Fitch Revises Outlook of Sierra Pacific Resources & Subs to Positive.

NEW YORK -- Fitch has affirmed the ratings of Sierra Pacific Resources (SRP) and its subsidiaries Nevada Power Co. (NPC) and Sierra Pacific Power Co. (SPPC) as outlined below and has also revised their Rating Outlooks to Positive from Stable.

The Positive Rating Outlook for SRP and its subsidiaries reflects evidence of a supportive regulatory environment in Nevada, reduced litigation exposure, improved financial flexibility, adequate liquidity and successful efforts to diminish reliance on the wholesale energy markets. Since January 2006, NPC has added approximately 1,700 MW of new generation capacity while SPPC has recently begun construction on its 514 MW gas-fired Tracy facility in northern Nevada following regulatory approval.

Recent orders by the Public Utilities Commission of Nevada (PUCN) for both utilities have continued to allow for full recovery of deferred energy costs and adjustments to going forward energy rates. This is a primary rating consideration given the exposure of both utilities to the wholesale energy markets. The PUCN has also supported the company's efforts to reduce its exposure to the wholesale energy markets and has approved the purchase and construction of new generating facilities. Regulatory decisions will remain critical going forward as the utilities are expected to consistently file for recovery of capital investments and deferred energy costs. A change to this pattern of constructive regulatory orders would have adverse rating implications for the company. Fitch notes that NPC has a $172 million deferred energy case pending before the PUCN. A decision in the proceeding is expected by the end of July 2006.

In addition to continued exposure to the wholesale power and natural gas markets and regulatory risk associated with recovering the utilities' deferred energy costs, a primary risk for fixed-income investors is SRP's significant capital expenditure commitments and related financing required over the next several years. Given the company's strategy to close its generation gap as well as expand its transmission and distribution system, substantial additional construction/acquisitions should be expected. SRP recently announced its intention to develop two 750 MW coal-fired plants and a 250 mile transmission line near Ely, Nevada. The project is subject to regulatory approval and permitting requirements and the first unit would be operational in 2011 with the second unit following in 2014. Total capital expenditures for the project are estimated at $3 billion and will significantly exceed internally generated cash. The company has not yet laid out its financing plans but Fitch expects that the company will utilize a balanced mix of debt and equity funding to support credit quality.

SRP's financial metrics remain somewhat weak but Fitch expects these measures will improve as the company recovers its deferred energy costs and capital investments. For the latest twelve months ended March 31, 2006, debt to EBITDA and EBITDA to interest equaled 7.0 times (x) and 2.2x, respectively. During 2006, the utilities have continued to demonstrate access to capital markets. Several debt financings have pushed out maturities and lowered interest expense. In response to elevated commodity prices, both NPC and SPPC recently increased the capacity of each of their revolving credit facilities by $100 million to $600 million and $350 million, respectively.

Positively, all remaining litigation stemming from the western energy crisis has been resolved. Of particular note was SRP's settlement agreement with the creditors of Enron that required only modest incremental cash payments.

SRP's senior unsecured debt rating reflects its consolidated financial profile and structural subordination. Although the holding company's liquidity has improved, the parent relies on dividends from its subsidiaries to meet it obligations and certain limitations have been put in place. The most restrictive dividend limitation currently is from a February 2006 PUCN financing order that restricts the combined dividends from NPC and SPPC to the amount of SRP's debt service. Fitch believes that permitted dividends will be sufficient to meet parent needs over the next several years, but any further deterioration of the subsidiaries' financial results would affect parent cash flow. SRP also intends to hold $30 million in cash at the parent level.

Supportive regulatory rulings in pending and future rate proceedings, further equity issuances or a significant reduction in system debt levels could lead to favorable resolution of the Positive Rating Outlook. A negative rating action could result from events restricting the parent's or utilities' access to adequate liquidity, the disallowance of significant deferred energy costs or capital expenditures by regulators or over-reliance on debt financings to meet its capital requirements.

Sierra Pacific Resources

-- Issuer Default Rating (IDR) 'B+';

-- Senior unsecured debt 'B+/RR4';

-- Rating Outlook Positive.

Nevada Power Co.

-- IDR 'BB-'

-- First mortgage bonds 'BB+';

-- General and refunding mortgage bonds 'BB+';

-- Secured revolving bank facility 'BB+';

-- Senior unsecured debt 'BB-';

-- Trust preferred securities 'B+'

-- Rating Outlook Positive.

Sierra Pacific Power Co.

-- IDR 'BB-'

-- First mortgage bonds 'BB+';

-- General and refunding mortgage bonds 'BB+';

-- Secured revolving bank facility 'BB+';

-- Preferred stock 'B+'.

-- Rating Outlook Positive.

Fitch's Recovery Ratings (RR), introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors, including a Case Study webcast, can be found at www.fitchratings.com/recovery.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.