Shareholder blasts Sierra Pacific

Another major shareholder of Reno's Sierra Pacific Resources complained last week about the company's direction, predicting the company's stock will remain below book value for months to come.

David Graham, a senior vice president with Metropolitan West Capital Management of Newport Beach, Calif., said the utility's common stock is alone among 50 publicly traded utilities in the United States to trade below book value.

He said Sierra Pacific common stock trades about $3 a share below the value of its assets.

Graham, whose company owns some 2 million shares of Sierra Pacific, said the stock price is unlikely to return to book value any time soon because the state's Public Utilities Commission doesn't allow the company sufficient return on its investments.

In a conference call with company executives, he urged Sierra Pacific Resources to sharply scale back construction programs, look for ways to buy power from other suppliers and refinance a convertible debt offering that's weighing down the stock price.

That convertible offering, which was completed about a year ago, also drew fire recently from Franklin Resources, the second- biggest owner of Sierra Pacific stock.

Franklin urged shareholders to withhold their proxies from Chairman Walt Higgins and two other incumbent members of the utility's board of directors.

Higgins told Graham last week that the company needs to continue its capital expenditures to reduce its reliance on energy markets that can be volatile.

A reliable utility system in Nevada, he said, requires Sierra Pacific Resources to build its own plants as well as purchase power elsewhere.

The Sierra Pacific chairman didn't disagree that the return on equity allowed by state regulators is lower than the utility wants.

But he noted that Graham apparently hasn't made his argument to the state PUC or its staff.

Earlier,Higgins defended the $300 million debt convertible into the company's common stock as the best deal available to the financially strapped company.

Last week, he said the company continues to look for good timing to refinance the debt although he stopped far short of saying a deal is in the works.

For the first quarter, Sierra Pacific Resources posted a loss of $44.5 million compared with a loss of $11.2 million in the same quarter a year earlier.