S&P rates Nevada power bonds BB

Standard & Poor's said it assigned a BB rating to the proposed $250 million general and refunding mortgage bond issue at Nevada Power Co. The outlook is positive.

Proceeds will be used to refinance existing higher-cost debt.

S&P said Nevada Power's B+ corporate credit rating is based on the consolidated business and financial risk profiles of parent Sierra Pacific Resources and its utility subsidiaries, Nevada Power and Sierra Pacific Co., and primarily reflects the weak consolidated financial risk profile, continued exposure to the wholesale gas and power markets and a $3.6 billion multiyear capital expenditure program driven by the dynamic sustained growth in Las Vegas that limits deleveraging potential to the level of operating earnings retained by the utilities.

Several positive developments over the past two years have contributed to an improved business risk profile score and an outlook revision to positive from stable, the agency said. These include a substantial reduction in the short capacity position at Nevada Power, the continued improvement in the regulatory environment in Nevada, substantially stronger liquidity, the settlement of the Enron litigation and the infusion of more than $500 million in equity in 2005 through the conversion of hybrid securities.

Despite these positive developments, Sierra Pacific Resources' consolidated financial ratios are expected to fall short of expectations for the BB- rating level for several years, absent, in S&P's assessment, an equity issuance to support the large capital expenditure plans.

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