<PAGE>
===============================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
<TABLE>
<S> <C>
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
------- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
------- ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
</TABLE>
<TABLE>
<S> <C> <C>
Registrant, State of Incorporation, Address of
Commission File Principal Executive Offices and Telephone I.R.S. employer
Number Number Identification Number
1-8788 SIERRA PACIFIC RESOURCES 88-0198358
P.O. Box 10100
(6100 Neil Road)
Reno, Nevada 89520-0400 (89511)
(775) 834-4011
1-4698 NEVADA POWER COMPANY 88-0045330
6226 West Sahara Avenue
Las Vegas, Nevada 89146
(702) 367-5000
</TABLE>
Indicate by check mark whether 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.
Class Outstanding at August 9, 2000
Common Stock, $1.00 par value 78,442,587 Shares
of Sierra Pacific Resources
Sierra Pacific Resources is the sole holder of the 1,000 shares of outstanding
Common Stock, $1.00 stated value, of Nevada Power Company.
This combined Quarterly Report on Form 10-Q is separately filed by Sierra
Pacific Resources and Nevada Power. Information contained in this document
relating to Nevada Power Company is filed by Sierra Pacific Resources and
separately by Nevada Power Company on its own behalf. Nevada Power Company makes
no representation as to information relating to Sierra Pacific Resources or its
subsidiaries, except as it may relate to Nevada Power Company.
===============================================================================
<PAGE>
SIERRA PACIFIC RESOURCES
NEVADA POWER COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
CONTENTS
PART I - FINANCIAL INFORMATION
------------------------------
<TABLE>
<CAPTION>
Page No.
<S> <C>
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 2000 and
December 31, 1999.............................................................................2
Condensed Consolidated Statements of Income - Three Months and Six Months
Ended June 30, 2000 and 1999..................................................................3
Condensed Consolidated Statements of Cash Flows - Six Months
Ended June 30, 2000 and 1999..................................................................4
Balance Sheets for Nevada Power Company - June 30, 2000 and
December 31, 1999.............................................................................5
Statements of Income for Nevada Power Company - Three and Six Months
Ended June 30, 2000 and 1999..................................................................6
Statements of Cash Flows for Nevada Power Company - Six Months
Ended June 30, 2000 and 1999..................................................................7
Notes to Condensed Consolidated Financial Statements..............................................8
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.................................................................................16
ITEM 3. Quantitative and Qualitative Disclosures about
Market Risk...................................................................................27
PART II - OTHER INFORMATION
---------------------------
<S> <C> <C>
ITEM 1. Legal Proceedings.............................................................................28
ITEM 4. Submission of Matters to a Vote of Security Holders...........................................29
ITEM 5. Other Information.............................................................................29
ITEM 6. Exhibits and Reports on Form 8-K..............................................................30
Signature Page.........................................................................................31
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
SIERRA PACIFIC RESOURCES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
June 30, December 31,
2000 1999
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Utility Plant at Original Cost:
Plant in service $5,481,022 $5,351,399
Less: accumulated provision for depreciation 1,652,576 1,571,102
-------------- -----------
3,828,446 3,780,297
Construction work-in-progress 305,388 293,232
-------------- -----------
4,133,834 4,073,529
-------------- -----------
Investments in subsidiaries and other property, net 122,579 105,880
-------------- -----------
Current Assets:
Cash and cash equivalents 122,321 4,789
Accounts receivable less provision for uncollectible accounts:
2000-$4,707; 1999-$6,475 314,811 215,972
Materials, supplies and fuel, at average cost 80,786 73,621
Deferred energy costs 2,972 14,884
Other 9,815 7,003
-------------- ----------
530,705 316,269
-------------- ----------
Deferred Charges:
Goodwill 323,589 327,725
Regulatory tax asset 196,364 196,364
Other regulatory assets 108,820 105,242
Other 130,073 122,677
-------------- ----------
758,846 752,008
-------------- ----------
$5,545,964 $5,247,686
============== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholders' equity $1,434,137 $1,477,129
Preferred stock 50,000 50,000
SPPC/ NVP obligated mandatorily redeemable preferred trust securities 237,372 237,372
Long-term debt 2,153,307 1,556,627
-------------- ----------
3,874,816 3,321,128
-------------- ----------
Current Liabilities:
Short-term borrowings 109,112 754,979
Current maturities of long-term debt 456,457 202,709
Accounts payable 255,730 138,448
Accrued interest 27,094 15,394
Dividends declared 20,712 20,850
Accrued salaries and benefits 18,793 15,410
Deferred taxes on deferred energy costs 3,080 5,683
Other current liabilities 19,892 29,773
-------------- ----------
910,870 1,183,246
-------------- ----------
Commitments & Contingencies (Note 9)
Deferred Credits:
Deferred federal income taxes 416,217 413,964
Deferred investment tax credit 63,980 62,604
Regulatory tax liability 51,906 52,839
Customer advances for construction 110,764 109,422
Accrued retirement benefits 73,868 67,314
Other 43,543 37,169
-------------- ----------
760,278 743,312
-------------- ----------
$5,545,964 $5,247,686
============== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
SIERRA PACIFIC RESOURCES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30,
__________________ ___________________
2000 1999 2000 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $456,210 $237,937 $809,862 $420,370
Gas 16,851 - 51,311 -
Water 15,335 - 25,584 -
Other 2,347 - 6,508 -
-------- -------- -------- -------
490,743 237,937 893,265 420,370
-------- -------- -------- -------
OPERATING EXPENSES:
Operation:
Purchased Power 226,482 83,781 329,779 137,641
Fuel for power generation 99,104 35,425 166,027 66,028
Gas purchased for resale 11,470 - 34,321 -
Deferral of energy costs-net 7,486 6,594 14,274 10,383
Other 70,370 35,577 136,936 67,291
Maintenance 14,491 14,216 28,797 29,228
Depreciation and amortization 40,725 19,827 81,358 39,530
Taxes:
Income taxes (11,815) 5,793 (1,800) 7,206
Other than income 10,819 5,811 21,262 11,189
------- ------- ------- -------
469,132 207,024 810,954 368,496
------- ------- ------- -------
OPERATING INCOME 21,611 30,913 82,311 51,874
------- ------- ------- -------
OTHER INCOME:
Allowance for other funds used during construction 1,145 1,830 1,993 4,083
Other income (expense) - net 3,047 (844) 3,203 (1,163)
------- ------ ------ ------
4,192 986 5,196 2,920
------- ------ ------ ------
Total Income 25,803 31,899 87,507 54,794
------- ------ ------ -------
Before Interest
Charges
INTEREST CHARGES:
Long-term debt 31,812 16,761 57,634 31,466
Other 10,947 1,329 25,137 3,340
Allowance for borrowed funds used during construction
and
capitalized interest (2,576) (1,738) (4,873) (3,835)
------ ------ ------ ------
40,183 16,352 77,898 30,971
------ ------ ------ ------
INCOME (LOSS) BEFORE SPPC/NVP OBLIGATED MANDATORILY
REDEEMABLE PREFERRED TRUST SECURITIES (14,380) 15,547 9,609 23,823
Preferred dividend requirements of SPPC/NVP obligated
mandatorily redeemable preferred trust securities (4,836) (3,793) (9,672) (7,586)
------ ------- ------- ------
INCOME (LOSS) BEFORE PREFERRED STOCK DIVIDENDS (19,216) 11,754 (63) 16,237
Preferred stock dividend requirements of subsidiary (975) (42) (1,950) (84)
-------- ------- ------- ------
NET INCOME (LOSS) $(20,191) $ 11,712 $ (2,013) $ 16,153
------- ------ ------- ------
Net Income (Loss) Per Share- Basic $(0.26) $0.23 $(0.03) $0.32
======== ======= ====== =======
- Diluted $(0.26) $0.23 $(0.03) $0.32
======== ======= ====== =======
Weighted Average Shares of Common Stock Outstanding 78,420 51,265 78,418 51,265
======== ======= ====== =======
(000's)
Dividends Paid Per Share of Common Stock $0.250 $0.250 $0.500 $0.500
====== ====== ====== =======
The accompanying notes are an integral part of the
financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SIERRA PACIFIC RESOURCES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Six Months Ended
June 30,
------------------
2000 1999
------- -----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before preferred dividends $ (63) $ 16,237
Non-cash items included in income:
Depreciation and amortization 81,358 39,530
Deferred taxes and deferred investment tax credit (3,205) (2,206)
AFUDC and capitalized interest (6,866) (7,918)
Deferred energy costs 11,911 4,783
Early retirement and severance amortization 2,098 -
Other non-cash 10,260 7,340
Changes in certain assets and liabilities, net of acquisition:
Materials, supplies and fuel (7,165) (2,278)
Accounts receivable (98,839) (41,577)
Other current assets (2,812) 3,440
Accounts payable 117,282 (12,178)
Other current liabilities 2,599 9,105
Other - net 1,269 (1,346)
-------- --------
Net Cash Flows From Operating Activities 107,827 12,932
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant (145,644) (105,005)
Non-cash charges to utility plant 2,023 (212)
Contributions in aid of construction 5,264 -
Customer refunds for construction 1,342 1,784
------- -------
Net cash used for utility plant (137,015) (103,433)
------- ---------
Investments in subsidiaries and other property - net (16,699) (1,733)
------- --------
Net Cash Used In Investing Activities (153,714) (105,166)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings (647,516) (11,012)
Proceeds from issuance of long-term debt 950,000 130,000
Retirement of long-term debt (97,923) (2,425)
Change in funds held in trust - 10
Retirement of preferred stock - (49)
Sale of common stock 5 -
Dividends paid (41,147) (25,725)
------ -------
Net Cash Provided By Financing Activities 163,419 90,799
------ ------
Net increase in Cash and Cash Equivalents 117,532 (1,435)
Beginning balance in Cash and Cash Equivalents 4,789 1,770
------- -------
Ending balance in Cash and Cash Equivalents $ 122,321 $ 335
======= ======
Supplemental Disclosures of Cash Flow Information:
Cash Paid During Period For:
Interest $ 71,516 $ 39,521
Income Taxes $ 12,730 $ 1,000
The accompanying notes are an integral part of the financial statements
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NEVADA POWER COMPANY
BALANCE SHEETS
(Dollars in Thousands)
June 30, December 31,
2000 1999
---------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Utility Plant at Original Cost:
Plant in service $3,029,962 $2,928,973
Less: accumulated provision for depreciation 816,220 772,003
-------------- ----------
2,213,742 2,156,970
Construction work-in-progress 182,388 195,671
-------------- ----------
2,396,130 2,352,641
-------------- ----------
Investments in Sierra Pacific Resources (Note 2) 541,307 654,156
Investments in subsidiaries and other property, net 12,731 15,644
-------------- ----------
554,038 669,800
-------------- ----------
Current Assets:
Cash and cash equivalents 29,744 243
Accounts receivable less provision for uncollectible accounts:
2000-$3,216; 1999-$2,826 180,125 110,955
Materials, supplies and fuel, at average cost 44,445 43,108
Deferred energy costs 2,253 14,884
Other 5,149 3,573
-------------- ---------
261,716 172,763
-------------- ---------
Deferred Charges
Regulatory tax asset 130,833 130,833
Other regulatory assets 32,145 28,190
Other 31,918 24,258
-------------- ---------
194,896 183,281
-------------- ---------
$3,406,780 $3,378,485
============== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholders' equity including $541,307 -2000; $654,156 -1999
of equity in Sierra Pacific Resources (Note 2) $1,434,137 $1,477,129
NVP obligated mandatorily redeemable preferred trust securities 188,872 188,872
Long-term debt 929,510 931,004
-------------- ----------
2,552,519 2,597,005
-------------- ----------
Current Liabilities:
Short-term borrowings 100,000 182,000
Current maturities of long-term debt 153,818 89,842
Accounts payable 155,700 75,088
Accrued interest 14,632 10,098
Dividends declared 24,086 24,126
Accrued salaries and benefits 9,667 7,025
Deferred taxes on deferred energy costs 3,080 5,683
Other current liabilities 12,370 18,536
-------------- ---------
473,353 412,398
-------------- ----------
Commitments & Contingencies (Note 9)
Deferred Credits:
Deferred federal income taxes 233,604 236,139
Deferred investment tax credit 25,893 26,624
Regulatory tax liability 14,060 14,993
Customer advances for construction 68,606 69,341
Accrued retirement benefits 24,672 18,262
Other 14,073 3,723
-------------- ----------
380,908 369,082
-------------- ----------
$3,406,780 $3,378,485
============== ==========
The accompanying notes are an integral part of the financial statements.
</TABLE>
5
<PAGE>
NEVADA POWER COMPANY
STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------ ------ ----- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $279,390 $237,937 $475,420 $420,370
OPERATING EXPENSES:
Operation:
Purchased power 154,533 83,781 208,350 137,641
Fuel for power generation 55,022 35,425 92,669 66,028
Deferral of energy costs-net 7,486 6,594 14,274 10,383
Other 35,134 35,577 64,285 67,291
Maintenance 9,263 14,216 19,084 29,228
Depreciation and amortization 21,314 19,827 42,730 39,530
Taxes:
Income taxes (10,446) 5,793 (6,819) 7,206
Other than income 5,912 5,811 11,318 11,189
------- ------- ------- -------
278,218 207,024 445,891 368,496
------- ------- ------- -------
OPERATING INCOME 1,172 30,913 29,529 51,874
------- ------- ------- -------
OTHER INCOME:
Equity in earnings of Sierra Pacific Resources (2,385) - 7,822 -
(Note 2)
Allowance for other funds used during construction 1,062 1,830 1,842 4,083
Other income (expense) - net 331 (844) 707 (1,163)
------- ------- ------- -------
(992) 986 10,371 2,920
------- ------- ------- -------
Total Income Before Interest 180 31,899 39,900 54,794
Charges ------- ------- ------- ------
INTEREST CHARGES:
Long-term debt 14,253 16,761 30,152 31,466
Other 4,267 1,329 7,932 3,340
Allowance for borrowed funds used during
construction and
capitalized interest (1,942) (1,738) (3,757) (3,835)
------- ------- ------- -------
16,578 16,352 34,327 30,971
------- ------- ------- -------
INCOME (LOSS) BEFORE NVP OBLIGATED MANDATORILY
REDEEMABLE PREFERRED TRUST SECURITIES (16,398) 15,547 5,573 23,823
Preferred dividend requirements of NVP obligated
mandatorily redeemable preferred trust securities (3,793) (3,793) (7,586) (7,586)
-------- ------- ------- -------
INCOME (LOSS) BEFORE PREFERRED STOCK DIVIDENDS (20,191) 11,754 (2,013) 16,237
Preferred stock dividend requirements - (42) - (84)
-------- ------ ------- -------
NET INCOME (LOSS) $(20,191) $ 11,712 $ (2,013) $ 16,153
======== ======= ======= ======
Net Income (Loss) Per Share- Basic $(0.26) $0.23 $(0.03) $0.32
======== ======= ======= ======
- Diluted $(0.26) $0.23 $(0.03) $0.32
======== ======= ========= ======
Weighted Average Shares of Common
Stock Outstanding (000's) 78,420 51,265 78,418 51,265
======== ======== ========= ======
Dividends Paid Per Share of Common Stock $0.250 $0.250 $0.500 $0.500
======== ======= ======== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NEVADA POWER COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
2000 1999
------ -----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before preferred dividends $ (2,013) $ 16,237
Non-cash items included in income:
Depreciation and amortization 42,730 39,530
Deferred taxes and deferred investment tax credit (3,810) (2,206)
AFUDC and capitalized interest (5,599) (7,918)
Deferred energy costs 12,631 4,783
Other non-cash 6,497 7,340
Equity in earnings of SPR (Note 2) (7,822) -
Changes in certain assets and liabilities, net of acquisition:
Materials, supplies and fuel (1,337) (2,278)
Accounts receivable (69,170) (41,577)
Other current assets (1,576) 3,440
Accounts payable 80,612 (12,178)
Other current liabilities (1,593) 9,105
Other - net 4,211 (1,346)
------- -------
Net Cash Flows From Operating Activities 53,761 12,932
------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant (84,315) (105,005)
Non-cash charges to utility plant 697 (212)
Customer refunds for construction (735) 1,784
-------- --------
Net cash used for utility plant (84,353) (103,433)
-------- --------
Investments in subsidiaries and other property - net (388) (1,733)
-------- --------
Net Cash Used In Investing Activities (84,741) (105,166)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings (84,516) (11,012)
Proceeds from issuance of long-term debt 150,000 130,000
Retirement of long-term debt (85,003) (2,425)
Change in funds held in trust - 10
Retirement of preferred stock - (49)
Additional investment of Parent 128,000 -
Dividends paid (48,000) (25,725)
-------- -------
Net Cash Provided By Financing Activities 60,481 90,799
-------- -------
Net increase in Cash and Cash Equivalents 29,501 (1,435)
Beginning balance in Cash and Cash Equivalents 243 1,770
-------- --------
Ending balance in Cash and Cash Equivalents $ 29,744 $ 335
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During Period For:
Interest $ 33,550 $ 39,521
Income Taxes $ 6,500 $ 1,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE 1. MANAGEMENT'S STATEMENT
--------------------------------
In the opinion of the management of Sierra Pacific Resources (SPR), the
accompanying unaudited interim condensed consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the condensed consolidated financial position,
condensed consolidated results of operations and condensed consolidated cash
flows for the periods shown. These condensed consolidated financial statements
do not contain the complete detail or footnote disclosure concerning accounting
policies and other matters which are included in full year financial statements
and therefore, they should be read in conjunction with the audited financial
statements included in SPR's Annual Report on Form 10-K for the year ended
December 31, 1999.
The results of operations for the six months ended June 30, 2000 are not
necessarily indicative of the results to be expected for the full year.
Principles of Consolidation
---------------------------
The condensed consolidated financial statements include the accounts of SPR
and its wholly-owned subsidiaries, Nevada Power Company (NVP), Sierra Pacific
Power Company (SPPC), Tuscarora Gas Pipeline Company, Sierra Gas Holding Company
(formerly Sierra Energy Company), Sierra Energy Company dba e/./three, Sierra
Pacific Energy Company, Lands of Sierra, Sierra Pacific Communications, Nevada
Electric Investment Company and Sierra Water Development Company. All
significant intercompany transactions and balances have been eliminated in
consolidation.
Reclassifications
-----------------
Certain items previously reported for years prior to 2000 have been
reclassified to conform to the current year's presentation. Net income and
shareholders' equity were not affected by these reclassifications.
NOTE 2. FINANCIAL STATEMENTS OF NEVADA POWER COMPANY
------------------------------------------------------
As described in Note 3 that follows, NVP is deemed to be the acquirer of SPR
for accounting purposes and this is reflected in the SPR Consolidated Financial
Statements. However, after the merger with SPR and as a result of the structure
of the transactions, NVP is a separate legal entity, which is a wholly owned
subsidiary of SPR. As a legal matter, NVP does not own any equity interest in
SPR. The audited NVP Financial Statements accommodate the presentation of
financial information of NVP on a stand-alone basis, without the benefit of the
other SPR entities, by summarizing all non-NVP financial information into a few
items on each of the Financial Statements. These summarized items are repeated
below:
Non-NVP Financial Items on the NVP Financial Statements
<TABLE>
<CAPTION>
NVP Balance Sheet: June 30, 2000 December 31, 1999
------------------ ------------- -----------------
<S> <C> <C> <C>
Investment in Sierra Pacific Resources $541,307 $654,156
Equity in Sierra Pacific Resources $541,307 $654,156
</TABLE>
The Investment in Sierra Pacific Resources reflects the net assets, after
deducting for all liabilities and preferred stock of Sierra Pacific Resources
not related to NVP. The Equity in Sierra Pacific Resources reflects the sum of
paid-in-capital and retained earnings of SPR, without the benefit of NVP.
These line items are required by the rules of purchase accounting and do not
represent any asset to which holders of NVP's securities may look for recovery
of their investment. These items must be disregarded for determining the
ability of NVP to satisfy its obligations or to pay dividends (preferred or
common), for calculating NVP's ratios of earnings to fixed charges and preferred
stock dividends and for all of NVP's financial covenants and earnings tests
including those under its charter and mortgage.
8
<PAGE>
<TABLE>
<CAPTION>
NVP Income Statement: Three Months Ended Six Months Ended
--------------------- ------------------ -----------------
June 30, 2000 June 30, 2000
------------- -------------
<S> <C> <C> <C>
Equity in Earnings of Sierra Pacific $(2,385) $7,822
Resources
</TABLE>
The Equity in Earnings of Sierra Pacific Resources reflects three and six
months, respectively, of SPR net income, after SPPC preferred stock dividends.
This line item is required by the rules of purchase accounting and does not
represent any item of revenue or income to which holders of NVP's securities may
look for recovery of their investment. This item must be disregarded for
determining the ability of NVP to satisfy its obligations or its ability to pay
dividends (preferred or common), for calculating NVP's ratios of earnings to
fixed charges and preferred dividends and for all of NVP's financial covenants
and earnings tests including those under its charter and mortgage.
<TABLE>
<CAPTION>
NVP Statement of Cash Flow: Six Months Ended
--------------------------- ----------------
June 30, 2000
-------------
<S> <C> <C>
Equity in Earnings of Sierra Pacific $7,822
Resources
</TABLE>
As in the income statement, the Equity in Earnings of Sierra Pacific Resources
reflects the six months of SPR net income, after SPPC preferred stock dividends.
This line item is required by the rules of purchase accounting and does not
represent any item of cash flow to which holders of NVP's securities may look
for recovery of their investment. This item must be disregarded for determining
the ability of NVP to satisfy its obligations or its ability to pay dividends
(preferred or common), for calculating NVP's ratios of earnings to fixed charges
and preferred dividends and for all of NVP's financial covenants and earnings
tests including those under its charter and mortgage.
NOTE 3. SIERRA PACIFIC RESOURCES AND NEVADA POWER COMPANY MERGER
------------------------------------------------------------------
On July 28, 1999 the merger between SPR and NVP was finalized. The merger
was accounted for as a reverse purchase under generally accepted accounting
principles, with NVP considered the acquiring entity even though SPR is the
surviving legal entity. In addition, for accounting purposes the merger was
deemed to have occurred on August 1, 1999. As a result of this reverse purchase
accounting treatment; (i) the historical financial statements of SPR for periods
prior to the date of the merger are no longer the financial statements of SPR,
and therefore, are no longer presented; (ii) the historical financial statements
of SPR for periods prior to the date of the merger are those of NVP.
Through June 30, 2000, SPR incurred a total of $60.3 million in capitalized
costs since merger work began. The capitalized merger amounts consist of $40.7
million of transaction and transition costs and $19.6 million of employee
separation costs. For more information regarding the capitalization of merger
costs, see Note 2 of "The Notes To Financial Statements" included in SPR's
Annual Report on Form 10-K for the year ended December 31, 1999.
Employee severance, relocation, and related costs for SPR were $15.1
million, of which $1.2 million remains unpaid as of June 30, 2000. Other costs
incurred in connection with employee separations included pension and
postretirement benefits net of curtailment gains of $4.5 million.
In accordance with the terms of the merger, each outstanding share of SPR's
common stock was converted into the right to receive either $37.55 in cash or
1.44 shares of newly issued SPR common stock. Each outstanding share of NVP
common stock was converted to the right receive either $26.00 in cash or 1.00
share of newly issued SPR common stock. 4,037,000 shares of SPR and 11,716,611
shares of NVP common stock were exchanged for $151.6 million and $304.6 million,
respectively. The remaining shares of each company were converted to newly
issued shares of SPR common stock. SPR stockholders and NVP stockholders
received 38,866,054 and 39,548,506 shares of newly issued SPR common stock,
resulting in 78,414,560 outstanding shares of SPR on August 1, 1999.
The total consideration paid to SPR common stockholders was equal to cash
of $151.6 million and 38,866,054 shares of newly issued SPR common stock at a
price of $24.18 per share based on the average closing price of NVP common stock
between April 22, 1998 and May 6, 1998. The eleven-day average price of NVP
common stock used in determining the total stock consideration represents the
market price over a reasonable period of time before and after the transaction
was announced on April 29, 1998. As shown below, $331.2 million of
9
<PAGE>
goodwill was recorded in connection with the merger and is being amortized over
40 years. However, the order of the Public Utilities Commission of Nevada (PUCN)
approving the merger allowed SPR to defer merger costs (including goodwill)
allocable to the regulated utilities for a three year period. At the end of the
deferral period SPR will propose an amortization period for goodwill and other
merger costs. Accordingly, goodwill amortization associated with the regulated
utility companies is being reclassified to a regulatory asset during the three-
year period. Also, because SPR is deferring merger costs as regulatory assets
the transaction costs included in the calculation of goodwill represent only
costs allocable to SPR's non-regulated subsidiaries.
Pro forma unaudited financial information for SPR on a consolidated basis,
giving effect to the merger as if it had occurred at the beginning of all
periods, is presented below. This pro forma information is not necessarily
indicative of the results that would have occurred, or that will occur in the
future.
<TABLE>
<CAPTION>
Three Months ended Six Months ended
(Dollars and shares in thousands June 30, June 30,
---------------------------- ---------------------
except per share amounts) 2000 1999 2000 1999
----------------------------------------- ------------ ------------ --------- -------
<S> <C> <C> <C> <C>
Operating Revenue $ 490,743 $420,094 $ 893,265 $797,313
Operating Income $ 21,611 $ 62,811 $ 82,311 $121,465
Income (Loss) Applicable to Common Stock $ (20,191) $ 21,634 $ (2,013) $ 41,295
Net Income (Loss) per share - basic and diluted $(0.26) $ 0.28 $(0.03) $ 0.53
Weighted Average Shares of Common
Stock Outstanding (000's) 78,420 78,420 78,418 78,418
Total Assets $5,545,964 $5,545,964
</TABLE>
NOTE 4. RECENT PRONOUNCEMENTS
-------------------------------
Financial Accounting Standards Board
------------------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 133, entitled "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position, and measure those instruments at fair value. In May 1999, members of
the FASB agreed to delay the effective date of Statement 133 to fiscal years
beginning after June 15, 2000.
In June 2000, the FASB issued SFAS 138 that amended SFAS 133 in a number of
respects. Among other revisions, SFAS 138 exempted from the fair value
requirements normal purchases and normal sales (as defined by SFAS 133) that
contain settlement provisions, if it is probable that the contracts will not
settle net and will result in physical delivery. SPR is still assessing the
impact of SFAS 133 and SFAS 138 on its financial condition and results of
operations.
Securities and Exchange Commission
----------------------------------
In December 1999, the Staff of the Securities and Exchange Commission
released Staff Accounting Bulletin (SAB) No. 101, which summarizes certain of
the staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. Subsequently, SAB No. 101A and SAB
No. 101B were released delaying the implementation date of SAB No. 101 until no
later than the fourth fiscal quarter of fiscal years beginning after December
15, 1999. SPR does not believe that the SAB will have a material effect on its
financial statements.
10
<PAGE>
NOTE 5. SHORT-TERM BORROWINGS
-------------------------------
SPR's commercial paper balance decreased by approximately $484.2 million
since March 31, 2000, as a result of the issuance of long-term debt. See Note 6
- Long-Term Debt (below). On June 30, 2000, SPR had $9.0 million of commercial
paper outstanding at an average rate of 6.90%.
NVP's commercial paper balance increased from $82.0 million at December 31,
1999, to approximately $95.3 million at March 31, 2000. On June 30, 2000, NVP
had no commercial paper outstanding, as a result of the issuance of long-term
debt. See Note 6 - Long-Term Debt (below).
NOTE 6. LONG-TERM DEBT
------------------------
On March 31, 2000, $10 million of SPR's Series E senior notes matured.
On April 20, 2000, SPR issued an aggregate of $300 million floating rate
notes, $200 million of which will mature on April 20, 2003 and the remaining
$100 million will mature on April 20, 2002. Interest on the notes is payable
quarterly commencing on July 20, 2000. The interest rate on the notes for each
interest period will be a floating rate, subject to adjustment every three
months, equal to the London InterBank Offered Rate (LIBOR) for three-month U.S.
dollar deposits plus a spread of 0.60% for the notes maturing in 2003 and a
spread of 0.65% for the notes maturing in 2002. These notes will not be
entitled to any sinking fund. The notes due 2002 will be redeemable, in whole,
without premium at the option of SPR beginning on April 20, 2001 and on each
interest payment date thereafter. The net proceeds of the $200 million issue
were used to retire an equal amount of commercial paper of SPR that was used as
temporary funding for the cash portion of the NVP merger consideration. The net
proceeds of the $100 million issue were used to make a capital contribution to
NVP, which in turn was used to retire $85 million of NVP's maturing First
Mortgage Bonds on May 1, 2000 and the remaining proceeds were used to pay off
its commercial paper outstanding.
On April 20, 2000, upon issuance of these floating rate notes, SPR also
reduced its bank credit facility to $300 million from the previous amount of
$500 million in accordance with the terms of the credit agreement.
On May 9, 2000, SPR issued $300 million of notes under its universal
shelf registration. These notes bear interest at an annual rate of 8.75% and
will mature on May 15, 2005. Interest on the notes is payable semi-annually on
May 15 and November 15 commencing on November 15, 2000. The notes will not be
subject to any sinking fund and will be redeemable in whole or in part at any
time upon payment of the principal amount of the notes being redeemed, accrued
interest and a make-whole premium. The net proceeds from the issuance of these
notes were used to retire an equal amount of commercial paper of SPR.
On June 9, 2000, NVP issued $150 million of floating rate notes that will
mature on June 12, 2001. Interest on the notes is payable quarterly commencing
on September 9, 2000. The interest rate on the notes for each interest period
will be a floating rate, subject to adjustment every three months, equal to the
London InterBank Offered Rate (LIBOR) for three-month U.S. dollar deposits plus
a spread of 0.55%. These notes will not be entitled to any sinking fund and are
non-callable. The net proceeds of the $150 million issue were used to redeem
$100 million of floating rate notes on July 14, 2000, and the remaining proceeds
were used to reduce NVP's commercial paper outstanding.
On June 21, 2000, SPR reduced its credit facility to $150 million from the
previously reduced amount of $300 million in accordance with the terms of the
credit agreement. The remaining $150 million credit facility was a 3-year
credit facility, which has since been terminated by SPR effective August 11,
2000.
On June 22, 2000, Clark County, Nevada issued for NVP's benefit $100
million Industrial Development Refunding Revenue Bonds, Series 2000A, Due June
1, 2020. The interest rate will be determined by a Dutch Auction based on an
auction period of 7 days. The Series A bonds were issued to refund NVP's $100
million of Clark County's 7.80% Industrial Development Revenue Bonds Series 1990
on June 30, 2000. The method of determining the interest rate on the Bonds may
be converted from time to time in accordance with the Indenture so that such
Bonds would, thereafter, bear interest at a Daily, Weekly, Flexible, Term or
Auction Rate as designated. The Bonds are insured by AMBAC Assurance
Corporation.
11
<PAGE>
NOTE 7. EARNINGS PER SHARE
-------------------------------
SPR follows SFAS No. 128, "Earnings Per Share". The difference between
Basic EPS and Diluted EPS is due to common stock equivalent shares resulting
from stock options, employee stock purchase plan, performance shares and a non-
employee director stock plan. Common stock equivalents were determined using
the treasury stock method.
The following provides a reconciliation of Basic EPS and Diluted EPS.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -----------------------
2000 1999 2000 1999
--------- --------- -------- ----------
<S> <C> <C> <C> <C>
Basic EPS
Numerator
Income (loss) available to common stockholders ($000) $ (20,191) $ 11,712 $ (2,013) $ 16,153
----------- ----------- ----------- -----------
Denominator
Weighted average number of shares outstanding 78,419,949 51,265,000 78,418,153 51,265,000
----------- ----------- ----------- -----------
Per-Share Amount $ (0.26) $ 0.23 $ (0.03) $ 0.32
=========== =========== =========== ===========
Diluted EPS
Numerator
Income (loss) available to common stockholders ($000) $ (20,191) $ 11,712 $ (2,013) $ 16,153
----------- ----------- ----------- -----------
Denominator
Weighted average number of shares outstanding
before dilution 78,419,949 51,265,000 78,418,153 51,265,000
Stock options 1,529 - 1,341 -
Executive long term incentive plan 28,901 - 42,652 -
Non-Employee stock plan 4,532 - 4,532 -
Employee stock purchase plan 694 - 347 -
----------- ----------- ----------- -----------
78,455,605 51,265,000 78,467,025 51,265,000
----------- ----------- ----------- -----------
Per-Share Amount $ (0.26) $ 0.23 $ (0.03) $ 0.32
================================================================
</TABLE>
12
<PAGE>
NOTE 8. SEGMENT INFORMATION
-----------------------------
SPR operates three business segments providing regulated electric, natural
gas and water service. Electric service is provided to Las Vegas and
surrounding Clark County, northern Nevada and the Lake Tahoe area of California.
Natural gas and water services are provided in the Reno-Sparks area of Nevada.
Other segment information includes segments below the quantitative threshold for
separate disclosure.
Information as to the operations of the different business segments is set
forth below based on the nature of products and services offered. SPR evaluates
performance based on several factors, of which the primary financial measure is
business segment operating income. Intersegment revenues are not material.
Financial data for business segments is as follows (in thousands). Segment
information for 1999 includes only the operating results of NVP.
<TABLE>
<CAPTION>
Three Months Ended
June 30, 2000 Electric Gas Water Other Consolidated
-------------------- ------------------ ------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues $456,210 $16,851 $15,335 $2,347 $490,743
================== =================== =================== =================== ==================
Operating Income $ 13,106 $ 1,139 $ 5,660 $1,706 $ 21,611
================== =================== =================== =================== ==================
Three Months Ended
June 30, 1999 Electric Gas Water Other Consolidated
-------------------- ---------------- ------------------- ------------------- ------------------- ------------------
Operating Revenues $237,937 $ - $ - $ - $237,937
=============== =================== =================== =================== ==================
Operating Income $ 30,913 $ - $ - $ - $ 30,913
=============== =================== =================== =================== ==================
Six Months Ended
June 30, 2000 Electric Gas Water Other Consolidated
------------------- --------------- ------------------ ------------------ ------------------- ------------------
Operating Revenues $809,862 $51,311 $25,584 $6,508 $893,265
=============== ================= ================== =================== ==================
Operating Income $ 67,462 $ 5,751 $ 8,392 $ 706 $ 82,311
=============== ================= ================== =================== ==================
Six Months Ended
June 30, 1999 Electric Gas Water Other Consolidated
------------------- --------------- ----------------- ----------------- ------------------ ------------------
Operating Revenues $420,370 $ - $ - $ - $420,370
============== ================= ================= ================== ==================
Operating Income $ 51,874 $ - $ - $ - $ 51,874
============== ================= ================= ================== ==================
</TABLE>
NOTE 9. COMMITMENTS AND CONTINGENCIES
---------------------------------------
The Grand Canyon Trust and Sierra Club filed a lawsuit in the U.S. District
Court, District of Nevada, in February 1998, against the owners (including NVP)
of the Mohave Generation Station ("Mohave"), alleging violations of the Clean
Air Act regarding emissions of sulfur dioxide and particulates. An additional
plaintiff, National Parks and Conservation Association, later joined the suit.
The plant owners and plaintiffs have had numerous settlement discussions and
filed a proposed settlement with the court on October 6, 1999. The consent
decree, approved by the court in November 1999, established emission limits for
sulfur dioxide and opacity and required installation of air pollution controls
for sulfur dioxide, nitrogen oxides and particulate matter. The new emission
limits must be met by January 1, 2006 and April 1, 2006, for the first and
second units, respectively. However, if the owners sell their entire ownership
interest, with a closing date prior to December 30, 2002, then the new emission
limits become effective 36 months and 39 months from the date of last closing
for the two respective units. The estimated cost of new controls is $300
million. As a 14% owner in the Mohave Station, NVP's costs could be $42
million.
Also, the United States Congress authorized the Environmental Protection
Agency ("EPA") to study the potential impact Mohave may have on visibility in
the Grand Canyon area. A final report of the study results was released in
March 1999. The study acknowledges that sulfur dioxide emissions from Mojave
are transported to the Grand Canyon. EPA has solicited information to determine
whether visibility impairment in the Grand Canyon can be reasonably attributed
to Mohave. If EPA determines that significant visibility impairment is
reasonably
13
<PAGE>
attributable to the station, EPA could initiate a review for Best Available
Retrofit Technology. Based upon indications from EPA and the National Park
Service, the Plant owners believe that terms of the settlement of the suit
discussed above are expected to be reflected in a State Implementation Plan for
Nevada and resolve any concerns of EPA regarding visibility impairment.
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% owner of Navajo, NVP was required to fund an
estimated $48 million for installation of the scrubbers. The first of three
scrubber units was placed in commercial operation in November 1997, the second
scrubber in September 1998, with the last scrubber placed in operation in June
1999. NVP spent approximately $47.6 million on the scrubbers' construction. In
1992, NVP received resource-planning approval from the PUCN for its share of the
cost of the scrubbers.
In May 1997, the Nevada Division of Environmental Protection (NDEP) issued
an Order requiring NVP to submit a plan to eliminate the discharge of Reid
Gardner Station wastewater to groundwater. The Order also required a
hydrological assessment of groundwater impacts in the area. In June 1999, NDEP
determined that wastewater ponds have degraded groundwater quality. In August
1999, NDEP issued a discharge permit to Reid Gardner Station and an Order that
requires all wastewater ponds to be closed or lined with impermeable liners over
the next 10 years. This Order also required NVP to submit a Site
Characterization Plan to NDEP to ascertain impacts. Technical information from
the Plan will be used to develop a corrective action plan and allow NVP to
determine an estimate of remediation costs for cleanup. New pond construction
and lining costs are estimated at $20 million.
Additionally, SPPC has four water wells which currently exceed the federal
drinking water standard for naturally occurring arsenic concentrations.
Production from three of these wells continues by blending treated water. The
fourth well is out of service pending treatment. SPPC's water laboratory
research staff is developing options to assure that SPPC is prepared to meet new
arsenic standards. The new Arsenic regulations will be promulgated in 2000 and
the proposed regulation is expected to require action on 17 of the 25 wells
serving SPPC's system. Depending upon final rules from the EPA, SPPC may incur
between $70 million and $98 million by 2004 to meet the new standards.
As part of the Generation Divestiture Process described below, Phase I
and/or Phase II and Phase III Environmental Assessments were conducted at NVP's
Harry Allen, Clark, Sunrise and Reid Gardner facilities. These were completed
in July, 2000 and submitted to NDEP for their review and any subsequent
remediation.
Nevada Electric Investment Company (NEICO), a subsidiary of NVP in 1999,
owns property in Wellington, Utah, which was the site of a coal washing and load
out facility. The site now has a reclamation estimate supported by a bond of
$4.9 million with the Utah Division of Oil and Gas Mining. The property was
under contract for sale and the contract required the purchaser to provide $1.3
million in escrow towards reclamation. However, the sales contract was recently
terminated and NEICO has taken title to the escrow funds. It is NEICO's
intention to sell the property. In June 2000 an adjacent property owner filed
suit in Utah District Court claiming impacts from coal dust. The coal dust was
stabilized with an acrylic polymer to control impacts. NEICO intends to defend
itself against the suit, no discovery has been conducted, and no trial date has
been set. At this time, management cannot express an opinion on the extent of
possible damages or liability related to this matter.
In accordance with the revised Divestiture Plan stipulation approved by the
PUCN in February 2000 (see the 1999 Annual Report on Form 10-K), SPR is offering
for sale generation assets with peak capacity of approximately 2,985 megawatts
(MW), with approximately 1045 MW owned by SPPC and approximately 1,940 MW owned
by NVP. Letters of interest were issued to potential bidders in February 2000.
Upon response from the qualified potential bidders and execution of the
confidentiality agreements, offering memoranda and materials were provided to
the bidders. First stage indicative bids were received on May 25, 2000. The
short list of qualified bidders for each of the seven bundles being offered was
completed and bidders notified by June 6. The second stage due diligence
process was started on June 6, 2000, and will continue through mid-August.
Final bids and the selection of winning bids will occur in late August and early
September 2000. Close of sale and transfer of ownership should occur between
December 2000 and mid-2001.
On May 10, 2000, AES Corporation announced that it was the successful
bidder for the purchase of a controlling interest in the 1,580 MW Mohave
Generating Station in Laughlin, Nevada for approximately $667 million. Mohave
Generating Station is a 2-unit, coal-fired power plant located on 2,500 acres
along the Colorado River, approximately 80 miles south of Las Vegas. AES
executed Asset Sale Agreements with the sellers, NVP (14%) and Southern
California Edison Company (56%), for a 70% undivided interest in the facility.
The acquisition is subject to approval by the Federal Energy Regulatory
Commission (FERC) and the California Public
14
<PAGE>
Utilities Commission, and review by the Public Utilities Commission of Nevada
and is expected to close late in the Fourth Quarter of 2000.
NOTE 10. NEVADA RESTRUCTURING ACTIVITIES
-----------------------------------------
The PUCN approved stipulated agreements that resolve a federal lawsuit and
major restructuring issues including past costs. Refer to the REGULATORY
MATTERS section in ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS of this report for a discussion of these
matters. NVP and SPPC have agreed to sell their generation assets and the
stipulated agreements provide for the disposition of the proceeds from the sale
of those assets.
As a result, SPR is evaluating the impact of these regulatory actions on
the value of certain Regulatory Assets currently reflected in the Condensed
Consolidated Balance Sheets. The evaluation relates to the recoverability of
Regulatory Assets, primarily related to generating activities, given the
provisions of the stipulated agreements.
NOTE 11. SUBSEQUENT EVENTS
---------------------------
On June 21, 2000, SPR reduced its credit facility to $150 million from the
previously reduced amount of $300 million in accordance with the terms of the
credit agreement. The remaining $150 million credit facility was a 3-year
credit facility, which has since been terminated by SPR effective August 11,
2000.
On July 24, 2000 NVP received a 30-day extension on its $150 million Credit
Facility to August 28, 2000, in accordance with the terms of the credit
agreement. NVP has requested a 364-day extension of this facility which, if
granted by the participating banks, would extend this facility to August 27,
2001.
On July 28, 2000 Clark County, Nevada issued for NVP's benefit $15 million
Pollution Control Refunding Revenue Bonds, Series 2000B, due October 1, 2009.
The interest rate will be determined by a Dutch Auction based on an auction
period of 7 days. The bonds were issued to refund a like principal amount of
Clark County's 7.80% Pollution Control Revenue Bonds Series 1989 on October 2,
2000. The method of determining the interest rate on the bonds may be converted
from time to time in accordance with the Indenture so that such bonds would,
thereafter, bear interest at a Daily, Weekly, Flexible, Term or Auction Rate
designated. The bonds are insured by AMBAC Assurance Corporation.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in this Form 10-Q, and in the Form 10-Q of Sierra Pacific
Power Company (SPPC) attached as an Appendix, includes forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements relate to anticipated financial
performance, management's plans and objectives for future operations, business
prospects, outcome of regulatory proceedings, market conditions and other
matters. Words such as "anticipate," "believe," "estimate," "expect," "intend,"
"plan" and "objective" and other similar expressions identify those statements
that are forward-looking. These statements are based on management's beliefs and
assumptions and on information currently available to management. Actual results
could differ materially from those contemplated by the forward-looking
statements. In addition to any assumptions and other factors referred to
specifically in connection with such statements, factors that could cause the
actual results of Sierra Pacific Resources (SPR), Nevada Power Company (NVP), or
SPPC to differ materially from those contemplated in any forward-looking
statement include, among others, the following: (1) failure to receive judicial
approval of the settlement agreement recently approved by the PUCN, or other
difficulties relating to the implementation of the settlement; (2) fluctuations
in electric, gas and other commodity prices, particularly a continuation of the
recent volatility in purchased power prices in the western United States, and
the ability to manage such fluctuations successfully; (3) the pace and extent of
the ongoing restructuring of the electric and gas industries in Nevada and
California; (4) the outcome of regulatory and legislative proceedings and
operational changes related to industry restructuring; (5) the amount NVP and
SPPC are allowed to recover from customers for certain costs that prove to be
uneconomic in the new competitive market; (6) regulatory delays or conditions
imposed by regulatory bodies in approving the acquisition of Portland General
Electric; (7) the outcome of ongoing and future regulatory proceedings; (8)
management's ability to integrate the operations of SPR, NVP, SPPC, and Portland
General Electric and to implement and realize anticipated cost savings from the
merger of SPR and NVP and the acquisition of Portland General Electric; (9) the
results of the contemplated sales by NVP and SPPC of their Nevada generating
assets; (10) industrial, commercial and residential growth in the service
territories of NVP and SPPC; (11) changes in the capital markets and interest
rates affecting the ability to finance capital requirements; (12) the loss of
any significant customers; (13) the weather and other natural phenomena; and
(14) changes in the business of major customers which may result in changes in
the demand for services of NVP or SPPC. Other factors and assumptions not
identified above may also have been involved in deriving these forward-looking
statements, and the failure of those other assumptions to be realized, as well
as other factors, may also cause actual results to differ materially from those
projected. SPR assumes no obligation to update forward-looking statements to
reflect actual results, changes in assumptions or changes in other factors
affecting forward-looking statements.
RESULTS OF OPERATIONS
---------------------
Tuscarora Gas Pipeline Company
------------------------------
The Condensed Consolidated Statements of Income of Sierra Pacific Resources
for the three and six months ended June 30, 2000 include the operating results
of Tuscarora Gas Pipeline Company (TGPC), a wholly-owned subsidiary of SPR.
TGPC contributed $.5 million and $1.1 million, respectively, in net income for
the three- and six-month periods ended June 30, 2000. Although not reflected in
the Condensed Consolidated Statements of Income of SPR for the three- and six-
month periods ended June 30, 1999 included in this report, TGPC contributed $.4
million and $.9 million, respectively, in net income for those periods. The
Condensed Consolidated Statements of Income for the three- and six-month periods
ended June 30, 1999 include only the operating results of NVP. See Note 2 for
more information regarding the presentation of financial information included in
this report.
e/./three
---------
The Condensed Consolidated Statements of Income of Sierra Pacific Resources
for the three and six months ended June 30, 2000 include the operating results
of e/./three, a wholly-owned subsidiary of SPR. e/./three contributed $.1
million and $.3 million, respectively, in net income for the three- and six-
month periods ended June 30, 2000. Although not reflected in the Condensed
Consolidated Statements of Income of SPR for the three- and six-month periods
ended June 30, 1999 included in this report, e/./three incurred net losses of
$.5 million and $1.2 million, respectively, for those periods due to start-up
activities.
16
<PAGE>
Sierra Pacific Energy Company
-----------------------------
The Condensed Consolidated Statements of Income of Sierra Pacific Resources
for the three and six months ended June 30, 2000 include the operating results
of Sierra Pacific Energy Company (SPE), a wholly-owned subsidiary of SPR. SPE
incurred net losses of $.5 million and $3.8 million, respectively, for the
three- and six-month periods ended June 30, 2000. The losses are the result of
costs incurred to exit the retail energy-sales business. Although not reflected
in the Condensed Consolidated Statements of Income of SPR for the three- and
six-month periods ended June 30, 1999 included in this report, SPE incurred net
losses of $.4 million and $.8 million, respectively, for those periods.
Sierra Pacific Communications
-----------------------------
The Condensed Consolidated Statements of Income of Sierra Pacific Resources
include the operating results of Sierra Pacific Communications (SPC), a wholly
owned subsidiary of SPR. SPC incurred net losses of $14,000 and $75,000,
respectively, for the three- and six-month periods ended June 30, 2000. SPC
began operations in the third quarter of 1999.
In the first quarter of 2000, SPC finalized a partnership, called Sierra
Touch America LLC, with Touch America, a subsidiary of Montana Power Company.
The partnership was formed to construct and operate a fiber optic connection
between Salt Lake City, Utah and Sacramento, CA. The route is being constructed
for AT&T, PF Net Corporation, and Sierra Touch America. SPC's share is
approximately $25 million of a total estimated construction cost of $100
million. Right-of-way and permitting is in progress. Construction activity
commenced in July of this year.
Sierra Pacific Power Company
----------------------------
Management's Discussion and Analysis of SPPC is contained in its Quarterly
Report on Form 10-Q for the three and six months ended June 30, 2000, which is
attached as an appendix. SPPC contributed $20.0 million in net income for the
six months ended June 30, 2000, which is reflected in the SPR Condensed
Consolidated Income Statement for that period. Although not reflected in the
SPR Condensed Consolidated Income Statement for the six months ended June 30,
1999 included in this report, SPPC contributed $36.6 million in net income for
that period.
Nevada Power Company
--------------------
The Condensed Consolidated Statements of Income of Sierra Pacific Resources
for the three and six months ended June 30, 2000 include the operating results
of Nevada Power Company (NVP), a wholly-owned subsidiary of SPR. The following
Condensed Consolidated Statements of Income illustrate the operating results of
NVP, SPPC and the combined results of all other operations. The results of
operations discussion that follows is based on NVP's operating results included
in these statements since the operating results of the other subsidiaries have
already been discussed in this section.
17
<PAGE>
SIERRA PACIFIC RESOURCES CONSOLIDATING STATEMENTS OF INCOME
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000 Three Months Ended June 30, 1999
---------------------------------------------- -----------------------------------------------
Sierra Sierra
Nevada Pacific Nevada Pacific
Power Power Other Total Power Power Other Total
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $ 279,390 $176,820 $ - $456,210 $ 237,937 $ - $ - 237,937
Gas - 16,851 - 16,851 - - - -
Water - 15,335 - 15,335 - - - -
Other - - 2,347 2,347 - - - -
--------- -------- ------- -------- ---------- ------ ------ -------
279,390 209,006 2,347 490,743 237,937 - - 237,937
--------- -------- ------- -------- ---------- ------ ------ -------
OPERATING EXPENSES:
Operation:
Purchased power 154,533 71,949 - 226,482 83,781 - - 83,781
Fuel for power generation 55,022 44,082 - 99,104 35,425 - - 35,425
Gas purchased for resale - 11,470 - 11,470 - - - -
Deferral of energy costs-net 7,486 - - 7,486 6,594 - - 6,594
Other 35,134 31,898 3,338 70,370 35,577 - - 35,577
Maintenance 9,263 5,228 - 14,491 14,216 - - 14,216
Depreciation and amortization 21,314 19,235 176 40,725 19,827 - - 19,827
Taxes:
Income taxes (10,446) 1,616 (2,985) (11,815) 5,793 - - 5,793
Other than income 5,912 4,795 112 10,819 5,811 - - 5,811
--------- -------- ------- -------- ---------- ------ ------ -------
278,218 190,273 641 469,132 207,024 - - 207,024
--------- -------- ------- -------- ---------- ------ ------ -------
OPERATING INCOME 1,172 18,733 1,706 21,611 30,913 - - 30,913
--------- -------- ------- -------- ---------- ------ ------ -------
OTHER INCOME:
Allowance for other funds
used during construction 1,062 84 (1) 1,145 1,830 - - 1,830
Other income - net 331 (1,067) 3,783 3,047 (844) - - (844)
1,393 (983) 3,782 4,192 986 - - 986
--------- -------- ------- -------- ---------- ------ ------ -------
Total Income 2,565 17,750 5,488 25,803 31,899 - - 31,899
--------- -------- ------- -------- ---------- ------ ------ -------
INTEREST CHARGES:
Long-term debt 14,253 10,683 6,876 31,812 16,761 - - 16,761
Other 4,267 4,197 2,483 10,947 1,329 - - 1,329
Allowance for borrowed
funds used during construction
and capitalized interest (1,942) (634) - (2,576) (1,738) - - (1,738)
--------- -------- ------- -------- ---------- ------ ------ -------
16,578 14,246 9,359 40,183 16,352 - - 16,352
--------- -------- ------- -------- ---------- ------ ------ -------
INCOME (LOSS) BEFORE SPPC/NVP
OBLIGATED MANDATORILY REDEEMABLE
PREFERRED TRUST SECURITIES (14,013) 3,504 (3,871) (14,380) 15,547 - - 15,547
Preferred dividend requirements
of mandatorily redeemable
preferred trust securities (3,793) (1,043) - (4,836) (3,793) - - (3,793)
--------- -------- ------- -------- ---------- ------ ------ -------
INCOME (LOSS) BEFORE PREFERRED
STOCK DIVIDENDS (17,806) 2,461 (3,871) (19,216) 11,754 - - 11,754
Preferred stock dividend
requirements - (975) - (975) (42) - - (42)
--------- -------- ------- -------- ---------- ------ ------ -------
INCOME (LOSS) APPLICABLE TO
COMMON STOCK $ (17,806) $ 1,486 $(3,871) $(20,191) $ 11,712 $ - $ - $11,712
========= ======== ======= ======== ========= ===== ===== =======
</TABLE>
<PAGE>
SIERRA PACIFIC RESOURCES CONSOLIDATING STATEMENTS OF INCOME
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000 Six Months Ended June 30, 1999
----------------------------------------------- -----------------------------------------------
Sierra Sierra
Nevada Pacific Nevada Pacific
Power Power Other Total Power Power Other Total
----------------------------------------------- -----------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $475,420 $334,442 $ - 809,862 $420,370 $ - $ - 420,370
Gas - 51,311 - 51,311 - - - -
Water - 25,584 - 25,584 - - - -
Other - - 6,508 6,508 - - - -
-------- -------- -------- -------- -------- ------ ------ --------
475,420 411,337 6,508 893,265 420,370 - - 420,370
-------- -------- -------- -------- -------- ------ ------ --------
OPERATING EXPENSES:
Operation:
Purchased power 208,350 121,429 - 329,779 137,641 - - 137,641
Fuel for power generation 92,669 73,358 - 166,027 66,028 - - 66,028
Gas purchased for resale - 34,321 - 34,321 - - - -
Deferral of energy costs-net 14,274 - - 14,274 10,383 - - 10,383
Other 64,285 59,767 12,884 136,936 67,291 - - 67,291
Maintenance 19,084 9,713 - 28,797 29,228 - - 29,228
Depreciation and amortization 42,730 38,266 362 81,358 39,530 - - 39,530
Taxes: -
Income taxes (6,819) 12,650 (7,631) (1,800) 7,206 - - 7,206
Other than income 11,318 9,757 187 21,262 11,189 - - 11,189
-------- -------- -------- -------- -------- ------ ------ --------
445,891 359,261 5,802 810,954 368,496 - - 368,496
-------- -------- -------- -------- -------- ------ ------ --------
OPERATING INCOME 29,529 52,076 706 82,311 51,874 - - 51,874
-------- -------- -------- -------- -------- ------ ------ --------
OTHER INCOME:
Allowance for other funds used
during construction 1,842 152 (1) 1,993 4,083 - - 4,083
Other income - net 707 (1,445) 3,941 3,203 (1,163) - - (1,163)
-------- -------- -------- -------- -------- ------ ------ --------
2,549 (1,293) 3,940 5,196 2,920 - - 2,920
-------- -------- -------- -------- -------- ------ ------ --------
Total Income 32,078 50,783 4,646 87,507 54,794 - - 54,794
-------- -------- -------- -------- -------- ------ ------ --------
INTEREST CHARGES:
Long-term debt 30,152 20,433 7,049 57,634 31,466 - - 31,466
Other 7,932 7,408 9,797 25,137 3,340 - - 3,340
Allowance for borrowed
funds used during construction
and capitalized interest (3,757) (1,116) - (4,873) (3,835) - - (3,835)
-------- -------- -------- -------- -------- ------ ------ --------
34,327 26,725 16,846 77,898 30,971 - - 30,971
-------- -------- -------- ------- -------- ------ ------ --------
INCOME (LOSS) BEFORE SPPC/NVP
OBLIGATED MANDATORLY REDEEMABLE
PREFERRED TRUST SECURITIES (2,249) 24,058 (12,200) 9,609 23,823 - - 23,823
Preferred dividend requirements
of mandatorily redeemable
preferred trust securities (7,586) (2,086) - (9,672) (7,586) - - (7,586)
-------- -------- -------- ------- -------- ------ ------ --------
INCOME (LOSS) BEFORE PREFERRED
STOCK DIVIDENDS (9,835) 21,972 (12,200) (63) 16,237 - - 16,237
Preferred stock dividend
requirements - (1,950) - (1,950) (84) - - (84)
-------- -------- -------- ------- -------- ------ ------ --------
INCOME (LOSS) APPLICABLE TO
COMMON STOCK $ (9,835) $ 20,022 $(12,200) $ (2,013) $16,153 $ - $ - $ 16,153
======== ======== ======== ======== ======= ====== ====== ========
</TABLE>
<PAGE>
As discussed in the results of operations discussion that follows,
operating results for the second quarter of 2000 were negatively affected by
higher fuel and purchased power costs during the same period. These costs were
reflective of significantly higher and extremely volatile prices for purchased
power that developed in May in the western United States and have continued
since. SPR and NVP cannot predict how long these unprecedented market
conditions will persist or how such a continuation could affect their future
earnings. However, in order to mitigate the effect of higher fuel and purchased
power costs NVP entered into a stipulation permitting it to increase prices
effective August 1, 2000, by approximately $48 million annually, and to update
its going-forward costs of fuel and purchased power thereafter with monthly fuel
and purchased power filings through March 2003. Customer price increases and/or
decreases are capped at incrementally increased or decreased rates over
successive six-month periods. Comparative fuel and purchased power cost
information is included in the results of operations discussion that follows.
See "Regulatory Matters" below.
The causes for significant changes in specific lines comprising the results
of operations for NVP are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year %
-------- -------- ------------ -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Electric Operating Revenues ($000):
Residential $125,539 $ 96,661 29.9% $209,112 $175,767 19.0%
Commercial 58,973 52,364 12.6% 105,707 93,691 12.8%
Industrial 77,327 73,667 5.0% 132,448 123,062 7.6%
-------- -------- -------- -------- -------- ----
Retail revenues 261,839 222,692 17.6% 447,267 392,520 13.9%
Other 17,551 15,245 15.1% 28,153 27,850 1.1%
-------- -------- -------- -------- -------- ----
Total Revenues $279,390 $237,937 17.4% $475,420 $420,370 13.1%
-------- -------- -------- -------- ======== ====
Total retail sales in thousands
of megawatt-hours (MWH) 4,313 3,571 20.8% 7,461 6,522 14.4%
Average retail revenue per MWH $60.71 $62.36 -2.6% $59.95 $60.18 -0.4%
</TABLE>
Residential electric revenues increased for the three and six months ended
June 30, 2000 due to increases in the number of customers and significantly
above-normal temperatures. For both the three and six month periods ended June
30, 2000, the number of residential customers increased by 5.7% over the same
periods of 1999. Hotter than normal weather also increased revenues in both the
three and six month periods ended June 30, 2000, in contrast to milder than
normal weather for the same periods the previous year. Residential revenues
were also affected by rate increases related to deferred energy accounting that
were effective March 1, 1999, and May 1, 2000.
Both commercial and industrial electric revenues increased for the three
and six months ended June 30, 2000, due, in part, to increases to the number of
customers. For the three and six month periods ended June 30, 2000, the number
of commercial customers increased by 4.8% and 4.9%, respectively, over the same
periods of 1999. For the three and six month periods ended June 30, 2000, the
number of industrial customers increased by 6.5% and 6.0%, respectively, over
the same periods of 1999. The opening of several new schools and large casinos
helped cause an increase in 2000 revenues despite an overall rate decrease
associated with deferred energy effective May 1, 2000. The May 1, 2000 rate
change associated with deferred energy resulted in an increase in residential
rates and a decrease in rates to all other customers.
The increase in other electric revenues for the three months ended June 30,
2000, over the same period in 1999 was mainly due to large increases in
wholesale power sales, which offset the loss of a public authority customer
during the first quarter of 2000. The second quarter increase more than offset
the decrease in other electric revenues for the three months ended March 31,
2000.
20
<PAGE>
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year %
--------- --------- ------------ --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Purchased Power ($000) $154,533 $83,781 84.4% $208,350 $137,641 51.4%
Purchased Power in thousands
of MWHs 2,472 2,126 16.3% 3,715 3,551 4.6%
Average cost per MWH of
Purchased Power $ 62.51 $ 39.41 58.6% $ 56.08 $ 38.76 44.7%
</TABLE>
Purchased power costs were significantly higher for the three and six
months ended June 30, 2000 as Short-Term Firm and Economy Energy prices
increased substantially. In addition, volume purchased rose sharply to
accommodate system load.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year %
--------- --------- ------------ --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Fuel for Power Generation ($000) $55,022 $35,425 55.3% $92,669 $66,028 40.3%
Thousands of MWHs generated 2,453 2,043 20.1% 4,717 4,012 17.6%
Average cost per MWH of
Generated Power $ 22.43 $ 17.34 29.4% $ 19.65 $ 16.46 19.4%
</TABLE>
Fuel for generation costs for the three and six months ended June 30, 2000,
were significantly higher than the prior year as volumes generated were higher
to accommodate system load. Furthermore, natural gas prices have increased over
50% from the prior year.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year %
---------- --------- ------------ --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Deferral of energy costs-net ($000) $7,486 $6,594 13.5% $14,274 $10,383 37.5%
========== ========= ============ ========= ========= ==============
</TABLE>
Deferred energy cost recognition for the three and six months ended June
30, 2000 has increased as a result of deferred energy rate increases granted in
1999 and the increased sales volumes in the current period. The rate increase
was granted to reflect the increased cost of fuel and purchased power.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year %
---------- --------- ------------ --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for other funds
used during construction $1,062 $1,830 -42.0% $1,842 $4,083 -54.9%
Allowance for borrowed funds
used during construction 1,942 1,738 11.7% 3,757 3,835 -2.0%
---------- --------- ------------ --------- ---------- --------------
$3,004 $3,568 -15.8% $5,599 $7,918 -29.3%
========== ========= ============ ========= ========== ==============
</TABLE>
21
<PAGE>
Total allowance for funds used during construction (AFUDC) is lower for the
three- and six-month periods ending June 30, 2000, compared to the same periods
in 1999 because of reductions in construction-in-progress resulting primarily
from the completion of the Crystal Transmission Project in May 1999. AFUDC was
also affected by the 2000 rate being 1.14% lower than the rate for 1999.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year %
---------- --------- ------------ --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Other operating expense $ 35,134 $35,577 -1.2% $64,285 $67,291 -4.5%
Maintenance expense 9,263 14,216 -34.8% 19,084 29,228 -34.7%
Depreciation and amortization 21,314 19,827 7.5% 42,730 39,530 8.1%
Income taxes (10,446) 5,793 -280.3% (6,819) 7,206 -194.6%
Interest charges- Long-term debt 14,253 16,761 -15.0% 30,152 31,466 -4.2%
Interest charges-other 4,267 1,329 221.1% 7,932 3,340 137.5%
</TABLE>
Other operating expense for the three months ended June 30, 2000 was
comparable to the same period in 1999, but is lower for the six months ended
June 30, 2000 due to reduced labor and benefit costs in 2000 as a result of
merger efficiencies and other unfilled vacancies.
Maintenance costs for the three- and six-month periods ending June 30,
2000, decreased from the prior year primarily as a result of fewer planned plant
maintenance activities at NVP's coal generation facilities. In addition, crews
have been performing required activities of a capital nature, thereby reducing
the amount of maintenance expense. Finally, in 1999 maintenance expenses were
higher than normal.
Depreciation and amortization expense increased for the three- and six-
month periods ending June 30, 2000, due to an increase in electric plant-in-
service over the prior year.
Income taxes decreased for both the three and six-month periods ending June
30, 2000, due to net pre-tax losses in the second quarter and lower pre-tax
income for the six months ended June 30, 2000 versus periods of higher net pre-
tax income in 1999.
The maturity of $85 million of long-term debt on May, 1, 2000 reduced
second quarter 2000 Interest charges- Long-term debt, more than offsetting a
first quarter 2000 expense increase over the same period of the prior year.
Interest charges- other increased for the both three- and six-month periods
ending June 30, 2000, because of interest incurred on the $100 million floating
rate notes issued in October 1999 and due to the utilization of commercial paper
in 2000.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------
During the first six months of 2000, SPR incurred a loss of $63
thousand before preferred stock dividends and declared $39.0 million in common
stock dividends. NVP and SPPC, SPR's principal subsidiaries, declared common
stock dividends to their parent, SPR, of $48 million and $38 million,
respectively. SPPC also declared $1.95 million in dividends to holders of its
preferred stock.
SPR cash flows during the six months ended June 30, 2000 increased compared
to the same period in 1999. A significant increase in cash flows from operating
activities and financing activities was offset in part by an increase in cash
flows used in investing activities. Cash flows from operating activities were
greater in 2000 than in 1999 due primarily to 2000 including the operating
results of the merged companies, as well as an increase in accounts payable
balances for NVP. Cash flows used in investing activities were also greater in
2000 than in 1999 mainly due to 2000 including the operating results of the
merged companies. Cash flows from financing activities increased in 2000 as
compared to 1999 due primarily to 2000's net increase in long-term debt in
excess of the decrease in short-term borrowings, compared to the same activity
in 1999.
22
<PAGE>
Construction Expenditures and Financing
---------------------------------------
A description of construction expenditures and financing of SPPC is
contained in its Quarterly Report Form 10-Q for the period ended June 30, 2000
attached as an appendix.
NVP's construction program and capital requirements for the period 2000-2004
were originally discussed in the combined SPR/NVP Annual Report on Form 10-K for
the year ending December 31, 1999. Of NVP's amount projected for 2000 ($190.5
million), $84.4 million (44%) was spent as of June 30, 2000. Internally
generated funds provided 6.8% of construction expenditures.
NVP may utilize internally generated cash and the proceeds from unsecured
borrowings and preferred securities to meet capital expenditure requirements
through 2000.
Financing
---------
On April 20, 2000, SPR issued an aggregate of $300 million floating rate
notes, $200 million of which will mature on April 20, 2003 and the remaining
$100 million will mature on April 20, 2002. Interest on the notes is payable
quarterly commencing on July 20, 2000. The interest rate on the notes for each
interest period will be a floating rate, subject to adjustment every three
months, equal to the London InterBank Offered Rate (LIBOR) for three-month U.S.
dollar deposits plus a spread of 0.60% for the notes maturing in 2003 and a
spread of 0.65% for the notes maturing in 2002. These notes will not be
entitled to any sinking fund. The notes due 2002 will be redeemable, in whole,
without premium at the option of SPR beginning on April 20, 2001 and on each
interest payment date thereafter. The net proceeds of the $200 million issue
were used to retire an equal amount of commercial paper of SPR that was used as
temporary funding for the cash portion of the NVP merger consideration. The net
proceeds of the $100 million issue were used to make a capital contribution to
NVP, which in turn was used to retire $85 million of NVP's maturing First
Mortgage Bonds on May 1, 2000 and the remaining proceeds were used to pay off
its commercial paper outstanding.
On April 20, 2000, upon issuance of these floating rate notes, SPR also
reduced its bank credit facility to $300 million from the previous amount of
$500 million in accordance with the terms of the credit agreement.
On May 9, 2000, SPR issued $300 million of notes under its universal shelf
registration. These notes bear interest at an annual rate of 8.75% and will
mature on May 15, 2005. Interest on the notes is payable semi-annually on May
15 and November 15 commencing on November 15, 2000. The notes will not be
subject to any sinking fund and will be redeemable in whole or in part at any
time upon payment of the principal amount of the notes being redeemed, accrued
interest and a make-whole premium. The net proceeds from the issuance of these
notes were used to retire an equal amount of commercial paper of SPR.
On June 9, 2000, NVP issued $150 million of floating rate notes that
will mature on June 12, 2001. Interest on the notes is payable quarterly
commencing on September 9, 2000. The interest rate on the notes for each
interest period will be a floating rate, subject to adjustment every three
months, equal to the London InterBank Offered Rate (LIBOR) for three-month U.S.
dollar deposits plus a spread of 0.55%. These notes will not be entitled to any
sinking fund and are non-callable. The net proceeds of the $150 million issue
were used to redeem $100 million of floating rate notes on July 14, 2000, and
the remaining proceeds were used to reduce NVP's commercial paper outstanding.
On June 21, 2000, SPR reduced its credit facility to $150 million from the
previously reduced amount of $300 million in accordance with the terms of the
credit agreement. The remaining $150 million credit facility was a 3-year
credit facility, which has since been terminated by SPR effective August 11,
2000.
On June 22, 2000, Clark County, Nevada issued for NVP's benefit $100
million Industrial Development Refunding Revenue Bonds, Series 2000A, Due June
1, 2020. The interest rate will be determined by a Dutch Auction based on an
auction period of 7 days. The Series A bonds were issued to refund $100 million
of Clark County's 7.80% Industrial Development Revenue Bonds Series 1990 on June
30, 2000.
On July 28, 2000, Clark County, Nevada issued for NVP's benefit $15 million
Pollution Control Refunding Revenue Bonds, Series 2000B, due October 1, 2009.
The interest rate will be determined by a Dutch Auction based on an auction
period of 7 days. The Series B bonds were issued to refund a like principal
amount of Clark County's 7.80% Pollution Control Revenue Bonds Series 1989 on
October 2, 2000.
23
<PAGE>
The method of determining the interest rate on the Series A and Series B
Bonds may be converted from time to time in accordance with the related
Indenture so that such Bonds would, thereafter, bear interest at a Daily,
Weekly, Flexible, Term or Auction Rate designated. Both Series A and Series B
Bonds are insured by AMBAC Assurance Corporation.
On July 24, 2000 NVP received a 30-day extension on its $150 million Credit
Facility to August 28, 2000, in accordance with the terms of the credit
agreement. NVP has requested a 364-day extension of this facility which, if
granted by the participating banks, would extend this facility to August 27,
2001.
Portland General Electric Acquisition
-------------------------------------
On November 8, 1999, SPR and Enron Corporation (Enron) announced they had
entered into a purchase and sale agreement for Enron's wholly owned electric
utility subsidiary, Portland General Electric Company (PGE). PGE is an electric
utility serving more than 700,000 retail customers in northwest Oregon. PGE
will become a wholly owned subsidiary of SPR.
The proposed transaction is subject to customary closing conditions,
including, without limitation, the receipt of all necessary governmental
approvals, including the Federal Energy Regulatory Commission (FERC), the
Federal Trade Commission/Department of Justice (FTC/DOJ), the Securities and
Exchange Commission (SEC), the Oregon Public Utility Commission (OPUC), and the
Nuclear Regulatory Commission (NRC). SPR's filings have been made and the
federal and state regulatory processes continue. As of May 3, 2000, the FTC/DOJ
investigation concluded and the waiting period under Hart-Scott-Rodino expired
with no action taken. On July 27, 2000, the NRC approved SPR's application to
purchase PGE. The FERC has issued a draft order in which it requested
additional information regarding market power and California pricing issues.
SPR is in the process of responding to these information requests. It is
anticipated that the remaining approvals will be received in the second half of
2000.
Generation Divestiture
----------------------
In accordance with the revised Divestiture Plan stipulation approved by the
PUCN in February 2000 (see the 1999 Annual Report on Form 10-K), SPR is offering
for sale generation assets with peak capacity of approximately 2,985 megawatts
(MW), with approximately 1,045 MW owned by SPPC and approximately 1,940 MW owned
by NVP. Letters of interest were issued to potential bidders in February 2000.
Upon response from the qualified potential bidders and execution of the
confidentiality agreements, offering memoranda and materials were provided to
the bidders. First stage indicative bids were received on May 25, 2000. The
short list of qualified bidders for each of the seven bundles being offered was
completed and bidders notified by June 6, 2000. The second stage due diligence
process was started on June 6, 2000, and will continue through mid-August.
Final bids and the selection of winning bids will occur in late August and early
September 2000. Close of sale and transfer of ownership should occur between
December 2000 and mid-2001.
On May 10, 2000, AES Corporation announced that it was the successful
bidder for the purchase of a controlling interest in the 1,580 MW Mohave
Generating Station in Laughlin, Nevada for approximately $667 million. NVP owns
a 14% undivided interest in the facility. Mohave Generating Station is a 2-
unit, coal-fired power plant located on 2,500 acres along the Colorado River,
approximately 80 miles south of Las Vegas. AES executed Asset Sale Agreements
with the sellers, which also include Southern California Edison Company (56%),
for a 70% undivided interest in the facility. The acquisition is subject to
approval by the FERC and the California Public Utilities Commission, and review
by the PUCN and is expected to close late in the Fourth Quarter of 2000.
REGULATORY MATTERS
------------------
Substantially all of the utility operations of both NVP and SPPC are
conducted in Nevada. As a result both companies are subject to utility
regulation within the State and therefore deal with many of the same regulatory
issues. Therefore, although the following regulatory discussion relates
specifically to NVP, many of the same issues are discussed in the regulatory
section of the current SPPC Form 10-Q, attached as an appendix.
24
<PAGE>
Nevada Electric Restructuring Activities
----------------------------------------
Competition was originally scheduled to start on March 1, 2000. However,
in February 2000 the Governor of Nevada delayed the start date of competition
indefinitely. Generally, restructuring regulations and PUCN decisions during
the first and second quarters of 2000 proceeded slowly. Numerous hearings and
workshops have been held by the Public Utilities Commission of Nevada (PUCN)
regarding two important regulations, Provider of Last Resort and Past Costs.
On March 28, 2000, SPR, NVP and SPPC filed a federal lawsuit challenging
Nevada's laws providing for competition in the electric utility industry and the
PUCN's implementation of competition. See SPR's and NVP's Form 8-K, filed on
April 17, 2000.
On July 20, 2000, the PUCN approved stipulated agreements that resolve the
federal lawsuit and major restructuring issues including past costs. See the
Form 8-K filed July 26, 2000. On August 3, 2000, the PUCN approved revisions to
the stipulated agreements. The stipulations pave the way for open access to
occur in a phased manner beginning in November for large commercial customers
and continuing until September 2001 for residential customers. The following
are highlights of the stipulations:
Opening Dates
Retail access choice will be phased in based upon customer size. Customers
will be able to choose a new supplier for energy, metering, billing or customer
service according to the following schedule:
November 1, 2000 - Large commercial customers including large resorts and
Southern Nevada Water Authority
April 1, 2001 - Medium commercial customers
June 1, 2001 - Small commercial customers
September 1, 2001 - December 1, 2001 - residential customers
Incentives for Company to Meet Open Access Dates
Provided that open access procedures including billing and settlement are in
place by the open access dates, NVP will be allowed to retain up to $16 million
from any gain on the divestiture of generation assets.
Transmission Access
NVP has filed a modified Open Access Tariff with FERC to facilitate retail
open access. NVP also continues to pursue compliance with FERC Order 2000 and
the formation of a regional transmission organization (RTO). Also see FERC
Matters, below.
Past Costs
Major past cost issues are resolved by the stipulations. NVP has waived
its rights to the collection of any past costs other than those provided for in
the stipulations. The parties have agreed that the stipulations eliminate the
need for a past cost regulation.
Generation
The gain on the sale of generation facilities will be calculated based upon
recorded book values as of the date of sale and includes costs of sale, less
applicable taxes. Common and general plant allocable to generation will be
recoverable from the gain. NVP is to receive the first $15 million dollars in
settlement for certain deferred energy costs. Additional gain, if any, will be
applied to the allowed incentive to NVP for meeting retail open access dates, as
described above. Any remaining gain will be set aside in an escrow account to be
utilized to pay down costs associated with above-market purchased power
contracts.
Purchased Power Contracts
NVP will auction its purchased power contracts on an annual basis in the
wholesale markets. If the auction does not yield sufficient proceeds to pay
for the purchased power contracts, NVP will collect the difference from all
customers through a non-bypassable wires charge. This Purchased Power Annual
Auction Mechanism (PPAAM) charge will be in place on November 1, 2000 when the
market opens.
25
<PAGE>
To the extent that there are tax or market advantages, NVP will pursue a
competitive permanent auction of purchased power contracts. Such an auction
would be funded by an amount not to exceed the principal and interest in the
escrow account that was funded by the gain on the sale of generation assets.
If the permanent auction does not proceed or if such auction does not
exhaust the generation escrow account, the PPAAM charge will be reduced by an
annuity calculated on any remaining amount in the generation escrow account.
Metering
Customers will have the opportunity to purchase metering equipment
directly from NVP or through an alternative seller. Such assets will be sold at
net book value.
Transition Costs
The ability of NVP to recover costs it expects to spend to open the
market, referred to as transition costs, was not resolved by the stipulations.
NVP expects to petition the PUCN in the near future to request recovery of its
transition costs.
In other matters related to restructuring, the PUCN has continued
rulemaking and discussion related to a number of topics including:
Independent Scheduling Administrator (ISA)
On March 21, 2000, the PUCN issued a Notice of Workshop on retail
transmission issues including funding for the Mountain West Independent
Scheduling Administrator (MWISA). In a workshop held April 12, various parties
advocated that the utilities provide funding and that the PUCN should provide
cost recovery for the utilities. The PUCN and the parties will continue to
explore this issue in the future workshops.
During the second quarter of 2000 the MWISA option has not been given a
means of funding its operation. Though this option is still available, NVP is
planning and proposing utility transmission open access tariffs until an RTO can
be put in place. See FERC Matters, below, for a further discussion of
transmission access issues.
Unbundling of Utility Services
On May 22, 2000, the PUCN issued a final order (the "Order") that was
consistent with its September 1999 interim order. See SPR's/NVP's 1999 Annual
Report on Form 10-K for additional information on the interim order. The Order
reduces NVP's revenue requirement and return on equity for distribution service
for those customers who choose to leave NVP upon the start of retail
competition. NVP filed a Petition for Reconsideration with the PUCN on June 6.
The Petition was granted by the PUCN on July 13.
Provider of Last Resort (PLR)
The PLR will provide electric service to customers who do not select an
electricity provider and to customers who are not able to obtain service from an
alternative seller after the date competition begins. Nevada Senate Bill 438
provides for the electric distribution utility (EDU) to provide PLR services
from the start of competition until July 1, 2001. NVP is seeking to modify the
PLR regulation. If NVP does not provide PLR services, the May 22, 2000 Order
referred to above could result in a reduction of revenues.
On May 3, 2000, the PUCN reissued the PLR regulation for comment. The
current draft regulation continues to contain various provisions that could have
negative financial ramifications for NVP. See the 1999 Annual Report on Form
10-K.
The PUCN is nearing completion of this regulation. Certain legal issues
surrounding the EDU or PLR ability to provide unbundled metering services are
not resolved. In addition, the proposed regulation continues to contain a
strict standard of conduct to govern the relationship between EDU and PLR
functions. Implementation of these provisions could have negative financial
ramifications.
26
<PAGE>
FERC Matters
------------
Independent Transmission Company
On April 26, 2000, NVP, together with Sierra Pacific Power Company,
Portland General Electric Company, Avista Corporation, The Montana Power
Company, and Puget Sound Energy, Inc. agreed to study the formation of a for-
profit Independent Transmission Company (ITC). The ITC is continuing to review
its options as the Regional Transmission Organization (RTO) process continues
toward the October 15, 2000 filing deadline.
Open Access Transmission Rates
In May 1999, NVP filed an application with the FERC to increase its Open
Access Transmission rates. On March 30, 2000, the FERC approved the settlement
filed on February 8, 2000 with rates becoming effective on March 1, 2000. Also
on March 30, 2000, NVP filed a Loss Study that NVP agreed to provide in the
settlement. On May 23, 2000, the FERC accepted NVP's Loss Study and the docket
was completed.
Revised Generation Tariffs and Transitional Purchase Power Agreements
On March 31, 2000, NVP filed for approval of revisions to its market-based
tariff for generation to be divested. The filing included adding ancillary
services to the tariffs and Transitional Purchase Power Agreements (TPPAs)
between NVP and the new owners.
On May 31, 2000, the FERC accepted the tariff modifications and the TPPAs.
The FERC required one change to the TPPAs. The FERC also set for hearing the
level of rates for ancillary services in the tariffs and the rates in the TPPAs.
A procedural schedule has been established for the hearing on rates. On June 29,
2000, NVP filed the revised TPPAs in compliance with the May 31 order.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
See "Results of Operations" above for a discussion of recent increased
prices and volatility in the markets for purchased power and fuel, which have
had a negative effect on the financial performance of NVP and SPR.
27
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
On March 28, 2000, SPR, NVP, and SPPC filed a lawsuit in Federal District
Court in Nevada asking the court to declare unconstitutional certain aspects of
the Nevada laws that created the framework for a deregulated electric market in
Nevada.
In response to the certain PUCN decisions described in SPR's Annual Report
on Form 10-K for the period ending December 31, 1999 and in SPR's Quarterly
Report on Form 10-Q for the period ending March 31, 2000, NVP filed a lawsuit
against the PUCN on March 30, 2000 in the First Judicial District of Nevada in
Carson City.
On July 20, 2000, the PUCN approved a stipulation (the "Settlement")
entered into among the parties to the state and federal lawsuits permitting NVP
to increase its rates effective August 1, 2000, by approximately $48 million
annually to recover increased costs of fuel and purchased power, and to update
its going-forward costs of fuel and purchased power thereafter with monthly fuel
and purchased power filings up to March 2003. Increases and/or decreases are
capped at incrementally increased or decreased rates over successive six-month
periods at .95 mils for the first six months, 1.15 mils for the second six
months, 1.25 mils for the third six months, 1.55 mils for the next six months,
and 1.75 mils for the remaining period. The Settlement also permits SPPC to
commence filing monthly fuel and purchased power adjustment cases on the same
basis to commence not later than November 1, 2000.
The Settlement also resolves numerous other issues relating to the
restructuring of the electric industry in Nevada, including phased-in access to
competitive markets by customer class, recovery of stranded costs, auctioning
out-of-market qualified facility and other purchased power contracts, imposition
of a wires charge to recover any balance, and filing of new proceedings to
address metering costs and transition costs. The Settlement is contingent on
stipulations entered into with third parties with respect to several other
pending dockets. On July 28, 2000, the parties revised the Settlement to remove
the contingencies. The revisions were approved by the PUCN on August 3, 2000,
but still remain subject to judicial approval as well as future regulatory
proceedings relating to the filing of monthly fuel and purchased power cases,
recovery of stranded costs, and divestiture of generation proceeds. The outcome
of the dockets and proceedings cannot be predicted at this time; however,
unfavorable treatment of any of these proceedings would have a negative effect
on the economic value of the Settlement.
See the Form 8-K filed July 26, 2000 and Regulatory Matters, above, for
additional details.
Although SPR is involved in other ongoing litigation on a variety of
matters, it is management's opinion that none individually or collectively are
material to SPR's financial position.
28
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 2000 Annual Meeting of the Shareholders of Sierra Pacific Resources was
held on June 19, 2000. The Company solicited proxies pursuant to Regulation 14
under the Securities and Exchange Act of 1934; there was no solicitation in
opposition to nominees listed in the proxy statement, and all such nominees were
elected to the classes indicated in the proxy statement pursuant to the vote of
shareholders as follows.
Reelected to the Company's Board of Directors to serve until the Annual
Meeting in 2003, or until their successors are elected, were:
Edward P. Bliss
Votes For: 62,688,871
Votes Against or Withheld: 2,111,681
Mary Lee Coleman
Votes For: 62,587,211
Votes Against or Withheld: 2,111,681
Theodore J. Day
Votes For: 62,711,917
Votes Against or Withheld: 2,067,975
Jerry E. Herbst
Votes For: 62,676,661
Votes Against or Withheld: 2,102,231
Other matters voted upon and approved at the meeting include: an amendment
to the Executive Long-Term Incentive Plan increasing the number of shares of
Common Stock available for grant under the Plan; an amendment to the 1992 Non-
Employee Director Stock Plan increasing the number of shares of Common Stock
available for grant under the Plan; and an amendment to Restatement No. 1 to the
Employee Stock Purchase Plan increasing the number of shares of Common Stock
available for sale under the Plan. The voting for each of these matters was as
follows:
Executive Long-Term Incentive Plan
Votes For: 43,929,254
Votes Against or Withheld: 20,673,570
Abstentions: 1,115,891
Non-Employee Director Stock Plan
Votes For: 58,002,118
Votes Against or Withheld: 6,552,905
Abstentions: 1,128,578
Employee Stock Purchase Plan
Votes For: 60,750,101
Votes Against or Withheld: 3,687,695
Abstentions: 1,128,578
ITEM 5. OTHER INFORMATION
On July 12, 2000, SPR issued a press release announcing that fuel and
purchased power costs would negatively impact earnings for the second quarter
and the remainder of 2000. For additional details, see Form 8-K filed July 14,
2000.
On July 20, 2000, SPR issued a press release announcing that the Company,
Nevada regulators and several other parties took steps toward a settlement of
issues involving restructuring the electric utility industry in the state,
setting new electric rates for NVP's and SPPC's customers and resolving other
issues involved in state and federal court cases filed by NVP and SPPC. For
additional details, see Form 8-K filed July 26, 2000.
29
<PAGE>
On July 21, 2000, SPR issued a press release announcing the resignation of
Michael R. Niggli, Chairman and Chief Executive Officer of Sierra Pacific
Resources. For additional details, see Form 8-K filed July 26, 2000.
On August 9, 2000, the Board of Directors of Sierra Pacific Resources
announced that Walter M. Higgins had been named chairman, president and chief
executive officer. Mr. Higgins returns to SPR, where he served from 1994 to
1998 as chairman of the board, president and chief executive officer. Since
January 1998, he has served as chairman and chief executive officer of Atlanta,
Georgia-based AGL Resources, Inc., the holding company of Atlanta Gas Light
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed with this Form 10-Q:
(10) Change in Control Agreement dated April 20, 2000, by and between
Sierra Pacific Resources and Gloria Banks Weddle substantially
the same as the Change in Control Agreements filed as Exhibit
(10)(A) to Sierra Pacific Power Company's Annual Report on Form
10-K for the year ended December 31, 1997, and incorporated
herein by reference thereto.
(27) The Financial Data Schedule containing summary financial
information extracted from the condensed consolidated financial
statements on Form 10-Q for the six month period ended June 30,
2000, for Sierra Pacific Resources, and is qualified in its
entirety by reference to such financial statements.
(b) Reports on Form 8-K:
Form 8-K filed on April 17, 2000 - Item 5, Other Events
Described material litigation and included as exhibits, (1) the Complaint
for Declaratory and Injunctive Relief filed on March 28, 2000 in the United
States District Court for the District of Nevada by SPR, NVP, and SPPC asking
the court to declare unconstitutional certain aspects of the Nevada laws that
created the framework for a deregulated electric market, and (2) the Petition
for Judicial Review filed on March 30, 2000 in the First Judicial District Court
of the State of Nevada by NVP alleging fourteen causes of action against the
PUCN and requesting certain actions by the court. Also see Part II, Item 1,
Legal Proceedings, above, and Part II, Item 5, Other Information, above.
Form 8-K filed on April 21, 2000 - Item 5, Other Events
Described, and included as an exhibit, SPR's press release dated April 18,
2000, announcing the resignation of Malyn K. Malquist, President and Chief
Operating Officer of SPR, and President of both NVP and SPPC.
Form 8-K filed on May 5, 2000 - Item 5, Other Events
Described, and included as an exhibit, SPR's press release dated May 5,
2000, announcing financial results for the quarter ended March 31, 2000.
Form 8-K filed on May 22, 2000 - Item 5, Other Events
Described Registration Statement on Form S-3, as amended by a Pre-Effective
Amendment No. 1, filed on May 1, 2000, in connection with SPR's offering of
$500,000,000 of securities and the subsequent offering and sale of $300,000,000
principal amount of 8-3/4% Notes due 2005, and included as exhibits final forms
of the following documents: (1) the Purchase Agreement, dated May 5, 2000, (2)
the Indenture between SPR and The Bank of New York, dated as of May 1, 2000, (3)
the form of the Global 8-3/4% Note due 2005, and (4) the Officers' Certificate
establishing the terms of the 8-3/4% Notes due 2005.
30
<PAGE>
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.
Sierra Pacific Resources
-----------------------------
(Registrant)
Date: August 14, 2000 By: /s/ Mark A. Ruelle
----------------------- -------------------------------
Mark A. Ruelle
Senior Vice President
Treasurer
Chief Financial Officer
(Principal Financial Officer)
Date: August 14, 2000 By: /s/ Mary O. Simmons
----------------------- -------------------------------
Mary O. Simmons
Controller
(Principal Accounting Officer)
31
<PAGE>
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission File Number 0-508
SIERRA PACIFIC POWER COMPANY
(Exact name of registrant as specified in its charter)
NEVADA 88-0044418
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 10100 (6100 Neil Road)
Reno, Nevada 89520-0400
(89511)
(Address of principal executive office) (Zip Code)
(775) 834-4011
(Registrant's telephone number, including area code)
Indicate by check mark whether 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.
Class Outstanding at August 14, 2000
Common Stock, $3.75 par value 1,000 Shares
================================================================================
1
<PAGE>
SIERRA PACIFIC POWER COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
CONTENTS
PART I - FINANCIAL INFORMATION
------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 2000 and
December 31, 1999.................................................... 3
Condensed Consolidated Statements of Income - Three Months and Six Months
Ended June 30, 2000 and 1999......................................... 4
Condensed Consolidated Statements of Cash Flows - Six Months
Ended June 30, 2000 and 1999......................................... 5
Notes to Condensed Consolidated Financial Statements...................... 6
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................................................. 9
ITEM 3. Quantitative and Qualitative Disclosures about
Market Risk............................................................... 17
PART II - OTHER INFORMATION
---------------------------
ITEM 1. Legal Proceedings.............................................. 18
ITEM 5. Other Information.............................................. 18
ITEM 6. Exhibits and Reports on Form 8-K............................... 19
Signature Page.................................................................... 20
</TABLE>
2
<PAGE>
SIERRA PACIFIC POWER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Utility Plant at Original Cost:
Plant in service $2,451,060 $2,420,728
Less: accumulated provision for depreciation 836,357 799,099
--------------------------------------
1,614,703 1,621,629
Construction work-in-progress 123,001 97,561
--------------------------------------
1,737,704 1,719,190
--------------------------------------
Investments in subsidiaries and other property, net 61,604 62,704
--------------------------------------
Current Assets:
Cash and cash equivalents 88,290 3,011
Accounts receivable less provision for uncollectible accounts:
$1,491 -2000 and $3,649 -1999 102,464 113,695
Materials, supplies and fuel, at average cost 35,768 30,070
Deferred energy costs 720 -
Other 3,219 3,103
--------------------------------------
230,461 149,879
--------------------------------------
Deferred Charges:
Regulatory tax asset 65,531 65,531
Other regulatory assets 66,065 73,660
Other 17,315 25,512
--------------------------------------
148,911 164,703
--------------------------------------
$2,178,680 $2,096,476
======================================
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholder's equity $ 669,760 $ 673,738
Preferred stock 50,000 50,000
Preferred securities subject to mandatory redemption 48,500 48,500
Long-term debt 623,718 625,430
--------------------------------------
1,391,978 1,397,668
--------------------------------------
Current Liabilities:
Short-term borrowings - 109,584
Current maturities of long-term debt 302,640 102,755
Accounts payable 76,770 78,491
Accrued interest 6,701 5,110
Dividends declared 19,982 19,974
Accrued salaries and benefits 9,482 8,385
Other current liabilities 17,262 10,673
--------------------------------------
432,837 334,972
--------------------------------------
Commitments & Contingencies (Note 4)
Deferred Credits:
Deferred federal income taxes 172,171 170,261
Deferred investment tax credit 38,087 35,980
Regulatory tax liability 37,846 37,846
Accrued retirement benefits 39,236 49,052
Customer advances for construction 42,158 40,081
Other 24,367 30,616
--------------------------------------
353,865 363,836
--------------------------------------
$2,178,680 $2,096,476
======================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
SIERRA PACIFIC POWER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ --------------------------
2000 1999 2000 1999
----------- --------- --------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $176,820 $147,348 $334,442 $291,651
Gas 16,851 18,851 51,311 56,878
Water 15,335 13,619 25,584 23,900
-------- -------- -------- --------
209,006 179,818 411,337 372,429
-------- -------- -------- --------
OPERATING EXPENSES:
Operation:
Purchased power 71,949 42,111 121,429 82,779
Fuel for power generation 44,082 26,367 73,358 52,837
Gas purchased for resale 11,470 12,658 34,321 37,375
Other 31,898 30,765 59,767 54,547
Maintenance 5,228 5,164 9,757 10,660
Depreciation and amortization 19,235 19,498 38,266 38,592
Taxes:
Income taxes 1,616 8,597 12,650 20,409
Other than income 4,795 4,821 9,757 9,620
-------- -------- -------- --------
190,273 149,981 359,261 306,819
-------- -------- -------- --------
OPERATING INCOME 18,733 29,837 52,076 65,610
-------- -------- -------- --------
OTHER INCOME:
Allowance for other funds used during construction 84 - 152 -
Other income (expense)- net (1,067) 213 (1,445) 220
-------- -------- -------- --------
(983) 213 (1,293) 220
-------- -------- -------- --------
Total Income 17,750 30,050 50,783 65,830
-------- -------- -------- --------
INTEREST CHARGES:
Long-term debt 10,683 10,071 20,433 19,932
Other 4,197 2,280 7,408 4,883
Allowance for borrowed funds used during
construction and capitalized interest (634) (236) (1,116) (434)
-------- -------- -------- --------
14,246 12,115 26,725 24,381
-------- -------- -------- --------
INCOME BEFORE OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES 3,504 17,935 24,058 41,449
Preferred dividend requirements of Company-
obligated mandatorily redeemable preferred
securities (1,043) (1,043) (2,086) (2,086)
-------- -------- -------- --------
INCOME BEFORE PREFERRED DIVIDENDS 2,461 16,892 21,972 39,363
Preferred dividend requirements (975) (1,365) (1,950) (2,730)
-------- -------- -------- --------
INCOME APPLICABLE TO COMMON STOCK $ 1,486 $ 15,527 $ 20,022 $ 36,633
======== ======== ======== ========
</TABLE>
The accompanying notes are integral part of the financial statements.
4
<PAGE>
SIERRA PACIFIC POWER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------------
2000 1999
--------------------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before preferred dividends $ 21,972 $ 39,363
Non-cash items included in income:
Depreciation and amortization 38,266 38,592
Deferred taxes and deferred investment tax credit 1,093 2,222
AFUDC and capitalized interest (1,268) (434)
Deferred energy costs - net (720) -
Early retirement and severance amortization 2,098 2,096
Other non-cash 3,763 (158)
Changes in certain assets and liabilities:
Accounts receivable 11,231 11,874
Materials, supplies and fuel (5,698) (4,053)
Other current assets (116) 133
Accounts payable (1,721) (16,021)
Other current liabilities 9,277 (1,919)
Other - net (592) (8,034)
--------------------------------------
Net Cash Flows From Operating Activities 77,585 63,661
--------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant (61,330) (55,708)
Non-cash charges to utility plant 1,326 -
Net customer refunds and contributions in aid construction 7,341 9,474
--------------------------------------
Net cash used for utility plant (52,663) (46,234)
(Investments in) disposal of subsidiaries and other property - net 919 (29,385)
--------------------------------------
Net Cash Used In Investing Activities (51,744) (75,619)
--------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings (111,813) 17,731
Proceeds from issuance of long-term debt 200,000 23,696
Reduction of long-term debt (2,808) (233)
Additional investment by parent company 14,000 8,000
Dividends paid (39,941) (45,930)
--------------------------------------
Net Cash Used In Financing Activities 59,438 3,264
--------------------------------------
Net (decrease) increase in Cash and Cash Equivalents 85,279 (8,694)
Beginning balance in Cash and Cash Equivalents 3,011 15,197
--------------------------------------
Ending balance in Cash and Cash Equivalents $ 88,290 $ 6,503
======================================
Supplemental Disclosures of Cash Flow Information:
Cash Paid During Period For:
Interest $ 26,252 $ 26,138
Income Taxes $ 9,644 $ 13,522
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE 1. MANAGEMENT'S STATEMENT
---------------------------------
In the opinion of the management of Sierra Pacific Power Company, (the
Company or SPPC), a wholly owned subsidiary of Sierra Pacific Resources (SPR),
the accompanying unaudited interim condensed consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the condensed consolidated financial position,
condensed consolidated results of operations and condensed consolidated cash
flows for the periods shown. These condensed consolidated financial statements
do not contain the complete detail or footnote disclosure concerning accounting
policies and other matters which are included in full year financial statements
and therefore, they should be read in conjunction with the Company's audited
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
The results of operations for the three and six month periods ended June
30, 2000 are not necessarily indicative of the results to be expected for the
full year.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Sierra Pacific Power Capital I, Pinon Pine
Corp., and Pinon Pine Investment Co. The Company accounts for its ownership of
GPSF-B, a Delaware corporation acquired in February 1999, using the equity
method because the Company intends to own the entity temporarily. All
significant intercompany transactions and balances have been eliminated in
consolidation.
Reclassifications
-----------------
Certain items previously reported for years prior to 2000 have been
reclassified to conform to the current year's presentation. Net income and
shareholder's equity were not affected by these reclassifications.
NOTE 2. RECENT PRONOUNCEMENTS
-------------------------------
Financial Accounting Standards Board
------------------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 133, entitled "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position, and measure those instruments at fair value. In May 1999, members of
the FASB agreed to delay the effective date of Statement 133 to fiscal years
beginning after June 15, 2000.
In June 2000, the FASB issued SFAS 138 that amended SFAS 133 in a number of
respects. Among other revisions, SFAS 138 exempted from the fair value
requirements normal purchases and normal sales (as defined by SFAS 133) that
contain settlement provisions, if it is probable that the contracts will not
settle net and will result in physical delivery. The Company is still assessing
the impact of SFAS 133 and SFAS 138 on its financial condition and results of
operations.
Securities and Exchange Commission
----------------------------------
In December 1999, the Staff of the Securities and Exchange Commission
released Staff Accounting Bulletin (SAB) No. 101, which summarizes certain of
the staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. Subsequently, SAB No. 101A and SAB
No. 101B were released delaying the implementation date of SAB No. 101 until no
later than the fourth fiscal quarter of fiscal years beginning after December
15, 1999. The Company does not believe that the SAB will have a material effect
on its financial statements.
NOTE 3. SEGMENT INFORMATION
-----------------------------
6
<PAGE>
The Company operates three business segments providing regulated electric,
natural gas and water service. Electric service is provided to northern Nevada
and the Lake Tahoe area of California. Natural gas and water services are
provided in the Reno-Sparks area of Nevada.
Information as to the operations of the different business segments is set
forth below based on the nature of products and services offered. The Company
evaluates performance based on several factors, of which the primary financial
measure is business segment operating income. Intersegment revenues are not
material.
Financial data for business segments is as follows (in thousands).
<TABLE>
<CAPTION>
Three Months
Ended June 30, 2000 Electric Gas Water Consolidated
------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Operating Revenues $ 176,820 $ 16,851 $ 15,335 $ 209,006
============== ============== ============== ==============
Operating Income $ 11,934 $ 1,139 $ 5,660 $ 18,773
============== ============== ============== ==============
Three Months
Ended June 30, 1999 Electric Gas Water Consolidated
------------------- -------------- -------------- -------------- --------------
Operating Revenues $ 147,348 $ 18,851 $ 13,619 $ 179,818
============== ============== ============== ==============
Operating Income $ 24,601 $ 1,189 $ 4,047 $ 29,837
============== ============== ============== ==============
Six Months
Ended June 30, 2000 Electric Gas Water Consolidated
------------------- -------------- -------------- -------------- --------------
Operating Revenues $ 334,442 $ 51,311 $ 25,584 $ 411,337
============== ============== ============== ==============
Operating Income $ 37,933 $ 5,751 $ 8,392 $ 52,076
============== ============== ============== ==============
Six Months
Ended June 30, 1999 Electric Gas Water Consolidated
------------------- -------------- -------------- -------------- --------------
Operating Revenues $ 291,651 $ 56,878 $ 23,900 $ 372,429
============== ============== ============== ==============
Operating Income $ 51,285 $ 7,479 $ 6,846 $ 65,610
============== ============== ============== ==============
</TABLE>
NOTE 4. COMMITMENTS AND CONTINGENCIES
---------------------------------------
The Company has four water wells which currently exceed the federal
drinking water standard for naturally occurring arsenic concentrations.
Production from three of these wells continues by blending water treated at the
Glendale Water Treatment Plant. The fourth well is out of service pending
treatment. The Company's water laboratory research staff is developing options
to assure that the Company is prepared to meet new arsenic standards. The new
Arsenic regulations will be promulgated in 2000 and the proposed regulation is
expected to require action on 17 of the 25 wells serving the Company's system.
Depending upon final rules from the EPA, the Company may incur between $70
million and $98 million by 2004 to meet the new standards.
In accordance with the revised Divestiture Plan stipulation approved by the
Public Utilities Commission of Nevada (PUCN) in February 2000 (see the 1999
Annual Report on Form 10-K), SPR is offering for sale generation assets with
peak capacity of approximately 2,985 megawatts (MW), with approximately 1045 MW
owned by SPPC and approximately 1,940 MW owned by Nevada Power Company (NVP).
Letters of interest were issued to potential bidders in February 2000. Upon
response from the qualified potential bidders and execution of the
confidentiality agreements, offering memoranda and materials were provided to
the bidders. First stage indicative bids were received on May 25, 2000. The
short list of qualified bidders for each of the seven bundles being offered was
completed and bidders notified by June 6, 2000. The second stage due diligence
process was started on June 6, 2000, and will continue through mid-August.
Final bids and the selection of winning bids will occur in late August and early
September 2000. Close of sale and transfer of ownership should occur between
December 2000 and mid-2001.
7
<PAGE>
NOTE 5. LONG TERM DEBT
------------------------
On June 9, 2000, the Company issued $200 million of floating rate notes
that will mature on June 12, 2001. Interest on the notes is payable quarterly
commencing on September 9, 2000. The interest rate on the notes for each
interest period will be a floating rate, subject to adjustment every three
months, equal to the London InterBank Offered Rate (LIBOR) for three-month U.S.
dollar deposits plus a spread of 0.50%. These notes will not be entitled to any
sinking fund and are non-callable. The net proceeds of the $200 million issue
were used to redeem $100 million of floating rate notes on July 14, 2000, and
the remaining proceeds were used to reduce the amount of the Company's
commercial paper outstanding.
NOTE 6. SHORT-TERM BORROWINGS
-------------------------------
The Company's commercial paper balance decreased from approximately $109.6
million at December 31, 1999, to approximately $101.8 million at March 31, 2000.
On June 30, 2000, the Company had no commercial paper outstanding, as a result
of the issuance of long-term debt in June 2000. See Note 5 - Long-Term Debt
(above).
NOTE 7. NEVADA RESTRUCTURING ACTIVITIES
-----------------------------------------
The PUCN approved stipulated agreements that resolve a federal lawsuit and
major restructuring issues including past costs. Refer to the REGULATORY
MATTERS section in ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS of this report for a discussion of these
matters. The Company has agreed to sell its generation assets and the
stipulated agreements provide for the disposition of the proceeds from the sale
of those assets.
As a result, the Company is evaluating the impact of these regulatory
actions on the value of certain Regulatory Assets currently reflected in the
Condensed Consolidated Balance Sheets. The evaluation relates to the
recoverability of Regulatory Assets, primarily related to generating activities,
given the provisions of the stipulated agreements.
NOTE 8. SUBSEQUENT EVENTS
---------------------------
On July 24, 2000 the Company received a 30-day extension of its $150
million Credit Facility to August 28, 2000, in accordance with the terms of the
credit agreement. The Company has requested a 364-day extension of this
facility which, if granted by the participating banks, would extend this
facility to August 27, 2001.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in this Form 10-Q includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements relate to anticipated financial performance,
management's plans and objectives for future operations, business prospects,
outcome of regulatory proceedings, market conditions and other matters. Words
such as "anticipate," "believe," "estimate," "expect," "intend," "plan" and
"objective" and other similar expressions identify those statements that are
forward-looking. These statements are based on management's beliefs and
assumptions and on information currently available to management. Actual results
could differ materially from those contemplated by the forward-looking
statements. In addition to any assumptions and other factors referred to
specifically in connection with such statements, factors that could cause Sierra
Pacific Power Company's (SPPC's) actual results to differ materially from those
contemplated in any forward-looking statement include, among others, the
following: (1) failure to receive judicial approval of the settlement agreement
recently approved by the PUCN, or other difficulties relating to the
implementation of the settlement; (2) fluctuations in electric, gas and other
commodity prices, particularly a continuation of the recent volatility in
purchased power prices in the western United States, and the ability to manage
such fluctuations successfully; (3) the pace and extent of the ongoing
restructuring of the electric and gas industries in Nevada and California; (4)
the outcome of regulatory and legislative proceedings and operational changes
related to industry restructuring; (5) the amount SPPC is allowed to recover
from customers for certain costs that prove to be uneconomic in the new
competitive market; (6) the outcome of ongoing and future regulatory
proceedings; (7) management's ability to integrate the operations of Nevada
Power Company (NVP) and SPPC, and to implement and realize anticipated cost
savings from the merger of SPR and NVP; (8) the results of the contemplated
sales by SPPC of its Nevada generating assets; (9) industrial, commercial and
residential growth in the service territory of SPPC; (10) changes in the capital
markets and interest rates affecting the ability to finance capital
requirements; (11) the loss of any significant customers; (12) the weather and
other natural phenomena; and (13) changes in the business of major customers
that may result in changes in the demand for services of SPPC. Other factors
and assumptions not identified above may also have been involved in deriving
these forward-looking statements, and the failure of those other assumptions to
be realized, as well as other factors, may also cause actual results to differ
materially from those projected. SPPC assumes no obligation to update forward-
looking statements to reflect actual results, changes in assumptions or changes
in other factors affecting forward-looking statements.
RESULTS OF OPERATIONS
---------------------
As discussed in the results of operations discussion that follows,
operating results for the second quarter of 2000 were negatively affected by
higher fuel and purchased power costs during the same period. These costs were
reflective of significantly higher and extremely volatile prices for purchased
power that developed in May in the western United States and have continued
since. The Company cannot predict how long these unprecedented market
conditions will persist or how such a continuation could affect the Company's
future earnings. However, in order to mitigate the effect of higher fuel and
purchased power costs the Company entered into a stipulation permitting it to
file monthly fuel and purchased power adjustment cases to commence not later
than November 1, 2000. Customer price increases that result from higher fuel
and purchased power costs are to be capped at incrementally increased or
decreased rates over six-month periods. Comparative fuel and purchased power
cost information is included in the results of operations discussion that
follows. See "Regulatory Matters" below.
The components of gross margin are set forth below (dollars in thousands):
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------- -------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year %
---------- ---------- -------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Electric $ 176,820 $ 147,348 20.0% $ 334,442 $ 291,651 14.7%
Gas 16,851 18,851 -10.6% 51,311 56,878 -9.8%
Water 15,335 13,619 12.6% 25,584 23,900 7.0%
--------- --------- ---------- --------- --------- ---------
Total Revenues 209,006 179,818 16.2% 411,337 372,429 10.4%
Energy Costs:
Electric 116,031 68,478 69.4% 194,787 135,616 43.6%
Gas 11,470 12,658 -9.4% 34,321 37,375 -8.2%
---------- --------- ---------- --------- --------- ---------
Total Energy Costs 127,501 81,136 57.1% 229,108 172,991 32.4%
---------- --------- --------- --------- --------- ---------
Gross Margin 81,505 98,682 -17.4% 182,229 199,438 -8.6%
========== ========= ========= ========= ========= =========
Gross Margin by Segment:
Electric 60,789 78,870 -22.9% 139,655 156,035 -10.5%
Gas 5,381 6,193 -13.1% 16,990 19,503 -12.9%
Water 15,335 13,619 12.6% 25,584 23,900 7.0%
---------- --------- ---------- --------- --------- --------
Total $ 81,505 $ 98,682 -17.4% $ 182,229 $ 199,438 -8.6%
========== ========= ========== ========= ========= ========
</TABLE>
The causes for significant changes in specific lines comprising the results
of operations are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year %
---------- ---------- -------------- ---------- ---------- ---------------
Electric Operating Revenues:
Residential $ 38,279 $ 38,486 -0.5% $ 86,190 $ 86,011 0.2%
Commercial 48,627 46,294 5.0% 93,426 89,699 4.2%
Industrial 48,900 46,548 5.1% 94,014 91,915 2.3%
--------- --------- ---------- --------- ---------- -----------
Retail revenues 135,806 131,328 3.4% 273,630 267,625 2.2%
Other 41,014 16,020 156.0% 60,812 24,026 153.1%
--------- --------- ---------- --------- ---------- -----------
Total Revenues $ 176,820 $ 147,348 20.0% $ 334,442 $ 291,651 14.7%
========= ========= ========== ========== ========== ===========
Retail sales in thousands of
megawatt-hours (MWH) 2,131 2,046 4.2% 4,248 4,140 2.6%
--------- --------- ---------- --------- ---------- -----------
Average retail revenue
per MWH $ 63.73 $ 64.19 -0.7% $ 64.41 $ 64.64 -0.4%
</TABLE>
Residential revenues decreased slightly for the three months ended June 30,
2000 and increased slightly for the six months ended June 30, 2000. These
changes were due to increases in total customers over the prior periods largely
being offset by lower use per customer as a result of milder weather in 2000
compared to the same periods in 1999.
Commercial revenues increased for both the three months and six months
ended June 30, 2000. This was due primarily to increases of 3.3% and 3.4%,
respectively, in customers and, to a lesser extent, usage at higher billing
rates within the class.
10
<PAGE>
Industrial revenues also increased for both the three months and six months
ended June 30, 2000. This was due to a change in classification of one customer
to the commercial class offset by increases in the number of smaller industrial
customers and to higher usage by the remaining large industrial customers.
Other electric revenues were higher in the second quarter of 2000 compared
to the prior year primarily due to a $24.9 million increase in wholesale
electric revenues that resulted from more wholesale opportunities offset by a
refund reserve reflecting an agreement with the PUCN. Similarly, other electric
revenues were higher for the six months ended June 30, 2000, due to a $32.8
million increase in wholesale electric sales. The increase for the six months
ended June 30, 2000, was also due in part to the 1999 reclassification of a $4.3
million reserve to revenues from operating expense, that was made in order to
reflect a refund resulting from an agreement with the PUCN to refund a share of
earnings.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year %
------------ ------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gas Operating Revenues ($000):
Residential $ 6,212 $ 8,273 -24.9% $ 22,938 $ 25,216 -9.0%
Commercial 3,292 4,311 -23.6% 11,716 13,149 -10.9%
Industrial 2,111 2,391 -11.7% 5,457 6,118 -10.8%
Deferred Energy 1,096 - - 720 - -
Miscellaneous 595 412 44.4% 1,008 943 6.9%
------------ ------------ ----------- ------------ ----------- ---------
Total retail revenue 13,306 15,387 -13.5% 41,839 45,426 -7.9%
Wholesale revenue 3,545 3,464 2.3% 9,472 11,452 -17.3%
------------ ------------ ----------- ------------ ----------- ---------
Total Revenues $ 16,851 18,851 -10.6% 51,311 56,878 -9.8%
============ ============ =========== ============ =========== =========
Sales Decatherms (Dth):
Retail 1,937,604 2,621,342 -26.1% 7,066,300 8,021,177 -11.9%
Wholesale 1,160,969 1,797,396 -35.4% 3,542,176 5,548,332 -36.2%
------------ ------------ ----------- ------------ ----------- ---------
Total 3,098,573 4,418,738 -29.9% 10,608,476 13,569,509 -21.8%
------------ ------------ ----------- ------------ ----------- ---------
Average revenues per Dth
Retail $ 6.87 $ 5.87 17.0% $ 5.92 $ 5.66 4.5%
Wholesale $ 3.05 $ 1.93 58.4% $ 2.67 $ 2.06 29.6%
</TABLE>
The three months ended June 30, 2000, continued to show decreased gas
revenues among residential, commercial and industrial customers, the result of
significantly lower usage per customer due to mild weather conditions. The
quarter's reduced usage exceeded the continued increases in residential and
commercial customers of 4.4% and 2.6%, respectively. Similarly, the six-month
period ended June 30, 2000, reflected significant reductions in usage by all
classes of retail customers, in spite of increases in residential and commercial
customers of 4.9% and 2.9%, respectively.
A small increase in wholesale gas revenues for the second quarter of 2000
over the same period in 1999 somewhat reduced the wholesale revenue shortfall in
the first quarter of 2000, which had resulted primarily from the expiration of
three short-term gas contracts that were included in 1999 revenues.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year%
------------ ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Water Operating Revenues ($000) $ 15,335 $ 13,619 12.6% $ 25,584 $ 23,900 7.0%
============ ============ =========== ============ =========== =========
</TABLE>
11
<PAGE>
Water revenues were higher for the second quarter of 2000 due to a 7.4%
increase in the number of customers and increased use per customer, primarily by
the Company's irrigation customers. Water revenues for the six months ended
June 30, 2000, also increased compared to the prior year due to increases in the
numbers of customers and increased use per customer.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year%
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Purchased Power ($000) $ 71,949 $ 42,111 70.9% $ 121,429 $ 82,779 46.7%
Purchased Power in thousands
of MWHs 1,706 1,703 0.2% 3,299 3,023 9.1%
Average cost per MWH
of Purchased Power $ 42.17 $ 24.73 70.6% $ 36.81 $ 27.38 34.4%
</TABLE>
Purchased power costs were higher for the three and six months ended June
30, 2000 because the Company fulfilled more of its total energy requirements
with more expensive economy energy purchased power, which significantly
increased in cost from the prior period.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year%
------------ ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Fuel for Power Generation ($000) $ 44,082 $ 26,367 67.2% $ 73,358 $ 52,837 38.8%
Thousands of MWHs generated 1,343 1,146 17.2% 2,543 2,319 9.7%
Average cost per MWH
of Generated Power $ 32.82 $ 23.01 42.7% $ 28.85 $ 22.78 26.6%
</TABLE>
Fuel for generation costs for the both the three month and six month periods
ended June 30, 2000, were significantly higher than the same periods of the
prior year as gas prices increased significantly and volumes were higher to
accommodate greater system load.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year%
------------ ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gas Purchased for Resale ($000)
Retail $ 7,760 $ 9,444 -17.8% $ 24,898 $ 27,005 -7.8%
Wholesale 3,710 3,214 15.4% 9,423 3,023 -9.1%
------------ ------------ ------------ ------------ ----------- -----------
Total 11,470 12,658 -9.4% 34,321 37,375 -8.2%
============ ============ ============ ============ =========== ==========
Gas Purchased for Resale
(thousands of decatherms)
Retail $ 1,945 $ 2,621 -25.8% $ 6,585 $ 8,025 -17.9%
Wholesale 1,162 1,797 -35.3% 3,543 5,548 -36.1%
------------ ------------ ------------ ------------ ----------- ----------
Total 3,107 4,418 -29.7% 10,128 13,573 -25.4%
============ ============ ============ ============ =========== ==========
Average cost per decatherm)
Retail $ 3.99 $ 3.60 10.8% $ 3.78 $ 3.37 12.2%
Wholesale $ 3.19 $ 1.79 78.2% $ 2.66 $ 1.87 42.2%
</TABLE>
12
<PAGE>
The cost of retail gas purchased for resale decreased for the three and six
months ended June 30, 2000 as reduced demand due to milder weather more than
offset increases in gas unit prices.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
(in $000's) (in $000's)
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year%
------------ ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Allowance for other funds
used during construction $ 84 $ - - $ 152 $ - -
Allowance for borrowed funds
used during construction 634 236 168.6% 1,116 434 157.1%
------------ ------------ ------------ ------------ ----------- -----------
Total 718 236 204.2% 1,268 434 192.2%
============ ============ ============ ============ =========== ===========
</TABLE>
Total allowance for funds used during construction (AFUDC) is higher for the
three and six months ended June 30, 2000, as compared to the same periods in
1999 because of higher construction work in progress balances in 2000.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
(in $000's) (in $000's)
-------------- --------------
Change from Change from
2000 1999 Prior Year % 2000 1999 Prior Year%
------------ ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Other operating expense $ 31,898 $ 30,765 3.7% $ 59,767 $ 54,547 9.6%
Maintenance expense 5,228 5,164 1.2% 9,713 10,660 -8.9%
Income taxes 1,616 8,597 -81.2% 12,650 20,409 -38.0%
Interest charges-other 4,197 2,280 84.1% 7,408 4,883 51.7%
</TABLE>
Other operating expense was higher for the second quarter of 2000 due to
increased legal fees over the same period in 1999. Other operating expense for
the six months ended June 30, 2000 also increased as compared to the same period
in 1999 due to increased legal fees in the current year and a first quarter 1999
reclassification of a reserve to revenues of $4.3 million from operating expense
that was made in order to reflect a refund resulting from an agreement with the
PUCN to refund a share of earnings.
Maintenance costs for the three months ended June 30, 2000 were comparable
to the same period in 1999, and were lower for the six months ended June 30,
2000 due to slightly lower plant maintenance expenses in the first quarter of
2000 than in the same period in 1999.
Income taxes decreased for both the three and six months periods ended June
30, 2000, due to comparable reductions in pre-tax income in 2000 as compared to
the same periods in 1999.
Interest charges-other were higher for the three and six months ended June
30, 2000, due to significantly higher commercial paper balances during those
periods as compared to the same periods in 1999, and due to interest on the $200
million of floating rate notes issued in early June 2000.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------
13
<PAGE>
During the first six months of 2000, the Company earned approximately $22.0
million in income before preferred stock dividends. It declared $1.95 million
in dividends to holders of its preferred stock and declared $38.0 million in
common stock dividends to its parent, Sierra Pacific Resources.
Cash flows during the six months ended June 30, 2000 increased compared to
the same period in 1999. Cash flows were greater due to an increase in cash
provided by financing activities, a decrease in cash used for investing
activities, and, to a lesser extent, an increase in cash flows from operating
activities. The increase in cash flows from financing activities is primarily
the result of a significant increase in long-term debt in excess of the decrease
in short-term borrowings. The decrease in cash used for investing activities
was due to the Company's 1999 acquisition of General Electric Capital
Corporation's interest in Pinon Pine Company L.L.C.
Construction Expenditures and Financing
---------------------------------------
The Company's construction program and capital requirements for the period
2000-2004 were originally discussed in the Company's 1999 Annual Report on Form
10-K. Of the amount projected for 2000 ($137.7 million), $52.7 million (38.3%)
had been spent as of June 30, 2000. Internally generated funds provided 71.5%
of construction expenditures.
Financing
---------
On June 9, 2000, the Company issued $200 million of floating rate notes,
that will mature on June 12, 2001. Interest on the notes is payable quarterly
commencing on September 9, 2000. The interest rate on the notes for each
interest period will be a floating rate, subject to adjustment every three
months, equal to the London InterBank Offered Rate (LIBOR) for three-month U.S.
dollar deposits plus a spread of 0.50%. These notes will not be entitled to any
sinking fund and are non-callable. The net proceeds of the $200 million issue
were used to redeem $100 million of floating rate notes on July 14, 2000, and
the remaining proceeds were used to reduce the amount of the Company's
commercial paper outstanding.
On July 24, 2000 the Company received a 30-day extension of its $150
million Credit Facility to August 28, 2000, in accordance with the terms of the
credit agreement. The Company has requested a 364-day extension of this
facility which, if granted by the participating banks, would extend this
facility to August 27, 2001.
Generation Divestiture
----------------------
In accordance with the revised Divestiture Plan stipulation approved by the
PUCN in February 2000 (see the 1999 Annual Report on Form 10-K), SPR is offering
for sale generation assets with peak capacity of approximately 2,985 megawatts
(MW), with approximately 1045 MW owned by SPPC and approximately 1,940 MW owned
by NVP. Letters of interest were issued to potential bidders in February 2000.
Upon response from the qualified potential bidders and execution of the
confidentiality agreements, offering memoranda and materials were provided to
the bidders. First stage indicative bids were received on May 25, 2000. The
short list of qualified bidders for each of the seven bundles being offered was
completed and bidders notified by June 6, 2000. The second stage due diligence
process was started on June 6, 2000, and will continue through mid-August.
Final bids and the selection of winning bids will occur in late August and early
September 2000. Close of sale and transfer of ownership should occur between
December 2000 and mid-2001.
REGULATORY MATTERS
------------------
Nevada Electric Restructuring Activities
----------------------------------------
Competition was originally scheduled to start on March 1, 2000. However,
in February 2000 the Governor of Nevada delayed the start date of competition
indefinitely. Generally, restructuring regulations and PUCN decisions during
the first and second quarters of 2000 proceeded slowly. Numerous hearings and
workshops have been held by the Public Utilities Commission of Nevada (PUCN)
regarding two important regulations, Provider of Last Resort and Past Costs.
On March 28, 2000, the Company and its parent, Sierra Pacific Resources,
together with Nevada Power Company, filed a federal lawsuit challenging Nevada's
laws providing for competition in the electric utility industry and the PUCN's
implementation of competition. See SPR's Form 8-K, filed on April 17, 2000.
14
<PAGE>
On July 20, 2000, the PUCN approved stipulated agreements that resolve the
federal lawsuit and major restructuring issues including past costs. See SPR's
Form 8-K, filed on July 26, 2000. On August 3, 2000, the PUCN approved
revisions to the stipulated agreements. The stipulations pave the way for open
access to occur in a phased manner beginning in November for large commercial
customers and continuing until September 2001 for residential customers. The
following are highlights of the stipulations:
Opening Dates
Retail access choice will be phased in based upon customer size. Customers
will be able to choose a new supplier for energy, metering, billing or customer
service according to the following schedule:
November 1, 2000 - Large commercial customers including large resorts
and mines
April 1, 2001 - Medium commercial customers
June 1, 2001 - Small commercial customers
September 1, 2001 - December 1, 2001 - residential customers
Incentives for Company to Meet Open Access Dates
Provided that open access procedures, including billing and settlement, are
in place by the open access dates, the Company will be allowed to retain up to
$9 million from any gain on the divestiture of generation assets.
Transmission Access
The Company has filed a modified Open Access Tariff with FERC to facilitate
retail open access. The Company also continues to pursue compliance with FERC
Order 2000 and the formation of a regional transmission organization (RTO).
Also see FERC Matters, below.
Past Costs
Major past cost issues are resolved by the stipulations. The Company has
waived its rights to the collection of any past costs other than those provided
for in the stipulations. The parties have agreed that the stipulations
eliminate the need for a past cost regulation.
Generation
The gain on the sale of generation facilities will be calculated based upon
recorded book values as of the date of sale and includes costs of sale, less
applicable taxes. Common and general plant allocable to generation will be
recoverable from the gain. Additional gain, if any, up to $9 million will be
applied to the allowed incentives to the Company for meeting retail open access
dates, as described above. Any remaining gain will be set aside in an escrow
account to be utilized to pay down costs associated with above-market purchased
power contracts.
Purchased Power Contracts
The Company will auction its purchased power contracts on an annual basis
in the wholesale markets. If the auction does not yield sufficient proceeds to
pay for the purchased power contracts, the Company will collect the difference
from all customers through a non-bypassable wires charge. This Purchased Power
Annual Auction Mechanism (PPAAM) charge will be in place on November 1, 2000
when the market opens.
To the extent that there are tax or market advantages, the Company will
pursue a competitive permanent auction of purchased power contracts. Such an
auction would be funded by an amount not to exceed the principal and interest in
the escrow account that was funded by the gain on the sale of generation assets.
If the permanent auction does not proceed or if such auction does not
exhaust the generation escrow account, the PPAAM charge will be reduced by an
annuity calculated on any remaining amount in the generation escrow account.
Metering
15
<PAGE>
Customers will have the opportunity to purchase metering equipment directly
from SPPC or through an alternative seller. Such assets will be sold at net
book value.
Transition Costs
The ability of the Company to recover costs it expects to spend to open the
market, referred to as transition costs, was not resolved by the stipulations.
The Company expects to petition the PUCN in the near future to request recovery
of its transition costs.
Earnings Sharing
The stipulated agreements discussed earlier set the shared earnings refund
to customers at a total of $9.3 million, for which the Company has recorded
appropriate reserves.
In other matters related to restructuring, the PUCN has continued
rulemaking and discussion related to a number of topics including:
Independent Scheduling Administrator (ISA)
On March 21, 2000, the PUCN issued a Notice of Workshop on retail
transmission issues including funding for the Mountain West Independent
Scheduling Administrator (MWISA). In a workshop held April 12, various parties
advocated that the utilities provide funding and that the PUCN should provide
cost recovery for the utilities. The PUCN and the parties will continue to
explore this issue in the future workshops.
During the second quarter of 2000 the MWISA option has not been given a
means of funding its operation. Though this option is still available, the
Company is planning and proposing utility transmission open access tariffs until
an RTO can be put in place. See FERC Matters, below, for a further discussion
of transmission access issues.
Unbundling of Utility Services
On May 4, 2000, the PUCN issued a final order (the "Order") that was
consistent with its September 1999 interim order. See the Company's 1999 Annual
Report on Form 10-K for additional information on the interim order. The Order
reduces the Company's revenue requirement and return on equity for distribution
service for those customers who choose to leave the Company upon the start of
retail competition. The Company filed a Petition for Reconsideration with the
PUCN on May 19. The Petition for Reconsideration was granted on July 12 by the
PUCN.
Provider of Last Resort (PLR)
The PLR will provide electric service to customers who do not select an
electricity provider and to customers who are not able to obtain service from an
alternative seller after the date competition begins. Nevada Senate Bill 438
provides for the electric distribution utility (EDU) to provide PLR services
from the start of competition until July 1, 2001. The Company is seeking to
modify the PLR regulation. If the Company does not provide PLR services, the
May 4, 2000 Order referred to above could result in a reduction of revenues.
On May 3, 2000, the PUCN reissued the PLR regulation for comment. The
current draft regulation continues to contain various provisions that could have
negative financial ramifications for the Company. See the Company's 1999 Annual
Report on Form 10-K.
The PUCN is nearing completion of this regulation. Certain legal issues
surrounding the EDU or PLR ability to provide unbundled metering services are
not resolved. In addition, the proposed regulation continues to contain a
strict standard of conduct to govern the relationship between EDU and PLR
functions. Implementation of these provisions could have negative financial
ramifications.
California Matters
------------------
Generation Divestiture
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On March 2, 2000, the Company filed a new application requesting exemption
from California Public Utility Commission (CPUC) approval of the Nevada-based
generation divestiture transaction. The Company cited several reasons for the
exemption including that the PUCN and FERC oversight of the generation
divestiture will assure reliability and market power mitigation as required by
California's electric restructuring legislation.
Distribution Performance-Based Rate-making (PBR)
On May 4, 2000, the CPUC dismissed without prejudice the Company's January
3, 2000 distribution PBR proposal (see the Company's 1999 Annual Report on Form
10-K). The order accepted the application as meeting the compliance requirement
but directed the Company to re-file it when the cost of capital and cost of
service studies are available. On May 8, 2000, the Company filed its 2001 Cost
of Capital application. On July 3, 2000, the Company re-submitted the PBR
proposal along with the Cost of Service Study.
FERC Matters
------------
Independent Transmission Company
On April 26, 2000, the Company, together with Nevada Power Company,
Portland General Electric Company, Avista Corporation, The Montana Power
Company, and Puget Sound Energy, Inc. agreed to study the formation of a for-
profit Independent Transmission Company (ITC). The ITC is continuing to review
its options as the Regional Transmission Organization (RTO) process continues
toward the October 15, 2000 filing deadline.
Transmission Rate Case
In March 1999, the Company filed an application with the FERC to increase
its Open Access Transmission rates. See the Company's 1999 Annual Report on
Form 10-K. On March 30, 2000, the Company filed a Loss Study that the Company
agreed to provide in the partial settlement that was approved in January 2000.
On April 27, 2000, a pre-hearing conference was held to set a procedural
schedule for remaining issues. A settlement has been reached on the loss study
that will be submitted to the FERC for approval.
Generation Tariffs and Transitional Purchase Power Agreements
On March 31, 2000, the Company filed for approval of generation tariffs
that contain the rates, terms and conditions under which the new owners of
divested generation would operate after divestiture. Included in the filing are
the Transitional Purchase Power Agreements (TPPAs) between the Company and the
new owners.
On May 31, 2000, the FERC accepted the tariffs and the TPPAs. The FERC
required one change to the TPPAs. The FERC also set for hearing the level of
rates for ancillary services in the tariffs and the rates in the TPPAs. A
procedural schedule has been established for the hearing on rates. On June 29,
2000, the Company filed the revised TPPAs in compliance with the May 31 order.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
See "Results of Operations" above for a discussion of recent increased
prices and volatility in the markets for purchased power and fuel, which have
had a negative effect on the financial performance of SPPC.
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PART II
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ITEM 1. LEGAL PROCEEDINGS
On March 28, 2000, SPR, NVP, and SPPC filed a lawsuit in Federal District
Court in Nevada asking the court to declare unconstitutional certain aspects of
the Nevada laws that created the framework for a deregulated electric market in
Nevada.
On July 20, 2000, the PUCN approved a stipulation (the "Settlement")
entered into among the parties to state and federal lawsuits permitting NVP to
increase its rates effective August 1, 2000, by approximately $48 million
annually to recover increased costs of fuel and purchased power, and to update
its going-forward costs of fuel and purchased power thereafter with monthly fuel
and purchased power filings up to March 2003. Increases and/or decreases are
capped at incrementally increased or decreased rates over successive six-month
periods at .95 mils for the first six months, 1.15 mils for the second six
months, 1.25 mils for the third six months, 1.55 mils for the next six months,
and 1.75 mils for the remaining period. The Settlement also permits SPPC to
commence filing monthly fuel and purchased power adjustment cases on the same
basis to commence not later than November 1, 2000. SPPC fuel and purchased
power increases and/or decreases are also capped at incrementally increased or
decreased rates over successive six-month periods starting October 1, 2000 at
4.5 mils for the first six-month period followed by .95, 1.15, 1.35, 1.55, and
1.75 mils for each successive six-month period.
The Settlement also resolves numerous other issues relating to the
restructuring of the electric industry in Nevada, including phased-in access to
competitive markets by customer class, recovery of stranded costs, auctioning
out-of-market qualified facility and other purchased power contracts, imposition
of a wires charge to recover any balance, and filing of new proceedings to
address metering costs and transition costs. The Settlement was contingent on
stipulations entered into with third parties with respect to several other
pending dockets. On July 28, 2000, the parties revised the Settlement to remove
the contingencies. The revisions were approved by the PUCN on August 3, 2000,
but still remain subject to judicial approval as well as future regulatory
proceedings relating to the filing of monthly fuel and purchased power cases,
recovery of stranded costs, and divestiture of generation proceeds. The outcome
of the dockets and proceedings cannot be predicted at this time; however,
unfavorable treatment of any of these proceedings would have a negative effect
on the economic value of the Settlement.
See the Form 8-K filed July 26, 2000 and Regulatory Matters, above, for
additional details.
Although the Company is involved in other ongoing litigation on a variety
of matters, it is management's opinion that none individually or collectively
are material to the Company's financial position.
ITEM 5. OTHER INFORMATION
On July 12, 2000, SPR issued a press release announcing that fuel and
purchased power costs would negatively impact earnings for the second quarter
and the remainder of 2000. For additional details, see the Form 8-K filed July
14, 2000.
On July 20, 2000, SPR issued a press release announcing that SPR, its
utility subsidiaries, SPPC and Nevada Power Company (NVP), Nevada regulators and
several other parties took steps toward a settlement of issues involving
restructuring the electric utility industry in the state, setting new electric
rates for NVP's and SPPC's customers and resolving other issues involved in
state and federal court cases filed by NVP and SPPC. For additional details,
see the Form 8-K filed July 26, 2000.
On July 21, 2000, SPR issued a press release announcing the resignation of
Michael R. Niggli, Chairman and Chief Executive Officer of Sierra Pacific
Resources. For additional details, see the Form 8-K filed July 26, 2000.
On August 9, 2000, the Board of Directors of Sierra Pacific Resources
announced that Walter M. Higgins had been named chairman, president and chief
executive officer. Mr. Higgins returns to SPR, where he served from 1994 to
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1998 as chairman of the board, president and chief executive officer. Since
January 1998, he has served as chairman and chief executive officer of Atlanta,
Georgia-based AGL Resources, Inc., the holding company of Atlanta Gas Light
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed with this Form 10-Q.
(27) The Financial Data Schedule containing summary financial
information extracted from the condensed consolidated financial
statements filed on Form 10-Q for the six month period ended June
30, 2000, for Sierra Pacific Power Company and is qualified in
its entirety by reference to such financial statements.
(b) Reports on Form 8-K
Form 8-K filed on April 21, 2000 - Item 5, Other Events
Described, and included as an exhibit, SPR's press release dated April 18,
2000, announcing the resignation of Malyn K. Malquist, President and Chief
Operating Officer of SPR, and President of SPPC.
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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.
Sierra Pacific Power Company
---------------------------------
(Registrant)
Date: August 14, 2000 By /s/ Mark A. Ruelle
----------------------------- -------------------
Mark A. Ruelle
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 14, 2000 By /s/ Mary O. Simmons
------------------------------ --------------------
Mary O. Simmons
Controller
(Principal Accounting Officer)
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