RENO -- Despite taking "painful" steps to reduce staff and eliminate most stock dividends, Sierra Pacific Resources reported $39.5 million in fourth quarter losses Monday for record year-end losses of more than $300 million.
Officials for the utility company blamed the losses largely on state regulators' refusal to allow it to recoup the cost of electrical power purchased in 2001 during a Western energy crisis.
Executives said the company would have recorded an annual profit of $35 million -- compared with $56.7 million the year before -- if not for a pretax write-off of $527 million related to the Public Utilities Commission's rulings in 2002.
The quarterly losses amounted to 39 cents per share for common stock and bring the company's net losses for the year ending Dec. 31 to $307.5 million, or $3.01 per share.
Walt Higgins, the company's president and chief executive officer, said 2002 was a difficult year for Sierra Pacific Resources and its investors.
"Let me assure everyone that restoring the company's financial health is our top priority and we are working diligently toward that goal," Higgins said. "We have made some painful and difficult decisions. We eliminated common stock dividends ... (and) now have 11 percent fewer employees than four years ago."
While acknowledging it was of little solace, Higgins noted it also was a bad year for other utilities, particularly in the West.
Sierra Pacific stock fell to $4.41 per share before closing at $4.52 per share Monday, down 8 cents.
State consumer advocate Tim Hay blamed the company's financial woes on imprudent business practices, saying the mismanagement by the utility caused the PUC to reject a major portion of the 2001 power and gas costs.
"They are certainly facing challenges, but whether bankruptcy is a likely prospect is an assessment only their management can make at this point," Hay said.
"Unfortunately, their weakened financial position makes it tougher to get good deals on power for Nevada consumers. We will make the argument that the company's financial condition is of their own making and that consumers shouldn't bear that burden," Hay added.
The Reno-based company is the parent firm of Nevada Power Co. in southern Nevada and Sierra Pacific Power Co., which serves northern Nevada and a portion of northern California.
Sierra Pacific serves 323,000 electric customers and 124,000 natural gas customers. Nevada Power supplies electricity to about 662,000 customers in the Las Vegas area.
Nevada Power recorded a fourth quarter loss of $19 million, down from net income of $6.9 million for the same quarter a year ago. Sierra Pacific Power reported a quarterly loss of $5.5 million, down from earnings of $9.3 million a year ago.
The $527 million pretax write-off of deferred energy charges resulted from the PUC's decision to disallow the recovery of a major portion of power and gas costs purchased in 2001.
The PUC disallowed recovery of $434.1 million in deferred energy costs for Nevada Power and $57 million in such costs for Sierra Pacific Power.
Both utilities have challenged the PUC's decision in state court. Nevada Power's case is set to be heard March 14. No date has been set in Sierra Pacific's case.
Higgins said the company continues to make strides to regain its financial footing, but has faced major challenges as its stock has plunged from a 52-week high of $16.85 per share and Wall Street downgraded its credit rating to junk bond status.
The Southern Nevada Water Authority is attempting to buy Nevada Power, but company officials have fended off the offer, saying the utility is not for sale.
Since the PUC's action, the companies have renegotiated contracts with some wholesale energy suppliers and refinanced some debt to improve cash reserves.
The parent company also has reached agreements to exchange 30 percent of certain securities for common stock, reducing its outstanding debt by about $105 million and its future interest expense by about $26 million through 2005.
"We are focused on steps to improve our balance sheet and liquidity," said Richard Atkinson, vice president and chief financial officer of Sierra Pacific Resources.
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On the Net: Sierra Pacific Resources:
http://www.sierrapacificresources.com/
