Analysts predict no Ely coal-fired power plant (UPDATE)

By Phoebe Sweet

Monday, Feb. 11, 2008 | 6:29 p.m.

One Wall Street analyst last week upgraded stock of Sierra Pacific Resources, Nevada Power's parent company, to "buy."

The reason? He thinks the controversial Ely Energy Center - a proposed $3.8 billion coal-fired power plant - is unlikely to ever be constructed.

According to an Associated Press story on Forbes.com, Goldman Sachsanalyst Michael Lapides "dismissed concerns about a controversy over a new coal-fired power plant being built in Nevada. He said he believes the project could be delayed or canceled because of opposition by Senate Majority Leader Harry Reid and environmental groups, and that the company will ultimately opt to build gas-fired units instead."

That perception that the company might abandon plans for the 1,500 megawatt coal plant in rural Nevada altogether has been fueled recently by an announcement that Sierra Pacific Resources plans to move up construction of the 500-megawatt Harry Allen gas-fired plant. Executives say delays inpermitting the Ely plant are the cause. But during a 2007 earnings conference call Monday, Sierra Pacific Resources President and CEO Michael Yackira assured analysts that the company stands by plans for an Ely plant.

"We decided to move ahead with the Harry Allen project because of uncertainties related to the timing of the in service date for the Ely Energy Center. Because of changes to the permitting schedule the original plan to have the first 750-megawatt phase complete in 2011 were no longer feasible," Yackira said, adding that the company had planned to expand the Harry Allen plant after Ely was complete. "Because we found that the (Ely) project was going to be delayed we decided it was in the best in of our customers to accelerate development of Harry Allen...

"Ely is certainly not dead."

If delays in permitting Ely drag on, Yackira said he wouldn't rule out "building or buying from others, from third parties, power plants."

There are currently two other coal-fired power plants proposed in Nevada, one near the Ely site in White Pine County and another in Mesquite.

UPDATE

In an interview today, Yackira said the analyst's comments meant to imply that it won't matter to investors whether the company builds the Ely plant, not that the plant won't happen.

He "was focused on the investment community, not on our customers," Yackira said.

Investors lost money and customers' rates rose in the early part of the decade, as Sierra Pacific Resources relied heavily on purchased power rather than building its own plants. The company's fortunes have changed in the last few years, though, as the company focuses on producing more of its own electricity, Yackira said.

"If we continue (with) that strategy it doesn¹t really matter from an investor perspective whether we build a coal plant. But what we're focused on is, what's the effect on our customers?" Yackira said, adding that the goal is to stabilize prices. "Even if the Ely Energy Center was canceled, the investment profile of the company would continue to be strong."