By the OGJ Online Staff
HOUSTON, Aug. 13, 2001 – Western Resources Inc. late Monday said it was surprised by Public Service Co. of New Mexico’s characterization Western discontinued talks with PNM over proposed changes to a deal under which PNM was to acquire Western’s electric utility operations.
Earlier Monday, PNM reported Western Resources wanted to pursue an existing agreement PNM now believes would have a “material adverse effect on the financial condition of the proposed combined companies, and could result in the failure of a significant condition to the transaction.”
In a statement, Western Resources CEO David C. Wittig said the company believes the current transaction “can be completed without significant modification of the economic terms of the transaction. We are extremely disappointed that PNM has refused to meet with us to discuss the transaction on that basis.”
PNM, Alburqueque, NM, and Western Resources, Topeka, Kan., agreed Nov. 9, 2000, to a deal under which PNM would acquire Western’s electricity utility operations in a stock-for-stock transaction. Western Resources also agreed to reorganize its remaining nonutility assets into Westar Industries and spin it off to its shareholders.
The proposed transaction ran into trouble after Kansas regulators refused to approve some its provisions. One of the orders prohibits the split-off of Western’s unregulated businesses in the manner proposed by Western. As the transaction with PNM is currently structured, the spin off is required prior to closing the deal.
The other order reduces Western’s rates by almost $23 million/year. Western has filed for reconsideration of the two orders. The companies reported in July they were in talks about possible modifications to the deal because of the changes ordered by Kansas regulators. At that time, they jointly warned the deal would be difficult to complete.
But Monday, PNM said Western Resources advised PNM it believed the parties should pursue completion of the transaction under the existing agreement, the two recent orders from the Kansas Corporation Commission, notwithstanding.
PNM reported it advised Western Resources it is disappointed the talks were discontinued since it continues to believe that the existing transaction cannot be consummated if the KCC orders remain in effect.
PNM said it believes Western has responsibility for resolving issues raised by the KCC orders.
PNM CEO Jeff Sterba said as currently structured, the company believes the transaction “cannot be consummated if the KCC orders stand and the KCC’s expressed concerns are not addressed by Western.”
PNM is a combined electric and gas utility serving 1.3 million people in New Mexico. The company also sells power on the wholesale market in the western US. Western Resources is a consumer services company with interests in monitored services and energy. Through its ownership in ONEOK Inc., a Tulsa-based natural gas company, Western has a 45% interest in one of the largest natural gas distribution companies in the nation, with more than 1.4 million customers.