SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
-
ACT OF 1934
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1999 COMMISSION FILE NUMBER 1-3034
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NORTHERN STATES POWER COMPANY
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 41-0448030
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
414 NICOLLET MALL, MINNEAPOLIS, MINNESOTA 55401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (612) 330-5500
NONE
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FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT
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
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INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT JULY 31, 1999
COMMON STOCK, $2.50 PAR VALUE 154,196,342 SHARES
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Northern States Power Company (Minnesota) and Subsidiaries
Consolidated Statements of Income (Unaudited)
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30 June 30
1999 1998 1999 1998
(Thousands of dollars)
Utility operating revenues
Electric: Retail $538,721 $518,745 $1,044,282 $998,571
Sales for resale and other 50,065 51,906 101,360 93,651
Gas 70,589 67,950 256,916 247,781
Total 659,375 638,601 1,402,558 1,340,003
Utility operating expenses
Fuel for electric generation 81,343 75,466 151,307 151,106
Purchased and interchange power 107,214 96,901 205,279 169,424
Cost of gas purchased and transported 35,121 37,137 147,300 150,719
Other operation 101,782 96,481 202,909 191,947
Maintenance 53,057 54,444 98,047 94,304
Administrative and general 35,234 36,492 65,797 74,271
Conservation and energy management 16,691 16,667 33,928 33,551
Depreciation and amortization 88,095 83,111 175,580 167,211
Taxes: Property and general 57,361 56,343 114,993 112,304
Current income 24,268 20,351 66,814 58,738
Deferred income (4,482) 2,357 (8,517) (3,265)
Investment tax credits recognized (2,215) (2,203) (4,438) (4,411)
Total 593,469 573,547 1,248,999 1,195,899
Utility operating income 65,906 65,054 153,559 144,104
Other income (expense)
Income (loss) from nonregulated businesses -
before interest and taxes 140 7,682 (7,213) 11,967
Allowance for funds used during construction -
equity (419) 1,812 2,757 3,557
Regulatory reserve-conservation program recovery (35,035) - (35,035) -
Other utility income (deductions) - net (4,340) (6,486) (9,351) (5,686)
Income tax benefit - nonregulated operations
and nonoperating items 35,844 11,825 51,986 25,851
Total (3,810) 14,833 3,144 35,689
Income before financing costs 62,096 79,887 156,703 179,793
Financing costs
Interest on utility long-term debt 23,288 26,204 47,253 51,470
Other utility interest and amortization 7,058 2,622 12,610 6,041
Nonregulated interest and amortization 17,188 13,859 29,329 26,138
Allowance for funds used during construction
- debt (866) (1,770) (4,175) (3,882)
Total interest charges 46,668 40,915 85,017 79,767
Distributions on redeemable preferred securities
of subsidiary trust 3,938 3,938 7,875 7,875
Total financing costs 50,606 44,853 92,892 87,642
Net income 11,490 35,034 63,811 92,151
Preferred stock dividends 2,110 1,060 3,171 3,427
Earnings available for common stock $9,380 $33,974 $60,640 $88,724
Average number of common shares outstanding (000's) 153,012 149,877 152,704 149,547
Average number of common and potentially dilutive
shares outstanding (000's) 153,118 150,143 152,834 149,807
Earnings per average common share - basic $0.06 $0.23 $0.40 $0.59
Earnings per average common share - assuming
dilution $0.06 $0.23 $0.40 $0.59
Common dividends declared per share $0.3625 $0.3575 $0.7200 $0.7100
Consolidated Statements of Retained Earnings (Unaudited)
Balance at beginning of period $1,429,410 $1,367,003 $1,432,696 $1,364,875
Net income for period 11,490 35,034 63,811 92,151
Dividends declared:
Cumulative preferred stock (2,110) (1,060) (3,171) (3,427)
Common stock (55,533) (54,000) (110,079) (106,622)
Balance at end of period $1,383,257 $1,346,977 $1,383,257 $1,346,977
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of the
Statements of Income and Retained Earnings.
1
<TABLE>
<CAPTION>
Northern States Power Company (Minnesota) and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<S> <C> <C>
Six Months Ended
June 30,
1999 1998
(Thousands of dollars)
Cash Flows from Operating Activities:
Net Income $63,811 $92,151
Adjustments to reconcile net income to cash from operating activities:
Depreciation and amortization 199,190 187,522
Nuclear fuel amortization 24,867 21,148
Deferred income taxes (33,746) (2,709)
Deferred investment tax credits recognized (4,465) (4,565)
Allowance for funds used during construction - equity (2,757) (3,557)
Distributions in excess of (less than) equity in earnings of unconsolidated affiliates 27,423 (13,520)
Regulatory reserve - conservation recovery 35,035 -
Cash used for changes in certain working capital items (65,329) (10,042)
Cash provided by changes in other assets and liabilities 9,820 3,557
Net cash provided by operating activities 253,849 269,985
Cash Flows from Investing Activities:
Capital expenditures (240,891) (180,459)
Increase (decrease) in construction payables 2,558 (1,367)
Allowance for funds used during construction - equity 2,757 3,557
Investment in external decommissioning fund (21,119) (21,020)
Equity investments, loans and deposits for nonregulated projects (77,606) (126,627)
Collection of loans made to nonregulated projects 39,956 63,739
Business acquisitions (930,185) -
Other investments - net (15,502) (10,603)
Net cash used for investing activities (1,240,032) (272,780)
Cash Flows from Financing Activities:
Change in short-term debt - net issuances (repayments) 1,025,992 (5,077)
Proceeds from issuance of long-term debt - net 309,197 267,467
Repayment of long-term debt (208,667) (115,078)
Proceeds from issuance of common stock - net 27,558 45,540
Redemption of preferred stock - (95,000)
Dividends paid (112,088) (109,762)
Net cash provided by (used for) financing activities 1,041,992 (11,910)
Net increase (decrease) in cash and cash equivalents 55,809 (14,705)
Cash and cash equivalents at beginning of period 42,364 54,765
Cash and cash equivalents at end of period $98,173 $40,060
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of the
Statements of Cash Flows.
2
<TABLE>
<CAPTION>
Northern States Power Company (Minnesota) and Subsidiaries
Consolidated Balance Sheets (Unaudited)
<S> <C> <C>
June 30, December 31,
1999 1998
ASSETS (Thousands of dollars)
Utility Plant
Electric $7,310,938 $7,199,843
Gas 907,171 884,182
Other 378,368 365,101
Total 8,596,477 8,449,126
Accumulated provision for depreciation (4,309,955) (4,155,641)
Nuclear fuel 989,303 975,030
Accumulated provision for amortization (898,147) (873,281)
Net utility plant 4,377,678 4,395,234
Current Assets
Cash and cash equivalents 98,173 42,364
Customer accounts receivable - net 274,019 253,559
Unbilled utility revenues 112,990 139,098
Other receivables 72,282 105,116
Fossil fuel inventories - at average cost 46,502 58,806
Materials and supplies inventories - at average cost 157,869 110,267
Prepayments and other 124,546 44,855
Total current assets 886,381 754,065
Other Assets
Nonregulated property - net of accumulated depreciation 1,213,803 282,524
Equity investments in nonregulated projects 893,946 862,596
External decommissioning fund and other investments 527,725 479,402
Regulatory assets 261,418 331,940
Notes receivable from nonregulated projects 108,582 106,427
Intangible assets - net of accumulated amortization 121,231 95,915
Long-term prepayments, deferred charges and long-term receivables 115,125 58,398
Other long-term receivables 32,736 29,796
Total other assets 3,274,566 2,246,998
TOTAL ASSETS $8,538,625 $7,396,297
LIABILITIES AND EQUITY
Capitalization
Common stock equity:
Common stock and premium - authorized: 1999 350,000,000 and 1998 350,000,000
shares of $2.50 par value, issued shares:
1999 153,796,567 and 1998 152,696,971 $1,183,682 $1,156,067
Retained earnings 1,383,257 1,432,696
Leveraged common stock held by ESOP (15,055) (18,503)
Accumulated other comprehensive income (64,397) (89,014)
Total common stock equity 2,487,487 2,481,246
Cumulative preferred stock and premium - authorized 7,000,000 shares of $100 par
value; outstanding shares: 1999 1,050,000 and 1998 1,050,000
without mandatory redemption 105,340 105,340
Mandatorily redeemable preferred securities of subsidiary trust - guaranteed
by NSP* 200,000 200,000
Long-term debt 2,152,611 1,851,146
Total capitalization 4,945,438 4,637,732
Current Liabilities
Long-term debt due within one year 26,775 227,600
Other long-term debt potentially due within one year 141,600 141,600
Short-term debt - utility 504,196 114,273
Short-term debt - nonregulated (mainly temporary NRG project financing) 761,626 125,557
Accounts payable 262,943 271,799
Taxes accrued 124,791 170,274
Interest accrued 38,777 38,836
Dividends payable on common and preferred stocks 56,812 55,650
Other accrued liabilities 142,150 86,673
Total current liabilities 2,059,670 1,232,262
Other Liabilities
Deferred income taxes 790,656 814,983
Deferred investment tax credits 123,549 128,444
Regulatory liabilities 407,098 372,239
Postretirement and other benefit obligations 126,829 129,514
Other long-term obligations and deferred income 85,385 81,123
Total other liabilities 1,533,517 1,526,303
Commitments and Contingent Liabilities (See Note 4)
TOTAL LIABILITIES AND EQUITY $8,538,625 $7,396,297
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of the
Balance Sheets.
* The primary asset of NSP Financing I, a subsidiary trust of NSP, is $200
million principal amount of the Company's 7.875% Junior Subordinated
Debentures due 2037.
3
<PAGE>
NORTHERN STATES POWER COMPANY (MINNESOTA) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the financial
position of Northern States Power Company (Minnesota) (NSP-Minnesota) and its
subsidiaries (collectively, NSP) as of June 30, 1999 and Dec. 31, 1998, the
results of its operations for the three and six months ended June 30, 1999 and
1998, and its cash flows for the six months ended June 30, 1999 and 1998. Due
to the seasonality of NSP's electric and gas sales and variability of
nonregulated operations, operating results on a quarterly basis are not
necessarily an appropriate base from which to project annual results.
The accounting policies followed by NSP are set forth in Note 1 to the
financial statements in NSP's Annual Report on Form 10-K for the year ended Dec.
31, 1998 (1998 Form 10-K). The following notes should be read in conjunction
with such policies and other disclosures in the 1998 Form 10-K.
1. PROPOSED BUSINESS COMBINATION
- -- -------------------------------
On March 24, 1999, NSP and New Century Energies, Inc. (NCE) agreed to merge
and form a new entity, Xcel Energy Inc. (Xcel). For more discussion of this
proposed business combination, see Part II, Item 5 - Other Information of this
report.
On June 28, 1999, shareholders of both NSP and NCE approved the merger.
NCE shareholder approval of the merger totaled 93 percent of votes received, and
78 percent of overall shares. NSP shareholder approval of the merger totaled 83
percent and 62 percent, respectively.
The merger requires approval or regulatory review by federal regulators,
including the Federal Energy Regulatory Commission (FERC) and the Securities and
Exchange Commission (SEC), as well as state regulators in eight of the 12 states
served by the two companies. The approval process is expected to be completed
within 12 to 18 months from the date of the merger announcement.
The costs associated with the proposed merger are being deferred based on
NSP's plan to request amortization and rate recovery over future periods. At
June 30, 1999, NSP had deferred $15.6 million of merger costs.
2. BUSINESS DEVELOPMENTS
- -- ----------------------
NRG ENERGY, INC. (NRG) - In April 1999, NRG reached agreement to purchase
the 1,700 MW oil and gas-fired Oswego generating station for $91 million from
Niagara Mohawk Power Corporation and Rochester Gas and Electric Corporation. The
facilities are located in Oswego, New York. The acquisition is expected to close
in the fourth quarter of 1999, pending regulatory approvals.
In April 1999, NRG completed its acquisition of the Somerset power station
for approximately $55 million from Eastern Utilities Associates. The Somerset
station, located in Somerset, Mass., includes two coal-fired generating
facilities and two aeroderivative combustion turbine peaking units with a total
capacity of 229 MW. A total of 69 MW of capacity is on deactivated reserve. NRG
owns a 100 percent interest in the project.
In May 1999, NRG and Dynegy completed their acquisition of the Encina
generating station and 17 combustion turbines for $356 million from San Diego
Gas & Electric Company. The facilities, which have a combined capacity of 1,218
MW, are located near Carlsbad and San Diego, Calif. NRG and Dynegy each own a
50 percent interest in the joint venture.
In June 1999, NRG completed its acquisition of the Huntley and Dunkirk
generating stations from Niagara Mohawk Power Corp. for $355 million. The two
coal-fired plants are located near Buffalo, New York, and have a combined summer
capacity of 1,360 MW. NRG owns a 100 percent interest in the project.
In June 1999, NRG completed its acquisition of the Arthur Kill generating
station and the Astoria gas turbine site for $505 million from the Consolidated
Edison Company of New York, Inc. These facilities, which are located in New York
City area, have a combined summer capacity rating of 1,456 MW. NRG owns a 100
percent interest in the project.
In July 1999, NRG reached agreement to purchase electric generating
stations with a combined capacity of 2,235 MW for $460 million from Connecticut
Light & Power Company. The facilities, located throughout Connecticut, include
the Middletown, Montville, Devon and Norwalk Harbor gas and oil fired steam
generating stations. The acquisition is expected to close in the fourth quarter
of 1999, pending regulatory approvals.
INDEPENDENT TRANSMISSION COMPANY (ITC) - In April 1998, NSP announced its
intention to form an ITC unaffiliated with the rest of its utility operations.
As originally proposed, NSP anticipated divesting its transmission assets to an
ITC. In light of the proposed merger with NCE, divestiture of transmission
assets would appear to trigger adverse tax and accounting consequences.
Therefore, NSP is evaluating alternatives to divestiture of its transmission
assets. In its regulatory filing seeking approval of the proposed merger with
NCE, NSP has proposed to transfer control, but not ownership, of its
transmission assets to the Midwest independent system operator (ISO) upon
completion of the merger.
In April 1998, Wisconsin Act 204 became law. Act 204 includes provisions
that require the Public Service Commission of Wisconsin (PSCW) to order a public
utility that owns transmission facilities in Wisconsin to transfer control of
its transmission facilities to an ISO or divest it's interest in its
transmission facilities to an independent transmission owner (ITO) if the public
utility has not already transferred control to an ISO or divested to an ITO by
June 30, 2000. Under certain circumstances, the PSCW has authority to waive
imposition of such an order on June 30, 2000. At June 30, 1999, the net book
value of NSP-Wisconsin's transmission assets was approximately $152 million.
INDEPENDENT NUCLEAR GENERATING COMPANY - In February 1999, NSP, Wisconsin
Electric Power Co. and Wisconsin Public Service Corp. established a nuclear
management company. Alliant Energy is seeking approval from the SEC to join the
management company at a later date. NSP does not intend to divest its nuclear
assets to the nuclear management company.
VIKING GAS - During the second quarter of 1999, Viking Gas reached a
settlement with TransCanada Pipelines, Ltd. and NICOR, Inc., Viking's former
partners in the Viking Voyageur pipeline project, which was cancelled in 1998.
The settlement provides for Viking Gas to receive all engineering and other
studies related to the former Voyageur project in return for a cash payment.
Since the studies obtained through the settlement have continuing value to
Viking Gas for projects currently under construction and consideration, the
payment has been capitalized as a plant cost.
3. REGULATION AND RATE MATTERS
- -- ------------------------------
FERC TRANSMISSION RATE CASE - As discussed in NSP's 1998 Form 10-K, in
the first quarter of 1998, NSP filed wholesale electric point-to-point and
network integration transmission service (NTS) rate cases with the FERC. In
March 1999, NSP filed an offer of settlement which would resolve virtually all
issues in the two cases. The offer of settlement provides an approximate two
percent reduction in point-to-point rates, which combined with anticipated
reductions in non-firm discounting, is expected to have little or no impact on
annual revenue. In addition, the settlement calls for an annual increase of
approximately $1 million in ancillary service revenues. Finally, the settlement
places a cap on NSP's annual NTS payment liabilities to its five current NTS
customers at $10 million per year. The point-to-point and ancillary rates would
be effective June 1, 1998. The offer also includes a two or three year
moratorium period on future transmission rate changes. The length of the
moratorium is based on whether NSP forms an ITC or is ordered to join an ISO
(two years), or voluntarily joins an ISO (three years). All parties filed
written comments generally recommending FERC approval of the offer. NSP expects
FERC approval later in 1999.
MIDCONTINENT AREA POWER POOL (MAPP) TRANSMISSION TARIFF - In May 1999, MAPP
members voted to approve a MAPP regional transmission service tariff which will
supercede MAPP members' individual electric transmission service tariffs for
most wholesale transactions. The proposed MAPP tariff was filed with the FERC
in July 1999. MAPP proposed the new tariff be effective 90 days after a FERC
order accepting the tariff for filing. NSP estimates that the MAPP regional
transmission service tariff will reduce NSP's year 2000 pretax earnings by
between $5 million and $16 million. NSP and several other parties filed
protests to the MAPP tariff, asking the FERC to modify and/or delay
implementation of the new tariff. The tariff is pending FERC action, which is
expected later in 1999.
VIKING RATE CASE - In June 1998, Viking filed a rate case with the FERC,
requesting a $3 million annual rate increase. In March 1999, Viking filed an
agreement of settlement which would resolve all issues in the case. The
settlement would provide Viking an annual rate increase of approximately $1.3
million, or 6 percent, effective Jan. 1, 1999, and a four year phased rate
roll-in for the cost of Viking's 1996 and 1997 expansion projects. FERC
approved this settlement in May 1999.
NSP-WISCONSIN - In May 1999, NSP-Wisconsin filed its biennial rate case, as
required by the PSCW. NSP-Wisconsin is requesting to maintain current rates for
electric and natural gas service through 2001. A rate order is expected later
this year.
4. COMMITMENTS AND CONTINGENT LIABILITIES
- -- -----------------------------------------
CONSERVATION IMPROVEMENT PROGRAM (CIP) - NSP recorded a charge to second
quarter 1999 earnings of $35 million (before tax), or 14 cents per share, due to
disallowance of rate recovery for accrued conservation program incentives based
on a June 24, 1999 decision by the Minnesota Public Utilities Commission (MPUC).
State law requires Minnesota utilities to fund and participate in various
energy conservation programs and initiatives. After NSP's last electric rate
case in 1993, NSP incurred higher levels of conservation program expenditures,
and in 1994 requested MPUC approval of a rate recovery mechanism to avoid a
significant delay between the incurring of CIP costs and their recovery in
rates. Since 1995, the MPUC has approved the use of this special rate recovery
mechanism to provide timely recovery (for NSP and other Minnesota public
utilities) of CIP costs and also to provide conservation program incentives,
including: reimbursement of a portion of electric margins lost due to energy
conservation, reimbursement of certain load management discounts provided to
customers under CIP programs, and performance incentives based on the success of
NSP's conservation programs.
MPUC procedures require an annual filing by each utility to consider
approval of conservation items. For NSP, this annual filing has typically
occurred in the second quarter of the year, and the rate recovery levels have
been adjusted each July 1 and then continued until the following June 30. The
requested recovery levels approved for NSP since 1995 have included recovery of
budgeted levels of conservation related items recoverable in the current year.
In late 1998, the MPUC considered a proposal to discontinue recovery of
lost margins and load management discounts related to conservation programs for
NSP and other Minnesota public utilities. The MPUC declined to take such
action, but put Minnesota utilities on notice that there may be significant
changes, including elimination of lost margin and load management discount
recovery for programs beginning January 1999. The MPUC established a roundtable
to study the issue.
On June 24, 1999, the MPUC held a hearing to consider NSP's April 1999
conservation filing. The MPUC voted three to two to deny NSP the lost margins,
load management discounts and incentives related to 1998 that were associated
with state-mandated programs for electric energy conservation. On July 27,
1999, the MPUC issued an order formalizing its conservation decision.
The MPUC decision did not appear to affect the recovery of CIP
expenditures. Also, the MPUC did not address or change 1999 conservation
incentive recovery levels. However, a review is under way.
NSP plans to request reconsideration of the MPUC decision, and if necessary
seek court review. The MPUC's decision appears to contradict previous orders
and reduce NSP's 1998 rates retroactively. However, due to the uncertainty of
the challenge, NSP has established a regulatory reserve as of June 30, 1999 for
all income recorded for expected recovery of 1998 accruals of lost margins, load
management discounts and performance incentives. This reserve has reduced NSP's
earnings by $35 million (before tax) or 14 cents per share.
Based on MPUC practice and approvals since 1995, NSP has continued to
accrue income for 1999 conservation incentives, consistent with the levels
requested in its filing earlier this year. Through June 30, 1999, NSP has
recorded pretax income, primarily in other electric revenue, of approximately
$14 million (representing 5 cents per share) for 1999 conservation program
incentives. No reserve has been established for possible non-recovery of these
amounts, pending MPUC action on 1999 conservation programs and recovery levels.
RATE INVESTIGATION - On July 27, 1999, the MPUC issued an order requiring
an investigation into the reasonableness of NSP's retail electric rates in
Minnesota. The rate investigation order requires NSP to file, within 60 days, a
written explanation and detailed schedules showing the individual adjustments to
the 1998 and projected 1999 normalized rate base, revenue and expense
statements, and the cost of capital that are necessary to reconcile 1998
normalized and 1999 projected returns on equity to the 11.47 percent authorized
return on equity. NSP is also required to explain why it believes its current
rates continue to be just and reasonable. Once NSP has filed the required
information, interested parties will have 60 days to review and file comments
and recommendations.
The rate investigation does not authorize the MPUC to reduce base rates,
but only to determine whether a rate proceeding should be initiated. If, after
hearing, the MPUC finds that a rate proceeding should be initiated, it must
then, under Minnesota law, allow the utility 120 days after the MPUC's Order to
file its case. If a rate case is initiated, NSP's rates would first become
subject to refund, as interim rates, 60 days after the filing of the rate
proceeding.
NUCLEAR INSURANCE - The circumstances set forth in Note 14 to NSP's
financial statements in NSP's 1998 Form 10-K appropriately represent, in all
material respects, the current status of commitments and contingent liabilities
regarding public liability for claims resulting from any nuclear incident.
5. SHORT-TERM BORROWINGS
- -- ----------------------
At June 30, 1999, NSP and its subsidiaries had approximately $1.3 billion
of short-term debt outstanding at a weighted average interest rate of 5.71
percent. NSP-Minnesota had $504 million in short-term commercial paper
borrowings outstanding at a composite rate of 5.07 percent. Included in NSP's
subsidiary debt is approximately $540 million of 364 day NRG project financing,
which is expected to be refinanced later this year with long-term project debt.
NSP has regulatory approval for up to $1.2 billion in short-term borrowing
levels. The regulatory approval permits NSP to be out of compliance with its
limits for up to 60 days without notifying the MPUC. During July 1999,
NSP-Minnesota issued $250 million of long-term debt, which was primarily used to
reduce short-term debt levels. With this issue, NSP is currently in compliance
with its regulatory short-term borrowing limits.
As of June 30, 1999, NSP-Minnesota had a $300 million revolving credit
facility under a commitment fee arrangement. This facility provides short-term
financing in the form of bank loans, letters of credit and support for
commercial paper sales. In addition to NSP-Minnesota lines, at June 30, 1999,
commercial banks provided credit lines of approximately $361 million to wholly
owned subsidiaries of NSP with approximately $222 million in borrowings
outstanding, mainly NRG.
6. OTHER COMPREHENSIVE INCOME
- -- ----------------------------
NSP's other comprehensive income consists of foreign currency translation
adjustments related to NRG's investments in international projects and changes
in the fair value of certain marketable securities. Other comprehensive income
items for the three and six month ended periods of 1999 and 1998 are listed
below.
<TABLE>
<CAPTION>
<S> <C> <C>
Millions of Dollars 3 Mos. Ended
Increase / (decrease) in Equity 6/30/99 6/30/98
- ---------------------------------------- ------------- --------
Currency translation adjustments $19.0 ($19.9)
Marketable securities:
Holding gain during period - net of tax 1.6 0.0
Loss realized during period - net of tax 0.5 0.0
--- ---
Total $21.1 ($19.9)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Millions of Dollars 6 Mos. Ended
Increase / (decrease) in Equity 6/30/99 6/30/98
- ---------------------------------------- ------------- --------
Currency translation adjustments $20.6 ($23.1)
Marketable securities:
Holding gain during period - net of tax 2.0 0.0
Loss realized during period - net of tax 2.0 0.0
--- ---
Total $24.6 ($23.1)
</TABLE>
7. SEGMENT INFORMATION
- -- --------------------
NSP has four reportable segments: Electric Utility, Gas Utility and two of
its wholly owned, nonregulated subsidiaries, NRG and EMI. Segment information
for the second quarter and six month ended periods of 1999 and 1998 are as
follows:
BUSINESS SEGMENTS
Business Segments
<TABLE>
<S> <C> <C> <C>
Operating
Revenues from Inter- Segment
3 Mos. Ended 6/30/99 External Segment Net Income
(Thousands of dollars) Customers Revenues (Loss)
Electric Utility $588,587 $199 $14,129
Gas Utility 70,564 522 (3,590)
NRG 59,610 425 2,341
EMI 10,504 0 (921)
All Other 7,176 0 (469)
Reconciling Eliminations 0 (922) 0
Consolidated Total<F1> $736,441 $224 $11,490
<FN>
<F1> The consolidated total revenue amounts represent the sum of utility and nonregulated amounts.
</FN>
</TABLE>
<TABLE>
<S> <C> <C> <C>
Operating
Revenues from Inter- Segment
3 Mos. Ended 6/30/98 External Segment Net Income
(Thousands of dollars) Customers Revenues (Loss)
Electric Utility $570,470 $181 $36,306
Gas Utility 67,933 2,306 (5,646)
NRG 24,931 329 6,969
EMI 11,434 0 (1,976)
All Other 7,219 221 (619)
Reconciling Eliminations 0 (2,839) 0
Consolidated Total <F1> $681,987 $198 $35,034
<FN>
<F1> The consolidated total revenue amounts represent the sum of utility and nonregulated amounts.
</FN>
</TABLE>
<TABLE>
<S> <C> <C> <C>
Operating
Revenues from Inter- Segment
6 Mos. Ended 6/30/99 External Segment Net Income
(Thousands of dollars) Customers Revenues (Loss)
Electric Utility $1,145,240 $402 $49,995
Gas Utility 256,819 1,655 15,276
NRG 97,133 748 1,401
EMI 28,082 0 (2,434)
All Other 14,511 0 (427)
Reconciling Eliminations 0 (2,306) 0
Consolidated Total <F1> $1,541,785 $499 $63,811
<FN>
<F1> The consolidated total revenue amounts represent the sum of utility and nonregulated amounts.
</FN>
</TABLE>
<TABLE>
<S> <C> <C> <C>
Operating
Revenues from Inter- Segment
6 Mos. Ended 6/30/98 External Segment Net Income
(Thousands of dollars) Customers Revenues (Loss)
Electric Utility $1,091,775 $446 $72,190
Gas Utility 247,703 3,368 9,310
NRG 49,101 682 13,058
EMI 22,720 0 (4,502)
All Other 14,291 316 2,095
Reconciling Eliminations 0 (4,287) 0
Consolidated Total <F1> $1,425,590 $525 $92,151
<FN>
<F1> The consolidated total revenue amounts represent the sum of utility and nonregulated amounts.
</FN>
</TABLE>
<PAGE>
- ------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
-------------
Except for the historical statements contained in this report, the matters
discussed in the following discussion and analysis are forward-looking
statements that are subject to certain risks, uncertainties and assumptions.
Such forward-looking statements are intended to be identified in this document
by the words "anticipate", "estimate", "expect", "objective", "possible",
"potential" and similar expressions. Actual results may vary materially.
Factors that could cause actual results to differ materially include, but are
not limited to:
- - general economic conditions, including their impact on capital expenditures;
- - business conditions in the energy industry;
- - competitive factors;
- - unusual weather;
- - changes in federal or state legislation;
- - regulation;
- - issues relating to Year 2000 remediation efforts;
- - the higher degree of risk associated with NSP's nonregulated businesses as
compared to NSP's regulated business;
- - the items set forth below under "Factors Affecting Results of Operations";
- - currency translation and transaction adjustments;
- - regulatory delays or conditions imposed by regulatory agencies in approving
the proposed merger with NCE;
- - and the other risk factors listed from time to time by NSP in reports filed
with the SEC, including Exhibit 99.01 to this report on Form 10-Q for the
quarter ended June 30, 1999.
RESULTS OF OPERATIONS
On March 24, 1999, NSP and NCE agreed to merge and form a new entity, Xcel.
For more discussion of this proposed business combination, see Part II, Item 5 -
Other Information and Note 1 to the Financial Statements of this report. The
following discussion and analysis is based on the financial condition and
operations of NSP and does not reflect the potential effects of the combination
between NSP and NCE.
NSP's earnings per share - diluted (EPS) for the three and six month periods
ending June 30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Earnings per share: 3 mos. Ended 6 Mos. Ended
6/30/99 6/30/98 6/30/99 6/30/98
Regulated $0.05 $0.20 $0.41 $0.52
Nonregulated 0.01 0.03 (0.01) 0.07
Total $0.06 $0.23 $0.40 $0.59
</TABLE>
FACTORS AFFECTING RESULTS OF OPERATIONS
- ---------------------------------------
In addition to items noted in the 1998 Form 10-K and the Notes to the
Financial Statements, the historical and future trends of NSP's operating
results are affected by the following factors:
CONSERVATION PROGRAM RECOVERY - NSP recorded a charge of $35 million
(before tax) or approximately 14 cents per share in the second quarter of 1999
as a result of a MPUC disallowance of rate recovery of accrued 1998 conservation
program incentives. See Note 4 to the Financial Statements for more
information.
ESTIMATED IMPACT OF WEATHER ON REGULATED EARNINGS - NSP estimates electric
and gas utility sales levels under normal weather conditions and analyzes the
approximate effect of variations from historical average temperatures on actual
sales levels. The following summarizes the estimated impact of weather on
actual utility operating results (in relation to sales under normal weather
conditions):
<TABLE>
<CAPTION>
Increase (Decrease)
Earnings per Share Actual Actual Actual
<S> <C> <C> <C>
For Periods Ending June 30: 1999 vs Normal 1998 vs Normal 1999 vs 1998
- --------------------------- ------------------- ----------------- ---------------
Quarter Ended . . . . . . . ($0.01) $0.00 ($0.01)
Six Months Ended. . . . . . ($0.05) ($0.08) $0.03
</TABLE>
SALES GROWTH - The following table summarizes NSP's growth in actual
electric and gas sales and growth on a weather normalized (W/N) basis for the
3-month and the 6-month periods ended June 30, 1999, as compared with the same
periods in 1998. NSP's weather normalization process removes the estimated
impact on sales of temperature variations from historical averages.
<TABLE>
<CAPTION>
3 Mos. Ended 6 Mos. Ended
Actual W/N Actual W/N
------- ----- ------- ----
<S> <C> <C> <C> <C>
Electric Residential . . . . . . . 3.1% 4.5% 3.9% 3.2%
Electric Industrial and Commercial (0.8%) (0.3%) 0.6% 0.5%
Total Electric Retail. . . . . . . 0.1% 0.9% 1.5% 1.2%
Electric Resale. . . . . . . . . . 13.7% NA 25.6% NA
Firm Gas Sales . . . . . . . . . . 34.5% 9.5% 15.8% 4.6%
</TABLE>
Year 2000 (Y2K) Readiness - This information is designated as a "Year 2000
Readiness Disclosure." NSP is incurring significant costs to modify or replace
existing technology, including computer software, for uninterrupted operation
in the year 2000 and beyond as discussed in NSP's 1998 Form 10-K.
NSP is on schedule for completion of its Y2K project.
o On June 30, 1999, 99 percent of both NSP's mission-critical and non-critical
systems and processes were Y2K ready.
o On June 30, 1999, NSP filed its contingency plans as required by the
North American Electric Reliability Council. NSP's contingency plans are
comprehensive and include the following actions: the establishment of
back-up or alternative data and voice communications, increasing generation
reserves, coordination with government agencies, increased staffing levels
during Y2K critical time periods and conducting readiness drills.
o By Dec. 31, 1999, NSP expects to have completed implementation and
testing of all applications.
Since the start of the Y2K project in 1996 through June 30, 1999, NSP has
spent approximately $19.1 million for Y2K efforts, which (except for a portion
deferred for approved rate recovery) has been expensed as incurred.
The additional development and remediation costs necessary for NSP to prepare
for Y2K is estimated to be approximately $5.3 million.
Accounting Change - In June 1998, the FASB issued Statement of Financial
Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement requires that all derivatives be recognized
at fair value in the balance sheet and all changes in fair value be
recognized currently in earnings or deferred as a component of other
comprehensive income, depending on the intended use of the derivative, its
resulting designation and its effectiveness. NSP plans to adopt this standard
in 2001, as required. NSP has not yet determined the potential impact of
implementing this statement.
Second Quarter 1999 vs. Second Quarter 1998
Utility Operating Results
Electric revenues for the second quarter of 1999 increased $18.1 million,
or 3.2 percent, compared with the second quarter of 1998. The following table
summarizes the change in electric revenues for the second quarter.
<TABLE>
<S> <C>
Millions of dollars 1999 vs. 1998
Retail sales growth (excluding weather impact) $5.8
Weather impact (3.7)
Sales for resale (0.6)
Conservation program recovery (0.8)
Fuel cost recovery 13.3
Rate changes 1.8
Transmission and other 2.3
Total electric revenue increase $18.1
</TABLE>
ELECTRIC MARGIN equals electric revenue minus production expenses which
includes electric fuel and purchased power costs. The table below summarizes
the change in electric margin for the second quarter.
<TABLE>
<CAPTION>
<S> <C>
Millions of dollars. . . . . . . . . . . . . . 1999 vs. 1998
- ---------------------------------------------- ---------------
Retail sales growth (excluding weather impact) $ 5.2
Weather impact . . . . . . . . . . . . . . . . (3.1)
Sales for resale . . . . . . . . . . . . . . . (1.8)
Conservation program recovery. . . . . . . . . (0.8)
Rate changes . . . . . . . . . . . . . . . . . 1.8
Transmission and other . . . . . . . . . . . . 0.6
---------------
Total electric margin increase . . . . . . . $ 1.9
===============
</TABLE>
GAS REVENUES for the second quarter of 1999 increased $2.6 million, or 3.9
percent, compared with 1998. The following table summarizes the change in gas
revenues for the second quarter.
<TABLE>
<CAPTION>
<S> <C>
Millions of dollars . . . . . . . . . . 1999 vs. 1998
- --------------------------------------- ---------------
Sales growth (excluding weather impact) $ 3.5
Weather impact. . . . . . . . . . . . . 6.7
Rate changes. . . . . . . . . . . . . . (0.4)
Black Mountain Gas merger . . . . . . . 1.4
Cost of gas recovery. . . . . . . . . . (4.4)
Other . . . . . . . . . . . . . . . . . (4.2)
---------------
Total gas revenue increase. . . . . . $ 2.6
===============
<FN>
GAS MARGIN equals gas revenue minus the cost of purchased gas. The table
below summarizes the change in gas margin for the second quarter.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Millions of dollars . . . . . . . . . . 1999 vs. 1998
- --------------------------------------- ---------------
Sales growth (excluding weather impact) $ 1.7
Weather impact. . . . . . . . . . . . . 2.1
Rate changes. . . . . . . . . . . . . . (0.4)
Black Mountain Gas merger . . . . . . . 1.0
Other . . . . . . . . . . . . . . . . . 0.3
---------------
Total gas margin increase . . . . . . $ 4.7
===============
</TABLE>
OTHER OPERATION, MAINTENANCE AND ADMINISTRATIVE AND GENERAL expenses
together increased $2.7 million, or 1.4 percent, compared with the second
quarter of 1998. The increases are primarily due to customer service and
reliability initiatives and plant outages, partially offset by lower storm
costs.
DEPRECIATION AND AMORTIZATION expense increased $5.0 million, or 6.0
percent, compared with the second quarter of 1998. The increase is mainly due
to increased plant in service.
Nonregulated Business Results
- -------------------------------
The following table summarizes NSP's nonregulated business results in the
aggregate, including consolidated subsidiaries and unconsolidated affiliates.
<TABLE>
<CAPTION>
3 Mos. Ended
(Thousands of dollars, except EPS) 6/30/99 6/30/98
----------------------------------------------------------------------
<S> <C> <C>
Operating revenues $ 77,290 $43,584
Equity in project earnings 6,282 12,751
Operating and development expenses (85,946) (50,645)
Other income (expense) 2,514 1,992
Income before interest & taxes 140 7,682
Interest expense (17,188) (13,859)
Income tax benefit and credits 17,999 10,551
Net income $ 951 $ 4,374
Nonregulated earnings per share $ 0.01 $ 0.03
</TABLE>
NSP's nonregulated operations include diversified businesses, as described
below.
- - NRG's primary business is independent power production, commercial and
industrial heating and c ooling, and energy-related refuse-derived fuel
production.
- - EMI's primary business is custom energy services and sales.
- - Eloigne invests in affordable housing projects.
- - Seren Innovations is a communications and data services subsidiary.
The following table summarizes the earnings contributions of NSP's
nonregulated businesses:
<TABLE>
3 Mos. Ended
6/30/99 6/30/98
--------- ---------
<S> <C> <C>
NRG . . . . . . . $ 0.02 $ 0.05
Eloigne Company . 0.01 0.01
EMI, Inc. . . . . (0.01) (0.01)
Seren Innovations (0.01) (0.01)
Other . . . . . . 0.00 (0.01)
--------- ---------
Total . . . . . $ 0.01 $ 0.03
========= =========
</TABLE>
NRG - NRG's 1999 second quarter earnings decreased compared with 1998,
primarily due to the timing of project earnings, increased costs related to new
project acquisitions and business development, and additional interest expense.
<PAGE>
FIRST SIX MONTHS 1999 VS. FIRST SIX MONTHS 1998
- -------------------------------------------------------
Utility Operating Results
- ---------------------------
ELECTRIC REVENUES for the first six months of 1999 increased $53.4 million,
or 4.9 percent, compared with the first six months of 1998. The following table
summarizes the change in electric revenues.
<TABLE>
<CAPTION>
<S> <C>
Millions of dollars. . . . . . . . . . . . . . 1999 vs. 1998
- ----------------------------------------------
Retail sales growth (excluding weather impact) $ 14.4
Weather impact . . . . . . . . . . . . . . . . 2.1
Sales for resale . . . . . . . . . . . . . . . 13.7
Conservation program recovery. . . . . . . . . (1.5)
Fuel cost recovery . . . . . . . . . . . . . . 20.3
Rate changes . . . . . . . . . . . . . . . . . 3.7
Transmission and other . . . . . . . . . . . . 0.7
---------------
Total electric revenue increase. . . . . . . $ 53.4
===============
</TABLE>
ELECTRIC MARGIN equals electric revenue minus production expenses which
includes electric fuel and purchased power costs. The following table
summarizes the change in electric margin for the first six months.
<TABLE>
<CAPTION>
<S> <C>
Millions of dollars. . . . . . . . . . . . . . 1999 vs. 1998
- ----------------------------------------------
Retail sales growth (excluding weather impact) $ 12.2
Weather impact . . . . . . . . . . . . . . . . 1.8
Sales for resale . . . . . . . . . . . . . . . (0.3)
Conservation program recovery. . . . . . . . . (1.5)
Rate changes . . . . . . . . . . . . . . . . . 3.7
Transmission and other . . . . . . . . . . . . 1.5
---------------
Total electric margin increase . . . . . . . $ 17.4
- ---------------------------------------------- ===============
</TABLE>
GAS REVENUES for the first six months of 1999 increased $9.1 million, or
3.7 percent, compared with the first six months of 1998. The table below
summarizes the change in gas revenues.
<TABLE>
<CAPTION>
<S> <C>
Millions of dollars . . . . . . . . . . 1999 vs. 1998
- ---------------------------------------
Sales growth (excluding weather impact) $ 6.3
Weather impact. . . . . . . . . . . . . 17.2
Rate changes. . . . . . . . . . . . . . 1.3
Black Mountain Gas merger . . . . . . . 3.7
Cost of gas recovery. . . . . . . . . . (12.8)
Other . . . . . . . . . . . . . . . . . (6.6)
---------------
Total gas revenue increase. . . . . . $ 9.1
- --------------------------------------- ===============
<FN>
GAS MARGIN equals gas revenue minus the cost of purchased gas. The table
below summarizes the change in gas margin for the first six months.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Millions of dollars . . . . . . . . . . 1999 vs. 1998
- ---------------------------------------
Sales growth (excluding weather impact) $ 3.8
Weather impact. . . . . . . . . . . . . 5.4
Rate changes. . . . . . . . . . . . . . 1.3
Black Mountain Gas merger . . . . . . . 2.6
Other . . . . . . . . . . . . . . . . . (0.5)
---------------
Total gas margin increase . . . . . . $ 12.6
- --------------------------------------- ===============
</TABLE>
OTHER OPERATION, MAINTENANCE AND ADMINISTRATIVE AND GENERAL expenses
together increased $6.2 million, or 1.7 percent, compared with the first six
months of 1998. The increases are primarily due to customer service and
reliability initiatives, increase in uncollectibles and Y2K remediation efforts,
partially offset by lower administrative and general expenses (primarily lower
employee benefit costs) and lower storm costs.
DEPRECIATION AND AMORTIZATION expense increased $8.4 million, or 5.0
percent, compared with the first six months of 1998. The increase is mainly due
to increased plant in service.
Nonregulated Business Results
- -------------------------------
The following table summarizes NSP's nonregulated business results in the
aggregate, including consolidated subsidiaries and unconsolidated affiliates.
<TABLE>
<CAPTION>
6 Mos. Ended
(Thousands of dollars, except EPS) 6/30/99 6/30/98
------------ ----------
<S> <C> <C>
Operating revenues $ 139,726 $ 86,112
Equity in project earnings 14,312 28,079
Operating and development expenses (164,572) (103,431)
Other income (expense) 3,321 1,207
---------- ----------
Income (loss) before interest & taxes (7,213) 11,967
Interest expense (29,329) (26,138)
Income tax benefit and credits 35,082 24,822
---------- ----------
Net income (loss) $ (1,460) $ 10,651
Nonregulated earnings (loss) per share $ (0.01) $ 0.07
</TABLE>
The following table summarizes the earnings contributions of NSP's
nonregulated businesses.
<TABLE>
<S> <C> <C>
6 Mos. Ended
6/30/99 6/30/98
NRG $0.01 $0.09
Eloigne Company 0.02 0.02
EMI, Inc. (0.02) (0.03)
Seren Innovations (0.02) (0.01)
Other 0.00 0.00
Total ($0.01) $0.07
</TABLE>
NRG - NRG's earnings for the first six months of 1999 decreased compared
with 1998, primarily due to increased costs related to new project acquisitions
and business development, additional interest expense and lower equity earnings.
The decrease in equity earnings was due to several factors, including lower
earnings from the Mt. Poso project primarily due to curtailment revenues that
were recorded in 1998; decreased earnings due to cool weather conditions at
the El Segundo, Long Beach and Encina facilities; and a decrease in earnings
from NEO affiliates. In addition, there was a decrease in equity earnings due
to the transaction adjustment related to the Kladno Project. A portion of the
Kladno project's debt is denominated in U.S. dollars and German deutsche marks,
which strengthened against the Czech koruna in the first six months of 1999.
Under SFAS No. 52, the Kladno project records foreign currency gains and losses
through the income statement.
LIQUIDITY AND CAPITAL RESOURCES
For a discussion of short-term borrowings, see Note 5 to the Financial
Statements.
In February 1999, stock options for 993,305 shares were awarded under NSP's
Executive Long-Term Incentive Award Stock Plan (the Long-Term Plan). These
options are not exercisable for approximately twelve months after the award
date. Effective in January 1999, stock options granted to NSP officers vest at
a rate of one-third each year for three years. As of June 30, 1999, a total of
3,332,215 options were outstanding, which were considered potentially dilutive
common shares for calculating earnings per share.
During the first six months of 1999, NSP issued 1,099,596 new shares of
common stock under the Long-Term Plan (pursuant to the exercise of options and
awards granted in prior years), the Dividend Reinvestment and Stock Purchase
Plan and the Employee Stock Ownership Plan.
NSP may consider a general common stock offering later in 1999, depending
on corporate needs, capital structure objectives and business opportunities.
In November 1998, NSP-Minnesota filed with the SEC a $400 million universal
debt shelf registration. NSP-Minnesota currently has $50 million of registered,
but unissued, bonds remaining from its $300 million first mortgage bond shelf
registration, which was filed in October 1995. In July 1999, NSP-Minnesota
issued $250 million of unsecured long-term debt under the universal
registration. These bonds have an annual coupon of 6.875% and mature Aug. 1,
2009. The net proceeds were used for general corporate purposes, including
reduction of short-term debt levels.
In March 1999, NRG filed a shelf registration with the SEC for up to $500
million in debt securities. In May 1999, NRG issued $300 million of 7.5 percent
senior notes due in 2009 under this shelf registration. The net proceeds were
used for general corporate purposes, including development and construction of
new facilities, working capital, debt reduction and acquisitions.
In addition, the board of directors of NSP-Wisconsin authorized the
issuance of up to $80 million of long-term debt in 1999 or 2000. NSP-Wisconsin
currently expects to issue between $50 million and $80 million of unsecured
long-term debt in the second half of 1999, primarily to reduce short-term debt
levels.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
--------------------------
In the normal course of business, various lawsuits and claims have arisen
against NSP. Management, after consultation with legal counsel, has recorded an
estimate of the probable cost of settlement or other disposition for such
matters.
As discussed in NSP's 1998 Form 10-K, Wisconsin Electric Power Co. (WEPCO)
filed a complaint against NSP with the FERC, relating to transmission service
curtailments. In March 1999, NSP and WEPCO reached a settlement agreement, which
was approved by the FERC on May 19, 1999. The settlement provides that NSP
would not be liable to WEPCO for transmission curtailments during 1998 and NSP
would bear certain disputed transmission mitigation costs for 1998 and 1999.
As discussed in NSP's 1998 Form 10-K, on Dec. 11, 1998, a gas explosion in
downtown St. Cloud, Minn., killed four people, including two NSP employees,
injured approximately 14 people and damaged several buildings. The accident
occurred as a crew from Cable Constructors Inc. (CCI) was installing fiber optic
cable. CCI was performing this work for Seren as part of its broad band
communications project in St. Cloud and surrounding communities. The accident is
under investigation by the National Transportation Safety Board (NTSB). Although
this investigation has yet to be completed, the NTSB investigator in charge has
stated publicly that "the location of the gas line and a gas main that runs
parallel had been properly marked by NSP before the drilling." Presently, there
are five lawsuits related to the explosion. One lawsuit involves multiple
plaintiffs seeking damages for personal injuries and property losses. Seren,
CCI and Sirti (an architecture/engineering firm retained by Seren for the St.
Cloud project) are named as defendants in all of the lawsuits. NSP is a
defendant in four of the lawsuits. NSP is not a defendant in a wrongful death
action brought by a trustee on behalf of the family of an NSP employee who was
killed during the explosion. NSP and Seren deny any liability for this accident.
NSP has a self-insured retention deductible of $2 million with general liability
coverage limits of $185 million. Seren's primary insurance coverage is $1
million and its secondary insurance coverage is $185 million. The ultimate cost
to NSP and Seren, if any, is presently unknown.
As discussed in NSP's 1998 Form 10-K, in April 1997, a fire damaged several
buildings in downtown Grand Forks, N. D., during the historic floods in that
city. On July 23, 1998, the St. Paul Mercury Insurance Co., which insured the
First National Corp. and its three buildings in downtown Grand Forks, commenced
a lawsuit against NSP for damages in excess of $15 million. The suit was filed
in the District Court in Grand Forks County in North Dakota. The insurance
company alleges that the fire was electrical in origin and that NSP was legally
responsible for the fire because it failed to shut off electrical power to
downtown Grand Forks during the flood and prior to the fire. In December 1998, a
second lawsuit related to the fire was commenced by two partnerships that owned
property damaged by the fire and Protection Mutual Insurance Co., which insured
the Grand Forks Herald building damaged by the fire. During 1999, four
additional law suits have been filed against NSP by insurance companies, which
insured businesses damaged by the fire. It is NSP's position that it is not
legally responsible for this unforeseeable event. At no time prior to the fire
was NSP instructed to shut off power to downtown Grand Forks by any government
officials, including representatives from the fire department. Moreover, people
in downtown Grand Forks were relying on electricity before and after the fire
occurred. NSP has a self-insured retention deductible of $2 million, with
general liability insurance coverage limits of $150 million. The ultimate cost
to NSP, if any, is unknown at this time.
As previously discussed in NSP's 1998 Form 10-K and Report on Form 8-K
dated April 6, 1999, NSP filed a complaint, on June 8, 1998, in the Court of
Federal Claims against the Department of Energy (DOE) requesting damages in
excess of $1 billion for the DOE's partial breach of the Standard Contract. NSP
requested damages consist of the costs of storage of spent nuclear fuel at the
Prairie Island nuclear generating plant, anticipated costs related to the
Private Fuel Storage, LLC and costs relating to the 1994 state legislation
limiting the number of casks that can be used to store spent nuclear fuel at
Prairie Island. On April 6, 1999, the Court of Federal Claims dismissed NSP's
complaint. On May 20, 1999, NSP filed a notice of appeals with the Federal
Circuit and on July 20, 1999, NSP filed its initial brief on appeal.
On or about July 12, 1999, Fortistar Capital, Inc. (Fortistar) commenced an
action against NRG in Hennepin County District Court in Minnesota, seeking
damages in excess of $100 million and an order restraining NRG from closing on
the acquisition of Niagara Mohawk Power Corporation's Oswego generating station.
Fortistar's motion for a temporary restraining order was denied and a temporary
injunction hearing has been scheduled for September 27, 1999. NRG intends to
vigorously defend the suit and believes Fortistar's claims to be without merit.
NRG has asserted numerous counterclaims against Fortistar. NRG intends to close
the Oswego acquisition in the fourth quarter of 1999, pending regulatory
approvals.
See Notes 3 and 4 of the Financial Statements for further discussion of
legal proceedings, including Regulatory Matters and Commitments and Contingent
Liabilities, incorporated by reference.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 28, 1999, a Special Meeting of Shareholders was held to vote on the
merger between NSP and NCE. The voting results are listed below. There
were no broker non-votes.
<TABLE>
<CAPTION>
<S> <C>
Common & Preferred Class:
-------------------------
Shares Voted For 96,625,254
Voted Against 17,727,719
Vote Abstained 1,478,929
Common Class Only:
-------------------------
Shares Voted For 95,822,237
Voted Against 17,684,944
Vote Abstained 1,456,516
</TABLE>
<PAGE>
ITEM 5. OTHER INFORMATION
PROPOSED BUSINESS COMBINATION
- -----------------------------
As previously reported in NSP's Report on Form 8-K, dated March 24, 1999,
which was filed on March 25, 1999, NSP and NCE agreed to merge and form Xcel.
At the time of the merger, each share of NCE common stock will be exchanged for
1.55 shares of Xcel common stock. NSP shares need not be exchanged and will
become Xcel shares on a one-for-one basis. Cash will be paid in lieu of any
fractional shares of Xcel common stock which holders of NCE common stock would
otherwise receive.
The merger requires approval or regulatory review by certain state
utilities regulators, the SEC, the FERC, the Nuclear Regulatory Commission, the
Federal Communications Commission, and expiration or termination of the waiting
period applicable to the Merger under the Hart-Scott-Rodino Antitrust
Improvements Act. In July 1999, NSP and NCE filed merger applications in
Minnesota, North Dakota, Colorado, Wyoming, Texas, New Mexico, Kansas and at the
FERC.
The merger is expected to be a tax-free, stock-for-stock exchange for
shareholders of both companies (except with respect to any cash received by NCE
shareholders in lieu of fractional shares), and to be accounted for as a pooling
of interests. NSP and NCE have agreed to certain undertakings and limitations
regarding the conduct of their respective businesses prior to the closing of the
transaction. At the time of the merger, Xcel will register as a holding company
under the Public Utility Holding Company Act of 1935. The merger is expected to
be completed within 12 to 18 months from the date of the merger announcement.
The dividend payment level of Xcel will be determined by its board of
directors. However, NSP anticipates that Xcel will adopt an initial dividend
policy which will maintain a dividend equivalent to the current dividend of NCE.
Based on the conversion ratio of 1.55, the pro forma dividend for the combined
company would be $1.50 per share annually.
James J. Howard, chairman, president and chief executive officer of NSP,
will serve as chairman of Xcel for one year following the merger. Wayne H.
Brunetti, vice chairman, president and chief operating officer of NCE, will be
president and chief executive officer following the merger and will assume the
responsibilities of chairman when James Howard retires.
The Merger Agreement was filed as Exhibit 2.1 to NSP's March 24, 1999 Form
8-K, and is incorporated by reference.
Xcel will be created by first transferring NSP-Minnesota's utility assets
(other than investments in and assets of subsidiaries) into a newly formed,
wholly owned subsidiary (which is referred to in this report as New NSP Utility
Sub). At the same time, New NSP Utility Sub will assume all of NSP-Minnesota's
liabilities associated with the assets transferred. Then NCE will merge into
NSP, with Xcel as the surviving corporate entity in the merger. Xcel will be a
holding company for the combined assets and operations of NSP and NCE. If
difficulties arise in obtaining the approvals and consents required to transfer
NSP-Minnesota's utility assets to New NSP Utility Sub, NSP and NCE may negotiate
a mutually acceptable alternative.
XCEL SUMMARIZED PRO FORMA INFORMATION
- -----------------------------------------
The following summary of unaudited pro forma financial information for Xcel
gives effect to the merger using the pooling of interests method of accounting.
Under this accounting method, NSP's and NCE's balance sheets and income
statements are treated as if they have always been combined for accounting and
financial reporting purposes. This unaudited pro forma summarized financial
information should be read in conjunction with the historical financial
statements and related notes of NSP and NCE, which are included in the Annual
Reports on Form 10-K of the respective companies for the year ended Dec. 31,
1998.
The unaudited pro forma balance sheet information at June 30, 1999, assumes
the merger had been completed on June 30, 1999. The unaudited pro forma income
statement information assumes the merger had been completed on Jan.1, 1999, the
beginning of the earliest period presented.
The unaudited summarized pro forma financial information does not
necessarily indicate what the combined company's financial position or operating
results would have been if the merger had been completed on the assumed
completion dates and does not necessarily indicate future operating results of
the combined company.
<TABLE>
<CAPTION>
XCEL ENERGY $Millions
<S> <C> <C> <C> <C>
As of June 30, 1999: . . NSP NCE Adjustments Pro Forma
--------- ------ ------------- ----------
Utility Plant - Net. . . $ 4,378 $6,034 $ 1,214 $ 11,626
Current Assets . . . . . 886 714 1,600
Other Assets . . . . . . 3,274 1,007 (1,214) 3,067
--------- ------ ------------- ----------
Total Assets . . . . . . $ 8,538 $7,755 $ 16,293
========= ====== ==========
Common Equity. . . . . . $ 2,487 $2,645 $ 5,132
Pref. Securities . . . . 305 294 599
Long-Term Debt . . . . . 2,152 2,127 4,279
--------- ------ ----------
Total Capitalization . . 4,944 5,066 10,010
Current Liabilities. . . 2,060 1,440 3,500
Other Liabilities. . . . 1,534 1,249 2,783
--------- ------ ----------
Tot Equity & Liabilities $ 8,538 $7,755 $ 16,293
- ------------------------ ========= ====== ==========
</TABLE>
<TABLE>
<CAPTION>
XCEL ENERGY Millions except for earnings per share
For the Six Months Ended June 30, 1999: NSP NCE Adjustments Pro Forma
------ ------ ------------ ----------
<S> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . . $1,403 $1,716 $ 166 $ 3,285
Operating Income . . . . . . . . . . . . . . . . . . 154 307 56 517
Net Income . . . . . . . . . . . . . . . . . . . . . 64 150 214
Available for Common . . . . . . . . . . . . . . . . $ 61 $ 150 $ 211
Earnings per Share - diluted . . . . . . . . . . . . $ 0.40 $ 1.31 $ 0.64
- ---------------------------------------------------- ====== ====== ==========
</TABLE>
NEW NSP UTILITY SUB SUMMARIZED PRO FORMA INFORMATION
- ----------------------------------------------------
The following summary of unaudited pro forma financial information for New
NSP Utility Sub adjusts the historical financial statements of NSP after the
transfer of ownership of all NSP-Minnesota utility assets (other than
investments in and assets of subsidiaries) to New NSP Utility Sub and the
assumption by New NSP Utility Sub of all of NSP-Minnesota's liabilities
associated with the assets transferred.
The unaudited pro forma balance sheet information at June 30, 1999, assumes
the merger had been completed on June 30, 1999. The unaudited pro forma income
statement information assumes the merger had been completed on Jan.1, 1999, the
beginning of the earliest period presented.
The unaudited summarized pro forma financial information does not
necessarily indicate what New NSP Utility Sub's financial position or operating
results would have been if the merger had been completed on the assumed
completion dates and does not necessarily indicate future operating results of
New NSP Utility Sub.
<TABLE>
<CAPTION>
NEW NSP UTILITY SUB $Millions
- --------------------------------------- ---------
As of June 30, 1999: NSP Adjustments Pro Forma
--------- ------------ ----------
<S> <C> <C> <C>
Utility Plant - Net . . . . . . . . . . $ 4,378 ($810) $ 3,568
Current Assets. . . . . . . . . . . . . 886 (288) 598
Other Assets. . . . . . . . . . . . . . 3,274 (2,407) 867
--------- ------------ ----------
Total Assets. . . . . . . . . . . . . . $ 8,538 ($3,505) $ 5,033
Common Equity . . . . . . . . . . . . . $ 2,487 ($1,104) $ 1,383
Pref. Securities. . . . . . . . . . . . 305 (305)
Long-Term Debt. . . . . . . . . . . . . 2,152 (924) 1,228
--------- ------------ ----------
Total Capitalization. . . . . . . . . . 4,944 (2,333) 2,611
Current Liabilities . . . . . . . . . . 2,060 (933) 1,127
Other Liabilities . . . . . . . . . . . 1,534 (239) 1,295
--------- ------------ ----------
Tot Equity & Liabilities. . . . . . . . $ 8,538 ($3,505) $ 5,033
- --------------------------------------- ========= ============ ==========
</TABLE>
<TABLE>
<CAPTION>
NEW NSP UTILITY SUB . . . . . . . . . . $Millions
<S> <C> <C> <C>
For the Six Months Ended June 30, 1999: NSP Adjustments Pro Forma
--------- ------------ ----------
Revenue . . . . . . . . . . . . . . . . $ 1,403 ($120) $ 1,283
Operating Income. . . . . . . . . . . . 154 (32) 122
Net Income. . . . . . . . . . . . . . . 64 (18) 46
Available for Common. . . . . . . . . . $ 61 ($15) $ 46
- --------------------------------------- ========= ============ ==========
</TABLE>
<PAGE>
------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(A) EXHIBITS
The following Exhibits are filed with this report:
2.01 Agreement and Plan of Merger, dated as of March 24, 1999, by and
between Northern States Power Company and New Century Energies, Inc.
(Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K
(File No. 1-12907) of New Century Energies, Inc. dated March 24, 1999).
3.01 Amended and Restated Corporate By-laws.
27.01 Financial Data Schedule for the six months ended June 30, 1999.
99.01 Statement pursuant to Private Securities Litigation Reform Act of
1995.
(B) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed either during the three months
ended June 30, 1999, or between June 30, 1999 and the date of this report:
April 6, 1999 (Filed April 8, 1999) - Item 5. Other Events. Re: Disclosure
of Court of Federal Claims' dismissal of NSP's complaint against the DOE for
damages relating to spent nuclear fuel storage.
April 23, 1999 (Filed April 23, 1999) - Item 5 and 7. Other Events and
Financial Statements and Exhibits. Re: Disclosure of pro forma condensed
financial statements reflecting the effect of the proposed merger between NSP
and New Century Energies, Inc.
June 24, 1999 (Filed June 25, 1999) - Item 5. Other Events. Re: Disclosure
of the MPUC vote to deny rate recovery of certain electric conservation program
incentives, retroactive to January 1, 1998.
June 28, 1999 (Filed June 29, 1999) - Item 5 and 7. Other Events and
Financial Statements and Exhibits. Re: Disclosure that the shareholders of NSP
and NCE voted, in their respective shareholder meetings, to approve the proposed
merger between the two companies.
July 15, 1999 (Filed July 15, 1999) - Item 5 and 7. Other Events and
Financial Statements and Exhibits. Re: Disclosure of NSP's second quarter
earnings.
July 21, 1999 (Filed July 23, 1999) - Item 5 and 7. Other Events and
Financial Statements and Exhibits. Re: Disclosure of NSP's issuance of $250
million of long-term unsecured debt.
July 27, 1999 (Filed July 30, 1999) - Item 5. Other Events. Re:
Disclosure of MPUC's order requiring an investigation into the reasonableness of
NSP's Minnesota electric rates.
.
<PAGE>
SIGNATURES
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 thereunto duly authorized.
NORTHERN STATES POWER COMPANY
------------------------------
(Registrant)
/s/
Roger D. Sandeen
Vice President and Controller
/s/
John P. Moore, Jr.
Vice President and Corporate Secretary
Date: August 13, 1999
- ----------------------
BYLAWS
OF
NORTHERN STATES POWER COMPANY
(A MINNESOTA CORPORATION)
(as amended at a regular meeting of the Board of Directors held on January 27,
1999)
ARTICLE 1.
NAME, REGISTERED OFFICE, AND CORPORATE SEAL
Section 1. The name of the Company is NORTHERN STATES POWER
COMPANY.
Section 2. The location and post office address of its
registered office and principal place of business is 414 Nicollet Mall,
Minneapolis, Hennepin County, Minnesota.
Section 3. The Company may establish and maintain an office or
offices at such other places within or without the State of Minnesota as the
Board of Directors may from time to time determine.
Section 4. The corporate seal of the Company shall have
inscribed thereon the name of the Company and the words "Corporate Seal,
Minnesota". In lieu of causing the corporate seal to be impressed upon any
bond, debenture, note, contract, or other instrument required or authorized to
bear the corporate seal of the Company, the Board of Directors may authorize a
facsimile of said seal to be engraved or printed thereon, and such facsimile,
when so engraved or printed, shall be and constitute the corporate seal of the
Company for such purpose.
ARTICLE 2.
BOARD OF DIRECTORS
Section 1. The business and property of the Company shall be managed
and controlled by a Board composed of seven (7) directors, which may be
increased to such greater number, not exceeding fifteen (15), as may be
determined by the Board of Directors or by shareholders in accordance with the
provisions of this Article. The number of directors shall be determined by the
Board of Directors, and if the Board fails to make such determination, then the
number may be determined by the shareholders at any annual or special meeting of
shareholders.
Section 2. A director shall hold office until the next annual meeting
of the shareholders and until his successor is elected and qualifies. At the
annual meeting of shareholders in 1974, the Board of Directors of the Company
shall be divided into three classes as nearly equal in number as possible, with
the term of office of one class expiring each year. Directors in Class I shall
be elected to hold office until the next succeeding annual meeting; directors in
Class II shall be elected to hold office until the second succeeding annual
meeting; and directors in Class III shall be elected to hold office until the
third succeeding annual meeting, and, in each of the foregoing cases, until
their respective successors are duly elected and qualify. At each subsequent
annual meeting of shareholders, the successors to the class of directors whose
term shall then expire shall be elected by the shareholders to hold office until
the third succeeding annual meeting, and until their respective successors are
duly elected and qualify. If, at any meeting of shareholders, commencing with
the annual meeting of shareholders in 1974, due to the initiation of the
classified method of electing directors or due to a vacancy or vacancies on the
Board of Directors, or otherwise, directors of more than one class are to be
elected, each class of directors to be elected at the meeting shall be nominated
and voted for in a separate election.
Section 3. During the intervals between annual meetings the number of
directors may be increased, and may be decreased by the number of vacancies then
existing, by the Board of Directors, within the limitations of Section 1 of this
Article, and in case of any such increase the Board may fill the vacancies so
created but in such event there shall be no classification of the additional
directors until the next annual meeting of the shareholders. No decrease in the
Board shall shorten the term of any incumbent director.
Section 4. Vacancies in the Board of Directors may be filled by the
remaining members of the Board though less than a quorum. Each person so elected
to fill a vacancy shall remain a director for the unexpired term in respect of
which such vacancy occurred and until his successor is elected and qualifies.
Section 5. In addition to the powers and authority expressly
conferred upon them by these Bylaws, the Board of Directors may exercise all
such powers and do all such acts and things as may be exercised or done by the
Company, but subject, nevertheless, to the provisions of statute, the Articles
of Incorporation, and these Bylaws.
Section 6. Without limiting the general powers conferred by Section 5
of this Article, and other powers conferred by statute, by the Articles of
Incorporation, and by these Bylaws, it is hereby expressly declared that the
Board of Directors shall have the following powers, that is to say:
(a) To purchase or otherwise acquire for the Company any property,
rights, or privileges which the Company is authorized to acquire, for such
consideration and on such terms and conditions as it deems proper.
(b) At its discretion to pay for any property or rights acquired by
the Company either wholly or partly in money or in stock, bonds, debentures, or
other securities or property of the Company.
(c) To appoint any person or persons to accept and hold in trust for
the Company any property belonging to the Company, or in which it is interested,
and to do and execute all such things as may be requisite in relation to any
such trust.
(d) To in any manner aid, facilitate, and assist, in behalf of the
Company, in the construction, extension, improvement, equipment, maintenance,
and operation of any electric light plant or distribution system, electric
transmission or distribution lines, steam plant for heating and power or
distribution system, natural, manufactured, mixed, or liquid petroleum gas plant
or distribution system, gas or oil pipe lines, barge lines, coal mines, water
power or water plants, or telephone systems, and all property and things
appurtenant to or used in connection therewith, and for that purpose to use the
cash or capital stock or other securities or obligations of the Company to buy,
refund, guarantee, or otherwise secure the indebtedness against any such
properties and guarantee the bonds, debentures, indebtedness, dividends,
contracts, or other obligations of firms or other corporations.
(e) To authorize one or more officers, on behalf of the Company, to
borrow money, make and issue notes, bonds, and other evidences or indebtedness,
execute mortgages, deeds of trust, trust agreements, and instruments of pledge
or hypothecation, and do all other acts necessary to effectuate the same.
(f) To designate the persons authorized, on the Company's behalf, to
make and sign notes, receipts, acceptances, endorsements, drafts, checks, or
other orders for the payment of money, releases, contracts, and other
instruments, and, when appropriate, to make provision for the use of facsimile
signatures thereon.
(g) To designate the persons authorized, on the Company's behalf, to
vote upon or to assign and transfer any shares of stock, bonds, or other
securities of other corporations held by the Company.
Section 7. Meetings of the Board of Directors shall be held at the
registered office of the Company, but the chairman of the Board, the President,
or a majority of the Board may from time to time designate some other place
within or without the State of Minnesota for the holding of any such meeting or
meetings.
Section 8. Regular meetings of the Board of Directors may be held,
without notice, at such times as shall be determined from time to time by
resolution of the Board.
Section 9. Special meetings of the Board of Directors shall be held
whenever called by the Chairman of the Board, by the President, or by a majority
of the Board.
Section 10. The Secretary shall give notice of a special meeting of
the Board of Directors to each director, either by mail or by telegraph, at
least two days before said meeting. Any director may in writing, either before
or after the meeting, waive notice thereof; and, without notice, any director by
his attendance at any meeting shall be deemed to have waived notice.
Section 11. Unless otherwise indicated in the notice thereof, any and
all business may be transacted at a special meeting.
Section 12. The Board of Directors shall elect the Officers of the
Company, who shall hold office until they are removed or their successors are
elected and qualify.
Section 13. A majority of the Board of Directors shall constitute a
quorum for the transaction of business, and the acts of a majority of the
directors present at a meeting at which a quorum is present shall be the acts of
the Board of Directors, except as may be otherwise specifically provided by
statute, by the Articles of Incorporation, or by these Bylaws. At any meeting
at which there is less than a quorum present, the director or directors present
shall have power by a majority vote to adjourn the meeting from time to time
without notice other than announcement at the meeting. At any adjourned meeting
at which a quorum is present any business may be transacted which might have
been transacted by a quorum of the directors at the meeting as originally
convened.
Section 14. Any action which might be taken at a meeting of the Board
of Directors may be taken without a meeting if done in writing signed by all of
the directors.
Section 15. Inasmuch as the directors of the Company are men of large
and diversified business interests and are likely to be connected with other
corporations with which this Company may have business dealings from time to
time, no contract or other transaction between this Company and any other
corporation shall be affected by the fact that directors of this Company are
interested in, or are directors or officers of, such other corporation, and any
director individually may be a party to or may be interested in any contract or
transaction of this Company, provided that any such contract or transaction
referred to in this section shall be approved or be ratified by the affirmative
vote of a majority of the members of the Board not so interested.
Section 16. The Board of Directors may provide for the payment to
each director of a fixed annual fee, a fixed fee for attendance at each meeting
of the Board or of any committee thereof, or a combination of the foregoing
fees, and the expenses of each director for attendance at each meeting of the
Board or of any committee thereof; provided, however, that no part of any such
fee shall be paid to any director during any year when there is in effect a
prior written request from such director that all or a portion of said fees not
be paid to him. Nothing herein shall be construed to preclude any director from
serving the Company in any other capacity as an officer or otherwise and
receiving compensation therefor.
ARTICLE 3.
OFFICERS
Section 1. (a) The officers of the Company shall be a Chairman of the
Board, a President, one or more Vice Presidents any of whom may have such
additional designation as the Board of Directors may provide, a Secretary and
one or more Assistant Secretaries, a Treasurer and one or more Assistant
Treasurers, and such other officers as may from time to time be elected or
appointed by the Board of Directors. The filling of the office of Chairman of
the Board shall be discretionary with the Board of Directors. Any two of the
offices, except those of President and Vice President, may be held by the same
person.
(b) At its discretion, the Board of Directors at any time, be
resolution, may recognize the outstanding services of an individual to the
Company by conferring upon him the honorary title of "Honorary Chairman of the
Board", such title to be held for such limited period of time, or for life, as
may be determined by the Board. Except when used in Article 4 of these Bylaws,
the words "director", "directors", "Board of Directors", "members of the Board",
"Board", "officer", and "officers", wherever used in the Articles of
Incorporation or in these Bylaws, shall not be construed to mean or to include
the Honorary Chairman of the Board.
(c) At its discretion, the Board of Directors at any time, by
resolution, may recognize the outstanding services of an individual who has
served as Chairman of the Board of the Company by conferring upon him the
honorary title of "Chairman Emeritus", such title to be held for such limited
period of time, or for life, as may be determined by the Board. The action of
the Board of Directors in conferring the honorary title of "Chairman Emeritus"
upon such individual shall not constitute such individual an officer of the
Company and shall not otherwise affect the status of such individual as a member
of the Board.
(d) The Board of Directors shall designate the Chief Executive Officer
of the Company who shall have general active management of the business of the
Company.
Section 2. The Chairman of the Board shall preside at all meetings of
the shareholders and the Board of Directors, shall be ex officio member of all
standing committees and shall have such other powers and perform such other
duties as may be prescribed by the Board.
Section 3. The President, in the absence of the Chairman of the
Board, shall preside at all meetings of the shareholders and the Board of
Directors and shall be an ex officio member of all standing committees. The
President shall have general supervision and direction of the affairs of the
Company and shall have all the powers and duties appurtenant to the office of
President of a corporation. The President shall report to the Board all matters
within his or her knowledge which the interests of the Company may require to be
brought to their notice; shall make such other reports to the shareholders and
the Board as may be required; and shall perform all such duties as are properly
required by the Board.
Section 4. The Vice Presidents shall be vested with all the powers
and shall perform all the duties of the President in the order designated by the
President in case of his absence and in the order designated by the President or
by the Board of Directors in case of his disability, and shall have such other
powers and perform such other duties as may be prescribed by the President or by
the Board.
Section 5. The Secretary shall give, or cause to be given, all
notices required by statute, by the Articles of Incorporation, or by these
Bylaws. He shall act as secretary of all the meetings of the shareholders and
of the Board of Directors and shall record the proceedings of all such meetings
in the book or books kept for that purpose. Unless otherwise prescribed by the
Chief Executive Officer of the Company, he shall keep, or cause to be kept, a
record of all certificates of stock issued and all transfers thereof, which
shall show the names and addresses of the holders of such certificates and dates
of issuance and transfer, and shall perform such other duties as may be
prescribed by the Chief Executive Officer or by the Board.
Section 6. The Assistant Secretaries shall be vested with all the
powers and shall perform all the duties of the Secretary in the absence or
disability of the latter, and shall perform such other duties as may be
prescribed by the President or by the Board of Directors.
Section 7. (a) The Controller, unless otherwise provided by the Board
of Directors, shall be the principal accounting officer of the Company. He
shall have executive direction of all accounting functions, and shall keep, or
cause to be kept, appropriate and complete books of account, and shall render to
the President and to the Board of Directors such reports as may be required from
time to time. He shall have such other powers and duties as are commonly
incidental to the office of controller and as may be prescribed for him by the
Board of Directors or the President.
(b) The Treasurer shall have the care and custody of the Company's
funds, securities, evidences of indebtedness, and other valuable financial
documents and shall deposit, or cause to be deposited, all moneys and other
valuable effects in the name of and to the credit of the Company in such
depositories as shall be designated by the Board of Directors. He shall have
the power to endorse for deposit all checks, notes, and drafts payable to the
Company. He shall disburse the funds of the Company when authorized by proper
vouchers for such disbursements. He shall have such other powers and duties as
are commonly incidental to the officer of Treasurer and as may be prescribed for
him by the Board of Directors, the President, or such other officer as may be
directed by the President.
Section 8. The Assistant Treasurers shall be vested with all the
powers and shall perform all the duties of the Treasurer in the absence or
disability of the latter, and shall perform such other duties as may be
prescribed by the President or by the Board of Directors.
Section 9. In case of the absence or disability of any officer of the
Company, or for any other reason deemed sufficient by it, the Board of Directors
may delegate the powers and duties of such officer to any other officer or to
any director for the time being.
Section 10. A bond in such sum, in such form, and with such security,
surety or sureties, as may be satisfactory to the Board of Directors, may be
required by the Board from the Treasurer, and such other officers, employees,
and agents of the Company as the Board may specify, conditioned on the faithful
performance of the duties of their office, and for the restoration to the
Company, when demanded, of all books, papers, vouchers, money, securities, and
property of whatever kind in their possession belonging to the Company. All
premiums on such bonds shall be paid by the Company.
Section 11. The salaries of all officers shall be fixed by the Board
of Directors.
Section 12. An Officer shall hold office from the date elected by the
Board of Directors until the earlier of his/her removal or until his/her
successor is elected and qualifies. Any Officer may be removed by the Board of
Directors at any time with or without cause.
Section 13. A vacancy in any office may be filled by the Board of
Directors at any time.
ARTICLE 4.
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND AGENTS
Section 1. The Company shall indemnify any person made or threatened
to be made a party to a proceeding by reason of the former or present official
capacity of the person acting for the Company or acting in an official capacity
with another entity at the direction or request of the Company, according to the
terms and under the procedures provided in Minnesota Statutes Sec. 302A.521.
Section 2. The indemnification provided by this Article shall inure
to the benefit of the heirs, executors, administrators and personal
representatives of any person acting in an official capacity for the Company.
Section 3. The Company may purchase and maintain insurance on behalf
of a person in that person's official capacity against any liability asserted
against and incurred by the person in or arising from that capacity, whether or
not the Company would be required by law to indemnify the person against the
liability.
ARTICLE 5.
ISSUANCE AND TRANSFER
OF CERTIFICATES OF SHARES
Section 1. Every certificate of shares shall be numbered and shall be
entered on the books of the Company as it is issued. It shall be signed by the
Chairman of the Board, President or a Vice President and by the Secretary or an
Assistant Secretary and shall bear the corporate seal. The foregoing signatures
and the corporate seal upon such certificate may be facsimiles, engraved or
printed on such certificate.
Section 2. Transfers of shares shall be made on the books of the
Company only by the person named in the certificate, or by his attorney lawfully
constituted in writing, and upon surrender of such certificate.
Section 3. In case of the loss, destruction, or theft of a
certificate of shares, a new certificate may be issued in its place upon the
submission of satisfactory proof of such loss, destruction, or theft and a bond
of indemnity satisfactory to the Treasurer.
Section 4. The Company shall be entitled to treat the holder of
record of any share or shares as the holder in fact thereof and shall not be
bound to recognize any equitable or other claim to or interest in such share on
the part of any other person whether or not it shall have express or other
notice thereof, save as expressly provided by statute.
Section 5. The Board of Directors shall have authority to appoint one
or more registrars or transfer agents for any or all classes of shares of the
Company, to make such rules and regulations as it may deem expedient concerning
the issuance, registration, and transfer of such shares, and to remove such
registrars or transfer agents, or any of them, and appoint another or others in
its or their stead. A certificate of shares of any class for which one or more
registrars or transfer agents shall have been so appointed shall not be valid
until countersigned by a registrar or a transfer agent, or both, as the case may
be, which countersignature may be in facsimile form.
ARTICLE 6.
SHAREHOLDERS
Section 1. The annual and special meetings of shareholders shall be
held at the registered office of the Company, but the Board of Directors may
designate some other place within or without the State of Minnesota for the
holding of any such meeting or meetings. Written notice of each meeting of
shareholders, stating the time and place, and, in case of a special meeting, the
purpose, shall be given by the Secretary to each shareholder entitled to vote at
such meeting, not less than ten days prior to the date of such meeting.
Section 2. The Chairman of the Board shall preside at all meetings of
the shareholders, and in his absence or disability or at his request the
President shall preside, and in the absence or disability of both said officers
a Vice President shall preside.
Section 3. The Board of Directors may, within the limitations of the
statute, fix a record date for the determination of shareholders entitled to
receive notice of and to vote at any meeting of shareholders, and a record date
for the determination of shareholders entitled to receive payments of any
dividend or distribution or allotment of rights or to exercise rights with
respect to any change, conversion, or exchange of shares, and may close the
books of the Company against the transfer of shares during the whole or any part
of the period so fixed.
Section 4. The annual meeting of shareholders shall be held on the
date and time and at the location designated by the Board of Directors.
Section 5. Special meetings of the shareholders may be called and
held as provided by Minnesota Statutes.
Section 6. The holders of a majority of the voting power of the
shares issued and outstanding and entitled to vote, present in person or by
proxy, shall constitute a quorum at all meetings of shareholders for the
transaction of business, except as otherwise provided by statute, by the
Articles of Incorporation, or by these Bylaws. In the absence of a quorum, any
meeting may be adjourned from time to time. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 7. At each meeting of shareholders every shareholder of
record, or his legal representatives, at the date fixed by the Board of
Directors for the determination of the persons entitled to vote at a meeting of
shareholders, or, if no date has been so fixed, then at the close of the
thirtieth day preceding the date of the meeting, shall be entitled at such
meeting to one vote for each share standing in his name on the books of the
Company and such additional votes for such share as may be provided for by the
Articles of Incorporation. A shareholder may cast his vote in person or by
proxy. The appointment of a proxy shall be in writing, by telegraph, cablegram,
or any other form of electronic transmission, including telephonic transmission,
whether or not accompanied by written instructions of the shareholder. If it is
determined that a telegram, cablegram, or other electronic transmission is
valid, the inspectors of election or, if there are no inspectors, the other
persons making that determination, shall specify the information upon which they
rely to make that determination. Such appointment shall be filed with the
Secretary or the Company's duly authorized agent at or before the meeting. The
vote for directors, and, upon the demand of any shareholder, the vote upon any
question before the meeting, shall be by ballot. All elections shall be had and
all questions decided by a plurality vote.
Section 8. In advance of any meeting of shareholders, the Chairman of
the Board shall appoint three or more inspectors of election, who need not be
shareholders, as to the matters to be submitted to a vote at any such meeting,
or any adjournment thereof. The inspectors of election when so appointed shall
take charge of all proxies and ballots and shall determine the number of shares
outstanding, the voting power of each, the shares represented at the meeting,
and the existence of a quorum. They shall determine all questions relating to
the qualifications of voters, the authenticity, validity, and effect of proxies,
and the acceptance or rejection of votes, challenges, and questions arising in
any way in connection with the right to vote and the counting and tabulation of
such votes. They shall determine the number of votes cast for any office or for
or against any proposal, and shall determine and report the results to the
meeting. The inspectors shall take an oath that they will perform their duties
impartially, in good faith, and to the best of their ability and as
expeditiously as is practical. If, for any reason, an inspector previously
appointed shall fail to attend or refuse or be unable to serve, the vacancy
shall be filled by the Chairman of the Board in advance of convening the
meeting, or at the meeting by the person acting as Chairman. Each report of the
inspectors shall be in writing and signed by the inspectors. The report of a
majority shall be the report of the inspectors.
Section 9. (a) At any annual meeting or any special meeting of
shareholders, only such business shall be conducted, and only such proposals
shall be acted upon as shall have been brought before the meeting (i) by, or at
the direction of, the Board of Directors, or (ii) by any shareholder of the
Company who complies with the requirements of Rule 14a-8 under the Securities
Exchange Act of 1934, as amended, or (iii) by any shareholder of the Company who
complies with the notice procedures set forth in this Section 9.
(b) For a proposal to be properly brought before an annual or special
meeting by a shareholder, the shareholder must have given timely notice thereof
in writing to the Secretary of the Company. To be timely, a shareholder's
notice must be delivered to, or mailed and received at, the principal
executive offices of the Company not less than twenty (20) days nor more than
ninety (90) days prior to the scheduled meeting, regardless of any
postponements, deferrals or adjournments of that meeting to a later date;
provided, however, that if less than thirty (30) days' notice or prior public
disclosure of the date of the scheduled meeting is given or made, notice by the
shareholder, to be timely, must be so delivered or received not later than the
close of business on the tenth (10th) day following the earlier of the day on
which such notice of the date of the scheduled meeting was mailed or the day on
which such public disclosure was made.
(c) A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the meeting (i) a brief
description of the proposal desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the name and address,
as they appear on the Company's books, of the shareholder proposing such
business and any other shareholder known by such shareholder to be supporting
such proposal who is the record or beneficial owner (as such term is defined in
Rule 13d-3 or 13d-5 under the Securities Exchange Act of 1934, as amended) of
any equity security of the Company, (iii) the class and number of shares of the
Company's equity securities which are beneficially owned (as defined above) and
owned of record by the shareholder giving the notice on the date of such
shareholder notice and by any other record or beneficial owners of the Company's
equity securities known by such shareholder to be supporting such proposal on
the date of such shareholder notice, and (iv) any financial or other interest of
the shareholder in such proposal.
(d) The Chairman of the Board may reject any shareholder proposal not
timely made in accordance with the terms of this Section 9. If the Chairman of
the Board determines that the information provided in a shareholder's notice
does not satisfy the informational requirements of this Section 9 in any
material respect, the Secretary of the Company shall promptly notify such
shareholder of the deficiency in the notice. The shareholder shall have an
opportunity to cure the deficiency by providing additional information to the
Secretary within such period of time, not to exceed five (5) days from the date
such deficiency notice is given to the shareholder, as the Chairman of the Board
shall reasonably determine. If the deficiency is not cured within such period,
or if the Chairman of the Board determines that the additional information
provided by the shareholder, together with the information previously provided,
does not satisfy the requirements of this Section 9 in any material respect,
then the Chairman of the Board may reject such shareholder's proposal. The
Secretary of the Company shall notify a shareholder in writing whether such
person's proposal has been made in accordance with the time and information
requirements of this Section 9. Notwithstanding the procedures set forth in
this paragraph, if the Chairman of the Board does not make a determination as to
the validity of any shareholder proposal under Section 9(c), the chairman of the
annual or special meeting of shareholders shall determine and declare at the
meeting whether the shareholder proposal was made in accordance with the terms
of Section 9. If the chairman of such meeting determines that a shareholder
proposal was not made in accordance with the terms of this Section 9, he or she
shall so declare at the meeting and any such proposal shall not be acted upon at
the meeting.
(e) This provision shall not prevent the consideration and approval or
disapproval at any meeting of reports of officers, directors and committees of
the Board of Directors, but, in connection with such reports, no new business
shall be acted upon at such meeting unless stated, filed and received as herein
provided.
ARTICLE 7.
FISCAL YEAR
Section 1. The fiscal year of the Company shall begin on the first
day of January and terminate on the last day of December in each year.
ARTICLE 8.
INTERPRETATION
Section 1. In these Bylaws, unless there shall be something in the
subject or context inconsistent therewith:
(a) "Notice" means a notice in writing given by mail to any director,
officer, or shareholder by depositing the same in the United States mail, with
postage prepaid, and addressed to such director, officer, or shareholder at his
address as the same appears on the books of the Company; and the time of mailing
shall be deemed to be the time of the giving of the notice.
(b) "Qualify" means filing with the Secretary a written acceptance, or
entering upon the duties, of an office.
(c) "Statute" means any applicable statute of the State of Minnesota.
(d) The specification in these Bylaws of rights, powers, duties, and
procedures shall not be deemed to exclude other applicable rights, powers,
duties, and procedures provided for by statute or by the Articles of
Incorporation which are not incorporated herein and which are not inconsistent
with these Bylaws.
(e) Words importing the singular number include the plural and vice
versa. Words importing males include females, and words importing natural
persons include corporations.
ARTICLE 9.
AMENDMENTS
Section 1. These Bylaws may be amended by the shareholders or by the
Board of Directors as provided by the Articles of Incorporation.
<TABLE> <S> <C>
<ARTICLE> UT
EXHIBIT 27.01
<LEGEND>
This schedule contains summary financial information extracted from the
Statements of Income, Balance Sheets, Statements of Capitalization, Statements
of Changes in Common Stockholders' Equity and Statements of Cash Flows and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,377,678
<OTHER-PROPERTY-AND-INVEST> 2,585,091
<TOTAL-CURRENT-ASSETS> 886,381
<TOTAL-DEFERRED-CHARGES> 261,418
<OTHER-ASSETS> 428,057
<TOTAL-ASSETS> 8,538,625
<COMMON> 384,491
<CAPITAL-SURPLUS-PAID-IN> 799,191
<RETAINED-EARNINGS> 1,383,257
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,487,487<F1>
200,000
105,340
<LONG-TERM-DEBT-NET> 2,152,611
<SHORT-TERM-NOTES> 761,626
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 504,196
<LONG-TERM-DEBT-CURRENT-PORT> 168,375
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,079,537<F1>
<TOT-CAPITALIZATION-AND-LIAB> 8,538,625
<GROSS-OPERATING-REVENUE> 1,402,558
<INCOME-TAX-EXPENSE> 1,873<F2>
<OTHER-OPERATING-EXPENSES> 1,195,140
<TOTAL-OPERATING-EXPENSES> 1,248,999
<OPERATING-INCOME-LOSS> 153,559
<OTHER-INCOME-NET> (56,717)<F3>
<INCOME-BEFORE-INTEREST-EXPEN> 3,144
<TOTAL-INTEREST-EXPENSE> 85,017
<NET-INCOME> 63,811
3,171
<EARNINGS-AVAILABLE-FOR-COMM> 60,640
<COMMON-STOCK-DIVIDENDS> 110,079
<TOTAL-INTEREST-ON-BONDS> 66,493
<CASH-FLOW-OPERATIONS> 253,849
<EPS-BASIC> .40
<EPS-DILUTED> .40
<FN>
<F1>Note 1 - ($79,452) thousand of Common Stockholders' Equity is classified
as Other Items-Capitalization and Liabilities. This represents
the net of leveraged common stock held by the Employee Stock
Ownership Plan, currency translation adjustments, and investment
valuation reserve.
<F2>Note 2 - ($51,986) thousand of nonregulated and nonoperating income tax
benefit is classified as Income Tax Expense. The financial
statement presentation includes them as a component of Other
Income (Expense).
<F3>Note 3 - Includes Income from Nonregulated Businesses - Before Interest and
Taxes, Allowance for Funds Used During Construction-Equity,
Other Utility Income (Deductions)-Net and
Distributions on redeemable preferred securities of subsidiary
trust.
</FN>
</TABLE>
Exhibit 99.01
Northern States Power Company Cautionary Factors
The Private Securities Litigation Reform Act of 1995 (the
Act) provides a new "safe harbor" for forward-looking statements
to encourage such disclosures without the threat of litigation
providing those statements are identified as forward-looking and
are accompanied by meaningful, cautionary statements identifying
important factors that could cause the actual results to differ
materially from those projected in the statement. Forward-
looking statements have been and will be made in written
documents and oral presentations of Northern States Power Company
(NSP). Such statements are based on management's beliefs as well
as assumptions made by and information currently available to
management. When used in NSP's documents or oral presentations,
the words "anticipate", "estimate", "expect", "objective",
"possible", "potential" and similar expressions are intended to
identify forward-looking statements. In addition to any
assumptions and other factors referred to specifically in
connection with such forward-looking statements, factors that
could cause NSP's actual results to differ materially from those
contemplated in any forward-looking statements include, among
others, the following:
- - Economic conditions, including inflation rates and monetary
fluctuations;
- - Trade, monetary, fiscal, taxation and environmental policies
of governments, agencies and similar organizations in
geographic areas where NSP has a financial interest;
- - Customer business conditions, including demand for their
products or services and supply of labor and materials used in
creating their products and services;
- - Financial or regulatory accounting principles or policies
imposed by the Financial Accounting Standards Board, the
Securities and Exchange Commission, the Federal Energy
Regulatory Commission and similar entities with regulatory
oversight;
- - Availability or cost of capital such as changes in: interest
rates; market perceptions of the utility industry, NSP or any
of its subsidiaries; or security ratings;
- - Factors affecting utility and nonutility operations such as
unusual weather conditions; catastrophic weather-related
damage; unscheduled generation outages, maintenance or
repairs; unanticipated changes to fossil fuel, nuclear fuel or
gas supply costs or availability due to higher demand,
shortages, transportation problems or other developments;
nuclear or environmental incidents; or electric transmission
or gas pipeline system constraints;
- - Employee workforce factors, including loss or retirement of
key executives, collective bargaining agreements with union
employees, or work stoppages;
- - Increased competition in the utility industry, including:
industry restructuring initiatives; transmission system
operation and/or administration initiatives; recovery of
investments made under traditional regulation; nature of
competitors entering the industry; retail wheeling; a new
pricing structure; and former customers entering the
generation market;
- - Rate-setting policies or procedures of regulatory entities,
including environmental externalities, which are values
established by regulators assigning environmental costs to
each method of electricity generation when evaluating
generation resource options;
- - Nuclear regulatory policies and procedures, including
operating regulations and spent nuclear fuel storage;
- - Social attitudes regarding the utility and power industries;
- - Cost and other effects of legal and administrative
proceedings, settlements, investigations and claims;
- - Technological developments that result in competitive
disadvantages and create the potential for impairment of
existing assets;
- - Factors associated with nonregulated investments, including
conditions of final legal closing, foreign government actions,
foreign economic and currency risks, political instability in
foreign countries, partnership actions, competition, operating
risks, dependence on certain suppliers and customers, domestic
and foreign environmental and energy regulations;
- - Most of the current project investments made by NSP's
subsidiary NRG Energy, Inc. (NRG) consist of minority
interests, and a substantial portion of future investments may
take the form of minority interests, which limits NRG's
ability to control the development or operation of the
project;
- - Regulatory delays or conditions imposed by regulatory
agencies in approving the proposed merger with NCE;
- - Factors associated with Y2k compliance that might cause
material differences from the expectations disclosed include, but
are not limited to, the availability of key Y2K personnel, NSP's
ability to locate and correct all relevant computer codes, the
readiness of third parties, and NSP's ability to respond to
unforeseen Y2K complications. Such material differences could
result in, among other things, business disruptions, operational
problems, financial loss, legal liability and similar risks;
- - Other business or investment considerations that may be
disclosed from time to time in NSP's Securities and Exchange
Commission filings or in other publicly disseminated written
documents.
NSP undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise. The foregoing review of
factors pursuant to the Act should not be construed as exhaustive
or as any admission regarding the adequacy of disclosures made by
NSP prior to the effective date of the act.
