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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
For the period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6986
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Exact name of registrant as specified in its charter)
New Mexico 85-0019030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Alvarado Square, Albuquerque, New Mexico 87158
(Address of principal executive offices)
(Zip Code)
(505) 848-2700
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock--$5.00 par value 41,774,083 shares
Class Outstanding at August 1, 1994
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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Report of Independent Public Accountants 3
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Earnings--
Three Months and Six Months Ended
June 30, 1994 and 1993 4
Consolidated Balance Sheets--
June 30, 1994 and December 31, 1993 5
Consolidated Statements of Cash Flows--
Six Months Ended June 30, 1994 and 1993 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
Signature 17
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Public Service Company of New Mexico:
We have reviewed the accompanying condensed consolidated balance sheet of
Public Service Company of New Mexico (a New Mexico corporation) and
subsidiaries as of June 30, 1994, and the related condensed consolidated
statements of earnings and cash flows for the three-month and six-month
periods ended June 30, 1994 and 1993. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Public Service Company of New
Mexico and subsidiaries as of December 31, 1993 (not presented herein). Our
report on that statement described the Company's adoption, effective January
1, 1993, of Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions, and No. 109,
Accounting for Income Taxes. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31,
1993, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
ARTHUR ANDERSEN & CO.
Albuquerque, New Mexico
August 10, 1994
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<TABLE>
ITEM 1. FINANCIAL STATEMENTS
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
(In thousands except per share amounts)
<S>
Operating revenues: <C> <C> <C> <C>
Electric $149,856 $135,736 $298,524 $281,894
Gas 50,959 51,354 160,378 151,343
Water 3,445 3,738 6,165 6,149
-------- -------- -------- --------
Total operating revenues 204,260 190,828 465,067 439,386
-------- -------- -------- --------
Operating expenses:
Fuel and purchased power 32,078 29,029 64,236 64,835
Gas purchased for resale 22,411 22,356 85,704 76,077
Other operation and maintenance 82,869 75,552 162,525 176,802
Depreciation and amortization 17,516 19,585 36,253 39,241
Taxes, other than income taxes 9,439 10,255 19,632 19,851
Income taxes 7,797 3,372 21,896 5,550
-------- -------- -------- --------
Total operating expenses 172,110 160,149 390,246 382,356
-------- -------- -------- --------
Operating income 32,150 30,679 74,821 57,030
-------- -------- -------- --------
Other income and deductions, net of taxes:
Allowance for equity funds used
during construction - - - 12
Other 4,717 (2,551) 4,670 3,101
-------- -------- -------- --------
Net other income and deductions 4,717 (2,551) 4,670 3,113
-------- -------- -------- --------
Income before interest charges 36,867 28,128 79,491 60,143
-------- -------- -------- --------
Interest charges:
Interest on long-term debt 16,300 18,072 33,482 36,082
Other interest charges 1,413 4,407 2,818 6,659
Allowance for borrowed funds used
during construction (94) (4) (160) (210)
-------- -------- -------- --------
Net interest charges 17,619 22,475 36,140 42,531
-------- -------- -------- --------
Net earnings 19,248 5,653 43,351 17,612
Preferred stock dividend requirements 1,677 1,707 3,358 3,423
-------- -------- -------- --------
Net earnings applicable to common stock $ 17,571 $ 3,946 $ 39,993 $ 14,189
======== ======== ======== ========
Average shares of common stock outstanding 41,774 41,774 41,774 41,774
======== ======== ======== ========
Net earnings per share of common stock $ 0.42 $ 0.09 $ 0.96 $ 0.34
======== ======== ======== ========
Dividends paid per share of common stock $ - $ - $ - $ -
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1994 1993
-------- -----------
(Unaudited)
<S> (In thousands)
ASSETS <C> <C>
Utility plant $2,552,730 $2,550,166
Accumulated provision for depreciation and amortization (873,813) (846,234)
---------- ----------
Net utility plant 1,678,917 1,703,932
---------- ----------
Other property and investments 38,634 33,966
---------- ----------
Current assets:
Cash 17,240 20,510
Temporary investments, at cost 53,430 47,850
Receivables 123,349 147,223
Income taxes receivable - 10,400
Fuel, materials and supplies 52,030 48,086
Gas in underground storage 7,662 8,599
Other current assets 17,797 11,347
---------- ----------
Total current assets 271,508 294,015
---------- ----------
Deferred charges 170,893 180,276
---------- ----------
$2,159,952 $2,212,189
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock $ 208,870 $ 208,870
Additional paid-in capital 470,151 470,149
Excess pension liability, net of tax (2,795) (2,795)
Retained earnings (deficit) since January 1, 1989
(appropriated $5.0 million as of June 30, 1994) (80,855) (120,848)
---------- ----------
Total common stock equity 595,371 555,376
Cumulative preferred stock:
Without mandatory redemption requirements 59,000 59,000
With mandatory redemption requirements 23,100 24,386
Long-term debt, less current maturities 892,969 957,622
---------- ----------
Total capitalization 1,570,440 1,596,384
---------- ----------
Current liabilities:
Short-term debt - -
Accounts payable 86,220 116,905
Current maturities of long-term debt 16,458 18,903
Accrued interest and taxes 43,122 29,992
Other current liabilities 54,758 51,364
---------- ----------
Total current liabilities 200,558 217,164
---------- ----------
Deferred credits 388,954 398,641
---------- ----------
$2,159,952 $2,212,189
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
June 30
----------------
1994 1993
---- ----
<S> (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES: <C> <C>
Net earnings $43,351 $17,612
Adjustments to reconcile net earnings to net cash
flows from operating activities:
Depreciation and amortization 42,581 49,091
Allowance for equity funds used during construction - (12)
Gain on sale of plant and property (6,576) (12,450)
Reserves for bad debts 526 -
Accumulated deferred investment tax credit (4,788) (2,808)
Accumulated deferred income tax (2,953) 5,017
Changes in certain assets and liabilities:
Receivables 33,749 27,578
Fuel, materials and supplies (6,959) (1,783)
Deferred charges 9,920 8,254
Accounts payable (30,680) (66,003)
Accrued interest and taxes 13,130 (1,541)
Deferred credits (9,286) (13,625)
Other 5,927 3,050
Other, net 4,100 3,286
------- -------
Net cash flows from operating activities 92,042 15,666
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility plant additions (50,503) (44,138)
Utility plant sales 39,725 -
Other property additions (4,777) (7,820)
Other property sales - 16,818
Temporary investments, net (5,580) (7,465)
------- -------
Net cash flows from investing activities (21,135) (42,605)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemptions and repurchases of preferred stock (1,439) (600)
Redemption of first mortgage bonds (45,000) -
Bond redemption premium and costs (2,222) -
Repayments of long-term debt (22,123) (1,766)
Net increase in short-term debt - 29,650
Dividends paid (3,393) (3,426)
------- -------
Net cash flows from financing activities (74,177) 23,858
------- -------
Decrease in cash (3,270) (3,081)
Cash at beginning of period 20,510 21,080
------- -------
Cash at end of period $17,240 $17,999
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $37,846 $41,897
======= =======
Income taxes paid $ 5,000 $ 500
======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) General Accounting Policy
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary for a fair
presentation of the consolidated financial statements. The accounting
policies followed by Public Service Company of New Mexico (the "Company") are
set forth in note (1) of notes to the Company's consolidated financial
statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 (the "1993 Form 10-K") filed with the Securities and
Exchange Commission.
(2) First Mortgage Bond Redemption
On April 20, 1994, the Company redeemed its $45 million 10 1/8% series first
mortgage bonds prior to scheduled maturity. The premium paid for the early
redemption and the unamortized issuance expense were approximately $1.9
million and $.2 million, respectively. Approximately $.5 million of these
amounts was written off with the remainder being deferred for future
recovery, which is consistent with past New Mexico Public Utility Commission
("NMPUC") treatment of similar costs.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's 1993 Form 10-K PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" discusses
management's assessment of the Company's financial condition, results of
operations and other issues facing the Company. The following discussion
supplements the 1993 Form 10-K discussion and should be read in conjunction
with the consolidated financial statements presented herein and in the 1993
Form 10-K.
The January 12, 1994 Stipulation
As previously reported, on January 12, 1994, the Company, the NMPUC staff and
primary intervenor groups entered into a stipulation ("stipulation') which
addresses retail electric prices, generation assets and certain financial
concerns of the Company. The Company filed the stipulation with the NMPUC,
recommending that electric retail rates be reduced by $30 million. The
stipulation is subject to NMPUC approval. (See PART II, ITEM 7.--
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--January 12, 1994 Stipulation" in the 1993 Form 10-K.)
On July 20, 1994, the NMPUC issued a procedural order on the Company's
application for approval of the stipulation and ordered a public hearing to
be held beginning September 14, 1994 through September 16, 1994, with
additional public hearings to be held September 27 through September 29,
1994, if necessary. The procedural order also requires the Company to file
by August 17, 1994 certain supplemental testimony and information as
specified by the order. The Company anticipates a final order during the
fourth quarter of 1994.
Sale of Gas Gathering and Processing Assets
As previously reported, on February 12, 1994, an agreement was executed with
Williams Gas Processing-Blanco, Inc., a subsidiary of the Williams Field
Service Group, Inc. for the sale of substantially all of the assets of
Sunterra Gas Gathering Company and Sunterra Gas Processing Company, wholly-
owned subsidiaries of the Company, and for the sale of Northwest and
Southeast gas gathering and processing facilities of the Company. The
agreement provides for a cash selling price of $155 million, subject to
certain adjustments. (See PART II, ITEM 7.-- "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Sale of Gas
Gathering and Processing Assets" in the 1993 Form 10-K.) Consummation of the
sale is subject to NMPUC approval. The Company filed its application for
approval with the NMPUC on May 20, 1994.
A prehearing conference was held on July 7, 1994 and hearings are scheduled
to begin January 10, 1995. The discovery process is currently in progress.
The Company currently anticipates that, if approved by the NMPUC, the
transaction would be consummated in the first half of 1995.
Sale of Sangre de Cristo Water Company ("SDCW")
As previously reported, on February 28, 1994, the Company and the City of
Santa Fe (the "City") executed a purchase and sale agreement for the
Company's water division for approximately $48 million. (See PART II, ITEM
7. --"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Sale of SDCW" in the 1993 Form 10-K.) The Company and the
City filed their respective applications with the NMPUC for approval of the
transaction. A prehearing conference was held on June 22, 1994 and a hearing
has been scheduled to be held on November 9, 1994. Consummation of a sale
will require approval by the NMPUC. The Company currently expects that the
closing of the sale will be in the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently estimates a total of $197 million for its capital
requirements for 1994. The Company expects that such cash requirements are to
be met primarily through internally-generated cash. However, to cover
differences in the amounts and timing of cash generation and cash
requirements, the Company intends to utilize short-term borrowings under its
liquidity arrangements, which consist of a $100 million secured revolving
credit facility ("Facility"), an additional $40 million credit facility
collateralized by the Company's electric customer accounts receivable, and
$11 million in local lines of credit. The Company had no borrowings under
such liquidity arrangements as of June 30, 1994.
The Facility has an expiration date of June 13, 1995 and contains a provision
that could prevent borrowings in the event of a material adverse change in
the condition (financial or otherwise), results of operations, assets,
business or prospects of the Company. In respect to the total debt to total
capitalization test under the Facility and the letter of credit issued to
support certain pollution control bonds, the Company is allowed to exclude
from the calculation of total capitalization up to $200 million in pre-tax
write-offs resulting from the Company's restructuring efforts. The Company
was allowed to exclude, from the calculation, approximately $180 million in
pre-tax write-offs resulting from the stipulation signed in January 1994.
The maximum allowed ratio of the Company's total debt to total capitalization
under the Facility and the letter of credit is 72%. As of June 30, 1994,
such ratio was 66.16%.
On July 5, 1994, the Company filed with the NMPUC for authorization to retire
up to approximately $134 million of First PV Funding Corporation Lease
Obligation Bonds ("LOBs"). The amounts and maturities of the LOBs proposed
to be retired relate to the beneficial interests in certain Palo Verde
Nuclear Generating Station ("PVNGS") Units 1 and 2 leases that the Company
purchased in 1992. The Company plans to use cash proceeds from the proposed
sales of its water company and certain gas gathering and processing assets,
as well as other available cash, to retire such debt. Both sales remain
subject to NMPUC approval. If the LOBs were retired on January 1, 1995,
estimated first year interest savings from the proposed LOB retirement would
be approximately $13.3 million. Due to the mandatory sinking funds
requirements of the LOBs, the annual interest savings would gradually decline
over the period the LOBs would have been outstanding. Subject to the method
of retirement, the costs (including any applicable redemption premium)
associated with the retirement of the LOBs could be up to approximately $10
million. The Company currently expects to write off such costs. Hearings have
not yet been scheduled. The Company is currently unable to predict when the
NMPUC will act on its request to retire LOBs. The Company will continue to
assess market conditions and alternative investment opportunities before any
debt retirement is implemented.
RESULTS OF OPERATIONS
Resources excluded from NMPUC jurisdictional rates continue to negatively
impact the Company's results of operations; however, as a result of the gain
from the sale of generating facilities to Utah Associated Municipal Power
Systems ("UAMPS") recorded in June 1994, the Company recorded positive net
earnings from resources excluded from NMPUC jurisdictional rates during the
current quarter. The Company experienced positive operating income from the
excluded resources for all periods except the current quarter, primarily as
a result of the PVNGS Unit 3 write-down and provision for loss associated
with the M-S-R Public Power Agency, a California public power agency ("M-S-
R"), power purchase contract recorded in 1992. The Company experienced
negative operating income for the current quarter primarily as a result of
the increased costs associated with the extended outage of PVNGS Unit 3.
Selected financial information for the excluded resources is shown below:
Three Months Ended Six Months Ended
June 30 June 30
------- -------
1994 1993 1994 1993
---- ---- ---- ----
(In thousands)
Operating revenues $ 9,650 $ 9,515 $ 19,504 $ 23,388
Operating income (loss) $ (162) $ 1,192 $ 457 $ 3,714
Net earnings (loss) $ 462 $ (4,825) $ (1,994) $ (6,503)
Net utility plant at end
of period $132,452* $ 197,255 $132,452* $197,255
* Decrease is a result of the sale of 50 MW of San Juan Generating Station
("SJGS") Unit 4 to the City of Anaheim, California and the sale of 35 MW
of SJGS Unit 4 to UAMPS.
Electric gross margin (electric operating revenues less fuel and purchased
power expense) increased $11.1 million and $17.2 million for the quarter and
six months ended June 30, 1994, respectively, from the corresponding periods
a year ago. Such increase results primarily from an increase in
jurisdictional energy sales of 146.9 million KWh, or $8.6 million for the
quarter, and 169.0 million KWh, or $10.4 million for the six months ended
June 30, 1994, due to warmer weather as compared with a year ago and an
increased number of customers. Also, gross margin attributable to the
excluded resources and firm-requirements wholesale customers contributed $1.7
million to the current quarter results. In addition, a difference between
the estimated unbilled revenues reported in the fourth quarter of 1993 and
actual unbilled revenues increased the gross margin by $6.7 million for the
six months ended June 30, 1994. These increases for the six months ended
June 30, 1994 were partially offset by a decrease in the gross margin of the
excluded resources and firm-requirements wholesale customers of $.9 million
as a result of a decrease in available capacity due to the sales of undivided
interests in SJGS Unit 4, and a mid-cycle outage and less than full power
operation of the PVNGS units.
Other operation and maintenance expenses increased $7.3 million for the
quarter due mainly to an increase in SJGS maintenance expense of $2.0 million
resulting from two scheduled outages in 1994 as compared to only one in 1993
and an increase in PVNGS maintenance expense of $1.6 million due primarily to
a Unit 2 mid-cycle outage and a longer than expected outage of Unit 3. In
addition, the increase in other operation and maintenance expenses for the
current quarter reflected an increase in pension and retirees health care
costs of $1.3 million as a result of lowering the discount rate from 8
percent to 7 percent for measuring the benefit obligation, increased office
supply and employee expense of $1.1 million and increased bad debt expense of
$.8 million.
Other operation and maintenance expenses for the six months ended June 30,
1994 decreased $14.3 million from the corresponding period a year ago
primarily due to the Company's 1993 severance program costs of $22.7 million.
Such decrease was partially offset by (i) an increase in PVNGS maintenance
expense of $4.3 million due mainly to the Unit 2 mid-cycle outage and a
longer than expected outage of Unit 3, which increases were partially reduced
by lower PVNGS operating expense of $1.4 million resulting mainly from the
reclassification of property taxes between non-leased and leased units; (ii)
increased SJGS maintenance expense of $2.2 million resulting from two
scheduled outages in 1994 as compared to only one in 1993; (iii) an increase
in pension and retirees health care costs of $2.5 million due to lowering the
discount rate; and (iv) a bad debt expense of $.6 million.
Operating income taxes for the quarter and six months ended June 30, 1994
increased $4.4 million and $16.3 million, respectively, over the
corresponding periods a year ago, due primarily to increased pre-tax earnings
for the current periods.
Other, under the caption, Other Income and Deductions, for the quarter and
six months ended June 30, 1994 increased $7.3 million and $1.6 million,
respectively, over the corresponding periods a year ago. Significant items
for the quarter, net of taxes, included the following: (i) the gain of $4.4
million from the sale of generating facilities to UAMPS; (ii) the tax benefit
of $1.7 million related to sharing the UAMPS gain with jurisdictional
customers; (iii) a decrease in legal expense of $1.2 million; and (iv) a
decrease of $.7 million due to a reclassification of certain costs.
Partially offsetting such increases was a regulatory reserve of $1.2 million.
In addition, significant year to date items included the following: (i) a
decrease in legal expense of $.8 million; (ii) a decrease of $.6 million due
to a reclassification of costs; and (iii) a write-off of $.5 million of debt
redemption costs in 1993. Partially offsetting such increases was a gain of
$7.5 million from the sale of an investment during the first quarter of 1993.
Interest charges for the quarter and six months ended June 30, 1994 decreased
$4.9 million and $6.4 million, respectively, from the corresponding periods
a year ago. This was due primarily to lower short-term borrowings in 1994,
the refinancing of $182 million of pollution control revenue bonds in January
($46 million) and September ($136 million) of 1993 and the retirement of $45
million of first mortgage bonds in April 1994.
OTHER ISSUES FACING THE COMPANY
Sale of SJGS Unit 4
On June 2, 1994, the Company completed the sale of a 35 MW undivided interest
in SJGS Unit 4 to UAMPS. (See PART I, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES
FACING THE COMPANY--Sale of SJGS Unit 4" in the Company's quarterly report on
Form 10-Q for the quarter ended March 31, 1994.)
The Company received proceeds of approximately $40 million from the sale. In
accordance with the NMPUC order approving the sale, the Company is required
to pass through $4.4 million of the after-tax gain of approximately $8.8
million to New Mexico jurisdictional customers in three installments
beginning with August 1994 bills. In June 1994, the Company recorded an
after-tax gain and a tax benefit associated with sharing such gain with the
New Mexico retail customers in the amount of $6.1 million ($.15 per share).
Toxic Substances Control Act ("TSCA")
As previously reported, TSCA requires reporting to the U.S. Environmental
Protection Agency (the "EPA") regarding the manufacturing and processing of
certain toxic chemicals, including natural gas substances produced by the
Company and its gas subsidiary. An inventory of such substances must be
submitted to the EPA every four years. Due to the natural gas industry's
interpretation on when unprocessed natural gas becomes a reportable
substance, the Company and its gas subsidiary did not report TSCA substances
to the EPA in prior reporting years of 1986 and 1990. (See PART II, ITEM 7.-
- - "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--OTHER ISSUES FACING THE COMPANY--Environmental Issues-Gas--Toxic
Substances Control Act ("TSCA")" in the 1993 Form 10-K.) In March 1994, the
Company and its gas subsidiary filed the requisite TSCA reports for 1986 and
1990 reporting years.
The EPA has issued two enforcement notices and proposed penalty assessments
related to late filing of the requisite inventory update reports in 1990.
The proposed penalty assessments against the Company and its gas subsidiary
are $42,000 and $75,000, respectively. The Company and its subsidiary have
responded to the EPA notices and are pursuing efforts to resolve the matter
with EPA regional officials.
TSCA reporting (inventory updating) is again due in 1994. The Company and
its gas subsidiary are preparing to make the requisite reports in 1994.
Palo Verde Nuclear Generating Station
Steam Generator Tubes
As previously reported, tube cracking in the PVNGS steam generators
adversely affected operations in 1993, and will continue to do so in 1994
and probably into 1995, because of the cost of replacement power, reduced
off-system sale incentives, maintenance expense associated with unit
outages and corrective actions required to deal with the issue. (See PART
II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE COMPANY-- Palo Verde
Nuclear Generating Station - Steam Generator Tubes" in the 1993 Form 10-K
and PART I, ITEM 2 in the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 1994.)
Arizona Public Service Company ("APS"), as the operating agent for PVNGS,
encountered axial tube cracking in the upper regions of the two steam
generators in Unit 2 and, to a lesser degree, in Unit 3. This form of
tube degradation is uncommon in the industry and, in March 1993, led to
a tube rupture in Unit 2 resulting in the extension of a scheduled
refueling outage through September 1993. Although APS's analysis is not
yet completed, APS believes that the axial cracking in the Unit 2 and Unit
3 steam generator tubes is due to the susceptibility of tube materials to
a combination of deposits on the tubes and the relatively high
temperatures at which all three units are currently designed to operate.
APS also believes that it can retard further tube degradation to
acceptable levels by remedial actions, which include chemically cleaning
the generators and performing analyses and adjustments that will allow the
units to be operated at lower temperatures without appreciably reducing
their power output. Chemical cleaning has been completed in Unit 2 and
Unit 3, and APS expects to chemically clean the Unit 1 generators during
its refueling outage in 1995. APS began operating the units at
approximately 86% capacity in October to reduce the operating temperature,
pending the completion of the temperature analyses and appropriate
modification of operating procedures. The temperature analyses have been
concluded for Units 1 and 3, and these units are operating at or near 100%
capacity. APS anticipates that Unit 2, which is currently operating at 88%
capacity, will be returned to full power by late 1994.
In March 1994, a mid-cycle inspection outage was completed on Unit 2 to
assess the status of the unit's steam generators' tubes and to continue
implementing a program of improvements. Unit 2 is scheduled for another
mid-cycle inspection outage beginning in September 1994 and a refueling
and maintenance outage in early 1995. Unit 3 completed a refueling outage
in June 1994 and, in light of the axial cracking that APS has found to
date, Unit 3 is scheduled for a mid-cycle inspection outage beginning in
November 1994. Unit 1 is scheduled for a refueling outage beginning in
April 1995. In late 1993, APS concluded that Unit 1 could be safely
operated until the 1995 outage and submitted its supporting analysis to
the Nuclear Regulatory Commission. However, the potential need for a mid-
cycle steam generator tube inspection outage in Unit 1 late in 1994 is
currently being evaluated.
When tube cracks are detected during any outage, the affected tubes are
taken out of service by plugging. That has occurred in a number of tubes
in all three units, particularly in Unit 2, which is by far the most
affected by cracking and plugging. APS expects that because of its
program to control the tube degradation, the rate of plugging will slow
to a manageable level.
A Transmission Right-of-Way
As previously reported, the Company has an easement for right-of-way with the
Navajo Nation (the "Nation") for portions of two transmission lines that
emanate from SJGS and connect with Four Corners Power Plant and with a
switching station in the Albuquerque area. This easement expired January 17,
1993, and the Company has been attempting to renew the grant. The Nation and
the Company executed an agreement whereby the Nation agreed not to object to
the Company's operating and maintaining the facilities on the easement for
right-of-way until July 17, 1994 in return for a cash payment and transfer of
title to land located near the Nation. (See PART II, ITEM 7.--"MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--
OTHER ISSUES FACING THE COMPANY--A Transmission Right-of-Way" in the 1993
Form 10-K.) The Nation's agreement not to challenge the Company's use of
the easement expired on July 17, 1994. However, the Nation has indicated
that it does not intend to challenge the Company's use of the easement unless
the Company fails to exert good faith efforts to reach resolution.
On April 1, 1994, the Company submitted a proposal to the Nation for a long-
term renewal of the easement. On June 18, 1994, the Company received a
request from the Nation, seeking more information regarding the proposal.
The Company is currently developing a response to the request.
The Company continues to assess its options but is not pursuing other
alternatives unless it receives indications that agreement cannot be reached
in a satisfactory manner. The Company is currently unable to predict the
outcome of the negotiations or the costs resulting therefrom.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Archaeological Resources Protection Act
In June 1994, a Company line crew used a bulldozer to blade an access road to
electric transmission towers on U.S. Forest Service land. The Company became
aware after the blading commenced that it did not have permission from the
U.S. Forest Service, as well as other necessary permits. The Company
immediately informed the U.S. Forest Service of the incident. The blading
disturbed at least two and possibly more archaeological sites, as well as
trees and the surface in the general area.
The Company has been advised that the U.S. Forest Service is conducting an
investigation into the incident. The incident may subject the Company and
its employees to civil and/or criminal liability under the Federal
Archaeological Resources Protection Act of 1979 ("ARPA"), as well as other
applicable federal statutes. The likelihood and type of any citations,
prosecutions or civil penalties that may be pursued by the U.S. Forest
Service are not known at this time.
Maximum civil penalties for first violations under ARPA are the full cost of
restoration and repair of the archaeological site plus either the
archaeological value or the commercial value of the archaeological resources
destroyed. The Company will not know the archaeological or commercial value
until the damage assessment is completed. The Company's preliminary estimate
of the cost of restoration and repair of the archaeological sites, the cost
of assessing the damage and establishing a plan to mitigate the damage, and
the cost of restoring the surrounding topography is in the range of $.5
million to $1.0 million. Although the Company is not able to predict the
ultimate outcome of any proceedings in this case, the Company does not expect
the ultimate resolution will have a material adverse effect on the Company's
financial condition or results of operations.
Toxic Substances Control Act
Reference is hereby made to "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE
COMPANY--Toxic Substances Control Act ("TSCA")" in PART I, ITEM 2 of this
report.
Other Proceedings
As previously reported, on April 16, 1993, the Company and certain current
and former employees of the Company or Meadows Resources, Inc., a subsidiary
of the Company ("Meadows"), were named as defendants in an action filed in
the United States District Court for the District of Arizona by the
Resolution Trust Corporation ("RTC"), as receiver for Western Savings $ Loan
Association ("Western"). Three of the individuals sued by the RTC have
indemnity agreements with the Company. The claims related to alleged actions
of the Company's or Meadows' employees in 1987 in connection with a loan
procured by Bellamah Community Development ("BCD"), whose general partners
include Meadows, from Western and the purchase by that partnership of
property owned by Western. The RTC apparently claims that the Company's
liability stems from the actions of a former employee who allegedly acted on
behalf of the Company for the Company's benefit. The RTC is claiming in
excess of $40 million in actual damages from the BCD/Western transactions and
alternatively is claiming damages substantially exceeding that amount on
Arizona racketeering, civil conspiracy and aiding and abetting theories.
These allegations involve claims against the Company for damages to Western
caused by other defendants and from other transactions to which BCD was not
a party. The RTC claims that damages under the Arizona racketeering statute
would be trebled under applicable Arizona law. The RTC may also seek
attorneys fees and costs.
On March 3 and 4, 1994, the parties participated in a mediation session aimed
at settling the litigation. The session ended without a settlement. The
mediator is continuing settlement discussions with the parties.
In May 1994, the RTC filed a motion seeking to amend the complaint to allege
against the Company civil conspiracy, common law fraud, negligent
misrepresentation, aiding and abetting breach of fiduciary duties, aiding and
abetting common law fraud, aiding and abetting violation of Federal and
Arizona racketeering laws (all of which claims are already asserted against
the Company's current and former employees named in the suit) and claims
seeking to hold the Company liable on undisclosed principal and unjust
enrichment theories. The Company has filed an opposition to the motion, and
the motion remains pending. In a recent decision on an unrelated motion, the
Court has dismissed the RTC's claims for aiding and abetting violations of
the Federal and Arizona racketeering laws against the
Company, the current and former employees of the Company or Meadows and
others.
The Company continues to investigate all of the claims made by the RTC in
this litigation and is vigorously defending those claims. The Company cannot
predict the ultimate outcome of the case but believes that the RTC's
contentions are without merit and currently believes that the outcome will
not result in a material adverse impact on the Company's results of
operations or financial condition.
For a discussion of certain related litigation, see PART I, ITEM 3.--"LEGAL
PROCEEDINGS--OTHER PROCEEDINGS" in the 1993 Form 10-K and PART II, ITEM 1.--
"LEGAL PROCEEDINGS--Other Proceedings" in the Company's quarterly report on
Form 10-Q for the quarter ended March 31, 1994.
ITEM 5. OTHER INFORMATION
Palo Verde Nuclear Generating Station
Discrimination Allegations
As previously reported, on March 21, 1994, the Secretary of Labor issued
a final order approving a settlement agreement between APS and a former
contract employee of APS who had raised a U.S. Department of Labor claim.
(See PART II, ITEM 5.--"OTHER INFORMATION--Palo Verde Nuclear Generation--
Discrimination Allegations" in the Company's quarterly report on Form 10-Q
for the quarter ended March 31, 1994.) On May 19, 1994, the Secretary of
Labor rescinded the order of March 21, 1994 and remanded the matter to the
responsible Administrative Law Judges ordering them to submit new
recommended orders (i) clarifying specifically the scope of the settlement
agreement and (ii) clarifying the extent to which any claims by the former
contract employee remain unresolved by the settlement agreement. APS
currently expects that the settlement agreement, as originally approved,
will ultimately be approved by the Secretary of Labor.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.46.1* Amendment No. 1 to the Public Service Company of New Mexico
Asset Sales Incentive Plan dated August 1, 1994
10.51.1* Second Amendment to the Public Service Company of New Mexico
Executive Retention Plan
10.60.1 Amendment No. 1 dated as of July 1, 1994, to the Reimbursement
Agreement dated as of November 1, 1992 between Public Service
Company of New Mexico and Canadian Imperial Bank of Commerce,
New York Agency
15.0 Letter Re Unaudited Interim Financial Information
99.1.5 1994 Supplemental Indenture dated as of June 8, 1994 among First
PV Funding Corporation, Public Service Company of New Mexico,
and Chemical Bank, as Trustee
* Designates each management contract, compensatory plan or arrangement
required to be identified as an exhibit to this report.
b. Reports on Form 8-K:
None.
<PAGE>
<PAGE>
Signature
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.
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Registrant)
Date: August 11, 1994 /s/ Donna M. Burnett
-----------------------------------
Donna M. Burnett
Corporate Controller and
Chief Accounting Officer
<PAGE>
<PAGE>
EXHIBIT INDEX
Paper (P) or
Exhibit Electronic (E)
- ------- --------------
10.46.1 Amendment No. 1 to the Public Service Company of New
Mexico Asset Sales Incentive Plan dated August 1, 1994 E
10.51.1 Second Amendment to the Public Service Company of New
Mexico Executive Retention Plan E
10.6.3 Amendment No. 1 dated as of July 1, 1994, to the
Reimbursement Agreement dated as of November 1, 1992
between Public Service Company of New Mexico and
Canadian Imperial Bank of Commerce, New York Agency E
15.0 Letter Re Unaudited Interim Financial Information E
99.1.5 1994 Supplemental Indenture dated as of June 8, 1994
among First PV Funding Corporation, Public Service
Company of New Mexico, and Chemical Bank, as Trustee E
<PAGE>
FIRST AMENDMENT TO THE
PUBLIC SERVICE COMPANY OF NEW MEXICO
ASSET SALES INCENTIVE PLAN
THIS FIRST AMENDMENT to the Public Service Company of New Mexico
Asset Sales Incentive Plan (the "Plan") is made this 1st day of August,
1994, by the Public Service Company of New Mexico (the "Company").
WHEREAS, the Plan was adopted by the Company, effective as June 30,
1993; and
WHEREAS, pursuant to Article IX. of the Plan the Company reserved the
right to amend the Plan;
WHEREAS, pursuant to Article II. Z. with respect to the definition
of "PAT" or "Primary Asset Team" the Plan reserved to the Board of
Directors of the Company (the "Board") the right to amend Exhibit A
attached to the Plan setting forth the employees identified as "PAT
members".
NOW, THEREFORE, consistent with its authority, the Board causes the
Company to adopt the following First Amendment to the Plan as follows:
Jeff Sterba, Kathy Mayer, Mike Slota and Blake Ridgeway have all
accepted other positions with the Company and are therefore no longer PRIMARY
ASSET TEAM members. Exhibit A to the PNM Asset Sales Incentive Plan is
therefore hereby amended, effective August 1, 1994, as follows:
a. JEFF STERBA is hereby removed as a PRIMARY ASSET TEAM member
of the Water Asset Group, the Gas Asset Group and the Generation Asset Group;
b. KATHY MAYER is hereby removed as a PRIMARY ASSET TEAM member
of the Water Asset Group, and the Gas Asset Group;
c. BLAKE RIDGEWAY is hereby removed as a PRIMARY ASSET TEAM
member of the Gas Asset Group and the Generation Asset Group; and
d. MIKE SLOTA is hereby removed as a PRIMARY ASSET TEAM member of
the Water Asset Group.
The foregoing changes do not impact the four named employees' right to
participate in benefits under the Plan that vested prior to August 1, 1994,
although no further benefits will vest with respect to these named employees
pursuant to the terms and conditions of the Plan document, on or after August
1, 1994.
IN WITNESS WHEREOF, the Public Service Company of New Mexico caused this
First Amendment to the Public Service Company of New Mexico Asset Sales
Incentive Plan to be executed by its authorized officers as of the date first
above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By______________________________________
BENJAMIN F. MONTOYA
President
ATTEST:
_____________________________
PATRICK T. ORTIZ
Secretary
13808
<PAGE>
<PAGE>
SECOND AMENDMENT TO THE
PUBLIC SERVICE COMPANY OF NEW MEXICO
EXECUTIVE RETENTION PLAN
THIS SECOND AMENDMENT to the Public Service Company of New
Mexico Executive Retention Plan (the "Second Amendment") is made as of the
1st day of August, 1994, by the Public Service Company of New Mexico (the
"Company"). If not defined in this Second Amendment, capitalized terms
contained herein have the meaning as set forth in the Public Service
Company of New Mexico Executive Retention Plan (the "Plan").
WHEREAS, the Plan and the First Amendment were adopted by the
Company, effective as of January 1, 1992 and January 1, 1994, respectively;
WHEREAS, Exhibit "A" to the Plan consists of a list of
employees of the Company (and their position with the Company) eligible to
participate in the Plan, which list was incorporated by reference into the
Plan document;
WHEREAS, the Company desires to amend Exhibit "A" to: (i) add
employees not previously eligible to participate in the Plan, (ii) delete
Participants set forth therein no longer employed by the Company and (iii)
delete or change the classification or job title of certain Participants
included on Exhibit "A".
WHEREAS, Article IX provides that the Plan may be amended at
any time to add employees to Exhibit "A", but it provides that any other
amendment would generally not be effective during the twenty-four month
period immediately preceding any Change In Control and the twenty-four (24)
month period immediately following such Change In Control to the extent
that such amendment impairs or abridges the rights or benefits of an
employee of the Company who was a Participant upon the occurrence of the
Change In Control or in the twenty-four (24) month period immediately prior
thereto; and
WHEREAS, the following Second Amendment, adopting a new Exhibit
"A", was approved effective immediately, with the understanding that the
effectiveness of the deletions or classification changes may be delayed
pursuant to the provisions of Article IX.
NOW, THEREFORE, the Plan shall be, and hereby is, amended as
follows:
1. Exhibit "A" is hereby amended in its entirety and replaced with
a new Exhibit "A" attached hereto, and incorporated herein by
reference, subject to applicable restrictions as required by Article
IX.
2.Except as amended by the First Amendment and this Second Amendment,
the Plan is otherwise unchanged.
IN WITNESS WHEREOF, the Company has caused this Second Amendment
to the Public Service Company of New Mexico Executive Retention Plan to be
executed and effective as of the date and year first above written.
PUBLIC SERVICE COMPANY
OF NEW MEXICO
By
BENJAMIN F. MONTOYA, President
ATTEST
____________________________
PATRICK T. ORTIZ
Secretary
14644
<PAGE>
<PAGE>
EXECUTIVE RETENTION PLAN
CORRECTIONS TO CURRENT EXHIBIT A
June 6, 1994
M. PHYLLIS BOURQUE SR VP, MARKETING AND CUSTOMER SERVICES
JERRY L. GODWIN SR VP, POWER SUPPLY RESOURCES
MAX H. MAERKI SR VP & CHIEF FINANCIAL OFFICER
PATRICK T. ORTIZ SR VP, REGULATORY POLICY,
GENERAL COUNSEL & SECRETARY
WILLIAM J. REAL SR VP, UTILITY OPERATIONS
JEFFRY E. STERBA SR VP, CORPORATE DEVELOPMENT
MARC D. CHRISTENSEN VP, PUBLIC AFFAIRS
JUDITH A. ZANOTTI VP, HUMAN RESOURCES
DONNA M. BURNETT CORPORATE CONTROLLER AND
CHIEF ACCOUNTING OFFICER
D.A. JAMES DIR, LEGAL AND CORPORATE AFFAIRS
EDWIN A. KRAFT VP, CUSTOMER SERVICES
ALFONSO R. LUJAN VP, ELECTRIC T&D SERVICES
MITCHELL J. MARZEC TREASURER
LAWRENCE D. RATLIFF VP, ENGINEERING & TECHNICAL SERVICES
JOHN RENNER VP, GAS SUPPLY SOURCING
TERRY D. RISTER VP, GAS DISTRIBUTION SERVICES
MICHAEL C. SLOTA VP, WATER OPERATIONS
BARBARA L. BARSKY DIR, INVESTOR RELATIONS/FINANCIAL
ANALYSIS
MELVIN CHRISTOPHER DIR, GAS SUPPLY SOURCING
JEFFREY R. HARRIS ASSET DISPOSAL TEAM
SCOTT WITSCHGER ASSET DISPOSAL TEAM
<PAGE>
<PAGE>
EXECUTIVE RETENTION PLAN
ADDITIONS TO CURRENT EXHIBIT A
June 6, 1994
PATRICK GOODMAN VP, POWER PRODUCTION
CINDY McGILL DIR, REGULATORY POLICY
RAMON GONZALES SENIOR COUNSEL, HUMAN RESOURCES
MARIE EAVES DIR, GOVERNMENT AFFAIRS
BLAKE RIDGEWAY DIR, CORPORATE STRATEGY
EDDIE PADILLA DIR, MARKETING AND POWER CONTRACTS
JACK MADDOX DIR, INTEGRATED RESOURCE PLANNING
RICK BRINNEMAN MGR, REGIONAL PUBLIC AFFAIRS
<PAGE>
<PAGE>
EXECUTIVE RETENTION PLAN
DELETIONS TO CURRENT EXHIBIT A
June 6, 1994
EVANS SPANOS MGR, NGV SERVICE
KATHLEEN A. MAYER CONS. STRATEGIC PLANNING
JAMES A. HUNTER DIR, GAS MARKETING/BUSINESS
DEVELOPMENT
<PAGE>
[Execution Copy]
Amendment No. 1
dated as of July 1, 1994
to the
Reimbursement Agreement
dated as of November 1, 1992
between
PUBLIC SERVICE COMPANY
OF NEW MEXICO
and
CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY
relating to
Pollution Control Revenue
Refunding Bonds, 1992 Series A
(Public Service Company of New Mexico
Palo Verde Project)
<PAGE>
AMENDMENT NO. 1
to the
REIMBURSEMENT AGREEMENT
<PAGE>
THIS AMENDMENT NO. 1 (this "Amendment"), dated as of July 1,
1994, to the Reimbursement Agreement, dated as of November 1,
1992 (the "Existing Reimbursement Agreement"), between PUBLIC
SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation (the
"Company") and CANADIAN IMPERIAL OF COMMERCE, acting through its
New York Agency (the "Bank"),
W I T N E S S E T H:
WHEREAS, the Existing Reimbursement Agreement was executed
by the Company and the Bank in connection with the issuance by
the Bank of the Letter of Credit for the benefit of the Trustee
in support of the Bonds;
WHEREAS, the Existing Reimbursement Agreement incorporates
by reference certain provisions of the U.S. $225,000,000 Amended
and Restated Credit Agreement, dated as of March 8, 1991, among
the Company, as borrower, Chemical Bank and Citibank N.A., as co-
agents thereunder, and the banks named therein (the "Existing
Credit Agreement");
WHEREAS, the Existing Credit Agreement has been replaced by
the U.S. $100,000,000 Revolving Credit Agreement, dated as of
December 14, 1993, among the Company, as borrower, Chemical Bank
and Citibank N.A., as co-agents thereunder, and the banks named
therein (the "New Credit Agreement");
WHEREAS, the parties wish to amend the Existing
Reimbursement Agreement to incorporate by reference certain
provisions of the New Credit Agreement instead of provisions of
the Existing Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Company and the Bank
hereby agree as follows:
SECTION 1. Certain Definitions. The following terms
(whether or not underscored) when used in this Amendment shall
have the following meanings:
"Amended Reimbursement Agreement" means the Existing
Reimbursement Agreement as amended by this Amendment.
"Amendment" is defined in the preamble.
"Bank" is defined in the preamble.
"Company" is defined in the preamble.
"Effective Date" is defined in Section 4.
"Existing Credit Agreement" is defined in the second
recital.
"Existing Reimbursement Agreement" is defined in the
preamble.
"New Credit Agreement" is defined in the third recital.
SECTION 2. Other Definitions. Terms for which meanings
are provided in the Existing Reimbursement Agreement are, unless
otherwise defined herein or the context otherwise requires, used
in this Amendment with such meanings.
SECTION 3. Amendments to Existing Reimbursement Agreement.
Effective on the Effective Date, the Existing Reimbursement
Agreement is hereby amended in accordance with this Section 3.
Except as expressly so amended, the Existing Reimbursement
Agreement shall continue in full force and effect in accordance
with its terms.
SECTION 3.1. Section 1 (Definitions). Section 1 of the
Existing Reimbursement Agreement is amended by amending and
restating in its entirety the definition of "Credit Agreement" as
follows:
"'Credit Agreement' means the U.S.$100,000,000
Revolving Credit Agreement, dated as of December 14, 1993,
among the Company, as borrower, Chemical Bank and Citibank
N.A., as co-agents thereunder, and the banks named therein,
as amended and in effect on the date of execution hereof but
without regard to any subsequent amendment thereof."
SECTION 3.2. Section 16 (Covenants). Section 16 of the
Existing Reimbursement Agreement is amended as follows:
(a) The first sentence of clause (a) of Section 16 is
amended and restated in its entirety as follows:
"Except as may be otherwise provided in this Section
16, the Company will perform, comply with and be bound
by, for the benefit of the Bank, each of its
agreements, covenants and obligations contained in
Article V of the Credit Agreement (other than Sections
5.01(a), 5.01(b), 5.01(c), 5.01(i) and 5.02(b)
thereof), together with the related definitions not
otherwise defined herein and ancillary provisions, as
in effect on the date of execution hereof."
(b) Clause (b)(i)(B) of Section 16 is amended and
restated in its entirety as follows:
"(B) a schedule in form satisfactory to the Bank of the
computations used by the Company in determining
compliance with the covenants contained in Sections
5.01(h), 5.02(a), 5.02(c), 5.02(d) and 5.02(i) of the
Credit Agreement"
(c) Clause (b)(ii)(A) of Section 16 is amended and
restated in its entirety as follows:
"(A) a certificate of such accounting firm in
substantially the form of Exhibit H to the Credit
Agreement (with the schedules referred to therein
attached thereto) addressed to the Bank, and"
SECTION 3.3. Section 17 (Events of Default). Section 17 of
the Existing Reimbursement Agreement is amended as follows:
(a) Clause (c)(i) of Section 17 is amended and
restated in its entirety to read as follows:
"(i) the Company shall default in the observance
or performance of any covenant incorporated in clause
(a) of Section 16 by reference to Section 5.01(h) or
5.02(i) of the Credit Agreement, or contained in clause
(b)(iii) of Section 16;"
(b) Clause (c)(iii) of Section 17 is amended and
restated in its entirety to read as follows:
"(iii) the Company or any Designated Subsidiary
shall default in the observance or performance of any
covenant or agreement incorporated in clause (a) of
Section 16 by reference to Section 5.01(g), 5.01(j),
5.01(k) or 5.01(l) of the Credit Agreement or contained
in this Agreement, and such default shall remain
unremedied for ten (10) days following delivery of
notice from the Bank; or"
SECTION 4. Effective Date. When all of the conditions set
forth in Section 4.1 through Section 4.3 have been satisfied,
this Amendment shall become effective as of July 1, 1994 (the
"Effective Date") and thereafter shall be known, and may be
referred to, as "Amendment No. 1 to the Reimbursement Agreement".
SECTION 4.1. Execution of Counterparts of this Amendment.
The Bank shall have received executed counterparts of this
Amendment duly executed on behalf of the Company.
SECTION 4.2. Effectiveness of Credit Agreement. The Credit
Agreement shall have been executed and delivered by the parties
thereto, and shall have become effective in accordance with its
terms.
SECTION 4.3. Opinion of Special Counsel. The Bank shall
have received the opinion of Keleher & McLeod, P.A., special
counsel to the Company, substantially in the form of Exhibit A
attached hereto.
SECTION 4.4. Representations and Warranties; No Default or
Event of Default. On the Effective Date,
(a) the representations and warranties contained in
Section 15 of the Reimbursement Agreement and each of the
other Related Documents shall be true and correct on and as
of the Effective Date as though made on such date, and the
Bank shall have received a certificate signed by an
Authorized Officer of the Company, dated the Effective Date,
to that effect; and
(b) no Default or Event of Default shall have occurred
and be continuing, or would result from the execution and
delivery of this Amendment, and the Bank shall have received
a certificate signed by an Authorized Officer of the
Company, dated as of the Effective Date, to that effect.
SECTION 5. References. References in the Existing
Reimbursement Agreement shall hereinafter be deemed to be
references to the Amended Reimbursement Agreement.
SECTION 6. Successors and Assigns. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, subject to Section 30 of
the Amended Reimbursement Agreement.
SECTION 7. Full Force and Effect. Except as expressly
amended hereby, all of the representations, warranties, terms,
covenants, and conditions of the Existing Reimbursement Agreement
and each other Related Document shall remain unchanged and shall
remain in full force and effect in accordance with their
respective terms. The amendments set forth herein shall be
limited precisely as provided for herein to the provisions
expressly amended herein and shall not be deemed to be an
amendment of consent to or modification of any other term or
provision of the Existing Reimbursement Agreement or of any term
or provision of any other Related Document or of any transaction
or further or future action on the part of the Company which
would require the consent of the Bank under the Existing
Reimbursement Agreement.
SECTION 8. Governing Law. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK.
SECTION 9. Counterparts. This Amendment may be signed in
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto were upon the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to the Reimbursement Agreement to be executed by
their respective officers thereunto duly authorized as of the day
and year first above written.
PUBLIC SERVICE COMPANY OF NEW
MEXICO
By __________________________
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By __________________________
Title:
By __________________________
Title:
<PAGE>
<PAGE>
EXHIBIT A
[FORM OF OPINION OF KELEHER & MCLEOD, P.A.,
SPECIAL NEW MEXICO COUNSEL TO THE COMPANY]
July 1, 1994
Canadian Imperial Bank
of Commerce
New York Agency
425 Lexington Avenue
New York, New York 10017
Pollution Control Revenue
Refunding Bonds, 1992 Series A
(Public Service Company of New Mexico
Palo Verde Project) (the "Bonds")
Ladies and Gentlemen:
As New Mexico counsel to Public Service Company of New
Mexico, a New Mexico corporation (the "Company"), and in
connection with the issuance of the Bonds in 1992, we are
familiar with the corporate records of the Company, including
(i) its Restated Articles of Incorporation and by-laws, as
amended to date, and (ii) the corporate proceedings of the Board
of Directors of the Company. We have examined the following:
(a) the Reimbursement Agreement, dated as of November
1, 1992 (as amended and modified from time to time, the
"Reimbursement Agreement"), and the Amendment No. 1 thereto,
dated as of July 1, 1994 (the "Amendment"), between the
Company and Canadian Imperial Bank of Commerce, acting
through its New York Agency (the "Bank"); and
(b) the Pledge Agreement, dated as of November 1,
1992, among the Company, First National Bank in Albuquerque,
as Collateral Agent, and the Bank.
The above-referenced documents are collectively referred to
as the "Subject Documents". Capitalized terms not otherwise
defined herein have the meanings specified in the Reimbursement
Agreement as amended by the Amendment.
In this connection, we have also examined originals or
photocopies or certified copies of such documents, corporate
records, agreements and other instruments, and certificates of
public officials and officers of the Company, as we have deemed
necessary as a basis for the opinions hereinafter expressed. In
such examination, except with respect to instruments executed by
the Company or any officer thereof, we have assumed the
genuineness of all signatures (other than those of officers of
the Company), the authenticity of all instruments submitted to us
as originals and the conformity to authentic original instruments
of all copies submitted to us as certified copies or photocopies.
As to questions of fact material to our opinion, we have, when
relevant facts were not independently established, relied upon
certifications by officers of the Company.
Based upon the foregoing and having regard to legal
considerations we deem relevant, we are of the opinion that:
(1) The execution, delivery and performance by
the Company of the Amendment are within the Company's
corporate powers, have been duly authorized by all
necessary corporate action, do not contravene (a) the
Company's Organic Documents or (b) any law, rule or
regulation, or, to the best of our knowledge, any
Contractual Obligation, court order or consent decree
binding on or affecting the Company or any of its
Designated Subsidiaries, and do not result in or
require the creation of any lien, security interest or
other charge or encumbrance upon or with respect to any
of their respective properties, except as contemplated
by the Pledge Agreement.
(2) No authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority
is required for the due execution and delivery by the
Company of the Amendment, and for the performance by the
Company of the Reimbursement Agreement as amended by the
Amendment or the Pledge Agreement, other than New Mexico
Public Utility Commission ("NMPUC") approvals relating to
collateralization and refunding, each of which has been duly
obtained and is in full force and effect, and an
informational compliance filing relating to the Amendment
which will be made with the NMPUC.
(3) (a) The governing law clauses of the Amendment,
the Reimbursement Agreement as amended by the Amendment
and the Pledge Agreement, subjecting them to the law of
the State of New York, are valid under the law of the
State of New Mexico to the extent that they relate to
substantive law and not to procedural or remedial
matters.
(b) Under the law of the State of New Mexico, the
substantive law of the State of New York will be
applied to agreements such as the Amendment, the
Reimbursement Agreement as amended by the Amendment and
the Pledge Agreement, except to the extent that any
term of either such agreement or any provision of the
law of the State of New York applicable to either such
agreement violates an important public policy of the
State of New Mexico.
(c) None of the terms of the Amendment, the
Reimbursement Agreement as amended by the Amendment or
the Pledge Agreement violates an important public
policy of the State of New Mexico.
(d) Assuming that the Amendment, the
Reimbursement Agreement as amended by the Amendment and
the Pledge Agreement are legal, valid and binding under
the law of the State of New York, each of them
constitutes the legal, valid and binding obligation of
the Company, and is enforceable against the Company in
accordance with its respective terms, the civil
procedure of the State of New Mexico, and, subject to
the opinions set forth in clauses (a), (b) and (c) of
this paragraph (3), the applicable provisions of the
chosen law of the State of New York.
(4) After giving effect to the execution and delivery
of the Amendment, the Bank continues to have a first
priority perfected security interest in any Pledged Bond
delivered to the Collateral Agent pursuant to and in
accordance with the Pledge Agreement, and, so long as such
Pledged Bond is in the possession of the Collateral Agent,
no further action will be necessary to preserve, perfect or
protect such security interest or the priority thereof.
(For purposes of this paragraph (4), "Pledged Bond" shall
have the meaning specified in the Pledge Agreement.)
No opinion is expressed herein regarding the registration
requirements under the Securities Act of 1933, as amended, with
respect to the letter of credit issued by the Bank pursuant to
the Reimbursement Agreement, as to which Mayer, Brown & Platt,
counsel for the Bank, has previously delivered an opinion.
We are members of the bar of the State of New Mexico and do
not purport to be an expert on, or to render any opinion
covering, the law of any jurisdiction other than the law of the
State of New Mexico and the federal law of the United States.
The opinion in paragraph (3) above is qualified to the
extent that the binding effect and enforceability of the
agreements and instruments referred to above are subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or
other laws in effect from time to time affecting the rights of
creditors generally and to the extent that the enforceability
thereof may be limited by the application of general principles
of equity.
Respectfully submitted,
ARTHUR
ANDERSEN
ARTHUR ANDERSEN & CO. SC
August 10, 1994 Arthur Andersen & Co.
Suite 400
6501 Americas Parkway NE
Albuquerque, NM 87110-5372
505 889-4700
Public Service Company of New Mexico:
We are aware that Public Service Company of New Mexico has incorporated by
reference in its Registration Statement No. 33-65418 its Form 10-Q for the
quarter ended June 30, 1994, which includes our report dated August 10, 1994,
covering the unaudited interim financial information contain therein.
Pursuant to Regulation C of the Securities Act of 1933, that report is not
considered a part of the registration statement prepared or certified by our
firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
Arthur Andersen & Co.
[Conformed]
FIRST PV FUNDING CORPORATION,
PUBLIC SERVICE COMPANY OF NEW MEXICO
and
CHEMICAL BANK,
as Trustee
--------------
1994 SUPPLEMENTAL INDENTURE
dated as of June 8, 1994
to
COLLATERAL TRUST INDENTURE
dated as of December 16, 1985
-----------------------------
Making Provision for a Corrective Amendment
to the Indenture
PALO VERDE NUCLEAR GENERATING STATION
<PAGE>
<PAGE>
1994 SUPPLEMENTAL INDENTURE dated as of June 8, 1994
among FIRST PV FUNDING CORPORATION, a Delaware corporation (the
Company), PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico
corporation (PNM), and CHEMICAL BANK, a New York banking
corporation, as trustee (the Trustee).
WHEREAS, the Company and PNM have heretofore executed and
delivered to the Trustee an indenture dated as of December 16, 1985
(the Original Indenture) to provide for the issue from time to time
of the Company's debentures, notes or other evidences of
indebtedness to be issued in one or more series (the Securities);
WHEREAS, Section 11.01 of the Original Indenture
provides, among other things, that PNM, the Company and the Trustee
may enter into indentures supplemental to the Original Indenture
for, among other things, the purpose of establishing the form and
terms of Securities of any series as permitted by Sections 2.01 and
2.03 of the Original Indenture;
WHEREAS, PNM and the Company heretofore executed and
delivered the Series 1986A Bond Supplemental Indenture dated as of
July 15, 1986 (the Series 1986A Supplement) to the Trustee, and the
Company issued thereunder a series of Securities designated "Lease
Obligation Bonds Series 1986A" (the 1986A Bonds) in the original
aggregate principal amount of $253,677,000;
WHEREAS, PNM and the Company heretofore executed and
delivered the Series 1986B Bond Supplemental Indenture dated as of
November 18, 1986 (the Series 1986B Supplement), and the Company
issued thereunder a series of Securities designated "Lease
Obligation Bonds, Series 1986B" (the 1986B Bonds) in the original
aggregate principal amount of $460,000,000;
WHEREAS, on June 1, 1994 $210,331,000 of 1986A Bonds and
$424,986,000 of 1986B Bonds were the only Securities Outstanding
under the Original Indenture as heretofore supplemented and amended
(the Original Indenture, as heretofore supplemented and amended and
as amended by this 1994 Supplemental Indenture, being hereinafter
called the Indenture);
WHEREAS, Section 11.01 of the Original Indenture provides
that the Company and the Trustee may, without consent of the
Holders of any Securities, enter into an indenture supplemental to
the Original Indenture to cure a defective provision in the
Original Indenture provided such action does not adversely affect
the interest of the Holders of the Securities;
WHEREAS, the Company desires to make the amendment to
Section 7.01 of the Original Indenture set forth in Section 1.01 of
this 1994 Supplemental Indenture;
WHEREAS, the Company and PNM have determined that the
amendment to Section 7.01 of the Original Indenture cures a
defective provision in the Original Indenture in a manner which
does not adversely affect the interest of the Holders of the
Securities; and
WHEREAS, all acts and things necessary to constitute
these presents a valid and binding supplemental indenture and
agreement according to its terms have been done and performed, and
the execution of this 1994 Supplemental Indenture has in all
respects been duly authorized, and the Company and PNM, in the
exercise of legal right and power in them vested, execute this 1994
Supplemental Indenture:
NOW, THEREFORE, THIS 1994 SUPPLEMENTAL INDENTURE
WITNESSETH:
ARTICLE ONE
AMENDMENT TO ORIGINAL INDENTURE
WITHOUT CONSENT
SECTION 1.01. Amendment to Original Indenture.
The first and second paragraphs of Section 7.01 of the
Original Indenture are designated paragraphs "(a)" and "(b)",
respectively. There is added to the Original Indenture the
following provision:
"(c) Pursuant to the Series 1986A Series
Supplemental Indenture dated as of July 15, 1986 (the
Series 1986A Supplement), the Company issued a series of
Securities designated "Lease Obligation Bonds Series
1986A" (the Series A Bonds), of which, on June 1, 1994
two Stated Maturities of principal remain outstanding:
July 15, 1996 and January 15, 2014. Paragraph (b) of
Section 7.01 of the Original Indenture to the contrary
notwithstanding, in the event that there shall have been
any partial redemption of Series A Bonds of a particular
Stated Maturity of principal (other than pursuant to the
Sinking Fund), the Sinking Fund payments thereafter to be
made with respect to such Series A Bonds shall be
adjusted as follows. The Company shall first identify
all related Pledged Lessor Notes (as defined in Article
II of Series 1986A Supplement and identified in Schedule
2 thereto) having the same maturity as the Series A Bonds
of such particular Stated Maturity of principal redeemed,
if any, which are outstanding following such redemption;
provided, however, that for purposes of this Section
7.01(c), any such Pledged Lessor Notes with a maturity
subsequent to January 15, 2010 shall be deemed to have a
maturity of January 15, 2014. Having identified all such
outstanding Pledged Lessor Notes (the Outstanding Notes),
the Company shall determine the dates on which the
principal of such Outstanding Notes is to be amortized
(the Scheduled Amortization Dates). The amount of the
Sinking Fund payment scheduled to be made on each Sinking
Fund Date subsequent to the date of such partial
redemption shall then be adjusted to equal the aggregate
principal amount of all Outstanding Notes scheduled to be
amortized on the Scheduled Amortization Date
corresponding to such Sinking Fund Date. All such
adjustments in respect of Sinking Fund payments on a
Sinking Fund Date shall be rounded to the nearest $1,000,
and shall be subject to necessary further adjustment so
that the total amount of such reduction is at least equal
to the total principal amount of Series A Bonds redeemed
pursuant to such partial redemption. Having made the
calculations required by the preceding two sentences, the
Company shall deliver to the Trustee a Company Request
not later than 30 days following any partial redemption
of Series A Bonds (other than pursuant to the Sinking
Fund), setting forth (x) the schedules of principal
amortization of all related Outstanding Notes having the
same maturity as the Stated Maturity of principal of the
Series A Bonds redeemed and (y) a revised schedule of
Sinking Fund payments applicable to Series A Bonds having
the same Stated Maturity of principal as the Series A
Bonds redeemed. The Trustee may rely on such Company
Request and shall have no duty with respect to the
adjustments set forth therein other than to make them
available for inspection by a Holder of Series A Bonds at
the Corporate Trust Office upon reasonable notice."
SECTION 1.02. Effectiveness.
(a) The amendments to the Original Indenture specified in
Section 1.01 shall become effective for all purposes of the
Indenture, without necessity for further act by or notice to PNM,
the Company or the Trustee, upon the execution and delivery of this
1994 Supplemental Indenture by the Trustee.
(b) Upon the effectiveness of the amendments to the
Original Indenture specified in Section 1.01, the Original
Indenture shall, as provided in Section 11.05 thereof, be modified
accordingly and such amendments shall form a part of the Indenture
for all purposes and every Holder of 1986A Bonds shall be bound
thereby.
ARTICLE TWO
MISCELLANEOUS
SECTION 2.01. Execution as Supplemental Indenture;
Definitions.
This 1994 Supplemental Indenture is executed and shall be
construed as an indenture supplemental to the Original Indenture
and, as provided in the Original Indenture, this 1994 Supplemental
Indenture forms a part thereof. Except as herein expressly
otherwise defined, the use of the terms herein is in accordance
with the definitions contained in the Original Indenture.
SECTION 2.02. Responsibility for Recitals, etc.
The recitals contained herein shall be taken as the
statements of the Company and PNM, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes
no representation as to the validity or sufficiency of this 1994
Supplemental Indenture.
SECTION 2.03. Provisions Binding on Successors.
All the covenants, stipulations, promises and agreements
in this 1994 Supplemental Indenture contained by or on behalf of
the Company or PNM shall bind its successors and assigns, whether
so expressed or not.
SECTION 2.04. New York Contract.
This 1994 Supplemental Indenture shall be deemed to be a
contract under the laws of the State of New York, and for all
purposes shall be governed by and construed in accordance with the
laws of said state.
SECTION 2.05. Counterparts.
This 1994 Supplemental Indenture may be executed in any
number of counterparts, each of which shall be an original; but
such counterparts shall together constitute but one and the same
instrument.<PAGE>
IN WITNESS WHEREOF, the Company, PNM and the Trustee have
caused this 1994 Supplemental Indenture to be duly executed by
their respective officers thereunto duly authorized, as of the date
and year first above written.
FIRST PV FUNDING CORPORATION
[CORPORATE SEAL]
By /s/ M.A. Ferrucci
-------------------------
M.A. Ferrucci
President
Attest:
/s/ Kim E. Luthans
- ----------------------
Assistant Secretary
PUBLIC SERVICE COMPANY
OF NEW MEXICO
[CORPORATE SEAL]
By /s/ M.J. Marzec
-------------------------
M.J. Marzec
Treasurer
Attest:
/s/ D.A. James
- ---------------------
Assistant Secretary
CHEMICAL BANK,
as Trustee
[CORPORATE SEAL]
By /s/ T.J. Foley
-------------------------
T.J. Foley
Vice President
Attest:
/s/ P. Morabito
- ------------------------
Senior Trust Officer
