Profits drop at Sierra Pacific

Population growth and rate increases weren’t enough to push quarterly earnings up for Sierra Pacific Resources, as higher costs for maintenance and operations ate away at income gains for the corporate parent of Nevada Power Co.

Sierra Pacific reported Monday that it earned $25.8 million, or 12 cents a share, in the quarter ended June 30. That’s down from $27.8 million, or 14 cents a share, in the same quarter a year ago.

Revenue rose 3.6 percent to $851.9 million from $821.9 million.

The earnings fell below analysts’ expectations, which Reuters Estimates set at 16 cents a share on revenue of $815.5 million.

The number of retail customers for Nevada Power grew 2.8 percent in the 12 months before June, while the customer base for Sierra Pacific’s Northern Nevada utility, Sierra Pacific Power Co., expanded 2 percent in the same time period.

But operating costs also jumped for the businesses. Operational and maintenance expenses rose from $62.1 million to $75.5 million, at Nevada Power because of outages for repairs, said Chief Financial Officer Bill Rogers. Maintenance costs for Sierra Pacific Power increased $4.2 million, from $42 million to $46.2 million, due partly to planned outages and “major maintenance” at its Tracy Power Plant east of Reno, Rogers said.

The downturn in earnings didn’t detract from the upbeat atmosphere during the company’s earnings conference call.

The earnings report was the last for Chief Executive Officer Walter Higgins, who’s leaving his position today. Higgins will stay as chairman of the board.

Higgins and other Sierra Pacific executives talked extensively about the 8 cent-per-share dividend they announced over the weekend. The dividend, the company’s first in five years, is a result of the company’s return to “investment-grade” status, Higgins said.

Since June 14, several companies that provide corporate credit ratings have upgraded the utility’s credit outlook from stable to positive.

“Reinstituting a dividend has been one of our primary financial goals for many years now,” Higgins said. “The restoration of the dividend has many positives, not only for our shareholders, but for our state and consumers.”

Michael Yackira, the Sierra Pacific president who will also become chief executive officer Wednesday, asked investors and analysts participating in the earnings call to give Higgins a round of applause for “his tremendous accomplishments in guiding our company through difficult times and leading us in the strong recovery we’ve been experiencing over the past several years.”

Sierra Pacific halted dividend payments in 2002 after a regional energy crisis that resulted from California’s experiment with deregulated retail electric power. Sierra Pacific was losing money at the time, and the Nevada Public Utilities Commission slashed a rate-increase request in half after regulators found that the company made poor power-buying decisions during the crisis from 2000 to 2001.

Higgins said Monday that Sierra Pacific has made strides in improving its financial footing in the last five years.

“I’m very proud of the progress we made as a company, and I’m very proud of the direction in which the company is headed,” Higgins said.

Nevada Power reported net income of $23.6 million in the quarter, down 17.2 percent from $28.5 million a year ago. Operating revenue grew 5.7 percent from $543.9 million to $575.1 million.

Sierra Pacific Power reported quarterly income of $22.2 million, down 10.5 percent from $24.8 million a year earlier. Operating revenue decreased 0.2 percent from $277.3 million to $276.7 million.

Nevada Power recorded an all-time high demand of 5,866 megawatts on July 5, up from the previous record of 5,623 megawatts set in July 2006. Sierra Pacific Power posted a record demand of 1,743 megawatts, compared with a previous peak of 1,701 megawatts in summer 2005.

Sierra Pacific executives also said they’ll proceed with plans to build a coal-fired power plant near Ely despite the objections of U.S. Sen. Harry Reid, D-Nev.

Reid said in a letter last week that he opposes construction of new coal-fueled power plants.

“While we respect our state’s senior senator, we respectfully and strongly disagree on this issue,” Yackira said. “We believe building a coal plant, especially one that has the attributes of the Ely Energy Center, is in the best interests of our customers and our state. Our public utilities commission has endorsed our plans and we will continue to move forward.”

Yackira said the Ely plant would have the capacity to add carbon capturing and storage once those technologies become available.

Sierra Pacific is also making strides in its efforts to add renewable-energy sources, Yackira said.

In the second quarter, the power company began buying all the energy production from Nevada Solar One, a 64-megawatt solar-power plant in Boulder City. Sierra Pacific will also add capacity by the end of the year from a 12-megawatt solar-power plant under construction near Nellis Air Force Base in northeast Las Vegas. Once both plants are selling power to Sierra Pacific, the company will be the nation’s largest per-capita supplier of solar energy, Yackira said.

Shares in Sierra Pacific fell 9 cents, or 0.56 percent, Monday to close at $16.10 on the New York Stock Exchange.