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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 17, 1995
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
1-1443 Central and South West Corporation 51-0007707
(A Delaware Corporation)
1616 Woodall Rodgers Freeway
Dallas, TX 75202
(214) 777-1000
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ITEM 5. OTHER EVENTS
CENTRAL AND SOUTH WEST CORPORATION (CSW) AND EL PASO
ELECTRIC COMPANY (EL PASO) PROPOSED MERGER
Recent Developments
On January 17, 1995, CSW issued a press release with respect
to its proposed merger with El Paso. The press release is
attached as Exhibit 99.1.
Background Information
For background information and earlier developments related
to the proposed merger with El Paso, reference is made to
CSW's 1993 Annual Report on Form 10-K and Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1994, June 30,
1994 and September 30, 1994 and the documents referenced
therein.
Other
El Paso is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in
accordance therewith files reports and other information
with the Securities and Exchange Commission. For additional
information concerning El Paso, see El Paso's Quarterly
Reports on Form 10-Q dated March 31, 1994, June 30, 1994 and
September 30, 1994 and its Annual Report on Form 10-K dated
December 31, 1993 and the documents referenced therein or
supplementary thereto.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
CENTRAL AND SOUTH WEST CORPORATION
Date: January 18, 1995
By: /s/ Wendy G. Hargus
Wendy G. Hargus
Controller
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EXHIBIT 99.1
Press Release
Issued 1/17/95
Central and South West Corporation files exceptions
in El Paso Electric Company rate and merger cases;
says presiding officers' proposal fails to meet merger needs
Dallas (January 17, 1995)--Central and South West
Corporation (NYSE: CSR) said today that the proposal for
decision issued January 3 by the Public Utility Commission
of Texas presiding officers who heard El Paso Electric
Company's pending rate and merger cases fails to provide
sufficient revenue and adequate rate-making treatment for
Central and South West to consummate the proposed merger.
In exceptions to the proposal for decision filed with the
PUC, Central and South West noted that the four presiding
officers found the merger to be in the public interest,
providing benefits for electric utility customers ranging
from $309 million to $379 million during the first 10 years
of the merger.
"However, the presiding officers' proposal falls far short
of providing the minimum initial base-rate increase and
treatment of El Paso Electric's asset value needed to
consummate the merger," said Holman King, vice president of
mergers and acquisitions for Central and South West.
Central and South West said it disagrees with the presiding
officers' proposal in four key areas:
The presiding officers propose to reduce El Paso
Electric's rates by allocating to its customers tax benefits
that would result from El Paso Electric's lease-rejection
damages associated with its leased assets at the Palo Verde
Nuclear Generating Station. Because utility customers would
not be asked to pay the lease-rejection damages, Central and
South West had proposed using the tax benefits to reduce El
Paso Electric's debt and to strengthen its financial health.
The presiding officers' attempt to mitigate this effect
through an acquisition adjustment does not come close to
providing the same economic value.
They recommend reducing a rate treatment the PUC
previously had approved for the utility under its rate
moderation plan.
They fail to recognize deferred accounting assets that
the PUC had authorized in a 1990 order for Unit 3 of the
Palo Verde Nuclear Generating Station.
They propose an 11.5 percent return on equity, which
would prevent El Paso Electric from having an opportunity to
earn a reasonable return as provided in the Texas Public
Utility Regulatory Act. A return of 12.5 percent had been
sought, and the Texas PUC staff had recommended a 12 percent
return.
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In their 600-page report, the presiding officers propose an
initial base-rate increase for El Paso Electric of $21.2
million. El Paso Electric had sought a base-rate increase
of $41.4 million.
King said the presiding officers found that El Paso Electric
could "emerge from bankruptcy as a financially viable
utility with a cost structure that is lower than it could
achieve on its own."
"There are enormous benefits for the customers, but they
cannot be realized without the merger," King said.
"Notwithstanding the benefits of the merger, the overall
recommendation in the proposal for decision does not give
Central and South West the economic values required by the
merger agreement to allow the company to acquire El Paso
Electric and bring it out of bankruptcy."
"In the proceeding, Central and South West proposed a rate
plan designed to provide substantial benefits for customers,
to satisfy creditors' claims and to provide the company the
ability to earn a reasonable rate of return on its
investment," King said. "That rate plan is based on rate
relief and asset treatment that are consistent with state
statutes, case law and previous PUC decisions."
"The proposal for decision, however, does not provide the
rate relief that is justified by commission decisions in
previous El Paso Electric rate cases, nor does it equitably
allocate the benefits created by the merger," he said.
Central and South West and El Paso Electric had stated in
their filed testimony that the tax effect of the lease-
rejection damages associated with their settlement with Palo
Verde claim holders would be used to help finance the
merger. The presiding officers noted that the companies saw
the $133 million of tax benefits as a key element of El Paso
Electric's ability to emerge from bankruptcy.
Depriving Central and South West of these tax benefits, King
said, effectively would increase the company's cost to
acquire El Paso Electric by $133 million, contrary to the
requirements of the merger agreement.
King also noted that the presiding officers recommended that
two other issues must be successfully resolved before the
PUC can find that the price Central and South West is paying
for El Paso Electric's stock is reasonable.
Regarding the first issue, the presiding officers
acknowledged that the loss of Las Cruces, New Mexico, as a
customer of El Paso Electric could result in a loss of
value, making the price Central and South West agreed to pay
to acquire the utility unreasonable.
On the second issue, the presiding officers stated that the
value of the merger also is contingent on the successful
resolution of problems with the steam-generators at the Palo
Verde nuclear generating station.
The presiding officers proposed that the PUC's decision be
conditioned on the successful resolution of these matters.
King said that neither the Las Cruces issue nor the Palo
Verde issue has been resolved and that Central and South
West remains concerned that these uncertainties could
preclude completing the merger under the terms of the
current agreement. Nevertheless, Central and South West is
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continuing to exert its best efforts to pursue the merger
with El Paso Electric, he said.
The Texas PUC commissioners will hear oral arguments in the
rate and merger cases on February 7 and 8. The PUC
commissioners are expected to issue their decision on
February 21.
"The PUC's decision will be one of several critical issues
that must be resolved in determining whether the merger
conditions will be met," King said.
The merger also is contingent upon receiving regulatory
approvals or authorizations from other state and federal
agencies as well as other conditions.
The merger was announced in May 1993, and El Paso Electric's
plan of reorganization was confirmed by the federal
bankruptcy court in December 1993. The rate and merger
cases pending before the Texas PUC were filed in January
1994 (Docket 12700).
Central and South West Corporation is a public utility
holding company based in Dallas. It owns Central Power and
Light Company, Public Service Company of Oklahoma,
Southwestern Electric Power Company and West Texas Utilities
Company. These four subsidiaries provide electric utility
service to 1.6 million customers in Texas, Oklahoma,
Louisiana and Arkansas.
Central and South West also owns Transok, Inc., an Oklahoma
intrastate natural gas pipeline company, and several other
subsidiaries.
El Paso Electric Company is an electric utility serving
approximately 263,000 customers in El Paso, Texas, and an
area of the Rio Grande Valley in West Texas and southern New
Mexico as well as wholesale customers located in Southern
California and Mexico.
