SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) JANUARY 12, 2000
----------------
NORTHERN STATES POWER COMPANY
-----------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA
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(State or other jurisdiction of incorporation)
1-3034 41-0448030
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(Commission File Number) (IRS Employer
Identification No.)
414 NICOLLET MALL, MPLS, MN 55401
--------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 612-330-5500
------------
(Former name or former address, if changed since last report)
<PAGE>
- ------
ITEM 5. OTHER EVENTS
- -------- -------------
On January 12, 2000, Northern States Power Company (NSP) released earnings
for the year ended Dec. 31, 1999. Additional information is contained in the
investor release attached as Exhibit 99.01.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- -------- ------------------------------------
(c) EXHIBITS
Exhibit
No. Description
- ----- -----------
99.01 Investor Release dated Jan. 12, 2000
-2-
<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 hereunto duly authorized.
Northern States Power Company
(a Minnesota Corporation)
By /s/
-------------------
Roger D. Sandeen
Vice President and Controller
Dated: Jan 13, 2000
--------------
<PAGE>
Exhibit 99.01
January 12, 2000
INVESTOR RELATIONS RELEASE
--------------------------
NSP REPORTS 1999 EARNINGS OF $1.43 PER SHARE
MINNEAPOLIS -- Northern States Power Co.'s earnings for 1999 were $1.43 per
share, compared with $1.84 per share in 1998. NSP's earnings for the fourth
quarter ended Dec. 31, 1999, were 32 cents per share, compared with 58 cents per
share in 1998. NSP's 1999 earnings were adversely affected by unfavorable
regulatory treatment of conservation incentive recovery, write-downs of
nonregulated investments and adverse weather conditions.
"Although NSP had a successful year from an operational standpoint, we suffered
a series of one-time financial setbacks specific to 1999 that resulted in
disappointing earnings. A significant setback was the decision by the Minnesota
Public Utilities Commission to disallow recovery of conservation incentives,"
said Jim McIntyre, vice president and chief financial officer.
The decision to disallow conservation incentives resulted in a decrease of 27
cents per share in 1999, compared with incentive recovery levels in 1998.
Regulated utility earnings were $1.26 per share in 1999, compared with $1.58 per
share in 1998.
Earnings from NRG Energy, an NSP subsidiary that develops and operates
independent power production projects, were 37 cents per share in 1999, an
increase of 32 percent over 28 cents per share in 1998. NRG's results reflect
earnings from acquisitions in the Northeast region of the United States during
1999.
Total nonregulated earnings from subsidiaries were 22 cents per share in 1999,
compared with 26 cents per share in 1998. Nonregulated earnings were reduced by
a write-off of goodwill at Energy Masters International, an NSP subsidiary,
which reduced NSP's 1999 earnings by 8 cents per share.
NSP also wrote down its investment in the stock of CellNet Data Systems, Inc.,
which reduced NSP's 1999 earnings by 5 cents per share. The market value of
CellNet's stock declined significantly during the fourth quarter of 1999, after
it announced it was experiencing financial difficulties and was contemplating
restructuring its capital financing.
"While we are disappointed with 1999 results, we move into 2000 with a clean
balance sheet, an operating utility with strong ongoing earnings potential and
increased earnings from NRG, the world's seventh largest independent power
producer. With a return to normal weather, continued earnings growth from NRG,
and by meeting our business plan for the year, we expect to achieve earnings of
approximately $1.95 per share in 2000," said Jim Howard, chairman, president
and CEO. "This outlook assumes up to 15 cents per share of startup costs
associated with the rollout of Seren's broadband telecommunications system in
Minnesota, California and Colorado."
This release includes 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," "outlook," "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; currency
translation and transaction adjustments; the higher degree of risk associated
with NSP's nonregulated businesses compared with NSP's regulated business;
regulatory delays or conditions imposed by regulatory agencies in approving the
proposed merger with New Century Energies, Inc.; and the other risk factors
listed from time to time by NSP in reports filed with the Securities and
Exchange Commission (SEC), including Exhibit 99.01 to NSP's Quarterly Report on
Form 10-Q for the quarter ended Sept. 30, 1999.
# # #
For more information, contact:
E J McIntyre Vice President & Chief Financial Officer 612/330-7712
P E Pender Vice President, Finance & Treasurer 612/330-7769
R J Kolkmann Director, Investor Relations 612/330-6622
NSP Internet Address: http://www.nspco.com
NSP Investor Relations Internet Address: http://www.nspco.com/ir.htm
This information is not given in connection with any
sale or offer for sale or offer to buy any security.
<PAGE>
NORTHERN STATES POWER COMPANY
EARNINGS PER SHARE - DILUTED
FOURTH QUARTER 12 MONTHS ENDED
DECEMBER 31
Bar chart illustrating Bar chart illustrating
earnings per share in earnings per share in
the quarters ending Dec. the years ending Dec.
31: 31:
1994 $0.34 1994 $1.73
1995 $0.41 1995 $1.95
1996 $0.56 1996 $1.91
1997 $0.42 1997 $1.61
1998 $0.58 1998 $1.84
1999 $0.32 1999 $1.43
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOURTH QUARTER 1994 1995 1996 1997 1998 1999
- -------------- ---- ---- ---- ---- ---- ----
Weather Adjusted EPS $0.40 $0.39 $0.52 $0.46 $0.64 $0.39
Weather Impact ($0.06) $0.02 $0.04 ($0.04) ($0.06) ($0.07)
------- ----- ----- ------- ------- -------
EPS Excluding Merger Write-off $0.34 $0.41 $0.56 $0.42 $0.58 $0.32
Merger Write-off $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
------- ----- ----- ------- ------- -------
Total EPS $0.34 $0.41 $0.56 $0.42 $0.58 $0.32
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
12 MONTH ENDED DECEMBER 31 1994 1995 1996 1997 1998 1999
- -------------------------- ---- ---- ---- ---- ---- ----
Weather Adjusted EPS $1.80 $1.85 $1.83 $1.79 $1.95 $1.51
Weather Impact ($0.07) $0.10 $0.08 ($0.06) ($0.11) ($0.08)
------- ----- ----- ------- ------- -------
EPS Excluding Merger Write-off $1.73 $1.95 $1.91 $1.73 $1.84 $1.43
Merger Write-off $0.00 $0.00 $0.00 ($0.12) $0.00 $0.00
----- ----- ----- ------- ----- -----
Total EPS $1.73 $1.95 $1.91 $1.61 $1.84 $1.43
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
NORTHERN STATES POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
3 MONTHS ENDED DECEMBER 31 12 MONTHS ENDED DECEMBER 31
-------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 CHANGE 1999 1998 CHANGE
---- ---- ------ ---- ---- ------
UTILITY OPERATING REVENUES
Electric:
Retail $516.7 $508.3 $8.4 $2,240.6 $2,145.6 $95.0
Sales for resale and other 10.5 61.2 (50.7) 156.5 216.8 (60.3)
Gas 158.0 143.2 14.8 471.9 456.8 15.1
----- ----- ---- ----- ----- ----
Total 685.2 712.7 (27.5) 2,869.0 2,819.2 49.8
----- ----- ---- ------- ------- ----
UTILITY OPERATING EXPENSES
Fuel for electric generation 74.1 70.4 3.7 319.2 311.4 7.8
Purchased and interchange power 78.8 95.9 (17.1) 452.9 377.9 75.0
Cost of gas purchased and transported 99.2 84.1 15.1 278.2 267.1 11.1
Other operation 101.0 104.4 (3.4) 402.0 392.0 10.0
Maintenance 40.8 50.0 (9.2) 178.6 181.1 (2.5)
Administrative and general 27.3 38.9 (11.6) 127.4 150.1 (22.7)
Conservation and energy management 6.6 18.2 (11.6) 60.2 71.1 (10.9)
Depreciation and amortization 91.0 86.2 4.8 355.7 338.2 17.5
Property and general taxes 48.6 50.3 (1.7) 222.4 220.6 1.8
Income taxes 31.5 29.1 2.4 128.0 145.4 (17.4)
---- ---- --- ----- ----- ------
Total 598.9 627.5 (28.6) 2,524.6 2,454.9 69.7
----- ----- ---- ------- ------- ----
UTILITY OPERATING INCOME 86.3 85.2 1.1 344.4 364.3 (19.9)
OTHER INCOME (EXPENSE)
Income from nonregulated businesses - before interest and taxes 33.8 44.3 (10.5) 79.4 51.2 28.2
Allowance for funds used during construction - equity (1.6) 3.4 (5.0) 0.2 8.5 (8.3)
Write-down of investment in CellNet stock (10.6) 0.0 (10.6) (14.1) 0.0 (14.1)
Other utility income (deductions) - net (2.3) 4.2 (6.5) (9.4) (3.7) (5.7)
Income taxes on nonregulated operations and nonoperating items 19.5 (3.3) 22.8 61.0 40.6 20.4
---- --- ---- ---- ---- ----
Total 38.8 48.6 (9.8) 117.1 96.6 20.5
---- ---- --- ----- ----- ----
INCOME BEFORE FINANCING COSTS 125.1 133.8 (8.7) 461.5 460.9 0.6
FINANCING COSTS
Interest on utility long-term debt 28.1 25.9 2.2 102.8 104.2 (1.4)
Other utility interest and amortization 7.1 3.0 4.1 25.7 11.6 14.1
Nonregulated interest and amortization 36.6 13.7 22.9 97.9 54.3 43.6
Allowance for funds used during construction - debt (0.7) (1.2) 0.5 (5.9) (7.3) 1.4
--- --- --- ----- ----- ---
Total interest charges 71.1 41.4 29.7 220.5 162.8 57.7
Distributions on redeemable preferred securities of subsidiary trust 3.9 3.9 0.0 15.7 15.7 0.0
--- --- --- ---- ---- ---
Total financing costs 75.0 45.3 29.7 236.2 178.5 57.7
NET INCOME 50.1 88.5 (38.4) 225.3 282.4 (57.1)
Preferred stock dividends 1.0 1.0 0.0 5.3 5.5 (0.2)
--- --- --- --- --- ----
EARNINGS AVAILABLE FOR COMMON STOCK $49.1 $87.5 ($38.4) $220.0 $276.9 ($56.9)
==== ==== ====== ====== ===== =====
Average number of common shares outstanding (000's) 154,371 151,856 153,366 150,502
Average number of common and potentially dilutive
shares outstanding (000's) 154,400 152,096 153,443 150,743
EARNINGS PER AVERAGE COMMON SHARE - BASIC $0.32 $0.58 ($0.26) $1.43 $1.84 ($0.41)
EARNINGS PER AVERAGE COMMON SHARE - DILUTED $0.32 $0.58 ($0.26) $1.43 $1.84 ($0.41)
COMMON DIVIDENDS DECLARED PER SHARE $0.3625 $0.3575 $0.0050 $1.4450 $1.4250 $0.020
RETURN ON COMMON AVERAGE EQUITY 8.7% 11.4%
</TABLE>
See Notes to Financial Statements on Page 2.
This information is not given in connection with any sale or offer for sale or
offer to buy any security.
-1-
<PAGE>
NORTHERN STATES POWER COMPANY (MINNESOTA) AND SUBSIDIARIES (NSP)
Notes to Financial Statements
Due to the seasonality of NSP's electric and gas sales, operating results on a
quarterly basis are not necessarily an appropriate base from which to project
annual results.
Except for the historical statements contained in this document, the matters
discussed in this investor relations release, including the statements regarding
revenue and earnings expectations, 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," "outlook," "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; the higher
risk associated with NSP's nonregulated businesses compared with NSP's regulated
business; currency translation and transaction adjustments; regulatory delays or
conditions imposed by regulatory agencies in approving the proposed merger with
New Century Energies, Inc. (NCE); and the other risk factors listed from time to
time in NSP's Securities and Exchange Commission (SEC) reports, including
Exhibit 99.01 to NSP's report on Form 10-Q for the quarter ended Sept. 30, 1999.
1. SIGNIFICANT FACTORS AFFECTING OPERATING RESULTS
CONSERVATION INCENTIVE RECOVERY - 1999
As previously discussed in NSP's Third Quarter 1999 10-Q, NSP has been working
with the Minnesota Department of Commerce and other parties to address the
Minnesota Public Utilities Commission's (MPUC) concerns regarding conservation
program incentives for 1999 and subsequent years. On Jan. 27, 2000, the MPUC is
expected to consider proposals by the Minnesota Department of Commerce and NSP
regarding the structure of conservation incentive plans for Minnesota utilities.
However, the MPUC is not likely to approve the actual level of incentives that
NSP may be entitled to for 1999 until later in 2000.
With the change in MPUC policy on conservation incentives in the past year, it
is currently very difficult to estimate the level of recovery that NSP can
expect. Until the MPUC decides this matter, the ultimate financial impact of
conservation incentives related to the year 1999 is unknown and required an
accounting judgement for year-end 1999 reporting.
In the fourth quarter of 1999, NSP reversed all income recorded to date for 1999
electric conservation program incentives, which reduced earnings by 8 cents per
share for the quarter. In addition, NSP did not accrue any additional
conservation incentives for the fourth quarter of 1999. Before these
adjustments, NSP had been recording 1999 electric conservation incentives at a
level that would have contributed annual revenue of $27 million, or 11 cents per
share. The fourth quarter adjustments were mainly reductions to electric
revenues, but also included revisions to carrying charges associated with prior
incentive accruals.
Despite the decision to eliminate 1999 conservation incentive accruals due to
regulatory uncertainty, NSP still plans to urge the MPUC to approve NSP's
incentive proposal. Under NSP's proposal, the company could be entitled to an
additional $6 million of recovery for load management discounts made available
to certain customers, as well as performance incentives earned based on the
success of NSP's conservation programs.
CONSERVATION INCENTIVE RECOVERY - 1998
As previously discussed in NSP's Third Quarter 1999 Form 10-Q, in 1999 the MPUC
disallowed the recovery of approximately $35 million in conservation incentives
related to the year 1998. In 1998, NSP's earnings were increased by
approximately 13 cents per share from accrued conservation incentives. With the
addition of carrying charges, the reversal of 1998 CIP incentives reduced 1999
earnings by 14 cents per share, a decrease of 27 cents per share compared with
incentive recovery levels in 1998. Although a regulatory order has not yet been
received, NSP may consider appealing the decision on 1998 conservation
incentives.
ENERGY MASTERS INTERNATIONAL GOODWILL
NSP recorded a pre-tax charge against fourth quarter earnings of approximately
$17 million, or about 8 cents per share, to write off goodwill that was recorded
by its subsidiary Energy Masters International (EMI) for its acquisitions of
Energy Masters Corporation and Energy Solutions International. These
acquisitions were made during 1995 and 1997, respectively. EMI had been
amortizing the goodwill over a 15-year period. This charge reflects a revised
business outlook based on recent levels of contract signings for EMI's energy
services customers. This assessment is part of EMI's ongoing effort to refocus
and rationalize its activities.
INVESTMENT WRITE-DOWN
NSP recorded a charge against fourth quarter pretax earnings of $10.6 million,
or 4 cents per share, for a valuation write-down on its investment in the
publicly traded common stock of CellNet Data Systems, Inc. Including
write-downs recognized earlier in the year, NSP's 1999 earnings have been
reduced by a total of 5 cents per share for market value declines in CellNet
stock. The remaining carrying value of NSP's investment in CellNet stock is
approximately $1 million. NSP does not have any other investments of this
nature.
In October 1999, CellNet announced it was experiencing financial difficulties
and was contemplating restructuring its capital financing. Consequently, the
market value of CellNet's stock declined significantly during the fourth quarter
of 1999. In light of this decline and CellNet's financial difficulties, NSP
believes the decline in the value of its investment in CellNet's stock to be
other than temporary.
NSP currently has a contract with an affiliate of CellNet, which owns and
operates the communication network that provides daily meter readings to NSP for
automated electric and gas meters. At this time, NSP does not expect CellNet's
financial difficulties to pose significant operational risk to NSP's ability to
continue to read customer meters or otherwise conduct business.
REGULATED OPERATIONS
---------------------
ESTIMATED IMPACT OF TEMPERATURE ON EARNINGS
NSP analyzes the approximate effect of variations from historical average
temperatures on actual sales levels. The following summarizes the estimated
impact of temperature variations on actual utility operating results (in
relation to sales under normal weather conditions).
<TABLE>
<CAPTION>
INCREASE (DECREASE)
--------------------
<S> <C> <C> <C>
1999 1998 1999
EARNINGS PER SHARE FOR THE VS. VS. VS.
PERIOD ENDED DEC. 31: NORMAL NORMAL 1998
- ------------------------- ------ ------ ----
Quarter Ended ($0.07) ($0.06) ($0.01)
12 Months Ended ($0.08) ($0.11) $0.03
</TABLE>
SALES GROWTH
The following table summarizes NSP's growth in actual electric and gas
sales and growth on a weather-normalized basis for the three-month and 12-month
periods ended Dec. 31, 1999, 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>
Fourth Quarter 12 Months Ended
--------------- -----------------
<S> <C> <C> <C> <C>
Actual Normalized Actual Normalized ------ ---------- ------ ----------
Electric Residential (1.3%) (0.4%) 2.4% 2.5%
Electric Commercial & Industrial 0.9% 1.2% 1.2% 1.3%
Total Retail Electric Sales 0.3% 0.8% 1.5% 1.6%
Electric Sales for Resale (17.5%) NA 6.7% NA
Total Firm Gas Sales (0.2%) (0.2%) 8.6% 1.4%
</TABLE>
PURCHASED CAPACITY AND ENERGY COSTS
During July 1999, NSP's service territory experienced extremely high
temperatures, which drove customer usage to record levels. With NSP's power
plants operating at maximum available capacity, market conditions forced NSP to
purchase the power necessary to serve customer demand at very high costs. This
situation was exacerbated by a 200-megawatt derate of NSP's King plant due to
water discharge temperature limitations. NSP's fuel clause billing adjustment
process in Minnesota does not allow for the recovery of capacity charges above
the levels reflected in base rates established in 1993, NSP's last general
electric rate case in Minnesota. In addition, NSP-Wisconsin does not have an
automatic fuel clause to recover increased energy and capacity charges from
customers. Without the ability to fully recover these unusually high energy and
increasing capacity costs, the otherwise favorable earnings effects of higher
sales for 1999 were offset by 7 cents per share for the full year compared with
1998.
<PAGE>
OTHER OPERATION, MAINTENANCE AND ADMINISTRATIVE AND GENERAL EXPENSES
Other operation, maintenance and administrative and general expenses combined
for the fourth quarter of 1999 decreased by $24.2 million, or 12.5 percent,
compared with 1998. The expense decrease is largely due to cost controls,
including lower plant outage expense, lower employee benefit costs, higher
levels of insurance refunds and lower Year 2000 remediation costs.
Other operation, maintenance and administrative and general expenses combined
for 1999 decreased by $15.2 million, or 2.1 percent, compared with 1998. The
expense decrease is largely due to cost controls, including lower employee
benefit costs, higher levels of insurance refunds and lower Year 2000
remediation costs.
NONREGULATED OPERATIONS
- ------------------------
The following table summarizes the earnings per share contributions of
NSP's nonregulated businesses.
<TABLE>
<CAPTION>
3 Mos. Ended 12 Mos. Ended
-------------- ---------------
<S> <C> <C> <C> <C>
12/31/99 12/31/98 12/31/99 12/31/98
-------- -------- -------- --------
NRG Energy Inc. (NRG) $0.18 $0.22 $0.37 $0.28
Eloigne Co. 0.01 0.01 0.05 0.04
Energy Masters International Inc. (EMI) (0.09) (0.01) (0.13) (0.05)
Seren Innovations Inc. (0.03) 0.00 (0.06) (0.02)
Other 0.00 0.00 (0.01) 0.01
---- ---- ------ ------
Subtotal $0.07 $0.22 $0.22 $0.26
Write-down CellNet Stock (0.04) 0.00 (0.05) 0.00
------ ---- ----- ----
Total Nonregulated $0.03 $0.22 $0.17 $0.26
===== ===== ===== =====
</TABLE>
NRG
NRG's earnings for 1999 were significantly influenced by the acquisitions of
generating facilities in the Northeast United States, as detailed under Note 2
on Business Developments. These acquisitions closed at various times from April
through December of 1999. Additionally, NRG recorded a gain of approximately 3
cents per share on the sale of an interest in Cogeneration Corporation of
America in December 1999. NRG reduced its ownership position in CogenAmerica
from 45 percent to 20 percent. Fourth quarter results in 1998 included a gain
of 11 cents per share from the sale of a part of NRG's interest in the Enfield
project in England.
EMI
EMI's losses for the fourth quarter and 1999 were greater than 1998 losses,
largely due to the write-off of goodwill associated with the acquisitions of
Energy Master Corporation and Energy Solutions International, as discussed
previously. The write-off of goodwill, which was recorded in the fourth quarter
of 1999, reduced 1999 results by approximately 8 cents per share.
SEREN
Seren's expansion of its broadband communications network in St. Cloud, Minn.,
and initial construction in California resulted in losses for the fourth quarter
and the full year of 1999. These results are consistent with Seren's business
plan.
<PAGE>
2. BUSINESS DEVELOPMENTS
PROPOSED BUSINESS COMBINATION
-------------------------------
On March 24, 1999, NSP and NCE agreed to merge and form a new entity named Xcel
Energy Inc. At the time of the merger, each share of NCE common stock, par
value $1.00 per share, will be exchanged for 1.55 shares of Xcel common stock,
par value $2.50 per share. NSP shares will become Xcel shares on a one-for-one
basis. The merger is expected to be a tax-free, stock-for-stock exchange for
shareholders of both companies and to be accounted for as a pooling of
interests.
The merger requires approval or regulatory review by federal regulators,
including the Federal Energy Regulatory Commission (FERC) and the SEC, as well
as state regulators in eight of the 12 states currently served by the two
companies. The merger approval process is currently expected to be completed by
the middle of 2000.
On Jan. 12, 2000, the FERC announced that it had approved the merger between NSP
and NCE. NSP has not yet received the FERC order regarding the merger approval.
NRG
- ---
In October 1999, NRG purchased the 1,700-MW oil and gas-fired Oswego generating
station, located in Oswego, N.Y., for approximately $85 million from Niagara
Mohawk Power Corporation and Rochester Gas and Electric Corporation.
In October 1999, a confirmation order was received from the court for NRG's
purchase of Cajun Electric Power Cooperative's (Cajun) 1,708 MW of fossil-fueled
generation. NRG had earlier exercised its option to purchase 100 percent of
Louisiana Generating LLC, the ownership vehicle created to acquire the Cajun
assets. Louisiana Generating expects to financially close the acquisition in
the first quarter of the year 2000.
In October 1999, NRG entered into a Standard Offer Service Wholesale Sales
Agreement with CL&P in which NRG will supply Connecticut Light & Power Company
(CL&P) with 35 percent of its standard offer service load during 2000, 40
percent during 2001 and 2002 and 45 percent during 2003.
In December 1999, NRG purchased gas and oil electric generating stations with a
combined capacity of 2,235 MW for $460 million from CL&P. The facilities are
located in Connecticut. NRG owns a 100-percent interest in the project.
In December 1999, NRG sold a portion of its ownership interest in CogenAmerica
to Calpine Corp, reducing its ownership stake in CogenAmerica from 45 percent to
20 percent.
<PAGE>
In November 1999, NRG agreed to purchase the 665-MW Killingholme A station from
National Power plc. Killingholme A was commissioned in 1994 and is a
combined-cycle, gas-turbine power station located in England. The purchase price
for the station will be approximately 410 million pounds sterling (approximately
$664 million U.S. at current exchange rates), subject to commercial adjustments.
The purchase price includes 20 million pounds sterling (approximately $32
million U.S. at current exchange rates) that is contingent upon the successful
completion of negotiations regarding NRG's purchase of National Power's Blyth
generating facilities. The Blyth assets consist of two coal-fired stations
totaling 1,140 MW of generation capacity located in England.
In January 2000, NRG reached agreement to purchase a 50 percent interest in the
Rocky Road Power Plant, a 250-MW natural gas-fired, simple-cycle peaking
facility in East Dundee, Ill. from Dynegy Inc.
The following table highlights NRG's recent and planned acquisitions.
<TABLE>
<S> <C> <C> <C> <C>
1999 NRG Acquisitions Cost in Millions MW Ownership Close
- ----------------------- ---------------- -- --------- -----
Somerset (USA) $55 229 100% April 1999
Encina (USA) $356 1,218 50% May 1999
Huntley/Dunkirk (USA) $355 1,360 100% June 1999
Arthur Kill/Astoria (USA) $505 1,456 100% June 1999
Oswego (USA) $91 1,700 100% Oct. 1999
CL&P Assets (USA) $460 2,235 100% Dec. 1999
Cajun Fossil Assets (USA) $1,026 1,708 100% 1st Qtr. 2000
Killingholme (UK) $664<F1> 665 100% 1st Qtr. 2000
<FN>
<F1> The purchase price for Killingholme is 410 million pounds sterling and
the estimated cost in dollars is based on current exchange rates.
</FN>
</TABLE>
<PAGE>
FINANCING ACTIVITIES
- ---------------------
In November 1999, NRG issued $240 million of long-term debt. The securities
have a fixed coupon of 8.0 percent and are remarketable after four years. The
net proceeds were used for general corporate purposes, which may include
financing the development and construction of new facilities, working capital,
debt reduction and pending or potential acquisitions.
In December 1999, NRG filed a shelf registration with the SEC to issue up to
$500 million of unsecured debt securities. NRG expects to issue debt under this
shelf during 2000 for general corporate purposes, which may include financing
development and construction of new facilities, additions to working capital and
financing capital expenditures and pending or potential acquisitions.
In October 1999, NSP filed its proposed 1999 Capital Structure and Financing
Plan with the MPUC. In its filing, NSP proposed that if the completion of its
merger with NCE is timed as currently anticipated, NSP will be recapitalized as
a subsidiary of Xcel. If completion of the merger appears to be delayed, NSP
may issue equity or an equity related security near the end of the first quarter
of 2000.
3. CONTINGENCIES
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. As required by the
rate investigation order, NSP filed 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. As required, NSP also filed an
explanation of why it believes its current rates continue to be just and
reasonable. In January 2000, the MPUC accepted NSP's filing, closed the
investigation and will transfer any further analysis to the NSP-NCE merger
proceeding.
