News Releases

Global Credit Research Rating Action

Jul 20, 2005


Approximately $4.1 Billion of Securities Affected

New York, July 21, 2005 --Moody's Investors Service placed the ratings of Sierra Pacific Resources (SPR; B2 senior unsecured) under review for possible upgrade. Moody's also placed the ratings of SPR's utility subsidiaries Nevada Power Company (NPC; Ba2 senior secured) and Sierra Pacific Power Company (SPPC; Ba2 senior secured) under review for possible upgrade. In addition, Moody's placed the (P)Caa1 shelf registration rating for trust preferred securities of Sierra Pacific Resources Capital Trust I and II and the B3 rating on trust preferred securities of NVP Capital I and III under review for possible upgrade. A list of the ratings placed under review appears towards the end of this press release.

In conjunction with initiating the review of the current ratings for SPR and its utility subsidiaries, Moody's assigned a B1 Corporate Family Rating (f/k/a: Senior Implied Rating) and a Speculative Grade Liquidity rating of SGL-3 for SPR. Concurrent with assigning the Corporate Family Rating, Moody's placed that rating under review for possible upgrade. The SGL-3 liquidity rating is not part of the review.

The assignment of a B1 Corporate Family Rating currently reflects SPR's significant debt leverage and Moody's expectation that SPR's consolidated operating cash flow generation will represent about 10% to 12% of adjusted debt over the next two years. SPR's significant leverage, which is characterized by its 70% adjusted debt to adjusted capitalization ratio as of March 31, 2005, has prevailed at close to that level since 2002 when the Public Utilities Commission of Nevada (PUCN) disallowed recovery of almost $500 million of utility-related deferred energy costs, requiring substantial write-offs and compromising SPR's liquidity at the time. Approximately $3.3 billion of SPR's reported consolidated debt represents obligations of its regulated utility subsidiaries and about $2.6 billion or 78% of the utility debt is secured under the first mortgage and general and refunding mortgage bond indentures of either NPC or SPPC. We expect that NPC and SPPC will generate funds from operations sufficient to cover their interest expense and debt by at least 2x and 12%, respectively, over the next couple of years, while also sending dividends to SPR to fully cover the parent's standalone interest expense.

Moody's review of the aforementioned ratings for possible upgrade reflects significantly reduced regulatory risk following a series of supportive decisions by the PUCN in deferred energy and general rate cases filed by NPC and SPPC. These decisions included settlements of the most recent deferred energy rate cases for both utilities earlier this year, approving recovery of virtually all the deferred energy costs covered by the filings and adjusting the base tariff energy rates going forward. The review also considers the good progress by the utilities to become less dependent upon outside sources of power and takes into account about $1.8 billion of refinancing activity completed over the past 18 months to reduce the amount of interest expense and significantly extend the debt maturity profile throughout the corporate family.

Moody's review will consider the likelihood that the PUCN will continue to be supportive of NPC and SPPC in future rate proceedings and the degree to which a combination of the previously mentioned factors results in higher and more predictable cash flow from operations for the utilities on a sustainable basis. Moody's review will also assess the adequacy of the utilities'future cash flow generating capability relative to its expected future consolidated debt levels given the need to fund a portion of the company's sizable capital programs over the next several years. Furthermore, the rating review will revisit circumstances surrounding SPR's protracted litigation with Enron Power Marketing, Inc. pertaining to liquidated damage claims for terminated power supply agreements with NPC and SPPC. Our current view is that the case is unlikely to be resolved in the near term and therefore should not pose a funding risk over that time frame.

The speculative grade liquidity rating of SGL-3 reflects SPR's overall adequate liquidity profile. The adequate liquidity profile is characterized by adequate internal and external sources of liquidity, a good amount of headroom under covenants in SPR's debt indentures, a manageable debt maturity profile, and no meaningful back-door supplement to existing liquidity through asset sales because virtually all of SPR's operating assets are encumbered under the respective first mortgage and general and refunding mortgage bond indentures of the utilities.

Although SPR does not have its own separate bank credit facility, it currently holds cash in escrow, which is dedicated to pay a portion of interest due through August 14, 2005. In addition, given our expectations for future cash flow generation at NPC and SPPC, we believe that the utility subsidiaries will have ample financial flexibility under their respective dividend limitations to send up sufficient funds in aggregate to meet all of SPR's standalone obligations over the next twelve months.

The SGL-3 rating also takes into consideration that both NPC and SPPC have their own revolving credit facility, currently sized at $350 million and $75 million, respectively. Both subsidiaries have ample headroom under covenants governing those facilities Both facilities, which had no direct borrowings outstanding as of March 31, 2005, expire in October 2007.

SPR's next material debt maturities relate to a $240 million short-term variable-rate note due November 16, 2005 and approximately $140 million of notes due 2007. The short-term note is earmarked to be repaid with proceeds from settlement of $240 million of common equity under forward contracts related to SPR's"old"and"new"premium income equity securities (PIES). The $140 million of notes relate to the underlying debt component of"old"PIES that are scheduled to be re-marketed in August 2005 as part of the process leading to eventual settlement of forward contracts to bring in additional common equity on November 15, 2005. Meanwhile, the utility subsidiaries do not face any material debt maturities in the next 12 months.

Sierra Pacific Resources ratings placed under review for possible upgrade include:

B1 corporate family rating

B2 senior unsecured debt and issuer rating

(P)B2 shelf registration rating for senior unsecured debt

(P)Caa1 shelf registration rating for junior subordinated debt

(P)Caa1 shelf registration rating for trust preferred securities of Sierra Pacific Resources Capital Trust I and Sierra Pacific Resources Capital Trust II

Nevada Power Company ratings placed under review for possible upgrade include:

Ba2 senior secured debt

Ba2 senior secured bank facility

B1 senior unsecured debt and Issuer rating

B3 trust preferred securities of NVP Capital I and NVP Capital III

Sierra Pacific Power Company ratings placed under review for possible upgrade include:

Ba2 senior secured debt

Ba2 senior secured bank facility

B1 Issuer Rating

Caa1 preferred stock

Sierra Pacific Resources is a holding company, whose principal subsidiaries, Nevada Power Company and Sierra Pacific Power Company, are electric and electric and gas utilities, respectively. Sierra Pacific Resources also holds relatively modest non-utility investments through other subsidiaries. Sierra Pacific Resources'headquarters are in Las Vegas, Nevada.

New York Andris G. Kalnins Senior Vice President Corporate Finance Group Moody's Investors Service JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653

New York Kevin G. Rose Vice President -Senior Analyst Corporate Finance Group Moody's Investors Service JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653

© Copyright 2005, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc. (together,"MOODY'S"). All rights reserved.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, such information is provided “as is” without warranty of any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, anyerror (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings and financial reporting analysis observations, if any, constituting part of theinformation contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling.

MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for appraisal and rating services rendered by it fees ranging from $1,500 to $2,300,000. Moody's Corporation (MCO) and its wholly-owned credit rating agency subsidiary, Moody's Investors Service (MIS), also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually on Moody's website atwww.moodys.comunder the heading“Shareholder Relations â€" Corporate Governance â€" Director and Shareholder Affiliation Policy.”