-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QHa5A+D63Y9o8GqTZh2c+SEMzpazc2+KCtLSDG8IvOdisKFL9EM++hyX8LLCK7Mj XRqdUmlZeQJfiHkOSf+xgA== 0000071180-96-000002.txt : 19960306 0000071180-96-000002.hdr.sgml : 19960306 ACCESSION NUMBER: 0000071180-96-000002 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960510 FILED AS OF DATE: 19960305 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: PRE 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-04698 FILM NUMBER: 96531113 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 PRE 14A 1 PRELIMINARY PROXY STATEMENT PRELIMINARY NOTICE OF ANNUAL MEETING OF SHAREHOLDERS MAY 10, 1996 TO OUR SHAREHOLDERS: The Annual Meeting of Shareholders of Nevada Power Company will be held at the Stardust Resort & Casino, Conference Center, 3000 Las Vegas Boulevard South, Las Vegas, Nevada, on Friday, May 10, 1996, at 2:00 P.M. for the following purposes: 1. To elect three directors to three-year terms. 2. To consider and vote upon a shareholder recommendation to the Board of Directors concerning the Retirement Plan for Outside Directors. 3. To consider and act upon any other business that may properly be brought before the meeting. For easy access to the Annual Meeting room, entry from the Industrial Road entrance is recommended. Please see accompanying map. Guest rooms have been reserved at the Stardust Resort & Casino at a special rate for those Nevada Power Company Shareholders who wish to stay any day(s) between Thursday, May 9, and Saturday, May 11, 1996. To obtain this special rate, reservations must be made by April 19, 1996 by calling the Stardust Resort & Casino at (800) 634-6757 or (702) 732-6111, asking for the Convention Desk and identifying yourself with the Group Code NEV 0509. The close of business on March 13, 1996 has been fixed as the record date for determining the shareholders entitled to receive notice of and to vote at the Annual Meeting. March 13, l996 Richard L. Hinckley Secretary EVEN IF YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE LOCATION OF 1996 ANNUAL MEETING OF SHAREHOLDERS A map of the locaion of the 1996 Annual Meeting of Shareholders to be held at the Stardust Resort & Casino, Conference Center, is included in this space. The map shows the area of Las Vegas, Nevada including Sahara Avenue to the North, Tropicana Avenue to the South, Interstate 15 to the West and Paradise Road to the East, as well as the relative location of McCarran Airport and the roads that immediately surround the Stardust Resort & Casino. PRELIMINARY NEVADA POWER COMPANY 6226 West Sahara Avenue P.O. Box 230 Las Vegas, Nevada 89151 _______________________ PROXY STATEMENT The enclosed proxy for the 1996 Annual Meeting of Shareholders is solicited by the Board of Directors of Nevada Power Company (the "Company") and it may be revoked by written notice to the Secretary of the Company at any time prior to its use. All shares represented by valid proxies on the enclosed form, timely received by the Company, will be voted at the meeting or any adjourned session in the manner directed by the shareholder. If no direction is made, the proxy will be voted "FOR" the nominees for Director and "YES" with respect to the shareholder recommendation. As of the close of business on March 13, 1996, there were outstanding and entitled to vote __________ shares of Common Stock. Only holders of Common Stock of record at the close of business on March 13, 1996 will be entitled to vote at the meeting. Each share of the Company's Common Stock is entitled to one vote. The total number of shares represented by individual proxies includes shares, if any, owned by shareholders and credited to their accounts under the Company's Stock Purchase and Dividend Reinvestment Plan. An affirmative vote of a majority of the shares present and voting at the meeting is required for approval of all items being submitted to the shareholders for their consideration. An automated system administered by the Company tabulates the votes. Abstentions are included in the determination of the number of shares present and voting, whereas broker non-votes are not counted for purposes of determining whether a proposal has been approved. The first mailing of the proxy and proxy statement to common shareholders will be on or about March 25, 1996. The cost of soliciting proxies in the enclosed form is being borne by the Company. In addition to solicitation by mail, arrangements have been made with brokerage houses, nominees and other custodians and fiduciaries to send proxy material to their principals and the Company will reimburse them for their reasonable expenses in doing so. Proxies also may be solicited personally or by telephone or telegraph by directors, officers, and a few regular employees of the Company in addition to their usual duties, but they will not be specially compensated for these services. The Company has retained Beacon Hill Partners, Inc., 90 Broad Street, New York, New York 10004 to aid in the solicitation of proxies by similar methods, for which Beacon Hill Partners, Inc. will receive a fee of $3,500, out-of-pocket expenses limited to a total of $1,500 and brokerage forwarding charges. 1 ELECTION OF DIRECTORS The Company's Restated Articles of Incorporation currently provide for a classified board consisting of between three and twelve directors. At present, the Board of Directors (sometimes referred to herein as the "Board") consists of ten members divided into three classes of three, four and three directors, respectively. One class of directors is elected at each Annual Meeting to serve a three-year term. A brief biography of each nominee up for election at the 1996 Annual Meeting is presented below. Management recommends that shareholders vote "FOR" these nominees. The proxies solicited by and on behalf of the Board of Directors of the Company will be voted "FOR" the election of the nominees, unless authority to do so is withheld as provided in the enclosed proxy. Although it is not contemplated that any of the nominees will be unable to serve, in the event any nominee should not be available as a candidate for director at the time of the Annual Meeting, the persons named in the proxy will vote for a substitute who will be designated by the present Board of Directors to fill such vacancy. The following table sets forth biographical information for the three nominees for director and the other directors of the Company. Principal Occupation and Year First Employment for the Past Five Became Director Name Age Years and Other Information /Term Expires - --------------------- ----- --------------------------------- --------------- Nominees for Director: MARY LEE COLEMAN 59 President of Coleman Enterprises 1980/1996 (developer of shopping centers and industrial parks). Mrs. Coleman is a graduate of the University of Southern California. She is a member of the Audit Committee and Pension Fund Committee. 2 Principal Occupation and Year First Employment for the Past Five Became Director Name Age Years and Other Information /Term Expires - --------------------- ----- ---------------------------------- --------------- CHARLES A. LENZIE 58 Chairman of the Board and Chief 1983/1996 Executive Officer of the Company. Mr. Lenzie joined the Company in 1974 as Vice President-Finance. He was elected Senior Vice President-Finance and Accounting Services in December 1979; President on February l, l983 and Chairman of the Board and Chief Executive Officer on May l, l989. On August 10, 1995, Mr. Lenzie also assumed the position of President and Chief Operating Officer. Mr. Lenzie is a director of Bank of America Nevada and Stewart Title Company of Nevada. Mr. Lenzie is a graduate of the University of Illinois and a Certified Public Accountant. He is Chairman of the Executive Committee. JOHN F. O'REILLY 50 President of the law firm of 1995/1996 Keefer, O'Reilly, Ferrario and Lubbers. Mr. O'Reilly is Chairman and Chief Executive Officer of the O'Reilly Gaming Group and is a Director of First Interstate Bank of Nevada, N.A. He is the Chairman of the Las Vegas Chamber of Commerce. Mr. O'Reilly is a graduate of St. Louis University and has his MBA from the University of Nevada, Las Vegas. He is a member of the Audit Committee and Nominating Committee. 3 Principal Occupation and Year First Employment for the Past Five Became Director Name Age Years and Other Information /Term Expires - --------------------- ----- ---------------------------------- --------------- Other Directors: JOHN L. GOOLSBY 54 President, Chief Executive Officer 1991/1997 and a director of each of The Hughes Corporation and The Howard Hughes Corporation (real estate investment and land development companies), the principal operating companies of the Howard Hughes Estate. Mr. Goolsby became affiliated with The Howard Hughes Corporation in l980, and since that time has held various positions with the operating companies of the Howard Hughes Estate. Mr. Goolsby is a director of Bank of America Nevada and America West Airlines. Mr. Goolsby is a graduate of the University of Texas at Arlington and a Certified Public Accountant. He is a member of the Executive Committee, Compensation Committee, Nominating Committee and Audit Committee. JERRY E. HERBST 58 Chief Executive Officer of each of 1990/1997 Terrible Herbst, Inc. (gas station, car wash, convenience store chain) and Herbst Supply Co., Inc. (wholesale fuel distribution), family-owned businesses for which he has worked since l959. Mr. Herbst is a general partner of the Gold Coast Hotel & Casino and a director of Bank of America Nevada. Mr. Herbst is a graduate of the University of Southern California. He is Chairman of the Nominating Committee and a member of the Compensation Committee and Pension Fund Committee. 4 Principal Occupation and Year First Employment for the Past Five Became Director Name Age Years and Other Information /Term Expires - --------------------- ----- ---------------------------------- --------------- FRANK E. SCOTT 76 Chairman of the Board and Chief 1972/1997 Executive Officer of First Western Financial Corporation (holding company of a savings and loan association) until his retirement in 1988. Mr. Scott is Chairman of the Board of Sports Media Network and until recently, was chairman of the Board of American Wollastonite Mining Corporation. Previously he was also Chairman of the Board and CEO of the Scott Corporation, Developer and Operator of the Union Plaza Hotel. He is a member of the Audit Committee, Compensation Committee and Pension Fund Committee. JELINDO A. TIBERTI 76 Chairman of the Board of J. A. 1963/1997 Tiberti Construction Company, Inc. Mr. Tiberti is a Registered Professional Engineer. He is Chairman of the Pension Fund Committee and a member of the Executive Committee and Compensation Committee. FRED D. GIBSON, JR. 68 Chairman, President, Chief 1978/1998 Executive Officer and a director of American Pacific Corporation (manufacture of chemicals and pollution abatement equipment; real estate development). Mr. Gibson has been affiliated with American Pacific Corporation and its predecessor, Pacific Engineering & Production Co., since l956. Mr. Gibson is a graduate of the University of Nevada and holds a degree in Metallurgical Engineering. He is Chairman of the Audit Committee and a member of the Executive Committee, Compensation Committee, and Nominating Committee. 5 Principal Occupation and Year First Employment for the Past Five Became Director Name Age Years and Other Information /Term Expires - --------------------- ----- ---------------------------------- --------------- CONRAD L. RYAN 71 Elected President of the Company 1978/1998 in 1978, Chief Executive Officer of the Company in l979 and Chairman of the Board in l982. Mr. Ryan retired from the Company and from the positions of Chief Executive Officer and Chairman of the Board in l989. Mr. Ryan is a graduate of the University of Utah and is a Registered Professional Engineer. He is a member of the Executive Committee and Pension Fund Committee. ARTHUR M. SMITH 73 Prior to his retirement in 1984, 1959/1998 Chairman of the Board of First Interstate Bank of Nevada, N.A. Mr. Smith is a director of Circus Circus Enterprises (hotel and casino), John Deere Insurance Group and the W. M. Keck Foundation. He is Chairman of the Compensation Committee and a member of the Audit Committee and Pension Fund Committee. 6 COMMITTEES OF THE BOARD OF DIRECTORS The Committees of the Board of Directors are the Executive Committee, the Audit Committee, the Compensation Committee, the Nominating Committee and the Pension Fund Committee. The major functions of these Committees are described briefly below. EXECUTIVE COMMITTEE Except for certain powers which, under Nevada law, may only be exercised by the full Board of Directors, the Executive Committee may exercise all powers and authority of the Board of Directors in the management of the business and affairs of the Company. AUDIT COMMITTEE The Audit Committee recommends to the Board of Directors the appointment of the independent public accountants. The Audit Committee reviews and considers the comments from the independent public accountants with respect to internal accounting controls and the consideration given or corrective action taken by management to weaknesses, if any, in internal controls. The Audit Committee discusses matters of concern to the Committee, the independent public accountants or management relating to the Company's financial statements or other results of the audit. It also meets with the Company's Director of Internal Audit regarding internal auditing matters and controls. COMPENSATION COMMITTEE The Compensation Committee reviews and recommends to the Board compensation for officers. NOMINATING COMMITTEE The Nominating Committee is empowered to consider and review the qualifications of potential nominees for directors and to recommend to the Board of Directors a slate of nominees for election as directors at the Annual Meeting of Shareholders and, when vacancies occur, candidates for election by the Board of Directors. The Committee will consider nominees recommended by shareholders; written recommendations must be received by the Secretary of the Company not less than thirty days nor more than sixty days prior to the meeting at which directors are to be elected. PENSION FUND COMMITTEE The Pension Fund Committee oversees the investment of the assets of the Company's Qualified Retirement Plan. 7 MEETINGS AND ATTENDANCE During 1995, the Company's Board of Directors met 12 times, the Executive Committee met 9 times, the Audit Committee, the Compensation Committee, the Pension Fund Committee and the Nominating Committee each met twice. During 1995, no director attended less than 75% of the aggregate meetings of the Board of Directors and Committees on which he or she served. DIRECTOR COMPENSATION No director who receives a salary from the Company is paid any fees to serve as a director or as a member of any committee of the Board of Directors. Those directors not receiving salaries from the Company (the "Outside Directors") are paid an annual fee of $20,000 plus $1,000 for each directors' meeting attended; an annual fee of $10,000 for serving on the Executive Committee; $1,000 per meeting attended for serving on the Audit Committee, the Compensation Committee, the Nominating Committee, or the Pension Fund Committee and an additional $400 per meeting for serving as Committee Chairman. In addition, the Company provides a $20,000 term life insurance benefit for each of the Outside Directors. SECURITY OWNERSHIP OF MANAGEMENT The following table presents certain information regarding the Company's Common Stock beneficially owned by each director, the Chief Executive Officer and the four other most highly compensated executive officers of the Company for the year 1995, and all directors and executive officers of the Company as a group as of December 31, 1995: Amount and Nature of Beneficial Percent of Name Ownership Class ---- --------- ---------- Mary Lee Coleman ......................... 321,752(1) .684% Fred D. Gibson, Jr. ...................... 7,024(2) .015% John L. Goolsby........................... 2,356(3) .005% Jerry E. Herbst........................... 5,000(4) .011% Charles A. Lenzie ........................ 11,229(5)(15) .024% John F. O'Reilly.......................... 1,000(6) .002% Conrad L. Ryan ........................... 12,278(7) .026% Frank E. Scott ........................... 5,893(4) .013% Arthur M. Smith .......................... 1,200(8) .003% Jelindo A. Tiberti ....................... 2,000(9) .004% David G. Barneby ......................... 3,975(10)(15) .008% Cynthia K. Gilliam ....................... 2,761(11)(15) .006% Richard L. Hinckley ...................... 2,227(12)(15) .005% Steven W. Rigazio......................... 5,934(13)(15) .013% All Directors & Executive Officers as a Group (15 individuals)(16).............. 387,271(14)(15) .823% 8 (1) 157,857 shares held in shareholder's name; balance held in family trust. (2) 4,600 shares held in street name; balance held in shareholder's name. (3) 2,000 shares held in street name; balance held in shareholder's name. (4) Held in shareholder's name. (5) 6,980 shares held in street name; balance held in shareholder's name. (6) Held in street name. (7) 400 shares held in street name; balance held in shareholder's name. (8) 1,000 shares held in street name; balance held in family trust. (9) 1,250 shares held in street name; balance held in name of controlled corporation. (10) 1,136 shares held in street name; 1,377 shares held in shareholder's name; balance held in trust. (11) 1,478 shares held in street name; balance held in shareholder's name. (12) 1,218 shares held in shareholder's name; balance held in custodial trust. (13) 1,081 shares held in shareholder's name; balance held in family trust. (14) Includes 750 shares held in the name of controlled corporation; 19,844 shares held in street name; 171,419 shares held in trust and 195,258 shares held in shareholders' names. (15) Of the shares shown, 1,948 shares beneficially owned by Mr. Lenzie, 1,377 shares beneficially owned by Mr. Barneby, 1,283 shares beneficially owned by Mrs. Gilliam, 1,211 shares beneficially owned by Mr. Hinckley, 1,081 shares beneficially owned by Mr. Rigazio, and 9,542 of the shares beneficially owned by all directors and executive officers as a group are held in the Company's 401(k) Plan for the benefit of such shareholders. These shares are fully vested. All shares of Company Common Stock held in the Company's 401(k) Plan are subject to shared voting power with the trustee of the 401(k) Plan. (16) None of the directors or executive officers own any of the Company's outstanding Cumulative Preferred Stock or Preference Stock. The management of the Company does not know of any shareholder holding more than 5% of the Company's Common Stock. 9 EXECUTIVE COMPENSATION The following table summarizes the total compensation of the Chief Executive Officer and the five other most highly compensated executive officers of the Company for the year 1995, as well as the total compensation paid to each such individual for the Company's two previous years. Summary Compensation Table (7) Annual Compensation ---------------------------------- Name and Principal Other Annual All Other Position(6) Year Salary(1) Bonus(2) Compensation(3) Compensation(4) - ------------------ ---- --------- -------- --------------- --------------- Charles A. Lenzie 1995 $405,991 $ -0- $ 7,252 $ 4,500 Chairman of the 1994 372,750 109,030 7,666 4,500 Board and Chief 1993 311,923 98,256 5,917 7,075 Executive Officer, Director James C. Holcombe 1995 197,617 -0- 6,882 537,500 President and 1994 273,368 79,960 9,809 4,500 Chief Operating 1993 247,160 77,855 11,686 7,075 Officer, Director (5) Steven W. Rigazio 1995 184,000 -0- 10,571 4,500 Vice President, 1994 166,121 31,978 8,646 4,500 Finance and Plan- 1993 127,374 23,947 8,384 3,744 ning, Treasurer, Chief Financial Officer Cynthia K. Gilliam 1995 179,000 -0- 8,310 4,500 Vice President, 1994 162,125 31,868 11,116 4,500 Retail Customer 1993 130,548 24,021 8,955 3,964 Operations David G. Barneby 1995 174,318 -0- 8,143 4,500 Vice President, 1994 153,632 30,342 9,559 4,327 Power Delivery 1993 134,958 25,373 7,985 3,868 Richard L. Hinckley 1995 151,000 -0- 9,017 3,445 Vice President, 1994 139,163 27,485 8,458 3,395 Secretary and 1993 119,081 21,911 8,403 3,415 General Counsel (1) Includes lump sum payments, in 1995, of $16,000 for Mr. Lenzie; $11,000 for Mr. Holcombe; $7,000 for Mr. Rigazio; $7,000 for Mrs. Gilliam; $7,000 for Mr. Barneby and $6,000 for Mr. Hinckley. 10 (2) Amounts awarded under the Executive Performance Incentive Plan for the respective fiscal years. (3) These amounts represent the personal use of Company automobiles and reimbursement for payment of taxes thereon. (4) These amounts represent the Company's contribution to the Company's 401(k) Plan except for the 1995 amount for James C. Holcombe which includes $4,500 for the Company's contribution to the 401(k) Plan and $533,000 for the payments made and to be made pursuant to a Separation Agreement. Since May, 1989, James C. Holcombe was the Company's President and Chief Operating Officer, a director and one of its highest paid employees. As a part of his resignation as an officer and member of the Board of Directors of the Company, a Separation Agreement and Release was entered into on September 6, 1995. The following are the material details of the Separation Agreement. Mr. Holcombe is, following his departure, to cooperate with the Company as to those matters which were under his control. The Company will contribute $15,000 towards Mr. Holcombe's office overhead so as to facilitate the rendering of these services. Mr. Holcombe was given some of the personal property which he used while an employee, valued for income tax purposes at $23,000. In addition, Mr. Holcombe will continue to participate in the Company's medical plans for two years or until he is eligible for such benefits from any other source and participate in the Company's $300,000 life insurance plan for a period of two years. The Company has also agreed to pay to Mr. Holcombe severance payments of $115,000 following execution of the Separation Agreement, $325,000 in 1996 and $25,000 in 1997. Mr. Holcombe will also participate in the Company's supplemental executive retirement plan with credited service of nine years and five months and based upon compensation earned through July 31, 1995. The Company has also agreed to pay $7,500 to Mr. Holcombe's attorneys and $30,000 for employment placement assistance to or for the benefit of Mr. Holcombe. The Separation Agreement also provides that the Company and Mr. Holcombe release each other from all claims or potential claims. In addition, the Company has promised to indemnify Mr. Holcombe for all liabilities which may incur as the result of his having served as an officer and director of the Company. (5) Resigned effective August 1, 1995. (6) Current positions reflect new organizational structure approved by the Board of Directors on October 14, 1993. (7) The number and value of the aggregate performance restricted shares under the Company's Long-Term Incentive Plan as of December 31, 1995, are 14,539 shares and $323,493 for Mr. Lenzie; 3,986 shares and $88,689 for Mr. Rigazio; 3,906 shares and $86,909 for Mrs. Gilliam; 3,760 shares and $83,660 for Mr. Barneby; and 3,403 shares and $75,717 for Mr. Hinckley, respectively. 11 LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR Estimated Future Payouts under Performance Non-Stock Price-Based Plans or Other Period ---------------------------------------- Until Maturation Threshold Target Maximum Name or Payout (#) (#) (#) - ------------------- ---------------- ------------ ------------ ------------ Charles A. Lenzie Three Years 3,828 shares 7,656 shares 9,570 shares Steven W. Rigazio Three Years 1,086 shares 2,172 shares 2,715 shares Cynthia K. Gilliam Three Years 1,055 shares 2,110 shares 2,638 shares David G. Barneby Three Years 982 shares 1,963 shares 2,454 shares Richard C. Hinckley Three Years 890 shares 1,779 shares 2,224 shares The Company's Long-Term Incentive Plan (the "LTIP") gives participants the opportunity to earn awards based on the Company's performance over a three-year performance period. The performance period for the 1995 LTIP awards (the "Awards") began January 1, 1995 and ends December 31, 1997. The Awards of LTIP incentive compensation units (the "Units") earned by the named executive officers will be determined at the end of the three-year performance period based on the ranking of the Company's total shareholder return (i.e., stock price appreciation plus reinvested dividends) in comparison to the Salomon Electric Utilities Index (the "Index"). Common stock of the Company at the rate of one share per Unit earned will be paid to LTIP participants at the end of the performance period. Participants would earn a percentage of the Award based on the percentile rank of the Company's total shareholder return in comparison to the Index, as follows: Percentage of Percentile Rank of Company Award Earned -------------------------- ------------- Less than 40th....................... 0% 40th....................... 50% 50th....................... 75% 60th....................... 90% 75th....................... 100% 90th....................... 125% 12 COMPENSATION COMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee of the Board of Directors (the "Committee") is responsible for establishing the philosophy for compensating the Company's executives and ensuring that all aspects of the Executive Compensation Program are administered consistent with the philosophy. During 1995, the Committee met two times. This report describes the Committee's decisions during 1995 in determining the compensation earned by the Chief Executive Officer (the "CEO"), and all other officers as a group. The Omnibus Budget Reconciliation Act of 1993 contained provisions on the deductibility of executive compensation. All compensation paid to the CEO and other proxy - named executives for 1995 is fully deductible. It is the Committee's intention to maintain the complete deductibility in the future, however, we reserve the right to deviate from this policy when and if we determine it is in the best interests of the Company and its shareholders to do so. The Company has retained the services of Towers Perrin, a compensation consulting firm, to assist the Committee in connection with the performance of its various duties. Towers Perrin has been retained in this capacity since 1990. Towers Perrin provides advice to the Committee with respect to the reasonableness of compensation paid to the officers of the Company. Overall Objectives The primary objective of the Executive Compensation Program is to motivate the officers to achieve the Company's goals of providing the Company's shareholders with a competitive return on their investment while at the same time providing its customers with high quality service at a competitive price. The compensation philosophy, therefore, bases a significant portion of each officer's total compensation on the achievement of these goals. Compensation Philosophy The Executive Compensation Program is reviewed on an annual basis to ensure its alignment with the Company's compensation philosophy. To retain and attract an experienced results-oriented team, the Company's compensation philosophy is to provide a total compensation opportunity between the median and 75th percentile in comparison to both regulated and nonregulated businesses. Each year, the Committee reviews data from the Edison Electric Institute (the "EEI") Executive Compensation Survey of electric utilities and Towers Perrin's annual management compensation survey. In the following performance graph on page 16, the Company's total return to shareholders is compared to that of the electric utilities comprising the Salomon Electric Utilities Index and the S&P 500 Stock Index. The overwhelming majority of the companies in the Salomon Electric Utilities Index participate in the EEI survey database. The companies in the Towers Perrin survey parallel the type and mix of companies comprising the S&P 500 Stock Index. 13 The Executive Compensation Program for the officers of the Company is comprised of base salary, annual performance-related awards and a long-term incentive plan. Annual base salary increases reflect the individual's performance and contribution over several years. Annual incentive awards vary directly with annual corporate performance for the CEO. Corporate performance is weighted 60% and individual goal achievement is weighted 40% for all other officers. Individual officer goals are established annually in support of the corporate performance goals. The long-term incentive plan approved by the Company's shareholders in 1993 provides officers with the opportunity to earn shares of common stock based on the Company's total return to shareholders compared to a peer group of electric utilities. The remainder of this report discusses the administration of the 1995 Executive Compensation Program with respect to the CEO and the other officers as a group. 1995 Base Salary The CEO received no increase to base salary in 1995. His salary, as set on April 1, 1994, remained at the same rate throughout 1995. All officers received similar treatment except Mr. Barneby, Vice-President Power Delivery, who received a $10,000 salary increase. The 1994 salary data reported in the Summary Compensation Table is a combination of salary rates in effect before and after April 1, 1994. For 1995, the CEO's salary and salaries for all other officers as a group were between the 50th and 75th percentile of salaries for comparable positions within the electric utility industry. A lump-sum cash award of 4% was made to each officer. 1995 Incentive Awards The corporate component of the 1995 incentive awards was based on three corporate performance goals weighted as follows _ corporate earnings, 50%; customer satisfaction, 30%; and cost control, 20%. Specific corporate performance goals were established at the beginning of the year. The CEO's 1995 annual incentive award is based entirely on the three corporate goals. Achievement of the corporate performance goals and individual goals were evaluated and taken into consideration in determining 1995 annual incentive awards for all other officers. There were no incentive awards earned by the CEO and all other officers in 1995. No awards were earned in 1995 under the Company's Long-Term Incentive Plan as total shareholder return performance relative to peer companies was below the standing required to provide long-term awards. 14 Under the provisions of the Company's Long-Term Incentive Plan, the officers of the Company were granted a total number of 17,459 stock units. The CEO's grant of 7,656 stock units and the grant to all other officers as a group was based on the Company's philosophy of providing the opportunity to earn total compensation between the 50th and 75th percentile of regulated and nonregulated businesses. The actual number of stock units earned by the CEO and all officers as a group will be determined in 1998 based on the Company's total shareholders return as compared to a peer group of electric utilities for the period 1995-1997 or such other measure as the Committee deems appropriate. Separation Agreement The Chief Operating Officer received compensation in 1995 pursuant to a Separation Agreement entered into as part of his resignation on August 1, 1995. See Footnote 4 to the Summary Compensation Table for the material details of the Separation Agreement. COMPENSATION COMMITTEE Arthur M. Smith Fred D. Gibson, Jr. John L. Goolsby Jerry E. Herbst Frank E. Scott Jelindo A. Tiberti 15 PERFORMANCE GRAPH The following graph shows a five-year comparison of cumulative total returns for the Company's common stock, the S&P 500 Stock Index and the Salomon Electric Utilities Index. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG NEVADA POWER COMPANY COMMON STOCK (NPC), S&P 500 STOCK INDEX (S&P 500) AND SALOMON ELECTRIC UTILITIES INDEX (SALOMON) Measurement Period (Fiscal Year Covered) NPC S&P 500 Salomon - --------------------- ------- ------- ------- Measurement Pt. - 12/31/90 $100 $100 $100 Fiscal Year Ended - 12/31/91 $ 96 $130 $130 Fiscal Year Ended - 12/31/92 $127 $140 $139 Fiscal Year Ended - 12/31/93 $138 $155 $155 Fiscal Year Ended - 12/31/94 $126 $157 $136 Fiscal Year Ended - 12/31/95 $148 $215 $179 Assumes $100 invested on 12/31/90 in Nevada Power Company common stock, S&P 500 Stock Index and Salomon Electric Utilities Index with dividend reinvestment over the period. RETIREMENT BENEFITS The Company's Qualified Retirement Plan (the "Retirement Plan") for salaried employees provides noncontributory benefits based upon both years of service and the employee's highest consecutive 5-year average annual compensation. Annual compensation includes salary and bonus amounts paid as shown in the Summary Compensation Table. The credited years of service under the Retirement Plan at December 31, 1995 for each of the individuals listed in the Summary Compensation Table are as follows: Charles A. Lenzie, 20 years; James C. Holcombe, 6 years; Steven W. Rigazio, 10 years; Cynthia K. Gilliam, 20 years; David G. Barneby, 28 years; and Richard L. Hinckley, 9 years. The Retirement Plan includes an early retirement option under which a covered employee may receive a reduced benefit upon early retirement between ages 55 and 62. Benefits payable upon retirement after age 62 are unreduced. Benefits payable under the Retirement Plan must be in compliance with applicable guidelines or maximums prescribed in the Employees Retirement Income Security Act of 1974 as currently stated or as adjusted from time to time. 16 The following table sets forth, by example, maximum annual benefits upon retirement on or after age 62 from the Retirement Plan. The amounts shown below represent the application of the Retirement Plan formula to the highest consecutive 5-year average annual earnings and years of service shown. Maximum Annual Benefit for Specific Highest Years of Credited Service at Retirement Consecutive 5-Year ---------------------------------------------------------- Average Earnings 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years - ------------------ -------- -------- -------- -------- -------- -------- $150,000 ......... $38,700 $51,500 $64,400 $77,300 $90,200 $100,100 200,000 ......... 38,700 51,500 64,400 77,300 90,200 100,100 250,000 ......... 38,700 51,500 64,400 77,300 90,200 100,100 300,000 ......... 38,700 51,500 64,400 77,300 90,200 100,100 350,000 and over. 38,700 51,500 64,400 77,300 90,200 100,100 The Company has adopted a Supplemental Executive Retirement Plan (the "SERP") in addition to the Retirement Plan. Participation is limited to such officers as the Board of Directors may select. Presently, 27 active or retired designated officers, managers and beneficiaries including the six highest paid officers of the Company, participate in the SERP. Each selected participant who retires on or after age 62 with 25 years of service will receive a SERP retirement benefit equivalent to 60% of his/her highest consecutive 3-year average annual earnings reduced by the Retirement Plan benefit. Annual earnings include wages, salary, bonus earned and the value of all other compensation amounts as shown in the Summary Compensation Table. Reduced benefits apply to participants who retire with less than 25 years of service or before age 62. Participants with more than 25 years of service at retirement receive an additional benefit equal to 1.5% of their highest consecutive 3-year average annual earnings for each year of service beyond 25 years. The credited years of service under the SERP at December 31, 1995 for each of the individuals listed in the Summary Compensation Table are as follows: Charles A. Lenzie, 21 years; James C. Holcombe, 9 years and 5 months; Steven W. Rigazio, 11 years; Cynthia K. Gilliam, 21 years; David G. Barneby, 29 years and Richard L. Hinckley, 10 years. 17 The following table sets forth, by example, maximum annual benefits upon retirement on or after age 62 under the combined regular Retirement Plan and the SERP. The amounts shown below represent the application of the SERP formula to the highest consecutive 3-year average annual earnings and years of service shown. The amounts shown do not include Social Security benefits payable upon retirement. Maximum Annual Benefit for Specific Highest Years of Credited Service at Retirement Consecutive 3-Year ---------------------------------------------------------- Average Earnings 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years - ------------------ -------- -------- -------- -------- -------- -------- $150,000 ......... $ 67,500 $ 78,750 $ 90,000 $101,250 $112,500 $123,750 200,000 ......... 90,000 105,000 120,000 135,000 150,000 165,000 250,000 ......... 112,500 131,250 150,000 168,750 187,500 206,250 300,000 ......... 135,000 157,500 180,000 202,500 225,000 247,500 350,000 ......... 157,500 183,750 210,000 236,250 262,500 288,750 400,000 ......... 180,000 210,000 240,000 270,000 300,000 330,000 450,000 ......... 202,500 236,250 270,000 303,750 337,500 371,250 500,000 ......... 225,000 262,500 300,000 337,500 375,000 412,500 RETIREMENT PLAN FOR OUTSIDE DIRECTORS The Company has established a Retirement Plan for the Outside Directors (the "RPOD"). The RPOD provides a maximum annual life benefit equivalent to the annual fee being paid to the Outside Director at the date of retirement. With respect to an Outside Director first elected after May 11, 1990, receipt of the maximum annual life benefit under the RPOD is subject to (a) minimum service for 5 years as an Outside Director and (b) retirement on or before the first day of the month following such Outside Director's 72nd birthday. The annual benefit received by an Outside Director elected after May 11, 1990, who has met the minimum 5-year service requirement, will be reduced by $500 for each year such Outside Director retires after their 65th birthday but prior to their 72nd birthday. 18 SHAREHOLDER RECOMMENDATION A shareholder, holding a total of 100 shares of the Company's Common Stock, has submitted a recommendation to the Board of Directors for consideration by the shareholders at the 1996 Annual Meeting. The name and address of the shareholder will be furnished by the Company to any person promptly upon receipt of an oral or written request therefor. The shareholder's recommendation is as follows: "Should Nevada Power Company establish a retirement plan for outside Directors ("RPOD") after only five years of service?" The Board of Directors recommends a vote of "YES". In 1990, the Board adopted a retirement plan for outside members of the Board that provides for an annual pension in the amount of the annual board fee at the time of retirement of the board member. There is one retired board member receiving benefits under the plan. All presently sitting board members are eligible at this time for the pension benefit with the exception of Mr. O'Reilly who joined the Board in 1995. The five year period is a reasonable minimum service requirement considering the duties performed and qualifications for board members. The 1995 Edison Electric Institute Executive Compensation Survey reported that "the typical retirement plan provides that after five years of board service, an outside director receives a pension benefit equal to 100% of the annual retainer at the time of retirement". The survey shows that 63% of the companies studied provide director's retirement plans and that 65% provide a benefit of 100% of the annual retainer at retirement. The Board believes the present pension plan with the minimum service requirement of five years is reasonable and appropriate in the overall compensation package to board members. The Board of Directors recommends a "YES" vote on the shareholder recommendation. 19 SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors has selected Deloitte & Touche as the Company's independent public accountants for 1996 at the recommendation of the Audit Committee. Representatives of Deloitte & Touche will be present at the 1996 Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions. SUBMISSION OF SHAREHOLDER PROPOSALS Shareholders are advised that any shareholder proposal intended for consideration at the 1997 Annual Meeting must be received by the Company on or before November 13, 1996 to be included in the proxy materials for the 1997 Annual Meeting. It is recommended that shareholders submitting proposals direct them to the Secretary of the Company and utilize Certified Mail-Return Receipt Requested. ANNUAL REPORT For further information with respect to the Company, reference is made to the 1995 Annual Report of the Company, a copy of which has been mailed to all shareholders of the Company. OTHER MATTERS The management knows of no matters to be presented at the meeting other than those mentioned above. However, if any other matters do properly come before the meeting, it is intended that the shares represented by proxies will be voted with respect thereto in accordance with the judgment of the persons voting thereon. Richard L. Hinckley Secretary Las Vegas, Nevada March 13, l996 20 1995 ANNUAL MEETING MINUTES Copies of the minutes of the Company's 1995 Annual Meeting of Shareholders and/or the Company's 1995 Annual Report on Form 10-K, including the financial statements and the schedules thereto filed with the Securities and Exchange Commission for the Company's most recent fiscal year, will be furnished upon written request to shareholders without charge. A copy may be obtained by writing to Shareholder Services, Nevada Power Company, P.O. Box 230, Las Vegas, Nevada 89151. 21 PRELIMINARY March 13, l996 Dear Shareholder: You are cordially invited to attend the Annual Meeting of Shareholders of Nevada Power Company to be held at 2:00 P.M. on May 10, 1996, at the Stardust Resort & Casino, Conference Center, 3000 Las Vegas Boulevard South, Las Vegas, Nevada. Your Board of Directors looks forward to greeting personally those shareholders able to attend. At the meeting, in addition to electing three directors to three-year terms, you will be asked to consider and vote upon a shareholder recommendation to the Board of Directors concerning the Retirement Plan for Outside Directors. Whether or not you plan to attend, it is important that your shares are represented at the meeting. Accordingly, you are requested to promptly vote, sign, date and mail the attached proxy in the envelope provided. Thank you for your consideration and continued support. Very truly yours, Charles A. Lenzie Chairman of the Board and Chief Executive Officer - ---------------------------------------------------------------------------- PROXY CARD - ------------------------------------------------------------------------------- (Proxy Card - front) DETACH HERE Date:_________________________, 1996 ___________________________________ (Signature) ___________________________________ (Signature) (Joint owners must EACH sign.Please sign EXACTLY as your name(s) appear(s) on this card. When signing as attorney, trustee, executor, administrator, guardian or corporate officer, please give FULL title.) THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE SIGNING SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1 AND "YES" WITH RESPECT TO THE SHAREHOLDER RECOMMENDATION. (TO BE VOTED ON REVERSE SIDE) - ------------------------------------------------------------------------------- (Proxy Card - back) NEVADA POWER COMPANY PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS May 10, 1996 The signing shareholder hereby appoints Conrad L. Ryan, Arthur M. Smith and Jelindo A. Tiberti, or any one of them, with full power of substitution, the attorneys and proxies of the signing shareholder to vote all shares of Common Stock of the Company which the signing shareholder is entitled to vote at the annual meeting of Nevada Power Company to be held on May 10, 1996, at 2:00 p.m. and at any and all adjournments of such meeting. (1) ELECTION OF DIRECTORS FOR all nominees listed WITHHOLD AUTHORITY___ to three-year terms below ___ (except as marked to vote for all to the contrary below) nominees listed below (INSTRUCTION: To withhold authority to vote for any individual nominee strike a line through the nominee's name in the list below.) Mary Lee Coleman, Charles A. Lenzie, John F. O'Reilly (2) SHAREHOLDER RECOMMENDATION: Should Nevada Power Company establish a retirement plan for outside Directors ("RPOD") after only five years of service? YES___ NO___ ______________________________________________________________________________ (3) IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. (TO BE SIGNED ON REVERSE SIDE) -----END PRIVACY-ENHANCED MESSAGE-----