Although it won’t boost its still-sagging credit rating, Nevada Power Co.’s financial push last week drew a positive response for Standard & Poor’s Ratings Services (S&P) last Wednesday when it labeled as a “positive development” the utility’s new short-term credit facility with Merrill Lynch. It provides additional liquidity this summer for Nevada Power, one of two private-sector electric utilities under Reno, NV-based Sierra Pacific Resources.
Even with the backdrop of the late June federal regulatory decision leaving a $287 million question mark hovering over its operations, Nevada Power announced June 30 it has established a $60 million revolving short-term credit facility to provide it with additional liquidity during the current summer months. The financial revolver is good through Sept. 8, 2003, the company said.
“The credit facility would supplement Nevada Power’s $125 million accounts receivables conduit, which is currently unused,” said Swami Venkataraman, an analyst in S&P’s San Francisco office. “In addition to providing incremental liquidity, this facility also demonstrates access to the capital markets, albeit on secured terms, that is a crucial consideration for entities rated in the ‘B” category. (S&P is keeping its B+ with a Negative outlook).
Sierra Pacific, the parent of both Sierra Pacific Power and Nevada Power utilities, indicated late last month it will ask for a rehearing or appeal in the wake of the Federal Energy Regulatory Commission decision to let stand existing long-term western wholesale electricity contracts. (see NGI, June 30) The two principal private-sector Nevada electric utilities earlier had been ordered by Enron Corp.’s Chapter 11 bankruptcy judge to set aside $24 million for possible payment to the former energy supplier, but that still leaves an estimated $287 million that suppliers, including Enron, allege the two utilities owe for power deals signed in the height of the 2000-2001 western energy debacle.
Despite this uncertainty, or perhaps because of it, Nevada Power entered into the credit facility with Merrill Lynch & Co., securing the utility’s obligations with a pledge of a general and refunding mortgage bond in a principal amount equal to the total amount of the facility, Nevada Power said in a news release.
Nevada Power’s holding company senior executives have told local news media that they are prepared to appeal all the way to the U. S. Supreme Court before they will “pay market manipulators.” If the two utilities are forced to make the payments, they ultimately would seek approval from Nevada state regulators for retail rates to cover the added costs, a report in the Las Vegas Review-Journal indicated last Friday.
In the same report, Nevada’s state consumer advocate, Tim Hay, said the state was “disappointed, but not surprised” by FERC’s action on the contracts. He predicated “lengthy court appeals,” similar to what officials in California and other western states have said in the aftermath of the June 25 FERC actions.
“This is a first step in a rather long ordeal,” Nevada Public Utilities Commission Chairman Don Soderberg said in the local news report. “(FERC) Commissioner (William) Massey’s coments eloquently laid out the blatant inequity here. I can only echo his concise comments.”
In yet another of the FERC’s actions, Sierra Pacific Power was one of the 60 companies to “show-cause” why it shouldn’t be ordered to return some alleged excess profits it made through possible market manipulation in the volatile wholesale market two years ago. The holding company executives argue that the utility did nothing wrong, as have all of the principal western energy companies named by FERC.
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