Sierra Pacific CEO defends big merger termination fee

Tuesday, May 22, 2001 | 11:15 a.m.

Executives at Nevada Power Co.'s parent company say the $7.5 million merger termination fee it is making to Enron Corp. is preferable to the millions that could be spent in a lengthy court battle.

Walt Higgins, chairman and chief executive officer of Sierra Pacific Resources Inc., the Reno-based holding company for Nevada Power, gave the first public details of the fee Monday at the company's annual meeting of shareholders.

Higgins, who told shareholders that lawmakers are responding to some of the energy problems that have migrated from California to Nevada and the rest of the West in the last year, explained that the payment to Houston-based Enron is for the cancellation of the acquisition of Enron's Portland General Electric, announced April 26.

Responding to questions following a presentation on the state of the company, Higgins said Enron had already begun converting computer systems in anticipation of the $3.1 billion acquisition.

Sierra Pacific's ability to acquire Portland General Electric from Enron was jeopardized in late 2000 and early 2001 when fuel costs skyrocketed and the company's financial stability faltered.

Higgins said one of the positives for the company in the past few months is that it has not had to file for bankruptcy protection like utility companies in California.

"There are still plenty of clouds and choppy water ahead and we have some repair work still to do, but I believe customers and investors in this state will be rewarded for how Nevada has stood up to this crisis and proven its ability to invest in its future and way of life," Higgins told shareholders.

The Nevada Legislature has approved a plan reinstating a deferred energy rate mechanism that will enable the company to collect or refund money to ratepayers as fuel and purchased power costs fluctuate. Nevada Power officials said the $7.5 million payment to Enron would be borne by company shareholders and not ratepayers.