<PAGE>
PROSPECTUS SUPPLEMENT FILED PURSUANT TO RULE 424(b)(5)
(TO PROSPECTUS DATED DECEMBER 20, 1996) REGISTRATION NO. 333-17041
$35,000,000
SIERRA PACIFIC POWER COMPANY
COLLATERALIZED MEDIUM-TERM NOTES, SERIES D
DUE FROM NINE MONTHS TO 40 YEARS
FROM DATE OF ISSUE
---------------------
Sierra Pacific Power Company (the "Company") may offer from time to time its
Collateralized Medium-Term Notes, Series D, due from nine months to 40 years
from the date of issue as selected by the purchaser and agreed to by the
Company, at an initial aggregate public offering price of up to $35,000,000. See
"Description of Notes" and "Supplemental Plan of Distribution."
(CONTINUED ON NEXT PAGE)
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
<S> <C> <C> <C>
Per Note............................................. 100% .125%-.750% 99.875%-99.250%
Total................................................ $35,000,000 $43,750-$262,500 $34,956,250-$34,737,500
</TABLE>
(1) Notes will be sold at 100% of their principal amount unless otherwise
indicated in the applicable Pricing Supplement.
(2) The Company will pay Lehman Brothers Inc., A.G. Edwards & Sons, Inc. and UBS
Securities LLC (each an "Agent"), a commission ranging from .125% to .750%
of the principal amount of any Note, depending on its Stated Maturity, sold
through such Agent. Any Agent, acting as principal, may also purchase Notes
at a discount for resale to one or more investors or one or more
broker-dealers (acting as principal for purposes of resale) at varying
prices related to prevailing market prices at the time of resale, as
determined by such Agent, or, if so agreed, at a fixed public offering
price. The Company has agreed to indemnify the Agents against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses payable by the Company, including
certain expenses of the Agents to be reimbursed by the Company, estimated at
$236,000.
------------------------
Offers to purchase Notes are being solicited, on a reasonable efforts basis,
from time to time by the Agents on behalf of the Company. Notes may be sold to
the Agents on their own behalf at negotiated discounts. The Company reserves the
right to sell Notes directly on its own behalf. The Company also reserves the
right to withdraw, cancel or modify the offering contemplated hereby without
notice. No termination date for the offering of the Notes has been established.
The Company or the Agents may reject any order as a whole or in part. See
"Supplemental Plan of Distribution."
------------------------
LEHMAN BROTHERS
A.G. EDWARDS & SONS, INC.
UBS SECURITIES
FEBRUARY 28, 1997
<PAGE>
(FROM PRECEDING PAGE)
The interest rate, issue price, Stated Maturity and redemption provisions,
if any, for each Note will be established by the Company at the date of issuance
of such Note and will be indicated in the applicable Pricing Supplement.
Interest rates are subject to change by the Company from time to time, but no
such change will affect any Note already issued or as to which an offer to
purchase has been accepted by the Company.
Unless a Redemption Date is specified in the applicable Pricing Supplement,
the Notes will not be redeemable prior to their Stated Maturity. If a Redemption
Date is so specified, the Notes will be redeemable as described herein at the
option of the Company at any time after such date.
The Notes offered hereby will be represented by one or more permanent global
Notes (a "Global Note") registered in the name of the nominee of The Depository
Trust Company, as Depositary (each such Note represented by a Global Note being
referred to herein as a "Book-Entry Note"). Beneficial interests in Book-Entry
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by the Depositary and its participants. Except as described
herein under "Description of Notes--Book-Entry Notes," owners of beneficial
interests in a Global Note will not be considered the Holders thereof and will
not be entitled to receive physical delivery of Notes in definitive form, and no
Global Note will be exchangeable except for another Global Note of like
denomination and terms to be registered in the name of the Depositary or its
nominee. Unless otherwise indicated in the applicable Pricing Supplement, each
Note will be in a minimum denomination of $10,000. See "Description of Notes."
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<PAGE>
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT LEVELS
OTHER THAN THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED
HEREBY (REFERRED TO IN THE ACCOMPANYING PROSPECTUS DATED DECEMBER 20, 1996, AS
THE "OFFERED SECURITIES") SUPPLEMENTS, AND TO THE EXTENT INCONSISTENT THEREWITH
REPLACES, THE DESCRIPTION OF THE GENERAL TERMS AND PROVISIONS OF DEBT SECURITIES
SET FORTH IN THE ACCOMPANYING PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS
HEREBY MADE. SEE THE ACCOMPANYING PROSPECTUS FOR DEFINITIONS OF CERTAIN TERMS
USED IN THIS PROSPECTUS SUPPLEMENT.
GENERAL
The notes offered hereby (the "Notes") will be issued in one or more
tranches under the Collateral Trust Indenture, dated as of June 1, 1992, as
supplemented (the "Indenture"), between the Company and Bankers Trust Company,
as Trustee (the "Trustee"). The summary contained herein of certain provisions
of the Notes does not purport to be complete and is qualified in its entirety by
reference to the provisions of the Notes and the Indenture, which has been filed
as an exhibit to the Registration Statement, of which the accompanying
Prospectus is a part, to which exhibit reference is hereby made.
The Notes constitute a single series of Debt Securities to be issued under
the Indenture referred to in the accompanying Prospectus and initially will be
limited to an aggregate initial offering price of $35,000,000 (or, if any Notes
are to be Original Issue Discount Notes, such principal amount as initially
shall result in an aggregate initial offering price equivalent to $35,000,000).
See "Supplemental Plan of Distribution." For a description of the rights
attaching to different series or tranches of Securities under the Indenture, see
"Description of Debt Securities" in the Prospectus. Terms of the Notes may vary,
and the terms of each Note will be specified in the Pricing Supplement relating
thereto.
Unless previously redeemed, a Note will mature from nine months to 40 years
from its date of issue, as selected by the initial purchaser and agreed to by
the Company as specified in the applicable Pricing Supplement.
The Notes will be denominated in United States dollars and payments of
principal of and premium, if any, and interest on the Notes will be made in
United States dollars.
The Notes will be issuable only in fully registered form. The authorized
denominations of Notes will be $10,000 and integral multiples of $1,000 in
excess thereof. Notes will be represented by one or more Global Notes, as set
forth in the applicable Pricing Supplement, registered in the name of the
nominee of the Depositary. So long as the Depositary or its nominee is the
registered owner of any Global Note, the Depositary or its nominee will be
considered the sole owner or holder of the Book-Entry Note or Notes represented
by such Global Note for all purposes under the Indenture and the Book-Entry
Notes. See "Book-Entry Notes" below.
Payments of interest and principal (and premium, if any) to Beneficial
Owners (as defined below) of Book-Entry Notes are expected to be made in
accordance with the Depositary's and its participants' procedures in effect from
time to time as described below under "Book-Entry Notes."
Notes will be sold in individual issues of Notes having such interest rate,
Stated Maturity and date of original issuance as shall be selected by the
initial purchasers and agreed to by the Company. Each Note will bear interest at
a fixed rate. See "Interest".
The Notes may be issued as Original Issue Discount Notes. An Original Issue
Discount Note is a Note which is issued at a price lower than the principal
amount thereof and which provides that upon
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<PAGE>
redemption or acceleration of the Maturity thereof an amount less than the
principal thereof shall become due and payable. In the event of redemption or
acceleration of the Maturity of an Original Issue Discount Note, the amount
payable to the Holder of such Note upon such redemption or acceleration will be
determined in accordance with the terms of the Note, but will be an amount less
than the amount payable at the Stated Maturity of such Note. In addition, the
Note issued at a discount may, for United States federal income tax purposes, be
considered to be issued at an original issue discount rate, regardless of the
amount payable upon redemption or acceleration of Maturity of such Note. See
"Certain United States Federal Income Tax Consequences--Original Issue Discount"
in the accompanying Prospectus.
The applicable Pricing Supplement will indicate either that a Note cannot be
redeemed prior to its Stated Maturity or that a Note will be redeemable at the
option of the Company on or after a specified date prior to its Stated Maturity
at a specified price or prices (which may include a premium), together with
accrued interest to the date of redemption. See "Optional Redemption" below. In
addition, the applicable Pricing Supplement will indicate either that the
Company will not be obligated to redeem a Note pursuant to any sinking fund or
analogous provisions or that the Company will be so obligated. If the Company
will be so obligated, the applicable Pricing Supplement will indicate the period
or periods within which and the price or prices at which the applicable Notes
will be redeemed, in whole or in part, pursuant to such obligation and the other
detailed terms and provisions of such obligation. Upon any redemption of the
Designated Mortgage Bonds relating to any of the Notes that is required under
the Mortgage Indenture in the event that all or substantially all of the
electric properties of the Company are sold to or taken through the exercise of
the right of eminent domain or the right to purchase by any municipal or
governmental body or agency, the Company will redeem such Notes in an aggregate
principal amount equal to the amount becoming due and payable on such Designated
Mortgage Bonds, plus accrued interest.
Unless otherwise specified in the applicable Pricing Supplement, payments of
principal of and any premium and interest on any Note, other than Book-Entry
Notes, will be made in immediately available funds at the Corporate Trust Office
of Bankers Trust Company in the Borough of Manhattan, The City of New York,
PROVIDED that such Note is presented to the Paying Agent in time for the Paying
Agent to make such payments in such funds in accordance with its normal
procedures; except that at the option of the Company payment of interest (other
than interest payable at Maturity) may be made by check mailed to the address of
the Person entitled thereto as such address appears in the Security Register. If
any interest payment is to be made by wire transfer, the Trustee must receive
wire payment instructions from the Holder by the Regular Record Date for such
interest payment. With respect to payments on Book-Entry Notes, see "Book-Entry
Notes" below.
The Notes, other than Book-Entry Notes, may be presented for registration of
transfer or exchange at the Corporate Trust Office of Bankers Trust Company in
the Borough of Manhattan, The City of New York. With respect to transfers of
Book-Entry Notes and exchanges of permanent Global Notes representing Book-Entry
Notes, see "Book-Entry Notes" below.
INTEREST
Each interest-bearing Note will bear interest from and including the Issue
Date or from and including the most recent Interest Payment Date with respect to
which interest on such Note has been paid or duly provided for at the fixed rate
per annum, stated therein and in the applicable Pricing Supplement, until the
principal thereof is paid or made available for payment. The Indenture provides
that any installment of interest on the Notes that is overdue by 60 days or more
may accrue interest (subject to any maximum stated interest rate applicable to
all Notes issued). The Mortgage Bonds do not contain such a provision. See
"Description of Debt Securities--Security; Pledge of Mortgage Bonds" in the
accompanying Prospectus. Interest will be payable generally to the Person
(which, in the case of a permanent Global Note representing Book-Entry Notes,
shall be the Depositary) in whose name a Note is registered at the close of
business on the Regular Record Date next preceding each Interest Payment Date;
PROVIDED, HOWEVER, that
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<PAGE>
interest payable at Maturity will be payable to the Person (which, in the case
of a permanent Global Note representing Book-Entry Notes, shall be the
Depositary) to whom principal shall be payable. The first payment of interest on
any Note originally issued between a Regular Record Date and an Interest Payment
Date will be made on the second Interest Payment Date following the Issue Date
of such Note to the registered owner on the Regular Record Date immediately
preceding such Interest Payment Date. With respect to payments of interest on
Book-Entry Notes, see "Book-Entry Notes" below.
Any payment required to be made in respect of a Note on a date that is not a
Market Day for such Note need not be made on such date, but may be made on the
next succeeding Market Day with the same force and effect as if made on such
date, and no additional interest shall accrue as a result of such delayed
payment. "Market Day" means any day that is not a Saturday or Sunday and that,
in the City of New York, is not a day on which banking institutions generally
are authorized or obligated by law or executive order to close.
The Mortgage Bonds will bear interest in amounts sufficient to provide for
the payment of interest on the Notes and will provide for payment of such
interest at times corresponding to the interest payment dates on the Notes. The
Mortgage Bonds will also be redeemed at times and in amounts that correspond to
the required payments of principal of and any premium on the Notes. Payments on
the Notes will satisfy payment obligations on the underlying Mortgage Bonds
relating thereto. See "Description of Debt Securities--Security; Pledge of
Mortgage Bonds" in the accompanying Prospectus.
Interest rates and other variable terms of the Notes are subject to change
by the Company from time to time, but no such change will affect any Note
already issued or as to which an offer to purchase has been accepted by the
Company.
The applicable Pricing Supplement relating to a Note will designate a fixed
rate of interest per annum payable on such Note. The Interest Payment Dates with
respect to the Notes shall be February 1 and August 1 of each year and at
Maturity, and the Regular Record Dates for such Notes shall be the January 17
and July 17 next preceding such Interest Payment Dates. Unless otherwise
indicated in the applicable Pricing Supplement, interest payments for the Notes
shall include the amount of interest accrued to, but excluding, the relevant
Interest Payment Date, and interest on the Notes will be computed on the basis
of a 360-day year of twelve 30-day months.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of like tenor and having the same Issue
Date will be represented by a single permanent Global Note. Each Global Note
representing Book-Entry Notes will be deposited with, or on behalf of, The
Depository Trust Company, as Depositary (the "Depositary"), located in the
Borough of Manhattan, The City of New York, and will be registered in the name
of the Depositary or a nominee of the Depositary. Except under the limited
circumstances described below, Book-Entry Notes represented by a Global Note
will not be exchangeable for, and will not otherwise be issuable as, Notes in
definitive form. No Global Note described above may be transferred except by the
Depositary for such Global Note to a nominee of the Depositary or by a nominee
of the Depositary to the Depositary or another nominee of the Depositary.
A Global Note representing Book-Entry Notes is exchangeable for Notes
registered in the name of a Holder other than the Depositary only if the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary or the Depositary ceases to be a clearing agency registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the Company
in its sole discretion instructs the Trustee that such Global Note shall be so
exchangeable or there shall have occurred and be continuing an Event of Default
with respect to the Notes evidenced by such Global Note. Notes issued in
exchange for a Global Note shall be registered in the name or names of such
person or persons as the Depositary shall instruct the Trustee. It is expected
that such instructions may be based upon directions received by the Depositary
from its participants with respect to ownership of beneficial interests in such
Global Note. The
S-5
<PAGE>
laws of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in such a Global Note.
Except as provided above, owners of beneficial interests in such Global Note
will not be entitled to receive physical delivery of Notes in definitive form
and will not be considered the Holders thereof for any purpose under the
Indenture, and no Global Note representing Book-Entry Notes shall be
exchangeable, except for another Global Note of like denomination and tenor to
be registered in the name of the Depositary or its nominee. Accordingly, each
person owning a beneficial interest in such Global Note must rely on the
procedures of the Depositary and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a Holder under the Indenture. The Indenture provides that
the Depositary, as a Holder, may appoint agents and otherwise authorize
participants to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action which a Holder is entitled to give or
take under the Indenture. The Company understands that under existing industry
practices, in the event that the Company requests any action of Holders or an
owner of a beneficial interest in such Global Note desires to give or take any
action that a Holder is entitled to give or take under the Indenture, the
Depositary would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.
The following is based solely on information furnished by the Depositary:
1. The Depositary will act as securities depositary for the Global
Notes. The Global Notes will be issued as fully-registered securities
registered in the name of Cede & Co. (the Depositary's partnership nominee).
One fully-registered Global Note will be issued for each issue of the Notes,
each in the aggregate principal amount of such issue, and will be deposited
with the Depositary.
2. The Depositary is a limited-purpose trust company organized under
the New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
a "clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. The Depositary holds securities that its participants
("Direct Participants") deposit with the Depositary. The Depositary also
facilitates the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Direct Participants' accounts,
thereby eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other
organizations. The Depositary is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the Depositary's system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through
or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"; and, together with the
Direct Participants, the "Participants"). The rules applicable to the
Depositary and its Participants are on file with the Securities and Exchange
Commission.
3. Purchases of Notes under the Depositary's system must be made by or
through Direct Participants, which will receive a credit for the Notes on
the Depositary's records. The ownership interest of each actual purchaser of
each Book-Entry Note ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from the Depositary of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which the
Beneficial Owner entered into the
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<PAGE>
transaction. Transfers of ownership interest in the Notes are to be
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in any Book-Entry Notes, except in
the event that use of the book-entry system for one or more Book-Entry Notes
is discontinued.
4. To facilitate subsequent transfers, all Global Notes deposited by
Participants with the Depositary are registered in the name of the
Depositary's partnership nominee, Cede & Co. The deposit of Global Notes
with the Depositary and their registration in the name of Cede & Co. effect
no change in beneficial ownership. The Depositary has no knowledge of the
actual Beneficial Owners of Book-Entry Notes; the Depositary's records
reflect only the identity of the Direct Participants to whose accounts
Book-Entry Notes are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
5. Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants and by
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
6. Redemption notices shall be sent to Cede & Co. If less than all of
Book-Entry Notes within an issue are being redeemed, the Depositary's
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
7. Neither the Depositary nor Cede & Co. will consent or vote with
respect to Book-Entry Notes. Under its usual procedures, the Depositary
mails an "Omnibus Proxy" to the Company as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the Book-Entry Notes are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
8. Principal and interest payments on the Book-Entry Notes will be made
to the Depositary. The Depositary's practice is to credit Direct
Participants' accounts on the date on which interest is payable in
accordance with their respective holdings shown on the Depositary's records
unless the Depositary has reason to believe that it will not receive payment
on such date. Payments by Participants to Beneficial Owners will be governed
by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such Participant and not
of the Depositary, the Agents or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to the Depositary is the responsibility of the
Company and the Trustee. Disbursement of such payments to Direct
Participants shall be the responsibility of the Depositary, and disbursement
of such payments to the Beneficial Owners shall be the responsibility of
Direct and Indirect Participants.
9. The Depositary may discontinue providing its services as securities
depositary with respect to the Notes at any time by giving reasonable notice
to the Company and the Trustee. Under such circumstances, in the event that
a successor securities depositary is not obtained, Notes in certificated
form are required to be printed and delivered in exchange for the Book-Entry
Notes represented by the Global Notes held by the Depository.
10. The Company may decide to discontinue use of the system of
book-entry transfers through the Depositary (or a successor securities
depositary). In that event, Notes in certificated form will be printed and
delivered in exchange for the Book-Entry Notes represented by the Global
Notes held by the Depository.
The information in this section concerning the Depository and the
Depository's book-entry system has been provided by sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
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<PAGE>
The Agents are Direct Participants of the Depositary.
NONE OF THE COMPANY, THE TRUSTEE OR ANY AGENT FOR PAYMENT ON OR REGISTRATION
OF TRANSFER OR EXCHANGE OF ANY GLOBAL NOTE WILL HAVE ANY RESPONSIBILITY OR
LIABILITY FOR ANY ASPECT OF THE RECORDS OF THE DEPOSITARY RELATING TO, OR
PAYMENTS BY THE DEPOSITARY MADE ON ACCOUNT OF, BENEFICIAL INTERESTS IN SUCH
GLOBAL NOTE OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS OF THE
DEPOSITARY RELATING TO SUCH BENEFICIAL INTERESTS.
OPTIONAL REDEMPTION
If one or more Redemption Dates (or range of Redemption Dates) is specified
in the applicable Pricing Supplement, the Notes described therein will be
subject to redemption, in whole or in part, as specified in such Pricing
Supplement, on any such date (or during any such range of dates) at the option
of the Company upon not less than 30 days' nor more than 60 days' notice, at the
Redemption Price or Prices specified in the applicable Pricing Supplement,
together with interest accrued to the Redemption Date; PROVIDED, HOWEVER, that
interest installments due prior to the date fixed for redemption will be payable
to the Holder of record at the close of business on the Regular Record Date. If
less than the entire principal amount of a Note is redeemed, the principal
amount of such Note that remains outstanding after such redemption shall not be
less than the minimum denomination of such Note.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution Agreement,
dated February 21, 1997 (the "Distribution Agreement"), the Notes are being
offered on a continuing basis by the Agents, each of which has agreed to use
reasonable efforts to solicit purchases of the Notes. The Company will have the
sole right to accept offers to purchase Notes and may reject any proposed
purchase of Notes as a whole or in part. Each Agent will have the right, in its
discretion reasonably exercised, to reject any offer to purchase Notes, as a
whole or in part. The Company will pay each Agent a commission of from 0.125% to
0.750% of the principal amount each Note, depending upon its Stated Maturity,
sold through such Agent.
The Company may also sell Notes to any Agent as principal for its own
account at a discount to be agreed upon at the time of sale, or the purchasing
Agents may receive from the Company a commission or discount equivalent to that
set forth on the cover page hereof in the case of any such principal transaction
in which no other discount is agreed. Such Notes may be resold at prevailing
market prices, or at prices related thereto, at the time of such resale, as
determined by the Agents. The Company reserves the right to sell Notes directly
on its own behalf. No commission will be payable on any Notes sold directly by
the Company.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Act"). The
Company has agreed to indemnify the Agents against certain liabilities,
including certain liabilities under the Act. The Company has agreed to reimburse
the Agents for certain expenses.
The Agents and certain affiliates thereof from time to time engage in
transactions with and perform services for the Company in the ordinary course of
business.
Notes may also be sold by the Agents to or through other dealers who may
resell to investors. The Agents may pay all or part of their discount or
commission to such dealers. Such dealers may be deemed to be "underwriters"
within the meaning of the Act.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Choate,
Hall & Stewart (a partnership including professional corporations), Boston,
Massachusetts, and for the Agents by Ropes & Gray, Boston Massachusetts. Choate,
Hall & Stewart and Ropes & Gray will rely as to all matters of Nevada law upon
the opinion of Woodburn and Wedge, Reno, Nevada and as to all matters of
California
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<PAGE>
law upon the opinion of Graham & James LLP, San Francisco, California. The
opinions of Choate, Hall & Stewart, Woodburn and Wedge, Graham & James LLP and
Ropes & Gray will be conditioned upon, and subject to certain assumptions
regarding, future action required to be taken by the Company and the Trustee in
connection with the issuance and sale of any particular Note, the specific terms
of Notes and other matters which may affect the validity of Notes but which
cannot be ascertained on the date of such opinions.
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PROSPECTUS
$35,000,000
SIERRA PACIFIC POWER COMPANY
COLLATERALIZED DEBT SECURITIES
---------------------
Sierra Pacific Power Company (the "Company") may offer from time to time its
collateralized debt securities consisting of notes or other evidences of
indebtedness (the "Debt Securities") in an initial aggregate principal amount of
$35,000,000. The Debt Securities may be offered as separate series or tranches
in amounts, at prices and on terms to be determined in light of market
conditions at the time of sale and set forth in one or more Prospectus
Supplements or a pricing supplement thereto.
The terms of each series or tranche of Debt Securities, including, where
applicable, the specific designation, aggregate principal amount, authorized
denominations, maturity date or dates, interest rate or rates (which may be
fixed or variable) and time or times of payment of any interest, any terms for
optional or mandatory redemption or payment of additional amounts or any sinking
fund provisions, any initial public offering price, the net proceeds to the
Company and any other specific terms in connection with the offering and sale of
such series or tranche (the "Offered Securities") will be set forth in one or
more Prospectus Supplements or a supplement thereto; provided, however, that in
no event shall the interest rate (whether fixed or variable) on any Debt
Securities exceed the 9% interest rate on the underlying Mortgage Bonds (as
defined below) relating thereto. As used herein, Debt Securities shall only
include securities denominated in United States dollars and will not be issued
or payable in foreign or composite currencies.
The Debt Securities will be secured by one or more series of first mortgage
bonds (the "Mortgage Bonds") to be issued and pledged by the Company to Bankers
Trust Company, acting as trustee (the "Trustee") under the indenture for the
Debt Securities. The aggregate principal amount of the Debt Securities
outstanding and the aggregate premium thereon, if any, will not exceed the
aggregate principal amount of Mortgage Bonds pledged to and held by the Trustee.
The Mortgage Bonds will bear interest at times and in amounts sufficient to
provide for the payment of interest on the Debt Securities, and the Mortgage
Bonds also will be redeemed at times and in amounts that correspond to the
required payments of principal of and any premium on the Debt Securities.
Payments on the Debt Securities will satisfy payment obligations on the
underlying Mortgage Bonds relating thereto. See "Description of Debt
Securities--Security; Pledge of Mortgage Bonds" and "Description of Mortgage
Bonds".
The Debt Securities may be sold directly by the Company, through agents
designated from time to time or to or through underwriters or dealers. See "Plan
of Distribution". If any agents of the Company or any underwriters are involved
in the sale of any Debt Securities in respect of which this Prospectus is being
delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in a Prospectus Supplement. The net
proceeds to the Company from such a sale also will be set forth in a Prospectus
Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
------------------------
The date of this Prospectus is December 20, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Information regarding the Company's directors,
the remuneration paid to the Company's directors and officers, and interests of
management and others in certain transactions with the Company is disclosed in
reports filed by the Company with the Commission. The Company's parent, Sierra
Pacific Resources, is also subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information filed with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 7 World Trade Center, 13th Floor, New York, New York 10048, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission (http://www.sec.gov). This Prospectus does not contain all the
information set forth in the Registration Statement and exhibits thereto which
the Company has filed with the Commission under the Securities Act of 1933, as
amended (the "Act"), and to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated by reference in this Prospectus and made a
part hereof:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1995, including the Form 10-K/A amendment thereto;
2. The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1996, June 30, 1996 and September 30, 1996; and
3. The Company's Current Reports on Form 8-K dated July 3, 1996
(relating to the termination of the Company's merger with The Washington
Water Power Company), dated August 2, 1996 (relating to the issuance of
trust originated preferred securities) and dated November 20, 1996,
including the Form 8-K/A amendment thereto (relating to the appointment of
Deloitte & Touche, L.L.P. as the Company's independent accountants),
succeeding Coopers & Lybrand L.L.P. who had previously served as the
Company's independent accountants).
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of this offering shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this Prospectus modifies
or supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon the
written or oral request of such person, a copy of any or all of the documents
which are incorporated by reference in this Prospectus, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests
2
<PAGE>
for such copies should be directed to Treasurer, Sierra Pacific Power Company,
P.O. Box 10100, Reno, Nevada 89520-0400, telephone (702) 689-4011.
THE COMPANY
The Company is a public utility company which is engaged primarily in the
generation, purchase, transmission, distribution and sale of electric energy to
approximately 270,000 customers in a service territory of approximately 50,000
square miles located in western, central and northeastern Nevada, including the
cities of Reno, Sparks, Carson City and Elko, and eastern California, including
the Lake Tahoe area. The Company met its electric energy requirements for the
twelve months ended December 31, 1995 by utilizing coal generation (23%),
gas/oil generation (30%), purchased power (46%) and hydro power (1%). The
Company has no ownership interest in, nor does it operate, any nuclear
generating units and has no future plans to do so. The Company also provides gas
and water service to approximately 92,000 gas and 61,000 water customers in the
cities of Reno and Sparks and environs. No material part of any of the Company's
business segments is dependent upon a single customer.
The Company is a subsidiary of Sierra Pacific Resources ("Resources"), which
owns all of the Company's outstanding common stock. In June, 1994, the Company,
Resources, and The Washington Water Power Company ("WWP") entered into an
Agreement and Plan of Reorganization and Merger, as subsequently amended (the
"Merger Agreement"), which provided for the merger of the Company, Resources and
WWP into Altus Corporation ("Altus"). WWP is a combined electric and gas
utility, with headquarters in Spokane, Washington. Although the parties to the
merger had received all of the necessary approvals from their respective
shareholders, the merger was still under review by the Federal Energy Regulatory
Commission when, on June 28, 1996, WWP notified Resources and the Company that
it was terminating the Merger Agreement in accordance with its terms. As a
result of the termination of the Merger Agreement, the Company is continuing to
operate as a separate utility.
The principal executive offices of the Company are located at 6100 Neil Road
(P.O. Box 10100), Reno, Nevada 89520-0400, telephone (702) 689-4011.
APPLICATION OF PROCEEDS
The net proceeds from the sale of the Debt Securities offered hereby will be
used for general corporate purposes including, but not limited to, the
acquisition of property, the construction, completion, extension or improvement
of facilities, or the refinancing or discharge or refunding of obligations,
including short-term borrowings. Pending the uses described above, the proceeds
from the sale of the Debt Securities offered hereby will be invested in
short-term investments.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of
the Company for each of the years 1991 through 1995 and the twelve months ended
September 30, 1996.
<TABLE>
<CAPTION>
TWELVE MONTHS
YEAR ENDED DECEMBER 31, ENDED
- ----------------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
- --------- --------- --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
2.62 2.81 2.94 3.09 3.54 3.90
</TABLE>
For the purpose of computing the Company's ratios of earnings to fixed
charges, "earnings" represent the aggregate of net income, taxes on income and
fixed charges. The Company's earnings used in the calculation of the ratios of
earnings to fixed charges include the allowance for funds used during
construction. "Fixed charges" represent interest on short-term and long-term
debt, the interest portion on capital leases and amortization of bond premiums,
discounts and expenses, excluding amortization of the net gain or loss on
reacquired mortgage bonds.
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<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under the Collateral Trust Indenture,
dated as of June 1, 1992, as supplemented in connection with the issuance and
sale of the Debt Securities (the "Indenture"), between the Company and Bankers
Trust Company, in its capacity as Trustee, which Indenture is an exhibit to the
Registration Statement of which this Prospectus is a part. The statements under
this caption are summaries of certain provisions of the Indenture, do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Indenture, including the
definitions therein of certain terms. Wherever particular sections of the
Indenture or terms that are defined in the Indenture are referred to herein or
in a Prospectus Supplement, it is intended that such sections or defined terms
shall be incorporated by reference herein or therein, as the case may be.
The term "Securities", as used under this caption, refers to all Securities
issued under the Indenture and includes the Debt Securities. Unless the context
otherwise requires, the term "series or tranche" as used in this Prospectus
means, with respect to each series of Securities, such series or, if one or more
tranches have been issued within such series, a tranche.
GENERAL
The Debt Securities may be issued from time to time in one or more series
and in one or more tranches. The particular terms of each series or tranche of
Debt Securities will be described in one or more Prospectus Supplements, or a
pricing supplement thereto, relating to such series or tranche.
The Indenture does not limit the aggregate amount of Securities that may be
issued thereunder, and Securities may be issued thereunder from time to time in
separate series up to the aggregate amount from time to time authorized by the
Company for each series. For a description of the security for the Securities,
see "Security; Pledge of Mortgage Bonds" below and "Description of Mortgage
Bonds".
The applicable Prospectus Supplement, or a pricing supplement thereto, will
describe the following terms of the Offered Securities: (1) the title of the
Offered Securities; (2) any limit on the aggregate principal amount of the
Offered Securities; (3) the date or dates on which the Offered Securities will
mature; (4) the rate or rates at which the Offered Securities will bear
interest, if any, or the formula pursuant to which such rate or rates will be
determined, and the date or dates from which any such interest will accrue;
provided that in no event shall the interest rate (whether fixed or variable) on
the Offered Securities exceed the 9% interest rate on the underlying Mortgage
Bonds relating thereto; (5) the Interest Payment Dates on which any such
interest on the Offered Securities will be payable and the Regular Record Date
for any interest payable on any Offered Securities on any Interest Payment Date;
(6) the person to whom any interest on any Registered Security of the series
will be payable if other than the person in whose name such Registered Security
is registered at the close of business on the Regular Record Date for such
interest as described under "Payment and Paying Agents" below; (7) any mandatory
or optional sinking fund, redemption or analogous provisions; (8) each office or
agency where, subject to the terms of the Indenture as described below under
"Payment and Paying Agents", the principal of (and premium, if any) and interest
on the Offered Securities will be payable and each office or agency where,
subject to the terms of the Indenture as described below under "Form, Exchange,
Registration and Transfer", the Offered Securities may be presented for
registration of transfer or exchange; (9) the date, if any, after which, and the
price or prices at which, the Offered Securities may be redeemed, in whole or in
part at the option of the Company, or pursuant to mandatory redemption
provisions, and the other detailed terms and provisions of any such optional or
mandatory redemption provisions; (10) the denominations in which any Offered
Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof; (11) any index or indices used to determine the
amount of payments of principal of (and premium, if any) and interest on the
Offered Securities; (12) the portion of the principal amount of the Offered
Securities, if other than the entire principal amount thereof, payable upon
acceleration of maturity thereof; (13) the Person who shall be the Security
Registrar for Offered Securities;
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<PAGE>
(14) any deletions or modifications of or additions to the Events of Default or
covenants set forth in the Indenture; (15) any Paying Agent or Authenticating
Agent; (16) whether the Securities of the series shall be issued in whole or in
part in the form of one or more Global Security or book-entry security or
securities and, if so, the depositary for such Global Security or book-entry
security or securities; (17) the Mortgage Bonds (or additional Mortgage Bonds)
granted to secure the Offered Securities of the series or tranche, and the
designation of the portion of the Mortgage Bonds which shall be Designated
Mortgage Bonds (as defined below); (18) any defeasance provisions applicable to
the Offered Securities of the series or tranche; and (19) any other terms of the
series or tranche (which terms shall not be inconsistent with the provisions of
the Indenture). (Section 301)
Securities may be issued as Original Issue Discount Securities to be sold at
a discount below their principal amount. Special United States federal income
tax considerations applicable to Securities issued at an original issue
discount, including Original Issue Discount Securities, are described under
"Certain United States Federal Income Tax Consequences--Original Issue
Discount". The applicable Prospectus Supplement, or a pricing supplement
thereto, will provide additional information regarding the original issue
discount aspects of such Securities.
SECURITY; PLEDGE OF MORTGAGE BONDS
GENERAL. In order to secure by the lien of the Mortgage Indenture (as
defined below) the obligation of the Company to pay the principal of (and
premium, if any) and interest on any series or tranche of the Securities, the
Company will issue, pledge and deliver to the Trustee, in trust for the ratable
benefit of the Holders of such series or tranches, Mortgage Bonds, which
Mortgage Bonds will be issued pursuant to that certain Indenture of Mortgage,
dated as of December 1, 1940 (the "Mortgage Indenture"), between the Company and
The New England Trust Company (State Street Bank and Trust Company, as successor
trustee) and Leo W. Huegle (Gerald R. Wheeler, as successor trustee) (the
"Mortgage Trustees"). (Section 401(a)) The aggregate principal amount of the
Securities outstanding and maximum aggregate amount of premium thereon, if any,
will not exceed the aggregate principal amount of Mortgage Bonds pledged with
and held by the Trustee. The Mortgage Bonds will bear interest at times and in
amounts sufficient to provide for the payment of interest on the Securities and
also will be redeemed at times and in amounts that correspond to the required
payments of principal of and any premium on the Securities. Payments on the
Securities will satisfy payment obligations on the underlying Mortgage Bonds
relating thereto. The Mortgage Bonds will be secured by a first mortgage lien on
certain property owned by the Company and will rank on a parity with all other
first mortgage bonds of the Company. As of September 30, 1996, the Company had
outstanding $571.4 million aggregate principal amount of first mortgage bonds.
See "Description of Mortgage Bonds".
PLEDGE OF MORTGAGE BONDS. The Company will from time to time issue and
deliver to and pledge with the Trustee, for the benefit of the Holders of each
series or tranche of the Securities, Mortgage Bonds in an aggregate principal
amount such that the aggregate principal amount of Mortgage Bonds then being
delivered to the Trustee pursuant to the Indenture is equal to or greater than
the aggregate principal amount (or, in the case of Original Issue Discount
Securities, the aggregate principal amount thereof due and payable at the Stated
Maturity thereof) of, plus the maximum aggregate amount of any premium on, the
series or tranche of Securities then being delivered to the Trustee or an
Authenticating Agent for authentication pursuant to the Indenture. Such pledge
becomes effective upon issuance of such series or tranche and satisfaction of
other conditions and is effective to the extent the amounts to be payable on
such Mortgage Bonds do not exceed the amounts stated to be payable on such
Securities. (Section 401)
The Indenture provides that the Company will not issue and deliver
Securities of any series or tranche to the Trustee or an Authenticating Agent
for authentication, and the Trustee or such Authenticating Agent will not
authenticate Securities of any series, unless the Company has delivered to the
Trustee or such Authenticating Agent a Company Order, pursuant to which the
Company designates with respect to such series or tranche Designated Mortgage
Bonds, which designation, subject to certain provisions
5
<PAGE>
relating to the surrender of the Designated Mortgage Bonds, shall remain in
effect to the extent that the series or tranche of Securities with respect to
which the Designated Mortgage Bonds have been so designated remain outstanding.
(Section 401(d)) For purposes of the foregoing, "Designated Mortgage Bonds",
with respect to any series or tranche of Securities, means an aggregate
principal amount of Mortgage Bonds held by (or then being delivered to) and
pledged with the Trustee, not designated at the time with respect to Outstanding
Securities, equal to the aggregate principal amount (or, in the case of Original
Issue Discount Securities, the aggregate principal amount thereof due and
payable at the Stated Maturity thereof) of, plus the maximum aggregate amount of
any premium on, the Securities of such series or tranche issued and delivered by
the Company to the Trustees or an Authenticating Agent for authentication
pursuant to the Indenture.
If at any time the principal, premium if any and interest due on any
Security is paid in full, the principal of a corresponding amount of the
Designated Mortgage Bonds designated in connection with the issue of such
Security shall cease to be a Designated Mortgage Bond.
SATISFACTION OF PAYMENT OBLIGATION ON MORTGAGE BONDS. The interest rate on
each series of Mortgage Bonds will be as specified in the applicable Prospectus
Supplement or a pricing supplement thereto. The Indenture provides that the
obligation of the Company to make any payment of the principal of (and premium,
if any) or interest on the Designated Mortgage Bonds will be deemed to have been
satisfied and discharged to the extent that at the time any such payment shall
be due, the then due principal of (and premium, if any) or interest on the
Securities to which such Designated Mortgage Bonds relate, shall have been paid,
deemed to have been paid or otherwise satisfied and discharged. In addition,
such obligation to make any payment of the principal of (and premium, if any) or
interest on the Designated Mortgage Bonds at any time shall be deemed to have
been satisfied and discharged to the extent that the amount of the Company's
obligation to make any payment of the principal of (and premium, if any) or
interest on the Designated Mortgage Bonds exceeds the obligation of the Company
at that time to make any payment on the applicable Redemption Date or Stated
Maturity of the principal of (and premium, if any) or interest on the Securities
to which such Designated Mortgage Bonds relate. The obligation of the Company to
make any payment of the principal of (and premium, if any) or interest on the
Mortgage Bonds other than Designated Mortgage Bonds shall be deemed to have been
satisfied and discharged in full at the time any such payment shall be stated to
be due. (Section 403(a))
REDEMPTION OF MORTGAGE BONDS. The Company covenants and agrees in the
Indenture that upon the required payment of principal or premium, if any,
becoming due and payable with respect to any Securities upon Stated Maturity or
redemption, it will redeem the Designated Mortgage Bonds relating to such
Securities in an aggregate principal amount equal to the amount becoming due and
payable on such Securities, plus accrued interest; provided, however, that the
Company's obligation to redeem such Designated Mortgage Bonds will be deemed to
have been satisfied and discharged to the extent that at the time any such
payment shall be due, the then due aggregate principal amount of the Securities
to which such Designated Mortgage Bonds relate, plus the aggregate amount of any
premium on, or accrued interest to the redemption date for, such Securities
shall have been paid, deemed to have been paid or otherwise satisfied and
discharged. Except for such redemption and any redemption required under the
Mortgage Indenture in the event that all or substantially all of the electric
properties of the Company are sold to or taken through the exercise of the right
of eminent domain or the right to purchase by any municipal or governmental body
or agency, the Company covenants that it will not redeem the Mortgage Bonds or
take any action that will result in the Mortgage Indenture Trustees incurring an
obligation to redeem any Mortgage Bonds. (Section 404)
The Trustee will, upon request of the Company, surrender to the Mortgage
Trustees for cancellation Mortgage Bonds in an aggregate principal amount equal
to the aggregate principal amount of any other Mortgage Bonds delivered to and
pledged with the Trustee pursuant to the Indenture in exchange therefor;
provided that the Mortgage Bonds so delivered to and pledged with the Trustee
(a) contain no provisions that would impair the benefit of the lien of the
Mortgage Indenture in favor of the holders of the
6
<PAGE>
Outstanding Securities, and (b) have the same terms as the Mortgage Bonds so
surrendered. (Section 406(b))
From time to time upon request of the Company, the Trustee will surrender to
the Mortgage Trustees for cancellation Mortgage Bonds other than Designated
Mortgage Bonds held by the Trustee pursuant to the Indenture. (Section 406(c))
FORM, EXCHANGE, REGISTRATION AND TRANSFER
The Securities will be issuable only in fully registered form. Securities of
a series or tranche may be represented, in whole or in part, by one or more
permanent Global Securities in a denomination or aggregate denominations equal
to the portion of the aggregate principal amount of Outstanding Securities of
the series or tranche to be represented by such Global Security or Securities.
Any such Global Security deposited with a Depositary or its nominee identified
in the applicable Prospectus Supplement or pricing supplement thereto and
bearing the legend required by the Indenture may not be surrendered for
registration of transfer or for exchange except by the Depositary for such
Global Security or any nominee of such Depositary, except if the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary,
or the Depositary ceases to be qualified as required by the Indenture, or the
Company instructs the Trustee in accordance with the Indenture that such Global
Security shall be so registrable and exchangeable, or there shall have occurred
and be continuing an Event of Default with respect to the Securities evidenced
by such Global Security, or there shall exist such other circumstances, if any,
as may be specified in the applicable Prospectus Supplement. (Sections 203, 204,
301 and 305)
The specific terms of the depository arrangement with respect to any portion
of a series or tranche of Securities to be represented by one or more Global
Securities will be described in the applicable Prospectus Supplement or pricing
supplement thereto. Beneficial interests in Global Securities will only be
evidenced by, and transfers thereof will only be effected through, records
maintained by the Depositary and the institutions that are participants in the
Depositary.
At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to Global Securities, Securities of any series or tranche
will be exchangeable for other Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor. (Section 305)
Securities may be presented for exchange as provided above and for
registration of transfer (with the form of transfer endorsed thereon duly
executed), at the office of the Trustee or at the office of any transfer agent
designated by the Company for such purpose with respect to any tranche or series
of Securities and referred to in an applicable Prospectus Supplement or pricing
supplement thereto, without service charge and upon payment of any taxes and
other governmental charges as described in the Indenture. Such transfer or
exchange will be effected upon the Trustee or such transfer agent, as the case
may be, being satisfied with the documents of title and identity of the person
making the request. If a Prospectus Supplement or pricing supplement thereto
refers to any transfer agents (in addition to the Trustee) initially designated
by the Company with respect to any series or tranche of Securities, the Company
may at any time rescind the designation of any such transfer agent or approve a
change in the location through which any such transfer agent (or Trustee) acts.
The Company may at any time designate additional transfer agents with respect to
any series or tranche of Securities. (Sections 305 and 1102)
The Company shall not be required to: (i) issue, register the transfer of or
exchange Securities of any series or tranche during a period beginning at the
opening of business 15 days before any selection of Securities of that series or
tranche to be redeemed and ending at the close of business on the day of mailing
of the relevant notice of redemption or (ii) register the transfer of or
exchange any Security, or portion thereof, called for redemption, except the
unredeemed portion of any Security being redeemed in part. (Section 305)
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<PAGE>
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement or a
pricing supplement thereto, payment of principal of (and premium, if any) and
interest on Securities will be made at the office of the Trustee, except that at
the option of the Company payment of any interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security Register. If any interest payment is to be made by wire transfer, the
Trustee must receive wire payment instructions from the holder by the Regular
Record Date for such interest payment. Unless otherwise indicated in an
applicable Prospectus Supplement or a pricing supplement thereto, payment of any
installment of interest on Securities will be made to the Person in whose name
such Security is registered at the close of business on the Regular Record Date
for such interest. (Sections 301 and 307)
Unless otherwise indicated in an applicable Prospectus Supplement or a
pricing supplement thereto, the corporate trust office of the Trustee in The
City of New York will be designated as the Company's sole Paying Agent for
payments with respect to Offered Securities. Any other Paying Agents initially
designated by the Company for the Offered Securities will be named in an
applicable Prospectus Supplement or a pricing supplement thereto. The Company
may at any time designate additional Paying Agents or rescind the designation of
any Paying Agent or approve a change in the office through which any Paying
Agent acts, except that the Company will be required to maintain a Paying Agent
in each Place of Payment for each series of Securities.
All moneys paid by the Company to a Paying Agent or held by the Company in
trust for the payment of principal of (and premium, if any) or interest on any
Security, which remain unclaimed at the end of two years after such principal,
premium or interest shall have become due and payable, will be discharged from
trust and repaid to the Company, and the Holder of such Security or any coupon
will thereafter look only to the Company for payment thereof. (Section 1103)
SATISFACTION AND DISCHARGE OF THE INDENTURE AND THE SECURITIES
The Indenture will cease to be of further effect, and the Trustee shall
execute instruments acknowledging satisfaction and discharge of the Indenture
and shall pay, or assign or transfer and deliver, the Trust Estate held by it as
security for the Securities remaining, when (1) either (a) all Securities
authenticated and delivered (other than certain specified Securities) have been
delivered for cancellation; or (b) all such Securities have become or will
become within one year due and payable, or are to be called for redemption
within one year under arrangements satisfactory to the Trustee, and the Company
has deposited or caused to be deposited in trust with the Trustee funds
sufficient to pay and discharge the entire indebtedness on such Securities for
principal (and premium, if any) and interest to the date of such deposit (in the
case of Securities that have become due and payable) or to their Stated Maturity
or Redemption Date, as the case may be; (2) the Company has paid or caused to be
paid all other sums payable by it under the terms of the Indenture; and (3) the
Company has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent provided for in the
Indenture relating to the satisfaction and discharge of the Indenture have been
complied with. (Section 501)
Unless otherwise provided in the Indenture or other instrument creating a
series or tranche of Securities, the Company shall be deemed to have paid and
discharged the indebtedness on all the Outstanding Securities of each tranche of
such series and the Trustee shall execute instruments acknowledging the
satisfaction and discharge of such indebtedness and shall pay, or assign or
transfer and deliver to the Company the Designated Mortgage Bonds which have
been held as security for the Securities of such series or tranche if (1) either
(a) with respect to all Outstanding Securities of such series or tranche (i) the
Company has irrevocably deposited or caused to be deposited with the Trustees an
amount sufficient to pay and discharge the entire indebtedness on all
Outstanding Securities of such series or tranche for principal (and premium, if
any) and interest to the Stated Maturity or any Redemption Date, as the case may
be; or (ii) the Company has irrevocably deposited or caused to be deposited with
the
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Trustee such amount of direct noncallable obligations of, or noncallable
obligations the payment of principal of and interest on which is fully
guaranteed by, the United States of America maturing as to principal and
interest in such amounts and at such times as will, without consideration of any
reinvestment thereof, be sufficient to pay and discharge the entire indebtedness
on all Outstanding Securities of such series or tranche for principal (and
premium, if any) and interest to the Stated Maturity or any Redemption Date, as
the case may be; or (b) the Company has properly fulfilled such other means of
satisfaction and discharge as are specified in the supplemental indenture or
other instrument creating such series or tranche; (2) the Company has paid or
caused to be paid all other sums payable with respect to the Outstanding
Securities of such series or tranche; (3) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for in the Indenture relating to the
satisfaction and discharge of the entire indebtedness on all Outstanding
Securities of any such series or tranche have been complied with and, if
required by Section 314 of the Trust Indenture Act, a certificate or opinion of
an engineer, appraiser, or other expert appointed by the Company as to the fair
value of the Trust Estate to be released from the lien of the Indenture, which
certificate or opinion shall state that in the opinion of the person making the
same, such release will not impair the security under the Indenture in
contravention of the provisions thereof; and (4) the Trustee has received an
opinion of tax counsel to the effect that such deposit and discharge will not
cause the Holders of the Outstanding Securities of such series to recognize
income, gain or loss for federal income tax purposes and that the Holders will
be subject to federal income tax in the same amounts, in the same manner and at
the same times as would have been the case if such deposit and discharge had not
occurred. Upon such discharge, the Company will be deemed to have satisfied all
the obligations under the Indenture, except for obligations with respect to
registration of transfer and exchange of the Outstanding Securities of such
series, and the rights of the Holders to receive from deposited funds payment of
the principal of (and premium, if any) and interest, if any, on the Outstanding
Securities of such series. (Section 503)
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
the Indenture with respect to Securities of any series: (a) failure to pay any
interest on any Security of that series when due, continued for 60 days; (b)
failure to pay principal of (or premium, if any, on) any Security of that series
when due; (c) failure to deposit any sinking fund payment or analogous
obligation, when due, in respect of any Security of that series and continuance
of such default for 60 days; (d) failure to perform any other covenant or
warranty of the Company in the Indenture (other than a covenant or warranty
included in the Indenture solely for the benefit of a series of Securities other
than that series), continued for 60 days after written notice as provided in the
Indenture; (e) certain events of bankruptcy, insolvency or reorganization
involving the Company; (f) the occurrence of an event of default under the
Mortgage Indenture, provided that, the waiver or cure of any such event of
default and the rescission and annulment of the consequences thereof shall
constitute a waiver of the corresponding Event of Default under the Indenture
and a rescission and annulment of the consequences thereof; and (g) any other
Event of Default provided in an indenture supplemental thereto. (Section 601)
Unless the Trustee holds more than 25% of the outstanding Mortgage Bonds
under the Mortgage Indenture, it cannot, without the concurrence of other
holders of first mortgage bonds, force a declaration of "default" under the
Mortgage Indenture or acceleration of the Mortgage Bonds. See "Description of
Mortgage Bonds--Defaults".
If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, either the Trustees or the Holders of at
least 25% in aggregate principal amount of the Outstanding Securities of that
series by notice as provided in the Indenture may declare the principal amount
(or, if the Securities of that series are Original Issue Discount Securities,
such portion of the principal amount as may be specified in the terms of that
series) of all the Securities of that series to be
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due and payable immediately. At any time after a declaration of acceleration
with respect to Securities of any series has been made, but before a judgment or
decree for payment of money has been obtained by the Trustees, and subject to
applicable law and certain other provisions of the Indenture, the Holders of a
majority in aggregate principal amount of the Outstanding Securities of that
series may, under certain circumstances, rescind and annul such acceleration.
(Section 602)
The Indenture provides that, if a default occurs with respect to the
Securities of any series, the Trustee shall give notice of default to the
Holders of the Securities of such series within 90 days after receipt by the
Trustee of written notice of such occurrence as and to the extent provided in
the Trust Indenture Act; provided, however, that in the case of any default
referred to in clause (d) of the third preceding paragraph with respect to
Securities of such series, no such notice to Holders shall be given until at
least 30 days after the occurrence thereof. (Section 702)
Upon the occurrence of an Event of Default with respect to Securities of any
series, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of Securities of such series by all
appropriate judicial proceedings, including the rights of the Trustee as the
holder of the Mortgage Bonds; provided, however, the Trustee shall not have the
power to sell the Mortgage Bonds. (Section 603)
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. (Sections 701 and 703) Subject to
such provisions for the indemnification of the Trustee, and subject to
applicable law and certain other provisions of the Indenture, the Holders of a
majority in aggregate principal amount of the Outstanding Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee, with respect to the Securities of that
series. (Section 612)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 1108)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities of each series,
considered as one class; provided, however, if less than all of the series of
Outstanding Securities are directly affected by such amendment or modification,
then the consent only of the Holders of a majority in aggregate principal amount
of Outstanding Securities of all series so directly affected, considered as one
class, will be required; and provided, further, that if the Outstanding
Securities of any series have been issued in more than one tranche and if the
proposed amendment or modification directly affects the rights of the Holders of
one or more, but less than all, such tranches, then the consent only of the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of all tranches (including each tranche which is the only tranche of
Outstanding Securities in a series) so directly affected, considered as one
class, will be required; and provided, further, that no such amendment or
modification may, without the consent of each Holder of the Outstanding
Securities of each series or tranche directly affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of principal of or
interest on, any Security, (b) reduce the principal amount of, or premium or
interest on, any Security, (c) reduce the amount of principal of an Original
Issue Discount Security payable upon acceleration of the Maturity thereof, (d)
permit the creation of any lien ranking prior to the lien of the Mortgage
Indenture with respect to all or substantially all of the property subject
thereto or deprive such Holder of the benefit of the security of the lien of the
Mortgage Indenture, (e) change the Place of
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Payment where, or the coin or currency in which, any Security or any premium or
interest thereon is payable, (f) impair the right to institute suit for the
enforcement of any payment on or after the Stated Maturity of any Security (or,
in the case of redemption, on or after the Redemption Date), (g) reduce the
percentage and principal amount of the Outstanding Securities of any series or
tranche, the consent of whose Holders is required in order to take certain
actions or modify any of the above provisions or (h) alter, amend or modify
Article Four of the Indenture. (Section 1002(1) and (2))
The Holders of at least 66 2/3% in aggregate principal amount of the
Outstanding Securities of each series or tranche may, on behalf of the Holders
of all the Securities of that series or tranche, waive, insofar as that series
or tranche is concerned, compliance by the Company with certain restrictive
provisions of the Indenture. (Section 1109) The Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities of each
series or tranche may, on behalf of all Holders of Securities of that series or
tranche, waive any past default and its consequences under the Indenture with
respect to Securities of that series or tranche, except a default (a) in the
payment of principal of (or premium, if any) or any interest on any Security of
such series or tranche or (b) in respect of a covenant or provision of the
Indenture that cannot be modified or amended without the consent of the Holder
of each Outstanding Security affected thereby. (Section 613)
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver thereunder or
whether a quorum is present at a meeting of Holders of Securities or the number
of votes entitled to be cast by the Holder of any Security (i) the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding shall be the amount of the principal thereof that would be due and
payable as of the date of such determination upon acceleration of the Maturity
thereof, and (ii) Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Outstanding
Securities under the Indenture, may consolidate or merge with or into, or
transfer or lease its properties and assets substantially as an entirety to, any
Person that is a corporation, partnership or trust organized and validly
existing under the laws of any domestic jurisdiction, or may permit any such
Person to consolidate with or merge into the Company or convey, transfer or
lease its properties and assets substantially as an entirety to the Company,
provided that (a) any successor Person assumes the Company's obligations on the
Securities and under the Indenture, (b) after giving effect to the transaction
no Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing, (c) in
the case of any lease, such lease will be expressly subject to termination by
the Company or by the Trustee at any time during the continuance of an Event of
Default, and (d) certain other conditions are met. (Section 901)
NOTICES
Except as otherwise provided in the Indenture, notices to Holders of
Securities will be given by mail to the addresses of such Holders as they appear
in the Security Register. (Section 106)
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the registered owner of any Security as the absolute owner thereof
(whether or not such Security shall be overdue and notwithstanding any notice to
the contrary) for the purpose of making payment and for all other purposes.
(Section 308)
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GOVERNING LAW
The Indenture and the Securities will be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflicts of laws thereof. (Section 113)
CONCERNING THE TRUSTEE
Bankers Trust Company will be the Trustee under the Indenture. Bankers Trust
Company also acts as issuing and paying agent with respect to the Company's
commercial paper program.
DESCRIPTION OF MORTGAGE BONDS
The following summarizes certain provisions of the Mortgage Indenture and
the Mortgage Bonds, and reference is made to the Mortgage Indenture in its
entirety for the detailed provisions thereof.
GENERAL
In order to secure by the lien of the Mortgage Indenture the obligation of
the Company to pay the principal of (and premium, if any) and interest on any
series or tranche of the Securities in accordance with the terms thereof, the
Company will from time to time issue and deliver to and pledge with the Trustee,
in trust for the ratable benefit of the Holders of such series or tranche, one
or more series of Mortgage Bonds. For additional information concerning the
pledge of the Mortgage Bonds with the Trustee, see "Description of Debt
Securities--Security; Pledge of Mortgage Bonds".
SINKING OR IMPROVEMENT FUNDS
No series of the Mortgage Bonds will be entitled to the benefits of any
sinking fund provision unless applicable specifically to the Mortgage Bonds.
Such provisions are in effect with respect to certain other series of first
mortgage bonds outstanding under the Mortgage Indenture.
KIND AND PRIORITY OF LIEN
The Mortgage Bonds will be secured, equally and ratably with all first
mortgage bonds of other series now or hereafter outstanding, by a first lien on
substantially all properties and franchises owned by the Company at October 31,
1940 and on property and franchises subsequently acquired which in each case are
used or useful in the business of furnishing electricity, water or gas, or in
any business incidental thereto or operated in connection therewith, except
properties released pursuant to the Mortgage Indenture and except certain
property in Nevada acquired after the filing of the Thirty-fifth Supplemental
Indenture with respect to the Mortgage Bonds, and before the filing of a
supplemental indenture specifically subjecting such property to such lien;
subject, however, to the lien of the Trustees for their compensation, expenses
and advances, to certain permitted liens, and to liens on after acquired
property existing at the time of acquisition or created in connection with the
purchase thereof. There are specifically excepted from the lien of the Mortgage
Indenture certain current assets, including accounts receivable, securities and
other personal property; timber; oil and other minerals; certain other property
owned at October 31, 1940; and all property subsequently acquired, not used or
useful to the Company in its utility business.
ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS AND WITHDRAWAL OF CASH DEPOSITED
AGAINST SUCH ISSUANCE
The maximum principal amount of first mortgage bonds which may be issued
under the Mortgage Indenture is not limited. Additional first mortgage bonds of
any series may be issued from time to time on the basis of (1) 60% of a net
amount of additional public utility property not theretofore funded (i.e., gross
property additions, including the Company's interest in jointly owned property,
less the excess of aggregate
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retirements over any credit for substitution); (2) retirement of first mortgage
bonds, not theretofore funded; and (3) deposit of cash. With certain exceptions,
the issuance of first mortgage bonds is subject to net earnings available for
interest for 12 consecutive months out of the preceding 15 months being at least
2 times the annual interest requirements on all first mortgage bonds and all
prior lien debt to be outstanding. Cash deposited with the Trustee pursuant to
(3) above may be withdrawn in amounts equal to the amount of first mortgage
bonds issuable under (1) or (2) above or be applied to the retirement of first
mortgage bonds of any series. For the 12 months ended September 30, 1996, the
net earnings available for interest were 3.68 times such annual interest
requirements, which would permit the issuance of approximately $481.54 million
principal amount of additional first mortgage bonds (after giving effect to the
issuance of the Mortgage Bonds) assuming the annual interest on such additional
first mortgage bonds is equal to 7.48%.
THE TRUSTEES
The written request of the holders of a majority of the aggregate
outstanding principal amount of the first mortgage bonds is necessary to require
the Trustees to exercise any remedy under the Mortgage Indenture; the Trustees
are entitled to receive reasonable indemnity and under certain circumstances are
not required to act.
DEFAULTS
A default is defined as (a) failure to pay interest for 90 days after
becoming due, (b) failure to pay principal when due, (c) failure to pay
principal or interest on any prior lien debt or satisfy any covenant or
condition in the instrument evidencing or securing any such prior lien debt if
any right of foreclosure or right of entry or of sale shall have arisen, (d)
failure for 90 days after notice to observe any other covenants or conditions,
including sinking fund obligations, in the Mortgage Indenture, (e) adjudication
of the Company as a bankrupt, entry of an order approving a reorganization
petition or appointment of a trustee or receiver in certain proceedings and the
continuance of such adjudication, order or appointment for 90 days, and (f) the
Company's admission of its inability to pay its debts, the Company's making of
an assignment for the benefit of creditors, or certain petitions or consents in
bankruptcy, insolvency or reorganization proceedings.
In addition, the Thirty-fifth Supplemental Indenture provides that if any of
the following events of default occurs under the Indenture, it shall be deemed
to be a default under the Mortgage Indenture as hereafter provided: (i) default
in the payment of any interest upon any Security when such interest becomes due
and payable shall be deemed to be a default in the due and punctual payment of a
like amount of interest on the Mortgage Bonds, (ii) default in the payment of
the principal of (or premium, if any, on) any Security at the stated maturity
thereof or upon redemption thereof shall be deemed to be a default in the due
and punctual payment of a like amount of principal of the Mortgage Bonds, (iii)
default in the deposit of any sinking fund payment when and as due by the terms
of a Security shall be deemed to be a default under the Mortgage Indenture, (iv)
a default in the performance, or breach, of any covenant or warranty of the
Company as described in Section 601(4) of the Indenture shall be deemed to be a
default under the Mortgage Indenture, (v) the occurrence of an event described
in Section 601(5) of the Indenture shall be deemed to be a default under Section
10.01(e) of the Mortgage Indenture, (vi) the occurrence of an event described in
Section 601(6) of the Indenture shall be deemed to be a default under Section
10.01(f) of the Mortgage Indenture and (vii) the occurrence of an event of
default provided in an indenture supplemental to the Indenture shall be deemed
to be a default under the Mortgage Indenture.
Upon a default, the Trustees may exercise any of their rights under the
Mortgage Indenture and upon direction of a majority of the outstanding first
mortgage bonds must so act if certain conditions are met.
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MODIFICATION OF MORTGAGE AND WAIVER OF DEFAULT
The rights of the holders of first mortgage bonds may be modified with the
consent of the holders of 75% of the first mortgage bonds, including, unless all
are affected alike, not less than 75% of each series affected; provided,
however, no modification of the terms of payment of principal or interest (other
than postponement of any interest payment date for not more than 3 years, which
may be consented to by the holders of 75% of the first mortgage bonds) and no
modification depriving the holder of a lien on the mortgaged property or
reducing the percentage required for modification is effective against any
bondholder without his consent. Uncured defaults (except in payment of principal
or interest) may be waived by the holders of 75% of the first mortgage bonds
(including the holders of 60% of the first mortgage bonds of each series).
VOTING OF THE MORTGAGE BONDS
The Trustee will attend such meetings of the holders of first mortgage
bonds, or deliver its proxy in connection therewith, as relate to matters with
respect to which it shall be entitled to vote or consent. The Indenture provides
that so long as no event of default shall have occurred and be continuing under
the Indenture, the Trustee will vote or consent as a holder of the Designated
Mortgage Bonds proportionately with what the Trustee reasonably believes will be
the vote or consent of the holders of all other first mortgage bonds outstanding
under the Mortgage Indenture that will vote or consent, provided, however, that
the Trustee will not so vote in favor of, or so consent to, any amendment or
modification of the Mortgage Indenture which, if it were an amendment or
modification of the Indenture, would require the consent of Holders of
Securities as described under "Description of Debt Securities--Modification and
Waiver," without the prior written consent of Holders of Outstanding Securities
which would be required for such an amendment or modification of the Indenture.
RESTRICTIVE COVENANTS
Certain series of the Company's first mortgage bonds impose specific
dividend restrictions on the Company, the most restrictive of which currently
provides that so long as there are outstanding any bonds of such series, the
Company may not (a) declare or pay any dividend (other than dividends payable in
common stock of the Company) on or make any other distribution in respect of any
shares of the common stock of the Company, or (b) purchase, redeem, retire or
otherwise acquire for a consideration (other than in exchange for or from the
proceeds of other shares of capital stock of the Company) any shares of capital
stock of the Company of any class, except to the extent required to comply with
any sinking or purchase fund which may now exist or hereafter be established for
any class of preferred stock of the Company, if the aggregate amount so
declared, paid, distributed or expended after December 31, 1961 would exceed the
aggregate amount of the net income of the Company available for dividends on its
common stock accumulated after December 31, 1961, plus the sum of $1,900,000. As
each series of first mortgage bonds subject to this restriction matures or
otherwise ceases to be outstanding, the Securities will cease to have the
benefit of such series' restrictive covenants.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
considerations that may be relevant to a holder of a Debt Security who is
subject to United States federal income taxation on a net income basis in
respect of a Debt Security (an "Owner"). This summary deals only with Owners who
will hold Debt Securities as capital assets and does not address tax
considerations applicable to investors that may be subject to special tax rules,
such as banks, insurance company, or dealers in securities, or persons who will
hold Debt Securities as a position in a "straddle" for tax purposes.
This summary is based on laws, existing and proposed regulations,
administrative rules, and judicial decisions as of the date hereof, all of which
are subject to change. Prospective investors should consult
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their own tax advisors in determining the tax consequences to them of holding
Debt Securities, including the application to their particular situation of the
federal income tax considerations discussed below, as well as the application of
state, local or other tax laws and prospects for enactment of future tax
legislation or regulations.
PAYMENTS OF INTEREST
Payments of interest on a Debt Security (other than a "Discount Security" as
defined below) will generally be taxable to an Owner as ordinary interest income
at the time such payments are accrued or are received in accordance with the
Owner's method of federal income tax accounting.
ORIGINAL ISSUE DISCOUNT
A Debt Security may be issued for an amount that is less than its stated
redemption price at Stated Maturity. The difference, if it exceeds 0.25 percent
of the stated redemption price at Stated Maturity multiplied by the number of
full years to maturity, will be "original issue discount" ("OID"). (Debt
Securities issued with OID shall be referred to as "Discount Securities.") For
this purpose, a Debt Security's stated redemption price at Stated Maturity
includes all payments to be made other than payments of "qualified stated
interest" (generally, interest payable on the outstanding principal amount at a
fixed rate or at a qualifying variable rate at least annually). Notice will be
given in the applicable Prospectus Supplement or pricing supplement thereto when
the Company determines that a particular Debt Security will be a Discount
Security.
Owners of Discount Securities should be aware that they must, in general,
include OID income in advance of the receipt of some or all of the related cash
payments. With respect to Discount Securities having a term in excess of one
year, the OID will be included in income currently as interest as it accrues
over the life of the Debt Security under a formula based upon the compounding of
interest at a rate that provides for a constant yield to maturity. Accrued OID
must be included in income by subsequent as well as original owners of Discount
Securities. See "Premium and Market Discount" below.
In certain cases, where interest payments do not constitute qualified stated
interest under the applicable Treasury regulations, Debt Securities that bear
interest from a non-tax standpoint may be deemed instead to bear OID for federal
income tax purposes. Treasury regulations would characterize Debt Securities as
Discount Securities if, for example, such Debt Securities provide for teaser
rates, interest holidays, or other interest short-falls resulting in more than a
de minimis amount of OID, or bear interest pursuant to an interest rate formula
subject to a cap, floor, or similar interest rate limitation that is reasonably
expected, as of the date of issue, to cause the interest rate for one or more
accrual periods to be significantly higher or lower (as the case may be) than
the overall expected return on the Debt Security determined without such cap,
floor or other limitation. Accordingly, Owners, including Owners who use the
cash method of accounting for federal income tax purposes, would be required to
report interest in respect of such a Debt Security under the method described
above for Discount Securities. Holders should consult their own tax advisors as
to whether Debt Securities will be considered to have been issued with OID under
such circumstances and as to the effect thereof on their particular situations.
Treasury Regulations provide an election for an Owner which uses the accrual
method to treat all interest on a Discount Security as OID which accrues on a
constant yield basis. Owners and prospective investors should consult their tax
advisors regarding the availability and tax consequences of this election.
In the case of Discount Securities having a term of one year or less
("Short-Term Discount Securities"), OID is included in income currently either
on a straight-line basis or, if the Owner so elects, under the constant-yield
method used generally for OID. However, certain categories of Owners (generally
individuals or other taxpayers who use the cash method of accounting for federal
income tax purposes) are not required to include accrued OID on Short-Term
Discount Securities in their income currently unless they elect to do so. If
such an Owner that does not elect to currently include OID in income
subsequently
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recognizes a gain upon the disposition of the Discount Security, such gain may
be treated as ordinary interest income to the extent of the accrued OID.
Furthermore, such an Owner of Short-Term Discount Securities may be required to
defer deductions for a portion of the Owner's interest expenses with respect to
any indebtedness incurred or maintained to purchase or carry such a Discount
Security. In the case of Owners that are required to include OID on Short-Term
Discount Securities in income currently, the amount of accrued OID included in
income will be added to the Owner's tax basis in the Discount Security.
The Company will provide annual information statements to the holders of
Discount Securities and to the Internal Revenue Service regarding the amount of
OID determined to be attributable to such Discount Securities for that year.
Prospective investors are advised to consult their tax advisers with respect to
the particular OID characteristics of any Discount Security and with respect to
any available elections that could affect the federal income tax consequences of
holding Discount Securities.
BASIS, SALE, EXCHANGE AND RETIREMENT
In general, an Owner's tax basis in a Debt Security will equal the Owner's
cost for the Debt Security, increased by any amounts includible in income by the
Owner as OID or market discount (as described below) and reduced by any
amortized acquisition premium (as described below) and any payments other than
qualified stated interest payments made on such Debt Security. Upon the sale,
exchange or retirement of a Debt Security, an Owner will recognize gain or loss
equal to the difference between the amount realized on the sale, exchange or
retirement (less any accrued qualified periodic interest not previously taken
into account, which will be taxable as such) and the owner's tax basis in the
Debt Security, except with respect to certain Short-Term Discount Securities.
See "Original Issue Discount" above. Except as discussed below with respect to
market discount, gain or loss recognized by an owner on the sale, exchange or
retirement of a Debt Security will be long-term capital gain or loss if the
owner has held the Debt Security for more than one year at the time of
disposition. In the case of individuals, capital gains are currently taxed at a
maximum marginal federal income tax rate of 28% while ordinary income is subject
to a maximum marginal federal income tax rate of 39.6%. In the case of
corporations, the maximum marginal federal income tax rate is 35% for both
ordinary income and capital gains. The distinction between capital gain or loss
and ordinary income or loss is also relevant for purposes of limitations on the
deductibility of capital losses and for determining the allowance for charitable
deductions.
PREMIUM AND MARKET DISCOUNT
An Owner who purchases a Discount Security for any amount that is greater
than its "adjusted issue price" (defined as the sum of the issue price of the
Discount Security and the portion of OID previously includible, disregarding any
reduction on account of acquisition premium, as discussed below, in the gross
income of any Owners of the Discount Security and reduced by the amount of any
payment previously made on the Discount Security other than a qualified stated
interest payment) and less than or equal to its stated redemption price at
Stated Maturity, reduced by the amount of any payment previously made on the
Discount Security other than a qualified stated interest payment, will be
considered to have purchased such Original Issue Discount Security at an
"acquisition premium." The amount of OID that such Owner must include in its
gross income with respect to such Discount Security for any taxable year is
generally reduced by the portion of such acquisition premium properly allocable
to such year. If an Owner purchases a Debt Security for a cost in excess of its
stated redemption price at Stated Maturity (reduced by the amount of any payment
made on the debt instrument prior to the purchase date other than a qualified
stated interest payment), such Debt Security will have no OID, and such Owner
may elect to amortize such premium, using a constant interest method, generally
over the remaining term of the Debt Security. Such premium generally shall be
deemed to be an offset to interest otherwise includible with respect to the Debt
Security. Premium on a Debt Security held by an Owner that does not make such an
election will decrease the gain or increase the loss otherwise recognized on
disposition of the Debt Security.
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If an Owner purchases a Debt Security or a Discount Security for an amount
that is less than, respectively, its stated redemption price at Stated Maturity
or its revised issue price (defined as the sum of the issue price of the
Discount Security and the aggregate amount of OID includible, disregarding any
reduction on account of acquisition premium, as discussed above, in the gross
income of all owners of the Discount Security), the amount of the difference
generally will be treated as "market discount" for federal income tax purposes,
unless such difference is less than a specified DE MINIMIS amount. Under the
market discount rules, an Owner will be required to treat any principal payment
on, or any gain on the sale, exchange, retirement or other disposition of, a
Debt Security as ordinary income to the extent of the market discount that has
accrued (and has not previously been included in income) during the period such
Owner held the Debt Security. In addition, the Owner may be required to defer,
until the maturity of the Debt Security or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Debt Security.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Debt Security, unless
the Owner elects to accrue on a constant interest basis. An Owner of a Debt
Security may elect to include market discount in income currently as it accrues
(on either a ratable or a constant interest basis with a corresponding increase
in the Owner's tax basis in the Debt Security), in which case the rule described
above regarding deferral of interest deductions will not apply. This election to
include currently, once made, applies to all market discount obligations
acquired on or after the first taxable year to which the election applies and
may not be revoked without the consent of the Internal Revenue Service.
BACKUP WITHHOLDING
In general, if a holder fails to furnish a correct taxpayer identification
number or certification of exempt status, fails to report dividend and interest
income in full, or fails to certify that he has provided a correct taxpayer
identification number and that he is not subject to withholding, the Company may
withhold a 31 percent federal backup withholding tax on certain amounts paid or
deemed paid (including OID) to the holder. An individual's taxpayer
identification number is his social security number. The backup withholding tax
is not an additional tax and may be credited against a holder's regular federal
income tax liability or refunded by the Internal Revenue Service where
applicable.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters or dealers
and also may sell Debt Securities directly or through agents. The Prospectus
Supplement or the pricing supplement thereto will set forth the names of any
underwriters or agents involved in the sale of the Offered Securities and any
applicable commissions or discounts.
Underwriters, dealers or agents may offer and sell the Offered Securities at
a fixed price or prices, which may be changed, or from time to time at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. In connection with the sale of Offered
Securities, underwriters, dealers or agents may be deemed to have received
compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters or agents may sell
Offered Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions (which may be changed from time to time) from
the purchasers for whom they may act as agent.
The Offered Securities, when first issued, will have no established trading
market. Any underwriters, dealers or agents to or through whom Offered
Securities are sold by the Company for public offering and sale may make a
market in such Offered Securities, but such underwriters, dealers or agents will
not be
17
<PAGE>
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
any Offered Securities.
Any underwriters, dealers and agents participating in the distribution of
the Offered Securities may be deemed to be underwriters and any discounts and
commissions received by them and any profit realized by them on resale of the
Offered Securities may be deemed to be underwriting discounts and commissions,
under the Act. Underwriters, dealers and agents may be entitled, under
agreements with the Company, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Act, and to
reimbursement by the Company for certain expenses.
If so indicated in an applicable Prospectus Supplement or pricing supplement
thereto, the Company will authorize dealers acting as the Company's agents to
solicit offers by certain institutions to purchase Offered Securities from the
Company at the public offering price set forth in such Prospectus Supplement or
pricing supplement thereto pursuant to contracts providing for payment and
delivery on a future date. Institutions with which such contracts may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions, but in all cases such institutions must be approved by the
Company. The obligations of any purchaser under any such contract will be
subject to the condition that the purchase of the Offered Securities shall not
at the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject. The underwriters and such
other persons will not have any responsibility in respect of the validity or
performance of such contracts.
EXPERTS
The balance sheets and statements of capitalization of the Company as of
December 31, 1995 and 1994, and the statements of income, common shareholder's
equity and cash flows for each of the three years in the period ended December
31, 1995, incorporated by reference in this prospectus, have been incorporated
by reference in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in auditing and
accounting.
Any financial statements and schedules hereafter incorporated by reference
in the registration statement of which this prospectus is a part that have been
audited and are the subject of a report by independent accountants will be so
incorporated by reference in reliance upon such reports and upon the authority
of such firms as experts in accounting and auditing to the extent covered by
consents filed with the Commission.
The statements made as to matters of law and legal conclusions under the
headings "Description of Debt Securities," "Description of Mortgage Bonds" and
"Certain United States Federal Income Tax Consequences" contained herein have
been reviewed by Choate, Hall & Stewart (a partnership including professional
corporations) and all such statements are set forth herein upon the authority of
such counsel.
ADDITIONAL INFORMATION
With respect to the unaudited interim financial information of the Company
for the periods ended March 31, June 30, and September 30, 1996, incorporated by
reference in this prospectus, the independent accountants have reported that
they have applied limited procedures in accordance with professional standards
for a review of such information. However, their reports included in the
Company's quarterly reports on Form 10-Q for the quarterly periods ended March
31, June 30, and September 30, 1996 and incorporated by reference herein, state
that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their report on
such information should be restricted in light of the limited nature of the
review procedures applied. The accountants are not subject to the liability
provisions of Section 11 of the Act for their reports on the unaudited interim
financial information because those reports are not "reports" or "parts" of the
registration statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of the Act.
18
<PAGE>
LEGAL OPINIONS
The legality of the Debt Securities offered hereby is being passed upon for
the Company by Choate, Hall & Stewart (a partnership including professional
corporations), Boston, Massachusetts and for the underwriters or agents, if any,
by Ropes & Gray, Boston, Massachusetts. Matters of local law are being passed
upon as to the State of Nevada by Woodburn and Wedge, Reno, Nevada, and as to
the State of California by Graham & James LLP. Choate, Hall & Stewart has relied
upon the opinions of such other counsel as to such matters.
19
<PAGE>
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NO DEALER, AGENT, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT (INCLUDING THE
ACCOMPANYING PRICING SUPPLEMENT) OR THE PROSPECTUS IN CONNECTION WITH THE OFFER
MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT (INCLUDING THE PRICING SUPPLEMENT) AND THE PROSPECTUS NOR ANY SALE
MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT (INCLUDING THE PRICING SUPPLEMENT)
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MADE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Description of Notes............................ S-3
Supplemental Plan of Distribution............... S-8
Validity of Notes............................... S-8
PROSPECTUS
Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 2
The Company..................................... 3
Application of Proceeds......................... 3
Ratio of Earnings to Fixed Charges.............. 3
Description of Debt Securities.................. 4
Description of Mortgage Bonds................... 12
Certain United States Federal Income Tax
Consequences.................................. 14
Plan of Distribution............................ 17
Experts......................................... 18
Additional Information.......................... 18
Legal Opinions.................................. 19
</TABLE>
$35,000,000
SIERRA PACIFIC POWER
COMPANY
COLLATERALIZED
MEDIUM-TERM NOTES,
SERIES D
---------------------
PROSPECTUS SUPPLEMENT
FEBRUARY 28, 1997
---------------------
LEHMAN BROTHERS
A.G. EDWARDS & SONS, INC.
UBS SECURITIES
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