UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X)COMBINED ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1994
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
TNP ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
4100 International Plaza
Texas P. O. Box 2943, Fort Worth, Texas 76113 Commission File
(State of (Address and zip code of Number: 1-8847
incorporation) principal executive offices)
817-731-0099
(Telephone number, including area code)
75-1907501
I.R.S. employer
Identification no.
Securities registered pursuant to Section 12(b) of the Act:
Shares Outstanding Name of each exchange
Title of each class on January 31, 1995 on which registered
Common stock, no par value 10,867,388 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of common stock held by nonaffiliates of TNP
Enterprises, Inc. on January 31, 1995, was $167,682,054, computed by
reference to the common stock's closing price on the New York Stock
Exchange on the same date of $15.50 per share.
Documents Incorporated By Reference
Part Where
Document Incorporated
Proxy Statement
(distributed to holders of
common stock on or about March 28, 1995) III
TEXAS-NEW MEXICO POWER COMPANY
(Exact name of registrant as specified in its charter)
4100 International Plaza,
Texas P. O. Box 2943, Fort Worth, TX 76113 Commission File
(State of (Address and zip code of
incorporation) principal executive offices) Number: 2-97230
(Telephone number, including area code)
817-731-0099
75-0204070
I.R.S. employer
identification no.
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
First mortgage bonds: on which registered
Series M, 8.7% due 2006; None
Series R, 10.0% due 2017;
Series S, 9.625% due 2019;
Series T, 11.25% due 1997
and Series U, 9.25% due 2000
Secured debentures: 12.5% due 1999;
Series A, 10.75% due 2003 None
Securities registered pursuant to
Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
As of January 31, 1995, TNP Enterprises, Inc. held all 10,705
outstanding common shares of Texas-New Mexico Power Company.
TNP ENTERPRISES INC. AND SUBSIDIARIES
TEXAS NEW-MEXICO POWER COMPANY AND SUBSIDIARIES
Combined Form 10-K for the fiscal year ended December 31, 1994
This combined Form 10-K is separately filed by TNP Enterprises, Inc.
and Texas-New Mexico Power Company. Information contained herein
relating to Texas-New Mexico Power Company is filed by TNP
Enterprises, Inc. and separately by Texas-New Mexico Power Company on
its own behalf. Texas-New Mexico Power Company makes no representation
as to information relating to TNP Enterprises, Inc., except as it may
relate to Texas-New Mexico Power Company, or to any other affiliate or
subsidiary of TNP Enterprises, Inc.
TABLE OF CONTENTS
Glossary of Terms 3
Part I
Item 1.BUSINESS 4
Introduction 4
Financial Information Regarding Business 5
Narrative Description of Business 6
Executive Officers of the Registrants 12
Item 2.PROPERTIES 14
Item 3.LEGAL PROCEEDINGS 15
Item 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
Part II
Item 5.MARKET FOR REGISTRANTS' COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS 15
Item 6.SELECTED FINANCIAL DATA 16
Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 18
Overview 18
Key Events During 1994 18
Results of Operations 20
Liquidity and Capital Resources 26
Other Matters 28
Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 29
TNP Enterprises, Inc. and subsidiaries 31
Texas-New Mexico Power Company and subsidiaries 39
Notes to Consolidated Financial Statements 47
Selected Quarterly Consolidated Financial Data 60
Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 61
Part III
Item 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 61
Item 11.EXECUTIVE COMPENSATION 61
Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 61
Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 61
Part IV
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K 61
TNP ENTERPRISES INC. AND SUBSIDIARIES
TEXAS NEW-MEXICO POWER COMPANY AND SUBSIDIARIES
Combined Form 10-K for the fiscal year ended December 31, 1994
Glossary of Terms
As used in this combined report, the following abbreviations,
acronyms, or defined terms have the meanings set forth below:
Abbreviation, Acronym, or Defined Term Meaning
Bayport Bayport Cogeneration, Inc., a
wholly owned subsidiary of TNPE
Bond Indenture FMBs document containing covenants
to which TNMP must adhere that are
designed to protect holders of FMBs
Clear Lake Clear Lake Cogeneration Limited
Partnership
Credit Agreements Two separate lending agreements
between TNMP and several lenders
for financing separately TNMP's
purchases of TNP One Units 1 and 2
EPA Environmental Protection Agency
EWG Exempt Wholesale Generators
EPS Earnings (Loss) Per Share
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
FMBs First Mortgage Bonds issued by TNMP
HL&P Houston Lighting & Power Company
IRS Internal Revenue Service
ITC Investment Tax Credits
KWH Kilowatt-Hours
MW Megawatts
NMPUC New Mexico Public Utility Commission
PUCT Public Utility Commission of Texas
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting
Standards
TEP Tucson Electric Power Company
TGC Texas Generating Company, a wholly
owned subsidiary of TNMP
TGC II Texas Generating Company II, a
wholly owned subsidiary of TNMP
TNP One A two-unit, lignite-fueled, circulating
fluidized-bed generating plant located in
Robertson County, Texas
TNMP Texas-New Mexico Power Company, a
wholly owned subsidiary of TNPE
TNPE TNP Enterprises, Inc.
TU Texas Utilities Electric Company
Unit 1 The first completed unit of TNP One
Unit 2 The second completed unit of TNP
One
Units 1 and 2 Unit 1 and Unit 2 of TNP One
PART I
Item 1. BUSINESS.
Introduction
TNPE and its Subsidiaries
TNPE, a Texas corporation organized in February 1983, is based in
Fort Worth, Texas. TNPE has three direct wholly owned
subsidiaries, TNMP, Bayport, and TNP Operating Company, and two
indirect wholly owned subsidiaries, TGC and TGC II, which are
direct wholly owned subsidiaries of TNMP, also a Texas
corporation. The following chart represents the corporate
structure and includes the total asset book values at the end of
1994 of each company (amounts in millions):
TNMP is TNPE's principal operating subsidiary. TNMP's operations
are described in greater detail in "TNMP and its Subsidiaries"
below. Bayport and TNP Operating Company are general purpose
Texas corporations, neither of which engaged in any material
activities during 1994.
The financial information presented within this document is on a
consolidated basis for TNMP and for TNPE, and all intercompany
transactions and balances have been eliminated.
Although TNPE and TNMP are "holding companies" as defined in the
Public Utility Holding Company Act of 1935 ("PUHCA"), both
companies are exempt from regulation as a "registered holding
company" as also defined in PUHCA. TNPE and TNMP each files Form
U-3A-2 with the SEC annually in support of its PUHCA exemption.
TNPE is not subject to FERC jurisdiction or to PUCT regulation.
TNPE generally is also not subject to NMPUC regulation; NMPUC
statutes do not regulate holding companies except under certain
circumstances of consolidation, merger or acquisition.
TNMP and its Subsidiaries
TNMP is a public utility engaged in generating, purchasing,
transmitting, distributing, and selling electricity to customers
in Texas and New Mexico. TNMP is qualified to transact business
as a foreign corporation in New Mexico, as well as in Arizona,
where activities are limited to owning as tenant-in-common with
two other electric utilities an electric transmission line.
TNMP is subject to both PUCT and NMPUC regulation. In some of its
activities, including its issuance of securities, TNMP is subject
to FERC jurisdiction. TNMP maintains its accounting records in
accordance with the FERC's Uniform System of Accounts.
TNMP's two wholly owned subsidiaries, TGC and TGC II, were
organized to facilitate TNMP's acquisitions of assets, and
assumptions of related debt obligations, pertaining to TNP One,
Units 1 and 2 in 1990 and 1991, respectively. Units 1 and 2 were
acquired at originally capitalized costs of $357 million and $283
million, respectively. Subsequently, TNMP purchased undivided
interests in each unit from TGC and TGC II to support the
issuance of FMBs. In 1994, as part of a Texas rate case
settlement, TNMP wrote off $35 million of the TNP One costs,
which the PUCT had disallowed in 1992. Items 7 and 8 - note 8 of
Notes to Consolidated Financial Statements provide additional
information on the settlement.
Construction costs applicable to Units 1 and 2 were funded
primarily through separate Credit Agreements for the two units,
which TNMP guaranteed. "Sources of Energy" discusses additional
information pertaining to TNP One. Also, Item 8 - note 2 of Notes
to Consolidated Financial statements provides additional
information relating to current debt obligations pertaining to
Units 1 and 2.
Item 7 - "Key Events During 1994" provides additional information
regarding 1994 activities.
Financial Information Regarding Business
The following table provides financial data pertaining to TNMP's
operations by customer classes.
1994 1993 1992 1991 1990
Operating revenues
(thousands of dollars):
Residential $194,933 193,484 175,885 176,651 153,844
Commercial 141,886 138,680 128,550 119,745 102,320
Industrial 122,714 124,474 121,027 128,356 125,640
Other 18,456 17,604 18,365 16,591 15,485
Total $477,989 474,242 443,827 441,343 397,289
Sales
(thousand KWH):
Residential 2,085,621 2,047,360 1,947,593 2,017,349 1,998,727
Commercial 1,618,840 1,567,083 1,499,927 1,485,211 1,441,275
Industrial 2,652,844 2,567,552 2,508,837 2,798,369 2,848,020
Other 114,190 104,882 109,954 115,406 133,549
Total 6,471,495 6,286,877 6,066,311 6,416,335 6,421,571
Number of customers
(at year-end):
Residential 185,364 181,298 178,154 174,859 172,560
Commercial 30,624 30,235 30,359 30,300 30,161
Industrial 142 141 155 160 173
Other 237 237 229 230 227
Total 216,367 211,911 208,897 205,549 203,121
Revenue statistics:
Average annual use per
residential customer
(KWH) 11,354 11,362 11,003 11,584 11,613
Average annual revenue per
residential customer
(dollars) 1,061 1,067 987 1,010 892
Average revenue per KWH
sold - residential
(cents) 9.35 9.45 9.03 8.76 7.70
Average revenue per KWH
sold - total sales
(cents) 7.39 7.54 7.32 6.88 6.19
Utility statistics:
Net generation and purchases
(thousand KWH):
Generated 2,336,830 2,363,493 2,247,664 1,337,366 395,852
Purchased 4,472,306 4,385,697 4,261,129 5,452,132 6,375,418
Total (a) 6,809,136 6,749,190 6,508,793 6,789,498 6,771,270
Average cost per KWH generated
and purchased
(cents) (b) 4.03 4.13 3.86 3.94 3.92
Net utility plant
(thousands of
dollars) $967,273 1,005,995 1,015,709 1,016,602 728,989
Estimated population
served at retail 630,000 616,000 605,000 595,000 587,000
Total employees
(year-end) 894 1,051 1,086 1,104 1,121
<F1>
(a) The difference between total sources and total sales
represents TNMP internal use and line losses.
(b) Cost per KWH is derived from costs for purchased power and
for fuel, operation and maintenance of TNP One.
Item 7 provides additional information on changes in operating
revenues from 1992 through 1994.
Narrative Description of Business
TNMP purchases and generates electricity for sale to customers in
Texas and New Mexico. Electricity is purchased primarily from
other utilities and cogenerators (as discussed under "Sources of
Energy" in this section). TNMP generates electricity at TNP One.
TNMP's sales are primarily to retail customers; TNMP has limited
wholesale business.
TNMP owns and operates electric transmission and distribution
facilities in 90 Texas and New Mexico municipalities and adjacent
rural areas. During 1994, TNMP reorganized these municipalities
and areas into three operating regions. Revenues contributed by
each operating region and its percentage of total operating
revenues in the years ended December 31, 1994, 1993 and 1992,
respectively, are set forth in the following table.
Operating Revenues
1994 1993 1992
Region (000's) % (000's) % (000's) %
South-Western $269,194 56.3% $262,979 55.4 $249,653 56.2%
North-Central 132,595 27.8 131,725 27.8 119,047 26.9
New Mexico 76,200 15.9 79,538 16.8 75,127 16.9
Total $477,989 100.0% $474,242 100.0% $443,827 100.0%
During 1992 through 1994, no single customer accounted for
greater than 10% of operating revenues, although two affiliated
industrial customers in the New Mexico Region combined to
contribute between 8% and 9% of total operating revenues in each
of the three years.
Certain information concerning the approximate geographical
location and economy of each TNMP operating region is set forth
below.
1. The South-Western Region includes two noncontiguous areas:
- One area is situated along the Texas Gulf Coast and adjacent to
the Johnson Space Center and lies between the cities of Houston and
Galveston. The oil and petrochemical industries, agricultural
industry
and general commercial activity in the Houston area support the
economy of this area.
- The other area is located in far west Texas between the cities of
Midland and El Paso. The economy in this area is based primarily on
oil and gas production, agriculture and food processing.
2. The North-Central Region includes two noncontiguous areas:
- One area extends from the city of Lewisville, which is north of
the Dallas-Fort Worth International Airport, to municipalities along
the Red River and includes a portion of the Texas Panhandle. TNMP
provides electric service to a variety of commercial, agricultural
and petroleum industry customers in this area.
- The other area includes municipalities and communities south and
west of Fort Worth. This area's economy depends largely on
agriculture and, to a lesser extent, tourism and oil production.
3. The New Mexico Region includes areas in southwestern and south
central New Mexico. This region's economy is primarily dependent upon
mining and agriculture. Copper mines are the major industrial
customers in this region.
Franchises
TNMP holds 88 franchises with 25-year terms and two franchises
with 20-year terms from the 90 municipalities in which it
provides electric service. These franchises will expire on
various dates ranging from 1996 to 2039. Three significant Texas
franchises are scheduled to expire in 1996, 1998 and 1999.
Pursuant to applicable Texas law, an electric utility is not
required to execute a franchise agreement with a Texas
municipality to be entitled to provide or continue to provide
electrical service to the municipality. A franchise agreement
merely documents the mutually agreeable terms under which the
service will be provided. TNMP intends to negotiate and execute
new or amended franchise agreements to be effective before
existing franchises expire.
TNMP also holds PUCT certificates of public convenience and
necessity covering all territories that TNMP serves in Texas.
These certificates include terms that are customary in the public
utility industry. Applicable provisions of New Mexico's Public
Utility Act generally permit TNMP to provide electric power in
that state without certificates of public convenience and
necessity. Some of the Texas service areas are certified to more
than one utility, as discussed further under "Competitive
Conditions."
Seasonality of Business
TNMP experiences increased sales and operating revenues during
the summer months as a result of increased air-conditioner usage
in hot weather. In 1994, approximately 40% of annual revenues
were recorded in June, July, August and September.
Sources of Energy
The following table sets forth certain information concerning
TNMP's sources of electric energy in 1994.
Year of Percent
Contract ofEnergy Fuel
Sources Area Served Expiration Provided Source
TEXAS(1)
Generation
TNP One Texas Gulf Coast, - 44% Texas Lignite (Western
Central & Coal, Petroleum Coke
Northern Texas & Natural Gas Capabilities)
Purchased Power
Clear Lake
Cogeneration Texas Gulf Coast 2004 28 Natural Gas (Oil Standby)
Limited Partnership
Texas Utilities
Electric Central, Northern 2006(2) 22 Natural Gas, Lignite &
Company (Texas & West Texas 2010 Nuclear (Oil Standby)
Utilities
Company subsidiary)
Southwestern Public Texas Panhandle 2005 3 Coal & Natural Gas
Service Company (Oil Standby)
West Texas
Utilities West Texas 2005 2 Natural Gas & Coal
Company West (Central and South (Oil Standby)
Corporation
subsidiary)
Houston Lighting & Texas Gulf Coast 2001 1 Natural Gas, Coal, Lignite,
Power Company Nuclear & Cogeneration
(Houston Industries (Oil Standby)
Incorporated subsidiary)
Total 100%
NEW MEXICO
Purchased Power
Southwestern Public South Central 2001 30% Coal & Natural Gas
Service Company New Mexico (Oil Standby)
El Paso
Electric Company Southwest 2002 21 Coal, Natural Gas,
New Mexico Oil & Nuclear
Public Service
Company South Central & 2006 20 Coal, Natural Gas
of New Mexico Southwest & Nuclear (Oil Standby)
New Mexico
Other South Central & Various 29 Coal, Natural Gas, Oil &
Southwest Cogeneration
New Mexico
Total 100%
<F1>
(1) The table does not include information concerning electric
energy from natural gas sources that TNMP receives from Union
Carbide for the Texas Gulf Coast pursuant to an automatically
renewing contract. In 1994, such energy was less than 1%.
<F2>
(2) Excluding one point of delivery (a major supply source under
the contract expiring 2010) the contract expires in 2006.
However, in January 1995, TNMP notified TU of its intent to cease
purchasing full requirements power and energy at TNMP's points of
delivery currently served by TU, effective by January 1, 1999.
Both TNMP and its suppliers consider TNMP's future load growth in
planning their construction expenditures. Currently, TNMP's
existing supply arrangements and available capacities on the
wholesale market are adequate to satisfy TNMP's foreseeable power
requirements.
The availability and cost of energy to TNMP is subject to
supplier cost increases in constructing new generating
facilities, changing regulations and laws, or changing fuel costs
or fuel supply shortages. TNMP does not expect that these issues
will prevent its suppliers from providing power needed to satisfy
TNMP's requirements.
TNMP's suppliers regulated by FERC (El Paso Electric Company,
Southwestern Public Service Company, West Texas Utilities
Company, and Public Service Company of New Mexico) may not
terminate service to TNMP without FERC authorization. TNMP plans
to renew and amend its purchased power supply contracts as
necessary to meet the changing competitive environment. TNMP's
efforts to contract for lower purchased power costs resulted in a
decrease of approximately $7.1 million in annualized firm
purchased power costs implemented in 1994. This decrease was
partially offset by a $400,000 base rate increase and is now
benefiting TNMP's New Mexico customers.
TNMP is pursuing other opportunities to reduce purchased power
costs. TNMP arranged for TEP to provide it with wholesale power
to replace more expensive current sources in New Mexico by
January 1, 1996. TNMP expects cost savings of $1.8 million during
1996 from this arrangement. TNMP also intends to terminate full
requirements purchases from TU by January 1, 1999. TNMP intends
to solicit competitive bids to replace power currently provided
by TU. Related discussion is provided under "Competitive
Conditions" in this section and under Item 7.
Prior to 1990, TNMP purchased virtually all of its electric
energy from other utilities. In 1990 and 1991, TNMP began
replacing portions of its Texas purchased power requirements as
Units 1 and 2, respectively, of TNP One became operational. The
two units, which have a combined name-plate rating of 300 MW,
operated for their first full year together in 1992. TNP One
provided approximately 30% of TNMP's electric capacity
requirements and 44% of its energy requirements in Texas during
1994. The TU and HL&P contracts permitted reductions in future
purchased power commitments to these suppliers to be supplanted
by TNP One generated power.
Power generated at TNP One is transmitted over TNMP's own
transmission line to other utilities' transmission systems for
delivery to TNMP's Texas service area systems. To aid in
maintaining a reliable supply of power for its customers and to
coordinate interconnected operations, TNMP is a member of the
Electric Reliability Council of Texas (ERCOT), the Inland Power
Pool, and the New Mexico Power Pool.
Recovering Purchased Power and Fuel Costs
The PUCT and the NMPUC have both authorized power cost recovery
adjustment clauses in TNMP's rate schedules. The PUCT has also
approved a fixed fuel recovery factor in Texas. The power cost
recovery adjustment clauses and the fixed fuel recovery factor
benefit TNMP substantially in its efforts to recover these
significant elements of operating expenses in a timely and
sufficient manner. TNMP expects to refund or collect any over- or
under-collected purchased power costs within two months or less
of billing by its suppliers. Items 7 and 8 - notes 1 and 9 of
Notes to Consolidated Financial Statements provide additional
information regarding this topic and the successful renegotiation
of the fuel supply agreement.
Working Capital
TNMP's most significant demands on working capital are (1)
monthly payments to TNMP's suppliers for purchased power, (2)
monthly and semi-annual interest payments on long-term debt, (3)
semi-monthly payments to purchase lignite fuel for TNP One and
(4) biweekly payroll costs. Purchased power and fuel costs are
eventually recovered from TNMP customers through power cost
recovery adjustment clauses and a fixed fuel recovery factor as
described in the preceding paragraph. TNMP is not required to
maintain a large fuel inventory (lignite) due to TNP One's
proximity to the lignite mine site. Items 7 and 8 - note 9 of
Notes to Consolidated Financial Statements provide additional
information regarding the fuel supply agreement.
TNMP sells customer receivables to an unaffiliated company on a
nonrecourse basis. This practice permits TNMP to reduce the cash
flow lag between customer billings and collections.
Employees
TNMP employed 894 persons at December 31, 1994, as compared to
1,051 persons at December 31, 1993. The decrease is primarily a
result of staff reductions made in the fourth quarter of 1994 in
connection with its reorganization as described in Item 8 - note
5 of Notes to Consolidated Financial Statements.
Competitive Conditions
As a regulated public utility, TNMP currently operates with
little direct competition throughout most of its service
territory.
The PUCT has issued all electric utilities in Texas certificates
of public convenience and necessity authorizing them to provide
electric service. Rural electric cooperatives, investor-owned
electric utilities, and municipally-owned electric utilities are
all treated as public utilities under applicable law. In 72 of
the 81 Texas municipalities that TNMP serves, TNMP is the only
electric utility issued a certificate to serve customers within
the municipal limits. TNMP is also the only electric utility
authorized to serve customers in some of the rural areas where it
has electric facilities. In other rural areas that TNMP serves,
other electric utilities have also been authorized to serve
customers. Where other electric utilities have been certificated
to serve customers within TNMP's service area, TNMP may be
subject to competition.
In New Mexico, TNMP holds exclusive franchise agreements with
those municipalities and adjacent areas it serves, as is required
by state law. A utility subject to NMPUC jurisdiction may not
extend into territory either served by another utility or not
contiguous to its service territory without a certificate of
public convenience and necessity from the NMPUC. Investor-owned
electric utilities and rural electric cooperatives are subject to
NMPUC jurisdiction.
From time to time, industrial customers express interest in
cogeneration to reduce or eliminate their reliance upon TNMP for
electric service, or to lower fuel costs and improve process
steam generation operating efficiency. During 1994, a significant
industrial customer in TNMP's South-Western Region contracted
with a developer to construct a 300-MW cogeneration plant. This
plant is expected to begin operations in 1998. TNMP's 1994
operating revenues from this customer were approximately $29
million ($9 million in base revenues). TNMP's goal is to retain
this customer and to lower overall system operating costs through
negotiation with the developer and the customer. Although TNMP
cannot predict the ultimate outcome of the process or its impact
on TNMP, TNMP and the customer are discussing an arrangement
through which TNMP may retain electric service to this customer
at current levels. TNMP is actively pursuing negotiation of
agreements with the developer and the customer to define the
degree to which electric service to this customer is retained and
overall system operating costs for TNMP and the customer may be
lowered.
The Energy Policy Act of 1992 significantly changed U.S. energy
policy affecting the electric utility industry. Among other
things, EWG's were created and FERC was authorized to order, on a
case-by-case basis, wholesale transmission access. An EWG is a
wholesale power producer that is allowed to operate free from
most federal and state regulation. These changes are not only
resulting in competition in generating and supplying electricity,
but are also contributing to an emerging "buyers" market for
wholesale power. TNMP believes that these developments should
ultimately benefit TNMP and its customers. Since TNMP purchases a
significant portion of its electric requirements from various
wholesale suppliers, TNMP anticipates that it will be able to
procure wholesale power at lower prices. Also, TNMP has no
significant wholesale power sales but expects to position itself
to take advantage of increased opportunities to serve additional
wholesale customers.
The evolving concept of "competitive retail wheeling" (in
general, transporting third party power to an end-user) is being
debated throughout the electric utility industry. Underlying this
concept is the potential that certain electric power consumers,
such as industrial customers, could consider sources of electric
power other than a utility, which traditionally provided the
service. Competitive retail wheeling is not presently permitted
in either Texas or New Mexico. However, the NMPUC currently is
conducting a study to determine the feasibility of so-called
"managed competition," which significantly resembles competitive
retail wheeling. TNMP anticipates that retail wheeling would
subject it to a more competitive environment with regard to its
customers. TNMP's strategy for dealing with competition resulting
from retail wheeling will be to reduce purchased power costs and
the price of its product while emphasizing community-based
service.
Environmental Requirements
Management does not expect applicable laws and regulations
relating to protection of the environment to materially impact
TNMP's future capital outlays or operations directly. As TNMP's
electric suppliers may be affected by environmental requirements
and resulting costs, TNMP and its customers may be affected
indirectly through increased purchased power costs.
Federal and state environmental agencies regulate TNMP's
facilities in Texas and New Mexico. These agencies have
jurisdiction over air emissions, water quality, wastewater
discharges, solid wastes and hazardous substances. TNMP has
adopted and follows procedures designed to facilitate compliance
with all applicable environmental laws, rules, and regulations.
Various utility-related activities require permits, licenses,
registrations, and approvals from these agencies. TNMP believes
that it has received all necessary authorizations to construct
and continue operating its generation, transmission, and
distribution systems.
Because of TNP One's circulating fluidized bed technology, TNMP
does not anticipate making any significant capital expenditures
to control air emissions. Pursuant to applicable federal law,
TNMP is allotted a number of allowances that permit sulfur
dioxide emissions up to a specified level for TNP One. Unit 1 is
allotted 2,106 allowances and Unit 2 is allotted 3,472 allowances
annually for emissions of sulfur dioxide. One allowance is equal
to one ton of sulfur dioxide. TNMP believes that it may be
required to increase limestone injections into the combustion
chamber or purchase additional allowances in the market for the
year 2000 and thereafter to comply with the Clean Air Act
Amendments of 1990.
TNP One construction costs included approximately $89 million for
environmental protection facilities. During 1994, 1993 and 1992,
TNP One incurred expenses related to air, water and solid waste
pollution abatement (including ash removal) of approximately $5.9
million, $4.3 million and $4.0 million, respectively. TNMP also
made capital expenditures of approximately $0.3 million in 1994
for air emissions monitoring equipment for TNP One and expects to
spend $0.3 million in 1995 for similar additional equipment.
In December 1988, the EPA issued regulations requiring
underground storage to conform with certain standards by December
1998. The regulations require these underground storage tanks to
be equipped with corrosion protection, leak detection and spill
prevention devices. TNMP estimates that its costs to comply with
these regulations over the next four years will total
approximately $100,000.
TNMP works closely with environmental agencies in both Texas and
New Mexico to comply with applicable state and federal
regulations. During the past three years, TNMP incurred cleanup
and testing costs on both leaking and nonleaking storage tanks of
$130,000, $98,000, and $89,000, respectively. In addition, TNMP
expects partial reimbursement from the Texas and New Mexico state
environmental agencies for certain cleanup costs.
Executive Officers of the Registrants
Executive Officers of TNPE
Positions & Offices Held
with TNPE Period of
Name Age Within the Past 5 Years1 Such Office
Kevern R. Joyce 48 President & Chief Executive
Officer and Director 1994 -
D. R. Spurlock2 62 Director 1993 -
Interim President & Chief
Executive Officer 1993 - 1994
D. R. Barnard3 62 Vice President & Chief
Financial Officer 1989 - 1994
Manjit S. Cheema 40 Vice President & Chief 1994 -
Financial Officer
Ralph Johnson 51 Vice President 1995 -
M. D. Blanchard 44 Corporate Secretary & 1987 -
General Counsel
Monte W. Smith 41 Treasurer 1989 -
Executive Officers of TNMP
Positions & Offices Held
with TNMP Period of
Name Age Within the Past 5 Years1 Such Office
Kevern R. Joyce 48 President & Chief Executive
Officer and Director 1994 -
D. R. Spurlock2 62 Director 1993 -
Interim President & Chief
Executive Officer 1993 - 1994
Sector Vice President
- Operations 1990 - 1992
D. R. Barnard3 62 Senior Vice President &
Chief Financial Officer 1994 - 1994
Sector Vice President &
Chief Financial Officer 1990 - 1994
J. V. Chambers, Jr. 45 Senior Vice President & Chief
Customer Officer 1994 -
Sector Vice President -
Revenue Production 1990 - 1994
Manjit S. Cheema 40 Vice President & Chief
Financial Officer and
Treasurer 1994 -
Dennis R. Cash 41 Vice President - Human
Resources & Communications 1994 -
General Manager - Human
Resources 1993 - 1994
Manager - Human Resources 1990 - 1993
M. C. Davie3 59 Vice President - Corporate
Affairs 1983 - 1994
A. B. Davis 57 Vice President & Regional
Customer Officer 1994 -
Vice President - Chief Engineer 1992 - 1994
Chief Engineer 1991 - 1992
Assistant Chief Engineer 1991
Manager - Engineering 1986 - 1991
Positions & Offices Held
with TNMP Period of
Name Age Within the Past 5 Years1 Such Office
L.W. Dillon 40 Vice President & Regional
Customer Officer 1994 -
Vice President - Operations 1993 - 1994
Division Manager 1990 - 1993
W.D. Hobbs 51 Vice President & Regional
Customer Officer 1994 -
TNP One Plant Manager 1992 - 1994
Ralph Johnson 51 Vice President - Power
Resources 1995 -
M. D. Blanchard 44 Corporate Secretary &
General Counsel 1987 -
Monte W. Smith 41 Controller 1994 -
Treasurer 1989 - 1994
<F1>
1 All officers are elected annually by the respective
Boards of Directors for a one-year term until the
next annual meeting of the Boards of Directors or
until their successors shall be elected and
qualified. The term of an officer elected at any
other time by the Boards also will run until the next
succeeding annual meeting of the Boards of Directors
or until a successor shall be elected and qualified.
<F2>
2 Resigned as Interim President & Chief Executive
Officer effective April 12, 1994.
<F3>
3 Retired as of December 31, 1994.
D. R. Spurlock resigned, and D. R. Barnard and M. C. Davie
retired on or before December 31, 1994, and each of the other
above-named officers is a full-time employee of TNMP and has been
for more than five years prior to the date of the filing of this
Form 10-K with the exception of Messrs. Joyce, Cheema, Hobbs and
Johnson.
Mr. Joyce joined TNMP and TNPE as President and Chief Executive
Officer and a Director in April 1994. Before joining TNMP and
TNPE, he was Senior Vice President and Chief Operating Officer of
TEP from January 1992 to March 1994. Prior to that, he was Vice
President-Rates and Conservation from July 1990 to January 1992.
Before joining TEP, Mr. Joyce was Assistant Controller of Public
Service Company of New Hampshire, an electric utility.
Mr. Cheema joined TNMP in June 1994 as Treasurer. Prior to
joining TNMP, Mr. Cheema was Assistant Treasurer and Manager of
Financial Planning and Budgeting for TEP since March 1990. From
1989 to March 1990, Mr. Cheema was Manager of Investor Relations
at Pinnacle West Capital Corporation.
Mr. Hobbs joined TNMP in April 1992 as TNP One Plant Manager.
From 1989 until February 1992 Mr. Hobbs was employed with Fluor
Corporation as Project Manager on international/domestic projects
which were involved in the development and implementation of
educational, maintenance and operational programs for utility and
industrial organizations.
Mr. Johnson joined TNMP and TNPE in February 1995. Before joining
TNMP and TNPE, Mr. Johnson was Assistant General Manager for Tri-
State Generation & Transmission Association ("Tri-State") in
Denver, Colorado, which sells power to rural electric
cooperatives, from March 1991 to January 1995. From January 1991
to March 1991, he was a consultant to the General Manager at Tri-
State. From 1988 to June 1990, Mr. Johnson was a Senior Vice
President at Public Service Company of New Hampshire. Mr.
Johnson's experience is in managing electric power generation and
transmission functions.
Item 2. PROPERTIES.
Substantially all of TNMP's real and personal property secures
its long-term debt. For information concerning TNMP's debt, see
note 2 of Notes to Consolidated Financial Statements, which is
incorporated in this Item 2 by reference.
Generating Facilities
TNP One generates power for TNMP's Texas Gulf Coast, Central and
Northern Texas service areas. TNP One is a two-unit, lignite-
fueled generating plant, using circulating fluidized bed
technology, located in Robertson County, Texas. TNP One is
satisfactorily operating as a base load facility.
Transmission and Distribution Facilities
TNMP's facilities are of sufficient capacity to serve existing
customers adequately and to be extended and expanded to serve
future customer growth. These facilities primarily consist of
overhead and underground lines, substations, transformers and
meters. TNMP generally constructs its transmission and
distribution facilities upon easements or public rights of way in
favor of TNMP and not upon real property held in fee simple.
Item 3. LEGAL PROCEEDINGS.
The information set forth in notes 8 and 9 of Notes to
Consolidated Financial Statements regarding regulatory and legal
matters is incorporated in this Item 3 by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders in the
fourth quarter of 1994.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
TNPE
The high and low sales prices of, and the amount of dividends
declared and paid on, TNPE's common stock each quarter during
1994 and 1993 are as follows:
Market Price Range Dividends
1994 1993 Paid
quarter high low high low 1994 1993
First $18 5/8 16 5/8 19 3/8 18 1/8 $0.4075 0.4075
Second 17 3/8 14 5/8 19 1/2 17 1/2 0.4075 0.4075
Third 15 5/8 13 1/4 17 7/8 14 5/8 0.2000 0.4075
Fourth 15 3/8 13 5/8 17 3/4 16 3/8 0.2000 0.4075
$1.2150 1.6300
TNPE's closing common stock price at the end of 1994 was $14 7/8.
TNPE's common stock is traded on the New York Stock Exchange
under the symbol "TNP."
Dividends paid by TNPE generally represent taxable income to
stockholders for federal income tax purposes. The approximate
number of record holders of TNPE's common stock as of January 31,
1995 was 6,300.
In February 1995, TNPE's Board of Directors declared quarterly
common stock dividends of $0.20 per share. The quarterly dividend
is indicative of an annual dividend rate of $0.80 per share.
TNMP
TNPE holds all 10,705 outstanding common shares of TNMP.
For the years ended December 31, 1994 and 1993, TNMP paid common
dividends to its parent, TNPE, as follows (amounts in thousands):
TNMP Dividends Paid
Quarter 1994 1993
First $ 4,400 4,336
Second 4,400 4,336
Third - 4,336
Fourth 2,200 4,336
Total $11,000 17,344
Due to the recognition of the regulatory disallowances during the
second quarter of 1994, restrictive convenants in TNMP's Bond
Indenture did not permit a cash dividend payment during the third
quarter. Sufficient earnings were generated during the third
quarter to permit a cash dividend payment to TNPE during the
fourth quarter. However, as of December 31, 1994, all of TNMP's
retained earnings were restricted and the cash dividend to TNPE
is suspended until unrestricted retained earnings are restored.
Additional information is provided at Items 7 and 8 - note 4 of
the Notes to Consolidated Financial Statements.
Item 6. SELECTED FINANCIAL DATA.
TNP ENTERPRISES, INC.
1994 1993 1992 1991 1990
(Dollars in Thousands)
Consolidated results:
Operating revenues $ 477,989 474,242 443,827 441,343 397,289
Power purchased for resale 194,595 200,183 174,257 216,818 253,416
Total operating expenses 399,998 396,002 366,824 378,778 360,220
Net operating income 77,991 78,240 77,003 62,565 37,069
Net earnings (loss) (17,441) 11,605 10,930 19,533 16,352
Earnings (loss) applicable
to common stock (18,231) 10,726 9,962 18,455 15,137
Total assets $1,071,792 1,103,853 1,182,707 1,122,591 807,854
Cash flows:
Construction expenditures $ 29,038 26,360 22,410 42,536 58,496
Cash internally generated as a
percentage of construction
expenditures 105% 123% 213% 101% 41%
Common shares outstanding:
Weighted average 10,750 10,641 8,545 8,275 8,207
End of year 10,866 10,696 10,598 8,318 8,238
Per share of common stock:
Earnings (loss) $ (1.700) 1.01 1.17 2.23 1.84
Cash dividends declared 1.215 1.63 1.63 1.63 1.63
Book value 17.010 19.97 20.62 21.45 20.86
Capitalization:
Common stockholders' equity $ 184,869 213,627 218,535 178,388 171,839
Preferred stock 8,680 9,560 10,440 11,320 12,600
Long-term debt,
less current maturities 682,832 678,994 742,087 525,060 350,301
Total capitalization $ 876,381 902,181 971,062 714,768 534,740
Capitalization ratios:
Common stockholders' equity 21.1% 23.7 22.5 25.0 32.1
Preferred stock 1.0 1.1 1.1 1.6 2.4
Long-term debt,
less current maturities 77.9 75.2 76.4 73.4 65.5
Total capitalization 100.0% 100.0 100.0 100.0 100.0
Short-term debt:
Current maturities of
long-term debt $ 2,670 1,070 10,288 201,276 78,570
Unsecured notes
payable to banks - - - 36,000 41,900
$ 2,670 1,070 10,288 237,276 120,470
Cash internally generated is defined as cash generated from
operations less cash dividends. The increases in cash internally
generated as a percentage of construction expenditures in 1991
and 1992 resulted from rate increases that became effective late
in each prior year.
Increases in long-term debt resulted from the following:
In September 1993, TNMP used proceeds from the
issuance of debt securities to prepay additional
amounts under the Credit Agreements.
In January 1992, TNMP used proceeds from the
issuance of debt securities to repay and prepay
the Credit Agreements and to repay unsecured notes
payable to banks.
In 1991, TNMP acquired the assets of Unit 2,
assuming related debt obligations.
Items 7 and 8 - notes 7 and 8 of the Notes to Consolidated
Financial Statements provide discussion of key events and
uncertainties that may cause the information listed above to not
be indicative of future financial condition or results of
operations.
SELECTED FINANCIAL DATA.
TEXAS-NEW MEXICO POWER COMPANY
1994 1993 1992 1991 1990
(Dollars in Thousands)
Consolidated results:
Operating revenues $477,989 474,242 443,827 441,343 397,289
Power purchased for resale 194,595 200,183 174,257 216,818 253,416
Total operating expenses 399,998 396,002 366,824 378,778 360,220
Net operating income 77,991 78,240 77,003 62,565 37,069
Net earnings (loss) (16,634) 11,523 10,845 19,840 15,376
Earnings(loss)applicable
to common stock (17,424) 10,644 9,877 18,762 14,161
Total assets $1,060,482 1,093,735 1,156,567 1,111,281 789,651
Cash flows:
Construction expenditures $29,038 26,360 22,410 42,536 58,496
Cash internally generated
as a percentage of
construction expenditures 105% 123% 213% 101% 41%
Capitalization:
Common stockholder's equity $185,777 214,184 205,875 171,393 166,419
Preferred stock 8,680 9,560 10,440 11,320 12,600
Long-term debt,
less current maturities 682,832 678,994 742,087 525,060 350,301
Total capitalization $877,289 902,738 958,402 707,773 529,320
Capitalization ratios:
Common stockholder's equity 21.2% 23.7 21.5 24.2 31.4
Preferred stock 1.0 1.1 1.1 1.6 2.4
Long-term debt,
less current maturities 77.8 75.2 77.4 74.2 66.2
Total capitalization 100.0% 100.0 100.0 100.0 100.0
Short-term debt:
Current maturities of
long-term debt $2,670 1,070 10,288 201,276 78,570
Unsecured notes
payable to banks - - - 36,000 41,900
$2,670 1,070 10,288 237,276 120,470
Per common share information omitted; see Item 5.
Cash internally generated is defined as cash generated from
operations less cash dividends. The increases in cash internally
generated as a percentage of construction expenditures in 1991
and 1992 resulted from rate increases that became effective late
in each prior year.
Increases in long-term debt resulted from the following:
In September 1993, TNMP used proceeds from the
issuance of debt securities to prepay additional
amounts under the Credit Agreements.
In January 1992, TNMP used proceeds from the
issuance of debt securities to repay and prepay
the Credit Agreements and to repay unsecured notes
payable to banks.
In 1991, TNMP acquired the assets of Unit 2,
assuming related debt obligations.
Items 7 and 8 - notes 7 and 8 of the Notes to Consolidated
Financial Statements provide discussion of key events and
uncertainties that may cause the information listed above to not
be indicative of future financial condition or results of
operations.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Overview
This discussion presents management's analysis of TNPE's and
TNMP's financial performance and discusses their strategies for
addressing the challenges of a developing competitive environment
in the utility industry. Throughout this discussion the
references to "note(s)" will refer to the accompanying notes of
the Notes to Consolidated Financial Statements.
Key Events During 1994
The utility industry is evolving into an increasingly competitive
environment. TNPE and TNMP have recognized the changes developing
in the utility industry and implemented a plan of action during
1994 to improve their competitive positions within the industry.
This action plan consisted of the following:
- reaching unanimous settlement agreements during 1994 in both
Texas and New Mexico to settle the most recent rate applications,
which reduce regulatory uncertainty for TNMP and long-term rate
uncertainties for customers,
- the development of a strategic plan that emphasizes providing
quality service to customers at competitive pricing and that
included an organizational restructuring and staffing reductions
and
- a 51% reduction in the quarterly dividends on TNPE common stock.
Rate Case Settlement Agreements
The settlement agreements combined to provide for an increase in
annualized base revenues of $17.9 million. The increase was
comprised of $17.5 million in Texas, effective October 2, 1994,
and $0.4 million in New Mexico, effective May 16, 1994. In
addition, the Texas settlement resolved substantially all
outstanding issues in connection with TNMP's two previous filings
and required TNMP to write off $35 million of the PUCT's earlier
total disallowances of $61.4 million applicable to TNP One. In
the approval of the settlement, the PUCT found the remaining
costs of TNP One to be reasonable and included in rate base. Note
8 provides additional information regarding the Texas rate case
settlement. The New Mexico settlement combined a $7.1 million
reduction in purchased power costs with a $0.4 million base
revenue increase to provide lower overall rates to TNMP's New
Mexico customers.
Management believes that the additional base revenues provided by
the settlement agreements will enable TNMP to rebuild its
financial strength. Of equal importance, the settlements enabled
TNMP to free up resources devoted toward resolution of disputes
arising from prior rate cases, and to redirect these resources
toward meeting the challenges of a competitive utility industry.
Strategic Plan
The new strategic plan provides TNMP a framework to pursue
improvement of its competitive position in an increasingly
competitive environment. Key objectives of this strategic plan
are to:
- provide customers with high quality, personal service at
competitive prices,
- concentrate on maintaining a presence in and serving smaller
communities (clearly defining TNMP's market niche),
- reduce costs and improve competitive position and
- create value resulting in a superior return for investors.
The overall focus of the strategic plan is to pursue activities
that primarily benefit customers and, ultimately, investors.
An initial step undertaken by TNMP in pursuit of its strategic
objectives is the company-wide reorganization as described at
note 5. The reorganization costs recognized in the fourth quarter
of 1994 were $8.8 million. Approximately $6.5 million of these
costs will be funded from TNMP's defined pension and
postretirement benefits trusts, and the remaining $2.3 million
was funded from TNMP's operations. The reorganization creates an
overall organizational structure designed to facilitate the
pursuit of the strategic objectives. The cost savings from
staffing reductions as a result of the reorganization are
expected to be approximately $7 million annually in payroll and
payroll-related items. Because portions of payroll and payroll-
related items are capitalized, the related reduction in operating
expenses is estimated to be approximately $5.5 million. Some
functions will be outsourced, and the expense of outsourcing
these functions is estimated to be $1.2 million in 1995.
Common Stock Dividends
TNMP's common stock is wholly owned by TNPE. Due to the
recognition of the regulatory disallowances during the second
quarter in 1994, restrictive covenants in TNMP's Bond Indenture
prohibited TNMP's payment of cash dividends to TNPE until
unrestricted retained earnings were available. Sufficient third
quarter earnings were generated to permit TNMP to remit a $2.2
million cash dividend to TNPE. However, as of December 31, 1994,
all of TNMP's retained earnings were again restricted and cash
dividend payments to TNPE are prohibited until unrestricted
retained earnings are available. Management expects that TNMP
should generate sufficient earnings from operations to permit
resumption of the cash dividend to TNPE by the fourth quarter of
1995.
The dividend restriction applicable to TNMP did not preclude TNPE
from remitting a cash dividend to its stockholders during 1994.
However, this restriction combined with other factors (the
relatively low common equity component of TNPE's capital
structure, industry considerations, etc.), contributed to the
TNPE Board of Directors' decision to reduce the quarterly
dividend by 51% to $0.20 per share. TNPE believes quarterly cash
dividends can be sustained at this level during the time period
that TNMP is restricted from paying a cash dividend. As of
December 31,1994, TNPE had temporary cash investments of $12.2
million.
Note 4 provides additional information applicable to common stock
dividends.
Results of Operations
TNPE's consolidated results of operations are summarized as
follows:
1994 1993 1992
(In Thousands Except Per Share Amounts)
Earnings (loss)
applicable to common stock
TNMP operations $(17,424) 10,644 9,877
Other operations (807) 82 85
Total $(18,231) 10,726 9,962
Earnings (loss) per
share of common stock
TNMP operations $ (1.62) 1.00 1.16
Other operations (0.08) .01 .01
Total $ (1.70) 1.01 1.17
As shown in the above table, the operations of TNMP (the
principal subsidiary) represent virtually all of TNPE's
operations. Therefore, the succeeding discussion will focus
primarily on TNMP's operations.
The overall TNPE results of operations for 1994 were
significantly affected by the one-time items previously mentioned
pertaining to the reorganization costs and the regulatory
disallowances. The components of these two items are detailed in
notes 5 and 8, and the combined after-tax effects are shown
below:
1994 1993 1992
Amount EPS Amount EPS Amount EPS
(In Thousands Except Per Share Amounts)
Earnings applicable to common
stock before one-time items $7,997 0.74 10,726 1.01 9,962 1.17
One-time items, net of
income taxes:
Reorganization costs (5,723) (0.53) - - - -
Regulatory disallowances (20,505) (1.91) - - - -
Total one-time
items, net (26,228) (2.44) - - - -
Earnings (loss) applicable
to common stock (18,231) (1.70) 10,726 1.01 9,962 1.17
Weighted average number of
common shares outstanding 10,750 10,641 8,545
Overall, 1994 earnings applicable to common stock before the one-
time items were $2.7 million less than in 1993. As discussed
under "Interest Charges," this resulted from increased interest
costs which exceeded an increase in net operating income.
Although 1993 earnings increased by $0.8 million over 1992, EPS
decreased by $0.16 per share due to the effect of issuing two
million additional common shares in December 1992.
TNPE and TNMP do not believe the effects of inflation, as
measured by the Consumer Price Index over the last three years,
have had a material negative impact on their consolidated
financial position or results of operations.
Results from operations for TNPE during the past three years are
summarized as follows (in millions):
Increase (Decrease)
Annual Amounts From Prior Year
1994 1993 1992 1994 1993
Operating revenues $ 478.0 474.2 443.8 3.8 30.4
Operating expenses (400.0) (396.0) (366.8) (4.0) (29.2)
Net operating income 78.0 78.2 77.0 (0.2) 1.2
Other income (loss), net (20.2) 1.3 2.2 (21.5) (0.9)
Interest charges (75.2) (67.9) (68.3) (7.3) 0.4
Net earnings (loss) $ (17.4) 11.6 10.9 (29.0) 0.7
Detailed explanations related to the annual fluctuations shown
above are included in the discussion below.
Operating Revenues
Annual Fluctuations
The following table presents the components of the changes in
operating revenues:
Increase (Decrease) From Prior Year
1994 1993
(Dollars In Millions)
Changes in:
Base rate operating revenues $1.8 0.4% $(1.6) (0.3)%
Recovery of purchased
power costs (5.6) (1.2) 25.9 5.8
Recovery of fuel costs 1.9 0.4 (1.2) (0.3)
Customer usage 5.5 1.2 8.3 1.9
Other revenues 0.2 0.0 (1.0) (0.2)
Total $3.8 0.8% $30.4 6.9%
Annual revenues increased by $3.8 million (0.8%) during 1994 as
compared to 1993. The revenue increase is the result of increases
in:
- customer usage (2.9% overall KWH sales increase) attributed to
increases in the number of residential and commercial customers,
- base rate revenues from settlements of rate application filings
in May 1994 for New Mexico, and in October 1994 for Texas, and
- the Texas fixed fuel recovery factor (discussed under "Operating
Expenses").
These increases were partially offset by a decrease in the
recovery of the costs of power purchased for resale. Purchased
power costs are passed directly through to customers. TNMP took
advantage of provisions in its New Mexico purchased power
contracts to shift purchases to lower cost suppliers, saving
approximately $7.1 million on an annualized basis (discussed
under "Operating Expenses").
During 1993, annual revenues increased by $30.4 million (6.9%) as
compared to 1992. This revenue increase is attributed primarily
to the recovery of increased purchased power costs and to
increased KWH sales in 1993 (3.6%) as a more normal weather
pattern was experienced in 1993 as compared to 1992. Also
contributing to the favorable revenue increases were increases in
(1) the number of residential customers and (2) commercial and
industrial usage spurred by increased economic activity. During
1993, the number of industrial customers decreased by 14, but
that decrease was primarily as a result of the consolidation of
customers for billing purposes and the reclassification of
certain customers to the commercial class. The actual net
reduction was only 3 industrial customers in 1993.
Anticipated Developments
In 1994, 84.1% of TNMP's revenues were generated in Texas. As
stated in note 8, a moratorium exists which prohibits TNMP from
filing for a rate increase prior to March 1997, and permits rate
increase filings from March 1997 through March 1999 only if
certain force majeure events occur. Those events must result in a
base revenue loss or an increase in costs or expenses of at least
$9 million in any one year or $12 million over two years. The
force majeure events include:
- changes in federal income taxes exceeding $2.5 million,
- legislative or regulatory actions exceeding $2.5 million,
- inflation greater than 8% for one year,
- 30-year U.S. Treasury Bond yield greater than 8.75% for six
months and/or
- base revenue decrease greater than $2.5 million.
TNMP does not currently foresee that these events will result in
a Texas rate application during the moratorium.
Presently, TNMP does not have any plans to file for a rate
increase in New Mexico in the near term. Since base rates are
expected to remain fairly level for the next several years,
TNMP's future opportunities for revenue growth is expected to be
derived from increasing its customer base and offering new
services. TNMP intends to aggressively pursue the opportunities
related to expanding the customer base, in addition to
maintaining and serving existing customers.
An example of expanding the customer base involves a former
customer that switched to self-generation during the late 1970s.
TNMP recently executed an agreement to commence selling electric
power to this customer beginning in 1996. This agreement is
expected to contribute $15 million to annual revenues ($2 million
to base revenues).
One major industrial customer providing annual revenues of $29
million in 1994 ($9 million in base revenues) has contracted with
a developer to construct a 300-MW cogeneration plant, which is
expected to commence operations in 1998. TNMP is actively
negotiating with the customer and the developer for arrangements
that potentially would enable TNMP to continue providing
electrical services to the customer and lower system operating
costs. Additional discussion is provided at Item 1 - Competitive
Conditions, which is incorporated here by reference.
The sale of the Texas Panhandle properties is expected to result
in lower revenues, as discussed under "Other Pending Issues."
Operating Expenses
Annual Fluctuations
Annual operating expenses during 1994 increased by $4.0 million
as compared to 1993. However, excluding the effect of the one-
time $8.8 million reorganization costs, operating expenses
decreased by $4.8 million. The overall decrease is primarily
attributed to reductions in purchased power ($5.6 million), and
income taxes ($5.5 million) partially offset by increases in fuel
($2.7 million) and other operating and general ("Other O & G")
expenses ($3.1 million).
The decrease in purchased power costs resulted from the New
Mexico-related unit cost reductions previously discussed and is
also reflected as a reduction in operating revenues. The increase
in fuel is primarily due to an increase in the fixed fuel
recovery factor approved by the PUCT in connection with the Texas
rate case settlement. The fixed fuel factor provides a basis for
TNMP to recover fuel costs through rates charged to the
customers. The corresponding effect to operating revenues is
described above. As of December 31, 1994, TNMP was under-
recovered on its cumulative fuel costs by $15 million. TNMP's
continued efforts to reduce this under-recovered balance is
discussed below in "Anticipated Developments."
The increase in Other O & G expenses from 1993 to 1994 is
primarily due to increases in costs of $2.3 million for labor
(general wage increase) and labor-related items (thrift plan
contributions and postretirement benefits plan contributions).
The labor increase of $1.2 million resulted from a 3% general
wage increase implemented in January 1994, the first such
adjustment since 1991. Increased thrift contributions of $0.8
million resulted from TNMP restoring employer matching
contributions to the 401(k) thrift plan in July 1994; the
employer thrift contributions had been discontinued since January
1, 1993. The increased postretirement benefits costs ($0.2
million) resulted from increases in the expected growth of health
care costs. In addition to labor and labor-related increases,
Other O & G expenses increased due to increased tree trimming
costs ($0.3 million).
During 1993, annual operating expenses increased by $29.2 million
as compared to 1992. The increase is primarily attributed to
purchased power ($25.9 million) and income taxes ($2.4 million).
The significant increase in purchased power is primarily due to
an increase in the average cost of KWH purchased from suppliers.
Also, contributing to the increase was increased KWH sales
experienced in 1993 as described above in "Operating Revenues."
The increase in income taxes is due to an increase in operating
income.
Anticipated Developments
Purchased power costs represent TNMP's largest operating expense.
As described in Item 1 - Competitive Conditions, TNMP believes
the Energy Policy Act of 1992 will present opportunities to
procure less expensive wholesale power. In pursuit of these
opportunities, TNMP provided notice to TU in January 1995 of its
intent to terminate its full requirements power supply contract
effective no later than January 1, 1999 as discussed in note 9.
In 1994, TU represented TNMP's second largest source of purchased
power in Texas. TNMP intends to solicit competitive bids during
the first half of 1995 to replace the power provided by TU. Also,
TNMP has contracted with TEP to procure wholesale power to reduce
purchases from its more expensive sources for TNMP's New Mexico
customers. This contract will be effective during 1996 and is
expected to result in savings of $1.8 million to TNMP's New
Mexico customers.
In addition, TNMP anticipates a 19% price reduction for wholesale
power purchased from HL&P. TNMP participated as an intervenor in
HL&P's recent Texas rate case and was a party to a stipulated
agreement signed February 22, 1995, which should resolve HL&P's
rate case. Contingent on regulatory approval, the stipulated
wholesale base rates will be retroactively effective January 1,
1995. TNMP's contract with Clear Lake provides that TNMP will pay
Clear Lake 98% of the cost that TNMP actually avoids from HL&P by
purchasing the power from Clear Lake. The cost that TNMP actually
avoids from HL&P is based upon HL&P's wholesale rate. Therefore,
this price reduction will also impact TNMP's cost of purchases
from Clear Lake, TNMP's largest source of purchased power in
Texas. Based on the quantities purchased from HL&P and Clear Lake
in 1994, the annual effect of the rate reductions is expected to
reduce purchased power costs to TNMP's customers by approximately
$11.5 million.
Fuel costs represent another significant operating expense. As
discussed in note 9, TNMP successfully negotiated a 20% reduction
in the cost of lignite coal procured from Walnut Creek Mining
Company effective January 1, 1995. The cost savings initially
will be applied to reduce the $15 million accumulated under-
recovery of fuel costs currently recorded on the accompanying
consolidated balance sheet. Once the under-recovery is
eliminated, TNMP plans to request a revised fuel factor from the
PUCT, enabling cost savings to be passed on to customers. This is
expected to occur during the latter half of 1996.
In 1995, labor and labor-related costs are expected to be reduced
by approximately $7 million due to the company-wide staffing
reductions resulting from the previously discussed
reorganization. The approximately $5.5 million portion of these
savings that would reduce operating expenses is expected to be
offset somewhat by the outsourcing of certain functions at a cost
estimated to be approximately $1.2 million during 1995.
Also, the 1995 results will be impacted by non-cash items
pertaining to depreciation and rate case amortization expenses.
TNMP will recognize increased annual depreciation expense of $1.1
million due to new depreciation studies approved in the Texas and
New Mexico rate case settlements. The studies generally provide
for higher depreciation rates. The depreciation increase will be
offset partially by decreased annual amortization of $0.8 million
resulting from a longer amortization period for deferred rate
case expenses.
During the first quarter of 1995, TNMP's Board of Directors
approved an incentive compensation plan, which is expected to be
effective during 1995 subject to stockholders' approval. Under
the plan, employees are awarded the opportunity to earn incentive
payments for achieving target goals established by the Board.
The sale of the Texas Panhandle properties should reduce
operating expenses, as discussed under "Other Pending Issues."
Other Income (Loss), Net of Taxes
TNMP
TNMP's $19.4 million other loss, net of taxes, for 1994 is due
primarily to the recognition of the $20.5 million regulatory
disallowance (net of income taxes) resulting from the Texas rate
case settlement as detailed in note 8. Excluding the effect of
this one-time item, 1994 other income was comparable to 1993.
In 1993, other income decreased by $0.9 million as compared to
1992. This resulted from TNMP having lower interest income on
investment balances after reducing temporary cash investments to
pay down debt in September 1993.
TNPE
TNPE's $20.2 million other loss, net of taxes, for 1994 is
essentially attributable to the regulatory disallowances and
other factors discussed above for TNMP. TNPE also experienced
decreases in interest income and increases in certain taxes that
added to the other loss in 1994. The change to 1993 from 1992 is
basically the result of the same factors discussed above for
TNMP.
Interest Charges
Annual Fluctuations
Annual interest charges during 1994 increased by $7.3 million as
compared to 1993. The increase resulted from the issuance of $270
million of debt during September 1993 which replaced debt with
lower interest rates. The issuance of these securities enabled
TNMP to extend the maturities of the remaining debt associated
with the Unit 2 Credit Agreement and to utilize the
prepayment/subsequent reborrowing provisions as discussed under
"Liquidity and Capital Resources."
During 1993, annual interest did not change materially from 1992.
Anticipated Developments
First mortgage bonds and secured debentures comprise 87.6% of
total long-term debt. Since the bonds and debentures have fixed
interest rates and insignificant maturities during the next two
years, overall interest charges are not expected to materially
vary during the next two years. Refer to "Liquidity and Capital
Resources" for comments pertaining to refinancing future
maturities of long-term debt beyond two years.
Outstanding amounts applicable to the Unit 2 Credit Agreement
will fluctuate due to the prepayment/subsequent reborrowing
provisions as described under "Liquidity and Capital Resources."
Also, the associated interest rates will fluctuate since they are
primarily linked to LIBOR, CD or prime rates which have been
rising since the first quarter of 1994. The amount outstanding
under the Unit 2 Credit Agreement is expected to be reduced from
1994 year-end levels by free cash flow from operations during
1995. Management plans to investigate alternatives to determine
the competitiveness of this source of capital.
The sale of the Texas Panhandle properties (as described at note
9) is expected to reduce future interest charges as explained
below.
Other Pending Issues
Sale of Texas Panhandle Properties
Pursuant to the Texas rate case settlement, TNMP agreed to
actively pursue the sale of its franchise rights and utility
plant located in the Texas Panhandle. In 1994, TNMP executed a
contract to sell to Southwestern Public Service Company the
electrical operations in the Texas Panhandle for $29.2 million,
subject to satisfaction of certain conditions and the necessary
regulatory approvals. TNMP will be required under the Bond
Indenture to apply the entire amount of sale proceeds toward the
reduction of FMBs. From an operating perspective, the loss of
annual revenues of $9.6 million is expected to be offset by
expected cost reductions of up to $9.8 million applicable to
operating expenses and interest costs. Therefore, the anticipated
divestiture of these properties is not expected to materially
impact TNMP's earnings except for any gain on disposition. In the
event that the regulatory approvals are not obtained or the
conditions are not satisfied, TNMP plans to consider other
alternatives that could result in similar economic benefits to
TNMP, its stockholders and the Panhandle customers. The timing of
the recognition of any gain will be dependent upon the manner in
which the matter is ultimately resolved. Note 9 provides
additional information regarding this sale.
Revenues Subject to Refund
The Texas rate case settlement did not affect a tax-related issue
from a previous Texas rate case filed in 1991. The issue involves
$4.8 million of revenues that have been collected from customers
as of December 31, 1994, but have not been recognized in the
consolidated statements of operations. Recognition of these
revenues is conditioned upon TNMP receiving a private letter
ruling from the IRS supporting TNMP's position on certain income
tax consequences. While no assurances can be given, TNMP expects
to receive a favorable ruling during 1995. An unfavorable ruling
would result in a refund to Texas customers of the $4.8 million
previously collected and the recognition of an additional $8.1
million regulatory liability to the Texas customers. Note 8
provides additional information regarding this item.
ITC Associated with TNP One
As described at note 7, TNPE's claim in the consolidated federal
income tax returns for ITC associated with the construction of
TNP One is expected to be formally contested by an IRS revenue
agent. Of the $22 million of ITC at issue, TNPE and its
subsidiaries have utilized $5 million in consolidated returns
through 1993. Management believes its claim to ITC is valid;
however, if the revenue agent's position is upheld, cash flow
from operations would be adversely impacted by the ITC utilized
to date and for related accelerated depreciation claimed in the
tax returns filed in prior years. The aggregate adverse effect to
cash flow would be $8.6 million, including interest. However, the
adverse impact to results of operations would approximate $0.8
million for the ITC amortized by TNPE and TNMP through 1994.
Management intends to vigorously defend its position that the
property qualifies for ITC.
Liquidity and Capital Resources
Sources of Liquidity
During the past three years, TNMP's sources of working capital
from internally generated cash flow provided through operations
and access to the Unit 2 Credit Agreement have been sufficient to
fund daily operational requirements (including capital
expenditures). This is supported by the cash flow statistics
included in Item 6. Following the 1993 debt refinancing, TNMP
obtained the ability to reborrow prepayments under the Unit 2
Credit Agreement. As discussed in note 2, each reborrowing from
the Unit 2 Credit Agreement is subject to an interest coverage
test and an equity ratio test. As of December 31, 1994, the
unused commitment associated with the Unit 2 Credit Agreement was
$62.5 million. The scheduled reductions to the commitment
commence on January 1, 1996, as discussed in note 2.
The sources of liquidity previously described are expected to be
adequate to fund operations for the foreseeable future and the
possible adverse resolution of the issues involving revenues
subject to refund and the ITC claim applicable to TNP One as
previously described.
See additional discussion below under "Future Capital
Requirements" detailing management's expectations of future cash
flows from operations.
Consolidated Financial Condition
A summary of the components of capitalization and related ratios
is listed at Item 6. TNPE's highly leveraged position (74% to 78%
debt to capitalization) is a direct result of the assumption of
the construction costs and related debt obligations of Unit 1 and
Unit 2 during 1990 and 1991, respectively. Prior to 1990, TNPE's
capital structure contained less than 50% debt. The discussion
listed below at "Capital Resources" will discuss management's
intent to increase the equity component of TNPE's capital
structure.
Capital Resources
During the past three years, TNMP has obtained needed outside
sources of capital as follows (in millions):
1994 1993 1992
Amount Rate Amount Rate Amount Rate
First mortgage bonds $ - - $100.0 9.25% $130.0 11.25%
Secured debentures - - 140.0 10.75 130.0 12.50
Net borrowings under
the Credit
Agreements 6.5 various* - various* 11.5 various*
Equity contributions
received from TNPE - - 15.0 - 38.4 -
<F1>
* Note 2 describes the methods under which interest rates were
determined.
Funds for the 1992 equity contribution from TNPE were obtained
from a public offering of 2 million shares of TNPE common stock.
TNMP used these funds to retire construction debt for TNP One.
TNMP's Bond Indenture contains covenants that restrict the
issuance of additional FMBs as described at note 2. Based on
December 31, 1994 financial information and assuming an 11.0%
interest rate with satisfactory market conditions, TNMP would be
permitted to issue $23 million of additional FMBs. However, this
amount must further be substantiated by another test that
requires sufficient collateral be available to secure the
issuance of additional FMBs. As of December 31, 1994, the
collateral provision would permit issuance of $33 million of
additional FMBs.
The indenture which governs secured debentures permits issuance
of additional secured debentures if equal amounts of secured
debentures and secured notes payable under the Unit 2 Credit
Agreement are replaced.
TNMP's ability to issue preferred stock is restricted by interest
and dividend coverage tests. TNMP does not presently have the
ability to issue any preferred stock, and does not expect to have
the ability to issue preferred stock before 1998.
TNPE's ability to issue common stock is predicated on market
conditions and its financial performance. As of December 31,
1994, TNPE's book value and market value were $17.01 and $14.78,
respectively. Since most of the assets, liabilities and earnings
capability of TNPE are those of TNMP, TNPE's ability to issue
common stock is largely dependent upon the financial performance
of TNMP.
Future Capital Requirements
Based upon the balance of preferred stock and long-term debt at
December 31, 1994, TNMP's future capital requirements through
1999 are projected to be as follows (amounts in millions):
1995 1996 1997 1998 1999
Preferred stock redemptions $ 0.9 0.8 0.6 0.6 0.2
Long-term debt
maturities (note 2) 2.7 10.9 168.0 38.0 131.0
Capital expenditures 29.0 29.1 33.3 32.5 33.2
Total capital requirements $32.6 40.8 201.9 71.1 164.4
Management believes the key events which occurred during 1994_the
rate case settlements and the development of the new strategic
plan_constitute the basis for enabling TNMP to increase
profitability and restore its financial integrity in the future.
The combination of the following items is expected to generate
increased cash flow from operations:
- increased base revenues from the rate case settlements,
- reduced labor costs from the reorganization,
- reduced fuel costs and
- increased customer base resulting from competitive pricing and
increased focus on customer needs.
TNMP expects to generate sufficient funds from internal
operations to fund capital requirements during 1995 and 1996.
TNMP anticipates that capital requirements from 1997 through 1999
will be primarily funded from the combination of internally
generated cash and issuance of new securities by TNMP and/or
TNPE. The anticipated improvement in TNMP's financial health
should enable TNMP to issue long-term debt at interest rates
lower than the debt replaced.
Other Matters
The FASB issued SFAS 112, "Employers' Accounting for
Postemployment Benefits" which addresses the accounting and
reporting for the estimated costs of benefits provided by an
employer to former employees after employment but before
retirement. SFAS 112 was effective for fiscal years beginning
after December 15, 1993. The costs applicable to TNMP are
immaterial.
Also under consideration by FASB is an anticipated pronouncement
regarding the subject of impairment of long-lived assets. Under
the present regulatory environment in which TNMP operates, this
pronouncement would not be expected to affect TNMP. As the
utility industry evolves into an increasingly competitive
environment, management will continue to assess the effects of
the proposed pronouncement.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
The Board of Directors and Stockholders
TNP Enterprises, Inc.:
We have audited the consolidated financial statements of TNP
Enterprises, Inc. and subsidiaries as listed in the accompanying
index at Part IV. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of TNP Enterprises, Inc. and subsidiaries as of December
31, 1994 and 1993, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1994, in conformity with generally accepted
accounting principles.
In connection with the revenues subject to refund discussed in
note 8 to the consolidated financial statements, uncertainties
exist with respect to the regulatory treatment of the income tax
benefits of the regulatory disallowances recognized in 1994. The
ultimate outcome of this matter cannot presently be determined.
Accordingly, no provision for any loss that may ultimately be
required upon resolution of this matter has been made in the
accompanying consolidated financial statements.
As discussed in note 1 to the consolidated financial statements,
the Company changed its method of accounting for income taxes in
1993 to adopt the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards
("SFAS") No. 109, Accounting for Income Taxes. As discussed in
note 6, the Company also adopted the provisions of the Financial
Accounting Standards Board's SFAS No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions in 1993.
KPMG Peat Marwick LLP
Fort Worth, Texas
January 27, 1995
Independent Auditors' Report
The Board of Directors
Texas-New Mexico Power Company:
We have audited the consolidated financial statements of Texas-
New Mexico Power Company (a wholly owned subsidiary of TNP
Enterprises, Inc.) and subsidiaries as listed in the accompanying
index at Part IV. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Texas-New Mexico Power Company and subsidiaries as of
December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1994, in conformity with generally
accepted accounting principles.
In connection with the revenues subject to refund discussed in
note 8 to the consolidated financial statements, uncertainties
exist with respect to the regulatory treatment of the income tax
benefits of the regulatory disallowances recognized in 1994. The
ultimate outcome of this matter cannot presently be determined.
Accordingly, no provision for any loss that may ultimately be
required upon resolution of this matter has been made in the
accompanying consolidated financial statements.
As discussed in note 1 to the consolidated financial statements,
the Company changed its method of accounting for income taxes in
1993 to adopt the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards
("SFAS") No. 109, Accounting for Income Taxes. As discussed in
note 6, the Company also adopted the provisions of the Financial
Accounting Standards Board's SFAS No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions in 1993.
KPMG Peat Marwick LLP
Fort Worth, Texas
January 27, 1995
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Years Ended December 31, 1994
1994 1993 1992
(In Thousands Except Per Share Amounts)
OPERATING REVENUES (note 8) $477,989 474,242 443,827
OPERATING EXPENSES:
Power purchased for resale 194,595 200,183 174,257
Fuel 46,988 44,348 44,977
Other operating and general expenses 72,472 69,406 70,003
Maintenance 11,966 11,460 11,342
Reorganization costs (note 5) 8,782 - -
Depreciation of utility plant 36,782 36,015 35,098
Taxes, other than on income 29,651 30,296 29,250
Income taxes (note 7) (1,238) 4,294 1,897
Total operating expenses 399,998 396,002 366,824
NET OPERATING INCOME 77,991 78,240 77,003
OTHER INCOME (LOSS):
Recognition of regulatory
disallowances (note 8) (31,546) - -
Other income and deductions, net 1,057 1,972 3,349
Income taxes (notes 7,8) 10,305 (666) (1,139)
Other income (loss), net of taxes (20,184) 1,306 2,210
EARNINGS BEFORE INTEREST CHARGES 57,807 79,546 79,213
INTEREST CHARGES:
Interest on long-term debt 71,568 63,833 63,893
Amortization of debt related costs
and other interest 3,955 4,411 4,539
Allowance for borrowed funds
used during construction (275) (303) (149)
Total interest charges 75,248 67,941 68,283
NET EARNINGS (LOSS) (17,441) 11,605 10,930
DIVIDENDS ON PREFERRED STOCK (790) (879) (968)
EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK $(18,231) 10,726 9,962
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 10,750 10,641 8,545
EARNINGS (LOSS) PER
SHARE OF COMMON STOCK $(1.70) 1.01 1.17
DIVIDENDS PER SHARE OF COMMON STOCK $1.215 1.630 1.630
See accompanying Notes to Consolidated Financial Statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Years Ended December 31, 1994
1994 1993 1992
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $475,462 460,463 460,803
Power purchased for resale (193,366) (195,063) (176,890)
Fuel costs paid (46,537) (46,049) (45,720)
Cash paid to other suppliers
and for payroll (85,912) (76,254) (90,835)
Interest paid, net of
amounts capitalized (76,402) (59,028) (62,130)
Income taxes paid 365 (3,263) (1,230)
Other taxes paid, net
of amounts capitalized (30,323) (30,344) (27,870)
Other operating cash receipts
and payments, net 1,014 236 6,420
NET CASH PROVIDED BY OPERATING ACTIVITIES 44,301 50,698 62,548
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant, net of
capitalized depreciation and interest (29,038) (26,360) (22,410)
Purchases of temporary investments (5,590) - -
NET CASH USED IN INVESTING ACTIVITIES (34,628) (26,360) (22,410)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on preferred
and common stocks (13,823) (18,223) (14,748)
Issuances:
Common stock 2,502 1,701 43,925
Borrowings under secured notes payable 188,500 - 11,500
Other long-term debt - 240,000 260,000
Deferred expenses associated
with financings - (8,940) (9,124)
Redemptions:
Preferred stock (880) (880) (880)
Repayments under
secured notes payable (182,028) (280,700) (244,000)
Other long-term debt (1,070) (31,658) (1,498)
Short-term debt - - (36,000)
NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES (6,799) (98,700) 9,175
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,874 (74,362) 49,313
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 12,423 86,785 37,472
CASH AND CASH EQUIVALENTS AT END OF YEAR $15,297 12,423 86,785
(continued)
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
Three Years Ended December 31, 1994
1994 1993 1992
(In Thousands)
RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net earnings (loss) $(17,441) 11,605 10,930
Adjustments to reconcile net
earnings (loss) to net
cash provided by operating activities:
Depreciation of utility plant 36,782 36,015 35,098
Amortization of debt expense, discount
and premium, and other deferred charges 5,495 4,939 5,667
Allowance for borrowed funds used
during construction (275) (303) (149)
Deferred income taxes (10,915) 5,534 541
Investment tax credit adjustments (1,436) (953) (2,479)
Reorganization costs 6,858 - -
Recognition of regulatory disallowances 31,546 - -
Cash flows impacted by changes in current assets and liabilities:
Deferred purchased power and fuel costs (107) 2,584 (5,493)
Accrued interest (4,422) 7,246 2,256
Revenues subject to refund 1,382 (14,115) 15,961
Changes in other current
assets and liabilities (2,495) (1,158) 2,488
Other - net (671) (696) (2,272)
NET CASH PROVIDED BY OPERATING ACTIVITIES $44,301 50,698 62,548
See accompanying Notes to Consolidated Financial Statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
1994 1993
(In Thousands)
ASSETS
UTILITY PLANT:
Electric plant (notes 2, 8) $1,192,277 1,203,636
Construction work in progress 3,816 5,282
Total 1,196,093 1,208,918
Less accumulated depreciation 228,820 202,923
Net utility plant 967,273 1,005,995
NONUTILITY PROPERTY, at cost 1,308 1,673
CURRENT ASSETS:
Cash and cash equivalents 15,297 12,423
Temporary investments 5,590 -
Customer receivables 3,832 764
Inventories, at the lower of
average cost or market:
Fuel 1,157 1,422
Materials and supplies 7,527 7,793
Deferred purchased power and fuel costs 15,258 15,151
Accumulated deferred income taxes (note 7) 2,702 2,867
Other current assets 1,817 1,071
Total current assets 53,180 41,491
REGULATORY TAX ASSETS 17,304 16,915
DEFERRED CHARGES 32,727 37,779
$1,071,792 1,103,853
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (See
Consolidated Statements of Capitalization):
Common stockholders' equity (notes 2, 4) $ 184,869 213,627
Preferred stock (note 3) 8,680 9,560
Long-term debt, less
current maturities (notes 2, 4) 682,832 678,994
Total capitalization 876,381 902,181
CURRENT LIABILITIES:
Current maturities of long-term debt 2,670 1,070
Accounts payable 21,951 22,450
Accrued interest 11,693 16,115
Accrued taxes 17,722 17,221
Customers' deposits 3,973 4,464
Revenues subject to refund (note 8) 4,782 3,400
Other current liabilities 10,621 9,344
Total current liabilities 73,412 74,064
REGULATORY TAX LIABILITIES (note 8) 47,307 49,314
ACCUMULATED DEFERRED INCOME TAXES (note 7) 46,960 55,709
ACCUMULATED DEFERRED
INVESTMENT TAX CREDITS (note 7) 16,912 18,348
DEFERRED CREDITS (note 6) 10,820 4,237
COMMITMENTS AND CONTINGENCIES (notes 7, 8, 9) $1,071,792 1,103,853
See accompanying Notes to Consolidated Financial Statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31, 1994 and 1993
1994 1993
(In Thousands)
COMMON STOCKHOLDERS' EQUITY (notes 2, 4):
Common stock with no par value per share.
Authorized shares: 50,000,000
Outstanding shares: 10,866,441 in
1994 and 10,695,860 in 1993 $134,117 131,615
Retained earnings 50,752 82,012
Total common stockholders' equity $184,869 213,627
PREFERRED STOCK (note 3):
Preferred stock with no par value.
Authorized shares: 5,000,000
Outstanding shares: None
Redeemable cumulative preferred stock of wholly owned subsidiary with
$100 par value.
Authorized shares: 1,000,000
Redemption price at
option of subsidiary Outstanding shares
1994 1993 1994 1993 1994 1993
Series B, 4.650% $100.000 100.000 24,000 25,200 $2,400 $2,520
Series C, 4.750 100.000 100.000 13,800 14,400 1,380 1,440
Series D,11.000 101.040 101.570 2,000 3,200 200 320
Series E,11.000 101.040 101.570 1,000 1,600 100 160
Series F,11.000 101.040 101.570 2,000 3,200 200 320
Series G,11.875 106.432 106.927 44,000 48,000 4,400 4,800
Total redeemable
cumulative preferred stock 86,800 95,600 $8,680 9,560
LONG-TERM DEBT (notes 2,4):
FIRST MORTGAGE BONDS:
Series L, 10.500% due 2000 $9,720 9,840
Series M, 8.700 due 2006 8,300 8,400
Series R, 10.000 due 2017 63,050 63,700
Series S, 9.625 due 2019 19,800 20,000
Series T, 11.250 due 1997 130,000 130,000
Series U, 9.250 due 2000 100,000 100,000
Total first mortgage bonds 330,870 331,940
Unamortized discount, net of premium (640) (676)
Total first mortgage bonds, net 330,230 331,264
SECURED DEBENTURES:
12.50% due 1999 130,000 130,000
Series A, 10.75% due 2003 140,000 140,000
Total secured debentures 270,000 270,000
SECURED NOTES PAYABLE 85,272 78,800
Total long-term debt 685,502 680,064
Less current maturities (2,670) (1,070)
Total long-term debt, less current maturities $682,832 678,994
TOTAL CAPITALIZATION $876,381 902,181
See accompanying Notes to Consolidated Financial Statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
AND REDEEMABLE CUMULATIVE PREFERRED STOCK
Three Years Ended December 31, 1994
Common Stockholders' Equity Redeemable
Cumulative
Common Stock Retained Preferred
Shares Amount Earnings Total Stock
(In Thousands)
YEAR ENDED DECEMBER 31, 1992:
Balance, January 1, 1992 8,318 $85,989 92,399 178,388 11,320
Net earnings - - 10,930 10,930 -
Dividends on preferred stock - - (968) (968) -
Dividends on common stock-
$1.630 per share - - (13,780) (13,780) -
Sale of common stock 2,280 43,925 - 43,925 -
Purchase and retirement of
preferred stock* - - 40 40 (880)
Balance, December 31, 1992 10,598 129,914 88,621 218,535 10,440
YEAR ENDED DECEMBER 31, 1993:
Net earnings - - 11,605 11,605 -
Dividends on preferred stock - - (879) (879) -
Dividends on common stock -
$1.630 per share - - (17,344) (17,344) -
Sale of common stock 98 1,701 - 1,701 -
Purchase and retirement of
preferred stock* - - 9 9 (880)
Balance, December 31, 1993 10,696 131,615 82,012 213,627 9,560
YEAR ENDED DECEMBER 31, 1994:
Net loss - - (17,441) (17,441) -
Dividends on preferred stock - - (790) (790) -
Dividends on common stock -
$1.215 per share - - (13,046) (13,046) -
Sale of common stock 170 2,502 - 2,502 -
Purchase and retirement of
preferred stock* - - 17 17 (880)
Balance, December 31, 1994 10,866 $134,117 50,752 184,869 8,680
* The following shares were retired each year:
Series Rate Shares
B 4.650% 1,200
C 4.750 600
D 11.000 1,200
E 11.000 600
F 11.000 1,200
G 11.875 4,000
See accompanying Notes to Consolidated Financial Statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Years Ended December 31, 1994
1994 1993 1992
(In Thousands)
OPERATING REVENUES (note 8) $477,989 474,242 443,827
OPERATING EXPENSES:
Power purchased for resale 194,595 200,183 174,257
Fuel 46,988 44,348 44,977
Other operating and
general expenses 72,472 69,406 70,003
Maintenance 11,966 11,460 11,342
Reorganization costs (note 5) 8,782 - -
Depreciation of utility plant 36,782 36,015 35,098
Taxes, other than on income 29,651 30,296 29,250
Income taxes (note 7) (1,238) 4,294 1,897
Total operating expenses 399,998 396,002 366,824
NET OPERATING INCOME 77,991 78,240 77,003
OTHER INCOME (LOSS):
Recognition of regulatory
disallowances (note 8) (31,546) - -
Other income and
deductions, net 1,475 1,846 3,220
Income taxes (notes 7, 8) 10,694 (622) (1,095)
Other income (loss),
net of taxes (19,377) 1,224 2,125
EARNINGS BEFORE
INTEREST CHARGES 58,614 79,464 79,128
INTEREST CHARGES
Interest on long-term debt 71,568 63,833 63,893
Amortization of debt related
costs and other interest 3,955 4,411 4,539
Allowance for borrowed funds
used during construction (275) (303) (149)
Total interest charges 75,248 67,941 68,283
NET EARNINGS (LOSS) (16,634) 11,523 10,845
DIVIDENDS ON PREFERRED STOCK (790) (879) (968)
EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK $(17,424) 10,644 9,877
See accompanying Notes to Consolidated Financial Statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Years Ended December 31, 1994
1994 1993 1992
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 475,462 460,463 460,803
Power purchased for resale (193,366) (195,063) (176,890)
Fuel costs paid (46,537) (46,049) (45,720)
Cash paid to other suppliers
and for payroll (86,632) (79,583) (83,413)
Interest paid, net of
amounts capitalized (76,402) (59,028) (62,130)
Income taxes paid (1,215) (2,388) (1,185)
Other taxes paid, net of
amounts capitalized (29,906) (29,888) (27,513)
Other operating cash
receipts and payments, net 1,442 1,532 3,759
NET CASH PROVIDED BY
OPERATING ACTIVITIES 42,846 49,996 67,711
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant, net of
capitalized depreciation
and interest (29,038) (26,360) (22,410)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on
preferred and common stocks (11,794) (18,223) (14,808)
Issuances:
Borrowings under
secured notes payable 188,500 - 11,500
Other long-term debt - 240,000 260,000
Deferred expenses
associated with financings - (8,940) (9,124)
Equity contribution received from
parent company - 15,000 38,405
Redemptions:
Preferred stock (880) (880) (880)
Repayments under
secured notes payable (182,028) (280,700) (244,000)
Other long-term debt (1,070) (31,658) (1,498)
Short-term debt - - (36,000)
NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES (7,272) (85,401) 3,595
NET CHANGE IN CASH AND
CASH EQUIVALENTS 6,536 (61,765) 48,896
CASH AND CASH
EQUIVALENTS AT BEGINNING OF YEAR 2,078 63,843 14,947
CASH AND CASH EQUIVALENTS
AT END OF YEAR $8,614 2,078 63,843
(continued)
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
Three Years Ended December 31, 1994
1994 1993 1992
(In Thousands)
RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net earnings (loss) $(16,634) 11,523 10,845
Adjustments to reconcile
net earnings (loss) to net
cash provided by operating activities:
Depreciation of utility plant 36,782 36,015 35,098
Amortization of debt
expense, discount and
premium, and other
deferred charges 5,495 4,939 5,667
Allowance for borrowed
funds used during construction (275) (303) (149)
Deferred income taxes (10,920) 5,515 1,347
Investment tax credit adjustments (1,374) (959) (444)
Reorganization costs 6,858 - -
Recognition of
regulatory disallowances 31,546 - -
Cash flows impacted by changes
in current assets and liabilities:
Deferred purchased
power and fuel costs (107) 2,584 (5,493)
Accrued interest (4,422) 7,246 2,256
Revenues subject to refund 1,382 (14,115) 15,961
Changes in other current
assets and liabilities (4,211) 2,044 4,901
Other - net (1,274) (4,493) (2,278)
NET CASH PROVIDED
BY OPERATING ACTIVITIES $ 42,846 49,996 67,711
See accompanying Notes to Consolidated Financial Statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
1994 1993
(In Thousands)
ASSETS
UTILITY PLANT:
Electric plant (notes 2, 8) $1,192,277 1,203,636
Construction work in progress 3,816 5,282
Total 1,196,093 1,208,918
Less accumulated depreciation 228,820 202,923
Net utility plant 967,273 1,005,995
NONUTILITY PROPERTY, at cost 183 541
CURRENT ASSETS:
Cash and cash equivalents 8,614 2,078
Customer receivables 3,832 764
Inventories, at the lower
of average cost or market:
Fuel 1,157 1,422
Materials and supplies 7,527 7,793
Deferred purchased power and fuel costs 15,258 15,151
Accumulated deferred income taxes (note 7) 2,702 2,867
Other current assets 1,958 1,091
Total current assets 41,048 31,166
REGULATORY TAX ASSETS 17,304 16,915
DEFERRED CHARGES 34,674 39,118
$1,060,482 1,093,735
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (See Consolidated
Statements of Capitalization):
Common stockholder's equity (notes 2, 4) $ 185,777 214,184
Redeemable cumulative
preferred stock (note 3) 8,680 9,560
Long-term debt, less current
maturities (notes 2, 4) 682,832 678,994
Total capitalization 877,289 902,738
CURRENT LIABILITIES:
Current maturities of long-term debt 2,670 1,070
Accounts payable 21,951 22,450
Accrued interest 11,693 16,115
Accrued taxes 16,898 18,006
Customers' deposits 3,973 4,464
Revenues subject to refund (note 8) 4,782 3,400
Other current liabilities 10,622 9,336
Total current liabilities 72,589 74,841
REGULATORY TAX LIABILITIES (note 8) 47,307 49,314
ACCUMULATED DEFERRED INCOME TAXES (note 7) 36,769 45,523
ACCUMULATED DEFERRED INVESTMENT
TAX CREDITS (note 7) 15,708 17,082
DEFERRED CREDITS (note 6) 10,820 4,237
COMMITMENTS AND CONTINGENCIES (notes 7, 8, 9)
$1,060,482 1,093,735
See accompanying Notes to Consolidated Financial Statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31, 1994 and 1993
1994 1993
(In Thousands)
COMMON STOCKHOLDER'S EQUITY (notes 2, 4):
Common stock, $10 par value per share.
Authorized shares: 12,000,000
Outstanding shares: 10,705 $ 107 107
Capital in excess of par value 175,111 175,094
Retained earnings 10,559 38,983
Total common stockholder's equity $185,777 214,184
REDEEMABLE CUMULATIVE PREFERRED STOCK (note 3):
Redeemable cumulative preferred stock, $100 par value.
Authorized shares: 1,000,000
Redemption price at
option of CompanyOutstanding shares
1994 1993 1994 1993
Series B, 4.650% $100.000 100.000 24,000 25,200 $2,400 2,520
Series C, 4.750 100.000 100.000 13,800 14,400 1,380 1,440
Series D, 11.000 101.040 101.570 2,000 3,200 200 320
Series E, 11.000 101.040 101.570 1,000 1,600 100 160
Series F, 11.000 101.040 101.570 2,000 3,200 200 320
Series G, 11.875 106.432 106.927 44,000 48,000 4,400 4,800
Total redeemable
cumulative preferred
stock 86,800 95,600 $8,680 9,560
LONG-TERM DEBT (notes 2, 4):
FIRST MORTGAGE BONDS:
Series L, 10.500% due 2000 $9,720 9,840
Series M, 8.700 due 2006 8,300 8,400
Series R, 10.000 due 2017 63,050 63,700
Series S, 9.625 due 2019 19,800 20,000
Series T, 11.250 due 1997 130,000 130,000
Series U, 9.250 due 2000 100,000 100,000
Total first mortgage bonds 330,870 331,940
Unamortized discount, net of premium (640) (676)
Total first mortgage bonds, net 330,230 331,264
SECURED DEBENTURES:
12.50% due 1999 130,000 130,000
Series A, 10.75% due 2003 140,000 140,000
Total secured debentures 270,000 270,000
SECURED NOTES PAYABLE 85,272 78,800
Total long-term debt 685,502 680,064
Less current maturities (2,670) (1,070)
Total long-term debt, less current maturities $682,832 678,994
TOTAL CAPITALIZATION $877,289 902,738
See accompanying Notes to Consolidated Financial Statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
AND REDEEMABLE CUMULATIVE PREFERRED STOCK
Three Years Ended December 31, 1994
Common Stockholder's Equity Redeemable
Capital in Cumulative
Common Stock Excess of Retained Preferred
Shares Amount Par Value Earnings Total Stock
(In Thousands)
YEAR ENDED DECEMBER 31, 1992:
Balance, January 1, 1992 10,705 $107 121,640 49,646 171,393 11,320
Net earnings - - - 10,845 10,845 -
Dividends on preferred stock - - - (968) (968) -
Dividends on common stock - - - (13,840) (13,840) -
Equity contribution from
parent company - - 38,405 - 38,405 -
Purchase and retirement of
preferred stock* - - 40 - 40 (880)
Balance, December 31, 1992 10,705 107 160,085 45,683 205,875 10,440
YEAR ENDED DECEMBER 31, 1993:
Net earnings - - - 11,523 11,523 -
Dividends on preferred stock - - - (879) (879) -
Dividends on common stock - - - (17,344) (17,344) -
Equity contribution from
parent company - - 15,000 - 15,000 -
Purchase and retirement of
preferred stock* - - 9 - 9 (880)
Balance, December 31, 1993 10,705 107 175,094 38,983 214,184 9,560
YEAR ENDED DECEMBER 31, 1994:
Net loss - - - (16,634) (16,634) -
Dividends on preferred stock - - - (790) (790) -
Dividends on common stock - - - (11,000) (11,000) -
Purchase and retirement of
preferred stock* - - 17 - 17 (880)
Balance, December 31, 1994 10,705 $107 175,111 10,559 185,777 8,680
* The following shares were retired each year:
Series Rate Shares
B 4.650% 1,200
C 4.750 600
D 11.000 1,200
E 11.000 600
F 11.000 1,200
G 11.875 4,000
See accompanying Notes to Consolidated Financial Statements.
(1) Summary of Significant Accounting Policies
General
The consolidated financial statements of TNP Enterprises, Inc.
("TNPE") and Subsidiaries include the accounts of TNPE and its
wholly owned subsidiaries, Texas-New Mexico Power Company
("TNMP"), Bayport Cogeneration, Inc. and TNP Operating Company.
The consolidated financial statements of Texas-New Mexico Power
Company and Subsidiaries include the accounts of TNMP and its
wholly owned subsidiaries, Texas Generating Company ("TGC") and
Texas Generating Company II ("TGC II").
TNMP is the principal operating subsidiary of TNPE. TNMP is a
public utility engaged in the generation, purchase, transmission,
distribution and sale of electricity within the states of Texas
and New Mexico. TNMP is subject to regulation by the Public
Utility Commission of Texas ("PUCT") and the New Mexico Public
Utility Commission ("NMPUC"). TNMP is subject in some of its
activities, including the issuance of securities, to the
jurisdiction of the Federal Energy Regulatory Commission
("FERC"), and its accounting records are maintained in accordance
with the FERC's Uniform System of Accounts.
All intercompany transactions and balances have been eliminated
in consolidation.
Utility Plant
Utility plant is stated at the historical cost of construction,
which includes labor, materials, an allowance for funds used
during construction and indirect charges for such items as
engineering, supervision and general administrative costs.
Property repairs and replacement of minor items are charged to
operating expenses; major replacements and improvements are
capitalized to utility plant.
The costs of depreciable units of plant retired or disposed of in
the normal course of business are eliminated from utility plant
accounts and such costs plus removal expenses less salvage are
charged to accumulated depreciation. When complete operating
units are disposed of, appropriate adjustments are made to
accumulated depreciation, and the resulting gains or losses, if
any, are recognized.
Depreciation is provided on a straight-line method based on the
estimated service lives of the properties as indicated by
periodic depreciation studies. A portion of depreciation of
transportation equipment used in construction is charged to
utility plant accounts in accordance with the equipment's use.
Depreciation as a percentage of average depreciable cost was
3.14%, 3.00% and 3.10% in 1994, 1993 and 1992, respectively.
Cash Equivalents
For purposes of the consolidated statements of cash flows, all
highly liquid debt instruments with maturities of three months or
less when purchased are considered to be cash equivalents.
Temporary Investments
Temporary investments are recorded at amortized cost, adjusted
for the amortization or accretion of premiums or discounts, as
management has the ability and intent to hold these securities
until maturity. These securities, which are debt obligations of
the U.S. Government, mature within one year.
Deferred Charges
Debt Expense, Discount and Premium
Expenses incurred in connection with the issuance of outstanding
long-term debt and discount and premium related to such debt are
amortized on a straight-line basis over the lives of the
respective issues.
Other
Included in deferred charges are other assets that are expected
to benefit future periods and certain costs that are deferred for
rate making purposes and amortized over periods allowed by
regulatory authorities.
(1) Summary of Significant Accounting Policies - continued
Operating Revenues
Revenues are recognized on the basis of meter readings which are
made on a monthly cycle. TNMP does not accrue revenues for
electric services provided but not billed at the end of an
accounting period.
TNMP sells customer receivables to a nonaffiliated company on a
nonrecourse basis.
Power Purchased for Resale and Fuel Costs
Power purchased for resale is recorded on the basis of billings
from suppliers; no accrual is made for power delivered to TNMP
between the dates of such billings and the end of an accounting
period.
Electric rates include estimates of power purchased for resale
and fuel costs incurred by TNMP in the purchase or generation of
electricity. Differences between amounts collected and allowable
costs are recorded as deferred purchased power and fuel costs in
accordance with ratemaking policies of regulatory authorities.
Allowance for Borrowed Funds Used During Construction
The allowance for borrowed funds used during construction
("AFUDC") is designed to allow TNMP to capitalize the net
composite interest costs during periods of construction and does
not represent current cash income. Established regulatory
practices permit TNMP to recover these costs in future periods by
determining rates to include a fair return on and a recovery of
these costs through their inclusion in rate base and cost of
service. The composite rates used for AFUDC were 8.76% in 1994,
7.53% in 1993 and 5.8% in 1992.
Income Taxes
On January 1, 1993, TNPE and TNMP implemented Statement of
Financial Accounting Standards ("SFAS") 109, "Accounting for
Income Taxes" on a prospective basis. SFAS 109 required a change
from the deferred method to the asset and liability method of
accounting for income taxes. Under the asset and liability
method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted tax
rates to differences between the financial statement amounts and
the tax bases of existing assets and liabilities.
SFAS 109 required TNMP to recognize deferred income taxes for:
- the reduction in depreciable tax bases due to investment tax
credits ("ITC"),
- ITC accounted for under the deferred method,
- prior flow-through rate making treatment of certain income tax
benefits and
- the effects of federal income tax rate changes.
Certain provisions of SFAS 109 provide that regulated enterprises
are permitted to recognize adjustments resulting from the
adoption of SFAS 109 as regulatory assets or liabilities if such
amounts are probable of being recovered from or returned to
customers through future rates. Accordingly, TNMP recorded
regulatory and deferred tax assets and liabilities as a result of
the adoption of SFAS 109.
The implementation of SFAS 109 in 1993 did not have a significant
effect on results of operations.
Prior to 1993, TNMP had provided income tax expense using the
deferred method required under Accounting Principles Board
Opinion ("APB") No. 11. Under this method, certain revenue and
expense items were reported in one period for financial reporting
purposes and a different period for income tax purposes. Deferred
income taxes were provided for these differences.
ITC utilized in the federal income tax return are deferred and
amortized to earnings ratably over the estimated service lives of
the related assets.
TNPE files a consolidated federal income tax return that includes
the consolidated operations of TNMP and its subsidiaries. The
amounts of income taxes recognized in TNMP's accompanying
consolidated financial statements were computed as if TNMP and
its subsidiaries filed a separate consolidated federal income tax
return. Accordingly, the amounts could differ from those
recognized as a member of TNPE's consolidated group.
(1) Summary of Significant Accounting Policies - continued
Fair Values of Financial Instruments
In the accompanying consolidated balance sheets as of December
31, 1994 and 1993, the fair values of cash equivalents and
temporary investments approximated the carrying amounts because
of the short maturities of those instruments.
The estimated fair values of long-term debt and preferred stock
were based on quoted market prices of the same or similar issues.
The estimated fair values of long-term debt and preferred stock
were as follows:
December 31, 1994 December 31, 1993
Carrying Amount Fair Values Carrying Amount Fair Values
(In Thousands)
Long-term debt $ 685,502 674,000 680,064 723,000
Preferred stock 8,680 5,900 9,560 7,600
Shareholder Rights Plan
TNPE has a Shareholder Rights Plan ("Rights Plan") that is
designed to protect TNPE's stockholders from coercive takeover
tactics and inadequate or unfair takeover bids. The Rights Plan,
adopted in 1988 and amended on November 13, 1990, by TNPE's Board
of Directors, provides for the distribution of one right for each
share of TNPE's common stock held of record as of the close of
business on November 4, 1988 and for each share of common stock
issued thereafter until November 4, 1998.
Each right entitles the stockholder to elect to exercise the
right in whole or in part to purchase, upon the occurrence of
certain events, one share of common stock at an initial price of
$45 per share or, under certain circumstances, shares of common
stock at half the then-current market price or, with an election
to exercise such rights without payment of cash, to receive the
number of shares of TNPE's common stock or other securities
having an aggregate value equal to the excess of (i) the value of
the common stock or other securities on the date of the exercise
of the rights over (ii) the cash payment that would have been
payable upon the exercise of the rights if an election for cash
payment had been made.
Until certain triggering events occur, the rights will trade
together with TNPE's common stock and separate rights
certificates will not be issued. Among the triggering events are
the acquisition by a person or group of persons of 10% or more of
TNPE's outstanding common stock or the commencement of a tender
or exchange offer which, upon consummation, would result in a
person or group of persons owning 15% or more of TNPE's
outstanding common stock. The rights expire November 4, 1998,
unless earlier redeemed or exchanged by TNPE, and have had no
effect on earnings (loss) per share.
Earnings (Loss) Per Share
Earnings (loss) per share of common stock is computed for each
year based upon the weighted average number of common shares
outstanding. Net earnings (loss) is adjusted for preferred
dividend requirements.
Common Stock
At December 31, 1994, 326,519 shares of TNPE's common stock were
reserved for issuance to TNMP's 401(k) Employees' Thrift Plan.
Additionally, 346,080 shares of TNPE's common stock were reserved
for subsequent issuance to TNPE's stockholders under a Dividend
Reinvestment and Stock Purchase Plan.
Basis of Presentation
Certain 1993 and 1992 amounts were reclassified to conform to the
1994 method of presentation.
During 1994, TNPE and TNMP changed their method of presentation
of the consolidated statements of cash flows from the indirect to
the direct method. Accordingly, the consolidated statements of
cash flows for 1993 and 1992 have been presented using the direct
method.
(2) Long-Term Debt
First Mortgage Bonds
First mortgage bonds ("Bonds") issued under TNMP's bond
indenture, as amended and supplemented (the "Bond Indenture") are
secured by substantially all utility plant owned directly by
TNMP. The Bond Indenture contains restrictions as to the payment
of cash dividends on the common stock of TNMP as discussed in
note 4. The Bond Indenture also provides that additional Bonds
may not be issued unless net earnings are at least twice the
annual interest charges on bonded indebtedness, as defined. Under
this test, based on December 31, 1994 financial statement
information, approximately $23 million of additional Bonds could
be issued, assuming an interest rate of 11.0% and satisfactory
market conditions.
Secured Notes Payable and Secured Debentures
Secured notes payable were outstanding with a group of fourteen
lenders (primarily banks) under the Unit 2 Credit Agreement (the
"Credit Agreement"). The total commitment under the Credit
Agreement is $147.75 million, and TNMP is permitted to prepay and
reborrow up to $141.75 million. The reborrowings under the Credit
Agreement are subject to compliance with an interest coverage
test and an equity ratio test mentioned below. The unused
commitment available to be borrowed under the Credit Agreement
was $62.5 million as of December 31, 1994. The total commitment
amount will be reduced approximately $37 million beginning each
January 1 in 1996, 1997 and 1998. A commitment fee of 1/4 of 1%
per annum is payable quarterly on the unused portion of the
reducing commitment.
Interest rates under the Credit Agreement are based upon LIBOR,
CD or prime rates, plus applicable margins. During 1994, the
interest rates on individual borrowings ranged from 6.88% to
10.38%. The margins included in the interest rates will increase
by 1/2 of 1% in 1995 and by 1/4 of 1% each year in 1996, 1997 and
1998. The effective costs of borrowings under the Credit
Agreement were 9.27% and 7.23% at December 31, 1994 and 1993,
respectively.
The Credit Agreement was originally entered into for the
construction and acquisition of Unit 2 of the TNP One generating
plant. Borrowings under the Credit Agreement are ratably secured
by a first lien on a 74% undivided interest, which is owned
directly by TGC II, in Unit 2.
The Series A, 10.75% secured debentures, issued by TNMP,
effectively are secured ratably with a first lien on a 59%
undivided interest, which is owned directly by TGC, in Unit 1 of
TNP One.
The 12.5% secured debentures, issued by TNMP, effectively are
secured ratably:
1. With the lenders under the Credit Agreement in
the first lien on the 74% undivided interest
in Unit 2 and
2. With the Series A, 10.75% secured debentures
in the first lien on the 59% undivided
interest in Unit 1.
The remaining interests in Unit 1 and Unit 2 are owned directly
by TNMP.
The lenders under the Credit Agreement and the holders of the
secured debentures are secured by second liens on substantially
all utility plant in Texas owned directly by TNMP.
The Credit Agreement and the secured debentures contain certain
covenants which, under specified conditions, restrict the payment
of cash dividends on the common stock of TNMP. The most
restrictive of such covenants are an interest coverage test and
an equity ratio test. TNMP has met the tests at each quarterly
date since each test became effective.
The Credit Agreement and the secured debentures also contain
covenants which generally prohibit the sale, lease, transfer or
other disposition of assets other than in the ordinary course of
business.
(2) Long-Term Debt - continued
Maturities
Based upon the December 31, 1994 balances, maturities and sinking
fund requirements for long-term debt for the five years following
1994 are as follows:
First Secured Secured
mortgage bonds debentures notes payable Total
(In Thousands)
1995 $ 1,070 - 1,600 2,670
1996 1,070 - 9,872 10,942
1997 131,070 - 36,900 167,970
1998 1,070 - 36,900 37,970
1999 1,070 130,000 - 131,070
(3) Redeemable Cumulative Preferred Stock
In the event of voluntary liquidation of TNMP, holders of the
preferred stock have a preference to the extent of amounts
payable on redemption, and in the event of involuntary
liquidation, to the extent of par plus accrued dividends.
On October 1 of each year, TNMP is required to offer to purchase
from the holders of shares in Series B and Series C, at a price
not exceeding $100 per share plus accrued dividends, a number of
shares equal to 2% of the maximum number of shares of each series
outstanding at any one time prior to August 15 of such year.
TNMP is required to redeem, at a price of $100 per share plus
accrued dividends, 1,200 shares each of Series D and F, and 600
shares of Series E on each March 15 through March 1, 1996. The
requirement to redeem such shares is cumulative and totals
$300,000 on an annual basis.
On each June 15 through June 15, 2008, TNMP is required to redeem
4,000 shares of Series G at a price of $100 per share plus
accrued dividends; the requirement to redeem such shares is
cumulative. The holders of Series G and/or TNMP separately have
the noncumulative option for redemption of an additional 4,000
shares on each June 15 at a price of $100 per share plus accrued
dividends.
The recognition of regulatory disallowances (discussed in note 8)
during 1994 will not impair the ability of TNMP to pay cash
dividends on its preferred stock.
(4) Retained Earnings
Common Stock Dividends - TNMP
The Bond Indenture contains restrictions pertaining to the
payment of cash dividends on TNMP's common stock, which is wholly
owned by TNPE. The restrictions do not permit TNMP to remit a
cash dividend unless supported by the availability of
unrestricted retained earnings.
Due to the recognition of certain regulatory disallowances
(discussed in note 8) during the second quarter of 1994, cash
dividends on TNMP's common stock were suspended for the third
quarter. However, sufficient earnings were generated during the
third quarter to restore TNMP's unrestricted retained earnings
and permitted TNMP to pay a cash dividend of $2.2 million to TNPE
during the fourth quarter of 1994. As of December 31, 1994, all
of TNMP's retained earnings were restricted and no common stock
dividends can be paid to TNPE until unrestricted retained
earnings are restored.
(4) Retained Earnings - continued
Common Stock Dividends - TNMP - continued
Information concerning TNMP's retained earnings and payment of
dividends is summarized below:
Dec. 31, Sept. 30,June 30,March 31,Dec. 31,
1994 1994 1994 1994 1993
(unaudited)
(In Thousands)
Total retained earnings $10,559 17,698 5,373 31,574 38,983
Less restricted level
required by Bond
Indenture before payment
of common stock dividends 13,696 13,517 13,517 13,117 12,817
Unrestricted retained
earnings $(3,137) 4,181 (8,144) 18,457 26,166
Dec. 15, June 15, March 15,
Date dividends paid 1994 1994 1994
Dividends paid on common
stock as permitted at
end of preceding quarter $2,200 - 4,400 4,400
Common Stock Dividends - TNPE
The dividend restriction at TNMP did not preclude TNPE from
paying quarterly cash dividends to its stockholders during 1994.
However, because of TNMP's restriction and other factors (the
relatively low common equity of TNPE's capital structure,
industry considerations, etc.), beginning with the third quarter
of 1994, the TNPE Board of Directors reduced the quarterly cash
dividend by 51% to $0.20 per share.
(5) Reorganization
During the fourth quarter of 1994, as part of its on-going
reorganization, TNMP reduced company-wide staffing levels by 140
positions, or 14% of the workforce, as a result of work
elimination reviews by employee teams. The goals of the teams
were to streamline operations and reduce future costs. The
staffing reductions were accomplished primarily through a
combination of early retirements and involuntary terminations.
The aggregate costs impacting TNMP's 1994 operations were as
follows (in thousands except loss per share):
Early retirements $6,379
Involuntary terminations 1,786
Other costs 617
Reorganization costs 8,782
Less related income taxes (3,059)
Reorganization costs, net
of income taxes $5,723
Loss per share of
TNPE common stock $ 0.53
(6) Employee Benefit Plans
Pension Plan
TNMP has a defined benefit pension plan covering substantially
all of its employees. The benefits are based on an employee's
years of service and compensation. In 1992, the defined benefit
retirement plan was amended to change, for all participants
retiring after December 31, 1992, the determination of average
monthly compensation used in calculating the amount of retirement
benefits from the average of the three highest consecutive
calendar years to the average of the completed calendar years of
compensation after 1992. TNMP's funding policy is to contribute
annually at least the minimum amount required by U.S. Government
funding standards, but not more than that which can be deducted
for federal income tax purposes.
The following tables set forth the plan's funded status and
amounts recognized in the consolidated balance sheets at December
31, 1994 and 1993.
1994 1993
(In Thousands)
Benefits earned
Actuarial present value of benefit obligations:
Vested benefit obligation $45,845 50,457
Nonvested benefit obligation 4,212 5,052
Accumulated benefit obligation $50,057 55,509
Reconciliation of funded status
Projected benefit obligation $60,000 60,618
Unrecognized net asset 131 171
Unrecognized prior service cost 2,746 2,990
Unrecognized net gain from past experience 10,533 9,554
73,410 73,333
Plan assets (principally marketable securities)
at estimated fair value 66,338 69,763
Accrued pension costs (included in deferred credits
in the consolidated balance sheets) $ 7,072 3,570
Net pension costs were comprised of the following components as
determined using the projected unit credit actuarial method:
[CAPTION]
1994 1993 1992
(In Thousands)
Service cost $1,763 1,472 2,148
Interest cost on projected
benefit obligation 4,179 4,191 4,504
Adjustment for actual return on
plan assets 260 (6,126) (5,071)
Effect of reorganization
costs, net 3,537 - -
Net amortization and deferral (6,238) 300 258
$3,501 (163) 1,839
Assumptions used in accounting for the pension plan as of
December 31, 1994 and 1993 were as follows:
1994 1993
Discount rates 8.50% 7.15%
Rates of increase in compensation levels 5.50% 4.15%
Expected long-term rate of return on assets 9.50% 9.50%
(6) Employee Benefit Plans - continued
Postretirement Benefits Plan
TNMP sponsors a health care plan that provides postretirement
medical and death benefits to retirees who satisfied minimum age
and service requirements during employment.
On January 1, 1993, TNMP adopted SFAS 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions." SFAS 106
requires an employer to recognize the costs of postretirement
benefits on the accrual basis during the periods that employees
render service to earn these benefits. Prior to 1993, the costs
of these benefits were expensed on a "pay-as-you-go" basis.
In each of its regulatory jurisdictions, TNMP was permitted to
recover the additional costs resulting from the adoption of SFAS
106. TNMP was required to establish a trust fund dedicated to the
payment of these postretirement benefits.
The following table sets forth the plan's funded status and
amounts recognized in the consolidated balance sheets at December
31, 1994 and 1993.
1994 1993
(In Thousands)
Accumulated postretirement benefits obligation:
Retirees and dependents $15,936 15,828
Active employees 7,192 7,671
Total benefits earned 23,128 23,499
Plan assets (principally marketable securities)
at estimated fair value 4,026 1,297
Accumulated postretirement benefits
obligation in excess of plan assets 19,102 22,202
Unrecognized transition obligation (15,436) (17,750)
Unrecognized net loss from
past experience - (3,533)
Accrued postretirement benefits costs (included
in deferred credits in the
consolidated balance sheets) $ 3,666 919
As previously explained, TNMP had accounted for postretirement
benefits on the "pay-as-you-go" basis prior to 1993. Under this
method, postretirement benefits costs were approximately $760,000
in 1992. Net postretirement benefits costs, pursuant to SFAS 106,
for 1994 and 1993 were comprised of the following components.
1994 1993
(In Thousands)
Service cost $ 738 508
Interest cost on postretirement
benefits obligation 1,642 1,510
Reduction for actual return on
plan assets (59) -
Effect of reorganization costs, net 2,945 -
Net amortization and deferral 784 934
Net postretirement benefits costs $6,050 2,952
(6) Employee Benefit Plans - continued
Postretirement Benefits Plan - continued
The transition obligation is being amortized over a twenty-year
period which began in 1993. The assumed health care cost trend
rate used to measure the expected cost of benefits was 6% for
1994 and is assumed to trend downward slightly each year to a
level of 4.3% for 2003 and thereafter. The health care cost trend
rate assumption has a significant effect on the amounts reported.
For example, increasing the assumed health care cost trend rates
by one percentage point in each year would increase the
accumulated postretirement benefits obligation as of December 31,
1994 by $2.8 million and the aggregate of the service and
interest cost components of net postretirement benefits cost for
the year ended December 31, 1994 by $366,000.
Additional assumptions used in accounting for the postretirement
benefits plan as of December 31, 1994 and 1993 were as follows:
1994 1993
Discount rates 8.50% 7.15%
Expected rate of return on assets 6.00% 6.00%
Other Employee Benefits
TNMP has a voluntary 401(k) thrift plan designed to enhance the
existing retirement plans available to its employees. Employees
have the option of investing their contributions in fixed income
securities, mutual funds or TNPE's common stock. The plan
provides for TNMP's contributions to be used to purchase TNPE's
common stock which employees may later convert into investments
in one or more other investment options. TNMP's contributions to
the thrift plan were approximately $753,000 in 1994, none in 1993
and $1,592,000 in 1992. Thrift plan assets included 1,721,553
shares and 1,471,213 shares of TNPE's common stock as of December
31, 1994 and 1993, respectively.
TNMP has employment contracts with certain members of management
and other key personnel. The contracts provide for lump sum
compensation payments and other rights in the event of
termination of employment or other adverse treatment of such
persons following a "change in control" of TNPE or TNMP. Such
event is defined to include, among other things, substantial
changes in the corporate structure or ownership of either entity
or in the Board of Directors of either entity.
An excess benefit plan has been provided for certain key
personnel and retired employees. The excess benefit plan is
provided under an insurance policy arrangement for benefits which
generally would have been provided by the pension and thrift
plans except for U.S. Government ceiling limitations.
(7) Income Taxes
The components of income taxes were as follows:
TNPE TNMP
1994 1993 1992 1994 1993 1992
(In Thousands)
Taxes on net operating income:
Federal - current $(253) (356) 655 (253) (356) 655
State - current 55 94 339 55 94 339
Federal - deferred (13) 5,515 1,347 (13) 5,515 1,347
ITC adjustments (1,027) (959) (444) (1,027) (959) (444)
(1,238) 4,294 1,897 (1,238) 4,294 1,897
Taxes on other income (loss):
Federal - current 1,006 641 1,114 560 622 1,095
Federal - deferred (10,902) 19 2,060 (10,907) - -
ITC adjustments (409) 6 (2,035) (347) - -
(10,305) 666 1,139 (10,694) 622 1,095
Total income taxes $(11,543) 4,960 3,036 (11,932) 4,916 2,992
(7) Income Taxes - continued
The amounts for total income taxes differ from the amounts
computed by applying the appropriate statutory federal income tax
rate to earnings (loss) before income taxes for the following
reasons:
TNPE TNMP
1994 1993 1992 1994 1993 1992
(In Thousands)
Tax at statutory tax rate $(9,873) 5,601 4,633 (9,731) 5,557 4,589
Amortization of
accumulated deferred ITC (1,055) (1,048) (1,051) (1,055) (1,048) (1,051)
Amortization of
excess deferred taxes (183) (142) (1,153) (183) (142) (1,153)
State income taxes 55 94 339 55 94 339
ITC related to disallowances (347) - - (347) - -
Other - net (140) 455 268 (670) 455 268
Actual income taxes $(11,543) 4,960 3,036 (11,931) 4,916 2,992
The tax effects of temporary differences that gave rise to
significant portions of net current and net noncurrent deferred
income taxes based on SFAS 109 as of December 31, 1994 and 1993
are presented below.
TNPE TNMP
1994 1993 1994 1993
(In Thousands)
Current deferred income taxes:
Deferred tax assets:
Unbilled revenues $ 6,264 6,914 6,264 6,914
Revenues subject to refund 1,404 1,053 1,404 1,053
Other 222 51 222 51
7,890 8,018 7,890 8,018
Deferred tax liability:
Deferred purchased power and
fuel costs (5,188) (5,151) (5,188) (5,151)
Current deferred income
taxes, net $ 2,702 2,867 2,702 2,867
Noncurrent deferred income taxes:
Deferred tax assets:
Minimum tax credit
carryforwards $10,086 10,067 14,993 14,890
Federal regular tax net operating
loss carryforwards 17,662 10,005 23,104 15,679
ITC carryforwards 17,469 17,434 18,672 18,786
Regulatory related items 18,291 10,116 18,291 10,116
Accrued employee
benefit costs 3,355 1,384 3,355 1,384
Other 2,149 2,388 788 792
69,012 51,394 79,203 61,647
Deferred tax liabilities:
Utility plant, principally
due to depreciation
and basis differences (108,094) (101,839) (108,094) (101,839)
Deferred charges (5,344) (5,993) (5,344) (5,993)
Regulatory related items (2,534) - (2,534) -
Other - 729 - 662
(115,972) (107,103) (115,972) (107,170)
Noncurrent deferred
income taxes, net $(46,960) (55,709) (36,769) (45,523)
(7) Income Taxes - continued
The provisions for deferred income taxes based on APB 11 for 1992
resulted from the following timing differences:
TNPE TNMP
1992
(In Thousands)
Deferred income taxes on net operating income:
Tax depreciation in excess of
book depreciation $ 13,615 13,615
Deferred charges expenses for tax purposes 674 674
Deferred purchase power and fuel costs 1,765 1,765
Unbilled revenues for tax purposes 519 519
Accrual for revenues subject to refund (5,069) (5,069)
Minimum tax credit (2,608) (2,608)
Change in deferred taxes due to tax
net operating loss (6,256) (6,256)
Amortization of excess deferred taxes (1,153) (1,153)
Other (140) (140)
1,347 1,347
Deferred income taxes on other income:
Recognition of deferred income taxes 6,256 -
Minimum tax credit (4,196) -
2,060 -
Total $ 3,407 1,347
The following is a summary of the federal tax carryforwards as of
December 31, 1994:
TNPE TNMP
1994
(In Thousands)
Net Operating Loss
Amount $50,464 66,012
First Year of Expiration Period 2008 2006
Last Year of Expiration Period 2009 2009
Minimum Tax Credits
Amount $10,086 14,993
Expiration Period None None
Investment Tax Credit Amount $17,469 18,672
Expiration Period 2005 2005
Based on TNPE and TNMP's historical and projected pretax
earnings, management believes it is more likely than not that
both TNPE and TNMP will realize the benefit of the deferred tax
assets existing at December 31, 1994.
In 1991, TNPE received a private letter ruling from the Internal
Revenue Service confirming that Unit 1 of the TNP One generating
plant was property eligible for ITC. In connection with an audit
of TNPE's consolidated federal income tax returns for 1990 and
1991, the IRS revenue agent has informally advised TNPE that he
will recommend that the private letter ruling be revoked.
Management believes the claim for ITC is valid; however, if the
revenue agent's position is upheld, TNPE's claim for ITC may be
denied resulting in a negative effect on future cash flows to the
extent of ITC utilized on TNPE's consolidated tax returns and any
related interest and penalties. Of the $22 million of ITC at
issue, TNPE and its subsidiaries have utilized $5 million in the
consolidated returns through 1993; TNMP's portion is $3.7
million. However, through 1994, TNPE and TNMP have only
recognized $0.8 million of the ITC in results of operations.
(8) Regulatory Matters
Texas Rate Case Settlement
On October 6, 1994, the PUCT issued a final order approving a
unanimous settlement agreement among the parties in TNMP's 1994
retail rate application. The final order provides for an increase
in annualized revenues in Texas of $17.5 million, or 4.5%, which
TNMP implemented on October 2, 1994.
The final order and the settlement agreement resolved all
outstanding court appeals in connection with TNMP's two previous
rate cases and provided for TNMP to write off $35 million of the
PUCT's total disallowances of $61.4 million regarding TNP One.
TNMP recognized the write-off in the second quarter of 1994,
which resulted in an after-tax charge of approximately $20.5
million, or $1.91 per share of TNPE common stock, as detailed
below (in thousands except loss per share):
Regulatory disallowances $35,000
Less accumulated depreciation previously recognized (3,454)
Regulatory disallowances, net of
accumulated depreciation 31,546
Less related income taxes (11,041)
Regulatory disallowances, net of income taxes $20,505
Loss per share of TNPE common stock $ 1.91
The final order includes a moratorium restricting TNMP from
filing applications for rate increases in Texas for a five-year
period beginning March 31, 1994, subject to certain conditions.
Those conditions do not allow TNMP to file for any base rate
increase under any circumstances prior to March 31, 1997 but
would allow an application for increased rates to be filed after
that time if certain force majeure events (as defined in the
agreement) occur at any time during the five-year moratorium
period.
Revenues Subject to Refund
The recent final order discussed above does not impact the
uncertainties concerning the $1.6 million in additional
annualized revenues granted to TNMP, subject to refund, by the
PUCT in the previous Texas rate case, filed in 1991. At December
31, 1994, revenues subject to refund totaled $4.8 million under a
tax-related issue from this previous Texas rate case. These
revenues subject to refund were excluded from the results of
operations. Recognition of these revenues is conditioned upon
TNMP obtaining a private letter ruling from the IRS supporting
TNMP's position on certain related income tax consequences. The
private letter ruling will not affect revenues related to
electricity sales on and after October 2, 1994, when the new
rates in the most recent Texas rate case settlement were
implemented.
While there can be no assurances given, based upon a similar
revenue ruling received by an unrelated utility, TNMP expects to
receive a favorable ruling during 1995. An unfavorable ruling
would result in a refund to TNMP's Texas customers of the $4.8
million of deferred revenues and in the recognition of an
additional expense of $8.1 million to provide for a regulatory
liability for the pass-through to customers of income tax
benefits applicable to the disallowed plant.
Other Regulatory Matters
In a 1990 PUCT application, TNMP was granted deferred accounting
treatment (DAT) for certain operating and interest costs relating
to the construction of Unit 1 of TNP One. The unamortized
balances of these costs were $4,418,000 and $4,549,000 as of
December 31, 1994 and 1993, respectively. Certain cities have
filed an appeal in district court contesting the DAT. In the
opinion of management, the ultimate disposition of this matter is
not expected to have a material adverse effect on TNMP's and
TNPE's consolidated financial position or results of operations.
(9) Commitments and Contingencies
Sale of Texas Panhandle Properties
In connection with the Texas rate case settlement (note 8), TNMP
agreed to actively pursue the sale of its franchise rights and
utility plant located in the Texas Panhandle. During December
1994, TNMP executed an agreement to sell the Panhandle properties
to Southwestern Public Service Company for $29.2 million, subject
to certain conditions and regulatory approvals. The Panhandle
properties comprise a relatively small portion of TNMP's
business. At December 31, 1994, the book value of the Panhandle
properties was $14.3 million; annual revenues were $9.6 million
with corresponding annual sales of 103 gigawatt-hours to 7,300
customers. Assuming satisfaction of the conditions and regulatory
approvals, the transaction is expected to be completed in 1995;
however, certain issues relating to the release of liens on the
Panhandle properties by debt holders could possibly delay the
completion of this transaction until such liens are released.
Fuel Supply Agreement
Under a fuel supply agreement, Walnut Creek Mining Company
provides TNMP with a lignite fuel source for the 38-year life of
TNP One. Walnut Creek Mining Company is jointly owned by Phillips
Coal Company and Peter Kiewit Sons', Inc. TNMP successfully
negotiated a 20 percent reduction in the cost of lignite coal
effective January 1, 1995, as a result of an amendment to this
agreement. Initially, the reduction will be used to offset the
accumulated under-recovery of fuel costs. These costs of
approximately $15 million are included in deferred purchased
power and fuel costs at December 31, 1994 in the accompanying
consolidated balance sheets.
Wholesale Purchased Power Agreements
TNMP purchases a significant portion of its electric requirements
from various wholesale suppliers. These contracts are scheduled
to expire in various years through 2010.
In 1995, TNMP provided notice to Texas Utilities Electric Company
("TU") of its intent to cease purchasing full requirements power
and energy at the points of delivery currently served by TU,
effective no later than January 1, 1999. In 1994, TU supplied
approximately 29% of TNMP's Texas capacity and 22% of its Texas
energy requirements. Management expects that, as a result of the
development of competition within the wholesale power market,
TNMP will enter into new arrangements for such capacity and
energy on terms that are more favorable for its customers.
Legal Actions
TNMP is involved in various claims and other legal actions
arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not
have a material adverse effect on TNMP's and TNPE's consolidated
financial position or results of operations.
TNP ENTERPRISES, INC. AND SUBSIDIARIES
Selected Quarterly Consolidated Financial Data
The following selected quarterly consolidated financial data for
TNPE is unaudited, and, in the opinion of the TNPE's management,
is a fair summary of the results of operations for such periods:
March 31 June 30 Sept. 30 Dec.31
(In thousands - except per share amounts)
1994
Operating revenues $107,599 111,046 149,864 109,480
Net operating income 15,704 17,622 30,984 13,681
Net earnings (loss) (2,884) (21,654) 11,921 (4,824)
Earnings (loss)
applicable to common stock $(3,095) (21,855) 11,732 (5,013)
Weighted average number of common
shares outstanding 10,702 10,725 10,752 10,822
Earnings (loss) per
share of common stock $ (0.29) (2.04) 1.09 (0.47)
Dividends per share of common stock $0.4075 0.4075 0.2000 0.2000
1993
Operating revenues $103,150 107,530 150,067 113,495
Net operating income 14,454 15,722 29,576 18,488
Net earnings (loss) (1,866) (410) 13,579 302
Earnings (loss) applicable
to common stock $(2,099) (634) 13,368 91
Weighted average number of common
shares outstanding 10,604 10,626 10,653 10,680
Earnings (loss) per
share of common stock $ (0.20) (0.06) 1.25 0.01
Dividends per share of common stock $0.4075 0.4075 0.4075 0.4075
Generally, the variations between quarters reflect the seasonal
fluctuations of TNMP's business. In addition, the results above
are impacted by net of tax amounts pertaining to the $20.5
million of regulatory disallowances (second quarter of 1994) and
$5.7 million of reorganization costs (fourth quarter of 1994).
These one-time items are explained more fully in notes 8 and 5,
respectively, of Notes to Consolidated Financial Statements.
Also, the dividend reduction commencing with the third quarter of
1994 is explained at note 4 of Notes to Consolidated Financial
Statements. The annual variations between 1994 and 1993 are
addressed at Item 7, "Managements' Discussion and Analysis of
Financial Condition and Results of Operations."
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Identification of Directors and Directorships
The information required by this item is incorporated by
reference to "Election of Directors" and "Security Ownership of
Management" of the definitive Proxy Statement relating to the
annual meeting of holders of common stock of TNPE, pursuant to
Regulation 14A, filed with the SEC and mailed on or about March
28, 1995 to the holders of common stock of TNPE.
Identification of Executive Officers
The information set forth under "Executive Officers of the
Registrants" in Part I is incorporated here by reference.
Item 11. EXECUTIVE COMPENSATION.*
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.*
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.*
*The information required by Items 11, 12, and 13 is incorporated
by reference to "Compensation of Directors and Executive
Officers," "Security Ownership of Management" and "Certain
Transactions" in the definitive Proxy Statement relating to the
annual meeting of holders of common stock of TNPE, pursuant to
Regulation 14A, filed with the SEC and mailed on or about March
28, 1995 to the holders of common stock of TNPE.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Items Filed as Part of This Report
Financial Statements Page
Independent Auditors' Reports 29
TNPE
Consolidated Statements of Operations, Three
Years Ended December 31, 1994 31
Consolidated Statements of Cash Flows, Three
Years Ended December 31, 1994 32
Consolidated Balance Sheets, December 31, 1994 and 1993 34
Consolidated Statements of Capitalization,
December 31, 1994 and 1993 35
Consolidated Statements of Common Stockholders' Equity
and Redeemable Cumulative Preferred Stock, Three
Years Ended December 31, 1994 37
TNMP
Consolidated Statements of Operations, Three
Years Ended December 31, 1994 39
Consolidated Statements of Cash Flows, Three
Years Ended December 31, 1994 40
Consolidated Balance Sheets, December 31, 1994 and 1993 42
Consolidated Statements of Capitalization,
December 31, 1994 and 1993 43
Consolidated Statements of Common Stockholder's Equity
and Redeemable Cumulative Preferred Stock, Three
Years Ended December 31, 1994 45
Notes to Consolidated Financial Statements 47
Selected Quarterly Consolidated Financial Data - TNPE 60
All financial statement schedules are omitted, as the
required information is not applicable or the information is
presented in the consolidated financial statements or related
notes.
Exhibits
See Exhibit Index, Pages 64-77
(b) Reports on Form 8-K
None during the last quarter covered by this report.
(c) The Exhibit Index on pages 64-77 is incorporated here by
reference.
(d) All financial statement schedules are omitted, as the
required information is not applicable or the information is
presented in the consolidated financial statements or related
notes.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrants have duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) TNP ENTERPRISES, INC.
By \s\ M. S. Cheema
Manjit S. Cheema
Date: March 24, 1995 Vice President & Chief Financial
Officer
(Registrant) TEXAS-NEW MEXICO POWER COMPANY
By \s\ M. S. Cheema
Manjit S. Cheema
Date: March 24, 1995 Vice President & Chief Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrants and in the capacities and on the dates indicated.
Title Date
By \s\ R.D. Woofter Chairman 3-24-95
R. D. Woofter
By \s\ Kevern R. Joyce President & Chief Executive Officer 3-24-95
Kevern R. Joyce
By \s\ M. S. Cheema Vice President & Chief Financial 3-24-95
Manjit S. Cheema Officer of TNPE and Vice President &
Chief Financial Officer and Treasurer of TNMP
By \s\ Monte W. Smith Treasurer (Principal Accounting 3-24-95
Monte W. Smith Officer) of TNPE and Controller (Principal
Accounting Officer) of TNMP
By \s\ R. Denny Alexander Director 3-24-95
R. Denny Alexander
By \s\ Cass O. Edwards,II Director 3-24-95
C. O. Edwards, II
By \s\ John A. Fanning Director 3-24-95
John A. Fanning
By \s\ Sidney M. Gutierrez Director 3-24-95
Sidney M. Gutierrez
By \s\ Harris L. Kempner, Jr. Director 3-24-95
Harris L. Kempner, Jr.
By \s\ Dwight R. Spurlock Director 3-24-95
Dwight R. Spurlock
TNP ENTERPRISES, INC. AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
These are exhibits applicable to the reports of both TNPE and
TNMP unless otherwise noted.
Exhibits filed herewith are denoted by "*." The other exhibits
have heretofore been filed with the Commission and are
incorporated herein by reference.
Exhibit
No. Description
TNPE incorporated documents 3(a) through 3(g), and 4(u) by
reference to exhibits with the same exhibit number designation in
that filing noted in the parenthesis.
3(a) - Articles of Incorporation and
Amendments through March 6, 1984 (Exhibit 3(a), File
No. 2-89800).
3(b) - Amendment to Articles of Incorporation
filed September 25, 1984 (Exhibit 3(b) to Form 10-K
for the year ended December 31, 1984, File No. 1-
8847).
3(c) - Amendment to Articles of Incorporation
filed August 29, 1985 (Exhibit 3(a) to Form 10-K for
the year ended December 31, 1985, File No. 1-8847).
3(d) - Amendment to Articles of Incorporation
filed June 2, 1986 (Exhibit 3(a) to Form 10-K for the
year ended December 31, 1986, File No. 1-8847).
3(e) - Amendment to Articles of Incorporation
filed May 10, 1988 (Exhibit 3(e) to Form 10-K for the
year ended December 31, 1988, File No. 1-8847).
3(f) - Amendment to Articles of Incorporation
filed May 10, 1988 (Exhibit 3(f) to Form 10-K for the
year ended December 31, 1988, File No. 1-8847).
3(g) - Amendment to Articles of Incorporation
filed December 27, 1988 (Exhibit 3(g) to Form 10-K for
the year ended December 31, 1988, File No. 1-8847).
*3(h) - Bylaws of TNPE, as amended November 15,
1994.
4(u) - Rights Agreement and Form of Right
Certificate, as amended, effective November 13, 1990
(Exhibit 2.1 to Form 8-A, File No. 1-8847).
*23 - Independent Auditors' Consent - KPMG
Peat Marwick LLP.
*27 - Financial Data Schedule for TNPE.
TNMP incorporated documents 3(a) through 3(gg) by reference to
exhibits with the same exhibit number designation in that filing
noted in the parenthesis.
3(a) - Restated Articles of Incorporation of
TNMP (Exhibit 4(a), File No. 2-86282).
3(b) - Amendment to Restated Articles of
Incorporation dated October 26, 1983 (Exhibit 3(b) to
Form 10-K for the year ended December 31, 1984, File
No. 1-2660-2).
3(c) - Amendment to Restated Articles of
Incorporation dated April 8, 1984 (Exhibit 3(c) to
Form 10-K for the year ended December 31, 1984, File
No. 1-2660-2).
3(d) - Amendment to Restated Articles of
Incorporation dated October 2, 1984 (Exhibit 3(d) to
Form 10-K for the year ended December 31, 1984, File
No. 1-2660-2).
3(e) - Articles of Merger dated October 3,
1984 (Exhibit 3(e) to Form 10-K for the year ended
December 31, 1984, File No. 1-2660-2).
3(f) - Amendment to Restated Articles of
Incorporation dated May 22, 1985 (Exhibit 3(a) to Form
10-K for the year ended December 31, 1985, File No. 2-
97230).
3(g) - Amendment to Restated Articles of
Incorporation dated August 20, 1985 (Exhibit 3(b) to
Form 10-K for the year ended December 31, 1985, File
No. 2-97230).
3(h) - Amendment to Restated Articles of
Incorporation dated October 7, 1985 (Exhibit 3(c) to
Form 10-K for the year ended December 31, 1985, File
No. 2-97230).
3(i) - Amendment to Restated Articles of
Incorporation dated June 12, 1986 (Exhibit 3(a) to
Form 10-K for the year ended December 31, 1986, File
No. 2-97230).
3(j) - Amendment to Restated Articles of
Incorporation dated October 17, 1986 (Exhibit 3(b) to
Form 10-K for the year ended December 31, 1986, File
No. 2-97230).
3(k) - Amendment to Restated Articles of
Incorporation dated July 14, 1987 (Exhibit 3(k) to
Form 10-K for the year ended December 31, 1987, File
No. 2-97230).
3(l) - Amendment to Restated Articles of
Incorporation dated October 23, 1987 (Exhibit 3(l) to
Form 10-K for the year ended December 31, 1987, File
No. 2-97230).
3(m) - Amendment to Restated Articles of
Incorporation dated May 4, 1988 (Exhibit 3(m) to Form
10-K for the year ended December 31, 1988, File No. 2-
97230).
3(n) - Amendment to Restated Articles of
Incorporation dated May 5, 1988 (Exhibit 3(n) to Form
10-K for the year ended December 31, 1988, File No. 2-
97230).
3(o) - Amendment to Restated Articles of
Incorporation dated May 5, 1988 (Exhibit 3(o) to Form
10-K for the year ended December 31, 1988, File No. 2-
97230).
3(p) - Amendment to Restated Articles of
Incorporation dated December 5, 1988 (Exhibit 3(p) to
Form 10-K for the year ended December 31, 1988, File
No. 2-97230).
3(q) - Amendment to Restated Articles of
Incorporation dated April 11, 1989 (Exhibit 3(q) to
Form 10-K for the year ended December 31, 1989, File
No. 2-97230).
3(r) - Amendment to Restated Articles of
Incorporation dated July 27, 1989 (Exhibit 3(r) to
Form 10-K for the year ended December 31, 1989, File
No. 2-97230).
3(s) - Amendment to Restated Articles of
Incorporation dated October 23, 1989 (Exhibit 3(s) to
Form 10-K for the year ended December 31, 1989, File
No. 2-97230).
3(t) - Amendment to Restated Articles of
Incorporation dated May 16, 1990 (Exhibit 3(t) to Form
10-K for the year ended December 31, 1990, File No. 2-
97230).
3(u) - Amendment to Restated Articles of
Incorporation dated June 26, 1990 (Exhibit 3(u) to
Form 10-K for the year ended December 31, 1990, File
No. 2-97230).
3(v) - Amendment to Restated Articles of
Incorporation dated November 27, 1990 (Exhibit 3(v) to
Form 10-K for the year ended December 31, 1990, File
No. 2-97230).
3(w) - Amendment to Restated Articles of
Incorporation dated May 1, 1991 (Exhibit 3(w) to Form
10-K for the year ended December 31, 1991, File No.
2-97230).
3(x) - Amendment to Restated Articles of
Incorporation dated July 18, 1991 (Exhibit 3(x) to
Form 10-K for the year ended December 31, 1991, File
No. 2-97230).
3(y) - Amendment to Restated Articles of
Incorporation dated October 18, 1991 (Exhibit 3(y) to
Form 10-K for the year ended December 31, 1991, File
No. 2-97230).
3(z) - Amendment to Restated Articles of
Incorporation dated April 30, 1992 (Exhibit 3(z) to
Form 10-K for the year ended December 31, 1992, File
No. 2-97230).
3(aa) - Amendment to Restated Articles of
Incorporation dated June 19, 1992 (Exhibit 3(aa) to
Form 10-K for the year ended December 31, 1992, File
No. 2-97230).
3(bb) - Amendment to Restated Articles of
Incorporation dated November 3, 1992 (Exhibit 3(bb) to
Form 10-K for the year ended December 31, 1992, File
No. 2-97230).
3(cc) - Amendment to Restated Articles of
Incorporation dated April 7, 1993 (Exhibit 3(cc) to
Form 10-K for the year ended December 31, 1993, File
No. 2-97230).
3(dd) - Amendment to Restated Articles of
Incorporation dated July 22, 1993 (Exhibit 3(dd) to
Form 10-K for the year ended December 31, 1993, File
No. 2-97230).
3(ee) - Amendment to Restated Articles of
Incorporation dated October 21, 1993 (Exhibit 3(ee) to
Form 10-K for the year ended December 31, 1993, File
No. 2-97230).
3(ff) - Amendment to Restated Articles of
Incorporation dated April 13, 1994 (Exhibit 3(ff) to
Form 10-Q for the quarter ended June 30, 1994, File
No. 2-97230).
3(gg) - Amendment to Restated Articles of
Incorporation dated June 27, 1994 (Exhibit 3(gg) to
Form 10-Q for the quarter ended June 30, 1994, File
No. 2-97230).
*3(hh) - Bylaws of TNMP, as amended November 15,
1994.
*27 - Financial Data Schedule for TNMP.
TNPE and TNMP incorporated documents 4(a) through 4(t) by
reference to same exhibit number as filing noted in parenthesis.
4(a) - Indenture of Mortgage and Deed of Trust
dated as of November 1, 1944 (Exhibit 2(d), File No. 2-
61323).
4(b) - Seventh Supplemental Indenture dated as
of May 1, 1963 (Exhibit 2(k), File No. 2-61323).
4(c) - Eighth Supplemental Indenture dated as
of July 1, 1963 (Exhibit 2(1), File No. 2-61323).
4(d) - Ninth Supplemental Indenture dated as
of August 1, 1965 (Exhibit 2(m), File No. 2-61323).
4(e) - Tenth Supplemental Indenture dated as
of May 1, 1966 (Exhibit 2(n), File No. 2-61323).
4(f) - Eleventh Supplemental Indenture dated
as of October 1, 1969 (Exhibit 2(o), File No. 2-
61323).
4(g) - Twelfth Supplemental Indenture dated as
of May 1, 1971 (Exhibit 2(p), File No. 2-61323).
4(h) - Thirteenth Supplemental Indenture dated
as of July 1, 1974 (Exhibit 2(q), File No. 2-61323).
4(i) - Fourteenth Supplemental Indenture dated
as of March 1, 1975 (Exhibit 2(r), File No. 2-61323).
4(j) - Fifteenth Supplemental Indenture dated
as of September 1, 1976 (Exhibit 2(e), File No. 2-
57034).
4(k) - Sixteenth Supplemental Indenture dated
as of November 1, 1981 (Exhibit 4(x), File No. 2-
74332).
4(l) - Seventeenth Supplemental Indenture
dated as of December 1, 1982 (Exhibit 4(cc), File No.
2-80407).
4(m) - Eighteenth Supplemental Indenture dated
as of September 1, 1983 (Exhibit (a) to Form 10-Q of
TNMP for the quarter ended September 30, 1983, File
No. 1-4756).
4(n) - Nineteenth Supplemental Indenture dated
as of May 1, 1985 (Exhibit 4(v), File No. 2-97230).
4(o) - Twentieth Supplemental Indenture dated
as of July 1, 1987 (Exhibit 4(o) to Form 10-K of TNMP
for the year ended December 31, 1987, File No. 2-
97230).
4(p) - Twenty-First Supplemental Indenture
dated as of July 1, 1989 (Exhibit 4(p) to Form 10-Q of
TNMP for the quarter ended June 30, 1989, File No. 2-
97230).
4(q) - Twenty-Second Supplemental Indenture
dated as of January 15, 1992 (Exhibit 4(q) to Form 10-
K of TNMP for the year ended December 31, 1991, File
No. 2-97230).
4(r) - Twenty-Third Supplemental Indenture
dated as of September 15, 1993 (Exhibit 4(r) to Form
10-K of TNMP for the year ended December 31, 1993,
File No. 2-97230).
4(s) - Indenture and Security Agreement for
Secured Debentures dated as of January 15, 1992
(Exhibit 4(r) to Form 10-K of TNMP for the year ended
December 31, 1991, File No. 2-97230).
4(t) - Indenture and Security Agreement for
Secured Debentures dated as of September 15, 1993
(Exhibit 4(t) to Form 10-K of TNMP for the year ended
December 31, 1993, File No. 2-97230).
Material Contracts Relating to TNP One
10(a) - Fuel Supply Agreement, dated November
18, 1987, between Phillips Coal Company and TNMP
(Exhibit 10(j) to Form 10-K of TNMP for the year ended
December 31, 1987, File No. 2-97230).
*10(a)1 - Amendment No. 1, dated as of April 1, 1988,
to the Fuel Supply Agreement dated November 18, 1987,
between Phillips Coal Company and TNMP.
*10(a)2 - Amendment No. 2, dated as of November 29,
1994, between Walnut Creek Mining Company and TNMP, to
the Fuel Supply Agreement dated November 18, 1987,
between Phillips Coal Company and TNMP, effective as
of January 1, 1995.
10(b) - Unit 1 First Amended and Restated
Project Loan and Credit Agreement, dated as of January
8, 1992 (the "Unit 1 Credit Agreement"), among TNMP,
Texas Generating Company ("TGC"), the banks named
therein as Banks (the "Unit 1 Banks") and The Chase
Manhattan Bank (National Association), as Agent for
the Unit 1 Banks (the "Unit 1 Agent"), amending and
restating the Project Loan and Credit Agreement among
such parties dated as of December 1, 1987 (Exhibit
10(c) to Form 10-K of TNMP for the year ended December
31, 1991, File No. 2-97230).
10(b)1 - Participation Agreement, dated as of
January 8, 1992, among the banks named therein as
Banks, the parties named therein as Participants and
the Unit 1 Agent (Exhibit 10(c)1 to Form 10-K of TNMP
for the year ended December 31, 1991, File No.
2-97230).
10(b)2 - Amendment No. 1, dated as of September
21, 1993, to the Unit 1 Credit Agreement (Exhibit
10(b)2 to Form 10-K of TNMP for the year ended
December 31, 1993, File No. 2-97230).
10(c) - Assignment and Security Agreement,
dated as of January 8, 1992, among TGC and the Unit 1
Agent, for the benefit of the Secured Parties, as
defined in the Unit 1 Credit Agreement, amending and
restating the Assignment and Security Agreement among
such parties dated as of December 1, 1987 (Exhibit
10(d) to Form 10-K of TNMP for the year ended December
31, 1991, File No. 2-97230).
10(d) - Assignment and Security Agreement,
dated December 1, 1987, executed by TNMP in favor of
the Unit 1 Agent for the benefit of the Secured
Parties, as defined therein (Exhibit 10(u) to Form 10-
K of TNMP for the year ended December 31, 1987, File
No. 2-97230).
10(e) - Amended and Restated Subordination
Agreement, dated as of October 1, 1988, among TNMP,
Continental Illinois National Bank and Trust Company
of Chicago and the Unit 1 Agent, amending and
restating the Subordination Agreement among such
parties dated as of December 1, 1987 (Exhibit 10(uu)
to Form 10-K of TNMP for the year ended December 31,
1988, File No. 2-97230).
10(f) - Mortgage and Deed of Trust (With
Security Agreement and UCC Financing Statement for
Fixture Filing), dated to be effective as of December
1, 1987, and executed by Project Funding Corporation
("PFC"), as Mortgagor, to Donald H. Snell, as Mortgage
Trustee, for the benefit of the Secured Parties, as
defined therein (Exhibit 10(ee) to Form 10-K of TNMP
for the year ended December 31, 1987, File No. 2-
97230).
10(f)1 - Supplemental Mortgage and Deed of Trust
(With Security Agreement and UCC Financing Statement
for Fixture Filing), executed by TGC, as Mortgagor, on
January 27, 1992, to be effective as of December 1,
1987, to Donald H. Snell, as Mortgage Trustee, for the
benefit of the Secured Parties, as defined therein
(Exhibit 10(g)4 to Form 10-K of TNMP for the year
ended December 31, 1991, File No. 2-97230).
10(f)2 - First TGC Modification and Extension
Agreement, dated as of January 24, 1992, among the
Unit 1 Banks, the Unit 1 Agent, TNMP and TGC (Exhibit
10(g)1 to Form 10-K of TNMP for the year ended
December 31, 1991, File No. 2-97230).
10(f)3 - Second TGC Modification and Extension
Agreement, dated as of January 27, 1992, among the
Unit 1 Banks, the Unit 1 Agent, TNMP and TGC (Exhibit
10(g)2 to Form 10-K of TNMP for the year ended
December 31, 1991, File No. 2-97230).
10(f)4 - Third TGC Modification and Extension
Agreement, dated as of January 27, 1992, among the
Unit 1 Banks, the Unit 1 Agent, TNMP and TGC (Exhibit
10(g)3 to Form 10-K of TNMP for the year ended
December 31, 1991, File No. 2-97230).
10(f)5 - Fourth TGC Modification and Extension
Agreement, dated as of September 29, 1993, among the
Unit 1 Banks, the Unit 1 Agent, TNMP and TGC (Exhibit
10(f)5 to Form 10-K of TNMP for the year ended
December 31, 1993, File No. 2-97230).
10(f)6 - Fifth TGC Modification and Extension
Agreement, dated as of September 29, 1993, among the
Unit 1 Banks, the Unit 1 Agent, TNMP and TGC (Exhibit
10(f)6 to Form 10-K of TNMP for the year ended
December 31, 1993, File No. 2-97230).
10(g) - Indemnity Agreement, made as of the 1st
day of December, 1987, by Westinghouse, CE and Zachry,
as Indemnitors, for the benefit of the Secured
Parties, as defined therein (Exhibit 10(ff) to Form 10-
K of TNMP for the year ended December 31, 1987, File
No. 2-97230).
10(h) - Second Lien Mortgage and Deed of Trust
(With Security Agreement) executed by TNMP, as
Mortgagor, to Donald H. Snell, as Mortgage Trustee,
for the benefit of the Secured Parties, as defined
therein (Exhibit 10(jj) to Form 10-K of TNMP for the
year ended December 31, 1987, File No. 2-97230).
10(h)1 - Correction Second Lien Mortgage and
Deed of Trust (with Security Agreement), dated as of
December 1, 1987, executed by TNMP, as Mortgagor, to
Donald H. Snell, as Mortgage Trustee, for the benefit
of the Secured Parties, as defined therein (Exhibit
10(vv) to Form 10-K of TNMP for the year ended
December 31, 1988, File No. 2-97230).
10(h)2 - Second Lien Mortgage and Deed of Trust
(with Security Agreement) Modification, Extension and
Amendment Agreement, dated as of January 8, 1992,
executed by TNMP to Donald H. Snell, as Mortgage
Trustee, for the benefit of the Secured Parties, as
defined therein (Exhibit 10(i)2 to Form 10-K of TNMP
for the year ended December 31, 1991, File No. 2-
97230).
10(h)3 - TNP Second Lien Mortgage Modification
No. 2, dated as of September 21, 1993, executed by
TNMP to Donald H. Snell, as Mortgage Trustee, for the
benefit of the Secured Parties, as defined therein
(Exhibit 10(h)3 to Form 10-K of TNMP for the year
ended December 31, 1993, File No. 2-97230).
10(i) - Agreement for Conveyance and Partial
Release of Liens, made as of the 1st day of December,
1987, by PFC and the Unit 1 Agent for the benefit of
TNMP (Exhibit 10(kk) to Form 10-K of TNMP for the year
ended December 31, 1987, File No. 2-97230).
10(j) - Inducement and Consent Agreement, dated
as of June 15, 1988, between Phillips Coal Company,
Kiewit Texas Mining Company, TNMP, Phillips Petroleum
Company and Peter Kiewit Son's, Inc. (Exhibit 10(nn)
to Form 10-K of TNMP for the year ended December 31,
1988, File No. 2-97230).
10(k) - Assumption Agreement, dated as of
October 1, 1988, executed by TGC, in favor of the
Issuing Bank, as defined therein, the Unit 1 Banks,
the Unit 1 Agent and the Depositary, as defined
therein (Exhibit 10(ww) to Form 10-K of TNMP for the
year ended December 31, 1988, File No. 2-97230).
10(l) - Guaranty, dated as of October 1, 1988,
executed by TNMP and given in respect of the TGC
obligations under the Unit 1 Credit Agreement (Exhibit
10(xx) to Form 10-K of TNMP for the year ended
December 31, 1988, File No. 2-97230).
10(m) - First Amended and Restated Facility
Purchase Agreement, dated as of January 8, 1992, among
TNMP, as the Purchaser, and TGC, as the Seller,
amending and restating the Facility Purchase Agreement
among such parties dated as of October 1, 1988
(Exhibit 10(n) to Form 10-K of TNMP for the year ended
December 31, 1991, File No. 2-97230).
10(n) - Operating Agreement, dated as of
October 1, 1988, among TNMP and TGC (Exhibit 10(zz) to
Form 10-K of TNMP for the year ended December 31,
1988, File No. 2-97230).
10(o) - Unit 2 First Amended and Restated
Project Loan and Credit Agreement, dated as of January
8, 1992 (the "Unit 2 Credit Agreement"), among TNMP,
Texas Generating Company II ("TGC II"), the banks
named therein as Banks (the "Unit 2 Banks") and The
Chase Manhattan Bank (National Association), as Agent
for the Unit 2 Banks (the "Unit 2 Agent"), amending
and restating the Project Loan and Credit Agreement
among such parties dated as of October 1, 1988
(Exhibit 10(q) to Form 10-K of TNMP for the year ended
December 31, 1991, File No. 2-97230).
10(o)1 - Amendment No. 1, dated as of September
21, 1993, to the Unit 2 Credit Agreement (Exhibit
10(o)1 to Form 10-K of TNMP for the year ended
December 31, 1993, File No. 2-97230).
10(p) - Assignment and Security Agreement,
dated as of January 8, 1992, among TGC II and the Unit
2 Agent, for the benefit of the Secured Parties, as
defined in the Unit 2 Credit Agreement, amending and
restating the Assignment and Security Agreement among
such parties dated as of October 1, 1988 (Exhibit
10(r) to Form 10-K of TNMP for the year ended December
31, 1991, File No. 2-97230).
10(q) - Assignment and Security Agreement,
dated as of October 1, 1988, executed by TNMP in favor
of the Unit 2 Agent for the benefit of the Secured
Parties, as defined therein (Exhibit 10(jjj) to Form
10-K of TNMP for the year ended December 31, 1988,
File No. 2-97230).
10(r) - Subordination Agreement, dated as of
October 1, 1988, among TNMP, Continental Illinois
National Bank and Trust Company of Chicago and the
Unit 2 Agent (Exhibit 10(mmm) to Form 10-K of TNMP for
the year ended December 31, 1988, File No. 2-97230).
10(s) - Mortgage and Deed of Trust (With
Security Agreement and UCC Financing Statement for
Fixture Filing), dated to be effective as of October
1, 1988, and executed by Texas PFC, Inc., as
Mortgagor, to Donald H. Snell, as Mortgage Trustee,
for the benefit of the Secured Parties, as defined
therein (Exhibit 10(uuu) to Form 10-K of TNMP for the
year ended December 31, 1988, File No. 2-97230).
10(s)1 - First TGC II Modification and Extension
Agreement, dated as of January 24, 1992, among the
Unit 2 Banks, the Unit 2 Agent, TNMP and TGC II
(Exhibit 10(u)1 to Form 10-K of TNMP for the year
ended December 31, 1991, File No. 2-97230).
10(s)2 - Second TGC II Modification and
Extension Agreement, dated as of January 27, 1992,
among the Unit 2 Banks, the Unit 2 Agent, TNMP and TGC
II (Exhibit 10(u)2 to Form 10-K of TNMP for the year
ended December 31, 1991, File No. 2-97230).
10(s)3 - Third TGC II Modification and Extension
Agreement, dated as of January 27, 1992, among the
Unit 2 Banks, the Unit 2 Agent, TNMP and TGC II
(Exhibit 10(u)3 to Form 10-K of TNMP for the year
ended December 31, 1991, File No. 2-97230).
10(s)4 - Fourth TGC II Modification and
Extension Agreement, dated as of September 29, 1993,
among the Unit 2 Banks, the Unit 2 Agent, TNMP and TGC
II (Exhibit 10(s)4 to Form 10-K of TNMP for the year
ended December 31, 1993, File No. 2-97230).
10(s)5 - Fifth TGC II Modification and Extension
Agreement, dated as of June 15, 1994, among the Unit 2
Banks, the Unit 2 Agent, TNMP and TGC II (Exhibit
10(s)5 to Form 10-Q of TNMP for the quarter ended June
30, 1994, File No. 2-97230).
10(t) - Release and Waiver of Liens and
Indemnity Agreement, made effective as of the 1st day
of October, 1988, by a consortium composed of
Westinghouse, CE, and Zachry (Exhibit 10(vvv) to Form
10-K of TNMP for the year ended December 31, 1988,
File No. 2-97230).
10(u) - Second Lien Mortgage and Deed of Trust
(With Security Agreement), dated as of October 1,
1988, and executed by TNMP, as Mortgagor, to Donald H.
Snell, as Mortgage Trustee, for the benefit of the
Secured Parties, as defined therein (Exhibit 10(www)
to Form 10-K of TNMP for the year ended December 31,
1988, File No. 2-97230).
10(u)1 - Second Lien Mortgage and Deed of Trust
(with Security Agreement) Modification, Extension and
Amendment Agreement, dated as of January 8, 1992,
executed by TNMP to Donald H. Snell, as Mortgage
Trustee, for the benefit of the Secured Parties, as
defined therein (Exhibit 10(w)1 to Form 10-K of TNMP
for the year ended December 31, 1991, File No. 2-
97230).
10(u)2 - TNP Second Lien Mortgage Modification
No. 2, dated as of September 21, 1993, executed by
TNMP to Donald H. Snell, as Mortgage Trustee, for the
benefit of the Secured Parties, as defined therein
(Exhibit 10(u)2 to Form 10-K of TNMP for the year
ended December 31, 1993, File No. 2-97230).
10(v) - Intercreditor and Nondisturbance
Agreement, dated as of October 1, 1988, among PFC,
Texas PFC, Inc., TNMP, the Project Creditors, as
defined therein, and the Collateral Agent, as defined
therein (Exhibit 10(xxx) to Form 10-K of TNMP for the
year ended December 31, 1988, File No. 2-97230).
10(v)1 - Amendment #1, dated as of January 8,
1992, to the Intercreditor and Nondisturbance
Agreement, dated as of October 1, 1988, among TGC, TGC
II, TNMP, the Unit 1 Banks, the Unit 2 Banks and The
Chase Manhattan Bank (National Association) in its
capacity as collateral agent for the Unit 1 Banks and
the Unit 2 Banks (Exhibit 10(x)1 to Form 10-K of TNMP
for the year ended December 31, 1991, File No. 2-
97230).
10(v)2 - Amendment No. 2, dated as of September
21, 1993, to the Intercreditor and Nondisturbance
Agreement, among TGC, TGC II, TNMP, the Unit 1 Banks,
the Unit 2 Banks and The Chase Manhattan Bank
(National Association) in its capacity as collateral
agent for the Unit 1 Banks and the Unit 2 Banks
(Exhibit 10(v)2 to Form 10-K of TNMP for the year
ended December 31, 1993, File No. 2-97230).
10(w) - Grant of Reciprocal Easements and
Declaration of Covenants Running with the Land, dated
as of the 1st day of October, 1988 between PFC and
Texas PFC, Inc. (Exhibit 10(yyy) to Form 10-K of TNMP
for the year ended December 31, 1988, File No. 2-
97230).
10(x) - Non-Partition Agreement, dated as of
May 30, 1990, among TNMP, TGC and The Chase Manhattan
Bank (National Association), as Agent for the Banks
which are parties to the Unit 1 Credit Agreement
(Exhibit 10(ss) to Form 10-K of TNMP for the year
ended December 31, 1990, File No. 2-97230).
10(y) - Assumption Agreement, dated July 26,
1991, to be effective as of May 31, 1991, by TGC II in
favor of the Issuing Bank, the Unit 2 Banks, the Unit
2 Agent and the Depositary, as defined therein
(Exhibit 10(kkk) to Amendment No. 1 to File No. 33-
41903).
10(z) - Guaranty, dated July 26, 1991, to be
effective as of May 31, 1991, by TNMP and given in
respect of the TGC II obligations under the Unit 2
Credit Agreement (Exhibit 10(lll) to Amendment No. 1
to File No. 33-41903).
10(aa) - First Amended and Restated Facility
Purchase Agreement, dated as of January 8, 1992, among
TNMP, as the Purchaser, and TGC II, as the Seller,
amending and restating the Facility Purchase Agreement
among such parties dated July 26, 1991, to be
effective as of May 31, 1991 (Exhibit 10(dd) to Form
10-K of TNMP for the year ended December 31, 1991,
File No. 2-97230).
10(aa)1 - Amendment No. 1 to the Unit 2 First
Amended and Restated Facility Purchase Agreement,
dated as of September 21, 1993, among TNMP, as the
Purchaser, and TGC II, as the Seller (Exhibit 10(aa)1
to Form 10-K of TNMP for the year ended December 31,
1993, File No. 2-97230).
10(bb) - Operating Agreement, dated July 26,
1991, to be effective as of May 31, 1991, between TNMP
and TGC II (Exhibit 10(nnn) to Amendment No. 1 to File
No. 33-41903).
10(cc) - Non-Partition Agreement, executed July
26, 1991, to be effective as of May 31, 1991, among
TNMP, TGC II and The Chase Manhattan Bank (National
Association) (Exhibit 10(ppp) to Amendment No. 1 to
File No. 33-41903).
Power Supply Contracts
10(dd) - Contract dated May 12, 1976 between
TNMP and Houston Lighting & Power Company (Exhibit
5(a), File No. 2-69353).
10(dd)1 - Amendment, dated January 4, 1989, to
the Contract dated May 12, 1976 between TNMP and
Houston Lighting & Power Company (Exhibit 10(cccc) to
Form 10-K of TNMP for the year ended December 31,
1988, File No. 2-97230).
10(ee) - Contract dated May 1, 1986 between TNMP
and Texas Electric Utilities Company, amended
September 29, 1986, October 24, 1986 and February 21,
1987 (Exhibit 10(c) of Form 8 applicable to Form 10-K
of TNMP for the year ended December 31, 1986, File No.
2-97230).
10(ff) - Amended and Restated Agreement for
Electric Service dated May 14, 1990 between TNMP and
Texas Utilities Electric Company (Exhibit 10(vv) to
Form 10-K of TNMP for the year ended December 31,
1990, File No. 2-97230).
10(ff)1 - Amendment, dated April 19, 1993, to
Amended and Restated Agreement for Electric Service,
dated May 14, 1990, As Amended between TNMP and Texas
Utilities Electric Company (Exhibit 10(ii)1 to Form S-
2 Registration Statement, filed on July 19, 1993, File
No. 33-66232).
10(gg) - Contract dated June 11, 1984 between
TNMP and Southwestern Public Service Company (Exhibit
10(d) of Form 8 applicable to Form 10-K of TNMP for
the year ended December 31, 1986, File No. 2-97230).
10(hh) - Contract dated April 27, 1977 between
TNMP and West Texas Utilities Company amended April
14, 1982, April 19, 1983, May 18, 1984 and October 21,
1985 (Exhibit 10(e) of Form 8 applicable to Form 10-K
of TNMP for the year ended December 31, 1986, File No.
2-97230).
10(ii) - Contract dated April 29, 1987 between
TNMP and El Paso Electric Company (Exhibit 10(f) of
Form 8 applicable to Form 10-K of TNMP for the year
ended December 31, 1986, File No. 2-97230).
10(jj) - Contract dated February 28, 1974,
amended May 13, 1974, November 26, 1975, August 26,
1976 and October 7, 1980 between TNMP and Public
Service Company of New Mexico (Exhibit 10(g) of Form 8
applicable to Form 10-K of TNMP for the year ended
December 31, 1986, File No. 2-97230).
10(jj)1 - Amendment, dated February 22, 1982, to
the Contract dated February 28, 1974, amended May 13,
1974, November 26, 1975, August 26, 1976, and October
7, 1980 between TNMP and Public Service Company of New
Mexico (Exhibit 10(iiii) to Form 10-K of TNMP for the
year ended December 31, 1988, File No. 2-97230).
10(jj)2 - Amendment, dated February 8, 1988, to
the Contract dated February 28, 1974, amended May 13,
1974, November 26, 1975, August 26, 1976, and October
7, 1980 between TNMP and Public Service Company of New
Mexico (Exhibit 10(jjjj) to Form 10-K of TNMP for the
year ended December 31, 1988, File No. 2-97230).
10(jj)3 - Amended and Restated Contract for
Electric Service, dated April 29, 1988, between TNMP
and Public Service Company of New Mexico (Exhibit
10(zz)3 to Amendment No. 1 to File No. 33-41903).
10(kk) - Contract dated December 8, 1981 between
TNMP and Southwestern Public Service Company amended
December 12, 1984, December 2, 1985 and December 19,
1986 (Exhibit 10(h) of Form 8 applicable to Form 10-K
of TNMP for the year ended December 31, 1986, File No.
2-97230).
10(kk)1 - Amendment, dated December 12, 1988, to
the Contract dated December 8, 1981 between TNMP and
Southwestern Public Service Company amended December
12, 1984, December 2, 1985 and December 19, 1986
(Exhibit 10(llll) to Form 10-K of TNMP for the year
ended December 31, 1988, File No. 2-97230).
10(kk)2 - Amendment, dated December 12, 1990, to
the Contract dated December 8, 1981 between TNMP and
Southwestern Public Service Company (Exhibit 19(t) to
Form 10-K of TNMP for the year ended December 31,
1990, File No. 2-97230).
10(ll) - Contract dated August 31, 1983, between
TNMP and Capitol Cogeneration Company, Ltd. (including
letter agreement dated August 14, 1986) (Exhibit 10(i)
of Form 8 applicable to Form 10-K of TNMP for the year
ended December 31, 1986, File No. 2-97230).
10(ll)1 - Agreement Substituting a Party, dated
May 3, 1988, among Capitol Cogeneration Company, Ltd.,
Clear Lake Cogeneration Limited Partnership and TNMP
(Exhibit 10(nnnn) to Form 10-K of TNMP for the year
ended December 31, 1988, File No. 2-97230).
10(ll)2 - Letter Agreements, dated May 30, 1990
and August 28, 1991, between Clear Lake Cogeneration
Limited Partnership and TNMP (Exhibit 10(oo)2 to Form
10-K of TNMP for the year ended December 31, 1992,
File No. 2-97230).
10(ll)3 - Notice of Extension Letter, dated
August 31, 1992, between Clear Lake Cogeneration
Limited Partnership and TNMP (Exhibit 10(oo)3 to Form
10-K of TNMP for the year ended December 31, 1992,
File No. 2-97230).
10(ll)4 - Scheduling Agreement, dated September
15, 1992, between Clear Lake Cogeneration Limited
Partnership and TNMP (Exhibit 10(oo)4 to Form 10-K of
TNMP for the year ended December 31, 1992, File No. 2-
97230).
10(mm) - Interconnection Agreement between TNMP
and Plains Electric Generation and Transmission
Cooperative, Inc. dated July 19, 1984 (Exhibit 10(j)
of Form 8 applicable to Form 10-K of TNMP for the year
ended December 31, 1986, File No. 2-97230).
10(nn) - Interchange Agreement between TNMP and
El Paso Electric Company dated April 29, 1987 (Exhibit
10(l) of Form 8 applicable to Form 10-K of TNMP for
the year ended December 31, 1986, File No. 2-97230).
*10(nn)1 - Amendment No. 1, dated November 21,
1994, to the Interchange Agreement between TNMP and El
Paso Electric Company dated April 29, 1987.
10(oo) - DC Terminal Participation Agreement
between TNMP and El Paso Electric Company dated
December 8, 1981 amended April 29, 1987 (Exhibit 10(m)
of Form 8 applicable to Form 10-K of TNMP for the year
ended December 31, 1986, File No. 2-97230).
*10(pp) - 1996 Firm Capacity & Energy Sale
Agreement between TNMP and TEP dated December 20,
1994, effective as of January 1, 1996.
Employment Contracts
10(qq) - Texas-New Mexico Power Company
Executive Agreement for Severance Compensation Upon
Change in Control, executed November 11, 1993, between
Sector Vice President and Chief Financial Officer and
TNMP (Pursuant to Instruction 2 of Reg. 229.601(a),
accompanying this document is a schedule: (i)
identifying documents substantially identical to the
document which have been omitted from the Exhibits;
and (ii) setting forth the material details in which
such omitted documents differ from the document)
(Exhibit 10(pp) to Form 10-K of TNMP for the year
ended December 31, 1993, File No. 2-97230).
10(rr) - Texas-New Mexico Power Company Key
Employee Agreement for Severance Compensation Upon
Change in Control, executed November 11, 1993, between
Assistant Treasurer and TNMP (Pursuant to Instruction
2 of Reg. 229.601(a), accompanying this document is a
schedule: (i) identifying documents substantially
identical to the document which have been omitted from
the Exhibits; and (ii) setting forth the material
details in which such omitted documents differ from
the document) (Exhibit 10(qq) to Form 10-K of TNMP for
the year ended December 31, 1993, File No. 2-97230).
10(ss) - Agreement between James M. Tarpley and
TNPE and TNMP, pursuant to resignation as of November
9, 1993, to be effective January 1, 1994 (Exhibit
10(rr) to Form 10-K of TNMP for the year ended
December 31, 1993, File No. 2-97230).
10(tt) - Agreement between Dwight R. Spurlock
and TNPE and TNMP, effective November 9, 1993 (Exhibit
10(ss) to Form 10-K of TNMP for the year ended
December 31, 1993, File No. 2-97230).
10(uu) - Agreement between Kevern Joyce and TNPE
and TNMP, executed March 25, 1994 (Exhibit 10(tt) to
Form 10-Q of TNMP for the quarter ended March 31,
1994, File No. 2-97230).
*21 - Subsidiaries of the Registrants.