By the OGJ Online Staff
HOUSTON, Aug. 13 -- Public Service Co. of New Mexico Monday said Western Resources Inc. discontinued talks about possible changes to a deal under which PNM was to acquire Western's electric utility operations.
It said the two companies disagree over the transaction's future. A spokeswoman for Western Resources said the Topeka, Kan., company would respond later Monday.
PNM, Alburqueque, NM, and Western Resources 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 advised Western the order reducing Western's rates 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. PNM said Western has advised PNM it disagrees.
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."
Earlier, Western CEO David Wittig said the company was hopeful it would reach agreement with PNM on alternative terms that would permit the transaction to move forward.
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.
