Sierra Pacific Resources shareholders voted Monday to allow the utility to issue up to 42.7 million shares of common stock to redeem convertible notes issued in February to restructure debt.
The issue, approved by a two-thirds majority of the votes tallied at the special stockholders meeting, allows the cash-poor holding company to issue the shares plus money to retire the $300 million in 7.25 percent convertible notes due in 2010.
"The idea is to give the company flexibility to do the right thing,"Chairman, President and Chief Executive Officer Walter Higgins said afterward.
"The option of issuing shares rather than paying the cash conversion price of the notes will allow us the option to reduce our debt without requiring additional cash,"he said.
The company's credit rating fell to junk bond status after an energy crisis in 2001 when it says it was forced to purchase power on the volatile market at exorbitant prices. State regulators later disallowed the power companies'requests to recoup much of those costs from customers.
"We are very limited in the amount of cash that exists at Sierra Pacific Resources and we expect that limitation to continue for some time,"Higgins said at the shareholder's meeting.
On Friday, the parent company of Nevada's two largest utilities reported that its second quarter losses deepened to $172.4 million compared with losses of $41 million in the same quarter a year earlier.
Company officials said losses this quarter included one-time write-offs, including disallowed deferred energy costs totaling $91 million for its subsidiaries Nevada Power Co. and Sierra Pacific Power Co.
Sierra Pacific Resources is not verging on insolvency, Higgins said.
"We're not close to bankruptcy today. Our assets are worth far more than the liabilities,"he said.
"There is good reason to believe the company can gradually work its way back over several _ perhaps several, several _ years to being an investment-grade utility."
Monday's vote, which won approval on 58.7 million of 91.7 million ballots cast, was announced after the stock market closed. Shares closed at $4.68, off 8 cents on the New York Stock Exchange.
Sierra Pacific Resources was formed in 1999 by the merger of Reno-based Sierra Pacific Power and Nevada Power headquartered in Las Vegas. It supplies electricity to 960,000 customers over a 55,000-square-mile area in Nevada and the eastern Sierra and natural gas to 119,500 people in the Reno-Sparks area.
On the Net: Sierra Pacific Resources:http://www.sierrapacificresources.com