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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6986
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Exact name of registrant as specified in its charter)
New Mexico 85-0019030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Alvarado Square, Albuquerque, New Mexico 87158
(Address of principal executive offices)
(Zip Code)
(505) 241-2700
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock--$5.00 par value 41,774,083 shares
Class Outstanding at November 1, 1995
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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
INDEX
Page
No.
PART I. FINANCIAL INFORMATION:
Report of Independent Public Accountants 3
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Earnings--
Three Months and Nine Months Ended
September 30, 1995 and 1994 4
Consolidated Balance Sheets--
September 30, 1995 and December 31, 1994 5
Consolidated Statements of Cash Flows--
Nine Months Ended September 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS 17
ITEM 5. OTHER INFORMATION 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
Signature 19
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Public Service Company of New Mexico:
We have reviewed the accompanying condensed consolidated balance sheet of
Public Service Company of New Mexico (a New Mexico corporation) and
subsidiaries as of September 30, 1995, and the related condensed
consolidated statements of earnings for the three-month and nine-month
periods ended September 30, 1995 and 1994, and the condensed consolidated
statements of cash flows for the nine-month periods ended September 30,
1995 and 1994. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Public Service Company of New
Mexico and subsidiaries as of December 31, 1994 (not presented herein),
and, in our report dated February 23, 1995, we expressed an unqualified
opinion on that statement. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31,
1994, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
November 1, 1995
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<TABLE>
ITEM 1. FINANCIAL STATEMENTS
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
(In thousands except per share amounts)
<S>
Operating revenues: <C> <C> <C> <C>
Electric $168,115 $175,024 $446,421 $473,548
Gas 27,410 39,291 164,736 199,669
Water 61 4,402 6,196 10,567
-------- -------- -------- --------
Total operating revenues 195,586 218,717 617,353 683,784
-------- -------- -------- --------
Operating expenses:
Fuel and purchased power 40,980 41,413 105,769 105,649
Gas purchased for resale 7,480 12,756 71,476 98,460
Other operation and maintenance 71,641 75,973 230,889 238,498
Depreciation and amortization 19,767 19,047 61,019 55,300
Taxes, other than income taxes 8,321 10,383 26,859 30,015
Income taxes 12,663 15,539 27,852 37,435
-------- -------- -------- --------
Total operating expenses 160,852 175,111 523,864 565,357
-------- -------- -------- --------
Operating income 34,734 43,606 93,489 118,427
-------- -------- -------- --------
Other income and deductions, net of taxes: 7,510 (4,557) 22,203 113
-------- -------- -------- --------
Income before interest charges 42,244 39,049 115,692 118,540
-------- -------- -------- --------
Interest charges:
Interest on long-term debt 12,215 15,978 40,606 49,460
Other interest charges 1,060 1,368 4,514 4,186
Allowance for borrowed funds used
during construction - (86) - (246)
-------- -------- -------- --------
Net interest charges 13,275 17,260 45,120 53,400
-------- -------- -------- --------
Net earnings 28,969 21,789 70,572 65,140
Preferred stock dividend requirements 495 1,538 3,567 4,895
-------- -------- -------- --------
Net earnings applicable to common stock $ 28,474 $ 20,251 $ 67,005 $ 60,245
======== ======== ======== ========
Average shares of common stock outstanding 41,774 41,774 41,774 41,774
======== ======== ======== ========
Net earnings per share of common stock $ 0.68 $ 0.48 $ 1.60 $ 1.44
======== ======== ======== ========
Dividends paid per share of common stock $ - $ - $ - $ -
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
/TABLE
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<TABLE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1995 1994
------------ -----------
(Unaudited)
<S> (In thousands)
ASSETS <C> <C>
Utility plant $2,459,733 $2,587,592
Accumulated provision for depreciation and amortization (887,767) (890,905)
---------- ----------
Net utility plant 1,571,966 1,696,687
---------- ----------
Other property and investments 33,594 34,523
---------- ----------
Current assets:
Cash 21,658 21,029
Temporary investments, at cost 76,314 74,521
Receivables 97,944 129,048
Income taxes receivable - 4,182
Fuel, materials and supplies 45,366 51,068
Gas in underground storage 8,249 8,744
Other current assets 8,321 9,549
---------- ----------
Total current assets 257,852 298,141
---------- ----------
Deferred charges 136,741 173,914
---------- ----------
$2,000,153 $2,203,265
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock $ 208,870 $ 208,870
Additional paid-in capital 470,416 469,648
Excess pension liability, net of tax (1,106) (1,106)
Retained earnings (deficit) since January 1, 1989 20,400 (46,006)
---------- ----------
Total common stock equity 698,580 631,406
Cumulative preferred stock:
Without mandatory redemption requirements 12,800 59,000
With mandatory redemption requirements - 17,975
Long-term debt, less current maturities 728,865 752,063
---------- ----------
Total capitalization 1,440,245 1,460,444
---------- ----------
Current liabilities:
Short-term debt - -
Accounts payable 58,244 105,213
Current maturities of long-term debt 105 148,532
Accrued interest and taxes 73,440 28,073
Other current liabilities 39,992 43,662
---------- ----------
Total current liabilities 171,781 325,480
---------- ----------
Deferred credits 388,127 417,341
---------- ----------
$2,000,153 $2,203,265
========== ==========
The accompanying notes are an integral part of these financial statements.
/TABLE
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<TABLE>
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30
-----------------
1995 1994
---- ----
<S> (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES: <C> <C>
Net earnings $70,572 $65,140
Adjustments to reconcile net earnings to net cash
flows from operating activities:
Depreciation and amortization 73,429 67,229
Gain on sale of plant and property (39,055) (6,576)
Reserves for bad debts - 526
Accumulated deferred investment tax credit (3,866) (6,084)
Accumulated deferred income tax (36,450) (2,226)
Changes in certain assets and liabilities:
Receivables 35,285 39,855
Fuel, materials and supplies (29,871) (2,394)
Deferred charges 10,754 4,869
Accounts payable (46,990) (46,422)
Accrued interest and taxes 45,366 28,378
Deferred credits 24,384 (10,624)
Other 4,043 3,268
Other, net 6,927 9,937
------- -------
Net cash flows from operating activities 114,528 144,876
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility plant additions (76,884) (80,122)
Utility plant sales 205,968 39,562
Other property additions (26) (1,715)
Temporary investments, net (1,793) (19,080)
------- -------
Net cash flows from investing activities 127,265 (61,355)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemptions of PV lease obligation bonds (132,663) -
Redemptions and repurchases of preferred stock (64,175) (7,384)
Redemption of first mortgage bonds - (45,000)
Bond redemption premium and costs (373) (2,418)
Proceeds from asset securitization 18,758 -
Repayments of other long-term debt (57,768) (27,292)
Net increase in short-term debt - -
Dividends paid (4,943) (5,081)
------- -------
Net cash flows from financing activities (241,164) (87,175)
------- -------
Increase (decrease) in cash 629 (3,654)
Cash at beginning of period 21,029 20,510
------- -------
Cash at end of period $21,658 $16,856
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $46,423 $56,104
======= =======
Income taxes paid $38,205 $ 7,000
======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) General Accounting Policy
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary for a fair
presentation of the consolidated financial statements. The accounting
policies followed by Public Service Company of New Mexico (the "Company")
are set forth in note (1) of notes to the Company's consolidated financial
statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 (the "1994 Form 10-K") filed with the Securities and
Exchange Commission.
(2) Palo Verde Nuclear Generating Station ("PVNGS") Lease Obligation
Bonds ("LOBs") Redemption
On March 8, 1995, $121 million of PVNGS LOBs were retired. The retired
LOBs consisted of $58 million of 10.30% LOBs due 2014 retired at a price of
100% of par and $63 million of 10.15% LOBs due 2016 retired at a price of
97.8% of par. Additionally, $4.4 million and $4.8 million of LOBs due 1996
and 1997 at interest rates of 9.125% and 8.95%, respectively, were retired
at par on March 22, 1995. In connection with the LOB retirements, $65
million was borrowed under the Company's liquidity arrangements and $19
million was obtained under the securitization facility related to amounts
being recovered from gas customers relating to certain gas contract
settlements. In July 1995, the Company repaid the borrowings with proceeds
from asset sales. In conjunction with these retirements, the Company wrote
off $1.5 million of net costs related to these transactions. The
retirement of the LOBs, which were the Company's highest cost debt, will
save the Company approximately $11 million annually in interest expense
over the next five years.
(3) Sale of Certain Gas Assets
In February 1994, an agreement was reached with Williams Gas Processing-
Blanco, Inc. ("Williams") for the sale of substantially all of the gas
gathering and processing assets of the Company and its gas subsidiaries.
On June 30, 1995, the sale was consummated. The Company and its gas
subsidiaries received approximately $154.1 million from Williams and
recorded an after-tax gain of $12.8 million, or $.31 per share.
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(4) Sale of Sangre de Cristo Water Company ("SDCW")
In February 1994, the Company and the City of Santa Fe (the "City") entered
into a purchase and sale agreement for the Company's water division. On
July 3, 1995, the sale was consummated. The Company received $51.9 million
(exclusive of current assets netted against current liabilities) from the
sale of assets and recorded an after-tax gain of $6.8 million, or $.16 per
share, in the third quarter of 1995. As a part of the sales agreement, the
Company will continue to operate the water utility for up to four years for
a fee under a contract with the City.
(5) Cumulative Preferred Stock
On August 7, 1995, the Company redeemed, at par, all of its 8.48% Series,
8.80% Series and 8.75% Series of cumulative preferred stock outstanding as
of July 6, 1995. The redemption price of $64 million included accrued
dividends through the redemption date.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's 1994 Form 10-K PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" discussed
management's assessment of the Company's financial condition, results of
operations and other issues facing the Company. The following discussion
supplements the 1994 Form 10-K discussion and should be read in conjunction
with the consolidated financial statements presented herein and in the 1994
Form 10-K.
LIQUIDITY AND CAPITAL RESOURCES
During the nine month period ended September 30, 1995, the Company generated
$114.5 million from operating activities and received proceeds of $206
million from the sales of certain gas gathering and gas processing assets and
from the sale of the Company's water division.
The Company's construction expenditures for the nine months ended September
30, 1995 were $76.9 million. The Company anticipates it will spend
approximately $22.1 million during the remainder of 1995 for additional
construction expenditures. The Company's construction expenditures have been
and are expected to be met primarily through internally-generated cash.
However, to cover differences in the amounts and timing of cash generation
and cash requirements, the Company utilizes short-term borrowings under its
liquidity arrangements, which consist of a $100 million secured revolving
credit facility, a $40 million credit facility collateralized by the
Company's electric customer accounts receivable and $11 million in local
lines of credit.
As previously reported, the Company's secured revolving credit facility was
amended in June 1995. The amended credit facility (the "Facility") contains
improved pricing, a three-year term and some covenant changes. The maximum
allowed ratio of the Company's total debt to total capitalization under the
Facility is 70%. As of September 30, 1995, such ratio was 65.4%.
During the first nine months of 1995, the Company retired $132.7 million of
PVNGS LOBs, $57.8 million of other long-term debt (which included the balance
outstanding from the August 1993 securitization of amounts being recovered
from gas customers relating to certain gas contract settlements) and $64
million of preferred stock. In addition, as of September 30, 1995, the
Company had no short-term borrowings and had cash and temporary investments
of $98 million. The Company continues to evaluate its investment and debt
retirement options to optimize its financing strategy and earnings potential.
<PAGE>
<PAGE>
Credit Rating
Fitch Investors Service, Inc. ("Fitch") recently upgraded the Company's first
mortgage bonds, secured facilities bonds, LOBs, and preferred stock.
However, all of the Company's securities are still rated below investment
grade by the major rating agencies, including Fitch. In its report, Fitch
stated that the higher ratings reflect "the Company's successful
restructuring program, improved operating and financial performance, and
favorable regulatory developments, while still recognizing its high debt
leverage, heavy reliance on the wholesale power market, comparatively high
rates, nuclear generating/asset concentration risk and limited financial and
operating flexibility".
RESULTS OF OPERATIONS
Operating income from the resources excluded from New Mexico Public Utility
Commission ("NMPUC") jurisdictional rates increased $2.6 million for the nine
months ended September 30, 1995 over the corresponding period a year ago.
Such increase resulted from lower 1995 PVNGS operation and maintenance
("O&M") expenses partially offset by lower gross margin as a result of poor
wholesale power market conditions. However, net earnings from such excluded
resources decreased $2.7 million for the nine months ended September 30, 1995
as a result of the June 1994 gain from the sale of generating facilities to
Utah Associated Municipal Power Systems ("UAMPS"). This gain was partially
offset by reduced 1995 interest expense due to certain long-term debt
retirements.
Operating results for the excluded resources for all these periods reflect
the allocation of interest charges based on average investment in excluded
net utility plant as a percent of total utility plant for the period.
Selected financial information for the excluded resources is shown below:
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
(In thousands)
Operating revenues $ 10,035 $ 10,729 $ 27,209 $ 30,233
Operating income $ 1,562 $ 1,422 $ 3,406 $ 760
Net earnings (loss) $ 441 $ 67 $ (533) $ 2,156
Net utility plant at end of period $132,683 $131,413 $132,683 $131,413
Electric gross margin (operating revenues less fuel and purchased power
expense) decreased $6.5 million and $27.2 million for the quarter and nine
months ended September 30, 1995, respectively, from the corresponding periods
a year ago. These decreases were attributable to: (i) the retail rate
reduction implemented in late 1994; (ii) a difference between the estimated
unbilled revenues reported in the fourth quarter of 1993 and actual revenues
recorded in the first quarter of 1994; and (iii) reduced off-system sales
margin as a result of the expiration of three sales contracts and generally
poor wholesale power market conditions. Partially offsetting such decreases
was the increase in retail revenues (net of the effect of the retail rate
reduction) resulting from increased load growth.
Gas gross margin (gas operating revenues less gas purchased for resale)
decreased $6.6 million and $7.9 million for the quarter and nine months
ended September 30, 1995, respectively, from the corresponding periods a year
ago due to a decrease in gas deliveries resulting from warmer than normal
weather in the first quarter of 1995 and reduced margin due to the sale of
the gas gathering and processing assets.
<PAGE>
Water revenues decreased $4.3 million and $4.4 million for the quarter and
nine months ended September 30, 1995, respectively, from the corresponding
periods a year ago due to the sale of the Company's water division in July
1995.
Other O&M expenses decreased $4.3 million for the quarter from the
corresponding period a year ago due to a decrease in injuries and damages
expense of $2.9 million as a result of the recording of workers' compensation
liability in the third quarter of 1994, a decrease in gas production and
products extraction expense of $2.8 million resulting from the gas assets
sale in June 1995, lower office supplies and expenses of $1.6 million as a
result of a decrease in temporary office labor and postage expense and a
decrease in water O&M expense of $1.0 million resulting from the sale of the
Company's water division in July 1995. Such decreases were offset by higher
employee benefit expense of $1.7 million caused by the retroactive deferral
of the gas operation's retiree health care cost for regulatory purposes
recorded in the third quarter of 1994, higher administration and general
("A&G") labor expense of $1.3 million and higher outside services expense of
$.9 million.
Other O&M expenses for the nine months ended September 30, 1995 decreased
$7.6 million from the corresponding period a year ago due to a decrease in
San Juan Generating Station ("SJGS") O&M expenses of $3.5 million resulting
from two scheduled outages in 1994, decreased PVNGS O&M expenses of $2.3
million as a result of a reduction in scheduled maintenance outage hours and
lower property taxes in the current period and decreased Four Corners
Generating Station ("Four Corners") O&M expenses of $1.6 million resulting
from scheduled outages in 1994. Also, contributing to the decrease in the
current period was a decrease in injuries and damages expense of $3.2 million
as a result of the recording of workers' compensation liability in the third
quarter of 1994, a decrease in gas production and products extraction expense
of $2.8 million resulting from the gas assets sale in June 1995, lower office
supplies and expenses of $2.6 million as a result of a decrease in temporary
office labor and postage expense and a decrease in water O&M expense of $.8
million resulting from the sale of the Company's water division in July 1995.
Such decreases were offset by higher production O&M expenses for the gas and
oil-fired units of $2.9 million resulting from the maintenance outages in
1995, higher transmission expense of $1.1 million due to higher wheeling and
maintenance expense, higher employee benefit expense of $2.5 million caused
by the retroactive deferral of the gas operation's retiree health care costs
for regulatory purposes recorded in the third quarter of 1994, higher A&G
labor expense of $2.1 million and higher outside services expense of $1.2
million.
Depreciation and amortization expenses increased $.7 million and $5.7 million
for the quarter and nine months ended September 30, 1995, respectively, from
the corresponding periods a year ago as a result of implementing the new
depreciation rates approved by the NMPUC.
Operating income taxes for the quarter and nine months ended September 30,
1995 decreased $2.9 million and $9.6 million, respectively, from the
corresponding periods a year ago due primarily to decreased pre-tax earnings
for the current periods.
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Other income and deductions, net of taxes, for the quarter and nine months
ended September 30, 1995 increased $12.1 million and $22.1 million,
respectively, over the corresponding periods a year ago. Significant items,
net of taxes, for the quarter included the following: (i) the gain of $6.8
million from the sale of the Company's water division; (ii) an additional
provision for legal expenses of $1.8 million in the third quarter of 1994;
and (iii) an additional 1994 third quarter write-off of $1.8 million relating
to the gas take-or-pay settlement payments which are not recoverable through
rates.
Significant year-to-date items, net of taxes, include the above items as well
as the following: (i) the gain of $12.8 million from the gas assets sale;
(ii) an after-tax accrual of $2.6 million of income pertaining to the
carrying costs related to gas take-or-pay settlement amounts; (iii) income of
$1.4 million related to adjusting reclamation reserves for certain mining
operations; and (iv) establishing a 1994 regulatory reserve of $1.2 million.
Offsetting such increases were the following: (i) the gain of $4.4 million
from the sale of generating facilities to UAMPS in 1994; (ii) the tax benefit
of $1.7 million related to sharing the UAMPS gain with jurisdictional
customers; (iii) an additional 1995 regulatory reserve of $1.5 million; and
(iv) an after-tax write off of debt retirement costs of $.9 million.
Net interest charges decreased $4.0 million and $8.3 million for the quarter
and nine months ended September 30, 1995, respectively, from the
corresponding periods a year ago. This was due to the retirement of $130
million of PVNGS LOBs in March 1995 and the retirement of $45 million of
first mortgage bonds in April 1994.
Preferred stock dividend requirements decreased $1.0 million and $1.3 million
for the quarter and nine months ended September 30, 1995, respectively, from
the corresponding periods a year ago as a result of the retirement of
preferred stock in August 1995.
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OTHER ISSUES FACING THE COMPANY
Transmission Issues
Transmission Right-of-Way
As previously reported, 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 the Albuquerque metropolitan area. One
grant of easement for approximately 4.2 miles of right-of-way for two
parallel 345 Kv transmission lines expired in January 1993. Prior to
expiration, the Company had unsuccessfully attempted to renew the grant.
(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" in the 1994 Form 10-K.)
The Navajo Nation and the Company continue to discuss settlement of various
right-of-way issues. The parties currently have no date by which they
expect to enter into a new agreement. The Company currently cannot predict
the results of these discussions; however, the Company believes that
resolution of this issue will not have a material adverse impact on the
Company's financial condition or results of operations.
Transmission Disputes
The Company receives approximately $14.0 million annually for the provision
of firm transmission service to several customers. Most of these customers,
through various actions, have initiated formal Federal Energy Regulatory
Commission ("FERC") investigations into the transmission service billing
units and transmission rates charged by the Company. If these various
allegations and requested rate reductions are approved by the FERC, the
Company's revenues for transmission services could be reduced by as much
as $9.0 million annually. The Company has responded to these allegations
and has requested that the FERC dismiss the complaints. The Company is
currently awaiting the FERC decision. The Company is not able to predict
the outcome of this issue but does not anticipate any material adverse
impact on the Company's financial condition or results of operations.
<PAGE>
<PAGE>
SJGS Water Supply
As previously reported, the Company has initiated a process to renew and
extend its Federal water contract for 16,200 acre feet of water per year for
SJGS. (See PART I, ITEM 1.--"BUSINESS--ELECTRIC OPERATIONS--Fuel and Water
Supply" in the 1994 Form 10-K.) During the process of conducting an
environmental assessment, the Company received numerous objections, primarily
from various Indian tribes in the Four Corners area, including the Navajo
Nation. The objections relate primarily to the potential impact of the
Company's contract renewal on proposed and existing uses of the San Juan
River or its tributaries by the various tribes. The Company is currently
investigating these objections and will respond to them as part of the
environmental assessment. In connection with the contract renewal process,
a Section 7 consultation under the Endangered Species Act of 1973 is being
conducted. The consultation will involve a review of potential impacts of
the Company's depletion of the 16,200 acre feet of water from the San Juan
River on two endangered fish species. The Company is currently unable to
predict the outcome of these matters.
Environmental Issues
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.
Santa Fe Station
As previously reported, the New Mexico Environment Department ("NMED") has
been conducting an investigation of the groundwater contamination detected
beneath the Santa Fe Station site to determine the source of the
contamination under a settlement agreement between the Company and the NMED.
(See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING
THE COMPANY--ENVIRONMENTAL ISSUES--Electric Operations--Santa Fe Station"
in the 1994 Form 10-K.)
A minimum site assessment ("MSA") has been conducted at the site under the
settlement agreement. The final results are not yet available and sampling
results are currently being reviewed. The Company is awaiting the final
report on the MSA. Preliminary results indicate that the Santa Fe station
site does not appear to have been a source of gasoline contamination. The
Company is unable to predict the ultimate outcome of the investigation or
action by the NMED.
<PAGE>
<PAGE>
Albuquerque Electric Service Center
Recent trenching work at the Company's Albuquerque Electric Service Center
revealed oil contaminated soil in an area of the service center used for
storage of used oil in drums. The trenched area bisects a small portion of
the storage area, indicating that potentially the entire area could be
underlain with contaminated soil. The Company has requested a laboratory
analysis on the soil to determine the type of contamination. The Company may
be required to assess soil and groundwater for contamination as well as
remediate extensive soil in the area. The Company currently cannot predict
the outcome of the analysis, to what extent the soil has been contaminated
or the costs of the remediation, if any.
In addition, a leaking fuel line, which has been replaced, caused soil and
groundwater contamination in the vicinity of the leak with fuel
constituents. The Company has proposed a quarterly sampling plan to the
NMED for the site. The NMED has concerns regarding the placement of
monitoring wells and the relatively high levels of residual contamination
remaining in the soil at the site. Based on analysis of the groundwater
sampling recently completed, the NMED may require an additional monitoring
well and soil remediation work at the site.
City Election
On October 3, 1995, the City of Albuquerque held a municipal election. As
expected, a bill regarding possible municipalization of the Company's
electric distribution system was excluded from the ballot. Groups consisting
of Concerned Citizens, United We Stand America and Coalition for Lower
Electric Rates had indicated that they would take this matter to a special
election if the bill was excluded from the October 3 ballot. A significant
number of signatures is required in order to force a special election. The
Company is unable to predict whether or not there will be a special election.
El Paso Electric Company ("El Paso")
As previously reported, El Paso, one of the joint owners of PVNGS and Four
Corners, has been operating under Chapter 11 of the Bankruptcy Code since
1992. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE
COMPANY--EL PASO ELECTRIC COMPANY BANKRUPTCY" in the 1994 Form 10-K.) On
September 29, 1995, El Paso filed with the bankruptcy court a revised plan
whereby, among other things, certain issues will be resolved, and El Paso
will assume the joint facilities operating agreements. The Company is unable
to predict whether or not the revised plan will be approved.
<PAGE>
<PAGE>
Gas Services Business Unit ("Gas Services") Rate Case
On August 28, 1995, Gas Services filed a request with the NMPUC for a $13.3
million increase in its annual retail natural gas sales and transportation
rates. On October 5, 1995, the NMPUC issued a procedural order on the
Company's application for the rate increase and ordered public hearings to be
held beginning February 19, 1996. At this time, the Company is unable to
predict the ultimate outcome of the hearings.
Non-Utility Subsidiaries
As previously reported, as part of the Company's strategic plan, the Company
internally restructured its operations into four separate business units,
each targeted at a specific segment of its customer base. (See PART II, ITEM
7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--OVERVIEW--Strategic Plan" in the 1994 Form 10-K.)
On December 30, 1994, the Company filed a petition for declaratory order with
the NMPUC. In the petition, the Company requested, among other things, a
declaratory order that its corporate reorganization into four main business
units was in compliance with NMPUC regulations and previous orders and
otherwise lawful. Subsequently, on June 23, 1995, the Company filed an
application for authorization for the creation of three wholly-owned
subsidiaries to: (i) manage and operate water and wastewater systems; (ii)
pursue energy marketing, alternative fuel vehicle services and energy
management services; and (iii) pursue utility management services and related
energy management services for federal installations and large commercial
customers. The Company sought approval to invest a maximum of $50 million in
the three subsidiaries over time and to enter into reciprocal loan agreements
for up to $30 million with these subsidiaries.
On September 30, 1995, the NMPUC Staff ("Staff") filed a motion for order of
partial dismissal, seeking denial of the Company's application to form the
new subsidiaries. The Staff argued that the New Mexico Public Utility Act
("NMPUA") should be read as requiring investment in non-utility activities to
come solely from retained earnings and, since the Company's level of retained
earnings is insufficient to support the level of investment requested, the
application should be denied. The Staff also suggested that, because of the
Company's quasi-reorganization in 1989, the Company should be required to
have a minimum of $201 million in retained earnings prior to allowing any
investment in non-utility activities. The New Mexico Attorney General and New
Mexico Industrial Energy Consumers ("NMIEC") support the Staff's motion,
although NMIEC does not oppose the Company's request for the formation of the
water service subsidiary.
<PAGE>
<PAGE>
On October 24, 1995, the Company filed its response to Staff's motion,
arguing that Staff was misinterpreting the NMPUA and misconstruing the
purposes of retained earnings since investment in these subsidiaries would
come from available cash. The Company intends to vigorously oppose attempts
to prevent the Company from expanding its business within the confines of
energy and utility-related activities and believes Staff's motion to be
without merit. The Company cannot predict, however, the ultimate outcome of
this matter. Although the Company does not believe that an adverse outcome
will materially impact the Company's results of operations and financial
condition, such an outcome will hinder the Company's ability to effectively
participate in the emerging competitive energy services marketplace.
<PAGE>
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Four Corners
The Company owns a 13.0% ownership interest in Units 4 and 5 of Four Corners
located in northwestern New Mexico on land leased from the Navajo Nation.
Arizona Public Service Company is the operating agent. In July 1995, the
Navajo Nation enacted the Navajo Nation Air Pollution Prevention and Control
Act, the Navajo Nation Safe Drinking Water Act and the Navajo Nation
Pesticide Act (collectively, the "Acts"). By letter dated October 12, 1995,
the Four Corners participants requested the United States Secretary of the
Interior (the "Secretary") to resolve their dispute with the Navajo Nation
regarding whether or not the Acts apply to operation of Four Corners. The
Four Corners participants subsequently filed a lawsuit in the District Court
of the Navajo Nation (the "Court"), Window Rock District, seeking, among
other things, a declaratory judgment that: (i) the Four Corners leases and
Federal easements preclude the application of the Acts to the operation of
Four Corners; and (ii) the Navajo Nation and its agencies and courts lack
adjudicatory jurisdiction to determine the enforceability of the Acts as
applied to Four Corners. On October 18, 1995, the Navajo Nation and the Four
Corners participants agreed to indefinitely stay the proceedings referenced
above so that the parties may attempt to resolve the dispute without
litigation, and have requested that the Secretary and the Court stay these
proceedings. The Company is unable to predict the outcome of this matter.
Archaeological Resources Protection Act
As previously reported, 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 incident that it did not have
permission from the U.S. Forest Service, as well as other necessary permits.
(See PART I, ITEM 3.-- "LEGAL PROCEEDINGS--OTHER PROCEEDINGS-- Archaeological
Resources Protection Act" in the 1994 Form 10-K.) The Company and the civil
division of the U.S. Attorney's Office have now entered into a settlement
agreement. The agreement provides that the U.S. Attorney's Office waives its
right to bring any civil action for damages against the Company as a result
of the incident, including an action for trespass or for violation of the
Archaeological Resources Protection Act of 1979. In exchange, the Company has
agreed to pay for restoration and repair of archaeological sites that were
disturbed and to reimburse the U.S. Forest Service for its expenses incurred
for the incident. The Company had already paid for the reclamation of the
surface areas outside the archaeological sites and the archaeological site
damage assessment. The resolution of this matter has not had a material
adverse effect on the Company's financial condition or results of operations.
Air Permits
Sunterra Gas Processing Company, a wholly-owned subsidiary of the Company,
submitted an air permit modification application for the Kutz Canyon Gas
Processing Plant ("Kutz") in the first quarter of 1995. (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--Air Permits" in the 1994 Form 10-K.) On October 30, 1995, the
Company received a Notice of Violation from the NMED with specified
corrective actions. Within thirty days, the NMED will propose a settlement.
The Company is not able to predict the outcome of this issue but does not
anticipate a material adverse impact on the Company's financial condition or
results of operations.
<PAGE>
<PAGE>
ITEM 5. OTHER INFORMATION
Natural Gas Supply
As previously reported, Meridian Oil Inc. and its related or affiliated
companies, Southland Royalty Company, Meridian Oil Production Inc. and Unicon
Producing Company (collectively "Meridian") asserted claims regarding the
allocation of natural gas liquids and measurement of gas under gathering,
processing and transportation agreements against the Company and Sunterra Gas
Gathering Company and Sunterra Gas Processing Company, wholly-owned
subsidiaries of the Company, as a result of periodic audits since 1990. (See
PART 1, ITEM 1.-- "BUSINESS--NATURAL GAS OPERATIONS--Natural Gas Supply" in
the 1994 Form 10-K.) The Company responded, and as expected, the claims have
been resolved at no material cost to the Company.
Other Natural Gas Matters
As previously reported, Gas Services filed a Purchased Gas Adjustment Clause
("PGAC") continuation filing regarding how its composite gas procurement
strategy would be affected by the sale of its gas gathering and gas
processing assets. The principal unresolved issues in the case were whether
gas supply reservation fees paid to certain gas suppliers are recoverable
through the PGAC. (See PART I, ITEM 1.--"BUSINESS--RATES AND REGULATION--
Other Natural Gas Matters" in the 1994 Form 10-K.)
On October 26, 1995, the hearing examiner issued his recommended decision
approving the continuation of Gas Services' PGAC. The hearing examiner also
recommended that gas reservation fees paid to certain gas suppliers not be
recoverable through the PGAC; however, the decision stated that Gas Services
may attempt to recover such costs in a general rate proceeding. Gas Services
filed for the recovery of such reservation fees in its general rate case
filed August 28, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.60.2 Amendment No. 2 dated as of October 1, 1995, to the
Reimbursement Agreement dated as of November 1, 1992 between
Public Service Company of New Mexico and Canadian Imperial Bank
of Commerce, New York Agency.
15.0 Letter Re Unaudited Interim Financial Information
27 Financial Data Schedule
b. Reports on Form 8-K:
None, other than the previously filed Form 8-K described in the Form 10-Q
for the period ended June 30, 1995 already reported.
<PAGE>
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Registrant)
Date: November 1, 1995 /s/ Donna M. Burnett
-----------------------------------
Donna M. Burnett
Corporate Controller and
Chief Accounting Officer
(Officer duly authorized to
sign this report)
<TABLE> <S> <C>
<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 September 30, 1995
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,571,966
<OTHER-PROPERTY-AND-INVEST> 33,594
<TOTAL-CURRENT-ASSETS> 257,852
<TOTAL-DEFERRED-CHARGES> 136,741
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,000,153
<COMMON> 208,870
<CAPITAL-SURPLUS-PAID-IN> 469,310
<RETAINED-EARNINGS> 20,400
<TOTAL-COMMON-STOCKHOLDERS-EQ> 698,580
0
12,800
<LONG-TERM-DEBT-NET> 728,865
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 105
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 559,803
<TOT-CAPITALIZATION-AND-LIAB> 2,000,153
<GROSS-OPERATING-REVENUE> 617,353
<INCOME-TAX-EXPENSE> 46,127
<OTHER-OPERATING-EXPENSES> 496,012
<TOTAL-OPERATING-EXPENSES> 523,864
<OPERATING-INCOME-LOSS> 93,489
<OTHER-INCOME-NET> 22,203
<INCOME-BEFORE-INTEREST-EXPEN> 115,692
<TOTAL-INTEREST-EXPENSE> 45,120
<NET-INCOME> 70,572
3,567
<EARNINGS-AVAILABLE-FOR-COMM> 67,005
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 39,043
<CASH-FLOW-OPERATIONS> 114,528
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 0
</TABLE>
<PAGE>
ARTHUR
ANDERSEN
ARTHUR ANDERSEN LLP
Arthur Andersen LLP
November 1, 1995 Suite 400
6501 Americas Parkway NE
Albuquerque, NM 87110-5372
505 889-4700
Public Service Company of New Mexico
Alvarado Square
Albuquerque, NM 87158
Gentlemen:
We are aware that Public Service Company of New Mexico has
incorporated by reference in its Registration Statement No. 33-
65418 its Form 10-Q for the quarter ended September 30, 1995, which
includes our report dated November 1, 1995 covering the unaudited
interim financial information contain therein. Pursuant to
Regulation C of the Securities Act of 1933, that report is not
considered a part of the registration statement prepared or
certified by our firm or a report prepared or certified by our firm
within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
- ---------------------------------
Arthur Andersen LLP
<PAGE>
<PAGE>
[EXECUTION COPY]
AMENDMENT No. 2
dated as of October 1, 1995
to the
REIMBURSEMENT AGREEMENT
dated as of November 1, 1992
between
PUBLIC SERVICE COMPANY
OF NEW MEXICO
and
CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY
relating to
Pollution Control Revenue
Refunding Bonds, 1992 Series A
(Public Service Company of New Mexico
Palo Verde Project)
<PAGE>
<PAGE>
AMENDMENT NO. 2
to the
REIMBURSEMENT AGREEMENT
THIS AMENDMENT NO. 2 (this "AMENDMENT"), dated as of October
1, 1995, to the Reimbursement Agreement, dated as of November 1,
1992 (as heretofore amended, the "EXISTING REIMBURSEMENT
AGREEMENT"), between PUBLIC SERVICE COMPANY OF NEW MEXICO, a New
Mexico corporation (the "Company"), and CANADIAN IMPERIAL OF
COMMERCE, acting through its New York Agency (the "Bank"),
W I T N E S S E T H:
WHEREAS, the Existing Reimbursement Agreement was executed by
the Company and the Bank in connection with the issuance by the
Bank of the Letter of Credit for the benefit of the Trustee in
support of the Bonds, and was amended pursuant to Amendment No. 1,
dated as of July 1, 1994;
WHEREAS, the Company desires, and the Bank is willing on the
terms and subject to the conditions hereinafter set forth, to
amend certain fee provisions of the Existing Reimbursement
Agreement and to extend the maturity of the Letter of Credit;
NOW, THEREFORE, in consideration, of the premises and the
mutual agreements herein contained, the Company and the Bank
hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. The following terms
whether or not underscored) when used in this Amendment shall
have the following meanings:
"AMENDED REIMBURSEMENT AGREEMENT" means the Existing
Reimbursement Agreement as amended by this Amendment.
"AMENDMENT" is defined in the PREAMBLE.
"BANK" is defined in the PREAMBLE.
"COMPANY" is defined in the PREAMBLE.
"EFFECTIVE DATE" is defined in SECTION 4.
"EXISTING REIMBURSEMENT AGREEMENT" is defined in the PREAMBLE.
SECTION 2. OTHER DEFINITIONS. Terms for which meanings are
provided in the Existing Reimbursement Agreement are, unless
otherwise defined herein or the context otherwise requires, used
in this Amendment with such meanings.
<PAGE>
SECTION 3. AMENDMENTS TO EXISTING REIMBURSEMENT
AGREEMENT. Effective on the Effective Date, the
Existing Reimbursement Agreement is hereby amended in
accordance with this Section 3. Except as expressly so
amended, the Existing Reimbursement Agreement shall
continue in full force and effect in accordance with
its terms.
SECTION 3.1. Section 1 (Definitions). Section 1
of the Existing Reimbursement Agreement is hereby
amended by amending and restating in their entirety
the definition of "Credit Agreement" and the
definition of "Scheduled Termination Date" as follows:
"'CREDIT AGREEMENT' means the
U.S.$100,000,000 Revolving Credit Agreement,
dated as of December 14, 1993, among the Company,
as borrower, Chemical Bank and Citibank N.A., as
co-agents thereunder, and the banks named
therein, as amended by Amendment No. 1, dated as
of June 7, 1995."
"'SCHEDULED TERMINATION DATE' means November 26,
1998.".
SECTION 3.2. SECTION 8 (FEES). CLAUSE (A) of
Section 8 of the Existing Reimbursement Agreement is
hereby amended by deleting SUBCLAUSES (I) through (V)
thereof and replacing them with the following
SUBCLAUSES (I) through (IV):
"(i) If the Bond Rating of Moody's or S&P is Baa3 or
BBB-, respectively, or higher, the Letter of Credit Fee
shall be .75%.
(ii) During such times as SUBCLAUSE (A)(I) of this
SECTION 8 is not applicable and the Bond Rating of Moody's
or S&P is at least Bal or BB+, respectively, the Letter of
Credit Fee shall be .85%.
(iii) During such times as SUBCLAUSES (A)(I) and
(A)(II) of this SECTION 8 are not applicable and the Bond
Rating of Moody's or S&P is at least Ba2 or BB,
respectively, the Letter of Credit Fee shall be 1.15%.
(iv) In all other cases, the Letter of Credit Fee
shall be 1.40%."
<PAGE>
<PAGE>
SECTION 3.3. SECTION 16 (COVENANTS). A new CLAUSE (l) is
hereby added to SECTION 16 of the Existing Reimbursement
Agreement to read as follows:
"(k) NO SURRENDER OF FIRST MORTGAGE BONDS.
Notwithstanding any provision contained in clause
(b) of Section 14.11 of the Indenture to the
contrary, the Company hereby agrees not to request
the Trustee to release to the Company any amount of
the First Mortgage Bonds (or Corresponding
Securities, as the case may be) and not to accept
any amount of the First Mortgage Bonds (or
Corresponding Securities, as the case may be) so
released."
SECTION 3.4. Section 17 (Events of Default). Clause (c)(i)
of SECTION 17 of the Existing Reimbursement Agreement is amended
and restated in its entirety to read as follows:
"(i) the Company shall default in the observance or
performance of any covenant incorporated in clause (a) of
SECTION 16 by reference to Section 5.01(h) or 5.02(i) of the
Credit Agreement, or contained in clause (b)(iii) or (l) of
Section 16;"
SECTION 4. EFFECTIVE DATE. When all of the conditions set
forth in this SECTION 4 have been satisfied, this Amendment shall
become effective as of October 1, 1995 (the "EFFECTIVE Date") and
thereafter shall be known, and may be referred to, as "Amendment
No. 2 to the Reimbursement Agreement".
SECTION 4.1. EXECUTION OF COUNTERPARTS OF THIS AMENDMENT. The
Bank shall have received executed counterparts of this Amendment
duly executed on behalf of the Company.
SECTION 4.2. EXECUTION OF AMENDMENT TO LETTER OF CREDIT. The
Bank shall have delivered to the Trustee an executed copy of the
notice of amendment to the Letter of Credit, substantially in the
form of Exhibit A hereto.
SECTION 4.3. UP-FRONT EXTENSION Fee. The Bank shall have
received a non-refundable up-front extension fee computed at a
rate of .10% of the Letter of Credit Amount on the Effective Date.
SECTION 4.4. OPINION OF SPECIAL Counsel. The Bank shall have
received the opinion of Keleher & McLeod, P.A., special counsel to
the Company, substantially in the form of EXHIBIT B attached
hereto.
<PAGE>
<PAGE>
SECTION 4.5. REPRESENTATIONS AND WARRANTIES; NO DEFAULT OR
EVENT OF DEFAULT. On the Effective Date,
(a) the representations and warranties contained in
SECTION 15 of the Reimbursement Agreement and each of the
other Related Documents shall be true and correct on and as
of the Effective Date as though made on such date, and the
Bank shall have received a certificate signed by an
Authorized Officer of the Company, dated the Effective Date,
to that effect; and
(b) no Default or Event of Default shall have occurred
and be continuing, or would result from the execution and
delivery of this Amendment, and the Bank shall have received
a certificate signed by an Authorized Officer of the Company,
dated as of the Effective Date, to that effect.
SECTION 4.6. RESOLUTIONS. The Bank shall have received
certified copies of the resolutions of the Board of Directors of
the Borrower approving this Amendment, and of all documents
evidencing other necessary corporate action and governmental
approvals permitting the extension of the Scheduled Termination
Date of the Letter of Credit, with respect to this Amendment and
the other documents to be delivered hereunder.
SECTION 4.7. SUPPLEMENTAL INDENTURES. The Bank shall have
received copies of the forty-third and forty-fourth supplemental
indentures to the First Mortgage Bond Indenture delivered in
connection with the effectiveness of Amendment No. 1 to the Credit
Agreement.
SECTION 4.8. LEGAL DETAILS, ETC. The Bank and its counsel
shall have received all information, and such counterpart
originals or such certified or other copies of such materials, as
the Bank or its counsel may reasonably request, and all legal
matters incident to the transactions contemplated by this
Amendment shall be satisfactory to the Bank and its counsel. All
documents executed or submitted pursuant hereto or in connection
herewith shall be satisfactory in form and substance to the Bank
and its counsel.
SECTION 5. REFERENCES. References in the Existing
Reimbursement Agreement shall hereinafter be deemed to be
references to the Amended Reimbursement Agreement.
SECTION 6. SUCCESSORS AND ASSIGNS. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, subject to SECTION 30 of
the Amended Reimbursement Agreement.
<PAGE>
<PAGE>
SECTION 7. FULL FORCE AND EFFECT. Except as expressly
amended hereby, all of the representations, warranties, terms,
covenants, and conditions of the Existing Reimbursement Agreement
and each other Related Document shall remain unchanged and shall
remain in full force and effect in accordance with their
respective terms. The amendments set forth herein shall be
limited precisely as provided for herein to the provisions
expressly amended herein and shall not be deemed to be an
amendment or consent to or modification of any other
term or provision of the Existing Reimbursement
Agreement or of any term or provision of any other
Related Document or of any transaction or further or
future action on the part of the Company which would
require the consent of the Bank under the Existing
Reimbursement Agreement.
SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
SECTION 9. COUNTERPARTS. This Amendment may be
signed in counterparts, each of which shall be an
original, with the same effect as if the signatures
thereto were upon the same instrument.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment No. 2 to the Reimbursement Agreement to
be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
PUBLIC SERVICE COMPANY OF NEW
MEXICO
By /s/ Max H. Maerki
--------------------------
Title: Senior Vice President
and Chief Financial
Officer
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By /s/ Joel W. Peterson
--------------------------
Title: Authorized Signatory
