Sierra Pacific sees progress on return to investment grade

Sierra Pacific Resources, the Reno-based utility holding company that flirted with bankruptcy three years ago, is taking everlarger steps toward restoration of its investment- grade credit rating.

The company's executives said last week they're watching closely as Moody's Investors Service reviews Sierra Pacific's finances as the first step toward upgrading its ratings.

That's no small matter.

The Moody's review covers about $4.1 billion in outstanding securities, and an upgrade could allow the company to raise capital less expensively.

And Walt Higgins, the chairman, president and chief executive officer of Sierra Pacific Resources, said the company expects to be raising a lot of capital, either through debt or additional stock offerings, to finance the infrastructure it needs to serve the fast-growing urban areas of Nevada.

"The difference (with a credit upgrade) can be between a little and a lot in the coupon rate,"Higgins said, noting that electric and gas rates reflect the company's borrowing costs.

Sierra Pacific Resources is the parent of Sierra Pacific Power, which delivers electricity and natural gas in northern Nevada, and Nevada Power, which is the electric utility in the Las Vegas area.

In northern Nevada, for instance, the company plans to spend about $421 million on construction of an additional 500 megawatts of generating capacity at Tracy along Interstate 80 east of Sparks.

That plant along with new power plants built by Barrick Gold and Newmont Mining that would take a big load off the Sierra Pacific system would give Sierra Pacific Power about 80 percent of the power it needs to meet customers' demands on the hottest summer days.

That's an important matter to Moody's.

The credit-rating agency said one of the factors that led it to give Sierra Pacific Resources a new look is the company's progress in reducing its reliance on outside suppliers.

But the biggest factor,Moody's analysts said, is the improved relationship between the two utilities and the Public Utilities Commission of Nevada.

Moody's said decisions in recent rate cases reflect "significantly reduced regulatory risk." A PUCN decision in 2002 that disallowed recovery of nearly $500 million in energy costs plunged Sierra Pacific Resources into deep financial trouble.

Higgins said better relations with the PUCN is a priority of the company.

"We are dedicated to doing exactly what the regulators want," he told securities analysts last week as the company reported a secondquarter profit of $9.1 million.

That compares with a loss of $44.9 million in the comparable quarter last year.

Moody's said the company's improved earnings, along with recent efforts to restructure its debt, give it additional financial breathing room.