AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 5,================================================================================
As filed with the Securities and Exchange Commission on December 18, 1996
REGISTRATION NO. 333-4032
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------Registration No. 333-17041
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------------
PRE-EFFECTIVE AMENDMENT
NO. 31
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SIERRA PACIFIC POWER CAPITAL I DELAWARE TO BE APPLIED FOR
SIERRA PACIFIC POWER COMPANY NEVADA 88-0044418
(Exact name of Each Registrant as (State or other Jurisdiction (I.R.S. Employer
specified of Identification
in its Charter) Incorporation or Number)
Organization)
---------------------
SIERRA PACIFIC POWER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------------
Nevada 88-0044418
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
P.O. Box 10100 (6100 Neil Road), Reno, Nevada 89520
(702) 689-401189520-0400, 702-689-4011
(Address, including zip code, and telephone number, including area code,
of each registrant's principal executive offices)
---------------------------------------------
WILLIAM E. PETERSON, ESQ.
Senior Vice President Corporate Secretary and General Counsel
Sierra Pacific Power Company
P.O. Box 10100 (6100 Neil Road)
Reno, Nevada 8952089520-0400
(702) 689-4011
------------------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service for each registrant)
------------------------
PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:
service)
---------------------
Copies to:
WILLIAM C. ROGERS, ESQ. DAVID C. CHAPIN, ESQ.
Choate, Hall & Stewart Ropes & Gray
Exchange Place One International Place
53 State Street One International Place
Boston, Massachusetts 02109 Boston, Massachusetts 02110
Boston, Massachusetts 02109 (617) 951-7000
(617) 248-5000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
If(617) 951-7000
---------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the only securities being registered onregistrant shall
file a further amendment which specifically states that this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If anyRegistration
Statement shall thereafter become effective in accordance with Section 8(a) of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, please check the following box: / /
If this Form is filed to register additional securities for an offeringCommission, acting pursuant to Rule 462(b)said Section 8(a),
may determine.
================================================================================
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the Securities Act, please check the following box
and list the Securities Act registration statement numbersecurities laws of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
INFORMATION CONTAINED HEREIN ISany such State.
PRELIMINARY PROSPECTUS DATED DECEMBER 18, 1996
SUBJECT TO COMPLETION
OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED JULY 5, 1996
PROSPECTUS
1,940,000 PREFERRED SECURITIES
SIERRA PACIFIC POWER CAPITAL I
% TRUST ORIGINATED PREFERRED SECURITIES-SM- ("TOPRS-SM-")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED BY$35,000,000
SIERRA PACIFIC POWER COMPANY
------------------
The % Trust Originated Preferred Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial ownership interests in
the assets of Sierra Pacific Power Capital I, a statutory business trust formed
under the laws of the State of Delaware ("Sierra Pacific Capital" or the
"Trust").COLLATERALIZED DEBT SECURITIES
______________________
Sierra Pacific Power Company (the "Company") may offer from time to time its
collateralized debt securities consisting of notes or other evidences of
indebtedness (the "Debt Securities") in an initial principal amount of
$35,000,000. The Debt Securities may be offered as separate series or tranches
in amounts, at prices and on terms to be determined in light of market
conditions at the time of sale and set forth in one or more Prospectus
Supplements or a Nevada corporation ("Sierra Pacific"pricing supplement thereto.
The terms of each series or tranche of Debt Securities, including, where
applicable, the "Company"specific designation, aggregate principal amount, authorized
denominations, maturity date or dates, interest rate or rates (which may be
fixed or variable) and time or times of payment of any interest, any terms for
optional or mandatory redemption or payment of additional amounts or any sinking
fund provisions, any initial public offering price, the net proceeds to the
Company and any other specific terms in connection with the offering and sale of
such series or tranche (the "Offered Securities"), will directlybe set forth in one or
indirectly own allmore Prospectus Supplements or a supplement thereto; provided, however, that in
no event shall the commoninterest rate (whether fixed or variable) on any Debt
Securities exceed the 9% interest rate on the underlying Mortgage Bonds (as
defined below) relating thereto. As used herein, Debt Securities shall only
include securities denominated in United States dollars and will not be issued
or payable in foreign or composite currencies.
The Debt Securities will be secured by one or more series of first mortgage
bonds (the "Mortgage Bonds") to be issued and pledged by the Company to Bankers
Trust Company, acting as trustee (the "Common Securities" and, together with"Trustee") under the Preferred
Securities, the "Trust Securities") representing undivided beneficial interests
in the assets of Sierra Pacific Capital. The Trust existsindenture for the
sole purposeDebt Securities. The aggregate principal amount of issuing the PreferredDebt Securities
outstanding and the aggregate premium thereon, if any, will not exceed the
aggregate principal amount of Mortgage Bonds pledged to and held by the
Trustee. The Mortgage Bonds will bear interest at times and in amounts
sufficient to provide for the payment of interest on the Debt Securities, and
Common Securities and using the proceeds
thereof to purchase from Sierra Pacific its % Junior Subordinated Debentures
due 2036 (the "Junior Subordinated Debentures") having the terms described
herein. The Junior Subordinated Debentures when issuedMortgage Bonds also will be unsecured
obligations of Sierra Pacific, will be issued pursuant to an Indenture which
will be qualified underredeemed at times and subjectin amounts that correspond
to the Trust Indenture Actrequired payments of 1939, as
amended,principal of and will be Subordinate and junior in right of payment to
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE
PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE
PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
Application has been made to list the Preferred Securitiesany premium on the New York
Stock Exchange, Inc. (the "NYSE"). If so approved, trading of the Preferred
SecuritiesDebt Securities.
Payments on the NYSE is expectedDebt Securities will satisfy payment obligations on the
underlying Mortgage Bonds relating thereto. See "Description of Debt
Securities--Security; Pledge of Mortgage Bonds" and "Description of Mortgage
Bonds".
The Debt Securities may be sold directly by the Company, through agents
designated from time to commence within a 30-day period after the
initial delivery of the Preferred Securities.time or to or through underwriters or dealers. See
"Plan of Distribution."
------------------------Distribution". If any agents of the Company or any underwriters are
involved in the sale of any Debt Securities in respect of which this Prospectus
is being delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in a Prospectus Supplement. The net
proceeds to the Company from such a sale also will be set forth in a Prospectus
Supplement.
___________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
INITIAL PUBLIC
OFFERING UNDERWRITING PROCEEDS TO
PRICE(1) COMMISSION (2) TRUST (3)(4)
Per Preferred Security.................... $25.00 (3) $25.00
Total..................................... $48,500,000 (3) $48,500,000
(1) Plus accrued distributions, if any, from the___________________
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.___________________
The date of issuance.
(2) Sierra Pacific Capital and Sierra Pacific have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debentures, Sierra
Pacific has agreed to pay to the Underwriters as compensation (the
"Underwriters' Compensation") for their arranging the investment therein of
such proceeds $ per Preferred Security (or $ in the aggregate);
provided, that such compensation for sales of 10,000 or more Preferred
Securities to a single purchaser will be $ per Preferred Security.
Therefore, to the extent of such sales, the actual amount of Underwriters'
Compensation will be less than the aggregate amount specified in the
preceding sentence. See "Plan of Distribution."
(4) Expenses of the offering which are payable by Sierra Pacific are estimated
to be $290,000.
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. Itthis Prospectus is expected
that delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company, on or about ,
1996.
------------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
------------------------
THE DATE OF THIS PROSPECTUS IS JULY , 1996.
- -SM-"Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
(continued from previous page)
certain other indebtedness of Sierra Pacific as described herein. Upon an event
of a default under the Declaration (as defined herein), the holders of Preferred
Securities will have a preference over the holders of the Common Securities with
respect to payments in respect of distributions and payments upon redemption,
liquidation and otherwise.
Holders of the Preferred Securities will be entitled to receive cumulative
cash distributions at an annual rate of % of the liquidation preference of $25
per Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing September 30,__, 1996 ("distributions"). See "Description of the
Preferred Securities -- Distributions". The payment of distributions and
payments on liquidation of the Trust or the redemption of Preferred Securities,
described below (but only to the extent funds of the Trust are available
therefor), are guaranteed by Sierra Pacific to the extent described herein (the
"Guarantee"). The Guarantee, when taken together with (a) Sierra Pacific's
obligation to make interest and other payments on the Junior Subordinated
Debentures issued to the Trust and (b) Sierra Pacific's obligations under the
Indenture pursuant to which the Junior Subordinated Debentures are issued and
its obligations under the Declaration (as defined herein), including its
liabilities to pay costs, expenses, debts and liabilities of Sierra Pacific
Capital (other than with respect to the Trust Securities), provides a full and
unconditional guarantee of amounts due on the Preferred Securities. See "Risk
Factors -- Rights Under the Guarantee" herein. The obligations of Sierra Pacific
under the Guarantee are subordinate and junior in right of payment to all other
liabilities of Sierra Pacific and PARI PASSU with the most senior preferred
stock issued, from time to time, if any, by Sierra Pacific. The obligations of
Sierra Pacific under the Junior Subordinated Debentures are subordinate and
junior in right of payment to all present and future Senior Indebtedness (as
defined herein) of Sierra Pacific, which aggregated approximately $493 million
at April 1, 1996, and rank PARI PASSU with Sierra Pacific's other general
unsecured creditors. The Junior Subordinated Debentures purchased by the Trust
may be subsequently distributed pro rata to holders of the Preferred Securities
and Common Securities in connection with the dissolution of the Trust, upon the
occurrence of certain events.
The distribution rate and the distribution payment date and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment date and other payment dates on the Junior Subordinated
Debentures, which will be the sole assets of the Trust. As a result, if
principal or interest is not paid on the Junior Subordinated Debentures, no
amounts will be paid on the Preferred Securities. If Sierra Pacific does not
make principal or interest payments on the Junior Subordinated Debentures, the
Trust will not have sufficient funds to make distributions on the Preferred
Securities, in which event, the Guarantee will not apply to such distributions
until the Trust has sufficient funds available therefor.
So long as Sierra Pacific shall not be in default in the payment of interest
on the Junior Subordinated Debentures, Sierra Pacific has the right to defer
payments of interest on the Junior Subordinated Debentures by extending the
interest payment period on the Junior Subordinated Debentures at any time for up
to 20 consecutive quarters (each, an "Extension Period"). If interest payments
are so deferred, distributions will also be deferred. During such Extension
Period, distributions will continue to accrue with interest thereon (to the
extent permitted by applicable law) at an annual rate of % per annum
compounded quarterly, and during any Extension Period, holders of Preferred
Securities will be required to include deferred interest income in their gross
income for United States federal income tax purposes in advance of receipt of
the cash distributions with respect to such deferred interest payments. There
could be multiple Extension Periods of varying lengths throughout the term of
the Junior Subordinated Debentures. See "Description of the Junior Subordinated
Debentures -- Option to Extend Interest Payment Period," "Risk Factors -- Option
to Extend Interest Payment Period" and "United States Federal Income Taxation --
Original Issue Discount."
The Junior Subordinated Debentures are redeemable by Sierra Pacific, in
whole or in part, from time to time, on or after June , 2001, or at any time
in certain circumstances upon the occurrence of a Tax Event (as defined herein).
If Sierra Pacific redeems Junior Subordinated Debentures, the Trust must redeem
Trust Securities on a PRO RATA basis having an aggregate liquidation amount
equal to the aggregate principal
2
amount of the Junior Subordinated Debentures so redeemed at $25 per Preferred
Security plus accrued and unpaid distributions thereon (the "Redemption Price")
to the date fixed for redemption. See "Description of the Preferred Securities
- -- Mandatory Redemption." The Preferred Securities will be redeemed upon
maturity of the Junior Subordinated Debentures. The Junior Subordinated
Debentures mature on , 2036. In addition, upon the occurrence of a Tax
Event arising from a change in law or a change in legal interpretation regarding
tax matters, unless the Junior Subordinated Debentures are redeemed in the
limited circumstances described herein, the Trust shall be dissolved, with the
result that the Junior Subordinated Debentures will be distributed to the
holders of the Preferred Securities, on a PRO RATA basis, in lieu of any cash
distribution. See "Description of the Preferred Securities -- Tax Event
Redemption or Distribution." In certain circumstances, Sierra Pacific will have
the right to redeem the Junior Subordinated Debentures, which would result in
the redemption by the Trust of Trust Securities in the same amount on a PRO RATA
basis. If the Junior Subordinated Debentures are distributed to the holders of
the Preferred Securities, Sierra Pacific will use its best efforts to have the
Junior Subordinated Debentures listed on the NYSE or on such other exchange as
the Preferred Securities are then listed. See "Description of the Preferred
Securities -- Tax Event Redemption or Distribution" and "Description of the
Junior Subordinated Debentures."
In the event of the involuntary or voluntary dissolution, winding up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive for each Preferred Security a liquidation amount of $25 plus
accrued and unpaid distributions thereon (including interest thereon to the
extent permitted by applicable law) to the date of payment, unless, in
connection with such dissolution, the Junior Subordinated Debentures are
distributed to the holders of the Preferred Securities. See "Description of the
Preferred Securities -- Liquidation Distribution Upon Dissolution."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
AVAILABLE INFORMATION
This Prospectus constitutes a part of a combined Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by Sierra Pacific and Sierra Pacific Capital with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Trust Securities, the
Junior Subordinated Debentures and the Guarantee (the "Offered Securities").
This Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to Sierra Pacific, the Sierra Pacific Trust and the Offered Securities.
Any statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the SEC or
incorporated by reference herein are not necessarily complete, and, in each
instance, reference is made to the copy of such document so filed for a more
complete description of the matter involved. Each such statement is qualified in
its entirety by such reference.
Sierra PacificThe Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the SEC.Securities and Exchange
Commission (the "Commission"). Information regarding Sierra Pacific'sthe Company's directors,
the remuneration paid to Sierra Pacific'sthe Company's directors and officers, and directors, and interests of
management and others in certain transactions with Sierra Pacificthe Company is disclosed in
reports filed by Sierra Pacificthe Company with the SEC. Sierra Pacific'sCommission. The Company's parent, Sierra
Pacific Resources, is also subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the SEC.Commission. Such reports, proxy statements and other
information filed with the SECCommission can be inspected and copied at prescribed ratesthe public
reference facilities maintained by the Commission at the SEC's Public Reference
Room Judiciary Plaza,1024, 450 Fifth
Street, Northwest,N.W., Washington, D.C. 20549, as
well asand at the following Regional Offices of the SEC:Commission's regional offices
at 7 World Trade Center, 13th Floor, New York, New York 10048;10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. No separate financialCopies of such material
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also
maintains a Web site that contains reports, proxy and information statements of Sierra Pacific Capital have been
included herein. Sierra Pacificand
other information regarding registrants that file electronically with the
Commission (http://www.sec.gov). This Prospectus does not consider that such financial statements
would be material to holders of the Preferred Securities because (i)contain all of the
voting securities of Sierra Pacific Capital will be owned, directly or
indirectly, by Sierra Pacific, a reporting company under the Exchange Act, (ii)
Sierra Pacific Capital has no independent operations but exists for the sole
purpose of issuing securities representing undivided beneficial interests in the
assets of Sierra Pacific Capital and investing the proceeds thereof in Junior
Subordinated Debentures issued by Sierra Pacific, and (iii) Sierra Pacific's
obligations described herein under the Declaration of Trust, the Guarantee
issued with respect to Preferred Securities, the Junior Subordinated Debentures
and the Indenture (as defined herein), taken together, constitute a full and
unconditional guarantee of payments due on the Trust Securities. See
"Description of the Junior Subordinated Debentures" and "Description of the
Guarantee."
Sierra Pacific Capital is not currently subject to the
information reporting
requirements of the Exchange Act. Sierra Pacific Capital will become subject to
such requirements upon the effectiveness ofset forth in the Registration Statement although
it intendsand exhibits thereto which
the Company has filed with the Commission under the Securities Act of 1933, as
amended (the "Act"), and to seek and expects to receive exemptions therefrom.which reference is hereby made.
---------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Sierra Pacific (File No. 1-8609)the Company with the SECCommission pursuant to
the Exchange Act isare incorporated by reference hereinin this Prospectus and made a
part hereof:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1995, including the Form 10-K/A amendment thereto;
2. The Company's Quarterly ReportReports on Form 10-Q for the quarterquarterly periods
ended March 31, 1996, June 30, 1996 and September 30, 1996; and
3. The Company's Current ReportReports on Form 8-K dated July 3, 1996.
4
1996
(relating to the termination of the Company's merger with The Washington
Water Power Company), dated August 2, 1996 (relating to the issuance of trust
originated preferred securities) and dated November 20, 1996, including the
Form 8-K/A amendment thereto (relating to the appointment of Deloitte &
Touche, L.L.P. as the Company's independent accountants, succeeding Coopers &
Lybrand L.L.P. who had previously served as the Company's independent
accountants).
All documents filed by Sierra Pacificthe Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent toafter the date hereofof this Prospectus
and prior to the termination of thethis offering of the Offered Securities pursuant hereto shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference hereinin this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained hereinin this Prospectus or therein (or in any other
2
subsequently filed document thatwhich also is or is deemed to be incorporated by
reference herein or therein)in this Prospectus modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Sierra Pacific undertakes toThe Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon the
written or oral request of any such person, a copy of any or all of the foregoing documents
which are incorporated
herein by reference in this Prospectus, other than exhibits to
such documents unless(unless such exhibits are specifically incorporated by reference
into such documents. Such requestsdocuments). Requests for such copies should be directed to Treasurer,
Sierra Pacific Power Company, P.O. Box 10100, Reno, Nevada 89520, Telephone89520-0400,
telephone (702) 689-4011.
5
SIERRA PACIFIC POWERTHE COMPANY
SELECTED HISTORICAL FINANCIAL INFORMATION
The following summary information is qualified in its entirety by the
information appearing elsewhere in this Prospectus and by the information and
financial statements in the documents incorporated by reference in this
Prospectus.
Business..................................... Primarily an electric utility which also
provides gas and water service in a portion
of its service area
Service Area................................. Western, central and northeastern Nevada, and
eastern California including the Lake Tahoe
Area
12 Months Ended December 31, 1995:
Customers................................ Electric 270,000; Gas 92,000; Water 61,000
Revenue Distribution..................... Electric 82%; Gas 11%; Water 7%
Electric Power Sources................... Purchased Power 46%; Coal 23%; Oil and Gas
30%; Hydro 1%
FINANCIAL INFORMATION
(THOUSANDS, EXCEPT RATIOS)
TWELVE MONTHS YEAR ENDED DECEMBER 31,
ENDED ----------------------------------------------------------
MARCH 31, 1996 1995 1994 1993 1992 1991
-------------- ---------- ---------- ---------- ---------- ----------
Income Summary:
Operating Revenues................ $ 600,658 $ 597,784 $ 603,193 $ 521,568 $ 476,769 $ 462,153
Operating Income.................. 103,712 101,811 95,983 90,562 84,823 86,330
Interest Charges (Excluding
AFUDC)........................... 36,918 37,107 41,027 40,914 40,392 43,362
Net Income........................ 68,836 65,983 60,863 57,457 49,843 50,224
Preferred Stock Dividend
Requirements..................... $ 7,234 $ 7,374 $ 7,934 $ 8,261 $ 5,640 $ 4,361
Ratio of Earnings to Fixed Charges
(1):
Actual.......................... 3.71(2) 3.54 3.09 2.94 2.81 2.62
Pro Forma....................... 3.50(2)
Ratio of Earnings to Fixed Charges
and Preferred Dividends (1):
Actual.......................... 2.88(2) 2.76 2.43 2.29 2.34 2.30
Pro Forma....................... 2.90(2)
6
MARCH 31, 1996
--------------------------------------------------------
ACTUAL AS ADJUSTED (3)
--------------------------- ---------------------------
OUTSTANDING PERCENTAGE OUTSTANDING PERCENTAGE
------------ ------------- ------------ -------------
Capitalization Summary:
Long-term debt (4)............................................... $ 562,877 45.9% $ 572,877 45.3%
Company-obligated mandatorily redeemable preferred securities of
subsidiary Sierra Pacific Power Capital I (all of the assets of
the Trust will be % Junior Subordinated Debentures due 2036
of Sierra Pacific with a principal amount of $50,000,000, and
upon redemption of such debt, the Preferred Securities will be
mandatorily redeemable)......................................... -- 0.0 48,500 3.8
Preferred Stock.................................................. 73,115 6.0 73,115 5.8
Preferred Stock Subject to Mandatory Redemption (5).............. 20,400 1.6 0.0
Common Shareholders' Equity...................................... 570,712 46.5 570,712 45.1
------------ ----- ------------ -----
Total.......................................................... $ 1,227,104 100.0% $ 1,265,204 100.0%
------------ ----- ------------ -----
------------ ----- ------------ -----
Short-Term Debt.................................................. $ 50,000 $ 11,900
- ------------------------------
(1) "Earnings" represent the aggregate of net income, including AFUDC, taxes on
income and fixed charges. "Fixed charges" represent interest on short-term
and long-term debt, the interest portion on capital leases, the
amortization of bond premiums, discounts and expenses, and the amortization
of the net gain or loss on reacquired debt.
(2) The pro forma ratios give effect to the interest payable on the Junior
Subordinated Debentures at an assumed annual rate of 8.5% and the
application of the proceeds as described in "Use of Proceeds".
(3) Also reflects the issuance on April 1, 1996 of $10,000,000 principal amount
of Medium-Term Notes, Series C at an annual interest rate of 6.81%, the net
proceeds of which were used to reduce short-term debt of Sierra Pacific.
Assumes that the net proceeds to Sierra Pacific from the sale of the
Preferred Securities offered hereby will be used to replace funds used to
redeem $20,400,000 in principal amount of Series G 8.24% Preferred Stock of
Sierra Pacific and to reduce short-term debt of Sierra Pacific.
(4) Includes current maturities of long-term debt.
(5) Includes current maturity of redeemable preferred stock.
7
SIERRA PACIFIC POWER COMPANY
Sierra PacificCompany is a public utility company which is engaged primarily in the
generation, purchase, transmission, distribution and sale of electric energy to
approximately 270,000 customers in a service territory of approximately 50,000
square miles located in western, central and northeastern Nevada, including the
citiscities of Reno, Sparks, Carson City and Elko, and eastern California, including
the Lake Tahoe area. Sierra PacificThe Company met its electric energy requirements for the
twelve months ended December 31, 1995 by utilizing coal generation (23%),
gas/oil generation (30%), purchased power (46%) and hydro power (1%). Sierra
PacificThe
Company has no ownership interest in, nor does it operate, any nuclear
generating units and has no future plans to do so. Sierra PacificThe Company also provides
gas and water service to approximately 92,000 gas and 61,000 water customers in
the cities of Reno and Sparks and environs. Sierra PacificNo material part of any of the
Company's business segments is dependent upon a single customer.
The Company is a subsidiary of Sierra Pacific Resources ("Resources"),
which owns all of Sierra Pacific'sthe Company's outstanding common stock. In June, 1994, Sierra Pacific,the
Company, Resources, and The Washington Water Power Company ("WWP") entered
into an Agreement and Plan of Reorganization and Merger, as subsequently
amended (the "Merger Agreement"), which provided for the merger of Sierra Pacific,the
Company, Resources and WWP into Altus Corporation ("Altus"). WWP is a
combined electric and gas utility, with headquarters in Spokane, Washington.
Although the parties to the merger had received all of the necessary
approvals from thetheir respective shareholders, of Resources,
Sierra Pacific and WWP and from six state utility commissions, the merger was still under
review by the Federal Energy Regulatory Commission when, on June 28, 1996,
WWP notified Resources and Sierra Pacificthe Company that it was terminating the Merger
Agreement in accordance with its terms. As a result of the termination of
the Merger Agreement, Sierra Pacific will continuethe Company is continuing to operate as a separate
utility.
The principal executive offices of Sierra Pacificthe Company are located at 6100 Neil Road
P.O.(P.O. Box 10100,10100), Reno, Nevada 89520,89520-0400, telephone (702) 689-4011.
83
SIERRA PACIFIC POWER CAPITAL I
Sierra Pacific Capital is a statutory business trust formed under Delaware
law pursuant to (i) a declaration of trust, dated as of April 23, 1996, executed
by Sierra Pacific, as sponsor of the Trust (the "Sponsor"), and the trustees of
Sierra Pacific Capital (the "Sierra Pacific Trustees") and (ii) the filing of a
certificate of trust with the Secretary of State of the State of Delaware on
April 23, 1996. Such declaration will be amended and restated in its entirety
(as so amended and restated, the "Declaration") substantially in the form filed
as an exhibit to the Registration Statement. The Declaration will be qualified
as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, the purchasers
thereof will own all of the Preferred Securities. See "Description of the
Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company." Sierra Pacific will directly or indirectly acquire Common Securities
in an aggregate liquidation amount equal to 3% of the total capital of Sierra
Pacific Capital. Sierra Pacific Capital exists for the exclusive purposes of (i)
issuing the Trust Securities representing undivided beneficial interests in the
assets of the Trust, (ii) investing the gross proceeds of the Trust Securities
in the Junior Subordinated Debentures and (iii) engaging in only those other
activities necessary or incidental thereto.
Pursuant to the Declaration, the number of Sierra Pacific Trustees will
initially be four. Two of the Sierra Pacific Trustees (the "Regular Trustees")
will be persons who are employees or officers of or who are affiliated with
Sierra Pacific. The third trustee will be a financial institution that is
unaffiliated with Sierra Pacific, which trustee will serve as institutional
trustee under the Declaration and as indenture trustee for the purposes of
compliance with the provisions of the Trust Indenture Act (the "Institutional
Trustee"). Initially, IBJ Schroder Bank & Trust Company, a New York banking
corporation, will be the Institutional Trustee until removed or replaced by the
holder of the Common Securities. For the purpose of compliance with the
provisions of the Trust Indenture Act, IBJ Schroder Bank & Trust Company will
act as trustee (the "Guarantee Trustee") under the Guarantee and as Debt Trustee
(as defined herein) under the Indenture. The fourth trustee will be an entity
that maintains its principal place of business in the state of Delaware (the
"Delaware Trustee"). Initially, Delaware Trust Capital Management, Inc. will act
as Delaware Trustee. See "Description of the Guarantee" and "Description of the
Preferred Securities -- Voting Rights."
The Institutional Trustee will hold title to the Junior Subordinated
Debentures for the benefit of the holders of the Trust Securities, and the
Institutional Trustee will have the power to exercise all rights, powers and
privileges under the Indenture (as defined herein) as the holder of the Junior
Subordinated Debentures. In addition, the Institutional Trustee will maintain
exclusive control of a segregated non-interest bearing bank account (the
"Property Account") to hold all payments made in respect of the Junior
Subordinated Debentures for the benefit of the holders of the Trust Securities.
The Institutional Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities out
of funds from the Property Account. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Preferred Securities. Sierra
Pacific, as the direct or indirect holder of all the Common Securities, will
have the right to appoint, remove or replace any Sierra Pacific Trustee and to
increase or decrease the number of Sierra Pacific Trustees. Sierra Pacific will
pay all fees and expenses related to Sierra Pacific Capital and the offering of
the Trust Securities. See "Description of the Junior Subordinated Debentures --
Miscellaneous."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities."
9
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus and should particularly
consider the following matters.
ABSENCE OF PRIOR PUBLIC MARKET
Prior to this offering, there has been no public market for the Preferred
Securities. Although application has been made to list the Preferred Securities
on the NYSE, there can be no assurance that an active public market will develop
for the Preferred Securities or that, if such market develops, the market price
will equal or exceed the public offering price set forth on the cover page of
this Prospectus. The public offering price for the Preferred Securities has been
determined through negotiations between Sierra Pacific and the Underwriters.
Prices for the Preferred Securities will be determined in the marketplace and
may be influenced by many factors, including the liquidity of the market for the
Preferred Securities, investor perceptions of Sierra Pacific and general
industry and economic conditions.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE, AND JUNIOR SUBORDINATED
DEBENTURES
Sierra Pacific's obligations under the Guarantee are subordinate and junior
in right of payment to all liabilities of Sierra Pacific and PARI PASSU with the
most senior preferred stock issued, from time to time, if any, by Sierra
Pacific. The obligations of Sierra Pacific under the Junior Subordinated
Debentures are subordinate and junior in right of payment to all present and
future Senior Indebtedness of Sierra Pacific and PARI PASSU with obligations to
or rights of Sierra Pacific's other general unsecured creditors. No payment of
principal of (including redemption payments, if any), premium, if any, or
interest on the Junior Subordinated Debentures may be made if (i) any Senior
Indebtedness of Sierra Pacific is not paid when due and any applicable grace
period with respect to such default has ended with such default not having been
cured or waived or ceasing to exist, or (ii) the maturity of any Senior
Indebtedness has been accelerated because of a default. As of April 1, 1996,
Senior Indebtedness aggregated approximately $493 million, substantially all of
which consists of first mortgage bonds or debt secured by first mortgage bonds
issued under Sierra Pacific's Indenture of Mortgage dated December 1, 1940, and
which are secured by a first lien on substantially all of Sierra Pacific's real
and personal property. There are no terms in the Preferred Securities, the
Junior Subordinated Debentures or the Guarantee that limit Sierra Pacific's
ability to incur additional indebtedness, including indebtedness that ranks
senior to the Junior Subordinated Debentures and the Guarantee. See "Description
of the Guarantee -- Status of the Guarantee" and "Description of the Junior
Subordinated Debentures" herein.
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act. IBJ Schroder Bank & Trust Company will act as indenture trustee under the
Guarantee for the purposes of compliance with the provisions of the Trust
Indenture Act (the "Guarantee Trustee"). The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Preferred Securities.
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i) any accrued and unpaid distributions that are required to be paid
on the Preferred Securities, to the extent the Trust has funds available
therefor, (ii) the Redemption Price, including all accrued and unpaid
distributions with respect to Preferred Securities called for redemption by the
Trust, to the extent the Trust has funds available therefor, and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Junior Subordinated
Debentures to the holders of Preferred Securities or a redemption of all the
Preferred Securities), the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid distributions on the Preferred Securities to the date
of the payment to the extent the Trust has funds available therefor or (b) the
amount of assets of the Trust remaining available for distribution to holders of
the Preferred Securities in liquidation of the Trust. The holders of a majority
in liquidation amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee or to direct the exercise of any trust or power conferred
upon the Guarantee Trustee under the Guarantee. Notwithstanding the foregoing,
any holder of Preferred Securities may institute a legal proceeding directly
against Sierra Pacific to enforce such holder's right to receive payment under
the Guarantee without first instituting a legal proceeding against the Trust,
10
the Guarantee Trustee or any other person or entity. If Sierra Pacific were to
default on its obligation to pay amounts payable on the Junior Subordinated
Debentures or otherwise, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and, in such event, holders of the Preferred Securities would not be
able to rely upon the Guarantee for payment of such amounts. Instead, holders of
the Preferred Securities would rely on the enforcement (1) by the Institutional
Trustee of its rights as registered holder of the Junior Subordinated Debentures
against Sierra Pacific pursuant to the terms of the Junior Subordinated
Debentures or (2) by such holder of its right against Sierra Pacific to enforce
payments on the Junior Subordinated Debentures. See "Description of the
Guarantee" and "Description of the Junior Subordinated Debentures." The
Declaration provides that each holder of Preferred Securities, by acceptance
thereof, agrees to the provisions of the Guarantee, including the subordination
provisions thereof, and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Institutional Trustee of its rights as a holder of the Junior
Subordinated Debentures against Sierra Pacific. In addition, the holders of a
majority in liquidation amount of the Preferred Securities will have the right
to direct the time, method, and place of conducting any proceeding for any
remedy available to the Institutional Trustee or to direct the exercise of any
trust or power conferred upon the Institutional Trustee under the Declaration,
including the right to direct the Institutional Trustee to exercise the remedies
available to it as a holder of the Junior Subordinated Debentures. If the
Institutional Trustee fails to enforce its rights under the Junior Subordinated
Debentures, a holder of Preferred Securities may institute a legal proceeding
directly against Sierra Pacific to enforce the Institutional Trustee's rights
under the Junior Subordinated Debentures without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of Sierra
Pacific to pay interest or principal on the Junior Subordinated Debentures on
the date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), then a holder of Preferred Securities may
directly institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Junior Subordinated Debentures having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder ( a "Direct Action") on or after the respective due
date specified in the Junior Subordinated Debentures. In connection with such
Direct Action, Sierra Pacific will be subrogated to the rights of such holder of
Preferred Securities under the Declaration to the extent of any payment made by
Sierra Pacific to such holder of Preferred Securities in such Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Debentures. See
"Description of the Preferred Securities -- Enforcement of Certain Rights by
Holders of Preferred Securities" and "-- Declaration Events of Default."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Sierra Pacific has the right under the Indenture (as such term is defined in
"Description of Junior Subordinated Debentures" herein) to defer payments of
interest on the Junior Subordinated Debentures by extending the interest payment
period at any time, and from time to time, on the Junior Subordinated
Debentures. As a consequence of such an extension, quarterly distributions on
the Preferred Securities would be deferred (but despite such deferral would
continue to accrue with interest thereon compounded quarterly to the extent
permitted by applicable law) by the Trust during any such extended interest
payment period. Such right to extend the interest payment period for the Junior
Subordinated Debentures is limited to a period not exceeding 20 consecutive
quarters. In the event that Sierra Pacific exercises this right to defer
interest payments, then (a) Sierra Pacific shall not declare or pay dividends
on, or make a distribution with respect to, or redeem, purchase or acquire, or
make a liquidation payment with respect to, any of its capital stock (other than
(i) purchases or acquisitions of shares of Sierra Pacific Common Stock in
connection with the satisfaction by Sierra Pacific of its obligations under any
employee benefit plans, (ii) as a result of a reclassification of Sierra Pacific
capital stock or the exchange or conversion of one class or series of Sierra
Pacific's capital stock for another class or series of Sierra Pacific capital
stock or (iii) the purchase of fractional interests in shares of Sierra
Pacific's capital stock pursuant to the conversion or exchange
11
provisions of such Sierra Pacific capital stock or the security being converted
or exchanged), (b) Sierra Pacific shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by Sierra Pacific that rank PARI PASSU with or junior to the
Junior Subordinated Debentures and (c) Sierra Pacific shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee). Prior to the termination of any such extension period, Sierra
Pacific may further extend the interest payment period; PROVIDED, that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity of
the Junior Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all amounts then due, Sierra Pacific may commence a new
Extension Period, subject to the above requirements. See "Description of the
Preferred Securities -- Distributions" and "Description of the Junior
Subordinated Debentures -- Option to Extend Interest Payment Period."
Should Sierra Pacific exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities will
continue to accrue income (as original issue discount ("OID")) in respect of the
deferred interest allocable to its Preferred Securities for United States
federal income tax purposes, which will be allocated but not distributed, to
holders of record of Preferred Securities. As a result, each such holder of
Preferred Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash and will not receive the cash from
Sierra Pacific Capital related to such income if such holder disposes of its
Preferred Securities prior to the record date for the date on which
distributions of such amounts are made. Sierra Pacific has no current intention
of exercising its right to defer payments of interest by extending the interest
payment period on the Junior Subordinated Debentures. However, should Sierra
Pacific determine to exercise such right in the future, the market price of the
Preferred Securities is likely to be affected. A holder that disposes of its
Preferred Securities during an Extension Period, therefore, might not receive
the same return on its investment as a holder that continues to hold its
Preferred Securities. In addition, as a result of the existence of Sierra
Pacific's right to defer interest payments, the market price of the Preferred
Securities (which represent an undivided beneficial interest in the Junior
Subordinated Debentures) may be more volatile than other securities on which OID
accrues that do not have such rights. See "United States Federal Income Taxation
- -- Original Issue Discount."
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the "Proposed Legislation") if such debt obligations have a maximum term
in excess of twenty years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. On March 29, 1996, the Senate Finance
Committee Chairman and the House Ways and Means Committee Chairman issued a
joint statement (the "Joint Statement") indicating their intent that certain
legislative proposals initiated by the Clinton administration, including the
Proposed Legislation, that may be adopted by either of the tax-writing
committees of Congress would have an effective date that is no earlier than the
date of "appropriate Congressional action." Based upon the Joint Statement, it
is expected that if the Proposed Legislation were to be enacted, such
legislation would not apply to the Junior Subordinated Debentures. There can be
no assurances, however, that the effective date guidance contained in the Joint
Statement will be incorporated into the Proposed Legislation, if enacted, or
that other legislation enacted after the date hereof will not otherwise
adversely affect the ability of Sierra Pacific to deduct the interest payable on
the Junior Subordinated Debentures. Accordingly, there can be no assurance that
a Tax Event will not occur. See "Description of the Preferred Securities -- Tax
Event Redemption or Distribution."
TAX EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Tax Event, the Trust shall be dissolved, except in
the limited circumstance described below, with the result that the Junior
Subordinated Debentures would be distributed to the holders of the Trust
Securities in connection with the liquidation of the Trust. In certain
circumstances, Sierra Pacific shall have the right to redeem the Junior
Subordinated Debentures, in whole or in part, in lieu of a distribution of the
Junior Subordinated Debentures by the Trust; in which event the Trust will
redeem
12
the Trust Securities on a PRO RATA basis to the same extent as the Junior
Subordinated Debentures are redeemed by Sierra Pacific. See "Description of the
Preferred Securities -- Tax Event Redemption or Distribution."
Under current United States federal income tax law, a distribution of Junior
Subordinated Debentures upon the dissolution of the Trust would not be a taxable
event to holders of the Preferred Securities. Upon occurrence of a Tax Event,
however, a dissolution of the Trust in which holders of the Preferred Securities
receive cash would be a taxable event to such holders. See "United States
Federal Income Taxation -- Receipt of Junior Subordinated Debentures or Cash
Upon Liquidation of Sierra Pacific Power Capital I."
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a dissolution or liquidation of the Trust
were to occur. Accordingly, the Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Junior Subordinated Debentures that a holder of Preferred Securities may
receive on dissolution and liquidation of the Trust, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby. Because holders of Preferred Securities may receive Junior Subordinated
Debentures upon the occurrence of a Tax Event, prospective purchasers of
Preferred Securities are also making an investment decision with regard to the
Junior Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein. See "Description
of the Preferred Securities -- Tax Event Redemption or Distribution" and
"Description of the Junior Subordinated Debentures -- General."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, Sierra Pacific Trustees, which voting rights are vested
exclusively in the holder of the Common Securities. See "Description of
Preferred Securities -- Voting Rights."
TRADING PRICE
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who disposes of his Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Junior Subordinated Debentures
through the date of disposition in income as ordinary income (i.e., OID), and to
add such amount to his adjusted tax basis in his PRO RATA share of the
underlying Junior Subordinated Debentures deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include,
in the form of OID, all accrued but unpaid interest), a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
See "United States Federal Income Taxation -- Original Issue Discount" and
"Sales of Preferred Securities."
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in Sierra Pacific's
consolidated financial statements filed under the Exchange Act, with the
Preferred Securities shown as a separate line item on the balance sheet entitled
"Company-obligated mandatorily-redeemable preferred securities of subsidiary
Trust holding solely junior subordinated debentures". In addition, such
consolidated financial statements of Sierra Pacific will include footnote
disclosure that the sole assets of the Trust are the Junior Subordinated
Debentures, specifying the interest rate, principal amount and maturity date
thereof and whether treatment under Staff Accounting Bulletin 53 is sought.
Finally, upon occasions when audited financial statements are required to be
filed under the Exchange Act, Sierra Pacific will include, in a footnote to its
audited consolidated financial statements, disclosure that (i) the Trust is
wholly-owned, (ii) the sole assets of the Trust are the Junior Subordinated
Debentures (specifying the interest rate, principal amount and maturity date),
and (iii) the back-up undertakings, in the aggregate, constitute a full and
unconditional guarantee by Sierra Pacific of the Trust's obligations under the
Preferred Securities.
13
USEAPPLICATION OF PROCEEDS
The Trust will use all proceeds received from the sale of Preferred
Securities to purchase Junior Subordinated Debentures from Sierra Pacific.
Sierra Pacific intends to use the net proceeds from the sale of the Junior
Subordinated Debentures to replace funds used to redeem $20,400,000 in principal
amount of 8.24% Sierra Pacific Power Company Series G Preferred Stock and to
reduce short-term debt. As of March 31, 1996, the total outstanding short-term
debt of Sierra Pacific was $50,000,000 with an average interest rate of 5.73%
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Institutional Trustee, IBJ Schroder Bank & Trust Company,
will act as indenture trustee for the Preferred Securities under the Declaration
for purposes of compliance with the provisions of the Trust Indenture Act. The
terms of the Preferred Securities will include those stated in the Declaration
and those made part of the Declaration by the Trust Indenture Act and will
mirror the terms of the Junior Subordinated Debentures held by the Trust as
described herein. See "Description of the Junior Subordinated Debentures." All
PreferredDebt Securities offered hereby will be
fully and unconditionally guaranteed
by Sierra Pacific. See "Descriptionused for general corporate purposes including, but not limited to, the
acquisition of Guarantee."property, the construction, completion, extension or improvement
of facilities, or the refinancing or discharge or refunding of obligations,
including short-term borrowings. Pending the uses described above, the proceeds
from the sale of the Debt Securities offered hereby will be invested in short-
term investments.
RATIOS OF EARNINGS TO FIXED CHARGES
The following summarytable sets forth the ratios of earnings to fixed charges of the
material terms and provisionsCompany for each of the Preferredyears 1991 through 1995 and the twelve months ended
September 30, 1996.
Year Ended December 31,
------------------------------------------- Twelve Months
Ended
September 30,
1991 1992 1993 1994 1995 1996
------------------------------------------- --------------
2.62 2.81 2.94 3.09 3.54 3.90
For the purpose of computing the Company's ratios of earnings to fixed
charges, "earnings" represent the aggregate of net income, taxes on income and
fixed charges. The Company's earnings used in the calculation of the ratios of
earnings to fixed charges include the allowance for funds used during
construction. "Fixed charges" represent interest on short-term and long-term
debt, the interest portion on capital leases and amortization of bond premiums,
discounts and expenses, excluding amortization of the net gain or loss on
reacquired mortgage bonds.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities does not purport towill be completeissued under the Collateral Trust Indenture,
dated as of June 1, 1992, as supplemented in connection with the issuance and
is subject to,sale of the Debt Securities (the "Indenture"), between the Company and qualifiedBankers
Trust Company, in its entirety by reference to, the
Declaration, a copy ofcapacity as Trustee, which Indenture is filed as an exhibit to the
Registration Statement of which this Prospectus is a part,part. The statements under
this caption are summaries of certain provisions of the Trust ActIndenture, do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the Trustprovisions of the Indenture, Act.including the
definitions therein of certain terms. Wherever particular sections of the
Indenture or terms that are defined in the Indenture are referred to herein or
in a Prospectus Supplement, it is intended that such sections or defined terms
shall be incorporated by reference herein or therein, as the case may be.
The term "Securities", as used under this caption, refers to all Securities
issued under the Indenture and includes the Debt Securities. Unless the context
otherwise requires, the term "series or tranche" as used in this Prospectus
means, with respect to each series of Securities, such series or, if one or more
tranches have been issued within such series, a tranche.
4
GENERAL
The Declaration authorizesDebt Securities may be issued from time to time in one or more series
and in one or more tranches. The particular terms of each series or tranche of
Debt Securities will be described in one or more Prospectus Supplements, or a
pricing supplement thereto, relating to such series or tranche.
The Indenture does not limit the Regular Trusteesaggregate amount of Securities that may be
issued thereunder, and Securities may be issued thereunder from time to issue on behalftime in
separate series up to the aggregate amount from time to time authorized by the
Company for each series. For a description of the Trustsecurity for the Trust Securities,
which represent undivided beneficial interests insee "Security; Pledge of Mortgage Bonds" below and "Description of Mortgage
Bonds".
The applicable Prospectus Supplement, or a pricing supplement thereto, will
describe the assets of the Trust. In connection with the issuance of Preferred
Securities, the Trust will issue one series of Trust Common Securities having
such terms including distributions, redemption, voting and liquidation rights or
such restrictions as shall be set forth therein. Thefollowing terms of the CommonOffered Securities: (1) the title of the
Offered Securities; (2) any limit on the aggregate principal amount of the
Offered Securities; (3) the date or dates on which the Offered Securities will
mature; (4) the rate or rates at which the Offered Securities will bear
interest, if any, or the formula pursuant to which such rate or rates will be
determined, and the date or dates from which any such interest will accrue;
provided that in no event shall the interest rate (whether fixed or variable) on
the Offered Securities exceed the 9% interest rate on the underlying Mortgage
Bonds relating thereto; (5) the Interest Payment Dates on which any such
interest on the Offered Securities will be substantially identicalpayable and the Regular Record Date
for any interest payable on any Offered Securities on any Interest Payment Date;
(6) the person to whom any interest on any Registered Security of the series
will be payable if other than the person in whose name such Registered Security
is registered at the close of business on the Regular Record Date for such
interest as described under "Payment and Paying Agents" below; (7) any mandatory
or optional sinking fund, redemption or analogous provisions; (8) each office or
agency where, subject to the terms of the Preferred
SecuritiesIndenture as described below under
"Payment and Paying Agents", the Common Securities will rank PARI PASSU,principal of (and premium, if any) and payments will be
made thereon PRO RATA, with the Preferred Securities except that, upon an event
of default under the Declaration, the rights of the holders of the Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. Except in certain limited circumstances, the Common
Securities will also carry the right to vote to appoint, remove or replace any
of the Sierra Pacific Trustees of Sierra Pacific Capital. All of the Common
Securities of Sierra Pacific Capital will be directly or indirectly owned by
Sierra Pacific.
The Declaration does not permit the issuance by the Trust of any securities
other than the Trust Securities or the incurrence of any indebtedness by the
Trust. Pursuant to the Declaration, the Institutional Trustee will own the
Junior Subordinated Debentures purchased by the Trust for the benefit of the
holders of the Trust Securities. The payment of distributions out of money held
by the Trust, and payments upon redemption of the Preferred Securities or
liquidation of the Trust, are fully and unconditionally guaranteed by Sierra
Pacific. See "Description of the Guarantee." The Guarantee will be held by IBJ
Schroder Bank & Trust Company, the Guarantee Trustee, for the benefit of the
holders of the Preferred Securities. The Guarantee does not cover payment of
distributions when Sierra Pacific Capital does not have sufficient available
funds to pay such distributions. In such event, the remedy of a holder of
Preferred Securities is to vote to direct the Institutional Trustee to enforce
the Institutional Trustee's rights under the Junior Subordinated Debentures
except in the limited circumstances in which the holder may take Direct Action.
See "Description of the Preferred Securities -- Enforcement of Certain Rights by
Holders of Preferred Securities," "-- Voting Rights" and "-- Declaration Events
of Default."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of % of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon at
the rate per annum of % thereof compounded quarterly (to the extent permitted
14
by applicable law). The term "distribution" as used herein includes any such
interest payable unless otherwise stated. The amount of distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months.
Distributions on the Preferred Securities will be cumulative, will accrue
from June , 1996, and will be payable quarterly in arrears on March 31, June
30, September 30 and December 31 of each year, commencing September 30, 1996,
when, as and if available for payment, distributions will be made by the
Institutional Trustee, except as otherwise described below. Interest payable in
the first payment period will be computed on the basis of days.
Sierra Pacific has the right under the Indenture to defer payments of interest
on the Junior Subordinated Debentures by extending the interest payment
period from time to time on the Junior Subordinated Debentures, which, if
exercised, would defer quarterly distributions on the Preferred Securities
(though such distributions would continue to accrue with interest since interest
would continue to accrue on the Junior Subordinated Debentures) during any such
extended interest payment period. Such right to extend the interest payment
period for the Junior Subordinated Debentures is limited to a period not
exceeding 20 consecutive quarters provided that such deferral period may not
extend beyond the maturity of the Junior Subordinated Debentures. In the event
that Sierra Pacific exercises this right, then (a) Sierra Pacific shall not
declare or pay dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock (other than (i) purchases or acquisitions of shares of Sierra
Pacific Common Stock in connection with the satisfaction by Sierra Pacific of
its obligations under any employee benefit plans, (ii) as a result of a
reclassification of Sierra Pacific capital stock or the exchange or conversion
of one class or series of Sierra Pacific's capital stock for another class or
series of Sierra Pacific capital stock or (iii) the purchase of fractional
interests in shares of Sierra Pacific's capital stock pursuant to the conversion
or exchange provisions of such Sierra Pacific capital stock or the security
being converted or exchanged) or make any guarantee payments with respect to the
foregoing, (b) Sierra Pacific shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt securities issued
by Sierra Pacific that rank PARI PASSU with or junior to such Junior
Subordinated Debentures and (c) Sierra Pacific shall not make any guarantee
payments with respect to the foregoing (other than pursuant to the Guarantee).
Prior to the termination of any such Extension Period, Sierra Pacific may
further extend the interest payment period; PROVIDED, that such Extension
Period, together with all such previous and further extensions thereof, may not
exceed 20 consecutive quarters or extend beyond the maturity of the Junior
Subordinated Debentures. Upon the termination of any Extension Period and the
payment of all amounts then due, Sierra Pacific may select a new Extension
Period, subject to the above requirements. See "Description of the Junior
Subordinated Debentures -- Interest" and "-- Option to Extend Interest Payment
Period." If distributions are deferred, the deferred distributions and accrued
interest thereon shall be paid to holders of record of the Preferred Securities
as they appear on the books and records of Sierra Pacific Capital on the record
date next following the termination of such deferral period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from Sierra Pacific on the Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures." The payment of
distributions out of moneys held by the Trust is fully and unconditionally
guaranteed by Sierra Pacific. See "Description of the Guarantee."
Distributions on the PreferredOffered Securities will be payable and each office or agency where,
subject to the holders
thereof as they appear on the books and recordsterms of the Trust onIndenture as described below under "Form, Exchange,
Registration and Transfer", the relevant
record dates,Offered Securities may be presented for
registration of transfer or exchange; (9) the date, if any, after which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day (as defined below) prior to the relevant
payment dates. Such distributions will be paid through the Institutional Trustee
who will hold amounts received in respect of the Junior Subordinated Debentures
in the Property Account for the benefit of the holders of the Trust Securities.
Subject to any applicable laws and regulations and the
provisions ofprice or prices at which, the Declaration, each such payment will be made as described under "Book-Entry Only
Issuance -- The Depository Trust Company" below. In the event that the PreferredOffered Securities do not continue to remain in book-entry only form, the Regular
Trustees shall have the right to select relevant record dates, which shall be
more than one Business
15
Day prior to the relevant payment dates. In the event that any date on which
distributions are to be made on the Preferred Securities is not a Business Day,
then payment of the distributions payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such record date. A "Business Day" shall mean any day other than Saturday,
Sunday or any other day on which banking institutions in New York City (in the
State of New York) are permitted or required by any applicable law to close.
MANDATORY REDEMPTION
The Junior Subordinated Debentures will mature on , 2036, and may be redeemed, in whole or in
part at any time on or after , 2001, or
at any time in certain circumstances upon the occurrence of a Tax Event. Upon
the repaymentoption of the Junior Subordinated Debentures, whether at maturityCompany, or uponpursuant to mandatory redemption
provisions, and the proceeds fromother detailed terms and provisions of any such repaymentoptional or
payment shall simultaneouslymandatory redemption provisions; (10) the denominations in which any Offered
Securities will be appliedissuable, if other than denominations of $1,000 and any
integral multiple thereof; (11) any index or indices used to redeem Trust Securities having an aggregate liquidationdetermine the
amount equal
toof payments of principal of (and premium, if any) and interest on the
aggregateOffered Securities; (12) the portion of the principal amount of the Junior Subordinated Debentures so
repaid or redeemed atOffered
Securities, if other than the Redemption Price; PROVIDED, that holdersentire principal amount thereof, payable upon
acceleration of Trust
Securitiesmaturity thereof; (13) the Person who shall be given not less than 30 nor more than 60 days' noticethe Security
Registrar for Offered Securities; (14) any deletions or modifications of such
redemption. See "Descriptionor
additions to the Events of Default or covenants set forth in the Indenture;
(15) any Paying Agent or Authenticating Agent; (16) whether the Securities of
the Junior Subordinated Debentures -- Optional
Redemption." Inseries shall be issued in whole or in part in the event that fewer than allform of one or more Global
Security or book-entry security or securities and, if so, the depositary for
such Global Security or book-entry security or securities; (17) the Mortgage
Bonds (or additional Mortgage Bonds) granted to secure the Offered Securities of
the outstanding Preferredseries or tranche, and the designation of the portion of the Mortgage Bonds
which shall be Designated Mortgage Bonds (as defined below); (18) any defeasance
provisions applicable to
5
the Offered Securities areof the series or tranche; and (19) any other terms of the
series or tranche (which terms shall not be inconsistent with the provisions of
the Indenture). (Section 301)
Securities may be issued as Original Issue Discount Securities to be redeemed, the Preferred Securities will be redeemed PRO
RATA as described under "Book-Entry Only Issuance -- The Depository Trust
Company" below.
TAX EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the Regular Trustee shall have received an opinion ofsold
at a nationally recognized independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that on or after the date of this
Prospectus, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, or (b) any amendment to, or change in, an interpretation or application
of any such laws or regulations by any legislative body, court, governmental
agency or regulatory authority which amendment or change is enacted,
promulgated, issued or announced or which interpretation or pronouncement is
issued or announced or which action is taken, in each case on or after the date
of this Prospectus, there is more than an insubstantial risk that (i) Sierra
Pacific Capital is, or will be within 90 days of the date thereof, subject todiscount below their principal amount. Special United States federal
income tax with respectconsiderations applicable to interest accruedSecurities issued at an original issue
discount, including Original Issue Discount Securities, are described under
"Certain United States Federal Income Tax Consequences - Original Issue
Discount". The applicable Prospectus Supplement, or received ona pricing supplement
thereto, will provide additional information regarding the Junior Subordinated Debentures, (ii)original issue
discount aspects of such Securities.
SECURITY; PLEDGE OF MORTGAGE BONDS
GENERAL. In order to secure by the Trust is, or will be within 90 days
thereof, subject to more than a DE MINIMIS amount of other taxes, duties or
other governmental charges or (iii) interest payable by Sierra Pacific to the
Trust on the Junior Subordinated Debentures is not, or within 90 dayslien of the date thereof will not be, deductible, in whole or in part by Sierra Pacific for
United States federal income tax purposes.
If, at any time, a Tax Event (as defined above) shall occur and be
continuing, the Trust shall, except in the limited circumstances described
below, be dissolved with the result that the Junior Subordinated Debentures with
an aggregate principal amount equal to the aggregate stated liquidation amount
of, with an interest rate identical to the distribution rate of, and accrued and
unpaid interest equal to accrued and unpaid distributions on, the Trust
Securities, would be distributed to the holders of the Trust Securities in
liquidation of such holders' interests in the Trust on a pro rata basis within
90 days following the occurrence of such Tax Event; PROVIDED, that such
dissolution and distribution shall be conditioned on (i) the Regular Trustee's
receipt of an opinion of nationally recognized independent tax counsel
experienced in such matters (a "No Recognition Opinion"), which opinion may rely
on published revenue rulings of the Internal Revenue Service, to the effect that
the holders of the Trust Securities will not recognize any gain or loss for
United States federal income tax purposes as a result of such dissolution and
distribution of Junior Subordinated Debentures and (ii) Sierra Pacific being
unable to avoid such Tax Event within such 90 day period by taking some
ministerial action or pursuing some other reasonable measure that will have no
adverse effect on the Trust, Sierra Pacific or the holders of the Trust
Securities. Furthermore, if after receipt of a Dissolution Tax Opinion by the
Regular Trustee (i) Sierra Pacific has received an opinion (a "Redemption Tax
Opinion") of nationally recognized independent tax counsel experienced in such
matters that, as a
16
result of a Tax Event, there is more than an insubstantial risk that Sierra
Pacific would be precluded from deducting the interest on the Junior
Subordinated Debentures for United States federal income tax purposes, even
after the Junior Subordinated Debentures were distributed to the holders of
Trust Securities in liquidation of such holders' interests in Sierra Pacific
Capital as described above, or (ii) the Regular Trustee shall have been informed
by such tax counsel that it cannot deliver a No Recognition Opinion to the
Trust, Sierra Pacific shall have the right, upon not less than 30 nor more than
60 days' notice, to redeem the Junior Subordinated Debentures, in whole or in
part, for cash within 90 days following the occurrence of such Tax Event, and,
following such redemption, Trust Securities with an aggregate liquidation amount
equal to the aggregate principal amount of the Junior Subordinated Debentures so
redeemed shall be redeemed by the Trust at the Redemption Price on a PRO RATA
basis; PROVIDED, HOWEVER, that if at the time there is available to Sierra
Pacific or the Trust the opportunity to eliminate, within such 90 day period,
the Tax Event by taking some ministerial action, such as filing a form or making
an election or pursuing some other similar reasonable measure that has no
adverse effect on the Trust, Sierra Pacific or the holders of the Trust
Securities, Sierra Pacific or the Trust will pursue such measure in lieu of
redemption.
If the Junior Subordinated Debentures are distributed to the holders of the
Preferred Securities, Sierra Pacific will use its best efforts to cause the
Junior Subordinated Debentures to be listed on the NYSE or on such other
exchange as the Preferred Securities are then listed.
After the date for any distribution of Junior Subordinated Debentures upon
dissolution of the Trust, (i) the Preferred Securities will no longer be deemed
to be outstanding, (ii) the Depositary (as defined herein) or its nominee, as
the record holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Junior Subordinated Debentures to
be delivered upon such distribution, and (iii) any certificates representing
Preferred Securities not held by the Depositary or its nominee will be deemed to
represent Junior Subordinated Debentures having an aggregate principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal to
accrued and unpaid distributions on such Preferred Securities until such
certificates are presented to Sierra Pacific or its agent for transfer or
reissuance.
There can be no assurance as to the market prices for either the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for the Preferred Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Junior Subordinated Debentures that an investor may receive if a
dissolution and liquidation of the Trust were to occur, may trade at a discount
to the price that the investor paid to purchase the Preferred Securities offered
hereby.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of DefaultMortgage Indenture (as
defined below) occurs and is
continuing, then the holders of Preferred Securitiesobligation of the Trust would rely on
the enforcement by the Institutional Trustee of its rights as a holder of the
Junior Subordinated Debentures against Sierra Pacific. In addition, the holders
of a majority in liquidation amount of the Preferred Securities of the Trust
will have the rightCompany to direct the time, method and place of conducting any
proceeding for any remedy available to the Institutional Trustee or to direct
the exercise of any trust or power conferred upon the Institutional Trustee
under the Declaration, including the right to direct the Institutional Trustee
to exercise the remedies available to it as a holder of the Junior Subordinated
Debentures. If the Institutional Trustee fails to enforce its rights under the
Junior Subordinated Debentures, a holder of Preferred Securities of the Trust
may institute a legal proceeding directly against Sierra Pacific to enforce the
Institutional Trustee's rights under the Junior Subordinated Debentures without
first instituting any legal proceeding against the Institutional Trustee or any
other person or entity. Notwithstanding the foregoing, if an Event of Default
under the Declaration has occurred and is continuing and such event is
attributable to the failure of Sierra Pacific to pay interest or principal on
the Junior Subordinated Debentures on the date such interest or principal is
otherwise payable (or in the case of redemption, on the redemption date), then a
holder of Preferred Securities of the Trust may directly institute a proceeding
for enforcement of payment to such holder of the principal of or interest on the
Junior Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the
17
Preferred Securities of such holder (a "Direct Action") on or after the
respective due date specified in the Junior Subordinated Debentures. In
connection with such Direct Action, Sierra Pacific will be subrogated to the
rights of such holder of Preferred Securities under the Declaration to the
extent of any payment made by Sierra Pacific to such holder of Preferred
Securities in such Direct Action.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed the Proposed Legislation
which, among other things, would generally deny corporate issuers a deduction
for interest in respect of certain debt obligations issued on or after December
7, 1995(and
premium, if such debt obligations have a maximum term in excess of twenty years
and are not shown as indebtedness on the issuer's applicable consolidated
balance sheet. On March 29, 1996, the Senate Finance Committee Chairman and the
House Ways and Means Committee Chairman issued the Joint Statement indicating
their intent that certain legislative proposals initiated by the Clinton
administration, including the Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress would have an effective date
that is no earlier than the date of "appropriate Congressional action." Based
upon the Joint Statement, it is expected that if the Proposed Legislation were
to be enacted, such legislation would not apply to the Junior Subordinated
Debentures. There can be no assurances, however, that the effective date
guidance contained in the Joint Statement will be incorporated into the Proposed
Legislation, if enacted, or that other legislation enacted after the date hereof
will not otherwise adversely affect the ability of Sierra Pacific to deduct the
interest payable on the Junior Subordinated Debentures. Accordingly, there can
be no assurance that a Tax Event will not occur. See "-- Tax Event Redemption or
Distribution."
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), then, by 12:00 noon, New York City time, on
the redemption date, provided that Sierra Pacific has paid to the Institutional
Trustee a sufficient amount of cash in connection with the related redemption or
maturity of the Junior Subordinated Debentures, the Trust will irrevocably
deposit with the Depositary funds sufficient to pay the applicable Redemption
Price and will give the Depositary irrevocable instructions and authority to pay
the Redemption Price to the holders of the Preferred Securities. See "Book-Entry
Only Issuance -- The Depository Trust Company." If notice of redemption shall
have been given and funds deposited as required, then, immediately prior to the
close of business on the date of such deposit, distributions will cease to
accrue and all rights of holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price but without interest on such
Redemption Price. In the event that any date fixed for redemption of Preferred
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business Day
(without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Preferred Securities is improperly withheld or
refused and not paid either by Sierra Pacific Capital, or by Sierra Pacific
pursuant to the Guarantee, distributions on such Preferred Securities will
continue to accrue at the then applicable rate from the original redemption date
to the date of payment, in which case the actual payment date will be considered
the date fixed for redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed PRO RATA as described
below under "Book-Entry Only Issuance -- The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), Sierra Pacific or its subsidiaries may
at any time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
18
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the Preferred Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $25 per
Preferred Security plus accrued and unpaid distributions thereon to the date of
payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Junior Subordinated Debentures in an aggregate stated principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and accrued and unpaid interest
equal to accrued and unpaid distributions on, the Preferred Securities have been
distributed on a PRO RATA basis to the holders of the Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because Sierra Pacific Capital has insufficient assets available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Preferred Securities shall be paid on a PRO RATA
basis. The holders of the Common Securities will be entitled to receive
distributions upon any such dissolution PRO RATA with the holders of the
Preferred Securities, except that if a Declaration Event of Default has occurred
and is continuing, the Preferred Securities shall have a preference over the
Common Securities with regard to such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on April 23,
2051, the expiration of the term of the Trust, (ii) upon the bankruptcy of
Sierra Pacific, (iii) upon the filing of a certificate of dissolution or its
equivalent with respect to Sierra Pacific, the filing of a certificate of
cancellation with respect to the Trust after obtaining the consent of the
holders of at least a majority in liquidation amount of Trust Securities
affected thereby voting together as a single class to file such certificate of
cancellation, or the revocation of the charter of Sierra Pacific and the
expiration of 90 days after the date of revocation without a reinstatement
thereof, (iv) upon the distribution of Junior Subordinated Debentures upon the
occurrence of a Tax Event, (v) upon the entry of a decree of a judicial
dissolution of the holder of the Common Securities, Sierra Pacific or the Trust,
or (vi) upon the redemption of all the Trust Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); PROVIDED, that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Preferred Securities have been so cured, waived, or
otherwise eliminated, the Institutional Trustee will be deemed to be acting
solely on behalf of the holders of the Preferred Securities and only the holders
of the Preferred Securities will have the right to direct the Institutional
Trustee with respect to certain matters under the Declaration, and therefore the
Indenture. If the Institutional Trustee fails to enforce its rights under the
Junior Subordinated Debentures after a holder of Preferred Securities has made a
written request, such holder of record of Preferred Securities may institute a
legal proceeding against Sierra Pacific to enforce the Institutional Trustee's
rights under the Junior Subordinated Debentures without first instituting any
legal proceeding against the Institutional Trustee or any other person or
entity. Notwithstanding the foregoing, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of
Sierra Pacific to pay interest or principal on the Junior Subordinated
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, the redemption date), Sierra Pacific acknowledges that
then a holder of Preferred Securities may institute a Direct Action for payment
on or after the respective due date specified in the Junior Subordinated
Debentures. In connection with such Direct Action, Sierra Pacific will be
subrogated to the rights of such holder of Preferred Securities under the
Declaration to the extent of any payment made by Sierra Pacific to such holder
of Preferred Securities in such Direct Action. The holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Junior Subordinated Debentures.
19
Upon the occurrence of a Declaration Event of Default, the Institutional
Trustee as the sole holder of the Junior Subordinated Debentures will have the
right under the Indenture to declare the principal ofany) and interest on the Junior
Subordinated Debentures to be immediately due and payable. Sierra Pacific and
Sierra Pacific Capital are each required to file annually with the Institutional
Trustee an officer's certificate as to its compliance with all conditions and
covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "Descriptionany series or tranche of the Guarantee -- ModificationSecurities, the
Company will issue, pledge and deliver to the Trustee, in trust for the ratable
benefit of the Guarantee;
Assignment" herein and as otherwise required by law and the Declaration, the
holders of the Preferred Securities will have no voting rights.
Subject to the requirement of the Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee,
or direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration including the right to direct the Institutional
Trustee, as holder of the Junior Subordinated Debentures, to (i) exercise the
remedies available to it under the Indenture as a holder of the Junior
Subordinated Debentures, (ii) waive any past Indenture Event of Default that is
waivable under Section 6.6 of the Indenture or (iii) exercise any right to
rescind or annul a declaration that the principal of all the Junior Subordinated
Debentures shall be due and payable; PROVIDED, HOWEVER, that, where a consent or
action under the Indenture would require the consent or act of holders of more
than a majority in principal amount of the Junior Subordinated Debentures (a
"Super-Majority") affected thereby, only the holders of at least such
Super-Majority in aggregate liquidation amount of the Preferred Securities may
direct the Institutional Trustee to give such consent or take such action. If
the Institutional Trustee fails to enforce its rights under the Junior
Subordinated Debentures, after a record holder has made a written request, such
holder of record of Preferred Securities may institute a legal proceeding
directly against Sierra Pacific to enforce the Institutional Trustee's rights
under the Junior Subordinated Debentures without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of Sierra
Pacific to pay interest or principal on the Junior Subordinated Debentures on
the date such interest or principal is otherwise payable (or in the case of
redemption on the redemption date), then a holder of Preferred Securities may
directly institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Junior Subordinated Debentures having a
principal amount equal to the aggregate liquidation amount of the Preferred
SecuritiesHolders of such holder onseries or after the respective due date specified in the
Junior Subordinated Debentures. The Institutional Trustee shall notify all
holders of the Preferred Securities of any notice of default received from the
Debt Trustee with respect to the Junior Subordinated Debentures. Such notice
shall state that such Indenture Event of Default also constitutes a Declaration
Event of Default. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Institutional Trustee shall not take
any of the actions described in clauses (i), (ii) or (iii) above unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such action, Sierra Pacific Capital will not fail to be
classified as a grantor trust for United States federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Junior Subordinated Debentures, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the direction of the holders of the Trust Securities with
respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a majority
in liquidation amount of the Trust Securities voting together as a single class;
PROVIDED, HOWEVER, that where a consent under the Indenture would require the
consent of a Super-Majority, the Institutional Trustee may only give such
consent at the direction of the holders of at least the proportion in
liquidation amount of the Trust Securitiestranches, Mortgage Bonds, which
the relevant Super-Majority
represents of the aggregate principal amount of the Junior Subordinated
Debentures outstanding. The Institutional Trustee shall be under no obligation
to take any such action in accordance with the
20
directions of the holders of the Trust Securities unless the Institutional
Trustee has obtained an opinion of tax counsel to the affect that for the
purposes of United States federal income tax Sierra Pacific Capital will not be
classified as other than a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for such
purpose, at a meeting of all of the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Preferred Securities will be required for Sierra Pacific
Capital to redeem and cancel Preferred Securities or distribute Junior
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by Sierra Pacific or any entity directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, Sierra Pacific, shall not be entitled to vote or consent and
shall, for purposes of such vote or consent, be treated as if such Preferred
Securities were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See " -- Book-Entry Only Issuance -- The
Depository Trust Company" below.
Holders of the Preferred Securities will have no rights to appoint or remove
the Sierra Pacific Trustees, who may be appointed, removed or replaced solely by
Sierra Pacific as the indirect or direct holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Institutional Trustee), provided
that, if any proposed amendment provides for, or the Regular Trustees otherwise
propose to effect, (i) any action that would adversely affect the powers,
preferences or special rights of the Trust Securities, whether by way of
amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or
termination of Sierra Pacific Capital other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected thereby;
PROVIDED, that, if any amendment or proposal referred to in clause (i) above
would adversely affect only the Preferred Securities or the Common Securities,
then only the affected class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of a majority in liquidation amount of such class of Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause Sierra Pacific
Capital to be classified for purposes of United States federal income taxation
as other than a grantor trust, (ii) reduce or otherwise adversely affect the
powers of the Institutional Trustee or (iii) cause Sierra Pacific Capital to be
deemed an "investment company" which is required to be registered under the
Investment Company Act of 1940, as amended (the "1940 Act").
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
Sierra Pacific Capital may not consolidate, amalgamate, merge with or into,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other
21
body, except as described below. Sierra Pacific Capital may, with the consent of
the Regular Trustees and without the consent of the holders of the Trust
Securities, the Institutional Trustee or the Delaware Trustee consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State of the United States; PROVIDED, that (i) if the
Trust is not the survivor such successor entity either (x) expressly assumes all
of the obligations of Sierra Pacific Capital under the Trust Securities or (y)
substitutes for the Preferred Securities other securities having substantially
the same terms as the Trust Securities (the "Successor Securities"), so long as
the Successor Securities rank the same as the Trust Securities rank with respect
to distributions and payments upon liquidation, redemption and otherwise, (ii)
Sierra Pacific expressly acknowledges a trustee of such successor entity
possessing the same powers and duties as the Institutional Trustee as the holder
of the Junior Subordinated Debentures, (iii) the Preferred Securities or any
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or with another
organization on which the Preferred Securities are then listed or quoted, (iv)
such merger, consolidation, amalgamation or replacement does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, (v) such
merger, consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new entity), (vi) such
successor entity has a purpose identical to that of Sierra Pacific Capital,
(vii) prior to such merger, consolidation, amalgamation or replacement, Sierra
Pacific has received an opinion of a nationally recognized independent counsel
to Sierra Pacific Capital experienced in such matters to the effect that (A)
such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect (other
than with respect to any dilution of the holders' interest in the new entity),
and (B) following such merger, consolidation, amalgamation or replacement,
neither Sierra Pacific Capital nor such successor entity will be required to
register as an investment company under the 1940 Act and (viii) Sierra Pacific
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee and the Common
Securities Guarantee. Notwithstanding the foregoing, Sierra Pacific Capital
shall not, except with the consent of holders of 100% in liquidation amount of
the Trust Securities, consolidate, amalgamate, merge with or into, or be
replaced by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if such consolidation,
amalgamation, merger or replacement would cause Sierra Pacific Capital or the
Successor Entity to be classified as other than a grantor trust for United
States federal income tax purposes.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary (the
"Depositary") for the Preferred Securities. The Preferred SecuritiesMortgage Bonds will be issued only as fully-registered securities registered in the name of Cede & Co.
(DTC's nominee). One or more fully-registered global Preferred Securities
certificates, representing the total aggregate number of Preferred Securities,
will be issued and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Participants and by the NYSE, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others, such as securities brokers and dealers, banks and
trust
22
companies that clear transactions through or maintain a direct or indirect
custodial relationship with a Participant either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Securities and Exchange Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Preferred Securities
on DTC's records. The ownership interest of each actual purchaser of each
Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Participants through which the Beneficial
Owners purchased Preferred Securities. Transfers of ownership interests in the
Preferred Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Preferred Securities
as represented by a global certificate.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities. DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Preferred Securities represented thereby for all
purposes under the Declaration and the Preferred Securities. No beneficial owner
of an interest in a Global Certificate will be able to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Declaration.
DTC has advised Sierra Pacific that it will take any action permitted to be
taken by a holder of Preferred Securities (including the presentation of
Preferred Securities for exchange as described below) only at the direction of
one or more Participants to whose account the DTC interests in the Global
Certificates are credited and only in respect of such portion of the aggregate
liquidation amount of Preferred Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event of
Default under the Preferred Securities, DTC will exchange the Global
Certificates for Certificated Securities, which it will distribute to its
Participants and which will be legended as set forth under the heading "Notices
to Investors."
Conveyance of notices and other communications by DTC to Participants, by
Direct Participants to Indirect Participants and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Preferred Securities held in book-entry
form shall be sent to Cede & Co. If less than all of the Preferred Securities
are being redeemed, DTC will determine the amount of the interest of each
Participant to be redeemed in accordance with its procedures. Although voting
with respect to the Preferred Securities is limited, in those cases where a vote
is required, neither DTC nor Cede & Co. will itself consent or vote with respect
to Preferred Securities. Under its usual procedures, DTC would mail an Omnibus
Proxy to Sierra Pacific Capital as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Participants to whose accounts the Preferred Securities are credited on the
record date (identified in a listing attached to the Omnibus Proxy). Sierra
Pacific and Sierra Pacific Capital believe that the arrangements among DTC,
Direct and Indirect Participants, and Beneficial Owners will enable the
Beneficial Owners to exercise rights equivalent in substance to the rights that
can be directly exercised by a holder of a beneficial interest in Sierra Pacific
Capital.
23
Distributions on the Preferred Securities held in book-entry form will be
made to DTC in immediately available funds. DTC's practice is to credit
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payments on such payment date. Payments by Participants and
Indirect Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participants and not of DTC, Sierra Pacific Capital or Sierra Pacific, subject
to any statutory or regulatory requirements to the contrary as may be in effect
from time to time. Although DTC has agreed to the foregoing procedures in order
to facilitate transfer of interests in the Global Certificates among
Participants of DTC, DTC is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither Sierra Pacific, the Trust nor the Sierra Pacific Trustees will have any
responsibility for the performance by DTC or its Participants or Indirect
Participants under the rules and procedures governing DTC. Payment of
distributions to DTC is the responsibility of Sierra Pacific Capital,
disbursement of such payments to Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the responsibility of
Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
Sierra Pacific Capital. Under such circumstances, in the event that a successor
securities depositary is not obtained, Preferred Securities certificates are
required to be printed and delivered. Additionally, the Trust (with the consent
of Sierra Pacific) may decide to discontinue use of the system of book-entry
transfers through DTC (or any successor depositary) with respect to the
Preferred Securities. In that event, certificates for the Preferred Securities
will be printed and delivered. In each of the above circumstances, Sierra
Pacific will appoint a paying agent with respect to the Preferred Securities.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Institutional Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The holders of Preferred Securities will not be required to offer such
indemnity in the event such holders, by exercising their voting rights, direct
the Institutional Trustee to take any action it is empowered to take under the
Declaration following a Declaration Event of Default. The Institutional Trustee
also serves as trustee under the Guarantee and the Indenture.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities represented by the Global
Certificates shall be made to DTC, which shall credit the relevant accounts at
DTC on the applicable distribution dates or, in the case of Certificated
Securities, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the Register. The Paying
Agent shall initially be the Institutional Trustee who may designate an
additional or substitute paying agent at any time. Registration of transfers of
Preferred Securities will be effected without charge by or on behalf of Sierra
Pacific Capital, but upon payment (with the giving of such indemnity as Sierra
Pacific Capital or Sierra Pacific may require) in respect of any tax or other
government charges imposed in relation to it. Sierra Pacific Capital will not be
required to register or cause to be registered the transfer of Preferred
Securities after such Preferred Securities have been called for redemption.
24
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate Sierra Pacific
Capital in such a way so that Sierra Pacific Capital will not be required to
register as an "investment company" under the 1940 Act or characterized as other
than a grantor trust for United States federal income tax purposes. Sierra
Pacific is authorized and directed to conduct its affairs so that the Junior
Subordinated Debentures will be treated as indebtedness of Sierra Pacific for
United States federal income tax purposes. In this connection, Sierra Pacific
and the Regular Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of Sierra Pacific Capital or the
articles of incorporation of Sierra Pacific, that each of Sierra Pacific and the
Regular Trustees determine in their discretion to be necessary or desirable to
achieve such end, as long as such action does not adversely affect the interests
of the holders of the Preferred Securities or vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee which
will be executed and delivered by Sierra Pacific for the benefit of the holders
of Preferred Securities. The Guarantee will be qualified as an indenture under
the Trust Indenture Act. IBJ Schroder Bank & Trust Company will act as indenture
trustee under the Guarantee (the "Guarantee Trustee") for purposes of the Trust
Indenture Act. The terms of the Guarantee will be those set forth in such
Guarantee and those made part of such Guarantee by the Trust Indenture Act. The
following summary of the material terms is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the form of
Guarantee, which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and the Trust Indenture Act. The Guarantee will be
held by the Guarantee Trustee for the benefit of the holders of the Preferred
Securities of the Trust.
GENERAL
Pursuant to the Guarantee, Sierra Pacific will irrevocably agree, to the
extent set forth therein, to pay in full, to the holders of the Preferred
Securities issued by the Trust, the Guarantee Payments (as defined herein)
(except to the extent paid by the Trust), as and when due, regardless of any
defense, right of set-off or counterclaim which the Trust may have or assert.
The following payments with respect to Preferred Securities issued by the Trust
to the extent not paid by such Trust (the "Guarantee Payments") will be subject
to the Guarantee thereon (without duplication): (i) any accrued and unpaid
distributions which are required to be paid on such Preferred Securities, to the
extent the Trust shall have funds available therefor; (ii) the redemption price
(the "Redemption Price"), and all accrued and unpaid distributions, to the
extent the Trust has funds available therefor with respect to any Preferred
Securities called for redemption by the Trust and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of Junior Subordinated Debentures to the
holders of Preferred Securities or the redemption of all of the Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on such Preferred Securities to the date of
payment, to the extent the Trust has funds available therefor and (b) the amount
of assets of the Trust remaining available for distribution to holders of the
Preferred Securities in liquidation of the Trust. The redemption price and the
liquidation amount will be fixed at the time the Preferred Securities are
issued. Sierra Pacific's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by Sierra Pacific to the holders of
Preferred Securities or by causing the Trust to pay such amounts to such
holders. The Guarantee will not apply to any payment of distributions on the
Preferred Securities except to the extent the Trust shall have funds available
therefor. If Sierra Pacific does not make interest payments on the Junior
Subordinated Debentures purchased by the Trust, the Trust will not pay
distributions on the Preferred Securities issued by the Trust and will not have
funds available therefor. See "Description of Junior
25
Subordinated Debentures -- Certain Covenants of the Company." The Guarantee,
when taken together with Sierra Pacific's obligations under the Junior
Subordinated Debentures, the Indenture and the Declaration, including its
obligations to pay costs, expenses, debts and liabilities of the Trust (other
than with respect to the Trust Securities), will provide a full and
unconditional guarantee on a subordinated basis by Sierra Pacific of payments
due on the Preferred Securities.
Sierra Pacific has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to the Trust Common
Securities (the "Common Securities Guarantee") to the same extent as the
Guarantee, except that upon an event of default under the Declaration, holders
of Preferred Securities shall have priority over holders of Common Securities
with respect to distributions and payments on liquidation, redemption or
otherwise.
CERTAIN COVENANTS OF SIERRA PACIFIC
In the Guarantee, Sierra Pacific will covenant that, so long as any
Preferred Securities issued by the Trust remain outstanding, if there shall have
occurred any event that would constitute an event of default under such
Guarantee or the Declaration of the Trust, then (a) Sierra Pacific shall not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or make a liquidation payment with respect to, any of its
capital stock (other than (i) purchases or acquisitions of shares of Common
Stock in connection with the satisfaction by Sierra Pacific of its obligations
under any employee benefit plans, (ii) as a result of a reclassification of
Sierra Pacific's capital stock or the exchange or (iii) the purchase of
fractional interests in shares of Sierra Pacific's capital stock pursuant to the
conversion or exchange provisions of such capital stock of Sierra Pacific or the
security being converted or exchanged), (b) Sierra Pacific shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by Sierra Pacific which
rank PARI PASSU with or junior to such Junior Subordinated Debentures and (c)
Sierra Pacific shall not make any guarantee payments with respect to the
foregoing (other than pursuant to the Guarantee).
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required), the
Guarantee may be amended only with the prior approval of the holders of not less
than a majority in liquidation amount of the outstanding Preferred Securities
issued by the Trust. All guarantees and agreements contained in the Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
Sierra Pacific and shall inure to the benefit of the holders of the Preferred
Securities of the Trust then outstanding.
TERMINATION
The Guarantee will terminate as to the Preferred Securities issued by the
Trust (a) upon full payment of the Redemption Price of all Preferred Securities
of the Trust, (b) upon distribution of the Junior Subordinated Debentures held
by the Trust to the holders of the Preferred Securities of the Trust or (c) upon
full payment of the amounts payable in accordance with the Declaration of the
Trust upon liquidation of the Trust. The Guarantee will continue to be effective
or will be reinstated, as the case may be, if at any time any holder of
Preferred Securities issued by the Trust must restore payment of any sums paid
under such Preferred Securities or the Guarantee. The subordination provisions
of the Junior Subordinated Debentures provide that in the event payment is made
on the Junior Subordinated Debentures or the Guarantee in contravention of such
provisions, such payments shall be paid over to the holders of Senior
Indebtedness.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
Sierra Pacific to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
relating to the Guarantee have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercises of any trust or power
conferred
26
upon the Guarantee Trustee under such Preferred Securities. If the Guarantee
Trustee fails to enforce such Guarantee, any holder of Preferred Securities
relating to such Guarantee may institute a legal proceeding directly against
Sierra Pacific to enforce the Guarantee Trustee's rights under such Guarantee,
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity. Notwithstanding the foregoing, if Sierra
Pacific has failed to make a Guarantee Payment, a holder of Preferred Securities
may directly institute a proceeding against Sierra Pacific for enforcement of
the Guarantee for such payment. Sierra Pacific waives any right or remedy to
require that any action be brought first against the Trust or any other person
or entity before proceeding directly against Sierra Pacific.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of Sierra Pacific and
will rank (i) subordinate and junior in right of payment to all other
liabilities of Sierra Pacific, (ii) PARI PASSU with the most senior preferred or
preference stock now or hereafter issued by Sierra Pacific and with any
guarantee now or hereafter entered into by Sierra Pacific in respect of any
preferred or preference stock of any affiliate of Sierra Pacific; and (iii)
senior to Sierra Pacific's common stock. The terms of the Preferred Securities
provide that each holder of Preferred Securities issued by the Trust by
acceptance thereof agrees to the subordination provisions and other terms of the
Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the guarantor to enforce its rights under the guarantee without instituting a
legal proceeding against any other person or entity).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Guarantee, undertakes to perform only such duties as are specifically set
forth in the Guarantee and, after default, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of Preferred Securities, unless offered reasonable
indemnity against the costs, expenses and liabilities which might be incurred
thereby.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the Junior
Subordinated Debentures in which Sierra Pacific Capital will invest the proceeds
from the issuance and sale of the Trust Securities. The following summary of the
material terms does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Indenture, dated as of June 1,
1996 (the "Indenture"), between Sierra Pacific and IBJ Schroder Bank & Trust
Company, as Trustee (the "Debt Trustee"). Whenever particular provisions or
defined terms in the Indenture are referred to herein, such provisions or
defined terms are incorporated by reference herein.
Under certain circumstances involving the dissolution of Sierra Pacific
Capital following the occurrence of a Tax Event, Junior Subordinated Debentures
may be distributed to the holders of the Trust Securities in liquidation of
Sierra Pacific Capital. See "Description of the Preferred Securities -- Tax
Event Redemption or Distribution."
If the Junior Subordinated Debentures are distributed to the holders of the
Preferred Securities, Sierra Pacific will use its best efforts to have the
Junior Subordinated Debentures listed on the NYSE or on such other national
securities exchange or similar organization on which the Preferred Securities
are then listed or quoted.
GENERAL
The Junior Subordinated Debentures will be issued as unsecured debt
securities under the Indenture. The Indenture does not limit the aggregate
principal amount of debt securities which may be issued thereunder and provides
that the debt securities may be issued thereunder from time to time in one or
more
27
series. However, the Junior Subordinated Debentures, as a separate series of
debt securities, will be limited in aggregate principal amount of $50,000,000,
such amount being the sum of the aggregate stated liquidation of the Preferred
Securities and the Common Securities.
The Junior Subordinated Debentures are not subject to a sinking fund
provision. The entire principal amount of the Junior Subordinated Debentures
will mature and become due and payable, together with any accrued and unpaid
interest thereon including Additional Interest (as defined herein), if any, on
, 2036.
If Junior Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in Sierra Pacific Capital,
such Junior Subordinated Debentures will initially be issued as one or more
Global Securities (as defined under "Book-Entry and Settlement" herein). Under
certain limited circumstances, Junior Subordinated Debentures may be issued in
certificated form in exchange for a Global Security. In the event that Junior
Subordinated Debentures are issued in certificated form, such Junior
Subordinated Debentures will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Junior Subordinated Debentures issued as a Global Security will
be made to DTC, a successor depositary or, in the event that no depositary is
used, to a Paying Agent for the Junior Subordinated Debentures. In the event
Junior Subordinated Debentures are issued in certificated form, principal and
interest will be payable, the transfer of the Junior Subordinated Debentures
will be registrable and Junior Subordinated Debentures will be exchangeable for
Junior Subordinated Debentures of other denominations of a like aggregate
principal amount at the corporate trust office of the Debt Trustee in New York,
New York; PROVIDED, that at the option of Sierra Pacific payment of interest may
be made by check mailed to the address of the holder entitled thereto or by wire
transfer to an account appropriately designated by the holder entitled thereto.
Notwithstanding the foregoing, so long as the holder of any Junior Subordinated
Debentures is the Institutional Trustee, the payment of principal and interest
on the Junior Subordinated Debentures held by the Institutional Trustee will be
made at such place and to such account as may be designated by the Institutional
Trustee.
There are no covenants or provisions in the Indenture which afford holders
of the Junior Subordinated Debentures protection in the event of a highly
leveraged transaction or other similar transaction involving Sierra Pacific that
may adversely affect such holders.
INTEREST
Each Junior Subordinated Debenture shall bear interest at the rate of %
per annum from the original date of issuance, payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year (each an "Interest
Payment Date"), commencing September 30, 1996, to the person in whose name such
Junior Subordinated Debenture is registered, subject to certain exceptions, at
the close of business on the Business Day next preceding such Interest Payment
Date. In the event the Junior Subordinated Debentures shall not continue to
remain in book-entry only form, Sierra Pacific shall have the right to select
record dates, which shall be more than one Business Day prior to the Interest
Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the Junior
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day which is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed the Proposed Legislation
which, among other things, would generally deny corporate issuers a deduction
for interest in respect of certain debt obligations issued on or after December
7, 1995 if such debt obligations have a maximum term in excess of twenty years
and are
28
not shown as indebtedness on the issuer's applicable consolidated balance sheet.
On March 29, 1996, the Senate Finance Committee Chairman and the House Ways and
Means Committee Chairman issued the Joint Statement indicating their intent that
certain legislative proposals initiated by the Clinton administration including
the Proposed Legislation, that may be adopted by either of the tax-writing
committees of Congress would have an effective date that is no earlier than the
date of "appropriate Congressional action." Based upon the Joint Statement, it
is expected that if the Proposed Legislation were to be enacted, such
legislation would not apply to the Junior Subordinated Debentures. There can be
no assurances, however, that the effective date guidance contained in the Joint
Statement will be incorporated into the Proposed Legislation, if enacted, or
that other legislation enacted after the date hereof will not otherwise
adversely affect the ability of Sierra Pacific to deduct the interest payable on
the Junior Subordinated Debentures. Accordingly, there can be no assurance that
a Tax Event will not occur. See "Description of the Preferred Securities -- Tax
Event Redemption or Distribution."
SUBORDINATION
The Indenture provides that the Junior Subordinated Debentures are
subordinated and junior in right of payment to all Senior Indebtedness of Sierra
Pacific. No payment of principal (including redemption), premium, if any, or
interest on the Junior Subordinated Debentures may be made (i) if any Senior
Indebtedness of Sierra Pacific is not paid when due and any applicable grace
period with respect to such default has ended and such default has not been
cured or waived or ceased to exist, or (ii) the maturity of any Senior
Indebtedness of Sierra Pacific has been accelerated because of a default. Upon
any distribution of assets of Sierra Pacific to creditors upon any dissolution,
winding-up, liquidation or reorganization, whether voluntary or involuntary, or
in bankruptcy, insolvency, receivership or other proceedings, all principal and
premium, if any, and interest due or to become due on all Senior Indebtedness of
Sierra Pacific must be paid in full before the holders of Junior Subordinated
Debentures are entitled to receive or retain any payment. Upon satisfaction of
all claims of all Senior Indebtedness then outstanding, the rights of the
holders of the Junior Subordinated Debentures will be subrogated to the rights
of the holders of Senior Indebtedness of Sierra Pacific to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Junior Subordinated Debentures are paid in full.
The term "Senior Indebtedness" means, with respect to Sierra Pacific, (i)
the principal, premium, if any, and interest in respect of (A) indebtedness of
Sierra Pacific, for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by Sierra Pacific,
including, without limitation, all obligations under the Indenture of Mortgage,
dated as of December 1, 1940 (the "Mortgage Indenture"), between Sierra Pacificthe Company and
The New England Trust Company (State Street Bank and Trust Company, as successor
trustee) and Leo W. Huegle (Gerald R. Wheeler, as successor trustee), and Collateral Trust Indenture
dated June 1, 1992, between Sierra Pacific and Bankers Trust Company, (ii) all
capital lease obligations of Sierra Pacific, (iii) all obligations of Sierra
Pacific issued or assumed as the deferred purchase price of property, all
conditional sale obligations of Sierra Pacific and all obligations of Sierra
Pacific under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations of
Sierra Pacific for the reimbursement on any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction, (v) all
obligations (the
"Mortgage Trustees"). (Section 401(a)) The aggregate principal amount of the
type referredSecurities outstanding and maximum aggregate amount of premium thereon, if any,
will not exceed the aggregate principal amount of Mortgage Bonds pledged with
and held by the Trustee. The Mortgage Bonds will bear interest at times and in
amounts sufficient to in clauses (i) through (iv) above of other
personsprovide for the payment of which Sierra Pacific is responsible or liable as
obligor, guarantor or otherwiseinterest on the Securities and
(vi)also will be redeemed at times and in amounts that correspond to the required
payments of principal of and any premium on the Securities. Payments on the
Securities will satisfy payment obligations on the underlying Mortgage Bonds
relating thereto. The Mortgage Bonds will be secured by a first mortgage lien
on certain property owned by the Company and will rank on a parity with all
obligationsother first mortgage bonds of the type referredCompany. As of September 30, 1996, the
Company had outstanding $571.4 million aggregate principal amount of first
mortgage bonds. See "Description of Mortgage Bonds".
PLEDGE OF MORTGAGE BONDS. The Company will from time to time issue and
deliver to and pledge with the Trustee, for the benefit of the Holders of each
series or tranche of the Securities, Mortgage Bonds in clauses (i) through (v) abovean aggregate principal
amount such that the aggregate principal amount of Mortgage Bonds then being
delivered to the Trustee pursuant to the Indenture is equal to or greater than
the aggregate principal amount (or, in the case of Original Issue Discount
Securities, the aggregate principal amount thereof due and payable at the Stated
Maturity thereof) of, plus the maximum aggregate amount of any premium on, the
series or tranche of Securities then being delivered to the Trustee or an
Authenticating Agent for authentication pursuant to the Indenture. Such pledge
becomes effective upon issuance of such series or tranche and satisfaction of
other persons securedconditions and is effective to the extent the amounts to be payable on
such Mortgage Bonds do not exceed the amounts stated to be payable on such
Securities. (Section 401)
The Indenture provides that the Company will not issue and deliver
Securities of any series or tranche to the Trustee or an Authenticating Agent
for authentication, and the Trustee
6
or such Authenticating Agent will not authenticate Securities of any series,
unless the Company has delivered to the Trustee or such Authenticating Agent a
Company Order, pursuant to which the Company designates with respect to such
series or tranche Designated Mortgage Bonds, which designation, subject to
certain provisions relating to the surrender of the Designated Mortgage Bonds,
shall remain in effect to the extent that the series or tranche of Securities
with respect to which the Designated Mortgage Bonds have been so designated
remain outstanding. (Section 401(d)) For purposes of the foregoing,
"Designated Mortgage Bonds", with respect to any series or tranche of
Securities, means an aggregate principal amount of Mortgage Bonds held by (or
then being delivered to) and pledged with the Trustee, not designated at the
time with respect to Outstanding Securities, equal to the aggregate principal
amount (or, in the case of Original Issue Discount Securities, the aggregate
principal amount thereof due and payable at the Stated Maturity thereof) of,
plus the maximum aggregate amount of any lienpremium on, the Securities of such
series or tranche issued and delivered by the Company to the Trustees or an
Authenticating Agent for authentication pursuant to the Indenture.
If at any time the principal, premium if any and interest due on any
property or assetSecurity is paid in full, the principal of Sierra Pacific (whether or not such obligation is assumed
by Sierra Pacific), except for (1) any such indebtedness that is by its terms
subordinated to or PARI PASSU witha corresponding amount of the
Junior Subordinated Debentures and (2)
any indebtedness between or among Sierra Pacific or its affiliates, including
all other debt securities and guarantees in respect of those debt securities,
issued to any other trust, or a trustee of such trust, partnership or other
entity affiliated with Sierra Pacific that is a financing vehicle of Sierra
Pacific (a "Financing Entity")Designated Mortgage Bonds designated in connection with the issuance byissue of such
financial
entitySecurity shall cease to be a Designated Mortgage Bond.
SATISFACTION OF PAYMENT OBLIGATION ON MORTGAGE BONDS. The interest rate on
each series of Preferred SecuritiesMortgage Bonds will be as specified in the applicable Prospectus
Supplement or other securitiesa pricing supplement thereto. The Indenture provides that rank PARI PASSU with,the
obligation of the Company to make any payment of the principal of (and premium,
if any) or juniorinterest on the Designated Mortgage Bonds will be deemed to have been
satisfied and discharged to the Preferred Securities. Such Senior Indebtednessextent that at the time any such payment shall
continuebe due, the then due principal of (and premium, if any) or interest on the
Securities to which such Designated Mortgage Bonds relate, shall have been paid,
deemed to have been paid or otherwise satisfied and discharged. In addition,
such obligation to make any payment of the principal of (and premium, if any) or
interest on the Designated Mortgage Bonds at any time shall be deemed to have
been satisfied and discharged to the extent that the amount of the Company's
obligation to make any payment of the principal of (and premium, if any) or
interest on the Designated Mortgage Bonds exceeds the obligation of the Company
at that time to make any payment on the applicable Redemption Date or Stated
Maturity of the principal of (and premium, if any) or interest on the Securities
to which such Designated Mortgage Bonds relate. The obligation of the Company
to make any payment of the principal of (and premium, if any) or interest on the
Mortgage Bonds other than Designated Mortgage Bonds shall be deemed to have been
satisfied and discharged in full at the time any such payment shall be stated to
be Senior Indebtednessdue. (Section 403(a))
REDEMPTION OF MORTGAGE BONDS. The Company covenants and be entitledagrees in the
Indenture that upon the required payment of principal or premium, if any,
becoming due and payable with respect to any Securities upon Stated Maturity or
redemption, it will redeem the Designated Mortgage Bonds relating to such
Securities in an aggregate principal amount equal to the benefitsamount becoming due and
payable on such Securities, plus accrued interest; provided, however, that the
Company's obligation to redeem such Designated Mortgage Bonds will be deemed to
have been satisfied and discharged to the extent that at the time any such
payment shall be due, the then due aggregate principal amount of the subordination
provisions irrespective of any amendment, modification or waiver of any term ofSecurities
to which such Senior Indebtedness.
29
The Indenture does not limitDesignated Mortgage Bonds relate, plus the aggregate amount of Senior Indebtednessany
premium on, or
7
accrued interest to the redemption date for, such Securities shall have been
paid, deemed to have been paid or otherwise satisfied and discharged. Except
for such redemption and any redemption required under the Mortgage Indenture in
the event that may be issued by Sierra Pacific. As of April 1, 1996, Senior Indebtedness
of Sierra Pacific aggregated approximately $493 million,all or substantially all of which consiststhe electric properties of first mortgage bondsthe
Company are sold to or debt secured by first mortgage bonds
issued under Sierra Pacific's Indenturetaken through the exercise of Mortgage and which are secured by a
first lien on substantially allthe right of Sierra Pacific's real and personal property.
OPTIONAL REDEMPTION
Sierra Pacific shall haveeminent domain
or the right to purchase by any municipal or governmental body or agency, the
Company covenants that it will not redeem the Junior Subordinated
Debentures,Mortgage Bonds or take any action
that will result in the Mortgage Indenture Trustees incurring an obligation to
redeem any Mortgage Bonds. (Section 404)
The Trustee will, upon request of the Company, surrender to the Mortgage
Trustees for cancellation Mortgage Bonds in an aggregate principal amount equal
to the aggregate principal amount of any other Mortgage Bonds delivered to and
pledged with the Trustee pursuant to the Indenture in exchange therefor;
provided that the Mortgage Bonds so delivered to and pledged with the Trustee
(a) contain no provisions that would impair the benefit of the lien of the
Mortgage Indenture in favor of the holders of the Outstanding Securities, and
(b) have the same terms as the Mortgage Bonds so surrendered. (Section 406(b))
From time to time upon request of the Company, the Trustee will surrender
to the Mortgage Trustees for cancellation Mortgage Bonds other than Designated
Mortgage Bonds held by the Trustee pursuant to the Indenture. (Section 406(c))
FORM, EXCHANGE, REGISTRATION AND TRANSFER
The Securities will be issuable only in fully registered form. Securities
of a series or tranche may be represented, in whole or in part, from timeby one or more
permanent Global Securities in a denomination or aggregate denominations equal
to time, onthe portion of the aggregate principal amount of Outstanding Securities of
the series or after June tranche to be represented by such Global Security or Securities.
Any such Global Security deposited with a Depositary or its nominee identified
in the applicable Prospectus Supplement or pricing supplement thereto and
bearing the legend required by the Indenture may not be surrendered for
registration of transfer or for exchange except by the Depositary for such
Global Security or any nominee of such Depositary, except if the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary,
or the Depositary ceases to be qualified as required by the Indenture, or the
Company instructs the Trustee in accordance with the Indenture that such Global
Security shall be so registrable and exchangeable, or there shall have occurred
and be continuing an Event of Default with respect to the Securities evidenced
by such Global Security, or there shall exist such other circumstances, if any,
as may be specified in the applicable Prospectus Supplement. (Sections 203,
204, 301 and 305)
The specific terms of the depository arrangement with respect to any
portion of a series or tranche of Securities to be represented by one or more
Global Securities will be described in the applicable Prospectus Supplement or
pricing supplement thereto. Beneficial interests in Global Securities will only
be evidenced by, and transfers thereof will only be effected through, records
maintained by the Depositary and the institutions that are participants in the
Depositary.
At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to Global Securities, Securities of any series or tranche
will be exchangeable for
8
other Securities of the same series of any authorized denominations and of a
like aggregate principal amount and tenor. (Section 305)
Securities may be presented for exchange as provided above and for
registration of transfer (with the form of transfer endorsed thereon duly
executed), 2001,at the office of the Trustee or at the office of any transfer agent
designated by the Company for such purpose with respect to any tranche or series
of Securities and referred to in an applicable Prospectus Supplement or pricing
supplement thereto, without service charge and upon payment of any taxes and
other governmental charges as described in the Indenture. Such transfer or
exchange will be effected upon the Trustee or such transfer agent, as the case
may be, being satisfied with the documents of title and identity of the person
making the request. If a Prospectus Supplement or pricing supplement thereto
refers to any transfer agents (in addition to the Trustee) initially designated
by the Company with respect to any series or tranche of Securities, the Company
may at any time rescind the designation of any such transfer agent or approve a
change in certain circumstances upon the occurrencelocation through which any such transfer agent (or Trustee) acts.
The Company may at any time designate additional transfer agents with respect to
any series or tranche of Securities. (Sections 305 and 1102)
The Company shall not be required to: (i) issue, register the transfer
of or exchange Securities of any series or tranche during a Tax Event as
described under "Descriptionperiod beginning
at the opening of the Preferredbusiness 15 days before any selection of Securities -- Tax Event Redemptionof that
series or Distribution," upon not less than 30 nor more than 60 days' notice, at a
redemption price equal to 100% of the principal amounttranche to be redeemed plusand ending at the close of business on the
day of mailing of the relevant notice of redemption or (ii) register the
transfer of or exchange any accruedSecurity, or portion thereof, called for
redemption, except the unredeemed portion of any Security being redeemed in
part. (Section 305)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement or a
pricing supplement thereto, payment of principal of (and premium, if any) and
unpaid interest including Additional Interest (as herein defined),
ifon Securities will be made at the office of the Trustee, except that at
the option of the Company payment of any interest may be made by check mailed to
the redemption date. If a partial redemptionaddress of the PreferredPerson entitled thereto as such address shall appear in the
Security Register. If any interest payment is to be made by wire transfer, the
Trustee must receive wire payment instructions from the holder by the Regular
Record Date for such interest payment. Unless otherwise indicated in an
applicable Prospectus Supplement or a pricing supplement thereto, payment of any
installment of interest on Securities resulting fromwill be made to the Person in whose name
such Security is registered at the close of business on the Regular Record Date
for such interest. (Sections 301 and 307)
Unless otherwise indicated in an applicable Prospectus Supplement or a
partial redemptionpricing supplement thereto, the corporate trust office of the Junior Subordinated
Debentures would resultTrustee in The
City of New York will be designated as the delisting ofCompany's sole Paying Agent for
payments with respect to Offered Securities. Any other Paying Agents initially
designated by the PreferredCompany for the Offered Securities Sierra
Pacificwill be named in an
applicable Prospectus Supplement or a pricing supplement thereto. The Company
may only redeem the Junior Subordinated Debentures in whole.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Sierra Pacific shall have the right at any time duringdesignate additional Paying Agents or rescind the termdesignation of
any Paying Agent or approve a change in the Junior Subordinated Debentures,office through which any Paying
Agent acts, except that the Company will be required to defermaintain a Paying Agent
in each Place of Payment for each series of Securities.
9
All moneys paid by the Company to a Paying Agent or held by the Company in
trust for the payment of principal of (and premium, if any) or interest payments from time to time by
extending the interest payment period for successive periods not exceeding 20
consecutive quarters,on any
Security, which remain unclaimed at the end of which Extension Period, Sierra Pacifictwo years after such principal,
premium or interest shall have become due and payable, will be discharged from
trust and repaid to the Company, and the Holder of such Security or any coupon
will thereafter look only to the Company for payment thereof. (Section 1103)
SATISFACTION AND DISCHARGE OF THE INDENTURE AND THE SECURITIES
The Indenture will cease to be of further effect, and the Trustee shall
execute instruments acknowledging satisfaction and discharge of the Indenture
and shall pay, all interest then accruedor assign or transfer and unpaid (including any Additional Interest,deliver, the Trust Estate held by it as
herein defined) together with interest thereon compounded quarterly at the rate
specifiedsecurity for the Junior Subordinated DebenturesSecurities remaining, when (1) either (a) all Securities
authenticated and delivered (other than certain specified Securities) have been
delivered for cancellation; or (b) all such Securities have become or will
become within one year due and payable, or are to be called for redemption
within one year under arrangements satisfactory to the extent permittedTrustee, and the Company
has deposited or caused to be deposited in trust with the Trustee funds
sufficient to pay and discharge the entire indebtedness on such Securities for
principal (and premium, if any) and interest to the date of such deposit (in the
case of Securities that have become due and payable) or to their Stated Maturity
or Redemption Date, as the case may be; (2) the Company has paid or caused to be
paid all other sums payable by applicable law ("Compound Interest"); PROVIDED,it under the terms of the Indenture; and (3) the
Company has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that during anyall conditions precedent provided for in the
Indenture relating to the satisfaction and discharge of the Indenture have been
complied with. (Section 501)
Unless otherwise provided in the Indenture or other instrument creating a
series or tranche of Securities, the Company shall be deemed to have paid and
discharged the indebtedness on all the Outstanding Securities of each tranche of
such Extension
Period,series and the Trustee shall execute instruments acknowledging the
satisfaction and discharge of such indebtedness and shall pay, or assign or
transfer and deliver to the Company the Designated Mortgage Bonds which have
been held as security for the Securities of such series or tranche if (1) either
(a) Sierra Pacific shall not declare or pay dividends on, make any
distribution with respect to all Outstanding Securities of such series or redeem, purchase, acquiretranche (i) the
Company has irrevocably deposited or make a liquidation
payment with respectcaused to any of its capital stock (other than (i) purchases or
acquisitions of shares of Sierra Pacific Common Stock in connectionbe deposited with the satisfaction by Sierra PacificTrustees an
amount sufficient to pay and discharge the entire indebtedness on all
Outstanding Securities of its obligations under any employee benefit
plans, (ii) as a result of a reclassification of Sierra Pacific capital stocksuch series or the exchange or conversion of one class or series of Sierra Pacific's capital
stocktranche for another class or series of Sierra Pacific capital stock or (iii) the
purchase of fractional interests in shares of Sierra Pacific's capital stock
pursuantprincipal (and premium, if
any) and interest to the conversionStated Maturity or exchange provisionsany Redemption Date, as the case may
be; or (ii) the Company has irrevocably deposited or caused to be deposited with
the Trustee such amount of direct noncallable obligations of, or noncallable
obligations the payment of principal of and interest on which is fully
guaranteed by, the United States of America maturing as to principal and
interest in such amounts and at such times as will, without consideration of any
reinvestment thereof, be sufficient to pay and discharge the entire indebtedness
on all Outstanding Securities of such Sierra Pacific capital
stockseries or the security being converted or exchanged), (b) Sierra Pacific shall
not make any payment of interest,tranche for principal or(and
premium, if any, on or repay,
repurchase or redeem any debt securities issued by Sierra Pacific that rank PARI
PASSU with or juniorany) and interest to the Junior Subordinated DebenturesStated Maturity or any Redemption Date, as
the case may be; or (b) the Company has properly fulfilled such other means of
satisfaction and (c) Sierra
Pacific shall not make any guarantee paymentsdischarge as are specified in the supplemental indenture or
other instrument creating such series or tranche; (2) the Company has paid or
caused to be paid all other sums payable with respect to the foregoing
(other than pursuantOutstanding
Securities of such series or tranche; (3) the Company has delivered to the
Guarantee). PriorTrustee an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for in the Indenture relating to the
terminationsatisfaction and discharge of the entire indebtedness on all Outstanding
Securities of any such Extension Period, Sierra Pacific may further defer paymentsseries or tranche have
10
been complied with and, if required by Section 314 of interestthe Trust Indenture Act, a
certificate or opinion of an engineer, appraiser, or other expert appointed by
extending the interest payment period; PROVIDED, HOWEVER,Company as to the fair value of the Trust Estate to be released from the
lien of the Indenture, which certificate or opinion shall state that in the
opinion of the person making the same, such release will not impair the security
under the Indenture in contravention of the provisions thereof; and (4) the
Trustee has received an opinion of tax counsel to the effect that such Extension
Period, including all such previousdeposit
and further extensions, maydischarge will not exceed 20
consecutive quarters or extend beyondcause the maturityHolders of the Junior Subordinated
Debentures. UponOutstanding Securities of such
series to recognize income, gain or loss for federal income tax purposes and
that the termination of any Extension Period and the payment of all
amounts then due, Sierra Pacific may commence a new Extension Period,Holders will be subject to federal income tax in the terms set forthsame amounts, in
this section. No interest during an Extension Period,
exceptthe same manner and at the end thereof, shall be duesame times as would have been the case if such
deposit and payable. Sierra Pacific has no
present intention of exercising its right to defer payments of interest by
extendingdischarge had not occurred. Upon such discharge, the interest payment period on the Junior Subordinated Debentures. If
the Institutional Trustee shall be the sole holder of the Junior Subordinated
Debentures, Sierra Pacific shall give the Regular Trustees and the Institutional
Trustee notice of its selection of such Extension Period one Business Day prior
to the earlier of (i) the date distributions on the Preferred Securities are
payable or (ii) the date the Regular Trustees are required to give notice to the
NYSE (or other applicable self-regulatory organization) or to holders of the
Preferred Securities of the record date or the date such distribution is
payable. The Regular Trustees shall give notice of Sierra Pacific's selection of
such Extension Period to the holders of the Preferred Securities. If the
Institutional Trustee shall not be the sole holder of the Junior Subordinated
Debentures, Sierra Pacific shall give the holders of the Junior Subordinated
Debentures notice of its selection of such Extension Period ten Business Days
prior to the earlier of (i) the Interest Payment Date or (ii) the date upon
which Sierra Pacific is required to give notice to the NYSE (or other applicable
self-regulatory organization) or to holders of the Junior Subordinated
Debentures of the record or payment date of such related interest payment.
30
ADDITIONAL INTEREST
If at any time Sierra Pacific Capital shall be required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any such case, Sierra Pacific will pay as additional interest
("Additional Interest") such additional amounts as shall be required so that the
net amounts received and retained by Sierra Pacific Capital after paying any
such taxes, duties, assessments or other governmental chargesCompany will
be not less
thandeemed to have satisfied all the amounts Sierra Pacific Capital would have received had no such taxes,
duties, assessments or other governmental charges been imposed.
CERTAIN COVENANTS
If (i) there shall have occurred any event that would constitute anobligations under the Indenture, Event of Default or (ii) Sierra Pacific shall be in defaultexcept for
obligations with respect to its paymentregistration of any obligations undertransfer and exchange of the
Guarantee, then (a) Sierra
Pacific shall not declare or pay dividends on, make distributions with respect
to, or redeem, purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock (other than (i) purchases or acquisitions of shares
of Sierra Pacific common stock in connection with the satisfaction by Sierra
Pacific of its obligations under any employee benefit plans, (ii) as a result of
a reclassification of Sierra Pacific's capital stock or the exchange or
conversion of one class or series of Sierra Pacific capital stock for another
class or series of Sierra Pacific capital stock or (iii) the purchase of
fractional interests in shares of Sierra Pacific capital stock pursuant to the
conversion or exchange provisionsOutstanding Securities of such Sierra Pacific capital stock orseries, and the security being converted or exchanged) or make any guarantee payments with
respect to the foregoing, and, (b) Sierra Pacific shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities (including guarantees) issued by Sierra Pacific that rank PARI
PASSU with or junior to the Junior Subordinated Debentures.
Sierra Pacific will covenant (i) to directly or indirectly maintain 100%
ownershiprights of the Common Securities of the Trust; PROVIDED, HOWEVER, that any
permitted successor of Sierra Pacific under the Indenture may succeedHolders to Sierra
Pacific's ownership of such Common Securities and (ii) to use its reasonable
efforts to cause the Trust (x) to remain a statutory business trust, except in
connection with the distribution of Junior Subordinated Debentures to the
holders of Trust Securities in liquidation of the Trust, the redemption of all
of the Trust Securities of the Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration, and (y) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that Sierra Pacific will not consolidate with or
merge into any other corporation or convey, transfer or lease its assets
substantially as an entirety unless (a) the successor is a corporation organized
in the United States and expressly assumes the due and punctualreceive
from deposited funds payment of the principal of (and premium, if any) and
interest, on all Junior Subordinated
Debentures issued thereunder and the performance of every other covenant of the
Indentureif any, on the partOutstanding Securities of Sierra Pacific and (b) immediately thereafter no
Indenture Event of Default and no event which, after notice or lapse of time, or
both, would become an Indenture Event of Default, shall have happened and be
continuing. Upon any such consolidation, merger, conveyance or transfer, the
successor corporation shall succeed to and be substituted for Sierra Pacific
under the Indenture and thereafter the predecessor corporation shall be relieved
of all obligations and covenants under the Indenture and the Junior Subordinated
Debentures.
INDENTUREseries. (Section 503)
EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holderAny one of the Junior Subordinated Debentures,following events will have the right to declare the principal of and the interest on the Junior
Subordinated Debentures (including any Compound Interest and Additional
Interest, if any) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Junior Subordinated Debentures. See "-- Events of Default" below
for a
31
description of the Indenture Events of Default. An Indenture Event of Default
also constitutes a Declaration Event of Default. The holders of Preferred
Securities in certain circumstances have the right to direct the Institutional
Trustee to exercise its rights as the holder of the Junior Subordinated
Debentures. See "Description of the Preferred Securities -- Declaration Events
of Default" and "Voting Rights."
Notwithstanding the foregoing, ifconstitute an Event of Default has occurred and is
continuing and such event is attributable tounder
the failure of Sierra Pacific to
pay interest or principal on the Junior Subordinated Debentures on the date such
interest or principal is otherwise payable, Sierra Pacific acknowledges that
then a holder of Preferred Securities may institute a Direct Action for payment
on or after the respective due date specified in the Junior Subordinated
Debentures. Notwithstanding any payment made to such holder of Preferred
Securities in connection with a Direct Action, Sierra Pacific shall remain
obligated to pay the principal of or interest on the Junior Subordinated
Debentures held by Sierra Pacific Capital or the Institutional Trustee of Sierra
Pacific Capital, and Sierra Pacific will be subrogated to the rights of such
holder of Preferred SecuritiesIndenture with respect to payments on the Preferred
Securities to the extent of any payments made by Sierra Pacificseries: (a) failure to such holder
inpay any
such Direct Action. The holders of Preferred Securities will not be able
to exercise directlyinterest on any other remedy available to the holders of the Junior
Subordinated Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of Sierra
Pacific Capital as a result of the occurrence of a Tax Event, the Junior
Subordinated Debentures will be issued in the form of one or more global
certificates (each a "Global Security") registered in the name of the Depositary
or its nominee. Except under the limited circumstances described below, Junior
Subordinated Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Junior Subordinated
Debentures in definitive form. The Global Securities described above may not be
transferred except by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the depositary
or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debentures in definitive form and will not be considered the
holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debentures
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the Depositary or its nominee or to a
successor Depositary or its nominee. Accordingly, each Beneficial Owner must
rely on the procedures of the Depositary or if such person is not a Participant,
on the procedures of the Participant through which such person owns its interest
to exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Junior Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in Sierra Pacific Capital,
DTC will act as securities depositarythat series when due, continued for the Junior Subordinated Debentures.
For a description of DTC and the specific terms of the depositary arrangements,
see "Description of the Preferred Securities -- Book-Entry Only Issuance -- The
Depositary Trust Company." As of the date of this Prospectus, the description
therein of DTC's book-entry system and DTC's practices as they relate to
purchases, transfers, notices and payments with respect to the Preferred
Securities apply in all material respects to any debt obligations represented by
one or more Global Securities held by DTC. Sierra Pacific may appoint a
successor to DTC or any successor depositary in the event DTC or such successor
depositary is unable or unwilling to continue as a depository for the Global
Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of
32
the Junior Subordinated Debentures represented by such Global Security for all
purposes under the Indenture. Except as set forth below, owners of beneficial
interests in a Global Security will not be entitled to have the Junior
Subordinated Debentures represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of such
Junior Subordinated Debentures in definitive form and will not be considered the
owners or holders thereof under the Indenture. Accordingly, each person owning a
beneficial interest in a Global Security must rely on the procedures of the
Depositary for such Global Security and, if such person is not a participant, on
the procedures of the participant through which such person owns its interest,
to exercise any rights of a holder under the Indenture. Sierra Pacific
understands that under existing industry practices, if Sierra Pacific requests
any action of holders or if an owner of a beneficial interest in a Global
Security desires to give or take any action which a holder is entitled to give
or take under the Indenture, the Depositary for such Global Security would
authorize the participants holding the relevant beneficial interests to give or
take such action, and such participants would authorize beneficial owners owning
through such participants to give or take such action or would otherwise act
upon the instructions of beneficial owners holding through them.
Principal, premium, if any, and interest payments on the Junior Subordinated
Debentures represented by a Global Security registered in the name of a
Depositary or its nominee will be made to such Depositary or its nominee, as the
case may be, as the registered owner of such Global Security. None of Sierra
Pacific, the Debt Trustee or any other agent of Sierra Pacific or agent of the
Debt Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in such Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
Sierra Pacific expects that the Depositary for any Junior Subordinated
Debentures represented by a Global Security, upon receipt of any payment of
principal, premium or interest in respect of such Global Security, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in such Global Security as shown on the
records of such Depositary. Sierra Pacific also expects that payments by
participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing customer instructions and
customary practices, and will be the responsibility of such participants.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
If the Depositary for any Junior Subordinated Debentures represented by a
Global Security is at any time unwilling or unable to continue as Depositary or
ceases to be a clearing agency registered under the Exchange Act, and a
successor Depositary registered as a clearing agency under the Exchange Act is
not appointed by Sierra Pacific within 90 days, Sierra Pacific will issue such
Junior Subordinated Debentures in definitive form in exchange for such Global
Security. In addition, Sierra Pacific may at any time and in its sole discretion
determine not to have any of the Junior Subordinated Debentures of a series
represented by one or more Global Securities and, in such event, will issue
Junior Subordinated Debentures of such series in definitive form in exchange for
all of the Global Security or Securities representing such Junior Subordinated
Debentures. Any Junior Subordinated Debentures issued in definitive form in
exchange for a Global Security will be registered in such name or names as the
Depositary shall instruct the relevant Trustee. It is expected that such
instructions will be based upon directions received by the Depositary from
participants with respect to ownership of beneficial interests in such Global
Security.
EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Junior Subordinated Debentures: (i) failure for 30 days to
pay interest on the Junior Subordinated Debentures, including any Additional
Interest in respect thereof, when due; PROVIDED, HOWEVER, that a valid extension
of the interest payment period by Sierra Pacific shall not constitute a default
in the payment of interest for this purpose; or (ii)60 days; (b)
failure to pay principal of or(or premium, if any, on the Junior Subordinated Debentureson) any Security of that series
when due; (c) failure to deposit any sinking fund payment or analogous
obligation, when due, whether at
maturity, upon redemption, by declaration or otherwise; PROVIDED, HOWEVER,in respect of any Security of that a valid extension of the maturityseries and continuance
of such Junior Subordinated Debentures shall
not constitute a default for this purpose; or (iii)60 days; (d) failure to observe or
33
perform any other covenant containedor
warranty of the Company in the Indenture (other than a covenant or warranty
included in the Indenture solely for 90the benefit of a series of Securities other
than that series), continued for 60 days after notice;
or (iv)written notice as provided in the
event Junior Subordinated Debentures are issued to the Trust or a
trustee of such Trust in connection with the issuance of Trust Securities by
such Trust, the voluntary or involuntary dissolution, winding up or termination
of the Trust, except in connection with the distribution of Junior Subordinated
Debentures to the holders of Preferred Securities in liquidation of the Trust
upon the redemption of all outstanding Preferred Securities and in connection
with certain mergers, consolidations or amalgamations permitted by the
Declaration; or (v)Indenture; (e) certain events inof bankruptcy, insolvency or reorganization
involving the Company; (f) the occurrence of Sierra Pacific.
The Debtan event of default under the
Mortgage Indenture, provided that, the waiver or cure of any such event of
default and the rescission and annulment of the consequences thereof shall
constitute a waiver of the corresponding Event of Default under the Indenture
and a rescission and annulment of the consequences thereof; and (g) any other
Event of Default provided in an indenture supplemental thereto. (Section 601)
Unless the Trustee holds more than 25% of the outstanding Mortgage Bonds
under the Mortgage Indenture, it cannot, without the concurrence of other
holders of first mortgage bonds, force a declaration of "default" under the
Mortgage Indenture or acceleration of the Mortgage Bonds. See "Description of
Mortgage Bonds - Defaults".
If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, either the Trustees or the holdersHolders of not less thanat
least 25% in aggregate
outstanding principal amount of the Junior Subordinated DebenturesOutstanding Securities of that
series by notice as provided in the Indenture may declare the principal amount
(or, if the Securities of and interest onthat series are Original Issue Discount Securities,
such portion of the Junior Subordinated Debenturesprincipal amount as may be specified in the terms of that
series) of all the Securities of that series to be due and payable immediately on the occurrenceimmediately.
At any time after a declaration of an Eventacceleration with respect to Securities of
Default; PROVIDED, HOWEVER,
that, after such acceleration,any series has been made, but before a judgment or decree based on
acceleration,for payment of money
has been obtained by the holdersTrustees, and subject to applicable law and certain
other provisions of the Indenture, the
11
Holders of a majority in aggregate principal amount of outstanding Junior Subordinated Debenturesthe Outstanding
Securities of that series may, under certain circumstances, rescind and annul
such accelerationacceleration. (Section 602)
The Indenture provides that, if all Eventsa default occurs with respect to the
Securities of Default, other thanany series, the nonpaymentTrustee shall give notice of accelerated principal, have been cured or waiveddefault to the
Holders of the Securities of such series within 90 days after receipt by the
Trustee of written notice of such occurrence as and to the extent provided in
the Indenture. For information asTrust Indenture Act; provided, however, that in the case of any default
referred to waiver of defaults, see "-- Modification
and Amendmentsin clause (d) of the Indenture."
Notwithstandingthird preceding paragraph with respect to
Securities of such series, no such notice to Holders shall be given until at
least 30 days after the foregoing, if a Declarationoccurrence thereof. (Section 702)
Upon the occurrence of an Event of Default has
occurred and is continuing and such event is attributablewith respect to the failure of
Sierra Pacific to pay interest or principal on the Junior Subordinated
Debentures on the date such interest or principal is otherwise payable, Sierra
Pacific acknowledges that, in such event, a holder of Preferred Securities may
institute a Direct Action for payment on or after the respective due date
specified in the Junior Subordinated Debentures. Sierra Pacific may not amend
the Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of all the holders of Preferred Securities of
any series, the Trust.
Notwithstanding any payment madeTrustee may in its discretion proceed to such holder of Preferred Securities by
Sierra Pacific in connection with a Direct Action, Sierra Pacific shall remain
obligated to pay the principal of or interest on the Junior Subordinated
Debentures held by the Trust or the Institutional Trustee of the Trustprotect and Sierra Pacific shall be subrogated toenforce its
rights and the rights of the holderHolders of Securities of such Preferred
Securities with respect to payments onseries by all
appropriate judicial proceedings, including the Preferred Securities to the extent of
any payments made by Sierra Pacific to such holder in any Direct Action. The
holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holdersrights of the Junior Subordinated Debentures.
The Holders of not less than a majority in principal amount of the
outstanding Junior Subordinated Debentures may waive any past defaults except
(a) a default in payment of the principal of (or premium, if any) or interest,
if any, on any Junior Subordinated Debentures and (b) a default in respect of a
covenant or provision of the Indenture which cannot be amended or modified
without the consent ofTrustee as the
holder of each Junior Subordinated Debenture;
PROVIDED, HOWEVER, that if the Junior Subordinated Debentures are held byMortgage Bonds; provided, however, the Trust or a trustee of such Trust, such waiver or modification to such waiverTrustee shall not be effective untilhave the
holders of a majority in liquidation preference
of Trust Securitiespower to sell the Mortgage Bonds. (Section 603)
The Indenture provides that, subject to the duty of the Trust shall have consentedTrustee during
default to such waiver or
modification to such waiver; PROVIDED FURTHER, that if the consent of the holder
of each outstanding Junior Subordinated Debenture is required, such waiver shall
not be effective until each holder of the Trust Securities of the Trust shall
have consented to such waiver.
Notwithstanding anything in the Indenture to the contrary, the right of any
holder of a Junior Subordinated Debenture to receive payment of the principal of
and interest on such Junior Subordinated Debt Security, on and after the
respective due dates expressed in such Junior Subordinated Debenture (as the
same may be extended in accordanceact with the termsrequired standard of such Junior Subordinated
Debenture), or to institute suit forcare, the enforcement of any such payment shall
not be impaired or affected without the consent of such holder, including the
holders of the Preferred Securities issued by Sierra Pacific Capital.
A default under any other indebtedness of Sierra Pacific or the Trust would
not constitute an Event of Default under the Junior Subordinated Debentures.
Subject to the provisions of the Indenture relating to the duties of the
Debt Trustee in case an Event of Default shall occur and be continuing, the Debt Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any holders of Junior
Subordinated Debentures,the Holders, unless such holdersHolders shall have
offered to the Debt
Trustee satisfactoryreasonable indemnity. (Sections 701 and 703) Subject to
34
such provisions for the indemnification of the Debt Trustee, and subject to
applicable law and certain other provisions of the holdersIndenture, the Holders of a
majority in aggregate principal amount of the Junior Subordinated Debentures
then outstandingOutstanding Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Debt Trustee, or exercising any trust
or power conferred on the Debt Trustee, with respect to suchthe Securities of that
series. (Section 612)
The right of a holder of Preferred SecuritiesCompany will be required to institute a proceeding
with respectfurnish to the Indenture is subject to certain conditions precedent
including notice and indemnityTrustee annually a statement
as to the Debt Trustee, butperformance by the holderCompany of a Junior
Subordinated Debenture has an absolute right to receiptcertain of principal, premium,
if any, and interest at the maturity of, or, in the case of redemption, on the
Redemption Date or to institute suit for the enforcement thereof.
No holder of any Junior Subordinated Debenture will have any right to
institute any proceeding with respect toits obligations under the
Indenture or forand as to any remedy
thereunder, unlessdefault in such holder shall have previously given toperformance. (Section 1108)
MODIFICATION AND WAIVER
Modifications and amendments of the DebtIndenture may be made by the Company
and the Trustee written noticewith the consent of the Holders of not less than a continuing Event of Default and, if the Trust is not the
sole holder of Junior Subordinated Debentures, unless the holders of at least
25%majority in
aggregate principal amount of the Junior Subordinated DebenturesOutstanding Securities of each series,
considered as one class; provided, however, if less than all of the series of
Outstanding Securities are directly affected by such amendment or modification,
then outstanding shall alsothe consent only of the Holders of a majority in aggregate principal amount
of Outstanding Securities of all series so directly affected, considered as one
class, will be required; and provided, further, that if the Outstanding
Securities of any series have made written request,been issued in more than one tranche and offered reasonable
indemnity, toif the
Debt Trustee to instituteproposed amendment or modification directly affects the rights of the Holders of
one or more, but less than all, such proceeding as Debt Trustee, andtranches, then the Debt Trustee shall not have received fromconsent only of the
holdersHolders of a majority in aggregate principal amount of the outstanding Junior Subordinated DebenturesOutstanding
Securities of all tranches (including each tranche which is the only tranche of
Outstanding Securities in a direction inconsistent withseries) so directly affected, considered as one
class, will be required; and provided, further, that no such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a holderamendment or
modification may, without the consent of a Junior Subordinated Debenture for enforcementeach Holder of paymentthe Outstanding
Securities of each series or tranche directly affected thereby,
12
(a) change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Security, (b) reduce the principal amount of,
or premium or interest on, any Security, (c) reduce the amount of principal of
an Original Issue Discount Security payable upon acceleration of the Maturity
thereof, (d) permit the creation of any lien ranking prior to the lien of the
Mortgage Indenture with respect to all or substantially all of the property
subject thereto or deprive such Junior Subordinated DebentureHolder of the benefit of the security of the
lien of the Mortgage Indenture, (e) change the Place of Payment where, or the
coin or currency in which, any Security or any premium or interest thereon is
payable, (f) impair the right to institute suit for the enforcement of any
payment on or after the respective due dates expressedStated Maturity of any Security (or, in such Junior Subordinated
Debenture.
Sierra Pacific is required to file annually with the Debt Trusteecase of
redemption, on or after the Redemption Date), (g) reduce the percentage and the
Institutional Trustee a certificate as to whether Sierra Pacific is in
compliance with all the conditions and covenants under the Indenture.
MODIFICATIONS AND AMENDMENTS OF THE INDENTURE
Modifications and amendments to the Indenture may be made by Sierra Pacific
and the Debt Trustee with the consent of the holders of a majority in
principal amount of the Junior Subordinated DebenturesOutstanding Securities of any series or tranche, the
consent of whose Holders is required in order to take certain actions or modify
any of the above provisions or (h) alter, amend or modify Article Four of the
Indenture. (Section 1002(1) and (2))
The Holders of at least 66 2/3% in aggregate principal amount of the
time outstanding, PROVIDED,Outstanding Securities of each series or tranche may, on behalf of the Holders
of all the Securities of that noseries or tranche, waive, insofar as that series
or tranche is concerned, compliance by the Company with certain restrictive
provisions of the Indenture. (Section 1109) The Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities of each
series or tranche may, on behalf of all Holders of Securities of that series or
tranche, waive any past default and its consequences under the Indenture with
respect to Securities of that series or tranche, except a default (a) in the
payment of principal of (or premium, if any) or any interest on any Security of
such modificationseries or amendment may,tranche or (b) in respect of a covenant or provision of the
Indenture that cannot be modified or amended without the consent of the holderHolder
of each Junior Subordinated DebentureOutstanding Security affected thereby to: (i) modifythereby. (Section 613)
The Indenture provides that in determining whether the termsHolders of paymentthe
requisite principal amount of principal, premium, ifthe Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or interestwaiver thereunder or
(ii) reducewhether a quorum is present at a meeting of Holders of Securities or the percentagenumber
of holders of Junior Subordinated Debentures necessaryvotes entitled to modify or amend the
Indenture or waive compliance by Sierra Pacific with any covenant or past
default, PROVIDED, FURTHER, that if the Junior Subordinated Debentures are heldbe cast by the Trust or a trusteeHolder of any Security (i) the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding shall be the amount of the principal thereof that would be due and
payable as of the date of such Trust, such supplemental indenture shall not
be effective until the holders of a majority in liquidation preference of Trust
Securitiesdetermination upon acceleration of the TrustMaturity
thereof, and (ii) Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall have consentedbe
disregarded and deemed not to such supplemental indenture;
PROVIDED FURTHER, that ifbe Outstanding.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the holderHolders of each outstanding Junior
Subordinated Debenture is required, such supplemental indenture shall not be
effective until each holderany of the TrustOutstanding
Securities under the Indenture, may consolidate or merge with or into, or
transfer or lease its properties and assets substantially as an entirety to, any
Person that is a corporation, partnership or trust organized and validly
existing under the laws of any domestic jurisdiction, or may permit any such
Person to consolidate with or merge into the TrustCompany or convey, transfer or
lease its properties and assets substantially as an entirety to the Company,
provided that (a) any successor Person assumes the Company's obligations on the
Securities and under the Indenture, (b) after giving effect to the transaction
no Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have consentedoccurred and be continuing, (c) in
the case of any lease, such lease will be expressly subject to
such supplemental indenture.
SETOFF
Notwithstanding anything contained to13
termination by the contraryCompany or by the Trustee at any time during the continuance
of an Event of Default, and (d) certain other conditions are met. (Section 901)
NOTICES
Except as otherwise provided in the Indenture, Sierra
Pacific shall have the rightnotices to set off any payment with respectHolders of
Securities will be given by mail to the Junior
Subordinated Debentures it is otherwise required to make thereunder withaddresses of such Holders as they appear
in the Security Register. (Section 106)
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the registered owner of any Security as the absolute owner thereof
(whether or not such Security shall be overdue and notwithstanding any notice to
the extent Sierra Pacific has theretofore made, or is concurrently oncontrary) for the datepurpose of suchmaking payment making, a payment under the Guarantee.and for all other purposes.
(Section 308)
GOVERNING LAW
The Indenture and the Junior Subordinated DebenturesSecurities will be governed by, and construed in
accordance with, the internal laws of the State of New York.
MISCELLANEOUSYork, without regard to principles
of conflicts of laws thereof. (Section 113)
CONCERNING THE TRUSTEE
Bankers Trust Company will be the Trustee under the Indenture. Bankers
Trust Company also acts as issuing and paying agent with respect to the
Company's commercial paper program.
DESCRIPTION OF MORTGAGE BONDS
The Indenture will provide that Sierra Pacific will pay all fees and
expenses related to (i) the offeringfollowing summarizes certain provisions of the Trust SecuritiesMortgage Indenture and
the Junior
Subordinated Debentures, (ii)Mortgage Bonds, and reference is made to the organization, maintenance and dissolution of
Sierra Pacific Capital, (iii)Mortgage Indenture in its
entirety for the retentiondetailed provisions thereof.
GENERAL
In order to secure by the lien of the Regular TrusteesMortgage Indenture the obligation of
the Company to pay the principal of (and premium, if any) and (iv)interest on any
series or tranche of the enforcementSecurities in accordance with the terms thereof, the
Company will from time to time issue and deliver to and pledge with the Trustee,
in trust for the ratable benefit of the Holders of such series or tranche, one
or more series of Mortgage Bonds. For additional information concerning the
pledge of the Mortgage Bonds with the Trustee, see "Description of Debt
Securities--Security; Pledge of Mortgage Bonds".
14
SINKING OR IMPROVEMENT FUNDS
No series of the Mortgage Bonds will be entitled to the benefits of any
sinking fund provision unless applicable specifically to the Mortgage Bonds.
Such provisions are in effect with respect to certain other series of first
mortgage bonds outstanding under the Mortgage Indenture.
KIND AND PRIORITY OF LIEN
The Mortgage Bonds will be secured, equally and ratably with all first
mortgage bonds of other series now or hereafter outstanding, by a first lien on
substantially all properties and franchises owned by the InstitutionalCompany at October 31,
1940 and on property and franchises subsequently acquired which in each case are
used or useful in the business of furnishing electricity, water or gas, or in
any business incidental thereto or operated in connection therewith, except
properties released pursuant to the Mortgage Indenture and except certain
property in Nevada acquired after the filing of the Thirty-fifth Supplemental
Indenture with respect to the Mortgage Bonds, and before the filing of a
supplemental indenture specifically subjecting such property to such lien;
subject, however, to the lien of the Trustees for their compensation, expenses
and advances, to certain permitted liens, and to liens on after acquired
property existing at the time of acquisition or created in connection with the
purchase thereof. There are specifically excepted from the lien of the Mortgage
Indenture certain current assets, including accounts receivable, securities and
other personal property; timber; oil and other minerals; certain other property
owned at October 31, 1940; and all property subsequently acquired, not used or
useful to the Company in its utility business.
ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS AND WITHDRAWAL
OF CASH DEPOSITED AGAINST SUCH ISSUANCE
The maximum principal amount of first mortgage bonds which may be issued
under the Mortgage Indenture is not limited. Additional first mortgage bonds
of any series may be issued from time to time on the basis of (1) 60% of a
net amount of additional public utility property not theretofore funded
(i.e., gross property additions, including the Company's interest in jointly
owned property, less the excess of aggregate retirements over any credit for
substitution); (2) retirement of first mortgage bonds, not theretofore
funded; and (3) deposit of cash. With certain exceptions, the issuance of
first mortgage bonds is subject to net earnings available for interest for 12
consecutive months out of the preceding 15 months being at least 2 times the
annual interest requirements on all first mortgage bonds and all prior lien
debt to be outstanding. Cash deposited with the Trustee pursuant to (3)
above may be withdrawn in amounts equal to the amount of first mortgage bonds
issuable under (1) or (2) above or be applied to the retirement of first
mortgage bonds of any series. For the 12 months ended September 30, 1996,
the net earnings available for interest were 3.68 times such annual interest
requirements, which would permit the issuance of approximately $481.54
million principal amount of additional first mortgage bonds (after giving
effect to the issuance of the Mortgage Bonds) assuming the annual interest on
such additional first mortgage bonds is equal to 7.48%.
15
THE TRUSTEES
The written request of the holders of a majority of the aggregate
outstanding principal amount of the first mortgage bonds is necessary to require
the Trustees to exercise any remedy under the Mortgage Indenture; the Trustees
are entitled to receive reasonable indemnity and under certain circumstances are
not required to act.
DEFAULTS
A default is defined as (a) failure to pay interest for 90 days after
becoming due, (b) failure to pay principal when due, (c) failure to pay
principal or interest on any prior lien debt or satisfy any covenant or
condition in the instrument evidencing or securing any such prior lien debt if
any right of foreclosure or right of entry or of sale shall have arisen, (d)
failure for 90 days after notice to observe any other covenants or conditions,
including sinking fund obligations, in the Mortgage Indenture, (e) adjudication
of the Company as a bankrupt, entry of an order approving a reorganization
petition or appointment of a trustee or receiver in certain proceedings and the
continuance of such adjudication, order or appointment for 90 days, and (f) the
Company's admission of its inability to pay its debts, the Company's making of
an assignment for the benefit of creditors, or certain petitions or consents in
bankruptcy, insolvency or reorganization proceedings.
In addition, the Thirty-fifth Supplemental Indenture provides that if any
of the following events of default occurs under the Indenture, it shall be
deemed to be a default under the Mortgage Indenture as hereafter provided: (i)
default in the payment of any interest upon any Security when such interest
becomes due and payable shall be deemed to be a default in the due and punctual
payment of a like amount of interest on the Mortgage Bonds, (ii) default in the
payment of the principal of (or premium, if any, on) any Security at the stated
maturity thereof or upon redemption thereof shall be deemed to be a default in
the due and punctual payment of a like amount of principal of the Mortgage
Bonds, (iii) default in the deposit of any sinking fund payment when and as due
by the terms of a Security shall be deemed to be a default under the Mortgage
Indenture, (iv) a default in the performance, or breach, of any covenant or
warranty of the Company as described in Section 601(4) of the Indenture shall be
deemed to be a default under the Mortgage Indenture, (v) the occurrence of an
event described in Section 601(5) of the Indenture shall be deemed to be a
default under Section 10.01(e) of the Mortgage Indenture, (vi) the occurrence of
an event described in Section 601(6) of the Indenture shall be deemed to be a
default under Section 10.01(f) of the Mortgage Indenture and (vii) the
occurrence of an event of default provided in an indenture supplemental to the
Indenture shall be deemed to be a default under the Mortgage Indenture.
Upon a default, the Trustees may exercise any of their rights under the
Mortgage Indenture and upon direction of a majority of the outstanding first
mortgage bonds must so act if certain conditions are met.
MODIFICATION OF MORTGAGE AND WAIVER OF DEFAULT
The rights of the holders of first mortgage bonds may be modified with the
Preferred Securities. Theconsent of the holders of 75% of the first mortgage bonds, including, unless all
are affected alike, not less than 75% of each series affected; provided,
however, no modification of the terms of payment of such fees and expenses will be fully and
unconditionally guaranteed by Sierra Pacific. Sierra Pacific will have the right
at all times to assign any of its rightsprincipal or obligations under the Indenture to a
direct or indirect wholly owned
35
subsidiary of Sierra Pacific; provided that, in the eventinterest (other
than postponement of any such
assignment, Sierra Pacific will remain liableinterest payment date for
all such obligations. Subject16
not more than 3 years, which may be consented to by the foregoing, the Indenture will be binding upon and inure to the benefitholders of 75% of the
parties theretofirst mortgage bonds) and their respective successors and assigns.no modification depriving the holder of a lien on the
mortgaged property or reducing the percentage required for modification is
effective against any bondholder without his consent. Uncured defaults (except
in payment of principal or interest) may be waived by the holders of 75% of the
first mortgage bonds (including the holders of 60% of the first mortgage bonds
of each series).
VOTING OF THE MORTGAGE BONDS
The Trustee will attend such meetings of the holders of first mortgage
bonds, or deliver its proxy in connection therewith, as relate to matters with
respect to which it shall be entitled to vote or consent. The Indenture
provides that it may not otherwiseso long as no event of default shall have occurred and be
assigned by the parties thereto. The Debt
Trustee, prior to default, undertakes to perform only such duties as are
specifically set forth incontinuing under the Indenture, and, after default, shall exercise the same degree of careTrustee will vote or consent as a prudent individual would exercise in the conduct of his
or her own affairs. Subject to such provision, the Debt Trustee is under no
obligation to exercise anyholder of
the powers vested in it byDesignated Mortgage Bonds proportionately with what the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
satisfactory indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Debt Trustee is not required to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of its duties if the Debt Trustee reasonably
believes that
repayment or adequate indemnity is not reasonably assured to it.
EFFECT OF OBLIGATIONS UNDER THE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of Sierra Pacific Capital
is to issue the Trust Securities evidencing undivided beneficial interests in
the assets of Sierra Pacific Capital, and to invest the proceeds from such
issuance and sale in the Junior Subordinated Debentures.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the following
factors: (i) the aggregate principal amount of Junior Subordinated Debentures
will be equal to the sum of the aggregate stated liquidation amount of the Trust
Securities; (ii) the interest rate and the interest and other payment dates on
the Junior Subordinated Debentures will match the distribution rate and
distribution and other payment dates for the Preferred Securities; (iii)
pursuant to the Indenture and the Declaration Sierra Pacific shall pay all, and
the Trust shall not be obligated to pay, directlyvote or indirectly, any costs,
expenses, debt and obligations of the Trust (other than with respect to the
Trust Securities); and (iv) the Declaration further provides that the Regular
Trustees shall not take or cause or permit Sierra Pacific Capital to, among
other things, engage in any activity that is not consistent with the purposes of
Sierra Pacific Capital.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are fully and unconditionally guaranteed by Sierra Pacific. See
"Description of the Guarantee." If Sierra Pacific does not make interest
payments on the Junior Subordinated Debentures purchased by the Trust, the Trust
will not pay distributions on the Preferred Securities and will not have
sufficient funds available therefor. The Guarantee is a guarantee on a
subordinated basis with respect to the Preferred Securities issued by the Trust
from the time of its issuance and does not apply to any payment of distributions
unless and until the Trust has sufficient funds for the payment of such
distributions.
The Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that Sierra Pacific has made a
payment of interest or principal on the Junior Subordinated Debentures held by
the Trust as its sole asset. The Guarantee, when taken together with Sierra
Pacific's obligations under the Junior Subordinated Debentures, the Indenture
and the Declaration, including its obligations to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities),
provides a full and unconditional guarantee of amounts due on the Preferred
Securities.
If Sierra Pacific fails to make interest or other payments on the Junior
Subordinated Debentures when due (taking account of any Extension Period), the
Declaration provides a mechanism whereby the holders of the Preferred
Securities, using the procedures described in "Description of the Preferred
Securities -- Book-Entry Only Issuance -- The Depository Trust Company" and " --
Voting Rights," may direct the Institutional Trustee to enforce its rights under
the Junior Subordinated Debentures. If the Institutional Trustee fails to
enforce its rights under the Junior Subordinated Debentures, a holder of
Preferred Securities may institute a legal proceeding against Sierra Pacific to
enforce the Institutional Trustee's rights under the
36
Junior Subordinated Debentures without first instituting any legal proceeding
against the Institutional Trustee or any other person or entity. Notwithstanding
the foregoing, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of Sierra Pacific to pay interest
or principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption on the redemption
date), then a holder of Preferred Securities may institute a Direct Action for
payment on or after the respective due date specified in the Junior Subordinated
Debentures. In connection with such Direct Action, Sierra Pacific will be
subrogated to the rights of such holder of Preferred Securities under the
Declaration to the extent of any payment made by Sierra Pacific to such holder
of Preferred Securities in such Direct Action. Sierra Pacific, under the
Guarantee, acknowledges that the Guarantee Trustee shall enforce the Guarantee
on behalfconsent of the holders of the Preferred Securities. If Sierra Pacific fails to
make paymentsall other first mortgage
bonds outstanding under the Guarantee,Mortgage Indenture that will vote or consent,
provided, however, that the Guarantee provides a mechanism whereby
the holdersTrustee will not so vote in favor of, or so consent
to, any amendment or modification of the PreferredMortgage Indenture which, if it were an
amendment or modification of the Indenture, would require the consent of Holders
of Securities as described under "Description of Debt Securities--Modification
and Waiver," without the prior written consent of Holders of Outstanding
Securities which would be required for such an amendment or modification of the
Indenture.
RESTRICTIVE COVENANTS
Certain series of the Company's first mortgage bonds impose specific
dividend restrictions on the Company, the most restrictive of which currently
provides that so long as there are outstanding any bonds of such series, the
Company may directnot (a) declare or pay any dividend (other than dividends payable in
common stock of the Guarantee Trustee to
enforce its rights thereunder. Any holder of Preferred Securities may institute
a legal proceeding directly against Sierra Pacific to enforce such Preferred
Guarantee Trustee's right to receive payment under the Guarantee without first
instituting a legal proceeding against Sierra Pacific Capital, the Guarantee
Trustee,Company) on or make any other persondistribution in respect of any
shares of the common stock of the Company, or entity.
Sierra Pacific and(b) purchase, redeem, retire or
otherwise acquire for a consideration (other than in exchange for or from the
Trust believe thatproceeds of other shares of capital stock of the above mechanisms and
obligations, taken together, provide a full and unconditional guarantee by
Sierra PacificCompany) any shares of payments duecapital
stock of the Company of any class, except to the extent required to comply with
any sinking or purchase fund which may now exist or hereafter be established for
any class of preferred stock of the Company, if the aggregate amount so
declared, paid, distributed or expended after December 31, 1961 would exceed the
aggregate amount of the net income of the Company available for dividends on its
common stock accumulated after December 31, 1961, plus the Preferred Securities. See "Descriptionsum of Guarantee -- General."
37$1,900,000.
As each series of first mortgage bonds subject to this restriction matures or
otherwise ceases to be outstanding, the Securities will cease to have the
benefit of such series' restrictive covenants.
17
CERTAIN UNITED STATES FEDERAL INCOME TAXATION
GENERAL
In the opinion of Choate, Hall & Stewart (a partnership including
professional corporations), counsel to Sierra Pacific and the Trust ("Tax
Counsel"), theTAX CONSEQUENCES
The following is a summary ofdescribes certain of the material United States federal income tax
consequencesconsiderations that may be relevant to a holder of the purchase, ownership and dispositiona Debt Security who is
subject to United States federal income taxation on a net income basis in
respect of Preferred Securities. Unless otherwise stated, thisa Debt Security (an "Owner"). This summary deals only with PreferredOwners
who will hold Debt Securities held as capital assets by holders who purchase the
Preferred Securities upon original issuance ("Initial Holders"). Itand does not deal withaddress tax
considerations applicable to investors that may be subject to special classes of holderstax rules,
such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies,company, or dealers in securities, or currencies, tax-exempt investors, or persons thatwho will
hold the
PreferredDebt Securities as a position in a "straddle," as part of a "synthetic
security" or "hedge," as part of a "conversion transaction" or other integrated
investment, or as other than a capital asset. This summary also does not address
the"straddle" for tax consequences to persons that have a functional currency other than the
U.S. Dollar or the tax consequences to shareholders, partners or beneficiaries
of a holder of Preferred Securities. Further, it does not include any
description of any alternative minimum tax consequences or the tax laws of any
state or local government or of any foreign government that may be applicable to
the Preferred Securities.purposes.
This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), Treasurylaws, existing and proposed regulations,
thereunder and
administrative rules, and judicial interpretations thereof,decisions as of the date hereof, all of which
are subject to change, possiblychange. Prospective investors should consult their own tax
advisors in determining the tax consequences to them of holding Debt Securities,
including the application to their particular situation of the federal income
tax considerations discussed below, as well as the application of state, local
or other tax laws and prospects for enactment of future tax legislation or
regulations.
PAYMENTS OF INTEREST
Payments of interest on a retroactive basis.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
BasedDebt Security (other than a "Discount Security"
as defined below) will generally be taxable to an Owner as ordinary interest
income at the time such payments are accrued or are received in accordance with
the Owner's method of federal income tax accounting.
ORIGINAL ISSUE DISCOUNT
A Debt Security may be issued for an amount that is less than its stated
redemption price at Stated Maturity. The difference, if it exceeds 0.25 percent
of the stated redemption price at Stated Maturity multiplied by the number of
full years to maturity, will be "original issue discount" ("OID"). (Debt
Securities issued with OID shall be referred to as "Discount Securities.") For
this purpose, a Debt Security's stated redemption price at Stated Maturity
includes all payments to be made other than payments of "qualified stated
interest" (generally, interest payable on the advice of Tax Counsel, Sierra Pacific intends to take the
position that the Junior Subordinated Debenturesoutstanding principal amount at a
fixed rate or at a qualifying variable rate at least annually). Notice will be
classifiedgiven in the applicable Prospectus Supplement or pricing supplement thereto when
the Company determines that a particular Debt Security will be a Discount
Security.
Owners of Discount Securities should be aware that they must, in general,
include OID income in advance of the receipt of some or all of the related cash
payments. With respect to Discount Securities having a term in excess of one
year, the OID will be included in income currently as interest as it accrues
over the life of the Debt Security under a formula based upon the compounding of
interest at a rate that provides for United
Statesa constant yield to maturity. Accrued OID
must be included in income by subsequent as well as original owners of Discount
Securities. See "Premium and Market Discount" below.
In certain cases, where interest payments do not constitute qualified
stated interest under the applicable Treasury regulations, Debt Securities that
bear interest from a non-tax standpoint may be deemed instead to bear OID for
federal income tax purposes. Treasury regulations would characterize Debt
Securities as Discount Securities if, for example, such
18
Debt Securities provide for teaser rates, interest holidays, or other interest
short-falls resulting in more than a de minimis amount of OID, or bear interest
pursuant to an interest rate formula subject to a cap, floor, or similar
interest rate limitation that is reasonably expected, as of the date of issue,
to cause the interest rate for one or more accrual periods to be significantly
higher or lower (as the case may be) than the overall expected return on the
Debt Security determined without such cap, floor or other limitation.
Accordingly, Owners, including Owners who use the cash method of accounting for
federal income tax purposes, would be required to report interest in respect of
such a Debt Security under the method described above for Discount Securities.
Holders should consult their own tax advisors as indebtedness of Sierra Pacificto whether Debt Securities will
be considered to have been issued with OID under current law,such circumstances and by acceptance of a Preferred Security, each holder covenantsas to
the effect thereof on their particular situations.
Treasury Regulations provide an election for an Owner which uses the
accrual method to treat all interest on a Discount Security as OID which accrues
on a constant yield basis. Owners and prospective investors should consult
their tax advisors regarding the Junior Subordinated Debenturesavailability and tax consequences of this
election.
In the case of Discount Securities having a term of one year or less
("Short-Term Discount Securities"), OID is included in income currently either
on a straight-line basis or, if the Owner so elects, under the constant-yield
method used generally for OID. However, certain categories of Owners (generally
individuals or other taxpayers who use the cash method of accounting for federal
income tax purposes) are not required to include accrued OID on Short-Term
Discount Securities in their income currently unless they elect to do so. If
such an Owner that does not elect to currently include OID in income
subsequently recognizes a gain upon the disposition of the Discount Security,
such gain may be treated as ordinary interest income to the extent of the
accrued OID. Furthermore, such an Owner of Short-Term Discount Securities may
be required to defer deductions for a portion of the Owner's interest expenses
with respect to any indebtedness andincurred or maintained to purchase or carry
such a Discount Security. In the Preferredcase of Owners that are required to include
OID on Short-Term Discount Securities as evidencein income currently, the amount of an indirect beneficial ownership interestaccrued
OID included in income will be added to the Owner's tax basis in the Junior Subordinated Debentures. No assurance can be given, however, that such
positionDiscount
Security.
The Company will provide annual information statements to the holders of
Sierra Pacific will not be challenged byDiscount Securities and to the Internal Revenue Service or, if challenged, that such a challenge will not be successful. The
remainder of this discussion assumes thatregarding the Junior Subordinated Debentures
will be classified for United States income tax purposes as indebtedness of
Sierra Pacific.
CLASSIFICATION OF SIERRA PACIFIC POWER CAPITAL I
In connection with the issuance of the Preferred Securities, Tax Counsel
will render its opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Declaration and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, Sierra Pacific Capital will be classified for United
States federal income tax purposes as a grantor trust and not as an association
taxable as a corporation. Accordingly, for United States federal income tax
purposes, each holder of Preferred Securities generally will be considered the
owner of an undivided interest in the Junior Subordinated Debentures, and
pursuant to the agreement to treat the Junior Subordinated Debentures as
indebtedness, each holder will be required to include in its gross income any
OID accrued with respect to its allocable share of those Junior Subordinated
Debentures.
ORIGINAL ISSUE DISCOUNT
Because Sierra Pacific has the option, under the terms of the Junior
Subordinated Debentures, to defer payments of interest by extending interest
payment periods for up to 20 quarters, all of the stated interest payments on
the Junior Subordinated Debentures will be treated as "original issue discount."
Holders of debt instruments issued with OID must include that discount in income
on an economic accrual basis before the receipt of cash attributable to the
interest, regardless of their method of tax accounting. Generally, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures will be accounted for as OID, and actual distributions of stated
interest will not be separately reported as taxable income. The amount of
OID determined to be attributable to such Discount Securities for that accrues in any month will approximately equal the amount of the interest
that accrues on the Junior Subordinated Debentures in that month at the stated
interest rate. In the event that the
38
interest payment period is extended, holders will continue to accrue OID
approximately equal to the amount of the interest payment due at the end of the
extended interest payment period on an economic accrual basis over the length of
the extended interest period.
Because income on the Preferred Securities will constitute OID, corporate
holders of Preferred Securities will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Preferred
Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Preferred Securities other than Initial Holders may be considered
to have acquired their undivided interests in the Junior Subordinated Debentures
with market discount or acquisition premium as such phrases are defined for
United States federal income tax purposes. Such holdersyear.
Prospective investors are advised to consult their tax advisors asadvisers with respect to
the particular OID characteristics of any Discount Security and with respect to
any available elections that could affect the federal income tax consequences of
the acquisition,
ownership and disposition of the Preferredholding Discount Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF SIERRA
PACIFIC POWER CAPITAL I
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Tax Event Redemption or Distribution," Junior
Subordinated Debentures may be distributed to holders in exchange for the
Preferred Securities and in liquidation of Sierra Pacific Capital. Under current
law, such a distribution, for United States federal income tax purposes, would
be treated as a non-taxable event to each holder, and each holder would receiveBASIS, SALE, EXCHANGE AND RETIREMENT
In general, an aggregateOwner's tax basis in a Debt Security will equal the Junior Subordinated Debentures equal toOwner's
cost for the Debt Security, increased by any amounts includible in income by the
Owner as OID or market discount (as described below) and reduced by any
amortized acquisition premium (as described below) and any payments other than
qualified stated interest payments made on such holder's aggregate tax basis in its Preferred Securities. A holder's holding
period inDebt Security. Upon the Junior Subordinated Debentures so received in liquidationsale,
exchange or retirement of Sierra Pacific Capital would include the period during which the Preferred
Securities were held by such holder. If, however, the related special event is a Tax Event which results in the Trust being treated asDebt Security, an association taxable as
a corporation, the distribution would likely constitute a taxable event to
holders of the Preferred Securities.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Junior Subordinated Debentures may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption of
their Preferred Securities. Under current law, such a redemption would, for
United States federal income tax purposes, constitute a taxable disposition of
the redeemed Preferred Securities, and a holder could recognize gain or loss as
if it sold such redeemed Preferred Securities for cash. See "United States
Federal Income Taxation -- Sales of Preferred Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred SecuritiesOwner will recognize gain or loss
equal to the difference between its adjusted tax basis in the Preferred Securities and
the amount realized on the sale, of such Preferred Securities. A holder's
adjustedexchange or
retirement (less any accrued qualified periodic interest not previously taken
into account, which will be taxable as such) and the owner's tax basis in the
Preferred Securities generally will be its initial
purchase price increased by OID previously includible in such holder's gross
incomeDebt Security, except
19
with respect to the date of disposition and decreased by payments received on the
Preferredcertain Short-Term Discount Securities. SuchSee "Original Issue
Discount" above. Except as discussed below with respect to market discount,
gain or loss generallyrecognized by an owner on the sale, exchange or retirement of a
Debt Security will be a capital gain or loss
and generally will be a long-term capital gain or loss if the Preferred
Securities have beenowner has held the
Debt Security for more than one year.
The Preferred Securities may tradeyear at the time of disposition. In the case of
individuals, capital gains are currently taxed at a maximum marginal federal
income tax rate of 28% while ordinary income is subject to a maximum marginal
federal income tax rate of 39.6%. In the case of corporations, the maximum
marginal federal income tax rate is 35% for both ordinary income and capital
gains. The distinction between capital gain or loss and ordinary income or loss
is also relevant for purposes of limitations on the deductibility of capital
losses and for determining the allowance for charitable deductions.
PREMIUM AND MARKET DISCOUNT
An Owner who purchases a Discount Security for any amount that is greater
than its "adjusted issue price" (defined as the sum of the issue price of the
Discount Security and the portion of OID previously includible, disregarding any
reduction on account of acquisition premium, as discussed below, in the gross
income of any Owners of the Discount Security and reduced by the amount of any
payment previously made on the Discount Security other than a qualified stated
interest payment) and less than or equal to its stated redemption price at
Stated Maturity, reduced by the amount of any payment previously made on the
Discount Security other than a qualified stated interest payment, will be
considered to have purchased such Original Issue Discount Security at an
"acquisition premium." The amount of OID that does not accurately
reflectsuch Owner must include in its
gross income with respect to such Discount Security for any taxable year is
generally reduced by the valueportion of accrued but unpaidsuch acquisition premium properly allocable
to such year. If an Owner purchases a Debt Security for a cost in excess of its
stated redemption price at Stated Maturity (reduced by the amount of any payment
made on the debt instrument prior to the purchase date other than a qualified
stated interest payment), such Debt Security will have no OID, and such Owner
may elect to amortize such premium, using a constant interest method, generally
over the remaining term of the Debt Security. Such premium generally shall be
deemed to be an offset to interest otherwise includible with respect to the underlying
Junior Subordinated Debentures. A holder who disposesDebt
Security. Premium on a Debt Security held by an Owner that does not make such
an election will decrease the gain or increase the loss otherwise recognized on
disposition of his Preferred
Securities between record datesthe Debt Security.
If an Owner purchases a Debt Security or a Discount Security for paymentsan amount
that is less than, respectively, its stated redemption price at Stated Maturity
or its revised issue price (defined as the sum of distributions thereonthe issue price of the
Discount Security and the aggregate amount of OID includible, disregarding any
reduction on account of acquisition premium, as discussed above, in the gross
income of all owners of the Discount Security), the amount of the difference
generally will be treated as "market discount" for federal income tax purposes,
unless such difference is less than a specified de minimis amount. Under the
market discount rules, an Owner will be required to include accrued but unpaid interesttreat any principal payment
on, or any gain on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income, and to
add such amount to his adjusted tax basis in his pro rata share of the
underlying Junior Subordinated Debentures deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include,
in the form of OID, all accrued but unpaid interest) a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
39
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed the Proposed Legislation
which, among other things, would generally deny corporate issuers a deduction
for interest in respect of certain debt obligations issued on or after December
7, 1995 if such debt obligations have a maximum term in excess of twenty years
and are not shown as indebtedness on the issuer's applicable consolidated
balance sheet. On March 29, 1996, the Senate Finance Committee Chairman and the
House Ways and Means Committee Chairman issued the Joint Statement indicating
their intent that certain legislative proposals initiated by the Clinton
administration including the Proposed Legislation, that may be adopted by either
of the tax-writing committees of Congress would have an effective date that is
no earlier than the date of "appropriate Congressional action." Based upon the
Joint Statement, it is expected that if the Proposed Legislation were to be
enacted, such legislation would not apply to the Junior Subordinated Debentures.
There can be no assurances, however, that the effective date guidance contained
in the Joint Statement will be incorporated into the Proposed Legislation, if
enacted, or that other legislation enacted after the date hereof will not
otherwise adversely affect the ability of Sierra Pacific to deduct the interest
payable on the Junior Subordinated Debentures. Accordingly, there can be no
assurance that a Tax Event will not occur. See "Description of the Preferred
Securities -- Tax Event Redemption or Distribution."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership, or a non-resident fiduciary of a foreign estate or trust.
Under present United States federal income tax law: (i) payments by Sierra
Pacific Capital or any of its paying agents to any holder of a Preferred
Security who or which is a United States Alien Holder will not be subject to
United States federal withholding tax; provided that, (a) the beneficial owner
of the Preferred Security does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of Sierra Pacific
entitled to vote, (b) the beneficial owner of the Preferred Security is not a
controlled foreign corporation that is related to Sierra Pacific through stock
ownership, and (c) either (A) the beneficial owner of the Preferred Security
certifies to Sierra Pacific Capital or its agent, under penalties of perjury,
that it is not a United States holder and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"Financial Institution"), and holds the Preferred Security in such capacity,
that certifies to Sierra Pacific Capital or its agent, under penalties of
perjury, that such statement has been received from the beneficial owner by it
or by a Financial Institution between it and the beneficial owner and furnishes
Sierra Pacific Capital or its agent with a copy thereof; and (ii) a United
States Alien Holder of a Preferred Security will not be subject to United States
federal withholding tax on any gain realized upon the sale, exchange, retirement or other disposition of, a
PreferredDebt Security as ordinary income to the extent of the market discount that has
accrued (and has not previously been included in income) during the period such
Owner held the Debt Security. INFORMATION REPORTING TO HOLDERS
Generally, incomeIn addition, the Owner may be required to defer,
until the maturity of the Debt Security or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on the Preferred Securitiesany
indebtedness incurred or continued to purchase or carry such Debt Security.
20
Any market discount will be reportedconsidered to holdersaccrue ratably during the period
from the date of acquisition to the maturity date of the Debt Security, unless
the Owner elects to accrue on Forms 1099-OID,a constant interest basis. An Owner of a Debt
Security may elect to include market discount in income currently as it accrues
(on either a ratable or a constant interest basis with a corresponding increase
in the Owner's tax basis in the Debt Security), in which forms shouldcase the rule described
above regarding deferral of interest deductions will not apply. This election
to include currently, once made, applies to all market discount obligations
acquired on or after the first taxable year to which the election applies and
may not be mailed to holdersrevoked without the consent of Preferred Securities
by January 31 following each calendar year.the Internal Revenue Service.
BACKUP WITHHOLDING
Payments madeIn general, if a holder fails to furnish a correct taxpayer identification
number or certification of exempt status, fails to report dividend and interest
income in full, or fails to certify that he has provided a correct taxpayer
identification number and that he is not subject to withholding, the Company may
withhold a 31 percent federal backup withholding tax on certain amounts paid or
deemed paid (including OID) to the holder. An individual's taxpayer
identification number is his social security number. The backup withholding tax
is not an additional tax and proceeds frommay be credited against a holder's regular federal
income tax liability or refunded by the Internal Revenue Service where
applicable.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters or dealers
and also may sell Debt Securities directly or through agents. The Prospectus
Supplement or the pricing supplement thereto will set forth the names of any
underwriters or agents involved in the sale of the PreferredOffered Securities and any
applicable commissions or discounts.
Underwriters, dealers or agents may offer and sell the Offered Securities
at a fixed price or prices, which may be subjectchanged, or from time to a "backup" withholding taxtime at market
prices prevailing at the time of 31% unlesssale, at prices related to such prevailing
market prices or at negotiated prices. In connection with the holder complies
with certain identification requirements. Any withheld amounts willsale of Offered
Securities, underwriters, dealers or agents may be allowed
as a credit againstdeemed to have received
compensation from the holder's United States federal income tax, providedCompany in the required information is provided to the Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
40
PLAN OF DISTRIBUTION
Subject to the termsform of underwriting discounts or
commissions and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to eachmay also receive commissions from purchasers of the
underwriters named below (the "Underwriters"), and each of the Underwriters,Offered
Securities for whom Merrill Lynch & Co. and Merrill, Lynch, Pierce, Fenner & Smith Incorporated
are actingthey may act as representative (the "Representative"), has severally agreedagent. Underwriters or agents may sell
Offered Securities to purchase the number of Preferred Securities set forth opposite its name below.
In the Underwriting Agreement, the several Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the Preferred
Securities offered hereby if any of the Preferred Securities are purchased,
provided that, under certain circumstances relating to a default of one or more
Underwriters, less than all of such Preferred Securities may be purchased.
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
- -------------------------------------------------------------------------- ------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated........................
Dean Witter Reynolds Inc..................................................
A.G. Edwards & Sons, Inc..................................................
Legg Mason Wood Walker Incorporated.......................................
----------
Total................................................................. 1,940,000
----------
----------
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price, as set forth on the cover
page of this Prospectus, and in part to certain securitiesthrough dealers, at such price
less a concession of $.[ ] per Preferred Security. The Underwriters may allow, and such dealers may reallow, a concession notreceive
compensation in excessthe form of $.[ ] per
Preferred Security to certain brokers and dealers. Afterdiscounts, concessions or commissions from the
Preferred
Securities are released for sale to the public, the offering price and other
selling termsunderwriters and/or commissions (which may be changed from time to time be variedtime) from
the purchasers for whom they may act as agent.
The Offered Securities, when first issued, will have no established trading
market. Any underwriters, dealers or agents to or through whom Offered
Securities are sold by the Representative.
In view of the fact that the proceeds of theCompany for public offering and sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures of Sierra
Pacific, the Underwriting Agreement provides that Sierra Pacific will agree to
pay as compensation ("Underwriters' Compensation") to the Underwriters for the
Underwriters' arranging the investment therein of such proceeds, an amount in
New York Clearing House (next day) funds of $[ ] per Preferred Security (or
$[ ] in the aggregate) for the accounts of the several Underwriters,
provided that such compensation for sales of 10,000 or more Preferred Securities
to any single purchaser will be $[ ] per Preferred Security. Therefore, to
the extent of such sales, the actual amount of Underwriters' Compensation will
be less than the aggregate amount specified in the preceding sentence.
During a period of 30 days from the date of the pricing of the Preferred
Securities, neither the Trust nor Sierra Pacific will, without the prior written
consent of the Representative, directly or indirectly, sell, offer to sell,
contract to sell, grant any option for the sale of, or otherwise dispose of, any
Preferred Securities, any security convertible into or exchangeable into or
exercisable for Preferred Securities or the Junior Subordinated Debentures or
any debt securities substantially similar to the Junior Subordinated Debentures
or any equity securities substantially similar to the Preferred Securities
(except for the Junior Subordinated Debentures and the Preferred Securities).
An application has been filed with the New York Stock Exchange for the
listing of the Preferred Securities, subject to official notice of issuance. If
approved for listing, trading of the Preferred Securities on
41
the New York Stock Exchange is expected to commence within a 30 day period after
the date of this Prospectus. The Representative has advised the Trust that the
Underwriters intend tomay make a
market in the Preferredsuch Offered Securities, priorbut such underwriters, dealers or agents will
not be obligated to do so and may discontinue any market making at any time
without notice. No assurance can be given as to the commencementliquidity of the trading
on the New York Stock Exchange. The Underwriters will
have no obligation to make a market for any Offered Securities.
Any underwriters, dealers and agents participating in the Preferred Securities, however, and
may cease market making activities, if commenced, at any time.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet onedistribution of
the requirements for listing the PreferredOffered Securities on the New York Stock Exchange, the Underwriters will undertake to
sell to a minimum of 400 beneficial holders.
Sierra Pacific and the Trust have agreed to indemnify the Underwriters
against, or to contribute to payments that the Underwriters may be requireddeemed to make in respectbe underwriters and any discounts and
commissions received by them and any profit realized by them on resale of the
Offered Securities may be deemed
21
to be underwriting discounts and commissions, under the Act. Underwriters,
dealers and agents may be entitled, under agreements with the Company, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Act, and to reimbursement by the Company for
certain expenses.
If so indicated in an applicable Prospectus Supplement or pricing
supplement thereto, the Company will authorize dealers acting as the Company's
agents to solicit offers by certain institutions to purchase Offered Securities
Act.
Certainfrom the Company at the public offering price set forth in such Prospectus
Supplement or pricing supplement thereto pursuant to contracts providing for
payment and delivery on a future date. Institutions with which such contracts
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and other
institutions, but in all cases such institutions must be approved by the
Company. The obligations of any purchaser under any such contract will be
subject to the condition that the purchase of the Underwriters engage in transactions with, and, fromOffered Securities shall not
at the time to
time, have performed services for, Sierra Pacificof delivery be prohibited under the laws of any jurisdiction in the
ordinary course of
business.
LEGAL MATTERSUnited States to which such institution is subject. The validityunderwriters and such
other persons will not have any responsibility in respect of the Preferred Securities, Junior Subordinated Debentures,
the Guarantee and certain matters relating thereto and certain United States
federal income taxation matters will be passed upon for Sierra Pacific and
Sierra Pacific Capital by Choate, Hall & Stewart (a partnership including
professional corporations), Boston, Massachusetts, counsel to Sierra Pacific.
Matters of local law are being passed upon by Woodburn and Wedge, special Nevada
counsel for Sierra Pacific, by Graham & James LLP, special California counsel
for Sierra Pacific, and with respect to certain matters of Delaware law by
Skadden, Arps, Slate, Meagher & Flom, special counsel to the Underwriters.
Choate, Hall & Stewart has relied upon the opinionsvalidity or
performance of such other counsel as to
such matters. Certain legal matters will be passed upon for the Underwriters by
Ropes & Gray, Boston, Massachusetts.
INDEPENDENT ACCOUNTANTScontracts.
EXPERTS
The balance sheets and statements of capitalization of Sierra Pacificthe Company as of
December 31, 1995 and 1994, and the statements of income, common shareholders'shareholder's
equity and cash flows for each of the three years in the period ended December
31, 1995, incorporated by reference in this Prospectus,prospectus, have been incorporated
by reference in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in auditing and
accounting.
Any financial statements and schedules hereafter incorporated by reference
in the registration statement of which the Prospectusthis prospectus is a part that have been
audited and are the subject of a report by independent accountants will be so
incorporated by reference in reliance upon such reports and upon the authority
of such firmfirms as experts in accounting and auditing to the extent covered by
consents filed with the Commission.
The statements made as to matters of law and legal conclusions under
the headings "Description of Debt Securities", "Description of Mortgage
Bonds" and "Certain United States Federal Income Tax Consequences" contained
herein have been reviewed by Choate, Hall & Stewart (a partnership including
professional corporations) and all such statements are set forth herein upon
the authority of such counsel.
ADDITIONAL INFORMATION
With respect to the unaudited interim financial information of the Company
for the periodperiods ended March 31, June 30, and September 30, 1996, incorporated by
reference in this prospectus, the independent accountants have reported that
they have applied limited procedures in accordance with professional standards
for a review of such information. However, their reports included in the
Company's quarterly reportreports on Form 10-Q for the quarterly periodperiods ended March
31, June 30, and September 30, 1996 and incorporated by reference herein, state
that they did not audit and they do not express an opinion on that
22
interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted in light of the limited nature
of the review procedures applied. The accountants are not subject to the
liability provisions of Section 11 of the Act for their reports on the unaudited
interim financial information because those reports are not "reports" or "parts"
of the registration statement prepared or certified by the accountants within
the meaning of Sections 7 and 11 of the Act.
42LEGAL OPINIONS
The legality of the Debt Securities offered hereby is being passed upon for
the Company by Choate, Hall & Stewart (a partnership including professional
corporations), Boston, Massachusetts and for the underwriters or agents, if any,
by Ropes & Gray, Boston, Massachusetts. Matters of local law are being passed
upon as to the State of Nevada by Woodburn and Wedge, Reno, Nevada, and as to
the State of California by Graham & James LLP. Choate, Hall & Stewart has
relied upon the opinions of such other counsel as to such matters.
23
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------=================================== =================================
NO DEALER, AGENT, SALESPERSON OR
ANY OTHER INDIVIDUALPERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, SIERRA PACIFIC
PROSPECTUS SUPPLEMENT AND ANY PRICING POWER
SUPPLEMENT IN CONNECTION WITH THE COMPANY
OFFER MADE
BY THIS PROSPECTUSCONTAINED HEREIN AND, IF GIVEN
OR MADE, SUCH INFORMATION OR
REPRESENTATIONREPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY SIERRA PACIFIC POWERTHE
COMPANY SIERRA PACIFIC POWER CAPITAL I, OR THE UNDERWRITERS. NEITHER THE
DELIVERY OFBY ANY AGENT. THIS
PROSPECTUS, NORPROSPECTUS SUPPLEMENT AND
ANY SALE MADE HEREUNDERPRICING SUPPLEMENT SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF SIERRA PACIFIC POWER COMPANY OR SIERRA PACIFIC POWER CAPITAL I SINCE THE DATE
HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE $35,000,000
SOLICITATION BY ANYONEOF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THE PROSPECTUS,
PROSPECTUS SUPPLEMENT OR ANY PRICING
SUPPLEMENT, OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY
STATECIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZEDUNLAWFUL. NEITHER THE
DELIVERY OF THE PROSPECTUS, PROSPECTUS Collateralized Debt
SUPPLEMENT OR IN WHICHANY PRICING SUPPLEMENT Securities
NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE PERSON MAKING SUCH OFFERINFORMATION CONTAINED HEREIN
OR SOLICITATIONTHEREIN IS NOT QUALIFIEDCORRECT AS OF ANY TIME
SUBSEQUENT TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------THEIR RESPECTIVE DATES.
PROSPECTUS
DECEMBER ___, 1996
TABLE OF CONTENTS
PAGE
-----
Available Information.......................... 4
Incorporation of Certain Documents by
Reference..................................... 4
Sierra Pacific Power Company Selected
Historical Financial Information.............. 6
Sierra Pacific Power Company................... 8
Sierra Pacific Power Capital I................. 9
Risk Factors................................... 10
Accounting Treatment........................... 13
Use of Proceeds................................ 14
Description of the Preferred Securities........ 14
Description of the Guarantee................... 25
Description of the Junior Subordinated
Debentures.................................... 27
Effect of Obligations Under the Junior
Subordinated Debentures and the Guarantee..... 36
United States Federal Income Taxation.......... 38
Plan of Distribution........................... 41
Legal Matters.................................. 42
Independent Accountants........................ 42
Additional Information......................... 42
1,940,000
PREFERRED SECURITIES
SIERRA PACIFIC POWER
CAPITAL I
% TRUST ORIGINATED
PREFERRED SECURITIES ("TOPRS")
FULLY AND UNCONDITIONALLY GUARANTEED BY
SIERRA PACIFIC
POWER COMPANY
---------------------
PROSPECTUS SUPPLEMENT
---------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
LEGG MASON WOOD WALKER
INCORPORATED
JULY , 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------Page
-----
Available Information . . . . . . . . 2
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . 3
Application of Proceeds . . . . . . . 4
Ratios of Earnings to Fixed Charges . 4
Description of Debt Securities. . . . 4
Description of Mortgage Bonds . . . . 14
Certain United States Federal Income
Tax Consequences . . . . . . . . . 18
Plan of Distribution . . . . . . . . 21
Experts . . . . . . . . . . . . . . . 22
Additional Information. . . . . . . . 22
Legal Opinions . . . . . . . . . . . 23
=================================== =================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.DISTRIBUTION
Expenses payable by the Company in connection with the sale of the Debt
Securities offered hereby are as follows:
Securities and Exchange Commission
Registration Fee.................. $16,725
New York Stock Exchange Listing Fee.................................. 14,750*Fee . . . . . . . . . . . $10,607
* Blue sky fees and expenses . . . . . . 10,000
Nevada Commission Fee................................................ 200Fee . . . . . . . . . 140
California Commission Fee............................................ 5,203
Rating Agency Fees................................................... 22,665*
Blue SkyFee . . . . . . . 6,500
* Fees and Expenses........................................... 7,000*
Trustee's Expenses................................................... 12,000*
Printingexpenses of Trustees . . . . . 4,000
* Fees and Expenses........................................... 40,000*
Accountingexpenses of Trustees' Counsel 30,000
* Fees and Expenses......................................... 14,000*
Legalexpenses of Agents' Counsel . 20,000
* Fees and Expenses.............................................. 149,500*expenses of Company's Counsel
(Special Counsel, California and Nevada
Counsel) . . . . . . . . . . . . . . . 65,000
* Accountant's fees and expenses . . . . 10,000
* Printing, including Form S-3,
prospectuses, exhibits, etc. . . . . . 20,000
* Rating agency fees . . . . . . . . . . 55,000
* Miscellaneous Expenses............................................... 7,957*expenses . . . . . . . . 4,753
-------------
* Total Expenses....................................................... $290,000*
_______________________________Expenses . . . . . . $236,000
-------------
-------------
- ---------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Nevada Revised statutes provide that under certain circumstances, a
corporation may indemnify any person for amounts incurred in connection with
a pending or threatened action, suit or proceeding in which he is, or is
threatened to be made, a party by reason of his being a director, officer,
employee or agent of the Corporation.
The Articles of Incorporation of Sierra Pacific provide in substance that
Sierra Pacific will indemnify each of its directors and officers and former
directors and officers against expenses necessarily incurred in connection
with the defense of any action, suit or proceeding in which he or she is made
a party by reason of being or having been a director or officer of Sierra
Pacific, except in relation to matters as to which he or she shall be
adjudged liable for negligence or misconduct.
Sierra Pacific has purchased insurance coverage under a policy insuring
directors and officers of Sierra Pacific against certain liabilities which
they may incur in their capacity as such.
The Declaration of the Sierra Pacific Trust provides that no Sierra
Pacific Trustee, affiliate of the Sierra Pacific Trustee, or any officers,
directors, shareholders, members, partners, employees, representatives or
agents of any Sierra Pacific Trustee, or any employee or agent of the Sierra
Pacific Trust or its affiliates (each an "Indemnified Person") shall be
liable, responsible or accountable in damages or otherwise to the Sierra
Pacific Trust or any employee or agent of the Trust or its affiliates for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Sierra
Pacific Trust and in a manner such Indemnified Person reasonably believed to
be within the scope of the authority conferred on such Indemnified Person by
the Declaration or by law, except that an Indemnified Person shall be liable
for any such loss,
II-1
damage or claim incurred by reason of such Indemnified Person's negligence or
willful misconduct withrespect to such acts or omissions. The Declaration of
the Sierra Pacific Trust also provides that to the fullest extent permitted
by applicable law, Sierra Pacific shall indemnify and hold harmless each
Indemnified Person from and against any loss, damage or claim incurred by
such Indemnified Person by reason of any act or omission performed or omitted
by such Indemnified Person in good faith on behalf of the Sierra Pacific
Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of authority conferred on such Indemnified Person by such
Declaration, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of the negligence of such Indemnified Person or
willful misconduct with respect to such acts or omissions. The Declaration
of the Sierra Pacific Trust further provides that, to the fullest extent
permitted by applicable law, expenses (including legal fees) incurred by an
Indemnified Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by Sierra Pacific prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
or an undertaking by or on behalf of the Indemnified Person to repay such
amount if it shall be determined that the Indemnified Person is not entitled
to be indemnified for the underlying cause of action as authorized by the
Declaration.
The directors and officers of Sierra Pacific and the Regular Trustees are
covered by insurance policies indemnifying against certain liabilities,
including certain liabilities arising under the Securities Act of 1933, as
amended, which might be incurred by them in such capacities and against which
they cannot be indemnified by Sierra Pacific or the Sierra Pacific Trust.
Any agents, dealers or underwriters who execute any of the agreements
filed as Exhibit I to this registration statement will agree to indemnify
Sierra Pacific's directors and their officers and the Sierra Pacific Trustees
who signed the registration statement against certain liabilities that may
arise under the Securities Act of 1993, as amended, with respect to
information furnished to Sierra Pacific or the Sierra Pacific Trust by or on
behalf of any such indemnifying party.
See "Item 17. Undertakings." for a description of the Securities and
Exchange Commission's position regarding such indemnification provisions.
ITEM 16. EXHIBITS.EXHIBITS
See Index to Exhibits immediately preceding the Exhibits included as part
of this Registration Statement.
ITEM 17. UNDERTAKING.
The Registrants hereby undertake that, for purposes of determining any
liability under the Securities Act, each filing of Sierra Pacific's Annual
Report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (and where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d)
of the Exchange Act) that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the provisions referred to in Item 15Pre-Effective Amendment.
II-2
(other than the insurance policies referred to therein), or otherwise, the
Registrants have been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer or
controlling person of the Registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the Plan of
Distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a post
effective amendment by those paragraphs is contained in periodic reports
filed by Sierra Pacific pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The Registrants hereby undertake that:
II-3
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrantregistrant
certifies that it has reasonable grounds to believe that it meets the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the Cityall of Reno, State of Nevada, on July 5, 1996.
SIERRA PACIFIC POWER COMPANY
By: /s/ Walter M. Higgins
----------------------------
(Walter M. Higgins)
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Walter M. Higgins Chairman, President and July 5, 1996
- ------------------------- Chief Executive Officer
Walter M. Higgins (Principal Executive Officer)
and Director
/s/ Malyn K. Malquist Senior Vice President, Chief July 5, 1996
- ------------------------- Financial Officer (Principal
Malyn K. Malquist Financial Officer) (Principal
Accounting Officer)
Edward P. Bliss* Director July 5, 1996
- -------------------------
Edward P. Bliss
Krestine M. Corbin* Director July 5, 1996
- -------------------------
Krestine M. Corbin
Theodore J. Day* Director July 5, 1996
- -------------------------
Theodore J. Day
Harold P. Dayton, Jr.* Director July 5, 1996
- -------------------------
Harold P. Dayton, Jr.
James R. Donnelley* Director July 5, 1996
- -------------------------
James R. Donnelley
Richard N. Fulstone* Director July 5, 1996
- -------------------------
Richard N. Fulstone
II-5
James L. Murphy* Director July 5, 1996
- -------------------------
James L. Murphy
Ronald K. Remington* Director July 5, 1996
- -------------------------
Ronald K. Remington
Dennis E. Wheeler* Director July 5, 1996
- -------------------------
Dennis E. Wheeler
Robert B. Whittington* Director July 5, 1996
- -------------------------
Robert B. Whittington
* By /s/ Malyn K. Malquist
------------------------
Malyn K. Malquist
Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Sierra
Pacific Power Capital I certifies that it has reasonable grounds to believe
that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Reno, State of Nevada, on the 5th18th day of July,December,
1996.
SIERRA PACIFIC POWER CAPITAL I
By:COMPANY
By /s/ Walter M. Higgins
-----------------------------------
Walter M. Higgins, Chairman,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Walter M. Higgins, Malyn K.
Malquist, William E. Peterson and William C. Rogers and each of them, as his or
her true and lawful attorneys-in-fact and agents, with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Walter M. Higgins Chairman, President and December 16, 1996
--------------------- Chief Executive Officer
Walter M. Higgins (Principal Executive
Officer) and Director
/s/ Malyn K. Malquist ----------------------------Senior Vice President, December 16, 1996
--------------------- Distribution Services
Malyn K. Malquist Trustee
By:Business Group and Acting
Chief Financial Officer
(Principal Financial Officer)
(Principal Accounting Officer)
Edward P. Bliss* Director December 16, 1996
---------------------
Edward P. Bliss
II-3
Signature Title Date
--------- ----- ----
Krestine M. Corbin* Director December 16, 1996
-------------------------
Krestine M. Corbin
Theodore J. Day* Director December 16, 1996
-------------------------
Theodore J. Day
Harold P. Dayton, Jr.* Director December 16, 1996
-------------------------
Harold P. Dayton, Jr.
James R. Donnelley* Director December 16, 1996
-------------------------
James R. Donnelley
Richard N. Fulstone* Director December 16, 1996
-------------------------
Richard N. Fulstone
James L. Murphy* Director December 16, 1996
-------------------------
James L. Murphy
Director December , 1996
-------------------------
Ronald K. Remington
Director December , 1996
-------------------------
Dennis E. Wheeler
Robert B. Whittington* Director December 16, 1996
-------------------------
Robert B. Whittington
*By /s/ William E. Peterson
----------------------------
William E. Peterson, Trustee
II-6Malyn K. Malquist
-----------------------
Malyn K. Malquist
Attorney-in-fact
II-4
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
-----------
*1# 1.1 - Form of UnderwritingDistribution Agreement for offeringby and among the
Company and the Agents.
* 4.1 - Collateral Trust Indenture dated as of Preferred
Securities.
*4-AJune 1, 1992
between the Company and Bankers Trust Company, in
its capacity as Trustee (Exhibit B to Form 8-K
dated July 15, 1992).
* 4.2 - CertificateFirst Supplemental Indenture dated as of June 1,
1992 to Collateral Trust Indenture dated as of Sierra Pacific Power Capital I.
*4-B-1June
1, 1992 between the Company and Bankers Trust
Company, as Trustee (Exhibit B to Form 8-K dated
July 15, 1992).
* 4.3 - DeclarationSecond Supplemental Indenture to Collateral Trust
Indenture dated as of June 1, 1992 between the
Company and Bankers Trust Company, as Trustee
(Exhibit B to Form 8-K dated October 25, 1993).
* 4.4 - Third Supplemental Indenture to Collateral Trust
Indenture dated as of Sierra Pacific Power Capital I.
*4-B-2February 1, 1996 between the
Company and Bankers Trust Company, as Trustee
(Exhibit B to Form 8-K dated March 11, 1996).
# 4.5 - Form of Amended and Restated Declaration ofFourth Supplemental Indenture to Collateral
Trust of Sierra
Pacific Power Capital I.
*4-C - Form of Indenture among Sierra Pacific Powerbetween the Company and IBJ
Schroder Bank &Bankers
Trust Company, as Trustee.
*4-D* 4.6 - Form of Supplemental IndentureMedium-Term Global Floating Rate Note,
Series A (Exhibit E to Indenture to be used in
connection with the issuance of Junior Subordinated
Debentures and Preferred Securities.
*4-EForm 8-K dated July 15,
1992).
* 4.7 - Form of Preferred Security (included in 4-B-2 above)Medium-Term Global Floating Rate Note,
Series B (Exhibit D to Form 8-K dated October 25,
1993).
*4-F* 4.8 - Form of Junior Subordinated Debenture (included in 4-D above)Medium-Term Global Floating Rate Note,
Series C (Exhibit D to Form 8-K dated March 11,
1996).
*4-G* 4.9 - Mortgage Indentures of the Company defining the
rights of the holders of the Company's First
Mortgage Bonds - Original Indenture (Exhibit 7-A to
Registration No. 2-7475); Sixth Supplemental
Indenture (Exhibit 4-F to Registration No. 2-
16157); Seventh Supplemental Indenture (Exhibit 2-G
to Registration No. 2-20365); Eighth Supplemental
Indenture (Exhibit 4-I to Registration No. 2-
21479); Ninth Supplemental Indenture (Exhibit 2-M
to Registration No. 2-59509); Tenth Supplemental
Indenture(Exhibit 4-K to Registration No. 2-
23932); Eleventh Supplemental Indenture (Exhibit 4-
L to Registration No. 2-26552); Twelfth
Supplemental Indenture (Exhibit 4-L to Registration
No. 2-36982); Fourteenth Supplemental Indenture
(Exhibit 2-P to Registration No. 2-46592);
Fifteenth Supplemental Indenture (Exhibit 2-Q to
EXHIBIT
NO. DESCRIPTION
- ------- -----------
Registration No. 2-51862); Sixteenth Supplemental
Indenture (Exhibit 2-Y to Registration No. 2-
53404); Seventeenth Supplemental Indenture (Exhibit
2-U to Registration No. 2-57033); Eighteenth
Supplemental Indenture (Exhibit 2-V to Registration
No. 2-60954); Nineteenth Supplemental Indenture
(originally filed as Exhibit (2)(B) to Annual
Report on Form 10-K filed for the year ended
December 31, 1978 - refiled as Exhibit 4(A) to
Annual Report on Form 10-K filed for the year ended
December 31, 1991); Twentieth Supplemental
Indenture (originally filed as Exhibit (2)(C) to
Annual Report on Form 10-K filed for the year ended
December 31, 1978 - refiled as Exhibit 4(B) to
Annual Report on Form 10-K filed for the year ended
December 31, 1991); Twenty-first Supplemental
Indenture (originally filed as Exhibit (2)(B) to
Annual Report on Form 10-K filed for the year ended
December 31, 1979 - refiled as Exhibit 4(C) to
Annual Report on Form 10-K filed for the year ended
December 31, 1991); Twenty-fourth Supplemental
Indenture (originally filed as Exhibit (a)(4) to
Quarterly Report on Form 10-Q filed for the quarter
ended September 30, 1982 - refiled as Exhibit 4(D)
to Annual Report on Form 10-K filed for the year
ended December 31, 1991); Twenty-fifth Supplemental
Indenture (Exhibit 4-B to Registration No. 33-
6226); Twenty-sixth Supplemental Indenture (Exhibit
4-B to Registration No. 33-23129); Twenty-seventh
Supplemental Indenture (Exhibit (4)(A) to Annual
Report on Form 10-K filed for the year ended
December 31, 1989); Twenty-eighth Supplemental
Indenture (Exhibit 4.3 to Registration No. 33-
48414); Twenty-ninth Supplemental Indenture
(Exhibit D to Form 8-K dated June 15, 1992);
Thirtieth Supplemental Indenture (Exhibit 4(B) to
Annual Report on Form 10-K filed for the year ended
December 31, 1992); Thirty-first Supplemental
Indenture (Exhibit 4(C) to Annual Report on Form
10-K filed for the year ended December 31, 1992);
Thirty-second Supplemental Indenture (Exhibit 4.6
to Registration No. 33-69550); Thirty-third
Supplemental Indenture (Exhibit C to Current Report
on Form 8-K dated October 20, 1993); Thirty-fourth
Supplemental Indenture (Exhibit C to Current Report
on Form 8-K dated March 11, 1996).
# 4.10 - Form of Guarantee with respect to Preferred Securities.
*5-A - Opinion of Choate, Hall & Stewart.
*5-B - Opinion of Woodburn and Wedge.
*5-C - Opinion of Graham & James L.L.P.
*5-D - Opinion of Skadden, Arps, Slate, Meager & Flom.
*8-AThirty-fifth Supplemental Indenture.
# 5.1 - Opinion of Choate, Hall & Stewart *12(a partnership
including professional corporations).
# 5.2 - ComputationsOpinion of RatioWoodburn and Wedge.
# 5.3 - Opinion of EarningsGraham & James LLP.
#12.1 - Statement setting forth computation of ratio of
earnings to Fixed Charges of Sierra
Pacific Power Company and Ratio of Earnings to Fixed Charges
and Preferred Dividends of Sierra Pacific Power Company.
*15fixed charges.
2
EXHIBIT
NO. DESCRIPTION
- Letter concerning------- -----------
#15.1 - Awareness letter from Coopers & Lybrand L.L.P.
regarding their reports on unaudited interim
financial information from Independent Accountants,included in the Quarterly
Report of the Company on Form 10-Q for the
quarterly periods ended March 31, 1996, June 30,
1996 and September 30, 1996.
#23.1 - Consent of Coopers & Lybrand L.L.P.
23-A - Consent of Independent Accountants, Coopers & Lybrand L.L.P.
*23-B#23.2 - Consent of Choate, Hall & Stewart (a partnership
including professional corporations) (included in
Exhibit 5-A)5.1).
*23-C#23.3 - Consent of Woodburn and Wedge (included in Exhibit
5-B)5.2).
*23-D#23.4 - Consent of Graham & James L.L.P.LLP (included in Exhibit
5-C)5.3).
*23-E+24.1 - ConsentPower of Skadden, Arps, Slate, Meager & Flom (included in
Exhibit 5-D).
*24 - PowersAttorney of Attorney.
II-7
EXHIBIT NO. DESCRIPTION
- ----------- -----------
*25-ADirectors of the Company.
Reference is made to the signature page of the
Registration Statement.
+25.1 - Form T-1 Statement of Eligibility and Qualification
under the Trust Indenture Act of 1939 of Bankers
Trust Company.
__________
* Incorporated by reference as amended of IBJ Schroder Bank & Trust
Company, as Trustee under the Indenture.
*25-B - Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended of IBJ Schroder Bank & Trust
Company, as Trustee under the Amended and Restated
Declaration of Trust of Sierra Pacific Power Capital I.
*25-C - Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of IBJ Schroder Bank & Trust
Company, as Trustee of the Preferred Securities Guarantees
of Sierra Pacific Power Company for the benefit of the
holders of Preferred securities of Sierra Pacific Power
Capital I.
____________________________
*indicated.
+ Previously filed.
II-8# Filed herewith.