0000071180-95-000021.txt : 19950810 0000071180-95-000021.hdr.sgml : 19950810 ACCESSION NUMBER: 0000071180-95-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950809 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEVADA POWER CO CENTRAL INDEX KEY: 0000071180 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 880045330 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04698 FILM NUMBER: 95559981 BUSINESS ADDRESS: STREET 1: 6226 W SAHARA AVE CITY: LAS VEGAS STATE: NV ZIP: 89102 BUSINESS PHONE: 7023675000 MAIL ADDRESS: STREET 1: P O BOX 230 CITY: LAS VEGAS STATE: NV ZIP: 89151 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHERN NEVADA POWER CO DATE OF NAME CHANGE: 19701113 10-Q 1 10-Q JUNE 30, 1995 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended June 30, 1995 Commission File No. 1-4698 ------------- ------ Nevada Power Company ------------------------------------------------------ (Exact name of registrant as specified in its charter) Nevada 88-0045330 -------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6226 West Sahara Avenue, Las Vegas, Nevada 89102 ------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) (702) 367-5000 ---------------------------------------------------- (Registrant's telephone number, including area code) ------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Common Stock outstanding July 31, 1995, 46,320,930 shares. ---------- 1 PART I. FINANCIAL INFORMATION STATEMENTS OF INCOME (In Thousands, Except Per Share Amounts) (Unaudited) FOR THE FOR THE THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ----------------- ------------------ 1995 1994 1995 1994 -------- -------- -------- -------- ELECTRIC REVENUES.................... $173,348 $195,788 $318,532 $340,446 -------- -------- -------- -------- OPERATING EXPENSES AND TAXES: Fuel .............................. 21,764 26,636 44,439 47,195 Purchased and interchanged power .. 57,548 67,004 102,588 119,495 Deferred energy cost adjustments, net ................ 8,027 9,679 18,127 14,817 -------- -------- -------- -------- Net energy costs .................. 87,339 103,319 165,154 181,507 Other production operations ....... 3,900 3,944 8,735 8,015 Other operations .................. 24,407 24,744 47,160 47,576 Maintenance and repairs ........... 8,996 9,441 18,939 19,185 Provision for depreciation ........ 13,463 12,578 26,529 24,538 General taxes ..................... 4,762 4,210 9,339 8,495 Federal income taxes .............. 6,720 9,391 7,273 10,773 -------- -------- -------- -------- 149,587 167,627 283,129 300,089 -------- -------- -------- -------- OPERATING INCOME .................... 23,761 28,161 35,403 40,357 -------- -------- -------- -------- OTHER INCOME (EXPENSES): Allowance for other funds used during construction ............... 1,477 1,444 3,172 3,671 Miscellaneous, net ................ (325) 4,613 1,727 4,851 -------- -------- -------- -------- 1,152 6,057 4,899 8,522 -------- -------- -------- -------- INCOME BEFORE INTEREST DEDUCTIONS ... 24,913 34,218 40,302 48,879 -------- -------- -------- -------- INTEREST DEDUCTIONS: Interest on long-term debt ..... 11,741 11,248 23,290 22,031 Other interest ................. 653 868 993 1,345 Allowance for borrowed funds used during construction ........... (891) (1,091) (1,945) (2,382) -------- -------- -------- -------- 11,503 11,025 22,338 20,994 -------- -------- -------- -------- NET INCOME .......................... 13,410 23,193 17,964 27,885 DIVIDEND REQUIREMENTS ON PREFERRED STOCK 992 994 1,984 1,989 -------- -------- -------- -------- EARNINGS AVAILABLE FOR COMMON STOCK . $ 12,418 $ 22,199 $ 15,980 $ 25,896 ======== ======== ======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ........................ 46,080 42,251 45,860 42,023 ======== ======== ======== ======== EARNINGS PER AVERAGE COMMON SHARE ... $ 0.27 $ 0.53 $ 0.35 $ 0.62 ======== ======== ======== ======== DIVIDENDS PER COMMON SHARE .......... $ 0.40 $ 0.40 $ 0.80 $ 0.80 ======== ======== ======== ======== See Notes to Financial Statements. 2 BALANCE SHEETS ASSETS (Unaudited) June 30, December 31, 1995 1994 ----------- ------------- (In Thousands) ELECTRIC PLANT: Original cost ....................................... $1,934,394 $1,831,400 Less accumulated depreciation ....................... 520,724 495,691 ----------- ----------- Net plant in service .............................. 1,413,670 1,335,709 Construction work in progress ....................... 137,355 159,167 Other plant, net .................................... 86,260 89,127 ----------- ----------- 1,637,285 1,584,003 ----------- ----------- INVESTMENTS ........................................... 9,956 21,602 ----------- ----------- CURRENT ASSETS: Cash and temporary cash investments ................. 12,074 123 Customer receivables ................................ 82,789 70,378 Other receivables ................................... 7,581 6,033 Fuel stock and materials and supplies ............... 37,950 36,657 Deferred energy costs ............................... 6,331 25,714 Prepayments ......................................... 8,269 9,657 ----------- ----------- 154,994 148,562 ----------- ----------- DEFERRED CHARGES ...................................... 154,863 153,222 ----------- ----------- $1,957,098 $1,907,389 =========== =========== CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common shareholders' equity: Common stock, 46,245,043 and 45,382,370 shares issued and outstanding, respectively ...... $ 49,450 $ 48,587 Premium and unamortized expense on capital stock .. 580,182 563,562 Retained earnings ................................. 99,039 119,600 ----------- ----------- 728,671 731,749 ----------- ----------- Cumulative preferred stock .......................... 41,984 42,064 ----------- ----------- Long-term debt ...................................... 801,366 712,571 ----------- ----------- 1,572,021 1,486,384 ----------- ----------- CURRENT LIABILITIES: Current maturities and sinking fund requirements .... 7,580 57,551 Accounts payable, including salaries and wages ...... 63,768 66,467 Accrued taxes ....................................... 14,181 2,493 Accrued interest .................................... 6,475 6,239 Accumulated deferred taxes on deferred energy costs . 2,216 9,000 Customers' service deposits and other ............... 38,673 35,763 ----------- ----------- 132,893 177,513 ----------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred investment tax credits ......... 33,194 33,924 Accumulated deferred taxes on income ................ 140,046 135,152 Customers' advances for construction and other ...... 78,944 74,416 ----------- ----------- 252,184 243,492 ----------- ----------- $1,957,098 $1,907,389 =========== =========== See Notes to Financial Statements. 3 STATEMENTS OF CASH FLOWS (Unaudited) FOR THE SIX MONTHS ENDED JUNE 30, -------------------- 1995 1994 -------- -------- (In Thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ..............................................$ 17,964 $ 27,885 Adjustments to reconcile net income to net cash provided- Depreciation and amortization .......................... 31,814 31,023 Deferred income taxes and investment tax credits ....... (5,230) (671) Allowance for other funds used during construction ..... (3,172) (3,671) Changes in- Receivables ............................................ (13,872) (46,126) Fuel stock and materials and supplies .................. (1,294) (1,020) Accounts payable and other current liabilities ......... 1,664 15,427 Deferred energy costs .................................. 17,463 12,417 Accrued taxes and interest ............................. 11,924 10,393 Other assets and liabilities ............................ (1,440) (2,306) -------- -------- Net cash provided by operating activities ............. 55,821 43,351 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Construction expenditures and gross additions ........... (81,450) (70,637) Investment in subsidiaries and other .................... 13,650 288 Salvage net of removal cost ............................. 1,449 (245) -------- -------- Net cash used in investing activities ................. (66,351) (70,594) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of capital stock ................................... 17,469 19,263 Sale of long-term debt .................................. 85,000 - Change in funds held in trust ........................... 7,158 32,295 Retirement of preferred stock and long-term debt ........ (54,043) (4,202) Coal contract buy-out ................................... - (15,439) Change in short-term borrowing .......................... - 28,990 Cash dividends .......................................... (38,504) (35,527) Other financing activities .............................. 5,401 2,016 -------- -------- Net cash provided by financing activities ............. 22,481 27,396 -------- -------- CASH AND TEMPORARY CASH INVESTMENTS: Net increase during the period .......................... 11,951 153 Beginning of period ..................................... 123 145 -------- -------- End of period ...........................................$ 12,074 $ 298 ======== ======== CASH PAID DURING THE PERIOD FOR: Interest, net of amounts capitalized ....................$ 26,332 $ 25,108 ======== ======== Income taxes ............................................$ 205 $ 2,000 ======== ======== See Notes to Financial Statements. 4 NOTES TO FINANCIAL STATEMENTS The condensed financial statements included herein have been prepared by the registrant, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which, in the opinion of management are necessary for a fair presentation. Certain information and footnote disclosures have been condensed in accordance with generally accepted accounting principles and pursuant to such rules and regulations. The registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements and notes thereto be read in conjunction with the financial statements and the notes thereto included in the registrant's latest annual report. Certain prior period amounts have been reclassified, with no effect on income or common shareholders' equity, to conform with the current period presentation. (1) FEDERAL INCOME TAXES: For interim financial reporting purposes, Nevada Power Company (Company) reflects in the computation of the federal income tax provision liberalized depreciation based upon the expected annual percentage relationship of book and tax depreciation and reflects the allowance for funds used during construction on an actual basis. The total federal income tax expense as set forth in the accompanying statements of income results in an effective federal income tax rate different than the statutory federal income tax rate. The table below shows the effects of those transactions which created this difference. THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ----------------- ---------------- 1995 1994 1995 1994 ------- ------- ------- ------- (In Thousands) Federal income tax at statutory rate .... $ 7,263 $12,316 $ 9,757 $14,906 Investment tax credit amortization ...... (365) (365) (730) (730) Other ................................... 442 45 884 529 ------- ------- ------- ------- Recorded federal income taxes ........... $ 7,340 $11,996 $ 9,911 $14,705 ======= ======= ======= ======= Federal income taxes included in- Operating expenses .................... $ 6,720 $ 9,391 $ 7,273 $10,773 Other income, net ..................... 620 2,605 2,638 3,932 ------- ------- ------- ------- Recorded federal income taxes ........... $ 7,340 $11,996 $ 9,911 $14,705 ======= ======= ======= ======= (2) COMMITMENTS AND CONTINGENCIES: 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. This will require the installation of additional pollution-control technology at some of the Reid Gardner Station generating units before 2000 at an estimated cost to the Company of no more than $6 million. The Clean Air Act Amendments also mandated creation of the Grand Canyon Visibility Transport Commission to work toward the goal of visibility improvement in the Grand Canyon and other national parks of the Colorado Plateau. The Commission is expected to make recommendations to the U.S. Environmental Protection Agency (EPA) by April 1996, regarding ways to improve visibility. A variety of actions could be considered including imposition of more pollution controls or emissions limitations upon large sources of pollution in the West and Southwest. The potential affect on the Company cannot be determined at this time. 5 Also related to visibility, the United States Congress authorized the EPA to study the potential impact the Mohave Generating Station (Mohave) may have on visibility in the Grand Canyon area. Results of this study are expected in late 1995. Also, the Nevada Division of Environmental Protection has imposed more stringent interim stack opacity limits for Mohave. This may affect the Company's utilization of resources, however, a final opacity standard will not be established until November 1995. As a 14 percent owner of Mohave, the Company will be required to fund any plant improvements that may result from the visibility study and opacity limitation. The cost of any potential improvements cannot be estimated at this time. Saguaro Power Company (Saguaro), a cogeneration power producer, and the Company are parties to a 30-year power purchase contract (Contract) wherein the Company agreed to purchase power from Saguaro's plant near Henderson, Nevada. On July 22, 1995, Saguaro filed a lawsuit in District Court, Clark County, Nevada, seeking damages and injunctive relief as a result of being curtailed in its power deliveries during periods of low load conditions on the Company's system. The lawsuit alleges that the Company refused to accept and pay for approximately $2 million of electric energy and capacity, and that the Company should reimburse Saguaro for $2 million related to the construction of the interconnection line. Saguaro also alleges that the Company has refused to pay Saguaro for excess capacity. Lastly, Saguaro alleges that the Company has committed fraud and anticipatory breach of the Contract and this conduct has damaged Saguaro in an approximate additional amount of $75 million. Saguaro also seeks injunctive relief to prevent curtailments of its power deliveries and arbitration regarding the curtailments. The Company believes its actions are consistent with the Contract, federal and state regulations, and state administrative directives, and will vigorously defend against these claims. Further, the Company contends it has paid Saguaro all amounts due it under the terms of the Contract. On July 24, 1995, Nevada Cogeneration Associates #1 and Nevada Cogeneration Associates #2, also cogeneration power producers, made a request for arbitration of their current contracts relative to the same issues of low load condition curtailments and energy and capacity payments. They allege under payments by the Company of approximately $2.6 million. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Company's customer growth rate during 1994 and 1993 was 6.0 and 5.4 percent, respectively. The increase in customers for the first six months of 1995 was at an annualized rate of 5.7 percent. At June 30, 1995, the Company provided electric service to 440,410 customers. Every three years Nevada law requires the Company to file with the Public Service Commission of Nevada (PSC) a forecast of electricity demands for the next 20 years and the Company's plans to meet those demands. In the third quarter of 1994, the Company filed with the PSC its 1994 Resource Plan. The Company introduced a Renewable Energy Program as part of the 1994 Resource Plan filing. This section of the plan requested approval for the Company to utilize all appropriate incentives, resources, and expertise to foster the development of economically competitive renewable energy systems with the intent to provide southern Nevada customers with 20 megawatts of solar-generated electricity by the year 2002. A stipulation on the Renewable Energy Program was signed by the Company, PSC Staff, Office of Consumer Advocate (OCA) and the Land and Water Fund of the Rockies. The PSC subsequently approved the stipulation which includes establishing a solar test facility 6 on Company property where new solar technologies will be installed and tested. The Company will also install several photovoltaic units in the Las Vegas Valley. The current information about the purchased power markets and the uncertainty of the changes in the electric utility industry mandated a fundamental change in the Company's resource planning strategy. This strategy led the Company to file a Refiled 1994 Resource Plan (Refiled Plan) on February 15, 1995. With the projections of future electricity costs decreasing, many of the Demand-Side Management (DSM) programs offered by the Company were no longer cost-effective. Therefore, the Company reevaluated its DSM programs and requested approval to phase out some programs and suspend the air conditioning load management program until a final analysis is complete in December 1995. Nevada Power, PSC Staff, OCA and other intervenors entered into two separate stipulations to the Refiled Plan, one dealt with Demand-Side Management issues exclusively, and the other dealt with all other aspects of the Refiled Plan. The stipulations included the following items: (1) the Company's load forecast as reasonably reflective of future requirements; (2) the continuation of the pool pump tripper, commercial lighting, customer incentive, standby generator and joint low income weatherization programs; (3) a limited residential new construction program offering education and assistance to contractors on energy efficiency measures in new homes; (4) the approval of DSM contracts with three energy service companies to promote conservation among certain commercial customers to be deferred until April 1, 1996 in a new filing with the PSC; (5) the discontinuation of attic insulation, energy efficient motor and air conditioning replacement programs; (6) the Company shall continue to pursue the short-term purchase strategy; (7) the Company will use environmental externalities values developed by National Economic Research Associates, Inc. in future resource plan filings; (8) a temporary waiver of filing long-term avoided costs during the short-term strategy; (9) the Company will have sufficient flexibility to implement an efficient cost-effective acquisition process, noting that the competitive solicitation process remains the preferred method for comparing resource options; (10) the Company will complete additional voltage, stability and reliability studies to assess and evaluate the capability of the transmission system and submit results to parties by April 1, 1996; 7 (11) the installation of the initial 230 kV circuit and associated substation and communication facilities on the previously approved Arden-Northwest 230 kV Transmission Line; (12) the rerouting of a portion of the Arden-McCullough #2 230 kV Transmission Line; (13) limited resource planning approval to seek the necessary UEPA and other permitting approvals, and to acquire necessary sites and rights-of-way for two 230 kV switching stations; (14) the financial plan will be used as the basis for evaluating the financial implications of the options in this resource plan. The PSC held a question and answer session regarding the stipulations on July 18, 1995. The stipulations were approved with a PSC vote on August 7, 1995. To meet capital expenditure requirements through 1996, the Company plans to utilize internally generated cash, the proceeds from industrial development revenue bonds (IDBs), first mortgage bonds, preferred securities and common stock issues through public offerings and the Stock Purchase and Dividend Reinvestment Plan (SPP). The Company has the option of issuing new shares or using open market purchases of its common stock to meet the requirements of the SPP. Under the SPP the Company issued 1,825,120 and 828,037 shares, respectively, of its common stock in 1994 and the first six months of 1995. On May 19, 1995, the Company sold $85 million of First Mortgage Bonds, Series AA, through a public offering. The bonds will mature in 2000 and will require interest payments due on May 1 and November 1 at the annual rate of 7.06%. Net proceeds from the sale of the bonds were used to repay approximately $70.0 million of indebtedness under the Company's bank revolving credit facility, which was incurred for the purposes of repaying the Company's $50,000,000 First Mortgage Bonds, 6.92% Series U due 1995 and funding the Company's construction program. The remaining net proceeds of the series AA First Mortgage Bonds will be used in connection with the Company's construction program and for general corporate purposes. On May 30, 1995, the Company filed a request with the PSC for authorization to issue an additional 4 million shares of common stock under the SPP. On May 31, 1995, the Company filed an application with the PSC for authorization to finance certain construction projects with up to $76.8 million of IDBs. The Company anticipates entering into agreements with Clark County, Nevada for the issuance of the IDBs in the fall of 1995 subject to PSC approval. On July 17, 1995, the Company filed a request with the PSC to decrease energy rates by approximately $20 million under the state's deferred energy accounting procedures. The Company proposes that there be a deviation from the previous practice so that large power users receive the bulk of the decrease since, according to Company studies, they are currently subsidizing residential users. The proposed energy rates would more closely reflect the customer's cost of service. The Company also committed not to seek an effective date for any rate increase any sooner than January 1997. 8 OPERATING RESULTS OF FIRST SIX MONTHS OF 1995 COMPARED TO FIRST SIX MONTHS OF 1994 Earnings per average common share were 35 cents for the first six months of 1995, compared to 62 cents for the same period in 1994. The decrease in earnings was due primarily to a decrease in kilowatthour sales and the settlement of the replacement power case from the 1985 Mohave Generating Station accident recorded in the second quarter of 1994. The average number of customers increased 5.8 percent and kilowatthour sales, excluding sales for resale, were down 2.0 percent, as compared to the first six months of 1994. Although the number of customers increased, revenues were lower due to mild weather in the first six months of 1995, unusually hot weather in the second quarter of 1994 and a general rate decrease for nonresidential customers effective October 1, 1994. Fuel expense decreased by $2.8 million due mainly to decreased generation at Reid Gardner Station. Purchased power decreased $16.9 million due to reduced power purchases. Depreciation expense increased $2.0 million because of a growing asset base. Other income miscellaneous, net decreased $3.1 million mainly due to the second quarter 1994 recording of the settlement of the replacement power case from the 1985 Mohave Generating Station accident. Average common shares increased because of the sale of additional common shares through a public offering in November 1994 and the SPP to partially provide funds for the construction of facilities necessary to meet increased customer demand for electricity. OPERATING RESULTS OF SECOND QUARTER OF 1995 COMPARED TO SECOND QUARTER OF 1994 Earnings per average common share were 27 cents for the second quarter of 1995, compared to 53 cents for the same period in 1994. The decrease in earnings was due primarily to a decrease in kilowatthour sales and the settlement of the replacement power case from the 1985 Mohave Generating Station accident recorded in the second quarter of 1994. The average number of customers increased 5.7 percent and kilowatthour sales, excluding sales for resale, were down 7.0 percent, as compared to the second quarter of 1994. Although the number of customers increased, revenues were lower due to extremely mild weather in the second quarter of 1995, unusually hot weather in the second quarter of 1994 and a general rate decrease for nonresidential customers effective October 1, 1994. Fuel expense decreased by $4.9 million due mainly to reduced generation at Reid Gardner Station. Purchased power decreased $9.5 million due to reduced power purchases. Depreciation expense increased $.9 million because of a growing asset base. Other income miscellaneous, net decreased $4.9 million mainly due to the second quarter 1994 recording of the settlement of the replacement power case from the 1985 Mohave Generating Station accident. Average common shares increased because of the sale of additional common shares through a public offering in November 1994 and the SPP to partially provide funds for the construction of facilities necessary to meet increased customer demand for electricity. 9 PART II. OTHER INFORMATION Items 1 through 5. None. Item 6. Exhibits and Reports on Form 8-K. a. Exhibits. Exhibits Filed Description -------------- ----------- 27 Financial Data Schedule b. Reports on Form 8-K. None. Signatures ---------- Pursuant to the requirements 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. Nevada Power Company -------------------- (Registrant) STEVEN W. RIGAZIO -------------------------------------- (Signature) Date: August 9, 1995 Steven W. Rigazio -------------- Vice President, Finance and Planning, Treasurer, Chief Financial Officer 10 EX-27 2 FINANCIAL DATA SCHEDULE 10-Q JUNE 30, 1995
UT THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET OF NEVADA POWER COMPANY AS OF JUNE 30, 1995, AND THE RELATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1995 JUN-30-1995 PER-BOOK $1,637,285 9,956 154,994 154,863 0 1,957,098 49,450 580,182 99,039 728,671 38,000 3,984 703,061 0 0 0 2,101 200 98,305 5,279 377,497 1,957,098 318,532 7,273 275,856 283,129 35,403 4,899 40,302 22,338 17,964 1,984 15,980 36,541 0 55,821 .35 0 INAPPLICABLE.