SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: July 2, 1998
(Date of earliest event reported)
Commission Registrant; State of Incorporation IRS Employer
file number Address; and Telephone Number Identification No.
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1-11337 WPS RESOURCES CORPORATION 39-1775292
(A Wisconsin Corporation)
700 North Adams Street
P. O. Box 19001
Green Bay, WI 54307-9001
920-433-1466
1-3016 WISCONSIN PUBLIC SERVICE CORPORATION 39-0715160
(A Wisconsin Corporation)
700 North Adams Street
P. O. Box 19001
Green Bay, WI 54307-9001
920-433-1466
ITEM 5. Other Events.
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On July 22, 1998, WPS Resources Corporation ("WPSR") issued a press
release announcing financial results of WPSR for the three-month and six-month
periods ended June 30, 1998. A copy of this press release is attached as
Exhibit 99.1 hereto and is incorporated herein by reference.
On July 2, 1998, the Public Service Commission of Wisconsin ("PSCW")
approved an agreement by Wisconsin Public Service Corporation ("WPSC") and
Alliant Utilities - Wisconsin Power and Light Company ("WP&L") to replace the
steam generators at the Kewaunee Nuclear Power Plant ("KNPP"). The steam
generators have been in use since the KNPP began operations in 1974, and
tubes contained in the generators have begun to wear out, reducing the
electricity that the KNPP can produce. The new steam generators will
return the KNPP to its full capacity of approximately 530,000 kilowatts
compared to its current 500,000 kilowatt capacity. The license to operate
the KNPP expires in 2013. Steam generator replacement is to begin in the
spring of 2000 at an estimated aggregate cost of approximately $90 million.
WPSC's share of this cost will be approximately $53.5 million.
On July 2, 1998, the PSCW agreed that WPSC and WP&L can recover their
investment in the new steam generators and any other unrecovered KNPP
capital costs in retail rates utilizing sum-of-the-years digits
accelerated depreciation over a period of 8-1/2 years following the
completion of the project.
Madison Gas and Electric Company ("MG&E") has appealed the PSCW's
order which authorized KNPP steam generator replacement to the circuit court
of Dane County, Wisconsin. WPSC and MG&E have entered into a letter of intent
to consummate certain transactions which would result in the settlement of
MG&E's opposition to the steam generator replacement and the dismissal of
MG&E's appeal. WPSC and MG&E anticipate executing a definitive settlement
agreement in August 1998. WPSC and WP&L are currently negotiating an
amendment to the KNPP joint power supply agreement to govern the operation of
the KNPP and related matters following the transfer of MG&E's interest to
WPSC.
These proposed agreements contemplate the following:
1) Immediately preceding the commencement of the KNPP steam
generator replacement, MG&E will transfer its 17.8% interest in
the KNPP to WPSC in exchange for an interest in a WPSC
combustion turbine generating facility or other WPSC assets
having an aggregate book value at time of transfer
approximately equal to the book value of MG&E's interest in the
KNPP (estimated at approximately $10 million) with any
difference being settled in cash. Following the ownership
transfer, MG&E, in satisfaction of its decommissioning
responsibilities, will transfer to the WPSC qualified
decommissioning trust the net assets in the MG&E qualified
decommissioning trust which will be fully funded as of the date
of ownership transfer and will transfer funds to the MG&E
nonqualified decommissioning trust which, together with amounts
then held in such trust and in the qualified decommissioning
trust, are deemed to be sufficient, pursuant to a funding plan
approved by the PSCW, to fund fully MG&E's estimated share of
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the costs of decommissioning the KNPP. MG&E will irrevocably
devote the MG&E nonqualified decommissioning trust to satisfy
KNPP decommissioning obligations. If the amounts available
from these decommissioning trusts shall for any reasons
which develop after the transfer exceed or be less
than the KNPP decommissioning costs applicable to MG&E's
original interest in the KNPP, WPSC expects that such
deviations would be reflected in retail rates. WPSC will
also grant to MG&E an option exercisable prior to the
commencement of steam generator replacement to enter into
agreement with WPSC to purchase power, for a two-year term
following the ownership transfer, in an amount equal to any
excess in capacity of the interest in the KNPP transferred by
MG&E to WPSC over the capacity of the interest in any
generating facility transferred in exchange by WPSC to MG&E.
Under this agreement, capacity would be sold by WPSC at a price
reflecting the cost of a new generating facility.
2) Following the transfer of MG&E's ownership interest in the KNPP
to WPSC, WPSC will own 59% of the KNPP and WP&L will own 41% of
the KNPP. WPSC will continue to operate the KNPP. MG&E will
not be liable for any part of the steam generator replacement
costs or for liabilities arising out of the operation of the
KNPP following the ownership transfer. MG&E will remain liable
for its share of any liabilities arising from the operation of
the KNPP prior to the transfer of ownership, including MG&E's
responsibility for disposal of spent fuel utilized prior to the
transfer of ownership.
3) WPSC and WP&L will amend the joint power supply agreement
relating to the KNPP. Under the amended agreement, WPSC will
be able to control decisions relating to the operation of the
KNPP. Both WPSC and WP&L, however, will under certain
circumstances have the right, upon 12 months prior notice, to
cause the other party to agree to the shutdown and
decommissioning of the KNPP or to require the purchase of its
interest in the KNPP by the other party. The purchase price of
the transferred interest would equal the portion of the book
value for regulatory purposes of the KNPP represented by the
interest being transferred. The right to require shutdown
or purchase could be exercised (i) at such time that the book
value of the interest in the KNPP of the party exercising such
right, exclusive of any capital investments made subsequent to
the steam generator replacement, is $5,000,000 or less, which
would not occur until about 2006, (ii) at any time subject to a
30% reduction in the purchase price, unless energy generated
from the KNPP is not then subject to retail rate regulation, or
(iii) at any time for "cause" which includes (a) a material
failure by WPSC to meet agreed upon operation and maintenance
standards which remains uncured 90 days after notice of such
failure, (b) the failure of the parties to resolve certain
material disagreements respecting the KNPP non-fuel operating
and maintenance budget or capital budget, (c) the existence of
material deviations of actual costs from such budgets and
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(d) the refusal, under certain circumstances, of WPSC to
transfer the operations or assets of the KNPP to a nuclear
operating or generating company. Either party will also
have the right to purchase the other party's interest
in the KNPP to enable such party to transfer the operations or
assets of the KNPP to a nuclear operating or generating
company.
WPSC believes that the right of either party to require the other to
agree to KNPP shutdown and decommissioning or to purchase such party's
interest is unlikely to be exercised in the near term because in the case of
an exercise of such right for cause, the triggering events are unlikely to
occur in light of the historic operational experience of the KNPP and because
an exercise not for cause would be subject to a 30% reduction in purchase
price so long as the KNPP remains subject to retail rate regulation. If
exercised in 2006 or thereafter, such exercise would occur at a time when the
book value of the owners' investment in the KNPP had been substantially or
fully depreciated and recovered in retail rates.
All of the foregoing proposed agreements are subject to the
execution of definitive documents and the receipt of required regulatory
approvals.
On July 7, 1998, WPSR's wholly-owned subsidiary, WPS Power
Development, Inc. ("PDI"), announced that it had entered into an agreement to
purchase generating facilities with 92 megawatts of aggregate capacity from
Maine Public Service Company and its subsidiary, New Brunswick Electric Power
Company, for a purchase price of $37.425 million. The transaction is
contingent upon receipt of required regulatory approvals. PDI intends to
finance the purchase through non-recourse project financing.
On July 9, 1998, PDI announced that it had entered into a joint
venture with an affiliate of EarthCo, a Nevada corporation, to turn residue
from coal mining at the Alabama Land & Mineral site in Jasper County, Alabama
into usable energy briquettes. At full production, more than 400,000 tons of
coal dust or "fines" will be processed annually by mixing the fines with a
binding compound to form briquettes. The project began operation in late June
1998 and is eligible to receive federal tax credits because of the briquettes'
status as a synthetic fuel. PDI has invested less than $10 million for a
two-thirds interest in the project.
ITEM 7. Financial Statements and Exhibits.
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(c) Exhibits.
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99-1 WPS Resources Corporation (WPSR) press release dated
July 22, 1998 announcing financial results of WPSR for
the three-month and six-month periods ended June 30,
1998.
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SIGNATURES
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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.
WPS RESOURCES CORPORATION
By: /s/ Ralph G. Baeten
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Ralph G. Baeten
Treasurer
Date: July 22, 1998
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SIGNATURES
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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.
WISCONSIN PUBLIC SERVICE CORPORATION
By: /s/ Ralph G. Baeten
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Ralph G. Baeten
Vice President-Treasurer
Date: July 22, 1998
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