<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, 1998
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 1-8788
SIERRA PACIFIC RESOURCES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 88-0198358
(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)
(702) 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, 1998
Common Stock, $1.00 par value 30,956,869 Shares
================================================================================
1
<PAGE>
SIERRA PACIFIC RESOURCES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
CONTENTS
PART I - FINANCIAL INFORMATION
------------------------------
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Report of Independent Accountants............................................. 3
Condensed Consolidated Balance Sheets June 30, 1998 and
December 31, 1997......................................................... 4
Condensed Consolidated Statements of Income - Three Months and Six-Months
Ended June 30, 1998 and 1997.............................................. 5
Condensed Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1998 and 1997.............................................. 6
Notes to Condensed Consolidated Financial Statements.......................... 7
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................ 9
PART II - OTHER INFORMATION
---------------------------
ITEM 1. Legal Proceedings........................................................ 11
ITEM 4. Submission of Matters to a Vote of Security Holders...................... 11
ITEM 5. Other Information........................................................ 11
ITEM 6. Exhibits and Reports on Form 8-K......................................... 11
Signature Page..................................................................... 12
Appendix........................................................................... 13
</TABLE>
2
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
Sierra Pacific Resources
Reno, Nevada
We have reviewed the accompanying condensed consolidated balance sheet of Sierra
Pacific Resources and subsidiaries as of June 30, 1998, and the related
condensed consolidated statements of income and cash flows for the three-month
and six-month periods ended June 30, 1998 and 1997. These financial statements
are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet and consolidated statement of
capitalization of Sierra Pacific Resources and subsidiaries as of December 31,
1997, and the related consolidated statements of income, retained earnings, and
cash flows for the year then ended (not presented herein); and in our report
dated January 30, 1998, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 1997 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Reno, Nevada
August 13, 1998
3
<PAGE>
SIERRA PACIFIC RESOURCES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Utility Plant at Original Cost:
Plant in service $2,151,055 $2,063,269
Less: accumulated provision for depreciation 695,737 664,490
---------- ----------
1,455,318 1,398,779
Construction work-in-progress 168,439 202,036
---------- ----------
1,623,757 1,600,815
---------- ----------
Investments in subsidiaries and other property, net 55,696 49,614
---------- ----------
Current Assets:
Cash and cash equivalents 9,548 8,901
Accounts receivable less provision for uncollectible accounts $1,424-
1998 and $1,704-1997 84,263 103,356
Materials, supplies and fuel, at average cost 26,126 25,255
Other 4,365 2,885
---------- ----------
124,302 140,397
---------- ----------
Deferred Charges:
Regulatory tax asset 66,455 66,563
Other regulatory assets 62,509 63,476
Other 16,828 15,015
---------- ----------
145,792 145,054
---------- ----------
$1,949,547 $1,935,880
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholder's equity $ 651,665 $ 633,394
Preferred stock 73,115 73,115
Preferred stock subject to mandatory redemption:
SPPC-obligated mandatorily redeemable preferred securities of
SPPC's subsidiary Sierra Pacific Power Capital I, holding
solely $50 million principal amount of 8.6% junior
subordinated debentures of SPPC, due 2036 48,500 48,500
Long-term debt 611,936 627,224
---------- ----------
1,385,216 1,382,233
---------- ----------
Current Liabilities:
Short-term borrowings 88,400 75,000
Current maturities of long-term debt and preferred stock 10,573 10,566
Accounts payable 57,142 62,105
Accrued interest 6,127 6,910
Dividends declared 11,470 10,941
Other current liabilities 38,867 34,360
---------- ----------
212,579 199,882
---------- ----------
Deferred Credits:
Accumulated deferred federal income taxes 166,273 165,076
Accumulated deferred investment tax credit 38,890 39,873
Regulatory tax liability 39,725 40,767
Customer advances for construction 33,064 38,478
Accrued retirement benefits 39,398 37,456
Other 34,402 32,115
---------- ----------
351,752 353,765
---------- ----------
$1,949,547 $1,935,880
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<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,
---------------------------------------------------------------
1998 1997 1998 1997
------------ ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $ 135,169 $ 130,603 $ 277,308 $ 265,258
Gas 22,112 11,803 53,478 39,980
Water 11,862 12,411 21,079 21,437
Other 2,489 1,903 4,249 3,358
------------ ----------- ----------- -----------
171,632 156,720 356,114 330,033
------------ ----------- ----------- -----------
OPERATING EXPENSES:
Operation:
Purchased power 35,377 29,600 73,752 61,478
Fuel for power generation 27,447 26,838 51,327 49,645
Gas purchased for resale 13,510 5,545 32,841 20,337
Other 32,463 32,151 63,479 66,639
Maintenance 6,007 5,428 10,703 11,477
Depreciation and amortization 16,672 15,448 33,593 30,825
Taxes:
Income taxes 8,313 9,734 20,699 22,023
Other than income 5,001 4,731 9,906 9,446
------------ ----------- ----------- -----------
144,790 129,475 296,300 271,870
------------ ----------- ----------- -----------
OPERATING INCOME 26,842 27,245 59,814 58,163
------------ ----------- ----------- -----------
OTHER INCOME:
Allowance for other funds used during construction 1,155 1,494 2,126 2,928
Other income - net (242) (292) (2) 787
------------ ----------- ----------- -----------
913 1,202 2,124 3,715
------------ ----------- ----------- -----------
Total Income 27,755 28,447 61,938 61,878
------------ ----------- ----------- -----------
INTEREST CHARGES:
Long-term debt 10,057 10,580 20,320 21,168
Other 1,759 1,161 3,667 1,930
Allowance for borrowed funds used during construction
and capitalized interest (2,039) (1,186) (3,721) (2,354)
------------ ----------- ----------- -----------
9,777 10,555 20,266 20,744
------------ ----------- ----------- -----------
INCOME BEFORE OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES 17,978 17,892 41,672 41,134
Preferred dividend requirements of SPPC-obligated
mandatorily redeemable preferred securities (1,043) (1,043) (2,086) (2,086)
------------ ----------- ----------- -----------
INCOME BEFORE PREFERRED DIVIDENDS 16,935 16,849 39,586 39,048
Preferred dividend requirements (1,365) (1,365) (2,730) (2,730)
------------ ----------- ----------- -----------
INCOME APPLICABLE TO COMMON STOCK $ 15,570 $ 15,484 $ 36,856 $ 36,318
============ =========== =========== ===========
Net Income Per Share - Basic $ 0.50 $ 0.50 $ 1.19 $ 1.18
Net Income Per Share - Diluted $ 0.50 $ 0.50 $ 1.19 $ 1.17
Weighted Average Shares of Common
Stock Outstanding 30,945,868 30,881,770 30,938,332 30,864,638
Dividends Paid Per Share of Common Stock $ 0.325 $ 0.310 $ 0.635 $ 0.605
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
<PAGE>
SIERRA PACIFIC RESOURCES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
SIX-MONTHS ENDED
JUNE 30,
----------------------------
1998 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before preferred dividends $ 39,586 $ 39,048
Non-cash items included in income:
Depreciation and amortization 33,593 30,825
Deferred taxes and deferred investment tax credit (718) (2,076)
AFUDC and capitalized interest (5,846) (5,282)
Early retirement and severance amortization 2,109 2,446
Other 1,427 (1,706)
Changes in certain assets and liabilities:
Accounts receivable 14,710 13,610
Materials, supplies and fuel (871) 2,551
Other current assets (1,480) (708)
Accounts payable (4,963) (14,021)
Other current liabilities 3,724 (144)
Other - net (763) (1,015)
-------- --------
Net Cash Flows From Operating Activities 80,508 63,528
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant (66,454) (68,465)
Net customer refunds and contributions in aid construction 10,319 9,889
-------- --------
Net cash used for utility plant (56,135) (58,576)
-------- --------
(Investments in) disposal of subsidiaries and other property - net (1,676) 604
-------- --------
Net Cash Used In Investing Activities (57,811) (57,972)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 14,037 34,349
Proceeds from issuance of long-term debt - 1,081
Reduction of long-term debt (15,300) (25,327)
Sale of common stock 1,535 2,111
Dividends paid (22,322) (21,393)
-------- --------
Net Cash Used In Financing Activities (22,050) (9,179)
-------- --------
Net decrease in Cash and Cash Equivalents 647 (3,623)
Beginning balance in Cash and Cash Equivalents 8,901 4,949
-------- --------
Ending balance in Cash and Cash Equivalents $ 9,548 $ 1,326
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash Paid During Period For:
Interest $ 26,189 $ 24,433
Income Taxes $ 34,350 $ 51,779
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE 1. MANAGEMENT'S STATEMENT
- --------------------------------
In the opinion of the management of Sierra Pacific Resources, hereafter
known as the Company, 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
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, 1997. Deloitte & Touche LLP, the
Company's independent accountants, have performed a review of the unaudited
condensed consolidated financial statements, and their report has been included
in this report.
The results of operations for the three-month and six-month period ended
June 30, 1998 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 the
Company and its wholly-owned subsidiaries, Sierra Pacific Power Company (SPPC),
Tuscarora Gas Pipeline Company (TGPC), Sierra Gas Holding Company (formerly
Sierra Energy Company), Sierra Energy Company dba e-three (e-three), Sierra
Pacific Energy Company (SPE), Lands of Sierra (LOS), and Sierra Water
Development Company (SWDC). All significant intercompany transactions and
balances have been eliminated in consolidation.
Reclassifications
-----------------
Certain items previously reported for years prior to 1998 have been
reclassified to conform with the current year's presentation. Net income and
shareholder's equity were not affected by these reclassifications.
NOTE 2. RECENT PRONOUNCEMENTS OF THE FASB
- -------------------------------------------
On June 30, 1997, the FASB issued SFAS 131 entitled "Disclosure About
Segments of an Enterprise and Related Information". This statement establishes
additional standards for segment reporting in the financial statements and is
effective for fiscal years beginning after December 15, 1997. Management has
concluded that the Company will continue to define its primary operating
segments as electric, gas and water. The Company expects to provide the
additional disclosure requirements of this statement in its Annual Report on
Form 10-K for the year ended December 31, 1998.
In February 1998, the FASB issued SFAS 132 entitled "Employers' Disclosures
about Pensions and Other Postretirement Benefits". This statement revises
employers' disclosures about pension and other postretirement benefit plans for
fiscal years beginning after December 15, 1997. The statement does not change
the measurement or recognition of those plans. Therefore, management believes
this statement will not have a material impact on the financial statements of
the Company.
7
<PAGE>
NOTE 3. EARNINGS PER SHARE
- ----------------------------
The Company adopted SFAS No. 128, "Earnings Per Share" for the period ended
December 31, 1997. This pronouncement supersedes APB Opinion No. 15, "Earnings
Per Share" and establishes new standards for computing and presenting EPS.
Previously reported primary and fully diluted EPS are replaced with basic and
diluted EPS. 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. Prior period EPS
have been restated to conform with the new statement.
The following provides a reconciliation of Basic EPS and Diluted EPS.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Basic EPS
Numerator
Income available to common stockholders ($000) 15,570 15,484 36,856 36,318
------------ ------------ ------------ ------------
Denominator
Weighted average number of shares outstanding 30,945,868 30,881,770 30,938,332 30,864,638
------------ ------------ ------------ ------------
Per-Share Amount $0.50 $0.50 $1.19 $1.18
============ ============ ============ ============
Diluted EPS
Numerator
Income available to common stockholders ($000) 15,570 15,484 36,856 36,318
------------ ------------ ------------ ------------
Denominator
Weighted average number of shares outstanding 30,945,868 30,881,770 30,938,332 30,864,638
before dilution
Stock options 62,508 32,923 47,346 30,240
Executive long term incentive plan - performance shares 18,387 27,004 16,806 29,954
</TABLE>
NOTE 4. LONG-TERM DEBT
- ------------------------
On April 1, 1998, the Company redeemed $10 million of 6.23% senior notes.
SPPC, the Company's subsidiary, redeemed $5 million 8.65% medium term notes on
June 18, 1998.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
When used anywhere in this Form 10-Q, or the Form 10-Q of Sierra Pacific
Power Company and in future filings by Sierra Pacific Power Company or Sierra
Pacific Resources with the Securities and Exchange Commission, in Sierra Pacific
Power Company or Sierra Pacific Resources' press releases and in oral statements
made with the approval of an authorized executive officer, the words or phrases
"will likely result", "are expected to", "will continue", "is anticipated",
"estimated", "project", or "outlook" or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. Sierra Pacific Resources wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. Sierra Pacific Resources wishes to advise readers that various
factors described in these Forms 10-Q could cause Sierra Pacific Resources'
actual results for future periods to differ materially from any opinions or
statements expressed with respect to future periods in any current statements.
Sierra Pacific Resources specifically declines any obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events.
SIERRA PACIFIC POWER COMPANY (SPPC)
- -----------------------------------
Management Discussion and Analysis of SPPC is contained in its Quarterly
Report on Form 10-Q for the three and six months ended June 30, 1998, which is
attached as an appendix.
TUSCARORA GAS PIPELINE COMPANY
- ------------------------------
For the three and six months ended June 30, 1998, Tuscarora Gas Pipeline
Company, a wholly-owned subsidiary of the Company, contributed net income of
$405 and $876 thousand compared to $354 and $671 thousand for the comparable
periods in 1997. The increase in net income for the six month period ended June
30, 1998 is primarily due to higher firm transportation revenues and
interruptible transportation revenue.
LANDS OF SIERRA
- ---------------
For the three and six months ended June 30, 1998, Lands of Sierra incurred
net losses of $25 and $44 thousand compared to $14 and $121 thousand net income
in 1997. The 1997 income resulted from commercial property sales.
E.THREE
- -------
For the three and six months ended June 30, 1998, e.three incurred net
losses of $369 and $736 thousand compared to $252 and $480 thousand in 1997.
The increase in losses is due to the continuation of start-up activities,
primarily staffing requirements.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------
During the first six months of 1998, the Company earned $39.6 million in
income before preferred dividends and declared $20.1 million in common stock
dividends. SPPC, the Company's principal subsidiary, declared $2.7 million in
preferred stock dividends.
9
<PAGE>
CONSTRUCTION EXPENDITURES AND FINANCING
- ---------------------------------------
Substantially all capital expenditures relate to SPPC. A description of
construction expenditures and financing of SPPC is contained in its Quarterly
Report Form 10-Q for the period ended June 30, 1998, attached as an appendix.
Merger
- ------
As reported in Sierra Pacific Resources' report on Form 8-K dated July 7,
1998, the Company and Nevada Power filed a joint merger application with the
Public Utilities Commission of Nevada for approval of their proposed merger.
In the filing, Nevada Power and Sierra Pacific propose selling their
generating plants if the merger is completed. Capital raised from the sale will
be reinvested primarily in new transmission and distribution facilities or used
to reduce outstanding capital.
Through June 30, 1998, the Company had incurred a total of $4.8 million in
costs to effect the merger. $4.3 million of the costs incurred have been
capitalized and the balance expensed during the period.
See the Form 8-K for additional details relating to the merger application
filing.
10
<PAGE>
PART II
-------
ITEM 1. LEGAL PROCEEDINGS
Although the Company is involved in 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Company held its 1997 Annual Meeting of Shareholders on May 18, 1998.
b) 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.
c) Re-elected to the Company's Board of Directors were:
Malyn K. Malquist
Votes For: 26,279,307
Votes Withheld: 245,677
James R. Donnelley
Votes For: 26,291,036
Votes Withheld: 233,948
James L. Murphy
Votes For: 26,279,954
Votes Withheld: 245,029
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed with this Form 10-Q:
(15) Letter of independent accountants acknowledging awareness
regarding unaudited interim financial information of the Company.
(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,
1998, for Sierra Pacific Resources, and is qualified in its
entirety by reference to such financial statements.
(b) Reports on Form 8-K:
Filed April 30, 1998 Item 5, Other Events, and Item 7, Financial Statements
and Exhibits.
Exhibit 2.1
Agreement and plan of merger by and among Nevada Power Company, Sierra
Pacific Resources, Desert Merger Sub, Inc. and Lake Merger Sub, Inc. dated
as of April 29, 1998.
Exhibit 99.1
Submission of matters to a vote of security holders. Press Release dated
April 30, 1998 of Nevada Power Company
11
<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 13, 1998 By: /s/ Mark A. Ruelle
-------------------------------- ------------------------------
Mark A. Ruelle
Senior Vice President
Treasurer
Chief Financial Officer
(Principal Financial Officer)
(Principal Accounting Officer)
12
<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, 1998
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)
(702) 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, 1998
Common Stock, $3.75 par value 1,000 Shares
================================================================================
<PAGE>
SIERRA PACIFIC POWER COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
------------------------------
PAGE
----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Report of Independent Accountants........................................................3
Condensed Consolidated Balance Sheets - June 30, 1998 and
December 31, 1997...................................................................4
Condensed Consolidated Statements of Income - Three Months and Six Months
Ended June 30, 1998 and 1997........................................................5
Condensed Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1998 and 1997........................................................6
Notes to Condensed Consolidated Financial Statements.....................................7
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................................................................8
<CAPTION>
PART II - OTHER INFORMATION
---------------------------
<S> <C>
ITEM 1. Legal Proceedings.......................................................................22
ITEM 5. Other Information.......................................................................22
ITEM 6. Exhibits and Reports on Form 8-K........................................................22
Signature Page.....................................................................................23
Appendix...........................................................................................25
</TABLE>
2
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholder of
Sierra Pacific Power Company
Reno, Nevada
We have reviewed the accompanying condensed consolidated balance sheet of Sierra
Pacific Power Company and subsidiaries as of June 30, 1998, and the related
condensed consolidated statements of income and cash flows for the three-month
and six-month periods ended June 30, 1998 and 1997. These financial statements
are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet and consolidated statement of
capitalization of Sierra Pacific Power Company and subsidiaries as of December
31, 1997, and the related consolidated statements of income, common
shareholder's equity, and cash flows for the year then ended (not presented
herein); and in our report dated January 30, 1998, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1997, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Reno, Nevada
August 13, 1998
3
<PAGE>
SIERRA PACIFIC POWER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Utility Plant at Original Cost:
Plant in service $2,151,055 $2,063,269
Less: accumulated provision for depreciation 695,737 664,490
---------- ----------
1,455,318 1,398,779
Construction work-in-progress 168,439 202,036
---------- ----------
1,623,757 1,600,815
---------- ----------
Investments in subsidiaries and other property, net 31,099 26,791
---------- ----------
Current Assets:
Cash and cash equivalents 7,443 6,920
Accounts receivable less provision for uncollectible accounts:
$1,424 -1998 and $1,704 -1997 83,973 104,926
Materials, supplies and fuel, at average cost 26,126 25,255
Other 3,762 2,572
---------- ----------
121,304 139,673
---------- ----------
Deferred Charges:
Regulatory tax asset 66,454 66,563
Other regulatory assets 62,509 63,476
Other 16,586 14,924
---------- ----------
145,549 144,963
---------- ----------
$1,921,709 $1,912,242
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholder's equity $ 644,726 $ 639,556
Preferred stock 73,115 73,115
Preferred stock subject to mandatory redemption:
Company-obligated mandatorily redeemable preferred securities of the
Company's subsidiary Sierra Pacific Power Capital I, holding
solely $50 million principal amount of 8.6% junior
subordinated debentures of the Company, due 2036 48,500 48,500
Long-term debt 601,712 606,889
---------- ----------
1,368,053 1,368,060
---------- ----------
Current Liabilities:
Short-term borrowings 88,400 75,000
Current maturities of long-term debt and preferred stock 461 454
Accounts payable 57,717 63,088
Accrued interest 5,790 6,394
Dividends declared 19,365 19,365
Accrued salaries and benefits 13,502 14,978
Other current liabilities 24,953 19,209
---------- ----------
210,188 198,488
---------- ----------
Deferred Credits:
Accumulated deferred federal income taxes 162,964 162,627
Accumulated deferred investment tax credit 38,890 39,873
Regulatory tax liability 39,725 40,767
Accrued Retirement Benefits 39,398 37,456
Customer advances for construction 33,064 38,478
Other 29,427 26,493
---------- ----------
343,468 345,694
---------- ----------
$1,921,709 $1,912,242
========== ==========
</TABLE>
4
<PAGE>
SIERRA PACIFIC POWER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE-MONTHS ENDED SIX-MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $135,169 $130,603 $277,308 $265,258
Gas 22,112 11,803 53,478 39,980
Water 11,862 12,411 21,079 21,437
---------- ---------- ---------- ----------
169,143 154,817 351,865 326,675
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Operation:
Purchased power 35,377 29,600 73,752 61,478
Fuel for power generation 27,447 26,838 51,327 49,645
Gas purchased for resale 13,510 5,545 32,841 20,337
Other 29,092 30,546 57,920 61,673
Maintenance 6,007 5,428 10,703 11,477
Depreciation and amortization 16,672 15,447 33,593 30,825
Taxes:
Income taxes 8,742 10,068 21,402 22,911
Other than income 4,988 4,708 9,881 9,400
---------- ---------- ---------- ----------
141,835 128,180 291,419 267,746
---------- ---------- ---------- ----------
OPERATING INCOME 27,308 26,637 60,446 58,929
---------- ---------- ---------- ----------
OTHER INCOME:
Allowance for other funds used during construction 1,155 1,494 2,126 2,928
Other income - net (275) 309 (153) 562
---------- ---------- ---------- ----------
880 1,803 1,973 3,490
---------- ---------- ---------- ----------
Total Income 28,188 28,440 62,419 62,419
---------- ---------- ---------- ----------
INTEREST CHARGES:
Long-term debt 9,720 10,084 19,487 20,030
Other 1,759 1,162 3,668 1,962
Allowance for borrowed funds used during construction
and capitalized interest (2,039) (1,186) (3,721) (2,354)
---------- ---------- ---------- ----------
9,440 10,060 19,434 19,638
---------- ---------- ---------- ----------
INCOME BEFORE OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES 18,748 18,380 42,985 42,781
Preferred dividend requirements of Company-obligated
mandatorily redeemable preferred securities (1,043) (1,043) (2,086) (2,086)
---------- ---------- ---------- ----------
INCOME BEFORE PREFERRED DIVIDENDS 17,705 17,337 40,899 40,695
Preferred dividend requirements (1,365) (1,365) (2,730) (2,730)
---------- ---------- ---------- ----------
INCOME APPLICABLE TO COMMON STOCK $ 16,340 $ 15,972 $ 38,169 $ 37,965
========== ========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
<PAGE>
SIERRA PACIFIC POWER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------------
1998 1997
-------------- ---------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before preferred dividends $ 40,899 $ 40,695
Non-cash items included in income:
Depreciation and amortization 33,593 30,825
Deferred taxes and deferred investment tax credit (1,579) (2,509)
AFUDC and capitalized interest (5,846) (5,282)
Early retirement and severance amortization 2,109 2,446
Other non-cash 1,427 (1,706)
Changes in certain assets and liabilities:
Accounts receivable 16,570 13,700
Materials, supplies and fuel (871) 2,551
Other current assets (1,190) (703)
Accounts payable (5,371) (13,524)
Other current liabilities 3,664 116
Other - net 36 (2,173)
----------- ------------
Net Cash Flows From Operating Activities 83,441 64,436
----------- ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant (66,454) (68,095)
Net customer refunds and contributions in aid construction 10,319 9,889
----------- ------------
Net cash used for utility plant (56,135) (58,206)
----------- ------------
(Investments in) disposal of subsidiaries and other property - net 98 (371)
----------- ------------
Net Cash Used In Investing Activities (56,037) (58,577)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 14,037 34,349
Reduction of long-term debt (5,188) (15,215)
Investment from the parent company 5,000 10,000
Dividends paid (40,730) (36,730)
----------- ------------
Net Cash Used In Financing Activities (26,881) (7,596)
----------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS 523 (1,737)
Beginning balance in Cash and Cash Equivalents 6,920 890
----------- ------------
Ending balance in Cash and Cash Equivalents $ 7,443 $ (847)
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During Period For:
Interest $ 25,178 $ 23,119
Income Taxes $ 36,588 $ 54,575
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE 1. MANAGEMENT'S STATEMENT
- ---------------------------------
In the opinion of the management of Sierra Pacific Power Company, hereafter
known as the Company, 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, 1997. Deloitte & Touche LLP, the
Company's independent accountants, have performed a review of the unaudited
consolidated financial statements, and their report has been included in this
report.
The results of operations for the three and six month periods ended June 30,
1998 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. All significant intercompany transactions
and balances have been eliminated in consolidation.
Reclassifications
-----------------
Certain items previously reported for years prior to 1998 have been
reclassified to conform with the current year's presentation. Net income and
shareholder's equity were not affected by these reclassifications.
NOTE 2. RECENT PRONOUNCEMENTS OF THE FASB
- -------------------------------------------
On June 30, 1997, the FASB issued SFAS 131 entitled "Disclosure About
Segments of an Enterprise and Related Information". This statement establishes
additional standards for segment reporting in the financial statements and is
effective for fiscal years beginning after December 15, 1997. Management has
concluded that the Company will continue to define its primary operating
segments as electric, gas and water. The Company expects to provide the
additional disclosure requirements of this statement in its Annual Report on
Form 10-K for the year ended December 31, 1998.
In February 1998, the FASB issued SFAS 132 entitled "Employers' Disclosures
about Pensions and Other Postretirement Benefits". This statement revises
employers' disclosures about pension and other postretirement benefit plans for
fiscal years beginning after December 15, 1997. The statement does not change
the measurement or recognition of those plans. Therefore, management believes
this statement will not have a material impact on the financial statements of
the Company.
NOTE 3. LONG TERM DEBT
- ------------------------
The Company redeemed $ 5 million of 8.65% medium term notes on June 18,
1998.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
WHEN USED ANYWHERE IN THIS FORM 10-Q, OR THE FORM 10-Q OF SIERRA PACIFIC
RESOURCES AND IN FUTURE FILINGS BY SIERRA PACIFIC RESOURCES OR SIERRA PACIFIC
POWER COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION, IN SIERRA PACIFIC
RESOURCES OR SIERRA PACIFIC POWER COMPANY'S PRESS RELEASES AND IN ORAL
STATEMENTS MADE WITH THE APPROVAL OF AN AUTHORIZED EXECUTIVE OFFICER, THE WORDS
OR PHRASES "WILL LIKELY RESULT", "ARE EXPECTED TO", "WILL CONTINUE", "IS
ANTICIPATED", "ESTIMATED", "PROJECT", OR "OUTLOOK" OR SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT
TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM HISTORICAL EARNINGS AND THOSE PRESENTLY ANTICIPATED OR
PROJECTED. SIERRA PACIFIC POWER COMPANY WISHES TO CAUTION READERS NOT TO PLACE
UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF
THE DATE MADE. SIERRA PACIFIC POWER COMPANY WISHES TO ADVISE READERS THAT
VARIOUS FACTORS DESCRIBED IN THESE FORMS 10-Q COULD CAUSE SIERRA PACIFIC POWER
COMPANY'S ACTUAL RESULTS FOR FUTURE PERIODS TO DIFFER MATERIALLY FROM ANY
OPINIONS OR STATEMENTS EXPRESSED WITH RESPECT TO FUTURE PERIODS IN ANY CURRENT
STATEMENTS. SIERRA PACIFIC POWER COMPANY SPECIFICALLY DECLINES ANY OBLIGATION
TO PUBLICLY RELEASE THE RESULT OF ANY REVISIONS WHICH MAY BE MADE TO ANY
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF
SUCH STATEMENTS OR TO REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED
EVENTS.
The Company's business is subject to seasonal fluctuations based upon
weather patterns. Significant portions of the Company's net revenues and
profits are typically realized during the first and third quarters of the
Company's year, which includes the peak heating and cooling periods. Because of
the seasonality of the Company's business, results for any quarter are not
necessarily indicative of the results that may be achieved for the full fiscal
year.
8
<PAGE>
RESULTS OF OPERATIONS
---------------------
Electric Operations
- -------------------
The components of gross margin for electric operations were (dollars in
thousands):
<TABLE>
<CAPTION>
Three Months
Ended June 30,
-------------------------
Increase Increase
1998 1997 (Decrease) (Decrease) %
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Electric Operating Revenues (dollars):
Residential $ 37,117 $ 35,863 $ 1,254 3.5%
Commercial 42,068 43,736 (1,668) -3.8%
Industrial 45,758 42,566 3,192 7.5%
---------- ---------- -------- ----
Electric Revenues before Other 124,943 122,165 2,778 2.3%
Other 10,226 8,438 1,788 21.2%
---------- ---------- -------- ----
Total Revenues 135,169 130,603 4,566 3.5%
Electric Energy Costs:
Purchased Power 35,377 29,600 5,777 19.5%
Fuel for Power Generation 27,447 26,838 609 2.3%
---------- ---------- -------- ----
Total Energy Costs 62,824 56,438 6,386 11.3%
---------- ---------- -------- ----
Gross Electric Margin $ 72,345 $ 74,165 $ (1,820) -2.5%
========== ========== ======== ====
Electric Operating Revenues Megawatt-Hours (MWH):
Total MWH Sales 2,225,182 1,948,035 277,147 14.2%
Less: Other Sales MWH 279,483 107,240 172,243 160.6%
---------- ---------- -------- ----
Electric Sales before Other
Sales MWH 1,945,699 1,840,795 104,904 5.7%
---------- ---------- -------- ----
Average Revenues per MWH $ 64.21 $ 66.37 $ (2.16) -3.2%
</TABLE>
Residential customer revenues increased due to an increase in customers of 3.
0% over the same period in the prior year.
Commercial revenues were lower in 1998 due to a decrease in customer use.
Industrial revenues increased as a result of higher use per customer
(primarily in the mining segment) which was partially offset by an adjustment
that increased revenues by $1.9 million in June 1997 for the reversal of a prior
year accrual.
Other revenues increased primarily because of an increase in resale sales
due to increased focus on this business opportunity.
9
<PAGE>
Purchased power energy costs in the preceding table consisted of the
following total MWHs and average electric costs:
<TABLE>
<CAPTION>
Three Months
Ended June 30,
----------------------------
Increase/ Increase/
1998 1997 (Decrease) (Decrease)%
-------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Purchased Power MWH 1,168,352 852,712 315,640 37.0%
Average cost per MWH of
Purchased Power $ 30.28 $ 34.71 $ (4.43) -12.8%
</TABLE>
The total cost of purchased power increased because of an increase in the
volume purchased due to system load growth and additional resale sales in 1998.
The increase in the cost of purchased power was partially offset by a reduction
in the cost per MWH due to an increase in the amount of non-firm purchases
relative to firm purchases. Secondary purchases were considerably less expensive
per MWH.
Fuel for power generation provided the total megawatt-hours (MWHs) and
average electric costs are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months
Ended June 30
-------------------------------
Increase/ Increase/
1998 1997 (Decrease) (Decrease)%
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Fuel for Power Generation $ 27,447 $ 26,838 $ 609 2.3%
Power Generated MWH 1,223,265 1,231,469 (8,204) -0.7%
Average cost per MWH of
generation fuel $ 22.44 $ 21.79 $ (0.65) 3.0%
</TABLE>
The increase in the cost of fuel for power generation in the second
quarter of 1998 over the prior year was the result of higher fuel costs. The
cost of gas used for generation increased approximately 12.8% over the prior
year. Also, inexpensive coal purchased on the spot market during the first three
months of 1998 was not available to reduce the total cost of fuel for generation
during the second quarter of 1998.
10
<PAGE>
The components of gross margin for electric operations were
(dollars in thousands):
<TABLE>
<CAPTION>
Six Months
Ended June 30,
------------------------------------------
Increase Increase
1998 1997 (Decrease) (Decrease) %
------------------ ------------------ -------------- --------------
<S> <C> <C> <C> <C>
Electric Operating Revenues (dollars):
Residential $83,643 $80,999 $2,644 3.3%
Commercial 83,870 84,319 (449) -0.5%
Industrial 89,750 84,286 5,464 6.5%
------------------ ------------------ -------------- -----------
Electric Revenues before Other 257,263 249,604 7,659 3.1%
Other 20,045 15,654 4,391 28.1%
------------------ ------------------ -------------- -----------
Total Revenues 277,308 265,258 12,050 4.5%
Electric Energy Costs:
Purchased Power 73,752 61,478 12,274 20.0%
Fuel for Power Generation 51,327 49,645 1,682 3.4%
------------------ ------------------ -------------- -----------
Total Energy Costs 125,079 111,123 13,956 12.6%
------------------ ------------------ -------------- -----------
Gross Electric Margin $152,229 $154,135 ($1,906) -1.2%
================== ================== ============== ===========
Electric Operating Revenues Megawatt-Hours (MWH):
Total MWH Sales 4,501,561 3,897,759 603,802 15.5%
Less: Other Sales MWH 531,347 210,235 321,112 152.7%
------------------ ------------------ -------------- -----------
Electric Sales before Other
Sales MWH 3,970,214 3,687,524 282,690 7.7%
------------------ ------------------ -------------- -----------
Average Revenues per MWH $64.80 $67.69 ($2.89) -4.3%
</TABLE>
Residential revenue increased due to an overall increase in customers of
3.00%. The increases in revenue was partially offset by a rate reduction that
went into effect in March 1997.
Commercial revenues were lower because of a decrease in customer use which
was partially offset by an increase in customers.
Industrial revenues increased because of higher use per customer. The
increase was in part offset by both an increase of $1.9 million in June 1997
revenues (the reversal of a prior year accrual) and a decrease in effective
rates beginning in March 1997.
Other revenues increased primarily due to an increase in wholesale sales and
additional facilities surcharge revenue because of an increased focus on
wholesale business and opportunities to provide facilities to industrial
customers.
11
<PAGE>
Purchased power energy costs in the preceding table consisted of the
following total MWHs and average electric costs:
<TABLE>
<CAPTION>
Six Months
Ended June 30,
----------------------------
Increase/ Increase/
1998 1997 (Decrease) (Decrease)%
------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Purchased Power MWH 2,356,554 1,786,442 570,112 31.9%
Average cost per MWH of
Purchased Power $ 31.30 $ 34.41 $ (3.11) -9.0%
</TABLE>
Purchased power costs increased because of an increase in the volume of
purchased power due to system load growth and additional resale sales in 1998.
The increase in the cost of purchased power was partially offset by a reduction
in the cost per MWH due to an increase in the amount of secondary energy
purchases relative to firm purchases in 1998. Secondary energy purchases were
considerably less expensive per MWH.
Fuel for power generation provided the following total megawatt-hours and
average electric costs (dollars in thousands):
<TABLE>
<CAPTION>
Six Months
Ended June 30
----------------------------
Increase/ Increase/
1998 1997 (Decrease) (Decrease)%
------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Fuel for Power Generation $ 51,327 $ 49,645 $ 1,682 3.4%
Power Generated MWH 2,453,018 2,341,984 111,034 4.7%
Average cost per MWH of
generation fuel $ 20.92 $ 21.20 $ (0.28) -1.3%
</TABLE>
The cost of fuel for generation for the six month period ended June 30,
1998 was higher than the comparable period in 1997 because of increased
generation requirements needed to meet continued customer growth. The increase
in the cost of fuel for generation was partially offset by a reduction in the
cost per MWH due to the availability of less expensive spot market coal
available during the first quarter of 1998.
12
<PAGE>
GAS OPERATIONS
- --------------
The components of gross margin for gas operations were (dollars in thousands):
<TABLE>
<CAPTION>
Three Months
Ended June 30,
--------------
Increase/ Increase/
1998 1997 (Decrease) (Decrease)%
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Gas Operating Revenues:
Residential $ 8,457 $ 5,822 $ 2,635 45.3%
Commercial 4,458 3,272 1,186 36.2%
Industrial 2,721 2,455 266 10.8%
Miscellaneous 312 247 65 26.3%
------- ------- ------- ------
Gas revenues before wholesale sales 15,948 11,796 4,152 35.2%
Wholesale sales 6,164 7 6,157
Total revenues 22,112 11,803 10,309 87.3%
------- ------- ------- ------
Gas Energy Costs:
Wholesale sale purchases 5,702 7 5,695
Other gas purchases 7,808 5,538 2,270 41.0%
Total gas purchased for resale 13,510 5,545 7,965 143.6%
------- ------- ------- ------
Gross Gas Margin $ 8,602 $ 6,258 $ 2,344 37.5%
======= ======= ======= ======
</TABLE>
Gas operating revenues above consisted of the following sales in decatherms and
average gas revenues:
<TABLE>
<CAPTION>
Three Months
Ended June 30,
--------------
Increase Increase
1998 1997 (Decrease) (Decrease)%
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Gas Operating Revenues (Decatherms):
Wholesale sales 3,346,159 5,493 3,340,666
Gas revenues before wholesale sales 2,810,977 2,053,486 757,491 36.9%
------------- ------------- ------------- --------
Total revenues 6,157,136 2,058,979 4,098,157 199.0%
------------- ------------- ------------- --------
Average Revenues per Decatherm
Wholesale sales $ 1.84 $ 1.27 $ 0.57 44.9%
Gas revenues before wholesale sales $ 5.67 $ 5.74 $ (0.07) -1.2%
</TABLE>
Wholesale sales in 1998, not present in the second quarter of 1997, reflect
continued focus on this business opportunity.
Residential, commercial and industrial revenues increased over the prior year
due to customer growth and colder weather in 1998.
13
<PAGE>
Gas energy costs consisted of the following decatherm purchases and average
gas costs:
<TABLE>
<CAPTION>
Three Months
Ended June 30,
----------------------------
Increase/ Increase/
1998 1997 (Decrease) (Decrease)%
------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Gas energy costs (decatherms):
Wholesale sale purchases 3,329,213 5,493 3,323,720
Other gas purchases 2,881,142 2,533,453 347,689 13.7%
------------ ----------- ------------- -------------
Total gas purchased for resale 6,210,355 2,538,946 3,671,409 144.6%
------------ ----------- ------------- -------------
Average cost per Decatherm
Wholesale sale purchases $ 1.71 $ 1.27 $ 0.44 34.6%
Other gas purchases $ 2.71 $ 2.19 $ 0.52 23.7%
</TABLE>
Consistent with the increase in gas sales from customer growth and colder
weather in 1998, other gas purchases (decatherms) were higher in 1998. The
average cost per decatherm was also higher because of an increase in the unit
cost of firm and spot purchases.
The components of gross margin for gas operations were (dollars in
thousands):
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------
Increase/ Increase/
1998 1997 (Decrease) (Decrease)%
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Gas Operating Revenues:
Residential $ 24,527 $ 20,792 $ 3,735 18.0%
Commercial 13,102 11,303 1,799 15.9%
Industrial 6,569 6,217 352 5.7%
Miscellaneous 647 484 163 33.7%
------------- ------------ ------------ -------------
Gas revenues before wholesale sales 44,845 38,796 6,049 15.6%
Wholesale sales 8,633 1,184 7,449 629.1%
------------- ------------ ------------ -------------
Total revenues 53,478 39,980 13,498 33.8%
------------- ------------ ------------ -------------
Gas Energy Costs:
Wholesale sale purchases 8,132 867 7,265 837.9%
Other gas purchases 24,709 19,470 5,239 26.9%
------------- ------------ ------------ -------------
Total gas purchased for resale 32,841 20,337 12,504 61.5%
------------- ------------ ------------ -------------
Gross Gas Margin $ 20,637 $ 19,643 $ 994 5.1%
============= ============ ============ =============
</TABLE>
14
<PAGE>
Gas operating revenues above consisted of the following sales in decatherms
and average gas revenues:
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-----------------------------
Increase Increase
1,998 1997 (Decrease) (Decrease) %
-------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Gas Operating Revenues (Decatherms):
Wholesale sales 4,582,449 511,872 4,070,577 795.2%
Gas revenues before wholesale sales 8,061,047 6,886,362 1,174,685 17.1%
-------------- ------------ --------------- ---------------
Total revenues 12,643,496 7,398,234 5,245,262 70.9%
-------------- ------------ --------------- ---------------
Average Revenues per Decatherm
Wholesale sales $ 1.88 $ 2.31 $ (0.43) -18.6%
Gas revenues before wholesale sales $ 5.56 $ 5.63 $ (0.07) -1.2%
</TABLE>
Residential, commercial and industrial revenues increased over the prior
year due to a 5.2% increase in customers and colder than normal weather in 1998.
The increase was partially offset by a reduction in rates in the first quarter
of 1998.
Increased wholesale sales in 1998 reflect continued focus on this business
opportunity.
Gas energy costs consisted of the following decatherm purchases and average
gas costs:
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-------------------------------
Increase/ Increase/
1998 1997 (Decrease) (Decrease)%
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Gas energy costs (decatherms):
Resale sale purchases 4,584,923 511,872 4,073,051 795.7%
Other gas purchases 8,129,377 7,202,149 927,228 12.9%
------------- ------------- ------------- ---------------
Total gas purchased for resale 12,714,300 7,714,021 5,000,279 64.8%
------------- ------------- ------------- ---------------
Average cost per Decatherm
Resale sale purchases $ 1.77 $ 1.69 $ 0.08 4.7%
Other gas purchases $ 3.04 $ 2.70 $ 0.34 12.6%
</TABLE>
Consistent with the increase in gas sales from customer growth and colder
weather in 1998, other gas purchases (decatherms) were higher in 1998. The
average cost per decatherm of all purchases was also higher because of an
increase in the unit cost of firm and spot purchases.
Water Operations
- ----------------
<TABLE>
<CAPTION>
Three Months
Ended June 30,
--------------
Increase/ Increase/
1998 1997 (Decrease) $ (Decrease) %
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Water Operating Revenues:
Sales and gross water margin $ 11,862 $ 12,411 $ (549) -4.4%
============= ============= ============= ===============
</TABLE>
15
<PAGE>
Water sales were lower in the second quarter of 1998 because of an
unusually wet spring in northern Nevada that reduced the need for irrigation.
Water sendout in gallons for the second quarter of 1998 was approximately 38%
lower than the same period in 1997. The effect of the lower usage on revenues
was partially offset by the price increase effective April 2, 1998 and by a 3.2
% increase in total customers over the prior year.
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------
Increase/ Increase/
1998 1997 (Decrease) $ (Decrease) %
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Water Operating Revenues:
Sales and gross water margin $21,079 $21,437 $ (358) -1.7%
============= ============= ============ ============
</TABLE>
Water sales for the first six months of 1998 were slightly less than the
prior year. The same factors which contributed to lower sales in the second
quarter of 1998, a wetter than normal spring offset by more customers and higher
prices, were also responsible for the decrease in sales during the first six
months.
Other Financial Information
- ---------------------------
<TABLE>
<CAPTION>
Three Months
Ended June 30,
--------------
Increase/ Increase/
1998 1997 Decrease $ Decrease %
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for other funds used
during construction $1,155 $1,494 $(339) -22.7%
Allowance for borrowed funds used
during construction 2,039 1,186 853 71.9%
------ ------ ----- ------
$3,194 $2,680 $ 514 19.2%
------ ------ ----- ------
</TABLE>
Total allowance for funds used during construction was higher in the second
quarter of 1998 over the comparable period in 1997 because of the continuing
construction of the Alturas transmission project and the Pinion Pine power
project (Pinon was completed in June 1998).
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------
Increase/ Increase/
1998 1997 Decrease $ Decrease %
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for other funds used
during construction $2,126 $2,928 $ (802) -27.4%
Allowance for borrowed funds used
during construction 3,721 2,354 1,367 58.1%
------ ------ ------ ------
$5,847 $5,282 $ 565 10.7%
------ ------ ------ ------
</TABLE>
The total allowance for funds used during construction was higher for the
first six months of 1998 over the comparable period in 1997 for the same reasons
described in the preceding second quarter 1998 discussion.
16
<PAGE>
The following table includes other items of financial information that varied
materially from the same items in the second quarter of 1997:
<TABLE>
<CAPTION>
Three Months
Ended June 30,
---------------------------
Increase/ Increase/
1998 1997 (Decrease)$ (Decrease)%
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Depreciation and amortization $16,672 $15,447 $ 1,225 7.9%
Income Taxes 8,742 10,068 (1,326) 13.2%
</TABLE>
Depreciation and amortization expense increased due to water division
additions and other customer improvements added to plant in service late in
1997.
Operating income taxes decreased due to a reclassification of interest
expense to operating income from non-operating income that lowered operating
income before income taxes and a lower effective tax rate in the 1998 period.
The following table includes other items of financial information that varied
materially from the same items in 1997:
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-------------------------
Increase/ Increase/
1998 1997 (Decrease)$ (Decrease)%
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Other operating expense $57,920 $61,673 $(3,753) -6.1%
Depreciation and amortization 33,593 30,825 2,768 9.0%
Income Taxes 21,402 22,911 (1,509) 6.6%
Interest Charges-Other 3,668 1,962 1,706 87.0%
</TABLE>
Other operating expense decreased due to higher stock compensation plan
costs and post-retirement benefits experienced in 1997. Also, 1998 costs were
lower because of the water rate case decision which directed the Company to
capitalize certain costs of approximately $0.6 million which were previously
expensed.
Depreciation and amortization expense was higher because of water
division additions and other customer improvements added to plant in service
late in 1997.
Operating income taxes were lower in 1998 due to lower operating income
before income taxes and a reduction in the effective tax rate. A
reclassification in 1998 of interest expense from non-operating income to
operating income contributed to the reduction of operating income.
Interest charges - other - increased because of higher short-term debt
balances in 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------
During the first six months of 1998, the Company earned $40.9 million in
income before preferred dividends, declared $2.7 million in dividends to
holders of its preferred stock, and declared $38 million in common stock
dividends to its parent, Sierra Pacific Resources.
17
<PAGE>
CONSTRUCTION EXPENDITURES AND FINANCING
- ---------------------------------------
The Company's construction program and capital requirements for the period
1998-2002 were originally discussed in the Company's 1997 Annual Report on Form
10-K. Of the amount projected for 1998, as of June 30, 1998, $56.1 million
(37.1%) had been spent. Of this amount, approximately 83.9% was provided by
internally-generated funds.
ALTURAS INTERTIE
- ----------------
As of June 30, 1998, the Company had spent approximately $100 million on
the Alturas Intertie transmission line. The current estimated total
construction cost, including AFUDC, is approximately $159 million. The increase
in the estimated construction cost of approximately $8.4 million over the amount
previously reported is due to higher costs associated with regulatory compliance
as well as enhanced construction techniques which are expected to expedite
completion of the project. Construction of the project is expected to be
completed in late 1998. For further discussion of major projects, refer to the
Company's 1997 Annual Report on Form 10-K.
PINON PINE
- ----------
On June 17, 1998, the Company completed the construction of the coal
gasifier portion of the Pinon Pine Power Project. The Company expects that
based on the in-service date, the performance warranty requirements, as
described in the Company's Annual Report on Form 10-K for 1997, will not be met
by December 31, 1998. Consequently, the Company had a reserve of $1.8 million
as of June 30, 1998 which represents the entire contingency for the year. Also,
because the project will not meet contracted performance levels, the Company may
be required to refinance General Electric Capital Corporation's (GECC)
investment in Pinon Pine Company LLC. If the Company is required to buyout
GECC, it is estimated that the additional investment required would be
approximately $30 million. For more information concerning the Pinon Pine Power
project see the Company's Annual Report on Form 10-K for 1997.
REGULATORY MATTERS
- ------------------
NEVADA
As a result of the rate plan referred to in the Company's Form 10-K for
1997, the Company made its first earnings sharing filing on April 29, 1998. For
its electric division customers, the Company recommended a refund of $7.321
million based upon calendar year 1997 results. The Company also proposed a
refund of $1.694 million to its gas division customers for results of the same
period. The Company expects the outcome of the filing within 180 days of the
filing date.
As mentioned in its 1997 Form 10-K, the Company has requested permission
from the Public Utilities Commission of Nevada (PUCN) to continue to serve
customers in the Truckee-Carson Irrigation District leasehold area upon
expiration of the leasehold agreement (June 1998). On June 26, 1998, the
Commission issued its interim order requiring the Company to continue serving
the area until a final order is issued. The final order is expected by the fall
of 1998.
On July 1, 1998, the Company filed its electric resource plan with the
PUCN. The plan discusses generation and transmission alternatives that would
supply Northern Nevada with electricity for the period 1998 through 2017. The
Company expects the PUCN to rule on this filing by November 12, 1998.
As reported in Sierra Pacific Resources (SPR) report on Form 8-K filed on
July 7, 1998, SPR, the parent company of Sierra Pacific Power Company, filed
with the PUCN a joint application with Nevada Power Company for an order
authorizing a merger. Among other issues in the PUCN merger application, the
filing addresses:
. Benefits of the merger to employees and stockholders.
. The impact of the proposed merger on competition and electricity prices.
. Operation of the electric transmission system to ensure competing energy
suppliers have equal access to customers.
A decision from the PUCN is expected within 180 days of the filing date.
18
<PAGE>
With regard to Nevada Assembly Bill 366 (electric and gas utility
restructuring) previously discussed in the Company's 1997 Form 10-K, the PUCN
opened several dockets to investigate issues relating to restructuring:
Docket 97-8001 is the general electric restructuring docket, covering
unbundled electric services, potentially competitive services, licensing,
non-price terms and conditions for distribution service, market power,
stranded costs and provider of last resort. The PUCN has issued several
draft rules for comment. An independent scheduling agent (ISA) is being
considered for the state to mitigate market power issues.
Docket 97-11018 was opened for unbundling of Sierra's costs into the eight
unbundled services and to delineate transmission and distribution
facilities applying FERC's seven criteria outlined in its Order 888.
Docket 97-5034 establishes rules for both electric and gas utilities
related to sharing of corporate services, employee transfers between
affiliates, non-discriminatory treatment of affiliates and non-affiliates,
audits, sharing of name and logo and penalties for violation of these rules
for both electric and gas utilities.
Docket 97-8002 was opened to investigate issues relating to compliance with
Nevada AB 366 for natural gas issues. The docket addresses unbundling of
services, potentially competitive designation of services, licensing, and
alternative plans of regulation.
In early 1998 the PUCN issued "OII Number Two" requesting comments on four
subject areas: which services should become "potentially competitive";
guidelines for distribution open access tariffs; consumer protection; and
licensing of alternative sellers. Comments have been filed and workshops have
been held on these matters:
Potentially Competitive Services
--------------------------------
On June 8, 1998 the PUCN issued an order determining that billing, metering,
and customer services should be declared "potentially competitive" effective
December 31, 1999. Generation services were already deemed to be potentially
competitive by AB 366. On June 23, 1998 the Company and Nevada Power filed
Petitions for Reconsideration, arguing that the PUCN did not follow the proper
administrative procedures. On July 15, 1998 the PUCN granted the Company's
petition to reconsider this Order. The PUCN agreed that an application should
be filed and a hearing should be held. The PUCN set a date of August 26, 1998
for the Company and Nevada Power to file applications for the services the
utilities wish to be declared potentially competitive. If either the Company
or Nevada Power do not file applications the PUCN Staff will file an
application on September 2, 1998.
Distribution Open Access Tariffs
--------------------------------
On June 4, 1998 the PUCN voted to issue a proposed rule on distribution
tariffs. This rule establishes the open access obligations of electric
distribution utilities. Electric distribution utilities will be required to
file tariffs in compliance with guidelines established in this proposed rule.
A workshop to discuss the proposed rule will be held later in the year.
Licensing of Alternative Sellers and Consumer Protection Requirements for
-------------------------------------------------------------------------
Alternative Sellers
-------------------
After soliciting comments and holding workshops, on June 26, 1998 the PUCN
issued proposed rules on licensing of alternative sellers and consumer
protection requirements for alternative sellers. These rules provide the
licensing and reporting requirements of alternative sellers and establish the
conduct required when alternative sellers provide generation or aggregation
services to residential and small commercial customers. Workshops will be
scheduled on these proposed rules later in the year.
On April 27, 1998 the PUCN issued OII Number Three which requested comments
and scheduled workshops in three areas: Load Pockets and Market Power,
Transition Costs, and Provider of Last Resort. Comments and initial workshops
are completed.
Load Pockets and Market Power
-----------------------------
As a result of the workshop the PUCN asked the parties to form a working group
to further explore the Independent Scheduling Agent (ISA) concept. The
working group is discussing ISA models presented by Enron, the utilities, and
19
<PAGE>
other parties. The group is also discussing a series of questions provided
by the PUCN. A working group report on ISA issues is to be filed by August
14, 1998. PUCN staff will file a report on load pocket mitigation by August
21, 1998. A third report, dealing with generation aggregation issues, is to
be filed by September 2, 1998. Hearings will be held in September 1998.
Transition Costs
----------------
The Company filed an extensive response to transition cost questions including
a "white paper" which addressed many aspects of transition costs. The PUCN
established a working group to resolve various issues that include mitigation
standards; filing requirements; tax and accounting issues; and recovery
mechanisms. The Company and Nevada Power are developing a proposal for
transition cost issues which will be discussed with the working group in
August 1998.
Provider of Last Resort
-----------------------
The Provider of Last Resort (PLR) will provide electric service to customers
who do not choose and customers who are not able to find service with an
alternative seller. In its workshop on PLR, the PUCN explored three different
scenarios for providing service to such customers. One option is for an
affiliate of the distribution company to be the PLR. The second option is a
balloting process where customers would choose a supplier or be assigned by
the PUCN to a supplier. The third option is a process where alternative
sellers bid to provide PLR service to blocks of customers. The Company has
provided comments on how each proposal could be implemented. Additional
workshops and a proposed regulation are expected later in the year.
Gas Restructuring
-----------------
In order to comply with Nevada AB 366 for natural gas deregulation, the PUCN
is developing new natural gas rules. The PUCN is following similar processes
as in electric restructuring to develop new rules. To date the PUCN has
developed a list of unbundled services and has issued a proposed rule for
declaring services potentially competitive. This rule, which is expected to
be adopted in the near future, will provide the process to be followed to
declare services to be potentially competitive. In the third quarter 1998,
the Company will begin the process of segregating costs into the unbundled
services. The PUCN has also obtained comments, developed a proposed rule, and
held workshops on licensing requirements for alternative sellers.
CALIFORNIA
As a result of the transition decision mentioned in the Company's Form 10-K
for 1997, the Company filed three compliance filings with the CPUC in early
1998. 1) A filing reflecting proposed tariff changes to implement direct
access; 2) a filing reflecting proposed unbundled rates; and 3) a proposal to
implement three billing options and revenue cycle unbundling (metering, meter
reading and billing) credits. In addition, the Company also filed on the same
date a plan for compliance with the affiliate transaction rules.
On June 24, 1998, the Company filed for approval to issue revenue reduction
bonds, as provided for in AB 1890 (the bill restructuring California's electric
services industry), to compensate the Company for the 10% rate reduction
provided beginning January 1, 1998. The company is requesting approval to issue
up to $ 25 million in revenue reduction bonds.
On June 30, 1998, the Company requested an extension for California market
valuation of generation assets. The Company requested an extension until July
1, 1999 (or, one year), to file its proposed mechanism for establishing the
market value of its generation assets. The Transition Plan order had required
the Company to file this proposal on July 1, 1998. On July 6, 1998 the CPUC
granted a 90-day extension for California market valuation.
FERC
On May 22, 1998, the Company and several other parties filed a "Petition
for Review" with the D.C. Court of Appeals requesting review of the FERC's
decisions in the Pacific Gas Transmission (PGT) rate case. The FERC had
previously denied the Company's protest of a settlement in PGT's last rate case
and the Company's request for rehearing.
20
<PAGE>
Updating the Company's original discussion in its 1997 Report on Form 10-K,
on July 9, 1998, the Administrative Law Judge (ALJ) certified the settlement
reached in the Import Limit Case (Dockets ER97-3593 and ER97-4462). The
settlement resolves all issues in these cases and provides for a continuation of
the current import limit allocation until the Alturas inter-tie is in service.
At that time and until February 28, 2001, Tahoe Donner Public Utility District
(TDPUD) will receive 30 MW of import capability. After 2/28/01, allocation of
import capacity will be determined by the FERC based on the results of the
Company's 1998 PUCN resource plan and a subsequent filing with FERC in 1999. The
settlement now goes to the FERC for approval. TCID has contested the settlement;
however, the ALJ certified the settlement since the opposition by TCID does not
raise issues of material fact.
ENVIRONMENTAL
- -------------
On Tuesday, July 7, 1998, a phase shifter at the Company's Fort Churchill
generation plant experienced an internal failure causing an oil spill of
approximately 10,000 gallons. The Company is now conducting technical studies
to determine remediation costs. However, the insurance policy covering the
affected equipment provides for both the repair of the facility as well as any
remediation costs. The policy deductible is $150,000 and as of June 30, 1998,
the Company had not yet reserved this amount because the event occurred after
June 30, 1998.
MERGER
- ------
As reported in Sierra Pacific Resources report on Form 8-K, the parent
company of Sierra Pacific Power Company, dated July 7, 1998, SPR and Nevada
Power filed a joint merger application with the Public Utilities Commission of
Nevada for approval of a proposed merger.
In the filing, Nevada Power and Sierra Pacific propose selling their
generation plants if the merger is completed. Capital raised from the sale will
be reinvested primarily in new transmission and distribution facilities.
Through June 30, 1998, the Company had incurred a total of $4.8 in costs to
effect the merger. $4.3 million of the external costs incurred have been
capitalized and the balance of internal costs expensed during the period.
21
<PAGE>
PART II
- -------
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed with this Form 10-Q.
(15) Letter of independent accountants acknowledging awareness
regarding interim financial information of the Company.
(27) The Financial Data Schedule containing summary financial
information extracted from the consolidated financial statements
filed on Form 10-Q for the six month period ended June 30, 1998,
for Sierra Pacific Power Company and is qualified in its entirety
by reference to such financial statements.
(b) Reports on Form 8-K
22
<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 Power Company
---------------------------------
(Registrant)
Date: August 13, 1998 By /s/ Mark A. Ruelle
------------------------ --------------------------------------
Mark A. Ruelle
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 13, 1998 By /s/ Mary O. Simmons
------------------------ --------------------------------------
Mary O. Simmons
Controller
(Principal Accounting Officer)
23
<PAGE>
Exhibit 15 to the June 30, 1998 Form 10-Q of Sierra Pacific Resources
Sierra Pacific Resources
6100 Neil Road
Reno, Nevada 89511
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Sierra Pacific Resources and subsidiaries for the periods ended
June 30, 1998 and 1997, as indicated in our report dated August 13, 1998;
because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, is
incorporated by reference in Registration Statement No. 333-4374 on Form S-3 and
Registration Statement Nos. 2-92454, 33-87646, and 33-48152 on Forms S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Reno, Nevada
August 13, 1998
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,623,757
<OTHER-PROPERTY-AND-INVEST> 55,696
<TOTAL-CURRENT-ASSETS> 124,302
<TOTAL-DEFERRED-CHARGES> 145,792
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,949,547
<COMMON> 30,957
<CAPITAL-SURPLUS-PAID-IN> 456,101
<RETAINED-EARNINGS> 164,607
<TOTAL-COMMON-STOCKHOLDERS-EQ> 651,665
48,500
73,115
<LONG-TERM-DEBT-NET> 611,936
<SHORT-TERM-NOTES> 88,400
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 10,573
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 465,358
<TOT-CAPITALIZATION-AND-LIAB> 1,949,547
<GROSS-OPERATING-REVENUE> 356,114
<INCOME-TAX-EXPENSE> 20,699
<OTHER-OPERATING-EXPENSES> 275,601
<TOTAL-OPERATING-EXPENSES> 296,300
<OPERATING-INCOME-LOSS> 59,814
<OTHER-INCOME-NET> 2,124
<INCOME-BEFORE-INTEREST-EXPEN> 61,938
<TOTAL-INTEREST-EXPENSE> 20,266
<NET-INCOME> 41,672
2,730
<EARNINGS-AVAILABLE-FOR-COMM> 38,856
<COMMON-STOCK-DIVIDENDS> 20,120
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 80,508
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
</TABLE>
