EXHIBIT 99.1
NEVADA POWER AND SIERRA PACIFIC AGREE TO
$4 BILLION MERGER OF EQUALS
Creates A Premier Distribution and Energy Services Company in the Western U.S.
Highest Annual Customer Growth in Industry
LAS VEGAS and RENO, NEVADA (April 30, 1998) -- Nevada Power Company (NYSE,
PSE: NVP) and Sierra Pacific Resources (NYSE: SRP) today announced that their
boards of directors have unanimously approved an agreement providing for a
merger of equals combination with stock and cash consideration, creating a
company with a total market capitalization of approximately $4.0 billion ($2.3
billion in equity; $1.5 billion in debt; $240 million in preferred stock). The
combination is expected to be accounted for as a purchase and is anticipated to
be accretive to both companies' earnings per share the first year after closing.
The combined entity, which will be named Sierra Pacific Resources, will
serve a total of more than 800,000 electric, 100,000 gas and 65,000 water
customers living in southern and northern Nevada, and in the Lake Tahoe area of
California. Combining Nevada Power, the fastest growing utility in the country,
with Sierra Pacific creates a company with annual customer and kilowatthour
sales growth of 5% and 7%, respectively, the highest in the industry. Based on
1997 results of Nevada Power and Sierra Pacific, total annual revenues for the
combined company would be approximately $1.5 billion, with annual earnings of
approximately $160 million, and assets of $4.3 billion. The companies
anticipate closing in about a year, given Nevada's 180-day approval process and
the transaction's consistency with Nevada's utility restructuring efforts.
Terms
As a result of the mergers contemplated by the agreement, Sierra Pacific
Resources will be the holding company for Nevada Power Company, Sierra Pacific
Power Company and other subsidiaries. Each stockholder of Nevada Power will
have the opportunity to elect to receive 1.00 shares of the combined company's
common stock per share or $26.00 in cash per share, such cash representing a 5%
premium to Nevada Power's 10-day average trading price through April 28, 1998;
and each stockholder of Sierra Pacific Resources will have the opportunity to
elect to receive 1.44 shares of the combined company's common stock per share or
$37.55 in cash per share, such cash representing a 5% premium to Sierra
Pacific's 10-day average trading price through April 28, 1998.
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Under the merger agreement, $304.6 million in cash will be paid to Nevada
Power stockholders and $151.6 million in cash will be paid to Sierra Pacific
stockholders. In the event that stockholders of Nevada Power or Sierra Pacific
fail to elect to receive all of the cash allocated to them, cash will be
proportionately allocated among those stockholders who have elected to receive
shares of the combined company's common stock; in the event that stockholders of
Nevada Power or Sierra Pacific fail to elect to receive all of the shares of the
combined company's common stock allocated to them, the shares will be
proportionately allocated among those stockholders who have elected to receive
cash, other than among odd lot holders who may receive cash in any event.
The transaction is expected to be tax-free to stockholders to the extent
they receive common stock of the combined company, and any cash received is
expected to be taxed as capital gain.
Based on 30,941,000 shares of Sierra Pacific and 50,767,000 shares of
Nevada Power currently outstanding, Sierra Pacific and Nevada Power stockholders
will receive approximately 77,792,000 shares and $456.2 million in cash in the
transaction. At the close of the transaction, Nevada Power and Sierra Pacific
stockholders will each own approximately 50% of the combined company.
Management and Board
Michael R. Niggli, currently president and chief operating officer of
Nevada Power Company, will become chairman and chief executive officer of the
holding company and chairman of its subsidiaries. Malyn K. Malquist, currently
chairman, president and chief executive officer of Sierra Pacific Resources,
will become president and chief operating officer of the holding company and
president and chief executive officer of Nevada Power Company and Sierra Pacific
Power Company. Charles A. Lenzie, currently chairman and chief executive
officer of Nevada Power Company, will retire upon completion of the transaction.
The board of directors of the holding company will consist of a total of 14
members, seven to be selected by each of Nevada Power and Sierra Pacific.
Mr. Lenzie said, "I am excited about the advantages which will accrue to
our stockholders and customers from this merger. Employees will benefit from
the increased opportunities that come from being part of a larger, more
diversified organization. This is a win-win for all. In the fast changing
utility environment, combining the two management teams will assure top-notch
leadership for the merged company into the 21st century. I feel strongly that
our legacy of high quality service to the people of Nevada will continue and be
enhanced. By combining Nevada Power and Sierra Pacific, we are creating a
premier distribution and energy services company with strong transmission
interconnections in the western United States."
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Mr. Niggli said, "This merger is about growth, opportunity and maximizing
shareholder value in the face of the dramatic changes taking place in the
utility industry. This combination will give us the ability to capitalize on
the rapid customer growth in our service territory and convert it into bottom
line growth. Customer demand for superior products and services at competitive
prices is leading to fundamental changes in how utilities approach their
business. Utilities that will succeed in this environment are those that
actively embrace this new reality. Both our companies share a common vision of
a high performance, high growth utility focused on the distribution and energy
services businesses.
"By merging with Sierra Pacific, we align ourselves with a company that has
strong leadership. Over the past three years, the total return to Sierra
Pacific stockholders has averaged about 30% annually, substantially
outperforming the Dow Jones Utility Average. Sierra Pacific has demonstrated
the ability to convert sales and revenue growth into earnings and has achieved a
strong track record in growing shareholder value," Mr. Niggli added.
Mr. Malquist said, "Together, Sierra Pacific and Nevada Power will create a
rapidly growing, customer focused energy company that can effectively serve the
needs of Nevada, the fastest growing state in the nation for over a decade.
This combination offers us the opportunity to lower costs, increase operating
efficiencies and take advantage of economies of scale, providing benefits for
both customers and stockholders. More than 1.5 million Nevada and California
residents will see benefits from the merger in the form of stable prices and
superior customer service."
Mr. Malquist continued, "This merger of Nevada's two major utilities makes
perfect sense in view of the changes taking place in the industry. Nevada Power
has effectively managed the extraordinary growth in its service territory while
still providing its customers with low prices and high quality reliable service.
Sierra Pacific and Nevada Power employees, who represent our competitive
advantage in this industry, know their customers and are involved in their
communities. Our employees understand our state's economic vitality and what it
takes to maximize the growth opportunities for the benefit of our customers and
stockholders."
Dividend Policy
The combined company expects to establish a dividend policy that will
maintain a dividend payout ratio of between 50% and 55% of net income. It is
expected that the board will review the dividend on an annual basis, as has been
the historic policy of Sierra Pacific. It is anticipated that the combined
company will adopt an initial annual dividend of $1.00 per share, subject to
financial condition, regulatory issues and the results of operations. Based
upon Sierra Pacific's exchange ratio of 1.44 to 1.00 this would be consistent
with Sierra Pacific's dividend policy and reflects a dividend equivalent of
$1.44 per share. For Nevada Power, the 1.00 to 1.00 exchange ratio reflects a
dividend equivalent of $1.00 per share.
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In conjunction with Nevada Power's approval of this transaction, the Nevada
Power board stated that, after it considers its August 1998 dividend at the
current rate of $0.40 per quarter ($1.60 per share annually), it intends to
adopt the expected combined company initial annual dividend rate. This would
result in an indicated annual dividend rate of $1.00 per share for periods
following the August 1998 dividend payment. Nevada Power's 1997 dividend payout
ratio was 97% of net income. Nevada Power noted that the new dividend level
would be more closely in line with industry trends and would provide equity
capital to fund Nevada Power's significant growth.
Capital Structure
To fund the cash portion of the consideration paid to both the Nevada Power
and Sierra Pacific stockholders, the combined company intends to borrow
approximately $450 million. This would result in an initial consolidated debt
to total capitalization ratio of approximately 55%. Pro forma for the proposed
transaction, 1997 cash flow after the payment of common dividends would have
increased by approximately $20 million in comparison to the combined stand-alone
entities after taking into account the additional interest expense on the new
indebtedness. It is anticipated that neither Nevada Power's nor Sierra Pacific
Power's credit ratings would be adversely affected as a result of this
transaction. The companies expect that the holding company, Sierra Pacific
Resources, would carry investment grade credit ratings.
Merger Benefits
The structure of the merger will allow both Sierra Pacific Power and Nevada
Power to retain and build upon their existing brand identities and customer
loyalties while enhancing available services. Drawing on the strengths of
Sierra Pacific and Nevada Power, the companies anticipate that as a result of
the transaction, net merger savings of approximately $350 million over ten years
will be realized from the elimination of duplicate corporate and administrative
programs and greater efficiencies in operations, business processes and
purchasing. The transaction creates the opportunity to offer Nevada customers
stable prices while continuing to increase shareholder value.
The companies will seek to minimize the impact to the existing workforce
through a combination of a general hiring freeze, employee re-training,
relocation and appropriate separation packages. All union contracts will be
honored.
Headquarters
Under the merger agreement, the headquarters of the holding company will be
in Reno, Nevada. The utility subsidiaries, Sierra Pacific Power Company and
Nevada Power Company, will be headquartered in Las Vegas, with gas and water
operations in Reno.
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Approvals and Timing
The merger is conditioned, among other things, upon the approvals of the
Public Utilities Commission of Nevada, the Federal Energy Regulatory Commission,
the Securities and Exchange Commission and the approval of both companies'
common stockholders. No approval is required from the holders of debt or
preferred stock of the two utilities. The companies anticipate that the
regulatory approval process can be completed in about one year. Nevada has a
180-day approval process by statute.
PaineWebber Incorporated acted as financial advisor and provided a fairness
opinion to Nevada Power. SG Barr Devlin and Merrill Lynch & Co. acted as
financial advisors and provided fairness opinions to Sierra Pacific.
Nevada Power Company provides electric service to more than 1.2 million
residents in southern Nevada. Customer growth in 1997 reached 6.4%, the highest
rate of growth for any investor owned utility in the United States. 1997
revenues were nearly $800 million, with earnings in excess of $83.2 million.
The weighted average number of shares outstanding in 1997 was 49.7 million.
Nevada Power has approximately 1,900 employees.
Sierra Pacific Resources, headquartered in Reno, Nevada, provides electric
service to approximately 287,000 customers in a 50,000 square mile region in
northern Nevada and the Lake Tahoe area of California, natural gas service to
100,000 customers, and water service to 65,000 customers in the Reno-Sparks
area. Other operating subsidiaries include Tuscarora Gas Pipeline Company,
which owns 50% interest in an interstate natural gas pipeline partnership, and
e-three, an energy services company. 1997 operating revenues were $663.2
million, with earnings of $74.4 million. The weighted average number of shares
outstanding was 30.9 million. Sierra Pacific has approximately 1,500 employees.
# # #
This press release includes forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements reflect numerous assumptions, and involve a number of risks and
uncertainties. Among the factors that could cause actual results to differ
materially are: electric load and customer growth; abnormal weather conditions;
available sources and cost of fuel and generating capacity; the speed and degree
to which competition enters the power generation, wholesale and retail sectors
of the electric utility industry; state and federal regulatory initiatives that
increase competition, threaten cost and investment recovery, and impact rate
structures; the ability of the combined company to successfully reduce its cost
structure; the economic climate and growth in the service territories of the two
companies; economies generated by the merger; interest costs and the other risks
detailed from time to time in the two companies' SEC reports.
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Note to Editors: Today's news release, along with other news about Nevada Power
and Sierra Pacific, is available on the Internet at http://www.nevadapower.com
and http://sierrapacific.com.
Contacts for Sierra Pacific: Contacts for Nevada Power:
Media: Media:
Faye Andersen Glenda McCartney / Tom Henley
(702) 834-4822 (702) 367-5678/(702) 367-5681
Investors: Investors:
Richard Atkinson Lauran M. Watson
(702) 834-4358 (702) 367-5610