Utility: Better credit rating will be step toward dividend

Investors hoping to get an early signal about Sierra Pacific Resources' plans to restore its dividend will get a strong hint from the credit-rating agencies.

Executives of the Reno-based utility holding company said a few days ago they won't do anything about restoring the dividend until Sierra Pacific's securities are considered to be investment grade.

The company's debt is rated Ba3 by Moody's and B+ by Standard and Poor's ratings that say the analysts believe Sierra Pacific's debt is low-grade and speculative.

Sierra Pacific suspended its dividend in April 2002 when its finances began cratering in the aftermath of the Western energy crisis. Previously, its quarterly payout had been set at 20 cents a share.

Since then, Sierra Pacific Chairman and Chief Executive Walt Higgins has made restoration of the dividend one of his priorities after the company's survival was assured.

Michael Yackira, the company's chief financial officer, told securities analysts that the ratings agencies look at soft issues the regulatory environment, for instance as well as its financial results.

The numbers, he said, should improve as the company continues to generate strong cash flows.

Sierra Pacific earned $21.7 million in the fourth quarter of 2005 and $82.2 million for the full year.

Dragging down the fourth quarter results were about $11 million in legal costs as the company wrapped up litigation lingering from the Western energy crisis.

The stronger cash flows and slowly improving credit ratings have allowed Sierra Pacific to begin making some big plans to reduce its reliance on out-of-state energy suppliers.

It's started work on a $421 million gas-fired power plant at Tracy along Interstate 80 east of Reno.The PUC this month OK'd a company proposal to issue debt to help pay for the Tracy facility.

For the longer term, the utility looks to a $3 billion energy center near Ely to serve both northern and southern Nevada.

That complex will include two coal-fired generating stations producing 750 megawatts each. The first is projected to be on-line in 2011, the second in 2004.

The facility also is projected to include two 500-megawatt coal gasification units once the gasification technology is commercially viable.


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