Tuesday, May 13, 2003 | 11:21 a.m.
A potentially volatile shareholders meeting on Monday went surprisingly smooth for Sierra Pacific Resources, parent company of Nevada Power Co.
With a Nevada Power rate case ruling looming and coming off a $16.5 million first-quarter loss, a handful of shareholders took the opportunity to criticize the company's management.
Edward J. Blosshart, a Las Vegas shareholder in the company, blasted the company for lawsuits it filed against Merrill Lynch and several natural gas suppliers.
"I'm really disappointed in the whole management team for using these frivolous lawsuits as a cover-up for mismanagement," he said.
Blosshart went on to criticize the company for failing to pursue the Southern Nevada Water Authority's offer to buy Nevada Power. He said the deal would have netted $12 per share for stockholders.
Sierra Pacific President and CEO Walter Higgins said the SNWA deal was never a formal offer, only a letter expressing interest and that no dollar amount was ever secure.
Jay Alt, another of about 200 shareholders attending the meeting, said ignoring the offer was a sound decision.
"I wouldn't accept anything less than $30 a share," he said.
Several times during comments to shareholders, Higgins addressed the price of Sierra Pacific stock, which has traded between $8.65 and $2.85 per share over the past year but jumped 20 percent this morning on news of a favorable rate ruling for Nevada Power on Monday.
"We are deeply and profoundly aware of the financial losses experienced by you the shareholders," he said. "I deeply appreciate your patience during a difficult period in the company's history."
Higgins said the opportunity to hear shareholder reaction was important.
"Our shareholders expressed those opinions in some cases not necessarily things that I wanted to hear but things that I, as CEO of the company, and the board need to hear about how shareholders feel about the company," Higgins said. "Whether there are comments that you are pleased to hear or comments that you wished you didn't have to hear, that's an important process."
Despite criticism, the company successfully re-elected three directors -- Mary Lee Coleman, T.J. Day and Jerry E. Herbst -- and approved a plan to provide a portion of directors' compensation with company stock.
The election success marked a failure for New York analyst Charles Studness' effort to request that shareholders withhold votes for the three directors in an effort to force a management change.
Instead, Higgins called the meeting "productive."
Higgins also took the opportunity to point to the future, citing the need for new generation and transmission capacity. He said the utilities that weathered the Western energy crisis well were companies that had all the power plants needed to generate their own power.
Nevada Power, however, currently buys more than 50 percent of its power on the open market, creating a substantial risk for the company.
"It can't be fixed overnight," he told shareholders. "It takes billions and billions of dollars."
With a $437 million rate case disallowance last year, the company saw it's debt rating cut, making access to capital for such system improvements expensive. A key in rebuilding that rating will be an improved relationship with regulators. That relationship may have improved on Monday with a preliminary rate case disallowance reduced from $180 million to about $47 million.
It's likely that such disallowances will have to disappear completely to satisfy Wall Street. Higgins said the company will seek methods to improve its track record with the state Public Utilities Commission.
"My first thought about recent disallowances is what are we doing wrong?" he said. "If you hit your head against the door and it isn't helping, you better find another way through the wall."
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