In money-saving move, Sierra won’t pay dividend

Friday, April 13, 2001 | 11:18 a.m.

By Richard N. Velotta LAS VEGAS SUN

Nevada Power Co. owner Sierra Pacific Resources Inc. said today it will not pay its 25-cent quarterly dividend as usual on May 1 in order to conserve cash because of uncertainty about the West's energy crisis.

The company's board of directors met Thursday and decided not to pay a dividend -- a move that would save the company about $18 million to $20 million -- and will review dividend policy at a board meeting scheduled May 21 in conjunction with the company's annual meeting.

Wall Street was closed today for the Good Friday holiday and many analysts that follow the company took the day off. Sierra Pacific's stock price is likely to fall on the news Monday.

"It was an enormously difficult decision for the board to take because utilities don't fail to pay a dividend," said Paul Heagen, vice president of corporate communications for Nevada Power, the Sierra Pacific subsidiary based in Las Vegas that serves Southern Nevada. "People buy our stock for some level of security."

Heagen said Sierra Pacific shareholders already have lost millions of dollars since last year when the stock lost value following the merger of Sierra Pacific and Nevada Power. The company's stock price tailed off when Nevada regulators did not allow the utilities to recover all of their purchased power and fuel costs from ratepayers when the state was considering the deregulation of the industry.

In a statement issued by Sierra Pacific following Thursday's meeting, President and Chief Executive Officer Walter Higgins said the company is not in a good position to pay a dividend at present.

"The dividend is vitally important in retaining investor confidence in Nevada at a time when new energy infrastructure is so critical to protecting consumers from this crisis," Higgins said. "However, it is equally important that our dividend reflect our current financial condition and the continued uncertainty about the energy crisis.

"We recognize that this decision is painful to shareholders who have already suffered an unprecedented drop in the value of their investment," he said. "However, it is really the only decision that can be made until we can get a more definitive view of how and when this crisis can be resolved."

State Consumer Advocate Tim Hay praised the decision, saying it was sound and will help Sierra Pacific re-establish its financial strength.

"We think it's an indication that the company has finally realized that the shareholders have to shoulder some of the burden that the ratepayers have been stuck with," Hay said, referring to recent massive rate hikes consumers have been hit with.