United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
X Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended SEPTEMBER 30, 1995
Commission File Number 10-3140
NORTHERN STATES POWER COMPANY, A WISCONSIN CORPORATION, MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H (1) AND (2) OF
FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
Northern States Power Company
(Exact name of registrant as specified in its charter)
Wisconsin
(State or other jurisdiction ofincorporation or organization
39-0508315
(I.R.S.Employer Identification No.)
100 North Barstow Street, Eau Claire, Wisconsin 54702
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code
(715) 839-2621
NONE
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 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
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 September 30, 1995
Common Stock, $100 par value 862,000 Shares
All outstanding common stock is owned beneficially and of record
by Northern States Power Company, a Minnesota corporation.
Northern States Power Company (Wisconsin)
NOTES TO FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited
financial statements contain all adjustments necessary to
present fairly the Northern States Power Company's, a Wisconsin
corporation, (The Company's) financial position as of September
30, 1995, and December 31, 1994, the results of its operations
for the three and nine months ended September 30, 1995 and 1994
and its cash flows for the nine months ended September 30, 1995
and 1994. Due to the seasonality of the Company's electric and
gas sales, operating results on a quarterly and year-to-date
basis are not necessarily an appropriate base from which to
project annual results.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements in its Annual
Report on Form 10-K for the year ended December 31, 1994, (The
Form 10-K). The following notes should be read in conjunction
with such policies and other disclosures in the Form 10-K.
1. Proposed Business Combination
The Company is a wholly owned subsidiary of Northern States
Power Company, a Minnesota corporation (NSPM). On April
28, 1995, NSPM and Wisconsin Energy Corporation (WEC)
entered into an Agreement and Plan of Merger (the Merger
Agreement). As a result, a registered utility holding
company, which will be known as Primergy Corporation
(Primergy), will be the parent of NSPM and the current
operating subsidiaries of NSPM and WEC. Each outstanding
share of common stock of NSPM will be converted into 1.626
shares of common stock of Primergy and each outstanding
share of common stock of WEC will remain outstanding as one
share of common stock of Primergy. The business
combination is intended to be tax-free for income tax
purposes, and to be accounted for as a pooling of
interests. The Agreement is subject to various
conditions, including approval of the stockholders of NSPM
and WEC, and the approval of various regulatory agencies.
The Company anticipates that the completion of the
regulatory review and approval process will take
approximately 12-18 months and, accordingly, the
completion of this business combination is not anticipated
until late 1996. Item 5 of Part II of this report provides
additional information regarding the proposed transaction.
2. Rate Matters
There were no changes in any of the Company's
jurisdictions' rates since the Form 10-K was filed.
However, by the end of the third quarter of 1995, six of
our wholesale customers signed power and energy supply
agreements with various rate discounts for commitments
ranging in length from five to ten years.
On June 1, 1995, the Company filed with the Public Service
Commission of Wisconsin (PSCW) for a $2.7 million increase
in natural gas rates and no change in electric rates to be
effective January 1, 1996. On October 6, 1995, the PSCW
ordered a $4.8 million decrease, or approximately 1.7
percent, on an annual basis in the Company's retail
electric rates. The new rates will take effect January 1,
1996. A decision regarding the gas retail rate increase is
expected by the end of the year.
In mid-October, as part of the Wisconsin Public Service
Commission's generic docket O5-EI-114, an advisory
committee completed a set of recommendations regarding
restructuring the electric industry in the state.
Currently, the Commission is reviewing the recommendations
and will issue a decision in December.
Item 2. Management's Discussion and Analysis of Results of
Operations
Discussion of financial condition and liquidity is omitted per
conditions set forth in general instructions H (1) and (2) of
Form 10-Q for wholly-owned subsidiaries. (Reduced disclosure
format.)
On April 28, 1995, NSPM and WEC entered into an Agreement and
Plan of Merger which provides for a strategic business
combination involving the two companies in a "merger-of-equals"
transaction. See Part II of this report.
The Company's net income for the third quarter and nine months
ended September 30, 1995 was $6.0 million and $25.5 million
respectively. Net income increased $1.2 million for the third
quarter and decreased $1.2 million for the nine months ended
September 30 from the comparable periods a year ago.
THIRD QUARTER 1995 AS COMPARED WITH THIRD QUARTER 1994
Electric revenues for the third quarter of 1995 increased $5.4
million (5.9 percent) from the electric revenues for the third
quarter of 1994. Electric sales increased 7.6% in the third
quarter of 1995 as compared with the third quarter of 1994 with
the majority of the increase due to the comparably warm
temperatures in August 1995 and the remainder due to customer
and load growth.
Gas revenues decreased $1.5 million (16.5 percent) in the third
quarter of 1995 compared to the third quarter 1994. Although
gas sales for the third quarter of 1995 were 1.9% higher than
those in the comparable quarter of 1994, this was offset by a
lower purchased gas expense. This lower purchased gas expense
is reflected in the purchased gas adjustment and decreases gas
revenues. The purchased gas adjustment is further defined in
the Fuel and Purchased Gas Adjustment Clauses section of the
Company's 1994 Report on Form 10-K.
Operating expenses increased $3.3 million in the third quarter
of 1995 as compared to the third quarter of 1994. Contributing
to the increase of $3.3 million are the following items:
Fuel for electric generation expenses increased $0.5 million due
to increased generation at our French Island, Wheaton, and Bayfront
generating facilities.
Purchased and interchange power increased $0.4 million as a
result of higher purchased power expenses in 1995 due to higher
contracted demand expense.
Gas purchased for resale decreased $0.4 million as a result of
a lower per unit cost of purchased gas.
Administrative and general costs decreased $0.7 million due
primarily to decreased labor costs.
Other operation costs increased $0.4 million as a result of
increased spending in the steam and hydro operating facilities.
Maintenance expense decreased $0.9 million due to decreased
spending in the steam and distribution facilities.
Depreciation increased $0.5 million in the third quarter of 1995
over the same quarter of 1994 from increases in the Company's
plant in service.
Property and general taxes increased $0.1 million primarily due
to increased plant in service in the State of Wisconsin.
Income tax expense of the third quarter of 1995 is up $3.4
million as compared to the third quarter of 1994. This reflects
a higher level of earnings in the third quarter of 1995 and is
also partially due to adjustments made in the third quarter of
1994 decreasing current tax expense resulting from the updating
of the status of the estimated income tax payments expected to
be incurred as a result of unaudited tax years.
Other income and deductions increased $0.1 million primarily as
a result of increases in subsidiary company earnings.
Interest expense decreased $0.5 million in as a result of the
recognition of interest payable on state income tax issues in
the third quarter of 1994.
FIRST NINE MONTHS OF 1995 AS COMPARED WITH THE FIRST NINE MONTHS
OF 1994
Electric revenues for the nine months ended September 30, 1995
increased $2.7 million (1.0 percent) from nine months ended
September 30, 1994. Electric sales were 3.0% higher in the nine
months ended September 30, 1995 as compared to the same period
a year ago. This is primarily due to the warm temperatures
experienced in the summer of 1995 in relation to the summer of
1994.
In addition, the increase in electric revenues for the nine
months ended September 30, 1995 as compared to the same period
a year ago were offset by a $2.5 million decrease in other
operating revenue. Other operating revenues consist primarily
of charges billed to Northern States Power Company, a Minnesota
Corporation (Minnesota Company) through the Interchange
Agreement. The Interchange Agreement is a cost-sharing
arrangement between the Company and the Minnesota Company in
which electric generation and transmission costs for the
combined systems of the two companies are shared. This $2.5
million decrease is a result of less generation being performed
by the Company compared to the Minnesota Company.
Gas revenues decreased $2.8 million (5.1 percent) in the first
nine months of 1995 compared to the same period in 1994.
Again, although the gas sales for the first nine months of 1995
were higher than those in the same period of 1994, the cost of
gas was 7 percent a DKT lower than that in 1994. This lower gas
cost is reflected in the purchased gas adjustment and decreases
gas revenues.
Operating expenses decreased $.1 million for the nine months
ended September 30, 1995 in relation to the same period for
1994. Contributing to the $0.1 million decrease are the
following items:
Fuel for electric generation costs were down $0.5 million for
the nine months ended September 30, 1995 as compared to the same
period in 1994. This decrease resulted from lower amounts of
generation at the Company in comparison to the Minnesota Company
and from lower costs incurred at some generation facilities.
Purchased and interchange power increased $1.8 million as a
result of increased charges billed to the Company from the
Minnesota Company through the Interchange Agreement. The
increased charges are as a result of purchasing more generation
from the Minnesota Company and partially due to the increased
costs of the Minnesota Company. NSPM had increases in fuel
expenses as a result of increased sales and higher 1995
generation levels. Purchase power expenses increased due to
higher electric demand costs and wind energy purchases, partly
offset by lower cost of other energy purchases due to market
conditions.
Gas purchased for resale is down 8.3%, $3.3 million for the
first three quarters of 1995 in comparison to the first three
quarters of 1994. Of the $3.3 million deviation, approximately
$2.5 million is due to the lower cost of gas and $0.6 million is
due to lower transportation charges.
Administrative and general costs decreased $2.5 million due to
a decrease in labor costs and due to the reclassification of
association dues to the functional operating areas.
Other operation costs increased $1.2 million due to increases in
the steam and distribution operating functions.
Maintenance expense for the nine months ended September 30, 1995
was $1.4 million less than the same period last year. Of this
deviation, $1.3 million related to maintenance in the hydro and
transmission areas.
Depreciation increased $1.7 million between 1995 and 1994 as a
result of added plant in service.
Property and general taxes increased $0.2 million primarily due
to increased plant in service in the State of Wisconsin.
Income tax expense increased $2.8 million partially due to
adjustments made in the third quarter of 1994 decreasing current
tax expense resulting from the updating of the status of the
estimated income tax payments expected to be incurred as a
result of unaudited tax years.
Other income and deductions increased $0.3 million primarily as
a result of increases in subsidiary company earnings.
Interest expense increased $1.0 million in as a result of write-
offs of previously capitalized interest expense and also
partially due to increases in both the interest rate and the
level of short-term debt between 1995 and 1994.<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
Proposed Business Combination
As previously reported in Northern States Power Company's, a
Wisconsin corporation, Current Report on Form 8-K, dated May 8,
1995, and filed on May 8, 1995, and Quarterly Reports on Form
10-Q for the quarters ended March 31 and June 30, 1995, Northern
States Power Company, a Minnesota corporation, (NSPM),
Wisconsin Electric Corporation, (WEC), New NSP, and WEC Sub,
have entered into an Agreement and Plan of Merger (the Merger
Agreement), which provides for a strategic business combination
involving NSP and WEC in a merger-of-equals transaction (the
Transaction). The Transaction, which was approved by the
shareholders of the constituent companies at meeting held on
September 13, 1995, is expected to close shortly after all of
the conditions to the consummation of the Transaction, including
obtaining applicable regulatory approvals, are met or waived.
The regulatory approval process is expected to take
approximately 12 to 18 months from April 28, 1995.
In the Transaction, the holding company of the combined
enterprise will be registered under the Public Utility Holding
Company Act of 1935, as amended. The holding company will be
named Primergy Corporation (Primergy) and will be the parent
company of both NSPM (which, for regulatory reasons, will
reincorporate in Wisconsin) and of WEC's present principal
utility subsidiary, Wisconsin Electric Power Company (WEPCO)
which will be renamed Wisconsin Energy Company. It is
anticipated that, following the Transaction, Northern States
Power Company, a Wisconsin corporation, will be merged into
Wisconsin Energy Company and that NSPM's other subsidiaries will
become subsidiaries of Primergy.
As noted above, pursuant to the Transaction, NSPM will
reincorporate in Wisconsin for regulatory reasons. This
reincorporation will be accomplished by the merger of NSPM into
New NSP, with New NSP being the surviving corporation and
succeeding to the business of NSPM as an operating public
utility. Following such merger, WEC Sub will be merged with and
into New NSP, with New NSP being the surviving corporation and
becoming a subsidiary of Primergy. Both New NSP and WEC Sub
were created to effect the Transactions and will not have any
significant operations, assets or liabilities prior to such
mergers. After the Transaction is completed, current common
stockholders of NSPM will own shares of Primergy common stock,
and current bondholders and preferred stockholders of NSPM will
become investors in New NSP.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following Exhibit is filed with this report:
27.01 Financial Data Schedule for the three and nine months
ended September 30, 1995.
The following Exhibits are incorporated herein by reference:
None
(b) Reports on Form 8-K
None
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)
Date: November 14, 1995 /s/ Kenneth J Zagzebski
Controller
(Principal Accounting Officer)
Date: November 14, 1995 /s/ Neal Siikarla
Treasurer
(Principal Financial Officer)<PAGE> 2
<TABLE>
NORTHERN STATES POWER COMPANY - WISCONSIN
INCOME STATEMENTS
Three Months Ended Nine Months Ended
September 30 September 30
(Thousands of dollars)
<CAPTION>
1995(*) 1994(*) 1995(*) 1994(*)
<S> <C> <C> <C> <C>
Operating revenues
Electric $97,380 $91,964 $283,744 $281,031
Gas 7,625 9,136 51,420 54,177
------------ ---------- ----------- ------------
Total 105,005 101,100 335,164 335,208
Operating expenses
Fuel for electric generation 1,969 1,473 3,758 4,272
Purchased and interchange power 43,985 43,620 132,788 130,965
Gas purchased for resale 8,585 8,971 35,792 39,051
Administrative and general 5,888 6,569 18,316 20,832
Other operation 14,320 13,969 40,294 39,132
Maintenance 5,140 6,057 14,425 15,827
Depreciation and amortization 8,243 7,729 24,539 22,821
Taxes: Property and general 3,455 3,302 10,455 10,252
Current income tax expense 2,294 (4,171) 14,400 6,973
Net Provision for Deferred 1,353 4,401 2,275 6,833
Net Investment tax credit (234) (236) (702) (707)
------------ ---------- ----------- ------------
Total 94,998 91,684 296,340 296,251
------------ ---------- ----------- ------------
Operating income 10,007 9,416 38,824 38,957
Other income
Other income and deductions
net 439 348 850 543
Allowance for funds used during
construction - equity 119 158 242 504
------------ ---------- ----------- ------------
Total Other income 558 506 1,092 1,047
------------ ---------- ----------- ------------
Income before interest 10,565 9,922 39,916 40,004
Interest charges
Interest on long-term debt 4,010 4,023 12,048 11,960
Other interest and amortization 620 1,107 2,696 1,721
Allowance for funds used during
construction - debt (112) (102) (296) (319)
------------ ---------- ----------- ------------
Total 4,518 5,028 14,448 13,362
------------ ---------- ----------- ------------
Net Income $6,047 $4,894 $25,468 $26,642
============ ========== =========== ============
Statement of Retained Earnings
<S> <C> <C> <C> <C>
Balance at beginning of period $220,048 $214,449 $218,833 $205,114
Net income for period 6,047 4,894 25,468 26,642
Net Additions 6,047 4,894 25,468 26,642
Dividends paid 6,603 6,206 24,809 18,619
------------ ---------- ----------- ------------
Balance at end of period $219,492 $213,137 $219,492 $213,137
============ ========== =========== ============
<FN>
(*) Unaudited
The Notes to Financial Statements are an integral part of the Statements of
Income and Retained Earnings
2
</TABLE>
<PAGE> 3
<TABLE>
NORTHERN STATES POWER COMPANY (WISCONSIN)
BALANCE SHEETS
<CAPTION>
September December 31
1995 (*) 1994
(Thousands of dollars)
<S> <C> <C>
ASSETS
UTILITY PLANT
Electric $857,841 $836,665
Gas 92,827 88,350
Common 59,702 54,675
--------- -----------
Total 1,010,370 979,690
Accumulated provision for depreciation (364,448) (344,675)
--------- -----------
Net utility plant 645,922 635,015
OTHER PROPERTY AND INVESTMENTS 7,962 6,691
CURRENT ASSETS
Cash and cash equivalents 141 61
Accounts receivable - net 30,854 36,946
Materials and supplies - at average cost
Fuel 1,972 3,413
Other 11,840 12,280
Accrued utility revenues 12,306 16,409
Prepayments and other 8,018 11,030
Deferred tax asset 0 1,415
--------- -----------
Total current assets 65,131 81,554
DEFERRED DEBITS
Unamortized debt expense 2,814 2,928
Regulatory assets 33,147 32,783
Federal Income tax receivable 3,307 3,307
Insurance receivable 95 3,091
Other 2,504 2,932
--------- -----------
Total deferred debits 41,867 45,041
--------- -----------
TOTAL ASSETS $760,882 $768,301
========= ===========
LIABILITIES
CAPITALIZATION
Common Stock - authorized 870,000 shares
of $100 par; issued shares: 1995 and 1994 $86,200 $86,200
Premium on common stock 10,461 10,461
Retained Earnings 219,492 218,833
--------- -----------
Total common stock equity 316,153 315,494
LONG-TERM DEBT 213,235 213,700
--------- -----------
Total capitalization 529,388 529,194
CURRENT LIABILITIES
Notes payable - parent company 31,600 41,300
Long-term debt due within one year 0 2,910
Accounts payable 12,283 14,415
Salaries, wages, and vacation pay accrued 5,184 6,028
Payable to affiliate companies (principally 17,640 8,982
Federal taxes accrued (1,969) 0
Other taxes accrued 637 936
Interest accrued 5,117 5,485
Deferred tax liability 1,359 0
Other 3,156 1,463
--------- -----------
Total current liabilities 75,007 81,519
DEFERRED CREDITS
Accumulated deferred income taxes 100,593 99,748
Accumulated deferred investment tax credits 21,510 22,332
Regulatory liability 17,327 17,961
Customer advances 6,308 5,543
Other 10,749 12,004
--------- -----------
Total deferred credits 156,487 157,588
--------- -----------
TOTAL LIABILITIES $760,882 $768,301
========= ===========
<FN>
(*) Unaudited
The Notes to Financial Statements are an integral part of the Balance Sheet.
3
</TABLE>
<PAGE> 4
<TABLE>
Northern States Power Company (Wisconsin)
Statements of Cash Flows
<CAPTION>
Nine Months Ended
September 30
(Thousands of dollars)
1995(*) 1994(*)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $25,468 $26,642
Adjustments to reconcile net income to cash from o
Depreciation and amortization 25,435 24,049
Deferred income taxes 3,619 12,093
Investment tax credit adjustments (702) (1,030)
Allowance for funds used during construction-eq (242) (504)
Insurance receivable 2,996
Cash provided from (used by) changes in working ca 19,551 3,732
Cash provided from (used by) changes in other asset (1,389) (5,064)
---------- ----------
Net cash provided from operating activities 74,736 59,918
Cash Flows from Financing Activities:
Issuance of long-term debt 0 0
Issuance (repayment) of short-term debt (12,610) (1,700)
Redemption of long-term debt(Including Reacquisiti (465) (990)
Dividends paid (24,809) (18,619)
---------- ----------
Net cash used for financing activities (37,884) (21,309)
Cash Flows from Investing Activities:
Capital expenditures (36,293) (35,570)
Increase (decrease) in construction related accoun 275 (1,255)
Allowance for funds used during construction - equ 242 504
Other (996) (2,358)
---------- ----------
Net cash used for investing activities (36,772) (38,679)
Net increase (decrease) in cash and cash equivalents 80 (70)
Cash and cash equivalents beginning of period 61 449
---------- ----------
Cash and cash equivalents end of period $141 $379
========== ==========
<FN>
(*) Unaudited
The Notes to Financial Statements are an integral part of the Statements
of Cash Flows.
4
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> SEP-30-1995 SEP-30-1995
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 645,922 645,922
<OTHER-PROPERTY-AND-INVEST> 7,962 7,962
<TOTAL-CURRENT-ASSETS> 65,131 65,131
<TOTAL-DEFERRED-CHARGES> 41,867 41,867
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 760,882 760,882
<COMMON> 86,200 86,200
<CAPITAL-SURPLUS-PAID-IN> 10,461 10,461
<RETAINED-EARNINGS> 219,492 219,492
<TOTAL-COMMON-STOCKHOLDERS-EQ> 316,153 316,153
0 0
0 0
<LONG-TERM-DEBT-NET> 213,235 213,235
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 31,600 31,600
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 199,894 199,894
<TOT-CAPITALIZATION-AND-LIAB> 760,882 760,882
<GROSS-OPERATING-REVENUE> 105,005 335,164
<INCOME-TAX-EXPENSE> 3,413 15,973
<OTHER-OPERATING-EXPENSES> 91,585 280,367
<TOTAL-OPERATING-EXPENSES> 94,998 296,340
<OPERATING-INCOME-LOSS> 10,007 38,824
<OTHER-INCOME-NET> 558 1,092
<INCOME-BEFORE-INTEREST-EXPEN> 10,565 39,916
<TOTAL-INTEREST-EXPENSE> 4,518 14,448
<NET-INCOME> 6,047 25,468
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 6,047 25,468
<COMMON-STOCK-DIVIDENDS> 6,603 24,809
<TOTAL-INTEREST-ON-BONDS> 4,010 12,048
<CASH-FLOW-OPERATIONS> 18,341 74,736
<EPS-PRIMARY> 7.02 29.54
<EPS-DILUTED> 7.02 29.54
</TABLE>
