10-Q

     UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2003

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM    TO

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

     Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x   No  o

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

Nevada Power Company       Yes  o  No  x;  Sierra Pacific Power Company  Yes  o  No  x

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

Class	Outstanding at November 10, 2003
Common Stock, $1.00 par value	117,181,075 Shares
of Sierra Pacific Resources

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

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

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

TABLE OF CONTENTS

		SIERRA PACIFIC RESOURCES CONSOLIDATED BALANCE SHEETS
		SIERRA PACIFIC RESOURCES CONSOLIDATED STATEMENTS OF OPERATIONS
		SIERRA PACIFIC RESOURCES CONSOLIDATED STATEMENTS OF CASH FLOWS
		NEVADA POWER COMPANY CONSOLIDATED BALANCE SHEETS
		NEVADA POWER COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS
		NEVADA POWER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
		SIERRA PACIFIC POWER COMPANY CONSOLIDATED BALANCE SHEETS
		SIERRA PACIFIC POWER COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS
		SIERRA PACIFIC POWER COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
		CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
			Sierra Pacific Resources
			Nevada Power Company
			Sierra Pacific Power Company
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5.OTHER INFORMATION
	ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EX-4.1 OFFICER'S CERTIFICATE NEVADA POWER CO.
EX-4.2 9% GENERAL AND REFUNDING MORTGAGE NOTES
EX-4.3 OFFICER'S CERTIFICATE SIERRA PACIFIC POWER
EX-4.4 GENERAL AND REFUNDING MORTGAGE NOTES (D)
EX-10.1 EMPLOYMENT AGREEMENT FOR WALTER HIGGINS
EX-31.1 SECTION 302 CERTIFICATION OF THE C.E.O.
EX-31.2 SECTION 302 CERTIFICATION OF C.F.O.
EX-32.1 SECTION 906 CERTIFICATION OF CEO & CFO

SIERRA PACIFIC RESOURCES
NEVADA POWER COMPANY
SIERRA PACIFIC POWER COMPANY
QUARTERLY REPORTS ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2003

CONTENTS

			PART I - FINANCIAL INFORMATION
ITEM 1.		Financial Statements
	Sierra Pacific Resources -
		Consolidated Balance Sheets – September 30, 2003 and December 31, 2002			3
		Consolidated Statements of Operations – Three Months and Nine Months Ended September 30, 2003 and 2002			4
		Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2003 and 2002			5
	Nevada Power Company -
		Consolidated Balance Sheets – September 30, 2003 and December 31, 2002			6
		Consolidated Statements of Operations – Three Months and Nine Months Ended September 30, 2003 and 2002			7
		Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2003 and 2002			8
	Sierra Pacific Power Company -
		Consolidated Balance Sheets – September 30, 2003 and December 31, 2002			9
		Consolidated Statements of Operations – Three Months and Nine Months Ended September 30, 2003 and 2002			10
		Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2003 and 2002			11
		Condensed Notes to Consolidated Financial Statements			12
ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			34
				Sierra Pacific Resources	45
				Nevada Power Company	50
				Sierra Pacific Power Company	58
ITEM 3.		Quantitative and Qualitative Disclosures about Market Risk			74
ITEM 4.		Controls and Procedures			76
				PART II - OTHER INFORMATION
ITEM 1.		Legal Proceedings			77
ITEM 4.		Submission of Matters to a Vote of Security Holders			79
ITEM 5.		Other Information			79
ITEM 6.		Exhibits and Reports on Form 8-K			79
Signature Page					81

2

SIERRA PACIFIC RESOURCES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)

				September 30,		December 31,
				2003		2002
				(unaudited)
ASSETS
Utility Plant at Original Cost:
	Plant in service			$	6,292,119	$	5,989,701
		Less accumulated provision for depreciation			2,084,049		1,944,351
					4,208,070		4,045,350
	Construction work-in-progress				221,334		263,346
					4,429,404		4,308,696
Investments and other property, net					106,634		124,580
Current Assets:
	Cash and cash equivalents				192,372		192,064
	Restricted cash				63,412		13,705
	Accounts receivable less provision for uncollectible accounts:
			2003-$39,394 ; 2002-$42,001		395,578		358,972
	Deferred energy costs - electric				294,057		268,979
	Deferred energy costs - gas				3,446		17,045
	Materials, supplies and fuel, at average cost				78,972		87,348
	Risk management assets (Note 10)				37,231		29,570
	Other				65,531		48,898
					1,130,599		1,016,581
Deferred Charges and Other Assets:
	Goodwill				309,971		309,971
	Deferred energy costs - electric				545,823		685,875
	Regulatory tax asset				159,501		163,889
	Other regulatory assets				142,289		136,933
	Risk management assets (Note 10)				137		368
	Risk management regulatory assets - net (Note 10)				31,693		44,970
	Other				96,640		92,250
					1,286,054		1,434,256
Assets of Business Sold (Note 8)					—		12,862
				$	6,952,691	$	6,896,975
CAPITALIZATION AND LIABILITIES
Capitalization:
	Common shareholders’ equity			$	1,457,272	$	1,327,166
	Preferred stock				50,000		50,000
	NPC obligated mandatorily redeemable preferred trust securities (Note 4)				—		188,872
	Long-term debt				3,572,344		3,062,815
					5,079,616		4,628,853
Current Liabilities:
	Current maturities of long-term debt				256,838		672,963
	Accounts payable				189,057		232,424
	Accrued interest				99,099		50,308
	Dividends declared				1,046		1,045
	Accrued salaries and benefits				28,556		20,798
	Deferred taxes				154,622		123,507
	Risk management liabilities (Note 10)				40,461		69,953
	Contract termination reserves (Note 11)				35,280		—
	Other current liabilities				33,246		46,719
					838,205		1,217,717
Commitments & Contingencies (Note 11)
Deferred Credits and Other Liabilities:
	Deferred federal income taxes				250,917		336,875
	Deferred investment tax credit				45,903		48,492
	Regulatory tax liability				39,730		42,718
	Customer advances for construction				126,790		116,032
	Accrued retirement benefits				107,417		107,580
	Risk management liabilities (Note 10)				717		3,917
	Contract termination reserves (Note 11)				348,179		312,594
	Other				115,217		81,410
					1,034,870		1,049,618
Liabilities of Business Sold (Note 8)					—		787
				$	6,952,691	$	6,896,975

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

3

SIERRA PACIFIC RESOURCES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Amounts) (Unaudited)

				Three Months Ended						Nine Months Ended
				September 30,						September 30,
				2003			2002			2003			2002
OPERATING REVENUES:
	Electric			$	890,138		$	998,256		$	2,057,781		$	2,253,425
	Gas				13,930			18,473			114,421			99,139
	Other				809			642			2,111			2,264
					904,877			1,017,371			2,174,313			2,354,828
OPERATING EXPENSES:
	Operation:
		Purchased power			423,446			604,683			905,327			1,546,394
		Fuel for power generation			192,825			120,668			393,864			356,084
		Gas purchased for resale			7,133			9,884			77,332			61,585
		Deferred energy costs disallowed			—			—			90,964			487,224
		Deferral of energy costs - electric - net			(58,141	)		(41,425	)		44,729			(309,203	)
		Deferral of energy costs - gas - net			2,200			4,281			14,023			14,649
		Impairment of subsidiary assets (Note 8)			—			—			32,911			—
		Other			74,065			68,142			233,673			200,265
	Maintenance				13,972			12,904			54,799			46,826
	Depreciation and amortization				49,552			43,661			142,236			130,012
	Taxes:
		Income taxes			23,288			41,044			(46,602	)		(145,565	)
		Other than income			11,093			10,257			33,715			33,508
					739,433			874,099			1,976,971			2,421,779
OPERATING INCOME (LOSS)					165,444			143,272			197,342			(66,951	)
OTHER INCOME (EXPENSE):
	Allowance for other funds used during construction				1,039			(272	)		3,883			382
	Interest accrued on deferred energy				6,684			10,712			21,142			11,644
	Other income				7,151			4,882			20,127			12,774
	Other expense				(3,751	)		(4,031	)		(10,750	)		(15,825	)
	Income taxes				(24,619	)		(3,553	)		6,956			(2,121	)
	Unrealized gain (loss) on derivative instrument ( Note 10)				61,513			—			(46,065	)		—
					48,017			7,738			(4,707	)		6,854
			Total Income (Loss) Before Interest Charges		213,461			151,010			192,635			(60,097	)
INTEREST CHARGES:
	Long-term debt				75,818			56,696			219,344			170,935
	Other				50,823			11,060			70,531			23,827
	Allowance for borrowed funds used during construction				(1,481	)		(902	)		(4,368	)		(3,483	)
					125,160			66,854			285,507			191,279
	Dividend requirements of NPC obligated mandatorily redeemable preferred trust securities (Note 4)				—			3,793			—			11,379
INCOME (LOSS) FROM CONTINUING OPERATIONS					88,301			80,363			(92,872	)		(262,755	)
DISCONTINUED OPERATIONS (Note 8)
	Loss from operations (including loss on disposal of $9,555 in 2003)				(707	)		(56	)		(11,160	)		(1,162	)
	Income tax benefit				248			42			3,906			384
	Loss from discontinued operations				(459	)		(14	)		(7,254	)		(778	)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, net of tax					—			—			—			(1,566	)
NET INCOME (LOSS)					87,842			80,349			(100,126	)		(265,099	)
Preferred stock dividend requirements of SPPC					975			975			2,925			2,925
INCOME (LOSS) APPLICABLE TO COMMON STOCK				$	86,867		$	79,374		$	(103,051	)	$	(268,024	)
Amount per share - basic and diluted
		Income/(Loss) from continuing operations (Note 6)		$	0.29		$	0.78		$	(0.81	)	$	(2.61	)
		Income/(Loss) per share applicable to common stock (Note 6)		$	0.28		$	0.78		$	(0.89	)	$	(2.62	)
Weighted Average Shares of Common Stock Outstanding					117,177,323			102,132,465			115,294,693			102,117,926
Dividends Paid Per Share of Common Stock				$	—		$	—		$	—		$	0.20

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

4

SIERRA PACIFIC RESOURCES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)

					Nine Months Ended
					September 30,
					2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net Loss				$	(100,126	)	$	(265,099	)
	Non-cash items included in income:
		Depreciation and amortization				142,236			131,422
		Deferred taxes and deferred investment tax credit				(8,575	)		79,410
		AFUDC and capitalized interest				(8,251	)		(3,865	)
		Amortization of deferred energy costs - electric				191,196			130,667
		Amortization of deferred energy costs - gas				10,784			8,950
		Deferred energy costs disallowed, net of taxes				59,127			317,977
		Unrealized loss on derivative instrument, net of taxes				29,942			—
		Impairment of assets of subsidiary, net of taxes				21,392			—
		Loss on disposal of subsidiary, net of taxes				6,211			—
		Other non-cash				(19,083	)		(8,387	)
	Changes in certain assets and liabilities:
		Accounts receivable				(36,606	)		(115,247	)
		Deferral of energy costs - electric				(151,435	)		(123,308	)
		Deferral of energy costs - gas				2,815			3,408
		Materials, supplies and fuel				8,376			(1,506	)
		Prepaid interest for convertible debt				(53,408	)		—
		Other current assets				(12,932	)		(32,658	)
		Accounts payable				(43,367	)		166,144
		Income tax receivable				—			108,992
		Other current liabilities				43,076			35,293
		Other assets				11,491			—
		Other liabilities				72,007			32,396
Net Cash from Operating Activities						164,870			464,589
CASH FLOWS FROM INVESTING ACTIVITIES:
			Additions to utility plant			(271,155	)		(259,923	)
			AFUDC and other charges to utility plant			8,251			3,865
			Customer advances for construction			10,758			6,268
			Contributions in aid of construction			9,656			32,381
			Net cash used for utility plant			(242,490	)		(217,409	)
			Investments and other property - net			(9,026	)		(55,349	)
Net Cash from Investing Activities						(251,516	)		(272,758	)
CASH FLOWS FROM FINANCING ACTIVITIES:
			Increase in short-term borrowings			—			173,000
			Proceeds from issuance of long-term debt			650,842			—
			Retirement of long-term debt			(560,358	)		(80,272	)
			Sale of Common Stock			(981	)		187
			Dividends paid			(2,549	)		(23,510	)
Net Cash from Financing Activities						86,954			69,405
Net Increase in Cash and Cash Equivalents						308			261,236
Beginning Balance in Cash and Cash Equivalents						192,064			99,109
Ending Balance in Cash and Cash Equivalents					$	192,372		$	360,345
Supplemental Disclosures of Cash Flow Information:
			Cash paid (received) during period for:
				Interest	$	188,482		$	154,754
				Income taxes	$	(1,521	)	$	(185,011	)
Noncash financing activities (Note 4):
				Exchanged Floating Rate Notes for SPR common stock	$	8,750
				Exchanged Premium Income Equity Securities for SPR common stock	$	104,782

The accompanying notes are an integral part of the financial statements

5

NEVADA POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)

				September 30,		December 31,
				2003		2002
				(Unaudited)
ASSETS
Utility Plant at Original Cost:
	Plant in service			$	3,783,204	$	3,542,300
		Less accumulated provision for depreciation			1,098,987		1,017,494
					2,684,217		2,524,806
	Construction work-in-progress				97,516		173,189
					2,781,733		2,697,995
Investments and other property, net					33,275		20,295
Current Assets:
	Cash and cash equivalents				97,249		95,009
	Restricted cash				—		3,850
	Accounts receivable less provision for uncollectible accounts:
			2003-$33,782; 2002-$33,841		276,449		202,590
	Deferred energy costs - electric				240,909		213,193
	Materials, supplies and fuel, at average cost				41,886		44,074
	Risk management assets (Note 10)				20,795		28,173
	Other				45,700		31,602
					722,988		618,491
Deferred Charges and Other Assets:
	Deferred energy costs - electric				419,302		524,345
	Regulatory tax asset				103,229		106,071
	Other regulatory assets				59,106		53,109
	Risk management assets (Note 10)				137		368
	Risk management regulatory assets - net (Note 10)				5,257		1,491
	Other				51,901		46,357
					638,932		731,741
				$	4,176,928	$	4,068,522
CAPITALIZATION AND LIABILITIES
Capitalization:
	Common shareholder’s equity				1,174,347	$	1,149,131
	NPC obligated mandatorily redeemable preferred trust securities (Note 4)				—		188,872
	Long-term debt				1,893,451		1,488,597
					3,067,798		2,826,600
Current Liabilities:
	Current maturities of long-term debt				135,123		354,677
	Accounts payable				120,042		143,002
	Accounts payable, affiliated companies				2,893		4,287
	Accrued interest				46,360		29,892
	Dividends declared				78		78
	Accrued salaries and benefits				12,198		7,781
	Deferred taxes				124,376		90,616
	Risk management liabilities (Note 10)				13,861		29,908
	Contract termination reserves (Note 11)				24,192		—
	Other current liabilities				25,240		22,115
					504,363		682,356
Commitments & Contingencies (Note 11)
Deferred Credits and Other Liabilities:
	Deferred federal income taxes				107,294		129,687
	Deferred investment tax credit				20,680		21,902
	Regulatory tax liability				16,322		17,300
	Customer advances for construction				74,066		66,434
	Accrued retirement benefits				49,409		54,216
	Contract termination reserves (Note 11)				254,765		225,816
	Other				82,231		44,211
					604,767		559,566
				$	4,176,928	$	4,068,522

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

6

NEVADA POWER COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands) (Unaudited)

				Three Months Ended						Nine Months Ended
				September 30,						September 30,
				2003			2002			2003			2002
OPERATING REVENUES:
	Electric			$	639,661		$	712,536		$	1,396,825		$	1,545,867
OPERATING EXPENSES:
	Operation:
		Purchased power			301,683			440,559			620,712			1,102,551
		Fuel for power generation			126,839			87,864			246,643			245,060
		Deferred energy costs disallowed			—			—			45,964			434,123
		Deferral of energy costs-net			(35,967	)		(43,224	)		48,260			(238,059	)
		Other			44,749			39,250			136,964			116,520
	Maintenance				9,203			8,050			38,390			31,576
	Depreciation and amortization				28,474			24,975			81,095			72,924
	Taxes:
		Income taxes			30,556			39,944			3,734			(116,536	)
		Other than income			6,387			5,935			19,429			19,122
					511,924			603,353			1,241,191			1,667,281
OPERATING INCOME (LOSS)					127,737			109,183			155,634			(121,414	)
OTHER INCOME (EXPENSE):
	Allowance for other funds used during construction				281			(262	)		1,922			239
	Interest accrued on deferred energy				5,952			8,506			16,896			5,411
	Other income				4,277			2,451			11,633			3,792
	Other expense				(1,441	)		(3,184	)		(4,491	)		(9,745	)
	Income taxes				(3,084	)		(2,840	)		(8,277	)		(297	)
					5,985			4,671			17,683			(600	)
			Total Income (Loss) Before Interest Charges		133,722			113,854			173,317			(122,014	)
INTEREST CHARGES:
	Long-term debt				37,600			23,714			104,215			70,668
	Other				34,171			7,251			46,165			14,133
	Allowance for borrowed funds used during construction				(573	)		(208	)		(2,149	)		(2,169	)
					71,198			30,757			148,231			82,632
	Dividend requirements of NPC obligated mandatorily redeemable preferred trust securities (Note 4)				—			3,793			—			11,379
NET INCOME (LOSS)				$	62,524		$	79,304		$	25,086		$	(216,025	)

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

7

NEVADA POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands) (Unaudited)

				Nine Months Ended
				September, 2003
				2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net Income / (Loss)			$	25,086		$	(216,025	)
	Non-cash items included in income:
		Depreciation and amortization			81,095			72,924
		Deferred taxes and deferred investment tax credit			28,097			68,430
		AFUDC and capitalized interest			(4,071	)		(2,408	)
		Amortization of deferred energy costs			156,065			112,959
		Deferred energy costs disallowed (net of taxes)			29,876			282,181
		Other non-cash			(16,908	)		(14,184	)
	Changes in certain assets and liabilities:
		Accounts receivable			(73,859	)		(95,791	)
		Deferral of energy costs			(124,701	)		(127,429	)
		Materials, supplies and fuel			2,188			3,077
		Other current assets			(10,248	)		(14,843	)
		Accounts payable			(24,354	)		129,728
		Income tax receivable			—			70,807
		Other current liabilities			24,010			11,961
		Other assets			8,208			—
		Other liabilities			70,436			18,832
Net Cash from Operating Activities					170,920			300,219
CASH FLOWS FROM INVESTING ACTIVITIES:
		Additions to utility plant			(166,993	)		(196,006	)
		AFUDC and other charges to utility plant			4,071			2,408
		Customer advances (refunds) for construction			7,632			3,072
		Contributions in aid of construction			2,941			27,635
		Net cash used for utility plant			(152,349	)		(162,891	)
		Investments and other property - net			(12,758	)		(2,200	)
Net Cash from Investing Activities					(165,107	)		(165,091	)
CASH FLOWS FROM FINANCING ACTIVITIES:
		Increase in short-term borrowings			—			69,500
		Proceeds form the issuance of long-term debt			350,000			—
		Retirement of long-term debt			(353,573	)		(5,387	)
		Investment by parent company			—			10,000
		Dividends paid			—			(10,000	)
Net Cash from Financing Activities					(3,573	)		64,113
Net Increase in Cash and Cash Equivalents					2,240			199,241
Beginning Balance in Cash and Cash Equivalents					95,009			8,508
Ending Balance in Cash and Cash Equivalents				$	97,249		$	207,749
Supplemental Disclosures of Cash Flow Information:
		Cash paid (received) during period for:
			Interest		96,903		$	66,400
			Income taxes		—		$	(102,904	)

The accompanying notes are an integral part of the financial statements

8

SIERRA PACIFIC POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)

			September 30,		December 31,
			2003		2002
			(Unaudited)
ASSETS
Utility Plant at Original Cost:
	Plant in service		$	2,508,915	$	2,447,401
		Less accumulated provision for depreciation		985,062		926,857
				1,523,853		1,520,544
	Construction work-in-progress			123,818		90,157
				1,647,671		1,610,701
Investments and other property, net				929		874
Current Assets:
	Cash and cash equivalents			83,503		88,910
	Restricted cash			6,626		9,605
	Accounts receivable less provision for uncollectible accounts:
		2003 - $5,612 2002 - $10,343		118,383		154,821
	Accounts receivable, affiliated companies			57,913		58,680
	Deferred energy costs - electric			53,148		55,786
	Deferred energy costs - gas			3,446		17,045
	Materials, supplies and fuel, at average cost			35,603		41,727
	Risk management assets (Note 10)			16,436		1,397
	Other			16,529		12,955
				391,587		440,926
Deferred Charges and Other Assets:
	Deferred energy costs - electric			126,521		161,530
	Regulatory tax asset			56,272		57,818
	Other regulatory assets			63,028		64,149
	Risk management regulatory assets - net (Note 10)			26,436		43,479
	Other			21,229		19,013
				293,486		345,989
			$	2,333,673	$	2,398,490
CAPITALIZATION AND LIABILITIES
Capitalization:
	Common shareholder’s equity		$	612,156	$	639,295
	Preferred stock			50,000		50,000
	Long-term debt			913,297		914,788
				1,575,453		1,604,083
Current Liabilities:
	Current maturities of long-term debt			101,400		101,400
	Accounts payable			43,758		71,247
	Accrued interest			24,761		12,136
	Dividends declared			968		968
	Accrued salaries and benefits			13,245		10,812
	Deferred taxes			30,245		32,891
	Risk management liabilities (Note 10)			26,600		40,045
	Contract termination reserves (Note 11)			11,088		—
	Other current liabilities			7,106		10,864
				259,171		280,363
Commitments & Contingencies (Note 11)
Deferred Credits and Other Liabilities:
	Deferred federal income taxes			229,448		251,487
	Deferred investment tax credit			25,223		26,590
	Regulatory tax liability			23,408		25,418
	Customer advances for construction			52,724		49,598
	Accrued retirement benefits			49,253		44,856
	Risk management liabilities (Note 10)			717		3,917
	Contract termination reserves (Note 11)			93,414		86,778
	Other			24,862		25,400
				499,049		514,044
			$	2,333,673	$	2,398,490

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

9

SIERRA PACIFIC POWER COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands) (Unaudited)

				Three Months Ended						Nine Months Ended
				September 30,						September 30,
				2003			2002			2003			2002
OPERATING REVENUES:
	Electric			$	250,476		$	285,720		$	660,956		$	707,558
	Gas				13,931			18,473			114,421			99,139
					264,407			304,193			775,377			806,697
OPERATING EXPENSES:
	Operation:
		Purchased power			121,763			164,124			284,615			443,843
		Fuel for power generation			65,986			32,804			147,221			111,024
		Gas purchased for resale			7,133			9,884			77,332			61,585
		Deferred energy costs disallowed			—			—			45,000			53,101
		Deferral of energy costs - electric - net			(22,174	)		1,799			(3,531	)		(71,144	)
		Deferral of energy costs - gas - net			2,200			4,281			14,023			14,649
		Other			26,684			25,319			87,522			75,974
	Maintenance				4,769			4,854			16,409			15,250
	Depreciation and amortization				20,811			19,034			60,478			57,186
	Taxes:
		Income taxes			(21	)		7,601			(16,229	)		(9,037	)
		Other than income			4,668			4,472			14,179			14,129
					231,819			274,172			727,019			766,560
OPERATING INCOME					32,588			30,021			48,358			40,137
OTHER INCOME (EXPENSE):
	Allowance for other funds used during construction				758			(10	)		1,961			143
	Interest accrued on deferred energy				732			2,207			4,246			6,233
	Other income				1,450			1,880			3,550			5,450
	Other expense				(1,450	)		(1,337	)		(5,057	)		(5,146	)
	Income taxes				(454	)		(796	)		(1,233	)		(1,906	)
					1,036			1,944			3,467			4,774
			Total Income Before Interest Charges		33,624			31,965			51,825			44,911
INTEREST CHARGES:
		Long-term debt			19,174			16,173			56,914			48,638
		Other			15,675			2,943			21,404			7,051
		Allowance for borrowed funds used during construction			(908	)		(694	)		(2,219	)		(1,314	)
					33,941			18,422			76,099			54,375
NET INCOME (LOSS)					(317	)		13,543			(24,274	)		(9,464	)
Preferred Dividend Requirements					975			975			2,925			2,925
Income (Loss) applicable to common stock				$	(1,292	)	$	12,568		$	(27,199	)	$	(12,389	)

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

10

SIERRA PACIFIC POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands) (Unaudited)

				Nine Months Ended
				September, 2003
				2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss				$	(24,274	)	$	(9,464	)
	Non-cash items included in income:
		Depreciation and amortization			60,478			57,186
		Deferred taxes and deferred investment tax credit			(26,518	)		10,979
		AFUDC and capitalized interest			(4,180	)		(1,457	)
		Amortization of deferred energy costs - electric			35,131			17,708
		Amortization of deferred energy costs - gas			10,784			8,950
		Deferred energy costs disallowed (net of taxes)			29,250			35,796
		Early retirement and severance amortization			1,873			2,082
		Other non-cash			(4,247	)		(10,548	)
	Changes in certain assets and liabilities:
		Accounts receivable			37,205			(54,994	)
		Deferral of energy costs - electric			(26,734	)		4,121
		Deferral of energy costs - gas			2,815			3,408
		Materials, supplies and fuel			6,124			(4,126	)
		Other current assets			(595	)		(14,165	)
		Accounts payable			(27,489	)		(13,285	)
		Income tax receivable			—			43,385
		Other current liabilities			11,300			13,738
		Other assets			3,284			—
		Other liabilities			4,999			12,096
Net Cash from Operating Activities					89,206			101,410
CASH FLOWS FROM INVESTING ACTIVITIES:
		Additions to utility plant			(104,162	)		(63,917	)
		AFUDC and other charges to utility plant			4,180			1,457
		Customer advances for construction			3,126			3,196
		Contributions in aid of construction			6,714			4,746
		Net cash used for utility plant			(90,142	)		(54,518	)
		Disposal of investments and other property - net			(55	)		734
Net Cash from Investing Activities					(90,197	)		(53,784	)
CASH FLOWS FROM FINANCING ACTIVITIES:
		Increase in short-term borrowings			—			103,500
		Retirement of long-term debt			(1,491	)		(6,200	)
		Investment by parent company			—			10,000
		Dividends paid			(2,925	)		(22,830	)
Net Cash from Financing Activities					(4,416	)		84,470
Net Increase (Decrease) in Cash and Cash Equivalents					(5,407	)		132,096
Beginning Balance in Cash and Cash Equivalents					88,910			11,772
Ending Balance in Cash and Cash Equivalents				$	83,503		$	143,868
Supplemental Disclosures of Cash Flow Information:
		Cash (received) paid during period for:
			Interest	$	50,100		$	38,294
			Income taxes	$	(1,521	)	$	(62,109	)

The accompanying notes are an integral part of the financial statements

11

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Management’s Statement (SPR, NPC, SPPC)

     In the opinion of the management of Sierra Pacific Resources (SPR), Nevada Power Company (NPC), and Sierra Pacific Power Company (SPPC), the accompanying unaudited interim consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows for the periods shown. These consolidated financial statements do not contain the complete detail or footnote disclosure concerning accounting policies and other matters, which are included in full year financial statements; therefore, they should be read in conjunction with the audited financial statements included in SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002.

     The results of operations and cash flows of SPR, NPC and SPPC for the three month and nine month periods ended September 30, 2003, are not necessarily indicative of the results to be expected for the full year. The accompanying financial statements do not include any adjustments that might result from the outcome of the uncertainties discussed below.

Enron Litigation

     In 2001, Enron Power Marketing, Inc. (Enron) filed a complaint with the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) against NPC and SPPC (the Utilities) seeking to recover liquidated damages for power supply contracts terminated by Enron in May 2002 and for unpaid power previously delivered to the Utilities (as defined below). The Utilities denied liability on numerous grounds, including deceit and misrepresentation in the inducement (including, but not limited to, misrepresentation as to Enron’s ability to perform) and fraud, unfair trade practices and market manipulation. The Utilities also filed proofs of claims and counterclaims against Enron, for the full amount of the approximately $300 million claimed to be owed and additional damages, as well as for other unspecified damages to be determined during the case as a result of acts and omissions of Enron in manipulating the power markets, wrongful termination of its transactions with the Utilities, and fraudulent inducement to enter into transactions with Enron, among other issues. See SPR’s, NPC’s and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002 for additional information regarding the Enron litigation.

     On September 26, 2003, the Bankruptcy Court entered a judgment (the Judgment) in favor of Enron for damages related to the termination of Enron’s power supply agreements with the Utilities. The Judgment requires NPC and SPPC to pay approximately $235 million and $103 million, respectively, to Enron for liquidated damages and pre-judgment interest for power not delivered by Enron under the power supply contracts terminated by Enron in May 2002 and approximately $17.7 million and $6.7 million, respectively, for power previously delivered to the Utilities. The Bankruptcy Court also dismissed the Utilities’ counter-claims against Enron, dismissed the Utilities’ counter-claims against Enron Corp., the parent of Enron, and denied the Utilities’ motion to dismiss or stay the proceedings pending the final outcome of their Federal Energy Regulatory Commission proceedings against Enron. Based on the prejudgment rate of 12%, NPC and SPPC recognized additional interest expense of $27.8 million and $12.4 million, respectively, in contract termination reserves in the third quarter of 2003. Also, NPC and SPPC recorded additional contract termination reserves for liquidated damages of $6.6 million and $2.1 million, respectively, in the third quarter of 2003. The Bankruptcy Court’s order provides that until paid, the amounts owed by the Utilities will accrue interest post-Judgment at a rate of 1.21% per annum.

     In response to the Judgment, the Utilities filed a motion with the Bankruptcy Court seeking a stay pending appeal of the Judgment and proposing to issue General and Refunding Mortgage Bonds as collateral to secure payment of the Judgment. On November 6, 2003, the Bankruptcy Court ruled to stay execution of the Judgment conditioned upon NPC and SPPC posting into escrow $235 million and $103 million, respectively, of General and Refunding Mortgage Bonds plus $281,695 in cash by NPC for prejudgment interest. NPC and SPPC have sufficient regulatory authority from the Public Utilities Commission of Nevada (PUCN) to comply with the Bankruptcy Court’s ruling. Additionally, the Utilities have been ordered to place into escrow $35 million, approximately $24 million and $11 million for NPC and SPPC, respectively, within 90 days from the date of the order, which will lower the principal amount of General and Refunding Mortgage Bonds held in escrow by a like amount. The Bankruptcy Court also ordered that during the duration of the stay, the Utilities (i) cannot transfer any funds or assets other than to unaffiliated third parties for ordinary course of business operating and capital expenses, (ii) cannot pay dividends to SPR other than for SPR’s current operating expenses and debt payment obligations, and (iii) shall seek a ruling from the PUCN to determine whether the cash payments into escrow trigger the Utilities’ rights to seek recovery of such amounts through their deferred energy rate cases. Furthermore, the Bankruptcy Court will review the Utilities’ abilities to provide additional cash collateral within two weeks after the $35 million is posted by NPC and SPPC.

     NPC and SPPC have established reserves, included in their Consolidated Balance Sheets as “Contract termination reserves,” of $235 million and $103 million, respectively, for power supply contracts terminated by Enron and associated interest. Correspondingly, pursuant to the deferred energy accounting provisions of AB 369, included in NPC and SPPC deferred energy balances as of September 30, 2003, is approximately $200 million and $87 million, (which excludes interest costs discussed below) respectively, for recovery in rates in future periods associated with the power supply contracts terminated by Enron. If NPC and SPPC are required to pay part or all of the amounts reserved, the Utilities will pursue recovery of the amounts through future deferred energy filings. To the extent that the Utilities are not permitted to recover any portion of these costs through a deferred energy filing, the amounts not permitted would be charged as a current operating expense. A significant disallowance of these costs by the PUCN could have a material adverse effect on the future financial position, results of operations, and cash flows of SPR, NPC, and SPPC. The Utilities intend to appeal the Judgment of the Bankruptcy Court to the U.S. District Court of New York.

     Through September 30, 2003, interest costs related to the Judgment of $36 million and $16 million for NPC and SPPC, respectively, were charged as interest expense and were not included in their deferred energy balances. If the Utilities are successful in their appeal, amounts previously charged to interest expense would be reversed and recognized in income in the respective period. Similarly amounts for power supply contracts terminated by Enron included in the deferred energy balances would be reversed. If the Utilities are unsuccessful in their appeal, they have not determined whether to seek recovery of the interest costs. The Utilities are unable to predict the outcome of their appeal of the Judgment of the Bankruptcy Court.

     Any requirement to pay the Judgment or to provide cash collateral, in excess of the $35 million the Utilities are required to deposit into escrow, described above, for Enron’s claims for termination payments could adversely affect SPR’s, NPC’s and SPPC’s cash flow, financial condition and liquidity, and could make it difficult for one or more of SPR, NPC or SPPC to continue to operate outside of bankruptcy.

12

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Sierra Pacific Resources

     SPR, on a stand-alone basis, had cash and cash equivalents of approximately $11.1 million at September 30, 2003. During the fourth quarter of 2003, SPR has approximately $18.6 million of interest due on its existing debt securities. Currently, SPR expects to meet its interest obligations for the fourth quarter of 2003 through the payment of a dividend by SPPC to SPR.

     SPR’s future liquidity and its ability to pay the principal of and interest on its indebtedness depend on SPPC’s ability to continue to pay dividends to SPR, on NPC’s financial stability and the restoration of its ability to pay dividends to SPR, and on SPR’s ability to access the capital markets or otherwise refinance maturing and/or convertible debt. Further adverse developments at NPC or SPPC, including a material disallowance of deferred energy costs (including terminated power supply contracts) in future rate cases, a requirement to pay the judgment of the Bankruptcy Court overseeing Enron’s bankruptcy proceeding in favor of Enron or provide cash collateral, in excess of the $35 million the Utilities are required to deposit into escrow within 90 days from the order date, for Enron’s claims for termination payments under the judgment, could adversely affect SPR’s, NPC’s and SPPC’s cash flow, financial condition and liquidity and could make it difficult for SPR, NPC and SPPC to operate outside of bankruptcy.

     The provisions that currently restrict dividend payments by NPC or SPPC have adversely affected SPR’s liquidity and will continue to negatively impact SPR’s liquidity until those provisions are no longer in effect. Management is currently in the process of seeking consent for a modification of the financial covenant contained in NPC’s first mortgage indenture. There can be no assurance that any such consent can be obtained or that any non-consenting first mortgage bonds could be redeemed or defeased prior to their stated maturity. The regulatory limitation contained in the PUCN’s Compliance Order, Docket No. 02-4037, dated June 19, 2002, expires on December 31, 2003.

Nevada Power Company

     NPC had cash and cash equivalents of approximately $97.2 million at September 30, 2003.

     NPC’s liquidity would be significantly affected by a requirement to pay the judgment of the Bankruptcy Court overseeing Enron’s bankruptcy proceeding in favor of Enron, a requirement to provide cash collateral in excess of the $24 million NPC is required to deposit into escrow within 90 days from the order date, for Enron’s claims for termination payments under the judgment, or unfavorable rulings by the PUCN in future NPC deferred energy rate cases (including terminated power supply contracts). In response to the announcement of the decision of the Bankruptcy Court on August 28, 2003, in favor of Enron, S&P and Moody’s placed NPC on “credit watch with negative implications” and “negative rating outlook,” respectively. Future downgrades by either S&P or Moody’s could preclude or reduce NPC’s access to the capital markets, and could adversely affect NPC’s ability to continue to purchase power and fuel. Adverse developments with respect to any one or a combination of the foregoing and regulatory contingencies, as discussed in Note 11, Commitments and Contingencies, could have a material adverse effect on NPC’s financial condition and liquidity, and could make it difficult for NPC to continue to operate outside of bankruptcy.

Sierra Pacific Power Company

     SPPC had cash and cash equivalents of approximately $83.5 million at September 30, 2003.

     SPPC’s liquidity would be significantly affected by a requirement to pay the judgment of the Bankruptcy Court overseeing Enron’s bankruptcy proceeding in favor of Enron, a requirement to provide cash collateral in excess of the $11 million SPPC is required to deposit into escrow within 90 days from the order date, for Enron’s claims for termination payments under the judgment, or unfavorable rulings by the PUCN in future SPPC deferred energy rate cases (including terminated power supply contracts). In response to the announcement of the decision of the Bankruptcy Court on August 28, 2003, in favor of Enron, S&P and Moody’s placed SPPC on “credit watch with negative implications” and “negative rating outlook,” respectively. Future downgrades by either S&P or Moody’s could preclude or reduce SPPC’s access to the capital markets and could adversely affect SPPC’s ability to continue to purchase power and fuel. Adverse developments with respect to any one or a combination of the foregoing and regulatory contingencies, as discussed in Note 11, Commitments and Contingencies, could have a material adverse effect on SPPC’s financial condition and liquidity, and could make it difficult for SPPC to continue to operate outside of bankruptcy.

13

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Principles of Consolidation

     The consolidated financial statements of SPR include the accounts of SPR and its wholly-owned subsidiaries, NPC and SPPC, Tuscarora Gas Pipeline Company (TGPC), Sierra Gas Holding Company (SGHC), Sierra Pacific Energy Company (SPE), Lands of Sierra (LOS), Sierra Pacific Communications (SPC), and Sierra Water Development Company (SWDC). Sierra Energy Company dba e·three (e·three) is a discontinued operation and as such is reported separately on the financial statements of SPR. The consolidated financial statements of NPC include the accounts of NPC and its wholly-owned subsidiaries, NEICO, NVP Capital I (Trust) and NVP Capital III (Trust). The consolidated financial statements of SPPC include the accounts of SPPC and its wholly- owned subsidiaries, GPSF-B, Piñon Pine Corp. (PPC), Piñon Pine Investment Co., Piñon Pine Company, L.L.C. and Sierra Pacific Funding L.L.C. All significant intercompany transactions and balances have been eliminated in consolidation.

Reclassifications

     Certain items previously reported have been reclassified to conform to the current year’s presentation. Net income and shareholders’ equity were not affected by these reclassifications.

Nevada Power Company Financial Statements

     The presentation of NPC’s consolidated statement of operations for the three months and nine months ended September 30, 2002, and NPC’s consolidated statement of cash flows for the nine months ended September 30, 2002, have been revised. Specifically, the effects of the revisions were to eliminate the line item “Equity in earnings (losses) of Sierra Pacific Resources” of, (the following dollars are in thousands), $70 and $(51,999) on NPC’s Consolidated Statement of Operations for the three and nine months ended September 30, 2002, respectively, and to eliminate the line item “Equity in losses of SPR” of $51,999, on NPC’s Consolidated Statement of Cash Flows for the nine months ended September 30, 2002. For additional information regarding this change in presentation, see Note 1, Summary of Significant Accounting Policies of Notes to Financial Statements in SPR’s, NPC’s and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002.

Recent Pronouncements

     In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees” (FIN 45), which elaborates on the disclosures to be made in interim and annual financial statements of a guarantor about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing a guarantee. Initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements were effective for financial statements of interim or annual periods beginning January 1, 2003. As of September 30, 2003, all guarantees of SPR and its subsidiaries were intercompany, whereby the parent issued the guarantees on behalf of its consolidated subsidiaries to a third party. Therefore, there was no impact on the financial position, results of operation or cash flows of SPR, NPC or SPPC as a result of the adoption.

     In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46), which elaborates on Accounting Research Bulletin No. 51, “Consolidated Financial Statements.” Among other requirements, FIN 46 provides that a variable interest entity be consolidated by the enterprise that is the primary beneficiary of the variable interest entity. Management believes under the current provisions of FIN 46, we would be required to deconsolidate NPC’s Trust I and Trust II subsidiaries. However, in October, 2003, the FASB issued FASB Staff Position (FSP) “46-6 Effective Date of FIN 46,” delaying the implementation of FIN 46 to modify certain provisions for all public entities until the first interim or annual period ending after December 15, 2003. We are unable to determine the ultimate outcome of FASB’s modification as such, we have elected to delay adoption of FIN 46 as permitted and continue to monitor and evaluate further developments. Furthermore, management believes the effect of adopting FIN 46 will not have a material impact on the financial position, results of operations or cash flows of SPR, NPC or SPPC.

     On April 30, 2003, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 149, which amends accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The Statement clarifies the circumstances under which a contract with an initial net investment meets the characteristics of a derivative as discussed in SFAS 133. In addition, SFAS 149 clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 has had no effect on the financial position, results of operation or cash flows of SPR, NPC or SPPC.

     On May 15, 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity,” which requires that certain financial instruments with characteristics of both liabilities and equities be

14

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

classified as liabilities by their issuers. The provisions of SFAS No. 150, which also include a number of new disclosure requirements, are effective for (1) instruments entered into or modified after May 31, 2003 and (2) pre-existing instruments as of the beginning of the first interim period that commences after June 15, 2003. NPC’s obligated mandatorily redeemable preferred trust securities are subject to the provisions of SFAS No. 150.

     The application of SFAS No. 150 to SPR’s and NPC’s balance sheet resulted in the presentation of NPC’s trust preferred securities, previously reported as NPC obligated mandatorily redeemable preferred trust securities, as Long-Term Debt. NPC’s payments on the obligations, previously classified on the income statement as, Dividend requirements of NPC obligated mandatorily redeemable preferred trust securities are reported as interest charges on Long-Term Debt for the periods ending September 30, 2003, prior year amounts have not been restated. See Note 4, Long-Term Debt for further information.

Deferral of Energy Costs

     NPC and SPPC implemented deferred energy accounting on March 1, 2001. See Note 1, Summary of Significant Accounting Policies, of Notes to Financial Statements in SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002, for additional information regarding the implementation of deferred energy accounting by the Utilities.

     The following deferred energy costs were included in the consolidated balance sheets as of September 30, 2003 (dollars in thousands):

		September 30, 2003
		NPC		SPPC		SPPC			SPR
Description		Electric		Electric		Gas			Total
Unamortized balances approved for collection in current rates		$	322,710	$	55,432	$	16,938		$	395,080
Balances accumulated since end of periods submitted for PUCN approval (1)			92,911		40,205		(13,492	)		119,624
Terminated suppliers (2)			244,590		84,032		—			328,622
	Total	$	660,211	$	179,669	$	3,446		$	843,326

(1)	Credits represent over-collections, that is, the extent to which gas or fuel and purchased power costs recovered through rates exceed actual gas or fuel and purchased power costs.
(2)	Amounts related to terminated suppliers are discussed in Note 11, Commitments & Contingencies and Note 17, Commitments and Contingencies, of Notes to Financial Statements in SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002.

Stock Compensation Plans

     In December 2002, the FASB released SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” as an amendment to SFAS No. 123, “Accounting for Stock-Based Compensation.” SPR has previously adopted the disclosure-only provisions of SFAS No. 123, and as of December 31, 2002, has adopted the updated disclosure requirements set forth in SFAS No. 148. At September 30, 2003, SPR had several stock-based compensation plans which are described more fully in Note 15, Stock Compensation Plans, in the Notes to Financial Statements in SPR’s, NPC’s, and SPPC’s Combined Annual Report on Form 10-K for the year ended December 31, 2002. SPR applies Accounting Principles 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. 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 (loss) applicable to common stock would have been decreased to the pro forma amounts indicated below (dollars in thousands, except per share):

15

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

			Three Months Ended					Nine Months Ended
			September 30,					September 30,
			2003		2002			2003			2002
Stock Compensation Cost included in Net Income (Loss) as Reported, net of related tax effects		As Reported	$	66	$	(127	)	$	90		$	(897	)
Earnings (Loss) applicable to Common Stock (1)		As Reported	$	51,578	$	79,374		$	(103,051	)	$	(268,024	)
	Less: Stock Compensation Cost, net of related tax effects	Pro Forma		17		512			1,234			1,535
Earnings (Loss) applicable to Common Stock		Pro Forma	$	51,561	$	78,862		$	(104,285	)	$	(269,559	)
Basic Earnings (Loss) Per Share		As Reported	$	0.28	$	0.78		$	(0.89	)	$	(2.62	)
		Pro Forma	$	0.28	$	0.77		$	(0.90	)	$	(2.64	)
Diluted Earnings (Loss) Per Share		As Reported	$	0.28	$	0.78		$	(0.89	)	$	(2.62	)
		Pro Forma	$	0.28	$	0.77		$	(0.90	)	$	(2.64	)

(1) Earnings for the quarter have been adjusted in accordance with EITF D-95. See Note 6, Earnings Per Share for discussion

Note 2. Asset Retirement Obligations (AROs)

     Effective January 1, 2003, the Utilities adopted the provisions of SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 generally applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. SFAS No. 143 requires NPC to recognize an estimated liability for the retirement of generation plant assets specified in land leases for NPC’s jointly-owned Navajo generating station because, at the expiration of the leases, the leases require the lessees to remove the facilities upon request of the Navajo Nation. However, the retirement obligation and corresponding charges recognized were immaterial to the financial statements of NPC. NPC also redesignated amounts from Accumulated Depreciation to a regulatory liability in order to reflect the estimated costs of removal collected through rates. NPC amortizes the amount added to Electric Plant In Service and recognizes accretion expense in connection with the discounted liability over the estimated remaining life of the Navajo generating station assets. SPPC has no significant asset retirement obligations.

     NPC and SPPC also collect removal costs in regulated rates for certain assets that do not have associated legal asset retirement obligations. As of September 30, 2003, NPC and SPPC estimate that they had approximately $136 million and $154 million related to such removal costs recorded in Accumulated Depreciation, respectively.

Note 3. Short-Term Borrowings

Nevada Power Company

     On June 30, 2003, NPC entered into a Credit Agreement, which provided for a $60 million revolving credit facility to provide additional liquidity to NPC for its summer 2003 power purchases. This facility was paid off in full on August 11, 2003, and was terminated on August 18, 2003.

     On October 29, 2002, NPC established an accounts receivable purchase facility of up to $125 million. The accounts receivable purchase facility was renewed on October 28, 2003, and will expire on October 26, 2004. If NPC elects to activate the receivables purchase facility, NPC will sell all of its accounts receivable generated from the sale of electricity to customers to its newly created bankruptcy remote special purchase subsidiary. The receivables sales will be without recourse except for breaches of customary representations and warranties made at the time of sale. The subsidiary will, in turn, sell these receivables to a bankruptcy remote subsidiary of SPR. SPR’s subsidiary will issue variable rate revolving notes backed by the purchased

16

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

receivables. The agreements relating to the receivables purchase facility contain various conditions to purchase, covenants and trigger events, termination events and other provisions customary in receivables transactions. In connection with NPC’s receivables facility, SPR has agreed to guaranty NPC’s performance of certain obligations as a seller and servicer under the facility.

     NPC has agreed to issue $125 million principal amount of its General and Refunding Mortgage Bonds upon activation of the accounts receivables purchase facility. The full principal amount of the Bond would secure certain of NPC’s obligations as seller and servicer, plus certain interest, fees and expenses thereon to the extent not paid when due, regardless of the actual amounts owing with respect to the secured obligations. As a result, in the event of an NPC bankruptcy or liquidation, the holder of the Bond securing the receivables facility may recover more on a pro rata basis than the holders of other General and Refunding Mortgage securities, who could recover less on a pro rata basis than they otherwise would recover. However, in no event will the holder of the Bond recover more than the amount of obligations secured by the Bond.

     NPC intends to use the accounts receivables purchase facility as a back-up liquidity facility and does not plan to activate this facility in the foreseeable future. As of October 31, 2003, this facility had not been activated.

Sierra Pacific Power Company

     On October 29, 2002, SPPC established an accounts receivable purchase facility of up to $75 million. The accounts receivable purchase facility was renewed on October 28, 2003, and will expire on October 26, 2004. If SPPC elects to activate the receivables purchase facility, SPPC will sell all of its accounts receivable generated from the sale of electricity and gas to customers to its newly created bankruptcy-remote special purpose subsidiary. The receivables sales will be without recourse except for breaches of customary representations and warranties made at the time of sale. The subsidiary will, in turn, sell these receivables to a bankruptcy-remote subsidiary of SPR. SPR’s subsidiary will issue variable rate revolving notes backed by the purchased receivables. The agreements relating to the receivables purchase facility contain various conditions to purchase, covenants and trigger events, termination events and other provisions customary in receivables transactions. In connection with SPPC’s receivables facility, SPR has agreed to guaranty SPPC’s performance of certain obligations as a seller and servicer under the facility.

     SPPC has agreed to issue $75 million principal amount of its General and Refunding Mortgage Bonds upon activation of the accounts receivables purchase facility. The full principal amount of the Bond would secure certain of SPPC’s obligations as seller and servicer, plus certain interest, fees and expenses thereon to the extent not paid when due, regardless of the actual amounts owing with respect to the secured obligations. As a result, in the event of an SPPC bankruptcy or liquidation, the holder of the Bond securing the receivables facility may recover more on a pro rata basis than the holders of other General and Refunding Mortgage securities, who could recover less on a pro rata basis than they otherwise would recover. However, in no event will the holder of the Bond recover more than the amount of obligations secured by the Bond.

     SPPC intends to use the accounts receivables purchase facility as a back-up liquidity facility and does not plan to activate this facility in the foreseeable future. SPPC may activate the facility within five days upon the delivery of certain customary funding documentation and the delivery of the $75 million General and Refunding Mortgage Bond. As of October 31, 2003, this facility had not been activated.

Note 4. Long-Term Debt

     Substantially all utility plant owned by NPC and SPPC is subject to the liens of their respective indentures under which their First Mortgage bonds and General and Refunding Mortgage bonds are issued.

     As of September 30, 2003, NPC’s, SPPC’s and SPR’s aggregate annual amount of maturities for Long-Term Debt (including obligations related to capital leases) for the balance of 2003, each of the next four years and thereafter is shown below (in thousands of dollars):

17

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

							SPR Holding Co.			SPR
	NPC *			SPPC			and Other Subs. **			Consolidated
2003	$	980		$	19,103		$	20,315		$	40,398
2004		135,570			83,400			—			218,970
2005		6,091			100,400			300,000			406,491
2006		6,509			52,400			—			58,909
2007		5,949			2,400			240,218			248,567
Thereafter		1,885,934			759,913			232,277			2,878,124
		2,041,033			1,017,616			792,810			3,851,459
Unamortized (Disc.)		(12,459	)		(2,919	)		(6,899	)		(22,277	)
Total	$	2,028,574		$	1,014,697		$	785,911		$	3,829,182

* Included in NPC’s “Thereafter” amount is $188,872 of Preferred Trust Securities, reclassified to Long-Term Debt as a result of the adoption of SFAS No. 150.

** $142,180 of SPR’s Convertible Notes due 2010 that were deemed current on the June 30, 2003 Form 10Q, have been reclassified, to “Thereafter” following the shareholder vote in August 2003, which gave SPR the ability to settle the conversion of its Convertible Notes entirely in shares rather than partially in cash.

Sierra Pacific Resources

     In January 2003, SPR acquired $8.75 million aggregate principal amount of its Floating Rate Notes due April 20, 2003, in exchange for approximately 1.3 million shares of its common stock, in two privately-negotiated transactions exempt from the registration requirements of the Securities Act of 1933.

     On February 5, 2003, SPR acquired 2.1 million of Premium Income Equity Securities (PIES) including approximately $104.8 million of 7.93% Senior Notes due 2007 that are a component of the PIES, in exchange for approximately 13.66 million shares of its common stock, in five privately negotiated transactions exempt from the registration requirements of the Securities Act.

     On February 14, 2003, SPR issued and sold $300 million of its 7.25% Convertible Notes due 2010. Approximately $53.4 million of the net proceeds from the sale of the notes was used to purchase U.S. government securities that were pledged to the trustee for the first five interest payments on the notes payable during the first two and one-half years. A portion of the remaining net proceeds of the notes were used to repurchase approximately $58.5 million of SPR’s Floating Rate Notes due April 20, 2003. Of the remaining net proceeds, approximately $133 million was used to repay SPR’s Floating Rate Notes due April 20, 2003, and the remaining proceeds were available for general corporate purposes.

     On August 11, 2003, SPR obtained shareholder approval to issue up to 42,736,920 additional shares of SPR’s common stock in lieu of paying the cash payment component upon conversion of the Convertible Notes. Before SPR received shareholder approval, holders of the Convertible Notes were entitled to receive both shares of common stock and cash upon conversion on their notes. As a result of receiving shareholder approval, through the close of business on February 14, 2010, for each $1,000 principal amount of the Convertible Notes surrendered, SPR has the option to issue (i) 76.7073 shares of Common Stock plus an amount of cash equal to the then market value of 142.4564 shares of our Common Stock, subject to adjustment upon the occurrence of certain dilution events; or (ii) 219.1637 shares of our Common Stock, subject to adjustment upon the occurrence of certain dilution events. If the noteholders present the Convertible Notes for conversion and SPR elects to satisfy the conversion of the Convertible Notes in stock and cash, the total amount of the cash payable on conversion would be approximately $253.6 million, at an assumed five-day average closing price of $5.93 per share (based upon the last reported sale price of SPR’s common stock on November 3, 2003). The amount of cash payable on conversion of the Convertible Notes will increase as the average closing price of SPR’s common stock increases.

18

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

     As a result of the shareholder approval discussed above, the conversion of the Convertible Notes may be fully satisfied by the issuance of stock at SPR’s election. As such, the portion to be settled with working capital, which was reported as current maturities of Long-Term Debt as of March 31, 2003 and June 30, 2003, has been reclassified as a long-term liability.

     The Convertible Notes provide for the payment of dividends to the holders in an amount equal to any per share dividends on SPR common stock that would have been payable to the holders if the holders of the notes had converted their notes into shares of common stock at the applicable conversion rate on the record date for such dividend.

     The indenture under which the Convertible Notes were issued does not contain any financial covenants or any restrictions on the payment of dividends, the repurchase of SPR’s securities or the incurrence of indebtedness. The indenture does allow the holders of the Convertible Notes to require SPR to repurchase all or a portion of the holders’ Convertible Notes upon a change of control. The indenture also provides for an event of default if SPR or any of its significant subsidiaries, including NPC and SPPC, fails to pay any indebtedness in excess of $10 million or has any indebtedness of $10 million or more accelerated and declared due and payable.

Nevada Power Company

     On August 18, 2003, NPC issued and sold $350 million of its 9% General and Refunding Mortgage Notes, Series G, due 2013. The Series G Notes were issued with registration rights. The proceeds of the issuance were used to satisfy NPC’s obligations with respect to its $210 million 6% Notes due September 15, 2003, and its $140 million General and Refunding Mortgage Notes, Floating Rate, Series B, due October 15, 2003.

     The Series G Notes limit the amount of payments in respect of common stock that NPC may pay to SPR. However, that limitation does not apply to payments by NPC to enable SPR to pay its reasonable fees and expenses (including, but not limited to, interest on SPR’s indebtedness and payment obligations on account of SPR’s PIES) provided that those payments do not exceed $60 million for any one calendar year, those payments comply with any regulatory restrictions then applicable to NPC, and the ratio of consolidated cash flow to fixed charges for NPC’s most recently ended four full fiscal quarters immediately preceding the date of payment is at least 1.75 to 1. The terms of the Series G Notes also permit NPC to make payments to SPR in an aggregate amount not to exceed $25 million from the date of the issuance of the Series G Notes. In addition, NPC may make dividend payments to SPR in excess of the amounts described above so long as, at the time of payment and after giving effect to the payment: there are no defaults or events of default with respect to the Series G Notes, NPC can meet a fixed charge coverage ratio test, and the total amount of such dividends is less than (i) the sum of 50% of NPC’s consolidated net income measured on a quarterly basis cumulative of all quarters from the date of issuance of the Series G Notes, plus (ii) 100% of NPC’s aggregate net cash proceeds from the issuance or sale of certain equity or convertible debt securities of NPC, plus (iii) the lesser of cash return of capital or the initial amount of certain restricted investments, plus (iv) the fair market value of NPC’s investment in certain subsidiaries.

     The terms of the Series G Notes also restrict NPC from incurring any additional indebtedness unless (i) at the time the debt is incurred, the ratio of consolidated cash flow to fixed charges for NPC’s most recently ended four quarter period on a pro forma basis is at least 2 to 1, or (ii) the debt incurred is specifically permitted, which includes certain credit facility or letter of credit indebtedness, obligations incurred to finance property construction or improvement, indebtedness incurred to refinance existing indebtedness, certain intercompany indebtedness, hedging obligations, indebtedness incurred to support bid, performance or surety bonds, indebtedness incurred to finance capital expenditures pursuant to NPC’s 2003 Resource Plan and certain letters of credit issued to support NPC’s obligations with respect to energy suppliers.

     If NPC’s Series G Notes are upgraded to investment grade by both Moody’s and S&P, the dividend restrictions and the restrictions on indebtedness applicable to the Series G Notes will be suspended and will no longer be in effect so long as the Series G Notes remain investment grade.

     Among other things, the Series G Notes also contain restrictions on liens (other than permitted liens, which include liens to secure certain permitted debt) and certain sale and leaseback transactions. In the event of a change of control of NPC, the holders of Series G Notes are entitled to require that NPC repurchase the Series G Notes for a cash payment equal to 101% of the aggregate principal amount plus accrued and unpaid interest. The Series G Notes will mature August 15, 2013.

     On April 2, 1997, NVP Capital I (Trust), a wholly-owned subsidiary of NPC, issued 4,754,860, 8.2% preferred trust securities (QUIPS) at $25 per security. NPC 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 NPC 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,

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

June, September and December of each year. Interest payments made by NPC in respect of the QUIDS are sufficient to provide the trust with funds to pay the required cash distribution on the QUIPS and the common securities of the trust. 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. NPC’s obligations provide a full and unconditional guarantee of the Trust’s obligations under the QUIPS. Financial statements of the Trust are consolidated with NPC’s. Separate financial statements are not filed because the Trust is wholly owned by NPC and essentially has no independent operations, and NPC’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, 7.75% Cumulative Trust Issued Preferred Securities (TIPS) at $25 per security. NPC owns the entire common securities, 86,598 shares issued by the Trust for $2.2 million. The TIPS 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 TIPS and the common securities and using the proceeds thereof to purchase from NPC its 7.75% 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 TIPS 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. Interest payments by NPC in respect of the Junior Subordinated Deferrable Interest Debentures are sufficient to provide the trust with funds to pay the required cash distributions on the TIPS and the common securities of the trust. The TIPS 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 TIPS are redeemable at $25 per preferred security plus accumulated and unpaid distributions thereon to the date of redemption. NPC’s obligations provide a full and unconditional guarantee of the Trust’s obligations under the TIPS. Financial statements of the Trust are consolidated with NPC’s. Separate financial statements are not filed because the Trust is wholly owned by NPC and essentially has no independent operations, and NPC’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.

     As discussed in Note 1, Recent Pronouncements, NPC’s Obligated Mandatorily Redeemable Preferred Trust Securities are subject to the provisions of SFAS No. 150. The application of SFAS No. 150 resulted in the presentation of NPC’s trust preferred securities, previously reported as NPC obligated mandatorily redeemable preferred trust securities, as Long-Term Debt. NPC’s obligations, previously presented on the income statement as Dividend requirements of NPC obligated mandatorily redeemable preferred trust securities are reported as interest charges on Long-Term Debt as of January 1, 2003.

     The following table indicates the principal amount and number of shares of NPC preferred trust securities outstanding that have been reclassified as of September 30, 2003:

(Dollars in thousands)		Amount		Shares Outstanding
Preferred Trust Securities
Subject to mandatory redemption
Preferred Securities of Nevada Power Co Capital I		$	118,872		147,058
Preferred Securities of Nevada Power Co Capital III			70,000		86,598
	Total Preferred Trust Securities	$	188,872		233,656

Sierra Pacific Power Company

     On May 1, 2003, SPPC’s $80 million Washoe County, Nevada, Water Facilities Refunding Revenue Bonds, Series 2001, were successfully remarketed. The interest rate on the bonds was adjusted from their prior two-year 5.75% term rate to a 7.50% term rate for the period of May 1, 2003, to and including May 3, 2004. The bonds will be subject to remarketing on May 3, 2004 and will continue to be included in current maturities of Long-Term Debt. In the event that the bonds cannot be successfully remarketed on that date, SPPC will be required to purchase the outstanding bonds at a price of 100% of principal amount, plus accrued interest. From May 1, 2003, to and including May 3, 2004, SPPC’s payment and purchase obligations in respect of the bonds are secured by SPPC’s $80 million General and Refunding Mortgage Note, Series D, due 2004.

20

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Note 5. Dividend Restrictions

     Since SPR is a holding company, substantially all of its cash flow is provided by dividends paid to SPR by NPC and SPPC on their common stock, all of which is owned by SPR. Since NPC and SPPC are public utilities, they are subject to regulation by state utility commissions which may impose limits on investment returns or otherwise impact the amount of dividends that the Utilities may declare and pay, and to federal statutory limitation on the payment of dividends. In addition, certain agreements entered into by the Utilities set restrictions on the amount of dividends they may declare and pay and restrict the circumstances under which such dividends may be declared and paid. The specific restrictions on dividends contained in agreements to which NPC and SPPC are party, as well as specific regulatory limitations on dividends, are summarized below.

     Nevada Power Company

     First Mortgage Indenture. NPC’s first mortgage indenture limits the cumulative amount of dividends and other distributions that NPC may pay on its capital stock to the cumulative net earnings of NPC since 1953, subject to adjustments for the net proceeds of sales of capital stock since 1953. At the present time, this restriction precludes NPC from making further payments of dividends on NPC’s common stock and will continue to preclude payment of dividends until NPC, over time, generates sufficient earnings to eliminate the deficit under this provision (which was approximately $220 million as of September 30, 2003), unless the restriction is waived, amended, or removed by the consent of the first mortgage bondholders, or the first mortgage bonds are redeemed or defeased. Management is currently in the process of seeking consent for the modification of this restriction. There can be no assurance that any such consent can be obtained or that any non-consenting first mortgage bonds could be redeemed or defeased prior to their stated maturity. Under this provision, NPC continues to have capacity to repurchase or redeem shares of its capital stock.

     Series E Notes and Series G Notes. NPC’s 10 7/8% General and Refunding Mortgage Notes, Series E, due 2009, which were issued on October 29, 2002, and NPC’s 9% General and Refunding Mortgage Notes, Series G, due 2013, which were issued on August 13, 2003, limit the amount of payments in respect of common stock that NPC may pay to SPR. However, that limitation does not apply to payments by NPC to enable SPR to pay its reasonable fees and expenses (including, but not limited to, interest on SPR’s indebtedness and payment obligations on account of SPR’s Premium Income Equity Securities (PIES)) provided that:

• those payments do not exceed $60 million for any one calendar year,

• those payments comply with any regulatory restrictions then applicable to NPC, and

• the ratio of consolidated cash flow to fixed charges for NPC’s most recently ended four full fiscal quarters immediately preceding the date of payment is at least 1.75 to 1.

     The terms of both series of Notes also permit NPC to make payments to SPR in an aggregate amount not to exceed: (1) under the Series E Notes, $15 million from the date of the issuance of the Series E Notes, and (2) under the Series G Notes, $25 million from the date of the issuance of the Series G Notes. In addition, NPC may make payments to SPR in excess of the amounts described above so long as, at the time of payment and after giving effect to the payment:

• there are no defaults or events of default with respect to the Series E Notes or the Series G Notes,

• NPC has a ratio of consolidated cash flow to fixed charges for NPC’s most recently ended four full fiscal quarters immediately preceding the payment date of at least 2.0 to 1, and

• the total amount of such dividends is less than:

• the sum of 50% of NPC’s consolidated net income measured on a quarterly basis cumulative of all quarters from the date of issuance of the applicable series of Notes, plus

• 100% of NPC’s aggregate net cash proceeds from contributions to its common equity capital or the issuance or sale of certain equity or convertible debt securities of NPC, plus

• the lesser of cash return of capital or the initial amount of certain restricted investments, plus

• the fair market value of NPC’s investment in certain subsidiaries.

     If NPC’s Series E Notes or the Series G Notes are upgraded to investment grade by both Moody’s Investors Service, Inc. (Moody’s) and Standard & Poor’s Rating Group, Inc. (S&P), these restrictions will be suspended and will no longer be in effect so long as the applicable series of Notes remain investment grade.

     Accounts Receivable Facility. On October 29, 2002, NPC established an accounts receivable purchase facility, which was renewed on October 28, 2003, and will expire October 26, 2004. The agreements relating to the receivables purchase facility contain various conditions, including a limitation on the payment of dividends by NPC to SPR that is identical to the limitation contained in NPC’s General and Refunding Mortgage Notes, Series E, described above.

21

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

     Preferred Trust Securities. The terms of NPC’s preferred trust securities provide that no dividends may be paid on NPC’s common stock if NPC has elected to defer payments on the junior subordinated debentures issued in conjunction with the preferred trust securities. At this time, NPC has not elected to defer payments on the junior subordinated debentures.

     PUCN Compliance Order. The PUCN issued a Compliance Order, Docket No. 02-4037, on June 19, 2002, relating to NPC’s request for authority to issue Long-Term Debt. The PUCN order requires that, until such time as the order’s authorization expires (December 31, 2003), NPC must either receive the prior approval of the PUCN or reach an equity ratio of 42% before paying any dividends to SPR. If NPC achieves a 42% equity ratio prior to December 31, 2003, the dividend restriction ceases to have effect. As of September 30, 2003, NPC’s equity ratio was 36.66%. Prior to the expiration date of the Compliance Order, management may seek PUCN approval for a payment of dividends by NPC or may seek a waiver from the PUCN of the dividend restriction.

     Federal Power Act. NPC is subject to the provisions of the Federal Power Act that state that dividends cannot be paid out of funds that are properly included in capital account. Although the meaning of this provision is unclear, NPC believes that the Federal Power Act restriction would not be construed or applied to prohibit the payment of dividends for lawful and legitimate business purposes from current year earnings, or in the absence of current year earnings, from other/additional paid-in capital accounts.

     Enron Litigation. On November 6, 2003, the Bankruptcy Court issued an order staying execution pending appeal of the September 26, 2003 judgment entered in favor of Enron against the Utilities. One of the conditions of the stay order is that the Utilities cannot pay dividends to SPR other than for SPR’s current operating expenses and debt payment obligations. The Utilities have the right to seek modification of the conditions of the stay if there is a material change in the facts upon which the stay order is based.

     Sierra Pacific Power Company

     Term Loan Agreement. SPPC’s Term Loan Agreement dated October 30, 2002, as amended, which expires October 31, 2005, limits the amount of dividends that SPPC may pay to SPR. However, that limitation does not apply to payments by SPPC to enable SPR to pay its reasonable fees and expenses (including, but not limited to, interest on SPR’s indebtedness and payment obligations on account of SPR’s PIES) provided that those payments do not exceed $90 million, $80 million and $60 million in the aggregate for the twelve month periods ending on October 30, 2003, 2004 and 2005, respectively. The Term Loan Agreement also permits SPPC to make dividend payments to SPR in an aggregate amount not to exceed $10 million during the term of the Term Loan Agreement. In addition, SPPC may make dividend payments to SPR in excess of the amounts described above so long as, at the time of the payment and after giving effect to the payment, there are no defaults or events of default under the Term Loan Agreement, and such amounts, when aggregated with the amount of dividends paid to SPR by SPPC since the date of execution of the Term Loan Agreement, do not exceed the sum of:

• 50% of SPPC’s Consolidated Net Income for the period commencing January 1, 2003, and ending with last day of fiscal quarter most recently completed prior to the date of the contemplated dividend payment, plus

• the aggregate amount of cash received by SPPC from SPR as equity contributions on its common stock during such period.

     Accounts Receivable Facility. On October 29, 2002, SPPC established an accounts receivable purchase facility, which was renewed on October 28, 2003, and expires on October 26, 2004. The agreements relating to the receivables purchase facility contain various conditions, including a limitation on the payment of dividends by SPPC to SPR that is identical to the limitation contained in SPPC’s Term Loan Agreement, described above.

     Articles of Incorporation. SPPC’s Articles of Incorporation contain restrictions on the payment of dividends on SPPC’s common stock in the event of a default in the payment of dividends on SPPC’s preferred stock. SPPC’s Articles also prohibit SPPC from declaring or paying any dividends on any shares of common stock (other than dividends payable in shares of common stock), or making any other distribution on any shares of common stock or any expenditures for the purchase, redemption or other retirement for a consideration of shares of common stock (other than in exchange for or from the proceeds of the sale of common stock) except from the net income of SPPC, and its predecessor, available for dividends on common stock accumulated subsequent to December 31, 1955, less preferred stock dividends, plus the sum of $500,000. At the present time, SPPC believes that these restrictions do not materially limit its ability to pay dividends and/or to purchase or redeem shares of its common stock.

     Federal Power Act. SPPC is subject to the provisions of the Federal Power Act that state that dividends cannot be paid out of funds that are properly included in capital account. Although the meaning of this provision is unclear, SPPC believes that the Federal Power Act restriction would not be construed or applied to prohibit the payment of dividends for lawful and legitimate business purposes from current year earnings, or in the absence of current year earnings, from other/additional paid-in capital accounts.

     Enron Litigation. On November 6, 2003, the Bankruptcy Court issued an order staying execution pending appeal of the September 26, 2003 judgment entered in favor of Enron against the Utilities. One of the conditions of the stay order is that the Utilities cannot pay dividends to SPR other than for SPR’s current operating expenses and debt payment obligations. The Utilities have the right to seek modification of the conditions of the stay if there is a material change in the facts upon which the stay order is based.

22

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Note 6. Earnings Per Share (SPR)

     FASB Emerging Issues Task Force (EITF) Topic D-95, “Effect of Participating Convertible Securities on the Computation of Basic Earnings Per Share” (Topic D-95), requires participating securities that are convertible into common stock be included in the computation of basic earnings per share (EPS) if the effect is dilutive. The Convertible Notes are considered participating securities because the terms of the Convertible Notes include dividend participation rights. Accordingly, the provisions of Topic D-95 are applicable. Further, in computing basic EPS, Topic D-95 provides for the use of the “if-converted” method or the “two-class” method. We have elected to apply the “if-converted” method.

     For the three months ended September 30, 2003, income from continuing operations and income applicable to common stock have been increased for interest expense and decreased for unrealized gain on the derivative of $4.7 million and $40 million, respectively, and 65,749,110 have been added to the weighted average number of shares outstanding, as if the notes were converted as of July 1, 2003, for the three month period ending September 30, 2003. See Note 10, Derivatives and Hedging Activities for discussion regarding the unrealized gain on the derivative. The effect of the Convertible Notes on EPS for the nine months ended September 30, 2003 is anti-dilutive and therefore excluded from the calculation of basic and 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 and restricted stock plans and the non-employee director stock plan. However, due to net losses for the nine month period ended September 30, 2003, and 2002, these items are anti-dilutive. Accordingly, Diluted EPS for these periods are computed using the weighted average shares outstanding before dilution. Common stock equivalents were determined using the treasury stock method.

     The following table outlines the calculation for EPS.

			Three Months Ended					Nine Months Ended
			September 30,					September 30,
			2003			2002		2003			2002
Basic EPS
	Numerator ($000)
		Income / (Loss) from continuing operations1	$	53,012		$	79,374	$	(92,872	)	$	(266,458	)
		Loss from discontinued operations	$	(1	)	$	—	$	(1,043	)	$	—
		Loss on disposal of subsidiary	$	(458	)	$	—	$	(6,211	)	$	—
		Cumulative effect of change in accounting principle	$	—		$	—	$	—		$	(1,566	)
		Income / (Loss) applicable to common stock1	$	51,578		$	79,374	$	(103,051	)	$	(268,024	)
	Denominator
		Weighted average number of shares outstanding2		182,926,433			102,132,465		115,294,693			102,117,926
	Per-Share Amount
		Income / (Loss) from continuing operations	$	0.29		$	0.78	$	(0.81	)	$	(2.61	)
		Loss from discontinued operations	$	—		$	—	$	(0.01	)	$	—
		Loss on disposal of subsidiary	$	—		$	—	$	(0.05	)	$	—
		Cumulative effect of change in accounting principle	$	—		$	—	$	—		$	(0.01	)
		Income / (Loss) applicable to common stock	$	0.28		$	0.78	$	(0.89	)	$	(2.62	)

23

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

			Three Months Ended					Nine Months Ended
			September 30,					September 30,
			2003			2002		2003			2002
Diluted EPS
	Numerator ($000)
		Income / (Loss) from continuing operations1	$	53,012		$	79,374	$	(92,872	)	$	(266,458	)
		Loss from discontinued operations	$	(1	)	$	—	$	(1,043	)	$	—
		Loss on disposal of subsidiary	$	(458	)	$	—	$	(6,211	)	$	—
		Cumulative effect of change in accounting principle	$	—		$	—	$	—		$	(1,566	)
		Income / (Loss) applicable to common stock1	$	51,578		$	79,374	$	(103,051	)	$	(268,024	)
	Denominator3
		Weighted average number of shares outstanding before dilution2		182,926,433			102,132,465		115,294,693			102,117,926
		Stock options		—			—		—			—
		Executive long term incentive plan - performance shares4		—			—		—			—
		Executive long term incentive plan - restricted shares5		67,084			—		—			—
		Non-Employee Director stock plan		19,629			15,148		—			—
		Employee stock purchase plan		1,725			—		—			—
		Convertible Notes					—		—			—
		Weighted average number of shares outstanding after dilution6		183,014,871			102,147,613		115,294,693			102,117,926
	Per-Share Amount
		Income / (Loss) from continuing operations	$	0.29		$	0.78	$	(0.81	)	$	(2.61	)
		Loss from discontinued operations	$	—		$	—	$	(0.01	)	$	—
		Loss on disposal of subsidiary	$	—		$	—	$	(0.05	)	$	—
		Cumulative effect of change in accounting principle	$	—		$	—	$	—		$	(0.01	)
		Income / (Loss) applicable to common stock	$	0.28		$	0.78	$	(0.89	)	$	(2.62	)

     Notes:

1.	Income from continuing operations and income applicable to common stock for the three months ended September 30, 2003 were adjusted by adding back interest expense of $4.7 million (net of tax) and subtracting the unrealized gain on derivative of $40 million (net of tax), included in net income for the three months ended September 30, 2003.
2.	Weighted average number of shares outstanding for the three months ended September 30, 2003 was adjusted by adding 65,749,110 shares for the Convertible Notes as of the beginning of the period.
3.	The denominator does not include anti-dilutive stock equivalents for the Stock Option Plan and Corporate PIES due to conversion prices being higher than market prices at September 30, 2003. The amounts that would be included in the calculation if the conversion price were met would be 1.5 million shares for the Stock Option Plan and 17.3 million shares for Corporate PIES.
4.	Plan terminated in 2002.
5.	New plan for 2003.
6.	For the nine months ended September 30, 2003 and 2002 the weighted average number of shares after dilution excludes shares of 65,814,279 and 33,004, respectively, for stock options, executive long term incentive plan — performance shares, executive long term incentive plan — restricted shares, non-employee Director stock plan, Employee stock purchase plan and convertible notes as they would be anti-dilutive.

Note 7. Segment Information (SPR)

     SPR operates three business segments providing regulated electric and natural gas services. NPC provides electric service to Las Vegas and surrounding Clark County. SPPC provides electric service in northern Nevada and the Lake Tahoe area of California. SPPC also provides natural gas service 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. Intersegment revenues are not material.

24

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

     Financial data for business segments is as follows (in thousands):

Three Months Ended	NPC		SPPC		Total
September 30, 2003	Electric		Electric		Electric		Gas			Other		Consolidated
Operating Revenues	$	639,661	$	250,476	$	890,137	$	13,931		$	809	$	904,877
Operating Income (Loss)	$	127,737	$	32,750	$	160,487	$	(162	)	$	5,119	$	165,444

Three Months Ended	NPC		SPPC		Total
September 30, 2002	Electric		Electric		Electric		Gas			Other		Consolidated
Operating Revenues	$	712,536	$	285,720	$	998,256	$	18,473		$	642	$	1,017,371
Operating Income	$	109,183	$	30,252	$	139,435	$	(231	)	$	4,068	$	143,272

Nine Months Ended	NPC		SPPC		Total
September 30, 2003	Electric		Electric		Electric		Gas		Other			Consolidated
Operating Revenues	$	1,396,825	$	660,956	$	2,057,781	$	114,421	$	2,111		$	2,174,313
Operating Income (Loss)	$	155,634	$	44,149	$	199,783	$	4,209	$	(6,650	)	$	197,342

Nine Months Ended	NPC			SPPC		Total
September 30, 2002	Electric			Electric		Electric			Gas		Other		Consolidated
Operating Revenues	$	1,545,867		$	707,558	$	2,253,425		$	99,139	$	2,264	$	2,354,828
Operating Income (Loss)	$	(121,414	)	$	35,311	$	(86,103	)	$	4,826	$	14,326	$	(66,951	)

Note 8. Disposal and Impairment of Long-Lived Assets

     e·three

     SPR’s subsidiary, e·three, was organized in October 1996 to provide energy and other business solutions in commercial and industrial markets. SPR’s subsidiary, e·three Custom Energy Solutions, LLC (CES) was formed in October 1998 for the purpose of selling and implementing energy-related performance contracts and the construction and operation of a chilled water cooling plant in the downtown area of Las Vegas supplying indoor air-cooling requirements for a number of businesses in its immediate vicinity.

     In keeping with management’s strategy to focus on its core utility businesses, SPR began negotiations in the second quarter of 2003 to sell e·three and CES. Accordingly, at June 30, 2003, e·three and CES were reported as discontinued operations. Based on the expected selling price, a pre-tax loss on disposal of $8.9 million was recognized for the six months ended June 30, 2003. On September 26, 2003, the sale of e·three and CES were completed. As a result of the final sales price, an additional pre-tax loss on disposal of $703,787 was recognized for the three months ended September 30, 2003. The operations of e·three and CES were included in the “Other” business segment.

     Other Property Disposals

     During 2002, the Utilities began pursuing the sale of several non-essential properties. As a result, on January 15, 2003, NPC sold a parcel of land located on Flamingo Road near the Barbary Coast Casino in Las Vegas, Nevada. NPC received cash proceeds of approximately $18 million for the property and retained an easement and other rights necessary to maintain aerial power lines that cross the property. Also, it was agreed that NPC will receive an additional $2.6 million from the sale if the power lines that cross the property are removed and the other rights are relinquished within a five-year period from the date of the sale. The property had been originally transferred to NPC at no cost. The transaction resulted in a gain of $17.7 million, which will be recognized into revenue over a period of three years consistent with the accounting treatment directed by the PUCN.

     On July 17, 2003, NPC sold a parcel of land located on Centennial Road in North Las Vegas, Nevada. NPC received cash proceeds of approximately $4.9 million for the property. The property had a carrying value of approximately $1.2 million. The transaction resulted in an approximate gain of $3.7 million, which will be recognized into revenue over a period of three years consistent with the accounting treatment directed by the PUCN.

25

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

     On August 12, 2003, NPC auctioned parcels of land located on Flamingo Road from Koval Lane to Maryland Parkway, commonly known as “the Flamingo Corridor.” The net sales price for these properties was $24.4 million. The carrying value of the properties was approximately $0.2 million. The sale closed on October 28, 2003. The transaction resulted in an approximate gain of $24.2 million, of which $2.4 million is being held in escrow pending the final outcome of related litigation. The gain will be recognized in revenue over a period of three years consistent with the accounting treatment directed by the PUCN.

     On November 11, 2002, SPPC agreed to sell land located in Nevada County and Sierra County, California, commonly referred to as Independence Lake. The sale was subject to review by a third party who retained certain rights, including water rights, after the sale is completed. Also, the sales agreement included a due diligence review period of 180 days which allowed the buyer to review and accept a variety of matters agreed to by both parties. In April 2003, the buyer terminated the agreement during the review period as provided for in the agreement. SPPC plans to sell the property and is engaged in discussions with potential buyers.

     Sierra Pacific Communications

     In 2000, Sierra Pacific Communications (SPC), a wholly owned subsidiary of SPR, and Touch America (formerly Montana Power), formed Sierra Touch America LLC (STA), a limited liability company whose primary purpose was to engage in communications and fiber optics business projects, including construction of a fiber optic line between Salt Lake City, Utah, and Sacramento, California.

     In September 2002, SPC conveyed its membership interest in STA to Touch America and obtained an indemnity for any liabilities associated with STA, all in exchange for title to several fibers in the line and a $35 million promissory note. On June 19, 2003, citing uncertainty about their liquidity, Touch America Holdings and STA filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code.

     In light of the bankruptcy of Touch America Holdings and STA, SPC evaluated its business to determine whether the Touch America bankruptcy has caused an impairment of SPC’s assets. SPC anticipates that the market for fiber optic cable and conduits will likely become significantly over-supplied and has recognized an impairment charge of $32.9 million during the second quarter of 2003. The asset impairment charge consisted of $14.7 million of fiber optic cable, conduits, and other related business equipment write-downs related to SPC’s metropolitan area network assets (MAN assets), and $18.2 million in fiber optic cable, conduits, and other related business equipment write-downs of its long haul network assets.

     This evaluation was conducted in conformance with the guidelines of SFAS 144, and also considered factors such as the anticipated liquidation of Sierra Touch America LLC assets, resulting in significant changes in business climate and projected discounted cash flows from the assets. SPC evaluated its MAN assets using projected discounted cash flows. The evaluation factored the undiscounted cash flows from current and projected sales contracts and continued operating expenses over the approximate 18-year remaining life of the assets and then discounted those cash flows to the end of the current reporting period. SPC evaluated its long haul network assets based in part on a pending sale for a portion of the long haul network assets currently under construction and in part by prices for similar assets adjusted for the market factors that resulted from the Touch America bankruptcy discussed above.

Note 9. Regulatory Actions

     Nevada Power Company 2002 Deferred Energy Case

     On November 14, 2002, NPC filed an application with the PUCN seeking repayment for purchased fuel and power costs accumulated between October 1, 2001, and September 30, 2002, as required by law. The application sought to establish a rate to collect accumulated purchased fuel and power costs of $195.7 million, together with a carrying charge, over a period of not more than three years. The application also requested a reduction to the going-forward rate for energy, reflecting reduced wholesale energy costs. The combined effect of these two adjustments resulted in a request for an overall rate reduction of 6.3%.

26

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

     The decision on this case was issued May 13, 2003, and authorized the following:

• recovery of $147.6 million, with a carrying charge, and a $48.1 million disallowance;

• a three-year amortization of the balance commencing on May 19, 2003;

• a reduction in the Base Tariff Energy Rate (BTER) to an effective non-residential rate of $0.04322 per kWh, and an effective residential rate of $0.04186 per kWh.

     The new rates went into effect on May 19, 2003.

     The Bureau of Consumer Protection (BCP) filed a Petition with the District Court of Clark County, Nevada, for Judicial Review of the PUCN Order on August 8, 2003, against PUCN, Case No. A471928. On September 8, 2003, the PUCN filed its answer to the BCP Petition. The PUCN response cites a number of affirmative defenses to the allegations contained in the BCP petition and asks that the court dismiss the BCP petition. The court has not ruled on this matter.

     Sierra Pacific Power Company 2003 Deferred Energy Case

     On January 14, 2003, SPPC filed an application with the PUCN, as required by law, seeking to clear deferred balances for purchased fuel and power costs accumulated between December 1, 2001, and November 30, 2002. The application sought to establish a rate to clear accumulated purchased fuel and power costs of $15.4 million and spread the cost recovery over a period of not more than three years. It also sought to recalculate the rate to reflect anticipated ongoing purchased fuel and power costs. The total rate increase request amounted to 0.01%. The interveners’ testimony was received April 25, 2003, and included proposed disallowances from $34 million to $76 million. Prior to the hearing that was scheduled to begin on May 12, 2003, the parties negotiated a settlement agreement. The agreement included the following provisions:

• A reduction in the current deferred energy balance of $45 million leaving a balance payable to customers of approximately $29.6 million.

• A two-year amortization of the amount payable returning one third of the balance in the first year (approximately $9.9 million), and two thirds of the balance the second year (approximately $19.7 million).

• Discontinue carrying charges on deferred energy balances that SPPC is already collecting from customers and on the $29.6 million amount payable as a result of the agreement.

• Maintain the currently effective Base Tariff Energy Rate.

• SPPC maintains the rights to claim the cost of terminated energy contracts in future deferred filings.

• Parties agreed that with the $45 million reduction the remaining costs for purchasing fuel and power during the test year were prudently incurred and are just and reasonable.

• SPPC and the BCP agreed to file a motion to dismiss the civil lawsuits filed in relation to the 2001 SPPC deferred energy case.

     The agreement was approved by the PUCN at the agenda meeting held on May 19, 2003, and the new rates went into effect on June 1, 2003.

     Annual Purchased Gas Cost Adjustment (SPPC)

     On May 15, 2003, SPPC filed its annual application for Purchased Gas Cost Adjustment for its natural gas local distribution company. In the application, SPPC asked for an increase of $0.02524 per therm to its Base Purchased Gas Rate (BPGR) and a Balancing Account Adjustment (BAA) credit to customers of $0.04833 per therm to be amortized over two years. This request would result in a decrease of approximately 5% in customer rates.

NOTE 10. Derivatives and Hedging Activities (SPR, NPC, SPPC)

     SPR, NPC, and SPPC apply SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 138 and SFAS No. 149. As amended, SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position, measure those instruments at fair value, and recognize changes in the fair value of the derivative instruments in earnings in the period of change unless the derivative qualifies as an effective hedge.

27

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

     SPR’s and the Utilities’ objective in using derivatives is to reduce exposure to energy price risk and interest rate risk. Energy price risks result from activities that include the generation, procurement and marketing of power and the procurement and marketing of natural gas. Derivative instruments used to manage energy price risk include forwards, options, and swaps. These contracts allow the Utilities to reduce the risks associated with volatile electricity and natural gas markets.

     At September 30, 2003, the fair value of the derivatives resulted in the recording of $37 million, $21 million and $16 million in risk management assets and $41 million, $14 million and $27 million in risk management liabilities in the Consolidated Balance Sheets of SPR, NPC and SPPC, respectively. Due to deferred energy accounting under which the Utilities operate, regulatory assets and liabilities are established to the extent that electricity and natural gas derivative gains and losses are recoverable or payable through future rates. Accordingly, at September 30, 2003, $32 million, $5 million and $26 million in net risk management regulatory assets were recorded in the Consolidated Balance Sheets of SPR, NPC, and SPPC, respectively. In addition, for the nine months ended September 30, 2003, the unrealized gains and losses resulting from the change in the fair value of derivatives designated and qualifying as cash flow hedges for SPR, NPC, and SPPC were recorded in Other Comprehensive Income. Such amounts are reclassified into earnings when the related transactions are settled or terminate. Accordingly, the remaining $1.5 million relating to SPR’s terminated interest rate swap was reclassified into earnings during the nine months ended September 30, 2003.

     The effects of SFAS No. 133 on comprehensive income and the components thereof at September 30, 2003, and 2002, are as follows (in thousands):

	SPR			NPC			SPPC
Net Income (Loss) for the nine months ended September 30, 2003	$	(103,051	)	$	25,086		$	(27,199	)
Change in market value of risk management assets and liabilities as of September 30, 2003, net of taxes of $940, $70, and $33, respectively		1,746			130			61
Total Comprehensive Income (Loss) for the nine months ended September 30, 2003	$	(101,305	)	$	25,216		$	(27,138	)
Net (Loss) for the nine months ended September 30, 2002	$	(268,024	)	$	(216,025	)	$	(12,389	)
Change in market value of risk management assets and liabilities as of September 30, 2002, net of taxes of $1,468, ($217), and ($103), respectively		2,726			(403	)		(191	)
Total Comprehensive (Loss) for the nine months ended September 30, 2002	$	(265,298	)	$	(216,428	)	$	(12,580	)

     In connection with SPR’s issuance of its Convertible Notes on February 14, 2003, (see Note 4, Long-Term Debt), the conversion option, which is treated as a cash-settled written call option, was separated from the debt and accounted for separately as a derivative instrument in accordance with EITF Issue No. 90-19, “Convertible Bonds with Issuer Option to Settle for Cash upon Conversion.” Upon issuance, the fair value of the option was recorded as a current liability in Other Current Liabilities. The change in the fair value was recognized in earnings in the period of the change.

     EITF Issue No. 00-19 of the Emerging Issues Task Force of the FASB (“EITF”), “Accounting for Derivative Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” provides for the recording of the fair value of the derivative in equity, if all of the applicable provisions of EITF Issue No. 00-19 are met. Management believes that all such applicable provisions have been met. Accordingly, the fair value of the derivative, $118 million on the date of the shareholder vote, was reclassified to equity. The fair value of the option was determined using the closing stock price of $4.68 as of August 11, 2003, the strike price for conversion of $4.5628, a measurement for the volatility of the stock price and the time value of money. The valuation resulted in an unrealized pre-tax gain of $61.5 million for the quarter ended September 30, 2003. The valuations for the quarters ended March 31, 2003, and June 30, 2003, resulted in a pre-tax gain of $15.9 million in the first quarter and a pre-tax loss of $123.5 million respectively. The net impact of these valuation adjustments was an unrealized pre-tax loss of $46.1 million for the nine months

28

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

ended September 30. EITF Issue No. 00-19 also provides that subsequent changes in fair value should not be recognized as long as the derivative remains classified in equity.

Note 11. Commitments and Contingencies

     Environmental

     Nevada Power Company

     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 NPC) 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 in October 1999. The consent decree, approved by the court in November 1999, 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. The estimated cost of new controls is $1.2 billion. As a 14% owner in Mohave, NPC’s cost could be $168 million.

     NPC’s ownership interest in Mohave comprises approximately 10% of NPC’s peak generation capacity. Southern California Edison (SCE) is the operating partner of Mohave. On May 17, 2002, SCE filed with the CPUC an application to address the future disposition of SCE’s share of Mohave. Mohave obtains all of its coal supply from a mine in northeast Arizona on lands of the Navajo Nation and the Hopi Tribe (the Tribes). This coal is delivered from the mine to Mohave by means of a coal slurry pipeline, which requires water that is obtained from groundwater wells located on lands of the Tribes in the mine vicinity.

     Due to the lack of progress in negotiations with the Tribes and other parties to resolve several coal and water supply issues, SCE’s application states that it appears that it probably will not be possible for SCE to extend Mohave’s operations beyond 2005. Due to the uncertainty over a post-2005 coal supply, SCE and the other Mohave co-owners have been prevented from commencing the installation of extensive pollution control equipment that must be put in place if Mohave’s operations are extended past 2005.

     Because of the coal and water supply issues at Mohave, NPC is preparing for the shutdown of the facility by the end of 2005. In July, NPC filed an Integrated Resource Plan with the PUCN, that assumed the Plant will be unavailable after December 31, 2005. In addition, in its General Rate Case filed on October 1, 2003, NPC requested that the PUCN authorize a higher depreciation rate be applied to Mohave in order to recover the remaining net book value of $36.1 million. Alternatively, NPC requested that the PUCN authorize the transfer of the remaining book value to a regulatory asset account to be amortized over a period as determined by the PUCN.

     In May 1997, the Nevada Division of Environmental Protection (NDEP) ordered NPC to submit a plan to eliminate the discharge of Reid Gardner Station wastewater to groundwater. The NDEP order also required a hydrological assessment of groundwater impacts in the area. In June 1999, NDEP determined that wastewater ponds had 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 NPC to submit a Site Characterization Plan to NDEP to ascertain impacts. NDEP is expected to identify remediation requirements for the contaminated groundwater that resulted from the evaporation ponds by the end of 2003. New pond construction and lining costs, which will be capitalized, are estimated to cost approximately $25 million, of which, $17 million is expected to be spent by the end of 2003.

     At the Reid Gardner Station, the NDEP determined that there is additional groundwater contamination that resulted from oil spills at the facility. NDEP has required NPC to submit a corrective action plan. A hydro-geologic evaluation of the current remediation was completed, and a dual phase extraction remediation system commenced operation in October 2003.

     In July 2000, NPC received a request from the EPA for information to determine the compliance of certain generation facilities at NPC’s Clark Station with the applicable State Implementation Plan. In November 2000, NPC and the Clark County Health District entered into a Corrective Action Order requiring, among other steps, capital expenditures at the Clark Station totaling approximately $3 million. In March 2001, the EPA issued an additional request for information that could result in remediation beyond that specified in the November 2000 Corrective Action Order. If the EPA requires remediation, capital expenditures and temporary outages of two of Clark Station’s generation units could be required. Additionally, depending on the time of year that the compliance activity and corresponding generation outage would occur, the incremental cost to purchase replacement energy could be substantial. On October 31, 2003, the EPA issued a Notice of Violation and Finding of Violation regarding turbine blade upgrades, which occurred in July 1993. A conference between the EPA and NPC is expected to occur before the end of 2003. The conference will enable NPC to present evidence on the nature and finding of violations and any efforts which NPC has taken or proposes to take to achieve compliance. Monetary penalties for the violation have not been determined.

29

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

     On February 25, 2003, NPC submitted its 2002 Phase II Annual Certification Report to the EPA in accordance with the EPA’s Acid Rain Program. NPC indicated that its Reid Gardner Unit 1 may be in violation with the EPA’s annual NOx emission rate for wall-fired boilers. In July 2003, the EPA concurred with the Company’s submission and the company paid $134,000 for excess emissions.

     NEICO, a wholly owned subsidiary of NPC, 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 $4.8 million with the Utah Division of Oil and Gas Mining. The property was leased in August 2002 with the intention to reclaim coal fines with subsequent revenues and reduction to the reclamation bond. However, this lease has expired and is not expected to be renewed.

     Sierra Pacific Power Company

     In September 1994, Region VII of the EPA notified SPPC that it was being named as a potentially responsible party (PRP) regarding the past improper handling of Polychlorinated Biphenyls (PCB’s) by PCB Treatment, Inc., in two buildings, one located in Kansas City, Kansas and the other in Kansas City, Missouri (the Sites). Prior to 1994, SPPC sent PCB contaminated material to PCB Treatment, Inc. for disposal. Certificates of disposal were issued to SPPC by PCB Treatment, Inc.; however, the contaminated material was not disposed of, but remained on-site. A number of the largest PRPs formed a steering committee, which is chaired by SPPC. The steering committee has completed its site investigations and the EPA has determined that the Sites should be remediated by removing the buildings to the appropriate landfills. The EPA issued an administrative order on consent requiring the steering committee to oversee the performance of the work. SPPC recorded a preliminary liability for the Sites of $650,000 of which approximately $136,000 has been spent through September 30, 2003. The steering committee is obtaining cost estimates for removal of the buildings. Once these costs have been determined, SPPC will be in a better position to estimate and revise, if necessary, its recorded liability for the Sites.

     Lands of Sierra

     LOS, 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 contamination resulting from an underground fuel tank that was removed from the property. Additional contamination from a third party fuel tank on the property has also been identified and is undergoing remediation. On February 3, 2003, the Lahontan Regional Water Quality Control Board re-opened closure of this property. SPR is completing the evaluation of alternative remediation technologies and their effectiveness in reducing contamination at this site. An application for closure will be re-submitted at that time. Additional remediation costs are expected to be approximately $100,000.

     Litigation Contingencies

     Nevada Power Company and Sierra Pacific Power Company

     Enron Litigation

     In 2001, Enron Power Marketing, Inc. (Enron) filed a complaint with the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) against NPC and SPPC (the Utilities) seeking to recover liquidated damages for power supply contracts terminated by Enron in May 2002 and for unpaid power previously delivered to the Utilities (as defined below). The Utilities denied liability on numerous grounds, including deceit and misrepresentation in the inducement (including, but not limited to, misrepresentation as to Enron’s ability to perform) and fraud, unfair trade practices and market manipulation. The Utilities also filed proofs of claims and counterclaims against Enron, for the full amount of the approximately $300 million claimed to be owed and additional damages, as well as for other unspecified damages to be determined during the case as a result of acts and omissions of Enron in manipulating the power markets, wrongful termination of its transactions with the Utilities, and fraudulent inducement to enter into transactions with Enron, among other issues. See SPR’s, NPC’s and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002 for additional information regarding the Enron litigation.

     On September 26, 2003, the Bankruptcy Court entered a judgment (the Judgment) in favor of Enron for damages related to the termination of Enron’s power supply agreements with the Utilities. The Judgment requires NPC and SPPC to pay approximately $235 million and $103 million, respectively, to Enron for liquidated damages and pre-judgment interest for power not delivered by Enron under the power supply contracts terminated by Enron in May 2002 and approximately $17.7 million and $6.7 million, respectively, for power previously delivered to the Utilities. The Bankruptcy Court also dismissed the Utilities’ counter-claims against Enron, dismissed the Utilities’ counter-claims against Enron Corp., the parent of Enron, and denied the Utilities’ motion to dismiss or stay the proceedings pending the final outcome of their Federal Energy Regulatory Commission proceedings against Enron. Based on the prejudgment rate of 12%, NPC and SPPC recognized additional interest expense of $27.8 million and $12.4 million, respectively, in contract termination reserves in the third quarter of 2003. Also, NPC and SPPC recorded additional contract termination reserves for liquidated damages of $6.6 million and $2.1 million, respectively, in the third quarter of 2003. The Bankruptcy Court’s order provides that until paid, the amounts owed by the Utilities will accrue interest post-Judgment at a rate of 1.21% per annum.

     In response to the Judgment, the Utilities filed a motion with the Bankruptcy Court seeking a stay pending appeal of the Judgment and proposing to issue General and Refunding Mortgage Bonds as collateral to secure payment of the Judgment. On November 6, 2003, the Bankruptcy Court ruled to stay execution of the Judgment conditioned upon NPC and SPPC posting into escrow $235 million and $103 million, respectively, of General and Refunding Mortgage Bonds plus $281,695 in cash by NPC for prejudgment interest. NPC and SPPC have sufficient regulatory authority from the Public Utilities Commission of Nevada (PUCN) to comply with the Bankruptcy Court’s ruling. Additionally, the Utilities have been ordered to place into escrow $35 million, approximately $24 million and $11 million for NPC and SPPC, respectively, within 90 days from the date of the order, which will lower the principal amount of General and Refunding Mortgage Bonds held in escrow by a like amount. The Bankruptcy Court also ordered that during the duration of the stay, the Utilities (i) cannot transfer any funds or assets other than to unaffiliated third parties for ordinary course of business operating and capital expenses, (ii) cannot pay dividends to SPR other than for SPR’s current operating expenses and debt payment obligations, and (iii) shall seek a ruling from the PUCN to determine whether the cash payments into escrow trigger the Utilities’ rights to seek recovery of such amounts through their deferred energy rate cases. Furthermore, the Bankruptcy Court will review the Utilities’ abilities to provide additional cash collateral within two weeks after the $35 million is posted by NPC and SPPC.

     NPC and SPPC have established reserves, included in their Consolidated Balance Sheets as “Contract termination reserves,” of $235 million and $103 million, respectively, for power supply contracts terminated by Enron and associated interest. Correspondingly, pursuant to the deferred energy accounting provisions of AB 369, included in NPC and SPPC deferred energy balances as of September 30, 2003, is approximately $200 million and $87 million, (which excludes interest costs discussed below) respectively, for recovery in rates in future periods associated with the power supply contracts terminated by Enron. If NPC and SPPC are required to pay part or all of the amounts reserved, the Utilities will pursue recovery of the amounts through future deferred energy filings. To the extent that the Utilities are not permitted to recover any portion of these costs

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

through a deferred energy filing, the amounts not permitted would be charged as a current operating expense. A significant disallowance of these costs by the PUCN could have a material adverse effect on the future financial position, results of operations, and cash flows of SPR, NPC, and SPPC. The Utilities intend to appeal the Judgment of the Bankruptcy Court to the U.S. District Court of New York.

     Through September 30, 2003, interest costs related to the Judgment of $36 million and $16 million for NPC and SPPC, respectively, were charged as interest expense and were not included in their deferred energy balances. If the Utilities are successful in their appeal, amounts previously charged to interest expense would be reversed and recognized in income in the respective period. Similarly amounts for power supply contracts terminated by Enron included in the deferred energy balances would be reversed. If the Utilities are unsuccessful in their appeal, they have not determined whether to seek recovery of the interest costs. The Utilities are unable to predict the outcome of their appeal of the Judgment of the Bankruptcy Court.

     Any requirement to pay the Judgment or to provide cash collateral, in excess of the $35 million the Utilities are required to deposit into escrow, described above, for Enron’s claims for termination payments could adversely affect SPR’s, NPC’s and SPPC’s cash flow, financial condition and liquidity, and could make it difficult for one or more of SPR, NPC or SPPC to continue to operate outside of bankruptcy.

     Nevada Power Company

     In June 2003, El Paso Merchant Energy demanded mediation of its claim for a termination payment arising out of El Paso’s September 25, 2002, termination of all executory purchase power contracts between NPC and El Paso. El Paso claims that under the terms of the contracts, NPC owes El Paso approximately $39 million representing the difference between the contract price and the market price for power to be delivered under all the terminated contracts and the amount remaining unpaid under the contracts for power delivered between May 2002 and October 2002. NPC claims that El Paso owes NPC an amount up to approximately $162 million for undelivered power representing the difference between the replacement price or market price for power to be delivered under all the executory contracts and the contract price for that power. The mediation was unsuccessful, and on July 25, 2003, NPC commenced an action against El Paso Merchant Energy and several of its affiliates in the Federal District Court for the District of Nevada for damages resulting from breach of these purchase power contracts. That action has not yet been served on El Paso and the issues have not been joined.

     On May 3, 2002, and July 3, 2002, respectively, Reliant Resources (Reliant) and IDACORP Energy, L.P. (Idaho) terminated their power deliveries to NPC. On May 20, 2002, and July 30, 2002, Reliant and Idaho asserted claims for $25.6 million and $8.9 million, respectively, under the Western System Power Pool Agreement (WSPP) for liquidated damages under energy contracts that each company terminated before the delivery dates of the power. Such claims are subject to mandatory mediation and, in some cases, arbitration under the contracts. Disputes between Idaho and Reliant were both mediated to conclusion without reaching a settlement. In May 2003, Idaho filed suit against NPC in Idaho state court claiming damages in the approximate amount of $8.9 million dollars. NPC has moved to dismiss the complaint on jurisdictional grounds and filed its own action in Nevada for declaratory relief claiming that it does not owe Idaho any money under the terminated contracts. The actions are currently in the pleading stage and NPC’s motion to dismiss is scheduled to be heard in the fourth quarter. NPC continues to have discussions with Reliant on a broad range of issues including whether any money is owed Reliant under the purchased power contracts. Neither party has filed any action arising out of this dispute.

     On September 5, 2002, Morgan Stanley Capital Group (MSCG) initiated arbitration pursuant to the arbitration provisions in various power supply contracts terminated by MSCG in April 2002. In the arbitration, MSCG requested that the arbitrator compel NPC to pay MSCG $25 million pending the outcome of any dispute regarding the amount owed under the contracts. NPC claimed that nothing is owed under the contracts on various grounds, including breach by MSCG in terminating the contracts, and further, that the arbitrator does not have jurisdiction over NPC’s contract claims and defenses. In March 2003, the arbitrator overseeing the arbitration proceedings dismissed MSCG’s demand for arbitration and agreed that the issues raised by MSCG were not calculation issues subject to arbitration and that NPC’s contract defenses were likewise not arbitrable.

     NPC filed a complaint for declaratory relief in the U.S. District Court for the District of Nevada asking the Court to declare that NPC is not liable for any damages as a result of MSCG’s termination of its power supply contracts. On April 17, 2003, MSCG answered the complaint and filed a counterclaim against NPC at the FERC alleging non-payment of the termination payment in the amount of $25 million. In April 2003 MSCG also filed a complaint against NPC at FERC alleging that NPC should be required to pay MSCG the amount of the claimed termination payment pending resolution of the case. NPC filed a motion to intervene in the

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

FERC action commenced by MSCG and FERC dismissed MSCG’s complaint. NPC is unable to predict the outcome of the District Court complaint.

     In connection with claims by their terminated energy suppliers, the Utilities have established reserves, included in their Consolidated Balance Sheets in “Contract termination reserves,” of approximately $279 million and $105 million as of September 30, 2003, for NPC and SPPC, respectively. Also, pursuant to the deferred energy accounting provisions of AB 369, NPC and SPPC added approximately $245 million and $84 million, respectively, to their deferred energy balances for recovery in rates in future periods associated with terminated supplier claims. The amounts deferred differ from the contract termination reserves because of payments which have reduced the reserves and because the reserves include amounts not subject to deferred energy accounting.

Regulatory Contingencies

     The Utilities’ rates are currently subject to the approval of the PUCN and, in the case of SPPC, they are also subject to the approval of California Public Utility Commission (CPUC) and are designed to recover the cost of providing generation, transmission, and distribution services. As a result, the Utilities 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.

     Regulatory assets represent incurred costs that have been deferred because it is probable they will be recovered through future rates collected from customers. Regulatory liabilities generally represent obligations to make refunds to customers for previous collections for costs that are not likely to be incurred. Management regularly assesses whether the regulatory assets are probable of future recovery by considering factors such as applicable regulatory environment changes and the status of any pending or potential deregulation legislation. Although current rates do not include the recovery of all existing regulatory assets as discussed further below and in Note 1 in Notes to Financial Statements in SPR’s, NPC’s, and SPPC’s Annual Report on Form 10-K for the year ended December 31, 2002, management believes the existing regulatory assets are probable of recovery. This determination reflects the current political and regulatory climate in the state, and is subject to change in the future. If future recovery of costs ceases to be probable, the write-off of regulatory assets would be required to be recognized as a charge or expensed in current period earnings.

     Regulatory Accounting affects Deferred Energy, Goodwill and Merger Costs, Generation Divestiture Costs, and Piñon Pine, all of which are discussed immediately below. To the extent that the Utilities may not be permitted to recover any portion of deferred energy, goodwill and merger costs, generation divestiture costs and long-lived assets (Piñon Pine), the disallowed costs and related carrying charges would be required to be written off in current period earnings. A significant disallowance of these costs by the PUCN would have a material adverse effect on the future financial position, results of operations, and cash flows of SPR, NPC, and SPPC.

     Deferred Energy

     Nevada and California statutes permit regulated utilities to, from time-to-time, adopt deferred energy accounting procedures. The intent of these procedures is to ease the effect of fluctuations in the cost of purchased gas, fuel, and purchased power.

     On April 18, 2001, the Governor of Nevada signed into law AB 369. The provisions of AB 369, include, among others, a reinstatement of deferred energy accounting for fuel and purchased power costs incurred by electric utilities. In accordance with the provisions of SFAS No. 71, the Utilities implemented deferred energy accounting on March 1, 2001, for their respective electric operations. Under deferred energy accounting, to the extent actual fuel and purchased power costs exceed fuel and purchased power costs recoverable through current rates, that excess is not recorded as a current expense on the statement of operations but rather is deferred and recorded as an asset on the balance sheet. Conversely, a liability is recorded to the extent fuel and purchased power costs recoverable through current rates exceed actual fuel and purchased power costs. These excess amounts are reflected in adjustments to rates and recorded as revenue or expense in future time periods, subject to PUCN review.

     AB 369 requires the Utilities to file applications to clear their respective deferred energy account balances at least every 12 months and provides that the PUCN may not allow the recovery of any costs for purchased fuel or purchased power “that were the result of any practice or transaction that was undertaken, managed or performed imprudently by the electric utility.” In reference to deferred energy accounting, AB 369 specifies that fuel and purchased power costs include all costs incurred to purchase fuel, to purchase capacity, and to purchase energy. The Utilities also record and are eligible under the statute to recover a carrying charge on such deferred balances. Deferred energy balances subject to PUCN review as of September 30, 2003 are $338 million and $124 million for NPC and SPPC, respectively, including contract termination costs.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Goodwill and Merger Costs

     The order issued by the PUCN in December 1998 approving the merger of SPR and NPC directed both NPC and SPPC to defer three categories of merger costs to be reviewed for recovery through future rates. That order specifically directed both Utilities to defer merger transaction costs, transition costs, and goodwill costs for a three-year period. The deferral of these costs was 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 Utilities to propose an amortization period for the merger costs and allows the Utilities to recover the costs to the extent they are offset by merger savings.

     Costs deferred as a result of the PUCN order were $331.2 million of goodwill and $63.4 million in other merger costs as of September 30, 2003. The deferred other merger costs consist of $41.5 million of transaction and transition costs and $21.9 million of employee separation costs. Employee separation costs were comprised of $17.4 million of employee severance, relocation, and related costs, and $4.5 million of pension and post-retirement benefits net of plan curtailment gains. NPC has requested recovery of these costs in its General Rate Case filed October 1, 2003. SPPC expects to request recovery of these costs in its General Rate Case to be filed December 1, 2003.

     Accounting for Generation Divestiture Costs

     As a condition to its approval of the merger between SPR and NPC, the Utilities filed, and in February 2000 the PUCN approved, a revised Divestiture Plan stipulation for the sale of the Utilities’ generation assets. In May 2000, an agreement was announced for the sale of NPC’s 14% undivided interest in the Mohave Generating Station (Mohave). In the fourth quarter of 2000, the Utilities announced agreements to sell six additional bundles of generation assets described in the approved Divestiture Plan. The sales were subject to approval and review by various regulatory agencies.

     AB 369, which was signed into law on April 18, 2001, prohibited the sale of generation assets until July 2003 and directs the PUCN to vacate any of its orders that had previously approved generation divestiture transactions. In January 2001, California enacted a law that prohibits any further divestiture of generation properties by California utilities until 2006, including SPPC

     The sales agreements for the six bundles provided that they would terminate eighteen months after their execution, and all of the agreements have now terminated in accordance with their respective provisions. As of September 30, 2003, NPC and SPPC had incurred costs, including carrying charges, of approximately $21.4 million and $13.0 million, respectively, in order to prepare for the sale of generation assets. In the fourth quarter of 2001, each Utility requested recovery of its respective costs in its application for a general rate increase filed with the PUCN. In 2002, the PUCN delayed recovery of divestiture costs to future rate case requests and granted a carrying charge on the costs until such time as recovery is allowed. NPC has requested recovery of these costs in its General Rate Case filed October 1, 2003. SPPC expects to request recovery of these costs in its General Rate Case to be filed December 1, 2003.

     Piñon Pine

     As discussed in more detail in Note 21, Piñon Pine, of Notes to Financial Statements in SPR’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002, SPPC owns a combined cycle generation facility, a post-gasification facility, and, through its wholly owned subsidiaries, owns a gasifier that are collectively referred to as the Piñon Pine Power Project (Piñon Pine). Construction of Piñon Pine was completed in June 1998. Included in the Consolidated Balance Sheets of SPR and SPPC is the net book value of the gasifier and related assets, which is approximately $97 million as of September 30, 2003.

     To date, SPPC has not been successful in obtaining sustained operation of the gasifier. In 2001, SPPC retained an independent engineering consulting firm to complete a comprehensive study of the Piñon Pine gasification plant. After evaluating the options presented in the draft report, SPPC decided not to pursue modifications intended to make the facility operational and intends to seek recovery, net of salvage, through regulated rates in its next general rate case to be filed by December 1, 2003, based, in part, on the PUCN’s approval of Piñon Pine as a demonstration project in an earlier resource plan.

Note 12. Subsequent Events

     See Notes 1, 3, 8 and 11 for discussion of events occurring after September 30, 2003.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements and Risk Factors

     The information in this Form 10-Q 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 the actual results of Sierra Pacific Resources (SPR), Nevada Power Company (NPC), or Sierra Pacific Power Company (SPPC) to differ materially from those contemplated in any forward-looking statement include, among others, the following:

(1)	a requirement to pay the judgment entered by the Bankruptcy Court overseeing Enron’s bankruptcy proceeding in favor of Enron for payments allegedly due under terminated purchase power contracts, or to provide additional cash collateral for the judgment pending appeal;
(2)	unfavorable rulings in rate cases to be filed by NPC and SPPC (the Utilities) with the Public Utilities Commission of Nevada (PUCN), including the periodic applications to recover costs for fuel and purchased power that have been recorded by the Utilities in their deferred energy accounts, and deferred natural gas recorded by SPPC for its gas distribution business;
(3)	the ability of SPR, NPC, and SPPC to access the capital markets to support their requirements for working capital, including amounts necessary to finance deferred energy costs, construction costs, and the repayment of maturing debt, particularly in the event of additional unfavorable rulings by the PUCN, a further downgrade of the current debt ratings of SPR, NPC, or SPPC, and/or adverse developments with respect to NPC’s or SPPC’s power and fuel suppliers;
(4)	whether NPC’s ability to pay SPR dividends will be restored in the near future, and whether SPPC will be able to continue to pay SPR dividends under the terms of SPPC’s financing agreements and/or restated articles of incorporation;
(5)	whether suppliers, other than Enron, which have terminated their power supply contracts with NPC and/or SPPC will be successful in pursuing their claims against the Utilities for liquidated damages under their power supply contracts;
(6)	whether the PUCN will issue favorable orders in a timely manner to permit the Utilities to borrow money and issue additional securities to finance the Utilities’ operations, and to purchase power and fuel necessary to serve their respective customers, and to repay maturing debt;
(7)	whether SPR, NPC, and SPPC will be able to maintain sufficient stability with respect to their liquidity and relationships with suppliers to be able to continue to operate outside of bankruptcy;
(8)	whether current suppliers of purchased power, natural gas, or fuel to NPC or SPPC will continue to do business with NPC or SPPC or will terminate their contracts, particularly in the event of a ratings downgrade and whether NPC or SPPC will have sufficient liquidity to pay its respective power requirements if their current suppliers continue to require the Utilities to make pre-payments or more frequent payments on their power purchases;
(9)	whether the Utilities will need to purchase additional power on the spot market to meet unanticipated power demands (for example, due to unseasonably hot weather) and whether suppliers will be willing to sell such power to the Utilities in light of their weakened financial condition;
(10)	whether SPPC will be successful in obtaining PUCN approval to recover the costs of the gasifier facility at the Piñon Pine Power Project in a future general rate case;

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(11)	whether NPC and SPPC will be successful in obtaining PUCN approval to recover goodwill and other merger costs recorded in connection with the 1999 merger between SPR and NPC in a future general rate case;
(12)	wholesale market conditions, including availability of power on the spot market, which affect the prices the Utilities have to pay for power as well as the prices at which the Utilities can sell any excess power;
(13)	the final outcome of NPC’s pending lawsuit in Nevada state court seeking to reverse portions of the PUCN’s 2002 order denying the recovery of NPC’s deferred energy costs;
(14)	whether the Utilities will be able, either through appeals of the Federal Energy Regulatory Commission (FERC) proceedings or negotiation, to obtain lower prices on the long-term purchased power contracts that they entered into during 2000 and 2001 that are priced above current market prices for electricity;
(15)	the effect that any future terrorist attacks, wars, threats of war, or epidemics may have on the tourism and gaming industries in Nevada, particularly in Las Vegas, as well as on the economy in general;
(16)	unseasonable weather and other natural phenomena which, in addition to impacting the Utilities’ customers’ demand for power, can have potentially serious impacts on the Utilities’ ability to procure adequate supplies of fuel or purchased power to serve their respective customers and on the cost of procuring such supplies;
(17)	industrial, commercial, and residential growth in the service territories of the Utilities;
(18)	the loss of any significant customers;
(19)	the effect of existing or future Nevada, California, or federal legislation or regulations affecting electric industry restructuring, including laws or regulations which could allow additional customers to choose new electricity suppliers or change the conditions under which they may do so;
(20)	changes in the business or power demands of the Utilities’ major customers, including those engaged in gold mining or gaming, which may result in changes in the demand for services of the Utilities, including the effect on the Nevada gaming industry of the opening of additional Indian gaming establishments in California and other states;
(21)	changes in environmental regulations, tax, or accounting matters or other laws and regulations to which the Utilities are subject;
(22)	future economic conditions, including inflation or deflation rates and monetary policy;
(23)	financial market conditions, including changes in availability of capital or interest rate fluctuations;
(24)	unusual or unanticipated changes in normal business operations, including unusual maintenance or repairs; and
(25)	employee workforce factors, including changes in collective bargaining unit agreements, strikes, or work stoppages.

     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, NPC, and SPPC assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking statements.

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Critical Accounting Policies

     The following items represent critical accounting policies that under different conditions or using different assumptions could have a material effect on the financial position and results of operations of SPR and the Utilities:

Regulatory Accounting

     The Utilities’ rates are currently subject to the approval of the PUCN and, in the case of SPPC, they are also subject to the approval of California Public Utility Commission (CPUC) and are designed to recover the cost of providing generation, transmission, and distribution services. As a result, the Utilities 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.

     Regulatory assets represent incurred costs that have been deferred because it is probable they will be recovered through future rates collected from customers. Regulatory liabilities generally represent obligations to make refunds to customers for previous collections for costs that are not likely to be incurred. Management regularly assesses whether the regulatory assets are probable of future recovery by considering factors such as applicable regulatory environment changes and the status of any pending or potential deregulation legislation. Although current rates do not include the recovery of all existing regulatory assets as discussed further below and in Note 1 in Notes to Financial Statements in SPR’s, NPC’s, and SPPC’s Annual Report on Form 10-K for the year ended December 31, 2002, management believes the existing regulatory assets are probable of recovery. This determination reflects the current political and regulatory climate in the state, and is subject to change in the future. If future recovery of costs ceases to be probable, the write-off of regulatory assets would be required to be recognized as a charge or expensed in current period earnings.

     Regulatory Accounting affects other Critical Accounting Policies, including Deferred Energy Accounting, Accounting for Goodwill and Merger Costs, Accounting for Generation Divestiture Costs, Disposal of and Impairment of Long-Lived Assets, and Accounting for Derivatives and Hedging Activities, all of which are discussed immediately below.

Deferred Energy Accounting

     On April 18, 2001, the Governor of Nevada signed into law Assembly Bill 369 (AB 369). The provisions of AB 369 include, among others, a reinstatement of deferred energy accounting for fuel and purchased power costs incurred by electric utilities. In accordance with the provisions of SFAS No. 71, the Utilities implemented deferred energy accounting on March 1, 2001, for their respective electric operations. Under deferred energy accounting, to the extent actual fuel and purchased power costs exceed fuel and purchased power costs recoverable through current rates, that excess is not recorded as a current expense on the statement of operations but rather is deferred and recorded as an asset on the balance sheet. Conversely, a liability is recorded to the extent fuel and purchased power costs recoverable through current rates exceed actual fuel and purchased power costs. These excess amounts are reflected in adjustments to rates and recorded as revenue or expense in future time periods, subject to PUCN review. AB 369 provides that the PUCN may not allow the recovery of any costs for purchased fuel or purchased power “that were the result of any practice or transaction that was undertaken, managed or performed imprudently by the electric utility.” In reference to deferred energy accounting, AB 369 specifies that fuel and purchased power costs include all costs incurred to purchase fuel, to purchase capacity, and to purchase energy. The Utilities also record, and are eligible under the statute to recover, a carrying charge on such deferred balances.

     The Utilities are 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. See Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in SPR’s, NPC’s, and SPPC’s Annual Report on Form 10-K for the year ended December 31, 2002, for a discussion of the Utilities’ purchased power procurement strategies, and Commodity Price Risk and commodity risk management program. As discussed above, deferred energy accounting facilitates the recovery of costs incurred to procure fuel and purchased power for NPC and SPPC.

     As described in more detail under Regulation and Rate Proceedings, Nevada Matters, Nevada Power Company 2001 Deferred Energy Case, in SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002, on November 30, 2001, NPC filed an application with the PUCN seeking to establish a Deferred Energy Accounting Adjustment (DEAA) rate to clear deferred balances for purchased fuel and power costs accumulated between March 1, 2001, and September 30,

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2001.     The application sought to establish a rate to clear accumulated purchased fuel and power costs of $922 million and spread the cost recovery over a period of not more than three years. On March 29, 2002, the PUCN issued its decision on the deferred energy application, disallowing $434 million of deferred purchased fuel and power costs, and allowing NPC to collect the remaining $478 million over three years beginning April 1, 2002. As a result of this disallowance, NPC wrote off $465 million of deferred energy costs and related carrying charges, the two major national rating agencies immediately downgraded the credit rating on SPR’s, NPC’s, and SPPC’s debt securities (followed by further downgrades late in April 2002), and the market price of SPR’s common stock fell substantially.

     On November 14, 2002, NPC filed an application with the PUCN seeking to clear deferred balances of $195.7 million for purchased fuel and power costs accumulated between October 1, 2001, and September 30, 2002, and to spread the recovery of the deferred costs, together with a carrying charge, over a period of not more than three years. On May 12, 2003, the PUCN issued its decision on NPC’s deferred energy application, disallowing $48.1 million of deferred purchased fuel and power and related carrying costs, and allowing NPC to collect the remaining $147.6 million over three years beginning May 19, 2003. As a result of this decision, NPC wrote off $48.1 million of disallowed deferred energy costs and related carrying charges in May 2003.

     As described in more detail under Regulation and Rate Proceedings, Nevada Matters, Sierra Pacific Power Company 2002 Deferred Energy Case, in SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002, SPPC filed an application with the PUCN seeking to establish a DEAA rate to clear its deferred balances for purchased fuel and power costs accumulated between March 1, 2001, and November 30, 2001. The application sought to establish a rate to clear accumulated purchased fuel and power costs of $205 million and spread the cost recovery over a period of not more than three years. On May 28, 2002, the PUCN issued its decision on SPPC’s deferred energy application, disallowing $53 million of deferred purchased fuel and power costs, and allowing SPPC to collect the remaining $150 million over three years beginning June 1, 2002. As a result of this decision, SPPC wrote off $58 million of disallowed deferred energy costs and related carrying charges in the second quarter of 2002.

     On January 14, 2003, SPPC filed an application with the PUCN that sought to clear deferred balances of $15.4 million for purchased fuel and power costs accumulated between December 1, 2001, and November 30, 2002. The application sought to establish a DEAA rate to repay accumulated purchased fuel and power costs of $15.4 million and spread the cost recovery over a period of not more than three years. On May 19, 2003, the PUCN approved a stipulated agreement between SPPC and the staff of the PUCN and others that resulted in a rate decrease of $9.9 million beginning June 1, 2003, and a rate decrease of $19.7 million beginning June 1, 2004. As a result of the agreement, SPPC reduced its deferred energy balance by $45 million, from a balance of approximately $15.4 million collectible from customers to a balance of approximately $29.6 million payable to customers. This resulted in a write off of $45 million in May 2003.

     Both Utilities continue to be entitled under AB 369 to utilize deferred energy accounting for their electric operations and both Utilities continue to accumulate amounts in their deferral of energy costs accounts. Because of contracts entered into during the Western energy crisis in 2001 to assure adequate supplies of electricity for their customers, the Utilities incurred fuel and purchased power costs in excess of amounts they were permitted to recover in current rates.

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Accounting for Goodwill and Merger Costs

     The order issued by the PUCN in December 1998 approving the merger of SPR and NPC directed both NPC and SPPC to defer three categories of merger costs to be reviewed for recovery through future rates. That order specifically directed both Utilities to defer merger transaction costs, transition costs, and goodwill costs for a three-year period. The deferral of these costs was 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 Utilities to propose an amortization period for the merger costs and allows the Utilities to recover the costs to the extent they are offset by merger savings.

     Costs deferred as a result of the PUCN order were $331.2 million of goodwill and $63.4 million in other merger costs as of September 30, 2003. The deferred other merger costs consist of $41.5 million of transaction and transition costs and $21.9 million of employee separation costs. Employee separation costs were comprised of $17.4 million of employee severance, relocation, and related costs, and $4.5 million of pension and post-retirement benefits net of plan curtailment gains.

     The extent to which goodwill and merger costs will be recovered in future revenues and the timing of those recoveries is expected to be determined in general rate cases filed in the third and fourth quarters of 2003 by NPC and SPPC, respectively. To the extent that the Utilities are not permitted to recover any portion of goodwill in future rates, the amount not recoverable will be reviewed for impairment and accounted for under the provisions of Statement of Financial Accounting Standard (SFAS) No. 142, “Goodwill and Other Intangible Assets”. A significant disallowance of goodwill or merger costs by the PUCN would have a material adverse effect on the future financial position, results of operations, and cash flows of SPR, NPC, and SPPC.

Accounting for Generation Divestiture Costs

     As a condition to its approval of the merger between SPR and NPC, the Utilities filed, and in February 2000 the PUCN approved, a revised Divestiture Plan stipulation for the sale of the Utilities’ generation assets. In May 2000, an agreement was announced for the sale of NPC’s 14% undivided interest in the Mohave Generating Station (Mohave). In the fourth quarter of 2000, the Utilities announced agreements to sell six additional bundles of generation assets described in the approved Divestiture Plan. The sales were subject to approval and review by various regulatory agencies.

     AB 369, which was signed into law on April 18, 2001, prohibited the sale of generation assets until July 2003 and directs the PUCN to vacate any of its orders that had previously approved generation divestiture transactions. In January 2001, California enacted a law that prohibits any further divestiture of generation properties by California utilities until 2006, including SPPC, and could also affect any sale of NPC’s interest in Mohave after July 2003 since the majority owner of that project is Southern California Edison. SPPC’s request for an exemption from the requirements of a separate California law requiring approval of the CPUC to divest its plants was denied. In September 2002, the California Legislature approved an exemption to AB 6, which had prevented private utilities from selling any power plants that provide energy to California customers until 2006. The exemption allows SPPC to complete the sale of the hydroelectric units to Truckee Meadows Water Authority (TMWA) subject to review and approval of the sale by the CPUC.

     The sales agreements for the six bundles provided that they would terminate eighteen months after their execution, and all of the agreements have now terminated in accordance with their respective provisions. As of September 30, 2003, NPC and SPPC had incurred costs, including carrying charges, of approximately $21.4 million and $13.0 million, respectively, in order to prepare for the sale of generation assets. In the fourth quarter of 2001, each Utility requested recovery of its respective costs in its application for a general rate increase filed with the PUCN. In 2002, the PUCN delayed recovery of divestiture costs to future rate case requests and granted a carrying charge on the costs until such time as recovery is allowed. To the extent that the Utilities may not be permitted to recover any portion of these costs in future rates, the disallowed costs and related carrying charges would be required to be written off in current period earnings.

Disposal of and Impairment of Long-Lived Assets

     SPR and the Utilities evaluate their Utility Plant and definite-lived tangible assets for impairment whenever indicators of impairment exist. Accounting standards require that if the sum of the undiscounted expected future cash flows from a company’s asset (without interest charges that will be recognized as expenses when incurred) is less than the carrying value of the asset, an asset impairment must be recognized in the financial statements. The amount of impairment recognized is calculated by subtracting the fair value of the asset from the carrying value of the asset.

Sierra Pacific Communications

     As discussed in Note 8, Disposal and Impairment of Long-Lived Assets, Sierra Pacific Communication (SPC) operates its telecommunication business in two segments, Metropolitan Area Network and Long Haul Fiber Network. SPC evaluated the assets of its business as of June 30, 2003, as a result of market conditions created by the bankruptcy of Touch America. This event

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substantially deteriorated the telecommunications market in the areas where SPC operates its long haul fiber assets. SPC anticipates the market for fiber optic cable and conduits will likely become significantly over-supplied which has caused Sierra Pacific Communications to test for, and as a result, recognize an impairment charge. Estimates underlying the asset impairment are significant in determining the impairment charge. The assumptions underlying the calculation of the undiscounted future cash flows used to evaluate the impairment, including projected revenues and expenses and the discount rate used to present value future cash flows materially effect the amount of the impairment charge. In estimating undiscounted future cash flows for its long haul fiber assets, SPC used prices for similar asset sales adjusted for the markets factors that resulted from the Touch America bankruptcy discussed above. To estimate the undiscounted cash flows from the metropolitan area network assets, SPC used revenues from current and projected sales contracts and continued operating expenses over the approximate 18-year remaining life of the assets. Any difference from the assumptions used could materially change the results of the asset impairment charge as recognized in the current period.

Piñon Pine

     As discussed in more detail in Note 21, Piñon Pine, of Notes to Financial Statements in SPR’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002, SPPC owns a combined cycle generation facility, a post-gasification facility, and, through its wholly owned subsidiaries, owns a gasifier that are collectively referred to as the Piñon Pine Power Project (Piñon Pine). Construction of Piñon Pine was completed in June 1998. Included in the Consolidated Balance Sheets of SPR and SPPC is the net book value of the gasifier and related assets, which is approximately $97 million as of September 30, 2003.

     To date, SPPC has not been successful in obtaining sustained operation of the gasifier. In 2001, SPPC retained an independent engineering consulting firm to complete a comprehensive study of the Piñon Pine gasification plant. After evaluating the options presented in the draft report, SPPC decided not to pursue modifications intended to make the facility operational and intends to seek recovery, net of salvage, through regulated rates in its next general rate case to be filed by December 1, 2003, based, in part, on the PUCN’s approval of Piñon Pine as a demonstration project in an earlier resource plan. However, if SPPC is unsuccessful in obtaining recovery, there could be a material adverse effect on SPPC’s and SPR’s financial position, results of operations, and cash flows.

Mohave

     As discussed in more detail in Note 11, Commitments and Contingencies, Environmental, NPC owns a 14% interest in the Mohave Generating Station located in Laughlin, Nevada. Included in the Consolidated Balance Sheets of SPR and NPC is the net book value of NPC’s share of the Mohave facility, which is approximately $36.1 million as of September 30, 2003.

     Due to a lack of progress in negotiations with the parties to resolve several coal and water supply issues, Southern California Edison (SCE), the operating partner, filed an application with the California Public Utility Commission (CPUC) to determine whether it is in the public interest to continue operation of the Mohave facility beyond 2005. Also, SCE and the other Mohave co-owners have been prevented from commencing the installation of extensive pollution control equipment that must be put in place if Mohave’s operations are extended past 2005 due to the uncertainty over the coal supply and water issues.

     Because of the coal and water supply issues at Mohave, NPC is preparing for the shutdown of the facility by the end of 2005. In July, NPC filed an Integrated Resource Plan with the PUCN, that assumes the Plant will be unavailable after December 31, 2005. In addition, in its General Rate Case filed on October 1, 2003, NPC requested that the PUCN authorize a higher depreciation rate be applied in order to recover the remaining book value of Mohave. Alternatively, NPC requested that the PUCN authorize the transfer of the remaining book value to a regulatory asset account to be amortized over a period as determined by the PUCN. However, if NPC is unsuccessful in obtaining recovery, there could be an adverse effect on NPC’s and SPR’s financial position, results of operations, and cash flows.

e·three and e·three Custom Energy Solutions

     SPR’s subsidiary, e·three, was organized in October 1996 to provide energy and other business solutions in commercial and industrial markets. SPR’s subsidiary, e·three Custom Energy Solutions, LLC (CES), was formed in October 1998 for the purpose of selling and implementing energy-related performance contracts and the construction and operation of a chilled water cooling plant in the downtown area of Las Vegas supplying indoor air-cooling requirements for a number of businesses in its immediate vicinity.

     In keeping with management’s strategy to focus on its core utility businesses, SPR began negotiations in the second quarter of 2003 to sell e·three and CES. Accordingly, at June 30, 2003, e·three and CES were reported as discontinued operations. Based on the expected selling price, a pre-tax loss on the disposal of $8.9 million was recognized for the six months ended June 30, 2003. On September 26, 2003, the sale of e·three and CES was completed. As a result of the final sales price, an additional pre-tax loss of $703,787 from disposal was recognized for the three months ended September 30, 2003.

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Accounting for Derivatives and Hedging Activities

     SPR, NPC, and SPPC apply SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value.

Fuel and Purchased Power Contracts

     In order to manage loads, resources, and energy price risk, the Utilities buy fuel and power under forward contracts. In addition to forward fuel and power purchase contracts, the Utilities also use options and swaps to manage price risk. All of these instruments are considered to be derivatives under SFAS No. 133. The risk management assets and liabilities recorded in the balance sheets of the Utilities and SPR are primarily comprised of the fair value of these forward fuel and power purchase contracts and other energy related derivative instruments.

     Fuel and purchased power costs are subject to deferred energy accounting. Accordingly, the energy related risk management assets and liabilities and the corresponding unrealized gains and losses (changes in fair value) are offset with a regulatory asset or liability rather than recognized in the statements of operations and comprehensive income. Upon settlement of a derivative instrument, actual fuel and purchased power costs are recognized if they are currently recoverable or deferred if they are recoverable or payable through future rates.

     The fair values of the forward contracts and swaps are determined based on quotes obtained from independent brokers and exchanges. The fair values of options are determined using a pricing model that incorporates assumptions such as the underlying commodity’s forward price curve, time to expiration, strike price, interest rates, and volatility. The use of different assumptions and variables in the model could have a significant impact on the valuation of the instruments.

Debt Conversion Option

     In connection with SPR’s issuance of its Convertible Notes the conversion option, which is treated as a cash-settled written call option, was separated from the debt and accounted for separately as a derivative instrument in accordance with EITF Issue No. 90-19, “Convertible Bonds with Issuer Option to Settle for Cash upon Conversion.” Upon issuance, the fair value of the option was recorded as a current liability in Other Current Liabilities. The change in the fair value was recognized in earnings in the period of the change.

     Issue No. 00-19 of the Emerging Issues Task Force of the FASB (“EITF”), “Accounting for Derivative Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” provides for the recording of the fair value of the derivative in equity, if all applicable provisions of EITF Issue No. 00-19 are met. On August 11, 2003, SPR obtained shareholder approval to issue up to 42,736,920 additional shares of SPR’s common stock in lieu of paying the cash payment component upon conversion of the Convertible Notes, which allows for the Company to choose net-cash settlement or settlement in shares upon conversion of the Convertible Notes. In accordance with EITF Issue No. 00-19, the fair value of the derivative of $118 million previously recorded in current liabilities was reclassified to equity on the date of the shareholder vote. In addition, EITF Issue No. 00-19 indicates that subsequent changes in fair value should not be recognized as long as the derivative remains classified in equity. As long as the derivative remains classified in equity, SPR will not mark this instrument to market. Accordingly, no unrealized gains or losses will be recorded in earnings subsequent to August 11, 2003. The previous changes in fair value of the derivative instrument recorded in earnings will not be reversed.

     Based on the closing price of SPR’s common stock at August 11, 2003, of $4.68, the fair value of the conversion option was determined to be approximately $118 at August 11, 2003, and as a result, SPR recorded an unrealized gain of approximately $61.5 million in the quarter ended September 30, 2003. SPR recorded a cumulative net unrealized loss of approximately $46.1 million for the nine month period ending September 30, 2003.

Other Derivatives

     SPR and the Utilities have other non-energy related derivative instruments. The changes in fair values of these non-energy related derivatives are reported in Other comprehensive income until the related transactions are settled or terminate, at which time the amounts are reclassified into earnings.

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Environmental Contingencies

     SPR and its subsidiaries are 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, or 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 and water quality, solid, hazardous, and toxic waste.

     SPR and its subsidiaries are subject to rising costs that result from a steady increase in the number of federal, state, and local laws and regulations designed to protect the environment. These laws and regulations can result in increased capital, operating, and other costs as a result of compliance, remediation, containment, and monitoring obligations, particularly with laws relating to power plant emissions. In addition, SPR or its subsidiaries may be a responsible party for environmental clean up at a site identified by a regulatory body. The management of SPR and its subsidiaries cannot predict with certainty the amount and timing of all future expenditures related to environmental matters because of the difficulty of estimating clean up costs and compliance and the possibility that changes will be made to the current environmental laws and regulations. There is also uncertainty in quantifying liabilities under environmental laws that impose joint and several liability on all potentially responsible parties. SPR and its subsidiaries accrue for environmental costs only when they can conclude that it is probable that they have an obligation for such costs and can reasonably determine the amount of such costs.

     Note 11, Commitments and Contingencies, of Condensed Notes to Consolidated Financial Statements discusses the environmental matters of SPR and its subsidiaries that have been identified, and the estimated financial effect of those matters. To the extent that (1) actual results differ from the estimated financial effects, (2) there are environmental matters not yet identified for which SPR or its subsidiaries are determined to be responsible, or (3) the Utilities are unable to recover through future rates the costs to remediate such environmental matters, there could be a material adverse effect on the financial condition and future liquidity and results of operations of SPR and its subsidiaries.

Litigation Contingencies

     Note 11, Commitments and Contingencies, of Condensed Notes to Consolidated Financial Statements discusses the significant legal matters of SPR and its subsidiaries. As described in Note 11, NPC and SPPC established reserves, included in their Consolidated Balance Sheets as “Contract termination reserves,” for amounts claimed for liquidated damages for terminated power supply contracts and for power previously delivered to the Utilities by Enron and other suppliers. Correspondingly, pursuant to the deferred energy accounting provisions of AB 369, NPC and SPPC added as of September 30, 2003, approximately $245 million and $84 million, respectively, to their deferred energy balances for recovery in rates in future periods associated with these terminated supplier claims. If NPC and SPPC receive unfavorable rulings with respect to the terminated supplier claims and as a result are required to pay part or all of the amounts reserved, the Utilities will pursue recovery of the amounts through future deferred energy filings. To the extent that the Utilities are not permitted to recover any portion of these costs through a deferred energy filing, the amounts not permitted would be charged as a current operating expense. A significant disallowance of these costs by the PUCN could have a material adverse effect on the future financial position, results of operations, and cash flows of SPR, NPC, and SPPC.

     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.

Defined Benefit Plans and Other Postretirement Plans

     As further explained in Note 14, Retirement Plan and Post-Retirement Benefits, of Notes to Financial Statements in SPR’s, NPC’s, and SPPC’s Annual Report on Form 10-K for the year ended December 31, 2002, SPR maintains a pension plan as well as other postretirement benefit plans that provide health and life insurance for retired employees. All employees are eligible for these benefits if they reach retirement age while still working for SPR or its subsidiaries. These costs are determined in accordance with the provisions of SFAS No. 87, “Employers’ Accounting for Pensions,” and SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” and ultimately collected in rates billed to customers. The amounts funded are then used to meet benefit payments to plan participants. In the first nine months of 2003, SPR has contributed approximately $31.9 million and $0.1 million to the pension and other postretirement plans, respectively. For the year ended December 31, 2002, SPR contributed $41.1 million to its pension plan, and $0.2 million to the other postretirement benefits plan. Due to the sharp decline in United States equity markets since the third quarter of 2000, the value of a significant portion of the assets held in the plans’ trusts to satisfy the obligations of the plans has decreased significantly. As a result, additional contributions may be required in the future to meet the requirements of the plan to pay benefits to plan participants.

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Pension Plans

     SPR’s reported costs of providing non-contributory defined pension benefits (described in Note 14, Retirement Plan and Post-Retirement Benefits, of Notes to Financial Statements in SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002) are dependent upon numerous factors resulting from actual plan experience and assumptions of future experience.

     For example, pension costs are impacted by actual employee demographics (including age and employment periods), the level of contributions SPR makes to the plan, and earnings on plan assets. Changes made to the provisions of the plan may also impact current and future pension costs. Pension costs may also be significantly affected by changes in key actuarial assumptions, including anticipated rates of return on plan assets and the discount rates used in determining the projected benefit obligation and pension costs.

     SPR made no changes to pension plan provisions in 2002 or 2003 that had a significant impact on recorded pension amounts. SPR reduced the discount rate used in determining pension expense for the calendar year 2003 from 7.5% to 6.75%. This change will not have a significant impact on reported pension costs for 2003. Additionally, SPR anticipates further reducing the discount rate in 2004. However, pension costs for 2004 are not expected to increase significantly as a result of the change in the discount rate, because of an improvement during 2003 in the market value of the plans assets.

     SPR’s pension plan assets are primarily made up of equity and fixed income investments. Fluctuations in actual equity market returns as well as changes in general interest rates may result in increased or decreased pension costs in future periods. Likewise, changes in assumptions regarding current discount rates and expected rates of return on plan assets could also increase or decrease recorded pension costs.

     In selecting an assumed rate of return on plan assets, SPR considers past performance and economic forecasts for the types of investments held by the plan. The market value of SPR’s plan assets has been affected by sharp declines in equity markets since the third quarter of 2000.

     Pension cost and cash funding requirements could increase in future years without a substantial recovery in the equity markets.

Other Postretirement Benefits

     SPR’s reported costs of providing other postretirement benefits (described in Note 14, Retirement Plan and Post-Retirement Benefits, of Notes to Financial Statements in SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002) are dependent upon numerous factors resulting from actual plan experience and assumptions of future experience.

     For example, other postretirement benefit costs are impacted by actual employee demographics (including age and employment periods), the level of contributions made to the plan, earnings on plan assets, and health care cost trends. Changes made to the provisions of the plan may also impact current and future other postretirement benefit costs. Other postretirement benefit costs may also be significantly affected by changes in key actuarial assumptions, including anticipated rates of return on plan assets and the discount rates used in determining the postretirement benefit obligation and postretirement costs.

     SPR has made no changes to other postretirement benefit plan provisions in 2002 or 2003 that have had any significant impact on recorded benefit plan amounts. SPR reduced the discount rate used in determining other postretirement expense for the calendar year 2003 from 7.5% to 6.75%. This change will not have a significant impact on reported other postretirement benefit costs for 2003. Additionally, SPR anticipates further reducing the discount rate in 2004. This change is not expected to have a significant impact on reported other postretirement benefit costs in 2004. However, in determining the other postretirement benefit obligation and related cost, these assumptions can change from period to period, and such changes could result in material changes to such amounts.

     SPR’s other postretirement benefit plan assets are primarily made up of equity and fixed income investments. Fluctuations in actual equity market returns as well as changes in general interest rates may result in increased or decreased other postretirement benefit costs in future periods. Likewise, changes in assumptions regarding current discount rates and expected rates of return on plan assets could also increase or decrease recorded other postretirement benefit costs.

     In selecting an assumed rate of return on plan assets, SPR considers past performance and economic forecasts for the types of investments held by the plan. The market value of the SPR’s plan assets has been affected by sharp declines in equity markets since the third quarter of 2000. Also, other postretirement benefit cost and cash funding requirements could increase in future years without a substantial recovery in the equity markets.

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Cost Capitalization Policies

     The Utilities continue to devote substantial resources in 2003 on the Centennial Transmission project at NPC and the Falcon to Gonder Transmission project at SPPC. In addition, certain operating units of the Utilities are charged with maintaining, repairing and replacing components of generation, transmission, and distribution systems both on a scheduled basis and on an as-needed basis. As described in Note 1, Summary of Significant Accounting Policies, of Notes to Financial Statements in SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002, the cost of additions, including betterments and replacements of units of property, is charged to utility plant. When units of property are replaced, renewed, or retired, their cost, plus removal or disposal costs less salvage, is charged to accumulated depreciation. Certain direct and indirect costs are capitalized, including the cost of debt and equity capital associated with construction and retirement activity as prescribed by Generally Accepted Accounting Principles (GAAP) and the FERC’s Uniform System of Accounts.

     The indirect construction overhead costs capitalized are based upon the following cost components: the cost of time spent by administrative employees in planning and directing construction; 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 level of indirect construction overhead costs capitalized by the Utilities is based upon real-time construction activity. Accordingly, payroll and other costs capitalized will fluctuate based upon seasonal construction activities and the deployment of resources to those efforts. During periods of higher maintenance levels, these payroll and other costs will not be capitalized. As such, operating income could be impacted by the manner in which payroll and related costs are deployed. However, the total cash flow of the Utilities is not impacted by the allocation of these costs to various construction or maintenance activities.

     During the three and nine months ended September 30, 2003, NPC and SPPC capitalized approximately $.85 million, $1.7 million, $4.1 million, and $4.2 million, respectively, of AFUDC as a result of construction activity. Similarly, during the three and nine months ended September 30, 2002, NPC and SPPC capitalized approximately ($54,000), $684,000, $2.4 million and $1.5 million, respectively, of AFUDC. These amounts are non-cash components reflected in the Consolidated Statements of Operations. Recognition of AFUDC as a cost of utility plant is in accordance with established regulatory ratemaking practices. Such practices permit the Utility to earn a return on, and recover in rates, all capital costs charged for Utility services.

Depreciation Expense

     The Utilities have a significant investment in electric plant. SPPC also has an investment in gas distribution plant. Depreciable assets of generation, transmission, and distribution operations represent approximately 91% of the Utilities’ investment in utility plant. As described in Note 1, Summary of Significant Accounting Policies, of Notes to Financial Statements in SPR’s, NPC’s, and SPPC’s Annual Report on Form 10-K for the year ended December 31, 2002, the Utilities depreciate these assets utilizing a composite rate, which currently includes a component for net negative salvage. These assets are depreciated on a straight-line basis over the remaining useful life of the related assets, which approximates the anticipated physical lives of these assets in most cases. The Nevada Administrative Code requires the Utilities to provide a depreciation study every four years in order to substantiate the remaining physical lives of their investment in utility plant. Adjustments to the estimated depreciable lives of the Utilities’ plant are recorded on a prospective basis, as prescribed by GAAP and the FERC’s Uniform System of Accounts.

     Substantially all of the Utilities’ plant is subject to the ratemaking jurisdiction of the PUCN or the FERC and, in the case of SPPC’s California operations, the CPUC, which also approves any changes SPPC may make to depreciation rates utilized for this property. Because the Utilities’ periodic depreciation expense is included as a component of the revenue requirement utilized in the development of the Utilities’ tariff rates, revenue reflects collection of the recognized depreciation expense. Accordingly, the impact of depreciation on net income is not significant. However, operating cash flows are positively affected by the amount of depreciation collected in rates, since depreciation expense is not a current cash outlay for the Utilities.

Asset Retirement Obligations

     In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 provides accounting requirements for the recognition and measurement of liabilities associated with the retirement of tangible long-lived assets. Under the standard, these liabilities will be recognized at fair value as incurred and capitalized as part of the cost of the related tangible long-lived assets. Accretion of the liabilities due to the passage of time will be an operating expense. Retirement obligations associated with long-lived assets included within the scope of SFAS No. 143 are those for which a legal obligation exists under enacted laws, statutes written, or oral contracts, including obligations arising under the doctrine of promissory estoppel. The Utilities adopted SFAS No. 143 on January 1, 2003.

     Prior to adopting SFAS 143, costs for removal of most utility assets were accrued as an additional component of depreciation expense. Under SFAS 143, only the costs to remove an asset with legally binding retirement obligations will be accrued over time through accretion of the asset retirement obligation and depreciation of the capitalized asset retirement cost.

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     Management’s methodology to assess its legal obligation included an inventory of assets by system and components, and a review of right of ways and easements, regulatory orders, leases, and federal, state, and local environmental laws. Management assumed in determining its Asset Retirement Obligations that transmission, distribution, and communications systems will be operated in perpetuity and would continue to be used or sold without land remediation; and mass asset properties that are replaced or retired frequently would be considered normal maintenance.

     Management has identified a legal obligation to retire generation plant assets specified in land leases for NPC’s jointly-owned Navajo generating station. The land on which the Navajo generating station resides is leased from the Navajo Nation. The provisions of the leases require the lessees to remove the facilities upon request of the Navajo Nation at the expiration of the leases. Although the related retirement obligation and corresponding charges recognized were immaterial to the financial statements of NPC, those amounts were based on certain estimates and assumptions. The estimated liability is based on two levels of decommissioning, minimal and full, and two possible retirement dates. The liability is escalated using average historical Consumer Price Index inflation factors equal to the estimated retirement dates. The liability is discounted using credit-adjusted risk-free rates of return for the respective retirement dates. Changes to future statements of financial position and results of operations will occur to the extent that actual results differ from the estimates and assumptions used, including changes in decommissioning costs, timing, or changes in NPC’s credit rating. SPPC has no significant asset retirement obligations.

     The Utilities have various transmission and distribution lines as well as substations that operate under various rights of way that contain end dates and restorative clauses. Management operates the transmission and distribution system as though they will be operated in perpetuity and will continue to be used or sold without land remediation. As a result, the Utilities have not recorded any costs associated with the removal of the transmission and distribution systems.

Stock Compensation Plans

     In December 2002, the FASB released SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” as an amendment to SFAS No. 123, “Accounting for Stock-Based Compensation.” SPR has previously adopted the disclosure-only provisions of SFAS No. 123, and as of December 31, 2002, has adopted the updated disclosure requirements set forth in SFAS No. 148. Pursuant to those updated disclosure requirements, SPR has included the following discussion on the stock compensation plans. For additional information on SPR’s stock compensation plans, see Note 1, Summary of Significant Accounting Policies, and Note 15, Stock Compensation Plans, of Notes to Financial Statements in SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002.

     At September 30, 2003, SPR had several stock-based compensation plans. SPR applies Accounting Principles 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. SPR has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock Based Compensation, and its related amendment(s).

Unbilled Receivables

     Revenues related to the sale of energy are recorded based on metered usage. Meters are read on a systematic basis throughout a month, rather than when the service is rendered or energy is delivered. At the end of each month, the energy delivered to the customers from the date of their last meter read to the end of the month is estimated and the corresponding unbilled revenues are calculated. These estimates of unbilled sales and revenues are based on the ratio of billable days versus unbilled days, amount of energy procured and generated during that month, historical customer class usage patterns and the Utilities’ current tariffs. Customer accounts receivable as of September 30, 2003, include unbilled receivables of $92.2 million and $49 million for NPC and SPPC, respectively. Customer accounts receivable as of September 30, 2002, include unbilled receivables of $77.5 million and $50.4 million for NPC and SPPC, respectively.

Provision for Uncollectible Accounts

     The Utilities reserve for doubtful accounts based on past experience writing off uncollectible customer accounts. The adequacy of these reserves will vary to the extent that future collections differ from past experience.

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FINANCIAL CONDITION AND MATERIAL CHANGES IN RESULTS OF OPERATIONS

Sierra Pacific Resources

     The operating results of SPR primarily reflect those of NPC and SPPC, discussed later.

     During the three months ended September 30, 2003, SPR recognized net income of $87.8 million compared to net income of $80.3 million for the same period during 2002. Operating results for the three months ended September 30, 2003, were significantly affected by the following items (before income taxes):

• an unrealized gain of $61.5 million on the derivative instrument associated with the issuance of $300 million of convertible debt (see Critical Accounting Policies). This unrealized gain has no effect on cash flows;

• other operating expenses that included increased reserves for uncollectible accounts and costs associated with collections for NPC and SPPC (see Other Income/(Expense analysis);

• interest costs at SPR, NPC, and SPPC that included the recognition of $40.2 million in interest as a result of a judgment issued September 26, 2003, by the Enron Bankruptcy Court. See Note 11, Commitments and Contingencies, of the Consolidated Financial Statements for more information regarding the Enron litigation.

     During the first nine months of 2003, SPR incurred a net loss of $100.1 million compared to a $265.1 million net loss for the same period during 2002. Similar to the items affecting the three month operating results, SPR operating results for the nine months ended September 30, 2003, were negatively affected by the following significant items (before income taxes):

• an unrealized loss of $46.1 million on the derivative instrument associated with the issuance of $300 million of convertible debt. This unrealized loss has no effect on cash flows;

• the write-off of disallowed deferred energy costs (excluding carrying charges) of approximately $46 million and $45 million by NPC and SPPC, respectively;

• losses by SPR subsidiaries due to the recognition of asset impairments and business disposals of $32.9 million and $9.6 million by SPC and e ·three, respectively;

• other operating expenses that included increased reserves for uncollectible accounts and costs associated with collections for NPC and SPPC (see Other Income/(Expense analysis); and

• interest costs at SPR, NPC, and SPPC, including $40.2 million as a result of the Enron Bankruptcy Court judgment.

     SPR operating results for the same nine month period during 2002 were negatively affected by write-offs of $434.1 million and $53.1 million of disallowed deferred energy costs by NPC and SPPC, respectively.

     SPR did not pay or declare a common dividend in the first nine months of 2003, nor did NPC and SPPC declare or pay common stock dividends to their parent, SPR, during the same period. SPPC paid $2.925 million in dividends to holders of its preferred stock during the first nine months of 2003.

Liquidity and Capital Resources (SPR Consolidated)

     SPR, on a stand-alone basis, had cash and cash equivalents of approximately $11.1 million at September 30, 2003. During the fourth quarter of 2003, SPR has approximately $18.6 million of interest due on its existing debt securities. Currently, SPR expects to meet its interest obligations for the fourth quarter of 2003 through the payment of a dividend by SPPC to SPR.

     SPR’s future liquidity and its ability to pay the principal of and interest on its indebtedness depend on SPPC’s ability to continue to pay dividends to SPR, on NPC’s financial stability and the restoration of its ability to pay dividends to SPR, and on SPR’s ability to access the capital markets or otherwise refinance maturing and/or convertible debt. Further adverse developments at NPC or SPPC, including a material disallowance of deferred energy costs (including terminated power supply contracts) in future rate cases, a requirement to pay the judgment of the Bankruptcy Court overseeing Enron’s bankruptcy proceeding in favor of Enron or provide cash collateral, in excess of the $35 million the Utilities are required to deposit into escrow within 90 days from the order date, for Enron’s claims for termination payments under the judgment, could adversely affect SPR’s, NPC’s and SPPC’s cash flow, financial condition and liquidity and could make it difficult for SPR, NPC and SPPC to operate outside of bankruptcy.

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Dividends from Subsidiaries

     Since SPR is a holding company, substantially all of its cash flow is provided by dividends paid to SPR by NPC and SPPC on their common stock, all of which is owned by SPR. Since NPC and SPPC are public utilities, they are subject to regulation by state utility commissions, which may impose limits on investment returns or otherwise impact the amount of dividends that the Utilities may declare and pay, and to federal statutory limitation on the payment of dividends. In addition, certain agreements entered into by the Utilities set restrictions on the amount of dividends they may declare and pay and restrict the circumstances under which such dividends may be declared and paid. The specific restrictions on dividends contained in agreements to which NPC and SPPC are party, as well as specific regulatory limitations on dividends, are summarized below.

• NPC’s first mortgage indenture limits the cumulative amount of dividends and other distributions that NPC may pay on its capital stock to the cumulative net earnings of NPC since 1953, subject to adjustments for the net proceeds of sales of capital stock since 1953. At the present time, this restriction precludes NPC from making further payments of dividends on NPC’s common stock and will continue to bar dividends until NPC, over time, generates sufficient earnings to eliminate the deficit under this provision (which was approximately $220 million as of September 30, 2003), unless the restriction is earlier waived, amended, or removed by the consent of the first mortgage bondholders, or the first mortgage bonds are redeemed or defeased. Management is currently in the process of seeking consent for the modification of this restriction. There can be no assurance that any such consent can be obtained or that any non-consenting first mortgage bonds could be redeemed or defeased prior to their stated maturity. Under this provision, NPC continues to have capacity to repurchase or redeem shares of its capital stock, although other restrictions set forth below would limit the amount of any such repurchases or redemptions.

• NPC’s 10 7/8% General and Refunding Mortgage Notes, Series E, due 2009, which were issued on October 29, 2002, and NPC’s 9% General and Refunding Mortgage Notes, Series G, due 2013, which were issued on August 13, 2003, limit the amount of payments in respect of common stock that NPC may pay to SPR. However, that limitation does not apply to payments by NPC to enable SPR to pay its reasonable fees and expenses (including, but not limited to, interest on SPR’s indebtedness and payment obligations on account of SPR’s Premium Income Equity Securities (PIES)) provided that:

• those payments do not exceed $60 million for any one calendar year,

• those payments comply with any regulatory restrictions then applicable to NPC, and

• the ratio of consolidated cash flow to fixed charges for NPC’s most recently ended four full fiscal quarters immediately preceding the date of payment is at least 1.75 to 1.

     The terms of both series of Notes also permit NPC to make payments to SPR in an aggregate amount not to exceed: (1) under the Series E Notes, $15 million from the date of the issuance of the Series E Notes, and (2) under the Series G Notes, $25 million from the date of the issuance of the Series G Notes. In addition, NPC may make payments to SPR in excess of the amounts described above so long as, at the time of payment and after giving effect to the payment:

• there are no defaults or events of default with respect to the Series E Notes or the Series G Notes,

• NPC has a ratio of consolidated cash flow to fixed charges for NPC’s most recently ended four full fiscal quarters immediately preceding the payment date of at least 2.0 to 1, and

• the total amount of such dividends is less than:

• the sum of 50% of NPC’s consolidated net income measured on a quarterly basis cumulative of all quarters from the date of issuance of the applicable series of Notes, plus

• 100% of NPC’s aggregate net cash proceeds from contributions to its common equity capital or the issuance or sale of certain equity or convertible debt securities of NPC, plus

• the lesser of cash return of capital or the initial amount of certain restricted investments, plus

• the fair market value of NPC’s investment in certain subsidiaries.

     If NPC’s Series E Notes or the Series G Notes are upgraded to investment grade by both Moody’s Investors Service, Inc. (Moody’s) and Standard & Poor’s Rating Group, Inc. (S&P), these restrictions will be suspended and will no longer be in effect so long as the applicable series of Notes remain investment grade.

• On October 29, 2002, NPC established an accounts receivables purchase facility, which was renewed on October 28, 2003, and will expire on October 26, 2004. The agreements relating to the receivables purchase facility contain various covenants, including a limitation on payments in respect of common stock by NPC to SPR that is identical to the limitation contained in NPC’s General and Refunding Mortgage Notes, Series E & Series G, described above.

• The PUCN issued a Compliance Order, Docket No. 02-4037, on June 19, 2002, relating to NPC’s request for authority to issue Long-Term Debt. The PUCN order requires that, until such time as the order’s authorization expires (December 31, 2003), NPC must either receive the prior approval of the PUCN or reach an equity ratio of 42% before paying any

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	dividends to SPR. If NPC achieves a 42% equity ratio prior to December 31, 2003, the dividend restriction ceases to have effect. As of September 30, 2003, NPC’s equity ratio was 36.66%. Prior to the expiration date of the Compliance Order, management may seek PUCN approval for a payment of dividends by NPC or may seek a waiver from the PUCN of the dividend restriction.
•	The terms of NPC’s preferred trust securities provide that no dividends may be paid on NPC’s common stock if NPC has elected to defer payments on the junior subordinated debentures issued in conjunction with the preferred trust securities. At this time, NPC has not elected to defer payments on the junior subordinated debentures.
•	SPPC’s Term Loan Agreement dated October 30, 2002, as amended, which expires October 31, 2005, limits the amount of payments that SPPC may pay to SPR. However, that limitation does not apply to payments by SPPC to enable SPR to pay its reasonable fees and expenses (including, but not limited to, interest on SPR’s indebtedness and payment obligations on account of SPR’s PIES) provided that those payments do not exceed $90 million, $80 million, and $60 million in the aggregate for the twelve month periods ending on October 30, 2003, 2004, and 2005, respectively. The Term Loan Agreement also permits SPPC to make payments to SPR in an aggregate amount not to exceed $10 million during the term of the Term Loan Agreement. In addition, SPPC may make payments to SPR in excess of the amounts described above so long as, at the time of the payment and after giving effect to the payment, there are no defaults or events of default under the Term Loan Agreement, and such amounts, when aggregated with the amount of payments to SPR by SPPC since the date of execution of the Term Loan Agreement, do not exceed the sum of:

• 50% of SPPC’s Consolidated Net Income for the period commencing January 1, 2003, and ending with last day of fiscal quarter most recently completed prior to the date of the contemplated dividend payment, plus

• the aggregate amount of cash received by SPPC from SPR as equity contributions on its common stock during such period.

• On October 29, 2002, SPPC established an accounts receivables purchase facility, which was renewed on October 28, 2003, and expires on October 26, 2004. The agreements relating to the receivables purchase facility contain various covenants, including a limitation on the payment of dividends by SPPC to SPR that is identical to the limitation contained in SPPC’s Term Loan Agreement, described above.

• SPPC’s Articles of Incorporation contain restrictions on the payment of dividends on SPPC’s common stock in the event of a default in the payment of dividends on SPPC’s preferred stock. SPPC’s Articles also prohibit SPPC from declaring or paying any dividends on any shares of common stock (other than dividends payable in shares of common stock), or making any other distribution on any shares of common stock or any expenditures for the purchase, redemption, or other retirement for a consideration of shares of common stock (other than in exchange for or from the proceeds of the sale of common stock) except from the net income of SPPC, and its predecessor, available for dividends on common stock accumulated subsequent to December 31, 1955, less preferred stock dividends, plus the sum of $500,000. At the present time, SPPC believes that these restrictions do not materially limit its ability to pay dividends and/or to purchase or redeem shares of its common stock.

• The Utilities are subject to the provision of the Federal Power Act that states that dividends cannot be paid out of funds that are properly included in capital account. Although the meaning of this provision is unclear, the Utilities believe that the Federal Power Act restriction would not be construed or applied to prohibit the payment of dividends for lawful and legitimate business purposes from current year earnings, or in the absence of current year earnings, from other/additional paid-in capital accounts.

• On November 6, 2003, the Bankruptcy Court issued an order staying execution pending appeal of the September 26, 2003 judgment entered in favor of Enron against the Utilities. One of the conditions of the stay order is that the Utilities cannot pay dividends to SPR other than for SPR’s current operating expenses and debt payment obligations. The Utilities have the right to seek modification of the conditions of the stay if there is a material change in the facts upon which the stay order is based.

Effects of 2002 Rate Case Decisions

     On March 29 and April 1, 2002, S&P and Moody’s lowered the unsecured debt ratings of SPR, NPC, and SPPC to below investment grade in response to the decision of the PUCN with respect to NPC’s rate cases. On April 23 and 24, 2002, the unsecured debt ratings of SPR and the Utilities were further downgraded by both rating agencies, and the Utilities’ secured debt ratings were downgraded to below investment grade. The downgrades affected SPR’s, NPC’s, and SPPC’s liquidity primarily in two principal areas: (1) their respective financing arrangements, and (2) NPC’s and SPPC’s contracts for fuel, for purchase and sale of electricity, and for transportation of natural gas.

     For more detailed discussion of these effects, please see SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002.

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Accounts Receivable Facilities

     On October 29, 2002, NPC and SPPC established accounts receivable purchase facilities of up to $125 million and $75 million, respectively. Both facilities were renewed on October 28, 2003, and will expire on October 26, 2004. If NPC and/or SPPC elect to activate their receivables purchase facilities, they will sell all of their accounts receivable generated from the sale of electricity and natural gas to customers to their newly created bankruptcy-remote special purpose subsidiaries. The receivables sales will be without recourse except for breaches of customary representations and warranties made at the time of sale. The subsidiaries will, in turn, sell these receivables to a bankruptcy-remote subsidiary of SPR. SPR’s subsidiary will issue variable rate revolving notes backed by the purchased receivables.

     The agreements relating to the receivables purchase facilities contain various conditions to purchase covenants, and trigger events, and other provisions customary in receivables transactions. In addition to customary termination and mandatory repurchase events, each Utilities’ receivables purchase facility may terminate in the event that the Utility or SPR defaults (i) on the payment of indebtedness, or (ii) on the payment of amounts due under a swap agreement, and such defaults aggregate to greater than $10 million and $5 million for the Utility and SPR, respectively. Under the terms of the agreements relating to the receivables purchase facility, each Utility’s facility may not be activated or, if activated, will be terminated in the event of a material adverse change in the condition, operations or business prospects of the Utility. SPR has agreed to guaranty the performance by NPC and SPPC of certain obligations as sellers and servicers under the receivables purchase facilities. NPC and SPPC intend to use their accounts receivables purchase facilities as back-up liquidity facilities and do not plan to activate these facilities in the foreseeable future.

Cross Default Provisions

     Certain financing agreements of SPR and the Utilities contain cross-default provisions that would result in an event of default under such financing agreements if there is a failure under other financing agreements of SPR and the Utilities to meet payment terms or to observe other covenants that would result in an acceleration of payments due. Most of these default provisions (other than ones relating to a failure to pay other indebtedness) provide for a cure period of 30-60 days from the occurrence of a specified event, during which time SPR or the Utilities may rectify or correct the situation before it becomes an event of default. The primary cross-default provisions in SPR’s and the Utilities’ various financing agreements are briefly summarized below:

• The indenture pursuant to which SPR issued its 7.25% Convertible Notes due 2010 provides for an event of default if SPR or any of its significant subsidiaries (NPC and SPPC) fails to pay indebtedness in excess of $10 million or has any indebtedness of $10 million or more accelerated and declared due and payable;

• NPC’s General and Refunding Mortgage Indenture, under which NPC has $1.08 billion of securities outstanding as of September 30, 2003, provides for an event of default if a matured event of default under NPC’s First Mortgage Indenture occurs;

• The terms of NPC’s Series E Notes and NPC’s Series G Notes provide that a default with respect to the payment of principal, interest or premium beyond the applicable grace period under any mortgage, indenture or other security instrument, by NPC or any of its restricted subsidiaries, relating to debt in excess of $15 million, triggers a right of the holders of each series of Notes to require NPC to redeem their series of Notes at a price equal to 100% of the aggregate principal amount plus accrued and unpaid interest and liquidated damages, if any, upon notice given by at least 25% of the outstanding noteholders for such series of Notes;

• NPC’s receivables purchase facility may terminate in the event that either NPC or SPR defaults (i) in the payment of indebtedness, or (ii) in the payment of amounts due under hedge agreements, and such defaults aggregate to greater than $10 million and $5 million for NPC and SPR, respectively;

• NPC’s Senior Unsecured Note Indenture, pursuant to which NPC issued its $130 million 6.20% Senior Unsecured Notes, Series B, due April 15, 2004, provides for a default if (a) NPC fails to pay indebtedness (after any applicable grace period), or (b) any of NPC’s indebtedness is accelerated, and (c) such indebtedness aggregates $15 million, and (d) such indebtedness is not repaid and such acceleration is not rescinded within 30 days;

• SPPC’s General and Refunding Mortgage Indenture, under which SPPC has $499.3 million of securities outstanding as of September 30, 2003, provides for an event of default if a matured event of default under SPPC’s First Mortgage Indenture occurs;

• SPPC’s Term Loan Agreement provides for an event of default if (a) SPPC or any of its subsidiaries default (i) in the payment of indebtedness, or (ii) in the payment of amounts due under hedge agreements, and such defaults aggregate to greater than $10 million, or (b) SPPC’s General and Refunding Mortgage Indenture ceases to be enforceable; and

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• SPPC’s receivables purchase facility may terminate in the event that either SPPC or SPR defaults (i) in the payment of indebtedness, or (ii) in the payment of amounts due under hedge agreements, and such defaults aggregate to greater than $10 million and $5 million for SPPC and SPR, respectively.

Judgment Related Defaults

Nevada Power Company

     NPC’s First Mortgage Indenture provides for an event of default if a final, unstayed judgment in excess of $25,000 is rendered against NPC and remains undischarged for 60 days. Upon a matured event of default, the trustee may, and upon the written request of the holders of at least 25% of the bonds outstanding under NPC’s First Mortgage Indenture, is required to declare the principal of and interest on the approximately $372.5 million of outstanding First Mortgage bonds immediately due and payable.

     NPC’s $250 million Series E and $350 million Series G General and Refunding Mortgage Notes and NPC’s $130 million 6.2% Senior Unsecured Notes, Series B, due April 15, 2004, provide for an event of default if a final, unstayed judgment in excess of $15 million is rendered against NPC and remains undischarged for 60 days. Since the Series E Notes and the Series G Notes were issued under NPC’s General and Refunding Mortgage Indenture and NPC’s Senior Unsecured Notes are secured by a General and Refunding Mortgage Bond, a default under any of the Series E Notes, the Series G Notes and the Senior Unsecured Notes, will trigger a default under NPC’s General and Refunding Mortgage Indenture. In addition, a matured event of default under NPC’s First Mortgage Indenture will trigger a default under NPC’s General and Refunding Mortgage Indenture. Upon a matured event of default under the NPC’s General and Refunding Mortgage Indenture, the trustee or the holders of 33% of the General and Refunding Mortgage securities outstanding may declare the principal and accrued interest of the approximately $1.08 billion of outstanding General and Refunding Mortgage securities immediately due and payable.

     If a judgment lien is created on NPC’s real property located in Nevada, NPC has been advised that the judgment lien would be an interceding lien that would have priority over subsequent advances under NPC’s General and Refunding Mortgage Indenture; therefore, NPC would be unable to provide certain required opinions of counsel to issue additional securities under its General and Refunding Mortgage Indenture until the judgment lien is discharged and released. Since NPC is unable to issue additional bonds under its First Mortgage Indenture, its sole means of issuing secured debt is through its General and Refunding Mortgage Indenture.

     If NPC’s indebtedness under either its First Mortgage Indenture and/or its General and Refunding Mortgage Indenture is accelerated, or if NPC is unable to issue additional securities under its General and Refunding Mortgage Indenture in order to raise funds for operations and to repay indebtedness and to provide security, as needed, for its obligations, NPC would likely be unable to continue to operate outside of bankruptcy.

Sierra Pacific Power Company

     SPPC’s $100 million Term Loan Agreement provides for an event of default if a judgment of $10 million or more is entered against SPPC and such judgment is not vacated, discharged, stayed or bonded pending appeal within 30 days. The Term Loan Agreement also prohibits the creation or existence of any liens on SPPC’s properties except for liens specifically permitted under the Term Loan Agreement. If a judgment lien is filed against SPPC, the filing of the lien will trigger an event of default under the Term Loan Agreement. Upon an event of default, the Administrative Agent under the Term Loan Agreement may, upon request of more than 50% of the lenders under the Term Loan Agreement, declare all amounts due under the Term Loan Agreement immediately due and payable. Currently, SPPC has $99.3 million outstanding under its Term Loan facility.

     SPPC’s obligations under the Term Loan Agreement are secured by a General and Refunding Mortgage Bond. If SPPC fails to repay all amounts due upon an acceleration under the Term Loan Agreement within 3 business days, such failure will be deemed a default in the payment of principal and will trigger an event of default under the SPPC General and Refunding Mortgage Indenture that would be applicable to all securities issued under the SPPC General and Refunding Mortgage Indenture.

     In the event that SPPC’s Term Loan is accelerated and results in the acceleration of all amounts outstanding under SPPC’s General and Refunding Mortgage Indenture, SPPC would likely be unable to continue to operate outside of bankruptcy.

     If a judgment lien is created on SPPC’s real property located in Nevada, SPPC has been advised that the judgment lien would be an interceding lien that would have priority over subsequent advances under SPPC’s General and Refunding Mortgage Indenture; therefore, SPPC would be unable to provide certain required opinions of counsel to issue additional securities under its General and Refunding Mortgage Indenture until the judgment lien is discharged and released. Since SPPC is unable to issue additional bonds under its First Mortgage Indenture, its sole means of issuing secured debt is through its General and Refunding Mortgage Indenture. If SPPC is unable to issue additional securities under its General and Refunding Mortgage Indenture in order to raise funds for operations and to repay indebtedness and to provide security, as needed, for its obligations, SPPC would likely be unable to continue to operate outside of bankruptcy.

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Financing Transactions

     In January 2003, SPR acquired $8.75 million aggregate principal amount of its Floating Rate Notes due April 20, 2003, in exchange for approximately 1.3 million shares of its common stock, in two privately-negotiated transactions exempt from the registration requirements of the Securities Act of 1933.

     On February 5, 2003, SPR issued approximately 13.66 million shares of common stock in exchange for a total of 2.1 million of its PIES in five privately-negotiated transactions exempt from the registration requirements of the Securities Act of 1933.

     On February 14, 2003, SPR issued and sold $300 million of its 7.25% Convertible Notes due 2010. Approximately $53.4 million of the net proceeds from the sale of the notes were used to purchase U.S. government securities that were pledged to the trustee for the first five interest payments on the notes payable during the first two and one-half years. A portion of the remaining net proceeds of the notes were used to repurchase approximately $58.5 million of SPR’s Floating Rate Notes due April 20, 2003. Of the remaining net proceeds, approximately $133 million were used to repay SPR’s Floating Rate Notes due April 20, 2003, and the remaining proceeds were available for general corporate purposes. The Convertible Notes were issued with registration rights.

     On August 11, 2003, SPR obtained shareholder approval to issue up to 42,736,920 additional shares of SPR’s common stock in lieu of paying the cash payment component upon conversion of the Convertible Notes. Before SPR received shareholder approval, holders of the Convertible Notes were entitled to receive both shares of common stock and cash upon conversion on their notes. As a result of receiving shareholder approval, through the close of business on February 14, 2010, for each $1,000 principal amount of the Convertible Notes surrendered, SPR has the option to issue (i) 76.7073 shares of Common Stock plus an amount of cash equal to the then market value of 142.4564 shares of our Common Stock, subject to adjustment upon the occurrence of certain dilution events; or (ii) 219.1637 shares of our Common Stock, subject to adjustment upon the occurrence of certain dilution events. If the noteholders present the Convertible Notes for conversion and SPR elects to convert the notes into stock and cash, the total amount of the cash payable on conversion would be approximately $253.6 million, at an assumed five-day average closing price of $5.93 per share (based upon the last reported sale price of SPR’s common stock on November 3, 2003). The amount of cash payable on conversion of the Convertible Notes will increase as the average closing price of SPR’s common stock increases. For further information regarding the terms of the Convertible Notes, see Note 4, Long-Term Debt.

     The indenture under which the Convertible Notes were issued does not contain any financial covenants or any restrictions on the payment of dividends, the repurchase of SPR’s securities or the incurrence of indebtedness. The indenture does allow the holders of the Convertible Notes to require SPR to repurchase all or a portion of the holders’ Convertible Notes upon a change of control. The indenture also provides for an event of default if SPR or any of its significant subsidiaries, including NPC and SPPC, fails to pay any indebtedness in excess of $10 million or has any indebtedness of $10 million or more accelerated and declared due and payable.

Effect of Holding Company Structure

     Currently, SPR (on a stand-alone basis) has a substantial amount of outstanding debt and other obligations including, but not limited to: $300 million of its unsecured 8¾% Senior Notes due 2005; $240 million of its unsecured 7.93% Senior Notes due 2007; and $300 million of its 7.25% Convertible Notes due 2010.

     Due to the holding company structure, SPR’s right as a common shareholder to receive assets of any of its direct or indirect subsidiaries upon a subsidiary’s liquidation or reorganization is junior to the claims against the assets of such subsidiary by its creditors and preferred stockholders. Therefore, SPR’s debt obligations are effectively subordinated to all existing and future claims of its subsidiaries’ creditors, particularly those of NPC and SPPC, including trade creditors, debt holders, secured creditors, taxing authorities, guarantee holders, NPC’s preferred trust security holders, and SPPC’s preferred stockholders. As of September 30, 2003, NPC, SPPC, and their subsidiaries had approximately $3.04 billion of debt and other obligations outstanding including $188.9 million previously reported as preferred trust securities of NPC, but which has been reclassified to Long-Term Debt in accordance with SFAS 150. See Note 4, Long-Term Debt, for further discussion. Additionally, SPPC had $50.0 million of outstanding preferred stock. Although the Utilities are parties to agreements that limit the amount of additional indebtedness they may incur, the Utilities retain the ability to incur substantial additional indebtedness and other liabilities.

Nevada Power Company

     During the three and nine months ended September 30, 2003, NPC recognized net income of approximately $62.5 million and $25.1 million, respectively, and did not pay or declare a common stock dividend to its parent, SPR. Operating results during the nine month period was negatively affected by the write-off of $46 million in May 2003 of disallowed deferred energy costs, and the recognition of $27.8 million of interest costs as a result of a September 26, 2003,

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judgment by the Enron Bankruptcy Court Judge, both described later. The causes for significant changes in specific lines comprising the results of operations for NPC are as follows:

  Electric Operating Revenues

			Three Months							Nine Months
			Ended September 30,							Ended September 30,
							Change from							Change from
			2003		2002		Prior Year %			2003		2002		Prior Year %
Electric Operating Revenues ($000)
	Residential		$	266,585	$	266,508		0.0	%	$	555,514	$	564,439		-1.6	%
	Commercial			103,638		103,367		0.3	%		264,861		263,425		0.5	%
	Industrial			193,601		189,440		2.2	%		414,177		413,602		0.1	%
	Retail revenues			563,824		559,315		0.8	%		1,234,552		1,241,466		-0.6	%
	Other			75,837		153,221		-50.5	%		162,273		304,401		-46.7	%
		Total Revenues	$	639,661	$	712,536		-10.2	%	$	1,396,825	$	1,545,867		-9.6	%
	Retail sales in thousands of megawatt-hours (MWH)			6,166		5,814		6.1	%		14,053		13,699		2.6	%
	Average retail revenue per MWH		$	91.44	$	96.20		-4.9	%	$	87.85	$	90.62		-3.1	%

     Retail revenues were slightly higher for the three months ended September 30, 2003, compared to the same period in 2002, due to warmer than normal weather and customer growth. Partially offsetting this increase was a decrease in retail rates that was effective May 19, 2003, as a result of NPC’s Deferred Energy Case (see Regulatory Matters, later).

     For the nine months ended September 30, 2003, retail revenues were slightly lower than the same period in 2002 primarily due to lower average retail rates in 2003 as a result of the aforementioned rate decrease effective May 19, 2003. This decrease in revenues was partially offset by an increase in revenues related to increases in residential, commercial, and industrial customers (5.1%, 5.0%, and 5.9%, respectively). Higher revenues in 2002 resulting from one-time rate increase in June 2002 of $.01 per kilowatt-hour, which allowed NPC to accelerate the recovery of its deferred energy balance, also contributed to the 2003 decrease in revenues.

     Other electric operating revenues decreased for the three and nine months ended September 30, 2003, compared to the same periods in 2002, due to a decrease in the sales volumes of wholesale electric power to other utilities. See NPC’s Annual Report in Form 10-K for the year ended December 31, 2002, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation - Energy Supply, for a discussion of NPC’s purchases power procurement strategies.

  Purchased Power

	Three Months							Nine Months
	Ended September 30,							Ended September 30,
					Change from							Change from
	2003		2002		Prior Year %			2003		2002		Prior Year %
Purchased Power ($000)	$	301,683	$	440,559		-31.5	%	$	620,712	$	1,102,551		-43.7	%
Purchased Power in thousands of MWHs		4,084		5,330		-23.4	%		9,494		11,112		-14.6	%
Average cost per MWH of Purchased Power (1)	$	73.87	$	82.66		-10.6	%	$	65.38	$	78.61		-16.8	%

(1)  Nine months ended September 30, 2002 average costs do not include contract termination costs discussed below

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     Purchased power costs were lower for the three months and nine months ended September 30, 2003, than the same period in the prior year primarily as a result of a decrease in the volumes purchased and a decrease in the price of Short-Term Firm energy. Additionally, lower costs resulted from a $229 million provision for terminated purchased power contracts that was recorded in the second quarter of 2002. See Part II, Item I - Legal Proceedings, in this report and SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002, for a discussion of the terminated purchased power contracts. Finally, purchases associated with risk management activities, which are included in purchased power, decreased in 2003. Risk management activities include transactions entered into to minimize purchased power costs. See SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation - Energy Supply, for a discussion of NPC’s purchased power procurement.

  Fuel For Power Generation

	Three Months							Nine Months
	Ended September 30,							Ended September 30,
					Change from							Change from
	2003		2002		Prior Year %			2003		2002		Prior Year %
Fuel for Power Generation ($000)	$	126,839	$	87,864		44.4	%	$	246,643	$	245,060		0.6	%
Thousands of MWHs generated		3,476		2,936		18.4	%		7,513		7,592		-1.0	%
Average cost per MWH of Generated Power	$	36.49	$	29.93		21.9	%	$	32.83	$	32.28		1.7	%

     Fuel for power generation costs for the three months ended September 30, 2003, were higher than the same period in 2002 due to the increase in the volume of coal generation and higher gas prices. The increase in generation volume was as a result of an increase in retail sales. Fuel for generation costs for the nine months ended September 30, 2003, were comparable to the same period in 2002 with slightly higher costs being offset by lower volumes.

Deferred Energy Costs

	Three Months									Nine Months
	Ended September 30,									Ended September 30,
							Change from								Change from
	2003			2002			Prior Year %			2003		2002			Prior Year %
Deferred energy costs disallowed ($000)		—				—		N/A			45,964		434,123			-89.4	%
Deferred energy costs - net ($000)	$	(35,967	)	$	(43,224	)		-16.8	%	$	48,260	$	(238,059	)		N/A

     Deferred energy costs disallowed for the nine months ended September 30, 2003, reflects the PUCN disallowance of approximately $46 million in May 2003, of deferred energy costs incurred during the twelve months ended September 30, 2002. Deferred energy costs disallowed for the nine months ended September 30, 2002, reflects the write-off of approximately $434 million of deferred energy costs incurred during the seven months ended September 30, 2001, that were disallowed by the PUCN in NPC’s 2001 deferred energy rate case.

     Deferred energy costs - net increased for the three month period ended September 30, 2003, compared to the same period during 2002, primarily as a result of an increase in the amortization of prior deferred energy costs. Also, the 2003 increase reflects a decrease in the amount that fuel and purchase power costs incurred during 2003 exceeded the recovery of those costs through rates. During periods when fuel and purchase power costs exceed amounts recovered through rates, the excess is shown as reduction in costs and as a receivable to be collected through future rate adjustments. The reduction in costs during the three months ended September 30, 2003, was less than the amount recognized during the same period during 2002.

     Deferred energy costs - net increased for the nine month period ended September 30, 2003, compared to the same period during 2002, primarily as a result of the deferral in the second quarter of 2002 of approximately $229 million for contract termination costs. Additionally, 2003 costs increased as a result of greater amortization of prior deferred energy costs compared to 2002. Finally, deferred energy costs were also higher during 2003 because of a decrease in the amount that fuel and purchase power costs exceeded the recovery of those costs through rates.

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  Allowance For Funds Used During Construction (AFUDC)

	Three Months								Nine Months
	Ended September 30,								Ended September 30,
						Change							Change
						from Prior							from Prior
	2003		2002			Year %			2003		2002		Year %
Allowance for other funds used during construction ($000)	$	281	$	(262	)		N/A		$	1,922	$	239		704.2	%
Allowance for borrowed funds used during construction ($000)	$	573	$	208			175.5	%	$	2,149	$	2,169		-0.9	%
	$	854	$	(54	)		N/A		$	4,071	$	2,408		69.1	%

     NPC’s total allowance for funds used during construction was higher for the three month and nine month periods ended September 30, 2003, than the comparable periods in 2002, as a result of an increase in the AFUDC debt and equity rates.

Other (Income) and Expenses

	Three Months									Nine Months
	Ended September 30,									Ended September 30,
							Change									Change
							from Prior									from Prior
($000)	2003			2002			Year %			2003			2002			Year %
Other operating expense	$	44,749		$	39,250			14.0	%	$	136,964		$	116,520			17.5	%
Maintenance expense	$	9,203		$	8,050			14.3	%	$	38,390		$	31,576			21.6	%
Depreciation and amortization	$	28,474		$	24,975			14.0	%	$	81,095		$	72,924			11.2	%
Income taxes	$	30,556		$	39,944			-23.5	%	$	3,734		$	(116,536	)		N/A
Taxes other than income taxes	$	6,387		$	5,935			7.6	%	$	19,429		$	19,122			1.6	%
Interest charges on long-term debt	$	37,600		$	23,714			58.6	%	$	104,215		$	70,668			47.5	%
Interest charges-other	$	34,171		$	7,251			371.3	%	$	46,165		$	14,133			226.6	%
Interest accrued on deferred energy	$	(5,952	)	$	(8,506	)		-30.0	%	$	(16,896	)	$	(5,411	)		212.3	%
Other income	$	(4,277	)	$	(2,451	)		74.5	%	$	(11,633	)	$	(3,792	)		206.8	%
Other expense	$	1,441		$	3,184			-54.7	%	$	4,491		$	9,745			-53.9	%
Income taxes - other income and expense	$	3,084		$	2,840			8.6	%	$	8,277		$	297			2686.9	%

     Other operating expense for the three month period ending September 30, 2003, was greater than the same period during the prior year, due primarily to increased reserves for uncollectible accounts, costs associated with increased billing and collection efforts, and higher employee labor overhead costs along with higher operating costs at the Navajo and Mohave generating facilities. Expenses for the nine month period were greater due to the aforementioned expenses along with increased insurance premiums and the recognition of short-term incentive compensation plan costs in 2003. NPC did not recognize incentive plan costs during the same period in 2002.

     Maintenance costs for the three and nine month periods ending September 30, 2003, were higher than the same periods in 2002 due to higher plant maintenance costs during 2003.

     Depreciation and amortization was higher for the three month period ended September 30, 2003, compared to the same period in 2002 as a result of both an adjustment that reduced depreciation in May 2002 and depreciation on software placed in service in 2003. Depreciation and amortization was higher for the nine month period ended September 30, 2003, compared to the same period in 2002 as a result of an increase in depreciable assets, including the Centennial Project, and the addition of new software in 2003.

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     NPC’s income taxes decreased for the three months ended September 30, 2003, compared to the amount recognized during the same period in 2002. The change resulted from changes in pretax income. The decrease in pretax income resulted from increases in other operating, maintenance, depreciation and amortization, and interest expenses and a decrease in revenues, partially offset by a decrease in fuel and purchase power expense.

     NPC’s income taxes increased for the nine months ended September 30, 2003, compared to the same period in 2002 due to pretax income in 2003 compared to pretax losses in 2002. The change in pretax income resulted largely from the write-off in 2002 of disallowed deferred energy costs that was partially offset by a decrease in revenues and increases in other operating, maintenance, depreciation, and interest expenses during 2003.

     Taxes other than income taxes for the three and nine months ended September 30, 2003, were comparable to amounts recognized during the same periods in 2002.

     Interest charges on Long-Term Debt for the three and nine month periods ended September 30, 2003, increased as the result of the adoption of SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” requiring the reclassification of NPC’s Dividend requirements of NPC obligated mandatorily redeemable preferred trust securities to interest charges on Long-Term Debt. For the three and nine month periods ended September 30, 2003, $3.8 million, and $11.4 million of dividends, respectively, were reclassified to interest charges on Long-Term Debt. (See Note 1, Recent Pronouncements, for discussion of SFAS No. 150). For the comparable periods in, 2002, the income statement presentation remains as originally presented. Aside from the impact of the reclassifications, interest charges on Long-Term Debt for the three and nine month periods ending September 30, 2003, increased over the same periods in 2002 due primarily to the issuance in October 2002 of $250 million additional debt at an interest rate of 10.875% and the issuance, in August 2003 of $350 million General and Refunding Bonds at an interest rate of 9.00%. The redemptions, in September 2003 and October 2002, of $350 million and $15 million of debt, respectively, slightly offset the increase in interest during 2003 over 2002.

     Interest charges-other for the three months ended September 30, 2003, increased, compared to the prior year period, due to higher interest on delayed/terminated contracts. NPC recorded in September 2003 $27.8 million of additional interest costs on terminated contracts as a result of a final judgment issued on September 26, 2003, by the Bankruptcy Court Judge overseeing the bankruptcy case of Enron Power Marketing (Enron). See Note 11, Commitments and Contingencies, of the Consolidated Financial Statements for more information regarding the Enron litigation. Higher charges related to debt discount and expenses associated with the October 2002 $250 million Notes issuance and the August 2003 $350 million Notes issuance. For the nine month period ending September 30, 2003, other interest charges were higher, compared to the same period in 2002 due to the aforementioned $27.8 million of additional interest costs on terminated contracts, greater year-to-date interest on delayed/terminated contracts, charges related to fees associated with NPC’s credit facilities and receivables conduit, and to the amortization of increased debt discount charges related to the additional debt issuances.

     Interest accrued on deferred energy costs decreased during the three months ended September 30, 2003, compared to the same period in 2002, following lower deferred fuel and purchased power balances during 2003. For the nine months ended September 30, 2003, the increase over the same period in 2002 compared favorably due to the first quarter 2002 write-off of approximately $20.1 million of carrying charges, net of taxes, on deferred energy costs that were disallowed by the PUCN in its March 29, 2002, decision on NPC’s deferred energy rate case. The 2002 write-off was partially offset by the recording of carrying charges on deferred energy costs incurred.

     Other income for the three months ended September 30, 2003, increased over the same period in 2002 due, primarily, to the continued recording of gains from the disposition of non-essential property during 2003. Other income increased for the nine months ended September 30, 2003, compared to the same period in 2002, due to the recognition of income from the disposition of SO2 allowances in 2003, an increase in gains from the disposition of non-utility property in 2003, income generated as a result of the relocation of electricity lines for Clark County, and the recognition of carrying charges related to divestiture costs ordered by the PUCN, and an increase in interest income.

     Other expense decreased during the three months ended September 30, 2003, compared to the same period in 2002 as a result of decreased expenditures related to low-income energy assistance programs, lobbying and ballot initiative charges, and charges related to depreciation on non-utility property. Other expense decreased during the nine months ended September 30, 2003, compared to the same period in 2002 due, primarily, to the 2002 write-off of $5.0 million relating to the disposition of SO2 allowances as ordered by the PUCN.

     NPC’s income taxes - other income and expenses for the three months ended September 30, 2003, were comparable to amounts recognized during the same period in 2002.

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     NPC’s income taxes - other income and expenses increased for the nine months ended September 30, 2003, compared to amounts recognized the same period during 2002 due to an increase in pretax income largely as a result of a write-off of disallowed interest charges on deferred energy costs in 2002.

Analysis of Cash Flows

     NPC’s cash flows were less during the nine-months ended September 30, 2003, compared to the same period in 2002, resulting primarily from decreases in cash flows from operating and financing activities. The decrease in cash from operating activities was substantially as a result of the prepayment of fuel and power purchases during 2003 and the receipt of an income tax refund in 2002 both, partially offset, by the collection in 2003 of previously deferred energy costs as a result of a rate increase that began April 1, 2002. The decrease operating cash flow was partially offset by the collection of previously deferred energy costs due to the PUCN decision in NPC’s 2001 deferred energy rate case, that resulted in increased rates beginning April 1, 2002. Cash flows from financing activities were lower in 2003 because of cash provided by short-term borrowings during 2002. NPC also utilized additional cash for financing activities in 2003 for the Centennial Plan and other construction projects.

  Liquidity and Capital Resources

     NPC had cash and cash equivalents of approximately $97.2 million at September 30, 2003.

     Due to NPC’s weakened financial condition and, in certain instances, the weakened financial condition of NPC’s power suppliers, NPC has been required to pre-pay its power purchases or make more frequent payments on its power deliveries. As a result of unseasonably cool weather during the spring of 2003 and its prepayment and more frequent payment obligations for its summer 2003 power requirements, NPC’s liquidity was significantly constrained during the early summer months of 2003. If NPC does not have sufficient liquidity to meet its power requirements, particularly at the onset of future summer seasons, NPC may be required to issue or incur additional indebtedness. If NPC is unable to issue or incur such indebtedness, whether due to lack of access to the capital markets, lack of regulatory authority to issue or incur such debt, or restrictive covenants in certain of its financing agreements (see below), its ability to provide power and its financial condition will be adversely affected.

     NPC’s liquidity would be significantly affected by a requirement to pay the judgment of the Bankruptcy Court overseeing Enron’s bankruptcy proceeding in favor of Enron, a requirement to provide cash collateral in excess of the $24 million NPC is required to deposit into escrow within 90 days from the order date, for Enron’s claims for termination payments under the judgment, or unfavorable rulings by the PUCN in future NPC rate cases (including terminated power supply contracts). In response to the announcement of the decision of the Bankruptcy Court on August 28, 2003, in favor of Enron, S&P and Moody’s placed NPC on “credit watch with negative implications” and “negative rating outlook,” respectively. Future downgrades by either S&P or Moody’s could preclude or reduce NPC’s access to the capital markets, and could adversely affect NPC’s ability to continue to purchase power and fuel. Adverse developments with respect to any one or a combination of the foregoing and regulatory contingencies, as discussed in Note 11, Commitments and Contingencies, could have a material adverse effect on NPC’s financial condition and liquidity, and could make it difficult for NPC to continue to operate outside of bankruptcy.

  Effect of 2002 Rate Case Decisions

     On March 29 and April 1, 2002, following the decision by the PUCN in NPC’s deferred energy rate case, S&P and Moody’s lowered NPC’s unsecured debt ratings to below investment grade. On April 23 and 24, 2002, NPC’s unsecured debt ratings were further downgraded and its secured debt ratings were downgraded to below investment grade. As a result of these downgrades, NPC’s ability to access the capital markets to raise funds was severely limited. Since SPR’s credit ratings were similarly downgraded, SPR’s ability to make capital contributions to NPC also became severely limited.

     For more detailed discussion of these effects, please see SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002.

  Financing Transactions

     On August 18, 2003, NPC issued and sold $350 million of its 9% General and Refunding Mortgage Notes, Series G, due 2013. The Series G Notes were issued with registration rights. The proceeds of the issuance were used to satisfy NPC’s obligations with respect to its $210 million 6% Notes due September 15, 2003, and its $140 million General and Refunding Mortgage Notes, Floating Rate, Series B, due October 15, 2003.

     The Series G Notes limit the amount of payments that NPC may pay on its common stock to SPR. However, that limitation does not apply to payments by NPC to enable SPR to pay its reasonable fees and expenses (including, but not limited

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to, interest on SPR’s indebtedness and payment obligations on account of SPR’s PIES) provided that those payments do not exceed $60 million for any one calendar year, those payments comply with any regulatory restrictions then applicable to NPC, and the ratio of consolidated cash flow to fixed charges for NPC’s most recently ended four full fiscal quarters immediately preceding the date of payment is at least 1.75 to 1. The terms of the Series G Notes also permit NPC to make payments to SPR in an aggregate amount not to exceed $25 million from the date of the issuance of the Series G Notes. In addition, NPC may make dividend payments to SPR in excess of the amounts described above so long as, at the time of payment and after giving effect to the payment: there are no defaults or events of default with respect to the Series G Notes, NPC can meet a fixed charge coverage ratio test, and the total amount of such dividends is less than (i) the sum of 50% of NPC’s consolidated net income measured on a quarterly basis cumulative of all quarters from the date of issuance of the Series G Notes, plus (ii) 100% of NPC’s aggregate net cash proceeds from the issuance or sale of certain equity or convertible debt securities of NPC, plus (iii) the lesser of cash return of capital or the initial amount of certain restricted investments, plus (iv) the fair market value of NPC’s investment in certain subsidiaries.

     The terms of the Series G Notes also restrict NPC from incurring any additional indebtedness unless (i) at the time the debt is incurred, the ratio of consolidated cash flow to fixed charges for NPC’s most recently ended four quarter period on a pro forma basis is at least 2 to 1, or (ii) the debt incurred is specifically permitted, which includes certain credit facility or letter of credit indebtedness, obligations incurred to finance property construction or improvement, indebtedness incurred to refinance existing indebtedness, certain intercompany indebtedness, hedging obligations, indebtedness incurred to support bid, performance or surety bonds, indebtedness incurred to finance capital expenditures pursuant to NPC’s 2003 Resource Plan, and certain letters of credit issued to support NPC’s obligations with respect to energy suppliers.

     If NPC’s Series G Notes are upgraded to investment grade by both Moody’s and S&P, the dividend restrictions and the restrictions on indebtedness applicable to the Series G Notes will be suspended and will no longer be in effect so long as the Series G Notes remain investment grade.

     Among other things, the Series G Notes also contain restrictions on liens (other than permitted liens, which include liens to secure certain permitted debt) and certain sale and leaseback transactions. In the event of a change of control of NPC, the holders of Series G Notes are entitled to require that NPC repurchase the Series G Notes for a cash payment equal to 101% of the aggregate principal amount plus accrued and unpaid interest. The Series G Notes will mature August 15, 2013.

  Credit Facility

     On June 30, 2003, NPC entered into a $60 million revolving Credit Agreement to provide additional liquidity to NPC for its summer 2003 power purchases. This facility was paid off on August 11, 2003, and was terminated on August 18, 2003.

  Accounts Receivable Facility

     On October 29, 2002, NPC established an accounts receivable purchase facility of up to $125 million. The receivables purchase facility was renewed on October 28, 2003, and expires as of October 26, 2004. If NPC elects to activate the receivables purchase facility, NPC will sell all of its accounts receivable generated from the sale of electricity to customers to its newly created bankruptcy-remote special purpose subsidiary. The receivables sales will be without recourse except for breaches of customary representations and warranties made at the time of sale. The subsidiary will, in turn, sell these receivables to a bankruptcy-remote subsidiary of SPR. SPR’s subsidiary will issue variable rate revolving notes backed by the purchased receivables.

     The agreements relating to the receivables purchase facility contain various conditions to purchase, covenants and trigger events, and other provisions customary in receivables transactions. In addition to customary termination and mandatory repurchase events, the receivables purchase facility may terminate in the event that either NPC or SPR defaults (i) in the payment of indebtedness, or (ii) in the payment of amounts due under a swap agreement, and such defaults aggregate to greater than $10 million and $5 million for NPC and SPR, respectively. Under the terms of the agreements relating to the receivables purchase facility, NPC’s facility may not be activated or, if activated, will be terminated in the event of a material adverse change in the condition, operations or business prospects of NPC. In addition, the agreements contain a limitation on the payment of dividends by NPC to SPR that is identical to the limitation contained in NPC’s General and Refunding Mortgage Notes, Series E, described below. SPR has agreed to guaranty NPC’s performance of certain obligations as a seller and servicer under the receivables purchase facility.

     NPC has agreed to issue a $125 million General and Refunding Mortgage Bond upon activation of the receivables purchase facility. The full principal amount of the bond would secure certain of NPC’s obligations as seller and servicer, plus certain interest, fees, and expenses thereon to the extent not paid when due, regardless of the actual amounts owing with respect to the secured obligations. As a result, in the event of an NPC bankruptcy or liquidation, the holder of the bond securing the receivables purchase facility may recover more on a pro rata basis than the holders of other General and Refunding Mortgage securities, who could recover less on a pro rata basis than they otherwise would recover. However, in no event will the holder of the bond recover more than the amount of obligations secured by the bond.

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     NPC intends to use the accounts receivable purchase facility as a back-up liquidity facility and does not plan to activate this facility in the foreseeable future.

  Mortgage Indentures

     NPC’s first mortgage indenture creates a first priority lien on substantially all of NPC’s properties. As of September 30, 2003, $372.5 million of NPC’s first mortgage bonds were outstanding. NPC agreed in connection with its Series E Notes and its Series G Notes that it would not issue any more first mortgage bonds.

     NPC’s General and Refunding Mortgage Indenture creates a lien on substantially all of NPC’s properties in Nevada that is junior to the lien of the first mortgage indenture. As of September 30, 2003, $1.08 billion of NPC’s General and Refunding Mortgage securities were outstanding. Additional securities may be issued under the General and Refunding Mortgage Indenture on the basis of (i) 70% of net utility property additions, (ii) the principal amount of retired General and Refunding Mortgage Bonds, and/or (iii) the principal amount of first mortgage bonds retired after October 19, 2001. On the basis of (i), (ii) and (iii) above, as of September 30, 2003, NPC had the capacity to issue approximately $911.5 million of additional General and Refunding Mortgage securities not including $235 million of General and Refunding bonds that will be issued into escrow during November 2003 in connection with the Enron litigation. See Note 11 of the Condensed Notes to Consolidated Financial Statements for more information regarding the Enron litigation. Although NPC has substantial capacity to issue additional General and Refunding Mortgage securities on the basis of property additions and retired securities, the financial covenants contained in the Series E Notes, the Series G Notes and the Receivables Purchase Facility Agreements limit the amount of additional indebtedness that NPC may issue and the reasons for which such indebtedness may be issued. NPC has reserved $125 million of General and Refunding Mortgage bonds for issuance upon the initial funding of NPC’s receivables facility.

     NPC also has the ability to release property from the liens of the two mortgage indentures on the basis of net property additions, cash and/or retired bonds. To the extent NPC releases property from the lien of its General and Refunding Mortgage Indenture, it will reduce the amount of bonds issuable under that indenture.

  Cross Default Provisions

     Certain financing agreements of NPC contain cross-default provisions that would result in an event of default under such financing agreements if there is a failure under other financing agreements of NPC and SPR to meet payment terms or to observe other covenants that would result in an acceleration of payments due. Most of these default provisions (other than ones relating to a failure to pay other indebtedness) provide for a cure period of 30-60 days from the occurrence of a specified event during which time, NPC or SPR may rectify or correct the situation before it becomes an event of default. The primary cross-default provisions in NPC’s various financing agreements are briefly summarized below:

• NPC’s General and Refunding Mortgage Indenture, under which NPC has $1.08 billion of securities outstanding as of September 30, 2003, provides for an event of default if a matured event of default under NPC’s First Mortgage Indenture occurs;

• The terms of NPC’s Series E Notes and NPC’s Series G Notes provide that a default with respect to the payment of principal, interest or premium beyond the applicable grace period under any mortgage, indenture or other security instrument, by NPC or any of its restricted subsidiaries, relating to debt in excess of $15 million, triggers a right of the holders of each series of Notes to require NPC to redeem their Series of Notes at a price equal to 100% of the aggregate principal amount plus accrued and unpaid interest and liquidated damages, if any, upon notice given by at least 25% of the outstanding noteholders for such series of Notes;

• NPC’s receivables purchase facility may terminate in the event that either NPC or SPR defaults (i) in the payment of indebtedness, or (ii) in the payment of amounts due under hedge agreements, and such defaults aggregate to greater than $10 million and $5 million for NPC and SPR, respectively; and

• NPC’s Senior Unsecured Note Indenture, pursuant to which NPC issued its $130 million 6.20% Senior Unsecured Notes, Series B, due April 15, 2004, provides for a default if (a) NPC fails to pay indebtedness (after any applicable grace period), or (b) any of NPC’s indebtedness is accelerated, and (x) such indebtedness aggregates $15 million, and (y) such indebtedness is not repaid and such acceleration is not rescinded within 30 days.

  Judgment Related Defaults

     NPC’s First Mortgage Indenture provides for an event of default if a final, unstayed judgment in excess of $25,000 is rendered against NPC and remains undischarged for 60 days. Upon a matured event of default, the trustee may, and upon the written request of the holders of at least 25% of the bonds outstanding under NPC’s First Mortgage Indenture, is required to declare the principal of and interest on the approximately $372.5 million of outstanding First Mortgage bonds immediately due and payable.

     NPC’s $250 million Series E and $350 million Series G General and Refunding Mortgage Notes and NPC’s $130 million 6.2% Senior Unsecured Notes, Series B, due April 15, 2004, provide for an event of default if a final, unstayed judgment in excess of $15 million is rendered against NPC and remains undischarged for 60 days. Since the Series E Notes and the Series G Notes were issued under NPC’s General and Refunding Mortgage Indenture and NPC’s Senior Unsecured Notes are secured by a General and Refunding Mortgage Bond, a default under any of the Series E Notes, the Series G Notes and the Senior Unsecured Notes, will trigger a default under NPC’s General and Refunding Mortgage Indenture. In addition, a matured event of default under NPC’s First Mortgage Indenture will trigger a default under NPC’s General and Refunding Mortgage Indenture. Upon a matured event of default under the NPC’s General and Refunding Mortgage Indenture, the trustee or the holders of 33% of the General and Refunding Mortgage securities outstanding may declare the principal and accrued interest of the approximately $1.08 billion of outstanding General and Refunding Mortgage securities immediately due and payable.

     If a judgment lien is created on NPC’s real property located in Nevada, NPC has been advised that the judgment lien would be an interceding lien that would have priority over subsequent advances under NPC’s General and Refunding Mortgage Indenture; therefore, NPC would be unable to provide certain required opinions of counsel to issue additional securities under its General and Refunding Mortgage Indenture until the judgment lien is discharged and released. Since NPC is unable to issue additional bonds under its First Mortgage Indenture, its sole means of issuing secured debt is through its General and Refunding Mortgage Indenture.

     If NPC’s indebtedness under either its First Mortgage Indenture and/or its General and Refunding Mortgage Indenture is accelerated, or if NPC is unable to issue additional securities under its General and Refunding Mortgage Indenture in order to raise funds for operations and to repay indebtedness and to provide security, as needed, for its obligations, NPC would likely be unable to continue to operate outside of bankruptcy.

  Limitations on Indebtedness

     The terms of NPC’s Series E Notes, which mature in 2009, and NPC’s Series G Notes, which mature in 2013, restrict NPC from incurring any additional indebtedness unless (i) at the time the debt is incurred, the ratio of consolidated cash flow to fixed charges for NPC’s most recently ended four quarter period on a pro forma basis is at least 2 to 1, or (ii) the debt incurred

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is specifically permitted, which includes limited amounts of debt with respect to certain credit facility or letter of credit indebtedness, obligations incurred to finance property construction or improvement, indebtedness incurred to refinance existing indebtedness, certain intercompany indebtedness, hedging obligations, indebtedness incurred to support bid, performance or surety bonds, certain letters of credit issued to support NPC’s obligations with respect to energy suppliers, and for the Series G Notes, indebtedness to finance capital expenditures incurred pursuant to NPC’s 2003 Resource Plan. At September 30, 2003, NPC met the fixed charge ratio test set forth in (i) above. If NPC’s Series E Notes and the Series G Notes are upgraded to investment grade by both Moody’s and S&P, these restrictions will be suspended and will no longer be in effect so long as the applicable series of Notes remain investment grade.

     If NPC is unable to access the capital markets to issue additional indebtedness to support its operations, including the purchase of fuel and power, and to refinance its existing indebtedness, whether due to lack of access to the capital markets, lack of regulatory authority, or restrictive covenants in its financing agreements, its ability to provide power and its financial condition will be adversely affected. In addition, the PUCN conducted hearings on NPC’s Resource Plan on October 16, 2003. The PUCN approved an order on NPC’s Resource Plan on November 12, 2003. In general, the order approved NPC’s various requests made in its filing and also imposed additional requirements for various briefings, and required amendments to the plan if there are delays in the combined cycle units construction, issues with transmission reservations, or difficulties financing the plan. As such, NPC may need to expend up to approximately $500 million prior to the summer of 2007 for the construction and/or acquisition of generation facilities.

Sierra Pacific Power Company

     During the three months ended September 30, 2003, SPPC recognized a net loss of $317 thousand and during the nine months ended September 30, 2003, SPPC recognized a net loss of $24.3 million. Operating results during both periods were negatively affected by a write-off of $45 million in June 2003 of disallowed deferred energy costs, and the recognition of $12.4 million of interest costs as a result of a September 26, 2003, judgment by the Enron Bankruptcy Court Judge (both described later). During the same period, SPPC paid $2.925 million in dividends to holders of its preferred stock, but did not declare nor pay dividends on its common stock, all of which is held by its parent, SPR.

     The components of SPPC’s gross margin are set forth below (dollars in thousands):

			Three Months							Nine Months
			Ended September 30,							Ended September 30,
							Change from							Change from
			2003		2002		Prior Year %			2003		2002		Prior Year %
Operating Revenues:
	Electric		$	250,476	$	285,720		-12.3	%	$	660,956	$	707,558		-6.6	%
	Gas			13,931		18,473		-24.6	%		114,421		99,139		15.4	%
		Total Revenues	$	264,407	$	304,193		-13.1	%	$	775,377	$	806,697		-3.9	%
Energy Costs:
	Electric		$	165,575	$	198,727		-16.7	%	$	428,305	$	483,723		-11.5	%
	Gas			9,333		14,165		-34.1	%		91,335		76,234		19.8	%
		Total Energy Costs		174,908		212,892		-17.8	%		519,640		559,957		-7.2	%
Gross Margin by Segment:
	Electric		$	84,901	$	86,993		-2.4	%	$	232,651	$	223,835		3.9	%
	Gas			4,598		4,308		6.7	%		23,086		22,905		0.8	%
		Total	$	89,499	$	91,301		-2.0	%	$	255,737	$	246,740		3.6	%

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     The causes for significant changes in specific lines comprising the results of operations for SPPC are as follows:

  Electric Operating Revenues

			Three Months							Nine Months
			Ended September 30,							Ended September 30,
							Change							Change
							from Prior							from Prior
			2003		2002		year %			2003		2002		year %
Electric Operating Revenues ($000)
	Residential		$	60,305	$	59,145		2.0	%	$	172,565	$	164,598		4.8	%
	Commercial			76,881		81,856		-6.1	%		208,746		203,211		2.7	%
	Industrial			75,752		76,776		-1.3	%		210,680		199,902		5.4	%
	Retail revenues			212,938		217,777		-2.2	%		591,991		567,711		4.3	%
	Other			37,538		67,943		-44.8	%		68,965		139,847		-50.7	%
		Total Revenues	$	250,476	$	285,720		-12.3	%	$	660,956	$	707,558		-6.6	%
	Retail sales in thousands of MWH			2,374		2,327		2.0	%		6,674		6,607		1.0	%
	Average retail revenue per MWH		$	89.70	$	93.59		-4.2	%	$	88.70	$	85.93		3.2	%

     SPPC’s retail electric revenues for the three months ended September 30, 2003, were lower due to a rate decrease effective June 1, 2003, which was the result of SPPC’s 2003 deferred energy case (see Regulatory Matters, below).

     The retail electric revenues for the nine months ended September 30, 2003, were higher than the same period in the prior year. This increase was primarily due to a rate increase effective June 1, 2002. Partially offsetting this increase was a decrease in the retail rates effective June 1, 2003, as a result of SPPC’s 2003 deferred energy case.

     Other electric operating revenues decreased for the three and nine month periods ended September 30, 2003, compared to the same periods in 2002 due to a decrease in wholesale sales to other utilities. See SPPC’s Annual Report on Form 10-K for the year ended December 31, 2002, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation, Energy Supply, for a discussion of SPPC’s purchased power procurement strategies.

  Gas Operating Revenues

			Three Months							Nine Months
			Ended September 30,							Ended September 30,
							Change							Change
							from Prior							from Prior
			2003		2002		year %			2003		2002		year %
Gas Operating Revenues ($000)
	Residential		$	6,825	$	6,627		3.0	%	$	49,730	$	49,735		0.0	%
	Commercial			3,811		4,027		-5.4	%		25,536		26,112		-2.2	%
	Industrial			1,967		3,436		-42.8	%		9,999		14,996		-33.3	%
	Retail revenue			12,603		14,090		-10.6	%		85,265		90,843		-6.1	%
	Wholesale revenue			682		4,164		-83.6	%		27,275		6,669		309.0	%
	Miscellaneous			646		219		195.0	%		1,881		1,627		15.6	%
		Total Revenues	$	13,931	$	18,473		-24.6	%	$	114,421	$	99,139		15.4	%
	Retail sales in thousands of decatherms			1,179		1,311		-10.1	%		8,740		9,550		-8.5	%
	Average retail revenues per decatherm		$	10.69	$	10.75		-0.6	%	$	9.76	$	9.51		2.6	%

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     Residential gas revenues for the three months ended September 30, 2003, were slightly higher than the same period in 2002. The higher revenues in 2003 resulted from increases in the number of customers and in higher use per customer that were both partially offset by the effect of a rate decrease from SPPC’s purchased gas adjustment case, that was effective December 26, 2002. Residential gas revenues for the nine months ended September 30, 2003, were comparable to the same period in 2002.

     Commercial gas revenues for the three months and nine months ended September 30, 2003, were slightly lower than the same periods in 2002 due to the aforementioned rate decrease that was effective December 26, 2002.

     Industrial revenues for both the three and nine months ended September 30, 2003, were lower than the same periods in 2002 because some industrial customers switched to SPPC’s gas transportation tariff which gave those customers the ability to procure their gas from a source other than SPPC. The reduction in industrial revenues was also primarily responsible for the decrease in retail decatherm sales for the three and nine months ended September 30, 2003. Industrial revenues were also lower due to the rate decrease effective December 26, 2002, as mentioned above.

     Wholesale gas revenues for the three months ending September 30, 2003, decreased from the same period in 2002 primarily due to a reduction in wholesale prices. Wholesale revenues for the nine months ended September 30, 2003, were higher than the same period in 2002 primarily due to the utilization of idle gas transportation capacity to move gas from Canada to California for resale.

     Miscellaneous revenues increased for the three and nine months ended September 30, 2003, due to an increase in transportation revenue for the transport of the gas procured from other sources by the former Industrial customers.

  Purchased Power

	Three Months							Nine Months
	Ended September 30,							Ended September 30,
					Change from							Change from
	2003		2002		Prior Year %			2003		2002		Prior Year %
Purchased Power ($000)	$	121,763	$	164,124		-25.8	%	$	284,615	$	443,843		-35.9	%
Purchased Power in thousands of MWHs		2,017		2,318		-13.0	%		5,230		5,642		-7.3	%
Average cost per MWH of Purchased Power (1)	$	60.37	$	70.80		-14.7	%	$	54.42	$	63.29		-14.0	%

     (1)  Nine months ended September 30, 2002 average cost does not include contract termination costs, discussed below

     Purchased power costs were lower for the three months and nine months ended September 30, 2003, than the prior year primarily as a result of a decrease in the price and volume of SPPC’s risk management activities. Risk management activities include transactions entered into to minimize purchased power costs. See SPPC’s Annual Report on Form 10-K for the year ended December 31, 2002, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation, Energy Supply, for a discussion of SPPC’s purchased power procurement strategies. In addition, the year-to-date figures were affected by the $86.8 million provision recorded in the second quarter of 2002 for terminated purchased power contracts. See Part II, Item I - Legal Proceedings, in this report and SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002 for a discussion of the terminated purchased power contracts.

  Fuel For Power Generation

	Three Months							Nine Months
	Ended September 30,							Ended September 30,
					Change from							Change from
	2003		2002		Prior Year %			2003		2002		Prior Year %
Fuel for Power Generation ($000)	$	65,986	$	32,804		101.2	%	$	147,221	$	111,024		32.6	%
Thousands of MWHs generated		1,168		1,264		-7.6	%		3,068		3,605		-14.9	%
Average fuel cost per MWH of Generated Power	$	56.49	$	25.95		117.7	%	$	47.99	$	30.80		55.8	%

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     Fuel for power generation costs for the three and nine month periods ended September 30, 2003, were higher than the same periods in the prior year primarily because natural gas prices increased significantly. Partially offsetting this increase was a reduction in volume. The Valmy generating facility was not operating/shut down due to both scheduled and unscheduled maintenance in 2003.

  Gas Purchased for Resale

	Three Months							Nine Months
	Ended September 30,							Ended September 30,
					Change from							Change from
	2003		2002		Prior Year %			2003		2002		Prior Year %
Gas Purchased for Resale ($000)	$	7,133	$	9,884		-27.8	%	$	77,332	$	61,585		25.6	%
Gas Purchased for Resale (thousands of decatherms)		1,587		2,882		-44.9	%		14,162		11,384		24.4	%
Average cost per decatherm	$	4.49	$	3.43		30.9	%	$	5.46	$	5.41		0.9	%

     Gas purchased for resale decreased for the three month period ended September 30, 2003, as compared to the prior year period due to a decrease in wholesale activity, which more than offset an increase in gas prices experienced during the same period. Gas purchased for resale increased for the nine month period ended September 30, 2003, due to an increase in wholesale activity, as explained above.

  Deferred Energy Costs

	Three Months								Nine Months
	Ended September 30,								Ended September 30,
						Change from									Change from
($000)	2003			2002		Prior Year %			2003			2002			Prior Year %
Deferred energy costs disallowed	$	—		$	—		N/A		$	45,000		$	53,101			-15.3	%
Deferred energy costs - electric - net	$	(22,174	)	$	1,799		-1332.6	%	$	(3,531	)	$	(71,144	)		-95.0	%
Deferred energy costs - gas - net	$	2,200		$	4,281		-48.6	%	$	14,023		$	14,649			-4.3	%

     Deferred energy costs disallowed for the nine months ended September 30, 2003, reflects the June 1, 2003 disallowance, effective June 1, 2003, of $45 million pursuant to a stipulation approved by the PUCN. Deferred energy costs disallowed for the nine months ended September 30, 2002, reflects the write-off of $53 million of electric deferred energy costs incurred in the nine months ended November 30, 2001, that were disallowed by the PUCN in their May 28, 2002, decision.

     The decrease in Deferred energy costs-electric-net for the three month period ended September 30, 2003, reflects an increase over 2002 in the amount that fuel and purchase power costs exceeded the recovery of those costs through rates. During periods when actual fuel and purchase power costs exceed amounts recovered through rates, the excess is shown as a reduction in costs, as is the case above, and as a receivable to be collected through future rate adjustments. Additionally, deferred energy costs for the three month period ended September 30, 2003 were lower due to a reduction in the amortization of prior deferred energy costs compared to 2002.

     The increase in Deferred energy costs-electric-net for the nine month period ended September 30, 2003, compared to the same period during 2002, resulted primarily from the deferral in the second quarter of 2002 of approximately $82 million for contract termination costs. Additionally, 2003 costs increased as a result of greater amortization of prior deferred energy costs compared to 2002. The 2003 increase in deferred energy costs was partially offset because of an increase over 2002 in the amount that fuel and purchase power costs exceeded the recovery of those costs through rates.

     SPPC’s Deferred energy costs-gas-net decreased for the three and nine months ended September 30, 2003, primarily as a result of a decrease in the amount by which the recovery of natural gas costs through rates exceeded the cost of natural gas incurred

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during 2003. The decrease in costs for both periods during 2003 was partially offset by an increase in the amortization of prior deferred gas costs, due to the PUCN authorized recovery of those costs.

  Allowance For Funds Used During Construction (AFUDC)

	Three Months								Nine Months
	Ended September 30,								Ended September 30,
						Change							Change
						from Prior							from Prior
	2003		2002			Year %			2003		2002		Year %
Allowance for other funds used during construction ($000)	$	758	$	(10	)		N/A		$	1,961	$	143		1271.3	%
Allowance for borrowed funds used during construction ($000)		908		694			30.8	%		2,219		1,314		68.9	%
	$	1,666	$	684			143.6	%	$	4,180	$	1,457		186.9	%

     Total allowance for funds used during construction increased for the three month and nine month periods ended September 30, 2003, compared to the same periods in the prior year due to increases in construction work in progress and an increase in the AFUDC Debt Rate.

  Other (Income) and Expenses

	Three Months									Nine Months
	Ended September 30,									Ended September 30,
							Change from									Change from
($000)	2003			2002			Prior Year %			2003			2002			Prior Year %
Other operating expense	$	26,684		$	25,319			5.4	%	$	87,522		$	75,974			15.2	%
Maintenance expense	$	4,769		$	4,854			-1.8	%	$	16,409		$	15,250			7.6	%
Depreciation and amortization	$	20,811		$	19,034			9.3	%	$	60,478		$	57,186			5.8	%
Income taxes	$	(21	)	$	7,601			-100.3	%	$	(16,229	)	$	(9,037	)		79.6	%
Taxes other than income taxes	$	4,668		$	4,472			4.4	%	$	14,179		$	14,129			0.4	%
Interest charges on long-term debt	$	19,174		$	16,173			18.6	%	$	56,914		$	48,638			17.0	%
Interest charges-other	$	15,675		$	2,943			432.6	%	$	21,404		$	7,051			203.6	%
Interest accrued on deferred energy	$	(732	)	$	(2,207	)		-66.8	%	$	(4,246	)	$	(6,233	)		-31.9	%
Other income	$	(1,450	)	$	(1,880	)		-22.9	%	$	(3,500	)	$	(5,450	)		-35.8	%
Other expense	$	1,450		$	1,337			8.5	%	$	5,057		$	5,146			-1.7	%
Income taxes - other income and expense	$	454		$	796			-43.0	%	$	1,233		$	1,906			-35.3	%

     Other operating expense for the three month period ending September 30, 2003, were greater than the prior year period due to the absence in 2003 of credits associated with the discontinuation of billing services for Truckee Meadows Water Authority (TMWA), costs associated with increased billing and collection efforts, and higher employee labor overhead costs. Other operating expenses for the nine month period ending September 30, 2003, were higher due to the aforementioned expenses along with increased insurance premiums, higher operating costs at the Tracy generation facility and the recognition of short-term incentive compensation plan costs in 2003. SPPC did not recognize incentive plan costs during the same period in 2002.

     Maintenance expense for the three month period ending September 30, 2003, was comparable to the same period in 2002. However, Maintenance expense for the nine months ended September 30, 2003, was higher due to costs associated with outages at the Valmy generating facility.

     Depreciation and amortization increased for the three month and nine month periods ended September 30, 2003, compared to the same period in 2002 as a result of an increase in depreciable assets due to growth.

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     SPPC’s income tax benefit for the three months ended September 30, 2003, resulted from pretax losses in 2003. The change resulted from changes in pretax income. The pretax losses resulted primarily from an increase in other operating expense, depreciation and amortization, and interest expense.

     SPPC’s income tax benefit for the nine months ended September 30, 2003, increased compared to the amount recognized during the same period in 2002. The change resulted from an increase in pretax losses. The increase in pretax losses resulted primarily from increases in other operating, maintenance, depreciation and amortization, and interest expenses.

     Taxes other than income taxes for the three and nine months ended September 30, 2003, were comparable to the amounts recognized during the same periods in 2002.

     Interest charges on Long-Term Debt for the three and nine month periods ending September 30, 2003, increased over the comparable periods in 2002 due to the issuance in October 2002 of $100 million of additional debt at an interest rate of 10.5% and the renewal in May 2003 of $80 million of Washoe County Water Bonds at a higher interest rate.

     Interest charges-other for the three months ended September 30, 2003, increased, compared to the same period in 2002. SPPC recorded in September 2003 $12.4 million of additional interest costs on terminated contracts as a result of a final judgment issued on September 26, 2003, by the Bankruptcy Court Judge overseeing the bankruptcy case of Enron Power Marketing (Enron). See Note 11, Commitments and Contingencies, of the Consolidated Financial Statements for more information regarding the Enron litigation. Additionally, interest charges-other increased due to higher debt discount and expenses related to the issuance in October 2002 of $100 million of additional debt, an increase in interest on delayed/terminated contracts, and the write-off of $.5 million of deferred interest related to SPPC’s Variable Rate Mechanism, as part of a stipulation reached with the PUCN in the Company’s Purchased Gas regulatory filing, and was reduced by the absence in 2003 of interest on short-term debt existing during the same period in 2002. During the nine month period ending September 30, 2003, Interest charges-other increased over the comparable period, in the prior year due, primarily, to the aforementioned $12.4 million of additional interest costs on terminated contracts, increased amortization of debt discount charges related to the October 2002 debt issuance and increased interest on delayed/terminated contracts. The absence of interest on short-term debt, compared to the same period, in the prior year, partially offset the increase from 2002.

     Interest accrued on deferred energy costs decreased for the three month period ending September 30, 2003, compared to the same period in 2002 due to lower deferred fuel and purchased power balances during 2003. For the nine months ended September 30, 2003, compared to the same period in 2002 the decrease in these charges also followed lower deferred fuel and purchased power balances during 2003, offset partially by the write-off, during the comparable period in 2002, of approximately $2 million of carrying charges, net of taxes, that were disallowed by the PUCN in its May 28, 2002, decision on SPPC’s deferred energy rate case.

     Other income for the three and nine months ended September 30, 2003, decreased compared to the same periods in the prior year due primarily to a decrease in interest income and subsidiary earnings, partially offset by increases in lease revenues and gains recognized from the sale of non-utility property.

     Other expense for the three months and nine months ended September 30, 2003, were comparable to the amounts recognized during the same periods in 2002.

     Income taxes - other income and expense for the three and nine months ended September 30, 2003, were comparable to the amounts recognized during the same periods in 2002.

Analysis of Cash Flows

     SPPC’s cash flows were less during the nine-months ended September 30, 2003, compared to the same period in 2002, resulting primarily from decreases in cash flows from financing and investing activities, and minimally by a slight decrease in cash flows from operating activities. Cash flows from financing activities were lower primarily as a result of the cash provided in 2002 from short-term borrowings, offset partially by no common dividend payments to SPR during 2003. Cash flows from investing activities decreased in 2003 because of additional cash requirements for construction activity during 2003. Cash flows from operating activities decreased slightly due to a prepayment of fuel and energy purchases during 2003 and the receipt of an income tax refund in 2002. The decrease was partially offset by the decrease in wholesale sales to other utilities in 2003.

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Liquidity and Capital Resources

     SPPC had cash and cash equivalents of approximately $83.5 million at September 30, 2003.

     Due to SPPC’s weakened financial condition and, in certain instances, the weakened financial condition of SPPC’s power suppliers, SPPC has been required to pre-pay its power purchases or make more frequent payments on its power deliveries. If SPPC does not have sufficient liquidity to meet its power requirements, SPPC may be required to issue additional indebtedness. If SPPC is unable to issue such indebtedness, whether due to lack of access to the capital markets, lack of regulatory authority to issue such debt, or restrictive covenants in its Term Loan Agreement (see below), its ability to provide power and its financial condition will be adversely affected.

     SPPC’s liquidity would be significantly affected by a requirement to pay the judgment of the Bankruptcy Court overseeing Enron’s bankruptcy proceeding in favor of Enron, a requirement to provide cash collateral in excess of the $11 million SPPC is required to deposit into escrow within 90 days from the order date for Enron’s claims for termination payments under the judgment, or unfavorable rulings by the PUCN in future SPPC rate cases (including terminated power supply contracts). In response to the announcement of the decision of the Bankruptcy Court on August 28, 2003, in favor of Enron, S&P and Moody’s placed SPPC on “credit watch with negative implications” and “negative rating outlook,” respectively. Future downgrades by either S&P or Moody’s could preclude or reduce SPPC’s access to the capital markets and could adversely affect SPPC’s ability to continue to purchase power and fuel. Adverse developments with respect to any one or a combination of the foregoing and regulatory contingencies, as discussed in Note 11, Commitments and Contingencies, could have a material adverse effect on SPPC’s financial condition and liquidity, and could make it difficult for SPPC to continue to operate outside of bankruptcy.

Effect of 2002 Rate Case Decisions

     On March 29 and April 1, 2002, following the decision by the PUCN in NPC’s deferred energy rate case, S&P and Moody’s lowered SPPC’s unsecured debt ratings to below investment grade. On April 23 and 24, 2002, SPPC’s unsecured debt ratings were further downgraded and its secured debt ratings were downgraded to below investment grade. The decision of the PUCN on May 29, 2002, on SPPC’s deferred energy application to disallow $53 million of deferred purchased fuel and power costs accumulated between March 1, 2001, and November 30, 2001, did not result in any further downgrades of SPPC’s securities. As a result of the downgrades, SPPC’s ability to access the capital markets to raise funds is severely limited. Since SPR’s credit ratings were similarly downgraded, SPR’s ability to make capital contributions to SPPC also became severely limited.

     For more detailed discussion of these effects please see SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002.

Accounts Receivable Facility

     On October 29, 2002, SPPC established an accounts receivable purchase facility of up to $75 million. The receivables purchase facility was renewed on October 28, 2003, and expires on October 26, 2004. If SPPC elects to activate the receivables purchase facility, SPPC will sell all of its accounts receivable generated from the sale of electricity and natural gas to customers to its newly created bankruptcy-remote special purpose subsidiary. The receivables sales will be without recourse except for breaches of customary representations and warranties made at the time of sale. The subsidiary will, in turn, sell these receivables to a bankruptcy-remote subsidiary of SPR. SPR’s subsidiary will issue variable rate revolving notes backed by the purchased receivables.

     The agreements relating to the receivables purchase facility contain various conditions to purchase, covenants and trigger events, and other provisions customary in receivables transactions. In additional to customary termination and mandatory repurchase events, the receivables purchase facility may terminate in the event that either SPPC or SPR defaults (1) on the payment of indebtedness, or (2) on the payment of amounts due under a swap agreement, and such defaults aggregate to greater than $10 million and $5 million for SPPC and SPR, respectively. Under the terms of the agreements relating to the receivables purchase facility, SPPC’s facility may not be activated or, if activated, will be terminated in the event of a material adverse change in the condition, operations or business prospects of SPPC. In addition, the agreements contain a limitation on the payment of dividends by SPPC to SPR that is identical to the limitation contained in SPPC’s Term Loan Agreement, described below. SPR has agreed to guaranty SPPC’s performance of certain obligations as a seller and servicer under the receivables purchase facility.

     SPPC has agreed to issue a $75 million General and Refunding Mortgage Bond upon activation of the receivables purchase facility. The full principal amount of the bond would secure certain of SPPC’s obligations as seller and servicer, plus certain interest, fees, and expenses thereon to the extent not paid when due, regardless of the actual amounts owing with respect to the secured obligations. As a result, in the event of a SPPC bankruptcy or liquidation, the holder of the bond securing the receivables purchase facility may recover more on a pro rata basis than the holders of other General and Refunding Mortgage

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securities, who could recover less on a pro rata basis than they otherwise would recover. However, in no event will the holder of the bond recover more than the amount of obligations secured by the bond.

     SPPC intends to use the accounts receivable purchase facility as a back-up liquidity facility and does not plan to activate this facility in the foreseeable future. SPPC may activate the facility within five days upon the delivery of certain customary funding documentation and the delivery of the $75 million General and Refunding Mortgage Bond.

Mortgage Indentures

     SPPC’s First Mortgage Indenture creates a first priority lien on substantially all of SPPC’s properties in Nevada and California. As of September 30, 2003, $505.3 million of SPPC’s first mortgage bonds were outstanding. SPPC agreed in its General and Refunding Mortgage Indenture that it would not issue any additional first mortgage bonds.

     SPPC’s General and Refunding Mortgage Indenture creates a lien on substantially all of SPPC’s properties in Nevada that is junior to the lien of the first mortgage indenture. As of September 30, 2003, $499.3 million of SPPC’s General and Refunding Mortgage bonds were outstanding. Additional securities may be issued under the General and Refunding Mortgage Indenture on the basis of (i) 70% of net utility property additions, (ii) the principal amount of retired General and Refunding Mortgage bonds, and/or (iii) the principal amount of first mortgage bonds retired after April 8, 2002. On the basis of (i), (ii) and (iii) above, as of September 30, 2003, SPPC had the capacity to issue approximately $321.9 million of additional General and Refunding Mortgage securities not including $103 million of General and Refunding mortgage bonds that will be issued into escrow during November 2003 in connection with the Enron litigation. See Note 11 of the Condensed Notes to Consolidated Financial Statements for more information regarding the Enron litigation. Although SPPC has substantial capacity to issue additional General and Refunding Mortgage securities on the basis of property additions and retired securities, the financial covenants contained in SPPC’s Term Loan Agreement and Receivable Purchase Facility Agreements limit the amount of additional indebtedness that SPPC may issue and the reasons for which such indebtedness may be issued. SPPC has reserved $75 million of General and Refunding Mortgage Bonds for issuance upon the initial funding of its receivables purchase facility.

     SPPC also has the ability to release property from the liens of the two mortgage indentures on the basis of net property additions, cash and/or retired bonds. To the extent SPPC releases property from the lien of its General and Refunding Mortgage Indenture, it will reduce the amount of bonds issuable under that indenture.

Covenants

     SPPC’s $100 million Term Loan Agreement, entered into on October 30, 2002, as amended on June 27, 2003, contains two financial maintenance covenants. The first requires that SPPC maintain a ratio of consolidated total debt to consolidated total capitalization at all times during each of the following quarters in an amount not to exceed (i) .650 to 1.0 for the fiscal quarters ended December 31, 2002 through December 31, 2003, (ii) .625 to 1.0 for the fiscal quarters ended March 31, 2004 through December 31, 2004, and (iii) .600 to 1.0 for the fiscal quarter ended March 31, 2005 and for each fiscal quarter thereafter. The second covenant requires that SPPC maintain a consolidated interest coverage ratio for the four consecutive fiscal quarters ending with each of the following fiscal quarters of not less than (i) 1.75 to 1.00 for the fiscal quarters ended December 31, 2002, March 31, 2003, and June 30, 2003, (ii) 1.85 to 1.0 for the fiscal quarter ended September 30, 2003, (iii) 2.00 to 1.0 for the fiscal quarter ended December 30, 2003, (iv) 2.25 to 1.0 for the fiscal quarter ended March 31, 2004, (v) 2.40 to 1.0 for the fiscal quarter ended June 30, 2004, (vi) 2.70 to 1.0 for the fiscal quarter ended September 30, 2004, and (vii) 3.00 to 1.0 for the fiscal quarter ended December 31, 2004 and for each fiscal quarter thereafter. As of September 30, 2003, SPPC was in compliance with these financial covenants. The Term Loan Facility, which is secured by SPPC’s $100 million Series C General and Refunding Mortgage Bond, will expire October 31, 2005.

Cross Default Provisions

     Certain financing agreements of SPPC contain cross-default provisions that would result in an event of default under such financing agreements if there is a failure under other financing agreements of SPPC and SPR to meet payment terms or to observe other covenants that would result in an acceleration of payments due. Most of these default provisions (other than ones relating to a failure to pay other indebtedness) provide for a cure period of 30-60 days from the occurrence of a specified event during which time, SPPC or SPR may rectify or correct the situation before it becomes an event of default. The primary cross-default provisions in SPPC’s various financing agreements are briefly summarized below:

• SPPC’s General and Refunding Mortgage Indenture, under which SPPC has $499.3 million of securities outstanding as of September 30, 2003, provides for an event of default if a matured event of default under SPPC’s First Mortgage Indenture occurs;

• SPPC’s Term Loan Agreement provides for an event of default if (a) SPPC or any of its subsidiaries default (i) in the payment of indebtedness, or (ii) in the payment of amounts due under hedge agreements, and such defaults aggregate to greater than $10 million, or (b) SPPC’s General and Refunding Mortgage Indenture ceases to be enforceable; and

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• SPPC’s receivables purchase facility may terminate in the event that either SPPC or SPR defaults (i) in the payment of indebtedness, or (ii) in the payment of amounts due under hedge agreements, and such defaults aggregate to greater than $10 million and $5 million for SPPC and SPR, respectively.

  Judgment Related Defaults

     SPPC’s $100 million Term Loan Agreement provides for an event of default if a judgment of $10 million or more is entered against SPPC and such judgment is not vacated, discharged, stayed or bonded pending appeal within 30 days. The Term Loan Agreement also prohibits the creation or existence of any liens on SPPC’s properties except for liens specifically permitted under the Term Loan Agreement. If a judgment lien is filed against SPPC, the filing of the lien will trigger an event of default under the Term Loan Agreement. Upon an event of default, the Administrative Agent under the Term Loan Agreement may, upon request of more than 50% of the lenders under the Term Loan Agreement, declare all amounts due under the Term Loan Agreement immediately due and payable. Currently, SPPC has $99.3 million outstanding under its Term Loan facility.

     SPPC’s obligations under the Term Loan Agreement are secured by a General and Refunding Mortgage Bond. If SPPC fails to repay all amounts due upon an acceleration under the Term Loan Agreement within 3 business days, such failure will be deemed a default in the payment of principal and will trigger an event of default under the SPPC General and Refunding Mortgage Indenture that would be applicable to all securities issued under the SPPC General and Refunding Mortgage Indenture.

     In the event that SPPC’s Term Loan is accelerated and results in the acceleration of all amounts outstanding under SPPC’s General and Refunding Mortgage Indenture, SPPC would likely be unable to continue to operate outside of bankruptcy.

     If a judgment lien is created on SPPC’s real property located in Nevada, SPPC has been advised that the judgment lien would be an interceding lien that would have priority over subsequent advances under SPPC’s General and Refunding Mortgage Indenture; therefore, SPPC would be unable to provide certain required opinions of counsel to issue additional securities under its General and Refunding Mortgage Indenture until the judgment lien is discharged and released. Since SPPC is unable to issue additional bonds under its First Mortgage Indenture, its sole means of issuing secured debt is through its General and Refunding Mortgage Indenture. If SPPC is unable to issue additional securities under its General and Refunding Mortgage Indenture in order to raise funds for operations and to repay indebtedness and to provide security, as needed, for its obligations, SPPC would likely be unable to continue to operate outside of bankruptcy.

Limitations on Indebtedness

     The terms of SPPC’s $100 million Credit Facility, which expires October 31, 2005, restrict SPPC from issuing additional indebtedness unless the debt issued is specifically permitted, which includes certain letter of credit indebtedness, certain capital lease obligations, indebtedness incurred to refinance existing indebtedness, certain intercompany indebtedness, certain letters of credit issued to support SPPC’s obligations with respect to energy suppliers, and a limited amount of general indebtedness.

     If SPPC is unable to access the capital markets to issue additional indebtedness to support its operations, including the purchase of fuel and power, and to refinance its existing indebtedness, whether due to lack of access to the capital markets, lack of regulatory authority, or restrictive covenants in its Term Loan Agreement, its ability to provide power and its financial condition will be adversely affected.

Sierra Pacific Resources (Holding Company)

     The Consolidated Statements of Operations of SPR for the nine months ended September 30, 2003, include the operating results of the holding company. The holding company recognized an unrealized loss of $46.1 million on the derivative instrument associated with the issuance of $300 million of convertible notes and higher interest costs of $59.6 million in 2003 compared to $53.8 million in 2002, also due to the issuance of $300 million of convertible notes in February 2003.

Tuscarora Gas Pipeline Company

     The Consolidated Statements of Income of Sierra Pacific Resources include the operating results of Tuscarora Gas Pipeline Company (TGPC), a wholly owned subsidiary of SPR. For the three and nine month periods ended September 30, 2003, TGPC contributed $0.9 million and $2.7 million, respectively, in net income. For the three and nine month periods ended September 30, 2002, TGPC contributed $0.7 million and $2.3 million, respectively, in net income.

e·three

     SPR began negotiations in the second quarter of 2003 to sell two of its subsidiaries, e·three and e·three Custom Energy Solutions, LLC (CES). Accordingly, at June 30, 2003, e·three and CES were reported as discontinued operations. Based on the expected selling price, a pre-tax loss on the disposal of $8.9 million was recognized for the six months ended June 30, 2003. On September 26, 2003, the sale of e·three and CES were completed. As a result of the final sales price, an additional pre-tax loss on disposal of $703,787 was recognized for the three months ended September 30, 2003. See Note 8 of Condensed Notes to Consolidated Financial Statements for additional information.

Sierra Pacific Communications

     The Consolidated Statements of Income of Sierra Pacific Resources include the operating results of Sierra Pacific Communications (SPC), a wholly owned subsidiary of SPR. For the three and nine month periods ended September 30, 2003, SPC incurred net losses of $.8 million and $23.9 million, respectively. SPC incurred net losses of $1.1 million and $2.4 million, respectively, for the three and nine month periods ended September 30, 2002. Included in 2003 net losses for the nine month period is a pre-tax asset impairment charge of $32.9 million. See Note 8 of the Condensed Notes to Consolidated Financial Statements for discussion of the asset impairment charge.

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REGULATORY MATTERS

     The Utilities are subject to the jurisdiction of the PUCN and, in the case of SPPC, the California Public Utility Commission (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 distribution and transmission operations. NPC and SPPC submit integrated resource plans to the PUCN for approval.

     Under federal law, the Utilities and Tuscarora Gas Pipeline Company (TGPC) are 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 Utilities’ sale of electricity for resale and interstate transmission. The FERC also has jurisdiction over the natural gas pipeline companies from which the Utilities take service.

     As a result of regulation, many of the fundamental business decisions of the Utilities, as well as the rate of return they are permitted to earn on their utility assets, are subject to the approval of governmental agencies.

Nevada Matters

     Nevada Power Company 2001 Deferred Energy Case

     On November 30, 2001, NPC filed an application with the PUCN seeking repayment for purchased fuel and power costs accumulated between March 1, 2001, and September 30, 2001, as required by law. The application sought to establish a rate to repay accumulated purchased fuel and power costs of $922 million and spread the recovery of the deferred costs, together with a carrying charge, over a period of not more than three years.

     On March 29, 2002, the PUCN issued its decision on the deferred energy application, allowing NPC to recover $478 million over a three-year period, but disallowing $434 million of deferred purchased fuel and power costs and $30.9 million in carrying charges consisting of $10.1 million in carrying charges accrued through September 2001 and $20.8 million in carrying charges accrued from October 2001 through February 2002. The order stated that the disallowance was based on alleged imprudence in incurring the disallowed costs.

     On April 11, 2002, NPC filed a lawsuit in First District Court of Nevada seeking to reverse portions of the decision of the PUCN denying the recovery of deferred energy costs incurred by NPC on behalf of its customers in 2001 on the grounds that such power costs were not prudently incurred. NPC asserted that, as a result of the PUCN’s decision, NPC’s credit rating was reduced to below investment grade, SPR suffered a reduction in its equity market capitalization of approximately 40% and the disallowed costs are effectively imposed upon SPR’s shareholders. NPC further alleged that the order of the PUCN was: in violation of constitutional and statutory provisions; made upon unlawful procedure; affected by other error of law; clearly erroneous in view of the reliable, probative and substantial evidence on the whole record; arbitrary and capricious, and characterized by abuse of discretion. NPC’s lawsuit requested that the District Court reverse portions of the order of the PUCN and remand the matter to the PUCN with direction that the PUCN authorize NPC to immediately establish rates that would allow NPC to recover its entire deferred energy balance of $922 million, with a carrying charge, over three years.

     Various interveners in NPC’s deferred energy case before the PUCN filed petitions with the PUCN for reconsideration of the PUCN’s order, seeking additional disallowances of between $12.8 million and $488 million. On May 24, 2002, the PUCN issued an order denying any further disallowances and granted NPC the authority to increase the deferred energy cost recovery charge for the month of June 2002 by one cent per kilowatt-hour. This increase accelerated the recovery of the deferred balance by approximately $16 million for the month of June 2002 only.

     On April 28, 2003, the court denied Nevada Power’s request for relief. NPC subsequently asked the court to reconsider its order. NPC’s request for reconsideration was denied on June 16, 2003. NPC filed appropriate notices of appeal with the Nevada Supreme Court on May 29, 2003, and June 16, 2003. The Supreme Court ordered the parties to submit to a settlement conference. The parties met on September 25, 2003, to discuss settlement. The parties then agreed to meet again in late October. In the event a settlement is not achieved, the case will be briefed and argued to the Nevada Supreme Court with a decision expected in late 2004.

Nevada Power Company 2002 Deferred Energy Case

     On November 14, 2002, NPC filed an application with the PUCN seeking repayment for purchased fuel and power costs accumulated between October 1, 2001, and September 30, 2002, as required by law. The application sought to establish a rate to collect accumulated purchased fuel and power costs of $195.7 million, together with a carrying charge, over a period of not more than three years. The application also requested a reduction to the going-forward rate for energy, reflecting reduced wholesale energy costs. The combined effect of these two adjustments resulted in a request for an overall rate reduction of 6.3%.

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        The decision on this case was issued May 13, 2003, and authorized the following:

• recovery of $147.6 million, with a carrying charge, and a $48.1 million disallowance;

• a three-year amortization of the balance commencing on May 19, 2003;

• a reduction in the Base Tariff Energy Rate (BTER) to an effective non-residential rate of $0.04322 per kWh, and an effective residential rate of $0.04186 per kWh.

     The new rates went into effect on May 19, 2003.

     The BCP filed a Petition with the District Court of Clark County, Nevada, for Judicial Review of the PUCN Order on August 8, 2003, against PUCN, Case No. A471928. On September 8, 2003, the PUCN filed its answer to the BCP Petition. The PUCN response cites a number of affirmative defenses to the allegations contained in the BCP petition and asks that the court dismiss the BCP petition. The court has not ruled on this matter.

Nevada Power Company Demand Reduction Programs

     On November 14, 2002, NPC filed an application with the PUCN seeking recovery of expenses incurred in the implementation and operation of programs for energy conservation and load management. In the filing, NPC requested a one-year recovery of approximately $1.9 million. This would result in an average 0.12% increase in NPC’s present rates. NPC asked for this increase to become effective simultaneously with the rate change to be ordered in its 2002 deferred energy case discussed above. The parties to the case subsequently negotiated a settlement agreement, which approved NPC’s request for cost recovery with the exception of a nominal disallowance. The stipulation was approved at the agenda meeting held April 4, 2003. The rate change went into effect on May 19, 2003, coincident with the deferred energy rate change discussed above.

Nevada Power Company 2003 Resource Plan

     On July 1, 2003, NPC filed its 2003 Resource Plan with the PUCN. The Resource Plan was prepared in compliance with Nevada laws and regulations. The Resource Plan was prepared for the 20-year period from 2003 through 2022. The three-year action plan covers calendar years 2004, 2005, and 2006. The 2003 Resource Plan develops a comprehensive, integrated plan that considers customer energy requirements and proposes the resources to meet that requirement in a manner that is consistent with prevailing market fundamentals. The ultimate goal of the plan is to balance the objectives of minimizing costs and reducing volatility while reliably meeting the electric needs of NPC’s customers.

     The 2003 Resource Plan is consistent with Governor Guinn’s 2001 Nevada Energy Protection Plan calling for the increased development of internal power generation to reduce dependence on volatile energy sources outside Nevada. The plan begins the process of taking control of energy supply and demand and reducing the dependence on others in order to provide price stability and electric reliability for customers.

     As a step towards achieving this objective, NPC proposed building an 80 mega watt (MW) combustion turbine at the Harry Allen power plant site with an in-service date prior to the 2006 summer peak and a 520 MW combined cycle generating turbine, also at the Harry Allen power plant site, with a 2007 in-service date. Delivery of the energy from this new generation to NPC’s customers will require a reservation on the Harry Allen-to-Mead 500 kilovolt (kV) transmission line. The construction of this transmission project is required to fulfill existing wholesale transmission contractual obligations to Independent Power Producers located within NPC’s control area.

     The three-year Action Plan describes the actions, specific projects, and budgets that NPC is proposing to implement during calendar years 2004, 2005, and 2006. NPC is seeking approval by the PUCN for the demand and supply side projects described in the plan. This three-year strategy is based on analyses of prevailing market dynamics and supply and demand fundamentals within the energy sector. NPC is therefore seeking PUCN approval of action items, including the following:

• Approval of NPC’s electric load forecast as being a fair representation of expected loads during the 20-year period spanning 2003 through 2022.

• Approval of NPC’s fuels price forecasts as being a fair representation of expected range of prices during the same 2003 through 2022 period.

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•	Approval of NPC’s plan to reserve up to 650 MW of additional native load transmission rights on the Centennial Transmission Project following the construction of the Harry Allen-to-Mead 500 kV transmission line, the third phase of the project.
•	Approval for re-conductoring the 230 kV Mead system that would increase system import by 450 MW at an estimated cost of $24 million.
•	Approval to construct a combustion turbine generating plant at the Harry Allen power plant site prior to the summer peak of 2006 at an estimated cost of $44.1 million.
•	Approval to construct a combined cycle generating plant including duct burners rated at 520 MW. The unit is planned for the Harry Allen power plant site with an in-service date prior to the 2007 summer peak, at a cost of $414.7 million.
•	NPC will submit long-term transmission service requests to other transmission owners for capacity from the Palo Verde region to Mead. Long-term transmission capacity has been unavailable from the Palo Verde region to Mead. These requests will likely result in system impact and facility studies by these transmission owners. NPC is requesting PUCN approval of the estimated $100,000 for the aforementioned studies.
•	Approval to spend $9.2 million, $9.3 million, and $9.3 million for calendar years 2004, 2005, and 2006, respectively, devoted to demand-side programs. The programs were developed in a collaborative effort, based upon input from various interested parties.
•	Approval of the recommended natural gas hedging strategy for 2004.
•	Exemption from the avoided cost filing requirements set forth in Nevada Administrative Code section 704.8783 based upon the use of a competitive bidding process to fill mega watts available to Qualifying Facilities as a result of the renewable energy request for proposal (RFP) and long-term purchase obligation RFP for up to 2,500 MW.
•	Approval for a plant life assessment of NPC’s existing power plants, at a cost of $500,000 per each year of the Three-Year Action Plan.
	In addition, the Action Plan includes the following action items:
•	Issue an RFP for long-term purchase power contracts to fill a substantial portion of remaining capacity requirements expected for 2004-2006. The results of the RFP and any executed contracts will be filed with the PUCN for approval.
•	Issue an RFP to meet the Renewable Energy Portfolio Standard through 2007 as adopted and passed into law by the Nevada State Legislature. NPC proposes to execute the agreements and bring the signed agreements to the PUCN for approval as a compliance item to this plan.

     Intervenor testimony was received on September 19, 2003. PUCN Staff was generally supportive of the plan as filed. Issues raised by intervenors included the Company’s proposed reservation of 650 MW of transmission capacity for future native load uses, the Company’s gas hedging strategy, and the ability to finance the Company’s preferred plan.

     The PUCN conducted hearings on NPC’s Resource Plan on October 16, 2003. The PUCN approved an order on NPC’s Resource Plan on November 12, 2003. In general, the order approved NPC’s various requests made in its filing and also imposed additional requirements for various briefings, and required amendments to the plan if there are delays in the combined cycle units construction, issues with transmission reservations, or difficulties financing the plan. As such, NPC may need to expend up to approximately $500 million prior to the summer of 2007 for the construction and/or acquisition of generation facilities. If NPC is unable to provide this amount with internally generated funds, it may need to access the capital markets to do so. See NPC’s Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources for a discussion of NPC’s financial condition and limitations on NPC’s ability to issue additional indebtedness.

Nevada Power Company 2003 General Rate Case

     Nevada Power Company filed its biennial General Rate Case on October 1, 2003, as required by statute (NRS 704.110(3)). NPC’s analysis and presentation of the costs of providing electric service (exclusive of purchased fuel and purchased power) indicate that it is necessary to increase the revenue requirement for general rates by $142 million annually. Factors supporting the requested revenue increase include, (1) investments in infrastructure of $433 million since the last general rate case, (2) a requested Return on Equity (ROE) of 12.4% and Rate of Return (ROR) of 10.0%, (3) recovery of the costs to merge NPC and Sierra Pacific, (4) recovery of the costs NPC spent on the generation divestiture project, which was cancelled by legislation, (5) a return on the cash balances NPC must maintain to provide continuous service, and (6) increased operating costs.

     NPC is recommending that the Commission authorize a deferred collection of the requested increase so that for nine months commencing April 1, 2004, annualized general revenue would increase $50 million. Beginning January 1, 2005, annualized general revenue would then increase by $92 million plus the amount necessary to return $76 million over the following 15 months. This $76 million is the estimated amount being deferred ($73 million plus interest of $3 million) during the prior nine month period between April 1, 2004 and January 1, 2005. Hearings are scheduled to begin February 3, 2004.

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Sierra Pacific Power Company 2003 Deferred Energy Case

     On January 14, 2003, SPPC filed an application with the PUCN, as required by law, seeking to clear deferred balances for purchased fuel and power costs accumulated between December 1, 2001, and November 30, 2002. The application sought to establish a rate to clear accumulated purchased fuel and power costs of $15.4 million and spread the cost recovery over a period of not more than three years. It also sought to recalculate the rate to reflect anticipated ongoing purchased fuel and power costs. The total rate increase request amounted to 0.01%. The interveners’ testimony was received April 25, 2003, and included proposed disallowances from $34 million to $76 million. Prior to the hearing that was scheduled to begin on May 12, 2003, the parties negotiated a settlement agreement. The agreement included the following provisions:

• A reduction in the current deferred energy balance of $45 million leaving a balance payable to customers of approximately $29.6 million.

• A two-year amortization of the amount payable returning one third of the balance in the first year (approximately $9.9 million), and two thirds of the balance the second year (approximately $19.7 million).

• Discontinue carrying charges on deferred energy balances that SPPC is already collecting from customers and on the $29.6 million amount payable as a result of the agreement.

• Maintain the currently effective Base Tariff Energy Rate.

• SPPC maintains the rights to claim the cost of terminated energy contracts in future deferred filings.

• Parties agreed that with the $45 million reduction the remaining costs for purchasing fuel and power during the test year were prudently incurred and are just and reasonable.

• SPPC and the Bureau of Consumer Protection agreed to file a motion to dismiss the civil lawsuits filed in relation to the 2001 SPPC deferred energy case.

     The agreement was approved by the PUCN at the agenda meeting held on May 19, 2003, and the new rates went into effect on June 1, 2003.

Sierra Pacific Power Company Demand Reduction Programs

     On January 14, 2003, SPPC filed an application with the PUCN seeking recovery of expenses incurred in the implementation and operation of programs for energy conservation and load management. In the filing, SPPC requested a one-year recovery of approximately $0.9 million, which would result in an average 0.12% increase in SPPC’s rates. The parties to the case subsequently negotiated a settlement agreement that is expected to be approved by the PUCN coincident with its 2003 deferred energy ruling. The agreement called for complete recovery of the $0.9 million balance. The agreement, allowing recovery of the entire balance, was signed by all parties and approved at the PUCN’s May 19, 2003, agenda meeting. Rates went into effect June 1, 2003, coincident with the deferred energy rate change discussed above.

Annual Purchased Gas Cost Adjustment (SPPC)

     On May 15, 2003, SPPC filed its annual application for Purchased Gas Cost Adjustment for its natural gas local distribution company. In the application, SPPC asked for an increase of $0.02524 per therm to its Base Purchased Gas Rate (BPGR) and a Balancing Account Adjustment (BAA) credit to customers of $0.04833 per therm to be amortized over two years. This request would result in a decrease of approximately 5% in customer rates.

     In addition, SPPC filed on May 15, 2003, to replace the Variable Rate Mechanism (VRM) component of the Base Tariff General Rate (BTGR) with a new component of $0.00756 per therm. This new adjustment would allow recovery over a 12-month period of a balance, which has accrued in the VRM deferred account. This request would result in an increase of approximately 1% in customer rates. Both of these dockets were consolidated with the docket for the Liquid Petroleum Gas Cost Adjustment below.

     SPPC, the PUCN Staff, and the Bureau of Consumer Protection agreed upon a Stipulation for all three dockets, which was approved by the PUCN Commission on October 1, 2003.

     Overall, rates for SPPC’s natural gas customers decreased by approximately 3%. SPPC agreed to write off $500,000 in its VRM account and the remaining balance of $446,603 will be recovered over a twelve-month period through an increase in the BTGR of $0.00519. The Parties agreed that the new BAA will be amortized over two years with 67% of the balance recovered in the first year, and 33% of the balance recovered in the second year. The BAA rate for the first year will be a credit of $0.06448 per therm. The BAA rate for the second year will be a credit of $0.03176 per therm. A BPGR of $0.66375 per therm was approved, an increase from the previous BPGR of $0.05316 per therm. The new rates were implemented November 1, 2003.

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Liquid Petroleum Gas Cost Adjustment (SPPC)

     On May 15, 2003, SPPC filed an application to adjust rates for its liquid petroleum gas (LPG) distribution company. In the application, SPPC asked for an increase of $0.08513 per therm to its current LPG rate of $0.65952 per therm and requested a new BAA of $0.08864 per therm. The proposed BAA rate would amortize the current balance over three years. This rate request would result in an increase of approximately 18% in customer rates. This docket was consolidated with the annual Purchased Gas Cost Adjustment above.

     The PUCN Commission approved a Stipulation on October 1, 2003, which had been agreed upon by SPPC, the PUCN Staff, and the Bureau of Consumer Protection for this docket along with the Purchased Gas Cost Adjustment and VRM dockets above.

     As a result of the Stipulation, rates for SPPC’s liquefied petroleum gas customers were increased by approximately 27%. The BPGR was increased to $0.78060 per therm and the Parties agreed to amortize the BAA over two years, resulting in a new BAA of $0.09797 per therm.

Senate Bill 8

     Senate Bill 8 recently passed in a Special Session of the Nevada Legislature (SB 8) provides for a modified business tax based upon payroll. Section 187 of SB 8 provides that a public utility may increase its previously approved rates by an amount that is reasonably estimated to produce an amount of revenue equal to the amount of any tax liability incurred by the public utility as a result of the act. Both NPC and SPPC implemented increased rates for recovery of this tax on October 1, 2003.

Customers File to be Served by New Providers under NRS 704B (AB 661)

     AB 661, passed by the Nevada legislature in 2001 and incorporated into Nevada Revised Statutes as NRS 704B, allows commercial and governmental customers with an average demand greater than 1 MW to select new energy suppliers. The Utilities would continue to provide transmission, distribution, metering, and billing services to such customers. NRS 704B requires customers wishing to choose a new supplier to receive the approval of the PUCN and meet public interest standards. In particular, departing customers must secure new energy resources that are not under contract to the Utilities, the departure must not burden the Utilities with increased costs or cause any remaining customers to pay increased costs, and the departing customers must pay their portion of any deferred energy balances. Management believes that those customers securing energy from new energy suppliers may help alleviate the Utilities’ need to access energy from potentially volatile wholesale energy markets. The PUCN adopted regulations prescribing the criteria that will be used to determine if there will be negative impacts to remaining customers or the Utility. Customers wishing to choose a new supplier must provide 180-day notice to the Utilities.

     Thirteen NPC customers have filed applications for departure. These applications total approximately 350 MW of peak load. In twelve of these applications, stipulations have been reached that addressed all issues except treatment of Base Tariff General Rate (BTGR) revenue impacts arising from departure. The PUCN has issued a compliance order for these twelve applications that will allow the customers to depart upon completion of items in the compliance order. Eight of these twelve customers elected not to make compliance filings and will remain full requirements customers of NPC and their applications have lapsed. Several of these eight customers filed notice of their intent to file new applications; however, to date, no new applications have been filed. While four customers made their required compliance filings, the PUCN determined that these customers did not comply with the provisions of their compliance orders. Consequently all of their approvals have been rescinded and, at this time, none of these customers have reapplied for departure. The remaining applicant withdrew their application. At the present time there are no applications pending before the commission.

Regulatory Filing Schedule

     Nevada Power Company will be filing a Deferred Rate Case by November 14, 2003 and Sierra Pacific Power Company will be filing a General Rate Case by December 1, 2003.

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California Matters (SPPC)

     Rate Stabilization Plan

     SPPC serves approximately 44,500 customers in California. On June 29, 2001, SPPC filed with the California Public Utilities Commission (CPUC) a Rate Stabilization Plan, which included two phases. Phase One, which was also filed June 29, 2001, was an emergency electric rate increase of $10.2 million annually or 26%. The increase was applicable to all customers except those eligible for low-income and medical-needs rates and went into effect July 18, 2002.

     Phase Two of the Rate Stabilization Plan was filed with the CPUC on April 1, 2002, and includes a general rate case and requests the CPUC to reinstate the Energy Cost Adjustment Clause, which would allow SPPC to file for periodic rate adjustments to reflect its actual costs for wholesale energy supplies. Phase Two also includes a proposal to terminate the 10% rate reduction mandated by AB 1890, but does not include a performance – based rate-making proposal. This request was for an additional overall increase in revenues of 17.1%, or $8.9 million annually.

     On December 19, 2002, SPPC filed an amendment to the Phase Two application reducing the requested increase by $4.1 million to $4.8 million or 9.2% annually. SPPC agreed to make certain changes to the application and file the amendment following discussions with the CPUC Office of Ratepayer Advocates. In February 2003, the Office of the Ratepayer Advocates (ORA) filed testimony on cost of service proposing to reduce SPPC’s request by $3.2 million resulting in a $1.6 million increase or 3.3%. On March 14, 2003, SPPC filed rebuttal testimony. On March 10, 2003, the ORA filed testimony on revenue allocation and rate design and on April 2, 2003, SPPC and the California Ski Areas Association filed rebuttal testimony. Hearings were held on April 9, 2003. Opening and reply briefs were filed on May 21, 2003, and June 6, 2003, respectively. Also on June 6, 2003, a settlement agreement was filed resolving all issues except rate design, reflecting an increase of $3.02 million or 5.8%. A decision by the CPUC regarding the Energy Cost Adjustment Clause is expected in late 2003.

     California Assembly Bill 1235

     On September 24, 2002, the Governor of California signed into law Assembly Bill 1235 (AB 1235), which allows the transfer of hydroelectric plants along the Truckee River from SPPC to the Truckee Meadows Water Authority (TMWA). AB 1235 effectively amends previous California legislation (AB 6) that prevented private utilities from selling any power plants that provide energy to California customers until 2006. AB 1235 provides an exemption for the four “run-of-the-river” hydroelectric plants that SPPC sold to TMWA as part of the sale of its water business in June 2001.

     On November 9, 2002, SPPC filed an application with the CPUC for authority to sell the four hydroelectric plants. On January 13, 2003, the CPUC issued a ruling that the California Environmental Quality Act applies to this proceeding and SPPC must supplement the application with a certified environmental document. SPPC has begun informal discussions with the CPUC on the environmental issues and cannot yet predict the outcome of this proceeding. On April 17, 2003, the CPUC issued a ruling dismissing the application without prejudice. The decision allows SPPC to re-file the application including an environmental assessment and on September 26, 2003, SPPC filed a new application. That application is currently under review by the CPUC.

FERC Matters (NPC, SPPC)

     In December 2001, the Utilities filed ten wholesale-purchased power complaints with the FERC under Section 206 of the Federal Power Act seeking to reduce prices of certain forward power purchase contracts that the Utilities entered into prior to the price caps established by the FERC during the western United States utility crisis. The Utilities believe the prices under these purchased power contracts are unjust and unreasonable. The Utilities negotiated a settlement with Duke Energy Trading and Marketing, but were unable to reach agreement in bilateral settlement discussions with other respondents.

     The Utilities have already paid the full contact price for all power actually delivered by these suppliers, but are contesting claims made for terminated power suppliers, including those terminated by Enron.

     The Administrative Law Judge (ALJ) overseeing the Utilities’ complaints and proceedings under Section 206 of the Federal Power Act issued an initial decision on December 19, 2002, which stated that the Utilities’ complaints did not meet the public interest standard of proof, which the ALJ believed applied to the reformation of their contracts. NPC, SPPC, and other parties to these proceedings filed Briefs on Exceptions to the ALJ’s initial order with the FERC.

     On June 26, 2003, FERC dismissed the Utilities’ Section 206 complaints on a two-to-one vote essentially finding that the strict public interest standard applied to the case and that the company had failed to satisfy the burden of proof required by that standard. In that order, FERC also determined that it would not deem the order final and conclusive as to any of the Utilities’ liability to Enron for purchase power contracts terminated by Enron. FERC indicated that any challenges to those contracts on the

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basis of market manipulation or fraud would be based on the evidence presented in that proceeding. On July 28, 2003, the Utilities filed a petition for rehearing at the FERC requesting that the FERC either reconsider or rehear the case. The petition cited several grounds for rehearing, including that the public interest standard did not apply but that even if it did apply the Utilities had satisfied that standard as well as the less onerous just and reasonable standard which the Utilities contend does apply to the case. On November 10, 2003, the FERC issued an Order on Requests for Rehearing and Clarification, which has reaffirmed the June 26, 2003 decision (by the same two-to-one margin), which decision now perfects the Utilities’ right to seek judicial review. The Utilities intend to pursue available appeals of this matter. Under applicable statutes, the Utilities may seek judicial review before the United States Court of Appeals for the District of Columbia Circuit or the Ninth Circuit.

     On September 26, 2003, the Bankruptcy Court entered an order granting Enron’s motion for summary judgment on its liquidated damage claim and dismissed the Utilities’ counterclaims. The judgment requires NPC and SPPC to pay approximately $235 million and $103 million, respectively, to Enron for liquidated damages and pre-judgment interest for power not delivered by Enron under power supply contracts terminated by Enron in May 2002 and approximately $17.7 million and $6.7 million, respectively, for power previously delivered to the Utilities. As a result, NPC and SPPC recognized additional contract termination reserves for interest, based on the ordered prejudgment rate of 12%, of $27.8 million and $12.4 million, in the third quarter of 2003, respectively. Also, NPC and SPPC recorded additional contract termination reserves for liquidated damages of $6.6 million and $2.1 million, in the third quarter of 2003, respectively. The courts’ order provides that until paid, the amounts owed by the Utilities will accrue interest post-judgment at a rate of 1.21% per annum. The court’s judgment ordered that all funds be held in escrow pending FERC’s resolution of the Utilities’ petition for rehearing and/or reconsideration on FERC’s June 25, 2003, dismissal of the Utilities’ 206 complaints against Enron. See SPR’s, NPC’s and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002 for additional information regarding the Enron litigation.

     On October 6, 2003, the Utilities filed a new FERC Section 206 complaint against Enron Power Marketing, Inc. (Enron) to prevent Enron from obtaining a final judgment in the Bankruptcy Court case and/or prevent enforcement of any right to collect its termination payments until FERC has had a chance to review the complaint. The new complaint has been designated as docket EL04-1. On October 27, 2003, Enron filed its answer to the Utilities’ complaint and the matter is pending.

     Enron was found by the FERC earlier this year to have unlawfully manipulated the Western energy market, engaging in fraud, deception and other actions that created power market prices that were unjust and unreasonable. Prior and subsequent to the FERC ruling, numerous Enron employees pled guilty to related criminal charges.

     The 206 complaint in EL04-1 asks FERC to issue an order to preserve the status quo by prohibiting Enron from enforcing the termination payment obligations set forth in the judgment until such time as FERC has an opportunity to review the merits of the Utilities’ claims raised in their new FERC Section 206 complaint. The complaint further asks that FERC find that Enron’s actions violated the terms of tariff language rendering Enron unable to collect termination payments; that Enron violated federal law, including the Federal Power Act, and breached FERC’s regulations and power tariffs governing the transactions. In addition, the complaint asks FERC to: (a) assert its jurisdiction over the issue of whether Enron may lawfully claim rights under the power deals to be paid for not providing power that it could not provide anyway; (b) issue an order to preserve the status quo by prohibiting Enron from enforcing the termination payment obligations set forth in the judgment until such time as FERC has an opportunity to review the merits of the Utilities’ claims raised in their new FERC Section 206 complaint; (c) find that the applicable rules to do not permit the sort of maneuver to create a windfall that Enron has attempted; and (d) find that, even if hypothetically Enron is technically entitled to a payment, it is neither equitable nor in the public interest for the Utilities to be required to pay Enron an additional award in excess of $300 million. At this time, NPC and SPPC are unable to predict either the outcome or timing of a decision in this matter.

     On October 8, 2003, the Nevada Attorney General’s office, through its Bureau of Consumer Protection, intervened on behalf of Nevada citizens, joining NPC and SPPC in opposing Enron’s actions through the Bankruptcy Court. On October 29, 2003, United States Senators Reid and Ensign of Nevada also filed an intervention joining NPC and SPPC in opposing Enron’s claims to termination payments.

     For more information regarding the Section 206 proceedings, please see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Regulation and Rate Proceedings – FERC Matters – FERC 206 Complaints, in SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002.

Open Access Transmission Tariff

     On September 27, 2002, the Utilities filed with the FERC a revised Open Access Transmission Tariff (OATT) designated Docket No. ER02-2609-000. The purpose of the filing was to implement changes that are required to implement retail open access in Nevada. The Utilities requested the changes to become effective November 1, 2002, the date retail access was scheduled to commence in Nevada in accordance with provisions of AB 661, passed in the 2001 session of the Nevada Legislature.

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     On October 11, 2002, the Utilities filed with the FERC revised rates, terms, and conditions for ancillary services offered in the OATT designated Docket No. ER03-37-000. On November 25, 2002, FERC combined Docket No. ER02-2609-000 with Docket No. ER03-37-000 and suspended the rates in Docket No. ER03-37-000 for a nominal period and made them effective subject to refund on January 1, 2003. On July 1, 2003, FERC approved the offer of settlement that was filed on May 12, 2003. The Utilities have issued refunds for amounts collected in excess of settlement rates and filed a report of such refunds at the FERC as instructed in the July 1 letter order. The Utilities have not yet received final approval of the refund report.

     Other

     On September 11, 2003, the Utilities filed with the FERC revised rates for transmission service offered by its subsidiary Nevada Power Company under Docket No. ER03-1328. The purpose of the filing is to update rates to reflect recent transmission additions and to improve rate design. FERC issued an order on November 7, 2003, setting rates effective November 10, 2003, subject to refund and setting issues for public hearing.

     The FERC Staff has recommended that certain market participants identified in a Cal ISO report released January 6, 2003, including SPPC, be directed to show cause why their behavior did not constitute gaming in violation of the Cal ISO and Cal PX tariffs. In its report, the Cal ISO indicated that it was unclear as to the reason SPPC received certain revenues in the amount of approximately $6 thousand. SPPC was one of the over 30 market participants included in the Staff’s recommendation. On April 7, 2003, SPR submitted documentation to the FERC demonstrating that SPPC did not engage in gaming in violation of the Cal ISO or Cal PX tariffs, nor in the manipulation of the Western energy market. The Cal ISO revised its report, removing SPPC’s name altogether, but other California parties’ testimony included SPPC’s name for the same transactions. On June 25, 2003, the FERC issued a show cause order allowing SPPC to justify its actions on these same transactions. SPPC is actively pursuing the issue to clear its name in this proceeding and the FERC Trial Staff has filed a motion to dismiss SPPC from the proceedings. The Trial Staff’s motion is pending.

     On July 10, 2003 Pinnacle West Energy Corporation filed a complaint (designated Docket No. EL03-209-000) with the FERC requesting that Nevada Power Company be directed to abide by Section 17.7 of its open access transmission tariff (OATT) and provide it with a one year extension for the commencement of transmission service pursuant to a transmission service agreement (TSA) between Pinnacle West and Nevada Power. On July 18, 2003, Southern Nevada Water Authority (SNWA) filed a similar complaint (designated Docket No. ER03-213-000) requesting the same relief to a TSA between SNWA and Nevada Power. Nevada Power answered both complaints and asserted that if new facilities have been constructed to provide service to a transmission customer, then an extension of the commencement of service can be provided only if the transmission customer pays Nevada Power’s full carrying charges on the newly constructed facilities. On August 21, 2003, in Docket No. ER03-1236-000, Sierra Pacific Power Company and Nevada Power Company filed an amendment to Section 17.7 of the Sierra Pacific Resources Operating Companies’ OATT. The companies assert that the filing is necessary to address requests for an extension of the commencement of service over Nevada Power’s newly constructed Centennial Project. These issues are currently being addressed through FERC settlement procedures.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates and commodity prices. Our primary exposures to market risk are interest rate risk associated with Long-Term Debt, commodity price risk associated with fuel and purchased power contracts, forwards and options held by the Utilities, the credit risk associated with energy and financial service company counterparties from which the Utilities procure fuel and purchase power, and until August 11, 2003, equity price risk associated with SPR’s Convertible Notes.

     Interest Rate Risk

     SPR has evaluated its risk related to financial instruments whose values are subject to market sensitivity, such as fixed and variable rate debt and preferred trust securities obligations. As shown in SPR’s Form 10-K for the year ended December 31, 2002, the fair market value of SPR’s consolidated Long-Term Debt and preferred trust securities was $3.372 billion, as of December 31, 2002. As of September 30, 2003, the fair market value of SPR’s market-sensitive financial instruments had increased approximately 8.58% to $3.661 billion. Fair market value is determined using quoted market price for the same or similar issues or on the current rates offered for debt or preferred obligations of the same remaining maturities.

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Long-Term Debt as of September 30, 2003 (dollars in thousands):

		September 30, 2003
		Expected Maturities Amounts								Weighted Avg Int Rate			Fair Market Value
Expected Maturity Date		NPC (1)		SPPC		SPR (2)		Consolidated		Consolidated			Consolidated
Fixed Rate
	2003	$	4	$	19,103	$	20,315	$	39,422		6.86	%
	2004		130,013		83,400		—		213,413		6.05	%
	2005		15		100,400		300,000		400,415		9.16	%
	2006		15		52,400		—		52,415		6.71	%
	2007		17		2,400		240,218		242,635		7.91	%
Thereafter			1,727,720		759,913		232,277		2,719,911		7.82	%
Total Fixed Rate		$	1,857,784	$	1,017,617	$	792,810	$	3,668,210				$	3,546,231
Variable Rate
2003		$	—	$	—	$	—	$	—
	2004		—		—		—		—
	2005		—		—		—		—
	2006		—		—		—		—
	2007		—		—		—		—
Thereafter			115,000		—		—		115,000		1.74%	(3)
		$	115,000	$	—	$	—	$	115,000				$	115,000
Total		$	1,972,784	$	1,017,616	$	792,810	$	3,783,210				$	3,661,231

     (1)  Included in NPC’s “Thereafter” amount is $188,872 of Preferred Trust Securities, reclassified to Long-Term Debt as the result of the adoption of SFAS No. 150. See Note 4, Long-Term Debt.

     (2)  $142,180 of SPR’s Convertible Notes due 2010 that were presented as current on the June 30, 2003, Form 10Q, have been reclassified, to “Thereafter” following the shareholder vote in August 2003, which gave SPR the ability to settle the conversion of its Convertible Notes entirely in shares rather than partially in cash. See Note 4, Long-Term Debt.

     (3)  Weighted average daily rate for month ended September 30, 2003.

Equity Price Risk

     In connection with SPR’s issuance of its Convertible Notes, the conversion option, until August 11, 2003, was treated as a cash-settled written call option separated from debt and accounted for separately as a derivative instrument in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. The fair market value of the derivative was recorded as a liability in SPR’s financial statements with changes in the fair value of the derivative reported in earnings in the period of the change.

     The fair value of the conversion option derivative is determined using a pricing model that incorporates information and assumptions such as SPR’s stock price, time to expiration, strike price, interest rates, and volatility. The use of different assumptions and variables in the model could have a significant impact on the valuation of the derivative.

     Issue No. 00-19 of the Emerging Issues Task Force of the FASB (“EITF”), “Accounting for Derivative Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” provides for the recording of the fair value of the derivative in equity, if all applicable provisions of EITF Issue No. 00-19 are met. On August 11, 2003, SPR obtained shareholder approval to issue up to 42,736,920 additional shares of SPR’s common stock in lieu of paying the cash payment component upon conversion of the Convertible Notes, which satisfied the provisions of EITF Issue No. 00-19. Accordingly, the fair value of the derivative of $118 million recorded in current liabilities was reclassified to equity on the date of the shareholder vote. In addition, EITF Issue No. 00-19 indicates that subsequent changes in fair value should not be recognized as long as the derivative remains classified in equity. As long as the derivative remains classified in equity, SPR will not mark this instrument to market. Accordingly, no unrealized gains or losses will be recorded in earnings subsequent to August 11, 2003. The previous changes in fair value of the derivative instrument recorded in earnings will not be reversed.

     Based on the closing price of SPR’s common stock at August 11, 2003, of $4.68, the fair value of the conversion option was determined to be approximately $118 at August 11, 2003, and as a result, SPR recorded an unrealized gain of approximately $61.5 million in the quarter ended September 30, 2003. SPR recorded a cumulative net unrealized loss of approximately $46.1 million for the nine month period ending September 30, 2003.

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Commodity Price Risk

     See the Annual Reports on Form 10-K of SPR, NPC, and SPPC for the year ended December 31, 2002, Item 7A, Quantitative and Qualitative Disclosures about Market Risk, Commodity Price Risk, for a discussion of Commodity Price Risk.

Credit Risk

     The Utilities monitor and manage credit risk with their trading counterparties. As of September 30, 2003, the Utilities had outstanding transactions with 38 energy and financial services companies. The Utilities’ credit risk associated with these transactions was approximately $4.1 million as of September 30, 2003. This credit risk represents the difference between the contract price of energy that the Utilities have secured with energy and financial services companies and the higher market prices as of September 30, 2003. In the event that the energy providers were unable to deliver under the contracts, it would be necessary for the Utilities to purchase alternative energy at the higher market price.

ITEM 4. CONTROLS AND PROCEDURES

     SPR, NPC, and SPPC maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), designed to ensure that they are able to collect the information required to be disclosed in the reports they file with the Securities and Exchange Commission (SEC), and to process, summarize, and disclose this information accurately and within the time periods specified in the rules of the SEC. The chief executive officer and chief financial officer of each of SPR, NPC, and SPPC have reviewed and evaluated SPR’s, NPC’s, and SPPC’s disclosure controls and procedures as of September 30, 2003, (the Evaluation Date). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the disclosure controls and procedures of SPR, NPC, and SPPC are effective in bringing to their attention on a timely basis material information relating to SPR, NPC, and SPPC required to be included in periodic filings under the Exchange Act.

     There have not been any significant changes in the internal controls over financial reporting of SPR, NPC, and SPPC that occurred during the quarter ended September 30, 2003, that materially affected, or were reasonably likely to materially affect SPR’s, NPC’s, and SPPC’s internal controls over financial reporting.

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PART II —OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     Refer to Item 3 of SPR’s, NPC’s, and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002, Note 18 to SPR’s consolidated financial statements contained in that report, and Note 11 to SPR’s consolidated financial statements contained in this report for a description of pending legal proceedings. Except as set forth below, there are no additional material legal proceedings or material developments with respect to previously reported proceedings involving SPR, NPC, or SPPC.

Sierra Pacific Resources and Nevada Power Company

     Lawsuit Against Merrill Lynch and Allegheny Energy, Inc.

     On April 2, 2003, SPR and NPC filed a complaint in the U.S. District Court for the District of Nevada against Merrill Lynch & Co., Inc. and Merrill Lynch Capital Services, Inc. (collectively, Merrill Lynch) and Allegheny Energy, Inc., and Allegheny Energy Supply Company, LLC (collectively, Allegheny) seeking actual and punitive damages in excess of $850 million and demanding a jury trial for all claims triable by jury. The complaint alleges that the Merrill Lynch defendants engaged in misrepresentation, suppression and concealment, breach of fiduciary duty, wrongful hiring and supervision of Daniel Gordon, and breach of contract and alleges that both Merrill Lynch and Allegheny engaged in intentional interference with contractual and prospective advantage, conspiracy and racketeering (in violation of Nevada Revised Statutes Section 207.470). The complaint also alleges that the improper behavior of Merrill Lynch and Allegheny was the direct and proximate cause of the March 2002 decision by the PUCN to disallow $180 million of rate adjustments in NPC’s 2001 deferred energy accounting adjustment rate application.

     On June 23, 2003, Merrill Lynch and Allegheny filed motions asking the court to dismiss SPR and NPC’s complaint. Briefing on the motions to dismiss closed on August 12, 2003, and the matter is currently pending. At this time, SPR and NPC are unable to predict either the outcome or timing of a decision in this matter.

     Lawsuit Against Natural Gas Providers

     On April 21, 2003, SPR and NPC filed a complaint in the U.S. District Court for the District of Nevada against natural gas providers El Paso Corporation, El Paso Natural Gas Company, El Paso Merchant Energy Company, El Paso Tennessee Pipeline Company, El Paso Merchant Energy-Gas Company, Sempra Energy, Southern California Gas Company (SoCal), San Diego Gas and Electric Company (SDG&E), Dynegy Holdings, Inc., Dynegy Energy Services, Inc., and Does 1-100, seeking $600 million in total damages. Reliant was added as a defendant in a subsequently filed amended complaint. The amended complaint alleges, among other things, that as a result of the defendants’ conspiracies and fraudulent behavior, SPR and NPC were forced to enter into natural gas purchase contracts “at artificially high, supracompetitive prices.” The amended complaint further states that between 1996 and 2001, certain of the defendants and their subsidiaries conspired, in secret meetings, to decrease competition by restricting the amount of pipeline capacity and fuel available to NPC while other defendants decreased natural gas supplies and drove up prices by illegally withholding pipeline capacity, maintained control over output and prices by manipulating natural gas price indexes, and harmed market competition and the plaintiffs by driving up prices and increasing the volatility of natural gas supplies. SPR and NPC assert (among other things) claims for federal and state antitrust violations, fraud, breach of contract, unjust enrichment, and violation of the state and federal RICO Acts. In September 2003, SoCal, SDG&E, and El Paso Corporation moved to dismiss the amended complaint because of a lack of personal jurisdiction. Reliant moved to compel arbitration. All of the remaining defendants (as well as Reliant, SoCal, and SDG&E) filed motions to dismiss for failure to state a claim. SPR and NPC must respond by November 11, 2003. At this time, SPR and NPC are unable to predict either the outcome or timing of a decision in this matter.

     Disputes with Purchased Power Providers

     In June 2003, El Paso Merchant Energy demanded mediation of its claim for a termination payment arising out of El Paso’s September 25, 2002, termination of all executory purchase power contracts between NPC and El Paso. El Paso claims that under the terms of the contracts, NPC owes El Paso approximately $39 million representing the difference between the contract price and the market price for power to be delivered under all the terminated contracts and the amount remaining unpaid under the contracts for power delivered between May 2002 and October 2002. NPC claims that El Paso owes NPC an amount up to approximately $162 million for undelivered power representing the difference between the replacement price or market price for power to be delivered under all the executory contracts and the contract price for that power. The mediation was unsuccessful, and on July 25, 2003, NPC commenced an action against El Paso Merchant Energy and several of its affiliates in the Federal District Court for the District of Nevada for damages resulting from breach of these purchase power contracts.

     In June 2003, Reliant Energy submitted a comprehensive settlement proposal to NPC proposing a settlement of NPC’s termination payment obligation arising out of Reliant’s May 2002 termination of its purchase power contracts with NPC. NPC denies that it owes Reliant any money under these contracts. Mediation of this claim occurred in 2002 and was not successful.

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Neither party has requested arbitration nor commenced litigation over this dispute, and the parties are continuing discussions. See Note 11 to SPR’s consolidated financial statements contained in this report for additional information regarding Reliant’s claims.

Nevada Power Company and Sierra Pacific Power Company

Enron Litigation

     In 2001, Enron Power Marketing, Inc. (Enron) filed a complaint with the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) against NPC and SPPC (the Utilities) seeking to recover liquidated damages for power supply contracts terminated by Enron in May 2002 and for unpaid power previously delivered to the Utilities (as defined below). The Utilities denied liability on numerous grounds, including deceit and misrepresentation in the inducement (including, but not limited to, misrepresentation as to Enron’s ability to perform) and fraud, unfair trade practices and market manipulation. The Utilities also filed proofs of claims and counterclaims against Enron, for the full amount of the approximately $300 million claimed to be owed and additional damages, as well as for other unspecified damages to be determined during the case as a result of acts and omissions of Enron in manipulating the power markets, wrongful termination of its transactions with the Utilities, and fraudulent inducement to enter into transactions with Enron, among other issues. See SPR’s, NPC’s and SPPC’s Annual Reports on Form 10-K for the year ended December 31, 2002 for additional information regarding the Enron litigation.

     On September 26, 2003, the Bankruptcy Court entered a judgment (the Judgment) in favor of Enron for damages related to the termination of Enron’s power supply agreements with the Utilities. The Judgment requires NPC and SPPC to pay approximately $235 million and $103 million, respectively, to Enron for liquidated damages and pre-judgment interest for power not delivered by Enron under the power supply contracts terminated by Enron in May 2002 and approximately $17.7 million and $6.7 million, respectively, for power previously delivered to the Utilities. The Bankruptcy Court also dismissed the Utilities’ counter-claims against Enron, dismissed the Utilities’ counter-claims against Enron Corp., the parent of Enron, and denied the Utilities’ motion to dismiss or stay the proceedings pending the final outcome of their Federal Energy Regulatory Commission proceedings against Enron. Based on the prejudgment rate of 12%, NPC and SPPC recognized additional interest expense of $27.8 million and $12.4 million, respectively, in contract termination reserves in the third quarter of 2003. Also, NPC and SPPC recorded additional contract termination reserves for liquidated damages of $6.6 million and $2.1 million, respectively, in the third quarter of 2003. The Bankruptcy Court’s order provides that until paid, the amounts owed by the Utilities will accrue interest post-Judgment at a rate of 1.21% per annum.

     In response to the Judgment, the Utilities filed a motion with the Bankruptcy Court seeking a stay pending appeal of the Judgment and proposing to issue General and Refunding Mortgage Bonds as collateral to secure payment of the Judgment. On November 6, 2003, the Bankruptcy Court ruled to stay execution of the Judgment conditioned upon NPC and SPPC posting into escrow $235 million and $103 million, respectively, of General and Refunding Mortgage Bonds plus $281,695 in cash by NPC for prejudgment interest. NPC and SPPC have sufficient regulatory authority from the Public Utilities Commission of Nevada (PUCN) to comply with the Bankruptcy Court’s ruling. Additionally, the Utilities have been ordered to place into escrow $35 million, approximately $24 million and $11 million for NPC and SPPC, respectively, within 90 days from the date of the order, which will lower the principal amount of General and Refunding Mortgage Bonds held in escrow by a like amount. The Bankruptcy Court also ordered that during the duration of the stay, the Utilities (i) cannot transfer any funds or assets other than to unaffiliated third parties for ordinary course of business operating and capital expenses, (ii) cannot pay dividends to SPR other than for SPR’s current operating expenses and debt payment obligations, and (iii) shall seek a ruling from the PUCN to determine whether the cash payments into escrow trigger the Utilities’ rights to seek recovery of such amounts through their deferred energy rate cases. Furthermore, the Bankruptcy Court will review the Utilities’ abilities to provide additional cash collateral within two weeks after the $35 million is posted by NPC and SPPC.

     NPC and SPPC have established reserves, included in their Consolidated Balance Sheets as “Contract termination reserves,” of $235 million and $103 million, respectively, for power supply contracts terminated by Enron and associated interest. Correspondingly, pursuant to the deferred energy accounting provisions of AB 369, included in NPC and SPPC deferred energy balances as of September 30, 2003, is approximately $200 million and $87 million, (which excludes interest costs discussed below) respectively, for recovery in rates in future periods associated with the power supply contracts terminated by Enron. If NPC and SPPC are required to pay part or all of the amounts reserved, the Utilities will pursue recovery of the amounts through future deferred energy filings. To the extent that the Utilities are not permitted to recover any portion of these costs

78

through a deferred energy filing, the amounts not permitted would be charged as a current operating expense. A significant disallowance of these costs by the PUCN could have a material adverse effect on the future financial position, results of operations, and cash flows of SPR, NPC, and SPPC. The Utilities intend to appeal the Judgment of the Bankruptcy Court to the U.S. District Court of New York.

     Through September 30, 2003, interest costs related to the Judgment of $36 million and $16 million for NPC and SPPC, respectively, were charged as interest expense and were not included in their deferred energy balances. If the Utilities are successful in their appeal, amounts previously charged to interest expense would be reversed and recognized in income in the respective period. Similarly amounts for power supply contracts terminated by Enron included in the deferred energy balances would be reversed. If the Utilities are unsuccessful in their appeal, they have not determined whether to seek recovery of the interest costs. The Utilities are unable to predict the outcome of their appeal of the Judgment of the Bankruptcy Court.

     Any requirement to pay the Judgment or to provide cash collateral, in excess of the $35 million the Utilities are required to deposit into escrow, described above, for Enron’s claims for termination payments could adversely affect SPR’s, NPC’s and SPPC’s cash flow, financial condition and liquidity, and could make it difficult for one or more of SPR, NPC or SPPC to continue to operate outside of bankruptcy.

Nevada Power Company

   Morgan Stanley Proceedings

     On September 5, 2002, Morgan Stanley Capital Group (MSCG) initiated an arbitration pursuant to the arbitration provisions in various power supply contracts terminated by MSCG in April 2002. In the arbitration, MSCG requested that the arbitrator compel NPC to pay MSCG $25 million pending the outcome of any dispute regarding the amount owed under the contracts. NPC claimed that nothing is owed under the contracts on various grounds, including breach by MSCG in terminating the contracts, and further, that the arbitrator does not have jurisdiction over NPC’s contract claims and defenses. In March 2003, the arbitrator overseeing the arbitration proceedings dismissed MSCG’s demand for arbitration and agreed that the issues raised by MSCG were not calculation issues subject to arbitration and that NPC’s contract defenses were likewise not arbitrable.

     NPC filed a complaint for declaratory relief in the U.S. District Court for the District of Nevada asking the Court to declare that NPC is not liable for any damages as a result of MSCG’s termination of its power supply contracts. On April 17, 2003, MSCG answered the complaint and filed a counterclaim against NPC at the FERC alleging non-payment of the termination payment in the amount of $25 million. In April 2003 MSCG also filed a complaint against NPC at FERC alleging that NPC should be required to pay MSCG the amount of the claimed termination payment pending resolution of the case. NPC filed a motion to intervene in the FERC action commenced by MSCG and FERC dismissed MSCG’s complaint. NPC is unable to predict the outcome of the District Court complaint.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     A 2003 Special Meeting of the Stockholders of Sierra Pacific Resources was held at 10:00 a.m., Pacific Daylight Time, on Monday, August 11, 2003, at its headquarters located at 6100 Neil Road, Reno, Nevada.

     At the meeting shareholders approved the potential issuance of up to 42,736,920 additional shares of SPR’s Common Stock in lieu of the cash payment component of the conversion price of SPR’s 7.25% Convertible Notes due 2010. Through the close of business February, 14, 2010, each $1,000 principal amount of the Notes are convertible, at SPR’s election, into: (1) 76.7073 shares of Common Stock plus an amount of cash equal to the then market value of 142.4564 shares of our Common Stock, subject to adjustment upon the occurrence of certain dilution events; or (2) 219.1637 shares of our Common Stock, subject to adjustment upon the occurrence of certain dilution events. For further information regarding the terms of the Convertible Notes, see Note 4. Long-Term Debt.

The voting results are shown below:

	For		Withheld		Abstain
Potential 42,736,920 additional share issuance		58,709,590		31,705,421		1,289,876
approval.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits filed with this Form 10-Q:

     Nevada Power Company

Exhibit 4.1	Officer’s Certificate establishing the terms of Nevada Power Company’s 9% General and Refunding Mortgage Notes, Series G. due 2013.
Exhibit 4.2	Form of Nevada Power Company’s 9% General and Refunding Mortgage Notes, Series G. Due 2013.

     Sierra Pacific Power Company

Exhibit 4.3	Officer’s Certificate establishing the terms of Sierra Pacific Power Company’s General and Refunding Mortgage Notes, Series D, due 2004.
Exhibit 4.4	Form of Sierra Pacific Power Company’s General and Refunding Mortgage Notes, Series D, due 2004

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Sierra Pacific Resources, Nevada Power Company, and Sierra Pacific Power Company

Exhibit 10.1	Employment Agreement for Walter M. Higgins
Exhibit 31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)  Reports on Form 8-K:

Form 8-K dated August 8, 2003, filed by SPR, NPC – Item 5, Other Events

     Disclosed, and included as an exhibit, NPC’s press release, dated August 8, 2003, announcing that it will privately offer $350 million principal amount of its General and Refunding Mortgage Notes, Series G, with an anticipated maturity of 10 years.

Form 8-K dated August 11, 2003, filed by SPR, NPC, and SPPC – Item 5, Other Events

     Disclosed, and included as an exhibit, SPR’s press release, dated August 11, 2003, announcing it had received, at a special shareholder meeting, shareholder approval to issue up to 42,736,920 additional shares of SPR’s common stock in lieu of the cash payment component of the conversion price of SPR’s 7.25% Convertible Notes due 2010.

Form 8-K dated August 13, 2003, filed by SPR, NPC – Item 5, Other Events

     Disclosed, and included as an exhibit, NPC’s press release, dated August 13, 2003, announcing it had priced a private offering of $350 million principal amount of its 9% General and Refunding Mortgage Notes, Series G, due 2013.

Form 8-K dated August 28, 2003, filed by SPR, NPC, and SPPC – Item 5, Other Events

     Disclosed, and included as an exhibit, SPR’s press release, dated August 28, 2003, announcing that the Bankruptcy Court for the Southern District of New York rendered a decision in Enron’s bankruptcy proceedings granting Enron Power Marketing Inc.’s motion for summary judgment with respect to Enron’s claims for terminated contracts.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

		Sierra Pacific Resources
		(Registrant)
Date: November 13, 2003	By:	/s/ Richard K. Atkinson
		Richard K. Atkinson Vice President Chief Financial Officer (Principal Financial Officer)
Date: November 13, 2003	By:	/s/ John E. Brown
		John E. Brown Vice President Controller (Principal Accounting Officer)
		Nevada Power Company
		(Registrant)
Date: November 13, 2003	By:	/s/ Richard K. Atkinson
		Richard K. Atkinson Vice President Chief Financial Officer (Principal Financial Officer)
Date: November 13, 2003	By:	/s/ John E. Brown
		John E. Brown Vice President Controller (Principal Accounting Officer)
		Sierra Pacific Power Company
		(Registrant)
Date: November 13, 2003	By:	/s/ Richard K. Atkinson
		Richard K. Atkinson Vice President Chief Financial Officer (Principal Financial Officer)
Date: November 13, 2003	By:	/s/ John E. Brown
		John E. Brown Vice President Controller (Principal Accounting Officer)

81 EX-4.1 3 b48102spexv4w1.txt EX-4.1 OFFICER'S CERTIFICATE NEVADA POWER CO. EXHIBIT 4.1 NEVADA POWER COMPANY OFFICER'S CERTIFICATE August 18, 2003 I, the undersigned officer of Nevada Power Company (the "Company"), do hereby certify that I am an Authorized Officer of the Company as such term is defined in the Indenture (as defined herein). I am delivering this certificate pursuant to the authority granted in the Board Resolutions of the Company dated June 26, 2003, and Sections 1.04, 2.01, 3.01, 4.01(a) and 4.02(b)(i) of the General and Refunding Mortgage Indenture dated as of May 1, 2001, as heretofore amended and supplemented to the date hereof (as heretofore amended and supplemented, the "Indenture"), between the Company and The Bank of New York, as Trustee (the "Trustee"). Section 1(u)(xviii) of this Officer's Certificate sets forth definitions of capitalized terms used herein. Terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Indenture. Regarding the use of the terms "subordinated" and "equally-ranked" herein, see Section 1(u)(i)(D). Based upon the foregoing, I hereby certify on behalf of the Company as follows: 1. The terms and conditions of the Securities described in this Officer's Certificate are as follows (the lettered subdivisions set forth in this Paragraph 1 corresponding to the lettered subdivisions of Section 3.01 of the Indenture): (a) The Securities of the seventh series to be issued under the Indenture shall be designated "9% General and Refunding Mortgage Notes, Series G, due 2013" (the "Series G Notes"). (b) There shall be no limit upon the aggregate principal amount of the Series G Notes that may be authenticated and delivered under the Indenture. The Series G Notes shall be initially authenticated and delivered in the aggregate principal amount of $350,000,000. (c) Interest on the Series G Notes shall be payable to the Persons in whose names such Securities are registered at the close of business on the Regular Record Date for such interest, except as otherwise expressly provided in the form of such Securities attached hereto as Exhibit A. (d) The Series G Notes shall mature and the principal thereof shall be due and payable together with all accrued and unpaid interest thereon on August 15, 2013. (e) The Series G Notes shall bear interest as provided in the form of such Securities attached hereto as Exhibit A. (f) If a Holder of Series G Notes has given wire transfer instructions to the Company prior to the fifth day preceding the related record date (or, in the case of principal or premium, the fifth day preceding the date such principal or premium is due), the Company shall pay all principal, interest and premium and Liquidated Damages (as such term is defined herein), if any, on that Holder's Series G Notes in accordance with such instructions. The Corporate Trust Office of The Bank of New York in New York, New NPC Officer's Certificate (Terms of Note) York shall be the place at which (i) the principal, interest and premium and Liquidated Damages, if any, on the Series G Notes shall be payable (other than payments made in accordance with the first sentence of this paragraph (f)), (ii) registration of transfer of the Series G Notes may be effected, (iii) exchanges of the Series G Notes may be effected and (iv) notices and demands to or upon the Company in respect of the Series G Notes and the Indenture may be served; and The Bank of New York shall be the Security Registrar for the Series G Notes; provided, however, that the Company reserves the right to change, by one or more Officer's Certificates, any such place or the Security Registrar; and provided, further, that the Company reserves the right to designate, by one or more Officer's Certificates, its principal office in Las Vegas, Nevada as any such place or itself or any of its Subsidiaries as the Security Registrar; provided, however, that there shall be only a single Security Registrar for the Series G Notes. (g) Optional Redemption. (i) Optional Redemption. Except as set forth in clause (ii) of this Section 1(g), the Series G Notes shall not be redeemable at the Company's option prior to August 15, 2008. On and after August 15, 2008, the Company may redeem all or a part of the Series G Notes upon not less than 30 nor more than 60 days' notice, at the Redemption Prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, on the Series G Notes redeemed, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

YEAR PERCENTAGE - ------------------- ---------- 2008 104.5% 2009 103.0% 2010 101.5% 2011 and thereafter 100.0%

(ii) Equity Claw-back. Notwithstanding the foregoing, at any time prior to August 15, 2006, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of the Series G Notes at a Redemption Price of 109% of the principal amount, plus accrued and unpaid interest and Liquidated Damages, if any, to the Redemption Date, with the net cash proceeds of any public or private offering of its Equity Interests (other than Disqualified Stock) or a capital contribution to the Company's equity made with net cash proceeds of an offering by Sierra Pacific Resources, provided that at least 65% of the aggregate principal amount of Series G Notes remains outstanding immediately after the occurrence of such redemption (excluding Series G Notes held by the Company and its Subsidiaries); and provided further, that any such redemption shall occur within 120 days of the date of the closing of such offering. (iii) Notice of Redemption. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the Redemption Date to each Holder of Series G Notes to be redeemed at its registered address, except that redemption 2 notices may be mailed more than 60 days prior to a Redemption Date if the notice is issued in connection with a defeasance of the Series G Notes or a satisfaction and discharge of the Series G Notes under the Indenture. Notices of redemption may not be conditional. (iv) Selection of Series G Notes to be Redeemed. In accordance with Section 5.03 of the Indenture, the following method is provided for the selection of Series G Notes to be redeemed and these procedures shall be followed by the Security Registrar in the event of a redemption of the Series G Notes pursuant to the provisions of this Officer's Certificate. If less than all of the Series G Notes are to be redeemed at any time, the Security Registrar shall select Series G Notes for redemption as follows: (A) if the Series G Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Series G Notes are listed; or (B) if the Series G Notes are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the Trustee deems fair and appropriate. No Series G Notes of $1,000 principal amount or less can be redeemed in part. (h) Mandatory Redemption/Redemption at Option of Holders/Offers to Purchase. (i) Mandatory Redemption. (A) Except as provided in Section 1(h)(i)(B) below or Section 1(h)(ii) below, the Company is not required to make mandatory redemption or sinking fund payments with respect to the Series G Notes. (B) Upon the occurrence of the events described below in clauses (1) or (2) of this Section 1(h)(i)(B), the Company shall be required to redeem the Series G Notes immediately, at a Redemption Price equal to 100% of the aggregate principal amount of the Series G Notes plus accrued and unpaid interest and Liquidated Damages, if any, on the Series G Notes to the date of redemption, without further action or notice on the part of the Trustee or the Holders of the Series G Notes: (1) the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (I) commences a voluntary case, (II) consents to the entry of an order for relief against it in an involuntary case, 3 (III) consents to the appointment of a custodian of it or for all or substantially all of its property, (IV) makes a general assignment for the benefit of its creditors, or (V) admits in writing of its inability to pay its debts generally as they become due; or (2) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (I) is for relief against the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (II) appoints a custodian of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (III) orders the liquidation of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days. (ii) Redemption at the Option of the Holders. (A) Upon the occurrence of any of the following events (each a "Triggering Event"): (1) failure for 30 days to pay when due interest on, or Liquidated Damages with respect to, the Series G Notes; (2) failure to pay when due the principal of, or premium, if any, on the Series G Notes; (3) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions described in Sections 1(u)(i), 1(u)(ii) or 1(u)(vi) of this Officer's Certificate (under the headings "Certain Covenants and Definitions--Restricted Payments," "Certain Covenants and Definitions-- 4 Incurrence of Indebtedness and Issuance of Preferred Stock" or "Certain Covenants and Definitions--Merger, Consolidation or Sale of Assets"); (4) failure by the Company or any of its Restricted Subsidiaries for 30 days after notice to comply with the provisions described in Section 1(h)(iii) or (iv) of this Officer's Certificate (under the headings "Offer to Purchase Upon Change of Control" or "Offer to Purchase by Application of Excess Proceeds"); (5) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to comply with any of the other agreements in this Officer's Certificate or the Series G Notes; (6) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the original issue date of the Series G Notes, if that default: (I) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or (II) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $15.0 million or more; (7) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $15.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; or (8) an event of default under the First Mortgage Indenture (other than any such matured event of default which (i) is of similar kind or character to the Triggering Event described in (3) or (5) above and (ii) has not resulted in the acceleration of the securities outstanding under the First Mortgage Indenture); provided, however, that, anything in this Officer's Certificate to the contrary notwithstanding, the waiver or cure of such event of default under the First Mortgage Indenture and the rescission and annulment of the consequences thereof under the First Mortgage Indenture shall constitute a cure of the corresponding Triggering Event and a rescission and annulment of the consequences thereof, 5 the Holders of Series G Notes of at least 25% in principal amount of the Series G Notes then Outstanding may deliver a notice to the Company requiring the Company to redeem the Series G Notes immediately at a Redemption Price equal to 100% of the aggregate principal amount of the Series G Notes plus accrued and unpaid interest and Liquidated Damages, if any, on the Series G Notes to the Redemption Date. (B) The Holders of a majority in aggregate principal amount of the Series G Notes then outstanding by notice to the Company and the Trustee may on behalf of the Holders of all of the Series G Notes waive any existing Triggering Event and its consequences except a continuing Triggering Event related to the payment of interest or Liquidated Damages on, or the principal of, the Series G Notes. (C) In the case of any Triggering Event occurring on or after August 15, 2008 by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Series G Notes pursuant to the provisions of Section 1(g)(i) of this Officer's Certificate relating to redemption at the option of the Company, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the redemption of the Series G Notes at the option of the Holders thereof. If a Triggering Event occurs prior to August 15, 2008, by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Series G Notes prior to August 15, 2008, then the premium specified in Section 1(g)(ii) of this Officer's Certificate shall also become immediately due and payable to the extent permitted by law upon the redemption of the Series G Notes at the option of the Holders thereof. (D) Upon becoming aware of any Triggering Event, the Company shall deliver to the Trustee a statement specifying such Triggering Event. (iii) Offer to Purchase Upon Change of Control. (A) Upon the occurrence of a Change of Control, each Holder of Series G Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder's Series G Notes pursuant to the offer described below (the "Change of Control Offer") on the terms set forth in this Officer's Certificate. In the Change of Control Offer, the Company shall offer an amount in cash (the "Change of Control Payment") equal to 101% of the aggregate principal amount of Series G Notes repurchased plus accrued and unpaid interest and Liquidated Damages, if any, on the Series G Notes repurchased, to Change of Control Payment Date (as defined below). (B) Within ten days following any Change of Control, the Company shall mail a notice to each Holder of Series G Notes stating: (1) the description of the transaction or transactions that constitute the Change of Control, that the Change of Control Offer is being made pursuant to this 6 Section 1(h)(iii), and that all Series G Notes validly tendered and not withdrawn shall be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (3) that any Series G Note not tendered or accepted for payment shall continue to accrue interest and Liquidated Damages, if any; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Series G Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest and Liquidated Damages, if any, after the Change of Control Payment Date; (5) that Holders of Series G Notes electing to have any Series G Notes purchased pursuant to a Change of Control Offer shall be required to surrender the Series G Notes properly endorsed, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Series G Notes properly completed, together with other customary documents as the Company may reasonably request, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders of Series G Notes shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Series G Notes delivered for purchase, and a statement that such Holder of Series G Notes is withdrawing its election to have the Series G Notes purchased; and (7) that Holders of Series G Notes whose Series G Notes are being purchased only in part shall be issued new Series G Notes equal in principal amount to the unpurchased portion of the Series G Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. (C) If any of the Series G Notes subject to a Change of Control Offer are in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the Applicable Procedures of the Depositary applicable to offers to purchase. (D) On the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Series G Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent in immediately available funds an amount equal to the Change of Control Payment in respect of all Series G Notes or portions thereof so tendered and (3) deliver or cause to be 7 delivered to the Trustee the Series G Notes so accepted together with an Officer's Certificate stating the aggregate principal amount of Series G Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Series G Notes so tendered the Change of Control Payment for such Series G Notes, and the Trustee shall promptly authenticate and make available for delivery to each Holder of Series G Notes a new Series G Note equal in principal amount to any unpurchased portion of the Series G Notes surrendered, if any; provided that each such new Series G Note shall be in a principal amount of $1,000 or an integral multiple thereof. Any Series G Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (E) The Change of Control provisions described above that require the Company to make a Change of Control Offer following a Change of Control shall be applicable whether or not any other provisions of this Officer's Certificate are applicable. (F) The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth herein applicable to a Change of Control Offer made by the Company and purchases all Series G Notes validly tendered and not withdrawn under such Change of Control Offer. (iv) Offer to Purchase by Application of Excess Proceeds. (A) In the event that, pursuant to Section 1(u)(v)(D) of this Officer's Certificate (under the heading "Certain Covenants and Definitions--Asset Sales"), the Company shall be required to commence an Asset Sale Offer, it shall make an offer (an "Asset Sale Offer") to all Holders of Series G Notes, and all holders of other Indebtedness that is equally-ranked with the Series G Notes containing provisions similar to those set forth in this Officer's Certificate with respect to offers to purchase or redeem with the proceeds of sales of assets, to purchase the maximum principal amount of the Series G Notes and such other equally-ranked Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Officer's Certificate. If the aggregate principal amount of Series G Notes and other equally-ranked Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Series G Notes and such other equally-ranked Indebtedness to be purchased on a pro rata basis. The Company shall advise the Trustee of such other equally-ranked Indebtedness and the Trustee shall have no duty or responsibility to determine the accuracy or correctness of such advice and shall be fully protected in relying on such advice. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. 8 (B) Any Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Series G Notes required to be purchased pursuant to paragraph (A) above (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Series G Notes validly tendered in response to the Asset Sale Offer. (C) Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to each of the Holders of Series G Notes, with a copy to the Trustee, stating: (1) that the Asset Sale Offer is being made pursuant to this Section 1(h)(iv) and Section 1(u)(v) of this Officer's Certificate (under the heading "Certain Covenants and Definitions--Asset Sales") and the length of time the Asset Sale Offer shall remain open; (2) the Offer Amount, the purchase price and the Purchase Date; (3) that any Series G Note not tendered or accepted for payment shall continue to accrue interest and Liquidated Damages, if any; (4) that, unless the Company defaults in making such payment, any Series G Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest and Liquidated Damages, if any, after the Purchase Date; (5) that Holders of Series G Notes electing to have a Series G Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Series G Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Series G Note properly completed, together with other customary documents as the Company may reasonably request, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Purchase Date; (6) that Holders of Series G Notes shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Series G Notes delivered for purchase, and a statement that such Holder of Series G Notes is withdrawing its election to have the Series G Notes purchased; (7) that, if the aggregate principal amount of Series G Notes surrendered by Holders of Series G Notes exceeds the Offer Amount, the Trustee shall select the Series G Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Trustee so that only Series G Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and 9 (8) that Holders of Series G Notes whose Series G Notes are being purchased only in part shall be issued new Series G Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. (D) If any of the Series G Notes subject to an Asset Sale Offer is in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the Applicable Procedures of the Depositary applicable to offers to purchase. (E) On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Series G Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Series G Notes tendered, and shall deliver to the Trustee an officer's certificate stating that such Series G Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 1(h)(iv). The Paying Agent shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder of Series G Notes an amount equal to the purchase price of the Series G Notes tendered by such Holder of Series G Notes and accepted by the Company for purchase, and the Company shall promptly issue a new Series G Note, and the Trustee, upon written request from the Company, shall authenticate and make available for delivery such new Series G Note to such Holder of Series G Notes, in a principal amount equal to any unpurchased portion of the Series G Note surrendered; provided that each such new Series G Note shall be in a principal amount of $1,000 or an integral multiple thereof. Any Series G Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. (F) The provisions of this Section 1(h)(iv) ("Offer to Purchase by Application of Excess Proceeds") is subject to the provisions of Section 1(u)(xiv) ("Certain Covenants and Definitions--Suspension of Certain Covenants"). (v) Offers to Purchase - General. (A) If the Change of Control Payment Date or Purchase Date is on or after a Regular Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest and Liquidated Damages, if any, shall be paid to the Person in whose name a Series G Note is registered at the close of business on such Regular Record Date, and no additional interest or Liquidated Damages shall be payable to Holders of Series G Notes who tender Series G Notes pursuant to the Change of Control Offer or the Asset Sale Offer. (B) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with a Change of Control Offer or an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations 10 conflict with the Change of Control Offer or Asset Sale Offer provisions of this Officer's Certificate, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control Offer or Asset Sale Offer provisions of this Officer's Certificate by virtue of such conflict. (i) The Series G Notes are issuable only in denominations of $1,000 and integral multiples of $1,000 in excess thereof. (j) Not applicable. (k) Not applicable. (l) Not applicable. (m) See subsection (e) above. (n) Not applicable. (o) Not applicable. (p) Not applicable. (q) Book-entry; Delivery and Form. (i) Form and Dating. The Series G Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Series G Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Series G Note shall be dated the date of its authentication. The Series G Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Series G Notes shall constitute, and are hereby expressly made, a part of this Officer's Certificate, and the Company, by its execution and delivery of this Officer's Certificate, expressly agrees to such terms and provisions and to be bound thereby. However, to the extent any provision of any Series G Note conflicts with the express provisions of this Officer's Certificate or the Indenture, the provisions of this Officer's Certificate or the Indenture, as applicable, shall govern and be controlling. Series G Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend and the "Schedule of Exchanges in the Global Note" attached thereto). Series G Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such aggregate principal amount of the outstanding Series G Notes as shall be specified therein and each shall provide that it 11 shall represent the aggregate principal amount of outstanding Series G Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Series G Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Series G Notes represented thereby shall be made by the Trustee, the Depositary or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 1(q)(v) of this Officer's Certificate. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Bank" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by members of, or Participants, in DTC through Euroclear or Clearstream. (ii) Authentication. The Trustee or an Authenticating Agent shall authenticate by delivery and execution of a Trustee's Certificate of Authentication in the form set forth in Section 2.02 of the Indenture (A) the Series G Notes for original issue on the Issue Date in the aggregate principal amount of $350,000,000 (the "Original Notes"), (B) additional Series G Notes for original issue from time to time after the Issue Date in such principal amounts as may be set forth in a Company Order (such additional Series G Notes, together with the Original Notes, the "Initial Notes") and (C) any Exchange Notes from time to time for issue only in exchange for a like principal amount of Initial Notes, in each case, upon a Company Order, which Company Order shall specify (x) the amount of Series G Notes to be authenticated and the date of original issue thereof, (y) whether the Series G Notes are Initial Notes or Exchange Notes and (z) the amount of Series G Notes to be issued in global form or definitive form. The aggregate principal amount of Series G Notes outstanding at any time may not exceed $350,000,000 plus such additional principal amounts as may be issued and authenticated pursuant to clause (B) of this paragraph, except as provided in Section 1(q)(vii) of this Officer's Certificate. (iii) Security Registrar, Paying Agent and Depositary. The Company initially appoints the Trustee to act as the Security Registrar and Paying Agent for the Series G Notes. Upon the occurrence of an event set forth under Sections 1(h)(i)(B)(1) or 1(h)(i)(B)(2) herein or an Event of Default set forth in Sections 10.01(d) or 10.01(e) of the Indenture, the Trustee shall serve as Paying Agent for the Series G Notes. The Company shall maintain a Place of Payment for the Series G Notes within the City and State of New York pursuant to Section 6.02 of the Indenture. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Trustee has been appointed by DTC to act as Note Custodian with respect to the Global Notes. (iv) Liquidated Damages, if any, to be Held in Trust. 12 Payments of Liquidated Damages, if any, shall be subject to the provisions of Section 6.03 of the Indenture to the same extent as any payments of principal of or premium or interest on the Series G Notes. (v) Transfer and Exchange. (A) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes shall be exchanged by the Company for Definitive Notes if: (1) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary for the Global Notes or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 90 days after the date of such notice from the Depositary or (2) the Company in its sole discretion notifies the Trustee in writing that it elects to cause issuance of the Series G Notes in certificated form. Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 3.06 and 3.09 of the Indenture. Every Series G Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to Sections 3.06 and 3.09 of the Indenture, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Series G Note other than as provided in this Section 1(q)(v)(A), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 1(q)(v)(B), (C) or (F) of this Officer's Certificate. (B) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Officer's Certificate and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs as applicable: (1) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same 13 Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred only to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Security Registrar to effect the transfers described in this Section 1(q)(v)(B)(1). (2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests (other than a transfer of a beneficial interest in a Global Note to a Person who takes delivery thereof in the form of a beneficial interest in the same Global Note), the transferor of such beneficial interest must deliver to the Security Registrar either: (a) both (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (ii) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (b) both (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (ii) instructions given by the Depositary to the Security Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (i) above. Upon an Exchange Offer by the Company in accordance with Section 1(q)(v)(F) of this Officer's Certificate, the requirements of this Section 1(q)(v)(B)(2) shall be deemed to have been satisfied upon receipt by the Security Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon notification from the Security Registrar that all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Officer's Certificate, the Series G Notes and otherwise applicable under the Securities Act have been satisfied, the Trustee shall adjust the principal amount of the relevant Global Notes pursuant to Section 1(q)(v)(H) of this Officer's Certificate. 14 (3) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of clause (2) above and the Security Registrar receives the following: (a) if the transferee shall take delivery in the form of a beneficial interest in the Rule 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (1) thereof; or (b) if the transferee shall take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (2) thereof. (4) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of clause (2) above and: (a) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, is not (i) a broker-dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (b) any such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement; (c) any such transfer is effected by a Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (d) the Security Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in Item (1)(a) thereof; or 15 (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and, in each such case set forth in this subparagraph (d), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (b) or (d) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 1(q)(ii) of this Officer's Certificate, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of beneficial interests transferred pursuant to subparagraph (b) or (d) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (C) Transfer or Exchange of Beneficial Interests for Definitive Notes. (1) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon receipt by the Security Registrar of the following documentation: (a) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in Item (2)(a) thereof; (b) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (1) thereof; (c) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (2) thereof; (d) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in 16 accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(a) thereof; (e) if such beneficial interest is being transferred to an Institutional Accredited Investor or in reliance on any other exemption from the registration requirements of the Securities Act, in either case other than those listed in subparagraphs (b) through (d) above, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and any Opinion of Counsel required by Item (3) thereof, if applicable; (f) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(b) thereof; or (g) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(c) thereof, the Trustee, upon notice of receipt of such documentation by the Security Registrar, shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 1(q)(v)(H) of this Officer's Certificate, and the Company shall execute and the Trustee shall authenticate and make available for delivery to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 1(q)(v)(C) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Security Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall make available for delivery such Definitive Notes to the Persons in whose names such Series G Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 1(q)(v)(C)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. Notwithstanding Sections 1(q)(v)(C)(1)(a) and (c) hereof, a beneficial interest in the Regulation S Global Note may not be (a) exchanged for a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Security Registrar of any certificates required pursuant to Rule 903(c)(3)(B) under the Securities Act or (b) transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to the conditions set forth in clause (a) above or unless the transfer is pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (2) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. Notwithstanding Section 1(q)(v)(C)(1) hereof, a holder of a 17 beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (a) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, is not (i) a broker-dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (b) any such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement; (c) any such transfer is effected by a Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (d) the Security Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in Item (1)(b) thereof; or (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and, in each such case set forth in this subparagraph (d), an Opinion of Counsel in form reasonably acceptable to the Company, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. (3) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon notice by the Security Registrar of satisfaction of the conditions set forth in Section 1(q)(v)(B)(2) of this Officer's Certificate, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 1(q)(v)(H) of this Officer's Certificate, and the Company shall execute and the Trustee shall authenticate and 18 make available for delivery to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 1(q)(v)(C)(3) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Security Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall make available for delivery such Definitive Notes to the Persons in whose names such Series G Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 1(q)(v)(C)(3) shall not bear the Private Placement Legend. A beneficial interest in an Unrestricted Global Note cannot be exchanged for a Definitive Note bearing the Private Placement Legend or transferred to a Person who takes delivery thereof in the form of a Definitive Note bearing the Private Placement Legend. (D) Transfer and Exchange of Definitive Notes for Beneficial Interests. (1) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Series G Note for a beneficial interest in a Restricted Global Note or to transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Security Registrar of the following documentation: (a) if the Holder of such Restricted Definitive Note proposes to exchange such Series G Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in Item (2)(b) thereof; (b) if such Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (1) thereof; (c) if such Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (2) thereof; (d) if such Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(a) thereof; (e) if such Definitive Note is being transferred to an Institutional Accredited Investor or in reliance on any other exemption 19 from the registration requirements of the Securities Act, in either case, other than those listed in subparagraphs (b) through (d) above, a certificate in the form of Exhibit B hereto, including certifications, certificates, and any Opinion of Counsel required by Item (3) thereof, if applicable; (f) if such Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(b) thereof; or (g) if such Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in Item (3)(c) thereof, the Trustee, upon notice of receipt of such documentation by the Security Registrar, shall cancel the Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of subparagraph (a) above, the appropriate Restricted Global Note and, in the case of subparagraph (b) above, the Rule 144A Global Note, and, in the case of subparagraph (c) above, the Regulation S Global Note. (2) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Series G Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (a) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, is not (i) a broker-dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (b) any such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement; (c) any such transfer is effected by a Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (d) the Security Registrar receives the following: (i) if the Holder of such Definitive Notes proposes to exchange such Series G Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in Item (1)(c) thereof; or 20 (ii) if the Holder of such Definitive Notes proposes to transfer such Series G Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and, in each such case set forth in this subparagraph (d), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Definitive Notes are being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. Upon satisfaction of the conditions of any of the subparagraphs in this Section 1(q)(v)(D)(2), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (3) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Series G Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to Sections 1(q)(v)(D)(2)(b) or (d) or the first paragraph of this Section 1(q)(v)(D)(3) at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 1(q)(ii) of this Officer's Certificate, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of beneficial interests transferred pursuant to Sections 1(q)(v)(D)(2)(b) or (d) or the first paragraph of this Section 1(q)(v)(D)(3). (E) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 1(q)(v)(E), the Security Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Security Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Security Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, pursuant to the provisions of this Section 1(q)(v)(E). 21 (1) Restricted Definitive Notes to Restricted Definitive Notes. Restricted Definitive Notes may be transferred to and registered in the name of Persons who take delivery thereof if the Security Registrar receives the following: (a) if the transfer shall be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (1) thereof; (b) if the transfer shall be made pursuant to Rule 903 or Rule 904 of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in Item (2) thereof; and (c) if the transfer shall be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by Item (3) thereof, if applicable. (2) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (a) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the Registration Rights Agreement and the Holder of such Series G Notes, in the case of an exchange, or the transferee, in the case of a transfer, is not (i) a broker-dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (b) any such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement; (c) any such transfer is effected by a Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (d) the Security Registrar receives the following: (i) if the Holder of such Restricted Definitive Notes proposes to exchange such Series G Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in Item (1)(b) thereof; or (ii) if the Holder of such Restricted Definitive Notes proposes to transfer such Series G Notes to a Person who shall take delivery thereof in the form of an 22 Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in Item (4) thereof; and, in each such case set forth in this subparagraph (d), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Restricted Definitive Note is being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. (3) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Series G Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request for such a transfer, the Security Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. Unrestricted Definitive Notes cannot be exchanged for or transferred to Persons who take delivery thereof in the form of a Restricted Definitive Note. (F) Exchange Offer. Upon the occurrence of an Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of (a) an authentication order in accordance with Section 1(q)(ii) of this Officer's Certificate and (b) an Opinion of Counsel opining as to the enforceability of the Exchange Notes and the guarantees thereof, if any, the Trustee shall authenticate (1) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that are not (i) broker-dealers, (ii) Persons participating in the distribution of the Exchange Notes or (iii) Persons who are affiliates (as defined in Rule 144) of the Company and accepted for exchange in such Exchange Offer and (2) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in such Exchange Offer, unless the Holders of such Restricted Definitive Notes shall request the receipt of Definitive Notes, in which case the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of such Restricted Definitive Notes one or more Definitive Notes without the Private Placement Legend in the appropriate principal amount. Concurrent with the issuance of such Unrestricted Global Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and make available for delivery to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (G) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Officer's Certificate. (1) Private Placement Legend. 23 (a) Except as permitted by subparagraph (b) below, each Global Note and each Definitive Note (and all Series G Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR OTHER SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS NOTE IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT SHALL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A INSIDE THE UNITED STATES, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE SECURITY REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND 24 (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE IS COMPLETED AND DELIVERED BY THIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND SHALL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT." (b) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraph (B)(4), (C)(2), (D)(2), (D)(3), (E)(2), (E)(3) or (F) of this Section 1(q)(v) (and all Series G Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (2) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE OFFICER'S CERTIFICATE UNDER THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO ARTICLE III OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 1(q)(v)(A) OF THE OFFICER'S CERTIFICATE UNDER THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 3.09 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY OR ANY SUCCESSOR THERETO." Additionally, for so long as DTC is the Depositary with respect to any Global Note, each such Global Note shall also bear a legend in substantially the following form: "UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY, TO THE COMPANY OR ANY SUCCESSOR THERETO 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 THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), 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." 25 (H) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 3.09 of the Indenture. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Series G Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note, by the Trustee, the Note Custodian or the Depositary at the direction of the Trustee, to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note, by the Trustee, the Note Custodian or by the Depositary at the direction of the Trustee, to reflect such increase. (I) General Provisions Relating to Transfers and Exchanges. (1) To permit registrations of transfers and exchanges, subject to Section 1(q)(v) of this Officer's Certificate, the Company shall execute and, upon the Company's order, the Trustee or an Authenticating Agent shall authenticate Global Notes and Definitive Notes at the Security Registrar's request. (2) All certifications, certificates and Opinions of Counsel required to be submitted to the Security Registrar pursuant to this Section 1(q)(v) to effect a transfer or exchange may be submitted by facsimile. (3) The Trustee and the Security Registrar shall have no obligation or duty to monitor, determine or inquire as to whether any Person is or is not a Person described in clauses (i), (ii) and (iii) of each of Sections 1(q)(v)(B)(4)(a), 1(q)(v)(C)(2)(a), 1(q)(v)(D)(2)(a), 1(q)(v)(E)(2)(a) and 1(q)(v)(F) of this Officer's Certificate or under applicable law (other than the Trust Indenture Act) with respect to any transfer of any interest in any Series G Note (including any transfers between or among Participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. (vi) Outstanding Series G Notes. Notwithstanding the definition of "Outstanding" in Section 1.01 of the Indenture, Series G Notes that the Company, a Subsidiary of the Company or an Affiliate of the Company offers to purchase or acquires pursuant to an offer, exchange offer, tender offer or otherwise shall not be deemed to be owned by the Company, such Subsidiary or such Affiliate until legal title to such Series G Notes passes to the Company, such Subsidiary or such Affiliate, as the case may be. 26 (r) Not applicable. (s) The Series G Notes have not been registered under the Securities Act and may not be offered, sold or otherwise transferred in the absence of such registration or an applicable exemption therefrom. No service charge shall be made for the registration of transfer or exchange of the Series G Notes; provided, however, that the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the exchange or transfer (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 1.06(f), 3.04, 5.06 or 14.06 of the Indenture and Sections 1(h)(iii) and 1(h)(iv) of this Officer's Certificate not involving any transfer). (t) For purposes of the Series G Notes, "Business Day" shall mean any day, other than Saturday or Sunday, on which commercial banks are open for business, including dealings in deposits in U.S. dollars, in New York. (u) Certain Covenants and Definitions. (i) Restricted Payments. (A) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company) or to the Company or a Restricted Subsidiary of the Company; (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Series G Notes, except a payment of interest or principal at the Stated Maturity thereof; or (4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: 27 (1) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment; and (2) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 1(u)(ii)(A) of this Officer's Certificate (under the heading "Incurrence of Indebtedness and Issuance of Preferred Stock"); and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the original issue date of the Series G Notes (excluding Restricted Payments permitted by clauses 1(u)(i)(B)(2), 1(u)(i)(B)(3) and 1(u)(i)(B)(4)), is less than the sum, without duplication, of: (a) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the original issue date of the Series G Notes to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (b) 100% of the aggregate net cash proceeds received by the Company (including the fair market value of any Permitted Business or assets used or useful in a Permitted Business to the extent acquired in consideration of Equity Interests (other than Disqualified Stock) of the Company) since the original issue date of the Series G Notes as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock and other than sales to a Restricted Subsidiary of the Company) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Disqualified Stock or debt securities sold to a Subsidiary of the Company), plus (c) to the extent that any Restricted Investment that was made after the original issue date of the Series G Notes is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment, plus 28 (d) to the extent that any Unrestricted Subsidiary of the Company is redesignated as a Restricted Subsidiary after the original issue date of the Series G Notes, the lesser of (i) the fair market value of the Company's Investment in such Subsidiary as of the date of such redesignation and (ii) the fair market value of the Company's Investment in such Subsidiary as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary. (B) Notwithstanding the foregoing, this Section 1(u)(i) shall not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of the dividend, if at the date of declaration the dividend payment would have complied with the provisions of this Officer's Certificate; (2) the redemption, repurchase, retirement, defeasance or other acquisition of Indebtedness of the Company or any Subsidiary Guarantor that is subordinate or junior in right of payment or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause 1(u)(i)(A)(3)(b); (3) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis; (5) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription agreement, stock option agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $1.5 million in any twelve-month period; (6) the payment of any distribution by a Trust Preferred Vehicle to holders of such trust's preferred beneficial interests, to the extent such distribution does not exceed the amount that is contemporaneously received by such trust as a payment of interest at its Stated Maturity on the subordinated Indebtedness of the Company held by such trust; (7) payments to Sierra Pacific Resources to enable Sierra Pacific Resources to pay its reasonable fees and expenses (including but not limited to, interest 29 on Sierra Pacific Resources' Indebtedness and payment obligations on account of Sierra Pacific's Premium Income Equity Securities) incurred in the ordinary course of business, which fees and expenses shall not be greater than $60.0 million for any one calendar year; provided that (a) any such payment complies with any regulatory restrictions then applicable to the Company and (b) the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which any such payment is made was at least 1.75 to 1; and (8) other Restricted Payments in an aggregate amount since the original issue date of the Series G Notes not to exceed $25.0 million; provided that, with respect to clauses (2), (3), (5), (7) and (8) above, no Default or Event of Default shall have occurred and be continuing immediately after such transaction. (C) The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $25.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officer's Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 1(u)(i) ("Restricted Payments") were computed, together with a copy of any fairness opinion or appraisal required under this Officer's Certificate. The Trustee shall have no duty or responsibility to determine the accuracy or correctness of this calculation and shall be fully protected in relying on such Officer's Certificate. The Trustee shall make such fairness opinion available for inspection by Holders of Series G Notes upon reasonably prior written request during regular business hours. (D) For purpose of clarification of the terms "subordinated" and "equally-ranked" as used in this Officer's Certificate, no Indebtedness of the Company shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being secured on a junior basis or by virtue of being unsecured. All Indebtedness that is not subordinated Indebtedness shall be equally-ranked to the Series G Notes. (E) The provisions of this Section 1(u)(i) ("Restricted Payments") is subject to the provisions of Section 1(u)(xiv) ("Certain Covenants and Definitions--Suspension of Certain Covenants"). 30 (ii) Incurrence of Indebtedness and Issuance of Preferred Stock. (A) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and its Subsidiary Guarantors may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. (B) Notwithstanding the foregoing, this Section 1(u)(ii) shall not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by the Company pursuant to this clause (1) of additional Indebtedness and letters of credit under one or more Credit Facilities (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company thereunder), together with the principal component of amounts outstanding under Qualified Receivables Transactions, in an aggregate amount up to $250.0 million at any time outstanding; (2) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (3) the incurrence by the Company of Indebtedness represented by the Series G Notes to be issued on the original issue date of the Series G Notes (and the related Exchange Notes to be issued pursuant to the Registration Rights Agreement) and the incurrence by any Subsidiary Guarantor of a Subsidiary Guarantee of those Series G Notes (and the related Exchange Notes); (4) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Subsidiary Guarantor, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred 31 pursuant to this clause (4), not to exceed $20.0 million at any time outstanding; (5) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was incurred under Section 1(u)(ii)(A) or clauses (2), (3) (5) or (12) of this Section 1(u)(ii)(B); (6) the incurrence by the Company or any of its Restricted Subsidiaries (other than a Receivables Entity) of intercompany Indebtedness between or among the Company or any of its Restricted Subsidiaries (other than a Receivables Entity); provided, however, that: (a) if the Company is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Series G Notes; (b) if a Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of such Subsidiary Guarantor's Subsidiary Guarantee; and (c) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations; (8) the guarantee by the Company or any Restricted Subsidiary of Indebtedness of the Company or any Restricted Subsidiary that was permitted to be incurred by another provision of this Section 1(u)(ii) ("Incurrence of Indebtedness and Issuance of Preferred Stock"); (9) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of such Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 1(u)(ii) ("Incurrence of Indebtedness and Issuance of Preferred Stock"); provided, in each such case, that the amount thereof is included in the Fixed Charges of the Company as accrued; 32 (10) Indebtedness in respect of bid, performance or surety bonds issued for the account of the Company or any Restricted Subsidiary thereof in the ordinary course of business, including guarantees or obligations of the Company or any Restricted Subsidiary thereof with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed); (11) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt; provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (11); (12) the incurrence by the Company of additional Indebtedness consisting of securities issued pursuant to the Indenture in respect of claims relating to the Company's obligations pursuant to agreements with gas, electric power and other energy suppliers that have been terminated as of the original issue date of the Series G Notes; (13) the incurrence by the Company or any Restricted Subsidiary of additional Indebtedness consisting of letters of credit for purposes of supporting the Company's or any Restricted Subsidiary's obligations now or hereafter owing to gas, electric power or other energy suppliers, not to exceed $20.0 million at any time outstanding; (14) the issuance by the Company of up to $125.0 million of Securities issued pursuant to the Indenture in connection with a Qualified Receivables Transaction; (15) the issuance by a Receivables Entity of a Purchase Money Note in connection with a Qualified Receivables Transaction; (16) the incurrence by the Company of additional Indebtedness to finance capital expenditures incurred pursuant to the Company's 2003 Resource Plan as approved under order by the Public Utilities Commission of Nevada or mandated by statute or by one or more federal or state regulatory authorities, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (16); and (17) the incurrence by the Company or any Restricted Subsidiary of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable), including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (17), not to exceed $40.0 million at any time outstanding. 33 (C) Notwithstanding the foregoing, the Company shall not issue any additional First Mortgage Bonds, except as necessary to replace any mutilated, lost or destroyed First Mortgage Bonds or to effect exchanges and transfers of First Mortgage Bonds. (D) The Company shall not incur any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the Series G Notes on substantially identical terms; provided, however, that no Indebtedness of the Company shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being secured on a junior basis or by virtue of being unsecured. (E) For purposes of determining compliance with this Section 1(u)(ii) ("Incurrence of Indebtedness and Issuance of Preferred Stock"): (1) in the event that an item of proposed Indebtedness, including Acquired Debt, meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (17) above, or is entitled to be incurred pursuant to the first paragraph of this Section 1(u)(ii), the Company shall be permitted to classify (or later classify or reclassify such Indebtedness, in whole or in part in its sole discretion) such item of Indebtedness in any manner that complies with this Section 1(u)(ii); and (2) for the purposes of determining compliance with any dollar-denominated restriction on the incurrence of Indebtedness denominated in a foreign currency, the dollar-equivalent principal amount of such Indebtedness incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in effect on the date that such Indebtedness was incurred. (F) The provisions of this Section 1(u)(ii) ("Incurrence of Indebtedness and Issuance of Preferred Stock") is subject to the provisions of Section 1(u)(xiv) ("Certain Covenants and Definitions--Suspension of Certain Covenants"). (iii) Series G Liens. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or otherwise cause or suffer to exist or become effective any Series G Lien of any kind securing Indebtedness, Attributable Debt or trade payables on any of their property or assets, now owned or hereafter acquired, except Series G Permitted Liens. (iv) Dividend and Other Payment Restrictions Affecting Subsidiaries. (A) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: 34 (1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to Company or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. (B) Notwithstanding the foregoing, this Section (1)(u)(iv) shall not apply to encumbrances or restrictions existing under or by reason of: (1) agreements governing Existing Indebtedness and Credit Facilities or Qualified Receivables Transactions as in effect on the original issue date of the Series G Notes and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the original issue date of the Series G Notes; (2) the Indenture, this Officer's Certificate and the Series G Notes; (3) applicable law; (4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Officer's Certificate to be incurred; (5) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (6) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause 1(u)(iv)(A)(3); (7) any Purchase Money Note or other Indebtedness or contractual requirements incurred with respect to a Qualified Receivables Transaction 35 relating exclusively to a Receivables Entity that, in the good faith determination of the Board of Directors, are necessary to effect such Qualified Receivables Transaction; (8) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions or dispositions of assets by that Restricted Subsidiary pending its sale or other disposition; (9) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (10) Series G Liens securing Indebtedness otherwise permitted to be incurred under the provisions of Section 1(u)(iii) of this Officer's Certificate ("Series G Liens") that limit the right of the debtor to dispose of the assets subject to such Series G Liens; and (11) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business. (C) The provisions of this Section 1(u)(iv)("Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries") is subject to the provisions of Section 1(u)(xiv)("Certain Covenants and Definitions--Suspension of Certain Covenants"). (v) Asset Sales. (A) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; (2) the fair market value is determined by the Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officer's Certificate delivered to the Trustee; and (3) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash. For purposes of this provision, each of the following shall be deemed to be cash: (a) any liabilities, as shown on the Company's or such Restricted Subsidiary's most recent balance sheet, of the Company or any 36 Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the notes) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability; and (b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are contemporaneously, subject to ordinary settlement periods, converted by the Company or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion. (B) Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply those Net Proceeds at its option: (1) to repay senior secured Indebtedness of the Company; (2) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business; (3) to make a capital expenditure; or (4) to acquire other long-term assets that are used or useful in a Permitted Business. (C) Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Officer's Certificate. (D) Any Net Proceeds from Asset Sales that are not applied or invested as provided in Section 1(u)(v)(B) shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $25.0 million, the Company shall make an Asset Sale Offer pursuant to the provisions of Section 1(h)(iv) of this Officer's Certificate. (E) To the extent that any Asset Sale constitutes the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole, such transaction shall be governed by the provisions of this Officer's Certificate in Sections (1)(h)(iii) and (1)(u)(vi) (under the heading "Offer to Purchase Upon a Change of Control" and the heading "Certain Covenants and Definitions--Merger, Consolidation or Sale of Assets") and not by the provisions of this Section 1(u)(v) or Section 1(h)(iv) of this Officer's Certificate. (vi) Merger, Consolidation or Sale of Assets. (A) The Company shall not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the 37 properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless: (1) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation organized or existing under the laws of the United States, any state of the United States or the District of Columbia; (2) (a) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Company under the Series G Notes, the Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee; and (b) such Person executes and delivers to the Trustee a supplemental indenture that contains a grant, conveyance, transfer and mortgage by such Person confirming the lien of the Indenture on the property subject to such lien and subjecting to such lien all property thereafter acquired by such Person that shall constitute an improvement, extension or addition to the property subject to the lien of the Indenture or renewal, replacement or substitution of or for any part thereof and, at the election of such Person, subjecting to the lien of the Indenture such other property then owned or thereafter acquired by such Person as such Person shall specify; (3) immediately after such transaction no Default or Event of Default exists; (4) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition has been made shall, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 1(u)(ii)(A) of this Officer's Certificate (under the heading "Incurrence of Indebtedness and Issuance of Preferred Stock"); provided, however, that this clause (4) shall be suspended during any period in which the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants; and (5) the Company, or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition has been made, shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such transaction and any supplemental indenture entered into in connection therewith complies with all of the 38 terms of this Section 1(u)(vi) and that all conditions precedent provided for in this Section 1(u)(vi) relating to such transaction or series of transactions have been complied with. (B) In addition, the Company may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. Clauses (4) and (5) under Section 1(u)(vi)(A) shall not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of its Restricted Subsidiaries. (C) In addition, the Company shall not effect any consolidation, merger, sale, assignment, transfer, conveyance or other disposition as is contemplated in this Section 1(u)(v), unless the Company also complies with Sections 13.01 and 13.02 of the Indenture and the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made, shall be deemed a Successor Corporation under the Indenture. (vii) Transactions with Affiliates. (A) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless: (1) the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (2) the Company delivers to the Trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, a resolution of the Board of Directors set forth in an Officer's Certificate certifying that such Affiliate Transaction complies with this Section 1(u)(vii) and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $20.0 million, an opinion as to the fairness to the Holders of Series G Notes of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. 39 (B) The following items shall not be deemed to be Affiliate Transactions and, therefore, shall not be subject to the provisions of Section 1(u)(vii)(A) above: (1) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary; (2) transactions between or among the Company and/or its Restricted Subsidiaries (other than a Receivables Entity); (3) transactions with a Person that is an Affiliate of the Company solely because the Company owns an Equity Interest in such Person; (4) payment of reasonable directors fees to Persons who are not otherwise Affiliates of the Company; (5) sales of Equity Interests (other than Disqualified Stock) to Affiliates of the Company; (6) Permitted Investments pursuant to this Officer's Certificate and Restricted Payments that are permitted by the provisions of this Officer's Certificate in Section 1(u)(i) (under the heading "Restricted Payments"); (7) fees and compensation paid to and indemnity provided on behalf of directors, officers or employees of the Company or any Restricted Subsidiary of the Company in the ordinary course of business; (8) transactions pursuant to any agreement in effect on the date of this Officer's Certificate as the same may be amended from time to time in any manner not materially less favorable to the Holders of the Series G Notes; (9) loans or advances to officers, directors and employees of the Company or any Restricted Subsidiary made in the ordinary course of business, consistent with past practices of the Company and/or its Restricted Subsidiaries and in compliance with applicable law in an aggregate amount not to exceed $1.0 million outstanding at any one time; and (10) sales or other transfers or dispositions of accounts receivable and other related assets customarily transferred in an asset securitization transaction involving accounts receivable to a Receivables Entity in a Qualified Receivables Transaction, and acquisitions of Permitted Investments in connection with a Qualified Receivables Transaction. (C) The provisions of this Section 1(u)(vii) ("Transactions with Affiliates") is subject to the provisions of Section 1(u)(xiv) ("Certain Covenants and Definitions--Suspension of Certain Covenants"). (viii) Designation of Restricted and Unrestricted Subsidiaries. 40 (A) The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default; provided that in no event shall the business currently operated by the Company be transferred to or held by an Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary properly designated shall be deemed to be an Investment made as of the time of the designation and shall reduce the amount available for Restricted Payments under Section 1(u)(i)(A) of this Officer's Certificate (under the heading "Restricted Payments"). That designation shall only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. (B) The Board of Directors may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (1) such Indebtedness is permitted under Section 1(u)(ii) of this Officer's Certificate (under the heading "Incurrence of Indebtedness and Issuance of Preferred Stock"), calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation. (C) The provisions of this Section 1(u)(viii) ("Designation of Restricted and Unrestricted Subsidiaries") is subject to the provisions of Section 1(u)(xiv) ("Certain Covenants and Definitions--Suspension of Certain Covenants"). (ix) Future Subsidiary Guarantees. (A) The Company shall not permit any Restricted Subsidiary to guarantee the payment of any Indebtedness of the Company unless: (1) such Restricted Subsidiary simultaneously executes and delivers to the Trustee a Subsidiary Guarantee of such Restricted Subsidiary except that with respect to a Guarantee of Indebtedness of the Company if such Indebtedness is by its express terms subordinated in right of payment to the Series G Notes, any such Guarantee of such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Restricted Subsidiary's Subsidiary Guarantee with respect to the Series G Notes substantially to the same extent as such Indebtedness is subordinated to the Series G Notes; (2) such Restricted Subsidiary waives and shall not in any manner whatsoever claim or take the benefit or advantage of, any rights or reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee of the Series G Notes; and 41 (3) such Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that (a) such Subsidiary Guarantee has been duly executed and authorized and (b) such Subsidiary Guarantee constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity; provided that this Section 1(u)(ix)(A) shall not be applicable to any Guarantee of any Restricted Subsidiary that (x) existed at the time such Person became a Restricted Subsidiary of the Company and (y) was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary of the Company. (B) Notwithstanding the foregoing and the other provisions of this Officer's Certificate, in the event a Subsidiary Guarantor is sold or disposed of (whether by merger, consolidation, the sale of its Capital Stock or the sale of all or substantially all of its assets (other than by lease) and whether or not the Subsidiary Guarantor is the surviving corporation in such transaction) to a Person which is not the Company or a Restricted Subsidiary of the Company (other than a Receivables Entity), such Subsidiary Guarantor shall be released from its obligations under its Subsidiary Guarantee if: (1) the sale or other disposition is in compliance with the applicable provisions of this Officer's Certificate, including Sections 1(h)(iv) of this Officer's Certificate (under the heading "Offer to Purchase by Application of Excess Proceeds"); and (2) the Subsidiary Guarantor is also released or discharged from its obligations under the Guarantee which resulted in the creation of such Subsidiary Guarantee, except by or as a result of payment under such Guarantee. (x) Sale and Leaseback Transactions. (A) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that the Company or any Restricted Subsidiary may enter into a sale and leaseback transaction if: (1) the Company or that Restricted Subsidiary, as applicable, could have incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction under the Fixed Charge Coverage Ratio test in Section 1(u)(ii)(A) of this Officer's Certificate (under the heading "Incurrence of Indebtedness and Issuance of Preferred Stock"); (2) the gross cash proceeds of that sale and leaseback transaction are at least equal to the fair market value, as determined in good faith by the Board of Directors and set forth in an Officer's Certificate delivered to the Trustee, 42 of the property that is the subject of that sale and leaseback transaction; and (3) the transfer of assets in that sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, Section 1(h)(iv) of this Officer's Certificate (under the heading "Offer to Purchase by Application of Excess Proceeds"); provided, however, that the foregoing clauses (1) and (3) shall be suspended during any period in which the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants. (xi) Business Activities. (A) The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Subsidiaries taken as a whole. (B) The provisions of this Section 1(u)(xi) ("Business Activities") is subject to the provisions of Section 1(u)(xiv) ("Certain Covenants and Definitions--Suspension of Certain Covenants"). (xii) Payments for Consent. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Series G Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Officer's Certificate or the Series G Notes unless such consideration is offered to be paid and is paid to all Holders of the Series G Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. (xiii) Reports. (A) Whether or not required by the Commission, so long as any Series G Notes are outstanding, the Company shall make available to the Holders of Series G Notes, within the time periods specified in the Commission's rules and regulations (as if required): (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the certifications that would be required by Rule 13a-14 under the Exchange Act and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants; and 43 (2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. (B) If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company. In addition, whether or not required by the Commission, the Company shall file a copy of all of the information and reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission shall not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company has agreed that, for so long as any Series G Notes remain outstanding, they shall furnish to the Holders of Series G Notes and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. (xiv) Suspension of Certain Covenants. (A) During any period of time that the notes have an Investment Grade Rating from both of the Rating Agencies and no Default or Event of Default has occurred and is continuing under the Indenture, the Company and its Restricted Subsidiaries shall not be subject to the following provisions of this Officer's Certificate: Section 1(h)(iv), Section 1(u)(i), Section 1(u)(ii), Section 1(u)(iv), Section 1(u)(v), Section 1(u)(vii), Section 1(u)(viii) and Section 1(u)(xi) (under the headings: "Mandatory Redemption/Redemption at Option of Holders/Offers to Purchase--Offer to Purchase by Application of Excess Proceeds," "Certain Covenants and Definitions--Restricted Payments," "Certain Covenants and Definitions--Incurrence of Indebtedness and Issuance of Preferred Stock," "Certain Covenants and Definitions--Dividend and Other Payment Restrictions Affecting Subsidiaries," "Certain Covenants and Definitions--Asset Sales," "Certain Covenants and Definitions--Transactions with Affiliates," "Certain Covenants and Definitions--Designation of Restricted and Unrestricted Subsidiaries," and "Certain Covenants and Definitions--Business Activities") (collectively, the "Suspended Covenants"); provided, however, that the provisions in Section 1(h)(iii), Section 1(u)(iii), Section 1(u)(vi) (except as set forth in that Section 1(u)(vi)), Section 1(u)(ix) (except as set forth in that Section 1(u)(ix), Section 1(u)(x), Section 1(u)(xii) (except as set forth in that Section 1(u)(xii)) and Section 1(u)(xiii) (under the headings "Mandatory Redemption/Redemption at Option of Holders/Offers to Purchase--Offer to Purchase Upon Change of Control," "Certain Covenants and Definitions--Liens," "Certain Covenants and Definitions--Merger, Consolidation or Sale of Assets" (except as set forth thereunder), "Certain Covenants and Definitions--Future Subsidiary Guarantees" (except as set forth thereunder), "Certain Covenants and Definitions--Sale and Leaseback 44 Transactions" (except as set forth thereunder), "Certain Covenants and Definitions--Payments for Consent," and "Reports") of this Officer's Certificate shall not be so suspended. (B) If the Company and its Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the preceding Section 1(xiv)(A) and, subsequently, either of the Rating Agencies withdraws its ratings or downgrades the ratings assigned to the Series G Notes below the Investment Grade Ratings so that the Series G Notes do not have an Investment Grade Rating from both Rating Agencies, or a Default or Event of Default (other than with respect to the Suspended Covenants) occurs and is continuing, the Company and its Restricted Subsidiaries shall thereafter again be subject to the Suspended Covenants, subject to the terms, conditions and obligations set forth in this Officer's Certificate (each such date of reinstatement being the "Reinstatement Date"), including the preceding Section 1(xiv)(A). Compliance with the Suspended Covenants with respect to Restricted Payments made after the Reinstatement Date shall be calculated in accordance with the terms of Section 1(u)(i) of this Officer's Certificate (under "Certain Covenants and Definitions--Restricted Payments") as though such covenant had been in effect during the entire period of time from which the Series G Notes are issued, provided, however, that no immediate Default or Event of Default shall occur as a result of such reinstatement of the Suspended Covenants. (xv) Covenant Defeasance. (A) Option to Effect Covenant Defeasance. The Company may, at the option of the Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have Section 1(u)(xv)(B) hereof be applied to all outstanding Series G Notes upon compliance with the conditions set forth below in Section 1(u)(xv)(C) hereof. (B) Exercise of Covenant Defeasance. Upon the Company's exercise under Section 1(u)(xv)(A) hereof of the option applicable to this Section 1(u)(xv)(B), the Company shall, subject to the satisfaction of the conditions set forth in Section 1(u)(xv)(C) hereof, be released from each of its obligations under the covenants contained in Section 1(h)(iii), Section 1(h)(iv), Section 1(u)(i), Section 1(u)(ii), Section 1(u)(iii), Section 1(u)(iv), Section 1(u)(v), Section 1(u)(vii), Section 1(u)(viii), Section 1(u)(ix), Section 1(u)(x), Section 1(u)(xi), Section 1(u)(xii) hereof (under the headings: "Mandatory Redemption/Redemption at Option of Holders/Offers to Purchase--Offer to Purchase Upon Change of Control," Mandatory Redemption/Redemption at Option of Holders/Offers to Purchase--Offer to Purchase by Application of Excess Proceeds," "Certain Covenants and Definitions--Restricted Payments," "Certain Covenants and Definitions--Incurrence of Indebtedness and Issuance of Preferred Stock," "Certain Covenants and Definitions--Liens," "Certain Covenants and Definitions--Dividend and Other Payment Restrictions Affecting Subsidiaries," "Certain Covenants and Definitions--Asset Sales," "Certain Covenants and Definitions--Transactions with Affiliates," "Certain Covenants and Definitions--Designation of Restricted and Unrestricted Subsidiaries," "Certain Covenants and Definitions--Future Subsidiary Guarantees," "Certain Covenants and Definitions--Sale and Leaseback Transactions," 45 "Certain Covenants and Definitions--Business Activities" and "Certain Covenants and Definitions--Payment for Consents") and clause (A)(4) of Section 1(u)(vi) (under the heading "Certain Covenants and Definitions--Merger, Consolidation or Sale of Assets") hereof with respect to the Outstanding Series G Notes on and after the date the conditions set forth in Section 1(u)(xv)(C) hereof are satisfied (hereinafter, "Covenant Defeasance"), and the Series G Notes shall thereafter be deemed not Outstanding for the purposes of any direction, waiver, consent or declaration or act of Holders of Securities, including but not limited to, Holders of Series G Notes (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed Outstanding for all other purposes hereunder. For this purpose, Covenant Defeasance means that, with respect to the Outstanding Series G Notes, the Company may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Triggering Event under Section 1(h)(ii) hereof or a Default or an Event of Default under Section 10.01 of the Indenture, but, except as specified above, the remainder of the Indenture, this Officer's Certificate and such Series G Notes will be unaffected thereby. In addition, upon the Company's exercise under Section 1(u)(xv)(A) hereof of the option applicable to Section 1(u)(xv)(B) hereof, subject to the satisfaction of the conditions set forth in Section 1(u)(xv)(C) hereof, Sections 1(h)(ii)(A)(3) through 1(h)(ii)(A)(7) hereof will not constitute Triggering Events. (C) Conditions to Covenant Defeasance. In order to exercise Covenant Defeasance under this Section 1(u)(xv): (1) the Company must irrevocably deposit with the Trustee or any Paying Agent (other than the Company), in trust for the benefit of the Holders of the Series G Notes: (a) money (including Funded Cash not otherwise applied pursuant to the Indenture) in an amount which will be sufficient, or (b) Eligible Obligations which do not contain provisions permitting the redemption or other prepayment thereof at the option of the issuer thereof, the principal of and the interest on which when due, without any regard to reinvestment thereof, will provide monies which, together with the money, if any, deposited with or held by the Trustee or such Paying Agent, will be sufficient, or (c) a combination of (a) and (b) which will be sufficient, to pay when due the principal of and premium, if any, and interest, if any, and Liquidated Damages, if any, due and to become due on the Series G Notes or portions thereof provided, that the Company shall have delivered to the Trustee and such Paying Agent: (I) a Company Order stating that the money and Eligible Obligations deposited in accordance with this Section 1(u)(xv)(C) shall be held in trust, as 46 provided in Section 9.03 of the Indenture; and (II) if Eligible Obligations shall have been deposited, an Opinion of Counsel to the effect that such obligations constitute Eligible Obligations and do not contain provisions permitting the redemption or other prepayment thereof at the option of the issuer thereof, and an opinion of an Independent public Accountant of nationally recognized standing, selected by the Company, to the effect that the other requirements set forth in Section 1(u)(xv)(C)(1)(b) above have been satisfied; (2) the Company shall have delivered to the Trustee an Opinion of Counsel confirming that the Holders of the Outstanding Series G Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (3) no Triggering Event shall have occurred and be continuing on the date of such deposit (other than a Triggering Event arising from the breach of a covenant under this Officer's Certificate resulting from the borrowing of funds to be applied to such deposit); (4) such Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture ) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (5) the Company must deliver to the Trustee an Officer's Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Series G Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (6) the Company must deliver to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Covenant Defeasance have been complied with. (xvi) Additional Conditions to Section 9.01 of Indenture. Notwithstanding the provisions of Section 9.01 of the Indenture, no Series G Note shall be deemed to have been paid pursuant to such provisions unless the Company shall have delivered to the Trustee either: (a) an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date of this Officer's Certificate, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the Outstanding Series G Notes will not recognize income, 47 gain or loss for federal income tax purposes as a result of such satisfaction and discharge and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such satisfaction and discharge had not occurred; or (b) (i) an instrument wherein the Company, notwithstanding the satisfaction and discharge of the Company's Indebtedness in respect of the Series G Notes, shall assume the obligation (which shall be absolute and unconditional) to irrevocably deposit with the Trustee such additional sums of money, if any, or additional Eligible Obligations, if any, or any combination thereof, at such time or times, as shall be necessary, together with the money and/or Eligible Obligations theretofore so deposited, to pay when due the principal of and premium, if any, and interest due and to become due on such Series G Notes or portions thereof; provided, however, that such instrument may state that the Company's obligation to make additional deposits as aforesaid shall be subject to the delivery to the Company by the Trustee of a notice asserting the deficiency accompanied by an opinion of an Independent public Accountant of nationally recognized standing showing the calculation thereof; and (ii) an Opinion of Counsel of tax counsel in the United States reasonably acceptable to the Trustee to the effect that the Holders of the Outstanding Series G Notes will not recognize income, gain or loss for federal income tax purposes as a result of such satisfaction and discharge and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such satisfaction and discharge had not occurred. (xvii) Modifications Requiring Consent. In addition to the provisions of Section 14.02 of the Indenture, no supplemental indenture shall alter or waive any of the provisions with respect to the redemption of the Series G Notes set forth in Section 1(g) hereof without the consent of each Holder of Series G Notes affected thereby. (xviii) Certain Definitions. Set forth below are certain defined terms used in this Officer's Certificate. Reference is made to the Indenture for the definitions of any other capitalized terms used herein for which no definition is provided herein. "2003 Resource Plan" means the integrated resource plan filed with the Public Utilities Commission of Nevada by the Company and Sierra Pacific Power Company in July 2003. "Acquired Debt" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (2) Indebtedness secured by a Series G Lien encumbering any asset acquired by such specified Person. 48 "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. "Affiliate Transaction" has the meaning assigned to it in Section 1(u)(vii)(A) of this Officer's Certificate. "Agent" means: any Security Registrar, Paying Agent or Authenticating Agent. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights, other than sales of inventory in the ordinary course of business consistent with past practices; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole shall be governed by the provisions in Section 1(u)(x) ("Repurchase at the Option of Holders--Change of Control") and/or Section 1(u)(vi) ("Certain Covenants--Merger, Consolidation or Sale of Assets") and not by Section 1(u)(v) ("Certain Covenants--Asset Sales") of this Officer's Certificate; and (2) the issuance of Equity Interests in any of the Company's Subsidiaries or the sale of Equity Interests in any of its Subsidiaries. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that involves assets having a fair market value of less than $1.0 million; (2) a transfer of assets between or among the Company and its Restricted Subsidiaries; (3) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; 49 (4) a Restricted Payment or Permitted Investment that is permitted by Section 1(u)(i) of this Officer's Certificate (under the heading "Certain Covenants--Restricted Payments"); (5) sales of accounts receivable and related assets or an interest therein of the type specified in the definition of Qualified Receivables Transaction to or by a Receivables Entity; and (6) sales, transfers or other dispositions of assets, including Capital Stock of Restricted Subsidiaries, for consideration at least equal to the fair market value of the assets sold or disposed of, but only if the consideration received consists of Capital Stock of a Person that becomes a Restricted Subsidiary engaged in, or property or assets (other than cash, except to extent used as a bona fide means of equalizing the value of the property or assets involved in the swap transaction) of a nature or type or that are used in, a business of the issuer and its Restricted Subsidiaries existing on the date of such sale or other disposition; provided, however, that any cash received by the Company shall be treated as Net Proceeds and applied as set forth in the Section 1(g)(iii) of this Officer's Certificate (under the heading "Repurchase at the Option of Holders--Asset Sales"); provided further that the fair market value of the assets sold or disposed of is determined as provided in Section 1(u)(i)(C) of this Officer's Certificate (under the heading "Certain Covenants--Restricted Payments"). "Asset Sale Offer" has the meaning assigned to it in Section 1(h)(iv)(A) of this Officer's Certificate. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning. 50 "Board of Directors" means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the board of directors of the general partner of the partnership; and (3) with respect to any other Person, the board or committee of such Person serving a similar function. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than one year from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better; 51 (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper having the highest rating obtainable from Moody's or S&P and in each case maturing within 270 days after the date of acquisition; and (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition. "Change of Control" means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act, including any "group" with the meaning of the Exchange Act); (2) the adoption of a plan relating to the liquidation or dissolution of the Company; (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) becomes the Beneficial Owner, directly or indirectly, of more than 30% of the Voting Stock of the Company or Sierra Pacific Resources, measured by voting power rather than number of shares; or (4) the first day on which a majority of the members of the Board of Directors or the Board of Sierra Pacific Resources are not Continuing Directors. "Change of Control Offer" has the meaning assigned to it in Section 1(h)(iii)(A) of this Officer's Certificate. "Change of Control Payment" has the meaning assigned to it in Section 1(h)(iii)(A) of this Officer's Certificate. "Change of Control Payment Date" has the meaning assigned to it in Section 1(h)(iii)(B)(2) of this Officer's Certificate. "Clearstream" means Clearstream Banking, societe anonyme. "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: 52 (1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income); plus (5) all extraordinary, unusual or non-recurring items of loss or expense; minus (6) all extraordinary, unusual or non-recurring items of gain or revenue; minus (7) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP; provided that non-cash expenses recorded as a result of deferred energy accounting shall not be added to Consolidated Net Income. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall 53 be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; (4) the cumulative effect of a change in accounting principles shall be excluded; and (5) any equity in earnings or losses of Sierra Pacific Resources shall be excluded. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors who: (1) was a member of the Board of Directors on the original issue date of the Series G Notes; or (2) was nominated for election or elected to the Board of Directors with the approval of a majority of the Continuing Directors who were members of the Board of Directors at the time of such nomination or election. "Credit Facilities" means one or more debt facilities or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time, and includes any securities issued pursuant to the Indenture in order to secure any amounts outstanding under a Credit Facility from time to time; provided that the obligation of the Company to make any payment on any such securities shall be: (1) no greater than the amount required to be paid under such Credit Facility that is secured by such payment obligation; (2) payable no earlier than such amount is required to be paid under such Credit Facility; and (3) deemed to have been paid or otherwise satisfied and discharged to the extent that the Company has paid such amount under such Credit Facility; 54 provided further that any amounts the Company is obligated to pay under such securities will not be included for purposes of determining the aggregate amount outstanding under Credit Facilities that is permitted under clause (1) of Section 1(u)(ii)(B) ("Incurrence of Indebtedness and Issuance of Preferred Stock"). "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default as defined in the Indenture. "Definitive Note" means a certificated Series G Note registered in the name of the Holder thereof and issued in accordance with Section 1(q)(v) of this Officer's Certificate, in the form of Exhibit A hereto except that such Series G Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Series G Notes issuable or issued in whole or in part in global form, the Person specified in Section 1(q)(iii) of this Officer's Certificate as the Depositary with respect to the Series G Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Officer's Certificate or the Indenture. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event (other than as a result of an optional redemption by the issuer thereof), matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Series G Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 1(u)(i) of this Officer's Certificate (under the heading "Certain Covenants and Definitions--Restricted Payments"). "DTC" has the meaning assigned to it in Section 1(q)(iii) of this Officer's Certificate. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Euroclear" means Euroclear Bank S.A./N.V. "Event of Default" means an Event of Default as defined in the Indenture. 55 "Excess Proceeds" has the meaning assigned to it in Section 1(u)(v)(D) of this Officer's Certificate. "Exchange Notes" means if and when issued, each series of the Series G Notes issued in exchange for any Initial Notes in an Exchange Offer or upon transfer pursuant to a Shelf Registration Statement. "Exchange Offer" has the meaning set forth in a corresponding Registration Rights Agreement. "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Existing Indebtedness" means all Indebtedness of the Company and its Subsidiaries (other than Indebtedness under a Credit Facility) in existence on the original issue date of the Series G Notes, until such amounts are repaid. "First Mortgage Indenture" means the Indenture of Mortgage, dated as of October 1, 1953, between the Company and Deutsche Bank Trust Company Americas, as trustee, as modified, amended or supplemented at any time or from time to time by supplemental indentures. "Fixed Charges" means, with respect to any specified Person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations; plus (2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus (3) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Series G Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Series G Lien is called upon; plus (4) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or 56 to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP; plus (5) all distributions by a Trust Preferred Vehicle to persons other than the Company of amounts received as interest by such trust on the subordinated Indebtedness of the Company held by such trust. "Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers, consolidations or otherwise (including acquisitions of assets used in a Permitted Business) and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period, including any pro forma expense and cost reductions that have occurred or are reasonably expected to occur, in the reasonable judgment of the chief financial officer of the Company (regardless of whether those cost savings or operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any other regulation or policy of the Commission related thereto); (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded; and 57 (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges shall not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the original issue date of the Series G Notes. "Global Note Legend" means the legend set forth in Section 1(q)(v)(G)(2) of this Officer's Certificate, which is required to be placed on all Global Notes issued under this Officer's Certificate. "Global Notes" means, individually and collectively, each of the Series G Notes (which may be either Restricted Global Notes or Unrestricted Global Notes) issued or issuable in the global form of Exhibit A hereto issued in accordance with Sections 1(q)(i), 1(q)(v)(B)(4), 1(q)(v)(D)(4) or 1(q)(v)(F) of this Officer's Certificate. "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person incurred in the normal course of business and consistent with past practices and not for speculative purposes under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements designed to protect the person or entity entering into the agreement against fluctuations in interest rates with respect to Indebtedness incurred and not for purposes of speculation; (2) foreign exchange contracts and currency protection agreements entered into with one of more financial institutions designed to protect the person or entity entering into the agreement against fluctuations in currency exchange rates with respect to Indebtedness incurred and not for purposes of speculation; (3) any commodity futures contract, commodity option or other similar agreement or arrangement designed to protect against fluctuations in the price of commodities used by that entity at the time; and 58 (4) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations; (5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes (i) all Indebtedness of others secured by a Series G Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person and (ii) all beneficial interests issued by a Trust Preferred Vehicle to persons other than the Company, which beneficial interests shall be treated as Indebtedness that is subordinated to the Series G Notes for all purposes of this Officer's Certificate. The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; and (2) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" has the meaning set forth in Section 1(q)(ii) of this Officer's Certificate. "Initial Purchaser" has the meaning set forth in the Purchase Agreement. 59 "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's or BBB- (or the equivalent) by S&P. "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in Section 1(u)(i)(C) of this Officer's Certificate (under the heading "Certain Covenants and Definitions--Restricted Payments"). The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Company or such Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in Section 1(u)(i)(C) of this Officer's Certificate (under the heading "Certain Covenants and Definitions--Restricted Payments"). "Issue Date" means the first date on which any Series G Notes are issued, authenticated and delivered under the Indenture and this Officer's Certificate. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of Initial Notes for use by such Holders in connection with an Exchange Offer. "Liquidated Damages" means all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. "Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof. "Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such Person or any of its 60 Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries; and (2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness, other than Senior Debt secured by a Series G Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness: (1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender; (2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Series G Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its stated maturity; and (3) as to which the lenders have been notified in writing that they shall not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Non-U.S. Person" means a person who is not a U.S. Person. "Note Custodian" means the Trustee, as custodian for the Depositary with respect to the Series G Notes in global form, or any successor entity thereto. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. 61 "Offer Amount" has the meaning assigned to it in Section 1(h)(iv)(B) of this Officer's Certificate. "Offer Period" has the meaning assigned to it in Section 1(h)(iv)(B) of this Officer's Certificate. "Offering" means the offering of the Original Notes by the Company on the Issue Date. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Original Notes" has the meaning set forth in Section 1(q)(ii) of this Officer's Certificate. "Participant" means, with respect to DTC, Euroclear or Clearstream, a Person who has an account with DTC, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "Payment Default" has the meaning assigned to it in Section 1(h)(ii)(A)(6)(I) of this Officer's Certificate. "Permitted Business" means any business that derives a majority of its revenues from the business engaged in by the Company and its Restricted Subsidiaries on the original issue date of the Series G Notes and/or activities that are reasonably similar, ancillary, incidental, complementary or related to, or a reasonable extension, development or expansion of, the businesses in which the Company and its Restricted Subsidiaries are engaged on the original issue date of the Series G Notes, as determined in good faith by the Board of Directors. "Permitted Investments" means: (1) any Investment in the Company or in a Restricted Subsidiary of the Company (other than a Receivables Entity); (2) any Investment in Cash Equivalents; (3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of the Company (other than a Receivables Entity); or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is 62 liquidated into, the Company or a Restricted Subsidiary of the Company (other than a Receivables Entity); (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 1(u)(v) of this Officer's Certificate (under the heading "Certain Covenants and Definitions--Asset Sales"); (5) any acquisition of assets to the extent it is in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (6) any Investments received in compromise of obligations of such persons incurred in the ordinary course of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; (7) Hedging Obligations; (8) Investments by the Company or a Restricted Subsidiary in a Receivables Entity or any Investment by a Receivables Entity in any other Person, in each case, in connection with a Qualified Receivables Transaction, provided however, that any Investment in any Receivables Entity or such other Person is in the form of a Purchase Money Note, or any equity interests, directly or indirectly, in accounts receivable and related assets generated by the Company or a Restricted Subsidiary and transferred to any Person in connection with a Qualified Receivables Transaction or any such Person owning such accounts receivable; (9) any Investments made in accordance with clause (6) of the definition of "Asset Sales"; and (10) other Investments in any Person that is not also a Restricted Subsidiary of the Company having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (10) since the original issue date of the Series G Notes, not to exceed $30.0 million. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, 63 renewed, replaced, defeased or refunded (plus all accrued and unpaid interest on the Indebtedness and the amount of all expenses and premiums incurred in connection therewith); (2) if such Permitted Refinancing Indebtedness is issued on or after the first anniversary of the original issue date of the Series G Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if such Permitted Refinancing Indebtedness is issued on or after the first anniversary of the original issue date of the Series G Notes, and the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is contractually subordinated in right of payment to the Series G Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Series G Notes on terms at least as favorable to the Holders of Series G Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by the Company or by the Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Private Placement Legend" means the legend set forth in Section 1(q)(v)(G)(1) of this Officer's Certificate to be placed on all Series G Notes issued under the Indenture and this Officer's Certificate except where otherwise permitted by the provisions of the Indenture and this Officer's Certificate. "Purchase Agreement" means the Purchase Agreement dated August 13, 2003 among the Company and each Initial Purchaser relating to the Offering. "Purchase Date" has the meaning assigned to it in Section 1(h)(iv)(B) of this Officer's Certificate. "Purchase Money Note" means a promissory note of a Receivables Entity evidencing a line of credit, which may be irrevocable, from the Company or any Restricted Subsidiary of the Company in connection with a Qualified Receivables Transaction to a Receivables Entity, which note is repayable from cash available to the Receivables Entity, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors and amounts owing to such investors and amounts paid in connection with the purchase of newly generated accounts receivable. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. 64 "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by the Company or any of its Restricted Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries may sell, convey or otherwise transfer to (1) a Receivables Entity (in the case of a transfer by the Company or any of its Restricted Subsidiaries) and (2) any other Person (in the case of a transfer by a Receivables Entity), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Company or any of its Restricted Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, the proceeds of such receivables and other assets which are customarily transferred, or in respect of which security interests are customarily granted in connection with asset securitization involving accounts receivable. "Rating Agencies" means S&P and Moody's, or if S&P or Moody's or both shall not make a rating on the Series G Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company (as certified by a resolution of the Board of Directors) which shall be substituted for S&P or Moody's or both, as the case may be. "Receivables Entity" means a wholly-owned Subsidiary of the Company or Sierra Pacific Resources (or another Person in which the Company or any Restricted Subsidiary of the Company makes an Investment and to which the Company or any Restricted Subsidiary of the Company transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable and which is designated by the Board of Directors (as provided below) as a Receivables Entity: (1) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which: (a) is guaranteed by the Company or any Restricted Subsidiary of the Company (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings); (b) is recourse to or obligates the Company or any Restricted Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings; or (c) subjects any property or asset of the Company or any Restricted Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings; (2) which is not party to any agreement, contract, arrangement or understanding (except in connection with a Purchase Money Note or 65 Qualified Receivables Transaction) with the Company or any Restricted Subsidiary of the Company other than on terms no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing accounts receivable; and (3) to which neither the Company nor any Restricted Subsidiary of the Company has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing conditions. "Registration Rights Agreement" means (i) the Registration Rights Agreement, dated as of the Issue Date, by and among the Company and the other parties named on the signature pages thereof relating to the Original Notes and (ii) any similar agreement that the Company and other parties may enter into in relation to any other Initial Notes, in each case as such agreement may be amended, modified or supplemented from time to time. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in an initial denomination equal to the outstanding principal amount of the Notes initially sold by the Initial Purchasers in reliance on Rule 903 of Regulation S. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Payments" has the meaning assigned to it in Section 1(u)(i)(A) of this Officer's Certificate. "Restricted Period" means the 40-day distribution compliance period as set forth in Regulation S. 66 "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 144A Global Note" means a Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with and registered in the name of the Depositary or its nominee, issued in an initial denomination equal to the outstanding principal amount of the Notes initially sold by the Initial Purchasers in reliance on Rule 144A. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "Securities Act" means the Security Act of 1933, as amended. "Series G Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Series G Permitted Liens" means: (1) Series G Liens securing any Indebtedness under a Credit Facility that was permitted by the terms of this Officer's Certificate to be incurred, and all Obligations and Hedging Obligations relating to such Indebtedness; (2) Series G Liens in favor of the Company or any Subsidiary Guarantors; (3) Series G Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Series G Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary; (4) Series G Liens on property existing at the time of acquisition of the property by the Company or any Restricted Subsidiary of the Company, provided that such Series G Liens were in existence prior to the contemplation of such acquisition; 67 (5) Series G Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (6) Series G Liens to secure Indebtedness (including Capital Lease Obligations) permitted by Section 1(u)(ii)(B)(4) of this Officer's Certificate ("Certain Covenants and Definitions--Incurrence of Indebtedness and Issuance of Preferred Stock") covering only the assets acquired with such Indebtedness; (7) Series G Liens existing on the original issue date of the Series G Notes (including the Series G Lien of the First Mortgage Indenture and the Series G Lien of the Indenture); (8) Series G Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor; (9) Series G Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary with respect to obligations (including Hedging Obligations) that do not exceed $15.0 million at any one time outstanding; (10) Series G Liens to secure Indebtedness permitted by clauses (7), (13), (16) or (17) of Section 1(u)(ii)(B) of this Officer's Certificate (under the heading "Certain Covenants and Definitions--Incurrence of Indebtedness and Issuance of Preferred Stock"); (11) Series G Liens securing any other Indebtedness issued or to be issued under the Indenture that was permitted to be incurred under the terms of Section 1(u)(ii) of this Officer's Certificate (under the heading "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"); (12) Series G Liens securing Permitted Refinancing Indebtedness incurred to refinance Indebtedness that was previously so secured, provided that any such Series G Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Series G Lien arose, could secure) the Indebtedness being refinanced or is in respect of property that is the security for a Series G Permitted Lien hereunder; (13) Series G Liens on assets transferred to a Receivables Entity or on assets of a Receivables Entity, in either case, incurred in connection with a Qualified Receivables Transaction; and 68 (14) Series G Liens, including pledges, rights of offset and bankers' liens, on deposit accounts, instruments, investment accounts and investment property (including cash, cash equivalents and marketable securities) from time to time maintained with or held by any financial and/or depository institutions, in each case solely to secure any and all obligations now or hereafter existing of the Company or any of its Subsidiaries in connection with any deposit account, investment account or cash management service (including ACH, Fedwire, CHIPS, concentration and zero balance accounts, and controlled disbursement, lockbox or restricted accounts) now or hereafter provided by any financial and/or depository institutions to or for the benefit of the Company, any of its Subsidiaries or any special purpose entity directly or indirectly providing loans to or making receivables purchases from the Company or any of its Subsidiaries. "Shelf Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof. "S&P" means Standard & Poor's Rating Group, Inc., or any successor to the rating agency business thereof. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Company or any Restricted Subsidiary of the Company which are reasonably customary in securitization of accounts receivable transactions. "Subsidiary" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). "Subsidiary Guarantee" means any Guarantee of the Series G Notes to be executed by any Subsidiary of the Company pursuant to Section 1(u)(ix) of this Officer's Certificate (under the heading "Future Subsidiary Guarantees"). 69 "Subsidiary Guarantors" means any Subsidiary of the Company that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns. "Triggering Event" has the meaning assigned to it in Section 1(h) of this Officer's Certificate. "Trust Preferred Vehicle" means NVP Capital I, NVP Capital III or any future similar trust, the only assets of which are subordinated Indebtedness of the Company. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Note" means a permanent Global Note in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (5) has at least one director on its Board that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. 70 Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officer's Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 1(u)(i) of this Officer's Certificate (under the heading "Certain Covenants and Definitions--Restricted Payments"). If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 1(u)(ii) of this Officer's Certificate (under the heading "Certain Covenants and Definitions--Incurrence of Indebtedness and Issuance of Preferred Stock"), the Company shall be in default of such covenant. "U.S." means the United States of America. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that shall elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. (v) The Series G Notes shall have such other terms and provisions as are provided in the form thereof attached hereto as Exhibit A, and shall be issued in substantially such form. 71 2. The undersigned has read all of the covenants and conditions contained in the Indenture, and the definitions in the Indenture relating thereto, relating to the issuance of the Series G Notes and in respect of compliance with which this certificate is made. The statements contained in this certificate are based upon the familiarity of the undersigned with the Indenture, the documents accompanying this certificate, and upon discussions by the undersigned with officers and employees of the Company familiar with the matters set forth herein. In the opinion of the undersigned, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenants and conditions have been complied with. In the opinion of the undersigned, such conditions and covenants have been complied with. 72 IN WITNESS WHEREOF, the undersigned has executed this Officer's Certificate as of the date first written above. By: /s/ Richard K. Atkinson ------------------------------------------ Richard K. Atkinson Vice President and Chief Financial Officer Acknowledged and Received on August 18, 2003 THE BANK OF NEW YORK, as Trustee By:/s/ Stacey B. Poindexter --------------------------------- Name: Stacey B. Poindexter Title: Assistant Treasurer NPC Officer's Certificate (Terms of Note) EXHIBIT A FORM OF SERIES G NOTES [Insert the Global Note Legend, if applicable, pursuant to the provisions of the Indenture and the Officer's Certificate] [Insert the Private Placement Legend, if applicable, pursuant to the provisions of the Indenture and the Officer's Certificate] NEVADA POWER COMPANY 9% General and Refunding Mortgage Notes, Series G, due 2013 Original Interest Accrual Date: August 18, 2003 Redeemable: Yes X No ---- ---- Stated Maturity: August 15, 2013 Redemption Date: See Below Interest Rate: 9% Redemption Price: See Below Interest Payment Dates: February 15 and August 15 Record Dates: February 1 and August 1 The Security is not a Discount Security within the meaning of the within-mentioned Indenture. --------------- CUSIP No. 641423 BE 7 9% General and Refunding Mortgage Notes, Series G, due 2013 No. R-1 $350,000,000 promises to pay to Cede & Co. or registered assigns, the principal sum of $350,000,000 Dollars on August 15, 2013. 1. Interest. Nevada Power Company, a Nevada corporation (the "Company"), promises to pay interest on the principal amount of this Series G Note at 9% per annum, from August 18, 2003 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on February 15 and August 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Series G Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from Original Interest Accrual Date specified above; provided that if there is no existing Default in the payment of interest, and if this Series G Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date, except in the case of the original issuance of Series G Notes, in which case interest shall accrue from the Original Interest Accrual Date specified above; provided, further, that the first Interest Payment Date shall be February 15, 2004. The Company shall pay interest A-1 (including postpetition interest in any proceeding under the Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate borne on the Series G Notes; it shall pay interest (including post-petition interest in any proceeding under the Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Series G Notes (except Defaulted Interest) and Liquidated Damages to the Persons who are registered Holders of Series G Notes at the close of business on the February 1 and August 1 next preceding the Interest Payment Date, even if such Series G Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 3.07 of the Indenture with respect to Defaulted Interest. The Series G Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders of Series G Notes at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of, and interest, premium and Liquidated Damages on, all Global Notes and all other Series G Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Security Registrar. Initially, The Bank of New York, the Trustee under the Indenture, shall act as Paying Agent and Security Registrar. The Company may change any Paying Agent or Security Registrar without notice to any Holder of Series G Notes. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture; Security. This Series G Note is one of a duly authorized issue of Securities of the Company, issued and issuable in one or more series under and equally secured by a General and Refunding Mortgage Indenture, dated as of May 1, 2001 (such Indenture as originally executed and delivered and as supplemented or amended from time to time thereafter, together with any constituent instruments establishing the terms of particular Securities, being herein called the "Indenture"), between the Company and The Bank of New York, Trustee (herein called the "Trustee," which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the property mortgaged, pledged and held in trust, the nature and extent of the security and the respective rights, limitations of rights, duties and immunities of the Company, the Trustee and the Holders of the Securities thereunder and of the terms and conditions upon which the Securities are, and are to be, authenticated and delivered and secured. The acceptance of this Series G Note shall be deemed to constitute the consent and agreement by the Holder hereof to all of the terms and provisions of the Indenture. This Series G Note is one of the series designated above. The terms of the Series G Notes include those stated in the Indenture, the Officer's Certificate dated August 18, 2003 (the "Officer's Certificate") and those made part of the Indenture by reference to the Trust Indenture Act. The Series G Notes are subject to all such terms, and Holders of Series G Notes are referred to the Indenture and such Act for a statement A-2 of such terms. To the extent any provision of this Series G Note conflicts with the express provisions of the Indenture or the Officer's Certificate, the provisions of the Indenture and the Officer's Certificate shall govern and be controlling. The Series G Notes are general obligations of the Company initially limited to $350,000,000 aggregate principal amount in the case of Series G Notes issued on the Issue Date. All Outstanding Securities, including the Series G Notes, issued under the Indenture are secured by the lien of the Indenture on the properties of the Company described in the Indenture. The lien of the Indenture is junior, subject and subordinate to the prior lien of the Indenture of Mortgage dated as of October 1, 1953 between the Company and Deutsche Bank Trust Company Americas, as trustee. 5. Optional Redemption. (a) Except as set forth in subparagraph (b) of this paragraph 5, the Series G Notes shall not be redeemable at the Company's option prior to August 15, 2008. Thereafter, the Series G Notes shall be subject to redemption at any time or from time to time at the option of the Company, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

YEAR PERCENTAGE - ---- ---------- 2008................................... 104.500% 2009................................... 103.000% 2010................................... 101.500% 2011 and thereafter.................... 100.000%

(b) Notwithstanding the foregoing, at any time or from time to time on or prior to August 15, 2006, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Series G Notes at a Redemption Price of 109% of the principal amount thereof, plus accrued and unpaid interest, if any, and Liquidated Damages thereon, if any, to the Redemption Date, with the net cash proceeds of any public or private offerings of its Equity Interests or capital contribution to the Company's equity made with net cash proceeds of an offering by Sierra Pacific Resources; provided that at least 65% of the aggregate principal amount of Series G Notes remain outstanding immediately after each occurrence of such redemption excluding Series G Notes held by the Company and its Subsidiaries; and provided, further, that each such redemption shall occur within 120 days of the date of the closing of such offering. 6. Notice of Optional Redemption. Notice of optional redemption shall be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder whose Series G Notes are to be redeemed at its registered address. Series G Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Series G Notes held by a Holder are to be redeemed. On and after the redemption date, interest and Liquidated Damages, if any, cease to accrue on Series G Notes or portions thereof called for redemption. A-3 7. Mandatory Redemption. (a) Other than in connection with clause (b) below or in connection with a redemption at the option of the Holders of the Series G Notes, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Series G Notes. (b) Upon the occurrence of the events described below in clauses (1) or (2) of this paragraph 7(b), the Company shall be required to redeem the Series G Notes immediately, at a Redemption Price equal to 100% of the aggregate principal amount of the Series G Notes plus accrued and unpaid interest and Liquidated Damages, if any, on the Series G Notes to the date of redemption, without further action or notice on the part of the Trustee or the Holders of the Series G Notes: (1) the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (I) commences a voluntary case, (II) consents to the entry of an order for relief against it in an involuntary case, (III) consents to the appointment of a custodian of it or for all or substantially all of its property, (IV) makes a general assignment for the benefit of its creditors, or (V) admits in writing of its inability to pay its debts generally as they become due; or (2) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (I) is for relief against the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (II) appoints a custodian of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or A-4 (III) orders the liquidation of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days. 8. Redemption at the Option of Holders. Upon the occurrence of any of the following Triggering Events: (a) failure for 30 days to pay when due interest on, or Liquidated Damages with respect to, the Series G Notes; (b) failure to pay when due the principal of, or premium, if any, on the Series G Notes; (c) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions described in Section 1(u)(i), 1(u)(ii) or 1(u)(vi) of the Officer's Certificate; (d) failure by the Company or any of its Restricted Subsidiaries for 30 days after notice to comply with the provisions described in Section 1(h)(iii) or (iv) of the Officer's Certificate; (e) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to comply with any of the other agreements in the Officer's Certificate or the Series G Notes; (f) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the original issue date of the Series G Notes, if that default (i) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (ii) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $15.0 million or more; (g) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $15.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; or (h) an event of default under the First Mortgage Indenture (other than any such matured event of default which (i) is of similar kind or character to the Triggering Event described in (c) or (e) above and (ii) has not resulted in the acceleration of the securities outstanding under the First Mortgage Indenture); provided, however, that, anything in the Officer's Certificate to the contrary notwithstanding, the waiver or cure of such event of default under the First Mortgage Indenture and the rescission and annulment of the consequences thereof under the First Mortgage Indenture shall constitute a cure of the corresponding Triggering Event and a rescission and annulment of the consequences thereof, the Holders of at least 25% in principal amount of the Series G Notes then Outstanding may deliver a notice to the Company requiring the Company to redeem the Series G Notes immediately at a Redemption Price equal to 100% of the aggregate principal amount of the Series G Notes plus accrued and unpaid interest and Liquidated Damages, if any, on the Series G Notes to the Redemption Date. The Holders of a majority in aggregate principal amount of the Series G Notes then Outstanding by notice to the Company and the Trustee may on behalf of the Holders of all of the Series G Notes waive any existing Triggering Event and its consequences except a continuing Triggering Event related to the payment of interest or Liquidated Damages on, or the principal of, the Series G Notes. In the case of any Triggering Event occurring on or after August 15, 2008 by reason of any willful A-5 action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Series G Notes pursuant to the provisions of Section 1(g)(i) of the Officer's Certificate relating to redemption at the option of the Company, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the redemption of the Series G Notes at the option of the Holders thereof. If a Triggering Event occurs prior to August 15, 2008, by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Series G Notes prior to August 15, 2008, then the premium specified in Section 1(g)(i) of this Officer's Certificate shall also become immediately due and payable to the extent permitted by law upon the redemption of the Series G Notes at the option of the Holders thereof. Upon becoming aware of any Triggering Event, the Company shall deliver to the Trustee a statement specifying such Triggering Event. 9. Denominations, Transfer, Exchange. The Series G Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Series G Notes may be registered and Series G Notes may be exchanged as provided in the Indenture and the Officer's Certificate. The Security Registrar and the Trustee may require a Holder of Series G Notes, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder of Series G Notes to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Series G Note or portion of a Series G Note selected for redemption, except for the unredeemed portion of any Series G Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Series G Notes for a period of 15 days before a selection of Series G Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. Persons Deemed Owners. The registered Holder of a Series G Note may be treated as its owner for all purposes. 11. Amendment, Supplement and Waiver. The Indenture permits, with certain exceptions as therein provided, the Trustee to enter into one or more supplemental indentures for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, the Indenture with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding under the Indenture, considered as one class; provided, however, that if there shall be Securities of more than one series Outstanding under the Indenture and if a proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such series, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series so directly affected, considered as one class, shall be required; and provided, further, that if the Securities of any series shall have been issued in more than one Tranche and if the proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such Tranches, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all Tranches so directly affected, considered as one class, shall be required; and provided, further, that the Indenture permits the Trustee to enter into one or more supplemental indentures for limited purposes without the consent of any Holders of Securities. The Indenture also contains A-6 provisions permitting the Holders of a majority in principal amount of the Securities then Outstanding, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Series G Note shall be conclusive and binding upon such Holder and upon all future Holders of this Series G Note and of any Series G Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Series G Note. 12. Events of Default. If an Event of Default shall occur and be continuing, the principal of this Series G Note may be declared due and payable in the manner and with the effect provided in the Indenture. 13. No Recourse Against Others. As provided in the Indenture, no recourse shall be had for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under the Indenture, against, and no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, officer or director, as such, past, present or future of the Company or of any predecessor or successor corporation (either directly or through the Company or a predecessor or successor corporation), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that the Indenture and all the Securities are solely corporate obligations and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of the Indenture and the issuance of the Securities. 14. Authentication. Unless the certificate of authentication hereon has been executed by the Trustee or an Authenticating Agent by manual signature, this Series G Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 15. Transfer and Exchange. (a) As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Series G Note is registrable in the Security Register, upon surrender of this Series G Note for registration of transfer at the Corporate Trust Office of The Bank of New York in New York, New York or such other office or agency as may be designated by the Company from time to time, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Series G Notes of this series of authorized denominations and of like tenor and aggregate principal amount, will be issued to the designated transferee or transferees. (b) No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. A-7 (c) Prior to due presentment of this Series G Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Series G Note is registered as the absolute owner hereof for all purposes, whether or not this Series G Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. 16. Governing Law. THE SERIES G NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 17. Definition of "Business Day" and Other Terms. As used herein, "Business Day" shall mean any day, other than Saturday or Sunday, on which commercial banks are open for business, including dealings in deposits in U.S. dollars, in New York. All other terms used in this Series G Note which are defined in the Indenture or the Officer's Certificate shall have the meanings assigned to them in the Indenture or the Officer's Certificate, as applicable, unless otherwise indicated. 18. Abbreviations. Customary abbreviations may be used in the name of a Holder of Series G Notes or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 19. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders of Series G Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of August 18, 2003 between Nevada Power Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 20. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Series G Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders of Series G Notes. No representation is made as to the accuracy of such numbers either as printed on the Series G Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder of Series G Notes upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Nevada Power Company P.O. Box 230 6226 W. Sahara Avenue Las Vegas, Nevada 89146 Attention: Chief Financial Officer A-8 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. NEVADA POWER COMPANY By: ____________________________ Richard K. Atkinson Vice President and Chief Financial Officer CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. Dated: August ___, 2003 THE BANK OF NEW YORK, as Trustee By: ____________________________ Authorized Signatory A-9 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*** The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

PRINCIPAL AMOUNT OF AMOUNT OF AMOUNT OF THIS SIGNATURE OF DECREASE IN INCREASE IN GLOBAL NOTE AUTHORIZED PRINCIPAL PRINCIPAL FOLLOWING SUCH SIGNATORY OF DATE OF AMOUNT OF THIS AMOUNT OF THIS DECREASE (OR TRUSTEE OF NOTE EXCHANGE GLOBAL NOTE GLOBAL NOTE INCREASE CUSTODIAN - --------- ------------- -------------- --------------- -----------

- --------------------------- *** This should be included only if the Note is issued in global form. A-10 ASSIGNMENT FORM To assign this Series G Note, fill in the form below: (I) or (we) assign and transfer this Series G Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Series G Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: Your Signature:_________________________________________________________________ (Sign exactly as your name appears on the face of this Series G Note) SIGNATURE GUARANTEE ________________________________________________________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-11 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Series G Note purchased by the Company pursuant to Section 1(h)(iii) (Offer to Purchase upon Change of Control) or 1(h)(iv) (Offer to Purchase Upon Application of Excess Proceeds) of the Officer's Certificate, check the box below: [ ] Section 1(h)(iii) (Offer [ ] Section 1(h)(iv) (Offer to Purchase upon Change to Purchase Upon Application of Control) of Excess Proceeds) If you want to elect to have only part of the Series G Note purchased by the Company pursuant to Section 1(h)(iii) (Offer to Purchase upon Change of Control) or 1(h)(iv) (Offer to Purchase Upon Application of Excess Proceeds) of the Indenture, state the amount you elect to have purchased: $____________________ Date: Your Signature:_________________________________________________________________ (Sign exactly as your name appears on the face of the Series G Note) Tax Identification No.:_________________________________________________________ SIGNATURE GUARANTEE _________________________________________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-12 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Nevada Power Company P.O. Box 230 6226 W. Sahara Avenue Las Vegas, Nevada 89146 Attention: Treasurer The Bank of New York 101 Barclay Street, Floor 8W New York, New York 10286 Attention: Corporate Trust Administration Re: Nevada Power Company 9% General and Refunding Mortgage Notes, Series G, due 2013 Reference is hereby made to the General and Refunding Mortgage Indenture, dated as of May 1, 2001, as amended or supplemented (the "Indenture"), between Nevada Power Company, as issuer (the "Company") and The Bank of New York, as trustee and the Officer's Certificate dated August 18, 2003 governing the Note[s] (the "Officer's Certificate"). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture and the Officer's Certificate. ____________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such in such Note[s] specified in Annex A hereto, in the principal amount of $__________ in such Note[s] or interests (the "Transfer"), to ____________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note shall be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Officer's Certificate and the Securities Act. B-1 2. [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act and (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture and the Officer's Certificate, the transferred beneficial interest or Definitive Note shall be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Officer's Certificate and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE SHALL TAKE DELIVERY OF A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an accredited investor within the meaning of Rule (501)(a)(1), (2), (3) or (7) under the Securities Act ("Institutional Accredited Investor") or pursuant to another exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby certifies that the B-2 Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) if the Transfer is to an Institutional Accredited Investor, a certificate executed by the Transferee in the form of Exhibit D to the Officer's Certificate and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certificate) to the effect that such Transfer is in compliance with the Securities Act (provided that an Opinion of Counsel need not be furnished in respect of Transfers of a principal amount of Notes of $250,000 or more at the time of Transfer to an Institutional Accredited Investor who furnishes the certificate set forth in (1) above). Upon consummation of the proposed transfer in accordance with the terms of the Indenture and the Officer's Certificate, the transferred beneficial interest or Definitive Note shall be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Global Note and/or the Definitive Notes and in the Officer's Certificate and the Securities Act. 4. [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture, the Officer's Certificate and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture and the Officer's Certificate, the transferred beneficial interest or Definitive Note shall no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Officer's Certificate. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and the Officer's Certificate and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Officer's Certificate and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture and the Officer's Certificate, the transferred beneficial interest or Definitive Note shall no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Officer's Certificate. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and the Officer's Certificate and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Officer's Certificate and the Private Placement B-3 Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture and the Officer's Certificate, the transferred beneficial interest or Definitive Note shall not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Officer's Certificate. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ___________________________ [Insert Name of Transferor] By:________________________ Name: Title: Dated:_____________________ B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (ii) [ ] 144A Global Note (CUSIP ___________), or (ii) [ ] Regulation S Global Note (CUSIP ___________); or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee shall hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP ___________), or (ii) [ ] Regulation S Global Note (CUSIP ___________), or (iii) [ ] Unrestricted Global Note (CUSIP ___________); or (b) [ ] a Restricted Definitive Note. (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture and the Officer's Certificate. B-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Nevada Power Company P.O. Box 230 6226 W. Sahara Avenue Attention: Treasurer Las Vegas, Nevada 89146 The Bank of New York 101 Barclay Street, Floor 8W New York, New York 10286 Attention: Corporate Trust Administration Re: Nevada Power Company 9% General and Refunding Mortgage Notes, Series G, due 2013 (CUSIP ____________) Reference is hereby made to the General and Refunding Mortgage Indenture, dated as of May 1, 2001, as amended or supplemented (the "Indenture"), between Nevada Power Company, as issuer (the "Company") and The Bank of New York, as trustee, and the Officer's Certificate dated August 18, 2003 governing the Note[s] (the "Officer's Certificate"). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture and the Officer's Certificate. ____________________ (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $______________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ]CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture, the Officer's Certificate and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note C-1 is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ]CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture, the Officer's Certificate and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficiary interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture, the Officer's Certificate and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture, the Officer's Certificate and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in C-2 accordance with the terms of the Indenture and the Officer's Certificate, the Restricted Definitive Note issued shall continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Officer's Certificate and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note [ ] Regulation S Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture and the Officer's Certificate, the beneficial interest issued shall be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Officer's Certificate and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ___________________________ [Insert Name of Owner] By:________________________ Name: Title: Dated:_____________________ C-3 EXHIBIT D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Nevada Power Company P.O. Box 230 6226 W. Sahara Avenue Las Vegas, Nevada 89146 Attention: Treasurer The Bank of New York 101 Barclay Street, Floor 8W New York, New York 10286 Attention: Corporate Trust Administration Re: Nevada Power Company 9% General and Refunding Mortgage Notes, Series G, due 2013 Reference is hereby made to the General and Refunding Mortgage Indenture, dated as of May 1, 2001, as amended or supplemented (the "Indenture"), among Nevada Power Company, as issuer (the "Company") and The Bank of New York, as trustee, and the Officer's Certificate dated August 18, 2003 governing the Notes (the "Officer's Certificate"). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture and the Officer's Certificate. In connection with our proposed purchase of $______________ aggregate principal amount of: (a) [ ] a beneficial interest in a Global Note, or (b) [ ] a Definitive Note, we confirm that: 1. we are an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule (501)(a)(1), (2), (3) or (7) under the Securities Act (an "institutional accredited investor"); 2. (i)(A) any purchase of the Notes by us shall be for our own account or for the account of one or more other institutional accredited investors or as fiduciary for the account of one or more trusts, each of which is an "accredited investor" within the meaning of Rule 501(a)(7) under the Securities Act and for each of which we exercise sole investment discretion or (B) we are a "bank," within the meaning of Section 3(a)(2) of the Securities Act, or a "savings and loan association" or other institution described in Section 3(a)(5)(A) of the Securities Act that is acquiring Notes as fiduciary for the account of one or more institutions for which we exercise sole investment discretion; D-1 3. in the event that we purchase any Notes, we shall acquire Notes having a minimum purchase price of not less than $250,000 for our own account and for each separate account for which we are acting; 4. we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing Notes; 5. we are not acquiring the Notes with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdictions, provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our control; 6. we have received a copy of the Offering Memorandum relating to the offering of the Notes and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary in connection with our decision to purchase the Notes; and 7. (vii)(a) we are not an employee benefit plan or other arrangement that is subject to the Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of the Internal Revenue Code of 1986, as amended, or an entity whose underlying assets include assets of such a plan or arrangement (pursuant to 29 C.F.R. Section 2510.3-101 or otherwise), and we are not purchasing (and shall not hold) the Notes on behalf of, or with the assets of, any such plan, arrangement or entity; or (b) our purchase and holding of the Notes are completely covered by the full exemptive relief provided by U.S. Department of Labor Prohibited Transaction Class Exemption 96-23, 95-60, 91-38, 90-1 or 84-14. We understand that the Notes were offered in a transaction not involving any public offering in the United States within the meaning of the Securities Act and that the Notes have not been registered under the Securities Act or any state securities laws, and they were offered for resale in transactions not requiring registration under the Securities Act. We agree on our own behalf and on behalf of any investor account for which we are purchasing the Notes, and each subsequent holder of the Notes by its acceptance of the Notes will agree, to offer, sell or otherwise transfer such notes prior to (x) the date which is two years (or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder) after the later of the date of the original issue of the Notes and the last date on which the Company or any of its affiliates were the owner of such Notes (or any predecessor thereto) or (y) such later date, if any, as may be required by applicable law (the "Resale Restriction Termination Date") only: (1) to the Company; (2) pursuant to a registration statement which has been declared effective under the Securities Act; (3) for so long as the Notes are eligible for resale pursuant to Rule 144A, to a person it reasonably believes is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the transfer is being made in reliance on Rule 144A; (4) pursuant to offers and sales to non-U.S. persons that occur outside the United States within the meaning of Regulation S under the Securities Act; or (5) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in D-2 each of the foregoing cases to any requirements of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control and in compliance with any applicable state securities laws. Subject to the procedures set forth under Section 1(q)(v) of the Officer's Certificate, prior to any proposed transfer of the Notes (otherwise than pursuant to an effective registration statement) within the period referred to in Rule 144(k) under the Securities Act with respect to such transfer, the Holder of the Notes must check the appropriate box set forth on the reverse of its Notes relating to the manner of such transfer and submit the Notes to the trustee. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. We acknowledge that the Company, the trustee and the transfer agent and security registrar reserve the right prior to any offer, sale or other transfer pursuant this paragraph, prior to the end of the restrictive periods described in clauses (x) and (y) above, to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Company, the trustee and the security registrar. We further understand that any Notes we receive shall be in the form of definitive physical certificates and that such certificates shall bear a legend reflecting the substance of this paragraph. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. We acknowledge that you and the Company shall rely upon the truth and accuracy of our acknowledgments, confirmations and agreements in this letter. Further, we acknowledge and agree that you and the Company are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or, official inquiry with respect to the matters covered hereby. ____________________________________ [Insert Name of Accredited Investor] By:_________________________________ Name: Title: Dated:________________________ D-3 EX-4.2 4 b48102spexv4w2.txt EX-4.2 9% GENERAL AND REFUNDING MORTGAGE NOTES EXHIBIT 4.2 THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE OFFICER'S CERTIFICATE UNDER THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO ARTICLE III OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 1(q)(v)(A) OF THE OFFICER'S CERTIFICATE UNDER THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 3.09 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY OR ANY SUCCESSOR THERETO. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY, TO THE COMPANY OR ANY SUCCESSOR THERETO 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 THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), 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. THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR OTHER SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS NOTE IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT SHALL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A INSIDE THE UNITED STATES, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE SECURITY REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE IS COMPLETED AND DELIVERED BY THIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND SHALL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. NEVADA POWER COMPANY 9% General and Refunding Mortgage Notes, Series G, due 2013 Original Interest Accrual Date: August 18, 2003 Redeemable: Yes [X] No [ ] Stated Maturity: August 15, 2013 Redemption Date: See Below Interest Rate: 9% Redemption Price: See Below Interest Payment Dates: February 15 and August 15 Record Dates: February 1 and August 1 The Security is not a Discount Security within the meaning of the within-mentioned Indenture. CUSIP No. 641423 BE 7 9% General and Refunding Mortgage Notes, Series G, due 2013 No. R-1 $350,000,000 promises to pay to Cede & Co. or registered assigns, the principal sum of $350,000,000 Dollars on August 15, 2013. 1. Interest. Nevada Power Company, a Nevada corporation (the "Company"), promises to pay interest on the principal amount of this Series G Note at 9% per annum, from August 18, 2003 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company shall pay interest and Liquidated Damages, if any, semi-annually in arrears on February 15 and August 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Series G Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from Original Interest Accrual Date specified above; provided that if there is no existing Default in the payment of interest, and if this Series G Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date, except in the case of the original issuance of Series G Notes, in which case interest shall accrue from the Original Interest Accrual Date specified above; provided, further, that the first Interest Payment Date shall be February 15, 2004. The Company shall pay interest (including postpetition interest in any proceeding under the Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate borne on the Series G Notes; it shall pay interest (including post-petition interest in any proceeding under the Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Series G Notes (except Defaulted Interest) and Liquidated Damages to the Persons who are registered Holders of Series G Notes at the close of business on the February 1 and August 1 next preceding the Interest Payment Date, even if such Series G Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 3.07 of the Indenture with respect to Defaulted Interest. The Series G Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders of Series G Notes at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of, and interest, premium and Liquidated Damages on, all Global Notes and all other Series G Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Security Registrar. Initially, The Bank of New York, the Trustee under the Indenture, shall act as Paying Agent and Security Registrar. The Company may change any Paying Agent or Security Registrar without notice to any Holder of Series G Notes. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture; Security. This Series G Note is one of a duly authorized issue of Securities of the Company, issued and issuable in one or more series under and equally secured by a General and Refunding Mortgage Indenture, dated as of May 1, 2001 (such Indenture as originally executed and delivered and as supplemented or amended from time to time thereafter, together with any constituent instruments establishing the terms of particular Securities, being herein called the "Indenture"), between the Company and The Bank of New York, Trustee (herein called the "Trustee," which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the property mortgaged, pledged and held in trust, the nature and extent of the security and the respective rights, limitations of rights, duties and immunities of the Company, the Trustee and the Holders of the Securities thereunder and of the terms and conditions upon which the Securities are, and are to be, authenticated and delivered and secured. The acceptance of this Series G Note shall be deemed to constitute the consent and agreement by the Holder hereof to all of the terms and provisions of the Indenture. This Series G Note is one of the series designated above. The terms of the Series G Notes include those stated in the Indenture, the Officer's Certificate dated August 18, 2003 (the "Officer's Certificate") and those made part of the Indenture by reference to the Trust Indenture Act. The Series G Notes are subject to all such terms, and Holders of Series G Notes are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Series G Note conflicts with the express provisions of the Indenture or the Officer's Certificate, the provisions of the Indenture and the Officer's Certificate shall govern and be controlling. The Series G Notes are general obligations of the Company initially limited to $350,000,000 aggregate principal amount in the case of Series G Notes issued on the Issue Date. All Outstanding Securities, including the Series G Notes, issued under the Indenture are secured by the lien of the Indenture on the properties of the Company described in the Indenture. The lien of the Indenture is junior, subject and subordinate to the prior lien of the Indenture of Mortgage dated as of October 1, 1953 between the Company and Deutsche Bank Trust Company Americas, as trustee. 5. Optional Redemption. (a) Except as set forth in subparagraph (b) of this paragraph 5, the Series G Notes shall not be redeemable at the Company's option prior to August 15, 2008. Thereafter, the Series G Notes shall be subject to redemption at any time or from time to time at the option of the Company, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

YEAR PERCENTAGE - ---- ---------- 2008................................... 104.500% 2009................................... 103.000% 2010................................... 101.500% 2011 and thereafter.................... 100.000%

(b) Notwithstanding the foregoing, at any time or from time to time on or prior to August 15, 2006, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Series G Notes at a Redemption Price of 109% of the principal amount thereof, plus accrued and unpaid interest, if any, and Liquidated Damages thereon, if any, to the Redemption Date, with the net cash proceeds of any public or private offerings of its Equity Interests or capital contribution to the Company's equity made with net cash proceeds of an offering by Sierra Pacific Resources; provided that at least 65% of the aggregate principal amount of Series G Notes remain outstanding immediately after each occurrence of such redemption excluding Series G Notes held by the Company and its Subsidiaries; and provided, further, that each such redemption shall occur within 120 days of the date of the closing of such offering. 6. Notice of Optional Redemption. Notice of optional redemption shall be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder whose Series G Notes are to be redeemed at its registered address. Series G Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Series G Notes held by a Holder are to be redeemed. On and after the redemption date, interest and Liquidated Damages, if any, cease to accrue on Series G Notes or portions thereof called for redemption. 7. Mandatory Redemption. (a) Other than in connection with clause (b) below or in connection with a redemption at the option of the Holders of the Series G Notes, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Series G Notes. (b) Upon the occurrence of the events described below in clauses (1) or (2) of this paragraph 7(b), the Company shall be required to redeem the Series G Notes immediately, at a Redemption Price equal to 100% of the aggregate principal amount of the Series G Notes plus accrued and unpaid interest and Liquidated Damages, if any, on the Series G Notes to the date of redemption, without further action or notice on the part of the Trustee or the Holders of the Series G Notes: THE COMPANY OR ANY OF ITS SUBSIDIARIES THAT IS A SIGNIFICANT SUBSIDIARY OR ANY GROUP OF SUBSIDIARIES THAT, TAKEN AS A WHOLE, WOULD CONSTITUTE A SIGNIFICANT SUBSIDIARY PURSUANT TO OR WITHIN THE MEANING OF BANKRUPTCY LAW: (I) commences a voluntary case, (II) consents to the entry of an order for relief against it in an involuntary case, (III) consents to the appointment of a custodian of it or for all or substantially all of its property, (IV) makes a general assignment for the benefit of its creditors, or (V) admits in writing of its inability to pay its debts generally as they become due; or A COURT OF COMPETENT JURISDICTION ENTERS AN ORDER OR DECREE UNDER ANY BANKRUPTCY LAW THAT: (I) is for relief against the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (II) appoints a custodian of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (III) orders the liquidation of the Company or any of its Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days. 8. Redemption at the Option of Holders. Upon the occurrence of any of the following Triggering Events: (a) failure for 30 days to pay when due interest on, or Liquidated Damages with respect to, the Series G Notes; (b) failure to pay when due the principal of, or premium, if any, on the Series G Notes; (c) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions described in Section 1(u)(i), 1(u)(ii) or 1(u)(vi) of the Officer's Certificate; (d) failure by the Company or any of its Restricted Subsidiaries for 30 days after notice to comply with the provisions described in Section 1(h)(iii) or (iv) of the Officer's Certificate; (e) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to comply with any of the other agreements in the Officer's Certificate or the Series G Notes; (f) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the original issue date of the Series G Notes, if that default (i) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (ii) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $15.0 million or more; (g) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $15.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; or (h) an event of default under the First Mortgage Indenture (other than any such matured event of default which (i) is of similar kind or character to the Triggering Event described in (c) or (e) above and (ii) has not resulted in the acceleration of the securities outstanding under the First Mortgage Indenture); provided, however, that, anything in the Officer's Certificate to the contrary notwithstanding, the waiver or cure of such event of default under the First Mortgage Indenture and the rescission and annulment of the consequences thereof under the First Mortgage Indenture shall constitute a cure of the corresponding Triggering Event and a rescission and annulment of the consequences thereof, the Holders of at least 25% in principal amount of the Series G Notes then Outstanding may deliver a notice to the Company requiring the Company to redeem the Series G Notes immediately at a Redemption Price equal to 100% of the aggregate principal amount of the Series G Notes plus accrued and unpaid interest and Liquidated Damages, if any, on the Series G Notes to the Redemption Date. The Holders of a majority in aggregate principal amount of the Series G Notes then Outstanding by notice to the Company and the Trustee may on behalf of the Holders of all of the Series G Notes waive any existing Triggering Event and its consequences except a continuing Triggering Event related to the payment of interest or Liquidated Damages on, or the principal of, the Series G Notes. In the case of any Triggering Event occurring on or after August 15, 2008 by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Series G Notes pursuant to the provisions of Section 1(g)(i) of the Officer's Certificate relating to redemption at the option of the Company, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the redemption of the Series G Notes at the option of the Holders thereof. If a Triggering Event occurs prior to August 15, 2008, by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Series G Notes prior to August 15, 2008, then the premium specified in Section 1(g)(i) of this Officer's Certificate shall also become immediately due and payable to the extent permitted by law upon the redemption of the Series G Notes at the option of the Holders thereof. Upon becoming aware of any Triggering Event, the Company shall deliver to the Trustee a statement specifying such Triggering Event. 9. Denominations, Transfer, Exchange. The Series G Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Series G Notes may be registered and Series G Notes may be exchanged as provided in the Indenture and the Officer's Certificate. The Security Registrar and the Trustee may require a Holder of Series G Notes, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder of Series G Notes to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Series G Note or portion of a Series G Note selected for redemption, except for the unredeemed portion of any Series G Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Series G Notes for a period of 15 days before a selection of Series G Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. Persons Deemed Owners. The registered Holder of a Series G Note may be treated as its owner for all purposes. 11. Amendment, Supplement and Waiver. The Indenture permits, with certain exceptions as therein provided, the Trustee to enter into one or more supplemental indentures for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, the Indenture with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding under the Indenture, considered as one class; provided, however, that if there shall be Securities of more than one series Outstanding under the Indenture and if a proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such series, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series so directly affected, considered as one class, shall be required; and provided, further, that if the Securities of any series shall have been issued in more than one Tranche and if the proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such Tranches, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all Tranches so directly affected, considered as one class, shall be required; and provided, further, that the Indenture permits the Trustee to enter into one or more supplemental indentures for limited purposes without the consent of any Holders of Securities. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities then Outstanding, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Series G Note shall be conclusive and binding upon such Holder and upon all future Holders of this Series G Note and of any Series G Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Series G Note. 12. Events of Default. If an Event of Default shall occur and be continuing, the principal of this Series G Note may be declared due and payable in the manner and with the effect provided in the Indenture. 13. No Recourse Against Others. As provided in the Indenture, no recourse shall be had for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under the Indenture, against, and no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, officer or director, as such, past, present or future of the Company or of any predecessor or successor corporation (either directly or through the Company or a predecessor or successor corporation), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that the Indenture and all the Securities are solely corporate obligations and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of the Indenture and the issuance of the Securities. 14. Authentication. Unless the certificate of authentication hereon has been executed by the Trustee or an Authenticating Agent by manual signature, this Series G Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 15. Transfer and Exchange. (a) As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Series G Note is registrable in the Security Register, upon surrender of this Series G Note for registration of transfer at the Corporate Trust Office of The Bank of New York in New York, New York or such other office or agency as may be designated by the Company from time to time, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Series G Notes of this series of authorized denominations and of like tenor and aggregate principal amount, will be issued to the designated transferee or transferees. (b) No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (c) Prior to due presentment of this Series G Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Series G Note is registered as the absolute owner hereof for all purposes, whether or not this Series G Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. 16. Governing Law. THE SERIES G NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 17. Definition of "Business Day" and Other Terms. As used herein, "Business Day" shall mean any day, other than Saturday or Sunday, on which commercial banks are open for business, including dealings in deposits in U.S. dollars, in New York. All other terms used in this Series G Note which are defined in the Indenture or the Officer's Certificate shall have the meanings assigned to them in the Indenture or the Officer's Certificate, as applicable, unless otherwise indicated. 18. Abbreviations. Customary abbreviations may be used in the name of a Holder of Series G Notes or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 19. Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders of Series G Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of August 18, 2003 between Nevada Power Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 20. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Series G Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders of Series G Notes. No representation is made as to the accuracy of such numbers either as printed on the Series G Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder of Series G Notes upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Nevada Power Company P.O. Box 230 6226 W. Sahara Avenue Las Vegas, Nevada 89146 Attention: Chief Financial Officer IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. NEVADA POWER COMPANY By: ____________________________ Richard K. Atkinson Vice President and Chief Financial Officer CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. Dated: August ___, 2003 THE BANK OF NEW YORK, as Trustee By: _______________________________ Authorized Signatory SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*** The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

PRINCIPAL AMOUNT OF AMOUNT OF AMOUNT OF THIS SIGNATURE OF DECREASE IN INCREASE IN GLOBAL NOTE AUTHORIZED PRINCIPAL PRINCIPAL FOLLOWING SUCH SIGNATORY OF DATE OF AMOUNT OF THIS AMOUNT OF THIS DECREASE (OR TRUSTEE OR NOTE EXCHANGE GLOBAL NOTE GLOBAL NOTE INCREASE) CUSTODIAN - -------- -------------- -------------- --------------- ---------------

- -------- *** This should be included only if the Note is issued in global form. ASSIGNMENT FORM To assign this Series G Note, fill in the form below: (I) or (we) assign and transfer this Series G Note to ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Series G Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: Your Signature: ________________________________________________________________ (Sign exactly as your name appears on the face of this Series G Note) SIGNATURE GUARANTEE ________________________________________________________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Series G Note purchased by the Company pursuant to Section 1(h)(iii) (Offer to Purchase upon Change of Control) or 1(h)(iv) (Offer to Purchase Upon Application of Excess Proceeds) of the Officer's Certificate, check the box below: [ ] Section 1(h)(iii) (Offer to [ ] Section 1(h)(iv) (Offer to Purchase upon Change of Control) Purchase Upon Application of Excess Proceeds) If you want to elect to have only part of the Series G Note purchased by the Company pursuant to Section 1(h)(iii) (Offer to Purchase upon Change of Control) or 1(h)(iv) (Offer to Purchase Upon Application of Excess Proceeds) of the Indenture, state the amount you elect to have purchased: $ ______________________ Date: Your Signature: ________________________________________________________________ (Sign exactly as your name appears on the face of the Series G Note) Tax Identification No.: ________________________________________________________ SIGNATURE GUARANTEE ________________________________________________________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. EX-4.3 5 b48102spexv4w3.txt EX-4.3 OFFICER'S CERTIFICATE SIERRA PACIFIC POWER EXHIBIT 4.3 SIERRA PACIFIC POWER COMPANY OFFICER'S CERTIFICATE May 1, 2003 I, the undersigned officer of Sierra Pacific Power Company (the "Company"), do hereby certify that I am an Authorized Officer of the Company as such term is defined in the Indenture (as defined herein). I am delivering this certificate pursuant to the authority granted in the Board Resolutions of the Company dated March 12, 2003, and Sections 1.04, 2.01, 3.01, 4.01(a) and 4.03(b)(i) of the General and Refunding Mortgage Indenture dated as of May 1, 2001, as heretofore supplemented to the date hereof (as heretofore supplemented, the "Indenture"), between the Company and The Bank of New York, as Trustee (the "Trustee"). Terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Indenture, unless the context clearly requires otherwise. Based upon the foregoing, I hereby certify on behalf of the Company as follows: 1. The terms and conditions of the Securities of the series described in this Officer's Certificate are as follows (the lettered subdivisions set forth in this Paragraph 1 corresponding to the lettered subdivisions of Section 3.01 of the Indenture): (a) The Securities of the fourth series to be issued under the Indenture shall be designated "General and Refunding Mortgage Notes, Series D, due 2004" (the "Series D Notes"). (b) The Series D Notes shall initially be authenticated and delivered in the aggregate principal amount of $80,000,000. Additional Series D Notes may be authenticated and delivered only in exchange for or in replacement of Series D Notes previously authenticated and delivered. (c) Not applicable. (d) The principal of the Series D Notes shall be payable by the Company in whole or in installments on such date or dates as the Company has any principal repayment or purchase price obligations under Sections 4.2(a) or (b) of the Financing Agreement dated as of March 1, 2001 (the "Financing Agreement") between the Company and Washoe County, Nevada (the "Issuer") in respect of the Issuer's Water Facilities Refunding Revenue Bonds (Sierra Pacific Power Company Project) Series 2001 (the "Series 2001 Bonds") issued under the Indenture of Trust dated as of March 1, 2001 (the "Series 2001 Indenture") between the Issuer and The Bank of New York, as trustee (the "Series 2001 Bond Trustee"), or in whole on the Stated Maturity of the Series D Notes (if not previously paid or deemed paid). The Stated Maturity of the Series D Notes shall be not later than May 3, 2004 and shall be as set forth in each of the Series D Notes presented to the Trustee for authentication. The obligation of the Company to make any payment of the principal on the Series D Notes shall be fully or partially, as the case may be, deemed to have been paid or otherwise satisfied and discharged to the extent that the Company has made a payment under Section 4.2(a) of the Financing Agreement in respect of the principal of the Series 2001 Bonds or has made a payment or is deemed to have made a payment under Section 4.2(b) of the Financing Agreement in respect of the purchase price of Series 2001 Bonds tendered for purchase on May 3, 2004. If the Company shall fail to make any such payment in respect of principal or purchase price in respect of the Series 2001 Bonds as required under Sections 4.2(a) or (b) of the Financing Agreement, it shall be deemed to be a default, for the purposes of Section 10.01(b) of the Indenture, in the payment of an amount of principal of the Series D Notes equal to the amount of such unpaid principal or purchase price in respect of the Series 2001 Bonds (but, in no event, shall such principal amount payable exceed the aggregate principal amount of the Series D Notes). (e) The Series D Notes shall bear interest at such rate per annum as shall cause the amount of interest on the Series D Notes to be equal to the amount of interest payable by the Company pursuant to the Financing Agreement in respect of the Term Rate Period (as defined under the Series 2001 Indenture) effective on May 1, 2003 and ending on and including May 2, 2004 (the "Current Term Rate Period"). Such interest on the Series D Notes shall be payable on the same date or dates as payment in respect of such interest is payable by the Company from time to time under the Financing Agreement, until the maturity of the Series D Notes (whether at their Stated Maturity or upon redemption or acceleration), at which time an amount of interest equal to all unpaid interest due on the Series 2001 Bonds through the end of the Current Term Rate Period shall be paid. The amounts payable by the Company from time to time under the Financing Agreement in respect of interest on the Series 2001 Bonds, the basis on which such interest is computed and the dates on which such interest is payable are set forth in the Financing Agreement and the Series 2001 Indenture. The obligation of the Company to make any payment of interest on the Series D Notes shall be fully or partially, as the case may be, deemed to have been paid or otherwise satisfied and discharged to the extent that the Company has made the payments in respect of interest on the Series 2001 Bonds required under Section 4.2(a) of the Financing Agreement. If the Company shall fail to make any payment in respect of interest on the Series 2001 Bonds as required under Section 4.2(a) of the Financing Agreement, it shall be deemed to be a default, for purposes of Section 10.01(a) of the Indenture, in the payment of an amount of interest on the Series D Notes equal to the amount of such unpaid interest in respect of the Series 2001 Bonds. The amount of interest that shall be payable upon a declaration of acceleration of the Maturity of the Series D Notes pursuant to Section 10.02 of the Indenture shall be the amount of accrued and unpaid interest on the Series 2001 Bonds to the date of such declaration plus the amount of interest that the Company would have been obligated to pay under the Financing Agreement in respect of interest on the Series 2001 Bonds from and after such date of declaration through the end of the Current Term Rate Period. 2 (f) The Corporate Trust Office of The Bank of New York in New York, New York shall be the place at which (i) the principal of and interest on the Series D Notes shall be payable, (ii) registration of transfer of the Series D Notes may be effected, (iii) exchanges of the Series D Notes may be effected and (iv) notices and demands to or upon the Company in respect of the Series D Notes and the Indenture may be served; and The Bank of New York shall be the Security Registrar for the Series D Notes; provided, however, that the Company reserves the right to change, by one or more Officer's Certificates, with the consent of the Series 2001 Bond Trustee, any such place or the Security Registrar; and provided, further, that the Company reserves the right to designate, by one or more Officer's Certificates, its principal office in Reno, Nevada as any such place or itself as the Security Registrar; provided, however, that there shall be only a single Security Registrar for the Series D Notes. The principal of the Series D Notes shall be payable without the presentment or surrender thereof. (g) Not applicable. (h) Not applicable. (i) The Series D Notes are issuable only in denominations of $80,000,000. (j) Not applicable. (k) Not applicable. (l) Not applicable. (m) See subsections (d) and (e) above. (n) Not applicable. (o) Not applicable. (p) Not applicable. (q) Each of the Series D Notes shall be evidenced by a registered Series D Note in the principal amount and denomination of Eighty Million Dollars ($80,000,000). The Series D Notes shall be dated no earlier than May 1, 2003, shall mature on May 3, 2004, or such earlier date as set forth as the Stated Maturity date in each of the Series D Notes presented to the Trustee for authentication, unless sooner paid, and shall bear interest at the rate specified in subsection (e) above. The Series D Notes may be executed by the Company and delivered to the Trustee for authentication and delivery. The principal of and interest on the Series D Notes shall be payable at the Corporate Trust Office of the Trustee in New York, New York. The initial Series D Note shall be identified by the number D-1 and additional Series D Notes shall be numbered consecutively from D-2 upwards. The Series D Notes shall upon issuance be delivered by the Company to, and registered in the name of, the Series 2001 Bond Trustee, and shall be transferable only as required to effect an 3 assignment thereof to a successor-in-interest of the Series 2001 Bond Trustee under the Series 2001 Indenture. The Series D Notes are to be delivered to the Series 2001 Bond Trustee as security for the payment by the Company of its obligations under the Financing Agreement. The Series D Notes shall be held by the Series 2001 Bond Trustee subject to the terms of such Delivery Agreements, as may be executed from time to time, between the Company and the Series 2001 Bond Trustee. Series D Notes issued upon transfer or exchange shall be numbered consecutively from D-2 upwards and issued in the same $80,000,000 denomination but, to the extent that the aggregate outstanding principal amount of the Series 2001 Bonds shall have theretofore been reduced, the registered holder thereof shall duly note on the Series D Notes a like reduction in such amount in the principal in the Schedule of Prepayments to such Series D Note and upon any transfer of said Series D Note, such Schedule of Prepayments shall transfer to the subsequently issued Series D Note. See also subsection (s) below. (r) Not applicable. (s) The holder of each Series D Note by acceptance of the Series D Note agrees to restrictions on transfer and to waivers of certain rights of exchange as set forth herein. In addition, the Series D Notes will not be registered under the Securities Act of 1933 and the Series D Notes may not be transferred without compliance with applicable securities laws. The Series D Notes are not transferable except to a successor to the Series 2001 Bond Trustee under the Series 2001 Indenture. (t) For purposes of the Series D Notes, "Business Day" shall mean any day that is not a Friday, Saturday, Sunday or other day on which commercial banks are open for business, including dealings in deposits in U.S. dollars, in New York. (u) The Trustee may conclusively presume that the obligation of the Company to pay the principal of and interest on the Series D Notes, when such payment is required to be made as provided therein, shall have been fully satisfied and discharged unless and until it shall have received a written notice from the Series 2001 Bond Trustee, signed by an authorized officer of the Series 2001 Bond Trustee, stating that the payment in respect of principal or purchase price of or interest on the Series 2001 Bonds has not been fully paid or provided for when due under the terms of the Financing Agreement and specifying the amount of funds required to make such payment. The Series D Notes shall have such other terms and provisions as are provided in the form thereof attached hereto as Exhibit A, and shall be issued in substantially such form. 2. The undersigned has read all of the covenants and conditions contained in the Indenture, and the definitions in the Indenture relating thereto, relating to the issuance of the Series D Notes and in respect of compliance with which this certificate is made. 4 The statements contained in this certificate are based upon the familiarity of the undersigned with the Indenture, the documents accompanying this certificate, and upon discussions by the undersigned with officers and employees of the Company familiar with the matters set forth herein. In the opinion of the undersigned, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenants and conditions have been complied with. In the opinion of the undersigned, such conditions and covenants have been complied with. 5 IN WITNESS WHEREOF, the undersigned has executed this Officer's Certificate as of the date first written above. By: _______________________________________________ Richard K. Atkinson Vice President and Chief Financial Officer Received on May 1, 2003 THE BANK OF NEW YORK, as Trustee By: __________________________________ Name: Stacey B. Poindexter Title: Assistant Treasurer 6 EXHIBIT A FORM OF SERIES D NOTES NOTE: THE HOLDER OF THIS NOTE BY ACCEPTANCE HEREOF AGREES TO RESTRICTIONS ON TRANSFER AND TO WAIVERS OF CERTAIN RIGHTS OF EXCHANGE, AS SET FORTH BELOW. IN ADDITION, THE NOTE REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH NOTE MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS. THIS NOTE IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TO THE SERIES 2001 BOND TRUSTEE UNDER THE SERIES 2001 INDENTURE REFERRED TO HEREIN. SIERRA PACIFIC POWER COMPANY General and Refunding Mortgage Note, Series D, due 2004 Original Interest Accrual Date: May 1, 2003 Redeemable by Company: Yes [ ] No [X] Stated Maturity: April 30, 2004 Redemption Date: N/A Interest Rate: See below Redemption Price: N/A Interest Payment Dates: See below Regular Record Dates: N/A This Security is not a Discount Security within the meaning of the within-mentioned Indenture. Principal Amount $80,000,000 No. D-1 SIERRA PACIFIC POWER COMPANY, a corporation duly organized and existing under the laws of the State of Nevada (herein called the "Company," which term includes any successor corporation under the Indenture referred to below), for value received, hereby promises to pay to THE BANK OF NEW YORK, as trustee (the "Series 2001 Bond Trustee") under the Indenture of Trust dated as of March 1, 2001 (the "Series 2001 Indenture") between the Series 2001 Bond Trustee and Washoe County, Nevada (the "Issuer"), the principal sum of EIGHTY MILLION DOLLARS, or such lesser amount as set forth herein. Capitalized terms used herein and not defined herein shall have the meanings specified in the Indenture (as defined below), unless otherwise noted. Section headings in this Note are for convenience only and shall not affect the construction hereof. 1. Principal. The principal of this Note shall be payable by the Company in whole or in installments on such date or dates as the Company has any principal repayment or purchase price obligations under Sections 4.2(a) or (b) of the Financing Agreement dated as of March 1, 2001 (the "Financing Agreement") between the Company and the Issuer in respect of the Issuer's Water Facilities Refunding Revenue Bonds (Sierra Pacific Power Company Project), Series 2001 (the "Series 2001 Bonds"), or in whole on the Stated Maturity specified above (if not previously paid or deemed paid). The obligation of the Company to make any payment of principal on this Note shall be fully or partially, as the case may be, deemed to have been paid or otherwise satisfied or discharged to the extent that the Company has made a payment under Section 4.2(a) of the Financing Agreement in respect of the principal of the Series 2001 Bonds or has made a payment or is deemed to have made a payment under Section 4.2(b) of the Financing Agreement in respect of the purchase price of Series 2001 Bonds tendered for purchase on May 3, 2004. If the Company shall fail to make any payment in respect of principal or purchase price of the Series 2001 Bonds as required under Sections 4.2(a) or (b) of the Financing Agreement, it shall be deemed to be a default, for purposes of Section 10.01(b) of the Indenture, in the payment of an amount of principal of this Note equal to the amount of such unpaid principal or purchase price in respect of the Series 2001 Bonds (but, in no event, shall such principal amount payable exceed the aggregate principal amount of this Note). 2. Interest. This Note shall bear interest at such rate per annum as shall cause the amount of interest on this Note to be equal to the amount in respect of interest payable by the Company pursuant to the Financing Agreement in respect of the Term Rate Period (as defined in the Series 2001 Indenture) effective on May 1, 2003 and ending on and including May 2, 2004 (the "Current Term Rate Period"). The interest on this Note shall be payable on the same date or dates as payment in respect of such interest is payable by the Company from time to time under the Financing Agreement, until the maturity of this Note (whether at the Stated Maturity as specified above or upon redemption or acceleration), at which time an amount of interest equal to all unpaid interest due on the Series 2001 Bond through the end of the Current Term Rate Period shall be paid. The amounts payable by the Company from time to time under the Financing Agreement in respect of interest on the Series 2001 Bonds, the basis on which the interest on this Note is computed and the dates on which such interest is payable are set forth in the Financing Agreement and the Series 2001 Indenture. The obligation of the Company to make any payment of interest on this Note shall be fully or partially, as the case may be, deemed to have been paid or otherwise satisfied and discharged to the extent that the Company has made the payments in respect of interest on the Series 2001 Bonds required under Section 4.2(a) of the Financing Agreement. If the Company shall fail to make any payment in respect of interest on the Series 2001 Bonds as required under Section 4.2(a) of the Financing Agreement, it shall be deemed to be a default, for purposes of Section 10.01(a) of the Indenture, in the payment of an amount of interest on this Note equal to the amount of such unpaid interest in respect of the Series 2001 Bonds. The amount of interest that shall be payable upon a declaration of acceleration of the maturity of this Note pursuant to Section 10.02 of the Indenture shall be the amount of accrued and unpaid interest on the Series 2001 Bonds to the date of such declaration plus the amount that the Company would have been obligated to pay under the Financing Agreement in respect of interest on the Series 2001 Bonds from and after the date of such declaration through the end of the Current Term Rate Period. 8 3. Terms of Issuance. This Note is issued to the Series 2001 Bond Trustee by the Company to secure the Company's payment obligations pursuant to Sections 4.2(a) and (b) of the Financing Agreement in respect of the Current Term Rate Period, in connection with the remarketing of the Series 2001 Bonds on May 1, 2003 and the purchase and reoffering thereof by Lehman Brothers, Inc. ("Lehman") pursuant to the Bond Purchase Agreement, dated as of April 25, 2003 (the "Bond Purchase Agreement") among the Company and Lehman, as remarketing agent and as underwriter. This Note shall be held by the Series 2001 Bond Trustee subject to the terms of the Delivery Agreement dated as of May 1, 2003 between the Company and the Series 2001 Bond Trustee. 4. Paying Agent and Security Registrar. The Corporate Trust Office of The Bank of New York in New York, New York shall be the place at which, with respect to this Note and the Indenture, as applicable, (i) the principal of and interest shall be payable, (ii) registration of transfer may be effected, (iii) exchanges may be effected and (iv) notices and demands to or upon the Company may be served; and The Bank of New York shall be the Security Registrar for this Note; provided, however, that the Company reserves the right to change, by one or more Officer's Certificates, with the consent of the Series 2001 Bond Trustee, any such place or the Security Registrar; and provided, further, that the Company reserves the right to designate, by one or more Officer's Certificates, its principal office in Reno, Nevada as any such place or itself as the Security Registrar; provided, however, that there shall be only a single Security Registrar for this Note. The principal of this Note shall be payable without the presentment or surrender thereof. 5. Indenture; Security. This Note is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and issuable in one or more series under and equally secured by a General and Refunding Mortgage Indenture, dated as of May 1, 2001 (such Indenture as originally executed and delivered and as supplemented or amended from time to time thereafter, together with any constituent instruments establishing the terms of particular Securities, being herein called the "Indenture"), between the Company and The Bank of New York, as trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the property mortgaged, pledged and held in trust, the nature and extent of the security and the respective rights, limitations of rights, duties and immunities of the Company, the Trustee and the Holders of the Securities thereunder and of the terms and conditions upon which the Securities are, and are to be, authenticated and delivered and secured. The acceptance of this Note shall be deemed to constitute the consent and agreement by the Holder hereof to all of the terms and provisions of the Indenture. This Note is one of the series designated above. 6. Sinking Fund; Optional Redemption. The Notes of this series will not be entitled to the benefit of any sinking fund or optional redemption provisions. 7. Event of Default. If an Event of Default, as defined in the Indenture, shall occur and be continuing, the principal of this Note may be declared due and payable in the manner and with the effect provided in the Indenture and herein. 8. Supplemental Indentures. The Indenture permits, with certain exceptions as therein provided, the Trustee to enter into one or more supplemental indentures for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, the Indenture with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding under the Indenture, considered as one class; provided, however, that if there shall be Securities of more than one series Outstanding under the Indenture and if a proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such series, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series so directly affected, considered as one class, shall be required; and 9 provided, further, that if the Securities of any series shall have been issued in more than one Tranche and if the proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such Tranches, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all Tranches so directly affected, considered as one class, shall be required; and provided, further, that the Indenture permits the Trustee to enter into one or more supplemental indentures for limited purposes without the consent of any Holders of Securities. 9. Consents and Waivers. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities then Outstanding, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Security issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. 10. Person Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee may deem and treat the person in whose name this Note shall be registered upon the Security Register for the Notes of this series as the absolute owner of such Note for the purpose of receiving payment of or on account of the principal of and interest on this Note and for all other purposes, whether or not this Note be overdue, and neither the Company nor the Trustee shall be affected by any notice to the contrary; and all such payments so made to such registered owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon this Note to the extent of the sum or sums paid. 11. Satisfaction and Discharge. The Trustee may conclusively presume that the obligation of the Company to pay the principal of and interest on this Note, when such payment is required to be made as provided herein, shall have been fully satisfied and discharged unless and until it shall have received a written notice from the Series 2001 Bond Trustee, signed by an authorized officer of the Series 2001 Bond Trustee, stating that the payment in respect of principal or purchase price of or interest on the Series 2001 Bonds has not been fully paid or provided for when due under the terms of the Financing Agreement and specifying the amount of funds required to make such payment. 12. Transfer. This Note is not transferable except to a successor to the Series 2001 Bond Trustee under the Series 2001 Indenture. Before any transfer of this Note by the registered holder or his or its legal representative will be recognized or given effect by the Company or the Trustee, the registered holder shall note the amounts of reductions, if any, in the aggregate outstanding principal amount of the Series 2001 Bonds, and shall notify the Company and the Trustee of the name and address of the transferee and shall afford the Company and the Trustee the opportunity of verifying the notation as to such reductions. 13. No Recourse. No recourse under or upon any obligation, covenant or agreement contained in the Indenture or in any indenture supplemental thereto, or in any Note or coupon thereby secured, or because of any indebtedness thereby secured, shall be had against any incorporator, or against any past, present or future stockholder, officer or director, as such, of the Company or any successor corporation, either directly or through the Company or of any successor corporation under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise; it being expressly agreed and understood that the Indenture, any indenture supplemental thereto and the obligations thereby secured, are solely corporate obligations, and that no personal liability whatsoever shall attach to, or be incurred by, such incorporators, stockholders, officers or directors, as such, of the Company or of any successor corporation, or any of them, because of the incurring of the indebtedness thereby authorized, or under or by reason of any of the obligations, covenants or agreements 10 contained in the Indenture or in any indenture supplemental thereto or in any of the Notes or coupons thereby secured, or implied therefrom. 14. Business Day. For the purposes of this Note, "Business Day" shall mean any day that is not a Friday, Saturday, Sunday or other day on which commercial banks are open for business, including dealings in deposits in U.S. dollars, in New York. 15. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York. 16. Certificate of Authentication. Unless the certificate of authentication hereon has been executed by the Trustee or an Authenticating Agent by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. [The remainder of this page is intentionally left blank.] 11 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. SIERRA PACIFIC POWER COMPANY By: /s/ Richard K. Atkinson -------------------------------------------- Name: Richard K. Atkinson Title: Vice President and Chief Financial Officer CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. Dated: May 1, 2003 THE BANK OF NEW YORK, AS TRUSTEE By: /s/ Stacey B. Poindexter ----------------------------- Authorized Signatory 12 EX-4.4 6 b48102spexv4w4.txt EX-4.4 GENERAL AND REFUNDING MORTGAGE NOTES (D) EXHIBIT 4.4 NOTE: THE HOLDER OF THIS NOTE BY ACCEPTANCE HEREOF AGREES TO RESTRICTIONS ON TRANSFER AND TO WAIVERS OF CERTAIN RIGHTS OF EXCHANGE, AS SET FORTH BELOW. IN ADDITION, THE NOTE REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH NOTE MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS. THIS NOTE IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TO THE SERIES 2001 BOND TRUSTEE UNDER THE SERIES 2001 INDENTURE REFERRED TO HEREIN. SIERRA PACIFIC POWER COMPANY General and Refunding Mortgage Note, Series D, due 2004 Original Interest Accrual Date: May 1, 2003 Redeemable by Company: Yes [ ] No [X] Stated Maturity: April 30, 2004 Redemption Date: N/A Interest Rate: See below Redemption Price: N/A Interest Payment Dates: See below Regular Record Dates: N/A This Security is not a Discount Security within the meaning of the within-mentioned Indenture. Principal Amount $80,000,000 No. D-1 SIERRA PACIFIC POWER COMPANY, a corporation duly organized and existing under the laws of the State of Nevada (herein called the "Company," which term includes any successor corporation under the Indenture referred to below), for value received, hereby promises to pay to THE BANK OF NEW YORK, as trustee (the "Series 2001 Bond Trustee") under the Indenture of Trust dated as of March 1, 2001 (the "Series 2001 Indenture") between the Series 2001 Bond Trustee and Washoe County, Nevada (the "Issuer"), the principal sum of EIGHTY MILLION DOLLARS, or such lesser amount as set forth herein. Capitalized terms used herein and not defined herein shall have the meanings specified in the Indenture (as defined below), unless otherwise noted. Section headings in this Note are for convenience only and shall not affect the construction hereof. 1. Principal. The principal of this Note shall be payable by the Company in whole or in installments on such date or dates as the Company has any principal repayment or purchase price obligations under Sections 4.2(a) or (b) of the Financing Agreement dated as of March 1, 2001 (the "Financing Agreement") between the Company and the Issuer in respect of the Issuer's Water Facilities Refunding Revenue Bonds (Sierra Pacific Power Company Project), Series 2001 (the "Series 2001 Bonds"), or in whole on the Stated Maturity specified above (if not previously paid or deemed paid). The obligation of the Company to make any payment of principal on this Note shall be fully or partially, as the case may be, deemed to have been paid or otherwise satisfied or discharged to the extent that the Company has made a payment under Section 4.2(a) of the Financing Agreement in respect of the principal of the Series 2001 Bonds or has made a payment or is deemed to have made a payment under Section 4.2(b) of the Financing Agreement in respect of the purchase price of Series 2001 Bonds tendered for purchase on May 3, 2004. If the Company shall fail to make any payment in respect of principal or purchase price of the Series 2001 Bonds as required under Sections 4.2(a) or (b) of the Financing Agreement, it shall be deemed to be a default, for purposes of Section 10.01(b) of the Indenture, in the payment of an amount of principal of this Note equal to the amount of such unpaid principal or purchase price in respect of the Series 2001 Bonds (but, in no event, shall such principal amount payable exceed the aggregate principal amount of this Note). 2. Interest. This Note shall bear interest at such rate per annum as shall cause the amount of interest on this Note to be equal to the amount in respect of interest payable by the Company pursuant to the Financing Agreement in respect of the Term Rate Period (as defined in the Series 2001 Indenture) effective on May 1, 2003 and ending on and including May 2, 2004 (the "Current Term Rate Period"). The interest on this Note shall be payable on the same date or dates as payment in respect of such interest is payable by the Company from time to time under the Financing Agreement, until the maturity of this Note (whether at the Stated Maturity as specified above or upon redemption or acceleration), at which time an amount of interest equal to all unpaid interest due on the Series 2001 Bond through the end of the Current Term Rate Period shall be paid. The amounts payable by the Company from time to time under the Financing Agreement in respect of interest on the Series 2001 Bonds, the basis on which the interest on this Note is computed and the dates on which such interest is payable are set forth in the Financing Agreement and the Series 2001 Indenture. The obligation of the Company to make any payment of interest on this Note shall be fully or partially, as the case may be, deemed to have been paid or otherwise satisfied and discharged to the extent that the Company has made the payments in respect of interest on the Series 2001 Bonds required under Section 4.2(a) of the Financing Agreement. If the Company shall fail to make any payment in respect of interest on the Series 2001 Bonds as required under Section 4.2(a) of the Financing Agreement, it shall be deemed to be a default, for purposes of Section 10.01(a) of the Indenture, in the payment of an amount of interest on this Note equal to the amount of such unpaid interest in respect of the Series 2001 Bonds. The amount of interest that shall be payable upon a declaration of acceleration of the maturity of this Note pursuant to Section 10.02 of the Indenture shall be the amount of accrued and unpaid interest on the Series 2001 Bonds to the date of such declaration plus the amount that the Company would have been obligated to pay under the Financing Agreement in respect of interest on the Series 2001 Bonds from and after the date of such declaration through the end of the Current Term Rate Period. 3. Terms of Issuance. This Note is issued to the Series 2001 Bond Trustee by the Company to secure the Company's payment obligations pursuant to Sections 4.2(a) and (b) of the Financing Agreement in respect of the Current Term Rate Period, in connection with the remarketing of the Series 2001 Bonds on May 1, 2003 and the purchase and reoffering thereof by Lehman Brothers, Inc. ("Lehman") pursuant to the Bond Purchase Agreement, dated as of April 25, 2003 (the "Bond Purchase Agreement") among the Company and Lehman, as remarketing agent and as underwriter. This Note shall be held by the Series 2001 Bond Trustee subject to the terms of the Delivery Agreement dated as of May 1, 2003 between the Company and the Series 2001 Bond Trustee. 2 4. Paying Agent and Security Registrar. The Corporate Trust Office of The Bank of New York in New York, New York shall be the place at which, with respect to this Note and the Indenture, as applicable, (i) the principal of and interest shall be payable, (ii) registration of transfer may be effected, (iii) exchanges may be effected and (iv) notices and demands to or upon the Company may be served; and The Bank of New York shall be the Security Registrar for this Note; provided, however, that the Company reserves the right to change, by one or more Officer's Certificates, with the consent of the Series 2001 Bond Trustee, any such place or the Security Registrar; and provided, further, that the Company reserves the right to designate, by one or more Officer's Certificates, its principal office in Reno, Nevada as any such place or itself as the Security Registrar; provided, however, that there shall be only a single Security Registrar for this Note. The principal of this Note shall be payable without the presentment or surrender thereof. 5. Indenture; Security. This Note is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and issuable in one or more series under and equally secured by a General and Refunding Mortgage Indenture, dated as of May 1, 2001 (such Indenture as originally executed and delivered and as supplemented or amended from time to time thereafter, together with any constituent instruments establishing the terms of particular Securities, being herein called the "Indenture"), between the Company and The Bank of New York, as trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the property mortgaged, pledged and held in trust, the nature and extent of the security and the respective rights, limitations of rights, duties and immunities of the Company, the Trustee and the Holders of the Securities thereunder and of the terms and conditions upon which the Securities are, and are to be, authenticated and delivered and secured. The acceptance of this Note shall be deemed to constitute the consent and agreement by the Holder hereof to all of the terms and provisions of the Indenture. This Note is one of the series designated above. 6. Sinking Fund; Optional Redemption. The Notes of this series will not be entitled to the benefit of any sinking fund or optional redemption provisions. 7. Event of Default. If an Event of Default, as defined in the Indenture, shall occur and be continuing, the principal of this Note may be declared due and payable in the manner and with the effect provided in the Indenture and herein. 8. Supplemental Indentures. The Indenture permits, with certain exceptions as therein provided, the Trustee to enter into one or more supplemental indentures for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, the Indenture with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding under the Indenture, considered as one class; provided, however, that if there shall be Securities of more than one series Outstanding under the Indenture and if a proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such series, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series so directly affected, considered as one class, shall be required; and provided, further, that if the Securities of any series shall have been issued in more than one Tranche and if the proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such Tranches, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all Tranches so directly affected, considered as one class, shall be required; and provided, further, that the Indenture permits the Trustee to enter into one or more supplemental indentures for limited purposes without the consent of any Holders of Securities. 3 9. Consents and Waivers. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities then Outstanding, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Security issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. 10. Person Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee may deem and treat the person in whose name this Note shall be registered upon the Security Register for the Notes of this series as the absolute owner of such Note for the purpose of receiving payment of or on account of the principal of and interest on this Note and for all other purposes, whether or not this Note be overdue, and neither the Company nor the Trustee shall be affected by any notice to the contrary; and all such payments so made to such registered owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon this Note to the extent of the sum or sums paid. 11. Satisfaction and Discharge. The Trustee may conclusively presume that the obligation of the Company to pay the principal of and interest on this Note, when such payment is required to be made as provided herein, shall have been fully satisfied and discharged unless and until it shall have received a written notice from the Series 2001 Bond Trustee, signed by an authorized officer of the Series 2001 Bond Trustee, stating that the payment in respect of principal or purchase price of or interest on the Series 2001 Bonds has not been fully paid or provided for when due under the terms of the Financing Agreement and specifying the amount of funds required to make such payment. 12. Transfer. This Note is not transferable except to a successor to the Series 2001 Bond Trustee under the Series 2001 Indenture. Before any transfer of this Note by the registered holder or his or its legal representative will be recognized or given effect by the Company or the Trustee, the registered holder shall note the amounts of reductions, if any, in the aggregate outstanding principal amount of the Series 2001 Bonds, and shall notify the Company and the Trustee of the name and address of the transferee and shall afford the Company and the Trustee the opportunity of verifying the notation as to such reductions. 13. No Recourse. No recourse under or upon any obligation, covenant or agreement contained in the Indenture or in any indenture supplemental thereto, or in any Note or coupon thereby secured, or because of any indebtedness thereby secured, shall be had against any incorporator, or against any past, present or future stockholder, officer or director, as such, of the Company or any successor corporation, either directly or through the Company or of any successor corporation under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise; it being expressly agreed and understood that the Indenture, any indenture supplemental thereto and the obligations thereby secured, are solely corporate obligations, and that no personal liability whatsoever shall attach to, or be incurred by, such incorporators, stockholders, officers or directors, as such, of the Company or of any successor corporation, or any of them, because of the incurring of the indebtedness thereby authorized, or under or by reason of any of the obligations, covenants or agreements contained in the Indenture or in any indenture supplemental thereto or in any of the Notes or coupons thereby secured, or implied therefrom. 14. Business Day. For the purposes of this Note, "Business Day" shall mean any day that is not a Friday, Saturday, Sunday or other day on which commercial banks are open for business, including dealings in deposits in U.S. dollars, in New York. 4 15. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York. 16. Certificate of Authentication. Unless the certificate of authentication hereon has been executed by the Trustee or an Authenticating Agent by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. [The remainder of this page is intentionally left blank.] 5 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. SIERRA PACIFIC POWER COMPANY By: ___________________________________________ Name: Title: CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. Dated: May __, 2003 THE BANK OF NEW YORK, AS TRUSTEE By: _________________________________________ Authorized Signatory 6 EX-10.1 7 b48102spexv10w1.txt EX-10.1 EMPLOYMENT AGREEMENT FOR WALTER HIGGINS Exhibit 10.1 EMPLOYMENT AGREEMENT WHEREAS, Walter M. Higgins ("Executive") is presently employed as Chairman, President and Chief Executive Officer of Sierra Pacific Resources ("SPR"), Chairman and Chief Executive Officer of its principal two subsidiaries, Sierra Pacific Power Company ("SPPC") and Nevada Power Company ("NPC") (together, "Utility Subsidiaries", and all three companies collectively, the "Company", and all together, the "Parties")), and also has various other positions with other subsidiaries of SPR, SPPC and NPC; and WHEREAS, the Company, through its Board of Directors, considers it in the best interests of its stockholders to secure the continued employment of Executive in his present capacity, and desires to retain and continue to retain the Executive in his present employment and current positions, subject to certain terms and conditions as set forth more fully below; and WHEREAS, Executive is willing to continue his employment and remain in his current position, subject to certain terms and conditions as set forth more fully below; WHEREAS, Executive and Company are currently parties to an employment agreement dated August 4, 2000 (the "Prior Employment Agreement"), and a Change in Control Agreement dated May 21, 2001 (the "Prior Change in Control Agreement"), which agreements, except for any specific provisions provided for and incorporated herein or carried forward herein, the parties agree to terminate and cancel in consideration for the promises and covenants set forth herein. WHEREAS, The Board of Directors (exclusive of the Executive, who has abstained from the relevant proceedings) has specifically authorized the Company to enter into this Agreement. NOW, THEREFORE, Company employs Executive and Executive accepts employment upon the terms and conditions of this Agreement and the parties do covenant and agree as follows: 1. Term. The term of this Agreement ("Employment Term") shall begin on September 26, 2003 ("Effective Date") and, subject to any early termination that may occur pursuant to Articles 6 or 7, expire on September 25, 2006 (the "Expiration Date"). 2. Positions and Duties. 2.1 Positions and Duties. During the Employment Term, the Executive will serve in the positions of Chairman of the Board, President and Chief Executive Officer of SPR, and Chairman of the Board and Chief Executive Officer of each of the Utility Subsidiaries and any other utility subsidiaries which the Company may come to own, and will have such powers, duties, functions, responsibilities and authority as are (i) consistent with the Executive's position as the Company's most senior executive officer and Chairman of the Board and Chief Executive Officer of 1 of 26 SPR and the Utility Subsidiaries; or (ii) assigned to his office in the SPR's and the Utility Subsidiaries' bylaws; or (iii) reasonably assigned to him by the Board of Directors of the Company. The Executive will report directly to the Board of Directors of the Company. SPR will use its best efforts to cause the Executive to continue to be elected as a member of the Board of Directors of SPR (the "Board") and, if so elected, will retain him as Chairman of the Board throughout the Employment Term and will use its best efforts to cause him to be included in the Board's slate for election as a director of SPR at every stockholders' meeting at which his term as a director would otherwise expire. In addition, SPR will cause the Executive to be elected a member of the board of directors, and as Chairman and Chief Executive officer, of each Utility Subsidiary throughout the Employment Term. 2.2 Commitment. During the Employment Term, the Executive will be SPR's full-time employee and, except as may otherwise be approved in advance in writing by the Board, and except during vacation periods and reasonable periods of absence due to sickness, personal injury, or other disability, the Executive will devote substantially all of his business time and attention to the performance of his duties hereunder. Notwithstanding the foregoing, the Executive may (i) serve as a director of a company or companies which are not engaged in "Competition" (as defined in Section 10.1) with the Company or any subsidiary entity owned or majority controlled by the Company, (ii) serve as an officer, director, or otherwise participate in educational, welfare, social, religious, and civic organizations, and (iii) manage personal and family investments and affairs; provided, however, that the Board may require the Executive to cease the activities he undertakes hereunder pursuant to clauses (i) and (ii) above if the Board determines that the Executive is unable to devote sufficient time and attention to the performance of his duties hereunder as a result of such activities. 3. Place of Performance. In connection with his employment during the Employment Term, unless otherwise agreed by the Executive, the Executive will maintain his principal office in Las Vegas, Nevada, and shall also have an office at the principal SPR/SPPC offices in the Reno/Sparks area and shall maintain an office at any other place reasonably determined by the Board to be necessary or appropriate for the discharge of his duties. The Executive will undertake normal business travel on behalf of the Company from office to office and/or to other places appropriate to conduct the business and affairs of the Company, at Company expense as set forth more fully below. The Company shall continue to provide a housing allowance and local transportation on the terms and conditions afforded to date in office locations other than the Las Vegas offices. 4. Compensation and Related Matters. 4.1 Compensation (i) Annual Base Salary. During the Employment Term, the Company will pay to the Executive an annual base salary ("Base Salary") in such amount as shall be commensurate with his position and level of responsibility as set forth in Article 2 as determined by the Board in its reasonably exercised discretion from time to time; provided, however, that in no event shall such Base Salary be less than the Executive's current annual base salary, except under extraordinary circumstances (including, without 2 of 26 limitation, a natural disaster or general economic downturn which significantly and adversely affects the Company's operations) which directly results in an across-the-board reduction of the annual base salary of all or substantially all other senior executives of the Company. Base Salary shall be payable at the time and in the manner consistent with the Company's general policies regarding compensation of executive employees. (ii) Annual Incentive Compensation. During the Employment Term, the Executive shall be eligible to receive an annual cash incentive award and shall be entitled to receive such an award based on the extent to which the Company achieves criteria or performance targets, reasonably selected by the Compensation Committee of the Board at or before the commencement of the annual performance period, on an annual target level of not less than 70% percent of Base Salary. Subject to the foregoing, nothing in this Section 4.1(ii) shall guarantee to the Executive any specific amount of incentive compensation. 4.2 Employee and Executive Benefits. In addition to the compensation described in Section 4.1 and subject to all the provisions of this Article 4, the Company will make or cause to be made available to the Executive and his eligible dependents, subject to the terms and conditions of the applicable plans, including, without limitation, the eligibility rules, participation in all employee pension, health, welfare and benefit plans, including all 401(k) plans, employee retirement income and welfare benefit policies, plans, programs, or arrangements, in which senior executives of the Company participate from time to time, including any stock purchase, savings, pension, supplemental executive retirement or other retirement income or welfare benefit, disability, salary continuation, and any other deferred compensation, group and/or executive life, health, medical/hospital, or other insurance (whether funded by actual insurance or self-insured by the Company or an affiliate), expense reimbursement, or other employee benefit policies, plans, programs, or arrangements. As part of these benefits, but not in addition thereto, the Company, during the Employment Term, shall continue to maintain a minimum of $2,000,000 life insurance policy for the Executive, who shall have the right to designate his beneficiaries, as well as an additional $1,000,000 life insurance policy should the Executive die while traveling on Company business, and Directors and Officers insurance coverage in substantially the same amounts and with substantially the same coverage as exists immediately prior to the Effective Date. 4.3 Vacation and Fringe Benefits. During the Employment Term, the Executive shall be entitled to vacation in such amounts as would be available under the Company's normal vacation policies applicable to senior executives, as in effect from time to time, to an employee who as of the Effective Date would have service with the Company equal to the Executive's years of professional service, as credited under Company policy (which, as of the Effective Date, was 37), such vacation to be taken in accordance with such normal vacation policies; and the Executive shall be entitled to the perquisites and other fringe benefits made available to senior executives of the Company, commensurate with his position and level of responsibility with the Company. 3 of 26 4.4 Expenses. The Company will promptly reimburse the Executive for all travel and other business expenses the Executive incurs in order to perform his duties to the Company under this Agreement in a manner commensurate with the Executive's position and level of responsibility with the Company, and in accordance with the Company's policy regarding substantiation of expenses. In addition, the Executive shall receive not less than $30,000 annually as and for a perquisite allowance to cover expenses including a car, tax preparation, club memberships, and to facilitate participation in certain community activities. In addition, Company will, subject to Board approval at its discretion, bear the expense of memberships in other appropriate clubs and facilities at appropriate locations for the purpose of advancing and protecting the business interests of the Company. 4.5 Supplemental Executive Retirement Plan ("SERP") and Other Benefits. The Executive is currently vested, and shall remain eligible for a benefit under the SERP heretofore established by the Company for executives. The benefit to which the Executive is entitled under the SERP will (1) be payable at the time and in such forms as are set forth in the SERP, (2) be calculated in accordance with the terms and conditions of the SERP and (3) remain subject to all the terms and conditions of the SERP as it is currently stated, except that Executive shall be entitled to all years of service performed for the Company at any time and additional years of credit under the SERP for each year of service (as defined by the Company's SERP) with AGL Resources or Louisville Gas & Electric Company. Any additional benefit provided under the SERP resulting from such additional years of credited service with AGL Resources or Louisville Gas & Electric Company shall be reduced by any amount of qualified benefit received from AGL Resources or Louisville Gas & Electric Company under their qualified pension plans. In addition, if the Executive is employed by the Company on the Expiration Date (or as provided in the last sentence of Section 6.5(f)), SERP and retiree medical benefits and all other benefits at retirement shall be calculated as though Executive had reached age 62 on the Expiration Date and had accrued service time as of the Expiration Date as if he had worked continuously from his first date of service with SPR (including time served with AGL Resources or Louisville Gas & Electric Company) until he had reached in the normal course of time age 62. 5. Special Compensation. 5.1 Long-Term Incentive Plan. Executive shall continue for fiscal year 2003 to be included in the regular Executive Long-Term Incentive Plan grants appropriate to the position of the Chief Executive Officer. 5.2 Previous Long-Term Incentive Plan Grants. Stock options, performance shares, and restricted stock granted to Executive under the Prior Employment Agreement, and all other stock options, performance shares, and Phantom Shares subsequently granted to Executive, as may have been modified by subsequent actions of the Board pursuant to the Long-Term Incentive Plan, shall continue in full force and, to the extent granted under the Prior Employment Agreement, shall remain subject to the terms and conditions set forth thereunder. 5.3 Phantom Shares. On the Effective Date of this Agreement, the Company shall grant Executive 600,000 shares of SPR common stock (the 4 of 26 "Phantom Shares"). Executive shall not take physical possession of any of said Phantom Shares nor shall Executive be permitted to sell, transfer, or alienate any of said Phantom Shares until they become vested. Any unvested Phantom Shares shall vest and be delivered to Executive in cash, or at the discretion of the Board and if legally permissible, stock without restriction on the sixth anniversary of the Effective Date, provided Executive is still employed by the Company on such date. If, on the Expiration Date, this Agreement is not renewed on mutually acceptable terms and conditions, then Executive shall be entitled to receive the number of remaining unvested Phantom Shares in cash, or at the discretion of the Board and if legally permissible, stock, multiplied by a fraction, the numerator of which shall be the number of days between the Effective Date and the Expiration Date, and the denominator of which shall be the number of days between the Effective Date and the sixth anniversary thereof; provided, however, that the payment under this Section 5.3 shall only be made upon the Expiration Date if the Board of Directors determines, in good faith, at such time that there is a reasonable opportunity for the performance goals and measures set forth in Exhibit A to be achieved by the respective target dates. Such cash or stock shall be delivered to him without restriction within ten (10) days of the expiration of this Agreement. Vesting of Phantom Shares herein will be accelerated and Company will deliver to Executive such cash or, at the discretion of the Board if legally permissible, shares free of restriction in such amounts as Executive shall be entitled to receive not later than seven (7) days after the Company achieves the performance goals and measures set forth in Exhibit A. Until such time as the Phantom Shares are distributed to the Executive as shares of stock, the Executive shall have the right to receive dividend equivalents with respect thereto, with all such dividend equivalents being credited to the Executive as additional Phantom Shares. Notwithstanding the foregoing, if restricted shares become available for grant under the Company's equity-based incentive plans, the Phantom Shares shall be replaced, in whole or in part, by shares of restricted stock to the extent available (and all references to dividend equivalents shall be deemed to refer to actual dividends). 5.4 Cash Retention. On the Effective Date, and on each of the second and third anniversaries of the Effective Date, the Company shall pay Executive $333,333, to the extent the Executive remains in the employ of the Company on such dates. Retention payments provided in this Agreement in no way affect the Executive's eligibility for any cash short-term incentive programs which the Board may put into place for the Company's executive officers. If, prior to the first anniversary of the Effective Date, the Executive's employment is terminated by (i) the Company for Cause (as defined in Section 6.3) or (ii) the Executive without Good Reason (as defined in Section 6.4), then the Executive shall repay to the Company, within five (5) days of such termination of employment, a lump sum amount equal to the product of (x) and (y), where (x) is the after-tax amount received from the Company in respect of the first retention payment and (y) is a fraction, the numerator of which shall be the number of days between the date of the Executive's termination of employment and the first anniversary of the Effective Date and the denominator of which shall be 365. 6. Termination. Notwithstanding the Employment Term, the termination of the Executive's employment hereunder will be governed by the following provisions. If at the time the Executive's employment terminates for any reason, other than by reason of his 5 of 26 death, the Executive is a member of the Board, or a member of the board of directors of the Utility Subsidiaries, or any Affiliate of the Company, the Executive shall execute and deliver to the Company the Executive's resignation from membership on the Board and from membership on all such other boards of directors and, notwithstanding any other provision of this Agreement, no benefit or amount will be paid or made available to the Executive under Section 6.5(d), (e), (f) or (g) until the Executive executes and delivers to the Company such resignation. 6.1 Death. In the event of the termination of Executive's employment during the Employment Term by reason of the Executive's death, the Company will pay to the Executive's designated beneficiaries or estate, as appropriate, promptly after the Executive's death, (a) any unpaid Base Salary to which the Executive is entitled, through the date of the Executive's death; (b) any accrued but unused vacation days; (c) a number of Phantom Shares in cash, or at the discretion of the Board and if legally permissible, stock, equal to the number of Phantom Shares then remaining unvested multiplied by a fraction, the numerator of which shall be the number of days between the Effective Date and the date of the Executive's death and the denominator of which shall be the number of days between the Effective Date and the sixth anniversary thereof; provided, however, that the payment under this Section 6.1(c) shall only be made if the Board determines, in good faith, that there is a reasonable opportunity for the performance goals and measures set forth in Exhibit A to be achieved by the respective target dates, and (iv) except for the cash retention payment set forth in Section 5.4, any other cash payment or stock payment or other award or benefit which Executive would earn if he were employed by the Company on a certain date, in the full amount of such payment or stock award at target award multiplied by a fraction, the numerator of which shall be the number of days from the effective date of such award to the date of the Executive's death and the denominator of which shall be the number of days from the effective date of such award to the date the award would have been paid assuming target level performance had the Executive lived to that date. This Section 6.1 will not limit the entitlement of the Executive's estate or beneficiaries to any death, disability, health, welfare or pension, or other benefits then available to the Executive under any pension, SERP, life insurance, stock ownership, stock options, or other health, welfare, or pension benefit plan or policy that is maintained by the Company or its affiliates for the Executive's benefit or in which the Executive participated. 6.2 Disability. (i) If 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 30th 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 or an affiliate) and benefits until the date of termination. In the event of the Executive's Disability, the Company will pay the Executive or his legal guardian or representative as appropriate, promptly 6 of 26 after the Executive's termination, (a) any unpaid Base Salary to which he is entitled 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 or an affiliate); (b) any accrued but unused vacation days; (c) a number of Phantom Shares in cash, or at the discretion of the Board and if legally permissible, stock, equal to the number of Phantom Shares then remaining unvested multiplied by a fraction, the numerator of which shall be the number of days between the Effective Date and the date of the Executive's termination of employment and the denominator of which shall be the number of days between the Effective Date and the sixth anniversary thereof; provided, however, that the payment under this Section 6.2(c) shall only be made if the Board determines, in good faith, at such time that there is a reasonable opportunity for the performance goals and measures set forth in Exhibit A to be achieved by the respective target dates, and (d) except for the cash retention payment set forth in Section 5.4, any other cash payment or stock payment or other award or benefit which Executive would earn if he were employed by the Company on a certain date, in the full amount of such payment or stock award at target award multiplied by a fraction, the numerator of which shall be the number of days from the effective date of such award to the date of the Executive's termination of employment and the denominator of which shall be the number of days from the effective date of such award to the date the award would have been paid assuming target level performance had the Executive lived to that date. This Section 6.2 will not limit the entitlement of the Executive's estate or beneficiaries to any death, disability, health, welfare or pension, or other benefits then available to the Executive under any pension, SERP, life insurance, stock ownership, stock options, or other health, welfare, or pension benefit plan or policy that is maintained by the Company or its affiliates 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 himself available for medical examinations by a doctor in accordance with this Section 6.2(ii), and (b) grant the Company and any such doctor access to all relevant medical information concerning him, 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. 7 of 26 6.3 Cause. (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 13.6. In the event of the Executive's termination for Cause, the Company will promptly pay to the Executive (or his representative) any unpaid Base Salary and unpaid vacation and any unpaid fully vested award or benefit to which he is entitled through the date the Executive is terminated and the Executive will be entitled to no other compensation or benefits, except as otherwise may be due or payable to him under applicable law or pursuant to any agreement, benefit plan or policy that is maintained by the Company or its affiliates for the Executive or in which the Executive participated. (ii) For purposes of this Agreement, "Cause" means that, at any time prior to the Expiration Date (including, but not limited to, periods prior to the Effective Date), (a) the Executive shall have committed or engaged in: (1) An 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 10.1, 10.2, or 10.3; (3) 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; (b) the Executive shall have engaged in intentional and repeated failure substantially to carry out the Executive's duties and/or responsibilities (other than any such failure resulting from the Executive's incapacity due to physical or mental illness or injury that qualifies as a Disability or would qualify as a Disability if such incapacity continued for the required length of time), which failure is not or cannot be cured within ten calendar 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; or (c) the Executive shall have been convicted of a felony or entered a plea of nolo contendere in respect of a felony charge (in each case, other than a traffic-related felony). For purposes of this Section, 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 8 of 26 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 (1) there shall have 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, (2) the Executive shall have had the opportunity to appear before the Board (with counsel if he so elects) to respond to such particulars and (3) at least 75% of the members of the Board (not including the Executive) shall have voted to terminate his employment for Cause. Nothing herein will limit the right of the Executive or the Executive's beneficiaries to contest the validity or propriety of any such determination. The Company hereby acknowledges it has no knowledge of any fact, event or circumstance that would provide the Company with grounds to terminate the Executive's employment hereunder for Cause and the Executive hereby represents that he has not committed or engaged in any activity that would provide the Company with grounds to terminate his employment hereunder for Cause. 6.4 Termination. (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 13.6. In the event of such a termination, the Executive will be entitled to the payments and benefits provided in Section 6.5, subject to the second sentence of this Article 6. This Section 6.4(i) and Section 6.5, 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 or its affiliates for the Executive's benefit or in which the Executive participated. The Executive will be treated for purposes of this Section 6.4(i) as having been 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 the date 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 ten (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 expressly assume and agree to perform this Agreement pursuant to Section 13.2(i); (c) a reduction in the scope or value of the aggregate benefits and incentive compensation described in Sections 4.1(iii), 4.2, 4.3, 4.5, and 4.6 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 within 10 calendar days after receipt by the Company of written notice from the Executive of such reduction or termination; (d) the Executive is not nominated for election to the Board or is removed from the Board; (e) the Board fails to appoint the Executive as Chief Executive Officer of the Company, or if the Executive is elected to the Board, 9 of 26 he is not elected as Chairman of the Board of the Company, or the Executive is removed from any such position; (f) the Executive is not elected to or is removed from any of the boards of directors of the Utility Subsidiaries or the position of Chairman of the boards of directors of any of the Utility Subsidiaries; (g) a reduction in the Executive's Base Salary (except under extraordinary circumstances as described in Section 4.1(i) hereof) 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; (h) 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 holds in accordance with this Agreement; (i) a change in circumstances has occurred, 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, 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, which situation is not remedied within 10 calendar days after written notice to the Company from the Executive of such determination; or (j) the relocation of the Company's principal executive offices to other than Reno or Las Vegas if the Executive's principal location of work is then in such offices, or any requirement that the Executive's principal location of work change to any location that is in excess of 50 miles from the location thereof immediately preceding the relocation, or the Company requires 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 two full years immediately prior to such change without, in either case, the Executive's prior written consent. Notwithstanding the foregoing, change in the Executive's title or titles or positions required by law, rule, order, or regulation of any agency with competent jurisdiction shall not be deemed Good Reason for purposes of this Agreement. In addition, notwithstanding anything in this Agreement to the contrary, the Executive shall not have Good Reason to terminate his employment hereunder pursuant to clauses (a), (h) or (i) of this Section 6.4(i) as a result of increased Board (or any committee thereof) involvement in the Company if the Board determines in good faith that such increased involvement is warranted in light of issues facing the Company. (ii) Voluntary Termination. The Executive may terminate his employment hereunder without Good Reason at any time upon ninety (90) days' notice to the Company as provided in Section 13.6. The Company may, prior to the date the Executive's voluntarily termination of employment becomes effective, accelerate the date upon which such termination shall 10 of 26 become effective by providing notice to the Executive as provided in Section 13.6 If the Company accelerates the date upon which the Executive's voluntary termination of employment becomes effective, the Company shall continue to pay the Executive his Base Salary in accordance with regular payroll practice until the earlier to occur of (i) the date the Executive's voluntary termination of employment would otherwise have become effective or (ii) the date the Executive commences new employment or enters into an agreement to commence new employment. In addition, in the event of any such termination, the Company will also promptly pay the Executive any unpaid Base Salary to which the Executive is entitled, pursuant to Section 4.1, through the date of the Executive's termination, and any accrued but unused vacation days and any fully vested unpaid benefit. This Section 6.4(ii) will not limit the entitlement of the Executive to any other benefits then available to the Executive under any agreement, benefit plan, or policy that is maintained by the Company or its affiliates for the Executive's benefit or in which the Executive participated. If the Company accelerates the date upon which the Executive's voluntary termination of employment becomes effective, prior to receiving any Base Salary attributable to such acceleration, the Executive shall, if requested by the Company, certify in writing that he has not commenced new employment or entered into an agreement to commence new employment. 6.5 Termination Payments and Benefits. If the Executive's employment is terminated other than by reason of Death, Disability, Voluntary Termination under Section 6.4(ii), or for Cause as provided in Section 6.4(i), the Company will promptly pay or provide to the Executive: (a) the unpaid Base Salary to which the Executive is entitled as well as any earned but unpaid incentive plan payments, pursuant to Section 4.1, through the date of the Executive's termination; (b) any accrued but unused vacation days; (c) any fully vested but unpaid benefit; (d) a lump sum payment within five (5) business days after termination in an amount equal to the sum of (A) one year's 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) one year's annual incentive compensation at target payment; plus (e) (1) a number of Phantom Shares in cash, or at the discretion of the Board and if legally permissible, stock, equal to the number of Phantom Shares then remaining unvested multiplied by a fraction, the numerator of which shall be the number of days between 11 of 26 the Effective Date and the date of the Executive's termination of employment and the denominator of which shall be the number of days between the Effective Date and the sixth anniversary thereof; provided, however, that the payment under this Section 6.5(e)(1) shall only be made if the Board of Directors determines, in good faith, at such time that there is a reasonable opportunity for the performance goals and measures set forth in Exhibit A to be achieved by the respective target dates and (2) except for the cash retention payment set forth in Section 5.4, any other cash payment or stock payment or other award or benefit which Executive would earn if he were employed by the Company on a certain date, in the full amount of such payment or stock award at target award multiplied by a fraction, the numerator of which shall be the number of days from the effective date of such award to the date of the Executive's termination of employment and the denominator of which shall be the number of days from the effective date of such award to the date the award would have been paid assuming target level performance had the Executive lived to that date. (f) For a period of 36 months following the termination (the "Continuation Period"), the Company will, at its expense, arrange to provide the Executive and his eligible dependents with health (including medical/hospital, dental, and vision) and life benefits substantially similar to those that the Executive and his eligible dependents were receiving or entitled to receive immediately prior to termination. 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 6.4(i)(c)). To the extent the coverage or benefits provided during the Continuation Period under this Section 6.5(f) 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 the result of such coverage or benefits. On or after the Termination Date, Executive will be eligible to receive all the benefits he would have been entitled to receive pursuant to the last sentence of Section 4.5 if Executive had remained employed until the Expiration Date. Benefits otherwise receivable by the Executive pursuant to this Section 6.5(f) during the Continuation Period 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, and any such benefits actually received shall be reported by the Executive or other recipient to the Company. 12 of 26 (g) Director and Officer Coverage. For a period of four years following the Executive's termination of employment, the Company shall maintain or obtain Directors and Officers Coverage ("D&O Coverage"), which covers the Executive as an insured on the policy in the same amounts and with equivalent coverage protection as covered the Executive immediately prior to such termination. Thereafter, the Company will continue to indemnify Executive for actions undertaken by Executive during his employment. 7. Change in Control Provisions. 7.1 Impact of Change in Control. Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated within two years following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then (a) the provisions of Section 10.1, 10.3, and 11 will be inapplicable to the Executive and (b) the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in Section 7.3, below, in lieu of any payments or benefits under Article 6 hereof. 7.2 Definition of Change in Control. For purposes of this Agreement, a "Change in Control" will be deemed to occur if any of the following events occur: (i) any Person (as defined below) is or becomes the Beneficial Owner (within the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of SPR (not including in the securities beneficially owned by such Person any securities acquired directly from SPR or its Affiliates (within the meaning set forth in Rule 12b-2 under the Securities Exchange Act of 1934)) representing 30% or more of the combined voting power of SPR's then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (A) of paragraph (iii) below; or (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of SPR) whose appointment or election by the Board or nomination for election by SPR's shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or (iii) there is consummated a merger or consolidation of SPR or any direct or indirect subsidiary of SPR with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of SPR outstanding immediately prior to such merger or consolidation continuing to 13 of 26 represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 65% of the combined voting power of the securities of SPR or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of SPR (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities SPR (not including in the securities Beneficially Owned by such Person any securities acquired directly from SPR or its Affiliates) representing 30% or more of the combined voting power of SPR's then outstanding securities; or (iv) SPR stockholders or a court or regulatory agency having jurisdiction over the matter approves a plan of complete liquidation or dissolution of SPR or there is consummated an agreement for or a court or regulatory agency having jurisdiction over the matter approves the sale or disposition by SPR of all or substantially all of SPR's assets, other than a sale or disposition by SPR of all or substantially all of SPR's assets to an entity, at least 65% of the combined voting power of the voting securities of which are owned by stockholders of SPR in substantially the same proportions as their ownership of SPR immediately prior to such sale. Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of SPR immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of SPR immediately following such transaction or series of transactions. For purposes of this Article 7, "Person" shall have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) SPR or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of SPR in substantially the same proportions as their ownership of stock of SPR. 7.3 Severance Payments. If the Executive's employment is terminated within two years following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 7.3 ("Severance Payments"), in lieu of any payments and benefits to which the Executive would otherwise have been entitled under Article 6 hereof. For purposes of this Agreement, the Executive's employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) the Executive's employment is terminated by the Company without Cause prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would 14 of 26 constitute a Change in Control, (ii) the Executive terminates his employment for Good Reason prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person, or (iii) the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). For purposes of any determination regarding the applicability of the immediately preceding sentence, any position taken by the Executive shall be presumed to be correct unless the Company establishes to the Board by clear and convincing evidence that such position is not correct. (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive under or pursuant to any contract or plan, except for any benefits relating to or resulting from the SERP, whether as a consequence of a Change in Control or otherwise, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to three times the sum of (i) the Executive's base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, and (ii) the target annual incentive award applicable to the Executive pursuant to any annual bonus or incentive plan maintained by the Company in respect of the fiscal year ending immediately prior to the fiscal year in which occurs the Date of Termination or, if higher, immediately prior to the fiscal year in which occurs the first event or circumstance constituting Good Reason. (B) For the thirty-six (36) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, disability, accident and health insurance benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the first occurrence of an event or circumstance constituting Good Reason, at no greater cost to the Executive than the cost to the Executive immediately prior to such date or occurrence; provided, however, that, unless the Executive consents to a different method (after taking into account the effect of such method on the calculation of "parachute payments" pursuant to Section 8 hereof), such health insurance benefits shall be provided through a third-party insurer. Benefits otherwise receivable by the Executive pursuant to this Section 7.3(B) shall be reduced to the extent benefits of the same type are received by or made available to the Executive during the thirty-six (36) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); provided, however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such benefits to the Executive over such cost immediately prior to the Date of Termination or, if more favorable to the Executive, the first occurrence of an event or circumstance constituting Good Reason. 15 of 26 (C) Notwithstanding any provision of any annual or long-term incentive plan to the contrary, the Company shall pay to the Executive a lump sum amount, in cash, equal to the sum of (i) any unpaid incentive compensation which has been allocated or awarded to the Executive for a completed fiscal year or other measuring period preceding the Date of Termination under any such plan and which, as of the Date of Termination, is contingent only upon the continued employment of the Executive to a subsequent date, and (ii) a pro rata portion to the Date of Termination of the aggregate value of all contingent incentive compensation awards to the Executive for all then uncompleted periods under any such plan, calculated as to each such award by multiplying the award that the Executive would have earned on the last day of the performance award period, assuming the achievement, at the target level of the individual and corporate performance goals established with respect to such award, by the fraction obtained by dividing the number of full months and any fractional portion of a month during such performance award period through the Date of Termination by the total number of months contained in such performance award period. (D) In addition to the retirement benefits to which the Executive is entitled under each Company pension plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the third anniversary of the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive would have accrued under the terms of all such pension plans (without regard to any amendment to any such pension plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive were fully vested thereunder and had accumulated (after the Date of Termination) thirty-six (36) additional months of service credit thereunder (except in the case of the SERP, in which case benefits shall be calculated by the amount provided for in the last sentence of Section 4.5, or 36 months, whichever is greater) and had been credited under each such pension plan during such period with compensation equal to the Executive's compensation (as defined in each such pension plan) during the twelve (12) months immediately preceding the Date of Termination or, if higher, during the twelve months immediately prior to the first occurrence of an event or circumstance constituting Good Reason, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive had accrued pursuant to the provisions of the pension plans as of the Date of Termination. For purposes of this Section 7.3(D), "actuarial equivalent" shall be determined using the same assumptions utilized under the Sierra Pacific Power Company Retirement Plan immediately prior to the Date of Termination. or, if more favorable to the 16 of 26 Executive, immediately prior to the first occurrence of an event or circumstance constituting Good Reason. 8. Certain Additional Payments by the Company. (i) If it is determined (as hereafter provided) that any payment or distribution by the Company, any person whose actions result in a Change in Control or any affiliate of the Company or such persons, 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 (each a "Payment", and all such Payments, excluding the Gross-Up Payments (as defined below), the "Total Payments")), 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. (ii) Subject to the provisions of Section 8(vi) hereof, all determinations required to be made under this Article 8, 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 17 of 26 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 not have been made by the Company should 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 8(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 otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Section 8(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 8(ii) and (iv) hereof will be borne by the Company. (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 ten (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 18 of 26 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 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, from 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 8(vi), the Company will control all proceedings taken in connection with the contest of any claim contemplated by this Section 8(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 19 of 26 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 8(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 8(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 8(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 thirty (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 the Gross-Up Payment required to be paid by the Company to the Executive pursuant to this Article 8. (viii) Notwithstanding the foregoing provisions of this Section 8, if it shall be determined that the Executive is entitled to a Gross-Up Payment, but the Total Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that could be paid to the Executive such that the receipt of the Total Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Total Payments, in the aggregate, shall be reduced to the Reduced Amount. If a reduction is required, the Executive and the Company shall determine, after consultation, which payments and or benefits shall be waived, reduced or forfeited to accomplish the reduction. 9. Mitigation and Offset. The payment of severance compensation by the Company to the Executive in accordance with the terms of the Agreement is hereby acknowledged by the Company to be reasonable, and the Executive is under no obligation to mitigate damages or the amount of any payment provided for hereunder by seeking other employment or otherwise. Any amounts payable to the Executive by the Company upon termination of employment shall be offset by any amounts then owed by the Executive to the Company or any entity that is then an Affiliate (within the meaning set forth in Rule 12b-2 under the Securities Exchange Act of 1934) of the Company. 10. Competition; Confidentiality; Nonsolicitation 10.1 (i) Subject to Section 7.1(i), the Executive hereby covenants and agrees that during the Employment Term and for one year following the end of 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 20 of 26 principally engaged in the business of generation, purchase, transmission, distribution, or sale of electricity, the provision of natural gas, in each case to customer segments being served or pursued in its business plans by the Company or its Subsidiaries, in states in which the Company or its Subsidiaries has significant operations; provided, however, that "Competition" will not include ownership by the Executive of stocks, bonds or other securities of any corporation or other entity (but without participating in the business thereof) if such stocks, bonds, or other securities are listed for trading on a national securities exchange or NASDAQ-National Market and the Executive's investment does not exceed 1% of the issued and outstanding shares of capital stock, or in the case of bonds or other securities, 1% of the aggregate principal amount thereof issued and outstanding. For purposes of applying the preceding sentence, operations of the Company or its Subsidiaries in the State of California will be deemed not to be significant if they are not materially greater than the operations in the aggregate of the Company and its respective Subsidiaries in the State of California as of the date of this Agreement. (ii) Subject to Section 7.1(i), the Executive hereby covenants and agrees that during the Employment Term and for three years following the end of 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. 10.2 During the Employment Term, the Company agrees that it will disclose to Executive its confidential or proprietary information (as defined in this Section 10.2) to the extent necessary for Executive to carry out the Executive's obligations under this Agreement. The Executive hereby covenants and agrees that he will not, without the prior written consent of the Company, during the Employment Term or at any time thereafter disclose to any person not employed by the Company or a Subsidiary, or use in connection with engaging in Competition with the Company or a Subsidiary, any confidential or proprietary information of the Company or its Subsidiaries. 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 or a Subsidiary and that is not publicly available or generally known to persons engaged in businesses similar or related to those of the Company or a Subsidiary. Confidential information will include, without limitation, the Company's or a Subsidiary'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 10.2 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). 10.3 Subject to Section 7.1(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 or a Subsidiary to give up, or to not commence, employment or a business relationship with the Company or a Subsidiary. 21 of 26 11. Post-Termination Assistance. Subject to Section 7.1(i), the Executive agrees that after the Executive's employment with the Company has terminated the Executive will provide, upon reasonable notice, such information and assistance to the Company as may reasonably be requested by the Company in connection with any litigation in which it or any of its affiliates is or may become a party; provided, however, that the Company agrees to promptly reimburse the Executive for any related out-of-pocket expenses, including travel expenses as well as reasonable compensation for any time expended, portal-to-portal, at a rate which approximates the Executive's gross cash income (base plus target incentive) at the time of termination. 12. Survival. The expiration or termination of the Employment Term will not impair the rights or obligations of any party hereto that accrue hereunder prior to such expiration or termination, except to the extent specifically stated herein. In addition to the foregoing, the Executive's covenants contained in Sections 5.4, , 6,4(ii), 10.1, 10.2, 10.3, and 11, and the Company's obligations under Articles Sections 6 and 8, and Section 13.1 will survive the expiration or termination of this Agreement or the termination of the Executive's employment for any reason whatsoever. 13. Miscellaneous Provisions. 13.1 Legal Fees and Expenses. If it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice (other than any counsel with whom the Company has any existing or prior attorney-client relationship), at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such interpretation, enforcement, or defense, including, without limitation, the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, stockholder, or other person affiliated with the Company, in any jurisdiction. If the facts or circumstances relating to such interpretation, enforcement or defense arise prior to a Change in Control and the Executive prevails, in whole or in part, in any material issue in dispute, the Company will pay and be solely financially responsible for any and all reasonable attorneys' fees and related fees and expenses incurred by the Executive in good faith in connection with such dispute. If the facts or circumstances relating to such interpretation, enforcement or defense arise on or after a Change in Control, the Company will reimburse the Executive for any and all reasonable attorneys' fees and related fees and expenses incurred by the Executive in good faith in connection with such interpretation, enforcement or defense as such fees and expenses are incurred; provided, however, that the Executive shall be required to reimburse the Company for the amounts advanced to the Executive pursuant to this sentence if the Executive does not prevail, in whole or in part, in any material issue in dispute. 13.2 Successors and Binding Agreement. (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, 22 of 26 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 reasonably 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 the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributes, 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 13.2(i) and 13.2(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 13.2(iii), the Company shall have no liability to pay any amount so attempted to be assigned, transferred, or delegated. 13.3 Governing Law. This Agreement will be governed, construed, interpreted, and enforced in accordance with the substantive laws of the State of Nevada, without regard to conflicts of law principles. 13.4 Withholding of Taxes. The Company may withhold from any amounts payable under this Agreement all federal, state, city, or other taxes as the Company is required to withhold pursuant to any law or government regulations or ruling. 13.5 Severability. Any provision of this Agreement that is deemed invalid, illegal, or unenforceable in any jurisdiction will, as to that jurisdiction be ineffective to the extent of such invalidity, illegality, or unenforceability, without affecting 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. 13.6 Notices. For all purposes of this Agreement, all communications, including, without limitation, notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been 23 of 26 duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as Federal Express, UPS, or Purolator, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive offices and to the Executive at his principal residence, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address will be effective only upon receipt. (i) To the Company: If to the Company, addressed to the attention of the Secretary; 6100 Neil Road, Reno, Nevada 89511, or to 6226 West Sahara Avenue, Las Vegas, Nevada, 89146. (ii) To the Executive: If to the Executive, at his address on file with SPR. 13.7 Counterparts. This Agreement may be executed in several counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same Agreement. 13.8 Effectiveness; Prior Agreement; Entire Agreement. This Agreement shall become effective on the Effective Date and shall have no force or effect prior thereto. On the Effective Date, the terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the Executive's employment by the Company, may not be contradicted by evidence of any prior or contemporaneous agreement, and shall supersede in all respects any prior or other agreement or understanding between the Company, any Subsidiary, and the Executive, including, but not limited to, the Prior Employment Agreement, which, except for any specific provisions included or carried forward herein, will terminate and be without further effect immediately upon the effectiveness of this Agreement without further action, and the Prior Change in Control Agreement, which will terminate and be without further effect immediately upon the effectiveness of this Agreement without further action. The parties further intend that this Agreement will constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement. 13.9 Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and the Company. Failure on the part of either party to complain of any action or omission, breach, or default on the part of the other party, no matter how long the same may continue, will never be deemed to be a waiver of any rights or remedies hereunder, at law, or in equity. The Executive or the Company may waive compliance by the other party with any provision of this Agreement that such other party was or is obligated to comply with or perform only through an executed writing; provided, however, that such waiver will not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. 24 of 26 13.10 Headings and Section References. The headings used in this Agreement are intended for convenience or reference only and will not in any manner amplify, limit, modify, or otherwise be used in the construction or interpretation of any provision of this Agreement. All section references are to sections of this Agreement, unless otherwise noted. 13.11 Interest. Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will pay interest on the amount or value thereof at an annualized rate of interest equal to the so-called composite "prime rate" as quoted from time to time during the relevant period in the Northeast Edition of The Wall Street Journal. Such interest will be payable as it accrues on demand. Any change in such prime rate will be effective on and as of the date of such change. 25 of 26 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the ____ day of September, 2003, but effective as provided in Article 1. By_____________________________________ Walter M. Higgins SIERRA PACIFIC RESOURCES, a Nevada corporation By_____________________________________ James R. Donnelley, Chair Compensation Committee, as directed by and approved by The Board of Directors SIERRA PACIFIC POWER COMPANY, a Nevada corporation By_____________________________________ James R. Donnelley, Chair Compensation Committee, as directed by and approved by The Board of Directors NEVADA POWER COMPANY, a Nevada corporation By_____________________________________ James R. Donnelley, Chair Compensation Committee, as directed by and approved by The Board of Directors WMH-EMPLAGRMT-03 26 of 26 EX-31.1 8 b48102spexv31w1.txt EX-31.1 SECTION 302 CERTIFICATION OF THE C.E.O. Exhibit 31.1 QUARTERLY CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER REQUIRED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Walter M. Higgins III, certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ending September 30, 2003 of Sierra Pacific Resources, Nevada Power Company and Sierra Pacific Power Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report; 4. The registrants' other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrants and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter that has materially affected, or is reasonably likely to affect, the registrants' internal control over financial reporting; and 5. The registrants' other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting. November 13, 2003 /s/ Walter M. Higgins III -------------------------------- Walter M. Higgins III Chief Executive Officer EX-31.2 9 b48102spexv31w2.txt EX-31.2 SECTION 302 CERTIFICATION OF C.F.O. Exhibit 31.2 QUARTERLY CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER REQUIRED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard K. Atkinson, certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ending September 30, 2003 of Sierra Pacific Resources, Nevada Power Company and Sierra Pacific Power Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report; 4. The registrants' other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrants and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter that has materially affected, or is reasonably likely to affect, the registrants' internal control over financial reporting; and 5. The registrants' other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting. November 13, 2003 /s/ Richard K. Atkinson --------------------------------- Richard K. Atkinson Chief Financial Officer EX-32.1 10 b48102spexv32w1.txt EX-32.1 SECTION 906 CERTIFICATION OF CEO & CFO Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the combined Quarterly Report of Sierra Pacific Resources, Nevada Power Company and Sierra Pacific Power Company (the "Companies") on Form 10-Q for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Walter M. Higgins, III, Chief Executive Officer, and Richard K. Atkinson, Chief Financial Officer, of the Companies, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies. November 13, 2003 /s/ Walter M. Higgins, III - ------------------------------------- Walter M. Higgins, III Chief Executive Officer /s/ Richard K. Atkinson - ------------------------------------- Richard K. Atkinson Chief Financial Officer This Certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by Section 906 has been provided to the Companies and will be retained by the Companies and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----

EX-4.1

                                                                     EXHIBIT 4.1

                              NEVADA POWER COMPANY

                              OFFICER'S CERTIFICATE

                                 August 18, 2003

         I, the undersigned officer of Nevada Power Company (the "Company"), do
hereby certify that I am an Authorized Officer of the Company as such term is
defined in the Indenture (as defined herein). I am delivering this certificate
pursuant to the authority granted in the Board Resolutions of the Company dated
June 26, 2003, and Sections 1.04, 2.01, 3.01, 4.01(a) and 4.02(b)(i) of the
General and Refunding Mortgage Indenture dated as of May 1, 2001, as heretofore
amended and supplemented to the date hereof (as heretofore amended and
supplemented, the "Indenture"), between the Company and The Bank of New York, as
Trustee (the "Trustee"). Section 1(u)(xviii) of this Officer's Certificate sets
forth definitions of capitalized terms used herein. Terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the
Indenture. Regarding the use of the terms "subordinated" and "equally-ranked"
herein, see Section 1(u)(i)(D). Based upon the foregoing, I hereby certify on
behalf of the Company as follows:

         1.       The terms and conditions of the Securities described in this
Officer's Certificate are as follows (the lettered subdivisions set forth in
this Paragraph 1 corresponding to the lettered subdivisions of Section 3.01 of
the Indenture):

         (a)      The Securities of the seventh series to be issued under the
         Indenture shall be designated "9% General and Refunding Mortgage Notes,
         Series G, due 2013" (the "Series G Notes").

         (b)      There shall be no limit upon the aggregate principal amount of
         the Series G Notes that may be authenticated and delivered under the
         Indenture. The Series G Notes shall be initially authenticated and
         delivered in the aggregate principal amount of $350,000,000.

         (c)      Interest on the Series G Notes shall be payable to the Persons
         in whose names such Securities are registered at the close of business
         on the Regular Record Date for such interest, except as otherwise
         expressly provided in the form of such Securities attached hereto as
         Exhibit A.

         (d)      The Series G Notes shall mature and the principal thereof
         shall be due and payable together with all accrued and unpaid interest
         thereon on August 15, 2013.

         (e)      The Series G Notes shall bear interest as provided in the form
         of such Securities attached hereto as Exhibit A.

         (f)      If a Holder of Series G Notes has given wire transfer
         instructions to the Company prior to the fifth day preceding the
         related record date (or, in the case of principal or premium, the fifth
         day preceding the date such principal or premium is due), the Company
         shall pay all principal, interest and premium and Liquidated Damages
         (as such term is defined herein), if any, on that Holder's Series G
         Notes in accordance with such instructions. The Corporate Trust Office
         of The Bank of New York in New York, New

NPC Officer's Certificate (Terms of Note)


         York shall be the place at which (i) the principal, interest and
         premium and Liquidated Damages, if any, on the Series G Notes shall be
         payable (other than payments made in accordance with the first sentence
         of this paragraph (f)), (ii) registration of transfer of the Series G
         Notes may be effected, (iii) exchanges of the Series G Notes may be
         effected and (iv) notices and demands to or upon the Company in respect
         of the Series G Notes and the Indenture may be served; and The Bank of
         New York shall be the Security Registrar for the Series G Notes;
         provided, however, that the Company reserves the right to change, by
         one or more Officer's Certificates, any such place or the Security
         Registrar; and provided, further, that the Company reserves the right
         to designate, by one or more Officer's Certificates, its principal
         office in Las Vegas, Nevada as any such place or itself or any of its
         Subsidiaries as the Security Registrar; provided, however, that there
         shall be only a single Security Registrar for the Series G Notes.

         (g)      Optional Redemption.

                  (i)      Optional Redemption. Except as set forth in clause
         (ii) of this Section 1(g), the Series G Notes shall not be redeemable
         at the Company's option prior to August 15, 2008. On and after August
         15, 2008, the Company may redeem all or a part of the Series G Notes
         upon not less than 30 nor more than 60 days' notice, at the Redemption
         Prices (expressed as percentages of principal amount) set forth below
         plus accrued and unpaid interest and Liquidated Damages, if any, on the
         Series G Notes redeemed, to the applicable Redemption Date, if redeemed
         during the twelve-month period beginning on August 15 of the years
         indicated below:



        YEAR                                                         PERCENTAGE
- -------------------                                                  ----------
                                                                  
2008                                                                   104.5%
2009                                                                   103.0%
2010                                                                   101.5%
2011 and thereafter                                                    100.0%


                  (ii)     Equity Claw-back. Notwithstanding the foregoing, at
         any time prior to August 15, 2006, the Company may on any one or more
         occasions redeem up to 35% of the aggregate principal amount of the
         Series G Notes at a Redemption Price of 109% of the principal amount,
         plus accrued and unpaid interest and Liquidated Damages, if any, to the
         Redemption Date, with the net cash proceeds of any public or private
         offering of its Equity Interests (other than Disqualified Stock) or a
         capital contribution to the Company's equity made with net cash
         proceeds of an offering by Sierra Pacific Resources, provided that at
         least 65% of the aggregate principal amount of Series G Notes remains
         outstanding immediately after the occurrence of such redemption
         (excluding Series G Notes held by the Company and its Subsidiaries);
         and provided further, that any such redemption shall occur within 120
         days of the date of the closing of such offering.

                  (iii)    Notice of Redemption. Notices of redemption shall be
         mailed by first class mail at least 30 but not more than 60 days before
         the Redemption Date to each Holder of Series G Notes to be redeemed at
         its registered address, except that redemption

                                       2



         notices may be mailed more than 60 days prior to a Redemption Date if
         the notice is issued in connection with a defeasance of the Series G
         Notes or a satisfaction and discharge of the Series G Notes under the
         Indenture. Notices of redemption may not be conditional.

                  (iv)     Selection of Series G Notes to be Redeemed. In
         accordance with Section 5.03 of the Indenture, the following method is
         provided for the selection of Series G Notes to be redeemed and these
         procedures shall be followed by the Security Registrar in the event of
         a redemption of the Series G Notes pursuant to the provisions of this
         Officer's Certificate. If less than all of the Series G Notes are to be
         redeemed at any time, the Security Registrar shall select Series G
         Notes for redemption as follows:

                  (A)      if the Series G Notes are listed on any national
                           securities exchange, in compliance with the
                           requirements of the principal national securities
                           exchange on which the Series G Notes are listed; or

                  (B)      if the Series G Notes are not listed on any national
                           securities exchange, on a pro rata basis, by lot or
                           by such method as the Trustee deems fair and
                           appropriate.

                  No Series G Notes of $1,000 principal amount or less can be
                  redeemed in part.

         (h)      Mandatory Redemption/Redemption at Option of Holders/Offers to
         Purchase.

                  (i)      Mandatory Redemption.

                  (A)      Except as provided in Section 1(h)(i)(B) below or
         Section 1(h)(ii) below, the Company is not required to make mandatory
         redemption or sinking fund payments with respect to the Series G Notes.

                  (B)      Upon the occurrence of the events described below in
         clauses (1) or (2) of this Section 1(h)(i)(B), the Company shall be
         required to redeem the Series G Notes immediately, at a Redemption
         Price equal to 100% of the aggregate principal amount of the Series G
         Notes plus accrued and unpaid interest and Liquidated Damages, if any,
         on the Series G Notes to the date of redemption, without further action
         or notice on the part of the Trustee or the Holders of the Series G
         Notes:

                  (1)      the Company or any of its Subsidiaries that is a
                           Significant Subsidiary or any group of Subsidiaries
                           that, taken together, would constitute a Significant
                           Subsidiary pursuant to or within the meaning of
                           Bankruptcy Law:

                           (I)      commences a voluntary case,

                           (II)     consents to the entry of an order for relief
                                    against it in an involuntary case,

                                       3



                           (III)    consents to the appointment of a custodian
                                    of it or for all or substantially all of its
                                    property,

                           (IV)     makes a general assignment for the benefit
                                    of its creditors, or

                           (V)      admits in writing of its inability to pay
                                    its debts generally as they become due; or

                  (2)      a court of competent jurisdiction enters an order or
                           decree under any Bankruptcy Law that:

                           (I)      is for relief against the Company or any of
                                    its Subsidiaries that is a Significant
                                    Subsidiary or any group of Subsidiaries
                                    that, taken as a whole, would constitute a
                                    Significant Subsidiary in an involuntary
                                    case;

                           (II)     appoints a custodian of the Company or any
                                    of its Subsidiaries that is a Significant
                                    Subsidiary or any group of Subsidiaries
                                    that, taken as a whole, would constitute a
                                    Significant Subsidiary or for all or
                                    substantially all of the property of the
                                    Company or any of its Subsidiaries that is a
                                    Significant Subsidiary or any group of
                                    Subsidiaries that, taken as a whole, would
                                    constitute a Significant Subsidiary; or

                           (III)    orders the liquidation of the Company or any
                                    of its Subsidiaries that is a Significant
                                    Subsidiary or any group of Restricted
                                    Subsidiaries that, taken as a whole, would
                                    constitute a Significant Subsidiary;

                           and the order or decree remains unstayed and in
                           effect for 60 consecutive days.

                  (ii)     Redemption at the Option of the Holders.

                  (A)      Upon the occurrence of any of the following events
         (each a "Triggering Event"):

                  (1)      failure for 30 days to pay when due interest on, or
                           Liquidated Damages with respect to, the Series G
                           Notes;

                  (2)      failure to pay when due the principal of, or premium,
                           if any, on the Series G Notes;

                  (3)      failure by the Company or any of its Restricted
                           Subsidiaries to comply with the provisions described
                           in Sections 1(u)(i), 1(u)(ii) or 1(u)(vi) of this
                           Officer's Certificate (under the headings "Certain
                           Covenants and Definitions--Restricted Payments,"
                           "Certain Covenants and Definitions--

                                       4



                           Incurrence of Indebtedness and Issuance of Preferred
                           Stock" or "Certain Covenants and Definitions--Merger,
                           Consolidation or Sale of Assets");

                  (4)      failure by the Company or any of its Restricted
                           Subsidiaries for 30 days after notice to comply with
                           the provisions described in Section 1(h)(iii) or (iv)
                           of this Officer's Certificate (under the headings
                           "Offer to Purchase Upon Change of Control" or "Offer
                           to Purchase by Application of Excess Proceeds");

                  (5)      failure by the Company or any of its Restricted
                           Subsidiaries for 60 days after notice to comply with
                           any of the other agreements in this Officer's
                           Certificate or the Series G Notes;

                  (6)      default under any mortgage, indenture or instrument
                           under which there may be issued or by which there may
                           be secured or evidenced any Indebtedness for money
                           borrowed by the Company or any of its Restricted
                           Subsidiaries (or the payment of which is guaranteed
                           by the Company or any of its Restricted Subsidiaries)
                           whether such Indebtedness or guarantee now exists, or
                           is created after the original issue date of the
                           Series G Notes, if that default:

                           (I)      is caused by a failure to pay principal of,
                                    or interest or premium, if any, on such
                                    Indebtedness prior to the expiration of the
                                    grace period provided in such Indebtedness
                                    on the date of such default (a "Payment
                                    Default"); or

                           (II)     results in the acceleration of such
                                    Indebtedness prior to its express maturity,

                           and, in each case, the principal amount of any such
                           Indebtedness, together with the principal amount of
                           any other such Indebtedness under which there has
                           been a Payment Default or the maturity of which has
                           been so accelerated, aggregates $15.0 million or
                           more;

                  (7)      failure by the Company or any of its Subsidiaries to
                           pay final judgments aggregating in excess of $15.0
                           million, which judgments are not paid, discharged or
                           stayed for a period of 60 days; or

                  (8)      an event of default under the First Mortgage
                           Indenture (other than any such matured event of
                           default which (i) is of similar kind or character to
                           the Triggering Event described in (3) or (5) above
                           and (ii) has not resulted in the acceleration of the
                           securities outstanding under the First Mortgage
                           Indenture); provided, however, that, anything in this
                           Officer's Certificate to the contrary
                           notwithstanding, the waiver or cure of such event of
                           default under the First Mortgage Indenture and the
                           rescission and annulment of the consequences thereof
                           under the First Mortgage Indenture shall constitute a
                           cure of the corresponding Triggering Event and a
                           rescission and annulment of the consequences thereof,

                                       5



         the Holders of Series G Notes of at least 25% in principal amount of
         the Series G Notes then Outstanding may deliver a notice to the Company
         requiring the Company to redeem the Series G Notes immediately at a
         Redemption Price equal to 100% of the aggregate principal amount of the
         Series G Notes plus accrued and unpaid interest and Liquidated Damages,
         if any, on the Series G Notes to the Redemption Date.

                  (B)      The Holders of a majority in aggregate principal
         amount of the Series G Notes then outstanding by notice to the Company
         and the Trustee may on behalf of the Holders of all of the Series G
         Notes waive any existing Triggering Event and its consequences except a
         continuing Triggering Event related to the payment of interest or
         Liquidated Damages on, or the principal of, the Series G Notes.

                  (C)      In the case of any Triggering Event occurring on or
         after August 15, 2008 by reason of any willful action or inaction taken
         or not taken by or on behalf of the Company with the intention of
         avoiding payment of the premium that the Company would have had to pay
         if the Company then had elected to redeem the Series G Notes pursuant
         to the provisions of Section 1(g)(i) of this Officer's Certificate
         relating to redemption at the option of the Company, an equivalent
         premium shall also become and be immediately due and payable to the
         extent permitted by law upon the redemption of the Series G Notes at
         the option of the Holders thereof. If a Triggering Event occurs prior
         to August 15, 2008, by reason of any willful action or inaction taken
         or not taken by or on behalf of the Company with the intention of
         avoiding the prohibition on redemption of the Series G Notes prior to
         August 15, 2008, then the premium specified in Section 1(g)(ii) of this
         Officer's Certificate shall also become immediately due and payable to
         the extent permitted by law upon the redemption of the Series G Notes
         at the option of the Holders thereof.

                  (D)      Upon becoming aware of any Triggering Event, the
         Company shall deliver to the Trustee a statement specifying such
         Triggering Event.

                  (iii)    Offer to Purchase Upon Change of Control.

                  (A)      Upon the occurrence of a Change of Control, each
         Holder of Series G Notes shall have the right to require the Company to
         repurchase all or any part (equal to $1,000 or an integral multiple of
         $1,000) of that Holder's Series G Notes pursuant to the offer described
         below (the "Change of Control Offer") on the terms set forth in this
         Officer's Certificate. In the Change of Control Offer, the Company
         shall offer an amount in cash (the "Change of Control Payment") equal
         to 101% of the aggregate principal amount of Series G Notes repurchased
         plus accrued and unpaid interest and Liquidated Damages, if any, on the
         Series G Notes repurchased, to Change of Control Payment Date (as
         defined below).

                  (B)      Within ten days following any Change of Control, the
         Company shall mail a notice to each Holder of Series G Notes stating:

                  (1)      the description of the transaction or transactions
                           that constitute the Change of Control, that the
                           Change of Control Offer is being made pursuant to
                           this

                                       6



                           Section 1(h)(iii), and that all Series G Notes
                           validly tendered and not withdrawn shall be accepted
                           for payment;

                  (2)      the purchase price and the purchase date, which shall
                           be no earlier than 30 days and no later than 60 days
                           from the date such notice is mailed (the "Change of
                           Control Payment Date");

                  (3)      that any Series G Note not tendered or accepted for
                           payment shall continue to accrue interest and
                           Liquidated Damages, if any;

                  (4)      that, unless the Company defaults in the payment of
                           the Change of Control Payment, all Series G Notes
                           accepted for payment pursuant to the Change of
                           Control Offer shall cease to accrue interest and
                           Liquidated Damages, if any, after the Change of
                           Control Payment Date;

                  (5)      that Holders of Series G Notes electing to have any
                           Series G Notes purchased pursuant to a Change of
                           Control Offer shall be required to surrender the
                           Series G Notes properly endorsed, with the form
                           entitled "Option of Holder to Elect Purchase" on the
                           reverse of the Series G Notes properly completed,
                           together with other customary documents as the
                           Company may reasonably request, to the Paying Agent
                           at the address specified in the notice prior to the
                           close of business on the third Business Day preceding
                           the Change of Control Payment Date;

                  (6)      that Holders of Series G Notes shall be entitled to
                           withdraw their election if the Paying Agent receives,
                           not later than the close of business on the second
                           Business Day preceding the Change of Control Payment
                           Date, a telegram, telex, facsimile transmission or
                           letter setting forth the name of the Holder, the
                           principal amount of Series G Notes delivered for
                           purchase, and a statement that such Holder of Series
                           G Notes is withdrawing its election to have the
                           Series G Notes purchased; and

                  (7)      that Holders of Series G Notes whose Series G Notes
                           are being purchased only in part shall be issued new
                           Series G Notes equal in principal amount to the
                           unpurchased portion of the Series G Notes
                           surrendered, which unpurchased portion must be equal
                           to $1,000 in principal amount or an integral multiple
                           thereof.

                  (C)      If any of the Series G Notes subject to a Change of
         Control Offer are in the form of a Global Note, then the Company shall
         modify such notice to the extent necessary to accord with the
         Applicable Procedures of the Depositary applicable to offers to
         purchase.

                  (D)      On the Change of Control Payment Date, the Company
         shall, to the extent lawful, (1) accept for payment all Series G Notes
         or portions thereof properly tendered pursuant to the Change of Control
         Offer, (2) deposit with the Paying Agent in immediately available funds
         an amount equal to the Change of Control Payment in respect of all
         Series G Notes or portions thereof so tendered and (3) deliver or cause
         to be

                                       7



         delivered to the Trustee the Series G Notes so accepted together with
         an Officer's Certificate stating the aggregate principal amount of
         Series G Notes or portions thereof being purchased by the Company. The
         Paying Agent shall promptly mail to each Holder of Series G Notes so
         tendered the Change of Control Payment for such Series G Notes, and the
         Trustee shall promptly authenticate and make available for delivery to
         each Holder of Series G Notes a new Series G Note equal in principal
         amount to any unpurchased portion of the Series G Notes surrendered, if
         any; provided that each such new Series G Note shall be in a principal
         amount of $1,000 or an integral multiple thereof. Any Series G Note not
         so accepted shall be promptly mailed or delivered by the Company to the
         Holder thereof. The Company shall publicly announce the results of the
         Change of Control Offer on or as soon as practicable after the Change
         of Control Payment Date.

                  (E)      The Change of Control provisions described above that
         require the Company to make a Change of Control Offer following a
         Change of Control shall be applicable whether or not any other
         provisions of this Officer's Certificate are applicable.

                  (F)      The Company shall not be required to make a Change of
         Control Offer upon a Change of Control if a third party makes the
         Change of Control Offer in the manner, at the times and otherwise in
         compliance with the requirements set forth herein applicable to a
         Change of Control Offer made by the Company and purchases all Series G
         Notes validly tendered and not withdrawn under such Change of Control
         Offer.

                  (iv)     Offer to Purchase by Application of Excess Proceeds.

                  (A)      In the event that, pursuant to Section 1(u)(v)(D) of
         this Officer's Certificate (under the heading "Certain Covenants and
         Definitions--Asset Sales"), the Company shall be required to commence
         an Asset Sale Offer, it shall make an offer (an "Asset Sale Offer") to
         all Holders of Series G Notes, and all holders of other Indebtedness
         that is equally-ranked with the Series G Notes containing provisions
         similar to those set forth in this Officer's Certificate with respect
         to offers to purchase or redeem with the proceeds of sales of assets,
         to purchase the maximum principal amount of the Series G Notes and such
         other equally-ranked Indebtedness that may be purchased out of the
         Excess Proceeds. The offer price in any Asset Sale Offer shall be equal
         to 100% of principal amount plus accrued and unpaid interest and
         Liquidated Damages, if any, to the date of purchase, and shall be
         payable in cash. If any Excess Proceeds remain after consummation of an
         Asset Sale Offer, the Company may use those Excess Proceeds for any
         purpose not otherwise prohibited by this Officer's Certificate. If the
         aggregate principal amount of Series G Notes and other equally-ranked
         Indebtedness tendered into such Asset Sale Offer exceeds the amount of
         Excess Proceeds, the Trustee shall select the Series G Notes and such
         other equally-ranked Indebtedness to be purchased on a pro rata basis.
         The Company shall advise the Trustee of such other equally-ranked
         Indebtedness and the Trustee shall have no duty or responsibility to
         determine the accuracy or correctness of such advice and shall be fully
         protected in relying on such advice. Upon completion of each Asset Sale
         Offer, the amount of Excess Proceeds shall be reset at zero.

                                       8



                  (B)      Any Asset Sale Offer shall remain open for a period
         of 20 Business Days following its commencement and no longer, except to
         the extent that a longer period is required by applicable law (the
         "Offer Period"). No later than five Business Days after the termination
         of the Offer Period (the "Purchase Date"), the Company shall purchase
         the principal amount of Series G Notes required to be purchased
         pursuant to paragraph (A) above (the "Offer Amount") or, if less than
         the Offer Amount has been tendered, all Series G Notes validly tendered
         in response to the Asset Sale Offer.

                  (C)      Upon the commencement of an Asset Sale Offer, the
         Company shall send, by first class mail, a notice to each of the
         Holders of Series G Notes, with a copy to the Trustee, stating:

                  (1)      that the Asset Sale Offer is being made pursuant to
                           this Section 1(h)(iv) and Section 1(u)(v) of this
                           Officer's Certificate (under the heading "Certain
                           Covenants and Definitions--Asset Sales") and the
                           length of time the Asset Sale Offer shall remain
                           open;

                  (2)      the Offer Amount, the purchase price and the Purchase
                           Date;

                  (3)      that any Series G Note not tendered or accepted for
                           payment shall continue to accrue interest and
                           Liquidated Damages, if any;

                  (4)      that, unless the Company defaults in making such
                           payment, any Series G Note accepted for payment
                           pursuant to the Asset Sale Offer shall cease to
                           accrue interest and Liquidated Damages, if any, after
                           the Purchase Date;

                  (5)      that Holders of Series G Notes electing to have a
                           Series G Note purchased pursuant to any Asset Sale
                           Offer shall be required to surrender the Series G
                           Note, with the form entitled "Option of Holder to
                           Elect Purchase" on the reverse of the Series G Note
                           properly completed, together with other customary
                           documents as the Company may reasonably request, to
                           the Paying Agent at the address specified in the
                           notice prior to the close of business on the third
                           Business Day preceding the Purchase Date;

                  (6)      that Holders of Series G Notes shall be entitled to
                           withdraw their election if the Paying Agent receives,
                           not later than the close of business on the second
                           Business Day preceding the Purchase Date, a telegram,
                           telex, facsimile transmission or letter setting forth
                           the name of the Holder, the principal amount of
                           Series G Notes delivered for purchase, and a
                           statement that such Holder of Series G Notes is
                           withdrawing its election to have the Series G Notes
                           purchased;

                  (7)      that, if the aggregate principal amount of Series G
                           Notes surrendered by Holders of Series G Notes
                           exceeds the Offer Amount, the Trustee shall select
                           the Series G Notes to be purchased on a pro rata
                           basis (with such adjustments as may be deemed
                           appropriate by the Trustee so that only Series G
                           Notes in denominations of $1,000, or integral
                           multiples thereof, shall be purchased); and

                                       9



                  (8)      that Holders of Series G Notes whose Series G Notes
                           are being purchased only in part shall be issued new
                           Series G Notes equal in principal amount to the
                           unpurchased portion of the Notes surrendered, which
                           unpurchased portion must be equal to $1,000 in
                           principal amount or an integral multiple thereof.

                  (D)      If any of the Series G Notes subject to an Asset Sale
         Offer is in the form of a Global Note, then the Company shall modify
         such notice to the extent necessary to accord with the Applicable
         Procedures of the Depositary applicable to offers to purchase.

                  (E)      On or before the Purchase Date, the Company shall, to
         the extent lawful, accept for payment, on a pro rata basis to the
         extent necessary, the Offer Amount of Series G Notes or portions
         thereof tendered pursuant to the Asset Sale Offer, or if less than the
         Offer Amount has been tendered, all Series G Notes tendered, and shall
         deliver to the Trustee an officer's certificate stating that such
         Series G Notes or portions thereof were accepted for payment by the
         Company in accordance with the terms of this Section 1(h)(iv). The
         Paying Agent shall promptly (but in any case not later than five days
         after the Purchase Date) mail or deliver to each tendering Holder of
         Series G Notes an amount equal to the purchase price of the Series G
         Notes tendered by such Holder of Series G Notes and accepted by the
         Company for purchase, and the Company shall promptly issue a new Series
         G Note, and the Trustee, upon written request from the Company, shall
         authenticate and make available for delivery such new Series G Note to
         such Holder of Series G Notes, in a principal amount equal to any
         unpurchased portion of the Series G Note surrendered; provided that
         each such new Series G Note shall be in a principal amount of $1,000 or
         an integral multiple thereof. Any Series G Note not so accepted shall
         be promptly mailed or delivered by the Company to the Holder thereof.
         The Company shall publicly announce the results of the Asset Sale Offer
         on the Purchase Date.

                  (F)      The provisions of this Section 1(h)(iv) ("Offer to
         Purchase by Application of Excess Proceeds") is subject to the
         provisions of Section 1(u)(xiv) ("Certain Covenants and
         Definitions--Suspension of Certain Covenants").

                  (v)      Offers to Purchase - General.

                  (A)      If the Change of Control Payment Date or Purchase
         Date is on or after a Regular Record Date and on or before the related
         Interest Payment Date, any accrued and unpaid interest and Liquidated
         Damages, if any, shall be paid to the Person in whose name a Series G
         Note is registered at the close of business on such Regular Record
         Date, and no additional interest or Liquidated Damages shall be payable
         to Holders of Series G Notes who tender Series G Notes pursuant to the
         Change of Control Offer or the Asset Sale Offer.

                  (B)      The Company shall comply with the requirements of
         Rule 14e-1 under the Exchange Act and any other securities laws and
         regulations thereunder to the extent those laws and regulations are
         applicable in connection with a Change of Control Offer or an Asset
         Sale Offer. To the extent that the provisions of any securities laws or
         regulations

                                       10



         conflict with the Change of Control Offer or Asset Sale Offer
         provisions of this Officer's Certificate, the Company shall comply with
         the applicable securities laws and regulations and shall not be deemed
         to have breached its obligations under the Change of Control Offer or
         Asset Sale Offer provisions of this Officer's Certificate by virtue of
         such conflict.

         (i)      The Series G Notes are issuable only in denominations of
         $1,000 and integral multiples of $1,000 in excess thereof.

         (j)      Not applicable.

         (k)      Not applicable.

         (l)      Not applicable.

         (m)      See subsection (e) above.

         (n)      Not applicable.

         (o)      Not applicable.

         (p)      Not applicable.

         (q)      Book-entry; Delivery and Form.

                  (i)      Form and Dating.

                  The Series G Notes and the Trustee's certificate of
         authentication shall be substantially in the form of Exhibit A hereto.
         The Series G Notes may have notations, legends or endorsements required
         by law, stock exchange rule or usage. Each Series G Note shall be dated
         the date of its authentication. The Series G Notes shall be in
         denominations of $1,000 and integral multiples thereof.

                  The terms and provisions contained in the Series G Notes shall
         constitute, and are hereby expressly made, a part of this Officer's
         Certificate, and the Company, by its execution and delivery of this
         Officer's Certificate, expressly agrees to such terms and provisions
         and to be bound thereby. However, to the extent any provision of any
         Series G Note conflicts with the express provisions of this Officer's
         Certificate or the Indenture, the provisions of this Officer's
         Certificate or the Indenture, as applicable, shall govern and be
         controlling.

                  Series G Notes issued in global form shall be substantially in
         the form of Exhibit A attached hereto (including the Global Note Legend
         and the "Schedule of Exchanges in the Global Note" attached thereto).
         Series G Notes issued in definitive form shall be substantially in the
         form of Exhibit A attached hereto (but without the Global Note Legend
         and without the "Schedule of Exchanges of Interests in the Global Note"
         attached thereto). Each Global Note shall represent such aggregate
         principal amount of the outstanding Series G Notes as shall be
         specified therein and each shall provide that it

                                       11



         shall represent the aggregate principal amount of outstanding Series G
         Notes from time to time endorsed thereon and that the aggregate
         principal amount of outstanding Series G Notes represented thereby may
         from time to time be reduced or increased, as appropriate, to reflect
         exchanges and redemptions. Any endorsement of a Global Note to reflect
         the amount of any increase or decrease in the aggregate principal
         amount of outstanding Series G Notes represented thereby shall be made
         by the Trustee, the Depositary or the Note Custodian, at the direction
         of the Trustee, in accordance with instructions given by the Holder
         thereof as required by Section 1(q)(v) of this Officer's Certificate.

                  The provisions of the "Operating Procedures of the Euroclear
         System" and "Terms and Conditions Governing Use of Euroclear" and the
         "General Terms and Conditions of Clearstream Bank" and "Customer
         Handbook" of Clearstream shall be applicable to transfers of beneficial
         interests in the Regulation S Global Notes that are held by members of,
         or Participants, in DTC through Euroclear or Clearstream.

                  (ii)     Authentication.

                  The Trustee or an Authenticating Agent shall authenticate by
         delivery and execution of a Trustee's Certificate of Authentication in
         the form set forth in Section 2.02 of the Indenture (A) the Series G
         Notes for original issue on the Issue Date in the aggregate principal
         amount of $350,000,000 (the "Original Notes"), (B) additional Series G
         Notes for original issue from time to time after the Issue Date in such
         principal amounts as may be set forth in a Company Order (such
         additional Series G Notes, together with the Original Notes, the
         "Initial Notes") and (C) any Exchange Notes from time to time for issue
         only in exchange for a like principal amount of Initial Notes, in each
         case, upon a Company Order, which Company Order shall specify (x) the
         amount of Series G Notes to be authenticated and the date of original
         issue thereof, (y) whether the Series G Notes are Initial Notes or
         Exchange Notes and (z) the amount of Series G Notes to be issued in
         global form or definitive form. The aggregate principal amount of
         Series G Notes outstanding at any time may not exceed $350,000,000 plus
         such additional principal amounts as may be issued and authenticated
         pursuant to clause (B) of this paragraph, except as provided in Section
         1(q)(vii) of this Officer's Certificate.

                  (iii)    Security Registrar, Paying Agent and Depositary.

                  The Company initially appoints the Trustee to act as the
         Security Registrar and Paying Agent for the Series G Notes. Upon the
         occurrence of an event set forth under Sections 1(h)(i)(B)(1) or
         1(h)(i)(B)(2) herein or an Event of Default set forth in Sections
         10.01(d) or 10.01(e) of the Indenture, the Trustee shall serve as
         Paying Agent for the Series G Notes. The Company shall maintain a Place
         of Payment for the Series G Notes within the City and State of New York
         pursuant to Section 6.02 of the Indenture.

                  The Company initially appoints The Depository Trust Company
         ("DTC") to act as Depositary with respect to the Global Notes. The
         Trustee has been appointed by DTC to act as Note Custodian with respect
         to the Global Notes.

                  (iv)     Liquidated Damages, if any, to be Held in Trust.

                                       12



                  Payments of Liquidated Damages, if any, shall be subject to
         the provisions of Section 6.03 of the Indenture to the same extent as
         any payments of principal of or premium or interest on the Series G
         Notes.

                  (v)      Transfer and Exchange.

                  (A)      Transfer and Exchange of Global Notes. A Global Note
         may not be transferred as a whole except by the Depositary to a nominee
         of the Depositary, by a nominee of the Depositary to the Depositary or
         to another nominee of the Depositary, or by the Depositary or any such
         nominee to a successor Depositary or a nominee of such successor
         Depositary. All Global Notes shall be exchanged by the Company for
         Definitive Notes if:

                  (1)      the Company delivers to the Trustee notice from the
                           Depositary that it is unwilling or unable to continue
                           to act as Depositary for the Global Notes or that it
                           is no longer a clearing agency registered under the
                           Exchange Act and, in either case, a successor
                           Depositary is not appointed by the Company within 90
                           days after the date of such notice from the
                           Depositary or

                  (2)      the Company in its sole discretion notifies the
                           Trustee in writing that it elects to cause issuance
                           of the Series G Notes in certificated form.

                  Upon the occurrence of either of the preceding events in (1)
                  or (2) above, Definitive Notes shall be issued in such names
                  as the Depositary shall instruct the Trustee. Global Notes
                  also may be exchanged or replaced, in whole or in part, as
                  provided in Sections 3.06 and 3.09 of the Indenture. Every
                  Series G Note authenticated and delivered in exchange for, or
                  in lieu of, a Global Note or any portion thereof, pursuant to
                  Sections 3.06 and 3.09 of the Indenture, shall be
                  authenticated and delivered in the form of, and shall be, a
                  Global Note. A Global Note may not be exchanged for another
                  Series G Note other than as provided in this Section
                  1(q)(v)(A), however, beneficial interests in a Global Note may
                  be transferred and exchanged as provided in Section
                  1(q)(v)(B), (C) or (F) of this Officer's Certificate.

                  (B)      Transfer and Exchange of Beneficial Interests in the
         Global Notes. The transfer and exchange of beneficial interests in the
         Global Notes shall be effected through the Depositary, in accordance
         with the provisions of this Officer's Certificate and the Applicable
         Procedures. Beneficial interests in the Restricted Global Notes shall
         be subject to restrictions on transfer comparable to those set forth
         herein to the extent required by the Securities Act. Transfers of
         beneficial interests in the Global Notes also shall require compliance
         with either subparagraph (1) or (2) below, as applicable, as well as
         one or more of the other following subparagraphs as applicable:

                           (1)      Transfer of Beneficial Interests in the Same
                  Global Note. Beneficial interests in any Restricted Global
                  Note may be transferred to Persons who take delivery thereof
                  in the form of a beneficial interest in the same

                                       13



                  Restricted Global Note in accordance with the transfer
                  restrictions set forth in the Private Placement Legend;
                  provided, however, that prior to the expiration of the
                  Restricted Period transfers of beneficial interests in the
                  Regulation S Global Note may not be made to a U.S. Person or
                  for the account or benefit of a U.S. Person (other than an
                  Initial Purchaser). Beneficial interests in any Unrestricted
                  Global Note may be transferred only to Persons who take
                  delivery thereof in the form of a beneficial interest in an
                  Unrestricted Global Note. No written orders or instructions
                  shall be required to be delivered to the Security Registrar to
                  effect the transfers described in this Section 1(q)(v)(B)(1).

                           (2)      All Other Transfers and Exchanges of
                  Beneficial Interests in Global Notes. In connection with all
                  transfers and exchanges of beneficial interests (other than a
                  transfer of a beneficial interest in a Global Note to a Person
                  who takes delivery thereof in the form of a beneficial
                  interest in the same Global Note), the transferor of such
                  beneficial interest must deliver to the Security Registrar
                  either:

                                    (a)      both (i) a written order from a
                           Participant or an Indirect Participant given to the
                           Depositary in accordance with the Applicable
                           Procedures directing the Depositary to credit or
                           cause to be credited a beneficial interest in another
                           Global Note in an amount equal to the beneficial
                           interest to be transferred or exchanged and (ii)
                           instructions given in accordance with the Applicable
                           Procedures containing information regarding the
                           Participant account to be credited with such increase
                           or

                                    (b)      both (i) a written order from a
                           Participant or an Indirect Participant given to the
                           Depositary in accordance with the Applicable
                           Procedures directing the Depositary to cause to be
                           issued a Definitive Note in an amount equal to the
                           beneficial interest to be transferred or exchanged
                           and (ii) instructions given by the Depositary to the
                           Security Registrar containing information regarding
                           the Person in whose name such Definitive Note shall
                           be registered to effect the transfer or exchange
                           referred to in (i) above.

                  Upon an Exchange Offer by the Company in accordance with
                  Section 1(q)(v)(F) of this Officer's Certificate, the
                  requirements of this Section 1(q)(v)(B)(2) shall be deemed to
                  have been satisfied upon receipt by the Security Registrar of
                  the instructions contained in the Letter of Transmittal
                  delivered by the Holder of such beneficial interests in the
                  Restricted Global Notes. Upon notification from the Security
                  Registrar that all of the requirements for transfer or
                  exchange of beneficial interests in Global Notes contained in
                  this Officer's Certificate, the Series G Notes and otherwise
                  applicable under the Securities Act have been satisfied, the
                  Trustee shall adjust the principal amount of the relevant
                  Global Notes pursuant to Section 1(q)(v)(H) of this Officer's
                  Certificate.

                                       14



                           (3)      Transfer of Beneficial Interests to Another
                  Restricted Global Note. A beneficial interest in any
                  Restricted Global Note may be transferred to a Person who
                  takes delivery thereof in the form of a beneficial interest in
                  another Restricted Global Note if the transfer complies with
                  the requirements of clause (2) above and the Security
                  Registrar receives the following:

                                    (a)      if the transferee shall take
                           delivery in the form of a beneficial interest in the
                           Rule 144A Global Note, then the transferor must
                           deliver a certificate in the form of Exhibit B
                           hereto, including the certifications in Item (1)
                           thereof; or

                                    (b)      if the transferee shall take
                           delivery in the form of a beneficial interest in the
                           Regulation S Global Note, then the transferor must
                           deliver a certificate in the form of Exhibit B
                           hereto, including the certifications in Item (2)
                           thereof.

                           (4)      Transfer and Exchange of Beneficial
                  Interests in a Restricted Global Note for Beneficial Interests
                  in the Unrestricted Global Note. A beneficial interest in any
                  Restricted Global Note may be exchanged by any holder thereof
                  for a beneficial interest in an Unrestricted Global Note or
                  transferred to a Person who takes delivery thereof in the form
                  of a beneficial interest in an Unrestricted Global Note if the
                  exchange or transfer complies with the requirements of clause
                  (2) above and:

                                    (a)      such exchange or transfer is
                           effected pursuant to an Exchange Offer in accordance
                           with the Registration Rights Agreement and the holder
                           of the beneficial interest to be transferred, in the
                           case of an exchange, or the transferee, in the case
                           of a transfer, is not (i) a broker-dealer, (ii) a
                           Person participating in the distribution of the
                           Exchange Notes or (iii) a Person who is an affiliate
                           (as defined in Rule 144) of the Company;

                                    (b)      any such transfer is effected
                           pursuant to a Shelf Registration Statement in
                           accordance with the Registration Rights Agreement;

                                    (c)      any such transfer is effected by a
                           Broker-Dealer pursuant to an Exchange Offer
                           Registration Statement in accordance with the
                           Registration Rights Agreement; or

                                    (d)      the Security Registrar receives the
                           following:

                           (i)      if the holder of such beneficial interest in
         a Restricted Global Note proposes to exchange such beneficial interest
         for a beneficial interest in an Unrestricted Global Note, a certificate
         from such holder in the form of Exhibit C hereto, including the
         certifications in Item (1)(a) thereof; or

                                       15



                           (ii)     if the holder of such beneficial interest in
         a Restricted Global Note proposes to transfer such beneficial interest
         to a Person who shall take delivery thereof in the form of a beneficial
         interest in an Unrestricted Global Note, a certificate from such holder
         in the form of Exhibit B hereto, including the certifications in Item
         (4) thereof;

         and, in each such case set forth in this subparagraph (d), an Opinion
         of Counsel in form reasonably acceptable to the Company to the effect
         that such exchange or transfer is in compliance with the Securities Act
         and that the restrictions on transfer contained herein and in the
         Private Placement Legend are not required in order to maintain
         compliance with the Securities Act.

                  If any such transfer is effected pursuant to subparagraph (b)
         or (d) above at a time when an Unrestricted Global Note has not yet
         been issued, the Company shall issue and, upon receipt of an
         authentication order in accordance with Section 1(q)(ii) of this
         Officer's Certificate, the Trustee shall authenticate one or more
         Unrestricted Global Notes in an aggregate principal amount equal to the
         principal amount of beneficial interests transferred pursuant to
         subparagraph (b) or (d) above.

                  Beneficial interests in an Unrestricted Global Note cannot be
         exchanged for, or transferred to Persons who take delivery thereof in
         the form of, a beneficial interest in a Restricted Global Note.

                  (C)      Transfer or Exchange of Beneficial Interests for
         Definitive Notes.

                           (1)      Beneficial Interests in Restricted Global
                  Notes to Restricted Definitive Notes. If any holder of a
                  beneficial interest in a Restricted Global Note proposes to
                  exchange such beneficial interest for a Definitive Note or to
                  transfer such beneficial interest to a Person who takes
                  delivery thereof in the form of a Definitive Note, then, upon
                  receipt by the Security Registrar of the following
                  documentation:

                                    (a)      if the holder of such beneficial
                           interest in a Restricted Global Note proposes to
                           exchange such beneficial interest for a Restricted
                           Definitive Note, a certificate from such holder in
                           the form of Exhibit C hereto, including the
                           certifications in Item (2)(a) thereof;

                                    (b)      if such beneficial interest is
                           being transferred to a QIB in accordance with Rule
                           144A under the Securities Act, a certificate to the
                           effect set forth in Exhibit B hereto, including the
                           certifications in Item (1) thereof;

                                    (c)      if such beneficial interest is
                           being transferred to a Non-U.S. Person in an offshore
                           transaction in accordance with Rule 903 or Rule 904
                           under the Securities Act, a certificate to the effect
                           set forth in Exhibit B hereto, including the
                           certifications in Item (2) thereof;

                                    (d)      if such beneficial interest is
                           being transferred pursuant to an exemption from the
                           registration requirements of the Securities Act in

                                       16



                           accordance with Rule 144 under the Securities Act, a
                           certificate to the effect set forth in Exhibit B
                           hereto, including the certifications in Item (3)(a)
                           thereof;

                                    (e)      if such beneficial interest is
                           being transferred to an Institutional Accredited
                           Investor or in reliance on any other exemption from
                           the registration requirements of the Securities Act,
                           in either case other than those listed in
                           subparagraphs (b) through (d) above, then the
                           transferor must deliver a certificate in the form of
                           Exhibit B hereto, including the certifications,
                           certificates and any Opinion of Counsel required by
                           Item (3) thereof, if applicable;

                                    (f)      if such beneficial interest is
                           being transferred to the Company or any of its
                           Subsidiaries, a certificate to the effect set forth
                           in Exhibit B hereto, including the certifications in
                           Item (3)(b) thereof; or

                                    (g)      if such beneficial interest is
                           being transferred pursuant to an effective
                           registration statement under the Securities Act, a
                           certificate to the effect set forth in Exhibit B
                           hereto, including the certifications in Item (3)(c)
                           thereof,

         the Trustee, upon notice of receipt of such documentation by the
         Security Registrar, shall cause the aggregate principal amount of the
         applicable Global Note to be reduced accordingly pursuant to Section
         1(q)(v)(H) of this Officer's Certificate, and the Company shall execute
         and the Trustee shall authenticate and make available for delivery to
         the Person designated in the instructions a Definitive Note in the
         appropriate principal amount. Any Definitive Note issued in exchange
         for a beneficial interest in a Restricted Global Note pursuant to this
         Section 1(q)(v)(C) shall be registered in such name or names and in
         such authorized denomination or denominations as the holder of such
         beneficial interest shall instruct the Security Registrar through
         instructions from the Depositary and the Participant or Indirect
         Participant. The Trustee shall make available for delivery such
         Definitive Notes to the Persons in whose names such Series G Notes are
         so registered. Any Definitive Note issued in exchange for a beneficial
         interest in a Restricted Global Note pursuant to this Section
         1(q)(v)(C)(1) shall bear the Private Placement Legend and shall be
         subject to all restrictions on transfer contained therein.

                  Notwithstanding Sections 1(q)(v)(C)(1)(a) and (c) hereof, a
         beneficial interest in the Regulation S Global Note may not be (a)
         exchanged for a Definitive Note prior to (x) the expiration of the
         Restricted Period and (y) the receipt by the Security Registrar of any
         certificates required pursuant to Rule 903(c)(3)(B) under the
         Securities Act or (b) transferred to a Person who takes delivery
         thereof in the form of a Definitive Note prior to the conditions set
         forth in clause (a) above or unless the transfer is pursuant to an
         exemption from the registration requirements of the Securities Act
         other than Rule 903 or Rule 904.

                           (2)      Beneficial Interests in Restricted Global
                  Notes to Unrestricted Definitive Notes. Notwithstanding
                  Section 1(q)(v)(C)(1) hereof, a holder of a

                                       17



                  beneficial interest in a Restricted Global Note may exchange
                  such beneficial interest for an Unrestricted Definitive Note
                  or may transfer such beneficial interest to a Person who takes
                  delivery thereof in the form of an Unrestricted Definitive
                  Note only if:

                                    (a)      such exchange or transfer is
                           effected pursuant to an Exchange Offer in accordance
                           with the Registration Rights Agreement and the holder
                           of such beneficial interest, in the case of an
                           exchange, or the transferee, in the case of a
                           transfer, is not (i) a broker-dealer, (ii) a Person
                           participating in the distribution of the Exchange
                           Notes or (iii) a Person who is an affiliate (as
                           defined in Rule 144) of the Company;

                                    (b)      any such transfer is effected
                           pursuant to a Shelf Registration Statement in
                           accordance with the Registration Rights Agreement;

                                    (c)      any such transfer is effected by a
                           Broker-Dealer pursuant to an Exchange Offer
                           Registration Statement in accordance with the
                           Registration Rights Agreement; or

                                    (d)      the Security Registrar receives the
                           following:

                           (i)      if the holder of such beneficial interest in
         a Restricted Global Note proposes to exchange such beneficial interest
         for a Definitive Note that does not bear the Private Placement Legend,
         a certificate from such holder in the form of Exhibit C hereto,
         including the certifications in Item (1)(b) thereof; or

                           (ii)     if the holder of such beneficial interest in
         a Restricted Global Note proposes to transfer such beneficial interest
         to a Person who shall take delivery thereof in the form of a Definitive
         Note that does not bear the Private Placement Legend, a certificate
         from such holder in the form of Exhibit B hereto, including the
         certifications in Item (4) thereof;

         and, in each such case set forth in this subparagraph (d), an Opinion
         of Counsel in form reasonably acceptable to the Company, to the effect
         that such exchange or transfer is in compliance with the Securities Act
         and that the restrictions on transfer contained herein and in the
         Private Placement Legend are not required in order to maintain
         compliance with the Securities Act.

                           (3)      Beneficial Interests in Unrestricted Global
                  Notes to Unrestricted Definitive Notes. If any holder of a
                  beneficial interest in an Unrestricted Global Note proposes to
                  exchange such beneficial interest for a Definitive Note or to
                  transfer such beneficial interest to a Person who takes
                  delivery thereof in the form of a Definitive Note, then, upon
                  notice by the Security Registrar of satisfaction of the
                  conditions set forth in Section 1(q)(v)(B)(2) of this
                  Officer's Certificate, the Trustee shall cause the aggregate
                  principal amount of the applicable Global Note to be reduced
                  accordingly pursuant to Section 1(q)(v)(H) of this Officer's
                  Certificate, and the Company shall execute and the Trustee
                  shall authenticate and

                                       18



                  make available for delivery to the Person designated in the
                  instructions a Definitive Note in the appropriate principal
                  amount. Any Definitive Note issued in exchange for a
                  beneficial interest pursuant to this Section 1(q)(v)(C)(3)
                  shall be registered in such name or names and in such
                  authorized denomination or denominations as the holder of such
                  beneficial interest shall instruct the Security Registrar
                  through instructions from the Depositary and the Participant
                  or Indirect Participant. The Trustee shall make available for
                  delivery such Definitive Notes to the Persons in whose names
                  such Series G Notes are so registered. Any Definitive Note
                  issued in exchange for a beneficial interest pursuant to this
                  Section 1(q)(v)(C)(3) shall not bear the Private Placement
                  Legend. A beneficial interest in an Unrestricted Global Note
                  cannot be exchanged for a Definitive Note bearing the Private
                  Placement Legend or transferred to a Person who takes delivery
                  thereof in the form of a Definitive Note bearing the Private
                  Placement Legend.

                  (D)      Transfer and Exchange of Definitive Notes for
         Beneficial Interests.

                           (1)      Restricted Definitive Notes to Beneficial
                  Interests in Restricted Global Notes. If any Holder of a
                  Restricted Definitive Note proposes to exchange such Series G
                  Note for a beneficial interest in a Restricted Global Note or
                  to transfer such Definitive Notes to a Person who takes
                  delivery thereof in the form of a beneficial interest in a
                  Restricted Global Note, then, upon receipt by the Security
                  Registrar of the following documentation:

                                    (a)      if the Holder of such Restricted
                           Definitive Note proposes to exchange such Series G
                           Note for a beneficial interest in a Restricted Global
                           Note, a certificate from such Holder in the form of
                           Exhibit C hereto, including the certifications in
                           Item (2)(b) thereof;

                                    (b)      if such Definitive Note is being
                           transferred to a QIB in accordance with Rule 144A
                           under the Securities Act, a certificate to the effect
                           set forth in Exhibit B hereto, including the
                           certifications in Item (1) thereof;

                                    (c)      if such Definitive Note is being
                           transferred to a Non-U.S. Person in an offshore
                           transaction in accordance with Rule 903 or Rule 904
                           under the Securities Act, a certificate to the effect
                           set forth in Exhibit B hereto, including the
                           certifications in Item (2) thereof;

                                    (d)      if such Definitive Note is being
                           transferred pursuant to an exemption from the
                           registration requirements of the Securities Act in
                           accordance with Rule 144 under the Securities Act, a
                           certificate to the effect set forth in Exhibit B
                           hereto, including the certifications in Item (3)(a)
                           thereof;

                                    (e)      if such Definitive Note is being
                           transferred to an Institutional Accredited Investor
                           or in reliance on any other exemption

                                       19



                           from the registration requirements of the Securities
                           Act, in either case, other than those listed in
                           subparagraphs (b) through (d) above, a certificate in
                           the form of Exhibit B hereto, including
                           certifications, certificates, and any Opinion of
                           Counsel required by Item (3) thereof, if applicable;

                                    (f)      if such Definitive Note is being
                           transferred to the Company or any of its
                           Subsidiaries, a certificate to the effect set forth
                           in Exhibit B hereto, including the certifications in
                           Item (3)(b) thereof; or

                                    (g)      if such Definitive Note is being
                           transferred pursuant to an effective registration
                           statement under the Securities Act, a certificate to
                           the effect set forth in Exhibit B hereto, including
                           the certifications in Item (3)(c) thereof,

         the Trustee, upon notice of receipt of such documentation by the
         Security Registrar, shall cancel the Definitive Note, increase or cause
         to be increased the aggregate principal amount of, in the case of
         subparagraph (a) above, the appropriate Restricted Global Note and, in
         the case of subparagraph (b) above, the Rule 144A Global Note, and, in
         the case of subparagraph (c) above, the Regulation S Global Note.

                           (2)      Restricted Definitive Notes to Beneficial
                  Interests in Unrestricted Global Notes. A Holder of a
                  Restricted Definitive Note may exchange such Series G Note for
                  a beneficial interest in an Unrestricted Global Note or
                  transfer such Restricted Definitive Note to a Person who takes
                  delivery thereof in the form of a beneficial interest in an
                  Unrestricted Global Note only if:

                                    (a)      such exchange or transfer is
                           effected pursuant to an Exchange Offer in accordance
                           with the Registration Rights Agreement and the
                           Holder, in the case of an exchange, or the
                           transferee, in the case of a transfer, is not (i) a
                           broker-dealer, (ii) a Person participating in the
                           distribution of the Exchange Notes or (iii) a Person
                           who is an affiliate (as defined in Rule 144) of the
                           Company;

                                    (b)      any such transfer is effected
                           pursuant to a Shelf Registration Statement in
                           accordance with the Registration Rights Agreement;

                                    (c)      any such transfer is effected by a
                           Broker-Dealer pursuant to an Exchange Offer
                           Registration Statement in accordance with the
                           Registration Rights Agreement; or

                                    (d)      the Security Registrar receives the
                           following:

                           (i)      if the Holder of such Definitive Notes
         proposes to exchange such Series G Notes for a beneficial interest in
         the Unrestricted Global Note, a certificate from such Holder in the
         form of Exhibit C hereto, including the certifications in Item (1)(c)
         thereof; or

                                       20



                           (ii)     if the Holder of such Definitive Notes
         proposes to transfer such Series G Notes to a Person who shall take
         delivery thereof in the form of a beneficial interest in the
         Unrestricted Global Note, a certificate from such Holder in the form of
         Exhibit B hereto, including the certifications in Item (4) thereof;

         and, in each such case set forth in this subparagraph (d), an Opinion
         of Counsel in form reasonably acceptable to the Company to the effect
         that such exchange or transfer is in compliance with the Securities
         Act, that the restrictions on transfer contained herein and in the
         Private Placement Legend are not required in order to maintain
         compliance with the Securities Act, and such Definitive Notes are being
         exchanged or transferred in compliance with any applicable blue sky
         securities laws of any State of the United States.

                  Upon satisfaction of the conditions of any of the
         subparagraphs in this Section 1(q)(v)(D)(2), the Trustee shall cancel
         the Definitive Notes and increase or cause to be increased the
         aggregate principal amount of the Unrestricted Global Note.

                           (3)      Unrestricted Definitive Notes to Beneficial
                  Interests in Unrestricted Global Notes. A Holder of an
                  Unrestricted Definitive Note may exchange such Series G Note
                  for a beneficial interest in an Unrestricted Global Note or
                  transfer such Definitive Notes to a Person who takes delivery
                  thereof in the form of a beneficial interest in an
                  Unrestricted Global Note at any time. Upon receipt of a
                  request for such an exchange or transfer, the Trustee shall
                  cancel the applicable Unrestricted Definitive Note and
                  increase or cause to be increased the aggregate principal
                  amount of one of the Unrestricted Global Notes.

                           If any such exchange or transfer from a Definitive
                  Note to a beneficial interest is effected pursuant to Sections
                  1(q)(v)(D)(2)(b) or (d) or the first paragraph of this Section
                  1(q)(v)(D)(3) at a time when an Unrestricted Global Note has
                  not yet been issued, the Company shall issue and, upon receipt
                  of an authentication order in accordance with Section 1(q)(ii)
                  of this Officer's Certificate, the Trustee shall authenticate
                  one or more Unrestricted Global Notes in an aggregate
                  principal amount equal to the principal amount of beneficial
                  interests transferred pursuant to Sections 1(q)(v)(D)(2)(b) or
                  (d) or the first paragraph of this Section 1(q)(v)(D)(3).

                  (E)      Transfer and Exchange of Definitive Notes for
         Definitive Notes. Upon request by a Holder of Definitive Notes and such
         Holder's compliance with the provisions of this Section 1(q)(v)(E), the
         Security Registrar shall register the transfer or exchange of
         Definitive Notes. Prior to such registration of transfer or exchange,
         the requesting Holder shall present or surrender to the Security
         Registrar the Definitive Notes duly endorsed or accompanied by a
         written instruction of transfer in form satisfactory to the Security
         Registrar duly executed by such Holder or by his attorney, duly
         authorized in writing. In addition, the requesting Holder shall provide
         any additional certifications, documents and information, as
         applicable, pursuant to the provisions of this Section 1(q)(v)(E).

                                       21



                           (1)      Restricted Definitive Notes to Restricted
                  Definitive Notes. Restricted Definitive Notes may be
                  transferred to and registered in the name of Persons who take
                  delivery thereof if the Security Registrar receives the
                  following:

                                    (a)      if the transfer shall be made
                           pursuant to Rule 144A under the Securities Act, then
                           the transferor must deliver a certificate in the form
                           of Exhibit B hereto, including the certifications in
                           Item (1) thereof;

                                    (b)      if the transfer shall be made
                           pursuant to Rule 903 or Rule 904 of the Securities
                           Act, then the transferor must deliver a certificate
                           in the form of Exhibit B hereto, including the
                           certifications in Item (2) thereof; and

                                    (c)      if the transfer shall be made
                           pursuant to any other exemption from the registration
                           requirements of the Securities Act, then the
                           transferor must deliver a certificate in the form of
                           Exhibit B hereto, including the certifications,
                           certificates and Opinion of Counsel required by Item
                           (3) thereof, if applicable.

                           (2)      Restricted Definitive Notes to Unrestricted
                  Definitive Notes. Any Restricted Definitive Note may be
                  exchanged by the Holder thereof for an Unrestricted Definitive
                  Note or transferred to a Person or Persons who take delivery
                  thereof in the form of an Unrestricted Definitive Note if:

                                    (a)      such exchange or transfer is
                           effected pursuant to an Exchange Offer in accordance
                           with the Registration Rights Agreement and the Holder
                           of such Series G Notes, in the case of an exchange,
                           or the transferee, in the case of a transfer, is not
                           (i) a broker-dealer, (ii) a Person participating in
                           the distribution of the Exchange Notes or (iii) a
                           Person who is an affiliate (as defined in Rule 144)
                           of the Company;

                                    (b)      any such transfer is effected
                           pursuant to a Shelf Registration Statement in
                           accordance with the Registration Rights Agreement;

                                    (c)      any such transfer is effected by a
                           Broker-Dealer pursuant to an Exchange Offer
                           Registration Statement in accordance with the
                           Registration Rights Agreement; or

                                    (d)      the Security Registrar receives the
                           following:

                           (i)      if the Holder of such Restricted Definitive
         Notes proposes to exchange such Series G Notes for an Unrestricted
         Definitive Note, a certificate from such Holder in the form of Exhibit
         C hereto, including the certifications in Item (1)(b) thereof; or

                           (ii)     if the Holder of such Restricted Definitive
         Notes proposes to transfer such Series G Notes to a Person who shall
         take delivery thereof in the form of an

                                       22



         Unrestricted Definitive Note, a certificate from such Holder in the
         form of Exhibit B hereto, including the certifications in Item (4)
         thereof;

         and, in each such case set forth in this subparagraph (d), an Opinion
         of Counsel in form reasonably acceptable to the Company to the effect
         that such exchange or transfer is in compliance with the Securities
         Act, that the restrictions on transfer contained herein and in the
         Private Placement Legend are not required in order to maintain
         compliance with the Securities Act, and such Restricted Definitive Note
         is being exchanged or transferred in compliance with any applicable
         blue sky securities laws of any State of the United States.

                           (3)      Unrestricted Definitive Notes to
                  Unrestricted Definitive Notes. A Holder of Unrestricted
                  Definitive Notes may transfer such Series G Notes to a Person
                  who takes delivery thereof in the form of an Unrestricted
                  Definitive Note. Upon receipt of a request for such a
                  transfer, the Security Registrar shall register the
                  Unrestricted Definitive Notes pursuant to the instructions
                  from the Holder thereof. Unrestricted Definitive Notes cannot
                  be exchanged for or transferred to Persons who take delivery
                  thereof in the form of a Restricted Definitive Note.

                  (F)      Exchange Offer. Upon the occurrence of an Exchange
         Offer in accordance with the Registration Rights Agreement, the Company
         shall issue and, upon receipt of (a) an authentication order in
         accordance with Section 1(q)(ii) of this Officer's Certificate and (b)
         an Opinion of Counsel opining as to the enforceability of the Exchange
         Notes and the guarantees thereof, if any, the Trustee shall
         authenticate (1) one or more Unrestricted Global Notes in an aggregate
         principal amount equal to the principal amount of the beneficial
         interests in the Restricted Global Notes tendered for acceptance by
         Persons that are not (i) broker-dealers, (ii) Persons participating in
         the distribution of the Exchange Notes or (iii) Persons who are
         affiliates (as defined in Rule 144) of the Company and accepted for
         exchange in such Exchange Offer and (2) Definitive Notes in an
         aggregate principal amount equal to the principal amount of the
         Restricted Definitive Notes accepted for exchange in such Exchange
         Offer, unless the Holders of such Restricted Definitive Notes shall
         request the receipt of Definitive Notes, in which case the Company
         shall execute and the Trustee shall authenticate and deliver to the
         Persons designated by the Holders of such Restricted Definitive Notes
         one or more Definitive Notes without the Private Placement Legend in
         the appropriate principal amount. Concurrent with the issuance of such
         Unrestricted Global Notes, the Trustee shall cause the aggregate
         principal amount of the applicable Restricted Global Notes to be
         reduced accordingly, and the Company shall execute and the Trustee
         shall authenticate and make available for delivery to the Persons
         designated by the Holders of Definitive Notes so accepted Definitive
         Notes in the appropriate principal amount.

                  (G)      Legends. The following legends shall appear on the
         face of all Global Notes and Definitive Notes issued under this
         Indenture unless specifically stated otherwise in the applicable
         provisions of this Officer's Certificate.

                           (1)      Private Placement Legend.

                                       23



                                    (a)      Except as permitted by subparagraph
                           (b) below, each Global Note and each Definitive Note
                           (and all Series G Notes issued in exchange therefor
                           or substitution thereof) shall bear the legend in
                           substantially the following form:

         "THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR OTHER
         SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION
         HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
         ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
         OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
         REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS
         SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
         "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
         SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS
         NOTE IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S
         UNDER THE SECURITIES ACT, (2) AGREES THAT IT SHALL NOT PRIOR TO (X) THE
         DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY
         RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION
         THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
         ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH THE COMPANY OR
         ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY
         PREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
         REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"),
         OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY,
         (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
         EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE
         ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
         BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
         UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
         ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
         THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A INSIDE THE UNITED
         STATES, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
         OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
         SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
         THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT
         IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
         SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY,
         THE TRUSTEE AND THE SECURITY REGISTRAR SHALL HAVE THE RIGHT PRIOR TO
         ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO
         REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR
         OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND

                                       24



         (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF
         TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE IS
         COMPLETED AND DELIVERED BY THIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND
         SHALL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
         RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE
         TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN
         TO THEM BY REGULATION S UNDER THE SECURITIES ACT."

                                    (b)      Notwithstanding the foregoing, any
                           Global Note or Definitive Note issued pursuant to
                           subparagraph (B)(4), (C)(2), (D)(2), (D)(3), (E)(2),
                           (E)(3) or (F) of this Section 1(q)(v) (and all Series
                           G Notes issued in exchange therefor or substitution
                           thereof) shall not bear the Private Placement Legend.

                           (2)      Global Note Legend. Each Global Note shall
                  bear a legend in substantially the following form:

         "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
         OFFICER'S CERTIFICATE UNDER THE INDENTURE GOVERNING THIS NOTE) OR ITS
         NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND
         IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT
         (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
         PURSUANT TO ARTICLE III OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
         EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 1(q)(v)(A) OF
         THE OFFICER'S CERTIFICATE UNDER THE INDENTURE, (III) THIS GLOBAL NOTE
         MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
         3.09 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
         SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY OR
         ANY SUCCESSOR THERETO."

                  Additionally, for so long as DTC is the Depositary with
         respect to any Global Note, each such Global Note shall also bear a
         legend in substantially the following form:

         "UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
         DEPOSITARY, TO THE COMPANY OR ANY SUCCESSOR THERETO 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 THE DEPOSITARY (AND ANY
         PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
         BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), 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."

                                       25



                  (H)      Cancellation and/or Adjustment of Global Notes. At
         such time as all beneficial interests in a particular Global Note have
         been exchanged for Definitive Notes or a particular Global Note has
         been redeemed, repurchased or canceled in whole and not in part, each
         such Global Note shall be returned to or retained and canceled by the
         Trustee in accordance with Section 3.09 of the Indenture. At any time
         prior to such cancellation, if any beneficial interest in a Global Note
         is exchanged for or transferred to a Person who shall take delivery
         thereof in the form of a beneficial interest in another Global Note or
         for Definitive Notes, the principal amount of Series G Notes
         represented by such Global Note shall be reduced accordingly and an
         endorsement shall be made on such Global Note, by the Trustee, the Note
         Custodian or the Depositary at the direction of the Trustee, to reflect
         such reduction; and if the beneficial interest is being exchanged for
         or transferred to a Person who shall take delivery thereof in the form
         of a beneficial interest in another Global Note, such other Global Note
         shall be increased accordingly and an endorsement shall be made on such
         Global Note, by the Trustee, the Note Custodian or by the Depositary at
         the direction of the Trustee, to reflect such increase.

                  (I)      General Provisions Relating to Transfers and
         Exchanges.

                  (1)      To permit registrations of transfers and exchanges,
         subject to Section 1(q)(v) of this Officer's Certificate, the Company
         shall execute and, upon the Company's order, the Trustee or an
         Authenticating Agent shall authenticate Global Notes and Definitive
         Notes at the Security Registrar's request.

                  (2)      All certifications, certificates and Opinions of
         Counsel required to be submitted to the Security Registrar pursuant to
         this Section 1(q)(v) to effect a transfer or exchange may be submitted
         by facsimile.

                  (3)      The Trustee and the Security Registrar shall have no
         obligation or duty to monitor, determine or inquire as to whether any
         Person is or is not a Person described in clauses (i), (ii) and (iii)
         of each of Sections 1(q)(v)(B)(4)(a), 1(q)(v)(C)(2)(a),
         1(q)(v)(D)(2)(a), 1(q)(v)(E)(2)(a) and 1(q)(v)(F) of this Officer's
         Certificate or under applicable law (other than the Trust Indenture
         Act) with respect to any transfer of any interest in any Series G Note
         (including any transfers between or among Participants or beneficial
         owners of interests in any Global Note) other than to require delivery
         of such certificates and other documentation or evidence as are
         expressly required by, and to do so if and when expressly required by
         the terms of, this Indenture, and to examine the same to determine
         substantial compliance as to form with the express requirements hereof.

                  (vi)     Outstanding Series G Notes.

                  Notwithstanding the definition of "Outstanding" in Section
         1.01 of the Indenture, Series G Notes that the Company, a Subsidiary of
         the Company or an Affiliate of the Company offers to purchase or
         acquires pursuant to an offer, exchange offer, tender offer or
         otherwise shall not be deemed to be owned by the Company, such
         Subsidiary or such Affiliate until legal title to such Series G Notes
         passes to the Company, such Subsidiary or such Affiliate, as the case
         may be.

                                       26



         (r)      Not applicable.

         (s)      The Series G Notes have not been registered under the
         Securities Act and may not be offered, sold or otherwise transferred in
         the absence of such registration or an applicable exemption therefrom.
         No service charge shall be made for the registration of transfer or
         exchange of the Series G Notes; provided, however, that the Company may
         require payment of a sum sufficient to cover any tax or other
         governmental charge payable in connection with the exchange or transfer
         (other than any such transfer taxes or similar governmental charge
         payable upon exchange or transfer pursuant to Sections 1.06(f), 3.04,
         5.06 or 14.06 of the Indenture and Sections 1(h)(iii) and 1(h)(iv) of
         this Officer's Certificate not involving any transfer).

         (t)      For purposes of the Series G Notes, "Business Day" shall mean
         any day, other than Saturday or Sunday, on which commercial banks are
         open for business, including dealings in deposits in U.S. dollars, in
         New York.

         (u)      Certain Covenants and Definitions.

                  (i)      Restricted Payments.

                  (A)      The Company shall not, and shall not permit any of
         its Restricted Subsidiaries to, directly or indirectly:

                  (1)      declare or pay any dividend or make any other payment
                           or distribution on account of the Company's or any of
                           its Restricted Subsidiaries' Equity Interests
                           (including, without limitation, any payment in
                           connection with any merger or consolidation involving
                           the Company or any of its Restricted Subsidiaries) or
                           to the direct or indirect holders of the Company's or
                           any of its Restricted Subsidiaries' Equity Interests
                           in their capacity as such (other than dividends or
                           distributions payable in Equity Interests (other than
                           Disqualified Stock) of the Company) or to the Company
                           or a Restricted Subsidiary of the Company;

                  (2)      purchase, redeem or otherwise acquire or retire for
                           value (including, without limitation, in connection
                           with any merger or consolidation involving the
                           Company) any Equity Interests of the Company or any
                           direct or indirect parent of the Company;

                  (3)      make any payment on or with respect to, or purchase,
                           redeem, defease or otherwise acquire or retire for
                           value any Indebtedness that is subordinated to the
                           Series G Notes, except a payment of interest or
                           principal at the Stated Maturity thereof; or

                  (4)      make any Restricted Investment (all such payments and
                           other actions set forth in these clauses (1) through
                           (4) above being collectively referred to as
                           "Restricted Payments"),

                  unless, at the time of and after giving effect to such
                  Restricted Payment:

                                       27



                  (1)      no Default or Event of Default has occurred and is
                           continuing or would occur as a consequence of such
                           Restricted Payment; and

                  (2)      the Company would, at the time of such Restricted
                           Payment and after giving pro forma effect thereto as
                           if such Restricted Payment had been made at the
                           beginning of the applicable four-quarter period, have
                           been permitted to incur at least $1.00 of additional
                           Indebtedness pursuant to the Fixed Charge Coverage
                           Ratio test set forth in Section 1(u)(ii)(A) of this
                           Officer's Certificate (under the heading "Incurrence
                           of Indebtedness and Issuance of Preferred Stock");
                           and

                  (3)      such Restricted Payment, together with the aggregate
                           amount of all other Restricted Payments made by the
                           Company and its Restricted Subsidiaries after the
                           original issue date of the Series G Notes (excluding
                           Restricted Payments permitted by clauses
                           1(u)(i)(B)(2), 1(u)(i)(B)(3) and 1(u)(i)(B)(4)), is
                           less than the sum, without duplication, of:

                           (a)      50% of the Consolidated Net Income of the
                                    Company for the period (taken as one
                                    accounting period) from the beginning of the
                                    first fiscal quarter commencing after the
                                    original issue date of the Series G Notes to
                                    the end of the Company's most recently ended
                                    fiscal quarter for which internal financial
                                    statements are available at the time of such
                                    Restricted Payment (or, if such Consolidated
                                    Net Income for such period is a deficit,
                                    less 100% of such deficit), plus

                           (b)      100% of the aggregate net cash proceeds
                                    received by the Company (including the fair
                                    market value of any Permitted Business or
                                    assets used or useful in a Permitted
                                    Business to the extent acquired in
                                    consideration of Equity Interests (other
                                    than Disqualified Stock) of the Company)
                                    since the original issue date of the Series
                                    G Notes as a contribution to its common
                                    equity capital or from the issue or sale of
                                    Equity Interests of the Company (other than
                                    Disqualified Stock and other than sales to a
                                    Restricted Subsidiary of the Company) or
                                    from the issue or sale of convertible or
                                    exchangeable Disqualified Stock or
                                    convertible or exchangeable debt securities
                                    of the Company that have been converted into
                                    or exchanged for such Equity Interests
                                    (other than Disqualified Stock or debt
                                    securities sold to a Subsidiary of the
                                    Company), plus

                           (c)      to the extent that any Restricted Investment
                                    that was made after the original issue date
                                    of the Series G Notes is sold for cash or
                                    otherwise liquidated or repaid for cash, the
                                    lesser of (i) the cash return of capital
                                    with respect to such Restricted Investment
                                    (less the cost of disposition, if any) and
                                    (ii) the initial amount of such Restricted
                                    Investment, plus

                                       28



                           (d)      to the extent that any Unrestricted
                                    Subsidiary of the Company is redesignated as
                                    a Restricted Subsidiary after the original
                                    issue date of the Series G Notes, the lesser
                                    of (i) the fair market value of the
                                    Company's Investment in such Subsidiary as
                                    of the date of such redesignation and (ii)
                                    the fair market value of the Company's
                                    Investment in such Subsidiary as of the date
                                    on which such Subsidiary was originally
                                    designated as an Unrestricted Subsidiary.

                  (B)      Notwithstanding the foregoing, this Section 1(u)(i)
                           shall not prohibit:

                  (1)      the payment of any dividend within 60 days after the
                           date of declaration of the dividend, if at the date
                           of declaration the dividend payment would have
                           complied with the provisions of this Officer's
                           Certificate;

                  (2)      the redemption, repurchase, retirement, defeasance or
                           other acquisition of Indebtedness of the Company or
                           any Subsidiary Guarantor that is subordinate or
                           junior in right of payment or of any Equity Interests
                           of the Company in exchange for, or out of the net
                           cash proceeds of the substantially concurrent sale
                           (other than to a Restricted Subsidiary of the
                           Company) of, Equity Interests of the Company (other
                           than Disqualified Stock); provided that the amount of
                           any such net cash proceeds that are utilized for any
                           such redemption, repurchase, retirement, defeasance
                           or other acquisition shall be excluded from clause
                           1(u)(i)(A)(3)(b);

                  (3)      the defeasance, redemption, repurchase or other
                           acquisition of subordinated Indebtedness of the
                           Company with the net cash proceeds from an incurrence
                           of Permitted Refinancing Indebtedness;

                  (4)      the payment of any dividend by a Restricted
                           Subsidiary of the Company to the holders of its
                           Equity Interests on a pro rata basis;

                  (5)      the repurchase, redemption or other acquisition or
                           retirement for value of any Equity Interests of the
                           Company or any Restricted Subsidiary of the Company
                           held by any member of the Company's (or any of its
                           Restricted Subsidiaries') management pursuant to any
                           management equity subscription agreement, stock
                           option agreement or similar agreement; provided that
                           the aggregate price paid for all such repurchased,
                           redeemed, acquired or retired Equity Interests may
                           not exceed $1.5 million in any twelve-month period;

                  (6)      the payment of any distribution by a Trust Preferred
                           Vehicle to holders of such trust's preferred
                           beneficial interests, to the extent such distribution
                           does not exceed the amount that is contemporaneously
                           received by such trust as a payment of interest at
                           its Stated Maturity on the subordinated Indebtedness
                           of the Company held by such trust;

                  (7)      payments to Sierra Pacific Resources to enable Sierra
                           Pacific Resources to pay its reasonable fees and
                           expenses (including but not limited to, interest

                                       29



                           on Sierra Pacific Resources' Indebtedness and payment
                           obligations on account of Sierra Pacific's Premium
                           Income Equity Securities) incurred in the ordinary
                           course of business, which fees and expenses shall not
                           be greater than $60.0 million for any one calendar
                           year; provided that (a) any such payment complies
                           with any regulatory restrictions then applicable to
                           the Company and (b) the Fixed Charge Coverage Ratio
                           for the Company's most recently ended four full
                           fiscal quarters for which internal financial
                           statements are available immediately preceding the
                           date on which any such payment is made was at least
                           1.75 to 1; and

                  (8)      other Restricted Payments in an aggregate amount
                           since the original issue date of the Series G Notes
                           not to exceed $25.0 million;

                  provided that, with respect to clauses (2), (3), (5), (7) and
                  (8) above, no Default or Event of Default shall have occurred
                  and be continuing immediately after such transaction.

                  (C)      The amount of all Restricted Payments (other than
         cash) shall be the fair market value on the date of the Restricted
         Payment of the asset(s) or securities proposed to be transferred or
         issued by the Company or such Restricted Subsidiary, as the case may
         be, pursuant to the Restricted Payment. The fair market value of any
         assets or securities that are required to be valued by this covenant
         shall be determined by the Board of Directors whose resolution with
         respect thereto shall be delivered to the Trustee. The Board of
         Directors' determination must be based upon an opinion or appraisal
         issued by an accounting, appraisal or investment banking firm of
         national standing if the fair market value exceeds $25.0 million. Not
         later than the date of making any Restricted Payment, the Company shall
         deliver to the Trustee an Officer's Certificate stating that such
         Restricted Payment is permitted and setting forth the basis upon which
         the calculations required by this Section 1(u)(i) ("Restricted
         Payments") were computed, together with a copy of any fairness opinion
         or appraisal required under this Officer's Certificate. The Trustee
         shall have no duty or responsibility to determine the accuracy or
         correctness of this calculation and shall be fully protected in relying
         on such Officer's Certificate. The Trustee shall make such fairness
         opinion available for inspection by Holders of Series G Notes upon
         reasonably prior written request during regular business hours.

                  (D)      For purpose of clarification of the terms
         "subordinated" and "equally-ranked" as used in this Officer's
         Certificate, no Indebtedness of the Company shall be deemed to be
         contractually subordinated in right of payment to any other
         Indebtedness of the Company solely by virtue of being secured on a
         junior basis or by virtue of being unsecured. All Indebtedness that is
         not subordinated Indebtedness shall be equally-ranked to the Series G
         Notes.

                  (E)      The provisions of this Section 1(u)(i) ("Restricted
         Payments") is subject to the provisions of Section 1(u)(xiv) ("Certain
         Covenants and Definitions--Suspension of Certain Covenants").

                                       30



                  (ii)     Incurrence of Indebtedness and Issuance of Preferred
                           Stock.

                  (A)      The Company shall not, and shall not permit any of
         its Restricted Subsidiaries to, directly or indirectly, create, incur,
         issue, assume, guarantee or otherwise become directly or indirectly
         liable, contingently or otherwise, with respect to (collectively,
         "incur") any Indebtedness (including Acquired Debt), and the Company
         shall not issue any Disqualified Stock and shall not permit any of its
         Restricted Subsidiaries to issue any shares of preferred stock;
         provided, however, that the Company may incur Indebtedness (including
         Acquired Debt) or issue Disqualified Stock, and its Subsidiary
         Guarantors may incur Indebtedness (including Acquired Debt) or issue
         Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's
         most recently ended four full fiscal quarters for which internal
         financial statements are available immediately preceding the date on
         which such additional Indebtedness is incurred or such Disqualified
         Stock is issued would have been at least 2.0 to 1, determined on a pro
         forma basis (including a pro forma application of the net proceeds
         therefrom), as if the additional Indebtedness had been incurred or
         Disqualified Stock had been issued, as the case may be, at the
         beginning of such four-quarter period.

                  (B)      Notwithstanding the foregoing, this Section 1(u)(ii)
         shall not prohibit the incurrence of any of the following items of
         Indebtedness (collectively, "Permitted Debt"):

                  (1)      the incurrence by the Company pursuant to this clause
                           (1) of additional Indebtedness and letters of credit
                           under one or more Credit Facilities (with letters of
                           credit being deemed to have a principal amount equal
                           to the maximum potential liability of the Company
                           thereunder), together with the principal component of
                           amounts outstanding under Qualified Receivables
                           Transactions, in an aggregate amount up to $250.0
                           million at any time outstanding;

                  (2)      the incurrence by the Company and its Restricted
                           Subsidiaries of the Existing Indebtedness;

                  (3)      the incurrence by the Company of Indebtedness
                           represented by the Series G Notes to be issued on the
                           original issue date of the Series G Notes (and the
                           related Exchange Notes to be issued pursuant to the
                           Registration Rights Agreement) and the incurrence by
                           any Subsidiary Guarantor of a Subsidiary Guarantee of
                           those Series G Notes (and the related Exchange
                           Notes);

                  (4)      the incurrence by the Company or any of its
                           Restricted Subsidiaries of Indebtedness represented
                           by Capital Lease Obligations, mortgage financings or
                           purchase money obligations, in each case, incurred
                           for the purpose of financing all or any part of the
                           purchase price or cost of construction or improvement
                           of property, plant or equipment used in the business
                           of the Company or such Subsidiary Guarantor, in an
                           aggregate principal amount, including all Permitted
                           Refinancing Indebtedness incurred to refund,
                           refinance or replace any Indebtedness incurred

                                       31



                           pursuant to this clause (4), not to exceed $20.0
                           million at any time outstanding;

                  (5)      the incurrence by the Company or any of its
                           Restricted Subsidiaries of Permitted Refinancing
                           Indebtedness in exchange for, or the net proceeds of
                           which are used to refund, refinance or replace
                           Indebtedness (other than intercompany Indebtedness)
                           that was incurred under Section 1(u)(ii)(A) or
                           clauses (2), (3) (5) or (12) of this Section
                           1(u)(ii)(B);

                  (6)      the incurrence by the Company or any of its
                           Restricted Subsidiaries (other than a Receivables
                           Entity) of intercompany Indebtedness between or among
                           the Company or any of its Restricted Subsidiaries
                           (other than a Receivables Entity); provided, however,
                           that:

                           (a)      if the Company is the obligor on such
                                    Indebtedness, such Indebtedness must be
                                    expressly subordinated to the prior payment
                                    in full in cash of all Obligations with
                                    respect to the Series G Notes;

                           (b)      if a Subsidiary Guarantor is the obligor on
                                    such Indebtedness, such Indebtedness is
                                    expressly subordinated to the prior payment
                                    in full in cash of such Subsidiary
                                    Guarantor's Subsidiary Guarantee; and

                           (c)      (i) any subsequent issuance or transfer of
                                    Equity Interests that results in any such
                                    Indebtedness being held by a Person other
                                    than the Company or a Restricted Subsidiary
                                    and (ii) any sale or other transfer of any
                                    such Indebtedness to a Person that is not
                                    either the Company or a Restricted
                                    Subsidiary shall be deemed, in each case, to
                                    constitute an incurrence of such
                                    Indebtedness by the Company or such
                                    Restricted Subsidiary, as the case may be,
                                    that was not permitted by this clause (6);

                  (7)      the incurrence by the Company or any of its
                           Restricted Subsidiaries of Hedging Obligations;

                  (8)      the guarantee by the Company or any Restricted
                           Subsidiary of Indebtedness of the Company or any
                           Restricted Subsidiary that was permitted to be
                           incurred by another provision of this Section
                           1(u)(ii) ("Incurrence of Indebtedness and Issuance of
                           Preferred Stock");

                  (9)      the accrual of interest, the accretion or
                           amortization of original issue discount, the payment
                           of interest on any Indebtedness in the form of
                           additional Indebtedness with the same terms, and the
                           payment of dividends on Disqualified Stock in the
                           form of additional shares of such Disqualified Stock
                           shall not be deemed to be an incurrence of
                           Indebtedness or an issuance of Disqualified Stock for
                           purposes of this Section 1(u)(ii) ("Incurrence of
                           Indebtedness and Issuance of Preferred Stock");
                           provided, in each such case, that the amount thereof
                           is included in the Fixed Charges of the Company as
                           accrued;

                                       32



                  (10)     Indebtedness in respect of bid, performance or surety
                           bonds issued for the account of the Company or any
                           Restricted Subsidiary thereof in the ordinary course
                           of business, including guarantees or obligations of
                           the Company or any Restricted Subsidiary thereof with
                           respect to letters of credit supporting such bid,
                           performance or surety obligations (in each case other
                           than for an obligation for money borrowed);

                  (11)     the incurrence by the Company's Unrestricted
                           Subsidiaries of Non-Recourse Debt; provided, however,
                           that if any such Indebtedness ceases to be
                           Non-Recourse Debt of an Unrestricted Subsidiary, such
                           event shall be deemed to constitute an incurrence of
                           Indebtedness by a Restricted Subsidiary of the
                           Company that was not permitted by this clause (11);

                  (12)     the incurrence by the Company of additional
                           Indebtedness consisting of securities issued pursuant
                           to the Indenture in respect of claims relating to the
                           Company's obligations pursuant to agreements with
                           gas, electric power and other energy suppliers that
                           have been terminated as of the original issue date of
                           the Series G Notes;

                  (13)     the incurrence by the Company or any Restricted
                           Subsidiary of additional Indebtedness consisting of
                           letters of credit for purposes of supporting the
                           Company's or any Restricted Subsidiary's obligations
                           now or hereafter owing to gas, electric power or
                           other energy suppliers, not to exceed $20.0 million
                           at any time outstanding;

                  (14)     the issuance by the Company of up to $125.0 million
                           of Securities issued pursuant to the Indenture in
                           connection with a Qualified Receivables Transaction;

                  (15)     the issuance by a Receivables Entity of a Purchase
                           Money Note in connection with a Qualified Receivables
                           Transaction;

                  (16)     the incurrence by the Company of additional
                           Indebtedness to finance capital expenditures incurred
                           pursuant to the Company's 2003 Resource Plan as
                           approved under order by the Public Utilities
                           Commission of Nevada or mandated by statute or by one
                           or more federal or state regulatory authorities,
                           including all Permitted Refinancing Indebtedness
                           incurred to refund, refinance or replace any
                           Indebtedness incurred pursuant to this clause (16);
                           and

                  (17)     the incurrence by the Company or any Restricted
                           Subsidiary of additional Indebtedness in an aggregate
                           principal amount (or accreted value, as applicable),
                           including all Permitted Refinancing Indebtedness
                           incurred to refund, refinance or replace any
                           Indebtedness incurred pursuant to this clause (17),
                           not to exceed $40.0 million at any time outstanding.

                                       33



                  (C)      Notwithstanding the foregoing, the Company shall not
         issue any additional First Mortgage Bonds, except as necessary to
         replace any mutilated, lost or destroyed First Mortgage Bonds or to
         effect exchanges and transfers of First Mortgage Bonds.

                  (D)      The Company shall not incur any Indebtedness
         (including Permitted Debt) that is contractually subordinated in right
         of payment to any other Indebtedness of the Company unless such
         Indebtedness is also contractually subordinated in right of payment to
         the Series G Notes on substantially identical terms; provided, however,
         that no Indebtedness of the Company shall be deemed to be contractually
         subordinated in right of payment to any other Indebtedness of the
         Company solely by virtue of being secured on a junior basis or by
         virtue of being unsecured.

                  (E)      For purposes of determining compliance with this
         Section 1(u)(ii) ("Incurrence of Indebtedness and Issuance of Preferred
         Stock"):

                  (1)      in the event that an item of proposed Indebtedness,
                           including Acquired Debt, meets the criteria of more
                           than one of the categories of Permitted Debt
                           described in clauses (1) through (17) above, or is
                           entitled to be incurred pursuant to the first
                           paragraph of this Section 1(u)(ii), the Company shall
                           be permitted to classify (or later classify or
                           reclassify such Indebtedness, in whole or in part in
                           its sole discretion) such item of Indebtedness in any
                           manner that complies with this Section 1(u)(ii); and

                  (2)      for the purposes of determining compliance with any
                           dollar-denominated restriction on the incurrence of
                           Indebtedness denominated in a foreign currency, the
                           dollar-equivalent principal amount of such
                           Indebtedness incurred pursuant thereto shall be
                           calculated based on the relevant currency exchange
                           rate in effect on the date that such Indebtedness was
                           incurred.

                  (F)      The provisions of this Section 1(u)(ii) ("Incurrence
         of Indebtedness and Issuance of Preferred Stock") is subject to the
         provisions of Section 1(u)(xiv) ("Certain Covenants and
         Definitions--Suspension of Certain Covenants").

                  (iii)    Series G Liens.

                  The Company shall not, and shall not permit any of its
         Restricted Subsidiaries to, directly or indirectly, create, incur,
         assume or otherwise cause or suffer to exist or become effective any
         Series G Lien of any kind securing Indebtedness, Attributable Debt or
         trade payables on any of their property or assets, now owned or
         hereafter acquired, except Series G Permitted Liens.

                  (iv)     Dividend and Other Payment Restrictions Affecting
                           Subsidiaries.

                  (A)      The Company shall not, and shall not permit any of
         its Restricted Subsidiaries to, directly or indirectly, create or
         permit to exist or become effective any consensual encumbrance or
         restriction on the ability of any Restricted Subsidiary to:

                                       34



                  (1)      pay dividends or make any other distributions on its
                           Capital Stock to the Company or any of its
                           Subsidiaries, or with respect to any other interest
                           or participation in, or measured by, its profits, or
                           pay any Indebtedness owed to the Company or any of
                           its Restricted Subsidiaries;

                  (2)      make loans or advances to Company or any of its
                           Restricted Subsidiaries; or

                  (3)      transfer any of its properties or assets to the
                           Company or any of its Restricted Subsidiaries.

                  (B)      Notwithstanding the foregoing, this Section
         (1)(u)(iv) shall not apply to encumbrances or restrictions existing
         under or by reason of:

                  (1)      agreements governing Existing Indebtedness and Credit
                           Facilities or Qualified Receivables Transactions as
                           in effect on the original issue date of the Series G
                           Notes and any amendments, modifications,
                           restatements, renewals, increases, supplements,
                           refundings, replacements or refinancings of those
                           agreements, provided that the amendments,
                           modifications, restatements, renewals, increases,
                           supplements, refundings, replacements or refinancings
                           are no more restrictive, taken as a whole, with
                           respect to such dividend and other payment
                           restrictions than those contained in those agreements
                           on the original issue date of the Series G Notes;

                  (2)      the Indenture, this Officer's Certificate and the
                           Series G Notes;

                  (3)      applicable law;

                  (4)      any instrument governing Indebtedness or Capital
                           Stock of a Person acquired by the Company or any of
                           its Restricted Subsidiaries as in effect at the time
                           of such acquisition (except to the extent such
                           Indebtedness or Capital Stock was incurred in
                           connection with or in contemplation of such
                           acquisition), which encumbrance or restriction is not
                           applicable to any Person, or the properties or assets
                           of any Person, other than the Person, or the property
                           or assets of the Person, so acquired, provided that,
                           in the case of Indebtedness, such Indebtedness was
                           permitted by the terms of this Officer's Certificate
                           to be incurred;

                  (5)      customary non-assignment provisions in leases entered
                           into in the ordinary course of business and
                           consistent with past practices;

                  (6)      purchase money obligations for property acquired in
                           the ordinary course of business that impose
                           restrictions on that property of the nature described
                           in clause 1(u)(iv)(A)(3);

                  (7)      any Purchase Money Note or other Indebtedness or
                           contractual requirements incurred with respect to a
                           Qualified Receivables Transaction

                                       35



                           relating exclusively to a Receivables Entity that, in
                           the good faith determination of the Board of
                           Directors, are necessary to effect such Qualified
                           Receivables Transaction;

                  (8)      any agreement for the sale or other disposition of a
                           Restricted Subsidiary that restricts distributions or
                           dispositions of assets by that Restricted Subsidiary
                           pending its sale or other disposition;

                  (9)      Permitted Refinancing Indebtedness, provided that the
                           restrictions contained in the agreements governing
                           such Permitted Refinancing Indebtedness are not more
                           restrictive, taken as a whole, than those contained
                           in the agreements governing the Indebtedness being
                           refinanced;

                  (10)     Series G Liens securing Indebtedness otherwise
                           permitted to be incurred under the provisions of
                           Section 1(u)(iii) of this Officer's Certificate
                           ("Series G Liens") that limit the right of the debtor
                           to dispose of the assets subject to such Series G
                           Liens; and

                  (11)     provisions with respect to the disposition or
                           distribution of assets or property in joint venture
                           agreements, asset sale agreements, stock sale
                           agreements and other similar agreements entered into
                           in the ordinary course of business.

                  (C)      The provisions of this Section 1(u)(iv)("Dividends
         and Other Payment Restrictions Affecting Restricted Subsidiaries") is
         subject to the provisions of Section 1(u)(xiv)("Certain Covenants and
         Definitions--Suspension of Certain Covenants").

                  (v)      Asset Sales.

                  (A)      The Company shall not, and shall not permit any of
         its Restricted Subsidiaries to, consummate an Asset Sale unless:

                  (1)      the Company (or the Restricted Subsidiary, as the
                           case may be) receives consideration at the time of
                           the Asset Sale at least equal to the fair market
                           value of the assets or Equity Interests issued or
                           sold or otherwise disposed of;

                  (2)      the fair market value is determined by the Board of
                           Directors and evidenced by a resolution of the Board
                           of Directors set forth in an Officer's Certificate
                           delivered to the Trustee; and

                  (3)      at least 75% of the consideration received in the
                           Asset Sale by the Company or such Restricted
                           Subsidiary is in the form of cash. For purposes of
                           this provision, each of the following shall be deemed
                           to be cash:

                           (a)      any liabilities, as shown on the Company's
                                    or such Restricted Subsidiary's most recent
                                    balance sheet, of the Company or any

                                       36



                                    Restricted Subsidiary (other than contingent
                                    liabilities and liabilities that are by
                                    their terms subordinated to the notes) that
                                    are assumed by the transferee of any such
                                    assets pursuant to a customary novation
                                    agreement that releases the Company or such
                                    Restricted Subsidiary from further
                                    liability; and

                           (b)      any securities, notes or other obligations
                                    received by the Company or any such
                                    Restricted Subsidiary from such transferee
                                    that are contemporaneously, subject to
                                    ordinary settlement periods, converted by
                                    the Company or such Restricted Subsidiary
                                    into cash, to the extent of the cash
                                    received in that conversion.

                  (B)      Within 365 days after the receipt of any Net Proceeds
         from an Asset Sale, the Company may apply those Net Proceeds at its
         option:

                  (1)      to repay senior secured Indebtedness of the Company;

                  (2)      to acquire all or substantially all of the assets of,
                           or a majority of the Voting Stock of, another
                           Permitted Business;

                  (3)      to make a capital expenditure; or

                  (4)      to acquire other long-term assets that are used or
                           useful in a Permitted Business.

                  (C)      Pending the final application of any Net Proceeds,
         the Company may temporarily reduce revolving credit borrowings or
         otherwise invest the Net Proceeds in any manner that is not prohibited
         by this Officer's Certificate.

                  (D)      Any Net Proceeds from Asset Sales that are not
         applied or invested as provided in Section 1(u)(v)(B) shall constitute
         "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds
         $25.0 million, the Company shall make an Asset Sale Offer pursuant to
         the provisions of Section 1(h)(iv) of this Officer's Certificate.

                  (E)      To the extent that any Asset Sale constitutes the
         sale, conveyance or other disposition of all or substantially all of
         the assets of the Company and its Restricted Subsidiaries taken as a
         whole, such transaction shall be governed by the provisions of this
         Officer's Certificate in Sections (1)(h)(iii) and (1)(u)(vi) (under the
         heading "Offer to Purchase Upon a Change of Control" and the heading
         "Certain Covenants and Definitions--Merger, Consolidation or Sale of
         Assets") and not by the provisions of this Section 1(u)(v) or Section
         1(h)(iv) of this Officer's Certificate.

                  (vi)     Merger, Consolidation or Sale of Assets.

                  (A)      The Company shall not, directly or indirectly: (1)
         consolidate or merge with or into another Person (whether or not the
         Company is the surviving corporation); or (2) sell, assign, transfer,
         convey or otherwise dispose of all or substantially all of the

                                       37



         properties or assets of the Company and its Restricted Subsidiaries
         taken as a whole, in one or more related transactions, to another
         Person; unless:

                  (1)      either: (a) the Company is the surviving corporation;
                           or (b) the Person formed by or surviving any such
                           consolidation or merger (if other than the Company)
                           or to which such sale, assignment, transfer,
                           conveyance or other disposition has been made is a
                           corporation organized or existing under the laws of
                           the United States, any state of the United States or
                           the District of Columbia;

                  (2)      (a) the Person formed by or surviving any such
                           consolidation or merger (if other than the Company)
                           or the Person to which such sale, assignment,
                           transfer, conveyance or other disposition has been
                           made assumes all the obligations of the Company under
                           the Series G Notes, the Indenture and the
                           Registration Rights Agreement pursuant to agreements
                           reasonably satisfactory to the Trustee; and (b) such
                           Person executes and delivers to the Trustee a
                           supplemental indenture that contains a grant,
                           conveyance, transfer and mortgage by such Person
                           confirming the lien of the Indenture on the property
                           subject to such lien and subjecting to such lien all
                           property thereafter acquired by such Person that
                           shall constitute an improvement, extension or
                           addition to the property subject to the lien of the
                           Indenture or renewal, replacement or substitution of
                           or for any part thereof and, at the election of such
                           Person, subjecting to the lien of the Indenture such
                           other property then owned or thereafter acquired by
                           such Person as such Person shall specify;

                  (3)      immediately after such transaction no Default or
                           Event of Default exists;

                  (4)      the Company or the Person formed by or surviving any
                           such consolidation or merger (if other than the
                           Company), or to which such sale, assignment,
                           transfer, conveyance or other disposition has been
                           made shall, on the date of such transaction after
                           giving pro forma effect thereto and any related
                           financing transactions as if the same had occurred at
                           the beginning of the applicable four-quarter period,
                           be permitted to incur at least $1.00 of additional
                           Indebtedness pursuant to the Fixed Charge Coverage
                           Ratio test set forth in Section 1(u)(ii)(A) of this
                           Officer's Certificate (under the heading "Incurrence
                           of Indebtedness and Issuance of Preferred Stock");
                           provided, however, that this clause (4) shall be
                           suspended during any period in which the Company and
                           its Restricted Subsidiaries are not subject to the
                           Suspended Covenants; and

                  (5)      the Company, or the Person formed by or surviving any
                           such consolidation or merger (if other than the
                           Company), or to which such sale, assignment,
                           transfer, conveyance or other disposition has been
                           made, shall have delivered to the Trustee an
                           Officer's Certificate and an Opinion of Counsel, each
                           stating that such transaction and any supplemental
                           indenture entered into in connection therewith
                           complies with all of the

                                       38



                           terms of this Section 1(u)(vi) and that all
                           conditions precedent provided for in this Section
                           1(u)(vi) relating to such transaction or series of
                           transactions have been complied with.

                  (B)      In addition, the Company may not, directly or
         indirectly, lease all or substantially all of its properties or assets,
         in one or more related transactions, to any other Person. Clauses (4)
         and (5) under Section 1(u)(vi)(A) shall not apply to a sale,
         assignment, transfer, conveyance or other disposition of assets between
         or among the Company and any of its Restricted Subsidiaries.

                  (C)      In addition, the Company shall not effect any
         consolidation, merger, sale, assignment, transfer, conveyance or other
         disposition as is contemplated in this Section 1(u)(v), unless the
         Company also complies with Sections 13.01 and 13.02 of the Indenture
         and the Person formed by or surviving any such consolidation or merger
         (if other than the Company) or to which such sale, assignment,
         transfer, conveyance or other disposition has been made, shall be
         deemed a Successor Corporation under the Indenture.

                  (vii)    Transactions with Affiliates.

                  (A)      The Company shall not, and shall not permit any of
         its Restricted Subsidiaries to, make any payment to, or sell, lease,
         transfer or otherwise dispose of any of its properties or assets to, or
         purchase any property or assets from, or enter into or make or amend
         any transaction, contract, agreement, understanding, loan, advance or
         guarantee with, or for the benefit of, any Affiliate (each, an
         "Affiliate Transaction"), unless:

                  (1)      the Affiliate Transaction is on terms that are no
                           less favorable to the Company or the relevant
                           Restricted Subsidiary than those that would have been
                           obtained in a comparable transaction by the Company
                           or such Restricted Subsidiary with an unrelated
                           Person; and

                  (2)      the Company delivers to the Trustee:

                           (a)      with respect to any Affiliate Transaction or
                                    series of related Affiliate Transactions
                                    involving aggregate consideration in excess
                                    of $10.0 million, a resolution of the Board
                                    of Directors set forth in an Officer's
                                    Certificate certifying that such Affiliate
                                    Transaction complies with this Section
                                    1(u)(vii) and that such Affiliate
                                    Transaction has been approved by a majority
                                    of the disinterested members of the Board of
                                    Directors; and

                           (b)      with respect to any Affiliate Transaction or
                                    series of related Affiliate Transactions
                                    involving aggregate consideration in excess
                                    of $20.0 million, an opinion as to the
                                    fairness to the Holders of Series G Notes of
                                    such Affiliate Transaction from a financial
                                    point of view issued by an accounting,
                                    appraisal or investment banking firm of
                                    national standing.

                                       39



                  (B)      The following items shall not be deemed to be
         Affiliate Transactions and, therefore, shall not be subject to the
         provisions of Section 1(u)(vii)(A) above:

                  (1)      any employment agreement entered into by the Company
                           or any of its Restricted Subsidiaries in the ordinary
                           course of business and consistent with the past
                           practice of the Company or such Restricted
                           Subsidiary;

                  (2)      transactions between or among the Company and/or its
                           Restricted Subsidiaries (other than a Receivables
                           Entity);

                  (3)      transactions with a Person that is an Affiliate of
                           the Company solely because the Company owns an Equity
                           Interest in such Person;

                  (4)      payment of reasonable directors fees to Persons who
                           are not otherwise Affiliates of the Company;

                  (5)      sales of Equity Interests (other than Disqualified
                           Stock) to Affiliates of the Company;

                  (6)      Permitted Investments pursuant to this Officer's
                           Certificate and Restricted Payments that are
                           permitted by the provisions of this Officer's
                           Certificate in Section 1(u)(i) (under the heading
                           "Restricted Payments");

                  (7)      fees and compensation paid to and indemnity provided
                           on behalf of directors, officers or employees of the
                           Company or any Restricted Subsidiary of the Company
                           in the ordinary course of business;

                  (8)      transactions pursuant to any agreement in effect on
                           the date of this Officer's Certificate as the same
                           may be amended from time to time in any manner not
                           materially less favorable to the Holders of the
                           Series G Notes;

                  (9)      loans or advances to officers, directors and
                           employees of the Company or any Restricted Subsidiary
                           made in the ordinary course of business, consistent
                           with past practices of the Company and/or its
                           Restricted Subsidiaries and in compliance with
                           applicable law in an aggregate amount not to exceed
                           $1.0 million outstanding at any one time; and

                  (10)     sales or other transfers or dispositions of accounts
                           receivable and other related assets customarily
                           transferred in an asset securitization transaction
                           involving accounts receivable to a Receivables Entity
                           in a Qualified Receivables Transaction, and
                           acquisitions of Permitted Investments in connection
                           with a Qualified Receivables Transaction.

                  (C)      The provisions of this Section 1(u)(vii)
         ("Transactions with Affiliates") is subject to the provisions of
         Section 1(u)(xiv) ("Certain Covenants and Definitions--Suspension of
         Certain Covenants").

                  (viii)   Designation of Restricted and Unrestricted
                           Subsidiaries.

                                       40


                  (A)      The Board of Directors may designate any Restricted
         Subsidiary to be an Unrestricted Subsidiary if that designation would
         not cause a Default; provided that in no event shall the business
         currently operated by the Company be transferred to or held by an
         Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an
         Unrestricted Subsidiary, the aggregate fair market value of all
         outstanding Investments owned by the Company and its Restricted
         Subsidiaries in the Subsidiary properly designated shall be deemed to
         be an Investment made as of the time of the designation and shall
         reduce the amount available for Restricted Payments under Section
         1(u)(i)(A) of this Officer's Certificate (under the heading "Restricted
         Payments"). That designation shall only be permitted if the Investment
         would be permitted at that time and if the Restricted Subsidiary
         otherwise meets the definition of an Unrestricted Subsidiary.

                  (B)      The Board of Directors may at any time designate any
         Unrestricted Subsidiary to be a Restricted Subsidiary; provided that
         such designation shall be deemed to be an incurrence of Indebtedness by
         a Restricted Subsidiary of the Company of any outstanding Indebtedness
         of such Unrestricted Subsidiary and such designation shall only be
         permitted if (1) such Indebtedness is permitted under Section 1(u)(ii)
         of this Officer's Certificate (under the heading "Incurrence of
         Indebtedness and Issuance of Preferred Stock"), calculated on a pro
         forma basis as if such designation had occurred at the beginning of the
         four-quarter reference period; and (2) no Default or Event of Default
         would be in existence following such designation.

                  (C)      The provisions of this Section 1(u)(viii)
         ("Designation of Restricted and Unrestricted Subsidiaries") is subject
         to the provisions of Section 1(u)(xiv) ("Certain Covenants and
         Definitions--Suspension of Certain Covenants").

                  (ix)     Future Subsidiary Guarantees.

                  (A)      The Company shall not permit any Restricted
         Subsidiary to guarantee the payment of any Indebtedness of the Company
         unless:

                  (1)      such Restricted Subsidiary simultaneously executes
                           and delivers to the Trustee a Subsidiary Guarantee of
                           such Restricted Subsidiary except that with respect
                           to a Guarantee of Indebtedness of the Company if such
                           Indebtedness is by its express terms subordinated in
                           right of payment to the Series G Notes, any such
                           Guarantee of such Restricted Subsidiary with respect
                           to such Indebtedness shall be subordinated in right
                           of payment to such Restricted Subsidiary's Subsidiary
                           Guarantee with respect to the Series G Notes
                           substantially to the same extent as such Indebtedness
                           is subordinated to the Series G Notes;

                  (2)      such Restricted Subsidiary waives and shall not in
                           any manner whatsoever claim or take the benefit or
                           advantage of, any rights or reimbursement, indemnity
                           or subrogation or any other rights against the
                           Company or any other Restricted Subsidiary as a
                           result of any payment by such Restricted Subsidiary
                           under its Subsidiary Guarantee of the Series G Notes;
                           and

                                       41



                  (3)      such Restricted Subsidiary shall deliver to the
                           Trustee an Opinion of Counsel to the effect that (a)
                           such Subsidiary Guarantee has been duly executed and
                           authorized and (b) such Subsidiary Guarantee
                           constitutes a valid, binding and enforceable
                           obligation of such Restricted Subsidiary, except
                           insofar as enforcement thereof may be limited by
                           bankruptcy, insolvency or similar laws (including,
                           without limitation, all laws relating to fraudulent
                           transfers) and except insofar as enforcement thereof
                           is subject to general principles of equity; provided
                           that this Section 1(u)(ix)(A) shall not be applicable
                           to any Guarantee of any Restricted Subsidiary that
                           (x) existed at the time such Person became a
                           Restricted Subsidiary of the Company and (y) was not
                           incurred in connection with, or in contemplation of,
                           such Person becoming a Restricted Subsidiary of the
                           Company.

                  (B)      Notwithstanding the foregoing and the other
         provisions of this Officer's Certificate, in the event a Subsidiary
         Guarantor is sold or disposed of (whether by merger, consolidation, the
         sale of its Capital Stock or the sale of all or substantially all of
         its assets (other than by lease) and whether or not the Subsidiary
         Guarantor is the surviving corporation in such transaction) to a Person
         which is not the Company or a Restricted Subsidiary of the Company
         (other than a Receivables Entity), such Subsidiary Guarantor shall be
         released from its obligations under its Subsidiary Guarantee if:

                  (1)      the sale or other disposition is in compliance with
                           the applicable provisions of this Officer's
                           Certificate, including Sections 1(h)(iv) of this
                           Officer's Certificate (under the heading "Offer to
                           Purchase by Application of Excess Proceeds"); and

                  (2)      the Subsidiary Guarantor is also released or
                           discharged from its obligations under the Guarantee
                           which resulted in the creation of such Subsidiary
                           Guarantee, except by or as a result of payment under
                           such Guarantee.

                  (x)      Sale and Leaseback Transactions.

                  (A)      The Company shall not, and shall not permit any of
         its Restricted Subsidiaries to, enter into any sale and leaseback
         transaction; provided that the Company or any Restricted Subsidiary may
         enter into a sale and leaseback transaction if:

                  (1)      the Company or that Restricted Subsidiary, as
                           applicable, could have incurred Indebtedness in an
                           amount equal to the Attributable Debt relating to
                           such sale and leaseback transaction under the Fixed
                           Charge Coverage Ratio test in Section 1(u)(ii)(A) of
                           this Officer's Certificate (under the heading
                           "Incurrence of Indebtedness and Issuance of Preferred
                           Stock");

                  (2)      the gross cash proceeds of that sale and leaseback
                           transaction are at least equal to the fair market
                           value, as determined in good faith by the Board of
                           Directors and set forth in an Officer's Certificate
                           delivered to the Trustee,

                                       42



                           of the property that is the subject of that sale and
                           leaseback transaction; and

                  (3)      the transfer of assets in that sale and leaseback
                           transaction is permitted by, and the Company applies
                           the proceeds of such transaction in compliance with,
                           Section 1(h)(iv) of this Officer's Certificate (under
                           the heading "Offer to Purchase by Application of
                           Excess Proceeds");

         provided, however, that the foregoing clauses (1) and (3) shall be
         suspended during any period in which the Company and its Restricted
         Subsidiaries are not subject to the Suspended Covenants.

                  (xi)     Business Activities.

                  (A)      The Company shall not, and shall not permit any
         Restricted Subsidiary to, engage in any business other than Permitted
         Businesses, except to such extent as would not be material to the
         Company and its Subsidiaries taken as a whole.

                  (B)      The provisions of this Section 1(u)(xi) ("Business
         Activities") is subject to the provisions of Section 1(u)(xiv)
         ("Certain Covenants and Definitions--Suspension of Certain Covenants").

                  (xii)    Payments for Consent.

                  The Company shall not, and shall not permit any of its
         Subsidiaries to, directly or indirectly, pay or cause to be paid any
         consideration to or for the benefit of any Holder of Series G Notes for
         or as an inducement to any consent, waiver or amendment of any of the
         terms or provisions of this Officer's Certificate or the Series G Notes
         unless such consideration is offered to be paid and is paid to all
         Holders of the Series G Notes that consent, waive or agree to amend in
         the time frame set forth in the solicitation documents relating to such
         consent, waiver or agreement.

                  (xiii)   Reports.

                  (A)      Whether or not required by the Commission, so long as
         any Series G Notes are outstanding, the Company shall make available to
         the Holders of Series G Notes, within the time periods specified in the
         Commission's rules and regulations (as if required):

                  (1)      all quarterly and annual financial information that
                           would be required to be contained in a filing with
                           the Commission on Forms 10-Q and 10-K if the Company
                           were required to file such Forms, including a
                           "Management's Discussion and Analysis of Financial
                           Condition and Results of Operations" and the
                           certifications that would be required by Rule 13a-14
                           under the Exchange Act and, with respect to the
                           annual information only, a report on the annual
                           financial statements by the Company's certified
                           independent accountants; and

                                       43



                  (2)      all current reports that would be required to be
         filed with the Commission on Form 8-K if the Company were required to
         file such reports.

                  (B)      If the Company has designated any of its Subsidiaries
         as Unrestricted Subsidiaries, then the quarterly and annual financial
         information required by the preceding paragraph shall include a
         reasonably detailed presentation, either on the face of the financial
         statements or in the footnotes thereto, and in Management's Discussion
         and Analysis of Financial Condition and Results of Operations, of the
         financial condition and results of operations of the Company and its
         Restricted Subsidiaries separate from the financial condition and
         results of operations of the Unrestricted Subsidiaries of the Company.

                  In addition, whether or not required by the Commission, the
         Company shall file a copy of all of the information and reports
         referred to in clauses (1) and (2) above with the Commission for public
         availability within the time periods specified in the Commission's
         rules and regulations (unless the Commission shall not accept such a
         filing) and make such information available to securities analysts and
         prospective investors upon request. In addition, the Company has agreed
         that, for so long as any Series G Notes remain outstanding, they shall
         furnish to the Holders of Series G Notes and to prospective investors,
         upon their request, the information required to be delivered pursuant
         to Rule 144A(d)(4) under the Securities Act.

                  (xiv)    Suspension of Certain Covenants.

                  (A)      During any period of time that the notes have an
         Investment Grade Rating from both of the Rating Agencies and no Default
         or Event of Default has occurred and is continuing under the Indenture,
         the Company and its Restricted Subsidiaries shall not be subject to the
         following provisions of this Officer's Certificate: Section 1(h)(iv),
         Section 1(u)(i), Section 1(u)(ii), Section 1(u)(iv), Section 1(u)(v),
         Section 1(u)(vii), Section 1(u)(viii) and Section 1(u)(xi) (under the
         headings: "Mandatory Redemption/Redemption at Option of Holders/Offers
         to Purchase--Offer to Purchase by Application of Excess Proceeds,"
         "Certain Covenants and Definitions--Restricted Payments," "Certain
         Covenants and Definitions--Incurrence of Indebtedness and Issuance of
         Preferred Stock," "Certain Covenants and Definitions--Dividend and
         Other Payment Restrictions Affecting Subsidiaries," "Certain Covenants
         and Definitions--Asset Sales," "Certain Covenants and
         Definitions--Transactions with Affiliates," "Certain Covenants and
         Definitions--Designation of Restricted and Unrestricted Subsidiaries,"
         and "Certain Covenants and Definitions--Business Activities")
         (collectively, the "Suspended Covenants"); provided, however, that the
         provisions in Section 1(h)(iii), Section 1(u)(iii), Section 1(u)(vi)
         (except as set forth in that Section 1(u)(vi)), Section 1(u)(ix)
         (except as set forth in that Section 1(u)(ix), Section 1(u)(x), Section
         1(u)(xii) (except as set forth in that Section 1(u)(xii)) and Section
         1(u)(xiii) (under the headings "Mandatory Redemption/Redemption at
         Option of Holders/Offers to Purchase--Offer to Purchase Upon Change of
         Control," "Certain Covenants and Definitions--Liens," "Certain
         Covenants and Definitions--Merger, Consolidation or Sale of Assets"
         (except as set forth thereunder), "Certain Covenants and
         Definitions--Future Subsidiary Guarantees" (except as set forth
         thereunder), "Certain Covenants and Definitions--Sale and Leaseback

                                       44



         Transactions" (except as set forth thereunder), "Certain Covenants and
         Definitions--Payments for Consent," and "Reports") of this Officer's
         Certificate shall not be so suspended.

                  (B)      If the Company and its Restricted Subsidiaries are
         not subject to the Suspended Covenants for any period of time as a
         result of the preceding Section 1(xiv)(A) and, subsequently, either of
         the Rating Agencies withdraws its ratings or downgrades the ratings
         assigned to the Series G Notes below the Investment Grade Ratings so
         that the Series G Notes do not have an Investment Grade Rating from
         both Rating Agencies, or a Default or Event of Default (other than with
         respect to the Suspended Covenants) occurs and is continuing, the
         Company and its Restricted Subsidiaries shall thereafter again be
         subject to the Suspended Covenants, subject to the terms, conditions
         and obligations set forth in this Officer's Certificate (each such date
         of reinstatement being the "Reinstatement Date"), including the
         preceding Section 1(xiv)(A). Compliance with the Suspended Covenants
         with respect to Restricted Payments made after the Reinstatement Date
         shall be calculated in accordance with the terms of Section 1(u)(i) of
         this Officer's Certificate (under "Certain Covenants and
         Definitions--Restricted Payments") as though such covenant had been in
         effect during the entire period of time from which the Series G Notes
         are issued, provided, however, that no immediate Default or Event of
         Default shall occur as a result of such reinstatement of  the Suspended
         Covenants.

                  (xv)     Covenant Defeasance.

                  (A)      Option to Effect Covenant Defeasance. The Company
         may, at the option of the Board of Directors evidenced by a resolution
         set forth in an Officers' Certificate, at any time, elect to have
         Section 1(u)(xv)(B) hereof be applied to all outstanding Series G Notes
         upon compliance with the conditions set forth below in Section
         1(u)(xv)(C) hereof.

                  (B)      Exercise of Covenant Defeasance. Upon the Company's
         exercise under Section 1(u)(xv)(A) hereof of the option applicable to
         this Section 1(u)(xv)(B), the Company shall, subject to the
         satisfaction of the conditions set forth in Section 1(u)(xv)(C) hereof,
         be released from each of its obligations under the covenants contained
         in Section 1(h)(iii), Section 1(h)(iv), Section 1(u)(i), Section
         1(u)(ii), Section 1(u)(iii), Section 1(u)(iv), Section 1(u)(v), Section
         1(u)(vii), Section 1(u)(viii), Section 1(u)(ix), Section 1(u)(x),
         Section 1(u)(xi), Section 1(u)(xii) hereof (under the headings:
         "Mandatory Redemption/Redemption at Option of Holders/Offers to
         Purchase--Offer to Purchase Upon Change of Control," Mandatory
         Redemption/Redemption at Option of Holders/Offers to Purchase--Offer to
         Purchase by Application of Excess Proceeds," "Certain Covenants and
         Definitions--Restricted Payments," "Certain Covenants and
         Definitions--Incurrence of Indebtedness and Issuance of Preferred
         Stock," "Certain Covenants and Definitions--Liens," "Certain Covenants
         and Definitions--Dividend and Other Payment Restrictions Affecting
         Subsidiaries," "Certain Covenants and Definitions--Asset Sales,"
         "Certain Covenants and Definitions--Transactions with Affiliates,"
         "Certain Covenants and Definitions--Designation of Restricted and
         Unrestricted Subsidiaries," "Certain Covenants and Definitions--Future
         Subsidiary Guarantees," "Certain Covenants and Definitions--Sale and
         Leaseback Transactions,"

                                       45



         "Certain Covenants and Definitions--Business Activities" and "Certain
         Covenants and Definitions--Payment for Consents") and clause (A)(4) of
         Section 1(u)(vi) (under the heading "Certain Covenants and
         Definitions--Merger, Consolidation or Sale of Assets") hereof with
         respect to the Outstanding Series G Notes on and after the date the
         conditions set forth in Section 1(u)(xv)(C) hereof are satisfied
         (hereinafter, "Covenant Defeasance"), and the Series G Notes shall
         thereafter be deemed not Outstanding for the purposes of any direction,
         waiver, consent or declaration or act of Holders of Securities,
         including but not limited to, Holders of Series G Notes (and the
         consequences of any thereof) in connection with such covenants, but
         will continue to be deemed Outstanding for all other purposes
         hereunder. For this purpose, Covenant Defeasance means that, with
         respect to the Outstanding Series G Notes, the Company may omit to
         comply with and will have no liability in respect of any term,
         condition or limitation set forth in any such covenant, whether
         directly or indirectly, by reason of any reference elsewhere herein to
         any such covenant or by reason of any reference in any such covenant to
         any other provision herein or in any other document and such omission
         to comply will not constitute a Triggering Event under Section 1(h)(ii)
         hereof or a Default or an Event of Default under Section 10.01 of the
         Indenture, but, except as specified above, the remainder of the
         Indenture, this Officer's Certificate and such Series G Notes will be
         unaffected thereby. In addition, upon the Company's exercise under
         Section 1(u)(xv)(A) hereof of the option applicable to Section
         1(u)(xv)(B) hereof, subject to the satisfaction of the conditions set
         forth in Section 1(u)(xv)(C) hereof, Sections 1(h)(ii)(A)(3) through
         1(h)(ii)(A)(7) hereof will not constitute Triggering Events.

                  (C)      Conditions to Covenant Defeasance. In order to
         exercise Covenant Defeasance under this Section 1(u)(xv):

                  (1)      the Company must irrevocably deposit with the Trustee
                           or any Paying Agent (other than the Company), in
                           trust for the benefit of the Holders of the Series G
                           Notes:

                           (a)      money (including Funded Cash not otherwise
                                    applied pursuant to the Indenture) in an
                                    amount which will be sufficient, or

                           (b)      Eligible Obligations which do not contain
                                    provisions permitting the redemption or
                                    other prepayment thereof at the option of
                                    the issuer thereof, the principal of and the
                                    interest on which when due, without any
                                    regard to reinvestment thereof, will provide
                                    monies which, together with the money, if
                                    any, deposited with or held by the Trustee
                                    or such Paying Agent, will be sufficient, or

                           (c)      a combination of (a) and (b) which will be
                                    sufficient, to pay when due the principal of
                                    and premium, if any, and interest, if any,
                                    and Liquidated Damages, if any, due and to
                                    become due on the Series G Notes or portions
                                    thereof provided, that the Company shall
                                    have delivered to the Trustee and such
                                    Paying Agent: (I) a Company Order stating
                                    that the money and Eligible Obligations
                                    deposited in accordance with this Section
                                    1(u)(xv)(C) shall be held in trust, as

                                       46



                                    provided in Section 9.03 of the Indenture;
                                    and (II) if Eligible Obligations shall have
                                    been deposited, an Opinion of Counsel to the
                                    effect that such obligations constitute
                                    Eligible Obligations and do not contain
                                    provisions permitting the redemption or
                                    other prepayment thereof at the option of
                                    the issuer thereof, and an opinion of an
                                    Independent public Accountant of nationally
                                    recognized standing, selected by the
                                    Company, to the effect that the other
                                    requirements set forth in Section
                                    1(u)(xv)(C)(1)(b) above have been satisfied;

                  (2)      the Company shall have delivered to the Trustee an
                           Opinion of Counsel confirming that the Holders of the
                           Outstanding Series G Notes will not recognize income,
                           gain or loss for federal income tax purposes as a
                           result of such Covenant Defeasance and will be
                           subject to federal income tax on the same amounts, in
                           the same manner and at the same times as would have
                           been the case if such Covenant Defeasance had not
                           occurred;

                  (3)      no Triggering Event shall have occurred and be
                           continuing on the date of such deposit (other than a
                           Triggering Event arising from the breach of a
                           covenant under this Officer's Certificate resulting
                           from the borrowing of funds to be applied to such
                           deposit);

                  (4)      such Covenant Defeasance will not result in a breach
                           or violation of, or constitute a default under any
                           material agreement or instrument (other than the
                           Indenture ) to which the Company or any of its
                           Subsidiaries is a party or by which the Company or
                           any of its Subsidiaries is bound;

                  (5)      the Company must deliver to the Trustee an Officer's
                           Certificate stating that the deposit was not made by
                           the Company with the intent of preferring the Holders
                           of Series G Notes over the other creditors of the
                           Company with the intent of defeating, hindering,
                           delaying or defrauding creditors of the Company or
                           others; and

                  (6)      the Company must deliver to the Trustee an Officer's
                           Certificate and an Opinion of Counsel, each stating
                           that all conditions precedent relating to the
                           Covenant Defeasance have been complied with.

                  (xvi)    Additional Conditions to Section 9.01 of Indenture.

         Notwithstanding the provisions of Section 9.01 of the Indenture, no
         Series G Note shall be deemed to have been paid pursuant to such
         provisions unless the Company shall have delivered to the Trustee
         either: (a) an Opinion of Counsel in the United States reasonably
         acceptable to the Trustee confirming that (i) the Company has received
         from, or there has been published by, the Internal Revenue Service a
         ruling or (ii) since the date of this Officer's Certificate, there has
         been a change in the applicable federal income tax law, in either case
         to the effect that, and based thereon such Opinion of Counsel shall
         confirm that, the Holders of the Outstanding Series G Notes will not
         recognize income,

                                       47



         gain or loss for federal income tax purposes as a result of such
         satisfaction and discharge and will be subject to federal income tax on
         the same amounts, in the same manner and at the same times as would
         have been the case if such satisfaction and discharge had not occurred;
         or (b) (i) an instrument wherein the Company, notwithstanding the
         satisfaction and discharge of the Company's Indebtedness in respect of
         the Series G Notes, shall assume the obligation (which shall be
         absolute and unconditional) to irrevocably deposit with the Trustee
         such additional sums of money, if any, or additional Eligible
         Obligations, if any, or any combination thereof, at such time or times,
         as shall be necessary, together with the money and/or Eligible
         Obligations theretofore so deposited, to pay when due the principal of
         and premium, if any, and interest due and to become due on such Series
         G Notes or portions thereof; provided, however, that such instrument
         may state that the Company's obligation to make additional deposits as
         aforesaid shall be subject to the delivery to the Company by the
         Trustee of a notice asserting the deficiency accompanied by an opinion
         of an Independent public Accountant of nationally recognized standing
         showing the calculation thereof; and (ii) an Opinion of Counsel of tax
         counsel in the United States reasonably acceptable to the Trustee to
         the effect that the Holders of the Outstanding Series G Notes will not
         recognize income, gain or loss for federal income tax purposes as a
         result of such satisfaction and discharge and will be subject to
         federal income tax on the same amounts, in the same manner and at the
         same times as would have been the case if such satisfaction and
         discharge had not occurred.

                  (xvii)   Modifications Requiring Consent.

                  In addition to the provisions of Section 14.02 of the
         Indenture, no supplemental indenture shall alter or waive any of the
         provisions with respect to the redemption of the Series G Notes set
         forth in Section 1(g) hereof without the consent of each Holder of
         Series G Notes affected thereby.

                  (xviii)  Certain Definitions.

                   Set forth below are certain defined terms used in this
         Officer's Certificate. Reference is made to the Indenture for the
         definitions of any other capitalized terms used herein for which no
         definition is provided herein.

                  "2003 Resource Plan" means the integrated resource plan filed
         with the Public Utilities Commission of Nevada by the Company and
         Sierra Pacific Power Company in July 2003.

                  "Acquired Debt" means, with respect to any specified Person:

                  (1)      Indebtedness of any other Person existing at the time
                           such other Person is merged with or into or became a
                           Subsidiary of such specified Person, whether or not
                           such Indebtedness is incurred in connection with, or
                           in contemplation of, such other Person merging with
                           or into, or becoming a Subsidiary of, such specified
                           Person; and

                  (2)      Indebtedness secured by a Series G Lien encumbering
                           any asset acquired by such specified Person.

                                       48



                  "Affiliate" of any specified Person means any other Person
         directly or indirectly controlling or controlled by or under direct or
         indirect common control with such specified Person. For purposes of
         this definition, "control," as used with respect to any Person, means
         the possession, directly or indirectly, of the power to direct or cause
         the direction of the management or policies of such Person, whether
         through the ownership of voting securities, by agreement or otherwise;
         provided that beneficial ownership of 10% or more of the Voting Stock
         of a Person shall be deemed to be control. For purposes of this
         definition, the terms "controlling," "controlled by" and "under common
         control with" have correlative meanings.

                  "Affiliate Transaction" has the meaning assigned to it in
         Section 1(u)(vii)(A) of this Officer's Certificate.

                  "Agent" means: any Security Registrar, Paying Agent or
         Authenticating Agent.

                  "Applicable Procedures" means, with respect to any transfer or
         exchange of or for beneficial interests in any Global Note, the rules
         and procedures of the Depositary, Euroclear and Clearstream that apply
         to such transfer or exchange.

                  "Asset Sale" means:

                  (1)      the sale, lease, conveyance or other disposition of
                           any assets or rights, other than sales of inventory
                           in the ordinary course of business consistent with
                           past practices; provided that the sale, conveyance or
                           other disposition of all or substantially all of the
                           assets of the Company and its Restricted Subsidiaries
                           taken as a whole shall be governed by the provisions
                           in Section 1(u)(x) ("Repurchase at the Option of
                           Holders--Change of Control") and/or Section 1(u)(vi)
                           ("Certain Covenants--Merger, Consolidation or Sale of
                           Assets") and not by Section 1(u)(v) ("Certain
                           Covenants--Asset Sales") of this Officer's
                           Certificate; and

                  (2)      the issuance of Equity Interests in any of the
                           Company's Subsidiaries or the sale of Equity
                           Interests in any of its Subsidiaries.

                  Notwithstanding the preceding, the following items shall not
         be deemed to be Asset Sales:

                  (1)      any single transaction or series of related
                           transactions that involves assets having a fair
                           market value of less than $1.0 million;

                  (2)      a transfer of assets between or among the Company and
                           its Restricted Subsidiaries;

                  (3)      an issuance of Equity Interests by a Restricted
                           Subsidiary to the Company or to another Restricted
                           Subsidiary;

                                       49



                  (4)      a Restricted Payment or Permitted Investment that is
                           permitted by Section 1(u)(i) of this Officer's
                           Certificate (under the heading "Certain
                           Covenants--Restricted Payments");

                  (5)      sales of accounts receivable and related assets or an
                           interest therein of the type specified in the
                           definition of Qualified Receivables Transaction to or
                           by a Receivables Entity; and

                  (6)      sales, transfers or other dispositions of assets,
                           including Capital Stock of Restricted Subsidiaries,
                           for consideration at least equal to the fair market
                           value of the assets sold or disposed of, but only if
                           the consideration received consists of Capital Stock
                           of a Person that becomes a Restricted Subsidiary
                           engaged in, or property or assets (other than cash,
                           except to extent used as a bona fide means of
                           equalizing the value of the property or assets
                           involved in the swap transaction) of a nature or type
                           or that are used in, a business of the issuer and its
                           Restricted Subsidiaries existing on the date of such
                           sale or other disposition; provided, however, that
                           any cash received by the Company shall be treated as
                           Net Proceeds and applied as set forth in the Section
                           1(g)(iii) of this Officer's Certificate (under the
                           heading "Repurchase at the Option of Holders--Asset
                           Sales"); provided further that the fair market value
                           of the assets sold or disposed of is determined as
                           provided in Section 1(u)(i)(C) of this Officer's
                           Certificate (under the heading "Certain
                           Covenants--Restricted Payments").

                  "Asset Sale Offer" has the meaning assigned to it in Section
         1(h)(iv)(A) of this Officer's Certificate.

                  "Attributable Debt" in respect of a sale and leaseback
         transaction means, at the time of determination, the present value of
         the obligation of the lessee for net rental payments during the
         remaining term of the lease included in such sale and leaseback
         transaction including any period for which such lease has been extended
         or may, at the option of the lessor, be extended. Such present value
         shall be calculated using a discount rate equal to the rate of interest
         implicit in such transaction, determined in accordance with GAAP.

                  "Bankruptcy Law" means Title 11, U.S. Code or any similar
         federal or state law for the relief of debtors.

                  "Beneficial Owner" has the meaning assigned to such term in
         Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in
         calculating the beneficial ownership of any particular "person" (as
         that term is used in Section 13(d)(3) of the Exchange Act), such
         "person" shall be deemed to have beneficial ownership of all securities
         that such "person" has the right to acquire by conversion or exercise
         of other securities, whether such right is currently exercisable or is
         exercisable only upon the occurrence of a subsequent condition. The
         terms "Beneficially Owns" and "Beneficially Owned" have a corresponding
         meaning.

                                       50



                  "Board of Directors" means:

                  (1)      with respect to a corporation, the board of directors
                           of the corporation;

                  (2)      with respect to a partnership, the board of directors
                           of the general partner of the partnership; and

                  (3)      with respect to any other Person, the board or
                           committee of such Person serving a similar function.

                  "Broker-Dealer" has the meaning set forth in the Registration
         Rights Agreement.

                  "Capital Lease Obligation" means, at the time any
         determination is to be made, the amount of the liability in respect of
         a capital lease that would at that time be required to be capitalized
         on a balance sheet in accordance with GAAP.

                  "Capital Stock" means:

                  (1)      in the case of a corporation, corporate stock;

                  (2)      in the case of an association or business entity, any
                           and all shares, interests, participations, rights or
                           other equivalents (however designated) of corporate
                           stock;

                  (3)      in the case of a partnership or limited liability
                           company, partnership or membership interests (whether
                           general or limited); and

                  (4)      any other interest or participation that confers on a
                           Person the right to receive a share of the profits
                           and losses of, or distributions of assets of, the
                           issuing Person.

                  "Cash Equivalents" means:

                  (1)      United States dollars;

                  (2)      securities issued or directly and fully guaranteed or
                           insured by the United States government or any agency
                           or instrumentality of the United States government
                           (provided that the full faith and credit of the
                           United States is pledged in support of those
                           securities) having maturities of not more than one
                           year from the date of acquisition;

                  (3)      certificates of deposit and eurodollar time deposits
                           with maturities of six months or less from the date
                           of acquisition, bankers' acceptances with maturities
                           not exceeding six months and overnight bank deposits,
                           in each case, with any domestic commercial bank
                           having capital and surplus in excess of $500.0
                           million and a Thomson Bank Watch Rating of "B" or
                           better;

                                       51



                  (4)      repurchase obligations with a term of not more than
                           seven days for underlying securities of the types
                           described in clauses (2) and (3) above entered into
                           with any financial institution meeting the
                           qualifications specified in clause (3) above;

                  (5)      commercial paper having the highest rating obtainable
                           from Moody's or S&P and in each case maturing within
                           270 days after the date of acquisition; and

                  (6)      money market funds at least 95% of the assets of
                           which constitute Cash Equivalents of the kinds
                           described in clauses (1) through (5) of this
                           definition.

                  "Change of Control" means the occurrence of any of the
         following:

                  (1)      the direct or indirect sale, transfer, conveyance or
                           other disposition (other than by way of merger or
                           consolidation), in one or a series of related
                           transactions, of all or substantially all of the
                           properties or assets of the Company and its
                           Restricted Subsidiaries taken as a whole to any
                           "person" (as that term is used in Section 13(d)(3) of
                           the Exchange Act, including any "group" with the
                           meaning of the Exchange Act);

                  (2)      the adoption of a plan relating to the liquidation or
                           dissolution of the Company;

                  (3)      the consummation of any transaction (including,
                           without limitation, any merger or consolidation) the
                           result of which is that any "person" (as defined
                           above) becomes the Beneficial Owner, directly or
                           indirectly, of more than 30% of the Voting Stock of
                           the Company or Sierra Pacific Resources, measured by
                           voting power rather than number of shares; or

                  (4)      the first day on which a majority of the members of
                           the Board of Directors or the Board of Sierra Pacific
                           Resources are not Continuing Directors.

                  "Change of Control Offer" has the meaning assigned to it in
         Section 1(h)(iii)(A) of this Officer's Certificate.

                  "Change of Control Payment" has the meaning assigned to it in
         Section 1(h)(iii)(A) of this Officer's Certificate.

                  "Change of Control Payment Date" has the meaning assigned to
         it in Section 1(h)(iii)(B)(2) of this Officer's Certificate.

                  "Clearstream" means Clearstream Banking, societe anonyme.

                  "Consolidated Cash Flow" means, with respect to any specified
         Person for any period, the Consolidated Net Income of such Person for
         such period plus:

                                       52



                  (1)      an amount equal to any extraordinary loss plus any
                           net loss realized by such Person or any of its
                           Subsidiaries in connection with an Asset Sale, to the
                           extent such losses were deducted in computing such
                           Consolidated Net Income; plus

                  (2)      provision for taxes based on income or profits of
                           such Person and its Restricted Subsidiaries for such
                           period, to the extent that such provision for taxes
                           was deducted in computing such Consolidated Net
                           Income; plus

                  (3)      consolidated interest expense of such Person and its
                           Restricted Subsidiaries for such period, whether paid
                           or accrued and whether or not capitalized (including,
                           without limitation, amortization of debt issuance
                           costs and original issue discount, non-cash interest
                           payments, the interest component of any deferred
                           payment obligations, the interest component of all
                           payments associated with Capital Lease Obligations,
                           imputed interest with respect to Attributable Debt,
                           commissions, discounts and other fees and charges
                           incurred in respect of letter of credit or bankers'
                           acceptance financings, and net of the effect of all
                           payments made or received pursuant to Hedging
                           Obligations), to the extent that any such expense was
                           deducted in computing such Consolidated Net Income;
                           plus

                  (4)      depreciation, amortization (including amortization of
                           goodwill and other intangibles but excluding
                           amortization of prepaid cash expenses that were paid
                           in a prior period) and other non-cash expenses
                           (excluding any such non-cash expense to the extent
                           that it represents an accrual of or reserve for cash
                           expenses in any future period of such Person and its
                           Restricted Subsidiaries for such period to the extent
                           that such depreciation, amortization and other
                           non-cash expenses were deducted in computing such
                           Consolidated Net Income); plus

                  (5)      all extraordinary, unusual or non-recurring items of
                           loss or expense; minus

                  (6)      all extraordinary, unusual or non-recurring items of
                           gain or revenue; minus

                  (7)      non-cash items increasing such Consolidated Net
                           Income for such period, other than the accrual of
                           revenue in the ordinary course of business,

         in each case, on a consolidated basis and determined in accordance with
         GAAP; provided that non-cash expenses recorded as a result of deferred
         energy accounting shall not be added to Consolidated Net Income.

                  "Consolidated Net Income" means, with respect to any specified
         Person for any period, the aggregate of the Net Income of such Person
         and its Restricted Subsidiaries for such period, on a consolidated
         basis, determined in accordance with GAAP; provided that:

                  (1)      the Net Income (but not loss) of any Person that is
                           not a Restricted Subsidiary or that is accounted for
                           by the equity method of accounting shall

                                       53



                           be included only to the extent of the amount of
                           dividends or distributions paid in cash to the
                           specified Person or a Restricted Subsidiary of the
                           Person;

                  (2)      the Net Income of any Restricted Subsidiary shall be
                           excluded to the extent that the declaration or
                           payment of dividends or similar distributions by that
                           Restricted Subsidiary of that Net Income is not at
                           the date of determination permitted without any prior
                           governmental approval (that has not been obtained)
                           or, directly or indirectly, by operation of the terms
                           of its charter or any agreement, instrument,
                           judgment, decree, order, statute, rule or
                           governmental regulation applicable to that Restricted
                           Subsidiary or its stockholders;

                  (3)      the Net Income of any Person acquired in a pooling of
                           interests transaction for any period prior to the
                           date of such acquisition shall be excluded;

                  (4)      the cumulative effect of a change in accounting
                           principles shall be excluded; and

                  (5)      any equity in earnings or losses of Sierra Pacific
                           Resources shall be excluded.

                  "Continuing Directors" means, as of any date of determination,
         any member of the Board of Directors who:

                  (1)      was a member of the Board of Directors on the
                           original issue date of the Series G Notes; or

                  (2)      was nominated for election or elected to the Board of
                           Directors with the approval of a majority of the
                           Continuing Directors who were members of the Board of
                           Directors at the time of such nomination or election.

                  "Credit Facilities" means one or more debt facilities or
         commercial paper facilities, in each case with banks or other
         institutional lenders providing for revolving credit loans, term loans
         or letters of credit, in each case, as amended, restated, modified,
         renewed, refunded, replaced or refinanced in whole or in part from time
         to time, and includes any securities issued pursuant to the Indenture
         in order to secure any amounts outstanding under a Credit Facility from
         time to time; provided that the obligation of the Company to make any
         payment on any such securities shall be:

                  (1)      no greater than the amount required to be paid under
                           such Credit Facility that is secured by such payment
                           obligation;

                  (2)      payable no earlier than such amount is required to be
                           paid under such Credit Facility; and

                  (3)      deemed to have been paid or otherwise satisfied and
                           discharged to the extent that the Company has paid
                           such amount under such Credit Facility;

                                       54



                           provided further that any amounts the Company is
                           obligated to pay under such securities will not be
                           included for purposes of determining the aggregate
                           amount outstanding under Credit Facilities that is
                           permitted under clause (1) of Section 1(u)(ii)(B)
                           ("Incurrence of Indebtedness and Issuance of
                           Preferred Stock").

                  "Default" means any event that is, or with the passage of time
         or the giving of notice or both would be, an Event of Default as
         defined in the Indenture.

                  "Definitive Note" means a certificated Series G Note
         registered in the name of the Holder thereof and issued in accordance
         with Section 1(q)(v) of this Officer's Certificate, in the form of
         Exhibit A hereto except that such Series G Note shall not bear the
         Global Note Legend and shall not have the "Schedule of Exchanges of
         Interests in the Global Note" attached thereto.

                  "Depositary" means, with respect to the Series G Notes
         issuable or issued in whole or in part in global form, the Person
         specified in Section 1(q)(iii) of this Officer's Certificate as the
         Depositary with respect to the Series G Notes, and any and all
         successors thereto appointed as depositary hereunder and having become
         such pursuant to the applicable provision of this Officer's Certificate
         or the Indenture.

                  "Disqualified Stock" means any Capital Stock that, by its
         terms (or by the terms of any security into which it is convertible, or
         for which it is exchangeable, in each case at the option of the holder
         of the Capital Stock), or upon the happening of any event (other than
         as a result of an optional redemption by the issuer thereof), matures
         or is mandatorily redeemable, pursuant to a sinking fund obligation or
         otherwise, or redeemable at the option of the holder of the Capital
         Stock, in whole or in part, on or prior to the date that is 91 days
         after the date on which the Series G Notes mature. Notwithstanding the
         preceding sentence, any Capital Stock that would constitute
         Disqualified Stock solely because the holders of the Capital Stock have
         the right to require the Company to repurchase such Capital Stock upon
         the occurrence of a change of control or an asset sale shall not
         constitute Disqualified Stock if the terms of such Capital Stock
         provide that the Company may not repurchase or redeem any such Capital
         Stock pursuant to such provisions unless such repurchase or redemption
         complies with Section 1(u)(i) of this Officer's Certificate (under the
         heading "Certain Covenants and Definitions--Restricted Payments").

                  "DTC" has the meaning assigned to it in Section 1(q)(iii) of
         this Officer's Certificate.

                  "Equity Interests" means Capital Stock and all warrants,
         options or other rights to acquire Capital Stock (but excluding any
         debt security that is convertible into, or exchangeable for, Capital
         Stock).

                  "Euroclear" means Euroclear Bank S.A./N.V.

                  "Event of Default" means an Event of Default as defined in the
         Indenture.

                                       55



                  "Excess Proceeds" has the meaning assigned to it in Section
1(u)(v)(D) of this Officer's Certificate.

                  "Exchange Notes" means if and when issued, each series of the
         Series G Notes issued in exchange for any Initial Notes in an Exchange
         Offer or upon transfer pursuant to a Shelf Registration Statement.

                  "Exchange Offer" has the meaning set forth in a corresponding
         Registration Rights Agreement.

                  "Exchange Offer Registration Statement" has the meaning set
         forth in the Registration Rights Agreement.

                  "Existing Indebtedness" means all Indebtedness of the Company
         and its Subsidiaries (other than Indebtedness under a Credit Facility)
         in existence on the original issue date of the Series G Notes, until
         such amounts are repaid.

                  "First Mortgage Indenture" means the Indenture of Mortgage,
         dated as of October 1, 1953, between the Company and Deutsche Bank
         Trust Company Americas, as trustee, as modified, amended or
         supplemented at any time or from time to time by supplemental
         indentures.

                  "Fixed Charges" means, with respect to any specified Person
         for any period, the sum, without duplication, of:

                  (1)      the consolidated interest expense of such Person and
                           its Restricted Subsidiaries for such period, whether
                           paid or accrued, including, without limitation,
                           amortization of debt issuance costs and original
                           issue discount, non-cash interest payments, the
                           interest component of any deferred payment
                           obligations, the interest component of all payments
                           associated with Capital Lease Obligations, imputed
                           interest with respect to Attributable Debt,
                           commissions, discounts and other fees and charges
                           incurred in respect of letter of credit or bankers'
                           acceptance financings, and net of the effect of all
                           payments made or received pursuant to Hedging
                           Obligations; plus

                  (2)      the consolidated interest of such Person and its
                           Restricted Subsidiaries that was capitalized during
                           such period; plus

                  (3)      any interest expense on Indebtedness of another
                           Person that is Guaranteed by such Person or one of
                           its Restricted Subsidiaries or secured by a Series G
                           Lien on assets of such Person or one of its
                           Restricted Subsidiaries, whether or not such
                           Guarantee or Series G Lien is called upon; plus

                  (4)      the product of (a) all dividends, whether paid or
                           accrued and whether or not in cash, on any series of
                           preferred stock of such Person or any of its
                           Restricted Subsidiaries, other than dividends on
                           Equity Interests payable solely in Equity Interests
                           of the Company (other than Disqualified Stock) or

                                       56



                           to the Company or a Restricted Subsidiary of the
                           Company, times (b) a fraction, the numerator of which
                           is one and the denominator of which is one minus the
                           then current combined federal, state and local
                           statutory tax rate of such Person, expressed as a
                           decimal, in each case, on a consolidated basis and in
                           accordance with GAAP; plus

                  (5)      all distributions by a Trust Preferred Vehicle to
                           persons other than the Company of amounts received as
                           interest by such trust on the subordinated
                           Indebtedness of the Company held by such trust.

                  "Fixed Charge Coverage Ratio" means with respect to any
         specified Person for any period, the ratio of the Consolidated Cash
         Flow of such Person and its Restricted Subsidiaries for such period to
         the Fixed Charges of such Person and its Restricted Subsidiaries for
         such period. In the event that the specified Person or any of its
         Restricted Subsidiaries incurs, assumes, Guarantees, repays,
         repurchases or redeems any Indebtedness (other than ordinary working
         capital borrowings) or issues, repurchases or redeems preferred stock
         subsequent to the commencement of the period for which the Fixed Charge
         Coverage Ratio is being calculated and on or prior to the date on which
         the event for which the calculation of the Fixed Charge Coverage Ratio
         is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio
         shall be calculated giving pro forma effect to such incurrence,
         assumption, Guarantee, repayment, repurchase or redemption of
         Indebtedness, or such issuance, repurchase or redemption of preferred
         stock, and the use of the proceeds therefrom as if the same had
         occurred at the beginning of the applicable four-quarter reference
         period.

                  In addition, for purposes of calculating the Fixed Charge
         Coverage Ratio:

                  (1)      acquisitions that have been made by the specified
                           Person or any of its Restricted Subsidiaries,
                           including through mergers, consolidations or
                           otherwise (including acquisitions of assets used in a
                           Permitted Business) and including any related
                           financing transactions, during the four-quarter
                           reference period or subsequent to such reference
                           period and on or prior to the Calculation Date shall
                           be given pro forma effect as if they had occurred on
                           the first day of the four-quarter reference period,
                           including any pro forma expense and cost reductions
                           that have occurred or are reasonably expected to
                           occur, in the reasonable judgment of the chief
                           financial officer of the Company (regardless of
                           whether those cost savings or operating improvements
                           could then be reflected in pro forma financial
                           statements in accordance with Regulation S-X
                           promulgated under the Securities Act or any other
                           regulation or policy of the Commission related
                           thereto);

                  (2)      the Consolidated Cash Flow attributable to
                           discontinued operations, as determined in accordance
                           with GAAP, and operations or businesses disposed of
                           prior to the Calculation Date, shall be excluded; and

                                       57



                  (3)      the Fixed Charges attributable to discontinued
                           operations, as determined in accordance with GAAP,
                           and operations or businesses disposed of prior to the
                           Calculation Date, shall be excluded, but only to the
                           extent that the obligations giving rise to such Fixed
                           Charges shall not be obligations of the specified
                           Person or any of its Restricted Subsidiaries
                           following the Calculation Date.

                  "GAAP" means generally accepted accounting principles set
         forth in the opinions and pronouncements of the Accounting Principles
         Board of the American Institute of Certified Public Accountants and
         statements and pronouncements of the Financial Accounting Standards
         Board or in such other statements by such other entity as have been
         approved by a significant segment of the accounting profession, which
         are in effect on the original issue date of the Series G Notes.

                  "Global Note Legend" means the legend set forth in Section
         1(q)(v)(G)(2) of this Officer's Certificate, which is required to be
         placed on all Global Notes issued under this Officer's Certificate.

                  "Global Notes" means, individually and collectively, each of
         the Series G Notes (which may be either Restricted Global Notes or
         Unrestricted Global Notes) issued or issuable in the global form of
         Exhibit A hereto issued in accordance with Sections 1(q)(i),
         1(q)(v)(B)(4), 1(q)(v)(D)(4) or 1(q)(v)(F) of this Officer's
         Certificate.

                  "Guarantee" means a guarantee other than by endorsement of
         negotiable instruments for collection in the ordinary course of
         business, direct or indirect, in any manner including, without
         limitation, by way of a pledge of assets or through letters of credit
         or reimbursement agreements in respect thereof, of all or any part of
         any Indebtedness.

                  "Hedging Obligations" means, with respect to any specified
         Person, the obligations of such Person incurred in the normal course of
         business and consistent with past practices and not for speculative
         purposes under:

                  (1)      interest rate swap agreements, interest rate cap
                           agreements and interest rate collar agreements
                           designed to protect the person or entity entering
                           into the agreement against fluctuations in interest
                           rates with respect to Indebtedness incurred and not
                           for purposes of speculation;

                  (2)      foreign exchange contracts and currency protection
                           agreements entered into with one of more financial
                           institutions designed to protect the person or entity
                           entering into the agreement against fluctuations in
                           currency exchange rates with respect to Indebtedness
                           incurred and not for purposes of speculation;

                  (3)      any commodity futures contract, commodity option or
                           other similar agreement or arrangement designed to
                           protect against fluctuations in the price of
                           commodities used by that entity at the time; and

                                       58



                  (4)      other agreements or arrangements designed to protect
                           such Person against fluctuations in interest rates or
                           currency exchange rates.

                  "Indebtedness" means, with respect to any specified Person,
         any indebtedness of such Person, whether or not contingent:

                  (1)      in respect of borrowed money;

                  (2)      evidenced by bonds, notes, debentures or similar
                           instruments or letters of credit (or reimbursement
                           agreements in respect thereof);

                  (3)      in respect of banker's acceptances;

                  (4)      representing Capital Lease Obligations;

                  (5)      representing the balance deferred and unpaid of the
                           purchase price of any property, except any such
                           balance that constitutes an accrued expense or trade
                           payable; or

                  (6)      representing any Hedging Obligations,

         if and to the extent any of the preceding items (other than letters of
         credit and Hedging Obligations) would appear as a liability upon a
         balance sheet of the specified Person prepared in accordance with GAAP.
         In addition, the term "Indebtedness" includes (i) all Indebtedness of
         others secured by a Series G Lien on any asset of the specified Person
         (whether or not such Indebtedness is assumed by the specified Person)
         and, to the extent not otherwise included, the Guarantee by the
         specified Person of any indebtedness of any other Person and (ii) all
         beneficial interests issued by a Trust Preferred Vehicle to persons
         other than the Company, which beneficial interests shall be treated as
         Indebtedness that is subordinated to the Series G Notes for all
         purposes of this Officer's Certificate.

                  The amount of any Indebtedness outstanding as of any date
         shall be:

                  (1)      the accreted value of the Indebtedness, in the case
                           of any Indebtedness issued with original issue
                           discount; and

                  (2)      the principal amount of the Indebtedness, together
                           with any interest on the Indebtedness that is more
                           than 30 days past due, in the case of any other
                           Indebtedness.

                  "Indirect Participant" means a Person who holds a beneficial
         interest in a Global Note through a Participant.

                  "Initial Notes" has the meaning set forth in Section 1(q)(ii)
         of this Officer's Certificate.

                  "Initial Purchaser" has the meaning set forth in the Purchase
         Agreement.

                                       59



                  "Institutional Accredited Investor" means an institution that
         is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or
         (7) under the Securities Act.

                  "Investment Grade Rating" means a rating equal to or higher
         than Baa3 (or the equivalent) by Moody's or BBB- (or the equivalent) by
         S&P.

                  "Investments" means, with respect to any Person, all direct or
         indirect investments by such Person in other Persons (including
         Affiliates) in the forms of loans (including Guarantees or other
         obligations), advances or capital contributions (excluding commission,
         travel and similar advances to officers and employees made in the
         ordinary course of business), purchases or other acquisitions for
         consideration of Indebtedness, Equity Interests or other securities,
         together with all items that are or would be classified as investments
         on a balance sheet prepared in accordance with GAAP. If the Company or
         any Subsidiary of the Company sells or otherwise disposes of any Equity
         Interests of any direct or indirect Subsidiary of the Company such
         that, after giving effect to any such sale or disposition, such Person
         is no longer a Subsidiary of the Company, the Company shall be deemed
         to have made an Investment on the date of any such sale or disposition
         equal to the fair market value of the Equity Interests of such
         Subsidiary not sold or disposed of in an amount determined as provided
         in Section 1(u)(i)(C) of this Officer's Certificate (under the heading
         "Certain Covenants and Definitions--Restricted Payments"). The
         acquisition by the Company or any Subsidiary of the Company of a Person
         that holds an Investment in a third Person shall be deemed to be an
         Investment by the Company or such Subsidiary in such third Person in an
         amount equal to the fair market value of the Investment held by the
         acquired Person in such third Person in an amount determined as
         provided in Section 1(u)(i)(C) of this Officer's Certificate (under the
         heading "Certain Covenants and Definitions--Restricted Payments").

                  "Issue Date" means the first date on which any Series G Notes
         are issued, authenticated and delivered under the Indenture and this
         Officer's Certificate.

                  "Letter of Transmittal" means the letter of transmittal to be
         prepared by the Company and sent to all Holders of Initial Notes for
         use by such Holders in connection with an Exchange Offer.

                  "Liquidated Damages" means all liquidated damages then owing
         pursuant to Section 5 of the Registration Rights Agreement.

                  "Moody's" means Moody's Investors Service, Inc. or any
         successor to the rating agency business thereof.

                  "Net Income" means, with respect to any specified Person, the
         net income (loss) of such Person, determined in accordance with GAAP
         and before any reduction in respect of preferred stock dividends,
         excluding, however:

                  (1)      any gain (but not loss), together with any related
                           provision for taxes on such gain (but not loss),
                           realized in connection with: (a) any Asset Sale; or
                           (b) the disposition of any securities by such Person
                           or any of its

                                       60



                           Subsidiaries or the extinguishment of any
                           Indebtedness of such Person or any of its
                           Subsidiaries; and

                  (2)      any extraordinary gain (but not loss), together with
                           any related provision for taxes on such extraordinary
                           gain (but not loss).

                  "Net Proceeds" means the aggregate cash proceeds received by
         the Company or any of its Restricted Subsidiaries in respect of any
         Asset Sale (including, without limitation, any cash received upon the
         sale or other disposition of any non-cash consideration received in any
         Asset Sale), net of the direct costs relating to such Asset Sale,
         including, without limitation, legal, accounting and investment banking
         fees, and sales commissions, and any relocation expenses incurred as a
         result of the Asset Sale, taxes paid or payable as a result of the
         Asset Sale, in each case, after taking into account any available tax
         credits or deductions and any tax sharing arrangements, and amounts
         required to be applied to the repayment of Indebtedness, other than
         Senior Debt secured by a Series G Lien on the asset or assets that were
         the subject of such Asset Sale and any reserve for adjustment in
         respect of the sale price of such asset or assets established in
         accordance with GAAP.

                  "Non-Recourse Debt" means Indebtedness:

                  (1)      as to which neither the Company nor any of its
                           Restricted Subsidiaries (a) provides credit support
                           of any kind (including any undertaking, agreement or
                           instrument that would constitute Indebtedness), (b)
                           is directly or indirectly liable as a guarantor or
                           otherwise, or (c) constitutes the lender;

                  (2)      no default with respect to which (including any
                           rights that the holders of the Indebtedness may have
                           to take enforcement action against an Unrestricted
                           Subsidiary) would permit upon notice, lapse of time
                           or both any holder of any other Indebtedness (other
                           than the Series G Notes) of the Company or any of its
                           Restricted Subsidiaries to declare a default on such
                           other Indebtedness or cause the payment of the
                           Indebtedness to be accelerated or payable prior to
                           its stated maturity; and

                  (3)      as to which the lenders have been notified in writing
                           that they shall not have any recourse to the stock or
                           assets of the Company or any of its Restricted
                           Subsidiaries.

                  "Non-U.S. Person" means a person who is not a U.S. Person.

                  "Note Custodian" means the Trustee, as custodian for the
         Depositary with respect to the Series G Notes in global form, or any
         successor entity thereto.

                  "Obligations" means any principal, interest, penalties, fees,
         indemnifications, reimbursements, damages and other liabilities payable
         under the documentation governing any Indebtedness.

                                       61



                  "Offer Amount" has the meaning assigned to it in Section
         1(h)(iv)(B) of this Officer's Certificate.

                  "Offer Period" has the meaning assigned to it in Section
         1(h)(iv)(B) of this Officer's Certificate.

                  "Offering" means the offering of the Original Notes by the
         Company on the Issue Date.

                  "Officer" means, with respect to any Person, the Chairman of
         the Board, the Chief Executive Officer, the President, the Chief
         Operating Officer, the Chief Financial Officer, the Treasurer, any
         Assistant Treasurer, the Controller, the Secretary or any
         Vice-President of such Person.

                  "Original Notes" has the meaning set forth in Section 1(q)(ii)
         of this Officer's Certificate.

                  "Participant" means, with respect to DTC, Euroclear or
         Clearstream, a Person who has an account with DTC, Euroclear or
         Clearstream, respectively (and, with respect to DTC, shall include
         Euroclear and Clearstream).

                  "Payment Default" has the meaning assigned to it in Section
         1(h)(ii)(A)(6)(I) of this Officer's Certificate.

                  "Permitted Business" means any business that derives a
         majority of its revenues from the business engaged in by the Company
         and its Restricted Subsidiaries on the original issue date of the
         Series G Notes and/or activities that are reasonably similar,
         ancillary, incidental, complementary or related to, or a reasonable
         extension, development or expansion of, the businesses in which the
         Company and its Restricted Subsidiaries are engaged on the original
         issue date of the Series G Notes, as determined in good faith by the
         Board of Directors.

                  "Permitted Investments" means:

                  (1)      any Investment in the Company or in a Restricted
                           Subsidiary of the Company (other than a Receivables
                           Entity);

                  (2)      any Investment in Cash Equivalents;

                  (3)      any Investment by the Company or any Restricted
                           Subsidiary of the Company in a Person, if as a result
                           of such Investment:

                           (a)      such Person becomes a Restricted Subsidiary
                                    of the Company (other than a Receivables
                                    Entity); or

                           (b)      such Person is merged, consolidated or
                                    amalgamated with or into, or transfers or
                                    conveys substantially all of its assets to,
                                    or is

                                       62



                                    liquidated into, the Company or a Restricted
                                    Subsidiary of the Company (other than a
                                    Receivables Entity);

                  (4)      any Investment made as a result of the receipt of
                           non-cash consideration from an Asset Sale that was
                           made pursuant to and in compliance with Section
                           1(u)(v) of this Officer's Certificate (under the
                           heading "Certain Covenants and Definitions--Asset
                           Sales");

                  (5)      any acquisition of assets to the extent it is in
                           exchange for the issuance of Equity Interests (other
                           than Disqualified Stock) of the Company;

                  (6)      any Investments received in compromise of obligations
                           of such persons incurred in the ordinary course of
                           trade creditors or customers that were incurred in
                           the ordinary course of business, including pursuant
                           to any plan of reorganization or similar arrangement
                           upon the bankruptcy or insolvency of any trade
                           creditor or customer;

                  (7)      Hedging Obligations;

                  (8)      Investments by the Company or a Restricted Subsidiary
                           in a Receivables Entity or any Investment by a
                           Receivables Entity in any other Person, in each case,
                           in connection with a Qualified Receivables
                           Transaction, provided however, that any Investment in
                           any Receivables Entity or such other Person is in the
                           form of a Purchase Money Note, or any equity
                           interests, directly or indirectly, in accounts
                           receivable and related assets generated by the
                           Company or a Restricted Subsidiary and transferred to
                           any Person in connection with a Qualified Receivables
                           Transaction or any such Person owning such accounts
                           receivable;

                  (9)      any Investments made in accordance with clause (6) of
                           the definition of "Asset Sales"; and

                  (10)     other Investments in any Person that is not also a
                           Restricted Subsidiary of the Company having an
                           aggregate fair market value (measured on the date
                           each such Investment was made and without giving
                           effect to subsequent changes in value), when taken
                           together with all other Investments made pursuant to
                           this clause (10) since the original issue date of the
                           Series G Notes, not to exceed $30.0 million.

                  "Permitted Refinancing Indebtedness" means any Indebtedness of
         the Company or any of its Restricted Subsidiaries issued in exchange
         for, or the net proceeds of which are used to extend, refinance, renew,
         replace, defease or refund other Indebtedness of the Company or any of
         its Restricted Subsidiaries (other than intercompany Indebtedness);
         provided that:

                  (1)      the principal amount (or accreted value, if
                           applicable) of such Permitted Refinancing
                           Indebtedness does not exceed the principal amount (or
                           accreted value, if applicable) of the Indebtedness
                           extended, refinanced,

                                       63



                           renewed, replaced, defeased or refunded (plus all
                           accrued and unpaid interest on the Indebtedness and
                           the amount of all expenses and premiums incurred in
                           connection therewith);

                  (2)      if such Permitted Refinancing Indebtedness is issued
                           on or after the first anniversary of the original
                           issue date of the Series G Notes, such Permitted
                           Refinancing Indebtedness has a final maturity date
                           later than the final maturity date of, and has a
                           Weighted Average Life to Maturity equal to or greater
                           than the Weighted Average Life to Maturity of, the
                           Indebtedness being extended, refinanced, renewed,
                           replaced, defeased or refunded;

                  (3)      if such Permitted Refinancing Indebtedness is issued
                           on or after the first anniversary of the original
                           issue date of the Series G Notes, and the
                           Indebtedness being extended, refinanced, renewed,
                           replaced, defeased or refunded is contractually
                           subordinated in right of payment to the Series G
                           Notes, such Permitted Refinancing Indebtedness has a
                           final maturity date later than the final maturity
                           date of, and is subordinated in right of payment to,
                           the Series G Notes on terms at least as favorable to
                           the Holders of Series G Notes as those contained in
                           the documentation governing the Indebtedness being
                           extended, refinanced, renewed, replaced, defeased or
                           refunded; and

                  (4)      such Indebtedness is incurred either by the Company
                           or by the Subsidiary who is the obligor on the
                           Indebtedness being extended, refinanced, renewed,
                           replaced, defeased or refunded.

                  "Private Placement Legend" means the legend set forth in
         Section 1(q)(v)(G)(1) of this Officer's Certificate to be placed on all
         Series G Notes issued under the Indenture and this Officer's
         Certificate except where otherwise permitted by the provisions of the
         Indenture and this Officer's Certificate.

                  "Purchase Agreement" means the Purchase Agreement dated August
         13, 2003 among the Company and each Initial Purchaser relating to the
         Offering.

                  "Purchase Date" has the meaning assigned to it in Section
         1(h)(iv)(B) of this Officer's Certificate.

                  "Purchase Money Note" means a promissory note of a Receivables
         Entity evidencing a line of credit, which may be irrevocable, from the
         Company or any Restricted Subsidiary of the Company in connection with
         a Qualified Receivables Transaction to a Receivables Entity, which note
         is repayable from cash available to the Receivables Entity, other than
         amounts required to be established as reserves pursuant to agreements,
         amounts paid to investors in respect of interest, principal and other
         amounts owing to such investors and amounts owing to such investors and
         amounts paid in connection with the purchase of newly generated
         accounts receivable.

                  "QIB" means a "qualified institutional buyer" as defined in
         Rule 144A.

                                       64



                  "Qualified Receivables Transaction" means any transaction or
         series of transactions that may be entered into by the Company or any
         of its Restricted Subsidiaries pursuant to which the Company or any of
         its Restricted Subsidiaries may sell, convey or otherwise transfer to
         (1) a Receivables Entity (in the case of a transfer by the Company or
         any of its Restricted Subsidiaries) and (2) any other Person (in the
         case of a transfer by a Receivables Entity), or may grant a security
         interest in, any accounts receivable (whether now existing or arising
         in the future) of the Company or any of its Restricted Subsidiaries,
         and any assets related thereto including, without limitation, all
         collateral securing such accounts receivable, all contracts and all
         guarantees or other obligations in respect of such accounts receivable,
         the proceeds of such receivables and other assets which are customarily
         transferred, or in respect of which security interests are customarily
         granted in connection with asset securitization involving accounts
         receivable.

                  "Rating Agencies" means S&P and Moody's, or if S&P or Moody's
         or both shall not make a rating on the Series G Notes publicly
         available, a nationally recognized statistical rating agency or
         agencies, as the case may be, selected by the Company (as certified by
         a resolution of the Board of Directors) which shall be substituted for
         S&P or Moody's or both, as the case may be.

                  "Receivables Entity" means a wholly-owned Subsidiary of the
         Company or Sierra Pacific Resources (or another Person in which the
         Company or any Restricted Subsidiary of the Company makes an Investment
         and to which the Company or any Restricted Subsidiary of the Company
         transfers accounts receivable and related assets) which engages in no
         activities other than in connection with the financing of accounts
         receivable and which is designated by the Board of Directors (as
         provided below) as a Receivables Entity:

                  (1)      no portion of the Indebtedness or any other
                           obligations (contingent or otherwise) of which:

                           (a)      is guaranteed by the Company or any
                                    Restricted Subsidiary of the Company
                                    (excluding guarantees of Obligations (other
                                    than the principal of, and interest on,
                                    Indebtedness) pursuant to Standard
                                    Securitization Undertakings);

                           (b)      is recourse to or obligates the Company or
                                    any Restricted Subsidiary of the Company in
                                    any way other than pursuant to Standard
                                    Securitization Undertakings; or

                           (c)      subjects any property or asset of the
                                    Company or any Restricted Subsidiary of the
                                    Company, directly or indirectly,
                                    contingently or otherwise, to the
                                    satisfaction thereof, other than pursuant to
                                    Standard Securitization Undertakings;

                  (2)      which is not party to any agreement, contract,
                           arrangement or understanding (except in connection
                           with a Purchase Money Note or

                                       65



                           Qualified Receivables Transaction) with the Company
                           or any Restricted Subsidiary of the Company other
                           than on terms no less favorable to the Company or
                           such Restricted Subsidiary than those that might be
                           obtained at the time from Persons that are not
                           Affiliates of the Company, other than fees payable in
                           the ordinary course of business in connection with
                           servicing accounts receivable; and

                  (3)      to which neither the Company nor any Restricted
                           Subsidiary of the Company has any direct or indirect
                           obligation (a) to subscribe for additional Equity
                           Interests or (b) to maintain or preserve such
                           entity's financial condition or cause such entity to
                           achieve certain levels of operating results.

                  Any such designation by the Board of Directors shall be
         evidenced to the Trustee by filing with the Trustee a certified copy of
         the Board Resolution giving effect to such designation and an Officer's
         Certificate certifying that such designation complied with the
         foregoing conditions.

                  "Registration Rights Agreement" means (i) the Registration
         Rights Agreement, dated as of the Issue Date, by and among the Company
         and the other parties named on the signature pages thereof relating to
         the Original Notes and (ii) any similar agreement that the Company and
         other parties may enter into in relation to any other Initial Notes, in
         each case as such agreement may be amended, modified or supplemented
         from time to time.

                  "Regulation S" means Regulation S promulgated under the
         Securities Act.

                  "Regulation S Global Note" means a Global Note in the form of
         Exhibit A hereto bearing the Global Note Legend and the Private
         Placement Legend and deposited with or on behalf of and registered in
         the name of the Depositary or its nominee, issued in an initial
         denomination equal to the outstanding principal amount of the Notes
         initially sold by the Initial Purchasers in reliance on Rule 903 of
         Regulation S.

                  "Restricted Definitive Note" means a Definitive Note bearing
         the Private Placement Legend.

                  "Restricted Global Note" means a Global Note bearing the
         Private Placement Legend.

                  "Restricted Investment" means an Investment other than a
         Permitted Investment.

                  "Restricted Payments" has the meaning assigned to it in
         Section 1(u)(i)(A) of this Officer's Certificate.

                  "Restricted Period" means the 40-day distribution compliance
         period as set forth in Regulation S.

                                       66



                  "Restricted Subsidiary" of a Person means any Subsidiary of
         the referent Person that is not an Unrestricted Subsidiary.

                  "Rule 144" means Rule 144 promulgated under the Securities
         Act.

                  "Rule 144A" means Rule 144A promulgated under the Securities
         Act.

                  "Rule 144A Global Note" means a Global Note in the form of
         Exhibit A hereto bearing the Global Note Legend and the Private
         Placement Legend and deposited with and registered in the name of the
         Depositary or its nominee, issued in an initial denomination equal to
         the outstanding principal amount of the Notes initially sold by the
         Initial Purchasers in reliance on Rule 144A.

                  "Rule 903" means Rule 903 promulgated under the Securities
         Act.

                  "Rule 904" means Rule 904 promulgated under the Securities
         Act.

                  "Securities Act" means the Security Act of 1933, as amended.

                  "Series G Lien" means, with respect to any asset, any
         mortgage, lien, pledge, charge, security interest or encumbrance of any
         kind in respect of such asset, whether or not filed, recorded or
         otherwise perfected under applicable law, including any conditional
         sale or other title retention agreement, any lease in the nature
         thereof, any option or other agreement to sell or give a security
         interest in and any filing of or agreement to give any financing
         statement under the Uniform Commercial Code (or equivalent statutes) of
         any jurisdiction.

                  "Series G Permitted Liens" means:

                  (1)      Series G Liens securing any Indebtedness under a
                           Credit Facility that was permitted by the terms of
                           this Officer's Certificate to be incurred, and all
                           Obligations and Hedging Obligations relating to such
                           Indebtedness;

                  (2)      Series G Liens in favor of the Company or any
                           Subsidiary Guarantors;

                  (3)      Series G Liens on property of a Person existing at
                           the time such Person is merged with or into or
                           consolidated with the Company or any Restricted
                           Subsidiary of the Company; provided that such Series
                           G Liens were in existence prior to the contemplation
                           of such merger or consolidation and do not extend to
                           any assets other than those of the Person merged into
                           or consolidated with the Company or the Restricted
                           Subsidiary;

                  (4)      Series G Liens on property existing at the time of
                           acquisition of the property by the Company or any
                           Restricted Subsidiary of the Company, provided that
                           such Series G Liens were in existence prior to the
                           contemplation of such acquisition;

                                       67



                  (5)      Series G Liens to secure the performance of statutory
                           obligations, surety or appeal bonds, performance
                           bonds or other obligations of a like nature incurred
                           in the ordinary course of business;

                  (6)      Series G Liens to secure Indebtedness (including
                           Capital Lease Obligations) permitted by Section
                           1(u)(ii)(B)(4) of this Officer's Certificate
                           ("Certain Covenants and Definitions--Incurrence of
                           Indebtedness and Issuance of Preferred Stock")
                           covering only the assets acquired with such
                           Indebtedness;

                  (7)      Series G Liens existing on the original issue date of
                           the Series G Notes (including the Series G Lien of
                           the First Mortgage Indenture and the Series G Lien of
                           the Indenture);

                  (8)      Series G Liens for taxes, assessments or governmental
                           charges or claims that are not yet delinquent or that
                           are being contested in good faith by appropriate
                           proceedings promptly instituted and diligently
                           concluded, provided that any reserve or other
                           appropriate provision as is required in conformity
                           with GAAP has been made therefor;

                  (9)      Series G Liens incurred in the ordinary course of
                           business of the Company or any Restricted Subsidiary
                           with respect to obligations (including Hedging
                           Obligations) that do not exceed $15.0 million at any
                           one time outstanding;

                  (10)     Series G Liens to secure Indebtedness permitted by
                           clauses (7), (13), (16) or (17) of Section
                           1(u)(ii)(B) of this Officer's Certificate (under the
                           heading "Certain Covenants and
                           Definitions--Incurrence of Indebtedness and Issuance
                           of Preferred Stock");

                  (11)     Series G Liens securing any other Indebtedness issued
                           or to be issued under the Indenture that was
                           permitted to be incurred under the terms of Section
                           1(u)(ii) of this Officer's Certificate (under the
                           heading "Certain Covenants--Incurrence of
                           Indebtedness and Issuance of Preferred Stock");

                  (12)     Series G Liens securing Permitted Refinancing
                           Indebtedness incurred to refinance Indebtedness that
                           was previously so secured, provided that any such
                           Series G Lien is limited to all or part of the same
                           property or assets (plus improvements, accessions,
                           proceeds or dividends or distributions in respect
                           thereof) that secured (or, under the written
                           arrangements under which the original Series G Lien
                           arose, could secure) the Indebtedness being
                           refinanced or is in respect of property that is the
                           security for a Series G Permitted Lien hereunder;

                  (13)     Series G Liens on assets transferred to a Receivables
                           Entity or on assets of a Receivables Entity, in
                           either case, incurred in connection with a Qualified
                           Receivables Transaction; and

                                       68



                  (14)     Series G Liens, including pledges, rights of offset
                           and bankers' liens, on deposit accounts, instruments,
                           investment accounts and investment property
                           (including cash, cash equivalents and marketable
                           securities) from time to time maintained with or held
                           by any financial and/or depository institutions, in
                           each case solely to secure any and all obligations
                           now or hereafter existing of the Company or any of
                           its Subsidiaries in connection with any deposit
                           account, investment account or cash management
                           service (including ACH, Fedwire, CHIPS, concentration
                           and zero balance accounts, and controlled
                           disbursement, lockbox or restricted accounts) now or
                           hereafter provided by any financial and/or depository
                           institutions to or for the benefit of the Company,
                           any of its Subsidiaries or any special purpose entity
                           directly or indirectly providing loans to or making
                           receivables purchases from the Company or any of its
                           Subsidiaries.

                  "Shelf Registration Statement" has the meaning set forth in
         the Registration Rights Agreement.

                  "Significant Subsidiary" means any Subsidiary that would be a
         "significant subsidiary" as defined in Article 1, Rule 1-02 of
         Regulation S-X, promulgated pursuant to the Securities Act, as such
         Regulation is in effect on the date hereof.

                  "S&P" means Standard & Poor's Rating Group, Inc., or any
         successor to the rating agency business thereof.

                  "Standard Securitization Undertakings" means representations,
         warranties, covenants and indemnities entered into by the Company or
         any Restricted Subsidiary of the Company which are reasonably customary
         in securitization of accounts receivable transactions.

                  "Subsidiary" means, with respect to any specified Person:

                  (1)      any corporation, association or other business entity
                           of which more than 50% of the total voting power of
                           shares of Capital Stock entitled (without regard to
                           the occurrence of any contingency) to vote in the
                           election of directors, managers or trustees of the
                           corporation, association or other business entity is
                           at the time owned or controlled, directly or
                           indirectly, by that Person or one or more of the
                           other Subsidiaries of that Person (or a combination
                           thereof); and

                  (2)      any partnership (a) the sole general partner or the
                           managing general partner of which is such Person or a
                           Subsidiary of such Person or (b) the only general
                           partners of which are that Person or one or more
                           Subsidiaries of that Person (or any combination
                           thereof).

                  "Subsidiary Guarantee" means any Guarantee of the Series G
         Notes to be executed by any Subsidiary of the Company pursuant to
         Section 1(u)(ix) of this Officer's Certificate (under the heading
         "Future Subsidiary Guarantees").

                                       69



                  "Subsidiary Guarantors" means any Subsidiary of the Company
         that executes a Subsidiary Guarantee in accordance with the provisions
         of the Indenture, and their respective successors and assigns.

                  "Triggering Event" has the meaning assigned to it in Section
         1(h) of this Officer's Certificate.

                  "Trust Preferred Vehicle" means NVP Capital I, NVP Capital III
         or any future similar trust, the only assets of which are subordinated
         Indebtedness of the Company.

                  "Unrestricted Definitive Note" means one or more Definitive
         Notes that do not bear and are not required to bear the Private
         Placement Legend.

                  "Unrestricted Global Note" means a permanent Global Note in
         the form of Exhibit A attached hereto that bears the Global Note Legend
         and that has the "Schedule of Exchanges of Interests in the Global
         Note" attached thereto, and that is deposited with or on behalf of and
         registered in the name of the Depositary, representing a series of
         Notes that do not bear the Private Placement Legend.

                  "Unrestricted Subsidiary" means any Subsidiary of the Company
         that is designated by the Board of Directors as an Unrestricted
         Subsidiary pursuant to a Board Resolution, but only to the extent that
         such Subsidiary:

                  (1)      has no Indebtedness other than Non-Recourse Debt;

                  (2)      is not party to any agreement, contract, arrangement
                           or understanding with the Company or any Restricted
                           Subsidiary of the Company unless the terms of any
                           such agreement, contract, arrangement or
                           understanding are no less favorable to the Company or
                           such Restricted Subsidiary than those that might be
                           obtained at the time from Persons who are not
                           Affiliates of the Company;

                  (3)      is a Person with respect to which neither the Company
                           nor any of its Restricted Subsidiaries has any direct
                           or indirect obligation (a) to subscribe for
                           additional Equity Interests or (b) to maintain or
                           preserve such Person's financial condition or to
                           cause such Person to achieve any specified levels of
                           operating results;

                  (4)      has not guaranteed or otherwise directly or
                           indirectly provided credit support for any
                           Indebtedness of the Company or any of its Restricted
                           Subsidiaries; and

                  (5)      has at least one director on its Board that is not a
                           director or executive officer of the Company or any
                           of its Restricted Subsidiaries and has at least one
                           executive officer that is not a director or executive
                           officer of the Company or any of its Restricted
                           Subsidiaries.

                                       70



                  Any designation of a Subsidiary of the Company as an
         Unrestricted Subsidiary shall be evidenced to the Trustee by filing
         with the Trustee a certified copy of the Board Resolution giving effect
         to such designation and an Officer's Certificate certifying that such
         designation complied with the preceding conditions and was permitted by
         Section 1(u)(i) of this Officer's Certificate (under the heading
         "Certain Covenants and Definitions--Restricted Payments"). If, at any
         time, any Unrestricted Subsidiary would fail to meet the preceding
         requirements as an Unrestricted Subsidiary, it shall thereafter cease
         to be an Unrestricted Subsidiary for purposes of the Indenture and any
         Indebtedness of such Subsidiary shall be deemed to be incurred by a
         Restricted Subsidiary of the Company as of such date and, if such
         Indebtedness is not permitted to be incurred as of such date under
         Section 1(u)(ii) of this Officer's Certificate (under the heading
         "Certain Covenants and Definitions--Incurrence of Indebtedness and
         Issuance of Preferred Stock"), the Company shall be in default of such
         covenant.

                  "U.S." means the United States of America.

                  "U.S. Person" means a U.S. person as defined in Rule 902(o)
         under the Securities Act.

                  "Voting Stock" of any Person as of any date means the Capital
         Stock of such Person that is at the time entitled to vote in the
         election of the Board of such Person.

                  "Weighted Average Life to Maturity" means, when applied to any
         Indebtedness at any date, the number of years obtained by dividing:

                  (1)      the sum of the products obtained by multiplying (a)
                           the amount of each then remaining installment,
                           sinking fund, serial maturity or other required
                           payments of principal, including payment at final
                           maturity, in respect of the Indebtedness, by (b) the
                           number of years (calculated to the nearest
                           one-twelfth) that shall elapse between such date and
                           the making of such payment; by

                  (2)      the then outstanding principal amount of such
                           Indebtedness.

         (v)      The Series G Notes shall have such other terms and provisions
         as are provided in the form thereof attached hereto as Exhibit A, and
         shall be issued in substantially such form.

                                       71



                  2.       The undersigned has read all of the covenants and
         conditions contained in the Indenture, and the definitions in the
         Indenture relating thereto, relating to the issuance of the Series G
         Notes and in respect of compliance with which this certificate is made.

                  The statements contained in this certificate are based upon
         the familiarity of the undersigned with the Indenture, the documents
         accompanying this certificate, and upon discussions by the undersigned
         with officers and employees of the Company familiar with the matters
         set forth herein.

                  In the opinion of the undersigned, he has made such
         examination or investigation as is necessary to enable him to express
         an informed opinion as to whether or not such covenants and conditions
         have been complied with.

                  In the opinion of the undersigned, such conditions and
         covenants have been complied with.

                                       72



         IN WITNESS WHEREOF, the undersigned has executed this Officer's
Certificate as of the date first written above.

                                  By: /s/ Richard K. Atkinson
                                      ------------------------------------------
                                      Richard K. Atkinson
                                      Vice President and Chief Financial Officer

Acknowledged and Received on
August 18, 2003

THE BANK OF NEW YORK,
as Trustee

By:/s/ Stacey B. Poindexter
   ---------------------------------
Name:  Stacey B. Poindexter
Title: Assistant Treasurer

NPC Officer's Certificate (Terms of Note)


                                    EXHIBIT A

                             FORM OF SERIES G NOTES

  [Insert the Global Note Legend, if applicable, pursuant to the provisions of
                  the Indenture and the Officer's Certificate]

 [Insert the Private Placement Legend, if applicable, pursuant to the provisions
                 of the Indenture and the Officer's Certificate]

                              NEVADA POWER COMPANY
           9% General and Refunding Mortgage Notes, Series G, due 2013

                                                                         
Original Interest Accrual Date:            August 18, 2003                     Redeemable:  Yes  X  No
                                                                                                ----  ----
Stated Maturity:                           August 15, 2013                     Redemption Date: See Below
Interest Rate:                             9%                                  Redemption Price: See Below
Interest Payment Dates:                    February 15 and August 15
Record Dates:                              February 1 and August 1



                     The Security is not a Discount Security
              within the meaning of the within-mentioned Indenture.

                                 ---------------

                                                           CUSIP No. 641423 BE 7

           9% General and Refunding Mortgage Notes, Series G, due 2013

No. R-1                                                            $350,000,000

promises to pay to Cede & Co. or registered assigns, the principal sum of
$350,000,000 Dollars on August 15, 2013.

         1.       Interest. Nevada Power Company, a Nevada corporation (the
"Company"), promises to pay interest on the principal amount of this Series G
Note at 9% per annum, from August 18, 2003 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages, if any, semi-annually in arrears on February 15 and August 15 of each
year, or if any such day is not a Business Day, on the next succeeding Business
Day (each an "Interest Payment Date"). Interest on the Series G Notes shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from Original Interest Accrual Date specified above;
provided that if there is no existing Default in the payment of interest, and if
this Series G Note is authenticated between a record date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest Payment Date, except in the case of the
original issuance of Series G Notes, in which case interest shall accrue from
the Original Interest Accrual Date specified above; provided, further, that the
first Interest Payment Date shall be February 15, 2004. The Company shall pay
interest

                                       A-1


(including postpetition interest in any proceeding under the Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at the rate
borne on the Series G Notes; it shall pay interest (including post-petition
interest in any proceeding under the Bankruptcy Law) on overdue installments of
interest and Liquidated Damages, if any, (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.

         2.       Method of Payment. The Company shall pay interest on the
Series G Notes (except Defaulted Interest) and Liquidated Damages to the Persons
who are registered Holders of Series G Notes at the close of business on the
February 1 and August 1 next preceding the Interest Payment Date, even if such
Series G Notes are canceled after such record date and on or before such
Interest Payment Date, except as provided in Section 3.07 of the Indenture with
respect to Defaulted Interest. The Series G Notes shall be payable as to
principal, premium and Liquidated Damages, if any, and interest at the office or
agency of the Company maintained for such purpose within the City and State of
New York, or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders of Series G Notes at their
addresses set forth in the register of Holders, and provided that payment by
wire transfer of immediately available funds shall be required with respect to
principal of, and interest, premium and Liquidated Damages on, all Global Notes
and all other Series G Notes the Holders of which shall have provided wire
transfer instructions to the Company or the Paying Agent. Such payment shall be
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.

         3.       Paying Agent and Security Registrar. Initially, The Bank of
New York, the Trustee under the Indenture, shall act as Paying Agent and
Security Registrar. The Company may change any Paying Agent or Security
Registrar without notice to any Holder of Series G Notes. The Company or any of
its Subsidiaries may act in any such capacity.

         4.       Indenture; Security. This Series G Note is one of a duly
authorized issue of Securities of the Company, issued and issuable in one or
more series under and equally secured by a General and Refunding Mortgage
Indenture, dated as of May 1, 2001 (such Indenture as originally executed and
delivered and as supplemented or amended from time to time thereafter, together
with any constituent instruments establishing the terms of particular
Securities, being herein called the "Indenture"), between the Company and The
Bank of New York, Trustee (herein called the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the property
mortgaged, pledged and held in trust, the nature and extent of the security and
the respective rights, limitations of rights, duties and immunities of the
Company, the Trustee and the Holders of the Securities thereunder and of the
terms and conditions upon which the Securities are, and are to be, authenticated
and delivered and secured. The acceptance of this Series G Note shall be deemed
to constitute the consent and agreement by the Holder hereof to all of the terms
and provisions of the Indenture. This Series G Note is one of the series
designated above. The terms of the Series G Notes include those stated in the
Indenture, the Officer's Certificate dated August 18, 2003 (the "Officer's
Certificate") and those made part of the Indenture by reference to the Trust
Indenture Act. The Series G Notes are subject to all such terms, and Holders of
Series G Notes are referred to the Indenture and such Act for a statement

                                      A-2



of such terms. To the extent any provision of this Series G Note conflicts with
the express provisions of the Indenture or the Officer's Certificate, the
provisions of the Indenture and the Officer's Certificate shall govern and be
controlling. The Series G Notes are general obligations of the Company initially
limited to $350,000,000 aggregate principal amount in the case of Series G Notes
issued on the Issue Date.

         All Outstanding Securities, including the Series G Notes, issued under
the Indenture are secured by the lien of the Indenture on the properties of the
Company described in the Indenture. The lien of the Indenture is junior, subject
and subordinate to the prior lien of the Indenture of Mortgage dated as of
October 1, 1953 between the Company and Deutsche Bank Trust Company Americas, as
trustee.

         5.       Optional Redemption.

                  (a)      Except as set forth in subparagraph (b) of this
paragraph 5, the Series G Notes shall not be redeemable at the Company's option
prior to August 15, 2008. Thereafter, the Series G Notes shall be subject to
redemption at any time or from time to time at the option of the Company, in
whole or in part, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the applicable redemption date, if
redeemed during the twelve-month period beginning on August 15 of the years
indicated below:



YEAR                                                 PERCENTAGE
- ----                                                 ----------
                                                  
2008...................................              104.500%
2009...................................              103.000%
2010...................................              101.500%
2011 and thereafter....................              100.000%


                  (b)      Notwithstanding the foregoing, at any time or from
time to time on or prior to August 15, 2006, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Series G Notes
at a Redemption Price of 109% of the principal amount thereof, plus accrued and
unpaid interest, if any, and Liquidated Damages thereon, if any, to the
Redemption Date, with the net cash proceeds of any public or private offerings
of its Equity Interests or capital contribution to the Company's equity made
with net cash proceeds of an offering by Sierra Pacific Resources; provided that
at least 65% of the aggregate principal amount of Series G Notes remain
outstanding immediately after each occurrence of such redemption excluding
Series G Notes held by the Company and its Subsidiaries; and provided, further,
that each such redemption shall occur within 120 days of the date of the closing
of such offering.

         6.       Notice of Optional Redemption. Notice of optional redemption
shall be mailed at least 30 days but not more than 60 days before the Redemption
Date to each Holder whose Series G Notes are to be redeemed at its registered
address. Series G Notes in denominations larger than $1,000 may be redeemed in
part but only in whole multiples of $1,000, unless all of the Series G Notes
held by a Holder are to be redeemed. On and after the redemption date, interest
and Liquidated Damages, if any, cease to accrue on Series G Notes or portions
thereof called for redemption.

                                      A-3



         7.       Mandatory Redemption.

                  (a)      Other than in connection with clause (b) below or in
connection with a redemption at the option of the Holders of the Series G Notes,
the Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Series G Notes.

                  (b)      Upon the occurrence of the events described below in
clauses (1) or (2) of this paragraph 7(b), the Company shall be required to
redeem the Series G Notes immediately, at a Redemption Price equal to 100% of
the aggregate principal amount of the Series G Notes plus accrued and unpaid
interest and Liquidated Damages, if any, on the Series G Notes to the date of
redemption, without further action or notice on the part of the Trustee or the
Holders of the Series G Notes:

                  (1)      the Company or any of its Subsidiaries that is a
                           Significant Subsidiary or any group of Subsidiaries
                           that, taken as a whole, would constitute a
                           Significant Subsidiary pursuant to or within the
                           meaning of Bankruptcy Law:

                           (I)      commences a voluntary case,

                           (II)     consents to the entry of an order for relief
                                    against it in an involuntary case,

                           (III)    consents to the appointment of a custodian
                                    of it or for all or substantially all of its
                                    property,

                           (IV)     makes a general assignment for the benefit
                                    of its creditors, or

                           (V)      admits in writing of its inability to pay
                                    its debts generally as they become due; or

                  (2)      a court of competent jurisdiction enters an order or
                           decree under any Bankruptcy Law that:

                           (I)      is for relief against the Company or any of
                                    its Subsidiaries that is a Significant
                                    Subsidiary or any group of Subsidiaries
                                    that, taken as a whole, would constitute a
                                    Significant Subsidiary in an involuntary
                                    case;

                           (II)     appoints a custodian of the Company or any
                                    of its Subsidiaries that is a Significant
                                    Subsidiary or any group of Subsidiaries
                                    that, taken as a whole, would constitute a
                                    Significant Subsidiary or for all or
                                    substantially all of the property of the
                                    Company or any of its Subsidiaries that is a
                                    Significant Subsidiary or any group of
                                    Subsidiaries that, taken as a whole, would
                                    constitute a Significant Subsidiary; or

                                      A-4



                           (III)    orders the liquidation of the Company or any
                                    of its Subsidiaries that is a Significant
                                    Subsidiary or any group of Restricted
                                    Subsidiaries that, taken as a whole, would
                                    constitute a Significant Subsidiary;

                           and the order or decree remains unstayed and in
                           effect for 60 consecutive days.

         8.       Redemption at the Option of Holders. Upon the occurrence of
any of the following Triggering Events: (a) failure for 30 days to pay when due
interest on, or Liquidated Damages with respect to, the Series G Notes; (b)
failure to pay when due the principal of, or premium, if any, on the Series G
Notes; (c) failure by the Company or any of its Restricted Subsidiaries to
comply with the provisions described in Section 1(u)(i), 1(u)(ii) or 1(u)(vi) of
the Officer's Certificate; (d) failure by the Company or any of its Restricted
Subsidiaries for 30 days after notice to comply with the provisions described in
Section 1(h)(iii) or (iv) of the Officer's Certificate; (e) failure by the
Company or any of its Restricted Subsidiaries for 60 days after notice to comply
with any of the other agreements in the Officer's Certificate or the Series G
Notes; (f) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the original issue date of the Series G Notes, if that default (i) is
caused by a failure to pay principal of, or interest or premium, if any, on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (ii) results
in the acceleration of such Indebtedness prior to its express maturity, and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$15.0 million or more; (g) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $15.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days; or (h) an event of
default under the First Mortgage Indenture (other than any such matured event of
default which (i) is of similar kind or character to the Triggering Event
described in (c) or (e) above and (ii) has not resulted in the acceleration of
the securities outstanding under the First Mortgage Indenture); provided,
however, that, anything in the Officer's Certificate to the contrary
notwithstanding, the waiver or cure of such event of default under the First
Mortgage Indenture and the rescission and annulment of the consequences thereof
under the First Mortgage Indenture shall constitute a cure of the corresponding
Triggering Event and a rescission and annulment of the consequences thereof, the
Holders of at least 25% in principal amount of the Series G Notes then
Outstanding may deliver a notice to the Company requiring the Company to redeem
the Series G Notes immediately at a Redemption Price equal to 100% of the
aggregate principal amount of the Series G Notes plus accrued and unpaid
interest and Liquidated Damages, if any, on the Series G Notes to the Redemption
Date. The Holders of a majority in aggregate principal amount of the Series G
Notes then Outstanding by notice to the Company and the Trustee may on behalf of
the Holders of all of the Series G Notes waive any existing Triggering Event and
its consequences except a continuing Triggering Event related to the payment of
interest or Liquidated Damages on, or the principal of, the Series G Notes. In
the case of any Triggering Event occurring on or after August 15, 2008 by reason
of any willful

                                      A-5



action or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the Series G Notes pursuant to the
provisions of Section 1(g)(i) of the Officer's Certificate relating to
redemption at the option of the Company, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
redemption of the Series G Notes at the option of the Holders thereof. If a
Triggering Event occurs prior to August 15, 2008, by reason of any willful
action or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding the prohibition on redemption of the Series G Notes prior
to August 15, 2008, then the premium specified in Section 1(g)(i) of this
Officer's Certificate shall also become immediately due and payable to the
extent permitted by law upon the redemption of the Series G Notes at the option
of the Holders thereof. Upon becoming aware of any Triggering Event, the Company
shall deliver to the Trustee a statement specifying such Triggering Event.

         9.       Denominations, Transfer, Exchange. The Series G Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Series G Notes may be registered and Series
G Notes may be exchanged as provided in the Indenture and the Officer's
Certificate. The Security Registrar and the Trustee may require a Holder of
Series G Notes, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder of Series G Notes to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Series G Note or portion of a
Series G Note selected for redemption, except for the unredeemed portion of any
Series G Note being redeemed in part. Also, the Company need not exchange or
register the transfer of any Series G Notes for a period of 15 days before a
selection of Series G Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.

         10.      Persons Deemed Owners. The registered Holder of a Series G
Note may be treated as its owner for all purposes.

         11.      Amendment, Supplement and Waiver. The Indenture permits, with
certain exceptions as therein provided, the Trustee to enter into one or more
supplemental indentures for the purpose of adding any provisions to, or changing
in any manner or eliminating any of the provisions of, the Indenture with the
consent of the Holders of not less than a majority in aggregate principal amount
of the Securities of all series then Outstanding under the Indenture, considered
as one class; provided, however, that if there shall be Securities of more than
one series Outstanding under the Indenture and if a proposed supplemental
indenture shall directly affect the rights of the Holders of Securities of one
or more, but less than all, of such series, then the consent only of the Holders
of a majority in aggregate principal amount of the Outstanding Securities of all
series so directly affected, considered as one class, shall be required; and
provided, further, that if the Securities of any series shall have been issued
in more than one Tranche and if the proposed supplemental indenture shall
directly affect the rights of the Holders of Securities of one or more, but less
than all, of such Tranches, then the consent only of the Holders of a majority
in aggregate principal amount of the Outstanding Securities of all Tranches so
directly affected, considered as one class, shall be required; and provided,
further, that the Indenture permits the Trustee to enter into one or more
supplemental indentures for limited purposes without the consent of any Holders
of Securities. The Indenture also contains

                                      A-6



provisions permitting the Holders of a majority in principal amount of the
Securities then Outstanding, on behalf of the Holders of all Securities, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Series G Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Series G Note and
of any Series G Note issued upon the registration of transfer hereof or in
exchange therefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Series G Note.

         12.      Events of Default. If an Event of Default shall occur and be
continuing, the principal of this Series G Note may be declared due and payable
in the manner and with the effect provided in the Indenture.

         13.      No Recourse Against Others. As provided in the Indenture, no
recourse shall be had for the payment of the principal of or premium, if any, or
interest on any Securities, or any part thereof, or for any claim based thereon
or otherwise in respect thereof, or of the indebtedness represented thereby, or
upon any obligation, covenant or agreement under the Indenture, against, and no
personal liability whatsoever shall attach to, or be incurred by, any
incorporator, stockholder, officer or director, as such, past, present or future
of the Company or of any predecessor or successor corporation (either directly
or through the Company or a predecessor or successor corporation), whether by
virtue of any constitutional provision, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly agreed
and understood that the Indenture and all the Securities are solely corporate
obligations and that any such personal liability is hereby expressly waived and
released as a condition of, and as part of the consideration for, the execution
of the Indenture and the issuance of the Securities.

         14.      Authentication. Unless the certificate of authentication
hereon has been executed by the Trustee or an Authenticating Agent by manual
signature, this Series G Note shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.

         15.      Transfer and Exchange.

                  (a)      As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Series G Note is registrable
in the Security Register, upon surrender of this Series G Note for registration
of transfer at the Corporate Trust Office of The Bank of New York in New York,
New York or such other office or agency as may be designated by the Company from
time to time, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Series G Notes of this series of authorized
denominations and of like tenor and aggregate principal amount, will be issued
to the designated transferee or transferees.

                  (b)      No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.

                                      A-7



                  (c)      Prior to due presentment of this Series G Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Series G Note is
registered as the absolute owner hereof for all purposes, whether or not this
Series G Note be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary.

         16.      Governing Law. THE SERIES G NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

         17.      Definition of "Business Day" and Other Terms. As used herein,
"Business Day" shall mean any day, other than Saturday or Sunday, on which
commercial banks are open for business, including dealings in deposits in U.S.
dollars, in New York. All other terms used in this Series G Note which are
defined in the Indenture or the Officer's Certificate shall have the meanings
assigned to them in the Indenture or the Officer's Certificate, as applicable,
unless otherwise indicated.

         18.      Abbreviations. Customary abbreviations may be used in the name
of a Holder of Series G Notes or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN joint tenants with right
of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).

         19.      Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Series G Notes under the Indenture, Holders of Restricted Global Notes and
Restricted Definitive Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of August 18, 2003 between Nevada Power
Company and the parties named on the signature pages thereof (the "Registration
Rights Agreement").

         20.      CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Series G Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders of Series G Notes.
No representation is made as to the accuracy of such numbers either as printed
on the Series G Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.

         The Company shall furnish to any Holder of Series G Notes upon written
request and without charge a copy of the Indenture and/or the Registration
Rights Agreement. Requests may be made to:

                              Nevada Power Company
                                  P.O. Box 230
                              6226 W. Sahara Avenue
                             Las Vegas, Nevada 89146
                       Attention: Chief Financial Officer

                                      A-8



         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.

                                               NEVADA POWER COMPANY

                                               By: ____________________________
                                                   Richard K. Atkinson
                                                   Vice President and Chief
                                                   Financial Officer

                          CERTIFICATE OF AUTHENTICATION

             This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.

Dated: August ___, 2003

                                               THE BANK OF NEW YORK, as Trustee

                                               By: ____________________________
                                                    Authorized Signatory

                                      A-9



           SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE***

         The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:



                                                   PRINCIPAL
                AMOUNT OF       AMOUNT OF       AMOUNT OF THIS     SIGNATURE OF
               DECREASE IN     INCREASE IN       GLOBAL NOTE        AUTHORIZED
                PRINCIPAL       PRINCIPAL       FOLLOWING SUCH      SIGNATORY OF
 DATE OF     AMOUNT OF THIS   AMOUNT OF THIS     DECREASE (OR      TRUSTEE OF NOTE
EXCHANGE       GLOBAL NOTE     GLOBAL NOTE         INCREASE          CUSTODIAN
- ---------    -------------    --------------    ---------------    -----------
                                                       


- ---------------------------
*** This should be included only if the Note is issued in global form.

                                      A-10



                                 ASSIGNMENT FORM

         To assign this Series G Note, fill in the form below: (I) or (we)
assign and transfer this Series G Note to

________________________________________________________________________________
                  (Insert assignee's soc. sec. or tax I.D. no.)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
              (Print or type assignee's name, address and zip code)

and irrevocably appoint_________________________________________________________
to transfer this Series G Note on the books of the Company. The agent may
substitute another to act for him.

________________________________________________________________________________

Date:
Your Signature:_________________________________________________________________
              (Sign exactly as your name appears on the face of this Series G
                                         Note)

                               SIGNATURE GUARANTEE

________________________________________________________________________________

                                     Signatures must be guaranteed by an
                                     "eligible guarantor institution" meeting
                                     the requirements of the Security Registrar,
                                     which requirements include membership or
                                     participation in the Security Transfer
                                     Agent Medallion Program ("STAMP") or such
                                     other "signature guarantee program" as may
                                     be determined by the Security Registrar in
                                     addition to, or in substitution for, STAMP,
                                     all in accordance with the Securities
                                     Exchange Act of 1934, as amended.

                                      A-11



                       OPTION OF HOLDER TO ELECT PURCHASE

         If you want to elect to have this Series G Note purchased by the
Company pursuant to Section 1(h)(iii) (Offer to Purchase upon Change of Control)
or 1(h)(iv) (Offer to Purchase Upon Application of Excess Proceeds) of the
Officer's Certificate, check the box below:

         [ ] Section 1(h)(iii) (Offer           [ ]  Section 1(h)(iv) (Offer
             to Purchase upon Change            to Purchase Upon Application
             of Control)                        of Excess Proceeds)

         If you want to elect to have only part of the Series G Note purchased
by the Company pursuant to Section 1(h)(iii) (Offer to Purchase upon Change of
Control) or 1(h)(iv) (Offer to Purchase Upon Application of Excess Proceeds) of
the Indenture, state the amount you elect to have purchased:

         $____________________

Date:

Your Signature:_________________________________________________________________
              (Sign exactly as your name appears on the face of the Series G
                                           Note)

Tax Identification No.:_________________________________________________________

                               SIGNATURE GUARANTEE

       _________________________________________________________________

                                            Signatures must be guaranteed by an
                                            "eligible guarantor institution"
                                            meeting the requirements of the
                                            Security Registrar, which
                                            requirements include membership or
                                            participation in the Security
                                            Transfer Agent Medallion Program
                                            ("STAMP") or such other "signature
                                            guarantee program" as may be
                                            determined by the Security Registrar
                                            in addition to, or in substitution
                                            for, STAMP, all in accordance with
                                            the Securities Exchange Act of 1934,
                                            as amended.

                                      A-12



                                    EXHIBIT B

                         FORM OF CERTIFICATE OF TRANSFER

Nevada Power Company
P.O. Box 230
6226 W. Sahara Avenue
Las Vegas, Nevada 89146
Attention: Treasurer

The Bank of New York
101 Barclay Street, Floor 8W
New York, New York 10286
Attention: Corporate Trust Administration

         Re: Nevada Power Company 9% General and Refunding Mortgage Notes,
             Series G, due 2013

         Reference is hereby made to the General and Refunding Mortgage
Indenture, dated as of May 1, 2001, as amended or supplemented (the
"Indenture"), between Nevada Power Company, as issuer (the "Company") and The
Bank of New York, as trustee and the Officer's Certificate dated August 18, 2003
governing the Note[s] (the "Officer's Certificate"). Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture and
the Officer's Certificate.

         ____________________, (the "Transferor") owns and proposes to transfer
the Note[s] or interest in such in such Note[s] specified in Annex A hereto, in
the principal amount of $__________ in such Note[s] or interests (the
"Transfer"), to ____________________ (the "Transferee"), as further specified in
Annex A hereto. In connection with the Transfer, the Transferor hereby certifies
that:

                             [CHECK ALL THAT APPLY]

         1.       [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE 144A GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO
RULE 144A. The Transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor hereby further certifies
that the beneficial interest or Definitive Note is being transferred to a Person
that the Transferor reasonably believed and believes is purchasing the
beneficial interest or Definitive Note for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion,
and such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note shall be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the 144A Global
Note and/or the Definitive Note and in the Officer's Certificate and the
Securities Act.

                                       B-1



         2.       [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE REGULATION S GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE
PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in
accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly,
the Transferor hereby further certifies that (i) the Transfer is not being made
to a person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United States or such Transferor and
any Person acting on its behalf reasonably believed and believes that the
Transferee was outside the United States or (y) the transaction was executed in,
on or through the facilities of a designated offshore securities market and
neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed
selling efforts have been made in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act and (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture and the Officer's Certificate, the transferred
beneficial interest or Definitive Note shall be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation S
Global Note and/or the Definitive Note and in the Officer's Certificate and the
Securities Act.

         3.       [ ] CHECK AND COMPLETE IF TRANSFEREE SHALL TAKE DELIVERY OF A
DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE
144A OR REGULATION S. The Transfer is being effected in compliance with the
transfer restrictions applicable to beneficial interests in Restricted Global
Notes and Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act and any applicable blue sky securities laws of any state of the
United States, and accordingly the Transferor hereby further certifies that
(check one):

                  (a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;

                                       or

                  (b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;

                                       or

                  (c) [ ] such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act; or

                  (d) [ ] such Transfer is being effected to an accredited
investor within the meaning of Rule (501)(a)(1), (2), (3) or (7) under the
Securities Act ("Institutional Accredited Investor") or pursuant to another
exemption from the registration requirements of the Securities Act other than
Rule 144A, Rule 144 or Rule 904, and the Transferor hereby certifies that the

                                      B-2



Transfer complies with the transfer restrictions applicable to beneficial
interests in a Restricted Global Note or Restricted Definitive Notes and the
requirements of the exemption claimed, which certification is supported by (1)
if the Transfer is to an Institutional Accredited Investor, a certificate
executed by the Transferee in the form of Exhibit D to the Officer's Certificate
and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a
copy of which the Transferor has attached to this certificate) to the effect
that such Transfer is in compliance with the Securities Act (provided that an
Opinion of Counsel need not be furnished in respect of Transfers of a principal
amount of Notes of $250,000 or more at the time of Transfer to an Institutional
Accredited Investor who furnishes the certificate set forth in (1) above). Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture and the Officer's Certificate, the transferred beneficial interest or
Definitive Note shall be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Global Note and/or the Definitive
Notes and in the Officer's Certificate and the Securities Act.

         4.       [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.

                  (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture, the
Officer's Certificate and the Private Placement Legend are not required in order
to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture and the
Officer's Certificate, the transferred beneficial interest or Definitive Note
shall no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Officer's Certificate.

                  (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and the Officer's Certificate and any applicable blue
sky securities laws of any state of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Officer's Certificate and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture and the Officer's Certificate, the transferred
beneficial interest or Definitive Note shall no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the Officer's
Certificate.

                  (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions contained
in the Indenture and the Officer's Certificate and any applicable blue sky
securities laws of any State of the United States and (ii) the restrictions on
transfer contained in the Indenture and the Officer's Certificate and the
Private Placement

                                      B-3



Legend are not required in order to maintain compliance with the Securities Act.
Upon consummation of the proposed Transfer in accordance with the terms of the
Indenture and the Officer's Certificate, the transferred beneficial interest or
Definitive Note shall not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Officer's Certificate.

         This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.

___________________________
[Insert Name of Transferor]

By:________________________
    Name:
    Title:

Dated:_____________________

                                      B-4



                       ANNEX A TO CERTIFICATE OF TRANSFER

         1.       The Transferor owns and proposes to transfer the following:

                            [CHECK ONE OF (a) OR (b)]

                  (a)      [ ] a beneficial interest in the:

                           (ii)     [ ] 144A Global Note (CUSIP ___________), or

                           (ii)     [ ] Regulation S Global Note
                                    (CUSIP ___________); or

                  (b)      [ ] a Restricted Definitive Note.

         2.       After the Transfer the Transferee shall hold:

                                   [CHECK ONE]

                  (a)      [ ] a beneficial interest in the:

                           (i)      [ ] 144A Global Note (CUSIP ___________), or

                           (ii)     [ ] Regulation S Global Note
                                    (CUSIP ___________), or

                           (iii)    [ ] Unrestricted Global Note
                                    (CUSIP ___________); or

                  (b)      [ ] a Restricted Definitive Note.

                  (c)      [ ] an Unrestricted Definitive Note,

  in accordance with the terms of the Indenture and the Officer's Certificate.

                                      B-5



                                    EXHIBIT C

                         FORM OF CERTIFICATE OF EXCHANGE

Nevada Power Company
P.O. Box 230
6226 W. Sahara Avenue
Attention: Treasurer
Las Vegas, Nevada 89146

The Bank of New York
101 Barclay Street, Floor 8W
New York, New York 10286
Attention: Corporate Trust Administration

         Re:    Nevada Power Company 9% General and Refunding Mortgage Notes,
                Series G, due 2013

                              (CUSIP ____________)

         Reference is hereby made to the General and Refunding Mortgage
Indenture, dated as of May 1, 2001, as amended or supplemented (the
"Indenture"), between Nevada Power Company, as issuer (the "Company") and The
Bank of New York, as trustee, and the Officer's Certificate dated August 18,
2003 governing the Note[s] (the "Officer's Certificate"). Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture
and the Officer's Certificate.

         ____________________ (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$______________ in such Note[s] or interests (the "Exchange"). In connection
with the Exchange, the Owner hereby certifies that:

         1.       EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR
BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE

                  (a)      [ ]CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture, the Officer's Certificate and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global Note

                                      C-1



is being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.

                  (b)      [ ]CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture, the Officer's Certificate and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Definitive Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.

                  (c)      [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with
the Owner's Exchange of a Restricted Definitive Note for a beneficiary interest
in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture, the Officer's Certificate and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.

                  (d)      [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of
a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to Restricted Definitive
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture, the Officer's Certificate
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive Note is
being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.

         2.       EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES

                  (a)      [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST
IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Note for
a Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in

                                      C-2


accordance with the terms of the Indenture and the Officer's Certificate, the
Restricted Definitive Note issued shall continue to be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Definitive Note and in the Officer's Certificate and the
Securities Act.

                  (b)      [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the

                                   [CHECK ONE]

[ ]  144A Global Note                              [ ]  Regulation S Global Note

with an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture and the Officer's
Certificate, the beneficial interest issued shall be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Note and in the Officer's Certificate and the Securities Act.

         This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.

                                                     ___________________________
                                                     [Insert Name of Owner]

                                                     By:________________________
                                                        Name:
                                                        Title:
Dated:_____________________

                                       C-3



                                    EXHIBIT D

       FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR

Nevada Power Company
P.O. Box 230
6226 W. Sahara Avenue
Las Vegas, Nevada 89146
Attention: Treasurer

The Bank of New York
101 Barclay Street, Floor 8W
New York, New York 10286
Attention: Corporate Trust Administration

         Re:    Nevada Power Company 9% General and Refunding Mortgage Notes,
                Series G, due 2013

         Reference is hereby made to the General and Refunding Mortgage
Indenture, dated as of May 1, 2001, as amended or supplemented (the
"Indenture"), among Nevada Power Company, as issuer (the "Company") and The Bank
of New York, as trustee, and the Officer's Certificate dated August 18, 2003
governing the Notes (the "Officer's Certificate"). Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture and
the Officer's Certificate.

         In connection with our proposed purchase of $______________ aggregate
principal amount of:

         (a)      [ ]      a beneficial interest in a Global Note, or

         (b)      [ ]      a Definitive Note,

         we confirm that:

1.       we are an "accredited investor" within the meaning of Rule 501(a)(1),
         (2), (3) or (7) under the Securities Act of 1933, as amended (the
         "Securities Act"), or an entity in which all of the equity owners are
         accredited investors within the meaning of Rule (501)(a)(1), (2), (3)
         or (7) under the Securities Act (an "institutional accredited
         investor");

2.       (i)(A) any purchase of the Notes by us shall be for our own account or
         for the account of one or more other institutional accredited investors
         or as fiduciary for the account of one or more trusts, each of which is
         an "accredited investor" within the meaning of Rule 501(a)(7) under the
         Securities Act and for each of which we exercise sole investment
         discretion or (B) we are a "bank," within the meaning of Section
         3(a)(2) of the Securities Act, or a "savings and loan association" or
         other institution described in Section 3(a)(5)(A) of the Securities Act
         that is acquiring Notes as fiduciary for the account of one or more
         institutions for which we exercise sole investment discretion;

                                      D-1


     3.   in the event that we purchase any Notes, we shall acquire Notes having
          a minimum purchase price of not less than $250,000 for our own account
          and for each separate account for which we are acting;

     4.   we have such knowledge and experience in financial and business
          matters that we are capable of evaluating the merits and risks of
          purchasing Notes;

     5.   we are not acquiring the Notes with a view to any distribution thereof
          in a transaction that would violate the Securities Act or the
          securities laws of any State of the United States or any other
          applicable jurisdictions, provided that the disposition of our
          property and the property of any accounts for which we are acting as
          fiduciary shall remain at all times within our control;

     6.   we have received a copy of the Offering Memorandum relating to the
          offering of the Notes and acknowledge that we have had access to such
          financial and other information, and have been afforded the
          opportunity to ask such questions of representatives of the Company
          and receive answers thereto, as we deem necessary in connection with
          our decision to purchase the Notes; and

     7.   (vii)(a) we are not an employee benefit plan or other arrangement that
          is subject to the Employee Retirement Income Security Act of 1974, as
          amended, or Section 4975 of the Internal Revenue Code of 1986, as
          amended, or an entity whose underlying assets include assets of such a
          plan or arrangement (pursuant to 29 C.F.R. Section 2510.3-101 or
          otherwise), and we are not purchasing (and shall not hold) the Notes
          on behalf of, or with the assets of, any such plan, arrangement or
          entity; or (b) our purchase and holding of the Notes are completely
          covered by the full exemptive relief provided by U.S. Department of
          Labor Prohibited Transaction Class Exemption 96-23, 95-60, 91-38, 90-1
          or 84-14.

                  We understand that the Notes were offered in a transaction not
involving any public offering in the United States within the meaning of the
Securities Act and that the Notes have not been registered under the Securities
Act or any state securities laws, and they were offered for resale in
transactions not requiring registration under the Securities Act. We agree on
our own behalf and on behalf of any investor account for which we are purchasing
the Notes, and each subsequent holder of the Notes by its acceptance of the
Notes will agree, to offer, sell or otherwise transfer such notes prior to (x)
the date which is two years (or such shorter period of time as permitted by Rule
144(k) under the Securities Act or any successor provision thereunder) after the
later of the date of the original issue of the Notes and the last date on which
the Company or any of its affiliates were the owner of such Notes (or any
predecessor thereto) or (y) such later date, if any, as may be required by
applicable law (the "Resale Restriction Termination Date") only: (1) to the
Company; (2) pursuant to a registration statement which has been declared
effective under the Securities Act; (3) for so long as the Notes are eligible
for resale pursuant to Rule 144A, to a person it reasonably believes is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) that purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that the transfer is being made in
reliance on Rule 144A; (4) pursuant to offers and sales to non-U.S. persons that
occur outside the United States within the meaning of Regulation S under the
Securities Act; or (5) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in

                                      D-2


each of the foregoing cases to any requirements of law that the disposition of
its property or the property of such investor account or accounts be at all
times within its or their control and in compliance with any applicable state
securities laws. Subject to the procedures set forth under Section 1(q)(v) of
the Officer's Certificate, prior to any proposed transfer of the Notes
(otherwise than pursuant to an effective registration statement) within the
period referred to in Rule 144(k) under the Securities Act with respect to such
transfer, the Holder of the Notes must check the appropriate box set forth on
the reverse of its Notes relating to the manner of such transfer and submit the
Notes to the trustee. The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date. We acknowledge that the
Company, the trustee and the transfer agent and security registrar reserve the
right prior to any offer, sale or other transfer pursuant this paragraph, prior
to the end of the restrictive periods described in clauses (x) and (y) above, to
require the delivery of an opinion of counsel, certifications and/or other
information satisfactory to the Company, the trustee and the security registrar.
We further understand that any Notes we receive shall be in the form of
definitive physical certificates and that such certificates shall bear a legend
reflecting the substance of this paragraph.

                  THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

                  We acknowledge that you and the Company shall rely upon the
truth and accuracy of our acknowledgments, confirmations and agreements in this
letter. Further, we acknowledge and agree that you and the Company are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or, official inquiry with
respect to the matters covered hereby.

                                            ____________________________________
                                            [Insert Name of Accredited Investor]

                                            By:_________________________________
                                               Name:
                                               Title:
Dated:________________________

                                      D-3

EX-4.2

                                                                     EXHIBIT 4.2

THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE OFFICER'S
CERTIFICATE UNDER THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY
FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO ARTICLE III OF THE INDENTURE,
(II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO
SECTION 1(q)(v)(A) OF THE OFFICER'S CERTIFICATE UNDER THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
3.09 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY OR ANY
SUCCESSOR THERETO.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY,
TO THE COMPANY OR ANY SUCCESSOR THERETO 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 THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY), 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.

THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR OTHER SECURITIES LAWS. NEITHER THIS
NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY
ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A
U.S. PERSON AND IS ACQUIRING ITS NOTE IN AN "OFFSHORE TRANSACTION" PURSUANT TO
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT SHALL NOT
PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS
PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION
THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY
PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE
OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND
(Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE
RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A INSIDE THE UNITED STATES, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER



AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY,
THE TRUSTEE AND THE SECURITY REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE
OF THIS NOTE IS COMPLETED AND DELIVERED BY THIS TRANSFEROR TO THE TRUSTEE. THIS
LEGEND SHALL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT.

                              NEVADA POWER COMPANY
           9% General and Refunding Mortgage Notes, Series G, due 2013

                                                       
Original Interest Accrual Date:  August 18, 2003             Redeemable: Yes [X] No [ ]
Stated Maturity:                 August 15, 2013             Redemption Date: See Below
Interest Rate:                   9%                          Redemption Price: See Below
Interest Payment Dates:          February 15 and August 15
Record Dates:                    February 1 and August 1



                     The Security is not a Discount Security
              within the meaning of the within-mentioned Indenture.

                                                           CUSIP No. 641423 BE 7

           9% General and Refunding Mortgage Notes, Series G, due 2013

No. R-1                                                             $350,000,000

promises to pay to Cede & Co. or registered assigns, the principal sum of
$350,000,000 Dollars on August 15, 2013.

         1. Interest. Nevada Power Company, a Nevada corporation (the
"Company"), promises to pay interest on the principal amount of this Series G
Note at 9% per annum, from August 18, 2003 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages, if any, semi-annually in arrears on February 15 and August 15 of each
year, or if any such day is not a Business Day, on the next succeeding Business
Day (each an "Interest Payment Date"). Interest on the Series G Notes shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from Original Interest Accrual Date specified above;
provided that if there is no existing Default in the payment of interest, and if
this Series G Note is authenticated between a record date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest



Payment Date, except in the case of the original issuance of Series G Notes, in
which case interest shall accrue from the Original Interest Accrual Date
specified above; provided, further, that the first Interest Payment Date shall
be February 15, 2004. The Company shall pay interest (including postpetition
interest in any proceeding under the Bankruptcy Law) on overdue principal and
premium, if any, from time to time on demand at the rate borne on the Series G
Notes; it shall pay interest (including post-petition interest in any proceeding
under the Bankruptcy Law) on overdue installments of interest and Liquidated
Damages, if any, (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest shall be computed
on the basis of a 360-day year of twelve 30-day months.

         2. Method of Payment. The Company shall pay interest on the Series G
Notes (except Defaulted Interest) and Liquidated Damages to the Persons who are
registered Holders of Series G Notes at the close of business on the February 1
and August 1 next preceding the Interest Payment Date, even if such Series G
Notes are canceled after such record date and on or before such Interest Payment
Date, except as provided in Section 3.07 of the Indenture with respect to
Defaulted Interest. The Series G Notes shall be payable as to principal, premium
and Liquidated Damages, if any, and interest at the office or agency of the
Company maintained for such purpose within the City and State of New York, or,
at the option of the Company, payment of interest and Liquidated Damages may be
made by check mailed to the Holders of Series G Notes at their addresses set
forth in the register of Holders, and provided that payment by wire transfer of
immediately available funds shall be required with respect to principal of, and
interest, premium and Liquidated Damages on, all Global Notes and all other
Series G Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.

         3. Paying Agent and Security Registrar. Initially, The Bank of New
York, the Trustee under the Indenture, shall act as Paying Agent and Security
Registrar. The Company may change any Paying Agent or Security Registrar without
notice to any Holder of Series G Notes. The Company or any of its Subsidiaries
may act in any such capacity.

         4. Indenture; Security. This Series G Note is one of a duly authorized
issue of Securities of the Company, issued and issuable in one or more series
under and equally secured by a General and Refunding Mortgage Indenture, dated
as of May 1, 2001 (such Indenture as originally executed and delivered and as
supplemented or amended from time to time thereafter, together with any
constituent instruments establishing the terms of particular Securities, being
herein called the "Indenture"), between the Company and The Bank of New York,
Trustee (herein called the "Trustee," which term includes any successor Trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the property mortgaged, pledged
and held in trust, the nature and extent of the security and the respective
rights, limitations of rights, duties and immunities of the Company, the Trustee
and the Holders of the Securities thereunder and of the terms and conditions
upon which the Securities are, and are to be, authenticated and delivered and
secured. The acceptance of this Series G Note shall be deemed to constitute the
consent and agreement by the Holder hereof to all of the terms and provisions of
the Indenture. This Series G Note is one of the series designated above. The
terms of the Series G Notes include those stated in the Indenture, the



Officer's Certificate dated August 18, 2003 (the "Officer's Certificate") and
those made part of the Indenture by reference to the Trust Indenture Act. The
Series G Notes are subject to all such terms, and Holders of Series G Notes are
referred to the Indenture and such Act for a statement of such terms. To the
extent any provision of this Series G Note conflicts with the express provisions
of the Indenture or the Officer's Certificate, the provisions of the Indenture
and the Officer's Certificate shall govern and be controlling. The Series G
Notes are general obligations of the Company initially limited to $350,000,000
aggregate principal amount in the case of Series G Notes issued on the Issue
Date.

         All Outstanding Securities, including the Series G Notes, issued under
the Indenture are secured by the lien of the Indenture on the properties of the
Company described in the Indenture. The lien of the Indenture is junior, subject
and subordinate to the prior lien of the Indenture of Mortgage dated as of
October 1, 1953 between the Company and Deutsche Bank Trust Company Americas, as
trustee.

         5. Optional Redemption.

                  (a)      Except as set forth in subparagraph (b) of this
paragraph 5, the Series G Notes shall not be redeemable at the Company's option
prior to August 15, 2008. Thereafter, the Series G Notes shall be subject to
redemption at any time or from time to time at the option of the Company, in
whole or in part, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the applicable redemption date, if
redeemed during the twelve-month period beginning on August 15 of the years
indicated below:



YEAR                                                PERCENTAGE
- ----                                                ----------
                                                 
2008...................................              104.500%
2009...................................              103.000%
2010...................................              101.500%
2011 and thereafter....................              100.000%


                  (b)      Notwithstanding the foregoing, at any time or from
time to time on or prior to August 15, 2006, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Series G Notes
at a Redemption Price of 109% of the principal amount thereof, plus accrued and
unpaid interest, if any, and Liquidated Damages thereon, if any, to the
Redemption Date, with the net cash proceeds of any public or private offerings
of its Equity Interests or capital contribution to the Company's equity made
with net cash proceeds of an offering by Sierra Pacific Resources; provided that
at least 65% of the aggregate principal amount of Series G Notes remain
outstanding immediately after each occurrence of such redemption excluding
Series G Notes held by the Company and its Subsidiaries; and provided, further,
that each such redemption shall occur within 120 days of the date of the closing
of such offering.

         6. Notice of Optional Redemption. Notice of optional redemption shall
be mailed at least 30 days but not more than 60 days before the Redemption Date
to each Holder whose Series G Notes are to be redeemed at its registered
address. Series G Notes in denominations larger than $1,000 may be redeemed in
part but only in whole multiples of $1,000, unless all of



the Series G Notes held by a Holder are to be redeemed. On and after the
redemption date, interest and Liquidated Damages, if any, cease to accrue on
Series G Notes or portions thereof called for redemption.

         7. Mandatory Redemption.

                  (a)      Other than in connection with clause (b) below or in
connection with a redemption at the option of the Holders of the Series G Notes,
the Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Series G Notes.

                  (b)      Upon the occurrence of the events described below in
clauses (1) or (2) of this paragraph 7(b), the Company shall be required to
redeem the Series G Notes immediately, at a Redemption Price equal to 100% of
the aggregate principal amount of the Series G Notes plus accrued and unpaid
interest and Liquidated Damages, if any, on the Series G Notes to the date of
redemption, without further action or notice on the part of the Trustee or the
Holders of the Series G Notes:

THE COMPANY OR ANY OF ITS SUBSIDIARIES THAT IS A SIGNIFICANT SUBSIDIARY OR ANY
GROUP OF SUBSIDIARIES THAT, TAKEN AS A WHOLE, WOULD CONSTITUTE A SIGNIFICANT
SUBSIDIARY PURSUANT TO OR WITHIN THE MEANING OF BANKRUPTCY LAW:

                           (I)      commences a voluntary case,

                           (II)     consents to the entry of an order for relief
                                    against it in an involuntary case,

                           (III)    consents to the appointment of a custodian
                                    of it or for all or substantially all of its
                                    property,

                           (IV)     makes a general assignment for the benefit
                                    of its creditors, or

                           (V)      admits in writing of its inability to pay
                                    its debts generally as they become due; or

A COURT OF COMPETENT JURISDICTION ENTERS AN ORDER OR DECREE UNDER ANY BANKRUPTCY
LAW THAT:

                           (I)      is for relief against the Company or any of
                                    its Subsidiaries that is a Significant
                                    Subsidiary or any group of Subsidiaries
                                    that, taken as a whole, would constitute a
                                    Significant Subsidiary in an involuntary
                                    case;

                           (II)     appoints a custodian of the Company or any
                                    of its Subsidiaries that is a Significant
                                    Subsidiary or any group of Subsidiaries
                                    that, taken as a whole, would constitute a
                                    Significant Subsidiary or for all or
                                    substantially all of the property of the
                                    Company or any of its Subsidiaries that is a
                                    Significant Subsidiary or any group of



                                    Subsidiaries that, taken as a whole, would
                                    constitute a Significant Subsidiary; or

                           (III)    orders the liquidation of the Company or any
                                    of its Subsidiaries that is a Significant
                                    Subsidiary or any group of Restricted
                                    Subsidiaries that, taken as a whole, would
                                    constitute a Significant Subsidiary;

                           and the order or decree remains unstayed and in
                           effect for 60 consecutive days.

         8. Redemption at the Option of Holders. Upon the occurrence of any of
the following Triggering Events: (a) failure for 30 days to pay when due
interest on, or Liquidated Damages with respect to, the Series G Notes; (b)
failure to pay when due the principal of, or premium, if any, on the Series G
Notes; (c) failure by the Company or any of its Restricted Subsidiaries to
comply with the provisions described in Section 1(u)(i), 1(u)(ii) or 1(u)(vi) of
the Officer's Certificate; (d) failure by the Company or any of its Restricted
Subsidiaries for 30 days after notice to comply with the provisions described in
Section 1(h)(iii) or (iv) of the Officer's Certificate; (e) failure by the
Company or any of its Restricted Subsidiaries for 60 days after notice to comply
with any of the other agreements in the Officer's Certificate or the Series G
Notes; (f) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the original issue date of the Series G Notes, if that default (i) is
caused by a failure to pay principal of, or interest or premium, if any, on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (ii) results
in the acceleration of such Indebtedness prior to its express maturity, and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$15.0 million or more; (g) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $15.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days; or (h) an event of
default under the First Mortgage Indenture (other than any such matured event of
default which (i) is of similar kind or character to the Triggering Event
described in (c) or (e) above and (ii) has not resulted in the acceleration of
the securities outstanding under the First Mortgage Indenture); provided,
however, that, anything in the Officer's Certificate to the contrary
notwithstanding, the waiver or cure of such event of default under the First
Mortgage Indenture and the rescission and annulment of the consequences thereof
under the First Mortgage Indenture shall constitute a cure of the corresponding
Triggering Event and a rescission and annulment of the consequences thereof, the
Holders of at least 25% in principal amount of the Series G Notes then
Outstanding may deliver a notice to the Company requiring the Company to redeem
the Series G Notes immediately at a Redemption Price equal to 100% of the
aggregate principal amount of the Series G Notes plus accrued and unpaid
interest and Liquidated Damages, if any, on the Series G Notes to the Redemption
Date. The Holders of a majority in aggregate principal amount of the Series G
Notes then Outstanding by notice to the Company and the Trustee may on behalf of
the Holders of all of the Series G Notes waive any existing



Triggering Event and its consequences except a continuing Triggering Event
related to the payment of interest or Liquidated Damages on, or the principal
of, the Series G Notes. In the case of any Triggering Event occurring on or
after August 15, 2008 by reason of any willful action or inaction taken or not
taken by or on behalf of the Company with the intention of avoiding payment of
the premium that the Company would have had to pay if the Company then had
elected to redeem the Series G Notes pursuant to the provisions of Section
1(g)(i) of the Officer's Certificate relating to redemption at the option of the
Company, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law upon the redemption of the Series G Notes
at the option of the Holders thereof. If a Triggering Event occurs prior to
August 15, 2008, by reason of any willful action or inaction taken or not taken
by or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Series G Notes prior to August 15, 2008, then the premium
specified in Section 1(g)(i) of this Officer's Certificate shall also become
immediately due and payable to the extent permitted by law upon the redemption
of the Series G Notes at the option of the Holders thereof. Upon becoming aware
of any Triggering Event, the Company shall deliver to the Trustee a statement
specifying such Triggering Event.

         9. Denominations, Transfer, Exchange. The Series G Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Series G Notes may be registered and Series
G Notes may be exchanged as provided in the Indenture and the Officer's
Certificate. The Security Registrar and the Trustee may require a Holder of
Series G Notes, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder of Series G Notes to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Series G Note or portion of a
Series G Note selected for redemption, except for the unredeemed portion of any
Series G Note being redeemed in part. Also, the Company need not exchange or
register the transfer of any Series G Notes for a period of 15 days before a
selection of Series G Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.

         10. Persons Deemed Owners. The registered Holder of a Series G Note may
be treated as its owner for all purposes.

         11. Amendment, Supplement and Waiver. The Indenture permits, with
certain exceptions as therein provided, the Trustee to enter into one or more
supplemental indentures for the purpose of adding any provisions to, or changing
in any manner or eliminating any of the provisions of, the Indenture with the
consent of the Holders of not less than a majority in aggregate principal amount
of the Securities of all series then Outstanding under the Indenture, considered
as one class; provided, however, that if there shall be Securities of more than
one series Outstanding under the Indenture and if a proposed supplemental
indenture shall directly affect the rights of the Holders of Securities of one
or more, but less than all, of such series, then the consent only of the Holders
of a majority in aggregate principal amount of the Outstanding Securities of all
series so directly affected, considered as one class, shall be required; and
provided, further, that if the Securities of any series shall have been issued
in more than one Tranche and if the proposed supplemental indenture shall
directly affect the rights of the Holders of Securities of one or more, but less
than all, of such Tranches, then the consent only of the Holders of a majority
in aggregate principal amount of the Outstanding Securities of all Tranches



so directly affected, considered as one class, shall be required; and provided,
further, that the Indenture permits the Trustee to enter into one or more
supplemental indentures for limited purposes without the consent of any Holders
of Securities. The Indenture also contains provisions permitting the Holders of
a majority in principal amount of the Securities then Outstanding, on behalf of
the Holders of all Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Series G
Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Series G Note and of any Series G Note issued upon the
registration of transfer hereof or in exchange therefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Series G
Note.

         12. Events of Default. If an Event of Default shall occur and be
continuing, the principal of this Series G Note may be declared due and payable
in the manner and with the effect provided in the Indenture.

         13. No Recourse Against Others. As provided in the Indenture, no
recourse shall be had for the payment of the principal of or premium, if any, or
interest on any Securities, or any part thereof, or for any claim based thereon
or otherwise in respect thereof, or of the indebtedness represented thereby, or
upon any obligation, covenant or agreement under the Indenture, against, and no
personal liability whatsoever shall attach to, or be incurred by, any
incorporator, stockholder, officer or director, as such, past, present or future
of the Company or of any predecessor or successor corporation (either directly
or through the Company or a predecessor or successor corporation), whether by
virtue of any constitutional provision, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly agreed
and understood that the Indenture and all the Securities are solely corporate
obligations and that any such personal liability is hereby expressly waived and
released as a condition of, and as part of the consideration for, the execution
of the Indenture and the issuance of the Securities.

         14. Authentication. Unless the certificate of authentication hereon has
been executed by the Trustee or an Authenticating Agent by manual signature,
this Series G Note shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.

         15. Transfer and Exchange.

                  (a)      As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Series G Note is registrable
in the Security Register, upon surrender of this Series G Note for registration
of transfer at the Corporate Trust Office of The Bank of New York in New York,
New York or such other office or agency as may be designated by the Company from
time to time, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Series G Notes of this series of authorized
denominations and of like tenor and aggregate principal amount, will be issued
to the designated transferee or transferees.

                  (b)      No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.



                  (c)      Prior to due presentment of this Series G Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Series G Note is
registered as the absolute owner hereof for all purposes, whether or not this
Series G Note be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary.

         16. Governing Law. THE SERIES G NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

         17. Definition of "Business Day" and Other Terms. As used herein,
"Business Day" shall mean any day, other than Saturday or Sunday, on which
commercial banks are open for business, including dealings in deposits in U.S.
dollars, in New York. All other terms used in this Series G Note which are
defined in the Indenture or the Officer's Certificate shall have the meanings
assigned to them in the Indenture or the Officer's Certificate, as applicable,
unless otherwise indicated.

         18. Abbreviations. Customary abbreviations may be used in the name of a
Holder of Series G Notes or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).

         19. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Series G Notes under the Indenture, Holders of Restricted Global Notes and
Restricted Definitive Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of August 18, 2003 between Nevada Power
Company and the parties named on the signature pages thereof (the "Registration
Rights Agreement").

         20. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Series G Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders of Series G Notes.
No representation is made as to the accuracy of such numbers either as printed
on the Series G Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.

         The Company shall furnish to any Holder of Series G Notes upon written
request and without charge a copy of the Indenture and/or the Registration
Rights Agreement. Requests may be made to:

                              Nevada Power Company
                                  P.O. Box 230
                              6226 W. Sahara Avenue
                             Las Vegas, Nevada 89146
                       Attention: Chief Financial Officer



         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.

                            NEVADA POWER COMPANY

                            By: ____________________________
                                Richard K. Atkinson
                                Vice President and Chief Financial Officer

                          CERTIFICATE OF AUTHENTICATION

                  This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.

Dated: August ___, 2003

                            THE BANK OF NEW YORK, as Trustee

                            By: _______________________________
                                Authorized Signatory



           SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE***

         The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:



                                                              PRINCIPAL
                         AMOUNT OF         AMOUNT OF       AMOUNT OF THIS        SIGNATURE OF
                        DECREASE IN       INCREASE IN        GLOBAL NOTE          AUTHORIZED
                         PRINCIPAL         PRINCIPAL       FOLLOWING SUCH        SIGNATORY OF
 DATE OF              AMOUNT OF THIS    AMOUNT OF THIS      DECREASE (OR        TRUSTEE OR NOTE
EXCHANGE                GLOBAL NOTE       GLOBAL NOTE         INCREASE)            CUSTODIAN
- --------              --------------    --------------     ---------------      ---------------
                                                                    


- --------
***      This should be included only if the Note is issued in global form.



                                 ASSIGNMENT FORM

    To assign this Series G Note, fill in the form below: (I) or (we) assign
                       and transfer this Series G

                                    Note to

________________________________________________________________________________
                  (Insert assignee's soc. sec. or tax I.D. no.)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
              (Print or type assignee's name, address and zip code)

and irrevocably appoint_________________________________________________________
to transfer this Series G Note on the books of the Company. The agent may
substitute another to act for him.

________________________________________________________________________________

Date:
Your Signature: ________________________________________________________________
           (Sign exactly as your name appears on the face of this Series G Note)

                               SIGNATURE GUARANTEE

________________________________________________________________________________

                                            Signatures must be guaranteed by an
                                            "eligible guarantor institution"
                                            meeting the requirements of the
                                            Security Registrar, which
                                            requirements include membership or
                                            participation in the Security
                                            Transfer Agent Medallion Program
                                            ("STAMP") or such other "signature
                                            guarantee program" as may be
                                            determined by the Security Registrar
                                            in addition to, or in substitution
                                            for, STAMP, all in accordance with
                                            the Securities Exchange Act of 1934,
                                            as amended.



                       OPTION OF HOLDER TO ELECT PURCHASE

         If you want to elect to have this Series G Note purchased by the
Company pursuant to Section 1(h)(iii) (Offer to Purchase upon Change of Control)
or 1(h)(iv) (Offer to Purchase Upon Application of Excess Proceeds) of the
Officer's Certificate, check the box below:

         [ ]  Section 1(h)(iii) (Offer to       [ ]  Section 1(h)(iv) (Offer to
               Purchase upon Change of Control)       Purchase Upon Application
                                                      of Excess Proceeds)

         If you want to elect to have only part of the Series G Note purchased
by the Company pursuant to Section 1(h)(iii) (Offer to Purchase upon Change of
Control) or 1(h)(iv) (Offer to Purchase Upon Application of Excess Proceeds) of
the Indenture, state the amount you elect to have purchased:

         $ ______________________

Date:

Your Signature: ________________________________________________________________
            (Sign exactly as your name appears on the face of the Series G Note)

Tax Identification No.: ________________________________________________________

                               SIGNATURE GUARANTEE

________________________________________________________________________________

                                            Signatures must be guaranteed by an
                                            "eligible guarantor institution"
                                            meeting the requirements of the
                                            Security Registrar, which
                                            requirements include membership or
                                            participation in the Security
                                            Transfer Agent Medallion Program
                                            ("STAMP") or such other "signature
                                            guarantee program" as may be
                                            determined by the Security Registrar
                                            in addition to, or in substitution
                                            for, STAMP, all in accordance with
                                            the Securities Exchange Act of 1934,
                                            as amended.

EX-4.3

                                                                     EXHIBIT 4.3

                          SIERRA PACIFIC POWER COMPANY

                              OFFICER'S CERTIFICATE

                                   May 1, 2003

         I, the undersigned officer of Sierra Pacific Power Company (the
"Company"), do hereby certify that I am an Authorized Officer of the Company as
such term is defined in the Indenture (as defined herein). I am delivering this
certificate pursuant to the authority granted in the Board Resolutions of the
Company dated March 12, 2003, and Sections 1.04, 2.01, 3.01, 4.01(a) and
4.03(b)(i) of the General and Refunding Mortgage Indenture dated as of May 1,
2001, as heretofore supplemented to the date hereof (as heretofore supplemented,
the "Indenture"), between the Company and The Bank of New York, as Trustee (the
"Trustee"). Terms used herein and not otherwise defined herein shall have the
meanings assigned to them in the Indenture, unless the context clearly requires
otherwise. Based upon the foregoing, I hereby certify on behalf of the Company
as follows:

         1.       The terms and conditions of the Securities of the series
described in this Officer's Certificate are as follows (the lettered
subdivisions set forth in this Paragraph 1 corresponding to the lettered
subdivisions of Section 3.01 of the Indenture):

         (a)      The Securities of the fourth series to be issued under the
         Indenture shall be designated "General and Refunding Mortgage Notes,
         Series D, due 2004" (the "Series D Notes").

         (b)      The Series D Notes shall initially be authenticated and
         delivered in the aggregate principal amount of $80,000,000. Additional
         Series D Notes may be authenticated and delivered only in exchange for
         or in replacement of Series D Notes previously authenticated and
         delivered.

         (c)      Not applicable.

         (d)      The principal of the Series D Notes shall be payable by the
         Company in whole or in installments on such date or dates as the
         Company has any principal repayment or purchase price obligations under
         Sections 4.2(a) or (b) of the Financing Agreement dated as of March 1,
         2001 (the "Financing Agreement") between the Company and Washoe County,
         Nevada (the "Issuer") in respect of the Issuer's Water Facilities
         Refunding Revenue Bonds (Sierra Pacific Power Company Project) Series
         2001 (the "Series 2001 Bonds") issued under the Indenture of Trust
         dated as of March 1, 2001 (the "Series 2001 Indenture") between the
         Issuer and The Bank of New York, as trustee (the "Series 2001 Bond
         Trustee"), or in whole on the Stated Maturity of the Series D Notes (if
         not previously paid or deemed paid). The Stated Maturity of the Series
         D Notes shall be not later than May 3, 2004 and shall be as set forth
         in each of the Series D Notes presented to the Trustee for
         authentication.



                  The obligation of the Company to make any payment of the
         principal on the Series D Notes shall be fully or partially, as the
         case may be, deemed to have been paid or otherwise satisfied and
         discharged to the extent that the Company has made a payment under
         Section 4.2(a) of the Financing Agreement in respect of the principal
         of the Series 2001 Bonds or has made a payment or is deemed to have
         made a payment under Section 4.2(b) of the Financing Agreement in
         respect of the purchase price of Series 2001 Bonds tendered for
         purchase on May 3, 2004. If the Company shall fail to make any such
         payment in respect of principal or purchase price in respect of the
         Series 2001 Bonds as required under Sections 4.2(a) or (b) of the
         Financing Agreement, it shall be deemed to be a default, for the
         purposes of Section 10.01(b) of the Indenture, in the payment of an
         amount of principal of the Series D Notes equal to the amount of such
         unpaid principal or purchase price in respect of the Series 2001 Bonds
         (but, in no event, shall such principal amount payable exceed the
         aggregate principal amount of the Series D Notes).

         (e)      The Series D Notes shall bear interest at such rate per annum
         as shall cause the amount of interest on the Series D Notes to be equal
         to the amount of interest payable by the Company pursuant to the
         Financing Agreement in respect of the Term Rate Period (as defined
         under the Series 2001 Indenture) effective on May 1, 2003 and ending on
         and including May 2, 2004 (the "Current Term Rate Period"). Such
         interest on the Series D Notes shall be payable on the same date or
         dates as payment in respect of such interest is payable by the Company
         from time to time under the Financing Agreement, until the maturity of
         the Series D Notes (whether at their Stated Maturity or upon redemption
         or acceleration), at which time an amount of interest equal to all
         unpaid interest due on the Series 2001 Bonds through the end of the
         Current Term Rate Period shall be paid.

                  The amounts payable by the Company from time to time under the
         Financing Agreement in respect of interest on the Series 2001 Bonds,
         the basis on which such interest is computed and the dates on which
         such interest is payable are set forth in the Financing Agreement and
         the Series 2001 Indenture. The obligation of the Company to make any
         payment of interest on the Series D Notes shall be fully or partially,
         as the case may be, deemed to have been paid or otherwise satisfied and
         discharged to the extent that the Company has made the payments in
         respect of interest on the Series 2001 Bonds required under Section
         4.2(a) of the Financing Agreement. If the Company shall fail to make
         any payment in respect of interest on the Series 2001 Bonds as required
         under Section 4.2(a) of the Financing Agreement, it shall be deemed to
         be a default, for purposes of Section 10.01(a) of the Indenture, in the
         payment of an amount of interest on the Series D Notes equal to the
         amount of such unpaid interest in respect of the Series 2001 Bonds.

                  The amount of interest that shall be payable upon a
         declaration of acceleration of the Maturity of the Series D Notes
         pursuant to Section 10.02 of the Indenture shall be the amount of
         accrued and unpaid interest on the Series 2001 Bonds to the date of
         such declaration plus the amount of interest that the Company would
         have been obligated to pay under the Financing Agreement in respect of
         interest on the Series 2001 Bonds from and after such date of
         declaration through the end of the Current Term Rate Period.

                                       2



         (f)      The Corporate Trust Office of The Bank of New York in New
         York, New York shall be the place at which (i) the principal of and
         interest on the Series D Notes shall be payable, (ii) registration of
         transfer of the Series D Notes may be effected, (iii) exchanges of the
         Series D Notes may be effected and (iv) notices and demands to or upon
         the Company in respect of the Series D Notes and the Indenture may be
         served; and The Bank of New York shall be the Security Registrar for
         the Series D Notes; provided, however, that the Company reserves the
         right to change, by one or more Officer's Certificates, with the
         consent of the Series 2001 Bond Trustee, any such place or the Security
         Registrar; and provided, further, that the Company reserves the right
         to designate, by one or more Officer's Certificates, its principal
         office in Reno, Nevada as any such place or itself as the Security
         Registrar; provided, however, that there shall be only a single
         Security Registrar for the Series D Notes. The principal of the Series
         D Notes shall be payable without the presentment or surrender thereof.

         (g)      Not applicable.

         (h)      Not applicable.

         (i)      The Series D Notes are issuable only in denominations of
                  $80,000,000.

         (j)      Not applicable.

         (k)      Not applicable.

         (l)      Not applicable.

         (m)      See subsections (d) and (e) above.

         (n)      Not applicable.

         (o)      Not applicable.

         (p)      Not applicable.

         (q)      Each of the Series D Notes shall be evidenced by a registered
         Series D Note in the principal amount and denomination of Eighty
         Million Dollars ($80,000,000). The Series D Notes shall be dated no
         earlier than May 1, 2003, shall mature on May 3, 2004, or such earlier
         date as set forth as the Stated Maturity date in each of the Series D
         Notes presented to the Trustee for authentication, unless sooner paid,
         and shall bear interest at the rate specified in subsection (e) above.
         The Series D Notes may be executed by the Company and delivered to the
         Trustee for authentication and delivery. The principal of and interest
         on the Series D Notes shall be payable at the Corporate Trust Office of
         the Trustee in New York, New York.

                  The initial Series D Note shall be identified by the number
         D-1 and additional Series D Notes shall be numbered consecutively from
         D-2 upwards. The Series D Notes shall upon issuance be delivered by the
         Company to, and registered in the name of, the Series 2001 Bond
         Trustee, and shall be transferable only as required to effect an

                                       3



         assignment thereof to a successor-in-interest of the Series 2001 Bond
         Trustee under the Series 2001 Indenture. The Series D Notes are to be
         delivered to the Series 2001 Bond Trustee as security for the payment
         by the Company of its obligations under the Financing Agreement. The
         Series D Notes shall be held by the Series 2001 Bond Trustee subject to
         the terms of such Delivery Agreements, as may be executed from time to
         time, between the Company and the Series 2001 Bond Trustee.

                  Series D Notes issued upon transfer or exchange shall be
         numbered consecutively from D-2 upwards and issued in the same
         $80,000,000 denomination but, to the extent that the aggregate
         outstanding principal amount of the Series 2001 Bonds shall have
         theretofore been reduced, the registered holder thereof shall duly note
         on the Series D Notes a like reduction in such amount in the principal
         in the Schedule of Prepayments to such Series D Note and upon any
         transfer of said Series D Note, such Schedule of Prepayments shall
         transfer to the subsequently issued Series D Note.

                  See also subsection (s) below.

         (r)      Not applicable.

         (s)      The holder of each Series D Note by acceptance of the Series D
         Note agrees to restrictions on transfer and to waivers of certain
         rights of exchange as set forth herein. In addition, the Series D Notes
         will not be registered under the Securities Act of 1933 and the Series
         D Notes may not be transferred without compliance with applicable
         securities laws. The Series D Notes are not transferable except to a
         successor to the Series 2001 Bond Trustee under the Series 2001
         Indenture.

         (t)      For purposes of the Series D Notes, "Business Day" shall mean
         any day that is not a Friday, Saturday, Sunday or other day on which
         commercial banks are open for business, including dealings in deposits
         in U.S. dollars, in New York.

         (u)      The Trustee may conclusively presume that the obligation of
         the Company to pay the principal of and interest on the Series D Notes,
         when such payment is required to be made as provided therein, shall
         have been fully satisfied and discharged unless and until it shall have
         received a written notice from the Series 2001 Bond Trustee, signed by
         an authorized officer of the Series 2001 Bond Trustee, stating that the
         payment in respect of principal or purchase price of or interest on the
         Series 2001 Bonds has not been fully paid or provided for when due
         under the terms of the Financing Agreement and specifying the amount of
         funds required to make such payment.

                  The Series D Notes shall have such other terms and provisions
          as are provided in the form thereof attached hereto as Exhibit A, and
          shall be issued in substantially such form.

         2.       The undersigned has read all of the covenants and conditions
contained in the Indenture, and the definitions in the Indenture relating
thereto, relating to the issuance of the Series D Notes and in respect of
compliance with which this certificate is made.

                                       4



                  The statements contained in this certificate are based upon
the familiarity of the undersigned with the Indenture, the documents
accompanying this certificate, and upon discussions by the undersigned with
officers and employees of the Company familiar with the matters set forth
herein.

                  In the opinion of the undersigned, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenants and conditions have been
complied with.

                  In the opinion of the undersigned, such conditions and
covenants have been complied with.

                                       5



         IN WITNESS WHEREOF, the undersigned has executed this Officer's
Certificate as of the date first written above.

                            By: _______________________________________________
                                Richard K. Atkinson
                                Vice President and Chief Financial Officer

Received on
May 1, 2003

THE BANK OF NEW YORK,
as Trustee

By:    __________________________________
Name:  Stacey B. Poindexter
Title: Assistant Treasurer

                                       6



                                    EXHIBIT A

                             FORM OF SERIES D NOTES

         NOTE: THE HOLDER OF THIS NOTE BY ACCEPTANCE HEREOF AGREES TO
RESTRICTIONS ON TRANSFER AND TO WAIVERS OF CERTAIN RIGHTS OF EXCHANGE, AS SET
FORTH BELOW. IN ADDITION, THE NOTE REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH NOTE MAY NOT BE TRANSFERRED
WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS.

         THIS NOTE IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TO THE SERIES 2001
BOND TRUSTEE UNDER THE SERIES 2001 INDENTURE REFERRED TO HEREIN.

                          SIERRA PACIFIC POWER COMPANY
             General and Refunding Mortgage Note, Series D, due 2004

                                            
Original Interest Accrual Date:  May 1, 2003      Redeemable by Company: Yes [ ] No [X]
Stated Maturity:                 April 30, 2004   Redemption Date:  N/A
Interest Rate:                   See below        Redemption Price: N/A
Interest Payment Dates:          See below
Regular Record Dates:            N/A



                    This Security is not a Discount Security
              within the meaning of the within-mentioned Indenture.

Principal Amount
$80,000,000                                                              No. D-1

         SIERRA PACIFIC POWER COMPANY, a corporation duly organized and existing
under the laws of the State of Nevada (herein called the "Company," which term
includes any successor corporation under the Indenture referred to below), for
value received, hereby promises to pay to THE BANK OF NEW YORK, as trustee (the
"Series 2001 Bond Trustee") under the Indenture of Trust dated as of March 1,
2001 (the "Series 2001 Indenture") between the Series 2001 Bond Trustee and
Washoe County, Nevada (the "Issuer"), the principal sum of EIGHTY MILLION
DOLLARS, or such lesser amount as set forth herein.

         Capitalized terms used herein and not defined herein shall have the
meanings specified in the Indenture (as defined below), unless otherwise noted.
Section headings in this Note are for convenience only and shall not affect the
construction hereof.



         1. Principal. The principal of this Note shall be payable by the
Company in whole or in installments on such date or dates as the Company has any
principal repayment or purchase price obligations under Sections 4.2(a) or (b)
of the Financing Agreement dated as of March 1, 2001 (the "Financing Agreement")
between the Company and the Issuer in respect of the Issuer's Water Facilities
Refunding Revenue Bonds (Sierra Pacific Power Company Project), Series 2001 (the
"Series 2001 Bonds"), or in whole on the Stated Maturity specified above (if not
previously paid or deemed paid).

         The obligation of the Company to make any payment of principal on this
Note shall be fully or partially, as the case may be, deemed to have been paid
or otherwise satisfied or discharged to the extent that the Company has made a
payment under Section 4.2(a) of the Financing Agreement in respect of the
principal of the Series 2001 Bonds or has made a payment or is deemed to have
made a payment under Section 4.2(b) of the Financing Agreement in respect of the
purchase price of Series 2001 Bonds tendered for purchase on May 3, 2004. If the
Company shall fail to make any payment in respect of principal or purchase price
of the Series 2001 Bonds as required under Sections 4.2(a) or (b) of the
Financing Agreement, it shall be deemed to be a default, for purposes of Section
10.01(b) of the Indenture, in the payment of an amount of principal of this Note
equal to the amount of such unpaid principal or purchase price in respect of the
Series 2001 Bonds (but, in no event, shall such principal amount payable exceed
the aggregate principal amount of this Note).

         2. Interest. This Note shall bear interest at such rate per annum as
shall cause the amount of interest on this Note to be equal to the amount in
respect of interest payable by the Company pursuant to the Financing Agreement
in respect of the Term Rate Period (as defined in the Series 2001 Indenture)
effective on May 1, 2003 and ending on and including May 2, 2004 (the "Current
Term Rate Period"). The interest on this Note shall be payable on the same date
or dates as payment in respect of such interest is payable by the Company from
time to time under the Financing Agreement, until the maturity of this Note
(whether at the Stated Maturity as specified above or upon redemption or
acceleration), at which time an amount of interest equal to all unpaid interest
due on the Series 2001 Bond through the end of the Current Term Rate Period
shall be paid.

         The amounts payable by the Company from time to time under the
Financing Agreement in respect of interest on the Series 2001 Bonds, the basis
on which the interest on this Note is computed and the dates on which such
interest is payable are set forth in the Financing Agreement and the Series 2001
Indenture. The obligation of the Company to make any payment of interest on this
Note shall be fully or partially, as the case may be, deemed to have been paid
or otherwise satisfied and discharged to the extent that the Company has made
the payments in respect of interest on the Series 2001 Bonds required under
Section 4.2(a) of the Financing Agreement. If the Company shall fail to make any
payment in respect of interest on the Series 2001 Bonds as required under
Section 4.2(a) of the Financing Agreement, it shall be deemed to be a default,
for purposes of Section 10.01(a) of the Indenture, in the payment of an amount
of interest on this Note equal to the amount of such unpaid interest in respect
of the Series 2001 Bonds.

         The amount of interest that shall be payable upon a declaration of
acceleration of the maturity of this Note pursuant to Section 10.02 of the
Indenture shall be the amount of accrued and unpaid interest on the Series 2001
Bonds to the date of such declaration plus the amount that the Company would
have been obligated to pay under the Financing Agreement in respect of interest
on the Series 2001 Bonds from and after the date of such declaration through the
end of the Current Term Rate Period.

                                       8



         3. Terms of Issuance. This Note is issued to the Series 2001 Bond
Trustee by the Company to secure the Company's payment obligations pursuant to
Sections 4.2(a) and (b) of the Financing Agreement in respect of the Current
Term Rate Period, in connection with the remarketing of the Series 2001 Bonds on
May 1, 2003 and the purchase and reoffering thereof by Lehman Brothers, Inc.
("Lehman") pursuant to the Bond Purchase Agreement, dated as of April 25, 2003
(the "Bond Purchase Agreement") among the Company and Lehman, as remarketing
agent and as underwriter. This Note shall be held by the Series 2001 Bond
Trustee subject to the terms of the Delivery Agreement dated as of May 1, 2003
between the Company and the Series 2001 Bond Trustee.

         4. Paying Agent and Security Registrar. The Corporate Trust Office of
The Bank of New York in New York, New York shall be the place at which, with
respect to this Note and the Indenture, as applicable, (i) the principal of and
interest shall be payable, (ii) registration of transfer may be effected, (iii)
exchanges may be effected and (iv) notices and demands to or upon the Company
may be served; and The Bank of New York shall be the Security Registrar for this
Note; provided, however, that the Company reserves the right to change, by one
or more Officer's Certificates, with the consent of the Series 2001 Bond
Trustee, any such place or the Security Registrar; and provided, further, that
the Company reserves the right to designate, by one or more Officer's
Certificates, its principal office in Reno, Nevada as any such place or itself
as the Security Registrar; provided, however, that there shall be only a single
Security Registrar for this Note. The principal of this Note shall be payable
without the presentment or surrender thereof.

         5. Indenture; Security. This Note is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and issuable
in one or more series under and equally secured by a General and Refunding
Mortgage Indenture, dated as of May 1, 2001 (such Indenture as originally
executed and delivered and as supplemented or amended from time to time
thereafter, together with any constituent instruments establishing the terms of
particular Securities, being herein called the "Indenture"), between the Company
and The Bank of New York, as trustee (herein called the "Trustee," which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the property mortgaged, pledged and held in trust, the nature and extent of the
security and the respective rights, limitations of rights, duties and immunities
of the Company, the Trustee and the Holders of the Securities thereunder and of
the terms and conditions upon which the Securities are, and are to be,
authenticated and delivered and secured. The acceptance of this Note shall be
deemed to constitute the consent and agreement by the Holder hereof to all of
the terms and provisions of the Indenture. This Note is one of the series
designated above.

         6. Sinking Fund; Optional Redemption. The Notes of this series will not
be entitled to the benefit of any sinking fund or optional redemption
provisions.

         7. Event of Default. If an Event of Default, as defined in the
Indenture, shall occur and be continuing, the principal of this Note may be
declared due and payable in the manner and with the effect provided in the
Indenture and herein.

         8. Supplemental Indentures. The Indenture permits, with certain
exceptions as therein provided, the Trustee to enter into one or more
supplemental indentures for the purpose of adding any provisions to, or changing
in any manner or eliminating any of the provisions of, the Indenture with the
consent of the Holders of not less than a majority in aggregate principal amount
of the Securities of all series then Outstanding under the Indenture, considered
as one class; provided, however, that if there shall be Securities of more than
one series Outstanding under the Indenture and if a proposed supplemental
indenture shall directly affect the rights of the Holders of Securities of one
or more, but less than all, of such series, then the consent only of the Holders
of a majority in aggregate principal amount of the Outstanding Securities of all
series so directly affected, considered as one class, shall be required; and

                                       9



provided, further, that if the Securities of any series shall have been issued
in more than one Tranche and if the proposed supplemental indenture shall
directly affect the rights of the Holders of Securities of one or more, but less
than all, of such Tranches, then the consent only of the Holders of a majority
in aggregate principal amount of the Outstanding Securities of all Tranches so
directly affected, considered as one class, shall be required; and provided,
further, that the Indenture permits the Trustee to enter into one or more
supplemental indentures for limited purposes without the consent of any Holders
of Securities.

         9. Consents and Waivers. The Indenture also contains provisions
permitting the Holders of a majority in principal amount of the Securities then
Outstanding, on behalf of the Holders of all Securities, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and of any Security issued upon the registration
of transfer hereof or in exchange therefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.

         10. Person Deemed Owners. The Company, the Trustee and any agent of the
Company or the Trustee may deem and treat the person in whose name this Note
shall be registered upon the Security Register for the Notes of this series as
the absolute owner of such Note for the purpose of receiving payment of or on
account of the principal of and interest on this Note and for all other
purposes, whether or not this Note be overdue, and neither the Company nor the
Trustee shall be affected by any notice to the contrary; and all such payments
so made to such registered owner or upon his order shall be valid and effectual
to satisfy and discharge the liability upon this Note to the extent of the sum
or sums paid.

         11. Satisfaction and Discharge. The Trustee may conclusively presume
that the obligation of the Company to pay the principal of and interest on this
Note, when such payment is required to be made as provided herein, shall have
been fully satisfied and discharged unless and until it shall have received a
written notice from the Series 2001 Bond Trustee, signed by an authorized
officer of the Series 2001 Bond Trustee, stating that the payment in respect of
principal or purchase price of or interest on the Series 2001 Bonds has not been
fully paid or provided for when due under the terms of the Financing Agreement
and specifying the amount of funds required to make such payment.

         12. Transfer. This Note is not transferable except to a successor to
the Series 2001 Bond Trustee under the Series 2001 Indenture. Before any
transfer of this Note by the registered holder or his or its legal
representative will be recognized or given effect by the Company or the Trustee,
the registered holder shall note the amounts of reductions, if any, in the
aggregate outstanding principal amount of the Series 2001 Bonds, and shall
notify the Company and the Trustee of the name and address of the transferee and
shall afford the Company and the Trustee the opportunity of verifying the
notation as to such reductions.

         13. No Recourse. No recourse under or upon any obligation, covenant or
agreement contained in the Indenture or in any indenture supplemental thereto,
or in any Note or coupon thereby secured, or because of any indebtedness thereby
secured, shall be had against any incorporator, or against any past, present or
future stockholder, officer or director, as such, of the Company or any
successor corporation, either directly or through the Company or of any
successor corporation under any rule of law, statute or constitutional provision
or by the enforcement of any assessment or by any legal or equitable proceeding
or otherwise; it being expressly agreed and understood that the Indenture, any
indenture supplemental thereto and the obligations thereby secured, are solely
corporate obligations, and that no personal liability whatsoever shall attach
to, or be incurred by, such incorporators, stockholders, officers or directors,
as such, of the Company or of any successor corporation, or any of them, because
of the incurring of the indebtedness thereby authorized, or under or by reason
of any of the obligations, covenants or agreements

                                       10



contained in the Indenture or in any indenture supplemental thereto or in any of
the Notes or coupons thereby secured, or implied therefrom.

         14. Business Day. For the purposes of this Note, "Business Day" shall
mean any day that is not a Friday, Saturday, Sunday or other day on which
commercial banks are open for business, including dealings in deposits in U.S.
dollars, in New York.

         15. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York.

         16. Certificate of Authentication. Unless the certificate of
authentication hereon has been executed by the Trustee or an Authenticating
Agent by manual signature, this Note shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose.

            [The remainder of this page is intentionally left blank.]

                                       11



         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.

                          SIERRA PACIFIC POWER COMPANY

                          By: /s/ Richard K. Atkinson
                              --------------------------------------------
                              Name:  Richard K. Atkinson
                              Title: Vice President and Chief Financial Officer

                          CERTIFICATE OF AUTHENTICATION

         This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.

Dated: May 1, 2003

                                   THE BANK OF NEW YORK, AS TRUSTEE

                                   By: /s/ Stacey B. Poindexter
                                       -----------------------------
                                       Authorized Signatory

                                       12

EX-4.4

                                                                     EXHIBIT 4.4

         NOTE: THE HOLDER OF THIS NOTE BY ACCEPTANCE HEREOF AGREES TO
RESTRICTIONS ON TRANSFER AND TO WAIVERS OF CERTAIN RIGHTS OF EXCHANGE, AS SET
FORTH BELOW. IN ADDITION, THE NOTE REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH NOTE MAY NOT BE TRANSFERRED
WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS.

         THIS NOTE IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TO THE SERIES 2001
BOND TRUSTEE UNDER THE SERIES 2001 INDENTURE REFERRED TO HEREIN.

                          SIERRA PACIFIC POWER COMPANY
             General and Refunding Mortgage Note, Series D, due 2004

                                                 
Original Interest Accrual Date:   May 1, 2003          Redeemable by Company: Yes [ ] No [X]
Stated Maturity:                  April 30, 2004       Redemption Date:  N/A
Interest Rate:                    See below            Redemption Price: N/A
Interest Payment Dates:           See below
Regular Record Dates:             N/A



                    This Security is not a Discount Security
              within the meaning of the within-mentioned Indenture.

Principal Amount
$80,000,000                                                              No. D-1

         SIERRA PACIFIC POWER COMPANY, a corporation duly organized and existing
under the laws of the State of Nevada (herein called the "Company," which term
includes any successor corporation under the Indenture referred to below), for
value received, hereby promises to pay to THE BANK OF NEW YORK, as trustee (the
"Series 2001 Bond Trustee") under the Indenture of Trust dated as of March 1,
2001 (the "Series 2001 Indenture") between the Series 2001 Bond Trustee and
Washoe County, Nevada (the "Issuer"), the principal sum of EIGHTY MILLION
DOLLARS, or such lesser amount as set forth herein.

         Capitalized terms used herein and not defined herein shall have the
meanings specified in the Indenture (as defined below), unless otherwise noted.
Section headings in this Note are for convenience only and shall not affect the
construction hereof.

         1. Principal. The principal of this Note shall be payable by the
Company in whole or in installments on such date or dates as the Company has any
principal repayment or purchase price obligations under Sections 4.2(a) or (b)
of the Financing Agreement dated as of March 1, 2001 (the "Financing Agreement")
between the Company and the Issuer in respect of the Issuer's Water Facilities
Refunding Revenue Bonds (Sierra Pacific Power Company Project), Series 2001 (the
"Series 2001 Bonds"), or in whole on the Stated Maturity specified above (if not
previously paid or deemed paid).



         The obligation of the Company to make any payment of principal on this
Note shall be fully or partially, as the case may be, deemed to have been paid
or otherwise satisfied or discharged to the extent that the Company has made a
payment under Section 4.2(a) of the Financing Agreement in respect of the
principal of the Series 2001 Bonds or has made a payment or is deemed to have
made a payment under Section 4.2(b) of the Financing Agreement in respect of the
purchase price of Series 2001 Bonds tendered for purchase on May 3, 2004. If the
Company shall fail to make any payment in respect of principal or purchase price
of the Series 2001 Bonds as required under Sections 4.2(a) or (b) of the
Financing Agreement, it shall be deemed to be a default, for purposes of Section
10.01(b) of the Indenture, in the payment of an amount of principal of this Note
equal to the amount of such unpaid principal or purchase price in respect of the
Series 2001 Bonds (but, in no event, shall such principal amount payable exceed
the aggregate principal amount of this Note).

         2. Interest. This Note shall bear interest at such rate per annum as
shall cause the amount of interest on this Note to be equal to the amount in
respect of interest payable by the Company pursuant to the Financing Agreement
in respect of the Term Rate Period (as defined in the Series 2001 Indenture)
effective on May 1, 2003 and ending on and including May 2, 2004 (the "Current
Term Rate Period"). The interest on this Note shall be payable on the same date
or dates as payment in respect of such interest is payable by the Company from
time to time under the Financing Agreement, until the maturity of this Note
(whether at the Stated Maturity as specified above or upon redemption or
acceleration), at which time an amount of interest equal to all unpaid interest
due on the Series 2001 Bond through the end of the Current Term Rate Period
shall be paid.

         The amounts payable by the Company from time to time under the
Financing Agreement in respect of interest on the Series 2001 Bonds, the basis
on which the interest on this Note is computed and the dates on which such
interest is payable are set forth in the Financing Agreement and the Series 2001
Indenture. The obligation of the Company to make any payment of interest on this
Note shall be fully or partially, as the case may be, deemed to have been paid
or otherwise satisfied and discharged to the extent that the Company has made
the payments in respect of interest on the Series 2001 Bonds required under
Section 4.2(a) of the Financing Agreement. If the Company shall fail to make any
payment in respect of interest on the Series 2001 Bonds as required under
Section 4.2(a) of the Financing Agreement, it shall be deemed to be a default,
for purposes of Section 10.01(a) of the Indenture, in the payment of an amount
of interest on this Note equal to the amount of such unpaid interest in respect
of the Series 2001 Bonds.

         The amount of interest that shall be payable upon a declaration of
acceleration of the maturity of this Note pursuant to Section 10.02 of the
Indenture shall be the amount of accrued and unpaid interest on the Series 2001
Bonds to the date of such declaration plus the amount that the Company would
have been obligated to pay under the Financing Agreement in respect of interest
on the Series 2001 Bonds from and after the date of such declaration through the
end of the Current Term Rate Period.

         3. Terms of Issuance. This Note is issued to the Series 2001 Bond
Trustee by the Company to secure the Company's payment obligations pursuant to
Sections 4.2(a) and (b) of the Financing Agreement in respect of the Current
Term Rate Period, in connection with the remarketing of the Series 2001 Bonds on
May 1, 2003 and the purchase and reoffering thereof by Lehman Brothers, Inc.
("Lehman") pursuant to the Bond Purchase Agreement, dated as of April 25, 2003
(the "Bond Purchase Agreement") among the Company and Lehman, as remarketing
agent and as underwriter. This Note shall be held by the Series 2001 Bond
Trustee subject to the terms of the Delivery Agreement dated as of May 1, 2003
between the Company and the Series 2001 Bond Trustee.

                                       2



         4. Paying Agent and Security Registrar. The Corporate Trust Office of
The Bank of New York in New York, New York shall be the place at which, with
respect to this Note and the Indenture, as applicable, (i) the principal of and
interest shall be payable, (ii) registration of transfer may be effected, (iii)
exchanges may be effected and (iv) notices and demands to or upon the Company
may be served; and The Bank of New York shall be the Security Registrar for this
Note; provided, however, that the Company reserves the right to change, by one
or more Officer's Certificates, with the consent of the Series 2001 Bond
Trustee, any such place or the Security Registrar; and provided, further, that
the Company reserves the right to designate, by one or more Officer's
Certificates, its principal office in Reno, Nevada as any such place or itself
as the Security Registrar; provided, however, that there shall be only a single
Security Registrar for this Note. The principal of this Note shall be payable
without the presentment or surrender thereof.

         5. Indenture; Security. This Note is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and issuable
in one or more series under and equally secured by a General and Refunding
Mortgage Indenture, dated as of May 1, 2001 (such Indenture as originally
executed and delivered and as supplemented or amended from time to time
thereafter, together with any constituent instruments establishing the terms of
particular Securities, being herein called the "Indenture"), between the Company
and The Bank of New York, as trustee (herein called the "Trustee," which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the property mortgaged, pledged and held in trust, the nature and extent of the
security and the respective rights, limitations of rights, duties and immunities
of the Company, the Trustee and the Holders of the Securities thereunder and of
the terms and conditions upon which the Securities are, and are to be,
authenticated and delivered and secured. The acceptance of this Note shall be
deemed to constitute the consent and agreement by the Holder hereof to all of
the terms and provisions of the Indenture. This Note is one of the series
designated above.

         6. Sinking Fund; Optional Redemption. The Notes of this series will not
be entitled to the benefit of any sinking fund or optional redemption
provisions.

         7. Event of Default. If an Event of Default, as defined in the
Indenture, shall occur and be continuing, the principal of this Note may be
declared due and payable in the manner and with the effect provided in the
Indenture and herein.

         8. Supplemental Indentures. The Indenture permits, with certain
exceptions as therein provided, the Trustee to enter into one or more
supplemental indentures for the purpose of adding any provisions to, or changing
in any manner or eliminating any of the provisions of, the Indenture with the
consent of the Holders of not less than a majority in aggregate principal amount
of the Securities of all series then Outstanding under the Indenture, considered
as one class; provided, however, that if there shall be Securities of more than
one series Outstanding under the Indenture and if a proposed supplemental
indenture shall directly affect the rights of the Holders of Securities of one
or more, but less than all, of such series, then the consent only of the Holders
of a majority in aggregate principal amount of the Outstanding Securities of all
series so directly affected, considered as one class, shall be required; and
provided, further, that if the Securities of any series shall have been issued
in more than one Tranche and if the proposed supplemental indenture shall
directly affect the rights of the Holders of Securities of one or more, but less
than all, of such Tranches, then the consent only of the Holders of a majority
in aggregate principal amount of the Outstanding Securities of all Tranches so
directly affected, considered as one class, shall be required; and provided,
further, that the Indenture permits the Trustee to enter into one or more
supplemental indentures for limited purposes without the consent of any Holders
of Securities.

                                       3



         9. Consents and Waivers. The Indenture also contains provisions
permitting the Holders of a majority in principal amount of the Securities then
Outstanding, on behalf of the Holders of all Securities, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and of any Security issued upon the registration
of transfer hereof or in exchange therefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.

         10. Person Deemed Owners. The Company, the Trustee and any agent of the
Company or the Trustee may deem and treat the person in whose name this Note
shall be registered upon the Security Register for the Notes of this series as
the absolute owner of such Note for the purpose of receiving payment of or on
account of the principal of and interest on this Note and for all other
purposes, whether or not this Note be overdue, and neither the Company nor the
Trustee shall be affected by any notice to the contrary; and all such payments
so made to such registered owner or upon his order shall be valid and effectual
to satisfy and discharge the liability upon this Note to the extent of the sum
or sums paid.

         11. Satisfaction and Discharge. The Trustee may conclusively presume
that the obligation of the Company to pay the principal of and interest on this
Note, when such payment is required to be made as provided herein, shall have
been fully satisfied and discharged unless and until it shall have received a
written notice from the Series 2001 Bond Trustee, signed by an authorized
officer of the Series 2001 Bond Trustee, stating that the payment in respect of
principal or purchase price of or interest on the Series 2001 Bonds has not been
fully paid or provided for when due under the terms of the Financing Agreement
and specifying the amount of funds required to make such payment.

         12. Transfer. This Note is not transferable except to a successor to
the Series 2001 Bond Trustee under the Series 2001 Indenture. Before any
transfer of this Note by the registered holder or his or its legal
representative will be recognized or given effect by the Company or the Trustee,
the registered holder shall note the amounts of reductions, if any, in the
aggregate outstanding principal amount of the Series 2001 Bonds, and shall
notify the Company and the Trustee of the name and address of the transferee and
shall afford the Company and the Trustee the opportunity of verifying the
notation as to such reductions.

         13. No Recourse. No recourse under or upon any obligation, covenant or
agreement contained in the Indenture or in any indenture supplemental thereto,
or in any Note or coupon thereby secured, or because of any indebtedness thereby
secured, shall be had against any incorporator, or against any past, present or
future stockholder, officer or director, as such, of the Company or any
successor corporation, either directly or through the Company or of any
successor corporation under any rule of law, statute or constitutional provision
or by the enforcement of any assessment or by any legal or equitable proceeding
or otherwise; it being expressly agreed and understood that the Indenture, any
indenture supplemental thereto and the obligations thereby secured, are solely
corporate obligations, and that no personal liability whatsoever shall attach
to, or be incurred by, such incorporators, stockholders, officers or directors,
as such, of the Company or of any successor corporation, or any of them, because
of the incurring of the indebtedness thereby authorized, or under or by reason
of any of the obligations, covenants or agreements contained in the Indenture or
in any indenture supplemental thereto or in any of the Notes or coupons thereby
secured, or implied therefrom.

         14. Business Day. For the purposes of this Note, "Business Day" shall
mean any day that is not a Friday, Saturday, Sunday or other day on which
commercial banks are open for business, including dealings in deposits in U.S.
dollars, in New York.

                                       4



         15. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York.

         16. Certificate of Authentication. Unless the certificate of
authentication hereon has been executed by the Trustee or an Authenticating
Agent by manual signature, this Note shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose.

            [The remainder of this page is intentionally left blank.]

                                       5



         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.

                                 SIERRA PACIFIC POWER COMPANY

                                 By: ___________________________________________
                                     Name:
                                     Title:

                          CERTIFICATE OF AUTHENTICATION

         This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.

Dated: May __, 2003

                                   THE BANK OF NEW YORK, AS TRUSTEE

                                   By: _________________________________________
                                       Authorized Signatory

                                       6

EX-10.1

                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

                  WHEREAS, Walter M. Higgins ("Executive") is presently employed
as Chairman, President and Chief Executive Officer of Sierra Pacific Resources
("SPR"), Chairman and Chief Executive Officer of its principal two subsidiaries,
Sierra Pacific Power Company ("SPPC") and Nevada Power Company ("NPC")
(together, "Utility Subsidiaries", and all three companies collectively, the
"Company", and all together, the "Parties")), and also has various other
positions with other subsidiaries of SPR, SPPC and NPC; and

                  WHEREAS, the Company, through its Board of Directors,
considers it in the best interests of its stockholders to secure the continued
employment of Executive in his present capacity, and desires to retain and
continue to retain the Executive in his present employment and current
positions, subject to certain terms and conditions as set forth more fully
below; and

                  WHEREAS, Executive is willing to continue his employment and
remain in his current position, subject to certain terms and conditions as set
forth more fully below;

                  WHEREAS, Executive and Company are currently parties to an
employment agreement dated August 4, 2000 (the "Prior Employment Agreement"),
and a Change in Control Agreement dated May 21, 2001 (the "Prior Change in
Control Agreement"), which agreements, except for any specific provisions
provided for and incorporated herein or carried forward herein, the parties
agree to terminate and cancel in consideration for the promises and covenants
set forth herein.

                  WHEREAS, The Board of Directors (exclusive of the Executive,
who has abstained from the relevant proceedings) has specifically authorized the
Company to enter into this Agreement.

                  NOW, THEREFORE, Company employs Executive and Executive
accepts employment upon the terms and conditions of this Agreement and the
parties do covenant and agree as follows:

                  1.       Term.

                  The term of this Agreement ("Employment Term") shall begin on
September 26, 2003 ("Effective Date") and, subject to any early termination that
may occur pursuant to Articles 6 or 7, expire on September 25, 2006 (the
"Expiration Date").

                  2.       Positions and Duties.

                           2.1      Positions and Duties. During the Employment
         Term, the Executive will serve in the positions of Chairman of the
         Board, President and Chief Executive Officer of SPR, and Chairman of
         the Board and Chief Executive Officer of each of the Utility
         Subsidiaries and any other utility subsidiaries which the Company may
         come to own, and will have such powers, duties, functions,
         responsibilities and authority as are (i) consistent with the
         Executive's position as the Company's most senior executive officer and
         Chairman of the Board and Chief Executive Officer of

                                                                         1 of 26


         SPR and the Utility Subsidiaries; or (ii) assigned to his office in the
         SPR's and the Utility Subsidiaries' bylaws; or (iii) reasonably
         assigned to him by the Board of Directors of the Company. The Executive
         will report directly to the Board of Directors of the Company. SPR will
         use its best efforts to cause the Executive to continue to be elected
         as a member of the Board of Directors of SPR (the "Board") and, if so
         elected, will retain him as Chairman of the Board throughout the
         Employment Term and will use its best efforts to cause him to be
         included in the Board's slate for election as a director of SPR at
         every stockholders' meeting at which his term as a director would
         otherwise expire. In addition, SPR will cause the Executive to be
         elected a member of the board of directors, and as Chairman and Chief
         Executive officer, of each Utility Subsidiary throughout the Employment
         Term.

                           2.2      Commitment. During the Employment Term, the
         Executive will be SPR's full-time employee and, except as may otherwise
         be approved in advance in writing by the Board, and except during
         vacation periods and reasonable periods of absence due to sickness,
         personal injury, or other disability, the Executive will devote
         substantially all of his business time and attention to the performance
         of his duties hereunder. Notwithstanding the foregoing, the Executive
         may (i) serve as a director of a company or companies which are not
         engaged in "Competition" (as defined in Section 10.1) with the Company
         or any subsidiary entity owned or majority controlled by the Company,
         (ii) serve as an officer, director, or otherwise participate in
         educational, welfare, social, religious, and civic organizations, and
         (iii) manage personal and family investments and affairs; provided,
         however, that the Board may require the Executive to cease the
         activities he undertakes hereunder pursuant to clauses (i) and (ii)
         above if the Board determines that the Executive is unable to devote
         sufficient time and attention to the performance of his duties
         hereunder as a result of such activities.

                  3.       Place of Performance. In connection with his
employment during the Employment Term, unless otherwise agreed by the Executive,
the Executive will maintain his principal office in Las Vegas, Nevada, and shall
also have an office at the principal SPR/SPPC offices in the Reno/Sparks area
and shall maintain an office at any other place reasonably determined by the
Board to be necessary or appropriate for the discharge of his duties. The
Executive will undertake normal business travel on behalf of the Company from
office to office and/or to other places appropriate to conduct the business and
affairs of the Company, at Company expense as set forth more fully below. The
Company shall continue to provide a housing allowance and local transportation
on the terms and conditions afforded to date in office locations other than the
Las Vegas offices.

                  4.       Compensation and Related Matters.

                  4.1      Compensation

                           (i)      Annual Base Salary. During the Employment
                  Term, the Company will pay to the Executive an annual base
                  salary ("Base Salary") in such amount as shall be commensurate
                  with his position and level of responsibility as set forth in
                  Article 2 as determined by the Board in its reasonably
                  exercised discretion from time to time; provided, however,
                  that in no event shall such Base Salary be less than the
                  Executive's current annual base salary, except under
                  extraordinary circumstances (including, without

                                                                         2 of 26


                  limitation, a natural disaster or general economic downturn
                  which significantly and adversely affects the Company's
                  operations) which directly results in an across-the-board
                  reduction of the annual base salary of all or substantially
                  all other senior executives of the Company. Base Salary shall
                  be payable at the time and in the manner consistent with the
                  Company's general policies regarding compensation of executive
                  employees.

                           (ii)     Annual Incentive Compensation. During the
                  Employment Term, the Executive shall be eligible to receive an
                  annual cash incentive award and shall be entitled to receive
                  such an award based on the extent to which the Company
                  achieves criteria or performance targets, reasonably selected
                  by the Compensation Committee of the Board at or before the
                  commencement of the annual performance period, on an annual
                  target level of not less than 70% percent of Base Salary.
                  Subject to the foregoing, nothing in this Section 4.1(ii)
                  shall guarantee to the Executive any specific amount of
                  incentive compensation.

                  4.2      Employee and Executive Benefits. In addition to the
         compensation described in Section 4.1 and subject to all the provisions
         of this Article 4, the Company will make or cause to be made available
         to the Executive and his eligible dependents, subject to the terms and
         conditions of the applicable plans, including, without limitation, the
         eligibility rules, participation in all employee pension, health,
         welfare and benefit plans, including all 401(k) plans, employee
         retirement income and welfare benefit policies, plans, programs, or
         arrangements, in which senior executives of the Company participate
         from time to time, including any stock purchase, savings, pension,
         supplemental executive retirement or other retirement income or welfare
         benefit, disability, salary continuation, and any other deferred
         compensation, group and/or executive life, health, medical/hospital, or
         other insurance (whether funded by actual insurance or self-insured by
         the Company or an affiliate), expense reimbursement, or other employee
         benefit policies, plans, programs, or arrangements. As part of these
         benefits, but not in addition thereto, the Company, during the
         Employment Term, shall continue to maintain a minimum of $2,000,000
         life insurance policy for the Executive, who shall have the right to
         designate his beneficiaries, as well as an additional $1,000,000 life
         insurance policy should the Executive die while traveling on Company
         business, and Directors and Officers insurance coverage in
         substantially the same amounts and with substantially the same coverage
         as exists immediately prior to the Effective Date.

                  4.3      Vacation and Fringe Benefits. During the Employment
         Term, the Executive shall be entitled to vacation in such amounts as
         would be available under the Company's normal vacation policies
         applicable to senior executives, as in effect from time to time, to an
         employee who as of the Effective Date would have service with the
         Company equal to the Executive's years of professional service, as
         credited under Company policy (which, as of the Effective Date, was
         37), such vacation to be taken in accordance with such normal vacation
         policies; and the Executive shall be entitled to the perquisites and
         other fringe benefits made available to senior executives of the
         Company, commensurate with his position and level of responsibility
         with the Company.

                                                                         3 of 26


                  4.4      Expenses. The Company will promptly reimburse the
         Executive for all travel and other business expenses the Executive
         incurs in order to perform his duties to the Company under this
         Agreement in a manner commensurate with the Executive's position and
         level of responsibility with the Company, and in accordance with the
         Company's policy regarding substantiation of expenses. In addition, the
         Executive shall receive not less than $30,000 annually as and for a
         perquisite allowance to cover expenses including a car, tax
         preparation, club memberships, and to facilitate participation in
         certain community activities. In addition, Company will, subject to
         Board approval at its discretion, bear the expense of memberships in
         other appropriate clubs and facilities at appropriate locations for the
         purpose of advancing and protecting the business interests of the
         Company.

                  4.5      Supplemental Executive Retirement Plan ("SERP") and
         Other Benefits. The Executive is currently vested, and shall remain
         eligible for a benefit under the SERP heretofore established by the
         Company for executives. The benefit to which the Executive is entitled
         under the SERP will (1) be payable at the time and in such forms as are
         set forth in the SERP, (2) be calculated in accordance with the terms
         and conditions of the SERP and (3) remain subject to all the terms and
         conditions of the SERP as it is currently stated, except that Executive
         shall be entitled to all years of service performed for the Company at
         any time and additional years of credit under the SERP for each year of
         service (as defined by the Company's SERP) with AGL Resources or
         Louisville Gas & Electric Company. Any additional benefit provided
         under the SERP resulting from such additional years of credited service
         with AGL Resources or Louisville Gas & Electric Company shall be
         reduced by any amount of qualified benefit received from AGL Resources
         or Louisville Gas & Electric Company under their qualified pension
         plans. In addition, if the Executive is employed by the Company on the
         Expiration Date (or as provided in the last sentence of Section
         6.5(f)), SERP and retiree medical benefits and all other benefits at
         retirement shall be calculated as though Executive had reached age 62
         on the Expiration Date and had accrued service time as of the
         Expiration Date as if he had worked continuously from his first date of
         service with SPR (including time served with AGL Resources or
         Louisville Gas & Electric Company) until he had reached in the normal
         course of time age 62.

                  5.       Special Compensation.

                  5.1      Long-Term Incentive Plan. Executive shall continue
         for fiscal year 2003 to be included in the regular Executive Long-Term
         Incentive Plan grants appropriate to the position of the Chief
         Executive Officer.

                  5.2      Previous Long-Term Incentive Plan Grants. Stock
         options, performance shares, and restricted stock granted to Executive
         under the Prior Employment Agreement, and all other stock options,
         performance shares, and Phantom Shares subsequently granted to
         Executive, as may have been modified by subsequent actions of the Board
         pursuant to the Long-Term Incentive Plan, shall continue in full force
         and, to the extent granted under the Prior Employment Agreement, shall
         remain subject to the terms and conditions set forth thereunder.

                  5.3      Phantom Shares. On the Effective Date of this
         Agreement, the Company shall grant Executive 600,000 shares of SPR
         common stock (the

                                                                         4 of 26


         "Phantom Shares"). Executive shall not take physical possession of any
         of said Phantom Shares nor shall Executive be permitted to sell,
         transfer, or alienate any of said Phantom Shares until they become
         vested. Any unvested Phantom Shares shall vest and be delivered to
         Executive in cash, or at the discretion of the Board and if legally
         permissible, stock without restriction on the sixth anniversary of the
         Effective Date, provided Executive is still employed by the Company on
         such date. If, on the Expiration Date, this Agreement is not renewed on
         mutually acceptable terms and conditions, then Executive shall be
         entitled to receive the number of remaining unvested Phantom Shares in
         cash, or at the discretion of the Board and if legally permissible,
         stock, multiplied by a fraction, the numerator of which shall be the
         number of days between the Effective Date and the Expiration Date, and
         the denominator of which shall be the number of days between the
         Effective Date and the sixth anniversary thereof; provided, however,
         that the payment under this Section 5.3 shall only be made upon the
         Expiration Date if the Board of Directors determines, in good faith, at
         such time that there is a reasonable opportunity for the performance
         goals and measures set forth in Exhibit A to be achieved by the
         respective target dates. Such cash or stock shall be delivered to him
         without restriction within ten (10) days of the expiration of this
         Agreement. Vesting of Phantom Shares herein will be accelerated and
         Company will deliver to Executive such cash or, at the discretion of
         the Board if legally permissible, shares free of restriction in such
         amounts as Executive shall be entitled to receive not later than seven
         (7) days after the Company achieves the performance goals and measures
         set forth in Exhibit A. Until such time as the Phantom Shares are
         distributed to the Executive as shares of stock, the Executive shall
         have the right to receive dividend equivalents with respect thereto,
         with all such dividend equivalents being credited to the Executive as
         additional Phantom Shares. Notwithstanding the foregoing, if restricted
         shares become available for grant under the Company's equity-based
         incentive plans, the Phantom Shares shall be replaced, in whole or in
         part, by shares of restricted stock to the extent available (and all
         references to dividend equivalents shall be deemed to refer to actual
         dividends).

                  5.4      Cash Retention. On the Effective Date, and on each of
         the second and third anniversaries of the Effective Date, the Company
         shall pay Executive $333,333, to the extent the Executive remains in
         the employ of the Company on such dates. Retention payments provided in
         this Agreement in no way affect the Executive's eligibility for any
         cash short-term incentive programs which the Board may put into place
         for the Company's executive officers. If, prior to the first
         anniversary of the Effective Date, the Executive's employment is
         terminated by (i) the Company for Cause (as defined in Section 6.3) or
         (ii) the Executive without Good Reason (as defined in Section 6.4),
         then the Executive shall repay to the Company, within five (5) days of
         such termination of employment, a lump sum amount equal to the product
         of (x) and (y), where (x) is the after-tax amount received from the
         Company in respect of the first retention payment and (y) is a
         fraction, the numerator of which shall be the number of days between
         the date of the Executive's termination of employment and the first
         anniversary of the Effective Date and the denominator of which shall be
         365.

                  6.       Termination. Notwithstanding the Employment Term, the
termination of the Executive's employment hereunder will be governed by the
following provisions. If at the time the Executive's employment terminates for
any reason, other than by reason of his

                                                                         5 of 26


death, the Executive is a member of the Board, or a member of the board of
directors of the Utility Subsidiaries, or any Affiliate of the Company, the
Executive shall execute and deliver to the Company the Executive's resignation
from membership on the Board and from membership on all such other boards of
directors and, notwithstanding any other provision of this Agreement, no benefit
or amount will be paid or made available to the Executive under Section 6.5(d),
(e), (f) or (g) until the Executive executes and delivers to the Company such
resignation.

                  6.1      Death. In the event of the termination of Executive's
         employment during the Employment Term by reason of the Executive's
         death, the Company will pay to the Executive's designated beneficiaries
         or estate, as appropriate, promptly after the Executive's death, (a)
         any unpaid Base Salary to which the Executive is entitled, through the
         date of the Executive's death; (b) any accrued but unused vacation
         days; (c) a number of Phantom Shares in cash, or at the discretion of
         the Board and if legally permissible, stock, equal to the number of
         Phantom Shares then remaining unvested multiplied by a fraction, the
         numerator of which shall be the number of days between the Effective
         Date and the date of the Executive's death and the denominator of which
         shall be the number of days between the Effective Date and the sixth
         anniversary thereof; provided, however, that the payment under this
         Section 6.1(c) shall only be made if the Board determines, in good
         faith, that there is a reasonable opportunity for the performance goals
         and measures set forth in Exhibit A to be achieved by the respective
         target dates, and (iv) except for the cash retention payment set forth
         in Section 5.4, any other cash payment or stock payment or other award
         or benefit which Executive would earn if he were employed by the
         Company on a certain date, in the full amount of such payment or stock
         award at target award multiplied by a fraction, the numerator of which
         shall be the number of days from the effective date of such award to
         the date of the Executive's death and the denominator of which shall be
         the number of days from the effective date of such award to the date
         the award would have been paid assuming target level performance had
         the Executive lived to that date. This Section 6.1 will not limit the
         entitlement of the Executive's estate or beneficiaries to any death,
         disability, health, welfare or pension, or other benefits then
         available to the Executive under any pension, SERP, life insurance,
         stock ownership, stock options, or other health, welfare, or pension
         benefit plan or policy that is maintained by the Company or its
         affiliates for the Executive's benefit or in which the Executive
         participated.

                  6.2      Disability.

                           (i)      If 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 30th 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 or an affiliate) and
                  benefits until the date of termination. In the event of the
                  Executive's Disability, the Company will pay the Executive or
                  his legal guardian or representative as appropriate, promptly

                                                                         6 of 26


                  after the Executive's termination, (a) any unpaid Base Salary
                  to which he is entitled 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 or an affiliate); (b) any accrued
                  but unused vacation days; (c) a number of Phantom Shares in
                  cash, or at the discretion of the Board and if legally
                  permissible, stock, equal to the number of Phantom Shares then
                  remaining unvested multiplied by a fraction, the numerator of
                  which shall be the number of days between the Effective Date
                  and the date of the Executive's termination of employment and
                  the denominator of which shall be the number of days between
                  the Effective Date and the sixth anniversary thereof;
                  provided, however, that the payment under this Section 6.2(c)
                  shall only be made if the Board determines, in good faith, at
                  such time that there is a reasonable opportunity for the
                  performance goals and measures set forth in Exhibit A to be
                  achieved by the respective target dates, and (d) except for
                  the cash retention payment set forth in Section 5.4, any other
                  cash payment or stock payment or other award or benefit which
                  Executive would earn if he were employed by the Company on a
                  certain date, in the full amount of such payment or stock
                  award at target award multiplied by a fraction, the numerator
                  of which shall be the number of days from the effective date
                  of such award to the date of the Executive's termination of
                  employment and the denominator of which shall be the number of
                  days from the effective date of such award to the date the
                  award would have been paid assuming target level performance
                  had the Executive lived to that date. This Section 6.2 will
                  not limit the entitlement of the Executive's estate or
                  beneficiaries to any death, disability, health, welfare or
                  pension, or other benefits then available to the Executive
                  under any pension, SERP, life insurance, stock ownership,
                  stock options, or other health, welfare, or pension benefit
                  plan or policy that is maintained by the Company or its
                  affiliates 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 himself available for
                  medical examinations by a doctor in accordance with this
                  Section 6.2(ii), and (b) grant the Company and any such doctor
                  access to all relevant medical information concerning him,
                  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.

                                                                         7 of 26


                  6.3      Cause.

                           (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 13.6.
                  In the event of the Executive's termination for Cause, the
                  Company will promptly pay to the Executive (or his
                  representative) any unpaid Base Salary and unpaid vacation and
                  any unpaid fully vested award or benefit to which he is
                  entitled through the date the Executive is terminated and the
                  Executive will be entitled to no other compensation or
                  benefits, except as otherwise may be due or payable to him
                  under applicable law or pursuant to any agreement, benefit
                  plan or policy that is maintained by the Company or its
                  affiliates for the Executive or in which the Executive
                  participated.

                           (ii)     For purposes of this Agreement, "Cause"
                  means that, at any time prior to the Expiration Date
                  (including, but not limited to, periods prior to the Effective
                  Date),

                  (a) the Executive shall have committed or engaged in:

                                    (1)      An 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 10.1, 10.2,
                           or 10.3;

                                    (3)      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;

                  (b) the Executive shall have engaged in intentional and
                  repeated failure substantially to carry out the Executive's
                  duties and/or responsibilities (other than any such failure
                  resulting from the Executive's incapacity due to physical or
                  mental illness or injury that qualifies as a Disability or
                  would qualify as a Disability if such incapacity continued for
                  the required length of time), which failure is not or cannot
                  be cured within ten calendar 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; or

                  (c) the Executive shall have been convicted of a felony or
                  entered a plea of nolo contendere in respect of a felony
                  charge (in each case, other than a traffic-related felony).

                  For purposes of this Section, 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

                                                                         8 of 26


                  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 (1) there shall have 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, (2) the
                  Executive shall have had the opportunity to appear before the
                  Board (with counsel if he so elects) to respond to such
                  particulars and (3) at least 75% of the members of the Board
                  (not including the Executive) shall have voted to terminate
                  his employment for Cause. Nothing herein will limit the right
                  of the Executive or the Executive's beneficiaries to contest
                  the validity or propriety of any such determination. The
                  Company hereby acknowledges it has no knowledge of any fact,
                  event or circumstance that would provide the Company with
                  grounds to terminate the Executive's employment hereunder for
                  Cause and the Executive hereby represents that he has not
                  committed or engaged in any activity that would provide the
                  Company with grounds to terminate his employment hereunder for
                  Cause.

                  6.4      Termination.

                           (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 13.6. In the event of such a termination, the
                  Executive will be entitled to the payments and benefits
                  provided in Section 6.5, subject to the second sentence of
                  this Article 6. This Section 6.4(i) and Section 6.5, 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 or its
                  affiliates for the Executive's benefit or in which the
                  Executive participated. The Executive will be treated for
                  purposes of this Section 6.4(i) as having been 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 the date 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
                  ten (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 expressly assume and agree to perform this
                  Agreement pursuant to Section 13.2(i); (c) a reduction in the
                  scope or value of the aggregate benefits and incentive
                  compensation described in Sections 4.1(iii), 4.2, 4.3, 4.5,
                  and 4.6 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
                  within 10 calendar days after receipt by the Company of
                  written notice from the Executive of such reduction or
                  termination; (d) the Executive is not nominated for election
                  to the Board or is removed from the Board; (e) the Board fails
                  to appoint the Executive as Chief Executive Officer of the
                  Company, or if the Executive is elected to the Board,

                                                                         9 of 26


                  he is not elected as Chairman of the Board of the Company, or
                  the Executive is removed from any such position; (f) the
                  Executive is not elected to or is removed from any of the
                  boards of directors of the Utility Subsidiaries or the
                  position of Chairman of the boards of directors of any of the
                  Utility Subsidiaries; (g) a reduction in the Executive's Base
                  Salary (except under extraordinary circumstances as described
                  in Section 4.1(i) hereof) 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; (h) 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 holds in accordance with this
                  Agreement; (i) a change in circumstances has occurred,
                  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, 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, which situation is not
                  remedied within 10 calendar days after written notice to the
                  Company from the Executive of such determination; or (j) the
                  relocation of the Company's principal executive offices to
                  other than Reno or Las Vegas if the Executive's principal
                  location of work is then in such offices, or any requirement
                  that the Executive's principal location of work change to any
                  location that is in excess of 50 miles from the location
                  thereof immediately preceding the relocation, or the Company
                  requires 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 two
                  full years immediately prior to such change without, in either
                  case, the Executive's prior written consent. Notwithstanding
                  the foregoing, change in the Executive's title or titles or
                  positions required by law, rule, order, or regulation of any
                  agency with competent jurisdiction shall not be deemed Good
                  Reason for purposes of this Agreement. In addition,
                  notwithstanding anything in this Agreement to the contrary,
                  the Executive shall not have Good Reason to terminate his
                  employment hereunder pursuant to clauses (a), (h) or (i) of
                  this Section 6.4(i) as a result of increased Board (or any
                  committee thereof) involvement in the Company if the Board
                  determines in good faith that such increased involvement is
                  warranted in light of issues facing the Company.

                           (ii)     Voluntary Termination. The Executive may
                  terminate his employment hereunder without Good Reason at any
                  time upon ninety (90) days' notice to the Company as provided
                  in Section 13.6. The Company may, prior to the date the
                  Executive's voluntarily termination of employment becomes
                  effective, accelerate the date upon which such termination
                  shall

                                                                        10 of 26


                  become effective by providing notice to the Executive as
                  provided in Section 13.6 If the Company accelerates the date
                  upon which the Executive's voluntary termination of employment
                  becomes effective, the Company shall continue to pay the
                  Executive his Base Salary in accordance with regular payroll
                  practice until the earlier to occur of (i) the date the
                  Executive's voluntary termination of employment would
                  otherwise have become effective or (ii) the date the Executive
                  commences new employment or enters into an agreement to
                  commence new employment. In addition, in the event of any such
                  termination, the Company will also promptly pay the Executive
                  any unpaid Base Salary to which the Executive is entitled,
                  pursuant to Section 4.1, through the date of the Executive's
                  termination, and any accrued but unused vacation days and any
                  fully vested unpaid benefit. This Section 6.4(ii) will not
                  limit the entitlement of the Executive to any other benefits
                  then available to the Executive under any agreement, benefit
                  plan, or policy that is maintained by the Company or its
                  affiliates for the Executive's benefit or in which the
                  Executive participated. If the Company accelerates the date
                  upon which the Executive's voluntary termination of employment
                  becomes effective, prior to receiving any Base Salary
                  attributable to such acceleration, the Executive shall, if
                  requested by the Company, certify in writing that he has not
                  commenced new employment or entered into an agreement to
                  commence new employment.

                  6.5      Termination Payments and Benefits.

                           If the Executive's employment is terminated other
                  than by reason of Death, Disability, Voluntary Termination
                  under Section 6.4(ii), or for Cause as provided in Section
                  6.4(i), the Company will promptly pay or provide to the
                  Executive:

                                    (a)      the unpaid Base Salary to which the
                           Executive is entitled as well as any earned but
                           unpaid incentive plan payments, pursuant to Section
                           4.1, through the date of the Executive's termination;

                                    (b)      any accrued but unused vacation
                           days;

                                    (c)      any fully vested but unpaid
                           benefit;

                                    (d)      a lump sum payment within five (5)
                           business days after termination in an amount equal to
                           the sum of (A) one year's 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) one year's annual
                           incentive compensation at target payment; plus

                                    (e)      (1) a number of Phantom Shares in
                           cash, or at the discretion of the Board and if
                           legally permissible, stock, equal to the number of
                           Phantom Shares then remaining unvested multiplied by
                           a fraction, the numerator of which shall be the
                           number of days between

                                                                        11 of 26


                           the Effective Date and the date of the Executive's
                           termination of employment and the denominator of
                           which shall be the number of days between the
                           Effective Date and the sixth anniversary thereof;
                           provided, however, that the payment under this
                           Section 6.5(e)(1) shall only be made if the Board of
                           Directors determines, in good faith, at such time
                           that there is a reasonable opportunity for the
                           performance goals and measures set forth in Exhibit A
                           to be achieved by the respective target dates and (2)
                           except for the cash retention payment set forth in
                           Section 5.4, any other cash payment or stock payment
                           or other award or benefit which Executive would earn
                           if he were employed by the Company on a certain date,
                           in the full amount of such payment or stock award at
                           target award multiplied by a fraction, the numerator
                           of which shall be the number of days from the
                           effective date of such award to the date of the
                           Executive's termination of employment and the
                           denominator of which shall be the number of days from
                           the effective date of such award to the date the
                           award would have been paid assuming target level
                           performance had the Executive lived to that date.

                                    (f)      For a period of 36 months following
                           the termination (the "Continuation Period"), the
                           Company will, at its expense, arrange to provide the
                           Executive and his eligible dependents with health
                           (including medical/hospital, dental, and vision) and
                           life benefits substantially similar to those that the
                           Executive and his eligible dependents were receiving
                           or entitled to receive immediately prior to
                           termination. 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 6.4(i)(c)). To the extent the coverage or
                           benefits provided during the Continuation Period
                           under this Section 6.5(f) 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 the result of such coverage or benefits.
                           On or after the Termination Date, Executive will be
                           eligible to receive all the benefits he would have
                           been entitled to receive pursuant to the last
                           sentence of Section 4.5 if Executive had remained
                           employed until the Expiration Date. Benefits
                           otherwise receivable by the Executive pursuant to
                           this Section 6.5(f) during the Continuation Period
                           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,
                           and any such benefits actually received shall be
                           reported by the Executive or other recipient to the
                           Company.

                                                                        12 of 26


                                    (g)      Director and Officer Coverage. For
                  a period of four years following the Executive's termination
                  of employment, the Company shall maintain or obtain Directors
                  and Officers Coverage ("D&O Coverage"), which covers the
                  Executive as an insured on the policy in the same amounts and
                  with equivalent coverage protection as covered the Executive
                  immediately prior to such termination. Thereafter, the Company
                  will continue to indemnify Executive for actions undertaken by
                  Executive during his employment.

                  7.       Change in Control Provisions.

                  7.1      Impact of Change in Control. Notwithstanding anything
         in this Agreement to the contrary, if the Executive's employment is
         terminated within two years following a Change in Control and during
         the Term, other than (A) by the Company for Cause, (B) by reason of
         death or Disability, or (C) by the Executive without Good Reason, then
         (a) the provisions of Section 10.1, 10.3, and 11 will be inapplicable
         to the Executive and (b) the Company shall pay the Executive the
         amounts, and provide the Executive the benefits, described in Section
         7.3, below, in lieu of any payments or benefits under Article 6 hereof.

                  7.2      Definition of Change in Control. For purposes of this
         Agreement, a "Change in Control" will be deemed to occur if any of the
         following events occur:

                  (i) any Person (as defined below) is or becomes the Beneficial
                  Owner (within the meaning set forth in Rule 13d-3 under the
                  Securities Exchange Act of 1934), directly or indirectly, of
                  securities of SPR (not including in the securities
                  beneficially owned by such Person any securities acquired
                  directly from SPR or its Affiliates (within the meaning set
                  forth in Rule 12b-2 under the Securities Exchange Act of
                  1934)) representing 30% or more of the combined voting power
                  of SPR's then outstanding securities, excluding any Person who
                  becomes such a Beneficial Owner in connection with a
                  transaction described in clause (A) of paragraph (iii) below;
                  or

                  (ii) the following individuals cease for any reason to
                  constitute a majority of the number of directors then serving:
                  individuals who, on the Effective Date, constitute the Board
                  and any new director (other than a director whose initial
                  assumption of office is in connection with an actual or
                  threatened election contest, including but not limited to a
                  consent solicitation, relating to the election of directors of
                  SPR) whose appointment or election by the Board or nomination
                  for election by SPR's shareholders was approved or recommended
                  by a vote of at least two-thirds (2/3) of the directors then
                  still in office who either were directors on the date hereof
                  or whose appointment, election or nomination for election was
                  previously so approved or recommended; or

                  (iii) there is consummated a merger or consolidation of SPR or
                  any direct or indirect subsidiary of SPR with any other
                  corporation, other than (A) a merger or consolidation which
                  would result in the voting securities of SPR outstanding
                  immediately prior to such merger or consolidation continuing
                  to

                                                                        13 of 26


                  represent (either by remaining outstanding or by being
                  converted into voting securities of the surviving entity or
                  any parent thereof), in combination with the ownership of any
                  trustee or other fiduciary holding securities under an
                  employee benefit plan of the Company, at least 65% of the
                  combined voting power of the securities of SPR or such
                  surviving entity or any parent thereof outstanding immediately
                  after such merger or consolidation, or (B) a merger or
                  consolidation effected to implement a recapitalization of SPR
                  (or similar transaction) in which no Person is or becomes the
                  Beneficial Owner, directly or indirectly, of securities SPR
                  (not including in the securities Beneficially Owned by such
                  Person any securities acquired directly from SPR or its
                  Affiliates) representing 30% or more of the combined voting
                  power of SPR's then outstanding securities; or

                  (iv) SPR stockholders or a court or regulatory agency having
                  jurisdiction over the matter approves a plan of complete
                  liquidation or dissolution of SPR or there is consummated an
                  agreement for or a court or regulatory agency having
                  jurisdiction over the matter approves the sale or disposition
                  by SPR of all or substantially all of SPR's assets, other than
                  a sale or disposition by SPR of all or substantially all of
                  SPR's assets to an entity, at least 65% of the combined voting
                  power of the voting securities of which are owned by
                  stockholders of SPR in substantially the same proportions as
                  their ownership of SPR immediately prior to such sale.

Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of SPR immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of SPR immediately
following such transaction or series of transactions. For purposes of this
Article 7, "Person" shall have the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934, as modified and used in Sections 13(d) and
14(d) thereof, except that such term shall not include (i) SPR or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of SPR in substantially the same proportions as their ownership of
stock of SPR.

                  7.3      Severance Payments. If the Executive's employment is
         terminated within two years following a Change in Control and during
         the Term, other than (A) by the Company for Cause, (B) by reason of
         death or Disability, or (C) by the Executive without Good Reason, then
         the Company shall pay the Executive the amounts, and provide the
         Executive the benefits, described in this Section 7.3 ("Severance
         Payments"), in lieu of any payments and benefits to which the Executive
         would otherwise have been entitled under Article 6 hereof. For purposes
         of this Agreement, the Executive's employment shall be deemed to have
         been terminated following a Change in Control by the Company without
         Cause or by the Executive with Good Reason, if (i) the Executive's
         employment is terminated by the Company without Cause prior to a Change
         in Control (whether or not a Change in Control ever occurs) and such
         termination was at the request or direction of a Person who has entered
         into an agreement with the Company the consummation of which would

                                                                        14 of 26


         constitute a Change in Control, (ii) the Executive terminates his
         employment for Good Reason prior to a Change in Control (whether or not
         a Change in Control ever occurs) and the circumstance or event which
         constitutes Good Reason occurs at the request or direction of such
         Person, or (iii) the Executive's employment is terminated by the
         Company without Cause or by the Executive for Good Reason and such
         termination or the circumstance or event which constitutes Good Reason
         is otherwise in connection with or in anticipation of a Change in
         Control (whether or not a Change in Control ever occurs). For purposes
         of any determination regarding the applicability of the immediately
         preceding sentence, any position taken by the Executive shall be
         presumed to be correct unless the Company establishes to the Board by
         clear and convincing evidence that such position is not correct.

                           (A) In lieu of any further salary payments to the
                  Executive for periods subsequent to the Date of Termination
                  and in lieu of any severance benefit otherwise payable to the
                  Executive under or pursuant to any contract or plan, except
                  for any benefits relating to or resulting from the SERP,
                  whether as a consequence of a Change in Control or otherwise,
                  the Company shall pay to the Executive a lump sum severance
                  payment, in cash, equal to three times the sum of (i) the
                  Executive's base salary as in effect immediately prior to the
                  Date of Termination or, if higher, in effect immediately prior
                  to the first occurrence of an event or circumstance
                  constituting Good Reason, and (ii) the target annual incentive
                  award applicable to the Executive pursuant to any annual bonus
                  or incentive plan maintained by the Company in respect of the
                  fiscal year ending immediately prior to the fiscal year in
                  which occurs the Date of Termination or, if higher,
                  immediately prior to the fiscal year in which occurs the first
                  event or circumstance constituting Good Reason.

                           (B) For the thirty-six (36) month period immediately
                  following the Date of Termination, the Company shall arrange
                  to provide the Executive and his dependents life, disability,
                  accident and health insurance benefits substantially similar
                  to those provided to the Executive and his dependents
                  immediately prior to the Date of Termination or, if more
                  favorable to the Executive, those provided to the Executive
                  and his dependents immediately prior to the first occurrence
                  of an event or circumstance constituting Good Reason, at no
                  greater cost to the Executive than the cost to the Executive
                  immediately prior to such date or occurrence; provided,
                  however, that, unless the Executive consents to a different
                  method (after taking into account the effect of such method on
                  the calculation of "parachute payments" pursuant to Section 8
                  hereof), such health insurance benefits shall be provided
                  through a third-party insurer. Benefits otherwise receivable
                  by the Executive pursuant to this Section 7.3(B) shall be
                  reduced to the extent benefits of the same type are received
                  by or made available to the Executive during the thirty-six
                  (36) month period following the Executive's termination of
                  employment (and any such benefits received by or made
                  available to the Executive shall be reported to the Company by
                  the Executive); provided, however, that the Company shall
                  reimburse the Executive for the excess, if any, of the cost of
                  such benefits to the Executive over such cost immediately
                  prior to the Date of Termination or, if more favorable to the
                  Executive, the first occurrence of an event or circumstance
                  constituting Good Reason.

                                                                        15 of 26


                           (C) Notwithstanding any provision of any annual or
                  long-term incentive plan to the contrary, the Company shall
                  pay to the Executive a lump sum amount, in cash, equal to the
                  sum of (i) any unpaid incentive compensation which has been
                  allocated or awarded to the Executive for a completed fiscal
                  year or other measuring period preceding the Date of
                  Termination under any such plan and which, as of the Date of
                  Termination, is contingent only upon the continued employment
                  of the Executive to a subsequent date, and (ii) a pro rata
                  portion to the Date of Termination of the aggregate value of
                  all contingent incentive compensation awards to the Executive
                  for all then uncompleted periods under any such plan,
                  calculated as to each such award by multiplying the award that
                  the Executive would have earned on the last day of the
                  performance award period, assuming the achievement, at the
                  target level of the individual and corporate performance goals
                  established with respect to such award, by the fraction
                  obtained by dividing the number of full months and any
                  fractional portion of a month during such performance award
                  period through the Date of Termination by the total number of
                  months contained in such performance award period.

                           (D) In addition to the retirement benefits to which
                  the Executive is entitled under each Company pension plan or
                  any successor plan thereto, the Company shall pay the
                  Executive a lump sum amount, in cash, equal to the excess of
                  (i) the actuarial equivalent of the aggregate retirement
                  pension (taking into account any early retirement subsidies
                  associated therewith and determined as a straight life annuity
                  commencing at the date (but in no event earlier than the third
                  anniversary of the Date of Termination) as of which the
                  actuarial equivalent of such annuity is greatest) which the
                  Executive would have accrued under the terms of all such
                  pension plans (without regard to any amendment to any such
                  pension plan made subsequent to a Change in Control and on or
                  prior to the Date of Termination, which amendment adversely
                  affects in any manner the computation of retirement benefits
                  thereunder), determined as if the Executive were fully vested
                  thereunder and had accumulated (after the Date of Termination)
                  thirty-six (36) additional months of service credit thereunder
                  (except in the case of the SERP, in which case benefits shall
                  be calculated by the amount provided for in the last sentence
                  of Section 4.5, or 36 months, whichever is greater) and had
                  been credited under each such pension plan during such period
                  with compensation equal to the Executive's compensation (as
                  defined in each such pension plan) during the twelve (12)
                  months immediately preceding the Date of Termination or, if
                  higher, during the twelve months immediately prior to the
                  first occurrence of an event or circumstance constituting Good
                  Reason, over (ii) the actuarial equivalent of the aggregate
                  retirement pension (taking into account any early retirement
                  subsidies associated therewith and determined as a straight
                  life annuity commencing at the date (but in no event earlier
                  than the Date of Termination) as of which the actuarial
                  equivalent of such annuity is greatest) which the Executive
                  had accrued pursuant to the provisions of the pension plans as
                  of the Date of Termination. For purposes of this Section
                  7.3(D), "actuarial equivalent" shall be determined using the
                  same assumptions utilized under the Sierra Pacific Power
                  Company Retirement Plan immediately prior to the Date of
                  Termination. or, if more favorable to the

                                                                        16 of 26


                  Executive, immediately prior to the first occurrence of an
                  event or circumstance constituting Good Reason.

                  8.       Certain Additional Payments by the Company.

                           (i)      If it is determined (as hereafter provided)
                  that any payment or distribution by the Company, any person
                  whose actions result in a Change in Control or any affiliate
                  of the Company or such persons, 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
                  (each a "Payment", and all such Payments, excluding the
                  Gross-Up Payments (as defined below), the "Total Payments")),
                  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.

                           (ii)     Subject to the provisions of Section 8(vi)
                  hereof, all determinations required to be made under this
                  Article 8, 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

                                                                        17 of 26


                  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 not
                  have been made by the Company should 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 8(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 otherwise cooperate with the Accounting
                  Firm in connection with the preparation and issuance of the
                  determinations and calculations contemplated by Section 8(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 8(ii) and (iv) hereof
                  will be borne by the Company.

                           (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 ten (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

                                                                        18 of 26


                  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 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, from
                  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 8(vi), the
                  Company will control all proceedings taken in connection with
                  the contest of any claim contemplated by this Section 8(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

                                                                        19 of 26


                  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 8(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 8(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 8(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 thirty (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 the Gross-Up Payment required to be paid by the
                  Company to the Executive pursuant to this Article 8.

                           (viii)   Notwithstanding the foregoing provisions of
                  this Section 8, if it shall be determined that the Executive
                  is entitled to a Gross-Up Payment, but the Total Payments do
                  not exceed 110% of the greatest amount (the "Reduced Amount")
                  that could be paid to the Executive such that the receipt of
                  the Total Payments would not give rise to any Excise Tax, then
                  no Gross-Up Payment shall be made to the Executive and the
                  Total Payments, in the aggregate, shall be reduced to the
                  Reduced Amount. If a reduction is required, the Executive and
                  the Company shall determine, after consultation, which
                  payments and or benefits shall be waived, reduced or forfeited
                  to accomplish the reduction.

                  9.       Mitigation and Offset. The payment of severance
compensation by the Company to the Executive in accordance with the terms of the
Agreement is hereby acknowledged by the Company to be reasonable, and the
Executive is under no obligation to mitigate damages or the amount of any
payment provided for hereunder by seeking other employment or otherwise. Any
amounts payable to the Executive by the Company upon termination of employment
shall be offset by any amounts then owed by the Executive to the Company or any
entity that is then an Affiliate (within the meaning set forth in Rule 12b-2
under the Securities Exchange Act of 1934) of the Company.

                  10.      Competition; Confidentiality; Nonsolicitation

                  10.1     (i)      Subject to Section 7.1(i), the Executive
                  hereby covenants and agrees that during the Employment Term
                  and for one year following the end of 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

                                                                        20 of 26


                  principally engaged in the business of generation, purchase,
                  transmission, distribution, or sale of electricity, the
                  provision of natural gas, in each case to customer segments
                  being served or pursued in its business plans by the Company
                  or its Subsidiaries, in states in which the Company or its
                  Subsidiaries has significant operations; provided, however,
                  that "Competition" will not include ownership by the Executive
                  of stocks, bonds or other securities of any corporation or
                  other entity (but without participating in the business
                  thereof) if such stocks, bonds, or other securities are listed
                  for trading on a national securities exchange or
                  NASDAQ-National Market and the Executive's investment does not
                  exceed 1% of the issued and outstanding shares of capital
                  stock, or in the case of bonds or other securities, 1% of the
                  aggregate principal amount thereof issued and outstanding. For
                  purposes of applying the preceding sentence, operations of the
                  Company or its Subsidiaries in the State of California will be
                  deemed not to be significant if they are not materially
                  greater than the operations in the aggregate of the Company
                  and its respective Subsidiaries in the State of California as
                  of the date of this Agreement.

                           (ii)     Subject to Section 7.1(i), the Executive
                  hereby covenants and agrees that during the Employment Term
                  and for three years following the end of 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.

                  10.2     During the Employment Term, the Company agrees that
         it will disclose to Executive its confidential or proprietary
         information (as defined in this Section 10.2) to the extent necessary
         for Executive to carry out the Executive's obligations under this
         Agreement. The Executive hereby covenants and agrees that he will not,
         without the prior written consent of the Company, during the Employment
         Term or at any time thereafter disclose to any person not employed by
         the Company or a Subsidiary, or use in connection with engaging in
         Competition with the Company or a Subsidiary, any confidential or
         proprietary information of the Company or its Subsidiaries. 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 or a Subsidiary and that is not publicly
         available or generally known to persons engaged in businesses similar
         or related to those of the Company or a Subsidiary. Confidential
         information will include, without limitation, the Company's or a
         Subsidiary'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 10.2 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).

                  10.3     Subject to Section 7.1(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 or a Subsidiary to give up, or to not commence,
         employment or a business relationship with the Company or a Subsidiary.

                                                                        21 of 26


                  11.      Post-Termination Assistance. Subject to Section
7.1(i), the Executive agrees that after the Executive's employment with the
Company has terminated the Executive will provide, upon reasonable notice, such
information and assistance to the Company as may reasonably be requested by the
Company in connection with any litigation in which it or any of its affiliates
is or may become a party; provided, however, that the Company agrees to promptly
reimburse the Executive for any related out-of-pocket expenses, including travel
expenses as well as reasonable compensation for any time expended,
portal-to-portal, at a rate which approximates the Executive's gross cash income
(base plus target incentive) at the time of termination.

                  12.      Survival. The expiration or termination of the
Employment Term will not impair the rights or obligations of any party hereto
that accrue hereunder prior to such expiration or termination, except to the
extent specifically stated herein. In addition to the foregoing, the Executive's
covenants contained in Sections 5.4, , 6,4(ii), 10.1, 10.2, 10.3, and 11, and
the Company's obligations under Articles Sections 6 and 8, and Section 13.1 will
survive the expiration or termination of this Agreement or the termination of
the Executive's employment for any reason whatsoever.

                  13.      Miscellaneous Provisions.

                  13.1     Legal Fees and Expenses. If it should appear to the
         Executive that the Company has failed to comply with any of its
         obligations under this Agreement or in the event that the Company or
         any other person takes or threatens to take any action to declare this
         Agreement void or unenforceable, or institutes any litigation or other
         action or proceeding designed to deny, or to recover from, the
         Executive the benefits provided or intended to be provided to the
         Executive hereunder, the Company irrevocably authorizes the Executive
         from time to time to retain counsel of Executive's choice (other than
         any counsel with whom the Company has any existing or prior
         attorney-client relationship), at the expense of the Company as
         hereafter provided, to advise and represent the Executive in connection
         with any such interpretation, enforcement, or defense, including,
         without limitation, the initiation or defense of any litigation or
         other legal action, whether by or against the Company or any director,
         officer, stockholder, or other person affiliated with the Company, in
         any jurisdiction. If the facts or circumstances relating to such
         interpretation, enforcement or defense arise prior to a Change in
         Control and the Executive prevails, in whole or in part, in any
         material issue in dispute, the Company will pay and be solely
         financially responsible for any and all reasonable attorneys' fees and
         related fees and expenses incurred by the Executive in good faith in
         connection with such dispute. If the facts or circumstances relating to
         such interpretation, enforcement or defense arise on or after a Change
         in Control, the Company will reimburse the Executive for any and all
         reasonable attorneys' fees and related fees and expenses incurred by
         the Executive in good faith in connection with such interpretation,
         enforcement or defense as such fees and expenses are incurred;
         provided, however, that the Executive shall be required to reimburse
         the Company for the amounts advanced to the Executive pursuant to this
         sentence if the Executive does not prevail, in whole or in part, in any
         material issue in dispute.

                  13.2     Successors and Binding Agreement. (i) The Company
         will require any successor (whether direct or indirect, by purchase,
         merger, consolidation,

                                                                        22 of 26


         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 reasonably 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 the Executive's personal or legal
                  representatives, executors, administrators, successors, heirs,
                  distributes, 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 13.2(i) and 13.2(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 13.2(iii), the Company shall have no
                  liability to pay any amount so attempted to be assigned,
                  transferred, or delegated.

                  13.3     Governing Law. This Agreement will be governed,
         construed, interpreted, and enforced in accordance with the substantive
         laws of the State of Nevada, without regard to conflicts of law
         principles.

                  13.4     Withholding of Taxes. The Company may withhold from
         any amounts payable under this Agreement all federal, state, city, or
         other taxes as the Company is required to withhold pursuant to any law
         or government regulations or ruling.

                  13.5     Severability. Any provision of this Agreement that is
         deemed invalid, illegal, or unenforceable in any jurisdiction will, as
         to that jurisdiction be ineffective to the extent of such invalidity,
         illegality, or unenforceability, without affecting 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.

                  13.6     Notices. For all purposes of this Agreement, all
         communications, including, without limitation, notices, consents,
         requests or approvals, required or permitted to be given hereunder will
         be in writing and will be deemed to have been

                                                                        23 of 26


         duly given when hand delivered or dispatched by electronic facsimile
         transmission (with receipt thereof confirmed), or five business days
         after having been mailed by United States registered or certified mail,
         return receipt requested, postage prepaid, or three business days after
         having been sent by a nationally recognized overnight courier service
         such as Federal Express, UPS, or Purolator, addressed to the Company
         (to the attention of the Secretary of the Company) at its principal
         executive offices and to the Executive at his principal residence, or
         to such other address as any party may have furnished to the other in
         writing and in accordance herewith, except that notices of changes of
         address will be effective only upon receipt.

                           (i)      To the Company: If to the Company, addressed
                  to the attention of the Secretary; 6100 Neil Road, Reno,
                  Nevada 89511, or to 6226 West Sahara Avenue, Las Vegas,
                  Nevada, 89146.

                           (ii)     To the Executive: If to the Executive, at
                  his address on file with SPR.

                  13.7     Counterparts. This Agreement may be executed in
         several counterparts, each of which will be deemed to be an original,
         but all of which together will constitute one and the same Agreement.

                  13.8     Effectiveness; Prior Agreement; Entire Agreement.
         This Agreement shall become effective on the Effective Date and shall
         have no force or effect prior thereto. On the Effective Date, the terms
         of this Agreement are intended by the parties to be the final
         expression of their agreement with respect to the Executive's
         employment by the Company, may not be contradicted by evidence of any
         prior or contemporaneous agreement, and shall supersede in all respects
         any prior or other agreement or understanding between the Company, any
         Subsidiary, and the Executive, including, but not limited to, the Prior
         Employment Agreement, which, except for any specific provisions
         included or carried forward herein, will terminate and be without
         further effect immediately upon the effectiveness of this Agreement
         without further action, and the Prior Change in Control Agreement,
         which will terminate and be without further effect immediately upon the
         effectiveness of this Agreement without further action. The parties
         further intend that this Agreement will constitute the complete and
         exclusive statement of its terms and that no extrinsic evidence
         whatsoever may be introduced in any judicial, administrative, or other
         legal proceeding to vary the terms of this Agreement.

                  13.9     Amendments; Waivers. This Agreement may not be
         modified, amended, or terminated except by an instrument in writing,
         signed by the Executive and the Company. Failure on the part of either
         party to complain of any action or omission, breach, or default on the
         part of the other party, no matter how long the same may continue, will
         never be deemed to be a waiver of any rights or remedies hereunder, at
         law, or in equity. The Executive or the Company may waive compliance by
         the other party with any provision of this Agreement that such other
         party was or is obligated to comply with or perform only through an
         executed writing; provided, however, that such waiver will not operate
         as a waiver of, or estoppel with respect to, any other or subsequent
         failure.

                                                                        24 of 26


                  13.10    Headings and Section References. The headings used in
         this Agreement are intended for convenience or reference only and will
         not in any manner amplify, limit, modify, or otherwise be used in the
         construction or interpretation of any provision of this Agreement. All
         section references are to sections of this Agreement, unless otherwise
         noted.

                  13.11    Interest. Without limiting the rights of the
         Executive at law or in equity, if the Company fails to make any payment
         or provide any benefit required to be made or provided hereunder on a
         timely basis, the Company will pay interest on the amount or value
         thereof at an annualized rate of interest equal to the so-called
         composite "prime rate" as quoted from time to time during the relevant
         period in the Northeast Edition of The Wall Street Journal. Such
         interest will be payable as it accrues on demand. Any change in such
         prime rate will be effective on and as of the date of such change.

                                                                        25 of 26


                  IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the ____ day of September, 2003, but effective as provided in Article 1.

                                        By_____________________________________
                                          Walter M. Higgins

                                        SIERRA PACIFIC RESOURCES,
                                        a Nevada corporation

                                        By_____________________________________
                                          James R. Donnelley, Chair
                                          Compensation Committee, as directed by
                                           and approved by
                                          The Board of Directors

                                        SIERRA PACIFIC POWER COMPANY,
                                        a Nevada corporation

                                        By_____________________________________
                                         James R. Donnelley, Chair
                                         Compensation Committee, as directed by
                                          and approved by
                                         The Board of Directors

                                        NEVADA POWER COMPANY,
                                        a Nevada corporation

                                        By_____________________________________
                                          James R. Donnelley, Chair
                                          Compensation Committee, as directed by
                                           and approved by
                                          The Board of Directors

WMH-EMPLAGRMT-03

                                                                        26 of 26

EX-31.1

                                                                    Exhibit 31.1

       QUARTERLY CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER REQUIRED BY
                 SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Walter M. Higgins III, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q for the
                  period ending September 30, 2003 of Sierra Pacific Resources,
                  Nevada Power Company and Sierra Pacific Power Company;

         2.       Based on my knowledge, this report does not contain any untrue
                  statement of a material fact or omit to state a material fact
                  necessary to make the statements made, in light of the
                  circumstances under which such statements were made, not
                  misleading with respect to the period covered by this report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this report, fairly present
                  in all material respects the financial condition, results of
                  operations and cash flows of the registrants as of, and for,
                  the periods presented in this report;

         4.       The registrants' other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d-15(e)) for the registrants and have:

                  a)       Designed such disclosure controls and procedures, or
                           caused such disclosure controls and procedures to be
                           designed under our supervision, to ensure that
                           material information relating to the registrants,
                           including their consolidated subsidiaries, is made
                           known to us by others within those entities,
                           particularly during the period in which this report
                           is being prepared;

                  b)       Evaluated the effectiveness of the registrants'
                           disclosure controls and procedures and presented in
                           this report our conclusions about the effectiveness
                           of the disclosure controls and procedures, as of the
                           end of the period covered by this report based on
                           such evaluation; and

                  c)       Disclosed in this report any change in the
                           registrants' internal control over financial
                           reporting that occurred during the registrants' most
                           recent fiscal quarter that has materially affected,
                           or is reasonably likely to affect, the registrants'
                           internal control over financial reporting; and

         5.       The registrants' other certifying officer and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrants' auditors
                  and the audit committee of the registrants' board of directors
                  (or persons performing the equivalent functions):

                  a)       All significant deficiencies and material weaknesses
                           in the design or operation of internal control over
                           financial reporting which are reasonably likely to
                           adversely affect the registrants' ability to record,
                           process, summarize and report financial information;
                           and

                  b)       Any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrants' internal control over
                           financial reporting.

         November 13, 2003

                                            /s/ Walter M. Higgins III
                                            --------------------------------

                                            Walter M. Higgins III
                                            Chief Executive Officer

EX-31.2

                                                                    Exhibit 31.2

       QUARTERLY CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER REQUIRED BY
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard K. Atkinson, certify that:

         1.       I have reviewed this quarterly report on Form 10-Q for the
                  period ending September 30, 2003 of Sierra Pacific Resources,
                  Nevada Power Company and Sierra Pacific Power Company;

         2.       Based on my knowledge, this report does not contain any untrue
                  statement of a material fact or omit to state a material fact
                  necessary to make the statements made, in light of the
                  circumstances under which such statements were made, not
                  misleading with respect to the period covered by this report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this report, fairly present
                  in all material respects the financial condition, results of
                  operations and cash flows of the registrants as of, and for,
                  the periods presented in this report;

         4.       The registrants' other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d-15(e)) for the registrants and have:

                  a)       Designed such disclosure controls and procedures, or
                           caused such disclosure controls and procedures to be
                           designed under our supervision, to ensure that
                           material information relating to the registrants,
                           including their consolidated subsidiaries, is made
                           known to us by others within those entities,
                           particularly during the period in which this report
                           is being prepared;

                  b)       Evaluated the effectiveness of the registrants'
                           disclosure controls and procedures and presented in
                           this report our conclusions about the effectiveness
                           of the disclosure controls and procedures, as of the
                           end of the period covered by this report based on
                           such evaluation; and

                  c)       Disclosed in this report any change in the
                           registrants' internal control over financial
                           reporting that occurred during the registrants' most
                           recent fiscal quarter that has materially affected,
                           or is reasonably likely to affect, the registrants'
                           internal control over financial reporting; and

         5.       The registrants' other certifying officer and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrants' auditors
                  and the audit committee of the registrants' board of directors
                  (or persons performing the equivalent functions):

                  a)       All significant deficiencies and material weaknesses
                           in the design or operation of internal control over
                           financial reporting which are reasonably likely to
                           adversely affect the registrants' ability to record,
                           process, summarize and report financial information;
                           and

                  b)       Any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrants' internal control over
                           financial reporting.

November 13, 2003

                                            /s/ Richard K. Atkinson
                                            ---------------------------------

                                            Richard K. Atkinson
                                            Chief Financial Officer

EX-32.1

                                                                    Exhibit 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the combined Quarterly Report of Sierra Pacific
Resources, Nevada Power Company and Sierra Pacific Power Company (the
"Companies") on Form 10-Q for the period ending September 30, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), we,
Walter M. Higgins, III, Chief Executive Officer, and Richard K. Atkinson, Chief
Financial Officer, of the Companies, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:

         (1)      the Report fully complies with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2)      the information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Companies.

November 13, 2003

/s/ Walter M. Higgins, III
- -------------------------------------

Walter M. Higgins, III
Chief Executive Officer

/s/ Richard K. Atkinson
- -------------------------------------

Richard K. Atkinson
Chief Financial Officer

This Certification accompanies this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been
provided to the Companies and will be retained by the Companies and furnished to
the Securities and Exchange Commission or its staff upon request.