Sierra Pacific quarterly earnings miss estimates

Kevin Rademacher

Tuesday, Nov. 9, 2004 | 10:55 a.m.

Sierra Pacific Resources, parent company of Nevada Power Co. of Las Vegas, this morning reported quarterly net income of $90.6 million, or 50 cents a share.

The results are off from the net income of $107.8 million, or 59 cents a share, reported in the same 2003 quarter.

The company, however, said those year-ago results were buoyed by a gain of $61.5 million from the valuation of convertible debt. That gain also was offset by a more than $40 million charge for interest expenses related to a dispute with Enron Corp. over cancelled power contracts.

The 2004 results missed a Thomson First Call estimate of 60 cents a share for the quarter.

Revenue for the parent company was $903.9 million, off slightly from $904.3 million a year ago.

"We are especially pleased with the continuing improvement of operating performance at Nevada Power Company and Sierra Pacific Power Company (of Reno), both of which had substantial earnings gains over the prior-year quarter," said Walter Higgins, chief executive of Sierra Pacific Resources.

Nevada Power reported third-quarter net income of $86.2 million, up from $62.5 million a year ago.

The results were lifted by strong customer growth and rate increases approved by state regulators which offset a cooler 2004 summer.

In that year-ago quarter, Nevada Power recorded a $28 million charge for interest related to the Enron dispute.

Sierra Pacific Power reported third-quarter net income of $20.8 million compared with a 2003 net loss of $1.3 million.

Nevada Power Co. has 731,017 customers and 1,800 employees. Sierra Pacific Power has 294,407 customers and 1,322 employees.

Nevada Power is expected to spend $473 million in 2004 on capital expenditures, including construction to meet customer growth, Sierra Pacific Resources said in filings made this today with the Securities and Exchange Commission. Sierra Pacific Power is expected to spend $112 million on capital expenditures this year, the filings said.

SEC documents also contained positive remarks on the company's ongoing legal battle with Enron. While a year ago, the company warned of possible insolvency should a $336 million judgment against the utilities handed down in Enron's bankruptcy proceedings, the tone has changed.

Sierra's quarterly report now reads that should Enron secure a final judgment against the Nevada company "management believes that the utilities would have the means to pay any such judgment."

In a conference call with investors this morning, Sierra executives also outlined a series of positive developments in the battle with Enron over power contracts that were canceled amid the fallout from the Western energy crisis of 2000-01.

The original $336 million bankruptcy court rulings has been vacated by an appeals court judge and ordered back for reconsideration. Also the Federal Energy Regulatory Commission has agreed to hear an appeal based on claims from the Nevada company that Enron wrongfully terminated the contracts.

Executives also pointed to the purchase of a new power plant north of Las Vegas, new renewable energy contracts and relief gained in recent regulatory cases in Nevada.

"The business strategies we have been pursuing ... are starting to bear fruit," Higgins told analysts.