Editorial: More dismal news for Nevada Power

Thursday, Feb. 13, 2003 | 9:02 a.m.

Nevada Power has been beset by problems since Sierra Pacific Resources acquired the company in 1999. The biggest setback was last year when state regulators' rejected nearly half of Nevada Power's billion-dollar rate hike request. There was more bad news Tuesday. Sierra Pacific's stock fell 17 percent, trading below $4 a share. The drop this time was due to negative reaction to Sierra Pacific's decision to refinance debt by privately issuing bonds, a move that could dilute the company's stock. The loss of investor confidence isn't new -- the parent company's stock has dropped 90 percent since the merger.

Ideally, Nevada Power would climb out of the hole that it dug for itself when it made some bad energy-purchasing decisions a couple of years ago, but that hope increasingly seems unlikely. An out-of-state company might seek to purchase Nevada Power, but analysts believe it's unlikely in the near term because of the company's uncertain future. Still, an acquisition is possible at some point. The management of a well-run, out-of-state company might perform better than Nevada Power has, but that prospect still is worrisome since we would be placed at the mercy of a utility that has no ties to Nevada.

There is an alternative. Last July the government-run Southern Nevada Water Authority made a $3.2 billion bid to buy Nevada Power, but Sierra Pacific rejected the overture. That offer may not continue to be as generous much longer, however, because the company's bargaining power is considerably weaker: Its stock has fallen from around $7 a share to under $4 a share since the water authority's initial offer. Nevertheless, we believe Nevada Power should at least seriously consider a buyout proposal from the water utility.