By the OGJ Online Staff
HOUSTON, Nov. 20, 2001 — Western Resources Inc., Topeka, Kan., Tuesday filed suit in a New York court alleging Public Service Co. of New Mexico violated an agreement to buy Western’s electric utility subsidiaries.
Western Resources also asked the court to dismiss PNM’s Oct. 12 petition asking the court to void the agreement. On Nov. 8, 2000, PNM agreed to purchase Western Resources’ utility operations in a $4 billion stock-for-stock transaction.
Western Resources alleged PNM first tried to retrade the deal and later sought to “sabotage” Western Resources’ efforts to comply with contractual conditions. After the deal was announced, PNM’s stock price rose significantly, increasing the value of PNM’s share contribution to the deal by a considerable amount. Western Resources alleged the increase in the purchase price was one of the reasons PNM has sought to escape from the contract.
In its complaint, PNM asked the court to find that it is impossible to complete the proposed transaction under the original terms. PNM also asked the court to rule an electric rate reduction mandated for Western by the Kansas Corporation Commission (KCC) is sufficient cause for PNM to terminate its agreement with Western.
The agreement requires Western to separate its electric utilities from its other businesses and split off those other businesses to Western’s shareholders, PNM said. The Albuquerque company said Western claimed that regulatory approval was not required for the split-off.
But in an order issued in July and since reaffirmed, the KCC has ruled that Western’s plan to restructure its operations, including the split-off, is contrary to the public interest, unlawful and prohibited with or without a merger, PNM said.
“We believe the current agreement must be restructured, so that it can be approved by the KCC,” said PNM Chairman Jeff Sterba.
Western Resources said it will continue to pursue satisfaction of its contractual obligations, including the filing of appeals from nonfinal orders entered by the KCC cited by PNM.