Bellagio is back

By Liz Benston (contact)

Wednesday, April 14, 2004 | 10:51 a.m.

Power was restored in phases early today at the Bellagio as the resort prepared to reopen this afternoon and welcome guests for the first time since a Sunday power outage shut the property on the Las Vegas Strip.

The marquee in front of the building was lit early this morning advertising the big, yellow "O" of the Cirque du Soleil show and the resort's Monet art exhibit. Light beamed from the cupola atop the resort.

After more than 24 hours of repairing and testing high-voltage cable lines at the Bellagio, engineers and MGM MIRAGE officials say they still don't know what caused power lines to fail early Sunday. Bellagio is considered MGM MIRAGE'S most luxurious and profitable resort.

The resort, considered the most profitable on the Strip, is expected to lose millions of dollars as a result of the major power outage that has idled the property for more than 36 hours.

According to county building officials participating in an ongoing investigation of the incident, the cable system met code requirements and passed several inspections, including an inspection about a year ago of electrical cables that were rerouted to allow for the construction of the Bellagio's upcoming room tower. The cables that were rerouted connected to the resort's marquee and water feature, Clark County Development Services Building Division Director Ron Lynn said.

The resort has dual power sources supplied by Nevada Power Co. -- one is a primary cable line and and the other is an emergency cable line that runs parallel to the primary line but is several feet away from it, Lynn said. The primary and emergency power lines don't run through the same conduit and the backup line is also hooked to an emergency generator, he said. That layout isn't atypical, though every resort's power design is somewhat different, he said.

"They're all fruit but it's difficult because you're comparing apples and oranges," he said.

All resorts are required to have an emergency or backup power source though some may go beyond that, Lynn said.

The problem began around 2 a.m. Sunday when two main power cables shorted, MGM MIRAGE spokesman Alan Feldman said. The failure caused overheating in a cable vault, causing additional damage to neighboring lines and taking out the resort's main power, he said. In order to repair the two lines, resort engineers cut power to the remaining circuits in the vault.

"It is not uncommon for a property of this size to lose a single circuit," Feldman said today. "It is uncommon to lose two simultaneously. That's what we're investigating."

The property's emergency power system kicked on when the main power went out and has been running minimal functions at the resort throughout the duration of the blackout, he said. Emergency power has lit some hallways, elevators and other primary areas and is intended to help guests exit safely, he said. The emergency system isn't intended to operate the resort as normal, he said.

The main power line consists of about seven cables located in the same vault, Lynn said. When the two cables burned, resort officials decided to drop power on the other five cables to repair the burned lines, he said.

Those cables are different from the resort's emergency power source, which is located in a separate vault, he said.

The property acted prudently by shutting down power altogether to examine and repair the system, he said.

"You can work around live power but it's dangerous," he added.

Some observers are questioning whether the configuration of the cables was somehow flawed or defective. Resorts say they spend millions of dollars on so-called "redundant" power systems that supposedly allow properties to run without interruption should the main power source be compromised. The Bellagio's power system is estimated to cost in the tens of millions of dollars.

"We know that the way in which the system was put in was not unusual, that it is used in other buildings and in other cities," Feldman said. "The employees at the time did everything appropriately" to repair the cables, he added.

Lynn said truly redundant systems are rare if not inconceivable on the Strip because they are cost prohibitive. Most resorts' backup systems do not allow properties that lose their main power source to operate "as normal" in any case, he said.

The Bellagio's emergency power system "worked as designed" by kicking on a after the main power shut down, Lynn said. Emergency power has remained on the entire time the resort was repairing the main power system.

Lynn said his department is "concerned" about determining the cause of the initial cable failure and wants to prevent it from happening again.

Feldman said "it's too early to tell" whether the same thing could happen at other resorts, though there's some evidence that the configuration of power is similar at Mirage and Treasure Island.

Feldman said the failure could be the result of any one of a number of factors, from a construction defect or design flaw to a freak accident.

"We're not going to rule out or rule in anything. That's going to be part of the analysis," Feldman said. "The problem we're having has never happened before in the history of the town."

The shutdown of the resort was handled in a controlled fashion in which gamblers and guests were asked to cash in their wagers and check out of the hotel, Feldman said. The resort doesn't anticipate many disputes or issues with customers over uncollected bets, in part because the slot machines have electronic counters that can track bets, he said.

Gaming Control Board agents were on hand during the shutdown of the property and will be present again this afternoon when the property is expected to reopen, he said.

Gamblers were asked to cash out their bets before machines and tables were shut down Sunday morning, he said.

About 90 to 95 percent of wagers were settled with guests, the Gaming Control Board's chief of enforcement Keith Copher said Tuesday.

"We didn't receive a single complaint about wagers and we'll be available (today) should any arise," he said.

The Bellagio isn't without disgruntled hotel guests.

Among them is April, an Orange County resident who was directed to a cheaper hotel Sunday and calls the experience her "worst three days of vacation ever."

"You'd think a huge prestigious resort would be able to reroute power, move a generator, borrow one of the other hotels' generators or something in an event like this," said April, who declined to give her last name.

"When they have power going to their tower under construction, fully lighting it up and night, yet not enough power to keep the water running in the rooms, they obviously weren't prepared in the last bit," she said.

The Bellagio also wasn't able to put some customers up at other "first class" hotels on the Strip, she said.

"There was no offer of a return visit which they should have done as a five diamond resort with supposedly good customer relations," she said.

The reopening procedure will resemble that of opening a new resort, with gaming agents on hand to inspect machines and surveillance equipment as power is brought on, Copher said.

The shutdown is expected to cost MGM MIRAGE from 2 to 3 cents per share in profit during the second quarter, company officials said.

A loss of 2 cents per share could cost the company about $5.7 million in gambling revenue, $12.9 million in total revenue and about $4.8 million in cash flow, a key performance indicator, gaming stock analyst Lawrence Klatzkin of Jefferies & Co. said today.

"While this accident is unfortunate, it is a one-time event and does not affect our positive opinion of the company," Klatzkin wrote in a research note to investors.

Bear, Stearns & Co. bond analyst John Mulkey also said he was "not yet concerned over the property's closure."

MGM MIRAGE can expect to somewhat offset the business lost at the Bellagio with a boost at its MGM Grand Detroit casino, which is siphoning customers from the Casino Windsor across the border from Detroit in Canada, Mulkey wrote in a research note to investors Tuesday. The Casino Windsor, which is managed by competitor Caesars Entertainment Inc., has been closed since April 2 because of a labor strike. The Bellagio generates about 30 percent of the company's cash flow during its historically strong second quarter.

At a regularly scheduled board meeting Tuesday, MGM MIRAGE officials decided to pay hourly wages for workers idled by the blackout. The move affects more than 2,500 union and nonunion workers and will cost in the millions of dollars, Feldman said.

"We had talked with the company about employees who have missed shifts," Culinary Union Secretary-Treasurer D. Taylor said. "I'm glad to hear that MGM MIRAGE is doing that for the Bellagio. The power's gone out (on the Strip before) but never on this scale."

At the Bellagio this morning, antique lanterns lining the property also were temporarily lit as the power was restored, as were lights in the retail shops along the manmade Lake Bellagio.

The famed dancing waters were not operating. Three workers in wetsuits worked from a barge, diving under the water and appearing to check the jets. Another hotel worker in a motorized raft navigated the perimeter of the lake, using a net to remove debris from the water.

Work continued on a 925-room hotel tower directly behind the resort. Elevators were running along with one of two huge cranes atop the structure. Workers also could be seen moving about on the top floor of the tower.

As the streets began to buzz with early morning walking traffic, people glanced over at the Bellagio to see any signs of power restoration.

Michael Schulz, a tourist from Berlin who was making his first visit to Las Vegas, stopped with his girlfriend to look at the Bellagio, where they had checked in days ago.

"Yes, of course I will stay here again," said Schulz, who was relocated to the Venetian hotel-casino where he will spend the remainder of his six-day vacation to America.

"Such a problem with electrical grids can happen anywhere in the world," he said. "But you don't expect it, of course, at a five-star hotel, so it was troublesome."