UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Exact name of registrant as specified in its
charter, State or other jurisdiction of
incorporation or organization, Address of
Commission principal executive offices and Registrant's IRS Employer
File Number Telephone Number, including area code Identification No.
- ----------- ------------------------------------- ------------------
1-12927 NEW CENTURY ENERGIES, INC. 84-1334327
(a Delaware Corporation)
1225 17th Street
Denver, Colorado 80202
Telephone (303) 571-7511
1-3280 PUBLIC SERVICE COMPANY OF COLORADO 84-0296600
(a Colorado Corporation)
1225 17th Street
Denver, Colorado 80202
Telephone (303) 571-7511
1-3789 SOUTHWESTERN PUBLIC SERVICE COMPANY 75-0575400
(a New Mexico Corporation)
Tyler at Sixth
Amarillo, Texas 79101
Telephone (303) 571-7511
-------------------
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
On May 11, 1998, 111,266,057 shares of the Registrant's Common Stock were
outstanding. The aggregate market value of this common stock held by
nonaffiliates based on the closing price on the New York Stock Exchange was
approximately $5,215,596,422.
Southwestern Public Service Company meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q
with the reduced disclosure format specified in General Instruction H (2) to
such Form 10-Q.
<PAGE>
Table of Contents
PART I - FINANCIAL INFORMATION
Item l. Financial Statements ............................................. 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................ 29
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................. 39
Item 6. Exhibits and Reports on Form 8-K.................................. 39
This combined Form 10-Q is separately filed by New Century Energies, Inc.,
Public Service Company of Colorado and Southwestern Public Service Company.
Information contained herein relating to any individual company is filed by such
company on its own behalf. Each registrant makes representations only as to
itself and makes no other representations whatsoever as to information relating
to the other registrants.
This report should be read in its entirety. No one section of the report deals
with all aspects of the subject matter.
FORWARD-LOOKING INFORMATION
The following discussions include "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Investors and prospective investors are
cautioned that the forward-looking statements contained herein with respect to
the revenues, earnings, capital expenditures, resolution and impact of
litigation, competitive performance, or other prospects for the business of New
Century Energies, Inc., Public Service Company of Colorado and/or Southwestern
Public Service Company or their affiliated companies, including any and all
underlying assumptions and other statements that are other than statements of
historical fact, may be influenced by factors that could cause actual outcomes
and results to be materially different than projected. Such factors include, but
are not limited to, the effects of weather, future economic conditions, the
performance of generating units, fuel prices and availability, regulatory
decisions and the effects of changes in state and federal laws, the pace of
deregulation of domestic retail natural gas and electricity markets, the timing
and extent of change in commodity prices for all forms of energy, capital
spending requirements, the evolution of competition, earnings retention and
dividend payout policies, changes in accounting standards, and other factors.
From time to time, New Century Energies, Inc., Public Service Company of
Colorado and Southwestern Public Service Company may publish or otherwise make
available forward-looking statements. All such subsequent forward-looking
statements, whether written or oral and whether made by or on behalf of each
company, are also expressly qualified by these cautionary statements.
i
<PAGE>
TERMS
The abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or Acronym Term
- ----------------------- ----
AEP.....................................................American Electric Power
CDPHE......................................Colorado Department of Public Health
and Environment
Cheyenne.................................Cheyenne Light, Fuel and Power Company
CPUC...................The Public Utilities Commission of the State of Colorado
Denver District Court ................................District Court in and for
the City and County of Denver
DOE........................................................Department of Energy
DSM......................................................Demand Side Management
DSMCA....................................Demand Side Management Cost Adjustment
Dth...................................................................Dekatherm
ECA......................................................Energy Cost Adjustment
e prime..........................................e prime, inc. and subsidiaries
FERC.......................................Federal Energy Regulatory Commission
Fort St. Vrain ......................Fort St. Vrain Electric Generating Station,
formerly a nuclear generating station
Fuelco ..........................................Fuel Resources Development Co.,
a dissolved Colorado Corporation
GCA.........................................................Gas Cost Adjustment
ICA...................................................Incentive Cost Adjustment
Kwh...............................................................kilowatt-hour
Merger............................the business combination between PSCo and SPS
Natural Fuels.........................................Natural Fuels Corporation
NCE or Company.......................................New Century Energies, Inc.
NC Enterprises.............................................NC Enterprises, Inc.
NCI.............................................New Century International, Inc.
NMPUC......................................New Mexico Public Utility Commission
NOx..............................................................Nitrogen Oxide
PSCo.........................................Public Service Company of Colorado
PUHCA................................Public Utility Holding Company Act of 1935
PSCCC............................................PS Colorado Credit Corporation
PUCT.........................................Public Utility Commission of Texas
QF..........................................................Qualifying Facility
Quixx........................................Quixx Corporation and subsidiaries
SEC..........................................Securities and Exchange Commission
SO2..............................................................Sulfur Dioxide
SPS.........................................Southwestern Public Service Company
SFAS 71....................Statement of Financial Accounting Standards No. 71 -
"Accounting for the Effects of Certain Types of Regulation"
SFAS 112..................Statement of Financial Accounting Standards No. 112 -
"Employers' Accounting for Postemployment Benefits"
SFAS 121..................Statement of Financial Accounting Standards No. 121 -
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of"
Thunder Basin........................................Thunder Basin Coal Company
UE.............................Utility Engineering Corporation and subsidiaries
WGI....................................................WestGas InterState, Inc.
Yorkshire Electricity..........................Yorkshire Electricity Group plc
Yorkshire Power......................................Yorkshire Power Group Ltd.
ii
<PAGE>
NEW CENTURY ENERGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of Dollars)
ASSETS
March 31, December 31,
1998 1997
---- ----
(Unaudited)
Property, plant and equipment, at cost:
Electric ........................................ $6,735,650 $6,703,863
Gas.............................................. 1,152,410 1,136,231
Steam and other.................................. 107,570 120,322
Common to all departments........................ 469,054 437,636
Construction in progress......................... 374,063 318,124
------- -------
8,838,747 8,716,176
Less: accumulated depreciation .................. 3,237,807 3,182,800
--------- ---------
Total property, plant and equipment............ 5,600,940 5,533,376
--------- ---------
Investments, at cost:
Investment in Yorkshire Power and other
unconsolidated subsidiaries (Note 2)......... 299,077 295,316
Other............................................ 66,123 71,411
------- ------
Total investments........................... ... 365,200 366,727
------- -------
Current assets:
Cash and temporary cash investments................ 76,005 72,623
Accounts receivable, less reserve for uncollectible
accounts ($5,143 at March 31, 1998; $5,355 at
December 31, 1997) .... ......................... 300,166 315,539
Accrued unbilled revenues.......................... 103,830 110,877
Recoverable purchased gas and electric energy costs
- net .......................................... 101,765 129,292
Materials and supplies, at average cost............ 65,037 68,411
Fuel inventory, at average cost.................... 22,094 23,162
Gas in underground storage, at cost (LIFO)......... 14,923 47,394
Prepaid expenses and other......................... 57,402 56,868
------ ------
Total current assets.............................. 741,222 824,166
------- -------
Deferred charges:
Regulatory assets (Note 1)......................... 417,918 430,475
Unamortized debt expense .......................... 20,276 20,833
Other.............................................. 144,337 134,704
------- -------
Total deferred charges............................ 582,531 586,012
------- -------
$7,289,893 $7,310,281
========== ==========
The accompanying notes to consolidated condensed financial statements
are an integral part of these financial statements.
1
<PAGE>
NEW CENTURY ENERGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of Dollars)
CAPITAL AND LIABILITIES
March 31, December 31,
1998 1997
---- ----
(Unaudited)
Common stock ........................................ $1,716,152 $1,694,195
Retained earnings.................................... 680,667 659,050
------- -------
Total common equity.............................. 2,396,819 2,353,245
Preferred stock of subsidiaries:
Not subject to mandatory redemption............... 140,002 140,002
Subject to mandatory redemption at par............ 39,253 39,253
SPS obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely
subordinated debentures of SPS ................... 100,000 100,000
Long-term debt of subsidiaries ...................... 1,986,183 1,987,955
--------- ---------
4,662,257 4,620,455
Noncurrent liabilities:
Employees' postretirement benefits other than
pensions ....................................... 65,089 62,716
Employees' postemployment benefits ............... 27,319 27,953
------ ------
Total noncurrent liabilities..................... 92,408 90,669
------ ------
Current liabilities:
Notes payable and commercial paper ............... 608,761 588,343
Long-term debt due within one year................ 207,486 257,469
Preferred stock subject to mandatory redemption
within one year ................................ 2,576 2,576
Accounts payable.................................. 228,253 298,469
Dividends payable................................. 69,083 68,296
Customers' deposits............................... 29,153 27,993
Accrued taxes..................................... 121,668 66,587
Accrued interest.................................. 36,456 52,615
Current portion of accumulated deferred income
taxes .......................................... 23,773 27,391
Other............................................. 83,602 87,380
------ ------
Total current liabilities........................ 1,410,811 1,477,119
--------- ---------
Deferred credits:
Customers' advances for construction.............. 52,778 53,041
Unamortized investment tax credits ............... 104,868 106,147
Accumulated deferred income taxes................. 918,057 922,341
Other............................................. 48,714 40,509
------- ------
Total deferred credits........................... 1,124,417 1,122,038
--------- ---------
Commitments and contingencies (Notes 3 and 4)........ --------- ---------
$7,289,893 $7,310,281
========== ==========
The accompanying notes to consolidated condensed financial statements
are an integral part of these financial statements.
2
<PAGE>
NEW CENTURY ENERGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Thousands of Dollars)
Three Months Ended
March 31,
1998 1997
---- ----
Operating revenues:
Electric........................................... $ 599,988 $ 588,357
Gas................................................ 319,707 291,624
Other.............................................. 19,809 10,030
------- ------
939,504 890,011
Operating expenses:
Fuel used in generation............................ 140,919 148,879
Purchased power.................................... 148,864 127,833
Cost of gas sold................................... 224,912 206,989
Other operating and maintenance expenses........... 147,681 135,121
Depreciation and amortization...................... 62,418 61,167
Taxes (other than income taxes) ................... 32,873 34,022
------- ------
757,667 714,011
Operating income..................................... 181,837 176,000
Other income and deductions:
Merger expenses.................................... (785) (4,058)
Equity in earnings of Yorkshire Power and other
unconsolidated subsidiaries (Note 2)............. 3,752 253
Miscellaneous income and deductions - net.......... (2,183) (1,534)
------ ------
784 (5,339)
Interest charges and preferred dividends of subsidiaries:
Interest on long-term debt......................... 40,473 39,421
Other interest..................................... 8,494 4,917
Allowance for borrowed funds used during construction (4,506) (2,301)
Dividends on SPS obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely subordinated debentures of SPS ........... 1,963 1,963
Dividend requirements on preferred stock of subsidiaries 2,929 2,943
----- -----
49,353 46,943
Income before income taxes............................ 133,268 123,718
Income taxes.......................................... 47,119 45,562
------- -------
Net income............................................ $86,149 $78,156
======= =======
Weighted average common shares outstanding............ 110,973 103,994
======= =======
Basic and diluted earnings per share of common stock
outstanding ......................................... $ 0.78 $0.75
====== =====
The accompanying notes to consolidated condensed financial statements
are an integral part of these financial statements.
3
<PAGE>
NEW CENTURY ENERGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands of Dollars)
Three Months Ended
March 31,
1998 1997
---- ----
Operating activities:
Net income......................................... $ 86,149 $ 78,156
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................... 64,887 62,162
Amortization of investment tax credits........... (1,279) (1,314)
Deferred income taxes............................ (6,433) 18,490
Equity in earnings of Yorkshire Power and other
unconsolidated subsidiaries, net............... (3,756) -
Allowance for funds used during construction..... 3 (5)
Change in accounts receivable.................... 15,373 18,139
Change in inventories............................ 36,913 24,221
Change in other current assets................... 34,040 (7,015)
Change in accounts payable....................... (70,216) (107,695)
Change in other current liabilities.............. 45,221 6,414
Change in deferred amounts....................... 5,192 (10,766)
Change in noncurrent liabilities................. 1,738 (574)
Other............................................ - (296)
------- --------
Net cash provided by operating activities...... 207,832 79,917
Investing activities:
Construction expenditures.......................... (127,989) (89,904)
Allowance for equity funds used during construction (3) 5
Proceeds from disposition from property, plant and
equipment ....................................... 441 1,244
Purchase of other investments...................... (214) (1,125)
Sale of other investments.......................... 5,458 4,205
------ -----
Net cash used in investing activities.......... (122,307) (85,575)
Financing activities:
Proceeds from sale of common stock................. 13,038 7,658
Proceeds from sale of long-term notes and bonds.... - 323,733
Redemption of long-term notes and bonds............ (51,854) (16,510)
Short-term borrowings - net........................ 20,418 116,425
Dividends on common stock.......................... (63,745) (56,536)
-------- -------
Net cash provided by (used in)financing
activities .................................. (82,143) 374,770
------- -------
Net increase in cash and temporary cash
investments ................................. 3,382 369,112
Cash and temporary cash investments at beginning
of period ................................... 72,623 50,015
------ ------
Cash and temporary cash investments at end of
period ...................................... $ 76,005 $419,127
======== ========
The accompanying notes to consolidated condensed financial statements
are an integral part of these financial statements
4
<PAGE>
PUBLIC SERVICE COMPANY OF COLORADO
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of Dollars)
ASSETS
March 31, December 31,
1998 1997
---- ----
(Unaudited)
Property, plant and equipment, at cost:
Electric .......................................... $4,113,935 $4,088,447
Gas................................................ 1,113,569 1,100,003
Steam and other.................................... 78,707 78,740
Common to all departments.......................... 454,162 432,840
Construction in progress........................... 213,160 170,503
------- -------
5,973,533 5,870,533
Less: accumulated depreciation .................... 2,182,818 2,145,673
--------- ---------
Total property, plant and equipment.............. 3,790,715 3,724,860
--------- ---------
Investments, at cost:
Investment in Yorkshire Power (Note 2)............. - 286,703
Note receivable from affiliate (Note 2)............ 292,620 -
Other.............................................. 23,898 43,311
------- ------
Total investments................................. 316,518 330,014
------- -------
Current assets:
Cash and temporary cash investments................ 19,665 18,909
Accounts receivable, less reserve for uncollectible
accounts ($2,006 at March 31, 1998; $2,272 at
December 31, 1997) .............................. 180,611 191,155
Accrued unbilled revenues ......................... 83,243 94,284
Recoverable purchased gas and electric energy costs
- net .......................................... 86,221 103,197
Materials and supplies, at average cost............ 44,569 48,030
Fuel inventory, at average cost.................... 19,792 20,862
Gas in underground storage, at cost (LIFO)......... 14,561 46,576
Prepaid expenses and other......................... 34,874 39,594
------- ------
Total current assets.............................. 483,536 562,607
------- -------
Deferred charges:
Regulatory assets (Note 1)......................... 300,207 310,658
Unamortized debt expense .......................... 10,416 10,800
Other.............................................. 61,760 55,794
------- ------
Total deferred charges............................ 372,383 377,252
------- -------
$4,963,152 $4,994,733
========== ==========
The accompanying notes to consolidated condensed financial statements
are an integral part of these financial statements.
5
<PAGE>
PUBLIC SERVICE COMPANY OF COLORADO
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of Dollars)
CAPITAL AND LIABILITIES
March 31, December 31,
1998 1997
---- ----
(Unaudited)
Common stock.......................................... $1,302,119 $1,302,119
Retained earnings..................................... 342,335 319,280
------- -------
Total common equity............................... 1,644,454 1,621,399
Preferred stock:
Not subject to mandatory redemption................ 140,002 140,002
Subject to mandatory redemption at par............. 39,253 39,253
Long-term debt........................................ 1,336,351 1,338,138
--------- ---------
3,160,060 3,138,792
Noncurrent liabilities:
Employees' postretirement benefits other than
pensions ........................................ 57,964 58,695
Employees' postemployment benefits................. 25,031 25,031
------- -------
Total noncurrent liabilities...................... 82,995 83,726
------- -------
Current liabilities:
Notes payable and commercial paper................. 353,500 348,555
Long-term debt due within one year................. 207,236 257,160
Preferred stock subject to mandatory redemption
within one year ................................. 2,576 2,576
Accounts payable................................... 171,238 218,773
Dividends payable.................................. 45,842 40,975
Customers' deposits................................ 22,996 21,888
Accrued taxes...................................... 94,489 42,549
Accrued interest................................... 26,658 39,177
Current portion of accumulated deferred income taxes 17,228 19,872
Other.............................................. 59,996 59,880
------ ------
Total current liabilities......................... 1,001,759 1,051,405
--------- ---------
Deferred credits:
Customers' advances for construction............... 51,599 51,830
Unamortized investment tax credits ................ 98,158 99,355
Accumulated deferred income taxes.................. 532,550 534,246
Other.............................................. 36,031 35,379
------- -------
Total deferred credits............................ 718,338 720,810
------- -------
Commitments and contingencies (Notes 3 and 4)......... ---------- ----------
$4,963,152 $4,994,733
========== ==========
The accompanying notes to consolidated condensed financial statements
are an integral part of these financial statements.
6
<PAGE>
PUBLIC SERVICE COMPANY OF COLORADO
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Thousands of Dollars)
Three Months Ended
March 31,
1998 1997
---- ----
Operating revenues:
Electric........................................... $375,446 $373,863
Gas................................................ 265,483 291,624
Other.............................................. 3,713 3,230
------- -------
644,642 668,717
Operating expenses:
Fuel used in generation............................ 50,629 44,261
Purchased power.................................... 124,057 122,626
Gas purchased for resale........................... 176,482 206,989
Other operating and maintenance expenses........... 93,945 98,157
Depreciation and amortization...................... 42,896 42,937
Taxes (other than income taxes) ................... 19,969 22,496
Income taxes ..................................... 36,818 35,270
------- -------
544,796 572,736
Operating income...................................... 99,846 95,981
Other income and deductions:
Merger expenses.................................... 418 (1,280)
Equity earnings in Yorkshire Power (Note 2)........ 3,446 -
Miscellaneous income and deductions - net.......... (3,303) (1,508)
------- -------
561 (2,788)
Interest charges:
Interest on long-term debt......................... 27,600 26,906
Amortization of debt discount and expense less premium 978 928
Other interest..................................... 5,653 3,939
Allowance for borrowed funds used during construction (2,721) (1,461)
------ ------
31,510 30,312
------ ------
Net income............................................ 68,897 62,881
Dividend requirements on preferred stock.............. 2,929 2,943
------- -------
Earnings available for common stock................... $65,968 $59,938
======= =======
The accompanying notes to consolidated condensed financial statements
are an integral part of these financial statements.
7
<PAGE>
PUBLIC SERVICE COMPANY OF COLORADO
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands of Dollars)
Three Months Ended
March 31,
1998 1997
---- ----
Operating activities:
Net income......................................... $68,897 $62,881
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................... 44,124 43,932
Amortization of investment tax credits........... (1,197) (1,252)
Deferred income taxes............................ (801) 23,609
Equity in earnings of Yorkshire Power............ (3,446) -
Change in accounts receivable.................... 10,165 14,528
Change in inventories............................ 36,546 24,592
Change in other current assets................... 32,739 (15,659)
Change in accounts payable....................... (46,326) (99,862)
Change in other current liabilities.............. 39,889 15,366
Change in deferred amounts....................... (2,194) 85
Change in noncurrent liabilities................. (732) 264
Other............................................ - (296)
------- --------
Net cash provided by operating activities...... 177,664 68,188
Investing activities:
Construction expenditures.......................... (107,298) (57,545)
Proceeds from disposition of property, plant and
equipment ....................................... 1,393 1,244
Purchase of other investments...................... (152) (418)
Sale of other investments.......................... 5,026 4,205
------- ------
Net cash used in investing activities.......... (101,031) (52,514)
Financing activities:
Proceeds from sale of common stock................. - 7,658
Proceeds from sale of long-term notes and bonds.... - 323,733
Redemption of long-term notes and bonds............ (51,800) (1,755)
Short-term borrowings - net........................ 16,899 50,675
Dividends on common stock.......................... (38,047) (34,030)
Dividends on preferred stock....................... (2,929) (2,943)
------- -------
Net cash provided by (used in) financing
activities ................................. (75,877) 343,338
------- -------
Net increase in cash and temporary cash
investments ................................ 756 359,012
Cash and temporary cash investments at beginning
of period .................................. 18,909 9,406
Cash and temporary cash investments at end of
period ..................................... $ 19,665 $368,418
========= ========
The accompanying notes to consolidated condensed financial statements
are an integral part of these financial statements.
8
<PAGE>
SOUTHWESTERN PUBLIC SERVICE COMPANY
CONDENSED BALANCE SHEETS
(Thousands of Dollars)
ASSETS
March 31, December 31,
1998 1997
---- ----
(Unaudited)
Property, plant and equipment, at cost:
Electric .......................................... $2,562,573 $2,557,579
Construction in progress........................... 157,435 144,452
2,720,008 2,702,031
Less: accumulated depreciation .................... 1,004,030 987,487
Total property, plant and equipment............... 1,715,978 1,714,544
--------- ---------
Investments, at cost:
Notes receivable from affiliate ................... 119,036 119,036
Other.............................................. 5,894 5,832
------- -------
Total investments................................. 124,930 124,868
------- -------
Current assets:
Cash and temporary cash investments................ 9,119 986
Accounts receivable, less reserve for uncollectible
accounts ($2,315 at March 31, 1998; $2,442 at
December 31, 1997) .............................. 80,540 96,548
Accrued unbilled revenues ......................... 19,727 15,468
Recoverable electric energy costs - net............ 13,057 23,086
Materials and supplies, at average cost............ 16,641 16,337
Fuel inventory, at average cost.................... 2,302 2,301
Prepaid expenses and other......................... 3,130 3,367
------- -------
Total current assets.............................. 144,516 158,093
------- -------
Deferred charges:
Regulatory assets (Note 1)......................... 117,164 119,244
Unamortized debt expense .......................... 9,229 9,395
Other.............................................. 53,538 55,349
------- -------
Total deferred charges............................ 179,931 183,988
------- -------
$2,165,355 $2,181,493
========== ==========
The accompanying notes to condensed financial statements are an
integral part of these financial statements.
9
<PAGE>
SOUTHWESTERN PUBLIC SERVICE COMPANY
CONSDENSED BALANCE SHEETS
(Thousands of Dollars)
CAPITAL AND LIABILITIES
March 31, December 31,
1998 1997
---- ----
(Unaudited)
Common stock.......................................... $ 348,402 $ 348,402
Retained earnings..................................... 343,125 349,988
------- -------
Total common equity............................... 691,527 698,390
SPS obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely
subordinated debentures of SPS ..................... 100,000 100,000
Long-term debt........................................ 620,667 620,598
------- -------
1,412,194 1,418,988
Noncurrent liabilities:
Employees' postretirement benefits other than
pensions ........................................ 4,153 3,800
Employees' postemployment benefits................. 1,812 2,446
------- -------
Total noncurrent liabilities...................... 5,965 6,246
------- -------
Current liabilities:
Notes payable and commercial paper................. 158,762 154,244
Notes payable to affiliates........................ 17,660 25,160
Long-term debt due within one year................. 114 173
Accounts payable................................... 98,325 107,465
Dividends payable.................................. 25,002 22,546
Customers' deposits................................ 5,515 5,471
Accrued taxes...................................... 31,168 28,051
Accrued interest................................... 9,320 12,715
Current portion of accumulated deferred income taxes 6,174 10,740
Other.............................................. 6,291 7,415
------- -------
Total current liabilities......................... 358,331 373,980
------- -------
Deferred credits:
Unamortized investment tax credits ................ 5,406 5,469
Accumulated deferred income taxes ................. 374,113 372,447
Other.............................................. 9,346 4,363
------- -------
Total deferred credits............................ 388,865 382,279
------- -------
Commitments and contingencies (Notes 3 and 4).........
$2,165,355 $2,181,493
========== ==========
The accompanying notes to condensed financial statements are an
integral part of these financial statements.
10
<PAGE>
SOUTHWESTERN PUBLIC SERVICE COMPANY
CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Thousands of Dollars)
Three Months Ended
March 31,
1998 1997
---- ----
Operating revenues:
Electric........................................... $199,732 $214,495
Other.............................................. - 6,800
------- -------
199,732 221,295
Operating expenses:
Fuel used in generation............................ 90,290 104,618
Purchased power.................................... 2,641 5,207
Other operating & maintenance expenses............. 34,396 36,965
Depreciation and amortization...................... 17,776 18,230
Taxes (other than income taxes) ................... 12,065 11,526
Income taxes ...................................... 11,225 10,292
------- -------
168,393 186,838
------- -------
Operating income...................................... 31,339 34,457
Other income and deductions:
Merger expenses.................................... (1,203) (2,778)
Miscellaneous income and deductions - net ......... 2,278 275
------- -------
1,075 (2,503)
Interest charges:
Interest on long-term debt......................... 10,943 11,025
Amortization of debt discount and expense less premium 561 562
Other interest..................................... 2,579 1,026
Allowance for borrowed funds used during construction (1,771) (840)
Dividends on SPS obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely subordinated debentures of SPS ............ 1,963 1,963
----- -----
14,275 13,736
------ ------
Net income............................................ $18,139 $18,218
======= =======
Theaccompanying notes to condensed financial statements are an
integral part of these financial statements.
11
<PAGE>
SOUTHWESTERN PUBLIC SERVICE COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands of Dollars)
Three Months Ended
March 31,
1998 1997
---- ----
Operating activities:
Net income......................................... $18,139 $18,218
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................... 18,859 18,230
Amortization of investment tax credits........... (63) (62)
Deferred income taxes............................ (4,969) (5,119)
Allowance for funds used during construction..... 3 (5)
Change in accounts receivable.................... 16,008 3,611
Change in inventories............................ (305) (371)
Change in other current assets................... 6,008 8,644
Change in accounts payable....................... (9,140) (7,833)
Change in other current liabilities.............. (1,359) (8,952)
Change in deferred amounts....................... 10,438 (10,851)
Change in noncurrent liabilities................. (279) (838)
------- -------
Net cash provided by operating activities...... 53,340 14,672
Investing activities:
Construction expenditures.......................... (18,601) (32,359)
Allowance for equity funds used during construction (3) 5
Cost of disposition of property, plant and equipment (1,013) -
Purchase of other investments...................... (62) (707)
------- -------
Net cash used in investing activities.......... (19,679) (33,061)
Financing activities:
Redemption of long-term notes and bonds............ - (14,755)
Short-term borrowings - net........................ (2,982) 65,750
Dividends on common stock.......................... (22,546) (22,506)
------- -------
Net cash provided by (used in) financing
activities ................................. (25,528) 28,489
------- ------
Net increase in cash and temporary cash
investments ................................ 8,133 10,100
Cash and temporary cash investments at beginning
of period .................................. 986 40,609
--- ------
Cash and temporary cash investments at end of
period ..................................... $ 9,119 $ 50,709
======== ========
The accompanying notes to condensed financial statements
are an integral part of these financial statements
12
<PAGE>
NEW CENTURY ENERGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies (NCE, PSCo and SPS)
Effective August 1, 1997, following the receipt of all required state and
Federal regulatory approvals, PSCo and SPS merged in a tax-free "merger of
equals" transaction and became wholly-owned subsidiaries of NCE. Each
outstanding share of PSCo common stock was canceled and converted into the right
to receive one share of NCE common stock, and each outstanding share of SPS
common stock was canceled and converted into the right to receive 0.95 of one
share of NCE common stock. Effective with the Merger, certain utility and
non-utility subsidiaries were transferred within NCE's common controlled
subsidiaries. The common stock of Quixx and UE, former SPS subsidiaries, were
transferred through the sale by SPS of the common stock of such subsidiaries at
net book value, aggregating approximately $119.0 million, to NC Enterprises in
exchange for notes payable of NC Enterprises. Subsidiaries of PSCo (Cheyenne,
WGI, e prime and Natural Fuels) were transferred by a declaration of a dividend
of the subsidiaries' stock, at net book value, aggregating approximately $49.9
million to NCE. NCE subsequently made a capital contribution of the e prime and
Natural Fuels common stock, at net book value, aggregating approximately $29.5
million to NC Enterprises.
The NCE consolidated condensed financial statements reflect the accounting
for the Merger as a pooling of interests. The Company's 1997 consolidated
condensed statements of income and cash flows include the consolidated financial
statements for both PSCo and SPS for the three months ended March 31, 1997.
Business, Utility Operations and Regulation
NCE is a registered holding company under the PUHCA and its utility
subsidiaries (PSCo, SPS and Cheyenne) are engaged principally in the generation,
purchase, transmission, distribution and sale of electricity and in the
purchase, transmission, distribution, sale and transportation of natural gas.
Both the Company and its subsidiaries are subject to the regulatory provisions
of the PUHCA. The utility subsidiaries are subject to regulation by the FERC and
state utility commissions in Colorado, Texas, New Mexico, Wyoming, Kansas and
Oklahoma. Over 90% of the Company's revenues are derived from its regulated
utility operations.
Regulatory Assets and Liabilities
The Company's regulated subsidiaries prepare their financial statements in
accordance with the provisions of SFAS 71, as amended. SFAS 71 recognizes that
accounting for rate regulated enterprises should reflect the relationship of
costs and revenues introduced by rate regulation. A regulated utility may defer
recognition of a cost (a regulatory asset) or recognize an obligation (a
regulatory liability) if it is probable that, through the ratemaking process,
there will be a corresponding increase or decrease in revenues.
13
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
The following regulatory assets are reflected in the accompanying
condensed consolidated balance sheets (in thousands):
March 31, 1998 NCE PSCo SPS
------ ------ -----
Income taxes ....................... $158,889 $80,816 $78,604
Nuclear decommissioning costs....... 75,252 75,252 -
Employees' postretirement benefits
other than pensions .............. 61,613 58,620 2,993
Early retirement costs.............. 5,703 4,430 1,273
Employees' postemployment
benefits (Note 3) ................ 24,335 23,835 -
Demand-side management costs........ 41,898 37,824 4,074
Unamortized debt reacquisition costs 35,824 17,285 17,960
Thunder Basin judgment (Note 3)..... 4,921 - 4,921
Other............................... 9,483 2,145 7,339
------ ------ ------
Total............................. $417,918 $300,207 $117,164
======== ======== ========
December 31, 1997 NCE PSCo SPS
------ ------ -----
Income taxes........................ $162,985 $84,356 $79,161
Nuclear decommissioning costs....... 76,881 76,881 -
Employees' postretirement benefits
other than pensions............... 63,023 59,995 3,028
Early retirement costs.............. 8,008 6,645 1,363
Employees' postemployment
benefits (Note 3) ................ 24,455 23,932 -
Demand-side management costs........ 42,503 38,518 3,985
Unamortized debt reacquisition costs 36,717 17,791 18,344
Thunder Basin judgment (Note 3)..... 5,912 - 5,912
Other............................... 9,991 2,540 7,451
------ ------ ------
Total............................. $430,475 $310,658 $119,244
======== ======== ========
The regulatory assets of the Company's regulated subsidiaries as of March
31, 1998 and December 31, 1997 are reflected in rates charged to customers over
periods ranging from two to thirty years. The Company believes its utility
subsidiaries will continue to be subject to rate regulation. In the event that a
portion of the Company's operations is no longer subject to the provisions of
SFAS 71, as a result of a change in regulation or the effects of competition,
the Company's subsidiaries could be required to write-off their regulatory
assets, determine any impairment to other assets resulting from deregulation and
write-down any impaired assets to their estimated fair value, which could have a
material adverse effect on NCE's, PSCo's and SPS's financial position, results
of operations or cash flows.
On January 27, 1997, the CPUC issued its order on PSCo's 1996 gas rate
case. The CPUC allowed recovery of postemployment benefit costs on an accrual
basis under SFAS 112 and denied amortization of the approximately $8.9 million
regulatory asset recognized upon the adoption of SFAS 112. PSCo has appealed in
the Denver District Court the decision related to this issue. PSCo believes that
it will be successful on appeal and that the associated regulatory asset is
realizable. On April 1, 1998, in connection with PSCo's earnings test filing,
PSCo has requested approval to recover its electric jurisdictional portion of
the postemployment benefit costs regulatory asset totaling approximately $15
million over three years. PSCo believes that it will be allowed recovery of SFAS
112 costs on an accrual basis. If PSCo is ultimately unsuccessful in its appeal
of the gas rate case decision and/or in its request to recover its electric
jurisdictional regulatory asset, all unrecoverable amounts will be written off
(see Note 3. Regulatory Matters - Electric Department Earnings Test and Quality
of Service Plan).
14
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
As of March 31, 1998, SPS has approximately $4.9 million in regulatory
assets associated with the Thunder Basin judgment. The judgment amount paid is
recoverable from customers subject to review by various regulatory agencies (see
Note 3. Regulatory Matters - Electric and Gas Cost Adjustment Mechanisms).
Non-utility Subsidiaries and International Investments
The Company's non-utility subsidiaries are principally involved in
engineering, design and construction management, non-regulated energy services,
including gas and power marketing, the management of real estate and certain
life insurance policies, the financing of certain current assets of PSCo and
investments in cogeneration facilities, electric wholesale generators and a
foreign utility company. The Company's international investments are subject to
regulation in the countries in which such investments are made (see Note 2.
Investment in Yorkshire Power). Financial statements of foreign subsidiaries are
translated into U.S. dollars at current exchange rates, except for revenues,
costs and expenses which are translated at average current exchange rates during
each reporting period.
Statements of Cash Flows - Non-cash Transactions:
Effective February 26, 1998, the Company issued 222,362 shares of its
common stock, valued at the market price on date of issuance of approximately
$10 million to the Employees' Savings and Stock Ownership Plan of Public Service
Company of Colorado and Participating Subsidiary Companies. Prior to the Merger,
during 1997, PSCo issued 250,058 shares of its common stock to the Employees'
Savings and Stock Ownership Plan of Public Service Company of Colorado and
Participating Subsidiary Companies valued at the market price on date of
issuance of approximately $10 million. The estimated issuance values were
recognized in other operating expenses during the respective preceding years.
On March 31, 1998, PSCo sold its common stock investment in NCI (at net
book value of approximately $292.6 million) to NC Enterprises, a subsidiary of
NCE. Consideration paid by NC Enterprises for such sale was a 20 year 7.02%
promissory note (see Note 2. Investment in Yorkshire Power).
Comprehensive Income
The Company and its subsidiaries adopted Statement of Financial Accounting
Standards No. 130 Reporting Comprehensive Income, effective January 1, 1998. The
individual and cumulative components of other comprehensive income are not
material to the Company and its subsidiaries.
General
See Note 1. of the Notes to Consolidated Financial Statements in NCE's,
PSCo's and SPS' 1997 Annual Report on Form 10-K for a summary of the companies
and their subsidiaries significant accounting policies. Certain prior year
amounts have been reclassified to conform to the current year's classification.
2. Investment in Yorkshire Power (NCE and PSCo)
During the second quarter of 1997, Yorkshire Power, a subsidiary equally
owned by PSCo, through NCI, and AEP, acquired indirectly all of the outstanding
ordinary shares of Yorkshire Electricity, a United Kingdom regional electricity
company. NCI accounts for its investment in Yorkshire Power using the equity
method. Yorkshire Power's results of operations include 100% of Yorkshire
Electricity's results since April 1, 1997. NCI's equity earnings in Yorkshire
Power is 50%, the same as its ownership share.
The total consideration paid by Yorkshire Power was approximately $2.4
billion (1.5 billion pounds sterling). The acquisition was financed by Yorkshire
Power through a combination of approximately 25% equity and 75% debt, including
the assumption of the existing debt of Yorkshire Electricity. The funds for the
15
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
acquisition were obtained from PSCo's and AEP's investment in Yorkshire Power of
approximately $360 million (220 million pounds sterling) each, with the
remainder obtained by Yorkshire Power through the issuance of non-recourse debt.
PSCo funded its entire equity investment in Yorkshire Power through $250 million
of publicly issued secured medium-term notes with varying maturities and
drawings of approximately $110 million on its short-term lines of credit
pursuant to its short-term credit agreement with Bank of America, as agent.
As approved by the SEC on May 14, 1998 under the PUHCA, effective March 31,
1998, PSCo sold its common stock investment in NCI to NC Enterprises, an NCE
subsidiary. NCI's primary investment is Yorkshire Power. PSCo received as
consideration a 20 year promissory note from NC Enterprises in the amount of
approximately $292.6 million. Annual interest payments are required for the
first three years followed by principal and interest payments for the remaining
seventeen years. The interest rate on the note is 7.02%. NCE intends to make
additional capital contributions to NC Enterprises to provide the necessary cash
flow requirements to make payments on the promissory note to PSCo.
Summarized income statement information for the three months ended March
31, 1998 is presented below (in millions):
Yorkshire Power:
Operating revenues....................... $ 663.2
--------
Operating income......................... 89.7
--------
Net income (1)........................... $ 6.9
========
NCI's equity in earnings of Yorkshire Power $ 3.4
========
(1)Includes a penalty, which was applicable to all United Kingdom regional
electricity utilities, designed to recognize the effects of the delay in
implementation of full competition for the period April 1998 to September
1998 (Yorkshire Power's portion was $8.3 million).
The unaudited pro forma financial information presented below for NCE
assumes that Yorkshire Power was acquired on January 1, 1997. The pro forma
adjustments include recognition of equity in the estimated earnings of Yorkshire
Power, an adjustment for interest expense on debt associated with the investment
in Yorkshire Power and related income taxes. The estimated earnings of Yorkshire
Power were based on historical earnings of Yorkshire Electricity, prior to its
acquisition by Yorkshire Power, adjusted for the estimated effects of purchase
accounting (including the amortization of goodwill), conversion to United States
generally accepted accounting principles, interest expense on debt issued by
Yorkshire Power associated with the acquisition and related income taxes. Sales
of electricity are affected by seasonal weather patterns and, therefore, the
results of Yorkshire Power/Yorkshire Electricity will not be distributed evenly
during the year. Equity in earnings of Yorkshire Power has been converted at the
average exchange rates for the quarter ended March 31, 1998 and March 31, 1997,
of $1.646/pound and $1.632/pound, respectively.
16
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
Based on the above assumptions, shown below is unaudited pro forma
financial information for the three months ended March 31, 1998 and 1997 (in
millions, except per share amounts):
NCE Earnings
Available for
common stock Per share (1)
------------ -------------
1998 1997 1998 1997
---- ---- ---- ----
Net income............................. $86.1 $ 78.2 $0.78 $0.75
===== =====
Pro forma adjustments:
Equity in earnings of
Yorkshire Power, net of
U.S. tax benefits (2)............... - (10.1)
Interest expense, net of tax......... - (3.5)
----- ------
Pro forma result....................... $86.1 $ 64.6 $0.78 $0.62
===== ====== ===== =====
(1) Based on the weighted average number of common shares outstanding for the
period.
(2) The first quarter of 1997 amount includes $24.0 million ($17.9 million
after-tax) of write-offs related to certain computer development costs,
acquisition expenses and costs incurred for the preparation for
deregulation.
The unaudited pro forma financial information presented below for PSCo
assumes that NCI (primarily representing Yorkshire Power) was sold to NC
Enterprises effective January 1, 1997. NCI was formed in connection with the
investment in Yorkshire Power and had no operations during the first three
months of 1997. The pro forma adjustments represent the removal of NCI's net
income from PSCo for the first quarter of 1998 and the inclusion of interest
income, net of tax, from the promissory note to PSCo from NC Enterprises.
Based upon the above assumptions, shown below is unaudited pro forma
financial information for the three months ended March 31, 1998 (in millions):
PSCo
Earnings
1998
----
Net income............................................... $ 68.9
Pro forma adjustments:
NCI's net income ...................................... (2.8)
Interest income from promissory note, net of tax....... 3.3
------
Pro forma result......................................... $ 69.4
======
3. Regulatory Matters (NCE, PSCo and SPS)
Merger Rate Filings
The discussion below summarizes the significant conditions imposed by the
state utility regulatory commissions in Colorado, Texas, New Mexico, Wyoming,
Oklahoma and Kansas in their respective approvals of the Merger.
17
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
PSCo
The CPUC decision approving the Merger established a five-year performance
based regulatory plan and acknowledged that the Merger was in the public
interest. The major provisions of the decision include the following, some of
which are discussed in other sections of this note:
- a $6 million annual electric rate reduction, which was instituted October
1, 1996, followed by an additional $12 million annual electric rate
reduction effective with the implementation of new gas rates on February
1, 1997;
- an annual electric department earnings test with the sharing of earnings
in excess of an 11% return on equity for the calendar years 1997-2001 and
the implementation of a Quality of Service Plan;
- a freeze in base electric rates for the period through December 31, 2001
with the flexibility to make certain other rate changes, including those
necessary to allow for the recovery of DSM, QF capacity and
decommissioning costs. The freeze in base electric rates does not prohibit
PSCo from filing a general rate case or deny any party the opportunity to
initiate a complaint or show cause proceeding; and
- the replacement of the ECA with an ICA.
Subsequent to the CPUC's decision approving the Merger, the CPUC approved
the recovery of merger costs, amortized from the effective date of the Merger
through December 31, 2001. PSCo has expensed merger costs as incurred and
recovery of such costs will be reflected in the electric department earnings
test, discussed below in Electric Department Earnings Test and Quality of
Service Plan. Merger costs attributable to Colorado gas retail customers were
included in the gas rate case approved by the CPUC, discussed below in Rate
Cases- PSCo Retail Gas.
SPS
Under the various regulatory commission approvals, SPS is required to
provide credits to customers over five years for one-half of the measured
non-fuel operation and maintenance expense savings associated with the Merger.
SPS will provide guaranteed minimum annual credits to retail customers of $3
million in Texas, $1.2 million in New Mexico, $100,000 in Oklahoma and $10,000
in Kansas and $1.5 million to wholesale customers.
Cheyenne
The WPSC approved the Merger on August 16, 1996. Cheyenne agreed not to
file a retail electric rate case for two years after the Merger is consummated.
Cheyenne expects to file a combined gas and electric rate case with the WPSC in
1999 after the two year moratorium expires.
Rate Cases
PSCo
Retail - Gas
On June 5, 1996, PSCo filed a retail rate case with the CPUC requesting an
annual increase in its jurisdictional gas department revenues of approximately
$34 million. In early 1997, the CPUC approved an overall increase of
approximately $18 million with an 11.25% return on equity, effective February 1,
1997 and as modified on May 15, 1997. The CPUC disallowed the recovery of
certain postemployment benefit costs under SFAS 112 and imputed anticipated
merger related savings net of costs related to the gas business (see Note 1.
Summary of Significant Accounting Policies). PSCo filed a petition with the
Denver District Court appealing the CPUC's decision. A decision from the Denver
District Court is expected in the last half of 1998.
18
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
SPS
New Mexico
On November 17, 1997, the NMPUC issued an order investigating SPS's rates.
In the order, the NMPUC determined that because of the rapid changes occurring
in the electric industry there is a need for the NMPUC to require rate case
filings by the major electricity suppliers who have not adopted a plan to
provide retail open access and customer choice of suppliers. SPS filed a
compliance filing on May 5, 1998, proposing a $1.7 million annual rate reduction
for certain retail customers in New Mexico, which incorporates the $1.2 million
guaranteed minimum annual credits, discussed above.
Wholesale - FERC
On December 19, 1989, the FERC issued its final order regarding a 1985
wholesale rate case. SPS appealed certain portions of the order that related to
recognition in rates of the reduction of the federal income tax rate from 46% to
34%. The United States Court of Appeals for the District of Columbia Circuit
remanded the case directing the FERC to reconsider SPS's claim of an offsetting
cost and limiting the FERC's actions. The FERC issued its Order on Remand in
July 1992, the required filings were made and a hearing was completed in
February 1994. In October 1994, the administrative law judge ("ALJ") issued a
favorable initial decision that, if approved by the FERC, would result in a
substantial revenue recovery for SPS. Negotiated settlements with SPS's partial
requirements customers and TNP were approved by the FERC in July 1993 and
September 1993, respectively, and SPS received approximately $2.8 million,
including interest. In a settlement with SPS's New Mexico rural electric
cooperative customers, SPS received approximately $7.0 million, including
interest. The FERC approved this settlement in July 1995. Resolutions of these
matters with the remaining wholesale customers, the Golden Spread member
cooperatives and Lyntegar Electric Cooperative, have not been achieved. On May
5, 1998, the FERC issued its opinion substantially modifying the ALJ's initial
decision, raising issues which may lower amounts previously expected to be
recoverable from wholesale customers. SPS is evaluating the impact of the FERC's
order.
Cheyenne
On May 12, 1997, Cheyenne filed an application with the WPSC for an
overall annual increase in retail gas revenues of approximately $1.25 million.
On September 23, 1997, the WPSC approved an increase in retail gas revenues of
approximately $1.19 million with an 11.71% return on equity, effective October
1, 1997.
Electric and Gas Cost Adjustment Mechanisms
PSCo
During 1994 and 1995, the CPUC conducted several proceedings to review
issues related to the ECA. The CPUC opened a docket to review whether the ECA
should be maintained in its then present form, altered or eliminated, and on
January 8, 1996, combined this docket with the merger docket discussed above.
The CPUC decision on the Merger modified and replaced the ECA with an ICA. The
ICA, which became effective October 1, 1996, allows for a 50%/50% sharing of
certain fuel and energy cost increases and decreases among customers and
shareholders. As of March 31, 1998, PSCo has deferred approximately $1.2
million, as recoverable fuel and energy costs. Management does not believe the
cost adjustment mechanism will have a significant impact on the Company's
results of operations, financial position or cash flows.
The CPUC had a docket to review and prescribe a standardized GCA process
to determine the prudence of gas commodity and pipeline delivery service costs
incurred by gas utilities. Other issues addressed in this docket included
whether the GCA should be maintained in its present form, altered or eliminated.
The CPUC issued an order on May 7, 1997, which provides for the current GCA to
be maintained and the adoption of certain standardized filing and gas purchase
reporting requirements. In early 1998, the CPUC issued another Notice of
Proposed Rulemaking seeking
19
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
comments on various customer notice and reporting requirements related to
changes in gas costs. On March 25, 1998, the CPUC decision was issued with no
material changes to the GCA.
SPS
Texas
A PUCT substantive rule requires periodic examination of SPS's fuel and
purchased power costs, the efficiency of the use of such fuel and purchased
power, fuel acquisition and management policies and purchase power commitments.
Under the PUCT's regulations, SPS is required to file an application for the
Commission to retrospectively review, at least every three years, the operations
of a utility's electricity generation and fuel management activities. SPS will
file a reconciliation in 1998 for the generation and fuel management activities
totaling approximately $690 million, for the period from January 1995 through
December 1997. For this same period, SPS had approximately $21.2 million in
underrecovered fuel costs associated with the Texas retail jurisdiction.
Currently, Texas retail customers are being surcharged for approximately $6.4
million of such underrecovered fuel costs. This surcharge does not include the
Thunder Basin judgment discussed below.
On May 1, 1995, SPS filed with the PUCT a petition for a fuel
reconciliation for the months of January 1992 through December 1994. The PUCT
issued an order in January 1996 requiring SPS to make a $3.9 million fuel refund
consisting of $2.1 million of overrecovered fuel costs and $1.8 million of
disallowed fuel costs for the period. This refund was made in April 1996.
Additionally, the order required SPS to pass through to customers 100% of
margins from non-firm off-system opportunity sales as of January 1995. Prior
PUCT rulings had allowed SPS to retain 25% of these margins. The 100% flow
through is required by PUCT rules, absent a waiver. A motion for rehearing on
the fuel disallowance (which was adjusted to $1.9 million) was subsequently
denied by the PUCT and SPS was ordered to flow through 100% of the non-firm
off-system sales margin effective with the first billing cycle after the date of
the order. Upon appeal by SPS to the Travis County District Court in May 1996,
the PUCT's decision on the disallowed fuel costs was upheld. SPS appealed the
decision and on January 29, 1998 the Texas Court of Appeals upheld the PUCT
decision to disallow fuel costs. On March 16, 1998, SPS filed an appeal to the
Supreme Court of Texas.
SPS was named as a defendant in a case entitled Thunder Basin Coal Co. vs.
Southwestern Public Service Co., No. 93-CV304B (D. Wyo.). On November 1, 1994,
the jury returned a verdict in favor of Thunder Basin and awarded damages of
approximately $18.8 million. SPS appealed the judgment to the Tenth Circuit
Court of Appeals and, on January 7, 1997, that Court found in favor of Thunder
Basin and upheld the judgment. SPS filed a motion for rehearing which was
denied. In February 1997, SPS recorded the liability for the judgment including
interest and court costs. The amount of approximately $22.3 million was paid in
April 1997.
On September 17, 1996, the FERC issued an order granting SPS conditional
approval to collect the FERC jurisdictional portion of the Thunder Basin
judgment from wholesale customers. On October 24, 1997, the NMPUC issued an
order granting recovery of the New Mexico retail jurisdictional portion of the
judgment. On May 1, 1997, SPS filed a request with the PUCT to surcharge
undercollected fuel and purchased power expenses, which included $9.1 million of
the Thunder Basin judgment. In November 1997, the PUCT issued a decision which
denied recovery of the judgment through a surcharge, on the grounds that the
costs are not classified as fuel costs. In 1997, SPS expensed approximately
$12.1 million of the Texas retail jurisdictional portion of the Thunder Basin
judgment and recognized an equal amount as deferred revenue in anticipation of
future recovery through the fuel reconciliation proceeding.
SPS believes that recovery of the Thunder Basin costs for the Texas retail
jurisdiction will be approved in a fuel reconciliation proceeding in 1998, but
cannot predict the ultimate outcome. Under the PUCT regulations, a utility may
recover eligible fuel expenses or fuel-related expenses, which result in
benefits to customers that exceed the costs that customers would otherwise have
to pay. The Thunder Basin costs resulted in total net savings to customers of
$8.9 million, of which $4.8 million net savings is attributable to Texas retail
jurisdictional customers.
20
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
Electric Department Earnings Test and Quality of Service Plan
PSCo
The CPUC's decision on the Merger implemented an electric department
earnings test with the sharing of earnings in excess of an 11% return on equity
for the calendar years 1997-2001 as follows:
Electric Department Sharing of Excess Earnings
Return on Equity Customers Shareholders
---------------- --------- ------------
11-12% 65% 35%
12-14% 50% 50%
14-15% 35% 65%
over 15% 100% 0%
The CPUC's decision on the Merger also implemented a QSP which provides
for bill credits totaling up to $5 million in year one and increasing to $11
million in year five, if PSCo does not achieve certain performance measures
relating to electric reliability, customer complaints and telephone response to
inquiries. On October 15, 1997, the CPUC issued an order addressing the
implementation of a reward mechanism in the QSP which provides up to $3 million
of annual rewards if PSCo achieves certain performance measures relating to
electric reliability.
On April 1, 1998, PSCo filed with the CPUC its proposed Performanced-Based
Regulatory Plan adjustment for calendar year 1997. This adjustment will provide
the means for implementing the sharing mechanism for the customers' portion of
earnings over PSCo's authorized return on equity threshold resulting from the
1997 electric department earnings test, net of QSP reward earned revenue. As of
December 31, 1997, PSCo recorded an estimated customer refund obligation of
approximately $16.4 million related to the 1997 electric department earnings
test, net of QSP rewards. As of March 31, 1998, PSCo has recorded a liability of
approximately $5.6 million for the 1998 electric department earnings test.
4. Commitments and Contingencies (NCE, PSCo and SPS)
Environmental Issues
The Company and its subsidiaries are subject to various environmental
laws, including regulations governing air and water quality and the storage and
disposal of hazardous or toxic wastes. The Company and its subsidiaries assess,
on an ongoing basis, measures to ensure compliance with laws and regulations
related to air and water quality, hazardous materials and hazardous waste
compliance and remediation activities.
Environmental Site Cleanup
As described below, PSCo has been or is currently involved with the clean
up of contamination from certain hazardous substances. In all situations, PSCo
is pursuing or intends to pursue insurance claims and believes it will recover
some portion of these costs through such claims. Additionally, where applicable,
PSCo intends to pursue recovery from other Potentially Responsible Parties
("PRPs"). To the extent such costs are not recovered, PSCo currently believes it
is probable that such costs will be recovered through the rate regulatory
process. To the extent any costs are not recovered through the options listed
above, PSCo would be required to recognize an expense for such unrecoverable
amounts.
Under the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), the U.S. Environmental Protection Agency ("EPA") identified, and
a Phase II environmental assessment revealed, low level, widespread
contamination from hazardous substances at the Barter Metals Company ("Barter")
properties located in
21
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
central Denver. For an estimated 30 years, PSCo sold scrap metal and electrical
equipment to Barter for reprocessing. PSCo has completed the cleanup of this
site at a cost of approximately $9 million and has received responses from the
Colorado Department of Public Health and Environment ("CDPHE") indicating that
no further action is required related to these properties. On January 3, 1996,
in a lawsuit by PSCo against its insurance providers, the Denver District Court
entered final judgment in favor of PSCo in the amount of $5.6 million for
certain cleanup costs at Barter. Several appeals and cross appeals have been
filed by one of the insurance providers and PSCo in the Colorado Court of
Appeals. The insurance provider has posted supersedeas bonds in the amount of
$9.7 million ($7.7 million attributable to the Barter judgment). On July 10,
1997, the Colorado Court of Appeals overturned the previously awarded $7.7
million judgment on the basis that the jury had not been properly instructed by
the Judge regarding a narrow issue associated with certain policies. Previously,
PSCo had received certain insurance settlement proceeds from other insurance
providers for Barter and other contaminated sites and a portion of those funds
remains to be allocated to this site by the trial court. In addition, in August
1996, PSCo filed a lawsuit against four PRPs seeking recovery of certain Barter
related costs. Settlement has been achieved with two smaller PRP's. On December
16, 1997, the U. S. District Court awarded summary judgment in favor of the
remaining PRPs, on the basis PSCo failed to follow CERCLA guidelines in the
cleanup. On January 15, 1998, PSCo appealed the summary judgment to the U.S.
Court of Appeals. In March 1998, PSCo sold the remaining Barter properties, and
the total proceeds of were $1.2 million.
PCB presence was identified in the basement of an historic office building
located in downtown Denver. The Company was negotiating the future cleanup with
the current owners; however, on October 5, 1993, the owners filed a civil action
against PSCo in the Denver District Court. The action alleged that PSCo was
responsible for the PCB releases and additionally claimed other damages in
unspecified amounts. On August 8, 1994, the Denver District Court entered a
judgment approving a $5.3 million offer of settlement between PSCo and the
building owners resolving all claims. In December 1995, complaints were filed by
PSCo against all applicable insurance carriers in the Denver District Court. On
June 30, 1997, the Court ruled in favor of the carriers on summary judgment
motions addressing late notice and other issues. On August 27, 1997, PSCo filed
an appeal of the decision with the Colorado Court of Appeals. Two carriers were
excluded from this proceeding; subsequently, one carrier received approval to be
dismissed on the same basis as the other carriers. In March 1998, PSCo reached a
settlement with the remaining carrier. The Company is pursuing the recovery of
$3.3 million net costs in the electric department earnings test over a three
year period.
In addition to these sites, PSCo has identified several other sites where
clean up of hazardous substances may be required. While potential liability and
settlement costs are still under investigation and negotiation, PSCo believes
that the resolution of these matters will not have a material adverse effect on
PSCo's financial position, results of operations or cash flows. PSCo fully
intends to pursue the recovery of all significant costs incurred for such
projects through insurance claims and/or the rate regulatory process.
Other Environmental Matters
Under the Clean Air Act Amendments of 1990 ("CAAA"), coal fueled power
plants are required to reduce SO2 and NOx emissions to specified levels through
a phased approach. PSCo's and SPS's facilities must comply with the Phase II
requirements, which will be effective in the year 2000. Currently, these
regulations permit compliance with SO2 emission limitations by using SO2
allowances allocated to plants by the EPA, using allowances generated by
reducing emissions at existing plants and by using allowances purchased from
other companies. The Company expects to meet the Phase II emission standards
placed on SO2 through the combination of: a) use of low sulfur coal, b) the
operation of air quality control equipment on certain generation facilities, and
c) allowances issued by the EPA and purchased from other companies. PSCo and SPS
will be required to modify certain boilers by the year 2000 to reduce the NOx
emissions in order to comply with Phase II requirements. The estimated Phase II
costs for future plant modifications to meet NOx requirements is approximately
$14.4 million for PSCo's Cherokee Unit 1 and 2 and Arapahoe Unit 3.
SPS installed two new gas turbines at its Cunningham Station in 1997. The
two gas turbine units have undergone performance testing to meet the
requirements of the air quality permit. The test results indicated the units may
22
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
not be in compliance with certain emission limitations. SPS is working with the
vendor and the New Mexico Environmental Department to ensure compliance with all
permit limits.
PSCo has announced its intention to spend approximately $211 million on
its Denver and Boulder Metro area coal-fueled power plants to further reduce
such emissions below the required regulatory levels discussed above, but will
only do so if the following three conditions are met: 1) the Colorado General
Assembly and the CPUC approve recovery of these costs, 2) PSCo obtains
flexibility in operating the plants and 3) PSCo is assured the emission
reduction plan is sufficient to meet future state requirements for 15 years.
Hayden Steam Electric Generating Station
On May 21, 1996, PSCo and the other joint owners of Hayden Station reached
an agreement resolving violations alleged in complaints filed by a conservation
organization, the CDPHE and the EPA against the joint owners. PSCo is the
operator and owns an average undivided interest of approximately 53% of the
station's two generating units. In connection with the settlement, the joint
owners of the Hayden station were required to install emission control equipment
of approximately $130 million (PSCo's portion is approximately $70 million). The
settlement included stipulated future penalties for failure to comply with the
terms of the agreement, including specific provisions related to meeting
construction deadlines associated with the installation of additional emission
control equipment and complying with particulate, SO2 and NOx emissions
limitations. In August 1996, the U.S. District Court for the District of
Colorado entered the settlement agreement which effectively resolved this
litigation. The Company is completing the installation of the emission control
equipment.
Craig Steam Electric Generating Station
On October 9, 1996, a conservation organization filed a complaint in the
U.S. District Court pursuant to provisions of the Federal Clean Air Act (the
"Act") against the joint owners of the Craig Steam Electric Generating Station
located in western Colorado. Tri-State Generation and Transmission Association,
Inc. is the operator of the Craig station and PSCo owns an undivided interest
(acquired in April 1992) in each of two units at the station totaling
approximately 9.7%. The plaintiff alleged that: 1) the station exceeded the 20%
opacity limitations in excess of 14,000 six minute intervals during the period
extending from the first quarter of 1991 through the second quarter of 1996, and
2) the owners failed to operate the station in a manner consistent with good air
pollution control practices. The complaint seeks, among other things, civil
monetary penalties and injunctive relief. The Act provides for penalties of up
to $25,000 per day per violation, but the level of penalties imposed in any
particular instance is discretionary. A settlement conference was held in
February 1998, although no settlement was reached. Resolution of this matter may
require installation of emission control equipment. Management does not believe
that this potential liability, the future impact of this litigation on plant
operations, or any related cost will have a material adverse impact on PSCo's
financial position, results of operations, or cash flows.
Pepsi Center
Hazardous substances resulting from manufactured gas plant operations have
been identified at the site of the Pepsi Center, a sports arena under
construction in lower downtown Denver. The site owners have approached PSCo,
seeking recovery of most of the costs of cleanup of the site. Total estimated
soil cleanup costs range from $1-2 million. The estimate does not include
potential costs to clean up affected ground water contamination, if any exists.
PSCo's insurance carriers have been notified.
Fort St. Vrain
In 1989, PSCo announced its decision to end nuclear operations at Fort St.
Vrain. Defueling of the reactor to the Independent Spent Fuel Storage
Installation ("ISFSI") was completed in June 1992. In March 1996, PSCo and the
decommissioning contractors announced that the physical decommissioning
activities at the facility had been completed. The final site survey was
completed in late October 1996. On August 5, 1997, the NRC approved PSCo's
request to
23
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
terminate the Part 50 license. This concluded the decommissioning activities as
the facilities and site were released for unrestricted use.
On February 9, 1996, PSCo and the DOE entered into an agreement resolving
all the defueling issues. As part of this agreement, PSCo has agreed to the
following: 1) the DOE assumed title to the fuel currently stored in the ISFSI,
2) the DOE will assume title to the ISFSI and will be responsible for the future
defueling and decommissioning of the facility, 3) the DOE agreed to pay PSCo $16
million for the settlement of claims associated with the ISFSI, 4) ISFSI
operating and maintenance costs, including licensing fees and other regulatory
costs, will be the responsibility of the DOE, and 5) PSCo provided to the DOE a
full and complete release of claims against the DOE resolving all contractual
disputes related to storage/disposal of Fort St. Vrain spent nuclear fuel. On
December 17, 1996, the DOE submitted a request to the NRC to transfer the title
of the ISFSI. This request is being reviewed by the NRC and PSCo anticipates
approval in late-1998.
Under the Price-Anderson Act, PSCo remains subject to potential
assessments levied in response to any nuclear incidents prior to early 1994.
PSCo continues to maintain primary commercial nuclear liability insurance of
$100 million for the Fort St. Vrain site and the adjoining ISFSI. PSCo also
maintains coverage of $20.4 million to provide property damage and
decontamination protection in the event of an accident involving the ISFSI.
Employee Matters
Several employee lawsuits have been filed against PSCo involving alleged
discrimination or workers' compensation issues which have arisen during the
normal course of business. Also, lawsuits have been filed against PSCo alleging
breach of certain fiduciary duties to employees. The plaintiffs lawsuits are in
various stages of litigation and/or appeal(s), including settlement discussions,
with the appropriate state and federal judicial courts. PSCo intends to contest,
or is actively contesting, all such lawsuits, and believes the ultimate outcome
will not have a material adverse impact on PSCo's financial position, results of
operations or cash flows.
During 1996, ninety former Information Technology and Systems ("IT&S")
employees filed a lawsuit against the Company. The complaint alleged that PSCo
unfairly amended its severance plan in connection with a restructuring in late
1994 to exclude the IT&S function/positions that were outsourced to a subsidiary
of IBM, effective February 1, 1995. On June 16, 1997, the Denver District Court
issued a decision in favor of the former IT&S employees and awarded
approximately $1.6 million in severance costs and, in a judgment on October 10,
1997, the former IT&S employees were awarded interest and attorney fees as well,
making the total judgment against PSCo $2.1 million. An additional case with 153
former IT&S employees was filed asserting identical claims. Settlement on both
cases was achieved in early 1998. During 1997, PSCo accrued related costs,
including estimated interest and attorney fees. In early 1998, two additional
lawsuits, asserting identical claims, were filed on behalf of a total of 26
former IT&S employees.
Year 2000 Costs
The Company has further refined its initial estimates and now expects to
incur costs of approximately $35-40 million during 1998 and 1999 to modify its
computer software, hardware and other automated systems used in operations
enabling proper data processing relating to the year 2000 and beyond. The
majority of these costs will be incurred by or allocated to the Company's
operating utilities, primarily PSCo and SPS. The Company continues to evaluate
appropriate courses of corrective action, including the replacement of certain
systems. A significant portion of these costs will represent the redeployment of
existing information technology resources. If such modifications and conversions
are not completed on a timely basis, the year 2000 problem may have a material
impact on the operations of the Company. Management does not anticipate these
activities will have a material adverse impact on the financial position,
results of operations or cash flows of the Company or its subsidiaries.
24
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
5. Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust
Holding Solely Subordinated Debentures (NCE, PSCo and SPS)
In October 1996, Southwestern Public Service Capital I, a wholly-owned trust
of SPS, issued in a public offering $100 million of its 7.85% Trust Preferred
Securities, Series A. The sole asset of the trust is $103 million principal
amount of SPS's 7.85% Deferrable Interest Subordinated Debentures, Series A due
September 1, 2036.
In May 1998, PSCo Capital Trust I, a wholly-owned trust of PSCo, issued in a
public offering $194 million of its 7.60% Trust Originated Preferred Securities.
The sole asset of the trust is $200 million principal amount of PSCo's 7.60%
Deferrable Interest Subordinated Debentures due June 30, 2038. The proceeds from
the issuance of the sale of the 7.60% Trust Originated Preferred Securities will
be used to redeem all of PSCo's outstanding preferred stock (totaling $181.8
million at March 31, 1998) on June 10, 1998.
6. Management's Representations (NCE, PSCo and SPS)
In the opinion of the registrants, the accompanying unaudited consolidated
condensed financial statements for NCE, PSCo and SPS include all adjustments
necessary for the fair presentation of the financial position of the Company and
its subsidiaries at March 31, 1998 and December 31, 1997 and the results of
operations and cash flows for the three months ended March 31, 1998 and 1997.
The consolidated condensed financial information and notes thereto should be
read in conjunction with the consolidated financial statements and notes
included in the combined 1997 Form 10-K for NCE, PSCo and SPS.
Because of seasonal and other factors, the results of operations for the
three months ended March 31, 1998 should not be taken as an indication of
earnings for all or any part of the balance of the year.
25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO NEW CENTURY ENERGIES, INC.:
We have reviewed the accompanying consolidated condensed balance sheet of New
Century Energies, Inc. (a Delaware corporation) and subsidiaries as of March 31,
1998, and the related consolidated condensed statements of income and cash flows
for the three-month periods ended March 31, 1998 and 1997. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of New Century Energies, Inc. and
subsidiaries as of December 31, 1997 (not presented herein), and, in our report
dated February 13, 1998, we expressed an unqualified opinion on that statement.
In our opinion, the information set forth in the accompanying consolidated
condensed balance sheet as of December 31, 1997, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
ARTHUR ANDERSEN LLP
Denver, Colorado,
May 14, 1998
26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO PUBLIC SERVICE COMPANY OF COLORADO:
We have reviewed the accompanying consolidated condensed balance sheet of Public
Service Company of Colorado (a Colorado corporation) and subsidiaries as of
March 31, 1998, and the related consolidated condensed statements of income and
cash flows for the three-month periods ended March 31, 1998 and 1997. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Public Service Company of Colorado
and subsidiaries as of December 31, 1997 (not presented herein), and, in our
report dated February 13, 1998, we expressed an unqualified opinion on that
statement. In our opinion, the information set forth in the accompanying
consolidated condensed balance sheet as of December 31, 1997, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
ARTHUR ANDERSEN LLP
Denver, Colorado,
May 14, 1998
27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO SOUTHWESTERN PUBLIC SERVICE COMPANY:
We have reviewed the accompanying condensed balance sheet of Southwestern Public
Service Company (a New Mexico corporation) as of March 31, 1998, and the related
condensed statements of income and cash flows for the three-month periods ended
March 31, 1998 and 1997. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Southwestern Public Service Company as of
December 31, 1997 (not presented herein), and, in our report dated February 13,
1998, we expressed an unqualified opinion on that statement. In our opinion, the
information set forth in the accompanying condensed balance sheet as of December
31, 1997, is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Denver, Colorado,
May 14, 1998
28
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (NCE, PSCo and SPS)
NCE's Management's Discussion and Analysis of Financial Condition and Results
of Operations
Earnings
Earnings per share were $0.78 for the first quarter of 1998 as compared to
$0.75 for the first quarter of 1997. The higher earnings were primarily
attributable to moderate increases in electric and gas sales resulting from
continued customer growth. The increased sales were mitigated to a certain
degree by mild weather experienced during the current period.
Electric Operations
The following table details the change in electric operating revenues and
energy costs for the first quarter of 1998 as compared to the same period in
1997.
Increase (Decrease)
-------------------
(Thousands of Dollars)
Electric operating revenues:
Retail............................................... $ 4,065
Wholesale............................................ 471
Non-regulated power marketing........................ 9,716
Other (including unbilled revenues and provision for
rate refunds) .................................... (2,621)
------
Total revenues...................................... 11,631
Fuel used in generation............................... (7,960)
Purchased power....................................... 21,031
-------
Net decrease in electric margin..................... $(1,440)
=======
The following table compares electric Kwh sales by major customer classes
for the first quarter of 1998 and 1997.
Millions of Kwh Sales
1998 1997 %Change *
---- ---- ---------
Residential ............................... 2,680 2,620 2.3%
Commercial and Industrial ................ 6,592 6,502 1.4
Public Authority .......................... 181 179 0.9
----- -----
Total Retail............................. 9,453 9,301 1.6
Wholesale.................................. 2,736 2,291 19.4
Non-regulated power marketing.............. 823 367 **
----- -----
Total...................................... 13,012 11,959 8.8
====== ======
* Percentages are calculated using unrounded amounts
** Percentage change is significant, but presentation of the amount is not
meaningful
Electric margin decreased slightly in the first quarter of 1998, when
compared to the first quarter of 1997, despite a 1.6% increase in total retail
sales and an 8.8% increase in total sales. PSCo's recognition of an estimated
customer refund obligation (approximately $5.6 million in the first quarter
1998, while no obligation was recorded in the first quarter 1997) in connection
with the earnings sharing in excess of 11% return on equity which resulted for
the settlement of the Merger proceedings in Colorado (see Note 3. Regulatory
Matters in Item 1. FINANCIAL STATEMENTS) and PSCo's retail rate reductions
(approximately $1.6 million) implemented in February 1997 were the primary
contributors to the decrease. PSCo's higher non-firm wholesale electric sales
contributed to increased revenues, but had little impact on electric margin. SPS
for the same period had lower wholesale revenues attributable to mild wet
weather during the first quarter of 1998 negating the need for irrigation.
29
<PAGE>
The Company's regulated subsidiaries had cost adjustment mechanisms which
recognize the majority of the effects of changes in fuel used in generation and
purchased power costs and allow recovery of such costs on a timely basis. PSCo's
ICA, which allows for a 50%/50% sharing of certain fuel and energy cost
increases and decreases among customers and shareholders, did not significantly
impact electric margin for the first quarter of 1998 or 1997 (see Note 3.
Regulatory Matters in Item 1. FINANCIAL STATEMENTS).
Fuel used in generation expense decreased approximately $8.0 million
during the first quarter of 1998 as compared to the same quarter in 1997. Lower
prices of coal and natural gas at SPS were offset by increased generation levels
at PSCo.
Purchased power expense increased during the first quarter of 1998, as
compared to the same quarter in 1997, primarily due to an increase in power
marketing activities at the Company's non-regulated subsidiaries.
Gas Operations
The following table details the change in revenues from gas sales and gas
purchased for resale for the first quarter of 1998 as compared to the same
period in 1997.
Increase (Decrease)
-------------------
(Thousands of Dollars)
Revenues from gas sales (including unbilled revenues). $26,806
Gas purchased for resale.............................. 17,923
-------
Net increase in gas sales margin..................... $ 8,883
=======
The following table compares gas Dth deliveries by major customer classes
for the first quarter of 1998 and 1997.
Millions of Dth Deliveries
--------------------------
1998 1997 % Change *
---- ---- ----------
Residential................................ 39.9 39.6 1.0%
Commercial................................. 19.3 21.3 (9.5)
Non-regulated gas marketing................ 16.4 15.6 4.7
----- -----
Total Sales.............................. 75.6 76.5 (1.2)
Transportation............................. 27.5 25.2 9.3
----- -----
Total.................................... 103.1 101.7 1.4
===== =====
* Percentages are calculated using unrounded amounts
Gas sales margin increased during the first quarter of 1998, when compared
to the first quarter of 1997, primarily due to an increase in PSCo's base
revenues associated with the higher rates effective February 1, 1997, resulting
from the 1996 rate case (see Note 3. Regulatory Matters in Item 1.
FINANCIAL STATEMENTS).
Gas transportation, gathering and processing revenues increased $1.3
million during the first quarter of 1998, when compared to the first quarter of
1997, primarily due to higher transportation rates effective February 1, 1997,
resulting from the Company's 1996 rate case (see Note 3. Regulatory Matters in
Item 1. FINANCIAL STATEMENTS).
PSCo and Cheyenne have in place a GCA mechanism for natural gas sales,
which recognizes the majority of the effects of changes in the cost of gas
purchased for resale and adjusts revenues to reflect such changes in cost on a
timely basis. As a result, the changes in revenues associated with these
mechanisms during the first quarter of 1998, as compared to the first quarter of
1997, had little impact on net income. However, the fluctuations in gas sales
impact the amount of gas the Company's gas utilities must purchase and,
therefore, along with the increases and decreases in the per-unit cost of gas,
affect total gas purchased for resale. The higher per-unit
30
<PAGE>
average cost of gas during the first quarter of 1998, along with an increase in
the quantity of gas purchased, contributed to the increase in cost of gas
purchased for resale.
Non-Fuel Operating Expenses and Other Income and Deductions
Other operating and maintenance expenses increased $12.6 million during
the first quarter of 1998, as compared to the same period in 1997, primarily due
to higher operating costs from non-regulated operations and higher advertising
costs, offset, in part, by lower labor and employee benefit costs attributable
to the Company's overall costs containment efforts.
Other income and deductions increased approximately $6.1 million during
the first quarter of 1998, when compared to the first quarter of 1997, primarily
due to the recognition of equity earnings in Yorkshire Power and a decrease in
merger expenses.
Interest charges increased $2.4 million during the first quarter of 1998,
when compared to the same quarter in 1997, primarily due to interest on
borrowings utilized to finance capital expenditures and the April 1997
investment in Yorkshire Power (see Note 2 Investment in Yorkshire Power in Item
1. FINANCIAL STATEMENTS).
Commitments and Contingencies
Issues relating to regulatory matters, environmental issues, employee
lawsuits and Year 2000 costs are discussed in Notes 3 and 4 in Item 1. FINANCIAL
STATEMENTS. These matters and the future resolution thereof may impact the
Company's future results of operations, financial position or cash flows.
Based on a preliminary analysis, the Company expects to incur costs of
approximately $35-40 million over the next two years to modify its computer
software, hardware and other automated systems used in operations enabling
proper data processing relating to the year 2000 and beyond. The majority of
these costs will be incurred by or allocated to the Company's operating
utilities, primarily PSCo and SPS. The Company continues to evaluate appropriate
courses of corrective action, including the replacement of certain systems. A
significant portion of these costs will represent the redeployment of existing
information technology resources. If such modifications and conversions are not
completed on a timely basis, the year 2000 problem may have a material impact on
the operations of the Company. Management does not anticipate these activities
will have a material adverse impact on the financial position, results of
operations or cash flows of the Company or its subsidiaries.
Common Stock Dividend
During the first quarter, the Board of Directors approved a $0.58 per
share dividend payable to shareholders of the Company. The Company's common
stock dividend level is dependent upon the Company's results of operations,
financial position, cash flows and other factors. The Board of Directors of the
Company will continue to evaluate the common stock dividend on a quarterly
basis.
Liquidity and Capital Resources
Cash Flows - Three Months Ended March 31
1998 1997 Increase
---- ---- --------
Net cash provided by operating
activities (in millions) ............. $207.8 $79.9 $127.9
Cash provided by operating activities increased during the first quarter
of 1998, when compared to the first quarter of 1997, primarily due to the
decrease in payments to gas suppliers resulting from lower gas costs during the
first quarter of 1998 as compared to the first quarter of 1997. A portion of
these lower gas costs have been deferred through the GCA and have reduced the
amount to be recovered from customers in the future.
31
<PAGE>
1998 1997 Increase
---- ---- --------
Net cash used in investing
activities (in millions) ............ $(122.3) $(85.6) $(36.7)
Cash used in investing activities increased during 1998, when compared to
1997, primarily due to an increase in construction expenditures and the purchase
of certain leased assets.
1998 1997 Decrease
---- ---- --------
Net cash provided by (used in) financing
activities (in millions) ............. $ (82.1) $374.8 $(456.9)
Cash provided by financing activities decreased during 1998, when compared
to 1997, primarily due to PSCo's issuance of medium-term notes in January and
March 1997. The proceeds from the $75 million financing by PSCo in January 1997
and the $250 million financing by PSCo in March 1997 were used to fund
construction expenditures and the investment in Yorkshire POWER. See Note 2.
Investment in Yorkshire Power in Item 1. FINANCIAL STATEMENTS.
Financing Activities
Long-Term Debt
In April 1998, PSCo issued $250 million of 6% First Collateral Trust Bonds
due April 15, 2003. The proceeds will be used for general corporate purposes and
to repay short-term and other debt incurred for such purposes.
Obligated Mandatorily Redeemable Preferred Securities
In May 1998, PSCo Capital Trust I, a wholly-owned trust of PSCo, issued in
a public offering $194 million of its 7.60% Trust Originated Preferred
Securities. The sole asset of the trust is $200 million principal amount of
PSCo's 7.60% Deferrable Interest Subordinated Debentures due June 30, 2038. The
proceeds from the issuance of the sale of the 7.60% Trust Originated Preferred
Securities will be used to redeem all of PSCo's outstanding preferred stock
(totaling $181.8 million at March 31, 1998) on June 10, 1998.
Electric Utility Industry
Electric utilities have historically operated in a highly regulated
environment in which they have an obligation to provide electric service to
their customers in return for an exclusive franchise within their service
territory with an opportunity to earn a regulated rate of return. This
regulatory environment is changing. The generation sector has experienced
competition from nonutility power producers and the FERC is requiring utilities,
including the Company, to provide wholesale transmission service to others and
may order electric utilities to enlarge their transmission systems to facilitate
transmission services without impairing reliability. State regulatory
authorities are in the process of changing utility regulations in response to
federal and state statutory changes and evolving markets, including
consideration of providing open access to retail customers. All of the Company's
jurisdictions continue to evaluate utility regulations with respect to
competition. The Company is unable to predict what financial impact or effect
the adoption of these proposals would have on its operations.
32
<PAGE>
PSCo's Management's Discussion and Analysis of Financial Condition and
Results of Operations
Merger
Effective August 1, 1997, following receipt of all required state and
Federal regulatory approvals, PSCo and SPS merged in a tax-free "merger of
equals" transaction and became wholly-owned subsidiaries of NCE, which is a
registered holding company under PUHCA. This transaction was accounted for as a
pooling of interests for accounting purposes. Effective with the Merger,
Cheyenne, WGI, e prime and Natural Fuels were transferred by a declaration of a
dividend of the subsidiaries' stock, at net book value, aggregating
approximately $49.9 million, to NCE. NCE subsequently made a capital
contribution of the e prime and Natural Fuels common stock, at net book value,
aggregating approximately $29.5 million, to NC Enterprises. See Note 1. Summary
of Significant Accounting Policies in Item 1. FINANCIAL STATEMENTS for
additional discussion regarding PSCo, the Merger and the transfer of Cheyenne,
WGI, e prime and Natural Fuels. The consolidated statements of income and cash
flows for the three months ended March 31, 1997 reflect the results of
operations of Cheyenne, WGI, e prime and Natural Fuels. Where relevant,
additional information has been presented to discuss the impact of the transfer
of these subsidiaries.
Earnings Available for Common Stock
Earnings increased approximately 10% to $66.0 million for the first
quarter of 1998, as compared to $59.9 million for the first quarter of 1997. The
increase was primarily attributable to an increase in the gas margin resulting
from an increase in rates which were effective February 1, 1997, and lower labor
and employee benefit costs and other general reductions resulting from the
Merger and continued cost containment efforts.
Electric Operations
The following table details the change in electric operating revenues and
energy costs for the three months ended March 31, 1998, as compared to the same
period in 1997 (in thousands of dollars).
Increase (Decrease)
-------------------
Cheyenne
PSCo Only &e prime Consolidated
--------- -------- ------------
Electric operating revenues:
Retail..................................... $ 7,956 $ (9,612) $ (1,656)
Wholesale - regulated...................... 11,719 - 11,719
Non-regulated power marketing.............. - (5,648) (5,648)
Other (including unbilled revenues and
provision for rate refunds).............. (2,927) 95 (2,832)
------ -- ------
Total revenues............................ 16,748 (15,165) 1,583
Fuel used in generation..................... 6,368 - 6,368
Purchased power............................. 14,115 (12,684) 1,431
------- -------- -------
Net decrease in electric margin.......... $(3,735) $ (2,481) $ (6,216)
======== ======== ========
The following table compares electric Kwh sales by major customer classes
for the three months ended March 31, 1998 and 1997.
Millions of Kwh Sales % Change *
-------------------- ----------
1998 1997 Consolidated PSCo Only
---- ---- ------------ ---------
Residential ..................... 1,856 1,867 (0.6)% 2.7%
Commercial and Industrial ...... 3,755 3,842 (2.3) 1.9
Public Authority ................ 47 48 (1.6) .8
----- ------
Total Retail................... 5,658 5,757 (1.7) 2.2
Wholesale - Regulated............ 1,493 850 75.6 75.6
Non-regulated Power Marketing.... - 367 ** -
----- ------
Total............................ 7,151 6,974 2.5 11.9
===== ======
* Percentages are calculated using unrounded amounts
** Percentage change is significant, but presentation of the amount is not
meaningful
33
<PAGE>
Electric margin decreased in the first quarter of 1998, when compared to
the first quarter of 1997, primarily due to the recognition of an estimated
customer refund obligation (approximately $5.6 million in the first quarter of
1998 while no obligation was recognized in the first quarter of 1997) in
connection with the earnings sharing in excess of 11% return on equity which
resulted from the settlement of the Merger proceedings in Colorado (see Note 3.
Regulatory Matters in Item 1. FINANCIAL STATEMENTS) and the retail rate
reductions (approximately $1.6 million) implemented in February 1997. Electric
margin, however, was favorably impacted by an overall increase in PSCo's retail
sales of 2.2% resulting primarily from customer growth of approximately 2.8%.
Higher wholesale electric sales also contributed to increased operating
revenues, however, the margin on such sales is minimal.
PSCo has cost adjustment mechanisms which recognize the majority of the
effects of changes in fuel used in generation and purchased power costs and
allow recovery of such costs on a timely basis. PSCo's ICA, which allows for a
50%/50% sharing of certain fuel and energy cost increases and decreases among
customers and shareholders, did not significantly impact the electric margin for
the first quarter of 1998 or 1997 (see Note 3. Regulatory Matters in Item 1.
FINANCIAL STATEMENTS).
Fuel used in generation expense increased approximately $6.4 million
during the first quarter of 1998, as compared to the same quarter in 1997 due to
increased generation levels at PSCo's power plants.
Purchased power expense increased slightly during the first quarter of
1998, as compared to the same quarter in 1997, primarily due to purchases to
meet increased wholesale requirements and other customer demands.
Gas Operations
The following table details the change in revenues from gas sales and gas
purchased for resale for the first quarter of 1998, as compared to the same
period in 1997 (in thousands of dollars).
Increase (Decrease)
-----------------
Cheyenne
Natural Fuels
WGI &
PSCo Only e prime Consolidated
--------- ------- ------------
Revenues from gas sales
(including unbilled revenues) ...... $28,760 $ (56,055) $ (27,295)
Gas purchased for resale.............. 21,926 (52,433) (30,507)
------ -------- --------
Net increase(decrease)in gas
sales margin....................... $6,834 $ (3,622) $ 3,212
====== ========= =========
The following table compares gas Dth deliveries by major customer classes
for the first quarter of 1998 and 1997.
Millions of Dth Deliveries % Change *
1998 1997 Consolidated PSCo Only
---- ---- ------------ ---------
Residential................... 38.8 39.6 (1.8)% 0.9%
Commercial.................... 18.4 21.3 (13.7) (10.4)
Non-regulated gas marketing... - 15.6 ** -
----- ----
Total sales................. 57.2 76.5 (25.2) (3.0)
Transportation, gathering and
processing ................. 23.3 25.2 (7.6) 13.3
----- ----
Total....................... 80.5 101.7 (20.8) 1.2
===== =====
* Percentages are calculated using unrounded amounts
** Percentage change is significant, but presentation of the amount is not
meaningful
Gas sales margin increased during the first quarter of 1998, when compared
to the first quarter of 1997, primarily due to an increase in PSCo's base
revenues associated with the higher rates effective February 1, 1997,
34
<PAGE>
resulting from the 1996 rate case. This increase was offset, in part, by a 3.0%
decrease in sales which resulted from warmer weather during the first quarter of
1998 despite a 2.7% increase in customers.
Gas transportation, gathering and processing revenues increased
approximately $1.2 million during the first quarter of 1998, when compared to
the first quarter of 1997, primarily due to higher transportation rates
effective February 1, 1997, resulting from PSCo's 1996 rate case and an increase
in transport deliveries. The increase in transport deliveries continues to be
impacted by the shifting of various commercial customers to transport customers.
PSCo has in place a GCA mechanism for natural gas sales, which recognizes
the majority of the effects of changes in the cost of gas purchased for resale
and adjusts revenues to reflect such changes in cost on a timely basis. As a
result, the changes in revenues associated with these mechanisms during the
first quarter of 1998, as compared to the first quarter of 1997, had little
impact on net income. However, the fluctuations in gas sales impact the amount
of gas PSCo must purchase and, therefore, along with the increases and decreases
in the per-unit cost of gas, affect total gas purchased for resale. The lower
per-unit average cost of gas during the first quarter of 1998, along with a
decrease in the quantity of gas purchased, contributed to the decrease in cost
of gas purchased for resale.
Non-Fuel Operating Expenses and Other Income and Deductions
Other operating and maintenance expenses decreased approximately $4.2
million during the first quarter of 1998, as compared to the first quarter of
1997. Excluding the effects of the sale of Cheyenne, WGI, e prime and Natural
Fuels, other operating and maintenance expenses decreased approximately $3.1
million due to lower labor and employee benefit costs and other general
reductions resulting from the Merger.
Taxes other than income taxes decreased approximately $2.5 million during
the first quarter of 1998, as compared to the first quarter of 1997. Excluding
the effects of the sale of Cheyenne, WGI, e prime and Natural Fuels, taxes other
than income taxes decreased approximately $2.0 million primarily due to lower
property tax accruals.
Other income and deductions increased approximately $3.4 million during
the first quarter of 1998, when compared to the first quarter of 1997, primarily
due to the recognition of equity earnings in Yorkshire Power ($3.4 million). On
March 31, 1998, NCI and its subsidiaries, including Yorkshire Power, were
transferred through the sale by PSCo of all the outstanding common stock at net
book value (approximately $292.6 million), to NC Enterprises, an intermediate
holding company for NCE, and received as consideration a promissory note from NC
Enterprises. See Note 2. Investment in Yorkshire Power in Item 1. FINANCIAL
STATEMENTS. Merger and business integration costs decreased approximately $1.7
million in the first quarter of 1998, as compared to the first quarter of 1997.
Miscellaneous income and deductions-net, changed primarily due to a decrease in
interest income as a result of higher investment balances during the first
quarter of 1997 from the proceeds of financings for the Yorkshire Power
investment.
Interest charges increased approximately $1.2 million during the first
quarter of 1998, as compared to the first quarter of 1997, primarily due to
interest on borrowings utilized to finance capital expenditures and the April
1997 investment in Yorkshire Power (see Note 2. Investment in Yorkshire Power in
Item 1. FINANCIAL STATEMENTS).
Commitments and Contingencies
See Note 4. Commitments and Contingencies in Item 1. FINANCIAL
STATEMENTS.
35
<PAGE>
Liquidity and Capital Resources
Cash Flows - Three Months Ended March 31
1998 1997 Increase
---- ---- --------
Net cash provided by operating activities
(in millions) .......................... $177.7 $68.2 $109.5
Cash provided by operating activities increased during the first quarter
of 1998, when compared to the first quarter of 1997, primarily due to the
decrease in payments to gas suppliers resulting from lower gas costs during the
first quarter of 1998 as compared to the first quarter of 1997. A portion of
these lower gas costs have been deferred through the GCA and have reduced the
amount to be recovered from customers in the future.
1998 1997 Increase
---- ---- --------
Net cash used in investing activities
(in millions) ......................... $(101.0) $(52.5) $ (48.5)
Cash used in investing activities increased during the first quarter of
1998, when compared to the first quarter of 1997, primarily due to higher
construction expenditures and the purchase of certain leased assets.
1998 1997 Increase
---- ---- --------
Net cash provided by(used in)financing
activities (in millions) ............. $ (75.9) $343.3 $(419.2)
Cash provided by financing activities decreased during the first quarter
of 1998, when compared to the first quarter of 1997, primarily due to the
issuance of $75 million and $250 million of medium-term notes in January and
March 1997, respectively. The proceeds from these financings were used to fund
PSCo's construction program and the investment in Yorkshire Power. See Note 2.
Investment in Yorkshire Power in Item 1. FINANCIAL STATEMENTS.
Financing Activities Subsequent to March 31, 1998
Discussion relating to PSCo's financing activities subsequent to March 31,
1998, is covered under "Financing Activities" in NCE's Management's Discussion
and Analysis of Financial Condition and Results of Operations.
36
<PAGE>
SPS's Management's Discussion and Analysis of Financial Condition and Results
of Operations
Merger
Effective August 1, 1997, following receipt of all required state and
Federal regulatory approvals, SPS and PSCo merged in a tax-free "merger of
equals" transaction and became wholly-owned subsidiaries of NCE, which is a
registered holding company under PUHCA. This transaction was accounted for as a
pooling of interests for accounting purposes. Effective with the Merger, Quixx
and UE, previously wholly-owned subsidiaries, were transferred through the sale
by SPS of all of the outstanding common stock of such subsidiaries at net book
value, to NC Enterprises, an intermediate holding company of NCE. The statements
of income and cash flows for the three months ended March 31, 1997 reflect the
results of operations of Quixx and UE.
Earnings Available for Common Stock
Earnings available for common stock were $18.1 million and $18.2 million
during the first quarter of 1998 and 1997, respectively. Operating income
decreased slightly with the sale of Quixx and UE and lower merger related costs
favorably impacted net income.
Operating Revenues
Electric Operations
Substantially all of SPS's operating revenues result from the sale of
electric energy. The principal factors impacting revenues are the amount and
price of energy sold. The following table details the change in electric
operating revenues and energy costs for the three months ended March 31, 1998 as
compared to the same period in 1997 (thousands of dollars).
Increase (Decrease)
------------------
Electric operating revenues:
Retail.............................. $(3,884)
Wholesale........................... (11,248)
Other (including unbilled revenues). 369
-------
Total revenues.................... (14,763)
Fuel used in generation.............. (14,328)
Purchased power...................... (2,566)
-------
Net increase in electric margin... $ 2,131
=======
The following table compares electric Kwh sales by major customer classes
for the three months ended March 31, 1998 and 1997.
Millions of Kwh Sales
1998 1997 % Change*
---- ---- ---------
Residential ............ 764 753 1.4%
Commercial ............ 663 682 (2.9)
Industrial ............ 2,014 1,978 1.9
Public Authority ....... 132 131 1.0
----- -----
Total Retail.......... 3,573 3,544 0.8
Wholesale............... 1,243 1,441 (13.7)
----- -----
Total................... 4,816 4,985 (3.4)
===== =====
* Percentages are calculated using unrounded amounts.
37
<PAGE>
Electric operating revenues decreased $14.8 million or 6.9% during the
three months ended March 31, 1998, when compared to the same period in 1997,
primarily due to lower wholesale revenues and $1.1 million of merger savings
passed on to customers. The decrease in wholesale revenues is attributable to a
lower average selling price per Kwh and a decrease in Kwh sales resulting from
mild wet weather in 1998. Under the various state regulatory approvals, SPS is
required to provide credits to retail customers over five years for one-half of
the measured non-fuel operation and maintenance expense savings associated with
the Merger. SPS will provide a guaranteed minimum annual savings to retail
customers of $3.0 million in Texas, $1.2 million in New Mexico, $100,000 in
Oklahoma, $10,000 in Kansas and $1.5 million to wholesale customers.
Fuel used in generation expense decreased $14.3 million or 13.7% during
the first quarter of 1998, when compared to the same period in 1997, primarily
due to lower prices of coal and natural gas. The decrease in coal costs is
primarily due to the expiration of a coal supply contract in 1997 and
negotiation with a new supplier in 1998 for consumption at the Harrington
generating station. Cost of natural gas used in generation decreased, largely
due to the decrease in the market price of gas. Flexibility in the procurement
of gas supply under the spot market has provided for lower gas costs for the
first quarter of 1998. SPS purchased approximately 48% of its gas supply
requirements on the spot market during this first quarter of 1998. SPS
generation levels for 1998 and 1997 were comparable.
SPS has fuel cost adjustment mechanisms which recognize the majority of
the effects of changes in fuel used in generation and purchased power costs and
allow recovery of such costs on a timely basis. As a result, the changes in
revenues associated with these mechanisms during the first quarter of 1998, when
compared to the first quarter of 1997, had little impact on net income.
Purchased power decreased $2.6 million during the first quarter of 1998,
when compared to the same period in 1997, primarily due to decreased wholesale
purchases. SPS generates substantially all of its power for sale to its firm
retail and wholesale customers and sells non-firm energy as the market demands.
Similarly, SPS purchases low-cost non-firm energy when available.
Other Operating Revenues
Other operating revenues decreased $6.8 million during the first quarter
of 1998, when compared to the same period in 1997, primarily due to the sale of
Quixx and UE in connection with the Merger as discussed above.
Non-Fuel Operating Expenses
Other operating and maintenance expenses decreased $2.6 million during the
first quarter of 1998 as compared to the same period in 1997. Excluding the
effects of the sale of Quixx and UE, other operating and maintenance expenses
increased $1.8 million, primarily due to higher operation and maintenance costs
at one of SPS's steam plants that was non-operational in March 1998 and
increased costs associated with demand side management programs.
Income taxes increased $0.9 million during the first quarter of 1998,
primarily due to higher pre-tax income, when compared to the same period in
1997. Additional income tax expense was recognized in both years for
non-deductible merger costs resulting in an effective income tax for the first
quarter of 38.2% in 1998 and 36.1% in 1997.
Other Income and Deductions
Other income and deductions increased $3.6 million during the first
quarter of 1998, as compared to the same period in 1997, primarily due to lower
1998 merger and business integration expenses and higher interest income related
to the note receivable from NC Enterprises for the sale of Quixx and UE.
38
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Part 1. See Note 4. Commitments and Contingencies in Item 1, Part 1.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4(a) Supplemental Indenture dated as of April 1, 1998, establishing a
series of PSCo First Mortgage Bonds under the Indenture dated as of
December 31, 1939.
4(b) Supplemental Indenture No. 7 dated as of April 1, 1998, establishing
a series of PSCo First Collateral Trust Bonds under the Indenture
dated as of October 1, 1993.
12(a) Computation of Ratio of Consolidated Earnings to Consolidated Fixed
Charges for PSCo is set forth at page 41 herein.
12(b) Computation of Ratio of Consolidated Earnings to Consolidated
Combined Fixed Charges and Preferred Stock Dividends for PSCo is
set forth at page 42 herein.
12(c) Computation of Ratio of Consolidated Earnings to Consolidated Fixed
Charges for SPS is set forth at page 43 herein.
15(a) Letter from Arthur Andersen LLP regarding unaudited interim
information is set forth at page 44 herein for NCE.
15(b) Letter from Arthur Andersen LLP regarding unaudited interim
information is set forth at page 45 herein for PSCo.
15(c) Letter from Arthur Andersen LLP regarding unaudited interim
information is set forth at page 46 herein for SPS.
27(a) Financial Data Schedule for NCE as of March 31, 1998.
27(b) Financial Data Schedule for PSCo as of March 31, 1998.
27(c) Financial Data Schedule for SPS as of March 31, 1998.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed by PSCo since the beginning of the
first quarter of 1998.
- A report on Form 8-K dated April 28, 1998, was filed by PSCo on April
28, 1998. The item reported was Item 5. Other Events: Filing of Bond Purchase
Contract, dated as of April 15, 1998.
- A report on Form 8-K dated April 30, 1998, was filed by PSCo on April 30,
1998. The item reported was Item 5. Other Events: Selected consolidated
financial information for PSCo was presented for the three months ended March
31, 1998 and 1997 and for the years ended December 31, 1997, 1996 and 1995.
- A report on Form 8-K/A dated April 30, 1998, was filed by PSCo on May 1,
1998. The item reported was Item 5. Other Events: Selected consolidated
financial information for PSCo was presented for the three months ended March
31, 1998 and 1997 and for the years ended December 31, 1997, 1996 and 1995.
- A report on Form 8-K dated May 6, 1998 was filed by PSCo on May 14,1998.
The item reported was Item 5. Other Events: Filing of an underwriting
Agreement and other documents in connection with a financing.
39
<PAGE>
NEW CENTURY ENERGIES, INC.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, New Century Energies, Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized on the
14th day of May, 1998.
NEW CENTURY ENERGIES, INC.
By /s/ R. C. Kelly
---------------------------------
R. C. KELLY
Executive Vice President and
and Chief Financial Officer
PUBLIC SERVICE COMPANY OF COLORADO
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Public Service Company of Colorado has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized
on the 14th day of May, 1998.
PUBLIC SERVICE COMPANY OF COLORADO
By /s/Brian P. Jackson
---------------------------------
Brian P. Jackson
Senior Vice President, Finance and
Administrative Services and
Chief Financial Officer
SOUTHWESTERN PUBLIC SERVICE COMPANY
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Southwestern Public Service Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized
on the 14th day of May, 1998.
SOUTHWESTERN PUBLIC SERVICE COMPANY
By /s/Brian P. Jackson
---------------------------------
Brian P. Jackson
Senior Vice President, Finance and
Administrative Services and
Chief Financial Officer
40
<PAGE>
EXHIBIT INDEX
4(a) Supplemental Indenture dated as of April 1, 1998, establishing a series of
PSCo First Mortgage Bonds under the Indenture dated as of December 31,
1939.
4(b) Supplemental Indenture No. 7 dated as of April 1, 1998, establishing a
series of PSCo First Collateral Trust Bonds under the Indenture dated as
of October 1, 1993.
12(a) Computation of Ratio of Consolidated Earnings to Consolidated Fixed
Charges for PSCo is set forth at page 41 herein.
12(b) Computation of Ratio of Consolidated Earnings to Consolidated Combined
Fixed Charges and Preferred Stock Dividends for PSCo is set forth at page
42 herein.
12(c) Computation of Ratio of Consolidated Earnings to Consolidated Fixed
Charges for SPS is set forth at page 43 herein.
15(a) Letter from Arthur Andersen LLP regarding unaudited interim information is
set forth at page 44 herein for NCE.
15(b) Letter from Arthur Andersen LLP regarding unaudited interim information is
set forth at page 45 herein for PSCo.
15(c) Letter from Arthur Andersen LLP regarding unaudited interim information is
set forth at page 46 herein for SPS.
27(a) Financial Data Schedule for NCE as of March 31, 1998.
27(b) Financial Data Schedule for PSCo as of March 31, 1998.
27(c) Financial Data Schedule UT for SPS as of March 31, 1998.
41
<PAGE>
EXHIBIT 12(a)
PUBLIC SERVICE COMPANY OF COLORADO
AND SUBSIDIARIES
COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS
TO CONSOLIDATED FIXED CHARGES
(not covered by Report of Independent Public Accountants)
Three Months Ended
March 31,
1998 1997
---- ----
(Thousands of Dollars, except ratios)
Fixed charges:
Interest on long-term debt................... $27,600 $26,906
Interest on borrowings against corporate-owned
life insurance contracts................... 11,671 10,736
Other interest................................ 5,653 3,939
Amortization of debt discount and expense less
premium ................................... 978 928
Interest component of rental expense......... 2,061 2,583
------ ------
Total ..................................... $47,963 $45,092
======= =======
Earnings (before fixed charges and taxes on income):
Net income................................... $68,897 $62,881
Fixed charges as above....................... 47,963 45,092
Provisions for Federal and state taxes on
income, net of investment tax credit
amortization............................... 36,818 35,317
------- ------
Total...................................... $153,678 $143,290
======== ========
Ratio of earnings to fixed charges.............. 3.20 3.18
====== ======
42
<PAGE>
EXHIBIT 12(b)
PUBLIC SERVICE COMPANY OF COLORADO
AND SUBSIDIARIES
COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS
TO CONSOLIDATED COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(not covered by Report of Independent Public Accountants)
Three Months Ended
March 31,
1998 1997
---- ----
(Thousands of Dollars, except ratios)
Fixed charges and preferred stock dividends:
Interest on long-term debt.................... $27,600 $26,906
Interest on borrowings against corporate-owned
life insurance contracts................... 11,671 10,736
Other interest................................ 5,653 3,939
Amortization of debt discount and expense less
premium ................................... 978 928
Interest component of rental expense.......... 2,061 2,583
Preferred stock dividend requirement.......... 2,929 2,943
Additional preferred stock dividend requirement 1,565 1,653
----- -----
Total .................................... $52,457 $49,688
======= =======
Earnings (before fixed charges and taxes on income):
Net income.................................... $68,897 $62,881
Interest on long-term debt.................... 27,600 26,906
Interest on borrowings against corporate-owned
life insurance contracts................... 11,671 10,736
Other interest................................ 5,653 3,939
Amortization of debt discount and expense less
premium ................................... 978 928
Interest component of rental expense.......... 2,061 2,583
Provisions for Federal and state taxes on income,
net of investment tax credit amortization..... 36,818 35,317
------ -------
Total....................................... $153,678 $143,290
======== ========
Ratio of earnings to fixed charges
and preferred stock dividends................ 2.93 2.88
==== ====
43
<PAGE>
EXHIBIT 12(c)
SOUTHWESTERN PUBLIC SERVICE COMPANY
AND SUBSIDIARIES
COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS
TO CONSOLIDATED FIXED CHARGES
(not covered by Report of Independent Public Accountants)
Three Months Ended
March 31,
1998 1997
---- ----
(Thousands of Dollars, except ratios)
Fixed charges:
Interest on long-term debt..................... $10,943 $11,025
Dividends on SPS obligated mandatorily redeemable
preferred securities........................ 1,963 1,963
Other interest................................. 2,579 1,026
Amortization of debt discount and expense less
premium .................................... 561 562
Interest component of rental expense........... 202 311
------ ------
Total ....................................... $16,248 $14,887
======= =======
Earnings (before fixed charges and taxes on income):
Net income..................................... $18,139 $18,218
Fixed charges as above......................... 16,248 14,887
Provisions for Federal and state taxes on income,
net of investment tax credit amortization...... 11,225 10,292
-------- --------
Total........................................ $45,612 $43,397
======= =======
Ratio of earnings to fixed charges................ 2.81 2.92
====== ======
44
<PAGE>
EXHIBIT 15(a)
May 14, 1998
New Century Energies, Inc.:
We are aware that New Century Energies, Inc. has incorporated by reference
in its Registration Statement (Form S-8, File No. 333-28639) pertaining to the
Omnibus Incentive Plan; its Registration Statement (Form S-3, File No.
333-28637) pertaining to the Dividend Reinvestment and Cash Payment Plan and its
Registration Statement (Form S-3, File No. 333-40361) pertaining to the
registration of NCE Common Stock, its Form 10-Q for the quarter ended March 31,
1998, which includes our report dated May 14, 1998, covering the unaudited
consolidated condensed financial statements contained therein. Pursuant to
Regulation C of the Securities Act of 1933, that report is not considered a part
of the registration statement prepared or certified by our Firm or a report
prepared or certified by our Firm within the meaning of Sections 7 and 11 of the
Act.
Very truly yours,
ARTHUR ANDERSEN LLP
45
<PAGE>
EXHIBIT 15(b)
May 14, 1998
Public Service Company of Colorado:
We are aware that Public Service Company of Colorado has incorporated by
reference in its Registration Statement (Form S-3, File No. 33-62233) pertaining
to the Automatic Dividend Reinvestment and Common Stock Purchase Plan; its
Registration Statement (Form S-3, File No. 33-37431) as amended on December 4,
1990, pertaining to the shelf registration of Public Service Company of
Colorado's First Mortgage Bonds; its Registration Statement (Form S-8, File No.
33-55432) pertaining to the Omnibus Incentive Plan; its Registration Statement
(Form S-3, File No. 33-51167) pertaining to the shelf registration of Public
Service Company of Colorado's First Collateral Trust Bonds; its Registration
Statement (Form S-3, File No. 33-54877) pertaining to the shelf registration of
Public Service Company of Colorado's First Collateral Trust Bonds and Cumulative
Preferred Stock and its Registration Statement (Form S-3, File No. 333-47485)
pertaining to the registration of PSCo Capital Trust I's Preferred Securities,
Public Service Company of Colorado's First Collateral Trust Bonds, Senior Debt
Securities and Subordinated Debt Securities, its Form 10-Q for the quarter ended
March 31, 1998, which includes our report dated May 14, 1998, covering the
unaudited consolidated condensed financial statements contained therein.
Pursuant to Regulation C of the Securities Act of 1933, that report is not
considered a part of the registration statement prepared or certified by our
Firm or a report prepared or certified by our Firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
46
<PAGE>
EXHIBIT 15(c)
May 14, 1998
Southwestern Public Service Company:
We are aware that Southwestern Public Service Company has incorporated by
reference in its Registration Statement (Form S-3, File No. 333-05199)
pertaining to Southwestern Public Service Company's Preferred Stock and Debt
Securities; its Registration Statement (Form S-8, File No. 33-27452) pertaining
to Southwestern Public Service Company's 1989 Stock Incentive Plan and its
Registration Statement (Form S-8, File No. 33-57869) pertaining to Southwestern
Public Service Company's Employee Investment Plan and Non-Qualified Salary
Deferral Plan, its Form 10-Q for the quarter ended March 31, 1998, which
includes our report dated May 14, 1998, covering the unaudited condensed
financial statements contained therein. Pursuant to Regulation C of the
Securities Act of 1933, that report is not considered a part of the registration
statement prepared or certified by our Firm or a report prepared or certified by
our Firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
47
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEW CENTURY
ENERGIES, INC. CONSOLIDATED CONDENSED BALANCE SHEET AS OF MARCH 31, 1998 AND
CONSOLIDATED CONDENSED STATMENTS OF INCOME AND CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATMENTS.
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<PERIOD-TYPE> 3-MOS
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<PERIOD-END> MAR-31-1998
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<OTHER-PROPERTY-AND-INVEST> 365,200
<TOTAL-CURRENT-ASSETS> 741,222
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<TOTAL-ASSETS> 7,289,893
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<CAPITAL-SURPLUS-PAID-IN> 1,604,912
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<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,396,819
139,253
140,002
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2,576
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<OPERATING-INCOME-LOSS> 181,837
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<INCOME-BEFORE-INTEREST-EXPEN> 182,621
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0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 64,538
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<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.78
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PUBLIC
SERVICE COMPANY OF COLORADO AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE
SHEET AS OF MARCH 31, 1998 AND CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND
CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,790,715
<OTHER-PROPERTY-AND-INVEST> 316,518
<TOTAL-CURRENT-ASSETS> 483,536
<TOTAL-DEFERRED-CHARGES> 372,383
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,963,152
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 1,302,119
<RETAINED-EARNINGS> 342,335
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,644,454
39,253
140,002
<LONG-TERM-DEBT-NET> 1,297,986
<SHORT-TERM-NOTES> 50,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 303,500
<LONG-TERM-DEBT-CURRENT-PORT> 202,414
2,576
<CAPITAL-LEASE-OBLIGATIONS> 38,365
<LEASES-CURRENT> 4,822
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,239,780
<TOT-CAPITALIZATION-AND-LIAB> 4,963,152
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<OTHER-OPERATING-EXPENSES> 507,978
<TOTAL-OPERATING-EXPENSES> 544,796
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<INCOME-BEFORE-INTEREST-EXPEN> 100,407
<TOTAL-INTEREST-EXPENSE> 31,510
<NET-INCOME> 68,897
2,929
<EARNINGS-AVAILABLE-FOR-COMM> 65,968
<COMMON-STOCK-DIVIDENDS> 42,913
<TOTAL-INTEREST-ON-BONDS> 27,600
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<EPS-DILUTED> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SOUTHWESTERN
PUBLIC SERVICE COMPANY CONDENSED BALANCE SHEET AS OF MARCH 31, 1998 AND
CONDENSED STATEMENTS OF INCOME AND CASH FLOWS FOR THE THREE MONTHS ENDED MARCH
31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
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<RETAINED-EARNINGS> 343,125
<TOTAL-COMMON-STOCKHOLDERS-EQ> 691,527
100,000
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0
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</TABLE>
Exhibit 4(a)
SUPPLEMENTAL INDENTURE
(Dated as of April 1, 1998)
PUBLIC SERVICE COMPANY OF COLORADO
TO
U.S. BANK TRUST NATIONAL ASSOCIATION,
As Trustee
--------
Creating an Issue of First Mortgage Bonds,
Collateral Series F
--------
(Supplemental to Indenture dated as of December 1, 1939, as amended)
<PAGE>
SUPPLEMENTAL INDENTURE, dated as of April 1, 1998, between PUBLIC
SERVICE COMPANY OF COLORADO, a corporation organized and existing under the laws
of the State of Colorado (the "Company"), party of the first part, and U.S. BANK
TRUST NATIONAL ASSOCIATION (formerly First Trust of New York, National
Association), a national banking association, as successor trustee (the
"Trustee") to Morgan Guaranty Trust Company of New York (formerly Guaranty Trust
Company of New York), party of the second part.
WHEREAS, the Company heretofore executed and delivered to the
Trustee its Indenture, dated as of December 1, 1939 (the "Principal Indenture"),
to secure its First Mortgage Bonds from time to time issued thereunder; and
WHEREAS, the Company has heretofore executed and delivered to the
Trustee the Supplemental Indentures referred to in Schedule A hereto for certain
purposes, including the creation of series of bonds, the subjection to the lien
of the Principal Indenture of property acquired after the execution and delivery
thereof, the amendment of certain provisions of the Principal Indenture and the
appointment of the successor Trustee; and
WHEREAS, the Principal Indenture as supplemented and amended by all
Supplemental Indentures heretofore executed by the Company and the Trustee is
hereinafter referred to as the "Indenture", and, unless the context requires
otherwise, references herein to Articles and Sections of the Indenture shall be
to Articles and Sections of the Principal Indenture as so amended; and
WHEREAS, the Company proposes to create a new series of First
Mortgage Bonds to be designated as First Mortgage Bonds, Collateral Series F
(the "Collateral Series F Bonds"), to be issued and delivered to the trustee
under the 1993 Mortgage (as hereinafter defined) as the basis for the
authentication and delivery under the 1993 Mortgage of a series of securities,
all as hereinafter provided, and to vary in certain respects the covenants and
provisions contained in Article V of the Indenture, to the extent that such
covenants and provisions apply to the Collateral Series F Bonds; and
WHEREAS, the Company, pursuant to the provisions of the Indenture,
has, by appropriate corporate action, duly resolved and determined to execute
this Supplemental Indenture for the purpose of providing for the creation of the
Collateral Series F Bonds and of specifying the form, provisions and particulars
thereof, as in the Indenture provided or permitted and of giving to the
Collateral Series F Bonds the protection and security of the Indenture; and
WHEREAS, the Company has acquired the additional property
hereinafter described, and the Company desires that such additional property so
acquired be specifically subjected to the lien of the Indenture; and
WHEREAS, the Company represents that all acts and proceedings
required by law and by the charter and by-laws of the Company, including all
action requisite on the part of its shareholders, directors and officers,
necessary to make the Collateral Series F Bonds, when executed by the Company,
authenticated and delivered by the Trustee and duly issued, the valid, binding
and legal obligations of the Company, and to constitute the Principal Indenture
and all indentures supplemental thereto, including this Supplemental Indenture,
valid, binding and legal instruments for the security of the bonds of all
series, including the Collateral Series F Bonds, in accordance with the terms of
such bonds and such instruments, have been done, performed and fulfilled, and
the execution and delivery hereof have been in all respects duly authorized;
<PAGE>
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
That Public Service Company of Colorado, the Company named in the
Indenture, in consideration of the premises and of One Dollar to it duly paid by
the Trustee at or before the ensealing and delivery of these presents, the
receipt whereof is hereby acknowledged, and in pursuance of the direction and
authority of the Board of Directors of the Company given at a meeting thereof
duly called and held, and in order to create the Collateral Series F Bonds and
to specify the form, terms and provisions thereof, and to make definite and
certain the lien of the Indenture upon the premises hereinafter described and to
subject said premises directly to the lien of the Indenture, and to secure the
payment of the principal of and premium, if any, and interest, if any, on all
bonds from time to time outstanding under the Indenture, including the
Collateral Series F Bonds, according to the terms of said bonds, and to secure
the performance and observance of all of the covenants and conditions contained
in the Indenture, has executed and delivered this Supplemental Indenture and has
granted, bargained, sold, warranted, aliened, remised, released, conveyed,
assigned, transferred, mortgaged, pledged, set over and confirmed, and by these
presents does grant, bargain, sell, warrant, alien, remise, release, convey,
assign, transfer, mortgage, pledge, set over and confirm unto U.S. Bank Trust
National Association, as Trustee, and its successor or successors in the trust
and its and their assigns forever, the property described in Schedule B hereto
(which is described in such manner as to fall within and under the headings or
parts or classifications set forth in the Granting Clauses of the Principal
Indenture);
TO HAVE AND TO HOLD the same and all and singular the properties,
rights, privileges and franchises described in the Principal Indenture and in
the several Supplemental Indentures hereinabove referred to and in this
Supplemental Indenture and owned by the Company on the date of the execution and
delivery hereof (other than property of a character expressly excepted from the
lien of the Indenture as therein set forth) unto the Trustee and its successor
or successors and assigns forever;
SUBJECT, HOWEVER, to permitted encumbrances as defined in the
Indenture;
IN TRUST, NEVERTHELESS, upon the terms and trusts set forth in the
Indenture, for the equal and proportionate benefit and security of all present
and future holders of the bonds and coupons issued and to be issued under the
Indenture, including the Collateral Series F Bonds, without preference, priority
or distinction as to lien (except as any sinking, amortization, improvement or
other fund established in accordance with the provisions of the Indenture or any
indenture supplemental thereto may afford additional security for the bonds of
any particular series) of any of said bonds over any others thereof by reason of
series, priority in the time of the issue or negotiation thereof, or otherwise
howsoever, except as provided in Section 2 of Article IV of the Indenture.
ARTICLE ONE
CREATION AND DESCRIPTION OF THE COLLATERAL SERIES F BONDS
SECTION 1. A new series of bonds to be issued under and secured by
the Indenture is hereby created, the bonds of such new series to be designated
First Mortgage Bonds, Collateral Series F. The Collateral Series F Bonds shall
be limited to an aggregate principal amount of Two hundred fifty million dollars
($250,000,000), excluding any Collateral Series F Bonds which may be
authenticated and exchanged for or in lieu of or in substitution for or on
transfer of other Collateral Series F Bonds
-2-
<PAGE>
pursuant to any provisions of the Indenture. The Collateral Series F Bonds shall
mature on April 15, 2003. The Collateral Series F Bonds shall not bear interest.
The principal of each Collateral Series F Bond shall be payable, upon
presentation thereof, at the office or agency of the Company in the city in
which the principal corporate trust office of the 1993 Mortgage Trustee (as
hereinafter defined) is located, in any coin or currency of the United States of
America which at the time of payment shall be legal tender for the payment of
public and private debts.
The Collateral Series F Bonds shall be issued and delivered by the
Company to U.S. Bank Trust National Association, as successor trustee under the
Indenture, dated as of October 1, 1993, as supplemented (the "1993 Mortgage"),
of the Company to such successor trustee (the "1993 Mortgage Trustee"), as the
basis for the authentication and delivery under the 1993 Mortgage of a series of
securities. As provided in the 1993 Mortgage, the Collateral Series F Bonds will
be registered in the name of the 1993 Mortgage Trustee or its nominee and will
be owned and held by the 1993 Mortgage Trustee, subject to the provisions of the
1993 Mortgage, for the benefit of the holders of all securities from time to
time outstanding under the 1993 Mortgage, and the Company shall have no interest
therein.
Any payment by the Company under the 1993 Mortgage of the principal
of the securities which shall have been authenticated and delivered under the
1993 Mortgage on the basis of the issuance and delivery to the 1993 Mortgage
Trustee of Collateral Series F Bonds (other than by the application of the
proceeds of a payment in respect of such Collateral Series F Bonds) shall, to
the extent thereof, be deemed to satisfy and discharge the obligation of the
Company, if any, to make a payment of principal of such Collateral Series F
Bonds which is then due.
The Trustee may conclusively presume that the obligation of the
Company to pay the principal of the Collateral Series F Bonds as the same shall
become due and payable shall have been fully satisfied and discharged unless and
until it shall have received a written notice from the 1993 Mortgage Trustee,
signed by an authorized officer thereof, stating that the principal of specified
Collateral Series F Bonds has become due and payable and has not been fully
paid, and specifying the amount of funds required to make such payment.
Each Collateral Series F Bond shall be dated as of the date of its
authentication.
The Collateral Series F Bonds shall be issued as fully registered
bonds only, in denominations of $1,000 and multiples thereof.
The Collateral Series F Bonds shall be registerable and exchangeable
at the office or agency of the Company in the city in which the principal
corporate trust office of the 1993 Mortgage Trustee is located, in the manner
and upon the terms set forth in Section 5 of Article II of the Indenture;
provided, however, that the Collateral Series F Bonds shall not be transferrable
except to a successor trustee under the 1993 Mortgage. No service charge shall
be made for any exchange or transfer of any Collateral Series F Bond.
SECTION 2. The text of the Collateral Series F Bonds shall be
substantially in the form attached hereto as Exhibit A.
SECTION 3. The Collateral Series F Bonds may be executed by the
Company and delivered to the Trustee and, upon compliance with all applicable
provisions and requirements of the
-3-
<PAGE>
Indenture in respect thereof, shall be authenticated by the Trustee and
delivered (without awaiting the filing or recording of this Supplemental
Indenture) in accordance with the written order or orders of the Company.
ARTICLE TWO
REDEMPTION OF THE COLLATERAL SERIES F BONDS
SECTION 1. Each Collateral Series F Bond shall be redeemable at the
option of the Company in whole at any time, or in part from time to time, prior
to maturity, at a redemption price equal to 100% of the principal amount thereof
to be redeemed.
SECTION 2. The provisions of Sections 3, 4, 5, 6 and 7 of Article V
of the Indenture shall be applicable to the Collateral Series F Bonds, except
that (a) no publication of notice of redemption of the Collateral Series F Bonds
shall be required and (b) if less than all the Collateral Series F Bonds are to
be redeemed, the Collateral Series F Bonds to be redeemed shall be selected in
the principal amounts designated to the Trustee by the Company, and except as
such provisions may otherwise be inconsistent with the provisions of this
Article Two.
SECTION 3. The holder of each and every Collateral Series F Bond
hereby agrees to accept payment thereof prior to maturity on the terms and
conditions provided for in this Article Two.
ARTICLE THREE
ACKNOWLEDGMENT OF RIGHT TO VOTE
OR CONSENT WITH RESPECT TO
CERTAIN AMENDMENTS TO INDENTURE
The Company hereby acknowledges the right of the holders of the
Collateral Series F Bonds to vote or consent with respect to any or all of the
modifications to the Indenture referred to in Article Three of the Supplemental
Indenture, dated as of March 1, 1980, irrespective of the fact that the Bonds of
the Second 1987 Series are no longer outstanding; provided, however, that such
acknowledgment shall not impair (a) the right of the Company to make such
modifications without the consent or other action of the holders of the Bonds of
the 2020 Series or the bonds of any other series subsequently created under the
Indenture with respect to which the Company has expressly reserved such right or
(b) the right of the Company to reserve the right to make such modifications
without the consent or other action of the holders of bonds of one or more, or
any or all, series created subsequent to the creation of the Collateral Series F
Bonds.
ARTICLE FOUR
THE TRUSTEE
The Trustee accepts the trusts created by this Supplemental
Indenture upon the terms and conditions set forth in the Indenture and this
Supplemental Indenture. The recitals in this Supplemental
-4-
<PAGE>
Indenture are made by the Company only and not by the Trustee. Each and every
term and condition contained in Article XII of the Indenture shall apply to this
Supplemental Indenture with the same force and effect as if the same were herein
set forth in full, with such omissions, variations and modifications thereof as
may be appropriate to make the same conform to this Supplemental Indenture.
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
SECTION 1. Subject to the variations contained in Article Two of
this Supplemental Indenture, the Indenture is in all respects ratified and
confirmed and the Principal Indenture, this Supplemental Indenture and all other
indentures supplemental to the Principal Indenture shall be read, taken and
construed as one and the same instrument. Neither the execution of this
Supplemental Indenture nor anything herein contained shall be construed to
impair the lien of the Indenture on any of the properties subject thereto, and
such lien shall remain in full force and effect as security for all bonds now
outstanding or hereafter issued under the Indenture.
All covenants and provisions of the Indenture shall continue in full
force and effect and this Supplemental Indenture shall form part of the
Indenture.
SECTION 2. If the date for making any payment or the last date for
performance of any act or the exercising of any right, as provided in this
Supplemental Indenture, shall not be a Business Day (as defined in the 1993
Mortgage), such payment may be made or act performed or right exercised on the
next succeeding Business Day with the same force and effect as if done on the
nominal date provided in this Supplemental Indenture.
SECTION 3. The terms defined in the Indenture shall, for all
purposes of this Supplemental Indenture, have the meaning specified in the
Indenture except as set forth in Section 4 of this Article or otherwise set
forth in this Supplemental Indenture or unless the context clearly indicates
some other meaning to be intended.
SECTION 4. Any term defined in Section 303 of the Trust Indenture
Act of 1939, as amended, and not otherwise defined in the Indenture shall, with
respect to this Supplemental Indenture and the Collateral Series F Bonds, have
the meaning assigned to such term in Section 303 as in force on the date of the
execution of this Supplemental Indenture.
SECTION 5. This Supplemental Indenture may be executed in any number
of counterparts, and all of said counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
-5-
<PAGE>
IN WITNESS WHEREOF, Public Service Company of Colorado, party hereto
of the first part, has caused its corporate name to be hereunto affixed, and
this instrument to be signed by its President, an Executive Vice President, a
Senior Vice President or a Vice President, and its corporate seal to be hereunto
affixed and attested by its Secretary or an Assistant Secretary for and in its
behalf; and U.S. Bank Trust National Association, the party hereto of the second
part, in evidence of its acceptance of the trust hereby created, has caused its
corporate name to be hereunto affixed, and this instrument to be signed and its
corporate seal to be affixed by one of its Vice Presidents and attested by one
of its Assistant Secretaries, for and in its behalf, all as of the day and year
first above written.
PUBLIC SERVICE COMPANY OF
COLORADO
By:/s/ Brian P. Jackson
Name: Brian P. Jackson
Title: Senior Vice President
ATTEST:/s/ Teresa S. Madden
Name: Teresa S. Madden
Title: Secretary
U.S. BANK TRUST
NATIONAL ASSOCIATION,
as Trustee
By:/s/ Catherine F. Donohue
Name: Catherine F. Donohue
Title: Vice President
ATTEST:/s/ Teresita Glasgow
Name: Teresita Glasgow
Title: Assistant Secretary
-6-
<PAGE>
STATE OF COLORADO )
) ss.:
CITY AND COUNTY OF DENVER )
On this 20th day of April, 1998, before me, Jo Lynn R. Rife, a duly
authorized Notary Public in and for said City and County in the State aforesaid,
personally appeared Brian P. Jackson and Teresa S. Madden to me known to be a
Senior Vice President and the Secretary, respectively, of PUBLIC SERVICE COMPANY
OF COLORADO, a corporation organized and existing under the laws of the State of
Colorado, one of the corporations that executed the within and foregoing
instrument; and the said Senior Vice President and Secretary severally
acknowledged the said instrument to be the free and voluntary act and deed of
said corporation, for the uses and purposes therein mentioned, and on oath
stated that they were authorized to execute said instrument and that the seal
affixed thereto is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
Name: /s/ Jo Lynn R. Rife
Notary Public, State of Colorado
Commission Expires April 28, 1998
-7-
<PAGE>
STATE OF NEW YORK )
)ss.:
CITY AND COUNTY OF NEW YORK )
On this 17th day of April, 1998, before me, Janet P. O'Hara, a duly
authorized Notary Public in and for said City and County in the State aforesaid,
personally appeared Catherine F. Donahue and Teresita Glasgow to me known to be
a Vice President and an Assistant Secretary, respectively, of U.S. BANK TRUST
NATIONAL ASSOCIATION, a national banking association, one of the corporations
that executed the within and foregoing instrument; and the said Vice President
and Assistant Secretary severally acknowledged the said instrument to be the
free and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that they were authorized to execute said
instrument and that the seal affixed thereto is the corporate seal of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
Name: /s/Janet P. O'Hara
Notary Public, State of New York
No. 010H5087549
Qualified In Queens County
Commission Expires November 3, 1999
-8-
<PAGE>
EXHIBIT A
FORM OF COLLATERAL SERIES F BOND
This bond is not transferable except to a successor trustee under the
Indenture, dated as of October 1, 1993, as supplemented, between Public Service
Company of Colorado and U.S. Bank Trust National Association (formerly First
Trust of New York, National Association), as successor
trustee thereunder.
PUBLIC SERVICE COMPANY OF COLORADO
FIRST MORTGAGE BOND,
CoLLATERAL SERIES F
DUE 2003
REGISTERED REGISTERED
No.................. $..................
FOR VALUE RECEIVED, PUBLIC SERVICE COMPANY OF COLORADO, a corporation
organized and existing under the laws of the State of Colorado (hereinafter
sometimes called the "Company"), promises to pay to U.S. Bank Trust National
Association (formerly known as First Trust of New York, National Association),
as successor trustee (the "1993 Mortgage Trustee") under the Indenture, dated as
of October 1, 1993 (the "1993 Mortgage"), of the Company, or registered assigns,
Dollars
on April 15, 2003, at the office or agency of the Company in the city in which
the principal corporate trust office of the 1993 Mortgage Trustee is located.
This bond shall not bear interest. The principal of this bond shall be payable
in any coin or currency of the United States of America which at the time of
payment shall be legal tender for the payment of public and private debts.
Any payment by the Company under the 1993 Mortgage of the principal of
securities which shall have been authenticated and delivered under the 1993
Mortgage on the basis of the issuance and delivery to the 1993 Mortgage Trustee
of this bond (the "1993 Mortgage Securities") (other than by the application of
the proceeds of a payment in respect of this bond) shall, to the extent thereof,
be deemed to satisfy and discharge the obligation of the Company, if any, to
make a payment of principal of this bond which is then due.
This bond is one of an issue of bonds of the Company, issued and to be
issued in one or more series under and equally and ratably secured (except as
any sinking, amortization, improvement or other fund, established in accordance
with the provisions of the indenture hereinafter mentioned, may afford
additional security for the bonds of any particular series) by a certain
indenture, dated as of December 1, 1939, made by the Company to U.S. BANK TRUST
NATIONAL ASSOCIATION (formerly First
<PAGE>
Trust of New York, National Association), as successor trustee (hereinafter
called the "Trustee") to Morgan Guaranty Trust Company of New York (formerly
Guaranty Trust Company of New York), as amended and supplemented by several
indentures supplemental thereto, including the Supplemental Indenture dated as
of April 1, 1998 (said Indenture as amended and supplemented by said indentures
supplemental thereto being hereinafter called the "Indenture"), to which
Indenture reference is hereby made for a description of the property mortgaged,
the nature and extent of the security, the rights and limitations of rights of
the Company, the Trustee, and the holders of said bonds, under the Indenture,
and the terms and conditions upon which said bonds are secured, to all of the
provisions of which Indenture and of all indentures supplemental thereto in
respect of such security, including the provisions of the Indenture permitting
the issue of bonds of any series for property which, under the restrictions and
limitations therein specified, may be subject to liens prior to the lien of the
Indenture, the holder, by accepting this bond, assents. To the extent permitted
by and as provided in the Indenture, the rights and obligations of the Company
and of the holders of said bonds (including those pertaining to any sinking or
other fund) may be changed and modified, with the consent of the Company, by the
holders of at least 75% in aggregate principal amount of the bonds then
outstanding (excluding bonds disqualified from voting by reason of the Company's
interest therein as provided in the Indenture); provided, however, that without
the consent of the holder hereof no such modification or alteration shall be
made which will extend the time of payment of the principal of this bond or
reduce the principal amount hereof or effect any other modification of the terms
of payment of such principal or will reduce the percentage of bonds required for
the aforesaid actions under the Indenture. The Company has reserved the right to
amend the Indenture without any consent or other action by holders of any series
of bonds created after October 31, 1975 (including this series) so as to change
75% in the foregoing sentence to 60% and to change certain procedures relating
to bondholders' meetings. This bond is one of a series of bonds designated as
the First Mortgage Bonds, Collateral Series F, of the Company.
This bond shall be redeemable at the option of the Company in whole at
any time, or in part from time to time, prior to maturity, at a redemption price
equal to 100% of the principal amount thereof to be redeemed.
The principal of this bond may be declared or may become due before the
maturity hereof, on the conditions, in the manner and at the times set forth in
the Indenture, upon the happening of an event of default as therein provided.
This bond is not transferable except to a successor trustee under the
1993 Mortgage, any such transfer to be made at the office or agency of the
Company in the city in which the principal corporate trust office of the 1993
Mortgage Trustee is located, upon surrender and cancellation of this bond, and
thereupon a new bond of this series of a like principal amount will be issued to
the transferee in exchange therefor, as provided in the Indenture. The Company,
the Trustee, any paying agent and any registrar may deem and treat the person in
whose name this bond is registered as the absolute owner hereof for the purpose
of receiving payment and for all other purposes. This bond, alone or with other
bonds of this series, may in like manner be exchanged at such office or agency
for one or more new bonds of this series of the same aggregate principal amount,
all as provided in the Indenture. No service charge shall be made to any holder
of any bond of this series for any exchange or transfer of bonds.
No recourse under or upon any covenant or obligation of the Indenture,
or of any bonds thereby secured, or for any claim based thereon, or otherwise in
any manner in respect thereof, shall be had against any incorporator, subscriber
to the capital stock, shareholder, officer or director, as such, of the Company,
whether former, present or future, either directly, or indirectly through the
Company or the
A-2
<PAGE>
Trustee, by the enforcement of any subscription to capital stock, assessment or
otherwise, or by any legal or equitable proceeding by virtue of any statute or
otherwise (including, without limiting the generality of the foregoing, any
proceeding to enforce any claimed liability of shareholders of the Company based
upon any theory of disregarding the corporate entity of the Company or upon any
theory that the Company was acting as the agent or instrumentality of the
shareholders), any and all such liability of incorporators, shareholders,
subscribers, officers and directors, as such, being released by the holder
hereof, by the acceptance of this bond, and being likewise waived and released
by the terms of the Indenture under which this bond is issued.
This bond shall not be valid or become obligatory for any purpose until
the certificate of authentication endorsed hereon shall have been signed by U.S.
Bank Trust National Association, or its successor, as Trustee under the
Indenture.
IN WITNESS WHEREOF, Public Service Company of Colorado has caused this
bond to be signed in its name by a [_________ Vice President] and its corporate
seal to be affixed hereto and attested by its Secretary or an Assistant
Secretary.
Dated: PUBLIC SERVICE COMPANY OF
COLORADO
By:________________________________
[__________ Vice President]
ATTEST:________________________
[Secretary]
CERTIFICATE OF AUTHENTICATION
This is one of the securities of the series designated therein referred
to in the within-mentioned Supplemental Indenture.
Dated: U.S. BANK TRUST
NATIONAL ASSOCIATION,
AS TRUSTEE
By:____________________________________
Authorized Officer
A-3
<PAGE>
SCHEDULE A
SUPPLEMENTAL INDENTURES
Date of Principal
Supplemental Principal Amount
Indenture Series of Bonds Amount Issued Outstanding
--------- --------------- ------------- -----------
March 14, 1941 None -- --
May 14, 1941 None -- --
April 28, 1942 None -- --
April 14, 1943 None -- --
April 27, 1944 None -- --
April 18, 1945 None -- --
April 23, 1946 None -- --
April 9, 1947 None -- --
June 1, 1947* 2-7/8% Series due 1977 $ 40,000,000 None
April 1, 1948 None -- --
May 20, 1948 None -- --
October 1, 1948 3-1/8% Series due 1978 10,000,000 None
April 20, 1949 None -- --
April 24, 1950 None -- --
April 18, 1951 None -- --
October 1, 1951 3-1/4% Series due 1981 15,000,000 None
April 21, 1952 None -- --
December 1, 1952 None -- --
April 15, 1953 None -- --
April 19, 1954 None -- --
October 1, 1954* 3-1/8% Series due 1984 20,000,000 None
April 18, 1955 None -- --
April 24, 1956 None -- --
May 1, 1957* 4-3/8% Series due 1987 30,000,000 None
April 10, 1958 None -- --
May 1, 1959 4-5/8% Series due 1989 20,000,000 None
April 18, 1960 None -- --
I-1
<PAGE>
Date of Principal
Supplemental Principal Amount
Indenture Series of Bonds Amount Issued Outstanding
--------- --------------- ------------- -----------
April 19, 1961 None -- --
October 1, 1961 4-1/2% Series due 1991 30,000,000 None
March 1, 1962 4-5/8% Series due 1992 8,800,000 None
June 1, 1964 4-1/2% Series due 1994 35,000,000 None
May 1, 1966 5-3/8% Series due 1996 35,000,000 None
July 1, 1967* 5-7/8% Series due 1997 35,000,000 None
July 1, 1968* 6-3/4% Series due 1998 25,000,000 25,000,000
April 25, 1969 None -- --
April 21, 1970 None -- --
September 1, 1970 8-3/4% Series due 2000 35,000,000 None
February 1, 1971 7-1/4% Series due 2001 40,000,000 None
August 1, 1972 7-1/2% Series due 2002 50,000,000 None
June 1, 1973 7-5/8% Series due 2003 50,000,000 None
March 1, 1974 Pollution Control Series A 24,000,000 21,500,000
December 1, 1974 Pollution Control Series B 50,000,000 None
October 1, 1975 9-3/8% Series due 2005 50,000,000 None
April 28, 1976 None -- --
April 28, 1977 None -- --
November 1, 1977* 8-1/4% Series due 2007 50,000,000 None
April 28, 1978 None -- --
October 1, 1978 9-1/4% Series due 2008 50,000,000 None
October 1, 1979* Pollution Control Series C 50,000,000 None
March 1, 1980* 15% Series due 1987 50,000,000 None
April 28, 1981 None -- --
November 1, 1981* Pollution Control Series D 27,380,000 None
December 1, 1981* 16-1/4% Series due 2011 50,000,000 None
April 29, 1982 None -- --
May 1, 1983* Pollution Control Series E 42,000,000 None
April 30, 1984 None -- --
March 1, 1985* 13% Series due 2015 50,000,000 None
I-2
<PAGE>
Date of Principal
Supplemental Principal Amount
Indenture Series of Bonds Amount Issued Outstanding
--------- --------------- ------------- -----------
November 1, 1986* Pollution Control Series F 27,250,000 27,250,000
May 1, 1987* 8.95% Series due 1992 75,000,000 None
July 1, 1990* 9-7/8% Series due 2020 75,000,000 75,000,000
December 1, 1990* Secured Medium-Term Notes, 191,500,000** 68,500,000
Series A
March 1, 1992* 8-1/8% Series due 2004 and 100,000,000 100,000,000
8-3/4% Series due 2022 150,000,000 150,000,000
April 1, 1993* Pollution Control Series G 79,500,000 79,500,000
June 1, 1993* Pollution Control Series H 50,000,000 50,000,000
November 1, 1993* Collateral Series A 134,500,000 134,500,000
January 1, 1994* Collateral Series B due
2001 and 102,667,000 102,667,000
Collateral Series B due
2024 110,000,000 110,000,000
September 2, 1994 None -- --
(Appointment of
Successor Trustee)
May 1, 1996 Collateral Series C 125,000,000 125,000,000
November 1, 1996 Collateral Series D 250,000,000 250,000,000
February 1, 1997 Collateral Series E 150,000,000 50,000,000
- --------------------
* Contains amendatory provisions
** $200,000,000 authorized
I-3
<PAGE>
SCHEDULE B
PROPERTY DESCRIPTION
PART SECOND.
(Substations)
The following electric substations and substation sites of the Company,
including all buildings, structures, towers, poles, lines, and all equipment,
appliances and devices for transforming, converting and distributing electric
energy, and all the right, title and interest of the Company in and to the land
on which the same are situated, and all of the Company's lands, easements,
rights-of-way, rights, franchises, privileges, machinery, equipment, appliances,
devices, appurtenances and supplies forming a part of said substations or any of
them, or used or enjoyed, or capable of being used or enjoyed, in conjunction or
connection with any thereof, all situated in the State of Colorado and the
counties thereof, more particularly described as follows:
ADAMS COUNTY
1. WASHINGTON ELECTRIC SUBSTATION
Lot 1, Block 1, Washington Electric Substation, Filing No. 1, County of
Adams, State of Colorado
DOUGLAS COUNTY
2. NEW MARCY SUBSTATION SITE
A parcel of land more particularly described as follows:
THAT PORTION OF SECTION 14, TOWNSHIP 6 SOUTH, RANGE 68 WEST OF THE SIXTH
PRINCIPAL MERIDIAN, IN THE COUNTY OF DOUGLAS, STATE OF COLORADO, AS SHOWN ON
THE LAND SURVEY PLAT RECORDED AT RECEPTION NUMBER 254255 IN THE OFFICE OF
THE CLERK AND COUNTY RECORDER OF SAID COUNTY OF DOUGLAS, DESCRIBED AS
FOLLOWS:
COMMENCING AT THE SOUTHWEST CORNER OF SAID SECTION 14, WHENCE THE SOUTHEAST
CORNER OF SAID SECTION 14 BEARS NORTH 89(Degree)58'33" EAST 5297.28 FEET;
THENCE NORTH 68(Degree)07'34" EAST 2841.07 FEET TO THE TRUE POINT OF
BEGINNING; THENCE NORTH 00(Degree)00'00" EAST 300.00 FEET; THENCE NORTH
90(Degree)00'00" EAST 300.00 FEET; THENCE SOUTH 00(Degree)00'00" EAST 300.00
FEET; THENCE NORTH 90(Degree)00'00" WEST 300.00 TO THE TRUE POINT OF
BEGINNING, EXCEPT WATER RIGHTS AND GROUND WATER, MINERALS AND MINERAL RIGHTS
CONTAINING 2.066 ACRES, MORE OR LESS.
WELD COUNTY
II-1
<PAGE>
3. GREELEY SUBSTATION: ADDITIONAL LAND
A tract of land lying in the Northeast Quarter of the Northeast Quarter
(NE 1/4 NE 1/4) of Section Twelve (12), Township Five (5) North, Range
Sixty-six (66) West of the Sixth (6th) Principal Meridian, situate, lying
and being in the County of Weld, State of Colorado, more particularly
described as follows:
Beginning at a point on the north line and 287 feet easterly of the
northwest corner of a tract of land conveyed by warranty deed dated June 10,
1930 and recorded in Book 896, Page 476, of the records of Weld County,
Colorado, wherein Simon Peterson is the grantor and Public Service Company
of Colorado is the grantee, thence westerly along said north line a distance
of 287 feet to a point; thence southerly along west line of said tract a
distance of 230 feet to a point; thence easterly and parallel to said north
line of said tract a distance of 302 feet to a point; thence northerly and
parallel to west line of said tract a distance of 215 feet to a point;
thence northwesterly a distance of 21.2 feet more or less to the point of
beginning.
PART THIRD.
(Miscellaneous Property)
The following residences, garages, warehouses, buildings, structures,
works and sites and the Company's lands on which the same are situated, and all
easements, rights, rights of way, permits, franchises, consents, privileges,
licenses, machinery, equipment, furniture and fixtures, appurtenances and
supplies forming a part of said residences, garages, warehouses, buildings,
structures, works and sites, or any of them, or used or enjoyed or capable of
being used or enjoyed in connection or conjunction therewith, situated in the
State of Colorado and the Counties thereof, more particularly described as
follows:
DENVER COUNTY
4. LIPAN SERVICE CENTER: ADDITIONAL LAND
(KEYS/GRIMES TRACT)
A parcel of land more particularly described as follows:
PART OF THE SOUTHEAST 1/4 OF THE NORTHEAST 1/4 OF SECTION 9, TOWNSHIP 4
SOUTH, RANGE 68 WEST OF THE 6TH PRINCIPAL MERIDIAN, BEGINNING AT A POINT ON
THE NORTH LINE OF WEST 3RD AVENUE WHICH IS 186.82 FEET EAST AND 378.31 FEET
SOUTH OF THE NORTHWEST CORNER OF SAID SOUTHEAST 1/4 OF THE NORTHEAST 1/4 OF
SAID SECTION 9; THENCE NORTH 143.00 FEET TO THE SOUTHWEST RIGHT OF WAY LINE
OF DENVER AND RIO GRANDE RAILROAD; THENCE SOUTHERLY ALONG SAID RIGHT OF WAY
LINE TO THE NORTH LINE OF WEST 3RD AVENUE; THENCE WEST ALONG THE NORTH LINE
OF WEST 3RD AVENUE 71.38 FEET TO THE POINT OF BEGINNING, CITY AND COUNTY OF
DENVER, STATE OF COLORADO.
II-2
<PAGE>
Exhibit 4(b)
PUBLIC SERVICE COMPANY
OF COLORADO
TO
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
---------------------
Supplemental Indenture No. 7
Dated as of April 1, 1998
Supplemental to the Indenture
dated as of October 1, 1993
---------------------
Establishing the Securities of Series No. 6,
designated First Collateral Trust Bonds, Series No. 6
<PAGE>
SUPPLEMENTAL INDENTURE NO. 7, dated as of April 1, 1998, between PUBLIC
SERVICE COMPANY OF COLORADO, a corporation duly organized and existing under the
laws of the State of Colorado (hereinafter sometimes called the "Company"), and
U.S. BANK TRUST NATIONAL ASSOCIATION (formerly First Trust of New York, National
Association), a national banking association, as successor trustee (hereinafter
sometimes called the "Trustee") to Morgan Guaranty Trust Company of New York
under the Indenture, dated as of October 1, 1993 (hereinafter called the
"Original Indenture"), as previously supplemented and as further supplemented by
this Supplemental Indenture No. 7. The Original Indenture and any and all
indentures and all other instruments supplemental thereto are hereinafter
sometimes collectively called the "Indenture".
Recitals of the Company
The Original Indenture was authorized, executed and delivered by the
Company to provide for the issuance from time to time of its Securities (such
term and all other capitalized terms used herein without definition having the
meanings assigned to them in the Original Indenture), to be issued in one or
more series as contemplated therein, and to provide security for the payment of
the principal of and premium, if any, and interest, if any, on the Securities.
The Company has heretofore executed and delivered to the Trustee the
Supplemental Indentures referred to in Schedule A hereto for the purpose of
establishing a series of bonds and appointing the successor Trustee.
The Company desires to establish a series of Securities to be designated
"First Collateral Trust Bonds, Series No. 6", such series of Securities to be
hereinafter sometimes called "Series No. 6".
The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. 7 to establish the Securities of Series No. 6 and
has duly authorized the issuance of such Securities; and all acts necessary
to make this Supplemental Indenture No. 7 a valid agreement of the Company,
and to make the Securities of Series No. 6 valid obligations of the Company,
have been performed.
Granting Clauses
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 7 WITNESSETH, that, in
consideration of the premises and of the purchase of the Securities by the
Holders thereof, and in order to secure the payment of the principal of and
premium, if any, and interest, if any, on all Securities from time to time
Outstanding and the performance of the covenants contained therein and in the
Indenture and to declare the terms and conditions on which such Securities are
secured, the Company hereby grants, bargains, sells, releases, conveys, assigns,
transfers, mortgages, pledges, sets over and confirms to the Trustee, and grants
to the Trustee a security interest in, the following:
Granting Clause First
All right, title and interest of the Company, as of the date of the
execution and delivery of this Supplemental Indenture No. 7, in and to
property (other than Excepted Property), real, personal and mixed and
wherever situated, in any case used or to be used in or in connection with
the Electric Utility Business (whether or not such use is the sole use of
such property), including without limitation (a) all lands and interests
in land described or referred to in Schedule B hereto; (b) all other
lands, easements, servitudes, licenses, permits, rights of way and other
rights and interests in or relating to real property used or to be used in
or in connection with the Electric Utility Business or relating to the
occupancy or use of such real property, subject however, to the exceptions
and exclusions set forth in clause (a) of Granting Clause First of the
Original Indenture; (c) all plants, generators, turbines, engines,
<PAGE>
boilers, fuel handling and transportation facilities, air and water
pollution control and sewage and solid waste disposal facilities and other
machinery and facilities for the generation of electric energy; (d) all
switchyards, lines, towers, substations, transformers and other machinery
and facilities for the transmission of electric energy; (e) all lines,
poles, conduits, conductors, meters, regulators and other machinery and
facilities for the distribution of electric energy; (f) all buildings,
offices, warehouses and other structures used or to be used in or in
connection with the Electric Utility Business; (g) all pipes, cables,
insulators, ducts, tools, computers and other data processing and/or
storage equipment and other equipment, apparatus and facilities used or to
be used in or in connection with the Electric Utility Business; (h) any or
all of the foregoing properties in the process of construction; and (i)
all other property, of whatever kind and nature, ancillary to or otherwise
used or to be used in conjunction with any or all of the foregoing or
otherwise, directly or indirectly, in furtherance of the Electric Utility
Business;
Granting Clause Second
Subject to the applicable exceptions permitted by Section 810(c),
Section 1303 and Section 1305 of the Original Indenture, all property
(other than Excepted Property) of the kind and nature described in
Granting Clause First which may be hereafter acquired by the Company, it
being the intention of the Company that all such property acquired by the
Company after the date of the execution and delivery of this Supplemental
Indenture No. 7 shall be as fully embraced within and subjected to the
Lien hereof as if such property were owned by the Company as of the date
of the execution and delivery of this Supplemental Indenture No. 7;
Granting Clause Fourth
All other property of whatever kind and nature subjected or required
to be subjected to the Lien of the Indenture by any of the provisions
thereof;
Excepted Property
Expressly excepting and excluding, however, from the Lien and
operation of the Indenture all Excepted Property of the Company, whether
now owned or hereafter acquired;
TO HAVE AND TO HOLD all such property, real, personal and mixed, unto the
Trustee, its successors in trust and their assigns forever;
SUBJECT, HOWEVER, to (a) Liens existing at the date of the execution and
delivery of the Original Indenture (including, but not limited to, the Lien of
the PSCO 1939 Mortgage), (b) as to property acquired by the Company after the
date of the execution and delivery of the Original Indenture, Liens existing or
placed thereon at the time of the acquisition thereof (including, but not
limited to, the Lien of any Class A Mortgage and purchase money Liens), (c)
Retained Interests and (d) any other Permitted Liens, it being understood that,
with respect to any property which was at the date of execution and delivery of
the Original Indenture or thereafter became or hereafter becomes subject to the
Lien of any Class A Mortgage, the Lien of the Indenture shall at all times be
junior, subject and subordinate to the Lien of such Class A Mortgage;
IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of all Outstanding Securities without
any priority of any such Security over any other such Security;
-2-
<PAGE>
PROVIDED, HOWEVER, that the right, title and interest of the Trustee in
and to the Mortgaged Property shall cease, terminate and become void in
accordance with, and subject to the conditions set forth in, Article Nine of the
Original Indenture, and if, thereafter, the principal of and premium, if any,
and interest, if any, on the Securities shall have been paid to the Holders
thereof, or shall have been paid to the Company pursuant to Section 603 of the
Original Indenture, then and in that case the Indenture shall terminate, and the
Trustee shall execute and deliver to the Company such instruments as the Company
shall require to evidence such termination; otherwise the Indenture, and the
estate and rights thereby granted shall be and remain in full force and effect;
and
THE PARTIES HEREBY FURTHER COVENANT AND AGREE as follows:
ARTICLE ONE
Securities of Series No. 6
There are hereby established the Securities of Series No. 6, which shall
have the terms and characteristics set forth below (the lettered subdivisions
set forth below corresponding to the lettered subdivisions of Section 301 of the
Original Indenture):
(a) the title of the Securities of such series shall be "First Collateral
Trust Bonds, Series No. 6"; provided, however, that, at any time after the
PSCO 1939 Mortgage shall have been satisfied and discharged, the Company
shall have the right, without any consent or other action by the Holders
of such Securities, to change such title in such manner as shall be deemed
by the Company to be appropriate to reflect such satisfaction and
discharge, such change to be evidenced in an Officer's Certificate;
(b) the Securities of Series No. 6 shall be initially
authenticated and delivered in the aggregate principal amount of
$250,000,000;
(c) interest on the Securities of Series No. 6 shall be payable to the
Persons in whose names such Securities are registered at the close of
business on the Regular Record Date for such interest, except as otherwise
expressly provided in the form of such Securities attached as Exhibit A
hereto;
(d) the principal of the Securities of Series No. 6 shall be payable on
April 15, 2003, the Stated Maturity.
(e) the Securities of Series No. 6 shall bear interest at a rate of 6% per
annum; interest shall accrue on the Securities of Series No. 6 from April
20, 1998, or the most recent date to which interest has been paid or duly
provided for; the Interest Payment Dates for such Securities shall be
April 15 and October 15 in each year, commencing October 15, 1998, and the
Regular Record Dates with respect to the Interest Payment Dates for such
Securities shall be April 1 and October 1 in each year, respectively
(whether or not a Business Day);
-3-
<PAGE>
(f) the Corporate Trust Office of U.S. Bank Trust National Association in
New York, New York shall be the place at which (i) the principal of,
premium, if any, and interest, if any, on the Securities of Series No. 6
shall be payable, (ii) registration of transfer of such Securities may be
effected, (iii) exchanges of such Securities may be effected and (iv)
notices and demands to or upon the Company in respect of such Securities
and the Indenture may be served; and U.S. Bank Trust National Association
shall be the Security Registrar for such Securities; provided, however,
that the Company reserves the right to change, by one or more Officer's
Certificates, any such place or the Security Registrar; and provided,
further, that the Company reserves the right to designate, by one or more
Officer's Certificates, its principal office in Denver, Colorado as any
such place or itself as the Security Registrar;
(g) the Securities of Series No. 6 shall not be redeemable prior to
maturity;
(h) not applicable;
(i) not applicable;
(j) not applicable;
(k) not applicable;
(l) not applicable;
(m) not applicable;
(n) not applicable;
(o) not applicable;
(p) not applicable;
(q) the Securities of Series No. 6 are to be initially registered in the
name of Cede & Co., as nominee for The Depository Trust Company (the
"Depositary"). Such Securities shall not be transferable or exchangeable,
nor shall any purported transfer be registered, except as follows:
(i) such Securities may be transferred in whole, and appropriate
registration of transfer effected, if such transfer is by such
nominee to the Depositary, or by the Depositary to another nominee
thereof, or by any nominee of the Depositary to any other nominee
thereof, or by the Depositary or any nominee thereof to any
successor securities depositary or any nominee thereof; and
(ii) such Securities may be exchanged for definitive Securities
registered in the respective names of the beneficial holders
thereof, and thereafter shall be transferable without restriction,
if:
(A) The Depositary, or any successor securities depositary,
shall have notified the Company and the Trustee that it is
unwilling or unable to continue to act as securities
depositary with respect to such Securities and the Trustee
shall not have been notified by the Company within ninety (90)
days
-4-
<PAGE>
of the identity of a successor securities depositary with
respect to such Securities;
(B) The Company shall have delivered to the Trustee a Company
Order to the effect that such Securities shall be so
exchangeable on and after a date specified therein; or
(C) (1) an Event of Default shall have occurred and be
continuing, (2) the Trustee shall have given notice of such
Event of Default pursuant to Section 1102 of the Original
Indenture and (3) there shall have been delivered to the
Company and the Trustee an Opinion of Counsel to the effect
that the interests of the beneficial owners of such Securities
in respect thereof will be materially impaired unless such
owners become Holders of definitive Securities.
(r) not applicable;
(s) no service charge shall be made for the registration of transfer or
exchange of the Securities of Series No. 6; provided, however, that the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the exchange or transfer;
(t) not applicable;
(u) (i) If the Company shall have caused the Company's
indebtedness in respect of any Securities of Series No. 6 to have
been satisfied and discharged prior to the Maturity of such
Securities, as provided in Section 901 of the Original Indenture,
the Company shall, promptly after the date of such satisfaction and
discharge, give a notice to each Person who was a Holder of any of
such Securities on such date stating (A)(1) the aggregate principal
amount of such Securities and (2) the aggregate amount of any money
(other than amounts, if any, deposited in respect of accrued interest
on such Securities) and the aggregate principal amount of, the rate
or rates of interest on, and the aggregate fair market value of, any
Eligible Obligations deposited pursuant to Section 901 of the
Original Indenture with respect to such Securities and (B) that the
Company will provide (and the Company shall promptly so provide) to
such Person, or any beneficial owner of such Securities holding
through such Person (upon written request to the Company sent to an
address specified in such notice), such other information as such
Person or beneficial owner, as the case may be, reasonably may
request in order to enable it to determine the federal income tax
consequences to it resulting from the satisfaction and discharge of
the Company's indebtedness in respect of such Securities. Thereafter,
the Company shall, within forty-five (45) days after the end of each
calendar year, give to each Person who at any time during such
calendar year was a Holder of such Securities a notice containing(X)
such information as may be necessary to enable such Person to report
its income, gain or loss for federal income tax purposes with respect
to such Securities or the assets held on deposit in respect thereof
during such calendar year or the portion thereof during which such
Person was a Holder of such Securities, as the case may be (such
information to be set forth for such calendar year as a whole and
for each month during such year) and (Y) a statement to the effect
that the Company will provide (and the Company shall promptly so
provide)
-5-
<PAGE>
to such Person, or any beneficial owner of such Securities holding
through such Person (upon written request to the Company sent to an
address specified in such notice), such other information as such
Person or beneficial owner, as the case may be, reasonably may request
in order to enable it to determine its income, gain or loss for
federal income tax purposes with respect to such Securities or such
assets for such year or portion thereof, as the case may be. The
obligation of the Company to provide or cause to be provided
information for purposes of income tax reporting by any Person as
described in the first two sentences of this paragraph shall be deemed
to have been satisfied to the extent that the Company has provided or
caused to be provided substantially comparable information pursuant to
any requirements of the Internal Revenue Code of 1986, as amended from
time to time (the "Code") and United States Treasury regulations
thereunder.
(ii) Notwithstanding the provisions of subparagraph (i) above, the
Company shall not be required to give any notice specified in such
subparagraph or to otherwise furnish any of the information
contemplated therein if the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of such
Securities will not recognize income, gain or loss for federal
income tax purposes as a result of the satisfaction and discharge of
the Company's indebtedness in respect of such Securities and such
Holders will be subject to federal income taxation on the same
amounts and in the same manner and at the same times as if such
satisfaction and discharge had not occurred.
(iii) Anything in this clause (u) to the contrary notwithstanding,
the Company shall not be required to give any notice specified in
subparagraph (i) or to otherwise furnish the information
contemplated therein or to deliver any Opinion of Counsel
contemplated by subparagraph (ii) if the Company shall have caused
Securities of Series No. 6 to be deemed to have been paid for
purposes of the Indenture, as provided in Section 901 of the
Original Indenture, but shall not have effected the satisfaction and
discharge of its indebtedness in respect of such Securities pursuant
to such Section.
(v) The Securities of Series No. 6 shall be substantially in the form
attached hereto as Exhibit A and shall have such further terms as are set
forth in such form.
ARTICLE TWO
Miscellaneous Provisions
This Supplemental Indenture No. 7 is a supplement to the Original
Indenture. As previously supplemented and further supplemented by this
Supplemental Indenture No. 7, the Original Indenture is in all respects
ratified, approved and confirmed, and the Original Indenture, all previous
supplements thereto and this Supplemental Indenture No. 7 shall together
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 7 to be duly executed as of the day and year first above written.
PUBLIC SERVICE COMPANY OF COLORADO
By:s/ Brian P. Jackson
Name: Brian P. Jackson
Title: Senior Vice President
U.S. BANK TRUST NATIONAL ASSOCIATION,
Trustee
By:s/ Catherine F. Donohue
Name: Catherine F. Donohue
Title: Vice President
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<PAGE>
STATE OF COLORADO )
) ss.:
CITY AND COUNTY OF DENVER )
On the 20th day of April, 1998, before me personally came Brian P.
Jackson to me known, who, being by me duly sworn, did depose and say that he is
a Senior Vice President of Public Service Company of Colorado, one of the
corporations described in and which executed the foregoing instrument; and that
he signed his name thereto by authority of the Board of Directors of said
corporation.
s/ Martha L. Palomar
Name: Martha L. Palomar
Notary Public, State of Colorado
Commission Expires February 29, 2000
-8-
<PAGE>
STATE OF NEW YORK )
) ss.:
CITY AND COUNTY OF NEW YORK )
On the 17th day of April, 1998, before me personally came Catherine
F. Donohue, to me known, who, being by me duly sworn, did depose and say that
she is a Vice President of U.S. Bank Trust National Association, the banking
association described in and which executed the foregoing instrument; and that
she signed her name thereto by authority of the Board of Directors of said
banking association.
s/ Janet O'Hara
Name: Janet O'Hara
Notary Public, State of New York
No. 010H5087549
Qualified in Queens County
Commission Expires November 3, 1999
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<PAGE>
EXHIBIT A
FORM OF SECURITY
(See legend at the end of this Security for
restrictions on transfer and change of form)
PUBLIC SERVICE COMPANY OF COLORADO
First Collateral Trust Bond, Series No. 6
Original Interest Accrual Date: April 20, 1998
Interest Rate: 6%
Stated Maturity: April 15, 2003
Interest Payment Dates: April 15 and October 15
Regular Record Dates: April 1 and October 1
This Security is not a Discount Security within the meaning
of the within-mentioned Indenture.
-----------------------------------------
Principal Amount Registered No.
$ CUSIP
PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized and
existing under the laws of the State of Colorado (herein called the "Company,"
which term includes any successor corporation under the Indenture referred to
below), for value received, hereby promises to pay to
, or registered assigns, the principal sum of
Dollars on the Stated Maturity specified above, and to pay interest thereon from
the Original Interest Accrual Date specified above or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually in arrears on the Interest Payment Dates specified above in each
year, commencing with the Interest Payment Date next succeeding the Original
Interest Accrual Date specified above, and at Maturity, at the Interest Rate per
annum specified above, until the principal hereof is paid or duly provided for.
The interest so payable, and paid or duly provided for, on any Interest Payment
Date shall, as provided in such Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date specified above (whether or not a
Business Day) next preceding such Interest Payment Date. Notwithstanding the
foregoing, interest payable at Maturity shall be paid to the Person to whom
principal shall be paid. Except as otherwise provided in said Indenture, any
such interest not so paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or
A-1
<PAGE>
more Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice of which shall be given to Holders of Securities of this series
not less than 15 days prior to such Special Record Date, or be paid in such
other manner as permitted by the Indenture.
Payment of the principal of this Security and interest hereon at Maturity
shall be made upon presentation of this Security at the Corporate Trust Office
of U.S. Bank Trust National Association, in New York, New York or at such other
office or agency as may be designated for such purpose by the Company from time
to time. Payment of interest on this Security (other than interest at Maturity)
shall be made by check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register, except that if such Person
shall be a securities depositary, such payment may be made by such other means
in lieu of check as shall be agreed upon by the Company, the Trustee and such
Person. Payment of the principal of and interest on this Security, as aforesaid,
shall be made in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and issuable in one or more
series under and equally secured by an Indenture, dated as of October 1, 1993
(such Indenture as originally executed and delivered and as supplemented or
amended from time to time thereafter, together with any constituent instruments
establishing the terms of particular Securities, being herein called the
"Indenture"), between the Company and U.S. Bank Trust National Association
(formerly First Trust of New York, National Association) as successor trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the property mortgaged, pledged
and held in trust, the nature and extent of the security and the respective
rights, limitations of rights, duties and immunities of the Company, the Trustee
and the Holders of the Securities thereunder and of the terms and conditions
upon which the Securities are, and are to be, authenticated and delivered and
secured. The acceptance of this Security shall be deemed to constitute the
consent and agreement by the Holder hereof to all of the terms and provisions of
the Indenture. This Security is one of the series designated above.
If any Interest Payment Date or the Stated Maturity shall not be a
Business Day (as hereinafter defined), payment of the amounts due on this
Security on such date may be made on the next succeeding Business Day; and, if
such payment is made or duly provided for on such Business Day, no interest
shall accrue on such amounts for the period from and after such Interest Payment
Date or Stated Maturity, as the case may be, to such Business Day.
A-2
<PAGE>
This Security is not subject to redemption prior to the Stated Maturity
hereof.
If an Event of Default shall occur and be continuing, the principal of
this Security may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Trustee to enter into one or more supplemental indentures for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, the Indenture with the consent of the Holders of not less than a
majority in aggregate principal amount of the Securities of all series then
Outstanding under the Indenture, considered as one class; provided, however,
that if there shall be Securities of more than one series Outstanding under the
Indenture and if a proposed supplemental indenture shall directly affect the
rights of the Holders of Securities of one or more, but less than all, of such
series, then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of all series so directly
affected, considered as one class, shall be required; and provided, further,
that if the Securities of any series shall have been issued in more than one
Tranche and if the proposed supplemental indenture shall directly affect the
rights of the Holders of Securities of one or more, but less than all, of such
Tranches, then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of all Tranches so directly
affected, considered as one class, shall be required; and provided, further,
that the Indenture permits the Trustee to enter into one or more supplemental
indentures for limited purposes without the consent of any Holders of
Securities. The Indenture also contains provisions permitting the Holders of a
majority in principal amount of the Securities then Outstanding, on behalf of
the Holders of all Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange therefor or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Security.
As provided in the Indenture and subject to certain limitations therein
set forth, this Security or any portion of the principal amount hereof will be
deemed to have been paid for all purposes of the Indenture and to be no longer
Outstanding thereunder, and, at the election of the Company, the Company's
entire indebtedness in respect thereof will be satisfied and discharged, if
there has been irrevocably deposited with the Trustee or any Paying Agent (other
than the Company), in trust, money in an amount which will be sufficient and/or
Eligible Obligations, the principal of and interest on which when due, without
regard to any reinvestment thereof, will provide moneys which, together with
moneys so deposited, will be sufficient, to pay when due the principal of and
interest on this Security when due.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office of U.S. Bank Trust National Association, in New York, New York or such
other office or agency as may be designated by the Company from time to time,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series of authorized denominations and of like tenor
and aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only as registered Securities,
without coupons, and in denominations of $1,000 and integral multiples thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of the same series, of any authorized denominations, as
requested by the Holder surrendering the same, and of like tenor upon surrender
of the Security or Securities to be exchanged at the office of U.S. Bank
A-3
<PAGE>
Trust National Association, in New York, New York or such other office or agency
as may be designated by the Company from time to time.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the absolute owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.
As used herein "Business Day" means any day, other than a Saturday or
Sunday, which is not a day on which banking institutions or trust companies in
The City of New York, New York or other city in which is located any office or
agency maintained for the payment of principal or interest on this Security, are
authorized or required by law, regulation or executive order to remain closed.
All other terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
As provided in the Indenture, no recourse shall be had for the payment of
the principal of or interest on any Securities, or any part thereof, or for any
claim based thereon or otherwise in respect thereof, or of the indebtedness
represented thereby, or upon any obligation, covenant or agreement under the
Indenture, against, and no personal liability whatsoever shall attach to, or be
incurred by, any incorporator, shareholder, officer or director, as such, past,
present or future of the Company or of any predecessor or successor corporation
(either directly or through the Company or a predecessor or successor
corporation), whether by virtue of any constitutional provision, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that the Indenture and all the Securities
are solely corporate obligations and that any such personal liability is hereby
expressly waived and released as a condition of, and as part of the
consideration for, the execution of the Indenture and the issuance of the
Securities.
Unless the certificate of authentication hereon has been executed by the
Trustee or an Authenticating Agent by manual signature, this Security shall not
be entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
A-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and its corporate seal to be hereunto affixed and attested.
PUBLIC SERVICE COMPANY OF COLORADO
By:
[Title]
Attest:
[Title]
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
Dated:
U.S. BANK TRUST OR U.S. BANK TRUST
NATIONAL ASSOCIATION, NATIONAL ASSOCIATION,
as Trustee as Trustee
By: By:[ ],
Authorized Officer as Authenticating Agent
By:
Authorized Officer
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York Corporation ("DTC"), to the Company or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
This Security may not be transferred or exchanged, nor may any purported
transfer be registered, except (i) this Security may be transferred in whole,
and appropriate registration of transfer effected, if such transfer is by Cede &
Co., as nominee for The Depository Trust Company (the "Depositary"), to the
Depositary, or by the Depositary to another nominee thereof, or by any nominee
of the Depositary to any other nominee thereof, or by the Depositary or any
nominee thereof to any successor securities depositary or any nominee thereof;
and (ii) this Security may be exchanged for definitive Securities registered in
the respective names of the beneficial holders hereof, and thereafter shall be
transferable without restrictions if: (A) the Depositary, or any successor
securities depositary, shall have notified the Company and the Trustee that it
is unwilling or unable to continue to act as securities depositary with respect
to the Securities and the Trustee shall not have been notified by the Company
within ninety (90) days of the identity of a successor securities depositary
with respect to the Securities; (B) the Company shall have delivered to the
Trustee a Company Order to the effect that the Securities shall be so
exchangeable on and after a date specified therein; or (C)(1) an Event of
Default shall have occurred and be continuing, (2) the Trustee shall have given
notice of such Event of Default pursuant to Section 1102 of the
A-5
<PAGE>
Indenture and
(3) there shall have been delivered to the Company and the Trustee an Opinion of
Counsel to the effect that the interests of the beneficial owners of the
Securities in respect thereof will be materially impaired unless such owners
become Holders of definitive Securities.
-------------------
A-6
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
[please insert social security or other identifying number of assignee]
- --------------------------------------------------------------------------------
[please print or typewrite name and address of assignee]
- --------------------------------------------------------------------------------
the within Security of PUBLIC SERVICE COMPANY OF COLORADO and does hereby
irrevocably constitute and appoint __________________________________ ,
Attorney, to transfer said Security on the books of the within-mentioned
Company, with full power of substitution in the premises.
Dated:__________________________
------------------------------------------------------
Notice: The signature to this assignment must correspond with the name as
written upon the face of the Security in every particular without
alteration or enlargement or any change whatsoever.
A-7
<PAGE>
SCHEDULE A
SUPPLEMENTAL INDENTURES
Date of Principal
Supplemental Principal Amount
Indenture Series of Bonds Amount Issued Outstanding
--------- --------------- ------------- -----------
November 1, 1993 Series No. 1 $134,500,000 $134,500,000
January 1, 1994 Series No. 2 due 2001 $102,667,000 $102,667,000
and
Series No. 2 due 2024 $110,000,000 $110,000,000
September 2, 1994 None None None
(Appointment of
Successor Trustee)
May 1, 1996 Series No. 3 $125,000,000 $125,000,000
November 1, 1996 Series No. 4 $250,000,000 $250,000,000
February 1, 1997 Series No. 5 $150,000,000 $ 50,000,000
================================================================================
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<PAGE>
SCHEDULE B
DESCRIPTION OF PROPERTY
The following properties are situated in the State of Colorado and the counties
thereof:
ADAMS COUNTY
1. WASHINGTON ELECTRIC SUBSTATION
Lot 1, Block 1, Washington Electric Substation, Filing No. 1, County of
Adams, State of Colorado
DENVER COUNTY
2. LIPAN SERVICE CENTER: ADDITIONAL LAND (KEYS/GRIMES TRACT)
A parcel of land more particularly described as follows:
PART OF THE SOUTHEAST 1/4 OF THE NORTHEAST 1/4 OF SECTION 9, TOWNSHIP 4
SOUTH, RANGE 68 WEST OF THE 6TH PRINCIPAL MERIDIAN, BEGINNING AT A POINT
ON THE NORTH LINE OF WEST 3RD AVENUE WHICH IS 186.82 FEET EAST AND 378.31
FEET SOUTH OF THE NORTHWEST CORNER OF SAID SOUTHEAST 1/4 OF THE NORTHEAST
1/4 OF SAID SECTION 9; THENCE NORTH 143.00 FEET TO THE SOUTHWEST RIGHT OF
WAY LINE OF DENVER AND RIO GRANDE RAILROAD; THENCE SOUTHERLY ALONG SAID
RIGHT OF WAY LINE TO THE NORTH LINE OF WEST 3RD AVENUE; THENCE WEST ALONG
THE NORTH LINE OF WEST 3RD AVENUE 71.38 FEET TO THE POINT OF BEGINNING,
CITY AND COUNTY OF DENVER, STATE OF COLORADO.
DOUGLAS COUNTY
3. NEW MARCY SUBSTATION SITE
A parcel of land more particularly described as follows:
THAT PORTION OF SECTION 14, TOWNSHIP 6 SOUTH, RANGE 68 WEST OF THE SIXTH
PRINCIPAL MERIDIAN, IN THE COUNTY OF DOUGLAS, STATE OF COLORADO, AS SHOWN
ON THE LAND SURVEY PLAT RECORDED AT RECEPTION NUMBER 254255 IN THE OFFICE
OF THE CLERK AND COUNTY RECORDER OF SAID COUNTY OF DOUGLAS, DESCRIBED AS
FOLLOWS:
COMMENCING AT THE SOUTHWEST CORNER OF SAID SECTION 14, WHENCE THE
SOUTHEAST CORNER OF SAID SECTION 14 BEARS NORTH 89(Degree)58'33" EAST
5297.28 FEET; THENCE NORTH 68(Degree)07'34" EAST 2841.07 FEET TO THE TRUE
POINT OF BEGINNING; THENCE NORTH 00(Degree)00'00" EAST 300.00 FEET; THENCE
NORTH 90(Degree)00'00" EAST 300.00 FEET; THENCE SOUTH 00(Degree)00'00"
EAST 300.00 FEET; THENCE NORTH 90(Degree)00'00" WEST 300.00 TO THE TRUE
POINT OF BEGINNING, EXCEPT WATER RIGHTS AND GROUND WATER, MINERALS AND
MINERAL RIGHTS CONTAINING 2.066 ACRES, MORE OR LESS.
II-1
<PAGE>
WELD COUNTY
4. GREELEY SUBSTATION: ADDITIONAL LAND
A tract of land lying in the Northeast Quarter of the Northeast Quarter
(NE1/4NE1/4) of Section Twelve (12), Township Five (5) North, Range
Sixty-six (66) West of the Sixth (6th) Principal Meridian, situate, lying
and being in the County of Weld, State of Colorado, more particularly
described as follows:
Beginning at a point on the north line and 287 feet easterly of the
northwest corner of a tract of land conveyed by warranty deed dated June
10, 1930 and recorded in Book 896, Page 476, of the records of Weld
County, Colorado, wherein Simon Peterson is the grantor and Public Service
Company of Colorado is the grantee, thence westerly along said north line
a distance of 287 feet to a point; thence southerly along west line of
said tract a distance of 230 feet to a point; thence easterly and parallel
to said north line of said tract a distance of 302 feet to a point; thence
northerly and parallel to west line of said tract a distance of 215 feet
to a point; thence northwesterly a distance of 21.2 feet more or less to
the point of beginning.
II-2
