Nevada Power parent returns to profitability

Friday, Aug. 3, 2001 | 11:02 a.m.

A revised energy policy enacted by Nevada lawmakers this year has helped Sierra Pacific Resources Inc. end four consecutive quarters of losses, the Nevada electric utility said today.

But an analyst who follows the company warned that Nevada Power's parent company is reaping the benefits of better credit and won't see substantial improvement until utility regulators approve a rate increase for the company.

Reno-based Sierra Pacific Resources today reported earnings of $54 million, 69 cents a share, on revenues of $1.2 billion. That compares with a loss of $20.2 million, 26 cents a share, on revenues of $474.3 million for the second quarter of 2000.

The dramatic increase in revenue was due to the $350 million sale of the company's water division in Northern Nevada and a rate increase that took effect during the quarter.

In the quarter ended June 30, the company had a one-time after-tax gain of $26 million, accounting for an increase of 33 cents a share from the sale of the company's water division to the Truckee Meadows Water Authority, which serves the cities of Reno and Sparks and Washoe County. The company reported an additional 1-cent-per-share improvement on the discontinuation of those water operations.

The 35 cents per share not attributable to the sale of the water company exceeded analysts' estimates of 28 cents.

But Sierra Pacific officials said it was the new legislation enabling the company to defer fuel and purchased power costs on behalf of customers that has enabled recovery.

"Our state's commitment to recovery of these wholesale costs finally removes the cloud that has hung over Nevada for some time and restores much-needed financial balance to our company and our state," said Walt Higgins, chairman and chief executive officer of Sierra Pacific.

"This quarter begins to reflect the earnings performance required to serve Nevada's dynamic, fast-growing economy. This partial recovery during the quarter is an important step foward in our ability to invest in Nevada and to attract new energy development in the state and keep pace with the needs of our customers."

But Ron Tanner, an analyst with Legg Mason, Baltimore, said the company doesn't have the money yet -- just good credit.

"They're still hurting until the (Nevada Public Utilities) Commission increases rates," Tanner said. "The earnings look good, but they're not cash. Until they (the company) go before the commission and get a rate increase approved, they really haven't turned the corner."

The deferred energy plan enables the company to pass through the cost of purchased power and fuel to customers and assures lenders that the company will have the resources to pay increased energy costs.