Sierra Pacific Resources may issue convertible to finance April 2003 note maturity

By Peter Heap

New York, Nov. 14 - Sierra Pacific Resources is considering the issuance of an original issue discount convertible as one option to finance a maturity of $200 million of floating-rate notes in April 2003.

Other alternatives being examined include exchanging or swapping the notes, converting them to another kind of security or issuing a combination of common stock and debt, Sierra Pacific chief financial officer and senior vice president Dennis Schiffel said in a conference call Thursday.

"We are working with our advisors and we are looking at all of those options and probably will not come down on any until perhaps January," Schiffel said.

"We believe that there are many options and we believe we will find the correct option," added Walter Higgins, the company's chairman, president and chief executive officer.

The notes are at the holding company level.

Its two utility units have had an easier time accessing the capital markets recently as the company has recovered from its financial crisis earlier in the year when its request to recover the costs of power purchased during the California energy crisis was denied by the Nevada Public Utilities Commission.

Sierra Pacific Resources' Nevada Power Co. unit last month sold $250 million of mortgage notes in the high-yield market at a yield of 12 1/8%.

And both Nevada Power and the company's other utility company Sierra Pacific Power were recently able to take out accounts receivables securitizations.

However the suggestion that more equity would be issued brought a protest from an investor who asked why stockholders should have to suffer dilution on top of all their other recent pain - especially as Sierra Pacific is recovering and could be back to investment grade by late next year.

Schiffel said stockholders' interests were the priority in examining the options.

"One of the options says that if you secure the future of the company by taking out some of the debt and substituting equity, the residual equity held by the other holders will in fact increase in value," Schiffel continued.

"We haven't come to that conclusion but those are the kind of things we are looking at.

"There's various ways of creating value for the shareholders."

Even with a transaction that results in the issuance of more shares, the value of the stock could rise, Schiffel added.

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