SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended March 31, 1995 Commission File Number 1-3034
Northern States Power Company
(Exact name of registrant as specified in its charter)
Minnesota 41-0448030
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
414 Nicollet Mall, Minneapolis, Minnesota 55401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 330-5500
None
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
_____ _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1995
Common Stock, $2.50 par value 67,430,635 shares
Item 1. Financial Statements
Northern States Power Company (Minnesota) and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended
March 31
1995 1994
(Thousands of dollars)
Utility operating revenues
Electric................................................... $497,314 $494,031
Gas........................................................ 163,853 189,431
Total.................................................... 661,167 683,462
Utility operating expenses
Fuel for electric generation............................... 83,338 76,004
Purchased and interchange power............................ 51,733 56,467
Cost of gas purchased and transported...................... 99,301 121,805
Other operation............................................ 79,108 77,583
Maintenance................................................ 37,767 40,469
Administrative and general................................. 43,749 47,747
Conservation and energy management......................... 7,770 8,157
Depreciation and amortization.............................. 71,831 67,345
Taxes: Property and general................................ 62,279 59,929
Current income tax expense.......................... 40,122 43,596
Deferred income tax expense......................... (1,290) 1,940
Investment tax credit adjustments - net............. (2,239) (3,375)
Total.................................................... 573,469 597,667
Utility operating income.................................... 87,698 85,795
Other income and expense
Equity in earnings of unconsolidated investees............. 10,506 (107)
Allowance for funds used during construction - equity...... 1,338 1,208
Other income and deductions - net.......................... (577) 3,266
Total .................................................... 11,267 4,367
Income before interest charges.............................. 98,965 90,162
Interest charges
Interest on long-term debt................................. 27,361 22,827
Other interest and amortization............................ 5,307 3,078
Allowance for funds used during construction - debt........ (1,893) (1,537)
Total.................................................... 30,775 24,368
Net Income ................................................. 68,190 65,794
Preferred stock dividends .................................. 3,201 3,057
Earnings available for common stock......................... $64,989 $62,737
Average number of common and equivalent
shares outstanding (000's)................................ 67,004 66,742
Earnings per average common share........................... $ .97 $ .94
Common dividends declared per share......................... $ .660 $ .645
Statements of Retained Earnings (Unaudited)
Balance at beginning of period.............................. $1,183,191 $1,127,372
Net income for period....................................... 68,190 65,794
Dividends declared:
Cumulative preferred stock................................. (3,201) (3,057)
Common stock............................................... (44,198) (43,050)
Balance at end of period.................................... $1,203,982 $1,147,059
The Notes to Financial Statements are an integral part of the Statements of Income and Retained Earnings.
Northern States Power Company (Minnesota) and Subsidiaries
Consolidated Balance Sheets (Unaudited)
March 31, December 31,
1995 1994
(Thousands of dollars)
ASSETS
UTILITY PLANT
Electric........................................................... $6,407,107 $6,372,317
Gas................................................................ 679,587 677,233
Common............................................................. 271,924 262,506
Total.......................................................... 7,358,618 7,312,056
Accumulated provision for depreciation........................... (3,189,171) (3,116,811)
Nuclear fuel....................................................... 811,809 797,097
Accumulated provision for amortization........................... (721,014) (718,690)
Net utility plant.............................................. 4,260,242 4,273,652
CURRENT ASSETS
Cash and cash equivalents.......................................... 36,525 41,055
Short-term investments............................................. 1,892 892
Accounts receivable - net.......................................... 290,284 280,858
Accrued utility revenues........................................... 81,999 98,651
Federal income tax and interest receivable......................... 0 28,858
Fossil fuel inventory - at average cost............................ 46,229 56,960
Materials and supplies - at average cost........................... 104,739 101,878
Prepayments and other.............................................. 48,862 56,075
Total current assets............................................. 610,530 665,227
OTHER ASSETS
Regulatory assets.................................................. 351,729 357,576
Investments in non-regulated projects and other investments........ 220,080 201,329
External decommissioning fund........................ ............. 160,731 145,467
Non-regulated property - net....................................... 175,654 172,961
Federal income tax and interest receivable......................... 56,358 56,358
Intangible assets and other........................................ 79,052 81,001
Total other assets.............................................. 1,043,604 1,014,692
TOTAL.......................................................... $5,914,376 $5,953,571
LIABILITIES AND EQUITY
CAPITALIZATION
Common stock equity:
Common stock and premium - authorized 160,000,000
shares of $2.50 par value, issued shares:
1995, 67,274,385; 1994, 66,922,144............................. $728,601 $713,180
Retained earnings................................................ 1,203,982 1,183,191
Leveraged common stock held by ESOP.............................. (15,998) (2,990)
Currency translation adjustments - net.......................... 3,492 3,586
Total common stock equity...................................... 1,920,077 1,896,967
Cumulative preferred stock and premium - authorized
7,000,000 shares of $100 par value; outstanding
shares: 1995 and 1994, 2,400,000
without mandatory redemption..................................... 240,469 240,469
Long-term debt..................................................... 1,456,217 1,463,354
Total capitalization........................................... 3,616,763 3,600,790
CURRENT LIABILITIES
Long-term debt due within one year................................. 19,006 16,106
Other long-term debt potentially due within one year............... 141,600 141,600
Short-term debt - primarily commercial paper....................... 157,648 238,439
Accounts payable................................................... 179,279 234,905
Taxes accrued...................................................... 256,616 178,119
Interest accrued................................................... 30,232 28,164
Dividends payable on common and preferred stocks................... 47,602 47,283
Accrued payroll, vacation and other................................ 61,421 79,029
Total current liabilities...................................... 893,404 963,645
OTHER LIABILITIES
Deferred income taxes.............................................. 850,823 848,870
Deferred investment tax credits.................................... 171,544 173,838
Regulatory liabilities............................................. 208,329 200,517
Pension and other benefit obligations.............................. 93,808 92,514
Other long-term obligations and deferred income.................... 79,705 73,397
Total other liabilities........................................ 1,404,209 1,389,136
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 4)
TOTAL........................................................ $5,914,376 $5,953,571
The Notes to Financial Statements are an integral part of the Balance Sheets.
Northern States Power Company (Minnesota) and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended
March 31
1995 1994
(Thousands of dollars)
Cash Flows from Operating Activities:
Net Income............................................................. $68,190 $65,794
Adjustments to reconcile net income to cash from operating activities:
Depreciation and amortization........................................ 79,517 73,541
Nuclear fuel amortization............................................ 12,817 12,789
Deferred income taxes................................................ 889 1,193
Deferred investment tax credits recognized........................... (2,349) (3,452)
Allowance for funds used during construction - equity................ (1,338) (1,208)
Undistributed equity in earnings of unconsolidated investees......... (7,910) 966
Cash provided by changes in certain working capital items............ 68,532 61,509
Conservation program expenditures - net of amortization.............. (3,953) (2,767)
Cash provided by changes in other assets and liabilities............. 17,483 (15,068)
Net cash provided by operating activities 231,878 193,297
Cash Flows from Investing Activities:
Capital expenditures .................................................. (77,989) (61,809)
Decrease in construction payables...................................... (14,724) (8,098)
Allowance for funds used during construction - equity.................. 1,338 1,208
Purchase of short-term investments - net............................... (1,000) (124)
Investment in external decommissioning fund............................ (6,981) (7,667)
Investments in non-regulated projects and other........................ (7,096) (67,794)
Net cash used for investing activities (106,452) (144,284)
Cash Flows from Financing Activities:
Change in short-term debt - net issuances (repayments)................. (80,791) 36,800
Proceeds from issuance of long-term debt - net......................... 3,171 198,696
Loan to ESOP........................................................... (15,000) 0
Repayment of long-term debt (including reacquisition premium).......... (5,656) (241,115)
Proceeds from issuance of common stock - net........................... 15,400 346
Dividends paid......................................................... (47,080) (46,195)
Net cash used for financing activities (129,956) (51,468)
Net decrease in cash and cash equivalents................................. (4,530) (2,455)
Cash and cash equivalents at beginning of period.......................... 41,055 57,812
Cash and cash equivalents at end of period................................ $36,525 $55,357
The Notes to Financial Statements are an integral part of the Statements of Cash Flows.
Northern States Power Company (Minnesota) and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the financial
position of Northern States Power Company (Minnesota) (the Company) and its
subsidiaries (collectively, NSP) as of March 31, 1995 and December 31, 1994,
the results of its operations for the three months ended March 31, 1995 and
1994, and its cash flows for the three months ended March 31, 1995 and 1994.
Due to the seasonality of NSP's electric and gas sales, operating results on
a quarterly basis are not necessarily an appropriate base from which to
project annual results.
The accounting policies followed by NSP are set forth in Note 1 to NSP's
financial statements in the 1994 Form 10-K. The following notes should be
read in conjunction with such policies and other disclosures in the Form 10-K.
Certain reclassifications have been made to 1994 financial information
to conform with the 1995 presentation. These reclassifications had no effect
on net income or earnings per share as previously reported.
1. Subsequent Event - Proposed Business Combination
On April 28, 1995, the Company and Wisconsin Energy Corporation (WEC)
entered into an Agreement and Plan of Merger (Agreement). As a result, a
registered utility holding company, which will be known as Primergy
Corporation (Primergy), will be the parent of the Company and the current
operating subsidiaries of the Company and WEC. Each outstanding share of
common stock of NSP will be converted into 1.626 shares of common stock of
Primergy, and each outstanding share of common stock of WEC will remain
outstanding as one share of common stock of Primergy. The business
combination is intended to be tax-free for income tax purposes, and to be
accounted for as a "pooling of interests". The Agreement is subject to
various conditions, including approval of the stockholders of NSP and WEC, and
the approval of various regulatory agencies. NSP anticipates that the
completion of the regulatory review and approval process will take
approximately 12-18 months and, accordingly, the companies do not anticipate
completing this business combination until late in 1996. Item 5 of Part II
of this report discusses further the proposed transaction and provides pro
forma combined condensed financial information for Primergy.
2. Rate Matters
In August 1994, the Company applied to the North Dakota Public Service
Commission (NDPSC) for an annualized electric rate reduction of $3.6 million
to reflect a correction in cost allocations to the North Dakota jurisdiction.
On November 9, 1994, the NDPSC approved the Company's request to make refunds
to customers to effectively implement the reduction as of June 1, 1994. These
refunds were accrued in 1994 and paid in February 1995. On May 10, 1995, the
NDPSC approved a retroactive refund to residential customers of approximately
$1.5 million for the period January 1, 1989 through June 1, 1994 to reflect
corrections to cost allocations for that period. This refund was accrued in
1994 and is expected to be paid later in 1995. Also, the NDPSC approved an
annualized rate reduction of $750,000 for North Dakota commercial and
industrial electric customers, to become effective prospectively on June 1,
1995.
3. Business Developments
Non-regulated Power Sales Contract - NRG, through wholly owned
subsidiaries, owns 45% of the San Joaquin Valley Energy Partnership (SJVEP),
which owns four power plants located near Fresno, California with a total
capacity of 55 megawatts. Through February 1995, the plants operated under
long-term Standard Offer 4 (SO4) power sales contracts with Pacific Gas and
Electric (PG&E) which expire in 2017. On February 28, 1995, PG&E reached
basic agreements with SJVEP to acquire the SO4 contracts. The parties entered
into a bridging agreement to cover the period until all regulatory approvals
are received for the transaction. The bridging agreement required SJVEP to
cease power deliveries to PG&E as of February 28, 1995. The negotiated
agreements will result in cost savings for PG&E customers as well as economic
benefits for SJVEP. The final impact of this transaction on the financial
results of NRG will not be known until the agreements have been approved and
all costs associated with the idling of the facilities are known. It is
expected that a one-time gain from the transaction will be recorded in the
second quarter of 1995. SJVEP will continue to own and maintain the
facilities and will explore all available options.
4. Commitments and Contingent Liabilities
The circumstances set forth in Note 17 to the Company's financial
statements contained in its 1994 Annual Report on Form 10-K appropriately
represent the current status of commitments and contingent liabilities
regarding public liability for claims resulting from any nuclear incident.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
On April 28, 1995, the Company and WEC entered into an Agreement and
Plan of Merger which provides for a strategic business combination involving
the two companies in a "merger-of-equals" transaction. Further information
concerning such agreement and proposed transaction and pro forma financial
information with respect thereto is included in Part II of this report.
Results of Operations
Northern States Power Company's earnings per share for the first quarter
ended March 31, 1995, were $.97, up $.03 from the $.94 earned for the same
period a year ago.
In addition to items noted in the 1994 Form 10-K, the historical and
future trends of NSP's operating results have been and are expected to be
impacted by the following factors:
Non-regulated Business Results - Quarterly results include earnings
contributions from non-regulated businesses of $0.13 per share in 1995 and
$0.03 per share in 1994.
Impact of Weather - NSP estimates sales levels under normal weather
conditions and analyzes the approximate effect of weather on actual sales
levels. The following summarizes the estimated impact of weather on actual
utility operating results (in relation to sales under normal weather
conditions):
Increase (Decrease)
1995 vs Normal 1994 vs Normal 1995 vs 1994
Earnings per Share
for Quarter Ended
March 31 ($0.07) $0.09 ($0.16)
Rate Changes - On May 10, 1995, the North Dakota Public Service
Commission approved rate reductions for electric customers in North Dakota.
See Note 2 to the Financial Statements for further discussion of the impact
of such reductions on financial results.
First Quarter 1995 Compared with First Quarter 1994
Utility Operating Results
Electric revenues for the first quarter 1995 compared with the first
quarter 1994 increased $3.3 million or 0.7%. Retail revenues decreased
approximately $2.2 million or 0.5% largely due to a 1.1% average retail price
decrease. The retail price decrease is largely due to rate decreases in North
Dakota in 1995 and sales mix variation between customer classes. This price
decrease was partially offset by electric retail sales growth of 0.6%. On a
weather adjusted basis, sales growth for the first quarter of 1995 was 3.0%
higher than 1994. In addition, revenues from sales to other utilities
increased by $6.9 million mainly due to increases in sales volume. This
increase in sales to other utilities reflects greater availability due to
fewer plant outages in 1995.
Gas revenues for the first quarter 1995 decreased $25.6 million or 13.5%
compared with the first quarter of 1994. Gas revenues decreased due to a 7.4%
decrease in gas sales volume and a 8.0% average price decrease. The sales
volume decrease is due primarily to weather impacts. The price decrease is
due to rate adjustments for decreased purchased gas costs resulting from
changes in natural gas supply and demand market conditions.
Fuel for electric generation and Purchased and interchange power
combined for a net increase of $2.6 million or 2.0% for the first quarter of
1995 compared with the first quarter of 1994. Fuel expense for the first
quarter of 1995 increased mainly due to electric sales growth and higher 1995
generation levels as a result of plant outages in 1994. The increased fuel
expense was partially offset by lower purchases in 1995 due to plant
availability and lower cost of purchases reflecting market conditions.
Cost of gas purchased and transported for first quarter 1995 compared
with first quarter 1994 decreased $22.5 million or 18.5% due to lower per unit
cost of purchased gas and lower gas sendout. The lower cost of purchased gas
reflects changes in market conditions, while the lower gas sendout reflects
the warmer than normal weather in 1995 compared to colder than normal weather
in 1994.
Other operation, Maintenance and Administrative and general expenses
together decreased $5.2 million or 3.1% compared with the first quarter 1994.
The lower costs are largely due to decreases in employee benefit costs and
timing of plant outages.
Depreciation and amortization increased $4.5 million or 6.7% compared
with the first quarter 1994. The increase is mainly due to increased plant
in service between the two periods.
Property and general taxes for the first quarter 1995 compared with the
first quarter of 1994 increased $2.4 million or 3.9% due primarily to higher
property tax rates in the state of Minnesota.
Utility income taxes for the first quarter 1995 compared with the first
quarter 1994 decreased $5.6 million primarily due to lower pretax operating
income (after interest charges) between the two periods.
Other income and deductions - net decreased mainly due to non-regulated
items discussed below. The portion related to utility operations decreased
$0.6 million to a net expense of $1.1 million in the first quarter of 1995
compared with the same period a year ago.
Interest Charges related to utility operations increased $6.4 million
to $29.4 million in 1995 largely due to long-term debt issues in 1994 and
higher short-term rates and balances in 1995.
Non-regulated Business Results
NSP's non-regulated operations include many diversified businesses, such
as independent power production, gas marketing, industrial heating and
cooling, and energy-related refuse-derived fuel production. NSP also has
investments in affordable housing projects and several income-producing
properties. The following discusses NSP's diversified business results in the
aggregate.
Operating Revenues and Expenses - The net results of non-regulated
businesses are reported in Other Income and Deductions-Net on the Consolidated
Statements of Income. Non-regulated operating revenues increased $33.8
million in 1995, to $82.6 million, largely due to increased gas marketing
sales by Cenergy, Inc (Cenergy). Non-regulated operating expenses increased
$36.4 million in 1995 to $80.3 million due to higher gas costs corresponding
with Cenergy gas sales and fewer project development costs being capitalized
on pending projects in 1995.
Equity Income - NSP has a less-than-majority equity interest in several
non-regulated projects. Consequently, a large portion of NSP's non-regulated
earnings is reported as Equity in Earnings of Unconsolidated Investees on the
Consolidated Statements of Income. Equity income increased in the first
quarter of 1995 by $10.6 million before taxes primarily due to new NRG energy
projects in Australia and Germany which began to provide earnings during the
second quarter of 1994.
Interest Expense - Interest charges on the Consolidated Statements of
Income include interest expense related to non-regulated businesses of $1.4
million in both 1995 and 1994.
Income Taxes - Other Income and Deductions-Net reported on the
Consolidated Statements of Income includes income taxes related to non-
regulated businesses. Such income taxes for the first quarter of 1995 were
$1.7 million, a $1.4 million increase over the first quarter of 1994. The
increase in 1995 is due mainly to higher income from NRG's energy projects,
as discussed above. NSP's management intends to reinvest the earnings of
international operations indefinitely. Accordingly, U.S. income taxes and
foreign withholding taxes have not been provided on the earnings of
international projects.
Liquidity and Capital Resources
The Company had $156 million in commercial paper debt outstanding as of
March 31, 1995. The Company plans to keep credit lines of at least 85% of the
expected level of commercial paper borrowings. Commercial banks currently
provide credit lines of approximately $299 million to the Company. These
credit lines make short-term financing available in the form of bank loans and
support for commercial paper sales. The Company has regulatory approval for
up to $446 million in short-term borrowing levels.
Commercial banks currently provide credit lines of $12 million to wholly
owned subsidiaries of the Company. Approximately $10 million of those credit
lines remained available at March 31, 1995.
In January 1995, stock options for the purchase of 277,977 shares were
awarded under the Company's Executive Long-Term Incentive Award Stock Plan
(the Plan). These options are not exercisable for approximately twelve months
after grant. As of March 31, 1995, a total of 1,034,774 stock options were
outstanding, which were considered as potential common stock equivalents for
earnings per share purposes. As of March 31, the Company has issued 9,873 new
shares of common stock in 1995 under the Plan pursuant to the exercise by non-
officers of the Company of options and awards granted in prior years.
On March 29, 1995 the Company loaned $15 million to the Employee Stock
Ownership Plan (ESOP) for the financing of stock purchases. The ESOP used the
loan proceeds to purchase 342,368 newly issued shares of Company common stock.
On April 3, 1995, the Company borrowed $15 million in unsecured debt to
finance the ESOP loan on a long-term basis. The interest rate on the
unsecured debt of the Company is variable (6.55% for the period April 20, 1995
through July 20, 1995). The rate is adjusted quarterly based on changes in
London Interbank Offered Rates (LIBOR). The approximate term of the loan is
seven years and will be repaid in quarterly installments.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
In the Environmental Matters section of Item 1 of the Company's 1994
Annual Report on Form 10-K, a proposed civil penalty was discussed regarding
the Company's reports on halogen content of water discharged at Prairie
Island, prior to October 1992. As a result of a Stipulation Agreement
negotiated by the Company and the Minnesota Pollution Control Agency on March
1, 1995, the Company will pay a civil penalty of $105,436.
For a discussion of proceedings involving NSP's utility rates, see Note
2 to these Financial Statements.
Item 5. Other Information
MERGER AGREEMENT WITH WISCONSIN ENERGY CORPORATION
As previously reported in NSP's 4/28/95 8-K (as defined below), Northern
States Power Company, a Minnesota corporation ("NSP"), Wisconsin Energy
Corporation, a Wisconsin corporation ("WEC"), Northern Power Wisconsin Corp.,
a Wisconsin corporation and wholly-owned subsidiary of NSP ("New NSP") and WEC
Sub Corp., a Wisconsin corporation and wholly-owned subsidiary of WEC ("WEC
Sub"), have entered into an Agreement and Plan of Merger, dated as of April
28, 1995 (the "Merger Agreement"), which provides for a strategic business
combination involving NSP and WEC in a "merger-of-equals" transaction (the
"Transaction"). The Transaction, which was unanimously approved by the Boards
of Directors of the constituent companies, is expected to close shortly after
all of the conditions to the consummation of the Transaction, including
obtaining applicable regulatory approvals, are met or waived. The regulatory
approval process is expected to take approximately 12 to 18 months.
In the Transaction, the holding company of the combined enterprise will
be registered under the Public Utility Holding Company Act of 1935, as
amended. The holding company will be named Primergy Corporation ("Primergy")
and will be the parent company of both NSP (which, for regulatory reasons,
will reincorporate in Wisconsin) and of WEC's present principal utility
subsidiary, Wisconsin Electric Power Company ("WEPCO"), which will be renamed
"Wisconsin Energy Company." Wisconsin Energy Company will include the
operations of WEC's other present utility subsidiary, Wisconsin Natural Gas
Company, which is anticipated to be merged into WEPCO by year-end 1995,
pending regulatory approval, as previously planned. It is anticipated that,
following the Transaction, NSP's Wisconsin utility subsidiary, Northern States
Power Company, a Wisconsin corporation ("NSP-W") will be merged into Wisconsin
Energy Company.
The Merger Agreement, the press release issued in connection therewith
and the related Stock Option Agreements (defined below) are filed as exhibits
to NSP's Current Report on Form 8-K, dated as of April 28, 1995 which was
filed on May 3, 1995 (the "NSP 4/28/95 8-K") and are incorporated herein by
reference. The descriptions of the Merger Agreement and the Stock Option
Agreements set forth herein do not purport to be complete and are qualified
in their entirety by the provisions of the Merger Agreement and the Stock
Option Agreements, as the case may be and the other exhibits filed with NSP's
4/28/95 8-K and incorporated as exhibits to this report by reference thereto.
Under the terms of the Merger Agreement, NSP will be merged with and
into New NSP and immediately thereafter WEC Sub will be merged with and into
New NSP, with New NSP being the surviving corporation. Each outstanding share
of Common Stock, par value $2.50 per share, of NSP ("NSP Common Stock") will
be cancelled and converted into the right to receive 1.626 shares of Common
Stock, par value $.01 per share, of Primergy ("Primergy Common Stock"). The
outstanding shares of WEC Common Stock, par value $.01 per share ("WEC Common
Stock"), will remain outstanding, unchanged, as shares of Primergy Common
Stock. As of the date of the Merger Agreement, NSP had 67.3 million common
shares outstanding and WEC had 109.4 million common shares outstanding. Based
on such capitalization, the Transaction would result in the common
shareholders of NSP receiving 50% of the common equity of Primergy and the
common shareholders of WEC owning the other 50% of the common equity of
Primergy. Each outstanding share of Cumulative Preferred Stock, par value
$100.00 per share, of NSP will be cancelled and converted into the right to
receive one share of Cumulative Preferred Stock, par value $100.00 per share,
of New NSP with identical rights (including dividend rights) and designations.
WEPCO's outstanding preferred stock will remain outstanding and be unchanged
in the Transaction.
It is anticipated that Primergy will adopt NSP's dividend payment level
adjusted for the exchange ratio. NSP currently pays $2.64 per share annually,
and WEC's annual dividend rate is currently $1.47 per share. Based on the
exchange ratio and NSP's current dividend rate, the pro forma dividend rate
for Primergy would be $1.62 per share.
The Transaction is subject to customary closing conditions, including,
without limitation, the receipt of required shareholder approvals of WEC and
NSP; and the receipt of all necessary governmental approvals and the making
of all necessary governmental filings, including approvals of state utility
regulators in Wisconsin, Minnesota and certain other states, the approval of
the Federal Energy Regulatory Commission, the Securities and Exchange
Commission (the "SEC"), the Nuclear Regulatory Commission, and the filing of
the requisite notification with the Federal Trade Commission and the
Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the expiration of the applicable waiting period
thereunder. The Transaction is also subject to receipt of assurances from the
Internal Revenue Service and opinions of counsel that the Transaction will
qualify as a tax-free reorganization, and the assurances from the parties' in-
dependent accountants, that the Transaction will qualify as a pooling of
interests for accounting purposes. In addition, the Transaction is
conditioned upon the effectiveness of a registration statement to be filed by
WEC with the SEC with respect to the Primergy Common Stock to be issued in the
Transaction and the approval for listing of such shares on the New York Stock
Exchange. (See Article VIII of the Merger Agreement.) Shareholder meetings
to vote upon the Transaction will be convened as soon as practicable and are
expected to be held in the third or fourth quarter of 1995.
The Merger Agreement contains certain covenants of the parties pending
the consummation of the Transaction. Generally, the parties must carry on
their businesses in the ordinary course consistent with past practice, may not
increase dividends on common stock beyond specified levels, and may not issue
any capital stock beyond certain limits. The Merger Agreement also contains
restrictions on, among other things, charter and bylaw amendments, capital
expenditures, acquisitions, dispositions, incurrence of indebtedness, certain
increases in employee compensation and benefits, and affiliate transactions.
(See Article VI of the Merger Agreement.)
The Merger Agreement provides that, after the effectiveness of the
Transaction (the "Effective Time"), the corporate headquarters and principal
executive offices of Primergy and NSP will be located in Minneapolis,
Minnesota, and the headquarters of Wisconsin Energy Company will remain in
Milwaukee, Wisconsin. Primergy's Board of Directors, which will be divided
into three classes, will consist of a total of 12 directors, 6 of whom will
be designated by WEC and 6 of whom will be designated by NSP. Mr. James J.
Howard, the current Chairman of the Board, President and Chief Executive
Officer ("CEO") of NSP, will serve as CEO of Primergy from the Effective Time
until the later of 16 months after the Effective Time or the date of the
annual meeting of shareholders of Primergy that occurs in 1998, and Chairman
of Primergy until the later of July 1, 2000 or two years after he ceases to
be CEO. Mr. Abdoo, the current Chairman of the Board, President and CEO of
WEC, will serve as Vice Chairman of the Board, President and Chief Operating
Officer of Primergy until the date when Mr. Howard ceases to be CEO, at which
time he will be entitled to assume the additional role of CEO. Mr. Abdoo will
assume the position of Chairman when Mr. Howard ceases to be Chairman.
The Merger Agreement may be terminated under certain circumstances,
including (1) by mutual consent of the parties; (2) by any party if the
Transaction is not consummated by April 30, 1997 (provided, however, that such
termination date shall be extended to October 31, 1997 if all conditions to
closing the Transaction, other than the receipt of certain consents and/or
statutory approvals by any of the parties, have been satisfied by April 30,
1997); (3) by any party if either NSP's or WEC's shareholders vote against the
Transaction or if any state or federal law or court order prohibits the
Transaction; (4) by a non-breaching party if there exist breaches of any
representations or warranties contained in the Merger Agreement as of the
date thereof which breaches, individually or in the aggregate, would result
in a material adverse effect on the breaching party and which is not cured
within twenty (20) days after notice; (5) by a non-breaching party if there
occur breaches of specified covenants or material breaches of any covenant or
agreement which are not cured within twenty (20) days after notice; (6) by
either party if the Board of Directors of the other party shall withdraw or
adversely modify its recommendation of the Transaction or shall approve any
competing transaction; or (7) by either party, under certain circumstances,
as a result of a third-party tender offer or business combination proposal
which such party's board of directors determines in good faith that their
fiduciary duties require be accepted, after the other party has first been
given an opportunity to make concessions and adjustments in the terms of the
Merger Agreement.
The Merger Agreement provides that if a breach described in clause (4)
or (5) of the previous paragraph occurs, then, if such breach is not willful,
the non-breaching party is entitled to reimbursement of its out-of-pocket ex-
penses, not to exceed $10 million. In the event of a willful breach, the non-
breaching party will be entitled to its out-of-pocket expenses (which shall
not be limited to $10 million) and any remedies it may have at law or in
equity, provided that if, at the time of the breaching party's willful breach,
there shall have been a third party tender offer or business combination
proposal which shall not have been rejected by the breaching party and with-
drawn by the third party, and within two and one-half years of any termination
by the non-breaching party, the breaching party accepts an offer to consummate
or consummates a business combination with such third party, then such
breaching party, upon the signing of a definitive agreement relating to such
a business combination, or, if no such agreement is signed then at the closing
of such business combination, will pay to the non-breaching party an
additional fee equal to $75 million. The Merger Agreement also requires
payment of a termination fee of $75 million (and reimbursement of out-of-
pocket expenses) by one party (the "Payor") to the other in certain
circumstances, if (i) the Merger Agreement is terminated (x) as a result of
the acceptance by the Payor of a third-party tender offer or business
combination proposal, (y) following a failure of the shareholders of the Payor
to grant their approval to the Transaction or (z) as a result of the Payor's
material failure to convene a shareholder meeting, distribute proxy materials
and, subject to its board of directors' fiduciary duties, recommend the
Transaction to its shareholders; (ii) at the time of such termination or prior
to the meeting of such party's shareholders there shall have been a third-
party tender offer or business combination proposal which shall not have been
rejected by the Payor and withdrawn by such third party; and (iii) within two
and one-half years of any such termination described in clause (i) above, the
Payor accepts an offer to consummate or consummates a business combination
with such third party. Such termination fee and out-of-pocket expenses
referred to in the previous sentence shall be paid upon the signing of a
definitive agreement between the Payor and the third party, or, if no such
agreement is signed, then at the closing of such third-party business
combination. The termination fees payable by NSP or WEC under these
provisions and the aggregate amount which could be payable by NSP or WEC upon
a required purchase of the options granted pursuant to the Stock Option
Agreements (defined below) may not exceed $125 million in the aggregate. (See
Article IX of the Merger Agreement.)
Concurrently with the Merger Agreement, the parties have entered into
reciprocal stock option agreements (the "Stock Option Agreements") each
granting the other an irrevocable option to purchase up to that number of
shares of common stock of the other company which equals 19.9% of the number
of shares of common stock of the other company outstanding on April 28, 1995
at an exercise price of $44.075 per share, in the case of NSP common stock,
or $27.675 per share, in the case of WEC common stock, under certain
circumstances if the Merger Agreement becomes terminable by one party as a
result of the other party's breach or as a result of the other party becoming
the subject of a third-party proposal for a business combination. Any party
whose option becomes exercisable (the "Exercising Party") may request the
other party to repurchase from it all or any portion of the Exercising Party's
option at the price specified in the Stock Option Agreements. (See the Stock
Option Agreements.)
A preliminary estimate indicates that the Transaction will result in net
savings of approximately $2.0 billion in costs over 10 years. It is
anticipated that the synergies created by the Transaction will allow the
companies to implement a modest reduction in electric retail rates followed
by a rate freeze for electric retail customers through the year 2000. The
allocation of the net savings between ratepayers and shareholders of NSP will
be determined by various regulatory agencies.
Both NSP and WEC recognize that the divestiture of their existing gas
operations and certain non-utility operations is a possibility under the new
registered holding company structure, but will seek approval from the SEC to
maintain such businesses. If divestiture is ultimately required, the SEC has
historically allowed companies sufficient time to accomplish divestitures in
a manner that protects shareholder value.
FINANCIAL STATEMENTS OF WEC
The consolidated financial statements of WEC listed in the descriptions
of Exhibits 99.01 and 99.02 in paragraph (a) of Item 6 of this report are
incorporated herein by reference. The audited financial statements so listed
are included in Item 8 of WEC's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (File No. 1-9057). The unaudited interim financial
statements so listed are included in Item 1 in Part I of WEC's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995 (File No. 1-9057).
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma financial information combines the
historical consolidated balance sheets and statements of income of NSP and WEC
after giving effect to their proposed business combination transaction (the
Transaction) to form Primergy Corporation (Primergy). The unaudited pro forma
combined condensed balance sheet at March 31, 1995 gives effect to the
Transaction as if it had occurred at March 31, 1995. The unaudited pro forma
combined condensed statements of income for each of the three years in the
period ended December 31, 1994, the three months ended March 31, 1995 and
1994, and the twelve months ended March 31, 1995, give effect to the
Transaction as if it had occurred at January 1, 1992. These statements are
prepared on the basis of accounting for the Transaction as a pooling of
interests and are based on the assumptions set forth in the notes thereto.
The WEC income statements for the three months ended March 31, 1994 and
the fiscal year ended December 31, 1994 include a significant one-time pretax
charge of $73.9 million for revitalization costs recorded in the first quarter
of 1994. To provide a more representative recent twelve-month period
summarizing combined operating results, a pro forma combined condensed
statement of income for the twelve months ended March 31, 1995 is also
presented.
The following pro forma financial information has been prepared from,
and should be read in conjunction with, the historical consolidated financial
statements and related notes thereto of NSP and WEC. The following
information is not necessarily indicative of the financial position or
operating results that would have occurred had the Transaction been
consummated on the date, or at the beginning of the periods, for which the
Transaction is being given effect nor is it necessarily indicative of future
operating results or financial position.
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
MARCH 31, 1995
(In thousands)
NSP WEC Pro Forma Pro Forma
Pro Forma Balance Sheet (As Reported) (As Report) Adjustments Combined
ASSETS
UTILITY PLANT
Electric $6,407,107 $4,544,978 $10,952,085
Gas 679,587 471,559 1,151,146
Other 271,924 40,114 312,038
Total 7,358,618 5,056,651 12,415,269
Accumulated provision for depreciation (3,189,171) (2,184,573) (5,373,744
Nuclear fuel - net 90,795 55,759 146,554
Net utility plant 4,260,242 2,927,837 7,188,079
CURRENT ASSETS
Cash and cash equivalents 36,525 16,831 53,356
Accounts receivable - net 290,284 128,879 419,163
Accrued utility revenues 81,999 103,737 185,736
Fossil fuel inventories 46,229 65,998 112,227
Material & supplies inventories 104,739 70,099 174,838
Prepayments and other 50,754 72,271 123,025
Total current assets 610,530 457,815 1,068,345
OTHER ASSETS
Regulatory Assets 351,729 332,089 683,818
External decommissioning fund 160,731 239,940 400,671
Investments in non-regulated projects
and other investments 220,080 115,346 335,426
Non-regulated property - net 175,654 97,907 273,561
Intangible assets and other (Note 4) 135,410 213,711 (139,758) 209,363
Total other assets 1,043,604 998,993 (139,758) 1,902,839
TOTAL ASSETS $5,914,376 $4,384,645 $(139,758) $10,159,263
LIABILITIES AND EQUITY
CAPITALIZATION
Common stock equity:
Common stock (Note 1) $ 168,186 $ 1,094 $(167,092) $ 2,188
Other stockholders' equity (Note 1) 1,751,891 1,779,491 167,092 3,698,474
Total common stock equity 1,920,077 1,780,585 3,700,662
Cumulative preferred stock and premium 240,469 30,451 270,920
Long-term debt 1,456,217 1,249,742 2,705,959
Total capitalization 3,616,763 3,060,778 6,677,541
CURRENT LIABILITIES
Current Portion of Long-term Debt 160,606 49,633 210,239
Short-term debt 157,648 181,574 339,222
Accounts payable 179,279 79,787 259,066
Taxes accrued 256,616 38,617 295,233
Other accrued liabilities 139,255 96,543 235,798
Total current liabilities 893,404 446,154 1,339,558
OTHER LIABILITIES
Deferred income taxes (Note 4) 850,823 478,974 (139,758) 1,190,039
Deferred investment tax credits 171,544 93,034 264,578
Regulatory liabilities 208,329 172,466 380,795
Other liabilities and deferred credits 173,513 133,239 306,752
Total other liabilities 1,404,209 877,713 (139,758) 2,142,164
TOTAL CAPITALIZATION AND LIABILITIES $5,914,376 $4,384,645 $(139,758) $10,159,263
See accompanying notes to pro forma combined condensed financial statements.
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
3 MONTHS ENDED MARCH 31, 1995
(In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
Utility Operating Revenues
Electric $497,314 $343,919 $841,233
Gas 163,853 121,100 284,953
Steam 6,103 6,103
Total Operating Revenues 661,167 471,122 1,132,289
Utility Operating Expenses
Electric Production-Fuel and Purchased 135,071 86,895 221,966
Cost of Gas Sold & Transported 99,301 72,803 172,104
Other Operation 130,627 97,760 228,387
Maintenance 37,767 28,372 66,139
Depreciation and Amortization 71,831 44,712 116,543
Taxes Other Than Income Taxes 62,279 19,379 81,658
Revitalization Charges
Income Taxes 36,593 36,629 73,222
Total Operating Expenses 573,469 386,550 960,019
Utility Operating Income 87,698 84,572 172,270
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 10,506 10,506
Other Income and Deductions - Net 761 6,094 6,855
Total Other Income (Expense) 11,267 6,094 17,361
Income before Interest Charges
and Preferred Dividends 98,965 90,666 189,631
Interest Charges 30,775 27,831 58,606
Preferred Dividends of Subsidiaries 3,201 301 3,502
Net Income $ 64,989 $62,534 $127,523
Average Common Shares Outstanding (Note 1) 67,004 109,133 41,945 218,082
Earnings Per Common Share $0.97 $0.57 $0.58
See accompanying notes to pro forma combined condensed financial statements.
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
3 MONTHS ENDED MARCH 31, 1994
(In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
Utility Operating Revenues
Electric $494,031 $355,239 $ 849,270
Gas 189,431 147,579 337,010
Steam 6,863 6,863
Total Operating Revenues 683,462 509,681 1,193,143
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 132,471 84,070 216,541
Cost of Gas Sold & Transported 121,805 91,153 212,958
Other Operation 133,487 107,473 240,960
Maintenance 40,469 33,516 73,985
Depreciation and Amortization 67,345 44,039 111,384
Taxes Other Than Income Taxes 59,929 21,068 80,997
Revitalization Charges 73,900 73,900
Income Taxes 42,161 11,026 53,187
Total Operating Expenses 597,667 466,245 1,063,912
Utility Operating Income 85,795 43,436 129,231
Other Income(Expense)
Equity Earnings of Unconsolidated Investees (107) (107)
Other Income and Deductions-Net 4,474 6,510 10,984
Total Other Income (Expense) 4,367 6,510 10,877
Income before Interest Charges
and Preferred Dividends 90,162 49,946 140,108
Interest Charges 24,368 26,735 51,103
Preferred Dividends of Subsidiaries 3,057 389 3,446
Net Income $62,737 $22,822 $85,559
Average Common Shares Outstanding (Note 1) 66,742 107,238 41,780 215,760
Earnings Per Common Share $0.94 $0.21 $0.40
See accompanying notes to pro forma combined condensed financial statements.
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
12 MONTHS ENDED MARCH 31, 1995
(In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
Utility Operating Revenues
Electric $2,069,927 $1,392,242 $3,462,169
Gas 394,325 297,870 692,195
Steam 13,521 13,521
Total Operating Revenues 2,464,252 1,703,633 4,167,885
Utility Operating Expenses
Electric Production-Fuel and Purchased 573,477 331,310 904,787
Cost of Gas Sold & Transported 240,939 181,161 422,100
Other Operation 533,310 389,298 922,608
Maintenance 167,444 119,458 286,902
Depreciation and Amortization 278,287 178,287 456,574
Taxes Other Than Income Taxes 236,914 74,346 311,260
Revitalization Charges
Income Taxes 123,661 125,364 249,025
Total Operating Expenses 2,154,032 1,399,224 3,553,256
Utility Operating Income 310,220 304,409 614,629
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 46,477 46,477
Other Income and Deductions - Net 2,797 26,549 29,346
Total Other Income (Expense) 49,274 26,549 75,823
Income before Interest Charges
and Preferred Dividends 359,494 330,958 690,452
Interest Charges 113,623 109,115 222,738
Preferred Dividends of Subsidiaries 12,509 1,263 13,772
Net Income $233,362 $220,580 $453,942
Average Common Shares Outstanding (Note 1) 66,896 108,492 41,877 217,265
Earnings Per Common Share $3.49 $2.03 $2.09
See accompanying notes to pro forma combined condensed financial statements.
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994
(In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
Utility Operating Revenues
Electric $2,066,644 $1,403,562 $3,470,206
Gas 419,903 324,349 744,252
Steam 14,281 14,281
Total Operating Revenues 2,486,547 1,742,192 4,228,739
Utility Operating Expenses
Electric Production-Fuel and Purchased 570,880 328,485 899,365
Cost of Gas Sold & Transported 263,443 199,511 462,954
Other Operation 536,168 399,011 935,179
Maintenance 170,145 124,602 294,747
Depreciation and Amortization 273,801 177,614 451,415
Taxes Other Than Income Taxes 234,564 76,035 310,599
Revitalization Charges 73,900 73,900
Income Taxes 129,228 99,761 228,989
Total Operating Expenses 2,178,229 1,478,919 3,657,148
Utility Operating Income 308,318 263,273 571,591
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 35,863 35,863
Other Income and Deductions - Net 6,509 26,965 33,474
Total Other Income (Expense) 42,372 26,965 69,337
Income before Interest Charges
and Preferred Dividends 350,690 290,238 640,928
Interest Charges 107,215 108,019 215,234
Preferred Dividends of Subsidiaries 12,364 1,351 13,715
Net Income $231,111 $180,868 $411,979
Average Common Shares Outstanding (Note 1) 66,845 108,025 41,845 216,715
Earnings Per Common Share $3.46 $1.67 $1.90
See accompanying notes to pro forma combined condensed financial statements.
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1993
(In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
Utility Operating Revenues
Electric $1,974,916 $1,347,844 $3,322,760
Gas 429,076 331,301 760,377
Steam 14,090 14,090
Total Operating Revenues 2,403,992 1,693,235 4,097,227
Utility Operating Expenses
Electric Production-Fuel and Purchased 524,126 318,265 842,391
Cost of Gas Sold & Transported 282,028 214,132 496,160
Other Operation 516,568 399,135 915,703
Maintenance 161,413 156,085 317,498
Depreciation and Amortization 264,517 167,066 431,583
Taxes Other Than Income Taxes 223,108 74,653 297,761
Revitalization Charges
Income Taxes 128,346 98,463 226,809
Total Operating Expenses 2,100,106 1,427,799 3,527,905
Utility Operating Income 303,886 265,436 569,322
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 3,030 3,030
Other Income and Deductions - Net 12,916 32,073 44,989
Total Other Income (Expense) 15,946 32,073 48,019
Income before Interest Charges
and Preferred Dividends 319,832 297,509 617,341
Interest Charges 108,092 102,997 211,089
Preferred Dividends of Subsidiaries 14,580 4,377 18,957
Net Income $197,160 $190,135 $387,295
Average Common Shares Outstanding (Note 1) 65,211 105,878 40,822 211,911
Earnings Per Common Share $3.02 $1.80 $1.83
See accompanying notes to pro forma combined condensed financial statements.
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1992
(In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
Utility Operating Revenues
Electric $1,823,316 $1,298,723 $3,122,039
Gas 336,206 283,699 619,905
Steam 13,093 13,093
Total Operating Revenues 2,159,522 1,595,515 3,755,037
Utility Operating Expenses
Electric Production-Fuel and Purchased 451,696 330,461 782,157
Cost of Gas Sold & Transported 220,370 177,947 398,317
Other Operation 512,833 367,020 879,853
Maintenance 180,585 150,462 331,047
Depreciation and Amortization 242,914 164,367 407,281
Taxes Other Than Income Taxes 204,439 73,714 278,153
Revitalization Charges
Income Taxes 90,669 89,838 180,507
Total Operating Expenses 1,903,506 1,353,809 3,257,315
Utility Operating Income 256,016 241,706 497,722
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 2,382 2,382
Other Income and Deductions - Net 5,570 26,136 31,706
Total Other Income (Expense) 7,952 26,136 34,088
Income before Interest Charges
and Preferred Dividends 263,968 267,842 531,810
Interest Charges 103,040 90,687 193,727
Preferred Dividends of Subsidiaries 16,172 5,916 22,088
Income Before Accounting Change $144,756 $171,239 $315,995
Average Common Shares Outstanding (Note 1) 62,641 103,382 39,213 205,236
Earnings Per Common Share $2.31 $1.66 $1.54
See accompanying notes to pro forma combined condensed financial statements.
PRIMERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS
1. The pro forma combined condensed financial statements reflect the
conversion of each share of NSP common stock outstanding ($2.50 par
value) into 1.626 shares of Primergy Common Stock ($.01 par value) and
the continuation of each share of WEC Common Stock outstanding as one
share of Primergy common stock ($.01 par value), as provided in the
Merger Agreement. The pro forma combined condensed financial statements
are presented as if the companies were combined during all periods
included therein.
2. The allocation between NSP and WEC and their customers of the estimated
cost savings, resulting from the Transaction, net of the costs incurred
to achieve such savings, will be subject to regulatory review and
approval. Transaction costs are currently estimated to be approximately
$30 million (including fees for financial advisors, accountants,
attorneys, filings and printing). None of the estimated cost savings,
the costs to achieve such savings, or the transaction costs have been
reflected in the pro forma combined condensed financial statements.
3. Intercompany transactions (including purchased and exchanged power
transactions) between NSP and WEC during the periods presented were not
material and, accordingly, no pro forma adjustments were made to
eliminate such transactions.
4. A pro forma adjustment has been made to conform the presentation of
noncurrent deferred income taxes in the pro forma combined condensed
balance sheet into one net amount. All other report presentation and
accounting policy differences are immaterial and have not been adjusted
in the pro forma combined condensed financial statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following Exhibits are filed with this report:
10.01 Annual Executive Incentive Plan for 1995.
23.01 Consent of Independent Accountants (Price Waterhouse LLP).
27.01 Financial Data Schedule for the three months ended March 31,
1995.
The following Exhibits are incorporated herein by reference:
2.01 Agreement and Plan of Merger, dated as of April 28, 1995, by and
among Northern States Power Company, Wisconsin Energy
Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp.
(Exhibit (2)-1 to Northern States Power Company's Current Report
on Form 8-K dated as of April 28, 1995, File No. 1-3034).
("NSP's 4/28/95 8-K")
2.02 WEC Stock Option Agreement, dated as of April 28, 1995, by and
among Northern States Power Company and Wisconsin Energy
Corporation. (Exhibit (2)-2 to NSP's 4/28/95 8-K.)
2.03 NSP Stock Option Agreement, dated as of April 28, 1995, by and
among Wisconsin Energy Corporation and Northern States Power
Company. (Exhibit (2)-3 to NSP's 4/28/95 8-K.)
2.04 Committees of the Board of Directors of Primergy Corporation.
(Exhibit (2)-4 to NSP's 4/28/95 8-K.)
2.05 Form of Employment Agreement of James J. Howard. (Exhibit (2)-5
to NSP's 4/28/95 8-K.)
2.06 Form of Employment Agreement of Richard A. Abdoo. (Exhibit (2)-6
to NSP's 4/28/95 8-K.)
2.07 Form of Amended and Restated Articles of Incorporation of
Northern Power Wisconsin Corp. (Exhibit (2)-7 to NSP's 4/28/95
8-K.)
99.01 Audited Financial Statements of Wisconsin Energy Corporation.
(Item 8 of Wisconsin Energy Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, File No. 1-
9057):
Report of Independent Accountants.
Consolidated Income Statement for the three years ended December
31, 1994.
Consolidated Statement of Cash Flows for the three years ended
December 31, 1994.
Consolidated Balance Sheets as of December 31, 1994 and 1993.
Consolidated Capitalization Statement as of December 31, 1994 and
1993.
Consolidated Common Stock Equity Statement for the three years
ended December 31, 1994.
Notes to Financial Statements.
99.02 Unaudited Interim Financial Statements of Wisconsin Energy
Corporation. (Item 1 in Part I of Wisconsin Energy Corporation's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, File No. 1-9057):
Consolidated Condensed Income Statement for the three months
ended March 31, 1995 and 1994.
Consolidated Condensed Balance Sheet as of March 31, 1995 and
December 31, 1994.
Consolidated Statement of Cash Flows for the three months ended
March 31, 1995 and 1994.
Notes to Consolidated Financial Statements.
99.03 Press Release, dated May 1, 1995, of Northern States Power
Company. (Exhibit (99)-1 of NSP's 4/28/95 8-K.)
(b) Reports on Form 8-K
The following reports on Form 8-K were filed either during the three
months ended March 31, 1995, or between March 31, 1995 and the date of this
report:
January 30, 1995 (Filed February 2, 1995) - Item 5. Other Events.
Disclosure of the Company receiving a notice of violation from the
United States Nuclear Regulatory Commission, regarding the inspection
of the quality assurance programs at the Company and PX Engineering
Company, Inc., a subcontractor responsible for the fabrication and
assembly of certain components for the TN-40 spent fuel storage
containers which will be used at the Prairie Island Nuclear Generating
Plant. Disclosure of the Mescalero Apache Tribe vote against
participation in a joint Mescalero-Utility Spent Nuclear Fuel Storage
Initiative.
February 28, 1995 (Filed March 2, 1995) - Item 5. Other Events.
Disclosure of a basic agreement between San Joaquin Valley Energy
Partners (SJVEP) and Pacific Gas & Electric Company (PG&E) regarding
the acquisition of existing Standard Offer 4 (SO4) contracts by PG&E
from SJVEP, subject to regulatory approvals for the transaction.
April 28, 1995 (Filed May 3, 1995) - Item 5. Other Events. Disclosure
of an agreement and plan of merger between the Company and Wisconsin
Energy Corporation, subject to approval by stockholders and regulatory
agencies.
SIGNATURES
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.
NORTHERN STATES POWER COMPANY
(Registrant)
(Roger D. Sandeen)
Roger D. Sandeen
Vice President, Controller and
Chief Information Officer
(Gary R. Johnson)
Gary R. Johnson
Vice President and General Counsel
Date: May 12, 1995
EXHIBIT INDEX
Method of Exhibit
Filing No. Description
DT 10.01 Annual Executive Incentive
Plan for 1995
DT 23.01 Consent of Independent Accountants
(Price Waterhouse LLP)
DT 27.01 Financial Data Schedule