Nevada Power equity hinges on PUC ruling

Monday, June 3, 2002 | 11:06 a.m.

The state Public Utilities Commission was scheduled to vote today on a request by Nevada Power Co. to issue up to $450 million in equity-secured bonds to help the cash-strapped utility raise more money.

The request, if approved, may not have a direct effect on ratepayers but it could affect shareholders since the company's equity would be at stake. But Nevada Power would also have to find parties willing to purchase the bonds, not an easy task given the fact the utility's credit rating is in "junk" status.

Nevada Power, which filed its request in April, has been vague about what it would do with the money.

"The proceeds from the debt securities will be used for all lawful purposes as a public utility including, but not limited to, the acquisition of property, construction, completion, extension or improvement of facilities, or for the refinancing or discharge or refunding of debt, or reimbursement of Treasury for expenditures made for the foregoing purposes," Nevada Power's application states.

In addition to paying off short-term debt, there is speculation on Wall Street that Nevada Power would use at least some of the proceeds to help it purchase energy from wholesalers to get through the summer. It was reported last month by a national organization that monitors the nation's electricity grids that Nevada Power still didn't have 25 percent of the power it needed to get through the summer.

The PUC staff, represented by the pre-filed testimony of financial analyst Daniel Gabour, recommended that Nevada Power's request be approved.

The utility "needs the ability to have access to capital markets in order to meet its cash demands from its operating and construction requirements and the redeem/refinance existing debt," Gabour stated. "The total available and borrowed via its bank credit facility is $200 million. This credit facility expires in November 2002 and renewal is not guaranteed.

"NPC represents they have no access to the short-term markets, their bank credit facility was fully drawn on to redeem maturing commercial paper and they have no long-term debt issuance authority. NPC believes it has no other options for financing if this application is not granted."

The Southern Nevada Water Authority, Nevada Power's largest customer, recommended conditional approval of the utility's request. But the water authority, represented by consultant Dennis Peseau of Salem, Ore., wants the PUC to require Nevada Power to explain its plan and its negotiations with potential lenders.

But opposition to the bonding request was filed by the state Bureau of Consumer Protection.

State Consumer Advocate Timothy Hay stated in his opposition that the application from Nevada Power is too vague and should either be rejected or delayed until more information is provided by the utility.

Philip Williamson, a financial analyst for the consumer protection bureau, stated in pre-filed testimony that Nevada Power's request would refinance debt that comes due in November and in the fall of 2003 but "is not intended to provide near-term liquidity."

Nevada Power has stated it was placed in financial jeopardy after the PUC ruled on March 29 to give the utility only $485 million of the $922 million it is seeking for energy used from March 2001 through September. The utility sued the PUC in Carson City District Court in an attempt to recover the full amount and a trial is set in October.