Nevada Power, Water Authority tap bond market

Monday, Oct. 28, 2002 | 11:26 a.m.

Nevada Power Co. is paying off $200 million in debt with a junk bond sale announced Friday.

The $250 million general and refunding mortgage notes will yield 12.125 percent and have been rated Ba2 by Moody's and BB by Standard & Poor's, both below investment grade.

Rich Atkinson, vice president of investor relations and treasurer of Sierra Pacific Resources, Nevada Power's parent company, said the company had to borrow money when it was downgraded earlier this year.

Atkinson said the company's bank credit facilities expire at the end of November and the company had no choice but to secure junk bonds to meet its obligations. The company announced that the proceeds of the new seven-year note would repay the existing $200 million credit facility and for general corporate purposes.

The bonds were underwritten by Lehman Brothers Inc., New York, and proceeds are expected to be delivered to the company Tuesday.

"It's not a good time for any utility," Atkinson said today. "All utilities are under a big cloud these days."

Meanwhile, the Southern Nevada Water Authority, which has made a $3.2 billion bid to acquire Nevada Power, said it would price $200 million of general obligation bonds Tuesday.

Those bonds would provide funds for $2.2 billion in capital improvement projects the water district already has begun.

A spokesman for the district said none of the funds are earmarked for the potential acquisition of the electrical utility.

Two rating services give the water district investment-grade ratings. Moody's lists the bond deal at Aa2 while Standard & Poor's rates the Water District AA-.

Vince Alberta, a spokesman for the district, said the interest rate has not been firmed up, but the agency expects it to be around 5 percent. The last time the district bonded, a $250 million issue in June 2001, the rate was 5.31 percent.