UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Registrant, State of Incorporation, Address of
Commission File Principal Executive Offices and Telephone I.R.S. employer State of
Number Number Identification Number Incorporation
1-8788 SIERRA PACIFIC RESOURCES 88-0198358 Nevada
P.O. Box 10100 (6100 Neil Road)
Reno, Nevada 89520-0400 (89511)
(775) 834-4011
1-4698 NEVADA POWER COMPANY 88-0045330 Nevada
6226 West Sahara Avenue
Las Vegas, Nevada 89146
(702) 367-5000
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Common Stock, $1.00 par value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities of Nevada Power Company and subsidiaries:
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8.2% Cumulative Quarterly Income New York Stock Exchange
Preferred Securities, Series A,
issued by NVP Capital I
7 3/4% Cumulative Quarterly Trust Issued New York Stock Exchange
Preferred Securities, issued by NVP Capital III
(Title of each class) (Name of exchange on
which registered)
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Securities registered pursuant to Section 12(g) of the Act: None
State the aggregate market value of the voting stock held by non-affiliates. As of March 21, 2000: $ 1,048,866,818
Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date.
Common Stock, $1.00 par value, of Sierra Pacific Resources Outstanding at March 21, 2000: 78,419,949 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. |
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive proxy statement to be filed in connection with the annual meeting of shareholders, to be held June 19, 2000, are incorporated by reference into Part III hereof.
SIERRA PACIFIC RESOURCES
1999 ANNUAL REPORT FORM 10-K
CONTENTS
PART I........................................................................................................... 3 ITEM 1. BUSINESS (1)...................................................................................... 3 SIERRA PACIFIC RESOURCES...................................................................................... 3 INTRODUCTION.................................................................................................. 4 BUSINESS OUTLOOK AND OVERVIEW................................................................................. 6 ITEM 2. PROPERTIES........................................................................................ 26 ITEM 3. LEGAL PROCEEDINGS................................................................................. 26 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................... 27 PART II.......................................................................................................... 31 ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS (SPR).................... 31 ITEM 6. SELECTED FINANCIAL DATA........................................................................... 32 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS.............................................................. 32 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (SPR)............................... 48 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................................... 49 INDEPENDENT AUDITORS' REPORT.................................................................................. 50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................................................................... 62 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES............. 95 PART III......................................................................................................... 96 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............................................. 96 ITEM 11. EXECUTIVE COMPENSATION......................................................................... 96 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................. 96 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................. 96 PART IV.......................................................................................................... 97 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS on FORM 8-K............................... 97 SIGNATURES.................................................................................................... 99 INDEPENDENT AUDITORS' REPORT.................................................................................. 100 |
PART I
(1) The information in this Form 10-K, and in the Form 10-K of SPPC attached as
an Appendix, includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements relate to anticipated financial performance, management's plans
and objectives for future operations, business prospects, outcome of
regulatory proceedings, market conditions and other matters. Words such as
"anticipate," "believe," "estimate," "expect," "intend," "plan" and
"objective" and other similar expressions identify those statements that are
forward-looking. These statements are based on management's beliefs and
assumptions and on information currently available to management. Actual
results could differ materially from those contemplated by the forward-
looking statements. In addition to any assumptions and other factors
referred to specifically in connection with such statements, factors that
could cause SPR's, NVP's or SPPC's actual results to differ materially from
those contemplated in any forward-looking statement include, among others,
the following: (1) the pace and extent of the ongoing restructuring of the
electric and gas industries in Nevada and California; (2) the outcome of
regulatory and legislative proceedings and operational changes related to
industry restructuring; (3) the amount NVP and SPPC are allowed to recover
from customers for certain costs that prove to be uneconomic in the new
competitive market; (4) regulatory delays or conditions imposed by
regulatory bodies in approving the acquisition of Portland General Electric;
(5) the outcome of ongoing and future regulatory proceedings; (6)
management's ability to integrate the operations of SPR, NVP, SPPC, and
Portland General Electric and to implement and realize anticipated cost
savings from the merger of SPR and NVP and the acquisition of Portland
General Electric; (7) the results of the contemplated sales by NVP and SPPC
of their Nevada generating assets; (8) industrial, commercial and
residential growth in the service territories of NVP and SPPC; (9)
fluctuations in electric, gas and other commodity prices and the ability to
manage such fluctuations successfully; (10) changes in the capital markets
and interest rates affecting the ability to finance capital requirements;
(11) the loss of any significant customers; (12) the weather and other
natural phenomena; and (13) changes in the business of major customers which
may result in changes in the demand for services of NVP or SPPC. Other
factors and assumptions not identified above may also have been involved in
deriving these forward-looking statements, and the failure of those other
assumptions to be realized, as well as other factors, may also cause actual
results to differ materially from those projected. SPR assumes no obligation
to update forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting forward-looking
statements.
ITEM 1. BUSINESS
SIERRA PACIFIC RESOURCES
Sierra Pacific Resources, hereafter known as SPR, was incorporated under Nevada Law on December 12, 1983. SPR's mailing address is P.O. Box 30150 (6100 Neil Road), Reno, Nevada 89520-3150.
SPR has seven primary, wholly owned subsidiaries: Nevada Power Company (NVP), Sierra Pacific Power Company (SPPC), Tuscarora Gas Pipeline Company (TGPC), Sierra Pacific Communications (SPC), Sierra Energy Company dba e.three (e.three), Sierra Pacific Energy Company (SPE), and Lands of Sierra (LOS).
INTRODUCTION
AN EXPLANATION OF THE REPORTING FORMAT
The body of this report describes the merger between Sierra Pacific Resources and Nevada Power Company, which was completed on July 28, 1999. The form of this merger resulted in reporting and accounting requirements, which may be difficult for the reader of the document to understand. The purpose of this section is to bring clarity to the reporting and accounting methods and to assist the user of the report in understanding all aspects of Sierra Pacific Resources and its subsidiaries.
The merger between Sierra Pacific Resources and Nevada Power Company is a reverse acquisition. Specifically, Sierra Pacific Resources is the legal parent of Nevada Power Company after the merger. In addition, Sierra Pacific Resources remained the parent of its pre merger subsidiaries, including Sierra Pacific Power Company. However, for financial reporting and accounting purposes, Nevada Power Company was determined to be the acquiring entity under the guidance of Accounting Principles Board Opinion No. 16, Business Combinations.
As a result, the consolidated financial statements included in this report represent the requirements of purchase accounting, with Nevada Power Company represented as the acquirer. Under this financial presentation two general items must be noted. First, all historic financial information presented in the financial statements is that of Nevada Power Company; that is, the information presented for 1998 and 1997 reflects the amount previously reported for Nevada Power Company in its Annual Report on Form 10-K and includes no information for Sierra Pacific Resources. Second, the financial information for the year ended December 31, 1999 reflects the acquisition of Sierra Pacific Resources by Nevada Power Company on August 1, 1999. Therefore, the results of operations reflect twelve months of information for Nevada Power Company and five months of information for Sierra Pacific Resources and its pre merger subsidiaries. This presentation is carried forward to the notes to the financial statements so that the notes are consistent with the financial statements of which they are an integral part.
In order to provide insight into the significant operations of the consolidated entity, the discussion has been divided wherever possible to highlight the activities of the major subsidiaries of Sierra Pacific Resources. Specifically, Item 7, Management's Discussion and Analysis includes a table, which provides separate operating results for the major subsidiaries, Nevada Power Company and Sierra Pacific Power Company. The table also provides the total Other Subsidiaries operating results as well as the Consolidated Total. This format allows the discussion to be focused on the operating results of each entity. This discussion is performed by the inclusion of a brief paragraph of the minor subsidiaries, which comprise the Other Subsidiaries. Sierra Pacific Power Company, is required to file a stand-alone Annual Report on Form 10-K. Therefore, its operating results for the entire year of 1999 are thoroughly discussed in its Annual Report on Form 10-K and included in this report by reference. The line-by-line discussion, included in this report, therefore focuses on Nevada Power Company's operating results. Therefore a review of this report, which covers the Management Discussion and Analysis for Nevada Power Company and the Annual Report on Form 10-K of Sierra Pacific Power Company, which is attached, will provide the reader with a comprehensive analysis of the results of operations of the consolidated entity.
This Item 1, Business, goes on to discuss the major operations of the consolidated entity. It then discusses the Electric Industry Trends, the Sierra Pacific Resources and Nevada Power Company Merger and Generation Divestiture for the consolidated entity. The next sections of Item 1 include a detailed discussion of the Business & Competitive Environment, Major Projects and Financing Programs, Construction Program, Facilities & Operations, General Regulation and Rate Proceedings for
Nevada Power Company only. This presentation allows the reader to focus on the main business issues of Nevada Power Company. The same issues are discussed for Sierra Pacific Power Company in its stand-alone Annual Report on Form 10-K, which is included by reference.
The discussion of the Environment, includes not only the significant issues of Nevada Power Company but also the remainder of Sierra Pacific Resources, other than Sierra Pacific Power Company, which is discussed in its Annual Report on Form 10-K.The remainder of Item 1 is general information, which is reported on a consolidated basis.
Item 5, Market for the Registrant's Common Stock and Related Stockholder
Matters, reflects the stock prices and dividends paid for Sierra Pacific
Resources, including the information for periods before the merger, for SPR.
Item 6, Selected financial data is presented in a manner consistent with
the financial statements. All historic information presented is that of Nevada
Power Company.
Item 7A, Quantitative and Qualitative Disclosures About Market Risk,
presents data related to all of consolidated long-term debt at the end of the
year and therefore includes the debt of SPR and all its subsidiaries.
To further assist the reader, parenthetical references are included after each major section title. These references provide insight into the specific entity addressed in the section. References to SPR refer to the consolidated entity, except for the section related to debt financing in which SPR debt is discussed separately from that of its subsidiaries.
BUSINESS OUTLOOK AND OVERVIEW
On November 8, 1999, SPR and Enron Corporation (Enron) announced that they had entered into a purchase and sale agreement for Enron's wholly owned electric utility subsidiary, Portland General Electric Company (PGE). PGE is an electric utility serving more than 700,000 retail customers in northwest Oregon. PGE will become a wholly-owned subsidiary of SPR. Under terms of the agreement, Enron will sell PGE to SPR for $2.1 billion, comprised of $2.02 billion in cash and the assumption of Enron's approximately $80 million merger payment obligation. In addition, $1.0 billion in PGE debt and preferred stock will be reflected in SPR's Consolidated Financial Statements. At closing, the transaction will be financed through a bank loan. Ultimately, the transaction is expected to be financed with $750 million of the proceeds from the sale of the Nevada generation assets of SPR's NVP and SPPC subsidiaries, the issuance by SPR of debt and equity securities, and internal cash flow.
The proposed transaction is subject to customary closing conditions, including, without limitation, the receipt of all necessary governmental approvals, including the Federal Energy Regulatory Commission (FERC), the Securities and Exchange Commission (SEC), the Oregon Public Utility Commission (OPUC) and the Nuclear Regulatory Commission. Also, SPR intends to register with the SEC as a public utility holding company under the Public Utility Holding Company Act. SPR has filed a Petition for Declaratory Judgment with the Public Utilities Commission of Nevada (PUCN) seeking its waiver of jurisdiction over SPR's conversion to a public utility holding company. SPR completed its filings with the FERC, the Department of Justice, the OPUC and the SEC by March 3, 2000. Approvals are expected to be received by the second half of 2000.
NVP is an operating public utility that provides electric service in Clark County in southern Nevada. The assets of NVP represented 52% of the consolidated assets of SPR at December 31, 1999. NVP provides electricity to approximately 566,700 customers in the communities of Las Vegas, North Las Vegas, Henderson, Searchlight, Laughlin and adjoining areas. Service is also provided to Nellis Air Force Base and the Department of Energy at Mercury and Jackass Flats at the Nevada Test Site. For a detailed discussion of NVP matters, see the discussion that follows SPR's other subsidiaries.
SPPC is an operating public utility primarily engaged in the distribution, transmission, generation, purchase and sale of electric energy. SPPC also provides natural gas and water services in the Reno/Sparks area of Nevada. The assets of SPPC represented 40% of the consolidated assets of SPR at December 31, 1999. SPPC provides electricity to approximately 302,000 customers in a 50,000 square mile service area including western, central and northeastern Nevada, including the cities of Reno, Sparks, Carson City, Elko, and a portion of eastern California, including the Lake Tahoe area.
A complete description of SPPC is contained in its Annual Report on Form 10-K for the year ended December 31, 1999, attached hereto as an Appendix.
TGPC was formed as a wholly owned subsidiary in 1993 for the purpose of entering into a partnership (Tuscarora Gas Transmission Company or TGTC) with a subsidiary of TransCanada to develop, construct and operate a natural gas pipeline to serve an expanding gas market in Reno, northern Nevada, and northeastern California. In December 1995, TGTC completed construction and began service on its 229-mile pipeline extending from Malin, Oregon to Reno, Nevada. TGTC interconnects with PG&E Gas Transmission-Northwest (PG&E GT-NW) at Malin, Oregon. PG&E GT-NW is a major interstate natural gas pipeline extending from the U.S./Canadian border, at a point near Bonners Ferry, Idaho to the Oregon/California border. The PG&E GT-NW system provides TGTC customers access to natural gas reserves in the Western Canadian Sedimentary basin, one of the largest natural gas reserve basins in North America. As of December 31, 1999, SPR had an investment of approximately $16.4 million in this subsidiary.
As an interstate pipeline, TGTC provides only transportation service. SPPC was the largest customer of TGTC during 1999, contributing 95% of revenues. Malin, Oregon began taking service from TGTC during October 1996. The Sierra Army Depot at Herlong, California began taking service from TGTC October 1997. In 1998, TGTC began serving two new customers - the United States Gypsum Company located north of Empire, Nevada and HL Power Company located northwest of Wendel, California.
For a discussion of TGPC's results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
SPC, formerly Sierra Pacific Media Group, was created to examine and pursue telecommunications opportunities that leveraged existing skill sets of installing and deploying pipe and wire infrastructure. SPC presently has fiber optic assets deployed in the cities of Reno and Las Vegas. The expanding telecommunications market in these areas should provide continuing future opportunities to expand this fiber base and other profitable opportunities.
For a discussion of SPC's results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
e.three was organized in October 1996 as an unregulated wholly owned subsidiary of SPR. It provides comprehensive energy and other business solutions in commercial and industrial markets. This is accomplished by offering a variety of energy-related products and services to increase customers' productivity and profits and improve the quality of the indoor environment. These products and services include: technology and efficiency improvements to lighting, heating, ventilation and air-conditioning equipment; installation or retrofit of controls and power quality systems; energy performance contracting; end-use services; and ongoing energy monitoring and verification services.
In September 1998, e.three and Nevada Electric Investment Company (NEICO), a wholly-owned subsidiary of Nevada Power Company, formed e.three Custom Energy Solutions, LLC, a Nevada limited liability company, for the purpose of selling and implementing energy-related performance contracts and similar energy services in Southern Nevada. e.three Custom Energy Solutions, LLC's primary focus for its sales activities is in the commercial and industrial markets. During the latter half
of 1999, e.three Custom Energy Solutions, LLC began developing a chilled water-
cooling plant in the downtown area of Las Vegas. The plant will be owned by
e.three Custom Energy Solutions, LLC and will supply the indoor air-cooling
requirements for a number of businesses in its immediate vicinity. The plant is
expected to be operational in the third quarter of 2000.
In October 1998, e.three acquired Independent Energy Consulting, Inc. (IEC), a California based company, in an exchange of SPR stock for all of IEC's stock. IEC provides energy procurement management, third party auditing, performance contract consulting and strategic energy planning in the industrial and commercial markets.
For a discussion of e.three's results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
SPE was formed to market a package of technology and energy-related products and services in Nevada. SPE filed an application with the PUCN to be licensed as an Alternative Seller of Electricity in the State of Nevada. Except for its interest in the Aladdin project discussed below, SPE has withdrawn its application with the PUCN to be licensed as an Alternative Seller of Electricity in the State of Nevada and is dissolving its retail energy marketing efforts. SPE will retain its interest in the Northwind Aladdin LLC (a limited liability company owned by NEICO & UTT Nevada, Inc., an affiliate of Unicom Thermal Technologies, Inc.) to own, construct and maintain the facility for the production and distribution of chilled water, hot water, and emergency electric power for the Aladdin project in Las Vegas, Nevada.
For a discussion of SPE's results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
Lands of Sierra (LOS) was organized in 1964 to develop and manage SPPC's non-utility property in Nevada and California. These properties previously included retail, industrial, office and residential sites, timberland, and other properties. Remaining properties include land in Nevada and California. SPR has decided to focus on its core energy business. In keeping with this strategy, LOS continues to sell its remaining properties.
For a discussion of LOS' results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
On July 28, 1999, SPR completed its merger with NVP. More than 30 other mergers of electric and/or gas companies were pending, announced, or completed in 1999. Merger and acquisition activity is expected to continue into the next decade, as companies' position themselves for continued electric restructuring throughout the United States.
SPR announced its plan to divest its generation assets in June 1998. A stipulation on the Divestiture Plan was approved by the PUCN in February 2000. This stipulation will clear the way for the Divestiture process to begin. See detail discussion on the divestiture in the Generation Divestiture Section.
Federal and state legislation is moving the electric utility industry toward competition. Federal and state regulators play critical roles in establishing a competitive marketplace. Currently, 21 states have passed restructuring bills, and 19 more states are considering legislation to restructure their electric markets. In addition, the U.S. Congress is considering national legislation that would implement electric restructuring across the nation. Passage of a comprehensive federal bill is expected within the next several years. Regulatory changes generally focus on the unbundling of utility functions into separate products and services. The major product being opened to competition is energy (e.g., kilowatt hours). Other services such as meter reading and billing are also being opened to competition in some states, including California and Nevada. The delivery of energy (e.g., transmission and distribution) to businesses and homes remains a utility product regulated by the FERC and state regulators.
On December 15, the FERC issued Order No. 2000, a long awaited rule on Regional Transmission Organizations (RTO's). The implementation of Order No. 2000 is expected to have major long-term effects on the electric power markets by promoting regionalization of the transmission grid.
SPR's utility subsidiaries are subject to California, Nevada and the FERC regulatory jurisdiction. Federal and state regulation will continue to play an active role in SPR's utility businesses. SPR's electric system demand exceeds the import capabilities of its transmission system. Accordingly, some of SPR's generation capacity has been identified as "must run" in order to meet load. Tariffs governing the availability and pricing of "must run" facilities after the divestiture of generation have been approved by the FERC (see Generation Divestiture). The FERC will also regulate SPR's subsidiaries' electric transmission system. The states will continue to regulate retail distribution services determined to be non-competitive.
All of NVP's and the majority of SPPC's operating revenues are related to electric sales in Nevada. Nevada passed Assembly Bill 366 (AB366) in July 1997, as enabling legislation to implement electric industry restructuring in Nevada. This legislation was modified in June 1999 by Senate Bill 438 (SB438). SB438 provides for competition to be implemented in the Nevada electric utility industry (see Electric Restructuring Activities). On February 28, 2000, the governor of Nevada postponed the expected March 1, 2000 opening date. No new date has been set, but competition could begin later in 2000 or possibly in 2001. SB438 allows the PUCN to authorize full recovery of costs that it determines to be stranded as a result of restructuring and provides criteria for recovery of costs associated with purchase power obligations. In addition, SB438 provides the electric distribution utility will be the provider of last resort (PLR) until alternate methods go into effect, no sooner than July 1, 2001; under rates which will be capped until March 1, 2003.
In August 1997, the PUCN opened an investigatory docket of the issues to be considered as a result of restructuring the electric industry under AB366 and SB438. NVP and SPPC are participants in this docket in which new regulations for the restructured marketplace have been developed. These regulations include standards of conduct, consumer protection, stranded costs and licensing provisions for alternative sellers. Implementation of some of the regulations, including unbundling of services, stranded costs and provider of last resort, has already posed or is expected to pose financial risks to NVP and SPPC. NVP and SPPC are working to mitigate these risks by changing their business strategies, actively pursuing regulatory remedies and, if necessary, pursuing legal remedies. See further discussion regarding restructuring activities and potential risks in Item 7, Nevada Matters.
For more information regarding regulatory changes affecting NVP, see Item 7, Nevada Matters, FERC Matters and Note 3 of SPR's consolidated financial statements. For a discussion of Electric Trends related to SPPC, see its Annual Report on Form 10-K attached as an appendix.
As previously mentioned, the merger between SPR and NVP was finalized on July 28, 1999 following receipt of all regulatory approvals. The PUCN gave unanimous approval of a stipulation among the merging companies, the PUCN staff and the Utility Consumer Advocate (UCA), regarding the merger.
As part of the stipulation approved by the PUCN, the companies were required to re-file the plan to divest their generating assets, and file a final Independent System Administrator (ISA) proposal with the PUCN and the FERC. In January 2000, the FERC approved the ISA proposal; the PUCN's decision on this matter is still pending. See Generation Divestiture and Item 7, Nevada Matters for more information.
As part of the conditions for the merger, NVP and SPPC were required to file a general rate case and unbundle costs. In April 1999, Phase I of the revenue requirement and the unbundling study was filed with the PUCN. In September 1999, the PUCN issued an interim order on revenue requirements. In October 1999, the utilities filed Phase II regarding rate design. Hearings for SPPC were conducted in November 1999, and hearings for NVP were held in February 2000. Phase III will be filed 15 days following the PUCN decision on Phases I and II and will include full proposed tariffs for distribution service and all other noncompetitive services. NVP and SPPC are also required to file a general rate case three years after the start of retail competition in the state of Nevada. The filing would give the companies the opportunity to recover certain costs of the merger, provided they can demonstrate that merger savings exceed certain merger costs. Merger costs are to be split among the non-competitive, potentially competitive and unregulated services or businesses. An opportunity to recover the non-competitive portion of the merger costs will be addressed in the rate case that follows the start of competition in Nevada. The burden is on NVP and SPPC to prove that merger savings exceed merger costs. NVP and SPPC will also have the opportunity to recover goodwill in the same proceeding. For more information regarding the Merger, see Note 2 of SPR's consolidated financial statements.
In June 1998, SPR announced a plan to divest its generation assets. This business strategy was described in the SPR/NVP merger applications filed with the PUCN and the FERC in July 1998.
The FERC, Department of Justice, and SEC approved the merger. The PUCN conditionally approved the merger in December 1998, and one of the conditions was the filing of the divestiture plan with the PUCN. The plan was filed in April 1999, and included details about the auction process, market power mitigation, sale of the assets in described bundles, description of the proposed generation tariffs, description of the proposed independent system administrator, and the description of the proposed power purchase contracts.
In June 1999, the PUCN approved a stipulation in the Merger docket case with several conditions. Some of those conditions were: re-file the divestiture plan with the PUCN; file the generation aggregation tariffs (GAT) at the FERC; file the proposal for the ISA at the FERC; file proposals for the buyback or purchase power contracts; and file proposals for mitigation of the QF and purchase power contracts.
A revised Divestiture Plan was filed with the PUCN in October 1999. The PUCN held a hearing on December 28, 1999 and a stipulation was offered to the Commission for approval. Approval was received in February 2000.
In accordance with the approved stipulation, SPR will be offering for sale generation assets with peak capacity of approximately 2,985 megawatts (MW) with approximately 1045 MW owned by SPPC and approximately 1,940 MW owned by NVP. Potential buyers will be allowed to offer bids for different combinations of assets or for a consolidated asset. The plants utilize either coal, natural gas, or oil as fuel and are a mix of base load or peaking units consisting of conventional steam turbines, combined-cycle, or combustion turbines.
SPR anticipates closing the sales of the generation assets during a period beginning in the fourth quarter of 2000 and ending in 2003.
For a discussion of SPPC, see its 1999 Annual Report on Form 10-K attached as an Appendix.
The FERC issued Order 2000 in December 1999. The order requires all investor-owned utilities in the United States that own interstate transmission to file their plans regarding Regional Transmission Organizations (RTO's) by October 15, 2000. Utilities must file by that date, either joining an RTO or stating why they are not joining one. The RTO must be operational by December 15, 2001 with congestion management in place one year later.
The FERC has required that RTO's be operated by independent entities that are not participants in the energy market. The RTO must accommodate broad participation by both private and public utilities, provide customer-efficient price signals and be independent of market participants (i.e., sellers of energy to end use customers). In addition, RTO rates must eliminate pancaking (multiple rates on a transmission path), manage congestion and internal parallel flows, deal effectively with non-RTO transmission owning entities (not under the FERC jurisdiction) and provide correct investment incentives. The FERC has offered the possibility of incentive ratemaking to RTO's that meet all the criteria for a large-scale regional entity.
NVP, with SPPC, will explore strategic transmission options, using the guidelines included in the Order 2000. Their response will be filed before the October 15, 2000 deadline. The FERC filings for the start of Nevada restructuring and the PGE acquisition will anticipate this October RTO filing.
NVP's electric business contributed $977.26 million (100%) of 1999 operating revenues. The system has an annual load factor of approximately 46.3%, which is lower than the industry norm of 50% to 55%.
Winter peak loads are low relative to the summer peak. Winter load above the base amount is driven by air handling in forced air furnaces. Summer peak loads are driven by air conditioning demand. NVP's peak load increased an average of 8.14% annually over the past five years, reaching 3,993 MW on July 1, 1999. NVP's total electric megawatt-hour (MWh) sales have increased an average of 7.21% annually over the past five years.
NVP's service territory continues to be one of the fastest growing areas in the nation. A significant part of the growth in NVP's electric sales has resulted from new residential, industrial, and gaming customers.
NVP's electric customers by class contributed the following toward 1999 and 1998 megawatt-hour sales:
1999 1998
-------------------- --------------------
Residential 6,138,436 37.9% 5,735,698 38.7%
Office 875,716 5.4% 777,171 5.2%
Gaming, recreation, restaurants 3,009,526 18.6% 2,604,906 17.6%
Wholesale 829,551 5.1% 670,724 4.5%
Retail 462,918 2.9% 405,833 2.7%
All other & unclassified 4,873,063 30.1% 4,638,646 31.3%
-------------------- --------------------
Total 16,189,210 100.0% 14,832,978 100.0%
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Las Vegas, Nevada is one of the top resort destinations in the world. Ten of the world's largest resorts are located in Las Vegas. The total number of hotel rooms available is 128,000; 13,000 of those rooms were added in 1999. Overall hotel room capacity is 20% higher than the national average. McCarran International Airport has added international carriers and increased flights into Las Vegas.
NVP supplies electricity to a residential customer base with demands of 6,138,436 MWh, 37.9% of total MWh demand. This demand has increased 7% from 1998.
In 1999, NVP worked with local economic development entities to expand and diversify the economy of southern Nevada. In cooperation with local economic development partners, NVP has developed joint marketing plans, which have enabled recruiting and attraction efforts to be more efficient and far reaching. Over 1,000,000 square feet of commercial or industrial space relocated or expanded to southern Nevada in 1999, helping to build demand to 5,784,168 MWh.
The growth in 1999 of non-gaming and non-retail commercial and industrial customers is reflective of the growth in recent years. Efforts to diversify southern Nevada's economy are continuing to be successful. In contributing to these efforts in 1999, NVP began focusing a part of its recruitment and attraction efforts on the plastics/polymers and metals fabrication industries.
NVP's industrial and large commercial customers continue their interest in the electric supply source options potentially available to them under regulatory reforms currently being considered in Nevada. NVP continues to prepare for a more competitive environment and has actively participated in regulatory reform deliberations in Nevada. Upon opening the market to retail access, one of the most significant regulations that will impact the distribution business is the requirement to be the provider of last resort for customers who do not chose a competitive supplier or who are unable to secure a new supplier. Due to a proposed PUCN rule that the provider of last resort be placed into a separate business function equivalent to an affiliate, recent PUCN decisions regarding recovery of fuel expenses, and the stringent proposed regulations, significant detrimental financial impacts are expected to occur. As a result, assuming no regulatory relief, NVP is determined to exit the provider of last resort requirement as quickly as possible. First NVP would seek to exit the energy supply portion of the provider of last resort. Then, if current legislation and regulation do not change, NVP would plan to exit other services, including metering, billing and customer service functions. See Item 7, Nevada Matters and FERC Matters.
NVP's Megawatt hour sales to wholesale customers have increased at a rate of 27% over the past year. During 1999, firm and non-firm sales to wholesale customers comprised about 5% of total energy sales. The wholesale market can be very competitive, and with the advent of the California Independent System Operator (ISO) and Power Exchange (PX), there has been a definite change in the margins. Volatility of annual sales volume to wholesale customers is highly affected by weather and unit availability.
Percent
MWh of Total
------- --------
Firm Sales 306,537 37.4%
Non-firm Sales 466,418 56.9%
Firm Off-System Sales 47,085 5.7%
------- ------
Total 820,040 100.0%
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While the wholesale sales in 1999 represented 5% of NVP sales, they represent only 2.9% of electric revenues. NVP utilizes wholesale sales to better manage fuel and purchased power costs.
NVP has a program in place to provide customers with a choice of qualified contractors to construct new distribution facilities. This program is especially aimed at the developers of large-scale projects and has provided them with more flexibility to coordinate the stages of their construction. NVP began implementing an automated utility design and mapping system to be completed in 2000. This project will provide more accurate and timely designs. These designs will provide a seamless map of the electric distribution system within our coverage area. This will lead to a more efficient method to operate and maintain our distribution systems.
NVP's construction program and estimated expenditures are subject to continuing review and are revised from time to time due to various factors, including the rate of load growth, escalation of construction costs, availability of fuel types, changes in environmental regulations, adequacy of rate relief and NVP's ability to raise necessary capital.
Of the $245.0 million projected for NVP's 1999 construction program, $224.0 million was actually spent. Internally generated funds provided 19.5% of all construction expenditures.
Estimated construction expenditures of NVP for 2000 are $223.1 million. NVP may utilize internally generated cash and proceeds from the issuance of securities to meet capital requirements.
The following NVP major projects have been approved in previous resource plans, and have been financed by internally generated cash and/or the proceeds from various forms of debt and preferred securities. For a description of SPPC's Major Projects and Financing please see its Annual Report on Form 10-K for the period ended December 31, 1999, attached as an Appendix.
Crystal Transmission is a 500 kilovolt (kV) transmission project that was placed in service in May 1999. Total project costs incurred through December 31, 1999 were $97.8 million. Actual costs incurred in 1999 were $16.0 million. Estimated costs for 2000 are $.1 million.
River Mountain is a 230kV joint transmission project with the Colorado River Commission. Total project costs incurred through December 31, 1999 were $4.8 million. Actual costs for 1999 were $4.6 million. Estimated costs for 2000 are $29.3 million.
FINANCING PROGRAMS (SPR and NVP)
For a discussion of SPPC, see its 1999 Annual Report on Form 10-K attached as an Appendix.
On July 28, 1999, immediately following the completion of the merger between SPR and NVP, SPR put into place two unsecured revolving credit facilities totaling $500 million. The first is a $150 million 364-day unsecured revolving credit facility that is convertible at SPR's election into a one-year term loan. The second is a $350 million three-year unsecured revolving credit facility. These facilities replaced SPR's previous credit facility and may be used for working capital and general corporate purposes, including commercial paper backup. At the same time NVP put into place a $150 million 364-day unsecured revolving credit facility that is convertible at NVP's election into a one-year term loan. This facility replaced the previous credit facility for NVP and may also be used for working capital and general corporate purposes, including commercial paper backup. In addition, immediately following the merger, SPR and NVP established new commercial paper programs. SPR issued $456.2 million of commercial paper to provide temporary funding of the cash portion of the merger consideration and NVP issued $90 million of commercial paper to pay off short-term debt.
SPR has filed a registration statement with the SEC for the issuance of up to $500 million of debt securities and/or trust-preferred securities. Although no securities have been issued to date under this registration statement, SPR intends to issue the entire registered amount as debt securities by the end of the first quarter, or early in the second quarter, of 2000. The proceeds from such issuance will be used to retire short-term indebtedness, which was incurred to provide temporary funding of the cash consideration due in the merger of SPR with NVP
On April 1, 1999, SPR redeemed $10,000,000 of senior notes, Series D, leaving the Series E $10,000,000 senior notes, which mature April 1, 2000.
On October 1, 1999, NVP redeemed $45,000,000 Series Y, 6.93%, of First Mortgage Bonds.
On October 15, 1999, NVP issued $100 million of floating rate notes ("Notes") due October 6, 2000. Interest on the Notes, payable quarterly, commenced on January 15, 2000. The interest rate on the Notes for each interest period to maturity is a floating rate, subject to adjustment every three months. This quarterly rate is equal to the London Interbank Offered Rate (LIBOR) for three-month U.S. dollar deposits plus a spread of 0.79%. The Notes will not be entitled to any sinking fund and will be redeemable, in whole, at the option of NVP beginning on April 15, 2000 and on the 15/th/ day of each month thereafter. The proceeds of this financing were used to pay down commercial paper.
On October 20, 1999, NVP redeemed $10,000,000 Series Z, 8.5%, of First Mortgage Bonds. On October 15, 1999, PaineWebber offered to Nevada Power Company $10,000,000 par amount of the Series Z, 8.5% bonds due January 1, 2023 at a price of $101.65. On October 15, 1999 NVP accepted Paine Webber's offer of $101.65 plus accrued interest on $10,000,000 par amount of the Series Z 8.5% bonds and settled on October 20, 1999. The Series Z bonds are callable by NVP on January 1, 2003 at a price of $103.71.
See Note 9 of SPR's consolidated financial statements for more information related to long-term debt.
Gross construction expenditures for 1999, including allowance for funds used during construction (AFUDC) and contributions in aid of construction were $224.9 million and for the period 1995 through 1999 were $1,141.8 million. Estimated construction expenditures for 2000 and the period from 2001 to 2004 are as follows (dollars in thousands):
Total
2000 2001-2004 5-Year
--------------------------------
Total construction expenditures $223,095 $890,112 $1,113,207
AFUDC (11,400) (45,062) ($56,462)
Net salvage, including cost of removal (1,100) (4,400) (5,500)
Net customer advances and
contributions in aid of construction (20,080) (80,320) (100,400)
--------------------------------
Total cash requirements $190,515 $760,330 $ 950,845
================================
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Total construction expenditures estimated for 2000 and the 2001-2004 period consist of the following (dollars in thousands):
Total
2000 2001-2004 5-Year
-------- --------- ----------
Electric Facilities:
Distribution $135,060 $504,906 $ 639,966
Generation 9,134 8,770 17,904
Transmission 51,576 275,261 326,837
Other 27,325 101,175 128,500
--------------------------------
$223,095 $890,112 $1,113,207
================================
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NVP continues to maintain a wide variety of resources in its generation system. During 1999, NVP generated 56.7% of its total electric energy requirements in its own plants, purchasing the remaining 44.7% as shown below:
Megawatt- Percent
Hours of Total
------------- ------------
Company Generation
------------------
Gas/Oil 3,710,876 23.0%
Coal 5,457,087 33.8%
------------- ------------
Total Generated 9,167,963 56.7%
------------- ------------
Purchased Power
---------------
Long-Term Firm:
Hydro 638,527 4.0%
Utility Purchases 215,515 1.4%
Non-Utility Purchases
Other 2,363,931 14.6%
Spot Market 4,644,012 28.7%
------------- ------------
Total Purchased 7,861,985 48.7%
------------- ------------
Less Net Sales -872,302 -5.4%
------------- ------------
Total 16,157,646 100.0%
============== ============
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NVP recognizes that the management of energy commodity (electricity, natural gas, coal, and oil) price risk is an essential component of its efforts to manage revenues and expenses. As a result of the merger of SPR and NVP, the Board of Directors of the combined company requested that management review and consolidate the Risk Management Programs of the two utilities. SPPC and NVP engaged the services of a leading energy risk management consulting company to review existing policies and procedures, make any recommendations to the existing Program, and implement the revised Program. That project led the companies to adapt revised policies and procedures, implement new IT systems to track any commodity price exposures, as well as focus on potential "Earnings-at- Risk" which measures the amount of exposure that the companies have to energy prices at any point in time.
The electric customer growth rate was 5.9%, 6.2%, and 6.8% in 1999, 1998 and 1997, respectively. The annual retail electricity sales reached 16,157,646 megawatt-hours in 1999, which represents an increase 8.2% over 1998. The peak electric demand rose from 3,855 megawatts in 1998 to 3,993 megawatts in 1999.
The Nevada Legislature mandated retail access to alternative electric suppliers. While the opening date of competition is not yet known, once access begins, NVP will continue to be required to supply electricity to customers as the "provider of last resort". It is expected that some customers will elect to receive their electric supply from other suppliers; however, reasonable estimates of the number and timing of customers switching are not yet available. The proposed "provider of last resort" regulations have highlighted NVP's exposure to fuel price risks. The projections shown below are forecasts of the load to be provided to all of NVP's current customers, and therefore include demand that may actually be met by other electric suppliers.
NVP has committed as part of the merger agreement with PUCN to divest its generation facilities to enhance competition in a deregulated environment. Current plans call for the divestiture to occur in the year 2000. Until such time, NVP will continue to provide energy through generation and purchased power to meet both summer and winter peak loads. NVP's actual total system capability and peak loads for 1999, and as estimated for summer peak demand through 2001 (assuming no curtailment of supply or load and normal weather conditions), are indicated below:
Capacity at 1999 Peak Forecast Summer Peak
------------------------------------------------
MW % 2000 2001
------------------------------------------------
NVP Generation:
Existing (1) 1,939 43% 1,939 0
------------------------------------------------
Purchases
Long/Short-Term Firm (2) (3) 1,875 42% 2,091 4,490
Non-Utility Generators (4) 515 12% 515 305
Wholesale Sales 55 1% 29 32
------------------------------------------------
Subtotal 2,335 52% 2,577 4,763
------------------------------------------------
Additional Required 198 5% 260 267
Total System Capacity 4,472 100% 4,776 5,030
================================================
Net System Peak (5) 3,993 89% 4,264 4,491
Planning Reserves 479 11% 512 539
------------------------------------------------
Total 4,472 100% 4,776 5,030
================================================
Growth over previous year 6.8% 5.3%
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(1) Assumes divestiture is complete by peak season 2001.
(2) Long-term purchases include NVP's allotment of Hoover energy. Values are
net of losses.
(3) Includes potential short-term firm purchases that are not under contract.
Values shown represent purchases within existing transmission system
limits.
(4) Includes Sunpeak IPP units, which will be divested with NVP's generating
units.
(5) The system peak shown for 1999 is the actual system peak of 3.993 MW, which
occurred on July 1, 1999.
NVP plans its system consistent with the Western System Coordinating Council guidelines, which recommends planning reserves in excess of required operating reserves. The "Additional Required" represents the difference between the planning reserves and the operating reserves needed for the system. These additional reserves will be met, if needed, by short-term purchases through 2001.
The following is a list of NVP's generation plants including their megawatt (MW) summer net capacity, the type of fuel that they use to generate, and the year(s) that the unit(s) was (were) installed.
Number
of MW Year(s)
Name Type/Fuel Units Capacity Installed
---- --------- ------ -------- ---------
Clark Station Steam/Gas Turbine, Combined 1955, 1957, 1961, 1973,
Cycle/Natural Gas, Oil 6 687 1993, 1994
Reid Gardner (1) Steam/Coal 4 580 1965, 1968, 1976, 1983
Navajo (2) Steam/Coal 3 255 1974
Mohave (3) Steam/Coal 2 196 1971
Sunrise Steam/Gas Turbine, Natural Gas, Oil 2 149 1964, 1974
Harry Allen Gas Turbine, Natural Gas, Oil 1 72 1995
--------
1,939
========
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(1) This represents 24 megawatts of base load capacity and 226 megawatts of peaking capacity. Reid Gardner Unit No. 4, placed in service July 25, 1983, is a coal-fired unit, which is owned 32.2% by NVP and 67.8% by the Department of Water Resources of the State of California (CDWR). NVP is entitled to use 100% of the unit's peaking capacity for 1,500 hours each year. NVP is entitled to 9.6% of the first 250 megawatts of capacity and associated energy. NVP had options for the use of increasing amounts of capacity and energy from the unit beginning in 1998 so that NVP would have been entitled to use all of the unit's output 15 years from that date. However, the 1998 through 2003 options for 10.17 MW per year were not exercised and have expired.
(2) This represents NVP's 11.3% undivided interest in the Navajo Generating Station as tenant in common without right of partition with five other non- affiliated utilities.
(3) This represents NVP's 14% undivided interest in the Mohave Generating Station as tenant in common without right of partition with three other non- affiliated utilities, less operating restrictions.
NVP maintains and utilizes a diverse portfolio of resources to minimize its net average system operating costs. These resources consist of contracted and spot market supplies, as well as its own generation. During the last several years, NVP has witnessed a dramatic increase in the price of market energy, compared to previous years. Some of this is reflective of the overall increase in electricity costs throughout the country, the changing of regulatory environments and the opening of new and/or deregulated markets.
NVP is a member of the Western Systems Power Pool and the Southwest Reserve Sharing Group (SWRSG). NVP's membership in the SWRSG has allowed it to network with other utilities in an effort to more efficiently use its resources in the sharing of responsibilities for reserves.
NVP purchases both forward firm energy (typically in blocks) and spot market energy based on economics, operating reserve margins and unit availability. NVP has been able to efficiently manage its growing loads by utilizing its generation resources in conjunction with buying and selling opportunities in the market.
NVP's peak electric demand was experienced on July 1, 1999 with a peak system load of 3993 MWs. This demand plus a reserve margin was served by a combination of company owned generation, and firm and short-term power purchases.
NVP purchases Hoover Dam power pursuant to a contract with the State of Nevada, which became effective June 1, 1987 and will continue through September 30, 2017. NVP's allocation of hydro capacity is 235MWs.
NVP has a contract to purchase 210 MWs from an independent power producer. The contract became effective June 8, 1991 and will continue through May 31, 2016.
According to the regulations of the Public Utility Regulator Policies Act (PURPA), NVP is obligated, under certain conditions, to purchase the generation produced by small power producers and cogeneration facilities at costs determined by the appropriate state utility commission. Generation facilities that meet the specifications of the regulations are known as qualifying facilities (QFs). As of December 31, 1999, NVP had a total of 305 MWs of contractual firm capacity under contract with four QFs. All QF contracts currently delivering power to NVP at long-term rates have been approved by the PUCN and have QF status as approved by the FERC. The QFs are as follows:
Net
Qualifying Facility Contract Contract Capacity
Start End (MW)
-------------------------------------------------------------
Saguaro Power Company 10/17/91 04/30/22 90
Nevada Cogeneration
Associates #1 06/18/92 04/30/23 85
Nevada Cogeneration
Associates #2 02/01/93 04/30/23 85
Las Vegas Cogeneration
Limited Partnership 05/10/94 05/31/24 45
-------
Total 305
=======
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Energy purchased by NVP from the QFs constituted 30% of the purchase power requirements and 15% of the net system requirements during 1999. All of the QFs are cogenerators providing steam for various products and businesses.
The management of SPR is responsible for exploring strategic transmission options for both NVP and SPPC. NVP shares ownership in a 59-mile, 500-kilovolt line and two 15-mile, 230 kilovolt lines that transmit power from the Mohave Generating Station near Davis Dam on the Colorado River via Eldorado Substation to Mead Substation located near Boulder City, Nevada. NVP has 32 miles of 230- kilovolt lines from Mead Substation to Las Vegas. This line, together with two NVP-owned 10-mile 230 kilovolt lines, presently connected to the Bureau of Reclamation lines between Mead Substation and Henderson, Nevada, transmit the Mohave Generating Station power to the Las Vegas area. A 25-mile, 230 kilovolt line between the Mead Substation and NVP's Winterwood Substation was energized in 1988. This line brings the additional Hoover energy to the Las Vegas Area and increases NVP's interconnected transmission capabilities. NVP shares ownership in 76 miles of 500 kilovolt transmission line from the Navajo Generating Station to the Moenkopi Switchyard in Coconino County, Arizona (the
Southern Transmission System) and 224 miles of 500 kilovolt transmission line from the Navajo Generating Station to the Crystal Substation and 52 miles of 500 kilovolt transmission line from Crystal Substation to the McCullough Substation in Clark County, Nevada (the Western Transmission System). Power is transmitted from the McCullough Substation to the Las Vegas area via three 230-kilovolt lines of 23 miles, 25 miles and 32 miles in length, respectively. The 25-mile line was energized in May 1992. Two 25 mile - 230-kilovolt lines transmit power from the Reid Gardner Station located near Glendale, Nevada to the Harry Allen Substation.
In 1990, NVP added a new transmission interconnection consisting of a 345 kilovolt line from Harry Allen Substation in southern Nevada to the Nevada-Utah border where it connects with a PacifiCorp line to Red Butte Substation in Southern Utah near the City of St. George and a 230 kilovolt line from Harry Allen Substation to Northwest Substation which is located in Las Vegas. NVP owns the 50-mile, 230-kilovolt line and the 69 miles of the 345 kilovolt line from Harry Allen Substation to the Nevada-Utah border; PacifiCorp owns the portion of the 345 kilovolt line from the Nevada-Utah border to Red Butte Substation. At Harry Allen Substation, NVP has a 336,000 kilovolt-ampere transformer and two 336,000 kilovolt-ampere, 345-kilovolt phase shifting transformers which are used for necessary voltage transformations and to control flows on the interconnection.
In 1999, NVP added the Crystal Transmission Project. This project increased the transfer capability into the Las Vegas Valley up to 950 MWs by looping the Navajo-McCullough 500 kilovolt line into the new Crystal substation (located 6 miles northeast of Harry Allen station) and adding 54 miles of 230 kilovolt transmission lines from Crystal substation to Harry Allen station and into the Las Vegas Valley. The project also provided necessary voltage and flow control for the northern Las Vegas Valley by looping all 230 kilovolt lines in the vicinity into Harry Allen substation and adding two 672 kilovolt-ampere transformers and two 672 kilovolt-ampere phase shifting transformers at Crystal substation. In total, NVP has 386 miles of 230 kilovolt, 344 miles of 138 kilovolt and 485 miles of 69 kilovolt transmission lines in service.
NVP's 1999 fuel requirements for electric generation were provided by natural gas (40.6%), coal (59.3%) and oil (0.1%).
The average costs of coal, gas and oil for energy generation per million British thermal units (MMBtu) for the years 1995 - 1999, along with the percentage contribution to total fuel requirements were as follows:
---------------------------------------------------------------------------------
Average Consumption Cost & Percentage Contribution to Total Fuel Requirements
Gas Coal Oil
--- ---- ---
$/MMBtu Percent $/MMBtu Percent $/MMBtu Percent
------- ------- ------- ------- ------- -------
1999 2.27 40.6% 1.28 59.3% 4.01 0.1%
1998 2.35 33.0% 1.15 67.0% *
1997 2.25 33.0% 1.39 67.0% *
1996 1.95 24.0% 1.39 76.0% *
1995 1.51 23.0% 1.44 77.0% *
* Oil was less than .1% of consumption
---------------------------------------------------------------------------------
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Coal delivered to the Reid Gardner Station originates from various mines in the Utah coalfields and is delivered to the Station via the Union Pacific. The Union Pacific Rail Transportation contract was effective January 1, 1996 and expires December 31, 2000. This contract provides for deliveries from the Provo, Utah interchange to Reid Gardner Station in Moapa, Nevada.
The Union Pacific Railroad originates a portion of NVP's contract and spot coal in the Price, Utah area for delivery to the Provo interchange, then to the Reid Gardner Station. This contract expired on December 31,1999.
The Utah Railway contract originates the remainder of NVP's Price area supplies. This contact expires on December 31, 2000 with provisions for extension of the term. All of NVP's rail transportation contracts contain certain tonnage requirements and railroad service criteria.
Coal for both the Mohave and Navajo Stations is obtained from surface mining operations conducted by Peabody Coal Company on portions of the Black Mesa in Arizona within the Navajo and Hopi Indian reservations. The supply contracts with Peabody extend to December 31, 2005 for Mohave and to June 1, 2011 for Navajo, each contract having an option to extend for an additional 15 years.
NVP purchases natural gas on a firm, fixed and indexed price basis from the Rocky Mountain, San Juan or Permian Supply Basins. As sufficient, economic gas supplies are available on seasonal, monthly and daily terms, NVP has no long term gas supply contracts.
Gas is transported to the Clark and Sunrise stations via El Paso Natural Gas Company from the San Juan and Permian Basins and by Kern River Gas Transmission Company from the Rocky Mountain Basin. As there is sufficient economically priced pipeline capacity in the region, NVP has not entered into any long-term interstate transportation contracts.
Local transportation service to Clark and Sunrise is provided under a 32- year transportation services contract with Southwest Gas Company signed in 1995. This contact provides firm service and contains certain operating and nominating provisions. The Harry Allen Station is directly connected to Kern River.
No. 2 Fuel Oil provides a secondary fuel for Clark, Sunrise and Harry Allen Stations and is used in the igniters at Reid Gardner.
NVP is subject to the jurisdiction of the PUCN with respect to rates, standards of service, siting of and necessity for generation and certain transmission facilities, accounting, issuance of securities and other matters with respect to electric operations. NVP submits resource plans regarding its electric operations to the PUCN for approval.
Under federal law, NVP is subject to certain jurisdictional regulation, primarily by the FERC. The FERC has jurisdiction under the Federal Power Act with respect to rates, service, interconnection, accounting, and other matters in connection with NVP's sales of electricity for resale and the transmission of energy. The FERC also has jurisdiction over the natural gas pipeline companies from which NVP takes service.
As a result of regulation, many of the fundamental business decisions of NVP, as well as the rate of return it is permitted to earn on its utility assets, are subject to the approval of governmental agencies.
NVP is also subject to regulation by environmental authorities. See Environment.
During the 1997 session, the Nevada Legislature passed Assembly Bill 366 (AB366). AB366 was a comprehensive bill that introduced competition for electric and gas retail services. Since the fall of 1997, the PUCN has been developing regulations to implement AB366. In the 1999 session, the legislature passed Senate Bill 438 (SB438), which significantly modified many provisions of AB366. These two pieces of legislation substantially alter the way the company is regulated and how it will serve its customers.
On February 2, 1999, NVP filed its non-price terms and conditions for unbundled distribution service. A stipulation resolving most issues and agreeing to further filings on unresolved issues was filed with the PUCN on April 9, 1999, and subsequently approved by the Commission on April 22, 1999. Settlements regarding the unresolved issues were subsequently filed and approved by the Commission.
On April 1, 1999, in accordance with the merger order and the implementation of AB366, NVP filed a revenue requirements and unbundling study with the PUCN (the "Compliance Filing. The Compliance Filing included the development of an electric revenue requirement for the test period 1998. The Compliance Filing regulation requires the revenue requirement development to be in the form used for rate cases. In the unbundling study, the revenue requirement was assigned and allocated to a number of service components including generation, aggregation, transmission, distribution, metering, billing, and customer services. On September 23, 1999, the PUCN issued an interim order on NVP's April 1, 1999 Compliance Filing. The order contained the PUCN's decision on revenue requirements, return on equity, depreciation, and the unbundling study. NVP did not utilize the order's revenue requirement, return on equity or depreciation rates from phase II of the case because SB438 legally mandated that NVP use its July 1, 1999 revenue requirement.
On October 12, 1999, NVP filed final versions of the approved non-price terms and conditions and rates reflecting a revenue requirement in accordance with SB 438. Hearings were held in January 2000. A decision is expected in 2000.
NVP filed a deferred energy case on July 15, 1999, covering the period from June 1, 1998 through May 31, 1999. On September 30, 1999, NVP filed an update through August 31, 1999. Hearings began in January 2000. On February 4, 2000 the PUCN issued an order that rejected NVP's updated September 30, 1999 deferred energy filing. In addition, on March 21, 2000 the PUCN made
available a draft order that indicated a substantial reduction in NVP's requested rate relief on the remaining $44 million included in the case. NVP expects a final decision to be issued on March 27, 2000, which will substantially reflect the decision in the draft order. As a result of these decisions, NVP recognized a reserve for previously deferred energy and imputed capacity costs of $80 million. $56 million of the reserve is associated with the February 4 decision and $24 million is associated with the March 21 decision. NVP intends to appeal the decisions.
See Item 7, Management's Discussion and Analysis, Nevada Matters for a discussion of Nevada regulatory issues.
On May 29, 1999, NVP filed an application with the FERC to increase its Open Access Transmission rates. On November 24, 1999, an unopposed motion to suspend the procedural schedule to allow consummation of a settlement was filed with the Commission. The Settlement was filed February 8, 2000, and the proposed rates became effective on March 1, 2000.
On March 31, 1999, NVP filed with the FERC for approval of generation tariffs, which contain the rates, terms and conditions under which the new owners of NVP's generation would operate after divestiture. The FERC approved the tariffs on November 1, 1999. In compliance with the FERC's November 1, 1999 order, NVP filed pro forma service agreements for the approved tariffs on November 16, 1999 which were subsequently approved on December 16, 1999.
On July 23, 1999, NVP and SPPC submitted a filing to create the Mountain West Independent Scheduling Administrator. The filing was made to request approval of certain of the tariffs and agreements with respect to the transmission services of NVP and SPPC. On January 27, 2000, the FERC issued an order approving with modifications the Mountain West ISA proposal. Proceedings before the PUCN are still pending.
See Item 7, FERC Matters for more discussion of FERC regulatory issues. For regulatory issues related to SPPC, refer to its Annual Report on Form 10-K for the period ending December 31, 1999, which is attached as an appendix.
For a discussion of environmental issues related to SPPC, refer to its 1999 Annual Report on Form 10-K, which is attached as an Appendix.
As with other utilities, NVP is subject to federal, state and local regulations governing air and water quality, hazardous and solid waste, land use and other environmental considerations. Nevada's Utility Environmental Protection Act requires approval of the PUCN prior to construction of major utility generation and transmission facilities. The United States Environmental Protection Agency (EPA), Nevada Division of Environmental Protection (NDEP), and Clark County Health District (CCHD) administer regulations involving air quality, water pollution and solid, hazardous and toxic waste. SPR's board of directors has a comprehensive environmental policy and separate board committee, which oversees corporate performance and achievements, related to the environment.
Lands of Sierra, a wholly-owned subsidiary of SPR, owns property in North Lake Tahoe, California, which is leased to independent condominium owners. The property has both soil and groundwater petroleum contaminate resulting from a historic underground fuel tank. Additional contaminate from a third party fuel tank on the property has also been identified and is undergoing characterization. Remediation costs are estimated from $60,000 - $250,000.
As part of the generation divestiture process, Phase I and/or Phase II Environmental Assessments were conducted at NVP's Harry Allen, Clark, Sunrise and Reid Gardner facilities. Additional environmental assessments will be conducted in 2000 to further characterize the sites. Remediation costs are unknown because characterization is not complete.
The Federal Clean Air Act Amendments of 1990 (Amendments) include provisions for reduction of emissions of oxides of nitrogen by establishing new emission limits for coal-fired generating units. To meet these requirements, NVP installed additional pollution control technology at the Reid Gardner Station.
The Grand Canyon Trust and Sierra Club filed a lawsuit in the U.S. District Court, District of Nevada, in February 1998, against the owners of the Mohave Generation Station (including NVP), alleging violations of the Clean Air Act regarding emissions of sulfur dioxide and particulates. An additional plaintiff, National Parks and Conservation Association later joined the suit. The plant owners and plaintiffs have had numerous settlement discussions and filed a proposed settlement with the court on October 6, 1999. The consent decree, approved by the court in November, established emission limits for sulfur dioxide and opacity and required installation of air pollution controls for sulfur dioxide, nitrogen oxides and particulate matter. The new emission limits must be met by January 1, 2006 and April 1, 2006, for the first and second units, respectively. However, if the owners sell their entire ownership interest, with a closing date prior to December 30, 2002, then the new emission limits become effective 36 months and 39 months from the date of last closing for the two respective units. The estimated cost of new controls is $300 million. As a 14% owner in the Mohave Station, NVP's costs could be $42 million.
Also, the United States Congress authorized the EPA to study the potential impact Mohave may have on visibility in the Grand Canyon area. A final report of the study results was released in March 1999. The study acknowledges that sulfur dioxide emissions from Mojave are transported to the Grand Canyon. EPA has solicited information to determine whether visibility impairment in the Grand Canyon can be reasonably attributed to Mohave. If EPA determines that significant visibility impairment is reasonably attributable to the station, EPA could initiate a review for Best Available Retrofit Technology. Based upon indications from EPA and the National Park Service, the Plant owners believe that terms of the settlement of the suit discussed above are expected to be reflected in a State Implementation Plan for Nevada and resolve any concerns of EPA regarding visibility impairment.
In 1991, the EPA published an order requiring the Navajo Generating Station (Navajo) to install scrubbers to remove 90 percent of sulfur dioxide emissions beginning in 1997. As an 11.3% owner of Navajo, NVP was required to fund an estimated $48 million for installation of the scrubbers. The first of three scrubber units was placed in commercial operation in November 1997, the second scrubber in September 1998, with the last scrubber placed in operation in June 1999. Currently, the project is 98% complete. NVP spent approximately $47.6 million on the scrubbers' construction. In 1992, NVP received resource-planning approval from the PUCN for its share of the cost of the scrubbers.
NVP recently determined that while constructing the McCullough-Arden transmission line, access roads were created within a wilderness study area in violation of the Bureau of Land Management (BLM) Right of Way Grant. NVP's preliminary estimate for restoration costs is $200,000, which was reserved as of December 31, 1999.
In May 1997, the NDEP ordered NVP to submit a plan to eliminate the discharge of Reid Gardner Station wastewater to groundwater. The Order also required a hydrological assessment of groundwater impacts in the area. In June 1999, NDEP determined that wastewater ponds have degraded groundwater quality. In August 1999, NDEP issued a discharge permit to Reid Gardner Station and an Order that requires all wastewater ponds to be closed or lined with impermeable liners over the next 10 years. This Order also required NVP to submit a Site Characterization Plan to NDEP to ascertain impacts. Technical information from the Plan will be used to develop a corrective action plan and allow NVP to determine an estimate of remediation costs for cleanup. New pond construction and lining costs are estimated at $20,000,000.
Also, at the Reid Gardner Station, the NDEP has determined that there is additional groundwater contamination that resulted from oil spills at the facility. NDEP has required submitting a corrective action. The extent of contamination has not yet been determined. However, management does not expect this item to materially affect the financial position of SPR or NVP.
In May NDEP issued an order to eliminate the discharge of NVP's Clark Station wastewater to groundwater. The Order also required a hydrological assessment of groundwater impacts in the area. $565,000 will be spent in the next two years to line existing ponds. The extent of contamination has not been determined. However, management does not expect this item to materially affect the financial position of SPR or NVP.
In August NDEP issued an order to correct deficient ambient air monitoring quality control procedures at the NVP Reid Gardner Station. NVP has agreed to conduct a supplemental environmental project limited to $9,000 in lieu of a fine.
Nevada Electric Investment Company (NEICO), a subsidiary of NVP in 1999, owns property in Wellington, Utah, which was the site of a coal washing and load out facility. The site now has a reclamation estimate supported by a bond of $4.9 million with the Utah Division of Oil and Gas Mining. The property was under contract for sale and the contract required the purchaser to provide $1.3 million in escrow towards reclamation. However, the sales contract was recently terminated and NEICO has taken title to the escrow funds. It is NEICO's intention to sell the property.
SPR and its subsidiaries had 3,250 employees as of December 31, 1999, of which 1,667 were employed by NVP and 1,430 were employed by SPPC. NVP's current contract with the International Brotherhood of Electrical Workers Local #396, which covers 53.5% of NVP's workforce, was renegotiated in 1997 and 1998, and is in effect until February 1, 2002. The contract provides for a 4% general wage increase for bargaining unit employees beginning February 2, 1998, with 3% increases in 1999, 2000, and 2001. Nevada is a "right-to-work" state.
A description of SPPC employee issues is contained in its Annual Report on Form 10-K for the year ended December 31, 1999, attached as an Appendix.
NVP and SPPC have nonexclusive local franchises or revocable permits to carry on its business in the localities in which its respective operations are conducted in Nevada and California. The franchise and other governmental requirements of some of the cities and counties in which NVP and SPPC operate provide for payments based on gross revenues. During 1999, NVP and SPPC collected $34.4 million in franchise or other fees based on gross revenues. They also paid and recorded as expense $0.4 million of fees based on net profits.
Franchise Type of Service Expiration Date
---------------------------------------------------------------------------------
NVP:
Las Vegas Electric November 2029
Clark County Electric May 2004
Nye County Electric May 2006
City of Henderson Electric November 1999
SPPC:
Reno Electric, Gas and Water January 2006
Sparks Electric May 2006
Sparks Gas May 2007
Sparks Water April 2004
Carson City Electric February 2012
City of Elko Electric April 2017
City of South Lake Tahoe Electric April 2018
Washoe County Gas and Water May 2015
Washoe County Electric September 2015
Eureka County Electric July 2018
|
NVP and SPPC apply for renewal of franchises in a timely manner prior to their respective expiration dates.
SPR has invested in Nth Power Technologies (Nth), a venture capital fund that invests in developing technology companies. Nth has made several investments that may result in SPR strengthening its market position and developing new products and services.
ITEM 2. PROPERTIES
The general character of SPR's principal facilities is discussed in Item 1
- Business.
A complete description of the properties of SPPC is contained in its Annual Report on Form 10-K for the year ended December 31, 1999, attached as an appendix.
ITEM 3. LEGAL PROCEEDINGS
SPR, through the course of its normal business operations, is currently involved in a number of legal actions, none of which has had or, in the opinion of management, is expected to have a significant impact on its financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Pursuant to General Instruction G, the following information is included as an additional item in Part I, as of December 31, 1999:
EXECUTIVE OFFICERS OF THE REGISTRANT (SPR)
The information with respect to SPR's directors called for by Item 10 of Part III is hereby incorporated by reference from the section titled "Election of Directors and Beneficial Ownership" of SPR's definitive proxy statement to be filed pursuant to regulation 14A.
The following are current executive officers of the companies indicated and their ages as of December 31, 1999. There are no family relationships among them. Officers serve a term which extends to and expires at the annual meeting of the Board of Directors or until a successor has been elected and qualified:
Michael R. Niggli, 50, Chairman and Chief Executive Officer
Mr. Niggli was elected Chairman and Chief Executive Officer of SPR, and Chairman of NVP and SPPC upon the close of SPR's merger with NVP in July 1999. He joined NVP as President and Chief Operating Officer in February 1998. He was appointed by NVP's Board of Directors as Chief Executive Officer effective February 23, 1999 and as Chairman on June 10, 1999. Prior to joining NVP, Mr. Niggli was Senior Vice President of the Custom Accounts Market Unit for Entergy, a New Orleans-based global energy company. At Entergy, Mr. Niggli served as Vice President of Fuels Management, Vice President of Strategic Planning, and Vice President for Customer Service in Louisiana. He was promoted to Senior Vice President of Marketing in 1993 and Senior Vice President of the Custom Accounts Market Unit in 1996.
Malyn K. Malquist, 47, President and Chief Operating Officer
Mr. Malquist was elected President and Chief Operating Officer of SPR, President & Chief Executive Officer of NVP and SPPC upon the close of SPR's merger with NVP in July 1999. He was previously elected President and Chief Executive Officer of SPR in January 1998. In February 1998, Mr. Malquist was elected to the additional position of Chairman. Mr. Malquist continued to hold the positions of Chairman and Chief Executive Officer until SPR's merger with NVP in July 1999. He was Sr. Vice President - Distribution Services Business Group and Principal Operations Officer from August 1996 to January 1998. He served as Senior Vice President and Chief Financial Officer of SPR from April 1994, when he joined SPR, until August 1996. Prior to joining SPR, Mr. Malquist was with San Diego Gas and Electric, where from 1978 he held various financial positions, including Treasurer in 1990 and Vice President in 1993.
William E. Peterson, 52, Senior Vice President, General Counsel and Corporate Secretary
Mr. Peterson was elected to his present position in January 1994, and holds the same positions with NVP and SPPC. He was previously Senior Vice President, Corporate Counsel for SPPC from July 1993 to January 1994. Prior to joining SPR in 1993, he served as General Counsel and Resident Agent for SPR since 1992, while a partner in the Woodburn and Wedge law firm. He was a partner in the Woodburn and Wedge law firm since 1982.
Mark A. Ruelle, 38, Senior Vice President, Chief Financial Officer and Treasurer
Mr. Ruelle was elected to his present position March 1, 1997, and holds the same positions with NVP and SPPC. Prior to joining SPR, Mr. Ruelle was President of Westar Energy, a subsidiary of Western Resources in 1996, and before that, served as Vice President, Corporate Development for Western Resources in 1995. Mr. Ruelle was with Western Resources since 1987 and served in
numerous positions in regulatory affairs, treasury, finance, corporate development, and strategy planning.
Steven C. Oldham, 49, Vice President Corporate Development and Strategic Planning for SPR
Mr. Oldham was elected to his current position in November 1996. His previous executive positions include Vice President - Strategic Development; Vice President - Information Resources, Corporate Redesign and Merger Transaction; Vice President Regulation and Treasurer; and Treasurer and Director of Finance. Mr. Oldham has been with SPR since 1976.
Mary O. Simmons, 44, Controller
Ms. Simmons was elected to her current position in June 1997, and holds the same position with NVP and SPPC. Her previous positions include: Director, Water Policy and Planning; Director, Budgets and Financial Services; and Assistant Treasurer, Shareholder Relations for SPR. Ms. Simmons, a certified public accountant, has been with SPR since 1985.
Steven Boss, 53, President, Sierra Pacific Energy Company/Nevada Power Services
Mr. Boss was elected to his current position in March 1999. He previously was a consultant/attorney at Guy, Boss & Associates. Prior to this, he held the position of Chief Executive Officer at Natural Gas Transmission Services, Inc. Mr. Boss left SPR in February 2000 coincident with SPR's exit from the unregulated retail energy business.
The following persons are Executive Officers of NVP (and SPPC) but do not hold executive offices of SPR:
Steven W. Rigazio, 45, Senior Vice President, Energy Delivery
Mr. Rigazio was elected Senior Vice President, Energy Delivery, in July 1999. Previously he was Vice President, Finance and Planning, Treasurer, Chief Financial Officer effective October 1993. Other management positions include Vice President and Treasurer, Chief Financial Officer; Vice President, Planning; Director of System Planning; Manager of Rates and Regulatory Affairs; and Supervisor of Rates and Regulations. Mr. Rigazio has been with NVP since 1984.
David G. Barneby, 54, Vice President, Generation
Mr. Barneby was elected Vice President, Generation, in July 1999. Previously he was elected Vice President, Power Delivery effective October 1993. Mr. Barneby has been with NVP since 1965, and other management positions include Vice President, Generation; Manager, Generation Engineering and Construction; and Superintendent and Project Manager, Reid Gardner Unit 4.
Jeffrey L. Ceccarelli, 45, Vice President, Distribution Services, New Business
Mr. Ceccarelli was elected Vice President, Distribution Services, New Business, in July 1999. He was elected Vice President, Distribution Services in February 1998. Prior to this, he served as Executive Director, Distribution Services. From January 1996 through January 1998, Mr. Ceccarelli was Director, Customer Operations. A civil engineer, Mr. Ceccarelli has been with SPPC since 1972 and has held numerous management positions in operations, customer service, design and engineering.
Gloria T. Banks Weddle, 50, Vice President, Corporate Services
Ms. Weddle was named Vice President, Corporate Services of NVP effective January 1996, and was elected to the same position with SPPC in July 1999. Previously she was Vice President, Human Resources and Corporate Services effective October 1993. Other management positions include Vice President, Human Resources; Director of Human Resources; and Manager of Compensation and Benefits. Ms. Weddle has been with NVP since 1973.
Matt H. Davis, 44, Vice President, Distribution Services, Operations and Maintenance
Mr. Davis was elected Vice President, Distribution Services, Operations and Maintenance in July 1999. Previously he was Director, System Planning and Division Director, System Planning and Operations. Mr. Davis has been with NVP since 1978and has held various positions in the distribution, transmission, power contracts, and land services departments.
Douglas R. Ponn, 52, Vice President, Governmental and Regulatory Affairs
Mr. Ponn was elected Vice President, Governmental and Regulatory Affairs in July 1999. Previously he was Executive Director, Governmental and Regulatory Affairs. Mr. Ponn has been with SPPC since 1986.
Mary Jane Reed, 53, Vice President, Human Resources
Ms. Reed was elected Vice President, Human Resources of SPPC in January 1997, and was named to the same position with NVP in July 1999. She was previously Vice President, Human Resources Network Group for Bell Atlantic Corporation. Ms. Reed was with Bell Atlantic from 1968 - 1996 and in addition to the Vice President's position, served as Director of Human Resources, Assistant to the President for Consumer Affairs, and several other managerial positions.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS (SPR)
SPR's Common Stock is traded on the New York Stock Exchange (symbol SRP). The dividends paid per share and high and low sale prices of the Common Stock in the consolidated transaction reporting system in "The Dow Jones News Retrieval Service" for 1999 and 1998 are as follows:
Dividends
Paid
Per Share High Low
--------- ---- ---
1999 First Quarter $.325 $39 7/8 $33 3/8
Second Quarter .340 37 34 1/2
Third Quarter* .250 39 1/8 21 1/8
Fourth Quarter .250 23 5/16 16 7/8
1998 First Quarter .310 37 7/8 34 9/16
Second Quarter .325 38 32 1/4
Third Quarter .325 39 1/2 34 7/16
Fourth Quarter .325 39 5/16 34 11/16
|
*The merger of SPR and NVP was consummated on July 28, 1999. After that time, SPR owned all of the outstanding common stock of NVP. Prior to that time, SPR owned no securities of NVP.
Number of Security Holders:
Title of Class Number of Holders
-------------- -----------------
Common Stock: $1.00 Par Value As of December 31, 1999: 29,344
|
On May 17, 1999 the Board of Directors declared a dividend based on 1) if the merger with Nevada Power Company took place prior to August 1/st/, or 2) if the merger with Nevada Power Company did not take place prior to August 1/st/. The merger with Nevada Power Company took place at the close of business on July 28, 1999. An August 11/th/ dividend was paid based on that declaration. Future dividends are considered by the Board of Directors and are subject to factors that ordinarily affect dividend policy, such as future earnings and the financial condition of SPR.
On February 25, 2000, the SPR Board of Directors voted for a quarterly common dividend of $.25 per share. This dividend of approximately $19.6 million will be paid on May 1, 2000, to holders of record as of April 14, 2000.
SPR's primary source of funds for the payment of dividends to its stockholders is dividends paid by SPPC and NVP on their common stock, all of which is owned by SPR. Certain contractual and regulatory restrictions may affect the ability of NVP and SPPC to pay dividends to SPR. See Note 13 to the consolidated financial statements.
ITEM 6. SELECTED FINANCIAL DATA
The table below, for periods prior to July 28, 1999, reflects historical information for NVP.
Year Ended December 31,
(dollars in thousands, except per share amounts)
------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Operating Revenues $ 1,309,131 $ 873,682 $ 799,148 $ 805,374 $ 749,981
============== ============== ============== ============== ==============
Operating Income $ 171,158 $ 147,277 $ 137,196 $ 132,230 $ 117,558
============== ============== ============== ============== ==============
Net Income $ 51,750 $ 83,499 $ 82,091 $ 74,912 $ 73,005
============== ============== ============== ============== ==============
Earnings per Average
Common Share $ 0.83 $ 1.64 $ 1.65 $ 1.56 $ 1.58
============== ============== ============== ============== ==============
Total Assets $ 5,247,686 $ 2,541,840 $ 2,339,422 $ 2,163,224 $ 2,073,050
============== ============== ============== ============== ==============
Long-Term Debt and
Redeemable Preferred
Securities $ 1,793,999 $ 1,089,099 $ 1,014,311 $ 841,364 $ 799,999
============== ============== ============== ============== ==============
Cash Dividends Paid
Per Common Share $ 1.17 $ 1.45 $ 1.60 $ 1.60 $ 1.60
============== ============== ============== ============== ==============
|
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
(Refer to Introduction for a discussion of the format of the Management
Discussion and Analysis)
The merger between SPR and NVP was accounted for as a reverse purchase
under generally accepted accounting principles, with NVP considered the
acquiring entity, even though SPR survives and is the legal parent of NVP. For
accounting purposes, the merger was deemed to have occurred on August 1, 1999.
As a result of this reverse purchase accounting treatment; (i) the historical
financial statements of SPR for periods prior to the date of the merger are no
longer the financial statements of SPR, and therefore, are no longer presented;
(ii) the historical financial statements of SPR for periods prior to the date of
the merger are those of NVP; (iii) based on a merger date of August 1, 1999, the
Consolidated Statements of Income for the twelve months ended December 31, 1999
include five months (August through December 1999) of operating activity for SPR
and its subsidiaries other than NVP. The same statements include the operating
results of NVP for the entire periods presented.
The Consolidated Statements of Income of Sierra Pacific Resources for the year ended December 31, 1999 include the operating results of the holding company for the five month period ended December 31, 1999, based on a merger date of August 1, 1999. The holding company operating results included approximately $11.5 million of interest costs that resulted from the merger financing. For additional merger information, see Note 2 of the consolidated financial statements included in this report.
The Consolidated Statements of Income of Sierra Pacific Resources for the year ended December 31, 1999 include the operating results of Tuscarora Gas Pipeline Company (TGPC), a wholly-owned subsidiary of SPR, for the five month period ended December 31, 1999 based on a merger date of August 1, 1999 for accounting purposes. TGPC contributed $711 thousand in net income for the five months ended December 31, 1999. TGPC contributed $1.8 million in net income for the twelve months ended December 31, 1999.
The Consolidated Statements of Income of Sierra Pacific Resources for the
year ended December 31, 1999 include the operating results of e.three, a wholly-
owned subsidiary of SPR, for the five month period ended December 31, 1999 based
on a merger date of August 1, 1999 for accounting purposes. e.three incurred
net losses of $381 thousand for the five months ended December 31, 1999.
e.three incurred net losses of $788 thousand for the twelve months ended
December 31, 1999.
The Consolidated Statements of Income of Sierra Pacific Resources for the year ended December 31, 1999 include the operating results of Sierra Pacific Energy Company (SPE), a wholly-owned subsidiary of SPR, for the five month period ended December 31, 1999 based on a merger date of August 1, 1999 for accounting purposes. SPE incurred net losses of $2.2 million for the five months ended December 31, 1999. SPE incurred net losses of $3.6 million for the twelve months ended December 31, 1999.
The Consolidated Statements of Income of Sierra Pacific Resources for the year ended December 31, 1999 include the operating results of Sierra Pacific Communications (SPC), a wholly-owned subsidiary of SPR, for the five month period ended December 31, 1999 based on a merger date of August 1, 1999 for accounting purposes. SPC incurred net losses of $62 thousand for the five months ended December 31, 1999. SPC incurred net losses of $75 thousand for the twelve months ended December 31, 1999.
The Consolidated Statements of Income of Sierra Pacific Resources for the year ended December 31, 1999 include the operating results of Lands of Sierra (LOS), a wholly-owned subsidiary of SPR, for the five month period ended December 31, 1999 based on a merger date of August 1, 1999 for accounting purposes. LOS contributed net income of $816 thousand for the five months ended December 31, 1999. LOS contributed net income of $810 thousand for the twelve months ended December 31, 1999.
A complete Management's Discussion and Analysis of SPPC is contained in its Annual Report on Form 10-K for the year ended December 31, 1999, attached as an appendix. The Consolidated Statements of Income for Sierra Pacific Resources for the year ended December 31, 1999 include net income of $21.9 million contributed by SPPC which represents SPPC's operating activity for the five month period ended December 31, 1999. SPPC contributed $66.2 million in net income for the twelve months ended December 31, 1999, as shown in its annual report on Form 10- K, which is attached to this report as an appendix.
Based on a merger date of August 1, 1999, the Consolidated Statements of Income for the twelve months ended December 31, 1999 include five months (August through December 1999) operating activity for SPR and its subsidiaries other than NVP. The same statements include the operating results of NVP for all of 1999 and all prior year periods presented.
As a result, the following Consolidated Statements of Income illustrate the operating results of SPR's principal subsidiaries (NVP and SPPC) and the combined results of all Other operations. The results of operations discussion that follows is based on the NVP operating results included in these statements as the operating results of the other subsidiaries have already been discussed in this section.
On February 4, 2000 the PUCN issued an order that rejected NVP's updated September 30, 1999 deferred energy filing. In addition, on March 21, 2000 the PUCN made available a draft order that indicated a substantial reduction in NVP's requested rate relief on the remaining $44 million included in the case. NVP expects a final decision to be issued on March 27, 2000, which will substantially reflect the decision in the draft order. As a result of these decisions, NVP operating results for 1999 include a pre-tax charge of $80.0 million. $56 million of the charge is associated with the February 4 decision and $24 million is associated with the March 21 decision. NVP is appealing the PUCN decisions. If not for this charge, NVP's net income would have been approximately $7 million higher than it was in 1998.
The discussion of SPPC is in its annual report on Form 10-K for the period ended December 31, 1999, which is attached as an appendix. The Other subsidiaries have been discussed in this section.
SIERRA PACIFIC RESOURCES CONSOLIDATING STATEMENTS OF INCOME
(Dollars in Thousands)
Year Ended December 31,
1999
----------------------------------------------------------------------------
12 Months 5 Months Sierra Consolidated
Nevada Power Pacific Power 5 Months Other Total
---------------- ----------------- ------------------ ---------------
OPERATING REVENUES:
Electric $ 977,262 $ 259,440 $ - $ 1,236,702
Gas - 38,958 - 38,958
Water - 24,339 - 24,339
Other - - 9,132 9,132
----------- ------------ ------------ ------------
977,262 322,737 9,132 1,309,131
----------- ------------ ------------ ------------
OPERATING EXPENSES:
Operation:
Purchased power 293,600 79,856 - 373,456
Fuel for power generation 154,546 51,584 - 206,130
Gas purchased for resale - 27,262 - 27,262
Deferral of energy cross-net 97,238 - - 97,238
Other 141,041 51,038 11,389 203,468
Maintenance 50,805 9,579 - 60,384
Depreciation and amortization 80,644 32,349 243 113,236
Taxes: - - - -
Income taxes 19,943 11,390 (5,247) 26,086
Other than income 22,462 8,161 90 30,713
----------- ------------ ------------ ------------
860,279 271,219 6,475 1,137,973
----------- ------------ ------------ ------------
OPERATING INCOME 116,983 51,518 2,657 171,158
----------- ------------ ------------ ------------
OTHER INCOME:
Allowance for other funds used during construction 3,713 (1,339) - 2,374
Other income - net (1,824) (1,044) 352 (2,516)
----------- ------------ ------------ ------------
1,889 (2,383) 352 (142)
----------- ------------ ------------ ------------
Total Income 118,872 49,135 3,009 171,016
----------- ------------ ------------ ------------
INTEREST CHARGES:
Long-term debt 64,454 16,978 299 81,731
Other 8,815 6,012 11,529 26,356
Allowance for borrowed funds used during
construction and capitalized interest (8,356) 229 - (8,127)
----------- ------------ ------------ ------------
64,913 23,219 11,828 99,960
----------- ------------ ------------ ------------
INCOME BEFORE OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES 53,959 25,916 (8,819) 71,056
Preferred dividend requirements of
mandatorily redeemable preferred securities (15,172) (1,738) - (16,910)
----------- ------------ ------------ ------------
INCOME BEFORE PREFERRED DIVIDENDS 38,787 24,178 (8,819) 54,146
Preferred dividend requirements (95) (2,301) (2,396) (174)
----------- ------------ ------------ ------------
NET INCOME $ 38,692 $ 21,877 $(8,819) 51,750
=========== ============ ============ ============
Years Ended December 31,
1998 1997
------------- ------------
Nevada Power Nevada Power
------------ ------------
OPERATING REVENUES:
Electric $873,682 $799,148
Gas - -
Water - -
Other - -
---------- ----------
873,682 799,148
---------- ----------
OPERATING EXPENSES:
Operation:
Purchased power 283,838 277,644
Fuel for power generation 149,804 138,956
Gas purchased for resale - -
Deferral of energy cross-net (29,680) (60,400)
Other 134,652 122,811
Maintenance 49,082 52,126
Depreciation and amortization 73,562 66,273
Taxes: - -
Income taxes 42,949 43,478
Other than income 22,198 21,064
---------- ----------
726,405 661,952
---------- ----------
OPERATING INCOME 147,277 137,196
---------- ----------
OTHER INCOME:
Allowance for other funds used during construction 8,944 8,760
Other income - net
(4,602) (5,741)
---------- ----------
4,342 3,019
Total Income ---------- ----------
151,619 140,215
INTEREST CHARGES: ---------- ----------
Long-term debt
Other
Allowance for borrowed funds used during 56,995 50,791
construction and capitalized interest 6,018 1,531
(6,080) (2,579)
---------- ----------
56,933 49,743
---------- ----------
INCOME BEFORE OBLIGATED MANDATORILY 94,686 90,472
REDEEMABLE PREFERRED SECURITIES
Preferred dividend requirements of
mandatorily redeemable preferred securities
(11,013) -
----------- -----------
INCOME BEFORE PREFERRED DIVIDENDS 83,673 83,216
Preferred dividend requirements
(174) (1,125)
----------- -----------
NET INCOME $ 83,499 $ 82,091
=========== ==========
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The causes for significant changes in specific lines comprising the results of operations for NVP for the years ended are as provided (dollars in thousands):
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
Electric Operating Revenues:
Residential $ 416,345 9.5% $ 380,299 6.0% $ 358,921
Commercial 200,186 13.9% 175,760 11.5% 157,694
Industrial 290,409 16.4% 249,390 11.9% 222,837
----------------- ------------ ----------------- ------------ -----------------
Retail revenues 906,940 12.6% 805,449 8.9% 739,452
Other 70,322 3.1% 68,233 14.3% 59,696
----------------- ------------ ----------------- ------------ -----------------
Total Revenues $ 977,262 11.9% $ 873,682 9.3% $ 799,148
================= ============ ================= ============ =================
Total retail sales (MWH) 14,715,000 9.1% 13,491,000 3.7% 13,012,000
----------------- ------------ ----------------- ------------ -----------------
Average retail revenue per MWH $ 61.63 3.2% $ 59.70 5.1% $ 56.83
|
NVP's residential and commercial electric revenue increased in 1999 primarily due to 6% customer growth for both categories and an energy price increase of 4% effective March 1999. Industrial electric revenues increased in 1999 primarily due to 7% customer growth and an energy price increase of 4% effective March 1999. Other electric revenues increased in 1999 due to greater wholesale electric revenue that was partially offset by lower emission credits and water rights revenue in 1999.
Residential, commercial and industrial electric revenues increased in 1998 due to an approximate 6% growth in all customer categories and an energy price increase of 6% during February 1998. The increase in 1998 revenues was partially offset by milder weather during the summer of 1998. Other electric revenues increased as a result of the sale of emission credits and water rights in 1998.
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
Total Purchased Power $ 338,972 19.4% $ 283,838 2.2% $ 277,644
Less Imputed Capacity Deferral $ (45,372) - $ - - $ -
----------------- ------------ ---------------- ------------ ------------------
Purchased Power $ 293,600 3.4% $ 283,838 2.2% $ 277,644
Purchased Power MWH 7,861,985 14.2% 6,886,920 -2.7% 7,078,669
Average cost per MWH of
Purchased Power $ 43.12 4.6% $ 41.21 5.1% $ 39.22
|
NVP has historically used deferred accounting for energy costs (see Note 1).
NVP's Purchase power costs were higher in 1999 due to a 14% increase in the volume purchased related to customer growth and an increase in the per unit cost of power. This increase in cost was partially offset by a $45 million adjustment (shown separately above) in 1999 related to the deferral of the portion of one-part firm power contracts deemed by regulators to be related to capacity costs rather than energy costs. NVP began deferring these costs in 1999 to comply with an order from the PUCN.
During 1999 the cost of energy continued to exceed the corresponding allowed revenue component that resulted in a deferral of expense of $9.8 million. This amount was offset by the recovery of energy costs related to prior years of $27.3 million.
In 1998 purchased power costs increased 2.2% primarily due to higher average unit prices paid for purchased power.
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
Fuel for Power Generation $ 154,546 3.2% $ 149,804 7.8% $ 138,956
MWHs generated 9,167,963 3.7% 8,843,057 7.5% 8,228,100
Average fuel cost per MWH
of Generated Power $ 16.86 -0.5% $ 16.94 0.3% $ 16.89
|
In 1999, NVP's fuel expense increased 3.2%, primarily due to an increase in volumes generated to accommodate customer growth described previously. In 1998, fuel expense increased 7.8%, primarily due to increased generation to accommodate customer growth.
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
Deferral of energy costs-net $ 97,238 427.6% $ (29,680) 50.9% $ (60,400)
|
On February 4, 2000 the PUCN issued an order that rejected NVP's updated September 30, 1999 deferred energy filing. In addition, on March 21, 2000 the PUCN made available a draft order that indicated a substantial reduction in NVP's requested rate relief on the remaining $44 million included in the case. NVP expects a final decision to be issued on March 27, 2000, which will substantially reflect the decision in the draft order. As a result of these decisions, a reserve was recognized for previously deferred energy and imputed capacity costs with a charge of $80 million to Deferral of energy costs-net. $56 million of the reserve is associated with the February 4 decision and $24 million is associated with the March 21 decision. Also, Deferral of energy costs-net were higher in 1999 because NVP was granted a price increase to cover current fuel expense, which allowed NVP to recognize previously deferred costs currently.
In 1998, NVP deferred $27.0 million of increased energy costs for collection in a later period and recognized $2.7 million of energy cost deferrals that had been deferred prior to 1998. In 1997, NVP deferred $27.8 million of increased energy costs for collection in a later period and recognized $32.6 million of energy cost decreases that had been previously deferred.
Recovery of fuel expenses is administered under the state's deferred energy cost accounting procedures. Under the deferred energy procedure, changes in the costs of fuel and purchased power are reflected in customer rates through annual rate adjustments and do not affect income. See Note 1 of "Notes to Consolidated Financial Statements" for more information regarding deferred energy accounting.
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
Allowance for other funds used
during construction $ 3,713 -58.5% $ 8,944 2.1% $ 8,760
Allowance for borrowed funds used
during construction 8,356 37.4% 6,080 135.8% 2,579
---------------- ------------ ----------------- ------------ ------------------
$ 12,069 -19.7% $ 15,024 32.5% $ 11,339
---------------- ------------ ----------------- ------------ ------------------
|
NVP's AFUDC was lower in 1999 because of construction completed in May 1999 for the Crystal Transmission Project. In 1998, NVP expended approximately $100 million more on construction activity than in 1997. The additional costs in 1998 resulted in higher AFUDC.
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
Other operating expense $ 141,041 4.7% $ 134,652 9.6% $ 122,811
Maintenance expense 50,805 3.5% 49,082 -5.8% 52,126
Depreciation and amortization 80,644 9.6% 73,562 11.0% 66,273
Income taxes 19,943 -53.6% 42,949 -1.2% 43,478
Interest charges on long-term debt 64,454 13.1% 56,995 12.2% 50,791
Interest charges- other 8,815 46.5% 6,018 293.1% 1,531
Other Income (expense)-net (1,824) -60.4% (4,602) -19.8% (5,741)
|
NVP's other operating expense increased $6.4 million in 1999 primarily due to growth related costs for distribution expenses and administrative and general costs that included group insurance and short-term incentive costs. Other operating expense increased in 1998 primarily due to increased costs for outside services, computer software and maintenance, administrative and general salaries and pension costs.
The level of NVP maintenance and repair expenses depends primarily upon the scheduling, magnitude and number of generation unit overhauls at NVP's generating stations. In 1999 maintenance expense increased by $1.7 million primarily due to boiler maintenance at the Reid Gardner Generating Station. In 1998, maintenance expense decreased by $3.0 million due primarily to lower maintenance expense at the Reid Gardner Generating Station.
NVP Depreciation expense was higher in 1999 because of the addition of approximately $280 million in depreciable assets during the current year including the completion of the Crystal Transmission Project in June 1999. Also, depreciation expense increased $7.3 million in 1998 because of a growing electric depreciable asset base.
NVP Income taxes were lower in 1999 due to lower operating income before taxes. Income taxes for 1998 and 1997 were comparable.
Interest charges on NVP long-term debt were higher in 1999 due to interest costs on $130.0 million of unsecured notes issued in March 1999. Interest on long-term debt increased in 1998 primarily due to the issuance in November 1997 of the new Series 1997A $52.3 million Industrial Development Revenue Bonds (IDBs) and Series 1997B $20 million Pollution Control Revenue Bonds (PCRBs) and the remarketing at fixed rates in January 1998 of variable rate revenue bonds, $76.8 million, Series 1995A, $44, million Series 1995C, $20.3 million, Series 1995D and $13 million, Series 1995E. See Note 9 of "Notes to Consolidated Financial Statements" for additional information regarding long-term debt.
NVP Interest charges- other was higher in 1999 because of interest costs associated with higher short-term borrowings in 1999. Other interest expense was also higher in 1998 compared to 1997 due to higher short-term borrowings.
NVP Other income (expense)-net was lower in 1999 because corporate and short-term incentive costs were charged to operating expense rather that other expense during 1999. Other expense was lower in 1998 because of higher costs in 1997 for cancellation fees, adjustments related to the PUCN decision and higher short-term incentive costs.
Overall net cash flows increased slightly during 1999, as compared to 1998. Net cash flows were greater in 1999 due to more cash provided from operating and financing activities. The increase in cash provided from operating and financing activities was partially offset by more cash used in investing activities. The increase in cash flows from operating activities was primarily due to the collection of revenues related to previously deferred energy costs. Increased cash from financing activities resulted from the issuance of $456.2 million of commercial paper by SPR to provide funding of the cash portion of the merger consideration. Also, NVP issued long-term debt of $130 million senior unsecured notes, due 2004 and both SPPC and NVP each issued $100 million floating rate notes in September and October 1999, respectively. Cash utilized for Investing activities increased primarily as a result of the merger cash requirements. See Note 2 to the consolidated financial statements included in this report for more information about the merger cash requirements.
Overall net cash flows increased during 1998, as compared to 1997, due to higher net cash from operating and financing activities that was partially offset by more cash used in investing activities. The increase in cash from operating activities was mainly due to an energy rate increase effective February 1, 1998, offset by the deferral of energy cost recovery. The increase in cash used in investing activities was primarily due to increased construction expenditures. The increase in net cash used in financing activities was mainly due to increased short-term borrowing.
A description of construction expenditures and financing of SPPC is contained in its Annual Report on Form 10-K for the period ended December 31, 1999, attached as an appendix.
The table below provides SPR's consolidated cash construction expenditures and internally generated cash, net for 1999. The historical information for 1998 and 1997 is NVP information. (Dollars in thousands):
1999 1998 1997 Total
-------------- --------------- ------------- --------------
Cash construction expenditures* $ 729,794 $ 302,041 204,795 $ 1,236,630
============== =============== ============= ==============
Net cash flow from operating activities 211,089 148,281 107,792 467,162
Less common & preferred cash dividends 115,833 73,962 81,216 271,011
-------------- --------------- ------------- --------------
Internally generated cash 95,256 74,319 26,576 196,151
============== =============== ============= ==============
Internally generated cash as a percentage of
cash construction expenditures 13% 25% 13% 16%
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* 1999 cash construction expenditures include $448.3 million of merger related costs.
SPR's estimated cash construction expenditures for 2000 through 2004 are $1.6 billion. SPR estimates that 90% of its 2000 cash expenditures of approximately $308 million will be provided by internally generated funds, with the remainder being provided by the issuance of long-term debt and short-term debt.
The estimated level of internally generated cash utilized for construction of 90% anticipates that NVP and SPPC will pay all of their net income in dividends to SPR. SPR anticipates capital contributions of $44 million to NVP and $28 million to SPPC in 2000.
On July 28, 1999, immediately following the consummation of the merger with NVP, SPR put into place a $500 million unsecured revolving credit facility. This facility may be used for working capital and general corporate purposes, including for commercial paper backup, and replaced SPR's existing credit facility. At the same time, SPPC and NVP each put into place a $150 million unsecured revolving credit facility, which replaced all existing credit facilities. These two facilities may also be used for working capital and general corporate purposes, including for commercial paper backup. In addition, immediately following the merger, SPR and NVP established new commercial paper programs, and SPPC revised its existing commercial paper program. SPR issued $456.2 million of commercial paper to provide temporary funding of the cash portion of the merger consideration and NVP issued $90 million of commercial paper to pay off short-term debt.
SPR has filed a registration statement with the SEC for the issuance of up to $500 million of debt securities and/or trust preferred securities. Although no securities have been issued to date under this registration statement, SPR intends to issue the entire registered amount as debt securities by the end of the first quarter, or early in the second quarter, of 2000. The proceeds from such issuance will be used to retire short-term indebtedness which was incurred to provide temporary funding of the cash consideration due in the merger of SPR with NVP.
As of December 31, 1999, SPR had $463 million of commercial paper issued and outstanding, NVP had $82 million of commercial paper issued and outstanding and SPPC had $110 million of commercial paper issued and outstanding. SPR's, NVP's and SPPC's commercial paper programs are rated A2 and P2 by Standard and Poor's and Moody's, respectively.
SPR's actual consolidated capital structure at December 31, 1999 and 1998 was as follows. The 1998 capital structure presented is NVP information. (Dollars in thousands):
1999 1998
--------------------------- --------------------------
Short-Term Debt (1) $ 957,688 22% $ 155,380 7%
Long-Term Debt 1,556,627 36% 900,227 43%
Preferred Stock 50,000 1% 3,265 -
Preferred Securities 237,372 6% 188,872 9%
Common Equity 1,477,129 35% 864,036 41%
--------------------------- --------------------------
TOTAL $4,278,816 100% $2,111,780 100%
=========================== ==========================
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(1) Including current maturities of long-term debt and preferred stock.
As of December 31, 1999, under tests required by NVP's first mortgage bonds and the terms of its preferred stock issues, NVP could issue up to $785 million of additional first mortgage bonds at an assumed interest rate of 8.0% and up to $84 million of additional preferred stock at an assumed dividend of 8.0%.
NVP's secured long-term debt is rated A and Baa1 by Standard & Poor's and Moody's, respectively. NVP's pre-tax interest coverages for 1999, 1998 and 1997 were 2.35%, 3.22% and 3.59%, respectively.
SPR currently does not have a secured long-term debt rating by Standard & Poor's or Moody's. A description of SPPC's capital structure, first mortgage bond and preferred stock issuance restrictions, its long-term debt ratings and its pre-tax interest coverage ratios are contained in its Annual Report Form 10- K for the period ended December 31, 1999, attached as an appendix.
For a discussion of Regulatory Events of SPPC, see its annual report on Form 10-K for the period ended December 31, 1999, which is attached as an Appendix.
In 1997, the Governor of Nevada signed into law Assembly Bill 366 (AB366) that provided for competition to be implemented in the electric utility industry. In 1999 the Governor signed into law Senate Bill 438 (SB438) that amended AB366. SB438 contains the following major provisions:
. In addition to generation, metering and billing are declared to be
potentially competitive services.
. The start date for competition is March 1, 2000 or such other start
date determined to be in the public interest by the Governor.
. The electric distribution utility is the provider of last resort (PLR)
until alternate methods go into effect, no sooner than July 1, 2001.
PLR rates are capped until March 1, 2003 at the rates in effect as of
July 1, 1999, as adjusted for any deferred energy cases filed with the
PUCN prior to October 1, 1999.
. Allows the use of the net proceeds of generation divestiture to pay
for certain reductions in PLR revenues until March 1, 2003, arising
from the departure of customers who select new suppliers.
. Repeals deferred energy for electric utilities on October 1, 1999.
. Permits alternative sellers to submit bids to provide PLR service
after July 1, 2001, subject to a PUCN public interest finding and a
PUCN-held auction.
. Provides for the recovery of Past Costs, often referred to as stranded
costs, including specific criteria for recovery of purchase power
costs.
The PUCN has conducted a number of hearings associated with AB366 and SB438. In February 2000 the Governor of Nevada delayed the start date of competition indefinitely. Electric competition may begin later in 2000 or 2001. Generally, restructuring regulations have proceeded slowly. Currently, many important regulations, including the affiliate regulations and the PLR, are not complete. In their present form several of the proposed regulations could have potentially significant negative financial ramifications. These regulations and the potential risks are described below. NVP's management is actively working to modify these regulations. Several key Nevada restructuring issues have also arisen in other states, been litigated, and resolved in favor of the utility. If final regulations are not modified to remove the financial risk exposures, NVP will likely pursue legal action to resolve these issues. As a final option, NVP will seek an injunction to the start of competition or to overturn portions of SB438.
While SB438 allows for the use of name and logo, the affiliate regulation has not yet been modified to reflect this change. In addition, NVP has requested that the PUCN modify the rule related to sharing services, sharing officers and directors, and transfer pricing. To date the PUCN has not acted on this request. On March 30, 1999, SPPC and NVP filed with the District Court a "Complaint and Petition for Declaratory and Injunctive Relief and for Judicial Review" relating to the Affiliate Transaction Rules. SPPC and NVP asked that the court find that the rules "violate plaintiff's federal and state constitutional guarantees, are unlawful and invalid because they were enacted in violation of the procedural and substantive provisions of the Administrative Procedures Act, and are unlawful and invalid because they exceed the authority of the PUCN and are unsupported by the evidence." SPPC and NVP asked that the court order the PUCN "to cease and desist from enforcing the regulations."
Past costs, commonly referred to as stranded costs in other jurisdictions, were the subject of several hearings in 1999. AB366/ SB438 permit the recovery of costs associated with potentially competitive services, such as generation and purchased power, pursuant to specified legal criteria. In the hearings, various topics were discussed, including the characteristics that define recoverable past costs, criteria for evaluating the effectiveness of mitigation efforts, options for cost recovery mechanisms, and applicable tax and accounting issues.
On December 29, 1999 the PUCN adopted the past cost regulation. This regulation requires the utility to file for past costs 45 days after the adoption of the regulation or issuance of the final order in the compliance plan filing. The regulation requires estimates of book values and market values as of the opening date of competition. In addition NVP must provide documentation relative to criteria in the law such as mitigation efforts, conduct relative to other states, and efforts to minimize taxes. The PUCN will take these criteria into consideration in determining allowable past costs. During comments related to this rule, NVP raised a number of legal issues including treatment of purchase power agreements, ability to true up initial estimates of past costs to actual results, and ability to recover costs to implement restructuring. NVP has not completed an estimate of its past costs, since such a calculation is dependent on a variety of issues related to restructuring which are not resolved at this time. However, based upon the current regulation and the positions taken by other parties to the rulemaking, several risk areas have been identified including:
. SB438 criteria provides latitude for the PUCN to reduce NVP's stranded
cost claim.
. Purchase power agreements are the largest category of past costs.
Federal and state laws provide protection to federally mandated power
purchase contracts. NVP believes that the PUCN regulation provides
less security to recover purchase power costs than provided by federal
and state laws.
. Because the regulation does not provide a guaranteed true up to actual
results, it is possible that stranded cost recovery could be set too
low to recover all stranded costs.
. The stranded cost proceeding will establish the gain or loss on the
divestiture sale of generation assets; the regulation provides that
any gain on divestiture would be utilized to reduce stranded costs.
Some elements of the calculation may be controversial. In addition,
the regulation does not address other claims to the generation gain,
such as recovery of certain revenue shortfalls as allowed by SB438,
which may arise as customers leave the PLR.
NVP is currently evaluating challenges to the regulation and will actively pursue changes in the regulatory process or, if necessary, pursue legal challenges in the federal and or state courts. NVP believes that based upon the content of the regulation and the applicable law, a legal challenge relative to purchase power agreements has a strong possibility of being successful.
The provider of last resort (PLR) will provide electric service to customers who do not select an electricity provider and to customers who are not able to obtain service from an alternative seller after the date competition begins. SB438 provides for the electric distribution utility (EDU) to provide PLR services until July 1, 2001. The PUCN has conducted several workshops and hearings on the PLR regulations. This rule is not expected to be finalized until mid-2000. The current draft proposed regulation includes standards of conduct relative to distribution and provider of last resort functions, which require segregation of operating functions and constraints on sharing of common services. As part of their comments during development of the proposed regulation, NVP raised concerns regarding the financial impacts of the proposed regulations that place into question the financial viability of the PLR. For instance the current regulations restrict the PLR from relying on distribution assets or revenues to obtain credit. Second, the current regulations provide no financial reward potential for the significant fuel price risks that the PLR may face during the PLR rate cap period which ends March 1, 2003. Third, the proposed standards of conduct for the EDU and PLR will increase costs as a result of the loss of economies of scale and scope.
In addition to these impacts, the proposed regulation does not address two important areas associated with the PLR. Regulations have yet to be developed that fairly compensates the utility for recovery of revenue shortfalls allowed under SB438 which arise as customers leave the PLR for new suppliers. Regulations also do not address how NVP will be able to collect the costs, allowed by SB438, which will be incurred to serve customers who leave the PLR and later return.
In the ongoing rulemaking process NVP is working to address these serious concerns and modify the PLR regulation. If the proposed regulations are adopted in their current form, NVP will seek to transition out of the PLR function. In addition, if necessary, NVP is prepared to pursue legal remedies to mitigate any significant financial exposures associated with the final PLR regulation.
NVP has participated in interim Independent Scheduling Administrator (iISA) working groups which are developing iISA standards, protocols and procedures. The PUCN has held hearings regarding entities interested in performing the iISA function, the timeline, the functions to be performed, the costs and how these entities will adhere to the PUCN iISA principles. To date NVP has not agreed to provide funding for the iISA because the PUCN has not provided a mechanism for NVP to recover costs associated with iISA. However, in February 2000, the PUCN opened an investigatory docket to consider the funding and other transmission access issues. See FERC Matters for further discussion.
To comply with Nevada AB366 for natural gas deregulation, the PUCN has developed some new natural gas rules. In 1999, little gas restructuring activity occurred. Two new regulations, gas licensing and gas licensing fees were adopted by the PUCN in 1999.
On February 2, 1999, NVP filed its non-price terms and conditions for unbundled distribution service. A stipulation resolving most issues and agreeing to further filings on unresolved issues was filed with the PUCN, and subsequently approved by the Commission on April 22, 1999. Settlements regarding the unresolved issues were subsequently filed and approved by the Commission.
On April 1, 1999, NVP filed the revenue requirements and unbundling study portions of the Compliance Filing with the PUCN. The filing included the development of an electric revenue requirement for the test period 1998. The compliance filing rule requires the revenue requirement development to be in the same form used for rate cases. In the unbundling study, the revenue requirement was assigned and allocated to a number of service components including generation, aggregation, transmission, distribution, metering, billing, and customer services. On September 23, 1999, The PUCN issued an interim order on NVP's April 1 compliance filing. The order contained the PUCN's decision on revenue requirements, return on equity, depreciation, and the unbundling study. NVP did not utilize the order's revenue requirement, return on equity or depreciation rates from Phase II of the case because SB438 legally mandated that NVP use its July 1, 1999 revenue requirement.
On October 12, 1999, NVP filed final versions of the approved non-price terms and conditions and rates reflecting a revenue requirement thought by NVP to be correct and in accordance with SB438. Hearings were held in January 2000.
On April 8, 1998, NVP and SPPC filed a joint application with the PUCN for approval of their proposed merger. On January 4, 1999, the PUCN issued the final order in the merger case. On December 31, 1998, the PUCN voted 3-0 to approve the merger, with conditions. The conditions include, among others, requirements to divest generation, file the divestiture plan with the Commission for approval, file an ISA proposal with the FERC, file a generation tariff with the FERC, file a rate case and unbundle costs in 1999, file a subsequent rate case three years after retail competition, and submit application to recover stranded costs.
NVP filed a deferred energy case on July 15, 1999, covering the period from June 1, 1998 through May 31, 1999. SB 438 froze the rates for NVP at the level that was in effect on July1, 1999, except that the PUCN was authorized to modify those rates in decisions related to deferred accounting cases filed by NVP prior to October 1, 1999. Accordingly, on September 30, 1999, NVP filed an update through August 31, 1999. Hearings began in January 2000. On February 4, 2000 the PUCN issued an order that rejected NVP's updated September 30, 1999 deferred energy filing. In addition, on March 21, 2000 the PUCN made available a draft order that indicated a substantial reduction in NVP's requested rate relief on the remaining $44 million included in the case. NVP expects a final decision to be issued on March 27, 2000, which will substantially reflect the decision in the draft order. As a result of these decisions, NVP recognized a reserve for previously deferred energy and imputed capacity costs of $80
million. $56 million of the reserve is associated with the February 4 decision and $24 million is associated with the March 21 decision. NVP intends to appeal the decisions.
On April 30, 1999, SPPC filed its second compliance filings related to the 1997 rate stipulation The filings provide a calculation of SPPC's electric and gas earnings in excess of a 12% return on equity (ROE). Any earnings in excess of 12% ROE are shared 50/50 between shareholders and customers. On August 19, 1999, the PUCN approved a stipulation between SPPC, Staff, and the UCA that rebated $7.37 million and $1.98 million to electric and gas customers, respectively in 1999. Based on 1999 operating results, SPPC anticipates it may make refunds to customers. Appropriate reserves have been recorded to reflect any anticipated refunds.
SPPC has filed with the PUCN its request for approval to sell its generation plants on October 12, 1999. On February 18, 2000, the PUCN approved an application to sell the generation plants of both SPPC and NVP. The PUCN approved the revised divestiture plan unanimously. Under the terms of the approved plan, both utilities will sell all of their power plants through an auction process.
On April 14, 1999, the FERC voted to approve the merger of SPR and NVP, as proposed. In approving the merger the FERC required the companies to divest of their generation facilities (as proposed by the companies) and required NVP to file an update of its transmission rates (also proposed by the companies).
On May 17th, TDPUD filed a Petition for Rehearing of the FERC's order approving the merger. TDPUD claims the FERC violated its own policy by allowing the merger to be consummated prior to divestiture of generation assets. SPPC and NVP filed an answer to TDPUD's Petition for Rehearing in May. On July 14, 1999, the FERC denied in all aspects TDPUD's petition.
On May 29, 1999, NVP filed an application with the FERC to increase its Open Access Transmission rates. On November 24, 1999, an unopposed motion to suspend the procedural schedule to allow consummation of a settlement was filed with the FERC. The Settlement was filed on February 8, 2000 and the rates became effective on March 1, 2000.
On March 31, 1999, NVP filed with the FERC for approval of generation tariffs, which contain the rates, terms and conditions under which the new owners of NVP's generation would operate after divestiture. The FERC approved the tariffs on November 1, 1999. In compliance with the FERC's November 1 order, NVP filed pro forma service agreements for the approved tariffs, which were subsequently approved on December 16, 1999.
On July 23, 1999, NVP and SPPC submitted a filing to create the Mountain West Independent Scheduling Administrator. The filing was made to request approval of certain of the tariffs and agreements with respect to the transmission services of NVP and SPPC. A decision is expected in 2000.
All significant computer systems of SPR are owned by NVP and SPPC. A complete description of Year 2000 (Y2K) issues related to SPPC is contained in its Annual Report on Form 10-K for the period ended December 31, 1999, attached as an appendix. The following discussion describes Y2K issues of NVP.
NVP made Y2K readiness a top priority for all of its departments. With the oversight of several officers, NVP reviewed all of its computers, software programs and electrical systems to verify that appropriate actions were taken in order to be Year 2000 ready, including the ability to process, calculate, compare and sequence date data into the next century, and, to make all necessary leap year corrections.
Overall status for NVP as of November 30, 1999 showed completion of mission critical functions. This status was within the guidelines established for NVP to achieve Y2K readiness. All generation units were successfully remediated and tested.
Even though NVP was confident that its critical systems would be fully remediated by July 1999, NVP initiated a corporate-wide process of Y2K contingency planning. Contingency planning was affected by the responses received from business partners and suppliers, as well as NVP's determination of the reasonably worst-case scenario. As a result of the overall efforts of NVP, there was no materially adverse impact on the utility's financial position, results of operations or cash flows.
Based on the work done within NVP, it is not anticipated that there will be any Y2K problems of significance or material impact, however NVP will maintain its awareness of the potential for Y2K problems throughout 2000.
The total cumulative cost to NVP for addressing Y2K readiness was originally estimated to be in the range of $4 to $7 million, including operating and capital expenditures. Through December 1999, approximately $3.0 million in operating expenses and approximately $2.4 million in capital additions were actually incurred. While additional expenditures and capital additions may be incurred during 2000, additional expenditures and capital additions are expected to be nominal.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (SPR)
SPR has evaluated its risk related to financial instruments whose values are subject to market sensitivity. The only such instruments are fixed-rate and variable-rate debt, and preferred securities obligations, which were as follows as of December 31, 1998 and 1999.
Long-term debt (dollars in thousands):
Expected Weighted Average
Maturity Date Expected Maturity Amounts Interest Rates Fair Value
----------------------------------------------------------------------------------------------------------------------------
December 31 December 31 December 31
Fixed Rate 1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
1999 - $ 136,600 - 6.88%
2000 102,709 85,000 7.00% 7.06%
2001 19,732 - 5.58% -
2002 17,626 15,000 7.05% 7.625%
2003 20,711 - 5.53% -
2004 132,621 - 6.20% -
Thereafter 1,285,936 714,007 6.68% 6.60%
============================ =========================== ===========================
Total Fixed Rate $ 1,579,335 $ 950,607 $ 1,540,990 $ 1,018,000
Variable Rate
Due 2000 $ 100,000 - 6.92%
Due 2020 80,000 - *3.81%
============================ =========================== ===========================
$ 180,000 - $ 180,000 -
Preferred securities
(fixed rate)
Due 2036 $ 237,372 $ 188,872 8.18% $ 208,618 $ 193,000
============================ =========================== ===========================
Total $ 1,996,707 $1,139,479 $ 1,929,608 $1,211,000
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* Weighted daily average rate for month ended December 31, 1998 and 1999.
SPR is exposed to commodity price risk primarily related to changes in the market price of electricity as well as changes in fuel costs incurred to generate electricity. Although the potential exists for market risk within these contracts, the future costs are expected to be covered in the rate making process. SPPC's gas local distribution company is also protected by deferred energy accounting procedures (See Note 1 to the Financial Statements). These risks are not expected to expose SPR to significant market risks related to commodity price fluctuations. As a result of the merger of SPR and NVP, the Board of Directors of the combined company requested that management review and consolidate the Risk Management Programs of the two utilities. SPPC and NVP engaged the services of a leading energy risk management consulting company to review existing policies and procedures, make any recommendations to the existing Program, and implement the revised Program. That project led SPPC and NVP to adopt revised policies and procedures, implement new IT systems to track any commodity price exposures, as well as focus on potential "Earnings-at-Risk" which measures the amount of exposure that SPPC and NVP have to energy prices at any point in time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(Refer to Introduction for a discussion of the method of accounting reflected
in the Financial Statements)
Page
----
Independent Auditors' Report............................................... 50
Financial Statements:
Consolidated Balance Sheets as of December 31, 1999 and 1998........ 51
Consolidated Statements of Income for the Years Ended December 31,
1999, 1998 and 1997............................................... 52
Consolidated Statements of Common Shareholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997...................... 53
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.................................. 54
Consolidated Statements of Capitalization as of December 31, 1999
and 1998.......................................................... 55-56
Balance Sheets for Nevada Power Company as of
December 31, 1999 and 1998....................................... 57
Statements of Income for Nevada Power Company
for the Years Ended December 31, 1999, 1998 and 1997.............. 58
Statements of Cash Flows for Nevada Power Company
for the Years Ended December 31, 1999, 1998 and 1997............. 59
Statements of Capitalization for Nevada Power
Company as of December 31, 1999 and 1998......................... 60-61
Notes to Financial Statements.............................................. 62-95
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Sierra Pacific Resources
Reno, Nevada
We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of Sierra Pacific Resources and subsidiaries (the Company) and the separate balance sheets and statements of capitalization of Nevada Power Company (NVP) as of December 31, 1999 and 1998, and the related statements of income, common shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's and NVP's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the consolidated financial position of the Company and the financial position of NVP as of December 31, 1999 and 1998, and the respective results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States.
DELOITTE & TOUCHE LLP
Reno, Nevada
March 21, 2000
SIERRA PACIFIC RESOURCES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
December 31,
ASSETS 1999 1998
------ ----------- ----------
Utility Plant, at Original Cost:
Plant in service $ 5,351,399 $ 2,695,312
Less accumulated provision for depreciation 1,571,102 708,791
----------- -----------
3,780,297 1,986,521
Construction work in progress 293,232 213,365
----------- -----------
4,073,529 2,199,886
----------- -----------
Investments in subsidiaries and other property, net 105,880 24,483
----------- -----------
Current Assets:
Cash and cash equivalents 4,789 1,770
Accounts receivable less provision for
uncollectible accounts: 1999 - $6,475; 1998 - $2,429 215,972 97,298
Materials, supplies and fuel, at average cost 73,621 39,606
Deferred energy costs 14,884 62,489
Other 7,003 7,787
----------- -----------
316,269 208,950
----------- -----------
Deferred Charges:
Goodwill 327,725 -
Regulatory tax asset 196,364 62,906
Other regulatory assets 105,242 22,236
Other 122,677 23,379
----------- -----------
752,008 108,521
$ 5,247,686 $ 2,541,840
=========== ===========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common shareholders' equity $ 1,477,129 $ 864,036
Preferred stock 50,000 3,265
SPPC/NVP - obligated mandatorily redeemable preferred securities 237,372 188,872
Long-term debt 1,556,627 900,227
----------- -----------
3,321,128 1,956,400
----------- -----------
Current Liabilities:
Short-term borrowings 754,979 105,000
Current maturities of long-term debt 202,709 50,380
Accounts payable 138,448 82,721
Accrued interest 15,394 7,829
Dividends declared 20,850 207
Accrued salaries and benefits 15,410 9,713
Deferred taxes on deferred energy costs 5,683 21,871
Other current liabilities 29,773 14,859
----------- -----------
1,183,246 292,580
----------- -----------
Commitments & Contingencies (Note 17)
Deferred Credits:
Deferred federal income taxes 413,964 165,625
Deferred investment tax credits 62,604 28,083
Regulatory tax liability 52,839 16,779
Customer advances for construction 109,422 64,114
Accrued retirement benefits 67,314 14,234
Other 37,169 4,025
----------- -----------
743,312 292,860
----------- -----------
$ 5,247,686 $ 2,541,840
=========== ===========
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The accompanying notes are an integral part of the financial statements.
SIERRA PACIFIC RESOURCES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
Year ended December 31,
1999 1998 1997
----------- ----------- -----------
Operating Revenues:
Electric $ 1,236,702 $ 873,682 $ 799,148
Gas 38,958 - -
Water 24,339 - -
Other 9,132 - -
----------- ----------- -----------
1,309,131 873,682 799,148
----------- ----------- -----------
Operating Expenses:
Operation:
Purchased power 373,456 283,838 277,644
Fuel for power generation 206,130 149,804 138,956
Gas purchased for resale 27,262 - -
Deferral of energy costs-net 97,238 (29,680) (60,400)
Other 203,468 134,652 122,811
Maintenance 60,384 49,082 52,126
Depreciation and Amortization 113,236 73,562 66,273
Taxes:
Income taxes 26,086 42,949 43,478
Other than income 30,713 22,198 21,064
----------- ----------- -----------
1,137,973 726,405 661,952
----------- ----------- -----------
Operating Income 171,158 147,277 137,196
----------- ----------- -----------
Other Income:
Allowance for other funds used during construction 2,374 8,944 8,760
Other income -net (2,516) (4,602) (5,741)
----------- ----------- -----------
(142) 4,342 3,019
----------- ----------- -----------
Total Income Before Interest Charges 171,016 151,619 140,215
----------- ----------- -----------
Interest Charges:
Long-term debt 81,731 56,995 50,791
Other 26,356 6,018 1,531
Allowance for borrowed funds used during construction
and capitalized interest (8,127) (6,080) (2,579)
----------- ----------- -----------
99,960 56,933 49,743
----------- ----------- -----------
Income before obligated mandatorily redeemable preferred
securities 71, 056 94,686 90,472
Preferred dividend requirements of SPPC/NVP obligated
mandatorily redeemable preferred securities (16,910) (11,013) (7,256)
----------- ----------- -----------
Income before preferred dividend requirements of
subsidiary 54,146 83,673 83,216
Preferred dividend requirements of subsidiary and
redemption premium (2,396) (174) (1,125)
----------- ----------- -----------
Net Income $ 51,750 $ 83,499 $ 82,091
=========== =========== ===========
Net Income Per Share - Basic $ 0.83 $ 1.64 $ 1.65
- Diluted $ 0.83 $ 1.64 $ 1.65
Weighted Average Shares of Common Stock
Outstanding 62,577,385 50,993,000 49,691,000
Annual Dividends Paid Per Share of Common Stock $ 1.165 $ 1.45 $ 1.60
|
The accompanying notes are an integral part of the financial statements.
SIERRA PACIFIC RESOURCES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(Dollars in Thousands)
Year ended December 31,
1999 1998 1997
----------- ---------- ----------
Common Stock:
Balance at Beginning of Year $ 54,066 $ 53,604 $ 51,990
401(k) Savings plan - 65 98
Stock purchase and dividend reimbursement - 397 1,516
Merger conversion 36,064 - -
Merger cash consideration (11,716) - -
----------- ---------- ----------
Balance at end of year 78,414 54,066 53,604
----------- ---------- ----------
Other Paid-In Capital:
Balance at Beginning of Year 683,156 662,987 631,204
Premium on sale of common stock - 20,169 31,783
CSIP, DRP, ESPP and other 1,409 - -
Merger transactions 275,384 - -
Revaluation of pension asset 66 - -
Goodwill 331,174 - -
----------- ---------- ----------
Balance at End of Year 1,293,990 683,156 662,987
----------- ---------- ----------
Retained Earnings:
Balance at Beginning of Year 126,814 117,032 117,360
Income before preferred dividends 54, 146 83,673 83,216
Dividends declared:
Preferred stock of subsidiaries (2,721) (174) (1,125)
Common stock (73,514) (73,717) (79,176)
Premium redemption of preferred stock - - (3,243)
----------- ---------- ----------
Balance at End of Year 104, 725 126,814 117,032
----------- ---------- ----------
Total Common Shareholder's Equity at End of Year $1,477, 129 $ 864,036 $ 833,623
=========== ========== ==========
|
The accompanying notes are an integral part of the financial statements
SIERRA PACIFIC RESOURCES
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Year ended December 31,
1999 1998 1997
---------- ---------- ----------
Cash Flows From Operating Activities:
------------------------------------
Income before preferred dividends $ 54, 146 $ 83,673 $ 83,216
Non-cash items included in income:
Depreciation and amortization 113,236 73,562 66,273
Deferred taxes and investment tax credits (16,543) 23,640 21,599
AFUDC and capitalized interest (10,501) (15,025) (11,339)
Deferred energy costs 48,313 (33,819) (59,543)
Early retirement and severance amortization 1,748 - -
Other non-cash 24,122 13,896 12,001
Changes in certain assets and liabilities, net of
acquisition:
Accounts receivable (7,393) (9,034) (15,407)
Materials, supplies and fuel (3,846) 2,764 163
Other current assets 155 1,359 1,492
Accounts payable 49,655 22,788 8,306
Other current liabilities (6,342) (7,918) 4,540
Other - net (35,661) (7,605) (3,509)
---------- ---------- ----------
Net Cash Flows From Operating Activities 211,089 148,281 107,792
---------- ---------- ----------
Cash Flows From Investing Activities:
------------------------------------
Acquisition of business net of cash acquired (448,311) - -
Additions to utility plant (299,064) (314,933) (211,371)
Non-cash charges to utility plant (3,645) 3,996 1,493
Customer refunds for construction 8,173 - -
Contributions in aid of construction 13,053 8,896 5,083
---------- ---------- ----------
Net cash used for utility plant (729,794) (302,041) (204,795)
Proceeds from sale of other assets - - 4
(Investments in) disposal of subsidiaries and 1,366 (2,277) (5,636)
other property - net
---------- ---------- ----------
Net Cash Used in Investing Activities (728,428) (304,318) (210,427)
---------- ---------- ----------
Cash Flows From Financing Activities:
------------------------------------
Increase in short-term borrowings 495,165 105,000 -
Proceeds from issuance of long-term debt 230,699 - 76,261
Retirement of long-term debt (63,293) (17,436) (7,131)
Change in funds held in trust - 52,939 (248)
Proceeds from NVP, obligated mandatorily - 70,000 118,872
redeemable preferred securities
Retirement of preferred stock (26,380) (200) (38,200)
Sale of common stock - 20,746 32,473
Dividends paid (115,833) (73,962) (81,216)
---------- ---------- ----------
Net Cash From Financing Activities 520,358 157,087 100,811
---------- ---------- ----------
Net Increase/Decrease in Cash and Cash Equivalents 3,019 1,050 (1,824)
Beginning Balance in Cash and Cash Equivalents 1,770 720 2,544
---------- ---------- ----------
Ending Balance in Cash and Cash Equivalents $ 4,789 $ 1,770 $ 720
========== ========== ==========
Supplemental Disclosures of Cash Flow Information:
-------------------------------------------------
Cash Paid During Year For:
Interest $ 127,063 $ 75,487 $ 64,692
Income taxes 43,719 27,110 19,545
|
The accompanying notes are an integral part of the financial statements.
SIERRA PACIFIC RESOURCES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
December 31,
1999 1998
----------- -----------
Common Shareholders' Equity:
---------------------------
Common stock, $1.00 par value, authorized 250 million;
issued and outstanding 1999: 78,428,480 shares; 1998, 51,265,117 shares $ 78,414 $ 54,066
Additional paid-in capital 1,293,990 683,156
Retained earnings 104, 725 126,814
----------- -----------
Total Common Shareholders' Equity 1,477, 129 864,036
----------- -----------
Preferred Stock of Subsidiaries:
-------------------------------
Not subject to mandatory redemption
Outstanding at December 31
5.40% Series, 36,669 shares - 733
5.20% Series, 34,570 shares - 692
4.70% Series, 102,006 shares - 2,040
Class A Series 1; $1.95 dividend 50,000 -
----------- -----------
Subtotal 50,000 3,465
Current sinking fund requirements: - (200)
----------- -----------
Total Preferred Stock 50,000 3,265
----------- -----------
Preferred Securities of Subsidiaries:
------------------------------------
NVP obligated Mandatorily Redeemable Preferred Securities of NVP's
Subsidiary Trust, NVP Capital I, holding solely $122.6 million principal amount of 118,872 118,872
8.2% Junior Subordinated Debentures of NVP, due 2037
NVP Capital III, holding solely $72.2 million principal amount of 7 3/4% Junior 70,000 70,000
Subordinated Debentures of NVP, due 2038
SPPC obligated Mandatorily Redeemable Preferred Securities of SPPC's
Subsidiary Trust, SPPC Capital I, holding solely $50 million principal amount of
8.60% Junior Subordinated Debentures of SPPC, due 2036 48,500 -
----------- -----------
Total Preferred Securities 237,372 188,872
----------- -----------
Long-Term Debt:
--------------
First Mortgage Bonds:
Unamortized bond premium and discount, net (583) 6
Debt Secured by First Mortgage Bonds:
7 5/8% Series L due 2002 15,000 15,000
7.80% Series T due 2009 15,000 15,000
6.70% Series V due 2022 105,000 105,000
6.60% Series W due 2019 39,500 39,500
7.20% Series X due 2022 78,000 78,000
6.93% Series Y due 1999 - 45,000
8.50% Series Z due 2023 35,000 45,000
7.06% Series AA due 2000 85,000 85,000
2.00% Series Z due 2004 72 -
2.00% Series O due 2011 1,374 -
6.35% Series FF due 2012 1,000 -
6.55% Series AA due 2013 39,500 -
6.30% Series DD due 2014 45,000 -
6.65% Series HH due 2017 75,000 -
6.65% Series BB due 2017 17,500 -
6.55% Series GG due 2020 20,000 -
6.30% Series EE due 2022 10,250 -
6.95% to 8.61% Series A MTN due 2022 110,000 -
7.10% and 7.14% Series B MTN due 2023 58,000 -
6.62% to 6.83% Series C MTN due 2006 50,000 -
5.90% Series JJ due 2023 9,800 -
5.90% Series KK due 2023 30,000 -
|
SIERRA PACIFIC RESOURCES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
Continued from previous page December 31,
1999 1998
----------- ----------
5.00% Series Y due 2024 3,138 -
6.70% Series II due 2032 21,200 -
5.47% Series D MTN due 2001 17,000 -
5.50% Series D MTN due 2003 5,000 -
5.59% Series D MTN due 2003 13,000 -
----------- ----------
Subtotal, excluding current portion 898,751 427,506
----------- ----------
Industrial development revenue bonds
7.80% due 2020 100,000 100,000
5.90% Series 1997A due 2032 52,285 52,285
5.90% Series 1995B due 2030 85,000 85,000
5.60% Series 1995A due 2030 76,750 76,750
5.50% Series 1995C due 2030 44,000 44,000
Pollution control revenue bonds
6 3/8% due 2036 20,000 20,000
5.80% Series 1997B due 2032 20,000 20,000
5.30% Series 1995D due 2011 14,000 14,000
5.45% Series 1995D due 2023 6,300 6,300
5.35% Series 1995E due 2022 13,000 13,000
Less funds held in trust - (10)
----------- ----------
Total excluding current portion 431,335 431,325
----------- ----------
6.20% Senior unsecured note Series A 130,000 -
Obligation under capital leases 87,007 91,249
Current maturities and sinking fund requirements (89,842) (50,180)
Variable rate note:
Water facilities note maturing 2020 80,000
Other, excluding current portion 19,376 327
----------- ----------
Total Long-Term Debt 1,556,627 900,227
----------- ----------
TOTAL CAPITALIZATION $ 3,321,128 $1,956,400
=========== ==========
|
The accompanying notes are an integral part of the financial statements.
NEVADA POWER COMPANY
BALANCE SHEETS
(Dollars in Thousands)
December 31,
ASSETS 1999 1998
------ ----------- ----------
Utility Plant, at Original Cost:
Plant in service $ 2,928,973 $2,695,312
Less accumulated provision for depreciation 772,003 708,791
----------- ----------
2,156,970 1,986,521
Construction work in progress 195,671 213,365
----------- ----------
2,352,641 2,199,886
----------- ----------
Investments in Sierra Pacific Resources (Note 1A) 654,156 -
Investments in subsidiaries and other property, net 15,644 24,483
----------- ----------
669,800 24,483
----------- ----------
Current Assets:
Cash and cash equivalents 243 1,770
Accounts receivable less provision for
uncollectible accounts: 1999 - $2,826; 1998 - $2,429 110,955 97,298
Materials, supplies and fuel, at average cost 43,108 39,606
Deferred energy costs 14,884 62,489
Other 3,573 7,787
----------- ----------
172,763 208,950
----------- ----------
Deferred Charges:
Regulatory tax asset 130,833 62,906
Other regulatory assets 28,190 22,236
Other 24,258 23,379
----------- ----------
183,281 108,521
----------- ----------
$ 3,378,485 $2,541,840
=========== ==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common shareholders' equity, including $654,156 of equity in Sierra Pacific $ 1,477,129 864,036
Resources in 1999 (Note 1A)
Preferred stock - 3,265
Obligated mandatorily redeemable preferred securities 188,872 188,872
Long-term debt 931,004 900,227
----------- ----------
2,597,005 1,956,400
----------- ----------
Current Liabilities:
Short-term borrowings 182,000 105,000
Current maturities of long-term debt 89,842 50,380
Accounts payable 75,088 82,721
Accrued interest 10,098 7,829
Dividends declared 24,126 207
Accrued salaries and benefits 7,025 9,713
Deferred taxes on deferred energy costs 5,683 21,871
Other current liabilities 18,536 14,859
----------- ----------
412,398 292,580
----------- ----------
Commitments & Contingencies (Note 17)
Deferred Credits:
Deferred federal income taxes 236,139 165,625
Deferred investment tax credits 26,624 28,083
Regulatory tax liability 14,993 16,779
Customer advances for construction 69,341 64,114
Accrued retirement benefits 18,262 14,234
Other 3,723 4,025
----------- ----------
369,082 292,860
----------- ----------
$ 3,378,485 $2,541,840
=========== ==========
|
The accompanying notes are an integral part of the financial statements.
NEVADA POWER COMPANY
STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
Year ended December 31,
1999 1998 1997
----------- ----------- -----------
Operating Revenues:
Electric $ 977,262 $ 873,682 $ 799,148
----------- ----------- -----------
977,262 873,682 799,148
----------- ----------- -----------
Operating Expenses:
Operation:
Purchased power 293,600 283,838 277,644
Fuel for power generation 154,546 149,804 138,956
Deferral of energy costs-net 97,238 (29,680) (60,400)
Other 141,041 134,652 122,811
Maintenance 50,805 49,082 52,126
Depreciation and Amortization 80,644 73,562 66,273
Taxes:
Income taxes 19,943 42,949 43,478
Other than income 22,462 22,198 21,064
----------- ----------- -----------
860,279 726,405 661,952
----------- ----------- -----------
Operating Income 116,983 147,277 137,196
----------- ----------- -----------
Other Income:
Equity in earnings of Sierra Pacific Resources (Note 1A) 13,058 - -
Allowance for other funds used during construction 3,713 8,944 8,760
Other income -net (1,824) (4,602) (5,741)
----------- ----------- -----------
14,947 4,342 3,019
----------- ----------- -----------
Total Income Before Interest Charges 131,930 151,619 140,215
----------- ----------- -----------
Interest Charges:
Long-term debt 64,454 56,995 50,791
Other 8,815 6,018 1,531
Allowance for borrowed funds used during construction
and capitalized interest (8,356) (6,080) (2,579)
----------- ----------- -----------
64,913 56,933 49,743
----------- ----------- -----------
Income before obligated mandatorily redeemable preferred
securities 67,017 94,686 90,472
Preferred dividend requirements obligated mandatorily
redeemable preferred securities (15,172) (11,013) (7,256)
----------- ----------- -----------
Income before preferred dividend requirements of 51,845
subsidiary 83,673 83,216
Preferred dividend requirements and redemption premium (95) (174) (1,125)
----------- ----------- -----------
Net Income $ 51,750 $ 83,499 $ 82,091
=========== =========== ===========
Net Income Per Share - Basic $ 0.83 $ 1.64 $ 1.65
- Diluted $ 0.83 $ 1.64 $ 1.65
Weighted Average Shares of Common Stock
Outstanding 62,577,385 50,993,000 49,691,000
Annual Dividends Paid Per Share of Common Stock $ 1.165 $ 1.45 $ 1.60
|
The accompanying notes are an integral part of the financial statements.
NEVADA POWER COMPANY
STATEMENTS OF CASH FLOWS
(dollars in thousands)
1999 1998 1997
---------- ---------- -----------
Cash Flows From Operating Activities:
Income before preferred dividends $ 51,845 $ 83,673 $ 83,216
Non-cash items included in income:
Depreciation and amortization 80,643 73,562 66,273
Deferred taxes and investment tax credits (18,913) 23,640 21,599
AFUDC and capitalized interest (12,069) (15,025) (11,339)
Deferred energy costs 48,313 (33,819) (59,543)
Other non-cash 16,908 13,896 12,001
Equity in earnings of Sierra Pacific Resources (Note 1A) (13,058) - -
Changes in certain assets and liabilities:
Accounts receivable (11,795) (9,034) (15,407)
Material, supplies and fuel (3,502) 2,764 163
Other current assets 1,778 1,359 1,492
Accounts payable 34,964 22,788 8,306
Other current liabilities 17,066 (7,918) 4,540
Other - net (14,002) (7,605) (3,509)
---------- ---------- -----------
Net Cash Flows From Operating Activities 178,178 148,281 107,792
---------- ---------- -----------
Cash Flows From Investing Activities:
Additions to utility plant (223,963) (314,933) (211,371)
Non-cash charges to utility plant (2,184) 3,996 1,493
Customer refunds for construction 5,228 - -
Contributions in aid of construction - 8,896 5,083
---------- ---------- -----------
Net cash used for utility plant (220,919) (302,041) (204,795)
Proceeds from sale of other assets - - 4
(Investments in) disposal of subsidiaries and other property - net 1,499 (2,277) (5,636)
---------- ---------- -----------
Net Cash Used In Investing Activities (219,420) (304,318) (210,427)
Cash Flows From Financing Activities:
Increase (Decrease) in short-term borrowings 77,000 105,000 -
Proceeds from issuance of long-term debt 129,900 - 76,261
Retirement of long-term debt (60,283) (17,436) (7,131)
Change in funds held in trust 9 52,939 (248)
Proceeds from NVP-obligated mandatorily redeemable - 70,000 118,872
preferred securities
Retirement of preferred stock (3,265) (200) (38,200)
Sale of common stock - 20,746 32,473
Additional investment of parent 18,000
Dividends paid (121,646) (73,962) (81,216)
---------- ---------- -----------
Net Cash From Financing Activities 39,715 157,087 100,811
---------- ---------- -----------
Net Increase/Decrease in Cash and Cash Equivalents (1,527) 1,050 (1,824)
Beginning Balance in Cash and Cash Equivalents 1,770 720 2,544
---------- ---------- -----------
Ending Balance in Cash and Cash Equivalents $ 243 $ 1,770 $ 720
========== ========== ===========
Supplemental Disclosures of Cash Flow Information:
-------------------------------------------------
Cash Paid During Year For:
Interest $ 91,196 $ 75,487 $ 64,692
Income taxes 38,219 27,110 19,545
|
The accompanying notes are an integral part of the financial statements.
NEVADA POWER COMPANY
STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
December 31,
1999 1998
---------- --------
Common Shareholders' Equity:
---------------------------
Common Shareholders' Equity, including $654,156 of equity in
Sierra Pacific Resources in 1999 (Note 1A) $1,477, 129 $864,036
Preferred Stock:
---------------
Not subject to mandatory redemption:
Outstanding at December 31, 1998 and 1999:
5.40% Series, 36,669 and 38,669 shares - 733
5.20% Series, 34,570 and 36,507 shares - 692
4.70% Series, 102,006 and 108,006 shares - 2,040
---------- --------
Subtotal - 3,465
Current sinking fund requirements: (200)
---------- --------
Total Preferred Stock - 3,265
---------- --------
Preferred Securities:
--------------------
NVP obligated Mandatorily Redeemable Preferred Securities of NVP's 118,872
Subsidiary Trust, NVP Capital I, holding solely $122.6 million principal
amount of 118,872
8.2% Junior Subordinated Debentures of NVP, due 2037
NVP Capital III, holding solely $72.2 million principal amount of 7 3/4% Junior 70,000 70,000
Subordinated Debentures of NVP, due 2038
---------- --------
Total Preferred Securities 188,872 188,872
---------- --------
Long-Term Debt:
--------------
First Mortgage Bonds:
Unamortized bond premium and discount, net 212 6
Debt Secured by First Mortgage Bonds:
7 5/8% Series L due 2002 15,000 15,000
7.80% Series T due 2009 15,000 15,000
6.70% Series V due 2022 105,000 105,000
6.60% Series W due 2019 39,500 39,500
7.20% Series X due 2022 78,000 78,000
6.93% Series Y due 1999 - 45,000
8.50% Series Z due 2023 35,000 45,000
7.06% Series AA due 2000 85,000 85,000
---------- --------
Subtotal, excluding current portion 372,712 427,506
Industrial development revenue bonds
7.80% due 2020 100,000 100,000
5.90% Series 1997A due 2032 52,285 52,285
5.90% Series 1995B due 2030 85,000 85,000
5.60% Series 1995A due 2030 76,750 76,750
5.50% Series 1995C due 2030 44,000 44,000
|
NEVADA POWER COMPANY
STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
Continued from previous page December 31,
1999 1998
----------- ----------
Pollution control revenue bonds
6 3/8% due 2036 20,000 20,000
5.80% Series 1997B due 2032 20,000 20,000
5.30% Series 1995D due 2011 14,000 14,000
5.45% Series 1995D due 2023 6,300 6,300
5.35% Series 1995E due 2022 13,000 13,000
Less funds held in trust - (10)
----------- ----------
Total excluding current portion 431,335 431,325
----------- ----------
6.20% Senior unsecured note Series A 130,000 -
Obligation under capital leases 87,007 91,249
Current maturities and sinking fund requirements (89,842) (50,180)
Other, excluding current portion (208) 327
----------- ----------
Total Long-Term Debt 931,004 900,227
----------- ----------
TOTAL CAPITALIZATION $2,597, 005 $1,956,400
----------- ----------
|
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies for both utility and non-utility operations are as follows:
The consolidated financial statements include the accounts of Sierra Pacific Resources (SPR) and its wholly-owned subsidiaries, Nevada Power Company (NVP), Sierra Pacific Power Company (SPPC), Tuscarora Gas Pipeline Company (TGPC), Lands of Sierra, Inc. (LOS), Sierra Gas Holding Company (SGHC), Sierra Energy Company dba e.three (e.three), Sierra Pacific Energy Company (SPE), Sierra Water Development Company (SWDC) and Sierra Pacific Communications (SPC). All significant intercompany balances and intercompany transactions have been eliminated in consolidation. See Note 2 for additional information regarding the presentation of consolidated financial results pursuant to the 1999 merger of SPR and NVP.
NVP is an operating public utility that provides electric service in Clark County in southern Nevada. The assets of NVP represent 52% of the consolidated assets of SPR at December 31, 1999. NVP provides electricity to approximately 566,700 customers in the communities of Las Vegas, North Las Vegas, Henderson, Searchlight, Laughlin and adjoining areas. Service is also provided to Nellis Air Force Base and the Department of Energy at Mercury and Jackass Flats at the Nevada Test Site. The consolidated financial statements of SPR include the accounts of NVP's wholly-owned subsidiaries, NVP Capital I, NVP Capital III, and Nevada Electric Investment Company. NVP has accounted for the earnings of its subsidiaries on the equity method in the financial statements.
SPPC is an operating public utility that provides electric service in northern Nevada and northeastern California. SPPC also provides natural gas and water services in the Reno/Sparks area of Nevada. The assets of SPPC represent 40% of the consolidated assets of SPR at December 31, 1999. SPPC provides electricity to approximately 302,000 customers in a 50,000 square mile service area including western, central and northeastern Nevada, including the cities of Reno, Sparks, Carson City, Elko, and a portion of eastern California, including the Lake Tahoe area. The consolidated financial statements of SPR include the accounts of SPPC's wholly-owned subsidiaries, Pinon Pine Corporation, Pinon Pine Investment Company, GPSF-B, and Sierra Pacific Power Capital I (Trust).
NVP's and SPPC's accounts for electric operations and SPPC's accounts for gas operations are maintained in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission. SPPC maintains its accounts for water operations in accordance with the Uniform System of Accounts prescribed by the National Association of Regulatory Utility Commissioners.
TGPC is a partner in a joint venture that developed, constructed, and operates a natural gas pipeline serving the expanding gas market in the Reno area and certain northeastern California markets. TGPC accounts for its joint venture interest under the equity method. e.three provides comprehensive energy services in commercial and industrial markets on a regional basis. SPE markets a package of telecommunication products and services. SPC was formed in 1999 to provide telecommunications services using fiber optic cable technology in both northern and southern Nevada.
SPR is a limited partner in an energy technology venture capital partnership formed to gain access to new technologies that could affect SPR and its subsidiaries. This partnership invests in energy companies offering technologies of strategic advantage to its partners. The initial term of this partnership expires in 2006, with two extensions of up to two years each. SPR's investment in the partnership was $3.5 million as of December 31, 1999, of which $1,250,000 was made in 1999. The remaining $1.5 million balance of SPR's commitment will be drawn as funds are needed by the partnership over the next two years. Gains and losses will be allocated 80% to the limited partners based on their contributions, and 20% to the general partner. SPR, as a limited partner, is entitled to 7.89% and accounts for this investment on the cost basis.
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities. These estimates and assumptions also affect the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of certain revenues and expenses during the reporting period. Actual results could differ from these estimates.
Certain reclassifications have been made for comparative purposes but have not affected previously reported net income or common shareholders' equity.
In addition to direct labor and material costs, NVP and SPPC also charge the following to the cost of constructing utility plant: the cost of time spent by administrative employees in planning and directing construction work; property taxes; employee benefits (including such costs as pensions, postretirement and postemployment benefits, vacations and payroll taxes); and an allowance for funds used during construction (AFUDC).
The original cost of plant retired or otherwise disposed of and the cost of removal less salvage is generally charged to the accumulated provision for depreciation. The cost of current repairs and minor replacements is charged to operating expenses when incurred. The cost of renewals and betterments is capitalized.
As part of the cost of constructing utility plant, NVP and SPPC capitalize AFUDC. AFUDC represents the cost of borrowed funds and, where appropriate, the cost of equity funds used for construction purposes in accordance with rules prescribed by the FERC and the PUCN. AFUDC is capitalized in the same manner as construction labor and material costs, with an offsetting credit to "other income" for the portion representing the cost of equity funds and as a reduction of interest charges for the portion representing borrowed funds. Recognition of this item as a cost of utility plant is in accordance with established regulatory ratemaking practices. Such practices permit the utility to earn a fair return on, and recover in rates charged for utility services, all capital costs. This is accomplished by including such costs in the rate base and in the provision for depreciation. NVP's AFUDC rates used during 1999, 1998, and 1997 were 8.55%, 9.66% and 9.66%, respectively. SPPC's AFUDC rates used during 1999, 1998, and 1997 were 6.09%, 7.69% and 8.30%, respectively. As specified by the PUCN, certain projects were assigned a lower AFUDC rate due to specific low- interest-rate financings directly associated with those projects.
Depreciation is calculated using the straight-line composite method over the estimated remaining service lives of the related properties. NVP's depreciation provision for 1999, 1998 and 1997, as authorized by the PUCN and stated as a percentage of the original cost of depreciable property, was approximately 2.9%. SPPC's depreciation provision for 1999, 1998 and 1997, as authorized by the PUCN and stated as a percentage of the original cost of depreciable property, was approximately 3.14%, 3.31%, and 3.16%, respectively.
Cash is comprised of cash on hand and working funds. Cash equivalents consist of high quality investments in money market funds. Short-term investments in money market funds were $.2 million and $.7 million for December 31, 1999 and 1998, respectively.
NVP's and SPPC's rates are currently subject to the approval of the PUCN and are designed to recover the cost of providing generation, transmission and distribution services. As a result, NVP and SPPC qualify for the application of Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation", issued by the Financial Accounting Standards Board (FASB). This statement recognizes that the rate actions of a regulator can provide reasonable assurance of the existence of an asset and requires the capitalization of incurred costs that would otherwise be charged to expense where it is probable that future revenue will be provided to recover these costs. SFAS No. 71 prescribes the method to be used to record the financial transactions of a regulated entity. The criteria for applying SFAS No. 71 include the following: (i) rates are set by an independent third party regulator, (ii) approved rates are intended to recover the specific costs of the regulated products or services, and (iii) rates that are set at levels that will recover costs can be charged to and collected from customers. SFAS No. 101, "Regulated Enterprises-Accounting for the Discontinuation of Application of FASB Statement No. 71", requires that an enterprise whose operations cease to meet the qualifying criteria of SFAS No. 71 discontinue the application of that statement by eliminating the effects of any actions of regulators that had been previously recognized.
In 1997, the Emerging Issues Task Force (EITF) released Issue 97-4. In doing so, it reached a consensus that a utility subject to a deregulation plan for its generation business should stop applying SFAS No. 71 to the generating portion of its business no later than the date when a deregulation plan with sufficient detail of the effect of the plan is known. EITF 97-4 also reached a consensus that regulatory assets and liabilities that originated in a portion of the business that is discontinuing its application of SFAS No. 71 should be evaluated on the basis of where (that is, the portion of the business in which) the regulated cash flows to realize and settle them will be derived. The result of the consensus is that there is no elimination of regulatory assets which the deregulatory legislation or rate order specifies collection of, if the regulatory assets are recoverable through a portion of the business which remains subject to SFAS No. 71.
In conformity with SFAS No. 71, the accounting for NVP and SPPC conforms to generally accepted accounting principles as applied to regulated public utilities and as prescribed by the agencies and commissions of the jurisdictions in which they operate. In accordance with these principles, certain costs that would otherwise be charged to expense or capitalized as plant costs are deferred as regulatory assets based on expected recovery from customers in future rates. Management's expected recovery of deferred costs is based upon specific ratemaking decisions or precedent for each item. The following other regulatory assets were included in the consolidated balance sheets as of December 31 (dollars in thousands):
DESCRIPTION 1999 1998 AMORTIZATION PERIODS
----------- ---- ---- --------------------
Early retirement and severance offers $ 17,001 1,657 Various through 2004
Loss on reacquired debt 31,279 13,689 Various through 2030
Plant assets 7,104 0 Various through 2031
Merger transition costs/1/ 6,638 0 To be determined
Merger severance/relocation/1/ 19,398 0 To be determined
Merger goodwill/1/ 3,392 0 To be determined
Other costs 20,430 6,890 Various
---------------------------
Total $ 105,242 22,236
===========================
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Currently, the electric utility industry is predominantly regulated on a basis designed to recover the cost of providing electric power to its retail and wholesale customers. If cost-based regulation were to be discontinued in the industry for any reason, including competitive pressure on the cost-based prices of electricity, profits could be reduced, and utilities might be required to reduce their asset balances to reflect a market basis less than cost. Discontinuance of cost-based regulation would also require affected utilities to write off their associated regulatory assets. Management cannot predict the potential impact, if any, of these competitive forces on NVP's and SPPC's future financial position and results of operations.
Nevada and California statutes permit regulated utilities to, from time-to- time, adopt deferred energy accounting procedures, which record as deferred energy costs the difference between actual energy expense and energy revenues. Under regulations adopted by the PUCN, deferred energy rates are revised at least every 12 months to recapture the accumulated deferred balance over a future period. The intent of these procedures is to ease the effect of fluctuations in the cost of purchased gas, fuel and purchased power.
NVP utilized deferred energy accounting procedures in 1997, 1998 and 1999. During 1999 SPPC did not employ deferred energy accounting procedures, but has resumed those procedures for natural gas operations as of January 1, 2000.
The passage of SB438 in Nevada terminated deferred energy accounting for electric utility operations effective October 1, 1999.
/1/ See Note 2 for information regarding merger and the amortization period for these costs. Also, merger goodwill included in the schedule represents the amount of goodwill that was amortized during 1999 under generally accepted accounting principles and subsequently removed from expense and established as a regulatory asset. Note 2 presents a calculation of the total goodwill recognized from the merger transaction.
SPR and its subsidiaries file a consolidated federal income tax return. Current income taxes are allocated based on SPR's and each subsidiary's respective taxable income or loss and investment tax credits as if each subsidiary filed a separate return. Deferred taxes are provided on temporary differences at the statutory income tax rate in effect as of the most recent balance sheet date.
SPR accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires recognition of deferred tax liabilities and assets for the future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
For regulatory purposes, NVP and SPPC are authorized to provide for deferred taxes on the difference between straight-line and accelerated tax depreciation on post-1969 utility plant expansion property, deferred energy, and certain other differences between financial reporting and taxable income, including those added by the Tax Reform Act of 1986 (TRA). In 1981, NVP and SPPC began providing for deferred taxes on the benefits of using the Accelerated Cost Recovery System for all post-1980 property. In 1987, the TRA required NVP and SPPC to begin providing deferred taxes on the benefits derived from using the Modified Accelerated Cost Recovery System.
Investment tax credits are no longer available to NVP and SPPC. The deferred investment tax credits are being amortized over the estimated service lives of the related properties.
Operating revenues include unbilled utility revenues earned (service has been delivered, but not yet billed by the end of the accounting period). These amounts are also included in accounts receivable.
In June 1998, the FASB issued SFAS No. 133, entitled "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position, and measure those instruments at fair value. In May 1999, members of the FASB agreed to delay the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. SPR is still assessing the impact of SFAS No. 133 on its financial condition and results of operations.
NOTE 1A. FINANCIAL STATEMENTS OF NEVADA POWER COMPANY
For accounting purposes, NVP is deemed to be the acquirer of SPR, and this is reflected in the SPR Consolidated Financial Statements. However, after the merger with SPR and as a result of the structure of the transactions, NVP is a separate legal entity, which is a wholly owned subsidiary of SPR. As a legal matter, NVP does not own any equity interest in SPR. The audited NVP Financial Statements accommodate the presentation of financial information of NVP on a stand-alone basis, without the benefit of the other SPR entities, by summarizing all non-NVP financial information into a few items on each of the Financial Statements. These summarized items are repeated below:
Non-NVP Financial Items on the NVP Financial Statements
NVP Balance Sheet:
-----------------
Investments in Sierra Pacific Resources $654,156
Equity in Sierra Pacific Resources $654,156
|
The Investment in Sierra Pacific Resources reflects the net assets, after deducting for all liabilities and preferred stock of Sierra Pacific Resources not related to NVP. The Equity in Sierra Pacific Resources reflects the sum of paid-in-capital and retained earnings of SPR, without the benefit of NVP.
The Equity in Earnings of Sierra Pacific Resources reflects five months of SPR net income, after SPPC preferred stock dividends.
This line item is required by the rules of purchase accounting and does not represent any asset to which holders of NVP's securities may look for recovery of their investment. This item must be disregarded for determining the ability of NVP to pay dividends (preferred or common), for calculating NVP ratio of earnings to fixed charges and preferred dividends, and for all NVP mortgage and charter issuance tests.
As in the income statement, the Equity in Earnings of Sierra Pacific Resources reflects the five months of SPR net income, after SPPC preferred stock dividends.
This line item is required by the rules of purchase accounting and does not represent any asset to which holders of NVP's securities may look for recovery of their investment. This item must be disregarded for determining the ability of NVP to pay dividends (preferred or common), for calculating NVP ratio of earnings to fixed charges and preferred dividends, and for all NVP mortgage and charter issuance tests.
The Equity in Sierra Pacific Resources reflects the sum of paid-in-capital and retained earnings of SPR on NVP's books.
This line item is required by the rules of purchase accounting and does not represent any asset to which holders of NVP's securities may look for recovery of their investment. This item must be disregarded for determing the ability of NVP to pay dividends (preferred or common) for calculating NVP ratio of earnings to fixed charges and preferred dividends, and for all NVP mortgage and charter issuance tests.
NOTE 2. SIERRA PACIFIC RESOURCES AND NEVADA POWER COMPANY MERGER
On July 28, 1999 the merger between SPR and NVP was finalized. The merger was accounted for as a reverse purchase under generally accounting accepted principles, with NVP considered the acquiring entity even though SPR survives and is the legal parent of NVP. In addition, for accounting purposes, the merger was deemed to have occurred on August 1, 1999. As a result of this reverse purchase accounting treatment; (i) the historical financial statements of SPR for periods prior to the date of the merger are no longer the financial statements of SPR, and therefore, no longer presented; (ii) the historical financial statements of SPR for periods prior to the date of the merger are those of NVP; (iii) based on a merger date of August 1, 1999, the Consolidated Statements of Income for the twelve months ended December 31, 1999 include five months (August through December 1999) of operating activity for SPR and its subsidiaries other than NVP. The same statements include the operating results of NVP for the entire periods presented.
On June 11, 1999, following approvals from the Department of Justice and the SEC, the PUCN gave unanimous approval of a stipulation among the merging companies (SPR and NVP), the PUCN staff and the Utility Consumer Advocate, regarding the merging companies' joint divestiture plan. As part of the stipulation, the companies were required to re-file the divestiture plan and file the final Independent System Administrator (ISA) proposal with the PUCN and the FERC. The last filing was submitted in October 1999. The PUCN merger order provides that upon selling the generating units, both companies can determine how they will use the proceeds of the sales, up to the book value of the plants. Any after-tax gains above book value will be used to offset past costs, as determined by the PUCN. The PUCN order also provided that any remaining gains can be used to offset goodwill. After-tax gains may not be sufficient to offset goodwill. However, if SPPC and NVP demonstrate that the divestiture "resulted in a market for generation services that produced market prices that are lower than what could have been achieved otherwise, SPPC and NVP may include in the general rate filing a request to recover goodwill." SPR expects that some of the generation facility sales will be completed by late 2000. Following the issuance of the PUCN order on the merger, the Nevada Legislature passed SB 438 that amended the restructuring process in Nevada. Among other provisions, it required the utilities (SPPC and NVP) to provide last resort service at a capped price, and provided that any shortfall experienced by the utilities in revenues from the capped rates over experienced costs could be recovered from the net gain from the generation divestiture. It is the utilities' position that any net gain must first be applied to any such shortfall; any remaining net gain may then be used to offset stranded costs and then allocated to goodwill.
Under terms of the stipulation, SPR's jurisdictional subsidiaries are required to file a general rate case three years after the start of retail competition in the state of Nevada that would give the merged company the opportunity to recover costs of the merger, provided SPR's jurisdictional subsidiaries can demonstrate that merger savings exceed merger costs. Merger costs are to be split among the non-competitive, potentially competitive and unregulated services or businesses. An opportunity to recover the non- competitive portion of the merger costs will be addressed in the rate case that follows the start of competition in Nevada. The burden is on SPPC and NVP to prove that merger savings exceed merger costs. SPPC and NVP will also have the opportunity to recover goodwill in the same proceeding.
Through December 31, 1999, SPR had incurred a total of $57.1 million in capitalized costs since merger work began. The capitalized merger amounts consist of $37.7 million of transaction and transition costs and $19.4 million of employee separation costs. Employee separation, relocation, and related costs for SPR were $14.9 million, of which $5.0 million remains unpaid as of December 31, 1999. Other costs incurred in connection with employee separations included pension and postretirement benefits net of curtailment gains of $4.5 million.
In accordance with the terms of the merger, each outstanding share of SPR's common stock was converted into the right to receive either $37.55 in cash or 1.44 shares of newly issued SPR common stock. Each outstanding share of NVP common stock was converted to the right to receive either $26.00 in cash or 1.00 share of newly issued SPR common stock. 4,037,000 shares of SPR and 11,716,611 shares of NVP common stock were exchanged for $151.6 million and $304.6 million, respectively. The remaining shares of each company were converted to newly issued shares of SPR common stock. SPR stockholders and NVP stockholders received 38,866,054 and 39,548,506 shares of newly issued SPR common stock, resulting in 78,414,560 outstanding shares of SPR on August 1, 1999.
The total consideration paid to SPR common stockholders was equal to cash of $151.6 million and 38,866,054 shares of newly issued SPR common stock at a price of $24.18 per share based on the average closing price of NVP common stock between April 22, 1998 and May 6, 1998. The eleven-day average price of NVP common stock used in determining the total stock consideration represents the market price over a reasonable period of time before and after the transaction was announced on April 29, 1998. As shown below, $331.2 million of goodwill was recorded in connection with the merger and is being amortized over 40 years. The PUCN's order approving the merger allowed SPR to defer merger costs (including goodwill) allocable to the regulated utilities for a three-year period. At the end of the deferral period SPR will propose an amortization period for goodwill and other merger costs. Accordingly, goodwill amortization associated with the regulated utility companies is being reclassified to a regulatory asset during the three-year period. Also, because SPR is deferring merger costs as regulatory assets the transaction costs included in the calculation of goodwill represent only costs allocable to the SPR's non- regulated subsidiaries. The calculation of goodwill follows:
COMPUTATION OF GOODWILL
(Dollars and shares in thousands, except per share amounts)
Cash consideration $ 151.600
Common stock consideration
Sierra Pacific Resources stock converted 26,990
Conversion rate 1.440
-------
New shares received 38,866
NVP avg stock price 24.18
-------
Total stock consideration 939.780
Merger transaction costs allocated to
non-regulated subsidiaries 626
----------
Total Consideration 1.092,006
Fair value of Sierra Pacific Resources'
net assets at 7/31/99 694.729
Other assets recognized, net of tax, for
pension and other postretirement benefits 66,103
----------
Goodwill $ 331,174
==========
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Pro forma unaudited financial information for SPR on a consolidated basis, giving effect to the merger as if it had occurred at the beginning of all periods presented, is shown below. The pro forma information presented below is not necessarily indicative of the results that would have occurred, or that will occur in the future.
(Dollars and shares in thousands Twelve Months Ended except per share amounts) 1999 1998 1997 -------------------------------- ----------------------------------------- Operating Revenue $ 1,756,235 $ 1,615,523 $ 1,462,391 Operating Income $ 253,785 $ 281,759 $ 266,185 Net income $ 82,449 $ 141,355 $ 138,022 Net income per share-basic and diluted $ 1.05 $ 1.81 $ 1.80 Weighted Average Shares of Common Stock Outstanding $ 78,414 $ 78,038 $ 76,627 Total Assets as of December 31 $ 5,247,606 $ 4,979,631 $ 4,605,713 |
NOTE 3. REGULATORY ACTIONS
On April 30, 1999, SPPC filed its second compliance filings related to the 1997 rate stipulation The filings provide a calculation of SPPC's electric and gas earnings in excess of a 12 % return on equity (ROE). Any earnings in excess of 12 % ROE are shared 50/50 between shareholders and customers. On August 19, 1999, the Commission approved a stipulation between SPPC, Staff, and the UCA, which rebated $7.34 million and $2.0 million to electric and gas customers, respectively in 1999. Based on 1999 operating results, SPPC anticipates in may make refunds to customers. Appropriate reserves have been recorded to reflect any anticipated refunds.
NVP filed a deferred energy case on July 15, 1999, covering the period from June 1, 1998 through May 31, 1999. Senate Bill 438 froze the rates for NVP at the level that was in effect on July 1, 1999, except that the PUCN was authorized to modify those rates in decisions related to deferred accounting cases filed by NVP prior to October 1, 1999. Accordingly, on September 30, 1999 NVP filed an update through August 31, 1999. Hearings began in January 2000. On February 4, 2000 the PUCN issued an order that rejected NVP's updated September 30, 1999 deferred energy filing. In addition, on March 21, 2000 the PUCN made available a draft order that indicated a substantial reduction in NVP's requested rate relief on the remaining $44 million included in the case. NVP expects a final decision to be issued on March 27, 2000, which will substantially reflect the decision in the draft order. As a result of these decisions, NVP recognized a reserve for previously deferred energy and imputed capacity costs of $80 million. $56 million of the reserve is associated with the February 4 decision and $24 million is associated with the March 21 decision. NVP intends to appeal the decisions.
On February 18, 1999, the CPUC approved SPPC's proposed Revenue Cycle Services Credits (RCSC) application filed February 2, 1998. The RCSC addresses meter ownership, meter services, meter reading, and billing and applies to customers who select their own provider of a revenue cycle service.
On April 9, 1999, SPPC made a compliance tariff filing which reflects the approved credits.
On April 5, 1999, the CPUC approved SPPC's proposed unbundled rates effective back to June 1, 1998.
On May 29, 1999, SPPC and NVP filed an application with the FERC to increase its Open Access Transmission rates. On November 24, 1999, an unopposed motion to suspend the procedural schedule to allow consummation of a settlement was filed with the FERC. The Settlement was filed February 8, 2000 and the proposed rates became effective on March 1, 2000.
On March 31, 1999, NVP filed with the FERC for approval of generation tariffs, which contain the rates, terms and conditions under which the new owners of SPR's generation would operate after divestiture. The FERC approved the tariffs on November 1, 1999. In compliance with the FERC's November 1 order, NVP filed pro forma service agreements for the approved tariffs on November 16, which were subsequently approved on December 16.
NOTE 4. EARNINGS PER SHARE
SPR follows SFAS No. 128, "Earnings Per Share". The following provides the calculation for Diluted EPS. The difference between Basic EPS and Diluted EPS is due to common stock equivalent shares resulting from stock options, the employee stock purchase plan, performance shares and a non-employee director stock plan. Common stock equivalents were determined using the treasury stock method.
December 31,
--------------------------------------------------------------------
1999 1998 1997
------------------- -------------------- -------------------
Basic EPS
Numerator
---------
Income available to common
stockholders ($000) $ 51, 750 $ 83,499 $ 82,091
------------------- -------------------- -------------------
Denominator
-----------
Weighted average number of shares 62,577,385 50,993,000 49,691,000
outstanding
Per-Share Amount $ 0.83 $ 1.64 $ 1.65
----------------
=================== ==================== ===================
Diluted EPS
Numerator
---------
Income available to common 51,750 83,499 82,091
stockholders ($000)
------------------- -------------------- -------------------
Denominator
-----------
Weighted average number of shares
outstanding before dilution 62,577,385 50,993,000 49,691,000
Stock options 20,447 0 0
Executive long term incentive plan
- performance shares 26,118 0 0
Non-employee stock plan 5,736 0 0
Employee stock purchase plan 1,790 0 0
62,631,476 50,993,000 49,691,000
------------------- -------------------- -------------------
Per-Share Amount $ 0.83 $ 1.64 $ 1.65
---------------- =================== ==================== ===================
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NOTE 5. INVESTMENTS IN SUBSIDIARIES AND OTHER PROPERTY
Investments in subsidiaries and other property consisted of (dollars in thousands):
December 31,
1999 1998
--------------- -----------------
Investment in Pinon Pine, LLC $ 60,043 $ -
Investment in TGTC 16,408 -
Cash Value-Life Insurance 11,492 12,649
Installment Contracts 3,301 4,385
Note Receivable 2,700 -
Other 11,936 7,449
$105,880 $24,483
=============== =================
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Pinon Pine Corp. and Pinon Pine Investment Co., subsidiaries of SPPC, own 25% and 75% of a 38% interest in Pinon Pine Company, L.L.C. GPSF-B, a Delaware corporation formerly owned by General Electric Capital Corporation (GECC) and now owned by SPPC, owns the remaining 62% as of February 1999. The LLC was formed to take advantage of federal income tax credits associated with the alternative fuel (syngas) produced by the coal gasifier available under (S) 29 of the Internal Revenue Code. The entire project, which includes an LLC-owned gasifier and an SPPC-owned power island and post-gasification facility to partially cool and clean the syngas, is referred to collectively as the Pinon Pine Power Project.
SPPC has a funding arrangement with the Department of Energy (DOE). Under the agreement, the DOE will provide funding towards the construction of the project, and towards the operating and maintenance costs of the facility. The DOE has committed $168 million of funding for Pinon construction and operation costs. The DOE provided funding for approximately 53% of the estimated construction cost and half of the operating and fuel expenses through December 31, 1999. Additional funding will be provided until the commitment is expended. A dispute has arisen with the DOE regarding the historical and future funding of natural gas costs. In February 1999, the DOE informed SPPC it will not fund the remaining $14 million under the cooperative agreement until the dispute is resolved. On November 2, 1999, SPPC reached final agreement with the DOE regarding the allowability of previously incurred natural gas costs. The agreement also redefines the cooperative agreement performance period and the responsibilities of both parties through the remainder of the agreement. The period of performance is extended until January 1, 2001 or until the facility is sold or operational control is transferred. The DOE agrees to share past fuel costs and future natural gas costs used to fuel the gas combustion turbine during periods when air extraction from the process is directed to the gasifier island. Estimated construction start-up and commissioning costs for Pinon, including the DOE's portion are approximately $301.5 million, which includes permitting taxes, start-up commissioning, operator training and Allowance for Funds Used During Construction. DOE funding for construction through December 1999 is $161.4 million.
Construction began on the project in February 1995, following resource plan approval and the receipt of all permits and other approvals. The natural gas portion (combined cycle combustion turbine) was satisfactorily completed and placed in service December 1, 1996. The balance of the plant was completed in June 1998. The construction of the gasifier portion of the project overran the fixed contract price by approximately 12% or $12.6 million. The overrun is primarily due to redesign issues, resolving technical issues relative to start up and other costs due to a later than anticipated completion date. To date, SPPC has not been successful in obtaining sustained operation of the gasifier but work continues to identify problem areas and redesign solutions which will likely require additional capital expenditures. Due to the problems noted above, SPPC and Foster Wheeler settled on a portion of the cost overrun and have entered into an alternative dispute resolution.
SPPC had to satisfy certain performance requirements as part of the construction agreement with the LLC. The initial performance warranty required that the gasifier attain an average capacity factor of 30% during 1997, regardless of delays in the in-service date. Since the gasifier was not in service in 1997, the certain performance warranties required by the contract were not met. Consequently, SPPC paid GECC $2.8 million as satisfaction of the performance obligation.
NOTE 6. JOINTLY OWNED FACILITIES
At December 31, 1999, SPR (through its utility subsidiaries NVP and SPPC) owned the following undivided interests in jointly owned electric utility facilities:
Construction
% Owned Accumulated Net Plant in Work in Subsidiary
Generating Facility by Company Plant in Service Depreciation Service Progress
----------------------------------------------------------------------------------------------------------------------------------
Navajo Station 11.3 $200,224 $ 84,781 $115,443 $1,818 NVP
Mohave Facility 14.0 78,608 32,406 46,202 3,995 NVP
Reid Gardner No. 4 32.2 125,648 47,198 78,450 24 NVP
Valmy Station 50.0 280,924 112,056 168,868 618 SPPC
-------- -------- -------- ------
TOTAL $685,404 $276,441 $408,963 $6,455
======== ======== ======== ======
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The amounts above for Navajo and Mohave include NVP's share of transmission systems and general plant equipment and, in the case of Navajo, NVP's share of the jointly owned railroad which delivers coal to the plant. Each participant provides its own financing for all of these jointly owned facilities. NVP's share of operating expenses for these facilities is included in the corresponding operating expenses in the Consolidated Statements of Income.
NOTE 7. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
As of December 31, 1999, 1,829,015 shares of common stock were reserved for
issuance under the Common Stock Investment Plan (CSIP), Employees' Stock
Purchase Plan (ESPP), Non-Employee Director Stock Plan and Executive Long-Term
Incentive Plan (ELTIP). The ELTIP for key management employees allows for the
issuance of SPR's common shares to key employees through December 31, 2003.
This Plan permits the following types of grants, separately or in combination:
nonqualified and qualified stock options; stock appreciation rights; restricted
stock; performance units; performance shares and bonus stock. SPR also provides
an ESPP to all of its employees meeting minimum service requirements. Employees
can choose twice each year to have up to 15% of their base earnings withheld to
purchase company common stock. The purchase price of the stock is 90% of the
market value on the offering date or 100% of the market price on the execution
date, if less. The Non-employee Director Stock Plan provides that a portion of
SPR's outside directors' annual retainer be paid in SPR common stock. SPR
records the costs of these plans in accordance with Accounting Principles Board
Opinion Number 25.
As a part of the August 1, 1999 merger, the NVP ELTIP was terminated and existing SPR plans were adopted by the surviving company.
On September 21, 1999, the Board of Directors of SPR (the "SPR Board") declared a dividend distribution of one right (an "SPR Right") for each outstanding share of SPR common stock to shareholders of record at the close of business on October 31, 1999. By issuing the new SPR Rights, the SPR Board extended the benefits and protections afforded to shareholders under the Rights Agreement, dated as of October 31, 1989, which expired on October 31, 1999. Each SPR Right, initially evidenced by and traded with the shares of SPR Common Stock, entitles the registered holder (other than an "Acquiring Person" as defined in the Rights Agreement) to purchase at an exercise price of $75.00, $150.00 worth of common stock at its then-market value, subject to certain conditions and approvals set forth in the Rights Agreement. If, at any time while there is an Acquiring Person, SPR engages in a merger or other business combination transaction or series of related transactions in which the Common Stock is changed or exchanged or 50% or more of its assets or earning power is transferred, each SPR Right (not previously voided by the occurrence of a Flip- in Event, as described in the Rights Agreement) will entitle its holder to purchase, at the SPR Right's then-current Exercise Price, common stock of such Acquiring Person having a calculated value of twice the SPR Right's then-current Exercise Price. The SPR Rights are not exercisable until the Distribution Date and expire on October 31, 2009, unless previously redeemed by SPR. Following an SPR Distribution Date, the SPR Rights will trade separately from the SPR Common Stock and will be evidenced by separate certificates. Until an SPR Right is exercised, the holder thereof will have no rights as a shareholder of SPR, including, without limitation, the right to receive dividends. The purpose of the plan is to help ensure that SPR's shareholders receive fair and equal treatment in the event of any proposed hostile takeover of SPR.
The changes in common stock and additional paid-in capital for 1999, 1998, and 1997 are as follows (dollars in thousands):
Shares Issued Amount
1999 1998 1997 1999 1998 1997
----------------- --------------- -------------- -------------- -------------- ---------------
Merger exchange 78,414,560 - - $66,540 $ - $ -
CSIP/DRP - 799,762 1,515,716 - 19,067 31,366
ESPP, and other - 65,609 98,184 - 1,564 2,031
78,414,560 865,371 1,613,900 $66,540 $20,631 $33,397
================= =============== ============== ============== ============== ===============
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NOTE 8. PREFERRED STOCK AND PREFERRED SECURITIES
All issues of SPPC and NVP preferred stock are superior to SPR's common stock with respect to dividend payments (which are cumulative) and liquidation rights.
The following table indicates the number of shares outstanding and the dollar amount thereof at December 31 of each year. The difference between total shares authorized and the amount outstanding represents undesignated shares authorized but not issued.
Shares Issued Amount
--------------------------------- --------------
(Dollars in thousands) 1999 1998 1997 1999 1998 1997
------------- ------------- ------------- --------------- --------------- --------------
Preferred Stock
---------------
With mandatory sinking fund
5.40% Series - 36,669 38,669 $ - $ 733 $ 773
5.20% Series - 34,570 36,507 - 692 730
4.70% Series - 102,006 108,006 - 2,040 2,160
--------------------------------------------- -----------------------------------------------
- 173,245 183,182 - 3,465 3,663
Current sinking fund
requirements - - - - (200) (200)
--------------------------------------------- -----------------------------------------------
173,245 183,182 - 3,265 3,463
Not subject to mandatory redemption:
Class A Series I 2,000,000 - - 50,000 - -
--------------------------------------------- -----------------------------------------------
Subtotal 2,000,000 - - 50,000 - -
Total Preferred Stock 2,000,000 173,245 183,182 50,000 3,265 3,463
============================================= ===============================================
Preferred Securities
--------------------
Subject to mandatory redemption:
Preferred securities of
Sierra Pacific Power
Capital II 1,940,000 - - 48,500 - -
Preferred securities of
Nevada Power Co.
Capital I 147,058 147,058 147,058 118,872 118,872 118,872
Preferred securities of
Nevada Power Co.
Capital III 86,598 86,598 - 70,000 70,000 -
--------------------------------------------- -----------------------------------------------
Total Preferred Securities 2,173,656 233,656 147,058 $237,372 $188,872 $118,872
============================================= ===============================================
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On July 29, 1996, Sierra Pacific Power Capital I (the Trust), a wholly- owned subsidiary of SPPC, issued $48.5 million (1,940,000 shares) of 8.60% Trust Originated Preferred Securities (the Preferred Securities). SPPC owns all the common securities of the Trust; 60,000 shares totaling $1.5 million (Common Securities). The Preferred Securities and the Common Securities (the Trust Securities) represent undivided beneficial ownership interests in the assets of the Trust. The existence of the Trust is for the sole purpose of issuing the Trust Securities and using the proceeds thereof to purchase from SPPC its 8.60% Junior Subordinated Debentures due July 30, 2036, in a principal amount of $50 million. The sole asset of the Trust is SPPC's junior subordinated debentures. SPPC's obligations provide a full and unconditional guarantee of the Trust's obligations under the Preferred Securities.
The Preferred Securities of Sierra Pacific Power Capital I are redeemable only in conjunction with the redemption of the related 8.60% Junior Subordinated Debentures. The Junior Subordinated Debentures will mature on July 30, 2036, and may be redeemed, in whole or in part, at any time on or after July 30, 2001,or at any time in certain circumstances upon the occurrence of a tax event. A tax event occurs if an opinion has been received from tax counsel that there is more than an insubstantial risk that: the Trust is, or will be subject to United States federal income tax with respect to interest accrued or received on the Junior Subordinated Debentures; the Trust is, or will be subject to more than a de minimis amount of other taxes, duties or other governmental charges; interest payable by SPPC to the Trust on the Junior Subordinated Debentures is not, or will not be, deductible, in whole or in part by SPPC for federal income tax purposes.
Upon the redemption of the Junior Subordinated Debentures, payment will simultaneously be applied to redeem preferred securities having an aggregate liquidation amount equal to the aggregate principal amount of the Junior Subordinated Debentures. The preferred securities are redeemable at $25 per preferred security plus accrued dividends.
On April 2, 1997, NVP Capital I (Trust), a wholly-owned subsidiary of NVP issued 4,754,860, 8.2% QUIPS at $25 per security. The NVP owns all of the Series A common securities, 147,058 shares issued by the Trust for $3.7 million. The QUIPS and the common securities represent undivided beneficial ownership interests in the assets of the Trust, a statutory business trust formed under the laws of the state of Delaware. The existence of the Trust is for the sole purpose of issuing the QUIPS and the common securities and using the proceeds thereof to purchase from the NVP its 8.2% Junior Subordinated Deferrable Interest Debentures (QUIDS) due March 31, 2037, extendible to March 31, 2046 under certain conditions, in a principal amount of $122.6 million. The sole asset of the Trust is the QUIDS. Holders of the Series A QUIPS are entitled to receive preferential cumulative cash distributions accruing from the date of original issuance and payable quarterly on the last day of March, June, September and December of each year. The Series A QUIPS are subject to mandatory redemption, in whole or in part, upon repayment of the Series A QUIDS at maturity or their earlier redemption in an amount equal to the amount of related Series A QUIDS maturing or being redeemed. The QUIPS are redeemable at $25 per preferred security plus accumulated and unpaid distributions thereon to the date of redemption.
NVP's obligations provide a full and unconditional guarantee of the Trust's obligations under the QUIPS. Financial statements of the Trust are consolidated with NVP's. Separate financial statements are not filed because the Trust is wholly-owned by NVP and essentially has no independent operations, and NVP's guarantee of the Trust's obligations is full and unconditional. The $118.9 million in net proceeds was used for general corporate utility purposes and the repayment of short-term debt.
In October 1998, NVP Capital III (Trust), a wholly-owned subsidiary of Nevada Power Company, issued 2,800,000, 7 3/4% Cumulative Quarterly Trust Issued Preferred Securities at $25 per security. NVP owns the entire common securities, 86,598 shares issued by the Trust for $2.2 million. The Trust Issued Preferred Securities and the common securities represent undivided beneficial ownership interests in the assets of the Trust, a statutory business trust formed under the laws of the state of Delaware. The existence of the Trust is for the sole purpose of issuing the Trust Issued Preferred Securities and the common securities and using the proceeds thereof to purchase from NVP its 7 3/4% Junior Subordinated Deferrable Interest Debentures due September 30, 2038, extendible to September 30, 2047 under certain conditions, in a principal amount of $72.2 million. The sole asset of the Trust is the deferrable interest debentures. Holders of the Trust Issued Preferred Securities are entitled to receive preferential cumulative cash distributions accruing from the date of original issuance and payable quarterly on the last day of March, June, September and December of each year. The Trust Issued
Preferred Securities are subject to mandatory redemption, in whole or in part, upon repayment of the deferrable interest debentures at maturity or their earlier redemption in an amount equal to the amount of related deferrable interest debentures maturing or being redeemed. The Trust Issued Preferred Securities are redeemable at $25 per preferred security plus accumulated and unpaid distributions thereon to the date of redemption. NVP's obligations provide a full and unconditional guarantee of the Trust's obligations under the Trust Issued Preferred Securities. Financial statements of the Trust are consolidated with NVP's. Separate financial statements are not filed because the Trust is wholly-owned by NVP and essentially has no independent operations, and NVP's guarantee of the Trust's obligations is full and unconditional. The $70 million in net proceeds was used for general corporate utility purposes including the repayment of short-term debt.
On July 23, 1999 NVP redeemed the 4.7%, 5.2% and 5.4% Series Redeemable Cumulative Preferred Stock. The total par value and premium was $3.5 million and was paid in accordance with the merger agreement with Sierra Pacific Resources.
On November 1, 1999, SPPC paid $23.5 million, par value and premium, to redeem Series A, $2.44 Dividend (4.88%), Series B, $2.36 Dividend (4.72%) and Series C, $3.90 Dividend (7.8%).
NOTE 9. LONG-TERM DEBT
Substantially all utility plant is subject to the lien of SPPC and NVP indentures under which the first mortgage bonds are issued.
On June 17, 1998, SPPC redeemed $5 million, 8.65% First Mortgage Bonds before the 2022 due date.
On April 1, 1998, SPR redeemed $10 million of Series C senior notes leaving a remaining balance of $20 million, of which $10 million has been included in the current liability portion of long-term debt on the consolidated balance sheets at December 31, 1999. On April 1, 1999, these $10 million were redeemed. Senior notes, Series D were redeemed on April 1, 1999 and Series E is due in 2000.
In December 1998, SPPC issued $35 million principal amount of collateralized Medium-Term Notes, Series D, consisting of a three year non- callable note, due in 2001, with an interest rate of 5.47% and five year non- callable notes, due in 2003, with interest rates ranging from 5.50% to 5.59%. For all notes, interest is payable in semi-annual payments. The proceeds to SPPC from the sale of the notes was used for general corporate purposes including but not limited to: the acquisition of property; the construction, completion, extension or improvement of facilities; or discharge or refunding of obligations, including short-term borrowings.
On April 9, 1999, SPPC sold the right to receive payments made in respect
of Transition Property as defined by the offering Circular dated March 30, 1999,
to SPPC Funding LLC, a Delaware special purpose limited liability company whose
sole member is SPPC, in exchange for the proceeds of the SPPC Funding LLC Notes,
Series 1999-1 (the Underlying Notes). SPPC Funding LLC then issued and sold the
Underlying Notes to the California Infrastructure and Economic Development Bank
Special Purpose Trust SPPC-1 (the Trust) in exchange for the proceeds of the
sale of the Trust's $24.0 million 6.4% Rate Reduction Certificates, Series 1999-
1 (the Certificates). The Trust, which had been established by the California
Infrastructure and Economic Development Bank, issued and sold the Certificates
in a private placement pursuant to Rule 144A under the Securities Act of 1933,
as amended.
The Certificates are one of a series of rate reduction certificates that may be issued from time to time by the Trust and sold to investors upon terms determined at the time of sale.
On July 12, and July 16, of 1999, respectively, $10 million of the 6.86% and $20 million of the 6.83% of the Series C, collateralized medium-term SPPC notes matured.
On September 17, 1999, SPPC issued $100 million floating rate notes, due October 13, 2000. Interest on the notes is payable quarterly commencing on December 15, 1999. The interest rate on the notes for each interest period to maturity will be a floating rate, subject to adjustment every three months, equal to the London InterBank Offered Rate (LIBOR) for three-month U.S. dollar deposits plus a spread of 0.75%. These notes will not be entitled to any sinking fund and will be redeemable without premium at the option of SPPC, in whole, beginning on March 15, 2000 and on the 15th day of each month thereafter.
On January 29, 1998, NVP remarketed at fixed rates $141.05 million Clark County, Nevada (Nevada Power Company Project) variable rate revenue bonds consisting of $76.75 million Series 1995A IDBs due 2030 at 5.6%, $44 million Series 1995C IDBs due 2030 at 5.5% and $20.3 million Series 1995D PCRBs with $14 million due 2011 at 5.3% and $6.3 million due 2023 at 5.45%. On the same date, $13 million Coconino County, Arizona (Nevada Power Company Project) Series 1995E PCRBs due 2022 were remarketed at a 5.35% fixed rate.
On March 30, 1999, NVP issued $130 million, 6.2%, Series A senior unsecured notes, due 2004. The notes were issued under rule 144A with registration rights. Net proceeds were used to repay SPR's and NVP's lines of credit.
On October 1, 1999, NVP redeemed $45,000,000, Series Y, 6.93%, in first mortgage bonds.
SPR's and NVP's aggregate annual amount of maturities for long-term debt for the next five years is shown below (dollars in thousands):
NVP SPR
2000 $ 89,842 $ 202,709
2001 0 19,732
2002 15,000 17,626
2003 0 20,711
2004 130,000 132,621
----------------- ----------------
Subtotal 234,842 393,399
Thereafter 786,004 1,365,937
----------------- ----------------
Total $1,020,846 $1,759,336
================= ================
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NOTE 10. TAXES
The following reflects the composition of taxes on income (in thousands of dollars):
1999 1998 1997
--------------------------------------------------
Federal:
Taxes estimated to be currently payable $ 42,379 $ 17,163 $ 18,939
Deferred taxes related to:
Excess of tax depreciation over book depreciation 11,569 24,111 13,669
Deferral of energy costs deducted currently for tax purposes-net (16,650) 11,162 20,848
Contributions in aid of construction and customer advances (11,508) (13,211) (6,302)
Avoided interest capitalized (3,594) 6,463 (2,406)
Repairs and Maintenance 1,469 - -
Severance Programs 6,072 - -
Other-net (464) 1,243 1,937
Net amortization of investment tax credit (2,285) (1,460) (1,460)
State (California) 370 - -
--------------------------------------------------
Total $ 27,358 $ 45,471 $ 45,225
==================================================
As Reflected in Statement of Income:
Federal income taxes $ 25,716 $ 42,949 $ 43,478
State income taxes 370 - -
--------------------------------------------------
Operating Income 26,086 42,949 43,478
Other income-net 1,272 2,522 1,747
--------------------------------------------------
Total $ 27,358 $ 45,471 $ 45,225
==================================================
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The total income tax provisions differ from amounts computed by applying the federal statutory tax rate to income before income taxes for the following reasons (in thousands of dollars):
1999 1998 1997
--------------------------------------------------
Income before preferred dividend requirements of subsidiary 54,146 $ 83,673 $ 83,216
Total income tax expense 27,358 45,471 45,225
--------------------------------------------------
81,504 129,144 128,441
Statutory tax rate 35% 35% 35%
Expected income tax expense 28,526 45,200 44,954
Depreciation related to difference in cost basis for tax purposes 1,879 1,431 1,431
Allowance for funds used during construction - equity 805 300 300
Tax benefit from the disposition of assets (184) - -
ITC amortization (2,441) (1,460) (1,460)
California franchise taxes (net of federal benefit) 241 - -
Other-net (1,468) - -
----------------------------------------------------
$ 27,358 $ 45,471 $ 45,225
====================================================
Effective tax rate 33. 6% 35.2% 35.2%
====================================================
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The net deferred federal income tax liability consists of deferred federal income tax liabilities less related deferred federal income tax assets, as shown (in thousands of dollars):
1999 1998
--------------- --------------
Deferred Federal
Income Tax Liabilities:
AFUDC $ 11,098 $ 1,889
Bond redemption's 8,043 2,177
Excess of tax depreciation over book depreciation 336,545 162,655
Severance Programs 9,168 -
Repairs and maintenance 7,684 -
Tax benefits flowed through to customers 196,365 62,906
Other 10,481 4,187
--------------- --------------
Total $579,384 $233,814
--------------- --------------
Deferred Federal Income Tax Assets:
Avoided interest capitalized 19,443 885
Employee benefit plans 6,825 2,549
Demand side program costs 1,473 1,319
Gross-ups received on contributions in aid of construction and
advances including gross-ups 98,615 47,149
Unamortized investment tax credit 34,051 15,122
Other 5,013 1,165
--------------- --------------
Total 165,420 68,189
--------------- --------------
Deferred Federal Income Taxes $413,964 $165,625
=============== ==============
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SPR's balance sheets contain a net regulatory tax asset of $27.7 million at December 31, 1999 and $26.7 million at December 31, 1998. The net regulatory asset consists of future revenue to be received from customers (a regulatory tax asset) of $65.5 million at December 31, 1999 and $65.6 million at December 31, 1998, due to flow through of the tax benefits of temporary differences. Offset against these amounts are future revenues to be refunded to customers (a regulatory tax liability), consisting of $17.9 million at December 31, 1999 and $18.5 million at year-end 1998, due to temporary differences for liberalized depreciation at rates in excess of current tax rates, and $20.0 million at December 31, 1999 and $20.4 million at December 31, 1998 due to temporary differences caused by the investment tax credit. The regulatory tax liability for temporary differences related to liberalized depreciation will continue to be amortized using the average rate assumption method required by the Tax Reform Act of 1986. The regulatory tax liability for temporary differences caused by the investment tax credit will be amortized ratably in the same fashion as the deferred investment credit.
The income tax expense computed for NVP in accordance with FAS 109 reflects the assets and liabilities of NVP on a stand alone basis and the effect of filing a consolidated income tax return with its subsidiary companies.
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The December 31, 1999 carrying amount for cash and cash equivalents, current assets, accounts receivable, accounts payable, and current liabilities approximates fair value due to the short-term nature of these instruments.
The total fair value of SPR and NVP's consolidated long-term debt at December 31, 1999, is estimated to be $1,518 million and $910.9 million, respectively, (excluding current portion) based on quoted market prices for the same or similar issues or on the current rates offered to SPR and NVP for debt of the same remaining maturities. The total fair value (excluding current portion) was estimated to be $868 million at December 31, 1998. The estimated fair value of SPR's and NVP's preferred securities are $208.6 million and $160.1 million, respectively, at December 31, 1999. The fair value of preferred securities were estimated to be $193 million and $144.5 million, respectively, at December 31, 1998.
NOTE 12. SHORT-TERM BORROWINGS
On July 28, 1999, immediately following the consummation of the merger between SPR and NVP, SPR (holding company) put into place a $500 million unsecured revolving credit facility, which replaced SPR's previous credit facility of $10 million. This facility may be used for working capital and general corporate purposes, including for commercial paper backup.
At the same time, NVP and SPPC each put into place $150 million unsecured revolving credit facilities. These facilities may also be used for working capital and general corporate purposes, including for commercial paper backup. These new facilities replaced the existing credit facilities for NVP and SPPC.
Immediately following the merger, SPR and NVP established commercial paper programs. These programs are rated A2/P2 by Standard and Poor's and Moody's, respectively.
On October 15, 1999, NVP issued $100 million floating rate notes, due October 6, 2000. Interest on the notes is payable quarterly commencing on January 15, 2000. The interest rate on the notes for each interest period to maturity will be a floating rate, subject to adjustment every three months, equal to LIBOR for U.S. dollar deposits plus a spread of 0.79%. These notes will not be entitled to any sinking fund and will be redeemable at the option of NVP, in whole, beginning on April 15, 2000 and on the 15th day of each month thereafter. The proceeds of this financing were used to pay down commercial paper.
At December 31, 1999, SPR's (holding company) short-term debt was $463.4 million comprised entirely of commercial paper at an average interest rate of 6.51%. NVP's short-term debt was $182.0 million comprised of $82.0 million of commercial paper at an average interest rate of 6.35% and the $100 million of floating rate notes. SPPC had $109.6 million outstanding at year end in commercial paper, with an average interest rate of 6.43%.
The other subsidiaries of SPR had no outstanding short-term borrowings at this time.
NOTE 13. DIVIDEND RESTRICTIONS
SPR's primary source of funds for the payment of dividends to its stockholders is dividends paid by SPPC and NPV on their common stock, all of which is owned by SPR. Accordingly, SPR's ability to
pay dividends is dependent upon the ability of SPPC and NPV to pay dividends on their common stock. The Restated Articles of Incorporation of SPPC and NPV and the indentures relating to the various series of their First Mortgage Bonds contain restrictions as to the payment of dividends on their common stock and as to the purchase or retirement of their capital stock. Under the most restrictive of these provisions, approximately $146 million of SPPC's and NVP's retained earnings were available at December 31, 1999, for the payment of cash dividends to SPR. As of December 31, 1999, SPR had consolidated retained earnings of approximately $120.3 million available for the payment of cash dividends on SPR's common stock.
NOTE 14. RETIREMENT PLAN AND POST RETIREMENT BENEFITS
SPR has pension plans covering substantially all employees. Benefits are based on years of service and the employee's highest compensation for a period prior to retirement. SPR also has other postretirement plans, which provide medical and life insurance benefits for certain retired employees. The following table provides a reconciliation of benefit obligations, plan assets and the funded status of the plans. The non-qualified Supplemental Executive Retirement Plan (SERP) is included as part of pension benefits. This reconciliation is based on a September 30, 1999 measurement date and reflects the merger of SPR and NVP during 1999 under purchase accounting. SPPC is a member of the controlled group in the multi-employer plans.
Other Postretirement
Pension Benefits Benefits
--------------------------------- ----------------------------------
1999 1998 1999 1998
--------------------------------- ----------------------------------
Change in benefit obligations
Benefit obligation, beginning of year $149,031 $119,533 $ 16,381 $ 15,496
Service cost 8,481 5,386 996 432
Interest cost 12,823 9,285 1,982 1,155
Participant contributions 0 0 255 252
Plan amendment&special termination 5,865 2,240 1,312 0
Actuarial (gains) losses 4,663 18,001 (1,694) 47
Merger of SPPC Plans 192,140 0 60,386 0
Curtailment loss (gain) (5,373) 0 386 0
Benefits paid (19,160) (5,414) (2,017) (1,001)
Benefit obligation, end of year $348,470 $149,031 $ 77,987 $ 16,381
=============== ============== ================ ==============
Change in plan assets
Fair value of plan assets, beginning of year $111,160 $100,898 $ 11,139 $ 8,665
Actual return on plan assets 15,510 9,546 4,649 1,464
Company contributions 10,432 6,130 2,069 1,759
Participant contributions 0 0 255 252
Merger of SPPC Plans 208,766 0 50,593 0
Benefits paid (19,160) (5,414) (2,017) (1,001)
--------------- -------------- ---------------- --------------
Fair value of plan assets, end of year $326,708 $111,160 $ 66,688 $ 11,139
=============== ============== ================ ==============
Funded Status
Funded Status, end of year $(21,762) $(37,870) $(11,299) $ (5,243)
Unrecognized net actuarial (gains) losses 26,550 19,320 (8,746) (11,507)
Unrecognized prior service cost 6,375 7,784 0 0
Contributions made in 4th quarter 288 3,609 1,096 1,908
Unrecognized net transition obligation 0 0 12,217 13,561
--------------- -------------- ---------------- --------------
Accrued pension and postretirement
benefit obligations $ 11,451 $ (7,157) $ (6,732) $ (1,281)
=============== ============== ================ ==============
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The following amounts pertain to the non-qualified SERP plan covering certain current and former employees. The projected benefit obligation and accumulated benefit obligation for pension plans with accumulated benefit obligations in excess of the plan assets were $18.5 million and $15.7 million, respectively, at the end of the year and $9.7 million and $8.3 million, respectively, at the beginning of the year.
Amounts for pension and postretirement benefits recognized in the consolidated balance sheets consist of the following:
Other Postretirement
Pension Benefits Benefits
----------------------------------- ---------------------------------
1999 1998 1999 1998
----------------------------------- ---------------------------------
Prepaid pension asset $ 26,166 $ - N/A N/A
Accrued benefit liability (14,716) (7,157) $(6,732) $(1,281)
Intangible asset 346 577 N/A N/A
Accumulated other comprehensive income 606 (2,722) N/A N/A
Additional minimum liability (951) 2,145 N/A N/A
------------- ----------------- ---------------- -------------
Net amount recognized 11,451 (7,157) (6,732) (1,281)
============= ================= ================ =============
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The weighted-average actuarial assumptions as of December 31 were as follows:
Other Postretirement
Pension Benefits Benefits
-------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
-------------------------------------- ------------------------------------------
Discount rate 7.50% 6.75% 7.50% 7.50% 6.50% 7.50%
Expected return on plan assets 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%
Rate of compensation increase 4.50% 4.50% 4.50% NA NA NA
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SPR has assumed a health care cost trend rate of 6% for 1999 and all future years.
Pension Benefits
-------------------------------------------------------
1999 1998 1997
-------------------------------------------------------
Service cost $ 8,481 $ 5,386 $ 4,406
Interest cost 12,823 9,285 8,437
Expected return on assets (11,712) (7,697) (7,015)
Amortization of:
Transition asset - - -
Prior service costs 841 780 675
Actuarial (gains) losses 976 187 86
---------------- -------------- -------------
Net periodic benefit cost 11,409 7,941 6,589
Additional charges (credits):
Special termination charges 5,865 - -
Curtailment credits (3,920) - -
---------------- -------------- -------------
Total net benefit cost $ 13,354 $ 7,941 $ 6,589
================ ============== =============
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Other Postretirement Benefits
-------------------------------------------------------
1999 1998 1997
-------------------------------------------------------
Service cost $ 996 $ 433 $ 370
Interest cost 1,982 1,155 1,270
Expected return on assets (1,741) (770) (626)
Amortization of:
Prior service costs - - -
Transition obligation 1,344 967 967
Actuarial (gains) losses (596) (505) (399)
---------------- -------------- -------------
Net periodic benefit cost 1,985 1,280 1,582
Additional charges (credits):
Special termination charges 1,312 - -
Curtailment loss 1,283 - -
---------------- -------------- -------------
Total net benefit cost $ 4,580 $ 1,280 $ 1,582
================ ============== =============
|
Net periodic pension and other postretirement benefit costs include the following components:
A regulatory asset was booked to offset the net effect of special termination benefits and curtailment costs incurred in connection with the merger of the two companies. The portion of the net periodic benefit cost recognized for pension benefits during 1999 was $10.5 million by NVP and $.9 million by SPPC. The portion for other postretirement benefits was $1.0 million by NVP and $.9 million by SPPC.
The assumed health care cost trend rate has a significant effect on the amounts reported. A one percentage point change in the assumed health care cost trend rate would have had the following effects on 1999 service and interest costs and the accumulated postretirement benefit obligation at year end:
Increase Decrease -------- -------- Effect on service and interest components of net periodic cost $ 554 $ (512) Effect on accumulated postretirement benefit obligation $ 6,239 $ (5,776) |
NOTE 15. STOCK COMPENSATION PLANS
At December 31, 1999 SPR had several stock-based compensation plans which are described below. The Company applies Accounting Principals Board Opinion No. 25, Accounting for Stock Issued to Employees, in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for nonqualified stock options and the employee stock purchase plan. The total compensation cost that has been charged against income for the performance shares, dividend equivalents and the non-employee director stock plans was $0.2 million for 1999. SPR has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock Based Compensation. Had compensation cost for SPR's nonqualified stock options and the employee stock purchase plan been determined based on the fair value at the grant dates for awards under those plans consistent with the provisions of SFAS No. 123, SPR's income applicable to common stock would have been decreased to the pro forma amounts indicated below:
1999
----
Net Income As Reported $ 51,750
Pro Forma $ 51,084
Basic Earnings Per Share As Reported $ 0.83
Pro Forma $ 0.82
Diluted Earnings Per Share As Reported $ 0.83
Pro Forma $ 0.82
|
1. Prior to the August 1, 1999 merger, NVP did not have a nonqualified stock option plan or an employee stock purchase plan; therefore, historical data for the above item has been omitted because the information, if presented, would be misleading and inappropriate.
SPR's executive long-term incentive plan for key management employees,
which was approved by shareholders on May 16, 1994, provides for the issuance of
up to 750,000 of SPR's common shares to key employees through December 31, 2003.
The plan permits the following types of grants, separately or in combination:
nonqualified and qualified stock options, stock appreciation rights, restricted
stock, performance units, performance shares, and bonus stock. During 1999 SPR
issued only nonqualified stock options and performance shares under the long-
term incentive plan.
Nonqualified stock options granted during 1999 were granted at an option price not less than market value at the date of the grant (January 1, and August 1, 1999). The January 1, 1999 options vest to the participants 33 1/3% per year over a three year period from the grant date, and may be exercised for a period not exceeding ten years from the date of the grant. The August 1, 1999 options vest to the participants 33 1/3% per year over a three year period beginning January 1, 2000, and may be exercised for a period not exceeding ten years from the date of the grant. The options may be exercised using either cash or previously acquired shares, valued at the current market price, or a combination of both.
As a result of the merger with NVP on August 1, 1999, all shares outstanding as of that date, for January 1, 1999 grants and prior (applicable only to pre-merger SPR executives), were converted at a 1.44:1 ratio. The subsequent change in the exercise prices and the outstanding shares is reflected in all numbers shown for the applicable grants.
A summary of the status of SPR's nonqualified stock option plan as of December 31, 1999, and changes during the year is presented below:
1999
----------------------------------
Weighted-
Average
Exercise
Nonqualified Stock Options Shares Price
----------------------------------------------------------------------------------------------------
Outstanding at beginning of year (1) 285,931 $22.00
Granted (2) 583,016 $25.36
Exercised 1,286 $14.39
Forfeited 34,678 $22.48
Outstanding at end of year 832,983 $24.34
Options exercisable at year-end 126,844 $20.54
Weighted-average grant date fair value of options granted (3)
January 1 $ 4.05
August 1 $ 5.11
|
1. There is no historical information presented because NVP did not have a nonqualified stock option plan prior to the August 1, 1999 merger. After the merger, the SPR plan, approved in 1994 by the SPR Board of Directors, was adopted by the surviving company. Also, as a result of the merger, all SPR options which were outstanding prior to the merger were converted at a 1.44:1 ratio. The beginning balance above consists of SPR shares outstanding prior to the merger, and has been adjusted to reflect the increase in shares due to the conversion.
2. The number of nonqualified stock options granted during the year consists of 209,576 shares for pre-merger grants, granted on January 1, 1999, and 373,440 shares granted on August 1, 1999, after the merger. The January 1 grants were given to pre-merger SPR executives, and retroactively to the NVP executives who joined SPR. The August 1 grants were given to all executives of the merged company.
3. The fair value of each nonqualified option has been estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants on January 1, 1999 and August 1, 1999, respectively: dividend yield of 4.40% and 4.25%, expected volatility of 18.60% and 17.41%, risk-free rate of return of 5.08% and 6.31%, and an expected life of 10 years for all grants.
The following table summarizes information about nonqualified stock options outstanding at December 31, 1999:
Options Outstanding Options Exercisable
------------------------------------ -------------------------------------
Number Remaining Number
Outstanding at Contractual Exercisable at
Grant Date Exercise Price 12/31/99 Life Exercise Price 12/31/99
----------------------------------------------------------------------------------------------------------------
01/01/1994 $14.24 11,976 4 years $14.24 11,976
01/01/1995 $13.02 15,841 5 years $13.02 12,673
01/01/1996 $16.23 13,718 6 years $16.23 8,231
01/01/1997 $19.97 62,472 7 years $19.97 41,649
01/01/1998 $24.93 156,960 8 years $24.93 52,315
01/01/1999 $24.22 198,576 9 years $24.22 -
08/01/1999 $26.00 373,440 9.6 years $26.00 -
Weighted Average 8.7 years
Remaining
Contractual Life
----------------------------------------------------------------------------------------------------------------
|
During 1999 SPR granted 27,765 performance shares valued at $26.00 per share. The actual number of shares earned by each participant is dependent upon SPR achieving certain financial goals over three-year performance periods. The value of performance shares, if earned, will be equal to the market value of SPR's common shares as of the end of the performance periods. SPR, at its sole discretion, may pay earned performance shares in the form of cash or in shares, or a combination thereof.
Simultaneous with the grant of both the nonqualified options and performance shares above, each participant was granted dividend equivalents for all performance share grants, and for 1996 and prior nonqualified option grants. Each dividend equivalent entitles the participant to receive a contingent right to be paid an amount equal to dividends declared on shares originally granted from the date of grant through the exercise date, or, in the case of performance shares, throughout the performance period. Additionally, in order for dividend equivalents to be paid on the performance shares, certain financial targets must be met. Dividend equivalents will be forfeited if options expire unexercised.
Under SPR's employee stock purchase plan, SPR is authorized to issue up to 400,162 shares of common stock to all of its employees with minimum service requirements. Under the terms of the plan, employees can choose twice each year to have up to 15% of their base earnings withheld to purchase SPR's common stock. The purchase price of the stock is 90% of the market value on the offering commencement date. Employees can withdraw from the plan at any time prior to the exercise date. Under the plan SPR sold 21,888 shares to employees in 1999. Proforma compensation cost has been estimated for the employees' purchase rights on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for 1999: average dividend yield of 4.31%, average expected volatility of 18.85%, and average risk-free interest rates of 5.08%. The weighted average fair value of those purchase rights in 1999 was $2.85.
SPR's non-employee director stock plan provides that a portion of the outside directors' annual retainer be paid in Company stock. Under the current plan, the annual retainer for non-employee directors is $30,000, and the minimum amount to be paid in Company stock is $20,000 per director. During 1999 SPR granted the following total shares and related compensation to directors in Company stock, respectively: 4,741 shares and $150,000. SPR also paid out phantom stock shares to retiring directors in the amount of $1,222,110.
NOTE 16. POSTEMPLOYMENT BENEFITS
During 1999, SPR offered a severance program to non-bargaining-unit employees, which provides for severance pay and medical benefits continuation totaling $13.7 million and $0.8 million respectively. As approved by the PUCN, this cost was deferred as a regulatory asset as of December 31, 1999. The order approving the merger by the PUCN, directed NVP and SPPC to defer merger costs (including severance and related benefits) for a three-year period. The deferral of these costs is intended to allow adequate time for the anticipated savings from the merger to develop. At the end of the three-year period, the order instructs SPPC and NVP to propose an amortization period for these costs, and allows SPPC and NVP to recover the costs to the extent that they are offset by merger savings. At December 31, 1999, the remaining liability for unpaid severance was $5.0 million.
NOTE 17: COMMITMENTS AND CONTINGENCIES
NVP's and SPPC's combined estimated cash construction expenditures for the year 2000 and the five-year period 2000-2004 are $328.2 million and $1,630.6 million, respectively.
NVP and SPPC have several long-term contracts for the purchase of electric energy and/or capacity. These contracts expire in years ranging from 2000 to 2009. Estimated future commitments under non-cancelable agreements with initial terms of one year or more at December 31, 1999 were as follows (dollars in thousands):
Accounted for as
Long-Term Accounted for as
Executory Long-Term
Contracts Capital Lease
2000 $ 39,452 $11,352
2001 22,787 10,823
2002 23,488 10,319
2003 24,308 9,790
2004 25,182 9,286
2005 to 2009 114,840 82,826
|
The above long-term capital lease minimum payments have not been reduced by an estimated $79.4 million of executory costs and $17.5 million in interest.
NVP and SPPC have several long-term contracts for the purchase and transportation of coal and natural gas. These contracts expire in years ranging from 2000 to 2015. Estimated future commitments under non-cancelable agreements with initial terms of one year or more at December 31, 1999 were as follows (dollars in thousands):
Coal and Gas Transportation
2000 $128,865 $ 60,037
2001 55,089 46,837
2002 33,364 45,849
2003 19,349 36,885
2004 11,476 32,972
2005 to 2015 28,533 295,848
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In 1984, NVP sold its administrative headquarters facility, less furniture and fixtures, for $27 million and entered into a 30-year capital lease of that facility with five-year renewal options beginning in year 31. The fixed rental obligation for the first 30 years is $5.1 million per year. Future cash rental payments as of December 31, 1999, were as follows (dollars in thousands):
2000 $ 6,156 2001 6,156 2002 6,156 2003 6,156 2004 6,156 2005 to 2014 74,277 |
The amount of imputed interest necessary to reduce the future cash rental payments to present value is $55.0 million as of December 31, 1999. Total interest expense on the lease obligation was $5.9 million and total amortization of the leased facility was $(397,000) for the year ended December 31, 1999. The total accumulated amortization of the leased facility on December 31, 1999, was $9.3 million.
SPPC has an operating lease for its corporate headquarters building. The primary term of the lease is 25 years, ending in 2010. The current annual rental is $5.4 million, which amount remains constant until the end of the primary term. The lease has renewal options for an additional 50 years.
Estimated future minimum cash payments, including SPPC's headquarters building, under non-cancelable operating leases with initial terms of one year or more at December 31, 1999 were as follows (dollars in thousands):
2000 $12,890 2001 9,302 2002 7,953 2003 7,655 2004 7,523 2005 to 2045 77,664 |
The Grand Canyon Trust and Sierra Club filed a lawsuit in the U.S. District Court, District of Nevada, in February 1998, against the owners (including NVP) of the Mohave Generation Station ("Mohave"), alleging violations of the Clean Air Act regarding emissions of sulfur dioxide and particulates. An additional plaintiff, National Parks and Conservation Association, later joined the suit. The plant owners and plaintiffs have had numerous settlement discussions and filed a proposed settlement with the court on October 6, 1999. The consent decree, approved by the court in November, established emission limits for sulfur dioxide and opacity and required installation of air pollution controls for sulfur dioxide, nitrogen oxides and particulate matter. The new emission limits must be met by January 1, 2006 and April 1, 2006, for the first and second units, respectively. However, if the owners sell their entire ownership interest, with a closing date prior to December 30, 2002, then the new emission limits become effective 36 months and 39 months from the date of last closing for the two respective units. The estimated cost of new controls is $300 million. As a 14% owner in the Mohave Station, NVP's costs could be $42 million.
Also, the United States Congress authorized the Environmental Protection Agency ("EPA") to study the potential impact Mohave may have on visibility in the Grand Canyon area. A final report of the study results was released in March 1999. The study acknowledges that sulfur dioxide emissions from Mojave are transported to the Grand Canyon. EPA has solicited information to determine whether visibility impairment in the Grand Canyon can be reasonably attributed to Mohave. If EPA determines that significant visibility impairment is reasonably attributable to the station, EPA could initiate a review for Best Available Retrofit Technology. Based upon indications from EPA and the National Park Service, the Plant owners believe that terms of the settlement of the suit discussed above are expected to be reflected in a State Implementation Plan for Nevada and resolve any concerns of EPA regarding visibility impairment.
In 1991, the EPA published an order requiring the Navajo Generating Station ("Navajo") to install scrubbers to remove 90 percent of sulfur dioxide emissions beginning in 1997. As an 11.3% owner of Navajo, NVP was required to fund an estimated $48 million for installation of the scrubbers. The first of three scrubber units was placed in commercial operation in November 1997, the second scrubber in September 1998, with the last scrubber placed in operation in June 1999. Currently, the project is 98% complete. NVP spent approximately $47.6 million on the scrubbers' construction. In 1992, NVP received resource-planning approval from the PUCN for its share of the cost of the scrubbers.
In May 1997, the Nevada Division of Environmental Protection (NDEP) issued an Order requiring NVP to submit a plan to eliminate the discharge of Reid Gardner Station wastewater to groundwater. The Order also required a hydrological assessment of groundwater impacts in the area. In June 1999, NDEP determined that wastewater ponds have degraded groundwater quality. In August 1999, NDEP issued a discharge permit to Reid Gardner Station and an Order that requires all wastewater ponds to be closed or lined with impermeable liners over the next 10 years. This Order also required NVP to submit a Site Characterization Plan to NDEP to ascertain impacts. Technical information from the Plan will be used to develop a corrective action plan and allow NVP to determine an estimate of remediation costs for cleanup. New pond construction and lining costs are estimated at $20 million.
Also, at the NVP Reid Gardner Station, NDEP has determined that there is additional groundwater contamination that resulted from oil spills at the facility. NDEP has required submitting a corrective action. The extent of contamination has not yet been determined. However, management does not expect this item to materially affect the financial position of SPR or NVP.
In May 1999 NDEP issued an Order to eliminate the discharge of NVP's Clark Station wastewater to groundwater. The Order also required a hydrological assessment of groundwater impacts in the area. $565,000 will be spent in the next two years to line existing ponds. The extent of contamination has not been determined. However, management does not expect this item to materially affect the financial position of SPR or NVP.
In August 1999 NDEP issued an Order to correct deficient ambient air monitoring quality control procedures at the Reid Gardner Station. NVP has agreed to conduct a supplemental environmental project limited to $9,000 in lieu of a fine.
NVP recently determined that, while constructing the McCullough-Arden transmission line, access roads were created within a wilderness study area in violation of the Bureau of Land Management (BLM) Right of Way Grant. NVP's preliminary estimate for restoration costs is $200,000, which was reserved as of December 31, 1999.
In September 1994, Region VII of EPA notified SPPC that SPPC was being named as a potentially responsible party (PRP) regarding the past improper handling of Polychlorinated Biphenyls (PCBs) by PCB Treatment, Inc., located in Kansas City, Kansas, and Kansas City, Missouri (the Sites). The EPA is requesting that SPPC voluntarily pay an undefined (pro rata) share of the ultimate clean-up costs at the Sites. A number of the largest PRP's formed a steering committee, which is chaired by SPPC. The responsibility of the Committee is to direct clean-up activities, determine appropriate cost allocation, and pursue actions against recalcitrant parties, if necessary. The EPA issued an administrative order on consent requiring signatories to perform certain investigative work at the Sites. The steering committee retained a consultant to prepare an analysis regarding the Sites. The site evaluations have been completed. EPA is developing an allocation formula to allocate the remediation costs. SPPC has recorded preliminary liability for the Sites of $650,000, of which approximately $150,000 has been spent through December 31, 1999. Once evaluations are completed, SPPC will be in a better position to estimate and record the ultimate liabilities for the Sites.
Additionally, SPPC has four wells which currently exceed the federal drinking water standard for naturally occurring arsenic concentrations. Production from three of these wells continues by blending treated water. The fourth well is out of service pending treatment. SPPC's water laboratory research staff is developing options to assure that SPPC is prepared to meet new arsenic standards. The new Arsenic regulations will be promulgated in 2000 and the proposed regulation is expected to require action on 17 of the 25 wells serving Sierra's system. Depending upon final rules from the EPA, SPPC may incur between $70 million and $98 million by 2004 to meet the new standards.
As part of the Generation Divestiture process, SPPC conducted Phase I and Phase II Environmental Assessments for its Ft. Churchill, Tracy and Valmy Power Plants. Anticipated remediation cost is $150,000.
As part of the Generation Divestiture process, Phase I and/or Phase II Environmental Assessments were conducted at NVP's Harry Allen, Clark, Sunrise and Reid Gardner facilities. Additional environmental assessments will be conducted in 2000 to further characterize the sites. Remediation costs are unknown because characterization is not complete.
Lands of Sierra owns property in North Lake Tahoe, California, which is leased to independent condominium owners. The property has both soil and groundwater petroleum contaminate resulting from a historic underground fuel tank. Additional contaminate from a third party fuel tank on the property has also been identified and is undergoing characterization. Remediation costs are estimated from $60,000 to $250,000. After final characterization, remediation costs will be known.
Nevada Electric Investment Company (NEICO), a subsidiary of NVP in 1999, owns property in Wellington, Utah, which was the site of a coal washing and load out facility. The site now has a reclamation estimate supported by a bond of $4.9 million with the Utah Division of Oil and Gas Mining. The property was under contract for sale and the contract required the purchaser to provide $1.3 million in escrow towards reclamation. However, the sales contract was recently terminated and NEICO has taken title to the escrow funds. It is NEICO's intention to sell the property.
See Notes 1, 3, 6, 8, 9, 12, 14, and 16 of SPR's consolidated financial statements for additional commitments and contingencies.
SPR and its subsidiaries, through the course of their normal business operations, are currently involved in a number of other legal actions, none of which has had or, in the opinion of management, is expected to have a significant impact on its financial position or results of operations.
NOTE 18. SEGMENT INFORMATION
SPR operates three business segments (as defined by FASB statement No. 131, Disclosure about Segments of an Enterprise and Related Information) providing regulated electric, natural gas and water service. Electric service is provided to Las Vegas and surrounding Clark County, northern Nevada and the Lake Tahoe area of California. Natural gas and water services are provided in the Reno- Sparks area of Nevada. Other segment information includes segments below the quantitative threshold for separate disclosure.
Information as to the operations of the different business segments is set forth below based on the nature of products and services offered. SPR evaluates performance based on several factors, of which the primary financial measure is business segment operating income. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies (Note 1). Intersegment revenues are not material.
In accordance with the requirements of purchase accounting and based on a merger date of August 1, 1999, the segmented financial information for the period ended December 31, 1999 includes five months of operating activity for SPR's subsidiaries other than NVP. Segmented information for 1998 and 1997 includes only the operations of NVP.
Reconciling
December 31, 1999 Electric Gas Water All Other Eliminations Consolidated
Operating Revenues $1,236,702 $ 38,958 $ 24,339 $ 9,132 $1,309,131
========== ======== ======== ========= ==========
Operating income $ 157,030 $ 3,175 $ 8,297 $ 2,656 $ 171,158
========== ======== ======== ========= ==========
Operating income taxes $ 30,120 $ 425 $ 788 $ (5,247) $ 26,086
========== ======== ======== ========= ==========
Depreciation $ 107,703 $ 2,128 $ 3,161 $ 244 $ 113,236
========== ======== ======== ========= ==========
Interest expense on
long term debt $ 75,870 $ 1,326 $ 4,236 $ 299 $ 81,731
========== ======== ======== ========= ==========
Assets $4,345,049 $152,016 $280,057 $ 426,881 $ 43,683 $5,247,686
========== ======== ======== ========= ========= ==========
Capital expenditures $ 275,761 $ 7,051 $ 16,252 $ 299,064
========== ======== ======== ==========
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Reconciling
December 31, 1998 Electric Gas Water All Other Eliminations Consolidated
Operating Revenues $ 873,682 $ 873,682
========== ============
Operating income $ 147,277 $ 147,277
========== ============
Operating income taxes $ 42,949 $ 42,949
========== ============
Depreciation $ 73,562 $ 73,562
========== ============
Interest expense
on long term debt $ 56,995 $ 56,995
========== ============
Assets $2,541,840 $ 2,541,840
========== ============
Capital expenditures $ 314,933 $ 314,933
========== ============
Reconciling
December 31, 1997 Electric Gas Water All Other Eliminations Consolidated
Operating Revenues $ 799,148 $ 799,148
========== ============
Operating income $ 137,196 $ 137,196
========== ============
Operating income taxes $ 43,478 $ 43,478
========== ============
Depreciation $ 66,273 $ 66,273
========== ============
Interest expense
on long term debt $ 50,791 $ 50,791
========== ============
Assets $2,339,422 $ 2,339,422
========== ============
Capital expenditures $ 211,371 $ 211,371
========== ============
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The reconciliation of segment assets at December 31, 1999 to the consolidated total includes the following unallocated amounts:
1999
----------
Other property $ 2,661
Cash 3,011
Current assets- other 3,103
Other regulatory assets 34,571
Deferred charges- other 337
-------
$43,683
=======
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Segment information for NVP on an unconsolidated basis for the year ended December 31, 1999 follows:
December 31, 1999 Electric
Operating Revenues $ 977,262
==========
Operating income $ 116,983
==========
Operating income taxes $ 19,943
==========
Depreciation $ 80,644
==========
Interest expense on long term debt $ 64,454
==========
Assets $3,378,485
==========
Capital expenditures $ 223,963
==========
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Results for the years ending December 31, 1998 and 1997 presented above are for NVP alone.
NOTE 19. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following figures are unaudited and include all adjustments necessary in the opinion of management for a fair presentation of the results of interim periods. In accordance with the requirements of purchase accounting and based on a merger date of August 1, 1999, the quarterly financial information for the first two quarters of 1999 and all four quarters of 1998 reflects the operations of NVP. The information for the quarter ended September 30, 1999 includes two months of operating activity for SPR's subsidiaries other than NVP as well as the quarterly data for NVP. Dollars are presented in thousands except per share amounts.
Quarter Ended
-------------
Mar. 31, 1999 June 30, 1999 Sept. 30, 1999 Dec. 31, 1999
------------------- ------------------ ------------------- ------------------
Operating Revenues $182,433 $237,937 $478,837 $409,924
=================== ================== =================== ==================
Operating Income $ 20,961 $ 30,913 $102,976 $ 16,308
=================== ================== =================== ==================
Net Income $ 4,483 $ 11,754 $ 64,700 $(29,187)
=================== ================== =================== ==================
Net Income per share-Basic $ 0.09 $ 0.23 $ 0.93 $ (0.42)
=================== ================== =================== ==================
-Diluted $ 0.09 $ 0.23 $ 0.93 $ (0.42)
=================== ================== =================== ==================
Quarter Ended
-------------
Mar. 31, 1998 June 30, 1998 Sept. 30, 1998 Dec. 31, 1998
------------------- ------------------ ------------------- ------------------
Operating Revenues $165,263 $198,935 $327,776 $181,708
=================== ================== =================== ==================
Operating Income $ 21,263 $ 24,788 $ 76,919 $ 24,307
=================== ================== =================== ==================
Net Income $ 6,936 $ 10,446 $ 61,987 $ 4,304
=================== ================== =================== ==================
Net Income per share-Basic $ 0.14 $ 0.20 $ 1.21 $ 0.08
=================== ================== =================== ==================
-Diluted $ 0.14 $ 0.20 $ 1.21 $ 0.08
=================== ================== =================== ==================
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
NONE.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to SPR's and NVP's directors called for by Item 10 of Part III is hereby incorporated by reference from the section titled "Security Ownership of Certain Beneficial Owners and Management" of SPR's definitive proxy statement to be filed pursuant to regulation 14A.
Information with respect to SPR's and NVP's executive officers is set forth in Part I hereof following Item 4.
ITEM 11. EXECUTIVE COMPENSATION
The information with respect to officers and directors called for by Item 11 of Part III is hereby incorporated by reference from the sections titled "Directors Compensation", "Summary Compensation Table" and "Severance Arrangements" of SPR's definitive proxy statement to be filed pursuant to regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information with respect to security ownership of certain beneficial owners and management called for by Item 12 of Part III is hereby incorporated by reference from the sections titled "Solicitation of Proxies" and "Election of Directors" of SPR's definitive proxy statement to be filed pursuant to regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information with respect to Certain Relationships and Related Transactions called for by Item 13 of Part III is hereby incorporated by reference from the section titled "Transactions with Management" of SPR's definitive proxy statement to be filed pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page
----
1. Financial Statements:
Independent Auditors' Report........................................................ 50
Consolidated Balance Sheets as of December 31, 1999 and 1998........................ 51
Consolidated Statements of Income for the Years Ended December 31,
1999, 1998 and 1997............................................................... 52
Consolidated Statements of Common Shareholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997...................................... 53
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.................................................. 54
Consolidated Statements of Capitalization as of December 31, 1999
and 1998.......................................................................... 55-56
Balance Sheets for Nevada Power Company as of
December 31, 1999 and 1998........................................................ 57
Statements of Income for Nevada Power Company
for the Years Ended December 31, 1999, 1998 and 1997.............................. 58
Statements of Cash Flows for Nevada Power
Company for the Years Ended December 31, 1999, 1998 and 1997...................... 59
Statements of Capitalization for Nevada Power
Company as of December 31, 1999 and 1998.......................................... 60-61
Notes to Financial Statements....................................................... 62-95
2. Financial Statement Schedules:
Independent Auditors' Report................................................. 100
Schedule II - Consolidated Valuation and Qualifying Accounts ................ 101
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All other schedules have been omitted because they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules have been omitted because the information is not applicable.
3. Exhibits:
Exhibits are listed in the Exhibit Index on pages 102-114.
Reports on Form 8-K
Filed on November 12, 1999 - Item 5, Other Events.
Reported that on November 5, 1999, Sierra Pacific Resources and Enron Corporation entered into an agreement for Enron to sell its wholly owned subsidiary, Portland General Electric.
Filed on December 7, 1999 - Item 5, Other Events
Reported that on September 21, 1999, the Board of Directors of Sierra Pacific Resources declared a dividend distribution of one right for each outstanding share of Sierra Pacific Resources common stock.
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIERRA PACIFIC RESOURCES
By /S/ Michael R. Niggli
---------------------
Michael R. Niggli
Chairman, Chief Executive Officer and Director
March 22, 2000
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 22nd day of March 2000.
/S/ Mark A. Ruelle /S/ Mary O. Simmons
------------------------------------------- ------------------------------------------
Mark A. Ruelle Mary O. Simmons
Senior Vice President, Controller
Chief Financial Officer and Treasurer (Principal Accounting Officer)
(Principal Financial Officer)
/S/ Edward P. Bliss /S/ Mary Kaye Cashman
------------------------------------------- ------------------------------------------
Edward P. Bliss Mary Kaye Cashman
Director Director
/S/ Mary Lee Coleman /S/ Jerry E. Herbst
------------------------------------------- ------------------------------------------
Mary Lee Coleman Jerry E. Herbst
Director Director
/S/ Theodore J. Day /S/ James R. Donnelley
------------------------------------------- ------------------------------------------
Theodore J. Day James R. Donnelley
Director Director
/S/ John L. Goolsby /S/ Malyn K. Malquist
------------------------------------------- ------------------------------------------
John L. Goolsby Malyn K. Malquist
Director President & Chief Operating Officer
Director
/S/ John F. O'Reilly /S/ Krestine M. Corbin
------------------------------------------- ------------------------------------------
John F. O'Reilly Krestine M. Corbin
Director Director
/S/ Fred D. Gibson, Jr. /S/ James L. Murphy
------------------------------------------- ------------------------------------------
Fred D. Gibson, Jr. James L. Murphy
Director Director
/S/ Dennis E. Wheeler
-------------------------------------------
Dennis E. Wheeler
Director
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Sierra Pacific Resources
Reno, Nevada
We have audited the consolidated financial statements of Sierra Pacific Resources and subsidiaries (the "Company") as of December 31, 1999 and 1998, and for each of the three years in the period ended December 31, 1999, and have issued our report thereon dated February 29, 2000; such report is included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule listed in Item 14. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLC
Reno, Nevada
March 21, 2000
Sierra Pacific Resources Schedule II - Consolidated Valuation Qualifying Accounts For The Years Ended December 31, 1999, 1998, and 1997
(Dollars in Thousands)
Provisions for
Uncollectible
Accounts
--------------
Balance at January 1, 1997 $ 2,892
Provision charged to income 2,737
Amounts written off, less recoveries (3,338)
--------------
Balance at December 31, 1997 2,291
Balance at January 1, 1998 2,291
Provision charged to income 3,697
Amounts written off, less recoveries (3,559)
--------------
Balance at December 31, 1998 2,429
Balance at January 1, 1999 2,429
Provision charged to income 4,019
Amounts written off, less recoveries (4,300)
SPR balance at August 1, 1999 4,327
--------------
Balance at December 31, 1999 $ 6,475
--------------
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SIERRA PACIFIC RESOURCES
1999 FORM 10-K EXHIBIT INDEX
(a) Exhibits Index
Exhibits with respect to SPR's subsidiary, SPPC, are listed in the exhibit index of its Annual Report on Form 10-K for the year ended December 31, 1999, attached hereto as an Appendix.
Certain of the following exhibits with respect to SPR and its subsidiaries, Nevada Power Company, Lands of Sierra, Inc., Sierra Energy Company, Tuscarora Gas Pipeline Company and Sierra Water Development Company, are filed herewith. Certain other of such exhibits have heretofore been filed with the Commission and are incorporated herein by reference.
(* Filed herewith)
Sierra Pacific Resources
(3) . *(A) Restated Articles of Incorporation of Sierra Pacific Resources dated July 28, 1999
. By-laws of SPR as amended through November 13, 1996 (filed as Exhibit 3(A) to Form 10-K for year ended December 31, 1996)
Nevada Power Company
. *(B) Restated Articles of Incorporation of Nevada Power Company, dated July 28, 1999
. *(C) Amended and Restated By-Laws of Nevada Power Company dated July 28, 1999
Sierra Pacific Resources
(4) . Rights Agreement between Sierra Pacific Resources and Harris Trust and Savings Bank dated as of September 21, 1999 (filed as Exhibit 99.1 to the Form 8-K dated December 7, 1999)
. Note Purchase Agreement, dated as of April 20, 1993, with respect to the private placement of $50 million in senior notes (Filed as Exhibit 10 to the Form 10-K for the year ended December 31, 1993)
Nevada Power Company
. *(A) Fiscal and Paying Agency Agreement dated as of October 12, 1999 between Nevada Power Company and Bankers Trust Company, relating to Nevada Power Company's money market note program.
. *(B) Form of Global Floating Rate Note due October 6, 2000
. Indenture of Mortgage and Deed of Trust Providing for First Mortgage
Bonds, dated October 1, 1953 and Twenty-Six Supplemental Indentures as follows:
. First Supplemental Indenture, dated August 1, 1954 (Filed as Exhibit 4.2 to Form S-1, File No. 2-11440)
. Second Supplemental Indenture, dated September 1, 1956 (Filed as Exhibit 4.9 to Form S-1, File No. 2-12566)
. Third Supplemental Indenture, dated May 1, 1959 (Filed as Exhibit 4.13 to Form S-1, File No. 2-14949)
. Fourth Supplemental Indenture, dated October 1, 1960 (Filed as Exhibit 4.5 to S-1, File No. 2-16968)
. Fifth Supplemental Indenture, dated December 1, 1961 (Filed as Exhibit 4.6 to Form S-16, File No. 2-74929)
. Sixth Supplemental Indenture, dated October 1, 1963 (Filed as Exhibit 4.6A to Form S-1, File No. 2-21689)
. Seventh Supplemental Indenture, dated August 1, 1964 (Filed as Exhibit 4.6B to Form S-1, File No. 2-22560)
. Eighth Supplemental Indenture, dated April 1, 1968 (Filed as Exhibit 4.6C to Form S-9, File No. 2-28348
. Ninth Supplemental Indenture, dated October 1, 1969 (Filed as Exhibit 4.6D to Form S-1, File No. 2-34588)
. Tenth Supplemental Indenture, dated October 1, 1970 (Filed as Exhibit 4.6E to Form S-7, File No. 2-38314)
. Eleventh Supplemental Indenture, dated November 1, 1972 (Filed as Exhibit 2.12 to Form S-7, File No. 2-45728)
. Twelfth Supplemental Indenture, dated December 1, 1974 (Filed as Exhibit 2.13 to Form S-7, File No. 2-52350)
. Thirteenth Supplemental Indenture, dated October 1, 1976 (Filed as Exhibit 4.14 to Form S-16, File No. 2-74929)
. Fourteenth Supplemental Indenture, dated May 1, 1977 (Filed as Exhibit 4.15 to Form S-16, File No. 2-74929)
. Fifteenth Supplemental Indenture, dated September 1, 1978 (Filed as Exhibit 4.16 to Form S-16, File No. 2-74929)
. Sixteenth Supplemental Indenture, December 1, 1981 (Filed as Exhibit 4.17 to Form S-16, File No. 2-74929)
. Seventeenth Supplemental Indenture, dated August 1, 1982 (Filed as
Exhibit 4.2 to Form 10-K, File No. 1-4698, Year 1982)
. Eighteenth Supplemental Indenture, dated November 1, 1986 (Filed as Exhibit 4.6 to Form S-3, File No. 33-9537)
. Nineteenth Supplemental Indenture, dated October 1, 1989 (Filed as Exhibit 4.2 to Form 10-K, File No. 1-4698, Year 1989)
. Twentieth Supplemental Indenture, dated May 1, 1992 (Filed as Exhibit 4.21 to Form S-3, File No. 33-53034)
. Twenty-First Supplemental Indenture, dated June 1, 1992 (Filed as Exhibit 4.22 to Form S-3, File No. 33-53034)
. Twenty-Second Supplemental Indenture, dated June 1, 1992 (Filed as Exhibit 4.23 to Form S-3, Filed No. 33-53034)
. Twenty-Third Supplemental Indenture, dated October 1, 1992 (Filed as Exhibit 4.23 to Form S-3, File No. 33-53034)
. Twenty-Fourth Supplemental Indenture, dated October 1, 1992 (Filed as Exhibit 4.23 to Form S-3, File No. 33-53034)
. Twenty-Fifth Supplemental Indenture, dated January 1, 1993 (Filed as Exhibit 4.23 to Form S-3, File No. 33-53034)
. Twenty-Sixth Supplemental Indenture, dated May 1, 1995 (Filed as Exhibit 4.2 to Form 10-K, File No. 1-4698, Year 1995)
. *(C) Twenty-Seventh Supplemental Indenture dated as of July 1, 1999
. Instrument of Further Assurance dated April 1, 1956 to Indenture of Mortgage and Deed of Trust dated October 1, 1953 (Filed as Exhibit 4.8 to Form S-1, File No. 2-12666)
. Junior Subordinated Indenture between Nevada Power and IBJ Schroder Bank & Trust Company, as Debenture Trustee dated March 1, 1997 (Filed as Exhibit 4.01 to Form S-3, File No. 333-21091)
. Trust Agreement of NVP Capital I dated March 1, 1997 (Filed as Exhibit 4.03 to Form S-3, File No. 333-21091)
. Form of Amended and Restated Trust Agreement dated March 1, 1997
(Filed as Exhibit 4.10 to Form S-3, File No. 333-21091)
. Form of Preferred Security Certificate for NVP Capital I and NVP Capital II dated March 1, 1997 (Filed as Exhibit 4.11 to Form S-3, File No. 333-21091)
. Form of Guarantee Agreement dated March 1, 1997 (Filed as Exhibit 4.12 to Form S-3, File No. 333-21091)
. Form of Supplemental Indenture between Nevada Power and IBJ
Schroder Bank & Trust Company, as Debenture Trustee dated March 1, 1997 (Filed as Exhibit 4.13 to Form S-3, File No. 333-21091)
. *(D) Supplemental Indenture No. 2 and Assumption Agreement, dated as of June 1, 1999, between Nevada Power Company and IBJ Whitehall Bank & Trust Company, supplementing and assuming the Junior Subordinated Indenture dated as of March 1, 1997 between Nevada Power Company and IBJ Whitehall Bank & Trust Company
. Form of Agreement as to Expenses and Liabilities between Nevada Power and NVP Capital I dated March 1, 1997 (Filed as Exhibit 4.14 to Form S-3, File No. 333-21091)
. Form of Indenture between Nevada Power and IBJ Schroder Bank & Trust Company, as Trustee dated October 1, 1998 (Filed as Exhibit 4.1 to Form S-3, File Nos. 333-63613 and 333-63613-01)
. *(E) Supplemental Indenture No. 1 and Assumption Agreement, dated as of June 1, 1999, between Nevada Power Company and IBJ Whitehall Bank & Trust Company, supplementing and assuming the Indenture dated as of October 1, 1998 between Nevada Power Company and IBJ Whitehall Bank & Trust Company
. Certificate of Trust of NVP Capital III dated October 1, 1998 (Filed as Exhibit 4.2 to Form S-3, File Nos. 333-63613 and 333- 63613-01)
. Trust Agreement for NVP Capital III dated October 1, 1998 (Filed as Exhibit 4.3 to Form S-3, File Nos. 333-63613 and 333-63613-01)
. Form of Amended and Restated Declaration of Trust dated October 1, 1998 (Filed as Exhibit 4.4 to Form S-3, File Nos. 333-63613 and 333-63613-01)
. Form of Preferred Security Certificate for NVP Capital III dated October 1, 1998 (Filed as Exhibit 4.5 to Form S-3, File Nos. 333- 63613 and 333-63613-01)
. Form of Preferred Securities Guarantee Agreement dated October 1, 1998 (Filed as Exhibit 4.7 to Form S-3, File Nos. 333-63613 and 333-63613-01)
. Form of Junior Subordinated Deferrable Interest Debenture dated October 1, 1998 (Filed as Exhibit 4.9 to Form S-3, File Nos. 333- 63613 and 333-63613-01)
. Amendment dated April 29, 1998 to Rights Agreement Exhibit 4.4
(Filed as Exhibit 10.1 to Form 8-K, File No. 1-4698, Year 1998)
. Form of Senior Unsecured Note Indenture between Nevada Power Company and IBJ Whitehall Bank & Trust Company dated as of April 1, 1999 (Filed as Exhibit 4.1 to Form S-4, File No. 333-77325)
. Supplemental Indenture No. 1 between Nevada Power Company and IBJ Whitehall Bank & Trust Company dated as of March 1, 1999 (Filed as Exhibit 4.2 to Form S-4, File No. 333-77325)
. Supplemental Indenture No. 2 between Nevada Power Company and IBJ
Whitehall Bank & Trust Company dated as of April 1, 1999 (including form of 6.20% Senior Unsecured Note, Series B due April 15, 2004) (Filed as Exhibit 4.3 to Form S-4, File No. 333-77325)
. *(F) Supplemental Indenture No. 3 and Assumption Agreement, dated as of July 1, 1999, between Nevada Power Company and IBJ Whitehall Bank & Trust Company, supplementing and assuming the Senior Unsecured Note Indenture dated as of March 1, 1999 between Nevada Power Company and IBJ Whitehall Bank & Trust Company
(10) Sierra Pacific Resources
. Sierra Pacific Resources Executive Long-Term Incentive Plan effective as of January 1, 1994 (Filed as Exhibit 99.1 to Form S-8 dated November 30, 1994, Registration No. 33-87646)
. Change in Control Agreements dated February 18, 1997 by and among Sierra Pacific Resources and the following officers (individually): Gerald W. Canning, Jeffrey L. Ceccarelli, Randy G. Harris, Malyn K. Malquist, Steven C. Oldham, William E. Peterson, Mark A. Ruelle, Mary O. Simmons, and Mary Jane Willier (Filed as Exhibit (10)(A) to Sierra Pacific Power Company's Form 10-K for the year ended December 31, 1997)
. Stock Purchase Agreement between Enron Corp. and Sierra Pacific Resources dated November 5, 1999, relating to the proposed acquisition of Portland General Electric Company (Filed as Exhibit 10.1 to Form 8-K dated November 10, 1999)
. Employment Agreement dated as Of April 29, 1998 between Sierra Pacific Resources and Michael R. Niggli (Exhibit 7.15.1 to Agreement and Plan of Merger, dated as of April 29, 1998, among Sierra Pacific Resources, Nevada Power Company, LAKE Merger Sub, and DESERT Merger Sub, filed as Exhibit 2.1 to Form 8-K dated April 30, 1998)
. Employment Agreement dated as of April 29, 1998 between Sierra Pacific Resources and Malyn K. Malquist (Exhibit 7.15.2 to Agreement and Plan of Merger, dated as of April 29, 1998, among Sierra Pacific Resources, Nevada Power Company, LAKE Merger Sub, and DESERT Merger Sub, filed as Exhibit 2.1 to Form 8-K dated April 30, 1998)
. Sierra Pacific Resources' Executive Long-Term Incentive Plan
. Sierra Pacific Resources' Non-Employee Director Stock Plan
. Sierra Pacific Resources' Employee Stock Purchase Plan
. *(A) Credit Agreement dated as of June 24, 1999 among Sierra Pacific Resources, Mellon Bank, N.A., First Union Bank and Wells Fargo Bank, N.A. relating to $500,000,000 credit facility
Nevada Power Company
. *(B) Credit Agreement dated as of June 24, 1999 among Nevada Power
Company, Mellon Bank, N.A., First Union Bank and Wells Fargo Bank, N.A. relating to $150,000,000 credit facility
. *(C) Employment Agreement dated as of March 13, 1998 between Nevada Power Company and Gloria Banks Weddle
. *(D) Employment Agreement dated as of March 13, 1998 between Nevada Power Company and Steven W. Rigazio
. *(E) Retention Agreement dated as of July 28, 1999 between Nevada Power Company and David G. Barneby
. Contract for Sale of Electrical Energy between State of Nevada and Nevada Power Company, dated October 10, 1941 (Filed as Exhibit 13.9A to Form S-1, File No. 2-10932)
. Amendment dated June 30, 1953 to Exhibit 10.1 (Filed as Exhibit 13.9A to Form S-1, File No. 2-10932)
. Contract for Sale of Electrical Energy between State of Nevada and Nevada Power Company, dated June 1, 1951 (Filed as Exhibit 13.10 to Form S-1, File No. 2-10932)
. Agreement dated November 10, 1948 between Nevada Power Company and
Lincoln County Power District No. 1 and Overton Power District No.
5 (Filed as Exhibit 13.18 to Form S-1, File No. 2-12697)
. Agreement dated October 21, 1949 between Nevada Power Company and
Lincoln County Power District No. 1 and Overton Power District No.
5 (Filed as Exhibit 13.19 to Form S-9, File No. 2.12697)
. Mohave Project Plant Site Conveyance and Co-tenancy Agreement dated May 29, 1967 between Nevada Power Company and Salt River Project Agricultural Improvement and Power District and Southern California Edison Company (Filed as Exhibit 13.27 to Form S-9, File No. 2-28348)
. Eldorado System Conveyance and Co-tenancy Agreement dated December 20, 1967 between Nevada Power Company and Salt River Project Agricultural Improvement and Power District and Southern California Edison Company (Filed as Exhibit 13.30 to Form S-9, File No. 2-28348)
. Mohave Operating Agreement dated July 6, 1970 between Nevada Power Company, Salt River Project Agricultural Improvement and Power District, Southern California Edison Company and Department of Water and Power of the City of Los Angeles (Filed as Exhibit 13.26F to Form S-1, File No. 2-38314)
. Navajo Project Participation Agreement dated September 30, 1969
between Nevada Power Company, the United States of America,
Arizona Public Service Company, Department of Water and Power of
the City of Los Angeles, Salt River Project Agricultural
Improvement and Power District and Tucson Gas & Electric Company
(Filed as Exhibit 13.27A to Form S-1, File No. 2-38314)
. Navajo Project Coal Supply Agreement dated June 1, 1970 between Nevada Power Company, the United States of America, Arizona Public Service Company, Department of Water and Power of the City of Los Angeles, Salt River Project Agricultural District, Tucson Gas & Electric Company and the Peabody Coal Company (Filed as Exhibit 13.27B to Form S-1, File No. 2-38314)
. Contract dated January 1, 1968 between Nevada Power Company and United States Bureau of Reclamation for interconnections at Mead Station (Filed as Exhibit 13.32 to Form S-1, File No. 34588)
. Reclaimed Wastewater Purchase Agreement dated June 21, 1974 among City of Las Vegas, Nevada, Clark County Sanitation District No. 1, County of Clark, Nevada and Nevada Power Company (Filed as Exhibit 5.36 to Form S-7, File No. 2-52238)
. Equipment Lease dated as of March 1, 1974 between Nevada Power Company, Lessor, and Clark County, Nevada, Lessee (Filed as Exhibit 5.37 to Form 8-K, File No. 1-4698, April, 1974)
. Sublease Agreement dated as of March 1, 1974 between Clark County, Nevada, Sublessor, and Nevada Power Company, Sublessee (Filed as Exhibit 5.38 to Form 8-K, File No. 1-4698, April 1974)
. Guaranty Agreement dated as of March 1, 1974 between Nevada Power Company and Commerce Union Bank as Trustee (Filed as Exhibit 5.39 to Form 8-K, File No. 1-4698, April 1974)
. Navajo Project Co-tenancy Agreement dated March 23, 1976 between Nevada Power Company, Arizona Public Service Company, Department of Water and Power of the City of Los Angeles, Salt River Project Agricultural Improvement and Power District, Tucson Gas & Electric Company and the United States of America (Filed as Exhibit 5.31 to Form 8-K, File No. 1-4696, April 1974)
. Amended Mohave Project Coal Supply Agreement dated May 26, 1976 between Nevada Power Company and Southern California Edison Company, Department of Water and Power of the City of Los Angeles, Salt River Project Agricultural Improvement and Power District and the Peabody Coal Company (Filed as Exhibit 5.35 to Form S-7, File No. 2-56356)
. Amended Mohave Project Coal Slurry Pipeline Agreement dated May 26, 1976 between Peabody Coal Company and Black Mesa Pipeline, Inc. (Exhibit B to Exhibit 10.18) (Filed as Exhibit 5.36 to Form S-7, File No. 2-56356)
. Coal Supply Agreement dated October 15, 1975 between Nevada Power Company and United States Fuel Company (Filed as Exhibit 5.38 to Form S-7, File No. 2-56356)
. Amendment dated November 19, 1976 to Coal Supply Agreement dated October 15, 1975 between Nevada Power Company and United States Fuel Company (Filed as Exhibit 5.30 to Form S-7, File No. 2-62105)
. Participation Agreement Reid Gardner Unit No. 4 dated July 11, 1979
between Nevada Power Company and California Department of Water Resources (Filed as Exhibit 5.34 to Form S-7, File No. 2-65097)
. Coal Supply Agreement dated March 1, 1980 between Nevada Power Company and Beaver Creek Coal Company (Filed as Exhibit 5.37 to Form S-7, File No. 2-62509)
. Coal Supply Agreement dated March 1, 1980 between Nevada Power Company and Trail Mountain Coal Company (Filed as Exhibit 5.38 to Form S-7, File No. 2-62509)
. Coal Supply Agreement dated December 8, 1980 between Nevada Power Company and Plateau Mining Company (Filed as Exhibit 10.26 to Form 10-K, File No. 1-4698, Year 1981)
. Coal Supply Agreement dated August 31, 1982 between Nevada Power Company and CO-OP Mining Company (Filed as Exhibit 10.26 to Form 10-K, File No. 1-4698, Year 1982)
. Coal Supply Agreement dated September 8, 1982 between Nevada Power Company and Getty Mining Company (Filed as Exhibit 10.27 to Form 10-K, File No. 1-4698, Year 1982
. Coal Supply Agreement dated September 8, 1982 between Nevada Power Company and Tower Resources, Inc. (Filed as Exhibit 10.28 to Form 10-K, File No. 1-4698, Year 1982)
. Coal Supply Agreement dated September 22, 1982 between Nevada Power Company and Beaver Creek Coal Company (Filed as Exhibit 10.29 to Form 10-K, File No. 1-4698, Year 1982)
. Memorandum of Understanding Concerning Interconnection between Utah Power & Light Company and Nevada Power Company dated February 2, 1984 (Filed as Exhibit 10.30 to Form 10-K, File No. 4698, Year 1983)
. Sublease Agreement between Powveg Leasing Corp., as Lessor and Nevada Power Company as Lessee, dated January 11, 1984 for lease of administrative headquarters (Filed as Exhibit 10.31 to Form 10- K, File No. 1-4698, Year 1983)
. Participation Agreement between Utah Power & Light Company and Nevada Power Company dated December 19, 1985 (Filed as Exhibit 10.32 to Form 10-K, File No. 1-4698, Year 1985)
. Sale and Purchase Agreement dated as of December 23, 1985 by and between Nevada Power Company and CP National Corporation (Filed as Exhibit 10.33 to Form 10-K, File No. 1-4698, Year 1985)
. Restated Coal Sales Agreement as of July 1, 1985 by and between Nevada Power Company and Trail Mountain Coal Company (Filed as Exhibit 10.34 to Form 10-K, File No. 1-4698, Year 1985)
. Financing Agreement dated as of February 1, 1983 between Clark County,
Nevada and Nevada Power Company (Filed as Exhibit 10.36 to Form 10-K, File No. 1-4698, Year 1985)
. Financing Agreement between Clark County, Nevada and Nevada Power Company dated as of December 1, 1985 (Filed as Exhibit 10.37 to Form 10-K, File No. 1-4698, Year 1985)
. Reimbursement Agreement dated as of December 1, 1985 between The Fuji Bank, Limited and Nevada Power Company (Filed as Exhibit 10.38 to Form 10-K, File No. 1-4698, Year 1986)
. Contract for Sale of Electrical Energy between the State of Nevada and Nevada Power Company, dated July 8, 1987 (Filed as Exhibit 10.39 to Form 10-K, File No. 1-4698, Year 1987)
. Power Sales Agreement between Utah Power & Light Company and Nevada Power Company, dated August 17, 1987 (Filed as Exhibit 10.40 to Form 10-K, File No. 1-4698, Year 1987)
. Transmission Facilities Agreement between Utah Power & Light Company and Nevada Power Company, dated August 17, 1987 (Filed as Exhibit 10.41 to Form 10-K, File No. 1-4698, Year 1987)
. Financing Agreement between Clark County, Nevada and Nevada Power Company dated as of November 1, 1988 (Filed as Exhibit 10.42 to Form 10-K, File No. 1-4698, Year 1988)
. Reimbursement Agreement dated as of November 1, 1988 between the Fuji Bank, Limited and Nevada Power Company (Filed as Exhibit 10.43 to Form 10-K, File No. 1-4698, Year 1988)
. Power Purchase Contract dated February 15, 1990 between Mission Energy Company and Nevada Power Company (Filed as Exhibit 10.45 to Form 10-K, File No. 1-4698, Year 1989)
. Contract for Long-Term Power Purchases from Qualifying Facilities dated May 1, 1989 between Oxford Energy of Nevada and Nevada Power Company (Filed as Exhibit 10.46 to Form 10-K, File No. 1-4698, year 1989)
. Contract A for Long-Term Power Purchases from Qualifying Facilities dated May 2, 1989 between Bonneville Nevada Corporation and Nevada Power Company (Filed as Exhibit 10.47 to Form 10-K, File No. 1-4698, Year 1989)
. Contract for Long-Term Power Purchases from Qualifying Facilities dated April 10, 1989 between Magna Energy Systems, Eastern Sierra Energy Company and Nevada Power Company (Filed as Exhibit 10.48 to Form 10-K, File No. 1-4698, Year 1989)
. Contract B for Long-Term Power Purchases from a Qualifying Facility dated October 27, 1989 between Bonneville Nevada Corporation and Nevada Power Company (Filed as Exhibit 10.49 to Form 10-K, File No. 1-4698, Year 1989)
. Agreement for Transmission Service dated March 29, 1989 between Overton Power District No. 5, Lincoln County Power District No. 1 and Nevada Power Company (Filed as Exhibit 10.51 to Form 10-K, File No. 1-4698, Year 1989)
. Contract dated June 30, 1988 between United States Department of Energy Western Area Power Administration and Nevada Power Company (Filed as Exhibit 10.52 to Form 10-K, File No. 1-4698, Year 1989
. Power Purchase Contract dated July 5, 1990 between Mission Energy Company and Nevada Power Company (Filed as Exhibit 10.55 to Form 10-K, File No. 1-4698, Year 1990)
. Contract B for Long-Term Power Purchases from a Qualifying Facility dated May 24, 1990 between Bonneville Nevada Corporation and Nevada Power Company (Filed as Exhibit 10.56 to Form 10-K, File No. 1-4698, Year 1990)
. Amendment dated June 15, 1989 to Exhibit 10.45 (Filed as Exhibit 10.57 to Form 10-K, File No. 1-4698, Year 1990)
. Amendment dated August 23, 1989 to Exhibit 10.45 (Filed as Exhibit 10.58 to Form 10-K, File No. 1-4698, Year 1990)
. Amendment dated April 23, 1990 to Exhibit 10.45 (Filed as Exhibit 10.59 to Form 10-K, File No. 1-4698, Year 1990)
. Exhibit H dated August 13, 1990 to Exhibit 10.45 (Filed as Exhibit 10.60 to Form 10-K, File No. 1-4698, Year 1990)
. Western Systems Power Pool Agreement (Agreement) dated January 2, 1991 between thirty-nine other Western Systems Power Pool members as listed on pages 1 and 2 of the Agreement and Nevada Power Company (Filed as Exhibit 10.61 to Form 10-K, File No. 1-4698, Year 1990)
. Financing Agreement between Clark County, Nevada and Nevada Power Company dated June 1, 1990 (Filed as Exhibit 10.62 to Form 10-K, File No. 1-4698, Year 1990)
. Restated Power Sales Agreement dated March 25, 1991 between Pacificorp and Nevada Power Company (Filed as Exhibit 10.63 to Form 10-K, File No. 1-4698, Year 1991)
. Amendment dated July 17, 1990 to Exhibit 10.54 (Filed as Exhibit 10.64 to Form 10-K, File No. 1-4698, Year 1991)
. Financing Agreement between Clark County, Nevada and Nevada Power Company dated June 1, 1992 (Series 1992A) (Filed as Exhibit 10.65 to Form 10-K, File No. 1-4698 (Year 1992)
. Financing Agreement between Clark County, Nevada and Nevada Power Company dated June 1, 1992 (Series 1992B) (Filed as Exhibit 10.66 to Form 10-K, File No. 1-4698, Year 1992)
. Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1992 (Filed as Exhibit 10.67 to Form 10-K, File No. 1-4698, Year 1992)
. Power Sales Agreement dated October 19, 1992 between the Department of Water and Power of the City of Los Angeles and Nevada Power Company (Filed as Exhibit 10.68 to Form 10-K, File No. 1-4698, Year 1992)
. Contract for Long-Term Power Purchases from Qualifying Facilities dated May 27, 1992 between Las Vegas Co-generation, Inc. and Nevada Power Company. (Filed as Exhibit 10.70 to Form 10-K, File No. 1-4698, Year 1993)
. Settlement Agreement and Promissory Note between Mountain Coal Company and Atlantic Richfield Company and Nevada Power Company dated March 9, 1994 (Filed as Exhibit 10.71 to Form 10-K, File No. 1-4698, Year 1993)
. Letter of Credit and Reimbursement Agreement dated as of April 12,
1994 between Nevada Power Company and Societe Generale, Los
Angeles Branch and Amendment No. 1 thereto dated as of May 3, 1994
(Filed as Exhibit 10.72 to Form 10-K, File No. 1-4698, Year 1994)
. Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995A) (Filed as Exhibit 10.75 to Form 10-K, File No. 1-4698, Year 1995)
. Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995B) (Filed as Exhibit 10.76 to Form 10-K, File No. 1-4698, Year 1995)
. Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995C) (Filed as Exhibit 10.77 to Form 10-K, File No. 1-4698, Year 1995)
. Financing Agreement between Clark County, Nevada and Nevada Power Company dated October 1, 1995 (Series 1995D) (Filed 10.78 to Form 10-K, File No. 1-4698, Year 1995)
. Financing Agreement between Coconino County, Arizona Pollution Control Corporation and Nevada Power Company dated October 1, 1995 (Series 1995E) (Filed as Exhibit 10.79 to Form 10-K, File No. 1- 4698, Year 1995)
. Letter of Credit and Reimbursement Agreement dated as of October 1, 1995 among Nevada Power Company, The Banks Named Herein, and Societe Generale, Los Angeles Branch (Filed as Exhibit 10.80 to Form 10-K, File No. 1-4698, Year 1995)
. Letter of Credit and Reimbursement Agreement dated as of October 1, 1995 among Nevada Power Company, The Banks Named Herein, and Barclays Bank PLC, New York Branch (Filed as Exhibit 10.81 to Form 10-K, File No. 1-4698, Year 1995)
. Financing Agreement between Coconino County, Arizona Pollution Control
Corporation and Nevada Power Company dated October 1, 1996 (Filed as Exhibit 10.82 to Form 10-K, File 1-4698, Year 1996)
. Financing Agreement between Clark County, Nevada and Nevada Power Company dated November 1, 1997 (Filed as Exhibit 10.83 to Form 10- K, File No. 1-4698, Year 1997)
. Financing Agreement between Coconino County, Arizona Pollution Control Corporation and Nevada Power Company dated November 1, 1997 (Filed as Exhibit 10.84 to Form 10-K, File No. 1-4698, Year 1997)
(12) Sierra Pacific Resources
. *(A) Calculation of Pre-Tax Interest Coverages for the Periods 1999, 1998, and 1997.
Nevada Power Company
. *(B) Calculation of Pre-Tax Interest Coverages for the Periods 1999, 1998, and 1997.
(21) Sierra Pacific Resources
. Nevada Power Company, a Nevada Corporation.
Sierra Pacific Power Company, a Nevada Corporation.
Lands of Sierra, Inc., a Nevada Corporation.
Sierra Energy Corporation, a Nevada Corporation.
Tuscarora Gas Pipeline Company, a Nevada Corporation.
Sierra Water Development Company, a Nevada Corporation.
Sierra Pacific Resources Capital Trust I, a Delaware business
trust
Sierra Pacific Resources Capital Trust II, a Delaware business trust
(23) Sierra Pacific Resources
. *(A) Consent of Independent Accountants in connection with the Sierra Pacific Resources' Registration Statements No. 333-77523 (Common Stock Investment Plan) on Form S-3, and No. 333-92651 (Employees' Stock Ownership Plan, Executive Long-Term Incentive Plan, and Non-Employee Director Stock Plan) on Forms S-8
(27) Sierra Pacific Resources
. *(A) The Financial Data Schedule containing summary financial information extracted from the consolidated financial statements filed on Form 10-K for the year ended December 31, 1999.
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 Commission File Number 0-508
SIERRA PACIFIC POWER COMPANY
(Exact name of registrant as specified in its charter)
NEVADA 88-0044418
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 10100 (6100 Neil Road)
Reno, Nevada 89520-0400 (89511)
(Address of principal executive office) (Zip Code)
(775) 834-4011
(Registrant's telephone number, including area code)
|
Securities registered pursuant to Section 12(b) of the Act: none. Securities registered pursuant to Section 12(g) of the Act:
Preferred Stock:
---------------
(Title of Class) Class A, Series 1, $1.95 Dividend, $25 stated value
Preferred Securities:
---------------------
(Title of Class) Sierra Pacific Power Capital Trust I, $2.15 Dividend,
$25 stated value
|
State the aggregate market value of the voting stock held by non-affiliates. As of March 22, 2000: None
Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date.
Class Outstanding at March 22, 2000: 1,000 shares
Common Stock, $3.75 par value
|
Proof of March 20, 2000
SIERRA PACIFIC POWER COMPANY
1999 ANNUAL REPORT FORM 10-K
CONTENTS
PART I............................................................................................................. 3 ITEM 1. BUSINESS (1)...................................................................................... 3 SIERRA PACIFIC POWER COMPANY..................................................................................... 3 BUSINESS OUTLOOK AND OVERVIEW.................................................................................... 4 ITEM 2. PROPERTIES......................................................................................... 29 ITEM 3. LEGAL PROCEEDINGS.................................................................................. 29 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................ 29 PART II............................................................................................................ 30 ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS................................................................................................ 30 ITEM 6. SELECTED FINANCIAL DATA............................................................................ 30 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............................................................................................. 31 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......................................... 50 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................................................ 51 SIERRA PACIFIC POWER COMPANY..................................................................................... 54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....................................................................... 58 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.............................................................................................. 80 PART III........................................................................................................... 80 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS................................................................... 80 ITEM 11. EXECUTIVE COMPENSATION............................................................................. 86 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..................................... 91 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................................................... 92 PART IV............................................................................................................ 96 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.................................... 96 SIGNATURES....................................................................................................... 97 |
PART I
ITEM 1. BUSINESS
The information in this Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to anticipated financial performance, management's plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters. Words such as "anticipate," "believe," "estimate," "expect," "intend," "plan" and "objective" and other similar expressions identify those statements that are forward-looking. These statements are based on management's beliefs and assumptions and on information currently available to management. Actual results could differ materially from those contemplated by the forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with such statements, factors that could cause Sierra Pacific Power Company's (SPPC's) actual results to differ materially from those contemplated in any forward-looking statement include, among others, the following: (1) the pace and extent of the ongoing restructuring of the electric and gas industries in Nevada and California; (2) the outcome of regulatory and legislative proceedings and operational changes related to industry restructuring; (3) the amount SPPC is allowed to recover from customers for certain costs that prove to be uneconomic in the new competitive market; (4) the outcome of ongoing and future regulatory proceedings; (5) management's ability to integrate the operations of Nevada Power Company (NVP) and SPPC, and to implement and realize anticipated cost savings from the merger of SPR and NVP; (6) industrial, commercial and residential growth in the service territory of SPPC; (7) fluctuations in electric, gas and other commodity prices and the ability to manage such fluctuations successfully; (8) changes in the capital markets and interest rates affecting the ability to finance capital requirements; (9) the loss of any significant customers; (10) the weather and other natural phenomena; and (11) changes in the business of major customers that may result in changes in the demand for services of SPPC. Other factors and assumptions not identified above may also have been involved in deriving these forward-looking statements, and the failure of those other assumptions to be realized, as well as other factors, may also cause actual results to differ materially from those projected. SPPC assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking statements.
SIERRA PACIFIC POWER COMPANY
Sierra Pacific Power Company, hereinafter known as the Company or SPPC, is a Nevada corporation organized in 1965 as a successor to a Maine corporation organized in 1912. The Company became a wholly owned subsidiary of Sierra Pacific Resources (SPR) on May 31, 1984. Its mailing address is Post Office Box 10100 (6100 Neil Road), Reno, Nevada 89520-0400.
The Company has four primary, wholly owned subsidiaries: Pinon Pine Corp. (PPC), Pinon Pine Investment Co. (PPIC), GPSF-B, and Sierra Pacific Power Capital I (the Trust). PPC and PPIC own 25% and 75% of a 38% interest in Pinon Pine Company, L.L.C. GPSF-B, a Delaware corporation formerly owned by General Electric Capital Corporation and now owned by the Company, owns the remaining 62%. The LLC was formed to take advantage of federal income tax credits associated with the alternative fuel (syngas) produced by the coal gasifier available under (S) 29 of the Internal Revenue Code. The Trust was created to issue trust securities in order to purchase the Company's junior subordinated debentures .
The Company is a public utility primarily engaged in the distribution, transmission, generation, purchase and sale of electric energy. It provides electricity to approximately 302,000 customers in a 50,000 square mile service area including western, central and northeastern Nevada, including the cities of Reno, Sparks, Carson City, Elko, and a portion of eastern California, including the Lake Tahoe area. In 1999, electric revenue was 79.8% of total revenue.
The Company also provides natural gas service in Nevada to approximately 110,000 customers in an area of about 600 square miles in Reno/Sparks and environs. It supplies water service in Nevada to about 70,600 customers in the Reno/Sparks metropolitan area. In 1999, natural gas revenues were 13.1% and water revenues were 7.1% of total revenues.
The Company used diverse resources to meet its 1999 electric energy requirements, including gas and oil generation (28.4%), coal generation (17.4%), and purchased power (53.8%). The Company has no ownership interest in, nor does it operate, any nuclear generating units.
In 1999, the Company's average electric customer count grew by 2.8%; its average natural gas customer count increased by 4.3%; and its average water customer count increased by 4.8%. Many factors account for this growth including population growth in the Company's service areas.
The Company had 1,430 regular employees as of December 31, 1999; this is a 1.1% decrease from 1998. The Company's current contract with the International Brotherhood of Electrical Workers, which represents 58.0% of the workforce, was renegotiated in 1997 and is in effect until December 31, 2000. The three-year contract provides for a 2.75% general wage increase for most bargaining unit employees beginning January 1, 1998, with 2.75% increases in both 1999 and 2000. In addition, the contract provides for bargaining unit employees to participate in the incentive compensation program. Nevada is a "right-to-work" state.
For a discussion of results of operations refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
Business Outlook And Overview
On July 28, 1999, SPR completed its merger with NVP. More than 30 other mergers of electric and/or gas companies were pending, announced, or completed in 1999. Merger and acquisition activity is expected to continue into the next decade, as companies position themselves for continued electric restructuring throughout the United States.
The Company announced its plan to divest its generation assets in June 1998. A stipulation on the Divestiture Plan was approved by the PUCN in February 2000. This stipulation will clear the way for the Divestiture process to begin. See Generation Divestiture for further information.
Federal and state legislation is moving the electric utility industry toward competition. Federal and state regulators play critical roles in establishing a competitive marketplace. Currently, 21 states have passed restructuring bills, and 19 more states are considering legislation to restructure their electric markets. In addition, the U.S. Congress is considering national legislation that would implement electric restructuring across the nation. Passage of a comprehensive federal bill is expected within the next several years. Regulatory changes generally focus on the unbundling of utility functions into separate products and services. The major product being opened to competition is energy (e.g., kilowatt hours). Other services such as meter reading and billing are also being opened to competition in some states, including California and Nevada.. The delivery of energy (e.g., transmission and distribution) to businesses and homes remains a utility product regulated by the Federal Energy Regulatory Commission and state regulators.
On December 15, the FERC issued Order No. 2000, a long awaited rule on Regional Transmission Organizations (RTO's). The implementation of Order No. 2000 is expected to have major long-term effects on the electric power markets by promoting regionalization of the transmission grid.
The Company is subject to California, Nevada and the FERC regulatory jurisdiction. Federal and state regulation will continue to play an active role in the Company's utility business. The Company's electric system demand exceeds the import capabilities of its transmission system. Accordingly, some of the Company's generation capacity has been identified as "must run" in order to meet load. Tariffs governing the availability and pricing of "must run" facilities after the divestiture of generation have been filed with the FERC. See Generation Divestiture. The FERC will also regulate the Company's electric transmission system. The states will continue to regulate those retail distribution services determined to be non-competitive.
Approximately 67% of SPPC's operating revenues is related to electric sales in Nevada. Nevada passed Assembly Bill 366 (AB366) in July 1997, as enabling legislation to implement electric industry restructuring in Nevada. This legislation was modified in June 1999 by Senate Bill 438 (SB438). SB438 provides for competition to be implemented in the Nevada electric utility industry. See Electric Restructuring Activities. On February 28, 2000, the governor of Nevada postponed the expected March 1, 2000 opening date. No new date has been set, but competition could begin later in 2000 or possibly in 2001. SB438 allows the PUCN to authorize full recovery of costs that it determines to be stranded as a result of restructuring, and provides criteria for recovery of costs associated with purchase power obligations. In addition SB438 provides the electric distribution utility will be the provider of last resort (PLR) until alternate methods go into effect, no sooner than July 1, 2001; under rates which will be capped until March 1, 2003.
In August 1997, the PUCN opened an investigatory docket of the issues to be considered as a result of restructuring the electric industry under AB366 and SB438. The Company is a participant in this docket in which new regulations for the restructured marketplace have been developed. These regulations include standards of conduct, consumer protection, stranded costs and licensing provisions for alternative sellers. Implementation of some of the regulations, including unbundling of services, stranded costs and provider of last resort, has already posed or is expected to pose financial risks to the Company. The Company is working to mitigate these risks by changing its business strategies, actively pursuing regulatory remedies and, if necessary, pursuing legal remedies. See further discussion regarding restructuring activities and potential risks in Item 7, Nevada Matters.
California accounts for approximately 6% of the Company's electric revenue. California opened retail access in 1998. California customers may choose to continue to take service from their incumbent utility at tariff rates, purchase energy from marketers or contract directly with a generator. Any customers choosing to purchase energy from marketers or generators will pay a distribution fee for their use of the Company's transmission and distribution systems. To date no California customers have opted for retail open access. Operating results should not be materially impacted by these regulatory changes because of the continued use of the Company's transmission /distribution facilities and the Company's limited exposure in California.
For more information regarding regulatory changes affecting SPPC, see Item 7, Nevada Matters, California Matters, FERC Matters and Note 2 of the Company's consolidated financial statements.
As previously mentioned, the merger between SPR and NVP was finalized on July 28, 1999 following receipt of all regulatory approvals. The PUCN gave unanimous approval of a stipulation among the merging companies, the PUCN staff and the Utility Consumer Advocate, regarding the merger.
As part of the stipulation approved by the PUCN, the companies were required to re-file the plan to divest their generating assets, and file a final Independent System Administrator (ISA) proposal with the PUCN and the FERC. In January 2000, the FERC approved the ISA proposal; the PUCN's decision is still pending. See Generation Divestiture and Item 7, Nevada Matters for more information.
As part of the conditions for the merger SPPC was required to file a general rate case and unbundle costs. In April 1999, Phase I of the revenue requirement and unbundling study was filed with the PUCN. In September 1999, the PUCN issued an interim order on revenue requirements. In October 1999,
Phase II regarding rate design was filed. Hearings were conducted in November 1999. Phase III will be filed 15 days following the PUCN decision on Phases I and II and will include full proposed tariffs for distribution service and all other noncompetitive services. SPPC is also required to file a general rate case three years after the start of retail competition in the state of Nevada. The filing would give the Company the opportunity to recover certain costs of the merger, provided it can be demonstrated that merger savings exceed certain merger costs. Merger costs are to be split among non-competitive and potentially competitive services or businesses. An opportunity to recover the non-competitive portion of the merger costs will be addressed in the rate case that follows the start of competition in Nevada. The burden is to prove that merger savings exceed merger costs.
In June 1998, SPR announced a plan to divest the generation assets of its NVP and SPPC subsidiaries. This business strategy was described in the SPR/NVP merger applications filed with the PUCN and the FERC in July 1998.
The FERC, Department of Justice, and SEC approved the merger. The PUCN conditionally approved the merger in December 1998, and one of the conditions was the filing of the divestiture plan with the PUCN. The plan was filed in April 1999, and included details about the auction process, market power mitigation, sale of the assets in described bundles, description of the proposed generation tariffs, description of the proposed independent system administrator, and the description of the proposed power purchase contracts.
In June 1999, the PUCN approved a stipulation in the Merger docket with several conditions. Some of those conditions were: re-file the divestiture plan with the PUCN; file the generation aggregation tariffs (GAT) at the FERC; file the proposal for the ISA at the FERC; file proposals for the buyback or purchase power contracts; and file proposals for mitigation of the qualifying facilities and purchase power contracts.
A revised Divestiture Plan was filed with the PUCN in October 1999. The PUCN held a hearing on December 28, 1999 and a stipulation was offered to the Commission for approval. Approval of the stipulation was received in February 2000.
In accordance with the approved stipulation, SPR will be offering for sale generation assets with peak capacity of approximately 2,985 megawatts (MW) with approximately 1,045 MW owned by SPPC and approximately 1,940 MW owned by NVP. Potential buyers will be allowed to offer bids for different combinations of assets or for a consolidated asset. The plants utilize either coal, natural gas, or oil as fuel and are a mix of base load or peaking units consisting of conventional steam turbines, combined-cycle, or combustion turbines. SPR anticipates closing the sales of the generation assets during a period beginning in the fourth quarter 2000 and ending in 2003.
Transmission
The FERC issued Order 2000 in December 1999. The order requires all investor-owned utilities in the United States who own interstate transmission to file their plans regarding Regional Transmission Organizations (RTOs) by October 15, 2000. Utilities must file by that date, either by joining an RTO or stating why they are not joining one. The RTOs must be operational by December 15, 2001 with congestion management in place one year later.
The FERC has required that RTOs be operated by independent entities that are not participants in the energy market. The RTO must accommodate broad participation by both private and public utilities, provide customer efficient price signals and be independent of market participants (i.e., sellers of energy to end use customers). In addition, RTO rates must eliminate pancaking (multiple rates on a transmission path), manage congestion and internal parallel flows, deal effectively with non-RTO transmission owning entities (not under the FERC jurisdiction) and provide correct investment incentives. The FERC has offered the possibility of incentive ratemaking to RTOs that meet all the criteria for a large-scale regional entity.
The Company will explore strategic transmission options, using the guidelines included in Order 2000. The Company's response will be filed before the October 15, 2000 deadline. The FERC filings for the start of Nevada restructuring and the PGE acquisition will anticipate this October 2000 RTO filing.
Distribution
The Company's electric business contributed $609 million (78.8%) of 1999 operating revenues. Electric system peaks typically occur in the summer, while winter peaks run nearly as high. The system has an annual load factor of approximately 70.9%, which is higher than the industry norm of 50-55%.
Winter peak loads are due to shorter daylight hours, colder temperatures (which affect space heating requirements) and ski resort demands (snowmaking, hotels, lifts, etc.). Summer peak loads result from air-conditioning, cooling equipment and irrigation pumping. The Company's peak load increased an average of 5% annually over the past five years, reaching 1,470 MW on July 12, 1999. The Company's total electric megawatt-hour (MWh) sales have increased an average of 7.65% annually over the past five years.
A significant part of the growth in the Company's electric sales has resulted from growth in the residential area, mining and manufacturing industry in northern Nevada.
SPPC's electric customers by class contributed the following toward 1999 and 1998 megawatt-hour sales:
MWh Sales
1999 1998
Residential 1,998,174 19.6% 1,987,562 20.4%
Commercial and Industrial:
Mining 2,716,579 26.6% 2,648,957 27.1%
Offices/Schools/Govt. 1,128,189 11.1% 1,048,553 10.7%
Resorts & Recreation 768,750 7.5% 760,848 7.8%
Manufacturing/Warehouse 586,963 5.8% 738,972 7.6%
Wholesale 1,695,420 16.6% 1,443,652 14.6%
All Other 1,308,861 12.8% 1,134,675 11.8%
-------------- --------- ------------ --------
Total 10,202,936 100.0% 9,763,219 100.0%
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According to the Nevada Mining Association statistics, Nevada leads the nation in gold production, accounting for approximately 74% of all U.S. production and 10% of world production, ranking it the third largest gold producer in the world behind South Africa and Australia. It is estimated that Nevada gold production for 1999 was approximately 8.2 million ounces. A majority of Nevada's gold mines are customers of the Company. Currently, known gold reserves at existing mines in Nevada total approximately 87 million ounces, the majority of the nation's known gold reserves. These reserves are sufficient to continue production at current rates for the next decade.
During 1999, world gold prices ranged from about $253 per ounce to $326 per ounce. Production costs continue to vary greatly at Nevada mines, along with profitability. Industry reports indicate many Nevada gold mines have a production cost of less than $300 per ounce, with some of the larger mines producing within the $192 to $240 per ounce range. When compared to world production costs, Nevada remains below the worldwide average. While Nevada's gold mines have the lowest costs in the world, investments in exploration and development have fallen, and may continue to fall. In addition, low gold prices may shorten the expected mine lives of certain Nevada properties as lower grade ore becomes uneconomic to mine.
The Company's territory also has a variety of other mineral producing mines. Approximately 19.5 million ounces of silver were produced in 1999, worth approximately $102 million, with over 123 million ounces of silver resources identified in the State. Silver demand has been exceeding new supply for most of the decade, drawing down inventories built up in the 1980's. As this situation continues, we will see continued upward pressure on silver prices. Other minerals produced in Nevada include copper, lithium, mercury, barite, diatomite, gypsum, and lime, valued at over $108 million.
The Company has seven long-term power sales agreements with major mining customers with terms of at least five years. The final contract expires in 2005. One of these customers has provided SPPC with two years' notice of termination. Five of these agreements have been reviewed and approved by the PUCN as part of the Company's new tariff structure designed for major customers. These mining agreements secure over 223 megawatts of present and future mining load, or approximately $74 million in annual revenues, which is 12.2% of the 1999 electric operating revenues. The agreements require that customers maintain minimum demand and load factor levels, and include termination charge provisions to recover all of the Company's customer-specific facilities investment. Sales to the mining sector grew at approximately the same percentage as overall system sales (3.8%).
The resorts and recreation group is comprised of hotels, casinos, and ski resorts. This major customer segment comprises 7.5% of the total electric system retail MWh sales. Tourism and gaming continue to be key contributors to the local economy. Several of the largest gaming customers are expanding their properties to differentiate the Reno/Tahoe market by creating a more desirable resort location. These same large gaming customers increased their 1999 electric load by 7,902 MWh (1.0%) over 1998.
Gaming has substantial potential for growth with the recent purchases and reopening of several smaller casinos. In addition, several closed properties have been razed and have plans for new properties to be built in their place.
The advent of increased competition in 1999, particularly "Indian gaming" in key feeder markets and the continuing expansion in Las Vegas, has not had a negative impact on the Northern Nevada market share and ultimately energy sales. The passing of Proposition 5 in California, which liberalizes Indian reservation gaming operations, had been predicted to cause a decline in Reno's gaming revenues once implemented. Northern Nevada casinos are evaluating and implementing competitive strategies to expand their entertainment portfolio. The key to this strategy is packaging entertainment value, customer comfort, and reasonable pricing, with the natural attraction of the Sierra Nevada geographic location.
The Company's industrial and large commercial customers continue their interest in the electric supply source options potentially available to them under regulatory reforms currently being considered in Nevada and in place in California. The Company continues to prepare for a more competitive environment and has actively participated in regulatory reform deliberations in Nevada. Upon opening the market to retail access, one of the most significant regulations that will impact the distribution business is the requirement to be the provider of last resort for customers who do not choose a competitive supplier or who are unable to secure a new supplier. Due to the SB438 requirement that the provider of last resort be placed into a separate affiliate, recent PUCN decisions regarding recovery of fuel expenses, and the stringent proposed regulations, significant detrimental financial impacts are expected to occur. As a result, the Company is determined to exit the provider of last resort requirement as quickly as possible. First the Company would seek to exit the energy supply portion of the provider of last resort. Then, if current legislation and regulation do not change, the Company would plan to exit other services, including metering, billing and customer service functions. See Item 7, Nevada Matters, California Matters, and FERC Matters for further discussion.
Over the past five years, MWh sales to wholesale customers have increased at a rate of 39.4%. During 1999, firm and non-firm sales to wholesale customers comprised about 14.8% of total energy sales. The wholesale market is very competitive and sales into this market are typically made at very low margins. This market is maturing and will become even more competitive in the future. The Company utilizes wholesale sales to better manage fuel and purchase power costs.
PERCENT
MWh OF TOTAL
------------ ---------
Firm Sales 507,640 29.9%
Non-firm Sales 123,567 7.3%
Firm Off-System Sales 1,064,213 62.8%
------------- ----------
Total 1,695,420 100.0%
============= ==========
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While the wholesale sales in 1999 represented 14.8% of sales they represent only 8.6% of electric revenues.
The following major projects have been approved in previous resource plans and may have been financed utilizing internally generated cash and/or the proceeds from various forms of debt and preferred securities:
Pinon Pine Project
The Pinon Pine Project is a cooperative agreement with the U.S. Department of Energy (DOE) for the construction of a coal-gasification power plant. Total project costs incurred by the Company through December 31, 1999, were $170.0 million. Actual costs incurred by the Company in 1999 were $.4 million.
Alturas Intertie Project
The Alturas Intertie Project, which went into service in December 1998, is a 345 kilovolt (kV) transmission line from Northern California to Reno. Total project costs incurred through December 31, 1999 were $153.2 million. Actual costs incurred in 1999 were $9.1 million. Estimated costs for 2000 are $1.0 million.
Falcon Transmission Project
The Falcon Transmission Project is a 345kV transmission line within Northern Nevada. Total project costs incurred through December 31, 1999 were $2.4 million. Actual costs incurred in 1999 were $2.1 million. Estimated costs for 2000 are $4.0 million.
The Company's construction program and estimated expenditures are subject to continuing review, and are revised from time to time due to various factors, including the rate of load growth, escalation of construction costs, availability of fuel types, changes in environmental regulations, adequacy of rate relief, and the Company's ability to raise necessary capital.
Current estimated cash construction expenditures for 2000 are $137.7 million. The Company may utilize internally generated cash and the proceeds from the issuance of securities to meet capital expenditure requirements through 2000. Internally generated funds provided 35% of all construction expenditures in 1999.
On July 28, 1999, the Company put into place a $150 million 364-day unsecured revolving credit facility that is convertible at the Company's election into a one-year term loan. This facility replaced the Company's previous credit facility and may be used for working capital and general corporate purposes, including commercial paper backup.
On April 9, 1999, The Company sold the Transition Property (See California Matters in Rate Proceedings, later) to SPPC Funding LLC, a Delaware special purpose limited liability company whose sole member is the Company, in exchange for the proceeds of the SPPC Funding LLC Notes, Series 1999-1 (the "Underlying Notes"). SPPC Funding LLC then issued and sold the Underlying Notes to the California Infrastructure and Economic Development Bank Special Purpose Trust SPPC-1 (the "Trust") in exchange for the proceeds of the sale of the Trust's $24.0 million 6.4% Rate Reduction Certificates, Series 1999-1 (the "Certificates"). The Trust, which had been established by the California Infrastructure and Economic Development Bank, issued and sold the Certificates in a private placement pursuant to Rule 144A under the Securities Act of 1933, as amended. The Certificates are one of a series of rate reduction certificates that may be issued from time to time by the Trust and sold to investors upon terms determined at the time of sale.
On July 12, 1999, $10 million of the Company's 6.86% medium-term notes matured. On July 6, 1999, $20 million of the Company's 6.83% medium-term notes matured.
On September 17, 1999, the Company issued $100 million of floating rate notes ("Notes") due October 13, 2000. Interest on the Notes, payable quarterly, commenced on December 15, 1999. The interest rate on the Notes for each interest period to maturity is a floating rate, subject to adjustment every three months. The quarterly rate is equal to the London Interbank Offered Rate (LIBOR) for three-month U.S. dollar deposits plus a spread of 0.75%. The Notes will not be entitled to any sinking fund and will be redeemable, in whole, at the option of the Company beginning on March 15, 2000 and on the 15th day of each month thereafter.
On November 1, 1999 the Company redeemed Preferred Stock, Series A, $2.44 Dividend (4.88%), Series B, $2.36 Dividend (4.72%) and Series C, $3.90 Dividend (7.80%).
Total System
As of December 31, 1999, the Company's electric transmission facilities consisted of approximately 4,000 overhead pole line miles and 81 substations. Its distribution facilities consisted of approximately 9,000 overhead pole line miles, 4,500 underground cable miles and 178 substations.
The Company continues to maintain a wide variety of resources in its generation system. During 1999, the Company generated 46.2% of its total electric energy requirements in its own plants, purchasing the remaining 53.8% as shown below:
Megawatt- Percent
Hours of Total
--------- --------
Company Generation
------------------
Gas/Oil 3,071,537 28.4%
Coal 1,879,326 17.4%
Hydro 47,277 0.4%
---------- -----
Total Generated 4,998,140 46.2%
---------- -----
Purchased Power
---------------
Utility Purchases:
Long-Term Firm 1,322,088 12.2%
Short-Term Firm 3,337,174 30.8%
Spot Market 297,333 2.8%
Non-Utility Purchases:
Geothermal 712,976 6.6%
Other 128,332 1.2%
Transmission & Balancing 23,939 0.2%
---------- -----
Total Purchased 5,821,842 53.8%
---------- -----
Total 10,819,982 100.0%
========== =====
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The Company's decision to purchase spot market energy is based on the economics of purchasing "as-available" energy when it is less expensive than the Company's own generation. At the time of the 1999 system peak, the Company had purchased firm capacity under long-term contracts with other utilities and qualifying facilities (QFs) equal to 17% of total peak hour capacity. In 1999, most of the Company's non-utility generation came from QFs, except for 14,951 megawatt hours, which came from two small power producers.
Risk Management
Over the past several years, SPPC recognized that the management of energy commodity (electricity, natural gas, coal, and oil) price risk was an essential component of SPPC's efforts to manage revenues and expenses. In 1998, SPPC's board of Directors approved a Risk Management Policy & Procedure Manual that governed price risk management activities. With the merger of SPR and NVP, the Board of Directors requested that management review and consolidate the Risk Management Programs of the two utilities. SPPC and NVP engaged the services of a leading energy risk management consulting company to review existing policies and procedures, make any recommendations to the existing Program, and implement the revised Program. That project led the companies to adapt revised policies and procedures, implement new IT systems to track any commodity price exposures, as well as focus on potential "Earnings-at-Risk" which measures the amount of exposure that the companies have to energy prices at any point.
Load and Resources Forecast
The electric customer growth rate was 2.8%, 2.8%, and 3.1% in 1999, 1998 and 1997, respectively. Annual electricity retail sales reached 8,412,853 megawatt-hours in 1999. Peak electric demand rose from 1,423 megawatts in 1998 to 1,470 megawatts in 1999.
The Nevada Legislature mandated retail access to alternative electric suppliers. While the opening date of competition is not yet known, once access begins, the Company will continue to be required to supply electricity to customers as the "provider of the last resort". It is expected that some customers will elect to receive their electric supply from other suppliers, however, reasonable estimates of the number and timing of customers switching are not yet available. The proposed "provider of last resort" regulations have highlighted the Company's exposure to fuel price risks. Consequently, if the proposed regulations are adopted, the Company will exit the provider of last resort function as quickly as possible, beginning with energy supply. The projections shown below are forecasts of the load to be provided to all of the Company's current customers, and therefore, include demand that may actually be met by other electric suppliers.
As part of the merger agreement with the PUCN, the Company has committed to divest its generation facilities to enhance competition in a deregulated environment. Current plans call for the divestiture to occur in the year 2000. Until such time, the Company will continue to provide energy through generation and purchase power to meet both summer and winter peak loads. The Company's actual total system capability and peak loads for 1999, and as estimated for summer peak demand through 2001 (assuming no curtailment of supply or load and normal weather conditions), are indicated below:
Capacity at 1999 Peak Forecast Summer Peak
-----------------------------------------------------
MW % 2000 2001
-----------------------------------------------------
Company Generation:
Existing (1) 1,045 63% 1,052 0
---------------------------------------------------
Purchases:
Long/Short-Term Firm (2) (3) 492 29% 498 1,541
Interruptible Customers 2 0% 2 2
Non-Utility Generators 70 4% 70 70
---------------------------------------------------
Subtotal 564 33% 570 1,613
---------------------------------------------------
Additional Required 60 4% 82 177
Total System Capacity 1,669 100% 1,704 1,790
---------------------------------------------------
Net System Peak (4) 1,470 88% 1,499 1,581
Planning Reserve 199 12% 205 209
---------------------------------------------------
Total 1,669 100% 1,704 1,790
===================================================
Growth over previous year 2.1% 5.1%
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(1) Assumes divestiture is complete by peak season 2001.
(2) Value net of losses.
(3) Includes potential short-term firm purchases that are not under
contract. Values shown represent purchases within existing
transmission system limits.
(4) The system peak shown for 1999 is the actual system peak of 1,470 MW, which occurred on July 12, 1999.
The Company plans its system consistent with the Western System Coordinating Council guidelines, which recommends planning reserves in excess of required operating reserves. The "Additional Required" represents the difference between the planning reserves and the operating reserves needed for the system. These additional reserves will be met, if needed, by short-term purchases through 2001.
Generation
The following is a list of the Company's generation plants including their megawatt (MW) summer peak capacity, the type/fuel that they use to generate, and the year(s) that the unit(s) was (were) installed:
Number
of MW Year(s)
Name Type/Fuel Units Capacity Installed
---- --------- ------ -------- ---------
Valmy (1) Steam/Coal 2 266 1981 and 1985
Tracy Steam/Natural Gas, Residual Oil 3 244 1963, 1965, 1974
Pinon (2) Combined Cycle/Coal, Natural Gas 1 89 1996 - 1998
Clark Mtn. CT's Combustion Turbine/Natural Gas,
Diesel Oil 2 138 1994
Ft. Churchill Steam/Natural Gas, Residual Oil 2 226 1968 and 1971
Other (3) Gas Turbine/Natural Gas, Diesel Oil,
Propane, Hydro 33 82 1899 1970
-----
1,045
=====
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(1) SPPC is the operator and owns an undivided 50 percent interest in the Valmy plant. Idaho Power Company (Idaho Power) owns the remainder. The capacities shown above for the Valmy plant represent the Company's share only. The Company owns 100 percent of all of its remaining electric generation plants.
(2) Includes the generation capacity of the 100% SPPC-owned power island portion of the Pinon Pine Power Project. Pinon's current summer peak capacity is 89 MW when operating on natural gas.
(3) Four of the Company's hydro generation units are located on the Truckee River, which runs approximately 100 miles from Lake Tahoe, through Reno/Sparks, to Pyramid Lake. A 2 MW facility located on the Truckee River at Farad was damaged by the January 1997 flood and was not available for generation during the 1999 summer peak.
Purchased Power
The Company continues to manage a diverse portfolio of contracted and spot market supplies, as well as its own generation, to minimize its net average system operating costs. During 1999, the Company witnessed a leveling of off- system energy prices compared to the previous year, but energy forecasts indicate steadily increasing prices as load appears to outpace additional supply.
The Company is a member of the Northwest Power Pool and Western Systems Power Pool. These pools have provided the Company further access to spot market power in the Pacific Northwest and the Southwest. In turn, the Company's generation facilities provide a backup source for other pool members who rely heavily on hydroelectric systems. The Company has an agreement with PacifiCorp's Utah division and Idaho Power in which a portion of the energy purchased by the Company from PacifiCorp is transmitted through the Idaho Power system. The agreement also provides added access to spot market power.
The Company purchases hydro- and thermally-produced spot market energy, by the hour, based upon economics and system import limits. Also purchased during peak load periods is firm energy as required to supply load and maintain adequate operating reserve margins. As off-system energy costs increase, the Company supplies a higher percentage of its native load utilizing its fossil fuel generation but is still required to buy peaking energy from the market. Also, market conditions throughout the West are in flux with regions approaching deregulation using different methods. Each change results in different market pricing characteristics.
Currently, the Company has contracted for a total of 165 MW of long-term firm purchased power from the utility suppliers listed below. Several of the Company's firm purchase power contracts contain minimum purchase obligations. Meeting these minimums has not been a problem for the Company in the past, and is not expected to be a problem in the future.
Contract Party Contract Operation Termination Minimum
Capacity Date Date Capacity %
----------------------------------------------------------------------------------------------
Idaho Power (for Elko) 15 MW March 1994 May 31, 2000 40%
PacifiCorp 75 MW June 1989 Feb 28, 2009 70%
PacifiCorp/Utah Power (1) 75 MW May 1991 April 30, 2000 78%
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(1) The Company has provided notice to terminate the PacifiCorp/Utah contract effective April 30, 2000.
According to the Public Utility Regulatory Policies Act, the Company is obligated, under certain conditions, to purchase the generation produced by small power producers and co-generation facilities at costs determined by the appropriate state utility commission. Generation facilities that meet the specifications of the regulations are known as qualifying facilities (QFs). As of December 31, 1999, the Company had a total of 109 MW of maximum contractual firm capacity under 15 contracts with QFs. The Company also had contracts with three projects at fluctuating short-term avoided cost rates. All QF contracts currently delivering power to the Company at long-term rates have been approved by either the PUCN or the California Public Utility Commission (CPUC), and have QF status as approved by the FERC. One long-term QF contract terminates in 2006, one terminates in 2039, and the remainder terminate between 2014 and 2022.
Energy purchased by the Company from QFs constituted 10% of the net system requirements during 1999. These contracts continue to provide useful diversity for the Company in meeting its peak load. All the QFs from which the Company makes firm purchases are either geothermal (87%), hydroelectric or biomass.
The actual QF firm capacity output under contract was 64 MW during the summer of 1999. The actual QF output for all non-utility generator deliveries during the summer 1999 peak was 83 MW. The table on page 13 reflects actual performance during the 1999 summer peak period. A difference exists between the non-utility generator figures and the table on page 13 because the 1999 figure is actual and the remaining years are forecasts. Any capacity shortfall created by under-performance was included in the Company's 1999 amended resource plan.
Transmission
In planning its transmission capacity, the Company considers generation and purchased power options, as well as the requirements for providing retail and wholesale transmission services.
The Company's existing transmission lines extend some 300 miles from the crest of the Sierra Nevada in eastern California, northeast to the Nevada-Idaho border at Jackpot, Nevada, and 250 miles from the Reno area south to Tonopah, Nevada. A 230 kV transmission line connects the Company to facilities near the Utah-Nevada state line, which in turn interconnects the Company to Utah Power facilities. A 345 kV transmission line connects the Company to Idaho Power facilities at the Idaho-Nevada state line. The Company also has two 120 kV lines and one 60 kV line which interconnect with Pacific Gas and Electric (PG&E) on the west side of the Company's system at Donner Summit, California. Two 60 kV transmission ties allow wheeling of up to 14 MW of power from the Beowawe Geothermal Project, which is located within the Company's service area, to Southern California Edison. These two minor interties are available for use during emergency conditions affecting either party.
The Company's transmission intertie system provides access to regional energy sources.
The Falcon Project is a 185-mile 345kV line connecting the Company's Falcon Substation to the Company's Gonder Substation. The Project improves system import and export capabilities and enables the Company to provide transmission service between Idaho, Utah, and the Northwest. A Right-of-Way application was submitted to the Bureau of Land Management (BLM) on December 17, 1998, and Electric Resource Plan approval was received from the PUCN on April 8, 1999. On October 5, 1999, the Company received a letter from the BLM requiring the preparation of an Environmental Impact Statement (EIS). Current activities include completion of environmental field surveys, hiring a consultant to prepare the EIS, and WSCC rating studies. The EIS process should continue until July 2001, which should translate to a project in-service date in June 2003. Annual costs for 1999 are $2.25 million, total costs as of December 31, 1999 are $2.28 million, and the estimated net cash total cost is $98.2 million.
The Company completed construction of the Alturas Intertie transmission line in December 1998. The Alturas Intertie was built to enhance service to existing load, to expand service to new customers and to increase significantly the Company's access to lower cost resources in the Pacific Northwest. This 345 kV line originates west of Alturas, California and extends 165 miles south to Reno.
Certain Northern California public power groups have challenged the Company's filing with the FERC of the interconnection and operating agreements related to the Alturas Intertie in December 1998 and January 1999. The California groups alleged that the potential reduction in imports into California constitutes an impairment of reliability and therefore seek to force reductions in use of the Alturas Intertie during peak periods. These allegations have already been rejected by the Western Systems Coordinating Council, which determined the capacity rating of the Alturas Intertie. The Company (supported by Bonneville Power Administration and PacifiCorp) has filed testimony before the FERC that the Alturas Intertie does not adversely affect reliability and that, under the FERC's Order No. 888, customers in Nevada are entitled to compete with customers in California for transmission capacity in the Pacific Northwest on a first-come, first-served basis. The FERC staff has agreed with the Company's position on this matter.
One of the California groups, the Transmission Agency of Northern California ("TANC"), also initiated proceedings in the United States District Court for the Eastern District of California and the United States Court of Appeals for the Ninth Circuit, in each case alleging that Bonneville's construction of a small portion of the Alturas Intertie violated the Northwest Power Preference Act and requesting an injunction prohibiting operation of the Alturas Intertie. The case before the Eastern District was dismissed for lack of jurisdiction. The case before the Ninth Circuit was dismissed for TANC's failure to prosecute. In December 1999, TANC filed suit in the Superior Court of the State of California, Sacramento County, seeking an injunction against operation of the Alturas Intertie based on numerous allegations under state law, including inverse condemnation, trespass, private nuisance, and conversion.
Fuel Availability
The Company's 1999 fuel requirements for electric generation were provided by natural gas, coal, and oil. During 1999 natural gas remained the fuel of choice, over oil, for generation plants other than Valmy, which is a coal-fired plant.
The average costs of coal, gas and oil for energy generation per million British thermal units (MMBtu) for the years 1995-1999, along with the percentage contribution to total fuel requirements were as follows:
______________________________________________________________________________
Average Consumption Cost & Percentage Contribution to Total Fuel Requirements
Gas Coal Oil
--- ---- ---
$/MMBtu Percent $/MMBtu Percent $/MMBtu Percent
------- ------- ------- ------- ------- -------
1999 $2.71 62.3 $1.46 37.3 $3.41 0.4
1998 2.12 60.7 1.56 39.0 3.96 0.3
1997 2.03 62.0 1.80 37.0 3.35 1.0
1996 2.10 61.0 1.88 37.0 3.48 2.0
1995 1.65 55.0 2.19 44.0 3.80 1.0
______________________________________________________________________________
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For a discussion of the change in fuel costs, see Item 7, Management Discussion and Analysis.
The Company's long-term contract with Black Butte Coal Company (Black Butte) for coal shipments to Valmy from the mine near Rock Springs, Wyoming, remains in effect until June 30, 2007, or until all volume requirements under the contract are delivered and/or canceled. Due to previous accelerated purchases and cancellations and continuing cancellations of minimum monthly volume obligations (described below), the Company projects it will fully satisfy all volume requirements and that termination of the contract will occur sometime in early to mid-2002.
Beginning in June 1996, the Company, along with its joint-ownership partner (Idaho Power Company), implemented an economic cancellation strategy that essentially buys down minimum tonnage requirements under the Black Butte contract rather than taking physical delivery of the coal. Canceling the Black Butte tonnage creates various economic and operating benefits, primarily the opportunity to buy lower-cost spot market coal and reduce overall fuel costs. In June 1996, the Company and Idaho Power expended $5 million ($2.5 million each) to cancel all minimum volume requirements for the 1996-97 contract year. The Company agreed with Idaho Power to satisfy even more volume requirements in the fall of 1996 and in June 1997 by matching the dollar cost of Black Butte tonnage purchased by Idaho Power for delivery to Idaho's coal-fired Jim Bridger plant. The Company expended $3.8 million for these matching cancellations. Since July 1997, the Company and Idaho Power have canceled (or delivered to the Bridger plant) minimum Black Butte volume requirements on a monthly basis. During the third quarter 1998 and in September through November 1999, minimum contract quantities were delivered to Idaho Power's Bridger plant, with these deliveries credited to Valmy requirements under the Black Butte contract.
The Company's long-term coal contract with Canyon Fuel Company, LLC (Canyon), which provides coal for Valmy from Canyon's SUFCO mine in Central Utah, expires on June 30, 2003. This contract also contains minimum volume requirements that the Company expects to meet each year until termination. The current owner of the SUFCO mine is Arch Coal, Inc., which acquired ARCO Coal (the previous owner of the Canyon Fuel properties, including SUFCO) on June 1, 1998.
During 1999, several short-term agreements for the purchase of spot market coal were executed, with two of these agreements extending into 2001. The source of this coal is the Uinta Basin of Utah. These spot market purchases supplement base volume requirements under the Company's long-term coal contracts at a cost approximately one-half that of contract coal.
The total amount of coal burned at the Valmy Power Plant during 1999 was 1.55 million tons. As of December 31, 1999, the coal inventory level was 383,053 tons, or approximately 67.0 days of consumption at 100% capacity. The Company normally targets an average annual coal stockpile sufficient to provide 30 days' supply at full load. For 1999, however, the Company made the decision to increase storage to approximately 60 days' supply by December 31 as part of its Y2K contingency plans. The Company has adjusted its operations toward reaching the normal 30 days' supply by the end of 2000.
During 1999, transportation of coal to Valmy was provided by the Union Pacific Railroad (UP) under a 3-year agreement effective June 1, 1998. This agreement was negotiated as a resolution to the Company's previously filed complaint with the Surface Transportation Board alleging unreasonable rate levels being charged by the UP.
During 1999, the Company operated the Pinon Pine facility exclusively on natural gas. Although no coal was purchased in 1998 for synthetic gas production in the plant's coal gasification facility, approximately 19,000 tons were purchased in 1997 and 450 tons in 1999. This inventory has been more than sufficient to fuel the gasifier during its limited operation during the last two years. Total coal burned in the gasifier during 1999 was 679 tons. Petroleum coke (used for gasifier startup) purchased in 1999 was 220 tons, with 169 tons being burned. Due to operational problems caused by high levels of fine particles inherent in the coal used at Pinon, about 450 tons of stoker coal, which is a sized and harder product, was purchased in November 1999 as an attempt to reduce the effects of filter clogging in the gasifier.
The Company meets its needs for residual oil for generation through purchases on the spot market. With no other mitigating factors, the Company's residual oil inventory policy is to maintain 50,000 to 75,000 barrels at each of its Tracy and Ft. Churchill generating plants. Based on Y2K contingency plans, the Company increased storage at its Ft. Churchill plant to full capacity this past summer and also increased Tracy storage to over 100,000 barrels which, in total, will provide over 10 days' supply at full load operation. The Company has adjusted its operations toward reaching normal inventory levels in 2000. Storage levels were not increased to full capacity at Tracy because of favorable natural gas availability estimates from the gas supply industry. The actual residual oil inventory level at these two sites was 232,134 barrels as of December 31, 1999, which is equal to 10.5 days' supply at full load operation. Total residual oil consumption in 1999 was 37,425 barrels. No residual oil was burned in the month of December, with natural gas supply being sufficient to fuel both the Tracy and Ft. Churchill steam units.
The Company's natural gas business is a local distribution company (LDC) in the Reno/Sparks area that accounted for $100.2 million in 1999 operating revenues or 13.1% of total Company operating revenues. Growth in the Company's service territory continues to be strong. Residential customer growth during 1999 was 4.3%. The overall natural gas customer growth rate was 4.3% for the year. The Company's total customer count increased 5,131 customers to 111,843 customers at the end of 1999.
Natural gas offers significant economic and environmental advantages over other energy sources for space heating, water heating and other uses in residential, commercial and industrial applications. Growth in all sectors is expected to continue as new developments in the Company's distribution service area are planned.
Contracts established during the last three years under the Company's Value Based Service Tariff (VBST) are being successfully renewed as the old contracts expire. During 1999, two contracts were renewed under the VBST tariff, which is designed to enable the Company to compete with competitive service options for its largest customers. As of December 31, 1999, the Company had seven VBST contracts in place with customers.
The Company's natural gas LDC business is subject to competition from other suppliers and other forms of energy available to its customers. Large customers with fuel switching capability compare natural gas prices on an interruptible basis to alternative energy source prices. Seven customers now secure their own gas supplies, with the Company providing transportation service on its distribution system.
The Company has contracted for firm winter-only and annual gas supplies with 13 Canadian and domestic suppliers to meet the firm requirements of its LDC and electric operations. The contracts total 157,500 decatherms per day through March 2000 and 95,000 decatherms per day for April through October 2000.
The Company's firm natural gas supply is supplemented with natural gas storage services and supplies from a Northwest Pipeline Co. facility located at Jackson Prairie in southern Washington and a liquefied natural gas (LNG) storage from a facility located near Lovelock, Nevada. The LNG facility is operated by Paiute Pipeline Company and is used for meeting peak demand. The Jackson Prairie and LNG facilities can contribute a total of approximately 48,000 decatherms per day of peaking supplies.
Starting November 1, 1996, the Company entered an agreement to sell winter seasonal peaking capacity supplies to another company over a seven-year period. The contract provides for the payment to the Company of a monthly reservation charge, reimbursement of pipeline capacity charges during the winter, and a volumetric commodity charge based on the market price for natural gas. The Company was able to enter into this agreement due to the ability of its power plants to utilize alternative fuels and its power importation option.
Following is a summary of the transportation and approximate storage capacity of the Company's current gas supply program. Firm transportation capacity on the Northwest/Paiute system exists to serve primarily the LDC. Firm transportation capacity on the PGT/Tuscarora system exists primarily to serve the Company's electric generating plants. Storage capacity is generally used for the peaking requirements of the LDC.
Transportation Capacity
Northwest: 68,696 decatherms per day firm
90,000 decatherms per day interruptible
Paiute: 103,774 decatherms per day firm from November through March
61,044 decatherms per day firm from April through October
90,000 decatherms per day interruptible
NOVA: 30,000 decatherms per day firm
ANG: 30,000 decatherms per day firm
PGT: 30,000 decatherms per day firm
40,270 decatherms per day firm (winter only)
90,000 decatherms per day interruptible
Tuscarora: 106,250 decatherms per day firm
50,000 decatherms per day interruptible
Storage Capacity
Williams: 281,242 decatherms from Jackson Prairie
12,687 decatherms per day from Jackson Prairie
Paiute: 463,034 decatherms from Lovelock LNG
35,078 decatherms per day from Lovelock LNG facility
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The Company plans to sell its gas fired generation by the end of 2000. As part of this sale the Company will be transferring portions of its firm pipeline and the winter peaking supply agreement, described above, to the buyers of the Ft. Churchill and Tracy generation bundles. The final allocation of capacity to the buyers is still being determined but will meet the divestiture stipulation requirement that Sierra maintain the availability and reliability of natural gas to its local gas distribution company.
Total LDC decatherm supply requirements in 1999 and 1998 were 13.4 million decatherms and 14.9 million decatherms, respectively. Electric generating fuel requirements for 1999 and 1998 were 31.6 million decatherms and 35.0 million decatherms, respectively.
As of December 31, 1999, the Company owned and operated 1,439 miles of three-inch equivalent natural gas distribution piping.
The water distribution business contributed $54.3 million (7.1%) to the Company's 1999 operating revenues. Water production in 1999 totaled 24.97 billion gallons. 3.99 billion gallons were produced from the Company's groundwater wells. The remaining 20.98 billion gallons were treated through the Company's two water treatment facilities, the Chalk Bluff Water Treatment Plant and the Glendale Water Treatment Plant. The Company's peak day send-out of water during 1999 was 133.1 million gallons (135.2 including the Silver Lake acquisition described below), a 0.5% decrease over the 133.8 million gallon peak set in 1998. The stability in peak day demand was due to mild summer temperatures which offset additional new customer demands. Overall weather conditions during the year produced an above average snow pack with a warm lingering fall; thus annual production was up 11.5%.
The Company's water supplies are from both surface and groundwater sources, with the addition of drought storage and refill provisions sufficient to withstand prolonged drought conditions. The surface water source is the Truckee River, which originates in Lake Tahoe and flows north and east through the cities of Reno and Sparks to Pyramid Lake, located northeast of Reno.
The Company's groundwater comes from 25 supply wells located around the Reno/Sparks area. Man-made contaminants, perchloroethylene, from local business operations have been found at levels exceeding the drinking water standards in five of these wells. All five of these wells have now been fit with treatment equipment that allows them to be returned to operation and deliver water to the system that meets federal standards. The Washoe County remediation district is expected to reimburse the Company for the cleanup of this groundwater contaminant in these five wells beginning in 2000.
Additionally, the Company has four wells which currently exceed the federal drinking water standard for naturally occurring arsenic concentrations. Production from three of these wells continues by blending water treated at the Glendale Water Treatment Plant. The fourth well is out of service pending treatment. The Company's water laboratory research staff is developing options to assure that the Company is prepared to meet new arsenic standards. The new Arsenic regulations will be promulgated in 2000 and the proposed regulation is expected to require action on 17 of the 25 wells serving the Company's system. Depending upon final rules from the EPA, the Company may incur between $70 million and $98 million by 2004 to meet the new standards.
A favorable piece of legislation, AB380, was passed in the 1999 State legislature that resolved more than a decade of litigation over water rights and addressed the issues of forfeiture and abandonment. The legislation creates a special fund for the acquisition of water rights in question and clears the future for conversion of agricultural rights to urban uses without the cloud of forfeiture or abandonment protests.
The Company continues to pursue the Negotiated Settlement that has been under development for several years. The Company is currently operating under a Preliminary Settlement Agreement (PSA) and interim storage contract until negotiations are completed and the final Truckee River Operating Agreement (TROA) is completed. Based on comments received from the initial release, the environmental impact statement (EIS) will be redone and resubmitted for comments following the final TROA drafting. This is expected to occur during 2000. The Negotiated Settlement is a complex set of agreements on Truckee River issues involving the United States, California and Nevada governments, the Pyramid Lake Paiute Tribe and the Company. It is expected the agreement will be finalized this year. During 1999, many details of the TROA and language of the draft have been solidified. Once in effect, the new agreement will allow the Company use of federal reservoirs for drought reserve storage.
The Company plans to rebuild the Farad dam and put the Farad Hydro plant back into service in 2001. The Company is designing and obtaining the appropriate permits to construct the replacement project. The dam was destroyed during a flood in 1997. The water rights associated with the hydro facilities are part of the Negotiated Settlement and provide for river flows to the water division, and therefore the four Truckee River hydro plants will stay with the Company's water business even after generation divestiture. See Merger/Generation Divestiture discussion.
As a condition of the Negotiated Settlement, the Company's unmetered residential water customers must be converted to metered service. A meter retrofit program was approved by the PUCN and began in 1995. Funding for the program is provided by business developers and administered by the Company. Meter installation costs are significantly lower if a meter box is already in place. Accordingly, meter boxes without meters are installed when roads and sidewalks are replaced. Since the program's inception, 5,533 meters (14% of 1995 unmetered customers) and 10,911 boxes without meters (41% of 1995 customers without facilities for meter installation) have been installed. During 1999, 671 meters and 3,611 boxes were installed with contributed funds. At this time, only customers who volunteer for the program may have meters installed. Water meters have been required in all new construction since 1986.
The Company has made application to the PUCN to transfer retail water customers in the Double Diamond area to Washoe County and serve these and other customers in the South Truckee Meadows as wholesale customers through the County. This option minimizes the need for duplicate and costly facilities.
In addition, the Company was successful in acquiring the assets of the Silver Lake Water Company and received approval by the PUCN. The Company began operation of the two Silver Lake wells, metering, billing, and customer services in October 1999. As a result of this acquisition, the Company increased its customer base by approximately 1600 customers, and more importantly, avoided costly capital expenditures.
Gross construction expenditures for 1999, including allowance for funds used during construction (AFUDC) and contributions in aid of construction, were $142.3 million and for the period 1995 through 1999 were $820.8 million. Estimated construction expenditures for 2000 and the period 2001-2004 are as follows (dollars in thousands):
Total
2000 2001-2004 5-Year
---------------------------------------
Electric facilities $ 98,563 $407,785 $506,348
Water facilities 24,112 131,410 155,522
Gas facilities 19,550 39,390 58,940
Common facilities 8,047 17,410 25,457
--------------------------------------
Total construction expenditures $150,272 $595,995 $746,267
======================================
AFUDC (2,220) (12,875) (15,095)
Net salvage, including cost of removal (120) (400) (520)
Net customer advances and
contributions in aid of construction (10,242) (40,620) (50,862)
--------------------------------------
Total cash requirements $137,690 $542,100 $679,790
======================================
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Total construction expenditures estimated for 2000 and the 2001-2004 period, for each segment of the Company's business, consist of the following (dollars in thousands):
Total
2000 2001-2004 5-Year
----------------------------------------
Electric Facilities:
Distribution $ 63,490 $221,055 $284,545
Generation 4,695 4,530 9,225
Transmission 12,329 154,720 167,049
Other 18,049 27,480 45,529
--------------------------------------
$ 98,563 $407,785 $506,348
--------------------------------------
Water Facilities:
Treatment and Supply $ 6,024 $ 57,200 $ 63,224
Distribution 17,720 72,910 90,630
Other 368 1,300 1,668
--------------------------------------
$ 24,112 $131,410 $155,522
--------------------------------------
Gas Facilities:
Distribution $ 18,944 $ 36,660 $ 55,604
Other 606 2,730 3,336
--------------------------------------
$ 19,550 $ 39,390 $ 58,940
--------------------------------------
Common Facilities $ 8,047 $ 17,410 $ 25,457
--------------------------------------
TOTAL $150,272 $595,995 $746,267
======================================
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The Company is subject to the jurisdiction of the PUCN and the CPUC with respect to rates, standards of service, siting of, and necessity for, generation and certain transmission facilities, accounting, issuance of securities and other matters with respect to electric operations. The Company submits integrated resource plans regarding its electric, gas, and water business operations to the PUCN for approval.
Under federal law, the Company is subject to certain jurisdictional regulation, primarily by the FERC. The FERC has jurisdiction under the Federal Power Act with respect to rates, service, interconnection, accounting, and other matters in connection with the Company's sale of electricity for resale and the transmission of energy for others. The FERC also has jurisdiction over the natural gas pipeline companies from which the Company takes service.
As a result of regulation, many of the fundamental business decisions of the Company, as well as the rate of return it is permitted to earn on its utility assets, are subject to the approval of governmental agencies.
The Company is also subject to regulation by environmental authorities. See Environment.
During 1999, 85% of the Company's revenues were from retail sales of electricity, natural gas and water in Nevada, 5% from retail sales of electricity in California and 10% from sales of electricity and gas for resale.
Electric Industry Restructuring
During the 1997 session, the Nevada Legislature passed Assembly Bill 366 (AB 366). AB 366 was a comprehensive bill that introduced competition for electric and gas retail services. Since the fall of 1997, the PUCN has been developing regulations to implement AB 366. In the 1999 session, the legislature passed Senate Bill 438 (SB 438) that significantly modified many provisions of AB 366. These two pieces of legislation substantially alter the way the Company is regulated and how it will serve its customers.
Non-price Terms and Conditions for Distribution Service
On February 2, 1999, the Company filed its non-price terms and conditions for unbundled distribution service pursuant to the PUCN regulations. A stipulation resolving most issues and agreeing to further filings on unresolved issues was filed with the PUCN on April 9, 1999, and subsequently approved by the PUCN on April 22, 1999. Settlements regarding the unresolved issues were subsequently filed and approved by the PUCN.
Unbundling of Utility Services
On April 1, 1999, in accordance with the merger order and the implementation of AB 366, the Company filed a revenue requirements and unbundling study with the PUCN (the "Compliance Filing"). The Compliance Filing included the development of an electric revenue requirement for the test period 1998. The Compliance Filing regulation requires the revenue requirement development to be in the form used for rate cases. In the unbundling study, the revenue requirement was assigned and allocated to a number of service components including generation, aggregation, transmission, distribution, metering, billing, and customer services. On September 23, 1999, the PUCN issued an interim order on the Company's April 1, 1999 Compliance Filing. The Order contained the PUCN's decision on revenue requirements, return on equity, depreciation, and the unbundling study. The Company did not utilize the order's revenue requirement, return on equity or depreciation rates in Phase II of this case because SP438 legally mandated that the Company use its July 1, 1999 revenue requirement in Phase II.
Pricing of Distribution Service
On October 8, 1999, the Company filed final versions of the approved non- price terms and conditions and rates reflecting a revenue requirement in accordance with SB 438. Hearings were held in early November. A decision is expected in 2000.
Earnings Sharing
On April 30, 1999 the Company filed an earnings sharing refund request, based on 1999 earnings of $7.0 million for electric customers and $1.9 million for gas customers. On August 19, 1999, the PUCN approved a stipulation between the Company, Staff, and the Utilities Consumer Advocate, which resulted in a $7.4 million and a $2.0 million refund to electric and gas customers, respectively. Based on 1999 operating results, the Company anticipates it may make refunds to customers. Appropriate reserves have been recorded to reflect any anticipated refunds.
Generation Divestiture
In October 1999, the Company filed with the PUCN its request for approval to sell its generation plants. Hearings were held in November 1999 and a stipulation was approved in February 2000.
Rate Reduction Bonds
California's electricity restructuring statute (Assembly Bill 1890, Chapter 854, California Statutes of 1996, as amended) permits California investor-owned utilities, including the Company, to finance the recovery of a reduction in electricity rates for residential and small commercial customers through the issuance of rate reduction certificates. Transition costs consist of the costs of generation-related assets and obligations that may become uneconomic as a result of a competitive generation market, together with certain other costs associated therewith.
In order for the Company to recover transition and associated costs, the CPUC authorized the establishment of non-bypassable, usage-based, per kilowatt- hour charges ("FTA Charges") to be included in the regular utility bills of residential and small commercial consumers located in the historical service territory of the Company in California. The right to receive payments made in respect of the FTA Charges is referred to as Transition Property.
On April 9, 1999, the Company sold the Transition Property to SPPC Funding
LLC, a Delaware special purpose limited liability company whose sole member is
the Company, in exchange for the proceeds of the SPPC Funding LLC Notes, Series
1999-1 (the "Underlying Notes"). SPPC Funding LLC then issued and sold the
Underlying Notes to the California Infrastructure and Economic Development Bank
Special Purpose Trust SPPC-1 (the "Trust") in exchange for the proceeds of the
sale of the Trust's $24.0 million 6.4% Rate Reduction Certificates, Series 1999-
1 (the "Certificates"). The Trust, which had been established by the California
Infrastructure and Economic Development Bank, issued and sold the Certificates
in a private placement pursuant to Rule 144A under the Securities Act of 1933,
as amended. The Certificates are one of a series of rate reduction certificates
that may be issued from time to time by the Trust and sold to investors upon
terms determined at the time of sale.
On January 10, 2000, the Commission approved the Company's annual true-up of the FTA charges effective January 1, 2000.
Revenue Cycle Unbundling
On February 18, 1999, the CPUC approved the Company's proposed Revenue Cycle Services Credits (RCSC) application filed February 2, 1998. The RCSC addresses meter ownership, meter services, meter reading, and billing and applies to customers who select their own provider of a revenue cycle service. On April 9, 1999, the Company made a compliance tariff filing which reflects the approved credits.
Direct Access Tariffs
On April 5, 1999, the CPUC approved the Company's compliance filing, effective back to March 18, 1998, which proposed tariff changes to implement direct access.
Rate Unbundling
On April 5, 1999, the CPUC approved the Company's proposed unbundled rates effective back to June 1, 1998.
Distribution Competition
The CPUC has opened a docket item to solicit comments and proposals on distributed generation and competition in electric distribution service. The Company is actively participating in the on-going workshops. It is too early to determine how this proceeding may affect the Company.
Generation Divestiture
The Company has filed with the CPUC its request for approval to sell its generation plants. The Company filed a revised application requesting an exemption. A decision is expected in the first half of 2000.
Distribution Performance-Based Rate-making (PBR)
On January 3, 2000, the Company filed a distribution PBR proposal to become effective January 1, 2001 through 2003. The proposal includes rate indexing and earnings sharing mechanisms as well as performance indicators for employee safety, customer satisfaction and system reliability. The Company will submit a 2001 Cost of Capital filing in May 2000 and a Distribution PBR 2001 Cost of Service filing in June 2000.
On March 30, 1999, the Company filed an application with the FERC to increase its Open Access Transmission rates. On October 12, 1999, the Company filed an Offer of Partial Settlement which resolved all issues but pricing to the Mines and to the City of Fallon. A status report on the two remaining issues was filed on January 11, 2000. On January 31, 2000, the FERC approved the Partial Settlement.
On March 31, 1999, the Company filed with the FERC for approval of generation tariffs that contain the rates, terms and conditions under which the new owners of the Company's generation would operate after divestiture. The FERC dismissed the tariffs on November 1, 1999, apparently misinterpreting the agreement reached with the PUCN on the tariffs. The Company filed a request for rehearing of the FERC's November 1, 1999 order dismissing the tariff. The rehearing request explains how the FERC erred in dismissing the tariff. On December 17, 1999, the Commission issued an Order Granting Rehearing for Further Consideration. A decision is expected in 2000.
On July 23, 1999, the Company and Nevada Power Company submitted a filing to create the Mountain West Independent Scheduling Administrator. The filing is made to request approval of certain of the tariffs and agreements with respect to the transmission services of the Company and Nevada Power Company. On January 27, 2000, the FERC issued an order approving with modifications the Mountain West ISA proposal. The PUCN is continuing to review aspects of the filing, including funding for the Mountain West ISA.
General
As with other utilities, the Company is subject to federal, state, and local regulations governing air and water quality, hazardous and solid waste, land use, and other environmental considerations. These considerations affect the construction and operation of electric, gas, and water utility facilities.
Nevada's Utility Environmental Protection Act requires approval of the PUCN prior to the construction of major utility generation and transmission facilities. The United States Environmental Protection Agency (EPA) and Nevada's Division of Environmental Protection (NDEP) administer regulations involving air quality; water pollution; and solid, hazardous, and toxic waste.
The Company's board of directors has a comprehensive environmental policy, and a separate board committee on environmental compliance that oversees corporate performance and achievements related to the environment. The Company's corporate environmental policy emphasizes environmental stewardship.
As part of the Generation Divestiture process, the Company conducted Phase I and Phase II Environmental Assessments for its Ft. Churchill, Tracy and Valmy Power Plants. The Anticipated remediation cost is $150,000.
In 1995, the Company identified one site formerly used for manufacturing gas from oil. This site was sold in 1997 with full disclosure to the buyer. Shortly after the sale, the buyer notified the Company of its intent to file legal action. In July 1998, the Company entered into an agreement with the buyer to mitigate the contamination on site to an acceptable level. In 1999, soil contamination was remediated in full compliance with the settlement agreement and the site case was closed by the local regulatory agency. No further action is required at this site.
In September 1994, Region VII of EPA notified the Company that the Company was being named as a potentially responsible party (PRP) regarding the past improper handling of Polychlorinated Biphenyls (PCBs) by PCB Treatment, Inc., located in Kansas City, Kansas, and Kansas City, Missouri (the Sites). The EPA is requesting that the Company voluntarily pay an undefined (pro rata) share of the ultimate clean-up costs at the Sites. A number of the largest PRP's formed a steering committee, which is chaired by the Company. The responsibility of the Committee is to direct clean-up activities, determine appropriate cost allocation, and pursue actions against recalcitrant parties, if necessary. The EPA issued an administrative order on consent requiring signatories to perform certain investigative work at the Sites. The steering committee retained a consultant to prepare an analysis regarding the Sites. The site evaluations have been completed. EPA is developing an allocation formula to allocate the remediation costs.
The Company has recorded preliminary liability for the Sites of $650,000, of which approximately $150,000 has been spent through December 31, 1999. Once evaluations are completed, the Company will be in a better position to estimate and record the ultimate liabilities for the Sites.
The Company continued and initiated several actions in accordance with its policy to be an environmental leader in principle and practice. These actions have (1) Resulted in reduced pollutant and greenhouse gas emission rates at power plants; (2) Demonstrated stewardship of wildlife and waterfowl habitat on and adjacent to Company property; (3) Improved water quality conditions; and (4) Lowered the cost of compliance with environmental regulations.
During 1999, the Company was awarded bonus sulfur dioxide emission allowances by the EPA for its use of geothermal energy, a renewable resource. Under the Acid Rain Rule of the Clean Air Act, bonus emission allowances are generated to utilities that have avoided sulfur dioxide emissions by using renewable energy to generate electricity. In 1999 the Company received 4,907 bonus allowances.
The Company has nonexclusive local franchises or revocable permits to carry on its business in the localities in which its respective operations are conducted in Nevada and California. The franchise and other governmental requirements of some of the cities and counties in which the Company operates provide for payments based on gross revenues. During 1999, the Company collected $8.8 million in franchise or other fees based on gross revenues. It also paid and recorded as expense $1.0 million of fees based on net profits.
Franchise Type of Service Expiration Date -------------------------------------------------------------------------- Reno Electric, Gas and Water January 2006 Sparks Electric May 2006 Sparks Gas May 2007 Sparks Water April 2004 Carson City Electric February 2012 City of Elko Electric April 2017 City of South Lake Tahoe Electric April 2018 Washoe County Gas and Water May 2015 Washoe County Electric September 2015 Eureka County Electric July 2018 |
The Company applies for renewal of franchises in a timely manner prior to their respective expiration dates.
The Company participates in several utility associations, including the Electric Power Research Institute and Gas Research Institute.
ITEM 2. PROPERTIES
The general character of the Company's principle facilities is discussed in Item 1, Business.
Substantially all utility plant is subject to the lien of the Indenture of Mortgage, dated December 1, 1940, and supplemental indentures thereto between the Company and State Street Bank and Trust, as trustee, securing the Company's outstanding first mortgage bonds.
ITEM 3. LEGAL PROCEEDINGS
The Company, through the course of its normal business operations, is currently involved in a number of legal actions, none of which has had or, in the opinion of management, is expected to have a significant impact on its financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company is a wholly-owned subsidiary of Sierra Pacific Resources and, as such, its common stock is not publicly traded and no market exists for it. Cash dividends declared by SPPC on its common stock were as follows (dollars in thousands):
1999 1998
------------------------
First Quarter $19,000 $19,000
Second Quarter 19,000 19,000
Third Quarter 19,000 19,000
Fourth Quarter 19,000 19,000
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Total $76,000 $76,000
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After provisions for payment of dividends on all outstanding shares of preferred stock, and subject to limitations in the Company's restated articles of incorporation and its indentures, dividends may be paid on the common stock out of any funds legally available for that purpose when declared by the board of directors. As of December 31, 1999, approximately $76.0 million of retained earnings were available for the payment of dividends on common stock under the most restrictive of these limitations.
ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31,
(dollars in thousands)
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
Operating Revenues $ 763,722 $ 734,332 $ 657,540 $ 619,724 $ 597,784
========== ========== ========== ========== ==========
Operating Income $ 129,836 $ 126,194 $ 120,172 $ 107,008 $ 101,811
========== ========== ========== ========== ==========
Income Before
Preferred Dividends $ 71,726 $ 86,020 $ 83,127 $ 73,651 $ 65,983
========== ========== ========== ========== ==========
Income Applicable To Common
Stock $ 66,241 $ 80,561 $ 77,668 $ 67,351 $ 58,609
========== ========== ========== ========== ==========
Total Assets $2,096,476 $2,011,820 $1,912,242 $1,842,628 $1,729,818
========== ========== ========== ========== ==========
Long-Term Debt and
Redeemable Preferred
Securities $ 673,930 $ 654,950 $ 655,389 $ 655,787 $ 547,124
========== ========== ========== ========== ==========
Cash Dividends Paid
Per Common Share $ 76,000 $ 75,000 $ 70,000 $ 63,000 $ 54,000
========== ========== ========== ========== ==========
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net income before preferred dividends in 1999 was $71.7 million, a decrease of $14.3 million compared to 1998. The Company was authorized to earn a return on equity of 12% in its Nevada electric operations and 12% and 11.25%, respectively, in its Nevada gas and water operations. The Company may have earned in excess of its allowed regulated returns for its electric and gas operations and therefore, under its currently effective rate settlement, the Company anticipates it may make refunds to customers reflecting one half of the excess earnings. Appropriate reserves have been recorded to reflect any anticipated refunds. California operations were authorized to earn a return on common equity of 11.6% in 1999. See Regulatory Matters for more discussion of these issues.
Nevada, the Company's primary jurisdiction, uses a marginal cost method for setting electric and gas rates by customer class. As a result, changes in sales mix can result in variations in revenues, regardless of changes in total consumption.
The components of gross margin are set forth (dollars in thousands):
1999 1998 1997
---------- ---------- ----------
Operating Revenues
Electric $609,197 $585,657 $540,346
Gas 100,177 99,532 70,675
Water 54,348 49,143 46,519
-------- -------- --------
Total Revenues 763,722 734,332 657,540
-------- -------- --------
Energy Costs:
Electric $294,822 $271,773 $231,473
Gas 68,125 65,430 38,135
-------- -------- --------
Total Energy Costs 362,947 337,203 269,608
-------- -------- --------
Gross Margin $400,775 $397,129 $387,932
======== ======== ========
Gross Margin by Segment
Electric $314,375 $313,884 $308,873
Gas 32,052 34,102 32,540
Water 54,348 49,143 46,519
-------- -------- --------
Total $400,775 $397,129 $387,932
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The causes for significant changes in specific lines comprising the results of operations for the years ended are provided (dollars thousands):
1999 1998 1997
--------------------------------------------------------------------------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ----------- ---------- ------------ -----------
Electric Operating Revenues:
Residential $ 117,533 1.4% $ 169,109 3.7% $ 163,003
Commercial 188,348 5.4% 178,752 1.9% 175,386
Industrial 185,771 0.5% 184,820 4.7% 176,463
----------- ---- ----------- ----- -----------
Retail revenues 545,652 2.4% 532,681 3.5% 514,852
Other 63,545 20.0% 52,976 107.8% 25,494
----------- ---- ----------- ------ -----------
Total Revenues $ 609,197 4.0% $ 585,657 8.4% $ 540,346
=========== ===== ============ ======= ==========
Retail sales in megawatt-hours (MWH) 8,412,853 4.5% 8,047,650 3.9% 7,743,799
---------- ---- ----------- ------ -----------
Average retail revenue per MWH $ 64.86 -2.0% $ 66.19 -0.4% $ 66.49
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In 1999, residential, commercial and industrial electric revenues increased due to a 3% increase in both residential and commercial customers and a 7.8% increase in industrial customers. The increase in residential and industrial revenues was partially offset by lower use per customer. Residential use per customer was lower due to milder weather in 1999. Industrial use per customer was lower primarily because of reduced production by several of the Company's gold mining customers as a result of lower gold prices in 1999. The average retail revenue per MWh was lower for 1999 because of higher revenues from customers that are charged lower rates per MWh. Other electric revenues were higher due to a $19.4 million increase in wholesale electric sales. This increase was partially offset by a $4.3 million reclassification from operating expense to a contra-revenue in order to reflect a refund resulting from the 1997 earnings sharing decision by the Public Utilities Commission of Nevada. Also, the increase in 1999 revenues was partially offset by a higher provision for customer refunds and also losses from the Company's Pinon Pine subsidiaries.
In 1998, residential and commercial revenues increased due to 2% and 3% increases in customers, respectively. Industrial revenues were higher in 1998 because of higher use per customer, primarily in the mining industry where several of the Company's customers expanded operations during 1998. The increases in revenues for residential, commercial and industrial were all partially offset by a rate reduction that went into effect March 1997. The increase in other revenues primarily resulted from higher wholesale electric sales and a smaller charge for customer refunds. Higher wholesale sales in 1998, $33.1 million compared to $13.3 in 1997, reflect an increased focus on this business opportunity.
1999 1998 1997
-------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
Gas Operating Revenues:
Residential $ 42,888 -2.2% $ 43,833 14.1% $ 38,410
Commercial 21,259 -3.5% 22,022 12.3% 19,606
Industrial 11,252 -9.0% 12,368 6.8% 11,580
Miscellaneous 1,305 281.3% (720) -6.2% (678)
----------- ----- ----------- ------ -----------
Total retail revenue 76,704 -1.0% $ 77,503 12.5% $ 68,918
Wholesale revenue 23,473 6.6% 22,029 1153.8% 1,757
----------- ----- ----------- ------ -----------
Total Revenues $ 100,177 0.6% $ 99,532 40.8% $ 70,675
=========== ===== =========== ====== ===========
Sale (Decatherms):
Retail 13,387,819 -5.3% 14,142,782 13.3% 12,487,087
Wholesale 10,424,212 -11.2% 11,738,372 1278.6% 851,459
---------- ----- ----------- ------ -----------
Total 23,812,031 -8.0% 25,881,154 94.0% 13,338,546
=========== ====== =========== ====== ===========
Average revenues per decatherm
Retail $ 5.73 4.6% $ 5.48 -0.7% $ 5.52
Wholesale $ 2.25 19.8% $ 1.88 -8.7% $ 2.06
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Residential, commercial and industrial gas revenues were lower in 1999 because of lower per customer use resulting from milder weather in 1999. Lower gas revenues in 1999 were partially offset by additional customers in all categories. Wholesale gas revenues were higher due to several large gas sales contracts in the first quarter of 1999.
Residential, commercial and industrial gas revenues increased in 1998 because of a 4% increase in customers and colder than normal weather during the year. The increase in wholesale revenues reflected the Company's increased focus on this business opportunity.
1999 1998 1997
---------------------------- ---------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
Water Operating Revenues $54,348 10.6% $49,143 5.6% $46,519
======= ==== ======= === =======
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Water revenues increased during 1999 due to a 5% increase in total customers and higher use per customer as a result of less precipitation in 1999.
Water revenues were higher in 1998 because of a 3% increase in customers and an April 1998 price increase.
1999 1998 1997
--------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
Purchased Power $ 179,781 14.5% $ 156,970 20.2% $ 130,612
Purchased Power MWH 5,797,903 25.4% 4,623,959 20.5% 3,836,975
Average cost per MWH of
Purchased Power $ 31.01 -8.7% $ 33.95 -0.3% $ 34.04
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Purchased power costs were higher in 1999 primarily because the Company fulfilled more of its total energy requirements with less expensive purchased power and reduced its own generation. Purchased power costs were also higher during 1999 due to increased wholesale sales. The higher costs were partially offset by lower average unit prices for purchased power.
Purchased power costs were significantly higher in 1998 due mostly to the costs associated with higher wholesale electric sales as discussed previously. To a lesser extent system load growth also contributed to higher purchased power costs.
1999 1998 1997
--------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
Fuel for Power Generation $ 115,065 0.2% $ 114,803 13.8% $ 100,861
MWHs generated 4,998,140 -9.5% 5,524,262 13.7% 4,859,203
Average fuel cost per MWH
of Generated Power $ 23.02 10.8% $ 20.78 0.1% $ 20.76
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Fuel for generation costs were comparable with the prior year despite a 9.5% reduction in the volume of electric generation. Higher gas prices and the absence of Department of Energy co-funding of fuel costs at the Pinon Pine project contributed to the higher average cost per MWh of generated power. As, previously discussed, the Company was able to replace electricity from generation with less expensive purchased power.
The costs of fuel for generation increased in 1998 because of higher generation requirements needed to meet continued customer growth and greater use per customer.
1999 1998 1997
--------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
Gas Purchased for Resale
Retail $ 47,696 7.2% $ 44,473 21.2% $ 36,703
Wholesale 20,429 -2.5% 20,957 1371.7% 1,424
----------- ----- ----------- ------ -----------
Total $ 68,125 4.1% $ 65,430 71.6% $ 38,127
=========== ===== =========== ====== ===========
Gas Purchased for Resale (decatherms)
Retail 13,501,728 -6.6% 14,462,505 13.6% 12,727,950
Wholesale 10,424,212 -11.2% 11,738,372 1278.6% 851,459
----------- ----- ----------- ------ -----------
Total 23,925,940 -8.7% 26,200,877 92.9% 13,579,409
=========== ===== =========== ====== ===========
Average cost per decatherm
Retail $ 3.53 14.6% $ 3.08 6.9% $ 2.88
Wholesale $ 1.96 9.5% $ 1.79 7.2% $ 1.67
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The cost of gas purchased for retail sales increased in 1999 because of higher unit prices. The increase in gas unti prices is attributable to increased demand for gas in the Pacific Northwest and additional transportation fees.
Consistent with the increase in retail gas revenues from customer growth and colder weather in 1998, retail gas purchases (decatherms) were higher in 1998. The average cost per decatherm for all purchases was also higher because of an increase in the unit cost of firm and spot purchases.
1999 1998 1997
--------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
Allowance for other funds used
during construction $(1,341) -135.3% $ 3,797 -33.7% $ 5,723
Allowance for borrowed funds used
during construction 308 -95.2% 6,414 34.0% 4,785
------- ------ ------- ----- -------
$(1,033) -110.1% $10,211 -2.8% $10,508
-------- ------ ------- ----- -------
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The total allowance for funds used during construction (AFUDC) was lower in 1999 because of construction completed in June and December 1998 for the Pinon and Alturas projects, respectively. Also, the 1999 amounts reflect an adjustment to reverse amounts previously charged to AFUDC of $2.3 million. This adjustment resulted from a refinement of amounts assigned to specific components of facilities that were completed at various times and that used differing AFUDC rates.
AFUDC was slightly lower in 1998 than 1997. The 1998 amount was lower due to the completion of the Pinon Pine power project in June 1998.
1999 1998 1997
-------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ----------- ---------- ------------ ----------
Other operating expense $115,453 -0.5% $116,076 -3.8% $120,600
Maintenance expense 22,520 1.1% 22,266 -4.8% 23,387
Depreciation and amortization 77,373 11.4% 69,435 8.3% 64,117
Income taxes 36,042 -17.2% 43,550 7.8% 40,387
Interest charges on long-term debt 40,263 3.5% 38,890 -1.8% 39,609
Interest charges-other 11,615 51.7% 7,659 67.1% 4,583
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Other operating expense for 1999 includes a $4.5 million adjustment, which increased expense and reduced revenue related to a rate reserve established in 1998. This was offset by other reductions. Other operating expense was lower in 1998 due to lower costs for stock compensation, post-retirement benefits, fuel buyouts, lower accruals for delays in the construction of Pinon, and no flood damage costs.
Maintenance expense for 1999 was comparable to the prior year. Maintenance expense was lower in 1998 because of additional electric plant maintenance performed during the previous year.
Depreciation and amortization expense increased for 1999 due to the completion of the Alturas intertie in December 1998 and the Pinon post- gasification facilities in June 1998. Depreciation expense increased in 1998 because of the Pinon Pine facilities completed in 1998. Also, 1998 depreciation was higher due to water division additions and other customer improvements added to plant in service late in 1997.
Operating income taxes were less in 1999 due to lower operating income before income taxes and a lower effective tax rate for the year. Operating income taxes increased in 1998 due to increases in pre-tax income and the effective tax rate. See Note 5 for more information.
Interest on long term debt was slightly higher in 1999 due to higher average long-term debt balances over the prior year. Interest on long-term debt was lower in 1998 because of the redemption of $5 million of 8.65% medium-term notes on June 18, 1998. See Note 6 to the consolidated financial statements for more information related to long-term debt.
Interest charges-other were higher for 1999 because of a Public Utilities Commission of Nevada's decision to assess partial interest on amounts payable in the 1997 earnings sharing case and higher average short-term borrowing in 1999. Interest charges-other increased in 1998 because of higher short-term debt balances utilized to partially finance the Alturas transmission project.
Liquidity and Capital Resources
Overall net cash flows decreased during 1999, as compared to 1998, due to lower net cash flows from operating activities and to a lesser extent greater cash used in investing activities. The decrease in cash flows from operating and investing activities was partially offset by cash provided from financing activities. The decrease in cash provided from operating activities was primarily due to cash utilized for customer refunds and merger related cash requirements. The increase in cash used for investing activities was due to the Company's acquisition of General Electric Capital Corporation's interest in
Pinon Pine Company L.L.C., GPSF-B. Net cash provided by financing activities resulted from the issuance of $24 million of California rate reduction bonds in April 1999, and $100 million floating rate notes issued on September 17, 1999. See "Regulatory Matters" for more details regarding the California bonds.
Overall net cash flows increased slightly during 1998, as compared to 1997, due to higher net cash flows from operating and financing activities which were mostly offset by more cash used in investing activities. The increase in cash flows from operating activities was mainly due to higher operating income as a result of increased revenues from customer growth. The increase in cash used in investing activities was primarily due to increased construction expenditures. The increase in net cash provided by financing activities was mainly due to increased long-term and short-term borrowings.
The table below provides cash construction expenditures and net internally generated cash for 1997 through 1999 (dollars in thousands):
1999 1998 1997 Total
---------- ---------- ---------- ----------
Cash Construction Expenditures $ 116,131 $ 39,098 $ 110,878 $ 366,107
========== ========== ========== ==========
Net cash flow from operating activities 122,329 153,191 145,455 420,975
Less common & preferred cash dividends 81,746 80,459 75,459 237,664
---------- ---------- ---------- ----------
Internally generated cash 40,583 72,732 69,996 183,311
Add equity contribution from parent 22,000 17,250 27,000 66,250
---------- ---------- ---------- ----------
Total cash available $ 62,583 $ 89,982 $ 96,996 $ 249,561
========== ========== ========== ==========
Internally generated cash as a percentage
of cash construction expenditures 35% 52% 63% 50%
Total cash available as a percentage of
cash construction expenditures 54% 64% 87% 68%
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SPPC's estimated cash construction expenditures for 2000 through 2004 are $680 million. SPPC estimates that 63% of its 2000 cash expenditures of approximately $125 million will be provided by internally generated funds, with the remainder being provided by the issuance of long-term debt, short-term debt, and parent contributions.
SPPC's estimated level of internally generated cash utilized for construction of 63% anticipates that SPPC will pay all of its net income in dividends to SPR. SPPC anticipates receiving $28 million of capital contribution from SPR in 2000.
As of December 31, 1999 SPPC had $110 million commercial paper issued and outstanding. SPPC's commercial paper is rated A2 and P2 by Standard and Poor's and Moody's, respectively.
SPPC's actual capital structure at December 31, 1999, 1998, and 1997 was as follows (dollars in thousands):
1999 1998 1997
--------------------- --------------------- ----------------------
Short-Term Debt (1) $ 212,339 13% $ 135,473 9% $ 75,454 6%
Long-Term Debt 625,430 39% 606,450 40% 606,889 42%
Preferred Stock 50,000 3% 73,115 5% 73,115 5%
Preferred Securities 48,500 3% 48,500 3% 48,500 3%
Common Equity 673,738 42% 661,367 43% 639,556 44%
------------------ ------------------ ------------------
TOTAL $1,610,007 100% $1,524,905 100% $1,443,514 100%
================== ================== ==================
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(1) Including current maturities of long-term debt and preferred stock.
The indenture under which the SPPC's first mortgage bonds are issued, prescribes certain coverage ratios that must be met before additional bonds may be issued. At December 31, 1999, these coverage provisions would allow for the issuance of approximately $511 million in additional first mortgage bonds at an assumed interest rate of 8.0%. The indenture also limits the amount of first mortgage bonds that SPPC may issue to 60 percent of unfunded property plus the amount of any previously issued bonds that have since been retired. Based on certifications to the trustee as of December 31, 1999, these indenture provisions would have allowed for the issuance of approximately $845 million in additional first mortgage bonds.
SPPC's secured long-term debt is rated A-, A3 by Standard & Poor's and Moody's, respectively. SPPC's pre-tax interest coverages for 1999, 1998 and 1997 were 3.15%, 3.87% and 3.86%, respectively.
Electric Restructuring Activities
In 1997, the Governor of Nevada signed into law Assembly Bill 366 (AB366) that provided for competition to be implemented in the electric utility industry. In 1999 the Governor signed into law Senate Bill 438 (SB438) that amended AB 366. SB 438 contains the following major provisions:
. In addition to generation, metering and billing are declared to be
potentially competitive services.
. The start date for competition is March 1, 2000 or such other start
date determined to be in the public interest by the Governor.
. The electric distribution utility is the provider of last resort (PLR)
until alternate methods go into effect, no sooner than July 1, 2001.
PLR rates are capped until March 1, 2003 at the rates in effect as of
July 1, 1999, as adjusted for any deferred energy cases filed with the
PUCN prior to October 1, 1999.
. Allows the use of the net proceeds of generation divestiture to pay
for certain reductions in PLR revenues until March 1, 2003, arising
from the departure of customers who select new suppliers.
. Repeals deferred energy for electric utilities on October 1, 1999.
. Permits alternative sellers to submit bids to provide PLR service
after July 1, 2001, subject to a PUCN public interest finding and a
PUCN-held auction.
. Provides for the recovery of Past Costs, often referred to as stranded
costs, including specific criteria for recovery of purchase power
costs.
The PUCN has conducted a number of hearings associated with AB366 and SB438. In February 2000 the Governor of Nevada delayed the start date of competition indefinitely. Electric competition may begin later in 2000 or 2001. Generally, restructuring regulations have proceeded slowly. Currently, many important regulations, including the affiliate regulations and the PLR, are not complete. In their present form several of the proposed regulations could have potentially significant negative financial ramifications. These regulations and the potential risks are described below. The Company's management is actively working to modify these regulations. Several key Nevada restructuring issues have also arisen in other states, been litigated, and resolved in favor of the utility. If final regulations are not modified to remove the financial risk exposures, The Company will likely pursue legal action to resolve these issues. As a final option, the Company will seek an injunction to the start of competition or to overturn portions of SB438.
Affiliate Transaction Regulation
While SB438 allows for the use of name and logo, the affiliate regulation has not yet been modified to reflect this change. In addition, the Company has requested that the PUCN modify the rule related to sharing services, sharing officers and directors, and transfer pricing. To date the PUCN has not acted on this request. On March 30, 1999, SPPC and the Company filed with the District Court a "Complaint and Petition for Declaratory and Injunctive Relief and for Judicial Review" relating to the Affiliate Transaction Rules. SPPC and the Company asked that the court find that the rules "violate plaintiff's federal and state constitutional guarantees, are unlawful and invalid because they were enacted in violation of the procedural and substantive provisions of the Administrative Procedures Act, and are unlawful and invalid because they exceed the authority of the PUCN and are unsupported by the evidence." SPPC and NVP asked that the court order the PUCN "to cease and desist from enforcing the regulations."
Past Costs
Past costs, commonly referred to as stranded costs in other jurisdictions, were the subject of several hearings in 1999. AB366/ SB438 permit the recovery of costs associated with potentially competitive services such as generation and purchased power pursuant to specified legal criteria. In the hearings, various topics were discussed including the characteristics that define recoverable past costs, criteria for evaluating the effectiveness of mitigation efforts, options for cost recovery mechanisms, and applicable tax and accounting issues.
On December 29, 1999 the PUCN adopted the past cost regulation. This regulation requires the utility to file for past costs 45 days after the adoption of the regulation or issuance of the final order in the compliance plan filing. The regulation requires estimates of book values and market values as of the opening date of competition. In addition, the Company must provide documentation relative to criteria in the law such as mitigation efforts, conduct relative to other states, and efforts to minimize taxes. The PUCN will take these criteria into consideration in determining allowable past costs. During comments related to this rule, the Company raised a number of legal issues including treatment of purchase power agreements, ability to true up initial estimates of past costs to actual results, and ability to recover costs to implement restructuring. The Company has not completed an estimate of its past costs, since such a calculation is dependent on a variety of issues related to restructuring which are not resolved at this time. However based upon the current regulation and the positions taken by other parties to the rulemaking, several risk areas have been identified including:
. SB438 criteria provide latitude for the PUCN to reduce the Company's stranded cost claim.
. Purchase power agreements are the largest category of past costs. Federal and state laws provide protection to federally mandated power purchase contracts. The Company believes that the PUCN regulation provides less security to recover purchase power costs than provided by federal and state laws.
. Because the regulation does not provide a guaranteed true up to actual results, it is possible that stranded cost recovery could be set too low to recover all stranded costs.
. The stranded cost proceeding will establish the gain or loss on the divestiture sale of generation assets; the regulation provides that any gain on divestiture would be utilized to reduce stranded costs. Some elements of the calculation may be controversial. In addition the regulation does not address other claims to generation gain, such as recovery of certain revenue shortfalls as allowed by SB438, which may arise as customers leave the PLR.
The Company is currently evaluating challenges to the regulation and will actively pursue changes in the regulatory process or, if necessary, pursue legal challenges in the federal and or state courts. The Company believes that based upon the content of the regulation and the applicable law, legal challenge relative to purchase power agreements has a strong possibility of being successful.
Provider of Last Resort
The provider of last resort (PLR) will provide electric service to customers who do not select an electricity provider and to customers who are not able to obtain service from an alternative seller after the date competition begins. SB 438 provides for the electric distribution utility (EDU) to provide PLR services until July 1, 2001. The PUCN has conducted several workshops and hearings on the PLR regulations. This rule is not expected to be finalized until mid-2000. The current draft proposed regulation includes standards of conduct relative to distribution and provider of last resort functions, which require segregation of operating functions and constraints on sharing of common services. As part of their comments during development of the proposed regulation, the Company raised concerns regarding the financial impacts of the proposed regulations that place into question the financial viability of the PLR. For instance the current regulations restrict the PLR from relying on distribution assets or revenues to obtain credit. Second, the current regulations provide no financial reward potential for the significant fuel price risks that the PLR may face during the PLR rate cap period which ends March 1, 2003. Third, the proposed standards of conduct for the EDU and PLR will increase costs as a result of the loss of economies of scale and scope.
In addition to these impacts, the proposed regulation does not address two important areas associated with the PLR. Regulations have yet to be developed that fairly compensates the utility for recovery of revenue shortfalls allowed under SB438 which arise as customers leave the PLR for new suppliers. Regulations also do not address how the Company will be able to collect the costs, allowed by SB438, which will be incurred to serve customers who leave the PLR and later return.
In the ongoing rulemaking process the Company is working to address these serious concerns and modify the PLR regulation. If the proposed regulations are adopted in their current form, the Company will seek to transition out of the PLR function. In addition, if necessary, the Company is prepared to pursue legal remedies to mitigate any significant financial exposures associated with the final PLR regulation.
Independent Scheduling Administrator
The Company has participated in interim Independent Scheduling Administrator (iISA) working groups which are developing iISA standards, protocols and procedures. The PUCN has held hearings regarding entities interested in performing the iISA function, the timeline, the functions to be performed, the costs and how these entities will adhere to the PUCN iISA principles. To date the Company has not agreed to provide funding for the iISA because the PUCN has not provided a mechanism for the Company to recover costs associated with iISA. However in February 2000 the PUCN opened an investigatory docket to consider the funding and other transmission access issues. See FERC Matters for further discussion.
Gas Restructuring
To comply with Nevada AB 366 for natural gas deregulation, the PUCN has developed some new natural gas rules. In 1999, little gas restructuring activity occurred. Two new regulations, gas licensing and gas licensing fees were adopted by the PUCN in 1999.
Non-price Terms and Conditions for Distribution Service
On February 1, 1999, the Company filed its non-price terms and conditions for unbundled distribution service pursuant to the PUCN regulations. A stipulation resolving most issues and agreeing to further filings on unresolved issues was filed with the PUCN on April 9, 1999, and subsequently approved by the PUCN on April 22, 1999. Settlements regarding the unresolved issues were subsequently filed and approved by the PUCN.
Unbundling of Utility Services
On April 1, 1999, the Company filed the revenue requirements and unbundling study portions of the Compliance Filing with the PUCN. The filing included the development of an electric revenue requirement for the test period 1998. The compliance filing regulation requires the revenue requirement development to be in the form used for rate cases. In the unbundling study, the revenue requirement was assigned and allocated to a number of service components including generation, aggregation, transmission, distribution, metering, billing, and customer services. On September 23, 1999, The PUCN issued an interim order on the Company's April 1 compliance filing. The order contained the PUCN's decision on revenue requirements, return on equity, depreciation, and the unbundling study. The Company did not utilize the order's revenue requirement, return on equity or depreciation rates from Phase II of the case because SB438 legally mandated that the Company use its July 1, 1999 revenue requirement.
Pricing of Distribution Service
On October 8, 1999, the Company filed final versions of the approved non- price terms and conditions and rates reflecting a revenue requirement thought by the Company to be correct and in accordance with SB 438. Hearings were held in early November. A decision is expected in 2000.
Merger of SPR and Nevada Power Company
On April 8, 1999, SPR and NVP filed a joint application with the PUCN for approval of their proposed merger. On January 4, 1999, the PUCN issued the final order in the merger case. On December 31, 1998, the PUCN voted 3-0 to approve the merger, with conditions. The conditions include, among others, requirements to divest generation, file the divestiture plan with the PUCN for approval, file an ISA proposal at the FERC, file a generation tariff at the FERC, file a rate case and unbundle costs in 1999, file a subsequent rate case three years after retail competition, and submit an application to recover stranded costs.
Earnings Sharing
On April 30, 1999, the Company filed its second compliance filings related to the 1997 rate stipulation The filings provide a calculation of Sierra's electric and gas earnings in excess of a 12% return on equity (ROE). Any earnings in excess of 12% ROE are shared 50/50 between shareholders and customers. On August 19, 1999, the PUCN approved a stipulation between SPPC, Staff, and the UCA that rebated $7.37 million and $1.98 million to electric and gas customers, respectively in 1999. Based on 1999 operating results, SPPC anticipates it may make refunds to customers. Appropriate reserves have been recorded to reflect any anticipated refunds.
Generation Divestiture
The Company has filed with the PUCN its request for approval to sell its generation plants on October 12, 1999. On February 18, 2000, the PUCN approved an application to sell the generation plants of both SPPC and NVP. The revised divestiture plan was approved unanimously by the PUCN. Under the terms of the approved plan, both utilities will sell all of their power plants through an auction process.
Rate Reduction Bonds
California's electricity restructuring statute (Assembly Bill 1890, Chapter 854, California Statutes of 1996, as amended), permits California investor-owned utilities, including the Company, to finance the recovery of a reduction in electricity rates for residential and small commercial customers through the issuance of rate reduction certificates. Transition costs consist of the costs of generation-related assets and obligations that may become uneconomic as a result of a competitive generation market, together with certain other costs associated therewith.
In order for the Company to recover transition and associated costs, the California Public Utilities Commission (CPUC) authorized the establishment of non-bypassable, usage-based, per kilowatt hour charges ("FTA Charges"), to be included in the regular utility bills of residential and small commercial consumers located in the historical service territory of the Company in California. The right to receive payments made in respect of the FTA Charges is referred to as Transition Property.
On April 9, 1999, the Company sold the Transition Property to SPPC Funding
LLC, a Delaware special purpose limited liability company whose sole member is
the Company, in exchange for the proceeds of the SPPC Funding LLC Notes, Series
1999-1 (the "Underlying Notes"). SPPC Funding LLC then issued and sold the
Underlying Notes to the California Infrastructure and Economic Development Bank
Special Purpose Trust SPPC-1 (the "Trust") in exchange for the proceeds of the
sale of the Trust's $24.0 million 6.4% Rate Reduction Certificates, Series 1999-
1 (the "Certificates"). The Trust, which had been established by the California
Infrastructure and Economic Development Bank, issued and sold the Certificates
in a private placement pursuant to Rule 144A under the Securities Act of 1933,
as amended. The Certificates are one of a series of rate reduction certificates
that may be issued from time to time by the Trust and sold to investors upon
terms determined at the time of sale.
On January 10, 2000, the CPUC approved the Company's annual true-up of the FTA charges effective January 1, 2000.
Revenue Cycle Unbundling
On February 18, 1999, the CPUC approved the Company's proposed Revenue Cycle Services Credits (RCSC) application filed February 2, 1998. The RCSC addresses meter ownership, meter services, meter reading, and billing and applies to customers who select their own provider of a revenue cycle service. On April 9, 1999, the Company made a compliance tariff filing which reflects the approved credits.
Direct Access Tariffs
On April 5, 1999, the CPUC approved the Company's compliance filing, effective back to March 18, 1998, which proposed tariff changes to implement direct access.
Rate Unbundling
On April 5, 1999, the CPUC approved the Company's proposed unbundled rates effective back to June 1, 1998.
Distribution Competition
The CPUC has opened a docket item to solicit comments and proposals on distributed generation and competition in electric distribution service. The Company is actively participating in the on-going workshops. It is too early to determine how this proceeding may affect the Company.
Generation Divestiture
The Company has filed with the CPUC its request for approval to sell its generation plants. The Company plans to file a revised application during the first half of 2000.
Distribution Performance-Based Rate-making (PBR)
On January 3, 2000, the Company filed a distribution PBR proposal to become effective January 1, 2001 through 2003. The proposal includes rate indexing and earnings sharing mechanisms as well as performance indicators for employee safety, customer satisfaction and system reliability. The Company will submit a 2001 Cost of Capital filing in May 2000 and a Distribution PBR 2001 Cost of Service filing in June 2000.
Regional Transmission Organizations
On May 13, 1999, the FERC issued a Notice of Proposed Rulemaking on Regional Transmission Organizations (RTOs). the FERC proposed characteristics of an RTO and also the requirement for utilities to form or join RTOs.
On August 23, 1999, the Company filed comments on the proposed rule along with numerous other parties. On December 15, 1999, the FERC approved the final rule on RTOs.
Merger
On April 14, 1999, the FERC voted to approve the merger of SPR and NVP, as proposed. In approving the merger the FERC required the companies to divest of their generation facilities (as proposed by the companies) and required Nevada Power to file an update of its transmission rates (also proposed by the companies).
On May 17th, TDPUD filed a Petition for Rehearing of the FERC's order approving the merger. TDPUD claims the FERC violated its own policy by allowing the merger to be consummated prior to divestiture of generation assets. The Company and Nevada Power filed an answer to TDPUD's Petition for Rehearing in May. On July 14, 1999, the FERC denied all aspects of TDPUD's petition.
Transmission Rate Case
On March 30, 1999, the Company filed with the FERC to increase its open access transmission rates. The Company requested an increase of $16 million in the annual revenue requirement for network service. The point-to-point rate would increase from $2.80 /kW-mo. to $3.21 /kW-mo. This filing incorporates the Alturas intertie, completed in December 1998, and the reclassification of transmission and distribution facilities approved by the PUCN last summer.
On May 28, 1999, as expected, the FERC issued an order setting the rate case for hearing. The proposed rates are accepted subject to refund and suspended until November 1, 1999. On June 14, 1999, as required by the May 28 order, the Company filed additional information on the proposed transmission and distribution (T&D) reclassification. The Company also requested that the FERC accept the filing and approve the T&D split. On July 29, 1999 the FERC accepted the Company's proposed T&D reclassification.
On October 12, 1999, the Company filed an Offer of Partial Settlement which resolved all issues but pricing to the Mines and to the City of Fallon. On November 3, the Partial Settlement was certified to the FERC. A status report on the two remaining issues was filed on January 11, 2000. On January 31, 2000, the FERC approved the Partial Settlement.
Generation Tariffs
On March 31, 1999, the Company filed Docket No. ER99-2332 with the FERC for approval of generation tariffs that contain the rates, terms and conditions under which the new owners of the Company's generation would operate after divestiture. The tariffs permit market-based rates after the offering of capacity under a cost-based recourse approach.
Motions to intervene and protest in the Company's generation tariffs rate case were due on April 20, 1999. Newmont, City of Fallon, and TDPUD filed motions to intervene and protest. Barrick (a mining company) filed a motion to intervene with comments. Several other parties also filed interventions. The PUCN filed motion to intervene and protest one day after the date established by the FERC. The PUCN requested the FERC to hold the proceedings in abeyance to allow the PUCN more time to review SPPC's divestiture plan filing.
The Company filed an Answer to the protests filed on the tariff on May 5, 1999. In response to the PUCN request, the Company requested that the FERC rule on the Company's tariff by November 30, 1999 (rather than September 30, 1999) to allow the PUCN more time. The Company also provided clarification in response to other protests.
On July 20, 1999, the Company filed a motion to expedite the FERC's consideration of the tariff. The motion requested that the FERC approve the tariff by September 30, 1999 since the PUCN issues were resolved.
On November 1, the FERC dismissed the tariffs, apparently misinterpreting the agreement reached with the PUCN on the tariffs. On November 22, 1999 the Company filed a request for rehearing of the FERC's November 1 order dismissing the tariffs. The rehearing request explains how the FERC erred in dismissing the tariff. On December 17, 1999, the FERC issued an Order Granting Rehearing for Further Consideration. A decision is expected in 2000.
Independent Scheduling Administrator (ISA)
On July 23, 1999, the Company and Nevada Power submitted a filing to establish the Mountain West ISA (Docket ER97-3719). The proposal centers on the formation of an interim ISA called Mountain West ISA, which will ensure the non- discriminatory treatment of transmission customer in two wholesale electricity markets; one in northern Nevada and one in southern Nevada. The formation of the ISA is viewed as an interim step in the move to broader regional restructuring of the electric service industry in the western United States.
Fifteen parties filed to intervene in the ISA filing. On September 17, 1999, the Company, Nevada Power and the Mountain West ISA filed answers to the protests filed on the ISA filing. The California ISO filed an answer to the Company's and Nevada Power's response to their protest on September 28, 1999.
On January 27, 2000, the FERC issued an order approving with modifications the Mountain West ISA proposal. The PUCN is continuing to review aspects of the filing, including funding for the Mountain West ISA.
The Company uses business application software programs and relies on computing infrastructure that includes embedded systems that have a Year 2000 (Y2K) affect on the Company. In many cases, the Company's software programs and embedded systems used two-digit years that recognized a date using `00' as the year 1900 rather than the year 2000. This could have resulted in the computer or device shutting down, performing incorrect computations, or performing in an inconsistent manner.
In 1996, the Company established its Y2K project to address Y2K issues. The project's scope included: (1) business application systems (including, but not limited to, customer information and billing) and financial systems (including time reporting, payroll, general ledger, accounts payable and purchasing, and end-user developed systems); (2) embedded systems (including equipment that operates or controls operating facilities such as power plants, electric transmission and distribution, water, gas, telecommunications, and information technology systems); (3) customer, vendor, and supplier relationships; and (4) testing and contingency planning.
Business Application Systems
The initial focus for the Y2K project team was on the business application systems. In the fall of 1996 the Company purchased software assessment tools and completed its inventory and code assessment for its mainframe business systems. The Company developed and strictly adhered to a Y2K methodology that included unit, system wide and Y2K date specific testing. As of November 1999 the Company had completed the assessment and modification of 100% of its business systems.
The Company experienced few business systems errors due to Y2K in the first week of 2000. The Company utilized quick action response teams and corrected all known problems without any material impact to its customers.
Embedded Systems
The Company hired an outside engineering consultant, Network Systems Engineering Corporation (NSEC), to assist the Company's staff in conducting a thorough and comprehensive inventory of its embedded systems at the component level. All systems were inventoried and assessed for Y2K date impacts. This inventory identified over 2,500 potentially date sensitive items. The Company and NSEC contacted all manufacturers of those components that they have identified as critical to operations and continues to contact other manufacturers of embedded system components to determine if their components were Y2K ready. As of June 30, 1999, 100% of the Company's mission critical embedded systems were Y2K ready.
Vendors and Suppliers
The Company contacted, in writing, all vendors and suppliers of products and services that it considered critical to its operations. These contacts included, but were not limited to, suppliers of interstate transportation capacity for coal supplies, natural gas producers, financial institutions, and telephone service providers. The Company met one on one with several of its critical vendors and suppliers to assess their Y2K readiness. From these meetings, the Company felt that these vendors and suppliers had a viable Y2K program.
There were no major vendor or supplier problems related to Y2K. During the first week of 2000, there were two vendor software licensing date problems and were corrected the same day they occurred.
Major Customers
The Company met face to face with many of its major customers to share its progress on Y2K. Also discussed at these meetings was the customer's Y2K readiness. There were no major customer issues related to the Y2K date rollover.
Contingency Planning
The Company's Y2K strategies included contingency planning for both business and embedded systems. The planning effort included critical Company areas such as electric generation, water, gas, telecommunications, building facilities, information technology, networks, vendors, suppliers, and operations personnel. Quick action response teams and additional Company personnel were available for the century rollover. Additionally, the Company's Emergency Operations Center (EOC) was activated for the century rollover. All Company contingency plans were completed as of September 30, 1999.
As the result of a non-eventful year 2000 rollover, it was not necessary to invoke Company contingency plans.
As part of its normal business practice, the Company maintains plans to follow during emergency circumstances.
Potential Risks
With respect to its internal operations, those over which the Company has direct control, the Company believed the most significant potential risks from Y2K problems were: (1) its ability to use electronic devices to control and operate its generation, gas, water, telecommunication, transmission and distribution systems, (2) its ability to render timely bills to its customers, and (3) the ability to maintain continuous operations of its computer systems.
Based upon the smooth transition to year 2000, the Company believes the continued probability of such failures is low. The Company is monitoring the progress of these critical entities and contingency plans will remain in place to address the potential failure of an external party.
Effect on Operations
The Company had no significant impacts on fourth quarter 1999 operations as a result of Y2K problems.
The Company experienced no significant interruptions to operations or business systems related to Y2K problems during the actual date rollover period.
The Company feels that there will be minimal risks during the year 2000 and that any Y2K related problems will be minor and corrected immediately without effect on operations.
Financial Implications
With 100% of mission critical components tested, the Company anticipated and proved that the transition through critical Y2K dates had minimal impact on the Company's Electric, Gas, and Water
operations during year 2000 rollover period and during year 2000 and beyond. These results are reflected in reduced costs discussed below.
The Company had estimated that its total incremental expenditures for the Y2K effort, since it began identification of Y2K cost, would be approximately $5.9 million. This estimate has been reduced from amounts previously reported based on updated assessments of the project costs. Y2K costs include assessment, remediation, testing, and contingency planning activities. Of the total project costs $5.4 million was incurred through December 31, 1999.
Approximately $4.0 million of the expenditures are operating and maintenance expenses, and $1.4 million are capital expenditures. The Company anticipates that the remaining Y2K expenditures will be approximately $100,000 for the 2000 business year. Final archiving of hard copy and electronic documentation, project review, and project shutdown will be completed in the first quarter of 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has evaluated its risk related to financial instruments whose values are subject to market sensitivity. The only such instruments are Company issued fixed-rate and variable-rate debt, and preferred securities obligations which were as follows as of December 31, 1998 and 1999.
Long-term debt (Dollars in Thousands):
Expected Expected Maturity Weighted Average
Maturity Date Amounts Interest Rates Fair Value
------------------------------------------------------------------------------------------------------------------------
December 31 December 31 December 31
Fixed Rate 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
1999 - $ 30,500 - 6.88%
2000 2,755 300 6.24% 9.00%
2001 19,620 17,500 5.56% 5.51%
2002 2,626 200 6.11% 9.00%
2003 20,632 18,200 5.63% 5.60%
2004 2,621 - 6.12% -
Thereafter 499,931 490,500 6.62% 6.83%
====================== =================== ======================
Total Fixed Rate $548,185 $556,900 $529,875 $592,373
Variable Rate
Due 2000 $100,000 - 6.87% -
Due 2020 80,000 80,000 *3.81% 3.55%
======================= =================== ======================
$180,000 $ 80,000 $180,000 $ 80,000
Preferred securities
(fixed rate)
Due 2036 $ 48,500 $ 48,500 8.60% - $ 48,500 $ 48,500
======================= =================== ======================
Total $776,685 $686,900 $758,375 $720,873
|
* Weighted daily average rate for month ended December 31, 1998 and 1999
Commodity Price Risk
SPPC is exposed to commodity price risk primarily related to changes in the market price of electricity as well as changes in fuel costs incurred to generate electricity. Although the potential exists for market risk within these contracts, the future costs are expected to be covered in the rate making process. SPPC's gas local distribution company is also protected by deferred energy accounting procedures (See Note 1 to the Financial Statements). These risks are not expected to expose SPPC to significant market risks related to commodity price fluctuations. As a result of the merger of SPR and NVP, the Board of Directors of the combined company requested that management review and consolidate the Risk Management Programs of the two utilities. SPPC and NVP engaged the services of a leading energy risk management consulting company to review existing policies and procedures, make any recommendations to the existing Program, and implement the revised Program. That project led SPPC to adopt revised policies and procedures, implement new IT systems to track any commodity price exposures, as well as focus on potential "Earnings-at-Risk" which measures the amount of exposure that SPPC have to energy prices at any point in time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
-----
Independent Auditors' Report................................................................52
Financial Statements:
Consolidated Balance Sheets as of December 31, 1999 and 1998......................53
Consolidated Statements of Income for the Years Ended December 31,
1999, 1998 and 1997.............................................................54
Consolidated Statements of Common Shareholder's Equity for the
Years Ended December 31, 1999, 1998 and 1997....................................55
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997................................................56
Consolidated Statements of Capitalization as of December 31, 1999 and 1998.....57-58
Notes to Consolidated Financial Statements...............................................59-81
|
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Sierra Pacific Power Company
Reno, Nevada
We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of Sierra Pacific Power Company and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, common shareholder's equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Reno, Nevada
February 29, 2000
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
December 31,
ASSETS: 1999 1998
------- ---- ----
Utility Plant, at Original Cost:
Plant in service $2,420,728 $2,348,996
Less accumulated provision for depreciation 799,099 727,624
--------- ---------
1,621,629 1,621,372
Construction work in progress 97,561 55,670
--------- ---------
1,719,190 1,677,042
--------- ---------
Other Investments 62,704 34,022
--------- ---------
Current Assets:
Cash and cash equivalents 3,011 15,197
Accounts receivable less provision for
Uncollectible accounts: 1999 - $3,649; 1998 - $3,461 113,695 114,380
Materials, supplies and fuel, at average cost 30,070 25,776
Other 3,103 2,692
------- -------
149,879 158,045
Deferred Charges:
Regulatory tax asset 65,531 65,619
Other regulatory assets 73,660 61,675
Other 25,512 15,417
------- -------
164,703 142,711
------- -------
$2,096,476 $2,011,820
========== ==========
CAPITALIZATION AND LIABILITIES:
-------------------------------
Capitalization:
Common shareholder's equity $ 673,738 $ 661,367
Preferred stock 50,000 73,115
Preferred securities subject to mandatory redemption 48,500 48,500
Long-term debt 625,430 606,450
--------- ---------
1,397,668 1,389,432
--------- ---------
Current Liabilities:
Short-term borrowings 109,584 105,000
Current maturities of long-term debt 102,755 30,473
Accounts payable 78,491 66,032
Accrued interest 5,110 7,535
Dividends declared 19,974 20,365
Accrued salaries and benefits 8,385 12,131
Other current liabilities 10,673 27,759
------- -------
334,972 269,295
------- -------
Commitments & Contingencies (Note 13)
Deferred Credits:
Deferred federal income taxes 170,261 161,697
Deferred investment tax credits 35,980 37,944
Regulatory tax liability 37,846 38,939
Accrued retirement benefits 49,052 42,560
Customer advances for construction 40,081 34,961
Other 30,616 36,992
------- -------
363,836 353,093
------- -------
$2,096,476 $2,011,820
========== ==========
|
The accompanying notes are an integral part of the financial statements.
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
Year Ended December 31,
1999 1998 1997
---- ---- ----
Operating Revenues:
Electric $609,197 $585,657 $540,346
Gas 100,177 99,532 70,675
Water 54,348 49,143 46,519
-------- -------- --------
763,722 734,332 657,540
-------- -------- --------
Operating Expenses:
Operation:
Purchased power 179,781 156,970 130,612
Fuel for power generation 115,065 114,803 100,861
Gas purchased for resale 68,125 65,430 38,127
Deferral of energy costs-net - - 8
Other 115,453 116,076 120,600
Maintenance 22,520 22,266 23,387
Depreciation and amortization 77,373 69,435 64,117
Taxes:
Income taxes 36,042 43,550 40,387
Other than income 19,527 19,608 19,269
-------- -------- --------
633,886 608,138 537,368
-------- -------- --------
Operating Income 129,836 126,194 120,172
-------- -------- --------
Other Income:
Allowance for other funds used during construction (1,341) 3,797 5,723
Other (expense)/income-net (1,028) 335 810
-------- ------- -------
(2,369) 4,132 6,533
-------- ------- -------
Total Income Before Interest Charges 127,467 130,326 126,705
-------- ------- -------
Interest Charges:
Long-term debt 40,263 38,890 39,609
Other 11,615 7,659 4,583
Allowance for borrowed funds used during
construction and capitalized interest (308) (6,414) (4,785)
------- ------- -------
51,570 40,135 39,407
------- ------- -------
Income Before Dividends on Mandatorily Redeemable
Preferred Securities 75,897 90,191 87,298
Preferred dividend requirements of company-obligated
mandatorily redeemable preferred securities (4,171) (4,171) (4,171)
------- ------- -------
Income Before Preferred Dividend requirements 71,726 86,020 83,127
Preferred dividend requirements and premium paid on
redemption (5,485) (5,459) (5,459)
------- ------- -------
Income Applicable to Common Stock $ 66,241 $ 80,561 $ 77,668
========= ========= =========
|
The accompanying notes are an integral part of the financial statements.
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED STATEMENTS OF COMMON
SHAREHOLDER'S EQUITY
(Dollars in Thousands)
Year ended December 31,
1999 1998 1997
---- ---- ----
Common Stock
------------
Balance at Beginning of Year
and End of Year $ 4 $ 4 $ 4
Other Paid-In Capital
---------------------
Balance at Beginning of Year 562,684 545,434 518,434
Additional investment by parent company 22,000 17,250 27,000
------- ------- -------
Balance at End of Year 584,684 562,684 545,434
------- ------- -------
Retained Earnings
-----------------
Balance at Beginning of Year 98,679 94,118 88,458
Income before preferred dividends 71,726 86,020 83,127
Preferred stock dividends declared & premium on
redemption (5,355) (5,459) (5,459)
Common stock dividends declared (76,000) (76,000) (72,000)
Cost of issuing common stock
(reimbursement to parent company) - - (8)
-------- -------- --------
Balance at End of Year 89,050 98,679 94,118
-------- -------- --------
Total Common Shareholder's Equity at
End of Year $673,738 $661,367 $639,556
========= ======== ========
|
The accompanying notes are an integral part of the financial statements.
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Year Ended December 31,
1999 1998 1997
---- ---- ----
Cash Flows From Operating Activities:
------------------------------------
Income before preferred dividends $71,726 $86,020 $83,127
Non-Cash items included in income:
Depreciation and amortization 77,373 69,435 64,117
Deferred taxes and investment tax credits 5,595 (3,743) (2,772)
AFUDC and capitalized interest 1,033 (10,211) (10,508)
Deferred energy costs, merger costs and other non-cash 8,644 2,400 (2,151)
Early Retirement and severance amortization 4,194 4,177 4,551
Changes in certain assets and liabilities:
Accounts receivable 685 (13,836) (10,144)
Materials, supplies and fuel (4,294) (521) 2,331
Other current assets (411) (120) 1,376
Accounts payable 12,459 2,944 9,090
Other current liabilities (23,257) 6,844 1,543
Other - net (31,418) 9,802 4,895
-------- ------- -------
Net Cash Flows From Operating Activities 122,329 153,191 145,455
-------- ------- -------
Cash Flows From Investing Activities:
------------------------------------
Additions to utility plant (142,306) (183,384) (147,801)
Non-cash charges to utility plant (768) 10,587 11,553
Customer refunds for construction 5,120 (3,517) (951)
Contributions in aid of construction 21,823 37,216 26,321
--------- --------- ---------
Net cash used for utility plant (116,131) (139,098) (110,878)
Investment in subsidiaries and other non-utility property-net (28,720) (2,788) (5,254)
--------- --------- ---------
Net Cash Used in Investing Activities (144,851) (141,886) (116,132)
--------- --------- ---------
Cash Flows From Financing Activities:
------------------------------------
Increase in short-term borrowings 1,972 30,637 40,583
Proceeds from issuance of long-term debt 124,495 35,000 -
Retirement of long-term debt (33,270) (5,456) (15,417)
Retirement of preferred stock (23,115) - -
Additional investment by parent company 22,000 17,250 27,000
Dividends paid and premiums on preferred redemption (81,746) (80,459) (75,459)
-------- -------- --------
Net Cash Provided (Used) By Financing Activities 10,336 (3,028) (23,293)
-------- -------- --------
Net (Decrease) Increase in Cash and Cash Equivalents (12,186) 8,277 6,030
Beginning Balance in Cash and Cash Equivalents 15,197 6,920 890
-------- ------- -------
Ending Balance in Cash and Cash Equivalents $ 3,011 $ 15,197 $ 6,920
======= ======= ===========
Supplemental Disclosures of Cash Flow Information:
-------------------------------------------------
Cash Paid During Year For:
Interest $54,303 $48,250 $46,824
Income taxes 28,604 45,963 41,656
|
The accompanying notes are an integral part of the financial statements.
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
December 31,
Common Shareholder's Equity: 1999 1998
---------------------------
Common Stock, $3.75 par value,
1,000 shares authorized, issued and outstanding $ 4 $ 4
Other paid-in capital 584,684 562,684
Retained earnings 89,050 98,679
--------- ---------
Total Common Shareholder's Equity 673,738 661,367
Cumulative Preferred Stock:
Not subject to mandatory redemption:
$50 par value:
Series A; $2.44 dividend - 4,025
Series B; $2.36 dividend - 4,100
Series C; $3.90 dividend - 14,990
$25 stated value:
Class A Series 1; $1.95 dividend 50,000 50,000
-------- ---------
Total Preferred Stock 50,000 73,115
Company-obligated mandatorily redeemable preferred securities of the Company's
subsidiary trust, Sierra Pacific Power Capital I, holding solely $50
million principal amount of 8.60% junior subordinated debentures
of the Company, due 2036 48,500 48,500
-------- ---------
Total cumulative preferred securities 98,500 121,615
-------- ---------
Long-Term Debt:
First Mortgage Bonds:
Unamortized bond premium and discount, net (795) (831)
Debt Secured by First Mortgage Bonds:
2.00%Series Z due 2004 72 93
2.00% Series O due 2011 1,374 1,497
6.35% Series FF due 2012 1,000 1,000
6.55% Series AA due 2013 39,500 39,500
6.30% Series DD due 2014 45,000 45,000
6.65% Series HH due 2017 75,000 75,000
6.65% Series BB due 2017 17,500 17,500
6.55% Series GG due 2020 20,000 20,000
6.30% Series EE due 2022 10,250 10,250
6.95% to 8.61% Series A MTN due 2022 110,000 110,000
7.10% and 7.14% Series B MTN due 2023 58,000 58,000
6.62% to 6.83% Series C MTN due 2006 50,000 50,000
5.90% Series JJ due 2023 9,800 9,800
5.90% Series KK due 2023 30,000 30,000
5.00% Series Y due 2024 3,138 3,207
6.70% Series II due 2032 21,200 21,200
5.47% Series D MTN due 2001 17,000 17,000
5.50% Series D MTN due 2003 5,000 5,000
5.59% Series D MTN due 2003 13,000 13,000
------- -------
Subtotal, excluding current portion 526,039 526,216
Variable Rate Note:
Water Facilities Note: maturing 2020 80,000 80,000
Other, excluding current portion 19,391 234
------- -------
Total Long-Term Debt 625,430 606,450
------- -------
TOTAL CAPITALIZATION $1,397,668 $1,389,432
========== ==========
|
The accompanying notes are an integral part of the financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies for both utility and non-utility operations are as follows:
General
Sierra Pacific Power Company (SPPC or the Company), a wholly-owned subsidiary of Sierra Pacific Resources (SPR), is a regulated public utility engaged principally in the generation, purchase, transmission, distribution, and sale of electric energy. It provides electricity to approximately 302,000 customers in a 50,000 square mile territory including western, central, and northeastern Nevada, including the cities of Reno, Sparks, Carson City and Elko, and a portion of eastern California, including the Lake Tahoe area. SPPC also provides water and gas service in the cities of Reno and Sparks, Nevada, and environs. In 1995, SPPC formed two subsidiaries for the specific purpose of forming a partnership to operate the Pinon Pine gasifier facility. These subsidiaries are Pinon Pine Corporation and Pinon Pine Investment Company. In February 1999, SPPC purchased GPSF-B, which owned the portion of the gasifier facility that was not already owned by SPPC. On July 29, 1996, SPPC formed a wholly-owned subsidiary, Sierra Pacific Power Capital I (Trust), for the purpose of completing a public offering of trust originated preferred securities. These subsidiaries are consolidated into the financial statements of SPPC, with all significant intercompany transactions eliminated. Refer to Note 4 of SPPC's consolidated financial statements for the stock issuance and Note 3 for the Pinon Pine Power Project.
SPPC maintains its accounts for electric and gas operations in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission, and for water operations, in accordance with the Uniform System of Accounts prescribed by the National Association of Regulatory Utility Commissioners.
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities. These estimates and assumptions also affect the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of certain revenues and expenses during the reporting period. Actual results could differ from these estimates.
Certain reclassifications have been made for comparative purposes but have not affected previously reported net income or common shareholder's equity.
Utility Plant
In addition to direct labor and material costs, the Company also charges the following to the cost of constructing utility plants: the cost of time spent by administrative employees in planning and directing construction work, property taxes, employee benefits (including such costs as pensions, postretirement and post-employment benefits, vacations and payroll taxes), and an allowance for funds used during construction (AFUDC).
The original cost of plant retired or otherwise disposed of and the cost of removal less salvage is generally charged to the accumulated provision for depreciation. The cost of current repairs and minor replacements is charged to operating expenses when incurred. The cost of renewals and betterments is capitalized.
Allowance For Funds Used During Construction and Capitalized Interest
As part of the cost of constructing utility plant, the Company capitalizes AFUDC. AFUDC represents the cost of borrowed funds and, where appropriate, the cost of equity funds used for construction purposes in accordance with rules prescribed by the FERC and the Public Utilities Commission of Nevada . AFUDC is capitalized in the same manner as construction labor and material costs, with an offsetting credit to "other income" for the portion representing the cost of equity funds and as a reduction of interest charges for the portion representing borrowed funds. Recognition of this item as a cost of utility plant is in accordance with established regulatory rate-making practices. Such practices permit the utility to earn a fair return on, and recover in rates charged for utility services, all capital costs. This is accomplished by including such costs in the rate base and in the provision for depreciation. The AFUDC rates used during 1999, 1998, and 1997 were 6.09%, 7.69% and 8.30%, respectively. As specified by the PUCN, certain projects were assigned a lower AFUDC rate due to specific low-interest-rate financings directly associated with those projects.
Depreciation
Depreciation is calculated using the straight-line composite method over the estimated remaining service lives of the related properties. The depreciation provision for 1999, 1998 and 1997, as authorized by the PUCN and stated as a percentage of the original cost of depreciable property, was approximately 3.14%, 3.31%, and 3.16%, respectively.
Cash and Cash Equivalents
Cash is comprised of cash on hand and working funds. Cash equivalents consist of high quality investments in money market funds. SPPC had no short- term investments in money market funds at December 31, 1999 and $12.4 million of short-term investments in money market funds at December 31, 1998.
Regulatory Accounting and Other Regulatory Assets
The Company's rates are currently subject to the approval of the PUCN and are designed to recover the cost of providing generation, transmission and distribution services. As a result, the Company qualifies for the application of Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation", issued by the Financial Accounting Standards Board (FASB). This statement recognizes that the rate actions of a regulator can provide reasonable assurance of the existence of an asset and requires the capitalization of incurred costs that would otherwise be charged to expense where it is probable that future revenue will be provided to recover these costs. SFAS No. 71 prescribes the method to be used to record the financial transactions of a regulated entity. The criteria for applying SFAS No. 71 include the following: (i) rates are set by an independent third party regulator, (ii) approved rates are intended to recover the specific costs of the regulated products or services, and (iii) rates that are set at levels that will recover costs can be charged to and collected from customers. SFAS No. 101, "Regulated Enterprises-Accounting for the Discontinuation of Application of FASB Statement No. 71," requires that an enterprise whose operations cease to meet the qualifying criteria of SFAS No. 71, discontinue the application of that statement by eliminating the effects of any actions of regulators that had been previously recognized.
In 1997, the Emerging Issues Task Force (EITF) released Issue 97-4. In doing so, it reached a consensus that a utility subject to a deregulation plan for its generation business should stop applying SFAS No. 71 to the generating portion of its business no later than the date when a deregulation plan with sufficient detail is known. EITF 97-4 also reached a consensus that regulatory assets and liabilities that originated in a portion of the business that is discontinuing its application of SFAS No. 71, should be evaluated on the basis of where (that is, the portion of the business in which) the regulated cash flows to realize and settle them will be derived. The result of the consensus is that there is no elimination of regulatory assets which the deregulatory legislation or rate order specifies collection of, if the regulatory assets are recoverable through a portion of the business which remains subject to SFAS No. 71.
In conformity with SFAS No. 71, the accounting for the Company conforms to generally accepted accounting principles as applied to regulated public utilities and as prescribed by the agencies and commissions of the jurisdictions in which they operate. In accordance with these principles, certain costs that would otherwise be charged to expense or capitalized as plant costs are deferred as regulatory assets based on expected recovery from customers in future rates. Management's expected recovery of deferred costs is based upon specific rate- making decisions or precedent for each item. The following other regulatory assets were included in the consolidated balance sheets as of December 31 (dollars in thousands):
DESCRIPTION 1999 1998 AMORTIZATION PERIODS
----------- ---- ---- --------------------
Early retirement and severance offers $16,274 $20,468 Various through 2004
Loss on reacquired debt 17,140 17,918 Various through 2023
Plant assets 7,104 7,978 Various through 2031
Conservation and demand side
programs 5,551 3,787 Various through 2007
Merger transition costs 4,703 0 To be determined*
Merger severance/relocation 11,432 0 To be determined*
Other costs 11,456 11,524 Various
------- -------
Total $73,660 $61,675
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* Under the terms of the merger stipulation with the PUCN, three years after the start of retail competition in the State of Nevada, the Company is required to file a general rate case that would give the Company the opportunity to recover the costs of the merger. The amortization period for these costs will be determined at the time of the general rate case filing.
Currently, the electric utility industry is predominantly regulated on a basis designed to recover the cost of providing electric power to its retail and wholesale customers. If cost-based regulation were to be discontinued in the industry for any reason, including competitive pressure on the cost-based prices of electricity, profits could be reduced, and utilities might be required to reduce their asset balances to reflect a market basis less than cost. Discontinuance of cost-based regulation would also require affected utilities to write off their associated regulatory assets. Management cannot predict the potential impact, if any, of these competitive forces on the Company's future financial position and results of operations.
Deferral of Energy Costs
Nevada and California statutes permit regulated utilities to, from time-to- time, adopt deferred energy accounting procedures, which record as deferred energy costs the difference between actual fuel expense and fuel revenues. Under regulations adopted by the PUCN, deferred energy rates are revised at least every 12 months to recapture the accumulated deferred balance over a future period. The intent of these procedures is to ease the effect of fluctuations in the cost of purchased gas, fuel and purchased power.
During 1999 SPPC did not employ deferred energy accounting procedures, but has resumed those procedures for natural gas operations as of January 1, 2000.
Federal Income Taxes and Investment Tax Credits
SPR and its subsidiaries file a consolidated federal income tax return. Current income taxes are allocated based on SPR's and each subsidiary's respective taxable income or loss and investment tax credits as if each subsidiary filed a separate return. Deferred taxes are provided on temporary differences at the statutory income tax rate in effect as of the most recent balance sheet date.
SPPC accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires recognition of deferred tax liabilities and assets for the future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
For regulatory purposes, SPPC is authorized to provide for deferred taxes on the difference between straight-line and accelerated tax depreciation on post-1969 utility plant expansion property, deferred energy, and certain other differences between financial reporting and taxable income, including those added by the Tax Reform Act of 1986 (TRA). In 1981, SPPC began providing for deferred taxes on the benefits of using the Accelerated Cost Recovery System for all post-1980 property. In 1987, the TRA required SPPC to begin providing deferred taxes on the benefits derived from using the Modified Accelerated Cost Recovery System.
Investment tax credits are no longer available to SPPC. The deferred investment tax credits are being amortized over the estimated service lives of the related properties.
Revenues
Operating revenues include unbilled utility revenues earned (service has been delivered, but not yet billed by the end of the accounting period). These amounts are also included in accounts receivable.
Recent Pronouncements of the FASB
In June 1998, the FASB issued SFAS No. 133, entitled "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position, and measure those instruments at fair value. In May 1999, members of the FASB agreed to delay the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000, and accordingly, the Company is required to adopt the statement effective January 1, 2001. The Company is still assessing the impact of SFAS No. 133 on its financial condition and results of operations.
NOTE 2. REGULATORY ACTIONS
Nevada Matters
On April 30, 1999, the Company filed its second compliance filings related to the 1997 rate stipulation The filings provide a calculation of the Company electric and gas earnings in excess of a 12 % return on equity (ROE). Any earnings in excess of 12 % ROE are shared 50/50 between shareholders and customers. On August 19, 1999, the Commission approved a stipulation between the Company, Staff, and the UCA, which rebated in 1999 $7.34 million and $2.0 million to electric and gas customers, respectively. Based on 1999 operating results, the Company anticipates it may make refunds to customers. Appropriate reserves have been recorded to reflect any anticipated refunds.
California Matters
On February 18, 1999, the California Public Utility Commission (CPUC) approved the Company's proposed Revenue Cycle Services Credits (RCSC) application filed February 2, 1998. The RCSC addresses meter ownership, meter services, meter reading, and billing and applies to customers who select their provider of a revenue cycle service.
On April 9, 1999, the Company made a compliance tariff filing which reflects the approved credits.
On April 5, 1999, the CPUC approved the Company's proposed unbundled rates effective back to June 1, 1998.
FERC Matters
On March 30, 1999, the Company filed an application with the FERC to increase its Open Access Transmission rates. On October 12, 1999, the Company filed an Offer of Partial Settlement which resolved all issues with the exception of pricing to the Mines and to the City of Fallon. On November 3, the Partial Settlement was certified to the FERC. A status report on the two remaining issues was filed on January 11, 2000. On January 31, 2000, the FERC approved the Partial Settlement.
On March 31, 1999, the Company filed an application with the FERC for approval of generation rates, terms and conditions under which the new owners of the Company's generation would operate after divestiture. The FERC dismissed the application on November 1, 1999, apparently misinterpreting the agreement reached between the Company and the PUCN. The Company filed a request for rehearing and on December 17, 1999, the FERC issued an Order Granting Rehearing for Further Consideration. A decision is expected in 2000.
NOTE 3. JOINTLY OWNED FACILITIES
Valmy
SPPC and Idaho Power Company each own an undivided 50% interest in the Valmy generating station, with each company being responsible for financing its share of capital and operating costs. SPPC is the operator of the plant for both parties.
SPPC's share of direct operation and maintenance expenses for Valmy is included in the accompanying consolidated statements of income.
The following schedule reflects SPPC's 50% ownership interest in jointly owned electric utility plant at December 31, 1999 (dollars in thousands):
Electric Accumulated Construction
MW Plant Provision For Work In
Plant Capacity In Service Depreciation Progress
-------- -------- ---------- ------------ --------
Valmy #1 129 $127,022 $55,625 $ 63
Valmy #2 137 $153,902 $56,431 $554
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Pinon Pine
Pinon Pine Corp. and Pinon Pine Investment Co., subsidiaries of SPPC, own 25% and 75% of a 38% interest in Pinon Pine Company, L.L.C. GPSF-B, a Delaware corporation formerly owned by General Electric Capital Corporation (GECC) and now owned by SPPC, owns the remaining 62% as of February 1999. The LLC was formed to take advantage of federal income tax credits associated with the alternative fuel (syngas) produced by the coal gasifier available under (S) 29 of the Internal Revenue Code. The entire project, which includes an LLC-owned gasifier and an SPPC-owned power island and post-gasification facility to partially cool and clean the syngas, is referred to collectively as the Pinon Pine Power Project.
SPPC has a funding arrangement with the Department of Energy (DOE). Under the agreement, the DOE will provide funding towards the construction of the project, and towards the operating and maintenance costs of the facility. The DOE has committed $168 million of funding for Pinon construction and operation costs. The DOE provided funding for approximately 53% of the estimated construction cost and half of the operating and fuel expenses through December 31, 1999. Additional funding will be provided until the commitment is expended. A dispute has arisen with the DOE regarding the historical and future funding of natural gas costs. In February 1999, the DOE informed SPPC it will not fund the remaining $14 million under the cooperative agreement until the dispute is resolved. On November 2, 1999, SPPC reached final agreement with the DOE regarding the allowability of previously incurred natural gas costs. The agreement also redefines the cooperative agreement performance period and the responsibilities of both parties through the remainder of the
agreement. The period of performance is extended until January 1, 2001 or until the facility is sold or operational control is transferred. The DOE agrees to share past fuel costs and future natural gas costs used to fuel the gas combustion turbine during periods when air extraction from the process is directed to the gasifier island. Estimated construction start-up and commissioning costs for Pinon, including the DOE's portion are approximately $301.5 million, which includes permitting taxes, start-up commissioning, operator training and Allowance for Funds Used During Construction. DOE funding for construction through December 1999 is $161.4 million.
Construction began on the project in February 1995, following resource plan approval and the receipt of all permits and other approvals. The natural gas portion (combined cycle combustion turbine) was satisfactorily completed and placed in service December 1, 1996. The balance of the plant was completed in June 1998. The construction of the gasifier portion of the project overran the fixed contract price by approximately 12% or $12.6 million. The overrun is primarily due to redesign issues, resolving technical issues relative to start up and other costs due to a later than anticipated completion date. To date, SPPC has not been successful in obtaining sustained operation of the gasifier but work continues to identify problem areas and redesign solutions which will likely require additional capital expenditures. Due to the problems noted above, SPPC and Foster Wheeler settled on a portion of the cost overrun and have entered into an alternative dispute resolution.
SPPC had to satisfy certain performance requirements as part of the construction agreement with the LLC. The initial performance warranty required that the gasifier attain an average capacity factor of 30% during 1997, regardless of delays in the in-service date. Since the gasifier was not in service in 1997, the certain performance warranties required by the contract were not met. Consequently, SPPC paid GECC $2.8 million as satisfaction of the performance obligation.
NOTE 4. PREFERRED STOCK AND PREFERRED SECURITIES
All issues of preferred stock are superior to SPR common stock with respect to dividend payments (which are cumulative) and liquidation rights. SPPC's Restated Articles of Incorporation, as amended on August 19, 1992, authorize an aggregate total of 11,780,500 shares of preferred stock at any given time.
On July 29, 1996, the Trust, a wholly-owned subsidiary of SPPC, issued $48.5 million (1,940,000 shares) of 8.60% Trust Originated Preferred Securities (the Preferred Securities). SPPC owns all the common securities of the Trust; 60,000 shares totaling $1.5 million (Common Securities). The Preferred Securities and the Common Securities (the Trust Securities) represent undivided beneficial ownership interests in the assets of the Trust. The existence of the Trust is for the sole purpose of issuing the Trust Securities and using the proceeds thereof to purchase from SPPC its 8.60% Junior Subordinated Debentures due July 30, 2036, in a principal amount of $50 million. The sole asset of the Trust is SPPC's junior subordinated debentures. SPPC's obligations provide a full and unconditional guarantee of the Trust's obligations under the Preferred Securities.
The Preferred Securities of Sierra Pacific Power Capital I are redeemable only in conjunction with the redemption of the related 8.60% junior subordinated debentures. The junior subordinated debentures will mature on July 30, 2036, and may be redeemed, in whole or in part, at any time on or after July 30, 2001, or at any time in certain circumstances upon the occurrence of a tax event. A tax event occurs if an opinion has been received from tax counsel that there is more than an insubstantial risk that: the Trust is, or will be subject to federal income tax with respect to interest accrued or received on the junior subordinated debentures; the Trust is, or will be subject to more than a de minimis amount of other taxes, duties or other governmental charges; interest payable by SPPC to the Trust on the junior subordinated debentures is not, or will not be, deductible, in whole or in part for federal income tax purposes.
Upon the redemption of the junior subordinated debentures, payment will simultaneously be applied to redeem preferred securities having an aggregate liquidation amount equal to the aggregate principal amount of the Junior Subordinated Debentures. The preferred securities are redeemable at $25 per preferred security plus accrued dividends.
On November 1, 1999, SPPC paid $23.5 million, par value and premium, to redeem Series A, $2.44 Dividend (4.88%), Series B, $2.36 Dividend (4.72%) and Series C, $3.90 Dividend (7.8%).
The following table indicates the number of shares outstanding at December 31 of each year and the dollar amount thereof. The difference between total shares authorized and the amount outstanding represents undesignated shares authorized but not issued.
Shares Issued Amount
-------------------------------------- --------------------------------------
(Dollars in thousands) 1999 1998 1997 1999 1998 1997
------------- ------------- ------------- ------------- -------------- -------------
Preferred Stock
Not subject to mandatory redemption:
Series A 80,500 80,500 $ 4,025 $ 4,025
Series B 82,000 82,000 4,100 4,100
Series C 299,800 299,800 14,990 14,990
Class A Series I 2,000,000 2,000,000 2,000,000 $50,000 50,000 50,000
------------- ------------- ------------- ------------- -------------- -------------
Subtotal 2,000,000 2,462,300 2,462,300 $50,000 $ 73,115 $ 73,115
Preferred Securities
Subject to mandatory redemption:
Preferred securities of
Sierra Pacific Power
Capital I 1,940,000 1,940,000 1,940,000 48,500 48,500 48,500
---------------------------------------------- ------------------------------------------------
Total 3,940,000 4,402,300 4,202,300 $98,500 $121,615 $121,615
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NOTE 5. TAXES
The following reflects the composition of taxes on income (in thousands of dollars):
1999 1998 1997
---------------------------------------------------------------
Federal:
Taxes estimated to be currently payable $ 29,101 $ 46,176 $ 40,574
Deferred taxes related to:
Excess of tax depreciation over book depreciation 3,574 4,100 3,997
Contributions in aid of construction and customer advances (2,701) (2,963) (3,966)
Avoided interest capitalized 69 (875) (1,578)
Repairs and maintenance 1,504 - -
Severance programs 3,774
Other-net, deferral of energy costs & costs of abandoned 1,384 (2,075) 1,010
merger
Net amortization of investment tax credit (1,981) (1,930) (1,962)
State (California) 888 925 801
----------------------------------------------------------------
Total $ 35,661 $ 43,358 $ 38,876
================================================================
As Reflected in Statement of Income:
Federal income taxes $ 35,154 $ 42,625 $ 39,586
State income taxes 888 925 801
---------------------------------------------------------------
Operating Income 36,042 43,550 40,387
Other income-net (381) (192) (1,511)
--------------------------- ----------------- --------------
Total $ 35,661 $ 43,358 $ 38,876
===============================================================
The total income tax provisions differ from amounts computed by applying
the federal statutory tax rate to income before income taxes for the following
reasons (in thousands of dollars):
1999 1998 1997
---------------------------------------------------------------
Income before preferred dividend requirements $ 71,726 $ 86,020 $ 83,127
Total income tax expense 35,661 43,358 38,876
---------------------------------------------------------------
107,387 129,378 122,003
Statutory tax rate 35% 35% 35%
---------------------------------------------------------------
Expected income tax expense 37,585 45,282 42,701
Depreciation related to difference in cost basis for tax purposes 1,408 1,383 1,591
Allowance for funds used during construction - equity 386 (1,334) (1,912)
Tax benefit from the disposition of assets (442) 63 (569)
ITC amortization (1,981) (1,930) (1,962)
California franchise taxes (net of federal benefit) 577 601 521
Other-net (1,872) (707) (1,494)
----------------------------------------------------------------
$ 35,661 $ 43,358 $ 38,876
===============================================================
Effective tax rate 33.2% 33.5% 31.9%
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The net deferred federal income tax liability consists of deferred federal income tax liabilities less related deferred federal income tax assets, as shown (in thousands of dollars):
1999 1998
------------------- --------------------
Deferred Federal Income Tax Liabilities:
AFUDC $ 8,894 $ 8,378
Bond redemptions 6,099 6,466
Excess of tax depreciation over book depreciation 161,903 157,906
Severance Programs 6,380 2,606
Repairs and maintenance 7,684 6,180
Tax benefits flowed through to customers 65,531 65,618
Other (510) (45)
------------------- --------------------
Total $255,981 247,109
------------------- --------------------
Deferred Federal Income Tax Assets:
Avoided interest capitalized 14,624 14,694
Employee benefit plans 3,944 3,049
Contributions in aid of construction and customer advances 36,626 33,925
Gross-ups received on contributions in aid of construction and customer advances 5,163 4,512
Unamortized investment tax credit 19,991 20,432
Other 5,372 8,800
------------------- --------------------
Total 85,720 85,412
------------------- --------------------
Deferred Federal Income Taxes $170,261 $161,697
=================== ====================
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The Company's balance sheets contain a net regulatory tax asset of $27.7 million at December 31, 1999 and $26.7 million at December 31, 1998. The net regulatory asset consists of future revenue to be received from customers (a regulatory tax asset) of $65.5 million at December 31, 1999 and $65.6 million at December 31, 1998, due to flow through of the tax benefits of temporary differences. Offset against these amounts are future revenues to be refunded to customers (a regulatory tax liability), consisting of $17.9 million at December 31, 1999 and $18.5 million at December 31, 1998, due to temporary differences for liberalized depreciation at rates in excess of current tax rates, and $20.0 million at December 31, 1999 and $20.4 million at December 31, 1998 due to temporary differences caused by the investment tax credit. The regulatory tax liability for temporary differences related to liberalized depreciation will continue to be amortized using the average rate assumption method required by the Tax Reform Act of 1986. The regulatory tax liability for temporary differences caused by the investment tax credit will be amortized ratably in the same fashion as the deferred investment credit.
NOTE 6. LONG-TERM DEBT
Substantially all utility plant is subject to the lien of the SPPC indenture under which the first mortgage bonds are issued.
On June 17, 1998, SPPC redeemed $5 million of 8.65% First Mortgage Bonds before the 2002 due date.
In December 1998, SPPC issued $35 million principal amount of collateralized Medium-Term Notes, Series D, consisting of a three year non- callable note, due in 2001, with an interest rate of 5.47% and five year non- callable notes, due in 2003, with interest rate ranging from 5.50% to 5.59%. For all notes, interest is payable in semi-annual payments. The proceeds to SPPC from the sale of the notes was used for general corporate purposes including but not limited to: the acquisition of property; the construction, completion, extension or improvement of facilities; or discharge or refunding of obligations, including short-term borrowings.
On April 9, 1999, the Company sold the right to receive payments made in respect of Transition Property as defined by the Offering Circular dated March 30, 1999, to SPPC Funding LLC, a Delaware special purpose limited liability company whose sole member is the Company, in exchange for the proceeds of the SPPC Funding LLC Notes, Series 1999-1 (the Underlying Notes). SPPC Funding LLC then issued and sold the Underlying Notes to the California Infrastructure and Economic Development Bank Special Purpose Trust SPPC-1 (the Trust) in exchange for the proceeds of the sale of the Trust's $24.0 million 6.4% Rate Reduction Certificates, Series 1999-1 (the Certificates). The Trust, which had been established by the California Infrastructure and Economic Development Bank, issued and sold the Certificates in a private placement pursuant to Rule 144A under the Securities Act of 1933, as amended. The Certificates are one of a series of rate reduction certificates that may be issued from time to time by the Trust and sold to investors upon terms determined at the time of sale.
On July 12, and July 16, 1999, respectively, $10 million of the 6.86% and $20 million of the 6.83% of the Series C, collateralized Medium-Term Notes matured.
On September 17, 1999, the Company issued $100,000,000 Floating Rate Notes, due October 13, 2000. Interest on the Notes is payable quarterly commencing on December 15, 1999. The interest rate on the Notes for each interest period to maturity is a floating rate, subject to adjustment every three months. The quarterly rate is equal to the London InterBank Offered Rate for three-month U.S. dollar deposits (LIBOR) plus a spread of 0.75%. These Notes will not be entitled to any sinking fund and will be redeemable in whole, without premium at the option of the Company, beginning on March 15, 2000 and on the 15th day of each month thereafter. The proceeds of this financing were used to pay down commercial paper.
SPPC's annual amount of maturities for long-term debt is as follows (dollars in thousands):
2000 $102,755
2001 19,620
2002 2,626
2003 20,632
2004 2,621
----------
2000-2004 148,254
Thereafter 579,931
-----------
Total $728,185
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NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The December 31, 1999 carrying amount for cash and cash equivalents, current assets, accounts receivable, accounts payable and current liabilities approximates fair value due to the short-term nature of these instruments.
The total fair value of SPPC's long-term debt at December 31, 1999, is estimated to be $607.1 million (excluding current portion) based on quoted market prices for the same or similar issues or on the current rates offered to SPPC for debt of the same remaining maturities. The total fair value (excluding current portion) was estimated to be $641.9 million as of December 31, 1998.
NOTE 8. SHORT-TERM BORROWINGS
In January of 1999 the Company revised its credit facilities resulting in a $150 million 364-day bank facility, and a $50 million revolving credit facility to support commercial paper activity.
On July 28, 1999 the Company revised its credit facilities resulting in a $150 million 364-day credit facility to support commercial paper activity. This facility may be used for working capital and general corporate purposes, including commercial paper backup. This credit facility will expire on July 28, 2000.
At December 31, 1999, SPPC's short-term debt was $109.6 million comprised entirely of commercial paper at an average interest rate of 6.54%.
The other subsidiaries of SPPC have no outstanding short-term borrowings at this time.
NOTE 9. DIVIDENDS
The Restated Articles of Incorporation of SPPC and the indentures relating to the various series of its First Mortgage Bonds contain restrictions as to the payment of dividends on its common stock. Under the most restrictive of these limitations, approximately $76 million of retained earnings were available at December 31, 1999 for the payment of common stock cash dividends.
NOTE 10. STOCK COMPENSATION PLANS
At December 31, 1999, Sierra Pacific Resources (SPR), SPPC's parent company, had several stock-based compensation plans, which are described below. The Company applies Accounting Principals Board Opinion No. 25, Accounting for Stock Issued to Employees in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for nonqualified stock options and the employee stock purchase plan. The total compensation cost that has been charged against income for the performance shares, dividend equivalents and the non-employee director stock plans was $0.7 million, $0.5 million, and $1.4 million for 1999, 1998 and 1997, respectively. The Company has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock Based Compensation. Had compensation cost for SPR's nonqualified stock options and the employee stock purchase plan been determined based on the fair value at the grant dates for awards under those plans consistent with the provisions of SFAS No. 123, SPPC's income applicable to common stock would have been decreased to the pro forma amounts indicated below:
Income Applicable to Common Stock 1999 1998 1997 ---------------------------------------------------------------------------------------- As Reported $66,241 $80,561 $77,668 Pro Forma $65,408 $80,217 $77,500 |
SPR's executive long-term incentive plan for key management employees,
which was approved by shareholders on May 16, 1994, provides for the issuance of
up to 750,000 of SPR's common shares to key employees through December 31, 2003.
The plan permits the following types of grants, separately or in combination:
nonqualified and qualified stock options, stock appreciation rights, restricted
stock, performance units, performance shares, and bonus stock. During 1999, 1998
and 1997, the Company issued only nonqualified stock options and performance
shares under the long-term incentive plan.
Nonqualified stock options granted during 1999, 1998 and 1997 were granted at an option price not less than market value at the date of the grant (August 1, and January 1, 1999, January 1, 1998 and January 1, 1997, respectively). The January 1 options for 1999, 1998 and 1997 vest to the participants 33 1/3% per year over a three year period from the grant date, and may be exercised for a period not exceeding ten years from the date of the grant. The August 1, 1999 options vest to the participants 33 1/3% per year over a three year period beginning January 1, 2000, and may be exercised for a period not exceeding ten years from the date of the grant. The options may be exercised using either cash or previously acquired shares valued at the current market price, or a combination of both.
As a result of the merger with NVP on August 1, 1999, all shares outstanding as of that date, for January 1, 1999 grants and prior, were converted at a 1.44:1 ratio. The subsequent change in the exercise prices and the outstanding shares is reflected in all numbers shown for the applicable grants.
The fair value of each nonqualified option has been estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants issued in 1999, 1998, and 1997:
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Dividend Expected Risk-Free
Yield Volatility Rate of Return Expected Life
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January 1, 1999 4.40% 18.60% 5.08% 10 years
August 1, 1999 4.25% 17.41% 6.31% 10 years
January 1, 1998 4.71% 13.16% 5.81% 10 years
January 1, 1997 5.30% 11.42% 6.68% 10 years
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A summary of the status of SPR's nonqualified stock option plan as of December 31, 1999, 1998 and 1997, and changes during those years is presented below:
----------------------------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Nonqualified Stock Options Shares (1) Price Shares (1) Price Shares (1) Price
------------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year 285,931 $22.00 187,669 $17.70 101,520 $14.40
Granted 583,016 $25.36 173,460 $24.93 114,472 $19.97
Exercised 1,286 $14.39 31,014 $16.84 14,836 $14.09
Forfeited 34,678 $22.48 44,184 $18.83 13,487 $16.09
Outstanding at end of year 832,983 $24.34 285,931 $22.00 187,669 $17.70
Options exercisable at year-end 126,844 $20.54 50,930 $16.95 29,827 $14.11
Weighted-average grant date fair
value of options:
January 1 $4.05 $4.79 $3.51
August 1 $5.11
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1. As a result of the merger, all options outstanding prior to August 1, 1999 were converted at a 1.44:1 ratio. The historical information has been adjusted to account for the related increase in shares.
The following table summarizes information about nonqualified stock options outstanding at December 31, 1999:
Options Outstanding Options Exercisable
Number Remaining Number
Outstanding at Contractual Life Exercisable at
Grant Date Exercise Price 12/31/99 Exercise Price 12/31/99
01/01/1994 $14.24 11,976 4 years $14.24 11,976
01/01/1995 $13.02 15,841 5 years $13.02 12,673
01/01/1996 $16.23 13,718 6 years $16.23 8,231
01/01/1997 $19.97 62,472 7 years $19.97 41,649
01/01/1998 $24.93 156,960 8 years $24.93 52,315
01/01/1999 $24.22 198,576 9 years $24.22 -
08/01/1999 $26.00 373,440 9.6 years $26.00 -
Weighted Average Remaining 8.7 years
Contractual Life
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During 1999, 1998 and 1997, SPR granted performance shares in the following numbers and initial values, respectively: 27,765, 23,778 and 17,726 shares; and $26.00, $24.22 and $24.93 per share. These numbers reflect a 1.44:1 conversion as a result of the August 1, 1999 merger with Nevada Power Company. The actual number of shares earned by each participant is dependent upon SPR achieving certain financial goals over three-year performance periods. The value of performance shares, if earned, will be equal to the market value of SPR's common shares as of the end of the performance periods. SPR, at its sole discretion, may pay earned performance shares in the form of cash or in shares, or a combination thereof.
Simultaneous with the grant of both the nonqualified options and performance shares above, each participant was granted dividend equivalents for all performance share grants, and for 1996 and prior nonqualified option grants. Each dividend equivalent entitles the participant to receive a contingent right to be paid an amount equal to dividends declared on shares originally granted from the date of grant through the exercise date, or, in the case of performance shares, throughout the performance period. Additionally, in order for dividend equivalents to be paid on the performance shares, certain financial targets must be met. Dividend equivalents will be forfeited if options expire unexercised.
Under SPR's employee stock purchase plan, SPR is authorized to issue up to 400,162 shares of common stock to all of its employees with minimum service requirements. Under the terms of the plan, employees can choose twice each year to have up to 15% of their base earnings withheld to purchase SPR's common stock. The purchase price of the stock is 90% of the market value on the offering commencement date. Employees can withdraw from the plan at any time prior to the exercise date. Under the plan, SPR sold 21,888, 15,282 and 17,822 shares to employees in 1999, 1998 and 1997, respectively. Proforma compensation cost has been estimated for the employees' purchase rights on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for 1999, 1998 and 1997, respectively.
Average Dividend Average Expected Average Risk-Free Weighted Average
Yield Volatility Interest Rate Fair Value
1999 4.31% 18.85% 5.08% $2.85
1998 4.17% 14.16% 4.96% $4.94
1997 4.87% 11.57% 5.59% $4.14
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SPPC and SPR share the same directors and, as a result, the directors are compensated according to the SPR non-employee director stock plan. The plan provides that a portion of the outside directors' annual retainer be paid in SPR stock. Under the current plan the annual retainer for non-employee directors is $30,000, and the minimum amount to be paid in stock is $20,000 per director. During 1999, 1998 and 1997, SPR granted the following total shares and related compensation to directors in SPR stock, respectively: 4,741, 6,391 and 8,208 shares; and $150,000, $233,250, and $230,833. Nevada Power directors, who were appointed to the SPR Board of Directors after the merger, were not issued any stock options for 1999. Stock options were granted only to the remaining SPR directors. In 2000, all directors will be eligible for stock option grants. The Company also paid out phantom stock shares to retiring directors in the amount of $1,222,110.
NOTE 11. RETIREMENT PLAN AND POST RETIREMENT BENEFITS
Pension and other postretirement benefit plans
SPR has pension plans covering substantially all employees. Benefits are based on years of service and the employee's highest compensation prior to retirement. SPR also has a postretirement plan, which provides medical and life insurance benefits for certain retired employees. The following table provides a reconciliation of benefit obligations, plan assets and the funded status of the plans. The non-qualified Supplemental Executive Retirement Plan (SERP) is included as part of pension benefits. This reconciliation is based on a September 30 measurement date and reflects the merger of SPR and NVP during 1999 under purchase accounting. SPPC is a member of the controlled group in the multi-employer plans.
Other Postretirement
Pension Benefits Benefits
--------------------------------------- --------------------------------------
1999 1998 1999 1998
----------------------------------- --------------------------------------
Change in benefit obligations
Benefit obligation, beginning of year $149,031 $119,533 $ 16,381 $ 15,496
Service cost 8,481 5,386 996 432
Interest cost 12,823 9,285 1,982 1,155
Participant contributions 0 0 255 252
Plan amendment&special termination 5,865 2,240 1,312 0
Actuarial (gains) losses 4,663 18,001 (1,694) 47
Merger of SPPC Plans 192,140 0 60,386 0
Curtailment loss (gain) (5,373) 0 386 0
Benefits paid (19,160) (5,414) (2,017) (1,001)
----------- ----------- ----------- -----------
Benefit obligation, end of year $348,470 $149,031 $ 77,987 $ 16,381
=========== =========== =========== ===========
Change in plan assets
Fair value of plan assets, beginning of year $111,160 $100,898 $ 11,139 $ 8,665
Actual return on plan assets 15,510 9,546 4,649 1,464
Company contributions 10,432 6,130 2,069 1,759
Participant contributions 0 0 255 252
Merger of SPPC Plans 208,766 0 50,593 $ -
Benefits paid (19,160) (5,414) (2,017) (1,001)
----------- ----------- ----------- -----------
Fair value of plan assets, end of year $326,708 $111,160 $ 66,688 $ 11,139
=========== =========== =========== ===========
Funded Status, end of year $(21,762) $(37,870) $(11,299) $ (5,243)
Unrecognized net actuarial (gains) losses 26,550 19,320 (8,746) (11,507)
Unrecognized prior service cost 6,375 7,784 0 0
Contributions made in 4th quarter 288 3,609 1,096 1,908
Unrecognized net transition obligation 0 0 12,217 13,561
----------- ----------- ------------ -----------
Accrued pension and postretirement
benefit obligations $ 11,451 $ (7,157) $ (6,732) $ (1,281)
=========== =========== =========== ===========
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The following amounts pertain to the non-qualified SERP plan covering certain current and former employees. The projected benefit obligation and accumulated benefit obligation for pension plans with accumulated benefit obligations in excess of the plan assets were $18.5 million and $15.7 million, respectively, at the end of the year and $9.7 million and $8.3 million, respectively, at the beginning of the year.
Amounts for pension and postretirement benefits recognized in the consolidated balance sheets consist of the following:
Other Postretirement
Pension Benefits Benefits
----------------------------------- -------------------------------
1999 1998 1999 1998
----------------------------------- -------------------------------
Prepaid pension asset $ 26,166 $ - N/A N/A
Accrued benefit liability (14,716) (7,157) $(6,732) $(1,281)
Intangible asset 346 577 N/A N/A
Accumulated other comprehensive income 606 (2,722) N/A N/A
Additional minimum liability (952) 2,145 N/A N/A
----------- ----------- ----------- -----------
Net amount recognized 11,450 (7,157) (6,732) (1,281)
=========== =========== =========== ===========
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The weighted-average actuarial assumptions as of December 31 were as follows:
Other Postretirement
Pension Benefits Benefits
----------------------------- ------------------------
1999 1998 1997 1999 1998 1997
----------------------------- ------------------------
Discount rate 7.50% 6.75% 7.50% 7.50% 6.50% 7.50%
Expected return on plan assets 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%
Rate of compensation increase 4.50% 4.50% 4.50% NA NA NA
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The Company has assumed a health care cost trend rate of 6% for 1999 and all future years.
Net periodic pension and other postretirement benefit costs include the following components:
Pension Benefits
---------------------------------------------------------
1999 1998 1997
---------------------------------------------------------
Service cost $ 8,481 $ 5,386 $ 4,406
Interest cost 12,823 9,285 8,437
Expected return on assets (11,712) (7,697) (7,015)
Amortization of:
Transition asset
Prior service costs 841 780 675
Actuarial (gains) losses 976 187 86
----------- ----------- -----------
Net periodic benefit cost 11,409 7,941 6,589
Additional charges (credits):
Special termination charges 5,865
Curtailment credits (3,920)
----------- ----------- -----------
Total net benefit cost $ 13,354 $ 7,941 $ 6,589
=========== =========== ===========
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Other Postretirement Benefits
--------------------------------------------------------
1999 1998 1997
--------------------------------------------------------
Service cost $ 996 $ 433 $ 370
Interest cost 1,982 1,155 1,270
Expected return on assets (1,741) (770) (626)
Amortization of:
Prior service costs 0 0 0
Transition obligation 1,344 967 967
Actuarial (gains) losses (596) (505) (399)
----------- ----------- -----------
Net periodic benefit cost 1,985 1,280 1,582
Additional charges (credits):
Special termination charges 1,312 0
Curtailment loss 1,283 0
----------- ----------- -----------
Total net benefit cost $ 4,580 $ 1,280 $ 1,582
=========== =========== ===========
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A regulatory asset was booked to offset the net effect of special termination benefits and curtailment costs incurred in connection with the merger of the two companies. The portion of the net periodic benefit cost recognized for pension benefits by SPPC during 1999 was $.9 million. The portion for other postretirement benefits recognized by SPPC was $.9 million.
The assumed health care cost trend rate has a significant effect on the amounts reported. A one percentage point change in the assumed health care cost trend rate would have had the following effects on 1999 service and interest costs and the accumulated postretirement benefit obligation at year end:
Increase Decrease
-------- --------
Effect on service and interest
components of net periodic cost $ 554 $ (512)
Effect on accumulated postretirement
benefit obligation $6,239 $(5,776)
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NOTE 12. POSTEMPLOYMENT BENEFITS
During 1999, SPPC offered a severance program to non-bargaining-unit employees which provided for severance pay and medical benefits continuation totaling $6.4 million and $0.2 million respectively. As of December 31, 1999, as approved by the PUCN, this cost was deferred as a regulatory asset. The order approving the merger of SPR and NVP, by the PUCN, directed SPR to defer merger costs (including severance and related benefits) for a three year period. The deferral of these costs is intended to allow adequate time for the anticipated savings from the merger to develop. At the end of the three year period, the order instructs the Company to propose an amortization period for these costs, and allows the Company to recover the costs to the extent that they are offset by merger savings. At December 31, 1999, the remaining liability for unpaid severance was $3.0 million.
NOTE 13: COMMITMENTS AND CONTINGENCIES
The Company's estimated cash construction expenditures for the year 2000 and the five-year period 2000-2004 are $137.7 million and $679.8 million, respectively.
The Company has several long-term contracts for the purchase of electric energy and/or capacity. These contracts expire in years ranging from 2000 to 2009. Estimated future commitments under non-cancelable agreements with initial terms of one year or more at December 31, 1999 were as follows (dollars in thousands):
Accounted for as
Long-Term
Executory Contracts
2000 $ 28,114
2001 22,787
2002 23,488
2003 24,308
2004 25,182
2005 to 2009 114,840
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The Company has several long-term contracts for the purchase and transportation of coal and gas. These contracts expire in years ranging from 2000 to 2015. Estimated future commitments under non-cancelable agreements with initial terms of one year or more at December 31, 1999 were as follows (dollars in thousands):
Coal and Gas Transportation
2000 $113,011 $ 46,091
2001 38,971 45,914
2002 17,648 44,926
2003 8,098 35,962
2004 0 32,049
2005 to 2015 0 289,619
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The Company has an operating lease for its corporate headquarters building. The primary term of the lease is 25 years, ending in 2010. The current annual rental is $5.4 million, which amount remains constant until the end of the primary term. The lease has renewal options for an additional 50 years.
The total rental expense under all operating leases, excluding fuel transportation contracts, was approximately $10.0 million in 1999, $7.0 million in 1998 and $6.9 million in 1997.
Estimated future minimum cash payments, including the Company's headquarters building, under non-cancelable operating leases with initial terms of one year or more at December 31, 1999 were as follows (dollars in thousands):
2000 $10,007 2001 8,650 2002 7,399 2003 7,220 2004 7,157 2005 to 2014 75,087 |
In September 1994, Region VII of the United States Environmental Protection Agency (EPA) notified the Company that the Company was being named as a potentially responsible party (PRP) regarding the past improper handling of Polychlorinated Biphenyls (PCBs) by PCB Treatment, Inc., located in Kansas City, Kansas, and Kansas City, Missouri (the Sites). The EPA is requesting that the Company voluntarily pay an undefined (pro rata) share of the ultimate clean-up costs at the Sites. A number of the largest PRP's formed a steering committee, which is chaired by the Company. The responsibility of the Committee is to direct clean-up activities, determine appropriate cost allocation, and pursue actions against recalcitrant parties, if necessary. The EPA issued an administrative order on consent requiring signatories to perform certain investigative work at the Sites. The steering committee retained a consultant to prepare an analysis regarding the Sites. The site evaluations have been completed. The EPA is developing an allocation formula to allocate the remediation costs. The Company has recorded preliminary liability for the Sites of $650,000, of which approximately $150,000 has been spent through December 31, 1999. Once evaluations are completed, the Company will be in a better position to estimate and record the ultimate liabilities for the Sites.
Additionally, the Company has four wells which currently exceed the federal drinking water standard for naturally occurring arsenic concentrations. Production from three of these wells continues by blending water treated at the Glendale Water Treatment Plant. The fourth well is out of service pending treatment. The Company's water laboratory research staff is developing options to assure that the Company is prepared to meet new arsenic standards. The new Arsenic regulations will be promulgated in 2000 and the proposed regulation is expected to require action on 17 of the 25 wells serving the Company's system. Depending upon final rules from the EPA, the Company may incur between $70 million and $98 million by 2004 to meet the new standards.
As part of the Generation Divestiture process, SPPC conducted Phase I and Phase II Environmental Assessments for its Ft. Churchill, Tracy and Valmy Power Plants. Anticipated remediation cost is $150,000.
See Notes 1, 3, 4, 6, 8, 11, and 12 of SPPC's consolidated financial statements for additional commitments and contingencies.
SPPC, through the course of its normal business operations, is currently involved in a number of other legal actions, none of which has had or, in the opinion of management, is expected to have a significant impact on its financial position or results of operations.
NOTE 14. SEGMENT INFORMATION
The Company adopted FASB statement No. 131, Disclosure about Segments of an Enterprise and Related Information for its annual reports as of December 31, 1998. The Company operates three business segments providing regulated electric, natural gas and water service. Electric service is provided to northern Nevada and the Lake Tahoe area of California. Natural gas and water services are provided in the Reno-Sparks area of Nevada. Other segment information includes segments below the quantitative threshold for separate disclosure.
Information as to the operations of the different business segments is set forth below based on the nature of products and services offered. The Company evaluates performance based on several factors, of which the primary financial measure is business segment operating income. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies (Note 1). Intersegment revenues are not material.
Financial data for business segments is as follows (in thousands):
Electric Gas Water Reconciling
December 31, 1999 Eliminations Consolidated
Operating revenues $ 609,197 $100,177 $ 54,348 763,722
Operating income 102,460 10,243 17,133 129,836
Operating income taxes 30,986 2,884 2,172 36,042
Depreciation 64,647 5,115 7,611 77,373
Interest expense on long term debt 27,803 3,348 9,112 40,263
Assets 1,620,720 152,016 280,057 43,683 2,096,476
Capital expenditures 102,249 12,041 28,016 142,306
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Reconciling Consolidated
December 31, 1998 Electric Gas Water Eliminations
Operating revenues $ 585,657 $ 99,532 $ 49,143 $ 734,332
Operating income 103,728 10,534 11,932 126,194
Operating income taxes 34,611 5,142 3,797 43,550
Depreciation 57,180 4,810 7,445 69,435
Interest expense on long term debt 25,497 3,601 9,792 38,890
Assets 1,558,322 139,398 274,124 39,976 2,011,820
Capital expenditures 144,080 11,124 28,180 183,384
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Consolidated
December 31, 1997 Electric Gas Water Reconciling Eliminations
Operating Revenues $540,346 $70,675 $46,519 $657,540
Operating income 99,671 10,057 10,444 120,172
Operating income taxes 33,742 4,223 2,422 40,387
Depreciation 52,239 4,531 7,347 64,117
Interest expense on long 28,095 3,312 8,202 39,609
term debt
Capital expenditures 105,531 12,191 30,079 147,801
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The reconciliation of segment assets to the consolidated total includes the following unallocated amounts:
1999 1998
------------- --------------
Other property $ 2,661 $ 1,342
Cash 3,011 15,197
Current assets- other 3,103 2,692
Other regulatory assets 34,571 21,031
Deferred charges- other 337 (286)
-------------- --------------
$43,683 $39,976
============== ==============
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NOTE 15. QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands):
Quarter Ended
------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1999 1999 1999 1999
---------------------------------------------------------------
Operating Revenues $192,611 $179,818 $194,802 $196,491
Operating Income 35,773 29,837 32,527 31,699
Income Before Preferred
Dividend Requirements 22,471 16,892 13,815 18,548
Income Applicable to
Common Stock 21,106 15,527 12,450 17,158
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Quarter Ended
------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998
------------------------------------------------------------
Operating Revenues $182,722 169,143 187,446 $195,021
Operating Income 33,138 27,308 33,626 $ 32,122
Income Before Preferred
Dividend Requirement 23,194 17,705 23,751 $ 21,370
Income Applicable to
Common Stock 21,829 16,340 22,386 $ 20,006
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
(a) Directors
The following is a listing of all the current directors of SPPC and their ages as of December 31, 1999. There are no family relationships among them. Directors serve three-year terms with four (or five) terms of office expiring at each Annual Meeting, or until their successors have been elected and qualified.
Directors whose terms expire in 2000:
Edward P. Bliss, 67
Consultant to Scudder Kemper Investments Co; retired partner, Loomis, Sayles & Company, Inc., an investment counsel firm in Boston, Massachusetts. He is also a Director of Seaboard Petroleum, Midland, Texas. Mr. Bliss has served as a Director of SPR since 1991, of SPPC since 1991, and was elected a Director of NVP in July 1999.
Mary Kaye Cashman, 48
Chief Executive Officer and Vice Chairman of the Board since 1995 of Cashman Equipment Company, one of the oldest and largest Caterpillar dealers in North America. She serves on the boards of the Nevada Test Site Development Corporation; Mackay School of Mines Advisory Board at the University of Nevada, Reno; Bishop Gorman High School Endowment Foundation; and McCaw Elementary School of Mines Foundation. Ms. Cashman has served as a Director of NVP since 1997, and was elected a Director of SPR and SPPC in July 1999. Ms. Cashman tendered her resignation as a Director on March 8, 2000.
Mary Lee Coleman, 62
President of Coleman Enterprises, a developer of shopping centers and industrial parks. She is also a director of First Dental Health. Ms. Coleman has served as a Director of NVP since 1980, and was elected a Director of SPR and SPPC in July 1999.
Jerry E. Herbst, 61
Chief Executive Officer of Terrible Herbst, Inc., a gas station, car wash, convenience store chain; and Herbst Supply Co., Inc., a wholesale fuel distributor; family-owned businesses for which he has worked since 1959. He is also a partner of the Coast Resorts (hotel and casino industry). Mr. Herbst has served as a Director of NVP since 1990, and was elected a Director of SPR and SPPC in July 1999.
Directors whose terms expire in 2001:
Theodore J. Day, 50
Senior Partner, Hale, Day, Gallagher Company, a real estate brokerage and investment firm. Mr. Day has served as a Director of SPPC since 1986, of SPR since 1987, and was elected a Director of NVP in July 1999. He is also a Director of the W.M. Keck Foundation.
James R. Donnelley, 64
Vice Chairman of the Board, R.R. Donnelley & Sons Company, since July 1990, and a Director of that company since 1976. Mr. Donnelley was R.R. Donnelley and Sons' Group President, Corporate Development from June 1987 to July 1990, and Group President, Financial Printing Services Group from January 1985 to January 1988. He is also a Director of Pacific Magazines & Printing Limited, and Chairman of National Merit Scholarship Corporation. Mr. Donnelley has served as a Director of SPR since 1987, of SPPC since 1992, and was elected a Director of NVP in July 1999.
John L. Goolsby, 57
Malyn K. Malquist, 47, President and Chief Executive Officer
Mr. Malquist was elected President, Chief Operating Officer, and a Director of SPR, and President, Chief Executive Officer, and a Director of NVP and SPPC upon the close of SPR's merger with NVP in July 1999. He was previously elected President and Chief Executive Officer of SPR and SPPC in January 1998. In February 1998, Mr. Malquist was elected to the additional position of Chairman. Mr. Malquist continued to hold the positions of Chairman and Chief Executive Officer until SPR's merger with NVP in July 1999. He was Senior Vice President - Distribution Services Business Group and Principal Operations Officer from August 1996 to January 1998. He served as Senior Vice President and Chief Financial Officer of SPR and SPPC from April 1994, when he joined SPR, until August 1996. Prior to joining SPR, Mr. Malquist was with San Diego Gas and Electric, where from 1978 he held various financial positions, including Treasurer and Vice President.
John F. O'Reilly, 54
Chairman and Chief Executive Officer of the law firm of Keefer, O'Reilly, Ferrario and Lubbers. Mr. O'Reilly is also Chairman and Chief Executive Officer of the O'Reilly Gaming Group and is Chairman of the Nevada Test Site Development Corporation. Mr. O'Reilly has served as a Director of NVP since 1995, and was elected a Director of SPR and SPPC in July 1999.
Directors whose terms expire in 2002:
Krestine M. Corbin, 62
President and Chief Executive Officer of Sierra Machinery, Incorporated since 1984 and a director of that company since 1980. She also serves on the Federal Reserve Bank Twelfth District Head Board. Ms. Corbin has served as a Director of SPR since 1991, of SPR since 1989, and was elected a Director of NVP in July 1999.
Fred D. Gibson, Jr., 72
Retired Chairman, President and Chief Executive Officer, but remains as a director, of American Pacific Corporation, a manufacturer of chemicals and pollution abatement equipment and a real estate developer. Mr. Gibson has been affiliated with American Pacific Corporation and its predecessor, Pacific Engineering & Production Co., since 1956. He is also a director of Cashman Equipment Company. Mr. Gibson has served as a Director of NVP since 1978, and was elected a Director of SPR and SPPC in July 1999.
James L. Murphy, 70
Certified Public Accountant and retired partner of and consultant to Grant Thornton L.L.P., an international accounting and management consulting firm. Mr. Murphy is the owner, independent trustee and general partner of several real estate development projects and numerous rental properties. He is also a retired Colonel in the United States Air Force Reserve. Mr. Murphy has served as a Director of SPPC since 1990, of SPR since 1992, and was elected a Director of NVP in July 1999.
Michael R. Niggli, 50, Chairman and Chief Executive Officer
Mr. Niggli was elected Chairman and Chief Executive Officer of SPR, and Chairman of NVP and SPPC, upon the close of SPR's merger with NVP in July 1999. He joined NVP as President and Chief Operating Officer in February 1998. He was appointed by NVP's Board of Directors as Chief Executive Officer effective February 23, 1999 and as Chairman on June 10, 1999. Prior to joining NVP, Mr. Niggli was Senior Vice President of the Custom Accounts Market Unit for Entergy, a New Orleans-based global energy company. Beginning in 1988, he also served at Entergy as Senior Vice President of Marketing and in Vice President positions for areas including fuels, strategic planning and customer service.
Dennis E. Wheeler, 57
Chairman, President and Chief Executive Officer of Coeur d'Alene Mines Corporation since 1986. Mr. Wheeler has served as a Director of SPR since 1990, of SPPC since 1992, and was elected a Director of NVP in July 1999.
All of the present Directors are Directors of SPR. Messrs. Malquist and Murphy are Directors of Lands of Sierra, Inc.; Messrs. Day and Malquist are Directors of Tuscarora Gas Pipeline Co.; Mr. Niggli is a Director of Sierra Pacific Communications; Mr. Malquist is a Director of Sierra Water Development Company, Sierra Gas Holdings Co., Pinon Pine Corp., and Pinon Pine Investment Co. All of the above listed companies are affiliates of SPPC with the exception of GPSF-B, Pinon Pine Corp., and Pinon Pine Investment Co, which are subsidiaries.
(b) Executive Officers
The following are current executive officers of the companies indicated and their ages as of December 31, 1999. There are no family relationships among them. Officers serve a term which extends to and expires at the annual meeting of the Board of Directors or until a successor has been elected and qualified:
Michael R. Niggli, 50, Chairman, Board of Directors
See description under Item 10(a), "Directors," page 83
Malyn K. Malquist, 47, President and Chief Executive Officer
See description under Item 10(a), "Directors," page 82.
Steven W. Rigazio, 45, Senior Vice President, Energy Delivery
Mr. Rigazio was elected Senior Vice President, Energy Delivery, in July 1999, and holds the same position with NVP. Previously he was Vice President, Finance and Planning, Treasurer, and Chief Financial Officer for NVP effective October 1993. Other NVP management positions include Vice President and Treasurer, Chief Financial Officer; Vice President, Planning; Director of System Planning; Manager of Rates and Regulatory Affairs; and Supervisor of Rates and Regulations. Mr. Rigazio has been with NVP since 1984.
William E. Peterson, 52, Senior Vice President, General Counsel and Corporate Secretary
Mr. Peterson was elected to his present position in January 1994, and holds the same positions with the Company's parent, SPR, and with NVP. He was previously Senior Vice President, Corporate Counsel for SPPC from July 1993 to January 1994. Prior to joining the Company in 1993, he served as General Counsel and Resident Agent for SPR since 1992, while a partner in the Woodburn and Wedge law firm. He was a partner in the Woodburn and Wedge law firm since 1982.
Mark A. Ruelle, 38, Senior Vice President, Chief Financial Officer and Treasurer
Mr. Ruelle was elected to his present position March 1, 1997, and holds the same positions with SPR and NVP. Prior to joining the Company, Mr. Ruelle was President of Westar Energy, a subsidiary of Western Resources in 1996, and before that, served as Vice President, Corporate Development for Western Resources in 1995. Mr. Ruelle was with Western Resources since 1987 and served in numerous positions in regulatory affairs, treasury, finance, corporate development, and strategy planning.
David G. Barneby, 54, Vice President, Generation
Mr. Barneby was elected Vice President, Generation, in July 1999, and holds the same position with NVP. Previously he was elected Vice President, Power Delivery for NVP effective October 1993. Mr. Barneby has been with NVP since 1965, and other management positions include Vice President, Generation; Manager, Generation Engineering and Construction; and Superintendent and Project Manager, Reid Gardner Unit 4.
Jeffrey L. Ceccarelli, 45, Vice President, Distribution Services, New Business
Mr. Ceccarelli was elected Vice President, Distribution Services, New Business, in July 1999, and holds the same position with NVP. He was elected Vice President, Distribution Services in February 1998. Prior to this, he served as Executive Director, Distribution Services. From January 1996 through January 1998, Mr. Ceccarelli was Director, Customer Operations. A civil engineer, Mr. Ceccarelli has been with the Company since 1972 and has held numerous management positions in operations, customer service, design and engineering.
Gloria T. Banks Weddle, 50, Vice President, Corporate Services
Ms. Weddle was elected Vice President, Corporate Services of the Company in July 1999, and was elected to the same position with NVP in January 1996. Previously she was Vice President, Human Resources and Corporate Services for NVP effective October 1993. Other NVP management positions include Vice President, Human Resources; Director of Human Resources; and Manager of Compensation and Benefits. Ms. Weddle has been with NVP since 1973.
Matt H. Davis, 44, Vice President, Distribution Services, Operations and Maintenance
Mr. Davis was elected Vice President, Distribution Services, Operations and Maintenance in July 1999, and holds the same position with NVP. Previously he was Director, System Planning and Division Director, System Planning and Operations for NVP. Mr. Davis has been with NVP since 1978 and has held various positions in the distribution, transmission, power contracts, and land services departments.
Mary O. Simmons, 44, Controller
Ms. Simmons was elected to her current position in June 1997, and holds the same position with SPR and NVP. Her previous positions include: Director, Water Policy and Planning; Director, Budgets and Financial Services; and Assistant Treasurer, Shareholder Relations for SPR. Ms. Simmons, a certified public accountant, has been with the Company since 1985.
Douglas R. Ponn, 52, Vice President, Governmental and Regulatory Affairs
Mr. Ponn was elected Vice President, Governmental and Regulatory Affairs in July 1999, and holds the same position with NVP. Previously he was Executive Director, Governmental and Regulatory Affairs. Mr. Ponn has been with the Company since 1986.
Mary Jane Reed, 53, Vice President, Human Resources
Ms. Reed was elected Vice President, Human Resources of the Company in January 1997, and was named to the same position with NVP in July 1999. She was previously Vice President, Human Resources Network Group for Bell Atlantic Corporation. Ms. Reed was with Bell Atlantic from 1968 - 1996 and in addition to the Vice President's position, served as Director of Human Resources, Assistant to the President for Consumer Affairs, and several other managerial positions.
Although all outstanding shares of the Company's common stock are held by SPR and it is SPR's common stock which is traded on the New York Stock Exchange, SPPC has four series of non-voting preferred stock still outstanding and registered under the Securities Exchange Act of 1934 ("the Act"). As a technical matter, the Company is thus deemed an "issuer" for purposes of the Act whose officers are required to make filings with respect to beneficial ownership, if any, of those non-voting preferred securities. The Company's officers, all of whom are currently reporting pursuant to Section 16(a) of the Act with respect to SPR's common stock, have now filed reports with respect to the Company's preferred stock, which reports show no past or current beneficial ownership of such preferred stock.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information about the compensation of each Chief Executive Officer that served in that position during 1999, and each of the four most highly compensated officers for services in all capacities to SPR and its subsidiaries.
Annual Compensation Long-Term Compensation
------------------------------------------------------------------------------------------------------
Awards Payout
-----------------------------------------------------------
Securities
Restricted Underlying
Name and Principal Other Annual Stock Options/ LTIP All Other
Position Year Salary ($) Bonus ($) Compensation ($) Awards ($) SARs (#) Payouts ($) Compensation ($)
(a) (b) (c) (d) (2) (e) (3) (f) (g) (4) (h) (5) (i) (6)
----------------------------------------------------------------------------------------------------------------------------------
Michael R. Niggli (1) 1999 $400,000 $255,130 $ 1,183 - 123,000 $410,306 $ 8,934
Chairman and Chief 1998 $353,846 $216,000 $11,161 - - $115,399 $79,743
Executive Officer
Malyn K. Malquist (1) 1999 $352,692 $199,875 $14,337 - 298,792 - $22,021
President and Chief 1998 $292,960 $180,900 $16,486 - 61,000 $ 85,184 $15,805
Operating Officer 1997 $212,803 $ 92,198 $ 2,052 - 14,000 $101,192 $15,279
Steven W. Rigazio 1999 $262,075 $ 81,700 $60,654 - 36,260 $127,712 $ 6,811
Senior Vice President, 1998 $219,462 $ 30,750 $13,712 - - $ 29,304 $ 4,800
Energy Delivery 1997 $202,269 $ 48,750 $11,736 - - $ 36,594 $ 4,800
Mark A. Ruelle 1999 $196,654 $ 86,658 $ 7,389 - 61,292 - $ 8,565
Senior Vice President, 1998 $192,116 $ 72,843 $12,342 - 9,000 $ 50,108 $ 8,974
Chief Financial Officer 1997 $143,308 $ 65,269 $ 3,808 - 8,384 - $77,329
and Treasurer
William E. Peterson 1999 $200,000 $ 83,053 $20,727 - 80,168 - $11,974
Senior Vice President, 1998 $199,385 $ 71,503 $18,918 - 9,000 $ 85,184 $29,939
General Counsel and 1997 $207,757 $ 78,184 $17,142 - 10,000 $101,192 $29,488
Corporate Secretary
Gloria T. Banks-Weddle 1999 $185,769 $ 57,564 $41,358 - 18,220 $101,582 $ 7,371
Vice President, 1998 $177,222 $ 54,000 - - - $ 29,960 $ 4,514
Corporate Services 1997 $164,539 $ 25,500 - - - - $ 3,067
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|
1. Mr. Malquist was Chairman, President and Chief Executive Officer of Sierra
Pacific Resources until the August 1, 1999 merger, at which time Mr.
Malquist was named President and Chief Executive Officer of SPPC, and
President and Chief Operating Officer of the parent, SPR; and Mr. Niggli
was appointed Chairman of the Board of Directors and Chief Executive
Officer of the parent, SPR, and Chairman of the Board of Directors of SPPC.
2. The amounts presented for 1999, and those for SPR executives in 1998 and
1997, represent incentive pay received pursuant to SPR's "pay for
performance" team incentive plan approved by stockholders in May, 1994. The
1998 and 1997 amounts for the NVP executives represent pay received
according to the NVP Short-Term Incentive Plan.
3. For the executives listed, with the exceptions noted below, these amounts
represent Personal Time Off payouts. For Mr. Rigazio and Ms. Banks-Weddle,
the Personal Time Off payouts were $17,881 and $5,596 respectively. Also
included for these executives is the amount of those perquisites, which in
the aggregate, exceeded the lesser of $50,000 or 10% of their salary and
bonus. Due to a change in policies after the merger, the NVP executives
were either given their company vehicle, or allowed to purchase it at a
bargain price. The fair market value and the related tax gross-up, less any
amount paid by the executive, if applicable, was included as compensation
for the executives. Mr.
Rigazio and Ms. Banks-Weddle received, as compensation for their automobiles,
$42,774 and $35,762 respectively.
4. As a result of the August 1, 1999 merger with Nevada Power Company, all SPR
nonqualifying stock options outstanding as of that date were converted at a
ratio of 1.44:1. For the pre-merger SPR executives, the 1999 option amounts
include the number of new shares issued during the year, as well as the total
number of shares that were converted for that employee. For 1998 and 1997,
the amounts are the same as those presented in prior years and do not reflect
the conversion.
5. The Long-term incentive payouts for the SPR executives, for the three-year
period January 1, 1997 to December 31, 1999, was not approved for payment by
the SPR Board of Directors; therefore, zero amounts are shown in 1999 for the
pre-merger SPR executives. Nevada Power executives received a lump sum payout
of all their performance shares as a result of the August 1, 1999 merger.
6. Amounts for All Other Compensation include the following for 1999:
-------------------------------------------------------------------------------------------------------------------------
Michael R. Malyn K. Steven W. Mark A. William E. Gloria T.
Description Niggli Malquist Rigazio Ruelle Peterson Banks-Weddle
-------------------------------------------------------------------------------------------------------------------------
Company contributions to $6,639 $ 6,000 $6,659 $6,000 $6,000 $7,204
the 401k deferred
compensation plan
Company contributions to $14,225 $2,000 $4,126
the nonqualified deferred
compensation plan
Imputed income on group $ 528 $ 152 $ 176 $ 643 $ 166
term life insurance
premiums paid by the
Company
Insurance premiums paid for $2,294 $ 1,268 $ 389 $1,205
executive term life
policies
-------------------------------------------------------------------------------------------------------------------------
|
Options/SAR Grants in Last Fiscal Year
The following table shows all grants of options to the named executive officers of SPR in 1999. Pursuant to Securities and Exchange Commission (SEC) rules, the table also shows the present value of the grant at the date of grant.
------------------------------------------------------------------------------------------------------------------------------------
Percent of Total
Number of Securities Options/SAR's Granted
Underlying to Employees in Exercise of Base Grant Date
Name Options/SAR's Granted Fiscal Year Price ($/share) Expiration Date Present Value
(a) (1) (b) (2) (c) (3) (d) (e) (f) (4)
------------------------------------------------------------------------------------------------------------------------------------
Michael R. Niggli
08/01/1999 Grant 123,000 14.77% $26.00 08/01/2009 $ 628,530
Employee Total 123,000 14.77% $ 628,530
Malyn K. Malquist
08/01/1999 Grant 87,840 10.55% $26.00 08/01/2009 $ 448,862
01/01/1999 Grant 87,840 10.55% $24.22 01/01/2009 $ 355,752
01/01/1998 Grant 87,840 10.55% $24.93 01/01/2008 $ 275,110
01/01/1997 Grant 20,160 2.42% $19.97 01/01/2007 $ 49,157
01/01/1996 Grant 5,045 0.61% $16.23 01/01/2006 $ 7,459
01/01/1995 Grant 6,092 0.73% $13.02 01/01/2005
01/01/1994 Grant 3,975 0.48% $14.24 01/01/2004
Employee Total 298,792 35.89% $1,136,340
|
Steven W. Rigazio 08/01/1999 Grant 23,300 2.80% $26.00 08/01/2009 $119,063 01/01/1999 Grant 12,960 1.56% $24.22 01/01/2009 $ 52,488 Employee Total 36,260 4.36% $171,551 Mark A. Ruelle 08/01/1999 Grant 23,300 2.80% $26.00 08/01/2009 $119,063 01/01/1999 Grant 12,960 1.56% $24.22 01/01/2009 $ 52,488 01/01/1998 Grant 12,960 1.56% $24.93 01/01/2008 $ 40,590 01/01/1997 Grant 12,072 1.45% $19.97 01/01/2007 $ 29,436 Employee Total 61,292 7.37% $241,577 William E. Peterson 08/01/1999 Grant 23,300 2.80% $26.00 08/01/2009 $119,063 01/01/1999 Grant 12,960 1.56% $24.22 01/01/2009 $ 52,488 01/01/1998 Grant 12,960 1.56% $24.93 01/01/2008 $ 40,590 01/01/1997 Grant 14,400 1.73% $19.97 01/01/2007 $ 35,112 01/01/1996 Grant 5,045 0.61% $16.23 01/01/2006 $ 7,459 01/01/1995 Grant 6,092 0.73% $13.02 01/01/2005 01/01/1994 Grant 5,411 0.65% $14.24 01/01/2004 Employee Total 80,168 9.64% $254,712 Gloria T. Banks-Weddle 08/01/1999 Grant 10,300 1.24% $26.00 08/01/2009 $ 52,633 01/01/1999 Grant 7,920 0.95% $24.22 01/01/2009 $ 32,076 Employee Total 18,220 2.19% $ 84,709 -------------------------------------------------------------------------------- |
1. Under the SPR executive long-term incentive plan, the 1999 grants of
nonqualifying stock options were made on January 1. One third of these
grants vest annually commencing one year after the date of the grant. An
additional grant of nonqualifying stock options was made on August 1, 1999,
following the merger with Nevada Power Company. One third of these grants
vest annually commencing January 1, 2001.
2. As a result of the August 1, 1999 merger with Nevada Power Company, all SPR
nonqualifying stock options outstanding as of that date were converted at a
ratio of 1.44:1. This resulted in the repricing of each grant and a change
in the number of outstanding shares for each employee. According to SEC
regulations, these repriced options are listed above as grants issued
during the year. The vesting periods and expiration dates of the grants
were not changed.
3. The total number of nonqualifying stock options granted to all employees in
1999 was 832,983.
4. The hypothetical grant date present values are calculated under the Black-
Scholes Model. The Black-Scholes Model is a mathematical formula used to
value options traded on stock exchanges. The assumptions used in
determining the option grant date present value listed above include the
stock's average expected volatility (17.77%), average risk free rate of
return (5.94%), average projected dividend yield (4.30%), the stock option
term (10 years), and an adjustment for risk of forfeiture during the
vesting period (3 years at 3%). No adjustment was made for non-
transferability.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
The following table provides information as to the value of the options held by the named executive officers at year end measured in terms of the closing price of Sierra Pacific Resources common stock on December 31, 1999.
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Shares Number of Securities Underlying
Acquired on Value Unexercised Options/SARs at Value of Unexercised in-the-money
Name Exercise Realized Fiscal Year-End Options/SARs at Fiscal Year-End
(a) (b) (c) (d) (e)
-------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------------------------------------------------------------------------------------------
Michael R. Niggli - - - 123,000 - -
Malyn K. Malquist - - 54,593 244,199 $36,384 $7,400
Steven W. Rigazio - - - 36,260 - -
Mark A. Ruelle - - 12,368 48,924 - -
William E. Peterson - - 27,232 52,936 $40,798 $7,400
Gloria T. Banks-Weddle - - - 18,220 - -
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|
(e) Pre-tax gain. Value of in-the-money options based on December 31, 1999 closing trading price of $17.31 less the option exercise price.
Long-Term Incentive Plans-Awards in Last Five Years
The executive long-term incentive plan (LTIP) provides for the granting of stock options (both nonqualified and qualified), stock appreciation rights (SARs), restricted stock performance units, performance shares and bonus stock to participating employees as an incentive for outstanding performance. Incentive compensation is based on the achievement of pre-established financial goals for SPR. Goals are established for total shareholder return (TSR) compared against the Dow Jones Utility Index and annual growth in earnings per share (EPS).
The following table provides information as to the performance shares granted to the named executive officers of Sierra Pacific Power Company in 1999. Nonqualifying stock options granted to the named executives as part of the LTIP are shown in the table "Option/SAR Grants in Last Fiscal Year."
-----------------------------------------------------------------------------------------------------------------------------
Estimated Future Payouts Under Non-Stock Price-
Based Plans
---------------------------------------------------
Performance or
Number of Shares, Other Period Until
Units or Other Maturation or
Name Rights Payout Threshold ($) Target ($) Maximum ($)
(a) (b) (c) (d)(1) (e)(2) (f)(3)
-----------------------------------------------------------------------------------------------------------------------------
Michael R. Niggli 6,480 3 years $78,473 $156,946 $274,655
Malyn K. Malquist 6,480 3 years $78,473 $156,946 $274,655
Steven W. Rigazio 1,872 3 years $22,670 $ 45,340 $ 79,345
Mark A. Ruelle 1,872 3 years $22,670 $ 45,340 $ 79,345
William E. Peterson 1,872 3 years $22,670 $ 45,340 $ 79,345
Gloria T. Banks-Weddle 1,152 3 years $13,951 $ 27,901 $ 48,828
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1. The threshold represents the level of TSR and EPS achieved during the cycle which represents minimum acceptable performance and which, if attained, results in payment of 50% of the target award. Performance below the minimum acceptable level results in no award earned.
2. The target represents the level of TSR and EPS achieved during the cycle
which indicates outstanding performance and which, if attained, results in
payment of 100% of the target award.
3. The maximum represents the maximum payout possible under the plan and a
level of TSR and EPS indicative of exceptional performance which, if
attained, results in a payment of 175% of the target award.
All levels of awards are made with reference to the price of each performance share at the time of the grant.
Pension Plans
The following table shows annual benefits payable on retirement at normal retirement age 65 to elected officers under the Company's defined benefit plans based on various levels of remuneration and years of service which may exist at the time of retirement.
---------------------------------------------------------------------------------------- Highest Average Annual Benefits for Years of Service Indicated Five-Years Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years ---------------------------------------------------------------------------------------- $ 60,000 $ 27,000 $ 31,500 $ 36,000 $ 36,000 $ 36,000 $120,000 $ 54,000 $ 63,000 $ 72,000 $ 72,000 $ 72,000 $180,000 $ 81,000 $ 94,500 $108,000 $108,000 $108,000 $240,000 $108,000 $126,000 $144,000 $144,000 $144,000 $300,000 $135,000 $157,500 $180,000 $180,000 $180,000 $360,000 $162,000 $189,000 $216,000 $216,000 $216,000 $420,000 $189,000 $220,500 $252,000 $252,000 $252,000 $480,000 $216,000 $252,000 $288,000 $288,000 $288,000 $540,000 $243,000 $283,500 $324,000 $324,000 $324,000 $600,000 $270,000 $315,000 $360,000 $360,000 $360,000 $660,000 $297,000 $346,500 $396,000 $396,000 $396,000 $720,000 $324,000 $378,000 $432,000 $432,000 $432,000 ---------------------------------------------------------------------------------------- |
The Company's noncontributory retirement plan provides retirement benefits to eligible employees upon retirement at a specified age. Annual benefits payable are determined by a formula based on years of service and final average earnings consisting of base salary and incentive compensation. Remuneration for the named executives is the amount shown under "Salary" and "Incentive Pay" in the "Summary Compensation Table. Pension costs of the retirement plan to which the Company contributes 100% of the funding are not and cannot be readily allocated to individual employees and are not subject to Social Security or other offsets.
Years of credited service for the named executives are as follows: Mr. Niggli, 0.9; Mr. Malquist, 4.6; Mr. Rigazio, 14.5; Mr. Ruelle, 1.8; Mr. Peterson, 12.5; and Ms. Banks-Weddle, 19.8.
A supplemental executive retirement plan (SERP) and an excess plan are also offered to the named executive officers. The SERP is intended to ensure the payment of a competitive level of retirement income to attract, retain and motivate selected executives. The excess plan is intended to provide benefits to executive officers whose pension benefits under the Company's retirement plan are limited by law to certain maximum amounts.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Voting Stock
SPR owns 100% of the voting stock of SPPC.
The table below sets forth the shares of Sierra Pacific Resources Common Stock beneficially owned by each director, nominee for director, the Chief Executive Officer, and the four other most highly compensated executive officers. No director, nominee for director or executive officer owns, nor do the directors and executive officers as a group own, in excess of one percent of the outstanding Common Stock of SPR. Unless otherwise indicated, all persons named in the table have sole voting and investment power with respect to the shares shown.
Common Shares
Beneficially Percent of Total Common
Owned as of Shares Outstanding as of
Name of Director or Nominee March 1, 2000 March 1, 2000
--------------------------- ----------------- ------------------------
Edward P. Bliss 22,988
Mary K. Cashman 9,054
Mary L. Coleman 262,656
Krestine M. Corbin 16,454
Theodore J. Day 31,429 No director or nominee
James R. Donnelley 30,129 for director owns in excess
Fred D. Gibson Jr. 7,708 of one percent
John L. Goolsby 7,965
Jerry E. Herbst 5,100
Malyn K. Malquist 158,479
James L. Murphy 18,285
Michael R. Niggli 43,867
John F. O'Reilly 4,000
Dennis E. Wheeler 13,635
-------
631,749
=======
Common Shares
Beneficially Percent of Total Common
Owned as of Shares Outstanding as of
Executive Officers March 1, 2000 March 1, 2000
------------------ ----------------- ------------------------
Charles A. Lenzie (1) 9,475
Michael R. Niggli (1) 43,867
Malyn K. Malquist (1) 158,479 No executive officer owns
Steven W. Rigazio 20,553 in excess of one percent
Mark A. Ruelle 35,444
William E. Peterson 55,993
Gloria T. Banks-Weddle 6,839
-------
330,650
=======
All directors and executive officers
as a group (a) (b) (c) 876,275
=======
|
(1) Mr. Malquist was Chairman, President and Chief Executive Officer of Sierra Pacific Resources until the August 1, 1999 merger, at which time Mr. Malquist was named President and Chief Executive Officer of SPPC, and President and Chief Operating Officer of the parent, SPR, and Mr.
Niggli was appointed Chairman of the Board of Directors and Chief Executive Officer of the parent, SPR, and Chairman of the Board of Directors of SPPC.
(a) Includes shares acquired through participation in the Employee Stock Purchase Plan and/or the 401(k) plan.
(b) The number of shares beneficially owned includes shares which the Executive Officers currently have the right to acquire pursuant to stock options granted, and performance shares earned under the Executive Long-Term Incentive Plan. Share beneficially owned pursuant to stock options granted to Messrs. Niggli, Malquist, Rigazio, Peterson, Ruelle, Banks-Weddle, and directors and executive officers as a group are 34,797, 151,365, 7,766, 50,668, 32,799 3,433, and 369,503 shares, respectively.
(c) Included in the shares beneficially owned by the Directors are 45,913 shares of "phantom stock" representing the actuarial value of the Director's vested benefits in the terminated Retirement Plan for Outside Directors. The "phantom stock" is held in an account to be paid at the time of the Director's departure from the Board.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SPR entered into an agreement with Hale Day Gallagher Co., a real estate brokerage and investment company, to act as broker for the sale of a property owned by Lands of Sierra, Inc., a subsidiary of SPR. The sale of the property resulted in Hale Day Gallagher Co. receiving a standard brokerage commission of 5% of the selling price. Mr. T.J. Day, a senior partner of Hale Day Gallagher Co. and a Director of the Company, did not participate in any discussions or voting to retain the firm, had no relationship with, or interest in, the transaction, will receive no part of the commission, and no direct or indirect benefit from the transaction.
Mr. Peterson, formerly a partner with the law firm of Woodburn and Wedge, became Senior Vice President and General Counsel for Sierra Pacific Resources in 1993. Woodburn and Wedge, which has performed legal services for Sierra Pacific Power Company since 1920 and for Sierra Pacific Resources and all of its subsidiaries from their inception, continues to perform legal work for the Company. Mr. Peterson's spouse, an equity partner in the firm since 1982, has performed work for the Company since 1976 and continues to do so from time to time.
Susan Oldham, a former employee of SPPC specializing in water resources law, planning and policy accepted the Company's voluntary severance offering in December 1995. Ms. Oldham is the spouse of Steven C. Oldham, Vice President Transmission Business Group and Strategic Development for Sierra Pacific Power Company. Ms. Oldham, a licensed attorney in Nevada and California, has continued to perform specialized legal services in the water resources area for the Company on a contract basis.
In 1999, SPPC purchased all of the plant assets of the Silver Lake Water Company. The stock is owned 50% by the Lear Family Trust and 50% by Moya Olsen Lear. Mr. Murphy, a Director of SPPC, and Mr. Dayton, a former director of SPPC and a director at the time of purchase, are trustees of the Lear Family Trust. Neither Mr. Murphy nor Mr. Dayton participated in any of the Company's discussions or deliberations to purchase the Silver Lake Water Company and neither received any benefit, either directly or indirectly, from the transaction.
Change in Control Agreement
Sierra Pacific Resources has entered into Employment Agreements with Messrs. Niggli and Malquist. Messrs. Niggli and Malquist are sometimes hereinafter individually referred to as the "Executive." The Employment Agreements became effective on July 28, 1999, and have an initial term of three years, which term would automatically be extended in the event of a Change in Control (as defined in the Agreements) to the third anniversary of the Change in Control (or the consummation of the Change in Control, if later). The extended term is subject to further extension on the occurrence of an additional Change in Control event.
Pursuant to the Employment Agreements, Mr. Niggli will serve as Chairman and Chief Executive Officer of Sierra Pacific Resources, and Mr. Malquist will serve as President and Chief Operating Officer of Sierra Pacific Resources and Chief Executive Officer of Nevada Power Company and SPPC.
Each Executive's Employment Agreement provides that he will receive annual base salary commensurate with his position and level of responsibility, as determined by the Sierra Pacific Board (or compensation committee thereof), but not less than the Executive's annual base salary as in effect immediately prior to the Merger. Base salary may not be decreased. Each Employment Agreement also provides that the Executive will be eligible to participate in any annual incentive and long-term cash incentive plans applicable to executive and management employees that are authorized by the Sierra Pacific Board (or compensation committee thereof), with such participation, subject to achievement of applicable performance measures, to be at annual target payout or grant levels, respectively, of not less than a percentage of the Executive's annual base salary equal to the corresponding target percentage of annual base salary in effect for the Executive under the Nevada Power or Sierra Pacific plans in which the Executive participated immediately prior to the Merger; provided, however, that the target percentages for one Executive shall in no event be less than the target percentages for the other Executive. The Executives also are entitled to participate in all employee benefit plans in which senior executives of Sierra pacific are entitled to participate, in certain fringe benefits and in the supplemental retirement plans in which they participated immediately prior to the Merger.
If during the term of the Employment Agreement Sierra Pacific terminates the employment of the Executive for reasons other than cause (as defined in each Employment Agreement), death or disability or the Executive terminates his employment for good reason (as defined in each Employment Agreement), the Executive will receive, in addition to all compensation earned through the date of termination and coverage and benefits under all benefit and incentive compensation plans to which he is entitled pursuant to the terms thereof, a severance payment equal to three times the sum of his annual base salary and target annual bonus. In addition, the Executive will continue to receive health benefits (i.e., medical insurance, etc.) and life benefits on the same terms and conditions as prior to his termination for 36 months following his termination (the "Continuation Period").
The Executive has no duty to mitigate, but the health and life benefits listed above will be offset by any benefits payable to the Executive during the Continuation Period from another employer. Under the Employment Agreements, Sierra Pacific will pay any additional amounts sufficient to hold the Executive harmless for any excise tax that might be imposed as a result of the Executive being subject to the federal excise tax on "excess parachute payments" or similar taxes imposed by state or local law in connection with receiving any compensation or benefits pursuant to his Employment Agreement or otherwise that is considered contingent on a change in control. If the Executive dies, is terminated due
to permanent disability, is terminated for cause, or terminates for other than good reason, in each case during the term of the Employment Agreement, Sierra Pacific will pay to the Executive or the Executive's beneficiaries or estate, as the case may be, all compensation earned through the date of termination and benefits payable under applicable benefit and incentive compensation plans.
A Change in Control for purposes of the Employment Agreements occurs (i) if Sierra Pacific merges or consolidates, or sells all or substantially all of its assets, and less than 65% of the voting power of the surviving corporation is owned by those stockholders who were stockholders of Sierra Pacific immediately prior to such merger or sale; (ii) any person acquires 20% or more of Sierra Pacific's voting stock; (iii) Sierra Pacific enters into an agreement or Sierra Pacific or any person announces an intent to take action, the consummation of which would otherwise result in a Change in Control, or the Board of Directors of Sierra Pacific adopts a resolution to the effect that a Change in Control has occurred; (iv) within a two-year period, a majority of the directors of Sierra Pacific at the beginning of such period cease to be directors; or (v) the stockholders of Sierra Pacific approve a complete liquidation or dissolution of Sierra Pacific.
Nevada Power Company
On March 13, 1998, Gloria Banks Weddle, David G. Barneby, and Steven W. Rigazio entered into employment agreements with Nevada Power Company for a three-year term which would automatically be extended in the event of a Change in Control to the third anniversary of the Change in Control (or the consummation of the Change in Control, if later). The extended term is subject to further extension on the occurrence of a further Change in Control event. The announcement of the execution of the Merger Agreement constituted a Change in Control under the employment agreements, and the consummation of the Mergers constituted an additional change in control event. If during the term of the employment agreement Nevada Power terminates the employment of an executive officer for reasons other than cause (as defined in each employment agreement), death or disability, or the executive officer terminates his or her employment for good reason (as defined in each employment agreement), the executive officer will receive, in addition to all compensation earned through the date of termination and coverage and benefits under all benefit and incentive compensation plans to which the executive officer is entitled pursuant to the terms thereof, a severance payment equal to two times the sum of his or her annual base salary and target annual bonus. In addition, the executive officer will continue to receive health benefits (i.e., medical insurance, etc.) and life benefits which will be offset by any benefits payable to the executive officer during the applicable benefit continuation period from another employer. Under the employment agreements, the executive officer will receive additional amounts sufficient to hold the executive harmless for any excise tax that might be imposed by state or local law in connection with receiving any compensation or benefits pursuant to the employment agreement or otherwise that is considered contingent on a Change in Control.
The annual incentive plans, 1993 Long-Term Incentive Plan and the Supplemental Executive Retirement Plan of Nevada Power, contained provisions relating to Change in Control. Under the annual incentive plans, after a Change in Control, eligible participants, whether or not the participants are terminated, including executive officers and participants who terminated prior to the Change in Control by reason of normal or early retirement or death, will have a right to an immediate cash payment of their annual awards, on a pro-rated basis, based on annual base salary and on the assumption that established targets at 100% achievement level for the year had been met. Under the 1993 Long-Term Incentive Plan, after a Change in Control, incentive compensation unit awards for outstanding performance periods will be immediately paid to participating executive officers in the
amount of one share of Nevada Power Common Stock for each incentive compensation unit. Under the Supplemental Executive Retirement Plan, the accrued benefit of each executive officer participating therein will become fully vested on the occurrence of a Change in Control. The consummation of the Mergers constituted a "Change in Control" under all the plans described above.
Sierra Pacific Power Company
In February 1997, SPR entered into severance agreements with Jeffrey L.
Ceccarellli, Steven C. Oldham, William E. Peterson, Douglas R. Ponn, Mark A.
Ruelle, Mary O. Simmons, and Mary Jane Reed. These agreements provide that,
upon termination of the executive's employment within twenty-four months
following a change in control of SPR (as defined in the agreements) either (a)
by SPR for reasons other than cause (as defined in the agreements), death or
disability, or (b) by the executive for good reason (as defined by the
agreement, including a diminution of responsibilities, compensation, or benefits
(unless, with respect to reduction in salary or benefits, such reduction is
applicable to all senior executives of SPR and the acquirer)), the executive
will receive certain payments and benefits. These severance payments and
benefits include (i) a lump sum payment equal to three times the sum of the
executive's base salary and target bonus, (ii) a lump sum payment equal to the
present value of the benefits the executive would have received had be continued
to participate in SPR's retirement plans for an additional 3 years (or, in the
case of SPR's Supplemental Executive Retirement Plan only, the greater of three
years or the period from the date of termination until the executive's early
retirement date, as defined in such plan), and (iii) continuation of life,
disability, accident and health insurance benefits for a period of thirty-six
(36) months immediately following termination of employment. The agreements
also provide that if any compensation paid, or benefit provided, to the
executive, whether or not pursuant to the change-in-control agreements, would be
subject to the federal excise tax on "excess parachute payments," payments and
benefits provided pursuant to the agreement will be cut back to the largest
amount that would not be subject to such excise tax, if such cutback results in
a higher after-tax payment to the executive. The Board of Directors entered
into these agreements in order to attract and retain excellent management and to
encourage and reinforce continued attention to the executives' assigned duties
without distraction under circumstances arising from the possibility of a change
in control of SPR. In entering into these agreements, the Board was advised by
Towers Perrin, the national compensation and benefits consulting firm described
above, and Skadden, Arps, Slate, Meager & Flom, an independent outside law firm,
to insure that the agreements entered into were in line with existing industry
standards and provided benefits to management consistent with those standards.
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
Page
----
1. Financial Statements:
Independent Auditors' Report................................... 52
Consolidated Balance Sheets as of
December 31, 1999 and 1998................................... 53
Consolidated Statements of Income for the Years
Ended December 31, 1999, 1998 and 1997....................... 54
Consolidated Statements of Common Shareholder's Equity
for the Years Ended December 31, 1999, 1998 and 1997......... 55
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1999, 1998and 1997.................. 56
Consolidated Statements of Capitalization as of
December 31, 1999 and 1998................................... 57
Notes to Consolidated Financial Statements..................... 58-80
2. Financial Statement Schedules:
Independent Auditors' Report................................... 98
Schedule II - Consolidated Valuation and Qualifying Accounts... 99
|
All other schedules have been omitted because they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules have been omitted because the information is not applicable.
3. Exhibits:
Exhibits are listed in the Exhibit Index on pages 100-107
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIERRA PACIFIC POWER COMPANY
By /S/ Malyn K. Malquist
----------------------
Malyn K. Malquist
President, Chief Operating Officer and Director
March 22, 2000
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 22nd day of March 2000.
/S/ Mark A. Ruelle /S/ Mary O. Simmons
-------------------------------------- --------------------------------------
Mark A. Ruelle Mary O. Simmons
Senior Vice President, Controller
Chief Financial Officer and Treasurer (Principal Accounting Officer)
(Principal Financial Officer)
/S/ Edward P. Bliss /S/ Mary Kaye Cashman
-------------------------------------- --------------------------------------
Edward P. Bliss Mary Kaye Cashman
Director Director
/S/ Mary Lee Coleman /S/ Jerry E. Herbst
-------------------------------------- --------------------------------------
Mary Lee Coleman Jerry E. Herbst
Director Director
/S/ Theodore J. Day /S/ James R. Donnelley
-------------------------------------- --------------------------------------
Theodore J. Day James R. Donnelley
Director Director
/S/ John L. Goolsby /S/ Michael R. Niggli
-------------------------------------- --------------------------------------
John L. Goolsby Michael R. Niggli
Director Chairman, Chief Executive Officer
Director
/S/ John F. O'Reilly /S/ Krestine M. Corbin
-------------------------------------- --------------------------------------
John F. O'Reilly Krestine M. Corbin
Director Director
/S/ Fred D. Gibson, Jr. /S/ James L. Murphy
-------------------------------------- --------------------------------------
Fred D. Gibson, Jr. James L. Murphy
Director Director
/S/ Dennis E. Wheeler
--------------------------------------
Dennis E. Wheeler
Director
|
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Sierra Pacific Power Company
Reno, Nevada
We have audited the consolidated financial statements of Sierra Pacific Power Company and subsidiaries (the Company") as of December 31, 1999 and 1998, and for each of the three years in the period ended December 31, 1999, and have issued our report thereon dated February 29, 2000; such report is included elsewhere in this Form 10-K. Our audits also included the financial statement schedule listed in Item 14. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLC
Reno, Nevada
February 29, 2000
Schedule II - Consolidated Valuation and Qualifying Accounts For The Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
Provision for
Uncollectible
Accounts
-----------------
Balance at January 1, 1997 $ 2,196
Provision charged to income 1,411
Amounts written off, less recoveries (1,903)
---------------
Balance at December 31, 1997 1,704
Balance at January 1, 1998 1,704
Provision charged to income 3,686
Amounts written off, less recoveries (1,929)
---------------
Balance at December 31, 1998 3,461
Balance at January 1, 1999 3,461
Provision charged to income 2,005
Amounts written off, less recoveries (1,817)
---------------
Balance at December 31, 1999 $ 3,649
===============
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SIERRA PACIFIC POWER COMPANY
1999 FORM 10-K EXHIBIT INDEX
Exhibits filed with this Form 10-K are denoted with an asterisk (*). The other listed exhibits have been previously filed with the Securities and Exchange Commission and are incorporated herein by reference.
. Restated Articles of Incorporation of the Company dated May 19, 1987 (Exhibit (3)(A) to the 1993 Form 10-K)
. Certificate of Amendments dated August 26, 1992 to Restated Articles of Incorporation of the Company dated May 19, 1987, in connection with the Company's preferred stock (Exhibit 3.1 to Form 8-K dated August 26, 1992)
. Certificate of Designation, Preferences and Rights dated August 31, 1992 to Restated Articles of Incorporation of the Company dated May 19, 1987, in connection with the Company's Class A Series 1 Preferred Stock (Exhibit 4.3 to Form 8-K dated August 26, 1992)
. By-laws of the Company, as amended through November 13, 1996 (Exhibit (3)(A) to Form 10-K for the year ended December 31, 1996)
. Articles of Incorporation of Pinon Pine Corp., dated December 11, 1995 (Exhibit (3)(A) to Form 10-K for the year ended December 31, 1995)
. Articles of Incorporation of Pinon Pine Investment Co., dated December 11, 1995 (Exhibit (3)(B) to Form 10-K for the year ended December 31, 1995)
. Agreement of Limited Liability Company of Pinon Pine Company, L.L.C., dated December 15, 1995, between Pinon Pine Corp., Pinon Pine Investment Co. and GPSF-B INC 1995 (Exhibit (3)(C) to Form 10-K for the year ended December 31, 1995)
. *(A) Amended and Restated Limited Liability Company Agreement of SPPC Funding LLC dated as of April 9, 1999, in connection with the issuance of California rate reduction bonds
. Mortgage Indentures of the Company defining the rights of the holders of the Company's First Mortgage Bonds: Original Indenture (Exhibit 7-A to Registration No. 2-7475); Ninth Supplemental Indenture (Exhibit 2-M to Registration No. 2-59509); Tenth Supplemental Indenture (Exhibit 4-K to Registration No. 2-23932); Eleventh Supplemental Indenture (Exhibit 4-L to Registration No. 2-26552); Twelfth Supplemental Indenture (Exhibit 4-L
to Registration No. 2-36982); Sixteenth Supplemental Indenture (Exhibit 2-Y to Registration No. 2-53404); Nineteenth Supplemental Indenture (Exhibit (4)(A) to the 1991 Form 10-K); Twentieth Supplemental Indenture (Exhibit (4)(B) to the 1991 Form 10-K); Twenty-Seventh Supplemental Indenture (Exhibit (4)(A) to the 1989 Form 10-K); Twenty-Eighth Supplemental Indenture (Exhibit (4)(A) to the 1992 Form 10-K); Twenty-Ninth Supplemental Indenture (Exhibit D to Form 8-K dated July 15, 1992); Thirtieth Supplemental Indenture (Exhibit (4)(B) to the 1992 Form 10-K); Thirty-First Supplemental Indenture (Exhibit (4)(C) to the 1992 Form 10-K); Thirty-Second Supplemental Indenture (Exhibit 4.6 to Registration No.33-69550); Thirty-Third Supplemental Indenture (Exhibit C to Form 8-K dated October 20, 1993); Thirty-Fourth Supplemental Indenture (Exhibit C to Form 8-K dated March 11, 1996) Thirty-Fifth Supplemental Indenture (Exhibit C to Form 8-K dated March 10, 1997).
. Collateral Trust Indenture dated June 1, 1992 between the Company and Bankers Trust Company, as Trustee, relating to the Company's medium-term note program (Exhibit B to Form 8-K dated July 15, 1992 in connection with the Company's medium-term note program); First Supplemental Indenture dated June 1, 1992 (Exhibit C to Form 8-K dated July 15, 1992); Second Supplemental Indenture dated October 1, 1993 (Exhibit B to Form 8-K dated October 20, 1993); Third Supplemental Indenture dated as of February 1, 1996 (Exhibit B to Form 8-K dated March 11, 1996); and Fourth Supplemental Indenture dated as of February 1, 1997 (Exhibit B to Form 8-K dated March 10, 1997).
. Form of Medium-Term Global Fixed Rate Note, Series A (Exhibit E to Form 8-K dated July 15, 1992 in connection with the Company's medium-term note program)
. Form of Medium-Term Global Fixed Rate Note, Series B (Exhibit D to Form 8-K dated October 25, 1993 in connection with the Company's medium-term note program)
. Form of Medium-Term Global Fixed-Rate Note, Series C (Exhibit D to Form 8-K dated March 11, 1996 in connection with the Company's medium-term note program)
. Form of Medium-Term Global Fixed-Rate Note, Series D (Exhibit D to Form 8-K dated March 10, 1997 in connection with the Company's medium-term note program)
. *(A) Fiscal and Paying Agency Agreement dated as of September 14, 1999 between the Company and Bankers Trust Company, relating to the Company's money market note program
. *(B) Form of Global Floating Rate Note due October 13, 2000
. *(C) Indenture dated as of April 9, 1999 between SPPC Funding LLC and Bankers Trust Company of California, N.A. in connection with the issuance of California rate reduction bonds
. *(D) First Series Supplement dated as of April 9, 1999 to Indenture between SPPC Funding LLC and Bankers Trust Company of California, N.A. in connection with the issuance of California rate reduction bonds
. *(E) Form of SPPC Funding LLC Notes, Series 1999-1, in connection with the issuance of California rate reduction bonds
. Amended and Restated Declaration of Trust of Sierra Pacific Power Capital I (the Trust) dated July 24, 1996 in connection with the offering of the Preferred Securities of the Trust. (Exhibit 4.1 to Form 8-K dated August 2, 1996)
. Indenture between the Company and IBJ Schroder Bank and Trust Company as Trustee dated July 1, 1996 in connection with the offering of the Preferred Securities of the Trust. (Exhibit 4.2 to Form 8-K dated August 2, 1996)
. First Supplemental Indenture to the Indenture used in connection with the issuance of Junior Subordinated Debentures dated July 24, 1996 in connection with the offering of the Preferred Securities of the Trust. (Exhibit 4.3 to Form 8-K dated August 2, 1996).
. Guarantee with respect to Preferred Securities dated July 29, 1996 in connection with the offering of the Preferred Securities of the Trust. (Exhibit 4.4 to Form 8-K dated August 2, 1996).
. Guarantee with respect to Common Securities dated July 29, 1996 in connection with the offering of the Preferred Securities of the Trust. (Exhibit 4.5 to Form 8-K dated August 2, 1996).
. Coal Sales Agreement dated May 16, 1978 between the Company and
Coastal States Energy Company (confidential portions omitted and
filed separately with the Securities and Exchange Commission)
(Exhibit 5-GG to Registration No. 2-62476)
. Amendment No. 1 dated November 8, 1983 to Coal Sales Agreement dated May 16, 1978 between the Company and Coastal States Energy Company (Exhibit (10)(B) to Form 10-K for the year ended December 31, 1991)
. Amendment No. 2 dated February 25, 1987 to Coal Sales Agreement dated May 16, 1978 between the Company and Coastal States Energy Company (Exhibit (10)(A) to Form 10-K for the year ended December 31, 1993)
. Amendment No. 3 dated May 8, 1992 to Coal Sales Agreement dated May 16, 1978 between the Company and Coastal States Energy Company (Exhibit (10)(B) to Form 10-K for the year ended December 31, 1992; confidential portions omitted and filed separately with the Securities and Exchange Commission)
. Coal Purchase Contract dated June 19, 1986 between the Company, Black Butte Coal Company and Idaho Power Company (Exhibit (10)(C) to the Form 10-K for the year ended December 31, 1992)
. Settlement Agreement and Mutual Release dated May 8, 1992 between the Company and Coastal States Energy Company (Exhibit (10)(D) to Form 10-K for the year ended December 31, 1992; confidential portions omitted and filed separately with the Securities and Exchange Commission)
. Interconnection Agreement dated May 29, 1981 between the Company and Idaho Power Company (Exhibit (10)(C) to Form 10-K for the year ended December 31, 1991)
. Amendatory Agreement dated February 14, 1992 to Interconnection Agreement dated May 29, 1981 between the Company and Idaho Power Company (Exhibit (10)(D) to Form 10-K for the year ended December 31, 1991)
. Agreement dated February 23, 1989 between the Company and Idaho Power Company for the supply of power and energy (Exhibit (10)(A) to Form 10-K for the year ended December 31, 1988)
. Cooperative Agreement dated July 31, 1992 between the Company and the United States Department of Energy in connection with the Pinon Pine Integrated Coal Gasification Combined Cycle Project (Exhibit (10)(H) to Form 10-K for the year ended December 31, 1992)
. Revised Intercompany Pool Agreement dated July 19, 1982 pertaining to the Company's membership (Exhibit (10)(E) to Form 10-K for the year ended December 31, 1991)
. Agreement dated November 7, 1986 between the Company and Western Systems Power Pool (Exhibit (10)(C) to Form 10-K for the year ended December 31, 1988)
. Memorandum dated October 1, 1988 to Agreement dated November 7,
1986 between the Company and Western Systems Power Pool (Exhibit
(10)(D) to Form 10-K for the year ended December 31, 1988)
. General Transfer Agreement dated February 25, 1988 between the Company and the United States of America Department of Energy acting by and through the Bonneville Power Administration (Exhibit (10)(E) to Form 10-K for the year ended December 31, 1988)
. Rail Transportation Contract dated June 30, 1986 between the Company and Idaho Power Company as shippers and Union Pacific and Western Pacific Railroad Companies as carriers (Exhibit (10)(C) to Form 10-K for the year ended December 31, 1993)
. Addendum dated October 9, 1993 to Rail Transportation Contract dated June 30, 1986 between the Company and Idaho Power Company as shippers and Union Pacific Railroad Companies as carriers (Exhibit (10)(D) to Form 10-K for the year ended December 31, 1993)
. Financing Agreement dated March 1, 1987 between the Company and
Humboldt County, Nevada relating to the Humboldt County, Nevada
Variable Rate Demand Pollution Control Refunding Revenue Bonds
(Sierra Pacific Power Company Project) Series 1987 (Exhibit
(10)(E) to Form 10-K for the year ended December 31, 1993)
. Financing Agreement dated March 1, 1987 between the Company and
Washoe County, Nevada relating to the Washoe County, Nevada
Variable Rate Demand Gas and Water Facilities Refunding Revenue
Bonds (Sierra Pacific Power Company Project) Series 1987 (Exhibit
(10)(F) to Form 10-K for the year ended December 31, 1993)
. Financing Agreement dated June 1, 1987 between the Company and Washoe County, Nevada relating to the Washoe County, Nevada Variable Rate Demand Water Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1987 (Exhibit (10)(G) to Form 10-K for the year ended December 31, 1993)
. Financing Agreement dated December 1, 1987 between the Company and Washoe County, Nevada relating to the Washoe County, Nevada Variable Rate Demand Gas Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1987 (Exhibit (10)(H) to Form 10-K for the year ended December 31, 1993)
. Financing Agreement dated September 1, 1990 between the Company and Washoe County, Nevada relating to the Washoe County, Nevada Gas
Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1990 (Exhibit (10)(C) to Form 10-K for the year ended December 31, 1990)
Financing Agreement dated December 1, 1990 between the Company and Washoe County, Nevada relating to the Washoe County, Nevada Water Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1990 (Exhibit (10)(E) to Form 10-K for the year ended December 31, 1990)
. First Amendment dated August 12, 1991 to Financing Agreement dated December 1, 1990 between the Company and Washoe County, Nevada relating to the Washoe County, Nevada Water Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1990 (Exhibit (10)(J) to Form 10-K for the year ended December 31, 1991)
. Letter of Credit, Reimbursement and Security Agreement dated December 12, 1990 between the Company and Union Bank of Switzerland relating to the Washoe County, Nevada Water Facilities Revenue Bonds (Sierra Pacific Power Company Project) Series 1990 (Exhibit (10)(F) to Form 10-K for the year ended December 31, 1990)
. Financing Agreement dated June 1, 1993 between the Company and Washoe County, Nevada relating to the Washoe County, Nevada Water Facilities Refunding Revenue Bonds (Sierra Pacific Power Company Project) Series 1993A (Exhibit (10) (I) to Form 10-K for the year ended December 31, 1993)
. Financing Agreement dated June 1, 1993 between the Company and Washoe County, Nevada relating to the Washoe County, Nevada Gas and Water Facilities Refunding Revenue Bonds (Sierra Pacific Power Company Project) Series 1993B (Exhibit (10) (J) to Form 10- K for the year ended December 31, 1993)
. *(A) Credit Agreement dated as of June 24, 1999 among the Company, Mellon Bank, N.A., First Union Bank and Wells Fargo Bank, N.A. relating to $150,000,000 credit facility
. *(B) Transition Property Purchase and Sale Agreement dated as of April 9, 1999 between Sierra Pacific Power Company and SPPC Funding LLC in connection with the issuance of California rate reduction bonds
. *(C) Transition Property Servicing Agreement dated as of April 9, 1999 between Sierra Pacific Power Company and SPPC Funding LLC in connection with the issuance of California rate reduction bonds
. *(D) Administrative Services Agreement dated as of April 9, 1999 between Sierra Pacific Power Company and SPPC Funding LLC in connection with the issuance of California rate reduction bonds
. Agreement dated May 1, 1991 between the Company and the Inter- national Brotherhood of Electrical Workers (Exhibit (10)(K) to Form 10-K for the year ended December 31, 1991)
. Ratified changes to the Agreement between the Company and the International Brotherhood of Electrical Workers dated October 31, 1994 (Exhibit (10)(B) to Form 10-K for the year ended December 31, 1994)
. Agreement dated January 1, 1998 between the Company and the International Brotherhood of Electrical Workers. (Filed as Exhibit 10(B) to Form 10-K for the year ended December 31, 1997)
. Lease dated January 30, 1986 between the Company and Silliman Associates Limited Partnership relating to the Company's corporate headquarters building (Exhibit (10)(I) to Form 10-K for the year ended December 31, 1992)
. Letter of Amendment dated May 18, 1987 to Lease dated January 30, 1986 between the Company and Silliman Associates Limited Partnership relating to the Company's corporate headquarters building (Exhibit (10) (K) to Form 10-K for the year ended December 31, 1993)
. Natural gas Transportation Service Agreement, dated January 11,
1995 between the Company and Tuscarora Gas Transmission Company
(Filed with Form 10-K for the year ended December 31, 1995)
. Fixed-Price Turn-Key Construction Agreement, dated December 15, 1995 between the Company and Pinon Pine Company, L.L.C (Filed with Form 10-K for the year ended December 31, 1995)
. Operation and Maintenance Agreement, dated December 15, 1995 between the Company and Pinon Pine Company, L.L.C. (Filed with Form 10-K for the year ended December 31, 1995)
. Syngas Purchase Agreement, dated December 15, 1995 between the Company and Pinon Pine Company, L.L.C. (Filed with Form 10-K for the year ended December 31, 1995)
. The Amended and Restated Nonqualified Deferred Compensation Plan in which any director or any executive officer of the Company may participate. The Plan was amended and restated January 1, 1996 (Filed as Exhibit 10(B) with Form 10-K for the year ended December 31, 1996)
. Change in Control Agreement dated February 18, 1997 by and among Sierra Pacific Resources and the following officers (individually): Gerald W. Canning, Jeffrey L. Ceccarelli, Randy G. Harris, Malyn K. Malquist, Steven C. Oldham, Victor H. Pena, William E. Peterson, Mark A. Ruelle, Mary O. Simmons, Doug Ponn, and Mary Jane Willier (filed as Exhibit 10(A) to Form 10-K for the year ended December 31, 1997)
. Notice of Termination of Power Purchase from PacifiCorp under the Interconnection Agreement of May 19, 1971 (filed as Exhibit 10(C) to Form 10-K for the year ended December 31, 1997)
. The Company is a wholly owned subsidiary and, in accordance with Paragraph 6 of SFAS No. 128 (Earnings Per Share), earnings per share data have been omitted.
. *(A) Calculation of Pre-Tax Interest Coverages for the Periods 1999, 1998 and 1997.
. Subsidiaries of the Registrant:
Pinon Pine Company, a Nevada Corporation
Pinon Pine Investment Company, a Nevada Corporation
GPSF-B, a Delaware Corporation
SPPC Funding LLC, a Delaware Limited Liability Company
Sierra Pacific Power Capital Trust I (The Trust)
. *(A) The Financial Data Schedule containing summary financial information extracted from the consolidated financial statements filed on Form 10-K for the year ended December 31, 1999.
EXHIBIT 3(A)
CERTIFICATE
OF
RESTATED
ARTICLES OF INCORPORATION
OF
SIERRA PACIFIC RESOURCES
SIERRA PACIFIC RESOURCES, a corporation organized under the laws of the State of Nevada (the "Corporation"), by its President and Secretary, does hereby certify:
(1) That by resolution of the Board of Directors of the Corporation adopted at a regular meeting of the Board of Directors held on July 13, 1999, the Board of Directors authorized and directed the President and Secretary of the Corporation to execute and file this certificate to restate in a single certificate the articles of incorporation of the Corporation, as amended to the date of this Certificate.
(2) That the following is a correct restatement of the entire text of the Restated Articles of Incorporation of the Corporation, as amended to the date of this Certificate:
[this space intentionally left blank]
RESTATED
ARTICLES OF INCORPORAITON
OF
SIERRA PACIFIC RESOURCES
(Effective Date: July 28, 1999)
Original Articles Filed December 12, 1983 Amended-Restated Articles on July 11, 1985 and Filed August 14, 1985 Amended-Restated Articles on May 18, 1987 and Filed October 23, 1987 Amended-Restated Articles on May 16, 1989 and Filed May 22, 1989 Amended-Restated Articles on May 21, 1990 and Filed October 5, 1990 Amended in Articles of Merger Filed on July 28, 1999
RESTATED ARTICLES OF INCORPORATION
OF
SIERRA PACIFIC RESOURCES
The name of the corporation is SIERRA PACIFIC RESOURCES.
The location of the Corporation's principal office or place of business in the State of Nevada shall be 6100 Neil Road, Sierra Plaza, P.O. Box 30150, Reno, Washoe County, Nevada 89520. The Corporation may maintain an office or offices in such other place within or without the State of Nevada as may be from time to time designated by the Board of Directors or by the By-Laws of the Corporation, and the Corporation may conduct all Corporation business of every kind and nature relative to the purposes of the Corporation, including the holding of meetings of directors and stockholders, outside the State of Nevada as well as in the State of Nevada.
The purpose for which the Corporation is organized is to transact any or all lawful business for which corporations may be incorporated under the Nevada Revised Statutes, Chapter 78.
The Corporation shall have a perpetual existence.
The amount of the total authorized capital stock of the Corporation is two hundred fifty million (250,000,000) shares of common stock of $1.00 par value. Said shares may be issued by the Corporation from time to time for such consideration as may be fixed from time to time by the Board of Directors.
The holders of common stock shall exclusively possess full voting rights for the election of directors and for all other purposes. Each holder of record of shares of common stock entitled to vote at any meeting of stockholders shall, as to all matters in respect of which such stock has voting power, be entitled, except as otherwise provided herein or in the By-Laws of the Corporation, to one vote for each share of such stock held and owned by him, as shown by the stock books of the Corporation, and may cast such vote in person or by proxy.
No holder of any stock, or of rights or options to purchase stock of the Corporation of any class, now or hereafter authorized, shall have any preferential or preemptive right to purchase or subscribe for any part of any stock of the Corporation, now or hereafter authorized or any bonds, certificates of indebtedness, debentures, options, warrants or other securities convertible into or evidencing the right to purchase stock of the Corporation, but any such stock or securities convertible into or evidencing the right to purchase stock may at any time be issued and disposed of by the Board of Directors to such purchasers, in such manner, for such lawful consideration and upon such terms as the Board of Directors may, in its discretion, determine without offering any thereof on the same terms or on any terms to all or any stockholders, as such, of the Corporation.
No certificates for fractional shares of any class of stock shall be issued. In lieu thereof, scrip certificates or other evidences of ownership of fractional interests in shares of the stock of the Corporation may be issued by the Corporation representing rights to such fractional shares and exchangeable, when accompanied by other certificates in such amount as to represent in the aggregate one or more full shares of stock, for certificates for full shares of stock. The holders of scrip certificates or other evidences of ownership of fractional interests in shares of stock
of the Corporation will not be entitled to any rights as stockholders of the Corporation until the scrip certificates are so exchanged. Such scrip certificates may, at the election of the Board of Directors of the Corporation, be in bearer form, shall be non-dividend bearing, non-voting and shall have such expiration date as the Board of Directors of the Corporation shall determine at the time of the authorization or issuance of such scrip certificates.
The provisions of the Articles of Incorporation, except as expressly otherwise herein provided or otherwise required by law, may be amended or altered by a vote of the holders of a majority of the common stock of the Corporation then issued, outstanding and entitled to vote.
The members of the governing board of the Corporation shall be known as Directors, and the number of Directors shall be as fixed in the By-Laws and may, from time to time, be increased or described by a two-thirds (2/3) affirmative vote of the entire Board of Directors provided that the number shall not be increased to more than fifteen (15). Directors need not be stockholders of the Corporation, however, they shall be at least twenty-one (21) years of age and at least a majority of them shall be citizens of the United States.
The Directors of this Corporation shall be divided into three classes:
Class I, Class II and Class III. Such classes shall be as nearly equal in
number as possible. The term of office of the initial Class I Directors shall
expire at the Annual Meeting of Stockholders in 1986; the term of office of the
initial Class II Directors shall expire at the Annual Meeting of Stockholders in
1987; and the term of office of the initial Class III Directors shall expire at
the Annual Meeting of Stockholders in 1988; or in each case thereafter when
their respective successors are elected and have qualified. At each annual
election held after the initial election of Directors according to classes, the
Directors chosen to succeed those whose terms then expire, shall be identified
as being of the same class of the Directors they succeed and shall be elected
for a term expiring at the third succeeding Annual Meeting of Stockholders or in
each case thereafter when their respective successors are elected and have
qualified. If the number of Directors has changed, any increase or decrease in
Directors shall be apportioned among the classes so as to maintain all classes
as nearly equal in number as possible, but in no case shall the decrease in
number of Directors shorten the term of any incumbent Director.
A Director or Directors may be removed from office only by the vote of stockholders representing not less than two-thirds (2/3) of the issued and outstanding capital stock entitled to vote generally in the election of Directors.
Vacancies occurring in the Board of Directors for any reason, including any newly created directorships resulting from an increase in the number of Directors shall be filled by the affirmative vote of a majority of the remaining Directors, though less than a quorum. Each Director so chosen shall hold office until
the expiration of the term of Director, if any, whom he or she has been chosen to succeed, or if none, until the expiration of the term of the class assigned to the newly created directorship to which he or she has been elected and until his or her successor shall be duly elected and qualified or until his or her earlier death, resignation or removal.
Notwithstanding any other provisions of these Articles of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the By-Laws of the Corporation), the affirmative vote of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the Common Stock of the Corporation then issued, outstanding and entitled to vote, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article VI, unless two-thirds (2/3) of the entire Board of Directors approves any such amendment, in which case, the affirmative vote of the holders of a majority of the Common Stock of the Corporation then issued, outstanding and entitled to vote shall be required.
The capital stock, after the amount of the subscription price, or par value, has been paid in, shall not be subject to assessment to pay the debts of the Corporation.
(i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Stockholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $1,000,000 or more; or
(iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange
for cash, securities or other property (or a combination thereof) having any aggregate Fair Market Value of $1,000,000 or more; or
(iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of any Interested Stockholder; or
(v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation of any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder;
shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the then outstanding shares of common stock of the Corporation authorized to be issued from time to time under Article V of these Articles of Incorporation (the "Common Stock"). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise.
(B) The term "Business Combination" as used in this Article VIII shall mean any transaction which is referred to in any one or more of clauses (i) through (v) of subparagraph (A) of this paragraph 1.
The provisions of paragraph 1 of this Article VIII shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and any other provision of these Articles of Incorporation, if all of the conditions specified in either of the following subparagraphs (A) or (B) are met:
(A) The Business Combination shall have been approved by a majority of the Continuing Directors (as hereinafter defined); provided, however, that such approval shall only be effective if obtained at a meeting at which a Continuing Director Quorum (as hereinafter defined) is present, or
(B) All of the following conditions have been met:
(i) The aggregate amount of (x) cash and (y) Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash, to be received per share by holders of the Corporation's Common Stock in such Business Combination transaction shall be at least equal to the highest amount determined under sub-clauses (a), (b) and (c) below:
(a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Stockholders for
any share of Common Stock acquired by it (1) within the two-year
period immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date") or
(2) in the transaction in which it became an Interested
Stockholder, whichever is higher;
(b) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (such latter date is referred to in this Article VIII as the "Determination Date"), whichever is higher; and
(c) (if applicable) the price per share equal to the Fair Market Value per share of Common Stock determined pursuant to subparagraph (B)(i)(b) above, multiplied by the ratio of (1) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it within the two-year period immediately prior to the Announcement Date to (2) the Fair Market Value per share of Common Stock on the first day in such two-year period in which the Interested Stockholder acquired any shares of Common Stock.
(ii) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (a) except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any stock of the Corporation having preferential dividend rights; (b) there shall have been (1) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Continuing Directors, and (2) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (c) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Common Stock except as part of the transaction which results in such Interested Stockholder becoming an Interested Stockholder. The approval by a majority of the Continuing Directors of an exception to the requirements set forth in clauses (a) and (b) above shall only be effective if obtained at a meeting at which a Continuing Director Quorum is present.
(iii) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder) of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.
(iv) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to public stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions).
(A) The term "person" shall mean any individual, firm, corporation, or other entity.
(B) The term "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership, or other employee benefit plan of the Corporation or any
Subsidiary or any trustee or fiduciary with respect to any such plan when acting in such capacity) who or which:
(i) is the beneficial owner (as hereinafter defined) of more than ten percent (10%) of the Common Stock; or
(ii) is an Affiliate (as hereinafter defined) of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of ten percent (10%) or more of the Common Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of Common Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.
(C) A person shall be a "beneficial owner" of any Common Stock:
(i) which such persons or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has, directly or indirectly, (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement, or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Common Stock.
(D) For purposes of determining whether a person is an Interested Stockholder pursuant to subparagraph (B) of this paragraph 3, the number of shares of Common Stock deemed to be outstanding shall include shares deemed owned through application of subparagraph (C) of this paragraph 3 but shall not include any other shares of Common Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
(E) The term "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on April 1, 1985, or amendments thereto.
(F) The term "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation, provided, however, that for the purposes of the definition of Interested Stockholder set forth in subparagraph (B) of this paragraph 3, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation.
(G) The term "Continuing Director" means any member of the Board of Directors of the Corporation (the "Board") who is unaffiliated with the Interested
Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director who is unaffiliated with the Interested Stockholder and is recommended to succeed a Continuing Director by a majority of Continuing Directors, provided that such recommendation or election shall only be effective if made at a meeting at which a Continuing Director Quorum is present.
(H) The term "Continuing Director Quorum" means six Continuing Directors capable of exercising the powers conferred upon them under the provisions of the Articles of Incorporation or By-Laws of the Corporation or by law.
(I) The term "Fair Market Value" means: (1) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc., Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of such stock as determined by the Board in good faith, and (ii) in the case of the property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of Continuing
Directors, provided that such determination shall only be effective if made at a meeting at which a Continuing Director Quorum is present.
(J) In the event of any Business Combination in which the Corporation survives, the phrase "other consideration to be received" as used in subparagraphs (B)(i) and (ii) of paragraph 2 of this Article VIII shall include the shares of Common Stock retained by the holders of such shares.
Notwithstanding any other provisions of these Articles of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the By-Laws of the Corporation), the affirmative vote of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the shares of Common Stock shall be required to amend or repeal, or adopt any provisions inconsistent with this Article VIII.
(B) This Article shall not apply to any action filed prior to March 18, 1987, nor to any breach of performance or failure of performance of duty by a Director, officer, employee, fiduciary, or authorized representative occurring prior to March, 1987. Any amendment or repeal of this Article which has the effect of increasing Director liability shall operate prospectively only, and shall not affect any action taken, or any failure to act, prior to its adoption.
incurred by such person in connection with any actual or threatened claim, action, suit or proceeding, civil, criminal, administrative, investigative or other, whether brought by or in the right of the company or otherwise, in which he or she may be involved, as a party or otherwise, by reason of such person being or having been a Director or officer of the company or by reason of the fact that such person is or was serving at the request of the company as a Director, officer, employee, fiduciary or other representative of the Corporation or another corporation, partnership, joint venture, trust, employee benefit plan or other entity (such claim, action, suit, or proceeding hereinafter being referred to as "action"); provided, however, that no such right of indemnification shall exist with respect to an action brought by a director or officer against the company (other than a suit for indemnification as provided in paragraph (B)). Such indemnification shall include the right to have expenses incurred by such person in connection with an action paid in advance by the company prior to final disposition of such action, subject to such conditions as may be prescribed by law. As used herein, "expense" shall include fees and expenses of counsel selected by such person; and "liability" shall include amounts of judgments, excise taxes, fines and penalties, and amounts paid in settlement.
conduct of the claimant was such that under Nevada law the company would be prohibited from indemnifying the claimant for the amount claimed, but the burden of proving such defense shall be on the company. Neither the failure of the company (including its Board of Directors, independent legal counsel and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the conduct of the claimant was not such that indemnification would be prohibited by law, nor an actual determination by the company (including the Board of Directors, independent legal counsel, or its stockholders) that the conduct of the claimant was such that indemnification would be prohibited by law, shall be a defense to the action or create a presumption that the conduct of the claimant was such that indemnification would be prohibited by law.
In furtherance, and not in limitation, of the powers conferred by statute, the Board of Directors, by majority vote of those present at any called meeting, is expressly authorized:
(A) To hold its meetings, to have one or more offices, and to keep the books of the Corporation, except as may be otherwise specifically required by
the laws of the State of Nevada, within or without the State of Nevada, at such places as may be from time to time designated by it.
(B) To determine from time to time whether, and if allowed under what conditions and regulations, the accounts and books of the Corporation (other than the books required by law to be kept at the principal office of the Corporation in Nevada), or any of them, shall be open to inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted or limited accordingly.
(C) To make, alter, amend and rescind the By-Laws of the Corporation, to fix the amount to be reserved as working capital, to fix the times for the declaration and payment of dividends, and to authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation.
(D) To designate from its number an executive committee, which, to the extent provided by the By-Laws of the Corporation or by resolution of the Board of Directors, shall have and may exercise in the intervals between meetings of the Board of Directors, the powers thereof which may lawfully be delegated in respect of the management of the business and the affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to such papers as may require it. The Board of Directors may also, in its discretion, designate from its number a finance committee and delegate thereto such of the powers of the Board of Directors as may be lawfully delegated, to be exercised when the Board is not in session.
In taking action, including (but not limited to) action which may involve or relate to a change or potential change in the control of the Corporation, the Board of Directors of the Corporation shall be entitled to consider, without limitation, (1) both the long-term and the short-term interests of the Corporation and its stockholders and (2) the effects that the Corporation's actions may have in the short-term or in the long-term upon any of the following: (i) the prospects for potential growth, development, productivity, and profitability of the Corporation; (ii) the Corporation's current employees; (iii) the Corporation's creditors; and (iv) the ability of the Corporation to provide, as a going concern, goods, services, employment opportunities and employment benefits and otherwise to contribute to the communities in which it does business and to serve the public interest. Nothing in this paragraph shall create any duties owed by any Director to any person or entity to consider or afford any particular weight to any of the foregoing. For purposes of this paragraph, "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Corporation, whether through the ownership of voting stock, by contract or other.
IN WITNESS WHEREOF, the said SIERRA PACIFIC RESOURCES has caused this Certificate to be signed by its President and its Secretary, and its corporate seal to be hereto affixed this 28/th/ day of July, 1999.
SIERRA PACIFIC RESOURCES
By________________________________
Malyn K. Malquist, President
By________________________________
William E. Peterson, Secretary
EXHIBIT 3(B)
CERTIFICATE
OF
RESTATED
ARTICLES OF INCORPORATION
OF
NEVADA POWER COMPANY
NEVADA POWER COMPANY, a corporation organized under the laws of the State of Nevada (the "Corporation"), by its President and Secretary, does hereby certify: (1) That by resolution of the Board of Directors of the Corporation adopted at a special meeting of the Board of Directors held on July 23, 1999, the Board of Directors authorized and directed the President and Secretary of the Corporation to execute and file this certificate to restate in a single certificate the articles of incorporation of the Corporation, as amended to the date of this Certificate.
(2) That the following is a correct restatement of the entire text of the Articles of Incorporation of the Corporation, as amended to the date of this Certificate:
[this space intentionally left blank]
RESTATED ARTICLES OF INCORPORATION
OF
NEVADA POWER COMPANY
ARTICLE I
Name
The name of the Corporation is Nevada Power Company.
ARTICLE II
Capital
ARTICLE III
Governing Board
ARTICLE IV
Directors' and Officers' Liability
No Director or, to the extent specified from time to time by the Board of Directors, officer of the Corporation will be liable to the Corporation or its stockholders for damages for breach of fiduciary duty as a director or officer, excepting only (a) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (b) the payment of dividends in violation of NRS 78.300. No amendment or repeal of this Article IV applies to or has any effect on the liability or alleged liability of any Director or officer of this
Corporation for or with respect to any acts or omissions of the Director or officer occurring prior to the amendment or repeal, except as otherwise required by law. In the event that Nevada law is amended to authorize the further elimination or limitation of liability of directors or officers, then this Article IV shall also be deemed to be so amended to provide for the elimination or limitation of liability to the fullest extent permitted by Nevada law.
ARTICLE V
Amendments to Articles of Incorporation
The provisions of the Articles of Incorporation, except as expressly otherwise herein provided or otherwise required by law, may be amended or altered by a vote of the holders of a majority of the common stock of the Corporation then issued, outstanding and entitled to vote.
IN WITNESS WHERREOF, the said NEVADA POWER COMPANY has caused this Certificate to be signed by its President and its Secretary this 28/th/ day of July, 1999.
NEVADA POWER COMPANY
By ________________________________
Malyn K. Malquist, President
By ________________________________
William E. Peterson, Secretary
EXHIBIT 3(C)
AMENDED AND RESTATED
BY-LAWS
OF
NEVADA POWER COMPANY
(amended and restated: July 28, 1999)
The name of the Corporation (hereinafter referred to as this Corporation) shall be as set forth in the Articles of Incorporation or in any lawful amendments thereto from time to time.
All meetings of the stockholders shall be held at the principal office of the Corporation in the State of Nevada unless some other place within or without the State of Nevada is stated in the call. No stockholder action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing without a meeting to the taking of any action is specifically denied.
The Annual Meeting of the Stockholders of the Corporation shall be held at such time and place as directed or selected by a majority of the Board of Directors.
Special meetings of the stockholders of this Corporation shall be held whenever called in the manner required by law for the purpose as to which there are special statutory provisions and for other purposes whenever called by the Chairman of the Board, the President, a Vice President or by a quorum of the Board of Directors or
whenever the holder or holders of at least one-third part in voting power of the capital stock entitled to vote shall make written application therefor to the Secretary or an Assistant Secretary stating the time, place and purpose of the meeting applied for.
Notice stating the place, day and hour of all stockholders' meetings and the purpose or purposes for which such meetings are called, shall be given by the President or a Vice President or the Secretary or an Assistant Secretary not less than ten (10) nor more than sixty (60) days prior to the date of the meeting to each stockholder entitled to vote thereat by leaving such notice with him at his residence or usual place of business, or by mailing it, postage prepaid, addressed to such stockholder at his address as it appears upon the books of this Corporation, and to the Chairman of the Board at the Corporation's main office, the person giving such notice shall make affidavit in relation thereto.
Except as otherwise provided by law, at any meeting of the stockholders, a majority of the voting power of the shares of capital stock issued and outstanding and entitled to vote, represented by such stockholders of record in person or by proxy, shall constitute a quorum, but a less interest may adjourn any meeting sine die or adjourn any meeting from time to time and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, a majority of the voting power of the stock entitled to vote represented thereat shall decide any question brought before such meeting, unless the question is one upon which by express provision of law, or of the
Articles of Incorporation, or of these By-Laws a larger or different vote is required, in which case such express provision shall govern and control the decision of such question.
Stockholders of record entitled to vote may vote at any meeting either in person or by proxy in writing, which shall be filed with the Secretary of the meeting before being voted. Such proxies shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after the expiration of six (6) months from the date of its execution unless the stockholder specifies therein the length of time for which it is to continue in force, which in no case shall exceed seven (7) years from the date of its execution. Stockholders entitled to vote shall be entitled to the voting rights as provided in the Articles of Incorporation.
A Board of not less than three (3) nor more than fifteen (15) Directors shall be chosen at the Annual Meeting of the Stockholders, or at any meeting held in place thereof as hereinbefore provided. The number of Directors for each corporate year shall be fixed by resolution or vote at the meeting when elected, but the Stockholders, at a Special Meeting held for the purpose during any such year, may increase or decrease (within the limits above specified) the number of Directors as thus fixed. If the number of Directors be increased at any such Annual or Special Meeting of Stockholders, the additional Directors may be elected by the Stockholders at such meeting, or in the event that the Stockholders shall fail to elect such additional Directors at such meeting, such
additional Directors may be elected by a majority of the Directors in office at the time of the increase. Except as otherwise provided in these By-Laws, each Director shall serve until the next Annual Meeting of the Stockholders and until his successor is duly elected and qualified. Directors need not be Stockholders in the Corporation. Directors shall be of full age and at least one of them shall be a citizen of the United States.
The Board of Directors shall have the entire management of the business of this Corporation. In the management and control of the property, business and affairs of this Corporation, the Board of Directors is hereby vested with all the powers possessed by this Corporation itself, so far as this delegation of authority is not inconsistent with the laws of the State of Nevada, with the Articles of Incorporation or with these By-Laws. Except as otherwise provided by law, the Board of Directors shall have power to determine what constitutes net earnings, profits and surplus, respectively, what amount shall be reserved for working capital and for any other purposes, and what amount shall be declared as dividends, and such determination by the Board of Directors shall be final and conclusive.
Directors may be compensated for their services on an annual basis and/or they may receive a fixed sum plus expenses of attendance, if any, for attendance at each Regular or Special Meeting of the Board, such compensation or fixed sum to be fixed from time to time by resolution of the Board of Directors, provided that nothing herein contained shall be construed to preclude any director from serving this Corporation in any other
capacity and receiving compensation therefor. Members of special or standing committees may receive like compensation for their services on an annual basis and/or fixed sum for attendance at each committee meeting. Any compensation so fixed and determined by the Board of Directors shall be subject to revision or amendment by the stockholders.
The Board of Directors may, by resolution or vote passed by a majority of the whole Board, designate from their number an Executive Committee of not less than three (3) nor more than a majority of the members of the whole Board as at the time constituted, which Committee shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of this Corporation when the Board is not in session. The Executive Committee may make rules for the notice, holding and conduct of its meetings and keeping of the records thereof. Such Committee shall serve until the first Directors' meeting following the next Annual Stockholders' Meeting, and until their successors shall be designated and shall qualify, and a majority of the members of said Committee shall constitute a quorum for the transaction of business.
The Board of Directors shall, by resolution or vote passed by a majority of the whole Board, designate from their members who are not employees of the Corporation to serve on an Audit Committee of not less than three (3) nor more than a majority of the whole Board at the time constituted, to nominate auditors for the annual audit of the Corporation's books and records, to develop the scope of the audit program, to discuss the results of such audits with the audit firm, and to take any other action they may deem
necessary or advisable in carrying out the work of the Committee. Such Committee shall serve until their successors shall be designated and shall qualify, and a majority of the members of the Audit Committee shall constitute a quorum for the transaction of business.
The Board of Directors may also appoint other committees from time to time, the number composing such committees, and the powers conferred upon the same to be determined by resolution or vote of the Board of Directors.
Regular meetings of the Board of Directors shall be held at such places within or without the State of Nevada and at such times as the Board by resolution or vote may determine from time to time, and if so determined no notice thereof need be given. Special meetings of the Board of Directors may be held at any time or place within or without the State of Nevada whenever called by the Chairman of the Board, the President, a Vice President, a Secretary, an Assistant Secretary or two or more Directors, notice thereof being given to each Director by the Secretary, an Assistant Secretary or officer calling the meeting, or at any time without formal notice provided all the Directors are present or those not present waive notice thereof. Notice of Special Meetings, stating the time and place thereof, shall be given by mailing the same to each Director at his residence or business address at least two days before the meeting, unless, in case of exigency, the President or in his absence the Secretary shall prescribe a shorter notice to be given personally or by telephoning or telegraphing each Director at his residence or business address. Such Special Meetings shall be held at such times and places as the notices thereof or waiver shall specify.
Meetings of the Board of Directors may be conducted by means of a conference telephone network or a similar communications method by which all persons participating in the meeting can hear each other. The minutes of such meeting shall be submitted to the Board of Directors, for approval, at a subsequent meeting.
Unless otherwise restricted by the Articles of Incorporation or these By- Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent
thereto is signed by all the members of the Board of Directors or of such committee. Such written consent shall be filed with the minutes of meetings of the Board or Committee.
Except as otherwise provided by law, by the Articles of Incorporation, or by these By-Laws, a majority of the members of the Board of Directors shall constitute a quorum for the transaction of business, but a lesser number may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, a majority of the members present thereat shall decide any question brought before such meeting.
Whenever any notice whatever of any meeting of the stockholders, Board of Directors or any committee is required to be given by these By-Laws or the Articles of Incorporation of this Corporation or any of the laws of the State of Nevada, a waiver thereof in writing, signed by the person or persons entitled to said notice whether before or after the time stated therein, shall be deemed equivalent to such notice so required. The presence at any meeting of a person or persons entitled to notice thereof shall be deemed a waiver of such notice as to such person or persons.
The officers of this Corporation shall be a President, one or more Vice Presidents, a Secretary, a Controller, and a Treasurer. The Board of Directors at its discretion may elect a Chairman of the Board of Directors. The Chairman of the Board of Directors, if one is to be elected, the President, the Vice Presidents, the Secretary, the Controller, and the Treasurer shall be elected annually by the Board of Directors after its election by the stockholders and shall hold office until their successors are duly elected and qualified, subject, however, to other provisions contained in these By-Laws, and a meeting of the Directors may be held without notice for this purpose immediately after the Annual Meeting of the Stockholders and at the same place.
Any two or more offices may be held by the same person except the offices of Chairman of the Board of Directors or President and Secretary shall not be held by the same person.
The Chairman of the Board of Directors and the President may, but need not, be Stockholders and shall be Directors of the Corporation. The Vice Presidents, Secretary, Treasurer and such other officers as may be elected or appointed need not be stockholders or Directors of this Corporation.
The Board of Directors, at its discretion, may appoint one or more Assistant Secretaries and one or more Assistant Treasurers and such other officers or agents as it
may deem advisable, and prescribe their duties. All officers and agents appointed pursuant to this Article may hold office during the pleasure of the Board of Directors.
Except as especially limited by resolution or vote of the Board of Directors, any Vice President shall perform the duties and have the powers of the President during the absence or disability of the President and shall have power to sign all certificates of
stock, deeds and contracts of this Corporation. He shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time.
The Secretary shall keep accurate minutes of all meetings of the Board of Directors, the Executive Committee and the Stockholders, shall perform all the duties commonly incident to this office, and shall perform such other duties and have such other powers as the Board of Directors shall from time to time designate. The Secretary shall have power, together with the Chairman of the Board or the President or a Vice President, to sign certificates of stock of this Corporation. In his absence, an Assistant Secretary or Secretary pro tempore shall perform his duties.
The Treasurer, subject to the order of the Board of Directors, shall have the care and custody of the money, funds, valuable papers and documents of this Corporation (other than his own bond which shall be in the custody of the President) and shall have and exercise, under the supervision of the Board of Directors, all the powers and duties commonly incident to his office, and shall give bond in such form and with such sureties as may be required by the Board of Directors.
He shall deposit all funds of this Corporation in such bank or banks, trust company or trust companies or with such firm or firms doing banking business as the Directors shall designate or approve. He may endorse for deposit or collection all checks, notes, et cetera, payable to this Corporation or to its order, may accept drafts on behalf of this Corporation and, together with the Chairman of the Board or the President or a Vice
President, may sign certificates of stock. He shall keep accurate books of account of this Corporation's transactions which shall be the property of this Corporation and, together with all its property of this Corporation, shall be subject at all times to the inspection and control of the Board of Directors.
The Controller, subject to the order of the Board of Directors, shall be responsible for the accounting functions of the Corporation. He may be assigned the additional responsibility of automated information systems. He shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time.
Any Director or officer of this Corporation may resign at any time by giving written notice to the Board of Directors or to the President or to the Secretary of this Corporation, and any member of any committee may resign by giving written notice either as aforesaid or to the committee of which he is a member or to the chairman thereof. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
The stockholders, at any meeting called for that purpose, by vote of not less than two-thirds of the voting power of the stock issued and outstanding and entitled to vote, may remove from office any director or officer elected or appointed by the Stockholders. The Board of Directors, by vote of not less than a majority of those present
at a duly called meeting, may remove from office any officer, agent or member or members of any committee elected or appointed by it or by the Executive Committee.
The Compensation and Organization Committee, at any meeting called for that purpose, or the Chief Executive Officer, or, in his absence, the President of the Company, may immediately suspend from his or her office and the performance of his or her duties any officer of the Company pending a regular meeting of Directors or any meeting of the Board of Directors called for the purposes of removing an officer of the Corporation.
If the office of any Director, officer or agent, one or more, becomes vacant by reason of death, resignation, removal, disqualification or otherwise, the Directors may, by vote of a majority of a quorum of the remaining Directors, as constituted for the time being, choose a successor or successors who shall hold office for the unexpired term. If there be less than a quorum of the Directors at the time in office, said directors may, by a majority vote, choose a successor or successors who shall hold office for the unexpired term. Vacancies in the Board of Directors may be filled for an unexpired term by the Stockholders at a meeting called for that purpose unless such vacancy shall have been filled by the Directors.
The Board of Directors, by vote of not less than a majority of the board at a called meeting, may create any mortgage or other lien upon its property and franchises to
secure the issuance of bonds, notes and/or other obligations of this Corporation without the consent of the Stockholders of his Corporation.
The amount of capital stock shall be as fixed in the Articles of Incorporation or in any lawful amendments thereto from time to time.
Every stockholder shall be entitled to a certificate or certificates of the capital stock of this Corporation in such form as may be prescribed by the Board of Directors, duly numbered and sealed with the corporate seal of this Corporation and setting forth the number of shares to which each stockholder is entitled. Such certificates shall be signed by the Chairman of the Board or the President, or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. The Board of Directors may also appoint one or more Transfer Agents and/or Registrars for its capital stock of any class or classes and may require stock certificates to be countersigned and/or registered by one or more of such Transfer Agents and/or Registrars. If certificates of capital stock of this Corporation are signed by a Transfer Agent and by a Registrar, the signatures thereon of the Chairman of the Board or the President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of this Corporation and the seal of this Corporation thereon may be facsimiles, engraved or printed. Any provisions of these By-Laws with reference to the signing and sealing of stock certificates shall include, in cases above permitted, such facsimiles. In case any
officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of this Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by this Corporation, such certificate or certificates may nevertheless be adopted by the Board of Directors of this Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of this Corporation.
Shares of stock may be transferred by delivery of the certificate accompanied either by an assignment in writing on the back of the certificate or by a written power of attorney to sell, assign and transfer the same on the books of this Corporation, signed by the person appearing by the certificate to be the owner of the shares represented thereby, and shall be transferable on the books of this Corporation upon surrender thereof so assigned or endorsed. The person registered on the books of this Corporation as the owner of any shares of stock shall exclusively be entitled as the owner of such shares, to receive dividends and to vote as such owner in respect thereof. It shall be the duty of every Stockholder to notify this Corporation of his post office address.
The transfer books of the stock of this Corporation may be closed for such period from time to time, not exceeding forty (40) days, in anticipation of Stockholders' meetings or the payment of dividends or the allotment of rights as the Directors from time to time may determine, provided, however, that in lieu of closing the transfer books as aforesaid, the Board of Directors may fix in advance a date, not exceeding forty (40) days, as of which Stockholders shall be entitled to vote at any meeting of the Stockholders or to receive dividends or rights, and in such case such Stockholders and only such Stockholders as shall be Stockholders of record as of the date so fixed shall be entitled to vote at any such meeting and at any adjournment or adjournments thereof or to receive dividends or rights, as the case may be, notwithstanding any transfer of any stock on the books of this Corporation after such record date fixed as aforesaid.
In case of the loss, mutilation or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms consistent with the laws of the State of Nevada as the Directors shall prescribe.
The seal of this Corporation shall consist of a flat-faced circular die with the corporate name of this Corporation, the year of its incorporation and the words "Corporate Seal Nevada" cut or engraved thereon. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
Unless otherwise provided by resolution or vote of the Board of Directors, the Chairman of the Board, the President or any Vice President, may from time to time appoint an attorney or attorneys or agent or agents of this Corporation, in the name on behalf of this Corporation to cast the votes which this Corporation may be entitled to cast as a Stockholder or otherwise in any other corporation, any of whose stock or securities may be held by this Corporation, at meetings of the holders of the stock or other securities of such other corporations, or to consent in writing to any action by any such other corporation, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent and may execute or cause to be executed on behalf of this Corporation and under its corporate seal, or otherwise such written proxies, consents, waivers or other instruments as he may deem necessary or proper in the premises; or the Chairman of the Board or the President or any Vice President may himself attend any meeting of the holders of stock or other securities of such other corporation and thereat vote or exercise any or all other powers of this Corporation as the holder of such stock or other securities of such other corporation.
The Chairman of the Board or the President or any Vice President may appoint one or more nominees in whose name or names stock or securities acquired by this Corporation may be taken. With the approval of the Chairman of the Board or the President or any Vice President of the Corporation (which approval may be evidenced by his signature as witness on the instruments hereinafter referred to) any such nominee may execute such written proxies, consents, waivers or other instruments as he may be entitled to execute as the record holder of stock or other securities owned by this Corporation.
All checks, drafts, notes, bonds, debentures, or other obligations for the payment of money shall be signed by such officer or officers, agent or agents, as the Board of Directors shall by resolution or vote direct. The Board of Directors may also, in its discretion, require, by resolution or vote, that checks, drafts, notes, bonds, debentures, or other obligations for the payment of money shall be countersigned or registered as a condition to their validity by such officer or officers, agent or agents as shall be directed in such resolution or vote. Checks for the total amount of any payroll and/or branch office current expenses may be drawn in accordance with the foregoing provisions and deposited in a special fund or funds. Checks upon such fund or funds may be drawn by such person or persons as the Treasurer shall designate and need not be countersigned.
The signatures of any officer or officers of this Corporation executing a corporate bond or debenture or attesting the corporate seal thereon, or upon any interest coupons annexed to any such corporate bond or debenture, and the corporate seal affixed to any such bond or debenture, may be facsimiles, engraves or printed, provided that such bond or debenture is authenticated or certified with the manual signature of an authorized officer of the corporate trustee designated by the indenture or other agreement under which said security is issued or of an authorized officer of an authenticating agent appointed by such corporate trustee. In case any officer or officers who signature or
signatures, whether manual or facsimile, shall have been used on any corporate bond or debenture shall cease to be an officer or officers of the Corporation for any reason before the same has been delivered by the Corporation, such bond or debenture may nevertheless be issued and delivered as though the person or persons who signatures were used thereon had not ceased to be such officer or officers.
(B) Any amendment or repeal of this Article which has the effect of increasing Director liability shall operate prospectively only, and shall not affect any action taken, or any failure to act, prior to its adoption.
It shall be a defense to any such action that the conduct of the claimant was such that under Nevada law the Company would be prohibited from indemnifying the claimant for the amount claimed, but the burden of proving such defense shall be on the Company. Neither the failure of the Company (including its Board of Directors, independent legal counsel and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the conduct of the claimant was not such that indemnification would be prohibited by law, nor an actual determination by the Company (including the Board of Directors, independent legal counsel or its stockholders) that the conduct of the claimant was such that indemnification would be prohibited by law, shall be a defense to the action or create a presumption that the conduct of the claimant was such that indemnification would be prohibited by law.
whether now existing or hereafter created, to which those seeking indemnification hereunder may be entitled under any agreement, by-law or article provision, vote of stockholders or directors or otherwise, (2) shall be deemed to create contractual rights in favor of persons entitled to indemnification hereunder, (3) shall continue as to persons who have ceased to have the status pursuant to which they were entitled or were denominated as entitled to indemnification hereunder and shall inure to the benefit of the heirs and legal representatives of persons entitled to indemnification hereunder, and (4) shall be applicable to actions, suits or proceedings commenced after the adoption hereof, whether arising from acts or omissions occurring before or after the adoption hereof. The right of indemnification provided for herein may not be amended, modified or repealed so as to limit in any way the indemnification provided for herein with respect to any acts or omissions occurring prior to the adoption of any such amendment or repeal.
In furtherance, and not in limitation, of the powers conferred by statute, the Board of Directors, by a majority vote of those present at any called meeting, is expressly authorized:
(A) To hold its meetings, to have one or more offices and to keep the books of the Corporation, except as may be otherwise specifically required by the laws of the State of Nevada, within or without the State of Nevada, at such places as may be from time to time designated by it.
(B) To determine from time to time whether, and if allowed under what conditions and regulations, the accounts and books of the Corporation (other than the books required by law to be kept at the principal office of the Corporation in Nevada), or
any of them, shall be open to inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted or limited accordingly.
(C) To make, alter, amend and rescind the By-Laws of the Corporation, to fix the amount to be reserved as working capital, to fix the times for the declaration and payment of dividends, and to authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation.
(D) To designate from its number an executive committee, which, to the extent provided by the By-Laws of the Corporation or by resolution of the Board of Directors, shall have and may exercise in the intervals between meetings of the Board of Directors, the powers thereof which may lawfully be delegated in respect of the management of the business and the affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to such papers as may require it. The Board of Directors may also, in its discretion, designate from its number a finance committee and delegate thereto such of the powers of the Board of Directors as may be lawfully delegated, to be exercised when the Board is not in session.
These By-Laws may be amended, added to, altered or repealed in whole or in part at any Annual or Special Meeting of the Stockholders by vote in either case of a majority of the voting power of the capital stock issued and outstanding and entitled to vote, provided notice of the general nature or character of the proposed amendment, addition, alteration or repeal is given in the notice of said meeting, or by the affirmative vote of a majority of the Board of Directors present at a called Regular or Special Meeting of the Board of Directors, provided notice of the general nature or character of the proposed amendment, addition, alteration or repeal is given in the notice of said meeting.
EXHIBIT 4(A)
THIS AGREEMENT dated as of October 12, 1999 between Nevada Power Company, a corporation organized under the laws of the State of Nevada (the "Company"), and Bankers Trust Company, a New York banking corporation as fiscal and paying agent (the "Agent").
(a) The Notes shall be issuable in series. The aggregate principal amount of Notes which may be issued hereunder is unlimited.
(b) Each Note shall be executed on behalf of the Company by the manual or facsimile signature of an Authorized Representative (as defined in Section 3 hereof) of the Company.
(a) The Notes shall be issued only upon receipt from the Company of an order (an "Authentication Order") with respect to a series of Notes, which shall be accompanied by the proposed form of the Notes of such series and, to the extent not set forth in such proposed form of Note, shall include:
(i) the designation of the Notes of the series (which may be part of a series of Notes previously issued);
(ii) any limit on the aggregate principal amount of the Notes of the series that may be authenticated and delivered hereunder (except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes of the series);
(iii) any date or dates on which the principal of the Notes of the series is payable;
(iv) the method by which the rate or rates at which the Notes shall bear interest shall be determined; the date or dates from which such interest shall be payable (each an "Interest Payment Date") and the record dates for the determination of holders to whom interest is payable; and the basis on which interest is to be calculated;
(v) the place or places where the principal of and any interest on the Notes shall be payable;
(vi) the price or prices at which, the period or periods within which and the terms and conditions upon which Notes of the series may be redeemed, in whole or in part;
(vii) the obligation, if any, of the Company to redeem, purchase or repay Notes of the series pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a holder thereof and the price or prices at which and the period or periods within which and the terms and conditions upon which Notes shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation;
(viii) the denominations in which Notes shall be issuable;
(ix) if other than the principal amount thereof, the portion of the principal amount of Notes which shall be payable upon declaration of acceleration of the maturity thereof;
(x) any restrictions on sale, resale, pledge or any other transfer of the Notes; and
(xi) whether the Notes will be in the form of a global security.
(i) complete each Note as to its Registered Holder and principal amount;
(ii) record each Note in a Note Register to be maintained by the Agent hereunder;
(iii) cause each Note to be manually authenticated by any one of the officers or employees of the Agent duly authorized and designated by it for such purpose; and
(iv) deliver each Note.
after the maturity date thereof. The Agent will forthwith cancel and destroy each such Note. If the maturity date is an Interest Payment Date, interest will be paid in the usual manner.
(a) The terms "Note Register" shall mean the definitive record in which shall be recorded the names, addresses and taxpayer identifying numbers of Registered Holders of the Notes, the Note numbers and original issue dates thereof and details with respect to the transfers and exchange of Notes.
(b) The Agent shall register the transfer of any Note and/or effect the exchange of any Note or Notes for Notes of other authorized denominations only in accordance with the terms and conditions of such Note.
Company and shall not assume any relationship of agency of trust for or with any Noteholder, except that all funds held by the Agent for payment of principal of or interest on the Notes shall be held in trust by it and applied to payments or the Notes subject to the limitations set forth herein and in the terms of the Note.
(a) All communications by or on behalf of the Company relating to the issuance, transfer, exchange or payment of Notes or interest thereon shall be directed to the Agent at its address set forth in subsection (b)(ii) hereof (or such other address as the Agent shall specify in writing to the Company).
(b) Notices and other communications hereunder shall except to the extent otherwise expressly provided, be in writing and shall be addressed as follows, or to such other addresses as the parties hereto shall specify from time to time:
(i) if to the Company:
Nevada Power Company
6226 W. Sahara Avenue
P.O. Box 230
Las Vegas , Nevada 89146
Attention: Director of Finance/Assistant Treasurer
(ii) if to the Agent in connection with the issuance, transfer, exchange or payment of Notes or interest thereon:
Bankers Trust Company
Corporate Trust and Agency Services
Four Albany Street
New York, New York 10006-1515
such counterpart, when so executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on their behalf by their officers thereunto duly authorized, all as of the date and year first above written.
NEVADA POWER COMPANY
By: _________________________________
BANKERS TRUST COMPANY
By: _________________________________
EXHIBIT 4(B)
NOTE NO. R-1 CUSIP N0. 641423 AT 5
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO NEVADA POWER COMPANY (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE IS A BOOK-ENTRY SECURITY AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED CIRCUMSTANCES.
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY (1) INSIDE THE U.S. TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE U.S. IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.
NEVADA POWER COMPANY
FLOATING RATE NOTES
DUE OCTOBER 6, 2000 (THE "NOTES")
If any Interest Payment Date for this Note (other than an Interest Payment Date at the Maturity Date) would otherwise be a day that is not a Business Day (as defined in Section 1 hereof), such Interest Payment Date shall be postponed until the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Payment Date shall be the next preceding Business Day. If the Maturity Date of this Note falls on a day that is not a Business Day, the payment of principal and interest will be made on the next succeeding Business Day, and no interest on such payment shall accrue for the period from and after such Maturity Date, except as otherwise expressly provided for herein.
This Note is one of a duly authorized series of securities of the Company, limited in aggregate principal amount of $100,000,000, issued under a Fiscal and Paying Agency Agreement, dated as of October 12, 1999 (the "Fiscal Agency Agreement"), duly executed and delivered by the Company to Bankers Trust Company, as Fiscal and Paying Agent (the "Fiscal Agent"). All terms that are used but not defined in this Note and that are defined in the Fiscal Agency Agreement shall have the meanings set forth therein.
This Note may be redeemed at the option of the Company, in whole, beginning on April 15, 2000, and on the 15th day of each month thereafter, at a redemption price equal to 100% of the unpaid principal amount plus accrued and unpaid interest on this Note to the date of redemption. Any such redemption may be made by the Company upon not less than 15 Business Days prior notice mailed to the holder of this Note at its registered address by first-class mail. On and after the redemption date, interest shall cease to accrue on this Note unless the Company defaults in the payment of any principal then due and payable.
1. Calculation of Interest. The period beginning on, and including, October 15, 1999 and ending on, but excluding, the first Interest Payment Date and each successive period beginning on, and including, an Interest Payment Date and ending on, but excluding, the next succeeding Interest Payment Date is herein called an "Interest Period". "Business Day" shall mean any day on which commercial banks and foreign exchange markets are open for business, including dealings in deposits in U.S. dollars in New York and London.
The rate of interest payable from time to time in respect of this Note (the "Rate of Interest") will be a floating rate determined by reference to LIBOR, determined as described below, plus a margin of 0.79% per annum. All percentages resulting from any calculation on this Note will be rounded to the nearest one hundredth-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation on the Notes will be rounded to the nearest cent (with one-half cent being rounded upward).
(a) At approximately 11:00 a.m. (London time) on the second day on which commercial banks are open for business (including dealings in U.S. Dollar deposits) in London (or, for purposes of paragraph (c) (ii) below, New York) prior to the commencement of the Interest Period for which such rate will apply (each such day an "Interest Determination Date"), Bankers Trust Company, or its successor in this capacity (the "Calculation Agent"), will calculate the rate of interest (the "Rate of Interest") for such Interest Period as, subject to the provisions described below, the rate per annum equal to 0.79% above the rate appearing on the Dow Jones Telerate Page 3750 (or such other page as may replace that page on the Dow Jones Telerate Service) for three-month U.S. dollar deposits in the London inter- bank market on such Interest Determination Date.
(b) If on any Interest Determination Date an appropriate rate cannot be determined from the Dow Jones Telerate Service, the Rate of Interest for the next Interest Period shall, subject to the provisions described below, be the rate per annum that the Calculation Agent certifies to be 0.79% per annum above the arithmetic mean of the offered quotations, as communicated to and at the request of the Calculation Agent by not less than two major banks in London selected by the Calculation Agent (the "Reference Banks," which expression shall include any successors nominated by the Calculation Agent), to leading banks in London by the principal London offices of the Reference Banks for three-month U.S. dollar deposits in the London inter- bank market as at 11:00 a.m. (London time) on such Interest Determination Date.
(c) If on any Interest Determination Date fewer than two of such offered rates are available, the Rate of Interest for the next Interest Period shall be whichever is the higher of:
(i) the Rate of interest in effect for the last preceding Interest Period to which (a) or (b) above shall have applied; and
(ii) the Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per annum which the Calculation Agent determines to be 0.79% per annum above either (1) the arithmetic mean of the U.S. dollar offered rates which New York City banks selected by the Calculation Agent are or were quoting, on the
relevant Interest Determination Date, for three-month deposits to the Reference Banks or those of them (being at least two in number) to which such quotations are or were, in the opinion of the Calculation Agent, being so made, or (2) in the event that the Calculation Agent can determine no such arithmetic mean, the arithmetic mean of the U.S. dollar offered rates which at least two New York City banks selected by the Calculation Agent are or were quoting on such Interest Determination Date to leading European banks for a period of three months; provided, however, that if the banks selected as aforesaid by the Calculation Agent are not quoting as mentioned above, the Rate of Interest shall be the Rate of Interest specified in (i) above.
The Calculation Agent shall, as soon as practicable after 11:00 a.m. (London time) on each Interest Determination Date, determine the Rate of Interest and calculate the amount of interest payable in respect of the following Interest Period (the "Interest Amount"). The Interest Amount shall be calculated by applying the Rate of Interest to the principal amount of each Note outstanding at the commencement of the Interest Period, multiplying each such amount by the actual number of days in the Interest Period concerned (which actual number of days shall include the first day but exclude the last day of such Interest Period) divided by 360 and rounding the resultant figure upwards to the nearest cent (half a cent being rounded upwards). The determination of the Rate of Interest and the Interest Amount by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be final and binding on all parties.
Notwithstanding anything herein to the contrary, the interest rate on the Notes shall in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application.
Interest shall cease to accrue on this Note on the Maturity Date unless, upon presentation of this Note, payment of principal is improperly withheld or refused, in which case, interest shall continue to accrue.
2. Calculation Agent. So long as any of this Note remains outstanding, the Company shall maintain under appointment a Calculation Agent, which shall initially be the Fiscal Agent, to calculate the Rate of Interest payable on this Note in respect of each Interest Period. If the Calculation Agent shall fail to establish the Rate of Interest for any Interest Period, or if the Company shall remove the Calculation Agent, the Company shall appoint another commercial or investment bank to act as the Calculation Agent. The Company may change the Calculation Agent without notice.
All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions hereof relating to the payment and calculation of interest on this Note by the Calculation Agent shall (in the absence of willful default, bad faith or manifest error) be binding on the Company, the
Calculation Agent and all of the holders and owners of beneficial interests in this Note, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions.
3. Registration; Registration of Transfer and Exchange. The Company shall cause to be kept at an office or agency to be maintained by the Company a register (the register maintained in such office being herein referred to as the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Fiscal Agent is hereby appointed "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint co-registrars and may change any Note Registrar or co- registrar without notice.
Notes shall be exchangeable pursuant to this Section 3 for Notes registered in the name of, and a transfer of a Note may be registered to, any person other than DTC or its successor depository (DTC or such successor being referred to as a "depository") for such Note or its nominee only if (i) such depository notifies the Company that it is unwilling or unable to continue as depository for such Note or if at any time such depository ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and a successor depository is not appointed by the Company within 90 days, (ii) there shall have occurred and be continuing an Event of Default (as defined below) with respect to the Notes or (iii) the Company, in its sole discretion, elects to terminate the book-entry system. Upon the occurrence of any one or more of the conditions specified in clauses (i), (ii) or (iii) of the preceding sentence, such Note shall be exchanged for Notes registered in the names of, and the transfer of such Note shall be registered to, such persons (including persons other than the depository with respect to such Notes and its nominee) as such depository shall direct, in each case subject to Section 5 hereof.
The Notes and any certificates for Notes issued in exchange for Notes or a beneficial interest therein will bear the third legend set forth in this Note. The holder of a certificated Note may transfer such Note, subject to compliance with the provisions of such legend, as provided in the preceding paragraph. Upon the transfer, exchange or replacement of Notes bearing such legend, or upon specific request for removal of such legend on a Note, the Company will deliver only Notes bearing such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Company that neither such legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act.
4. Acts by Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by the Notes or the Fiscal Agency Agreement to be given or taken by holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such holders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided in the Notes or the Fiscal Agency Agreement, such action shall become effective when such instrument or instruments are delivered to the Fiscal Agent and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of the Notes and the Fiscal Agency Agreement and conclusive in favor of the Fiscal Agent and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his or her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his or her authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Fiscal Agent deems sufficient.
(c) The Company may set any day as the record date for the purpose of determining the holders of outstanding Notes entitled to make any request or demand or give any authorization, direction, notice, consent or waiver or take other action, provided or permitted by the Notes and the Fiscal Agency Agreement to be made, given or taken by holders of the Notes.
With regard to any record date set pursuant to the immediately preceding paragraph, the holders of outstanding Notes on such record date (or their duly appointed agents), and only such persons, shall be entitled to take relevant action, whether or not such holders remain holders after such record date. With regard to any action that may be taken hereunder only by holders of a requisite principal amount of outstanding Notes (or their duly appointed agents) and for which a record date is set pursuant to the immediately preceding paragraph, the Company, may at its option, set an expiration date after which no such action purported to be taken by any holder shall be effective unless taken on or prior to such expiration date by holders of the requisite principal amount of outstanding Notes on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this paragraph, the Company
may, on one or more occasions at its option, extend such expiration date to any later date. Nothing in this paragraph shall prevent any holder (or any duly appointed agent thereof) from taking, at any time, any action contrary to or different from, any action previously taken, or purported to have been taken hereunder by such holder, in which event the Company may set a record date in respect thereof pursuant to this paragraph. Notwithstanding the foregoing, the Company shall not set a record date for, and the provisions to this paragraph shall not apply with respect to, any action to be taken by holders pursuant to Section 8 hereof.
(d) The ownership of the Notes shall be proved by the Note Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver, or other Act of the holder of any Note shall bind every future holder of the same Note and the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Fiscal Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Note.
5. Denominations. The Notes are issuable only in registered form without coupons in denominations of $100,000 and integral multiples of $1,000 in excess thereof.
6. Persons Deemed Owners. The Company, the Fiscal Agent and any agent of the Company or the Fiscal Agent may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes whatsoever, whether or not this Note shall be overdue, and neither the Company, the Fiscal Agent nor any such agent shall be affected by notice to the contrary.
7. Amendments and Waivers. Without the consent of any holders of the Notes, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of the Notes and enter into one or more agreements supplemental to the Fiscal Agency Agreement, in form satisfactory to the Fiscal Agent, for any of the following purposes:
(a) to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Fiscal Agency Agreement; or
(b) to add to the covenants of the Company for the benefit of the holders of the Notes; or
(e) to add any additional Events of Default; or
(d) to secure the Notes; or
(e) to evidence and provide for the acceptance of appointment Fiscal Agent with respect to the Notes; or by a successor
(f) to amend the restrictions on transfer applicable to the on this Note; or Notes as set forth
With the consent of the holders of not less than 66-2/3% in principal amount of the outstanding Notes, by act of said holders delivered to the Company and the Fiscal Agent, the Company, when authorized by a resolution duly adopted by the Board of Directors of the Company, and the Fiscal Agent, at any time and from time to time, may amend the terms of
(1) change the stated maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon, or change any place of payment where, or the coin or currency in which, any Note or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof, or
(2) reduce the percentage in principal amount of the outstanding Notes, the consent of whose holders is required for any such amendment or supplemental agreement or the consent of whose holders is required for any waiver provided for herein or in the Fiscal Agency Agreement, or
(3) modify any of the provisions of this Section or Section 9, except to increase any such percentage or to provide that certain other provisions of the Notes cannot be modified or waived without the consent of the holder of each outstanding Note affected thereby.
It shall not be necessary for any act of holders under this Section 7 to approve the particular form of any proposed amendment or supplemental agreement, but it shall be sufficient if such act shall approve the substance thereof.
Upon the execution of any agreement supplement to the Fiscal Agency Agreement as permitted by this Section 7, the Notes and the Fiscal Agency Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of the Notes and the Fiscal Agency Agreement, as the same pertains to the Notes, for all purposes; and every holder of the Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
8. Defaults and Remedies. The occurrence of any of the following events shall constitute an Event of Default with respect to the Notes:
(a) default in the payment of the principal of any of the Notes when the same becomes due and payable; or
(b) default in the payment of any installment of interest upon any of the Notes when the same becomes due and payable, and continuance of such default for a period of 30 days; or
(c) failure on the part of the Company duly to observe or perform any other of the covenants or agreements on the part of the Company in the Notes for a period of 90 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Fiscal Agent by registered or certified mail or to the Company and the Fiscal Agent by the holders of at least 25% in aggregate principal amount of the Notes, or
(d) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company under the Federal Bankruptcy Code or any other similar applicable Federal or State law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in the bankruptcy or insolvency of the Company or of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or
(e) the Company shall institute proceedings to be adjudicated bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Federal Bankruptcy Code or any other similar Federal or State law, or shall consent to the filing of any such petition or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due.
If an Event of Default occurs and is continuing, the holders of at least 25% in principal amount of the Notes then outstanding may declare all the Notes to be due and payable immediately. Holders of a majority in principal amount of the Notes may waive an Event of Default and rescind any related declaration except as provided in Section 9(a) hereof. The Fiscal Agent may withhold from holders of Notes notice of any continuing Event of Default, except in respect of a default in the payment of principal of or interest on the Notes, if it determines that withholding such notice is in their interest.
9. Waivers.
(a) The holders of not less than a majority in principal amount of the outstanding Notes may on behalf of the holders of the Notes waive any past default hereunder with respect to the Notes and its consequences, except a default
(1) in the payment of the principal of or interest on any Note, or
(2) In respect of a covenant or provision hereof which under
Section 7 cannot be modified or amended without the consent of the
holder of each outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of the Notes; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
(b) The Company may omit in any particular instance to comply with any term, provision or condition set forth in the Notes or the Fiscal Agency Agreement with respect to the Notes if before the time for such compliance the holders of at least 66-2/3% in principal amount of the outstanding Notes shall, by act of such holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but (i) without the consent of the holder of each Note affected thereby, no such waiver shall extend to or affect any term, provision or condition which under Section 7 cannot be modified or amended without the consent of the holder of each outstanding Note affected, and (ii) no such waiver shall extend to or affect any term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and any duties of the Fiscal Agent in respect of any such term, provision or condition shall remain in full force and effect.
Upon any consolidation of the Company with, or merger of the Company into, any other person or any sale or conveyance of all or substantially all of the assets of the Company in accordance with this Section 10, the successor person formed by such consolidation or into which the Company is merged or to which such sale or conveyance is made shall succeed to, and be substituted for, and may exercise every right and power of the Company under this
Note and the Fiscal Agency Agreement with the same effect as if such successor person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor person shall be relieved of all obligations and covenants under the Notes and the Fiscal Agency Agreement.
11. Unclaimed Amounts. Any money deposited with the Fiscal Agent in trust for the payment of the principal of or interest on any Note and remaining unclaimed for twelve months after such principal or interest has become due and payable shall be paid to the Company upon its request; and the holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Fiscal Agent with respect to such money shall thereupon cease.
12. Mutilated, Destroyed, Lost and Stolen Notes. If any Note becomes mutilated or defaced or is apparently destroyed, lost or stolen, the Fiscal Agent shall, subject to the provisions of this Section 12, authenticate and deliver a new Note in exchange and substitution for the mutilated or defaced Note or in lieu of or in substitution for the apparently destroyed, lost or stolen Note.
Application for the authentication and delivery of a substitute Note pursuant to this Section 12 may be made at the office of the Fiscal Agent. If the applicant for any substitute Note shall furnish to the Company and the Fiscal Agent (i) in the case of any such request in case of loss or theft, such security or indemnity as may be required by the Company and the Fiscal Agent in their sole discretion to indemnify and defend and to save each of them and any agent of either of them harmless, and (ii) in the case of any request for a substitute Note in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Fiscal Agent of the apparent destruction, loss or theft of such Note and of the ownership thereof, then, in the absence of notice to the Company or the Fiscal Agent that such Note has been acquired by a bona fide purchaseer, the Company shall execute and the Fiscal Agent shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note.
Upon the issuance of any substitute Note under this Section 12, the Company may require the payment of a sum sufficient to cover any tax assessment or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith.
Every new Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of the Fiscal Agency Agreement equally and proportionately with any and all other Notes.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.
13. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Fiscal Agency Agreement, or for any claim based on, in respect of or by reason of such obligations or their creation. Each holder (and each beneficial owner) of a Note by accepting such Note (or acquisition of a beneficial interest therein) waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Notes.
THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
This Note shall not be valid or obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Fiscal Agent under the Fiscal Agency Agreement.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Company has caused this instrument to be signed in its corporate name, manually or by facsimile, by an Authorized Representative and a facsimile of its corporate seal to be affixed hereunto or imprinted hereon, attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries.
NEVADA POWER COMPANY
Attest: ____________________ By: __________________________ Name:
Title:
Dated: October 15, 1999
FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement.
BANKERS TRUST COMPANY, as
Fiscal Agent
By: __________________________
Authorized Signer
EXHIBIT 4(C)
NEVADA POWER COMPANY
(Formerly DESERT Merger Sub, Inc., a wholly owned subsidiary of Sierra Pacific Resources and successor by merger to Nevada Power Company)
TO
BANKERS TRUST COMPANY
as Trustee
TWENTY-SEVENTH SUPPLEMENTAL INDENTURE
Dated as of July 1, 1999
THIS TWENTY-SEVENTH SUPPLEMENTAL INDENTURE dated as of July 1, 1999 made by and between NEVADA POWER COMPANY (formerly DESERT Merger Sub, Inc., a wholly owned subsidiary of Sierra Pacific Resources and successor by merger to Nevada Power Company), a corporation duly organized and existing under the laws of the State of Nevada (the "Company"), having its principal place of business at Las Vegas, Nevada, party of first part, and BANKERS TRUST COMPANY (successor to FIRST INTERSTATE BANK OF NEVADA, N.A., formerly FIRST NATIONAL BANK OF NEVADA, RENO, NEVADA), a banking corporation duly organized and existing under and by virtue of the banking laws of the State of New York, having its principal corporate office at 130 Liberty Street, New York, New York (hereinafter sometimes called the "Trustee"), party of the second part;
WHEREAS, the Company has heretofore executed and delivered to the Trustee its Indenture of Mortgage and Deed of Trust ("Original Indenture") dated October 1, 1953, to secure the payment thereunder; and, for the purpose of amending and supplementing and further confirming the lien of the Original Indenture, has heretofore executed and delivered the following Supplemental Indentures and Instrument of Further Assurance, each dated as hereinafter set forth:
Instrument Date
---------- ----
First Supplemental Indenture August 1, 1954
Instrument of Further Assurance as of April 1, 1956
Second Supplemental Indenture September 1, 1956
Third Supplemental Indenture as of May 1, 1959
Fourth Supplemental Indenture as of October 1, 1960
Fifth Supplemental Indenture as of December 1, 1961
Sixth Supplemental Indenture as of October 1, 1963
Seventh Supplemental Indenture as of August 1, 1964
Eighth Supplemental Indenture as of April 1, 1968
Ninth Supplemental Indenture as of October 1, 1969
Tenth Supplemental Indenture as of October 1, 1970
Eleventh Supplemental Indenture as of November 1, 1972
Twelfth Supplemental Indenture as of December 1, 1974
Thirteenth Supplemental Indenture as of October 1, 1976
Fourteenth Supplemental Indenture as of May 1, 1977
Fifteenth Supplemental Indenture as of September 1, 1978
Sixteenth Supplemental Indenture as of December 1, 1981
Seventeenth Supplemental Indenture as of August 1, 1982
Eighteenth Supplemental Indenture as of November 1, 1986
Nineteenth Supplemental Indenture as of October 1, 1989
Twentieth Supplemental Indenture as of May 1, 1992
Twenty-First Supplemental Indenture as of June 1, 1992
Twenty-Second Supplemental Indenture as of June 1, 1992
Twenty-Third Supplemental Indenture as of October 1, 1992
Twenty-Fourth Supplemental Indenture as of October 1, 1992
Twenty-Fifth Supplemental Indenture as of January 1, 1993
Twenty-Sixth Supplemental Indenture as of May 1, 1995
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the Original Indenture, as amended and supplemented by the instruments listed above and as to be supplemented by this Twenty-Seventh Supplemental Indenture and as it may from time to time be
amended or supplemented pursuant to the provisions thereof, is hereinafter sometimes called the "Indenture";
WHEREAS, the Original Indenture, the Instrument of Further Assurance and the Supplemental Indentures listed in the foregoing paragraph were recorded in Offices of the County Recorders of the States of Nevada, Arizona and Utah as set forth in Exhibit A attached hereto and incorporated herein by reference;
WHEREAS, in addition to thirteen series of Bonds heretofore issued under the Indenture, all of which have been retired, there have heretofore been issued under the Indenture: $15,000,000 principal amount of First Mortgage Bonds, 7 5/8% Series L Due 2002 of which $15,000,000 is now outstanding; $15,000,000 principal amount of First Mortgage Bonds, 7.80% Series T Due 2009 of which $15,000,000 is now outstanding; $105,000,000 principal amount of First Mortgage Bonds, 6.70% Series V Due 2022 of which $105,000,000 is now outstanding; $39,500,000 principal amount of First Mortgage Bonds, 6.60% Series W Due 2019 of which $39,500,000 is now outstanding; $78,000,000 principal amount of First Mortgage Bonds, 7.20% Series X Due 2022 of which $78,000,000 is now outstanding; $45,000,000 principal amount of First Mortgage Bonds, 6.93% Series Y Due 1999 of which $45,000,000 is now outstanding; and $45,000,000 principal amount of First Mortgage Bonds, 8.50% Series Z Due 2023 of which $45,000,000 is now outstanding; and 7.06% Series AA Due 2000 of which $85,000,000 is now outstanding (each such series of outstanding bonds being referred to herein as the "First Mortgage Bonds");
WHEREAS, First Interstate Bank of Nevada, N. A. heretofore resigned as Trustee under the terms of the Original Indenture, effective July 24, 1992 and Bankers Trust Company was duly appointed by the Company as temporary Trustee on such date by an instrument dated such date and recorded in various counties in the States of Nevada, Arizona and Utah, and Bankers Trust Company was thereafter duly elected by the bondholders as successor Trustee, and duly accepted such appointments, all in accordance with the Original Indenture; and
WHEREAS, on April 29, 1998 Nevada Power Company (formerly Southern Nevada Power Co. and referred to herein as the "Merged Company") entered into a Merger Agreement with Sierra Pacific Resources, a Nevada utility holding company, pursuant to which DESERT Merger Sub, Inc., a wholly owned subsidiary of Sierra Pacific Resources, merged with the Merged Company and DESERT Merger Sub, Inc. became the surviving corporation and changed its name to Nevada Power Company; and
WHEREAS, Section 8.15 of the Indenture provides in part that the Merged Company will not merge into any corporation, or permit any other corporation to merge into it, unless:
(1) any such merger shall be upon such terms as fully preserve the lien and security of the Indenture and all of the rights and powers of the Trustee and the Bondholders under the Indenture; and
(2) Upon any such merger, the successor corporation shall execute and deliver to the Trustee a supplemental indenture in form satisfactory to the Trustee expressly assuring the due and punctual payment of principal, premium, if any, and interest on all of the Bonds according to their
tenor and effect, the due and punctual performance and observance of all of the covenants and conditions of the Indenture to be performed by the Merged Company and all obligations with respect to the lien created by the granting clauses hereof or properties hereafter acquired; and
WHEREAS, the Company, as successor by merger to the Merged Company, desires to comply with Section 8.15 of the Indenture by entering into this Twenty- Seventh Supplemental Indenture to assume all and to secure the performance and observation of each and every of the covenants and conditions contained in the Indenture, and without in any way limiting the generality or effect of the Indenture insofar as by any provision thereof any of the properties therein or hereinafter referred to are now subject, or are now intended to be subject to the lien and operation thereof, but to such extent confirming such lien and operation, to this Twenty-Seventh Supplemental Indenture and by these presents does grant, bargain, sell, warrant, alien, remise, release, convey, assign, transfer, mortgage, pledge, set over and confirm, unto Bankers Trust Company, as Trustee aforesaid, and to its successors in the trust hereby created, in trust upon the conditions, terms and provisions of the Indenture, subject to the encumbrances and other matters permitted by the Indenture, all and singular the following premises, properties, interests and rights, all to the same extent and with the same force and effect as though owned by the Company at the date of execution of the Original Indenture and described in the same detail in the Granting Clauses of the Original Indenture, such premises, properties, interests and rights having been generally described and referred to in the Original Indenture, and to such ends the company hereby supplements, as below set forth, the Granting Clauses of the Original Indenture.
WHEREAS, all conditions and requirements necessary to make this Twenty- Seventh Supplemental Indenture a valid, binding and legal instrument have been done, performed and fulfilled, and the execution and delivery hereof have been in all respects duly authorized;
NOW, THEREFORE, to secure the performance and observation of each and every of the covenants and conditions contained in the Indenture, and without in any way limiting the generality or effect of the Indenture insofar as by any provision thereof any of the properties therein or hereinafter referred to are now subject, or are now intended to be subject to the lien and operation thereof, but to such extent confirming such lien and operation to this Twenty- Seventh Supplemental Indenture and by these presents does grant, bargain, sell, warrant, alien, remise, release, convey, assign, transfer, mortgage, pledge, set over and confirm, unto Bankers Trust Company, as Trustee aforesaid, and to its successors in the trust hereby created, in trust upon the conditions, terms and provisions of the Indenture, subject to the encumbrances and other matters permitted by the Indenture, all and singular the following premises, properties, interests and rights, all to the same extent and with the same force and effect as though owned by the Company at the date of execution of the Original Indenture and described in the same detail in the Granting Clauses of the Original Indenture, such premises, properties, interests and rights having been generally described and referred to in the Original Indenture, and to such ends the Company hereby supplements, as below set forth, the Granting Clauses of the Original Indenture:
GRANTING CLAUSES
FIRST: All those certain parcels of land, leasehold estates and interests in land, situate in the County of Clark, State of Nevada, and described on Exhibit B attached hereto and incorporated herein by reference.
SECOND: All of the premises, property, franchises and rights of every kind and description, real, personal and mixed, tangible and intangible, now owned or hereafter acquired by the Company and wherever situate.
Together with all and singular the tenements, hereditament and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders, tolls, rents, revenues, issues, income, products and profits thereof and all the estate, right, title, interest and claim whatsoever at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
Excepting and excluding, however, any and all property, premises and rights of the kinds or classes which by the terms of the Indenture are excepted and excluded from the lien and operation thereof, and therein sometimes referred to as "Excepted Property" (subject, however, to the Trustee's rights to possession of Excepted Property in case of default, as set forth under "Excepted Property" in the Original Indenture).
TO HAVE AND TO HOLD in trust with power of sale for the equal and proportionate benefit and security of all holders of all Bonds and the interest coupons appertaining thereto, now or hereafter issued under the Indenture, and for the enforcement and payment of Bonds and interest thereon when payable, and the performance of and compliance with the covenants and conditions of the Indenture, without any preference, distinction or priority as to lien or otherwise of any Bonds or coupons over any others thereof by reason of the difference in the time of the actual issue, sale or negotiation thereof, or by reason of the date of maturity thereof, or for any other reason whatsoever, except as otherwise expressly provided in the Indenture, so that each and every Bond shall have the same lien and so that the interest and principal of every Bond shall, subject to the terms thereof, be equally and proportionately secured by said lien, as if such Bond had been made, executed, delivered, sold and negotiated simultaneously with the execution and delivery of the Original Indenture.
The Trustee executes this Twenty-Seventh Supplemental Indenture only on the condition that it shall have and enjoy with respect thereto all of the rights, privileges and immunities as set forth in the Indenture.
The Company has agreed and covenanted and does hereby agree and covenant with the Trustee and its successors and assigns, and with the respective holders from time to time of the Bonds, or any thereof, as follows:
PART I
ARTICLE I
ASSUMPTION OF OBLIGATIONS
(S) 1.01 The Company hereby expressly assumes the due and punctual payment of principal, premium, if any, and interest on all of the Bonds according to their tenor and effect, and also hereby assumes the due and punctual performance and observance of all of the covenants and conditions of the Indenture to be performed by the Company, and all obligations with respect to the lien created by the granting clauses thereof on properties hereafter acquired.
(S) 1.02 The Company hereby covenants and agrees that it will take any and all action necessary or advisable or desirable to preserve the lien and security of the Indenture and all of the rights and powers of the Trustee and the Bondholders thereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
(S) 2.01 The Company represents and warrants that, as of the date of execution of this Twenty-Seventh Supplemental Indenture, it has good and marketable title in fee simple to all the real properties described in the Granting Clauses of the Original Indenture, the First Supplemental Indenture, the Instrument of Further Assurance, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh Supplemental Indenture, the Twelfth Supplemental Indenture, the Thirteenth Supplemental Indenture, the Fourteenth Supplemental Indenture, the Fifteenth Supplemental Indenture, the Sixteenth Supplemental Indenture, the Seventeenth Supplemental Indenture, the Eighteenth Supplemental Indenture, the Nineteenth Supplemental Indenture, the Twentieth Supplemental Indenture, the Twenty-First Supplemental Indenture, the Twenty-Second Supplemental Indenture, the Twenty- Third Supplemental Indenture, the Twenty-Fourth Supplemental Indenture, the Twenty-Fifth Supplemental Indenture, the Twenty-Sixth Supplemental Indenture and this Twenty-Seventh Supplemental Indenture (except any property heretofore released from the lien of the Indenture in accordance with the terms thereof), free and clear of any liens and encumbrances except Permitted Encumbrances and those, if any, referred to in said Granting Clauses, and that it has good and marketable title and is lawfully possessed of all other properties described in said Granting Clauses (except any properties therein described as to be acquired by the Company after the date of this Twenty-Seventh Supplemental Indenture and except any property heretofore released from the lien of the Indenture in accordance with the terms thereof), and the Indenture constitutes a direct and valid first mortgage lien on all such properties, subject only to Permitted Encumbrances and those, if any, referred to in said Granting Clauses. The Company represents and warrants that it has and covenants that it will continue to have, subject to the provisions of the Indenture, good right, full power and lawful authority to grant, bargain, sell, warrant, alien, remise, release, convey, assign, transfer, mortgage, pledge, set over and confirm to the Trustee all properties of every kind and nature described or referred to in said Granting Clauses (except any properties therein described as to be acquired by the Company after the date of this Twenty-Seventh Supplemental Indenture) which by the provisions of the Indenture are intended to be subject to the lien of the Indenture and that it will defend the title to such property and every part thereof to the Trustee forever, for the benefit of the holders of the Bonds, against the claims and demands of all persons whomsoever.
PART II
MISCELLANEOUS PROVISIONS
Except insofar as herein otherwise expressly provided, all of the definitions, provisions, terms and conditions of the Indenture shall be deemed to be incorporated in, and made a part of, this Twenty-Seventh Supplemental Indenture; and the Original Indenture as amended and supplemented by the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth Supplemental
Indenture, the Sixth Supplemental Indenture, the Seventh Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh Supplemental Indenture, the Twelfth Supplemental Indenture, the Thirteenth Supplemental Indenture, the Fourteenth Supplemental Indenture, the Fifteenth Supplemental Indenture, the Sixteenth Supplemental Indenture, the Seventeenth Supplemental Indenture, the Eighteenth Supplemental Indenture, the Nineteenth Supplemental Indenture, the Twentieth Supplemental Indenture, the Twenty-First Supplemental Indenture, the Twenty- Second Supplemental Indenture, the Twenty-Third Supplemental Indenture, Twenty- Fourth Supplemental Indenture, the Twenty-Fifth Supplemental Indenture and the Twenty-Sixth Supplemental Indenture is in all respects ratified and confirmed and supplemented by this Twenty-Seventh Supplemental Indenture; and the Original Indenture as amended and supplemented shall be read, taken and construed as one and the same instrument; provided, however, that no provision of this Twenty- Seventh Supplemental Indenture is intended to reinstate any provisions in the Original Indenture which were amended and superseded by the Trust Indenture Reform Act of 1990.
All covenants, promises, agreements, undertakings and provisions of the Indenture which exist for the benefit of, or while or so long as Series L Bonds, Series T Bonds, Series V Bonds, Series W Bonds, Series X Bonds, Series Y Bonds, Series Z Bonds or Series AA Bonds are outstanding, are hereby confirmed and the Company warrants and represents that each such covenant, promise, agreement, undertaking and provisions shall be observed, performed and complied with by the Company.
This Twenty-Seventh Supplemental Indenture shall be effective as of the date first hereinabove set forth, and may be executed simultaneously or from time to time in several counterparts, and each counterpart shall constitute an original instrument, and it shall not be necessary in making proof of this Twenty-Seventh Supplemental Indenture or of any counterpart thereof to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, said Nevada Power Company has caused this Twenty- Seventh Supplemental Indenture to be executed on its behalf by its President or one of its Vice Presidents and its corporate seal to be hereto affixed, and the said seal and this Twenty-Seventh Supplemental Indenture to be attested by its Secretary or Assistant Secretary; and said Bankers Trust Company, in evidence of its acceptance of the trust hereby created has caused this Twenty-Seventh Supplemental Indenture to be executed on its behalf by its Chairman of the Board and Chief Executive Officer, President or a Vice President and its corporate seal to be hereto affixed and said seal and this Twenty-Seventh Supplemental Indenture to be attested by its Secretary or an Assistant Secretary, all as of the 1st day of July, 1999.
NEVADA POWER COMPANY
[S E A L]
By:
William E. Peterson
ATTEST: Senior Vice President
and General Counsel
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BANKERS TRUST COMPANY, as Trustee
By:
Assistant Vice President
[S E A L]
ATTEST:
STATE OF NEVADA )
) ss.
COUNTY OF __________)
On this ____ day of ___________, 1999, personally appeared before me, a Notary Public in and for said County and State, __________________________ and ___________________________, known to me to be the ___________________________ and ______________________, respectively, of Nevada Power Company, one of the corporations that executed the foregoing instrument, and upon oath did depose that they are the officers of said corporation as above designated; that they are acquainted with the seal of said corporation and that the seal affixed to said instrument is the corporate seal of said corporation; that the signatures to said instrument were made by officers of said corporation as indicated after said signatures, and that the said corporation executed the said instrument freely and voluntarily and for the uses and purposes therein mentioned.
On ____________, 1999, before me, ________________________, personally appeared _______________________________ [_] personally known to me OR [_] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
[SEAL]
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this ____ day of __________, 1999, before me personally came ___________________, to me known, who, being by me duly sworn, did depose and say that he resides at ______________________ ________________________; that he is an Assistant Vice President of Bankers Trust Company, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
[Notarial seal] ________________________________________
On ____________, 1999, before me, ________________________, personally appeared _______________________________ [ ] personally known to me OR [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
[SEAL]
EXHIBIT A
The Original Indenture, First Supplemental Indenture, an Instrument of Further Assurance, Second Supplemental Indenture, Third Supplemental Indenture, Fourth Supplemental Indenture, Fifth Supplemental Indenture, Sixth Supplemental Indenture, Seventh Supplemental Indenture, Eighth Supplemental Indenture, Ninth Supplemental Indenture, Tenth Supplemental Indenture, Eleventh Supplemental Indenture, Twelfth Supplemental Indenture, Thirteenth Supplemental Indenture, Fourteenth Supplemental Indenture, Fifteenth Supplemental Indenture, Sixteenth Supplemental Indenture, Seventeenth Supplemental Indenture, Eighteenth Supplemental Indenture, Nineteenth Supplemental Indenture, Twentieth Supplemental Indenture, Twenty-First Supplemental Indenture, Twenty-Second Supplemental Indenture, Twenty-Third Supplemental Indenture, Twenty-Fourth Supplemental Indenture, Twenty-Fifth Supplemental Indenture and Twenty-Sixth Supplemental Indenture were recorded in Offices of the County Recorders of the States of Nevada, Arizona and Utah as follows:
NEVADA
CLARK COUNTY
RECORDED DOC. NO. RECORDS
-------- -------- ---------
Original Indenture Nov. 6, 1953 417,677 Trust Deeds
First Supplemental Indenture Sept. 23, 1954 20,904 Official Records
Instrument of Further Assurance Apr. 19, 1956 75,779 Official Records
Second Supplemental Indenture Sept. 19, 1956 89,423 Official Records
Third Supplemental Indenture May 15, 1959 160,878 Official Records
Fourth Supplemental Indenture Oct. 28, 1960 215,907 Official Records
Fifth Supplemental Indenture Dec. 4, 1961 267,362 Official Records
Sixth Supplemental Indenture Oct. 18, 1963 391,466 Official Records
Seventh Supplemental Indenture Aug. 7, 1964 451,010 Official Records
Eighth Supplemental Indenture May 10, 1968 700,126 Official Records
Ninth Supplemental Indenture Oct. 16, 1969 791,246 Official Records
Tenth Supplemental Indenture Oct. 2, 1970 53,871 Official Records
Eleventh Supplemental Indenture Oct. 27, 1972 233,640 Official Records
Twelfth Supplemental Indenture Dec. 6, 1974 438,246 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 629,589 Official Records
Fourteenth Supplemental Indenture May 4, 1977 693,961 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 898,343 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 1,453,990 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 1,569,991 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 00622 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 00576 Official Records
Twentieth Supplemental Indenture April 30, 1992 01212 Official Records
Twenty-First Supplemental Indenture June 19, 1992 01239 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 01240 Official Records
Twenty-Third Supplemental Indenture October 26, 199 00858 Official Records
Twenty-Fourth Supplemental Indenture November 2, 199 00901 Official Records
Twenty-Fifth Supplemental Indenture January 11, 199 00710 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 00625 Official Records
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NEVADA
NYE COUNTY
RECORDED DOC. NO. RECORDS
-------- -------- -------
Original Indenture Sept. 19, 1956 24,334 Trust Deeds
First Supplemental Indenture Sept. 19, 1956 24,335 Official Records
Instrument of Further Assurance Sept. 19, 1956 24,336 Official Records
Second Supplemental Indenture Sept. 19, 1956 24,337 Official Records
Third Supplemental Indenture May 15, 1959 31,466 Official Records
Fourth Supplemental Indenture Oct. 28, 1960 37,060 Official Records
Fifth Supplemental Indenture Dec. 5, 1961 39,876 Official Records
Sixth Supplemental Indenture Oct. 18, 1963 46,249 Official Records
Seventh Supplemental Indenture Aug. 7, 1964 48,660 Official Records
Eighth Supplemental Indenture May 10, 1968 05,910 Official Records
Ninth Supplemental Indenture Oct. 17, 1969 15,192 Official Records
Tenth Supplemental Indenture Oct. 5, 1970 20,294 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 35,265 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 45,632 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 55,802 Official Records
Fourteenth Supplemental Indenture May 4, 1977 58,169 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 70,767 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 54,601 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 65,354 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 171,431 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 245632 Official Records
Twentieth Supplemental Indenture April 30, 1992 307547 Official Records
Twenty-First Supplemental Indenture June 19, 1992 310469 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 310470 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 320357 Official Records
Twenty-Fourth Supplemental Indenture November 2, 1992 320802 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 324817 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 372538 Official Records
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NEVADA
LINCOLN COUNTY
RECORDED DOC. NO. RECORDS
-------- -------- -------
Original Indenture Sept. 1, 1972 52,162 Official Records
First Supplemental Indenture Sept. 1, 1972 52,163 Official Records
Instrument of Further Assurance Sept. 1, 1972 52,164 Official Records
Second Supplemental Indenture Sept. 1, 1972 52,165 Official Records
Third Supplemental Indenture Sept. 1, 1972 52,166 Official Records
Fourth Supplemental Indenture Sept. 1, 1972 52,167 Official Records
Fifth Supplemental Indenture Sept. 1, 1972 52,168 Official Records
Sixth Supplemental Indenture Sept. 1, 1972 52,169 Official Records
Seventh Supplemental Indenture Sept. 1, 1972 52,170 Official Records
Eighth Supplemental Indenture Sept. 1, 1972 52,171 Official Records
Ninth Supplemental Indenture Sept. 1, 1972 52,172 Official Records
Tenth Supplemental Indenture Sept. 1, 1972 52,173 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 52,330 Official Records
Twelfth Supplemental Indenture Dec. 6, 1974 55,557 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 58,659 Official Records
Fourteenth Supplemental Indenture May 4, 1977 59,627 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 62,731 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 74,010 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 75,970 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 85,911 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 92444 Official Records
Twentieth Supplemental Indenture April 30, 1992 98382 Official Records
Twenty-First Supplemental Indenture June 19, 1992 98558 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 98559 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 99552 Official Records
Twenty-Fourth Supplemental Indenture November 2, 1992 99062 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 99782 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 103516 Official Records
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ARIZONA
NAVAJO COUNTY
RECORDED DOC. NO. RECORDS
-------- -------- -------
Original Indenture Oct. 5, 1970 330/196 Official Records
First Supplemental Indenture Oct. 5, 1970 330/301 Official Records
Instrument of Further Assurance Oct. 5, 1970 330/340 Official Records
Second Supplemental Indenture Oct. 5, 1970 330/351 Official Records
Third Supplemental Indenture Oct. 5, 1970 330/422 Official Records
Fourth Supplemental Indenture Oct. 5, 1970 330/464 Official Records
Fifth Supplemental Indenture Oct. 5, 1970 330/496 Official Records
Sixth Supplemental Indenture Oct. 5, 1970 330/530 Official Records
Seventh Supplemental Indenture Oct. 5, 1970 330/567 Official Records
Eighth Supplemental Indenture Oct. 5, 1970 330/604 Official Records
Ninth Supplemental Indenture Oct. 5, 1970 330/635 Official Records
Tenth Supplemental Indenture Oct. 5, 1970 330/80 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 376/364 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 426/148 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 473/494 Official Records
Fourteenth Supplemental Indenture May 4, 1977 486/754 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 531/167 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 647/828 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 671/789 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 846/551 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 970/816 Official Records
Twentieth Supplemental Indenture April 30, 1992 1076//21 Official Records
Twenty-First Supplemental Indenture June 19, 1992 1083/537 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 1083/557 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 1103/36 Official Records
Twenty-Fourth Supplemental Indenture October 30, 1992 1104/1 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 1112/693 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 1995/7363 Official Records
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ARIZONA
COCONINO COUNTY
RECORDED DOC. NO. RECORDS
-------- -------- -------
Original Indenture Oct. 1, 1970 370 Official Records
First Supplemental Indenture Oct. 1, 1970 370 Official Records
Instrument of Further Assurance Oct. 1, 1970 370 Official Records
Second Supplemental Indenture Oct. 1, 1970 370 Official Records
Third Supplemental Indenture Oct. 1, 1970 370 Official Records
Fourth Supplemental Indenture Oct. 1, 1970 370 Official Records
Fifth Supplemental Indenture Oct. 1, 1970 370 Official Records
Sixth Supplemental Indenture Oct. 1, 1970 370 Official Records
Seventh Supplemental Indenture Oct. 1, 1970 370 Official Records
Eighth Supplemental Indenture Oct. 1, 1970 370 Official Records
Ninth Supplemental Indenture Oct. 1, 1970 370 Official Records
Tenth Supplemental Indenture Oct. 5, 1970 370 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 445 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 528 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 606 Official Records
Fourteenth Supplemental Indenture May 4, 1977 628 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 697 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 862 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 896 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 1125 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 1304 Official Records
Twentieth Supplemental Indenture April 30, 1992 1471 Official Records
Twenty-First Supplemental Indenture June 19, 1992 1483 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 1483 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 1515 Official Records
Twenty-Fourth Supplemental Indenture October 30, 1992 1517 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 1535 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 1769 Official Records
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ARIZONA
MOHAVE COUNTY
RECORDED DOC. NO. RECORDS
---------------- -------- ----------------
Original Indenture Aug. 28, 1972 50 Official Records
First Supplemental Indenture Aug. 28, 1972 50 Official Records
Instrument of Further Assurance Aug. 28, 1972 50 Official Records
Second Supplemental Indenture Aug. 28, 1972 50 Official Records
Third Supplemental Indenture Aug. 28, 1972 50 Official Records
Fourth Supplemental Indenture Aug. 28, 1972 50 Official Records
Fifth Supplemental Indenture Aug. 28, 1972 50 Official Records
Sixth Supplemental Indenture Aug. 28, 1972 50 Official Records
Seventh Supplemental Indenture Aug. 28, 1972 51 Official Records
Eighth Supplemental Indenture Aug. 28, 1972 51 Official Records
Ninth Supplemental Indenture Aug. 28, 1972 51 Official Records
Tenth Supplemental Indenture Aug. 28, 1972 51 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 67 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 250 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 355 Official Records
Fourteenth Supplemental Indenture May 4, 1977 390 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 489 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 765 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 865 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 1264 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 1612 Official Records
Twentieth Supplemental Indenture April 30, 1992 92-12800 Official Records
Twenty-First Supplemental Indenture June 19, 1992 92-33181 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 92-33182 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 92-58584 Official Records
Twenty-Fourth Supplemental Indenture October 30, 1992 92-59727 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 2160 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 2568 Official Records
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UTAH
KANE COUNTY
RECORDED DOC. NO. RECORDS
---------------- -------- ----------------
Original Indenture Sept. 12, 1972 35 Official Records
First Supplemental Indenture Sept. 12, 1972 35 Official Records
Instrument of Further Assurance Sept. 12, 1972 35 Official Records
Second Supplemental Indenture Sept. 12, 1972 35 Official Records
Third Supplemental Indenture Sept. 12, 1972 35 Official Records
Fourth Supplemental Indenture Sept. 12, 1972 35 Official Records
Fifth Supplemental Indenture Sept. 12, 1972 35 Official Records
Sixth Supplemental Indenture Sept. 12, 1972 35 Official Records
Seventh Supplemental Indenture Sept. 12, 1972 35 Official Records
Eighth Supplemental Indenture Sept. 12, 1972 35 Official Records
Ninth Supplemental Indenture Sept. 12, 1972 35 Official Records
Tenth Supplemental Indenture Sept. 12, 1972 35 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 35 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 44 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 53 Official Records
Fourteenth Supplemental Indenture May 4, 1977 55 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 59 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 71 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 074 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 093 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 0106 Official Records
Twentieth Supplemental Indenture April 30, 1992 72900 Official Records
Twenty-First Supplemental Indenture June 19, 1992 73283 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 73284 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 74584 Official Records
Twenty-Fourth Supplemental Indenture October 30, 1992 74641 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 75203 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 83330 Official Records
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UTAH
WASHINGTON COUNTY
RECORDED DOC. NO. RECORDS
---------------- -------- ----------------
Original Indenture Sept. 22, 1972 124 Official Records
First Supplemental Indenture Sept. 22, 1972 124 Official Records
Instrument of Further Assurance Sept. 22, 1972 124 Official Records
Second Supplemental Indenture Sept. 22, 1972 124 Official Records
Third Supplemental Indenture Sept. 22, 1972 124 Official Records
Fourth Supplemental Indenture Sept. 22, 1972 124 Official Records
Fifth Supplemental Indenture Sept. 22, 1972 124 Official Records
Sixth Supplemental Indenture Sept. 22, 1972 124 Official Records
Seventh Supplemental Indenture Sept. 22, 1972 124 Official Records
Eighth Supplemental Indenture Sept. 22, 1972 124 Official Records
Ninth Supplemental Indenture Sept. 22, 1972 124 Official Records
Tenth Supplemental Indenture Sept. 22, 1972 124 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 127 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 163 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 204 Official Records
Fourteenth Supplemental Indenture May 4, 1977 218 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 239 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 302 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 313 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 431 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 537 Official Records
Twentieth Supplemental Indenture April 30, 1992 405624 Official Records
Twenty-First Supplemental Indenture June 19, 1992 409301 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 409302 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 417975 Official Records
Twenty-Fourth Supplemental Indenture October 30, 1992 418495 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 423543 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 500264 Official Records
|
The foregoing document was recorded as follows:
RECORDED DOC. NO. RECORDS
-------------- ---------- ----------------
Clark County, Nevada August 5, 1999 01202 Official Records
Nye County, Nevada August 5, 1999 475120 Official Records
Lincoln County, Nevada August 5, 1999 113157 Official Records
Navajo County, Arizona August 5, 1999 1999 16074 Official Records
Coconino County, Arizona August 5, 1999 3017077 Official Records
Mohave County, Arizona August 5, 1999 99047383 Official Records
Kane County, Utah August 5, 1999 99595 Official Records
Washington County, Utah August 5, 1999 00657403 Official Records
|
EXHIBIT B
PROPERTY ADDITIONS
All that Real Property situate in the County of Clark, State of Nevada bounded and described as follows:
Government Lot Eight (8) in Section 19, Township 21 South, Range 60 East, M.D.B. & M.
That portion of the Northwest quarter (NW1/4) of Section 18, Township 22 South, Range 63 East, M.D. B & M described as follows:
Parcel (2) as shown by map thereof in file 76 of Parcel Maps, page 41, in the office of the County Recorder, Clark County, Nevada.
Also known as:
A portion of Parcel F per Document No. 645527 in Book 803, Official Records, Clark County, Nevada.
The above referred to parcel of land, situate in the County of Clark, State of Nevada, is that portion of the Northwest Quarter (NW1/4) of Section 18, Township 22 South, Range 63 East, M.D.M., Nevada, described as follows:
COMMENCING at the Northwest (NW) corner of said Section 18; thence North 89 (degrees) 42' 30" East, along the North line thereof, 1553.94 feet to a point on the West right of way line of BMP Entrance Road; thence South 08(degrees) 51' 37" East, along the West line thereof, 294.54 feet to a point hereinafter designated as POINT "A"; thence continuing South 08(degrees) 51' 37" East, along said West line, 30.00 feet to a point of intersection of Avenue "L" and BMP Entrance Road; thence South 81(degrees) 08' 23" West, along the centerline of Avenue "L", 53.00 feet; thence North 08(degrees) 51' 37" West, 30.00 feet to the POINT OF BEGINNING; thence continuing North 08(degrees) 51' 37" West, 270.00 feet; thence South 81(degrees) 08' 23" West, 300.00 feet; thence South 08(degrees) 51' 37" East, 270.00 feet; thence North 81(degrees) 08' 23" East, 300 feet to the point of beginning.
The Northeast Quarter (NE 1/4) of the Northeast Quarter (NE 1/4) of the Northeast Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of Section 5, Township 20 South, Range 60 East, Mount Diablo Meridian, Nevada.
THAT PORTION OF THE NORTH HALF (N 1/2) OF SECTION 27, TOWNSHIP 20 SOUTH,
RANGE 62 EAST, M.D.B. & M., DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHWEST CORNER OF SECTION 27, TOWNSHIP 20 SOUTH, RANGE
62 EAST, M.D.B. & M.; THENCE 89 53' 57" EAST, ALONG THE NORTH LINE THEREOF
A DISTANCE OF 265.40 FEET TO A POINT ON THE WEST RIGHT OF WAY LINE OF A 100
FOOT WIDE RIGHT OF WAY DEDICATED TO THE LINCOLN COUNTY POWER DISTRICT NO.
1, RECORDED JANUARY 19, 1956 AS DOCUMENT NO. 67575 OF OFFICIAL RECORDS,
CLARK COUNTY, NEVADA; THENCE SOUTH 00 03'22" EAST ALONG SAID WEST RIGHT OF
WAY LINE A DISTANCE OF 1344.03 FEET TO A POINT ON THE SOUTH LINE OF THE
NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SAID
SECTION 27; THENCE NORTH 89 46'46" WEST ALONG SAID SOUTH LINE A DISTANCE OF
267.56 FEET TO A POINT IN THE WEST LINE OF THE NORTHWEST QUARTER (NW 1/4)
OF SECTION 27; THENCE NORTH 00 02'10" WEST A DISTANCE OF 1342.53 FEET ALONG
SAID WEST LINE TO THE TRUE POINT OF BEGINNING.
EXCEPT THE INTEREST IN AND TO THE WESTERLY FORTY (40) FEET OF SAID LAND AS CONVEYED TO CLARK COUNTY, NEVADA FOR STREET AND ROAD PURPOSES BY DEED RECORDED JUNE 16, 1954 AS DOCUMENT NO. 12744 OF OFFICIAL RECORDS, CLARK COUNTY, NEVADA.
ALSO EXCEPTING THEREFROM AN UNDIVIDED ONE-HALF (1/2) INTEREST IN ALL OIL AND GAS RIGHTS IN AND UNDER SAID LAND AS RESERVED BY JOHN E. CAVANAUGH, ET AL, IN DEED RECORDED MARCH 4, 1954 AS DOCUMENT NO. 4535 OF OFFICIAL RECORDS, CLARK COUNTY, NEVADA RECORDS.
The South Half (S 1/2) of the North Half (N 1/2) of the Northeast Quarter (NE 1/4) of the Southeast Quarter (SE 1/4) of Section 31, Township 19 South, Range 61 East, M.D.M.
EXCEPTING THEREFROM the interest in and to the East Forty (40.00) feet thereof as conveyed to the City of North Las Vegas by Deed Recorded July 17, 1987 as Document No. 00590, Official Records.
Said land also being Lot Five Hundred Sixty-three (563) of that certain Record of Survey Recorded October 18, 1989 in File 52, Page 70 of surveys.
That portion of the northeast Quarter (NE 1/4) of Section 2, Township 20 South, Range 61 East, M.D.M., Nevada, being the Northerly 436.56 feet of Lot 2 per File 55 of Parcel Maps, Page 78, recorded February 25, 1988, as Document No. 00935 in Book 880225 of Official Records, Clark County, Nevada.
U.S. GOVERNMENT TRACT THIRTY-EIGHT (38) in Section 20 and 21, Township 17 South, Range 64 East, M.D.B.&M.
THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHEAST QUARTER (NE 1/4) OF THE SOUTHWEST QUARTER (SW 1/4) OF THE NORTHEAST QUARTER (NE 1/4) OF SECTION 25, TOWNSHIP 22 SOUTH, RANGE 60 EAST, M.D.B. & M.
EXCEPTING AND RESERVING ALSO TO THE UNITED STATES ALL OIL, GAS, AND OTHER MINERAL DEPOSITS IN THE LAND, TOGETHER WITH THE RIGHT TO PROSPECT FOR, MINE AND REMOVE THE SAME ACCORDING TO THE PROVISIONS OF THE ACT OF JUNE 1, 1938, AS RESERVED IN THE PATENT RECORDED JULY 31, 1957, IN BOOK 136, OF OFFICIAL RECORDS, CLARK COUNTY, NEVADA RECORDS, AS DOCUMENT NO. 111808.
All of Lot 7 of Block C, containing approximately 2561 acres, as shown on the subdivision map of "The Crossing at Summerlin Village 8 - Unit No. 1 - Phase 3," on file in Book 63 of Plats at Page 92, in the Office of the County Clerk of Clark County, Nevada.
THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF THE SOUTHWEST QUARTER (SW 1/4) OF THE NORTHEAST QUARTER (NE 1/4) OF SECTION 25, TOWNSHIP 22 SOUTH, RANGE 60 EAST, M.D.B. & M.
EXCEPTING AND RESERVING ALSO TO THE UNITED STATES ALL OIL, GAS, AND OTHER MINERAL DEPOSITS IN THE LAND, TOGETHER WITH THE RIGHT TO PROSPECT FOR, MINE AND REMOVE THE SAME ACCORDING TO THE PROVISIONS OF THE ACT OF JUNE 1, 1938, AS RESERVED IN THE PATENT RECORDED MAY 4, 1960, IN BOOK 242, OF OFFICIAL RECORDS, CLARK COUNTY, NEVADA RECORDS, AS DOCUMENT NO. 196507.
The Southwest Quarter of the Southwest Quarter of the Southwest Quarter of the Southwest Quarter (SW1/4 SW1/4 SW1/4 SW1/4) of Section 9, Township 20 South, Range 60 East, M.D.B.&M.
The West Half (W 1/2) of the Southwest Quarter (SW 1/4) of the Southwest Quarter (SW 1/4) of the Southwest Quarter (SW 1/4) of the Southwest Quarter (SW 1/4) of Section 9, Township 20 South, Range 60 East, M.D.B.& M.
The North Half (N 1/2) of the Northeast Quarter (NE 1/4) of the Northeast Quarter (NE 1/4 of the Northeast Quarter (NE 1/4) Section 23, Township 22 South, Range 61 East, M.D.B.&M.
PARCELS ONE (1), TWO (2) AND THREE (3) OF THAT CERTAIN PARCEL MAP, IN FILE 23 OF PARCEL MAPS, PAGE 72, RECORDED JANUARY 12, 1979 IN BOOK 895 OF OFFICIAL RECORDS, CLARK COUNTY, NEVADA.
TOGETHER WITH AN EASEMENT FOR RAILROAD PURPOSES OVER A STRIP OF LAND TEN
(10.00) FEET IN WIDTH LYING EASTERLY OF, AND IMMEDIATELY ADJACENT TO, THE
FOLLOWING DESCRIBED LINE:
COMMENCING AT THE SOUTHWEST CORNER OF THE SAID SOUTHEAST QUARTER (SE 1/4)
OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 20, TOWNSHIP 21 SOUTH, RANGE
61 EAST; THENCE NORTH 0(DEGREES) 02'39" WEST ALONG THE WEST LINE OF THE
SAID SOUTHEAST QUARTER (SE 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF
SECTION 20 A DISTANCE OF 352.04 FEET TO A POINT; THENCE SOUTH 89(DEGREES)
04'49" EAST ALONG THE NORTH LINE OF THE SOUTH 352.00 FEET OF THE SAID WEST
HALF (W 1/2) OF THE SOUTHEAST QUARTER (SE 1/4) OF THE NORTHWEST QUARTER (NW
1/4) OF SECTION 20, A DISTANCE OF 324.52 FEET TO THE NORTHWEST CORNER OF
THE DAIS EAST HALF (E 1/2) OF THE SOUTH 352.00 FEET OF THE WEST HALF (W
1/2) OF THE SOUTHEAST QUARTER (SE 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF
SECTION 20, THE TRUE POINT OF BEGINNING OF SAID LINE; THENCE ALONG THE WEST
LINE OF SAID EAST HALF (E 1/2) SOUTH 0(DEGREES) 14'37" WEST 312.01 FEET;
ALSO KNOWN AS THE WESTERLY TEN (10.00) FEET OF PARCEL FOUR (4) AS SHOWN BY
MAP THEREOF ON FILE IN FILE 23 OF PARCEL MAPS, PAGE 72, IN THE OFFICE OF
THE COUNTY RECORDER OF CLARK COUNTY, NEVADA.
THE EAST HALF (E 1/2) OF THE NORTHEAST QUARTER (NE 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF THE SOUTHWEST QUARTER (SW 1/4) OF SECTION 26, TOWNSHIP 19 SOUTH, RANGE 60 EAST, M.D.B.&M.
LOTS EIGHT (8) AND NINE (9) IN BLOCK THREE (3) OF NELLIS INDUSTRIAL PARK UNIT NO. 1, AS SHOWN BY MAP THEREOF ON FILE IN BOOK 10 OF PLATS, PAGE 76, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA.
THAT PORTION OF THE NORTH HALF (N 1/2) OF THE SOUTHEAST QUARTER (SE 1/4) OF
SECTION 15, TOWNSHIP 22 SOUTH, RANGE 62 EAST, M.D.M., MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
LOT FOUR (4) AS SHOWN BY MAP THEREOF ON FILE IN BOOK 84 OF PARCEL MAPS,
PAGE 31, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA.
The Northeast Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of the Southeast Quarter SE1/4) of the Southwest Quarter (SW1/4) of Section 4, Township 22 South, Range 60 East, M.D.B. & M.
EXCEPTING THEREFROM that portion lying within Tomsik Street and Warm Springs Road as conveyed to Clark County, by Document recorded January 10, 1980 in Book 1171 of Official Records, Clark County, Nevada Records as Document No. 1130768.
Said land is also shown as Lot 1 on that certain Certificate of Land Division No. LD-209-79, recorded January 10, 1980 in Book 1171 of Official Records, Clark County, Nevada Records, as Document No. 1130767.
The Southeast Quarter (SE1/4) of the Southwest Quarter (SW1/4) of the Southeast Quarter (SE1/4) of the Southwest Quarter (SW1/4) of Section 4, Township 22 South, Range 60 East, M.D.B. & M.
EXCEPTING THEREFROM that portion lying within the Tomsik Street and Warm Springs Road as conveyed to Clark County, by Document recorded January 10, 1980 in Book 1171 of Official Records, Clark County, Nevada Records as Document No. 1130768.
Said land is also shown as Lot 2 on that certain Certificate of Land Division No. LD-209-79, recorded January 10, 1980 in Book 1171 of Official Records, Clark County, Nevada Records, as Document No. 1130767.
THE WEST ONE-HALF (W 1/2) OF THE SOUTHWEST ONE-QUARTER (SW 1/4) OF THE
SOUTHWEST ONE QUARTER (SW 1/4) OF THE NORTHWEST ONE-QUARTER (NW 1/4) OF
SECTION 11, TOWNSHIP 22 SOUTH, RANGE 60 EAST, M.D.B. & M.
EXCEPT THEREFROM THE WESTERLY FIFTY (50) FEET AS CONVEYED TO CLARK COUNTY BY DEED RECORDED NOVEMBER 23, 1965 IN BOOK 673 OF OFFICIAL RECORDS, AS DOCUMENT NO. 541383, OFFICIAL RECORDS.
Government Lot 35 in Section 30, Township 21 South, Range 60 East, M.D.M.,
being the West Half (W 1/2) of the Southeast Quarter (SE 1/4) of the
Southwest Quarter (SW 1/4) of the Southwest Quarter (SW 1/4) of said
Section 30.
EXCEPTING THEREFROM the South 50 feet of said land as conveyed to Clark County for road and other public purposes by Deed recorded June 6, 1973 as Document No. 293773 of Official Records, Clark County, Nevada.
That portion of the Southwest Quarter (SW 1/4) of the Southwest Quarter (SW 1/4) of Section 33, Township 21 South, Range 63 East, M.D.B. & M., described as follows:
Lots A-1 and B-111 as shown by map thereof in File 32 of Parcel Maps, Page 17 in the Office of the County Recorder, Clark County, Nevada.
Less and Except those portions conveyed to the City of Henderson in deeds recorded on September 19, 1984 in Book 1993 as Document Nos. 1962934 and 1952935.
THE SOUTH HALF (S 1/2) OF THE NORTH HALF (N 1/2) OF THE SOUTHWEST QUARTER (SW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 25, TOWNSHIP 19 SOUTH, RANGE 60 EAST, M.D.B. & M.
EXCEPTING THEREFROM THE WESTERLY FIFTY (50) FEET AND SOUTHERLY FIFTEEN (15) FEET AND EASTERLY FIFTEEN (15) FEET THEREOF, TO BE USED AS A PUBLIC ROAD AND FOR UTILITIES.
FURTHER DESCRIBED AS LOT THREE HUNDRED SEVEN (307) AS SHOWN IN THAT CERTAIN RECORD OF SURVEY RECORDED OCTOBER 18, 1989 IN BOOK 891018 AS DOCUMENT NO. 0057 IN FILE 52 OF SURVEYS, PAGE 70.
East One-Half (E-1/2) of the Southeast Quarter (SE-1/4) of the Northwest Quarter (NW-1/4) of Southeast Quarter (SE-1/4) of Section Twenty-five (25), Township 21 South, Range 60 East M.D.B.M.
EXCEPTING THEREFROM the North Thirty feet (30.00'), the East Thirty Feet (30.00') and the South Thirty-feet (30.00') and these certain spandrels in the Northeast and Southeast corners as conveyed to Clark County, Nevada, for roads and incidental purposes in a Deed recorded November 6, 1986 in Book 861106 as Instrument No. 00494, Official Records, Clark County, Nevada.
The West Half (W-1/2) of the Southeast Quarter (SE-1/4) of the Northwest Quarter (NW-1/4) of the Southeast Quarter (SE-1/4) of Section 25, Township 21 South, Range 60 East, M.D.B. & M.
THAT PORTION OF THE NORTHEAST QUARTER (NE1/4) OF THE NORTHWEST QUARTER (NW1/4) OF THE SOUTHWEST QUARTER (SW1/4) OF SECTION 26, TOWNSHIP 19, SOUTH, RANGE 61 EAST OF M.D.M. DESCRIBED AS:
PARCEL TWO (2) AS SHOWN BY MAP THEREOF ON FILE IN FILE 86 OF PARCEL MAPS
PAGE 72 IN THE OFFICE OF THE COUNTY RECORDER, CLARK COUNTY, NEVADA.
The South Half (S 1/2) of the Southwest Quarter (SW 1/4) of the Northeast Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of Section 26, Township 22 South, Range 61 East, M.D.B. & M.
The South Half (S 1/2) of the Southeast Quarter (SE 1/4) of the Northeast Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) in Section 26, Township 22 South, Range 61 East, M.D.B. & M.
The North Half (N 1/2) of the Northeast Quarter (NE 1/4) of the Southeast Quarter (SE 1/4) of the Southwest Quarter (SW 1/4) of Section 26, Township 22 South, Range 61 East, M.D.B. & M.
The basis of bearing for this property description is the easterly line of the Northeast Quarter (NE 1/4) of Section 15, Township 22 South, Range 62 East, M.D.M., City of Henderson, County of Clark, State of Nevada, which bears North 00(degrees)46'25" East, as per map recorded in Book 56, Page 36 of Plats in the Office of the County Recorder of said County.
Being a portion of Lot 3, of GIBSON BUSINESS PARK III (A COMMERCIAL SUBDIVISION) in the City of Henderson, County of Clark, State of Nevada, as per map recorded in Book 56, Page 36 of Plats in the Office of the County Recorder of said County, a portion of said map being amended in Book 76, Page 51 of Plats, situated in the Northeast Quarter (NE 1/4) of Section 15, Township 22 South, Range 62 East, M.D.M., more particularly described as follows:
way line of Gibson Road, being 50.00 feet wide half street width as per said Parcel Map; Thence along said right-of-way line, South 00(degrees)46'25" West, 452.86 feet to a point on the aforementioned northwesterly line of said 60.00 foot wide B.M.I. easement; Thence along said line, South 88(degrees)11'07" West, 475.94 feet to the POINT OF BEGINNING.
THAT PORTION OF LOT 2 OF "HUGHES CHEYENNE CENTER PHASE 1" AS SHOWN BY MAP THEREOF ON FILE IN BOOK 76, PAGE 87 OF PLATS IN THE CLARK COUNTY RECORDER'S OFFICE, CLARK COUNTY, NEVADA, LYING WITHIN THE NORTHEAST QUARTER (NE 1/4) OF SECTION 16, TOWNSHIP 20 SOUTH, RANGE 61 EAST, M.D.M., CITY OF NORTH LAS VEGAS, CLARK COUNTY, NEVADA AND DESCRIBED AS FOLLOWS:
COMMENCING AT THE NORTHEAST CORNER OF SAID SECTION 16: THENCE ALONG THE NORTH LINE OF SAID SECTION 16, SOUTH 89(degrees)33'23" WEST, 750.00 FEET TO THE INTERSECTION WITH THE CONTROL LINE OF TRADE DRIVE (VARYING WIDTH - PRIVATE STREET): THENCE ALONG SAID CONTROL LINE, THE FOLLOWING THREE (3) COURSES: SOUTH 00(degrees)26'37" EAST, 281.00 FEET; THENCE CURVING TO THE RIGHT ALONG THE ARC OF A 372.50 FOOT RADIUS CURVE, CONCAVE NORTHWESTERLY, THROUGH A CENTRAL ANGLE OF 90(degrees)00'00", AN ARC LENGTH OF 585.12 FEET; THENCE SOUTH 89(degrees)33'23" WEST, 920.58 FEET; THENCE SOUTH 00(degrees)26'37" EAST 27.50 FEET TO A POINT ON THE SOUTHERLY RIGHT-OF-WAY LINE OF TRADE DRIVE SAID POINT BEING THE NORTHWEST CORNER OF THAT CERTAIN PARCEL OF LAND DESCRIBED BY "GRANT BARGAIN AND SALE DEED" RECORDED SEPTEMBER 30, 1997 IN BOOK 970930 OF OFFICIAL RECORDS AS INSTRUMENT NO. 02714; THENCE ALONG THE WEST LINE OF SAID PARCEL OF LAND SOUTH 00(degrees)26'37", 379.76 FEET TO THE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID WEST LINE, SOUTH 00(degrees)26'37" EAST, 244.61 FEET TO A POINT ON THE NORTHERLY RIGHT-OF-WAY LINE OF BROOKS STREET; THENCE ALONG SAID RIGHT-OF-WAY LINE, SOUTH 89(degrees)31'21" WEST, 598.46 FEET; THENCE CONTINUING ALONG SAID RIGHT-OF-WAY LINE, CURVING TO THE RIGHT ALONG THE ARC OF A 25.00 FOOT RADIUS CURVE, CONCAVE NORTHEASTERLY, THROUGH A CENTRAL ANGEL OF 89(degrees)49'30", AN ARC LENGTH OF 39.19 FEET TO A POINT ON THE EASTERLY RIGHT-OF-WAY LINE OF MARTIN L. KING BOULEVARD; THENCE ALONG SAID RIGHT-OF-WAY LINE, NORTH 00(degrees)39'09" WEST, 219.68 FEET; THENCE DEPARTING SAID RIGHT-OF-WAY LINE, NORTH 89(degrees)31'21" EAST, 624.28 FEET TO THE POINT OF BEGINNING.
ALL OF PARCEL 3 AS SHOWN ON THE SUMMERLIN SOUTH PARCEL MAP #2 ON FILE IN FILE 89 OF PLATS AT PAGE 78, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA.
The Northwest Quarter (NW1/4) of the Northwest Quarter (NW1/4) of Section 14, Township 20 South, Range 61 East, M.D.B.&M.
EXCEPTING THEREFROM THE FOLLOWING THOSE PORTIONS PORTIONS DESCRIBED IN DEED
TO THE CITY OF NORTH LAS VEGAS, RECORDED MAY 13,
1977 IN BOOK 738 AS DOCUMENT NO. 697671 OF OFFICIAL RECORDS, DESCRIBED AS
FOLLOWS:
PARCEL I:
That portion of the Northwest Quarter (NW1/4) of the Northwest Quarter (NW1/4) of Section 14, Township 20 South, Range 61 East, M.D.M., Nevada, more particularly described as follows:
BEGINNING at the Southeast (SE) corner of said Northwest Quarter (NW1/4) of the Northwest Quarter (NW1/4) of Section 14; thence North 89(degrees)07'48" West along the South line thereof a distance of 14.09 feet; thence North 31(degrees)00'00" East a distance of 27.75 feet to a point on the East line of said Northwest Quarter (NW1/4) of Section 14; thence North 89(degrees)07'48"k West along the South line thereof a distance of 14.09 feet; thence North 31(degrees)00'00" East a distance of 27.75 feet to a point on the East line of said Northwest Quarter (NW1/4) of the Northwest Quarter (NW1/4); thence South 0(degrees)29'01" West along said East line a distance of 24.00 feet to the POINT OF BEGINNING.
PARCEL II:
That portion of the Northwest Quarter (NW1/4) of the Northwest Quarter (NW1/4) of Section 14, Township 20 South, Range 61 East, M.D.M., Nevada, more particularly described as follows:
COMMENCING at the Southeast (SE) corner of said Northwest Quarter (NW 1/4) of the Northwest Quarter (NW 1/4) of Section 14; thence North 0(degrees)29'01" East along the East line thereof a distance of 181.54 feet to the POINT OF BEGINNING; thence South 31(degrees)00'00" West along the Northwesterly right-of-way line of Losee Road (80.00 feet in width) a distance of 175.21 feet; thence North 89(degrees)07'48" West along a line parallel to and 30.00 feet measured Northerly and at right angles from the South line of said Northwest Quarter (NW1/4) of the Northwest Quarter (NW1/4) said line also being the North right-of-way line of Brooks Avenue, a distance of 25.96 feet to a point on a tangent curve concave to the Northwest, having a radius of 25.00 feet and subtending a central angle of 59(degrees)52'12'; thence along the arc of said curve a distance of 26.12 feet to a point of tangency; thence North 31(degrees)00'00" East along a line parallel to and 10.00 feet measured Northwesterly and at right angles from said Losee Road right-of-way line a distance of 183.58 feet to a point on the East line of said Northwest Quarter (NW1/4) of the Northwest Quarter (NW1/4); thence South 0(degrees)29'01" West along said East line a distance of 19.69 fee to the POINT OF BEGINNING.
FURTHER EXCEPTING THEREFROM THE NORTH FIFTY (50) FEET OF THE NORTHWEST QUARTER (NW1/4) OF THE NORTHWEST QUARTER (NW1/4) OF SECTION 14, TOWNSHIP 20 SOUTH, RANGE 61 EAST, M.D.B. & M. AS DESCRIBED IN DEED TO THE CITY OF NORTH LAS VEGAS, RECORDED MARCH 16, 1965 IN BOOK 612 AS DOCUMENT NO. 492646 OF OFFICIAL RECORDS.
FURTHER EXCEPTING THEREFROM Those portions of the Northwest Quarter of the
Northwest Quarter of Section 14, Township 20 South, Range 61 East, M.D.B. &
M., described in Deed to the City of North Las Vegas, Recorded April 8,
1965 in Book 618 as Document No. 496957 of Official Records, more
particularly described as follows:
PARCEL 1:
COMMENCING at the Southeast Corner of the Northwest Quarter (NW1/4) of the said Northwest Quarter (NW1/4), the true point of beginning; thence South 89(degrees)47'06" West along the
South line of said Northwest Quarter (NW1/4) a distance westerly of 118.59 feet to a point; thence North 31(degrees)00'00" East, a distance of 234.75 feet more or less to the East line of the Northwest Quarter (NW1/4) of the said Northwest Quarter (NW1/4); thence South 0(degrees)29'01" West along the East line of the Northwest Quarter (NW1/4) of the Northwest Quarter (NW1/4) a distance of 201.23 feet to the point of beginning.
PARCEL 2:
The South 30.00 feet of the Northwest Quarter (NW1/4) of the Northwest Quarter (NW1/4), saving and excepting Parcel 1, above described.
FURTHER EXCEPTING THEREFROM The West Fifty (50) of said Northwest Quarter (NW 1/4) of the Northwest Quarter (NW 1/4) as described in Deed to the City of North Las Vegas, recorded September 18, 1997 in Book 970918 as Document No. 00342 of Official Records.
BEING A PORTION OF THE SOUTH HALF (S 1/2) OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 11 TOWNSHIP 22 SOUTH, RANGE 60 EAST, MOUNT DIABLO MERIDIAN, CLARK COUNTY, NEVADA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTH SIXTEENTH CORNER OF SAID SECTION 11, COMMON TO
SECTION 10 OF SAID TOWNSHIP AND SAID RANGE, BEING THE NORTHWEST CORNER OF
THE SOUTHWEST QUARTER (SW 1/4) OF SAID NORTHWEST QUARTER (NW 1/4), MARKED
BY A NAIL AND TIN IN A 2 INCH IRON PIPE; THENCE NORTH 87(degrees)16'05"
EAST, ALONG THE NORTH LINE OF THE WEST HALF (W 1/2) OF THE NORTHWEST
QUARTER (NW 1/4) OF SAID SOUTHWEST QUARTER (SW 1/4), A DISTANCE OF 332.69
FEET TO THE EAST LINE OF SAID WEST HALF (W 1/2); THENCE SOUTH
01(degrees)17'39" WEST, DEPARTING SAID NORTH LINE, ALONG SAID EAST LINE,
400.05 FEET; THENCE SOUTH 87(degrees)16'05" WEST, DEPARTING SAID EAST LINE,
331.92 FEET TO THE WEST LINE OF SAID WEST HALF (W 1/2) THENCE NORTH
01(degrees)11'07" EAST, ALONG SAID WEST LINE, 400.00 FEET TO SAID NORTH
SIXTEENTH CORNER OF SECTION 11, SAME BEING THE POINT OF BEGINNING AS SHOWN
ON THE EXHIBIT TO ACCOMPANY LAND DESCRIPTION ATTACHED HERETO AND MADE A
PART HEREOF.
CONTAINING 3.04 ACRES, AS DETERMINED BY COMPUTER METHODS.
BASIS OF BEARINGS
NORTH 87(degrees)03'00" EAST, BEING THE BEARING OF THE SOUTH LINE OF THE SOUTHWEST QUARTER (SW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 11, TOWNSHIP 22 SOUTH, RANGE 60 EAST, MOUNT DIABLO MERIDIAN, CLARK COUNTY, NEVADA, AS SHOWN ON A MAP ON FILE IN THE CLARK COUNTY RECORDERS OFFICE IN FILE 86 OF SURVEYS, AT PAGE 38.
That portion of the Northwest Quarter (NW 1/4) of the Northwest Quarter (NW 1/4) of Section 27, Township 20 South, Range 62 East, M.D.B. & M., lying within that Final Judgment in favor of Lincoln County Power District No. 1, recorded January 19, 1956 in Book 81, as Document No. 67575, Official Records, and being described as follows:
BEGINNING at a point on the North line of Section 27, distant along said
North line East 265.40 Feet from the Northwest Corner of said Section 27;
Thence Southerly 1344.47 Feet to a point on the South line of the Northwest
Quarter (NW 1/4) of the Northwest Quarter (NW 1/4) of said Section 27;
Thence East 100.00 Feet to the West boundary line of Sunrise View Estates
Unit No. 1A, as shown by map thereof on file in Book 24 of Plats, Page 21;
Thence North along said West boundary 1344.47 Feet to the North line of the
Northwest Quarter (NW 1/4) of the Northwest Quarter (NW 1/4) of said
Section 27; Thence West along said North line a distance of 100.00 Feet to
the POINT OF BEGINNING.
EXCEPTING THEREFROM any portion lying within Owens Avenue.
THE SOUTH HALF (S 1/2) OF THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHEAST QUARTER (NE 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 9, TOWNSHIP 23 SOUTH, RANGE 61 EAST, M.D.B. & M.
A portion of the Northwest Quarter (NW 1/4) of the Southeast Quarter (SE 1/4) of Section 30, Township 22 South, Range 62 East, M.D.M., Clark County Nevada, more particularly described as follows:
Commencing at the Northeast corner of the Southeast Quarter of said Section
30;
thence North 8926'01" West along the North Line of the Southeast Quarter
(SE 1/4) a distance of 2016.98 feet;
thence South 0019'53" West along the Centerline of Annet Street a distance
of 894.07 feet to THE POINT OF BEGINNING OF THIS DESCRIPTION;
thence South 00(degrees)19'53" West, 380.00 feet;
thence North 89(degrees)31'33" West 435.00 feet;
thence North 00(degrees)19'53" East, 380.00 feet;
thence South 89(degrees)31'33" East, 435.00 feet to THE POINT OF BEGINNING
THE SOUTHWEST QUARTER OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF
THE SOUTHWEST QUARTER OF SECTION 29, TOWNSHIP 21 SOUTH, RANGE 61 EAST
M.D.M.
EXCEPTING THEREFROM THE INTEREST IN AND TO THE SOUTH FORTY (40) FEET OF SAID LAND AS CLAIMED AND ACCEPTED BY THE BOARD OF COMMISSIONERS OF CLARK COUNTY FOR ROAD AND INCIDENTAL PURPOSES AS DISCLOSED BY RESOLUTION RECORDED AUGUST 7, 1956 AS DOCUMENT NO. 85856, AND AS ILLUSTRATED BY RECORD OF SURVEY RECORDED AUGUST 7, 1956, KNOWN AS FILE 6, PAGE 35.
ALSO ACCEPTING THEREFROM THE NORTH TEN (10) FEET OF THE SOUTH FIFTY (50)
FEET AND THE WEST THIRTY (30) FEET OF THE SOUTHWEST QUARTER OF THE
SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SAID
SECTION 29, TOGETHER WITH THAT CERTAIN SPANDREL AREA IN THE SOUTHWEST
CORNER THEREOF, ALSO BEING THE NORTHEAST CORNER OF THE INTERSECTION OF
PROCYON STREET AND RUSSELL ROAD BOUNDED AS FOLLOWS: ON THE SOUTH BY THE
NORTH LINE OF SOUTH FIFTY (50) FEET; ON THE WEST BY THE EAST LINE OF THE
WEST THIRTY (30) FEET; AND ON THE NORTHEAST BY THE ARC OF A CURVE CONCAVE
NORTHEASTERLY, HAVING A RADIUS OF TWENTY-FIVE (25) FEET AND BEING TANGENT
TO THE NORTH LINE OF SAID SOUTH FIFTY (50) FEET AND TO THE EAST LINE OF
SAID WEST THIRTY (30) FEET AS CONVEYED BY THAT CERTAIN DEED RECORDED MAY
20, 1977 AS DOCUMENT NO. 699997.
All of Parcel 3 as shown on the Summerlin 3435 Zone Reservoir Parcel Map on file in File 91 at Page 28 in the Office of the County Recorder of Clark County, Nevada.
All of Parcel 4 as shown on the Summerlin 3435 Zone Reservoir Parcel Map on file in File 91 at Page 28 in the Office of the County Recorder of Clark County, Nevada.
Government Lot One Hundred Ten (110) and Government Lot One Hundred Sixty- two (162) in the Southwest Quarter (SW1/4) of the Southwest Quarter (SW1/4) of Section 28, Township 22 south, Range 61 East, M.D.M.
EXCEPTING THEREFROM any State or County roads that may exist in said land.
Lots One Hundred Nine (109) and One Hundred Sixty-One (161) in Section 28, Township 22 South, Range 61 East, M.D.M.
EXCEPTING THEREFROM any State or County Roads that may exist in said land.
The Northwest Quarter (NW1/4) of the Northeast Quarter (NE1/4) of the Southwest Quarter (SW1/4) of the Southwest Quarter (SW1/4) of Section 28, Township 22 South, Range 61 East, M.D.B.&M, being further described as Government Lot One Hundred Eight (108)
THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION
29, TOWNSHIP 19 SOUTH, RANGE 61, M.D.B.&M.
THE NORTHWEST QUARTER (NW1/4) OF THE SOUTHEAST QUARTER (SE1/4) OF THE SOUTHWEST QUARTER (SW1/4) OF THE SOUTHWEST QUARTER (SW1/4) OF SECTION 29, TOWNSHIP 21 SOUTH, RANGE 61 EAST, M.D.B.&M.
THE EAST HALF (E 1/2) OF THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST (NW 1/4) OF SECTION 1, TOWNSHIP 19 SOUTH, RANGE 59 EAST, M.D.B. & ., ALSO BEING DEPICTED AS GOVERNMENT LOT THIRTY-ONE (31).
EXHIBIT 4(D)
NEVADA POWER COMPANY
(formerly DESERT Merger Sub, Inc., as successor to Nevada Power company)
to
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
SUPPLEMENTAL INDENTURE NO. 2
AND ASSUMPTION AGREEMENT
Dated as of June 1, 1999
$122,547,950
8.20% Junior Subordinated Deferrable Interest Debentures Series A
NEVADA POWER COMPANY
$122,547,950
8.20% Junior Subordinated Deferrable Interest Debentures Series A
SUPPLEMENTAL INDENTURE NO. 2
AND ASSUMPTION AGREEMENT
SUPPLEMENTAL INDENTURE No. 2 AND ASSUMPTION AGREEMENT, dated as of July 1, 1999, between Nevada Power Company, a Nevada corporation formerly known as Desert Merger Sub, Inc., as successor to Nevada Power Company (the "Company"), and IBJ Whitehall Bank & Trust Company, as successor to IBJ Schroder Bank & Trust Company, a New York banking corporation, as Trustee (the "Trustee").
WHEREAS, Nevada Power Company (the "Merged Company") has heretofore executed and delivered to the Trustee a Junior Subordinated Indenture, dated as of March 1, 1997 (the "Indenture"), providing for the issuance from time to time of series of the Company's Securities; and
WHEREAS, in connection with the issuance of the Securities by the Merged Company, the Merged Company also entered into the following agreements and executed the following instruments:
(1) the Indenture;
(2) Supplemental Indenture No. 1 dated as of March 1, 1997 from the Merged Company to the Trustee;
(3) the Securities;
(4) Amended and Restated Trust Agreement dated as of March 1, 1997, among the Merged Company, the Trustee, Delaware Trust Capital Management, Inc. and the Administrative Trustees named therein;
(5) Guarantee Agreement dated as of March 1, 1997 between the Merged Company and the Trustee; and
(6) Agreement as to Expenses and Liabilities dated as of March 1, 1997 between the Merged Company and NVP Capital I, a Delaware business trust.
Each of the foregoing agreements or instruments being referred to herein collectively as the "Nevada Power Obligations".
WHEREAS, on April 29, 1998, the Merged Company entered into a Merger Agreement with Sierra Pacific Resources, a Nevada utility holding company, pursuant to which DESERT Merger Sub, Inc., a wholly owned subsidiary of Sierra Pacific Resources, merged with the Merged Company with DESERT Merger Sub, Inc. being the surviving corporation which surviving corporation then changed its name to Nevada Power Company; and
WHEREAS, Section 801 of the Indenture provides that the Merged Company shall not merge into any other Person (as defined in the Indenture) and that no Person shall consolidate with or merge into the Merged Company unless:
(1) the Person formed by such consolidation or into which the company is merged shall be a corporation, partnership or trust, shall be organized and existing under the laws of the United States of America or any State or the District of Columbia, and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest (including any Additional Interest) on all the Securities and the performance of every covenant of the Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effet to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have happened and be continuing;
(3) in the case of the Securities of a series issued by an NVP Trust, such merger is permitted under the related Trust Agreement and Nevada Power Guarantee and does not give rise to any breach or violation of the related Trust Agreement or Nevada Power Guarantee; and
(4) the Merged Company delivers to the Trustee an Officer's Certificate and an Opinion of Independent Counsel each stating that such merger and supplemental indenture complies with Section 801 of the Indenture and that all conditions precedent therein provided for relating to such transaction have been complied with; and the Trustee, subject to Section 601, may rely upon such Officer's Certificate and opinion of Independent Counsel as conclusive evidence that such transaction complies with Section 801.
WHEREAS, Section 901(2) of the Indenture provides for the Company and the Trustee to enter into an indenture supplemental to the Indenture to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company in the Indenture and in the Securities contained; and
WHEREAS, the Company, as the surviving entity of the Merger, has determined
to enter into this Agreement for purposes of complying with said provision of
Section 801 of the Indenture in accordance with the provisions of Article IX of
the Indenture.
ARTICLE 1
RELATION TO INDENTURE; DEFINITIONS
Section 1.1. This Supplemental Indenture No. 2 constitutes an integral part of the Indenture.
Section 1.2. For all purposes of this Supplemental Indenture No. 2:
(1) Capitalized terms used herein without definition shall have the meanings specified in the Indenture or in the Amended and Restated Trust Agreement, dated as of March 1, 1997, among Nevada Power Company, as Depositor, IBJ Schroder Bank & Trust Company, as Property Trustee, Delaware Trust Capital Management, Inc., as Delaware Trustee, and the Administrative Trustees named therein, as the case may be;
(2) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 2; and
(3) The terms "herein", "hereof", "hereunder" and other words of similar import refer to this Supplemental Indenture No. 2.
ARTICLE 2
REPRESENTATIONS AND ASSUMPTION OF OBLIGATIONS
Section 2.1. The Company hereby represents that: (a) it is a corporation duly organized and existing under the laws of the State of Nevada; (b) there has not been an Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, and (3) the merger as described in the recitals hereof is permitted under the Trust Agreement and the Nevada Power Guarantee and does not give rise to any breach or violation of the related Trust Agreement or Nevada Power Guarantee.
Section 2.2. The Company hereby expressly assumes the due punctual payment of the principal of (and premium, if any) and interest (including any Additional Interest) on all the Securities and the performance of every covenant of the Indenture and all other Nevada Power Obligations.
ARTICLE 3
Miscellaneous Provisions
Section 3.1. The Indenture, as supplemented and amended by this Supplemental Indenture No. 2, is in all respects hereby adopted, ratified and confirmed.
Section 3.2. This Supplemental Indenture No. 2 may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
Section 3.3. THIS SUPPLEMENTAL INDENTURE NO. 2 AND EACH SECURITY SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture No. 2 to be duly executed, as of the day and year first written above.
NEVADA POWER COMPANY
By:
William E. Peterson
Senior Vice President
and General Counsel
Attest: _______________________
Secretary
IBJ WHITEHALL BANK & TRUST COMPANY, as
Trustee
By: ___________________________________
Name:
Title:
EXHIBIT 4(E)
NEVADA POWER COMPANY
(formerly DESERT Merger Sub, Inc., as successor to Nevada Power Company)
to
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
SUPPLEMENTAL INDENTURE NO. 1
AND ASSUMPTION AGREEMENT
Dated as of June 1, 1999
$72,164,950
7 3/4% Junior Subordinated Deferrable Interest Debentures Due 2038
SUPPLEMENTAL INDENTURE NO. 1
AND ASSUMPTION AGREEMENT
SUPPLEMENTAL INDENTURE No. 1 AND ASSUMPTION AGREEMENT, dated as of June 1, 1999, between Nevada Power Company, a Nevada corporation formerly known as Desert Merger Sub, Inc., as successor to Nevada Power Company (the "Company"), and IBJ Whitehall Bank & Trust Company, as successor to IBJ Schroder Bank & Trust Company, a New York banking corporation, as Trustee (the "Trustee").
WHEREAS, Nevada Power Company (the "Merged Company") has heretofore executed and delivered to the Trustee an Indenture, dated as of October 1, 1998 (the "Indenture"), providing for the issuance from time to time of series of the Company's Debentures; and
WHEREAS, in connection with the issuance of the Debentures by the Merged Company, the Merged Company also entered into the following agreements and executed the following instruments:
(1) the Indenture;
(2) the Debentures;
(3) Amended and Restated Declaration of Trust dated as of October 1, 1998, among the Merged Company, the Trustee, Delaware Trust Capital Management, Inc., the Administrative Trustees named therein and the holders of undivided beneficial interests in NVP Capital III;
(4) Preferred Securities Guarantee Agreement dated as of October 1, 1998 between the Merged Company and the Trustee; and
(5) Common Securities Agreement dated as of October 1, 1998 by the Merged Company.
Each of the foregoing agreements or instruments being referred to herein collectively as the "Nevada Power Obligations".
WHEREAS, on April 29, 1998, the Merged Company entered into a Merger Agreement with Sierra Pacific Resources, a Nevada utility holding company, pursuant to which DESERT Merger Sub, Inc., a wholly owned subsidiary of Sierra Pacific Resources, merged with the Merged Company with DESERT Merger Sub, Inc. being the surviving corporation which surviving corporation then changed its name to Nevada Power Company; and
WHEREAS, Section 701 of the Indenture provides that the Merged Company shall not merge into any other Person (as defined in the Indenture) and that no Person shall consolidate with or merge into the Merged Company unless:
(1) the Person formed by such consolidation or into which the Company is merged is a corporation, partnership, limited liability company or trust, is be organized and validly existing under the laws of the United States of America or any State or the District of Columbia, and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and interest on all the Debentures and the performance or observance of every covenant of the Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company as a result of such transaction as having been incurred by the Company at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing;
(3) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.
WHEREAS, Section 801(2) of the Indenture provides for the Company and the Trustee to enter into an indenture supplemental to the Indenture to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company in the Indenture and in the Debentures contained; and
WHEREAS, the Company, as the surviving entity of the merger, has determined
to enter into this Agreement for purposes of complying with said provision of
Section 801 of the Indenture in accordance with the provisions of Article Eight
of the Indenture.
ARTICLE 1
RELATION TO INDENTURE; DEFINITIONS
Section 1.1. This Supplemental Indenture No. 1 constitutes an integral part of the Indenture.
Section 1.2. For all purposes of this Supplemental Indenture No. 1:
(1) Capitalized terms used herein without definition shall have the meanings specified in the Indenture;
(2) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 1; and
(3) The terms "herein", "hereof", "hereunder" and other words of similar import refer to this Supplemental Indenture No. 1.
ARTICLE 2
REPRESENTATIONS AND ASSUMPTION OF OBLIGATIONS
Section 2.1. The Company hereby represents that: (a) it is a corporation duly organized and existing under the laws of the State of Nevada; and (b) there has not been an Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default.
Section 2.2. The Company hereby expressly assumes the due punctual payment of the principal of (and premium, if any) and interest (including any Additional Interest) on all the Debentures and the performance of every covenant of the Indenture and all other Nevada Power Obligations.
ARTICLE 3
Miscellaneous Provisions
Section 3.1. The Indenture, as supplemented and amended by this Supplemental Indenture No. 1, is in all respects hereby adopted, ratified and confirmed.
Section 3.2. This Supplemental Indenture No. 1 may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
Section 3.3. THIS SUPPLEMENTAL INDENTURE NO. 1 AND EACH SECURITY SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture No. 1 to be duly executed, as of the day and year first written above.
NEVADA POWER COMPANY
By:
William E. Peterson
Senior Vice President
and General Counsel
Attest: _______________________
Secretary
IBJ WHITEHALL BANK & TRUST COMPANY, as
Trustee
By: ___________________________________
Name:
Title:
EXHIBIT 4(F)
NEVADA POWER COMPANY
(formerly DESERT Merger Sub, Inc., as successor to Nevada Power Company)
to
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
SUPPLEMENTAL INDENTURE NO. 3
AND ASSUMPTION AGREEMENT
Dated as of July 1, 1999
Relating to
$130,000,000 6.20% Senior Unsecured Notes, Series B
SUPPLEMENTAL INDENTURE NO. 3
AND ASSUMPTION AGREEMENT
SUPPLEMENTAL INDENTURE No. 3 AND ASSUMPTION AGREEMENT, dated as of July 1, 1999, between Nevada Power Company, a Nevada corporation formerly known as DESERT Merger Sub, Inc., as successor to Nevada Power Company (the "Company"), and IBJ Whitehall Bank & Trust Company, as successor to IBJ Schroder Bank & Trust Company, a New York banking corporation, as Trustee (the "Trustee").
WHEREAS, Nevada Power Company (the "Merged Company") has heretofore executed and delivered to the Trustee a Senior Unsecured Note Indenture, dated as of March 1, 1999 as amended by a Supplemental Indenture No. 1 dated as of March 1, 1999 and as further amended by a Supplemental Indenture No. 2 dated as of April 1, 1999 (as supplemented, the "Indenture"), pursuant to which the Merged Company has issued its $130,000,000 principal amount 6.20% Senior Unsecured Notes, Series B due April 15, 2004 (the "Notes"); and
WHEREAS, on April 29, 1998, the Merged Company entered into a Merger Agreement with Sierra Pacific Resources, a Nevada utility holding company, pursuant to which DESERT Merger Sub, Inc., a wholly owned subsidiary of Sierra Pacific Resources, merged with the Merged Company with DESERT Merger Sub, Inc. being the surviving corporation which surviving corporation then changed its name to Nevada Power Company; and
WHEREAS, Section 11.01 of the Indenture provides that the Merged Company will not merge into any other corporation unless the corporation into which the Merged Company is merged (a) shall expressly assume, by supplemental indenture, the due and punctual payment of the principal of and premium and interest on all of the Notes and the performance of every covenant of the Indenture on part of the Merged Company to be performed or observed and (b) deliver to the Trustee an Officer's Certificate and an Opinion of Counsel each stating that all conditions precedent to such action, if any, provided for in the Indenture has been satisfied; and
WHEREAS, Section 12.01(4) of the Indenture provides that a supplemental indenture may be entered into without the consent of the Holders to evidence the succession and the assumption by a successor of all covenants under the Indenture;
WHEREAS, the Surviving Company has determined to enter into this Agreement to comply with said provision of Section 11.01 and Section 12.01(4) of the Indenture.
ARTICLE 1
RELATION TO INDENTURE; DEFINITIONS
Section 1.1. This Supplemental Indenture No. 3 constitutes an integral part of the Indenture.
Section 1.2. For all purposes of this Supplemental Indenture No. 3:
(1) Capitalized terms used herein without definition shall have the meanings specified in the Indenture;
(2) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture No. 3; and
(3) The terms "herein", "hereof", "hereunder" and other words of similar import refer to this Supplemental Indenture No. 3.
ARTICLE 2
REPRESENTATIONS AND ASSUMPTION OF OBLIGATIONS
Section 2.1. The Company hereby represents that: (a) it is a corporation duly organized and existing under the laws of the State of Nevada; and (b) there has not been an Event of Default, and no event has occurred which, after notice or lapse of time, or both, would become an Event of Default.
Section 2.2. The Company hereby expressly assumes the due punctual payment of the principal of and premium and interest on the Notes and the performance of every covenant of the Indenture.
ARTICLE 3
Miscellaneous Provisions
Section 3.1. The Indenture, as supplemented and amended by this Supplemental Indenture No. 3, is in all respects hereby adopted, ratified and confirmed.
Section 3.2. This Supplemental Indenture No. 3 may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
Section 3.3. THIS SUPPLEMENTAL INDENTURE NO. 3 SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture No. 1 to be duly executed, as of the day and year first written above.
NEVADA POWER COMPANY
By: ______________________________
William E. Peterson
Senior Vice President
and General Counsel
Attest: _______________________
Secretary
IBJ WHITEHALL BANK & TRUST COMPANY, as
Trustee
By: _______________________________
Name:______________________________
Title:_____________________________
EXHIBIT 10(A)
$500,000,000
CREDIT AGREEMENT
dated as of
June 24, 1999
among
SIERRA PACIFIC RESOURCES,
MELLON BANK, N.A.,
as Administrative Agent,
FIRST UNION NATIONAL BANK
and
WELLS FARGO BANK, N.A.,
as Syndication Agents,
and
the LENDERS party hereto from time to time,
Arranged By
MELLON BANK, N.A.
CREDIT AGREEMENT, dated as of June 24, 1999, among SIERRA PACIFIC RESOURCES, a Nevada corporation, MELLON BANK, N.A., as Administrative Agent, FIRST UNION NATIONAL BANK and WELLS FARGO BANK, N.A., as Syndication Agents, the LENDERS party hereto from time to time and MELLON BANK, N.A., as Arranger.
WHEREAS, the Borrower (as defined below) has requested, and Lenders (as defined below) have agreed to make available, the credit facilities described below upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
As used in this Agreement, the following terms have the following meanings:
Facility Fee Eurodollar
(364-Day Spread (364-Day
Facility/3-Year Facility/3- Usage Fee
Index Debt rating: S&P/Moody's Facility) Year Facility) (*33%/*66%)
------------------------------ --------- -------------- ----------
Ratings greater than A-/A3 .1500/.2000% .3500/.3000% .0250/.0750%
Ratings equal to A-/A3 .1500/.2000% .4000/.3500% .0250/.0750%
Ratings equal to BBB+/Baa1 .2000/.2500% .4250/.3750% .0250/.0750%
|
* greater than
Ratings equal to BBB/Baa2 .2250/.2750% .5250/.4750% .0500/.1250% Ratings equal to BBB-/Baa3 .2500/.3000% .7500/.7000% .0500/.1250% Ratings less than BBB-/Baa3 .3750/.4250% .8750/.8250% .1250/.2500% |
For purposes of the foregoing, (i) if either Moody's or S&P shall not have in
effect a rating for the Index Debt (other than by reason of the circumstances
referred to in the last sentence of this definition), then such rating agency
shall be deemed to have established a rating in its lowest rating category, (ii)
if the ratings established or deemed to have been established by Moody's and S&P
for the Index Debt shall be changed (other than as a result of a change in the
rating system of Moody's or S&P), such change shall be effective as of two
Business Days after it is first announced by the applicable rating agency and
(iii) if the rating assigned by Moody's and the rating assigned by S&P shall
differ (a) by one level (e.g., Moody's rating of A3 and S&P rating of BBB+),
then the higher rating level shall apply (i.e., A3) and (b) by more than one
level (e.g., Moody's rating of A3 and S&P rating of BBB-), then the rating level
above the lower rating level shall apply (i.e., BBB/Baa2). Each change in the
Applicable Rate shall apply during the period commencing two Business Days after
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change. If the rating system of Moody's or
S&P shall change, or if either such rating agency shall cease to be in the
business of rating corporate debt obligations, the Borrower and the Lenders
shall negotiate in good faith to amend this definition to reflect such changed
rating system or the unavailability of ratings from such rating agency and,
pending the effectiveness of any such amendment, the Applicable Rate shall be
determined by reference to the rating most recently in effect prior to such
change or cessation.
States of America by the Borrower or any one or more of its Subsidiaries primarily for the benefit of employees of the Borrower or such Subsidiaries residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code.
which appear on the Telerate Page 3750, British Bankers Association Interest Settlement Rates, with maturities comparable to the Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00 A.M. (Pittsburgh, Pennsylvania time) on the date which is two Business Days prior to the commencement of such Interest Period.
agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency approved for purposes hereof by the Required Lenders and the Borrower.
For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a Revolving Loan or a Term Loan) or by Type (e.g., a Eurodollar Loan or an ABR Loan) or by Class and Type (e.g., a Eurodollar Revolving Loan). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing").
The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof and (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.
Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time.
ARTICLE II
THE CREDITS
(b) Subject to the terms and conditions set forth herein, each Lender agrees, so long as no Default or Event of Default has occurred and is continuing, to consolidate on the
shall not at any time be more than a total of (x) five Eurodollar Borrowings outstanding under the 364-Day Facility and (y) five Eurodollar Borrowings outstanding under the 3-Year Facility.
To request a Revolving Borrowing under a Facility, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Revolving Borrowing, not later than 12:00 noon., Pittsburgh, Pennsylvania time, three Business Days before the date of the proposed Borrowing, or (b) in the case of an ABR Borrowing, not later than 12:00 noon, Pittsburgh, Pennsylvania time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in the form attached hereto as Exhibit B and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:
(i) the Facility pursuant to which such Borrowing is to be made;
(ii) the aggregate amount of the requested Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
(v) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and
(vi) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.04.
If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing
Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing.
of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower.
(i) the Borrowing and Facility to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) of this paragraph shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing, or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration.
(x) if Lenders having 364-Day Commitments totaling an amount equal to at least 51% of the aggregate amount of the 364-Day Commitments then in effect do not agree as contemplated by Section 2.06(f)(i), then the 364-Day Revolving Termination Date shall not be extended pursuant to this Section 2.06(f) and the 364-Day Commitments of all of the Lenders shall remain in effect until the 364-Day Revolving Termination Date except as otherwise provided in this Agreement; and
(y) the Borrower may not request any extension of the 364-Day Revolving Termination Date pursuant to this Section 2.06(f)(i) more frequently than once in any calendar year.
(ii) Any 364-Day Revolving Loan by any Lender the 364-Day Commitment of which is to terminate pursuant to Section 2.06(f)(i) hereof that would otherwise be made or converted by such Lender as a Eurodollar Loan having an Interest Period ending after the date such 364-Day Commitment is to terminate shall be made or continued as an ABR Loan and all ABR Loans of such Lender that would otherwise be converted into Eurodollar Loans having such Interest Periods shall remain as ABR Loans.
(iii) It shall be a condition precedent to any extension of the 364-Day Revolving Termination Date that: (a) on the date of such extension no Default or Event of Default shall have occurred and be continuing; (b) the representations and warranties made by the Borrower in Article III shall be true and complete on and as of the date of such extension (or if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and (c) except for the Mergers, on the date of such extension there shall have been no material adverse change in the consolidated financial condition, operations, business or prospects taken as a whole of the Borrower and its Subsidiaries from that set forth in its financial statements as of December 31, 1998 referred to in Section 3.06 hereof or, if the Borrower has delivered its financial statements for any fiscal year to the Lenders and the Administrative Agent pursuant to Section 5.01(a) hereof, as of the date of the most recent such financial statements. Each request for an extension of the 364-Day Revolving Termination Date pursuant to Section 2.06(f) shall constitute a certification by the Borrower to the effect set forth in the preceding sentence (both as of the date of such request and, unless the Borrower notifies the Administrative Agent prior to the date of such extension, as of the date of such extension).
notwithstanding, whether such extension is effective shall be determined accordingly; provided that following any such assumption and purchase the 364- Day Commitment of each Substitute Lender (including any 364-Day Commitment theretofore held by it) shall be not less than $10,000,000.
(b) The Notice of Term Loan Conversion shall specify:
(i) the Term Loan Conversion Date, which shall be a date (A) no sooner than 5 days after the date on which the Notice of Term Loan Conversion is delivered to the Administrative Agent, (B) no later than the 364-Day Revolving Termination Date and (C) that is a Business Day;
(ii) the principal amount of 364-Day Revolving Loans that are to be consolidated into Term Loans on the Term Loan Conversion Date, which amount shall be the aggregate principal amount of all 364-Day Revolving Loans that will be outstanding on the Term Loan Conversion Date after giving effect to all payments or prepayments to be made prior to such date;
(iii) whether the Term Loans are to be ABR Loans or Eurodollar Loans on the Term Loan Conversion Date; and
(iv) if the Terms Loans are to be Eurodollar Loans on the Term Loan Conversion Date, the duration of the Interest Period applicable thereto, provided that if the Notice of Term Loan Conversion fails to specify the duration of the Interest Period for any Borrowing comprised of Eurodollar Loans, such Interest Period shall be three months.
(c) The Administrative Agent will promptly notify each Lender of its receipt of the Notice of Term Loan Conversion from the Borrower and of the contents of such notice.
(d) If the Borrower requests that Term Loans be made available on the Term Loan Conversion Date, each Lender shall, on the Term Loan Conversion Date, be deemed to have made available to the Borrower its Applicable Percentage of the Term Loans requested and the Borrower shall be deemed to have applied the full amount of such proceeds to the repayment of the 364-Day Revolving Loans previously made by such Lender to such Borrower.
(e) Unless all the Lenders otherwise consent, (i) the Borrower may not deliver any Notice of Term Loan Conversion so long as any Default or Event of Default has occurred and is continuing and (ii) no consolidation of 364-Day Revolving Loans into Term Loans pursuant to any validly given Notice of Term Loan Conversion shall be permitted if on the Term
Loan Conversion Date specified a Default or an Event of Default shall have occurred and is continuing.
(a) the Administrative Agent determines (which determination shall be conclusive, absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Revolving Borrowing.
(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or its Parent (except any such reserve requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on any Lender or its Parent or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such Lender or its Parent of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or its Parent, as the case may be, for such additional costs incurred or reduction suffered.
any Lender attributable to any such event shall be deemed to include an amount
determined by such Lender to be equal to the excess, if any, of (i) the amount
of interest that such Lender would pay for a deposit equal to the principal
amount of such Loan for the period from the date of such payment, conversion,
failure or assignment to the last day of the then current Interest Period for
such Loan (or, in the case of a failure to borrow, convert or continue, the
duration of the Interest Period that would have resulted from such borrowing,
conversion or continuation) if the interest rate payable on such deposit were
equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount
of interest that such Lender would earn on such principal amount for such period
if such Lender were to invest such principal amount for such period at the
interest rate that would be bid by such Lender (or an Affiliate of such Lender)
for dollar deposits from other banks in the eurodollar market at the
commencement of such period. A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive, absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.
such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(iii) each payment or prepayment of principal of Loans by the Borrower shall be made for account of the Lenders pro rata in accordance with the respective unpaid principal amounts of the Loans held by them; and (iv) each payment of interest on Loans by the Borrower shall be made for account of the Lenders pro rata in accordance with the amounts of interest on such Loans then due and payable to the respective Lenders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Administrative Agent and each Lender as follows:
The Borrower and each Subsidiary of the Borrower is a corporation, trust or limited liability company duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization. The Borrower and each Subsidiary of the Borrower has the corporate power and authority to own its Property and to transact the business in which it is engaged or presently proposes to engage. The Borrower and each Subsidiary of the Borrower is
duly qualified to do business as a foreign corporation, trust or limited liability company and is in good standing in all jurisdictions in which the ownership of its properties or the nature of its activities or both makes such qualification necessary or advisable. Schedule II states as of the date hereof the jurisdiction of organization of the Borrower and each Subsidiary of the Borrower, and the jurisdictions in which the Borrower and each Subsidiary of the Borrower is qualified to do business as a foreign corporation, trust or limited liability company.
The Borrower has the corporate power and authority to execute, deliver, perform, and take all actions contemplated by, each of the Loan Documents to which it is a party, and all such action has been duly and validly authorized by all necessary corporate proceedings on its part. Without limiting the foregoing, the Borrower has the corporate power and authority to borrow pursuant to the Loan Documents to the fullest extent permitted hereby and thereby from time to time, and has taken all necessary corporate action to authorize such borrowings.
This Agreement and each of the other Loan Documents to which the Borrower is a party and which is required to be delivered on or before the Effective Date pursuant to Section 4.01 has been duly and validly executed and delivered by the Borrower. This Agreement and each such other Loan Document constitutes, and when executed and delivered by the Borrower will constitute, the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as the enforceability hereof or thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies.
No Governmental Action is required for the due execution, delivery and performance by the Borrower of this Agreement or any of the other Loan Documents to which it is a party. All Governmental Actions required to be taken in order the effect the Mergers have been taken.
Neither the execution and delivery of any of the Loan Documents by the Borrower, nor the consummation of the transactions herein or therein contemplated by the Borrower, nor the performance of or the compliance with the terms and conditions hereof or thereof by the Borrower, nor the consummation of the Mergers, does or will:
(a) violate or conflict with any Law; or
(i) the articles of incorporation or by-laws (or other constituent documents) of the Borrower or any Subsidiary of the Borrower;
(ii) any agreement or instrument creating, evidencing or securing any Indebtedness to which the Borrower or any Subsidiary of the Borrower is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound; or
(iii) any other material agreement or instrument to which the Borrower or any Subsidiary of the Borrower is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound.
The Borrower has heretofore furnished to each of the Agents and each of the Lenders consolidated balance sheets of the Borrower, its consolidated Subsidiaries and NPC as of December 31, 1996, 1997 and 1998 and the related consolidated statements of income, retained earnings and changes in cash flows for the fiscal years then ended, as examined and reported on by independent certified public accountants for the Borrower, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly the financial condition of the Borrower and its consolidated Subsidiaries as of the end of each such fiscal year and the results of their operations and their retained earnings and changes in cash flows for the fiscal years then ended, all in conformity with GAAP.
The Borrower has heretofore furnished to each of the Agents and each of the Lenders an interim consolidated balance sheet of the Borrower, its consolidated Subsidiaries and NPC as of the end of the first fiscal quarter of the fiscal year beginning January 1, 1999, together with the related consolidated statements of income, retained earnings and changes in cash flows for the applicable fiscal period ending on such date. Such financial statements (including the notes thereto) present fairly the financial condition of the Borrower and its consolidated Subsidiaries as of the end of such fiscal quarter and the results of their operations and their retained earnings and changes in cash flows for the fiscal periods then ended, all in conformity with GAAP, subject to normal and recurring year-end audit adjustments.
Neither the Borrower nor any Subsidiary of the Borrower has any
liability or obligation of any nature whatever (whether absolute, accrued,
contingent or otherwise, whether or not due), forward or long-term commitments
or unrealized or anticipated losses from unfavorable commitments, except (a) as
disclosed in the financial statements referred to in Sections 3.06 and 3.07, and
(b) liabilities, obligations, commitments and losses incurred after
March 31, 1999, in the ordinary course of business and consistent with past practices.
Except for the Mergers, since December 31, 1998, there has been no material adverse change in the business, operations, condition (financial or otherwise), or prospects of the Borrower and its Subsidiaries taken as a whole.
All information heretofore, contemporaneously or hereafter provided by or on behalf of the Borrower to any Agent or any Lender pursuant to or in connection with any Loan Document or any transaction contemplated hereby or thereby is or will be (as the case may be) true and accurate in all material respects on the date as of which such information is dated (or, if not dated, when received by such Agent or such Lender) and does not or will not (as the case may be) omit to state any material fact necessary to make such information not misleading at such time in light of the circumstances in which it was provided. The Borrower has disclosed to each Agent and each Lender in writing every fact or circumstance which has, or which so far as the Borrower can reasonably foresee is reasonably likely and is reasonably likely to have, a Material Adverse Effect.
No part of the proceeds of any Loan hereunder will be used for the purpose of buying or carrying any "margin stock", as such term is used in Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time, or to extend credit to others for the purpose of buying or carrying any "margin stock". Neither the Borrower nor any Subsidiary of the Borrower is engaged in the business of extending credit to others for the purpose of buying or carrying "margin stock". Neither the Borrower nor any Subsidiary of the Borrower owns any "margin stock". Neither the making of any Loan nor any use of proceeds of any such Loan will violate or conflict with the provisions of Regulation T, U or X of the Board, as amended from time to time.
There is no pending or (to the Borrower's knowledge after due inquiry) threatened action, suit, proceeding or investigation (including any Environmental Claim) by or before any Governmental Authority against or affecting the Borrower or any Subsidiary of the Borrower which, if adversely decided, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, except for (a) matters described in the financial statements referred to in Section 3.06 and (b) matters set forth in Schedule III.
No event has occurred and is continuing and no condition exists which constitutes a Default or an Event of Default.
Neither the Borrower nor any Subsidiary of the Borrower is in violation of or conflict with, or is subject to any contingent liability on account of any violation of or conflict with:
(a) any Law (including ERISA, the Code, any applicable occupational health, safety or welfare Law or any applicable Environmental Law);
(b) its articles of incorporation or by-laws (or other constituent documents); or
(c) any agreement or instrument to which it is party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound;
except for matters which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
The Borrower and each Subsidiary of the Borrower maintains with financially sound and reputable insurers insurance with respect to its properties and business and against at least such liabilities, casualties and contingencies and in at least such types and amounts as is customary in the case of corporations engaged in the same or a similar business or having similar properties similarly situated.
The Borrower and each Subsidiary of the Borrower has good and marketable title in fee simple to all real Property owned or purported to be owned by it and good title to all other Property of whatever nature owned or purported to be owned by it, including but not limited to all Property reflected in the most recent audited balance sheet referred to in Section 3.06 or submitted pursuant to Section 5.01(b), as the case may be (except as sold or otherwise disposed of in the ordinary course of business after the date of such balance sheet). Except for (i) Liens reflected in the most recent audited balance sheet referred to in Section 3.06 or submitted pursuant to Section 5.01(b), as the case may be, (ii) Liens consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real Property or irregularities in title thereto which do not materially detract from the value of, or impair the use of, such Property by the Borrower or any Subsidiary of the Borrower in the operation of its business, (iii) Liens for current Taxes not yet due and delinquent and (iv) Liens set forth on Schedule IV, no Property owned by the Borrower or any Subsidiary of the Borrower is subject to any Lien.
All tax and information returns required to be filed by or on behalf of the Borrower or any Subsidiary of the Borrower have been properly prepared, executed and filed. All Taxes upon the Borrower or any Subsidiary of the Borrower or upon any of their respective Properties, incomes, sales or franchises which are due and payable have been paid, other than those not yet delinquent and payable without premium or penalty, and except for those being diligently
contested in good faith by appropriate proceedings, and in each case adequate reserves and provisions for Taxes have been made on the books of the Borrower and each Subsidiary of the Borrower. The reserves and provisions for Taxes on the books of the Borrower and each Subsidiary of the Borrower are adequate for all open years and for its current fiscal period. Neither the Borrower nor any Subsidiary of the Borrower knows of any proposed additional assessment or basis for any material assessment for additional Taxes (whether or not reserved against).
Neither the Borrower nor any Subsidiary of the Borrower is an "investment company" or a company controlled by an "investment company" within the meaning of the Investment Company Act of 1940. The Borrower is not a "holding company" within the meaning of the Public Utility Holding Company Act of 1935 which is subject to registration.
(a) The Borrower and each of its Subsidiaries have complied with and are in compliance with, all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws. Except as disclosed on Schedule V, there are no pending or threatened Environmental Claims against the Borrower or any of its Subsidiaries (including any such claim arising out of the ownership, lease or operation by the Borrower or any of its Subsidiaries of any real Property no longer owned, leased or operated by the Borrower or any of its Subsidiaries) or any real Property owned, leased or operated by the Borrower or any of its Subsidiaries. Except as disclosed on Schedule V, there are no facts, circumstances, conditions or occurrences with respect to the business or operations of the Borrower or any of its Subsidiaries, or any real Property owned, leased or operated by the Borrower or any of its Subsidiaries (including any real Property formerly owned, leased or operated by the Borrower or any of its Subsidiaries but no longer owned, leased or operated by the Borrower or any of its Subsidiaries) or any Property adjoining or adjacent to any such real Property that could be expected (i) to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or any real Property owned, leased or operated by the Borrower or any of its Subsidiaries or (ii) to cause any real Property owned, leased or operated by the Borrower or any of its Subsidiaries to be subject to any restrictions on the ownership, occupancy or transferability of such real Property by the Borrower or any of its Subsidiaries under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, any real Property owned, leased or operated by the Borrower or any of its Subsidiaries where such generation, use, treatment or storage has violated or could be expected to violate any Environmental Law. Hazardous Materials have not at any time been Released on or from any real Property owned, leased or operated by Borrower or any of its Subsidiaries where such Release has violated or would be expected to violate any applicable Environmental Law.
(c) Notwithstanding anything to the contrary in this Section, the representations made in this Section shall not be untrue unless the effect of all violations, claims,
restrictions, failures and noncompliances of the types described in this Section would reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Borrower.
(a) Each Plan (and each related trust, insurance contract or fund) is in substantial compliance with its terms and with all applicable Laws, including without limitation ERISA and the Code; each Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; no Multiemployer Plan is insolvent or in reorganization; no Plan has an Unfunded Current Liability; no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency within the meaning of such sections of the Code or ERISA or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan have been timely made; neither the Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such liability under any of the foregoing sections with respect to any Plan; no condition exists which presents a material risk to the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no proceedings have been instituted to terminate or appoint a trustee to administer any Plan; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, expected or threatened; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA Affiliates to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Borrowing, would not have a Material Adverse Effect; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of the Borrower, any Subsidiary of the Borrower, or any ERISA Affiliate has at all times been operated in compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no Lien imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Borrower and its Subsidiaries may cease contributions to or terminate any Plan maintained by any of them without incurring any material liability.
(b) Each Foreign Pension Plan, if any, has been maintained in substantial compliance with its terms and with the requirements of any and all applicable Laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. All contributions required to be made with respect to a Foreign Pension Plan have been timely made. Neither the Borrower nor any of its Subsidiaries has incurred any obligation in connection with the termination of or withdrawal from any Foreign Pension Plan. The present value of the accrued benefit liabilities (whether or not vested) under
each Foreign Pension Plan, determined as of the end of the Borrower's most recently ended Fiscal Year on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan allocable to such benefit liabilities.
The Borrower has (i) initiated a detailed review and assessment of all
areas within its business and operations and the business and operations of its
Subsidiaries, including those affected by suppliers and vendors, that could be
adversely impacted by the "Year 2000 Problem", i.e., the risk that computer
applications used by the Borrower, its Subsidiaries, or their suppliers and
vendors, may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31, 1999,
(ii) developed a detailed plan and timetable for addressing the Year 2000
Problem on a timely basis (the "Year 2000 Plan"), and (iii) to date, implemented
this plan in accordance with the timetable. The Borrower reasonably believes
that all computer applications, including those of its suppliers and vendors,
that are material to its business, operations or conditions (financial or
otherwise) will, on a timely basis, be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000, that is, be "Year 2000
Compliant", except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect.
The claims and rights of the Lenders against the Borrower hereunder are not subordinated to, and rank at least pari passu with, the claims and rights of other holders of its unsecured indebtedness except to the extent otherwise provided by Law (including without limitation the Bankruptcy Code and the provisions of 31 U.S.C. (S)3713).
ARTICLE IV
CONDITIONS
This Agreement and the other Loan Documents shall become effective as against the Lenders and the Agents on the first date on which all of the following conditions shall be satisfied or waived:
received copies of all documentation related there, including, without limitation, the order(s) of the Federal Energy Regulatory Commission and the Securities and Exchange Commission approving the Mergers.
(i) The total commitments in respect of the Indebtedness to be Refinanced shall have been terminated, and all loans and notes with respect thereto shall have been repaid in full, together with interest thereon, all letters of credit issued thereunder shall have been terminated and all other amounts (including premiums) owing pursuant to the Indebtedness to be Refinanced shall have been repaid in full and all documents in respect of the Indebtedness to be Refinanced and all guarantees with respect thereto shall have been terminated (except as to indemnification provisions, which may survive to the extent provided therein) and be of no further force and effect.
(ii) The creditors in respect of the Indebtedness to be Refinanced shall have terminated and released any and all security interests and Liens on the assets owned by Borrower and its Subsidiaries. The Administrative Agent shall have received such releases of security interests in and Liens on the assets owned by Borrower and its Subsidiaries as may have been requested by the Administrative Agent, which releases
shall be in form and substance reasonably satisfactory to the Administrative Agent. Without limiting the foregoing, there shall have been delivered (i) proper termination statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC of each jurisdiction where a financing statement (Form UCC-1 or the appropriate equivalent) was filed with respect to Borrower or any of its Subsidiaries in connection with the security interests created with respect to the Indebtedness to be Refinanced and the documentation related thereto, (ii) termination or reassignment of any security interest in, or Lien on, any patents, trademarks, copyrights, or similar interests of Borrower or any of its Subsidiaries on which filings have been made, (iii) terminations of all mortgages, leasehold mortgages, deeds of trust and leasehold deeds of trust created with respect to Property of Borrower or any of its Subsidiaries, in each case to secure the obligations in respect of the Indebtedness to be Refinanced, all of which shall be in form and substance reasonably satisfactory to the Administrative Agent, and (iv) all collateral owned by Borrower and its Subsidiaries in the possession of any of the creditors in respect of the Indebtedness to be Refinanced or any collateral agent or trustee under any related security document shall have been returned to Borrower or its respective Subsidiary, as the case may be.
(i) Each of the representations and warranties made by the Borrower herein and in each other Loan Document shall be true and correct in all material respects on and as of the Effective Date as if made on and as of such date, both before and after giving effect to the Loans requested to be made on such date.
(ii) No Default or Event of Default shall have occurred and be continuing on the Effective Date.
The obligation of each Lender to make, convert or continue any Loan on the occasion of any Borrowing is subject to satisfaction of the conditions precedent set forth in Section 4.01 and satisfaction of the following further conditions precedent:
Each request by the Borrower for any Loan or conversion or continuation thereof shall constitute a representation and warranty by the Borrower that the conditions set forth in this Section 4.02 have been satisfied as of the date of such request. Failure of the Administrative Agent to receive notice from the Borrower to the contrary before such Loan is made shall constitute a further representation and warranty by the Borrower that the conditions referred to in this Section 4.02 have been satisfied as of the date such Loan is made.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower hereby covenants to the Administrative Agent and each Lender:
accompanied by an opinion of independent certified public accountants of
recognized national standing selected by the Borrower, which opinion shall not
be subject to any qualification as to scope of audit or as to any other matter
which the Required Lenders determine is adverse. Such opinion in any event shall
contain a written statement of such accountants substantially to the effect that
(i) such accountants examined such financial statements in accordance with
generally accepted auditing standards and accordingly made such tests of
accounting records and such other auditing procedures as such accountants
considered necessary in the circumstances and (ii) in the opinion of such
accountants such financial statements present fairly the financial position of
the Borrower and its consolidated Subsidiaries as of the end of such fiscal year
and the results of their operations and their retained earnings and cash flows
for such fiscal year, in conformity with GAAP.
(i) Any Default or Event of Default.
(ii) The occurrence or existence of any event or condition (including (A) the violation or alleged violation of any Environmental Law by the Borrower or any Subsidiary of the Borrower or the assertion of any Environmental Claim against the Borrower or any Subsidiary of the Borrower, (B) the commencement of any other action, suit, proceeding or investigation by or before any Governmental Authority against or affecting the Borrower or any Subsidiary of the Borrower, or (C) the violation, breach or default or alleged violation, breach or default by the Borrower or any Subsidiary of the Borrower or any other Person under any agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole) which event or condition, either individually or in the aggregate, has, or would reasonably be expected to have, a Material Adverse Effect.
(iii) Any change in the Index Debt rating.
(i) any Reportable Event and any request for a waiver under
Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by the Borrower or an ERISA Affiliate to
terminate any Plan, in each case with respect to which there are insufficient assets to pay benefits as they become due;
(iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Borrower or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Borrower or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt by
the Borrower or any ERISA Affiliate of notice from a Multiemployer Plan
that it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA or that it intends to terminate or has terminated under Section
4041A of ERISA; and
(v) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the
loss of tax-exempt status of the trust of which such Plan is a part if the
Borrower or an ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections.
The Borrower shall, and shall cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as is customary in the case of corporations engaged in the same or similar businesses or having similar properties similarly situated and as is satisfactory from time to time to the Required Lenders in their reasonable discretion.
The Borrower shall, and shall cause each of its Subsidiaries to, pay or discharge
(a) on or prior to the date on which penalties or Liens attach thereto, all Taxes imposed upon it or any of its properties;
(b) on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any such Property; and
(c) on or prior to the date when due, all other lawful claims which, if unpaid, might result in the creation of a Lien upon any such Property or which, if unpaid, might give rise to a claim entitled to priority over general creditors of the Borrower or such Subsidiary in a case under the Bankruptcy Code;
The Borrower shall keep and maintain in full force and effect all Governmental Actions necessary or advisable in connection with execution and delivery of any Loan Document, consummation of the transactions herein or therein contemplated, performance of or compliance with the terms and conditions hereof or thereof or to ensure the legality, validity, binding effect or enforceability hereof or thereof.
The Borrower shall, and shall cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by it and shall make or cause to be made all needful and proper repairs, renewals, replacements and improvements thereto so that the business carried on in connection therewith may be properly and advantageously conducted at all times.
The Borrower shall not, and shall not permit any of its Subsidiaries to, violate or conflict with, be in violation of or in conflict with, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with
(a) any Law;
(b) its articles of incorporation or by-laws; or
(c) any agreement or instrument to which it is party or by which any of them or any of their respective Subsidiaries is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound,
except for matters which would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect.
The Borrower shall, and shall cause each of its Subsidiaries to, make
and keep books, records and accounts which, in reasonable detail, accurately and
fairly reflect its transactions and dispositions of its assets and maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (a) transactions are executed in accordance with management's
general or specific authorization, (b) transactions are recorded as necessary
(i) to permit preparation of financial statements in conformity with GAAP and
(ii) to maintain accountability for assets, (c) access to assets is permitted
only in accordance with management's general or specific authorization and (d)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
The Borrower shall apply the proceeds of all Loans hereunder only (a) to fund a cash payment in an aggregate amount of up to $460,000,000 to be made in connection with the Mergers and (b) for working capital and general corporate purposes of the Borrower, including commercial paper backup. The Borrower shall not use the proceeds of any Loans hereunder directly or indirectly for any unlawful purpose, in any manner inconsistent with Section 3.11, or inconsistent with any other provision of any Loan Document.
The Borrower shall cause (a) each of its, and each of its Subsidiary's, fiscal years to end on December 31 and (b) each of its, and each of its Subsidiary's, fiscal quarters to end on March 31, June 30, September 30 and December 31.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower hereby covenants to the Administrative Agent and each Lender as follows:
(a) Liens existing on the date hereof and securing obligations existing on the date hereof, other than Indebtedness to be Refinanced, as such Liens and obligations are listed on Schedule IV;
(b) Liens securing obligations of NPC issued under and pursuant to the terms and conditions of the NPC First Mortgage Indenture;
(c) Liens securing obligations of SPPC issued under and pursuant to the terms and conditions of the SPPC First Mortgage Indenture;
(d) Liens on NPC First Mortgage Bonds issued as collateral for pollution control revenue bonds issued for the benefit of NPC or its Subsidiaries (and related rights and interests) to secure obligations of NPC or such Subsidiaries for the benefit of the holders of such bonds, provided that such bonds are not secured by any other assets or Properties of NPC or its Subsidiaries;
(e) Liens on SPPC First Mortgage Bonds issued as collateral for pollution control or gas or water facility revenue bonds issued for the benefit of SPPC or its Subsidiaries (and related rights and interests) to secure obligations of SPPC or such Subsidiaries for the benefit of the holders of such bonds, provided that such bonds are not secured by any other assets or Properties of SPPC or its Subsidiaries;
(f) Liens on SPPC First Mortgage Bonds issued as collateral for medium-term notes issued pursuant to the Collateral Trust Indenture, dated as of June 1, 1992, between SPPC and Bankers Trust Company, as Trustee;
(g) Liens on "transition property" arising pursuant to Section 843 of the California Public Utility Code for the benefit of holders of rate reduction bonds issued pursuant to a valid financing order of the California Public Utilities Commission;
(h) Liens arising from taxes, assessments, charges or claims described
in Section 5.03 that are not yet due or that remain payable without penalty
or to the extent permitted to remain unpaid under the proviso to such
Section 5.03;
(i) Deposits or pledges of cash or securities in the ordinary course of business to secure (i) worker's compensation, unemployment insurance or other social security obligations, (ii) performance of bids, tenders, trade contracts (other than for payment of money) or leases, (iii) stay, surety or appeal bonds, or (iv) other obligations of a like nature incurred in the ordinary course of business;
(j) Zoning restrictions, easements, minor restrictions on the use of real Property, minor irregularities in title thereto and other minor Liens that do not secure the payment of money or the performance of an obligation and that do not in the aggregate materially detract from the value of an asset to, or materially impair its use in the business of, the Borrower or such Subsidiary; and
(k) Liens on Property securing all or part of the purchase price thereof and Liens (whether or not assumed) existing in Property at the time of purchase thereof, provided that: (i) such Lien is created before or substantially simultaneously with the purchase of such Property by the Borrower or such Subsidiary, (ii) such Lien is confined solely to the Property so purchased, improvements thereto and proceeds thereof, (iii) the aggregate amount secured by such Liens on any particular Property at the time purchased by the Borrower or such Subsidiary, as the case may be, shall not exceed the lesser of the purchase price of such Property and the fair market value of such Property at the time of purchase thereof by the Borrower or such Subsidiary, and (iv) the aggregate amount secured by all Liens described in this Section 6.02(k) shall not at any time exceed $150,000,000.
"Permitted Liens" shall in no event include any Lien imposed by, or required to be granted pursuant to, ERISA or any Environmental Law.
The Borrower shall not, and shall not permit any of its Subsidiaries to, (a) merge with or into or consolidate with any other Person, (b) liquidate, wind-up, dissolve or divide, or (c) agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except:
(i) A Person may merge with or into or consolidate with any Subsidiary of the Borrower, provided that (x) the surviving Person shall be a Subsidiary of the Borrower, (y) no Default or Event of Default shall have occurred and be continuing or shall exist at such
time or after giving effect to such transaction and (z) the Borrower shall deliver to the Administrative Agent (A) a certificate, in a form reasonably satisfactory to the Administrative Agent, certifying that no Default or Event of Default exists or will result from such merger and (B) pro forma financial statements in support of such certification; and
(ii) A Person may merge with or into or consolidate with the Borrower, provided that (x) the Borrower shall be the surviving Person, (y) no Default or Event of Default shall have occurred and be continuing or shall exist at such time or after giving effect to such transaction and (z) the Borrower shall deliver to the Administrative Agent (A) a certificate, in a form reasonably satisfactory to the Administrative Agent, certifying that no Default or Event of Default exists or will result from such merger and (B) pro forma financial statements in support of such certification.
Prior to the making of any Investment or the consummation of any Acquisition by the Borrower or any of its Subsidiaries, the amount or purchase price of which, as the case may be, when aggregated with the amounts and purchase prices of other Investments and Acquisitions made by the Borrower and its Subsidiaries, would exceed $70,000,000 in the aggregate at any time, the Borrower shall deliver to the Administrative Agent (i) a certificate, in a form reasonably satisfactory to the Administrative Agent, certifying that no Default or Event of Default exists or will result from such Acquisition and (ii) pro forma financial statements in support of such certification.
The Borrower shall not declare or pay any dividend on its capital stock (except for dividends in the form of capital stock), or redeem or repurchase any of its capital stock, if a Default or Event of Default shall have occurred and be continuing or shall exist at such time or after giving effect to such transaction.
The Borrower shall not enter into any transaction of any kind with any Person that Controls the Borrower or is controlled by the Borrower or is under common control with the Borrower other than (a) salary, bonus, employee stock option and other compensation arrangements with directors or officers in the ordinary course of business, (b) transactions that are fully disclosed to the board of directors (or executive committee thereof) of the Borrower and expressly authorized by a resolution of the board of directors (or executive committee) of the Borrower which is approved by a majority of the directors (or executive committee) not having an interest in the transaction, (c) transactions between or among the Borrower and its Wholly-Owned Subsidiaries and (d) transactions on overall terms at least as favorable to the Borrower as would be the case in an arm's-length transaction between unrelated parties of equal bargaining power.
If, notwithstanding the prohibition contained in Section 6.02, the
Borrower or any of its Subsidiaries shall create, assume or permit to exist any
Lien upon any of its Property, other than those permitted by the provisions of
Section 6.02, it will make or cause to be made effective provision whereby the
Borrowings will be secured equally and ratably with any and all other
obligations thereby secured, such security to be pursuant to agreements
reasonably satisfactory to the Administrative Agent and, in any such case, the
Borrowings shall have the benefit, to the fullest extent that, and with such
priority as, the Lenders may be entitled under applicable law, of an equitable
Lien on such Property. Such violation of Section 6.02 will constitute an Event
of Default, whether or not provision is made for an equal and ratable Lien
pursuant to this Section.
Except as otherwise permitted under Article VI hereunder, Article VI of the SPPC Credit Agreement and Article VI of the NPC Credit Agreement, the Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its Property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to guarantee Indebtedness of the Borrower or any other Subsidiary.
At the request of any Lender, the Borrower will make available to such Lender the Borrower's Year 2000 Plan, together with any updates or progress reports with respect thereto. The Borrower will promptly notify the Administrative Agent in the event the Borrower discovers or determines that any computer application, including those of its suppliers and vendors, that is material to its business, operations or conditions (financial or otherwise) will not be Year 2000 Compliant on a timely basis, except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect.
ARTICLE VII
DEFAULTS
(a) The Borrower shall fail to pay when due principal of any Loan.
(b) The Borrower shall fail to pay when due interest on any Loan, any fees, indemnity or expenses, or any other amount due hereunder or under any other Loan Document and such failure shall have continued for a period of three business days.
(c) Any representation or warranty made or deemed made by the Borrower in or pursuant to or in connection with any Loan Document, or any statement made by the Borrower in any financial statement, certificate, report, exhibit or document furnished by the Borrower to the Administrative Agent or any Lender pursuant to or in connection with any Loan Document, shall prove to have been false or misleading in any material respect as of the time when made or deemed made (including by omission of material information necessary to make such representation, warranty or statement not misleading).
(d) The Borrower shall default in the performance or observance of any covenant contained in Article VI or any of the covenants contained in Sections 5.01(f)(i) or 5.09 or 5.10.
(e) The Borrower shall default in the performance or observance of any other covenant, agreement or duty under this Agreement or any other Loan Document and (i) in the case of a default under Section 5.01 (other than as referred to in subsection (f)(i) thereof) such default shall have continued for a period of ten Business Days and (ii) in the case of any other default such default shall have continued for a period of 30 days after notice from the Administrative Agent to the Borrower.
(f) The Borrower or any Subsidiary of the Borrower shall (i) fail to make any payment (x) on account of any Indebtedness under the NPC Credit Agreement or the SPPC Credit Agreement, (y) on account of any Indebtedness aggregating $10,000,000 or more in principal amount or (z) aggregating $10,000,000 or more on any Indebtedness, or any interest or premium thereon, in each case, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and, in each case, such failure shall have continued beyond any applicable grace period specified in any agreement or instrument relating to such Indebtedness, or (ii) fail to perform or observe any other term, covenant or condition on its part to be performed or observed under any agreement or instrument relating to any Indebtedness when required to be performed or observed, and such failure shall have continued beyond any applicable grace period specified in any agreement or instrument relating to such Indebtedness, if the effect of such failure to perform or observe is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness, the unpaid principal amount of which then aggregates $10,000,000.
(g) One or more final judgments or orders for the payment of money shall have been entered against the Borrower or any Subsidiary of the Borrower, which judgments or orders exceed $10,000,000 in the aggregate, and such judgments or orders shall have remained undischarged and unstayed for a period of thirty consecutive days.
(h) One or more writs or warrants of attachment, garnishment, execution, distraint or similar process exceeding in value the aggregate amount of $10,000,000 shall have been issued against the Borrower or any Subsidiary of the Borrower or any of their respective properties and shall have remained undischarged and unstayed for a period of thirty consecutive days.
(i) Any Governmental Action now or hereafter made by or with any Governmental Authority in connection with any Loan Document is not obtained or shall have ceased to be in full force and effect or shall have been modified or amended or shall have been held to be illegal or invalid, and the Required Lenders shall have determined (which determination shall be conclusive provided it is reached in good faith) that the consequence of any of the foregoing events would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(j) Any Loan Document or any material term or provision thereof shall have ceased to be in full force and effect, or the Borrower or any Governmental Authority with jurisdiction over the Borrower shall, or shall purport to, terminate, repudiate, declare voidable or void or otherwise contest, any Loan Document or any material term or provision thereof or any obligation or liability of the Borrower thereunder.
(k) An event or condition specified in Section 5.01(h) hereof shall occur or exist with respect to any Plan or Multiemployer Plan or any Lien arises pursuant to ERISA and, as a result of such event or condition or Liens, together with all other such events or conditions or Liens, the Borrower or any ERISA Affiliate shall incur or shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC or suffer an encumbrance to exist in favor of any thereof (or any combination of the foregoing) which would constitute a Material Adverse Effect.
(l) The Borrower or any Subsidiary of the Borrower shall have violated any Environmental Law or become subject to any Environmental Claim and, in either case, the Required Lenders shall have determined (which determination shall be conclusive provided it is reached in good faith) that such event would reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect.
(m) A proceeding shall have been instituted in respect of the Borrower or any Subsidiary of the Borrower:
(i) seeking to have an order for relief entered in respect of such Person, or seeking a declaration or entailing a finding that such Person is insolvent or a similar declaration or finding, or seeking dissolution, winding-up, charter revocation or forfeiture, liquidation, reorganization, arrangement, adjustment, composition or other similar relief with respect to such Person, its assets or its debts
under any Law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, termination of legal entities or any other similar Law now or hereafter in effect, or
(ii) seeking appointment of a receiver, trustee, liquidator, assignee, sequestrator or other custodian for such Person or for all or any substantial part of its Property,
and such proceeding shall result in the entry, making or grant of any such order for relief, declaration, finding, relief or appointment, or such proceeding shall remain undismissed and unstayed for a period of thirty consecutive days.
(n) The Borrower or any Subsidiary of the Borrower shall become insolvent; shall fail to pay, become unable to pay, or state that it is or will be unable to pay, its debts as they become due; shall voluntarily suspend transaction of its business; shall make a general assignment for the benefit of creditors; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(m)(i), or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such order for relief, declaration, finding or relief described therein; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(m)(ii), or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such appointment or to the taking of possession by any such custodian of all or any substantial part of its Property; shall dissolve, wind-up, revoke or forfeit its charter (or other constituent documents) or liquidate itself or any substantial part of its Property; or shall take any action in furtherance of any of the foregoing.
(o) A Change in Control shall occur.
(p) NPC or SPPC shall cease to maintain a first mortgage bond rating of at least Baa3 by Moody's and BBB- by S&P.
(q) The Borrower shall fail to maintain ongoing utility segment- identifiable assets (exclusive of cash and marketable securities) and operating income relating to the generation, transmission and/or distribution of electricity, gas or water in a proportion not less than 80% of total assets (exclusive of cash and marketable securities) and operating income.
(a) If an Event of Default specified in subsections (a) through (l),
(o), (p) or (q) of Section 7.01 shall occur and, be continuing or shall exist,
then, in addition to all other rights and remedies which the Administrative
Agent or any Lender may have hereunder or under any other Loan Document, at law,
in equity or otherwise, the Lenders shall be under no further obligation to make
Loans hereunder, and the Administrative Agent may, and, upon the written request
of the Required Lenders shall, by notice to the Borrower, from time to time do
any or all of the following:
(i) Declare the Commitments terminated, whereupon the Commitments will terminate and any fees hereunder shall be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue.
(ii) Declare the unpaid principal amount of the Loans, interest accrued thereon and all other obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue.
(b) If an Event of Default specified in subsection (m) or (n) of
Section 7.01 shall occur or exist, then, in addition to all other rights and
remedies which the Administrative Agent or any Lender may have hereunder or
under any other Loan Document, at law, in equity or otherwise, the Commitments
shall automatically terminate and the Lenders shall be under no further
obligation to make Loans, and the unpaid principal amount of the Loans, interest
accrued thereon and all other obligations shall become immediately due and
payable without presentment, demand, protest or notice of any kind, all of which
are hereby waived, and an action therefor shall immediately accrue.
ARTICLE VIII
THE AGENTS
Each Lender hereby irrevocably appoints Mellon Bank, N.A. to act as
Administrative Agent for such Lender under this Agreement and the other Loan
Documents. Each Lender hereby irrevocably authorizes the Administrative Agent
to take such action on behalf of such Lender under the provisions of this
Agreement and the other Loan Documents, and to exercise such powers and to
perform such duties, as are expressly delegated to or required of the
Administrative Agent by the terms hereof or thereof, together with such powers
as are reasonably incidental thereto. Mellon Bank, N.A. hereby agrees to act as
Administrative Agent on behalf of the Lenders on the terms and conditions set
forth in this Agreement and the other Loan Documents, subject to its right to
resign as provided in Section 8.10. Each Lender hereby irrevocably authorizes
the Administrative Agent to execute and deliver each of the Loan Documents
executed after the date hereof and to accept delivery of such of the other Loan
Documents delivered after the date hereof as may not require execution by the
Administrative Agent (with such consents of the Lenders as required pursuant to
Section 9.01). Each Lender agrees that the rights and remedies granted to the
Administrative Agent under the Loan Documents shall be exercised exclusively by
the Administrative Agent, and that no Lender shall have any right individually
to exercise any such right or remedy, except to the extent expressly provided
herein or therein.
Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Loan Document:
(a) The Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and no implied duties or responsibilities on the part of the Administrative Agent shall be read into this Agreement or any other Loan Document or shall otherwise exist.
(b) The duties and responsibilities of the Administrative Agent under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and the Administrative Agent shall not have a fiduciary relationship in respect of any Lender.
(c) The Administrative Agent is and shall be solely the agent of the Lenders. The Administrative Agent does not assume, and shall not at any time be deemed to have, any relationship of agency or trust with or for, or any other duty or responsibility to, the Borrower or any other Person (except only for its relationship as agent for, and its express duties and responsibilities to, the Lenders as provided in this Agreement and the other Loan Documents).
(d) The Administrative Agent shall be under no obligation to take any action hereunder or under any other Loan Document if the Administrative Agent believes in good faith that taking such action may conflict with any Law or any provision of this Agreement or any other Loan Document, or may require the Administrative Agent to qualify to do business in any jurisdiction where it is not then so qualified.
The Administrative Agent shall take any action of the type specified
in this Agreement or any other Loan Document as being within the Administrative
Agent's rights, powers or discretion in accordance with directions from the
Required Lenders (or, to the extent this Agreement or such Loan Document
expressly requires the direction or consent of some other Person or set of
Persons, then instead in accordance with the directions of such other Person or
set of Persons). In the absence of such directions, the Administrative Agent
shall have the authority (but under no circumstances shall be obligated), in its
sole discretion, to take any such action, except to the extent that this
Agreement or such Loan Document expressly requires the direction or consent of
the Required Lenders (or some other Person or set of Persons), in which case the
Administrative Agent shall not take such action absent such direction or
consent. Any action or inaction pursuant to such direction, discretion or
consent shall be binding on all the Lenders. The Administrative Agent shall not
have any liability to any Person as a result of (a) the Administrative Agent
acting or refraining from acting in accordance with the directions of the
Required Lenders (or other applicable Person or set of Persons), (b) the
Administrative Agent refraining from acting in the absence of instructions to
act from the Required Lenders (or other applicable Person or set of Persons),
whether or not the Administrative Agent has discretionary power to take such
action, or (c) the Administrative Agent taking discretionary action it is
authorized to take under this Section (subject, in the case of clauses (b) and
(c), to the provisions of Section 8.04(a)).
Notwithstanding anything to the contrary elsewhere in this Agreement or any other Loan Document:
(a) The Administrative Agent shall not be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or any other Loan Document, unless caused by its own gross negligence or willful misconduct.
(b) The Administrative Agent shall not be responsible for (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of this Agreement or any other Loan Document, (ii) any recital, representation, warranty, document, certificate, report or statement in, provided for in, or received under or in connection with, this Agreement or any other Loan Document, (iii) any failure of the Borrower or any Lender to perform any of their respective obligations under this Agreement or any other Loan Document, or (iv) the existence, validity, enforceability, perfection, recordation, priority, adequacy or value, now or hereafter, of any Lien or other direct or indirect security afforded or purported to be afforded by any of the Loan Documents or otherwise from time to time.
(c) The Administrative Agent shall not be under any obligation to ascertain, inquire or give any notice relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of the Borrower, (ii) the business, operations, condition (financial or otherwise) or prospects of the Borrower or any other Person, or (iii) except to the extent set forth in Section 8.05(f), the existence of any Default or Event of Default.
(d) The Administrative Agent shall not be under any obligation, either initially or on a continuing basis, to provide any Lender with any notices, reports or information of any nature, whether in its possession presently or hereafter, except for such notices, reports and other information expressly required by this Agreement or any other Loan Document to be furnished by the Administrative Agent to such Lender.
(a) The Administrative Agent may rely upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of the proper party or parties, and the Administrative Agent shall not have any duty to verify the identity or authority of any Person giving such notice or other communication.
(b) The Administrative Agent may consult with legal counsel (including, without limitation, in-house counsel for the Administrative Agent or in-house or other counsel for the Borrower), independent public accountants and any other experts selected by it from time to time, and the Administrative Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts.
(c) The Administrative Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to the Administrative Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever the Administrative Agent shall deem it necessary or desirable that a matter be proved or established with respect to the Borrower or any Lender, such matter may be established by a certificate of the Borrower or such Lender, as the case may be, and the Administrative Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document).
(d) The Administrative Agent may fail or refuse to take any action unless it shall be indemnified to its satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred by or asserted against the Administrative Agent by reason of taking or continuing to take any such action.
(e) The Administrative Agent may perform any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.
(f) The Administrative Agent shall not be deemed to have any knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default, and stating that such notice is a "notice of default". If the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to each Lender.
Each Lender acknowledges as follows:
(a) Neither the Administrative Agent nor any other Lender has made any representations or warranties to it, and no act taken hereafter by the Administrative Agent or any other Lender shall be deemed to constitute any representation or warranty by the Administrative Agent or such other Lender to it.
(b) It has, independently and without reliance upon the Administrative Agent or any other Lender, and based upon such documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the other Loan Documents.
(c) It will, independently and without reliance upon the Administrative Agent or any other Lender, and based upon such documents and information as it shall deem appropriate at the time, make its own decisions to take or not take action under or in connection with this Agreement and the other Loan Documents.
With respect to its Commitment and the Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lenders," "holders of Notes" and like terms shall include the Administrative Agent in its individual capacity as such. The Administrative Agent and its affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, and engage in any other business with, the Borrower and any stockholder, subsidiary or affiliate of the Borrower, as though the Administrative Agent were not the Administrative Agent hereunder.
The Administrative Agent may deem and treat the Lender which is payee of a Note as the owner and holder of such Note for all purposes hereof unless and until an Assignment and Acceptance with respect to the assignment or transfer thereof shall have been filed with the Administrative Agent in accordance with Section 9.12. Any authority, direction or consent of any Person who at the time of giving such authority, direction or consent is shown in the Register as being a Lender shall be conclusive and binding on each present and subsequent holder, transferee or assignee of any Note or Notes payable to such Lender or of any Note or Notes issued in exchange therefor.
The Administrative Agent may resign at any time by giving 10 days' prior written notice thereof to the Lenders and the Borrower. The Administrative Agent may be removed by the Required Lenders at any time with or without cause by giving 10 days, prior written notice thereof to the Administrative Agent, the other Lenders and the Borrower. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed and consented to, and shall have accepted such appointment, within 30 days after such notice of resignation or removal, then the retiring Administrative Agent, on behalf of the Lenders, may appoint a successor Administrative Agent. Each successor Administrative Agent shall be a commercial bank or trust company organized under the Laws of the United States of America or any State thereof and having a combined capital and surplus of at least $1,000,000,000. The appointment of any successor Administrative Agent at any time pursuant to this Section 8.10 shall be subject to the approval of the Borrower, provided that at such time there shall not have occurred and be continuing any Default or Event of Default, and provided further that the Borrower's consent to any such appointment shall not be unreasonably withheld. Upon the acceptance by a successor Administrative Agent of its appointment as Administrative Agent hereunder, such successor Administrative Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Administrative Agent without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Administrative Agent, the Administrative Agent shall be discharged from its duties under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Administrative Agent under this Agreement. If and for so long as no successor Administrative Agent shall have been appointed, then any notice or other communication required or permitted to be given by the Administrative Agent shall be sufficiently given if given by the Required Lenders, all notices or other communications required or permitted to be given to the Administrative Agent shall be given to each Lender, and all payments to be made to the Administrative Agent shall be made directly to the Borrower or Lender for whose account such payment is made.
If the Administrative Agent shall from time to time deem it necessary or advisable, for its own protection in the performance of its duties hereunder or in the interest of the Lenders, the Administrative Agent and the Borrower shall execute and deliver a supplemental agreement and all other instruments and agreements necessary or advisable in the opinion of the Administrative Agent to constitute another commercial bank or trust company, or one or more other Persons approved by the Administrative Agent, to act as co-Administrative Agent, with such powers of the Administrative Agent as may be provided in such supplemental agreement, and to vest in such bank, trust company or Person, as such co-Administrative Agent, any properties, rights, powers, privileges and duties of the Administrative Agent under this Agreement or any other Loan Document. The appointment of any co-Administrative Agent at any time pursuant to this Section 8.11 shall be subject to the approval of the Borrower, provided that at such time there shall not have occurred and be continuing any Default or Event of Default, and provided further that the Borrower's consent to any such appointment shall not be unreasonably withheld.
The Administrative Agent shall not be liable for any calculation, apportionment or distribution of payments made by it in good faith, in the absence of its own gross negligence or willful misconduct. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made (except as provided in the preceding sentence) shall be to recover from the other Lenders any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the Borrower, to recover such amount from the Borrower.
As Syndication Agents, neither First Union National Bank nor Wells Fargo Bank, N.A. shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, neither First Union National Bank nor Wells Fargo Bank, N.A. shall have any or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on First Union National Bank or Wells Fargo Bank, N.A. in deciding to enter into this Agreement or in not taking action hereunder or under the Loan Documents.
ARTICLE IX
MISCELLANEOUS
(a) Increase the Commitments of any Lender over the amount thereof then in effect, without the written consent of each Lender affected thereby;
(b) Extend either Revolving Termination Date, without the written consent of all the Lenders;
(c) Reduce the principal amount of or extend the time for any payment of principal of any Loan, or reduce the rate of interest or extend the time for payment of any interest borne by any Loan, or extend the time for payment of or reduce the amount of any fees, or reduce or postpone the date for payment of any other obligation, without the written consent of each Lender affected thereby;
(d) Change the definition of "Required Lenders" or amend this Section 9.01 or Section 9.12(a) or any other provision of this Agreement that requires the consent of all of the Lenders to the taking or failure to take action hereunder, without the written consent of all the Lenders; or
(e) Amend or waive any of the provisions of Article VIII, or impose additional duties upon the Administrative Agent or otherwise adversely affect the rights, interests or obligations of the Administrative Agent, without the written consent of the Administrative Agent;
No course of dealing and no delay or failure of the Administrative Agent or any Lender in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or the exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Administrative Agent and the Lenders under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have hereunder or thereunder, at law, in equity or otherwise.
(b) Any Lender giving any notice to the Borrower or any other party to a Loan Document shall simultaneously send a copy thereof to the Administrative Agent, and the
Administrative Agent shall promptly notify the other Lenders of the receipt by it of any such notice.
(c) The Administrative Agent and each Lender may rely on any notice (whether or not such notice is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of the Borrower, and neither the Administrative Agent nor any Lender shall have any duty to verify the identity or authority of any Person giving such notice.
(a) The Borrower agrees to pay or cause to be paid and to save the
Administrative Agent and each of the Lenders harmless against liability for the
payment of all reasonable out-of-pocket costs and expenses (including but not
limited to reasonable fees and expenses of counsel) incurred by the
Administrative Agent or any Lender from time to time arising from or relating to
(i) in the case of the Administrative Agent, the negotiation, syndication,
preparation, execution, delivery, administration and performance of this
Agreement and the other Loan Documents, (ii) in the case of the Syndication
Agents, the syndication of this Agreement and the other Loan Documents, (iii) in
the case of the Administrative Agent, any amendments, modifications,
supplements, waivers or consents to this Agreement or any other Loan Document
(whether or not ultimately entered into or granted), and (iv) in the case of the
Administrative Agent or any Lender, the enforcement or preservation of rights
under this Agreement or any other Loan Document (including but not limited to
any such costs or expenses arising from or relating to (A) collection or
enforcement of an outstanding Loan or any other amount owing hereunder or
thereunder by the Administrative Agent or such Lender, and (B) any litigation,
proceeding, dispute, work-out, restructuring or rescheduling related in any way
to this Agreement or the Loan Documents).
(b) The Borrower hereby agrees to pay all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or hereafter determined by the Administrative Agent or any Lender to be payable in connection with this Agreement or any other Loan Documents or any other documents, instruments or transactions pursuant to or in connection herewith or therewith (which determination shall be conclusive provided it is reached in good faith), and the Borrower agrees to save the Administrative Agent and each Lender harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such fees, taxes or impositions.
(c) The Borrower hereby agrees to reimburse and indemnify each of the Indemnified Parties from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnified Party in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnified Party shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnified Party as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document, any transaction from time to time contemplated hereby or thereby, or
any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan (and without in any way limiting the generality of the foregoing, including any violation or breach of any Environmental Law or any other Law by the Borrower or any Subsidiary of the Borrower; any Environmental Claim arising out of the management, use, control, ownership or operation of Property by any of such Persons, including all onsite and off-site activities involving Hazardous Materials; or any exercise by the Administrative Agent or any Lender of any of its rights or remedies under this Agreement or any other Loan Document); but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting solely from the gross negligence or willful misconduct of such Indemnified Party, as finally determined by a court of competent jurisdiction. If and to the extent that the foregoing obligations of the Borrower under this subsection (c), or any other indemnification obligation of the Borrower hereunder or under any other Loan Document, are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law.
The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.
This Agreement, the other Loan Documents and that certain letter agreement regarding fees dated March 30, 1999 among Mellon Bank, N.A., SPPC and the Borrower, as such agreements shall be amended from time to time, supersede all prior and contemporaneous understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein.
All representations and warranties of the Borrower contained herein or in any other Loan Document or made in connection herewith or therewith shall survive the making, and shall not be waived by the execution and delivery, of this Agreement or any other Loan Document, any investigation by or knowledge of the Administrative Agent or any Lender, the making of any Loan, or any other event or condition whatever. All covenants and agreements of the Borrower contained herein or in any other Loan Document shall continue in full force and effect from and after the date hereof so long as the Borrower may borrow hereunder and until payment in full of all Obligations. Without limitation, all obligations of the Borrower hereunder or under any other Loan Document to make payments to or indemnify the Administrative Agent or any Lender shall survive the payment in full of all other Obligations, termination of the Borrower's right to borrow hereunder, and all other events and conditions whatever. In addition, all obligations of each Lender to make payments to or indemnify the Administrative Agent shall survive the payment in full by the Borrower of all Obligations, termination of the Borrower's right to borrow hereunder, and all other events or conditions whatever.
This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.
The parties hereto intend to conform to all applicable Laws in effect from time to time limiting the maximum rate of interest that may be charged or collected. Accordingly, notwithstanding any other provision hereof or of any other Loan Document, the Borrower shall not be required to make any payment to or for the account of any Lender, and each Lender shall refund any payment made by the Borrower, to the extent that such requirement or such failure to refund would violate or conflict with nonwaivable provisions of applicable Laws limiting the maximum amount of interest which may be charged or collected by such Lender.
The Borrower hereby agrees that, to the fullest extent permitted by
Law, if any Obligation of the Borrower shall be due and payable (by acceleration
or otherwise), each Lender shall have the right, without notice to the Borrower,
to set-off against and to appropriate and apply to such Obligation any
indebtedness, liability or obligation of any nature owing to the Borrower by
such Lender, including but not limited to all deposits (whether time or demand,
general or special, provisionally credited or finally credited, whether or not
evidenced by a certificate of deposit) now or hereafter maintained by the
Borrower with such Lender. Such right shall be absolute and unconditional in
all circumstances and, without limitation shall exist whether or not such Lender
or any other Person shall have given notice or made a demand to the Borrower or
any other Person, whether such indebtedness, obligation or liability owed to the
Borrower is contingent, absolute, matured or unmatured (it being agreed that
such Lender may deem such indebtedness, obligation or liability to be then due
and payable at the time of such setoff), and regardless of the existence or
adequacy of any collateral, guaranty or any other security, right or remedy
available to any Lender or any other Person. The Borrower hereby agrees that,
to the fullest extent permitted by Law, any Participant and any branch,
subsidiary or affiliate of any Lender or any Participant shall have the same
rights of set-off as a Lender as provided in this Section (regardless of whether
such Participant, branch, subsidiary or affiliate would otherwise be deemed in
privity with or a direct creditor of the Borrower). The rights provided by this
Section are in addition to all other rights of set-off and banker's lien and all
other rights and remedies which any Lender (or any such Participant, branch,
subsidiary or affiliate) may otherwise have under this Agreement, any other Loan
Document, at law or in equity, or otherwise, and nothing in this Agreement or
any other Loan Document shall be deemed a waiver or prohibition of or
restriction on the rights of set-off or bankers' lien of any such Person.
The Lenders hereby agree among themselves that if any Lender shall receive (by voluntary payment, realization upon security, set-off or from any other source) any amount on account of the Loans, interest thereon, or any other Obligation contemplated by this Agreement or
the other Loan Documents to be made by the Borrower pro rata to all Lenders (or pro rata to holders of Notes) in greater proportion than any such amount received by any other applicable Lender, then the Lender receiving such proportionately greater payment shall notify each other Lender and the Administrative Agent of such receipt, and equitable adjustment will be made in the manner stated in this Section 9.11 so that, in effect, all such excess amounts will be shared ratably among all of the applicable Lenders. The Lender receiving such excess amount shall purchase (which it shall be deemed to have done simultaneously upon the receipt of such excess amount) for cash from the other applicable Lenders a participation in the applicable Obligations owed to such other Lenders in such amount as shall result in a ratable sharing by all applicable Lenders of such excess amount (and to such extent the receiving Lender shall be a Participant). If all or any portion of such excess amount is thereafter recovered from the Lender making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law to be paid by the Lender making such purchase. The Borrower hereby consents to and confirms the foregoing arrangements. Each Participant shall be bound by this Section as fully as if it were a Lender hereunder.
(i) any such Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations,
(iii) the parties hereto shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents,
(iv) such Participant shall be bound by the provisions of Section 9.11, and
(v) no Participant (unless such Participant is an Affiliate of such Lender, or is itself a Lender) shall be entitled to require such Lender to take or refrain from taking action under this Agreement or under any other Loan Document, except that such Lender may agree with such Participant that such Lender will not, without such Participant's consent, take any action, or consent to the taking of any action, of the type described in Section 9.01(a), (b) or (c).
(i) any such assignment to a Purchasing Lender which is not a Lender or an affiliate of a Lender shall be made only with the consent (which in each case shall not be unreasonably withheld) of the Borrower (so long as no Default or Event of Default shall have occurred and be continuing) and the Administrative Agent;
(ii) if a Lender makes such an assignment of less than all of its then remaining rights and obligations under this Agreement and the other Loan Documents, such transferor Lender shall retain, after such assignment, a minimum principal amount of $10,000,000 of the Commitments and Loans then outstanding, and such assignment, unless made to an assignee who is a Lender hereunder prior to such assignment, shall be in a minimum principal amount of $10,000,000 of the Commitments and Loans then outstanding;
(iii) each such assignment shall be of a constant, and not a varying, percentage of the 364-Day Commitment and 3-Year Commitment of the transferor Lender and of all of the transferor Lender's rights and obligations under this Agreement and the other Loan Documents; and
(iv) each such assignment shall be made pursuant to an Assignment and Acceptance.
In order to effect any such assignment, the transferor Lender and the Purchasing Lender shall execute and deliver to the Administrative Agent a duly completed Assignment and Acceptance (including the consents required by clause (i) of the preceding sentence) with respect to such assignment, together with any Note or Notes subject to such assignment and a processing and recording fee of $3,500; and, upon receipt thereof, the Administrative Agent shall accept such Assignment and Acceptance. Upon receipt of notice from the transferor Lender that it has received the consideration described in the Assignment and Acceptance, the Administrative Agent shall record such acceptance in the Register. Upon such execution, delivery, acceptance and recording, from and after the close of business at the Administrative Agent's Office on the settlement date specified in such Assignment and Acceptance:
(x) the Purchasing Lender shall be a party hereto and, to the extent provided in such Assignment and Acceptance, shall have the rights and obligations of a Lender hereunder, and
(y) the transferor Lender thereunder shall be released from its obligations under this Agreement to the extent so transferred (and, in the case of an Assignment and Acceptance covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party to this Agreement) from and after the settlement date.
On or prior to the settlement date specified in an Assignment and Acceptance, the Borrower, at its expense, shall execute and deliver to the Administrative Agent (for delivery to the Purchasing Lender) new Notes evidencing such Purchasing Lender's assigned Commitments or Loans and (for delivery to the transferor Lender) replacement Notes in the principal amount of the Loans or Commitments retained by the transferor Lender (such Notes to be in exchange for, but not in payment of, those Notes then held by such transferor Lender). Each such Note shall be dated the date and be substantially in the form of the predecessor Note. The Administrative Agent shall mark the predecessor Notes "exchanged" and deliver them to the Borrower. Accrued interest and accrued fees shall be paid to the Purchasing Lender at the same time or times provided in the predecessor Notes and this Agreement.
Lender to the same extent, and as if, such Loan were funded by such Granting
Lender. Each party hereto hereby agrees that no SPC shall be liable for any
indemnity or payment under this Agreement for which a Lender would otherwise be
liable for so long as, and to the extent, the Granting Lender provides such
indemnity or makes such payment. Notwithstanding anything to the contrary
contained in this Agreement, any SPC may disclose on a confidential basis any
non-public information relating to its funding of Loans to any rating agency,
commercial paper dealer or provider of any surety or guarantee to such SPC. This
Section may not be amended without the prior written consent of each Granting
Lender, all or any part of whose Loan is being funded by an SPC at the time of
such amendment.
(ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER IT;
(iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED
U.S. MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS FOR NOTICES DESCRIBED IN
SECTION 9.03, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN
EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT
THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER
PERMITTED BY LAW); AND
(iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED LITIGATION.
SUCH DAMAGES, WHETHER SUCH CLAIM PRESENTLY EXISTS OR ARISES HEREAFTER AND WHETHER OR NOT SUCH CLAIM IS KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
Address SIERRA PACIFIC RESOURCES
-------
Sierra Pacific Resources
6100 Neil Road
P.O. Box 30150 By____________________________
Reno, Nevada 89520 Name:
Attn: Mark Ruelle Title:
75
|
Address MELLON BANK, N.A., as Administrative
------- Agent, Arranger and as a Lender
Mellon Bank
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Attn: Richard A. Matthews By_______________________________
Name: Richard A. Matthews
Title: Vice President
76
|
Address FIRST UNION NATIONAL BANK, as
------- Syndication Agent and as a Lender
First Union National Bank
One First Union Center
301 South College Street
Charlotte, North Carolina 28288-0735 By_______________________________
Attn: Dana Maloney Name:
Title:
77
|
Address WELLS FARGO BANK, N.A., as
------- Syndication Agent and as a Lender
Wells Fargo Bank
201 Third Street
8/th/ Floor
San Francisco, California 94103 By_______________________________
Attn: Maria Josefa Prosperi Name:
Title:
78
|
Address BANK OF AMERICA NATIONAL TRUST
------- AND SAVINGS ASSOCIATION
Bank of America
300 South Fourth Street
2/nd/ Floor
Las Vegas, Nevada 89101 By_______________________________
Attn: Dolores A. Rippo Name:
Title:
79
|
Address THE BANK OF NEW YORK ------- The Bank of New York One Wall Street New York, New York 10286 By_______________________________ Attn: Kathy D'Elena Name: |
Title:
Address THE FIRST NATIONAL BANK OF CHICAGO
-------
The First National Bank of Chicago
One First National Plaza
Suite 0573
Chicago, Illinois By_______________________________
Attn: Mari Albanese Name:
Title:
81
|
Address CREDIT SUISSE FIRST BOSTON
-------
Credit Suisse First Boston
5 World Trade Center
New York, New York 10048 By_______________________________
Attn: Genaro Sarasola Name:
Title:
82
|
Address PARIBAS
-------
Paribas
787 7/th/ Avenue
New York, New York 10019 By____________________________
Attn: Telca Hurley Name:
Title:
By____________________________
Name:
Title:
83
|
Address UNION BANK OF CALIFORNIA, N.A.
-------
Union Bank of California
Energy Capital Services - LA Office
445 South Figueroa Street By_____________________________
15/th/ Floor Name:
Los Angeles, CA 90071 Title:
Attn Patricia A. Gonzales
84
|
Address BANK OF MONTREAL
-------
Bank of Montreal
700 Louisiana Street
Suite 4400 By_______________________________
Houston, TX 77002 Name: Cahal B. Carmody
Attn: Cahal B. Carmody Title: Director
85
|
Address BAYERISCHE LANDESBANK
------- GIROZENTRALE
Bayerische Landesbank Girozentrale
560 Lexington Avenue
New York, New York 10022
Attn: Patricia Sanchez By______________________________
Name: Peter Obermann
Title: Senior Vice President
By_______________________________
Name: Sean O'Sullivan
Title: Vice President
86
|
Address FLEET NATIONAL BANK ------- Fleet National Bank One Federal Street Boston, Massachusetts 02110 By_______________________________ |
Attn: Francia Castillo, Loan Administrator Name:
Title:
Address FIRST SECURITY BANK OF NEVADA
-------
First Security Bank of Nevada
P.O. Box 19250
Las Vegas, Nevada 89132 By_______________________________
Attn: Cheryl Moss Name: Cheryl Moss
Title: Senior Vice President & Manager
Corporate Banking Department
88
|
Address KBC BANK, N.V.
-------
KBC Bank, N.V.
125 West 55/th/ Street
10/th/ Floor By______________________________
New York, New York 10019 Name:
Attn: Claire Kowalski/Charlene Cumberbatch Title:
By______________________________
Name:
Title:
89
|
Address U.S. BANK NATIONAL ASSOCIATION
-------
U.S. Bank National Association
Commercial Loan Servicing Department
555 S.W. Oak Street, PL-7 By______________________________
Portland, Oregon 97204 Name:
Attn: Jan Knox, Participation Specialist Title:
90
|
I
-
|
364-Day Commitments
-------------------
LENDER COMMITMENT AMOUNT
------ -----------------
Mellon Bank, N.A. $ 15,937,500
First Union National Bank $ 12,187,500
Wells Fargo Bank, N.A. $ 12,187,500
Bank of America National
Trust and Savings Association $ 11,250,000
The Bank of New York $ 11,250,000
The First National Bank of Chicago $ 11,250,000
Credit Suisse First Boston $ 11,250,000
Paribas $ 11,250,000
Union Bank of California, N.A. $ 11,250,000
Bank of Montreal $ 9,375,000
Bayerische Landesbank Girozentrale $ 9,375,000
Fleet National Bank $ 9,375,000
First Security Bank of Nevada $ 4,687,500
KBC Bank, N.V. $ 4,687,500
U.S. Bank National Association $ 4,687,500
Total $150,000,000
============
91
|
SCHEDULE I
Page 2
3-Year Commitments
------------------
LENDER COMMITMENT AMOUNT
------ -----------------
Mellon Bank, N.A. $ 37,187,500
First Union National Bank $ 28,437,500
Wells Fargo Bank, N.A. $ 28,437,500
Bank of America National
Trust and Savings Association $ 26,250,000
The Bank of New York $ 26,250,000
The First National Bank of Chicago $ 26,250,000
Credit Suisse First Boston $ 26,250,000
Banque Paribas $ 26,250,000
Union Bank of California, N.A. $ 26,250,000
Bank of Montreal $ 21,875,000
Bayerische Landesbank Girozentrale $ 21,875,000
Fleet National Bank $ 21,875,000
First Security Bank of Nevada $ 10,937,500
KBC Bank, N.V. $ 10,937,500
U.S. Bank National Association $ 10,937,500
Total $350,000,000
============
|
Page
----
ARTICLE I
DEFINITIONS; CONSTRUCTION............................................................... 1
SECTION 1.01 Defined Terms............................................................. 1
SECTION 1.02. Classification of Loans and Borrowings................................... 17
SECTION 1.03 Terms Generally........................................................... 17
SECTION 1.04 Accounting Terms; GAAP.................................................... 17
ARTICLE II
THE CREDITS............................................................................. 17
SECTION 2.01 The Commitments........................................................... 17
SECTION 2.02 Loans and Borrowings...................................................... 18
SECTION 2.03 Requests for Revolving Borrowings......................................... 19
SECTION 2.04 Funding of Borrowings..................................................... 20
SECTION 2.05 Interest Elections........................................................ 20
SECTION 2.06 Termination, Reduction and Extension of Commitments....................... 22
SECTION 2.07 Term Loan Conversion Option............................................... 25
SECTION 2.08 Repayment of Loans; Evidence of Debt...................................... 26
SECTION 2.09 Prepayment of Loans....................................................... 27
SECTION 2.10 Fees...................................................................... 28
SECTION 2.11 Interest.................................................................. 28
SECTION 2.12 Alternate Rate of Interest................................................ 29
SECTION 2.13 Increased Costs........................................................... 30
SECTION 2.14 Break Funding Payments.................................................... 30
SECTION 2.15 Taxes..................................................................... 31
SECTION 2.16 Payments Generally; Pro Rata Treatment; Sharing of Set-offs............... 32
SECTION 2.17 Mitigation Obligations; Replacement of Lenders............................ 34
ARTICLE III
REPRESENTATIONS AND WARRANTIES.......................................................... 35
SECTION 3.01 Corporate Status.......................................................... 35
SECTION 3.02 Corporate Power and Authorization......................................... 35
SECTION 3.03 Execution and Binding Effect.............................................. 35
SECTION 3.04 Governmental Approvals and Filings........................................ 35
|
SECTION 3.05 Absence of Conflicts...................................................... 36
SECTION 3.06 Audited Financial Statements.............................................. 36
SECTION 3.07 Interim Financial Statements.............................................. 36
SECTION 3.08 Absence of Undisclosed Liabilities........................................ 37
SECTION 3.09 Absence of Material Adverse Effect........................................ 37
SECTION 3.10 Accurate and Complete Disclosure.......................................... 37
SECTION 3.11 Margin Regulations........................................................ 37
SECTION 3.12 Litigation................................................................ 38
SECTION 3.13 Absence of Events of Default.............................................. 38
SECTION 3.14 Absence of Other Conflicts................................................ 38
SECTION 3.15 Insurance................................................................. 38
SECTION 3.16 Title to Property; No Liens............................................... 38
SECTION 3.17 Taxes..................................................................... 39
SECTION 3.18 Borrower Not An Investment Company or a Registered Public Utility Holding
Company................................................................... 39
SECTION 3.19 Environmental Matters..................................................... 39
SECTION 3.20 ERISA..................................................................... 40
SECTION 3.21 Year 2000 Issues.......................................................... 41
SECTION 3.22 Pari Passu Status......................................................... 41
SECTION 3.23 Indebtedness.............................................................. 41
ARTICLE IV
CONDITIONS.............................................................................. 42
SECTION 4.01 Effective Date............................................................ 42
SECTION 4.02 Conditions to All Loans................................................... 45
ARTICLE V
AFFIRMATIVE COVENANTS................................................................... 46
SECTION 5.01 Basic Reporting Requirements.............................................. 46
SECTION 5.02 Insurance................................................................. 49
SECTION 5.03 Payment of Taxes and Other Potential Charges and Priority Claims.......... 49
SECTION 5.04 Preservation of Corporate Status and Franchises........................... 49
SECTION 5.05 Governmental Approvals and Filings........................................ 50
SECTION 5.06 Maintenance of Properties................................................. 50
SECTION 5.07 Avoidance of Other Conflicts.............................................. 50
SECTION 5.08 Financial Accounting Practices............................................ 50
SECTION 5.09 Use of Proceeds........................................................... 51
SECTION 5.10 End of Fiscal Periods..................................................... 51
ARTICLE VI
NEGATIVE COVENANTS...................................................................... 51
|
SECTION 6.01 Financial Covenants....................................................... 51
SECTION 6.02 Liens..................................................................... 51
SECTION 6.03 Mergers................................................................... 53
SECTION 6.04 Dispositions of Properties................................................ 53
SECTION 6.05 Investments and Acquisitions.............................................. 54
SECTION 6.06 Dividends and Stock Repurchases........................................... 54
SECTION 6.07 Transactions with Affiliates.............................................. 54
SECTION 6.08 Equal and Ratable Lien.................................................... 54
SECTION 6.09 Restrictive Agreements.................................................... 54
SECTION 6.10 Year 2000................................................................. 55
ARTICLE VII
DEFAULTS................................................................................ 55
SECTION 7.01 Events of Default......................................................... 55
SECTION 7.02 Consequences of an Event of Default....................................... 58
ARTICLE VIII
THE AGENTS.............................................................................. 58
SECTION 8.01 Appointment............................................................... 58
SECTION 8.02 General Nature of Administrative Agent's Duties........................... 59
SECTION 8.03 Exercise of Powers........................................................ 59
SECTION 8.04 General Exculpatory Provisions............................................ 60
SECTION 8.05 Administration by the Administrative Agent................................ 61
SECTION 8.06 Lenders Not Relying on Administrative Agent or Other Lenders.............. 61
SECTION 8.07 Indemnification........................................................... 62
SECTION 8.08 Administrative Agent in its Individual Capacity........................... 62
SECTION 8.09 Holders of Notes.......................................................... 63
SECTION 8.10 Successor Administrative Agent............................................ 63
SECTION 8.11 Additional Administrative Agents.......................................... 64
SECTION 8.12 Calculations.............................................................. 64
SECTION 8.13 Syndication Agents........................................................ 64
ARTICLE IX
MISCELLANEOUS........................................................................... 64
SECTION 9.01 Amendments and Waivers.................................................... 64
SECTION 9.02 No Implied Waiver; Cumulative Remedies.................................... 65
SECTION 9.03 Notices................................................................... 66
SECTION 9.04 Expenses; Taxes; Indemnity................................................ 66
SECTION 9.05 Severability.............................................................. 67
|
SECTION 9.06 Prior Understandings.......................................................... 67 SECTION 9.07 Duration; Survival............................................................ 68 SECTION 9.08 Counterparts.................................................................. 68 SECTION 9.09 Limitation on Payments........................................................ 68 SECTION 9.10 Set-Off....................................................................... 68 SECTION 9.11 Sharing of Collections........................................................ 69 SECTION 9.12 Successors and Assigns; Participations; Assignments........................... 69 SECTION 9.13 Governing Law; Submission to Jurisdiction Waiver of Jury Trial; Limitation of Liability.................................................................................. 72 |
EXHIBIT 10(B)
$150,000,000
CREDIT AGREEMENT
dated as of
June 24, 1999
among
NEVADA POWER COMPANY,
MELLON BANK, N.A.,
as Administrative Agent,
FIRST UNION NATIONAL BANK
and
WELLS FARGO BANK, N.A.,
as Syndication Agents,
and
the LENDERS party hereto from time to time
Arranged By
MELLON BANK, N.A.
CREDIT AGREEMENT, dated as of June 24, 1999, among NEVADA POWER COMPANY, a Nevada corporation, MELLON BANK, N.A., as Administrative Agent, FIRST UNION NATIONAL BANK and WELLS FARGO BANK, N.A., as Syndication Agents, the LENDERS party hereto from time to time and MELLON BANK, N.A., as Arranger.
WHEREAS, the Borrower (as defined below) has requested, and Lenders (as defined below) have agreed to make available, the credit facilities described below upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
As used in this Agreement, the following terms have the following meanings:
Facility Eurodollar Usage Fee
Index Debt rating: S&P/Moody's Fee Spread (*33%/*66%)
------------------------------- --- ------ -----------
Ratings greater than A-/A3 .1500% .3500% .0250/.0750%
Ratings equal to A-/A3 .1500% .4000% .0250/.0750%
Ratings equal to BBB+/Baa1 .2000% .4250% .0250/.0750%
Ratings equal to BBB/Baa2 .2250% .5250% .0500/.1250%
|
Ratings equal to BBB-/Baa3 .2500% .7500% .0500/.1250% Ratings less than BBB-/Baa3 .3750% .8750% .1250/.2500% |
For purposes of the foregoing, (i) if either Moody's or S&P shall not have in
effect a rating for the Index Debt (other than by reason of the circumstances
referred to in the last sentence of this definition), then such rating agency
shall be deemed to have established a rating in its lowest rating category, (ii)
if the ratings established or deemed to have been established by Moody's and S&P
for the Index Debt shall be changed (other than as a result of a change in the
rating system of Moody's or S&P), such change shall be effective as of two
Business Days after it is first announced by the applicable rating agency and
(iii) if the rating assigned by Moody's and the rating assigned by S&P shall
differ (a) by one level (e.g., Moody's rating of A3 and S&P rating of BBB+),
then the higher rating level shall apply (i.e., A3) and (b) by more than one
level (e.g., Moody's rating of A3 and S&P rating of BBB-), then the rating level
above the lower rating level shall apply (i.e., BBB/Baa2). Each change in the
Applicable Rate shall apply during the period commencing two Business Days after
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change. If the rating system of Moody's or
S&P shall change, or if either such rating agency shall cease to be in the
business of rating corporate debt obligations, the Borrower and the Lenders
shall negotiate in good faith to amend this definition to reflect such changed
rating system or the unavailability of ratings from such rating agency and,
pending the effectiveness of any such amendment, the Applicable Rate shall be
determined by reference to the rating most recently in effect prior to such
change or cessation.
may be (a) reduced from time to time pursuant to Section 2.06 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.12. The initial amount of each Lender's Commitment is set forth on Schedule I or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders' Commitments is $150,000,000.
Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period.
For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a Revolving Loan or a Term Loan) or by Type (e.g., a Eurodollar Loan or an ABR Loan) or by Class and Type (e.g., a Eurodollar Revolving Loan). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing").
The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof and (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.
Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time.
ARTICLE II
THE CREDITS
balance of the total Commitments. The Borrower may thereafter, upon irrevocable notice to the Administrative Agent in accordance with Section 2.05(b), (i) elect, as of any Business Day, in the case of ABR Loans, to convert any such ABR Loans or any part thereof, in an aggregate amount equal to $5,000,000 or a multiple of $1,000,000 in excess thereof, into Eurodollar Loans, and (ii) elect, as of the last day of the applicable Interest Period, to continue any Eurodollar Loans having Interest Periods expiring on such day or any part thereof in an aggregate amount of $5,000,000 or a multiple of $1,000,000 in excess thereof; provided that, if at any time the aggregate amount of Eurodollar Loans in respect of any Borrowing is reduced by payment, prepayment or conversion of part thereof to be less than $5,000,000, such Eurodollar Loans shall automatically convert into ABR Loans. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of five Eurodollar Borrowings outstanding.
To request a Revolving Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Revolving Borrowing, not later than 12:00 noon., Pittsburgh, Pennsylvania time, three Business Days before the date of the proposed Borrowing, or (b) in the case of an ABR Borrowing, not later than 12:00 noon, Pittsburgh, Pennsylvania time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in the form attached hereto as Exhibit B and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.04.
If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing.
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) of this paragraph shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing, or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration.
agreeing shall expire on the then expiring Revolving Termination Date and the Borrower shall pay or prepay on such day without premium or penalty all principal of such Lender's Loans together with accrued interest thereon and all accrued facility and usage fees and other amounts payable to such Lender hereunder (including, without limitation, amounts payable pursuant to Section 2.14 hereof as a result of such payment or prepayment); provided, however, that
(x) if Lenders having Commitments totaling an amount equal to at least 51% of the aggregate amount of the Commitments then in effect do not agree as contemplated by Section 2.06(e)(i), then the Revolving Termination Date shall not be extended pursuant to this Section 2.06(e) and the Commitments of all of the Lenders shall remain in effect until the Revolving Termination Date except as otherwise provided in this Agreement; and
(y) the Borrower may not request any extension of the Revolving Termination Date pursuant to this Section 2.06(e)(i) more frequently than once in any calendar year.
(ii) Any Loan by any Lender the Commitment of which is to terminate pursuant to Section 2.06(e)(i) hereof that would otherwise be made or converted by such Lender as a Eurodollar Loan having an Interest Period ending after the date such Commitment is to terminate shall be made or continued as an ABR Loan and all ABR Loans of such Lender that would otherwise be converted into Eurodollar Loans having such Interest Periods shall remain as ABR Loans.
(iii) It shall be a condition precedent to any extension of the Revolving Termination Date that: (a) on the date of such extension no Default or Event of Default shall have occurred and be continuing; (b) the representations and warranties made by the Borrower in Article III shall be true and complete on and as of the date of such extension (or if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and (c) except for the Mergers, on the date of such extension there shall have been no material adverse change in the consolidated financial condition, operations, business or prospects taken as a whole of the Borrower and its Subsidiaries from that set forth in its financial statements as of December 31, 1998 referred to in Section 3.06 hereof or, if the Borrower has delivered its financial statements for any fiscal year to the Lenders and the Administrative Agent pursuant to Section 5.01(a) hereof, as of the date of the most recent such financial statements. Each request for an extension of the Revolving Termination Date pursuant to Section 2.06(e) shall constitute a certification by the Borrower to the effect set forth in the preceding sentence (both as of the date of such request and, unless the Borrower notifies the Administrative Agent prior to the date of such extension, as of the date of such extension).
withheld), to assume such non-consenting Lender's Commitment hereunder and to purchase, on or before the date such Lender's Loans would otherwise be required to be paid or prepaid hereunder, the Loans and Notes of such Lender and such Lender's rights hereunder in respect thereof, without recourse to or representation or warranty by, or expense to, such Lender. In such event, the purchase price shall be equal to the outstanding principal amount of the Loans and Notes payable to such Lender plus any accrued but unpaid interest on such Loans and Notes and accrued but unpaid facility and usage fees in respect of such Lender's Commitment. Upon such assumption and purchase and the receipt by such Lender of any other amounts payable to it by the Borrower under this Agreement, and subject to the execution and delivery to the Administrative Agent and such Lender by the Substitute Lender of documentation reasonably satisfactory to the Administrative Agent and such Lender pursuant to which such Substitute Lender shall assume the obligations of such original Lender under this Agreement in respect of its Loans, Notes and Commitment and agree to become a "Lender" hereunder (if not already a Lender) to the extent of the Commitments, Loans and Notes assumed and purchased, the Substitute Lender shall succeed to the rights, obligations and benefits of such Lender hereunder in such respect (except for such rights, obligations and benefits of the Lender as have accrued (other than principal, accrued interest or facility and usage fees ) or are required to be performed by it on or prior to the date of such assumption and purchase) (and such Lender shall be released from its Commitment except for any liability arising or relating to any event occurring prior to the date of such assumption and purchase) and the Substitute Lender shall be deemed to have agreed to the relevant extension of the Revolving Termination Date and, anything in Section 2.06(e) to the contrary notwithstanding, whether such extension is effective shall be determined accordingly; provided that following any such assumption and purchase the Commitments of each Substitute Lender (including any Commitments theretofore held by it) shall be not less than $10,000,000.
(b) The Notice of Term Loan Conversion shall specify:
(i) the Term Loan Conversion Date, which shall be a date (A) no sooner than 5 days after the date on which the Notice of Term Loan Conversion is delivered to the Administrative Agent, (B) no later than the Revolving Termination Date and (C) that is a Business Day;
(ii) the principal amount of Revolving Loans that are to be consolidated into Term Loans on the Term Loan Conversion Date, which amount shall be the aggregate principal amount of all Revolving Loans that will be outstanding on the Term Loan Conversion Date after giving effect to all payments or prepayments to be made prior to such date;
(iii) whether the Term Loans are to be ABR Loans or Eurodollar Loans on the Term Loan Conversion Date; and
(iv) if the Terms Loans are to be Eurodollar Loans on the Term Loan Conversion Date, the duration of the Interest Period applicable thereto, provided that if the Notice of Term Loan Conversion fails to specify the duration of the Interest Period for any Borrowing comprised of Eurodollar Loans, such Interest Period shall be three months.
(c) The Administrative Agent will promptly notify each Lender of its receipt of the Notice of Term Loan Conversion from the Borrower and of the contents of such notice.
(d) If the Borrower requests that Term Loans be made available on the Term Loan Conversion Date, each Lender shall, on the Term Loan Conversion Date, be deemed to have made available to the Borrower its Applicable Percentage of the Term Loans requested and the Borrower shall be deemed to have applied the full amount of such proceeds to the repayment of the Revolving Loans previously made by such Lender to such Borrower.
(e) Unless all the Lenders otherwise consent, (i) the Borrower may not deliver any Notice of Term Loan Conversion so long as any Default or Event of Default has occurred and is continuing and (ii) no consolidation of Revolving Loans into Term Loans pursuant to any validly given Notice of Term Loan Conversion shall be permitted if on the Term Loan Conversion Date specified a Default or an Event of Default shall have occurred and is continuing.
Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11 and shall be made in the manner specified in this Section 2.09(b).
(a) the Administrative Agent determines (which determination shall be conclusive, absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Revolving Borrowing.
(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or its Parent (except any such reserve requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on any Lender or its Parent or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such Lender or its Parent of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or its Parent, as the case may be, for such additional costs incurred or reduction suffered.
if such Lender were to invest such principal amount for such period at the
interest rate that would be bid by such Lender (or an Affiliate of such Lender)
for dollar deposits from other banks in the eurodollar market at the
commencement of such period. A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive, absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.
completed and executed documentation prescribed by applicable Law as will permit such payments to be made without withholding or at a reduced rate.
received by any other Lender, then the Lender receiving such greater proportion
shall purchase (for cash at face value) participations in the Loans of other
Lenders to the extent necessary so that the benefit of all such payments shall
be shared by the Lenders ratably in accordance with the aggregate amount of
principal of and accrued interest on their respective Loans; provided that (i)
if any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans to any assignee
or participant, other than to the Borrower or any Subsidiary or Affiliate
thereof (as to which the provisions of this paragraph shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable Law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Administrative Agent and each Lender as follows:
The Borrower and each Subsidiary of the Borrower is a corporation, trust or limited liability company duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization. The Borrower and each Subsidiary of the Borrower has the corporate power and authority to own its Property and to transact the business in which it is engaged or presently proposes to engage. The Borrower and each Subsidiary of the Borrower is duly qualified to do business as a foreign corporation, trust or limited liability company and is in good standing in all jurisdictions in which the ownership of its properties or the nature of its activities or both makes such qualification necessary or advisable. Schedule II states as of the date hereof the jurisdiction of organization of the Borrower and each Subsidiary of the Borrower, and the jurisdictions in which the Borrower and each Subsidiary of the Borrower is qualified to do business as a foreign corporation, trust or limited liability company.
The Borrower has the corporate power and authority to execute, deliver, perform, and take all actions contemplated by, each of the Loan Documents to which it is a party, and all
such action has been duly and validly authorized by all necessary corporate proceedings on its part. Without limiting the foregoing, the Borrower has the corporate power and authority to borrow pursuant to the Loan Documents to the fullest extent permitted hereby and thereby from time to time, and has taken all necessary corporate action to authorize such borrowings.
This Agreement and each of the other Loan Documents to which the Borrower is a party and which is required to be delivered on or before the Effective Date pursuant to Section 4.01 has been duly and validly executed and delivered by the Borrower. This Agreement and each such other Loan Document constitutes, and when executed and delivered by the Borrower will constitute, the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as the enforceability hereof or thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies.
The Public Utilities Commission of Nevada has duly and validly issued orders authorizing the Borrower to enter into this Agreement and the other Loan Documents to which it is a party and to take all actions contemplated hereby or thereby or in connection herewith or therewith, and such orders remain in full force and effect in the form issued. No other Governmental Action is required for the due execution, delivery and performance by the Borrower of this Agreement or any of the other Loan Documents to which it is a party. All Governmental Actions required to be taken in order the effect the Mergers have been taken.
Neither the execution and delivery of any of the Loan Documents by the Borrower, nor the consummation of the transactions herein or therein contemplated by the Borrower, nor the performance of or the compliance with the terms and conditions hereof or thereof by the Borrower, nor the consummation of the Mergers, does or will:
(a) violate or conflict with any Law; or
(i) the articles of incorporation or by-laws (or other constituent documents) of the Borrower or any Subsidiary of the Borrower;
(ii) any agreement or instrument creating, evidencing or securing any Indebtedness to which the Borrower or any Subsidiary of the Borrower is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound; or
(iii) any other material agreement or instrument to which the Borrower or any Subsidiary of the Borrower is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound.
The Borrower has heretofore furnished to each of the Agents and each of the Lenders consolidated balance sheets of the Borrower and its consolidated Subsidiaries as of December 31, 1996, 1997 and 1998 and the related consolidated statements of income, retained earnings and changes in cash flows for the fiscal years then ended, as examined and reported on by independent certified public accountants for the Borrower, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly the financial condition of the Borrower and its consolidated Subsidiaries as of the end of each such fiscal year and the results of their operations and their retained earnings and changes in cash flows for the fiscal years then ended, all in conformity with GAAP.
The Borrower has heretofore furnished to each of the Agents and each of the Lenders an interim consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of the end of the first fiscal quarter of the fiscal year beginning January 1, 1999, together with the related consolidated statements of income, retained earnings and changes in cash flows for the applicable fiscal period ending on such date. Such financial statements (including the notes thereto) present fairly the financial condition of the Borrower and its consolidated Subsidiaries as of the end of such fiscal quarter and the results of their operations and their retained earnings and changes in cash flows for the fiscal periods then ended, all in conformity with GAAP, subject to normal and recurring year-end audit adjustments.
Neither the Borrower nor any Subsidiary of the Borrower has any
liability or obligation of any nature whatever (whether absolute, accrued,
contingent or otherwise, whether or not due), forward or long-term commitments
or unrealized or anticipated losses from unfavorable commitments, except (a) as
disclosed in the financial statements referred to in Sections 3.06 and 3.07, and
(b) liabilities, obligations, commitments and losses incurred after March 31,
1999, in the ordinary course of business and consistent with past practices.
Except for the Mergers, since December 31, 1998, there has been no material adverse change in the business, operations, condition (financial or otherwise), or prospects of the Borrower and its Subsidiaries taken as a whole.
All information heretofore, contemporaneously or hereafter provided by or on behalf of the Borrower to any Agent or any Lender pursuant to or in connection with any Loan Document or any transaction contemplated hereby or thereby is or will be (as the case may be) true and accurate in all material respects on the date as of which such information is dated (or, if not dated, when received by such Agent or such Lender) and does not or will not (as the case may be) omit to state any material fact necessary to make such information not misleading at such time in light of the circumstances in which it was provided. The Borrower has disclosed to each Agent and each Lender in writing every fact or circumstance which has, or which so far as the Borrower can reasonably foresee is reasonably likely and is reasonably likely to have, a Material Adverse Effect.
No part of the proceeds of any Loan hereunder will be used for the purpose of buying or carrying any "margin stock", as such term is used in Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time, or to extend credit to others for the purpose of buying or carrying any "margin stock". Neither the Borrower nor any Subsidiary of the Borrower is engaged in the business of extending credit to others for the purpose of buying or carrying "margin stock". Neither the Borrower nor any Subsidiary of the Borrower owns any "margin stock". Neither the making of any Loan nor any use of proceeds of any such Loan will violate or conflict with the provisions of Regulation T, U or X of the Board, as amended from time to time.
There is no pending or (to the Borrower's knowledge after due inquiry) threatened action, suit, proceeding or investigation (including any Environmental Claim) by or before any Governmental Authority against or affecting the Borrower or any Subsidiary of the Borrower which, if adversely decided, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect, except for (a) matters described in the financial statements referred to in Section 3.06 and (b) matters set forth in Schedule III.
No event has occurred and is continuing and no condition exists which constitutes a Default or an Event of Default.
Neither the Borrower nor any Subsidiary of the Borrower is in violation of or conflict with, or is subject to any contingent liability on account of any violation of or conflict with:
(a) any Law (including ERISA, the Code, any applicable occupational health, safety or welfare Law or any applicable Environmental Law);
(b) its articles of incorporation or by-laws (or other constituent documents); or
(c) any agreement or instrument to which it is party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound;
except for matters which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
The Borrower and each Subsidiary of the Borrower maintains with financially sound and reputable insurers insurance with respect to its properties and business and against at least such liabilities, casualties and contingencies and in at least such types and amounts as is customary in the case of corporations engaged in the same or a similar business or having similar properties similarly situated.
The Borrower and each Subsidiary of the Borrower has good and marketable title in fee simple to all real Property owned or purported to be owned by it and good title to all other Property of whatever nature owned or purported to be owned by it, including but not limited to all Property reflected in the most recent audited balance sheet referred to in Section 3.06 or submitted pursuant to Section 5.01(b), as the case may be (except as sold or otherwise disposed of in the ordinary course of business after the date of such balance sheet). Except for (i) Liens reflected in the most recent audited balance sheet referred to in Section 3.06 or submitted pursuant to Section 5.01(b), as the case may be, (ii) Liens consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real Property or irregularities in title thereto which do not materially detract from the value of, or impair the use of, such Property by the Borrower or any Subsidiary of the Borrower in the operation of its business, (iii) Liens for current Taxes not yet due and delinquent and (iv) Liens set forth on Schedule IV, no Property owned by the Borrower or any Subsidiary of the Borrower is subject to any Lien.
All tax and information returns required to be filed by or on behalf of the Borrower or any Subsidiary of the Borrower have been properly prepared, executed and filed. All Taxes upon the Borrower or any Subsidiary of the Borrower or upon any of their respective Properties, incomes, sales or franchises which are due and payable have been paid, other than those not yet delinquent and payable without premium or penalty, and except for those being diligently contested in good faith by appropriate proceedings, and in each case adequate reserves and provisions for Taxes have been made on the books of the Borrower and each Subsidiary of the Borrower. The reserves and provisions for Taxes on the books of the Borrower and each Subsidiary of the Borrower are adequate for all open years and for its current fiscal period. Neither the Borrower nor any Subsidiary of the Borrower knows of any proposed additional assessment or basis for any material assessment for additional Taxes (whether or not reserved against).
Neither the Borrower nor any Subsidiary of the Borrower is an "investment company" or a company controlled by an "investment company" within the meaning of the Investment Company Act of 1940.
(a) The Borrower and each of its Subsidiaries have complied with and are in compliance with, all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws. Except as disclosed on Schedule V, there are no pending or threatened Environmental Claims against the Borrower or any of its Subsidiaries (including any such claim arising out of the ownership, lease or operation by the Borrower or any of its Subsidiaries of any real Property no longer owned, leased or operated by the Borrower or any of its Subsidiaries) or any real Property owned, leased or operated by the Borrower or any of its Subsidiaries. Except as disclosed on Schedule V, there are no facts, circumstances, conditions or occurrences with respect to the business or operations of the Borrower or any of its Subsidiaries, or any real Property owned, leased or operated by the Borrower or any of its Subsidiaries (including any real Property formerly owned, leased or operated by the Borrower or any of its Subsidiaries but no longer owned, leased or operated by the Borrower or any of its Subsidiaries) or any Property adjoining or adjacent to any such real Property that could be expected (i) to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or any real Property owned, leased or operated by the Borrower or any of its Subsidiaries or (ii) to cause any real Property owned, leased or operated by the Borrower or any of its Subsidiaries to be subject to any restrictions on the ownership, occupancy or transferability of such real Property by the Borrower or any of its Subsidiaries under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, any real Property owned, leased or operated by the Borrower or any of its Subsidiaries where such generation, use, treatment or storage has violated or could be expected to violate any Environmental Law. Hazardous Materials have not at any time been Released on or from any real Property owned, leased or operated by Borrower or any of its Subsidiaries where such Release has violated or would be expected to violate any applicable Environmental Law.
(c) Notwithstanding anything to the contrary in this Section, the representations made in this Section shall not be untrue unless the effect of all violations, claims, restrictions, failures and noncompliances of the types described in this Section would reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Borrower.
(a) Each Plan (and each related trust, insurance contract or fund) is in substantial compliance with its terms and with all applicable Laws, including without limitation ERISA and the Code; each Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no
Reportable Event has occurred; no Multiemployer Plan is insolvent or in reorganization; no Plan has an Unfunded Current Liability; no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency within the meaning of such sections of the Code or ERISA or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan have been timely made; neither the Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such liability under any of the foregoing sections with respect to any Plan; no condition exists which presents a material risk to the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no proceedings have been instituted to terminate or appoint a trustee to administer any Plan; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, expected or threatened; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA Affiliates to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Borrowing, would not have a Material Adverse Effect; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of the Borrower, any Subsidiary of the Borrower, or any ERISA Affiliate has at all times been operated in compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no Lien imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Borrower and its Subsidiaries may cease contributions to or terminate any Plan maintained by any of them without incurring any material liability.
(b) Each Foreign Pension Plan, if any, has been maintained in substantial compliance with its terms and with the requirements of any and all applicable Laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. All contributions required to be made with respect to a Foreign Pension Plan have been timely made. Neither the Borrower nor any of its Subsidiaries has incurred any obligation in connection with the termination of or withdrawal from any Foreign Pension Plan. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Pension Plan, determined as of the end of the Borrower's most recently ended Fiscal Year on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan allocable to such benefit liabilities.
The Borrower has (i) initiated a detailed review and assessment of all areas within its business and operations and the business and operations of its Subsidiaries, including those affected by suppliers and vendors, that could be adversely impacted by the "Year 2000 Problem", i.e., the risk that computer applications used by the Borrower, its Subsidiaries, or their
suppliers and vendors, may be unable to recognize and perform properly date- sensitive functions involving certain dates prior to and any date after December 31, 1999, (ii) developed a detailed plan and timetable for addressing the Year 2000 Problem on a timely basis (the "Year 2000 Plan"), and (iii) to date, implemented this plan in accordance with the timetable. The Borrower reasonably believes that all computer applications, including those of its suppliers and vendors, that are material to its business, operations or conditions (financial or otherwise) will, on a timely basis, be able to perform properly date- sensitive functions for all dates before and after January 1, 2000, that is, be "Year 2000 Compliant", except to the extent that a failure to do so could not reasonably be expected to have a Material Adverse Effect.
The claims and rights of the Lenders against the Borrower hereunder are not subordinated to, and rank at least pari passu with, the claims and rights of other holders of its unsecured indebtedness except to the extent otherwise provided by Law (including without limitation the Bankruptcy Code and the provisions of 31 U.S.C. (S)3713).
ARTICLE IV
CONDITIONS
This Agreement and the other Loan Documents shall become effective as against the Lenders and the Agents on the first date on which all of the following conditions shall be satisfied or waived:
(which, in the case of articles of incorporation or other constituent
documents filed or required to be filed with the Secretary of State or
other Governmental Authority in its jurisdiction of incorporation, shall be
certified to be true, correct and complete by such Secretary of State or
other Governmental Authority not more than 30 days before the date hereof),
(ii) true copies of all corporate action taken by the Borrower relative to
this Agreement and the other Loan Documents, and (iii) the incumbency and
signatures of the respective officers of the Borrower executing this
Agreement and the other Loan Documents to which the Borrower is a party,
together with satisfactory evidence of the incumbency of such Secretary or
Assistant Secretary. The Administrative Agent shall have received, with a
copy for each Lender, certificates from the Secretary of State of Nevada
(or other applicable Governmental Authority) dated not more than 30 days
before the Effective Date showing the good standing of the Borrower in
Nevada and in each state in which the Borrower does business.
have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon, the consummation of the Mergers or the transactions contemplated hereby or otherwise referred to herein. The Administrative Agent shall have received documentation reasonably acceptable to it that (i) the Federal Energy Regulatory Commission and the Securities and Exchange Commission have each duly approved the Mergers and (ii) the Public Utilities Commission of Nevada has duly approved the Borrowings hereunder.
(i) The total commitments in respect of the Indebtedness to be Refinanced shall have been terminated, and all loans and notes with respect thereto shall have been repaid in full, together with interest thereon, all letters of credit issued thereunder shall have been terminated and all other amounts (including premiums) owing pursuant to the Indebtedness to be Refinanced shall have been repaid in full and all documents in respect of the Indebtedness to be Refinanced and all guarantees with respect thereto shall have been terminated (except as to indemnification provisions, which may survive to the extent provided therein) and be of no further force and effect.
(ii) The creditors in respect of the Indebtedness to be Refinanced shall have terminated and released any and all security interests and Liens on the assets owned by Borrower and its Subsidiaries. The Administrative Agent shall have received such releases of security interests in and Liens on the assets owned by Borrower and its Subsidiaries as may have been requested by the Administrative Agent, which releases shall be in form and substance reasonably satisfactory to the Administrative Agent. Without limiting the foregoing, there shall have been delivered (i) proper termination statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC of each jurisdiction where a financing statement (Form UCC-1 or the appropriate equivalent) was filed with respect to Borrower or any of its Subsidiaries in connection with the security interests created with respect to the Indebtedness to be Refinanced and the documentation related thereto, (ii) termination or reassignment of any security interest in, or Lien on, any
patents, trademarks, copyrights, or similar interests of Borrower or any of its Subsidiaries on which filings have been made, (iii) terminations of all mortgages, leasehold mortgages, deeds of trust and leasehold deeds of trust created with respect to Property of Borrower or any of its Subsidiaries, in each case to secure the obligations in respect of the Indebtedness to be Refinanced, all of which shall be in form and substance reasonably satisfactory to the Administrative Agent, and (iv) all collateral owned by Borrower and its Subsidiaries in the possession of any of the creditors in respect of the Indebtedness to be Refinanced or any collateral agent or trustee under any related security document shall have been returned to Borrower or its respective Subsidiary, as the case may be.
(i) Each of the representations and warranties made by the Borrower herein and in each other Loan Document shall be true and correct in all material respects on and as of the Effective Date as if made on and as of such date, both before and after giving effect to the Loans requested to be made on such date.
(ii) No Default or Event of Default shall have occurred and be continuing on the Effective Date.
The obligation of each Lender to make, convert or continue any Loan on the occasion of any Borrowing is subject to satisfaction of the conditions precedent set forth in Section 4.01 and satisfaction of the following further conditions precedent:
Each request by the Borrower for any Loan or conversion or continuation thereof shall constitute a representation and warranty by the Borrower that the conditions set forth in this Section 4.02 have been satisfied as of the date of such request. Failure of the Administrative Agent to receive notice from the Borrower to the contrary before such Loan is made shall constitute a further representation and warranty by the Borrower that the conditions referred to in this Section 4.02 have been satisfied as of the date such Loan is made.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower hereby covenants to the Administrative Agent and each Lender:
operations and their retained earnings and changes in cash flows for such fiscal year, in conformity with GAAP, subject to normal and recurring year-end audit adjustments.
(i) Any Default or Event of Default.
(ii) The occurrence or existence of any event or condition (including (A) the violation or alleged violation of any Environmental Law by the Borrower or any Subsidiary
of the Borrower or the assertion of any Environmental Claim against the Borrower or any Subsidiary of the Borrower, (B) the commencement of any other action, suit, proceeding or investigation by or before any Governmental Authority against or affecting the Borrower or any Subsidiary of the Borrower, or (C) the violation, breach or default or alleged violation, breach or default by the Borrower or any Subsidiary of the Borrower or any other Person under any agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole) which event or condition, either individually or in the aggregate, has, or would reasonably be expected to have, a Material Adverse Effect.
(iii) Any change in the Index Debt rating.
(i) any Reportable Event and any request for a waiver under
Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by the Borrower or an ERISA Affiliate to terminate any Plan, in each case with respect to which there are insufficient assets to pay benefits as they become due;
(iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Borrower or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Borrower or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser
default) or the receipt by the Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; and
(v) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the
loss of tax-exempt status of the trust of which such Plan is a part if the
Borrower or an ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections.
The Borrower shall, and shall cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as is customary in the case of corporations engaged in the same or similar businesses or having similar properties similarly situated and as is satisfactory from time to time to the Required Lenders in their reasonable discretion.
The Borrower shall, and shall cause each of its Subsidiaries to, pay or discharge
(a) on or prior to the date on which penalties or Liens attach thereto, all Taxes imposed upon it or any of its properties;
(b) on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any such Property; and
(c) on or prior to the date when due, all other lawful claims which, if unpaid, might result in the creation of a Lien upon any such Property or which, if unpaid, might give rise to a claim entitled to priority over general creditors of the Borrower or such Subsidiary in a case under the Bankruptcy Code;
The Borrower shall keep and maintain in full force and effect all Governmental Actions necessary or advisable in connection with execution and delivery of any Loan Document, consummation of the transactions herein or therein contemplated, performance of or compliance with the terms and conditions hereof or thereof or to ensure the legality, validity, binding effect or enforceability hereof or thereof.
The Borrower shall, and shall cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by it and shall make or cause to be made all needful and proper repairs, renewals, replacements and improvements thereto so that the business carried on in connection therewith may be properly and advantageously conducted at all times.
The Borrower shall not, and shall not permit any of its Subsidiaries to, violate or conflict with, be in violation of or in conflict with, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with
(a) any Law;
(b) its articles of incorporation or by-laws; or
(c) any agreement or instrument to which it is party or by which any of them or any of their respective Subsidiaries is a party or by which any of them or any of their respective properties (now owned or hereafter acquired) may be subject or bound,
except for matters which would not reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect.
The Borrower shall, and shall cause each of its Subsidiaries to, make
and keep books, records and accounts which, in reasonable detail, accurately and
fairly reflect its transactions and dispositions of its assets and maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (a) transactions are executed in accordance with management's
general or specific authorization, (b) transactions are recorded as necessary
(i) to permit preparation of financial statements in conformity with GAAP and
(ii) to maintain accountability for assets, (c) access to assets is permitted
only in accordance with management's general or specific authorization and (d)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
The Borrower shall apply the proceeds of all Loans hereunder only for working capital and general corporate purposes of the Borrower, including commercial paper backup. The Borrower shall not use the proceeds of any Loans hereunder directly or indirectly for any unlawful purpose, in any manner inconsistent with Section 3.11, or inconsistent with any other provision of any Loan Document.
The Borrower shall cause (a) each of its, and each of its Subsidiary's, fiscal years to end on December 31 and (b) each of its, and each of its Subsidiary's, fiscal quarters to end on March 31, June 30, September 30 and December 31.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower hereby covenants to the Administrative Agent and each Lender as follows:
(a) Liens existing on the date hereof and securing obligations existing on the date hereof other than Indebtedness to be Refinanced, as such Liens and obligations are listed on Schedule IV;
(b) Liens securing obligations issued under and pursuant to the terms and conditions of the First Mortgage Indenture;
(c) Liens on First Mortgage Bonds issued as collateral for pollution control or gas or water facility revenue bonds issued for the benefit of the Borrower or its Subsidiaries (and related rights and interests) to secure obligations of the Borrower or such Subsidiaries for the benefit of the holders of such bonds, provided that such bonds are not secured by any other assets or Properties of the Borrower or its Subsidiaries;
(d) Liens arising from taxes, assessments, charges or claims described
in Section 5.03 that are not yet due or that remain payable without penalty
or to the extent permitted to remain unpaid under the proviso to such
Section 5.03;
(e) Deposits or pledges of cash or securities in the ordinary course of business to secure (i) worker's compensation, unemployment insurance or other social security obligations, (ii) performance of bids, tenders, trade contracts (other than for payment of money) or leases, (iii) stay, surety or appeal bonds, or (iv) other obligations of a like nature incurred in the ordinary course of business;
(f) Zoning restrictions, easements, minor restrictions on the use of real Property, minor irregularities in title thereto and other minor Liens that do not secure the payment of money or the performance of an obligation and that do not in the aggregate materially detract from the value of an asset to, or materially impair its use in the business of, the Borrower or such Subsidiary; and
(g) Liens on Property securing all or part of the purchase price thereof and Liens (whether or not assumed) existing in Property at the time of purchase thereof, provided that: (i) such Lien is created before or substantially simultaneously with the purchase of such Property by the Borrower or such Subsidiary, (ii) such Lien is confined solely to the Property so purchased, improvements thereto and proceeds thereof, (iii) the aggregate amount secured by such Liens on any particular Property at the time purchased by the Borrower or such Subsidiary, as the case may be, shall not exceed the lesser of the purchase price of such Property and the fair market value of such Property at the time of
purchase thereof by the Borrower or such Subsidiary, and (iv) the aggregate amount secured by all Liens described in this Section 6.02(g) shall not at any time exceed $50,000,000.
"Permitted Liens" shall in no event include any Lien imposed by, or required to be granted pursuant to, ERISA or any Environmental Law.
The Borrower shall not, and shall not permit any of its Subsidiaries to, (a) merge with or into or consolidate with any other Person, (b) liquidate, wind-up, dissolve or divide, or (c) agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except:
(i) A Person may merge with or into or consolidate with any Subsidiary of the Borrower, provided that (x) the surviving Person shall be a Subsidiary of the Borrower, (y) no Default or Event of Default shall have occurred and be continuing or shall exist at such time or after giving effect to such transaction and (z) the Borrower shall deliver to the Administrative Agent (A) a certificate, in a form reasonably satisfactory to the Administrative Agent, certifying that no Default or Event of Default exists or will result from such merger and (B) pro forma financial statements in support of such certification; and
(ii) A Person may merge with or into or consolidate with the Borrower, provided that (x) the Borrower shall be the surviving Person, (y) no Default or Event of Default shall have occurred and be continuing or shall exist at such time or after giving effect to such transaction and (z) the Borrower shall deliver to the Administrative Agent (A) a certificate, in a form reasonably satisfactory to the Administrative Agent, certifying that no Default or Event of Default exists or will result from such merger and (B) pro forma financial statements in support of such certification.
Prior to the making of any Investment or the consummation of any Acquisition by the Borrower or any of its Subsidiaries, the amount or purchase price of which, as the case may be,
when aggregated with the amounts and purchase prices of other Investments and Acquisitions made by the Borrower and its Subsidiaries, would exceed $10,000,000 in the aggregate at any time, the Borrower shall deliver to the Administrative Agent (i) a certificate, in a form reasonably satisfactory to the Administrative Agent, certifying that no Default or Event of Default exists or will result from such Acquisition and (ii) pro forma financial statements in support of such certification.
The Borrower shall not declare or pay any dividend on its capital stock (except for dividends in the form of capital stock), or redeem or repurchase any of its capital stock, if a Default or Event of Default shall have occurred and be continuing or shall exist at such time or after giving effect to such transaction.
The Borrower shall not enter into any transaction of any kind with any Person that Controls the Borrower or is controlled by the Borrower or is under common control with the Borrower other than (a) salary, bonus, employee stock option and other compensation arrangements with directors or officers in the ordinary course of business, (b) transactions that are fully disclosed to the board of directors (or executive committee thereof) of the Borrower and expressly authorized by a resolution of the board of directors (or executive committee) of the Borrower which is approved by a majority of the directors (or executive committee) not having an interest in the transaction, (c) transactions between or among the Borrower and its Wholly-Owned Subsidiaries, (d) transactions between the Borrower and its Subsidiaries, on the one hand, and SPPC and its Subsidiaries, on the other hand, and (e) transactions on overall terms at least as favorable to the Borrower as would be the case in an arm's- length transaction between unrelated parties of equal bargaining power.
The Borrower shall not engage in any business other than the businesses of (a) the generation or purchase of electrical power, (b) the purchase of natural gas and (c) the acquisition of water, and in each case the transmission and distribution thereof to industrial, commercial and residential customers.
If, notwithstanding the prohibition contained in Section 6.02, the
Borrower or any of its Subsidiaries shall create, assume or permit to exist any
Lien upon any of its Property, other than those permitted by the provisions of
Section 6.02, it will make or cause to be made effective provision whereby the
Borrowings will be secured equally and ratably with any and all other
obligations thereby secured, such security to be pursuant to agreements
reasonably satisfactory to the Administrative Agent and, in any such case, the
Borrowings shall have the benefit, to the fullest extent that, and with such
priority as, the Lenders may be entitled under applicable law, of an equitable
Lien on such Property. Such violation of Section 6.02 will constitute an Event
of Default, whether or not provision is made for an equal and ratable Lien
pursuant to this Section.
Except as otherwise permitted under Article VI hereunder, the Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its Property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to guarantee Indebtedness of the Borrower or any other Subsidiary.
At the request of any Lender, the Borrower will make available to such Lender the Borrower's Year 2000 Plan, together with any updates or progress reports with respect thereto. The Borrower will promptly notify the Administrative Agent in the event the Borrower discovers or determines that any computer application, including those of its suppliers and vendors, that is material to its business, operations or conditions (financial or otherwise) will not be Year 2000 Compliant on a timely basis, except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect.
ARTICLE VII
DEFAULTS
(a) The Borrower shall fail to pay when due principal of any Loan.
(b) The Borrower shall fail to pay when due interest on any Loan, any fees, indemnity or expenses, or any other amount due hereunder or under any other Loan Document and such failure shall have continued for a period of three business days.
(c) Any representation or warranty made or deemed made by the Borrower in or pursuant to or in connection with any Loan Document, or any statement made by the Borrower in any financial statement, certificate, report, exhibit or document furnished by the Borrower to the Administrative Agent or any Lender pursuant to or in connection with any Loan Document, shall prove to have been false or misleading in any material respect as of the time when made or deemed made (including by omission of material information necessary to make such representation, warranty or statement not misleading).
(d) The Borrower shall default in the performance or observance of any covenant contained in Article VI or any of the covenants contained in Sections 5.01(f)(i) or 5.09 or 5.10.
(e) The Borrower shall default in the performance or observance of any other covenant, agreement or duty under this Agreement or any other Loan Document and (i) in the case of a default under Section 5.01 (other than as referred to in subsection (f)(i) thereof) such default shall have continued for a period of ten Business Days and (ii) in the case of any other default such default shall have continued for a period of 30 days after notice from the Administrative Agent to the Borrower.
(f) The Borrower or any Subsidiary of the Borrower shall (i) fail to make any payment (x) on account of any Indebtedness aggregating $10,000,000 or more in principal amount or (y) aggregating $10,000,000 or more, on any Indebtedness, or any interest or premium thereon, in each case, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and, in each case, such failure shall have continued beyond any applicable grace period specified in any agreement or instrument relating to such Indebtedness, or (ii) fail to perform or observe any other term, covenant or condition on its part to be performed or observed under any agreement or instrument relating to any Indebtedness when required to be performed or observed, and such failure shall have continued beyond any applicable grace period specified in any agreement or instrument relating to such Indebtedness, if the effect of such failure to perform or observe is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness, the unpaid principal amount of which then aggregates $10,000,000.
(g) One or more final judgments or orders for the payment of money shall have been entered against the Borrower or any Subsidiary of the Borrower, which judgments or orders exceed $10,000,000 in the aggregate, and such judgments or orders shall have remained undischarged and unstayed for a period of thirty consecutive days.
(h) One or more writs or warrants of attachment, garnishment, execution, distraint or similar process exceeding in value the aggregate amount of $10,000,000 shall have been issued against the Borrower or any Subsidiary of the Borrower or any of their respective properties and shall have remained undischarged and unstayed for a period of thirty consecutive days.
(i) Any Governmental Action now or hereafter made by or with any Governmental Authority in connection with any Loan Document is not obtained or shall have ceased to be in full force and effect or shall have been modified or amended or shall have been held to be illegal or invalid, and the Required Lenders shall have determined (which determination shall be conclusive provided it is reached in good faith) that the consequence of any of the foregoing events would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(j) Any Loan Document or any material term or provision thereof shall have ceased to be in full force and effect, or the Borrower or any Governmental Authority with jurisdiction over the Borrower shall, or shall purport to, terminate, repudiate, declare voidable or void or otherwise contest, any Loan Document or any material term or provision thereof or any obligation or liability of the Borrower thereunder.
(k) An event or condition specified in Section 5.01(h) hereof shall occur or exist with respect to any Plan or Multiemployer Plan or any Lien arises pursuant to ERISA and, as a result of such event or condition or Liens, together with all other such events or conditions or Liens, the Borrower or any ERISA Affiliate shall incur or shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC or suffer an encumbrance to exist in favor of any thereof (or any combination of the foregoing) which would constitute a Material Adverse Effect.
(l) The Borrower or any Subsidiary of the Borrower shall have violated any Environmental Law or become subject to any Environmental Claim and, in either case, the Required Lenders shall have determined (which determination shall be conclusive provided it is reached in good faith) that such event would reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect.
(m) A proceeding shall have been instituted in respect of the Borrower or any Subsidiary of the Borrower:
(i) seeking to have an order for relief entered in respect of such Person, or seeking a declaration or entailing a finding that such Person is insolvent or a similar declaration or finding, or seeking dissolution, winding-up, charter revocation or forfeiture, liquidation, reorganization, arrangement, adjustment, composition or other similar relief with respect to such Person, its assets or its debts under any Law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, termination of legal entities or any other similar Law now or hereafter in effect, or
(ii) seeking appointment of a receiver, trustee, liquidator, assignee, sequestrator or other custodian for such Person or for all or any substantial part of its Property,
and such proceeding shall result in the entry, making or grant of any such order for relief, declaration, finding, relief or appointment, or such proceeding shall remain undismissed and unstayed for a period of thirty consecutive days.
(n) The Borrower or any Subsidiary of the Borrower shall become insolvent; shall fail to pay, become unable to pay, or state that it is or will be unable to pay, its debts as they become due; shall voluntarily suspend transaction of its business; shall make a general assignment for the benefit of creditors; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(m)(i), or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such order for relief, declaration, finding or relief described therein; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 7.01(m)(ii), or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such appointment or to the taking of possession by any such custodian of all or any substantial part of its Property; shall dissolve, wind-up, revoke or forfeit its charter (or other constituent documents) or liquidate itself or any substantial part of its Property; or shall take any action in furtherance of any of the foregoing.
(o) A Change in Control shall occur.
(p) The Borrower shall cease to maintain a first mortgage bond rating of at least Baa3 by Moody's and BBB- by S&P.
(a) If an Event of Default specified in subsections (a) through (l),
(o), (p) or (q) of Section 7.01 shall occur and, be continuing or shall exist,
then, in addition to all other rights and remedies which the Administrative
Agent or any Lender may have hereunder or under any other Loan Document, at law,
in equity or otherwise, the Lenders shall be under no further obligation to make
Loans hereunder, and the Administrative Agent may, and, upon the written request
of the Required Lenders shall, by notice to the Borrower, from time to time do
any or all of the following:
(i) Declare the Commitments terminated, whereupon the Commitments will terminate and any fees hereunder shall be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue.
(ii) Declare the unpaid principal amount of the Loans, interest accrued thereon and all other obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue.
(b) If an Event of Default specified in subsection (m) or (n) of
Section 7.01 shall occur or exist, then, in addition to all other rights and
remedies which the Administrative Agent or any Lender may have hereunder or
under any other Loan Document, at law, in equity or otherwise, the Commitments
shall automatically terminate and the Lenders shall be under no further
obligation to make Loans, and the unpaid principal amount of the Loans, interest
accrued thereon and all other obligations shall become immediately due and
payable without presentment, demand, protest or notice of any kind, all of which
are hereby waived, and an action therefor shall immediately accrue.
ARTICLE VIII
THE AGENTS
Each Lender hereby irrevocably appoints Mellon Bank, N.A. to act as Administrative Agent for such Lender under this Agreement and the other Loan Documents. Each Lender hereby irrevocably authorizes the Administrative Agent to take such action on behalf of such Lender under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and to perform such duties, as are expressly delegated to or required of the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto. Mellon Bank, N.A. hereby agrees to act as Administrative Agent on behalf of the Lenders on the terms and conditions set forth in this Agreement and the other Loan Documents, subject to its right to resign as provided in Section 8.10. Each Lender hereby
irrevocably authorizes the Administrative Agent to execute and deliver each of the Loan Documents executed after the date hereof and to accept delivery of such of the other Loan Documents delivered after the date hereof as may not require execution by the Administrative Agent (with such consents of the Lenders as required pursuant to Section 9.01). Each Lender agrees that the rights and remedies granted to the Administrative Agent under the Loan Documents shall be exercised exclusively by the Administrative Agent, and that no Lender shall have any right individually to exercise any such right or remedy, except to the extent expressly provided herein or therein.
Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Loan Document:
(a) The Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and no implied duties or responsibilities on the part of the Administrative Agent shall be read into this Agreement or any other Loan Document or shall otherwise exist.
(b) The duties and responsibilities of the Administrative Agent under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and the Administrative Agent shall not have a fiduciary relationship in respect of any Lender.
(c) The Administrative Agent is and shall be solely the agent of the Lenders. The Administrative Agent does not assume, and shall not at any time be deemed to have, any relationship of agency or trust with or for, or any other duty or responsibility to, the Borrower or any other Person (except only for its relationship as agent for, and its express duties and responsibilities to, the Lenders as provided in this Agreement and the other Loan Documents).
(d) The Administrative Agent shall be under no obligation to take any action hereunder or under any other Loan Document if the Administrative Agent believes in good faith that taking such action may conflict with any Law or any provision of this Agreement or any other Loan Document, or may require the Administrative Agent to qualify to do business in any jurisdiction where it is not then so qualified.
The Administrative Agent shall take any action of the type specified in this Agreement or any other Loan Document as being within the Administrative Agent's rights, powers or discretion in accordance with directions from the Required Lenders (or, to the extent this Agreement or such Loan Document expressly requires the direction or consent of some other Person or set of Persons, then instead in accordance with the directions of such other Person or set of Persons). In the absence of such directions, the Administrative Agent shall have the authority (but under no circumstances shall be obligated), in its sole discretion, to take any such action, except to the extent that this Agreement or such Loan Document expressly requires the direction or consent of the Required Lenders (or some other Person or set of Persons), in which case the
Administrative Agent shall not take such action absent such direction or
consent. Any action or inaction pursuant to such direction, discretion or
consent shall be binding on all the Lenders. The Administrative Agent shall not
have any liability to any Person as a result of (a) the Administrative Agent
acting or refraining from acting in accordance with the directions of the
Required Lenders (or other applicable Person or set of Persons), (b) the
Administrative Agent refraining from acting in the absence of instructions to
act from the Required Lenders (or other applicable Person or set of Persons),
whether or not the Administrative Agent has discretionary power to take such
action, or (c) the Administrative Agent taking discretionary action it is
authorized to take under this Section (subject, in the case of clauses (b) and
(c), to the provisions of Section 8.04(a)).
Notwithstanding anything to the contrary elsewhere in this Agreement or any other Loan Document:
(a) The Administrative Agent shall not be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or any other Loan Document, unless caused by its own gross negligence or willful misconduct.
(b) The Administrative Agent shall not be responsible for (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of this Agreement or any other Loan Document, (ii) any recital, representation, warranty, document, certificate, report or statement in, provided for in, or received under or in connection with, this Agreement or any other Loan Document, (iii) any failure of the Borrower or any Lender to perform any of their respective obligations under this Agreement or any other Loan Document, or (iv) the existence, validity, enforceability, perfection, recordation, priority, adequacy or value, now or hereafter, of any Lien or other direct or indirect security afforded or purported to be afforded by any of the Loan Documents or otherwise from time to time.
(c) The Administrative Agent shall not be under any obligation to ascertain, inquire or give any notice relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of the Borrower, (ii) the business, operations, condition (financial or otherwise) or prospects of the Borrower or any other Person, or (iii) except to the extent set forth in Section 8.05(f), the existence of any Default or Event of Default.
(d) The Administrative Agent shall not be under any obligation, either initially or on a continuing basis, to provide any Lender with any notices, reports or information of any nature, whether in its possession presently or hereafter, except for such notices, reports and other information expressly required by this Agreement or any other Loan Document to be furnished by the Administrative Agent to such Lender.
(a) The Administrative Agent may rely upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by
this Agreement or any other Loan Document) purportedly made by or on behalf of the proper party or parties, and the Administrative Agent shall not have any duty to verify the identity or authority of any Person giving such notice or other communication.
(b) The Administrative Agent may consult with legal counsel (including, without limitation, in-house counsel for the Administrative Agent or in-house or other counsel for the Borrower), independent public accountants and any other experts selected by it from time to time, and the Administrative Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts.
(c) The Administrative Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to the Administrative Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever the Administrative Agent shall deem it necessary or desirable that a matter be proved or established with respect to the Borrower or any Lender, such matter may be established by a certificate of the Borrower or such Lender, as the case may be, and the Administrative Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document).
(d) The Administrative Agent may fail or refuse to take any action unless it shall be indemnified to its satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred by or asserted against the Administrative Agent by reason of taking or continuing to take any such action.
(e) The Administrative Agent may perform any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.
(f) The Administrative Agent shall not be deemed to have any knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default, and stating that such notice is a "notice of default". If the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to each Lender.
Each Lender acknowledges as follows:
(a) Neither the Administrative Agent nor any other Lender has made any representations or warranties to it, and no act taken hereafter by the Administrative Agent or any other Lender shall be deemed to constitute any representation or warranty by the Administrative Agent or such other Lender to it.
(b) It has, independently and without reliance upon the Administrative Agent or any other Lender, and based upon such documents and information as it has deemed
appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the other Loan Documents.
(c) It will, independently and without reliance upon the Administrative Agent or any other Lender, and based upon such documents and information as it shall deem appropriate at the time, make its own decisions to take or not take action under or in connection with this Agreement and the other Loan Documents.
With respect to its Commitment and the Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lenders," "holders of Notes" and like terms shall include the Administrative Agent in its individual capacity as such. The Administrative Agent and its affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, and engage in any other business with, the Borrower and any stockholder, subsidiary or affiliate of the Borrower, as though the Administrative Agent were not the Administrative Agent hereunder.
The Administrative Agent may deem and treat the Lender which is payee of a Note as the owner and holder of such Note for all purposes hereof unless and until an Assignment and Acceptance with respect to the assignment or transfer thereof shall have been filed with the Administrative Agent in accordance with Section 9.12. Any authority, direction or consent of any Person who at the time of giving such authority, direction or consent is shown in the Register as being a Lender shall be conclusive and binding on each present and subsequent holder, transferee or assignee of any Note or Notes payable to such Lender or of any Note or Notes issued in exchange therefor.
The Administrative Agent may resign at any time by giving 10 days' prior written notice thereof to the Lenders and the Borrower. The Administrative Agent may be removed by the Required Lenders at any time with or without cause by giving 10 days, prior written notice thereof to the Administrative Agent, the other Lenders and the Borrower. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed and consented to, and shall have accepted such appointment, within 30 days after such notice of resignation or removal, then the retiring Administrative Agent, on behalf of the Lenders, may appoint a successor Administrative Agent. Each successor Administrative Agent shall be a commercial bank or trust company organized under the Laws of the United States of America or any State thereof and having a combined capital and surplus of at least $1,000,000,000. The appointment of any successor Administrative Agent at any time pursuant to this Section 8.10 shall be subject to the approval of the Borrower, provided that at such time there shall not have occurred and be continuing any Default or Event of Default, and provided further that the Borrower's consent to any such appointment shall not be unreasonably withheld. Upon the acceptance by a successor Administrative Agent of its appointment as Administrative Agent hereunder, such successor Administrative Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Administrative Agent without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Administrative Agent, the Administrative Agent shall be discharged from its duties under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Administrative Agent under this Agreement. If and for so long as no successor Administrative Agent shall have been appointed, then any notice or other communication required or permitted to be given by the Administrative Agent shall be sufficiently given if given by the Required Lenders, all notices or other communications required or permitted to be given to the Administrative Agent shall be given to each Lender, and all payments to be made to the Administrative Agent shall be made directly to the Borrower or Lender for whose account such payment is made.
If the Administrative Agent shall from time to time deem it necessary or advisable, for its own protection in the performance of its duties hereunder or in the interest of the Lenders, the Administrative Agent and the Borrower shall execute and deliver a supplemental agreement
and all other instruments and agreements necessary or advisable in the opinion of the Administrative Agent to constitute another commercial bank or trust company, or one or more other Persons approved by the Administrative Agent, to act as co-Administrative Agent, with such powers of the Administrative Agent as may be provided in such supplemental agreement, and to vest in such bank, trust company or Person, as such co-Administrative Agent, any properties, rights, powers, privileges and duties of the Administrative Agent under this Agreement or any other Loan Document. The appointment of any co-Administrative Agent at any time pursuant to this Section 8.11 shall be subject to the approval of the Borrower, provided that at such time there shall not have occurred and be continuing any Default or Event of Default, and provided further that the Borrower's consent to any such appointment shall not be unreasonably withheld.
The Administrative Agent shall not be liable for any calculation, apportionment or distribution of payments made by it in good faith, in the absence of its own gross negligence or willful misconduct. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made (except as provided in the preceding sentence) shall be to recover from the other Lenders any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the Borrower, to recover such amount from the Borrower.
As Syndication Agents, neither First Union National Bank nor Wells Fargo Bank, N.A. shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, neither First Union National Bank nor Wells Fargo Bank, N.A. shall have any or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on First Union National Bank or Wells Fargo Bank, N.A. in deciding to enter into this Agreement or in not taking action hereunder or under the Loan Documents.
ARTICLE IX
MISCELLANEOUS
(a) Increase the Commitment of any Lender over the amount thereof then in effect, without the written consent of each Lender affected thereby;
(b) Extend the Revolving Termination Date, without the written consent of all the Lenders;
(c) Reduce the principal amount of or extend the time for any payment of principal of any Loan, or reduce the rate of interest or extend the time for payment of any interest borne by any Loan, or extend the time for payment of or reduce the amount of any fees, or reduce or postpone the date for payment of any other obligation, without the written consent of each Lender affected thereby;
(d) Change the definition of "Required Lenders" or amend this Section 9.01 or Section 9.12(a) or any other provision of this Agreement that requires the consent of all of the Lenders to the taking or failure to take action hereunder, without the written consent of all the Lenders; or
(e) Amend or waive any of the provisions of Article VIII, or impose additional duties upon the Administrative Agent or otherwise adversely affect the rights, interests or obligations of the Administrative Agent, without the written consent of the Administrative Agent;
No course of dealing and no delay or failure of the Administrative Agent or any Lender in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or the exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Administrative Agent and the Lenders under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Lender would otherwise have hereunder or thereunder, at law, in equity or otherwise.
courier, or by telecopier (with confirmation in writing mailed first-class or sent by such an overnight courier), or by personal delivery. All notices shall be sent to the applicable party at the address stated on the signature pages hereof or in accordance with the last unrevoked written direction from such party to the other parties hereto in all cases with postage or other charges prepaid. Any such properly given notice shall be effective on the earliest to occur of receipt, telephone confirmation of receipt of telecopy communication, one Business Day after delivery to a nationally-recognized overnight courier, or three Business Days after deposit in the mail.
(b) Any Lender giving any notice to the Borrower or any other party to a Loan Document shall simultaneously send a copy thereof to the Administrative Agent, and the Administrative Agent shall promptly notify the other Lenders of the receipt by it of any such notice.
(c) The Administrative Agent and each Lender may rely on any notice (whether or not such notice is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of the Borrower, and neither the Administrative Agent nor any Lender shall have any duty to verify the identity or authority of any Person giving such notice.
(a) The Borrower agrees to pay or cause to be paid and to save the
Administrative Agent and each of the Lenders harmless against liability for the
payment of all reasonable out-of-pocket costs and expenses (including but not
limited to reasonable fees and expenses of counsel) incurred by the
Administrative Agent or any Lender from time to time arising from or relating to
(i) in the case of the Administrative Agent, the negotiation, syndication,
preparation, execution, delivery, administration and performance of this
Agreement and the other Loan Documents, (ii) in the case of the Syndication
Agents, the syndication of this Agreement and the other Loan Documents, (iii) in
the case of the Administrative Agent, any amendments, modifications,
supplements, waivers or consents to this Agreement or any other Loan Document
(whether or not ultimately entered into or granted), and (iv) in the case of the
Administrative Agent or any Lender, the enforcement or preservation of rights
under this Agreement or any other Loan Document (including but not limited to
any such costs or expenses arising from or relating to (A) collection or
enforcement of an outstanding Loan or any other amount owing hereunder or
thereunder by the Administrative Agent or such Lender, and (B) any litigation,
proceeding, dispute, work-out, restructuring or rescheduling related in any way
to this Agreement or the Loan Documents).
(b) The Borrower hereby agrees to pay all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or hereafter determined by the Administrative Agent or any Lender to be payable in connection with this Agreement or any other Loan Documents or any other documents, instruments or transactions pursuant to or in connection herewith or therewith (which determination shall be conclusive provided it is reached in good faith), and the Borrower agrees to save the Administrative Agent and each Lender harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such fees, taxes or impositions.
(c) The Borrower hereby agrees to reimburse and indemnify each of the Indemnified Parties from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnified Party in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnified Party shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnified Party as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan (and without in any way limiting the generality of the foregoing, including any violation or breach of any Environmental Law or any other Law by the Borrower or any Subsidiary of the Borrower; any Environmental Claim arising out of the management, use, control, ownership or operation of Property by any of such Persons, including all onsite and off-site activities involving Hazardous Materials; or any exercise by the Administrative Agent or any Lender of any of its rights or remedies under this Agreement or any other Loan Document); but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting solely from the gross negligence or willful misconduct of such Indemnified Party, as finally determined by a court of competent jurisdiction. If and to the extent that the foregoing obligations of the Borrower under this subsection (c), or any other indemnification obligation of the Borrower hereunder or under any other Loan Document, are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law.
The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.
This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein.
All representations and warranties of the Borrower contained herein or in any other Loan Document or made in connection herewith or therewith shall survive the making, and shall not be waived by the execution and delivery, of this Agreement or any other Loan Document, any investigation by or knowledge of the Administrative Agent or any Lender, the making of any Loan, or any other event or condition whatever. All covenants and agreements of the Borrower contained herein or in any other Loan Document shall continue in full force and effect from and after the date hereof so long as the Borrower may borrow hereunder and until payment in full of all
Obligations. Without limitation, all obligations of the Borrower hereunder or under any other Loan Document to make payments to or indemnify the Administrative Agent or any Lender shall survive the payment in full of all other Obligations, termination of the Borrower's right to borrow hereunder, and all other events and conditions whatever. In addition, all obligations of each Lender to make payments to or indemnify the Administrative Agent shall survive the payment in full by the Borrower of all Obligations, termination of the Borrower's right to borrow hereunder, and all other events or conditions whatever.
This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.
The parties hereto intend to conform to all applicable Laws in effect from time to time limiting the maximum rate of interest that may be charged or collected. Accordingly, notwithstanding any other provision hereof or of any other Loan Document, the Borrower shall not be required to make any payment to or for the account of any Lender, and each Lender shall refund any payment made by the Borrower, to the extent that such requirement or such failure to refund would violate or conflict with nonwaivable provisions of applicable Laws limiting the maximum amount of interest which may be charged or collected by such Lender.
The Borrower hereby agrees that, to the fullest extent permitted by
Law, if any Obligation of the Borrower shall be due and payable (by acceleration
or otherwise), each Lender shall have the right, without notice to the Borrower,
to set-off against and to appropriate and apply to such Obligation any
indebtedness, liability or obligation of any nature owing to the Borrower by
such Lender, including but not limited to all deposits (whether time or demand,
general or special, provisionally credited or finally credited, whether or not
evidenced by a certificate of deposit) now or hereafter maintained by the
Borrower with such Lender. Such right shall be absolute and unconditional in
all circumstances and, without limitation shall exist whether or not such Lender
or any other Person shall have given notice or made a demand to the Borrower or
any other Person, whether such indebtedness, obligation or liability owed to the
Borrower is contingent, absolute, matured or unmatured (it being agreed that
such Lender may deem such indebtedness, obligation or liability to be then due
and payable at the time of such setoff), and regardless of the existence or
adequacy of any collateral, guaranty or any other security, right or remedy
available to any Lender or any other Person. The Borrower hereby agrees that,
to the fullest extent permitted by Law, any Participant and any branch,
subsidiary or affiliate of any Lender or any Participant shall have the same
rights of set-off as a Lender as provided in this Section (regardless of whether
such Participant, branch, subsidiary or affiliate would otherwise be deemed in
privity with or a direct creditor of the Borrower). The rights provided by this
Section are in addition to all other rights of set-off and banker's lien and all
other rights and remedies which any Lender (or any such Participant, branch,
subsidiary or affiliate) may otherwise have under this Agreement, any other Loan
Document, at law or in equity, or otherwise, and nothing in this Agreement or
any other
Loan Document shall be deemed a waiver or prohibition of or restriction on the rights of set-off or bankers' lien of any such Person.
The Lenders hereby agree among themselves that if any Lender shall receive (by voluntary payment, realization upon security, set-off or from any other source) any amount on account of the Loans, interest thereon, or any other Obligation contemplated by this Agreement or the other Loan Documents to be made by the Borrower pro rata to all Lenders (or pro rata to holders of Notes) in greater proportion than any such amount received by any other applicable Lender, then the Lender receiving such proportionately greater payment shall notify each other Lender and the Administrative Agent of such receipt, and equitable adjustment will be made in the manner stated in this Section 9.11 so that, in effect, all such excess amounts will be shared ratably among all of the applicable Lenders. The Lender receiving such excess amount shall purchase (which it shall be deemed to have done simultaneously upon the receipt of such excess amount) for cash from the other applicable Lenders a participation in the applicable Obligations owed to such other Lenders in such amount as shall result in a ratable sharing by all applicable Lenders of such excess amount (and to such extent the receiving Lender shall be a Participant). If all or any portion of such excess amount is thereafter recovered from the Lender making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law to be paid by the Lender making such purchase. The Borrower hereby consents to and confirms the foregoing arrangements. Each Participant shall be bound by this Section as fully as if it were a Lender hereunder.
(i) any such Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations,
(iii) the parties hereto shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents,
(iv) such Participant shall be bound by the provisions of Section 9.11, and
(v) no Participant (unless such Participant is an Affiliate of such Lender, or is itself a Lender) shall be entitled to require such Lender to take or refrain from taking action under this Agreement or under any other Loan Document, except that such Lender may agree with such Participant that such Lender will not, without such Participant's consent, take any action, or consent to the taking of any action, of the type described in Section 9.01(a), (b) or (c).
(i) any such assignment to a Purchasing Lender which is not a Lender or an affiliate of a Lender shall be made only with the consent (which in each case shall not be unreasonably withheld) of the Borrower (so long as no Default or Event of Default shall have occurred and be continuing) and the Administrative Agent;
(ii) if a Lender makes such an assignment of less than all of its then remaining rights and obligations under this Agreement and the other Loan Documents, such transferor Lender shall retain, after such assignment, a minimum principal amount of $10,000,000 of the Commitments and Loans then outstanding, and such assignment, unless made to an assignee who is a Lender hereunder prior to such assignment, shall be in a minimum principal amount of $10,000,000 of the Commitments and Loans then outstanding;
(iii) each such assignment shall be of a constant, and not a varying, percentage of the Commitment of the transferor Lender and of all of the transferor Lender's rights and obligations under this Agreement and the other Loan Documents; and
(iv) each such assignment shall be made pursuant to an Assignment and Acceptance.
In order to effect any such assignment, the transferor Lender and the Purchasing Lender shall execute and deliver to the Administrative Agent a duly completed Assignment and Acceptance (including the consents required by clause (i) of the preceding sentence) with respect to such assignment, together with any Note or Notes subject to such assignment and a processing and recording fee of $3,500; and, upon receipt thereof, the Administrative Agent shall accept such Assignment and Acceptance. Upon receipt of notice from the transferor Lender that it has received the consideration described in the Assignment and Acceptance, the Administrative Agent
shall record such acceptance in the Register. Upon such execution, delivery, acceptance and recording, from and after the close of business at the Administrative Agent's Office on the settlement date specified in such Assignment and Acceptance:
(x) the Purchasing Lender shall be a party hereto and, to the extent provided in such Assignment and Acceptance, shall have the rights and obligations of a Lender hereunder, and
(y) the transferor Lender thereunder shall be released from its obligations under this Agreement to the extent so transferred (and, in the case of an Assignment and Acceptance covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party to this Agreement) from and after the settlement date.
On or prior to the settlement date specified in an Assignment and Acceptance, the Borrower, at its expense, shall execute and deliver to the Administrative Agent (for delivery to the Purchasing Lender) new Notes evidencing such Purchasing Lender's assigned Commitment or Loans and (for delivery to the transferor Lender) replacement Notes in the principal amount of the Loans or Commitment retained by the transferor Lender (such Notes to be in exchange for, but not in payment of, those Notes then held by such transferor Lender). Each such Note shall be dated the date and be substantially in the form of the predecessor Note. The Administrative Agent shall mark the predecessor Notes "exchanged" and deliver them to the Borrower. Accrued interest and accrued fees shall be paid to the Purchasing Lender at the same time or times provided in the predecessor Notes and this Agreement.
(ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER IT;
(iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED
U.S. MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS FOR NOTICES DESCRIBED IN
SECTION 9.03, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN
EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT
THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER
PERMITTED BY LAW); AND
(iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED LITIGATION.
SUCH DAMAGES, WHETHER SUCH CLAIM PRESENTLY EXISTS OR ARISES HEREAFTER AND WHETHER OR NOT SUCH CLAIM IS KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
Address NEVADA POWER COMPANY
-------
Sierra Pacific Resources
6100 Neil Road
P.O. Box 30150 By_________________________
Reno, Nevada 89520 Name:
Attn: Mark Ruelle Title:
70
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Address MELLON BANK, N.A., as Administrative
------- Agent, Arranger and as a Lender
Mellon Bank
One Mellon Bank Center By_______________________________
Pittsburgh, Pennsylvania 15258 Name: Richard A. Matthews
Attn: Richard A. Matthews Title: Vice President
71
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Address FIRST UNION NATIONAL BANK, as
------- Syndication Agent and as a Lender
First Union National Bank
One First Union Center
301 South College Street By_______________________________
Charlotte, North Carolina 28288-0735 Name:
Attn: Dana Maloney Title:
72
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Address WELLS FARGO BANK, N.A., as ------- Syndication Agent and as a Lender Wells Fargo Bank 201 Third Street 8/th/ Floor By_______________________________ San Francisco, California 94103 Name: |
Attn: Maria Josefa Prosperi Title:
Address BANK OF AMERICA NATIONAL TRUST
------- AND SAVINGS ASSOCIATION
Bank of America
300 South Fourth Street
2/nd/ Floor By_______________________________
Las Vegas, Nevada 89101 Name:
Attn: Dolores A. Rippo Title:
74
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Address THE BANK OF NEW YORK
-------
The Bank of New York
One Wall Street By_______________________________
New York, New York 10286 Name:
Attn: Kathy D'Elena Title:
75
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Address THE FIRST NATIONAL BANK OF CHICAGO
-------
The First National Bank of Chicago
One First National Plaza
Suite 0573
Chicago, Illinois By_______________________________
Attn: Mari Albanese Name:
Title:
76
|
Address CREDIT SUISSE FIRST BOSTON
-------
Credit Suisse First Boston
5 World Trade Center
New York, New York 10048 By_______________________________
Attn: Genaro Sarasola Name:
Title:
77
|
Address PARIBAS
-------
Paribas
787 7/th/ Avenue
New York, New York 10019 By_______________________________
Attn: Telca Hurley Name:
Title:
By_______________________________
Name:
Title:
78
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Address UNION BANK OF CALIFORNIA, N.A.
-------
Union Bank of California
Energy Capital Services - LA Office
445 South Figueroa Street
15/th/ Floor
Los Angeles, CA 90071 By_______________________________
Attn Patricia A. Gonzales Name:
Title:
79
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Address BANK OF MONTREAL
-------
Bank of Montreal
700 Louisiana Street
Suite 4400 By_______________________________
Houston, TX 77002 Name: Cahal B. Carmody
Attn: Cahal B. Carmody Title: Director
80
|
Address BAYERISCHE LANDESBANK GIROZENTRALE
-------
Bayerische Landesbank Girozentrale
560 Lexington Avenue
New York, New York 10022 By_______________________________
Attn: Patricia Sanchez Name: Peter Obermann
Title: Senior Vice President
By_______________________________
Name: Sean O'Sullivan
Title: Vice President
81
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Address FLEET NATIONAL BANK ------- Fleet National Bank One Federal Street Boston, Massachusetts 02110 By_______________________________ |
Attn: Francia Castillo, Loan Administrator Name:
Title:
Address FIRST SECURITY BANK OF NEVADA
-------
First Security Bank of Nevada
P.O. Box 19250
Las Vegas, Nevada 89132 By_______________________________
Attn: Cheryl Moss Name: Cheryl Moss
Title: Senior Vice President & Manager
Corporate Banking Department
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Address KBC BANK, N.V.
-------
KBC Bank, N.V.
125 West 55/th/ Street
10/th/ Floor By_______________________________
New York, New York 10019 Name:
Attn: Claire Kowalski/Charlene Cumberbatch Title:
By_______________________________
Name:
Title:
84
|
Address U.S. BANK NATIONAL ASSOCIATION
-------
U.S. Bank National Association
Commercial Loan Servicing Department
555 S.W. Oak Street, PL-7 By_______________________________
Portland, Oregon 97204 Name:
Attn: Jan Knox, Participation Specialist Title:
85
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SCHEDULE I
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LENDER COMMITMENT AMOUNT
------ -----------------
Mellon Bank, N.A. $ 15,937,500
First Union National Bank $ 12,187,500
Wells Fargo Bank, N.A. $ 12,187,500
Bank of America National
Trust and Savings Association $ 11,250,000
The Bank of New York $ 11,250,000
The First National Bank of Chicago $ 11,250,000
Credit Suisse First Boston $ 11,250,000
Paribas $ 11,250,000
Union Bank of California, N.A. $ 11,250,000
Bank of Montreal $ 9,375,000
Bayerische Landesbank Girozentrale $ 9,375,000
Fleet National Bank $ 9,375,000
First Security Bank of Nevada $ 4,687,500
KBC Bank, N.V. $ 4,687,500
U.S. Bank National Association $ 4,687,500
Total $150,000,000
============
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Page
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ARTICLE I
DEFINITIONS; CONSTRUCTION................................................... 1
SECTION 1.01 Defined Terms................................................. 1
SECTION 1.02. Classification of Loans and Borrowings....................... 14
SECTION 1.03 Terms Generally............................................... 14
SECTION 1.04 Accounting Terms; GAAP........................................ 15
ARTICLE II
THE CREDITS.................................................................. 15
SECTION 2.01 The Commitments................................................ 15
SECTION 2.02 Loans and Borrowings........................................... 15
SECTION 2.03 Requests for Revolving Borrowings.............................. 16
SECTION 2.04 Funding of Borrowings.......................................... 17
SECTION 2.05 Interest Elections............................................. 18
SECTION 2.06 Termination, Reduction and Extension of Commitments............ 19
SECTION 2.07 Term Loan Conversion Option.................................... 21
SECTION 2.08 Repayment of Loans; Evidence of Debt........................... 22
SECTION 2.09 Prepayment of Loans............................................ 23
SECTION 2.10 Fees........................................................... 24
SECTION 2.11 Interest....................................................... 24
SECTION 2.12 Alternate Rate of Interest..................................... 25
SECTION 2.13 Increased Costs................................................ 26
SECTION 2.14 Break Funding Payments......................................... 26
SECTION 2.15 Taxes.......................................................... 27
SECTION 2.16 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.... 28
SECTION 2.17 Mitigation Obligations; Replacement of Lenders................. 30
ARTICLE III
REPRESENTATIONS AND WARRANTIES.............................................. 30
SECTION 3.01 Corporate Status.............................................. 31
SECTION 3.02 Corporate Power and Authorization............................. 31
SECTION 3.03 Execution and Binding Effect.................................. 31
SECTION 3.04 Governmental Approvals and Filings............................ 31
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SECTION 3.05 Absence of Conflicts.............................................. 32
SECTION 3.06 Audited Financial Statements...................................... 32
SECTION 3.07 Interim Financial Statements...................................... 32
SECTION 3.08 Absence of Undisclosed Liabilities................................ 33
SECTION 3.09 Absence of Material Adverse Change................................ 33
SECTION 3.10 Accurate and Complete Disclosure.................................. 33
SECTION 3.11 Margin Regulations................................................ 33
SECTION 3.12 Litigation........................................................ 34
SECTION 3.13 Absence of Events of Default...................................... 34
SECTION 3.14 Absence of Other Conflicts........................................ 34
SECTION 3.15 Insurance......................................................... 34
SECTION 3.16 Title to Property; No Liens....................................... 34
SECTION 3.17 Taxes............................................................. 35
SECTION 3.18 Borrower Not An Investment Company................................ 35
SECTION 3.19 Environmental Matters............................................. 35
SECTION 3.20 ERISA............................................................. 36
SECTION 3.21 Year 2000 Issues.................................................. 37
SECTION 3.22 Pari Passu Status................................................. 37
SECTION 3.23 Indebtedness...................................................... 37
ARTICLE IV
CONDITIONS...................................................................... 38
SECTION 4.01 Effective Date.................................................... 38
SECTION 4.02 Conditions to All Loans........................................... 41
ARTICLE V
AFFIRMATIVE COVENANTS........................................................... 42
SECTION 5.01 Basic Reporting Requirements...................................... 42
SECTION 5.02 Insurance......................................................... 45
SECTION 5.03 Payment of Taxes and Other Potential Charges and Priority Claims.. 45
SECTION 5.04 Preservation of Corporate Status and Franchises................... 45
SECTION 5.05 Governmental Approvals and Filings................................ 46
SECTION 5.06 Maintenance of Properties......................................... 46
SECTION 5.07 Avoidance of Other Conflicts...................................... 46
SECTION 5.08 Financial Accounting Practices.................................... 46
SECTION 5.09 Use of Proceeds................................................... 47
SECTION 5.10 End of Fiscal Periods............................................. 47
ARTICLE VI
NEGATIVE COVENANTS.............................................................. 47
SECTION 6.01 Financial Covenants............................................... 47
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SECTION 6.02 Liens............................................................. 47
SECTION 6.03 Mergers........................................................... 48
SECTION 6.04 Dispositions of Properties........................................ 49
SECTION 6.05 Investments and Acquisitions...................................... 49
SECTION 6.06 Dividends and Stock Repurchases................................... 49
SECTION 6.07 Transactions with Affiliates...................................... 50
SECTION 6.08 Change of Business................................................ 50
SECTION 6.09 Equal and Ratable Lien............................................ 50
SECTION 6.10 Restrictive Agreements............................................ 50
SECTION 6.11 Year 2000......................................................... 51
ARTICLE VII
DEFAULTS........................................................................ 51
SECTION 7.01 Events of Default................................................. 51
SECTION 7.02 Consequences of an Event of Default............................... 53
ARTICLE VIII
THE AGENTS...................................................................... 54
SECTION 8.01 Appointment....................................................... 54
SECTION 8.02 General Nature of Administrative Agent's Duties................... 55
SECTION 8.03 Exercise of Powers................................................ 55
SECTION 8.04 General Exculpatory Provisions.................................... 56
SECTION 8.05 Administration by the Administrative Agent........................ 56
SECTION 8.06 Lenders Not Relying on Administrative Agent or Other Lenders...... 57
SECTION 8.07 Indemnification................................................... 58
SECTION 8.08 Administrative Agent in its Individual Capacity................... 58
SECTION 8.09 Holders of Notes.................................................. 58
SECTION 8.10 Successor Administrative Agent.................................... 59
SECTION 8.11 Additional Administrative Agents.................................. 59
SECTION 8.12 Calculations...................................................... 60
SECTION 8.13 Syndication Agents................................................ 60
ARTICLE IX
MISCELLANEOUS................................................................... 60
SECTION 9.01 Amendments and Waivers............................................ 60
SECTION 9.02 No Implied Waiver; Cumulative Remedies............................ 61
SECTION 9.03 Notices........................................................... 61
SECTION 9.04 Expenses; Taxes; Indemnity........................................ 62
SECTION 9.05 Severability...................................................... 63
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SECTION 9.06 Prior Understandings.............................................. 63 SECTION 9.07 Duration; Survival................................................ 63 SECTION 9.08 Counterparts...................................................... 64 SECTION 9.09 Limitation on Payments............................................ 64 SECTION 9.10 Set-Off........................................................... 64 SECTION 9.11 Sharing of Collections............................................ 65 SECTION 9.12 Successors and Assigns; Participations; Assignments............... 65 |
EXHIBIT 10(C)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of March 13, 1998, but effective as provided herein, is made and entered into by and between Nevada Power Company, a Nevada corporation (the "Company"), and Gloria Banks Weddle (the "Executive").
WHEREAS, the Executive has been serving as the Vice President, Corporate Services, of the Company;
WHEREAS, the Company considers it in the best interests of its stockholders to foster the continuous employment of certain key management personnel;
WHEREAS, the Company recognizes that, as is the case for most publicly held companies, the possibility of a Change in Control (as defined herein) exists;
WHEREAS, the Company wishes to assure itself of both present and future continuation of management, including in the event of a Change in Control; and
WHEREAS, the Company wishes to employ the Executive and the Executive is willing to render services, both on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and of the mutual covenants herein contained, it is agreed as follows:
1.1 The Company hereby agrees to employ the Executive, and the Executive hereby agrees to undertake employment with the Company, upon the terms and conditions herein set forth.
1.2 Employment will be for a term commencing on March 12, 1998 (the
"Effective Date") and, subject to earlier expiration upon the Executive's
termination under Section 5, expiring on March 11, 2001 (the "Employment Term").
The Employment Term may be extended by mutual written agreement of the parties.
In the event a Change in Control (as defined in Section 6.2) occurs less than
three years before the end of the Employment Term, the Employment Term will be
extended for a period ending on the third anniversary of the occurrence of the
Change in Control, except that in the event the occurrence of a Change in
Control resulting from a filing of a report or proxy statement described in
Section 6.2(iv) occurs less than three years before the end of the Employment
Term, the Employment Term will be extended for a period ending on the later of
(i) the third anniversary of the occurrence of such Change in Control, or (ii)
the earlier of (a) the day after any transaction, occurrence or event described
in such report or proxy statement (a "Transaction") is consummated, or (b) the
date it is determined by resolution of the Board of Directors of the Company
(the "Board") adopted in good faith that such Transaction will not be
consummated. (The Employment Term, as so extended under this Section 1.2, will
thereafter constitute the "Employment Term" hereunder and is subject to further
extension as provided in this Section 1.2.)
(i) Annual Base Salary. During the Employment Term, the Company will pay to the Executive an annual base salary ("Base Salary") (a) prior to April 1, 1998, of not less than the Executive's annual base salary in effect as of the Effective Date, and (b) effective on and after April `1, 1998, of not less than $180,000, which annual base salary may be increased from time to time by the Board (or the Compensation Committee thereof) in its sole discretion (and, as so increased, shall thereafter constitute "Base Salary" hereunder), payable at the times and in the manner
consistent with the Company's general policies regarding compensation of executive employees. Base Salary may not be decreased. The Board may from time to time authorize such additional compensation to the Executive, in cash or in property, as the Board may determine in its sole discretion to be appropriate.
(ii) Annual Incentive Compensation. If the Board (or the Compensation Committee thereof) authorizes any annual cash incentive compensation or approves any other annual management incentive program or arrangement, the Executive will be eligible to participate in such plan, program or arrangement under the general terms and conditions applicable to executive and management employees. Nothing in this Section 4.1(ii) will guarantee to the Executive any specific amount of incentive compensation, or prevent the Board (or the Compensation Committee thereof) from establishing performance goals and compensation targets applicable only to the Executive.
(iii) Long-Term Incentive Compensation Plans and Programs. If the Board (or the Compensation Committee thereof) authorizes any long-term incentive plan or program, the Executive will be eligible to participate in such plan or program under the general terms and conditions applicable to executive and management employees. Nothing in this Section 4.1(iii) will guarantee the Executive any specific amount of long-term incentive compensation, or prevent the Board (or the Compensation Committee thereof) from establishing performance goals and compensation targets applicable only to the Executive.
(i) If the Company determines in good faith that the Executive has incurred a Disability (as defined below) during the Employment Term, the Company may give the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company will terminate effective on the 30/th/ calendar day after receipt of such notice by the Executive, provided that within the 30 calendar days after such receipt, the Executive will not have returned to full-time performance of her duties. The Executive will continue to receive her Base Salary (less any amounts payable to the Executive for such period under any short- or long-term disability plan maintained by the Company) and benefits until the date of termination. In the event of the Executive's Disability, the Company will pay the Executive, promptly after the Executive's termination, (a) the unpaid Base Salary to which she is entitled, pursuant to Section 4.1, through the date of the Executive's termination (less any amounts payable to the Executive for such period under any short- or long-term disability plan maintained by the Company), and (b) for any accrued but unused vacation days, to the extent and in the amounts, if any, provided under the Company's usual policies and arrangements. This Section 5.2 will not limit the entitlement of the Executive or the Executive's estate or beneficiaries to any disability or other benefits then available to the Executive under any disability insurance or other benefit plan or policy that is maintained by the Company for the Executive's benefit or in which the Executive participated.
(ii) For purposes of this Agreement, "Disability" will mean the Executive's incapacity due to physical or mental illness or injury substantially to perform her
duties on a full-time basis for six consecutive months and within 30 calendar days after a notice of termination is thereafter given by the Company the Executive will not have returned to the full-time performance of the Executive's duties; provided, however, if the Executive disagrees with a determination to terminate her because of Disability, the question of the Executive's Disability will be subject to the certification of a qualified medical doctor agreed to by the Company and the Executive or, in the event of the Executive's incapacity to designate a doctor, the Executive's legal representative. In the absence of agreement between the Company and the Executive, each party will nominate a qualified medical doctor and the two doctors will select a third doctor, who will make the determination as to Disability. In order to facilitate such determination, the Executive will, as reasonably requested by the Company, (a) make herself available for medical examinations by a doctor in accordance with this Section 5.2(ii), and (b) grant the Company and any such doctor access to all relevant medical information concerning her, arrange to furnish copies of medical records to such doctor, and use her best efforts to cause her own doctor to be available to discuss her health with such doctor.
(i) The Company may terminate the Executive's employment hereunder for Cause (as defined below) during the Employment Term by written notice as provided in Section 12.6. In the event of the Executive's termination for Cause, the Company will promptly pay to the Executive (or her representative) the unpaid Base Salary to which she is entitled, pursuant to Section 4.1, through the date the Executive is terminated and the Executive will be entitled to no other compensation or benefits, except as otherwise due to her under applicable law or pursuant to any benefit plan or policy that is maintained by the Company in which the Executive participated.
(ii) For purposes of this Agreement, "Cause" means that, prior to the end of the Employment Term, (a) the Executive shall have committed or engaged in:
(1) An intentional act of fraud, embezzlement or theft in connection with the Executive's duties or in the course of the Executive's employment with the company;
(2) An intentional breach of any of the express covenants set forth in Sections 9.1, 9.2, or 9.3;
(3) Intentional wrongful damage to property of the Company or any Subsidiary (as defined below);
(4) Gross negligence or gross misconduct against the Company or another employee, or in carrying out the Executive's duties and responsibilities;
and any such act shall have been materially harmful to the Company, or (b) the Executive shall have engaged in intentional and repeated failure substantially to carry out the
Executive's duties and responsibilities (other than any such failure resulting from the Executive's incapacity due to physical or mental illness that qualifies as a Disability or would qualify as a Disability is such incapacity continued for the required length of time), which failure is not or cannot be cured within five business days after the Company has given written notice to the Executive specifying in detail the particulars of the acts or omissions deemed to constitute such failure. For purposes of this Agreement, no act or failure to act on the part of the Executive shall be deemed "intentional" if it was due primarily to an error in judgment or negligence, but shall be deemed "intentional" only if done or omitted to be done by the Executive not in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall been delivered to the Executive a written notice from the Company stating that it has determined that the Executive had committed an act constituting "Cause" as herein defined and specifying the particulars thereof in detail. Nothing herein will limit the right of the Executive or the Executive's beneficiaries to contest the validity or propriety of any such determination.
(i) Involuntary Termination. The Executive's employment hereunder
may be terminated during the Employment Term by the Company for any reason other
than Death, disability, or for Cause by written notice as provided in Section
12.6. In the event of such an involuntary termination, the Executive will be
entitled to the payments and benefits provided in Section 5.5. This Section
5.4(i) and Section 5.5, however, will not limit the entitlement of the Executive
to any other benefits then available to the Executive under any benefit plan or
policy that is maintained by the Company for the Executive's benefit or in which
the Executive participated. The Executive will be treated for purposes of this
Agreement as having been involuntarily terminated by the Company for reasons
other than Death, Disability, or for Cause if the Executive terminates her
employment with the Company for any of the following reasons (each, a "Good
Reason") prior to the date of the Executive's Death, Disability, or on which the
Executive has committed or engaged in an act constituting Cause: (a) the Company
has materially breached any provision of this Agreement and within 10 calendar
days after notice thereof from the Executive, the Company fails to cure such
breach; (b) a successor or assign (whether direct or indirect, by purchase,
merger, consolidation, operation of law or otherwise) to all or substantially
all of the business and/or assets of the Company fails to assume all duties,
obligations and liabilities of the Company under the Agreement pursuant to
Section 12.2(I); (c) a reduction in the scope or value of the aggregate benefits
and incentive compensation described in Sections 4.1(iii), 4.2 and 4.3 provided
to the Executive or the termination or denial of the Executive's rights to such
benefits or incentive compensation, any of which is not remedied by the Company
with 10 calendar days after receipt by the Company of written notice from the
Executive of such reduction or termination; (d) the Board fails to appoint the
Executive as Vice President, Corporate Services, or the Executive is removed
from such position; (e) a reduction in the Executive's Base Salary or the
opportunity to earn annual incentive compensation under Section 4.1(ii) on a
basis at least as favorable to the Executive (in terms of each of the amounts of
benefits, levels of coverage and performance measures and levels
of required performance) as the benefits payable thereunder prior to the reduction, or the failure to pay the Executive Base Salary or incentive compensation earned when due.
(ii) Voluntary Termination. The Executive may voluntarily terminate
the Agreement at any time by notice to the Company as provided in Section 12.6.
In the event of the Executive's voluntary termination, the Company will promptly
pay the Executive (a) the unpaid Base Salary to which the Executive is entitled,
pursuant to Section 4.1, through the date of the Executive's termination, and
(b) for any accrued but unused vacation days, to the extent and in the amounts,
if any, provided under the Company's usual policies and arrangements. This
Section 5.4(ii) will not limit the entitlement of the Executive to any other
benefits then available to the Executive under any benefit plan or policy that
is maintained by the company for the Executive's benefit or in which the
Executive participated.
(i) Form and Amount. Upon the Executive's involuntary termination other than by reason of Death, Disability, or for Cause as provided in Section 5.4(i), the Company will promptly pay or provide to the Executive:
(a) The unpaid Base Salary to which the Executive is entitled, pursuant to Section 4.1, through the date of the Executive's termination;
(b) For any accrued but unused vacation days, to the extent and in the amounts, if any, provided under the Company's usual policies and arrangements;
(c) A lump sum payment within five (5) business days after termination in an amount equal to two times the sum of (A) the annual rate of Base Salary (prior to any deferrals or reductions under qualified or non-qualified plans) being paid to the Executive immediately prior to termination (or immediately prior to any reduction therein occurring prior to termination, if greater), plus (B) the aggregate annual bonus, incentive or other payments of cash compensation (determined without regard to any deferral election) to which the Executive would have been entitled in accordance with Section 4.1(ii) under the bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement of the Company in which the Executive was participating for the year in which the termination occurs (or for the year in which any prior reduction therein occurs, if greater) based on the assumption that target performance goals for such year would be met and such payments would be made; and
(d) For a period of 24 months following the termination (the
"Continuation Period"), the Company will arrange to provide the Executive
with health (including medical/hospital, dental and vision) and life
benefits substantially similar to those that the Executive was receiving or
entitled to receive immediately prior to termination (or, if greater,
immediately prior to the reduction, termination, or denial described in
Section 5.4(i)(c). Benefits otherwise receivable by the Executive pursuant
to this Section 5.5(i)(d) will be reduced to the extent comparable benefits
are
actually received by or in respect of the Executive from another employer during the Continuation Period following the Executive's termination, and any such benefits actually received shall be reported by the Executive or other recipient to the Company.
(ii) Maintenance of Benefits. During the Continuation Period set forth in Section 5.5(i)(d), the Company will use its best efforts to maintain in full force and effect for the continued benefit of the Executive all benefits referenced therein or will arrange to make available to the Executive benefits substantially similar to the referenced benefits. Such benefits will be provided to the Executive on the same terms and conditions (including employee contributions toward the premium payments) under which the Executive was entitled to participate immediately prior to the Executive's termination (or, if more favorable to the Executive, immediately prior to the reduction, termination, or denial described in Section 5.4(i)(c)). To the extent, however, the coverage or benefits provided under Section 5.5(i)(d) results in the Executive or any dependent or beneficiary thereof incurring additional federal, state or local taxes that would otherwise not have been incurred in connection with the provision of such coverage or benefits had the Executive's employment not been terminated, the Company shall promptly pay the Executive, dependent or beneficiary, as the case may be, on an after-tax basis, an additional payment in an amount equal to all taxes, including interest and penalties thereon, imposed as a result of such coverage or benefits.
(iii) Resignation. If at termination the Executive is a member of the Board or a board of any affiliate of the Company, no benefit will be paid or made available under Section 5.5(i)(c) or Section 5.5(i)(d) unless the Executive first executes and delivers to the Company a resignation from membership on the Board and from membership on the boards of all affiliates of the Company, as the case may be, such resignation to be effective on receipt of the payment to which the Executive is entitled under Section 5.5(i)(c).
(a) A significant adverse change in the nature or scope of authorities, powers, functions, responsibilities or duties attached to the positions held by the Executive from those authorities, powers, functions, responsibilities or duties which the Executive held immediately prior to the Change in Control;
(b) A determination by the Executive (which determination will be conclusive and binding upon the parties hereto provided it has been made in good
faith and in all events the Executive's determination will be presumed to have been made in good faith unless otherwise shown by the Company by clear and convincing evidence) that a change in circumstances has occurred following the Change in Control, including, without limitation, a change in the scope of the business or other activities for which the Executive was responsible immediately prior to the Change in Control, which has rendered the Executive substantially unable to carry out, has substantially hindered the Executive's performance of, or has caused the Executive to suffer a substantial reduction in, any of the authorities, powers, functions, responsibilities or duties attached to any of the Executive's positions immediately prior to such Change in Control, which situation is not remedied within 10 calendar days after written notice to the Company from the Executive of such determination; or
(c) The relocation of the Company's principal executive offices and the Executive's principal location of work is then in such offices, or requirement that the Executive have the Executive's principal location of work changed, to any location thereof immediately preceding the Change in Control or the requirement that the Executive travel away from the Executive's office in the course of discharging the Executive's responsibilities or duties hereunder at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Executive in any of the three full years immediately prior to such Change in Control without, in either case, the Executive's prior written consent.
(i) The Company is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than 65% of the combined voting power of the then-outstanding securities or interests entitled to vote generally in the election of directors or other controlling persons (the "Voting Stock") of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock of the Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than 65% of the combined voting power of the then-outstanding Voting Stock of such corporation or person immediately after such sale or transfer is held in the aggregate (directly or through ownership of Voting Stock of the Company or Subsidiary (as defined herein)) by the holders of the Voting Stock of the Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the combined voting power of the then-outstanding Voting Stock of the Company;
(iv) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company will occur in the future pursuant to a then-existing contract or transaction which when consummated would be a Change in Control determined without regard to this Section 6.2(iv);
(vi) The approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing provisions of Sections 6.2(iii) or 6.2(iv) above, unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of Sections 6.2(iii) or 6.2(iv) solely because (A) the Company, (B) an entity in which the Company directly or indirectly beneficially owns 50% or more of the outstanding Voting Stock (a "Subsidiary"), or (C) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K, or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 20% or otherwise, or because the Company reports that a Change in Control of the Company has occurred or will occur in the future by reason of such beneficial ownership.
(i) Anything in this Agreement to the contrary notwithstanding, if it is determined (as hereafter provided) that any payment or distribution by the Company or any of its affiliates to or for the benefit of the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being considered "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the "Excise Tax"), then the Executive will be entitled to receive an additional payment or payments (collectively, a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. No Gross-Up Payment will be made with respect to the Excise Tax, if any, attributable to (a) any incentive stock option, as defined by Section 422 of the Code ("ISO") granted prior to the execution of this Agreement (unless a comparable Gross-Up Payment has theretofore been made available with respect to such option), or (b) any stock appreciation or similar right, whether or not limited, granted in tandem with any ISO described in clause (a).
(ii) Subject to the provisions of Section 7(vi) hereof, all determinations required to be made under this Section 7, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the Executive and the amount of such Gross-Up Payment, will be made by a nationally recognized firm of certified public accountants (the "Accounting Firm") selected by the Executive in her sole discretion. The Executive will direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and the Executive within 15 calendar days after the Executive's termination, if applicable, and any other such time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company will pay the required Gross-Up Payment to the Executive within five business days after receipt of such determination and calculations with respect to any Payment to the Executive. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it will, at the same time as it makes such determination, furnish the Company and the Executive an opinion that the Executive has substantial authority not to report any Excise Tax on the Executive's federal, state, local income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment will be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the C ode (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payment that will not have been made by the Company have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 7(vi) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive will direct the Accounting
Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment will be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations.
(iii) The Company and the Executive will each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and other cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Section 7(ii) hereof.
(iv) The federal, state and local income or other tax returns filed by the Executive will be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive will make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of the Executive's federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive will within five business days pay to the Company the amount of such reduction.
(v) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 7(ii) and (iv) hereof will be borne by the Company. If such fees and expenses are initially paid by the Executive, the Company will reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of her payment thereof.
(vi) The Executive will notify the Company in writing of any claim by the
Internal Revenue Service or other taxing authority that, if successful, would
require the payment by the Company of a Gross-Up Payment. Such notification
will be given as promptly as practicable but no later than 10 business days
after the Executive actually receives notice of such claim and the Executive
will further apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the extent known by
the Executive). The Executive will not pay such claim prior to the earlier of
(a) the expiration of the 30-calendar-day period following the date on which the
Executive gives such notice to the Company, and (b) the date that any payment of
amount with respect to such claim is due. If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive will:
(a) provide the Company with any written records or documents in the Executive's possession relating to such claim reasonably requested by the Company;
(b) take such action in connection with contesting such claim as the Company will reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company;
(c) cooperate with the Company in good faith in order to effectively contest such claim; and
(d) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company will bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and will indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 7(vi), the Company will control all proceedings taken in connection with the contest of any claim contemplated by this Section 7(vi) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that the Executive may participate therein at the Executive's own cost and expense) and may, at its option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine; provided, however, that if the Company directs the Executive to pay the tax claimed and sue for a refund, the Company will advance the amount of such payment to the Executive on an interest-free basis and will indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(vii) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 7(vi) hereof, the Executive receives any refund with respect to such claim, the Executive will (subject to the Company's complying with the requirements of Section 7(vi) hereof) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 7(vi) hereof, a determination is made that the Executive will not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest
such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance will be forgiven and will not be required to be repaid and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by the Company to the Executive pursuant to this Section 7.
9.1 (i) Subject to section 6.1(i), the Executive hereby covenants and agrees that during the employment Term and for one year following the Employment Term and for one year following the Employment Term she will not, without the prior written consent of the Company, engage in Competition (as defined below) with the Company. For purposes of this Agreement, if the Executive takes any of the following actions she will be engaged in "Competition": engaging in or carrying on, directly or indirectly, any enterprise, whether as an advisor, principal, agent, partner, officer, director, employee, stockholder, associate or consultant to any person, partnership, corporation or any other business entity, that is principally engaged in the business of the generation, transmission, or distribution of electricity in States in which the Company or its affiliates has significant operations; provided, however, that "Competition" will not include (a) the mere ownership of securities in any enterprise and exercise of rights appurtenant thereto, or (b) participation in management of any enterprise or business operation thereof other than in connection with the competitive operation of such enterprise.
(ii) Subject to Section 6.1(i), the Executive hereby covenants and agrees that during the Employment Term and for three years following the Employment Term, she will not assist a third party in preparing or making an unsolicited bid for the Company, engaging in a proxy contest with the Company, or engaging in any other similar activity.
9.2 During the Employment Term, the Company agrees that it will disclose
to Executive its confidential or proprietary information (as defined in this
Section 9.2) to the extent necessary for Executive to carry out the Executive's
obligations under this Agreement. Subject to Section 6.1(i), the Executive
hereby covenants and agrees that she will not, without the prior written consent
of the Company, during the Employment Term or thereafter, disclose to any person
not employed by the Company, or use in connection with engaging in Competition
with the Company, any confidential or proprietary information of the Company.
For purposes of this Agreement, the term "confidential or proprietary
information" will include all information of any nature and in any form that is
owned by the Company and that is not publicly available or generally known to
persons engaged in
businesses similar or related to those of the Company. Confidential information will include, without limitation, the Company's financial matters, customers, employees, industry contracts, and all other secrets and all other information of a confidential or proprietary nature. The foregoing obligations imposed by this Section 9.2 will cease if such confidential or proprietary information will have become, through no fault of the Executive, generally known to the public or the Executive is required by law to make disclosure (after giving the Company notice and an opportunity to contest such requirement).
9.3 Subject to Section 6.1(i), the Executive hereby covenants and agrees that during the Employment Term and for one year thereafter the Executive will not attempt to influence, persuade or induce, or assist any other person in so persuading or inducing, any employee of the Company to give up, or to not commence, employment or a business relationship with the Company.
such counsel, the Company irrevocably consents to the Executive's entering into an attorney-client relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship shall exist between the Executive and such counsel. Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys' and related fees and expenses incurred by the Executive in connection with any of the foregoing.
(i) The company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization, operation of law or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company where by purchase, merger, consolidation, reorganization, operation of law or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company.
(ii) This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees.
(iii) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 12.2(i) and 12.2(ii). Without limiting the generality or effect of the foregoing, the Executive's right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by Executive's will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 12.2(iii), the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated.
writing; provided, however, that such waiver will not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written, but effective as provided in Section 1.2.
Gloria Banks Weddle . ------------------------------------ Gloria Banks Weddle NEVADA POWER COMPANY, a Nevada corporation Charles A. Lenzie . ------------------------------------ Charles A. Lenzie |
EXHIBIT 10(D)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of March 13, 1998, but effective as provided herein, is made and entered into by and between Nevada Power Company, a Nevada corporation (the "Company"), and Steven W. Rigazio (the "Executive").
WHEREAS, the Executive has been serving as the Vice President, Finance and Planning, Treasurer and Chief Financial Officer, of the Company;
WHEREAS, the Company considers it in the best interests of its stockholders to foster the continuous employment of certain key management personnel;
WHEREAS, the Company recognizes that, as is the case for most publicly held companies, the possibility of a Change in Control (as defined herein) exists;
WHEREAS, the Company wishes to assure itself of both present and future continuation of management, including in the event of a Change in Control; and
WHEREAS, the Company wishes to employ the Executive and the Executive is willing to render services, both on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and of the mutual covenants herein contained, it is agreed as follows:
1.1 The Company hereby agrees to employ the Executive, and the Executive hereby agrees to undertake employment with the Company, upon the terms and conditions herein set forth.
1.2 Employment will be for a term commencing on March 12, 1998 (the
"Effective Date") and, subject to earlier expiration upon the Executive's
termination under Section 5, expiring on March 11, 2001 (the "Employment Term").
The Employment Term may be extended by mutual written agreement of the parties.
In the event a Change in Control (as defined in Section 6.2) occurs less than
three years before the end of the Employment Term, the Employment Term will be
extended for a period ending on the third anniversary of the occurrence of the
Change in Control, except that in the event the occurrence of a Change in
Control resulting from a filing of a report or proxy statement described in
Section 6.2(iv) occurs less than three years before the end of the Employment
Term, the Employment Term will be extended for a period ending on the later of
(i) the third anniversary of the occurrence of such Change in Control, or (ii)
the earlier of (a) the day after any transaction, occurrence or event described
in such report or proxy statement (a "Transaction") is consummated, or (b) the
date it is determined by resolution of the Board of Directors of the Company
(the "Board") adopted in good faith that such Transaction will not be
consummated. (The Employment Term, as so extended under this Section 1.2, will
thereafter constitute the "Employment Term" hereunder and is subject to further
extension as provided in this Section 1.2.)
(i) Annual Base Salary. During the Employment Term, the Company will pay to the Executive an annual base salary ("Base Salary") (a) prior to April 1, 1998, of not less than the Executive's annual base salary in effect as of the Effective Date, and (b) effective on and after April 1, 1998, of not less than $225,000, which annual base salary may be increased from time to time by the Board (or the Compensation Committee thereof) in its sole discretion (and, as so increased, shall thereafter constitute "Base Salary" hereunder), payable at the times and in the manner
consistent with the Company's general policies regarding compensation of executive employees. Base Salary may not be decreased. The Board may from time to time authorize such additional compensation to the Executive, in cash or in property, as the Board may determine in its sole discretion to be appropriate.
(ii) Annual Incentive Compensation. If the Board (or the Compensation Committee thereof) authorizes any annual cash incentive compensation or approves any other annual management incentive program or arrangement, the Executive will be eligible to participate in such plan, program or arrangement under the general terms and conditions applicable to executive and management employees. Nothing in this Section 4.1(ii) will guarantee to the Executive any specific amount of incentive compensation, or prevent the Board (or the Compensation Committee thereof) from establishing performance goals and compensation targets applicable only to the Executive.
(iii) Long-Term Incentive Compensation Plans and Programs. If the Board (or the Compensation Committee thereof) authorizes any long-term incentive plan or program, the Executive will be eligible to participate in such plan or program under the general terms and conditions applicable to executive and management employees. Nothing in this Section 4.1(iii) will guarantee the Executive any specific amount of long-term incentive compensation, or prevent the Board (or the Compensation Committee thereof) from establishing performance goals and compensation targets applicable only to the Executive.
(i) If the Company determines in good faith that the Executive has incurred a Disability (as defined below) during the Employment Term, the Company may give the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company will terminate effective on the 30/th/ calendar day after receipt of such notice by the Executive, provided that within the 30 calendar days after such receipt, the Executive will not have returned to full-time performance of his duties. The Executive will continue to receive his Base Salary (less any amounts payable to the Executive for such period under any short- or long-term disability plan maintained by the Company) and benefits until the date of termination. In the event of the Executive's Disability, the Company will pay the Executive, promptly after the Executive's termination, (a) the unpaid Base Salary to which he is entitled, pursuant to Section 4.1, through the date of the Executive's termination (less any amounts payable to the Executive for such period under any short- or long-term disability plan maintained by the Company), and (b) for any accrued but unused vacation days, to the extent and in the amounts, if any, provided under the Company's usual policies and arrangements. This Section 5.2 will not limit the entitlement of the Executive or the Executive's estate or beneficiaries to any disability or other benefits then available to the Executive under any disability insurance or other benefit plan or policy that is maintained by the Company for the Executive's benefit or in which the Executive participated.
(ii) For purposes of this Agreement, "Disability" will mean the Executive's incapacity due to physical or mental illness or injury substantially to perform his
duties on a full-time basis for six consecutive months and within 30 calendar days after a notice of termination is thereafter given by the Company the Executive will not have returned to the full-time performance of the Executive's duties; provided, however, if the Executive disagrees with a determination to terminate him because of Disability, the question of the Executive's Disability will be subject to the certification of a qualified medical doctor agreed to by the Company and the Executive or, in the event of the Executive's incapacity to designate a doctor, the Executive's legal representative. In the absence of agreement between the Company and the Executive, each party will nominate a qualified medical doctor and the two doctors will select a third doctor, who will make the determination as to Disability. In order to facilitate such determination, the Executive will, as reasonably requested by the Company, (a) make herself available for medical examinations by a doctor in accordance with this Section 5.2(ii), and (b) grant the Company and any such doctor access to all relevant medical information concerning her, arrange to furnish copies of medical records to such doctor, and use his best efforts to cause his own doctor to be available to discuss his health with such doctor.
(i) The Company may terminate the Executive's employment hereunder for Cause (as defined below) during the Employment Term by written notice as provided in Section 12.6. In the event of the Executive's termination for Cause, the Company will promptly pay to the Executive (or his representative) the unpaid Base Salary to which he is entitled, pursuant to Section 4.1, through the date the Executive is terminated and the Executive will be entitled to no other compensation or benefits, except as otherwise due to him under applicable law or pursuant to any benefit plan or policy that is maintained by the Company in which the Executive participated.
(ii) For purposes of this Agreement, "Cause" means that, prior to the end of the Employment Term, (a) the Executive shall have committed or engaged in:
(1) An intentional act of fraud, embezzlement or theft in connection with the Executive's duties or in the course of the Executive's employment with the company;
(2) An intentional breach of any of the express covenants set forth in Sections 9.1, 9.2, or 9.3;
(3) Intentional wrongful damage to property of the Company or any Subsidiary (as defined below);
(4) Gross negligence or gross misconduct against the Company or another employee, or in carrying out the Executive's duties and responsibilities;
and any such act shall have been materially harmful to the Company, or (b) the Executive shall have engaged in intentional and repeated failure substantially to carry out the
Executive's duties and responsibilities (other than any such failure resulting from the Executive's incapacity due to physical or mental illness that qualifies as a Disability or would qualify as a Disability is such incapacity continued for the required length of time), which failure is not or cannot be cured within five business days after the Company has given written notice to the Executive specifying in detail the particulars of the acts or omissions deemed to constitute such failure. For purposes of this Agreement, no act or failure to act on the part of the Executive shall be deemed "intentional" if it was due primarily to an error in judgment or negligence, but shall be deemed "intentional" only if done or omitted to be done by the Executive not in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for "Cause" hereunder unless and until there shall been delivered to the Executive a written notice from the Company stating that it has determined that the Executive had committed an act constituting "Cause" as herein defined and specifying the particulars thereof in detail. Nothing herein will limit the right of the Executive or the Executive's beneficiaries to contest the validity or propriety of any such determination.
(i) Involuntary Termination. The Executive's employment hereunder
may be terminated during the Employment Term by the Company for any reason other
than Death, disability, or for Cause by written notice as provided in Section
12.6. In the event of such an involuntary termination, the Executive will be
entitled to the payments and benefits provided in Section 5.5. This Section
5.4(i) and Section 5.5, however, will not limit the entitlement of the Executive
to any other benefits then available to the Executive under any benefit plan or
policy that is maintained by the Company for the Executive's benefit or in which
the Executive participated. The Executive will be treated for purposes of this
Agreement as having been involuntarily terminated by the Company for reasons
other than Death, Disability, or for Cause if the Executive terminates his
employment with the Company for any of the following reasons (each, a "Good
Reason") prior to the date of the Executive's Death, Disability, or on which the
Executive has committed or engaged in an act constituting Cause: (a) the Company
has materially breached any provision of this Agreement and within 10 calendar
days after notice thereof from the Executive, the Company fails to cure such
breach; (b) a successor or assign (whether direct or indirect, by purchase,
merger, consolidation, operation of law or otherwise) to all or substantially
all of the business and/or assets of the Company fails to assume all duties,
obligations and liabilities of the Company under the Agreement pursuant to
Section 12.2(I); (c) a reduction in the scope or value of the aggregate benefits
and incentive compensation described in Sections 4.1(iii), 4.2 and 4.3 provided
to the Executive or the termination or denial of the Executive's rights to such
benefits or incentive compensation, any of which is not remedied by the Company
with 10 calendar days after receipt by the Company of written notice from the
Executive of such reduction or termination; (d) the Board fails to appoint the
Executive as Vice President, Corporate Services, or the Executive is removed
from such position; (e) a reduction in the Executive's Base Salary or the
opportunity to earn annual incentive compensation under Section 4.1(ii) on a
basis at least as favorable to the Executive (in terms of each of the amounts of
benefits, levels of coverage and performance measures and levels
of required performance) as the benefits payable thereunder prior to the reduction, or the failure to pay the Executive Base Salary or incentive compensation earned when due.
(ii) Voluntary Termination. The Executive may voluntarily terminate
the Agreement at any time by notice to the Company as provided in Section 12.6.
In the event of the Executive's voluntary termination, the Company will promptly
pay the Executive (a) the unpaid Base Salary to which the Executive is entitled,
pursuant to Section 4.1, through the date of the Executive's termination, and
(b) for any accrued but unused vacation days, to the extent and in the amounts,
if any, provided under the Company's usual policies and arrangements. This
Section 5.4(ii) will not limit the entitlement of the Executive to any other
benefits then available to the Executive under any benefit plan or policy that
is maintained by the company for the Executive's benefit or in which the
Executive participated.
(i) Form and Amount. Upon the Executive's involuntary termination other than by reason of Death, Disability, or for Cause as provided in Section 5.4(i), the Company will promptly pay or provide to the Executive:
(a) The unpaid Base Salary to which the Executive is entitled, pursuant to Section 4.1, through the date of the Executive's termination;
(b) For any accrued but unused vacation days, to the extent and in the amounts, if any, provided under the Company's usual policies and arrangements;
(c) A lump sum payment within five (5) business days after termination in an amount equal to two times the sum of (A) the annual rate of Base Salary (prior to any deferrals or reductions under qualified or non-qualified plans) being paid to the Executive immediately prior to termination (or immediately prior to any reduction therein occurring prior to termination, if greater), plus (B) the aggregate annual bonus, incentive or other payments of cash compensation (determined without regard to any deferral election) to which the Executive would have been entitled in accordance with Section 4.1(ii) under the bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement of the Company in which the Executive was participating for the year in which the termination occurs (or for the year in which any prior reduction therein occurs, if greater) based on the assumption that target performance goals for such year would be met and such payments would be made; and
(d) For a period of 24 months following the termination (the
"Continuation Period"), the Company will arrange to provide the Executive
with health (including medical/hospital, dental and vision) and life
benefits substantially similar to those that the Executive was receiving or
entitled to receive immediately prior to termination (or, if greater,
immediately prior to the reduction, termination, or denial described in
Section 5.4(i)(c). Benefits otherwise receivable by the Executive pursuant
to this Section 5.5(i)(d) will be reduced to the extent comparable benefits
are
actually received by or in respect of the Executive from another employer during the Continuation Period following the Executive's termination, and any such benefits actually received shall be reported by the Executive or other recipient to the Company.
(ii) Maintenance of Benefits. During the Continuation Period set forth in Section 5.5(i)(d), the Company will use its best efforts to maintain in full force and effect for the continued benefit of the Executive all benefits referenced therein or will arrange to make available to the Executive benefits substantially similar to the referenced benefits. Such benefits will be provided to the Executive on the same terms and conditions (including employee contributions toward the premium payments) under which the Executive was entitled to participate immediately prior to the Executive's termination (or, if more favorable to the Executive, immediately prior to the reduction, termination, or denial described in Section 5.4(i)(c)). To the extent, however, the coverage or benefits provided under Section 5.5(i)(d) results in the Executive or any dependent or beneficiary thereof incurring additional federal, state or local taxes that would otherwise not have been incurred in connection with the provision of such coverage or benefits had the Executive's employment not been terminated, the Company shall promptly pay the Executive, dependent or beneficiary, as the case may be, on an after-tax basis, an additional payment in an amount equal to all taxes, including interest and penalties thereon, imposed as a result of such coverage or benefits.
(iii) Resignation. If at termination the Executive is a member of the Board or a board of any affiliate of the Company, no benefit will be paid or made available under Section 5.5(i)(c) or Section 5.5(i)(d) unless the Executive first executes and delivers to the Company a resignation from membership on the Board and from membership on the boards of all affiliates of the Company, as the case may be, such resignation to be effective on receipt of the payment to which the Executive is entitled under Section 5.5(i)(c).
(a) A significant adverse change in the nature or scope of authorities, powers, functions, responsibilities or duties attached to the positions held by the Executive from those authorities, powers, functions, responsibilities or duties which the Executive held immediately prior to the Change in Control;
(b) A determination by the Executive (which determination will be conclusive and binding upon the parties hereto provided it has been made in good
faith and in all events the Executive's determination will be presumed to have been made in good faith unless otherwise shown by the Company by clear and convincing evidence) that a change in circumstances has occurred following the Change in Control, including, without limitation, a change in the scope of the business or other activities for which the Executive was responsible immediately prior to the Change in Control, which has rendered the Executive substantially unable to carry out, has substantially hindered the Executive's performance of, or has caused the Executive to suffer a substantial reduction in, any of the authorities, powers, functions, responsibilities or duties attached to any of the Executive's positions immediately prior to such Change in Control, which situation is not remedied within 10 calendar days after written notice to the Company from the Executive of such determination; or
(c) The relocation of the Company's principal executive offices and the Executive's principal location of work is then in such offices, or requirement that the Executive have the Executive's principal location of work changed, to any location thereof immediately preceding the Change in Control or the requirement that the Executive travel away from the Executive's office in the course of discharging the Executive's responsibilities or duties hereunder at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Executive in any of the three full years immediately prior to such Change in Control without, in either case, the Executive's prior written consent.
(i) The Company is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than 65% of the combined voting power of the then-outstanding securities or interests entitled to vote generally in the election of directors or other controlling persons (the "Voting Stock") of such corporation or person immediately after such transaction are held in the aggregate by the holders of Voting Stock of the Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than 65% of the combined voting power of the then-outstanding Voting Stock of such corporation or person immediately after such sale or transfer is held in the aggregate (directly or through ownership of Voting Stock of the Company or Subsidiary (as defined herein)) by the holders of the Voting Stock of the Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the combined voting power of the then-outstanding Voting Stock of the Company;
(iv) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company will occur in the future pursuant to a then-existing contract or transaction which when consummated would be a Change in Control determined without regard to this Section 6.2(iv);
(vi) The approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing provisions of Sections 6.2(iii) or 6.2(iv) above, unless otherwise determined in a specific case by majority vote of the Board, a "Change in Control" shall not be deemed to have occurred for purposes of Sections 6.2(iii) or 6.2(iv) solely because (A) the Company, (B) an entity in which the Company directly or indirectly beneficially owns 50% or more of the outstanding Voting Stock (a "Subsidiary"), or (C) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K, or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 20% or otherwise, or because the Company reports that a Change in Control of the Company has occurred or will occur in the future by reason of such beneficial ownership.
(i) Anything in this Agreement to the contrary notwithstanding, if it is determined (as hereafter provided) that any payment or distribution by the Company or any of its affiliates to or for the benefit of the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being considered "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the "Excise Tax"), then the Executive will be entitled to receive an additional payment or payments (collectively, a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. No Gross-Up Payment will be made with respect to the Excise Tax, if any, attributable to (a) any incentive stock option, as defined by Section 422 of the Code ("ISO") granted prior to the execution of this Agreement (unless a comparable Gross-Up Payment has theretofore been made available with respect to such option), or (b) any stock appreciation or similar right, whether or not limited, granted in tandem with any ISO described in clause (a).
(ii) Subject to the provisions of Section 7(vi) hereof, all determinations required to be made under this Section 7, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross- Up Payment is required to be paid by the Company to the Executive and the amount of such Gross-Up Payment, will be made by a nationally recognized firm of certified public accountants (the "Accounting Firm") selected by the Executive in his sole discretion. The Executive will direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and the Executive within 15 calendar days after the Executive's termination, if applicable, and any other such time or times as may be requested by the Company or the Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company will pay the required Gross-Up Payment to the Executive within five business days after receipt of such determination and calculations with respect to any Payment to the Executive. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it will, at the same time as it makes such determination, furnish the Company and the Executive an opinion that the Executive has substantial authority not to report any Excise Tax on the Executive's federal, state, local income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment will be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the C ode (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payment that will not have been made by the Company have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 7(vi) hereof and the Executive thereafter is required to make a payment of any Excise Tax, the Executive will direct the Accounting
Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible. Any such Underpayment will be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations.
(iii) The Company and the Executive will each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and other cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Section 7(ii) hereof.
(iv) The federal, state and local income or other tax returns filed by the Executive will be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive. The Executive will make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of the Executive's federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Executive's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive will within five business days pay to the Company the amount of such reduction.
(v) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 7(ii) and (iv) hereof will be borne by the Company. If such fees and expenses are initially paid by the Executive, the Company will reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of his payment thereof.
(vi) The Executive will notify the Company in writing of any claim by the
Internal Revenue Service or other taxing authority that, if successful, would
require the payment by the Company of a Gross-Up Payment. Such notification
will be given as promptly as practicable but no later than 10 business days
after the Executive actually receives notice of such claim and the Executive
will further apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the extent known by
the Executive). The Executive will not pay such claim prior to the earlier of
(a) the expiration of the 30-calendar-day period following the date on which the
Executive gives such notice to the Company, and (b) the date that any payment of
amount with respect to such claim is due. If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive will:
(a) provide the Company with any written records or documents in the Executive's possession relating to such claim reasonably requested by the Company;
(b) take such action in connection with contesting such claim as the Company will reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company;
(c) cooperate with the Company in good faith in order to effectively contest such claim; and
(d) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company will bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and will indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 7(vi), the Company will control all proceedings taken in connection with the contest of any claim contemplated by this Section 7(vi) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that the Executive may participate therein at the Executive's own cost and expense) and may, at its option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine; provided, however, that if the Company directs the Executive to pay the tax claimed and sue for a refund, the Company will advance the amount of such payment to the Executive on an interest-free basis and will indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(vii) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 7(vi) hereof, the Executive receives any refund with respect to such claim, the Executive will (subject to the Company's complying with the requirements of Section 7(vi) hereof) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 7(vi) hereof, a determination is made that the Executive will not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest
such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance will be forgiven and will not be required to be repaid and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by the Company to the Executive pursuant to this Section 7.
9.1 (i) Subject to section 6.1(i), the Executive hereby covenants and agrees that during the employment Term and for one year following the Employment Term and for one year following the Employment Term he will not, without the prior written consent of the Company, engage in Competition (as defined below) with the Company. For purposes of this Agreement, if the Executive takes any of the following actions he will be engaged in "Competition": engaging in or carrying on, directly or indirectly, any enterprise, whether as an advisor, principal, agent, partner, officer, director, employee, stockholder, associate or consultant to any person, partnership, corporation or any other business entity, that is principally engaged in the business of the generation, transmission, or distribution of electricity in States in which the Company or its affiliates has significant operations; provided, however, that "Competition" will not include (a) the mere ownership of securities in any enterprise and exercise of rights appurtenant thereto, or (b) participation in management of any enterprise or business operation thereof other than in connection with the competitive operation of such enterprise.
(ii) Subject to Section 6.1(i), the Executive hereby covenants and agrees that during the Employment Term and for three years following the Employment Term, he will not assist a third party in preparing or making an unsolicited bid for the Company, engaging in a proxy contest with the Company, or engaging in any other similar activity.
9.2 During the Employment Term, the Company agrees that it will disclose
to Executive its confidential or proprietary information (as defined in this
Section 9.2) to the extent necessary for Executive to carry out the Executive's
obligations under this Agreement. Subject to Section 6.1(i), the Executive
hereby covenants and agrees that he will not, without the prior written consent
of the Company, during the Employment Term or thereafter, disclose to any person
not employed by the Company, or use in connection with engaging in Competition
with the Company, any confidential or proprietary information of the Company.
For purposes of this Agreement, the term "confidential or proprietary
information" will include all information of any nature and in any form that is
owned by the Company and that is not publicly available or generally known to
persons engaged in businesses similar or
related to those of the Company. Confidential information will include, without limitation, the Company's financial matters, customers, employees, industry contracts, and all other secrets and all other information of a confidential or proprietary nature. The foregoing obligations imposed by this Section 9.2 will cease if such confidential or proprietary information will have become, through no fault of the Executive, generally known to the public or the Executive is required by law to make disclosure (after giving the Company notice and an opportunity to contest such requirement).
9.3 Subject to Section 6.1(i), the Executive hereby covenants and agrees that during the Employment Term and for one year thereafter the Executive will not attempt to influence, persuade or induce, or assist any other person in so persuading or inducing, any employee of the Company to give up, or to not commence, employment or a business relationship with the Company.
such counsel, the Company irrevocably consents to the Executive's entering into an attorney-client relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship shall exist between the Executive and such counsel. Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys' and related fees and expenses incurred by the Executive in connection with any of the foregoing.
(i) The company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization, operation of law or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company where by purchase, merger, consolidation, reorganization, operation of law or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company.
(ii) This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees.
(iii) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 12.2(i) and 12.2(ii). Without limiting the generality or effect of the foregoing, the Executive's right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by Executive's will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 12.2(iii), the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated.
writing; provided, however, that such waiver will not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written, but effective as provided in Section 1.2.
NEVADA POWER COMPANY,
a Nevada corporation
EXHIBIT 10(E)
RETENTION AGREEMENT
PARTIES
The parties to this Retention Agreement ("Agreement") are Nevada Power Company and David G. Barneby.
(a) Employee currently holds the position of Vice President, Power Delivery, with Company.
(b) Company is currently in the process of divesting itself of all or a portion of its generation facilities ("Divestiture").
(c) Company and Employee have executed the Original Agreement. Company is currently in the process of merging with Sierra Pacific Resources ("Merger") which is a "change in control" as defined in the Original Agreement. Pursuant to the terms of the Original Agreement and upon completion of the Merger, Employee will be entitled to receive the involuntary termination benefits contained in Section 5 of the Original Agreement.
(d) Company and Employee desire to have Employee remain an employee of Successor Company under the terms of this Agreement. Therefore, upon completion of the Merger, this Agreement is intended to replace the Original Agreement and the Original Agreement is intended to become void and unenforceable. The benefits contained in this Agreement are in addition to Employee's salary, bonuses, SERP, and all other benefits which Employee is currently entitled to receive as a result of his employment at Company and which will not be reduced in aggregate value from current levels during the term of this Agreement.
(e) Employee may have access to Confidential Information. In addition, Employee may develop on behalf of Company an acquaintance with Company's customers and prospective customers. Employee will occupy a position of trust and confidence with respect to such customers and such Confidential Information. Employee understands that any entrusting of Confidential Information and/or customer contacts or relationships to Employee by Company is done in reliance on a confidential relationship arising out of employment with Company. Employee understands that Confidential Information and customer contracts that Employee may acquire or may have access to is of great value to Company.
(f) The consideration for the terms and conditions of this Agreement is adequate and is fully set forth in this Agreement.
2.1 Company shall pay to Employee the following amounts. The principal amount is economically similar to the benefits to which Employee would be entitled to receive after a voluntary termination under the Original Agreement.
These amounts shall be paid to Employee under the following schedule, less withholding, assessments and authorized deductions:
Payment Date Principal Interest Payment
------------ --------- -------- -------
Amount
------
Within 15 days after the
close of the Merger 125,000 0 125,000
October 1, 1999 29,300 14,920 44,220
January 1, 2000 29,300 13,750 43,050
April 1, 2000 29,300 12,580 41,880
July 1, 2000 29,300 11,400 40,700
October 1, 2000 29,300 10,230 39,530
January 1, 2001 29,300 9,060 38,360
April 1, 2001 29,300 7,890 37,190
July 1, 2001 29,300 6,720 36,020
October 1, 2001 29,300 5,540 36,020
January 1, 2002 29,300 4,370 33,670
July 31, 2002 80,000 6,430 86,430
TOTALS 498.000 102,890 600,890
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If Employee's employment is Terminated, then Employee shall be paid the remaining unpaid principal amount and interest prorated to the date of termination within 30 days of Employee's Termination. If Employee dies prior to July 31, 2002, then Employee's estate shall be paid the remaining unpaid principal amount and interest prorated to the date of death within 30 days of Employee's death.
The above payments will not be recognized as covered pay under any employee benefit plan sponsored by the Company except for the Deferred Compensation Program.
2.2 Employee shall be paid for any accrued but unused vacation as defined under Company's vacation policy then in effect.
2.3 If Employee's employment is Terminated and/or if Employee retires, then Employee shall be entitled to receive an amount which is economically similar to the following:
2.3.1 The Program includes an enhancement to the Nevada Power Company
Retirement Plan ("Retirement Plan") ("Enhanced Lump Sum"). The
Enhanced Lump Sum is based upon the following calculations and
conditions:
(1) If Employee is under the age of 55, then Employee shall
receive the present value of an Early Retirement Benefit
commencing at age 55, calculated using the Early Retirement
3
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Fact (i.e., 65%) that applies to employees who retire at
age 55. If Employee is over the age of 55, then at his
actual age under the terms of the plan; and
(2) The dollar limitation in Section 5.2(c) of the Retirement
Plan will not apply, however, all other restrictions
required by federal law (e.g., Internal Revenue Code (S)415
limits and spousal waivers) will apply.
Company shall maintain a life insurance policy (either Company
owned or other policy) in an amount no less than the then
current value of the Enhanced Lump Sum and payable to a
beneficiary named by Employee. This policy shall remain in
effect so long as Employee is an active employee of Company.
2.3.2 Company shall add a total of five years to Employee's age or
years of service or a combination thereof in order to qualify
for, or improve, Employee" retiree medical benefits contained
in Company" health care plans.
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Employee understands and agrees that the Retirement Plan is a "qualified" plan and offering Employee the Enhanced Lump Sum benefit set forth in Section 2.3.1 above may violate one or more sections of the Internal Revenue Code and therefore, the Retirement Plan may not be able to pay this benefit to Employee. In such case, Company and Employee will work together to reach an agreement as to a cash payment from general assets that produces a value comparable to the lump sum benefit that could not be paid from the qualified plan. Such value shall factor in the time value of tax consequences and shall be offset by the value of the payments expected to be made from the qualified plan.
2.4 For a period of 24 months following Termination, the Company will arrange to provide the Employee with health (including medical/hospital, dental and vision) and life benefits substantially similar to those that Employee was receiving or entitled to receive immediately prior to Termination. These benefits will be reduced to the extent comparable benefits are actually received by or in respect of Employee from another employer during the 24-month period, and any such benefits actually received shall be reported by Employee or other recipient to the Company. During the 24-month period, the Company will use its best efforts to maintain in full force and effect for the continued benefit of Employee all benefits referenced herein or will arrange to make available to Employee benefits substantially similar to the referenced benefits. Such benefits will be provided to Employee on the same terms and conditions (including employee contributions toward the premium payments) under which Employee was entitled to participate immediately prior to Termination. To the extent the coverage or benefits provided herein
results in Employee or any dependent or beneficiary thereof incurring additional federal, state or local taxes that would otherwise not have been incurred in connection with the provision of such coverage of benefits had Employee's employment not been terminated, the Company shall promptly pay Employee, dependent or beneficiary, as the case may be, on an after-tax basis, an additional payment, in an amount equal to all taxes, including interest and penalties thereon, imposed as the result of such coverage or benefits.
2.5 Anything in this Agreement to the contrary notwithstanding, if it is determined (as hereafter provided) that any payment or distribution by the Company or any of its affiliates to or for the benefit of Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being considered "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the "Excise Tax"), then Employee will be entitled to receive an additional payment or payments (collectively, a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. No Gross-Up Payment will be made with respect to the Excise Tax, if any, attributable to (a) any incentive stock option, as defined by Section 422 of the Code ("ISO") granted prior to the execution of this Agreement (unless a comparable Gross-Up Payment has theretofore been made available with respect to such option), or (b) any stock appreciation or similar right, whether or not limited, granted in tandem with any ISO. All determinations required to be made under this Section, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the Executive and the amount of such Gross-Up Payment, will be made by a nationally recognized firm of certified public accountants (the "Accounting Firm") selected by Employee in his sole discretion. Employee will direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and Employee within 15 calendar days after Termination, if applicable, and any other such time or times as may be requested by the Company or employee. If the Accounting Firm determines that any Excise Tax is payable by Employee, then the
Company will pay the required Gross-Up Payment to the Executive within five business days after receipt of such determination and calculation with respect to any Payment to the Executive. If the Accounting Firm determines that no Excise Tax is payable by Employee, then it will, at the same as it makes such determination, furnish the Company and Employee an opinion that Employee has substantial authority not to report any Excise Tax on Employee's federal income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment will be binding upon the Company and Employee. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments that will have not been made by the Company should have been made (an "Underpayment"), consistent with the calculations required to be made hereunder. If the Company exhausts or fails to pursue its remedies contained herein and Employee is required to make a payment of any Excise Tax, then Employee will direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and Employee as promptly as possible. Any such Underpayment will be promptly paid by the Company to, or for the benefit of, Employee within five business days after receipt of such determination and calculations. The Company and Employee will each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or Employee, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Section. The federal income or other tax returns filed by Employee will be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by Employee. Employee will make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of Employee's federal income tax return as filed with the Internal Revenue Service and corresponding other tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of the Employee's federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, Employee will within five business days pay to the Company the amount of such reduction. The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by this Section will be borne by the Company. If such fees and expenses are initially paid by Employee, then the Company will reimburse employee the full amount of such fees and expenses within five business days after receipt from Employee of a statement therefor and reasonable evidence of his payment thereof. Employee will
notify the Company in writing of any claim by the Internal Revenue Service or other taxing authority that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification will be given as promptly as practicable but no later than 10 business days after Employee actually receives notice of such claim and Employee will further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent know by Employee). Employee will not pay such claim prior to the earlier of (a) the expiration of the 30-calendar- day period following the date on which Employee gives such notice to the Company, and (b) the date that any payment of amount with respect to such claim is due. If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee will:
(1) Provide the Company with any written records or documents in Employee's possession relating to such claim reasonably requested by the Company;
(2) take such action in connection with contesting such claim as the Company will reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claims by an attorney competent in respect of the subject matter and reasonably selected by the Company;
(3) cooperate with the Company in good faith in order to effectively contest such claim; and
(4) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company will bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and will indemnify and hold harmless Employee, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. The Company will control all proceedings taken in connection with the contest on any claim contemplated by this Section, the contest of any claim contemplated by this Section and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that Employee may participate therein at his own cost and expense) and may, at its option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine; provided, however, that if the Company
directs Employee to pay the tax claimed and sue for a refund, the Company will advance the amount of such payment to Employee on an interest-free basis and will indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Employee will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. If, after the receipt by Employee of an amount advanced by the Company pursuant to this Section, Employee receives any refund with respect to such claim, then Employee will (subject to the Company's complying with the requirements of this Section) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by Employee of an amount advanced by the Company pursuant to this Section, a determination is made that Employee will not be entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance will be forgiven and will not be required to be repaid and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by the Company to Employee pursuant to this Section.
3.1 Upon Termination, Employee shall deliver to Company all Items in Employee's possession or under Employee's control which are owned by Company (including all copies), and Employee shall retain no copies thereof.
4. Confidentiality
4.1 Employee agrees that he will not, without prior written consent of the Company, during the time of employment with Company or thereafter disclose to any person not employed by the Company, or use in connection with engaging in Competition with the Company, any confidential or proprietary information of the Company. For purposes of this Agreement, the term "confidential or proprietary information" will include all information of any nature and in any form that is owned by the Company and that is not publicly available or generally known to persons engaged in businesses similar or related to those of the Company. Confidential Information will include, without limitation, the Company's financial matters, customers, employees, industry contracts, and all other secrets and all other information
of a confidential or proprietary nature. The foregoing obligations will cease if such confidential or proprietary information will have become, through no fault of the Executive, generally known to the public or the Executive is required by law to make disclosure (after giving the Company notice and an opportunity to contest such requirement).
5. Non-Competition
5.1 Employee agrees that during the time of employment with Company and
for one year thereafter, he will not, without the prior written
consent of the company, engage in Competition (as defined below) with
the Company. For purposes of this Agreement, if the Executive takes
any of the following actions he will be engaged in "Competition":
engaging in or carrying on, directly or indirectly, any enterprise,
whether as an advisor, principal agent, partner, officer, director,
employee, stockholder, associate or consultant to any person,
partnership, corporation, or any other business entity that is
principally engaged in the business of the generation, transmission,
or distribution of electricity in states in which the Company or its
affiliates have significant operations; provided, however, that
"Competition" will not included (a) the mere ownership of securities
in any enterprise and exercise of rights appurtenant thereto, or (b)
participation in management of any enterprise or business operation
thereof other than in connection with the competitive operation of
such enterprise.
5.2 Employee agrees that during the time of employment with Company and for three years thereafter, he will not assist a third party in preparing or making an unsolicited bid for the Company, engage in a proxy contest with the Company, or engage in any other similar activity.
5.3 Employee agrees that during the time of employment with Company and for one year thereafter, he will not attempt to influence, persuade or induce, or assist any other person in so persuading or inducing, any employee of the Company to give up, or to not commence, employment or a business relationship with the Company.
5.4 Employee agrees that the restrictions set forth in paragraphs 5.1, 5.2, and 5.3 are fair and reasonable and are reasonably required for the protection of the interests of Company. Employee agrees that compliance with the provisions of paragraphs 5.1, 5.2 and 5.3 will not cause Employee undue hardship nor unreasonably interfere with Employee's ability to earn a livelihood.
6. Miscellaneous Provisions
applicable legal duty to disclose such information, it shall be a condition of eligibility to receive any payment pursuant to this Agreement that Employee hold the terms of this Agreement and the amount of any payment hereunder in strict confidence. Employee may disclose such information on a confidential basis to Employee's spouse (if any), and to any financial counselor, tax advisor or legal counsel retained by Employee.
satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization, operation of law or otherwise (and such successor shall thereafter be deemed the "Company" for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company. (ii) This Agreement will inure to the benefit of and be enforceable by Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees. (iii) This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder. Without limiting the generality or effect of the foregoing, the Executive's right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by Executive'' will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section, the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated.
in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant will be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable.
NEVADA POWER COMPANY EMPLOYEE
By_________________________________ __________________________ Chief Executive Officer Date Signature Date
Exhibit (12)(A) to the Sierra Pacific Resources 1999 Form 10-K
SIERRA PACIFIC RESOURCES
CALCULATION OF PRE-TAX INTEREST COVERAGES
(dollars in thousands)
1999 1998 1997
-------- -------- --------
Total Income Before
Interest Charges $171,016 $151,619 $140,215
Add: Income Taxes:
Included in operating expense 26,086 42,949 43,478
Included in other income - net 1,272 2,522 1,747
Allowance for Borrowed Funds
Used During Construction 8,127 6,080 2,579
-------- -------- --------
Total Numerator $206,501 $203,170 $188,019
======== ======== ========
Interest Charges:
Long-Term Debt $ 81,731 $ 56,995 $ 50,791
Other 26,356 6,018 1,531
-------- -------- --------
Total Denominator $108,087 $ 63,013 $ 52,322
======== ======== ========
Pre-Tax Interest Coverage 1.91 3.22 3.59
======== ======== ========
|
Exhibit (12)(B) to the Sierra Pacific Resources 1999 Form 10-K
NEVADA POWER COMPANY
CALCULATION OF PRE-TAX INTEREST COVERAGES
(dollars in thousands)
1999 1998 1997
--------- --------- ---------
Total Income Before
Interest Charges $ 131,930 $ 151,619 $ 140,215
Less: Equity in Earnings of
Sierra Pacific Resources (13,058) - -
Add: Income Taxes:
Included in operating expense 19,943 42,949 43,478
Included in other income - net 1,272 2,522 1,747
Allowance for Borrowed Funds
Used During Construction 8,356 6,080 2,579
--------- --------- ---------
Total Numerator $ 148,443 $ 203,170 $ 188,019
========= ========= =========
Interest Charges:
Long-Term Debt $ 64,454 $ 56,995 $ 50,791
Other 8,815 6,018 1,531
--------- --------- ---------
Total Denominator $ 73,269 $ 63,013 $ 52,322
========= ========= =========
Pre-Tax Interest Coverage 2.03 3.22 3.59
========= ========= =========
|
EXHIBIT 23(A)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No. 333-92651 of Sierra Pacific Resources on Form S-8, Registration Statement No. 333-80149 of Sierra Pacific Resources on Form S-3 and Registration Statement No. 333-77523 of Sierra Pacific Resources on Form S-3 of our reports dated March 21, 2000, appearing in the Annual Report on Form 10-K of Sierra Pacific Resources for the year ended December 31, 1999.
DELOITTE & TOUCHE LLC
Reno, Nevada
March 24, 2000
| ARTICLE OPUR1 |
| THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPR'S FINANCIAL RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| CIK: 0000741508 |
| NAME: SIERRA PACIFIC RESOURCES |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | DEC 31 1999 |
| PERIOD END | DEC 31 1999 |
| BOOK VALUE | PER BOOK |
| TOTAL NET UTILITY PLANT | 4,073,529 |
| OTHER PROPERTY AND INVEST | 105,880 |
| TOTAL CURRENT ASSETS | 316,269 |
| TOTAL DEFERRED CHARGES | 752,008 |
| OTHER ASSETS | 0 |
| TOTAL ASSETS | 5,247,686 |
| COMMON | 78,414 |
| CAPITAL SURPLUS PAID IN | 1,293,990 |
| RETAINED EARNINGS | 104,725 |
| TOTAL COMMON STOCKHOLDERS EQ | 1,477,129 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 50,000 |
| LONG TERM DEBT NET | 1,474,203 |
| SHORT TERM NOTES | 100,000 |
| LONG TERM NOTES PAYABLE | 0 |
| COMMERCIAL PAPER OBLIGATIONS | 654,979 |
| LONG TERM DEBT CURRENT PORT | 198,126 |
| PREFERRED STOCK CURRENT | 0 |
| CAPITAL LEASE OBLIGATIONS | 82,424 |
| LEASES CURRENT | 4,583 |
| OTHER ITEMS CAPITAL AND LIAB | 1,206,242 |
| TOT CAPITALIZATION AND LIAB | 5,247,686 |
| GROSS OPERATING REVENUE | 1,309,131 |
| INCOME TAX EXPENSE | 26,086 |
| OTHER OPERATING EXPENSES | 1,111,887 |
| TOTAL OPERATING EXPENSES | 1,137,973 |
| OPERATING INCOME LOSS | 171,158 |
| OTHER INCOME NET | (142) |
| INCOME BEFORE INTEREST EXPEN | 171,016 |
| TOTAL INTEREST EXPENSE | 99,960 |
| NET INCOME | 71,056 |
| PREFERRED STOCK DIVIDENDS | 2,396 |
| EARNINGS AVAILABLE FOR COMM | 51,750 |
| COMMON STOCK DIVIDENDS | 73,514 |
| TOTAL INTEREST ON BONDS | 81,731 |
| CASH FLOW OPERATIONS | 211,089 |
| EPS BASIC | .83 |
| EPS DILUTED | .83 |