UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 19951996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6986
PUBLIC SERVICE COMPANY OF NEW MEXICO
------------------------------------
(Exact name of registrant as specified in its charter)
New Mexico 85-0019030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Alvarado Square, Albuquerque, New Mexico 87158
----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(505) 241-2700
--------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock--$5.00 par value 41,774,083 shares
- ----------------------------- -----------------
Class Outstanding at May 11, 1995
5, 1996
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Report of Independent Public AccountantsAccountants......................... 3
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Earnings--
Three Months Ended March 31, 19951996 and 19941995....................... 4
Consolidated Balance Sheets--
March 31, 19951996 and December 31, 19941995............................. 5
Consolidated Statements of Cash Flows--
Three Months Ended March 31, 19951996 and 19941995....................... 6
Notes to Consolidated Financial StatementsStatements....................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONSOPERATIONS.................... 8
PART II. OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS 13PROCEEDINGS............................................ 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14HOLDERS.......... 12
ITEM 5. OTHER INFORMATION 14INFORMATION............................................ 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
Signature8-K............................. 16
Signature................................................................ 17
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Public Service Company of New Mexico:
We have reviewed the accompanying condensed consolidated balance sheet of Public
Service Company of New Mexico (a New Mexico corporation) and subsidiaries as of
March 31, 1995,1996, and the related condensed consolidated statements of earnings
and cash flows for the three-month periods ended March 31, 19951996 and 1994.1995. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Public Service Company of New
Mexico and subsidiaries as of December 31, 19941995 (not presented herein). In, and, in
our report dated February 23, 1995,13, 1996, we expressed an unqualified opinion on that
statement. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1994,1995, is fairly presented,stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
May 8, 1996
3
ITEM 1. FINANCIAL STATEMENTS
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
March 31
----------------------------
1996 1995
---- ----
(In thousands except per share
amounts)
Operating revenues:
Electric $ 152,102 $ 141,608
Gas 89,802 86,200
Water -- 2,427
---------- ----------
Total operating revenues 241,904 230,235
---------- ----------
Operating expenses:
Fuel and purchased power 39,725 31,866
Gas purchased for resale 46,489 43,582
Other operation and maintenance 72,900 81,211
Depreciation and amortization 20,030 20,515
Taxes, other than income taxes 9,230 9,669
Income taxes 15,055 9,661
---------- ----------
Total operating expenses 203,429 196,504
---------- ----------
Operating income 38,475 33,731
---------- ----------
Other income and deductions, net of taxes: 817 1,575
Income before interest charges 39,292 35,306
---------- ----------
Interest charges:
Interest on long-term debt 12,085 15,434
Other interest charges 759 1,688
Allowance for borrowed funds used
during construction -- --
Net interest charges 12,844 17,122
---------- ----------
Net earnings 26,448 18,184
Preferred stock dividend requirements 147 1,538
---------- ----------
Net earnings applicable to common stock $ 26,301 $ 16,646
========== ==========
Average shares of common stock outstanding 41,774 41,774
========== ==========
Net earnings per share of common stock $ 0.63 $ 0.40
========== ==========
Dividends paid per share of common stock $ -- $ --
========== ==========
The accompanying notes are an integral part of these financial statements.
4
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
-------- -----------
(Unaudited)
(In thousands)
ASSETS
Utility plant $2,485,569 $2,467,161
Accumulated provision for depreciation
and amortization (912,478) (892,727)
---------- ----------
Net utility plant 1,573,091 1,574,434
---------- ----------
Other property and investments 35,190 33,433
---------- ----------
Current assets:
Cash 6,261 4,228
Temporary investments, at cost 114,064 95,972
Receivables 121,403 127,642
Income taxes receivable -- 4,792
Fuel, materials and supplies 42,780 44,660
Gas in underground storage 2,343 5,431
Other current assets 8,723 7,186
---------- ----------
Total current assets 295,574 289,911
---------- ----------
Deferred charges 136,596 137,891
---------- ----------
$2,040,451 $2,035,669
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock $ 208,870 $ 208,870
Additional paid-in capital 470,358 470,358
Excess pension liability, net of tax (2,101) (1,623)
Retained earnings since January 1, 1989 46,531 25,243
---------- ----------
Total common stock equity 723,658 702,848
Cumulative preferred stock without mandatory
redemption requirements 12,800 12,800
Long-term debt, less current maturities 728,860 728,843
---------- ----------
Total capitalization 1,465,318 1,444,491
---------- ----------
Current liabilities:
Short-term debt -- --
Accounts payable 71,077 93,666
93,666
Current maturities of long-term debt 41 146
Accrued interest and taxes 36,179 26,856
Other current liabilities 45,331 44,699
---------- ----------
Total current liabilities 152,628 165,367
---------- ----------
Deferred credits 422,505 425,811
---------- ----------
$2,040,451 $2,035,669
========== ==========
The accompanying notes are an integral part of these financial statements.
5
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
--------------------
1996 1995
-------- --------
(In thousands)
Cash Flows From Operating Activities:
Net earnings $ 26,448 $ 18,184
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Depreciation and amortization 23,954 25,001
Accumulated deferred investment tax credit (1,166) (1,162)
Accumulated deferred income tax (690) 249
Changes in certain assets and liabilities:
Receivables 11,032 20,111
Fuel, materials and supplies 4,968 1,895
1,895
Deferred charges 1,009 6,727
Accounts payable (22,583) (47,059)
Accrued interest and taxes 9,323 9,075
9,075
Deferred credits (3,453) (1,714)
Other (5,825) 1,805
Other, net 1,197 1,864
-------- ---------
Net cash flows from operating activities 44,214 34,976
-------- ---------
Cash Flows From Investing Activities:
Utility plant additions (22,005) (22,779)
(Increase) decrease in other property (1,805) 299
Temporary investments, net (18,092) 44,011
-------- ---------
Net cash flows from investing activities (41,902) 21,531
-------- ---------
Cash Flows From Financing Activities:
Redemptions of PV lease obligation bonds -- (132,663)
Bond redemption premium and costs (21) (85)
Proceeds from asset securitization -- 18,758
Repayments of other long-term debt (105) (4,000)
Net increase in short-term debt -- 65,000
Dividends paid (153) (1,531)
-------- ---------
Net cash flows from financing activities (279) (54,521)
-------- ---------
Increase in cash 2,033 1,986
Cash at beginning of period 4,228 21,029
-------- ---------
Cash at end of period $ 6,261 $ 23,015
======== =========
Supplemental Cash Flow Disclosures:
Interest paid $ 17,502 $ 26,986
======== =========
Income taxes paid, net $ 4,000 $ --
======== =========
The accompanying notes are an integral part of these financial statements.
6
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) General Accounting Policy
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary for a fair presentation of the
consolidated financial statements. The significant accounting policies followed
by Public Service Company of New Mexico (the "Company") are set forth in note
(1) of notes to the Company's consolidated financial statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995 (the "1995 Form
10-K") filed with the Securities and Exchange Commission.
(2) Accounts Receivable Facility
The Company has a $40 million credit facility collateralized by the Company's
electric customer accounts receivable. In March 1996, the New Mexico Public
Utility Commission ("NMPUC") approved the Company's request to increase the
capacity of the accounts receivable facility up to $100 million by including in
the collateral pool the Company's gas accounts receivable and certain amounts
being recovered from gas customers relating to certain gas contract settlements.
The amended accounts receivable facility will have a five year term.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's 1995 Form 10-K PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" discussed
management's assessment of the Company's financial condition, results of
operations and other issues facing the Company. The following discussion and
analysis by management focuses on those factors that had a material effect on
the Company's financial condition and results of operations during the first
quarter of 1996 and 1995. It should be read in conjunction with the Company's
consolidated financial statements. Trends and contingencies of a material nature
are discussed to the extent known and considered relevant.
LIQUIDITY AND CAPITAL RESOURCES
The original capital requirements for 1996 included a discretionary cash outlay
for debt retirement of $90 million. Due to the Company's proposed plan for the
purchases of the Palo Verde Nuclear Generation Station ("PVNGS") lease
obligation bonds and Eastern Interconnect Project ("EIP") secured facility bonds
over the next three years (discussed below), total capital requirements for 1996
have been reduced to $117 million. The Company spent approximately $22 million
for its utility construction expenditures during the first quarter of 1996. For
the remainder of 1996, the Company anticipates that it will spend approximately
$93 million for additional construction expenditures.
The Company expects that such cash requirements are to be met primarily through
internally-generated cash. However, to cover differences in the amounts and
timing of cash generation and cash requirements, the Company intends to utilize
short-term borrowings under its liquidity arrangements. At March 31, 1996, the
Company had available liquidity arrangements of $151 million, consisting of a
$100 million secured revolving credit facility ("Facility"), $40 million credit
facility collateralized by the Company's electric customer accounts receivable
("Accounts Receivable Facility") and $11 million in local lines of credit. The
Facility will expire in June 1998 and includes a maximum allowed debt to
capitalization ratio of 70%. As of March 31, 1996, such ratio was 64.6%. In
addition, in March 1996, the NMPUC approved the Company's request to increase
the capacity of the Accounts Receivable Facility up to $100 million by including
in the collateral pool the Company's gas accounts receivable and certain amounts
being recovered from gas customers relating to certain gas contract settlements.
The amended Accounts Receivable Facility will have a five year term.
On March 21, 1996, the Company filed for NMPUC approval to buy up to $300
million of PVNGS lease obligation bonds and/or EIP secured facility bonds over
the next three years. Hearings on the Company's application are scheduled to
begin in May 1996 and may be continued until June 1996 if the intervenors in the
NMPUC case raise significant contested issues. Although these purchases will be
accounted for as investments in securities, the rating agencies should view the
Company's debt leverage as having been reduced. The Company currently intends to
use cash from temporary investments and future internal cash generation in
excess of capital requirements to fund these purchases. As of March 31, 1996,
the Company had approximately $114 million in temporary investments. The Company
continues to evaluate its investment and debt retirement options to optimize its
financing strategy and earnings potential.
8
On March 12, 1996, the Company's Board of Directors ("Board"), at its regular
meeting, declared a cash dividend of 12 cents per common share payable on May
24, 1996, to stockholders of record as of May 1, 1996. The Company has not
declared dividends on its common stock since January 1989. The Company's Board
reviews the Company's dividend policy on a continuing basis. The declaration of
common dividends is dependent upon a number of factors including earnings and
financial condition of the Company and market conditions.
RESULTS OF OPERATIONS
Net earnings available for common stockholders for the first quarter of 1996
were $26.3 million, an increase of $9.7 million from a year ago. The increase in
earnings was attributable to increased wholesale energy sales, decreased
non-fuel operation and maintenance ("O&M") expenses and decreased interest
charges.
Operating margin for the current quarter increased $.9 million from a year ago
due to (i) an increase in gas off-system sales margin, (ii) an 8.5% increase in
retail Kwh sales and (iii) a 40.9% increase in Kwh sales to electric wholesale
customers. Offsetting such increases was the loss of water revenues of $2.4
million due to the sale of the water division in July 1995.
Non-fuel O&M expenses decreased $8.3 million from a year ago due to (i) an
adjustment of $3.4 million for retirees' health care costs, (ii) a reduction in
O&M expenses of $4.0 million from the 1995 sales of the water division and gas
processing and gathering assets and (iii) decreased PVNGS O&M expense of $2.2
million resulting from the 1995 Unit 2 refueling outage. Offsetting such
decrease was increased maintenance expenses of $2.0 million at the San Juan
Generating Station ("SJGS") Unit 3 and Four Corners Power Plant Unit 5.
Interest charges and preferred stock dividend requirements for the current
quarter decreased $4.3 million and $1.4 million, respectively, from a year ago
due to the retirement of the PVNGS lease obligation bonds of $132.7 million in
March 1995, repayment of other long-term debt of $57.8 million in 1995 and the
redemption of $64.2 million of preferred stock in 1995.
OTHER ISSUES FACING THE COMPANY
Gas Rate Case
As previously reported, in August 1995, the Company filed a request for a $13.3
million increase for its retail natural gas sales and transportation rates.
NMPUC Staff and intervenors in the case filed their testimony in January 1996.
The NMPUC Staff recommended a $2.5 million rate decrease and the New Mexico
Attorney General ("AG") recommended a $14.7 million (subsequently revised to
$13.2 million) rate decrease. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES
FACING THE COMPANY--GAS RATE CASE" in the Company's 1995 Form 10-K.)
9
In March 1996, a stipulated agreement was entered into by the Company, NMPUC
Staff, the AG and the Regents of the University of New Mexico. In the
stipulation, the Company agreed not to seek a rate increase in this case but
would be allowed to recover certain deferred costs incurred through July 1,
1996. It also imposed certain conditions on the Company's transportation
customers. Many of the transportation customers opposed the stipulation.
On April 9, 1996, the NMPUC issued an order, declining to set the proposed
settlement of the Company's pending rate case for hearing. In its order, the
NMPUC ruled that "the nature and extent of the opposition to the stipulation is
such that hearing the stipulation will not materially conserve the NMPUC, NMPUC
Staff and party resources". The Company filed a request for NMPUC to reconsider
its denial of a hearing on the settlement. The Company anticipates that the
request for reconsideration will be disposed of by May 13, 1996. Hearings on the
Company's originally proposed $13.3 million rate increase began on May 6, 1996.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Federal Deposit Insurance Corporation ("FDIC") Litigation, formerly Resolution
Trust Corporation ("RTC") Litigation("MDL-995")
As previously reported, in April 1993, the Company and certain current and
former employees of the Company or Meadows Resources, Inc., a wholly-owned
subsidiary of the Company ("Meadows"), were named as defendants in an action
filed in the United States District Court for the District of Arizona by the
RTC. Three of the individuals sued by the RTC have indemnity agreements with the
Company. The claims related to alleged actions of the Company's or Meadows'
employees in 1987 in connection with a loan procured by Bellamah Community
Development ("BCD") (BCD's general partners include Meadows) from Western
Savings and Loan Association ("Western") and the purchase by that partnership of
property owned by Western. The FDIC (the FDIC was substituted for the RTC as
plaintiff in MDL-995 in early 1996) apparently claims that the Company's
liability stems from the actions of a former employee who allegedly acted on
behalf of the Company for the Company's benefit. The FDIC is claiming in excess
of $40 million in actual damages from the BCD/Western transactions and is also
claiming damages substantially exceeding that amount on Arizona racketeering,
civil conspiracy and aiding and abetting theories. (See PART I, ITEM 3.--"LEGAL
PROCEEDINGS--OTHER PROCEEDINGS" in the Company's 1995 Form 10-K.)
On April 11, 1996, representatives of the Company, certain current and former
employees of the Company or Meadows ("BCD parties") and the FDIC met with a
mediator to continue settlement discussions. The mediation session resulted in
an agreement to settle the case for $5.75 million, $3.125 million of which would
be paid by the Company and the remainder to be paid by insurance covering the
BCD parties. Settlement documents are being drafted for submission to the Court
for approval. After consideration of established reserves, the Company believes
that there will be no material adverse effect on the Company's financial
condition or results of operations.
10
The Company continues to believe that all of the claims made by the FDIC in this
case are without merit but, for business reasons, believes that the settlement
is in the best interest of the Company.
PVNGS PROPERTY TAXES
As previously reported, in November 1995, the Arizona Court of Appeals held that
an Arizona state property tax law, effective December 31, 1989, is
unconstitutional and a lawsuit filed by the PVNGS participants, including the
Company, was returned to the Arizona Tax Court for determination of the
appropriate remedy consistent with that decision. (See PART 1, ITEM 3.--"LEGAL
PROCEEDINGS--PVNGS PROPERTY TAXES" in the Company's 1995 Form 10- K.) On April
23, 1996, the Arizona Department of Revenue and the PVNGS participants reached
an agreement to settle the pending litigation. Pursuant to the tentative
settlement, the Company will relinquish its claims for relief with respect to
prior years and the defendants will not challenge the Court of Appeals' decision
concerning prospective relief (for tax years 1996 and thereafter).
Negotiations of the final settlement are continuing.
11
ITEM 1. FINANCIAL STATEMENTS
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
Three Months Ended
March 31
------------------
1995 1994
---- ----
(In thousands except
per share amounts)
Operating revenues:
Electric $141,608 $148,668
Gas 86,200 109,419
Water 2,427 2,720
-------- --------
Total operating revenues 230,235 260,807
-------- --------
Operating expenses:
Fuel and purchased power 31,866 32,158
Gas purchased for resale 43,582 63,293
Other operation and maintenance 81,211 79,656
Depreciation and amortization 20,515 18,737
Taxes, other than income taxes 9,669 10,193
Income taxes 9,661 14,099
-------- --------
Total operating expenses 196,504 218,136
-------- --------
Operating income 33,731 42,671
-------- --------
Other income and deductions, net of taxes 1,575 (47)
-------- --------
Income before interest charges 35,306 42,624
-------- --------
Interest charges:
Interest on long-term debt 15,434 17,182
Other interest charges 1,688 1,405
Allowance for borrowed funds used
during construction - (66)
-------- --------
Net interest charges 17,122 18,521
-------- --------
Net earnings 18,184 24,103
Preferred stock dividend requirements 1,538 1,681
-------- --------
Net earnings applicable to common stock $ 16,646 $ 22,422
======== ========
Average shares of common stock outstanding 41,774 41,774
======== ========
Net earnings per share of common stock $ 0.40 $ 0.54
======== ========
Dividends paid per share of common stock $ - $ -
======== ========
The accompanying notes are an integral part of these financial statements.
/TABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Annual Meeting
At the meeting of shareholders held on April 30, 1996, the shareholders
reelected the following three nominees to serve as directors until the annual
meeting of shareholders in 1999, or until their successors are duly elected and
qualified, as follows:
Votes
Against Broker
Director Votes For or Withheld Abstentions Non-Votes
-------- --------- ----------- ----------- ---------
L. H. Lattman 37,621,204 313,511 * *
B. F. Montoya 37,660,865 273,850 * *
R. M. Price 37,639,262 295,453 * *
The approval of the selection by the Company's board of directors of Arthur
Andersen LLP as independent auditors for the fiscal year ending December 31,
1996, was voted on, as follows:
Votes
Against Broker
Votes for or Withheld Abstentions Non-Votes
--------- ----------- ----------- ---------
37,729,817 100,296 104,602 *
The approval of the First Restated and Amended Director Retainer Plan was voted
on, as follows:
Votes
Against Broker
Votes for or Withheld Abstentions Non-Votes
--------- ----------- ----------- ---------
27,961,014 3,203,253 1,325,994 *
The approval of the First Restated and Amended Performance Stock Plan was voted
on, as follows:
Votes
Against Broker
Votes for or Withheld Abstentions Non-Votes
--------- ----------- ----------- ---------
27,766,298 3,427,505 1,296,208 *
* Not applicable or not readily available.
12
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
-------- -----------
(Unaudited)
(In thousands)
ASSETS
Utility plant $2,619,687 $2,587,592
Accumulated provision for depreciation and amortization (924,845) (890,905)
---------- ----------
Net utility plant 1,694,842 1,696,687
---------- ----------
Other property and investments 34,040 34,523
---------- ----------
Current assets:
Cash 23,015 21,029
Temporary investments, at cost 30,510 74,521
Receivables 113,119 129,048
Income taxes receivable - 4,182
Fuel, materials and supplies 49,425 51,068
Gas in underground storage 8,492 8,744
Other current assets 9,160 9,549
---------- ----------
Total current assets 233,721 298,141
---------- ----------
Deferred charges 166,858 173,914
---------- ----------
$2,129,461 $2,203,265
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock $ 208,870 $ 208,870
Additional paid-in capital 469,708 469,648
Excess pension liability, net of tax (1,106) (1,106)
Retained earnings (deficit) since January 1, 1989
(appropriated $4.7 million as of March 31, 1995) (29,360) (46,006)
---------- ----------
Total common stock equity 648,112 631,406
Cumulative preferred stock:
Without mandatory redemption requirements 59,000 59,000
With mandatory redemption requirements 17,975 17,975
Long-term debt, less current maturities 746,839 752,063
---------- ----------
Total capitalization 1,471,926 1,460,444
---------- ----------
Current liabilities:
Short-term debt 65,000 -
Accounts payable 58,161 105,213
Current maturities of long-term debt 35,869 148,532
Accrued interest and taxes 37,148 28,073
Other current liabilities 44,861 43,662
---------- ----------
Total current liabilities 241,039 325,480
---------- ----------
Deferred credits 416,496 417,341
---------- ----------
$2,129,461 $2,203,265
========== ==========
The accompanying notes are an integral part of these financial statements.
/TABLE
ITEM 5. OTHER INFORMATION
Rulings from Federal Energy Regulatory Commission ("FERC")
On April 24, 1996, the FERC issued several orders and a Notice of Proposed
Rulemaking ("NOPR"), related to the provision of transmission service by public
utilities.
FERC Order 888 addresses both open transmission access and stranded costs. Order
888 requires all public utilities that own, operate or control interstate
transmission facilities to file open access transmission tariffs, offering other
users the same services the public utility provides to itself, under comparable
terms and conditions. In addition, such transmission owning public utilities
will be required to "purchase" transmission services from themselves in order to
engage in wholesale generation transactions. On April 10, 1996, the Company
filed an open access transmission tariff. As a result of Order 888, the Company
will be required to make a compliance filing, making the appropriate changes to
the filed open access tariff to bring its terms and conditions into compliance
with Order 888. The Company's April 10 filing was generally in compliance with
the terms and conditions of Order 888. As a result, the Company does not
anticipate any material changes being required to comply with Order 888.
Order 888 also addresses conditions required for public utilities to be granted
the right to market-based rates for wholesale power sales. On April 10, the
Company also filed a market-based rate tariff that would enable the Company to
sell in the wholesale power market at market-based rates rather than rates
limited by cost of service. The Company believes that it meets the criteria
established in Order 888 for such a tariff.
Both the open access tariff filing and the market-based tariff filing by the
Company await FERC action. The Company has requested June 1, 1996 as an
effective date for both tariffs, but will require a short extension of time to
bring the open access tariff into compliance. The FERC has also required power
pools to file open access tariffs. The Company is a member of the Inland Power
Pool and the Western Systems Power Pool. The membership of both pools is
evaluating Order 888 and will take the appropriate steps to address compliance
with the order.
Order 888 also establishes federal rules for the recovery of stranded costs by
public utilities. The FERC will allow recovery of stranded costs under certain
circumstances. Wholesale stranded cost recovery will be determined based on
expected revenues loss from a departing wholesale requirements customer, net of
transmission revenues that would be received by the public utility (if such
service is provided) and net of mitigation efforts by the public utility.
Mitigation efforts include the public utility marketing the stranded assets it
holds that had previously been used to serve the departing customer.
The open access and stranded asset rules will be effective on July 1, 1996.
On April 24, FERC also issued Order 889, requiring public utilities to install
and operate an Open Access Same-time Information System ("OASIS") and comply
with certain standards of conduct among its employees in transmission operations
and wholesale power marketing. The standards of conduct are designed to prevent
employees of a public utility or its affiliates engaged in marketing functions
from obtaining preferential access to OASIS-related information or from engaging
in unduly discriminatory business practices.
13
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
------------------
1995 1994
---- ----
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $18,184 $24,103
Adjustments to reconcile net earnings to net cash
flows from operating activities:
Depreciation and amortization 25,001 22,931
Accumulated deferred investment tax credit (1,162) (1,295)
Accumulated deferred income tax 249 3,476
Changes in certain assets and liabilities:
Receivables 20,111 14,204
Fuel, materials and supplies 1,895 (3,766)
Deferred charges 6,727 13,204
Accounts payable (47,059) (39,744)
Accrued interest and taxes 9,075 7,553
Deferred credits (1,714) (2,628)
Other 1,805 5,167
Other, net 1,864 1,711
------- -------
Net cash flows from operating activities 34,976 44,916
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility plant additions (22,779) (26,884)
(Increase) decrease in other property 299 (274)
Temporary investments, net 44,011 -
------- -------
Net cash flows from investing activities 21,531 (27,158)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of PV lease obligation bonds (132,663) -
Redemptions and repurchases of preferred stock - (1,419)
Bond redemption premium and costs (85) -
Proceeds from asset securitization 18,758 -
Repayments of long-term debt (4,000) (10,568)
Net increase in short-term debt 65,000 -
Dividends paid (1,531) (1,704)
------- -------
Net cash flows from financing activities (54,521) (13,691)
------- -------
Increase in cash 1,986 4,067
Cash at beginning of period 21,029 20,510
------- -------
Cash at end of period $23,015 $24,577
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $20,833 $19,368
======= =======
Income taxes paid, net $ - $ -
======= =======
The accompanying notes are an integral part of these financial statements.
/TABLE
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) General Accounting Policy
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary for a fair presentation of the
consolidated financial statements. The accounting policies followed by Public
Service Company of New Mexico (the "Company") are set forth in note (1) of notes
to the Company's consolidated financial statements in the Company's Annual Re-
port on Form 10-K for the year ended December 31, 1994 (the "1994 Form 10-K")
filed with the Securities and Exchange Commission.
(2) Palo Verde Nuclear Generating Station ("PVNGS") Lease Obligation Bonds
("LOBs") Redemption
On March 8, 1995, approximately $121 million of PVNGS LOBs were retired. The
retired LOBs consisted of approximately $58 million of 10.30% LOBs due 2014
retired at a price of 100% of par and approximately $63 million of 10.15% LOBs
due 2016 retired at a price of 97.8% of par. Additionally, approximately $4.4
million and $4.8 million of LOBs due 1996 and 1997 at interest rates of 9.125%
and 8.95%, respectively, were retired at par on March 22, 1995. In connection
with the LOB retirements, approximately $65 million was borrowed under the
Company's liquidity arrangements and approximately $19 million was obtained un-
der the securitization facility related to certain amounts being recovered from
gas customers relating to certain gas contract settlements. The Company intends
to repay the borrowing from proceeds of pending asset sales. In conjunction with
these retirements, the Company wrote off approximately $1.5 million of net costs
related to these transactions. The retirement of the LOBs, which were the
Company's highest cost debt, will save the Company approximately $11 million
annually in interest expense over the next five years.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company's 1994 Form 10-K PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" discussed manage-
ment's assessment of the Company's financial condition, results of operations
and other issues facing the Company. The following discussion supplements the
1994 Form 10-K discussion and should be read in conjunction with the consoli-
dated financial statements presented herein and in the 1994 Form 10-K.
LIQUIDITY AND CAPITAL RESOURCES
The Company's construction expenditures for the first quarter of 1995 were
approximately $22.8 million. During the remainder of 1995, the Company
anticipates it will spend approximately $87 million for additional construction
expenditures and approximately $100 million for the retirement of additional
long-term debt.
The Company expects that such cash requirements are to be met primarily through
internally-generated cash. However, to cover differences in the amounts and
timing of cash generation and cash requirements, the Company intends to utilize
short-term borrowings under its liquidity arrangements, which consist of a $100
million secured revolving credit facility ("Facility"), a $40 million credit
facility collateralized by the Company's electric customer accounts receivable,
and $11 million in local lines of credit. As of March 31, 1995, the Company had
short-term borrowings of $40 million under the credit facility collateralized by
the electric customer accounts receivable and $25 million under the Facility,
and temporary investments of $ 30.5 million.
The Company received New Mexico Public Utility Commission ("NMPUC") authoriza-
tion on May 1, 1995, to extend the Facility, which was to expire on June 13,
1995, for an additional three years. The Company expects to renew the Facility
before its expiration date.
Credit Rating
In addition to the recent upgrade of the Company's security rating outlook from
"stable" to "positive" by Standard & Poor's Corp., Duff & Phelps Inc. upgraded
the EIP Funding Corp. secured lease obligation bonds and the Company's preferred
stock. Duff & Phelps Inc. stated that the upgrade reflects, among other things,
the Company's progress toward restructuring its rates and operations, improving
the Company's competitive position by lowering rates and providing the Company
with a reasonable framework for gradually improving its financial position.
Duff & Phelps Inc. further stated that with the Company's reduced regulatory
uncertainty and business risk, credit protection measures are expected to
gradually improve.
RESULTS OF OPERATIONS
The financial performance of the excluded resources improved from last year's
quarter as a result of the sale of 35 MW of San Juan Generating Station ("SJGS")
Unit 4 to Utah Associated Municipal Power Systems ("UAMPS") and reduced PVNGS
Unit 3 operation and maintenance ("O&M") expenses. Operating results for the
excluded resources for these periods reflect the allocation of interest charges
based on the average investment in excluded net utility plant as a percent of
total utility plant for the period. Selected financial information for the
excluded resources is shown below:
Three Months Ended
March 31
--------
1995 1994
---- ----
(In thousands)
Operating revenues $ 9,061 $ 9,854
Operating income $ 11319 $ 87
Net loss $ (116) $ (1,644)
Net utility plant at end of period $140,252* $158,350
* Decrease is a result of the sale of 35 MW of SJGS Unit 4 to UAMPS.
Electric gross margin (electric operating revenues less fuel and purchased power
expense) decreased $6.8 million in the current quarter due to: (1) reduced off-
system sales of $5.8 million as a result of the expiration of three power sale
contracts and generally poor wholesale power market conditions caused by the
abundance of inexpensive hydro power and warmer than usual temperatures and (2)
a difference of $6.7 million between the estimated unbilled revenues reported in
the fourth quarter of 1993 and actual unbilled revenues recorded in the first
quarter of 1994. Partially offsetting such decrease was the increase in retail
revenues (net of the effect of retail rate reductions) resulting from increased
load growth.
Gas gross margin (gas operating revenues less gas purchased for resale) de-
creased $3.5 million from the same quarter last year due to a decrease in gas
deliveries resulting from much warmer than normal weather experienced in the
first quarter of 1995.
Other O&M expenses increased $1.6 million from last year's quarter as a result
of higher distribution expense of $1.4 million attributed to increased tree
trimming and maintenance expenses, higher production O&M expense for the gas and
oil-fired units of $1.1 million resulting from the maintenance outages in the
first quarter of 1995, and higher transmission expense of $.9 million. Such
increases were partially offset by lower O&M expenses of $2.0 million related to
outages at Four Corners Generating Station and PVNGS during the first quarter of
1994.
Depreciation and amortization expenses increased $1.8 million in the current
quarter as a result of implementing the new depreciation rates approved by the
NMPUC.
Other income and deductions (net) increased $1.6 million from the same quarter
last year due to an after-tax accrual of $2.6 million of income resulting from
the carrying costs related to gas take-or-pay settlement amounts, which was
partially offset by an after-tax write-off of debt retirement expenses of $.9
million.
Net interest charges decreased $1.4 million in the current quarter due to the
retirement of $45 million of 10.125% first mortgage bonds in April 1994.
OTHER ISSUES FACING THE COMPANY
OLE Project
As previously reported, plans to construct the OLE transmission line, a 345 Kv
line connecting the existing Ojo 345 Kv line to the Norton station in northern
New Mexico, had faced considerable opposition by persons concerned primarily
about the environmental impacts of the project. As a result, in 1994, an
alternative route was identified. (See PART II, ITEM 7.--"MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER
ISSUES FACING THE COMPANY--TRANSMISSION ISSUES--OLE Transmission Project" in the
Company's 1994 Form 10-K.)
The proposed alternative route required endorsements from the three affected
Indian tribes prior to the construction of the line across those tribal lands.
One of the three Indian tribes has withdrawn its support for the proposed
alternative route. Given that development, the Company advised the hearing
examiner at a prehearing conference held on May 8, 1995, that the Company is
unable to identify a viable alternative and requested a decision on the
application for the OLE line as originally filed. The Company is awaiting a
final decision from the NMPUC.
Sale of SDCW
As previously reported, in February 1994, the Company and the City of Santa Fe
(the "City") entered into a purchase and sale agreement for the Company's water
division. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS--OTHER ISSUES FACING THE COMPANY--
SALE OF SDCW".) The Company's current estimate of the sales price is
approximately $52 million. Such amount will be adjusted in accordance with the
terms and conditions of the contract at the time of sale. On March 9, 1995,
the hearing examiner issued his recommended decision, recommending approval of
the sale and the terms and condition of the agreement reached with the City.
The Company currently expects that the closing will occur in the second quarter
of 1995.
Open Transmission Access and Stranded Cost
On March 29, 1995, the Federal Energy Regulatory Commission ("FERC") issued its
Notice of Proposed Rulemakings on various issues pertaining to restructuring of
the wholesale electric industry. The FERC is seeking comments on various issues,
including non-discriminatory transmission access, stranded cost recovery and
functional unbundling of generation and transmission services. The Company is
currently evaluating these issues and plans to file responses with the FERC.
The Company does not anticipate a final ruling from FERC in 1995.
Gas Assets Sale
As previously reported,in February 1994, an agreement was executed with Williams
Gas Processing--Blanco, Inc, a subsidiary of the Williams Field Services Group,
Inc., of Tulsa, Oklahoma, for the sale of the assets of the Company's gas
gathering and processing subsidiaries and for the sale of Northwest andSoutheast
gas gathering and processing facilities of the Company. The agreement provides
for a cash selling price of $155 million, subject to certain adjustments. The
Company would recognize an after-tax gain of approximately $14.1 million from
the sale.The sale is subject to NMPUC approval.(See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING
THE COMPANY--SALE OF GAS GATHERING AND PROCESSING ASSETS" in the Company's 1994
Form 10-K).
On April 14, 1995, the hearing examiner issued his recommended decision,
recommending approval of the sale. If NMPUC approval is issued on an expedited
basis, the Company expects to finalize the sale by the end of July 1995. How-
ever, the Company cannot predict the ultimate timing or outcome of the NMPUC
action.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Archaeological Site Damage
In March 1995, a contractor installing gas pipeline on State Road 14 on behalf
of the Company damaged an archaeological site located in the New Mexico State
Highway and Transportation Department ("NMSHTD") right-of-way. The contractor
was installing the gas pipeline at the direction of the Company. The Company
notified both the NMSHTD and the New Mexico State Historic Preservation Office
("SHPO"). The Company conducted an investigation and provided information
regarding the site,damage and remedial measures in response to requests from the
NMSHTD. The incident may subject the Company and its employees to criminal and
civil liability under the New Mexico Cultural Properties Act ("NMCPA"). Under
NMCPA, the maximum civil penalty can be the cost of restoration, stabilization
or interpretation of the archaeological site, or twice such cost in the court's
discretion. The likelihood and type of any citations, prosecutions or civil
penalties that may be pursued by either the NMSHTD or the SHPO are unknown at
this time. Although the Company is unable to predict the outcome of any
proceeding stemming from this incident, the Company does not expect that the
ultimate resolution will have a material adverse effect on the Company's
financial condition or results of operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders held on April 25, 1995, the shareholders
elected the following three nominees to serve as directors until the annual
meeting of shareholders in 1998, or until their successors are duly elected and
qualified, as follows:
Votes
Against Broker
Director Votes For or Withheld Abstentions Non-Votes
-------- --------- ----------- ----------- ---------
J. T. Ackerman 36,296,038 364,260 * *
J. A. Godwin 36,276,828 383,470 * *
M. Lujan, Jr. 36,287,787 372,511 * *
The approval of the selection by the Company's board of directors of Arthur
Andersen LLP as independent auditors for the fiscal year ending December 31,
1995, was voted on, as follows:
Votes
Against Broker
Votes for or Withheld Abstentions Non-Votes
--------- ----------- ----------- ---------
36,354,331 145,877 160,090 *
* Not applicable or not readily available.
LOBs Consent Solicitation
On January 12, 1995, the Company and First PV Funding Corporation ("First PV")
commenced the Solicitation of Consents to certain proposed amendments to the
Indenture governing the 10.30% Lease Obligation Bonds Series 1986A due 2014,
9.125% Lease Obligation Bonds Series 1986A due 1996, 10.15% Lease Obligation
Bonds Series 1986B due 2016 and 8.95% Lease Obligation Bonds Series 1986B due
1997 (the "LOBs"). The purpose of the proposed amendments was to facilitate the
retirement or acquisition at current market prices of certain LOBs.
At the conclusion of the Solicitation of Consents on March 1, 1995, bondholders
owning $560,067,000 in aggregate principal amount of LOBs, or about 91% of the
$614,933,000 of LOBs outstanding had given their consent to amending the
Indenture governing such LOBs. The Company paid $2.50 in cash for each $1,000
in principal amount of LOBs for which a proper consent was given.
ITEM 5. OTHER INFORMATION
Nuclear Fuel Supply
The Company has made arrangements through contract flexibilities to obtain
quantities of uranium concentrates anticipated to be sufficient to meet its
share of uranium concentrates requirements through 2000. The Company's existing
contracts and options could be utilized to meet 75% of such requirements in 2001
and 2002 and 40% of requirements from 2003 through 2007.The Company understands
that other PVNGS participants have made arrangements for the uranium concentrate
requirements through 1997. Their existing contracts and options could be
utilized to meet 80% of requirements in 1998 and 1999 and 70% of requirements
from 2000 through 2006. The PVNGS participants, including the Company,
contracted for all conversion services required through 2000 with options for up
to 70% through 2002. The PVNGS participants, including the Company, also have an
enrichment services contract with United States Enrichment Corporation ("USEC")
which obligates USEC to furnish enrichment services required for the operation
of the three PVNGS units over a term expiring in September 2002, with options to
continue through September 2007.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.18.4 Amendment No. 4 dated as of March 8, 1995, to Facility Lease
between Public Service Company of New Mexico and The First
National Bank of Boston, dated as of December 16, 1985
10.20.3 Amendment No. 3 dated as of March 8, 1995, to Facility Lease
between Public Service Company of New Mexico and The First
National Bank of Boston, dated as of August 12, 1986
10.64* Results Pay
15.0 Letter Re Unaudited Interim Financial Information
27 Financial Data Schedule
99.1.6 1995 Supplemental Indenture among First PV Funding Corporation,
Public Service Company of New Mexico and Chemical Bank, as
Trustee dated as of February 14, 1995
99.3.3 Supplemental Indenture No. 3 dated as of March 8, 1995, to Trust
Indenture, Mortgage, Security Agreement and Assignment of Rents
between The First National Bank of Boston and Chemical Bank dated
as of December 16, 1985
99.9.1 Supplemental Indenture No. 2 dated as of March 8, 1995, to Trust
Indenture, Mortgage, Security Agreement and Assignment of Rents
between The First National Bank of Boston and Chemical Bank dated
as of August 12, 1986
*Designates each management contract, compensatory plan or arrangement
required to be filed as an exhibit to this report.
b. Reports on Form 8-K:
None, other than the previously filed Form 8-Ks described in the 1994 Form
10-K.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Registrant)
Date: May 11, 1995 /s/ Donna M. Burnett
-----------------------------------Public utilities will be required to separate transmission operations and
reliability functions from the marketing and merchant functions and prevent
system operation personnel from providing information to marketing personnel
that is not available to all customers at the same time through public posting
on the OASIS. Order 889 requires implementation of the standards of conduct on
July 1, 1996, and implementation of an OASIS no later than November 1, 1996. The
FERC anticipates that the OASIS will be made available to the public via the
Internet.
The NOPR seeks further comments and input from the industry regarding further
changes to the method by which customers access and use the transmission systems
of public utilities. The FERC proposes replacement of the network and
point-to-point transmission service concepts embodied in Order 888 with a single
capacity reservation system that would further enhance the provision of
"comparable" transmission service among all transmission users. Comments are due
to the FERC no later than August 1, 1996.
The Company continues to assess these rules and the NOPR and the effects
thereof.
FERC Rate Filings
On April 1, 1996, the Company filed a notice of change in rates for its firm
transmission service for all point-to-point and network customers on the
Company's transmission system. The Company also requested changes for services
provided to two customers who receive integration and transmission service for
power purchased from a third party. The rates proposed under the request would
increase projected 1996 transmission revenues by approximately $10.5 million.
The request would also bring certain pricing and service terms into compliance
with FERC Order 888 and current FERC policy. In particular, the Company seeks to
have transmission service provided to Plains Electric Generation and
Transmission Cooperative, Inc., ("Plains") designated by the FERC as network
transmission service.
The Company has also requested that this filing be consolidated with four
Section 206 complaint proceedings submitted by four of the affected customers
filed in 1995, as well as a proceeding related to the Company's provision of
firm transmission service to El Paso Electric Company. (See PART II, ITEM
7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--OTHER ISSUES FACING THE COMPANY--Transmission Disputes" in the
Company's 1995 Form 10-K.)
The Company has requested an effective date of June 1, 1996, for the rates
requested in this filing, with the exception of one service agreement with
Plains, which would have an effective date of July 1, 1996. The Company has
filed the same cost support in the open access tariff filing and anticipates
that the FERC will determine rates for the open access tariff based on the
results of the rate change proceeding.
Energy and Utility Related Subsidiaries
As previously reported, in June 1995, the Company filed an application for
authorization for the creation of three wholly-owned subsidiaries and sought
approval to invest a maximum of $50 million in the three subsidiaries over time
and to enter into reciprocal loan agreements for up to $30 million with these
subsidiaries. In January 1996, the hearing examiner assigned to the case
recommended that the NMPUC deny the NMPUC Staff's motion to have the case
14
dismissed. In February 1996, the NMPUC Staff filed a motion seeking to have the
Company report on its non-regulated activities, explain why NMPUC approval is
not required and why sanctions should not be considered if approval is required.
The Company filed its response describing its activities and presented legal
authority demonstrating its compliance with the New Mexico Public Utility Act.
(See PART 1, ITEM 1.--"BUSINESS--RATES AND REGULATION--Energy and Utility
Related Subsidiaries" in the 1995 Form 10-K.)
On March 5, 1996, the NMPUC issued an order adopting the hearing examiner's
recommendation and denied NMPUC Staff's motion to dismiss the case. The NMPUC
has not acted on the NMPUC Staff's subsequent motion. On April 3, 1996, the
hearing examiner issued a second procedural order and a hearing in the case has
been scheduled for July 8, 1996. The Company is currently having discussions
with the NMPUC Staff and other intervenors regarding their concerns on the
Company's request. The Company currently cannot predict the ultimate outcome of
this proceeding but intends to vigorously defend against any allegation that it
is in violation of any legal requirements.
Gas Transmission Pipeline
As previously reported, the Company leases approximately 130 miles of
transmission pipeline from the Department of Energy ("DOE") for transportation
of natural gas to certain customers in northern New Mexico, including the county
of Los Alamos and Los Alamos National Laboratory. (See PART I, ITEM
2.--"PROPERTIES--NATURAL GAS" in the 1995 Form 10-K.) On March 15, 1996, the DOE
issued a request for proposal ("RFP") for the sale of the pipeline. The RFP
provides that proposals for purchase of the line be received by May 30, 1996 and
the closing be completed by September 30, 1996. The Company plans to submit a
bid. If the Company is the successful bidder, transfer of the property would be
completed by the end of 1996, subject to resolution of outstanding right-of-way
issues.
Department of Labor Matter (PVNGS)
In 1993, a Department of Labor ("DOL") Administrative Law Judge ("ALJ") issued a
Recommended Decision and Order finding that Arizona Public Service Company
("APS"), as the operating agent of PVNGS, discriminated against a former
contract employee who worked at PVNGS because he engaged in protected activities
(as defined under Federal regulations). APS and the former contract employee who
had raised the DOL claim entered into a settlement agreement which was approved
by the Secretary of Labor in June 1995. By letter dated March 7, 1996, the
Nuclear Regulatory Commission ("NRC") sent a Notice of Violation and Proposed
Imposition of Civil Penalty notifying APS that the NRC proposes to impose a
$100,000 civil penalty for a "Severity Level III" violation of NRC requirements
relating to the circumstances surrounding this matter. The NRC also concluded in
its March 7, 1996 letter that APS's actions taken and planned to correct the
violation have already been addressed and therefore APS is not required to
respond to the Notice of Violation. APS paid the associated penalty in April
1996.
15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.68 Master Decommissioning Trust Agreement for Palo Verde Nuclear
Generating Station dated March 15, 1996, between Public Service
Company of New Mexico and Mellon Bank, N.A.
15.0 Letter Re Unaudited Interim Financial Information
27 Financial Data Schedule
99.3 Trust Indenture, Mortgage, Security Agreement and Assignment of
Rents dated as of December 16, 1985, between the First National
Bank of Boston, as Owner Trustee, and Chemical Bank, as
Indenture Trustee together with Supplemental Indentures Nos. 1
and 2 (refiled).
b. Reports on Form 8-K:
Report dated March 13, 1996 and filed March 13, 1996, relating to the
Declaration of Cash Dividends on Common Stock.
16
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW MEXICO
------------------------------------
(Registrant)
Date: May 8, 1996 /s/ Donna M. Burnett
------------------------------------
Donna M. Burnett
Corporate Controller and
Chief Accounting Officer
(Officer duly authorized to
sign this report)
17