SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended December 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number : 1-3034
NORTHERN STATES POWER COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
NORTHERN STATES POWER COMPANY (the "Company")
414 NICOLLET MALL
MINNEAPOLIS, MINNESOTA 55401
NORTHERN STATES POWER COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
_________
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 30, December 30,
1996 1995
ASSETS:
Total noninterest-bearing cash $1 ($1,324)
Receivables:
Participant contributions 2,539 2,733
Dividends and interest 4,051,136 3,838,924
Total 4,053,676 3,840,333
General investments:
Interest-bearing cash
(including money market funds) 1,758 15,093
Employer-related investments:
Investment in Northern States
Power Company common stock 270,459,824 282,600,454
TOTAL ASSETS 274,515,258 286,455,880
LIABILITIES:
Loans and interest payable to
Northern States Power Company 17,765,580 9,999,929
TOTAL LIABILITIES 17,765,580 9,999,929
NET ASSETS AVAILABLE
FOR PLAN BENEFITS $256,749,678 $276,455,951
See accompanying notes to financial statements.
NORTHERN STATES POWER COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
_________
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended
December 30,
INCOME: 1996
Contributions:
Employers $4,663,106
Participants 35,088
Total contributions 4,698,194
Earnings on investments:
Interest-bearing cash
(including money market funds) 14,762
Dividends:
Northern States Power Company common stock 15,745,187
Net gain (loss) on sale of assets:
Aggregate proceeds 21,081,462
Aggregate carrying amount 12,906,394
Total net gain (loss) on sale of assets 8,175,068
Unrealized appreciation
(depreciation) of assets (26,665,324)
TOTAL INCOME 1,967,887
EXPENSES:
Benefit payments directly to participants
or beneficiaries 21,071,523
Interest expense 592,736
Other 9,901
TOTAL EXPENSES 21,674,160
NET INCREASE (DECREASE) IN PLAN ASSETS (19,706,273)
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 276,455,951
End of year $256,749,678
See accompanying notes to financial statements.
NORTHERN STATES POWER COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
(EIN: 41-0448030 PN: 002)
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Investments - Substantially all investments of the Northern States
Power Company Employee Stock Ownership Plan (the "Plan") consist of
common stock of Northern States Power Company (Minnesota) (the
"Company") and are carried at market. The Plan recognizes unrealized
appreciation or depreciation in the market value of Company shares
which is determined using the year-end closing market price. Realized
appreciation or depreciation is recognized by the Plan upon
distribution of individual account balances to participants or
beneficiaries. The cost of stock distributed is determined on the
average cost basis.
Use of Estimates - In recording transactions and balances resulting
from Plan activity, the Plan uses estimates based on the best
information available. Estimates are used for such items as interest
and dividends receivable. As better information becomes available (or
actual amounts are determinable), the recorded estimates are revised.
Consequently, Plan operating results can be affected by revisions to
prior estimates.
Other - The Plan follows the accrual basis of accounting. Most
administrative expenses of the Plan are paid by the Company or its
subsidiaries, except that terminating participants who at their
election desire an early and additional distribution of their accounts
are charged a fee by the Company to partially offset the added
administrative cost for two distributions.
2. Plan Description
The following brief description of the Plan is provided for general
informational purposes only. Participants should refer to the Plan
document for more complete information.
General - Adopted in 1975, the Plan is a defined contribution employee
benefit plan which provides eligible employees of the Company and its
participating subsidiaries (collectively the "Companies") with the
opportunity to acquire ownership of common stock of the Company,
without reduction in pay or other benefits. Eligible participants may
purchase additional Company common stock under the Plan by making
after-tax contributions. The Plan covers substantially all of the
employees of the Companies.
Funding - Assets of the Plan are maintained in a trust. The Companies
can make contributions to the Plan at their discretion. Generally, the
Company makes contributions to the extent that tax savings are realized
by the Companies as a result of the use of the dividends received by
the Plan to repay the loan, as discussed below. Shares purchased with
contributions made by the Company are allocated to the eligible active
participants' accounts in the proportion that the participants' covered
compensation bears to the covered compensation of all eligible
participants, excluding compensation in excess of $150,000, as required
by the Internal Revenue Code. Since 1977, the Plan has also provided
for voluntary savings contributions to be made by eligible employees
through payroll deductions which are not matched by the Companies under
current Plan provisions.
Benefits - Each participant is fully vested (that is, has a right which
cannot be lost) in all of the common stock allocated to the
participant's account. Participant accounts can be distributed to
participants in the plan year following retirement or other termination
of employment with the Companies. Qualifying participants may
accelerate or delay distribution after termination of employment. The
Plan also permits limited in-service withdrawals of amounts
attributable to employee contributions, but some withdrawals are
available only to satisfy qualifying hardships, and some amounts may
be withdrawn only after a seven-year holding period.
Loans - The Plan is designed so that loans may be taken out by the Plan
and the proceeds used to purchase shares of Company common stock. (See
Note 6 for further discussion of Plan loans.) Dividends received for
unallocated shares and for certain shares allocated to active
participants are used to repay the loan. As the dividends for shares
allocated to participant accounts are applied to the loan, the shares
purchased with the loan proceeds are allocated to the individual
accounts of the active participants whose dividends were used, as though
the dividends were used to purchase stock on the open market, but at the
price per share of the shares acquired with the loan proceeds, if that
price is lower than the market price. Dividends are applied to loan
repayments before any contributions by the Companies are applied.
Plan Termination - There is no specified term for the Plan but the
employer may terminate the Plan at any time in accordance with the
provisions of ERISA.
3. Federal Income Tax
The Plan has been determined by the Internal Revenue Service to be a
qualified plan under Section 401(a) of the Internal Revenue Code (the
Code). As a result, any income earned by the Plan is exempt from
federal income tax. The Company believes that the Plan is currently
designed and being operated in compliance with the applicable
requirements of the Code to maintain compliance with Section 401(a).
Based on amendments to the Plan made in the 1993 plan year, the Company
requested the Internal Revenue Service determine that the Plan as
amended continues to qualify under Section 401(a). In September 1995,
the Company received a favorable determination letter from the IRS
reaffirming the Plan's status as a qualified plan under section 401(a)
of the Code.
As long as the Plan remains a qualified plan, participants are not
subject to income tax on amounts contributed by the Companies or any
income received by the Plan until a distribution is received from the
Plan. Participants may not claim a deduction on their Federal income
tax return for any employee contributions. Distributions in excess of
the participant's contributions will usually be taxed as ordinary
income. However, if common stock is distributed, the portion of the
value representing unrealized appreciation while held in the Plan, may
not, under certain circumstances, be subject to immediate tax.
Participants of age 50 or older as of January 1, 1986 may elect 10-year
averaging at pre-1987 income tax rates or 5-year averaging at current
rates. Through tax year 1999, other participants may elect a one time
only 5-year averaging option for lump sum distributions received after
the participant attains age 59 1/2.
4. Changes In Unrealized Appreciation (Depreciation)
Of Company Common Stock
Unrealized
Appreciation
Market Value* Cost (Depreciation)
Balance, December
30, 1995 $282 600 454 $173 141 887 $109 458 567
Net Change (12 140 630) 14 524 694 (26 665 324)
Balance, December
30, 1996 $270 459 824 $187 666 581 $ 82 793 243
*The market value at December 30, 1996 and 1995 was $45 7/8 and $49 1/8
per share, respectively.
5. Allocation of Plan Investments
The Plan's cash investments are not allocated to participants. The
Plan's investments in Company common stock were allocated to
participants' accounts at December 30, 1996 and 1995 as follows:
1996 1995
Allocated Unallocated Allocated Unallocated
Number of Shares 5 420 993 474 589 5 407 993 344 688
Market Value $248 688 054 $21 771 770 $265 667 656 $16 932 798
Cost $165 716 468 $21 950 113 $157 919 161 $15 222 725
6. Related Party Transactions
Transactions with the Company - Income from common stock dividends
relate to Company shares held by the Plan. Income receivables include
dividends on Company stock payable to the Plan of $4,051,129 and
$3,838,799 at December 30, 1996 and 1995, respectively. Employer
contributions for the 1996 plan year were based on tax savings realized
by the Company.
Loan Payable - In September 1996 and March 1995, the Plan entered into
respective $15,000,000 term loan agreements with the Company as
permitted by the Trust Agreement between the Trustee and the Company.
The proceeds of the loans were used to purchase the Company's common
stock. In September 1996 and April 1995, the Company obtained
$15,000,000 in unsecured bank loans to finance the loans to the Plan on a
long-term basis. The agreements with the Company provide for the Plan's
loans to be repaid coincidentally with the Company's bank loans,
in quarterly installments over approximately seven years. Loan payments
in the amount of $7,302,869 and $7,823,247 were made
during the years ended December 30, 1996 and 1995, respectively. The
loans bear interest at a variable rate which is adjusted quarterly,
based on changes in London Interbank Offered Rates (LIBOR). At
December 30, 1996 the interest rate was 5.5% on the loan dated
September 1996 and 5.8% on the loan dated April 1995.
7. Reconciliation of Financial Statements to Form 5500
As required by the Department of Labor's rules and regulations for
reporting and disclosure under the Employee Retirement Income Security
Act of 1974, on the Plan's Form 5500 report the net asset amounts
allocable to withdrawing participants are recorded as a liability
based on benefit claims that have been processed and approved for
payment prior to December 30 but have not yet been paid as of that
date. As required by generally accepted accounting principles, on
the accompanying financial statements such amounts are recorded as
paid.
The following is a reconciliation of net assets available for benefits
per the financial statements to the Plan's Form 5500 report filed with
the Department of Labor:
December 30,
1996 1995
Net assets available for benefits
per these financial statements $256 749 678 $276 455 951
Benefits payable to withdrawing
participants (0) (1 867 929)
Net assets available for benefits
per the Form 5500 $256 749 678 $274 588 022
The following is a reconciliation of benefit expenses per the financial
statements to Form 5500:
Year Ended
December 30,
1996
Benefit expenses per these
financial statements $21 071 523
Add: Benefits payable to
withdrawing participants at
December 30, 1996 0
Less: Benefits payable to withdrawing
participants at December 30, 1995 (1 867 929)
Benefits paid to participants
per Form 5500 $19 203 594
Item 27a - Schedule of Assets held for Investment Purposes at December 30,
1996
DESCRIPTION OF
IDENTITY OF ISSUE INVESTMENT COST CURRENT VALUE
* Northern States
Power Company Common Stock - Par $2.50 $187 666 581 $270 459 824
* Known to be a party-in-interest to the Plan.
Item 27d - Schedule of Reportable Transactions
(a)Identity (b)Description (c)Purchase (d)Selling (h)Current (i)Net gain
of of Price Price Value or (loss)
Party Transaction
Involved
Single Transactions
Northern Seven year
States Power variable
Company * rate loan to
the Plan for
the purchase
of Common
Stock $15,000,000
Northern Purchase of
States Power Common Stock
Company * by the Plan $15,000,000
Series of Transactions - Security of the Same Issue
Northern Purchases and
States Power Sales of
Company Northern
Common States Power
Stock * Company
Common Stock
by the Plan $27,431,089 $9,939 $3,680
First Bank Purchases and
N.A. * Sales of First
American
Institutional
Money Fund $24,548,176 $24,561,511
Series of Transactions - Same Person
Northern Northern
States Power States Power
Company * Co. Common
Stock Dividends,
Employer
Contribution,
and Purchase of
Common Stock
from Northern
States Power
Company $29,180,334
* Known to be a party in interest.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator
of the Northern States Power Company
Employee Stock Ownership Plan
In our opinion, the accompanying statement of net assets available for
benefits and the related statement of changes in net assets available for
benefits present fairly, in all material respects, the net assets available
for benefits of the Northern States Power Company Employee Stock Ownership
Plan (the Plan) at December 30, 1996 and 1995, and the changes in its net
assets available for benefits for the year ended December 30, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Plan's management; our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information provided
in Items 27a and 27d is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental items have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
are fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/
Price Waterhouse LLP
Minneapolis, Minnesota
June 27, 1997
Signature
As permitted under Form 11-K rules, the Company's Employee Stock Ownership
Plan is filing plan financial statements and schedules prepared in accordance
with the financial reporting requirements of ERISA.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company's Plan Administrator has duly caused this annual report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Northern States Power Company
Employee Stock Ownership Plan
(Registrant)
By/s/
E J McIntyre
Vice President and Chief Financial
Officer
Northern States Power Company
June 27, 1997
EXHIBIT INDEX
Method of Exhibit
Filing No. Description
DT 23.01 Consent of Independent Accountants
DT = Filed electronically with this direct transmission.
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement No.
2-61264 of Northern States Power Company on Form S-8 of our report dated June
27, 1997 appearing on page 9 of the Northern States Power Company Employee
Stock Ownership Plan's Annual Report on Form 11-K for the year ended December
30, 1996.
/s/
Price Waterhouse LLP
Minneapolis, Minnesota
June 27, 1997
