Sierra Pacific highlights profit during meeting

Kevin Rademacher

Tuesday, May 3, 2005 | 10:50 a.m.

In contrast to heated events in recent years, Sierra Pacific Resources enjoyed a largely calm audience on Monday at its annual shareholders meeting.

During a presentation to about 100 shareholders, company Chief Executive Walter Higgins said Sierra Pacific's financial state is improving after it suffered a near collapse in the wake of the 2000-01 Western energy crisis.

"I'm very pleased to report that we achieved significant improvements during 2004 and, while serious challenges remain, our company is well positioned to continue that progress," he said.

Higgins pointed to the company's 2004 net income of $28.6 million -- Sierra Pacific's first full-year profit since 2001 -- as the primary exhibit in the case for better financial health. The company's stock price, Higgins also pointed out, has also climbed from the $7.42 a share level which marked the beginning of 2004. The stock closed Monday at $10.87 a share.

Shareholders on hand responded well.

The only outburst was applause after shareholder Jay Alt said, "I have full confidence in this company."

His response came after one shareholder criticized the company for failing to add power plants.

Higgins responded that the company is currently in the process of completing the 1,200-megawatt Lenzie Generating Station, which it purchased from Duke Energy last year.

Shareholder Richard P. Thomas asked Higgins why the company would not put a freeze on executive salaries and bonuses until a dividend is reinstated.

"I think you should put a hold on it right now until you pay dividends," Thomas said.

He said he purchased the stock for the dividend income and that the stock, which has not paid a dividend since 2002, is now worth about half the purchase price.

"The question is: 'Will I be able to attract the people that can make (happen) what you and I (want to) happen ... unless I pay them something comparable to what they can earn in the market?' " Higgins said. "The answer is: You can't."

Thomas said he did not think the executives were overpaid, but he wanted the additional funds to allow a dividend.

Higgins said the dividend was unlikely to return until after the company returned to investment-grade credit levels. Sierra Pacific was cut to junk levels after the state Public Utilities Commission disallowed the utility's Nevada Power Co. subsidiary to recover from customers more than $400 million spent on purchasing power during the energy crisis.

"It will not be possible to even contemplate the reinstatement of the dividend until we achieve investment grade," Higgins said, adding that such an upgrade was between one and three years away.

During his remarks to the audience, Higgins also warned of rising natural gas prices.

He said the wholesale cost of natural gas, which is used to fuel much of the company's power plants, has jumped from $2 per thousand cubic feet in the 1990s to $7 for the same amount of gas today.

Those prices will be reflected in rate case filings that will be made with regulators this summer for Nevada Power and Sierra Pacific Power Co. of Reno.

"The natural gas situation is one that all of us must remain concerned about," Higgins said, adding that the fuel-price spike emphasizes the need to pursue renewable energy and new coal plant technologies.

Also at the meeting, shareholders elected Joseph B. Anderson Jr., Krestine M. Corbin, former Harrah's Entertainment Chairman Phil Satre and former Las Vegas casino boss Clyde Turner to the board of directors. Their terms will expire in 2008.

Shareholders also approved a plan to give shareholders a greater voice in proposals for purchases of company assets. The plan by shareholder Chris Rossi of Boonville, Calif., would give shareholders the right to vote on proposed takeovers opposed by management.

Rossi's proposal said in the proxy statement that "Poison pills entrench current management, even when it's going a poor job. Pills water down shareholders' vote and deprive them of a meaningful voice in corporate affairs.'

Sierra Pacific's directors recommended rejecting the proposal.

"A similar proposal from Mr. Rossi was passed by shareholders at last years annual meeting," the company said in the proxy statement. "Since that time the board evaluated the (poison pill) plan to determine whether it continued to provide any benefit to shareholders. After careful consideration, the Board concluded that it is in the best interests of shareholders to continue the Plan in accordance with its terms until it expires in 2009."

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