SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 26, 1995
------------------
(January 3, 1995)
------------------
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Exact Name of Registrant as Specified in its Charter)
Commission
New Mexico File Number 1-6986 85-0019030
---------- ------ ----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification Number)
Alvarado Square, Albuquerque, New Mexico 87158
---------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(505) 848-2700
--------------
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address if Changed, Since Last Report)
ITEM 5. OTHER EVENTS
Palo Verde Lease Obligation Bonds ("LOBs")
On January 3, 1995, the New Mexico Public Utility Commission ("NMPUC")
approved the Company's request for authority to retire up to $134 million of
LOBs. (See PART I, ITEM 2,--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--LIQUIDITY AND CAPITAL
RESOURCES" in the quarterly report on Form 10-Q for the quarter ended
September 30, 1994.) The bonds to be retired were issued in 1986 by First PV
Funding Corporation ("First PV") in connection with the Company's sale and
leaseback of its interests in PVNGS Units 1 and 2. In 1992, the Company
purchased approximately 22% of the beneficial interests in these leases from
Burnham Leasing Corporation for $17.5 million in cash and recorded $140.8
million as long-term debt (outstanding approximately $132.7 million as of
January 19, 1995) in the Company's consolidated balance sheet. A total of
approximately $615 million in principal amount of LOBs is outstanding,
including the amount ($132.7 million) recorded in the Company's consolidated
balance sheet.
On January 12, 1995, the Company and First PV issued a consent solicitation
to the holders of 10.30% LOBs, Series 1986A due 2014, 9.125% LOBs, Series
1986A due 1996, 10.15% LOBs, Series 1986B due 2016 and 8.95% LOBs, Series
1986B due 1997. Consent of such holders is sought to amend the indenture
governing the LOBs. The proposed amendments to the indenture would permit the
special optional redemption of LOBs maturing 2014 and 2016 (which are the
subject of the invitation referred to below) as well as future special
optional redemptions of LOBs. The consent of holders of the majority in
outstanding principal amount of the LOBs is required to adopt the proposed
amendments. Holders of LOBs who give a valid and unrevoked consent in favor
of the proposed amendments will receive a consent payment of $2.50 per $1,000
principal amount of LOBs.
Concurrently with the consent solicitation, First PV has issued an invitation
to the holders of LOBs due 2014 and 2016 to offer to sell such LOBs for cash
at prices designated by such holders within a range specified by the company
to be not greater than $1,010 and not less than $900 per $1,000 principal
amount of LOBs (plus accrued interest thereon from January 15, 1995). Subject
to the terms and conditions of the offer, First PV will purchase up to
$58,031,000 principal amount of 10.30% LOBs 1986A due 2014 and up to
$63,054,000 principal amount of 10.15%, Series 1986B due 2016 in a modified
Dutch auction tender offer. First PV will not purchase the LOBs if a majority
of holders in outstanding principal amount of LOBS do not consent to the
proposed amendments. The consent solicitation and invitation to tender LOBs
commenced on January 12, 1995 and will expire at 5:00 p.m., New York City
time on Friday, February 10, 1995, unless extended.
The Company expects that the source of funds to retire the LOBs would
ultimately come from the proceeds from the sales of the Company's gas
gathering and processing assets and water division. The Company is currently
awaiting the NMPUC approval of these sales. The Company expects to finalize
the water division sale by the end of second quarter 1995. The schedule for
the sale of the gas gathering and processing assets is discussed below. Cash
on hand, liquidated temporary investments and borrowings under its credit
facilities will be used to effect the retirements of LOBs in advance of these
sales. The Company estimates that retiring the LOBs would save the Company up
to $11.5 million in interest expense in 1995, declining gradually to $11.2
million in 1999.
Stipulation Reached for the Sale of Gas Gathering and Processing Assets
As previously reported, on February 12, 1994, the Company and its gas
subsidiaries (Sunterra Gas Gathering Company and Sunterra Gas Processing
Company) entered into a purchase and sale agreement with Williams Gas
Processing-Blanco, Inc. ("Williams"), a subsidiary of the Williams Field
Services Group, Inc., for the sale of substantially all of the assets of the
Company's gas subsidiaries, and for the sale of Northwest and Southwest gas
gathering and processing facilities of the Company. The agreement, which is
subject to NMPUC approval, provides for a cash selling price of $155 million,
subject to certain adjustments. The Company filed its application for
approval with the NMPUC on May 20, 1994. (See PART I. ITEM 2.--"MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
Sale of Gas Gathering and Processing Assets" in the quarterly report on Form
10-Q for the quarter ended September 30, 1994.)
On January 13, 1995, the Company and certain intervenors (the NMPUC Staff,
the New Mexico Attorney General, Williams and GPM Gas Corporation) reached a
stipulated agreement, subject to NMPUC approval, settling certain issues,
including the division of the gain from the sale of the gas gathering and
processing assets. Under the stipulation, the Company would recognize an
after-tax gain of approximately $14.1 million, subject to certain adjustments
at the closing, and would record a liability of approximately $35.5 million
which would be credited to the Company's gas customers' bills over
approximately five years. At the sixth year after the closing, such liability
amount would be recalculated to reflect the actual transaction costs and any
resulting difference would be refunded or billed to customers over a one year
period.
The stipulated agreement provides for the approval of three 10-year
contracts, each with an option to renew for an additional 5-year term, with
Williams for competitively priced gathering and processing services. The
Company believes that the contracts will save customers amounts estimated to
be between $100 million and $128 million over 10 years.
On January 13, 1995, the Company filed the stipulated agreement with the
NMPUC for approval. On January 23, 1995, certain natural gas producers
(Meridian Oil Inc., Marathon Oil Company, Conoco, Inc., Amoco Production
Company and Caulkins Oil Company) filed a statement in opposition to the
stipulation, stating, among other things, that the resulting gain from the
sale was improperly calculated and allocated, the proposed gathering and
processing contracts with Williams are unreasonable and discriminatory to
certain gas gathering and processing customers and the transaction as
proposed is not in their best interest.
Hearings are scheduled to begin on February 13, 1995. The parties to the
stipulation requested a final order from the NMPUC on an expedited basis. If
NMPUC approval is issued on an expedited basis, the Company expects to
finalize the sale by the end of second quarter of 1995. However, the Company
cannot predict the ultimate timing of the NMPUC action.
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 hereunto duly authorized.
Public Service Company of New Mexico
(Registrant)
Date: January 26, 1995 /s/ Donna M. Burnett
-------------------------------------
Donna M. Burnett
Corporate Controller and
Chief Accounting Officer