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 JUNE 30, 1996 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 39-0508315
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
100 North Barstow Street, Eau Claire, Wisconsin 54703
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code (715) 839-2592
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 August 14, 1996
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.
<TABLE>
Northern States Power Company (Wisconsin)
Statements of Income (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
(Thousands of dollars)
<S> <C> <C> <C> <C>
Operating revenues
Electric.................................................... $88,141 $90,086 $188,501 $186,521
Gas......................................................... 13,537 12,237 51,907 43,795
Total..................................................... 101,678 102,323 240,408 230,316
Operating expenses
Fuel for electric generation................................ 819 631 2,600 1,789
Purchased and interchange power............................. 42,903 45,219 90,983 88,803
Gas purchased for resale.................................... 8,138 9,186 34,398 27,207
Other operation............................................. 13,725 12,755 27,959 25,974
Maintenance................................................. 5,381 5,392 9,995 9,285
Administrative and general.................................. 4,715 5,857 10,903 12,428
Depreciation and amortization............................... 8,984 8,191 17,514 16,315
Taxes: Property and general................................. 3,598 3,479 7,246 7,000
Current income tax expense....................... 3,137 2,595 11,038 12,106
Net provision for deferred income taxes.......... 603 (55) 984 922
Net investment tax credit adjustments............ (227) (234) (455) (468)
Total..................................................... 91,776 93,016 213,165 201,361
Operating income............................................. 9,902 9,307 27,243 28,955
Other income
Other income and deductions - net........................... 107 117 233 274
Allowance for funds used during construction - equity....... 75 64 211 122
Total other income ........................................ 182 181 444 396
Income before interest charges............................... 10,084 9,488 27,687 29,351
Interest charges
Interest on long-term debt.................................. 3,962 4,027 7,942 8,038
Other interest and amortization............................. 767 1,238 1,566 2,076
Allowance for funds used during construction - debt......... (77) (38) (172) (184)
Total..................................................... 4,652 5,227 9,336 9,930
Net Income .................................................. $5,432 $4,261 $18,351 $19,421
Statements of Retained Earnings (Unaudited)
Balance at beginning of period............................... $228,161 $227,390 $221,638 $218,833
Net income for period........................................ 5,432 4,261 18,351 19,421
Net additions.............................................. 5,432 4,261 18,351 19,421
Dividends paid............................................... 6,396 11,603 12,792 18,206
Balance at end of period..................................... $227,197 $220,048 $227,197 $220,048
The Notes to Financial Statements are an integral part of the Statements of Income and Retained Earnings.
</TABLE>
<TABLE>
Northern States Power Company (Wisconsin)
Balance Sheets (Unaudited)
<CAPTION>
June 30, December 31,
1996 1995
(Thousands of dollars)
<S> <C> <C>
ASSETS
Utility Plant
Electric........................................................... $878,085 $864,514
Gas................................................................ 96,520 94,425
Other.............................................................. 65,925 63,758
Total.......................................................... 1,040,530 1,022,697
Accumulated provision for depreciation........................... (381,845) (370,634)
Net utility plant.............................................. 658,685 652,063
Other Property and Investments....................................... 9,429 9,218
Current Assets
Cash............................................................... 243 247
Accounts receivable - net.......................................... 39,983 43,134
Materials and supplies - at average cost
Fuel........................................................... 4,333 6,689
Other.......................................................... 5,429 5,561
Unbilled utility revenues.......................................... 12,257 18,665
Prepayments and other.............................................. 10,728 11,295
Total current assets............................................. 72,973 85,591
Other Assets
Unamortized debt expense........................................... 2,713 2,780
Regulatory assets.................................................. 33,423 34,704
Federal income tax receivable...................................... 3,307 3,307
Other.............................................................. 1,332 3,235
Total other assets.............................................. 40,775 44,026
TOTAL ASSETS................................................... $781,862 $790,898
LIABILITIES AND EQUITY
Capitalization
Common stock - authorized 870,000 shares of $100 par value,
issued shares: 1996 and 1995, 862,000......................... $86,200 $86,200
Premium on common stock.......................................... 10,461 10,461
Retained earnings................................................ 227,197 221,638
Total common stock equity...................................... 323,858 318,299
Long-term debt..................................................... 211,552 213,235
Total capitalization........................................... 535,410 531,534
Current Liabilities
Notes payable - parent company..................................... 39,300 50,900
Accounts payable................................................... 10,588 14,884
Payable to affiliate companies (principally parent)................ 21,146 13,457
Salaries, wages, and vacation pay accrued.......................... 5,058 6,343
Federal taxes accrued.............................................. (635) 4,111
Other taxes accrued................................................ 1,887 1,537
Interest accrued................................................... 5,078 5,300
Current deferred taxes............................................. 1,946 1,963
Other.............................................................. 8,046 4,177
Total current liabilities...................................... 92,414 102,672
Other Liabilities
Accumulated deferred income taxes.................................. 101,000 100,227
Accumulated deferred investment tax credits........................ 20,607 21,205
Regulatory liabilities............................................. 17,931 18,020
Customer advances.................................................. 6,880 6,458
Benefit obligations and other...................................... 7,620 10,782
Total other liabilities........................................ 154,038 156,692
TOTAL LIABILITIES AND EQUITY................................. $781,862 $790,898
The Notes to Financial Statements are an integral part of the Balance Sheets.
</TABLE>
<TABLE>
Northern States Power Company (Wisconsin)
Statements of Cash Flows (Unaudited)
<CAPTION>
Six Months Ended
June 30
1996 1995
(Thousands of dollars)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income....................................... $18,351 $19,420
Adjustments to reconcile net income
to cash from operating activities:
Depreciation and amortization.................. 17,947 16,960
Deferred income taxes.......................... 0 665
Deferred investment tax credit recognized...... (455) (468)
Allowance for funds used during
construction - equity........................ (211) (122)
Decrease in insurance receivable............... 1,615
Cash provided from changes in working capital.... 13,559 17,956
Cash used for changes in other assets
and liabilities................................ (1,048) (630)
Net cash provided from operating activities 48,143 55,396
Cash Flows from Investing Activities:
Capital expenditures............................. (24,137) (17,164)
Increase (decrease) in construction related
accounts payable............................... 413 (473)
Allowance for funds used during
construction - equity.......................... 211 122
Other............................................ (242) (1,219)
Net cash used for investing activities (23,755) (18,734)
Cash Flows from Financing Activities:
Repayment of short-term debt..................... (11,600) (15,000)
Redemption of long-term debt..................... 0 (3,375)
Dividends paid................................... (12,792) (18,206)
Net cash used for financing activities (24,392) (36,581)
Net increase (decrease) in cash and cash equivalents (4) 81
Cash and cash equivalents beginning of period....... 247 61
Cash and cash equivalents end of period............. $243 $142
The Notes to Financial Statements are an integral part of the Statements of Cash Flows.
</TABLE>
Northern States Power Company (Wisconsin)
NOTES TO FINANCIAL STATEMENTS
The Company is a wholly owned subsidiary of Northern States
Power Company, a Minnesota corporation (NSPM).
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, a Wisconsin corporation, (the Company) as of June 30,
1996 and Dec. 31, 1995, the results of its operations for the
three and six months ended June 30, 1996 and 1995 and its cash
flows for the six months ended June 30, 1996 and 1995. 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 Dec. 31, 1995
(Form 10-K). The following notes should be read in conjunction
with such policies and other disclosures in the Form 10-K.
Certain reclassifications have been made to 1995 financial
information to conform with the 1996 presentation. These
reclassifications had no effect on net income as previously
reported.
1. Accounting Change - Gas Costs
While fixed costs (demand charges) from gas suppliers and
transporters are incurred fairly evenly throughout the year,
such costs are recovered in customer rates on a per unit basis
(using average annual costs per unit), primarily in the winter
heating season when sales volumes are highest. Also, the energy
price of gas purchased (excluding demand charges) can vary from
estimated levels included in customer rates. As a result, gas
costs for both demand and energy charges are incurred throughout
the year at a different time than when such costs are recovered
from customers. The purchased gas adjustment (PGA) clause
allows customer rates to be adjusted periodically to ensure full
recovery of all gas costs incurred.
Effective Jan. 1, 1996, the Company changed its method of
accounting for the regulatory effects of costs recovered through
the PGA rate adjustment clause. Previously, the Company
expensed gas costs as incurred. Beginning in 1996, the cost of
gas expensed is adjusted to equal the level of cost recovery in
customer rates, with such adjustments being reflected as
regulatory deferrals on the balance sheet. This accounting
change results in a better matching of revenues and expenses,
and conforms to the cost recognition method used by NSPM.
This change affects the timing of expense recognition
within the year but will not change total annual gas expense for
1996 or any prior years. The effect of the change on second
quarter 1996 results was a decrease in gas costs recognized and
an increase in pre-tax operating income of approximately $3.1
million, and an increase in net income of $1.9 million. The
effect of the change on the first six months 1996 results was an
increase in gas costs recognized and a decrease in pretax
operating income of approximately $3.4 million, and a decrease
in net income of $2.0 million. Consistent with accounting
requirements, prior year quarterly results have not been
restated for this change. Had the change been implemented as of
Jan. 1, 1995, the effect of the change on second quarter 1995
results would have been a decrease in gas costs recognized and
an increase in pretax operating income of approximately $1.2
million, and an increase in net income of $0.7 million. The
effect of the change on the first six months of 1995 results
would have been an increase in gas costs recognized and a
decrease in pretax operating income of approximately $2.5
million, and a decrease in net income of $1.5 million.
2. Proposed Business Combination
On April 28, 1995, NSPM and Wisconsin Energy Corporation
(WEC) entered into an Agreement and Plan of Merger (the Merger
Agreement), which provides for a strategic business combination
involving NSPM, WEC and the Company to form a registered utility
holding company, which will be known as Primergy Corporation
(Primergy). See further discussion of the proposed business
combination in the 1995 Form 10-K and Part II, Item 5-Other
Information of this report. The 1996 developments related to
merger filings made in 1995 are discussed below. The goal of
NSPM and WEC is to receive approvals from all required
regulatory authorities by the end of 1996. However, there is a
possibility (as discussed below) that, unless NSPM and the Company are
able to settle the issues prior to that time, all necessary
regulatory approvals may not be obtained until the first quarter
of 1997, and as a result, the merger may not be consummated
until the first quarter of 1997.
In July 1995, WEC and NSPM filed an application and
supporting testimony with the Federal Energy Regulatory
Commission (FERC) seeking approval of the Merger Agreement. The
FERC has put the merger application on an accelerated schedule,
ordering the administrative law judge's initial decision by
August 30, 1996. On May 28, 1996, WEC and NSPM filed additional
evidence with the FERC, providing a detailed analysis of
generation "market power" and more specific information about
the independent system operator (ISO) proposal originally
included in the merger application. This additional information
was provided to the FERC in response to concerns raised by
intervenors in the merger proceeding and by the FERC staff. The
FERC asked for an analysis of "market power" or Primergy's
potential ability to manipulate its generation to raise prices
or cause transmission constraints. WEC and NSPM have continued
to work with the FERC staff and other parties on the ISO
proposal and anticipate that the FERC will act on the merger
application in the fourth quarter of 1996.
On April 5, 1996, WEC and NSPM submitted the initial filing
to the Securities and Exchange Commission to facilitate
registration of Primergy under the Public Utility Holding
Company Act of 1935, as amended. On April 10, 1996, the
Michigan Public Service Commission approved the merger
application through a settlement agreement containing terms
consistent with the merger application. On June 26, 1996, the
North Dakota Public Service Commission approved the merger
application. These state commission approvals represent two of
the four states where approval of the merger is required.
On July 24, 1996, the Public Service Commission of Wisconsin
(PSCW) held a prehearing conference on the merger proceeding.
At the prehearing conference the parties agreed upon an
extensive issues list and a schedule for the hearing. The
schedule required staff and intervenor case filings on Sept. 9,
1996, applicants rebuttal filing on Sept. 20, 1996, and three
weeks of hearings commencing on Sept. 24, 1996. At its open
meeting on August 8, 1996, the Commission decided to delay this
schedule by one month. The resulting schedule should lead to a
PSCW decision on the merger in late 1996 or early 1997 and a
written order in the first quarter of 1997.
In June 1996, the Minnesota Public Utilities Commission
(MPUC) issued an order which established the procedural
framework for the MPUC's consideration of the merger. The
issues of merger-related savings, electric rate freeze
characteristics, NSPM's pre-merger revenue requirements,
Primergy's ability to control the transmission interface between
the Mid-Continent Area Power Pool and the Wisconsin and upper
Michigan area, and the impact of this interface on Minnesota
utilities were set for contested case hearings. On August 5,
1996 a Minnesota administrative law judge issued a Pre-Hearing
Order which set the evidentiary hearing dates from Nov. 18
through Dec. 6, 1996. If the MPUC approvals proceed on these
hearing dates without settlement, the MPUC's decision may not be
obtained until the first quarter of 1997.
Later in 1996, WEC and NSPM will also file required
notifications with the Federal Trade Commission and the
Department of Justice under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. The merger filings, with
each state, included a request for deferred accounting treatment
and rate recovery of costs incurred associated with the proposed
merger. At June 30, 1996, the Company had incurred
approximately $358,000 of costs associated with the proposed
merger which have been deferred as a component of Other Deferred
Debits.
Under the Merger Agreement, completion of the merger is
conditioned upon the prior receipt of all necessary regulatory
approvals without the imposition of materially adverse terms.
3. Rate Matters
There were no changes in any of the Company's
jurisdictions' rates since the Form 10-K was filed. The
technical hearings for the electric and gas stand alone rate
cases, based on a 1997 pre-merger test year, were held before
the PSCW on July 8, 1996. The Company had requested changes to
electric rates for various classes of customers which would have
an offsetting effect on overall revenues. The Company had
requested no changes to gas rates. There were no parties to the
proceeding that recommended a change to electric or gas rates
that would impact total revenues. The Company expects a rate
order later this year.
4. Commitments and Contingent Liabilities
As discussed in Note 8 to the Financial Statements in the
1995 Form 10-K, the Company is involved in contamination at a
site in Ashland, Wisconsin. With respect to developments since
the 1995 Form 10-K was filed, during 1996 the Wisconsin
Department of Natural Resources (WDNR) has recently completed a
sediment contamination investigation of the impacted area of
Chequamegon Bay portion of the Ashland site to determine the
extent and nature of contamination. Contamination of the near
shore area has been confirmed by the study. WDNR's consultant
is now preparing a remedial option study for the Chequamegon Bay
portion of the site. At June 30, 1996, the Company had recorded
an estimated liability of $900,000 for future remediation costs
at this site. To date the Company has incurred approximately
$500,000 in actual expenditures.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
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 Note 2 to the Financial Statements and Part II
of this report.
The Company's net income for the quarter ended June 30,
1996 was $5.4 million. Net income increased $1.2 million from
the comparable period a year ago.
Except for the historical statements contained herein, the
matters discussed in the following discussion and analysis,
including the statements regarding the anticipated impact of the
proposed merger, 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" 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; regulatory decisions regarding the proposed
combination of NSPM and WEC; and the other risk factors listed
in Exhibit 99.01 to this report on Form 10-Q for the quarter
ended June 30, 1996.
Second Quarter 1996 Compared with Second Quarter 1995
Electric revenues for the second quarter 1996 decreased
$1.9 million or 2.2% from the electric revenues for the second
quarter 1995. Electric sales decreased 0.9% in 1996 from 1995,
with the majority of the decrease due to favorable weather in
1995 which did not recur, partially offset by customer and load
growth.
Gas revenues increased $1.3 million or 10.6% in the second
quarter 1996 compared to the second quarter 1995. Gas sales for
the second quarter of 1996 were 13.1% higher than those in the
comparable quarter 1995. Contributing to the increase was the
impacts of colder weather in 1996 relative to 1995 and the gas
rate increase effective Jan. 1, 1996, as discussed in the Rate
Matters Jurisdiction section of the 1995 Form 10-K.
Fuel for electric generation and Purchased and interchange
power combined for a net decrease of $2.1 million or 4.6% due in
part to decreased generation to meet sales requirements and to
lower operating costs charged to the Company by NSPM.
Gas purchased for resale decreased $1.0 million,
representing the net effects of a $2.1 million increase as a
result of higher gas sales and a decrease of $3.1 million as a
result of the change in accounting for gas costs as discussed in
Note 1 of the Notes to the Financial Statements in this report.
Other operation, Maintenance and Administrative and general
expenses together decreased $0.2 million primarily as a result
of decreases in employee benefit expenses.
Depreciation and amortization increased $0.8 million in the
second quarter 1996 over the same quarter of 1995 due to
increases in the Company's plant in service.
Property and general taxes were approximately the same in
both periods.
Income tax expense of the second quarter 1996 is up $1.2
million as compared to the second quarter 1995 mainly due to a
higher level of pre-tax income in the second quarter 1996.
Other income and deductions was about the same in both
periods.
Interest expense decreased $0.6 million due to interest
related to tax assessments in 1995.
First Six Months of 1996 Compared with First Six Months of 1995
Electric revenues for the first six months of 1996
increased $2.0 million or 1.1% from the electric revenues for
the same period of 1995. Electric sales increased 2.2% in 1996
from 1995, with the majority of the increase due to the
comparably colder temperatures in 1996 and the remainder due to
customer and load growth.
Gas revenues increased $8.1 million or 18.5% for the first
six months of 1996 compared to the same period of 1995. Gas
sales increased 15.2% in 1996 from 1995 due to colder winter
weather and sales growth. Also contributing to the increased
revenues was the gas rate increase effective Jan. 1, 1996, as
discussed in the Rate Matters Jurisdiction section of the 1995
Form 10-K.
Fuel for electric generation and Purchased and interchange
power together increased $3.0 million or 3.3% primarily due to
increased generation and interchange purchases from NSPM to meet
sales requirements.
Gas purchased for resale increased $7.2 million or 26.4%,
with $3.8 million of the increase as a result of higher gas
sales and the remaining increase of $3.4 million as a result of
the change in accounting for gas costs as discussed in Note 1 of
the Notes to the Financial Statements in this report.
Other operation, Maintenance and Administrative and general
expenses together increased $1.2 million primarily as a result
of increased spending in the production and transmission area
and increased maintenance and operation expenses in the
distribution area, partially offset by decreases in employee
benefit expenses.
Depreciation and amortization increased $1.2 million in
1996 over 1995 due to increases in the Company's plant in
service.
Property and general taxes increased $0.2 million primarily
due to an increase in gross receipts taxes as a result of
increased revenue.
Income tax expense for the first six months of 1996 is down
$1.0 million as compared to 1995 due mainly to a lower level of
pre-tax income in 1996.
Other income and deductions was about the same in both
periods.
Interest expense decreased $0.6 million due to interest
related to tax assessments in 1995.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
In June 1996, the Landfill Remediation Trust filed suit in
the U.S. District Court for the Western District of Wisconsin
seeking to establish liability for and contributions from
parties at the Junker landfill in Hudson, Wisconsin. NSPM and
the Company are among over 600 parties sued in connection with
this landfill. The Company does not believe the liability, if
any, will be material.
Item 5. Other Information
MERGER AGREEMENT WITH WISCONSIN ENERGY CORPORATION
As previously reported in the Company's Current Report on
Form 8-K, dated May 8, 1995, and filed on May 8, 1995, and the
1995 Form 10-K, NSPM and WEC have entered into a Merger
Agreement which provides for a strategic business combination
involving NSPM and WEC in a "merger-of-equals" transaction
(Transaction).
In connection with the Transaction, the Company will be
merged into WEC's principal utility subsidiary, Wisconsin
Electric Power Company (WE), which will be renamed "Wisconsin
Energy Company." Prior to the merger of the Company into
Wisconsin Energy Company, a new successor company to NSPM,
Northern Power Wisconsin Corp. (New NSP), will acquire from the
Company certain gas utility properties and operations in La
Crosse and Hudson, Wisconsin with a net historical cost at June
30, 1996 of approximately $17.9 million.
Detailed information with respect to the Merger Agreement
and the proposed Transaction is contained in the 1995 Annual
Reports on Form 10-K of NSPM and the Company and in the Joint
Proxy Statement/Prospectus dated August 7, 1995 relating to the
meetings of the stockholders of WEC and NSPM to vote on the
Merger Agreement and related matters.
SUMMARIZED PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following summary of unaudited pro forma financial
information combines historical balance sheet and income
statement information of WEC and NSPM, and of WE and the
Company, to give effect to the Transaction to form Primergy and
Wisconsin Energy Company, respectively. The unaudited pro forma
balance sheet information gives effect to the Transaction as if
it had occurred at June 30, 1996. The unaudited pro forma
income statement information gives effect to the Transaction as
if it had occurred at Jan. 1, 1996. This pro forma information
was prepared from the historical financial statements of NSPM,
WEC and WE and the Company on the basis of accounting for the
Transaction as a pooling of interests and should be read in
conjunction with such historical financial statements and
related notes thereto.
The allocation between Wisconsin Energy Company and New NSP
and their customers of the estimated cost savings resulting from
the Transaction, net of the costs incurred to achieve such
estimated cost savings, will be subject to regulatory review and
approval. None of the estimated cost savings, the costs to
achieve such savings, nor transaction costs are reflected in the
summarized unaudited pro forma income statement information.
With the exception of certain non-current deferred tax balance
sheet reclassifications described below, all other financial
statement presentation and accounting policy differences are
immaterial and have not been adjusted in the unaudited pro forma
financial information. The following information is not
necessarily indicative of the financial position or operating
results that would have occurred had the Transaction been
consummated on the date or at the beginning of the period for
which the Transaction is being given effect nor is it
necessarily indicative of future operating results or financial
position.
Primergy Information
The following summarized Primergy unaudited pro forma
financial information reflects the combination of the historical
financial statements of WEC and NSPM after giving effect to the
Transaction to form Primergy. A pro forma adjustment has been
made to conform the presentations of non-current deferred income
taxes in the summarized unaudited pro forma combined balance
sheet information as a net liability. The unaudited pro forma
combined earnings per common share reflect pro forma adjustments
to average NSPM common shares outstanding in accordance with the
provisions of the Merger Agreement, whereby each outstanding
share of NSPM common stock will be converted into 1.626 shares
of Primergy common stock. In the Transaction, each outstanding
share of WEC common stock will remain outstanding as a share of
Primergy common stock.
Unaudited
Pro Forma
PRIMERGY CORP: NSPM WEC Combined
(in millions, except per share amounts)
As of June 30, 1996:
Utility Plant-Net $4,324 $2,914 $7,238
Current Assets 801 487 1,288
Other Assets * 1,276 1,151 2,281
Total Assets $6,401 $4,552 $10,807
Common Stockholders' Equity $2,074 $1,897 $3,971
Preferred Stockholders' Equity 240 30 270
Long-Term Debt 1,666 1,359 3,025
Total Capitalization 3,980 3,286 7,266
Current Liabilities 1,014 382 1,396
Other Liabilities * 1,407 884 2,145
Total Equity & Liabilities $6,401 $4,552 $10,807
For the Six Months Ended
June 30, 1996:
Utility Operating Revenues $1,311 $897 $2,208
Utility Operating Income $160 $154 $314
Net Income, after Preferred
Dividend Requirements $104 $108 $212
Earnings per Common Share:
As reported $1.53 $.98 --
NSPM Equivalent Shares -- -- $1.56
Primergy Shares -- -- $.96
* Includes a $146 million pro forma adjustment to conform the
presentation of non-current deferred taxes as a net liability.
Wisconsin Energy Company Information
The following summarized Wisconsin Energy Company unaudited
pro forma financial information combines historical balance
sheet and income statement information of WE and the Company to
give effect to the Transaction, including the transfer of
certain gas utility properties from the Company to New NSP. The
unaudited pro forma income statement information does not
reflect adjustments for 1996 year to date revenues of $21.6
million and related expenses associated with the transfer of
certain gas utility properties and operations from the Company
to New NSP. A pro forma adjustment has been made to conform the
presentation of non-current deferred income taxes in the
summarized unaudited pro forma combined balance sheet
information as a net liability.
Wisconsin Energy Company: **
Unaudited
The Pro Forma
WE Company Combined
(as Reported) (as Reported) ***
(Millions of Dollars)
As of June 30, 1996:
Utility Plant-Net $2,914 $659 $3,553
Current Assets 474 73 563
Other Assets * 911 50 819
Total Assets $4,299 $782 $4,935
Common Stockholder's Equity $1,720 $324 $2,044
Preferred Stockholder's Equity 30 -- 30
Long-Term Debt 1,318 212 1,530
Total Capitalization 3,068 $536 3,604
Current Liabilities 360 92 452
Other Liabilities * 871 154 879
Total Equity & Liabilities $4,299 $782 $4,935
For the Six Months Ended
June 30, 1996:
Utility Operating Revenues $897 $240 $1,137
Utility Operating Income $154 $27 $181
Net Income, after Preferred
Dividend Requirements $107 $18 $125
* Includes a $142 million pro forma adjustment to conform the
presentation of non-current deferred taxes as a net
liability.
** In connection with the Merger Agreement, WE will be renamed
Wisconsin Energy Company.
*** Includes a pro forma adjustment for the transfer of certain
gas properties from the Company to New NSP.
Note: Earnings per share of common stock are not applicable
because all of the Wisconsin Energy Company common stock
will be owned by Primergy.
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 six months ended
June 30, 1996
99.01 Statement pursuant to Private Securities Litigation
Reform Act of 1995.
(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)
/s/
David E. Ripka
Controller
(Principal Accounting Officer)
/s/
Neal Siikarla
Treasurer
(Principal Financial Officer)
Date: August 14, 1996
EXHIBIT INDEX
Method of Exhibit Description
Filing No.
DT 27.01 Financial Data Schedule
DT 99.01 Statement pursuant to Private
Securities Litigation Reform
Act of 1995
DT = Filed electronically with this direct transmission.
<TABLE> <S> <C>
<ARTICLE> UT
EXHIBIT 27.01
<LEGEND>
This schedule contains summary financial information extracted from the
Statements of Income, Balance Sheets 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-31-1995
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 658,685
<OTHER-PROPERTY-AND-INVEST> 9,429
<TOTAL-CURRENT-ASSETS> 72,740
<TOTAL-DEFERRED-CHARGES> 40,775
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 781,629
<COMMON> 86,200
<CAPITAL-SURPLUS-PAID-IN> 10,461
<RETAINED-EARNINGS> 227,197
<TOTAL-COMMON-STOCKHOLDERS-EQ> 323,858
0
0
<LONG-TERM-DEBT-NET> 211,552
<SHORT-TERM-NOTES> 39,300
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 206,919
<TOT-CAPITALIZATION-AND-LIAB> 781,629
<GROSS-OPERATING-REVENUE> 240,408
<INCOME-TAX-EXPENSE> 11,566
<OTHER-OPERATING-EXPENSES> 201,599
<TOTAL-OPERATING-EXPENSES> 213,165
<OPERATING-INCOME-LOSS> 27,243
<OTHER-INCOME-NET> 444
<INCOME-BEFORE-INTEREST-EXPEN> 27,687
<TOTAL-INTEREST-EXPENSE> 9,336
<NET-INCOME> 18,351
0
<EARNINGS-AVAILABLE-FOR-COMM> 18,351
<COMMON-STOCK-DIVIDENDS> 12,792
<TOTAL-INTEREST-ON-BONDS> 7,942
<CASH-FLOW-OPERATIONS> 48,143
<EPS-PRIMARY> $21.29
<EPS-DILUTED> $21.29
</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, a Wisconsin corporation (the Company). Such statements
are based on management's beliefs as well as assumptions made by
and information currently available to management. When used in
the Company's documents or oral presentations, the words
"anticipate", "estimate", "expect", "objective" 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 the Company'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 the Company 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, or the
Company; or security ratings;
- - Factors affecting operations such as unusual weather
conditions; catastrophic weather-related damage; unscheduled
generation outages, maintenance or repairs; unanticipated
changes to fossil fuel or gas supply costs or availability
due to higher demand, shortages, transportation problems or
other developments; 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;
- - 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;
- - Numerous matters associated with the proposed combination of
Northern States Power Company, a Minnesota corporation (NSPM)
and Wisconsin Energy Corporation to form Primergy Corporation
(Primergy), including:
- Regulatory authorities' decisions regarding business
combination issues including the approval of the
business combination as proposed, the rate structure of
utility operating companies after the merger,
transmission system operation and administration, or
divestiture of gas utility or non-regulated portions of
NSPM's business;
- Qualification of the transaction as a pooling of
interests;
- Factors affecting the anticipated cost savings including
national and regional economic conditions, national and
regional competitive conditions, inflation rates,
weather conditions, financial market conditions, and
synergies resulting from the business combination;
- Allocation of benefits of cost savings between
shareholders and customers, which will depend, among
other things, upon the results of regulatory proceedings
in various jurisdictions;
- Regulation of Primergy as a registered public utility
holding company and other different or additional
federal and state regulatory requirements or
restrictions to which Primergy and its subsidiaries may
be subject as a result of the business combination
(including conditions which may be imposed in connection
with obtaining the regulatory approvals necessary to
consummate the business combination, such as the
possible requirement to divest gas utility and possibly
certain non-regulated operations);
- Factors affecting dividend policy including results of
operations and financial condition of Primergy and its
subsidiaries and such other business considerations as
the Primergy Board of Directors considers relevant.
- - Other business or investment considerations that may be
disclosed from time to time in the Company's Securities and
Exchange Commission filings or in other publicly disseminated
written documents.
The Company 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 the Company prior to the effective date of
the Act.
