UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITES EXCHANGE ACT OF 1934
Date of Report (Date of earliest events reported) November 16, 2000
-------------------
November 14, 2000
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PUBLIC SERVICE COMPANY OF NEW MEXICO
(Exact name of registrant as specified in its charter)
New Mexico 85-0019030
--------------------------- Commission ----------------------
(State or Other Jurisdiction File Number 1-6986 (I.R.S. Employer
of Incorporation) ------ Identification) Number)
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)
<PAGE>
Item 9. Regulation FD Disclosure
The following is information from a slide presentation by Jeff Sterba the
Company's Chairman, President and Chief Executive Officer to utility investment
analysts in New York on November 14, 2000, which has been amended for changes
subsequent to the previous Form 8-K filing and is being filed herewith as a
Regulation FD disclosure.
A High-Voltage Combination
PNM and Western Resources
1. Strategic Rationale
o Creates scope and scale needed to compete
o Solidifies market reach from Midwest to West Coast
o Builds on successful track record in wholesale marketing
o Combines stable utility core with strong wholesale growth
2. Transaction Terms
o $4.4B Purchase Price
o Stock for Stock Transaction
o New Holding Company Issues 55 Million Shares (subject to adjustment)
o Tax Free
o New Holding Company Assumes $2.9B in Western Resources debt
o Reverse Merger Accounting (PNM balance sheet marked to market)
3. Purchase Price Multiples
Purchase Price $4.424 Billion
Estimated EBIT (2000) $357 Million
Estimated EBIT Multiple 12.4 Times
Estimated EBITDA $527 Million
Estimated EBITDA Multiple 8.4 Times
4. PNM/WR Coal-Fired Power Plant Utilization
Capacity Factor %
Western PNM
1997 60 81
1998 57 82
1999 63 82
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<PAGE>
5.
Western Resources Coal-Fired Power Plant Estimated Opportunity
Additional At At
Capacity $10/Mwh Margin $20/Mwh Margin
5% $14,561,482 $29,122,963
10% $29,122,963 $58,245,927
15% $43,684,445 $87,368,890
20% $58,245,927 $116,491,854
6. PNM Churn Rate
Gwh
Generation Total Sales
1997 3,200 6,926
1998 3,200 8,784
1999 3,200 11,171
7. Western Resources Estimated Churn Opportunity
Western Sales
to Generation At At
Ratio $2/Mwh Margin $4/Mwh Margin
1.5:1 $33,600,000 $67,200,000
2.0:1 $44,800,000 $89,600,000
2.5:1 $56,000,000 $112,000,000
8. 5-year Estimated Free Cash Flow Summary($000)
PNM Cash from Operations $ 1,388
Capital Expenditures $ (1,341)
---------
Free Cash Flow $ 47
=========
WR Cash from Operations $ 1,904
Capital Expenditures $ (725)
---------
Free Cash Flow $ 1,179
=========
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<PAGE>
9. Earnings Power
Assumptions:
Net Income
(In millions, except
per share amounts)
PRO FORMA:
2001 PNM @ $2.50 - $2.60 $100
2001 Western $100
-----
$200
2002 Earnings Growth 10
-----
$210
PRO FORMA ADJUSTMENTS: (after-tax)
PNM Balance Sheet Marked to Fair Market Value 49
Merger Integration Effects (9)
Western Resources Rate Case ($0-$30 Million after-tax) 15
Wholesale Marketing Improvements
($15-Unknown Million after-tax) 15
-----
$280 +/-
=====
Earnings Per Share (95 Million Shares Outstanding) $2.95 +/-
=====
10. Regulatory Material Adverse Effect
o PNM Board determines whether there is a Material Adverse Effect on the
revenue potential of Western Resources
11. Financial Benefits
o Accretive in First Year
o Broader, More Predictable Cash Flow
o Accelerated Revenue and Earnings Growth
o Diversified Business/Geographic Mix
o Improved Access to Capital
o Increased Market Float
12. A Strong Commitment to Investment Grade
o Operating companies expected to be investment grade immediately
o Holding company is expected to be debt free in 3 years
o Western and Westar have opportunity to convert debt into equity and
preferred stock
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<PAGE>
13. Acquisition Consideration Adjustment Mechanism
o Base 55 million shares
Fixed # of shares for all stock of Western
and $234 million of intra-company debt
o Western Resources Adjustment Each $27 = 1 share
DRIP, rights offering, other non-utility
assets (unlimited)
o Westar Adjustment Each $27 = 1 share up to 9.9%
Sale of Westar Asset, maximum $407 million of NEWCO
- then - convertible preferred stock
7.5%, 20% premium (maximum
19.9% of NEWCO fully diluted)
o Application of Cash
Debt reduction at Western Resources
14. Approval Process
o NMPRC
o KCC
o FERC/NRC
o SEC
o HSR
o SHAREHOLDERS
15. Going Forward
o 10% Earnings Growth Target Maintained
o Commitment to Investment Grade Rating
o Dedicated to utility and utility-related businesses
16. Our Strategy:
o Committed to the regulated business
o Focused on expanded wholesale market opportunities
o Pursuit of new growth opportunities rooted in technological innovation and
the new economy
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<PAGE>
17. Market Rank
Company Market Cap*
Pinnacle West Capital $3,643.8
Newco (1) $2,565.0
Utilicorp United Inc. $2,478.4
OGE Energy $1,557.2
Western Resources $1,540.0
Sierra Pacific Resources $1,240.3
Public Service Co of New Mexico $1,080.0
Avista $1,072.4
El Paso Electric Co. $682.9
Unisource $474.8
(1) Calculated using the number of new Holding Company expected shares
outstanding of 95,000,000 times the targer price of $27.00 pursuant to the
merger agreement.
*As of 11/7/00
18. 1999 Revenue Mix
% of
Combined
(in millions) PNM Western Combined Total
Electric Revenues:
Residential $184.1 $407.4 $591.5 23.7
Commercial $238.8 $356.3 $595.1 23.9
Industrial $85.8 $251.4 $337.2 13.5
Wholesale $365.4 $368.3 $733.7 29.4
Gas Revenues: $236.7 N/A $236.7 9.5
Total $1,110.8 $1,383.4 $2,494.2 100.0
19. Example Calculation
Additional Equity Contributions
Newco Shares
(000's)
------------
1. Merger Consideration (see note 1)
---------------------------------
68 million shares of Western Resources (WR) 48,345
9.36 million shares of Western Resources issued to Westar
for conversion of $234 million inter-company debt 6,655
------------
Total Initial Merger Consideration 55,000
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<PAGE>
2. Equity Contribution by Western Resources
----------------------------------------
(assumes $135 million in equity contributions through
sale of non utility assets or equity offerings, such as
rights offering, DRIP, etc.)
Newco shares issued for $135 million equity contribution
at $27/Share 5,000
--------
Newco Shares issued after WR contributions 60,000
3. PNM Shares Exchanged for Newco 39,500
------------------------------
4. Additional Equity Contribution by Westar (see note 2)
-----------------------------------------------------
(assumes maximum $407 million in equity contributions)
(a) Common stock issued at $27/share up to a maximum
of 9.9% ownership in Newco 3,547
--------
Total Newco Shares outstanding 103,047
(b) $ 311,231, 000. Convertible Preferred Stock at 7.5%,
with conversion 20% Premium ($32.40) 9,606
TOTAL NEWCO SHARES (fully diluted) 112,653
========
Note 1
Shares to be issued to Westar from Western Resources in consideration for the
conversion of a $234 million inter-company note owed to Westar:
Assumptions: Shares of Western Resources trade at $25/share prior to closing.
----------- 68 million WR shares outstanding prior to closing.
(In Thousands)
$234 million inter-company note exchanged for WR stock
at $25/share, new WR shares to be issued 9,360
WR shares outstanding prior to close 68,000
-----------
Total WR shares outstanding at closing 77,360
Total Newco shares to be exchanged for WR 55,000
Exchange Ratio .711
Newco shares to WR shareholders (68,000 x .711) 48,345
Newco shares to Westar (9360x .711) 6,655
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<PAGE>
Note 2
PNM Shares Exchanged for Newco 39,500
Newco shares issued to WR and Westar 60,000
Total owned by Westar (6,655)
-----------
Newco shares owned directly by WR Shareholders and
PNM Shareholders 92,845 90.1%
Newco share maximum 10,202 9.9%
----------- ------
Total Newco shares outstanding 103,047 100%
Additional shares to be issue to Westar:
Maximum ownership 10,202
less shares issued for note conversion (6,655)
-----------
Additional Newco common shares to be issued to Westar 3,547
Equity contribution to be converted: $407,000
a) Into 3,547 shares at $27 $(95,769)
b) Preferred stock to be issued for remainder $311,231
20. Greater Scope and Scale
PNM WR Newco % Chg
Generating Capacity 1,521 MW 5,604 MW 7,125 MW 368
Peak Load 2000 1,350 MW 4,512 MW
Transmission Lines 2,000 Miles 4,500 Miles 6,500 Miles 225
Distribution System 11,000 Miles 25,000 Miles 36,000 Miles 227
Retail Electric Customers 361,000 634,000 989,000 174
Communities Served 112 471 583 420
21. Strategically Positioned
A map showing the resources of KPL and KGE strongly interconnected to MAPP,
MAIN, SERC and SPP NERC regions. Projects planned by third parties may provide
access to the Rocky Mountain region. The resources of PNM are located in the
Arizona-New Mexico sub-region of WSCC which is interconnected to southern
California, Nevada, Utah and Colorado. In addition to access to the WSCC
markets, PNM is interconnected to SPP.
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<PAGE>
22. The Opportunity in Trading and Generation (coal)
<TABLE>
<CAPTION>
PNM Western Resources
SJGS Four Corners Jeffrey Lacygne Lawrence Tecumseh
Energy Energy Energy Center
Center Center
<S> <C> <C> <C> <C> <C> <C>
Ownership 46% 13% 84% 50% 100% 100%
In Service 1973 1969 1978 1973 1954 1957
Net Gen. Capacity 265 MW 192 MW 1,871MW 681 MW 572 MW 284 MW
Fuel Cost $/MWh $18.00 $10.00 $12.04 $9.05 $13.31 $12.94
Capacity Factor 87.5% 84% 65% 68% 49% 46%
</TABLE>
23. A Balanced Generation Mix (1999)
PNM WR NEWCO
Coal 63% 61% 61%
Gas/Oil 11% 29% 26%
Nuclear 26% 10% 13%
24. Diversified Fuel Mix (1999 - Based on MWh Produced)
PNM WR NEWCO
Coal 68% 76% 73%
Gas/Oil 1% 6% 5%
Nuclear 31% 18% 22%
25. Post Merger Organization
Holding Company (Parent):
Direct subsidiaries of parent:
Western
Intermediate Holding Company
Avistar
Division of Western:
KPL
Subsidiaries of Intermediate Holding Company:
Manzano Energy
PNM Utility
Subsidiary of Western
KGE
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<PAGE>
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This press release contains forward looking statements within the meaning of the
"safe harbor" provisions of the United States Private Securities Litigation
Reform Act of 1995. Investors are cautioned that such forward-looking statements
with respect to revenues, earnings, performance, strategies, prospects and other
aspects of the businesses of PNM and Western Resources and with respect to the
benefits of the transaction are based on current expectations that are subject
to risk and uncertainties. Such statements are based upon the current beliefs
and expectations of the management of PNM and Western Resources. A number of
factors could cause actual results or outcomes to differ materially from those
indicated by such forward looking statements. These factors include, but are not
limited to, risks and uncertainties relating to: the possibility that
shareholders of PNM and/or Western Resources will not approve the transaction,
the risks that the businesses will not be integrated successfully, the risk that
the benefits of the transaction may not be fully realized or may take longer to
realize than expected, disruption from the transaction making it more difficult
to maintain relationships with clients, employees, suppliers or other third
parties, conditions in the financial markets relevant to the proposed
transaction, the receipt of regulatory and other approvals of the transaction,
that future circumstances could cause business decisions or accounting treatment
to be decided differently than now intended, changes in laws or regulations,
changing governmental policies and regulatory actions with respect to allowed
rates of return on equity and equity ratio limits, industry and rate structure,
stranded cost recovery, operation of nuclear power facilities, acquisition,
disposal, depreciation and amortization of assets and facilities, operation and
construction of plant facilities, recovery of fuel and purchased power costs,
decommissioning costs, present or prospective wholesale and retail competition
(including retail wheeling and transmission costs), political and economic
risks, changes in and compliance with environmental and safety laws and
policies, weather conditions (including natural disasters such as tornadoes),
population growth rates and demographic patterns, competition for retail and
wholesale customers, availability, pricing and transportation of fuel and other
energy commodities, market demand for energy from plants or facilities, changes
in tax rates or policies or in rates of inflation or in accounting standards,
unanticipated delays or changes in costs for capital projects, unanticipated
changes in operating expenses and capital expenditures, capital market
conditions, competition for new energy development opportunities and legal and
administrative proceedings (whether civil, such as environmental, or criminal)
and settlements, the outcome of Protection One accounting issues reviewed by the
SEC staff as disclosed in previous Western Resources SEC filings, the impact of
Protection One's financial condition on Western Resources' consolidated results,
and other factors. PNM and Western Resources disclaim any obligation to update
any forward-looking statements as a result of developments occurring after the
date of this news release. Readers are referred to PNM's and Western Resources'
most recent reports filed with the Securities and Exchange Commission.
11
<PAGE>
Additional Information
In connection with the proposed transaction, PNM and Western Resources will file
a joint proxy statement / prospectus with the Securities and Exchange
Commission. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE JOINT PROXY
STATEMENT / PROSPECTUS WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of
the joint proxy statement / prospectus (when available) and other documents
filed by PNM and Western Resources with the SEC at the SEC's web site at
http://www.sec.gov. Free copies of the joint proxy statement / prospectus, when
available, and each company's other filings with the SEC may also be obtained
from the respective companies. Free copies of PNM's filings may be obtained by
directing a request to PNM, Alvarado Square, Albuquerque, New Mexico 87158.
Phone: (800) 545-4425. Free copies of Western Resources' filings may be obtained
by directing a request to Western Resources, P.O. Box 889, Topeka, Kansas
66601-0889. Phone: (800) 527-2495.
Participants in Solicitation. PNM, Western Resources and certain of their
respective directors, executive officers and other members of their management
and employees, each of whom may be considered participants in this transaction
under applicable securities laws, may be soliciting proxies from their
respective stockholders in favor of the transaction. Information concerning
PNM's directors and executive officers participating in the solicitation is set
forth in PNM's Annual Report on Form 10-K filed with the Commission on March 9,
2000 and information concerning Western Resources' directors and executive
officers participating in the solicitation is set forth in Western Resources'
Annual Report on Form 10-K filed with the Commission on March 29, 2000 and
amended on April 3, 2000. Certain directors and executive officers of PNM and
Western Resources may have direct or indirect interests in the transaction due
to securities holdings, vesting of options, and rights to severance payments if
their employment is terminated following the transaction. In addition, directors
and officers, after the transaction, will be indemnified by PNM and Western
Resources, and benefit from insurance coverage for liabilities that may arise
from their service as directors and officers of PNM or Western Resources prior
to the transaction. Additional information regarding PNM's and Western
Resources' respective participants in the solicitation will be contained in the
joint proxy statement/prospectus.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Registrant)
Date: November 16, 2000 /s/ John R. Loyack
------------------------------------
John R. Loyack
Vice President, Corporate Controller
and Chief Accounting Officer
(Officer duly authorized
to sign this report)
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