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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER 1-6986
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Exact name of Registrant as specified in its charter)
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NEW MEXICO 85-0019030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ALVARADO SQUARE 87158
ALBUQUERQUE, NEW MEXICO (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code: (505) 241-2700
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $5.00 Par Value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
(TITLE OF CLASS)
CUMULATIVE PREFERRED STOCK ($100 STATED VALUE AND WITHOUT SINKING FUND)
COMPRISED OF THE FOLLOWING SERIES:
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1965 Series, 4.58% 8.48% Series 8.80% Series
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8.75% CUMULATIVE PREFERRED STOCK ($100 STATED VALUE AND WITH A PERIODIC SINKING
FUND)
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 and (2) has been subject to such filing
requirements for the past 90 days. YES _X_ NO ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The total number of shares of the Company's Common Stock outstanding as of
January 31, 1995 was 41,774,083. On such date, the aggregate market value of the
voting stock held by non-affiliates of the Company, as computed by reference to
the New York Stock Exchange composite transaction closing price of $13 3/4 per
share reported by the Wall Street Journal, was $574,393,641.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference into the
indicated part of this report:
Proxy Statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A relating to the annual meeting of stockholders to
be held on April 25, 1995 -- PART III.
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TABLE OF CONTENTS
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GLOSSARY..................................................................................................... iii
PART I
ITEM 1. BUSINESS............................................................................................ 1
THE COMPANY........................................................................................ 1
ELECTRIC OPERATIONS................................................................................ 1
Service Area and Customers................................................................. 1
Power Sales................................................................................ 2
Sources of Power........................................................................... 3
Fuel and Water Supply...................................................................... 4
NATURAL GAS OPERATIONS............................................................................. 6
Acquisition of Natural Gas Operations...................................................... 6
Proposed Sale of Gathering and Processing Assets........................................... 6
Gas Company of New Mexico Division......................................................... 6
Gathering Company.......................................................................... 7
Processing Company......................................................................... 7
Natural Gas Supply......................................................................... 7
Natural Gas Sales.......................................................................... 8
RATES AND REGULATION............................................................................... 9
January 12, 1994 Stipulation............................................................... 9
FPPCAC..................................................................................... 9
Fossil-Fueled Plant Decommissioning Costs.................................................. 10
Postretirement Benefits.................................................................... 10
Consolidation Issues....................................................................... 10
Natural Gas Supply Matters................................................................. 11
Other Natural Gas Matters.................................................................. 12
ENVIRONMENTAL FACTORS.............................................................................. 12
ITEM 2. PROPERTIES.......................................................................................... 14
ELECTRIC........................................................................................... 14
Fossil-Fueled Plants....................................................................... 14
Nuclear Plant.............................................................................. 15
Other Electric Properties.................................................................. 16
NATURAL GAS........................................................................................ 17
WATER.............................................................................................. 17
OTHER INFORMATION.................................................................................. 17
ITEM 3. LEGAL PROCEEDINGS................................................................................... 18
PVNGS WATER SUPPLY LITIGATION...................................................................... 18
SAN JUAN RIVER ADJUDICATION........................................................................ 18
PVNGS PROPERTY TAXES............................................................................... 18
OTHER PROCEEDINGS.................................................................................. 19
Resolution Trust Corporation ("RTC") Litigation............................................ 19
Archaeological Resources Protection Act.................................................... 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................. 21
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE COMPANY......................................................... 21
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PART II
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ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..............................
23
ITEM 6. SELECTED FINANCIAL DATA............................................................................. 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............
25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................................................... F-1
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE................
E-1
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY..................................................... E-1
ITEM 11. EXECUTIVE COMPENSATION.............................................................................. E-1
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................
E-1
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................... E-1
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K....................................
E-1
SIGNATURES................................................................................................... E-22
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GLOSSARY
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AEPCO............................ Arizona Electric Power Cooperative
AG............................... New Mexico Attorney General
Amoco............................ Amoco Production Company
Anaheim.......................... City of Anaheim, California
APPA............................. Arizona Power Pooling Association
APS.............................. Arizona Public Service Company
BCD.............................. Bellamah Community Development
BHP.............................. BHP Minerals International, Inc.
BLM.............................. Bureau of Land Management
BTU.............................. British Thermal Unit
Century.......................... Century Power Corporation
Conoco........................... Conoco, Inc.
decatherm........................ 1,000,000 BTUs
DOE.............................. United States Department of Energy
EIP.............................. Eastern Interconnection Project
El Paso.......................... El Paso Electric Company
EPA.............................. United States Environmental Protection Agency
EPNG............................. El Paso Natural Gas Company
Farmington....................... City of Farmington, New Mexico
FERC............................. Federal Energy Regulatory Commission
Four Corners..................... Four Corners Power Plant
FPPCAC........................... Fuel and Purchased Power Cost Adjustment Clause
Gathering Company................ Sunterra Gas Gathering Company, a wholly-owned subsidiary of the
Company
GCNM............................. Gas Company of New Mexico, a division of the Company
IID.............................. Imperial Irrigation District in Southern California
Kv............................... Kilovolt
KWh.............................. Kilowatt Hour
Los Alamos....................... The County of Los Alamos, New Mexico
mcf.............................. Thousand cubic feet
Meadows.......................... Meadows Resources, Inc., a wholly-owned subsidiary of the Company
M-S-R............................ M-S-R Public Power Agency, a California public power agency
MW............................... Megawatt
MWh.............................. Megawatt Hour
NMED............................. New Mexico Environment Department
NMPUC............................ New Mexico Public Utility Commission
NRC.............................. United States Nuclear Regulatory Commission
OCD.............................. New Mexico Oil Conservation Division
OLE.............................. Ojo Line Extension
PGAC............................. GCNM's Purchased Gas Adjustment Clause
Plains........................... Plains Electric Generation and Transmission Cooperative, Inc.
PSCo............................. Public Service Company of Colorado
Processing Company............... Sunterra Gas Processing Company, a wholly-owned subsidiary of the
Company
PVNGS............................ Palo Verde Nuclear Generating Station
Reeves Station................... Reeves Generating Station
Salt River Project............... Salt River Project Agricultural Improvement and Power District
SCE.............................. Southern California Edison Company
SCPPA............................ Southern California Public Power Authority
SDCW............................. Sangre de Cristo Water Company, a division of the Company
SDG&E............................ San Diego Gas and Electric Company
SFAS............................. Statement of Financial Accounting Standards
SJCC............................. San Juan Coal Company
SJGS............................. San Juan Generating Station
Southern Union................... Southern Union Company
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iii
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SPS.............................. Southwestern Public Service Company
Sunbelt.......................... Sunbelt Mining Company, Inc., a wholly-owned subsidiary of the
Company
TNP.............................. Texas-New Mexico Power Company
throughput....................... Volumes of gas delivered, whether or not owned by GCNM or
Gathering Company
Tucson........................... Tucson Electric Power Company
UAMPS............................ Utah Associated Municipal Power Systems
USEC............................. United States Enrichment Corporation
Williams......................... Williams Gas Processing--Blanco, Inc., a subsidiary of the
Williams Field Services Group, Inc., of Tulsa, Oklahoma
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PART I
ITEM 1. BUSINESS
THE COMPANY
Public Service Company of New Mexico (the "Company") was incorporated in the
State of New Mexico in 1917 and has its principal offices at Alvarado Square,
Albuquerque, New Mexico 87158 (telephone number 505-241-2700). The Company is a
public utility engaged in the generation, transmission, distribution and sale of
electricity and in the gathering, processing, transmission, distribution and
sale of natural gas within the State of New Mexico. The Company also owns
facilities for the pumping, storage, transmission, distribution and sale of
water in Santa Fe, New Mexico.
On January 11, 1993, the Company announced its intention to dispose of the
Company's natural gas gathering and natural gas processing assets and SDCW. Both
sales are pending NMPUC approval. (See PART II, ITEM 7. --"MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
OTHER ISSUES FACING THE COMPANY -- SALE OF GAS GATHERING AND PROCESSING ASSETS"
and -- "SALE OF SDCW.")
The total population of the area served by one or more of the Company's
utility services is estimated to be approximately 1.2 million, of which 51% live
in the greater Albuquerque area.
For the year ended December 31, 1994, the Company derived 68.7% of its
utility operating revenues from electric operations, 29.8% from natural gas
operations and 1.5% from water operations.
As of December 31, 1994, the Company employed 2,768 persons.
Financial information relating to amounts of revenue and operating income
and identifiable assets attributable to the Company's industry segments is
contained in note 12 of the notes to consolidated financial statements.
ELECTRIC OPERATIONS
SERVICE AREA AND CUSTOMERS
The Company's electric operations serve four principal markets. Sales to
retail customers and sales to firm-requirements wholesale customers, sometimes
referred to collectively as "system" sales, comprise two of these markets. The
third market consists of other contracted sales to utilities for which the
Company commits to deliver a specified amount of capacity (measured in MW) or
energy (measured in MWh) over a given period of time. The fourth market consists
of economy energy sales made on an hourly basis to utilities at fluctuating,
spot-market rates. Sales to the third and fourth markets are sometimes referred
to collectively as "off-system" sales.
The Company provides retail electric service to a large area of north
central New Mexico, including the cities of Albuquerque, Santa Fe, Rio Rancho,
Las Vegas, Belen and Bernalillo. The Company also provides retail electric
service to Deming in southwestern New Mexico and to Clayton in northeastern New
Mexico. As of December 31, 1994, approximately 323,000 retail electric customers
were served by the Company, the largest of which accounted for approximately
3.4% of the Company's total electric revenues for the year ended December 31,
1994.
The Company's largest retail electric customer, Kirtland Air Force Base
("KAFB"), has been recommended by the Department of the Air Force for
realignment. Such recommendation will be reviewed by the Base Realignment and
Closure Commission ("Closure Commission"). The Company's President and Chief
Executive Officer is a member of the Closure Commission. The Closure
Commission's recommendation, once finalized, is subject to approval by both the
President and Congress. If the proposal is approved, major military units at
KAFB would be deployed elsewhere and a portion of the base would be closed. The
Department of the Air Force recommendation stated that the realignment could
result in a maximum potential reduction of approximately 12,000 jobs
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(both direct and indirect) over the 1996-2001 time period in the Bernalillo
County area of New Mexico. The Company does not anticipate that such action will
have a material effect on its total electric revenues.
The Company holds 23 long-term, non-exclusive franchise agreements for its
electric retail operations, expiring between August 1996 and November 2028. The
City of Albuquerque (the "City") franchise expired in early 1992. Customers in
the area covered by the City franchise represent approximately 45.6% of the
Company's 1994 total electric operating revenues, and no other franchise area
represents more than 7.1%. These franchises are agreements that provide the
Company access to public rights-of-way for placement of the Company's electric
facilities. The Company remains obligated under state law to provide service to
customers in the franchise area even in the absence of a franchise agreement
with the City. (See PART II, ITEM 7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING THE COMPANY
- -- ALBUQUERQUE FRANCHISE ISSUES".)
POWER SALES
For the years 1990 through 1994, retail KWh sales have grown at a compound
annual rate of approximately 4.2%. The Company's system and off-system sales
(revenues and energy consumption) and system peak demands in summer and winter
are shown in the following tables:
ELECTRIC SALES BY MARKET
(THOUSANDS OF DOLLARS)
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1994 1993 1992 1991 1990
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Retail.......................................... $ 506,286 $ 471,099 $ 455,387 $ 444,594 $ 427,505
Firm-requirements wholesale..................... 22,296 18,468 20,173 22,390 25,739
Other contracted off-system sales............... 54,862+ 56,214+ 62,348 55,581 70,640
Economy energy sales*........................... 19,663+ 25,213+ 40,770 29,665 26,052
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ELECTRIC SALES BY MARKET
(MEGAWATT HOURS)
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1994 1993 1992 1991 1990
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Retail....................................... 5,953,151 5,446,788 5,358,246 5,139,954 5,048,830
Firm-requirements wholesale.................. 489,182 342,137 322,177 308,390 376,040
Other contracted off-system sales............ 1,403,480 1,450,966 1,198,250 1,223,212 1,743,196
Economy energy sales*........................ 1,469,271 1,582,113 2,164,991 1,559,939 1,378,270
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* Pursuant to FERC Order No. 529, all spot market economy sale transactions
were reclassified from net purchased power to revenue.
+ Due to the provision for the loss associated with the M-S-R contingent
power purchase contract recognized in 1992, revenues from other contracted
off-system sales and economy energy sales were reduced by a total of $25
million and $20.5 million in 1994 and 1993, respectively.
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SYSTEM PEAK DEMAND*
(MEGAWATTS)
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1994 1993 1992 1991 1990
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Summer............................................................... 1,189 1,104 1,053 1,018 1,051
Winter............................................................... 1,040 982 992 955 897
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* System peak demand relates to retail and firm-requirements wholesale
customers only.
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During 1994 and 1993, the Company's sales in the off-system markets
accounted for approximately 30.8 percent and 34.4 percent, respectively, of its
total KWh sales and approximately 15.8 percent and 17.2 percent (before
reduction of revenues from the M-S-R contingent power purchase contract, which
were accounted for in the determination of the provision for loss recorded in
1992), respectively, of its total revenues from energy sales. During 1994, the
Company's major off-system sale contracts in effect were with SDG&E, APPA,
AEPCO, IID and PSCo.
The SDG&E contract requires SDG&E to purchase 100 MW from the Company
through April 2001. On October 27, 1993, SDG&E filed a complaint with the FERC
against the Company, alleging that certain charges under this 1985 power
purchase agreement are unjust, unreasonable and unduly discriminatory. SDG&E is
requesting that the FERC investigate the rates charged under the agreement. The
relief, if granted, would reduce annual demand charges paid by SDG&E by up to
$11 million per year from the date of the ruling through April 2001, and could
require a refund of up to approximately $14 million. The Company responded to
the complaint on December 8, 1993, and SDG&E and the Company filed subsequent
pleadings. The FERC has not issued a ruling in the case and has not indicated
when or if the complaint will be considered. The Company believes that the
complaint is without merit, and the Company intends to vigorously resist the
complaint.
The APPA contract requires APPA to purchase varying amounts of power from
the Company through May 2008 and allows APPA to make adjustments to the purchase
amounts subject to certain notice provisions. APPA provided notice that it was
invoking its option to reduce the power demand in 1995, resulting in a peak
demand of 89 MW. The AEPCO contract which required AEPCO to purchase 15 MW of
power terminated on May 31, 1994. The IID contract which required IID to
purchase a peak amount of 81 MW from the Company expired on February 28, 1995.
The Company sold 75 MW of capacity and associated energy to PSCo from October 1,
1993 through September 30, 1994.
The Company furnishes firm-requirements wholesale power in New Mexico to the
cities of Farmington and Gallup, TNP and Plains. Plains may terminate its
contract for 10 MW at any time with one year's advance notice. The Company
expects to receive a termination notice from Plains but cannot predict the
timing of such notice. The Company is committed to provide service to the City
of Gallup through April 2003. Average monthly demands under the City of Gallup
contract for 1994 were approximately 26 MW. TNP is currently purchasing 36 MW
but has provided notice that it will reduce its purchase to 15 MW for 1996. TNP
may adjust its annual demand between 15 MW and 40 MW with one year's notice and
may terminate service with two years' notice. No firm-requirements wholesale
customer accounted for more than 1.6% of the Company's total electric operating
revenues for the year ended December 31, 1994.
SOURCES OF POWER
As of December 31, 1994, the total net generation capacity of facilities
owned or leased by the Company was 1,506 MW.
In addition, the Company has power purchase contracts with M-S-R for 105 MW
through April 1995 and with SPS for up to 100 MW of interruptible power through
April 1995 and up to 200 MW from May 1995 through May 2011. The Company may
reduce its purchases from SPS by 25 MW annually upon three years' notice. Also,
the Company has 39 MW of contingent capacity obtained from El Paso under a
transmission capacity for generation capacity trade arrangement that increases
to 70 MW from 1998 through 2003. In addition, the Company is interconnected with
various utilities for economy interchanges and mutual assistance in emergencies.
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FUEL AND WATER SUPPLY
The percentages of the Company's generation of electricity (on the basis of
KWh) fueled by coal, nuclear fuel and gas and oil, and the average costs to the
Company of those fuels (in cents per million BTU), during the past five years
were as follows:
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COAL NUCLEAR GAS AND OIL
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PERCENT OF AVERAGE PERCENT OF AVERAGE PERCENT OF AVERAGE
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1990.................................... 74.6 152.0 25.2 73.1 0.2 310.3
1991.................................... 67.1 167.9 32.9 67.9 -- 216.5
1992.................................... 69.2 161.7 30.5 59.8 0.3 239.7
1993.................................... 72.9 164.7 26.7 58.1 0.4 331.7
1994.................................... 72.0 162.9 27.8 58.5 0.2 321.7
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The estimated generation mix for 1995 is 72.2% coal, 27.7% nuclear and 0.1%
gas and oil. Due to locally available natural gas and oil supplies, the
utilization of locally available coal deposits and the generally abundant supply
of nuclear fuel, the Company believes that adequate sources of fuel are
available for its generating stations.
COAL
The coal requirements for SJGS are being supplied by SJCC, a wholly-owned
subsidiary of BHP, from certain Federal, state and private coal leases under a
coal sales agreement, pursuant to which SJCC will supply processed coal for
operation of SJGS until 2017. BHP guaranteed the obligations of SJCC under the
agreement, which contemplates the delivery of approximately 126 million tons of
coal during its remaining term. Such amount would supply substantially all the
requirements of SJGS through approximately 2017. The primary sources of coal are
a mine adjacent to SJGS and a mine located approximately 25 miles northeast of
SJGS in the La Plata area of northwestern New Mexico. The Company is currently
discussing with SJCC alternatives for securing both short and long term fuel
resource requirements which at this time are uncommitted. As a part of this
discussion, the Company is also negotiating other issues which may result in
modifications to certain coal sales agreement terms and provisions which include
but are not limited to cost recovery and pricing. The average cost of fuel,
including ash disposal and land reclamation costs, for SJGS for the years 1992,
1993 and 1994 was 175.5 cents, 177.4 cents and 172.1 cents, respectively, per
million BTU ($34.28, $34.59 and $33.62 per ton, respectively).
Four Corners is supplied with coal under a fuel agreement between the owners
and BHP, under which BHP agreed to supply all the coal requirements for the life
of the plant. BHP holds a long-term coal mining lease, with options for renewal,
from the Navajo Nation and operates a strip mine adjacent to Four Corners with
the coal supply expected to be sufficient to supply the units for their
estimated useful lives. The average cost of fuel, including ash disposal and
land reclamation costs, for the years 1992, 1993 and 1994 at Four Corners was
114.3 cents, 114.9 cents and 125.8 cents, respectively, per million BTU ($20.19,
$20.11 and $22.03 per ton, respectively).
NATURAL GAS
The natural gas used as fuel for the Company's Albuquerque electric
generating plant (Reeves Station) is delivered by GCNM. (See "NATURAL GAS
OPERATIONS".) In addition to rate changes under filed tariffs, the Company's
cost of gas increases or decreases according to the average cost of gas supplied
by GCNM or other sources.
NUCLEAR FUEL
The fuel cycle for PVNGS is comprised of the following stages: (1) the
mining and milling of uranium ore to produce uranium concentrates, (2) the
conversion of uranium concentrates to uranium hexafluoride, (3) the enrichment
of uranium hexafluoride, (4) the fabrication of fuel assemblies, (5) the
utilization of fuel assemblies in reactors, and (6) the storage of spent fuel
and the disposal thereof. The PVNGS participants made arrangements to obtain
quantities of uranium concentrates anticipated to be sufficient to meet
operational requirements through 1996. Existing
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contracts and options could be utilized to meet 95% of requirements from 1997
through 2000. Spot purchases in the uranium market will be made, as appropriate.
The PVNGS participants contracted for all conversion services required through
1995 and for up to 65% of conversion services required through 1998, with
options to continue through the year 2000. The PVNGS participants, including the
Company, have an enrichment services contract with USEC which obligates USEC to
furnish enrichment services required for the operation of the three PVNGS units
over a term expiring in November 2014. The participants have obtained 100% of
the enrichment requirements through the year 2002 under the latest contract and
options. The PVNGS participants are currently re-negotiating fuel assembly
fabrication arrangements and anticipate finalizing contract terms during 1995.
Existing spent fuel storage facilities at PVNGS have sufficient capacity
with certain modifications to store all fuel expected to be discharged from
normal operation of all of the PVNGS units through at least the year 2005.
Pursuant to the Nuclear Waste Policy Act of 1982, as amended in 1987 (the "Waste
Act"), DOE is obligated to accept and dispose of all spent nuclear fuel and
other high-level radioactive wastes generated by all domestic power reactors.
The NRC, pursuant to the Waste Act, also requires operators of nuclear power
reactors to enter into spent fuel disposal contracts with DOE. APS, on its own
behalf and on behalf of the other PVNGS participants, executed a spent fuel
disposal contract with DOE. The Waste Act also obligates DOE to develop the
facilities necessary for the permanent disposal of all spent fuel generated and
to be generated by domestic power reactors and to have the first such facility
in operation by 1998 under prescribed procedures. In November 1989, DOE reported
that such a permanent disposal facility will not be in operation until 2010. As
a result, under DOE's current criteria for shipping allocation rights, PVNGS's
spent fuel shipments to the DOE permanent disposal facility would begin in
approximately 2025. In addition, APS believes that on-site storage of spent fuel
may be required beyond the life of the PVNGS Units. APS currently believes that
alternative interim spent fuel storage methods are or will be available on-site
or off-site for use by PVNGS to allow its continued operation beyond 2005 and to
safely store spent fuel until DOE's scheduled shipments from PVNGS begin.
WATER SUPPLY
Water for Four Corners and SJGS is obtained from the San Juan River. (See
ITEM 3. --"LEGAL PROCEEDINGS -- SAN JUAN RIVER ADJUDICATION".) BHP holds rights
to San Juan River water and has committed a portion of such rights to Four
Corners through the life of the project. The Company and Tucson have a contract
with the United States Bureau of Reclamation for consumption of 16,200 acre feet
of water per year for SJGS, which contract expires in 2005, and in addition, the
Company was granted the authority to consume 8,000 acre feet of water per year
under a state permit that is held by BHP. The Company is of the opinion that
sufficient water is under contract for SJGS until 2005.
On January 29, 1993, the U.S. Fish and Wildlife Service proposed a portion
of the San Juan River as critical habitat for two fish species. This designation
may impact uses of the river and its flood plains and will require certain
analysis under the Endangered Species Act of 1973 of all significant Federal
actions. Renewal of the SJGS water contract is considered a significant Federal
action.
Due to extensive lead times required to renew the water rights contract, the
Company has formally initiated the renewal and extension process for requesting
rights through the year 2025. The Company is actively conducting an
environmental assessment with the Bureau of Reclamation and a biological
assessment with the U.S. Fish and Wildlife Service. These studies are required
by the Federal agencies before the existing water contract can be renewed. The
Company is currently unable to predict the outcome of these matters.
Sewage effluent used for cooling purposes in the operation of the PVNGS
units has been obtained under contracts with certain municipalities in the area.
The contracted quantity of effluent exceeds the amount required for the three
PVNGS units. The validity of these effluent contracts is the subject of
litigation in state and Federal courts. (See ITEM 3. --"LEGAL PROCEEDINGS --
PVNGS WATER SUPPLY LITIGATION".)
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NATURAL GAS OPERATIONS
ACQUISITION OF NATURAL GAS OPERATIONS
In 1985, the Company acquired substantially all of the New Mexico natural
gas utility assets of Southern Union (principally a natural gas retail
distribution system operated by Southern Union as the Gas Company of New Mexico
division and now operated by the Company as GCNM) and Sunbelt acquired all of
the stock of Southern Union Gathering Company (subsequently renamed Sunterra Gas
Gathering Company), a wholly-owned subsidiary of Southern Union, in connection
with the settlement of antitrust litigation against Southern Union in which the
Company and others were plaintiffs. In a separate transaction, a wholly-owned
subsidiary of Sunbelt acquired from Southern Union all of the stock of Southern
Union Processing Company (subsequently renamed Sunterra Gas Processing Company)
in 1986. In 1990, the Company acquired all of the common stock of Gathering
Company and Processing Company from Sunbelt and the Sunbelt subsidiary,
respectively. Together with GCNM, Gathering Company and Processing Company are
referred to as the Company's natural gas operations.
PROPOSED SALE OF GATHERING AND PROCESSING ASSETS
On February 12, 1994, the Company, Gathering Company and Processing Company
entered an agreement to sell substantially all of their gas gathering and
processing facilities. The Company believes that the sale, which requires prior
NMPUC approval, will allow GCNM to focus on providing retail gas services to New
Mexico gas consumers while maintaining its flexibility in accessing
competitively priced, reliable and secure gas supplies. (See PART II, ITEM 7.
- --"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- OTHER ISSUES FACING THE COMPANY -- SALE OF GAS GATHERING AND
PROCESSING ASSETS".)
GAS COMPANY OF NEW MEXICO DIVISION
The Company distributes natural gas through GCNM to most of the major
communities in New Mexico, including Albuquerque and Santa Fe, serving
approximately 382,000 customers as of December 31, 1994. The Albuquerque
metropolitan area accounts for approximately 54.4% of the Company's total
customers. The Company holds long-term, non-exclusive franchises with varying
expiration dates in all incorporated communities requiring franchise agreements.
The expiration dates for the Company's franchises in Albuquerque and Santa Fe
are 1998 and 1995, respectively. The Company is in the process of negotiation
with the City of Santa Fe and anticipates that a new agreement will be in place
prior to the termination of the current agreement. GCNM's customer base includes
both "sales-service" customers and "transportation-service" customers.
Sales-service customers purchase natural gas and receive transportation and
delivery services from GCNM for which GCNM receives both cost-of-gas and
cost-of-service revenues. Cost-of-gas revenues collected from sales service
customers are a recovery of the cost of purchased gas in accordance with NMPUC
rules and regulations and, in that sense, do not affect the net earnings of the
Company. Transportation-service customers, who procure gas independently of GCNM
and contract with GCNM for transportation and related services, provide GCNM
with cost-of-service revenues only. Transportation services are provided both to
gas marketers generally for delivery to locations throughout GCNM's distribution
systems and to natural gas producers generally for delivery to other interstate
pipelines.
For the twelve months ended December 31, 1994, GCNM had throughput of
approximately 85.0 million decatherms, including sales of 41.9 million
decatherms to sales-service customers. No single customer accounted for more
than 1.5% of GCNM's therm sales in 1994. During 1994, approximately 50.8% of
GCNM's total gas throughput was related to transportation gas deliveries. GCNM's
transportation rates are unbundled, and transportation customers only pay for
the amount of transportation service they receive from GCNM. GCNM's total
operating revenues for the year ended
6
<PAGE>
December 31, 1994, were approximately $234.9 million. Cost-of-gas revenues,
received from sales-service customers, accounted for approximately 43.4% of
GCNM's total operating revenues. Since a major portion of GCNM's load is related
to heating, levels of therm sales are affected by the weather. Approximately
44.6% of GCNM's total therm sales in 1994 occurred in the months of January,
February, November and December.
GATHERING COMPANY
Gathering Company is engaged in the ownership and operation of gas gathering
facilities primarily in the San Juan Basin in northwestern New Mexico, the
purchase of gas from sources in the San Juan Basin, the sale of natural gas to
GCNM and the gathering of natural gas for third parties. In 1994, Gathering
Company sold approximately 9.9 million decatherms of natural gas to GCNM and
gathered 47.1 million decatherms of natural gas for third parties.
In January 1990, Gathering Company entered into a natural gas sale and
gathering contract with GCNM. The contract allows Gathering Company to recover
from GCNM, effective January 1988, substantially all of its operating costs, net
of its third-party revenues (including revenues received from Processing
Company), and to earn a return on its investment in its operating assets. In
addition, Gathering Company is permitted under the contract to charge to GCNM
all payments made arising from take-or-pay obligations and from contract
reformation. (See "RATES AND REGULATION -- Natural Gas Supply Matters".) On
February 12, 1994, Gathering Company entered into an agreement to sell
substantially all of its assets. (See PART II, ITEM 7. --"MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
OTHER ISSUES FACING THE COMPANY -- SALE OF GAS GATHERING AND PROCESSING
ASSETS".) As a result of the sale, the gas sales and gathering contract with
GCNM will either be terminated or assigned to the purchaser of the assets.
PROCESSING COMPANY
Processing Company processes natural gas for GCNM, Gathering Company and
others. The natural gas is processed at Processing Company's plants under
separate contracts. Both GCNM and Gathering Company executed contracts with
Processing Company in January 1990. The GCNM contract provides that GCNM will
reimburse Processing Company for all of its operating costs, net of its
third-party revenues (including fees from Gathering Company), and provides a
return on Processing Company's investment in its operating assets, in return for
providing the service of processing GCNM's natural gas. Additionally, Processing
Company reimburses GCNM for all revenues from liquid by-products derived from
GCNM's throughput processed at the plants. Such revenues, including all third
party processing fees, are ultimately credited to GCNM's sales-service customers
through the PGAC. The Gathering Company's contract with Processing Company
provides the same service for Gathering Company and in return for such service,
Gathering Company pays Processing Company a fee per mcf of gas which is
processed on behalf of Gathering Company. Processing Company reimburses
Gathering Company for all revenues from liquid by-products derived from
Gathering Company's throughput processed at the plants. On February 12, 1994,
Processing Company entered into an agreement to sell substantially all of its
assets. (See PART II, ITEM 7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING THE COMPANY
- -- SALE OF GAS GATHERING AND PROCESSING ASSETS".) As a result of the sale, the
processing agreements with GCNM and Gathering Company will either be terminated
or assigned to the purchaser of the assets.
NATURAL GAS SUPPLY
During the late 1980's, there were significant changes in the natural gas
industry brought about by Federal and state regulations which dramatically
altered the way gas is bought, transported and sold nationwide. These changes
required GCNM and Gathering Company to reform or terminate certain natural gas
purchase contracts which required GCNM and Gathering Company to take gas in
7
<PAGE>
excess of demand. This process resulted in breach of contract claims from some
producers. GCNM and Gathering Company have been able to resolve substantially
all of the producer litigation and reform their supply portfolio so that it
better matches the demands of GCNM's sales-service customers. These reformations
have also allowed GCNM to seek new sources of gas supplies through pipeline
interconnects which have created a more flexible and reliable supply portfolio.
GCNM may purchase natural gas through contracts which contain reservation fees.
The NMPUC is currently examining in GCNM's PGAC continuation filing whether
reservation fees, which have been paid to suppliers for standing ready to serve
GCNM's needs during the winter heating season, should be recovered from
sales-service customers through the PGAC or should be recovered in some other
fashion. (See "RATES AND REGULATION -- Other Natural Gas Matters".)
GCNM obtains its supply of natural gas primarily from New Mexico wells
pursuant to contracts with producers and marketers. In connection with the sale
of substantially all of the assets of Gathering Company, GCNM has petitioned the
NMPUC to approve assignment of all of the gas purchase contracts held by
Gathering Company to GCNM. These contracts are generally sufficient to meet
GCNM's peak-day demand.
GCNM serves certain cities which depend on EPNG or Transwestern Pipeline
Company for transportation of gas supplies. Because these cities are not
directly connected to GCNM's transmission facilities, gas transported by these
companies is the sole supply source for those cities. Such transportation is
regulated by FERC. As a result of FERC Order 636, GCNM's options for
transporting gas to such cities and other portions of its distribution system
have increased.
As a result of routine periodic audits since 1990 by Meridian Oil Inc. and
its related or affiliated companies, Southland Royalty Company, Meridian Oil
Production Inc. and Unicon Producing Company (collectively "Meridian"), Meridian
has asserted claims against GCNM, Gathering Company and Processing Company
regarding the allocation of natural gas liquids from Processing Company's Kutz
and Lybrook plants. Meridian has also asserted certain related gathering and
transportation claims. Some issues have been resolved, and certain other issues,
primarily those regarding allocation of liquids and the measurement of gas under
gathering/transportation agreements, are still pending. Unresolved claims appear
to be approximately $4 million; however, the Company has responded to the
majority of the claims, continues to evaluate the claims, and expects that such
claims will be ultimately resolved at no material cost to the Company.
NATURAL GAS SALES
The following table shows gas throughput by customer class for GCNM and
Gathering Company:
GAS THROUGHPUT
(MILLIONS OF DECATHERMS)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Residential........................................................... 27.1 28.0 27.1 26.2 25.2
Commercial............................................................ 9.8 10.4 10.6 11.4 11.3
Industrial............................................................ 0.8 0.9 0.7 0.8 1.3
Public authorities.................................................... 2.5 2.5 4.2 4.9 5.3
Irrigation............................................................ 1.3 1.3 1.1 1.4 1.8
Sales for resale...................................................... 0.7 1.0 2.0 1.4 3.5
Unbilled.............................................................. (0.3) (0.6) 0.6 -- --
Transportation*....................................................... 90.2 91.8 73.6 62.6 42.5
Spot market sale...................................................... -- -- 0.9 1.6 8.1
--------- --------- --------- --------- ---
132.1 135.3 120.8 110.3 99.0
--------- --------- --------- --------- ---
--------- --------- --------- --------- ---
<FN>
- ------------------------
* Customer-owned gas
</TABLE>
8
<PAGE>
The following table shows gas revenues by customer class for GCNM, Gathering
Company and Processing Company:
GAS REVENUES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Residential..................................... $ 149,439 $ 149,796 $ 125,313 $ 137,436 $ 137,633
Commercial...................................... 42,725 44,575 37,222 46,676 49,575
Industrial...................................... 2,905 3,369 2,063 2,754 4,993
Public authorities.............................. 9,969 9,694 12,313 17,711 20,392
Irrigation...................................... 4,061 4,418 2,713 4,495 5,934
Sales for resale................................ 2,462 3,137 4,460 3,848 7,253
Unbilled........................................ 267 (1,573) 716 -- --
Transportation*................................. 27,592 26,729 18,753 16,997 11,939
Liquids......................................... 16,090 18,724 26,427 30,500 39,086
Processing fees................................. 10,638 9,761 6,795 5,819 3,127
Spot market sales............................... -- -- 1,410 1,771 13,880
Other........................................... 3,362 2,457 4,974 9,062 8,292
----------- ----------- ----------- ----------- -----------
$ 269,510 $ 271,087 $ 243,159 $ 277,069 $ 302,104
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<FN>
- ------------------------
* Customer-owned gas
</TABLE>
RATES AND REGULATION
The Company is subject to the jurisdiction of the NMPUC with respect to its
retail electric, gas and water rates, service, accounting, issuance of
securities, construction of new generation and transmission facilities and other
matters. The FERC has jurisdiction over rates and other matters related to
wholesale electric sales.
JANUARY 12, 1994 STIPULATION
On January 12, 1994, the Company and the NMPUC staff and primary intervenor
groups entered into a stipulation. The Company filed the stipulation with the
NMPUC, recommending that electric retail rates be reduced by $30 million. On
November 28, 1994, the NMPUC issued a final order approving the stipulation as
interpreted and provided by the order which was effective for bills rendered
starting November 29, 1994. (See PART II, ITEM 7. -- "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- OVERVIEW --
SPECIFIC ACTIONS BY THE COMPANY".)
FPPCAC
RETAIL CUSTOMERS
On December 22, 1993, the Company and primary intervenors entered into a
stipulation, agreeing to eliminate the FPPCAC from the Company's retail
billings, and set the base fuel cost (defined in the stipulation as fuel costs
plus net purchased power costs less off-system sales revenues) as a component of
the cost of service effective with the order in the Company's next general rate
case.
As part of the final order approving the January 12, 1994 stipulation, the
Company's FPPCAC for its retail customers was eliminated. A base fuel cost was
incorporated into the overall rates approved by the stipulation. Although the
cost of fuel and the conditions in the off-system sales market could change
either positively or negatively from the levels established, the Company
currently does not believe that the elimination of the FPPCAC will have a
material adverse impact on the Company's results of operation or financial
condition.
9
<PAGE>
FIRM-REQUIREMENTS WHOLESALE CUSTOMERS
The Company's firm-requirements wholesale customers have a FPPCAC which has
an approximate 30-day time lag in implementation of the FPPCAC for billing
purposes. The Company's FPPCAC for its firm-requirement wholesale customers had
been at variance with the filed FERC tariffs. As a result, the Company filed a
petition with FERC on October 28, 1993 to request deviation from the filed FERC
tariffs for the period of July 1985 through January 1993. The Company's filing
indicated that the four firm-requirement wholesale customers benefitted during
that time period relative to the energy costs they would have been billed under
the application of the filed FERC tariffs. The four affected customers concur
with the Company's position and have filed a certificate of concurrence with
FERC. Discussions regarding the Company's filing with FERC staff have occurred,
but at this time no formal response has been given to the Company. The Company
has no indication of when a formal response will be received. However, the
Company does not anticipate any material adverse impacts on the Company's
financial condition or results of operations as a result of this issue.
FOSSIL-FUELED PLANT DECOMMISSIONING COSTS
The Company's six owned or partially owned, in service and retired,
fossil-fueled generating stations are expected to incur dismantling and
reclamation costs as they are decommissioned. The Company's share of
decommissioning costs for all of its fossil-fueled generating stations is
projected to be approximately $134 million stated in 1994 dollars, including
approximately $24.4 million (of which $10.2 million has already been expended)
for Person, Prager and Santa Fe Stations which have been retired.
In June 1993, the Company filed for recovery of all estimated
decommissioning costs by factoring such costs into the Company's depreciation
rate study filed with the NMPUC.
As part of the final order approving the January 12, 1994 stipulation, the
NMPUC approved the depreciation rates, except for those decommissioning costs
related to the three retired generating units, and incorporated them into the
determination of retail rates.
POSTRETIREMENT BENEFITS
The Company adopted SFAS No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS, effective January 1, 1993. SFAS No. 106 requires
accrual of postretirement benefits during the years employees provide services.
Prior to 1993, the costs of these benefits were expensed on a pay-as-you-go
basis. In 1993, the NMPUC issued a final order in a case regarding an inquiry
into SFAS No. 106. In its final order, the NMPUC adopted a policy which provides
for accrual accounting for the postretirement benefit costs, funding
requirements into an irrevocable trust and specific reporting for the benefit
costs in future rate cases. The order also provides for specific waiver
provisions with respect to the external trust funding requirements and a
deferral of the benefit costs in excess of the pay-as-you-go basis. The Company
received approval on November 28, 1994 for the recovery of the full accrual
amount of SFAS No. 106 expense for its electric business unit. As of December
31, 1994, no benefit costs were deferred for the electric business unit. The
Company filed supplemental information regarding the funding of postretirement
benefits on February 24, 1995, which outlined the types of funding vehicles and
the amounts funded for 1994 related to the electric business unit. The Company
defers the benefit costs in excess of the pay-as-you-go basis for the gas
business unit ($2.8 million deferred as of December 31, 1994) and will address
the recovery of this amount as well as the full accrual amount of SFAS No. 106
expense related to the gas business unit in its next general rate case which
will be filed in 1995.
CONSOLIDATION ISSUES
Pursuant to a prior NMPUC order, the Company filed an application on
December 21, 1993 for NMPUC approval to combine certain customer service
functions of its gas and electric utility divisions in order to achieve cost
savings and to improve service to customers. At the same time, the Company
10
<PAGE>
filed a separate request for a declaratory order from the NMPUC confirming that
the Company's realignment of senior corporate officers' responsibilities during
1993 complies with a 1984 NMPUC order placing certain organizational
restrictions on the operation of the gas and electric divisions. On February 7,
1994, the NMPUC consolidated the two proceedings.
On January 17, 1995, the Company and the staff of the NMPUC entered into a
stipulation regarding the consolidated cases. The stipulation provides for the
approval of the consolidation of certain customer service functions of the gas
and electric divisions, as proposed by the Company. The stipulation also
provides for the dismissal of the declaratory order proceeding without a
determination that the Company's 1993 or 1994 organizational structure was
either in compliance or not in compliance with the 1984 NMPUC order. The basis
for the dismissal of the Company's declaratory order petition is that the
Company's post-January 1, 1995 organizational structure has rendered the case
moot. The two intervenors in the consolidated cases, the City of Albuquerque and
the New Mexico Industrial Energy Consumers, did not join in the stipulation, but
filed statements of position supporting customer service consolidation and not
agreeing to final determination of the compliance issues relating to the
Company's organizational structure. The stipulation is subject to the approval
of the NMPUC.
A hearing on the approval of the stipulation was held before an NMPUC
hearing examiner on January 24, 1995, and the matter is currently pending before
the hearing examiner. A decision from the NMPUC is anticipated in the first half
of 1995.
NATURAL GAS SUPPLY MATTERS
On December 18, 1989, the NMPUC issued an order approving a stipulation
relating to GCNM's need to reform its gas supply portfolio. This stipulation
provides for the partial recovery of certain gas costs arising from reformation
of gas purchase contracts and from claims by certain producers relating to
take-or-pay obligations, contract pricing and other matters. The mechanism
established by the order does not apply to any suits not settled or for which no
initial judgement on the merits had been rendered by December 31, 1993. Under
the order, GCNM bears 25% of producer take-or-pay costs (including such costs
paid by GCNM to Gathering Company under their gas sale and gas gathering
contract) for claims settled. GCNM will be permitted to recover from its sales
and transportation customers the remaining 75% of take-or-pay costs over a
period of years. The order allows GCNM to recover from its customers all
take-or-pay costs assessed by interstate pipelines. The order also provides that
GCNM may recover all costs (including costs paid by GCNM to Gathering Company
under their natural gas sale and gathering contract) determined by the NMPUC to
be prudently incurred or just and reasonable (on a case-by-case basis) as the
result of the settlement or litigation of claims arising from certain intrastate
natural gas purchase contracts that were the subject of the antitrust litigation
that resulted in the Company's acquisition of GCNM from Southern Union in
January 1985.
On March 29, 1993, GCNM was ordered to submit testimony concerning the
allocation of certain take-or-pay settlement amounts paid to Unicon Producing
Company ("Unicon"), Pioneer Exploration Company, Oryx Energy Company and EPNG.
On July 12, 1993, the NMPUC issued an order granting motions filed by GCNM, the
NMPUC staff and the AG concerning gas contract settlements among GCNM, Gathering
Company, Amoco, Conoco, Mobil Producing Texas and New Mexico, Texaco, Inc. and
Texaco Production Inc. The order required GCNM to file testimony concerning the
amounts paid in the settlements, the allocation of such amounts between
take-or-pay and contract pricing issues, and the prudence of the settlements
involving the contract pricing issues. On December 15, 1993, GCNM filed
testimony. On September 13, 1994, GCNM entered into a negotiated settlement with
the parties in the proceedings. With this settlement, all outstanding issues
regarding recovery of payments GCNM made to settle gas take-or-pay contracts and
pricing disputes have been resolved in accordance with the December 18, 1989
NMPUC order. On December 5, 1994, the NMPUC issued a final order approving the
stipulation. Under the stipulation, GCNM is authorized to recover a total of
$43.4 million of the approximately $48.6 million it sought to recover. As a
result of the stipulation, GCNM wrote off approximately $2.9 million of
additional amounts that will not be recovered.
11
<PAGE>
OTHER NATURAL GAS MATTERS
GCNM's retail gas rate schedules contain a PGAC which provides for timely
recovery of the cost of gas purchased by GCNM for resale to its sales-service
customers. On January 19, 1993, the NMPUC issued a final order which provided
for the continuation of GCNM's PGAC substantially in its present form. The final
order required GCNM to file its PGAC continuation filing by April 20, 1993 and
specifically ordered GCNM to explain how its composite gas procurement strategy
will be affected by the announced intention to sell all or major portions of
Gathering Company's and Processing Company's assets. The case has been fully
litigated and briefed. The principal unresolved issues in the case were whether
gas supply reservation fees paid to certain gas suppliers are recoverable
through the PGAC. The parties are awaiting a recommended decision from the
hearing examiner. In this proceeding, GCNM agreed that recovery of costs paid to
Gathering Company and Processing Company in excess of 1990/1991 levels would be
deferred. Those amounts were considered in connection with the sale of
substantially all of the assets of Gathering Company and Processing Company (see
PART II, ITEM 7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING THE COMPANY -- SALE OF GAS
GATHERING AND PROCESSING ASSETS".)
ENVIRONMENTAL FACTORS
The Company, in common with other electric and gas utilities, is subject to
stringent regulations for protection of the environment by both state and
Federal authorities. PVNGS is subject to the jurisdiction of the NRC, which has
authority to issue permits and licenses and to regulate nuclear facilities in
order to protect the health and safety of the public from radioactive hazards
and to conduct environmental reviews pursuant to the National Environmental
Policy Act. The Company believes that it is in compliance, in all material
respects, with the environmental laws. The Company does not currently expect
that material expenditures for environmental control facilities will be required
in 1995 and 1996.
THE CLEAN AIR ACT
The Clean Air Act amendments of 1990 (the "Act") impose stringent limits on
emissions of sulfur dioxide and nitrogen oxides from fossil-fueled electric
generating plants. The Act is intended to reduce air contamination from every
sizeable source of air pollution in the nation. Electric utilities with
fossil-fueled generating units will be affected particularly by the section of
the Act which deals with acid rain. To be in compliance with the Act, many
utilities will be faced with installing expensive sulfur dioxide removal
equipment, securing low sulfur coal, buying sulfur dioxide emission allowances,
or a combination of these. Due to the existing air pollution control equipment
on the coal-fired SJGS and Four Corners, the Company believes that it will not
be faced with any material capital expenditures in order to be in compliance
with the acid rain provision of the Act. SJGS and Four Corners have installed
flow monitoring equipment and have completed certification testing of their
continuous emission monitoring equipment. Certification testing data was
submitted to the EPA on January 30, 1995, as required. Certification of the
monitoring systems by the EPA is expected. Under other provisions of the Act,
the Company will be required to obtain operating permits for its coal- and gas-
fired generating units and to pay annual fees associated with the operating
permit program. The New Mexico operating permit program was approved by the EPA
in November 1994. Operating permit applications are due to the state in 1995.
The Act also established the Grand Canyon Visibility Transport Commission
("Commission") and charged it with assessing adverse impacts on visibility at
the Grand Canyon. The Commission broadened its scope to assess visibility
impairment in mandatory Class I areas (parks and wilderness areas) located in
the Colorado Plateau ("Golden Circle"). The Commission must report to the EPA by
November 1995 on its findings and make recommendations regarding what actions,
if any, should be pursued in order to remedy the visibility impairment in the
Golden Circle. Depending on the recommendations of the Commission, the EPA may
require stricter controls on sources that may be
12
<PAGE>
contributing to the visibility impairment. Both SJGS and Four Corners are
located near the Golden Circle. The exact nature and cost of additional
controls, if any, that may be required as a result of the recommendations cannot
be estimated at this time.
TOXIC SUBSTANCES CONTROL ACT ("TSCA")
In December 1993, the EPA issued two enforcement notices and proposed
penalty assessments against GCNM and Processing Company for alleged failure to
file the 1990 inventory update reports ("IUR") on GCNM's and Processing
Company's natural gas processing operations. The EPA proposed assessing
penalties against GCNM in the amount of $42,000 and against Processing Company
in the amount of $72,000. GCNM and Processing Company responded to the EPA's
notice of enforcement and, consistent with the industry's position, contested
the EPA's interpretation of the regulations requiring IUR for the natural gas
processing industry. The EPA entered into a settlement agreement with the Gas
Processors Association regarding the application of the IUR regulations to the
industry. Subsequently, on February 6, 1995, the EPA, GCNM and Processing
Company entered into a settlement agreement whereby amended 1990 IURs will be
filed by GCNM and Processing Company; GCNM will pay a fine of $4,000 and
Processing Company will pay a fine of $12,000. This settlement constitutes final
resolution of this matter.
DEPARTMENT OF ENERGY ("DOE") GAS LINE REPLACEMENT
GCNM is a contractor to the DOE for the replacement of a natural gas line
for which GCNM subcontracted the construction work. Work on the line commenced
prior to filing a Notice of Intent ("NOI") for coverage under the Storm Water
General Permit for construction activities with the EPA. The EPA issued a "Show
Cause" letter for this violation. Following GCNM's timely response to the "Show
Cause" letter, the EPA and GCNM entered into a Consent Order in connection with
the violation, with an agreed penalty of $3,000. In addition, the NMED,
responding to complaints regarding dust and sediment generation, and upon
discovery that the requisite NOI and Storm Water Pollution Prevention Plan
("SWPPP") had not been prepared, requested GCNM to prepare a corrective action
plan to implement a SWPPP and mitigate existing stream channel discharges. GCNM
responded on a timely basis to the NMED's request. GCNM has been advised that,
at this time, the NMED does not intend to take any further enforcement actions.
The Company is unable to predict the ultimate outcome of any enforcement
actions, but believes that any enforcement actions would not have a material
impact on the Company's results of operations or financial condition.
For other environmental issues facing the Company, 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
Operations" and -- "ENVIRONMENTAL ISSUES -- Electric Operations".
13
<PAGE>
ITEM 2. PROPERTIES
Substantially all of the Company's utility plant is mortgaged to secure its
first mortgage bonds.
ELECTRIC
The Company's electric generating stations in commercial service as of
December 31, 1994, were as follows:
<TABLE>
<CAPTION>
TOTAL NET
GENERATION
TYPE NAME LOCATION CAPACITY (MW)
- ------------------------------- --------------------- ------------------------------- ---------------
<S> <C> <C> <C>
Nuclear........................ PVNGS (a) Wintersburg, Arizona 390
Coal........................... SJGS (b) Waterflow, New Mexico 750
Coal........................... Four Corners (c) Fruitland, New Mexico 192
Gas/Oil........................ Reeves Albuquerque, New Mexico 154
Gas/Oil........................ Las Vegas Las Vegas, New Mexico 20
-----
1,506
-----
-----
<FN>
- ------------------------
(a) The Company is entitled to 10.2% of the power and energy generated by
PVNGS. The Company has a 10.2% ownership interest in Unit 3 and has
leasehold interests in Units 1 and 2.
(b) SJGS Units 1, 2 and 3 are 50% owned by the Company; SJGS Unit 4 is 38.457%
owned by the Company.
(c) Four Corners Units 4 and 5 are 13% owned by the Company.
</TABLE>
FOSSIL-FUELED PLANTS
SJGS is located in northwestern New Mexico, and consists of four units
operated by the Company. Units 1, 2, 3 and 4 at SJGS have net rated capacities
of 316 MW, 312 MW, 488 MW and 498 MW, respectively. SJGS Units 1 and 2 are owned
on a 50% shared basis with Tucson. Unit 3 is owned 50% by the Company, 41.8% by
SCPPA and 8.2% by Century. Century has agreed to sell its remaining 8.2%
interest to Tri-State Generation and Transmission Association, Inc. Unit 4 is
owned 38.457% by the Company, 8.475% by Farmington, 28.8% by M-S-R, 7.2% by Los
Alamos, 10.04% by Anaheim and 7.028% by UAMPS. The Company's net aggregate
ownership in SJGS is 750 MW. In connection with the Company's sale to M-S-R in
December 1983 of a 28.8% interest in SJGS Unit 4, the Company agreed to purchase
under certain conditions 73.53% (105 MW) of M-S-R's capacity through April 30,
1995, an amount which may be reduced by M-S-R under certain conditions. The
Company also agreed to market the energy associated with the remaining 26.47%
portion of M-S-R's capacity through April 30, 1995. This marketing arrangement
may be terminated by M-S-R at any time upon 30 days notice.
The Company also owns 192 MW of net rated capacity derived from its 13%
interest in Units 4 and 5 of Four Corners located in northwestern New Mexico on
land leased from the Navajo Nation and adjacent to available coal deposits.
Units 4 and 5 at Four Corners are jointly owned with SCE, APS, Salt River
Project, Tucson and El Paso and are operated by APS.
The Company owns 154 MW of generation capacity at Reeves Station in
Albuquerque, New Mexico, and 20 MW of generation capacity at Las Vegas Station
in Las Vegas, New Mexico. These stations are used primarily for peaking and
transmission support.
14
<PAGE>
NUCLEAR PLANT
THE COMPANY'S INTEREST IN PVNGS
The Company is participating in the three 1,270 MW units of PVNGS, also
known as the Arizona Nuclear Power Project, with APS (the operating agent), Salt
River Project, El Paso, SCE, SCPPA and The Department of Water and Power of the
City of Los Angeles. The Company has a 10.2% undivided interest in PVNGS, with
its interests in Units 1 and 2 held under leases. In September 1992, the Company
purchased approximately 22% of the beneficial interests in the PVNGS Units 1 and
2 leases for approximately $17.5 million. The Company's ownership and leasehold
interests in PVNGS amount to 130 MW per unit, or a total of 390 MW. PVNGS Units
1, 2 and 3 were declared in commercial service by the Company in January 1986,
September 1986 and January 1988, respectively. Commercial operation of PVNGS
requires full power operating licenses which were granted by the NRC.
Maintenance of these licenses is subject to NRC regulation.
STEAM GENERATOR TUBES
For information concerning steam generator tubes, see PART II, ITEM 7. --
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- OTHER ISSUES FACING THE COMPANY -- PVNGS -- STEAM GENERATOR
TUBES".
SALE AND LEASEBACK TRANSACTIONS OF PVNGS UNITS 1 AND 2
In eleven transactions consummated in 1985 and 1986, the Company sold and
leased back its entire 10.2% interest in PVNGS Units 1 and 2, together with
portions of the Company's undivided interest in certain PVNGS common facilities.
In each transaction, the Company sold interests to an owner trustee under an
owner trust agreement with an institutional equity investor. The owner trustees,
as lessors, leased the interests to the Company under lease agreements having
initial terms expiring January 15, 2015 (with respect to the Unit 1 leases) or
January 15, 2016 (with respect to the Unit 2 leases). Each lease provides an
option to the Company to extend the term of the lease as well as a repurchase
option. The lease expense for the Company's PVNGS leases is approximately $66.3
million per year. Throughout the terms of the leases, the Company continues to
have full and exclusive authority and responsibility to exercise and perform all
of the rights and duties of a participant in PVNGS under the Arizona Nuclear
Power Project Participation Agreement and retains the exclusive right to sell
and dispose of its 10.2% share of the power and energy generated by PVNGS Units
1 and 2. The Company also retains responsibility for payment of its share of all
taxes, insurance premiums, operating and maintenance costs, costs related to
capital improvements and decommissioning and all other similar costs and
expenses associated with the leased facilities. On September 2, 1992, the
Company purchased approximately 22% of the beneficial interests in the PVNGS
Units 1 and 2 leases for $17.5 million. For accounting purposes, this
transaction was recorded as a purchase with the Company recording approximately
$158.3 million as utility plant and $140.8 million as long-term debt on the
Company's consolidated balance sheet. In connection with the January 12, 1994
stipulation, the Company wrote down the purchased beneficial interests in PVNGS
Units 1 and 2 leases to $46.7 million. The purchase is expected to provide the
Company with (1) the residual value of a certain portion of the PVNGS Units at
no cost, (2) reduced exposure to indemnification provisions in the lease
agreements and (3) added flexibility to cause the retirement of the underlying
lease obligation bonds ("LOBs"). (See also notes 7 and 9 of the notes to
consolidated financial statements.) On January 3, 1995, the NMPUC approved the
Company's request for authority to retire up to approximately $134 million of
PVNGS LOBs. (See PART II, ITEM 7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- LIQUIDITY AND CAPITAL RESOURCES
- -- Financing Capability and Dividend Restrictions".)
Each lease describes certain events, "Events of Loss" or "Deemed Loss
Events", the occurrence of which could require the Company to, among other
things, (1) pay the lessor and the equity investor, in return for such
investor's interest in PVNGS, cash in the amount provided in the lease, which
amount, primarily because of certain tax consequences, would exceed such equity
investor's
15
<PAGE>
outstanding equity investment, and (2) assume debt obligations relating to the
PVNGS lease. The "Events of Loss" generally relate to casualties, accidents and
other events at PVNGS, which would severely adversely affect the ability of the
operating agent, APS, to operate, and the ability of the Company to earn a
return on its interests in, PVNGS. The "Deemed Loss Events" consist mostly of
legal and regulatory changes (such as changes in law making the sale and
leaseback transactions illegal, or changes in law making the lessors liable for
nuclear decommissioning obligations). The Company believes the probability of
such "Events of Loss" or "Deemed Loss Events" occurring is remote. Such belief
is based on the following reasons: (a) to a large extent, prevention of "Events
of Loss" and some "Deemed Loss Events" is within the control of the PVNGS
participants, including the Company, and the PVNGS operating agent, through the
general PVNGS operational and safety oversight process and (b) with respect to
other "Deemed Loss Events," which would involve a significant change in current
law and policy, the Company is unaware of any pending proposals or proposals
being considered for introduction in Congress or any state legislative or
regulatory body that, if adopted, would cause any such events.
PVNGS DECOMMISSIONING FUNDING
For information concerning PVNGS decommissioning funding, see PART II, ITEM
7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- OTHER ISSUES FACING THE COMPANY -- PVNGS DECOMMISSIONING
FUNDING".
PVNGS LIABILITY AND INSURANCE MATTERS
The PVNGS participants have insurance for public liability payments
resulting from nuclear energy hazards to the full limit of liability under
Federal law. This potential liability is covered by primary liability insurance
provided by commercial insurance carriers in the amount of $200 million and the
balance by an industry-wide retrospective assessment program. The maximum
assessment per reactor under the retrospective rating program for each nuclear
incident occurring at any nuclear power plant in the United States is
approximately $79.3 million, subject to an annual limit of $10 million per
incident. Based upon the Company's 10.2% interest in the three PVNGS units, the
Company's maximum potential assessment per incident is approximately $24.3
million, with an annual payment limitation of $3 million. The insureds under
this liability insurance include the PVNGS participants and "any other person or
organization with respect to his legal responsibility for damage caused by the
nuclear energy hazard". The PVNGS participants maintain "all-risk" (including
nuclear hazards) insurance for nuclear property damage to, and decontamination
of, property at PVNGS in the aggregate amount of approximately $2.8 billion as
of January 1, 1995, a substantial portion of which must be applied to
stabilization and decontamination. The Company has also secured insurance
against a portion of the increased cost of generation or purchased power
resulting from certain accidental outages of any of the three PVNGS units if the
outage exceeds 21 weeks.
OTHER ELECTRIC PROPERTIES
Four Corners and a portion of the facilities adjacent to SJGS are located on
land held under easements from the United States and also under leases from the
Navajo Nation, the enforcement of which leases might require Congressional
consent. The risk with respect to the enforcement of these easements and leases
is not deemed by the Company to be material. However, the Company is dependent
in some measure upon the willingness and ability of the Navajo Nation to protect
these properties. (See PART II, ITEM 7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING THE
COMPANY -- TRANSMISSION ISSUES -- TRANSMISSION RIGHT-OF-WAY".)
As of December 31, 1994, the Company owned, jointly owned or leased 2,781
circuit miles of electric transmission lines, 5,254 miles of distribution
overhead lines, 2,982 cable miles of underground distribution lines (excluding
street lighting) and 223 substations.
16
<PAGE>
On May 1, 1984, the Company's board of directors approved plans to proceed
with OLE, which involves construction of a 345 Kv transmission line connecting
the existing Ojo 345 Kv line to the existing Norton Station. For discussion of
issues relating to OLE, see PART II, ITEM 7. -- "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING
THE COMPANY -- TRANSMISSION ISSUES -- OLE TRANSMISSION PROJECT".
NATURAL GAS
The property owned by GCNM, as of December 31, 1994, consisted primarily of
natural gas gathering, storage, transmission and distribution systems. The
gathering systems consisted of approximately 1,178 miles (approximately 355
miles of which are leased to Gathering Company) of pipe with compression and
treatment facilities. Provisions for storage made by GCNM include ownership and
operation of an underground storage facility located near Albuquerque and an
agreement with owners of a unitized oil field located near Artesia, New Mexico,
in which GCNM has injection and redelivery rights. The transmission systems
consisted of approximately 1,355 miles of pipe with appurtenant compression
facilities. The distribution systems consisted of approximately 9,551 miles of
pipe.
GCNM leases approximately 128 miles of transmission pipe from the DOE for
transportation of natural gas to Los Alamos and to certain other communities in
northern New Mexico. The lease can be terminated by either party on 30 days
written notice, although the Company has the right to use the facility for two
years after termination. The Company understands that the DOE is considering
issuing a request for proposals to purchase such transmission facility.
The property of Gathering Company includes approximately 553 miles of
gathering pipe with appurtenant compression facilities.
Processing Company owns facilities located in northwestern New Mexico having
an aggregate design capacity for processing of natural gas of approximately
300,000 mcf per day.
The Company, Gathering Company and Processing Company have entered into an
agreement to sell substantially all of their natural gas gathering and
processing assets. Such sale is pending NMPUC approval. (See PART II, ITEM 7.
- --"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- OTHER ISSUES FACING THE COMPANY -- SALE OF GAS GATHERING AND
PROCESSING ASSETS".)
WATER
The Company's water property consists of wells, water rights, pumping and
treatment plants, storage reservoirs and transmission and distribution mains.
The Company has reached agreement with the City of Santa Fe for the sale of its
water utility division. Such sale is pending NMPUC approval. (See PART II, ITEM
7. --"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION -- OTHER ISSUES FACING THE COMPANY -- SALE OF SDCW".)
OTHER INFORMATION
The electric and gas transmission and distribution lines are generally
located within easements and rights-of-way on public, private and Indian lands.
The Company leases interests in PVNGS Units 1 and 2 and related property, EIP
and associated equipment, data processing, communication, office and other
equipment, office space, utility poles (joint use), vehicles and real estate.
The Company also owns and leases service and office facilities in Albuquerque
and in other operating divisions throughout its service territory.
17
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
PVNGS WATER SUPPLY LITIGATION
The validity of the primary effluent contract under which water necessary
for the operation of the PVNGS units is obtained was challenged in a suit filed
in January 1982 by the Salt River Pima-Maricopa Indian Community (the
"community") against the Department of the Interior, the Federal agency alleged
to have jurisdiction over the use of the effluent. The PVNGS participants,
including the Company, were named as additional defendants in the proceeding,
which is before the United States District Court for the District of Arizona.
The portion of the action challenging the effluent contract has been stayed
until the community litigates certain claims in the same action against the
Department of the Interior and other defendants. On October 21, 1988, Federal
legislation was enacted conforming to the requirements of a proposed settlement
that would terminate this case without affecting the validity of the primary
effluent contract. However, certain contingencies are to be performed before the
settlement is finalized and the suit is dismissed. One of these contingencies is
the approval of the settlement by the court in the Lower Gila River Watershed
litigation referred to below.
The Company understands that a summons served on APS in early 1986 required
all water claimants in the Lower Gila River Watershed of Arizona to assert any
claims to water on or before January 20, 1987, in an action pending in the
Maricopa County Superior Court. PVNGS is located within the geographic area
subject to the summons and the rights of the PVNGS participants to the use of
groundwater and effluent at PVNGS are potentially at issue in this action. APS,
as the PVNGS project manager, filed claims that dispute the court's jurisdiction
over the PVNGS participants' groundwater rights and their contractual rights to
effluent relating to PVNGS and, alternatively, seek confirmation of such rights.
No trial date has been set in this matter.
Although the foregoing matters remain subject to further evaluation, APS
expects that the described litigation will not have a material adverse impact on
the operation of PVNGS.
SAN JUAN RIVER ADJUDICATION
In 1975, the State of New Mexico filed an action entitled State of New
Mexico v. United States, et al., in the District Court of San Juan County, New
Mexico, to adjudicate all water rights in the "San Juan River Stream System".
The Company was made a defendant in the litigation in 1976. The action was
expected to adjudicate water rights used at the Four Corners plant, at SJGS and
at Santa Fe. (See ITEM 1. "BUSINESS -- ELECTRIC OPERATIONS -- Fuel and Water
Supply".) The Company cannot at this time anticipate the effect, if any, of any
water rights adjudication on the present arrangements for water at SJGS and Four
Corners, nor can it determine what effect the action will have on water for
Santa Fe. It is the Company's understanding that final resolution of the case
cannot be expected for several years.
PVNGS PROPERTY TAXES
On June 29, 1990, an Arizona state tax law was enacted, effective as of
December 31, 1989, which adversely impacted the Company's earnings in the 1990,
1991, 1992, 1993 and 1994 tax years by approximately $5 million per year, before
income taxes and capitalized and deferred costs. On December 20, 1990, the PVNGS
participants, including the Company, filed a lawsuit in the Arizona Tax Court, a
division of the Maricopa County Superior Court, against the Arizona Department
of Revenue, the Treasurer of the State of Arizona, and various Arizona counties,
claiming, among other things, that portions of the new tax law are
unconstitutional. In December 1992, the court granted summary judgment to the
taxing authorities, holding that the law is constitutional. The PVNGS
participants appealed this decision to the Arizona Court of Appeals. The Company
cannot currently predict the ultimate outcome of this matter.
18
<PAGE>
OTHER PROCEEDINGS
RESOLUTION TRUST CORPORATION ("RTC") LITIGATION
On March 31, 1993, certain individuals ("the New Mexico Plaintiffs"),
formerly affiliated with BCD, whose general partners include Meadows, filed suit
("the New Mexico suit") in the United States District Court for the District of
New Mexico against numerous parties, including the Company, current and former
employees of the Company or Meadows, and MCB Financial Group, Inc., a Delaware
corporation ("MCB"), 50% of which stock is owned by Meadows. The New Mexico
Plaintiffs have not requested any monetary relief against the Company or certain
current and former employees of the Company and Meadows but have joined those
parties in connection with insurance coverage and bad faith insurance practices
alleged against the insurance company which had issued a directors and officers
liability policy to various entities, including MCB and BCD. The insurance
allegations are made in connection with claims which were then threatened by the
RTC, as receiver for Western Savings & Loan Association ("Western"), against the
Company and others. The New Mexico Plaintiffs also sued the RTC for a
declaration that they are not liable for any claims asserted by the RTC
involving Western and BCD. The Company and the current and former employees of
the Company or Meadows counterclaimed against the New Mexico Plaintiffs and
cross-claimed against the insurance company and the RTC in connection with
insurance coverage and bad faith insurance practices. In addition, the Company
and the current and former employees of the Company or Meadows cross-claimed
against the RTC, seeking a declaration of non-liability.
The RTC moved to transfer the case to the United States District Court for
the District of Arizona. On February 7, 1994, an order was entered transferring
the case in its entirety. Prior to the transfer, however, the New Mexico
magistrate judge issued a proposed order which, if accepted by the district
judge, would require the parties to enter into mediation of all the claims. The
parties to the New Mexico suit have reached agreement on a dismissal without
prejudice of the claims remaining in that suit, and the Company expects that
suit will be dismissed in the near future. Under the terms of the proposed order
of dismissal, a motion for sanctions filed against the RTC by the Company and
other parties to the suit (which asserts that RTC engaged in bad faith
settlement negotiations) will remain pending before the Arizona court.
On April 16, 1993, the Company and certain current and former employees of
the Company or Meadows were named as defendants in an action filed in the United
States District Court for the District of Arizona by the RTC, as receiver for
Western. Three of the individuals sued by the RTC have indemnity agreements with
the Company. The claims relate to alleged actions of the Company's or Meadows'
employees in 1987 in connection with a loan procured by 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 is also
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 Company is sued only
on the Arizona racketeering claims. The RTC claims that damages under the
Arizona racketeering statute would be trebled under applicable Arizona law. The
prevailing parties on the Arizona racketeering claims could seek their fees and
costs from the parties who do not prevail.
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 filed an opposition to the motion
19
<PAGE>
and, in September 1994, the Court denied the RTC's motion to amend. Previously
the Court 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.
Subsequent to the Court's denial of the RTC's motion to amend the complaint,
the RTC filed a motion seeking to amend the case management order previously
entered by the Court. The purpose of the motion was to allow the RTC to file an
amended complaint which would include the allegations against the Company sought
by the motion to amend that was denied by the Court in September 1994. On
November 7, 1994, the Court denied this new motion.
The Company and the current and former employees of the Company or Meadows
sued by the RTC continue to have settlement negotiations with the RTC, but, to
date, those efforts have not been fruitful.
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.
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 three
archaeological sites, as well as trees and the surface in the general area.
The U.S. Forest Service conducted an investigation into the incident. The
Company cooperated fully with the U.S. Forest Service in that regard, including
taking appropriate actions to ensure that natural forces do not cause additional
damage to the archaeological resources and the general area.
The incident may subject the Company and its employees to civil liability
under the Federal Archaeological Resources Protection Act of 1979 ("ARPA"), as
well as other applicable statutes. The office of the U.S. Attorney has
determined not to pursue a criminal complaint against the Company or its
employees and has referred the matter to its civil division. The likelihood and
type of any citations or civil penalties that may be pursued by the U.S.
Attorney or 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. An
archaeological consultant, agreed upon by the Company and the U.S. Forest
Service, has prepared an archaeological site damage assessment at a cost to the
Company of approximately $14,000. The consultant estimated that the damage,
based on archaeological value, is approximately $32,500, and that the cost of
restoration and repairs is approximately $24,000. The archaeological consultant
felt that commercial valuation of the archaeological resources was not
applicable to the incident. The Company estimates that the cost of restoring the
general surrounding area will be approximately $150,000. Although the Company is
unable to predict the ultimate outcome of any proceedings in this case, the
Company does not expect that the ultimate resolution will have a material
adverse effect on the Company's financial condition or results of operations.
See PART II, ITEM 7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING THE COMPANY --
ENVIRONMENTAL ISSUES" for a discussion of certain other environmental matters.
20
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE COMPANY
Executive officers, their ages, offices held with the Company in the past
five years and initial effective dates thereof, were as follows on December 31,
1994:
<TABLE>
<CAPTION>
NAME AGE OFFICE INITIAL EFFECTIVE DATE
- -------------------------- --- ------------------------------------------------------- ----------------------
<S> <C> <C> <C>
B. F. Montoya............. 59 President and Chief Executive Officer August 1, 1993
M. P. Bourque............. 47 Senior Vice President, Energy Services December 6, 1994
Senior Vice President, Marketing and Customer Services December 7, 1993
Senior Vice President, Marketing and Energy Management March 2, 1993
Senior Vice President, Gas Management Services June 19, 1990
Vice President, Gas Supply, Gas Company of New Mexico March 2, 1987
Division
R. J. Flynn............... 52 Senior Vice President, Electric Services December 1, 1994
J. L. Godwin*............. 51 Senior Vice President, Power Supply Resource December 7, 1993
Vice President, Electric Supply Sourcing March 2, 1993
Senior Vice President, Wholesale Marketing and Power January 29, 1991
Supply
Vice President, Electric Operations Group, Electric and September 1, 1988
Water Operations
M. H. Maerki.............. 54 Senior Vice President and Chief Financial Officer December 7, 1993
Senior Vice President, Administration and Chief March 2, 1993
Financial Officer
Senior Vice President and Chief Financial Officer June 1, 1988
P. T. Ortiz............... 44 Senior Vice President, General Counsel and Secretary December 6, 1994
Senior Vice President, Regulatory Policy, General December 7, 1993
Counsel and Secretary
Senior Vice President, Public Policy and General March 2, 1993
Counsel and Secretary
Senior Vice President, General Counsel and Corporate February 4, 1992
Secretary
Senior Vice President and General Counsel October 14, 1991
W. J. Real................ 46 Senior Vice President, Gas Services December 6, 1994
Senior Vice President, Utility Operations December 7, 1993
Senior Vice President, Customer Service and Operations March 2, 1993
Executive Vice President, Gas Operations June 19, 1990
Vice President, Operations Gas Operations Regional Vice September 1, 1988
President, Central Gas Operations
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NAME AGE OFFICE INITIAL EFFECTIVE DATE
- -------------------------- --- ------------------------------------------------------- ----------------------
J. E. Sterba.............. 39 Senior Vice President, Bulk Power Services December 6, 1994
<S> <C> <C> <C>
Senior Vice President, Corporate Development December 7, 1993
Senior Vice President, Asset Restructuring April 6, 1993
Senior Vice President, Retail Electric and Water January 29, 1991
Services
Senior Vice President, Business Development Group, September 1, 1988
Electric and Water Operations
M. D. Christensen......... 46 Vice President, Public Affairs December 7, 1993
Vice President, Communications July 22, 1991
E. A. Kraft............... 46 Vice President, Customer Services December 6, 1994
Vice President, Electric Customer Services, Rio Grande March 3, 1993
Vice President, Central Rio Grande Customer Service February 19, 1991
Vice President, Customer Services Group, Electric and September 1, 1988
Water Operations
J. A. Zanotti............. 54 Vice President, Human Resources March 2, 1993
Senior Vice President, Human Resources and July 26, 1990
Communications
Vice President, Human Resources and Staff Services, Gas September 1, 1988
Company of New Mexico Division
<FN>
- ------------------------
* J. L. Godwin resigned as an executive officer of the Company effective October
28, 1994.
</TABLE>
All officers are elected annually by the board of directors of the Company.
All of the above executive officers have been employed by the Company and/or
its subsidiaries for more than five years in executive or management positions,
with the exception of P. T. Ortiz, M. D. Christensen, B. F. Montoya and R. J.
Flynn. Prior to employment with the Company, P. T. Ortiz was employed by U S
WEST Communications during the period of January 1988 to October 1991 as Chief
Counsel -- New Mexico. The principal business of U S WEST Communications is
telecommunications. Prior to employment with the Company, M. D. Christensen was
employed with Southern California Gas. During the period 1990 through 1991, M.
D. Christensen was Vice President of Planning and for the period 1987 through
1990, M. D. Christensen was Vice President of Public Affairs. Prior to
employment with the Company, B. F. Montoya was employed with Pacific Gas and
Electric Company ("PG&E") since 1989. In 1991, he was promoted to Senior Vice
President and General Manager of the Gas Supply Business Unit of PG&E. Prior to
his employment with PG&E, B. F. Montoya spent 31 years in the Civil Engineer
Corps of the U.S. Navy, performing a wide range of management and
utility-related assignments. B. F. Montoya achieved the rank of Rear Admiral
when he became Commander, Naval Facilities Engineering Command and Chief of
Civil Engineers. R. J. Flynn has a 30-year history in the utility industry
working with PG&E. Since 1989, R. J. Flynn held the position of Regional Vice
President, responsible for all gas and electric utility operations in the San
Joaquin Valley. Prior to 1989, R. J. Flynn held the positions of Division
Manager of Customer Service, Marketing, Engineering, Construction and Public
Relations; Regional Electric Manager; Division Electric Superintendent;
Assistant Superintendent; Senior Substation Engineer and Substation Engineer.
22
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the New York Stock Exchange. Ranges
of sales prices of the Company's common stock, reported as composite
transactions (Symbol: PNM) for 1994 and 1993, by quarters, are as follows:
<TABLE>
<CAPTION>
RANGE OF SALES PRICES
----------------------
QUARTER ENDED HIGH LOW
- ----------------------------------------------------------------------------------------- ----- -----
<S> <C> <C>
1994:
December 31............................................................................ 131/2 115/8
September 30........................................................................... 125/8 111/4
June 30................................................................................ 133/8 113/8
March 31............................................................................... 135/8 11
Fiscal Year.......................................................................... 135/8 11
1993:
December 31............................................................................ 111/2 91/2
September 30........................................................................... 137/8 105/8
June 30................................................................................ 133/4 115/8
March 31............................................................................... 125/8 97/8
Fiscal Year.......................................................................... 137/8 91/2
</TABLE>
On January 31, 1995, there were 21,966 holders of record of the Company's
common stock.
CUMULATIVE PREFERRED STOCK
While isolated sales of the Company's cumulative preferred stock have
occurred in the past, the Company is not aware of any active trading market for
its cumulative preferred stock. Quarterly cash dividends were paid on each
series of the Company's cumulative preferred stock at their stated rates during
1994 and 1993.
For a discussion of dividend restrictions on the Company's common and
preferred stock, see note 3 of notes to consolidated financial statements and
ITEM 7. -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- LIQUIDITY AND CAPITAL RESOURCES -- Financing Capability
and Dividend Restrictions".
23
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------------- --------------- ------------- ------------- --------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
Total Operating Revenues*............... $ 904,711 $ 873,878 $ 851,953 $ 857,168 $ 881,183
Net Earnings (Loss)..................... $ 80,318 $ (61,486)** $ (104,255)+ $ 22,960 $ 442
Earnings (Loss) per Common Share........ $ 1.77 $ (1.64)** $ (2.67)+ $ 0.32 $ (0.23)
Total Assets............................ $ 2,203,265 $ 2,212,189 $ 2,375,582 $ 2,344,332 $ 2,313,709
Preferred Stock with Mandatory
Redemption Requirements................ $ 17,975 $ 24,386 $ 25,700 $ 26,982 $ 45,581
Long-Term Debt, less Current
Maturities............................. $ 752,063 $ 957,622 $ 911,252 $ 786,279 $ 790,126
Common Stock Data:
Market price per common share at year
end.................................. $ 13.00 $ 11.25 $ 12.375 $ 9.75 $ 8.375
Book value per common share at year
end.................................. $ 15.11 $ 13.29 $ 15.00 $ 17.69 $ 17.36
Average number of common shares
outstanding.......................... 41,774 41,774 41,774 41,774 41,774
Return on Average Common Equity......... 12.4% (10.7)% (15.0)% 1.8% (1.3)%
Capitalization:
Common stock equity................... 43.2% 34.8% 38.6% 45.8% 44.8%
Preferred stock:
Without mandatory redemption
requirements....................... 4.1 3.7 3.6 3.7 3.6
With mandatory redemption
requirements....................... 1.2 1.5 1.6 1.7 2.8
Long-term debt, less current
maturities........................... 51.5 60.0 56.2 48.8 48.8
------------- --------------- ------------- ------------- --------------
100.0% 100.0% 100.0% 100.0% 100.0%
------------- --------------- ------------- ------------- --------------
------------- --------------- ------------- ------------- --------------
<FN>
- --------------------------
* The Company changed its method of accounting for unbilled revenues in 1992.
** Includes the write-down of the 22% beneficial interests in the PVNGS Units
1 and 2 leases purchased by the Company, the write-off of certain
regulatory assets and other deferred costs and the write-off of certain
PVNGS Units 1 and 2 common costs, aggregating $108.2 million, net of taxes
($2.59 per share).
+ Includes the write-down of the Company's investment in PVNGS Unit 3 and the
provision for loss associated with the M-S-R power purchase contract,
aggregating $126.2 million, net of taxes ($3.02 per share).
</TABLE>
The selected financial data should be read in conjunction with the
consolidated financial statements, the notes to consolidated financial
statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations.
24
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's assessment of the Company's financial
condition and the significant factors affecting the results of operations. This
discussion should be read in conjunction with the Company's consolidated
financial statements.
OVERVIEW
COMPETITIVE ELECTRIC MARKET
The electric utility industry, as did the gas industry a decade ago, is
currently undergoing major changes to meet a changing marketplace. Changes are
occurring in response to actions by both Federal and state governments without
an overarching plan to make all of the pieces and policies fit together and
without a single government agency having the authority to impose one. At the
Federal level, the passage of the National Energy Policy Act of 1992 (the
"Energy Act") is causing the evolution of a traditional rate regulated industry
into a competitive market environment. The Energy Act is intended to promote
competition among utility and non-utility generators in the wholesale electric
generation market. The Energy Act, coupled with increasing customer demands for
lower-priced electricity, has accelerated industry restructuring and has
intensified interest in increased competition at the retail level. In response
to the Energy Act, FERC has released notices of proposed rulemakings which
include topics such as transmission access and pricing, stranded investment, and
regional pooling. Such proposed rulemakings would affect the electric utility
industry generally. The Company is unable to predict the outcome of these
proposals. In addition, initiatives at the state level in New Mexico relating to
retail wheeling continue to receive attention (see "RETAIL WHEELING -- NEW
MEXICO").
SPECIFIC ACTIONS BY THE COMPANY
On January 11, 1993, the Company announced specific actions determined to be
necessary in order to accelerate the Company's preparation for the new
challenges in the competitive electric energy market. As part of this
announcement, the Company stated its intention to attempt to sell PVNGS Unit 3.
As a result, the Company recorded a $126.2 million after-tax charge to 1992
earnings related to the write-down of PVNGS Unit 3 and the provision for loss
associated with the M-S-R power purchase contract based on the estimated net
realizable value of these resources.
On January 12, 1994, the Company and the NMPUC staff and primary intervenor
groups entered into a rate reduction stipulation. The Company filed the
stipulation with the NMPUC, recommending that electric retail rates be reduced
by $30 million. This reduction was accomplished primarily through the write-down
of the 22% beneficial interests in the PVNGS Units 1 and 2 leases purchased by
the Company, the write-off of certain regulatory assets and other deferred
costs, the write-off of certain PVNGS Units 1 and 2 common costs and the
Company's previously announced cost reduction efforts. In conjunction with the
stipulation, the Company charged approximately $108.2 million, after-tax, to the
1993 results of operations.
On November 28, 1994, the NMPUC issued a final order approving the
stipulation as interpreted and provided by the order which was effective for
bills rendered starting November 29, 1994.
As recommended in the stipulation, the Company's interests in PVNGS Units 1
and 2 are now confirmed in this NMPUC order as "used and useful" for the rate
making purposes of the stipulation and the finding remains in force until the
stipulation is superseded or otherwise terminated. The order confirms that the
status of PVNGS Units 1 and 2 is no different from that of other used and useful
assets. Any costs incurred for these units as of January 12, 1994, will be fully
recoverable in the Company's jurisdictional rates consistent with the terms and
conditions of the NMPUC order and the stipulation, and subject to assurance that
all such costs have been accounted for accurately.
25
<PAGE>
In approving the stipulation, the NMPUC reconfirmed its authority over the
Company and its authority to issue orders in the public interest, finding
nothing in the stipulation to supersede that authority. Pursuant to the
stipulation, the signatories do not intend to file or cause the filing of a
general rate case before January 1, 1998, in the absence of a significant
restructuring of rate base or unforeseen circumstances occasioning a significant
change in the Company's costs. As a result of the order, the Company believes
that the rates agreed upon in the stipulation will be adequate to recover the
cost of its New Mexico jurisdictional services going forward and further
believes that the Company will be in a better position to compete in a
competitive electric market environment.
UNCERTAINTIES
The Company believes that the stipulation has improved its competitive
position in the electric market, but recognizes that low cost producers may have
an advantage if the regulatory framework changes significantly towards retail
wheeling concepts. The Company's generating costs are currently above those of
some neighboring utilities due primarily to the expensive nuclear generation.
The future structure of the industry, the form and timing of competition and
the method of regulation in a competitive environment remain uncertain. In the
transition to a more competitive market environment from a traditional rate
regulated environment, the value of a utility's assets could be affected
significantly. If the cost of operating a utility's existing assets is above
market prices, the utility may be unable to recover all of its costs without
adequate treatment for stranded assets. In the Company's situation, if included
generation costs currently being recovered in retail rates were to be based on a
competitive market price which is lower than its current costs, the value of the
Company's PVNGS Units 1 and 2 investment could be economically impaired.
STRATEGIC PLAN
In order to mitigate the exposures associated with a competitive electric
market and transition into this changing environment, the Company, in addition
to the January 11, 1993 announcement and other actions discussed above, has set
the following strategic plan: (1) secure financial flexibility by retiring debt,
(2) restructure the Company's expensive generating assets and nuclear leases,
(3) control operating and maintenance costs, and (4) develop new business
opportunities in the energy related area. It should be noted, however, that the
Company's ability to restructure its generating assets and nuclear leases is
limited. In addition, the Company's ability to develop new business
opportunities will be subject to state laws, rules and regulations.
As part of this plan, the Company has internally restructured its operations
into four separate business units, each targeted at a specific segment of its
customer base. The new structure is intended to make the Company more customer
oriented and responsive to the changing competitive environment. The four units
- -- Electric Services, Gas Services, Bulk Power Services and Energy Services --
will be evaluated continuously for their contribution to building shareholder
value.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ability to generate sufficient amounts of cash to meet its
operating and capital cash requirements ("liquidity") is a function of the rates
it is allowed to charge and its ability to access the credit markets. The recent
NMPUC order relating to the retail electric rate reduction and potential
longer-term effects of a more competitive energy market are expected to
negatively affect the Company's liquidity. However, the Company believes that
anticipated sales of assets and cost reduction efforts will minimize the
Company's need for external capital resources. The Company currently expects
that cash generated from internal sources will be sufficient to meet the capital
requirements during the 1995 through 1999 period. 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.
26
<PAGE>
CAPITAL REQUIREMENTS
Total capital requirements include construction expenditures as well as
other major capital requirements, including retirements of long-term debt,
preferred stock and long-term debt sinking funds and preferred stock dividend
requirements. The main focus of the construction program is upgrading generating
systems, upgrading and expanding the electric and gas transmission and
distribution systems, and purchasing nuclear fuel. Total capital requirements
for 1994 and projections for 1995-1999 are shown below:
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
CONSTRUCTION EXPENDITURES:
Generation/Environmental/Production................ $ 19 $ 19 $ 23 $ 16 $ 30 $ 45
Distribution....................................... 51 42 35 36 35 36
Transmission....................................... 26 22 43* 15 20 24
Nuclear Fuel....................................... 8 11 11 11 12 11
Common & General/Other............................. 16 23 17 18 18 15
--------- --------- --------- --------- --------- ---------
Total Construction Expenditures**................ 120 117 129 96 115 131
CONTRIBUTIONS IN AID OF CONSTRUCTION................. (6) (7) (7) (7) (7) (7)
OTHER MAJOR REQUIREMENTS............................. 93 230+ 42+ 28 6 5
--------- --------- --------- --------- --------- ---------
Total Capital Requirements....................... $ 207 $ 340 $ 164 $ 117 $ 114 $ 129
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<FN>
- ------------------------
* Includes construction expenditures for OLE.
** Total construction expenditures for 1995 through 1999 do not include
expenditures for SDCW and Gathering Company and Processing Company (see
"SALE OF GAS GATHERING AND PROCESSING ASSETS" and "SALE OF SDCW").
+ Requirements for 1995 and 1996 assume discretionary debt retirement
including the retirement of PVNGS LOBs of $130 million.
These estimates are under continuing review and subject to on-going
adjustment.
</TABLE>
LIQUIDITY
The Company's construction expenditures for 1994 were entirely funded
through cash flow from operations. In addition to cash flow from operations, the
Company received approximately $40 million, on June 2, 1994, from the sale of a
35 MW undivided interest in SJGS Unit 4 to UAMPS. On April 20, 1994, the Company
retired its $45 million 10 1/8% series first mortgage bonds and at the end of
1994, the Company had $74.5 million of temporary investments and no short-term
borrowings. In addition, at year-end 1994, the Company had available liquidity
arrangements of $151 million consisting of a $100 million secured revolving
credit facility ("Facility") which expires in June 1995, $40 million credit
facility collateralized by electric accounts receivables of the Company and $11
million of local lines of credit. The Company expects to renew the Facility
prior to its expiration.
On March 8, 1995, after the required consent of the holders of PVNGS LOBs
was obtained, approximately $121 million in principal amount of PVNGS LOBs was
retired. The retired LOBs consisted of approximately $58 million of 10.30% LOBs
due 2014 retired at a price of 100% of par and approximately $63 million of
10.15% LOBs due 2016 retired at a price of 97.8% of par. In connection with the
LOB retirements, approximately $65 million was borrowed under the Company's
liquidity arrangements and approximately $19 million was obtained under the
securitization facility related to certain amounts being recovered from gas
customers relating to certain gas contract settlements. The Company intends to
repay the borrowings from proceeds of pending asset sales.
27
<PAGE>
Additionally, approximately $4.4 million and $4.8 million in principal
amount of LOBs due 1996 and 1997 at interest rates of 9.125% and 8.95%,
respectively, are expected to be redeemed at par on March 22, 1995.
The Company currently estimates a total of $864 million for its capital
requirements for the period of 1995 through 1999. The Company expects that such
cash requirements are to be met primarily through internally-generated cash.
The Company also expects to receive cash proceeds from asset sales during
1995. The Company expects to consummate the sale of the Company's water division
to the City of Santa Fe for approximately $56 million (as currently adjusted) in
the second quarter of 1995. The Company, along with its subsidiaries, Gathering
Company and Processing Company, also anticipates to receive approximately $155
million from the sale of certain natural gas gathering and processing assets. If
these sales are consummated, the current plan for the use of the proceeds from
these sales which the Company is allowed to retain after tax payments and
sharing of the gains with customers would be to retire debt. The sale of these
assets, as well as the amount of proceeds the Company would ultimately retain
and the use of those proceeds, will be subject to a number of conditions and
various regulatory approvals.
FINANCING/CREDIT MARKET
The Company's ability to finance its construction program at a reasonable
cost and to provide for other capital needs is largely dependent upon its
ability to earn a fair return on capital, results of operations, credit ratings,
regulatory approvals and financial market conditions. Financing flexibility is
enhanced by providing a high percentage of total capital requirements from
internal sources and having the ability, if necessary, to issue long-term debt
securities and preferred stock, and to obtain short-term credit. However, all of
the Company's securities are rated below investment grade by Standard & Poor's
Corp. ("S&P") and Moody's Investors Service ("Moody's"), which may result in
limited credit markets being available and/or higher financing costs to the
Company.
While S&P recently upgraded the Company's rating outlook from "stable" to
"positive" as a result of "approved settlement agreement, plans to sell unneeded
assets and pay down debt, relatively strong electric sales growth, recent PVNGS
operating performance and increasing confidence in management's basic business
strategy", S&P indicated that a rating upgrade could be several years off.
Moody's, however, has advised investors that it is reviewing for possible
downgrades all lease obligation bonds associated with nuclear power plants.
FINANCING CAPABILITY AND DIVIDEND RESTRICTIONS
One impact of the Company's current ratings, together with covenants in the
Company's PVNGS Units 1 and 2 lease agreements (see PART I, ITEM 2. --
PROPERTIES -- Nuclear Plant"), is to limit the Company's ability, without
consent of the owner participants and bondholders in the lease transactions, (i)
to enter into any merger or consolidation, or (ii) except in connection with
normal dividend policy, to convey, transfer, lease or dividend more than 5% of
its assets in any single transaction or series of related transactions. The
Facility and a reimbursement agreement associated with the letter of credit
supporting $37.3 million of pollution control revenue bonds impose similar
restrictions irrespective of credit ratings.
The issuance of first mortgage bonds by the Company is subject to earnings
coverage and bondable property provisions of the Company's first mortgage
indenture. The Company also has the capability under the mortgage indenture,
without regard to the earnings test but subject to other conditions, to issue
first mortgage bonds on the basis of certain previously retired bonds. At
December 31, 1994, based on the earnings test, the Company could have issued
approximately $248 million of additional first mortgage bonds, assuming an
annual interest rate of 11.5 percent. The Company's restated articles of
incorporation limit the amount of preferred stock which may be issued. Assuming
a preferred stock dividend rate of 10 percent, the Company could have issued
$291 million
28
<PAGE>
of preferred stock as of year end. At year-end 1994, the Company had $74.5
million of temporary investments. The Company currently has no requirements for
long-term financing during the period of 1995 through 1999 period. However,
during this period, the Company could enter into long-term financings for the
purpose of strengthening its balance sheet and reducing its cost of capital. In
1995, subject to other investment opportunities available to the Company, the
Company may potentially retire other long-term debt.
The Company's board of directors, which reviews the Company's dividend
policy on a continuing basis, has not declared dividends on its common stock
since January 1989. As of December 31, 1994, the Company had a deficit in
retained earnings of $46 million and is currently unable to resume payment of
dividends on its common stock. The resumption of common dividends is dependent
upon a number of factors including earnings and financial condition of the
Company and market conditions. The Company evaluated its ability to continue
paying dividends on its preferred stock under restrictions imposed by the
Federal Power Act due to the Company's negative retained earnings. In 1993, the
Company advised the FERC staff of the Company's position that payment of
preferred stock dividends would not be in violation of the Federal Power Act. As
a result, the Company has continued to declare and pay dividends on its
preferred stock on scheduled dates.
CAPITAL STRUCTURE:
The Company's capitalization, including short-term debt, at December 31 is
shown below:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Common Equity.......................................................... 39.2% 34.4% 37.1%
Preferred Stock........................................................ 4.8 5.2 5.0
Long-term Debt (including current maturities).......................... 56.0 60.4 54.8
Short-term Debt........................................................ -- -- 3.1
----- ----- -----
Total Capitalization*................................................ 100.0 % 100.0 % 100.0 %
----- ----- -----
----- ----- -----
<FN>
- ------------------------
* Total capitalization does not include the present value of the Company's lease
obligations for PVNGS Units 1 and 2 and EIP leases as debt, but does include
the debt associated with the beneficial interests in certain PVNGS Units 1 and
2 leases purchased by the Company on September 2, 1992.
</TABLE>
RESULTS OF OPERATIONS
Net earnings per common share in 1994 were $1.77, compared to a loss of
$1.64 per common share in 1993 and a loss of $2.67 per common share in 1992. The
loss experienced in 1993 was due primarily to the Company recording an after-tax
charge of $108.2 million to earnings resulting from the stipulation filed with
the NMPUC recommending that electric retail rates be reduced by $30 million. The
loss experienced in 1992 was due primarily to the write-down of PVNGS Unit 3 and
the provision for loss associated with the M-S-R power purchase contract. This
resulted in an after-tax charge of $126.2 million to 1992 earnings.
The financial performance of the excluded resources has been improved by the
PVNGS Unit 3 write-down and the provision for loss associated with the M-S-R
power purchase contract recorded in 1992. The gains from the sale of generating
facilities to Anaheim recorded in August 1993 and to UAMPS recorded in June 1994
have also improved the financial performance of the excluded resources.
Operating results for the excluded resources for all these periods reflect the
allocation of interest charges based on the average investment in excluded net
utility plant as a percent of total utility plant for the period.
29
<PAGE>
Selected financial information for the excluded resources for 1994, 1993 and
1992 is shown below:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating revenues.............................................. $ 39,227* $ 42,517* $ 60,063
Operating income (loss)......................................... $ 2,448 $ 4,297 $ (13,912)
Net earnings (loss)............................................. $ 1,701 $ (5,553) $ (145,835)
Net utility plant at year-end................................... $ 142,232 $ 159,387 $ 200,707
<FN>
- ------------------------
* Due to the provision for the loss associated with the M-S-R contingent power
purchase contract recognized in 1992, operating revenues were reduced by $25.0
million and $20.5 million for 1994 and 1993, respectively.
</TABLE>
The following discussion highlights other significant items which affected
the results of operations in 1994, 1993 and 1992, and certain items impacting
future earnings.
Results of operations for 1994 may not be indicative of future results of
operations; for example, the electric retail rate reduction effective for bills
rendered starting November 29, 1994, is expected to reduce electric revenues
annually by approximately $30 million.
Electric gross margin (electric operating revenue less fuel and purchased
power expense) increased $32.3 million in 1994, $23.2 million of which was
caused by an increase in jurisdictional energy sales of 408.5 million KWh or a
7% increase. This increase was partially due to warmer weather than a year ago.
A difference between the estimated unbilled revenues reported in 1993 and actual
unbilled revenues also increased gross margin by $6.7 million in 1994. Electric
gross margin increased $30.1 million in 1993 compared to 1992; $20.9 million of
this was a result of the 1992 provision for loss associated with the M-S-R power
purchase contract and $9.3 million from a 2.7% increase in jurisdictional energy
sales of 145.5 million KWh.
Gas gross margin (gas operating revenues less gas purchased for resale)
decreased $5.1 million from a year ago. Principal factors were the write-off of
certain deferred charges relating to costs of gas and a decrease in gas
deliveries resulting from a warmer than normal winter in 1994. Although gas
gross margin remained flat from 1992 to 1993, gas operating revenues increased
$27.9 million and gas purchased for resale increased $27.4 million in 1993 when
compared to 1992. Increases in purchased gas costs (which are recovered from
customers through the PGAC) and transportation revenues were the principal
reasons. Purchased gas costs affect revenues and gas purchased for resale
equally.
Other operation and maintenance expenses decreased $5.1 million from a year
ago. Major factors were a $10.6 million decrease as a result of the Company's
1993 severance program, a deferral of gas operation's retirees health care costs
of $2.8 million for regulatory purposes and lower electric regulatory commission
expense of $2.1 million. There were, however, increased pension and retirees
health care cost of $3 million, increased electric distribution expense of $3.6
million due to weather-related outages and increased tree trimming activity,
increased workers' compensation liability of $2.2 million and increased
generating station maintenance expense of $2.4 million.
Other operation and maintenance expenses increased $3.4 million in 1993 over
1992. The major factors were the Company's 1993 severance program costs of $10.6
million, increased pension and benefit expense of $4.8 million resulting from
the adoption of SFAS No. 106, EMPLOYER'S ACCOUNTING FOR POSTRETIREMENT BENEFITS
OTHER THAN PENSIONS, higher electric regulatory expenses of $2.5 million and
higher PVNGS decommissioning expense of $2.4 million. Such increases were
partially offset by a decrease in PVNGS lease expense of $12.2 million resulting
from the Company's purchase of approximately 22% of the beneficial interests in
the PVNGS Units 1 and 2 leases in September 1992 and a decrease in PVNGS
operating costs of $5.6 million.
30
<PAGE>
The January 12, 1994 stipulation resulted in an after-tax charge of $108.2
million in 1993. In 1992, the Company recorded an after-tax charge of $126.2
million for the write-down of the Company's investment in PVNGS Unit 3 and the
provision for loss associated with the M-S-R power purchase contract (see note 2
of notes to consolidated financial statements).
Other, under the caption Other Income and Deductions, increased $9.3 million
from a year ago and increased $16.1 million from 1992 to 1993.
Significant 1994 items, net of taxes, include the write-off of $3.0 million
relating to gas take-or-pay settlement payments which are not recoverable
through rates and additional provisions for legal expense of $3.6 million and a
gain and associated tax benefit of $6.1 million from the sale of generating
facilities to UAMPS.
Significant 1993 items, net of taxes, included the following: (1) the gain
of $7.5 million recognized from the sale of an investment, (2) the gain and
associated tax benefit of $7.6 million from the sale of generating facilities to
Anaheim, and (3) tax benefits of $3.2 million from the Federal income tax rate
change which will allow the Company to utilize its net operating loss at a
higher tax rate. Partially offsetting such increases were: (1) additional
provisions for legal and litigation expenses of $5.7 million, (2) a write-off of
$4.6 million of other deferred costs, (3) PVNGS decommissioning fund adjustment
of $2.8 million and (4) a write-off of $2.1 million resulting from costs
associated with refunding certain pollution control and EIP bonds which
represents the amount related to FERC firm-requirement wholesale customers and
resources excluded from New Mexico jurisdictional rates.
Significant 1992 items, net of taxes, included the following: (1) a $9.8
million charge recorded as a result of the Company's conclusion in the fourth
quarter of 1992 that it did not meet the criteria of SFAS No. 71, ACCOUNTING FOR
THE EFFECTS OF CERTAIN TYPES OF REGULATION, for recording electric regulatory
assets, (2) additional loss provision of $6.3 million related to gas contract
disputes, (3) recognition of an additional $2.3 million of PVNGS decommissioning
and decontamination costs related to the excluded resources, (4) write-offs of
$2.3 million resulting from the application of SFAS No. 101, ACCOUNTING FOR THE
DISCONTINUANCE OF APPLICATION OF SFAS NO. 71, to the Company's firm-requirement
wholesale customers, (5) write-downs of $2.2 million for various non-utility
properties, (6) a write-off of $2.2 million relating to a canceled transmission
project and (7) additional transaction privilege taxes of $2.1 million.
Partially offsetting such charges were the cumulative effect of the change in
the method of accounting for unbilled revenues of $12.7 million.
Net interest charges decreased $15.2 million in 1994. Major factors were:
(1) lower short-term borrowings in 1994, (2) the refinancing of $182 million of
pollution control revenue bonds in January ($46 million) and September ($136
million) of 1993 and (3) the retirement of $45 million of first mortgage bonds
in April 1994. In 1993, net interest charges increased $12.4 million compared to
1992. Major factors were: (1) recording long-term debt of $141 million for the
purchase of approximately 22% of the beneficial interests in the PVNGS Units 1
and 2 leases in September 1992, (2) the recording of the interest component of
the provision for loss on the M-S-R power purchase contract which was recorded
in 1992 and (3) interest resulting from the IRS examination settlement.
31
<PAGE>
OTHER ISSUES FACING THE COMPANY
RETAIL WHEELING -- NEW MEXICO
During 1992, the Energy Act stimulated interest in the retail wheeling
concept throughout the United States. In New Mexico, legislation was introduced
in the 1993 New Mexico state legislature. On March 6, 1993, the New Mexico State
Senate passed Senate Memorial 54, which called for the concept of retail
wheeling to be studied by the Integrated Resource Planning Committee, an interim
legislative committee, with a report to be made to the 1995 legislature. In its
report, the Integrated Resource Planning Committee recommended to the
legislature that the committee be continued for an additional two-year term and
that the committee's oversight be expanded to include, among other things,
consideration of the restructure of the electric utility industry and its
regulation in light of competitive influences. A bill has been introduced in the
1995 legislature providing for the creation of the "Electric Utility Regulation
Oversight Committee" and requiring such interim committee to report its findings
and recommendations to the legislature by December 15, 1996. This bill was
unanimously passed by the Senate and is awaiting consideration by the House. The
Company provided information for the initial study effort and will continue to
provide information should the legislature agree to continue the study
committee. A bill which would have authorized retail wheeling and limited
electric rates to 110% of those of the lowest cost electric utility in the state
after a five year phase-in period has been tabled in committee. Other bills
regarding retail wheeling have also been introduced in the legislature and are
awaiting hearings.
TRANSMISSION ISSUES
OLE TRANSMISSION PROJECT
In 1984, the Company's board of directors approved plans to construct OLE, a
345 Kv transmission line connecting the existing Ojo 345 Kv line to the Norton
station in northern New Mexico. The Company has incurred approximately $15.8
million of costs associated with OLE as of December 31, 1994, and it currently
estimates that project costs will total approximately $54.3 million. A
significant amount of the costs to date relate to obtaining regulatory and
environmental approvals. OLE is designed to provide a needed improvement to the
northern New Mexico transmission system and to allow greater delivery of power
into the Company's two largest service territories, the greater Albuquerque area
and the Santa Fe/Las Vegas area. The Company had obtained necessary right-of-way
permits from two of the three Federal agencies having authority over the lands
involved in the project. In 1991, the Company filed for NMPUC approval for
construction of OLE and final briefs were filed in December 1992. However, OLE
has faced considerable opposition by persons concerned primarily about the
environmental impacts of the project. The Company is awaiting a final decision
from the NMPUC.
On January 11, 1993, the Company's board of directors directed a project
team to take a fresh look to see if any alternatives had not been considered. In
1994, a working group consisting of the Company and other interested parties
identified an alternative route to the originally proposed OLE route. The group
has determined that this alternative route could be environmentally, technically
and economically better or equal to the original route. This route involves the
rebuild of an existing 26-mile 115 Kv line owned by Plains and will require
further environmental studies.
The 1994 record summer heat resulted in record high loads on the Company's
transmission systems which brought greater attention to the problems related to
delays in adding OLE transmission capacity to the northern transmission system.
Outages at the Company's Reeves Station (oil and gas-fired units) due to
emergency turbine repairs and interruptions of power deliveries from SPS
resulted in the transmission loading exceeding the operating limits of the
system during the summer of 1994. The Company would have experienced
interruptions of load if an outage of any major transmission facility had
occurred during this time period. The 1995 summer peak could result in load
levels greater than 1994 levels. To prevent transmission limits from being
exceeded this summer, the Company has negotiated with entities in southern New
Mexico to insure that agreed import levels will
32
<PAGE>
not be exceeded. Also, every effort is being made to insure that all Reeves
Station units will be available and additional equipment has been installed on
the Company's existing transmission system to mitigate potential problems.
TRANSMISSION RIGHT-OF-WAY
The Company has easements for right-of-way with the Navajo Nation for
portions of several transmission lines that deliver the Company's generation
resources to load centers. One grant of easement for approximately 4.2 miles of
right-of-way for two parallel 345 Kv transmission lines expired on January 17,
1993. Prior to the expiration, the Company had unsuccessfully attempted to renew
the grant. Thereafter, the Company was successful in reaching an interim
agreement which provided for the Navajo Nation not to challenge the Company's
use of the easement until July 17, 1994.
On October 31, 1994, the Navajo Nation adopted a Civil Trespass Statute
providing for civil penalties, damages and other remedies, including removal, to
be imposed for unconsented or unauthorized use of Navajo Nation lands. The
Company is currently evaluating the impact, if any, of the new statute.
On November 8, 1994, the Navajo Nation elected a new President. On November
11, 1994, the Navajo Nation informed the Company that the President had directed
the negotiation to be halted until the new administration could become
familiarized with the issues. The Company is unable to predict what effect a new
administration will have on the ongoing negotiations. However, the Company has
scheduled meetings with new administration officials to discuss this issue.
The Company continues to assess its options but is not pursuing other
alternatives unless it receives indications that settlement cannot be reached in
a satisfactory manner. The Company currently cannot predict the outcome of the
negotiations or the costs resulting therefrom; however, the Company believes
that resolution of this issue will not have a material impact on the Company's
results of operations or financial condition.
ENVIRONMENTAL ISSUES
The Company is committed to complying with all applicable environmental
regulations in a responsible manner. Compliance with all environmental issues
has and will continue to present a challenge to the Company. The Company has
evaluated the potential impacts of the following environmental issues and
believes, after consideration of established reserves, that the ultimate outcome
of these environmental issues will not have a material adverse effect on the
Company's financial condition or results of operations.
GAS OPERATIONS
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT ("CERCLA")
Two CERCLA 104(e) requests for information were received from the EPA in
late 1993, requesting information regarding shipment of wastes to the Lee Acres
Landfill, located on BLM land near the city of Bloomfield in San Juan County,
New Mexico. The landfill is currently listed on the National Priorities List as
a superfund site. GCNM and Gathering Company assessed their records and other
information to determine whether wastes were ever shipped from their facilities
to the landfill during the period when they owned and operated the natural gas
facilities. GCNM and Gathering Company's assessment indicated that no hazardous
materials were shipped from their facilities to the landfill during this time
period. Nonetheless, GCNM and Gathering Company could be determined to be
potentially responsible parties if the EPA ultimately determines GCNM and
Gathering Company shipped wastes to the site, and could be asked or compelled to
provide funds for site cleanup. GCNM and Gathering Company submitted their
response to the EPA on March 8, 1994. To date, GCNM and Gathering Company have
not received any further notification from the EPA regarding the Lee Acres site.
33
<PAGE>
AIR PERMITS
An environmental audit performed in association with the Company's proposed
sale of certain gas assets brought to light certain discrepancies regarding
required air permits associated with certain natural gas facilities. The audit
identified a total of thirteen facilities containing discrepancies. The vast
majority of the discrepancies were minor in nature and included discrepancies in
record keeping, equipment identification and inaccurate information in air
permit applications. The discrepancies at three of the facilities involve permit
issuance and modification and are more serious in nature. The Company is subject
to administrative fines/penalties by the NMED for these discrepancies.
In April 1994, the Company met with the NMED to discuss the nature of the
permit discrepancies and to propose methods and schedules to resolve the
discrepancies. As a result of this meeting, the NMED has informed the Company
that it will not pursue enforcement of the thirteen minor discrepancies noted
above. On August 30, 1994, the Company submitted its permit modification
application for the Lybrook Gas Processing Plant ("Lybrook"). On November 14,
1994, the Company received a written Notice of Violation ("NOV") from the NMED
for Lybrook. The NOV indicates that the NMED has concluded that the Company
violated air quality control regulations requiring permits for modification of
stationary sources. The NOV indicated the Company may be subject to a civil
action in district court for the appropriate relief and/or the assessment of
civil penalties. The Company has responded to the NOV and is pursuing efforts to
address the NOV with the NMED.
The Company anticipates that it will submit Processing Company's air permit
modification application on the Kutz Canyon Gas Processing Plant ("Kutz") in the
first quarter of 1995. While the Company cannot be certain, the Kutz filing,
which will be similar to the Lybrook filing, may also result in an NOV from the
NMED due to apparent permit discrepancies in the Kutz air permit.
GAS WELLHEAD PIT REMEDIATION
The New Mexico Oil Conservation Commission ("NMOCC") issued an order
effective on January 14, 1993, that affects GCNM and Gathering Company's natural
gas gathering facilities located in the San Juan Basin in Northwestern New
Mexico. The NMOCC ruling prohibits the further discharge of fluids associated
with the production of natural gas into unlined earthen pits in certain
specified areas of the San Juan Basin. The NMOCC ruling required the cessation
of discharge of production fluids in three specified areas within specific time
frames. In addition, the ruling required the submission of closure plans for the
closure of pits in which production fluids were previously discharged. The BLM
has issued a similar ruling. GCNM and Gathering Company have ceased discharge in
the first area identified by the NMOCC and are proceeding to cease discharge in
the second area identified in the NMOCC ruling. GCNM and Gathering Company have
also submitted and received approval of their pit closure plans from the OCD,
the Energy Minerals and Natural Resources Department, as well as the BLM.
Because the assets associated with GCNM and Gathering Company's gathering
operations are the subject of the sale of gas assets to Williams, GCNM and
Gathering Company will not be subject to the cease discharge requirement for the
third and final area identified in the NMOCC's ruling if the sale closes prior
to March 1, 1996.
The three previously mentioned gas operations environmental issues, with the
exception of the third and final area identified in NMOCC's ruling related to
gas wellhead pit remediation, are part of the retained environmental liabilities
under the sale agreement with Williams (see "SALE OF GAS GATHERING AND
PROCESSING ASSETS").
DIETHANOLAMINE ("DEA") SPILL
In June 1994, the Processing Company experienced a release of DEA due to an
equipment malfunction. DEA wastes are oilfield exempt wastes which are not
subject to regulation as hazardous wastes under the Resource Conservation and
Recovery Act ("RCRA"). The spill and subsequent removal of DEA-contaminated
soils were reported to the OCD which has jurisdiction over such spills and
wastes. However, the release of DEA to the air in amounts that exceed the
reportable quantity of one pound is potentially reportable under CERCLA as
amended by the Superfund Amendments and Reauthorization Act ("SARA"). When it
was discovered in September 1994 that the spill had not been
34
<PAGE>
reported under CERCLA/SARA, as a precaution, the spill notification/report was
forwarded to the National Response Center on September 22, 1994. The Company is
currently unable to predict what, if any, enforcement action may ensue.
ELECTRIC OPERATIONS
PERSON STATION
The Company's current estimate to decommission its retired fossil-fueled
plants includes approximately $10.9 million to complete the groundwater
remediation program at Person Station. The Company, in compliance with the New
Mexico Environment Department Corrective Action Directive, determined that
groundwater contamination exists in the deep and shallow water aquifers. The
Company is required to delineate the extent of the contamination and remediate
the contaminant in the ground water. The extent of the contaminant plume in the
deep water aquifer is not currently known, and the estimate assumes that the
deep ground water plume can be easily delineated with a minimum number of
monitoring wells. As part of the financial assurance requirements of the Person
Station Hazardous Waste Permit, the Company posted a $5.1 million performance
bond with a trustee. The remediation program continues on schedule.
SANTA FE STATION
The estimate to decommission Santa Fe Station includes monies for
environmental issues related to the site. The NMED has been conducting an
investigation of the groundwater contamination detected beneath the site to
determine the source of the contamination. The source of groundwater
contamination has not yet been definitely identified, and the Company is
continuing to cooperate with the NMED site investigations pursuant to a consent
agreement between the Company and the NMED.
CERCLA
On January 18, 1995, the Company received a CERCLA Section 104(e) request
for information from the EPA regarding the Hansen Container Site in Grand
Junction, Colorado ("Hansen Site"). The EPA is investigating the site and
seeking information relating to the number and contents of drums, barrels and
other materials that were sent to the Hansen Site for reconditioning, disposal
or storage. The Company undertook an internal investigation to determine if the
Company or its subsidiaries may have sent or shipped any drums, barrels or other
materials containing hazardous materials to the Hansen Site. The Company filed
its response to the EPA's request for information on March 2, 1995, and stated
that the Company's records indicate that it did not dispose of any hazardous
materials at the Hansen Site and did not cause others to transport hazardous
materials for disposal at the Hansen Site. The Company's records did indicate,
however, that the Company sold empty scrap drums to a drum recycler in the
1980's who has been linked to the Hansen Site by the EPA. The Company's position
is that it is not a potential responsible party; however, given these
transactions, the Company could possibly be determined to be a potential
responsible party and could be asked or compelled to provide funds for site
cleanup. Based on the Company's discussions with the EPA to date, the Company
does not expect to be required to provide any significant funding for site
cleanup.
PVNGS -- STEAM GENERATOR TUBES
APS, as the operating agent of PVNGS, has encountered tube cracking in the
steam generators and has taken, and will continue to take, remedial actions that
it believes have slowed further tube degradation. At the present time, APS is
undergoing a refueling outage in Unit 2. The steam generator tubes are being
inspected in conjunction with this outage. APS currently believes that the PVNGS
steam generators are capable of operating for their designed life of forty
years, although, at some point, long-term economic considerations may warrant
examination of possible steam generator replacement. All of the PVNGS units were
operating at full power at December 31, 1994 and are expected to continue
operating at full power, except for scheduled (mid-cycle or refueling) outages.
35
<PAGE>
PVNGS DECOMMISSIONING FUNDING
The Company has a program for funding its share of decommissioning costs for
PVNGS. Under this program, the Company makes a series of annual deposits to an
external trust fund over the estimated useful life of each unit with the trust
funds being invested under a plan which allows the accumulation of funds largely
on a tax-deferred basis through the use of life insurance policies on certain
current and former employees. The results of the 1992 decommissioning study
indicate that the Company's share of the PVNGS decommissioning costs will be
approximately $150.4 million, an increase from $98.9 million based on the
previous study (both amounts are stated in 1994 dollars). The Company determined
that a supplemental investment program will be needed as a result of both the
cost increase and the under performance of the existing investment program. In
1995, the Company will file a request for permission from the NMPUC to establish
a supplemental investment program, allowing for investment in more traditional
classes of investments. The Company will also request the authority to establish
a qualified tax advantaged trust for Units 1 and 2. Due to IRS regulations, Unit
3 will remain in a non-qualified trust. With the uncertainty of the FERC
regulation regarding restrictions on investment vehicles, the Company will
address any issues as they are resolved. In the November 28, 1994 NMPUC order
(see "SPECIFIC ACTIONS BY THE COMPANY"), the NMPUC approved the increased
decommissioning costs for PVNGS Units 1 and 2 and included such amounts as a
component in the determination of retail rates. The market value of the existing
trust at the end of 1994 was approximately $12 million, including cash surrender
value of the policies. A new PVNGS decommissioning cost study will be performed
during the latter half of 1995.
EL PASO ELECTRIC COMPANY BANKRUPTCY
El Paso, a joint owner in the PVNGS and Four Corners facilities, is and has
been operating under Chapter 11 of the Bankruptcy Code since 1992. A plan
whereby El Paso would become a wholly-owned subsidiary of Central and South West
Corporation ("CSW") would resolve certain issues to which PVNGS participants
could be exposed by the bankruptcy, has been confirmed by the bankruptcy court,
but cannot become fully effective until several additional or related approvals
are obtained. El Paso would also assume the Four Corners Operating Agreement and
the Arizona Nuclear Power Project Participation Agreement under the plan. CSW
has stated that certain issues have arisen which may impede completion of the
merger, but it has not terminated merger efforts. If the approvals are not
obtained, the plan could be withdrawn or terminated, thereby reintroducing
issues affecting the Company. At this time, the Company is unable to predict the
result of this bankruptcy proceeding.
SALE OF SDCW
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. As currently adjusted, the purchase price will be
approximately $56 million. In March 1994, the Company filed its application with
the NMPUC for approval of the sale and hearings were commenced on December 12,
1994 and concluded on January 9, 1995. The NMPUC staff and intervenors
recommended that the Company retain the estimated after-tax gain of $6 million
for the sale. The proposed agreement excluded from the sale certain Santa Fe
area real estate which the Company would either sell or trade separately. Under
the agreement, the Company would continue to operate the water utility for up to
four years for a fee under a proposed contract with the City. The NMPUC staff
recommended that the Company be allowed to form an unregulated subsidiary to
manage the water utility. The parties are awaiting a recommended decision from
the hearing examiner. The Company currently expects that the closing will be in
the second quarter of 1995.
36
<PAGE>
SALE OF GAS GATHERING AND PROCESSING ASSETS
On February 12, 1994, an agreement was executed with Williams for the sale
of substantially all of the assets of Gathering Company and Processing 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.
The sale is subject to NMPUC approval. The Company filed its application for
approval with the NMPUC on May 20, 1994. On January 13, 1995, the Company and
certain intervenors (the NMPUC Staff, the AG, Williams and GPM Gas Corporation)
reached a stipulated agreement, subject to NMPUC approval, settling certain
issues, including the division of the gain from the sale of the gas gathering
and processing assets. Under the stipulation, the Company would recognize an
after-tax gain of approximately $14.1 million, subject to certain adjustments at
the closing, and would record a liability of approximately $35.5 million which
would be credited to the Company's gas customers' bills over approximately five
years. At the sixth year after the closing, such liability amount would be
recalculated to reflect the actual transaction costs and any resulting
difference would be refunded or billed to customers over a one year period.
The stipulated agreement provides for the approval of three 10-year
contracts, each with an option to renew for an additional 5-year term, with
Williams for competitively priced gathering and processing services. The Company
believes that the contracts will save customers amounts estimated to be between
$100 million and $128 million over 10 years. The stipulation also provides that
GCNM will recover, as an expense of the sale, $3.3 million of the $4.8 million
of costs deferred in GCNM's PGAC continuation proceeding. The Company wrote off
$1.5 million of such costs against 1994 earnings (see "RATES AND REGULATION --
Other Natural Gas Matters").
On January 23, 1995, certain natural gas producers (Meridian Oil Inc.,
Marathon Oil Company, Conoco, Inc., Amoco Production Company and Caulkins Oil
Company) filed a statement in opposition to the stipulation. Initially the
producers claimed that the resulting gain from the sale was improperly
calculated and allocated and that the proposed gathering and processing
contracts with Williams are unreasonable. Prior to the hearing, two of the
producers withdrew their opposition and another two withdrew their opposition
concerning the proposed gathering and processing contracts.
Hearings began on February 13, 1995 and were completed on February 17, 1995.
The parties to the stipulation requested a final order from the NMPUC on an
expedited basis. If NMPUC approval is issued on an expedited basis, the Company
expects to finalize the sale by the end of second quarter of 1995. However, the
Company cannot predict the ultimate timing or outcome of the NMPUC action.
EXCLUDED CAPACITY
As of December 31, 1994, the Company had a total of 280 MW of capacity
excluded from NMPUC jurisdictional rates which consists of 130 MW of PVNGS Unit
3, 45 MW of SJGS Unit 4 and the 105 MW M-S-R power purchase contract which
expires April 30, 1995. The Company continues to be dependent on the wholesale
power market for the recovery of its costs associated with excluded capacity
(see "RESULTS OF OPERATIONS").
In accordance with the Company's plan announced in January 1993, the Company
has sold 85 MW of its excluded capacity and continues to attempt to sell some or
all of its interest in PVNGS Unit 3. To date, the Company's attempts to sell
excluded nuclear generation have been unsuccessful.
ALBUQUERQUE FRANCHISE ISSUES
The Company's non-exclusive electric service franchise with the City of
Albuquerque (the "City") expired in early 1992. The franchise agreement provided
for the Company's use of City property for electric service rights-of-way. The
Company continues service to the area, which contributed 45.6% of the Company's
total 1994 electric operating revenues. The absence of a franchise does not
change the Company's right and obligation to serve those customers under state
law.
37
<PAGE>
In November 1991, the NMPUC issued an order concluding, among other things,
that the City could bid for services to its own facilities (Albuquerque
municipal loads generated approximately $17.0 million in annual revenue for
1994), but not for service to other customers. In reaching this conclusion, the
NMPUC noted that New Mexico law reflects a legislative choice to vest the NMPUC
with exclusive control over utility rates and services. The NMPUC also noted
that the Company's obligation to serve its customers in Albuquerque will
continue irrespective of whether the municipal franchise is renewed. The City
appealed the NMPUC's order to the New Mexico Supreme Court (the "Court"). On
April 21, 1993, the Court issued its decision on the City's appeal of the NMPUC
order. The Court ruled that a city can negotiate rates for its citizens in
addition to its own facility uses. The Court also ruled that any contracts with
utilities for electric rates are a matter of statewide concern and subject to
approval, disapproval or modification by the NMPUC. In addition, the Court
reaffirmed the NMPUC's exclusive power to designate providers of utility service
within a municipality and confirmed that municipal franchises are not licenses
to serve but rather to provide access to public rights-of-way.
In 1992, representatives of the Company and the City met in attempts to
resolve the franchise renewal issue. Currently, the franchise renewal meetings
are in abeyance due to the City's interest in the outcome of the retail wheeling
legislation (see "RETAIL WHEELING -- NEW MEXICO"). The Company continues to pay
franchise fees to the City.
38
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Management's Responsibility for Financial Statements....................................................... F-1
Report of Independent Public Accountants................................................................... F-2
Independent Auditors' Report............................................................................... F-3
Financial Statements:
Consolidated Statements of Earnings (Loss)............................................................... F-4
Consolidated Statements of Retained Earnings (Deficit)................................................... F-5
Consolidated Balance Sheets.............................................................................. F-6
Consolidated Statements of Cash Flows.................................................................... F-7
Consolidated Statements of Capitalization................................................................ F-8
Notes to Consolidated Financial Statements............................................................... F-9
Supplementary Data:
Quarterly Operating Results.............................................................................. F-29
Comparative Operating Statistics......................................................................... F-30
</TABLE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Public Service Company of New Mexico is responsible for
the preparation and presentation of the accompanying consolidated financial
statements. The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and include amounts
that are based on informed estimates and judgments of management.
Management maintains a system of internal accounting controls which it
believes is adequate to provide reasonable assurance that assets are
safeguarded, transactions are executed in accordance with management
authorization and the financial records are reliable for preparing the
consolidated financial statements. The system of internal accounting controls is
supported by written policies and procedures, by a staff of internal auditors
who conduct comprehensive internal audits and by the selection and training of
qualified personnel.
The board of directors, through its audit committee comprised entirely of
outside directors, meets periodically with management, internal auditors and the
Company's independent auditors to discuss auditing, internal control and
financial reporting matters. To ensure their independence, both the internal
auditors and independent auditors have full and free access to the audit
committee.
The independent auditors, Arthur Andersen LLP, are engaged to audit the
Company's consolidated financial statements in accordance with generally
accepted auditing standards.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Public Service Company of New Mexico:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of Public Service Company of New Mexico (a New Mexico
corporation) and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of earnings (loss), retained earnings (deficit), and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Public Service Company of
New Mexico and subsidiaries as of December 31, 1994 and 1993, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
As explained in notes 1 and 6 to the financial statements, effective January
1, 1993, the Company adopted Statement of Financial Accounting Standards No.
106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, and
No. 109, ACCOUNTING FOR INCOME TAXES.
ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
February 23, 1995
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Public Service Company of New Mexico:
We have audited the consolidated statements of earnings (loss), retained
earnings (deficit) and cash flows of Public Service Company of New Mexico and
subsidiaries for the year ended December 31, 1992. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Public Service Company of New Mexico and subsidiaries for the year
ended December 31, 1992, in conformity with generally accepted accounting
principles.
The Company has substantial excess electric generating capacity, the cost
and amount of which continue to negatively impact financial condition and
results of operations as well as the level of New Mexico retail rates. The
Company has adopted certain plans and is evaluating other options to address the
negative effects related to its excess capacity. Because the ultimate outcome of
these matters, including NMPUC regulatory responses thereto, is not presently
determinable, the recovery of (i) the Company's remaining direct investment in
Palo Verde Nuclear Generating Station (PVNGS) Unit 3, and (ii) its lease costs
related to PVNGS Units 1 and 2, is uncertain. Accordingly, neither a provision
for any additional loss related to PVNGS Unit 3 nor any provision for loss
related to PVNGS Units 1 and 2 has been recognized in the accompanying 1992
consolidated financial statements.
As discussed in note 1 of notes to consolidated financial statements in the
1992 Form 10-K, the Company changed its method of accounting for unbilled
revenues in 1992.
KPMG PEAT MARWICK LLP
Albuquerque, New Mexico
March 11, 1993
F-3
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
----------- ----------- ------------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Operating Revenues:
Electric................................................................ $ 621,794 $ 589,728 $ 596,323
Gas..................................................................... 269,510 271,087 243,159
Water................................................................... 13,407 13,063 12,471
----------- ----------- ------------
Total operating revenues.................................................. 904,711 873,878 851,953
----------- ----------- ------------
Operating Expenses:
Fuel and purchased power................................................ 140,411 140,674 177,325
Gas purchased for resale................................................ 129,381 125,940 98,517
Other operation expenses................................................ 264,391 274,023 273,141
Maintenance and repairs................................................. 61,386 56,821 54,309
Depreciation and amortization........................................... 74,137 77,326 79,256
Taxes, other than income taxes.......................................... 39,717 40,089 40,579
Income taxes............................................................ 44,210 25,721 16,891
----------- ----------- ------------
Total operating expenses.............................................. 753,633 740,594 740,018
----------- ----------- ------------
Operating income...................................................... 151,078 133,284 111,935
----------- ----------- ------------
Other Income and Deductions:
Allowance for equity funds used during construction..................... -- -- 68
Write-down of PVNGS Unit 3 and the provision for loss associated with
the M-S-R power purchase contract...................................... -- -- (221,324)
Write-down of the PVNGS Units 1 and 2 leases, regulatory assets and
other deferred costs................................................... -- (178,954) --
Other................................................................... (3,512) (12,792) (28,895)
Income tax benefit...................................................... 3,339 82,799 107,371
----------- ----------- ------------
Net other income and deductions....................................... (173) (108,947) (142,780)
----------- ----------- ------------
Income (loss) before interest charges................................. 150,905 24,337 (30,845)
----------- ----------- ------------
Interest Charges:
Interest on long-term debt.............................................. 65,511 72,525 63,826
Other interest charges.................................................. 5,341 13,719 10,735
Allowance for borrowed funds used during construction................... (265) (421) (1,151)
----------- ----------- ------------
Net interest charges.................................................. 70,587 85,823 73,410
----------- ----------- ------------
Net Earnings (Loss)....................................................... 80,318 (61,486) (104,255)
Preferred Stock Dividend Requirements..................................... 6,433 6,829 7,105
----------- ----------- ------------
Net Earnings (Loss) Available for Common Stock............................ $ 73,885 $ (68,315) $ (111,360)
----------- ----------- ------------
----------- ----------- ------------
Average Number of Common Shares Outstanding............................... 41,774 41,774 41,774
----------- ----------- ------------
----------- ----------- ------------
Net Earnings (Loss) per Share of Common Stock............................. $ 1.77 $ (1.64) $ (2.67)
----------- ----------- ------------
----------- ----------- ------------
Dividends Paid per Share of Common Stock.................................. $ -- $ -- $ --
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at Beginning of Year............................................ $ (120,848) $ (52,533) $ 60,189
Net earnings (loss)..................................................... 80,318 (61,486) (104,255)
Redemption of cumulative preferred stock................................ 957 -- (1,362)
Cumulative preferred stock dividends.................................... (6,433) (6,829) (7,105)
------------ ------------ ------------
Balance at End of Year.................................................. $ (46,006) $ (120,848) $ (52,533)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Utility Plant, at original cost except PVNGS:
Electric plant in service............................................................. $ 1,783,962 $ 1,789,100
Gas plant in service.................................................................. 537,762 511,527
Water plant in service................................................................ 63,048 54,325
Common plant in service............................................................... 49,049 47,581
Plant held for future use............................................................. 894 375
----------- -----------
2,434,715 2,402,908
Less accumulated depreciation and amortization........................................ 890,905 846,234
----------- -----------
1,543,810 1,556,674
Construction work in progress......................................................... 119,308 109,333
Nuclear fuel, net of accumulated amortization of $35,333 and $30,425.................. 33,569 37,925
----------- -----------
Net utility plant................................................................... 1,696,687 1,703,932
----------- -----------
Other Property and Investments, at cost:
Non-utility property, net of accumulated depreciation of $1,328 and $1,110............ 5,752 6,489
Other investments..................................................................... 28,771 27,477
----------- -----------
Total other property and investments................................................ 34,523 33,966
----------- -----------
Current Assets:
Cash.................................................................................. 21,029 20,510
Temporary investments, at cost........................................................ 74,521 47,850
Receivables........................................................................... 129,048 147,223
Income taxes receivable............................................................... 4,182 10,400
Fuel, materials and supplies, at average cost......................................... 51,068 48,086
Gas in underground storage, at average cost........................................... 8,744 8,599
Other current assets.................................................................. 9,549 11,347
----------- -----------
Total current assets.............................................................. 298,141 294,015
----------- -----------
Deferred charges........................................................................ 173,914 180,276
----------- -----------
$ 2,203,265 $ 2,212,189
----------- -----------
----------- -----------
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock outstanding -- 41,774,083 shares....................................... $ 208,870 $ 208,870
Additional paid-in capital.......................................................... 469,648 470,149
Excess pension liability, net of tax................................................ (1,106) (2,795)
Retained earnings (deficit) since January 1, 1989................................... (46,006) (120,848)
----------- -----------
Total common stock equity......................................................... 631,406 555,376
Cumulative preferred stock without mandatory redemption requirements.................. 59,000 59,000
Cumulative preferred stock with mandatory redemption requirements..................... 17,975 24,386
Long-term debt, less current maturities............................................... 752,063 957,622
----------- -----------
Total capitalization.............................................................. 1,460,444 1,596,384
----------- -----------
Current Liabilities:
Short-term debt....................................................................... -- --
Accounts payable...................................................................... 105,213 116,905
Current maturities of long-term debt.................................................. 148,532 18,903
Accrued interest and taxes............................................................ 28,073 29,992
Other current liabilities............................................................. 43,662 51,364
----------- -----------
Total current liabilities......................................................... 325,480 217,164
----------- -----------
Deferred Credits:
Accumulated deferred investment tax credits........................................... 71,564 78,462
Accumulated deferred income taxes..................................................... 77,207 47,283
Other deferred credits................................................................ 268,570 272,896
----------- -----------
Total deferred credits............................................................ 417,341 398,641
----------- -----------
Commitments and Contingencies (notes 2 through 11)
$ 2,203,265 $ 2,212,189
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings (loss).......................................................... $ 80,318 $ (61,486) $(104,255)
Adjustments to reconcile net earnings (loss) to net cash flows from operating
activities:
Depreciation and amortization.............................................. 90,656 95,415 100,510
Allowance for equity funds used during construction........................ -- -- (68)
Accumulated deferred investment tax credit................................. (6,898) (8,321) (21,390)
Accumulated deferred income taxes.......................................... 23,069 (63,393) (88,664)
Write-down of PVNGS Unit 3 and the provision for loss associated with the
M-S-R power purchase contract............................................. -- -- 221,324
Gain on sale of utility property........................................... (6,576) (7,350) --
Gain on sale of other property and investments............................. -- (12,394) --
Write-down of the PVNGS Units 1 & 2 leases, regulatory assets and other
deferred costs............................................................ -- 178,954 --
Changes in certain assets and liabilities:
Receivables.............................................................. 23,868 (12,551) (29,224)
Fuel, materials and supplies............................................. (3,126) 3,222 621
Deferred charges......................................................... 8,427 20,936 (31,427)
Accounts payable......................................................... (11,893) (53,973) 13,671
Accrued interest and taxes............................................... (1,919) 631 (155)
Deferred credits......................................................... (5,418) (7,137) 38,997
Other.................................................................... (3,604) 10,571 10,654
Other, net................................................................. 14,160 14,181 7,612
--------- --------- ---------
Net cash flows from operating activities............................... 201,064 97,305 118,206
--------- --------- ---------
Cash Flows From Investing Activities:
Utility plant additions...................................................... (119,284) (100,784) (95,009)
PVNGS lease purchase......................................................... -- -- (17,523)
Utility plant sales.......................................................... 39,562 49,302 --
Other property additions..................................................... (1,307) (2,554) (8,564)
Other property sales......................................................... -- 19,912 68
Temporary investments, net................................................... (26,671) (47,665) 3,920
--------- --------- ---------
Net cash flows from investing activities............................... (107,700) (81,789) (117,108)
--------- --------- ---------
Cash Flows From Financing Activities:
Redemptions and repurchases of preferred stock............................... (7,711) (600) (19,067)
Redemption of first mortgage bonds........................................... (45,000) -- --
Bond refinancing costs....................................................... -- (8,960) --
Bond redemption premium and costs............................................ (2,732) -- --
Proceeds from asset securitization........................................... -- 60,475 --
Repayments of long-term debt................................................. (31,002) (8,842) (2,456)
Net increase (decrease) in short-term debt................................... -- (51,550) 38,550
Dividends paid............................................................... (6,400) (6,609) (7,750)
--------- --------- ---------
Net cash flows from financing activities............................... (92,845) (16,086) 9,277
--------- --------- ---------
Increase (Decrease) in Cash.................................................... 519 (570) 10,375
Cash at Beginning of Year...................................................... 20,510 21,080 10,705
--------- --------- ---------
Cash at End of Year............................................................ $ 21,029 $ 20,510 $ 21,080
--------- --------- ---------
--------- --------- ---------
Supplemental cash flow disclosures:
Interest paid................................................................ $ 70,720 $ 83,248 $ 72,630
--------- --------- ---------
--------- --------- ---------
Income taxes paid............................................................ $ 20,000 $ 13,978 $ 11,848
--------- --------- ---------
--------- --------- ---------
Supplemental schedule of noncash investing and financing activities:
On September 2, 1992, the Company acquired approximately 22% of the lessors'
interests in the PVNGS Units 1 and 2 leases. In conjunction with the
acquisition, long-term debt was recorded as follows:
Utility plant acquired..................................................... $ 158,282
Cash paid for beneficial interests and transaction costs................... (17,523)
---------
Long-term debt recorded.................................................. $(140,759)
---------
---------
Cash consists of currency on hand and demand deposits.
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1993
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Common Stock Equity:
Common Stock, par value $5 per share........................................................... $208,870 $208,870
Additional paid-in capital..................................................................... 469,648 470,149
Excess pension liability, net of tax........................................................... (1,106) (2,795)
Retained earnings (deficit) since January 1, 1989.............................................. (46,006) (120,848)
------------ ------------
Total common stock equity.................................................................. 631,406 555,376
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OUTSTANDING AT CURRENT
STATED DECEMBER 31, REDEMPTION
VALUE 1994 PRICE
----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Cumulative Preferred Stock:
Without mandatory redemption requirements:
1965 Series, 4.58%............................... $ 100 130,000 $ 102.00 13,000 13,000
8.48% Series..................................... 100 200,000 100.00 20,000 20,000
8.80% Series..................................... 100 260,000 100.00 26,000 26,000
-------------- ------------ ------------
590,000 59,000 59,000
-------------- ------------ ------------
--------------
With mandatory redemption requirements:
8.75% Series..................................... 100 179,750 100.00 17,975 25,686
Redeemable within one year....................... -- -- 1,300
-------------- ------------ ------------
179,750 17,975 24,386
-------------- ------------ ------------
--------------
Long-Term Debt:
<CAPTION>
ISSUE AND FINAL MATURITY INTEREST RATES
- ----------------------------------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
First mortgage bonds:
1997.............................................. 5 7/8% 14,650 15,400
1999 through 2002................................. 7 1/4% to 8 1/8% 43,272 44,639
2004 through 2007................................. 8 1/8% to 10 1/8% 43,421 92,461
2008.............................................. 9 % 54,374 57,386
Pollution control revenue bonds:
1993 through 2023................................. 5.9% to 7 3/4% 537,045 537,045
2022.............................................. Variable rate 37,300 37,300
------------ ------------
Total first mortgage bonds...................... 730,062 784,231
Lease obligation bonds of First PV Funding
Corporation:
1996 through 2016................................. 8.95% to 10.3% 132,663 137,164
Asset securitization................................ 38,805 56,137
Other, including unamortized premium and
(discount)......................................... (935) (1,007)
------------ ------------
Total long-term debt............................ 900,595 976,525
Less current maturities............................. 148,532 18,903
------------ ------------
Long-term debt, less current maturities......... 752,063 957,622
------------ ------------
Total Capitalization.................................. $ 1,460,444 $ 1,596,384
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SYSTEMS OF ACCOUNTS
The Company maintains its accounts for utility operations primarily in
accordance with the uniform systems of accounts prescribed by the Federal Energy
Regulatory Commission ("FERC") and the National Association of Regulatory
Utility Commissioners ("NARUC"), and adopted by the New Mexico Public Utility
Commission ("NMPUC").
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and subsidiaries in which it owns a majority voting interest. All significant
intercompany transactions and balances have been eliminated.
UTILITY PLANT
Utility plant, with the exception of Palo Verde Nuclear Generating Station
("PVNGS") Unit 3 and the Company's purchased 22% beneficial interests in the
PVNGS Units 1 and 2 leases is stated at original cost, which includes
capitalized payroll-related costs such as taxes, pension and other fringe
benefits, administrative costs and an allowance for funds used during
construction ("AFUDC"). Utility plant includes certain electric assets not
subject to NMPUC regulation. The results of operations of such electric assets
are included in operating income.
PVNGS Unit 3 and the Company's purchased 22% beneficial interests in the
PVNGS Units 1 and 2 leases have been written down to net realizable value to
reflect a permanent impairment in their estimated value.
It is Company policy to charge repairs and minor replacements of property to
maintenance expense and to charge major replacements to utility plant. Gains or
losses resulting from retirements or other dispositions of operating property in
the normal course of business are credited or charged to the accumulated
provision for depreciation.
DEPRECIATION AND AMORTIZATION
Provision for depreciation and amortization of utility plant is made at
annual straight-line rates approved by the NMPUC. The average rates used are as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Electric plant............................................................. 3.01% 2.98% 2.94%
Gas plant.................................................................. 3.15% 3.12% 2.91%
Water plant................................................................ 2.68% 2.62% 2.62%
Common plant............................................................... 4.94% 4.90% 4.92%
</TABLE>
As part of the final order approving the January 12, 1994 stipulation (see
note 2), the NMPUC approved revised depreciation rates and incorporated them
into the determination of retail rates. The new rates include a provision for
the recovery of fossil-fueled plant decommissioning costs (see note 10).
The provision for depreciation of certain equipment is charged to clearing
accounts and subsequently allocated to operating expenses or construction
projects based on the use of the equipment.
Depreciation of non-utility property is computed on the straight-line
method. Amortization of nuclear fuel is computed based on the units of
production method.
F-9
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NUCLEAR DECOMMISSIONING
The Company accounts for nuclear decommissioning costs on a straight-line
basis over the estimated useful life of the facilities. Such amounts are based
on the net present value of expenditures estimated to be required to
decommission the plant.
FUEL AND PURCHASED POWER ADJUSTMENT CLAUSE ("FPPCAC")
As part of the final order approving the January 12, 1994 stipulation, the
Company's FPPCAC for its retail customers was eliminated (see note 2). The
Company continues to use the deferral method of accounting for fuel and
purchased power costs for its firm-requirements wholesale customers. Such
amounts are reflected in subsequent periods under a FPPCAC approved by the FERC.
PURCHASED GAS ADJUSTMENT CLAUSE ("PGAC")
The Company uses the deferral method of accounting for gas purchase costs
which are reflected in subsequent periods under gas adjustment clauses. Future
recovery of these costs is based on orders issued by the NMPUC.
AMORTIZATION OF DEBT DISCOUNT, PREMIUM AND EXPENSE
Discount, premium and expense related to the issuance of long-term debt are
amortized over the lives of the respective issues. In connection with the
retirement of long-term debt, such amounts associated with resources subject to
NMPUC regulation are amortized over the lives of the respective issues. Amounts
associated with the Company's firm-requirements wholesale customers and its
excluded resources are recognized immediately as expense or income as they are
incurred.
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, ACCOUNTING FOR INCOME TAXES. SFAS No. 109
requires deferred income taxes for temporary differences between book and tax to
be recorded using the liability method. Deferred income taxes are computed using
the enacted tax rates scheduled to be in effect when the temporary differences
reverse. Current NMPUC jurisdictional rates include the tax effects of the
majority of these temporary differences (normalization). Recovery of reversing
temporary differences previously accounted for under the flow-through method is
also included in rates charged to customers. For regulated operations, any
changes in tax rates applied to accumulated deferred income taxes may not be
immediately recognized because of ratemaking and tax accounting provisions
contained in the Tax Reform Act of 1986. For items accorded flow-through
treatment under NMPUC orders, deferred income taxes and the future ratemaking
effects of such taxes, as well as corresponding regulatory assets and
liabilities, are recorded.
(2) ELECTRIC OPERATIONS
COMPETITIVE ELECTRIC MARKET
The electric utility industry, as did the gas industry a decade ago, is
currently undergoing major changes to meet a changing marketplace. Changes are
occurring in response to actions by both Federal and state governments without
an overarching plan to make all of the pieces and policies fit together and
without a single government agency having the authority to impose one. At the
Federal level, the passage of the National Energy Policy Act of 1992 (the
"Energy Act") is causing the evolution of a traditional rate regulated industry
into a competitive market environment. The Energy Act is intended to promote
competition among utility and non-utility generators in the wholesale electric
generation market. The Energy Act, coupled with increasing customer demands for
lower-priced electricity, has accelerated industry restructuring and has
intensified interest in increased
F-10
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(2) ELECTRIC OPERATIONS (CONTINUED)
competition at the retail level. In response to the Energy Act, FERC has
released notices of proposed rulemakings which include topics such as
transmission access and pricing, stranded investment, and regional pooling. Such
proposed rulemakings would affect the electric utility industry generally. The
Company is unable to predict the outcome of these proposals. In addition,
initiatives at the state level in New Mexico relating to retail wheeling
continue to receive attention
SPECIFIC ACTIONS BY THE COMPANY
On January 11, 1993, the Company announced specific actions determined to be
necessary in order to accelerate the Company's preparation for the new
challenges in the competitive electric energy market. As part of this
announcement, the Company stated its intention to attempt to sell PVNGS Unit 3.
As a result, the Company recorded a $126.2 million after-tax charge to 1992
earnings related to the write-down of PVNGS Unit 3 and the provision for loss
associated with the M-S-R power purchase contract based on the estimated net
realizable value of these resources.
On January 12, 1994, the Company and the NMPUC staff and primary intervenor
groups entered into a rate reduction stipulation. The Company filed the
stipulation with the NMPUC, recommending that electric retail rates be reduced
by $30 million. This reduction was accomplished primarily through the write-down
of the 22% beneficial interests in the PVNGS Units 1 and 2 leases purchased by
the Company, the write-off of certain regulatory assets and other deferred
costs, the write-off of certain PVNGS Units 1 and 2 common costs and the
Company's previously announced cost reduction efforts. In conjunction with the
stipulation, the Company charged approximately $108.2 million, after-tax, to the
1993 results of operations.
On November 28, 1994, the NMPUC issued a final order approving the
stipulation as interpreted and provided by the order which was effective for
bills rendered starting November 29, 1994.
As recommended in the stipulation, the Company's interests in PVNGS Units 1
and 2 are now confirmed in this NMPUC order as "used and useful" for the rate
making purposes of the stipulation and the finding remains in force until the
stipulation is superseded or otherwise terminated. The order confirms that the
status of PVNGS Units 1 and 2 is no different from that of other used and useful
assets. Any costs incurred for these units as of January 12, 1994, will be fully
recoverable in the Company's jurisdictional rates consistent with the terms and
conditions of the NMPUC order and the stipulation, and subject to assurance that
all such costs have been accounted for accurately.
In approving the stipulation, the NMPUC reconfirmed its authority over the
Company and its authority to issue orders in the public interest, finding
nothing in the stipulation to supersede that authority. Pursuant to the
stipulation, the signatories do not intend to file or cause the filing of a
general rate case before January 1, 1998, in the absence of a significant
restructuring of rate base or unforeseen circumstances occasioning a significant
change in the Company's costs. As a result of the order, the Company believes
that the rates agreed upon in the stipulation will be adequate to recover the
cost of its New Mexico jurisdictional services going forward and further
believes that the Company will be in a better position to compete in a
competitive electric market environment.
UNCERTAINTIES
The Company believes that the stipulation has improved its competitive
position in the electric market, but recognizes that low cost producers may have
an advantage if the regulatory framework changes significantly towards retail
wheeling concepts. The Company's generating costs are currently above those of
some neighboring utilities due primarily to the expensive nuclear generation.
F-11
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(2) ELECTRIC OPERATIONS (CONTINUED)
The future structure of the industry, the form and timing of competition and
the method of regulation in a competitive environment remains uncertain. In the
transition to a more competitive market environment from a traditional rate
regulated environment, the value of a utility's assets could be affected
significantly. If the cost of operating a utility's existing assets is above
market prices, the utility may be unable to recover all of its costs without
adequate treatment for stranded assets. In the Company's situation, if included
generation costs currently being recovered in retail rates were to be based on a
competitive market price which is lower than its current costs, the value of the
Company's PVNGS Units 1 and 2 investment could be economically impaired.
STRATEGIC PLAN
In order to mitigate the exposures associated with a competitive electric
market and transition into this changing environment, the Company, in addition
to the January 11, 1993 announcement and other actions discussed above, has set
the following strategic plan: (1) secure financial flexibility by retiring debt,
(2) restructure the Company's expensive generating assets and nuclear leases,
(3) control operating and maintenance costs, and (4) develop new business
opportunities in the energy related area. It should be noted, however, that the
Company's ability to restructure its generating assets and nuclear leases is
limited. In addition, the Company's ability to develop new business
opportunities will be subject to state laws, rules and regulations.
As part of this plan, the Company has internally restructured its operations
into four separate business units, each targeted at a specific segment of its
customer base. The new structure is intended to make the Company more customer
oriented and responsive to the changing competitive environment. The four units
- -- Electric Services, Gas Services, Bulk Power Services and Energy Services --
will be evaluated continuously for their contribution to building shareholder
value.
(3) CAPITALIZATION
Changes in common stock, additional paid-in capital and cumulative preferred
stock are as follows:
<TABLE>
<CAPTION>
CUMULATIVE PREFERRED STOCK
-------------------------------------
WITH
WITHOUT MANDATORY MANDATORY
REDEMPTION
REDEMPTION REQUIREMENTS REQUIREMENTS
COMMON STOCK ------------------------ -----------
----------------------- ADDITIONAL AGGREGATE
NUMBER OF AGGREGATE PAID-IN NUMBER OF STATED NUMBER OF
SHARES PAR VALUE CAPITAL SHARES VALUE SHARES
---------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992...................... 41,774,083 208,870 470,149 590,000 59,000 257,000
Redemption of preferred stock................... -- -- -- -- -- (139)
Redemption within one year...................... -- -- -- -- -- (13,000)
---------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1993...................... 41,774,083 208,870 470,149 590,000 59,000 243,861
Redemption of preferred stock................... -- -- (501) -- -- (64,111)
Balance at December 31, 1994...................... 41,774,083 $ 208,870 $ 469,648 590,000 $ 59,000 179,750
---------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
AGGREGATE
STATED
VALUE
-----------
<S> <C>
Balance at December 31, 1992...................... 25,700
Redemption of preferred stock................... (14)
Redemption within one year...................... (1,300)
-----------
Balance at December 31, 1993...................... 24,386
Redemption of preferred stock................... (6,411)
Balance at December 31, 1994...................... $ 17,975
-----------
-----------
</TABLE>
COMMON STOCK
The number of authorized shares of common stock with par value of $5 per
share is 80 million shares.
The payment of cash dividends on the common stock of the Company is subject
to certain restrictions, including those contained in the Company's mortgage
indenture, which effectively prevent the payment of dividends on common stock
unless the Company has positive retained
F-12
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(3) CAPITALIZATION (CONTINUED)
earnings. The Company's board of directors, which reviews the Company's dividend
policy on a continuing basis, has not declared dividends on its common stock
since January 1989. As of December 31, 1994, the Company had a deficit in
retained earnings of $46 million and is, therefore, currently unable to resume
payment of dividends on its common stock. The resumption of common dividends is
dependent upon a number of factors including earnings and financial condition of
the Company and market conditions.
CUMULATIVE PREFERRED STOCK
The number of authorized shares of cumulative preferred stock is 10 million
shares. The Company's restated articles of incorporation limit the amount of
preferred stock which may be issued. The earnings test in the Company's restated
articles of incorporation currently allows for the issuance of preferred stock.
The Company, upon 30 days notice, may redeem the cumulative preferred stock
at stated redemption prices plus accrued and unpaid dividends. Redemption prices
are at reduced premiums in future years.
The Company evaluated its ability to continue paying dividends on its
preferred stock under restrictions imposed by the Federal Power Act due to the
Company's negative retained earnings. In 1993, the Company advised the FERC
staff of the Company's position that payment of preferred stock dividends would
not be in violation of the Federal Power Act. As a result, the Company continued
to declare and pay dividends on its preferred stock on scheduled dates.
There are no mandatory redemption requirements for 1995 through 1998 and
only $75,000 in 1999. During any period that the Company is unable to pay
preferred dividends, if that should occur, the Company would be prohibited by
its restated articles of incorporation from making future mandatory redemption
payments.
LONG-TERM DEBT
Substantially all utility plant is pledged to secure the Company's first
mortgage bonds. A portion of certain series of long-term debt will be redeemed
serially prior to their due dates. The issuance of first mortgage bonds by the
Company is subject to earnings coverage and bondable property provisions of the
Company's first mortgage indenture. The Company also has the capability under
the mortgage indenture without regard to the earnings test but subject to other
conditions to issue first mortgage bonds on the basis of certain previously
retired bonds and earnings.
The aggregate amounts (in thousands) of maturities for 1995 through 1999 on
long-term debt outstanding at December 31, 1994 are as follows:
<TABLE>
<S> <C>
1995............................................................. $ 148,532
1996............................................................. $ 17,317
1997............................................................. $ 22,345
1998............................................................. $ 4,341
1999............................................................. $ 16,229
</TABLE>
F-13
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(3) CAPITALIZATION (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's long-term debt and preferred stock
(including current maturities) is estimated to be approximately:
<TABLE>
<CAPTION>
1994 1993
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Preferred Stock..................................... $ 76,975 $ 60,000 $ 84,686 $ 75,000
Long-Term Debt...................................... $ 900,595 $ 805,000 $ 976,525 $ 986,000
<FN>
Estimates are based on market quotes obtained from the Company's investment
bankers.
</TABLE>
(4) REVOLVING CREDIT FACILITY AND OTHER CREDIT FACILITIES
At December 31, 1994, the Company had a $100 million secured revolving
credit facility (the "Facility") with the expiration date of June 13, 1995. The
Company must pay commitment fees of .5% per year on the total amount of the
Facility. The Company expects to renew the Facility prior to its expiration. The
Company also has a $40 million credit facility, collateralized by the Company's
electric customer accounts receivable (the "Accounts Receivable Securitization")
with an expiration date of December 20, 1998. Together with $11 million in local
lines of credit, the Company has $151 million in liquidity arrangements. As of
December 31, 1994, there were no borrowings outstanding under the Facility, the
Accounts Receivable Securitization or any of the local lines of credit.
(5) INCOME TAXES
Income taxes consist of the following components:
<TABLE>
<CAPTION>
1994 1993 1992
--------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current Federal income tax........................................ $ 24,243 $ 12,502 $ 19,285
Current State income tax.......................................... -- -- 3,292
Deferred Federal income tax....................................... 15,449 (52,827) (76,808)
Deferred State income tax......................................... 8,077 (8,433) (14,859)
Investment tax credit carryforward................................ -- -- 1,036
Amortization of accumulated investment tax credits................ (4,701) (5,036) (6,113)
Recognition of accumulated deferred investment tax credits
relating to PVNGS Unit 3 (1992) and other utility property (1993
and 1994)........................................................ (2,197) (3,284) (16,313)
--------- ---------- ------------
Total income taxes.............................................. $ 40,871 $ (57,078) $ (90,480)
--------- ---------- ------------
--------- ---------- ------------
Charged to operating expenses..................................... $ 44,210 $ 25,721 $ 16,891
Charged (credited) to other income and deductions................. (3,339) (82,799) (107,371)
--------- ---------- ------------
Total income taxes.............................................. $ 40,871 $ (57,078) $ (90,480)
--------- ---------- ------------
--------- ---------- ------------
</TABLE>
F-14
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(5) INCOME TAXES (CONTINUED)
The Company's provision for income taxes differed from the Federal income
tax computed at the statutory rate for each of the years shown. The differences
are attributable to the following factors:
<TABLE>
<CAPTION>
1994 1993 1992
--------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income tax at statutory rates.............................. $ 42,417 $ (41,497) $ (66,210)
Investment tax credits............................................. (4,701) (5,036) (6,113)
Depreciation of flow-through items................................. 1,112 1,719 2,027
Gains on the sale and leaseback of PVNGS Units 1
and 2............................................................. (527) (514) (491)
State income tax................................................... 5,222 (5,585) (9,249)
Write-down of PVNGS Unit 3......................................... -- -- (9,529)
Gain on sale of utility property................................... (2,139) (3,169) --
Federal income tax rate change to 35%.............................. -- (2,527) --
Other.............................................................. (513) (469) (915)
--------- ---------- ----------
Total income taxes............................................... $ 40,871 $ (57,078) $ (90,480)
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
Deferred income taxes result from certain differences between the
recognition of income and expense for tax and financial reporting purposes, as
described in note 1. The major sources of these differences for which deferred
taxes have been provided and the tax effects of each are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred fuel costs............................................... $ (1,945) $ 4,549 $ 10,938
Depreciation and cost recovery.................................... 22,118 17,668 14,632
Write-down of PVNGS Unit 3........................................ -- -- (62,259)
Loss provision for the M-S-R power purchase contract.............. 5,632 6,335 (15,464)
Contributions in aid of construction.............................. (5,055) (4,491) (2,435)
Unbilled revenues................................................. -- -- 11,136
Alternative minimum tax in excess of regular tax.................. (24,100) (13,808) 526
Net operating losses utilized (carryforward)...................... 35,077 15,067 (38,565)
PVNGS decommissioning............................................. (2,445) (3,962) (2,925)
Write-down of interests in PVNGS Units 1 and 2.................... -- (51,585) --
Hedge loss write-off.............................................. -- (3,908) --
Loss on reacquired debt write-off................................. -- (5,561) --
Gain on sale of utility property.................................. (8,421) (11,321) --
Contribution to 401(h) plan....................................... 1,204 (3,226) --
PVNGS decontamination............................................. -- -- (2,590)
Reserve for litigation............................................ -- (1,979) --
Other............................................................. 1,461 (5,038) (4,661)
---------- ---------- ----------
Net deferred taxes provided..................................... $ 23,526 $ (61,260) $ (91,667)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-15
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(5) INCOME TAXES (CONTINUED)
The components of the net accumulated deferred income tax liability were:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Assets:
Net operating losses........................................................ $ 51,199 $ 84,768
Alternative minimum tax..................................................... 40,626 16,527
Nuclear decommissioning..................................................... 11,703 9,258
Regulatory liabilities...................................................... 64,877 69,880
Other....................................................................... 41,446 50,027
----------- -----------
Total deferred tax assets................................................. $ 209,851 $ 230,460
----------- -----------
Deferred Tax Liabilities:
Depreciation................................................................ $ 175,068 $ 169,107
Investment tax credit....................................................... 71,564 78,462
Fuel costs.................................................................. 28,794 30,739
Regulatory assets........................................................... 77,020 75,168
Other....................................................................... 6,176 2,729
----------- -----------
Total deferred tax liabilities............................................ 358,622 356,205
----------- -----------
Accumulated deferred income taxes--net........................................ $ 148,771 $ 125,745
----------- -----------
----------- -----------
</TABLE>
At December 31, 1994, the Company had net operating loss carryforwards for
Federal income tax purposes of $69.1 million, $15.1 million, and $55.1 million
which expire in 2004, 2005 and 2007, respectively. For purposes of New Mexico
state income tax, these carryforwards, if unused, would expire in 2004, 2005 and
1997, respectively. New Mexico law provides a five-year carryforward for all net
operating losses incurred after 1990. The Company anticipates that all of these
carryforwards will be fully utilized before expiration, and the financial
statements reflect that expectation.
The Company defers investment tax credits related to utility assets and
amortizes them over the estimated useful lives of those assets. Investment tax
credits related to non-utility assets have been flowed through in earlier years.
(6) EMPLOYEE AND POST-EMPLOYMENT BENEFITS
PENSION PLAN
The Company and its subsidiaries have a pension plan covering substantially
all of their employees, including officers. The plan is non-contributory and
provides for benefits to be paid to eligible employees at retirement based
primarily upon years of service with the Company and their average of highest
annual base salary for three consecutive years. The Company's policy is to fund
actuarially-determined contributions. Contributions to the plan reflect benefits
attributed to employees' years of service to date and also for services expected
to be provided in the future. Plan assets primarily consist of common stock,
fixed income securities, cash equivalents and real estate.
F-16
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(6) EMPLOYEE AND POST-EMPLOYMENT BENEFITS (CONTINUED)
The components of pension cost (in thousands) are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Service cost...................................................... $ 8,121 $ 7,263 $ 7,701
Interest cost..................................................... 17,589 16,849 15,537
Actual loss (return) on plan assets............................... 1,079 (18,148) (7,547)
Net amortization and deferral..................................... (18,731) (878) (11,596)
---------- ---------- ----------
Net periodic pension cost......................................... 8,058 5,086 4,095
Curtailment loss.................................................. -- 1,657 --
---------- ---------- ----------
Total pension expense............................................. $ 8,058 $ 6,743 $ 4,095
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The following sets forth the plan's funded status and amounts (in thousands)
at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Vested benefits............................................................... $ 183,364 $ 205,909
Non-vested benefits........................................................... 8,071 8,191
----------- -----------
Accumulated benefit obligation................................................ 191,435 214,100
Effect of future compensation levels.......................................... 36,581 44,500
----------- -----------
Projected benefit obligation.................................................. 228,016 258,600
Fair value of plan assets..................................................... 208,751 212,475
----------- -----------
Projected benefit obligation in excess of assets.............................. 19,265 46,125
Unrecognized prior service cost............................................... (248) (282)
Net unrecognized loss from past experience different from assumed and the
effects of changes in assumptions............................................ (27,183) (54,876)
Unamortized asset at transition, being amortized through the year 2002........ 8,142 9,306
Additional liability (unfunded accumulated benefits in excess of accrued
pension cost)................................................................ -- 1,352
----------- -----------
Accrued pension liability (asset)............................................. $ (24) $ 1,625
----------- -----------
----------- -----------
</TABLE>
The weighted average discount rate used to measure the projected benefit
obligation was 8.25% for 1994 and 7.0% for 1993 and the expected long-term rate
of return on plan assets was 8.75% for 1994 and 9.0% for 1993. The rate of
increase in future compensation levels based on age-related scales was 4.1% for
1994 and 1993.
OTHER POSTRETIREMENT BENEFITS
The Company adopted SFAS No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS, effective January 1, 1993. The Company provides
medical and dental benefits to
F-17
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(6) EMPLOYEE AND POST-EMPLOYMENT BENEFITS (CONTINUED)
eligible retirees. Currently, retirees are offered the same benefits as active
employees after reflecting Medicare coordination. The components of
postretirement benefit cost (in thousands) for 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Service cost...................................................................... $ 1,389 $ 1,175
Interest cost..................................................................... 3,250 2,974
Actual loss (return) on plan assets............................................... 100 (56)
Transition obligation amortization................................................ 1,817 1,857
Net amortization and deferral..................................................... (295) --
--------- ---------
Net periodic postretirement benefit cost.......................................... 6,261 5,950
Curtailment loss.................................................................. -- 4,295
--------- ---------
Total postretirement benefit expense.............................................. $ 6,261 $ 10,245
--------- ---------
--------- ---------
</TABLE>
The following sets forth the plan's funded status and amounts (in thousands)
at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Accumulated benefit obligations for:
Retirees.................................................................... $ 32,085 $ 24,007
Fully eligible employees.................................................... 1,848 1,120
Active employees............................................................ 27,387 22,144
----------- -----------
Accumulated benefit obligation................................................ 61,320 47,271
Fair value of plan assets..................................................... 8,559 2,118
----------- -----------
Funded status................................................................. (52,761) (45,153)
Net unrecognized loss......................................................... 15,310 3,956
Unrecognized transition obligation (being amortized through the year 2012).... 32,708 34,525
----------- -----------
Accrued postretirement liability.............................................. $ (4,743) $ (6,672)
----------- -----------
----------- -----------
</TABLE>
Prior to 1993, the costs of these benefits were expensed on a pay-as-you-go
basis. The cost of providing these benefits was approximately $1.5 million for
1992. The discount rate used to measure the postretirement benefit obligation
was 8.25% for 1994 and 7% for 1993. The health care cost trend rate was 7.5% and
6% for 1994 and 1993, respectively. The effect of a 1% increase in the health
care trend rate assumption would increase the accumulated postretirement benefit
obligation as of December 31, 1994 by approximately $9.1 million and the
aggregate service and interest cost components of net periodic postretirement
benefit cost for 1994 by approximately $1.2 million.
SFAS No. 106 requires accrual of postretirement benefits during the years
employees provide services. In 1993, the NMPUC issued a final order in a case
regarding an inquiry into SFAS No. 106. In its final order, the NMPUC adopted a
policy which provides for accrual accounting for the postretirement benefit
costs, funding requirements into an irrevocable trust and specific reporting for
the benefit costs in future rate cases. The order also provides for specific
waiver provisions with respect to the external trust funding requirements and a
deferral of the benefit costs in excess of the pay-as-you-go basis. The Company
received approval on November 28, 1994 for the recovery of the full accrual
amount of SFAS No. 106 expense for its electric business unit. As of December
31, 1994, no benefit costs were deferred for the electric business unit. The
Company filed supplemental
F-18
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(6) EMPLOYEE AND POST-EMPLOYMENT BENEFITS (CONTINUED)
information regarding the funding of postretirement benefits on February 24,
1995, which outlined the types of funding vehicles and the amounts funded for
1994 related to the electric business unit. The Company defers the benefit costs
in excess of the pay-as-you-go basis for the gas business unit ($2.8 million
deferred as of December 31, 1994) and will address the recovery of this amount
as well as the full accrual amount of SFAS No. 106 expense related to the gas
business unit in its next general rate case which will be filed in 1995.
PERFORMANCE STOCK PLAN
As approved by the Company's shareholders on May 25, 1993, the Company
adopted a nonqualified stock option plan (Performance Stock Plan) covering a
group of management employees. Under the terms of the plan which became
effective on July 1, 1993, options to purchase shares of the Company's common
stock are granted with an exercise price equal to the fair market value of the
stock at the date of grant. On July 1, 1993, the Company granted 370,000 options
to the covered employees under the plan at an exercise price of $13.75 per
share. In 1994, the Company made an additional initial grant under the plan of
8,306 options with an exercise price of $11.50 per share. In addition, based on
the Company's 1994 performance, 803,127 options were granted at an exercise
price of $13.00. The remaining 842,385 options, including 23,818 returned
options, are available for future grants. Options may be exercised following
vesting as described in the plan. Currently no options are eligible for
exercise.
EXECUTIVE RETIREMENT PROGRAM
The Company had an executive retirement program for a group of management
employees. The program was intended to attract, motivate and retain key
management employees. The Company's projected benefit obligation for this
program, as of December 31, 1994, was $17.7 million, of which the accumulated
and vested benefit obligation was $16.3 million. As of December 31, 1994, the
Company has recognized an additional liability of $1.1 million for the amount of
unfunded accumulated benefits in excess of accrued pension costs. The net
periodic pension cost for 1994, 1993 and 1992 was $2.2 million, $2.1 million and
$2.0 million, respectively. In 1989, the Company established an irrevocable
grantor trust in connection with the executive retirement program. Under the
terms of the trust, the Company may, but is not obligated to, provide funds to
the trust, which was established with an independent trustee, to aid it in
meeting its obligations under such program. Funds in the amount of approximately
$11.1 million (fair market value of $11.4 million) are presently in trust. No
additional funds have been provided to the trust since 1989.
(7) CONSTRUCTION PROGRAM AND JOINTLY-OWNED PLANTS
It is estimated that the Company's construction expenditures for 1995 will
be approximately $117 million, including expenditures on jointly-owned projects.
The Company's proportionate share of expenses for the jointly-owned plants is
included in operating expenses in the consolidated statement of earnings.
F-19
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(7) CONSTRUCTION PROGRAM AND JOINTLY-OWNED PLANTS (CONTINUED)
At December 31, 1994, the Company's interests and investments in
jointly-owned generating facilities are:
<TABLE>
<CAPTION>
CONSTRUCTION
PLANT IN ACCUMULATED WORK IN COMPOSITE
STATION (FUEL TYPE) SERVICE DEPRECIATION PROGRESS INTEREST
- --------------------------------------------------- ----------- ------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
San Juan Generating Station (Coal)................. $ 708,335 $ 269,625 $ 5,591 46.3%
Palo Verde Nuclear Generating Station (Nuclear).... $ 189,504* $ 32,623* $ 10,148* 10.2%
Four Corners Generating Station Units 4 and 5
(Coal)............................................ $ 114,910 $ 35,537 $ 4,494 13.0%
<FN>
- ------------------------
* Includes the Company's interest in PVNGS Unit 3, the Company's interest in
common facilities for all PVNGS units and the 22% beneficial interests in the
PVNGS Units 1 and 2 leases purchased on September 2, 1992.
</TABLE>
F-20
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1994, 1993 and 1992
(7) CONSTRUCTION PROGRAM AND JOINTLY-OWNED PLANTS
SAN JUAN GENERATING STATION ("SJGS")
The Company operates and jointly owns SJGS. At December 31, 1994, SJGS Units
1 and 2 are owned on a 50% shared basis with Tucson Electric Power Company, Unit
3 is owned 50% by the Company, 41.8% by Southern California Public Power
Authority and 8.2% by Century Power Corporation ("Century"). Century has agreed
to sell its remaining 8.2% interest to Tri-State Generation and Transmission
Association, Inc. Unit 4 is owned 38.457% by the Company, 8.475% by the City of
Farmington, 28.8% by M-S-R, 7.2% by the County of Los Alamos, 10.04% by the City
of Anaheim, California and 7.028% by Utah Associated Municipal Power Systems.
PALO VERDE NUCLEAR GENERATING STATION
The Company has a 10.2% interest in PVNGS. Commercial operation commenced in
1986 for Unit 1 and Unit 2 and 1988 for Unit 3. In 1985 and 1986, the Company
completed sale and leaseback transactions for its undivided interests in Units 1
and 2 and certain related common facilities.
On September 2, 1992, the Company purchased approximately 22% of the
beneficial interests in PVNGS Units 1 and 2 leases for approximately $17.5
million. For accounting purposes, this transaction was recorded as a purchase
with the Company recording approximately $158.3 million as utility plant
(written down to $46.7 million as a result of the January 12, 1994 stipulation,
see note 2) and $140.8 million as long-term debt on the Company's consolidated
balance sheet.
The PVNGS participants have insurance for public liability payments
resulting from nuclear energy hazards to the full limit of liability under
Federal law. This potential liability is covered by primary liability insurance
provided by commercial insurance carriers in the amount of $200 million and the
balance by an industry wide retrospective assessment program. The maximum
assessment per reactor under the retrospective rating program for each nuclear
incident occurring at any nuclear power plant in the United States is
approximately $79.3 million, subject to an annual limit of $10 million per
incident. Based upon the Company's 10.2% interest in the three PVNGS units, the
Company's maximum potential assessment per incident is approximately $24.3
million, with an annual payment limitation of $3 million. The insureds under
this liability insurance include the PVNGS participants and "any other person or
organization with respect to his legal responsibility for damage caused by the
nuclear energy hazard".
The PVNGS participants maintain "all-risk" (including nuclear hazards)
insurance for nuclear property damage to, and decontamination of, property at
PVNGS in the aggregate amount of approximately $2.8 billion as of January 1,
1995, a substantial portion of which must first be applied to stabilization and
decontamination. The Company has also secured insurance against a portion of the
increased cost of generation or purchased power resulting from certain
accidental outages of any of the three PVNGS units if such outage exceeds 21
weeks.
The Company has a program for funding its share of decommissioning costs for
PVNGS. Under this program, the Company makes a series of annual deposits to an
external trust fund over the estimated useful life of each unit with the trust
funds being invested under a plan which allows the accumulation of funds largely
on a tax-deferred basis through the use of life insurance policies on certain
current and former employees. The results of the 1992 decommissioning study
indicate that the Company's share of the PVNGS decommissioning costs will be
approximately $150.4 million, an increase from $98.9 million based on the
previous study (both amounts are stated in 1994 dollars). The Company determined
that a supplemental investment program will be needed as a result of both the
cost increase and the under performance of the existing investment program. In
1995, the Company will file a request for permission from the NMPUC to establish
a supplemental investment program,
F-21
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(7) CONSTRUCTION PROGRAM AND JOINTLY-OWNED PLANTS (CONTINUED)
allowing for investment in more traditional classes of investments. The Company
will also request the authority to establish a qualified tax advantaged trust
for Units 1 and 2. Due to IRS regulations, Unit 3 will remain in a non-qualified
trust. With the uncertainty of the FERC regulation regarding restrictions on
investment vehicles, the Company will address any issues as they are resolved.
In the November 28, 1994 NMPUC order (see note 2), the NMPUC approved the
increased decommissioning costs for PVNGS Units 1 and 2 and included such
amounts as a component in the determination of retail rates. The market value of
the existing trust at the end of 1994 was approximately $12 million, including
cash surrender value of the policies. A new PVNGS decommissioning cost study
will be performed during the latter half of 1995.
(8) LONG-TERM POWER CONTRACTS AND FRANCHISES
The Company has two long-term contracts for the purchase of electric power.
Under a contract with M-S-R, which expires in early 1995, the Company is
obligated to pay certain minimum amounts and a variable component representing
the expenses associated with the energy purchased and debt service costs
associated with capital improvements. Total payments under this contract
amounted to approximately $42 million for 1994 and 1993, and $40 million for
1992. The minimum payment under this contract is $9.0 million for the first four
months of 1995, at which time this contract expires. The Company recorded a
provision for loss associated with the M-S-R power purchase contract in its 1992
results of operation.
The Company has a long-term contract with Southwestern Public Service
Company ("SPS") to purchase interruptible power which began in June 1991. Total
payments under this contract amounted to approximately $9.0 million in 1994.
Minimum payments under the contract amount to approximately $11.7 million and
$14.0 million for 1995 and 1996, respectively. In addition, the Company will be
required to pay for any energy purchased under the contract. The amount of
minimum payments for future years will depend on whether the Company exercises
its option to reduce its purchase obligations under the contract. Such options
require three years advance notification.
(9) LEASE COMMITMENTS
The Company classifies its leases in accordance with generally accepted
accounting principles. The Company leases Units 1 and 2 of PVNGS, transmission
facilities, office buildings and other equipment under operating leases. The
lease expense for PVNGS is $66.3 million per year over base lease terms expiring
in 2015 and 2016. Prior to 1992, the aggregate lease expense for the PVNGS
leases was $84.6 million per year over the base lease terms; however, this
amount was reduced by the purchase of approximately 22% of the beneficial
interests in the PVNGS Units 1 and 2 leases (see note 7). Each PVNGS lease
contains renewal and fair market value purchase options at the end of the base
lease term.
Future minimum operating lease payments (in thousands) at December 31, 1994
are:
<TABLE>
<S> <C>
1995........................................................... $ 77,205
1996........................................................... 77,076
1997........................................................... 76,967
1998........................................................... 76,865
1999........................................................... 76,580
Later years.................................................... 1,178,376
----------
Total minimum lease payments................................. $1,563,069
----------
----------
</TABLE>
F-22
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(9) LEASE COMMITMENTS (CONTINUED)
Operating lease expense, inclusive of PVNGS, was approximately $79.1 million
in 1994, $80.6 million in 1993 and $91.1 million in 1992. The aggregate minimum
payments to be received in future periods under noncancelable subleases are
approximately $7.1 million.
(10) ENVIRONMENTAL ISSUES AND FOSSIL-FUELED PLANT DECOMMISSIONING COSTS
The Company is committed to complying with all applicable environmental
regulations in a responsible manner. Compliance with all environmental issues
has and will continue to present a challenge to the Company. The Company has
evaluated the potential impacts of the following environmental issues and
believes, after consideration of established reserves, that the ultimate outcome
of these environmental issues will not have a material adverse effect on the
Company's financial condition or results of operations.
ENVIRONMENTAL ISSUES -- GAS
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT ("CERCLA")
Two CERCLA 104(e) requests for information were received from the United
States Environmental Protection Agency ("EPA") in late 1993, requesting
information regarding shipment of wastes to the Lee Acres Landfill, located on
Bureau of Land Management ("BLM") land near the city of Bloomfield in San Juan
County, New Mexico. The landfill is currently listed on the National Priorities
List as a superfund site. Gas Company of New Mexico, a division of the Company
("GCNM") and Sunterra Gas Gathering Company, a wholly-owned subsidiary of the
Company ("Gathering Company") assessed their records and other information to
determine whether wastes were ever shipped from their facilities to the landfill
during the period when they owned and operated the natural gas facilities. GCNM
and Gathering Company's assessment indicated that no hazardous materials were
shipped from their facilities to the landfill during this time period.
Nonetheless, GCNM and Gathering Company could be determined to be potentially
responsible parties if the EPA ultimately determines GCNM and Gathering Company
shipped wastes to the site, and could be asked or compelled to provide funds for
site cleanup. GCNM and Gathering Company submitted their response to the EPA on
March 8, 1994. To date, GCNM and Gathering Company have not received any further
notification from the EPA regarding the Lee Acres site.
AIR PERMITS
An environmental audit performed in association with the Company's proposed
sale of certain gas assets brought to light certain discrepancies regarding
required air permits associated with certain natural gas facilities. The audit
identified a total of thirteen facilities containing discrepancies. The vast
majority of the discrepancies were minor in nature and included discrepancies in
record keeping, equipment identification and inaccurate information in air
permit applications. The discrepancies at three of the facilities involve permit
issuance and modification and are more serious in nature. The Company is subject
to administrative fines/penalties by the New Mexico Environment Department
("NMED") for these discrepancies.
In April 1994, the Company met with the NMED to discuss the nature of the
permit discrepancies and to propose methods and schedules to resolve the
discrepancies. As a result of this meeting, the NMED has informed the Company
that it will not pursue enforcement of the thirteen minor discrepancies noted
above. On August 30, 1994, the Company submitted its permit modification
application for the Lybrook Gas Processing Plant ("Lybrook"). On November 14,
1994, the Company received a written Notice of Violation ("NOV") from the NMED
for Lybrook. The NOV indicates the NMED has concluded that the Company violated
air quality control regulations requiring permits for
F-23
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(10) ENVIRONMENTAL ISSUES AND FOSSIL-FUELED PLANT DECOMMISSIONING
COSTS (CONTINUED)
modification of stationary sources. The NOV indicated the Company may be subject
to a civil action in district court for the appropriate relief and/or the
assessment of civil penalties. The Company has responded to the NOV and is
pursuing efforts to address the NOV with the NMED.
The Company anticipates that it will submit Processing Company's air permit
modification application on the Kutz Canyon Gas Processing Plant ("Kutz") in the
first quarter of 1995. While the Company cannot be certain, the Kutz filing,
which will be similar to the Lybrook filing, may also result in an NOV from the
NMED due to apparent permit discrepancies in the Kutz air permit. At this point
in time, the Company cannot estimate the amount of any fine or penalty, if any,
that may be attributable to the Kutz filing.
GAS WELLHEAD PIT REMEDIATION
The New Mexico Oil Conservation Commission ("NMOCC") issued an order
effective on January 14, 1993, that affects GCNM and Gathering Company's natural
gas gathering facilities located in the San Juan Basin in Northwestern New
Mexico. The NMOCC ruling prohibits the further discharge of fluids associated
with the production of natural gas into unlined earthen pits in certain
specified areas of the San Juan Basin. The NMOCC ruling required the cessation
of discharge of production fluids in three specified areas within specific time
frames. In addition, the ruling required the submission of closure plans for the
closure of pits in which production fluids were previously discharged. The BLM
has issued a similar ruling. GCNM and Gathering Company have ceased discharge in
the first area identified by the NMOCC and are proceeding to cease discharge in
the second area identified in the NMOCC ruling. GCNM and Gathering Company have
also submitted and received approval of their pit closure plans from the New
Mexico Oil Conservation Division, ("OCD"), the Energy Minerals and Natural
Resources Department, as well as the BLM. Because the assets associated with
GCNM and Gathering Company's gathering operations are the subject of the sale of
gas assets to Gas Processing Blanco, Inc., a subsidiary of the Williams Field
Service Group, Inc. ("Williams"), GCNM and Gathering Company will not be subject
to the cease discharge requirement for the third and final area identified in
the NMOCC's ruling if the sale closes prior to March 1, 1996.
The three previously mentioned gas operations environmental issues, with the
exception of the third and final area identified in NMOCC's ruling related to
gas wellhead pit remediation are part of the retained environmental liabilities
under the sale agreement with Williams (see note 11).
DIETHANOLAMINE ("DEA") SPILL
In June 1994, Sunterra Gas Processing Company, a wholly-owned subsidiary of
the Company ("Processing Company"), experienced a release of DEA due to an
equipment malfunction. DEA wastes are oilfield exempt wastes which are not
subject to regulation as hazardous wastes under the Resource Conservation and
Recovery Act ("RCRA"). The spill and subsequent removal of DEA-contaminated
soils were reported to the OCD which has jurisdiction over such spills and
wastes. However, the release of DEA to the air in amounts that exceed the
reportable quantity of one pound is potentially reportable under CERCLA as
amended by the Superfund Amendments and Reauthorization Act ("SARA"). When it
was discovered in September 1994 that the spill had not been reported under
CERCLA/SARA, as a precaution, the spill notification/report was forwarded to the
National Response Center on September 22, 1994. The Company is currently unable
to predict what, if any, enforcement action may ensue.
F-24
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(10) ENVIRONMENTAL ISSUES AND FOSSIL-FUELED PLANT DECOMMISSIONING
COSTS (CONTINUED)
ENVIRONMENTAL ISSUE -- ELECTRIC
PERSON STATION
The Company's current estimate to decommission its retired fossil-fueled
plants includes approximately $10.9 million to complete the groundwater
remediation program at Person Station. The Company, in compliance with the New
Mexico Environment Department Corrective Action Directive, determined that
groundwater contamination exists in the deep and shallow water aquifers. The
Company is required to delineate the extent of the contamination and remediate
the contaminant in the ground water. The extent of the contaminant plume in the
deep water aquifer is not currently known, and the estimate assumes that the
deep ground water plume can be easily delineated with a minimum number of
monitoring wells. As part of the financial assurance requirements of the Person
Station Hazardous Waste Permit, the Company posted a $5.1 million performance
bond with a trustee. The remediation program continues on schedule.
SANTA FE STATION
The estimate to decommission Santa Fe Station includes monies for
environmental issues related to the site. The NMED has been conducting an
investigation of the groundwater contamination detected beneath the site to
determine the source of the contamination. The source of groundwater
contamination has not yet been definitely identified, and the Company is
continuing to cooperate with the NMED site investigations pursuant to a consent
agreement between the Company and the NMED.
CERCLA
On January 18, 1995, the Company received a CERCLA Section 104(e) request
for information from the EPA regarding the Hansen Container Site in Grand
Junction, Colorado ("Hansen Site"). The EPA is investigating the site and
seeking information relating to the number and contents of drums, barrels, and
other materials that were sent to the Hansen Site for reconditioning, disposal,
or storage. The Company undertook an internal investigation to determine if the
Company or its subsidiaries may have sent or shipped any drums, barrels or other
materials containing hazardous materials to the Hansen Site. The Company filed
its response to the EPA's request for information on March 2, 1995, and stated
that the Company's records indicate that it did not dispose of any hazardous
materials at the Hansen Site and did not cause others to transport hazardous
materials for disposal at the Hansen Site. The Company's records did indicate,
however, that the Company sold empty scrap drums to a drum recycler in the
1980's who has been linked to the Hansen Site by the EPA. The Company's position
is that it is not a potential responsible party; however, given these
transactions, the Company could possibly be determined to be a potential
responsible party and could be asked or compelled to provide funds for site
cleanup. Based on the Company's discussions with the EPA to date, the Company
does not expect to be required to provide any significant funding for site
cleanup.
FOSSIL-FUELED PLANT DECOMMISSIONING COSTS
The Company's six owned or partially owned, in service and retired,
fossil-fueled generating stations are expected to incur dismantling and
reclamation costs as they are decommissioned. The Company's share of
decommissioning costs for all of its fossil-fueled generating stations is
projected to be approximately $134 million stated in 1994 dollars, including
approximately $24.4 million (of which $10.2 million has already been expended)
for Person, Prager and Santa Fe Stations which have been retired.
In June 1993, the Company filed for recovery of all estimated
decommissioning costs by factoring such costs into the Company's depreciation
rate study filed with the NMPUC.
F-25
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(10) ENVIRONMENTAL ISSUES AND FOSSIL-FUELED PLANT DECOMMISSIONING
COSTS (CONTINUED)
As part of the final order approving the January 12, 1994 stipulation, the
NMPUC approved the depreciation rates, except for those decommissioning costs
related to the three retired generating units, and incorporated them into the
determination of retail rates.
(11) ASSET SALES
SALE OF SDCW
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. As currently adjusted, the purchase price will be
approximately $56 million. The NMPUC staff and intervenors recommended that the
Company retain the estimated after-tax gain of $6 million for the sale. In March
1994, the Company filed its application with the NMPUC for approval of the sale
and hearings were commenced on December 12, 1994 and concluded on January 9,
1995. The proposed agreement excluded from the sale certain Santa Fe area real
estate which the Company would either sell or trade separately. Under the
agreement, the Company would continue to operate the water utility for up to
four years for a fee under a proposed contract with the City. The NMPUC staff
recommended that the Company be allowed to form an unregulated subsidiary to
manage the water utility. The parties are awaiting a recommended decision from
the hearing examiner. The Company currently expects that the closing will be in
the second quarter of 1995.
SALE OF GAS GATHERING AND PROCESSING ASSETS
On February 12, 1994, an agreement was executed with Williams for the sale
of substantially all of the assets of Gathering Company and Processing Company,
and for the sale of Northwest and Southwest gas gathering and processing
facilities of the Company. The agreement provides for a cash selling price of
$155 million, subject to certain adjustments.
The sale is subject to NMPUC approval. The Company filed its application for
approval with the NMPUC on May 20, 1994. On January 13, 1995, the Company and
certain intervenors (the NMPUC Staff, the New Mexico Attorney General, Williams
and GPM Gas Corporation) reached a stipulated agreement, subject to NMPUC
approval, settling certain issues, including the division of the gain from the
sale of the gas gathering and processing assets. Under the stipulation, the
Company would recognize an after-tax gain of approximately $14.1 million,
subject to certain adjustments at the closing, and would record a liability of
approximately $35.5 million which would be credited to the Company's gas
customers' bills over approximately five years. At the sixth year after the
closing, such liability amount would be recalculated to reflect the actual
transaction costs and any resulting difference would be refunded or billed to
customers over a one year period.
The stipulated agreement provides for the approval of three 10-year
contracts, each with an option to renew for an additional 5-year term, with
Williams for competitively priced gathering and processing services. The Company
believes that the contracts will save customers amounts estimated to be between
$100 million and $128 million over 10 years. The stipulation also provides that
GCNM will recover, as an expense of the sale, $3.3 million of the $4.8 million
of costs deferred in GCNM's Purchase Gas Adjustment Clause ("PGAC") continuation
proceeding. The Company wrote off $1.5 million of such costs against 1994
earnings.
On January 23, 1995, certain natural gas producers (Meridian Oil Inc.,
Marathon Oil Company, Conoco, Inc., Amoco Production Company and Caulkins Oil
Company) filed a statement in opposition to the stipulation. Initially the
producers claimed that the resulting gain from the sale was improperly
F-26
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(11) ASSET SALES (CONTINUED)
calculated and allocated and that the proposed gathering and processing
contracts with Williams are unreasonable. Prior to the hearing, two of the
producers withdrew their opposition and another two withdrew their opposition
concerning the proposed gathering and processing contracts.
Hearings began on February 13, 1995 and were completed on February 17, 1995.
The parties to the stipulation requested a final order from the NMPUC on an
expedited basis. If NMPUC approval is issued on an expedited basis, the Company
expects to finalize the sale by the end of second quarter of 1995. However, the
Company cannot predict the ultimate timing or outcome of the NMPUC action.
(12) SEGMENT INFORMATION
The financial information pertaining to the Company's electric, gas and
other operations for the years ended December 31, 1994, 1993 and 1992 are as
follows:
<TABLE>
<CAPTION>
ELECTRIC* GAS OTHER TOTAL
------------- ----------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1994:
Operating revenues....................................... $ 621,794 $ 269,510 $ 13,407 $ 904,711
Operating expenses excluding income taxes................ 468,519 233,743 7,161 709,423
------------- ----------- --------- -------------
Pre-tax operating income................................. 153,275 35,767 6,246 195,288
Operating income tax..................................... 32,998 9,158 2,054 44,210
------------- ----------- --------- -------------
Operating income......................................... $ 120,277 $ 26,609 $ 4,192 $ 151,078
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Depreciation and amortization expense.................... $ 56,003 $ 16,847 $ 1,287 $ 74,137
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Construction expenditures................................ $ 80,282 $ 31,518 $ 8,506 $ 120,306
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Identifiable assets:
Net utility plant...................................... $ 1,302,467 $ 341,232 $ 52,988 $ 1,696,687
Other.................................................. 307,010 187,748 11,820 506,578
------------- ----------- --------- -------------
Total assets......................................... $ 1,609,477 $ 528,980 $ 64,808 $ 2,203,265
------------- ----------- --------- -------------
------------- ----------- --------- -------------
1993:
Operating revenues....................................... $ 589,728 $ 271,087 $ 13,063 $ 873,878
Operating expenses excluding income taxes................ 467,659 239,859 7,355 714,873
------------- ----------- --------- -------------
Pre-tax operating income................................. 122,069 31,228 5,708 159,005
Operating income tax..................................... 19,184 5,347 1,190 25,721
------------- ----------- --------- -------------
Operating income......................................... $ 102,885 $ 25,881 $ 4,518 $ 133,284
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Depreciation and amortization expense.................... $ 59,298 $ 16,859 $ 1,169 $ 77,326
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Construction expenditures................................ $ 67,886 $ 26,593 $ 2,847 $ 97,326
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Identifiable assets:
Net utility plant...................................... $ 1,324,110 $ 333,862 $ 45,960 $ 1,703,932
Other.................................................. 257,153 240,908 10,196 508,257
------------- ----------- --------- -------------
Total assets......................................... $ 1,581,263 $ 574,770 $ 56,156 $ 2,212,189
------------- ----------- --------- -------------
------------- ----------- --------- -------------
</TABLE>
F-27
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1993 AND 1992
(12) SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
ELECTRIC* GAS OTHER TOTAL
------------- ----------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1992:
Operating revenues....................................... $ 596,323 $ 243,159 $ 12,471 $ 851,953
Operating expenses excluding income taxes................ 513,919 203,129 6,079 723,127
------------- ----------- --------- -------------
Pre-tax operating income................................. 82,404 40,030 6,392 128,826
Operating income tax..................................... 7,138 7,879 1,874 16,891
------------- ----------- --------- -------------
Operating income......................................... $ 75,266 $ 32,151 $ 4,518 $ 111,935
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Depreciation and amortization expense.................... $ 61,832 $ 16,290 $ 1,134 $ 79,256
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Construction expenditures................................ $ 51,924 $ 25,461 $ 17,410 $ 94,795
------------- ----------- --------- -------------
------------- ----------- --------- -------------
Identifiable assets:
Net utility plant...................................... $ 1,513,224 $ 317,341 $ 46,496 $ 1,877,061
Other.................................................. 275,775 210,791 11,955 498,521
------------- ----------- --------- -------------
Total assets......................................... $ 1,788,999 $ 528,132 $ 58,451 $ 2,375,582
------------- ----------- --------- -------------
------------- ----------- --------- -------------
<FN>
- ------------------------
* Includes the resources excluded from NMPUC regulation (see note 2).
</TABLE>
On January 11, 1993, the Company announced its intention to dispose of SDCW
and all or major portions of the natural gas gathering and natural gas
processing assets (see note 11). Such sales are pending NMPUC approval.
F-28
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
QUARTERLY OPERATING RESULTS
The unaudited operating results by quarters for 1994 and 1993 are as
follows:
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- ----------- ------------ ------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1994:
Operating Revenues....................................... $ 260,807 $ 204,260 $ 218,717 $ 220,927
Operating Income......................................... $ 42,671 $ 32,150 $ 43,606 $ 32,651
Net Earnings............................................. $ 24,103 $ 19,248 $ 21,789 $ 15,178
Net Earnings per Share................................... $ 0.54 $ 0.42 $ 0.48 $ 0.33
1993:
Operating Revenues....................................... $ 248,558 $ 190,828 $ 203,751 $ 230,741
Operating Income......................................... $ 26,351 $ 30,679 $ 37,895 $ 38,359
Net Earnings (Loss) (1).................................. $ 11,960 $ 5,653 $ 23,946 $ (103,045 )
Net Earnings (Loss) per Share (1)........................ $ 0.25 $ 0.09 $ 0.53 $ (2.51 )
In the opinion of management of the Company, all adjustments (consisting of normal recurring accruals)
necessary for a fair statement of the results of operations for such periods have been included.
<FN>
- ------------------------
(1) On January 12, 1994, the Company and the NMPUC staff and the primary
intervenor groups entered into a rate reduction stipulation. The Company
filed the stipulation with the NMPUC, recommending that electric retail
rates be reduced by $30 million. This reduction was accomplished primarily
through the write-down of the 22% benefical interests in the PVNGS Units 1
and 2 leases purchased by the Company, the write-off of certain regulatory
assets and other deferred costs, the write-off of certain PVNGS Units 1 and
2 common costs and the Company's previously announced cost reduction
efforts. In conjunction with the stipulation, the Company charged
approximately $108.2 million, after-tax, to the 1993 results of operations.
(See PART II, ITEM 7, -- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- OVERVIEW -- SPECIFIC ACTIONS BY THE
COMPANY".)
</TABLE>
F-29
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ELECTRIC SERVICE
Energy Sales -- KWh (in thousands):
Residential............................ 1,786,292 1,683,213 1,650,491 1,606,993 1,575,622
Commercial............................. 2,534,507 2,398,725 2,353,152 2,299,213 2,270,380
Industrial............................. 1,268,208 1,145,369 1,087,357 1,025,420 999,823
Other ultimate customers............... 364,144 219,481 267,246 208,328 203,005
------------ ------------ ------------ ------------ ------------
Total sales to ultimate customers.... 5,953,151 5,446,788 5,358,246 5,139,954 5,048,830
Sales for resale....................... 3,361,933 3,375,216 3,685,418 3,091,541 3,497,506
------------ ------------ ------------ ------------ ------------
Total KWh sales...................... 9,315,084 8,822,004 9,043,664 8,231,495 8,546,336
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Electric Revenues (in thousands):
Residential............................ $ 172,559 $ 163,131 $ 158,190 $ 155,162 $ 147,059
Commercial............................. 229,851 218,263 211,086 207,929 200,041
Industrial............................. 79,729 74,157 69,590 67,031 66,351
Other ultimate customers............... 24,147 15,548 16,521 14,472 14,054
------------ ------------ ------------ ------------ ------------
Total revenues to ultimate
customers........................... 506,286 471,099 455,387 444,594 427,505
Sales for resale....................... 96,821* 99,895* 123,291 107,636 122,431
------------ ------------ ------------ ------------ ------------
Total revenues from energy sales..... 603,107 570,994 578,678 552,230 549,936
Miscellaneous electric revenues........ 18,687 18,734 17,645 16,256 17,446
------------ ------------ ------------ ------------ ------------
Total electric revenues.............. $ 621,794 $ 589,728 $ 596,323 $ 568,486 $ 567,382
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Customers at Year End:
Residential............................ 287,369 278,357 271,155 264,425 259,546
Commercial............................. 34,336 33,568 32,504 31,666 31,295
Industrial............................. 384 381 386 385 392
Other ultimate customers............... 599 576 537 499 454
------------ ------------ ------------ ------------ ------------
Total ultimate customers............. 322,688 312,882 304,582 296,975 291,687
Sales for Resale....................... 42 37 47 33 34
------------ ------------ ------------ ------------ ------------
Total customers...................... 322,730 312,919 304,629 297,008 291,721
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Reliable Net Capability -- KW............ 1,506,000 1,541,000 1,591,000 1,591,000 1,591,000
Coincidental Peak Demand -- KW........... 1,189,000 1,104,000 1,053,000 1,018,000 1,051,000
Average Fuel Cost per Million BTU........ $ 1.3488 $ 1.3844 $ 1.3263 $ 1.3696 $ 1.3384
BTU per KWh of Net Generation............ 10,817 11,036 11,039 11,086 11,181
WATER SERVICE
Water Sales -- Gallons (in
thousands)............................ 3,366,388 3,414,950 3,224,271 2,996,587 3,001,391
Revenues (in thousands)................ $ 13,407 $ 13,063 $ 12,471 $ 11,613 $ 11,700
Customers at Year End.................. 23,452 22,743 22,098 21,522 21,134
</TABLE>
- --------------------------
* Due to the provision for the loss associated with the M-S-R contingent
power purchase contract recognized in 1992, operating revenues were
reduced by $25 million and $20.5 million for 1994 and 1993, respectively.
(See Note 2 of the notes to consolidated financial statements.)
Note: In 1991, the Company implemented a FERC order requiring classification of
economy sales as operating revenues. Prior period amounts have been
reclassified for comparability purposes.
F-30
<PAGE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
GAS SERVICE
Gas Throughput -- Decatherms (in thousands)
GCNM:
Residential....................................... 27,139 28,031 27,063 26,237 25,190
Commercial........................................ 9,767 10,428 10,590 11,375 11,344
Industrial........................................ 831 923 707 766 1,278
Public authorities................................ 2,465 2,473 4,199 4,951 5,300
Irrigation........................................ 1,272 1,259 1,134 1,374 1,780
Sales for resale.................................. 680 1,041 2,035 1,357 3,539
Unbilled.......................................... (309) (636) 649 -- --
---------- ---------- ---------- ---------- ----------
GCNM sales........................................ 41,845 43,519 46,377 46,060 48,431
Transportation throughput......................... 43,135 46,059 48,674 38,976 31,717
---------- ---------- ---------- ---------- ----------
GCNM throughput................................... 84,980 89,578 95,051 85,036 80,148
Gathering Company:
Spot market sales................................. -- -- 858 1,624 8,112
Transportation throughput......................... 47,091 45,754 24,889 23,631 10,785
---------- ---------- ---------- ---------- ----------
Total gas throughput............................ 132,071 135,332 120,798 110,291 99,045
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Gas Revenues (in thousands)
GCNM:
Residential....................................... $ 149,439 $ 149,796 $ 125,313 $ 137,436 $ 137,633
Commercial........................................ 42,725 44,575 37,222 46,676 49,575
Industrial........................................ 2,905 3,369 2,063 2,754 4,993
Public authorities................................ 9,969 9,694 12,313 17,711 20,392
Irrigation........................................ 4,061 4,418 2,713 4,495 5,934
Sales for resale.................................. 2,462 3,137 4,460 3,848 7,253
Imbalance penalties............................... 944 -- -- -- --
Unbilled.......................................... 267 (1,573) 716 -- --
---------- ---------- ---------- ---------- ----------
Revenues from gas sales........................... 212,772 213,416 184,800 212,920 225,780
Transportation.................................... 19,742 19,376 14,861 13,386 10,246
Other............................................. 2,392 2,453 4,974 9,062 8,292
---------- ---------- ---------- ---------- ----------
GCNM gas revenues................................. 234,906 235,245 204,635 235,368 244,318
Gathering Company:
Spot market sales................................. -- 4 1,410 1,771 13,880
Transportation.................................... 7,850 7,353 3,892 3,611 1,693
Imbalance penalties............................... 26 -- -- -- --
Processing Company:
Sales of liquids.................................. 16,090 18,724 26,427 30,500 39,086
Processing fees................................... 10,638 9,761 6,795 5,819 3,127
---------- ---------- ---------- ---------- ----------
Total gas revenues.............................. $ 269,510 $ 271,087 $ 243,159 $ 277,069 $ 302,104
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Customers at Year End
GCNM:
Residential....................................... 348,715 337,768 329,385 320,546 312,899
Commercial........................................ 30,139 30,151 29,765 29,608 29,305
Industrial........................................ 57 72 61 72 81
Public authorities................................ 2,463 1,958 2,004 2,153 2,125
Irrigation........................................ 899 951 1,012 1,043 1,224
Sales for resale.................................. 3 3 4 7 4
Transportation.................................... 43 37 43 41 40
---------- ---------- ---------- ---------- ----------
GCNM customers.................................... 382,319 370,940 362,274 353,470 345,678
Gathering Company:
Off-system sales.................................. -- 1 2 13 12
Transportation.................................... 21 21 16 8 9
Processing Company.................................. 32 25 22 21 20
---------- ---------- ---------- ---------- ----------
Total customers................................. 382,372 370,987 362,314 353,512 345,719
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
F-31
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Reference is hereby made to "Election of Directors" in the Company's Proxy
Statement relating to the annual meeting of stockholders to be held on April 25,
1995 (the "1995 Proxy Statement") and to PART I, SUPPLEMENTAL ITEM -- "EXECUTIVE
OFFICERS OF THE COMPANY".
ITEM 11. EXECUTIVE COMPENSATION
Reference is hereby made to "Executive Compensation" in the 1995 Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is hereby made to "Voting Information", "Election of Directors"
and "Stock Ownership of Certain Executive Officers" in the 1995 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is hereby made to the 1995 Proxy Statement for such disclosure, if
any, as may be required by this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) -- 1. See Index to Financial Statements under Item 8.
(a) -- 2. Financial Statement Schedules for the years 1994, 1993, and 1992
are omitted for the reason that they are not required or the information is
otherwise supplied.
(a) -- 3-A. Exhibits Filed:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------------
<C> <S> <C> <C>
2.1.1 First Amendment to Purchase and Sale Agreement By and Among Public Service Company of
New Mexico, Sunterra Gas Gathering Company, Sunterra Gas Processing Company (Sellers)
and Williams Gas Processing -- Blanco, Inc. (Buyer)
2.1.2 Second Amendment to Purchase and Sale Agreement By and Among Public Service Company of
New Mexico, Sunterra Gas Gathering Company, Sunterra Gas Processing Company (Sellers)
and Williams Gas Processing -- Blanco, Inc. (Buyer)
2.2.1 First Amendment to Agreement to Purchase and Sell Between the City of Santa Fe, New
Mexico and Public Service Company of New Mexico.
2.2.2 Second Amendment to Agreement to Purchase and Sell Between the City of Santa Fe, New
Mexico and Public Service Company of New Mexico.
2.2.3 Third Amendment to Agreement to Purchase and Sell Between the City of Santa Fe, New
Mexico and Public Service Company of New Mexico.
2.2.4 Fourth Amendment to Agreement to Purchase and Sell Between the City of Santa Fe, New
Mexico and Public Service Company of New Mexico.
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------------
2.2.5 Fifth Amendment to Agreement to Purchase and Sell Between the City of Santa Fe, New
Mexico and Public Service Company of New Mexico.
<C> <S> <C> <C>
2.2.6 Sixth Amendment to Agreement to Purchase and Sell Between the City of Santa Fe, New
Mexico and Public Service Company of New Mexico.
3.2 Bylaws of Public Service Company of New Mexico With All Amendments to and including
December 5, 1994.
10.5.2 Modifications No. 3 to San Juan Project Agreements dated July 17, 1984 (refiled).
10.8.4 Amendment No. 9 to Arizona Nuclear Power Project Participation Agreement dated as of
June 12, 1984 (refiled).
10.9.1 Amendment No. Three to Coal Sales Agreement dated April 30, 1984 among San Juan Coal
Company, the Company and Tucson Electric Power Company (confidentiality treatment was
requested at the time of filing the Annual Report of the Registrant on Form 10-K for
fiscal year ended December 31, 1984; exhibit was not filed therewith nor is the
exhibit being filed herewith based on the same confidentiality request).
10.12 Amended and Restated San Juan Unit 4 Purchase and Participation Agreement dated as of
December 28, 1984 between the Company and the Incorporated County of Los Alamos
(refiled).
10.49** Employment Contract By and Between the Public Service Company of New Mexico and Roger
J. Flynn.
10.50 Stipulation regarding negotiated agreement with intervenors to settle all outstanding
issues regarding recovery of payments GCNM made to settle gas take-or-pay contracts
and pricing disputes.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
</TABLE>
(a) -- 3-B. Exhibits Incorporated By Reference:
- ------------------------
** Designates each management contract or compensatory plan arrangement
required to be identified pursuant to paragraph 3 of Item 14(a) of Form
10-K.
E-2
<PAGE>
In addition to those Exhibits shown above, the Company hereby incorporates
the following Exhibits pursuant to Exchange Act Rule 12b-32 and Regulation
201.24 by reference to the filings set forth below:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
<C> <S> <C> <C>
PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION
2.1 Purchase and Sale Agreement By and Among 4-(b) to Registration Statement No. 2-99990
Public Service Company of New Mexico, 2-99990 of the Company.
Sunterra Gas Gathering Company, Sunterra Gas
Processing (Sellers) and Williams Gas
Processing -- Blanco, Inc. (Buyer).
2.2 Agreement to Purchase and Sell Between City 4-(b) to Registration Statement No. 2-99990
of Santa Fe, New Mexico and Public Service 2-99990 of the Company.
Company of New Mexico.
ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Restated Articles of Incorporation of the 4-(b) to Registration Statement No. 2-99990
Company, as amended through May 10, 1985. 2-99990 of the Company.
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
4.1 Indenture of Mortgage and Deed of Trust dated 4-(d) to Registration Statement No. 2-99990
as of June 1, 1947, between the Company and 2-99990 of the Company.
The Bank of New York (formerly Irving Trust
Company), as Trustee, together with the Ninth
Supplemental Indenture dated as of January 1,
1967, the Twelfth Supplemental Indenture
dated as of September 15, 1971, the
Fourteenth Supplemental Indenture dated as of
December 1, 1974 and the Twenty-second
Supplemental Indenture dated as of October 1,
1979 thereto relating to First Mortgage Bonds
of the Company.
4.2 Portions of sixteen supplemental indentures 4-(e) to Registration Statement No. 2-99990
to the Indenture of Mortgage and Deed of 2-99990 of the Company.
Trust dated as of June 1, 1947, between the
Company and The Bank of New York (formerly
Irving Trust Company), as Trustee, relevant
to the declaration or payment of dividends or
the making of other distributions on or the
purchase by the Company of shares of the
Company's Common Stock.
</TABLE>
E-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
MATERIAL CONTRACTS
<C> <S> <C> <C>
10.1 Supplemental Indenture of Lease dated as of 4-D to Registration Statement No. 2-26116
July 19, 1966 between the Company and other 2-26116 of the Company.
participants in the Four Corners Project and
the Navajo Indian Tribal Council.
10.1.1 Amendment and Supplement No. 1 to 10.1.1 to Annual Report of the 1-6986
Supplemental and Additional Indenture of Registrant on Form 10-K for fiscal year
Lease dated April 25, 1985 between the Navajo ended December 31, 1985.
Tribe of Indians and Arizona Public Service
Company, El Paso Electric Company, Public
Service Company of New Mexico, Salt River
Project Agricultural Improvement and Power
District, Southern California Edison Company,
and Tucson Electric Power Company.
10.2 Fuel Agreement, as supplemented, dated as of 4-H to Registration Statement No. 2-35042
September 1, 1966 between Utah Construction & 2-35042 of the Company.
Mining Co. and the participants in the Four
Corners Project including the Company.
10.3 Fourth Supplement to Four Corners Fuel 10.3 to Annual Report of the Registrant 1-6986
Agreement No. 2 effective as of January 1, on Form 10-K for fiscal year ended
1981, between Utah International Inc. and the December 31, 1991.
participants in the Four Corners Project,
including the Company.
10.4 Contract between the United States and the 5-L to Registration Statement No. 2-41010
Company dated April 11, 1968, for furnishing 2-41010 of the Company.
water.
10.4.1 Amendatory Contract between the United States 5-R to Registration Statement No. 2-60021
and the Company dated September 29, 1977, for 2-60021 of the Company.
furnishing water.
10.5 Co-Tenancy Agreement between the Company and 5-O to Registration Statement No. 2-44425
Tucson Gas & Electric Company dated February 2-44425 of the Company.
15, 1972, pertaining to the San Juan
generating plant.
10.5.1 Modifications No. 1 to San Juan Project 10.10 to Annual Report of the 1-6986
Agreements. Registrant on Form 10-K for fiscal year
ended December 31, 1991.
</TABLE>
E-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
10.5.3 Modification No. 4 to Co-Tenancy Agreement 10.5.1 to Annual Report of the 1-6986
between the Company and Tucson Electric Power Registrant on Form 10-K for fiscal year
Company dated October 25, 1984. ended December 31, 1985.
<C> <S> <C> <C>
10.5.4 Modification No. 5 to Co-Tenancy Agreement 10.5.2 to Annual Report of the 1-6986
between the Company and Tucson Electric Power Registrant on Form 10-K for fiscal year
Company dated July 1, 1985. ended December 31, 1985.
10.5.5 Modification No. 8 to San Juan Project 10.5.5 to the Company's Quarterly 1-6986
Co-Tenancy Agreement between Public Service Report on Form 10-Q for the quarter
Company of New Mexico and Tucson Electric ended March 31, 1994.
Power Company dated September 15, 1993.
10.5.6 Modification No. 9 to San Juan Project 10.5.6 to the Company's Quarterly 1-6986
Co-Tenancy Agreement between Public Service Report on Form 10-Q for the quarter
Company of New Mexico and Tucson Electric ended March 31, 1994.
Power Company dated January 12, 1994.
10.6 San Juan Project Construction Agreement 5-R to Registration Statement No. 2-50338
between the Company and Tucson Gas & Electric 2-50338 of the Company.
Company, executed December 21, 1973.
10.6.1 Modification No. 4 to San Juan Project 10.6.1 to Annual Report of the 1-6986
Construction Agreement between the Company Registrant on Form 10-K for fiscal year
and Tucson Electric Power Company dated ended December 31, 1985.
October 25, 1984.
10.6.2 Modification No. 5 to San Juan Project 10.6.2 to Annual Report of the 1-6986
Construction Agreement between the Company Registrant on Form 10-K for fiscal year
and Tucson Electric Power Company dated July ended December 31, 1985.
1, 1985.
10.6.3 Modification No. 8 to San Juan Project 10.6.3 to the Company's Quarterly 1-6986
Construction Agreement between Public Service Report on Form 10-Q for the quarter
Company of New Mexico and Tucson Electric ended March 31, 1994.
Power Company dated January 12, 1994.
10.7 San Juan Project Operating Agreement between 5-S to Registration Statement No. 2-50338
the Company and Tucson Gas & Electric 2-50338 of the Company.
Company, executed December 21, 1973.
</TABLE>
E-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
10.7.1 Modification No. 4 to San Juan Project 10.7.1 to Annual Report of the 1-6986
Operating Agreement between the Company and Registrant on Form 10-K for fiscal year
Tucson Electric Power Company dated October ended December 31, 1985.
25, 1984.
<C> <S> <C> <C>
10.7.2 Modification No. 5 to San Juan Project 10.7.2 to Annual Report of the 1-6986
Operating Agreement between the Company and Registrant on Form 10-K for fiscal year
Tucson Electric Power Company dated July 1, ended December 31, 1985.
1985.
10.7.3 Modification No. 8 to San Juan Project 10.7.3 to the Company's Quarterly 1-6986
Operating Agreement between Public Service Report on Form 10-Q for the quarter
Company of New Mexico and Tucson Electric ended March 31, 1994.
Power Company dated September 15, 1993.
10.7.4 Modification No. 9 to San Juan Project 10.7.4 to the Company's Quarterly 1-6986
Operating Agreement between Public Service Report on Form 10-Q for the quarter
Company of New Mexico and Tucson Electric ended March 31, 1994.
Power Company dated January 12, 1994.
10.8 Arizona Nuclear Power Project Participation 5-T to Registration Statement No. 2-50338
Agreement among the Company and Arizona 2-50338 of the Company.
Public Service Company, Salt River Project
Agricultural Improvement and Power District,
Tucson Gas & Electric Company and El Paso
Electric Company, dated August 23, 1973.
10.8.1 Amendments No. 1 through No. 6 to Arizona 10.8.1 to Annual Report of the 1-6986
Nuclear Power Project Participation Registrant on Form 10-K for fiscal year
Agreement. ended December 31, 1991.
10.8.2 Amendment No. 7 effective April 1, 1982, to 10.8.2 to Annual Report of the 1-6986
the Arizona Nuclear Power Project Registrant on Form 10-K for fiscal year
Participation Agreement (refiled). ended December 31, 1991.
10.8.5 Amendment No. 10 to Arizona Nuclear Power 10.8.7 to Annual Report of the 1-6986
Project Participation Agreement dated as of Registrant on Form 10-K for fiscal year
November 21, 1985. ended December 31, 1985.
10.8.6 Amendment No. 11 to Arizona Nuclear Power 10.8.8 to Annual Report of the 1-6986
Project Participation Agreement dated June Registrant on Form 10-K for fiscal year
13, 1986 and effective January 10, 1987. ended December 31, 1986.
10.8.7 Amendment No. 12 to Arizona Nuclear Power 19.1 to the Company's Quarterly Report 1-6986
Project Participation Agreement dated June on Form 10-Q for the quarter ended
14, 1988, and effective August 5, 1988. September 30, 1990.
</TABLE>
E-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
10.8.8 Amendment No. 13 to the Arizona Nuclear Power 10.8.10 to Annual Report of Registrant 1-6986
Project Participation Agreement dated April on Form 10-K for the fiscal year ended
4, 1990, and effective June 15, 1991. December 31, 1990.
<C> <S> <C> <C>
10.9 Coal Sales Agreement executed August 18, 1980 10.9 to Annual Report of the Registrant 1-6986
among San Juan Coal Company, the Company and on Form 10-K for fiscal year ended
Tucson Electric Power Company, together with December 31, 1991.
Amendments No. One, Two, Four, and Six
thereto.
10.9.2 Amendment No. Five to Coal Sales Agreement 10.9.2 to Annual Report of the 1-6986
dated May 29, 1990 among San Juan Coal Registrant on Form 10-K for fiscal year
Company, the Company and Tucson Electric ended December 31, 1991
Power Company. (confidentiality treatment was
requested as to portions of the
exhibit, and such portions were omitted
from the exhibit filed and were filed
separately with the Securities and
Exchange Commission).
10.9.3 Amendment No. Seven to Coal Sales Agreement, 19.3 to the Company's Quarterly Report 1-6986
dated as of July 27, 1992 among San Juan Coal on Form 10-Q for the quarter ended
Company, the Company and Tucson Electric September 30, 1992 (confidentiality
Power Company. treatment was requested as to portions
of this exhibit, and such portions were
omitted from the exhibit filed and were
filed separately with the Securities
and Exchange Commission).
10.9.4 First Supplement to Coal Sales Agreement, 19.4 to the Company's Quarterly Report 1-6986
dated July 27, 1992 among San Juan Coal on Form 10-Q for the quarter ended
Company, the Company and Tucson Electric September 30, 1992 (confidentiality
Power Company. treatment was requested as to portions
of this exhibit, and such portions were
omitted from the exhibit as of filed
and were filed separately with the
Securities and Exchange Commission).
10.11 San Juan Unit 4 Early Purchase and 10.11 to the Company's Quarterly Report 1-6986
Participation Agreement dated as of September on Form 10-Q for the quarter ended
26, 1983 between the Company and M-S-R Public March 31, 1994.
Power Agency, and Modification No. 2 to the
San Juan Project Agreements dated December
31, 1983. (refiled)
</TABLE>
E-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
10.11.1 Amendment No. 1 to the Early Purchase and 10.11.1 to Annual Report of the 1-6986
Participation Agreement between Public Registrant on Form 10-K for fiscal year
Service Company of New Mexico and M-S-R ended December 31, 1987.
Public Power Agency, executed as of December
16, 1987, for San Juan Unit 4.
<C> <S> <C> <C>
10.14 Participation Agreement among the Company, 10.14 to Annual Report of the 1-6986
Tucson Electric Power Company and certain Registrant on Form 10-K for fiscal year
financial institutions relating to the San ended December 31, 1992.
Juan Coal Trust dated as of December 31, 1981
(refiled).
10.16 Interconnection Agreement dated November 23, 10.16 to Annual Report of the 1-6986
1982, between the Company and Southwestern Registrant on Form 10-K for fiscal year
Public Service Company (refiled). ended December 31, 1992.
10.18* Facility Lease dated as of December 16, 1985, 28(a) to the Company's Current Report 1-6986
between The First National Bank of Boston, as on Form 8-K dated December 31, 1985.
Owner Trustee, and Public Service Company of
New Mexico.
10.18.1* Amendment No. 1 dated as of July 15, 1986, to 28.1 to the Company's Current Report on 1-6986
Facility Lease dated as of December 16, 1985. Form 8-K dated July 17, 1986.
10.18.2* Amendment No. 2 dated as of November 18, 28.1 to the Company's Current Report on 1-6986
1986, to Facility Lease dated as of December Form 8-K dated November 25, 1986.
16, 1985.
10.18.3* Amendment No. 3 dated as of March 30, 1987, 10.21.3 to Annual Report of the 1-6986
to Facility Lease dated as of December 16, Registrant on Form 10-K for fiscal year
1985. ended December 31, 1987.
10.19 Facility Lease dated as of July 31, 1986, 28.1 to the Company's Quarterly Report 1-6986
between The First National Bank of Boston, as on Form 10-Q for the quarter ended June
Owner Trustee, and Public Service Company of 30, 1986.
New Mexico.
10.19.1 Amendment No. 1 dated as of November 18, 28.5 to the Company's Current Report on 1-6986
1986, Facility Lease dated as of July 31, Form 8-K dated November 25, 1986.
1986.
10.19.2 Amendment No. 2 dated as of December 11, 10.22.2 to Annual Report of the 1-6986
1986, to Facility Lease dated as of July 31, Registrant on Form 10-K for fiscal year
1986. ended December 31, 1986.
10.19.3 Amendment No. 3 dated as of April 8, 1987, to 10.22.3 to Annual Report of the 1-6986
Facility Lease dated as of July 31, 1986. Registrant on Form 10-K for fiscal year
ended December 31, 1987.
</TABLE>
E-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
10.20* Facility Lease dated as of August 12, 1986, 28.1 to the Company's Current Report on 1-6986
between The First National Bank of Boston, as Form 8-K dated August 18, 1986.
Owner Trustee, and Public Service Company of
New Mexico.
<C> <S> <C> <C>
10.20.1* Amendment No. 1 dated as of November 18, 28.9 to the Company Current Report on 1-6986
1986, to Facility Lease dated as of August Form 8-K dated November 25, 1986.
12, 1986.
10.20.2 Amendment No. 2 dated as of November 25, 10.23.2 to Annual Report of the 1-6986
1986, to Facility Lease dated as of August Registrant on Form 10-K for fiscal year
12, 1986. ended December 31, 1986.
10.21 Facility Lease dated as of December 15, 1986, 28.1 to the Company's Current Report on 1-6986
between The First National Bank of Boston, as Form 8-K dated December 17, 1986.
Owner Trustee, and Public Service Company of
New Mexico (Unit 1 Transaction).
10.21.1 Amendment No. 1 dated as of April 8, 1987, to 10.24.1 to Annual Report of the 1-6986
Facility Lease dated as of December 15, 1986. Registrant on Form 10-K for fiscal year
ended December 31, 1987.
10.22 Facility Lease dated as of December 15, 1986, 28.9 to the Company's Current Report on 1-6986
between The First National Bank of Boston, as Form 8-K dated December 17, 1986.
Owner Trustee, and Public Service Company of
New Mexico (Unit 2 Transaction).
10.22.1 Amendment No. 1 dated as of April 8, 1987, to 10.25.1 to Annual Report of the 1-6986
Facility Lease dated as of December 15, 1986. Registrant on Form 10-K for fiscal year
ended December 31, 1987.
10.23** Restated and Amended Public Service Company 19.5 to the Company's Quarterly Report 1-6986
of New Mexico Accelerated Management on Form 10-Q for the quarter ended
Performance Plan (1988). (August 16, 1988.) September 30, 1988.
10.23.1** First Amendment to Restated and Amended 19.6 to the Company's Quarterly Report 1-6986
Public Service Company of New Mexico on Form 10-Q for the quarter ended
Accelerated Management Performance Plan September 30, 1988.
(1988). (August 30, 1988.)
10.23.2** Second Amendment to Restated and Amended 10.26.2 to Annual Report of the 1-6986
Public Service Company of New Mexico Registrant on Form 10-K for fiscal year
Accelerated Management Performance Plan ended December 31, 1989.
(1988). (December 29, 1989).
10.24** Management Life Insurance Plan (July 1985) of 10.39 to Annual Report of the 1-6986
the Company. Registrant on Form 10-K for fiscal year
ended December 31, 1985.
</TABLE>
E-9
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
10.25** Amended and Restated Medical Reimbursement 19.6 to the Company's Quarterly Report 1-6986
Plan of Public Service Company of New Mexico. on Form 10-Q for the quarter ended
March 31, 1987.
<C> <S> <C> <C>
10.25.1** Second Restated and Amended Public Service 10.25.1 to Annual Report of the 1-6986
Company of New Mexico Executive Medical Plan. Registrant on Form 10-K for the fiscal
year ended December 31, 1992.
10.27 Amendment No. 2 dated as of April 10, 1987, 10.53 to Annual Report of the 1-6986
to the Facility Lease dated as of August 12, Registrant on Form 10-K for fiscal year
1986, between The First National Bank of ended December 31, 1987.
Boston, as Owner Trustee, and Public Service
Company of New Mexico. (Unit 2 Transaction.)
(This is an amendment to a Facility Lease
which is substantially similar to the
Facility Lease filed as Exhibit 28.1 to the
Company's Current Report on Form 8-K dated
August 18, 1986.)
10.28 Amendment No. 3 dated as of March 30, 1987, 10.54 to Annual Report of the 1-6986
to the Facility Lease dated as of December Registrant on Form 10-K for fiscal year
16, 1985, between The First National Bank of ended December 31, 1987.
Boston, as Owner Trustee, and Public Service
Company of New Mexico. (Unit 1 Transaction.)
(This is an amendment to a Facility Lease
which is substantially similar to the
Facility Lease filed as Exhibit 28(a) to the
Company's Current Report on Form 8-K dated
December 31, 1985.)
10.29 Decommissioning Trust Agreement between 10.55 to Annual Report of the 1-6986
Public Service Company of New Mexico and Registrant on Form 10-K for fiscal year
First Interstate Bank of Albuquerque dated as ended December 31, 1987.
of July 31, 1987.
10.30 New Mexico Public Service Commission Order 10.56 to Annual Report of the 1-6986
dated July 30, 1987, and Exhibit 1 thereto, Registrant on Form 10-K for fiscal year
in NMPUC Case No. 2004, regarding the PVNGS ended December 31, 1987.
decommissioning trust fund.
10.31** Executive Retention Agreements. 10.42 to Annual Report of the 1-6986
Registrant on Form 10-K for fiscal year
ended December 31, 1990.
10.32** Supplemental Employee Retirement Agreements 19.4 to the Company's Quarterly Report 1-6986
dated August 4, 1989. on Form 10-Q for the quarter ended
September 30, 1989.
</TABLE>
E-10
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
10.33** Supplemental Employee Retirement Agreement 10.47 to Annual Report of the 1-6986
dated March 6, 1990. Registrant on Form 10-K for fiscal year
ended December 31, 1989.
<C> <S> <C> <C>
10.34 Settlement Agreement between Public Service 10.48 to Annual Report of the 1-6986
Company of New Mexico and Creditors of Registrant on Form 10-K for fiscal year
Meadows Resources, Inc. dated November 2, ended December 31, 1989.
1989.
10.34.1 First amendment dated April 24, 1992 to the 19.1 to the Company's Quarterly Report 1-6986
Settlement Agreement dated November 2, 1989 on Form 10-Q for the quarter ended
among Public Service Company of New Mexico, September 30, 1992.
the lender parties thereto and collateral
agent.
10.35 Amendment dated April 11, 1991 among Public 19.1 to the Company's Quarterly Report 1-6986
Service Company of New Mexico, certain banks on Form 10-Q for the quarter ended
and Chemical Bank and Citibank, N.A., as September 30, 1991.
agents for the banks.
10.36 San Juan Unit 4 Purchase and Participation 19.2 to the Company's Quarterly Report 1-6986
Agreement Public Service Company of New on Form 10-Q for the quarter ended
Mexico and the City of Anaheim, California March 31, 1991.
dated April 26, 1991.
10.36.1 Second stipulation in the matter of 10.38 to Annual Report of the 1-6986
application of Public Service Company of New Registrant on Form 10-K for fiscal year
Mexico for NMPSC approval to sell a 10.04% ended December 31, 1992.
undivided interest in San Juan Generating
Station Unit 4 to the City of Anaheim,
California, and for related orders and
approvals.
10.37** Executive Retention Plan. 10.37 to Annual Report of the 1-6986
Registrant on Form 10-K for fiscal year
ended December 31, 1991.
10.38 Restated and Amended San Juan Unit 4 Purchase 10.2.1 to the Company's Quarterly
and Participation Agreement between Public Report on Form 10-Q for the quarter
Service Company of New Mexico and Utah ended September 30, 1993.
Associated Municipal Power Systems.
10.39 Purchase agreement dated February 7, 1992 10.39 to Annual Report of the 1-6986
between Burnham Leasing Corporation and Registrant on Form 10-K for fiscal year
Public Service Company of New Mexico. ended December 31, 1991.
10.40** Director Restricted Stock Retainer Plan. 10.40 to Annual Report of the 1-6986
Registrant on Form 10-K for fiscal year
ended December 31, 1991.
</TABLE>
E-11
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
10.40.1** First Amendment to the Public Service Company 19.3 to the Company's Quarterly Report 1-6986
of New Mexico Director Restricted Stock on Form 10-Q for the quarter ended
Retainer Plan. March 31, 1993.
<C> <S> <C> <C>
10.40.2** Second Amendment to the Public Service 10.40.2 to the Company's Quarterly 1-6986
Company of New Mexico Director Restricted Report on Form 10-Q for the quarter
Stock Retainer Plan dated April 27, 1994. ended March 31, 1994.
10.41 Waste Disposal Agreement, dated as of July 19.5 to the Company's Quarterly Report 1-6986
27, 1992 among San Juan Coal Company, the on Form 10-Q for the quarter ended
Company and Tucson Electric Power Company. September 30, 1992 (confidentiality
treatment was requested as to portions
of this exhibit, and such portions were
omitted from the exhibit and were filed
separately with the Securities and
Exchange Commission).
10.42 Stipulation in the matter of the application 10.42 to Annual Report of the 1-6986
of Gas Company of New Mexico for an order Registrant on Form 10-K for fiscal year
authorizing recovery of MDL costs through ended December 31, 1992.
Rate Rider Number 8.
10.43** Description of certain Plans which include 10.43 to Annual Report of the 1-6986
executive officers as participants. Registrant on Form 10-K for fiscal year
ended December 31, 1992.
10.44** Public Service Company of New 10.44 to Annual Report of the 1-6986
Mexico-Non-Union Voluntary Separation Registrant on Form 10-K for fiscal year
Program. ended December 31, 1992.
10.44.1** First Amendment dated April 6, 1993 to the 19.2 to the Company's Quarterly Report 1-6986
First Restated and Amended Public Service on Form 10-Q for the quarter ended
Company of New Mexico Non-Union Severance Pay March 31, 1993.
Plan dated August 1, 1992.
10.45** Public Service Company of New Mexico 99.1 to Registration Statement No. 33-65418
Performance Stock Plan. 33-65418 of the Company.
10.46** Public Service Company of New Mexico Asset 10.1 to the Company's Quarterly Report 1-6986
Sales Incentive Plan. on Form 10-Q for the quarter ended June
30, 1993.
10.46.1** Amendment No. 1 to the Public Service Company 10.46.1 to the Company's Quarterly 1-6986
of New Mexico Asset Sales Incentive Plan Report on Form 10-Q for the quarter
dated August 1, 1994. ended June 30, 1994.
10.47** Compensation Arrangement with Chief Executive 10.3 to the Company's Quarterly Report 1-6986
Officer. on Form 10-Q for the quarter ended June
30, 1993.
</TABLE>
E-12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
10.47.1** Pension Service Adjustment Agreement for 10.3.1 to the Company's Quarterly 1-6986
Benjamin F. Montoya. Report on Form 10-Q for the quarter
ended September 30, 1993.
<C> <S> <C> <C>
10.47.2** Severance Agreement for Benjamin F. Montoya. 10.3.2 to the Company's Quarterly 1-6986
Report on Form 10-Q for the quarter
ended September 30, 1993.
10.47.3** Executive Retention Agreement for Benjamin F. 10.3.3 to the Company's Quarterly 1-6986
Montoya. Report on Form 10-Q for the quarter
ended September 30, 1993.
10.48** Public Service Company of New Mexico OBRA '93 10.4 to the Company's Quarterly Report 1-6986
Retirement Plan. on Form 10-Q for the quarter ended
September 30, 1993.
10.50** Public Service Company of New Mexico Section 10.50 to Annual Report of the 1-6986
415 Plan. Registrant on Form 10-K for fiscal year
ended December 31, 1993.
10.51** First Amendment to the Public Service Company 10.51 to Annual Report of the 1-6986
of New Mexico Executive Retention Plan. Registrant on Form 10-K for fiscal year
ended December 31, 1993.
10.51.1** Second Amendment to the Public Service 10.51.1 to the Company's Quarterly 1-6986
Company of New Mexico Executive Retention Report on Form 10-Q for the quarter
Plan. ended June 30, 1994.
10.52** First Amendment to the Public Service Company 10.52 to Annual Report of the 1-6986
of New Mexico Performance Stock Plan. Registrant on Form 10-K for fiscal year
ended December 31, 1993.
10.53 January 12, 1994 Stipulation. 10.53 to Annual Report of the 1-6986
Registrant on Form 10-K for fiscal year
ended December 31, 1993.
10.54** Employment, Retirement and Release Agreement 10.54 to Annual Report of the 1-6986
By and Between the Public Service Company of Registrant on Form 10-K for fiscal year
New Mexico and William M. Eglinton. ended December 31, 1993.
10.54.1** Health Care and Retirement Benefit Agreement 10.54.1 to the Company's Quarterly 1-6986
By and Between the Public Service Company of Report on Form 10-Q for the quarter
New Mexico and John T. Ackerman dated ended March 31, 1994.
February 1, 1994.
</TABLE>
E-13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
10.55 Receivable Purchase Agreement Dated as of 10.55 to Annual Report of the 1-6986
August 1, 1983 Among Public Service Company Registrant on Form 10-K for fiscal year
of New Mexico (Seller) and CXC Incorporated ended December 31, 1993.
(Purchaser) and Citicorp North America, Inc.
(Agent)
<C> <S> <C> <C>
10.56 U.S. $40,000,000 Receivables Purchase 10.56 to Annual Report of the 1-6986
Agreement Dated December 21, 1993 Among Registrant on Form 10-K for fiscal year
Public Service Company of New Mexico (Seller) ended December 31, 1993.
and Corporate Receivables Corporation
(Investor) and Citicorp North America, Inc.
(Agent)
10.57 U.S. $100,000,000 Revolving Credit Agreement 10.57 to Annual Report of the 1-6986
Dated as of December 14, 1993 Among Public Registrant on Form 10-K for fiscal year
Service Company of New Mexico (Borrower) and ended December 31, 1993.
The Banks Herein (Banks) and Chemical Bank
and Citibank, N.A. (Co-Agents)
10.58 Amendment No. 8 effective September 12, 1983, 10.58 to Annual Report of the 1-6986
to the Arizona Nuclear Power Project Registrant on Form 10-K for fiscal year
Participation Agreement. (refiled) ended December 31, 1993.
10.59* Amended and Restated Lease dated as of 10.59 to Annual Report of the 1-6986
September 1, 1993, between The First National Registrant on Form 10-K for fiscal year
Bank of Boston, Lessor, and the Company, ended December 31, 1993.
Lessee. (EIP Lease)
10.60 Reimbursement Agreement, dated as of November 4.5 to Registration Statement No. 33-65418
1, 1992 between Public Service Company of New 33-65418 of the Company.
Mexico and Canadian Imperial Bank of
Commerce, New York Agency.
10.60.1 Amendment No. 1 dated as of July 1, 1994, to 10.60.1 to the Company's Quarterly 1-6986
the Reimbursement Agreement dated as of Report on Form 10-Q for the quarter
November 1, 1992 between Public Service ended June 30, 1994.
Company of New Mexico and Canadian Imperial
Bank of Commerce, New York Agency.
10.61 Participation Agreement dated as of June 30, 10.61 to Annual Report of the 1-6986
1983 among Security Trust Company, as Registrant on Form 10-K for fiscal year
Trustee, the Company, Tucson Electric Power ended December 31, 1993.
Company and certain financial institutions
relating to the San Juan Coal Trust.
(refiled)
10.62 Agreement of the Company pursuant to Item 10.62 to Annual Report of the 1-6986
601(b)(4)(iii) of Regulation S-K. (refiled) Registrant on Form 10-K for fiscal year
ended December 31, 1993.
</TABLE>
E-14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
10.63 A Stipulation regarding sale of certain 10.63 to Current Report on Form 8-K 1-6986
natural gas gathering and processing assets. dated January 26, 1995.
<C> <S> <C> <C>
ADDITIONAL EXHIBITS
22 Certain subsidiaries of the registrant. 22 to Annual Report of the Registrant 1-6986
on Form 10-K for fiscal year ended
December 31, 1992.
99.1 Collateral Trust Indenture dated as of 28(i) to the Company's Current Report 1-6986
December 16, 1985, among First PV Funding on Form 8-K dated December 31, 1985.
Corporation, Public Service Company of New
Mexico and Chemical Bank, as Trustee.
99.1.1 Series 1986A Bond Supplemental Indenture 28.4 to the Company's Current Report on 1-6986
dated as of July 15, 1986, to Collateral Form 8-K dated July 17, 1986.
Trust Indenture dated as of December 16,
1985.
99.1.2 Series 1986B Bond Supplemental Indenture 28.1.2 to the Company's Current Report 1-6986
dated as of November 18, 1986, to Collateral on Form 8-K dated November 25, 1986.
Trust Indenture dated as of December 16,
1985.
99.1.3 Unit 1 Supplemental Indenture of Pledge 28.8 to the Company's Current Report on 1-6986
(Lease Obligation Bonds, Series 1986B) dated Form 8-K dated December 16, 1985.
as of December 15, 1986, to the Collateral
Trust Indenture dated as of December 17,
1986.
99.1.4 Unit 2 Supplemental Indenture of Pledge 28.16 to the Company's Current Report 1-6986
(Lease Obligation Bonds, Series 1986B) dated on Form 8-K dated December 17, 1986.
as of December 15, 1986, to the Collateral
Trust Indenture dated as of December 16,
1985.
99.1.5 1994 Supplemental Indenture dated as of June 99.1.5 to the Company's Quarterly 1-6986
8, 1994 among First PV Funding Corporation, Report on Form 10-Q for the quarter
Public Service Company of New Mexico, and ended June 30, 1994.
Chemical Bank, as Trustee.
</TABLE>
E-15
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
99.2* Participation Agreement dated as of December 2 to the Company's Current Report on 1-6986
16, 1985, among the Owner Participant named Form 8-K dated December 31, 1985.
therein, First PV Funding Corporation. The
First National Bank of Boston, in its
individual capacity and as Owner Trustee
(under a Trust Agreement dated as of December
16, 1985 with the Owner Participant),
Chemical Bank, in its individual capacity and
as Indenture Trustee (under a Trust
Indenture, Mortgage, Security Agreement and
Assignment of Rents dated as of December 16,
1985 with the Owner Trustee), and Public
Service Company of New Mexico, including
Appendix A definitions.
<C> <S> <C> <C>
99.2.1* Amendment No. 1 dated as of July 15, 1986, to 2.1 to the Company's Current Report on 1-6986
Participation Agreement dated as of December Form 8-K dated July 17, 1986.
16, 1985.
99.2.2* Amendment No. 2 dated as of November 18, 2.1 to the Company's Current Report on 1-6986
1986, to Participation Agreement dated as of Form 8-K dated November 25, 1986.
December 16, 1985.
99.3* Trust Indenture, Mortgage, Security Agreement 28(b) to the Company's Current Report 1-6986
and Assignment of Rents dated as of December on Form 8-K dated December 31, 1985.
16, 1985, between The First National Bank of
Boston, as Owner Trustee, and Chemical Bank,
as Indenture Trustee.
99.3.1* Supplemental Indenture No. 1 dated as of July 28.2 to the Company's Current Report on 1-6986
15, 1986, to the Trust Indenture, Mortgage, Form 8-K dated July 17, 1986.
Security Agreement and Assignment of Rents
dated as of December 16, 1985.
99.3.2* Supplemental Indenture No. 2 dated as of 28.2 to the Company's Current Report on 1-6986
November 18, 1986, to the Trust Indenture, Form 8-K dated November 25, 1986.
Mortgage, Security Agreement and Assignment
of Rents dated as of December 16, 1985.
99.4* Assignment, Assumption and Further Agreement 28(e) to the Company's Current Report 1-6986
dated as of December 16, 1985, between Public on Form 8-K dated December 31, 1985.
Service Company of New Mexico and The First
National Bank of Boston, as Owner Trustee.
</TABLE>
E-16
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
99.5 Participation Agreement dated as of July 31, 2.1 to the Company's Quarterly Report 1-6986
1986, among the Owner Participant named on Form 10-Q for the quarter ended June
therein, First PV Funding Corporation. The 30, 1986.
First National Bank of Boston, in its
individual capacity and as Owner Trustee
(under a Trust Agreement dated as of July 31,
1986, with the Owner Participant), Chemical
Bank, in its individual capacity and as
Indenture Trustee (under a Trust Indenture,
Mortgage, Security Agreement and Assignment
of Rents dated as of July 31, 1986, with the
Owner Trustee), and Public Service Company of
New Mexico, including Appendix A definitions.
<C> <S> <C> <C>
99.5.1 Amendment No. 1 dated as of November 18, 28.4 to the Company's Current Report on 1-6986
1986, to Participation Agreement dated as of Form 8-K dated November 25, 1986.
July 31, 1986.
99.6 Trust Indenture, Mortgage, Security Agreement 28.2 to the Company's Quarterly Report 1-6986
and Assignment of Rents dated as of July 31, on Form 10-Q for the quarter ended June
1986, between The First National Bank of 30, 1986.
Boston, as Owner Trustee, and Chemical Bank,
as Indenture Trustee.
99.6.1 Supplemental Indenture No. 1 dated as of 28.6 to the Company's Current Report on 1-6986
November 18, 1986, to the Trust Indenture, Form 8-K dated November 25, 1986.
Mortgage, Security Agreement and Assignments
of Rents dated as of July 31, 1986.
99.7 Assignment, Assumption, and Further Agreement 28.3 to the Company's Quarterly Report 1-6986
dated as of July 31, 1986, between Public on Form 10-Q for the quarter ended June
Service Company of New Mexico and The First 30, 1986.
National Bank of Boston, as Owner Trustee.
</TABLE>
E-17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
99.8* Participation Agreement dated as of August 2.1 to the Company's Current Report on 1-6986
12, 1986, among the Owner Participant named Form 8-K dated August 18, 1986.
therein, First PV Funding Corporation. The
First National Bank of Boston, in its
individual capacity and as Owner Trustee
(under a Trust Agreement dated as of August
12, 1986, with the Owner Participant),
Chemical Bank, in its individual capacity and
as Indenture Trustee (under a Trust
Indenture, Mortgage, Security Agreement and
Assignment of Rents dated as of August 12,
1986, with the Owner Trustee), and Public
Service Company of New Mexico, including
Appendix A definitions.
<C> <S> <C> <C>
99.8.1* Amendment No. 1 dated as of November 18, 28.8 to the Company's Current Report on 1-6986
1986, to Participation Agreement dated as of Form 8-K dated November 25, 1986.
August 12, 1986.
99.9* Trust Indenture, Mortgage, Security Agreement 28.2 to the Company's Current Report on 1-6986
and Assignment of Rents dated as of August Form 8-K dated August 18, 1986.
12, 1986, between The First National Bank of
Boston, as Owner Trustee, and Chemical Bank,
as Indenture Trustee.
99.9.1* Supplemental Indenture No. 1 dated as of 28.10 to the Company's Current Report 1-6986
November 18, 1986, to the Trust Indenture, on Form 8-K dated November 25, 1986.
Mortgage, Security Agreement and Assignment
of Rents dated as of August 12, 1986.
99.10* Assignment, Assumption, and Further Agreement 28.3 to the Company's Current Report on 1-6986
dated as of August 12, 1986, between Public Form 8-K dated August 18, 1986.
Service Company of New Mexico and The First
National Bank of Boston, as Owner Trustee.
</TABLE>
E-18
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
99.11 Participation Agreement dated as of December 2.1 to the Company's Current Report on 1-6986
15, 1986, among the Owner Participant named Form 8-K dated December 17, 1986.
therein, First PV Funding Corporation. The
First National Bank of Boston, in its
individual capacity and as Owner Trustee
(under a Trust Agreement dated as of December
15, 1986, with the Owner Participant),
Chemical Bank, in its individual capacity and
as Indenture Trustee (under a Trust
Indenture, Mortgage, Security Agreement and
Assignment of Rents dated as of December 15,
1986, with the Owner Trustee), and Public
Service Company of New Mexico, including
Appendix A definitions (Unit 1 Transaction).
<C> <S> <C> <C>
99.12 Trust Indenture, Mortgage, Security Agreement 28.2 to the Company's Current Report on 1-6986
and Assignment of Rents dated as of December Form 8-K dated December 17, 1986.
15, 1986, between The First National Bank of
Boston, as Owner Trustee, and Chemical Bank,
as Indenture Trustee (Unit 1 Transaction).
99.13 Assignment, Assumption and Further Agreement 28.3 to the Company's Current Report on 1-6986
dated as of December 15, 1986, between Public Form 8-K dated December 17, 1986.
Service Company of New Mexico and The First
National Bank of Boston, as Owner Trustee
(Unit 1 Transaction).
99.14 Participation Agreement dated as of December 2.2 to the Company's Current Report on 1-6986
15, 1986, among the Owner Participant named Form 8-K dated December 17, 1986.
therein, First PV Funding Corporation, The
First National Bank of Boston, in its
individual capacity and as Owner Trustee
(under a Trust Agreement dated as of December
15, 1986, with the Owner Participant),
Chemical Bank, in its individual capacity and
as Indenture Trustee (under a Trust
Indenture, Mortgage, Security Agreement and
Assignment of Rents dated as of December 15,
1986, with the Owner Trustee), and Public
Service Company of New Mexico, including
Appendix A definitions (Unit 2 Transaction).
</TABLE>
E-19
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION FILED AS EXHIBIT: FILE NO.
- ----------- --------------------------------------------- --------------------------------------- -----------
99.15 Trust Indenture, Mortgage, Security Agreement 28.10 to the Company's Current Report 1-6986
and Assignment of Rents dated as of December on Form 8-K dated December 17, 1986.
15, 1986, between the First National Bank of
Boston, as Owner Trustee, and Chemical Bank,
as Indenture Trustee (Unit 2 Transaction).
<C> <S> <C> <C>
99.16 Assignment, Assumption, and Further Agreement 28.11 to the Company's Current Report 1-6986
dated as of December 15, 1986, between Public on Form 8-K dated December 17, 1986.
Service Company of New Mexico and The First
National Bank of Boston, as Owner Trustee
(Unit 2 Transaction).
99.17* Waiver letter with respect to "Deemed Loss 28.12 to the Company's Current Report 1-6986
Event" dated as of August 18, 1986, between on Form 8-K dated August 18, 1986.
the Owner Participant named therein, and
Public Service Company of New Mexico.
99.18* Waiver letter with respect to "Deemed Loss 28.13 to the Company's Current Report 1-6986
Event" dated as of August 18, 1986, between on Form 8-K dated August 18, 1986.
the Owner Participant named therein, and
Public Service Company of New Mexico.
99.19 Agreement No. 13904 (Option and Purchase of 28.19 to Annual Report of the 1-6986
Effluent), dated April 23, 1973, among Registrant on Form 10-K for fiscal year
Arizona Public Service Company, Salt River ended December 31, 1986.
Project Agricultural Improvement and Power
District, the Cities of Phoenix, Glendale,
Mesa, Scottsdale, and Tempe, and the Town of
Youngtown.
99.20 Agreement for the Sale and Purchase of 28.20 to Annual Report of the 1-6986
Wastewater Effluent, dated June 12, 1981, Registrant on Form 10-K for fiscal year
among Arizona Public Service Company, Salt ended December 31, 1986.
River Project Agricultural Improvement and
Power District and the City of Tolleson, as
amended.
<FN>
- ------------------------
*One or more additional documents, substantially identical in all material
respects to this exhibit, have been entered into, relating to one or more
additional sale and leaseback transactions. Although such additional documents
may differ in other respects (such as dollar amounts and percentages), there
are no material details in which such additional documents differ from this
exhibit.
**Designates each management contract or compensatory plan arrangement required
to be identified pursuant to paragraph 3 of Item 14(a) of Form 10-K.
</TABLE>
E-20
<PAGE>
(b) Reports on Form 8-K:
During the quarter ended December 31, 1994, and during the period beginning
January 1, 1995 and ending March 9, 1995, the Company filed, on the dates
indicated, the following reports on Form 8-K.
<TABLE>
<CAPTION>
DATED: FILED: RELATING TO:
- ----------------------- ----------------------- ----------------------------------------------------
<S> <C> <C>
November 28, 1994 December 6, 1994 January 12, 1994 Stipulation and Natural Gas Supply
Matters
January 3, 1995 January 26, 1995 Palo Verde Lease Obligation Bonds and Stipulation
Reached for the Sale of Gas Gathering and
Processing assets
January 26, 1995 January 27, 1995 Unaudited 1994 Earnings Released
February 14, 1995 February 17, 1995 Palo Verde Lease Obligation Bonds
</TABLE>
E-21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 9, 1995 By /s/ B. F. MONTOYA
-----------------------------------
B. F. Montoya
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
- ----------------------------------- ------------------------- ----------------
/s/ B. F. MONTOYA Principal Executive March 9, 1995
- ----------------------------------- Officer and Director
B. F. MONTOYA
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
/s/ M. H. MAERKI Principal Financial March 9, 1995
- ----------------------------------- Officer
M. H. Maerki
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
/s/ D. M. BURNETT Principal Accounting March 9, 1995
- ----------------------------------- Officer
D. M. Burnett
CORPORATE CONTROLLER AND
CHIEF ACCOUNTING OFFICER
/s/ J. T. ACKERMAN Chairman of the Board March 9, 1995
- -----------------------------------
J. T. Ackerman
/s/ R. G. ARMSTRONG Director March 9, 1995
- -----------------------------------
R. G. Armstrong
/s/ J. A. GODWIN Director March 9, 1995
- -----------------------------------
J. A. Godwin
/s/ L. H. LATTMAN Director March 9, 1995
- -----------------------------------
L. H. Lattman
/s/ M. LUJAN JR. Director March 9, 1995
- -----------------------------------
M. Lujan Jr.
/s/ R. U. ORTIZ Director March 9, 1995
- -----------------------------------
R. U. Ortiz
/s/ R. M. PRICE Director March 9, 1995
- -----------------------------------
R. M. Price
/s/ P. F. ROTH Director March 9, 1995
- -----------------------------------
P. F. Roth
E-22
<PAGE>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ------------
2.1.1 First Amendment to Purchase and Sale Agreement By and Among
Public Service Company of New Mexico, Sunterra Gas Gathering
Company, Sunterra Gas Processing Company (Sellers) and
Williams Gas Processing--Blanco, Inc. (Buyer). . . . . . . .
2.1.2 Second Amendment to Purchase and Sale Agreement By and Among
Public Service Company of New Mexico, Sunterra Gas Gathering
Company, Sunterra Gas Processing Company (Sellers) and
Williams Gas Processing--Blanco, Inc. (Buyer). . . . . . . .
2.2.1 First Amendment to Agreement to Purchase and Sell Between
City of Santa Fe, New Mexico and Public Service Company of
New Mexico . . . . . . . . . . . . . . . . . . . . . . . . .
2.2.2 Second Amendment to Agreement to Purchase and Sell Between
City of Santa Fe, New Mexico and Public Service Company of
New Mexico . . . . . . . . . . . . . . . . . . . . . . . . .
2.2.3 Third Amendment to Agreement to Purchase and Sell Between
City of Santa Fe, New Mexico and Public Service Company of
New Mexico . . . . . . . . . . . . . . . . . . . . . . . . .
2.2.4 Fourth Amendment to Agreement to Purchase and Sell Between
City of Santa Fe, New Mexico and Public Service Company of
New Mexico . . . . . . . . . . . . . . . . . . . . . . . . .
2.2.5 Fifth Amendment to Agreement to Purchase and Sell Between
City of Santa Fe, New Mexico and Public Service Company of
New Mexico . . . . . . . . . . . . . . . . . . . . . . . . .
2.2.6 Sixth Amendment to Agreement to Purchase and Sell Between
City of Santa Fe, New Mexico and Public Service Company of
New Mexico . . . . . . . . . . . . . . . . . . . . . . . . .
3.2 Bylaws of Public Service Company of New Mexico With All
Amendments to and Including December 5, 1994 . . . . . . . .
10.49 Employment Contract By and Between the Public Service
Company of New Mexico and Roger J. Flynn . . . . . . . . . .
10.5.2 Modifications No. 3 to San Juan Project Agreements dated
July 17, 1994 (refiled). . . . . . . . . . . . . . . . . . .
10.8.4 Amendment No. 9 to Arizona Nuclear Power Project
Participation Agreement dated as of June 12, 1984 (refiled).
10.12 Amendment and Restated San Juan Unit 4 Purchase and
Participation Agreement dated as of December 28, 1984
between the Company and the Incorporated County of Los
Alamos (refiled) . . . . . . . . . . . . . . . . . . . . . .
10.49 NMPUC Order, Case 2501 and 2503 regarding negotiated
agreement with intervenors to settle all outstanding issues
regarding recovery of payments GCNM made to settle gas take-
or-pay contracts and pricing disputes . . . . . . . . . . .
10.50 NMPUC Order, Case 2526 regarding GCNM's proposed Balancing
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.1 Consent of Arthur Andersen & Co. . . . . . . . . . . . . . .
23.2 Consent of KPMG Peat Marwick . . . . . . . . . . . . . . . .
27 Financial Data Schedule. . . . . . . . . . . . . . . . . . .
<PAGE>
FIRST AMENDMENT
TO
PURCHASE AND SALE AGREEMENT
This First Amendment to Purchase and Sale Agreement (this "First
Amendment"), dated as of January 1, 1995, is by and among Public Service Company
of New Mexico, a New Mexico corporation ("PNM"), Sunterra Gas Gathering Company,
a New Mexico corporation and a wholly-owned subsidiary of PNM ("Gathering
Company") and Sunterra Gas Processing Company, a New Mexico corporation and a
wholly owned subsidiary of PNM ("Processing Company") (collectively "Sellers"
and individual "Seller"), and Williams Gas Processing - Blanco Inc., a Delaware
corporation ("Buyer").
RECITALS
WHEREAS, Sellers and Buyer have entered into a Purchase and Sale
Agreement (the "Purchase and Sale Agreement") dated as of February 12, 1994
regarding the sale by PNM, Gathering Company and Processing Company of the PNM
Property, the Gathering Property and the Processing Property (each as defined in
the Purchase and Sale Agreement), respectively, to Buyer; and
WHEREAS Buyer and GPM Gas Corporation ("GPM") have entered into a
Purchase and Sale Agreement dated as of July 27, 1994 regarding the resale by
Buyer to GPM of certain PNM Property located in Lea and Eddy counties, New
Mexico, or associated therewith; and
WHEREAS, Sellers and Buyer desire to amend the Purchase and Sale
Agreement to address certain issues raised by Buyer's proposed resale to GPM or
otherwise requiring an amendment;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the Parties agree as follows:
1. Section 11.03(a) of the Purchase and Sale Agreement shall be
amended to permit Buyer to propose GPM personnel as Contract
Employees. Between Sellers and Buyer, GPM personnel used as Contract
Employees shall be treated as though they were employees of Buyer for
purposes of the Purchase and Sale Agreement and that certain Services
Agreement between Sellers and Buyer dated as of May 9, 1994 (the
"Services Agreement"), and Sellers and Buyer shall be entitled to all
rights and remedies, and subject to all obligations, with respect to
such personnel under Section 11.03(a) and under the Services Agreement
to which Sellers and Buyer would be entitled or subject with respect
to any employee of Buyer. This paragraph shall apply retroactively to
any GPM personnel that may have been previously placed as Contract
Employees.
2. Buyer agrees that it will keep confidential from and not
disclose to GPM or its affiliates or its or their directors, officers,
employees, agents or
-1-
<PAGE>
advisors the contents of any proposals, drafts or negotiations with respect
to gathering and processing agreements applicable to the PNM Property in
Lea and Eddy Counties, New Mexico between the Signing Date and the Closing
Date (as such terms are defined in the Purchase and Sale Agreement) that
Buyer obtains through the exercise of the rights granted to it in the first
sentence of Section 6.04(c) of the Purchase and Sale Agreement.
3. The following new language shall be added following the
fourth sentence of Section 11.03(b) of the Purchase and Sale
Agreement:
In addition, if requested by Sellers, such employees shall
execute a confidentiality agreement (i) acknowledging that
they are bound by the terms of the Confidentiality
Agreement, (ii) agreeing that they may disclose personnel
records of any Seller's employees only to Buyer's human
resources personnel, or Buyer's managers who will have
responsibility for the area in which the particular
employees work following the Closing, and that any such
disclosures may be subject to limitations imposed by
applicable laws and existing contracts and policies of the
applicable Seller and (iii) agreeing to treat as
confidential and not disclose to anyone, including any of
Buyer's other employees, information regarding pricing,
rates or profits of Seller's operations.
The amendment contained in this paragraph 3 shall apply to employees
of Buyer, if any, already acting as observers pursuant to Section
11.03(b) in addition to any employees who may subsequently act as
observers.
4. Except as amended and supplemented by this First Amendment,
and by that certain Termination Agreement between Sellers and Buyer
dated April 21, 1994, the Purchase and Sale Agreement remains in full
force and effect.
5. THIS FIRST AMENDMENT SHALL BE GOVERNED BY THE LAW OF THE
STATE OF NEW MEXICO, WITHOUT REGARD TO THE CONFLICTS OF LAWS
PROVISIONS THEREOF. The arbitration provisions in Section 14.08 of
the Purchase and Sale Agreement are hereby adopted and incorporated in
this First Amendment by reference.
6. No party hereto shall assign this First Amendment or any
part thereof without the prior written consent of the other parties.
7. This First Amendment may be executed in any number of
counterparts, and by different parties in separate counterparts, each
of which shall be deemed to be an original, but all of which together
shall constitute but one and the same agreement.
EXECUTED on the dates set forth below each party's signature but
effective for all purposes as of the date first above written.
-2-
<PAGE>
SELLERS:
PUBLIC SERVICE COMPANY OF NEW MEXICO
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date:
-------------------------------------------------
SUNTERRA GAS GATHERING COMPANY
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date:
-------------------------------------------------
SUNTERRA GAS PROCESSING COMPANY
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date:
-------------------------------------------------
BUYER:
WILLIAMS GAS PROCESSING - BLANCO, INC.
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
Date:
-------------------------------------------------
-3-
<PAGE>
EXHIBIT 2.1.2
SECOND AMENDMENT
TO
PURCHASE AND SALE AGREEMENT
This Second Amendment to Purchase and Sale Agreement (this "Second
Amendment"), dated as of January 1, 1995, is by and among Public Service Company
of New Mexico, a New Mexico corporation ("PNM"), Sunterra Gas Gathering Company,
a New Mexico corporation and a wholly-owned subsidiary of PNM ("Gathering
Company") and Sunterra Gas Processing Company, a New Mexico corporation and a
wholly owned subsidiary of PNM ("Processing Company") (collectively "Sellers"
and individual "Seller"), and Williams Gas Processing - Blanco Inc., a Delaware
corporation ("Buyer").
RECITALS
WHEREAS, Sellers and Buyer have entered into a Purchase and Sale
Agreement (the "Purchase and Sale Agreement") dated as of February 12, 1994
regarding the sale by PNM, Gathering Company and Processing Company of the PNM
Property, the Gathering Property and the Processing Property (each as defined in
the Purchase and Sale Agreement), respectively, to Buyer; and
WHEREAS, Sellers and Buyer have entered into a First Amendment to
Purchase and Sale Agreement dated as of January 1, 1995 (the "First Amendment");
and
WHEREAS, Sellers and Buyer desire to further amend the Purchase and
Sale Agreement to address certain operational issues;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the parties agree as follows:
1. On Schedule 1.01(d)(i) to the Purchase and Sale Agreement,
part IV, "Lybrook Plant Facilities", item number 3 shall be deleted
and replaced by the following:
"3. The 12" Lybrook Plant by-pass line from the downstream flange of
the block valve at the 16" outlet line of the Dogie Canyon
Mainline liquid receiver to the Lybrook-Star Lake Mainline."
2. The deadline for completion of Exhibits B, C, D, E and F to the
Easement Agreement, which is attached to the Purchase and Sale Agreement as
Exhibit A, shall be extended until September 27, 1994.
3. Except as amended and supplemented by the First Amendment,
this Second Amendment, and that certain Termination Agreement between
Sellers and
- 1 -
<PAGE>
Buyer dated April 21, 1994, the Purchase and Sale Agreement remains in
full force and effect.
4. THIS SECOND AMENDMENT SHALL BE GOVERNED BY THE LAW OF THE
STATE OF NEW MEXICO, WITHOUT REGARD TO THE CONFLICTS OF LAWS
PROVISIONS THEREOF. The arbitration provisions in Section 14.08 of
the Purchase and Sale Agreement are hereby adopted and incorporated in
this Second Amendment by reference.
5. No party hereto shall assign this Second Amendment or any
part thereof without the prior written consent of the other parties.
6. This Second Amendment may be executed in any number of
counterparts, and by different parties in separate counterparts, each
of which shall be deemed to be an original, but all of which together
shall constitute but one and the same agreement.
EXECUTED on the dates set forth below each party's signature but
effective for all purposes as of the date first above written.
SELLERS:
PUBLIC SERVICE COMPANY OF NEW MEXICO
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
Date:
--------------------------------------------
SUNTERRA GAS GATHERING COMPANY
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
Date:
--------------------------------------------
SUNTERRA GAS PROCESSING COMPANY
By:
----------------------------------------------
- 2 -
<PAGE>
Name:
--------------------------------------------
Title:
--------------------------------------------
Date:
--------------------------------------------
BUYER:
WILLIAMS GAS PROCESSING - BLANCO, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
Date:
--------------------------------------------
- 3 -
<PAGE>
EXHIBIT 2.2.1
FIRST AMENDMENT TO AGREEMENT TO PURCHASE AND SELL
THIS FIRST AMENDMENT TO AGREEMENT TO PURCHASE AND SELL (this "Amendment")
is made as of the 29th day of April, 1994, by and between the City of Santa Fe,
New Mexico ("Purchaser"), and Public Service Company of New Mexico ("Seller").
Unless otherwise defined herein, any term with its initial letter capitalized
shall have the meaning ascribed to it in that certain Agreement to Purchase and
Sell (the "Agreement"), dated February 28, 1994, by and between the Purchaser
and Seller.
RECITALS
A. Pursuant to Section 7.2.2 of the Agreement, Seller was required to
provide Purchaser with surveys, plats and descriptions of the Real
Property/Watershed and Major Easements (collectively, the "Documents") on or
before March 11, 1994 (the "Document Deadline"). Because Seller did not meet
the Document Deadline, Purchaser could not complete its review of the Documents
on or before the date required by Section 7.2.2 of the Agreement (the "Document
Review Deadline").
B. Pursuant to Sections 7.4 and 7.5 of the Agreement, if Purchaser
determines that (i) the Real Property or other Assets are unsuitable, for any
reason in Purchaser's sole discretion, or (ii) that (a) there exists a potential
risk of liability to Purchaser under any Environmental Law with respect to the
Assets, including the Real Property owned or leased by Seller, or (b) the use of
any of the Assets, including the Real Property, may be adversely affected
because of the existence of any Hazardous Substances (an "Environmental
Condition"), Purchaser has the right to terminate the Agreement by giving
written notice to Seller prior to April 29, 1994 (the "Inspection Deadline").
During Purchaser's investigation of the Assets, it has found certain conditions
which it desires time to investigate further.
C. Pursuant to Section 7.6 of the Agreement, if the Purchaser determines
that it will be unable to obtain the transference or issuance of any
Governmental Permits or Non-Transferrable Governmental Permits necessary to use
the Assets as they currently are being used or to operate the Business as it
currently is being operated, Purchaser has the right to terminate the Agreement
by giving written notice to Seller prior to April 29, 1994 (the "Governmental
Permit Deadline"). Purchaser has determined that it needs additional time to
review the ability to transfer of the Governmental Permits and Non-Transferable
Governmental Permits.
D. Pursuant to Section 7.7 of the Agreement, Seller was required to
provide Purchaser with a search of the records of the New Mexico Secretary of
State, the filing officers of any other state in which Assets are located, and
the county clerks of the counties in which any Real Property is located of any
financing statements or fixture filings by March 29, 1994 (the "UCC Deadline"),
and delivered such financing statements and fixture filings after the UCC
Deadline.
<PAGE>
E. Pursuant to Section 9.10 of the Agreement, Purchaser was required to
deliver to Seller the form of legal opinion that Purchaser requested of counsel
of Seller by March 30, 1994 (the "Opinion Deadline"), and delivered such opinion
after the Opinion Deadline.
F. Purchaser and Seller desire to waive certain provisions of the
Purchase Agreement and amend the Purchase Agreement, all on the terms and
conditions of this Amendment.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises and
agreements contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
AGREEMENT
1. Purchaser hereby waives Seller's compliance with the Document
Deadline and Purchaser and Seller hereby amend Section 7.2.2 of the Agreement to
require Seller to provide to Purchaser the Documents on or before May 6, 1994.
2. Seller hereby waives Purchaser's compliance with the Document
Review Deadline. Purchaser and Seller hereby agree that, notwithstanding any
provision of the Agreement or this Amendment to the contrary, Purchaser shall
have thirty (30) days after its receipt from Seller of the last item required by
Sections 7.2.1, 7.2.2 and 7.3.1 of the Agreement to notify Seller of any
objections to any of the matters disclosed therein. If Purchaser has any
objections to any matter(s) disclosed in such documents, Seller and Purchaser
shall have their respective rights to correct such matters, in the case of
Seller, or waive such matters or terminate the Agreement, in the case of
Purchaser, on the time frames set forth in Sections 7.2.1, 7.2.2 and 7.3.1,
respectively, of the Agreement.
3. Purchaser and Seller hereby amend Section Section 7.4.2 of the
Agreement to provide that (i) the Inspection Deadline is hereby extended to June
30, 1994, (ii) Purchaser's right to terminate the Agreement pursuant to Section
7.4.2 shall expire if not exercised on or before June 30, 1994, (iii) if
Purchaser elects not to terminate the Agreement pursuant to Section 7.4.2,
Purchaser shall deliver a Waiver Notice to Seller on or before June 30, 1994,
and (iv) the deadline for the Purchaser to notify Seller of an Environmental
Condition shall be extended until June 30, 1994. If Purchaser fails to deliver
a Waiver Notice to Seller on or before June 30, 1994, Purchaser shall
conclusively be deemed to have elected to terminate the Agreement. The effect
of such a termination shall be as provided in Section 7.4.2. If Purchaser
notifies Seller of an Environmental Condition on or before June 30, 1994,
Purchaser and Seller shall have their respective rights to correct such matters,
indemnify Purchaser, pay costs, remediate, or undertake some other alternative,
in the case of Seller, or waive such matters or terminate the Agreement, in the
case of Purchaser, on the time frames set forth in Section 7.5.2 of the
Agreement. In the event that this Amendment is not executed on or before the
Inspection
2
<PAGE>
Deadline of April 29, 1994, but is executed thereafter, the Agreement shall not
be deemed to be terminated pursuant to Section 7.4.2.
4. Purchaser and Seller hereby amend Section 7.6 of the Agreement to
extend the Governmental Permit Deadline to June 30, 1994; provided, however,
Purchaser's right to terminate the Agreement pursuant to Section 7.6 shall
terminate unless Purchaser notifies Seller, on or before June 30, 1994, that it
has determined that it will be unable to obtain the transference or issuance of
any Governmental Permits or Non-Transferrable Governmental Permits necessary to
use the Assets as they currently are being used or to operate the Business as it
currently is being operated.
5. Purchaser hereby waives Seller's compliance with the UCC
Deadline.
6. Seller hereby waives Purchaser's compliance with the Opinion
Deadline.
7. Purchaser and Seller hereby amend Section 6.2(b) of the Agreement
to read as follows: "(b) violate any Legal Requirements applicable to the
City;".
8. Purchaser and Seller amend Section 6.4 of the Agreement by
deleting the word "legal".
9. The parties hereto acknowledge that the respective waivers
contained herein shall not be a waiver of any other right either such party may
have hereunder or under the Agreement. Seller's or Purchaser's failure comply
with the terms of this Amendment shall be a breach of that Section of the
Agreement to which such failure relates and Purchaser or Seller, as the case may
be, shall have all rights and remedies provided to Purchaser or Seller, as the
case may be, by the Agreement for such breach. Except as expressly amended by
this Amendment, the Agreement is hereby ratified.
IN WITNESS WHEREOF, the undersigned have executed this First Amendment to
Agreement to Purchase and Sell as of the date first above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
BY
-----------------------------------
Title Vice President
--------------------------------
3
<PAGE>
ATTEST: CITY OF SANTA FE, NEW MEXICO
BY
- --------------------------- -----------------------------------
City Clerk
Title City Manager
--------------------------------
APPROVED AS TO FORM:
- ---------------------------
City Attorney
4
<PAGE>
EXHIBIT 2.2.2
SECOND AMENDMENT TO AGREEMENT
TO PURCHASE AND SELL
THIS SECOND AMENDMENT TO AGREEMENT TO PURCHASE AND SELL (this "Amendment")
is made as of the 29th day of June, 1994, by and between the City of Santa Fe,
New Mexico ("Purchaser") and Public Service Company of New Mexico ("Seller").
R E C I T A L S
A. Section 9.9 of the Agreement to Purchase and Sell, dated February 28,
1994 between Purchaser and Seller (the "Agreement"), sets forth certain
agreements between Purchaser and Seller regarding the breach and removal by
Seller of the Two Mile Dam, the diversion and redirection of the Santa Fe River
back to nearly its original bed, and the relocation and reconstruction of Cerro
Gordo Road.
B. Public controversies have arisen regarding whether Two Mile Dam should
be completely demolished and removed or should be reconstructed. Seller has
maintained generally that reconstruction is not economically feasible and that
demolition and removal of the existing dam structure are necessary to avert a
public safety hazard and are an obligation of Seller to Purchaser pursuant to
Section 9.9 of the Agreement.
C. On May 9, 1994, the New Mexico State Engineer Office ("State
Engineer") issued an order (the "May 9 Order") requiring that Seller breach Two
Mile Dam by May 31, 1994, in such a manner as to avoid any threat posed by what
the State Engineer has characterized as inadequate by-pass channel capacity.
The May 9 Order was made as an interim emergency measure and does not
<PAGE>
necessarily envision total demolition of the dam, redirection of the Santa Fe
River watercourse or relocation of Cerro Gordo Road.
D. On May 20, 1994, Seller submitted plans and specifications for the
required breach of Two Mile Dam (the "Breach Plan") to the State Engineer, and
on May 24, 1994, the State Engineer authorized Seller to proceed in accordance
with the Breach Plan.
E. On May 23, 1994, Seller also requested the United States Army Corps of
Engineers (the "Corps") to issue an emergency permit pursuant to Section 404 of
the Clean Water Act (33 U.S.C. 1344) authorizing Seller to carry out the Breach
Plan, and on May 25, 1994, the Corps issued Permit No. NM-94-00180 (the
"Emergency 404 Permit") authorizing Seller to perform such work in accordance
with the conditions therein stated. A copy of the Emergency 404 Permit is
attached as Exhibit "A" to this Amendment.
F. Purchaser and Seller desire to make this Agreement for the purpose of
amending and clarifying their respective rights and obligations pursuant to
Section 9.9 of the Agreement in light of the May 9 Order, the issuance of the
Emergency 404 Permit, and the aforementioned public controversies.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises and
agreements contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
- 2 -
<PAGE>
AGREEMENT
1. Seller shall proceed with the Breach Plan in accordance with the
Emergency 404 Permit and the authorization by the State Engineer. Seller's
completion of the breach of Two Mile Dam in accordance with the Breach Plan and
the Emergency 404 Permit shall be deemed full and complete performance by Seller
of its obligations to Purchaser pursuant to Section 9.9 of the Agreement.
Accordingly, Purchaser hereby waives, and releases and discharges Seller from,
the performance of any and all other or further obligations of Seller to
Purchaser pursuant to Section 9.9 of the Agreement, but not from any liabilities
to Purchaser arising from Seller's negligence or willful misconduct. While not
anticipated under the Breach Plan, in the event that reconstruction of Cerro
Gordo Road, or the design and installation of a culvert beneath Cerro Gordo
Road, is required by the State Engineer or the Corps, Purchaser agrees to
reimburse Seller for fifty percent (50%) of the total cost of said construction,
design and installation.
2. Unless otherwise required by the State Engineer or the Corps, and
subject to Seller's receipt of assurances satisfactory to Seller from the State
Engineer and the Corps that no further work is required of Seller to protect the
public health and safety from hazards associated with Two Mile Dam or to
remediate environmental effects or other consequences of the Breach Plan, Seller
shall withdraw its currently pending application to the
- 3 -
<PAGE>
Corps, filed January 28, 1994, for a permit authorizing complete demolition of
Two Mile Dam.
3. Nothing in this Amendment shall be deemed to express or imply any
agreement by Seller to take or refrain from taking any action with regard to the
Two Mile Dam or the property on which it is located, other than those actions
which Seller is specifically required to take or refrain from taking hereunder.
This Amendment is exclusively between and for the benefit of Seller and
Purchaser and neither creates nor is intended to create any rights in any third
parties.
4. Except as amended and modified by this Amendment and the First
Amendment to Agreement to Purchase and Sell, dated April 29, 1994 between Seller
and Purchaser, the Agreement remains in full force and effect and is hereby
ratified and affirmed by Seller and Purchaser. This Amendment is subject to all
terms and provisions of the Agreement as so amended and modified. Seller's or
Purchaser's failure to comply with the terms of this Amendment shall be a breach
of that Section of the Agreement to which such failure relates and Purchaser or
Seller, as the case may be, shall have all rights and remedies provided to
Purchaser or Seller, as the case may be, by the Agreement for such breach.
IN WITNESS WHEREOF, the undersigned have executed this Second Amendment to
Agreement to Purchase and Sell as of the date first above written.
- 4 -
<PAGE>
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By: /s/
--------------------------------
Title: Vice President
-----------------------------
ATTEST: CITY OF SANTA FE, NEW MEXICO
/s/ By: /s/
- ------------------------- --------------------------------
City Clerk
Title: City Manager
----------------------------
APPROVED AS TO FORM:
/s/
- -------------------------
City Attorney
- 5 -
<PAGE>
EXHIBIT 2.2.3
THIRD AMENDMENT TO AGREEMENT TO PURCHASE AND SELL
THIS THIRD AMENDMENT TO AGREEMENT TO PURCHASE AND SELL (this "Amendment")
is made as of the 30th day of June, 1994, by and between the City of Santa Fe,
New Mexico ("Purchaser"), and Public Service Company of New Mexico ("Seller").
Unless otherwise defined herein, initially capitalized terms shall have the
meaning ascribed to them in that certain Agreement to Purchase and Sell (the
"Agreement"), dated February 28, 1994, by and between Purchaser and Seller, as
amended by that certain First Amendment to Agreement to Purchase and Sell (the
"First Amendment"), dated April 29, 1994, between Purchaser and Seller. All
references to the Agreement, shall be as amended by the First Amendment.
RECITALS
WHEREAS, Purchaser and Seller executed the First Amendment to Agreement to,
among other things, extend the time for performance or exercise of certain of
Seller and Purchaser's rights, under the Agreement; and
WHEREAS, Purchaser and Seller desire to extend further the time for
performance or exercise of certain of those rights by further amending the
Agreement, as amended, all on the terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises and
agreements contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
AGREEMENT
1. Purchaser and Seller hereby amend Section 7.4.2 of the Agreement
to provide that (i) the Inspection Deadline is hereby extended to August 31,
1994, (ii) Purchaser's right to terminate the Agreement pursuant to Section
7.4.2 shall expire if not exercised on or before August 31, 1994, (iii) if
Purchaser elects not to terminate the Agreement pursuant to Section 7.4.2,
Purchaser shall deliver a Waiver Notice to Seller on or before August 31, 1994,
and (iv) the deadline for Purchaser to notify Seller of an Environmental
Condition shall be extended until August 31, 1994. If Purchaser fails to
deliver a Waiver Notice to Seller on or before August 31, 1994, Purchaser shall
conclusively be deemed to have elected to terminate the Agreement. The effect
of such a termination shall be as provided in Section 7.4.2. If Purchaser
notifies Seller of an Environmental Condition on or before August 31, 1994,
Purchaser and Seller shall have their respective rights to correct such matters,
indemnify Purchaser, pay costs, remediate, or undertake some other alternative,
in the case of Seller, or waive such matters or terminate the Agreement, in the
case of Purchaser, on the time frames set forth in Section 7.5.2 of the
Agreement. In the event that this Amendment is not executed on or before June
30, 1994, but is executed thereafter, the Agreement shall not be deemed to be
terminated pursuant to Section 7.4.2 of the Agreement.
<PAGE>
2. Purchaser and Seller hereby amend Section 7.6 of the Agreement to
extend the Governmental Permit Deadline to August 31, 1994; provided, however,
Purchaser's right to terminate the Agreement pursuant to Section 7.6 shall
terminate unless Purchaser notifies Seller, on or before August 31, 1994, that
it has determined that it will be unable to obtain the transference or issuance
of any Governmental Permits or Non-Transferrable Governmental Permits necessary
to use the Assets as they currently are being used or to operate the Business as
it currently is being operated.
3. On or before August 31, 1994, Purchaser shall notify Seller of
those Major Easements with respect to which Purchaser shall require Seller to
purchase title insurance pursuant to Section 7.3 of the Agreement.
4. Seller or Purchaser's failure comply with the terms of this
Amendment shall be a breach of that Section of the Agreement to which such
failure relates and Purchaser or Seller, as the case may be, shall have all
rights and remedies provided to Purchaser or Seller, as the case may be, by the
Agreement for such breach. Except as expressly amended by this Amendment, the
Agreement, as previously amended by the First Amendment, is hereby ratified.
IN WITNESS WHEREOF, the undersigned have executed this Third Amendment to
Agreement to Purchase and Sell as of the date first above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
BY
-----------------------------------
Title
--------------------------------
ATTEST: CITY OF SANTA FE, NEW MEXICO
BY
- --------------------------- -----------------------------------
City Clerk
Title
--------------------------------
APPROVED AS TO FORM:
- ---------------------------
City Attorney
2
<PAGE>
EXHIBIT 2.2.4
FOURTH AMENDMENT TO AGREEMENT TO PURCHASE AND SELL
THIS FOURTH AMENDMENT TO AGREEMENT TO PURCHASE AND SELL (this "Amendment")
is made as of the 30th day of August 1994, by and between the City of Santa Fe,
New Mexico ("Purchaser"), and Public Service Company of New Mexico ("Seller").
Unless otherwise defined herein, initially capitalized terms shall have the
meaning ascribed to them in that certain Agreement to Purchase and Sell (the
"Agreement"), dated February 28, 1994, by and between Purchaser and Seller, as
amended by that certain First Amendment to Agreement to Purchase and Sell (the
"First Amendment"), dated April 29, 1994, between Purchaser and Seller, that
certain Second Amendment to Agreement to Purchase and Sell (the "Second
Amendment"), dated June 29, 1994, and that certain Third Amendment to Agreement
to Purchase and Sell (the "Third Amendment"), dated June 30, 1994. All
references to the Agreement, shall be as amended by the First Amendment, the
Second Amendment and the Third Amendment.
RECITALS
WHEREAS, Purchaser and Seller executed the First Amendment and the Third
Amendment to, among other things, extend the time for performance or exercise of
certain of Seller's and Purchaser's rights, under the Agreement; and
WHEREAS, Purchaser and Seller desire to extend further the time for
performance or exercise of certain of those rights by further amending the
Agreement, as amended, all on the terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises and
agreements contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
AGREEMENT
1. Purchaser and Seller hereby amend Section 7.4.2 of the Agreement
to provide that (i) the Inspection Deadline is hereby extended to October 31,
1994, (ii) Purchaser's right to terminate the Agreement pursuant to Section
7.4.2 shall expire if not exercised on or before October 31, 1994, (iii) if
Purchaser elects not to terminate the Agreement pursuant to Section 7.4.2,
Purchaser shall deliver a Waiver Notice to Seller on or before October 31, 1994,
and (iv) the deadline for Purchaser to notify Seller of an Environmental
Condition shall be extended until October 31, 1994. If Purchaser fails to
deliver a Waiver Notice to Seller on or before October 31, 1994, Purchaser shall
conclusively be deemed to have elected to terminate the Agreement. The effect
of such a termination shall be as provided in Section 7.4.2. If Purchaser
notifies Seller of an Environmental Condition on or before October 31, 1994,
Purchaser and Seller shall have their respective rights to correct such matters,
indemnify Purchaser, pay costs, remediate, or undertake some other alternative,
in the case of Seller, or waive such matters or terminate the Agreement, in the
case of Purchaser, on the time frames
<PAGE>
set forth in Section 7.5.2 of the Agreement. In the event that this Amendment
is not executed on or before August 31, 1994, but is executed thereafter, the
Agreement shall not be deemed to be terminated pursuant to Section 7.4.2 of the
Agreement.
2. Purchaser and Seller hereby amend Section 7.6 of the Agreement to
extend the Governmental Permit Deadline to October 31, 1994; provided, however,
Purchaser's right to terminate the Agreement pursuant to Section 7.6 shall
terminate unless Purchaser notifies Seller, on or before October 31, 1994, that
it has determined that it will be unable to obtain the transference or issuance
of any Governmental Permits or Non-Transferrable Governmental Permits necessary
to use the Assets as they currently are being used or to operate the Business as
it currently is being operated.
3. On or before October 31, 1994, Purchaser shall notify Seller of
those Major Easements with respect to which Purchaser shall require Seller to
purchase title insurance pursuant to Section 7.3 of the Agreement.
4. Seller or Purchaser's failure comply with the terms of this
Amendment shall be a breach of that Section of the Agreement to which such
failure relates and Purchaser or Seller, as the case may be, shall have all
rights and remedies provided to Purchaser or Seller, as the case may be, by the
Agreement for such breach. Except as expressly amended by this Amendment, the
Agreement, as previously amended by the First Amendment, the Second Amendment
and the Third Amendment, is hereby ratified.
IN WITNESS WHEREOF, the undersigned have executed this Fourth Amendment to
Agreement to Purchase and Sell as of the date first above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
BY
-------------------------------------
Title Vice President
----------------------------------
2
<PAGE>
ATTEST: CITY OF SANTA FE, NEW MEXICO
BY
- --------------------------- -------------------------------------
City Clerk
Title City Manager
----------------------------------
APPROVED AS TO FORM:
- ---------------------------
City Attorney
3
<PAGE>
EXHIBIT 2.2.5
FIFTH AMENDMENT TO AGREEMENT TO PURCHASE AND SELL
THIS FIFTH AMENDMENT TO AGREEMENT TO PURCHASE AND SELL (this "Amendment")
is made as of the 31st day of October 1994, by and between the City of Santa Fe,
New Mexico ("Purchaser"), and Public Service Company of New Mexico ("Seller").
Unless otherwise defined herein, any term with its initial letter capitalized
shall have the meaning ascribed to it in that certain Agreement to Purchase and
Sell (the "Agreement"), dated February 28, 1994, by and between Purchaser and
Seller, as amended by that certain First Amendment to Agreement to Purchase and
Sell (the "First Amendment"), dated April 29, 1994, between Purchaser and
Seller, that certain Second Amendment to Agreement to Purchase and Sell (the
"Second Amendment"), dated June 29, 1994, that certain Third Amendment to
Agreement to Purchase and Sell (the "Third Amendment"), dated June 30, 1994, and
that certain Fourth Amendment to Agreement to Purchase and Sell (the "Fourth
Amendment"), dated August 30, 1994, between Purchaser and Seller. All
references to the Agreement shall be as amended by the First Amendment, Second
Amendment, Third Amendment and the Fourth Amendment.
RECITALS
WHEREAS, Purchaser and Seller executed the First Amendment, Third Amendment
and Fourth Amendment to, among other things, extend the time for performance or
exercise of certain of Seller's and Purchaser's rights under the Agreement; and
WHEREAS, Purchaser and Seller desire to extend further the time for
performance or exercise of certain of those rights by further amending the
Agreement, as amended, all on the terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises and
agreements contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
AGREEMENT
1. Purchaser and Seller hereby amend Section 7.4.2 of the Agreement
to provide that (i) the Inspection Deadline is hereby extended to December 31,
1994, (ii) Purchaser's right to terminate the Agreement pursuant to Section
7.4.2 shall expire if not exercised on or before December 31, 1994, (iii) if
Purchaser elects not to terminate the Agreement pursuant to Section 7.4.2,
Purchaser shall deliver a Waiver Notice to Seller on or before December 31,
1994, and (iv) the deadline for Purchaser to notify Seller of an Environmental
Condition shall be extended until December 31, 1994.
<PAGE>
If Purchaser fails to deliver a Waiver Notice to Seller on or before December
31, 1994, Purchaser shall conclusively be deemed to have elected to terminate
the Agreement. The effect of such a termination shall be as provided in Section
7.4.2. If Purchaser notifies Seller of an Environmental Condition on or before
December 31, 1994, Purchaser and Seller shall have their respective rights to
correct such matters, indemnify Purchaser, pay costs, remediate, or undertake
some other alternative, in the case of Seller, or waive such matters or
terminate the Agreement, in the case of Purchaser, on the time frames set forth
in Section 7.5.2 of the Agreement. In the event that this Amendment is not
executed on or before October 31, 1994, but is executed thereafter, the
Agreement shall not be deemed to be terminated pursuant to Section 7.4.2 of the
Agreement.
2. Purchaser and Seller hereby amend Section 7.6 of the Agreement to
extend the Governmental Permit Deadline to December 31, 1994; provided, however,
Purchaser's right to terminate the Agreement pursuant to Section 7.6 shall
terminate unless Purchaser notifies Seller, on or before December 31, 1994, that
it has determined that it will be unable to obtain the transference or issuance
of any Governmental Permits or Non-Transferrable Governmental Permits necessary
to use the Assets as they currently are being used or to operate the Business as
it currently is being operated.
3. On or before December 31, 1994, Purchaser shall notify Seller of
those Major Easements with respect to which Purchaser shall require Seller to
purchase title insurance pursuant to Section 7.3 of the Agreement.
4. Sections 12.1.2 and 12.1.3 of the Agreement are amended by
deleting "December 31, 1994" and inserting in lieu thereof "May 31, 1995."
5. Seller or Purchaser's failure to comply with the terms of this
Amendment shall be a breach of that Section of the Agreement to which such
failure relates and Purchaser or Seller, as the case may be, shall have all
rights and remedies provided to Purchaser or Seller, as the case may be, by the
Agreement for such breach. Except as expressly amended by this Amendment, the
Agreement, as previously amended by the First Amendment, Second Amendment, Third
Amendment and Fourth Amendment, is hereby ratified.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Fifth Amendment to
Agreement to Purchase and Sell as of the date first above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
BY /s/
------------------------------
Title Vice President
---------------------------
ATTEST: CITY OF SANTA FE, NEW MEXICO
BY /s/
- --------------------------- -------------------------------
City Clerk
Title City Manager
---------------------------
APPROVED AS TO FORM:
/s/
- ---------------------------
City Attorney
3
<PAGE>
EXHIBIT 2.2.6
SIXTH AMENDMENT TO AGREEMENT TO PURCHASE AND SELL
THIS SIXTH AMENDMENT TO AGREEMENT TO PURCHASE AND SELL (this "Amendment")
is made as of the 31st day of December 1994, by and between the City of Santa
Fe, New Mexico ("Purchaser"), and Public Service Company of New Mexico
("Seller"). Unless otherwise defined herein, any term with its initial letter
capitalized shall have the meaning ascribed to it in that certain Agreement to
Purchase and Sell (the "Agreement"), dated February 28, 1994, by and between
Purchaser and Seller, as amended by that certain First Amendment to Agreement to
Purchase and Sell (the "First Amendment"), dated April 29, 1994, that certain
Second Amendment to Agreement to Purchase and Sell (the "Second Amendment"),
dated June 29, 1994, that certain Third Amendment to Agreement to Purchase and
Sell (the "Third Amendment"), dated June 30, 1994, that certain Fourth Amendment
to Agreement to Purchase and Sell (the "Fourth Amendment"), dated August 30,
1994, and that certain Fifth Amendment to Agreement to Purchase and Sell (the
"Fifth Amendment"), dated October 31, 1994. All references to the Agreement
shall be as amended by the First Amendment, Second Amendment, Third Amendment,
Fourth Amendment and Fifth Amendment.
RECITALS
WHEREAS, Purchaser and Seller executed the First Amendment, Third
Amendment, Fourth Amendment and Fifth Amendment to, among other things, extend
the time for performance or exercise of certain of Seller's and Purchaser's
rights under the Agreement; and
WHEREAS, Purchaser and Seller desire to extend further the time for
performance or exercise of certain of those rights by further amending the
Agreement, as amended, all on the terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises and
agreements contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
AGREEMENT
1. Purchaser and Seller hereby amend Section 7.4.2 of the Agreement
to provide that (i) the Inspection Deadline is hereby extended to February 28,
1995, (ii) Purchaser's right to terminate the Agreement pursuant to Section
7.4.2 shall expire if not exercised on or before February 28, 1995, (iii) if
Purchaser elects not to terminate the Agreement pursuant to Section 7.4.2,
Purchaser shall deliver a Waiver Notice to Seller on or before February 28,
1995, and (iv) the deadline for Purchaser to notify Seller of an Environmental
Condition shall be extended until February 28, 1995.
<PAGE>
If Purchaser fails to deliver a Waiver Notice to Seller on or before February
28, 1995, Purchaser shall conclusively be deemed to have elected to terminate
the Agreement. The effect of such a termination shall be as provided in Section
7.4.2. If Purchaser notifies Seller of an Environmental Condition on or before
February 28, 1995, Purchaser and Seller shall have their respective rights to
correct such matters, indemnify Purchaser, pay costs, remediate, or undertake
some other alternative, in the case of Seller, or waive such matters or
terminate the Agreement, in the case of Purchaser, on the time frames set forth
in Section 7.5.2 of the Agreement. In the event that this Amendment is not
executed on or before December 31, 1994, but is executed thereafter, the
Agreement shall not be deemed to be terminated pursuant to Section 7.4.2 of the
Agreement.
2. Purchaser and Seller hereby amend Section 7.6 of the Agreement to
extend the Governmental Permit Deadline to February 28, 1995; provided, however,
Purchaser's right to terminate the Agreement pursuant to Section 7.6 shall
terminate unless Purchaser notifies Seller, on or before February 28, 1994, that
it has determined that it will be unable to obtain the transference or issuance
of any Governmental Permits or Non-Transferrable Governmental Permits necessary
to use the Assets as they currently are being used or to operate the Business as
it currently is being operated.
3. On or before January 15, 1995, Purchaser shall notify Seller of
those Major Easements with respect to which Purchaser shall require Seller to
purchase title insurance pursuant to Section 7.3 of the Agreement.
4. Seller or Purchaser's failure to comply with the terms of this
Amendment shall be a breach of that Section of the Agreement to which such
failure relates and Purchaser or Seller, as the case may be, shall have all
rights and remedies provided to Purchaser or Seller, as the case may be, by the
Agreement for such breach. Except as expressly amended by this Amendment, the
Agreement, as previously amended by the First Amendment, Second Amendment, Third
Amendment, Fourth Amendment and Fifth Amendment, is hereby ratified.
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IN WITNESS WHEREOF, the undersigned have executed this Sixth Amendment to
Agreement to Purchase and Sell as of the date first above written.
PUBLIC SERVICE COMPANY OF
NEW MEXICO
BY /s/
-------------------------------------
Title Vice President
----------------------------------
ATTEST: CITY OF SANTA FE, NEW MEXICO
BY /s/
- --------------------------- -------------------------------------
City Clerk
Title City Manager
----------------------------------
APPROVED AS TO FORM:
/s/
- ---------------------------
City Attorney
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<PAGE>
EXHIBIT 3.2
BYLAWS
OF
PUBLIC SERVICE COMPANY OF NEW MEXICO
WITH ALL AMENDMENTS TO AND INCLUDING DECEMBER 6, 1994
<PAGE>
BYLAWS
OF
PUBLIC SERVICE COMPANY OF NEW MEXICO
ARTICLE I.
MEETINGS OF STOCKHOLDERS
SECTION 1. MEETINGS. The Annual Meeting of Stockholders shall be held on such
date and at such time and place as may be fixed from time to time by the Board
of Directors of the Company pursuant to a resolution adopted by a majority of
the members of the Board then in office, for the election of directors and the
transaction of such other business as may properly come before the meeting.
Special meetings may be called by a majority of the Board of Directors, the
Executive Committee, the Chairman of the Board or the President.
SECTION 2. PLACE OF MEETINGS. The annual or any special meeting of stockhold-
ers shall be held at the principal office of the Company in the City of
Albuquerque, Bernalillo County, State of New Mexico, or at such other places
within or without the State of New Mexico as shall be specified in the notice of
such meeting.
SECTION 3. NOTICE. Written notice of any meeting stating the time and place,
and if a special meeting, the purpose or purposes of such meeting, shall be
mailed to each stockholder of record entitled to vote at such meeting at the
address of such stockholders as the same appears on the stock transfer books of
the Company, except as otherwise provided by law. In the event of the transfer
of a stockholder's stock after mailing of such notice and prior to the holding
of the meeting, it shall not be necessary to mail notice of the meeting to any
transferee. All notices of any special stockholder meeting shall be mailed not
less than forty (40) days before the date of the meeting; however, notice of any
such special meeting called by a majority of the Board of Directors, the
Executive Committee, the Chairman of the
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Board or the President, and notice of any annual meeting, shall be mailed not
less than ten (10) days before such meeting of stockholders.
SECTION 4. QUORUM. At any meeting of the stockholders, except as otherwise
provided by law, it shall be necessary that the holders of a majority of the
issued and outstanding shares of the capital stock entitled to vote at such
meeting shall be represented in person or by proxy to constitute a quorum for
the transaction of business.
SECTION 5. ADJOURNMENT. Whenever at any meeting of the stockholders, notice of
which shall have been duly given, a quorum shall not be present, or whenever for
any reason it may be deemed desirable, a majority in interest of the stockhold-
ers present in person or by proxy may adjourn the meeting from time to time to
any future day, without notice other than by announcement at the meeting or
adjournment thereof. At any such adjourned meeting at which quorum shall be
present, any business may be transacted which might have been transacted at the
meeting on the date originally fixed.
SECTION 6. ORGANIZATION. The Chairman, or in the absence of the Chairman, the
President, or in the absence of both, a Vice President shall call meetings of
the stockholders to order and shall act as Chairman of such meetings. The
stockholders may appoint any stockholder or the proxy of any stockholder to act
as Chairman of any meeting of the stockholders in the absence of the Chairman,
President and Vice Presidents. The Secretary, or in the absence of the Secre-
tary, an Assistant Secretary, shall act as Secretary at all meetings of the
stockholders, but in the absence of the Secretary and Assistant Secretaries at
any meeting of the stockholders the presiding officer may appoint any person to
act as Secretary of such meeting.
SECTION 7. INSPECTORS. At each meeting of the stockholders at which a vote by
ballot is taken, the polls shall be opened and closed, the proxies and ballots
shall be received and be taken in charge, and the validity of proxies and the
acceptance or rejection of votes shall be decided by two inspectors. No person
who is a candidate for the office of director shall act
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as Inspector of any election for directors. Such inspectors shall be appointed
by the Board of Directors before the meeting, or, if no such appointment shall
have been made, then by the presiding officer of the meeting. If for any reason
any of the inspectors previously appointed shall fail to attend or refuse or be
unable to serve, inspectors in place of any so failing to attend or refusing or
unable to serve shall be appointed in like manner.
SECTION 8. VOTING. At each meeting of stockholders every stockholder, whether
resident or nonresident, shall be entitled to one vote for each share of stock
standing in the name of the stockholder on the books of the Company on the date
on which stockholders entitled to vote are determined. Such stockholder may be
represented and vote by a proxy or proxies appointed by an instrument in
writing; in the event that such instrument in writing shall designate two or
more persons to act as proxies, a majority of such persons present at the
meeting, or if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such written instrument upon all of the
persons so designated, unless the instrument shall otherwise provide. No proxy
shall be voted at any meeting or adjournment thereof other than that for which
the proxy is given.
In all elections for directors, voting shall be by written ballot.
The Board of Directors may fix a date in advance not exceeding fifty (50) days
preceding the date of any meeting of stockholders as a record date for the
determination of stockholders entitled to notice of and to vote at any such
meeting, and in such case only stockholders of record on the date so fixed shall
be entitled to notice of and to vote at such meeting.
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<PAGE>
ARTICLE II.
DIRECTORS
SECTION 1. NUMBER, ELECTION AND TERMS. The business and property of the
corporation shall be managed and controlled by a Board of Directors who, if and
while so required by law, shall be stockholders in the Company, and none of whom
need be a resident of the State of New Mexico. The directors shall be nine in
number and shall be elected in classes in the manner provided in Article Fifth
of the Articles of Incorporation as amended.
SECTION 2. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman shall be elected
annually by the Board of Directors at the annual meeting thereof and shall hold
that office until the next annual meeting or until a successor shall be elected
and shall qualify. In the event of the incapacity of the Chairman of the Board,
the Board of Directors shall, by a majority vote of the Board of Directors,
designate an Acting Chairman who shall, during the incapacity of the Chairman,
assume and perform all functions and duties which the Chairman is authorized or
required by law to do. The Chairman of the Board shall have the power to call
special meetings of the stockholders and of the Directors for any purpose or
purposes. The Chairman shall preside at all meetings of the stockholders and of
the Board of Directors unless the Chairman shall be absent or incapacitated.
The Chairman of the Board, subject to the authority of the Board, shall
generally do and perform all acts incident to the office of the Chairman of the
Board and which are authorized or required by law.
SECTION 3. VACANCIES. Any vacancies occurring on the Board of Directors by
death, resignation, or otherwise shall be filled by a majority of Directors then
remaining in office.
SECTION 4. MEETINGS. The meetings of the Board of Directors shall be held at
the times and places designated by the Board of Directors. There shall be no
fewer than four regular meetings of the Board during any calendar year.
4
<PAGE>
The Annual Meeting of the Board of Directors for the election of officers and
of the Executive Committee, and such other business as may properly come before
the meeting, shall be held immediately following the annual meeting of stock-
holders.
Special meetings of the Board of Directors shall be held whenever called at the
direction of the Chairman of the Board of Directors, the President, any two
directors, or the Executive Committee.
SECTION 5. NOTICE. No notice shall be required of any annual or regular
meeting of the Board of Directors unless the place thereof shall be other than
that last designated by the Board. Notice of any annual or regular meeting, when
required, or of any special meeting of the Board of Directors shall be given to
each director by mailing or delivering the same at least forty-eight hours, or
by telephoning the same at least twenty-four hours before the time fixed for the
meeting. Such notice may be waived by any director. Unless otherwise indicated
in the notice thereof any and all business may be transacted at a special
meeting. At any meeting at which every director shall be present, even without
notice, any business may be transacted.
SECTION 6. QUORUM. A majority of the Board of Directors shall constitute a
quorum for the transaction of business, and any action receiving the affirmative
vote of a majority of the directors present at any meeting shall be effective.
SECTION 7. ADJOURNMENTS. Any annual, regular or special meeting of the Board
of Directors may be adjourned from time to time by the members present whether
or not a quorum shall be present, and no notice shall be required of any
adjourned meeting beyond the announcement of such adjournment at the meeting.
SECTION 8. INDEMNIFICATION. Each person who shall have served as a director or
an officer of the Company, or, at the request of the Company, as a director or
an officer of any other corporation, partnership or joint venture, whether
profit or nonprofit, in which the Company
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<PAGE>
(a) owns shares of capital stock, (b) has an ownership interest, (c) is a
member, or (d) is a creditor, and regardless of whether or not such person is
then in office, and the heirs, executors, administrators and personal
representatives of any such person shall be indemnified by the Company to the
full extent of the authority of the Company to so indemnify as authorized by the
law of New Mexico.
SECTION 9. COMMITTEES. The Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate from among its members
one or more committees, in addition to the Executive Committee provided for in
Article III hereof, each of which, to the extent provided in the resolution
establishing such committee and designating the member or members thereof, shall
have and may exercise all the authority of the Board of Directors, except as may
be limited by law.
ARTICLE III.
EXECUTIVE COMMITTEE
SECTION 1. The Board of Directors may from time to time appoint by resolution
adopted by a majority of the full Board of Directors from among its members an
Executive Committee which may exercise the powers of the Board of Directors in
the management of the business, affairs and property of the Company during
intervals between the meetings of the Board of Directors unless and until the
Board of Directors shall otherwise direct. Membership will be the Chairman of
the Board and the Chairperson of each of the standing committees of the Board.
SECTION 2. A majority of the Executive Committee shall constitute a quorum for
the transaction of business and any action receiving the affirmative vote of a
majority of the members of the Executive Committee present at any meeting shall
be effective; provided, however, that the affirmative vote of not less than
three members of the Executive Committee shall be required for any such action.
6
<PAGE>
SECTION 3. Meetings of the Executive Committee shall be held whenever called
by the direction of the Chairman of the Board of Directors, the president or any
two members of the Executive Committee. Notice of any meeting of the Executive
Committee shall be given each member of the Executive Committee in writing or by
telephone at least 24 hours before the time fixed for the meeting. Such notice
may be waived by any member of the Executive Committee.
ARTICLE IV.
OFFICERS
SECTION 1. NUMBER, ELECTION AND TERM. The officers of the Company shall be a
President, one or more Vice Presidents, a Secretary, a Treasurer, and a
Controller who shall be elected annually by the Board of Directors at the annual
meeting thereof and who shall hold their respective offices until the next
annual meeting or until their successor shall be elected and shall qualify. The
Board of Directors may designate one or more Vice Presidents as "Executive" Vice
Presidents and one or more Vice Presidents as "Senior" Vice Presidents. The
title of any Vice President may include words indicative of the area of
responsibility of such Vice President. The Board of Directors shall designate
one of the Vice Presidents as the chief financial officer of the Company. The
Board of Directors may from time to time appoint such additional officers as the
interest of the Company may require and fix their terms and duties of office. A
vacancy occurring in any office may be filled by the Board of Directors. All
officers shall hold office subject to the Board of Directors and shall be
subject to removal at any time by the affirmative vote of a majority of the
whole Board of Directors. Election of any person as an officer of the Company
shall not of itself create contract rights.
SECTION 2. PRESIDENT. The President shall be the Chief Executive Officer of
the Company and shall provide active executive management over all operations of
the Company; subject, however, to control of the Board of Directors. The
President shall have the power to appoint and discharge, subject to the general
approval or review by the Board of Directors,
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<PAGE>
employees and agents of the Company and to fix their compensation to make and
sign contracts and agreements in the name of and on behalf of the Company and
direct the general management and control of the business and affairs of the
Company. The President may delegate from among the powers enumerated in the
preceding sentence to officers of the Company, such responsibilities and
authority as the President may determine. The President shall have the power to
segregate the operations of the Company into areas of responsibility. The
President shall see that the books, reports, statements and certificates
required by the statute under which the Company is organized or any other laws
applicable thereto are properly kept, made, and filed according to law; and the
President shall generally do and perform all acts which are authorized or
required by law. The President shall designate a Vice President who shall,
during the absence or incapacity of the President, assume and perform all
functions and duties which the President might lawfully do if present in person
and not under any incapacity.
SECTION 3. VICE PRESIDENTS.
SECTION 3(a). EXECUTIVE AND SENIOR VICE PRESIDENTS. Each Vice President
designated as "Executive" or "Senior Vice President" shall be responsible for
such areas and activities as assigned by the President, shall be subject to the
authority of the President and shall assist in the general control and manage-
ment of the business and affairs of the Company.
SECTION 3(b). OTHER VICE PRESIDENTS. The Vice Presidents shall be responsible
for such areas and activities as are assigned by the President and shall perform
such duties as may be required.
SECTION 3(c). ASSUMPTION OF DUTIES BY A VICE PRESIDENT. A Vice President,
consistent with the title or duty of such Vice President, shall assume and
perform all functions and duties assigned to a superior executive during the
absence or incapacity of such superior.
8
<PAGE>
SECTION 4. SECRETARY. The Secretary shall be sworn to the faithful discharge
of the duties of the Secretary. The Secretary shall keep a record in the proper
books provided for that purpose of meetings and proceedings of the Board of
Directors, Executive Committee and other Committees as may be designated by the
Board and stockholders, and shall record all votes of the directors and
stockholders in a book to be kept for that purpose. The Secretary shall notify
the directors and stockholders of the respective meetings as required by law or
by the bylaws of the Company and shall perform such other duties as may be
required by law or the bylaws of the Company, or which may be assigned from time
to time by the Board of Directors or Executive Committee. The Secretary is
authorized to appoint one or more assistants from time to time as the Secretary
deems advisable, the assistant or assistants to serve at the pleasure of the
Secretary, and to perform the duties that are delegated by the Secretary. The
assistant or assistants so appointed shall not be officers of the Company.
SECTION 5. TREASURER. The Treasurer shall have the custody of all the funds
and securities of the Company, and shall have the power on behalf of the Company
to sign checks, notes, drafts and other evidences of indebtedness, to borrow
money for the current needs of the business of the Company and to make short-
term investments of surplus funds of the Company. The Treasurer shall render to
the President or directors, whenever required by them, an account of all
transactions performed as Treasurer and of the financial conditions of the
Company. The Treasurer shall perform such other duties as may be assigned from
time to time by the Board of Directors, by the Executive Committee or by the
President. The Treasurer is authorized to appoint one or more assistants from
time to time as the Treasurer deems advisable, the assistant or assistants to
serve at the pleasure of the Treasurer, and to perform the duties that are
delegated by the Treasurer. The assistant or assistants so appointed shall not
be officers of the Company.
SECTION 6. CONTROLLER. The Controller shall be the chief accounting officer of
the Company and have full responsibility and control of the accounting depart-
ment, which department shall include all accounting functions carried on
throughout the Company and its subsidiaries. As such, the Controller shall,
subject to the approval of the Board of Directors, the Executive
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<PAGE>
Committee or the President, establish accounting policies. The Controller
shall standardize and coordinate accounting practices, supervise all accounting
records and the presentation of all financial statements and tax returns. The
Controller shall have such other powers and duties as, from time to time, may be
conferred by the Board of Directors, by the Executive Committee or by the
President. The Controller is authorized to appoint one or more assistants from
time to time as the Controller deems advisable, the assistant or assistants to
serve at the pleasure of the Controller, and to perform the duties that are
delegated by the Controller. The assistant or assistants so appointed shall not
be officers of the Company.
SECTION 7. FORM OF APPOINTMENT. In making any appointments of assistants the
Secretary, Treasurer, and Controller shall use the following form:
I, (Name), the duly elected (Title) of Public Service Company of New
Mexico, do hereby appoint (Name) to serve as Assistant (Title) for the
period of (date) to (date), unless this appointment is terminated earlier
in writing, to assume or perform all functions and duties which I might
require and, in my absence or incapacity, which I might lawfully do if
present and not under any incapacity.
Any appointments of assistants by the Secretary, Treasurer or Controller and any
terminations of appointments shall be maintained in the records of the
Secretary's office.
ARTICLE V.
CONTRACTS
SECTION 1. Unless the Board of Directors shall otherwise specifically direct,
all contracts, instruments, documents or agreements of the Company shall be
executed in the name of the Company by the President, or any Vice President, or
any other employee, if approved by the President by either administrative policy
letter or specific written designation. It shall not be necessary that the
corporate seal be affixed to any contract.
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SECTION 2. No contract or other transaction between the Company and any other
corporation owning or holding stock in this Company shall be affected by the
fact that the directors or officers of this Company are interested in, or are
directors or officers of, such other corporation. No contract or transaction of
this Company with any person or persons or firm or association or corporation
(other than one owning or holding stock in this Company) shall be affected by
the fact that any director or officer of this Company is a party thereto or
interested therein, or in any way connected with such person or persons, firm or
association, or corporation, provided that at the meeting of the Board of
Directors of this Company, making, authorizing or confirming such contract or
transaction, there shall be present a quorum of directors not so interested, and
that such contract or transaction shall be approved or be ratified by the
affirmative vote of at least three directors not so interested.
The Board of Directors in its discretion may submit any contract, or act, for
approval or ratification at any annual meeting of the stockholders, or at any
meeting of the stockholders called for the purpose of considering any such act
or contract; and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the capital stock of the Company which
is represented in person or by proxy at such meeting (provided that lawful
quorum of stockholders be there represented in person or by proxy) shall be as
valid and as binding upon the Company and upon all the stockholders as though it
had been approved or ratified by every stockholder of the Company.
ARTICLE VI.
NEGOTIABLE INSTRUMENTS
Except as otherwise provided by the Board of Directors, all checks, drafts,
bills of exchange, promissory notes and other negotiable instruments shall be
signed by the Chairman of the Board, the President, any Vice President,
Secretary or Treasurer.
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ARTICLE VII.
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK. All certificates of stock shall be in such
form as the Board of Directors may approve and shall be signed by the President
or a Vice President and by the Secretary and may be sealed with the seal of the
Company or a facsimile thereof. The signatures of the President or Vice
President and the Secretary of the Company upon a certificate may be facsimiles.
In case any officer of the Company whose signature, whether facsimile or
otherwise, shall have been placed upon any certificate shall cease to be such
officer before any certificate so signed shall have been actually issued and
delivered, such certificate may nevertheless be issued and delivered by the
Company as though the person who had signed such certificate had not ceased to
be an officer. All certificates shall be numbered for identification. The name
of the person owning the shares represented thereby with the number of shares
and the date of issue shall be entered on the Company's books. All certificates
surrendered to the Company shall be cancelled, and no new certificates shall be
issued until a certificate or certificates aggregating the same number of shares
of the same class shall have been surrendered or cancelled; but the Board of
Directors or Executive Committee may make proper provision, from time to time,
for the issue of new certificates in place of lost or destroyed certificates.
SECTION 2. TRANSFER AGENTS AND REGISTRARS. The Company shall, if and whenever
the Board of Directors shall so determine maintain one or more transfer offices
or agencies, each in charge of a transfer agent designated by the Board of
Directors, where the shares of the capital stock of the Company shall be
directly transferable, and also one or more registry offices, each in charge of
a registrar designated by the Board of Directors, where such shares of stock
shall be registered and no certificates for shares of the capital stock of the
Company, in respect of which one or more transfer agents and registrars shall
have been designated, shall be valid unless countersigned by one of such
transfer agents and registered by one of such registrars. The Board of
Directors may also make such additional rules and regulations
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<PAGE>
as it may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the Company.
SECTION 3. TRANSFER OF STOCK. Transfers of stock shall be made only upon the
books of the Company by the holder in person or by the holder's attorney upon
surrender of certificates for a like number of shares.
SECTION 4. CLOSING OF TRANSFER BOOKS. The Board of Directors shall have power
to close the transfer books of the Company for a period not exceeding fifty (50)
days preceding the date of any meeting of stockholders or the date for the
payment of any dividend or the date for the allotment of rights or the date when
any change or conversion or exchange of capital stock shall go into effect;
provided, however, that in lieu of closing the transfer books as aforesaid, the
Board of Directors may fix in advance a date, not exceeding fifty (50) days
preceding the date of any meeting of stockholders or the date for the payment of
any dividend or the date for the allotment of rights or the date when any change
or conversion or exchange of capital stock shall go into effect, as a record
date for the determination of stockholders entitled to notice of and to vote at
any such meeting, or entitled to receive payment of any such dividend or to any
such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, and in such cases only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at such meeting, or to receive the
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights, as the case may be, notwithstanding any transfer of any stock on
the books of the Company after any such record date fixed as aforesaid.
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ARTICLE VIII.
DIVIDENDS
Dividends upon the stock of the Company may be declared from time to time by
the Board of Directors in its discretion and paid to stockholders from the
surplus or net profits arising from the business of the Company.
ARTICLE IX.
BOOKS
The books of the Company, except as otherwise provided by law, may be kept
outside of the State of New Mexico, at such place or places as may be from to
time designated by the Board of Directors.
The Directors shall, from time to time determine whether and to what extent,
and at what time and places, and under what conditions and regulations the
accounts and the books of the Company, or any of them, shall be open to the
inspection of stockholders; and no stockholder shall have any right to inspect
any book or account or document of the Company except as conferred by the
statutes of New Mexico, or authorized by the Directors.
ARTICLE X.
CORPORATE SEAL
The common corporate seal is, and until otherwise ordered by the Board of
Directors shall be, an impression circular in form upon paper or wax bearing the
words "Public Service Company of New Mexico, Incorporated, 1917."
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The seal shall be in the charge of the Secretary. If and when so directed by
the Board of Directors or by the Executive Committee a duplicate of the seal may
be kept and used by the Treasurer or by an Assistant Secretary or Assistant
Treasurer.
ARTICLE XI.
AMENDMENTS
The power to alter, amend or repeal the Bylaws of the Company or adopt new
Bylaws for this Company shall be vested in the Board of Directors.
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EXHIBIT 10.5.2
MODIFICATION NO. 3
TO
SAN JUAN PROJECT CONSTRUCTION AGREEMENT
BETWEEN
PUBLIC SERVICE COMPANY OF NEW MEXICO
AND
TUCSON ELECTRIC POWER COMPANY
This modification No. 3 to the San Juan Project Construction Agreement between
PUBLIC SERVICE COMPANY OF NEW MEXICO ("New Mexico") and TUCSON
ELECTRIC POWER COMPANY ("Tucson"), hereinafter referred to collectively as the
"Parties" or "Participants", is hereby entered into and executed this 17th day
of July, 1984.
WITNESSETH:
WHEREAS, the Parties hereto entered into an agreement described as the San
Juan Project Construction Agreement effective July 1, 1969, as modified by
Modification No. 1 on May 16, 1979, and Modification No. 2 on December 31, 1983
("Construction Agreement"), which establishes certain terms and conditions
relating to their participation and responsibility in the construction of the
San Juan Project; and
WHEREAS, the Parties desire to limit their risks of liability due to
Willful Action; and
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<PAGE>
WHEREAS, the Parties desire to amend the Construction Agreement to reflect
certain changes resulting from the liquidation of Western Coal Co. ("Western")
in 1981, the cessation of coal deliveries from Western to the San Juan Project,
and the execution of a Coal Sales Agreement among New Mexico, Tucson, and San
Juan Coal Company; and
WHEREAS, the Parties desire to amend the Construction Agreement in other
particulars as described herein.
NOW THEREFORE, the Parties agree that the Construction Agreement is hereby
amended as follows:
1.0 EFFECTIVE DATE. This Modification No. 3 shall become effective
immediately upon its execution by New Mexico and Tucson.
2.0 AMENDED SECTION 2.4. Section 2.4 shall be amended to read as follows:
2.4 Western Coal Co. ("Western") formerly had reserves of coal in San
Juan County, New Mexico held under lease. Effective December 1, 1980,
Western subleased its leases to Utah International Inc. ("Utah"). Utah
further subleased such leases to San Juan Coal Company ("SJCC"), its
wholly-owned subsidiary. SJCC then entered into a Coal Sales Agreement
with New Mexico and Tucson whereby SJCC will supply the San Juan Project
with coal. Western was liquidated in 1981.
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<PAGE>
3.0 AMENDED SECTION 5.2. Section 5.2 shall be deleted in its entirety and
amended to read as follows:
5.2 COAL SALES AGREEMENT: Agreement of New Mexico and Tucson with
San Juan Coal Company ("SJCC") executed on August 18, 1980, as amended by
Amendment No. 1 on September 30, 1981, and Amendment No. 2 on October 28,
1983, and as said Agreement may be amended, supplemented, or modified from
time to time.
4.0 DELETE SECTION 5.17. Section 5.17 shall be deleted in its entirety.
5.0 AMENDED SECTION 5.23.1. Section 5.23.1 shall be amended to read as
follows:
5.23.1 PARTICIPATION SHARES; Each Participant's, Unit Participant's
or other entity's percentage ownership in the San Juan Project as it is set
forth in Section 6 of the Co-Tenancy Agreement.
6.0 AMENDED SECTION 5.25. Section 5.25 shall be amended by replacing the
words "Fuel Agreement" with the words "Coal Sales Agreement."
7.0 AMENDED SECTION 5.30. Section 5.30 shall be amended to read in its
entirety as follows:
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<PAGE>
5.30 SAN JUAN PROJECT: Four unit, coal-fired electric generation
plant constructed at the San Juan Site in four stages. The San Juan
Project includes all facilities, structures, transmission and distribution
lines incident to the four-unit electric generating plant. The San Juan
Project does not include distribution lines, transmission lines, equipment
in the Switchyard Facilities, or other facilities owned exclusively by a
Participant.
8.0 DELETE SECTION 5.40. Section 5.40 shall be deleted in its entirety.
9.0 AMENDED SECTION 5.41. Section 5.41 shall be amended to read as
follows:
5.41 WILLFUL ACTION
5.41.1 Action taken or not taken by a Participant (including the
Project Manager), at the direction of its directors, members of its
governing body, officers or employees having management or administrative
responsibility affecting its performance under any of the Project
Agreements, which action is knowingly or intentionally taken or not taken
with conscious indifference to the consequences thereof or with intent that
injury or damage would probably result therefrom.
5.41.2 Action taken or not taken by a Participant (including the
Project Manager), at the direction of its directors, members of
- 4 -
<PAGE>
its governing body, officers or employees having management or
administrative responsibility affecting its performance under any of the
Project Agreements, which action has been determined by final arbitration
award or final judgment or judicial decree to be a material default under
any of the Project Agreements and which action occurs or continues beyond
the time specified in such arbitration award or judgment or judicial decree
for curing such default, or if no time to cure is specified therein, occurs
or continues beyond a reasonable time to cure such default.
5.41.3 Action taken or not taken by a Participant (including the
Project Manager), at the direction of its directors, members of its
governing body, officers or employees having management or administrative
responsibility affecting its performance under any of the Project
Agreements, which action is knowingly or intentionally taken or not taken
with the knowledge that such action taken or not taken is a material
default under any of the Project Agreements.
5.41.4 The phrase "employees having management or administrative
responsibility" as used in this Section 5.41 means employees of a
Participant (including the Project Manager) who are responsible for one or
more of the executive functions of planning, organizing, coordinating,
directing, controlling, and supervising such Participant's performance
under any of the Project Agreements; provided however, that, with respect
to employees of the Project Manager engaged in the design and construction
of Project Work, such phrase
- 5 -
<PAGE>
shall refer only to (i) the employee of the Project Manager designated as
the "project manager" for the Project Work (or such other title designation
as the Project Manager shall determine) who directly supervises the design
and construction of the Project Work and, during his absence, the Project
Manager's employee who has been designated to act and is acting for said
"project manager," and (ii) anyone in the organizational structure of
Project Manager between such "project manager" and an officer.
5.41.5 Willful Action does not include any act or failure to act
which is merely involuntary, accidental or negligent.
10.0 DELETE SECTION 6.4.1. Section 6.4.1 shall be deleted in its
entirety.
11.0 AMENDED SECTION 12. Section 12 shall be amended to read as follows:
12. LIABILITY
12.1 Except for any judgment debt for damage resulting from Willful
Action and except to the extent any judgment debt is collectible from valid
Insurance, and subject to the provisions of Section 12.1.1, 12.4, 12.5, and
12.6, hereof, each Participant hereby extends to all other Participants,
their directors, members of their governing bodies, officers and employees,
its covenant not to execute, levy or otherwise enforce a judgment obtained
against
- 6 -
<PAGE>
any of them, including recording or effecting a judgment lien, for any
direct, indirect, or consequential loss, damage, claim, cost, charge or
expense, whether or not resulting from the negligence of such Participant,
its directors, members of its governing body, officers, employees or any
person or entity whose negligence would be imputed to such Participant from
(i) the past and future performance or nonperformance of Project Work; or
(ii) the engineering, repair, supervision, inspection, testing, protection,
operation, maintenance, replacement, reconstruction or the use or ownership
of the San Juan Project; or (iii) the past or future performance or
nonperformance of the obligations of any Participant under or pursuant to
any of the Project Agreements, other than the obligation to pay any monies
becoming due.
12.1.1 In the event any insurer providing Insurance refuses to pay
any judgment obtained by a Participant against any other Participant, its
directors, members of its governing body, officers, or employees on account
of liability referred to in Section 12.1 hereof, the Participant, its
directors, members of its governing body, officers, or employees against
whom the judgment is obtained shall, at the request of the prevailing
Participant and in consideration for the covenant granted in Section 12.1
hereof, execute such documents as may be necessary to effect an assignment
of its contractual rights against the nonpaying insurer and thereby give
the prevailing Participant the opportunity to enforce its judgment directly
against such insurer. In no event when a judgment debt is collectible from
valid Insurance shall the Participant obtaining the
- 7 -
<PAGE>
judgment execute, levy, or otherwise enforce the judgment (including
recording or effecting a judgment lien) against the Participant, its
directors, members of its governing body, officers, or employees against
whom the judgment was obtained.
12.1.2 To the extent that Section 41-3-5, New Mexico Statutes
Annotated, 1978 compilation, shall be applicable and for the purpose of
relieving such Participant, its directors, members of its governing body,
officers and employees of any liability to make contribution to other non-
Participant tortfeasors, the foregoing covenant not to execute hereby
effects a reduction of all injured Participants' damages recoverable
against all other non-Participant tortfeasors to the extent of the pro rata
share (as referred to in Section 41-3-5, New Mexico Statures Annotated,
1978 compilation) of the other Participants, their directors, members of
their governing bodies, officers and employees.
12.1.3 Each Participant agrees, upon request by any other
Participant, to make, execute and deliver any and all documents or take
such other action as may reasonably be required to effectuate the intent of
this Section 12.1.
12.2 Except as provided in Sections 12.4, 12.5, and 12.6 herein, the
costs and expenses of discharging all work liability imposed upon one or
more of the Participants, for which payment is not made by Insurance, shall
be allocated among the Participants in proportion to their respective
Participation Shares in the property
- 8 -
<PAGE>
giving rise to the work liability. Work liability is defined as liability
of one or more Participants for any loss, damage, claim, cost, charge or
expense of any kind or nature (including direct, indirect or consequential)
suffered or incurred by any party other than a Participant, whether or not
resulting or to result in the future from the negligence of any
Participant, its directors, members of its governing body, officers,
employees, or any other person or entity whose negligence would be imputed
to such Participant, that has resulted or may result in the future from (i)
performance or nonperformance of the work herein described, (ii) operation,
maintenance, use or ownership of the San Juan Project, and (iii) past or
future performance or nonperformance of the obligations of any Participant
under any of the Project Agreements.
12.3 If it cannot be determined which property gave rise to work
liability, the allocation for discharging costs and expenses associated
therewith shall be as specified in Section 17.1.2.7 of the San Juan Project
Operating Agreement as modified.
12.4 Except for liability resulting from Willful Action (which
subject to the provisions of Section 12.6 hereof shall be the
responsibility of the willfully acting Participant), any Participant whose
electric customer shall have a claim or bring an action against any other
Participant for any death, injury, loss or damage arising out of or in
connection with electric service to such customer caused by the operation
or failure of operation of the San
- 9 -
<PAGE>
Juan Project or any portion thereof shall indemnify and hold harmless such
other Participant, its directors, members of its governing body, officers
and employees from and against any liability for such death, injury, loss
or damage.
12.5 Each Participant shall be responsible for any damage, loss,
claim, cost, charge, or expense that is not covered by Insurance and
results from its own Willful Action as defined in Section 5.41.2 hereof and
shall indemnify and hold harmless the other Participants, their directors,
members of their governing bodies, officers and employees, from any such
damage, loss, claims, cost, charge or expense.
12.6 Except as provided in Section 12.5 hereof, the aggregate
liability of any Participant to all other Participants for Willful Action
not covered by Insurance shall be determined as follows:
12.6.1 All such liability for damages, losses, claims, costs, charges
or expenses of such Participant shall not exceed $10,000,000 per
occurrence. Each Participant extends to each other Participant, its
directors, members of its governing body, officers and employees its
covenant not to execute, levy or otherwise enforce a judgment against any
of them for any such aggregate liability in excess of $10,000,000 per
occurrence.
12.6.2 A claim based on Willful Action must be perfected by filing a
suit in a court of competent jurisdiction within three
- 10 -
<PAGE>
years after the Willful Action occurs. All claims made thereafter relating
to the same Willful Action shall be barred by this Section 12.6.2. The
award to each nonwillfully acting Participant from each Participant
determined to have committed Willful Action shall be determined as follows:
(i) Each Participant who successfully files suit for remuneration shall
receive the lesser of (a) its final judgment awarded (or settlement made)
or (b) its pro rata Participation Share of the $10,000,000 maximum recovery
established in Section 12.6.1 hereof. (ii) When all pending suits are
resolved, those Participants who were awarded judgments or reached
settlements but whose claims were not fully satisfied pursuant to Section
12.6.2(i) shall be entitled to participate in any remaining portion of the
$10,000,000 maximum recovery limit, based upon the ratio of the unsatisfied
portion of such Participant's judgment or settlement to the total
unsatisfied portion of all such judgments and settlements. Such
participation shall be limited to the Participants' unsatisfied judgments
or settlements.
12.7 The provisions of this Section 12 shall not be construed so as
to relieve any insurer of its obligation to pay any insurance proceeds in
accordance with the terms and conditions of valid and collectible Insurance
policies.
12.8 The Participants agree that any agreement to indemnify contained
in this Construction Agreement shall not extend to liability, claims,
damages, losses, or expenses, including attorney's fees, arising out of:
- 11 -
<PAGE>
(i) The preparation or approval of maps, drawings, opinions, reports,
surveys, change orders, designs or specifications by the indemnitee, or the
agents or employees of the indemnitee; or
(ii) The giving of or the failure to give directions or instructions
by the indemnitee, or the agents or employees of the indemnitee, where such
giving or failure to give directions or instructions is the primary cause
of bodily injury to persons or damage to property.
The word "indemnify" as used in this Section 12.8 includes, without
limitation, an agreement to remedy damage or loss caused in whole or in
part by the negligence, act or omission of the indemnitee, the agents or
employees of the indemnitee, or any legal entity for whose negligence, acts
or omissions any of the foregoing may be liable.
12.9 The Participants agree that the aggregate liability limit of
$10,000,000 referenced in Sections 12.6.1 and 12.6.2 hereof may be determined in
the future to be inappropriate and shall make a good faith effort to evaluate
and, if appropriate, revise said limit at the request of any Participant.
12.10 The term "Insurance," as used in this Section 12, shall include but
not be limited to Operating Insurance (as defined din Section 5.35 of the
Operating Agreement) and Project Insurance.
- 12 -
<PAGE>
12.0 AMENDED SECTION 18.10. Section 18.10 shall be amended to read in its
entirety as follows:
18.10 Except as modified by the provisions set forth in Modification
No. 3, all of the terms and conditions of this Construction Agreement,
effective as of December 21, 1973, as modified by Modification No. 1 as of
May 16, 1979, and Modification No. 2 as of December 31, 1983, shall remain
in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have caused this Modification No. 3
to the Construction Agreement to be executed this 17th day of July, 1984.
PUBLIC SERVICE COMPANY OF NEW MEXICO
Attest: By: /s/ J. L. Wilkins
--------------------------------
/s/ D. E. Peckham Its: Senior Vice President
- ------------------------- --------------------------------
SECRETARY
TUCSON ELECTRIC POWER COMPANY
Attest: By: /s/ Einar Greve
--------------------------------
/s/ Jean E. Kettlewell Its: Executive Vice President
- ------------------------- --------------------------------
- 13 -
<PAGE>
STATE OF NEW MEXICO
ss.
COUNTY OF BERNALILLO
The foregoing instrument was acknowledged before me this 17th
day of July, 1984, by J. L. Wilkins, a Senior Vice President of Public Service
Company of New Mexico, a New Mexico corporation, on behalf of said corporation.
NOTARY PUBLIC: /s/ Kathy L. Vollbrecht
------------------------
October 12, 1986
- ----------------------
My Commission Expires:
STATE OF ARIZONA
ss.
COUNTY OF PIMA
The foregoing instrument was acknowledged before me this 2nd day of July,
1984, by Einar Greve, of Tucson Electric Power Company, an Arizona corporation
on behalf of said corporation.
NOTARY PUBLIC: /s/ Herlinda M. Herrera
-----------------------
April 14, 1987
- ----------------------
My Commission Expires:
- 14 -
<PAGE>
EXHIBIT 10.8.4
AMENDMENT NO. 9 TO THE
ARIZONA NUCLEAR POWER PROJECT
PARTICIPATION AGREEMENT
APS Contract No: 4172-419.00
June 12, 1984
<PAGE>
AMENDMENT NO. 9 TO THE
ARIZONA NUCLEAR POWER PROJECT
PARTICIPATION AGREEMENT
1. PARTIES:
The Parties to this Amendment No. 9 to the Arizona Nuclear Power Project
Participation Agreement, hereinafter referred to as "Amendment No. 9," are:
ARIZONA PUBLIC SERVICE COMPANY, a corporation organized and existing under
and by virtue of the laws of the State of Arizona, hereinafter referred to
as "Arizona"; SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER
DISTRICT, an agricultural improvement district organized and existing under
and by virtue of the laws of the State of Arizona, hereinafter referred to
as "Salt River Project"; SOUTHERN CALIFORNIA EDISON COMPANY, a corporation
organized and existing under and by virtue of the laws of the State of
California, hereinafter referred to as "Edison"; PUBLIC SERVICE COMPANY OF
NEW MEXICO, a corporation organized and existing under and by virtue of the
laws of the State of New Mexico, hereinafter referred to as "PNM"; EL PASO
ELECTRIC COMPANY, a corporation organized and existing under and by virtue
of the laws of the State of Texas, hereinafter referred to as "El Paso"; and
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, a joint powers agency organized
and existing under and by virtue of the laws of the State of California,
doing business in the State of Arizona as SOUTHERN ARIZONA PUBLIC POWER
AUTHORITY ASSOCIATION, hereinafter referred to as "SCPPA."
2. RECITALS:
<PAGE>
2.1 Arizona, Salt River Project, Edison, PNM, El Paso and SCPPA are
parties to a certain agreement entitled Arizona Nuclear Power Project
Participation Agreement, dated as of August 23, 1973, as amended by
Amendment No. 1, dated as of January 1, 1974, Amendment No. 2, dated
as of August 28, 1975, Amendment No. 3, dated as of July 22, 1976,
Amendment No. 4, dated as of December 15, 1977, Amendment No. 5, dated
as of December 5, 1979, Amendment No. 6, dated as of September 28,
1981, Amendment No. 7, dated as of March 4, 1982, and Amendment No. 8,
dated as of June 17, 1983, hereinafter as so amended "Participation
Agreement."
2.2 The Participants desire to limit their risks of liability due to
Willful Action, whether or not it results from or arises out of a
nuclear incident.
3. AGREEMENT:
In consideration of the terms and conditions contained in this Agreement No.
9 to the Participation Agreement, the parties agree as follows:
4. EFFECTIVE DATE:
This amendment No. 9 shall become effective when executed by all
Participants.
5. AMENDMENT NO. 9 TO THE PARTICIPATION AGREEMENT:
5.1 Amendment to Section 3.56.
Section 3.56 of the Participation Agreement shall be deleted in its
entirety and a new Section 3.56 shall be added to read as follows:
-2-
<PAGE>
"3.56 WILLFUL ACTION
3.56.1 Action taken or not taken by a Participant (including the
Operating Agent), at the direction of its directors,
members of its governing bodies, officers or employees
having management or administrative responsibility
affecting its performance under any of the Project
Agreements,which action is knowingly or intentionally
taken or not taken with conscious indifference to the
consequences thereof or with intent that injury or damage
would result or would probably result therefrom.
3.56.2 Action taken or not taken by a Participant (including the
Operating Agent), at the direction of its directors,
members of its governing bodies, officers or employees
having management or administrative responsibility
affecting its performance under any of the Project
Agreements, which action has been determined by final
arbitration award or final judgment or judicial decree to
be a material default under any of the Project Agreements
and which action occurs or continues beyond the time
specified in
-3-
<PAGE>
such arbitration award or judgment or judicial decree for
curing such default or, if no time to cure is specified
therein, occurs or continues beyond a reasonable time to
cure such default.
3.56.3 Action taken or not taken by a Participant (including the
Operating Agent), at the direction of its directors,
members of its governing bodies, officers or employees
having management or administrative responsibility
affecting its performance under any of the Project
Agreements, which action is knowingly or intentionally
taken or not taken with the knowledge that such action
taken or not taken is a material default under any of the
Project Agreements.
3.56.4 The phrase 'employees having management or administrative
responsibility' as used in this Section 3.56 means
employees of a Participant who are responsible for one or
more of the executive functions of planning, organizing,
coordinating, directing, controlling, and supervising
such Participant's performance under any of the Project
Agreements; provided
-4-
<PAGE>
however, that, with respect to employees of the Operating
Agent acting in its capacity as such and not in its
capacity as a Participant, such phrase shall refer only
to (i) the senior employee of the Operating Agent on duty
at ANPP who is responsible for the operation of the
Generating Units and (ii) anyone in the organizational
structure of the Operating Agent between such senior
employee and an officer.
3.56.5 Willful Action does not include any act or failure to act
which is merely involuntary, accidental or negligent."
5.2 Amendment to Section 21.
Section 21 of the Participation Agreement, composed of subsections
21.1 through 21.6 inclusive, shall be deleted in its entirety and a
new Section 21 shall be added to read as follows:
"21. LIABILITY
21.1 Except for any judgment debt for damage resulting from
Willful Action and except to the extent any judgment debt
is collectible from valid Project Insurance, and subject
to the provisions of Sections 21.2, 21.4, 21.5, and 21.6
hereof, each Participant hereby extends to
-5-
<PAGE>
all other Participants, their directors, members of their
governing bodies, officers and employees its covenant not
to execute, levy or otherwise enforce a judgment obtained
against any of them, including recording or effecting a
judgment lien, for any direct, indirect or consequential
loss, damage, claim, cost, charge or expense, whether or
not resulting from the negligence of such Participant,
its directors, members of its governing bodies, officers,
employees, or any person or entity whose negligence would
be imputed to such Participant from (i) Construction
Work, Operating Work, the design and construction of
Capital Improvements, or the use of or ownership of ANPP
or (ii) the performance or nonperformance of the
obligations of a Participant under the Project
Agreements, other than the obligation to pay any monies
which have become due.
21.2 In the event any insurer providing Project Insurance refuses to pay
any judgment obtained
-6-
<PAGE>
by a Participant against another Participant, its directors,
members of its governing bodies, officers or employees, on account
of liability referred to in Section 21.1 hereof, the Participant,
its directors, members of its governing bodies, officers or
employees against whom the judgment is obtained shall, at the
request of the prevailing Participant and in consideration of the
covenant given in Section 21.1 hereof, execute such documents as
may be necessary to effect an assignment of its contractual rights
against the nonpaying insurer and thereby give the prevailing
Participant the opportunity to enforce its judgment directly
against such insurer. In no event when a judgment debt is
collectible from valid Project Insurance shall the Participant
obtaining the judgment execute, levy or otherwise enforce the
judgment (including recording or effecting a judgment lien) against
the Participant, its directors, members of its governing bodies,
officers or employees, against whom the judgment was obtained.
21.3 Except as provided in Sections 21.4, 21.5, and 21.6 hereof, the
costs and expenses of discharging all Work Liability or liability
-7-
<PAGE>
resulting from the design or construction of Capital Improvements
imposed upon on or more of the Participants for which payment is
not made by Project Insurance shall be shared among and paid by all
Participants in proportion to their respective Generation
Entitlement Shares.
21.4 Each Participant shall be responsible for any damage, loss, claim,
cost, charge or expense that is not covered by Project Insurance
and results from its own Willful Action as defined in Section
3.56.2 hereof and shall indemnify and hold harmless the other
Participants, their directors, members of their governing bodies,
officers and employees from any such damage, loss, claim, cost,
charge or expense.
21.5 Except as provided in Section 21.4 hereof, the aggregate liability
of any Participant to all other Participants for Willful Action not
covered by Project Insurance shall be determined as follows:
21.5.1 All such liability for damages, losses, claims, costs,
charges or expenses of such Participant shall not exceed
$10,000,000 per occurrence. Each Participant extends to
each other Participant, its directors, members of
-8-
<PAGE>
its governing bodies, officers and employees its covenant
not to execute, levy or otherwise enforce a judgment
obtained against any of them for any such aggregate
liability in excess of $10,000,000 per occurrence.
21.5.2 A claim based on Willful Action must be perfected by
filing suit in a court of competent jurisdiction within
three years after the Willful Action occurs. All claims
made thereafter relating to the same Willful Action shall
be barred by this Section 21.5.2. The award to each
nonwillfully acting Participant from each Participant
determined to have committed Willful Action shall be
determined as follows: (i) Each Participant who
successfully files suit for remuneration shall receive
the lesser of (a) its final judgment awarded (or
settlement made) or (b) its pro-rata Generation
Entitlement Share of the $10,000,000 maximum recovery
established in Section 21.5.1 hereof. (ii) When all
pending suits are resolved, those Participants who were
-9-
<PAGE>
awarded judgments or reached settlements but whose claims
were not fully satisfied pursuant to Section 21.5.2(i)
shall be entitled to participate in any remaining portion
of the $10,000,000 maximum recovery limit, based upon the
ratio of the unsatisfied portion of such Participant's
judgment or settlement to the total unsatisfied portion
of all such judgments and settlements. Such
participation shall be limited to the Participants'
unsatisfied judgments or settlements.
21.6 Except for liability resulting from Willful Action (which, subject
to the provisions of Section 21.5 hereof, shall be the
responsibility of the willfully acting Participant), any
Participant whose electric customer shall have a claim or bring an
action against any other Participant for any death, injury, loss or
damage arising out of or in connection with electric service to
such customer and caused by the operation or failure of operation
of ANPP or any portion thereof, shall indemnify and hold harmless
such other Participant, its directors, members of its governing
bodies,
-10-
<PAGE>
officers and employees from and against any liability for such
death, injury, loss or damage.
21.7 The provisions of this Section 21 shall not be construed so as to
relieve any insurer of its obligation to pay any insurance proceeds
in accordance with the terms and conditions of valid and
collectible Project Insurance policies.
21.8 The Participants agree that the aggregate liability limit of
$10,000,000 referenced in Sections 21.5.1 and 21.5.2 hereof may be
determined in the future to be inappropriate and shall make a good
faith effort to evaluate and, if appropriate, revise said limit at
the request of any Participant."
5.3 Except as provided herein, the Participation Agreement, as amended by
this Amendment No. 9, shall remain in full force and effect.
6. EXECUTION BY COUNTERPARTS:
This Amendment No. 9 may be executed in any number of counterparts, and upon
execution by all Participants, each executed counterpart shall have the same
force and effect as an original instrument and as if all Participants had
signed the same instrument. Any signature page of this Amendment No. 9 may
be detached from any counterpart of this Amendment No. 9 without
-11-
<PAGE>
impairing the legal effect of any signatures thereon, and may be attached to
another counterpart of this Amendment No. 9 identical in form hereto but
having attached to it one or more signature pages.
7. SIGNATURE CLAUSE:
The signatories hereto represent that they have been appropriately
authorized to enter into this Amendment No. 9 on behalf of the party for
whom they sign. This Amendment No. 9 is hereby executed as of the day
of , 1984.
ARIZONA PUBLIC SERVICE COMPANY
ATTEST:
By
- -------------------------- -------------------------------
Its Its
----------------------- ------------------------------
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT
ATTEST AND COUNTERSIGN:
By
- -------------------------- -------------------------------
Its Its
----------------------- ------------------------------
-12-
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
ATTEST:
By
- -------------------------- --------------------------------
Its Its
----------------------- -------------------------------
PUBLIC SERVICE COMPANY OF NEW MEXICO
ATTEST:
By
- -------------------------- --------------------------------
Its Its
----------------------- -------------------------------
EL PASO ELECTRIC COMPANY
ATTEST:
By
- -------------------------- --------------------------------
Its Its
----------------------- -------------------------------
SOUTHERN CALIFORNIA PUBLIC POWER
AUTHORITY, doing business in the
State of Arizona as SOUTHERN
CALIFORNIA PUBLIC POWER AUTHORITY
ASSOCIATION
ATTEST:
By
- -------------------------- --------------------------------
Its Its
----------------------- -------------------------------
-13-
<PAGE>
EXHIBIT 10.12
AMENDED AND RESTATED
SAN JUAN UNIT 4
PURCHASE AND PARTICIPATION AGREEMENT
Dated as of December 28, 1984
BETWEEN
PUBLIC SERVICE COMPANY OF NEW MEXICO
AND
THE INCORPORATED COUNTY OF LOS ALAMOS
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1 Effective Date and Termination Date . . . . . . . . . . . . . . . 6
2 Consideration and Conveyance. . . . . . . . . . . . . . . . . . . 7
3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4 Purchase Price of San Juan Unit 4 Transfer
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5 San Juan Project Agreements . . . . . . . . . . . . . . . . . . . 16
6 PNM as Project Manager; Construction Phases of
Project Work. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7 PNM as Operating Agent; Operating Work. . . . . . . . . . . . . . 20
8 Applicability of Certain Provisions of San Juan
Project Co-Tenancy Agreement. . . . . . . . . . . . . . . . . . . 23
9 Entitlement to and Scheduling of San Juan Unit 4
Power and Energy. . . . . . . . . . . . . . . . . . . . . . . . . 25
10 Start-up and Auxiliary Power and Energy
Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11 Allocation of San Juan Station Capital Betterments
Capital Additions, Capital Replacements and Costs
of Operating Work . . . . . . . . . . . . . . . . . . . . . . . . 26
12 PNM's Right of First Refusal. . . . . . . . . . . . . . . . . . . 27
13 Coal Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14 Water Supply. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15 Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
16 Disputes; Arbitration . . . . . . . . . . . . . . . . . . . . . . 37
17 Warranties and Representations. . . . . . . . . . . . . . . . . . 40
18 Consistency of Terms. . . . . . . . . . . . . . . . . . . . . . . 44
19 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . 45
20 Letter of Principles. . . . . . . . . . . . . . . . . . . . . . . 46
21 Part and Section Headings . . . . . . . . . . . . . . . . . . . . 46
22 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
<PAGE>
23 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 47
24 Survival of Warranties and Representations. . . . . . . . . . . . 47
25 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 47
26 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
27 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
28 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 49
29 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
30 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . 50
31 Independent Covenants . . . . . . . . . . . . . . . . . . . . . . 50
32 Equal Opportunity . . . . . . . . . . . . . . . . . . . . . . . . 51
33 Filing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
34 Risk of Loss Prior to Closing . . . . . . . . . . . . . . . . . . 51
35 Destruction, Damage, or Condemnation of Unit 4. . . . . . . . . . 52
36 Nondedication of Facilities . . . . . . . . . . . . . . . . . . . 54
37 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . 54
38 Right of County to Inspect and Audit. . . . . . . . . . . . . . . 55
39 Source of Funds for Payment: County Obligations. . . . . . . . . 55
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Exhibit A--Definitions of Capitalized Terms
Exhibit A-1--Definitions of Cross-References
Exhibit B--Instrument of Sale and Conveyance
Annex A--Real Property
Annex B--Pollution Control
Exhibit C--Easement and License
Exhibit D--Opinions of Council
Exhibit E--Purchase Price
Exhibit F--Prepaid Items
<PAGE>
AMENDED AND RESTATED
SAN JUAN UNIT 4
PURCHASE AND PARTICIPATION AGREEMENT
This Amended and Restated San Juan Unit 4 Purchase and Participation
Agreement (this "Agreement") dated as of the 28th day of December, 1984, is
between PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation
(hereinafter called "PNM"), and the Incorporated County of Los Alamos, New
Mexico, a body politic and corporate, existing as a political subdivision under
the constitution and laws of the state of New Mexico, (hereinafter called the
"County"), collectively hereinafter sometimes referred to as the "Parties."
The capitalized terms used in this Agreement, unless otherwise specifically
defined herein or in Exhibit A hereto, shall have the meanings defined in the
San Juan Project Agreements.
RECITALS
This agreement is made with reference to the following facts, among others:
0.1 PNM and Tucson Electric Power Company, an Arizona corporation
(hereinafter called "TEP"), are owners of the San Juan Project consisting of
four coal-fired electric generating units. San Juan Units 1, 2, and 3 are
jointly owned by PNM and TEP, and San Juan Unit 4 ("Unit 4") is owned 62.725
percent by PNM, 28.8 percent by M-S-R Public Power Agency
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(hereinafter called "M-S-R"), and 8.475 percent by the City of Farmington, New
Mexico (hereinafter called "Farmington"). The lands upon which San Juan Units
1, 2, 3, and 4 are situated are jointly owned by PNM and TEP.
0.2 PNM and TEP have entered into the San Juan Project Agreements for the
San Juan Project which establish the terms and conditions of the ownership,
construction, and operation of the San Juan Project and their respective rights
and obligations relating thereto.
0.3 The New Mexico Public Service Commission ("NMPSC") has issued
certificates of public convenience and necessity and location permits to PNM in
NMPSC Case Numbers 1111 and 965 with respect to Units 1 and 2, and 1221 with
respect to Units 3 and 4, authorizing PNM to participate with TEP in the San
Juan Project. Up until 1979, PNM and TEP each owned an undivided fifty percent
(50%) interest in the San Juan Project.
0.4 In NMPSC Case Number 1452, the NMPSC issued to PNM a certificate of
public convenience and necessity authorizing PNM to purchase TEP's fifty percent
(50%) undivided interest in Unit 4.
0.5 By Purchase Agreement, dated as of May 16, 1979, PNM and TEP agreed
upon and consummated the purchase and sale of TEP's fifty percent (50%)
undivided interest in Unit 4, with TEP retaining an option ("TEP Option") to
acquire up to a twenty-eight and eight-tenths percent (28.8%) ownership interest
in Unit 4 ("Ownership Interest") at a later date, on at least eight years'
notice.
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0.6 PNM's acquisition of TEP's share of Unit 4 has enabled PNM to sell
portions of Unit 4 to Farmington and M-S-R and to offer to sell a portion of
Unit 4 to the County. All such sales and offers by PNM are from the share of
Unit 4 that PNM acquired from TEP. PNM's book cost of the portion of Unit 4
acquired from TEP has a higher book cost than does the 50 percent interest in
Unit 4 originally owned and retained by PNM, which interest has not been offered
for sale.
0.7 In NMPSC Cases 1675 and 1676 (consolidated), the NMPSC issued to
Farmington a certificate of convenience and necessity authorizing Farmington to
purchase an 8.475 percent ownership interest in Unit 4 and authorizing PNM to
sell such interest to Farmington.
0.8 On November 17, 1981, PNM and Farmington executed the San Juan Unit 4
Purchase Agreement and Participation Agreement which detailed the sale by PNM to
Farmington of an 8.475 percent undivided ownership interest in Unit 4 and the
participation between PNM and Farmington in the operation, construction, and
ownership of Unit 4.
0.9 On December 31, 1981, TEP and M-S-R entered into the TEP/M-S-R
Agreement--Option to Acquire Ownership Interest in Unit 4 ("TEP/M-S-R
Agreement"), wherein TEP agreed to sell to M-S-R and M-S-R agreed to purchase
from TEP, pursuant to the terms and conditions of such agreement, on or before
November 30, 1982, the TEP Option (also referred to as the "Option to
Repurchase" in the May 16, 1979, Unit 4 Purchase Agreement between PNM and TEP).
On December 31, 1981, TEP and M-S-R also entered into the TEP/M-S-R Agreement on
Power Sales. TEP subsequently advised
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PNM of those agreements. On January 5, 1982, TEP extended to PNM the right of
first refusal to acquire the TEP Option upon the same terms and conditions
agreed to by M-S-R. On March 5, 1982, PNM confirmed that it would not exercise
its right of first refusal and that M-S-R had the right to purchase from TEP the
TEP Option. The NMPSC, by Order of Hearing and Investigation, dated April 3,
1982, and docketed in NMPSC Case Number 1452, initiated an investigation into
the PNM refusal to exercise its right of first refusal. At the conclusion of
the investigation, the NMPSC issued an order authorizing PNM to sell the
Ownership Interest in Unit 4 on or after May 1, 1995. On November 29, 1982, PNM
and M-S-R executed the San Juan Unit 4 Purchase and Participation Agreement
("Purchase and Participation Agreement") which detailed the sale by PNM to M-S-R
of the Ownership Interest and the participation between M-S-R and PNM in the
operation and ownership of Unit 4. The Purchase and Participation Agreement was
submitted to the NMPSC on December 20, 1982.
0.10 On November 30, 1982, M-S-R gave to PNM, and PNM received from M-S-R,
Notice of Exercise of Option ("Notice of Exercise of Option"), by which M-S-R
exercised the TEP Option to acquire the Ownership Interest. PNM and M-S-R each
determined that it would be individually and mutually beneficial to consummate
the purchase, sale, and transfer of the Ownership Interest in 1983 rather than
in 1995. PNM and M-S-R entered into a First Amendment ("First Amendment") to
the Purchase and Participation Agreement on May 31, 1983, which amendment
provided for the purchase of the Ownership Interest to occur on or before
December 31, 1983.
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0.11 On September 26, 1983, PNM and M-S-R executed the San Juan Unit 4
Early Purchase and Participation Agreement ("EPPA") which detailed the sale by
PNM to M-S-R of the Ownership Interest in 1983 and the participation between PNM
and M-S-R in the operation and ownership of Unit 4. By order of November 21,
1983, the NMPSC in Case Number 1829 approved the sale of the Ownership Interest
to M-S-R pursuant to the terms of the EPPA. Such sale was consummated on
December 31, 1983.
0.12 TEP and Alamito Company, an Arizona Corporation (Alamito), have
entered into the San Juan Unit No. 3 Purchase Agreement dated October 1, 1984,
which provides for the sale by TEP to Alamito of a 50 percent undivided
ownership interest in San Juan Unit 3. On October 31, 1984, pursuant to said
agreement, TEP transferred its 50 percent undivided ownership interest in San
Juan Unit 3 to Alamito.
0.13 Units 1, 2, 3, and 4 of the San Juan Project are in commercial
operation.
0.14 The Parties hereto have entered into a Letter of Principles ("Letter
of Principles") dated March 5, 1984, relating to the terms and conditions of the
sale by PNM and the purchase by the County of a 7.20 percent undivided interest
in Unit 4 (the "Transfer Interest" as such term is defined in Exhibit A).
0.15 In NMPSC Case 1925, the County has requested a certificate of public
convenience and necessity authorizing the County to purchase the
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County Transfer Interest. In NMPSC Case 1923, PNM has requested an order
authorizing PNM to sell the Transfer Interest to the County.
0.16 Consistent with the Letter of Principles, on November 26, 1984, the
Parties hereto entered into the San Juan Unit 4 Purchase and Participation
Agreement ("PPA"), which established the terms and conditions of the sale by PNM
to the County of the Transfer Interest and the participation between the County
and PNM in the completion of construction and the operation and ownership of
Unit 4.
0.17 The Parties now desire to amend and restate the PPA.
NOW, THEREFORE, for the consideration enumerated in Section 2 hereof, PNM
agrees to sell and convey, and the County agrees to purchase, the Transfer
Interest, and the Parties agree to participate in the completion of construction
and the operation and ownership of Unit 4, in accordance with the following
terms and conditions:
Section 1: EFFECTIVE DATE AND TERMINATION DATE
1.1 EFFECTIVE DATE. This Agreement shall become effective, and the PPA
shall terminate and be of no further force or effect, on the date and at the
time this Agreement is executed by both PNM and the County and shall remain in
effect until such date as is set forth in Section 1.2 herein; provided, however,
that this Agreement shall be earlier terminated without further action (i) in
the event Closing has not occurred on or before March 31, 1985 (or such other
date as
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may be agreed upon in writing by the Parties pursuant to Section 3.1 hereof), or
(ii) pursuant to the provisions of Section 35 hereof.
1.2 TERMINATION DATE. This Agreement shall continue in full force and
effect from its Effective Date until July 1, 2022, unless sooner terminated in
accordance with Sections 1.1 or 34.1 hereof or by the mutual written agreement
of the Parties. In the event the term of the Co-Tenancy Agreement referred to
in Section 5.1 hereof is extended, the term of this Agreement shall be extended
so that the terms of both agreements shall be coterminous.
1.3 NO EFFECT ON OWNERSHIP. Termination of this Agreement shall not
affect the County's rights of ownership in the Transfer Interest.
Section 2: CONSIDERATION AND CONVEYANCE
2.1 CONSIDERATION. The consideration for the execution, delivery, and
performance by the Parties to this Agreement is (a) the conveyance by PNM to the
County of the Transfer Interest; (b) the payment by the County at Closing to PNM
of the Purchase Price; and (c) the other material agreements and covenants of
the Parties contained herein.
2.2 CONVEYANCE AT CLOSING. PNM shall convey to the County at Closing the
Transfer Interest by the Instrument of Sale and Conveyance and in substantially
the form of Exhibit B attached hereto together with the Easement and License in
substantially the form of Exhibit C attached hereto.
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SECTION 3. CLOSING
3.1 Closing shall be held (i) on or before March 31, 1985, unless changed
by the mutual written agreement of the County and PNM and (ii) at a location
agreed to by PNM and the County. At the Closing the County shall pay PNM, in
immediately available funds, the Purchase Price of the Transfer Interest as
provided in Section 4.2 hereof and the cost of prepaid items as provided in
Section 4.3 hereof; PNM shall execute and deliver to the County an Instrument of
Sale and Conveyance in substantially the form of Exhibit B hereto; the Easement
and License in substantially the form of Exhibit C shall be executed and
delivered; PNM and the County shall execute and deliver this Agreement and such
other agreements, documents and certificates as may be appropriate, including
such acknowledgement from TEP as the Parties shall agree may be necessary; and
counsel for PNM and the County shall deliver the opinions described in Exhibit D
hereof.
3.2 CLOSING CONDITIONS
3.2.1 CONDITIONS TO PNM'S OBLIGATIONS HEREUNDER. All obligations of PNM
under this Agreement are subject to the fulfillment, prior to or at Closing, of
each of the following conditions (or waiver in writing of such conditions by
PNM):
3.2.1.1 PNM shall not have discovered any material error, misstatement or
omission in the representations and warranties made by the County in this
Agreement.
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3.2.1.2 The County's representations and warranties contained in this
Agreement shall be deemed to have been made again at and as of the time of
Closing and shall then be true in all material respects.
3.2.1.3 The County shall have performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed or complied
with by it prior to or at Closing.
3.2.1.4 PNM shall have been furnished with a certified copy of the formal
action of the Los Alamos County Council approving the execution of this
Agreement and a certificate of the Chairman of the Los Alamos County Council
dated effective the date of Closing, certifying in such detail as PNM may
reasonably request to the fulfillment of the foregoing conditions.
3.2.1.5 PNM shall have received all governmental and regulatory orders
and approvals, and all releases, release of liens, mortgages and encumbrances
(except Permitted Encumbrances), consents, and approvals, including the release
by Irving Trust Company under the PNM Indenture of the Transfer Interest from
the lien of such indenture, necessary to the execution, delivery, and
performance of this Agreement by PNM. The condition of this Section 3.2.1.5
shall not be subject to waiver by PNM pursuant to Section 3.2 hereof, unless
approved in writing by the County.
3.2.1.6 Delivery of the opinion of counsel as set forth in Exhibit D-1.
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3.2.1.7 Execution of all those agreements and the closing of all those
transactions which were contemplated in the Letter of Principles to be executed
and closed prior to January 1, 1985.
3.2.2 CONDITIONS TO THE COUNTY'S OBLIGATIONS HEREUNDER. All obligations
of the County under this Agreement are subject to the fulfillment, prior to or
at Closing, of each of the following conditions (or the waiver in writing of
such conditions by the County):
3.2.2.1 The County shall not have discovered any material error,
misstatement, or omission in the representations and warranties made by PNM in
this Agreement.
3.2.2.2 PNM's representations and warranties contained in this Agreement
shall be deemed to have been made again at and as of the time of Closing and
shall then be true in all material respects.
3.2.2.3 PNM shall have performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed or complied
with by it prior to or at Closing.
3.2.2.4 The County shall have been furnished with a certificate of the
Chairman of the Board or the President or a duly authorized Vice President of
PNM, dated the date of Closing, (i) certifying in such detail as the County may
reasonably request to the fulfillment of the foregoing conditions, and (ii)
stating that the descriptions of all real and personal property referenced in
Exhibit B are true and correct, and
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that such documents in fact correctly describe all of the Transfer Interest and
related property and rights to which the County is entitled, for and in
connection with the Transfer Interest.
3.2.2.5 The County shall have received all statutory, governmental and
regulatory orders and approvals necessary to the execution, delivery, and
performance of this Agreement by the County. The County shall have duly adopted
an ordinance authorizing the issuance of revenue bonds to finance acquisition of
the Transfer Interest, and such ordinance shall have become effective in
accordance with Section 3-31-4 NMSA 1978.
3.2.2.6 Delivery of the opinion of counsel as set forth in Exhibit D-2.
3.2.2.7 Endorsements shall have been obtained evidencing that the County
shall have been added as an additional named insured on all of the policies of
insurance covering the San Juan project and maintained by the Operating Agent
and the Project Manager, effective as of Closing.
3.2.2.8 Execution of all those agreements and the closing of all those
transactions which were contemplated in the Letter of Principles to be executed
and closed prior to January 1, 1985.
3.3 "AS IS" SALE. THE TRANSFER INTEREST IS TO BE SOLD "AS IS" AND "WHERE
IS." PNM MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER IN THIS AGREEMENT,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION
OR WARRANTY AS TO THE VALUE, QUANTITY, CONDITION,
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SALEABILITY, OBSOLESCENCE, MERCHANTABILITY, FITNESS, OR SUITABILITY FOR USE OR
WORKING ORDER OF ANY OF UNIT 4, NOR DOES PNM REPRESENT OR WARRANT THAT THE USE
OR OPERATION OF UNIT 4 WILL NOT VIOLATE PATENT, TRADEMARK, OR SERVICE MARK
RIGHTS OF ANY THIRD PARTIES. THE COUNTY IS WILLING TO PURCHASE THE TRANSFER
INTEREST "AS IS" AND "WHERE IS" AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS
OF THIS AGREEMENT. Notwithstanding the foregoing, the County shall have the
benefit, in proportion to its interest in Unit 4, of all the manufacturers' and
vendors' warranties (to the extent such warranties are transferable or
enforceable by PNM for the County's benefit) running to PNM in connection with
the Transfer Interest.
3.3.1 NOTWITHSTANDING THE FOREGOING IT IS EXPRESSLY UNDERSTOOD AND
AGREED THAT: (1) PNM expressly covenants and warrants that title to be
Transfer Interest is, or will be at the date of Closing, free from all former
grants, sales, taxes, assessments, liens and encumbrances (except Permitted
Encumbrances), and that PNM has not otherwise encumbered or alienated such
interest; and (2) nothing contained herein shall be construed to relieve PNM
from its duties and obligations under the Operating, Co-Tenancy, and
Construction Agreements.
Section 4: PURCHASE PRICE OF SAN JUAN UNIT 4 TRANSFER INTEREST
4.1 PURCHASE PRICE. The Purchase Price to be paid by the County to PNM
for the Transfer Interest, exclusive of the prepaid items referred to in Section
4.3 hereof, shall be the sum of (i) forty one million two hundred fifty five
thousand five hundred eighty dollars ($41,255,580.00),
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(ii) adjusted by decreasing said amount for PNM depreciation from December 31,
1983 through December 31, 1984, and increasing said amount for additional
capital costs with AFUDC (including but not limited to capital budget items,
construction work in progress, and net plant additions), incurred from January
1, 1984 through the date of Closing (the "Adjustment Amount"), all as determined
in accordance with the methodology shown on Exhibit E hereto, and (iii) four
million eight hundred thousand dollars ($4,800,000). Adjustments to book cost
shall reflect any credit for insurance or condemnation proceeds received by
reason of any damage, destruction, condemnation or similar occurrence involving
Unit 4 if such insurance or condemnation proceeds were paid to reimburse utility
plant account property. Minor additional costs to complete the San Juan Project
after Closing are anticipated. It is PNM's present estimate that the total of
such costs allocable to the County's Transfer Interest will be approximately one
hundred forty seven thousand four hundred ninety five dollars ($147,495,000).
4.2 At Closing, the County shall pay PNM forty five million four hundred
twenty eight thousand one hundred seventy one dollars ($45,428,171.00) which
amount is the sum of the amounts set forth in Section 4.1 (i) and (iii) hereof,
less PNM's estimate of the Adjustment Amount of six hundred twenty seven
thousand four hundred nine dollars ($627,409.00). As soon as practicable after
Closing, but no later than 90 days thereafter, PNM shall determine the
Adjustment Amount in accordance with the methodology set forth in Section 4.1 of
this Agreement. PNM shall notify the County of such Adjustment Amount and
provide
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accounting information and work papers to substantiate such amount. In the
event the actual Adjustment Amount exceeds the estimated Adjustment Amount paid
at Closing, the County shall pay PNM such difference. In the event the actual
Adjustment Amount is less than the estimated Adjustment paid at Closing, PNM
shall pay the County such difference. Such payment, together with interest at
the rate last published or quoted by Irving Trust Company, New York City, New
York ("Irving Trust Company") as the prime rate of interest as of the date of
Closing, from the date of Closing to the date of payment, shall be made within
ten (10) days of the date that PNM delivers its Adjustment Amount determination
to the County, unless the County disputes such determination.
4.2.1 In the event the County disputes the Adjustment Amount as
determined by PNM, the County shall have the right to audit the PNM books
and records relating to the Adjustment Amount, in which event the audit
shall be commenced within fifteen (15) days from the date PNM delivers its
Adjustment Amount determination, and completed within thirty (30)
thereafter. In the event the County and PNM are able to reach agreement
within thirty (30) days after completion of the audit as to the Adjustment
Amount, then the final audited differential due PNM or the County shall be
paid within ten (10) days with interest at the rate last published or
quoted by Irving Trust Company as the prime rate of interest as of the date
of Closing, from the date of Closing to the date of payment. In the
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event the County and PNM are unable to reach agreement within thirty (30)
days of completion of the audit as to the Adjustment Amount, then either
Party may call for independent arbitration in accordance with the last
sentence of Section 16.1 hereof, and the final arbitrated differential due
PNM or due the County shall bear interest at the rate last published or
quoted by Irving Trust Company as the prime rate of interest as of the date
of Closing, from the date of Closing to the date of payment, which payment
shall be made within 30 days of the arbitration award.
4.3 PREPAID ITEMS. In addition to the Purchase Price to be paid by the
County to PNM at Closing, the County shall pay PNM an amount equal to PNM's cost
of prepaid items properly allocable to the Transfer Interest as reflected on
PNM's books as of the date of Closing. The representative items for
reimbursement are shown on Exhibit F. The Parties agree that an estimate of one
million one hundred forty thousand four hundred fifty one dollars
($1,140,451.00) shall be used at the cost of such prepaid items to be paid at
Closing. As soon after Closing as practicable, but no later than 90 days
thereafter, the actual cost of such prepaid items as of the date of Closing
shall be determined and, if the actual cost of the prepaid items is higher than
$1,140,451.00 the County shall reimburse PNM for the difference, plus interest
at the rate last published or quote by Irving Trust Company as the prime rate of
interest as of the date of Closing, from the date of Closing to the date of
payment, which shall be within 30 days after the determination of the actual
cost of prepaid items. If the actual cost of prepaid items is less than
$1,140,451.00, PNM shall reimburse the County for the
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difference, plus interest at the rate last published or quoted by Irving Trust
Company as the prime rate of interest as of the date of Closing, from the date
of Closing to the date of payment, which shall be within 30 days after the
determination of the actual cost of the prepaid items. The County shall be
entitled to all rights, titles and interest associated with such prepaid items
and shall be entitled to audit PNM's books regarding the cost of the prepaid
items.
4.3.1 In the event the County disputes the costs of prepaid
items as determined by PNM, the audit, arbitration, refund, and payment
provisions of Section 4.2.1 hereof shall apply.
Section 5: SAN JUAN PROJECT AGREEMENTS
5.1 EXISTING PNM-TEP AGREEMENTS. The Parties recognize that the San Juan
Project, as between PNM and TEP, is contractually governed by the following San
Juan Project Agreements, as amended (copies of which have been provided to the
County); (i) Co-Tenancy Agreement between PNM and TEP dated February 15, 1972,
as amended on May 16, 1979, December 31, 1983, July 17, 1984, and October 25,
1984 ("Co-Tenancy Agreement"); (ii) San Juan Project Operating Agreement between
PNM and TEP dated December 21, 1978, as amended on May 16, 1979, December 31,
1983, July 17, 1984, and October 25, 1984 ("Operating Agreement"); and (iii) San
Juan Project Construction Agreement between PNM and TEP dated July 1, 1969, as
amended on May 16, 1979, December 31, 1983, July 17, 1984, and October 25, 1984
("Construction Agreement"). Inasmuch as certain sections of these agreements
are incorporated herein, and as
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these agreements may be amended from time to time, PNM will advise the County in
advance of such amendments whenever Unit 4 is involved.
5.2 PNM-COUNTY RELATIONSHIP. The relationship between PNM and the County
with respect to Unit 4 shall be governed by this Agreement. The County
acknowledges that it is familiar with the San Juan Project Agreements between
PNM and TEP and that such agreements govern the activities of the San Juan
Project. With respect only to the PNM-County relationship, where a specific
provision of this Agreement is in conflict with a provision in one or more of
the San Juan Project Agreements, then the provision of this Agreement shall
govern.
5.3 PROJECT COMMITTEE VOTING RIGHTS.
5.3.1 PNM, with the transfer of the Transfer Interest to the County,
hereby consents that the County has the voting rights and obligations of a Unit
Participant on San Juan Project committees as said voting rights and obligations
are set forth in Modification No. 2 to each of the San Juan Project Agreements.
5.3.2 The County hereby accepts the voting rights and obligations of a
Unit Participant on San Juan Project committees as said voting rights and
obligations are set forth in Modification No. 2 to each of the San Juan Project
Agreements.
5.3.3 With respect to matters involving and not solely related to Unit
4, PNM as a participant with use good faith in soliciting the
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County's views on matters involving the San Juan Project which affect Unit 4.
Such discussions shall be conducted by the Parties' representatives on the
Coordination Committee, Engineering and Operating Committee, Auditing Committee
or any other applicable committee. The requisite PNM and County committee
members shall meet for the purpose of soliciting the County's views on such
matters on call of either PNM or the County as often as required.
Section 6: PNM AS PROJECT MANAGER; CONSTRUCTION PHASES OF PROJECT WORK
6.1 The County recognizes that PNM is the Project Manager, as such term is
defined in Section 5.27 of the Construction Agreement, for the San Juan Project,
including Unit 4.
6.2 PNM's responsibilities as Project Manager are governed by Sections
6.3, 6.4, and 6.5 of the Construction Agreement, as such sections may from time
to time be amended.
6.3 The County hereby appoints PNM as its agent as of the date of Closing,
and PNM agrees to undertake, as the County's agent as of such date, and as
principal on its own behalf, upon the terms and subject to the conditions set
forth in this Agreement, the responsibility for the performance and completion
of Project Work relating to Unit 4.
6.4 After Closing, the following provisions of the Construction Agreement,
as amended and as it may be amended from time to time, shall govern Unit 4
participation as between PNM and the County, with the term
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"Participant" as used in such provisions being deemed to include the County as
a participant in proportion to its ownership responsibilities with PNM in Unit 4
for the purposes of this Section 6.4:
6.4.1 Section 8, "Construction Costs," except wherein specific reference
is to Switchyard Facilities.
6.4.2 Section 9, "Advances During Construction for Costs of Project
Work."
6.4.3 Section 10, "Adjustment for Payment of Actual Construction Costs."
6.4.4 Section 11, "Project Insurance."
6.4.5 Section 12, "Liability."
6.4.6 Section 13, "Authorizations and Approvals."
6.4.7 Section 14, "Additional Agreements and Consents."
6.4.8 Section 16, "Payment of Taxes and Costs of Land Rights."
6.4.9 Section 21, "Administration," except that the County will have
voting rights solely with respect to Unit 4 and will not have voting rights
related to the other San Juan units and common facilities.
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6.4.10 Section 5, "Definitions," for definitions used in other sections
of the Construction Agreement referenced herein, unless otherwise defined
herein.
6.5 All Construction Costs shall be shared by the Parties in proportion to
their respective percentage ownership interests in Unit 4 and shall be advanced
by them and disbursed and accounted for by the Project Manager in accordance
with Sections 6.4.1, 6.4.2, and 6.4.3 hereof.
6.6 In the event PNM in the performance of its duties pursuant to this
Section 6 incurs any liability to any third party, any amount paid by PNM on
account of such liability shall be considered a Construction Cost and
apportioned between the Parties pursuant to Section 6.4 hereof; provided, that
the County shall receive a credit for its proportionate share of any insurance
proceeds.
Section 7: PNM AS OPERATING AGENT; OPERATING WORK
7.1 The County recognizes that PNM is the Operating Agent, as that term is
defined in Section 5.31 of the Operating Agreement, for the San Juan Project,
including Unit 4.
7.2 PNM's responsibilities as Operating Agent are governed by Section 6.3
of the Operating Agreement, as such section may from time to time be amended.
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7.3 The County hereby appoints PNM as its agent as of the date of Closing,
and PNM agrees to undertake, as the County's agent as of such date, and as
principal on its own behalf, upon the terms and subject to the conditions as set
forth in this Agreement the responsibility for the performance of Operating
Work, as that term is defined in Section 5.36 of the Operating Agreement,
relating to Unit 4.
7.4 PNM's liability as agent for the County under this Agreement and as
agent for the County under any San Juan Project Agreement is expressly limited
and governed by Section 21 of the Operating Agreement as such section may be
amended from time to time.
7.5 After Closing, the following provisions of the Operating Agreement, as
amended and as it may be amended from time to time, shall govern Unit 4
participation as between PNM and the County with the term "Participant" as used
in such provisions being deemed to include the County as a participant in
proportion to its ownership interest with PNM in Unit 4 for the purposes of this
Section 7.5:
7.5.1 Section 7, "Coordination Committee," except that the County will
have voting rights solely with respect to Unit 4 and will not have voting rights
related to other San Juan units and common facilities.
7.5.2 Section 8, "Engineering and Operating Committee," except that the
County will have voting rights solely with respect to Unit 4 and will not have
voting rights related to other San Juan units and common facilities.
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7.5.3 Section 9, "Auditing Committee," except that the County will have
voting rights solely with respect to Unit 4 and will not have voting rights
related to other San Juan units and common facilities.
7.5.4 Section 10, "Payment of Expenses by Participants."
7.5.5 Section 11, "Initial Training Expenses."
7.5.6 Section 12, "Materials and Supplies."
7.5.7 Section 13, "Emergency Spare Parts."
7.5.8 Section 14, "Annual Budgets."
7.5.9 Section 15, "Capital Additions, Capital Betterments, and Capital
Requirements."
7.5.10 Section 16, "Operating Emergency."
7.5.11 Section 17, "Operation and Maintenance Expenses," except wherein
specific reference to Switchyard Facilities.
7.5.12 Section 18, "Fuel Costs."
7.5.13 Section 19, "Payment of Taxes."
7.5.14 Section 20, "Operating Insurance."
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7.5.15 Section 21, "Liability."
7.5.16 Section 30, "Surplus or Retired Property"
7.5.17 Section 5, "Definitions," for definitions used in other sections
of the Operating Agreement referenced herein, unless otherwise defined herein.
7.6 After Closing, all costs of Operating Work shall be shared by the
Parties pursuant to Section 11 hereof and shall be advanced by them to the
Operating Agent and disbursed and accounted for by it in accordance with Section
7.5.4 hereof.
7.7 After Closing, in the event PNM in the performance of its duties
pursuant to this Section 7 incurs any liability to any third party, any amount
paid by PNM on account of such liability shall be considered a cost of Operating
Work and apportioned between the Parties pursuant to Section 7.6 hereof;
provided, that the County shall receive a credit for its proportionate share of
any insurance proceeds.
Section 8: APPLICABILITY OF CERTAIN PROVISIONS OF SAN JUAN PROJECT CO-TENANCY
AGREEMENT
8.1 After Closing, the following provisions of the Co-Tenancy Agreement,
as amended and as it may be amended from time to time, shall govern Unit 4
participation as between PNM and County, with the term "Participant" as used in
such provisions being deemed to include the
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County as a participant in proportion to its ownership interest with PNM in Unit
4 for the purposes of this Section 8.
8.1.1 Section 9, "Coordination Committee," except that the County will
have voting rights solely with respect to Unit 4 and will not have voting
related to other San Juan units and common facilities.
8.1.2 Section 10, "Use of Facilities during Curtailments," except as
modified by Service Schedule C, "Hazard Sharing," of the Interconnection
Agreement between PNM and the County of even date herewith.
8.1.3 Section 11, "Waiver of Right to Partition."
8.1.4 Section 12, "Mortgage and Transfer of Participants' Interests."
8.1.5 Section 14, "Severance of Improvements from Leasehold."
8.1.6 Section 15, "Capital Additions, Capital Betterments, Capital
Replacements and Retirement of San Juan Project and Participants' Solely Owned
Facilities."
8.1.7 Section 17, "Rights of Participants Upon Termination."
8.1.8 Section 24, "Covenants Running With the Land."
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8.1.9 Section 5, "Definitions," for definitions used in other Sections
of the Co-Tenancy Agreement reference herein, unless otherwise defined herein.
Section 9: ENTITLEMENT TO AND SCHEDULING OF UNIT 4 POWER AND ENERGY
9.1 The provisions of this Section 9 shall apply after Closing.
9.2 Each Party shall be entitled to Power and Energy, as said terms are
defined in Sections 5.39 and 5.17, respectively, of the Operating Agreement,
from Unit 4 to proportion to its ownership interest in Unit 4.
9.3 The Operating Agent shall keep the County's system dispatcher advised
of the Available Operating Capacity, as such term is defined in Section 5.3 of
the Operating Agreement.
9.4 The Operating Agent shall, to the extent possible, generate power and
energy at the San Juan Project in accordance with schedules submitted by each
Participant and Unit Participant in Unit 4, as such schedules may be revised
from time to time, as long as such schedules do not jeopardize the operation of
the San Juan Project. To the extent practicable, Unit 4 shall be scheduled as a
base load generating unit. If, however, a Participant or Unit Participant has
scheduled an amount of power in excess of its share of the Minimum Net
Generation, as such term is defined in Section 5.27 of the Operating Agreement,
the other Participants and Unit Participants shall be allowed to reduce its
scheduled
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power load amount that will maintain the unit at the Minimum Net Generation
level.
9.5 The delivery of Power and Energy from Unit 4 shall be scheduled in
advance by each Participant or Unit Participant in Unit 4 and accounted for on
the basis of integrated hourly actual generation, all in accordance with
operating procedures established in writing by the San Juan Engineering and
Operating Committee, as such term is defined in Section 5.18 of the Operating
Agreement. Such operating procedures shall provide for modifying such schedules
to meet the needs of day-to-day and hour-by-hour operation, including
emergencies on a Party's system.
Section 10: START-UP AND AUXILIARY POWER AND ENERGY REQUIREMENTS
10.1 The provisions of this Section 10 shall apply after Closing.
10.2 Each Party shall be obligated to provide in proportion to its
ownership interest in Unit 4, its share of Power and Energy necessary to start-
up and operate Unit 4. Advance arrangements for start-up power and energy shall
be made in accordance with operating procedures established by the Engineering
and Operating Committee.
Section 11: ALLOCATION OF SAN JUAN STATION CAPITAL BETTERMENTS, CAPITAL
ADDITIONS, CAPITAL REPLACEMENTS AND COSTS OF OPERATING WORK
11.1 The provisions of this Section 11 shall apply after Closing.
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11.2 With respect to San Juan Station Capital Betterments, as defined in
Section 5.6 of the Operating Agreement, Capital Additions, as defined in Section
5.5 of the Operating Agreement, Capital Replacements, as defined in Section 5.7
of the Operating Agreement, and costs of Operating Work, the Parties agree that
the costs incurred by reason of this Agreement and the San Juan Project
Agreements shall be distributed as follows, with the exception of costs
associated solely with Switchyard Facilities for which the County will bear no
cost responsibility:
11.2.1 Costs which are directly tied to Unit 4 shall be charged in
accordance with the percentage ownership of that unit.
11.2.2 Costs which are tied to groups of units common with Unit 4 shall
be charged in proportion to the ownership in that group of units.
11.3 The costs referred to in Section 11.2 hereof shall be allocated in
accordance with the Uniform System of Accounts established by the Federal Energy
Regulatory Commission ("FERC").
Section 12: PNM'S RIGHT OF FIRST REFUSAL
12.1 PNM shall have a right of first refusal with respect to the sale or
disposition of the Transfer Interest or portion thereof pursuant to the
provisions of this Section 12. Such right of first refusal shall exist as of
Closing and shall continue for the term of this Agreement.
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12.2 Except as otherwise specifically provided in this Section 12, should
the County desire to assign, transfer, convey, or otherwise dispose of
(hereinafter in this Section 12 collectively referred to as "Assign") its
rights, titles, and interest in the Transfer Interest or portion thereof to any
person, company, corporation, governmental agency, or other entity (hereinafter
in this Section 12 referred to as "Outside Party"), PNM shall have a right of
first refusal, as hereinafter described, to purchase such Transfer Interest or
portion thereof for the amount and upon the terms and conditions set forth in a
bona fide written offer ("Outside Offer") made by an Outside Party to which the
County desires to Assign the Transfer Interest or portion thereof. PNM's
exercise of its right of first refusal shall additionally include a condition
that all necessary approvals to the purchase be obtained prior to closing.
12.3 After the County's receipt of the Outside Offer and prior to its
intended date to Assign, the County shall serve written notice of its intention
to Assign upon PNM in accordance with Section 26 of this Agreement. Such notice
shall have attached as an exhibit a copy of the Outside Offer.
12.4 PNM shall signify its intention to purchase the Transfer Interest (or
portion thereof specified in the Outside Offer) by serving written notice of
such intention upon the County pursuant to Section 26 hereof within sixty (60)
days after service by the County, pursuant to Section 12.3, of the written
notice of intention to Assign. Failure by
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PNM to serve notice as provided hereunder within the time period specified shall
be conclusively deemed to be notice of its intention not to purchase the
Transfer Interest (or portion thereof specified in the Outside Offer).
12.5 When intention to purchase the Transfer Interest (or portion thereof
specified in the Outside Offer) has been indicated by PNM by notice duly given
as provided herein, the Parties shall thereby incur the following obligations:
12.5.1 They shall be obligated to proceed in good faith and with
diligence to obtain all required authorizations and approvals to Assign;
12.5.2 The County shall be obligated to obtain the release of any liens
imposed by or through it upon any part of the Transfer Interest (or portion
thereof specified in the Outside Offer) and to Assign the Transfer Interest (or
portion thereof specified in the Outside Offer) at the earliest practicable date
thereafter;
12.5.3 PNM shall be obligated to perform all terms and conditions
required of it to complete the purchase of the Transfer Interest (or portion
thereof specified in the Outside Offer); and
12.5.4 The purchase of the Transfer Interest (or portion thereof
specified in the Outside Offer) shall be fully consummated within six (6) months
following the date upon which all notices required to be given
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under this Section have been duly served, unless a Party is then diligently
pursuing applications to appropriate regulatory bodies (if any) for required
authorizations to effect such assignment or is then diligently prosecuting or
defending appeals from orders entered or authorizations issued in connection
with such applications.
12.6 If the intention to purchase the Transfer Interest (or portion thereof
specified in the Outside Offer) has not been indicated by PNM by notice given
within the time period specified in this Section 12, the County shall be free to
Assign the Transfer Interest (or portion thereof specified in the Outside Offer)
to the Outside Party that made the Outside Offer described in Section 12.2 at
the price and upon the terms and conditions set forth in such Outside Offer.
If, after the date PNM received notice of the County's intention to Assign
pursuant to Section 12.3, and prior to closing the transaction contemplated in
the Outside Offer, the price, terms or conditions of the Outside Offer
(including the date of closing) are materially changed, modified or suspended,
or if the Outside Offer is determined not to be a bona fide offer, or if the
Outside Party is determined not to be a ready, willing and able purchaser of the
Transfer Interest (or portion thereof specified in the Outside Offer), the
County must give another notice to PNM of its intention to Assign pursuant to
Section 12.3 before it shall be free to Assign the Transfer Interest or portion
thereof to said Outside Party.
12.7 Any transferee, successor or assignee, or any party who may succeed to
the Transfer Interest or portion thereof, pursuant to this Section 12, shall
specifically agree in writing with PNM at the time of
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such transfer or assignment that it will not transfer or assign all or any
portion of the Transfer Interest so acquired without complying with the terms
and conditions of this Section 12.
12.8 PNM's right of first refusal shall not exist with respect to a
proposed sale or other disposition of the Transfer Interest or portion thereof
by the County if all of the following conditions are met:
12.8.1 The County's entire right, title, and interest in the Transfer
Interest are transferred to an entity for the primary purpose of developing
or utilizing a financing arrangement under which the Transfer Interest
would continue to be used to serve the Los Alamos area and such entity
assumes all of the obligations of the assets transferred.
12.8.2 The transfer of ownership to such entity will not create
technical or administrative burdens on PNM's operations or materially
increase costs with respect to Unit 4 over those existing under ownership
by the County, as reasonably determined by PNM.
12.8.3 Any such transfer shall not detract from PNM's rights under
this Agreement or any other agreement resulting from the Letter of
Principles, including, but not limited to PNM's rights of first refusal set
forth in this Section 12.
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Section 13: COAL SUPPLY
13.1 PNM agrees that, after Closing, the supply of coal for the County's
ownership share of Unit 4 is to be acquired by PNM as Operating Agent for the
County and will be provided under the following terms:
13.1.1 The price the County will pay PNM for coal will always be
the price paid by both PNM and TEP for coal required for their ownership
shares of the San Juan Project. Such pricing will be pursuant to the Coal
Sales Agreement in effect on the date of Closing and as it may be amended;
provided, however, that no amendment shall thereafter be made that is
inconsistent with any of the principles noted in this Section 13.
13.2 The quality of coal available to Unit 4 shall be the same as that made
available to San Juan Units 1, 2, and 3. Coal will be priced uniformly with
respect to all four units of the San Juan Project and the availability of coal
will be shared by all four units in proportion to their generating capabilities.
13.3 The Coal force majeure pile(s) for the San Juan Project are owned in
proportion to ownership in the units with the cost of coal in each pile
determined at the time the pile is established. The County will carry its
proportionate share of any costs associated with any coal force majeure pile(s).
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Section 14: WATER SUPPLY
14.1 PNM agrees that, after Closing, the supply of water for the San Juan
Project (including water for the County's ownership share of Unit 4 and water
for any other Participant's ownership share in the San Juan Units) is to be
acquired by PNM as Operating Agent and will be provided under the following
terms:
14.1.1 The price the County will pay PNM for water will always be the
price paid by both PNM and TEP for water required for their ownership
shares of the San Juan Project.
14.1.2 The quality of the water available to Unit 4 shall be same as
that made available to San Juan Units 1, 2, and 3. Water will be priced
uniformly with respect to all four units of the San Juan Project and the
availability of water will be shared by all four units in order that any
curtailment of generating capacity due to water shortage will be borne pro
rata by each unit.
Section 15: DEFAULTS
15.1 Each Party hereby agrees that it shall pay all monies and carry out
all other duties and obligations agreed to be paid and/or performed by it
pursuant to all of the terms and conditions set forth and contained in this
Agreement.
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15.2 In the event of a default by either Party in any of the terms and
conditions of this Agreement, then, within ten (10) days after written notice
has been given by the nondefaulting Party to the other Party of the existence
and nature of the default, the defaulting Party shall remedy such default either
by paying the necessary funds and/or commencing to render the necessary
performance. In the event the defaulting Party fails to so remedy such default,
the nondefaulting Party shall, as soon as reasonably practical, advance the
necessary funds and/or commence to render the necessary performance to cure the
default on behalf of the defaulting Party.
15.3 In the event of a default by a Party in any of the terms and
conditions of this Agreement, and the giving of notice as provided in Section
15.2 hereof, the defaulting Party shall take all steps necessary to cure such
default as promptly and completely as possible and shall pay promptly upon
demand to the nondefaulting Party the total amount of money and/or the
reasonable equivalent in money of nonmonetary performance, if any, paid and/or
made by such nondefaulting Party in order to cure any default by the defaulting
Party, together with interest thereon, to be calculated monthly, at the lesser
of (i) the prime lending rate established and last published or quoted by Irving
Trust Company or (ii) the maximum rate of interest legally chargeable, from the
date of payment by the nondefaulting Party or from the date of completion of
performance of a disputed obligation to the date of payment by the defaulting
Party or from the date of completion of performance of a disputed obligation to
the date of reimbursement by the defaulting Party.
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15.4 In the event that a Party shall dispute the existence or nature of a
default asserted in a notice given pursuant to Section 15.2 hereof, then such
Party shall pay the disputed payment or perform the disputed obligation, but may
do so under protest. The protest shall be in writing, shall accompany the
disputed payment or precede the performance of the disputed obligation, and
shall specify the reasons upon which the protest is based. Copies of such
protest shall be mailed by such Party to the other Party. Payments not made
under protest shall be deemed to be correct, except to the extent that periodic
or annual audits may reveal over or under payments by a Party, necessitating
adjustments. In the event it is determined by arbitration, pursuant to the
provisions of this Agreement or otherwise, that a protesting Party is entitled
to a refund of all or any portion of a disputed payment or payments or is
entitled to the reasonable equivalent in money of nonmonetary performance of a
disputed obligation theretofore made, then, upon such determination, the
nonprotesting Party shall pay such amount to the protesting Party, together with
interest thereon, to be calculated monthly, at the lesser of (i) the prime
lending rate established and last published or quoted by Irving Trust Company,
or (ii) the maximum rate of interest legally chargeable, from the date of
payment by the Protesting Party or from the date of completion of performance of
a disputed obligation to the date of reimbursement by the nonprotesting Party.
15.5 Unless otherwise determined by a board of arbitrators, in the event a
default by any Party in the payment or performance of any obligation under this
Agreement shall continue for a period of six (6) months or more without having
been cured by the defaulting party or without such
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party having commenced or continued action in good faith to cure such default,
or in the event the question of whether an act of default exists becomes the
subject of an arbitration pursuant to Section 16 hereof, and such act continues
for a period of six (6) months following a final determination by a board of
arbitrators or otherwise that an act of default exists and the defaulting Party
has failed to cure such default or to commence such action during said six (6)
month period, then, at any time thereafter and while said default is continuing,
the nondefaulting Party, by written notice to the defaulting party, may suspend
the right of the defaulting Party (i) to be represented on and participate in
the actions of any committee, and (ii) to receive all or any part of its
proportionate share of Power and Energy in which event:
15.5.1 During the period that such suspension is in effect, the
nondefaulting Party (i) shall bear all of the operation and maintenance
costs, insurance costs and other expenses, otherwise payable by the
defaulting Party under this Agreement, and (ii) shall be entitled to
schedule and receive for its account the generation entitlement of the
defaulting Party.
15.5.2 A defaulting Party shall be liable to the nondefaulting Party
for all costs and expenses, less associated fuel costs, incurred by such
nondefaulting Party pursuant to Section 15.5.1 hereof.
15.5.3 The suspension of a defaulting Party shall be terminated and
its full rights hereunder restored when all of its defaults
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have been cured and all costs, less associated fuel costs, incurred by the
nondefaulting Party pursuant to Section 15.5.1 hereof have been paid by the
defaulting Party or other arrangements suitable to the nondefaulting Party
have been made.
15.6 In addition to the remedies provided for in Section 15.5 hereof, the
nondefaulting Party may, in submitting a dispute to arbitration in accordance
with the provision of Section 16 hereof, request that the board of arbitrators
determine what additional remedies may be reasonably necessary or required under
the circumstances which give rise to the dispute. The board of arbitrators may
determine what remedies are necessary or required in the premises, including but
not limited to the conditions under which Unit 4 may be operated economically
and efficiently during the period when the defaulting Party's right to receive
its proportionate share of Power and Energy is suspended.
Section 16: DISPUTES; ARBITRATION
16.1 In the event that a dispute between the Parties should arise under
this Agreement, except for a dispute regarding the Purchase Price or the cost of
prepaid items, which shall be subject to the provisions of Sections 4.2 and 4.3
hereof, such dispute shall first be submitted to the Parties' respective members
on the San Juan Project Engineering and Operating Committee for resolution. In
the event the Parties' Engineering and Operating Committee members are unable to
resolve such dispute within ninety (90) days after submission, the dispute shall
be referred for resolution to the next higher level of management of both
Parties as
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determined by each Party's management structure. If such dispute has not been
resolved within thirty (30) days after such referral, either Party may
thereafter call for submission of such dispute to arbitration in the manner
hereinafter set forth, which call shall be binding upon the Parties to the
extent permitted by law.
16.2 The Party calling for arbitration shall give written notice to the
other Party, setting forth in such notice in adequate detail the nature of the
dispute, the amount or amounts, if any, involved in such dispute, and the remedy
sought by such arbitration proceedings, and, within twenty (20) days from
receipt of such notice, the other Party may, by written notice to the first
Party, prepare its own statement of the matter at issue and set forth in
adequate detail additional related matters or issues to be arbitrated.
Thereafter, the Party first submitting its statement of the matter at issue
shall have ten (10) days in which to submit a rebuttal statement.
16.3 Within ten (10) days following the submission of the rebuttal
statement, if any, or if none is submitted, then not later than forty (40) days
after the initial notice, the Parties shall meet for the purpose of selecting
arbitrators. Each Party shall designate an arbitrator. The arbitrators so
selected shall meet within twenty (20) days following their selection and shall
select one additional arbitrator. If the arbitrators selected by the Parties,
as herein provided, shall fail to select such additional arbitrator within said
twenty (20) days period, such third arbitrator shall be selected by the Chief
Judge of the Federal District of New Mexico consistent with the qualifications
required
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herein. The arbitrators shall be persons skilled and experienced in the field
with gives rise to the dispute and no person shall be eligible for appointment
as an arbitrator who is an officer, employee or otherwise interested in either
of the Parties to the dispute or in the matter to be arbitrated.
16.4 The questions which may be submitted to arbitration pursuant to this
Section 16 shall include the question of whether the right to arbitrate exists.
16.5 The arbitrators shall hear evidence submitted by the respective
Parties and may call for additional information, which additional information
shall be furnished by the Party having such information. The decision of a
majority of the arbitrators shall be binding upon both Parties, to the extent
permitted by law. In the event such decision requires action which is unlawful
for a Party to perform, such Party shall substitute equivalent lawful action
acceptable to the other Party.
16.6 This agreement to arbitrate shall be specifically enforceable and the
award of the arbitrators shall be final and binding upon the Parties to the
extent provided by the laws of the State of New Mexico. Any award may be filed
with the Clerk of any Court having jurisdiction over the Parties or either of
them against whom the award is rendered, and, upon such filing, such award, to
the extent permitted by the laws of the jurisdiction in which the award is
filed, shall be specifically enforceable or shall form the basis of a
declaratory judgment or other similar relief.
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16.7 The fees and expenses of the arbitrators shall be shared equally by
the Parties unless the decision of the arbitrators shall specify some other
apportionment of such fees and expenses. All other expenses and costs of the
arbitration shall be borne by the Party incurring the same.
16.8 In the event that either Party shall attempt to institute or to carry
out the provisions herein set forth in regard to arbitration, and such Party
shall not be able to obtain a valid and enforceable arbitration decree, such
Party shall be entitled to seek legal remedies in a Court having jurisdiction in
the premises, and the provisions in this Agreement referring to decisions of a
board of arbitrators shall be then deemed applicable to final decisions of such
Court.
Section 17: WARRANTIES AND REPRESENTATIONS
17.1 The Parties hereto warrant and represent to each other the matters
hereinafter set forth in this Section 17.
17.2 The County hereby covenants, warrants, and represents to PNM as
follows: (i) the County is a body politic and corporate, existing as a
political subdivision under the Constitution and laws of the state of New
Mexico, and has the requisite power and authority to own an 7.20 percent
undivided ownership interest in Unit 4; (ii) the execution, delivery, and
performance of this Agreement by the County have been duly and effectively
authorized by all requisite action by the County; (iii) the County has full
power and authority to execute this Agreement
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and this Agreement has been duly executed and delivered by the County and is the
legal, valid, and binding obligation of the County enforceable against it in
accordance with its terms; (iv) the County will have duly and validly obtained
by Closing from the NMPSC all consents and approvals necessary to the execution,
delivery and performance of this Agreement and no other regulatory or
governmental or other approval is required to be obtained for the County's
purchase of the Transfer Interest (or if any other regulatory or governmental or
other approval is required, it has been duly obtained); (v) the Los Alamos
County Council approval hereof is in all respects valid and will be effective on
or before Closing and any other required actions or approvals necessary to the
execution, delivery, and performance of this Agreement have been obtained; (vi)
those requirements under Chapter 260, Laws of 1979 of the State of New Mexico,
as amended to date of Closing, which are materially applicable to the
transaction contemplated herein have been complied with by the County; (vii) the
execution and delivery of this Agreement and compliance with the provisions
hereof will not conflict with or constitute on the part of the County a breach
of or a default under existing law, court, or administrative regulation, decree
or order to which the County is subject or any agreement, ordinance, indenture,
mortgage, lease, or other instrument by which the County is or may be bound; and
(viii) except for the NMPSC and FERC proceedings specifically contemplated by
this Agreement, there is no action, suit, proceeding, inquiry, or investigation
at law or in equity or before or by any public board or body pending or, to the
County's knowledge, threatened against or affecting the County, or to the
County's knowledge, any basis therefor, wherein an unfavorable decision,
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ruling, or finding would have a material adverse effect on the County's
performance of its obligations under this Agreement.
17.3 PNM hereby covenants, warrants, and represents to the County as
follows: (i) PNM is a corporation duly organized, validly existing and in good
standing as a public utility under the laws of the State of New Mexico and has
corporate power and authority to own its undivided ownership interest in Unit 4
and to carry on its business as it is then being conducted; (ii) the execution,
delivery, and performance of this Agreement by PNM have been duly and
effectively authorized by all requisite corporate action; (iii) PNM has full
power and authority to execute this Agreement and this Agreement has been duly
executed and delivered by PNM and is the legal, valid, and binding obligation of
PNM enforceable against it in accordance with its terms; (iv) PNM will have duly
and validly obtained by Closing from the NMPSC and the FERC all consents and
approvals necessary to the execution, delivery and performance of this
Agreement, and all releases, release of liens, mortgages, trusts, security
agreements, financing statements, waivers, consents, approvals, including the
release (which may be delivered simultaneously with the payment of the Purchase
Price for the Transfer Interest at Closing) by Irving Trust Company under the
PNM Indenture of the Transfer Interest from the lien of such indenture,
necessary to the execution, delivery and performance of this agreement by PNM,
and no other regulatory or governmental or other approval is required (or if any
other regulatory or governmental or other approval is required, it has been duly
obtained); (v) the execution and delivery of this Agreement and compliance with
the provisions hereof and thereof will not conflict or constitute on the part
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of PNM a breach of or a default under existing law, court or administrative
regulation, decree or order to which PNM is subject, or any agreement,
ordinance, indenture, mortgage, lease or other instrument by which PNM is or may
be bound; (vi) immediately prior to Closing, PNM will be the owner of the
Transfer Interest and entitled to sell such Transfer Interest to the County;
(vii) the title and conveyance of the Transfer Interest from PNM to the County
will be at Closing free and clear of all taxes and assessments, liens, trusts,
mortgages and encumbrances except Permitted Encumbrances; and (viii) except for
the NMPSC and FERC proceedings specifically contemplated by this Agreement, and
except as set forth in reports filed by PNM with the Securities and Exchange
Commission on Forms 10-K, 10-Q, or 8-K, for the period ending December 31, 1982,
through the date of Closing, there is no action, suit, proceeding, inquiry or
investigation at law or in equity or before or by any public board or body
pending or, to PNM's knowledge, threatened against or affecting PNM, or to PNM's
knowledge, any basis therefore, wherein any unfavorable decision, ruling or
finding would have a material adverse effect on PNM's performance of its
obligations under this Agreement, (ix) neither TEP nor M-S-R nor any other
person has the option to purchase the Transfer Interest or any interest therein,
and (x) PNM has paid or will pay its allocable share of all ad valorem taxes due
and owing with respect to the San Juan Project, and acknowledges that the County
shall have no liability for ad valorem taxes with respect to the San Juan
Project which are attributable to any period prior to the date of Closing.
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17.4 The County and PNM each covenant, warrant and represent to each other
that they respectively will not take any action, or omit to take any action,
which would impair their ability to respectively covenant, warrant and represent
herein, and again as of the date of Closing, that the matters set forth in
Sections 17.2 and 17.3 hereof are true in all material respects as of such
dates. The County and PNM further covenant, warrant and represent to each other
that they respectively will use their best efforts to prevent or correct any
actions taken, or any omissions to act, by third parties which would impair the
Parties from respectively covenanting, warranting and representing to each other
herein, and again as of the date of Closing, that the matters set forth in
Sections 17.2 and 17.3 hereof are true in all material respects as of such
dates.
17.5 Subject to the provisions of Sections 17.4 hereof and any changes
contemplated thereunder, and subject to Section 30 hereof, the County and PNM
shall again covenant, warrant, and represent, as of the date of Closing, that
the matters set forth in Sections 17.2 and 17.3 hereof respectively are true in
all material respects.
Section 18: CONSISTENCY OF TERMS
18.1 The terms and provisions of this Agreement, together with documents
attached hereto as Exhibits, and any amendments hereto, shall be read in pari
materia and are to be construed as a whole. If any term or provision is found
to be illegal or inconsistent or incompatible with the provisions as a whole,
said provision is hereby eliminated and the
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remaining provisions are to remain in full force and effect; provided, however,
that if the absence of the eliminated provision substantially renders this
Agreement destructive of the original intentions of the Parties, the Parties
agree to negotiate in good faith to amend this Agreement in order to restore to
the maximum extent practicable the original intentions of the Parties.
Section 19: RELATIONSHIP OF PARTIES
19.1 The covenants, obligations, and liabilities of the Parties are
intended to be several and not joint or collective, and nothing herein contained
shall ever be construed to create an association, joint venture, trust or
partnership, or to impose a trust or partnership covenant, obligation, or
liability on or with regard to one or both of the Parties. Each Party shall be
individually responsible for its own covenants, obligations, and liabilities as
herein provided. No Party shall be under the control of or shall be deemed to
control any other Party or the Parties in a group. No Party shall be the agent
of or have a right or power to bind any other Party without its express written
consent, except as expressly provided in this Agreement.
19.2 After Closing, the Project Manager and Operating Agent shall be the
agent of the Parties and shall exercise in good faith such authority as is
conferred upon it by this Agreement.
19.3 The Parties hereby elect to be excluded from the application of
Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code
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of 1954, or such portion or portions thereof as may be permitted or authorized
by the Secretary of the Treasury or his delegate insofar as such subchapter, or
any portion or portions thereof, may be applicable to the Parties under this
Agreement.
19.4 PNM, as agent for the County, Project Manager and Operating Agent,
will use prudent utility practice in performance of construction project work,
and in operation and maintenance of the project, insofar as it affects Unit 4,
and shall keep the County informed as to the construction, operation, and
maintenance of the project insofar as the same affects Unit 4.
Section 20: LETTER OF PRINCIPLES
20.1 The terms and provisions of this Agreement fully carry out and
incorporate the terms and conditions of the Letter of Principles that are
applicable to the County and PNM with respect to the sale of PNM and the
purchase by the County of the Transfer Interest, and said terms and conditions
of the Letter of Principles are hereby superseded.
Section 21: PART AND SECTION HEADINGS
21.1 The headings to each Section of this Agreement are for reference only
and are not to be read as a part of this Agreement.
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Section 22: AMENDMENTS
22.1 This agreement shall not be amended except by written instrument
executed on behalf of both Parties.
Section 23: GOVERNING LAW
23.1 This Agreement is made under and shall be governed by the laws of the
State of New Mexico, including those laws which govern the rights and
obligations of municipalities and governmental entities and their public
employees.
Section 24: SURVIVAL OF WARRANTIES AND REPRESENTATIONS
24.1 All warranties and representations made herein shall be as of the date
specified herein and such warranties and representations shall survive Closing.
Section 25: SUCCESSORS AND ASSIGNS
25.1 This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors and assigns.
25.2 No assignment of the Transfer Interest or portion thereof, whether to
PNM or to an Outside Party, shall relieve the County from full liability and
financial responsibility for performance after any such assignment of (i) all
obligations and duties incurred by the County prior
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to such assignment under the terms and conditions of this Agreement, and (ii)
all obligations and duties provided and imposed after such assignment upon the
County under the terms and conditions of this Agreement unless and until the
assignee shall agree in writing with PNM to assume such obligations and duties;
provided, however, that the County shall not be relieved of any of its
obligations and duties by an assignment under Section 12, without the express
prior written consent of PNM, unless such assignee shall have proven to be
financially and operationally responsible for a period of two years subsequent
to the assignment; and provided further that the provisions of this Section 25.2
shall not be applicable to any assignment of the Transfer Interest by the County
to PNM.
Section 26: NOTICES
26.1 Any notice, demand, or request provided for in this Agreement shall
be deemed properly served, given, or made if delivered in person or sent by
registered or certified mail, postage prepaid, to the persons specified below:
26.1.1 Public Service Company of New Mexico
c/o Secretary
Alvarado Square
Albuquerque, NM 87158
26.1.2 Incorporated County of Los Alamos
c/o Utilities Manager
Post Office Box 30
Los Alamos, NM 87544
26.2 Any Party may, at any time, by written notice to the other Party,
designate different persons or different addresses for the giving of notices
hereunder.
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Section 27: COUNTERPARTS
27.1 This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 28: FURTHER ASSURANCES
28.1 From time to time after the Closing PNM and the County will execute
such instruments of conveyance and other documents, upon the request of the
other, as may be necessary or appropriate, to carry out the intent of this
Agreement.
Section 29: WAIVER
29.1 No waiver by a Party of its rights with respect to a default under
this Agreement or with respect to any other matter arising in connection with
this Agreement, shall be effective unless the nondefaulting Party waives its
respective rights in writing with respect thereto and any such waiver shall not
be deemed to be a waiver with respect to any subsequent default or matter. No
delay, short of the statutory period of limitations, in asserting or enforcing
any right hereunder shall be deemed a waiver or such right.
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<PAGE>
Section 30: FORCE MAJEURE
30.1 Neither Party shall be considered to be in default in the performance
of any of the obligations hereunder (other than obligations of the Parties to
pay costs and expenses) if failure of performance shall be due to uncontrollable
forces ("Uncontrollable Forces"). The term Uncontrollable Forces shall mean any
cause beyond the control of the Party affected, including but not limited to
failure of facilities, flood, earthquake, storm, fire, lightning, epidemic, war,
riot, civil disturbance, labor dispute, sabotage, and restraint by court order
or public authority or failure to obtain approval from a necessary governmental
authority, which by exercise of due diligence and foresight such Party could not
reasonably have been expected to avoid and which by exercise of due diligence it
shall be unable to overcome. Nothing contained herein shall be construed so as
to require a Party to settle any strike or labor dispute in which it may be
involved. Either Party rendered unable to fulfill any obligations by reason of
Uncontrollable Forces shall exercise due diligence to remove such inability with
all reasonable dispatch.
Section 31: INDEPENDENT COVENANTS
31.1 The covenants and obligations set forth and contained in this
Agreement are to be deemed to be independent covenants, not dependent covenants,
and the obligations and covenants to be kept and performed are not conditioned
on the performance by the other Party of all of the covenants and obligations to
be kept and performed by a Party.
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<PAGE>
Section 32: EQUAL OPPORTUNITY
32.1 PNM and the County are equal opportunity employers. During the term
of this Agreement, PNM and the County agree to abide by all applicable equal
employment opportunity laws, rules, and regulations. PNM and the County agree
that they will not discriminate against any employee or applicant for employment
because of race, color, religion, sex, or national origin and will take
affirmative action to ensure that applicants are employed, and that employees
are treated during employment without regard to their race, color, religion,
sex, or national origin. The parties will comply with all provisions of
Executive Order 11246 of September 24, 1965, as amended, and of the rules,
regulations, and relevant orders of the Secretary of Labor.
Section 33: FILING
33.1 This Agreement shall be subject to filing with competent regulatory
authority, in the exercise of its lawful jurisdiction.
Section 34: RISK OF LOSS PRIOR TO CLOSING
34.1 In the event Unit 4 should be destroyed, damaged or condemned prior
to Closing, the Parties hereto and other parties who have an ownership interest
in and generation entitlement to Unit 4 shall jointly determine whether to
repair, restore, or reconstruct the damaged, destroyed or condemned facility.
Should the County elect not to participate in the repair, restoration, or
reconstruction of the damaged,
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<PAGE>
destroyed, or condemned facility, then this Agreement shall thereupon terminate
and PNM and the other aforementioned parties shall be entitled to proceed in
such manner as it or they may determine. Should the Parties elect to repair,
restore, or reconstruct the damaged, destroyed, or condemned facility, and
should construction be underway on the date set for Closing, the Closing shall
occur without postponement.
34.2 Before Closing, the County may purchase and maintain such insurance
as it determines necessary to insure against the risk of loss to its interests
by damage to, or destruction of, Unit 4. Any such insurance shall contain a
waiver of subrogation in favor of PNM, and its insurers, with provisions
reasonably acceptable to PNM. By requiring such waiver of subrogation, it is
not the intent of the Parties to modify the provisions of Section 7.4 of this
Agreement. Upon Closing, PNM shall cause the County to be added as an additional
named insured on each of the insurance policies provided under the San Juan
Project Agreements.
Section 35: DESTRUCTION, DAMAGE OR CONDEMNATION OF UNIT 4 AFTER CLOSING
35.1 Notwithstanding any provision to the contrary in the San Juan Project
Agreements, the provisions of this Section 35 shall govern Unit 4 after Closing.
For the purpose of this Section 35, "Parties" shall include all parties who
have, at the time of the event or action contemplated by this Section 35.1, both
an ownership interest in and generation entitlement to Unit 4.
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<PAGE>
35.2 If all, or substantially all, of the Unit 4 should be destroyed,
damaged, or condemned, then the Parties may elect to repair, restore, or
reconstruct the damaged, destroyed, or condemned facilities in such a manner as
to restore the facilities to substantially the same general character or use as
the original, or to such other character or use as the Parties may then mutually
agree. In the event of such election, it shall be the obligation of the Parties
to pay for the costs of such repair, restoration, or reconstruction in
accordance with the percentage ownership interests of the respective Parties in
such facilities, and, upon completion thereof, the Parties' rights, titles and
interests shall be as provided in this Agreement.
35.3 In the event of an election by the Parties not to repair, restore, or
reconstruct the damaged, destroyed, or condemned facilities, the proceeds from
any insurance or from any award shall be distributed to the Parties in
accordance with the respective percentage ownership interests in and to such
facilities. The facilities not destroyed, damaged, or condemned shall be
disposed of by the Parties in a manner to be mutually agreed upon, and the
proceeds from such disposition shall be distributed in accordance with the
percentage ownership interests of the respective Parties in such facilities.
35.4 In the event the Parties cannot agree to repair, restore, or
reconstruct the damaged, destroyed, or condemned facilities then the Party or
Parties electing to restore, reconstruct, or repair may do so at its own expense
providing that payment at salvage value is first made to the withdrawing Party
or Parties. In such event the withdrawing Party or
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<PAGE>
Parties has no further obligation or benefit under this Agreement, except for
obligations incurred prior to such withdrawal.
35.5 In the event that less than substantially all of Unit 4 is destroyed,
damaged, or condemned, then it shall be the obligation of the Parties to repair,
restore, or reconstruct the damaged, destroyed, or condemned equipment and
facilities in such a manner as to restore such equipment and facilities to
substantially the same general character or use as existed prior to the
destruction, damage, or condemnation. Each Party shall be obligated to pay its
proportionate share of the costs of such restoration or reconstruction to the
extent not covered by insurance or condemnation proceeds.
Section 36. NONDEDICATION OF FACILITIES
36.1 The Parties do not intend to dedicate and nothing in this Agreement
shall be construed as constituting a dedication by any Party of its properties
or facilities, or any part thereof to any other Party or to the customers of any
Party.
Section 37. NO THIRD PARTY BENEFICIARIES
37.1 Except as otherwise specifically provided in this Agreement, the
Parties do not intend to create rights in or to grant remedies to any third
party as a beneficiary of this Agreement or of any duty, covenant, obligation,
or undertaking established herein.
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<PAGE>
Section 38. RIGHT OF COUNTY TO INSPECT AND AUDIT
38.1 It is expressly understood and agreed, notwithstanding any provision
contained herein or any provision in the San Juan Project Agreements to the
contrary, that the County shall have the right, at reasonable times and places,
to inspect the premises and to audit any books or records which in any way
pertain to Unit 4 or the Transfer Interest, including inspection and audit of
any facilities or common facilities which in any way affect the Transfer
Interest.
Section 39: SOURCE OF FUNDS FOR PAYMENT: COUNTY OBLIGATIONS
39.1 Obligations of the County under this Agreement shall not constitute
the general obligations or indebtedness of the County within the meaning of
Article IX, Section 12 of the Constitution of New Mexico and shall never
constitute a charge against the general credit or taxing power of the County.
39.2 Payment of the purchase price and payment for the acquisition and
construction of the Transfer Interest shall be payable from the proceeds of
utility system revenue bonds which, together with the interest accruing thereon
and any prior redemption premium due in connection therewith, shall be special
obligations of the County and shall be payable and collectible solely from the
net revenues of the utility system, in accordance with the County Charter and
applicable state statutes, which income has been irrevocably so pledged.
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<PAGE>
39.3 Payment by the County of other obligations under this Agreement shall
be limited to the available revenues specified for such purposes under the
Charter and applicable state statutes, ordinances and indenture of the County
authorizing utility system revenue bonds and any limitations imposed by Section
3-24-16 NMSA 1978. The County agrees that such ordinances and indenture shall
be consistent with this Section 39. Obligations under this Agreement which
constitute operation and maintenance expenses of the utility system shall be
payable from the gross revenues of the utility system and shall be payable prior
to payment of debt service on revenue bonds of the utility system. Other
obligations hereunder are payable from the net revenues of the utility system
(after payment of operation and maintenance expenses and debt service on revenue
bonds of the utility system).
39.4 PNM's right under this Agreement shall not be abrogated or abridged by
any amendment to the County Charter or applicable state statutes which become
effective subsequent to the date hereof.
39.5 The failure of the County to pay its obligations hereunder shall
constitute a default under Section 15. Such default shall not be excused by
reason of insufficiency of revenues of the utility system or for any other
reason whatsoever.
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement the day and year first above written.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By: /s/ J. L. Wilkins
--------------------------
Its: Senior Vice President
-----------------------------
INCORPORATED COUNTY OF LOS ALAMOS COUNTY
Attest:
/s/ Marguerite Cantrell, Deputy By: /s/ Sidney Singer
- ------------------------------- ------------------------------
County Clerk
------------------------------
Chairman, County Council
By: /s/ Fred A. Gross, Jr.
------------------------------
------------------------------
Chairman, Board of
Public Utilities
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<PAGE>
STATE OF NEW MEXICO )
) ss
COUNTY OF BERNALILLO)
The foregoing instrument was acknowledged before me this 21st day of
December, 1984 by J. L. Wilkins, a Senior Vice President of Public Service
Company of New Mexico, a New Mexico corporation, on behalf of said Corporation.
/s/ Sherry Leeson
-------------------------------
NOTARY PUBLIC
My Commission Expires: July 1, 1988 [SEAL]
- ---------------------------
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<PAGE>
STATE OF NEW MEXICO )
) ss
INCORPORATED COUNTY OF LOS ALAMOS)
The foregoing instrument was acknowledged before me this 28th day of
December, 1984 by Sidney Singer, Chairman of the Los Alamos County Council, and
Fred A. Gross, of the Incorporated County of Los Alamos, a political subdivision
under the constitution and laws of the State of New Mexico, on behalf of said
County.
/s/ Marguerite K. Cantrell
--------------------------------
NOTARY PUBLIC
My Commission Expires:
[SEAL]
August 11, 1988
- ---------------------
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<PAGE>
EXHIBIT "A"
DEFINITIONS OF CAPITALIZED TERMS
NOTE: For capitalized terms not found in this Exhibit "A," refer to
Definitional Cross-Reference Exhibit "A-1."
AFUDC: Allowance for Funds Used During Construction.
COUNTY: Incorporated County of Los Alamos, New Mexico.
CLOSING: The meeting by the Parties hereto which results in the conclusion of
all transactions relating to the sale by PNM of the Transfer Interest to the
County, including but not limited to the payment by the County to PNM of the
Purchase Price, the execution and delivery of this Purchase and Participation
Agreement and all agreements, documents, and certificates contemplated hereby
and delivery of opinions of counsel referred to herein.
COAL SALES AGREEMENT: That certain Coal Sales Agreement between San Juan Coal
Company and PNM and TEP, dated August 18, 1980, and effective as of December 1,
1980, as amended on September 30, 1981 and October 28, 1983, as in effect on the
date hereof and as may from time to time be amended.
FARMINGTON: The City of Farmington, New Mexico.
INSTRUMENT OF SALE AND CONVEYANCE: The conveyance by PNM to the County of the
Transfer Interest in the form of Exhibit B.
A-1
<PAGE>
LETTER OF PRINCIPLES: The Letter of Principles between PNM, the County and the
Department of Energy, dated March 5, 1984 and entitled "Letter of Principles
among Public Service Company of New Mexico, Los Alamos County, and United States
of America, Department of Energy."
M-S-R: M-S-R Public Power Agency.
NMPSC: New Mexico Public Service Commission.
PARTIES: PNM and the County, except as provided in Section 35.
PERMITTED ENCUMBRANCES:
(a) Liens for taxes, assessments or governmental charges for the then
current year; and liens for taxes, assessments or governmental charges,
workmen's compensation awards and similar obligations not then due and
delinquent or which can be paid without penalty;
(b) Liens for taxes, assessments or governmental charges already due (or
liens incidental to construction for indebtedness already due) but the validity
of which is being contested at the time by PNM in good faith;
(c) Easements, licenses, restrictions, exceptions, reservations or other
outstanding interests in or against any property and/or rights of way of PNM
created or existing by way of, or for the purpose of, public highways, private
roads, railroads, railroad sidetracks, pipelines, gas
A-2
<PAGE>
transportation lines, transmission lines, transportation lines, distribution
lines, telegraph or telephone lines, mains, ditches, and other like purposes;
water power rights of the state or others; and building and use restrictions;
(d) Any obligations or duties affecting the property of PNM to any
municipality or public authority with respect to any franchise, grant, license
or permit;
(e) Defects in titles to overflow and flood lands and rights, and in titles
to rights of way for transmission lines, distribution lines, mains, ditches,
telephone lines, telegraph lines or for other purposes of PNM, over public or
private property, none of which, in the opinion of counsel for PNM materially
impairs the use of the property affected thereby in the operation of the
business of PNM;
(f) Rights reserved to or vested in any municipality or public authority by
the terms of any right, power, franchise, grant, license or permit, or by any
provisions of law, to terminate such right, power, franchise, grant, license or
permit or to purchase or recapture or to designate a purchaser of any of the
property of PNM or otherwise to control or regulate any property of PNM;
(g) Rights granted or created or burdens assumed by PNM under agreements
for the joint use of poles and equipment, and similar agreements; and burdens
created under any law or governmental regulation or permit requiring PNM to
maintain certain facilities or perform certain
A-3
<PAGE>
acts as a conditions of PNM's occupancy of or interference with any public lands
or any river or stream or navigable waters or bridge or highway;
(h) Any right of use, ingress, egress, partition, easement, license or
reservation, contractual or otherwise, of any joint owner in any property,
plant, system or facility owned by PNM jointly with other persons and any lien
securing indebtedness of any such joint owner, neither payable by, nor assumed
nor guaranteed by, PNM existing as to any undivided interest of such other joint
owner in such jointly owned property.
(i) Unfiled, inchoate mechanics' and materialmen's liens for construction
work in progress and any other undetermined liens and charges incidental to
current construction;
(j) Workmen's, repairmen's, warehousemen's and carriers' liens and other
similar liens, if any, arising in the ordinary course of business.
(k) All the following, if they do not individually or in the aggregate
materially impair the use of the Transfer Interest or materially detract from
the value thereof to the County, viz.: any easements, restrictions, mineral,
oil, gas and mining rights and reservations, zoning laws and defects in title or
other encumbrances to which the Transfer Interest may be subject; and
A-4
<PAGE>
(l) The rights of PNM, TEP, Farmington and M-S-R under existing agreements
relating to San Juan Project; and
(m) Patent reservations of either the United States of America or the State
of New Mexico.
PNM: Public Service Company of New Mexico.
PNM INDENTURE: The Indenture of Mortgage and Deed of Trust between PNM and
Irving Trust Company, as Trustee, dated as of June 1, 1947, as amended and
supplemented.
PURCHASE PRICE: The Purchase Price of the Transfer Interest to be paid by the
County to PNM at Closing, calculated in accordance with Section 4 hereof.
SAN JUAN PROJECT: Four-unit coal-fired electric generating plant constructed or
under construction at the San Juan Site. The San Juan Project includes all
facilities, structures, transmission and distribution lines incident to the
four-unit electric generating plant; provided, however, that the San Juan
Project shall not include distribution and transmission lines owned exclusively
by a Party or TEP (such as 12.47 kV distribution system), equipment in the
Switchyard Facilities owned exclusively by a Party OR TEP, and coal processing
facilities owned by a third party.
A-5
<PAGE>
SAN JUAN PROJECT AGREEMENTS: Those Agreements specified in Section 5.1 of this
Agreement, as such Agreements have been amended and as the same may be amended
from time to time.
SAN JUAN STATION: Same as "San Juan Project."
TRANSFER INTEREST: The Transfer Interest to be received by the County from PNM
at Closing pursuant to this Agreement. This is an undivided 7.20 percent
interest in Unit 4 from that 50 percent interest in Unit 4 purchased by PNM from
TEP (but not the portion thereof subject to the option to reacquire a 28.8
percent interest in Unit 4 which is now owned by M-S-R) pursuant to the San Juan
Unit 4 Purchase Agreement between PNM and TEP, dated May 16, 1979, including
generator, turbine, coal-handling facilities, pollution control facilities,
cooling towers, start-up and step-up transformers, material and supply
inventories, initial fuel supply (if any), tools and equipment (to the extent
the cost of such tools and equipment is included in the Purchase Price), and an
allocated share of common facilities, including those assets reflected in
Exhibit E, placed in service prior to Closing, together with other assets and
interests described in the Instrument of Sale and Conveyance, and in the
Easement and License, attached as Exhibits B and C, respectively, to this
Agreement.
TEP: Tucson Electric Power Company.
UNIT 4: Unit 4 of the San Juan Project (sometimes referred to herein as San
Juan Unit 4), presently having a net output of approximately 472 MW,
A-6
<PAGE>
including, but not limited to cooling tower and the pollution control systems
and facilities relating thereto (situated on but excluding that certain real
property more particularly described in Annex A to Exhibit B hereto), which
began commercial operation on April 27, 1982, and is presently owned 62.725
percent by PNM, 28.8 percent by M-S-R and 8.475 percent by Farmington.
A-7
<PAGE>
EXHIBIT "A-1"
DEFINITIONAL CROSS-REFERENCES
Term Defined At*
- -------------------------------- -----------
Available Operating Capacity O.A. 5.3
Capacity O.A. 5.4
Construction Agreement Co-T. 5.7
Construction Costs C.A. 5.5
Co-Tenancy Agreement Co-T. 5.8
Energy O.A. 5.17
Engineering and Operating Committee O.A. 5.18
Minimum Net Generation O.A. 5.27
Operating Agent O.A. 5.31
Operating Agreement Co-T. 5.16
Operating Emergency O.A. 5.33
Operating Insurance O.A. 5.35
Operating Work O.A. 5.36
Power O.A. 5.39
Project Insurance C.A. 5.26
Project Manager C.A. 5.27
Project Work C.A. 5.28
San Juan Site Co-T. 5.22
Switchyard Facilities Co-T. 5.23
Unit Participant Co-T. 5.30
C.A. 5.39.1
O.A. 5.53.1
- ---------------
*NOTE: "C.A." = Construction Agreement
"Co-T." = Co-Tenancy Agreement
"O.A." = Operating Agreement
<PAGE>
EXHIBIT "B"
INSTRUMENT OF SALE AND CONVEYANCE
PUBLIC SERVICE COMPANY OF NEW MEXICO, A New Mexico corporation ("PNM"), for
consideration paid and the mutual covenants and agreements of the Parties
contained in that certain Amended and Restated San Juan Unit 4 Purchase and
Participation Agreement dated as of ______________, (the "Agreement"), which
Agreement is incorporated herein by this reference, hereby grants, transfers,
bargains, sells, and conveys to the INCORPORATED COUNTY OF LOS ALAMOS, NEW
MEXICO, a body politic and corporate and a political subdivision existing under
the Constitution and laws of the State of New Mexico (the "County"), the
Transfer Interest, as defined in the Agreement, including all of the following:
1. An undivided 7.20% interest in and to all of that certain commercially
operating, coal-fired, steam electric generating unit, currently with a net
rated capacity of 472 megawatts, described as the San Juan Unit 4, San Juan
Generating Station (also called the "San Juan Project"), New Mexico ("Unit 4"),
situated upon that certain real property located in San Juan County, New Mexico,
which real property is described in Annex A attached hereto and incorporated
herein by reference, together with an undivided 7.20% interest in all fixtures
associated with Unit 4 including, but not limited to, the startup and step-up
transformers, boiler, 616,700 kVA General Electric turbine generator, ash
storage and unloading systems, cooling towers, control equipment, auxiliary
equipment, and all other components of every kind and description affixed to
Unit 4 and situate upon such real property.
B-1
<PAGE>
2. An undivided 7.20% interest in all auxiliary equipment, instruments,
tools, and equipment (to the extent the cost of such tools and equipment is
included in the Purchase Price or prepaid items), and construction work in
progress, and all other components of every kind and description purchased or to
be purchased for or in connection with Unit 4, including those Pollution Control
Systems and Facilities associated with Unit 4 which are not common to other
units at the San Juan Station, a portion of which systems and facilities are
described in Annex B attached hereto and incorporated herein by reference.
3. An undivided 2.175% interest in the "San Juan Project Agreements", as
defined in the Agreement, and an undivided 7.20% interest in the "Unit No. 4
Contracts," which are all agreements that may exist solely for materials,
equipment, facilities, and construction necessary for the completion of Unit 4.
4. An undivided 3.612% interest in the fuel oil supply common to San Juan
Units 3 and 4, and all of the facilities (personal property and fixtures) which
are common only to San Juan Units 3 and 4 in service on the date hereof, as
referenced in the San Juan Project Agreements, including the coal handling
facilities, fuel oil system, and the Pollution Control Systems and Facilities
associated with the San Juan Units 3 and 4, a portion of which systems and
facilities are described in Annex B including, but not limited to, the SO2
system, chemical plant, crystallizors, condensate stripper, evaporators,
centrifuges, dryers, storage silos, mixing tanks, load out facilities, control
room and controls, pumps, blowers, and piping.
B-2
<PAGE>
5. An undivided 2.175% interest in the material and supply inventories and
coal supply which are common to San Juan Units 1, 2, 3, and 4, and all of the
facilities (personal property and fixtures) which are common to San Juan Units
1, 2, 3, and 4 in service on the date hereof, as referenced in the San Juan
Project Agreements, including those Pollution Control Systems and Facilities
associated with San Juan Units 1, 2, 3, and 4, a portion of which systems and
facilities are described in Annex B and including, but not limited to, the raw
water system, the water management system, and the support services complex,
improvements and structures.
6. This Instrument of Sale and Conveyance is intended to pass title as to
the fixtures situate upon the real property described in Annex A, attached
hereto, but is not intended to pass title to the underlying real property
described in Annex A.
This instrument of Sale and Conveyance is made with special warranty
covenants subject to the following disclaimer:
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THE BUILDINGS,
OTHER STRUCTURES AND IMPROVEMENTS, FIXTURES AND PERSONAL PROPERTY HEREIN
CONVEYED ARE HEREBY CONVEYED BY PNM TO THE COUNTY UPON AN "AS IS" AND "WHERE IS"
BASIS. NEITHER PNM NOR ANY PERSON OR ENTITY OF ANY KIND OR NATURE WHATSOEVER
ACTING FOR OR ON BEHALF OF PNM EITHER HAS MADE OR HEREBY MAKES ANY
REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, WHETHER EXPRESS,
IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION OR
WARRANTY AS TO THE VALUE, QUANTITY,
B-3
<PAGE>
CONDITION SALEABILITY, OBSOLESCENCE, MERCHANTABILITY, FITNESS OR SUITABILITY FOR
USE OR WORKING ORDER THEREOF OR THAT THE USE OR OPERATION THEREOF WILL NOT
VIOLATE PATENT, TRADEMARK OR SERVICE MARK RIGHTS OF ANY THIRD PARTIES.
Notwithstanding the foregoing, the County shall have the benefit, in proportion
to its interest in Unit 4, of all manufacturers' and vendors' warranties (to the
extent such warranties are transferable or enforceable by PNM for the County's
benefit) running to PNM in connection with the property herein conveyed.
NOTWITHSTANDING THE FOREGOING IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT:
(1) PNM expressly covenants and warrants that title to the Ownership Interest is
free from all former grants, sales, taxes, assessments, liens and encumbrances,
except for "Permitted Encumbrances" as that term is defined in the Agreement and
that PNM has not otherwise encumbered or alienated such interest; and (2)
nothing contained herein shall be construed to relieve PNM from its duties and
obligations under the Operating, Co-Tenancy and Construction Agreements relating
to the San Juan Project, and under the Agreement.
PNM, by execution and delivery of this instrument, and the County, by its
acceptance of the within instrument, hereby expressly waive and renounce for the
term of the Agreement, for themselves, their successors, transferees and
assigns, any and all rights of any kind or nature whatsoever, legal or
equitable, as a tenant in common in the property herein conveyed to partition
and equitable accounting.
B-4
<PAGE>
This Instrument of Sale and Conveyance and the terms and conditions
contained herein shall bind and inure to the benefit of the respective
successors, assigns, trustees and representatives of PNM and the County.
This Instrument of Sale and Conveyance shall be governed by and construed in
accordance with the laws of the State of New Mexico.
IN WITNESS THEREOF, PNM has caused this Instrument of Sale and Conveyance to
be executed as of the ____ day of ________________ 19__.
PUBLIC SERVICE COMPANY OF NEW MEXICO,
a New Mexico Corporation
By:
---------------------------------
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO)
The foregoing instrument was acknowledged before me this ___ day of_______ ,
19__ by ______________, a Senior Vice President of Public Service Company of New
Mexico, a New Mexico corporation, on behalf of said corporation.
------------------------------------
NOTARY PUBLIC
My Commission Expires:
- ---------------------
B-5
<PAGE>
ANNEX A
DESCRIPTION OF SAN JUAN UNIT 4
(REAL PROPERTY)
Three particular parcels of land situate in the Southeastern part of Section 17
and the central part of Section 20, Township 30 North, Range 15 West, NMPM, San
Juan County, New Mexico, and being more particularly described as follows:
TRACT A - POWER PLANT
Beginning at a brass cap, a corner common to Sections 17, 16, 20, and 21,
T.30N., R.15W., N.M.P.M.: thence S.58 degree 30'38"W., 2129.76 feet to the
northeast corner of said tract and the true point of beginning; thence South,
285.72 feet to the southeast corner; thence West, 433.00 feet; thence North,
24.00 feet; thence West, 298.00 feet; thence South, 12.00 feet; thence West,
124.00 feet to the southwest corner; thence North, 120.00 feet; thence East,
75.00 feet; thence North, 153.72 feet to the northwest corner: thence East,
780.00 feet to the northeast corner and true point of beginning.
Containing 5.146 acres more or less.
TRACT B - ASH HANDLING
Beginning at a brass cap, a corner common to Sections 17, 16, 20, and 21,
T.30N., R.15W., N.M.P.M.: thence S.47 degree 14'48"W., 1637.72 feet to the
B-A-1
<PAGE>
northeast corner of said tract and the true point of beginning; thence South,
255.00 feet to the southeast corner; thence West 255.00 feet to the southwest
corner; thence North 255.00 feed to the northwest corner; thence East 255.00
feed to the northeast corner and the true point of beginning.
Containing 1.493 acres more or less.
TRACT C - COOLING TOWER
Beginning at a brass cap, a corner common to Sections 17, 16, 20, and 21,
T.30N., R.15W., N.M.P.M.: thence N.89 degree 39'10"W., 695.00 feet to the
southeast corner of said tract and the true point of beginning; thence North,
281.58 feet to the northeast corner; thence West, 1087.00 feet to the northwest
corner; thence South, 275.00 feet to the southwest corner; thence S.89 degree
39'10"E., 1087.02 feet to the southeast corner and true point of beginning.
Containing 6.945 acres more or less.
NOTE: Bearings are based on the New Mexico State Plane Coordinate System, West
Zone. Distances are true ground dimensions.
B-A-2
<PAGE>
ANNEX B
DESCRIPTION OF A PORTION OF THE POLLUTION
CONTROL SYSTEMS AND FACILITIES
The Pollution Control Systems and Facilities consist, in part, of various
systems to abate or control atmospheric pollution resulting from the generation
of electricity by Unit 4 of the San Juan Generating Station (also called the San
Juan Project).
NITROGEN OXIDES REDUCTION SYSTEM - Low heat input burners with two storage
combustion firing and over-fire air ports in addition to duct work, dampers,
fans and motors for gas recirculation, all to reduce NOx emissions by reducing
flame temperatures and diluting combustion air.
DUST SUPPRESSION SYSTEM - Pipes, pumps, pipe nozzles, tanks, and associated
equipment to spray water over coal transfer points in order to control the
escape of coal dust into the atmosphere.
SULFUR OXIDE REMOVAL SYSTEM - The sulfur oxide removal system is a regenerative
system and is designed to reduce emissions of sulfur oxides to permissible
levels. The regenerative system utilizes a sodium solution reagent as the
absorbing agent and produces sulfuric acid or other marketable or
environmentally acceptable end product. The system includes material-handling
and by-product or waste disposal facilities.
B-B-1
<PAGE>
ELECTROSTATIC PRECIPITATOR - A high efficiency electrostatic precipitator for
Unit 4 along with associated structural supports and duct work, to remove fly
ash from flue gas exiting the steam boiler.
ASH HANDLING SYSTEM - A pneumatic system including blower, valves, pipes,
storage silos, unloading facilities, associated structural supports and controls
to transfer and store fly ash collected from the steam generator economizer and
precipitator hoppers. The system also includes dewatering tanks and storage
bins utilized for the preparation and storage of bottom ash immediately prior to
final disposal.
WATER MANAGEMENT SYSTEM - The water management system consists of equipment
common to all four units necessary to supply and treat all plant water
requirements, including demineralizer boiler/feedwater makeup as well as to
treat all plant drains, sanitary system effluent, and wastewater streams,
including cooling tower blow down for reuse within the generating complex or for
ultimate disposal to on site evaporation ponds to accomplish "zero water
discharge."
The water management system includes evaporation ponds, brine concentrators,
oxidation towers, drainage and run-off capture facilities and instrumentation to
regulate and assist in the operation of such facilities.
B-B-2
<PAGE>
EXHIBIT "C"
EASEMENT AND LICENSE
PUBLIC SERVICE COMPANY OF NEW MEXICO ("PNM"), a New Mexico corporation, and
TUCSON ELECTRIC POWER COMPANY ("TEP"), an Arizona corporation authorized to
transact business in New Mexico ("Grantors"), for consideration paid, grant to
Los Alamos County, a political subdivision existing under the constitution and
laws of the State of New Mexico (the "County") ("Grantee"), an easement in and
to all of the real estate, premises and leasehold interests described in that
certain Co-Tenancy Agreement between PNM and TEP (formerly "Tucson Gas and
Electric Company"), dated February 15, 1972, and filed in the records of San
Juan County, New Mexico, February 23, 1972, in Book 694 at Page 171 ET SEQ., as
modified by Modification No. 1 dated May 16, 1979, Modification No. 2 dated
December 31, 1983, Modification No. 3 dated July 17, 1984, Modification No. 4
dated October 25, 1984, and Modification No. 5 dated _________, to the extent
necessary for the purpose of allowing Grantee, the County, to own, enter upon
and inspect, and the Operating Agent, as agent for Grantee, to operate Grantee's
undivided 7.20 percent interest in Unit 4 of the San Juan Generating Station
(also called the San Juan Project) pursuant to that certain Amended and Restated
San Juan Unit 4 Purchase and Participation Agreement dated ____________, ("the
Agreement"), between PNM and the County, together with an irrevocable license to
bring upon such real estate, premises and leasehold interests, store and process
coal, fuel and water, upon payment of the charges appropriate therefor pursuant
to the terms of the Agreement, required to operate the Grantee's 7.20 percent
undivided interest in Unit 4.
C-1
<PAGE>
This easement and license shall continue for the entire term of the
Agreement and for any renewal or extension thereof or for any additional period
in which the owners of Unit 4 of the San Juan Generating Station maintain Unit 4
as an operational unit, and shall be binding alike upon the Grantors, their
successors and assigns.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the ___ day of ____________, 19__.
PUBLIC SERVICE COMPANY OF NEW MEXICO,
a New Mexico Corporation
By:
--------------------------------
TUCSON ELECTRIC POWER COMPANY,
an Arizona Corporation
By:
--------------------------------
C-2
<PAGE>
STATE OF NEW MEXICO )
ss.
COUNTY OF BERNALILLO)
The above and foregoing document was acknowledged before me this __ day of
_______________, 19__, by_______________________, a Senior Vice President of
Public Service Company of New Mexico, a New Mexico Corporation, on behalf of
said corporation.
------------------------------------
NOTARY PUBLIC
My Commission Expires:
- ---------------------
STATE OF ARIZONA)
ss.
COUNTY OF PIMA )
The above and foregoing document was acknowledged before me this __ day of
____________________, 19__ by ___________________,______________________ of
Tucson Electric Power Company, an Arizona corporation, on behalf of said
corporation.
------------------------------------
NOTARY PUBLIC
My Commission Expires:
- ---------------------
C-3
<PAGE>
EXHIBIT D-1
OPINION OF COUNSEL
[The following form of opinion to be rendered at closing may be modified as
counsel may deem necessary, subject to PNM's acceptance, which shall not be
unreasonably withheld.]
, 1985
---------------
Public Service Company of New Mexico
Alvarado Square
Albuquerque, NM 87158
Subject: Amended and Restated San Juan Unit 4
Purchase and Participation Agreement dated
as of __________________, Between Public
Service Company of New Mexico and the
Incorporated County of Los Alamos
Gentlemen:
The undersigned, attorney for the Incorporated County of Los Alamos, New
Mexico, a body politic and corporate, existing as a political subdivision under
the constitution and laws of the State of New Mexico ("the County"), and special
counsel for the County in connection with legal matters pertaining to the
Amended and Restated San Juan Unit 4 Purchase and Participation Agreement
("Amended and Restated Purchase and Participation Agreement") dated as of
__________________, between Public
D-1-1
<PAGE>
Service Company of New Mexico, a New Mexico corporation ("PNM"), and the County.
We have been requested by our client the County to provide you with this
opinion. Unless otherwise defined herein or the context hereof requires, each
item herein with its initial letter capitalized has the meaning given to such
term in the Amended and Restated Purchase and Participation Agreement.
In this connection, we have examined such certificates of public officials,
such certificates of officers of the County, and the originals or copies
certified to our satisfaction of all such corporate documents and records of the
County, and such other documents, records and papers, as we have deemed relevant
and necessary as a basis for our opinion hereinafter set forth. In our
examinations, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
the originals or all documents submitted to us as certified, photocopied or
conformed copies, and the authenticity of the originals of all such latter
documents. We have relied upon such certificates of public officials and such
certificates and statements of officers of the County with respect to the
accuracy of material factual matters contained therein, which were not
independently established by the undersigned, including the representations and
warranties of the County contained in the Amended and Restated Purchase and
Participation Agreement.
D-1-2
<PAGE>
Based upon the foregoing, it is our opinion that as of the date hereof:
1. The County is a body politic and corporate, existing as a political
subdivision under the constitution and laws of the State of New Mexico, and has
the requisite power and authority to purchase the Transfer Interest.
2. The execution, delivery and performance of the Amended and Restated
Purchase and Participation Agreement by the County has been duly and effectively
authorized by all requisite action of the County.
3. The County has full power and authority to execute the Amended and
Restated Purchase and Participation Agreement, and the Amended and Restated
Purchase and Participation Agreement has been duly executed and delivered by the
County and is the valid and binding obligation of the County, enforceable
against the County in accordance with its terms. The County has adopted an
ordinance authorizing the issuance of revenue bonds to finance the acquisition
of the Transfer Interest and such ordinance has become effective in accordance
with Section 3-31-4 NMSA 1978.
4. The County has obtained from the New Mexico Public Service Commission
("NMPSC") all consents and approvals necessary for the execution, delivery and
performance of the Amended and Restated Purchase and Participation Agreement.
In our opinion, such consents and approvals of the NMPSC, other than other
consents and approvals already obtained,
D-1-3
<PAGE>
constitute all regulatory or other governmental approvals required of the County
to fully perform its obligations under the Amended and Restated Purchase and
Participation Agreement. To the best of our knowledge, no appeal of the NMPSC
approval has been undertaken and in our opinion, the statutory period for appeal
has expired.
5. To the best of our knowledge, the execution and delivery of the Amended
and Restated Purchase and Participation Agreement and compliance with the
provisions thereof will not conflict with or constitute on the part of the
County a breach of or a default under any existing law, court or administrative
regulation, decree or order to which the County is subject to any agreement,
ordinance, indenture, mortgage, lease or other instrument by which the County is
or may be bound.
6. To the best of our knowledge, there is no action, suit, proceeding,
inquiry or investigation at law or in equity or before or by any public board or
body pending or, to our knowledge, threatened against or affecting the County,
or to our knowledge, any basis therefor, wherein an unfavorable decision, ruling
or finding would have a material adverse effect on the County's performance of
the transactions contemplated by the Amended and Restated Purchase and
Participation Agreement or on its obligations thereunder.
The opinions expressed herein relating to the enforceability of the rights
and remedies provided in the Amended and Restated Purchase and Participation
Agreement are qualified to the extent that such rights and remedies (i) may be
limited by bankruptcy, insolvency, reorganization,
D-1-4
<PAGE>
moratorium or other similar laws heretofore or hereafter enacted affecting the
creditors' rights, to the extent constitutionally applicable, (ii) may be
subject to the exercise of judicial discretion in accordance with general
principles of equity, (iii) may be subject to the valid exercise of the
sovereign police powers of the State of New Mexico or (iv) may be subject to the
constitutional powers of the United States of America or the State of New
Mexico.
The opinions expressed herein are for the sole use of PNM and may be relied
upon only by PNM, its counsel, bond counsel for the County and the County's
underwriters counsel.
Our opinion is not to be circulated, quoted, or otherwise relied upon by any
other party except with our prior written consent.
Very truly yours,
Rodey, Dickason, Sloan, Akin & Robb, P.A.
By:
------------------------------------
D-1-5
<PAGE>
EXHIBIT D-2
OPINION OF COUNSEL
[Letterhead of Keleher & McLeod, P.A.]
[The following form of opinion to be rendered at closing may be modified as
counsel may deem necessary, subject to the County's acceptance, which shall not
be unreasonably withheld.]
, 1985
---------------
Incorporated County of Los Alamos
Post Office Box 30
Los Alamos, New Mexico 87544
Gentlemen:
We have acted as counsel for Public Service Company of New Mexico, a New
Mexico corporation ("PNM"), in connection with legal matters pertaining to the
Amended and Restated San Juan Unit 4 Purchase and Participation Agreement
("Amended and Restated Purchase and Participation Agreement"), dated as of
___________________, between PNM and the Incorporated County of Los Alamos, a
body politic and corporate existing as a political subdivision under the laws of
the State of New Mexico (the "County"). We have been requested by our client,
PNM, to provide you with this opinion. Unless otherwise defined herein or the
context hereof
D-2-1
<PAGE>
requires, each term used herein with its initial letter capitalized has the
meaning given to such term in the Amended and Restated Purchase and
Participation Agreement.
In this connection, we have examined such certificates of public officials,
such certificates of officers of PNM, and the originals or copies certified to
our satisfaction of all such corporate documents and records of PNM, and such
other documents, records and papers, including copies of Orders issued by the
New Mexico Public Service Commission ("NMPSC") in Case 1923 and in Case 1925 and
by the Federal Energy Regulatory Commission ("FERC") in Docket No. EC 85-2-000
as we have deemed relevant and necessary as a basis for our opinion hereinafter
set forth. In our examinations, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to the originals of all documents submitted to us as certified,
photocopied or conformed copies, and the authenticity of the originals of all
such latter documents. We have relied upon such certificates of public
officials and such certificates and statements of officers of PNM with respect
to the accuracy of material factual matters contained therein, which were not
independently established by Keleher & McLeod, P.A., including the
representations and warranties of PNM contained in the Amended and Restated
Purchase and Participation Agreement.
D-2-2
<PAGE>
Based upon the foregoing, we are of the opinion that as of the date hereof:
1. PNM is a corporation duly organized, validly existing and in good
standing as a public utility under the laws of the State of New Mexico and has
corporate power and authority to carry on its business as it is presently being
conducted, to own its undivided ownership interest in Unit 4, and to sell to the
County the Transfer Interest.
2. The execution, delivery, and performance of the Amended and Restated
Purchase and Participation Agreement by PNM have been duly and effectively
authorized by all requisite corporate action.
3. PNM has full power and authority to execute the Amended and Restated
Purchase and Participation Agreement, and the Amended and Restated Purchase and
Participation Agreement has been duly executed and delivered by PNM and is the
valid and binding obligation of PNM, enforceable against PNM in accordance with
its terms.
4. PNM has obtained from the NMPSC and the FERC all consents and approvals
necessary for the execution, delivery and performance of the Amended and
Restated Purchase and Participation Agreement. In our opinion, such consents
and approvals of the NMPSC and the FERC constitute all regulatory or other
governmental approvals required of PNM to fully perform its obligations under
the Amended and Restated Purchase and
D-2-3
<PAGE>
Participation Agreement. To the best of our knowledge, no appeal of either the
NMPSC or FERC approval has been taken and in our opinion the statutory period
for appeal has expired.
5. To the best of our knowledge, the execution and delivery of the Amended
and Restated Purchase and Participation Agreement by PNM and compliance with the
provisions thereof will not conflict with or constitute on the part of PNM a
breach of or a default under existing law, court or administrative regulation,
decree or order to which PNM is presently subject, or any existing agreement,
ordinance, indenture, mortgage, lease or other instrument by which PNM is
presently bound.
6. To the best of our knowledge, all releases, release of liens, trusts,
mortgages and encumbrances, except Permitted Encumbrances, consents, and
approvals, including the release by IRVING TRUST COMPANY of the lien created
under the PNM Indenture, necessary to the execution, delivery and performance of
the Amended and Restated Purchase and Participation Agreement by PNM have been
obtained.
7. Except as set forth in reports filed by PNM with the Securities and
Exchange Commission on Forms 10-K, 10-Q, or 8-K, for the period ending December
31, 1982 through the date of this letter, to the best of our knowledge, there is
no action, suit, proceeding, inquiry or investigation at law or in equity or
before or by any public board or body pending or, to our knowledge, threatened
against or affecting PNM, or to our knowledge, any basis therefor, wherein any
unfavorable decision,
D-2-4
<PAGE>
ruling or finding would have a material adverse effect on PNM's performance of
the transactions contemplated by the Amended and Restated Purchase and
Participation Agreement or on its obligations hereunder.
The opinions expressed herein relating to the enforceability of the rights
and remedies provided in the Amended and Restated Purchase and Participation
Agreement are qualified to the extent that such rights and remedies (i) may be
limited to bankruptcy, insolvency, reorganization, moratorium or other similar
laws heretofore or hereafter enacted affecting creditors' rights, (ii) may be
subject to the exercise of judicial discretion in accordance with general
principles of equity, (iii) may be subject to the valid exercise of the
sovereign police powers of the State of New Mexico, and (iv) may be subject to
the constitutional powers of the United States of America or the State of New
Mexico.
The opinions expressed herein are for the sole use of the County and may be
relied upon only by the County and its counsel. Our opinion is not to be
circulated, quoted or otherwise relied upon by any other party except with our
prior written consent.
Yours very truly,
KELEHER & MCLEOD, P.A.
By:
------------------------
D-2-5
<PAGE>
EXHIBIT E
THE COUNTY'S ESTIMATED NET BOOK INVESTMENT
ACTUALS THROUGH JULY 31, 1984 - BUDGETED THROUGH COMPLETION
<TABLE>
<CAPTION>
L.A.'S L.A.'S L.A.'S
L.A.'S ACTUAL ACTUAL L.A.'S ESTIMATED
NET BOOK VALUE EXPENDITURES DEPRECIATION NET BOOK VALUE EXPENDITURES
IA DESCRIPTION 12/31/83 1/84 - 7/84 1/84 - 7/84 7/31/84 8/84 - 12/84
-- ----------- -------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
6050 WCC Coal Water Supply Handling Facility $1,655.99 $0.00 ($25.06) $1,630.93 $0.00
6051 602A Air Monitoring 70,787.34 (553.17) 0.00 70,234.17 0.00
6052 Reservoir Raising 164,610.08 0.00 (2,491.03) 162,119.05 0.00
6079 Automatic Generation Control 1,008.81 0.00 (15.12) 993.69 0.00
6091 San Juan Paving 16,271.36 8,365.24 (184.10) 24,452.50 52,166.00
6094 1980 Construction Budget Item 25,137.18 0.00 (855.89) 24,281.29 0.00
6184 San Juan Auxiliary Power Improvements 148,506.14 (10,564.83) (2,427.88) 135,513.43 0.00
6185 San Juan Acid Plant 231,414.53 440.10 (9,473.29) 222,381.34 0.00
6194 1981 Construction Budget Items 17,863.24 85.37 (682.15) 17,266.46 0.00
6282 Power Plant Maint. Information System 10,778.64 962.18 0.00 11,740.82 0.00
6294 1982 Construction Budget Items 29,671.68 901.69 (664.28) 29,909.09 1,678.00
6295 1983 Construction Budget Items 65,557.70 7,691.68 (532.54) 72,716.84 13,456.00
6349 Unit 4 Close-Out Items 5,371.05 3,421.53 0.00 8,792.58 6,525.00
6360 Units 3 & 4 SO2 Close-Out Items 959.61 3,317.49 0.00 4,277.10 4,132.00
6361 Raw Water & Fire Prot. Supply Project 5,593.21 2,142.36 0.00 7,735.57 12,857.00
6394 1983 Construction Budget Items 50,759.58 5,776.61 (4.86) 56,531.33 3,009.00
6395 1983 Construction Budget Items 12,438.93 15,066.35 (9.45) 27,495.83 9,394.00
6396 1983 Construction Budget Items 4,540.21 9,718.77 0.00 14,258.98 3,415.00
6398 Materials Management System 6,050.38 0.00 (23.73) 6,026.65 0.00
6441 Unit 4 Common in Unit 3 Utility 1,471,536.35 0.00 (23,740.01) 1,447,796.34 0.00
6442 Unit 4 Utility 20,895,298.88 (3,091.87) (317,463.44) 20,574,743.55 0.00
6444 Unit 4 Boilerwork 0.00 33,552.77 0.00 33,552.77 30,606.00
6445 Expansion Joints 0.00 59,854.84 0.00 59,854.84 0.00
6446 Capitalized Spare Parts 0.00 20,002.72 0.00 20,002.72 0.00
6490 1984 Construction Budget Items 0.00 4,691.68 0.00 4,691.68 1,794.00
6494 1984 Construction Budget Items 0.00 5,889.58 0.00 5,889.58 24,883.00
6495 1984 Construction Budget Items 0.00 25,108.36 0.00 25,108.36 0.00
6496 1984 Construction Budget Items 0.00 488.64 0.00 488.64 0.00
6561 Unit 4 Common in Unit 3 Environmental 17,396.33 0.00 (272.72) 17,123.61 0.00
6562 Unit 4 Environmental 7,630,217.62 0.00 (115,944.89) 7,514,272.73 0.00
6760 Unit 4 Common in Unit 3 SO2 31,337.64 0.00 (1,743.35) 29,594.29 0.00
6761 Units 3 and 4 Wastewater 922,509.93 818.55 (44,957.25) 878,371.23 0.00
6894 1978 Construction Budget Items 618.27 0.00 (25.62) 592.65 0.00
6898 1978 Construction Budget Items 836.71 0.00 (23.52) 813.19 0.00
6962 Water Management Study 1,885,337.16 210,275.04 (32,450.11) 2,063,162.09 81,838.00
6963 Unit 4 SO2 4,741,736.83 (1,820.16) (197,090.45) 4,542,826.22 0.00
6985 1979 CBIs and Const. Support Facility 277,539.14 915.71 (4,123.03) 274,331.82 0.00
6994 1979 Construction Budget Items 9,985.66 0.00 (458.36) 9,527.30 0.00
6998 1979 Construction Budget Items 1,347.77 0.00 (44.73) 1,303.04 0.00
7094 1980 Retirement Budget Items (2.09) 0.00 0.00 (2.09) 0.00
7098 Removal of Old Support Facility 964.44 138.77 0.00 1,103.21 0.00
7181 San Juan Transformer Fire Retirement 38.67 0.00 0.00 38.67 0.00
7294 1982 Retirement Budget Items (30.26) 0.00 0.00 (30.26) 0.00
7394 1983 Retirement Budget Items (1.63) (12.00) 0.00 (13.63) 0.00
7445 Retirement Expansion Joints 0.00 0.00 0.00 0.00 14,353.00
7460 Retirement Reverse Osmosis 0.00 0.00 0.00 0.00 4,631.00
7494 1984 Retirement Budget Items 0.00 0.00 0.00 0.00 (198.00)
7681 Reverse Osmosis Building Demolition (63.06) 0.00 0.00 (63.06) 0.00
--------------- ------------- ------------- ---------------- ------------
38,755,580.00 403,584.00 (755,726.86) 38,403,437.14 264,539.00
--------------- ------------- ------------- ---------------- ------------
--------------- ------------- ------------- ---------------- ------------
<CAPTION>
L.A.'S L.A.'S SHARE L.A.'S SHARE
L.A.'S ESTIMATED OF RETENTION OF ESTIMATED L.A.'S
ESTIMATED BOOK AND PAYABLES EXPENDITURES ESTIMATED BOOK
DEPRECIATION VALUE 7/31/84 1/84 - VALUE THROUGH
IA DESCRIPTION 8/84 - 12/84 12/31/84 BALANCE COMPLETION COMPLETION
-- ----------- ------------ ----------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
6050 WCC Coal Water Supply Handling Facility ($17.90) $1,613.03 $0.00 $0.00 $1,613.03
6051 602A Air Monitoring 0.00 70,234.17 0.00 0.00 70,234.17
6052 Reservoir Raising (1,779.31) 160,339.74 0.00 0.00 160,339.74
6079 Automatic Generation Control (10.80) 982.89 0.00 0.00 982.89
6091 San Juan Paving (131.50) 76,487.00 6,759.54 23,173.00 106,419.54
6094 1980 Construction Budget Item (611.35) 23,669.94 0.00 0.00 23,669.94
6184 San Juan Auxiliary Power Improvements (1,734.20) 133,779.23 0.00 0.00 133,779.23
6185 San Juan Acid Plant (6,766.63) 215,614.71 0.00 0.00 215,614.71
6194 1981 Construction Budget Items (487.25) 16,779.21 0.00 0.00 16,779.21
6282 Power Plant Maint. Information System 0.00 11,740.82 0.00 0.00 11,740.82
6294 1982 Construction Budget Items (474.49) 31,112.60 45.10 0.00 31,157.70
6295 1983 Construction Budget Items (380.39) 85,792.45 121.54 0.00 85,913.99
6349 Unit 4 Close-Out Items 0.00 15,317.58 627.91 19,825.00 35,770.49
6360 Units 3 & 4 SO2 Close-Out Items 0.00 8,409.10 84.28 5,418.00 13,911.38
6361 Raw Water & Fire Prot. Supply Project 0.00 20,589.10 0.86 0.00 20,589.96
6394 1983 Construction Budget Items (3.47) 59,533.58 307.89 0.00 59,841.47
6395 1983 Construction Budget Items (6.75) 36,889.83 1,141.66 0.00 38,031.49
6396 1983 Construction Budget Items 0.00 17,657.03 (432.56) 0.00 17,224.47
6398 Materials Management System (16.95) (10,930.50) 0.00 0.00 (10,930.50)
6441 Unit 4 Common in Unit 3 Utility (16,957.15) 1,221,036.74 0.00 0.00 1,221,036.74
6442 Unit 4 Utility (226,759.60) 20,574,743.55 (69.96) 0.00 20,574,673.59
6444 Unit 4 Boilerwork 0.00 64,158.77 12,965.30 722.00 77,846.07
6445 Expansion Joints 0.00 59,854.84 98.01 0.00 59,952.85
6446 Capitalized Spare Parts 0.00 20,002.72 0.00 0.00 20,002.72
6490 1984 Construction Budget Items 0.00 6,485.68 0.00 0.00 6,485.68
6494 1984 Construction Budget Items 0.00 30,772.58 223.05 0.00 30,995.63
6495 1984 Construction Budget Items 0.00 25,108.36 863.92 0.00 25,972.28
6496 1984 Construction Budget Items 0.00 488.64 0.00 0.00 488.64
6561 Unit 4 Common in Unit 3 Environmental (194.80) 16,928.81 0.00 0.00 16,928.81
6562 Unit 4 Environmental (82,817.78) 7,431,454.95 0.00 0.00 7,431,454.95
6760 Unit 4 Common in Unit 3 SO2 (1,245.25) 28,349.04 0.00 0.00 28,349.04
6761 Units 3 and 4 Wastewater (32,112.32) 846,258.91 36.74 0.00 846,295.65
6894 1978 Construction Budget Items (18.30) 574.35 0.00 0.00 574.35
6898 1978 Construction Budget Items (16.80) 796.39 0.00 0.00 796.39
6962 Water Management Study (23,178.65) 2,121,821.44 16,340.10 98,357.00 2,236,518.54
6963 Unit 4 SO2 (140,778.89) 4,402,047.33 0.00 0.00 4,402,047.33
6985 1979 CBIs and Const. Support Facility (2,945.02) 271,386.80 22.68 0.00 271,409.48
6994 1979 Construction Budget Items (327.40) 9,199.90 0.00 0.00 9,199.90
6998 1979 Construction Budget Items (31.95) 1,271.09 0.00 0.00 1,271.09
7094 1980 Retirement Budget Items 0.00 (2.09) 0.00 0.00 (2.09)
7098 Removal of Old Support Facility 0.00 1,103.21 14.94 0.00 1,118.15
7181 San Juan Transformer Fire Retirement 0.00 38.67 0.00 0.00 38.67
7294 1982 Retirement Budget Items 0.00 (30.26) 0.00 0.00 (30.26)
7394 1983 Retirement Budget Items 0.00 (13.63) 0.00 0.00 (13.63)
7445 Retirement Expansion Joints 0.00 14,353.00 0.00 0.00 14,353.00
7460 Retirement Reverse Osmosis 0.00 4,631.00 0.00 0.00 4,631.00
7494 1984 Retirement Budget Items 0.00 (198.00) 0.00 0.00 (198.00)
7681 Reverse Osmosis Building Demolition 0.00 (63.06) 0.00 0.00 (63.06)
-------------- --------------- ----------- ------------- ---------------
(539,804.90) 38,128,171.24 39,151.00 147,495.00 38,314,817.24
-------------- --------------- ----------- ------------- ---------------
-------------- --------------- ----------- ------------- ---------------
</TABLE>
<PAGE>
EXHIBIT F
The County's Estimated Share of
Prepaid Items as
of December 31, 1984 (1)
<TABLE>
<CAPTION>
FERC
Account
Number Item County's Share
- ------- ---- --------------
<S> <C> <C>
128 Insurance Deposits $ 3,926.36
151 Fuel Stock 739,978.66
154 Materials and Supplies 558,395.79
165 Prepaids 10,419.61
163 Stores Expense Undistributed 40,953.46
183 Preliminary Engineering 30,132.57
186 Deferred Debits (1,781.90)
-------------
Subtotal $1,382,024.55
Less: 232 Payables (2) (241,573.08)
253 Retentions (2)
-------------
Totals $1,140,451.47
<FN>
- -------------------
(1) Reflects actual balances as of July 31, 1984, and no attempt has been made
to project increases or decreases which may occur prior to the date of
Closing due to the volatility of inventory levels.
(2) These amounts would represent future cash flows to the County.
</TABLE>
<PAGE>
EXHIBIT 10.49
October 26, 1994
Mr. Roger J. Flynn
2801 W. Decatur Avenue
Fresno, California 93711
Re: Offer of Employment
Dear Roger:
On behalf of the Public Service Company of New Mexico ("PNM"), I am pleased to
offer you the position of Senior Vice President of the Electric Service Business
Unit ("Senior Vice President - ESBU") effective December 1, 1994.
The terms of this offer of employment are:
1. SALARY. Your annual base salary will be $154,000.00 payable on a bi-weekly
basis. Your salary is determined by the Company in accordance with the
compensation policies applicable to all PNM employees.
2. FRINGE BENEFITS. PNM's fringe benefit package consists of two components.
Please note that during the first six months of employment, certain benefits are
not available or are contributory as specified in documents which will be sent
to you today via Federal Express.
The first component includes benefits available to all PNM employees, regardless
of position. This includes participation in PNM's "Benefits My Way," flexible
benefit plans which provide benefit options and benefit credits for the purchase
of medical and dental coverage, dependent life insurance coverage and flexible
spending accounts for health care and day care expenses. We enclose the PNM
Employee Handbook ("Handbook") which contains the Summary Plan Descriptions for
the plans. You are entitled to participate in the benefits available under
PNM's policies or programs regarding sick leave, holidays, absence and leaves,
merchandise purchase plan, employee assistance program and workers compensation,
all of which are described in the Handbook. You are also eligible to
participate in the
<PAGE>
Mr. Roger J. Flynn
October 26, 1994
Page 2
Master Employee Savings Plan (a 401k plan). The only exception to the benefits
described in this paragraph is that you are eligible to accrue three (3) weeks
of vacation annually beginning immediately rather than after your fifth (5th)
year of employment.
The second component of the fringe benefit package includes benefits which are
provided to senior officers of PNM. PNM will reimburse you, on an annual basis,
for up to $700.00 for costs incurred in a routine physical examination. PNM
will supplement certain health benefits as described in the enclosed Executive
Medical Plan Document up to a maximum of $2,500.00 per year. PNM will also
provide 24 hour per day insurance coverage amount of $250,000.00 and Management
Life Insurance coverage up to $400,000.00 at no cost to you. PNM will pay for
tax return preparation assistance up to a maximum of $1,500.00 per year. Paid
parking will be provided.
As a Senior Officer, you will also participate in PNM's Executive Retention
Plan, which provides benefits in the event of a change in control of PNM. We
enclose the plan document.
You will be designated by the Board's Management Compensation and Development
Committee to participate in the Performance Stock Plan ("PSP") as a Senior
Officer. The Plan document is enclosed with sample calculations for
illustrative purposes only. Because your employment will commence on or about
December 1, 1994, you are thus ineligible for an Initial Award of Options under
the PSP; PNM will render a one time cash payment of $20,500.00 to be paid upon
your acceptance of this offer, to enable you to purchase 1,000 shares of PNM
stock.
3. TERMINATION AND SEVERANCE BENEFITS. As an officer, the Senior Vice
President - ESBU is employed at the will of the Company. The Company can
terminate your employment with or without cause or advance notice. If your
employment is terminated for cause or if you resign from employment, you will be
ineligible for any severance benefits.
After you complete six (6) months of employment with PNM, you will become a
participant in PNM's Non-Union Severance Pay Plan ("Plan"). However, in the
unlikely event that you are terminated from employment for reasons other than
cause during your first six months of employment, PNM will pay you severance
benefits equivalent to those paid to Senior Management Plan participants.
4. HOME SALE EXPENSES. Under PNM's Relocation and Transfer Policy, you may
elect one of the following options.
<PAGE>
Mr. Roger J. Flynn
October 26, 1994
Page 3
a. You may elect to sell your own home. You may use our Home Marketing
Assistance Program, which provides advice regarding the marketing and sale
of a residence, for 90 days. If the closing of the sale of your home
occurs within six months of your first day at PNM, PNM will pay 8% of the
sale price to you for reimbursement of closing costs. If your home is sold
within 120 days of your first day, PNM will pay you an additional 3% of the
sales price.
b. You may elect to turn your home over to PNM's Relocation Service which
will purchase your home from you at a price determined by the Service. You
must elect this option within 120 days of your first day. PNM will arrange
for detailed information regarding this option to be provided to you as
soon as possible.
5. RELOCATION BENEFITS. PNM will reimburse you for costs incurred in two
trips with your spouse to look for a new home. Reimbursable costs are airfare,
hotel, car rental expenses and meals for trips of no longer than three (3) days
duration. PNM will reimburse you for the actual costs incurred in moving your
household possession to New Mexico pursuant to PNM's Employee Relocation Expense
Policy, as modified by this paragraph. Ryder Move Management will make the
necessary arrangements for you and will provide Destination Services. Any
unusual items or expenses will require the advance approval of PNM.
6. INTERIM LIVING EXPENSES. For a period of two (2) months, PNM will reimburse
you for rent and utilities, except for telephone, incurred while living in a
temporary residence.
7. RETIREMENT. You will be eligible to participate in PNM's Employee
Retirement Plan, as described in the PNM Benefits Handbook.
8. CONDITIONS. As with all new PNM employees, your appointment is contingent
upon passing a physical examination and a drug and alcohol screen, paid for by
PNM. This offer may be accepted until October 28, 1994. Your expected
reporting date is no later than December 1, 1994.
9. CONSULTING SERVICES PRIOR TO START OF PNM EMPLOYMENT. You may be asked to
perform services for PNM prior to the commencement of employment with PNM by Ben
Montoya or his designee. As you perform such services, you will perform them as
an independent contractor of PNM. For each day services are rendered, PNM
agrees to pay you Six Hundred dollars ($600.00) per day and will reimburse you
for all reasonable
<PAGE>
Mr. Roger J. Flynn
October 26, 1994
Page 4
expenses you incur, including but not limited to, travel, lodging and meal
expenses. As an independent contractor, you will be solely responsible for your
state and federal taxes, FICA, FUTA, unemployment taxes and workers'
compensation coverage. While an independent contractor, you will not be
eligible for any fringe benefits PNM provides to its employees. You agree to
maintain the confidentiality of any confidential, proprietary, trade secret or
financial information of PNM that you receive while performing services as an
independent contractor.
We look forward to your acceptance of our offer and will be happy to provide any
additional information. If you accept this offer, please sign the original of
this letter and return it to me.
Our Company is enthusiastic at the prospect of your affiliation with PNM and
looks forward to working with you. This offer reflects our full support and
confidence in your talents and abilities.
Very truly yours,
/s/ Benjamin F. Montoya
-------------------------------------
Benjamin F. Montoya
President and Chief Executive Officer
Accepted:
/s/ Roger J. Flynn
- --------------------------
Date: /s/ October 26, 1994
---------------------
<PAGE>
BEFORE THE NEW MEXICO PUBLIC UTILITY COMMISSION
IN THE MATTER OF THE APPLICATION OF )
GAS COMPANY OF NEW MEXICO FOR AN )
ORDER AUTHORIZING RECOVERY OF )
SETTLEMENT AMOUNTS AND LEGAL AND )
CONSULTING FEES AS PRODUCER )
TAKE-OR-PAY COSTS THROUGH RATE )
RIDER NO. 8, )
) Case No. 2503
GAS COMPANY OF NEW MEXICO, a )
division of Public Service Company )
of New Mexico, )
)
Applicant. )
___________________________________________)
IN THE MATTER OF THE APPLICATION OF )
GAS COMPANY OF NEW MEXICO FOR AN )
ORDER AUTHORIZING RECOVERY OF MDL-403 )
COSTS THROUGH RATE RIDER NO. 8, )
CERTAIN PAST PRICING AMOUNTS THROUGH ) Case No. 2521
RATE RIDER NO. 4 and ALLOCATION OF )
AMOUNTS INCURRED IN VARIOUS )
SETTLEMENTS, )
)
GAS COMPANY OF NEW MEXICO, a division )
of Public Service Company of New )
Mexico, )
)
Applicant. )
___________________________________________)
STIPULATION
The undersigned parties (the "Parties") including Gas Company of New
Mexico, a division of Public Service Company of New Mexico ("GCNM"), Staff
("Staff") of the New Mexico Public Utility Commission (the "Commission" or
"NMPUC"), and the United
1
<PAGE>
States Executive Agencies (the "USEA") stipulate as follows:
1. The Parties were some of the parties to NMPUC Case No. 2183 ("Case
2183"). The Commission's Final Order in Case 2183, issued on December 18, 1989,
adopted a Stipulation ("Case 2183 Stipulation") that provided that GCNM would be
permitted to collect from its customers 75% of all producer take-or-pay costs,
as that term is defined in the Case 2183 Stipulation ("Producer TOP Costs"),
incurred by GCNM and Sunterra Gas Gathering Company ("SGGC") to settle certain
contract disputes with producers and 100% of amounts incurred to settle certain
pricing claim disputes with producers that were determined by the Commission to
be prudently incurred or otherwise just and reasonable ("MDL-403 Costs"). Such
amounts are collectible through Rate Rider No. 8, which was approved by the
Commission in NMPUC Case No. 2340 ("Case 2340").
2. On March 29, 1993, the Commission, in its Final Order in NMPUC Case
No. 2353 ("Case 2353"), opened a new docket to consider issues regarding GCNM's
allocations as Producer TOP Costs of settlement amounts paid and legal and
consulting fees incurred in connection with settlements with Unicon Producing
Company, Pioneer Exploration Company, Oryx Energy Company and El Paso Natural
Gas Company. That case was docketed as NMPUC Case No. 2503 ("Case 2503"). The
New Mexico Attorney General (the "AG"), the New Mexico Industrial Energy
Consumers ("NMIEC"), the
2
<PAGE>
USEA, the Incorporated County of Los Alamos ("LAC"), Western Natural Gas and
Transmission Corporation ("WNG"), and the City of Albuquerque timely
intervened. In that case, GCNM sought to recover as Producer TOP Costs
approximately $11.9 million of the approximately $17.3 million it had incurred
relating to those settlements. Staff filed testimony supporting recovery of
$8,997,166 as Producer TOP Costs, and the AG filed testimony supporting recovery
of a lesser amount. Hearings were held in November and December of 1993 and
briefs were filed by GCNM, Staff and the AG in February and March of 1994.
3. NMPUC Case No. 2521 ("Case 2521") was docketed by the Commission to
consider the Petition For Order Suspending a Portion of Gas Company of New
Mexico's Gas Cost Factor, filed by Staff on June 24, 1993; the Joint Motion for
Consolidation of Issues Relating to Amounts Paid In Certain Settlements, filed
by Staff, GCNM, and the AG on June 30, 1993; and the Petition For An Order
Investigating the Allocation of Amounts in Gas Company of New Mexico's
Take-Or-Pay Surcharge Statement Filed June 1, 1993, filed by the AG on June 30,
1993. In granting all three requests, the Commission established the scope of
Case 2521 to determine:
a. The allocation of amounts incurred by GCNM and SGGC in the
settlements with Amoco Production Company; Conoco, Inc.; the Click-Hill Group;
Mobil Producing Texas and New Mexico;
3
<PAGE>
and Texaco, Inc. and Texaco Exploration and Production, Inc. between MDL-403
Costs, Producer TOP Costs and any other costs, including non-MDL-403 pricing
amounts.
b. The prudence of any amounts GCNM maintains are MDL-403 Costs or
non-MDL-403 pricing amounts that GCNM claims should be recovered through its
purchased gas adjustment clause ("PGAC").
The AG, NMIEC, WNG, and the USEA timely intervened in Case 2521. In that
case, GCNM sought to recover through rates approximately $36.7 million of the
approximately $46.0 million it had incurred in the settlements at issue. GCNM
sought to recover approximately $27.8 million as Producer TOP Costs and
approximately $6.7 million as MDL-403 Costs through Rate Rider No. 8, plus
approximately $2.2 million as non-MDL-403 pricing amounts through its PGAC, Rate
Rider No. 4. Staff filed testimony supporting recovery of a total of
approximately $33.0 million, including approximately $25.8 million of Producer
TOP Costs and approximately $5.4 million of MDL-403 Costs to be collected
through Rate Rider No. 8 and $1.8 million of non-MDL-403 pricing amounts to be
collected through Rate Rider No. 4. The AG and the USEA filed testimony
supporting recovery of lesser amounts.
A hearing was commenced on August 23, 1994. After the first day, the
hearing was recessed at the request of GCNM,
4
<PAGE>
Staff, the AG and the USEA so that they could continue to negotiate a
settlement.
4. This Stipulation is the result of those settlement negotiations. It
resolves all outstanding issues raised in Cases 2503 and 2521, which pertain to
Rate Rider No. 8 and Rate Rider No. 4 collection of settlement amounts paid to
producers and legal and consulting expenses incurred by GCNM and SGGC in
reaching the producer settlements at issue in those dockets.
5. Under this Stipulation, GCNM shall be authorized to collect a total of
$43.35 million of the approximately $48.6 million it sought to recover in Cases
2503 and 2521. Of this amount, GCNM will be authorized to recover $41.55
million through Rate Rider No. 8 and $1.8 million through Rate Rider No. 4.
6. Under the terms of this Stipulation, GCNM shall be authorized to
collect $8,997,165 relating to the settlements and issues that were the subject
of Case 2503. This entire amount shall be classified as Producer TOP Costs and
shall be recovered through Rate Rider No. 8. In addition, GCNM shall be
authorized to collect $34,352,835 relating to the settlements and issues that
were the subject of Case 2521. Of that amount, $27,089,315 shall be classified
as Producer TOP Costs and $5,463,520 shall be classified as MDL-403 Costs, all
of which shall be collected through Rate Rider No. 8, and $1,800,000 shall be
classified as non-MDL-403 pricing amounts and collected through Rate Rider No.
5
<PAGE>
4.
7. The allocations of Producer TOP Costs and MDL-403 Costs described in
paragraph 6 above are just and reasonable. The $5,463,520 allocated as MDL-403
Costs shall be deemed to be just and reasonable. The $1,800,000 classified as
non-MDL-403 pricing amounts shall be deemed to be just and reasonable purchased
gas costs properly recoverable through the PGAC.
8. Sales Service Customers, as that term is defined in GCNM's First
Revised Rule No. 27, along with any End-Use Transportation Customers who were
Sales Service Customers on the Status Determination Date of March 1, 1990, shall
be designated as the "Sales MDL-403 Cost Pool." Amounts to be collected from
the Sales MDL-403 Pool shall be collected in the manner set forth in paragraphs
3.A.3(a), 3.A.5(a)(i), and 3.A.5(b) of First Revised Rule No. 27.
9. The $36,086,480 classified as Producer TOP Costs shall be collected
from Sales Service Customers and End-Use Transportation Customers, as those
terms are defined in GCNM's First Revised Rule No. 27, on a volumetric basis,
pursuant to the Final Orders in Cases 2183 , 2340 and 2353 and paragraphs 3.A.1.
and 3.A.5. of GCNM's First Revised Rule No. 27.
10. For purposes of allocating the MDL-403 Costs under this Stipulation,
the Status determination Date as defined in the Final Order in Case 2340 and in
GCNM's First Revised Rule No. 27
6
<PAGE>
shall be March 1, 1990. In accordance with the Final Order in Case 2340 and
GCNM's First Revised Rule No. 27, once a customer's status is determined, that
status shall remain unchanged for the duration of the collection of the costs
described in this Stipulation. The March 1, 1990, Status Determination Date
notwithstanding, the Department of Energy in Los Alamos, Hollamon Air Force
Base, Cannon Air Force Base and White Sands Missile Range shall be deemed to be
End-Use Transportation Customers as of the Status Determination Date, March 1,
1990.
11. The provisions of the 2183 Stipulation, the Final Orders in Cases 2183
and 2340, and GCNM's First Revised Rule No. 27 mandating the development of
individual, pro-rata MDL-403 Costs allocations for End-Use Transportation
Customers shall be modified to provide for the recovery on a pooled basis of any
MDL-403 Costs under this Stipulation from End-Use Transportation Customers, as
that term is defined in GCNM's First Revised Rule No. 27. End-Use
Transportation Customers as defined in paragraph 10 above, along with any
End-Use Transportation Customers whose service from GCNM commenced after March
1, 1990, shall be designated as the "Transport MDL-403 Cost Pool." Amounts to
be collected from the Transport MDL-403 Cost Pool will not be calculated
pursuant to the provisions of Rate Rider No. 8 as specified in GCNM's First
Revised Rule No. 27, paragraph 3.A.3(b), and that paragraph shall be amended to
provide that a
7
<PAGE>
single MDL-403 Factor shall be computed for all members of the Transport MDL-403
Cost Pool in a manner similar to that set forth for the Recoverable Amounts
Authorized in Case 2353 as described in paragraph 3.A.6. of First Revised Rule
No. 27, except such amounts to be recovered shall be recovered with interest
after the first year of collection as provided in paragraph 3.A.3.(a)(ii) and
3.A.3.(b)(ii) of First Revised Rule No. 27. The amounts allocated to the
Transport MDL-403 Cost Pool shall be recovered from members of the pool
prospectively on a per-therm basis.
12. Sales Service Customers, as that term is defined in GCNM's First
Revised Rule No. 27, along with any End-Use Transportation Customers who were
Sales Service Customers on the Status Determination Date of March 1, 1990, shall
be designated as the "Sales MDL-403 Cost Pool." Amounts to be collected from
the Sales MDL-403 Pool shall be collected in the manner set forth in paragraphs
3.A.3(a), 3.A.5(a)(i), and 3.A.5(b) of First Revised Rule No. 27.
13. The $1,800,000 of non-MDL-403 pricing cost shall be offset against any
credit amount due as a result of the annual PGAC reconciliation for the period
ending August 31, 1994.
14. Pursuant to the Stipulation Regarding Discounted Transactions
Associated with Contract Reformations approved and adopted by the Commission in
Case 2353, costs and revenues
8
<PAGE>
associated with discounted gathering, processing or transmission services
granted to producers in conjunction with the settlements at issue in Cases 2503
and 2521 shall be treated in the manner provided for in that stipulation and
detailed in paragraphs 3.A.4. and 3.A.5. of GCNM's First Revised Rule No. 27.
15. GCNM agrees to file proposed amendments to Rate Rider No. 8 and First
Revised Rule No. 27 concurrently with its testimony in support of this
Stipulation which will include implementation of the provisions set forth in
paragraphs 5 through 14, above.
16. This settlement may be implemented at the beginning
of the earliest possible calendar quarter.
17. Except as specifically modified herein, all the terms and conditions
of the Final Orders in Cases 2183, 2340 and 2353 and Rate Rider No. 8 shall
govern the collection of MDL-403 Costs and Producer TOP Costs. Such variances
from the Final Orders in Cases 2353, 2340 and 2183, NMPSC Rule 640, and any
other Commission rules or orders should be granted as are necessary and proper
for the adoption and implementation of this Stipulation.
18. Except as specifically stated in the language of this Stipulation, the
provisions of this Stipulation are effective only for these Cases 2503 and 2521
and shall have no precedential effect. Except as specifically stated in this
9
<PAGE>
Stipulation, the Parties do not waive any rights they may have in any other
pending or future proceedings and will not be deemed to have approved, accepted,
agreed to or consented to any concept, principle, theory or method. Issues
raised in the pleadings and testimony or any issues that may have been raised or
any other matters not specifically addressed by this Stipulation have not been
fully litigated nor necessarily determined by the execution of this Stipulation
and its approval by the Commission and will not be binding on the Parties nor be
relied upon by the Parties as a basis for any claim of estoppel or res judicata
in any future proceeding.
A final order issued by the Commission approving this Stipulation shall not
constitute a bar to any future litigation of issues raised in the pleadings and
testimony or any issues which could have been raised or any other matters which
have not been addressed specifically by this Stipulation. By approving this
Stipulation, the Commission, in accordance with NMPUC Rule 110.87, is not
granting any approval or precedent regarding any principle or issue in these
proceedings.
19. This Stipulation reflects settlement discussions, and if the
Stipulation is not executed or is not adopted in its entirety by the Commission,
this Stipulation shall be void and the statements made or the positions taken by
the Parties shall not be admissible in any proceeding before any regulatory
agency
10
<PAGE>
or court. This Stipulation contains the full intent, understanding and entire
agreement of the Parties and no implication should be drawn on any matter not
addressed in the Stipulation. There are not and have not been any
representations, warranties or agreements other than those specifically set
forth above.
20. This Stipulation may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which shall constitute one
and the same agreement.
21. The AG does not oppose this Stipulation.
EXECUTED this day of September, 1994.
GAS COMPANY OF NEW MEXICO, NEW MEXICO PUBLIC SERVICE
a division of Public Service COMMISSION STAFF
Company of New Mexico
By___________________________ By____________________________
UNITED STATES EXECUTIVE
AGENCIES
By___________________________
11
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 33-65418.
Arthur Andersen LLP
Albuquerque, New Mexico
March 9, 1995
<PAGE>
Consent of KPMG Peat Marwick
The Board of Directors
Public Service Company of New Mexico:
We consent to incorporation by reference in the registration statement (No. 33-
65418) on Form S-8 of Public Service Company of New Mexico of our report dated
March 11, 1993, relating to the consolidated statements of earnings (loss),
retained earnings (deficit), and cash flows of Public Service Company of
New Mexico and subsidiaries for the year ended December 31, 1992, which report
appears in the December 31, 1994 annual report on Form 10-K of Public Service
Company of New Mexico. Our report dated March 11, 1993, included an
explanatory paragraph that described the uncertainties related to the valuation
of, and the continued regulatory recovery of costs related to, the Company's
interest in the Palo Verde Nuclear Generating Station as discussed in note 2 to
those statements. Additionally, our report refers to the fact that the Company
changed its method of accounting for unbilled revenue in 1992.
KPMG Peat Marwick LLP
Albuquerque, New Mexico
March 9, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Statements of Earnings, Consolidated Balance Sheets
and Consolidated Statements of Cash Flows for the period ended December
31, 1994 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,696,687
<OTHER-PROPERTY-AND-INVEST> 34,523
<TOTAL-CURRENT-ASSETS> 298,141
<TOTAL-DEFERRED-CHARGES> 173,914
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,203,265
<COMMON> 208,870
<CAPITAL-SURPLUS-PAID-IN> 468,542
<RETAINED-EARNINGS> (46,006)
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17,975
59,000
<LONG-TERM-DEBT-NET> 752,063
<SHORT-TERM-NOTES> 0
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0
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<OTHER-ITEMS-CAPITAL-AND-LIAB> 594,289
<TOT-CAPITALIZATION-AND-LIAB> 2,203,265
<GROSS-OPERATING-REVENUE> 904,711
<INCOME-TAX-EXPENSE> 40,871
<OTHER-OPERATING-EXPENSES> 709,423
<TOTAL-OPERATING-EXPENSES> 753,633
<OPERATING-INCOME-LOSS> 151,078
<OTHER-INCOME-NET> (173)
<INCOME-BEFORE-INTEREST-EXPEN> 150,905
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6,433
<EARNINGS-AVAILABLE-FOR-COMM> 73,885
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</TABLE>
