UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(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, 1995
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)
Texas 4100 International Plaza,
P. O. Box 2943,
Fort Worth, Texas 76113 Commission File
- --------- ------------------------ ---------------
(State of (Address and zip code of Number: 1-8847
incorporation) principal executive offices)
Telephone number, including area code: 817-731-0099
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, 1996 on which registered
- --------------------- ------------------- ---------------------
Common stock, no par value 10,920,060 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 TNP Enterprises, Inc. common stock held by
nonaffiliates on January 31, 1996, was $223,755,700, based on the common stock's
closing price on the New York Stock Exchange on the same date of $20.63 per
share.
- -------------------------------------------------------------------------------
TEXAS-NEW MEXICO POWER COMPANY
(Exact name of registrant as specified in its charter)
Texas 4100 International Plaza,
P. O. Box 2943,
Fort Worth, Texas 76113 Commission File
- --------- ------------------------ ---------------
(State of (Address and zip code of Number:2-97230
incorporation) principal executive offices)
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: None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ------------------------
First mortgage bonds:
Series M, 8.7% due 2006;
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 None
Secured debentures:
12.5% due 1999;
Series A, 10.75% due 2003 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\
TNP Enterprises, Inc. holds all 10,705 outstanding common shares of
Texas-New Mexico Power Company.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part Where Incorporated
Proxy Statement for 1996 Annual
Meeting of Holders of TNP
Enterprises, Inc. Common Stock III
TNP ENTERPRISES INC. AND SUBSIDIARIES
TEXAS NEW-MEXICO POWER COMPANY AND SUBSIDIARIES
Combined Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1995
This combined annual report on Form 10-K is filed separately by TNP
Enterprises, Inc. and Texas-New Mexico Power Company. Information contained in
this report 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. or to any other affiliate or subsidiary of TNP
Enterprises, Inc., except as it may relate to Texas-New Mexico Power Company.
TABLE OF CONTENTS
Glossary of Terms......................................................... 3
Part I
Item 1. BUSINESS........................................................ 4
Introduction.................................................... 4
TNP's Service Areas............................................. 4
Seasonality of Business......................................... 5
Sources of Energy............................................... 5
Government Regulation........................................... 6
Employees and Executive Officers................................ 6
Item 2. PROPERTIES...................................................... 7
Administrative and Service Facilities........................... 7
Generating Facilities........................................... 7
Transmission and Distribution Facilities........................ 7
Item 3. LEGAL PROCEEDINGS............................................... 8
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............. 8
Part II
Item 5. MARKET FOR REGISTRANTS' COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS................................. 8
Item 6. SELECTED FINANCIAL DATA......................................... 9
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................. 11
Competitive Conditions.......................................... 11
Results of Operations........................................... 12
Liquidity and Capital Resources................................. 15
Other Matters................................................... 15
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................... 16
TNP Enterprises, Inc. and Subsidiaries.......................... 18
Texas-New Mexico Power Company and Subsidiaries................. 23
Notes to Consolidated Financial Statements...................... 28
Selected Quarterly Consolidated Financial Data.................. 39
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............................. 39
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............. 40
Directors....................................................... 40
Executive Officers.............................................. 40
Item 11. EXECUTIVE COMPENSATION.......................................... 40
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.. 40
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................. 40
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.. 40
Page 1
TNP ENTERPRISES INC. AND SUBSIDIARIES
TEXAS NEW-MEXICO POWER COMPANY AND SUBSIDIARIES
Combined Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1995
Glossary of Terms
As used in this combined report, the following abbreviations, acronyms, or
capitalized terms have the meanings set forth below:
Abbreviation, Acronym,
or Capitalized Term Meaning
- ------------------------------------------------------------------------------------------------
AFUDC .......................................... Allowance for borrowed funds used during construction
Bond Indenture.................................. Document pursuant to which FMBs are issued
DAT............................................. Deferred accounting treatment
EPA............................................. Environmental Protection Agency
EWG............................................. Exempt Wholesale Generator
EPS............................................. Earnings (loss) per share of common stock
FASB............................................ Financial Accounting Standards Board
FERC............................................ Federal Energy Regulatory Commission
FMB(s).......................................... One or more First Mortgage Bonds issued by TNP
GWH............................................. Gigawatt-Hours
IRS............................................. Internal Revenue Service
ITC............................................. Investment Tax Credits
KWH............................................. Kilowatt-Hours
MW.............................................. Megawatts
MWH............................................. Megawatt-Hours
New Credit Facility............................. Revolving credit facility from syndicate of lenders represented
by Chemical Bank, effective November 3, 1995
NMPUC........................................... New Mexico Public Utility Commission
Note(s)......................................... One or more Notes to Consolidated Financial Statements
PPM............................................. PPM America, Inc.
PUCT............................................ Public Utility Commission of Texas
SPS............................................. Southwestern Public Service Company
SFAS............................................ Statement of Financial Accounting Standards
Rights Plan..................................... Shareholder Rights Plan adopted by TNPE
TEP............................................. Tucson Electric Power Company
TGC............................................. Texas Generating Company, a wholly owned subsidiary of TNP
TGC II.......................................... Texas Generating Company II, a wholly owned subsidiary of TNP
TNP One......................................... A two-unit, lignite-fueled, circulating fluidized-bed generating
plant located in Robertson County, Texas
TNP............................................. Texas-New Mexico Power Company, a wholly owned subsidiary of TNPE
TNPE............................................ TNP Enterprises, Inc.
Tri-State....................................... Tri-State Generation and Transmission Association
TU.............................................. Texas Utilities Electric Company
Unit 1.......................................... The first completed electric generating unit of TNP One
Unit 2.......................................... The second completed electric generating unit of TNP One
Page 2
PART I
Item 1. BUSINESS.
Introduction
TNPE was organized as a holding company in 1983 and currently transacts
business through its subsidiary, TNP. TNP is a public utility engaged in
generating, purchasing, transmitting, distributing, and selling electricity to
customers in Texas and New Mexico. TNP's original predecessor was organized in
1925. TNP has two subsidiaries, TGC and TGC II, both of which were organized to
facilitate TNP's acquisitions of TNP One, Unit 1 and Unit 2 in 1990 and 1991,
respectively.
TNPE, TNP, TGC, and TGC II are all Texas corporations. Their executive
offices are located at 4100 International Plaza, P.O. Box 2943, Fort Worth,
Texas 76113 and their telephone number is (817) 731-0099. Unless otherwise
indicated, all financial information in this report is presented on a
consolidated basis.
TNP's Service Areas
TNP provides electric service to 84 Texas and New Mexico municipalities and
adjacent rural areas with more than 213,000 customers. TNP's service areas are
organized into three operating regions: the South-Western Region, the
North-Central Region, and the New Mexico Region.
South-Western Region
The South-Western Region includes the area along the Texas Gulf Coast
between Houston and Galveston. The oil and petrochemical industries,
agricultural industry, and general commercial activity in the Houston area
support the economy of this area. This region also includes the area in far west
Texas between Midland and El Paso. The economy in this area is based primarily
on oil and gas production, agriculture, and food processing.
North-Central Region
The North-Central Region extends from Lewisville, Texas, which is north of
Dallas-Fort Worth International Airport, to municipalities along the Red River.
TNP provides electric service to a variety of commercial, agricultural, and
petroleum industry customers in this area. This region also 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. The North-Central Region previously included service territory in a
portion of the Texas Panhandle that TNP sold in September 1995. Information
about the sale is set forth in Note 3, which is incorporated here by reference.
New Mexico Region
The New Mexico Region includes areas in southwest 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.
TNP's sales in all regions are primarily to retail customers. Revenues
contributed by each operating region and its percentage of total operating
revenues in 1995, 1994, and 1993, respectively, are set forth in the following
table. No single customer accounted for more than 10% of operating revenues
during the years presented in the table.
Operating Revenues ($000's)
Region 1995 1994 1993
- -------- ------------------- ------------------ --------------------
South-Western $ 278,791 57.4% $ 269,194 56.3% $ 262,979 55.4%
North-Central 137,521 28.3 132,595 27.8 131,725 27.8
New Mexico 69,511 14.3 76,200 15.9 79,538 16.8
-------- ----- ------- ----- -------- -----
Total $ 485,823 100.0% $ 477,989 100.0% $ 474,242 100.0%
======== ===== ======= ===== ======== =====
Page 4
Franchises and Certificates of Public Convenience and Necessity
TNP holds 82 franchises with terms ranging from 20 to 50 years and two
franchises with indefinite terms from the 84 municipalities to which it provides
electric service. These franchises will expire on various dates from 1996 to
2039. Three Texas franchises, comprising 21% of total company revenues, are
scheduled to expire in 1996, 1998, and 1999. However, Texas law does not require
an electric utility to execute a franchise agreement with a Texas municipality
to be entitled to provide or continue to provide electrical service within the
municipality. A franchise agreement documents the mutually agreeable terms under
which the service will be provided. TNP intends to negotiate and execute new or
amended franchise agreements to be effective before existing franchises expire.
TNP also holds PUCT certificates of public convenience and necessity
covering all Texas areas that TNP serves. These certificates include terms that
are customary in the public utility industry. TNP generally has not been
required to have certificates of public convenience and necessity to provide
electric power in New Mexico.
Seasonality of Business
TNP experiences increased sales and operating revenues during the summer
months as a result of increased air conditioner usage in hot weather. In 1995,
approximately 40% of annual revenues were recorded in June, July, August, and
September.
Sources of Energy
TNP generates electricity at TNP One. TNP One, which has 300 MW of
capacity, provided approximately 25% of TNP's total firm power requirements
during 1995. Power generated at TNP One is transmitted over TNP's own
transmission lines to other utilities' transmission systems for delivery to
TNP's Texas service area systems. To maintain a reliable power supply for its
customers and to coordinate interconnected operations, TNP is a member of the
Electric Reliability Council of Texas, the Inland Power Pool, and the New Mexico
Power Pool.
TNP purchases the remainder of its electricity from various suppliers with
diversified fuel sources. The availability and cost of purchased energy to TNP
is subject to changes in supplier costs, regulations and laws, fuel costs, and
other factors. TNP is pursuing various opportunities to reduce purchased power
costs.
The following table sets forth certain information concerning TNP's sources
of electric energy in 1995.
Year Contract Percent of
Expires Energy Provided
TEXAS
- ---------
Generation
TNP One.................................... - 44%
Purchased Power
TU(1)...................................... 1999 29
Clear Lake Cogeneration L.P................ 2004 19
Other...................................... Various 8
---
Total 100%
===
NEW MEXICO
- ----------
Purchased Power
TEP(2)..................................... 1995 35%
Public Service Co. of New Mexico(3)........ 2006 26
El Paso Electric Co.(3).................... 2002 21
SPS(3)..................................... 2001 11
Other...................................... Various 7
----
Total 100%
<FN>
(1) TNP has notified TU of its intent to cease purchasing full requirements
power and energy effective January 1, 1999, as described in Note 12.
(2) TNP purchased economy energy from TEP pursuant to a temporary arrangement
that expired in August 1995. Subsequently, TNP entered into a firm supply
contract with TEP that expires at the end of 1996.
(3) Supplier may not terminate service to TNP without FERC authorization.
</FN>
Management believes that current supply arrangements and available
capacities on the wholesale market are adequate to satisfy TNP's foreseeable
power requirements.
Page 5
Recovering Purchased Power and Fuel Costs
Purchased power is recovered from TNP customers through power cost recovery
adjustment clauses authorized by the PUCT and NMPUC. These clauses enable TNP to
recover this significant component of operating expenses within two months of
billing by its suppliers.
Fuel costs are recovered from TNP's Texas customers through a fixed fuel
recovery factor approved by the PUCT. The fixed fuel recovery factor is
described at Item 7, "Pass-Through Expenses--Fuel," which is incorporated here
by reference.
Government Regulation
TNP is subject to PUCT and NMPUC regulation. Some of its activities, such
as issuing securities, are also subject to FERC regulation. Recent regulatory
developments are changing competitive conditions in the electric utility
industry. These changes are discussed in Item 7, "Competitive Conditions," which
is incorporated here by reference.
In addition to regulation as a utility, TNP's facilities are regulated by
the EPA and Texas and New Mexico environmental agencies. TNP One uses
environmentally superior circulating fluidized bed technology that eliminates
the need for expensive scrubbers. TNP was allotted sufficient emission
allowances to comply with the Clean Air Act of 1990 through the year 2000.
During 1995, 1994, and 1993, TNP incurred expenses related to air, water, and
solid waste pollution abatement (including ash removal) of approximately $5.5
million, $5.9 million, and $4.3 million, respectively.
Employees And Executive Officers
At December 31, 1995, TNP had 858 employees. TNP's employees are not
represented by a union or covered by a collective bargaining agreement.
Management believes TNP's relations with its employees are good.
Executive officers of TNPE and TNP, who are elected annually by the
respective boards of directors and serve at the discretion of the boards, are as
follows:
Name Age Position with TNPE
Kevern R. Joyce 49 Chairman, President, & Chief Executive Officer
Manjit S. Cheema 41 Vice President & Chief Financial Officer
Ralph Johnson 52 Vice President
Michael D. Blanchard 45 Corporate Secretary & General Counsel
Patrick L. Bridges 37 Treasurer
Name Age Position with TNP
Kevern R. Joyce 49 Chairman, President, & Chief Executive Officer
Jack V. Chambers, Jr. 46 Senior Vice President & Chief Customer Officer
Manjit S. Cheema 41 Vice President & Chief Financial Officer
Dennis R. Cash 42 Vice President - Human Resources
Allan B. Davis 58 Vice President & Regional Customer Officer
Larry W. Dillon 41 Vice President & Regional Customer Officer
W. Douglas Hobbs 52 Vice President & Regional Customer Officer
Ralph Johnson 52 Vice President - Power Resources
John A. Montgomery 34 Vice President - Marketing & Communications
Michael D. Blanchard 45 Corporate Secretary & General Counsel
Patrick L. Bridges 37 Treasurer
Melissa D. Davis 38 Controller
Kevern R. Joyce joined TNPE and TNP in April 1994. He became Chairman in
April 1995. From 1992 until April 1994, Mr. Joyce served as Senior Vice
President and Chief Operating Officer of TEP, and from 1990 to 1992, he was Vice
President - Rates and Conservation.
Manjit S. Cheema joined TNP in June 1994. He was also Treasurer of TNP from
June 1994 until September 1995. In December 1994, he became Vice President &
Chief Financial Officer of TNPE and TNP. From March 1990 until he joined TNPE
and TNP, Mr. Cheema was Assistant Treasurer and Manager of Financial Planning
and Budgeting for TEP.
Page 6
Jack V. Chambers has served as Senior Vice President and Chief Customer
Officer of TNP since 1994. He was TNP's Sector Vice President - Revenue
Production from 1990 to 1994.
Ralph Johnson joined TNP and TNPE in February 1995. From March 1991 until
he joined TNP and TNPE, Mr. Johnson was Assistant General Manager for Tri-State
in Denver, Colorado, which sells power to rural electric cooperatives. From
January 1991 to March 1991, he was a consultant to the General Manager at
Tri-State. Mr.
Johnson managed electric power generation and transmission functions.
Michael D. Blanchard has been Corporate Secretary and General Counsel of
TNP and TNPE since 1987.
Patrick L. Bridges was appointed Treasurer of TNPE and TNP in September
1995. He served as TNP's Director Finance from 1994 to September 1995, Assistant
Treasurer from 1993 to September 1995, Manager - Revenue Accounting during 1993,
and Manager - Forecasting from 1990 to 1993.
Dennis R. Cash has served TNP as Vice President - Human Resources since
1994. From 1990 until 1994 he was General Manager - or Manager - Human
Resources.
Allan B. Davis has been a TNP Vice President and Regional Customer Officer
since 1994. From 1991 to 1994, he was TNP's Vice President - Chief Engineer,
Chief Engineer, or Assistant Chief Engineer.
Larry W. Dillon has been a TNP Vice President and Regional Customer Officer
since 1994. From 1993 to 1994, he was TNP's Vice President - Operations. He was
TNP's Division Manager from 1990 to 1993.
W. Douglas Hobbs became a TNP Vice President and Regional Customer Officer
in 1994. He served as TNP One Plant Manager from April 1992 to 1994. From 1989
until February 1992, Mr. Hobbs was Project Manager with Fluor Corporation, where
he worked on international/domestic projects involving developing and
implementing education, maintenance, and operating programs for utility and
industrial organizations.
John A. Montgomery joined TNP in December 1995. From February 1994 until he
joined TNP, he served as Director of Marketing and Regional Marketing Director
of Greyhound Lines, Inc., a bus transportation company. From August 1990 to
February 1994, Mr. Montgomery was President of Viva Brands International, Inc.,
a tropical fruit beverage company that he founded.
Melissa D. Davis was appointed TNP's Controller in September 1995. From
1994 to September 1995, she was Director - Financial Accounting and Assistant
Controller of TNP. She served as Division Accounting Manager from 1991 to 1994.
Item 2. PROPERTIES.
Substantially all of TNP's real and personal property secures its FMBs.
Substantially all of TNP's real and personal property in Texas secures its
revolving credit facility and debentures. TNP's long-term debt is described in
Note 9.
Administrative and Service Facilities
TNPE's and TNP's corporate headquarters are located in an office building
in Fort Worth, Texas. Space in this building is leased through 2003.
TNP owns or leases local offices in 37 of the municipalities that it
serves. TNP owns 14 construction/service centers in Texas and New Mexico.
Generating Facilities
TNP One generates power for TNP's Texas service areas and operates as a
base load facility.
Transmission and Distribution Facilities
Management believes that TNP's transmission and distribution facilities are
of sufficient capacity to serve existing customers adequately and to be extended
and expanded to serve customer growth for the foreseeable future. These
facilities primarily consist of overhead and underground lines, substations,
transformers, and meters. TNP generally constructs its transmission and
distribution facilities on easements or public rights of way and not on real
property held in fee simple.
Page 7
Item 3. LEGAL PROCEEDINGS.
The information set forth in Notes 3, 5, and 12 regarding regulatory and
legal matters is incorporated here 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 1995.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
TNPE's common stock is traded on the New York Stock Exchange under the
symbol "TNP." The high and low sales prices of, and the amount of dividends
declared and paid on, TNPE's common stock during each quarter in 1995 and 1994
were as follows:
TNPE
MARKET PRICE RANGE DIVIDENDS
1995 1994 PAID
-------------- ---------------- ---------
QUARTER HIGH LOW HIGH LOW 1995 1994
- ------- ---- --- ---- --- ---- ----
First $16 0/0 $14 5/8 $18 5/8 $16 5/8 $ 0.20 $ 0.41
Second 16 3/4 15 0/0 17 3/8 14 5/8 0.20 0.41
Third 17 3/4 16 0/0 15 5/8 13 1/4 0.20 0.20
Fourth 19 1/8 17 1/2 15 3/8 13 5/8 0.22 0.20
---- ----
Total $ 0.82 $ 1.22
==== ====
As of January 31, 1996, there were approximately 6,300 record holders of
TNPE common stock.
TNPE holds all 10,705 outstanding common shares of TNP. During 1995 and
1994, TNP paid common dividends to TNPE as follows:
TNP DIVIDENDS PAID ($000'S)
QUARTER 1995 1994
First $ - $ 4,400
Second - 4,400
Third - -
Fourth 2,400 2,200
----- -------
Total $ 2,400 $ 11,000
===== =======
Page 8
Item 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data of TNPE and TNP for
1991 through 1995. For information on changes in net earnings (loss) and EPS
from 1993 through 1995, see Item 7, which is incorporated here by reference.
Information on changes from 1991 to 1992 is contained in footnotes to the
following table.
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In thousands except per share amounts and percentages)
TNP ENTERPRISES, INC.
Consolidated results
Operating revenues..........................$ 485,823 $ 477,989 $ 474,242 $ 443,827 $ 441,343
Net earnings (loss)(1)......................$ 41,505 $ (17,441) $ 11,605 $ 10,930 $ 19,533
Total assets(2)...............................$ 1,030,433 $ 1,054,488 $ 1,086,938 $ 1,182,707 $1,122,591
Cash flows
Construction expenditures...................$ 28,689 $ 29,038 $ 26,360 $ 22,410 $ 42,536
Cash internally generated as a percentage
of construction expenditures (3).......... 274% 105% 123% 213% 101%
Common shares outstanding
Weighted average............................ 10,901 10,750 10,641 8,545 8,275
End of year................................. 10,920 10,866 10,696 10,598 8,318
Per share of common stock
Earnings (loss) (1).........................$ 3.75 $ (1.70) $ 1.01 $ 1.17 $ 2.23
Cash dividends declared.....................$ 0.82 $ 1.22 $ 1.63 $ 1.63 $ 1.63
Book value..................................$ 19.91 $ 17.01 $ 19.97 $ 20.62 $ 21.45
Capitalization
Common shareholders' equity.................$ 217,457 184,869 213,627 218,535 178,388
Preferred stock............................. 3,600 8,680 9,560 10,440 11,320
Long-term debt, less current maturities (4). 611,925 682,832 678,994 742,087 525,060
------- ------- ------- ------- -------
Total capitalization......................$ 832,982 $ 876,381 $ 902,181 $ 971,062 $ 714,768
======= ======= ======= ======= =======
Capitalization ratios
Common shareholders' equity.................. 26.1% 21.1% 23.7% 22.5% 25.0%
Preferred stock.............................. 0.4 1.0 1.1 1.1 1.6
Long-term debt, less current maturities...... 73.5 77.9 75.2 76.4 73.4
------ ----- ----- ----- -----
Total capitalization....................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
TEXAS-NEW MEXICO POWER COMPANY
Consolidated results
Operating revenues..........................$ 485,823 $ 477,989 $ 474,242 $ 443,827 $ 441,343
Net earnings (loss) (1).....................$ 41,809 $ (16,634) $ 11,523 $ 10,845 $ 19,840
Total assets(2)...............................$ 1,024,943 $ 1,043,178 $ 1,076,820 $ 1,156,567 $1,111,281
Cash flows (same as TNPE)
Capitalization
Common shareholder's equity.................$ 224,351 $ 185,777 $ 214,184 $ 205,875 $ 171,393
Preferred stock............................. 3,600 8,680 9,560 10,440 11,320
Long-term debt, less current maturities(4).. 611,925 682,832 678,994 742,087 525,060
------- ------- ------- ------- -------
Total capitalization......................$ 839,876 $ 877,289 $ 902,738 $ 958,402 $ 707,773
======= ======= ======= ======= =======
Capitalization ratios
Common shareholder's equity................. 26.7% 21.2% 23.7% 21.5% 24.2%
Preferred stock............................. 0.4 1.0 1.1 1.1 1.6
Long-term debt, less current maturities..... 72.9 77.8 75.2 77.4 74.2
------- ------ ------ ------ ------
Total capitalization...................... 100.0% 100.0% 100.0% 100.0% 100.0%
======= ====== ====== ====== ======
<FN>
(1) TNPE's and TNP's 1995 earnings before cumulative effect of change in
accounting were $33,060 and $33,364, respectively. TNPE's 1995 EPS before
cumulative effect of change in accounting was $2.98.
(2) Total assets for 1994 and 1993 were reclassified to conform to the 1995
method of presentation.
(3) Cash internally generated is defined as cash generated from operations less
cash dividends. The increase in cash internally generated as a percentage
of construction expenditures in 1992 resulted from rate increases late in
1991. The decrease from 1992 to 1993 resulted from an $18 million refund to
customers in 1993 for amounts collected over bonded rates relating to the
1991 rate increase. (4) The increase in long-term debt in 1992 resulted
primarily from the issuance of debt securities to satisfy current
maturities of long-term debt and unsecured notes payable.
</FN>
Page 9
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
UTILITY STATISTICS Operating revenues (in thousands):
Residential................................... $ 200,455 $ 194,933 $ 193,484 $ 175,885 $ 176,651
Commercial.................................... 148,908 141,886 138,680 128,550 119,745
Industrial.................................... 113,728 122,714 124,474 121,027 128,356
Other......................................... 22,732 18,456 17,604 18,365 16,591
-------- ------- -------- -------- -------
Total....................................... $ 485,823 $ 477,989 $ 474,242 $ 443,827 $ 441,343
======== ======= ======== ======== =======
Sales (MWH):
Residential.................................. 2,141,553 2,085,621 2,047,360 1,947,593 2,017,349
Commercial................................... 1,681,130 1,618,840 1,567,083 1,499,927 1,485,211
Industrial................................... 2,704,159 2,652,844 2,567,552 2,508,837 2,798,369
Other........................................ 113,985 114,190 104,882 109,954 115,406
---------- ---------- ---------- ---------- ---------
Total...................................... 6,640,827 6,471,495 6,286,877 6,066,311 6,416,335
========== ========== ========== ========== =========
Number of customers (at year-end):
Residential................................... 183,863 185,364 181,298 178,154 174,859
Commercial.................................... 29,361 30,624 30,235 30,359 30,300
Industrial.................................... 136 142 141 155 160
Other......................................... 244 237 237 229 230
-------- ------- -------- -------- -------
Total....................................... 213,604 216,367 211,911 208,897 205,549
======== ======= ======== ======== =======
Revenue statistics:
Average annual use per residential
customer (KWH)............................. 11,476 11,354 11,362 11,003 11,584
Average annual revenue per residential
customer (dollars)......................... 1,074 1,061 1,067 987 1,010
Average revenue per KWH
sold - residential (cents)................. 9.36 9.35 9.45 9.03 8.76
Average revenue per KWH
sold - total sales (cents)................. 7.32 7.39 7.54 7.32 6.88
Net generation and purchases (MWH):
Generated.................................... 2,351,000 2,336,830 2,363,493 2,247,664 1,337,366
Purchased.................................... 4,612,186 4,472,306 4,385,697 4,261,129 5,452,132
---------- ---------- ---------- ---------- ---------
Total(5)................................... 6,963,186 6,809,136 6,749,190 6,508,793 6,789,498
========== ========== ========== ========== =========
Average cost per KWH purchased (cents).......... 3.87 4.35 4.56 4.09 3.98
Employees (year-end)............................ 858 894 1,051 1,086 1,104
<FN>
(5) The difference between total sources and total sales represents TNP
internal use and line losses. Also, increase in MWH generation and the
related decrease in MWH purchased in 1992 resulted from the full calendar
year utilization of TNP One Unit 2 that became commercially operational in
October 1991.
</FN>
Page 10
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Competitive Conditions
Historical Condition
Historically, TNP has operated with little direct competition throughout
most of its service territory. TNP is the only electric utility issued a
certificate of public convenience and necessity to serve customers in most of
its Texas service areas. In New Mexico, TNP holds exclusive franchise agreements
with the municipalities and adjacent areas that it serves. TNP expects
competitive conditions in the electric utility industry to change significantly,
as discussed below.
Regulatory Changes
Federal. In March 1995, FERC proposed comprehensive regulatory changes to
facilitate development of a competitive wholesale electric power market. FERC's
notice of proposed rulemaking, commonly referred to as the "Mega-NOPR," will
require all FERC regulated public utilities to offer nondiscriminatory, open
access tariffs to all wholesale sellers and purchasers of electric energy in
interstate commerce. Utilities that own transmission facilities will be required
to provide all wholesale purchasers and sellers of electric energy full service
transmission arrangements comparable in quality and cost to transmission
services that the owner charges its own customers. No such requirement currently
exists. These utilities will also be required to provide all actual and
potential transmission users access to real time information on the transmission
capabilities of its network. Currently, this information is treated as
proprietary. FERC is expected to adopt the Mega-NOPR by mid 1996.
FERC's proposal stems from the Energy Policy Act of 1992, in which, among
other things, Congress authorized FERC to relieve various discriminatory
practices in the electric utility industry. This legislation eliminated many
anticompetitive restrictions on owning and operating nonutility power producers,
or EWGs. It also mandated increased transmission access for wholesale suppliers
in interstate commerce.
State. Many states are also considering regulatory changes to increase
competition in the electric utility industry and lower consumer prices. The PUCT
recently passed a wholesale transmission access rule to lower costs for a third
party to transport electricity through a utility's transmission network. During
1995, the PUCT considered proposals to enable retail customers to choose among
suppliers, a practice commonly referred to as "retail wheeling," but took no
action. The New Mexico legislature has currently rejected retail wheeling
proposals. However, the NMPUC is conducting a study to determine the feasibility
of "managed competition," which resembles retail wheeling. The largest
impediment to retail wheeling centers on how to account for the potential
financial impairment of utility assets, or "stranded costs," as the industry
evolves from a regulated to a competitive environment. Generating facilities are
most at risk of impairment because they will be most exposed to competition from
an increasing number of power producers. TNP believes that transmission and
distribution facilities are less vulnerable to impairment considerations because
they will continue to be regulated.
Industry Response
The regulatory changes described above are resulting in competition in
generating and supplying electricity and contributing to a "buyers" market for
wholesale power. Electric utilities are responding by attempting to reduce
operating costs and adopting strategies to protect current markets and identify
opportunities for customer growth. This has been achieved through a combination
of mergers, internal restructuring, "unbundling of services," and the creation
of power marketers. Services are "unbundled" when a fully integrated utility
reorganizes into separate companies or divisions, each specializing in a
specific service such as generation, transmission and distribution, and
marketing. Power marketers actively search for buyers of excess generated
electricity.
Although the electric utility industry is evolving into an increasingly
competitive, market-dominated environment, the transition toward federal and
state deregulation is currently proceeding independently and TNP cannot predict
when the transition will be completed. However, the transition is expected to
result in a growing number of competing power suppliers and declining customer
prices.
Impact on TNP
The inability to recover stranded costs could adversely impact TNPE's and
TNP's financial condition. TNP is considering various alternatives to address
its potential for stranded costs. Although final resolution and magnitude of the
issue is uncertain, management anticipates that shareholders and customers will
share the financial burden of stranded costs.
Page 11
Assuming satisfactory resolution of the stranded costs issue, TNP believes
that current competitive developments on the wholesale market ultimately will
benefit TNP and its customers. Because TNP purchases much of its power, TNP can
take advantage of the lower transmission prices, additional market flexibility,
and new options in obtaining purchased power. TNP's competitive position has
been strengthened with the PUCT open access to transmission rule. TNP currently
has no significant wholesale power sales but expects to position itself to take
advantage of opportunities to serve additional wholesale customers as they
arise. Management believes TNP's revenue growth opportunities are in an
increased customer base and new services. TNP established a marketing division
in December 1995 to pursue these opportunities.
TNP believes its market niche is in smaller to medium sized communities.
Only two of the 84 communities in TNP's service area have populations in excess
of 50,000. While some larger, fully integrated utilities are closing offices in
smaller towns and consolidating in major population centers, TNP opened two
additional small-town offices in 1995.
Results of Operations
Overall Results
Earnings applicable to common stock were $40.8 million for 1995, the second
highest earnings in TNPE's history. This was an increase of $59.0 million as
compared to a loss applicable to common stock of $18.2 million for 1994.
Management believes the initiatives taken in 1994 - adopting a strategic plan,
rate settlements, reorganization - set the framework for the earnings increase
in 1995.
Excluding the one-time items discussed below, 1995 earnings were $19.9
million, an $11.9 million improvement over 1994 earnings of $8.0 million. The
$11.9 million improvement resulted primarily from base revenue increases, but
also from increased GWH sales, cost containment of operating expenses, and lower
interest charges.
One-time items, net of taxes, in 1995 consisted of the cumulative effect of
the change in accounting for unbilled revenues of $8.4 million, gain on sale of
the Texas Panhandle properties of $9.5 million, and recognition of deferred
revenues related to a favorable IRS private letter ruling of $3.0 million.
One-time items, net of taxes, in 1994 consisted of the recognition of regulatory
disallowances of $20.5 million and reorganization costs of $5.7 million.
Additional information concerning these one-time items is set forth in Notes 2,
3, 4, 5, and 6, which are incorporated here by reference.
Earnings applicable to common stock before one-time items in 1994 were $2.7
million less than in 1993. This decrease resulted from increases in interest
charges and labor/benefits expenses partially offset by increased base revenue
and decreased income taxes.
The following table sets forth results of operations for 1995, 1994, and
1993 and the impact of one-time items:
1995 1994 1993
------------------ ------------------- -----------
Amount EPS Amount EPS Amount EPS
(In thousands except per share amounts)
Earnings applicable to common
stock before one-time items.................. $ 19,908 $ 1.83 $ 7,997 $ 0.74 $ 10,726 $ 1.01
------- ----- -------- ----- ------- ----
One-time items, net of income taxes:
Cumulative effect of change in accounting.... 8,445 0.77 - - - -
Gain on sale of Texas Panhandle properties... 9,479 0.87 - - - -
Recognition of deferred revenues............. 3,018 0.28 - - - -
Reorganization costs......................... - - (5,723) (0.53) - -
Regulatory disallowances..................... - - (20,505) (1.91) - -
------- ----- -------- ----- ------- ---
Total one-time items, net................. 20,942 1.92 (26,228) (2.44) - -
------- ---- ------- ----- ------- ---
Earnings (loss) applicable
to common stock.............................. $ 40,850 $ 3.75 $ (18,231) $ (1.70) $ 10,726 $ 1.01
====== ===== ======= ===== ======= ====
Page 12
Operating Revenues
The following table summarizes the components of operating revenues (in
thousands). One-time items are identified separately to enhance comparability of
annual operating revenues.
Increase (Decrease)
1995 1994 1993 `95 v. `94 `94 v. `93
-------- --------- --------- ---------- ----------
Operating revenues $ 485,823 $ 477,989 $ 474,242 $ 7,834 $ 3,747
Effect of change in unbilled revenues 212 - - 212 -
Effect of recognizing deferred
revenue from private letter ruling (4,128) - - (4,128) -
------- ------- -------- ------- -----
Subtotal 481,907 477,989 474,242 3,918 3,747
------- ------- -------- ------- ------
Less pass-through items:
Purchased power 178,465 194,595 200,183 (16,130) (5,588)
Fuel 44,828 43,024 41,099 1,804 1,925
Standby power 5,610 5,894 6,474 (284) (580)
------- ------- -------- ------- ------
Total pass-through items 228,903 243,513 247,756 (14,610) (4,243)
------- ------- ------- ------- ------
Base revenues-billed $ 253,004 $ 234,476 $ 226,486 $ 18,528 $ 7,990
======= ======= ======== ======= ======
Pass-through items are the portion of operating revenues that recover from
customers the costs of purchased power, fuel, and standby power. These items
affect customer rates but do not affect operating income. Annual variances are
discussed under "Results of Operations--Operating Expenses."
Excluding the effects of one-time items, 1995 base revenues exceeded 1994
base revenues by $18.5 million. The increase is primarily due to rate increases
in both Texas ($17.5 million annualized) and New Mexico ($0.4 million
annualized) resulting from settlement agreements in October and May of 1994,
respectively. Increased sales also contributed to the base revenue increase.
Sales of 6,641 GWH in 1995 represented a 2.6% improvement over prior year sales
and contributed $5.1 million to the increase in 1995 base revenues. The increase
in sales resulted from increased consumption by all customer classes, and is
attributed to warmer weather and customer growth. The increases for each
customer class are residential (2.7%), commercial (3.9%), and industrial (1.9%).
Excluding the reduction in customers from the sale of the Texas Panhandle
properties, total customers increased by 2.1%.
Base revenues in 1994 exceeded the 1993 amount by $8.0 million. This
increase is also attributable to the 1994 settlement agreements, as well as to
higher customer usage (2.9% overall KWH sales increase) from increases in the
number of residential and commercial customers.
In 1995, 85.7% of TNP's revenues were generated in Texas. Pursuant to a
rate case settlement approved by the PUCT in October 1994, TNP may not increase
its base rates in Texas prior to March 1999 except in certain extraordinary
circumstances. Additional information about the settlement is set forth in Note
5. TNP currently has no plans to file for a rate increase in New Mexico in the
near term.
TNP is aggressively pursuing arrangements with industrial customers that
benefit both the customer and TNP. One industrial customer has switched from
self-generation and is expected to increase annual sales by 430 GWH and provide
$2.4 million of additional base revenues beginning in mid 1996. TNP is actively
negotiating with another major industrial customer providing annual revenues of
$26.7 million in 1995 ($9.4 million in base revenues). This customer is
constructing a 300-MW cogeneration plant, the first phase of which is expected
to commence operations in 1998. TNP is negotiating with the customer to continue
providing electrical services to the customer. If TNP is successful, revenues
from this customer are expected to be at lower profit margins.
Operating Expenses
Operating expenses for 1995 were $2.0 million lower than in 1994, excluding
the $8.8 million reorganization costs in 1994. The decrease is primarily due to
lower pass-through expenses of $14.6 million and labor/benefits expenses of $1.0
million offset by increased income tax expense of $13.6 million.
Operating expenses for 1994, excluding reorganization costs, decreased by
$4.8 million as compared to 1993. This decrease is primarily due to lower
pass-through expenses of $4.2 million and income tax expense of $5.5 million
partially offset by increases in labor/benefits expenses of $2.3 million.
Page 13
Pass-Through Expenses
Pass-through expenses consist of purchased power, fuel, and standby power.
The overall decreases are primarily due to lower costs of purchased power offset
by increased fuel expense.
Purchased Power. Purchased power in 1995 and 1994 decreased $16.1 million
and $5.6 million, respectively, as compared to the corresponding prior years.
Purchases for Texas service areas were shifted to lower cost suppliers for 1995
supplemental summer peaking capacity. This arrangement became effective May 1,
1995, and is expected to result in annualized cost savings of $7.0 million.
During 1995, TNP actively intervened in a Texas rate case of a major supplier
and is benefiting with annualized cost savings of $10.5 million. Purchases for
New Mexico service areas were also shifted to lower cost suppliers beginning mid
1994 and continuing in 1995. TNP's customers directly benefit from these cost
reductions as these expenses are recovered through adjustment clauses.
Purchased power costs represent TNP's largest operating expense. In 1995,
TU was TNP's largest supplier of purchased power in Texas and is TNP's highest
price supplier. As described in Note 12, TNP has notified TU of its intent to
cease purchasing full requirements power and energy effective January 1, 1999.
In July 1995, TNP issued requests for proposals for purchased power resources
during 1996 through 2004 to replace the power currently provided by TU.
Fuel. Fuel expense in 1995 and 1994 increased $1.8 million and $1.9
million, excluding amounts of nonpass-through fuel expenditures, respectively,
as compared to the corresponding prior years. Fuel expense is directly related
to an increased fixed fuel recovery factor approved by the PUCT in connection
with the 1994 Texas rate case settlement. The majority of TNP's fuel expense is
recovered in revenues and any difference from actual costs is deferred until a
new factor is established under a fuel factor reconciliation hearing. The
current fixed fuel factor was established to recover current expense as well as
any under-recovered fuel. The under-recovered amount at December 31, 1995, was
$9.3 million. Also, contributing to the recovery of under-recovered fuel is a
20% reduction in the cost of lignite coal or $7.6 million annually. Additional
information about the cost of coal is set forth in Note 12. In management's
opinion, the current fixed fuel factor along with the fuel cost reduction should
enable the recovery of under-recovered fuel costs by the second half of 1997.
Originally, the recovery of under-recovered fuel costs was expected by the
second half of 1996; however, increased standby purchases in connection with
outages at TNP One and increased economy sales, to which the fixed fuel factor
does not apply, have delayed the recovery of under-recovered fuel costs. Economy
sales were higher because of the increasing number of renegotiated contracts
with industrial customers.
Labor/Benefits Expenses
Other operating expense was $1.0 million lower in 1995 than in 1994.
Payroll and payroll related items decreased $7.2 million, primarily as a result
of the 1994 reorganization. Offsetting these savings were the costs of employee
incentive compensation plans adopted in 1995, increases in customer collection
costs, outsourcing, outside services, wage and salary increases, and other
administrative expenses.
Labor/benefits expenses increased $2.3 million from 1993 to 1994. Labor
increased $1.2 million due to a 3% general wage increase implemented in January
1994, the first such adjustment since 1991. TNP also restored employer matching
contributions to the 401(k) thrift plan in July 1994. Matching contributions had
been discontinued since January 1, 1993.
Interest Charges
The $1.3 million decrease in 1995 interest charges resulted from reduced
long-term debt levels and decreased interest rates associated with the New
Credit Facility. Contributing to reduced debt levels were the retirement of
$29.2 million of Series T FMBs in October 1995 with proceeds from the sale of
the Texas panhandle properties and lower average borrowings under TNP's credit
facilities. Increased profitability during 1995 as previously discussed at
"Results of Operations--Overall Results" enabled TNP to reduce its average
borrowings under the its credit facilities.
Interest charges are expected to decrease during 1996 for three reasons.
First, management expects to use available cash flow to reduce borrowings under
the New Credit Facility in 1996. Second, TNP will experience a full year effect
of the $29.2 million Series T FMBs retirement ($3.3 million annually). Third,
the reduced interest rate margin associated with the New Credit Facility will
contribute to lower interest charges.
Annual interest charges during 1994 increased by $7.3 million as compared
to 1993. The increase resulted from the issuance of $270.0 million of debt
during September 1993 which replaced debt with lower interest rates. Issuing
these securities enabled TNP to extend maturities and utilize
prepayment/subsequent reborrowing provisions of the remaining debt outstanding
under its previous credit facilities, which were used to finance TNP's
acquisition of TNP One.
Page 14
Liquidity and Capital Resources
Sources of Liquidity
As discussed in Note 9, TNP entered into the New Credit Facility on
November 3, 1995, amending its previous credit facilities. TNP's improved cash
flow from operations resulted in significant reductions in outstanding principal
balances associated with its credit facilities. As of December 31, 1995, the
unused commitment under the New Credit Facility was $107 million. TNP can borrow
only $57 million of the unused commitment unless it pledges FMBs equal in
principal amount to total New Credit Facility borrowings over $100 million.
Capital Resources
Both TNPE's and TNP's capital structure improved during 1995 as TNP was
able to reduce debt levels due to the sale of the Texas Panhandle properties
(see Note 3) and the significant earnings improvement described at "Results of
Operations--Overall Results." The equity portion of TNPE's capital structure
increased from 21.1% at December 31, 1994, to 26.1% at December 31, 1995.
Conversely, the long-term debt ratio decreased from 77.9% to 73.5% for the same
period. TNP experienced similar results with its capital ratios. TNP also
retired $5.1 million of preferred stock during 1995.
TNP's capital requirements through 2000 are projected to be as follows
(amounts in millions):
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
FMB and secured debenture maturities (see Note 9) $ 1.1 $ 101.9 $ 1.1 $ 131.1 $ 110.1
Capital expenditures 32.3 30.5 31.8 33.2 34.9
----- ------ ----- ----- -----
Total capital requirements $ 33.4 $ 132.4 $ 32.9 $ 164.3 $ 145.0
===== ====== ===== ===== =====
At the end of 1995 the outstanding balance under the New Credit Facility
was $43 million, which will be due in 2000. The New Credit Facility provides
greater financial flexibility to TNP. In addition to lower interest rate
margins, the New Credit Facility is available to retire other outstanding
long-term debt. TNP believes that cash flow from operations and periodic
borrowings under the New Credit Facility will be sufficient to meet working
capital requirements and fund planned capital requirements through 1996. TNP
expects to use the New Credit Facility to redeem maturing debt in 1997.
Borrowings under the New Credit Facility may be supplemented, however, by
issuing other long-term debt or a capital contribution from the proceeds of a
TNPE common stock sale.
Other Matters
In March 1995, FASB issued SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS 121
requires that long-lived assets and certain intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
In October 1995, FASB issued SFAS 123, "Accounting for Stock-Based
Compensation." SFAS 123 permits companies to retain the current approach set
forth in APB Opinion 25, "Accounting for Stock Issued to Employees," for
recognizing stock-based compensation. However, companies are encouraged to adopt
a new accounting method based on estimated fair values. Companies that do not
follow the new fair value based method will be required to provide expanded
disclosures in their 1996 financial statements.
Management believes that adopting SFAS 121 and SFAS 123 in 1996 will not
have a material effect on TNPE's and TNP's consolidated financial position or
results of operations.
Page 15
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Independent Auditors' Report
The Board of Directors and Shareholders
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, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for operating revenues in 1995. 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 7, 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
February 6, 1996
Page 16
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, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for operating revenues in 1995. 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 7, 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
February 6, 1996
Page 17
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Years Ended December 31, 1995
1995 1994 1993
---- ---- ----
(In thousands except per share amounts)
OPERATING REVENUES (Notes 2, 4, and 5)................................... $ 485,823 $ 477,989 $ 474,242
--------- ------- -------
OPERATING EXPENSES:
Purchased power....................................................... 178,465 194,595 200,183
Fuel.................................................................. 48,898 46,988 44,348
Other operating and general expenses.................................. 71,311 72,472 69,406
Maintenance........................................................... 11,522 11,966 11,460
Reorganization costs (Note 6)......................................... - 8,782 -
Depreciation of utility plant......................................... 37,850 36,782 36,015
Taxes other than income taxes......................................... 28,865 29,651 30,296
Income taxes (Note 8)................................................. 12,317 (1,238) 4,294
-------- -------- --------
Total operating expenses........................................... 389,228 399,998 396,002
-------- -------- --------
NET OPERATING INCOME..................................................... 96,595 77,991 78,240
-------- -------- --------
OTHER INCOME (LOSS):
Gain on sale of Texas Panhandle properties (Note 3)................... 14,583 - -
Recognition of regulatory disallowances (Note 5)...................... - (31,546) -
Other income and deductions, net ..................................... 1,245 1,057 1,972
Income taxes (Note 8)................................................. (5,403) 10,305 (666)
-------- -------- --------
Other income (loss), net of taxes.................................. 10,425 (20,184) 1,306
-------- -------- --------
EARNINGS BEFORE INTEREST CHARGES
AND CHANGE IN ACCOUNTING........................................... 107,020 57,807 79,546
-------- -------- --------
INTEREST CHARGES:
Interest on long-term debt............................................ 70,544 71,568 63,833
Other interest and amortization of debt-related costs................. 3,416 3,680 4,108
-------- -------- --------
Total interest charges............................................. 73,960 75,248 67,941
-------- -------- --------
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING............................................ 33,060 (17,441) 11,605
Cumulative effect of change in accounting for
unbilled revenues, net of taxes (Note 2).............................. 8,445 - -
-------- -------- -------
NET EARNINGS (LOSS)...................................................... 41,505 (17,441) 11,605
Dividends on preferred stock............................................. 655 790 879
-------- -------- --------
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK............................... $ 40,850 $ (18,231) $ 10,726
======== ======== ========
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
Earnings (loss) before cumulative effect of change in accounting...... $ 2.98 $ (1.70) $ 1.01
Cumulative effect of change in accounting for unbilled revenues....... 0.77 - -
-------- -------- -------
Earnings (loss) per share............................................. $ 3.75 $ (1.70) $ 1.01
======== ======= ========
DIVIDENDS PER SHARE...................................................... $ 0.82 $ 1.22 $ 1.63
======== ======= ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING............................... 10,901 10,750 10,641
======== ======== ========
PRO FORMA AMOUNTS ASSUMING RETROACTIVE
APPLICATION OF CHANGE IN ACCOUNTING:
Earnings (loss) applicable to common stock............................ $ 32,405 $ (16,884) $ 11,724
Earnings (loss) per share............................................. $ 2.98 $ (1.57) $ 1.10
See accompanying Notes to Consolidated Financial Statements.
Page 18
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Years Ended December 31, 1995
1995 1994 1993
---- ---- ----
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers..........................................$ 481,470 $ 475,462 $ 460,463
Purchased power....................................................... (172,486) (193,366) (195,063)
Fuel costs paid....................................................... (44,781) (46,537) (46,049)
Cash paid for payroll and to other suppliers.......................... (76,735) (85,912) (76,254)
Interest paid, net of amounts capitalized............................. (68,484) (76,402) (59,028)
Income taxes paid..................................................... (1,095) 365 (3,263)
Other taxes paid, net of amounts capitalized.......................... (30,556) (30,323) (30,344)
Other operating cash receipts and payments, net....................... 1,043 1,014 236
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................. 88,376 44,301 50,698
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant, net of
capitalized depreciation and interest............................ (28,689) (29,038) (26,360)
Net proceeds from sale of Texas Panhandle properties.................. 29,009 - -
Purchases of temporary investments.................................... - (5,590) -
Maturities of temporary investments................................... 5,590 - -
--------- --------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES....................... 5,910 (34,628) (26,360)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on preferred and common stocks......................... (9,616) (13,823) (18,223)
Issuances:
Common stock....................................................... 856 2,502 1,701
Borrowings under revolving credit facility......................... 77,000 188,500 -
First mortgage bonds............................................... - - 240,000
Deferred expenses associated with financings....................... (2,096) - (8,940)
Redemptions:
Preferred stock.................................................... (5,080) (880) (880)
Repayments under revolving credit facility......................... (119,272) (182,028) (280,700)
First mortgage bonds............................................... (30,270) (1,070) (31,658)
--------- --------- ---------
NET CASH USED IN FINANCING ACTIVITIES..................................... (88,478) (6,799) (98,700)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS................................... 5,808 2,874 (74,362)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............................ 15,297 12,423 86,785
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR..................................$ 21,105 $ 15,297 $ 12,423
========= ========= =========
RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net earnings (loss)...................................................$ 41,505 $ (17,441) $ 11,605
Adjustments to reconcile net earnings (loss) to net cash provided:
Cumulative effect of change in accounting, net of taxes............ (8,445) - -
Gain on sale of Texas Panhandle properties................................ (14,583) - -
Depreciation of utility plant...................................... 37,850 36,782 36,015
Amortization of debt-related costs and other deferred charges...... 4,952 5,495 4,939
Allowance for borrowed funds used during construction.............. (162) (275) (303)
Deferred income taxes (excluding the change in accounting)......... 5,256 (10,915) 5,534
Investment tax credits............................................. 1,679 (1,436) (953)
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............................ 5,997 (107) 2,584
Accrued interest................................................... 2,289 (4,422) 7,246
Accrued taxes...................................................... 8,483 (1,108) (2,130)
Revenues subject to refund......................................... (4,782) 1,382 (14,115)
Purchased power costs subject to refund............................ 5,688 - -
Changes in other current assets and liabilities.................... 3,138 (1,387) 972
Other, net............................................................ (489) (671) (696)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................................$ 88,376 $ 44,301 $ 50,698
========= ========= =========
See accompanying Notes to Consolidated Financial Statements.
Page 19
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995, and 1994
1995 1994
---- ----
(In thousands)
ASSETS
UTILITY PLANT (Notes 3, 5, and 9):
Electric plant................................................................... $ 1,193,538 $ 1,192,277
Construction work in progress.................................................... 3,334 3,816
--------- ----------
Total...................................................................... 1,196,872 1,196,093
Less accumulated depreciation.................................................... 252,868 228,820
--------- ----------
Net utility plant.......................................................... 944,004 967,273
--------- ----------
NONUTILITY PROPERTY, at cost........................................................ 1,156 1,308
CURRENT ASSETS:
Cash and cash equivalents........................................................ 21,105 15,297
Temporary investments............................................................ - 5,590
Customer receivables (Note 2).................................................... 15,569 3,832
Inventories, at the lower of average cost or market:
Fuel.......................................................................... 492 1,157
Materials and supplies........................................................ 7,287 7,527
Deferred purchased power and fuel costs.......................................... 9,261 15,258
Accumulated deferred income taxes (Note 8)....................................... 144 2,702
Other current assets............................................................. 960 1,817
--------- ----------
Total current assets....................................................... 54,818 53,180
--------- ----------
DEFERRED CHARGES.................................................................... 30,455 32,727
--------- ----------
$ 1,030,433 $ 1,054,488
========= ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (See Consolidated Statements of Capitalization):
Common shareholders' equity (Note 11)............................................ $ 217,457 $ 184,869
Preferred stock (Note 10)........................................................ 3,600 8,680
Long-term debt, less current maturities (Note 9)................................. 611,925 682,832
--------- ----------
Total capitalization....................................................... 832,982 876,381
--------- ----------
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 9).................................... 1,070 2,670
Accounts payable................................................................. 22,040 21,951
Accrued interest................................................................. 13,982 11,693
Accrued taxes.................................................................... 26,205 17,722
Customers' deposits.............................................................. 2,493 3,973
Revenues subject to refund (Note 4).............................................. - 4,782
Purchased power costs subject to refund.......................................... 5,688 -
Other current liabilities........................................................ 12,472 10,621
--------- ----------
Total current liabilities.................................................. 83,950 73,412
--------- ----------
REGULATORY TAX LIABILITIES.......................................................... 26,826 30,003
ACCUMULATED DEFERRED INCOME TAXES (Note 8).......................................... 57,381 46,960
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS (Note 8)................................ 18,592 16,912
DEFERRED CREDITS (Note 7)........................................................... 10,702 10,820
COMMITMENTS AND CONTINGENCIES (Notes 1, 3, 5, 8, and 12)
$ 1,030,433 $ 1,054,488
========= ==========
See accompanying Notes to Consolidated Financial Statements.
Page 20
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31, 1995, and 1994
1995 1994
---- ----
(In thousands)
COMMON SHAREHOLDERS' EQUITY (Note 11): Common stock with no par value per share.
Authorized shares: 50,000,000
Outstanding shares: 10,920,060 in 1995 and 10,866,441 in 1994........................ $ 134,973 $ 134,117
Retained earnings....................................................................... 82,484 50,752
-------- --------
Total common shareholders' equity $ 217,457 $ 184,869
======== ========
PREFERRED STOCK (Note 10): Preferred stock with no par value.
Authorized shares: 5,000,000
Outstanding shares: None
Redeemable cumulative preferred stock of TNP with $100 par value.
Authorized shares: 1,000,000
Redemption price at
option of TNP Outstanding shares
1995 1994 1995 1994
Series B 4.65% $100.00 $100.00 22,800 24,000................ $ 2,280 $ 2,400
Series C 4.75 100.00 100.00 13,200 13,800................ 1,320 1,380
Series D 11.00 - 101.04 - 2,000................ - 200
Series E 11.00 - 101.04 - 1,000................ - 100
Series F 11.00 - 101.04 - 2,000................ - 200
Series G 11.88 - 106.43 - 44,000................ - 4,400
-------- ------- -------- --------
Total redeemable
cumulative preferred stock 36,000 86,800 $ 3,600 $ 8,680
======== ======= ======== ========
LONG-TERM DEBT (Note 9):
FIRST MORTGAGE BONDS:
Series L 10.50% due 2000.................................................... $ 9,600 $ 9,720
Series M 8.70 due 2006.................................................... 8,200 8,300
Series R 10.00 due 2017.................................................... 62,400 63,050
Series S 9.63 due 2019.................................................... 19,600 19,800
Series T 11.25 due 1997.................................................... 100,800 130,000
Series U 9.25 due 2000.................................................... 100,000 100,000
-------- --------
Total first mortgage bonds 300,600 330,870
Unamortized discount........................................................... (605) (640)
-------- --------
Total first mortgage bonds, net 299,995 330,230
-------- --------
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
-------- --------
REVOLVING CREDIT FACILITY............................................................... 43,000 85,272
-------- --------
Total long-term debt 612,995 685,502
Less current maturities......................................................... (1,070) (2,670)
-------- --------
Total long-term debt, less current maturities $ 611,925 $ 682,832
======== ========
TOTAL CAPITALIZATION $ 832,982 $ 876,381
======== ========
See accompanying Notes to Consolidated Financial Statements.
Page 21
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
AND REDEEMABLE CUMULATIVE PREFERRED STOCK
Three Years Ended December 31, 1995
Common Shareholders' Equity Redeemable
-------------------------------------------------- Cumulative
Common Stock Retained Preferred
Shares Amount Earnings Total Stock
------ ------ -------- ----- ---------
(In thousands)
----------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993:
Balance at December 31, 1992............................. 10,598 $ 129,914 $ 88,621 $ 218,535 $ 10,440
Net earnings............................................. - - 11,605 11,605 -
Dividends on preferred stock............................. - - (879) (879) -
Dividends on common stock - $1.63 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 at 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 - $1.22 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 at December 31, 1994 10,866 134,117 50,752 184,869 8,680
YEAR ENDED DECEMBER 31, 1995:
Net earnings............................................. - - 41,505 41,505 -
Dividends on preferred stock............................. - - (655) (655) -
Dividends on common stock - $ 0.82 per share............. - - (8,938) (8,938) -
Sale of common stock..................................... 54 856 - 856 -
Purchase and retirement of preferred stock (Note 10)..... - - (180) (180) (5,080)
------- -------- -------- ------- --------
Balance at December 31, 1995 10,920 $ 134,973 $ 82,484 $ 217,457 $ 3,600
======= ======== ======== ======= ========
See accompanying Notes to Consolidated Financial Statements.
Page 22
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Years Ended December 31, 1995
1995 1994 1993
---- ---- ----
(In thousands)
OPERATING REVENUES (Notes 2, 4, and 5)............................... $ 485,823 $ 477,989 $ 474,242
-------- -------- --------
OPERATING EXPENSES:
Purchased power................................................... 178,465 194,595 200,183
Fuel.............................................................. 48,898 46,988 44,348
Other operating and general expenses.............................. 71,311 72,472 69,406
Maintenance....................................................... 11,522 11,966 11,460
Reorganization costs (Note 6)..................................... - 8,782 -
Depreciation of utility plant..................................... 37,850 36,782 36,015
Taxes other than income taxes..................................... 28,865 29,651 30,296
Income taxes (Note 8)............................................. 12,317 (1,238) 4,294
-------- -------- --------
Total operating expenses....................................... 389,228 399,998 396,002
-------- -------- --------
NET OPERATING INCOME................................................. 96,595 77,991 78,240
-------- -------- --------
OTHER INCOME (LOSS):
Gain on sale of Texas Panhandle properties (Note 3)............... 14,583 - -
Recognition of regulatory disallowances (Note 5).................. - (31,546) -
Other income and deductions, net ................................. 1,470 1,475 1,846
Income taxes (Note 8)............................................. (5,324) 10,694 (622)
-------- -------- --------
Other income (loss), net of taxes.............................. 10,729 (19,377) 1,224
-------- -------- --------
EARNINGS BEFORE INTEREST CHARGES
AND CHANGE IN ACCOUNTING....................................... 107,324 58,614 79,464
-------- -------- --------
INTEREST CHARGES
Interest on long-term debt........................................ 70,544 71,568 63,833
Other interest and amortization of debt-related costs............. 3,416 3,680 4,108
-------- -------- --------
Total interest charges......................................... 73,960 75,248 67,941
-------- -------- --------
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING........................................ 33,364 (16,634) 11,523
Cumulative effect of change in accounting
for unbilled revenues, net of taxes (Note 2)...................... 8,445 - -
-------- -------- -------
NET EARNINGS (LOSS).................................................. 41,809 (16,634) 11,523
Dividends on preferred stock......................................... 655 790 879
-------- -------- --------
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK........................... $ 41,154 $ (17,424) $ 10,644
======== ======== ========
PRO FORMA EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK ASSUMING RETROACTIVE.....................
APPLICATION OF CHANGE IN ACCOUNTING............................ $ 32,709 $ (16,077) $ 11,642
======== ======== ========
See accompanying Notes to Consolidated Financial Statements.
Page 23
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, 1995
1995 1994 1993
---- ---- ----
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers..........................................$ 481,470 $ 475,462 $ 460,463
Purchased power....................................................... (172,486) (193,366) (195,063)
Fuel costs paid....................................................... (44,781) (46,537) (46,049)
Cash paid for payroll and to other suppliers.......................... (76,793) (86,632) (79,583)
Interest paid, net of amounts capitalized............................. (68,484) (76,402) (59,028)
Income taxes paid..................................................... (1,199) (1,215) (2,388)
Other taxes paid, net of amounts capitalized.......................... (30,054) (29,906) (29,888)
Other operating cash receipts and payments, net....................... 639 1,442 1,532
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................. 88,312 42,846 49,996
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant, net of capitalized depreciation and interest (28,689) (29,038)
(26,360)
Net proceeds from sale of Texas Panhandle properties.................. 29,009 - -
--------- --------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES....................... 320 (29,038) (26,360)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on preferred and common stocks......................... (3,078) (11,794) (18,223)
Issuances:
Borrowings under revolving credit facility......................... 77,000 188,500 -
First mortgage bonds............................................... - - 240,000
Deferred expenses associated with financings....................... (2,096) - (8,940)
Equity contribution received from TNPE............................. - - 15,000
Redemptions:
Preferred stock.................................................... (5,080) (880) (880)
Repayments under revolving credit facility......................... (119,272) (182,028) (280,700)
First mortgage bonds............................................... (30,270) (1,070) (31,658)
--------- --------- ---------
NET CASH USED IN FINANCING ACTIVITIES..................................... (82,796) (7,272) (85,401)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS................................... 5,836 6,536 (61,765)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............................ 8,614 2,078 63,843
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR..................................$ 14,450 $ 8,614 $ 2,078
========= ========= =========
RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net earnings (loss)...................................................$ 41,809 $ (16,634) $ 11,523
Adjustments to reconcile net earnings (loss) to net cash provided:
Cumulative effect of change in accounting, net of taxes............ (8,445) - -
Gain on sale of Texas Panhandle properties......................... (14,583) - -
Depreciation of utility plant...................................... 37,850 36,782 36,015
Amortization of debt-related costs and other deferred charges...... 4,952 5,495 4,939
Allowance for borrowed funds used during construction.............. (162) (275) (303)
Deferred income taxes (excluding the change in accounting)......... 5,132 (10,920) 5,515
Investment tax credits............................................. 1,691 (1,374) (959)
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............................ 5,997 (107) 2,584
Accrued interest................................................... 2,289 (4,422) 7,246
Accrued taxes...................................................... 8,432 (1,108) (2,130)
Revenues subject to refund......................................... (4,782) 1,382 (14,115)
Purchased power costs subject to refund............................ 5,688 - -
Changes in other current assets and liabilities.................... 3,174 (3,103) 4,174
Other, net............................................................ (730) (1,274) (4,493)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................................$ 88,312 $ 42,846 $ 49,996
========= ========= =========
See accompanying Notes to Consolidated Financial Statements.
Page 24
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED BALANCE SHEETS
December 31, 1995, and 1994
1995 1994
---- ----
(In thousands)
ASSETS
UTILITY PLANT (Notes 3, 5, and 9):
Electric plant................................................................... $ 1,193,538 $ 1,192,277
Construction work in progress.................................................... 3,334 3,816
--------- ----------
Total...................................................................... 1,196,872 1,196,093
Less accumulated depreciation.................................................... 252,868 228,820
--------- ----------
Net utility plant.......................................................... 944,004 967,273
--------- ----------
NONUTILITY PROPERTY, at cost........................................................ 175 183
CURRENT ASSETS:
Cash and cash equivalents........................................................ 14,450 8,614
Customer receivables (Note 2).................................................... 15,569 3,832
Inventories, at the lower of average cost or market:
Fuel.......................................................................... 492 1,157
Materials and supplies........................................................ 7,287 7,527
Deferred purchased power and fuel costs.......................................... 9,261 15,258
Accumulated deferred income taxes (Note 8)....................................... 144 2,702
Other current assets............................................................. 1,274 1,958
--------- ----------
Total current assets....................................................... 48,477 41,048
--------- ----------
DEFERRED CHARGES.................................................................... 32,287 34,674
--------- ----------
$ 1,024,943 $ 1,043,178
========= ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (See Consolidated Statements of Capitalization):
Common shareholder's equity (Note 11)............................................ $ 224,351 $ 185,777
Redeemable cumulative preferred stock (Note 10).................................. 3,600 8,680
Long-term debt, less current maturities (Note 9)................................. 611,925 682,832
--------- ----------
Total capitalization....................................................... 839,876 877,289
--------- ----------
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 9).................................... 1,070 2,670
Accounts payable................................................................. 22,040 21,951
Accrued interest................................................................. 13,982 11,693
Accrued taxes.................................................................... 25,330 16,898
Customers' deposits.............................................................. 2,493 3,973
Revenues subject to refund (Note 4).............................................. - 4,782
Purchased power costs subject to refund.......................................... 5,688 -
Other current liabilities........................................................ 12,472 10,622
--------- ----------
Total current liabilities.................................................. 83,075 72,589
--------- ----------
REGULATORY TAX LIABILITIES.......................................................... 26,826 30,003
ACCUMULATED DEFERRED INCOME TAXES (Note 8).......................................... 47,066 36,769
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS (Note 8)................................ 17,398 15,708
DEFERRED CREDITS (Note 7)........................................................... 10,702 10,820
COMMITMENTS AND CONTINGENCIES (Notes 1, 3, 5, 8, and 12)
$ 1,024,943 $ 1,043,178
========= ==========
See accompanying Notes to Consolidated Financial Statements.
Page 25
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31, 1995, and 1994
1995 1994
---- ----
(In thousands)
COMMON SHAREHOLDER'S EQUITY (Note 11): Common stock, $10 par value per share.
Authorized shares: 12,000,000
Outstanding shares: 10,705........................................................... $ 107 $ 107
Capital in excess of par value.......................................................... 174,931 175,111
Retained earnings....................................................................... 49,313 10,559
-------- --------
Total common shareholder's equity $ 224,351 $ 185,777
======== ========
REDEEMABLE CUMULATIVE PREFERRED STOCK (Note 10):
Redeemable cumulative preferred stock, $100 par value.
Authorized shares: 1,000,000
Redemption price at
option of TNP Outstanding shares
1995 1994 1995 1994
Series B 4.65% $100.00 $100.00 22,800 24,000................ $ 2,280 $ 2,400
Series C 4.75 100.00 100.00 13,200 13,800................ 1,320 1,380
Series D 11.00 - 101.04 - 2,000................ - 200
Series E 11.00 - 101.04 - 1,000................ - 100
Series F 11.00 - 101.04 - 2,000................ - 200
Series G 11.88 - 106.43 - 44,000................ - 4,400
-------- ------- -------- --------
Total redeemable
cumulative preferred stock 36,000 86,800 $ 3,600 $ 8,680
======== ======= ======== ========
LONG-TERM DEBT (Note 9):
FIRST MORTGAGE BONDS:
Series L 10.50% due 2000.................................................... $ 9,600 $ 9,720
Series M 8.70 due 2006.................................................... 8,200 8,300
Series R 10.00 due 2017.................................................... 62,400 63,050
Series S 9.63 due 2019.................................................... 19,600 19,800
Series T 11.25 due 1997.................................................... 100,800 130,000
Series U 9.25 due 2000.................................................... 100,000 100,000
-------- --------
Total first mortgage bonds 300,600 330,870
Unamortized discount........................................................... (605) (640)
-------- --------
Total first mortgage bonds, net 299,995 330,230
-------- --------
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
-------- ---------
REVOLVING CREDIT FACILITY............................................................... 43,000 85,272
-------- ---------
Total long-term debt 612,995 685,502
Less current maturities......................................................... (1,070) (2,670)
-------- ---------
Total long-term debt, less current maturities $ 611,925 $ 682,832
======== ========
TOTAL CAPITALIZATION $ 839,876 $ 877,289
======= =======
See accompanying Notes to Consolidated Financial Statements.
Page 26
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER'S EQUITY
AND REDEEMABLE CUMULATIVE PREFERRED STOCK
Three Years Ended December 31, 1995
Common Shareholder'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, 1993:
Balance at December 31, 1992........................... 10,705 $ 107 $ 160,085 $ 45,683 $ 205,875 $ 10,440
Net earnings........................................... - - - 11,523 11,523 -
Dividends on preferred stock........................... - - - (879) (879) -
Dividends on common stock.............................. - - - (17,344) (17,344) -
Equity contribution from TNPE.......................... - - 15,000 - 15,000 -
Purchase and retirement of preferred stock............. - - 9 - 9 (880)
------ --- ------- ------- -------- --------
Balance at 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 at December 31, 1994 10,705 107 175,111 10,559 185,777 8,680
YEAR ENDED DECEMBER 31, 1995:
Net earnings........................................... - - - 41,809 41,809 -
Dividends on preferred stock........................... - - - (655) (655) -
Dividends on common stock.............................. - - - (2,400) (2,400) -
Purchase and retirement of preferred stock (Note 10)... - - (180) - (180) (5,080)
------ --- ------- ------- -------- --------
Balance at December 31, 1995 10,705 $ 107 $ 174,931 $ 49,313 $ 224,351 $ 3,600
====== === ======= ======= ======== ========
See accompanying Notes to Consolidated Financial Statements.
Page 27
TNP ENTERPRISES, INC. AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three Years Ended December 31, 1995
(1) Summary of Significant Accounting Policies
General Information
The consolidated financial statements of TNPE and subsidiaries include the
accounts of TNPE and its wholly owned subsidiaries, TNP, Bayport Cogeneration,
Inc., and TNP Operating Company. The consolidated financial statements of TNP
and subsidiaries include the accounts of TNP and its wholly owned subsidiaries,
TGC and TGC II. All intercompany transactions and balances have been eliminated
in consolidation.
TNP is TNPE's principal operating subsidiary. TNP is a public utility
engaged in generating, purchasing, transmitting, distributing, and selling
electricity in Texas and New Mexico. TNP is subject to PUCT and NMPUC
regulation. Some of TNP's activities, including the issuance of securities, are
subject to FERC regulation and its accounting records are maintained in
accordance with FERC's Uniform System of Accounts.
The use of estimates is required to prepare TNPE's and TNP's consolidated
financial statements in conformity with generally accepted accounting
principles. Management believes that estimates are essential and will not
materially differ from actual results.
Certain 1994 and 1993 amounts have been reclassified to conform to the 1995
method of presentation.
Accounting for the Effects of Regulation
Electric utilities operate in a highly regulated environment. TNPE's and
TNP's consolidated financial statements reflect the application of certain
accounting standards, including SFAS 71, "Accounting for the Effects of Certain
Types of Regulation," which provide for recognition of the economic effects of
rate regulation. Included among these effects are the recognition of regulatory
assets and liabilities. Regulatory assets represent revenues associated with
certain costs that are expected to be recovered from customers in future rates.
Regulatory liabilities are costs previously collected from customers and other
amounts that are refundable in future rates. The following table summarizes
TNPE's and TNP's regulatory assets and liabilities as of December 31, 1995, and
1994.
1995 1994
---- ----
(In thousands)
Regulatory Assets:
Deferred purchased power and fuel costs $ 9,261 $ 15,258
Deferred charges:
Losses on reaquired debt 4,810 5,034
Rate case expenses 4,454 5,817
DAT 4,287 4,418
Other 792 437
------ ------
Total $ 23,604 $ 30,964
====== ======
Regulatory Liabilities:
Income tax related $ 26,826 $ 30,003
Purchased power costs subject to refund 5,688 -
------ -----
Total $ 32,514 $ 30,003
====== ======
Federal and state legislators and regulatory authorities have adopted or
are considering a number of changes that are significantly impacting competitive
conditions in the electric utility industry, such as the creation of independent
power producers, wholesale transmission access, and retail wheeling. If recovery
of costs through rates becomes uncertain or unlikely, whether due to legislative
or regulatory changes, competition, or otherwise, accounting standards such as
SFAS 71 may no longer apply to TNPE and TNP. As a result, TNPE and TNP could be
required to write off all or a portion of their regulatory assets and
liabilities. Moreover, to the extent that future rates are insufficient to
recover costs, additional write downs could be required. Management of TNPE and
TNP are currently unable to predict the ultimate outcome of changes in the
electric utility industry and whether the outcome will have a significant effect
on their consolidated financial position and results of operations. However,
based upon current regulatory conditions in the states in which TNP operates,
management believes it probable that TNPE and TNP will continue, for the
foreseeable future, to recover from ratepayers the regulatory assets included in
the table above.
Page 28
Utility Plant
Utility plant is stated at the historical cost of construction which
includes labor, materials, indirect charges for such items as engineering and
administrative costs, and AFUDC. Property repairs and replacement of minor items
are charged to operating expenses; major replacements and improvements are
capitalized to utility plant.
AFUDC is a noncash item designed to enable a utility to capitalize interest
costs during periods of construction. Established regulatory practices enable
TNP to recover these costs from ratepayers. The composite rates used for AFUDC
were 8.0%, 8.8%, and 7.5% in 1995, 1994, and 1993, respectively.
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
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 3.3%, 3.1%, and 3.0% in 1995, 1994,
and 1993, respectively.
Cash Equivalents
All highly liquid debt instruments with maturities of three months or less
when purchased are considered cash equivalents.
Temporary Investments
Temporary investments are recorded at amortized cost, adjusted for
amortized or accreted premiums or discounts, as management has the ability and
intent to hold these securities until maturity. These securities are federal
debt obligations that mature within one year.
Customer Receivables and Operating Revenues
Effective January 1, 1995, TNP changed its method of accounting for
operating revenues from cycle billing to the accrual method as described in Note
2. Unbilled revenues represent the estimated amount customers will be charged
for service received, but not yet billed, as of the end of each month.
Previously these revenues were recognized as operating revenues in the following
month.
TNP sells customer receivables to an unaffiliated company on a nonrecourse
basis.
Purchased Power and Fuel Costs
Electric rates include estimates of purchased power and fuel costs incurred
by TNP in purchasing or generating electricity. Differences between amounts
collected and allowable costs are recorded either as purchased power subject to
refund or deferred purchased power and fuel costs in accordance with regulatory
ratemaking policy.
Deferred Charges
Expenses incurred in issuing long-term debt and related discount and
premium are amortized on a straight-line basis over the lives of the respective
issues.
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.
Income Taxes
In 1993, TNPE and TNP implemented 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 TNP to recognize deferred income taxes for:
- the reduction in depreciable tax bases due to 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.
Page 29
SFAS 109 permits regulated enterprises 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, TNP 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.
ITC amounts 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 TNP and its subsidiaries. The amounts of income taxes
recognized in TNP's accompanying consolidated financial statements were computed
as if TNP and its subsidiaries filed a separate consolidated federal income tax
return.
Fair Values of Financial Instruments
Fair values of cash equivalents, temporary investments, and customer
receivables 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, 1995 December 31, 1994
Carrying Amount Fair Values Carrying Amount Fair Values
--------------- ----------- --------------- -----------
(In thousands)
Long-term debt $ 612,995 $ 643,000 $ 685,502 $ 674,000
Preferred stock 3,600 1,600 8,680 5,900
Earnings (Loss) Per Share
EPS is computed for each year based upon the weighted average common shares
outstanding. Net earnings (loss) is adjusted for preferred dividend
requirements. The effect on EPS of the incentive compensation plans was not
significant as discussed in Note 7.
Common Stock
At December 31, 1995, 306,223 shares of TNPE's common stock were reserved
for issuance to TNP's 401(k) plan. Additionally, 646,957 shares of TNPE's common
stock were reserved for subsequent issuance under other stock compensation or
shareholder plans.
Shareholder Rights Plan
TNPE has a Rights Plan that is designed to protect TNPE's shareholders from
coercive takeover tactics and inadequate or unfair takeover bids. The Rights
Plan provides for the distribution of one right for each share of TNPE's common
stock currently outstanding or issued until the close of business on November 4,
1998.
Upon the occurrence of certain events, each right entitles a shareholder to
elect to purchase one share of common stock at $45 per share or, under certain
circumstances, shares of common stock at half the then-current market price or
to receive TNPE 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 the rights are exercised over (ii) the cash payment that would have been
payable upon exercise of the rights if cash payment had been elected.
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 10% or more of
TNPE's outstanding common stock or the commencement of a tender or exchange
offer that, 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 EPS.
(2) Change in Accounting for Unbilled Revenues
Effective January 1, 1995, TNP changed its method of accounting for
operating revenues from cycle billing to the accrual method. This change
resulted in the recognition of $12,993,000 of additional revenues ($8,445,000,
net of taxes, or $0.77 per share). Accruing unbilled revenues more closely
matches revenues and expenses and more closely conforms to common utility
industry practice. At December 31, 1995, the accrual for unbilled revenues was
$12,781,000.
Page 30
(3) Sale of Texas Panhandle Properties
TNP completed the $29.2 million sale of its Texas Panhandle properties to
SPS on September 15, 1995, and recognized a net of tax gain of $9.5 million, or
$0.87 per share of TNPE common stock. The sale was consummated pursuant to the
sale agreement between TNP and SPS in connection with the Texas rate case
settlement discussed in Note 5. The Panhandle properties comprised a relatively
small portion of TNP's business. The book value of the Panhandle properties sold
was $14.3 million. Revenues from the properties for 1995 through the closing
date were $7.4 million with corresponding sales of 76.3 GWH to 7,350 customers.
The proceeds received from SPS were deposited directly with Bank of
America, Illinois, as Trustee and $29.2 million of Series T FMBs were redeemed
in accordance with the indenture governing TNP's FMBs. On October 16, 1995, the
Trustee paid the proceeds to the holders of the FMBs that were called.
In January 1996, TNP filed a class action lawsuit against John Hancock
Mutual Life Insurance Company, a Series T bondholder. TNP seeks confirmation
that its redemption of Series T FMBs with proceeds from the Panhandle sale was
within its rights under the indenture governing the FMBs. TNP also seeks
attorneys' fees.
TNP's lawsuit originally was filed in Texas state court in September 1995
against PPM, which claimed to be a bondholder and threatened to take legal
action against TNP over the redemption. On PPM's motion, the original lawsuit
was removed to the United States District Court, Northern District of Texas,
Fort Worth Division (No. 495-CV-738-A). PPM filed a counterclaim seeking
declarations that the Series T partial redemption breached the indenture
governing the FMBs and that TNP cannot redeem Series T FMBs prior to maturity
under circumstances like the Panhandle sale. PPM sought an injunction barring
future redemptions under such circumstances. PPM also claimed that TNP violated
the antifraud provisions of the Texas Securities Act and Section10(b) of the
Securities Exchange Act of 1934 and restrictions of the Trust Indenture Act of
1939 on impairing bondholder rights. PPM sought alleged actual and punitive
damages of approximately $6.0 million and attorneys' fees. Because PPM was not a
bondholder, it was dismissed from the lawsuit and, on PPM's motion, Jackson
National Life Insurance Company was substituted as defendant.
Management believes that the substitute defendant's counterclaims are
without merit and is vigorously contesting the claims. In management's opinion,
the ultimate disposition of this matter will not have a material adverse effect
on TNPE's and TNP's consolidated financial position or results of operations.
(4) Revenues Subject to Refund
During the third quarter of 1995, the IRS issued TNP a favorable private
letter ruling that enabled TNP to recognize additional revenues and accrued
interest of $4.9 million that previously had been deferred. This resulted in a
one-time after-tax earnings increase of $3.0 million, or $0.28 per share of TNPE
common stock.
The revenues recognized were collected from October 1991 through October
1994, as a result of a Texas rate case filed in 1991. The PUCT allowed TNP to
collect additional annualized revenues of $1.6 million pending the resolution of
the regulatory tax treatment of disallowed utility plant. Recognition of these
revenues was conditioned upon TNP obtaining the ruling from the IRS. The private
letter ruling does 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.
(5) Regulatory Matters
Texas Rate Case Settlement
On October 6, 1994, the PUCT approved a unanimous settlement among the
parties in TNP's 1994 retail rate application. The rate case settlement provides
for an increase in annualized revenues in Texas of $17.5 million, or 4.5%, which
TNP implemented on October 2, 1994.
The settlement resolved all outstanding court appeals in connection with
TNP's two previous rate cases and required TNP to write off $31.5 million ($35.0
million of the original cost of TNP One). TNP 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. The settlement also
required TNP to sell its Texas Panhandle properties, subject to certain
conditions.
The rate case settlement includes a moratorium restricting TNP from
applying for rate increases in Texas until March 31, 1999, subject to certain
conditions. These conditions do not allow TNP to apply 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 during the moratorium.
Page 31
Other Regulatory Matters
In a 1990 PUCT application, TNP was granted DAT for certain operating and
interest costs relating to the construction of Unit 1 of TNP One. The
unamortized balances of these costs were $4.3 million and $4.4 million as of
December 31, 1995, and 1994, respectively. Certain cities have filed an appeal
in district court contesting the DAT. Management does not expect the ultimate
disposition of this matter to have a material adverse effect on TNP's and TNPE's
consolidated financial position or results of operations.
(6) Reorganization
During the fourth quarter of 1994, TNP 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 early retirements and involuntary terminations. The aggregate costs
impacting TNP's 1994 operations were $8,782,000 ($5,723,000, net of taxes, or
$0.53 per share of TNPE common stock).
(7) Employee Benefit Plans
Pension Plan
TNP has a defined benefit pension plan covering substantially all of its
employees. Benefits are based on an employee's years of service and
compensation. TNP's funding policy is to contribute the minimum amount required
by federal funding standards. The following table sets forth the plan's funded
status and amounts recognized in the consolidated balance sheets at December 31,
1995, and 1994.
1995 1994
---- ----
(In thousands)
Actuarial present value of benefit obligations:
Vested benefit obligation $ 59,393 $ 45,845
Unvested benefit obligation 4,383 4,212
------- -------
Accumulated benefit obligation $ 63,776 $ 50,057
======= =======
Projected benefit obligation $ 67,752 $ 60,000
Unrecognized net asset 107 131
Unrecognized prior service cost 2,536 2,746
Unrecognized net gain from past experience 11,357 10,533
------- -------
81,752 73,410
Plan assets (principally marketable securities)
at estimated fair value 75,037 66,338
------- -------
Accrued pension costs (included in deferred
credits in the consolidated balance sheets) $ 6,715 $ 7,072
======= =======
Net pension costs were comprised of the following components as determined
using the projected unit credit actuarial method:
1995 1994 1993
---- ---- ----
(In thousands)
Service cost $ 1,071 $ 1,763 $ 1,472
Interest cost on projected benefit obligation 4,762 4,179 4,191
Adjustment for actual return on plan assets (13,797) 260 (6,126)
Effect of reorganization costs, net - 3,537 -
Net amortization and deferral 7,607 (6,238) 300
------- ------- -------
Net pension costs $ (357) $ 3,501 $ (163)
======= ======= =======
Assumptions used in accounting for the pension plan as of December 31,
1995, and 1994 were as follows:
1995 1994
---- ----
Discount rates 7.3% 8.5%
Rates of increase in compensation levels 4.0% 5.5%
Expected long-term rate of return on assets 9.5% 9.5%
Page 32
Postretirement Benefit Plan
TNP sponsors a health care plan that provides postretirement medical and
death benefits to retirees who satisfied minimum age and service requirements
during employment. In 1993, TNP 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 the benefits. Prior to 1993, the
costs of these benefits were expensed on a "pay-as-you-go" basis. TNP has been
permitted to recover through rates the additional costs resulting from the
adoption of SFAS 106. TNP established a trust fund dedicated to paying these
postretirement benefits.
The following table sets forth the plan's funded status and amounts
recognized in the consolidated balance sheets at December 31, 1995, and 1994.
1995 1994
---- ----
(In thousands)
Accumulated postretirement benefit obligation:
Retirees and dependents $ 14,229 $ 15,936
Active employees 4,093 7,192
-------- --------
Total benefits earned 18,322 23,128
Plan assets (principally marketable securities)
at estimated fair value 5,710 4,026
-------- --------
Accumulated postretirement benefit
obligation in excess of plan assets 12,612 19,102
Unrecognized transition obligation (14,579) (15,436)
Unrecognized net gain from past experience 5,603 -
-------- -------
Accrued postretirement benefit costs (included in
deferred credits in the consolidated balance sheets) $ 3,636 $ 3,666
======== ========
Net postretirement benefit costs were comprised of the following
components:
1995 1994 1993
---- ---- ----
(In thousands)
Service cost $ 374 $ 738 $ 508
Interest cost on postretirement benefit obligation 1,265 1,642 1,510
Reduction for actual return on plan assets (956) (59) -
Effect of reorganization costs, net - 2,945 -
Net amortization and deferral 1,145 784 934
------ ----- -----
Net postretirement benefit costs $ 1,828 $ 6,050 $ 2,952
====== ===== =====
The transition obligation is being amortized over a 20-year period that
began in 1993. The assumed health care cost trend rate used to measure the
expected cost of benefits was 6.0% for 1995 and is assumed to trend downward
slightly each year to 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 benefit obligation as of
December 31, 1995, by $2.3 million and the aggregate of the service and interest
cost components of net postretirement benefit cost for 1995 by $279,000.
Additional assumptions used in accounting for the postretirement benefit
plan as of December 31, 1995, and 1994, were as follows:
1995 1994
---- ----
Discount rates 7.3% 8.5%
Expected rate of return on assets (net of taxes) 6.0% 6.0%
Incentive Plans
TNPE and TNP established several incentive compensation plans in 1995. All
employees participate in one or more of these plans. Incentive compensation is
based on meeting key financial and operational performance goals such as EPS,
operations and maintenance costs per KWH, and system reliability measures.
Results of operations at December 31, 1995, include costs for the various cash
and equity plans of $2.0 million.
Page 33
Other Employee Benefits
TNP has a 401(k) plan designed to enhance the other retirement plans
available to its employees. Employees may invest their contributions in fixed
income securities, mutual funds, or TNPE common stock. TNP's contributions are
used to purchase TNPE common stock, which employees may later convert into
investments in other investment options. TNP dedicated a portion of its matching
contribution to meeting certain performance goals during 1995. Based on
achievement of 1995 financial performance goals, TNP contributed $653,000 to the
401(k) plan. TNP's total contributions to the 401(k) plan were approximately
$1,746,000 in 1995, $753,000 in 1994, and none in 1993. Plan assets included
1,474,982 shares and 1,721,553 shares of TNPE common stock as of December 31,
1995, and 1994, respectively.
TNP 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 TNP. Such
event is defined to include, among other things, substantial changes in the
corporate structure, ownership, or 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 partially provided under an
insurance policy arrangement for benefits that generally would have been
provided by the pension and thrift plans except for federal limitations.
(8) Income Taxes
Components of income taxes were as follows:
TNPE TNP
---------------------------------- ------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
(In thousands)
Taxes on net operating income:
Federal - current $ 3,108 $ (253) $ (356) $ 3,108 $ (253) $ (356)
State - current 507 55 94 507 55 94
Federal - deferred 6,700 (13) 5,515 6,700 (13) 5,515
ITC adjustments 2,002 (1,027) (959) 2,002 (1,027) (959)
------ -------- ------ ------ -------- -----
12,317 (1,238) 4,294 12,317 (1,238) 4,294
------ -------- ------ ------ -------- -----
Taxes on other income (loss):
Federal - current 7,170 1,006 641 7,203 560 622
Federal - deferred (1,444) (10,902) 19 (1,568) (10,907) -
ITC adjustments (323) (409) 6 (311) (347) -
------ -------- ------ ------ -------- ----
5,403 (10,305) 666 5,324 (10,694) 622
------ -------- ------ ------ -------- -----
Taxes on cumulative effect
of change in accounting,
federal-deferred (Note 2) 4,548 - - 4,548 - -
------ -------- ------ ------ -------- ----
Total income taxes $ 22,268 $ (11,543) $ 4,960 $ 22,189 $ (11,932) $ 4,916
====== ======== ====== ====== ======== =====
Page 34
The amounts for total income taxes differ from the amounts computed by
applying the appropriate federal income tax rate to earnings (loss) before
income taxes for the following reasons:
TNPE TNP
--------------------------------- -----------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
(In thousands)
Tax at statutory tax rate $ 17,595 $ (9,873) $ 5,601 $ 17,674 $ (9,731) $ 5,557
Amortization of
accumulated deferred ITC (1,079) (1,055) (1,048) (1,079) (1,055) (1,048)
Amortization of
excess deferred taxes (160) (183) (142) (318) (183) (142)
State income taxes 507 55 94 507 55 94
ITC related to disallowances (312) (347) - (312) (347) -
Taxes on cumulative effect
of change in accounting,
federal- deferred (Note 2) 4,548 - - 4,548 - -
Other, net 1,169 (140) 455 1,169 (671) 455
------- -------- ------- ------ -------- ------
Actual income taxes $ 22,268 $ (11,543) $ 4,960 $ 22,189 $ (11,932) $ 4,916
======= ======== ======= ====== ======== ======
The tax effects of temporary differences that gave rise to significant
portions of net current and net noncurrent deferred income taxes as of December
31, 1995, and 1994, are presented below.
TNPE TNP
-------------------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
(In thousands)
Current deferred income taxes:
Deferred tax assets:
Unbilled revenues $ 2,413 $ 6,264 $ 2,413 $ 6,264
Revenues subject to refund - 1,404 - 1,404
Other 264 222 264 222
--------- --------- --------- ---------
2,677 7,890 2,677 7,890
Deferred tax liability:
Deferred purchased power and fuel costs (2,533) (5,188) (2,533) (5,188)
--------- --------- --------- ---------
Current deferred income taxes, net $ 144 $ 2,702 $ 144 $ 2,702
========= ========= ========= =========
Noncurrent deferred income taxes:
Deferred tax assets:
Minimum tax credit carryforwards $ 22,365 $ 10,086 $ 27,317 $ 14,993
Federal regular tax net operating
loss carryforwards 4,240 17,662 9,604 23,104
ITC carryforwards 14,399 17,469 15,591 18,672
Regulatory related items 17,921 18,291 17,921 18,291
Accrued employee benefit costs 3,323 3,355 3,323 3,355
Other 1,900 2,149 707 788
--------- --------- --------- ---------
64,148 69,012 74,463 79,203
--------- --------- --------- ---------
Deferred tax liabilities:
Utility plant, principally due to
depreciation and basis differences (114,446) (108,094) (114,446) (108,094)
Deferred charges (4,743) (5,344) (4,743) (5,344)
Regulatory related items (2,340) (2,534) (2,340) (2,534)
Other - - - -
--------- --------- --------- --------
(121,529) (115,972) (121,529) (115,972)
--------- --------- --------- ---------
Noncurrent deferred income taxes, net $ (57,381) $ (46,960) $ (47,066) $ (36,769)
========= ========= ========= =========
Page 35
Federal tax carryforwards as of December 31, 1995, were as follows:
TNPE TNP
(In thousands)
Net operating loss
Amount $ 12,115 $ 27,440
Expiration period 2009 2009
Minimum tax credits
Amount $ 22,365 $ 27,317
Expiration period None None
Investment tax credit
Amount $ 14,399 $ 15,591
Expiration period 2005 2005
In 1991, TNPE received an IRS private letter ruling confirming that Unit 1
generating plant was property eligible for ITC. In connection with an audit of
TNPE's 1990 and 1991 consolidated federal income tax returns, the IRS revenue
agent recommended, in March 1995, that the private letter ruling concerning the
TNP One generating plant's eligibility for ITC be revoked retroactively.
Management believes that TNP's claim for ITC is valid and is contesting the
agent's recommendation. Of the $22.5 million of ITC at issue, TNPE and its
subsidiaries have utilized $5.2 million in the consolidated tax returns through
1994 and expect to utilize $2.9 million in the 1995 consolidated tax returns.
TNP's portion is $4.0 million and $2.9 million, respectively. However, through
1995, TNPE and TNP have only recognized $1.1 million of the ITC in results of
operations since 1990.
(9) Long-Term Debt
First Mortgage Bonds
FMBs issued under the Bond Indenture are secured by substantially all
utility plant owned directly by TNP. The Bond Indenture restricts cash dividend
payments on TNP common stock as discussed in Note 11. The Bond Indenture also
prohibits issuing additional FMBs unless net earnings available for fixed
charges are at least twice the annual interest charges on bonded indebtedness,
as defined. Under this test, as of December 31, 1995, approximately $208.0
million of additional FMBs could be issued, assuming an interest rate of 9.0%.
In addition, TNP may only issue FMBs for 60% of available additions, as defined
in the Bond Indenture. At December 31, 1995, TNP could not issue any significant
amount of FMBs pursuant to this test.
Secured Debentures
TNP's Series A, 10.75% secured debentures and 12.5% secured debentures are
secured with a first lien on a portion of Unit 1. The 12.5% secured debentures
are also secured by a first lien on a portion of Unit 2. TNP's secured debenture
holders are also secured by second liens on substantially all utility plant in
Texas owned directly by TNP.
The secured debentures also contain restrictions on dividends and asset
dispositions.
Revolving Credit Facility
TNP entered into a New Credit Facility effective November 3, 1995. The New
Credit Facility provides for a total commitment of $150 million and replaced
borrowings under the credit facilities used to acquire TNP One. The interest
rate margins under the New Credit Facility were 0.875% lower in 1995 than those
under the previous credit facilities. In addition, interest rate margins under
the previous credit facilities were scheduled to increase automatically each
year while those under the New Credit Facility will decrease as the ratings on
TNP's FMBs improve.
Collateral securing the New Credit Facility is generally a first lien on a
portion of TNP One, a second lien on TNP's first mortgage bond trust estate
located in Texas, and a pledge of $30 million of FMBs that do not bear interest
except upon default under the New Credit Facility. This collateral secures
borrowings up to $100 million. Before increasing borrowings above $100 million,
TNP must pledge additional FMBs (noninterest bearing except upon default) in an
amount equal to the borrowings over $100 million. As of December 31, 1995, TNP
had outstanding borrowings of $43 million under the New Credit Facility.
The New Credit Facility not only resulted in lower interest rate margins,
but also will provide TNP with additional financing flexibility. The previous
credit facilities' commitment was scheduled to reduce by approximately $36.9
million annually over four years beginning December 31, 1995. The New Credit
Facility commitment will reduce to $125 million on November 3, 1998, and to $100
million on November 3, 1999, and will expire on November 3, 2000. TNP also has
the ability to draw on the New Credit Facility to redeem other outstanding debt.
Page 36
During 1995, interest rates on borrowings under TNP's credit facilities
ranged from 7.63% to 11.38%. The average borrowing rates under TNP's credit
facilities were 8.92% and 9.27% for 1995 and 1994, respectively.
Under specified conditions, TNP's credit facilities restrict the payment of
cash dividends on TNP common stock. The credit facilities also prohibit the
sale, lease, transfer, or other disposition of assets other than in the ordinary
course of business.
Maturities
As of December 31, 1995, FMB and secured debenture maturities and sinking
fund requirements for the five years following 1995 are as follows:
Secured Total FMBs and
Year FMBs Debentures Secured Debentures
(In thousands)
1996 $ 1,070 $ - $ 1,070
1997 101,870 - 101,870
1998 1,070 - 1,070
1999 1,070 130,000 131,070
2000 110,070 - 110,070
At the end of 1995, $43 million was outstanding under the New Credit
Facility, which matures in 2000. TNP anticipates that borrowings under the New
Credit Facility will fluctuate up to $150 million over this period.
(10) Redeemable Cumulative Preferred Stock
If TNP liquidates voluntarily or involuntarily, holders of preferred stock
have preferences equal to amounts payable on redemption or par, respectively,
plus accrued dividends. During 1995, TNP partially retired Series B and C, and
completely retired series D, E, F, and G, with a combined par value of $5.1
million.
TNP's charter provides that additional shares of preferred stock may not be
issued unless certain tests are met. As of December 31, 1995, no additional
preferred stock could be issued.
(11) Common Stock Dividends
TNP
---
The Bond Indenture prohibits TNP from paying cash dividends on its common
stock (which is wholly owned by TNPE) unless unrestricted retained earnings are
available. The restriction became operative during 1994 due to the recognition
of $35.0 million of regulatory disallowances as discussed in Note 5 and
temporarily precluded TNP from paying cash dividends. Unrestricted retained
earnings became available again at March 31, 1995, and continued to be available
during the remainder of 1995. As of December 31, 1995, $30.6 million of
unrestricted retained earnings were available for dividends.
TNPE
----
The dividend restriction at TNP did not preclude TNPE from paying quarterly
cash dividends to its shareholders during 1994 and 1995. TNPE increased its
quarterly dividend from $0.20 to $0.22 per share, beginning with quarterly
dividends paid on December 15, 1995. TNPE had reduced the quarterly dividend by
51% from $0.41 to $0.20 per share beginning with the third quarter of 1994 due
to TNP's restriction and other factors such as the relatively low common equity
of TNPE's capital structure and industry considerations.
(12) Commitments and Contingencies
Fuel Supply Agreement
TNP successfully negotiated a 20% reduction in the cost of lignite provided
by Walnut Creek Mining Company effective January 1, 1995, for the life of TNP
One. Walnut Creek Mining Company is jointly owned by Phillips Coal Company and
Peter Kiewit Sons', Inc. Initially, the reduction will be used to offset the
accumulated under-recovery of fuel costs which aggregated $9.3 million and $15.3
million as of December 31, 1995, and 1994, respectively.
Page 37
Wholesale Purchased Power Agreements
TNP purchases a significant portion of its electric requirements from
various wholesale suppliers. These contracts are scheduled to expire in various
years through 2010.
TNP has notified TU of its intent to cease purchasing full requirements
power and energy effective January 1, 1999. In addition, in July 1995 TNP filed
proceedings with the PUCT and in a Texas state district court to declare TNP's
wholesale purchased power agreement with TU null and void. TNP asserts that the
terms of the agreement are against public policy and violate Texas law. TNP
requests a declaration that provisions in the TU agreement prohibiting TNP from
disclosing the agreement's terms and filing the agreement for regulatory review
are against public policy and violate Texas law. Pursuant to an order issued by
the state district court, TNP's action is being held in abeyance until such time
as TNP's PUCT action is resolved. In February 1996, an administrative law judge
recommended that the PUCT conclude that most of TNP's complaints about the TU
agreements lack merit. The judge did recommend, however, that the agreement's
prohibitions on disclosure and regulatory review are void. TNP expects the PUCT
action to be determined by mid 1996.
In 1995, TU supplied approximately 36% of TNP's Texas capacity and 29% of
its Texas energy requirements. Management expects that, as a result of the
developing competition within the wholesale power market, TNP will enter into
new arrangements for such capacity and energy on terms that are more favorable
for its customers. During July 1995, TNP issued requests for proposals for
purchased power resources during 1996 through 2004 to replace power currently
purchased from TU.
Legal Actions
TNP 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 TNP's
and TNPE's consolidated financial position or results of operations.
Page 38
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)
1995
- ----
Operating revenues........................................ $ 105,647 $ 121,237 $ 151,586 $ 107,353
Net operating income...................................... 17,044 25,100 35,147 19,304
Net earnings.............................................. 6,124 6,131 26,728 2,522
Earnings applicable to common stock....................... 5,936 5,951 26,576 2,387
Earnings per share of common stock........................ 0.55 0.54 2.44 0.22
Dividends per share of common stock....................... $ 0.20 $ 0.20 $ 0.20 $ 0.22
Weighted average common shares outstanding................ 10,877 10,901 10,909 10,915
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)
Earnings (loss) per share of common stock................. (0.29) (2.04) 1.09 (0.47)
Dividends per share of common stock....................... $ 0.41 $ 0.41 $ 0.20 $ 0.20
Weighted average common shares outstanding................ 10,702 10,725 10,752 10,822
Generally, the variations between quarters reflect the seasonal
fluctuations of TNP's business. In addition, the results above are impacted by
one-time items. These items, net of taxes, are as follows:
- change in accounting for unbilled revenues of $8.4 million in
first quarter of 1995 (Note 2)
- gain on sale of Texas Panhandle properties of $9.5 million in
third quarter of 1995 (Note 3)
- recognition of previously deferred revenues of $3.0 million
during the third quarter of 1995 (Note 4)
- regulatory disallowances of $20.5 million in second quarter of
1994 (Note 5)
- reorganization costs of $5.7 million in fourth quarter of 1994
(Note 6)
The changes in dividend payments commencing with the third quarter of 1994
and the fourth quarter of 1995 are explained at Note 11. The annual variations
between 1995 and 1994 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.
Page 39
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors
The information required by this item is incorporated by reference to
"Election of Directors" and "Security Ownership of Management and Certain
Beneficial Owners" in the proxy statement relating to the 1996 Annual Meeting of
Holders of TNPE Common Stock.
Executive Officers
The information set forth under "Employees and Executives" 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" and
"Security Ownership of Management and Certain Beneficial Owners" in the
proxy statement relating to the 1996 Annual Meeting of Holders of TNPE
Common Stock.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following financial statements are filed as part of this report:
Page
Independent Auditors' Reports...................................................................... 16
TNPE
Consolidated Statements of Operations, Three Years Ended December 31, 1995......................... 18
Consolidated Statements of Cash Flows, Three Years Ended December 31, 1995......................... 19
Consolidated Balance Sheets, December 31, 1995, and 1994........................................... 20
Consolidated Statements of Capitalization, December 31, 1995, and 1994............................. 21
Consolidated Statements of Common Shareholders' Equity
and Redeemable Cumulative Preferred Stock, Three Years Ended December 31, 1995................... 22
TNP
Consolidated Statements of Operations, Three Years Ended December 31, 1995......................... 23
Consolidated Statements of Cash Flows, Three Years Ended December 31, 1995......................... 24
Consolidated Balance Sheets, December 31, 1995, and 1994........................................... 25
Consolidated Statements of Capitalization, December 31, 1995, and 1994............................. 26
Consolidated Statements of Common Shareholder's Equity
and Redeemable Cumulative Preferred Stock, Three Years Ended December 31, 1995................... 27
Notes to Consolidated Financial Statements......................................................... 28
Selected Quarterly Consolidated Financial Data - TNPE.............................................. 39
(b) No reports on Form 8-K were filed during the last quarter of 1995.
(c) The Exhibit Index on pages 42-47 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.
Page 40
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 their behalf by the undersigned, thereunto duly authorized.
TNP ENTERPRISES, INC.
Date: March 7, 1996 By: \s\ M. S. Cheema
-----------------------------------
Manjit S. Cheema, Vice President &
Chief Financial Officer
TEXAS-NEW MEXICO POWER COMPANY
Date: March 7, 1996 By: \s\ M. S. Cheema
-----------------------------------
Manjit S. Cheema, Vice President &
Chief Financial Officer
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\ Kevern R. Joyce Chairman, President, & Chief Executive Officer 3/7/96
-------------------------------- ------
Kevern R. Joyce
By \s\ M. S. Cheema Vice President & Chief Financial Officer 3/7/96
-------------------------------- ------
Manjit S. Cheema
By \s\ Melissa D. Davis Controller of TNP & Chief Accounting 3/7/96
-------------------------------- ------
Melissa D. Davis Officer of TNPE
By \s\ R. Denny Alexander Director 3/7/96
-------------------------------- ------
R. Denny Alexander
By \s\ Cass O. Edwards, II Director 3/7/96
-------------------------------- ------
C. O. Edwards, II
By \s\ John A. Fanning Director 3/7/96
-------------------------------- ------
John A. Fanning
By \s\ Sidney M. Gutierrez Director 3/7/96
-------------------------------- ------
Sidney M. Gutierrez
By \s\ Harris L. Kempner, Jr. Director 3/7/96
-------------------------------- ------
Harris L. Kempner, Jr.
By \s\ Dwight R. Spurlock Director 3/7/96
-------------------------------- ------
Dwight R. Spurlock
By \s\ Dr. Carol D. Smith Surles Director 3/7/96
-------------------------------- ------
Dr. Carol D. Smith Surles
By \s\ Dennis H. Withers Director 3/7/96
-------------------------------- ------
Dennis H. Withers
Page 41
EXHIBIT INDEX
Exhibits filed with this report are denoted by "*."
Exhibit
No. Description
TNPE incorporates the following exhibits by reference to the exhibits and
filings noted in parenthesis.
3(a) - Articles of Incorporation and Amendments through March 6, 1984 (Exhibit 3(a) to TNPE 1984 Form S-14, File No.
2-89800).
3(b) - Amendment to Articles of Incorporation filed September 25, 1984 (Exhibit 3(b) to TNPE 1984 Form 10-K, File No.
1-8847).
3(c) - Amendment to Articles of Incorporation filed August 29, 1985 (Exhibit 3(a) to TNPE 1985 Form 10-K, File No.
1-8847).
3(d) - Amendment to Articles of Incorporation filed June 2, 1986 (Exhibit 3(a) to TNPE 1986 Form 10-K, File No.
1-8847).
3(e) - Amendment to Articles of Incorporation filed May 10, 1988 (Exhibit 3(e) to TNPE 1988 Form 10-K, File No.
1-8847).
3(f) - Amendment to Articles of Incorporation filed May 10, 1988 (Exhibit 3(f) to TNPE 1988 Form 10-K, File No.
1-8847).
3(g) - Amendment to Articles of Incorporation filed December 27, 1988 (Exhibit 3(g) to TNPE 1988 Form 10-K, File No.
1-8847).
3(h) - Bylaws, as amended (Exhibit 3(h) to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).
4(u) - Rights Agreement and Form of Right Certificate, as amended, effective November 13, 1990 (Exhibit 2.1 to TNPE
Form 8-A, File No. 1-8847).
*23 - Independent Auditors' Consent - KPMG Peat Marwick LLP.
*27 - Financial Data Schedule for TNPE.
TNP incorporates the following exhibits by reference to the exhibits and filings
noted in parenthesis.
*3(i) - Restated Articles of Incorporation.
3(ii) - Bylaws, as amended November 15, 1994 (Exhibit 3(hh) to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).
*27 - Financial Data Schedule for TNP.
TNPE and TNP incorporate the following exhibits by reference to the exhibits and
filings noted in parenthesis.
4(a) - Indenture of Mortgage and Deed of Trust dated as of November 1, 1944 (Exhibit 2(d) to Community Public Service
Co. ("CPS") 1978 Form S-7, File No. 2-61323).
4(b) - Seventh Supplemental Indenture dated as of May 1, 1963 (Exhibit 2(k) to CPS Form S-7, File No. 2-61323).
4(c) - Eighth Supplemental Indenture dated as of July 1, 1963 (Exhibit 2(1), to CPS Form S-7, File No. 2-61323).
4(d) - Ninth Supplemental Indenture dated as of August 1, 1965 (Exhibit 2(m), to CPS Form S-7, File No. 2-61323).
4(e) - Tenth Supplemental Indenture dated as of May 1, 1966 (Exhibit 2(n), to CPS Form S-7, File No. 2-61323).
4(f) - Eleventh Supplemental Indenture dated as of October 1, 1969 (Exhibit 2(o), to CPS Form S-7, File No. 2-61323).
4(g) - Twelfth Supplemental Indenture dated as of May 1, 1971 (Exhibit 2(p), to CPS Form S-7, File No. 2-61323).
4(h) - Thirteenth Supplemental Indenture dated as of July 1, 1974 (Exhibit 2(q), to CPS Form S-7, File No. 2-61323).
4(i) - Fourteenth Supplemental Indenture dated as of March 1, 1975 (Exhibit 2(r), to CPS Form S-7, 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).
Page 42
4(m) - Eighteenth Supplemental Indenture dated as of September 1, 1983 (Exhibit (a) to Form 10-Q of TNP 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 TNP 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 TNP 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 TNP 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 TNP for the
year ended December 31, 1993, File No. 2-97230).
*4(s) - Twenty-Fourth Supplemental Indenture dated as of November 3, 1995.
4(t) - Indenture and Security Agreement for 12 1/2% Secured Debentures dated as of January 15, 1992 (Exhibit 4(r) to
TNP 1991 Form 10-K, File No. 2-97230).
4(u) - Indenture and Security Agreement for 10 3/4% Secured Debentures dated as of September 15, 1993 (Exhibit 4(t) to
TNP 1993 Form 10-K, File No. 2-97230).
Contracts Relating to TNP One
10(a) - Fuel Supply Agreement, dated November 18, 1987, between Phillips Coal Company and TNP (Exhibit 10(j) to TNP
1987 Form 10-K, File No. 2-97230).
10(a)1 - Amendment No. 1, dated as of April 1, 1988, to Fuel Supply
Agreement dated November 18, 1987, between Phillips Coal Company
and TNP (Exhibit 10(a)1 to Joint 1994 Form 10-K, File Nos. 1-8847
and 2-97230).
10(a)2 - Amendment No. 2, dated as of November 29, 1994, between Walnut
Creek Mining Company and TNP, to Fuel Supply Agreement dated
November 18, 1987, between Phillips Coal Company and TNP, (Exhibit
10(a)2 to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).
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 TNP, TGC, certain banks (the "Unit 1 Banks") and Chase Manhattan Bank (National
Association), as Agent for the Unit 1 Banks (the "Unit 1 Agent"), (Exhibit 10(c) to TNP 1991 Form 10-K , File
No. 2-97230).
10(b)1 - Participation Agreement, dated as of January 8, 1992, among certain banks, Participants, and the Unit 1 Agent
(Exhibit 10(c)1 to TNP 1991 Form 10-K, 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 TNP 1993
Form 10-K , File No. 2-97230).
10(c) - Assignment and Security Agreement, dated as of January 8, 1992, among TGC and the Unit 1 Agent (Exhibit 10(d)
to TNP 1991 Form 10-K , File No. 2-97230).
10(d) - Amended and Restated Subordination Agreement, dated as of October
1, 1988, among TNP, Continental Illinois National Bank and Trust
Company of Chicago and the Unit 1 Agent(Exhibit 10(uu) to TNP 1988
Form 10-K, File No.
2-97230).
10(e) - Unit 1 Mortgage and Deed of Trust, dated as of December 1, 1987, (Exhibit 10(ee) to TNP 1987 Form 10-K , File
No. 2-97230).
10(e)1 - Supplemental Unit 1 Mortgage and Deed of Trust executed on January 27, 1992, (Exhibit 10(g)4 to TNP 1991 Form
10-K , File No. 2-97230).
10(e)2 - First TGC Modification and Extension Agreement, dated as of January 24, 1992, among the Unit 1 Banks, the Unit
1 Agent, TNP, and TGC (Exhibit 10(g)1 to TNP 1991 Form 10-K, File No. 2-97230).
10(e)3 - Second TGC Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 1 Banks, the Unit
1 Agent, TNP, and TGC (Exhibit 10(g)2 to TNP 1991 Form 10-K, File No. 2-97230).
10(e)4 - Third TGC Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 1 Banks, the Unit
1 Agent, TNP, and TGC (Exhibit 10(g)3 to TNP 1991 Form 10-K, File No. 2-97230).
Page 43
10(e)5 - Fourth TGC Modification and Extension Agreement, dated as of September 29, 1993, among the Unit 1 Banks, the
Unit 1 Agent, TNP, and TGC (Exhibit 10(f)5 to TNP 1993 Form 10-K, File No. 2-97230).
10(e)6 - Fifth TGC Modification and Extension Agreement, dated as of
September 29, 1993, among the Unit 1 Banks, the Unit 1 Agent, TNP,
and TGC (Exhibit 10(f)6 to TNP 1993 Form 10-K, File No. 2-97230).
10(f) - Indemnity Agreement, dated December 1, 1987, by Westinghouse, CE and Zachry, (Exhibit 10(ff) to TNP 1987 Form
10-K, File No. 2-97230).
10(g) - Unit 1 Second Lien Mortgage and Deed of Trust dated as of December 1, 1987, (Exhibit 10(jj) to TNP 1987 Form
10-K, File No. 2-97230).
10(g)1 - Correction Second Lien Mortgage and Deed of Trust, dated as of December 1, 1987, (Exhibit 10(vv) to TNP 1988
Form 10-K, File No. 2-97230).
10(g)2 - Second Lien Mortgage and Deed of Trust Modification, Extension
and Amendment Agreement, dated as of January 8, 1992 (Exhibit
10(i)2 to TNP 1991 Form 10-K, File No. 2-97230).
10(g)3 - TNP Second Lien Mortgage Modification No. 2, dated as of September 21, 1993 (Exhibit 10(h)3 to TNP 1993 Form
10-K, File No. 2-97230).
10(h) - Agreement for Conveyance and Partial Release of Liens, dated as of December 1, 1987, by PFC and the Unit 1
Agent (Exhibit 10(kk) to TNP 1987 Form 10-K, File No. 2-97230).
10(i) - Inducement and Consent Agreement, dated as of June 15, 1988, among Phillips Coal Company, Kiewit Texas Mining
Company, TNP, Phillips Petroleum Company, and Peter Kiewit Son's, Inc. (Exhibit 10(nn) to TNP 1988 Form 10-K,
File No. 2-97230).
10(j) - Assumption Agreement, dated as of October 1, 1988, by TGC, in favor of certain banks, the Unit 1 Agent, and the
Depositary, as defined therein (Exhibit 10(ww) to TNP 1988 Form 10-K, File No. 2-97230).
10(k) - Guaranty, dated as of October 1, 1988, by TNP of TGC obligations under Unit 1 Credit Agreement (Exhibit 10(xx)
to TNP 1988 Form 10-K of TNP, File No. 2-97230).
10(l) - First Amended and Restated Facility Purchase Agreement, dated as of January 8, 1992, between TNP and TGC
(Exhibit 10(n) to TNP 1991 Form 10-K, 1991, File No. 2-97230).
10(m) - Operating Agreement, dated as of October 1, 1988, between TNP and TGC (Exhibit 10(zz) to TNP 1988 Form 10-K,
File No. 2-97230).
10(n) - Unit 2 First Amended and Restated Project Loan and Credit Agreement, dated as of January 8, 1992 (the "Unit 2
Credit Agreement"), among TNP, TGC II, certain banks (the "Unit 2 Banks") and The Chase Manhattan Bank
(National Association), as Agent for the Unit 2 Banks (the "Unit 2 Agent") (Exhibit 10(q) to TNP 1991 Form
10-K, File No. 2-97230).
10(n)1 - Amendment No. 1, dated as of September 21, 1993, to the Unit 2 Credit Agreement (Exhibit 10(o)1 to TNP 1993
Form 10-K, File No. 2-97230).
10(o) - Assignment and Security Agreement, dated as of January 8, 1992, among TGC II and the Unit 2 Agent (Exhibit
10(r) to TNP 1991 Form 10-K, File No. 2-97230).
10(p) - Assignment and Security Agreement, dated as of October 1, 1988, by TNP to the Unit 2 Agent (Exhibit 10(jjj) to
TNP 1988 Form 10-K, File No. 2-97230).
10(q) - Subordination Agreement, dated as of October 1, 1988, among TNP,
Continental Illinois National Bank and Trust Company of Chicago,
and the Unit 2 Agent (Exhibit 10(mmm) to TNP 1988 Form 10-K, File
No. 2-97230).
10(r) - Unit 2 Mortgage and Deed of Trust dated as of October 1, 1988 (Exhibit 10(uuu) to TNP 1988 Form 10-K, File No.
2-97230).
10(r)1 - First TGC II Modification and Extension Agreement, dated as of January 24, 1992, among the Unit 2 Banks, the
Unit 2 Agent, TNP, and TGC II (Exhibit 10(u)1 to TNP 1991 Form 10-K, File No. 2-97230).
10(r)2 - Second TGC II Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 2 Banks, the
Unit 2 Agent, TNP and TGC II (Exhibit 10(u)2 to TNP 1991 Form 10-K, File No. 2-97230).
10(r)3 - Third TGC II Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 2 Banks, the
Unit 2 Agent, TNP, and TGC II (Exhibit 10(u)3 to TNP 1991 Form 10-K, File No. 2-97230).
Page 44
10(r)4 - Fourth TGC II Modification and Extension Agreement, dated as of September 29, 1993, among the Unit 2 Banks, the
Unit 2 Agent, TNP, and TGC II (Exhibit 10(s)4 to TNP 1993 Form 10-K, File No. 2-97230).
10(r)5 - Fifth TGC II Modification and Extension Agreement, dated as of
June 15, 1994, among the Unit 2 Banks, the Unit 2 Agent, TNP, and
TGC II (Exhibit 10(s)5 to TNP Form 10-Q for quarter ended June 30,
1994, File No. 2-97230).
10(s) - Release and Waiver of Liens and Indemnity Agreement, dated October 1, 1988, by Westinghouse, CE, and Zachry
(Exhibit 10(vvv) to TNP 1988 Form 10-K, File No. 2-97230).
10(t) - Second Lien Mortgage and Deed of Trust, dated as of October 1, 1988, (Exhibit 10(www) to TNP 1988 Form 10-K,
File No. 2-97230).
10(t)1 - Second Lien Mortgage and Deed of Trust Modification, Extension
and Amendment Agreement, dated as of January 8, 1992, (Exhibit
10(w)1 to TNP 1991 Form 10-K, File No. 2-97230).
10(t)2 - TNP Second Lien Mortgage Modification No. 2, dated as of September 21, 1993, (Exhibit 10(u)2 to TNP 1993 Form
10-K, File No. 2-97230).
10(u) - Intercreditor and Nondisturbance Agreement, dated as of October 1, 1988, among PFC, Texas PFC, Inc., TNP,
certain creditors, as defined therein, and the Collateral Agent, as defined therein (Exhibit 10(xxx) to TNP
1988 Form 10-K, File No. 2-97230).
10(u)1 - Amendment No. 1, dated as of January 8, 1992, to Intercreditor and Nondisturbance Agreement, (Exhibit 10(x)1 to
TNP 1991 Form 10-K, File No. 2-97230).
10(u)2 - Amendment No. 2, dated as of September 21, 1993, to Intercreditor and Nondisturbance Agreement, (Exhibit 10(v)2
to TNP 1993 Form 10-K of TNP, File No. 2-97230).
10(v) - Grant of Reciprocal Easements and Declaration of Covenants
Running with the Land, dated October 1, 1988, between PFC and Texas
PFC, Inc. (Exhibit 10(yyy) to TNP 1988 Form 10-K, File No.
2-97230).
10(w) - Non-Partition Agreement, dated as of May 30, 1990, among TNP, TGC, and the Unit 1 Agent (Exhibit 10(ss) to TNP
1990 Form 10-K of TNP, File No. 2-97230).
10(x) - Assumption Agreement, dated as of May 31, 1991, by TGC II in favor of certain banks, the Unit 2 Agent, and the
Depositary, as defined therein (Exhibit 10(kkk) to Amendment No. 1 to File No. 33-41903).
10(y) - Guaranty, dated as of May 31, 1991, by TNP, for TGC II obligations under the Unit 2 Credit Agreement (Exhibit
10(lll) to Amendment No. 1 to File No. 33-41903).
10(z) - First Amended and Restated Facility Purchase Agreement, dated as of January 8, 1992, between TNP, and TGC II
(Exhibit 10(dd) to TNP 1991 Form 10-K, File No. 2-97230).
10(z)1 - Amendment No. 1 to the Unit 2 First Amended and Restated Facility
Purchase Agreement, dated as of September 21, 1993, between TNP and
TGC II (Exhibit 10(aa)1 to TNP 1993 Form 10-K, File No. 2-97230).
10(aa) - Operating Agreement, dated as of May 31, 1991, between TNP and TGC II (Exhibit 10(nnn) to Amendment No. 1 to
File No. 33-41903).
10(bb) - Non-Partition Agreement, dated as of May 31, 1991, among TNP, TGC II, and the Unit 2 Agent (Exhibit 10(ppp) to
Amendment No. 1 to File No. 33-41903).
Contracts Relating to TNP One
*10(cc) - Revolving Credit Facility Agreement, dated as of November 3,
1995, among TNP, certain lenders, and Chemical Bank, as
Administrative Agent and Collateral Agent.
*10(cc)1- Form of Guarantee and Pledge Agreement, dated as of November 3,
1995, between TGC II, and Chemical Bank, as collateral agent
(Exhibit D to Revolving Credit Facility Agreement).
*10(cc)2- Form of Bond Agreement, dated as of November 3, 1995, between TNP
and Chemical Bank, as Collateral Agent (Exhibit E to Revolving
Credit Facility Agreement).
*10(cc)3- Form of Note Pledge Agreement, dated as of November 3, 1995,
between TNP and Chemical Bank, as collateral agent (Exhibit F to
Revolving Credit Facility Agreement).
Page 45
*10(cc)4- Form of Sixth TGC II Modification and Extension Agreement, dated as
of November 3, 1995, among the Unit 2 Banks, The Chase Manhattan
Bank, as agent, TNP, and TGC II (Exhibit H to the Revolving Credit
Facility Agreement).
*10(cc)5- Form of Second Lien Mortgage and Deed of Trust Modification, Extension and Amendment Agreement No. 3, dated as
of November 3, 1995 (Exhibit I to the Revolving Credit Facility Agreement).
*10(cc)6- Form of Assignment and Amendment Agreement, dated as of November 3,
1995, among TNP, TGC II, and Chemical Bank, as administrative agent
and collateral agent (Exhibit J to the Revolving Credit Facility
Agreement).
*10(cc)7- Form of Assignment of TGC II Mortgage Lien, dated as of November 3,
1995, by The Chase Manhattan Bank as agent to Chemical Bank
(Exhibit K to the Revolving Credit Facility Agreement).
*10(cc)8- Form of Collateral Transfer of Notes, Rights and Interests, dated
as of November 3, 1995, between TNP and Chemical Bank, as
Administrative Agent and as Collateral Agent (Exhibit L to the
Revolving Credit Facility Agreement).
*10(cc)9- Form of Assignment of Second Lien Mortgage and Deed of Trust, dated
as of November 3, 1995, between the Chase Manhattan Bank, as Agent,
and Chemical Bank, as agent (Exhibit M to the Revolving Credit
Facility Agreement).
*10(cc)10- Form of Collateral Transfer of Notes, Rights and Interests, dated
as of November 3, 1995, between TNP and Chemical Bank, as
Administrative Agent and as Collateral Agent (Exhibit N to the
Revolving Credit Facility Agreement).
*10(cc)11- Form of Amendment No. 1, dated as of November 3, 1995, to the Assignment and Security Agreement between TNP,
and The Chase Manhattan Bank, as agent (Exhibit O to the Revolving Credit Agreement).
Power Supply Contracts
10(dd) - Contract dated May 12, 1976, between TNP and Houston
Lighting & Power Company (Exhibit 5(a), File No. 2-69353).
10(dd)1- Amendment, dated January 4, 1989, to contract between TNP and Houston
Lighting & Power Company (Exhibit 10(cccc) to TNP 1988 Form 10-K).
10(ee) - Amended and Restated Agreement for Electric Service dated May 14,
1990, between TNP and Texas Utilities Electric Company (Exhibit
10(vv) to TNP 1990 Form 10-K, File No. 2-97230).
10(ee)1- Amendment, dated April 19, 1993, to Amended and Restated Agreement
for Electric Service, between TNP and Texas Utilities Electric
Company (Exhibit 10(ii)1 to 1993 Form S-2, Registration Statement,
File No. 33-66232).
10(ff) - Contract dated June 11, 1984 between TNP and SPS (Exhibit 10(d) of Form 8 applicable to TNP 1986 Form 10-K,
File No. 2-97230).
10(gg) - Contract dated April 27, 1977, between TNP and West Texas Utilities Company, as amended (Exhibit 10(e) of Form
8 applicable to TNP 1986 Form 10-K, File No. 2-97230).
10(hh) - Contract dated April 29, 1987, between TNP and El Paso Electric Company (Exhibit 10(f) of Form 8 applicable to
TNP 1986 Form 10-K, File No. 2-97230).
10(ii) - Amended and Restated Contract for Electric Service, dated April 29, 1988, between TNP and Public Service
Company of New Mexico (Exhibit 10(zz)3 to Amendment No. 1 to File No. 33-41903).
10(jj) - Contract dated December 8, 1981, between TNP and SPS as amended (Exhibit 10(h) of Form 8 applicable to TNP 1986
Form 10-K, File No. 2-97230).
10(jj)1- Amendment, dated December 12, 1988, to contract between TNP and SPS (Exhibit 10(llll) to TNP 1988 Form 10-K,
File No. 2-97230).
10(jj)2- Amendment, dated December 12, 1990, to contract between TNP and SPS (Exhibit 19(t) to TNP 1990 Form 10-K, File
No. 2-97230).
10(kk) - Contract dated August 31, 1983, between TNP and Capitol Cogeneration Company, Ltd. (Exhibit 10(i) of Form 8
applicable to TNP 1986 Form 10-K, File No. 2-97230).
10(kk)1- Agreement Substituting a Party, dated May 3, 1988, among Capitol
Cogeneration Company, Ltd., Clear Lake Cogeneration Limited
Partnership and TNP (Exhibit 10(nnnn) to TNP 1988 Form 10-K, File
No. 2-97230).
10(kk)2- Letter Agreements, dated May 30, 1990, and August 28, 1991, between
Clear Lake Cogeneration Limited Partnership and TNP (Exhibit
10(oo)2 to TNP 1992 Form 10-K, File No. 2-97230).
Page 46
10(kk)3- Notice of Extension Letter, dated August 31, 1992, between Clear
Lake Cogeneration Limited Partnership and TNP (Exhibit 10(oo)3 to
TNP 1992 Form 10-K, File No. 2-97230).
10(kk)4- Scheduling Agreement, dated September 15, 1992, between Clear Lake
Cogeneration Limited Partnership and TNP (Exhibit 10(oo)4 to TNP
1992 Form 10-K, File No. 2-97230).
10(ll) - Interconnection Agreement between TNP and Plains Electric Generation and Transmission Cooperative, Inc. dated
July 19, 1984 (Exhibit 10(j) of Form 8 applicable to TNP 1986 Form 10-K, File No. 2-97230).
10(mm) - Interchange Agreement between TNP and El Paso Electric Company dated April 29, 1987 (Exhibit 10(l) of Form 8
applicable to TNP 1986 Form 10-K, File No. 2-97230).
10(nn)1- Amendment No. 1, dated November 21, 1994, to Interchange Agreement between TNP and El Paso Electric Company
(Exhibit 10(nn)1 to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).
10(oo) - DC Terminal Participation Agreement between TNP and El Paso Electric Company dated December 8, 1981 as amended
(Exhibit 10(m) of Form 8 applicable to TNP 1986 Form 10-K, File No. 2-97230).
10(pp) - 1996 Firm Capacity & Energy Sale Agreement between TNP and TEP dated, as of January 1, 1996 (Exhibit 10(pp) to
joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).
Management Contracts
*10(qq) - Form of TNP Executive Agreement for Severance Compensation Upon
Change in Control and schedule of substantially identical
agreements.
10(rr) - Agreement between Kevern Joyce and TNPE and TNP, executed March 25, 1994 (Exhibit 10(tt) to TNP 1994 Form 10-Q,
File No. 2-97230).
*10(ss) - Form of TNPE Incentive Compensation Award Agreement and schedule of
substantially identical agreements.
*21 - Subsidiaries of the Registrants.
Page 47
SUBSIDIARIES OF THE REGISTRANTS Exhibit 21
Name State of Incorporation
TNPE
- ----
Texas-New Mexico Power Company Texas
Bayport Cogeneration, Inc. Texas
TNP Operating Company Texas
TNP
- ---
Texas Generating Company Texas
Texas Generating Company II Texas
TNP ENTERPRISES, INC. AND SUBSIDIARIES Exhibit 23
--------------------------------------
Independent Auditors' Consent
The Board of Directors
TNP Enterprises, Inc.:
We consent to incorporation by reference in the Registration Statement (No.
2-93266) on Form S-3 and in the Registration Statements (Nos. 2-93265 and
33-58897) on Form S-8 of TNP Enterprises, Inc. of our report dated February 6,
1996, relating to the consolidated balance sheets and statements of
capitalization of TNP Enterprises, Inc. and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, common
shareholders' equity and redeemable cumulative preferred stock, and cash flows
for each of the years in the three-year period ended December 31, 1995, which
report appears in the December 31, 1995, annual report on Form 10-K of TNP
Enterprises, Inc.
Our report refers to a change in the method of accounting for operating revenues
in 1995 and changes in the methods of accounting for income taxes and
postretirement benefits in 1993.
KPMG Peat Marwick LLP
Fort Worth, Texas
March 15, 1996