Plan at December 31, 1997 for each of the individuals listed in
the Summary Compensation Table are as follows: Charles A. Lenzie, 22 years;
Steven W. Rigazio, 12 years; Cynthia K. Gilliam, 22 years; David G. Barneby, 30
years; and Richard L. Hinckley, 11 years. The Retirement Plan includes an early
retirement option under which a covered employee may receive a reduced benefit
upon early retirement between ages 55 and 62. Benefits payable upon retirement
after age 62 are unreduced. Benefits payable under the Retirement Plan must be
in compliance with applicable guidelines or maximums prescribed in the Employees
Retirement Income Security Act of 1974 as currently stated or as adjusted from
time to time.
The following table sets forth, by example, maximum annual benefits upon
retirement on or after age 62 from the Retirement Plan. The amounts shown below
represent the application of the Retirement Plan formula to the highest
consecutive 5-year average annual earnings and years of service shown.
Maximum Annual Benefit for Specific
Highest Years of Credited Service at Retirement
Consecutive 5-Year ---------------------------------------------------------
Average Earnings 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
- ------------------ -------- -------- -------- -------- -------- --------
$150,000 .......... $38,400 $51,200 $64,000 $76,800 $89,600 $99,600
200,000 .......... 38,400 51,200 64,000 76,800 89,600 99,600
250,000 .......... 38,400 51,200 64,000 76,800 89,600 99,600
300,000 .......... 38,400 51,200 64,000 76,800 89,600 99,600
350,000 and over.. 38,400 51,200 64,000 76,800 89,600 99,600
The Company has adopted a Supplemental Executive Retirement Plan (the
"SERP") in addition to the Retirement Plan. Participation is limited to such
officers as the Board of Directors may select. Presently, 28 active or retired
designated officers, managers and beneficiaries including the five highest paid
officers of the Company, participate in the SERP. Each selected participant who
retires on or after age 62 with 25 years of service will receive a SERP
retirement benefit equivalent to 60% of his/her highest consecutive 3-year
average annual earnings reduced by the Retirement Plan benefit. Annual earnings
include wages, salary, bonus earned and the value of other annual compensation
amounts as shown in the Summary Compensation Table. Reduced benefits apply to
participants who retire with less than 25 years of service or before age 62.
Participants with more than 25 years of service at retirement receive an
additional benefit equal to 1.5% of their highest consecutive 3-year average
annual earnings for each year of service beyond 25 years. The credited years of
service under the SERP at December 31, 1997 for each of the individuals listed
in the Summary Compensation Table are as follows: Charles A. Lenzie, 23 years;
Steven W. Rigazio, 13 years; Cynthia K. Gilliam, 23 years; David G. Barneby, 31
years and Richard L. Hinckley, 12 years.
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The following table sets forth, by example, maximum annual benefits upon
retirement on or after age 62 under the combined regular Retirement Plan and the
SERP. The amounts shown below represent the application of the SERP formula to
the highest consecutive 3-year average annual earnings and years of service
shown. The amounts shown do not include Social Security benefits payable upon
retirement.
Maximum Annual Benefit for Specific
Highest Years of Credited Service at Retirement
Consecutive 3-Year ----------------------------------------------------------
Average Earnings 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
- ------------------ -------- -------- -------- -------- -------- --------
$150,000 ........ $ 67,500 $ 78,750 $ 90,000 $101,250 $112,500 $123,750
200,000 ........ 90,000 105,000 120,000 135,000 150,000 165,000
250,000 ........ 112,500 131,250 150,000 168,750 187,500 206,250
300,000 ........ 135,000 157,500 180,000 202,500 225,000 247,500
350,000 ........ 157,500 183,750 210,000 236,250 262,500 288,750
400,000 ........ 180,000 210,000 240,000 270,000 300,000 330,000
450,000 ........ 202,500 236,250 270,000 303,750 337,500 371,250
500,000 ........ 225,000 262,500 300,000 337,500 375,000 412,500
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
The Company has established a Retirement Plan for the Outside Directors
(the "RPOD"). Outside Directors who are first elected after March 12, 1998 are
not eligible for benefits under the RPOD. The RPOD provides a maximum annual
life benefit equivalent to the annual fee being paid to the Outside Director at
the date of retirement. With respect to an Outside Director first elected after
May 11, 1990, receipt of the maximum annual life benefit under the RPOD is
subject to (a) minimum service for 5 years as an Outside Director and (b)
retirement on or before the first day of the month following such Outside
Director's 72nd birthday. The annual benefit received by an Outside Director
elected after May 11, 1990, who has met the minimum 5-year service requirement,
will be reduced by $500 for each year such Outside Director retires after their
65th birthday but prior to their 72nd birthday.
EMPLOYMENT CONTRACT
The Company entered into an employment contract with Mr. Niggli when he joined
Nevada Power Company as President and Chief Operating Officer. The employment
contract is for a three year term and provides for an initial base salary of
$400,000 per year. Mr. Niggli will be provided with 26 years of credited
service for the Retirement Plan, but the Company will only be responsible for
paying the difference between the Retirement Plan benefit and any benefits being
paid by previous employers. Mr. Niggli will also be included in the SERP, the
LTIP, the Short-Term Incentive Plan and he will also be provided an automobile
pursuant to the executive automobile policy. The employment contract also
contains a change-in-control provision which would give Mr. Niggli an amount
equal to 2.99 times the annual salary, and full vesting of his Retirement Plan
and SERP benefits in the event the Company is sold or merged and Mr. Niggli
terminates his employment with the Company.
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SEVERANCE ALLOWANCE PLAN
The Company has a Severance Allowance Plan (the "Severance Plan") for
eligible employees under which any regular full-time or part-time employee of
the Company will be eligible for severance benefits if terminated within three
years after a change in control of the Company. The following are circumstances
under which a change in control may occur: (a)the dissolution or liquidation of
the Company; (b)a reorganization, merger, or consolidation with one or more
corporations in which the Company is not the surviving corporation; (c)the sale,
exchange, or transfer of Company stock resulting in any person or the person's
affiliates owning more than 20 percent of the outstanding shares; (d)the
election to the Company's Board of Directors of new members who were not
originally nominated to the Board at the previous two annual meetings if, as a
result of this election, new members constitute a majority of the Board, and
(e)the sale of all or substantially all of the Company's assets. These are the
only business conditions under which the severance plan becomes effective.
The severance benefit is payable in full at the time of the employee's
termination and equals the employee's monthly base salary, plus any bonus, in
effect during the month immediately preceding termination, times the total
number of months of severance benefits (the "severance benefit period") to which
the employee is entitled based upon the employee's years of service. The
severance benefit period for each employee shall be determined under the
following schedule:
Severance
Company Seniority Except Officers Benefit Period
--------------------------------- --------------
6 Months to 5 Years ............... 6 Months
6 Years to 10 Years ............... 9 Months
11 Years to 20 Years ............... 12 Months
21 Years and over ............... 18 Months
The severance benefit period for officers will be 24 months, except for the
Chief Executive Officer and Chief Operating Officer whose severance benefit
period is 36 months. In addition, each eligible employee will receive continued
medical and life insurance benefits during such severance benefit period. No
amounts paid or payable under the Severance Plan shall reduce or offset any
amounts payable under other plans maintained by the Company, including any
amounts payable under the Company's Retirement Plan or 401(k) Plan; nor shall
any amounts paid or payable under any such plans reduce or offset any amounts
payable under the Severance Plan. No payments will be made under the Severance
Plan, if combined with any other compensation from the Company, the payments
constitute what is defined as "excess parachute payments" by the Internal
Revenue Code. Excess parachute payments are defined as those amounts over three
times an individual's annualized average total compensation at the Company for
each of the five years preceding the change-in-control.
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SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Deloitte & Touche LLP as the Company's
independent public accountants for 1998 at the recommendation of the Audit
Committee. Representatives of Deloitte & Touche LLP will be present at the 1998
Annual Meeting. They will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal intended for
consideration at the 1999 Annual Meeting must be received by the Company on or
before November 12, 1998 to be included in the proxy materials for the 1999
Annual Meeting. It is recommended that shareholders submitting proposals direct
them to the Secretary of the Company and utilize Certified Mail-Return Receipt
Requested.
ANNUAL REPORT
For further information with respect to the Company, reference is made to
the 1997 Annual Report of the Company, a copy of which has been mailed to all
shareholders of the Company.
OTHER MATTERS
The management knows of no matters to be presented at the meeting other
than those mentioned above. However, if any other matters do properly come
before the meeting, it is intended that the shares represented by proxies will
be voted with respect thereto in accordance with the judgment of the persons
voting thereon.
Richard L. Hinckely
Richard L. Hinckley
Secretary
Las Vegas, Nevada
March 12, l998
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1997 ANNUAL MEETING MINUTES
Copies of the minutes of the Company's 1997 Annual Meeting of Shareholders
and/or the Company's 1997 Annual Report on Form 10-K, including the financial
statements and the schedules thereto filed with the Securities and Exchange
Commission for the Company's most recent fiscal year, will be furnished upon
written request to shareholders without charge. A copy may be obtained by
calling our toll free number, 1-800-344-9239, or by writing to Shareholder
Services, Nevada Power Company, P.O. Box 98669, Las Vegas, Nevada 89193-8669.
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March 12, l998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Nevada Power Company to be held at 2:00 P.M. on May 8, 1998, at the Stardust
Resort & Casino, Conference Center, 3000 Las Vegas Boulevard South, Las
Vegas, Nevada. Your Board of Directors looks forward to greeting personally
those shareholders able to attend.
At the meeting you will be asked to elect three directors to three-year
terms.
Whether or not you plan to attend, it is important that your shares are
represented at the meeting. Accordingly, you are requested to promptly vote,
sign, date and mail the attached proxy in the envelope provided.
Thank you for your consideration and continued support.
Very truly yours,
NP
C. Lenzie
Charles A. Lenzie NEVADA
Chairman of the Board POWER COMPANY
and Chief Executive Officer
PLEASE DETACH HERE
- ------------------------------------------------------------------------------
The signing shareholder(s) hereby appoints Mary Lee Coleman, Charles A.
Lenzie and J. A. Tiberti, or any one of them, with full power of substitution,
the attorneys and proxies of the signing shareholder(s) to vote all shares
of Common Stock of the Company which the signing shareholder(s) is entitled to
vote at the Annual Meeting of Nevada Power Company to be held on May 8, 1998,
at 2:00 PM and at any and all adjournments of such meeting.
MANAGEMENT RECOMMENDS A "FOR" VOTE FOR ITEM 1.
(1) ELECTION OF DIRECTORS FOR all nominees WITHHOLD AUTHORITY_____
to the terms listed below listed below____ for all nominees listed
(except as marked below
to the contrary)
(INSTRUCTION: To withhold authority to vote for any individual nominee
listed below, strike a line through the nominee's name.)
Three Year Term: Fred D. Gibson, Jr. Michael R. Niggli Arthur M. Smith
_____________________________________
(Signature) (Date)
_____________________________________
(Signature) (Date)
(Please sign EXACTLY as your name(s)
appears on this ballot. Joint owners
must EACH sign.)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE SIGNING SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSAL 1. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
<PAGE>
