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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

     
x
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2004
 
    
  OR
 
    
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 FOR THE TRANSITION PERIOD FROM      TO
             

Commission File
Number
  Registrant, Address of
Principal Executive Offices and Telephone
Number 		 
I.R.S. employer
Identification Number 		 
State of
Incorporation
 
            
1-08788
  SIERRA PACIFIC RESOURCES
P.O. Box 10100
(6100 Neil Road)
Reno, Nevada 89520-0400 (89511)
(775) 834-4011
   88-0198358   Nevada
 
            
2-28348
  NEVADA POWER COMPANY
6226 West Sahara Avenue
Las Vegas, Nevada 89146
(702) 367-5000
   88-0420104   Nevada
 
            
0-00508
  SIERRA PACIFIC POWER COMPANY
P.O. Box 10100
(6100 Neil Road)
Reno, Nevada 89520-0400 (89511)
(775) 834-4011 		  88-0044418   Nevada

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes x   No  o

Indicate by check mark whether any registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Sierra Pacific Resources Yes x   No   o;Nevada Power Company Yes  o  No  x ; Sierra Pacific Power Company Yes o   No   x

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.

     
Class
Common Stock, $1.00 par value
of Sierra Pacific Resources 		  Outstanding at November 8, 2004
117,430,679 Shares

Sierra Pacific Resources is the sole holder of the 1,000 shares of outstanding Common Stock, $1.00 stated value, of Nevada Power Company. Sierra Pacific Resources is the sole holder of the 1,000 shares of outstanding Common Stock, $3.75 stated value, of Sierra Pacific Power Company.

This combined Quarterly Report on Form 10-Q is separately filed by Sierra Pacific Resources, Nevada Power Company and Sierra Pacific Power Company. Information contained in this document relating to Nevada Power Company is filed by Sierra Pacific Resources and separately by Nevada Power Company on its own behalf. Nevada Power Company makes no representation as to information relating to Sierra Pacific Resources or its subsidiaries, except as it may relate to Nevada Power Company. Information contained in this document relating to Sierra Pacific Power Company is filed by Sierra Pacific Resources and separately by Sierra Pacific Power Company on its own behalf. Sierra Pacific Power Company makes no representation as to information relating to Sierra Pacific Resources or its subsidiaries, except as it may relate to Sierra Pacific Power Company.

 

Table of Contents

SIERRA PACIFIC RESOURCES
NEVADA POWER COMPANY
SIERRA PACIFIC POWER COMPANY
QUARTERLY REPORTS ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2004

CONTENTS

         
PART I - FINANCIAL INFORMATION
        
ITEM 1. Financial Statements (Unaudited)
        
Sierra Pacific Resources -
        
    3  
    4  
    5  
Nevada Power Company -
        
    6  
    7  
    8  
Sierra Pacific Power Company -
        
    9  
    10  
    11  
    12  
    50  
    59  
    67  
    76  
    96  
    96  
       
    97  
    102  
    102  
    102  
    104  
 EX-10.1 PURCHASE AGREEMENT
 EX-10.2 CLOSING AGREEMENT
 EX-10.3 ENGINEERING,PROCUREMENT AND CONSTRUCTION AGREEMENT
 EX-10.4 EXHIBIT A SPECIFICATION
 EX-10.5 AMENDED AND RESTATED CREDIT AGREEMENT
 EX-10.6 CREDIT AGREEMENT
 EX-31.1 SECTION 302 CERTIFICATION OF CEO
 EX-31.2 SECTION 302 CERTIFICATION OF CFO
 EX-32.1 SECTION 906 CERTIFICATION OF CEO
 EX-32.2 SECTION 906 CERTIFICATION OF CFO

2

Table of Contents

SIERRA PACIFIC RESOURCES

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
                 
    September 30,   December 31,
    2004
   2003
ASSETS
                
Utility Plant at Original Cost:
                
Plant in service
   $ 6,530,179     $ 6,353,399  
Less accumulated provision for depreciation
     2,046,875       1,953,271  
 
    
 		      
 		  
 
     4,483,304       4,400,128  
Construction work-in-progress
     153,823       242,522  
 
    
 		      
 		  
 
     4,637,127       4,642,650  
 
    
 		      
 		  
Investments and other property, net
     70,367       73,130  
 
    
 		      
 		  
Current Assets:
                
Cash and cash equivalents
     153,762       181,757  
Restricted cash and investments (Note 1)
     88,125       54,705  
Accounts receivable less allowance for uncollectible accounts: 2004-$41,612; 2003-$44,917
     388,402       301,322  
Deferred energy costs - electric (Note 1)
     82,906       295,677  
Deferred energy costs - gas (Note 1)
     1,136       1,358  
Materials, supplies and fuel, at average cost
     73,808       79,525  
Risk management assets
     36,119       22,099  
Accumulated deferred income tax
     43,417       —  
Deposits and prepayments for energy
     66,489       63,847  
Other
     34,741       33,016  
 
    
 		      
 		  
 
     968,905       1,033,306  
 
    
 		      
 		  
Deferred Charges and Other Assets:
                
Goodwill (Note 11)
     22,877       309,971  
Deferred energy costs - electric
     635,296       497,905  
Regulatory tax asset
     312,988       155,547  
Other regulatory assets (Note 1)
     487,127       142,507  
Risk management assets
     367       —  
Risk management regulatory assets - net (Note 8)
     —       14,283  
Unamortized debt issuance expense
     61,328       50,842  
Other
     117,138       103,545  
 
    
 		      
 		  
 
     1,637,121       1,274,600  
 
    
 		      
 		  
Assets of Discontinued Operations (Note 12)
     30,178       40,072  
 
    
 		      
 		  
 
   $ 7,343,698     $ 7,063,758  
 
    
 		      
 		  
CAPITALIZATION AND LIABILITIES
                
Capitalization:
                
Common shareholders’ equity
   $ 1,438,149     $ 1,435,394  
Preferred stock
     50,000       50,000  
Long-term debt
     3,828,885       3,579,674  
 
    
 		      
 		  
 
     5,317,034       5,065,068  
 
    
 		      
 		  
Current Liabilities:
                
Short-term borrowings
     —       25,000  
Current maturities of long-term debt
     8,192       218,970  
Accounts payable
     183,850       165,936  
Accrued interest
     81,271       59,592  
Dividends declared
     1,046       968  
Accrued salaries and benefits
     26,421       24,444  
Deferred taxes
     —       106,478  
Risk management liabilities (Note 8)
     3,205       16,540  
Accrued income taxes
     5,582       8,077  
Contract termination liabilities (Note 9)
     342,013       338,704  
Other current liabilities
     32,239       29,088  
 
    
 		      
 		  
 
     683,819       993,797  
 
    
 		      
 		  
Commitments and Contingencies (Note 9)
                
Deferred Credits and Other Liabilities:
                
Deferred federal income taxes
     617,727       298,457  
Deferred investment tax credit
     42,880       45,329  
Regulatory tax liability
     39,385       41,877  
Customer advances for construction
     139,582       126,506  
Accrued retirement benefits
     107,681       112,075  
Risk management regulatory liability - net (Note 8)
     14,677       —  
Contract termination liabilities (Note 9)
     36,521       45,766  
Regulatory liabilities (Note 1)
     225,971       218,158  
Other
     89,971       80,859  
 
    
 		      
 		  
 
     1,314,395       969,027  
 
    
 		      
 		  
Liabilities of Discontinued Operations (Note 12)
     28,450       35,866  
 
    
 		      
 		  
 
   $ 7,343,698     $ 7,063,758  
 
    
 		      
 		  

The accompanying notes are an integral part of the financial statements.

3

Table of Contents

SIERRA PACIFIC RESOURCES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
                                 
    Three Months Ended   Nine Months Ended
    September 30,
   September 30,
    2004
   2003
   2004
   2003
            As Revised (Note 1)           As Revised (Note 1)
OPERATING REVENUES:
                                
Electric
   $ 887,224     $ 890,137     $ 2,067,948     $ 2,057,781  
Gas
     16,387       13,931       97,742       114,421  
Other
     304       279       3,762       908  
 
    
 		      
 		      
 		      
 		  
 
     903,915       904,347       2,169,452       2,173,110  
 
    
 		      
 		      
 		      
 		  
OPERATING EXPENSES:
                                
Operation:
                                
Purchased power
     392,771       458,406       849,906       946,147  
Fuel for power generation
     126,710       157,865       343,598       353,044  
Gas purchased for resale
     11,322       7,133       73,721       77,332  
Deferred energy costs disallowed
     —       —       1,586       90,964  
Deferral of energy costs - electric - net
     6,227       (58,141 )     93,058       44,729  
Deferral of energy costs - gas - net
     297       2,200       266       14,023  
Impairment of goodwill
     —       —       11,695       —  
Other
     80,912       73,098       244,163       230,887  
Maintenance
     16,046       13,972       63,150       54,799  
Depreciation and amortization
     51,435       49,315       153,501       141,663  
Taxes:
                                
Income tax expense/(benefit)
     45,193       24,262       17,296       (32,342 )
Other than income
     10,734       11,090       34,424       33,701  
 
    
 		      
 		      
 		      
 		  
 
     741,647       739,200       1,886,364       1,954,947  
 
    
 		      
 		      
 		      
 		  
OPERATING INCOME
     162,268       165,147       283,088       218,163  
OTHER INCOME (EXPENSE):
                                
Allowance for other funds used during construction
     717       1,039       3,282       3,883  
Interest accrued on deferred energy
     6,777       6,684       19,307       21,142  
Disallowed merger costs
     —       —       (5,890 )     —  
Disallowed plant costs
     —       —       (47,092 )     —  
Other income
     8,214       6,916       25,258       20,127  
Other expense
     (3,990 )     (3,751 )     (10,220 )     (10,750 )
Income (taxes) / benefit
     (3,406 )     (3,090 )     7,392       (9,167 )
Unrealized gain/(loss) on derivative instrument
     —       61,513       —       (46,065 )
 
    
 		      
 		      
 		      
 		  
 
     8,312       69,311       (7,963 )     (20,830 )
 
    
 		      
 		      
 		      
 		  
Total Income Before Interest Charges
     170,580       234,458       275,125       197,333  
INTEREST CHARGES:
                                
Long-term debt
     74,517       75,140       235,696       217,816  
Other
     5,437       50,821       36,385       70,525  
Allowance for borrowed funds used during construction
     (1,123 )     (1,481 )     (4,963 )     (4,368 )
 
    
 		      
 		      
 		      
 		  
 
     78,831       124,480       267,118       283,973  
 
    
 		      
 		      
 		      
 		  
INCOME (LOSS) FROM CONTINUING OPERATIONS
     91,749       109,978       8,007       (86,640 )
DISCONTINUED OPERATIONS:
                                
Loss from discontinued operations (net of income taxes of $163, $603, $2,091 and $16,642 respectively)
     (127 )     (1,231 )     (3,769 )     (31,133 )
 
    
 		      
 		      
 		      
 		  
NET INCOME/(LOSS)
     91,622       108,747       4,238       (117,773 )
Preferred stock dividend requirements of subsidiary
     975       975       2,925       2,925  
 
    
 		      
 		      
 		      
 		  
INCOME/(LOSS) APPLICABLE TO COMMON STOCK
   $ 90,647     $ 107,772     $ 1,313     $ (120,698 )
 
    
 		      
 		      
 		      
 		  
Amount per share (Note 10)
                               
Income/(loss) from continuing operations – basic
   $ 0.50     $ 0.60     $ 0.04     $ (0.75 )
Income/(loss) applicable to common stock – basic
   $ 0.50     $ 0.59     $ 0.01     $ (1.05 )
Income/(loss) from continuing operations – diluted
   $ 0.50     $ 0.29     $ 0.04     $ (0.75 )
Income/(loss) applicable to common stock – diluted
   $ 0.50     $ 0.28     $ 0.01     $ (1.05 )
Weighted Average Shares of Common Stock - basic
     183,117,111       182,926,433       183,045,191       115,294,693  
 
    
 		      
 		      
 		      
 		  
Weighted Average Shares of Common Stock - diluted
     183,117,111       183,014,871       183,045,191       115,294,693  
 
    
 		      
 		      
 		      
 		  

The accompanying notes are an integral part of the financial statements.

4

Table of Contents

SIERRA PACIFIC RESOURCES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
                 
    Nine Months Ended
    September 30,
    2004
   2003
CASH FLOWS FROM OPERATING ACTIVITIES:
                
Net Income (Loss)
   $ 4,238     $ (117,773 )
Non-cash items included in net income (loss):
                
Depreciation and amortization
     153,501       141,663  
Deferred taxes and deferred investment tax credit
     7,113       (53,506 )
AFUDC and capitalized interest
     (8,245 )     (8,251 )
Amortization of deferred energy costs - electric
     206,784       191,196  
Amortization of deferred energy costs - gas
     3,126       10,784  
Deferred energy costs disallowed
     1,586       90,965  
Goodwill impairment
     11,695       —  
Unrealized loss on derivative instrument
     —       46,065  
Impairment of assets of subsidiary
     —       32,911  
Loss on disposal of discontinued operations
     2,346       9,309  
Plant costs disallowed
     47,092       —  
Other non-cash
     (37,109 )     (14,098 )
Changes in certain assets and liabilities:
                
Accounts receivable
     (87,080 )     (36,934 )
Deferral of energy costs - electric
     (132,991 )     (151,435 )
Deferral of energy costs - gas
     (2,905 )     2,815  
Materials, supplies and fuel
     5,716       8,611  
Other current assets
     (4,369 )     37,424  
Accounts payable
     17,914       (54,235 )
Escrow payment for terminating supplier
     (60,867 )     —  
Other current liabilities
     24,192       51,591  
Change in net assets of discontinued operations
     131       (12,072 )
Other assets
     (10,491 )     11,478  
Other liabilities
     8,952       74,365  
 
    
 		      
 		  
Net Cash from Operating Activities
     150,329       260,873  
 
    
 		      
 		  
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Additions to utility plant
     (264,234 )     (276,438 )
AFUDC and other charges to utility plant
     8,245       8,251  
Customer advances for construction
     13,076       10,758  
Contributions in aid of construction
     16,973       9,656  
 
    
 		      
 		  
Net cash used for utility plant
     (225,940 )     (247,773 )
Investments in subsidiaries and other property - net
     8,227       (7,634 )
 
    
 		      
 		  
Net Cash used by Investing Activities
     (217,713 )     (255,407 )
 
    
 		      
 		  
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Increase /(Decrease) in short-term borrowings
     (25,000 )     —  
Change in restricted cash and investments
     27,448       (104,115 )
Proceeds from issuance of long-term debt
     565,000       650,842  
Retirement of long-term debt
     (526,568 )     (549,358 )
Sale of common stock, net of issuance cost
     1,356       (981 )
Dividends paid
     (2,847 )     (2,549 )
 
    
 		      
 		  
Net Cash from Financing Activities
     39,389       (6,161 )
 
    
 		      
 		  
Net Decrease in Cash and Cash Equivalents
     (27,995 )     (695 )
Beginning Balance in Cash and Cash Equivalents
     181,757       192,064  
 
    
 		      
 		  
Ending Balance in Cash and Cash Equivalents
   $ 153,762     $ 191,369  
 
    
 		      
 		  
Supplemental Disclosures of Cash Flow Information:
                
Cash paid during period for:
                
Interest
   $ 247,070     $ 188,482  
Income taxes
   $ —     $ (1,521 )
Noncash Activities:
                
Exchange of Floating Rate Notes for SPR Common Stock
   $ —     $ 8,750  
Exchange of Premium Income Equity Securities for SPR Common Stock
   $ —     $ 104,782  

The accompanying notes are an integral part of the financial statements.

5

Table of Contents

NEVADA POWER COMPANY

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
                 
    September 30,   December 31,
    2004
   2003
ASSETS
                
Utility Plant at Original Cost:
                
Plant in service
   $ 3,984,687     $ 3,816,630  
Less accumulated provision for depreciation
     1,091,812       1,018,044  
 
    
 		      
 		  
 
     2,892,875       2,798,586  
Construction work-in-progress
     96,258       109,148  
 
    
 		      
 		  
 
     2,989,133       2,907,734  
 
    
 		      
 		  
Investments and other property, net
     36,140       36,312  
 
    
 		      
 		  
Current Assets:
                
Cash and cash equivalents
     108,265       144,897  
Restricted cash (Note 1)
     50,049       2,600  
Accounts receivable less allowance for uncollectible accounts: 2004-$36,337; 2003-$40,297
     264,170       167,296  
Accounts receivable, affiliate companies
     2,728       3,533  
Deferred energy costs - electric (Note 1)
     58,205       247,249  
Materials, supplies and fuel, at average cost
     42,881       41,076  
Risk management assets (Note 8)
     14,126       11,702  
Accumulated deferred income tax
     —       —  
Deposits and prepayments for energy
     44,504       39,794  
Other
     22,802       21,540  
 
    
 		      
 		  
 
     607,730       679,687  
 
    
 		      
 		  
Deferred Charges and Other Assets:
                
Deferred energy costs - electric (Note 1)
     482,476       371,305  
Regulatory tax asset
     199,539       102,282  
Other regulatory assets (Note 1)
     275,962       60,721  
Risk management regulatory assets - net (Note 8)
     —       3,109  
Unamortized debt issuance expense
     37,121       34,052  
Other
     31,538       15,557  
 
    
 		      
 		  
 
     1,026,636       587,026  
 
    
 		      
 		  
 
   $ 4,659,639     $ 4,210,759  
 
    
 		      
 		  
CAPITALIZATION AND LIABILITIES
                
Capitalization:
                
Common shareholder’s equity
   $ 1,417,041     $ 1,174,645  
Long-term debt
     2,024,991       1,899,709  
 
    
 		      
 		  
 
     3,442,032       3,074,354  
 
    
 		      
 		  
Current Liabilities:
                
Current maturities of long-term debt
     5,965       135,570  
Accounts payable
     133,461       107,812  
Accrued interest
     49,815       35,399