FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1995 Commission File No. 1-4698
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Nevada Power Company
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(Exact name of registrant as specified in its charter)
Nevada 88-0045330
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6226 West Sahara Avenue, Las Vegas, Nevada 89102
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(Address of principal executive offices) (Zip Code)
(702) 367-5000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
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Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
Common Stock outstanding April 30, 1995, 45,891,087 shares.
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PART I. FINANCIAL INFORMATION
STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
FOR THE THREE MONTHS
ENDED MARCH 31,
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1995 1994
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ELECTRIC REVENUES......................................... $145,184 $144,658
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OPERATING EXPENSES AND TAXES:
Fuel ............................................... 22,675 20,559
Purchased and interchanged power ................... 45,040 52,491
Deferred energy cost adjustments, net .............. 10,100 5,138
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Net energy costs................................... 77,815 78,188
Other production operations ........................ 4,835 4,071
Other operations ................................... 22,753 22,832
Maintenance and repairs ............................ 9,943 9,744
Provision for depreciation ......................... 13,066 11,960
General taxes ...................................... 4,577 4,285
Federal income taxes ............................... 553 1,382
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133,542 132,462
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OPERATING INCOME ......................................... 11,642 12,196
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OTHER INCOME (EXPENSES):
Allowance for other funds used during
construction ...................................... 1,695 2,227
Miscellaneous, net ................................. 2,052 238
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3,747 2,465
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INCOME BEFORE INTEREST DEDUCTIONS ........................ 15,389 14,661
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INTEREST DEDUCTIONS:
Interest on long-term debt ......................... 11,549 10,783
Other interest ..................................... 340 477
Allowance for borrowed funds used
during construction ............................... (1,054) (1,291)
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10,835 9,969
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NET INCOME ............................................... 4,554 4,692
DIVIDEND REQUIREMENTS ON PREFERRED STOCK ................. 992 995
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EARNINGS AVAILABLE FOR COMMON STOCK ...................... $ 3,562 $ 3,697
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING ............................................. 45,637 41,793
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EARNINGS PER AVERAGE COMMON SHARE ........................ $ 0.08 $ 0.09
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DIVIDENDS PER COMMON SHARE ............................... $ 0.40 $ 0.40
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See Notes to Financial Statements.
2
BALANCE SHEETS
ASSETS
(Unaudited)
March 31, December 31,
1995 1994
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(In Thousands)
ELECTRIC PLANT:
Original cost ....................................... $1,858,125 $1,831,400
Less accumulated depreciation ....................... 508,233 495,691
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Net plant in service .............................. 1,349,892 1,335,709
Construction work in progress ....................... 171,225 159,167
Other plant, net .................................... 87,703 89,127
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1,608,820 1,584,003
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INVESTMENTS ........................................... 14,024 21,602
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CURRENT ASSETS:
Cash and temporary cash investments ................. 1,118 123
Customer receivables ................................ 58,009 70,378
Other receivables ................................... 5,346 6,033
Fuel stock and materials and supplies ............... 35,498 36,657
Deferred energy costs ............................... 15,875 25,714
Prepayments ......................................... 7,817 9,657
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123,663 148,562
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DEFERRED CHARGES ...................................... 154,151 153,222
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$1,900,658 $1,907,389
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CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholders' equity:
Common stock, 45,798,919 and 45,382,370
shares issued, respectively ...................... $ 49,004 $ 48,587
Premium and unamortized expense on capital stock .. 572,984 563,562
Retained earnings ................................. 104,978 119,600
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726,966 731,749
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Cumulative preferred stock .......................... 41,983 42,064
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Long-term debt ...................................... 717,000 712,571
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1,485,949 1,486,384
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CURRENT LIABILITIES:
Current maturities and sinking fund requirements .... 57,566 57,551
Accounts payable, including salaries and wages ...... 51,972 66,467
Accrued taxes ....................................... 6,227 2,493
Accrued interest .................................... 9,540 6,239
Accumulated deferred taxes on deferred energy costs . 5,557 9,000
Customers' service deposits and other ............... 38,654 39,359
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169,516 181,109
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DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred investment tax credits ......... 33,559 33,924
Accumulated deferred taxes on income ................ 137,770 135,152
Customers' advances for construction and other ...... 73,864 70,820
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245,193 239,896
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$1,900,658 $1,907,389
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See Notes to Financial Statements.
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STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE THREE MONTHS
ENDED MARCH 31,
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1995 1994
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(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................. $ 4,554 $ 4,692
Adjustments to reconcile net income to net cash provided-
Depreciation and amortization .......................... 15,708 15,150
Deferred income taxes and investment tax credits ....... (2,683) 88
Allowance for other funds used during construction ..... (1,695) (2,227)
Changes in-
Receivables ............................................ 13,143 3,351
Fuel stock and materials and supplies .................. 1,159 839
Accounts payable and other current liabilities ......... (15,136) (14,036)
Deferred energy costs .................................. 9,653 3,866
Accrued taxes and interest ............................. 7,035 5,712
Other assets and liabilities ............................ (1,725) 1,750
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Net cash provided by operating activities ............. 30,013 19,185
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CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures and gross additions ........... (37,960) (32,587)
Investment in subsidiaries and other..................... 9,857 (559)
Salvage net of removal cost ............................. 104 (206)
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Net cash used in investing activities ................. (27,999) (33,352)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of capital stock ................................... 9,826 9,760
Sale of long-term debt .................................. - -
Change in funds held in trust ........................... 7,302 17,482
Retirement of preferred stock and long-term debt ........ (2,347) (2,425)
Change in short-term borrowing .......................... - 6,000
Cash dividends .......................................... (19,165) (17,632)
Other financing activities .............................. 3,365 1,022
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Net cash (used in) provided by financing activities ... (1,019) 14,207
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CASH AND TEMPORARY CASH INVESTMENTS:
Net increase during the period .......................... 995 40
Beginning of period ..................................... 123 145
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End of period ........................................... $ 1,118 $ 185
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CASH PAID DURING THE PERIOD FOR:
Interest, net of amounts capitalized .................... $ 10,483 $ 9,729
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Income taxes ............................................ $ 205 $ -
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See Notes to Financial Statements.
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NOTES TO FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by
the registrant, pursuant to the rules and regulations of the Securities and
Exchange Commission, and reflect all adjustments which, in the opinion of
management are necessary for a fair presentation. Certain information and
footnote disclosures have been condensed in accordance with generally accepted
accounting principles and pursuant to such rules and regulations. The
registrant believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements and notes thereto be read in conjunction with the financial
statements and the notes thereto included in the registrant's latest annual
report. Certain prior period amounts have been reclassified, with no effect on
income or common shareholders' equity, to conform with the current period
presentation.
(1) FEDERAL INCOME TAXES:
For interim financial reporting purposes, Nevada Power Company (Company)
reflects in its computation of the federal income tax provision liberalized
depreciation based upon the expected annual percentage relationship of book and
tax depreciation and reflects the allowance for funds used during construction
on an actual basis. The total federal income tax expense as set forth in the
accompanying statements of income results in an effective federal income tax
rate different than the statutory federal income tax rate. The table below
shows the effects of those transactions which created this difference.
FOR THE THREE MONTHS
ENDED MARCH 31,
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1995 1994
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(In Thousands)
Federal income tax at statutory rate ..................... $ 2,494 $ 2,590
Investment tax credit amortization ....................... (365) (365)
Other .................................................... 442 484
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Recorded federal income taxes ............................ $ 2,571 $ 2,709
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Federal income taxes included in-
Operating expenses ..................................... $ 553 $ 1,382
Other income, net ...................................... 2,018 1,327
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Recorded federal income taxes ............................ $ 2,571 $ 2,709
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(2) COMMITMENTS AND CONTINGENCIES:
On July 11, 1991, Nevada Electric Investment Company (NEICO), the Company's
unregulated subsidiary, sold a 50 percent undivided ownership interest in
certain coal mining assets to the Intermountain Power Agency (IPA), and NEICO
and IPA conducted the coal mining operations as joint venturers under the name
of the Crandall Canyon Project. On January 11, 1995, NEICO sold its remaining
50 percent undivided ownership interest in the coal mining assets. A gain of
$2.3 million, net of tax, was recorded during the first quarter of 1995.
The Federal Clean Air Act Amendments of 1990 (Amendments) include
provisions which will affect the Company's existing steam generating facilities
and all new fossil fuel fired facilities. Title IV of the Amendments provides a
national cap on sulfur dioxide emissions by mandating emissions reductions for
many electric steam generating facilities. The sulfur dioxide provisions of the
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Amendments will not adversely affect the Company because the Company's steam
units burn low sulfur fuels or have sulfur dioxide control equipment. Title IV
of the Amendments also provides for reduction of emissions of oxides of nitrogen
by establishing new emission limits for coal-fired generating units. This Title
will require the installation of additional pollution-control technology at some
of the Reid Gardner Station generating units before 2000 at an estimated cost to
the Company of no more than $6 million.
The Clean Air Act Amendments also mandated creation of the Grand Canyon
Visibility Transport Commission to work toward the goal of visibility
improvement in the Grand Canyon and other national parks of the Colorado
Plateau. The Commission is required to make recommendations to the U.S.
Environmental Protection Agency (EPA) by November 1995, regarding ways to
improve visibility. A variety of actions could be considered including
imposition of more pollution controls or emissions limitations upon large
sources of pollution in the West and Southwest. The potential affect on the
Company cannot be determined at this time.
Also related to visibility, the United States Congress authorized the EPA
to study the potential impact the Mohave Generating Station (Mohave) may have on
visibility in the Grand Canyon area. Results of this study are expected in late
1995. Also, the Nevada Division of Environmental Protection has imposed more
stringent stack opacity limits for Mohave. This may affect the Company's
utilization of resources but until more experience is gained by operating at the
new opacity levels, optimal utilization cannot be determined. As a 14 percent
owner of Mohave, the Company will be required to fund any plant improvements
that may result from the visibility study and opacity limitation. The cost of
any potential improvements cannot be estimated at this time.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's customer growth rate during 1994 and 1993 was 6.0 and 5.4
percent, respectively. The increase in customers for the first three months of
1995 was at an annualized rate of 5.2 percent. At March 31, 1995, the Company
provided electric service to 433,838 customers.
Every three years Nevada law requires the Company to file with the Public
Service Commission of Nevada (PSC) a forecast of electricity demands for the
next 20 years and the Company's plans to meet those demands. In the third
quarter of 1994, the Company filed with the PSC its 1994 Resource Plan.
The Company introduced a Renewable Energy Program as part of the 1994
Resource Plan filing. This section of the plan requested approval for the
Company to utilize all appropriate incentives, resources, and expertise to
foster the development of economically competitive renewable energy systems with
the intent to provide southern Nevada customers with 20 megawatts of solar-
generated electricity by the year 2002. A stipulation on the Renewable Energy
Program was signed by the Company, PSC Staff, Office of Consumer Advocate (OCA)
and the Land and Water Fund of the Rockies. The PSC subsequently approved the
stipulation which includes establishing a solar test facility on Company
property where new solar technologies will be installed and tested. The Company
will also install several photovoltaic units in the Las Vegas Valley and will
serve on the Technical Advisory Committee of the Solar II Project in Barstow,
California.
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At the time of the 1994 Resource Plan filing, the Company had yet to
complete its long-term supply-side request for proposal (RFP) process. The PSC
issued an order approving a stipulation between the Company, the PSC Staff, the
OCA and other intervenors allowing the Company to refile its 1994 Resource Plan
when it completed the RFP process. The Company completed the final analysis of
the RFP in December 1994.
At the time of the final analysis of the RFP, there was tremendous
uncertainty about competitive changes in the electric utility industry. The
combination of the final analysis of the RFP, the current information about the
purchased power markets and the uncertainty of the changes in the electric
utility industry mandated a fundamental change in the Company's resource
planning strategy. The Company will rely on short-term power purchases rather
than proceed with the RFP process to meet its forecasted increase in load.
On February 15, 1995, the Company filed its Refiled 1994 Resource Plan. To
support the Company's position in its decision to rely on short-term markets for
purchased power, the Company requested the following projects to be approved by
the PSC:
(1) The installation of a 230 kV transmission line on the
previously approved Northwest-Arden line;
(2) the construction of two new switchyards in the southern
portion of the Company's transmission system; and
(3) funds to study the development of transmission systems,
the Price and Availability Purchased Power Forecast,
modifications to existing generating facilities and the
stability of the Company's transmission system.
With the projections of future electricity costs decreasing, many of the
Demand-Side Management (DSM) programs offered by the Company are no longer cost-
effective. Therefore, the Company reevaluated its DSM programs and requested
approval to phase out three of its programs: air conditioning replacement, attic
insulation and energy efficient motors. In addition, the Company requested
approval to reduce incentives to numerous other programs and suspend the air
conditioning load management program in 1995. The DSM section of the Refiled
1994 Resource Plan also includes:
(1) DSM contracts with three energy service companies to
promote conservation among certain commercial customers.
The total targeted reduction in demand is equivalent to 13.8
megawatts; and
(2) a limited residential new construction program offering
education and assistance to contractors on energy efficiency
measures in new homes.
Hearings on the Company's Refiled 1994 Resource Plan began in April 1995.
To meet capital expenditure requirements through 1996, the Company plans to
utilize internally generated cash, the proceeds from industrial development
revenue bonds (IDBs), first mortgage bonds, preferred securities and common
stock issues through public offerings and the Stock Purchase and Dividend
Reinvestment Plan (SPP).
The Company has the option of issuing new shares or using open market
purchases of its common stock to meet the requirements of the SPP. Under the
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SPP the Company issued 1,825,120 and 399,555 shares, respectively, of its common
stock in 1994 and the first three months of 1995.
On June 24, 1992, Clark County, Nevada issued $105 million 6.70% fixed rate
30-year IDBs (Nevada Power Company Project) Series 1992A. Net proceeds from the
sale of the IDBs were placed on deposit with a trustee and were used to finance
the construction of certain facilities which qualify for tax-exempt financing.
At March 31, 1995, no funds remained on deposit with the trustee.
OPERATING RESULTS OF FIRST THREE MONTHS OF 1995
COMPARED TO FIRST THREE MONTHS OF 1994
Earnings per average common share were eight cents for the first three
months of 1995, compared to nine cents for the same period in 1994. The average
number of customers increased 5.9 percent and kilowatthour sales, excluding
sales for resale, were up 4.2 percent, as compared to the first three months of
1994. Although the number of customers increased, revenues were only slightly
higher due to mild weather and a general rate decrease for nonresidential
customers effective October 1, 1994.
Fuel expense increased by $2.1 million due mainly to increased generation
at Clark Station. Purchased power decreased $7.5 million due to reduced power
purchases. Depreciation expense increased $1.1 million because of a growing
asset base. Other income miscellaneous, net increased $1.8 million mainly due
to the recording of the sale of coal mining assets by NEICO, the Company's
unregulated subsidiary. (See Note 2 of "Notes to Financial Statements.")
Average common shares increased because of the sale of additional common
shares through a public offering in November 1994 and the SPP to partially
provide funds for the construction of facilities necessary to meet increased
customer demand for electricity.
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PART II. OTHER INFORMATION
Items 1 through 5. None.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibits Filed Description
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27 Financial Data Schedule
b. Reports on Form 8-K.
None.
Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Nevada Power Company
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(Registrant)
STEVEN W. RIGAZIO
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Date: May 5, 1995 Steven W. Rigazio
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Vice President, Finance and Planning,
Treasurer, Chief Financial Officer
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