-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O34oYJPWiwIZIj543JzgWyc9KhRLjairxY9EFJLk/P/0TakkBpqMkI4017cnuzN2 dVHklKJfEClz51ObSe9XgA== 0000741612-97-000012.txt : 19970310 0000741612-97-000012.hdr.sgml : 19970310 ACCESSION NUMBER: 0000741612-97-000012 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970307 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TNP ENTERPRISES INC CENTRAL INDEX KEY: 0000741612 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 751907501 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-08847 FILM NUMBER: 97552629 BUSINESS ADDRESS: STREET 1: 4100 INTERNATIONAL PLZ STREET 2: PO BOX 2943 CITY: FORT WORTH STATE: TX ZIP: 76113 BUSINESS PHONE: 8177310099 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEXAS NEW MEXICO POWER CO CENTRAL INDEX KEY: 0000022767 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 750204070 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 002-97230 FILM NUMBER: 97552630 BUSINESS ADDRESS: STREET 1: 4100 INTERNATIONAL PLZ STREET 2: PO BOX 2943 CITY: FORT WORTH STATE: TX ZIP: 76113 BUSINESS PHONE: 8177310099 MAIL ADDRESS: STREET 1: 4100 INTERNATIONAL PLAZA STREET 2: PO BOX 2943 CITY: FORT WORTH STATE: TX ZIP: 76113 FORMER COMPANY: FORMER CONFORMED NAME: COMMUNITY PUBLIC SERVICE CO DATE OF NAME CHANGE: 19810617 10-K405 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ___________ FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (X) COMBINED ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to TNP ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Texas 4100 International Plaza, P. O. Box 2943, Commission File (State of Fort Worth, Texas 76113 Number: 1-8847 incorporation) (Address and zip code of principal executive offices) Telephone number, including area code: 817-731-0099 75-1907501 (I.R.S. employer identification no.) Securities registered pursuant to Section 12(b) of the Act: Shares Outstanding Name of each exchange Title of each class on January 31, 1997 on which registered Common stock, no par value 13,011,454 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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\ \ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. \X\ The aggregate market value of TNP Enterprises, Inc. common stock held by nonaffiliates on January 31, 1997, was $355,560,068 based on the common stock's closing price on the New York Stock Exchange on the same date of $27.50 per share. TEXAS-NEW MEXICO POWER COMPANY (Exact name of registrant as specified in its charter) Texas 4100 International Plaza, P. O. Box 2943, Commission File (State of Fort Worth, Texas 76113 Number: 2-97230 incorporation) (Address and zip code of principal executive offices) Telephone number, including area code: 817-731-0099 75-0204070 (I.R.S. employer identification no.) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Name of each exchange Title of each class on which registered First mortgage bonds: Series M, 8.7% due 2006; Series T, 11.25% due 1997; and Series U, 9.25% due 2000 None Secured debentures: 12.5% due 1999; Series A, 10.75% due 2003 None 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\ \ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. \X\ TNP Enterprises, Inc. holds all 10,705 outstanding common shares of Texas-New Mexico Power Company. ________________________________________________________________________________ DOCUMENTS INCORPORATED BY REFERENCE Document Part Where Incorporated Proxy Statement for 1997 Annual Meeting of Holders of TNP Enterprises, Inc. Common Stock III TNP ENTERPRISES INC. AND SUBSIDIARIES TEXAS NEW-MEXICO POWER COMPANY AND SUBSIDIARIES Combined Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1996 This combined annual report on Form 10-K is filed separately by TNP Enterprises, Inc. and Texas-New Mexico Power Company. Information contained in this report relating to Texas-New Mexico Power Company is filed by TNP Enterprises, Inc. and separately by Texas-New Mexico Power Company on its own behalf. Texas-New Mexico Power Company makes no representation as to information relating to TNP Enterprises, Inc. or to any other affiliate or subsidiary of TNP Enterprises, Inc., except as it may relate to Texas-New Mexico Power Company. TABLE OF CONTENTS Glossary of Terms.......................................................... 3 Part I Item 1. BUSINESS......................................................... 4 Introduction..................................................... 4 TNP's Service Areas.............................................. 4 Seasonality of Business.......................................... 5 Sources of Energy................................................ 5 Government Regulation............................................ 6 Employees and Executive Officers................................. 6 Item 2. PROPERTIES....................................................... 7 Administrative and Service Facilities............................ 7 Generating Facilities............................................ 8 Transmission and Distribution Facilities......................... 8 Item 3. LEGAL PROCEEDINGS................................................ 8 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 8 Part II Item 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.................................. 8 Item 6. SELECTED FINANCIAL DATA.......................................... 9 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............................. 11 Competitive Conditions........................................... 11 Results of Operations............................................ 12 Liquidity and Capital Resources.................................. 15 Other Matters.................................................... 16 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 17 TNP Enterprises, Inc. and Subsidiaries........................... 19 Texas-New Mexico Power Company and Subsidiaries.................. 24 Notes to Consolidated Financial Statements....................... 29 Selected Quarterly Consolidated Financial Data................... 40 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.............................. 40 Part III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............... 41 Directors........................................................ 41 Executive Officers............................................... 41 Item 11. EXECUTIVE COMPENSATION........................................... 41 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT... 41 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 41 Part IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.. 41 TNP ENTERPRISES INC. AND SUBSIDIARIES TEXAS NEW-MEXICO POWER COMPANY AND SUBSIDIARIES Combined Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1996 Glossary of Terms As used in this combined report, the following abbreviations, acronyms, or capitalized terms have the meanings set forth below: Abbreviation, Acronym, or Capitalized Term Meaning AFUDC ................Allowance for borrowed funds used during construction Bond Indenture .......Document pursuant to which FMBs are issued EPS...................Earnings (loss) per share of common stock Facility Works........Facility Works, Inc., a wholly owned subsidiary of TNPE, formerly known as Community Public Service Company FERC..................Federal Energy Regulatory Commission FMB(s)................One or more First Mortgage Bonds issued by TNP GWH...................Gigawatt-Hours IRS...................Internal Revenue Service ITC...................Investment Tax Credits KWH...................Kilowatt-Hours MW....................Megawatts MWH...................Megawatt-Hours NMPUC.................New Mexico Public Utility Commission PPM...................PPM America, Inc. PUCT..................Public Utility Commission of Texas SPS...................Southwestern Public Service Company SFAS..................Statement of Financial Accounting Standards TEP...................Tucson Electric Power Company TGC...................Texas Generating Company, a wholly owned subsidiary of TNP TGC II................Texas Generating Company II, a wholly owned subsidiary of TNP TNP One...............A two-unit, lignite-fueled, circulating fluidized-bed generating plant located in Robertson County, Texas TNP...................Texas-New Mexico Power Company, a wholly owned subsidiary of TNPE TNPE..................TNP Enterprises, Inc. TU....................Texas Utilities Electric Company Unit 1................The first completed electric generating unit of TNP One Unit 2................The second completed electric generating unit of TNP One Statement Regarding Forward Looking Information The discussions in this document that are not historical facts, including, but not limited to, statements regarding TNPE and TNP's business strategy, projected sources and uses of cash, and projected operations, are based upon current expectations. Actual results may differ materially. Among the facts that could cause the results to differ materially are the following: changes in regulations; results of regulatory proceedings; future acquisitions or strategic partnerships; general business and economic conditions; and other factors described from time to time in TNPE and TNP's reports filed with the Securities and Exchange Commission. TNPE and TNP wish to caution readers not to place undue reliance on any such forward-looking statements, which are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. PART I Item 1. BUSINESS. Introduction TNPE was organized as a holding company in 1983 and currently transacts business through its subsidiaries. TNP is a public utility engaged in generating, purchasing, transmitting, distributing, and selling electricity to customers in Texas and New Mexico. TNP's original predecessor was organized in 1925. TNP has two subsidiaries, TGC and TGC II, both of which were organized to facilitate TNP's acquisitions of TNP One, Unit 1 and Unit 2 in 1990 and 1991, respectively. Facility Works is a wholly owned subsidiary of TNPE that began operations in early 1996. Facility Works provides energy and utility related facility services to commercial and institutional customers in mostly nonmetropolitan areas. Facility Works provides lighting and electrical services; heating, cooling and power-related services; and energy-management services. TNPE, TNP, TGC, TGC II and Facility Works are all Texas corporations. Their executive offices are located at 4100 International Plaza, P.O. Box 2943, Fort Worth, Texas 76113 and their telephone number is (817) 731-0099. Unless otherwise indicated, all financial information in this report is presented on a consolidated basis. TNP's Service Areas TNP provides electric service to 85 Texas and New Mexico municipalities and adjacent rural areas with more than 218,000 customers. TNP's ser vice areas are organized into three operating regions: the Gulf Coast Region, the North-Central Region, and the Mountain Region. Gulf Coast Region The Gulf Coast Region includes the area along the Texas Gulf Coast between Houston and Galveston. The oil and petrochemical industries, agricultural industry and general commercial activity in the Houston area support the economy of this area. North-Central Region The North-Central Region extends from Lewisville, Texas, which is north of Dallas-Fort Worth International Airport, to municipalities along the Red River. TNP provides electric service to a variety of commercial, agricultural and petroleum industry customers in this area. This region also includes municipalities and communities south and west of Fort Worth. This area's economy depends largely on agriculture and, to a lesser extent, tourism and oil production. The North-Central Region previously included service territory in a portion of the Texas Panhandle that TNP sold in September 1995. Mountain Region The Mountain Region includes areas in southwest and south-central New Mexico. This region's economy is primarily dependent upon mining and agriculture. Copper mines are the major industrial customers in this region. This region also includes the area in far west Texas between Midland and El Paso. The economy in this area is based primarily on oil and gas production, agriculture, and food processing. TNP's sales in all regions are primarily to retail customers. Revenues contributed by each operating region and its percentage of total operating revenues in 1996, 1995, and 1994, respectively, are set forth in the following table. No single customer accounted for more than 10% of operating revenues during the years presented in the table.
Operating Revenues ($000's) Region 1996 1995 1994 Gulf Coast $ 269,535 53.6% $ 250,165 51.5% $ 241,285 50.5% North-Central 134,236 26.7 130,200 26.8 122,945 25.7 Panhandle - - 7,322 1.5 9,650 2.0 Mountain 98,966 19.7 98,136 20.2 104,109 21.8 Total $ 502,737 100.0% $ 485,823 100.0% $ 477,989 100.0%
Franchises and Certificates of Public Convenience and Necessity TNP holds 83 franchises with terms ranging from 20 to 50 years and two franchises with indefinite terms from the 85 municipalities to which it provides electric service. These franchises will expire on various dates from 1997 to 2039. Three Texas franchises, comprising 23% of total company revenues, are scheduled to expire in 1997, 1998 and 1999. However, Texas law does not require an electric utility to execute a franchise agreement with a Texas municipality to be entitled to provide or continue to provide electrical service within the municipality. A franchise agreement documents the mutually agreeable terms under which the service will be provided. TNP intends to negotiate and execute new or amended franchise agreements to be effective before existing franchises expire. TNP also holds PUCT certificates of public convenience and necessity covering all Texas areas that TNP serves. These certificates include terms that are customary in the public utility industry. TNP generally has not been required to have certificates of public convenience and necessity to provide electric power in New Mexico. Seasonality of Business TNP experiences increased sales and operating revenues during the summer months as a result of increased air conditioner usage in hot weather. In 1996, approximately 41% of annual revenues were recorded in June, July, August, and September. Sources of Energy TNP owns one 300 MW lignite-fueled generating facility, TNP One. During 1996, TNP One provided approximately 28% of TNP's total energy requirements. Power generated at TNP One is transmitted over TNP's own transmission lines to other utilities' transmission systems for delivery to TNP's Texas service area systems. To maintain a reliable power supply for its customers and to coordinate interconnected operations, TNP is a member of the Electric Reliability Council of Texas and the Western Systems Coordinating Council. TNP purchases the remainder of its electricity from various suppliers with diversified fuel sources. During 1996, approximately 80% of the purchases of power were made under firm contracts, while 20% was purchased through short-term spot market purchases. The availability and cost of purchased power to TNP is subject to changes in supplier costs, regulations and laws, fuel costs, and other factors. TNP is pursuing various opportunities to reduce purchased power costs. The following table sets forth certain information concerning TNP's sources of electric energy in 1996. Year Contract Percent of Expires Energy Provided TEXAS Generation TNP One.................................... - 35% Purchased Power Texas Utilities (1)........................ 1999 24 Clear Lake Cogeneration L.P................ 2004 17 Other (primarily co-generators)............ Various 24 Total 100% NEW MEXICO Purchased Power Public Service Co. of New Mexico(2) (3).... 1999 7% El Paso Electric Co.(3).................... 2002 13 Southwest Public Service Co. (3)........... 2001 7 Other (primarily short-term contracts) (4). - 73 Total 100% (1) TNP has notified TU of its intent to cease purchasing full requirements power and energy effective January 1, 1999, as described in Note 12. (2) TNP has notified PNM of its intent to cease purchasing full requirements power and energy effective January 1, 1999 under an existing agreement. TNP continues to purchase power from PNM under both old and newly executed agreements. (3) These suppliers may not terminate service to TNP without FERC authorization. (4) Suppliers under the short-term contracts include Tucson Electric Power Co., Public Service Co. of New Mexico, El Paso Electric Co. and Southwest Public Service Co. Management believes that current supply arrangements and available capacities on the wholesale market are adequate to satisfy TNP's foreseeable power requirements. Recovering Purchased Power and Fuel Costs Purchased power is recovered from TNP customers through power cost recovery adjustment clauses authorized by the PUCT and NMPUC. These clauses enable TNP to recover this significant component of operating expenses within two months of billing by its suppliers. Fuel costs are recovered from TNP's Texas customers through a fixed fuel recovery factor approved by the PUCT. The fixed fuel recovery factor is described at Item 7, "Pass-Through Expenses--Fuel," which is incorporated here by reference. Government Regulation TNP is subject to PUCT and NMPUC regulation. Some of its activities, such as issuing securities, are also subject to FERC regulation. Recent regulatory developments are changing competitive conditions in the electric utility industry. These changes are discussed in Item 7, "Competitive Conditions," which is incorporated here by reference. In addition to regulation as a utility, TNP's facilities are regulated by the Environmental Protection Agency and Texas and New Mexico environmental agencies. TNP One uses environmentally superior circulating fluidized bed technology that eliminates the need for expensive scrubbers. TNP was allotted sufficient emission allowances to comply with the Clean Air Act of 1990 through the year 2000. During 1996, 1995, and 1994, TNP incurred expenses related to air, water, and solid waste pollution abatement (including ash removal) of approximately $6.1 million, $5.5 million, and $5.9 million, respectively. Employees And Executive Officers At December 31, 1996, TNP had 819 employees and Facility Works had 116 employees. The employees are not represented by a union or covered by a collective bargaining agreement. Management believes relations with its employees are good. Executive officers of TNPE and TNP, who are elected annually by the respective boards of directors and serve at the discretion of the boards, are as follows: Name Age Position with TNPE Kevern R. Joyce 50 Chairman, President, & Chief Executive Officer Jack V. Chambers, Jr. 47 Senior Vice President John P. Edwards 54 Senior Vice President Manjit S. Cheema 42 Vice President & Chief Financial Officer Ralph Johnson 53 Vice President John A. Montgomery 35 Vice President Michael D. Blanchard 46 Corporate Secretary & General Counsel Patrick L. Bridges 38 Treasurer Name Age Position with TNP Kevern R. Joyce 50 Chairman, President, & Chief Executive Officer Jack V. Chambers, Jr. 47 Senior Vice President & Chief Customer Officer Manjit S. Cheema 42 Senior Vice President & Chief Financial Officer John P. Edwards 54 Senior Vice President - Corporate Relations Ralph Johnson 53 Senior Vice President - Power Resources Dennis R. Cash 43 Vice President - Human Resources Allan B. Davis 59 Vice President & Regional Customer Officer Melissa D. Davis 39 Vice President & Regional Customer Officer Larry W. Dillon 42 Vice President & Regional Customer Officer W. Douglas Hobbs 53 Vice President - Business Development Michael D. Blanchard 46 Corporate Secretary & General Counsel Patrick L. Bridges 38 Treasurer Scott Forbes 39 Controller Kevern R. Joyce joined TNPE and TNP in April 1994 as President and Chief Executive Officer. He became Chairman in April 1995. From 1992 until April 1994, Mr. Joyce served as Senior Vice President and Chief Operating Officer of TEP. Jack V. Chambers has served as Senior Vice President and Chief Customer Officer of TNP since 1994. He was TNP's Sector Vice President - Revenue Production from 1990 to 1994. John P. Edwards joined TNP and TNPE in July 1996 as Senior Vice President - Corporate Relations. From October 1994 until joining TNP and TNPE he was Senior Vice President/Customer Group and Special Assistant to the Chief Operating Officer, Tennessee Valley Authority. His primary responsibilities were general administrative in nature for TVA's transmission operations, customer relationship, rate and regulatory affairs. From July 1990 until October 1994, he was President/CEO of Old Dominion Electric Cooperative and Virginia-Maryland-Delaware Association of Electric Cooperatives. Manjit S. Cheema joined TNP in June 1994. He was Treasurer of TNP from June 1994 until September 1995. In December 1994, he became Vice President & Chief Financial Officer of TNPE and TNP, and in July 1996, he became Senior Vice President & Chief Financial Officer of TNP. From March 1990 until he joined TNPE and TNP, Mr. Cheema was Assistant Treasurer and Manager of Financial Planning and Budgeting for TEP. Ralph Johnson joined TNP and TNPE as Vice President in February 1995. In July 1996, he was named Senior Vice President - Power Resources. From March 1991 until he joined TNP and TNPE, Mr. Johnson was Assistant General Manager for Tri-State Generation and Transmission Association in Denver, Colorado, which sells power to rural electric cooperatives. John A. Montgomery became President of Facility Works in April 1996. From December 1995 to December 1996 he served as TNP's Vice President - Marketing. He became Vice President of TNPE in April 1996. From February 1994 until he joined TNP, he served as Director of Marketing and Regional Marketing Director of Greyhound Lines, Inc., a bus transportation company. From August 1990 to February 1994, Mr. Montgomery was President of Viva Brands International, Inc., a tropical fruit beverage company that he founded. Michael D. Blanchard has been Corporate Secretary and General Counsel of TNP and TNPE since 1987. Patrick L. Bridges was appointed Treasurer of TNPE and TNP in September 1995. He served as TNP's Director - Finance from 1994 to September 1995, Assistant Treasurer from 1993 to September 1995, Manager - Revenue Accounting during 1993, and Manager - Forecasting from 1990 to 1993. Dennis R. Cash has served TNP as Vice President - Human Resources since 1994. From 1990 until 1994 he was General Manager - or Manager - Human Resources. Allan B. Davis has been a TNP Vice President and Regional Customer Officer since 1994. From 1991 to 1994, he was TNP's Vice President - Chief Engineer, Chief Engineer, or Assistant Chief Engineer. Melissa D. Davis became a TNP Vice President and Regional Customer Officer in February 1997. From September 1995 to February 1997 she was TNP' Controller. From 1994 to September 1995, she was Director - Financial Accounting and Assistant Controller of TNP. She served as Division Accounting Manager from 1991 to 1994. Larry W. Dillon has been a TNP Vice President and Regional Customer Officer since 1994. From 1993 to 1994, he was TNP's Vice President - Operations. He was TNP's Division Manager from 1990 to 1993. W. Douglas Hobbs was appointed as Vice President - Business Development of TNP in February 1997. He was a TNP Vice President and Regional Customer Officer from April 1994 to February 1997. He served as TNP One Plant Manager from April 1992 to 1994. Scott Forbes was appointed TNP's Controller in February 1997. From September 1996 to February 1997, he was Manager - Financial Systems and Reporting. From January 1994 to September 1996 he was Manager - Financial Reporting and Accounting Policy with Entergy Services, Inc. From 1991 to 1993 he was Manager - Regulatory and Financial Reporting with Gulf States Utilities Company. Item 2. PROPERTIES. Substantially all of TNP's real and personal property secures its FMBs. Substantially all of TNP's real and personal property in Texas secures its revolving credit facilities and debentures. TNP's long-term debt is described in Note 9. Administrative and Service Facilities TNPE's, TNP's and Facility Works' corporate headquarters are located in an office building in Fort Worth, Texas. Space in this building is leased through 2003. TNP owns or leases local offices in 37 of the municipalities that it serves. TNP owns 14 construction/service centers in Texas and New Mexico. Generating Facilities TNP One is a two-unit, lignite-fueled generating plant, located in Robertson County, Texas. TNP One generates power for TNP's Texas service areas and operates as a base load facility. Transmission and Distribution Facilities Management believes that TNP's transmission and distribution facilities are of sufficient capacity to serve existing customers adequately and to be extended and expanded to serve customer growth for the foreseeable future. These facilities primarily consist of overhead and underground lines, substations, transformers, and meters. TNP generally constructs its transmission and distribution facilities on easements or public rights of way and not on real property held in fee simple. Item 3. LEGAL PROCEEDINGS. The information set forth in Notes 2, 4, and 12 regarding regulatory and legal matters is incorporated here by reference. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders in the fourth quarter of 1996. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. TNPE's common stock is traded on the New York Stock Exchange under the symbol "TNP." The high and low sales prices of, and the amount of dividends declared and paid on, TNPE's common stock during each quarter in 1996 and 1995 were as follows: TNPE MARKET PRICE RANGE DIVIDENDS 1996 1995 PAID QUARTER HIGH LOW HIGH LOW 1996 1995 _______ ____ ___ ____ ___ ____ ____ First $23 1/4 $18 1/2 $16 $14 5/8 $ 0.22 $ 0.20 Second 28 5/8 22 16 3/4 15 0.22 0.20 Third 28 1/8 23 17 3/4 16 0.245 0.20 Fourth 28 1/8 24 1/2 19 1/8 17 1/2 0.245 0.22 $ 0.930 $ 0.82 As of January 31, 1997, there were approximately 4,980 record holders of TNPE common stock. TNPE holds all 10,705 outstanding common shares of TNP. During 1996 and 1995, TNP paid common dividends to TNPE as follows: TNP DIVIDENDS PAID ($000's) QUARTER 1996 1995 First $ 2,400 $ - Second 2,400 - Third 2,700 - Fourth 3,200 2,400 Total $ 10,700 $ 2,400
Item 6. SELECTED FINANCIAL DATA The following table sets forth selected financial data of TNPE and TNP for 1992 through 1996. 1996 1995 1994 1993 1992 ------------- -------------- -------------- ------------- ------------- (In thousands except per share amounts and percentages) TNP ENTERPRISES, INC. Consolidated results Operating revenues $ 502,737 $ 485,823 $ 477,989 $ 474,242 $ 443,827 Net income (loss) (1) $ 23,053 $ 41,505 $ (17,441) $ 11,605 $ 10,930 Total assets $ 1,006,784 $ 1,030,433 $ 1,054,488 $ 1,086,938 $ 1,182,707 Cash flows Construction expenditures $ 28,006 $ 28,689 $ 29,038 $ 26,360 $ 22,410 Cash internally generated as a percentage of construction expenditures 194% 275% 105% 123% 213% Common shares outstanding Weighted average 11,543 10,901 10,750 10,641 8,545 End of year 13,006 10,920 10,866 10,696 10,598 Per share of common stock Earnings (loss) (1) $ 1.98 $ 3.75 $ (1.70) $ 1.01 $ 1.17 Cash dividends declared $ 0.93 $ 0.82 $ 1.22 $ 1.63 $ 1.63 Book value $ 21.41 $ 19.91 $ 17.01 $ 19.97 $ 20.62 Capitalization Common shareholders' equity $ 278,474 $ 217,457 $ 184,869 $ 213,627 $ 218,535 Preferred stock 3,420 3,600 8,680 9,560 10,440 Long-term debt, less current maturities 533,964 611,925 682,832 678,994 742,087 ------------- -------------- -------------- ------------- ------------- Total capitalization $ 815,858 $ 832,982 $ 876,381 $ 902,181 $ 971,062 ============= ============== ============== ============= ============= Capitalization ratios Common shareholders' equity 34.1% 26.1% 21.1% 23.7% 22.5% Preferred stock 0.4 0.4 1.0 1.1 1.1 Long-term debt, less current maturities 65.5 73.5 77.9 75.2 76.4 ------------- -------------- -------------- ------------- ------------- Total capitalization 100.0% 100.0% 100.0% 100.0% 100.0% ============= ============== ============== ============= ============= TEXAS-NEW MEXICO POWER COMPANY Consolidated results Operating revenues $ 502,737 $ 485,823 $ 477,989 $ 474,242 $ 443,827 Net income (loss) (1) $ 26,862 $ 41,809 $ (16,634) $ 11,523 $ 10,845 Total assets $ 1,002,157 $ 1,024,943 $ 1,043,178 $ 1,076,820 $ 1,156,567 Cash flows (same as TNPE) Capitalization Common shareholder's equity $ 287,548 $ 224,351 $ 185,777 $ 214,184 $ 205,875 Preferred stock 3,420 3,600 8,680 9,560 10,440 Long-term debt, less current maturities 533,800 611,925 682,832 678,994 742,087 ------------- -------------- -------------- ------------- ------------- Total capitalization $ 824,768 $ 839,876 $ 877,289 $ 902,738 $ 958,402 ============= ============== ============== ============= ============= Capitalization ratios Common shareholder's equity 34.9% 26.7% 21.2% 23.7% 21.5% Preferred stock 0.4 0.4 1.0 1.1 1.1 Long-term debt, less current maturities 64.7 72.9 77.8 75.2 77.4 ------------- -------------- -------------- ------------- ------------- Total capitalization 100.0% 100.0% 100.0% 100.0% 100.0% ============= ============== ============== ============= ============= (1) TNPE's and TNP's 1995 income before the cumulative effect of change in accounting were $33,060 and $33,364, respectively. TNPE's 1995 EPS before the cumulative effect of change in accounting was $2.98. (2) Cash internally generated is defined as cash generated from operations less cash dividends.
SELECTED OPERATING STATISTICS 1996 1995 1994 1993 1992 -------------- --------------- --------------- --------------- -------------- TNP ENTERPRISES, INC. Operating revenues (in thousands): Residential $ 206,748 $ 200,455 $ 194,933 $ 193,484 $ 175,885 Commercial 150,034 148,908 141,886 138,680 128,550 Industrial 129,972 113,728 122,714 124,474 121,027 Other 15,983 22,732 18,456 17,604 18,365 ------------- --------------- --------------- --------------- --------------- Total $ 502,737 $ 485,823 $ 477,989 $ 474,242 $ 443,827 ============== =============== =============== =============== =============== Sales (MWH): Residential 2,230,558 2,141,553 2,085,621 2,047,360 1,947,593 Commercial 1,725,650 1,681,130 1,618,840 1,567,083 1,499,927 Industrial 3,797,776 2,704,159 2,652,844 2,567,552 2,508,837 Other 108,039 113,985 114,190 104,882 109,954 ------------- --------------- --------------- --------------- --------------- Total 7,862,023 6,640,827 6,471,495 6,286,877 6,066,311 ============== =============== =============== =============== =============== Number of customers (at year end): Residential 187,796 183,863 185,364 181,298 178,154 Commercial 29,864 29,361 30,624 30,235 30,359 Industrial 135 136 142 141 155 Other 224 244 237 237 229 ------------- --------------- --------------- --------------- --------------- Total 218,019 213,604 216,367 211,911 208,897 ============== =============== =============== =============== =============== Revenue statistics: Average annual use per residential customer (KWH) 11,973 11,476 11,354 11,362 11,003 Average annual revenue per residential customer (dollars) 1,110 1,074 1,061 1,067 987 Average revenue per KWH sold per residential customer (cents) 9.27 9.36 9.35 9.45 9.03 Average revenue per KWH sold total sales (cents) 6.39 7.32 7.39 7.54 7.32 Net generation and purchases (MWH): Generated 2,296,056 2,351,000 2,336,830 2,363,493 2,247,664 Purchased 5,769,173 4,612,186 4,472,306 4,385,697 4,261,129 ------------- --------------- --------------- --------------- --------------- Total 8,065,229 6,963,186 6,809,136 6,749,190 6,508,793 ============== =============== =============== =============== =============== Average cost per KWH purchased (cents) 3.51 3.87 4.35 4.56 4.09 Employees (year-end) Texas-New Mexico Power Company 819 858 894 1,051 1,086 Facility Works 116 - - - -
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. SIGNIFICANT EVENTS AND KNOWN TRENDS AFFECTING TNPE AND TNP Competitive Conditions The electric utility industry continues its transition toward an environment of increased competition. Pressures that underlie the movement toward increasing competition are numerous and complex. They include legislative and regulatory changes, technological advances, consumer demands, greater availability of natural gas, environmental needs, and other factors. The increasingly competitive environment presents opportunities to compete for new customers, as well as the risk of loss of existing customers. Community ChoiceSM In May 1996, in order to meet the issue of competition head on, TNP filed an application with the PUCT requesting approval of a program known as Community Choice that would apply to electric services provided by TNP in Texas. On June 21, 1996, TNP filed an application with the NMPUC requesting approval of a similar Community Choice program that would apply to electric service provided by TNP in New Mexico. Community Choice is a transition plan designed to address the opportunities and challenges presented by the increasingly deregulated and competitive environment of the electric services industry. As proposed by TNP, Community Choice provided for transition periods of four years in New Mexico and five years in Texas. Community Choice proposed that, during the transition periods, TNP's rates for electric service in New Mexico and Texas would be structured to provide TNP a reasonable opportunity to reduce its so-called potential "stranded costs." "Stranded costs" means the difference between what it currently costs TNP to provide service and what a customer would be willing to pay for such service in a competitive market. In Texas, TNP's potential stranded cost relates to TNP One, its 300 MW generating unit, and could potentially be more than $250 million. In New Mexico, TNP's potential stranded cost relates to its purchased power contracts and could potentially be more than $10 million. At the end of the transition periods, TNP would aggregate, or combine, its customers at the community level and permit these aggregated electrical loads to choose the types and nature of electric services that will be available to individual customers within each aggregated load. In November 1996, TNP withdrew its Community Choice filing in Texas. Prior to the withdrawal TNP had attempted to work through the numerous issues with various intervenors. The withdrawal was due to a lack of consensus on key issues, including the issue of stranded costs. In late February 1997, TNP proposed a new plan for transition to competition to the communities within TNP's service territory in Texas. The new plan includes a five-year transition period and the opportunity to reduce potential stranded costs. The new plan also includes options providing various levels of access to the open market, which TNP customers will be able to select from at the end of the transition period. Due to the numerous issues involved, TNP can provide no assurance as to the timing or outcome of the new transition to competition plan in Texas. As discussed below, certain gulf coast cities and TNP agreed to delay a rate review filing until July 1, 1997, in order to reopen negotiations on the new transition to competition plan. On February 4, 1997, TNP filed a stipulation with the NMPUC adjusting several of the components of the original Community Choice proposal. The stipulation has the support of the major stakeholders. The revised plan gives TNP customers the right to choose their energy provider after a three-year transition period, freezes rates (including fuel and purchased power) for a three-year period, and allows for customer aggregation based on market forces. Hearings were held in late February 1997. Approval by the NMPUC is the final step. TNP believes the plan will allow it to recover most if not all of its potential stranded costs in New Mexico, however, the actual recovery of any stranded costs will depend on the future market and price for energy through 2002. Impact of Competition on TNP The most significant effect of competition on TNP, as well as other utilities, will be the ability to recover potential stranded costs, as well as to retain and attract new customers. The inability to recover a significant portion of stranded costs would adversely impact TNPE's and TNP's financial condition. TNP will continue to seek solutions to the recovery of its potential stranded costs. Although the final resolution and magnitude of the issue is uncertain, management realizes it is possible that shareholders may share the financial burden of stranded costs with customers. Assuming satisfactory resolution of the stranded costs issue, TNP believes that current competitive developments on the wholesale market ultimately will benefit TNP and its customers. Because TNP purchases much of its power, TNP can take advantage of the lower transmission prices, additional market flexibility, and new options in obtaining purchased power. TNP's competitive position has been strengthened with the PUCT open access to transmission rule. TNP currently has no significant wholesale power sales but expects to position itself to take advantage of opportunities to serve additional wholesale customers as they arise. Management believes TNP's revenue growth opportunities are in an increased customer base and new services. TNP believes its market niche is in smaller to medium sized communities. Only two of the 85 communities in TNP's service area have populations in excess of 50,000. Control Area TNP implemented a control area in Texas which became operational on July 31, 1996. The control area is an electrical system which enables TNP to instantaneously balance its system resources with loads. TNP had previously contracted with another utility for these services. It also permits TNP to replace standby power for TNP One with the purchase of planning reserves. Implementation of the control area is estimated to result in additional base revenues and cost savings of approximately $10 million annually. Texas Transmission Access Filing During 1996 the PUCT passed a wholesale transmission access rule which establishes a regional method of transmission pricing, terms, and conditions. The purpose is to increase competition in wholesale energy sales within Texas and establish an Independent System Operator for the Electric Reliability Council of Texas ("ERCOT") transmission system. The PUCT will set the transmission pricing rules for the ERCOT region. TNP believes it should benefit from the new rules as competition should increase in the wholesale power market and result in reduced purchased power and wheeling costs. The new transmission fee structure is scheduled to start in early 1997. However, several Texas utilities have petitioned the PUCT to revise the new transmission rules. Unregulated Operations TNPE also plans to meet the effects of competition on the traditional utility business by expanding earnings through unregulated operations. In early 1996, TNPE formed Facility Works, a wholly owned subsidiary, to provide energy and utility related facility services to commercial and institutional customers in primarily nonmetropolitan areas. TNPE is also evaluating unregulated investment and joint venture opportunities in additional energy-related businesses, but has not entered into any agreements related to such activities. Results of Operations Overall Results Income applicable to common stock was $22.9 million for 1996, compared to $40.9 million in 1995. Results for 1996 included a $3.1 million loss associated with the start-up operations of Facility Works, and a $1.3 million after tax reserve for the tentative settlement of litigation associated with the Series T FMB retirement in 1995. Results for 1995 included a number of one-time items consisting of the cumulative effect of the change in accounting for unbilled revenues of $8.4 million, a gain on sale of the Texas Panhandle properties of $9.5 million, and recognition of deferred revenues related to a favorable IRS private letter ruling of $3.0 million. Excluding the one-time items, 1996 earnings were $27.3 million, and 1995 earnings were $19.9 million. One-time items, net of taxes, in 1994 consisted of the recognition of regulatory disallowances of $20.5 million and reorganization costs of $5.7 million. Additional information concerning these one-time items is set forth in Notes 2, 3, 4, 5, and 6. The following table sets forth results of operations for 1996, 1995, and 1994 and the impact of one-time items:
1996 1995 1994 _________________ _________________ ________________ Amount EPS Amount EPS Amount EPS ______ ___ ______ ___ ______ ___ (In thousands except per share amounts) Income applicable to common stock before one-time items................. $27,283 $ 2.36 $19,908 $ 1.83 $ 7,997 $ 0.74 One-time items, net of income taxes: Start up costs of Facility Works............ (3,097) (0.27) - - - - Reserve for Series T litigation settlement.. (1,300) (0.11) - - - - Cumulative effect of change in accounting... - - 8,445 0.77 - - Gain on sale of Texas Panhandle properties.. - - 9,479 0.87 - - Recognition of deferred revenues............ - - 3,018 0.28 - - Reorganization costs........................ - - - - (5,723) (0.53) Regulatory disallowances.................... - - - - (20,505) (1.91) Total one-time items, net................. (4,397) (0.38) 20,942 1.92 (26,228) (2.44) Income (loss) applicable to common stock............................. $22,886 $ 1.98 $40,850 $ 3.75 $(18,231) $(1.70)
The operations of TNP currently represent most of TNPE's operations. The following discussion focuses on TNP's operations, except where stated otherwise. Operating Revenues The following table summarizes the components of operating revenues (in thousands).
Increase (Decrease) ___________________ 1996 1995 1994 '96 v. '95 '95 v. '94 __________ _________ __________ __________ __________ Operating revenues $ 502,737 $ 485,823 $ 477,989 $ 16,914 $ 7,834 Effect of recognizing deferred revenue from private letter ruling - (4,128) - 4,128 (4,128) __________ _________ __________ __________ __________ Subtotal 502,737 481,695 477,989 21,042 3,706 Pass-through items 244,889 228,903 243,513 15,986 (14,610) __________ _________ __________ __________ __________ Base revenues $ 257,848 $ 252,792 $ 234,476 $ 5,056 $ 18,316 ========== ========= ========== ========== ==========
Pass-through items are the portion of operating revenues that recover from customers the costs of purchased power, fuel, and standby power. These items affect customer rates but do not affect operating income. Annual variances are discussed under "Results of Operations--Operating Expenses." The base revenue increase of $5.1 million during 1996 was attributable to increased residential, commercial, and economy rate industrial sales, and additional base revenues provided by the control area. The overall increase, was partially offset by a reduction in firm rate industrial sales and lower margins on the industrial economy rate sales. Excluding the effects of one-time items, 1995 base revenues exceeded 1994 base revenues by $18.3 million. The increase is primarily due to rate increases in both Texas ($17.5 million annualized) and New Mexico ($0.4 million annualized) resulting from settlement agreements in October and May of 1994, respectively. Increased sales also contributed to the base revenue increase. Sales of 6,641 GWH in 1995 represented a 2.6% improvement over prior year sales and contributed $5.1 million to the increase in 1995 base revenues. The components of GWH sales for 1996 and 1995 are summarized in the following table: 1996 1995 Variance % ________ _______ _________ ________ Residential 2,230 2,142 88 4.1 Commercial 1,726 1,681 45 2.7 Industrial: Firm 1,295 1,440 (145) (10.1) Economy 2,503 1,264 1,239 98.0 Other 108 114 (6) (5.3) Total GWH sales 7,862 6,641 1,221 18.4 Sales to residential and commercial customers increased during 1996 due to warmer than usual weather during the second quarter of 1996, in addition to colder than usual weather in Texas during the first quarter. The increase in GWH sales resulted primarily from increased industrial economy sales. During 1996, TNP entered into new sales agreements with two cogeneration customers. The new economy rate sales are at significantly lower margins than traditional firm rate industrial sales. Pursuant to a rate case settlement approved by the PUCT in October 1994, TNP may not increase its base rates in Texas prior to March 1999 except in certain extraordinary circumstances. Additional information about the settlement is set forth in Note 2. In December 1996, certain cities in the Texas gulf coast area served by TNP passed resolutions requiring TNP to file complete rate information with those cities. In February 1997, those cities have agreed to reopen negotiations on a new transition to competition proposal and have deferred the required rate filing until July 1, 1997. If negotiations on the new transition to competition proposal are not successful and the rate filings are made, TNP anticipates a final resolution of the rate review with the cities in late 1997. Based on its preliminary analysis, TNP believes the filing will support the reasonableness of TNP's current rates. TNP is actively negotiating with a significant industrial customer in Texas that provided sales of 628 GWH and annual revenues of $27.8 million in 1996 ($9.9 million in base revenues). This customer will replace the power previously provided by TNP with a cogeneration plant, which is expected to commence operations in 1998. TNP is negotiating with the customer to continue providing transmission, distribution and other services. Even if TNP is successful in these negotiations, base revenues from this customer are expected to be significantly less. In October 1996, a large industrial customer in New Mexico gave TNP notice to reduce their power supply requirements under its current contract by 25 MW's effective December 1998, and to terminate the contract effective December 1999. TNP believes the customer is positioning itself for access to a competitive power supply market. Due to the potential effects that the recently approved Community Choice plan in New Mexico may have on which power supplier this customer may ultimately choose, TNP is unable to determine the impact of this notice at this time. Operating Expenses Operating expenses for 1996 were $19.6 million higher than in 1995, due primarily to higher pass-through expenses, property taxes and franchise taxes. Operating expenses for 1995 were $2.0 million lower than in 1994, excluding the $8.8 million reorganization costs in 1994. The decrease is primarily due to lower pass-through expenses of $14.6 million and labor/benefits expenses of $1.0 million offset by increased income tax expense of $13.6 million. Pass-Through Expenses The following table summarizes the components of pass-through expenses (in thousands).
Increase (Decrease) ________________________ 1996 1995 1994 '96 v. '95 '95 v. '94 __________ _________ __________ ___________ ___________ Pass-through expenses: Purchased power $ 196,481 $ 178,465 $ 194,595 $ 18,016 $ (16,130) Fuel 45,300 44,828 43,024 472 1,804 Standby power 3,108 5,610 5,894 (2,502) (284) Total $ 244,889 $ 228,903 $ 243,513 $ 15,986 $ (14,610)
Purchased Power. During 1996, purchased power expense increased by $18 million due to the substantial increase in the number of MWH's purchased. The additional purchases were made to meet increased sales requirements, primarily for two new economy rate industrial customers. Purchased power decreased $16.1 million in 1995. Purchases for Texas service areas were shifted to lower cost suppliers for 1995 supplemental summer peaking capacity. This arrangement became effective May 1, 1995, and resulted in annualized cost savings of $7.0 million. During 1995, TNP actively intervened in a Texas rate case of a major supplier and is benefiting with annualized cost savings of $10.5 million. Purchases for New Mexico service areas were also shifted to lower cost suppliers beginning mid 1994 and continuing in 1995. TNP's customers directly benefit from these cost reductions as these expenses are recovered through adjustment clauses. Purchased power costs represent TNP's largest operating expense. Based on current contracts, TU continues as TNP's largest supplier of purchased power in Texas and is TNP's highest price supplier. As described in Note 12, TNP has notified TU of its intent to cease purchasing full requirements power and energy effective January 1, 1999. TNP has requested proposals for purchased power resources to replace most of the power currently provided by TU. Fuel. Fuel expense in 1996 and 1995 increased $.5 million and $1.8 million, excluding amounts of nonpass-through fuel expenditures, respectively, as compared to the corresponding prior years. Fuel expense is directly related to an increased fixed fuel recovery factor approved by the PUCT in connection with the 1994 Texas rate case settlement. The majority of TNP's fuel expense is recovered in revenues and any difference from actual costs is deferred until a new factor is established. TNP expects to file a reconciliation of fuel costs in June 1997, for the period of October 1993 through December 1996. Management believes the ultimate outcome of this fuel reconciliation will not have a material adverse effect on TNP's or TNPE's consolidated financial position or results of operations. The under-recovered fuel amount at December 31, 1996, was $4.4 million. TNP currently estimates that the current fixed fuel factor should enable the recovery of under-recovered fuel costs during 1997. Other Operating Expenses Other operating expense was $2.0 million higher in 1996 than in 1995. The increase is due to higher payroll and payroll related items, incentive compensation and the reserve associated with the tentative settlement of Series T FMB litigation. These increases were offset in part by reduced standby power costs resulting from the implementation of the control area in July 1996, as discussed above. Other operating expense was $1.0 million lower in 1995 than in 1994. Payroll and payroll related items decreased $7.2 million, primarily as a result of the 1994 reorganization. Offsetting these savings were the costs of employee incentive compensation plans adopted in 1995, increases in customer collection costs, outsourcing, outside services, wage and salary increases, and other administrative expenses. Interest Charges During 1996 interest charges decreased $4.6 million due to the reduction in the amount of debt and lower interest rates on the credit facilities. During 1996 TNP retired $91.7 million of FMBs and reduced the average amount outstanding under the credit facilities. Partially offsetting the reductions discussed above was interest charges of $1.3 million payable to the IRS associated with the resolution of outstanding tax audits for the years 1990 through 1994. A $1.3 million decrease in 1995 interest charges, compared to 1994 resulted from reduced long-term debt levels and decreased interest rates associated with the 1995 Credit Facility. Contributing to reduced debt levels were the retirement of $29.2 million of Series T FMBs in October 1995 with proceeds from the sale of the Texas panhandle properties and lower average borrowings under TNP's credit facility. Increased cash flow during 1995 enabled TNP to reduce its average borrowings under its credit facility. Interest charges are expected to continue to decrease during 1997 due to reduced levels of overall long-term debt, the refinancing of high cost long-term debt with borrowings under the credit facilities, and reduced interest rate margins on the credit facilities. Liquidity and Capital Resources Sources of Liquidity The main sources of liquidity for TNPE are cash flow from operations, borrowings from credit facilities and sale of additional common stock. TNPE's cash flow from operations totaled $65.2 million, $88.4 million and $44.3 million in 1996, 1995, and 1994. Cash flow from operations continues to be strong, however it decreased in 1996 due to increased income tax payments. Cash flow from operations had increased in 1995 due to increased base revenues. TNP's cash flow from operations mirrored that of TNPE. As discussed in Note 9, TNP entered into a new credit facility in 1996 to supplement the existing credit facility. As of December 31, 1996, the unused commitment under the credit facilities was $195 million. In January 1997 TNP used borrowings from the credit facilities to retire the $100.8 million of outstanding Series T FMBs, which reduced the available borrowings under the credit facilities to $90.5 million. TNPE has reserved 1 million shares of common stock for issuance through a new direct stock purchase plan beginning in 1997. The plan is designed to provide investors with a convenient method to purchase shares of TNPE's common stock directly from the company and to reinvest cash dividends. The plan has replaced TNPE's prior dividend reinvestment plan. Capital Resources TNPE's and TNP's capital structure continued to improve during 1996, due to reduced debt levels and increased common equity. TNPE's common equity increased during 1996, due to an issuance of 2 million shares of common stock with proceeds of $47.2 million in October 1996, in addition to strong earnings for the year. Proceeds from TNPE's common stock issuance were transferred to TNP as an equity contribution. The equity portion of TNPE's capital structure increased from 26.1% at December 31, 1995, to 34.1% at December 31, 1996. Conversely, the long-term debt ratio decreased from 73.5% to 65.5% for the same period. TNP experienced similar results with its capital ratios. TNP's capital requirements through 2001 are projected to be as follows (amounts in millions):
1997 1998 1999 2000 2001 _______ ________ ________ _______ _______ FMB and secured debenture maturities (see Note 9) $ .1 $ .1 $ 130.1 $ 100.1 $ .1 Capital expenditures 28.6 29.9 31.2 32.7 34.1 Total capital requirements $ 28.7 $ 30.0 $ 161.3 $ 132.8 $ 34.2
TNP believes that cash flow from operations and periodic borrowings under the credit facilities will be sufficient to meet working capital requirements and planned capital requirements through 1998. Other Matters As a result of the Energy Policy Act of 1992 and actions of regulatory commissions, the electric utility industry is moving toward a combination of competition and modified regulatory environment. TNP's financial statements currently reflect assets and costs based on current cost-based ratemaking regulations in accordance with SFAS 71, Accounting for the Effects of Certain Types of Regulation. Continued applicability of SFAS 71 to TNP's financial statements requires that rates set by an independent regulator on a cost-of-service basis can actually be charged to and collected from customers. In the event that all or a portion of a utility's operations cease to meet those criteria for various reasons, including deregulation, a change in the method of regulation, or a change in the competitive environment for the utilities regulated service, the utility will have to discontinue SFAS 71 for that portion of operations. That discontinuation would be reported by the write-off of regulatory assets and liabilities. Management believes that, as of December 31, 1996, and for the foreseeable future, TNP's financial statements continue to follow SFAS 71. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Independent Auditors' Report The Board of Directors and Shareholders TNP Enterprises, Inc.: We have audited the consolidated financial statements of TNP Enterprises, Inc. and subsidiaries as listed in the accompanying index at Part IV. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TNP Enterprises, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for operating revenues in 1995. KPMG Peat Marwick LLP Fort Worth, Texas January 30, 1997 Independent Auditors' Report The Board of Directors Texas-New Mexico Power Company: We have audited the consolidated financial statements of Texas-New Mexico Power Company (a wholly owned subsidiary of TNP Enterprises, Inc.) and subsidiaries as listed in the accompanying index at Part IV. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Texas-New Mexico Power Company and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for operating revenues in 1995. KPMG Peat Marwick LLP Fort Worth, Texas January 30, 1997
TNP ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) For the Years Ended December 31, 1996 1995 1994 --------------- --------------- --------------- (In thousands except per share amounts) OPERATING REVENUES $ 502,737 $ 485,823 $ 477,989 --------------- --------------- --------------- OPERATING EXPENSES: Purchased power 196,481 178,465 194,595 Fuel 47,201 48,898 46,988 Other operating and general expenses 73,276 71,311 72,472 Maintenance 10,672 11,522 11,966 Reorganization costs - - 8,782 Depreciation of utility plant 38,170 37,850 36,782 Taxes other than income taxes 32,727 28,865 29,651 Income taxes 10,333 12,317 (1,238) --------------- --------------- --------------- Total operating expenses 408,860 389,228 399,998 --------------- --------------- --------------- NET OPERATING INCOME 93,877 96,595 77,991 --------------- --------------- --------------- OTHER INCOME (LOSS): Gain on sale of Texas Panhandle properties (note 4) - 14,583 - Recognition of regulatory disallowances (note 2) - - (31,546) Other income and deductions, net (3,799) 1,245 1,057 Income taxes 2,338 (5,403) 10,305 --------------- --------------- --------------- Other income (loss), net of taxes (1,461) 10,425 (20,184) --------------- --------------- --------------- INCOME BEFORE INTEREST CHARGES AND CHANGE IN ACCOUNTING 92,416 107,020 57,807 --------------- --------------- --------------- INTEREST CHARGES: Interest on long-term debt 64,654 70,544 71,568 Other interest and amortization of debt-related costs 4,709 3,416 3,680 --------------- --------------- --------------- Total interest charges 69,363 73,960 75,248 --------------- --------------- --------------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 23,053 33,060 (17,441) Cumulative effect of change in accounting for unbilled revenues, net of taxes (note 3) - 8,445 - --------------- --------------- --------------- NET INCOME (LOSS) 23,053 41,505 (17,441) Dividends on preferred stock 167 655 790 --------------- --------------- --------------- INCOME (LOSS) APPLICABLE TO COMMON STOCK $ 22,886 $ 40,850 $ (18,231) =============== =============== =============== EARNINGS PER SHARE OF COMMON STOCK: Earnings (loss) before cumulative effect of change in accounting $ 1.98 $ 2.98 $ (1.70) Cumulative effect of change in accounting for unbilled revenues - 0.77 - --------------- --------------- --------------- Earnings (loss) per share $ 1.98 $ 3.75 $ (1.70) =============== =============== =============== DIVIDENDS PER SHARE OF COMMON STOCK $ 0.93 $ 0.82 $ 1.22 =============== =============== =============== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 11,543 10,901 10,750 =============== =============== =============== See accompanying Notes to Consolidated Financial Statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1996 1995 1994 --------------- ---------------- ----------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 505,307 $ 481,470 $ 475,462 Purchased power (198,696) (172,486) (193,366) Fuel costs paid (45,576) (44,781) (46,537) Cash paid for payroll and to other suppliers (75,138) (76,735) (85,912) Interest paid, net of amounts capitalized (69,247) (68,484) (76,402) Income taxes paid (15,684) (1,095) 365 Other taxes paid, net of amounts capitalized (32,243) (30,556) (30,323) Other operating cash receipts and payments, net (3,522) 1,043 1,014 --------------- ---------------- ----------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 65,201 88,376 44,301 --------------- ---------------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant, net of capitalized depreciation and interest (28,006) (28,689) (29,038) Net proceeds from sale of Texas Panhandle properties - 29,009 - Maturities (purchases) of temporary investments - 5,590 (5,590) Additions to other property and investments (2,771) - - --------------- ---------------- ----------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (30,777) 5,910 (34,628) --------------- ---------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid on preferred and common stocks (10,866) (9,616) (13,823) Borrowings (repayments) under revolving credit facilities 12,000 (42,272) 6,472 Issuances: Common stock 48,798 856 2,502 Other long-term debt 202 - - Deferred expenses associated with financings (588) (2,096) - Redemptions: Preferred stock (180) (5,080) (880) First mortgage bonds (96,508) (30,270) (1,070) --------------- ---------------- ----------------- NET CASH USED IN FINANCING ACTIVITIES (47,142) (88,478) (6,799) --------------- ---------------- ----------------- NET CHANGE IN CASH AND CASH EQUIVALENTS (12,718) 5,808 2,874 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 21,105 15,297 12,423 --------------- ---------------- ----------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,387 $ 21,105 $ 15,297 =============== ================ ================= RECONCILIATION OF NET EARNINGS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income (loss) $ 23,053 $ 41,505 $ (17,441) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of change in accounting for unbilled revenues, net of taxes - (8,445) - Gain on sale of Texas Panhandle properties - (14,583) - Recognition of deferred revenues - (4,782) 1,382 Depreciation of utility plant 38,170 37,850 36,782 Amortization of debt-related costs and other deferred charges 3,329 4,952 5,495 Allowance for borrowed funds used during construction (99) (162) (275) Deferred income taxes (excluding effect of change in accounting) (193) 5,256 (10,915) Investment tax credits (380) 1,679 (1,436) Reorganization costs - - 6,858 Recognition of regulatory disallowances - - 31,546 Cash flows impacted by changes in current assets and liabilities: Deferred purchased power and fuel costs 5,696 5,997 (107) Accrued interest (3,103) 2,289 (4,422) Accrued taxes (7,372) 8,483 (1,108) Purchased power costs subject to refund (5,688) 5,688 - Changes in other current assets and liabilities 4,181 3,138 (1,387) Other, net 7,607 (489) (671) --------------- ---------------- ----------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 65,201 $ 88,376 $ 44,301 =============== ================ ================= See accompanying Notes to Consolidated Financial Statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1996 1995 --------------- ---------------- (In thousands) ASSETS UTILITY PLANT: Electric plant $ 1,215,355 $ 1,193,538 Construction work in progress 906 3,334 --------------- ---------------- Total 1,216,261 1,196,872 Less accumulated depreciation 282,322 252,868 --------------- ---------------- Net utility plant 933,939 944,004 --------------- ---------------- OTHER PROPERTY AND INVESTMENTS, at cost 3,927 1,156 --------------- ---------------- CURRENT ASSETS: Cash and cash equivalents 8,387 21,105 Customer receivables 16,362 15,569 Inventories, at lower of average cost or market: Fuel 367 492 Materials and supplies 6,384 7,287 Deferred purchased power and fuel costs 3,565 9,261 Accumulated deferred income taxes 1,937 144 Other current assets 1,121 960 --------------- ---------------- Total current assets 38,123 54,818 --------------- ---------------- DEFERRED CHARGES 30,795 30,455 --------------- ---------------- $ 1,006,784 $ 1,030,433 =============== ================ CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common shareholders' equity: Common stock - no par value per share. Authorized 50,000,000 shares; issued 13,006,492 shares in 1996 and 10,920,060 in 1995 $ 183,771 $ 134,973 Retained earnings 94,703 82,484 --------------- ---------------- Total common shareholders' equity 278,474 217,457 Preferred stock 3,420 3,600 Long-term debt, less current maturities 533,964 611,925 --------------- ---------------- Total capitalization 815,858 832,982 --------------- ---------------- CURRENT LIABILITIES: Current maturities of long-term debt 138 1,070 Accounts payable 28,446 22,040 Accrued interest 10,879 13,982 Accrued taxes 18,833 26,205 Customers' deposits 2,662 2,493 Purchased power costs subject to refund - 5,688 Other current liabilities 11,797 12,472 --------------- ---------------- Total current liabilities 72,755 83,950 --------------- ---------------- REGULATORY TAX LIABILITIES 10,963 26,826 ACCUMULATED DEFERRED INCOME TAXES 74,844 57,381 ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 19,734 18,592 DEFERRED CREDITS 12,630 10,702 COMMITMENTS AND CONTINGENCIES (Notes 1, 2, 4, 8 and 12) --------------- ---------------- $ 1,006,784 $ 1,030,433 =============== ================ See accompanying Notes to Consolidated Financial Statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CAPITALIZATION December 31, 1996 1995 --------------- --------------- (In thousands) COMMON SHAREHOLDERS' EQUITY Common stock with no par value per share Authorized shares - 50,000,000 Outstanding shares - 13,006,492 in 1996 and 10,920,060 in 1995 $ 183,771 $ 134,973 Retained earnings 94,703 82,484 --------------- --------------- Total common shareholders' equity 278,474 217,457 --------------- --------------- PREFERRED STOCK Preferred stock with no par value Authorized shares - 5,000,000 Outstanding shares - None Redeemable cumulative preferred stock of TNP with $100 par value Authorized shares - 1,000,000 Redemption price at TNP's Outstanding shares option 1996 1995 ------ ---- ---- Series B 4.65% $ 100.00 21,600 22,800 2,160 2,280 Series C 4.75% 100.00 12,600 13,200 1,260 1,320 ------------ ------------ --------------- --------------- Total redeemable cumulative preferred stock 34,200 36,000 3,420 3,600 ------------ ------------ --------------- --------------- LONG-TERM DEBT FIRST MORTGAGE BONDS Series L 10.50% due 2000 - 9,600 Series M 8.70% due 2006 8,100 8,200 Series R 10.00% due 2017 - 62,400 Series S 9.63% due 2019 - 19,600 Series T 11.25% due 1997 100,800 100,800 Series U 9.25% due 2000 100,000 100,000 Unamortized debt discount - (605) SECURED DEBENTURES 12.50% due 1999 130,000 130,000 Series A 10.75% due 2003 140,000 140,000 REVOLVING CREDIT FACILITIES 1995 Facility - 43,000 1996 Facility 55,000 - OTHER 202 - --------------- --------------- Total long-term debt 534,102 612,995 Less current maturities (138) (1,070) --------------- --------------- Total long-term debt, less current maturities 533,964 611,925 --------------- --------------- TOTAL CAPITALIZATION $ 815,858 $ 832,982 =============== =============== See accompanying Notes to Consolidated Financial Statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY For the Years Ended December 31, Common Shareholders' Equity -------------------------------------------------------- Common Stock Retained Shares Amount Earnings Total ______ ______ ________ _____ (In thousands) YEAR ENDED DECEMBER 31, 1994 Balance at December 31, 1993 10,696 $ 131,615 $ 82,012 $ 213,627 Net loss - - (17,441) (17,441) Dividends on preferred stock - - (790) (790) Dividends on common stock - $1.22 per share - - (13,046) (13,046) Sale of common stock 170 2,502 - 2,502 Retirement of preferred stock - - 17 17 ------------ ------------ ------------- ------------- Balance at December 31, 1994 10,866 134,117 50,752 184,869 YEAR ENDED DECEMBER 31, 1995 Net income - - 41,505 41,505 Dividends on preferred stock - - (655) (655) Dividends on common stock - $0.82 per share - - (8,938) (8,938) Sale of common stock 54 856 - 856 Retirement of preferred stock - - (180) (180) ------------ ------------ ------------- ------------- Balance at December 31, 1995 10,920 134,973 82,484 217,457 YEAR ENDED DECEMBER 31, 1996 Net income - - 23,053 23,053 Dividends on preferred stock - - (167) (167) Dividends on common stock - $0.93 per share - - (10,699) (10,699) Sale of common stock 2,086 48,798 - 48,798 Retirement of preferred stock - - 32 32 ------------ ------------ ------------- ------------- Balance at December 31, 1996 13,006 $ 183,771 $ 94,703 $ 278,474 ============ ============ ============= ============= See accompanying Notes to Consolidated Financial Statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED STATEMENTS OF INCOME (LOSS) For the Years Ended December 31, 1996 1995 1994 -------------- -------------- -------------- (In thousands) OPERATING REVENUES $ 502,737 $ 485,823 $ 477,989 -------------- -------------- -------------- OPERATING EXPENSES: Purchased power 196,481 178,465 194,595 Fuel 47,201 48,898 46,988 Other operating and general expenses 73,276 71,311 72,472 Maintenance 10,672 11,522 11,966 Reorganization costs - - 8,782 Depreciation of utility plant 38,170 37,850 36,782 Taxes other than income taxes 32,727 28,865 29,651 Income taxes 10,333 12,317 (1,238) ------------- -------------- -------------- Total operating expenses 408,860 389,228 399,998 ------------- -------------- -------------- NET OPERATING INCOME 93,877 96,595 77,991 ------------- -------------- -------------- OTHER INCOME (LOSS) : Gain on sale of Texas Panhandle properties (note 4) - 14,583 - Recognition of regulatory disallowances (note 2) - - (31,546) Other income and deductions, net 1,626 1,470 1,475 Income taxes 722 (5,324) 10,694 ------------- -------------- -------------- Other income (loss), net of taxes 2,348 10,729 (19,377) ------------- -------------- -------------- INCOME BEFORE INTEREST CHARGES AND CHANGE IN ACCOUNTING 96,225 107,324 58,614 ------------- -------------- -------------- INTEREST CHARGES: Interest on long-term debt 64,654 70,544 71,568 Other interest and amortization of debt-related costs 4,709 3,416 3,680 ------------- -------------- -------------- Total interest charges 69,363 73,960 75,248 ------------- -------------- -------------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 26,862 33,364 (16,634) Cumulative effect of change in accounting for unbilled revenues, net of taxes (note 3) - 8,445 - ------------- -------------- -------------- NET INCOME (LOSS) 26,862 41,809 (16,634) Dividends on preferred stock 167 655 790 ------------- -------------- -------------- INCOME (LOSS) APPLICABLE TO COMMON STOCK $ 26,695 $ 41,154 $ (17,424) ============= ============== ============== See accompanying Notes to Consolidated Financial Statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1996 1995 1994 --------------- ------------- --------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 502,954 $ 481,470 $ 475,462 Purchased power (198,696) (172,486) (193,366) Fuel costs paid (45,576) (44,781) (46,537) Cash paid for payroll and to other suppliers (75,807) (76,793) (86,632) Interest paid, net of amounts capitalized (69,236) (68,484) (76,402) Income taxes paid (14,242) (1,199) (1,215) Other taxes paid, net of amounts capitalized (31,219) (30,054) (29,906) Other operating cash receipts and payments, net 1,135 639 1,442 --------------- ------------- --------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 69,313 88,312 42,846 --------------- ------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant, net of capitalized depreciation and interest (28,006) (28,689) (29,038) Net proceeds from sale of Texas Panhandle properties - 29,009 - Additions to other property and investments (1,669) - - --------------- ------------- --------------- CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES (29,675) 320 (29,038) --------------- ------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid on preferred and common stocks (10,867) (3,078) (11,794) Equity contribution from TNPE 47,170 - - Borrowings (repayments) under revolving credit facilities 12,000 (42,272) 6,472 Deferred expenses associated with financings (588) (2,096) - Redemptions: Preferred stock (180) (5,080) (880) First mortgage bonds (96,508) (30,270) (1,070) --------------- ------------- --------------- NET CASH USED IN FINANCING ACTIVITIES (48,973) (82,796) (7,272) --------------- ------------- --------------- NET CHANGE IN CASH AND CASH EQUIVALENTS (9,335) 5,836 6,536 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,450 8,614 2,078 --------------- ------------- --------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,115 14,450 $ 8,614 =============== ============= =============== RECONCILIATION OF NET EARNINGS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income (loss) $ 26,862 $ 41,809 $ (16,634) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of change in accounting for unbilled revenues, net of taxes - (8,445) - Gain on sale of Texas Panhandle properties - (14,583) - Recognition of deferred revenues - (4,782) 1,382 Depreciation of utility plant 38,170 37,850 36,782 Amortization of debt-related costs and other deferred charges 3,329 4,952 5,495 Allowance for borrowed funds used during construction (99) (162) (275) Deferred income taxes (excluding effect of change in accounting) 1,140 5,132 (10,920) Investment tax credits (111) 1,691 (1,374) Reorganization costs - - 6,858 Recognition of regulatory disallowances - - 31,546 Cash flows impacted by changes in current assets and liabilities: Deferred purchased power and fuel costs 5,696 5,997 (107) Accrued interest (3,103) 2,289 (4,422) Accrued taxes (8,429) 8,432 (1,108) Purchased power costs subject to refund (5,688) 5,688 - Changes in other current assets and liabilities 6,474 3,174 (3,103) Other, net 5,072 (730) (1,274) --------------- ------------- --------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 69,313 $ 88,312 $ 42,846 =============== ============= =============== See accompanying Notes to Consolidated Financial Statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED BALANCE SHEETS December 31, 1996 1995 --------------- ---------------- (In thousands) ASSETS UTILITY PLANT: Electric plant $ 1,215,355 $ 1,193,538 Construction work in progress 906 3,334 --------------- ---------------- Total 1,216,261 1,196,872 Less accumulated depreciation 282,322 252,868 --------------- ---------------- Net utility plant 933,939 944,004 --------------- ---------------- OTHER PROPERTY AND INVESTMENTS, at cost 1,884 175 --------------- ---------------- CURRENT ASSETS: Cash and cash equivalents 5,115 14,450 Customer receivables 15,521 15,569 Inventories, at lower of average cost or market: Fuel 367 492 Materials and supplies 6,384 7,287 Deferred purchased power and fuel costs 3,565 9,261 Accumulated deferred income taxes 1,937 144 Other current assets 1,324 1,274 --------------- ---------------- Total current assets 34,213 48,477 --------------- ---------------- DEFERRED CHARGES 32,121 32,287 --------------- ---------------- $ 1,002,157 $ 1,024,943 =============== ================ CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common shareholder's equity: Common stock, $10 par value per share. Authorized 12,000,000 shares; issued 10,705 shares $ 107 $ 107 Capital in excess of par value 222,133 174,931 Retained earnings 65,308 49,313 --------------- ---------------- Total common shareholder's equity 287,548 224,351 Redeemable cumulative preferred stock 3,420 3,600 Long-term debt, less current maturities 533,800 611,925 --------------- ---------------- Total capitalization 824,768 839,876 --------------- ---------------- CURRENT LIABILITIES: Current maturities of long-term debt 100 1,070 Accounts payable 27,254 22,040 Accrued interest 10,879 13,982 Accrued taxes 16,901 25,330 Customers' deposits 2,662 2,493 Purchased power costs subject to refund - 5,688 Other current liabilities 10,993 12,472 --------------- ---------------- Total current liabilities 68,789 83,075 --------------- ---------------- REGULATORY TAX LIABILITIES 10,963 26,826 ACCUMULATED DEFERRED INCOME TAXES 65,860 47,066 ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 19,164 17,398 DEFERRED CREDITS 12,613 10,702 COMMITMENTS AND CONTINGENCIES (Notes 1, 2, 4, 8 and 12) --------------- ---------------- $ 1,002,157 $ 1,024,943 =============== ================ See accompanying Notes to Consolidated Financial Statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED STATEMENTS OF CAPITALIZATION December 31, 1996 1995 --------------- --------------- (In thousands) COMMON SHAREHOLDER'S EQUITY Common stock, $10 par value per share Authorized shares - 12,000,000 Outstanding shares - 10,705 $ 107 $ 107 Capital in excess of par value 222,133 174,931 Retained earnings 65,308 49,313 --------------- ---------------- Total common shareholder's equity 287,548 224,351 --------------- ---------------- PREFERRED STOCK Redeemable cumulative preferred stock with $100 par value Authorized shares - 1,000,000 Redemption price at TNP's Outstanding shares option 1996 1995 ------ ---- ---- Series B 4.65% 100.00 21,600 22,800 2,160 2,280 Series C 4.75% 100.00 12,600 13,200 1,260 1,320 ------------ ----------- --------------- --------------- Total redeemable cumulative preferred stock 34,200 36,000 3,420 3,600 ------------ ----------- --------------- --------------- LONG-TERM DEBT FIRST MORTGAGE BONDS Series L 10.50% due 2000 - 9,600 Series M 8.70% due 2006 8,100 8,200 Series R 10.00% due 2017 - 62,400 Series S 9.63% due 2019 - 19,600 Series T 11.25% due 1997 100,800 100,800 Series U 9.25% due 2000 100,000 100,000 Unamortized debt discount - (605) SECURED DEBENTURES 12.50% due 1999 130,000 130,000 Series A 10.75% due 2003 140,000 140,000 REVOLVING CREDIT FACILITIES 1995 Facility - 43,000 1996 Facility 55,000 - --------------- --------------- Total long-term debt 533,900 612,995 Less current maturities (100) (1,070) --------------- --------------- Total long-term debt, less current maturities 533,800 611,925 --------------- --------------- TOTAL CAPITALIZATION $ 824,768 $ 839,876 =============== =============== See accompanying Notes to Consolidated Financial Statements.
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of TNP Enterprises, Inc.) CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER'S EQUITY For the Years Ended December 31, Common Shareholder's Equity -------------------------------------------------------------- Capital in Common Stock Excess of Retained Shares Amount Par Value Earnings Total ______ ______ __________ ________ _____ (In thousands) YEAR ENDED DECEMBER 31, 1994 Balance at December 31, 1993 11 $ 107 $ 175,094 $ 38,983 $ 214,184 Net loss - - - (16,634) (16,634) Dividends on preferred stock - - - (790) (790) Dividends on common stock - - - (11,000) (11,000) Retirement of preferred stock - - 17 - 17 ---------- ---------- ----------- ------------ ----------- Balance at December 31, 1994 11 107 175,111 10,559 185,777 YEAR ENDED DECEMBER 31, 1995 Net income - - - 41,809 41,809 Dividends on preferred stock - - - (655) (655) Dividends on common stock - - - (2,400) (2,400) Retirement of preferred stock - - (180) - (180) ---------- ---------- ----------- ------------ ----------- Balance at December 31, 1995 11 107 174,931 49,313 224,351 YEAR ENDED DECEMBER 31, 1996 Net income - - - 26,862 26,862 Dividends on preferred stock - - - (167) (167) Dividends on common stock - - - (10,700) (10,700) Equity contribution from TNPE - - 47,170 - 47,170 Retirement of preferred stock - - 32 - 32 ---------- ---------- ----------- ------------ ----------- Balance at December 31, 1996 11 $ 107 $ 222,133 $ 65,308 $ 287,548 ========== ========== =========== ============ =========== See accompanying Notes to Consolidated Financial Statements.
TNP ENTERPRISES, INC. AND SUBSIDIARIES TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies General Information The consolidated financial statements of TNPE and subsidiaries include the accounts of TNPE and its wholly owned subsidiaries, TNP, Facility Works, Inc., and TNP Operating Company. The consolidated financial statements of TNP and subsidiaries include the accounts of TNP and its wholly owned subsidiaries, TGC and TGC II. All intercompany transactions and balances have been eliminated in consolidation. TNP is TNPE's principal operating subsidiary. TNP is a public utility engaged in generating, purchasing, transmitting, distributing, and selling electricity in Texas and New Mexico. TNP is subject to PUCT and NMPUC regulation. Some of TNP's activities, including the issuance of securities, are subject to FERC regulation and its accounting records are maintained in accordance with FERC's Uniform System of Accounts. The use of estimates is required to prepare TNPE's and TNP's consolidated financial statements in conformity with generally accepted accounting principles. Management believes that estimates are essential and will not materially differ from actual results. However, adjustments may be necessary in the future to the extent that future estimates or actual results are different from the estimates used in the 1996 financial statements. Accounting for the Effects of Regulation Electric utilities operate in a highly regulated environment. TNPE's and TNP's consolidated financial statements reflect the application of certain accounting standards, including SFAS 71, "Accounting for the Effects of Certain Types of Regulation," which provide for recognition of the economic effects of rate regulation. Included among these effects are the recognition of regulatory assets and liabilities. Regulatory assets represent revenues associated with certain costs that are expected to be recovered from customers in future rates. Regulatory liabilities are costs previously collected from customers or other amounts that reduce future rates. The following table summarizes TNPE's and TNP's regulatory assets and liabilities as of December 31, 1996 and 1995. 1996 1995 ________ _________ (In thousands) Regulatory Assets: Deferred purchased power and fuel costs $ 3,565 $ 9,261 Deferred charges: Losses on reaquired debt 10,000 4,810 Rate case expenses 3,743 4,454 Deferred accounting amounts 4,157 4,287 Other - 792 ________ _________ Total $ 21,465 $ 23,604 ======== ========= Regulatory Liabilities: Income tax related $ 10,963 $ 26,826 Purchased power costs subject to refund - 5,688 ________ _________ Total $ 10,963 $ 32,514 ======== ========= Federal and state legislators and regulatory authorities have adopted or are considering a number of changes that are significantly impacting competitive conditions in the electric utility industry, such as the emergence of independent power producers, wholesale transmission access, and retail wheeling. If recovery of costs through rates becomes uncertain or unlikely, whether due to legislative or regulatory changes, competition, or otherwise, accounting standards such as SFAS 71 may no longer apply to TNPE and TNP. As a result, TNPE and TNP could be required to write off all or a portion of their regulatory assets and liabilities. Moreover, to the extent that future rates are insufficient to recover costs, additional write downs could be required. Management of TNPE and TNP are currently unable to predict the ultimate outcome of changes in the electric utility industry and whether the outcome will have a significant effect on their consolidated financial position and results of operations. However, based upon current regulatory conditions in the states in which TNP operates, management believes it probable that TNP will continue, for the foreseeable future, to meet the criteria for continued application of SFAS 71, and it is probable that TNP will recover from ratepayers the regulatory assets included in the table above. Utility Plant Utility plant is stated at the historical cost of construction which includes labor, materials, indirect charges for such items as engineering and administrative costs, and AFUDC. Property repairs and replacement of minor items are charged to operating expenses; major replacements and improvements are capitalized to utility plant. AFUDC is a noncash item designed to enable a utility to capitalize interest costs during periods of construction. Established regulatory practices enable TNP to recover these costs from ratepayers. The composite rates used for AFUDC were 6.0%, 8.0%, and 8.8% in 1996, 1995, and 1994, respectively. The costs of depreciable units of plant retired or disposed of in the normal course of business are eliminated from utility plant accounts and such costs plus removal expenses less salvage are charged to accumulated depreciation. When complete operating units are disposed of, appropriate adjustments are made to accumulated depreciation, and the resulting gains or losses, if any, are recognized. Depreciation is provided on a straight-line method based on the estimated lives of the properties as indicated by periodic depreciation studies. A portion of depreciation of transportation equipment used in construction is charged to utility plant accounts in accordance with the equipment's use. Depreciation as a percentage of average depreciable cost was 3.2%, 3.3%, and 3.1% in 1996, 1995, and 1994, respectively. Cash Equivalents All highly liquid debt instruments with maturities of three months or less when purchased are considered cash equivalents. Customer Receivables and Operating Revenues TNP accrues estimated revenues for energy delivered since the latest billing. Prior to January 1, 1995, TNP recognized revenue when billed. See Note 3 for the effects of the change in recognizing revenues from cycle billing to the accrual method in 1995. TNP sells customer receivables to an unaffiliated company on a nonrecourse basis. Purchased Power and Fuel Costs Electric rates include estimates of purchased power and fuel costs incurred by TNP in purchasing or generating electricity. Differences between amounts collected and allowable costs are recorded either as purchased power subject to refund or deferred purchased power and fuel costs in accordance with regulatory ratemaking policy. Deferred Charges Expenses incurred in issuing long-term debt and related discount and premium are amortized on a straight-line basis over the lives of the respective issues. Included in deferred charges are other assets that are expected to benefit future periods and certain costs that are deferred for ratemaking purposes and amortized over periods allowed by regulatory authorities. Derivatives Premiums paid for an interest rate collar will be amortized over the term of the related agreement. Unamortized premiums are included in Deferred Charges in the consolidated balance sheets. Amounts to be received or paid under the agreement will be recognized on the accrual basis as a component of interest expense. Income Taxes TNPE files a consolidated federal income tax return that includes the consolidated operations of TNP and its subsidiaries. The amounts of income taxes recognized in TNP's accompanying consolidated financial statements were computed as if TNP and its subsidiaries filed a separate consolidated federal income tax return. ITC amounts utilized in the federal income tax return are deferred and amortized to earnings ratably over the estimated service lives of the related assets. Fair Values of Financial Instruments Fair values of cash equivalents, temporary investments, and customer receivables approximated the carrying amounts because of the short maturities of those instruments. The estimated fair values of long-term debt and preferred stock were based on quoted market prices of the same or similar issues. The estimated fair values of long-term debt and preferred stock were as follows: December 31, 1996 December 31, 1995 _________________ _________________ Carrying Amount Fair Values Carrying Amount Fair Values _______________ ___________ _______________ ___________ (In thousands) Long-term debt $ 533,900 $ 564,000 $ 612,995 $ 643,000 Preferred stock 3,420 1,500 3,600 1,600 Interest rate collar 295 180 - - Common Stock At December 31, 1996, 280,799 shares of TNPE's common stock were reserved for issuance to TNP's 401(k) plan. Additionally, 576,947 shares of TNPE's common stock were reserved for subsequent issuance under other stock compensation or shareholder plans. Shareholder Rights Plan TNPE has a Rights Plan that is designed to protect TNPE's shareholders from coercive takeover tactics and inadequate or unfair takeover bids. The Rights Plan provides for the distribution of one right for each share of TNPE's common stock currently outstanding or issued until the close of business on November 4, 1998. Upon the occurrence of certain events, each right entitles a shareholder to elect to purchase one share of common stock at $45 per share or, under certain circumstances, shares of common stock at half the then-current market price or to receive TNPE common stock or other securities having an aggregate value equal to the excess of (i) the value of the common stock or other securities on the date the rights are exercised over (ii) the cash payment that would have been payable upon exercise of the rights if cash payment had been elected. Until certain triggering events occur, the rights will trade together with TNPE's common stock and separate rights certificates will not be issued. Among the triggering events are the acquisition by a person or group of 10% or more of TNPE's outstanding common stock or the commencement of a tender or exchange offer that, upon consummation, would result in a person or group of persons owning 15% or more of TNPE's outstanding common stock. The rights expire November 4, 1998, unless earlier redeemed or exchanged by TNPE, and have had no effect on EPS. Stock-Based Compensation As discussed in Note 7, TNPE has an equity based incentive compensation plan that awards stock-based compensation. In 1995 the FASB issued SFAS 123, Accounting for Stock-Based Compensation, that changes the method for calculating expenses associated with stock-based compensation. SFAS 123, which became effective for 1996, also allows companies to retain the approach as set forth in APB Opinion 25, Accounting for Stock Issued to Employees, for measuring expense for stock-based compensation. TNP has elected to continue to apply the provisions of APB Opinion 25 in calculating stock-based compensation. The pro forma effect of applying SFAS 123 to the equity awards during 1995 and 1996 was immaterial. Note 2. Regulatory Matters Cities Rate Review In December 1996, certain cities in the Texas gulf coast area served by TNP passed resolutions requiring TNP to file complete rate information with those cities. In 1997 those cities have agreed to reopen negotiations on a new transition to competition proposal and have deferred the required rate filing until July 1, 1997. If negotiations on the new transition to competition proposal is not successful and the rate filings are made, TNP anticipates a final resolution of the rate review with the cities in late 1997. Based on its preliminary analysis, TNP believes the filing will support the reasonableness of TNP's current rates. Community ChoiceSM On May 2, 1996, TNP filed an application with the PUCT requesting approval of a program known as Community Choice that would apply to electric services provided by TNP in Texas. On June 21, 1996, TNP filed an application with the NMPUC requesting approval of a similar program that would apply to electric service provided by TNP in New Mexico. Community Choice is a transition plan designed to address the opportunities and challenges presented by the increasingly deregulated and competitive environment of the electric services industry. As proposed by TNP, Community Choice provided for transition periods of four years in New Mexico and five years in Texas. Community Choice proposed that during the transition periods, TNP's rates for electric service in New Mexico and Texas would be structured to provide TNP a reasonable opportunity to reduce its so-called potential "stranded costs." "Stranded costs" means the difference between what it currently costs TNP to provide service and what a customer would be willing to pay for such service in a competitive market. In Texas, TNP's potential stranded cost relates to TNP One, its 300 MW generating unit, and could potentially be more than $250 million. In New Mexico, TNP's potential stranded cost relates to its purchased power contracts and could potentially be more than $10 million. At the end of the transition periods, TNP would aggregate, or combine, its customers at the community level and permit these aggregated electrical loads to choose the types and nature of electric services that will be available to individual customers within each aggregated load. In November 1996, TNP withdrew its Community Choice filing in Texas. Prior to the withdrawal TNP had attempted to work through the numerous issues with various intervenors. The withdrawal was due to a lack of consensus on key issues, including the issue of stranded costs. In 1997 TNP proposed a new plan for transition to competition to the communities within TNP's service territory in Texas. The new plan includes a five-year transition period and the opportunity to reduce potential stranded costs. The new plan also entails options providing various levels of access to the open market, which TNP customers will be able to select from at the end of the transition period. Due to the numerous issues involved, TNP can provide no assurance as to the timing or outcome of the new transition to competition plan in Texas. In 1997 TNP filed a stipulation with the NMPUC adjusting several of the components of the original Community Choice proposal. The stipulation has the support of the major stakeholders. The revised plan gives TNP customers the right to choose their energy provider after a three-year transition period, freezes rates (including fuel and purchased power) for a three-year period, and allows for customer aggregation based on market forces. Hearings were held in late February 1997. Approval by the NMPUC is the final step. TNP believes the plan will allow it to recover most if not all of its potential stranded costs in New Mexico, however, the actual recovery of any stranded costs will depend on the future market and price for energy through 2002. Fuel Reconciliation TNP's fixed fuel factor remains the same until changed as part of general rate case or fuel reconciliation, or until the PUCT orders a reconciliation for any over or under collections of fuel costs. TNP expects to file a reconciliation of fuel costs in June 1997, for the period of October 1993 through December 1996. Management believes the ultimate outcome of this fuel reconciliation will not have a material adverse effect on TNP's or TNPE's consolidated financial position or results of operations. 1994 Texas Rate Case Settlement On October 6, 1994, the PUCT approved a unanimous settlement among the parties in TNP's 1994 retail rate application. The rate case settlement provided for an increase in annualized revenues in Texas of $17.5 million, or 4.5%, which TNP implemented on October 2, 1994. The settlement resolved all outstanding court appeals in connection with TNP's two previous rate cases and required TNP to write off $31.5 million ($35.0 million of the original cost of TNP One). TNP recognized the write-off in the second quarter of 1994, which resulted in an after-tax charge of approximately $20.5 million, or $1.91 per share of TNPE common stock. The settlement also required TNP to sell its Texas Panhandle properties, subject to certain conditions. The rate case settlement includes a moratorium restricting TNP from applying for rate increases in Texas until March 31, 1999, subject to certain conditions. These conditions do not allow TNP to apply for any base rate increase under any circumstances prior to March 31, 1997, but would allow an application for increased rates to be filed after that time if certain force majeure events (as defined in the agreement) occur during the moratorium. Note 3. Change in Accounting for Unbilled Revenues Effective January 1, 1995, TNP changed its method of accounting for operating revenues from cycle billing to the accrual method. The change was made in order to more closely match revenues and expenses and more closely conforms to common utility industry practice. The cumulative effect of this change was to recognize $12,993,000 of additional revenues ($8,445,000, net of taxes, or $0.77 per share). The pro forma effects of the change in accounting on 1994, assuming the new method was applied retroactively to that year, would have been to decrease the net loss by $1,347,000 or $0.13 per share). Note 4. Sale of Texas Panhandle Properties In September 1995, TNP sold its Texas Panhandle properties to SPS for $29.2 million, and recognized a net of tax gain of $9.5 million, or $0.87 per share of TNPE common stock. The sale was consummated pursuant to the sale agreement between TNP and SPS in connection with the Texas rate case settlement discussed in Note 2. The Panhandle properties comprised a relatively small portion of TNP's business. The book value of the Panhandle properties sold was $14.3 million. Revenues from the properties for 1995 through the closing date were $7.4 million with corresponding sales of 76.3 GWH to 7,350 customers. The proceeds received from SPS were used to redeem $29.2 million of Series T FMBs. In January 1996, TNP filed a class action lawsuit against John Hancock Mutual Life Insurance Company, a Series T bondholder. TNP sought confirmation that its redemption of Series T FMBs with proceeds from the Panhandle sale was within its rights under the indenture governing the FMBs. TNP's lawsuit was originally filed against PPM, which claimed to be a bondholder and threatened to take legal action against TNP over the redemption. PPM filed a counterclaim seeking declarations that the Series T partial redemption breached the indenture governing the FMBs and that TNP could not redeem Series T FMBs prior to maturity under circumstances like the Panhandle sale. Because PPM was not a bondholder, it was dismissed from the lawsuit and, on PPM's motion, Jackson National Life Insurance Company was substituted as defendant. As a result of federal mediation on January 30, 1997, TNP, Jackson National Life Insurance Company and John Hancock Insurance Co. agreed to a tentative settlement of the lawsuit. The proposed settlement, which is subject to approval of the federal judge, calls for TNP to pay $2 million to the parties of the lawsuit. Accordingly, TNP established a reserve for the settlement in 1996. The proposed settlement, if approved, will allow for the end of costly ongoing litigation. Note 5. Revenues Subject to Refund During the third quarter of 1995, the IRS issued TNP a favorable private letter ruling that enabled TNP to recognize additional revenues and accrued interest of $4.9 million that previously had been deferred. This resulted in a one-time after-tax earnings increase of $3.0 million, or $0.28 per share of TNPE common stock. The revenues recognized were collected from October 1991 through October 1994, as a result of a Texas rate case filed in 1991. The PUCT allowed TNP to collect additional annualized revenues of $1.6 million pending the resolution of the regulatory tax treatment of disallowed utility plant. Recognition of these revenues was conditioned upon TNP obtaining the ruling from the IRS. Note 6. Reorganization During the fourth quarter of 1994, TNP reduced company-wide staffing levels by 140 positions, or 14% of the workforce, as a result of work elimination reviews by employee teams. The goals of the teams were to streamline operations and reduce future costs. The staffing reductions were accomplished primarily through early retirements and involuntary terminations. The aggregate costs impacting TNP's 1994 operations were $8,782,000 ($5,723,000, net of taxes, or $0.53 per share of TNPE common stock). Note 7. Employee Benefit Plans Pension Plan TNP has a defined benefit pension plan covering substantially all of its employees. Benefits are based on an employee's years of service and compensation. TNP's funding policy is to contribute the minimum amount required by federal funding standards. The following table sets forth the plan's funded status and amounts recognized in the consolidated balance sheets at December 31, 1996, and 1995. 1996 1995 _________ _________ (In thousands) Actuarial present value of benefit obligations: Vested benefit obligation $ 58,466 $ 59,393 Unvested benefit obligation 4,539 4,383 _________ _________ Accumulated benefit obligation $ 63,005 $ 63,776 ========= ========= Projected benefit obligation $ 66,406 $ 67,752 Unrecognized net asset 83 107 Unrecognized prior service cost 1,588 2,536 Unrecognized net gain from past experience 21,484 11,357 _________ _________ 89,561 81,752 Plan assets (principally marketable securities) at estimated fair value 82,771 75,037 ________ _________ Accrued pension costs (included in deferred credits in the consolidated balance sheets) $ 6,790 $ 6,715 ========= ========= Net pension costs were comprised of the following components as determined using the projected unit credit actuarial method: 1996 1995 1994 _______ _______ _______ (In thousands) Service cost $ 1,425 $ 1,071 $ 1,763 Interest cost on projected benefit obligation 4,841 4,762 4,179 Adjustment for actual return on plan assets (12,398) (13,797) 260 Effect of reorganization costs, net - - 3,537 Net amortization and deferral 6,207 7,607 (6,238) _______ ________ ________ Net pension costs $ 75 $ (357) $ 3,501 ======= ======== ======== Assumptions used in accounting for the pension plan as of December 31, 1996, and 1995 were as follows: 1996 1995 ____ ____ Discount rates 7.75% 7.25% Rates of increase in compensation levels 4.0% 4.0% Expected long-term rate of return on assets 9.5% 9.5% Postretirement Benefit Plan TNP sponsors a health care plan that provides postretirement medical and death benefits to retirees who satisfied minimum age and service requirements during employment. TNP recognizes the costs of postretirement benefits on the accrual basis during the periods that employees render service to earn the benefits in accordance with SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". Prior to 1993, the costs of these benefits were expensed on a "pay-as-you-go" basis. TNP has been permitted to recover through rates the additional costs resulting from the adoption of SFAS 106. TNP established a trust fund dedicated to paying these postretirement benefits. The following table sets forth the plan's funded status and amounts recognized in the consolidated balance sheets at December 31, 1996, and 1995. 1996 1995 _______ _______ (In thousands) Accumulated postretirement benefit obligation: Retirees and dependents $13,060 $14,229 Active employees 4,244 4,093 _______ _______ Total benefits earned 17,304 18,322 Plan assets (principally marketable securities) at estimated fair value 6,975 5,710 _______ _______ Accumulated postretirement benefit obligation in excess of plan assets 10,329 12,612 Unrecognized transition obligation (13,721) (14,579) Unrecognized net gain from past experience 6,998 5,603 _______ _______ Accrued postretirement benefit costs (included in deferred credits in the consolidated balance sheets) $ 3,606 $ 3,636 ======= ======= Net postretirement benefit costs were comprised of the following components: 1996 1995 1994 ______ ______ ______ (In thousands) Service cost $ 524 $ 374 $ 738 Interest cost on postretirement benefit obligation 1,259 1,265 1,642 Reduction for actual return on plan assets (708) (956) (59) Effect of reorganization costs, net - - 2,945 Net amortization and deferral 922 1,145 784 ______ ______ ______ Net postretirement benefit costs $1,997 $1,828 $6,050 ====== ====== ====== The transition obligation is being amortized over a 20-year period that began in 1993. The assumed health care cost trend rate used to measure the expected cost of benefits was 5.7% for 1996 and is assumed to trend downward slightly each year to 4.3% for 2003 and thereafter. That assumed rate has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1996, by $2.1 million and the aggregate of the service and interest cost components of net postretirement benefit cost for 1996 by $288,000. Additional assumptions used in accounting for the postretirement benefit plan as of December 31, 1996, and 1995, were as follows: 1996 1995 ____ ____ Discount rates 7.75% 7.25% Expected rate of return on assets (net of taxes) 5.7% 6.0% Incentive Plans TNPE and TNP have several incentive compensation plans. All employees participate in one or more of these plans. Incentive compensation is based on meeting key financial and operational performance goals such as EPS, operations and maintenance costs per KWH, and system reliability measures. Operating expenses for 1996 and 1995 included costs for the various cash and equity plans of $4.8 million and $2.0 million, respectively. Other Employee Benefits TNP has a 401(k) plan designed to enhance the other retirement plans available to its employees. Employees may invest their contributions in fixed income securities, mutual funds, or TNPE common stock. TNP's contributions are used to purchase TNPE common stock, which employees may later convert into investments in other investment options. TNP has employment contracts with certain members of management and other key personnel. The contracts provide for lump sum compensation payments and other rights in the event of termination of employment or other adverse treatment of such persons following a "change in control" of TNPE or TNP. Such event is defined to include, among other things, substantial changes in the corporate structure, ownership, or board of directors of either entity. An excess benefit plan has been provided for certain key personnel and retired employees. The payment of benefits under the excess benefit plan is partially provided under an insurance policy arrangement for paying the benefits that generally would have been provided by the pension and thrift plans except for federal limitations. Note 8. Income Taxes
Components of income taxes were as follows: TNPE TNP ____________________________________ _____________________________________ 1996 1995 1994 1996 1995 1994 ____ ____ ____ ____ ____ ____ (In thousands) Taxes on net operating income: Federal - current $ 8,596 $ 3,108 $ (253) $ 8,596 $ 3,108 $ (253) State - current 86 507 55 86 507 55 Federal - deferred 1,381 6,700 (13) 1,381 6,700 (13) ITC adjustments 270 2,002 (1,027) 270 2,002 (1,027) _________ ___________ __________ __________ ___________ __________ 10,333 12,317 (1,238) 10,333 12,317 (1,238) _________ ___________ __________ __________ ___________ __________ Taxes on other income (loss): Federal - current (114) 7,170 1,006 (100) 7,203 560 Federal - deferred (1,574) (1,444) (10,902) (241) (1,568) (10,907) ITC adjustments (650) (323) (409) (381) (311) (347) _________ ___________ __________ __________ ___________ __________ (2,338) 5,403 (10,305) (722) 5,324 (10,694) _________ ___________ __________ __________ ___________ __________ Taxes on cumulative effect of change in accounting, federal-deferred (Note 3) - 4,548 - - 4,548 - _________ ___________ __________ __________ ___________ __________ Total income taxes $ 7,995 $ 22,268 $ (11,543) $ 9,611 $ 22,189 $ (11,932) ======== ========== =========== ========== =========== ==========
The amounts for total income taxes differ from the amounts computed by applying the appropriate federal income tax rate to earnings (loss) before income taxes for the following reasons:
TNPE TNP ___________________________________ ___________________________________ 1996 1995 1994 1996 1995 1994 ____ ____ ____ ____ ____ ____ (In thousands) Tax at statutory tax rate $ 10,850 $ 17,595 $ (9,873) $ 12,735 $ 17,674 $ (9,731) Amortization of accumulated deferred ITC (1,323) (1,079) (1,055) (1,323) (1,079) (1,055) Amortization of excess deferred taxes (143) (160) (183) (143) (318) (183) State income taxes 86 507 55 86 507 55 ITC related to disallowances (191) (312) (347) (191) (312) (347) ITC adjustment (760) - - - - - Taxes on cumulative effect of change in accounting, federal- deferred (Note 3) - 4,548 - - 4,548 - Other, net (524) 1,169 (140) (1,553) 1,169 (671) _________ _________ __________ _________ _________ _________ Actual income taxes $ 7,995 $ 22,268 $ (11,543) $ 9,611 $ 22,189 $(11,932) ========= ========= ========== ========= ========= =========
The tax effects of temporary differences that gave rise to significant portions of net current and net noncurrent deferred income taxes as of December 31, 1996, and 1995, are presented below.
TNPE TNP __________________________ __________________________ 1996 1995 1996 1995 ____ ____ ____ ____ (In thousands) Current deferred income taxes: Deferred tax assets: Unbilled revenues $ 2,470 $ 2,413 $ 2,470 $ 2,413 Other 663 264 663 264 ____________ ____________ ____________ ____________ 3,133 2,677 3,133 2,677 Deferred tax liability: Deferred purchased power and fuel costs (1,196) (2,533) (1,196) (2,533) ____________ ____________ ____________ ____________ Current deferred income taxes, net $ 1,937 $ 144 $ 1,937 $ 144 ============ ============ ============ ============ Noncurrent deferred income taxes: Deferred tax assets: Minimum tax credit carryforwards $ 27,445 $ 22,365 $ 34,703 $ 27,317 Federal regular tax net operating loss carryforwards - 4,240 1,724 9,604 ITC carryforwards 11,255 14,399 11,823 15,591 Regulatory related items 16,844 17,921 16,844 17,921 Accrued employee benefit costs 3,486 3,323 3,486 3,323 Other 1,263 1,900 696 707 ____________ ____________ ___________ ____________ 60,293 64,148 69,276 74,463 ____________ ____________ ___________ ____________ Deferred tax liabilities: Utility plant, principally due to depreciation and basis differences (115,823) (114,446) (115,823) (114,446) Deferred charges and other (5,565) (4,743) (5,565) (4,743) Regulatory related items (13,749) (2,340) (13,748) (2,340) ____________ ____________ ____________ ____________ (135,137) (121,529) (135,136) (121,529) ____________ ____________ ____________ ____________ Noncurrent deferred income taxes, net $ (74,844) $ (57,381) $ (65,860) $ (47,066) ============ ============ ============ ============
Federal tax carryforwards as of December 31, 1996, were as follows: TNPE TNP (In thousands) Net operating loss Amount $ - $ 4,926 Expiration period - 2009 Minimum tax credits Amount $ 27,445 $ 34,703 Expiration period None None Investment tax credit Amount $ 11,255 $ 11,823 Expiration period 2005 2005 In March 1995, an Internal Revenue Service revenue agent involved in auditing TNPE's 1990-1994 consolidated federal income tax returns recommended that a private letter ruling concerning eligibility of the TNP One generating plant for ITC be revoked retroactively. Management believes that TNP's claim for ITC is valid and is contesting the agent's recommendation. Of the $22.5 million of ITC at issue, TNPE and its subsidiaries have utilized $8.2 million of ITC in the consolidated tax returns through 1995 and expect to utilize $1.6 million in the 1996 consolidated tax returns. TNP's portion is $7.0 million and $1.8 million, respectively. However, since 1990 TNPE and TNP have only recognized $2.2 million of the ITC in results of operations. Note 9. Long-Term Debt First Mortgage Bonds FMBs issued under the Bond Indenture are secured by substantially all utility plant owned directly by TNP. The Bond Indenture restricts cash dividend payments on TNP common stock as discussed in Note 11. TNP has the ability to issue additional FMBs based on certain financial tests, or based on previously retired FMBs. As of December 31, 1996, TNP could not issue any additional FMBs based on the required financial tests. However, TNP also has the ability to issue additional FMBs against previously retired FMBs, as limited by an earnings test. As of December 31, 1996, TNP could issue up to $91 million of FMBs at an assumed interest rate of 9% based on previously retired FMBs. Secured Debentures TNP's Series A, 10.75% secured debentures and 12.5% secured debentures are secured with a first lien on a portion of Unit 1. The 12.5% secured debentures are also secured by a first lien on a portion of Unit 2. TNP's secured debenture holders are also secured by second liens on substantially all utility plant in Texas owned directly by TNP. The secured debentures also contain restrictions on dividends and asset dispositions. Revolving Credit Facilities In September 1996, TNP entered into a new credit facility ("1996 Facility"). The 1996 Facility provides for a total commitment of $100 million and supplements the existing credit facility ("1995 Facility"). The 1995 Facility provides for a total commitment of $150 million. The 1996 Facility commitment expires September 2001, while the 1995 Facility commitment will reduce to $125 million on November 3, 1998, and to $100 million on November 3, 1999, and will expire on November 3, 2000. The collateral securing the 1996 Facility is $100 million of non-interest bearing (except upon default) FMBs. Collateral securing the 1995 Facility is generally a first lien on a portion of TNP One, a second lien on TNP's first mortgage bond trust estate located in Texas, and $30 million of noninterest bearing FMBs. This collateral secures borrowings up to $100 million. Before increasing borrowings above $100 million, TNP must pledge additional noninterest bearing FMBs in an amount equal to the borrowings over $100 million. In addition to the 1996 Facility, TNP purchased a $50 million interest rate collar to mitigate exposure to variable interest rates. The collar sets floor and ceiling rates on the 90-day LIBOR rate at 5.25% and 7.50%, respectively. The term of the interest rate collar is September 1997 through September 2000. TNP has sufficient liquidity to satisfy the possibility of any known contingencies. Management believes cash flow from operations and periodic borrowings under its two revolving credit facilities should be sufficient to meet working capital requirements and planned capital expenditures at least through 1998. At December 31, 1996, interest rates on borrowings under the 1996 Facility were 7.06% and would have been 7.12% on the 1995 Facility. The composite average borrowing rates under TNP's credit facilities were 7.32% and 8.92% for 1996 and 1995, respectively. The interest rate margins on both facilities will decrease as the ratings on TNP's FMBs improve. Under specified conditions, TNP's credit facilities restrict the payment of cash dividends on TNP common stock. The credit facilities also prohibit the sale, lease, transfer, or other disposition of assets other than in the ordinary course of business. Maturities As of December 31, 1996, FMB and secured debenture maturities and sinking fund requirements for the five years following 1996 are as follows: Secured Total FMBs and Year FMBs Debentures Secured Debentures ____ ____ __________ __________________ (In thousands) 1997 $ 100 $ - $ 100 1998 100 - 100 1999 100 130,000 130,100 2000 100,100 - 100,100 2001 100 - 100 At the end of 1996, $55 million was outstanding under the 1996 Facility, which matures in 2001. In January 1997 TNP borrowed from its credit facilities in order to retire the $100.8 million of 11.25% Series T FMBs. Accordingly, at December 31, 1996, the $100.8 million was classified as long-term debt. Following the retirement of the Series T FMBs, TNP had available borrowing capacity of $90.5 million under the credit facilities. As of December 31, 1996, Facility Works had $202,000 of debt associated with the purchase of vehicles. Note 10. Redeemable Cumulative Preferred Stock If TNP liquidates voluntarily or involuntarily, holders of preferred stock have preferences equal to amounts payable on redemption or par, respectively, plus accrued dividends. TNP's charter provides that additional shares of preferred stock may not be issued unless certain tests are met. As of December 31, 1996, $25 million additional preferred stock could be issued. Note 11. Capital Stock and Dividends TNPE In October 1996, TNPE issued 2 million shares of common stock in a public offering, with net proceeds of approximately $47,170,000. The net proceeds were transferred to TNP as an equity contribution. In September 1996, TNPE increased its quarterly dividend from $0.22 to $0.245 per share. TNPE had reduced the quarterly dividend by 51% from $0.41 to $0.20 per share beginning with the third quarter of 1994 due to TNP's restriction (discussed below) and other factors such as the relatively low common equity component of TNPE's capital structure and industry considerations. TNP The Bond Indenture prohibits TNP from paying cash dividends on its common stock to TNPE unless unrestricted retained earnings are available. The restriction became operative during 1994 due to the recognition of $35.0 million of regulatory disallowances as discussed in Note 2 and temporarily precluded TNP from paying cash dividends until March 1995. As of December 31, 1996, $46.6 million of unrestricted retained earnings were available for dividends. Note 12. Commitments and Contingencies Fuel Supply Agreement TNP successfully negotiated a 20% reduction in the cost of lignite provided by Walnut Creek Mining Company effective January 1, 1995, for the life of TNP One. Walnut Creek Mining Company is jointly owned by Phillips Coal Company and Peter Kiewit Sons', Inc. Wholesale Purchased Power Agreements TNP purchases a significant portion of its electric requirements from various wholesale suppliers. These contracts are scheduled to expire in various years through 2010. TNP has notified TU of its intent to cease purchasing full requirements power and energy effective January 1, 1999. In addition, in July 1995 TNP filed proceedings with the PUCT and in a Texas state district court to declare TNP's wholesale purchased power agreement with TU null and void. On August 29, 1996, The PUCT entered an order declaring two of the terms of the TU Agreement void, but upheld the validity of the remainder of the contract. In November 1996, TNP filed an a appeal of the PUCT's ruling with a state district court. In 1996, TU supplied approximately 43% of TNP's Texas capacity and 24% of its Texas energy requirements. Management expects, as a result of the developing competition within the wholesale power market, to enter into new arrangements for such capacity and energy on terms that are more favorable for its customers. TNP has requested proposals for purchased power resources to replace power currently purchased from TU. At December 31, 1996, TNP had various outstanding commitments for take or pay agreements, including the fuel supply agreement discussed above. Detailed below are the fixed and determinable portion of the obligations (amounts in millions):
1997 1998 1999 2000 2001 _______ ________ ________ _______ _______ Purchased power agreements $ 67.4 $ 52.0 $ 17.1 $ 16.7 $ 16.4 Fuel supply agreements 30.2 30.2 30.2 30.2 30.2 _______ ________ ________ _______ _______ Total $ 97.6 $ 82.2 $ 47.3 $ 46.9 $ 46.6 ======= ======== ======== ======= =======
Significant Customer TNP is actively negotiating with a significant major industrial customer in Texas that provided GWH sales of 628 and annual revenues of $27.8 million in 1996 ($9.9 million in base revenues). This customer is constructing a 300-MW cogeneration plant, the first phase of which is expected to commence operations in 1998. TNP is negotiating with the customer to continue providing transmission, distribution and other services. Even if TNP is successful in these negotiations, base revenues from this customer are expected to be significantly less. Legal Actions TNP is involved in various claims and other legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on TNP's and TNPE's consolidated financial position or results of operations. TNP ENTERPRISES, INC. AND SUBSIDIARIES Selected Quarterly Consolidated Financial Data The following selected quarterly consolidated financial data for TNPE is unaudited, and, in the opinion of the TNPE's management, is a fair summary of the results of operations for such periods:
March 31 June 30 Sept. 30 Dec. 31 __________ __________ __________ __________ (In thousands except per share amounts) 1996 ____ Operating revenues........................................ $ 99,827 $ 122,020 $ 157,453 $ 123,437 Net operating income...................................... 17,786 25,327 31,237 19,527 Net income................................................ 562 7,831 14,292 368 Income applicable to common stock......................... 520 7,789 14,250 327 Earnings per share of common stock........................ 0.05 0.71 1.29 0.03 Dividends per share of common stock....................... $ 0.22 $ 0.22 $ 0.245 $ 0.245 Weighted average common shares outstanding................ 10,986 11,028 11,080 13,032 1995 ____ Operating revenues........................................ $ 105,647 $ 121,237 $ 151,586 $ 107,353 Net operating income...................................... 17,044 25,100 35,147 19,304 Net income ............................................... 6,124 6,131 26,728 2,522 Income applicable to common stock......................... 5,936 5,951 26,576 2,387 Earnings per share of common stock........................ 0.55 0.54 2.44 0.22 Dividends per share of common stock....................... $ 0.20 $ 0.20 $ 0.20 $ 0.22 Weighted average common shares outstanding................ 10,877 10,901 10,909 10,915
Generally, the variations between quarters reflect the seasonal fluctuations of TNP's business. In addition, the results above are impacted by one-time items. These items, net of taxes, are as follows: - - reserve for tentative settlement of Series T litigation $1.3 million in fourth quarter of 1996 (Note 4) - - change in accounting for unbilled revenues of $8.4 million in first quarter of 1995 (Note 3) - - gain on sale of Texas Panhandle properties of $9.5 million in third quarter of 1995 (Note 4) - - recognition of previously deferred revenues of $3.0 million during the third quarter of 1995 (Note 5) Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. See Form 8-K filed on February 25, 1997. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Directors The information required by this item is incorporated by reference to "Election of Directors" and "Security Ownership of Management and Certain Beneficial Owners" in the proxy statement relating to the 1997 Annual Meeting of Holders of TNPE Common Stock. Executive Officers The information set forth under "Employees and Executives" in Part I is incorporated here by reference. Item 11. EXECUTIVE COMPENSATION.* Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.* Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.* * The information required by Items 11, 12, and 13 is incorporated by reference to "Compensation of Directors and Executive Officers" and "Security Ownership of Management and Certain Beneficial Owners" in the proxy statement relating to the 1997 Annual Meeting of Holders of TNPE Common Stock. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following financial statements are filed as part of this report: Page Independent Auditors' Reports...................................................................... 17 TNPE Consolidated Statements of Income (Loss), Three Years Ended December 31, 1996...................... 19 Consolidated Statements of Cash Flows, Three Years Ended December 31, 1996......................... 20 Consolidated Balance Sheets, December 31, 1996, and 1995........................................... 21 Consolidated Statements of Capitalization, December 31, 1996, and 1995............................. 22 Consolidated Statements of Common Shareholders' Equity, Three Years Ended December 31, 1996.............................................................. 23 TNP Consolidated Statements of Income (Loss), Three Years Ended December 31, 1996...................... 24 Consolidated Statements of Cash Flows, Three Years Ended December 31, 1996......................... 25 Consolidated Balance Sheets, December 31, 1996, and 1995........................................... 26 Consolidated Statements of Capitalization, December 31, 1996, and 1995............................. 27 Consolidated Statements of Common Shareholders' Equity, Three Years Ended December 31, 1996.............................................................. 28 Notes to Consolidated Financial Statements......................................................... 29 Selected Quarterly Consolidated Financial Data - TNPE.............................................. 40
(b) Report on Form 8-K TNPE and TNP filed a report on Form 8-K dated February 25, 1997, reporting information under Item 4 - regarding a change in Independent Accountants and the satisfactory resolution of a disagreement on accounting. (c) The Exhibit Index on pages 43-48 is incorporated here by reference. (d) All financial statement schedules are omitted, as the required information is not applicable or the information is presented in the consolidated financial statements or related Notes. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. TNP ENTERPRISES, INC. Date: March 7, 1997 By: \s\ M. S. Cheema Manjit S. Cheema, Vice President & Chief Financial Officer TEXAS-NEW MEXICO POWER COMPANY Date: March 7, 1997 By: \s\ M. S. Cheema Manjit S. Cheema, Senior Vice President & Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrants and in the capacities and on the dates indicated. Title Date By \s\ Kevern R. Joyce Chairman, President, 3/7/97 Kevern R. Joyce & Chief Executive Officer By \s\ M. S. Cheema Senior Vice President 3/7/97 Manjit S. Cheema & Chief Financial Officer of TNP and Vice President & Chief Financial Officer of TNPE By \s\ Scott Forbes Controller of TNP & 3/7/97 Scott Forbes Chief Accounting Officer of TNPE By \s\ R. Denny Alexander Director 3/7/97 R. Denny Alexander By \s\ John A. Fanning Director 3/7/97 John A. Fanning By \s\ Sidney M. Gutierrez Director 3/7/97 Sidney M. Gutierrez By \s\ James R. Holland, Jr. Director 3/7/97 James R. Holland, Jr. By \s\ Harris L. Kempner, Jr. Director 3/7/97 Harris L. Kempner, Jr. By \s\ Dwight R. Spurlock Director 3/7/97 Dwight R. Spurlock By \s\ Dr. Carol D. Smith Surles Director 3/7/97 Dr. Carol D. Smith Surles By \s\ Dennis H. Withers Director 3/7/97 Dennis H. Withers EXHIBIT INDEX Exhibits filed with this report are denoted by "*." Exhibit No. Description TNPE incorporates the following exhibits by reference to the exhibits and filings noted in parenthesis. 3(a) - Articles of Incorporation and Amendments through March 6, 1984 (Exhibit 3(a) to TNPE 1984 Form S-14, File No. 2-89800). 3(b) - Amendment to Articles of Incorporation filed September 25, 1984 (Exhibit 3(b) to TNPE 1984 Form 10-K, File No. 1-8847). 3(c) - Amendment to Articles of Incorporation filed August 29, 1985 (Exhibit 3(a) to TNPE 1985 Form 10-K, File No.1-8847). 3(d) - Amendment to Articles of Incorporation filed June 2, 1986 (Exhibit 3(a) to TNPE 1986 Form 10-K, File No.1-8847). 3(e) - Amendment to Articles of Incorporation filed May 10, 1988 (Exhibit 3(e) to TNPE 1988 Form 10-K, File No.1-8847). 3(f) - Amendment to Articles of Incorporation filed May 10, 1988 (Exhibit 3(f) to TNPE 1988 Form 10-K, File No.1-8847). 3(g) - Amendment to Articles of Incorporation filed December 27, 1988 (Exhibit 3(g) to TNPE 1988 Form 10-K, File No.1-8847). 3(h) - Bylaws, as amended (Exhibit 3(h) to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230). 4(u) - Rights Agreement and Form of Right Certificate, as amended, effective November 13, 1990 (Exhibit 2.1 to TNPE Form 8-A, File No. 1-8847). *23 - Independent Auditors' Consent - KPMG Peat Marwick LLP. *27 - Financial Data Schedule for TNPE. TNP incorporates the following exhibits by reference to the exhibits and filings noted in parenthesis. 3(i) - Restated Articles of Incorporation. (Exhibit 3(i) to TNP 1996 10-K, File No. 2-97230) 3(ii) - Bylaws, as amended November 15, 1994 (Exhibit 3(hh) to TNP 1994 Form 10-K, File No. 2-97230). *27 - Financial Data Schedule for TNP. TNPE and TNP incorporate the following exhibits by reference to the exhibits and filings noted in parenthesis. 4(a) - Indenture of Mortgage and Deed of Trust dated as of November 1, 1944 (Exhibit 2(d) to Community Public Service Co. ("CPS") 1978 Form S-7, File No. 2-61323). 4(b) - Seventh Supplemental Indenture dated as of May 1, 1963 (Exhibit 2(k) to CPS Form S-7, File No. 2-61323). 4(c) - Eighth Supplemental Indenture dated as of July 1, 1963 (Exhibit 2(1), to CPS Form S-7, File No. 2-61323). 4(d) - Ninth Supplemental Indenture dated as of August 1, 1965 (Exhibit 2(m), to CPS Form S-7, File No. 2-61323). 4(e) - Tenth Supplemental Indenture dated as of May 1, 1966 (Exhibit 2(n), to CPS Form S-7, File No. 2-61323). 4(f) - Eleventh Supplemental Indenture dated as of October 1, 1969 (Exhibit 2(o), to CPS Form S-7, File No. 2-61323). 4(g) - Twelfth Supplemental Indenture dated as of May 1, 1971 (Exhibit 2(p), to CPS Form S-7, File No. 2-61323). 4(h) - Thirteenth Supplemental Indenture dated as of July 1, 1974 (Exhibit 2(q), to CPS Form S-7, File No. 2-61323). 4(i) - Fourteenth Supplemental Indenture dated as of March 1, 1975 (Exhibit 2(r), to CPS Form S-7, File No. 2-61323). 4(j) - Fifteenth Supplemental Indenture dated as of September 1, 1976 (Exhibit 2(e), File No. 2-57034). 4(k) - Sixteenth Supplemental Indenture dated as of November 1, 1981 (Exhibit 4(x), File No. 2-74332). 4(l) - Seventeenth Supplemental Indenture dated as of December 1, 1982 (Exhibit 4(cc), File No. 2-80407). 4(m) - Eighteenth Supplemental Indenture dated as of September 1, 1983 (Exhibit (a) to Form 10-Q of TNP for the quarter ended September 30, 1983, File No. 1-4756). 4(n) - Nineteenth Supplemental Indenture dated as of May 1, 1985 (Exhibit 4(v), File No. 2-97230). 4(o) - Twentieth Supplemental Indenture dated as of July 1, 1987 (Exhibit 4(o) to Form 10-K of TNP for the year ended December 31, 1987, File No. 2-97230). 4(p) - Twenty-First Supplemental Indenture dated as of July 1, 1989 (Exhibit 4(p) to Form 10-Q of TNP for the quarter ended June 30, 1989, File No. 2-97230). 4(q) - Twenty-Second Supplemental Indenture dated as of January 15, 1992 (Exhibit 4(q) to Form 10-K of TNP for the year ended December 31, 1991, File No. 2-97230). 4(r) - Twenty-Third Supplemental Indenture dated as of September 15, 1993 (Exhibit 4(r) to Form 10-K of TNP for the year ended December 31, 1993, File No. 2-97230). 4(s) - Twenty-Fourth Supplemental Indenture dated as of November 3, 1995 (Exhibit 4(s) to Form 10-K of TNP for the year ended December 31, 1993, File No. 2-97230). 4(t) - Twenty-Fifth Supplemental Indenture dated as of September 10, 1996 (Exhibit 4(t) to Form 10-Q of TNP for the quarter ended September 30, 1996, File No. 2-97230). 4(u) - Indenture and Security Agreement for 12 1/2% Secured Debentures dated as of January 15, 1992 (Exhibit 4(r) to TNP 1991 Form 10-K, File No. 2-97230). 4(v) - Indenture and Security Agreement for 10 3/4% Secured Debentures dated as of September 15, 1993 (Exhibit 4(t) to TNP 1993 Form 10-K, File No. 2-97230). Contracts Relating to TNP One 10(a) - Fuel Supply Agreement, dated November 18, 1987, between Phillips Coal Company and TNP (Exhibit 10(j) to TNP 1987 Form 10-K, File No. 2-97230). 10(a)1 - Amendment No. 1, dated as of April 1, 1988, to Fuel Supply Agreement dated November 18, 1987, between Phillips Coal Company and TNP (Exhibit 10(a)1 to Joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230). 10(a)2 - Amendment No. 2, dated as of November 29, 1994, between Walnut Creek Mining Company and TNP, to Fuel Supply Agreement dated November 18, 1987, between Phillips Coal Company and TNP, (Exhibit 10(a)2 to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230). 10(b) - Unit 1 First Amended and Restated Project Loan and Credit Agreement, dated as of January 8, 1992 (the "Unit 1 Credit Agreement"), among TNP, TGC, certain banks (the "Unit 1 Banks") and Chase Manhattan Bank (National Association), as Agent for the Unit 1 Banks (the "Unit 1 Agent"), (Exhibit 10(c) to TNP 1991 Form 10-K , File No. 2-97230). 10(b)1 - Participation Agreement, dated as of January 8, 1992, among certain banks, Participants, and the Unit 1 Agent (Exhibit 10(c)1 to TNP 1991 Form 10-K, File No. 2-97230). 10(b)2 - Amendment No. 1, dated as of September 21, 1993, to the Unit 1 Credit Agreement (Exhibit 10(b)2 to TNP 1993 Form 10-K , File No. 2-97230). 10(c) - Assignment and Security Agreement, dated as of January 8, 1992, among TGC and the Unit 1 Agent (Exhibit 10(d) to TNP 1991 Form 10-K , File No. 2-97230). 10(d) - Amended and Restated Subordination Agreement, dated as of October 1, 1988, among TNP, Continental Illinois National Bank and Trust Company of Chicago and the Unit 1 Agent(Exhibit 10(uu) to TNP 1988 Form 10-K, File No. 2-97230). 10(e) - Unit 1 Mortgage and Deed of Trust, dated as of December 1, 1987, (Exhibit 10(ee) to TNP 1987 Form 10-K , File No. 2-97230). 10(e)1 - Supplemental Unit 1 Mortgage and Deed of Trust executed on January 27, 1992, (Exhibit 10(g)4 to TNP 1991 Form 10-K , File No. 2-97230). 10(e)2 - First TGC Modification and Extension Agreement, dated as of January 24, 1992, among the Unit 1 Banks, the Unit 1 Agent, TNP, and TGC (Exhibit 10(g)1 to TNP 1991 Form 10-K, File No. 2-97230). 10(e)3 - Second TGC Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 1 Banks, the Unit 1 Agent, TNP, and TGC (Exhibit 10(g)2 to TNP 1991 Form 10-K, File No. 2-97230). 10(e)4 - Third TGC Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 1 Banks, the Unit 1 Agent, TNP, and TGC (Exhibit 10(g)3 to TNP 1991 Form 10-K, File No. 2-97230). 10(e)5 - Fourth TGC Modification and Extension Agreement, dated as of September 29, 1993, among the Unit 1 Banks, the Unit 1 Agent, TNP, and TGC (Exhibit 10(f)5 to TNP 1993 Form 10-K, File No. 2-97230). 10(e)6 - Fifth TGC Modification and Extension Agreement, dated as of September 29, 1993, among the Unit 1 Banks, the Unit 1 Agent, TNP, and TGC (Exhibit 10(f)6 to TNP 1993 Form 10-K, File No. 2-97230). 10(f) - Indemnity Agreement, dated December 1, 1987, by Westinghouse, CE and Zachry, (Exhibit 10(ff) to TNP 1987 Form 10-K, File No. 2-97230). 10(g) - Unit 1 Second Lien Mortgage and Deed of Trust dated as of December 1, 1987, (Exhibit 10(jj) to TNP 1987 Form 10-K, File No. 2-97230). 10(g)1 - Correction Second Lien Mortgage and Deed of Trust, dated as of December 1, 1987, (Exhibit 10(vv) to TNP 1988 Form 10-K, File No. 2-97230). 10(g)2 - Second Lien Mortgage and Deed of Trust Modification, Extension and Amendment Agreement, dated as of January 8, 1992 (Exhibit 10(i)2 to TNP 1991 Form 10-K, File No. 2-97230). 10(g)3 - TNP Second Lien Mortgage Modification No. 2, dated as of September 21, 1993 (Exhibit 10(h)3 to TNP 1993 Form 10-K, File No. 2-97230). 10(h) - Agreement for Conveyance and Partial Release of Liens, dated as of December 1, 1987, by PFC and the Unit 1 Agent (Exhibit 10(kk) to TNP 1987 Form 10-K, File No. 2-97230). 10(i) - Inducement and Consent Agreement, dated as of June 15, 1988, among Phillips Coal Company, Kiewit Texas Mining Company, TNP, Phillips Petroleum Company, and Peter Kiewit Son's, Inc. (Exhibit 10(nn) to TNP 1988 Form 10-K, File No. 2-97230). 10(j) - Assumption Agreement, dated as of October 1, 1988, by TGC, in favor of certain banks, the Unit 1 Agent, and the Depositary, as defined therein (Exhibit 10(ww) to TNP 1988 Form 10-K, File No. 2-97230). 10(k) - Guaranty, dated as of October 1, 1988, by TNP of TGC obligations under Unit 1 Credit Agreement (Exhibit 10(xx)to TNP 1988 Form 10-K of TNP, File No. 2-97230). 10(l) - First Amended and Restated Facility Purchase Agreement, dated as of January 8, 1992, between TNP and TGC (Exhibit 10(n) to TNP 1991 Form 10-K, 1991, File No. 2-97230). 10(m) - Operating Agreement, dated as of October 1, 1988, between TNP and TGC (Exhibit 10(zz) to TNP 1988 Form 10-K, File No. 2-97230). 10(n) - Unit 2 First Amended and Restated Project Loan and Credit Agreement, dated as of January 8, 1992 (the "Unit 2 Credit Agreement"), among TNP, TGC II, certain banks (the "Unit 2 Banks") and The Chase Manhattan Bank (National Association), as Agent for the Unit 2 Banks (the "Unit 2 Agent") (Exhibit 10(q) to TNP 1991 Form 10-K, File No. 2-97230). 10(n)1 - Amendment No. 1, dated as of September 21, 1993, to the Unit 2 Credit Agreement (Exhibit 10(o)1 to TNP 1993 Form 10-K, File No. 2-97230). 10(o) - Assignment and Security Agreement, dated as of January 8, 1992, among TGC II and the Unit 2 Agent (Exhibit 10(r) to TNP 1991 Form 10-K, File No. 2-97230). 10(p) - Assignment and Security Agreement, dated as of October 1, 1988, by TNP to the Unit 2 Agent (Exhibit 10(jjj) to TNP 1988 Form 10-K, File No. 2-97230). 10(q) - Subordination Agreement, dated as of October 1, 1988, among TNP, Continental Illinois National Bank and Trust Company of Chicago, and the Unit 2 Agent (Exhibit 10(mmm) to TNP 1988 Form 10-K, File No. 2-97230). 10(r) - Unit 2 Mortgage and Deed of Trust dated as of October 1, 1988 (Exhibit 10(uuu) to TNP 1988 Form 10-K, File No.2-97230). 10(r)1 - First TGC II Modification and Extension Agreement, dated as of January 24, 1992, among the Unit 2 Banks, the Unit 2 Agent, TNP, and TGC II (Exhibit 10(u)1 to TNP 1991 Form 10-K, File No.2-97230). 10(r)2 - Second TGC II Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 2 Banks, the Unit 2 Agent, TNP and TGC II (Exhibit 10(u)2 to TNP 1991 Form 10-K, File No. 2-97230). 10(r)3 - Third TGC II Modification and Extension Agreement, dated as of January 27, 1992, among the Unit 2 Banks, the Unit 2 Agent, TNP, and TGC II (Exhibit 10(u)3 to TNP 1991 Form 10-K, File No.2-97230). 10(r)4 - Fourth TGC II Modification and Extension Agreement, dated as of September 29, 1993, among the Unit 2 Banks, the Unit 2 Agent, TNP, and TGC II (Exhibit 10(s)4 to TNP 1993 Form 10-K, File No.2-97230). 10(r)5 - Fifth TGC II Modification and Extension Agreement, dated as of June 15, 1994, among the Unit 2 Banks, the Unit 2 Agent, TNP, and TGC II (Exhibit 10(s)5 to TNP Form 10-Q for quarter ended June 30, 1994, File No. 2-97230). 10(s) - Release and Waiver of Liens and Indemnity Agreement, dated October 1, 1988, by Westinghouse, CE, and Zachry (Exhibit 10(vvv) to TNP 1988 Form 10-K, File No. 2-97230). 10(t) - Second Lien Mortgage and Deed of Trust, dated as of October 1, 1988, (Exhibit 10(www) to TNP 1988 Form 10-K, File No. 2-97230). 10(t)1 - Second Lien Mortgage and Deed of Trust Modification, Extension and Amendment Agreement, dated as of January 8, 1992, (Exhibit 10(w)1 to TNP 1991 Form 10-K, File No. 2-97230). 10(t)2 - TNP Second Lien Mortgage Modification No. 2, dated as of September 21, 1993, (Exhibit 10(u)2 to TNP 1993 Form 10-K, File No. 2-97230). 10(u) - Intercreditor and Nondisturbance Agreement, dated as of October 1, 1988, among PFC, Texas PFC, Inc., TNP, certain creditors, as defined therein, and the Collateral Agent, as defined therein (Exhibit 10(xxx) to TNP 1988 Form 10-K, File No. 2-97230). 10(u)1 - Amendment No. 1, dated as of January 8, 1992, to Intercreditor and Nondisturbance Agreement, (Exhibit 10(x)1 to TNP 1991 Form 10-K, File No. 2-97230). 10(u)2 - Amendment No. 2, dated as of September 21, 1993, to Intercreditor and Nondisturbance Agreement, (Exhibit 10(v)2 to TNP 1993 Form 10-K of TNP, File No. 2-97230). 10(v) - Grant of Reciprocal Easements and Declaration of Covenants Running with the Land, dated October 1, 1988, between PFC and Texas PFC, Inc. (Exhibit 10(yyy) to TNP 1988 Form 10-K, File No. 2-97230). 10(w) - Non-Partition Agreement, dated as of May 30, 1990, among TNP, TGC, and the Unit 1 Agent (Exhibit 10(ss) to TNP 1990 Form 10-K of TNP, File No. 2-97230). 10(x) - Assumption Agreement, dated as of May 31, 1991, by TGC II in favor of certain banks, the Unit 2 Agent, and the Depositary, as defined therein (Exhibit 10(kkk) to Amendment No. 1 to File No. 33-41903). 10(y) - Guaranty, dated as of May 31, 1991, by TNP, for TGC II obligations under the Unit 2 Credit Agreement (Exhibit 10(lll) to Amendment No. 1 to File No. 33-41903). 10(z) - First Amended and Restated Facility Purchase Agreement, dated as of January 8, 1992, between TNP, and TGC II (Exhibit 10(dd) to TNP 1991 Form 10-K, File No. 2-97230). 10(z)1 - Amendment No. 1 to the Unit 2 First Amended and Restated Facility Purchase Agreement, dated as of September 21, 1993, between TNP and TGC II (Exhibit 10(aa)1 to TNP 1993 Form 10-K, File No. 2-97230). 10(aa) - Operating Agreement, dated as of May 31, 1991, between TNP and TGC II (Exhibit 10(nnn) to Amendment No. 1 to File No. 33-41903). 10(bb) - Non-Partition Agreement, dated as of May 31, 1991, among TNP, TGC II, and the Unit 2 Agent (Exhibit 10(ppp) to Amendment No. 1 to File No. 33-41903). Contracts Relating to TNP One 10(cc) - Revolving Credit Facility Agreement, dated as of November 3, 1995, among TNP, certain lenders, and Chemical Bank, as Administrative Agent and Collateral Agent. (Exhibit 10(cc) to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730). 10(cc)1 - Form of Guarantee and Pledge Agreement, dated as of November 3, 1995, between TGC II, and Chemical Bank, as collateral agent (Exhibit D to Revolving Credit Facility Agreement). (Exhibit 10(cc)1 to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730) 10(cc)2 - Form of Bond Agreement, dated as of November 3, 1995, between TNP and Chemical Bank, as Collateral Agent (Exhibit E to Revolving Credit Facility Agreement). (Exhibit 10(cc)2 to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730) 10(cc)3 - Form of Note Pledge Agreement, dated as of November 3, 1995, between TNP and Chemical Bank, as collateral agent (Exhibit F to Revolving Credit Facility Agreement). (Exhibit 10(cc)3 to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730) 10(cc)4 - Form of Sixth TGC II Modification and Extension Agreement, dated as of November 3, 1995, among the Unit 2 Banks, The Chase Manhattan Bank, as agent, TNP, and TGC II (Exhibit H to the Revolving Credit Facility Agreement). (Exhibit 10(cc)4 to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730) 10(cc)5 - Form of Second Lien Mortgage and Deed of Trust Modification, Extension and Amendment Agreement No. 3, dated as of November 3, 1995 (Exhibit I to the Revolving Credit Facility Agreement). (Exhibit 10(cc)5 to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730) 10(cc)6 - Form of Assignment and Amendment Agreement, dated as of November 3, 1995, among TNP, TGC II, and Chemical Bank, as administrative agent and collateral agent (Exhibit J to the Revolving Credit Facility Agreement). (Exhibit 10(cc)6 to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730) 10(cc)7 - Form of Assignment of TGC II Mortgage Lien, dated as of November 3, 1995, by The Chase Manhattan Bank as agent to Chemical Bank (Exhibit K to the Revolving Credit Facility Agreement). (Exhibit 10(cc)7 to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730) 10(cc)8 - Form of Collateral Transfer of Notes, Rights and Interests, dated as of November 3, 1995, between TNP and Chemical Bank, as Administrative Agent and as Collateral Agent (Exhibit L to the Revolving Credit Facility Agreement). (Exhibit 10(cc)8 to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730) 10(cc)9 - Form of Assignment of Second Lien Mortgage and Deed of Trust, dated as of November 3, 1995, between the Chase Manhattan Bank, as Agent, and Chemical Bank, as agent (Exhibit M to the Revolving Credit Facility Agreement). (Exhibit 10(cc)9 to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730) 10(cc)10 - Form of Collateral Transfer of Notes, Rights and Interests, dated as of November 3, 1995, between TNP and Chemical Bank, as Administrative Agent and as Collateral Agent (Exhibit N to the Revolving Credit Facility Agreement). (Exhibit 10(cc)10 to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730) 10(cc)11 - Form of Amendment No. 1, dated as of November 3, 1995, to the Assignment and Security Agreement between TNP, and The Chase Manhattan Bank, as agent (Exhibit O to the Revolving Credit Agreement). (Exhibit 10(cc)11 to Form 10-K of TNPE and TNP for 1996, File Nos. 1-8847 and 2-9730) Power Supply Contracts 10(dd) - Contract dated May 12, 1976, between TNP and Houston Lighting & Power Company (Exhibit 5(a), File No. 2-69353). 10(dd)1 - Amendment, dated January 4, 1989, to contract between TNP and Houston Lighting & Power Company (Exhibit 10(cccc) to TNP 1988 Form 10-K). 10(ee) - Amended and Restated Agreement for Electric Service dated May 14, 1990, between TNP and Texas Utilities Electric Company (Exhibit 10(vv) to TNP 1990 Form 10-K, File No. 2-97230). 10(ee)1 - Amendment, dated April 19, 1993, to Amended and Restated Agreement for Electric Service, between TNP and Texas Utilities Electric Company (Exhibit 10(ii)1 to 1993 Form S-2, Registration Statement, File No. 33-66232). 10(ff) - Contract dated April 27, 1977, between TNP and West Texas Utilities Company, as amended (Exhibit 10(e) of Form 8 applicable to TNP 1986 Form 10-K, File No. 2-97230). 10(gg) - Contract dated April 29, 1987, between TNP and El Paso Electric Company (Exhibit 10(f) of Form 8 applicable to TNP 1986 Form 10-K, File No. 2-97230). 10(hh) - Amended and Restated Contract for Electric Service, dated April 29, 1988, between TNP and Public Service Company of New Mexico (Exhibit 10(zz)3 to Amendment No. 1 to File No. 33-41903). 10(ii) - Contract dated December 8, 1981, between TNP and SPS as amended (Exhibit 10(h) of Form 8 applicable to TNP 1986 Form 10-K, File No. 2-97230). 10(ii)1 - Amendment, dated December 12, 1988, to contract between TNP and SPS (Exhibit 10(llll) to TNP 1988 Form 10-K, File No. 2-97230). 10(ii)2 - Amendment, dated December 12, 1990, to contract between TNP and SPS (Exhibit 19(t) to TNP 1990 Form 10-K, File No. 2-97230). 10(jj) - Contract dated August 31, 1983, between TNP and Capitol Cogeneration Company, Ltd. (Exhibit 10(i) of Form 8 applicable to TNP 1986 Form 10-K, File No. 2-97230). 10(jj)1 - Agreement Substituting a Party, dated May 3, 1988, among Capitol Cogeneration Company, Ltd., Clear Lake Cogeneration Limited Partnership and TNP (Exhibit 10(nnnn) to TNP 1988 Form 10-K, File No. 2-97230). 10(jj)2 - Letter Agreements, dated May 30, 1990, and August 28, 1991, between Clear Lake Cogeneration Limited Partnership and TNP (Exhibit 10(oo)2 to TNP 1992 Form 10-K, File No. 2-97230). 10(jj)3 - Notice of Extension Letter, dated August 31, 1992, between Clear Lake Cogeneration Limited Partnership and TNP (Exhibit 10(oo)3 to TNP 1992 Form 10-K, File No. 2-97230). 10(jj)4 - Scheduling Agreement, dated September 15, 1992, between Clear Lake Cogeneration Limited Partnership and TNP (Exhibit 10(oo)4 to TNP 1992 Form 10-K, File No. 2-97230). 10(kk) - Interconnection Agreement between TNP and Plains Electric Generation and Transmission Cooperative, Inc. dated July 19, 1984 (Exhibit 10(j) of Form 8 applicable to TNP 1986 Form 10-K, File No. 2-97230). 10(ll) - Interchange Agreement between TNP and El Paso Electric Company dated April 29, 1987 (Exhibit 10(l) of Form 8 applicable to TNP 1986 Form 10-K, File No. 2-97230). 10(mm) - Amendment No. 1, dated November 21, 1994, to Interchange Agreement between TNP and El Paso Electric Company (Exhibit 10(nn)1 to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230). 10(nn) - DC Terminal Participation Agreement between TNP and El Paso Electric Company dated December 8, 1981 as amended (Exhibit 10(m) of Form 8 applicable to TNP 1986 Form 10-K, File No. 2-97230). 10(oo) - 1996 Firm Capacity & Energy Sale Agreement between TNP and TEP dated, as of January 1, 1996 (Exhibit 10(pp) to joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230). *10(pp) - Agreement for Purchase and Sale of Energy effective as of May 1, 1996 among TNP, Amoco Chemical Company and Amoco Oil Company. *10(qq) - Agreement dated December 30, 1994 between TNP and Union Carbide Corporation ("UCC") for Purchase of Capacity and Energy from UCC. Management Contracts 10(rr) - Form of TNP Executive Agreement for Severance Compensation Upon Change in Control and schedule of substantially identical agreements. (Exhibit 10(qq) to TNP and TNPE Form 10-K for 1996, File Nos. 1-8847 and 2-97230) 10(ss) - Agreement between Kevern Joyce and TNPE and TNP, executed March 25, 1994 (Exhibit 10(tt) to TNPE and TNP 1994 Form 10-Q, File Nos. 1-8847 and 2-97230). *10(tt) - Form of TNPE Incentive Compensation Award Agreement and schedule of substantially identical agreements. *21 - Subsidiaries of the Registrants. EX-21 2 SUBSIDIARIES OF THE REGISTRANTS Exhibit 21 Name State of Incorporation TNPE Texas-New Mexico Power Company Texas Facility Works, Inc. Texas TNP Operating Company Texas TNP Texas Generating Company Texas Texas Generating Company II Texas EX-23 3 TNP ENTERPRISES, INC. AND SUBSIDIARIES Exhibit 23 Independent Auditors' Consent The Board of Directors TNP Enterprises, Inc.: We consent to incorporation by reference in the Registration Statements (Nos. 2-93266 and 333-17835) on Form S-3 and in the Registration Statements (Nos. 2-93265 and 33-58897) on Form S-8 of TNP Enterprises, Inc. of our report dated January 30, 1997, relating to the consolidated balance sheets and statements of capitalization of TNP Enterprises, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income (loss), common shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996, which report appears in the December 31, 1996, annual report on Form 10-K of TNP Enterprises, Inc. Our report refers to a change in the method of accounting for operating revenues in 1995. KPMG Peat Marwick LLP Fort Worth, Texas March 6, 1997 EX-10 4 TEXAS-NEW MEXICO POWER COMPANY TERMS AND CONDITIONS FOR PURCHASE OF CAPACITY AND ENERGY FROM UNION CARBIDE CORPORATION DECEMBER 30, 1994 TABLE OF CONTENTS I. RECITALS 04 II. DEFINITIONS 04 III. SALE AND PURCHASE OF ENERGY AND CAPACITY 09 IV. STATUTORY OR REGULATORY CHANGES 10 V. PRE-OPERATION PERIOD 14 VI. EFFECTIVE DATE, TERM AND TERMINATION 18 Vii. DEFAULT 20 Viii. REPRESENTATIONS, WARRANTIES AND AGREEMENT OF THE PARTIES 20 IX. CONTROL AND OPERATION OF QUALIFYING X. INTERCONNECTION AND SPECIAL FACILITIES 26 XI. METERING 29 XII. PAYMENT AND BILLING 31 XIII. INSURANCE 33 XIV. LIABILITY, NONCOMPLIANCE AND GUARANTEES 34 XV. TAXES 36 XVI. CHOICE OF LAW 36 XVII. MISCELLANEOUS PROVISIONS 37 XVIII. NOTICES 39 XIX. STANDBY POWER 39 XX. FORCE MAJEURE 41 XXI. ENTIRETY 43 XXII. AMENDMENTS 44 XXIII. COUNTERPARTS 44 XXIV. REMEDIES CUMULATIVE AND CONCURRENT 44 XXV. SIGNATURE CLAUSE 45 APPENDICES Appendix A Interconnection Cost ..........................................Study Appendix B One Line Diagram Appendix C Safety Requirements Appendix D Operating Agreement PURCHASE AGREEMENT Union Carbide Corporation ("UCC") and Texas-New Mexico Power Company ("TNP") agree as follows: I. RECITAL 1.1 This Agreement describes the terms, conditions and prices applicable to Energy and Capacity sold and delivered by UCC to TNP from the Qualifying Facility, as provided for by the PUCT, the FERC and PURPA. 1.2 UCC desires to construct, own, operate and control a generation facility that meets the qualifying facility requirements established by the FERC rules (18 C.F.R. 292 et seq.) implementing PURPA, and desires to generate electric energy and sell energy and capacity produced by the Facility to TNP. 1.3 TNP agrees to purchase Energy delivered and Capacity made available from UCC's Qualifying Facility to TNP subject to the terms of this Agreement. II. DEFINITIONS 2.1 "Agreement" - This document, including any appendices attached hereto, as may be amended from time to time. 2.2 "Capacity Factor" - The ratio, expressed as a percentage, of the (i) total amount of Energy up to Contract Capacity that UCC was able to deliver to TNP at the Point of Delivery during a calendar year and divided by (ii) the number of clock hours for such period multiplied by Contract Capacity. 2.3 "Commercial Operations" - The period of time commencing on the first day following the date on which TNP received written notice from UCC that all start-up and testing operations are complete and the Facility is able to operate at or above Contract Capacity and continuing until termination of this Agreement, provided however, if Commercial Operations commence on a day other than the first day of a calendar month, the compensation provisions and delivery requirements hereunder shall be adjusted by mutual agreement of the parties. 2.4 "Contract Capacity" or "Capacity" - The electrical capacity indicated in Section 3.1 which UCC shall deliver and TNP shall receive in accordance with the terms of this Agreement. 2.5 "Emergency" - A condition or situation which in the sole judgment of either TNP, SWPP or ERCOT affects or will affect TNP's ability, or the ability of any member of ERCOT, SWPP, or any other applicable groups, to maintain safe, adequate and continuous electric service. 2.6 "Energy" - The electrical energy, expressed in kilowatt-hours, indicated in Section 3.1 which UCC's Qualifying Facility shall deliver and TNP shall receive in accordance with the terms of this Agreement. 2.7 "ERCOT" - The Electric Reliability Council of Texas, including any successor thereto and subdivision thereof. 2.8 "FERC" - The Federal Energy Regulatory commission or any successor thereto. 2.9 "Forced outage" - Any outage that fully or partially curtails the electric output of the Facility, other than an outage caused by a force majeure event as defined in Section XX or a Scheduled Maintenance. 2.10 "Heat-Rate" - The number of BTU's required to produce one (1) kilowatt-hour of Energy, determined in accordance with standard practice in the utility industry. 2.11 "Interconnection Costs" - Reasonable costs of connection, switching, metering, transmission, distribution, safety provisions, engineering, administrative costs and taxes incurred by TNP as described in Exhibit A directly related to the installation of the physical facilities necessary to permit interconnected operations with UCC's Qualifying Facility, to the extent that such costs are in excess of the corresponding costs that TNP would have incurred if it had not engaged in interconnected operations with the Qualifying Facility, but instead generated an equivalent amount of capacity and energy itself or purchased an equivalent amount of capacity and energy from other sources. 2.12 "Interconnection Facilities" All machinery, equipment, and fixtures required to be installed or retained in service solely to interconnect and deliver capacity and Energy from UCC's Qualifying Facility to TNP's electrical system, including, but not limited to, connection, transformation, switching, metering, relaying, line and safety equipment and shall include all necessary additions to, and/or reinforcements of TNP'S system as described in Exhibit A attached hereto and incorporated herein by reference. 2.13 "Internal Usage Energy", or "Internal Usage Capacity" - the energy or capacity that UCC is purchasing from TNP under the Power Sales Agreement. 2.14 "KW" or "kw" - One Kilowatt (1000 watts) of electricity. 2.15 "KWH" or "kwh" - One kilowatt-hour of electricity. 2.16 "MWH" or ""mwh" - One thousand kilowatt-hours of electricity. 2.17 "Off-Peak Billing Month" - Any calendar month without On Peak Hours. 2.18 "Off-Peak Hours" - All hours of the year not designated as On Peak Hours. 2.19 "On Peak Billing Month" Any calendar month with On Peak Hours. 2.20 "On Peak Hours - From 9 a.m. to 10 p.m. -each Monday through Friday starting on May 15 and continuing through October 15 each year. Labor Day and Independence Day (July 4) shall not be considered on Peak. If July 4th occurs on Sunday then the following Monday shall not be considered On Peak. 2.21 "Point of Delivery" or "POD" - The geographical and physical location as shown on the attached Appendix B at which the Qualifying Facility and the Interconnection Facilities are to be located. UCC will furnish, install, own, and maintain the UCC-TNP tie lines including conductors, dead-ends, hardware and connectors up to the TNP furnished ball and socket dead-end insulators and the jaw end connector pads of TNP's line disconnect switches. TNP will furnish, install, own, and maintain the arrester leads that connect to the TNP end of the UCC tie lines. 2.22 "PUCT" - The Public Utility Commission of Texas or any successor thereto. 2.23 "PURA" Public Utility Act as amended as of September 1, 1987. 2.24 "PURPA" Public Utility Regulatory Policies Act of 1978, as amended. 2.25 "Qualifying Facility" or "Facility" or "Q.F." UCC's Texas City cogeneration facility which meets the criteria for a qualifying facility as presently set forth in Subpart B of Paragraph 292, Subchapter k, Chapter 1, Title 18 of the Code of Federal Regulations. 2.26 "Reserve Margin" - The difference between (i) TNP's net generating station capability, plus firm capability obtained from third parties by contract, including, without limitation, firm power contracts with utilities, small power producers, other qualifying facilities, and the Qualifying Facility and (ii) TNP's net peak load requirement. 2.27 "Power Sales Agreement" - The Agreement dated December 30, 1994 whereby UCC agrees to purchase its electrical energy requirements for its facilities located at or near Texas City, Texas from TNP. 2.28 "Scheduled Maintenance" - Periodical period of time when curtailment of the electric output of the Facility is due to inspection or maintenance in accordance with an advance schedule. 2.29 "Special Facilities" All equipment and facilities other than those defined as Interconnection Facilities which are furnished by TNP and are necessary to economically, reliably and safely integrate the Qualifying Facility into TNP's electrical system. 2.30 Suspension - Suspension of the obligation of TNP to interconnect with or make power deliveries for or on behalf of UCC. 2.31 "SWPP" - The Southwest Power Pool, including any successor thereto and subdivision thereof. 2.32 Termination - Termination of this Agreement and the rights and obligations of the parties under this Agreement, except as otherwise provided for in this Agreement. III. SALE AND PURCHASE OF ENERGY AND CAPACITY 3.1 UCC will supply and sell and TNP will take and pay for (i) Energy and (ii) Contract Capacity in the amount of 60 MW, subject to the following: 1. UCC shall not be required to furnish Energy in excess of 70 MW, except as otherwise provided for herein; and 2. TNP shall not be required to take or pay for Contract Capacity or Energy it refuses to take pursuant to Section IX of this Agreement, and 3. Without the prior authorization of TNP, UCC shall not supply, nor be entitled to compen-sationfor deliveries of Energy at an instantaneous rate in excess of 70 MW. 4. UCC will endeavor to maintain a Capacity Factor greater than or equal to 90%. If the Capacity Factor falls below 85% UCC and TNP will renegotiate in good faith the Agreement. 5. Either party has the right to change the Contract Capacity if both parties agree to the change. This will be negotiated in good faith between the Parties. 3.2. UCC shall at any time, upon TNP's request, increase deliveries of Energy up to a maximum rate of delivery equal to 70 MW except to the extent that output of the Facility is unavailable because of Forced Outage or Schedule Maintenance or that UCC would be required to operate in an inefficient manner. 3.3 UCC's supply will be three (3) phase, four, (4) wire alternating current at approximately 60 hertz and approximately 138,000 volts unless TNP specifically approves otherwise, in writing. IV. STATUTORY OR REGULATORY CHANGES 4.1 If during the term hereof statutory or regulatory requirements change (including, without limitation, legislative, administrative or judicial changes, interpretations or reinterpretations, whether involving TNP's participation or not) in such a way as to prevent TNP from accepting and paying for electric energy tendered from qualifying facilities, then TNP shall have the right, upon ninety (90) days' written notice and good faith negotiations, to reduce, limit or modify its purchases and takes of Energy delivered hereunder to the, same extent required by such change in statutory or regulatory requirements. In such event, UCC shall have no further obligation to supply or sell to TNP any energy at a rate in excess of Contract Capacity to the same extent as TNP shall have reduced, limited, modified or eliminated its purchase and take obligations hereunder, and UCC may at its option-,i supply or sell all- or any part of such energy to any lawful purchaser to the full extent permitted by applicable law, or may upon thirty (30) days written notice to TNP terminate this Agreement without further obligations or liability. 4.2 Nothing in this Agreement shall limit UCC or TNP's right to petition in good faith FERC, PUCT, or other agency of competent jurisdiction for such rules, orders or other relief as such agency may issue with respect to TNP's right to reduce or otherwise dispatch Energy deliveries hereunder, and any required changes lawfully ordered by such agency shall apply to this Agreement. Prior to initiating a petition under this Section, the petitioner shall give the other party advance written notice of its intent, and shall provide the other party a copy of its filing when made with the appropriate regulatory authority. 4.3 This Agreement has been entered into in accordance with relevant rules of the PUCT currently in force; however, if any federal, state or municipal government or regulatory authority, including without limitation the PUCT, should for any reason enter an order modifying its rule or TNP's tariff, or take any action whatsoever, having the effect of disallowing TNP recovery in its rates, fuel cost recovery factor, purchased power cost recovery factor, or otherwise, of all or any portion of the cost of purchases hereunder (except where such disallowance is due to TNP's failure to seek recovery or comply with procedural requirements governing recovery of such costs) TNP may, at its option, suspend any affected portion(s) of the payment obligation hereunder pending approval of a superseding order, modified rules or tariff for TNP, or other action that would permit timely recovery of such costs. During such suspension, UCC may make any lawful disposition it elects of the Energy and Capacity for which payment has been suspended to the full extent permitted by applicable law, and TNP will transmit, at UCC's request, such Energy and Capacity to such other lawful purchaser under reasonable terms and conditions to be agreed upon by the parties in accordance with any applicable rules and regulations; except that TNP shall not be required to transmit such Energy and Capacity, if in TNP's good faith judgment, UCC's equipment and facilities are not sufficient to protect TNP's system, employees or customers from damage or injury arising out of such transmission. TNP and UCC obligate themselves to all good faith efforts necessary to expedite the establishment, if possible, of such superseding order, approval of modified rules or tariffs, or other action so as to allow the earliest possible resumption of full payment, or failing that, adjusted payments hereunder should any such government or regulatory action denying recovery hereunder become final and unappealable: 1. UCC shall indemnify (TNP) including interest at the rate announced from time to time by Texas Commerce Bank N.A. at its prime rate to the extent of any prior payments for Energy and/or Capacity made to UCC for energy in excess of UCC's Internal Usage, the recovery of which is prevented by such government or regulatory action; and 2. TNP may, at its option, upon at least fourteen (14) days prior written notice to UCC, and within thirty (30) days following the date on which such government or regulatory action hereunder becomes final and unappealable, (i) reduce UCC's deliveries hereunder to a level that will allow TNP complete recovery of the cost thereof, or (ii) terminate this Agreement in whole or in part. TNP's option to terminate does not relieve UCC of the responsibility to repay TNP pursuant to paragraph 4.3.1. This section 4.3 shall survive termination of this Agreement for a period of two (2) years after the effective day of termination. 4.4 TNP and UCC recognize that TNP's decision to purchase Contract Capacity hereunder is based on and limited by TNP's electric system capacity requirements and capacity expansion plan(s), as approved by the PUCT pursuant to PUCT Substantive Rule 23.66 and as may from time to time be reviewed by the PUCT in any proceeding. If the PUCT should determine in any proceeding that T Is available capacity sources exceed its capacity requirements, and on that basis by final order reduces TNP's recoverable cost of service (which includes the recovery of capacity purchases hereunder), then TNP may reduce the Contract Capacity hereunder to the extent such excess Capacity results from purchases made hereunder by an amount sufficient to enable TNP to achieve a Reserve Margin which the PUCT has determined to be reasonable and prudent. 4.5 TNP and UCC recognize that TNP's decision to purchase energy hereunder is based on, and limited by, TNP's electric system energy requirements. If the PUCT determines in any proceeding that TNP's available energy sources exceed its energy requirements and on that basis, by final order, reduces TNP's recoverable cost of service, then TNP may reduce the Energy purchased hereunder so that TNP's energy purchases do not exceed its energy requirements. 4.6 In the event that, under section 4.4 or 4.5 of this Agreement, reductions to the Contract Capacity or Energy requirements hereunder are made, then in such event or events UCC may upon thirty (30) days prior written notice to TNP, and within thirty (30) days following the date on which such regulatory action hereunder becomes final and unappealable terminate this Agreement without further obligation or liability, or renegotiate this Agreement with TNP to address such event(s). V. PRE-OPERATION PERIOD 5.1 UCC shall make available to TNP site(s) to be used for the Interconnection Facilities and Special Facilities. The site(s) with easements shall be made available to TNP within three (3) months of signing this Agreement. 5.2 UCC shall, at its sole expense, acquire and maintain in effect all permits and approvals, and complete or have completed all environmental impact studies necessary for the construction, operation and maintenance of the Qualifying Facility. UCC agrees to cooperate with TNP in the applications for permits required by TNP as contemplated herein. 5.3 UCC agrees to grant, at no expense to TNP, all easements and rights-of-way necessary for TNP to install, operate, maintain, replace, and remove TNP's metering and Interconnection Facilities, including, but not limited to, adequate and continuous access rights to property owned or leased by UCC. TNP is limited to accessing UCC's property for purposes of construction, inspections, improvements and repairs. TNP agrees to abide by UCC's Health Safety and Environmental requirements while on UCC's plant site. 5.4 UCC agrees to execute and deliver to TNP all documents TNP shall deem necessary to enable TNP to obtain and record such easements and rights-of-way. 5.5 It is the responsibility of UCC to obtain all easements and access to land used for Interconnection Facilities. TNP is responsible for obtaining all transmission line easements and rights-of-way. 5.6 UCC hereby grants to TNP all necessary licenses, rights-of-way and easements, including adequate and continuing access rights on property of UCC to install, operate, maintain, replace and/or remove the Special Facilities. UCC agrees to execute such other grants, deeds or documents as TNP may require to enable it to record such rights-of-way and easements, in a form reasonably satisfactory to TNP, for the construction, operation, maintenance, replacement or removal of TNP's equipment upon such property. TNP shall endeavor to acquire other necessary licenses, rights-of-way and easements for the Special Facilities on reasonable terms in accordance with its usual practices. 5.7 UCC shall submit for TNP's review its construction, start-up and testing schedule for the Facility within thirty (30) calendar days after execution of this Agreement or thirty (30) days after completion by TNP of an interconnection study, whichever is later. UCC shall thereafter submit periodic progress reports in a form reasonably satisfactory to TNP and notify TNP of any changes to such schedules in a timely manner. TNP shall have the right to monitor the construction, start-up and testing of the Facility and UCC shall comply with all reasonable requests of TNP resulting therefrom. 5.8 TNP shall perform an interconnection study at TNP's cost within a reasonable period of time after receipt of written application from UCC and under reasonable terms and conditions agreed upon by the parties. The interconnection study shall determine the Special Facilities and Interconnection Facilities and the estimated costs associated therewith. The parties shall enter into mutually satisfactory terms under which TNP shall construct Special Facilities in a timely manner, subject, however, to events beyond TNP's reasonable control, including, without limitation, time constraints incident to events of force majeure, in order that such Special Facilities will be available as of the date identified by UCC for start of deliveries hereunder or as soon thereafter as such Special Facilities can reasonably be constructed and readied for safe and reliable operation to receive the Energy and Capacity UCC is to deliver hereunder. TNP shall submit for UCC's review its construction, start-up and testing schedule for the Interconnection Facilities and Special Facilities within thirty (30) calendar days after execution of this Agreement or thirty (30) days after completion by TNP of an interconnection study, whichever is later. TNP shall thereafter submit periodic progress reports to UCC. 5.9 UCC shall notify TNP in writing prior to (i) the initial energizing at the Point of Delivery, (ii) the initial parallel operation with TNP's system, and (iii) the initial testing of UCC's Facility . TNP and UCC shall agree on the dates and times of the foregoing and TNP shall have the right to have a representative present at such time. 5.10 UCC may conduct such tests of the Facility from time to time, prior to Commercial Operations, as UCC in its discretion may deem appropriate. Subject to the limitations expressed in Section 5.10, if UCC desires TNP to take energy generated by the Facility during any proposed test, UCC shall notify TNP in writing within a reasonable time not less than three (3) days prior to such test. Such notice shall, at a minimum, include a description of the test, approximate time and duration of the test and approximate amount of energy intended to be delivered to TNP as a result of such test. For energy delivered during start-up and testing, TNP shall pay UCC at the rate, expressed in dollars per kilowatt-hour, as calculated based upon TNP's decremental cost of energy purchased, that is avoided by TNP due to the Qualifying Facility's delivery. 5.11 UCC shall determine when the Facility is ready to commence Commercial Operations; provided however, TNP shall not be required to accept or pay for capacity and energy deliveries, including, without limitation, capacity and energy deliveries during startup and testing of UCC's generating unit(s), if in TNP's good faith judgment the Interconnection Facilities and/or Special Facilities are not sufficiently completed to accept or meter such deliveries or protect the public, TNP's employees, customers, or electrical system from damage or injury arising out of or in connection with the operation of uccls generating unit(s). TNP's agreement to accept capacity and/or energy shall not be construed as confirming or endorsing the design, construction, or operation of UCC's facility, or as a warranty of its safety, durability, or reliability. In the event TNP determines that the Interconnection Facilities are not sufficient to accept or meter capacity and energy deliveries, TNP shall give UCC prompt written notice of such fact. After such notification, TNP shall promptly take any actions it deems necessary to remedy any problem with the Interconnection Facilities which TNP installed or maintains. 5.12 UCC shall provide TNP seven (7) days prior written notice that the Facility is ready to commence Commercial operations. The delivery requirements and the compensation provisions hereunder shall take effect on the first day of Commercial operation; provided, however, if commercial operations commence on a day other than the first day of a calendar month, the compensation provisions and delivery requirements hereunder shall be adjusted by mutual agreement of the parties, to account for the partial month of delivery. VI. EFFECTIVE DATE, TERM AND TERMINATION 6.1 This Agreement is effective as of December 30, 1994, and shall continue in effect for an initial term of ten (10) years from the commencement of Commercial Operations. 6.2 TNP reserves the right to i terminate this agreement, without prejudice to any other power, right or remedy it may have, if UCC should: 1. Fail to deliver any Energy for 12 consecutive months after Commercial Operations have begun provided that such failure to deliver is not due to an act of or omission of TNP; or, 2. Fail to commence construction of the Facility PAGE 19 by March 1, 1995, abandon construction of the Facility at any time after construction commences, or fail to commence Commercial Operations by May 15, 1996. 3. Fail to maintain a Capacity Factor of 85% as addressed in Section III, provided that such failure is not due to an act or omission of TNP, except when TNP has arranged and provided standby power, or TNP could make up the capacity loss from its available resources; or, TNP and UCC negotiate a new Capacity Factor as addressed in Section III; or, 4. Fail to perform its obligations contained in Section XII. 6.3 Should UCC default on this Agreement pursuant to Section VII or cancel this Agreement prior to its expiration or TNP terminates this Agreement pursuant to Section 6.2 above, then UCC will reimburse TNP for all Interconnection Costs and Special Facilities Costs incurred to date that have not been recovered to date by TNP. This will include any enhancements or modifications made to the Interconnection and Special Facilities. If any of the aforementioned items occur, the Power Sales Agreement is also nullified at that time. 6.4 Should UCC cancel the Power Sales Agreement, or UCC no longer purchases power from TNP under the Power Sales Agreement, this Agreement is nullified. As such, UCC will reimburse TNP for all Interconnection Costs and Special Facilities costs incurred to date that have not been recovered to date by TNP. This will include any enhancements or modifications made to the Interconnection and/or Special Facilities. 6.5 TNP will remove at its expense all Interconnection Facilities and Special Facilities on UCC's land within one (1) year of the expiration or cancellation of this Agreement unless agreed otherwise. VII. DEFAULT 7.1 Should either party materially default in the performance of its obligations hereunder, or should UCC default in payment to TNP of any applicable tariff schedules, the nondefaulting party may suspend performance under this Agreement upon thirty (30) days written notice; and if the default continues for more than ninety (90) days after such written notice by the non-defaulting party, then the non-defaulting party may terminate this Agreement. No termination shall occur, however, if the defaulting party, at the end of said ninety (90) day period presents evidence to I the .1 non-defaulting party that satisfactory measures have been taken or are being taken to cure the default within the next one hundred and eighty (180) days. Section VI above further addresses termination by either party. VIII. REPRESENTATION. WARRANTIES AND AGREEMENTS 8.1 The Facility shall be operated and maintained in accordance with TNP's Specification of Qualifying Facility Interconnection and Safety Requirements attached hereto as Appendix C, and good and generally accepted utility standards with respect to synchronizing, voltage and reactive power control. 8.2 UCC shall operate the Facility at the power factors and/or voltage levels reasonably prescribed by TNP's system dispatcher or designated representative, provided such factors or levels are within the Facility's design limitations. Without limiting the generality of the foregoing, the Facility shall generate such reactive power as may be necessary to maintain reactive area support. 8.3 UCC shall during an Emergency supply such Capacity and Energy as the Facility is able to generate and TNP is able to receive. If UCC has previously scheduled an outage coincident with an Emergency, UCC shall make all reasonable efforts to reschedule the outage. 8.4 Each party shall at all times conform to all applicable laws, ordinances, rules and regulations applicable to it. Each party shall give all required notices, shall procure and maintain all necessary governmental permits, licenses and inspections necessary for its performance of this Agreement, and shall pay all charges and fees in-connection therewith. 8.5 UCC shall keep TNP's dispatcher informed, in the manner prescribed in the Operating Agreement, attached hereto as Appendix D, as to the daily operating schedule and generation capability of its Facility, including, without limitation, Forced Outage. 8.6 UCC shall, within thirty (30) days following execution of this Agreement, submit a maintenance, schedule for the first year of the Facility's Commercial operations. Thereafter, UCC shall submit semi-annual maintenance schedules on July 1 and January 1. The January 1 schedule shall cover the period July 1 through December 31 of that same year, the July 1 schedule shall cover the period January 1 through June 30 of the following year. UCC shall furnish TNP with reasonable advance notice of any change in the schedule. TNP's ability to recognize and accept such notice is contingent upon any necessary scheduled backup power arrangements. TNP shall provide UCC reasonable advance notice of significant plans with respect to its system that may affect interconnection with the Facility. 8.7 For any planned outages, UCC must submit written notice to TNP at least 50 days prior to the date UCC intends to begin the outage. 8.8 UCC shall submit an annual forecast of the electric output which UCC expects to sell to TNP from the Facility. Such forecast shall be submitted to TNP within one (1) month after execution of this Agreement and thereafter annually by April 1 during the term of this Agreement. Each annual forecast shall express the anticipated electric sales on a monthly basis for the first two (2 years of the forecast and on an annual basis thereafter. 8.9 UCC shall maintain an accurate and up-to-date operating log at the Facility with records of: real and reactive power production for each clock hour, changes in operating status, scheduled and Forced Outages and any unusual conditions found during inspections. TNP shall be permitted to inspect such operating log upon request and copies of such log shall be provided, if requested, within thirty (30) days of TNP's request. IX. CONTROL AND OPERATION OF QUALIFYING FACILITY; DISPATCHING 9.1 UCC shall control and operate the Facility; except that TNP shall not be obligated to purchase or receive and may require UCC to reduce Energy deliveries in excess of UCC's internal usage, and from time to time, if: (i) an Emergency condition or situation exists; or (ii) TNP reasonably determines that it is necessary to construct, install, repair, replace, remove, investigate or inspect any part of its electrical system relating to the Qualifying Facility. TNP will make a reasonable effort to notify and coordinate such reductions with UCC; except that with respect to (ii) above, TNP shall provide UCC at least forty-eight (48) hours prior notice if practical. Any reduction required of UCC's Facility hereunder shall be implemented in a manner consistent with safe operating procedures. 9.2 In addition to the rights to reduce Energy deliveries granted to TNP in the preceding Section 9.1, TNP shall not be obligated to purchase or receive and may require UCC to reduce Energy deliveries at any time from time to time, if in TNP's judgment: i) reduction of deliveries is required pursuant to Section 23.66 of the Substantive Rules of the PUCT; or ii) a reduction is necessary because of minimum loading conditions or other operational conditions on TNP's system. TNP shall furnish Qualifying Facility with reasonable notice of reductions directed under this Section 9.2. Reasonable notice of any reduction is as follows: The reduction of generation shall be based upon the requirements of TNP at the time of the requested reduction. UCC agrees to reduce output to a level specified by TNP at the time of notice in order to meet and not exceed TNP's requirements. 9.3 UCC shall employ operators or dispatchers for monitoring the Facility and for coordinating operations of the Facility with TNP's system. UCC shall ensure that operators or dispatchers (or an alternate contact if the Facility has been shut down) are on duty at all times, twenty-four (24) hours a day and seven (7) days a week. 9.4 The parties recognize that TNP is a member of ERCOT and may in the future become a member of other reliability councils or power pools, and to ensure continuous and reliable electric service, TNP operates its system in accordance with the operating criteria and guidelines of ERCOT or other reliability councils or their equivalent where applicable. 9.5 The load-break disconnect switch(es) provided by UCC may be secured by TNP and operated by TNP without prior notice to UCC in the event of either of the following circumstances provided that TNP uses its best efforts to notify UCC in advance: a) An Emergency that requires immediate disconnection. b) An immediate hazard to life or property caused by UCC. TNP will notify UCC of its intent to open the switch if: a) The operation of UCC's Facility is interfering with electrical service to other TNP customers or interfering with, the operation of TNP-owned equipment. UCC's Facility will be reconnected by TNP to TNP's electrical system when UCC makes the necessary changes so that the Facility will no longer be interfering with electrical service to other TNP customers. UCC will cooperate with TNP in any disconnection procedure that is necessary to investigate and determine the cause of problems on TNP's system. b) It is necessary to assure the safety of TNP personnel. c) Suspension of service is required under order of the PUCT. 9.6 The notification required above shall be given to UCC's Facility plant manager or to any other employee designated in writing by the plant manager. The Facility plant manager is hereby designated to be: Colleen Robisheaux P.O. Box 471 3301 5th Avenue South Texas City, Texas 77592-0471 The name, title or address of the Facility plant manager designated in this Section 9.6 may be changed by written notification from UCC to TNP in accordance with the provisions of Section XVIII. 9.7 Without limiting the generality of the foregoing, TNP's dispatcher may require UCC's Facility operator or dispatcher to raise or lower production of Energy generated by the Facility to maintain safe and reliable load levels and voltages on TNP's transmission system; provided, however, any changes in the level of electric output required of Facility hereunder shall be implemented in a manner consistent with safe operating procedures and within the Facility's design limitations. 9.8 UCC shall operate the Facility with its speed governors and voltage regulators in service whenever the Facility is connected to or operated in parallel with TNP's electric system. UCC shall not cause its Facility to automatically or instantaneously disconnect from TNP's system or trip any generating unit comprising the Facility on account of abnormal frequency conditions unless the frequency of TNP's system is below that stated in the Operating Agreement provided in Appendix D. 9.9 UCC shall notify TNP prior to making any modifications to the interconnection between UCC's Facility and TNP. UCC must receive approval from TNP, which approval shall not be unreasonably withheld, prior to proceeding with such modifications. UCC shall permit TNP at any time to install or modify any equipment, facility or apparatus which is reasonably necessary to protect the safety of TNP employees or to assure the accuracy of TNP metering equipment, the reasonable cost of which shall be paid for by TNP. 9.10 UCC agrees to the terms and conditions detailed in Appendix C, the Specification of Qualifying Facility Interconnection and Safety Requirements. X. INTERCONNECTION AND SPECIAL FACILITIES 10. 1 Following execution of this Agreement and receipt by TNP of necessary rights-of-way and easements, TNP shall design, construct, and install the Interconnection Facilities and Special Facilities at TNP's expense with a target completion date of twelve (12) months after the signing of this Agreement, and no later than May 1, 1996 as long as this Agreement has been signed by May 1, 1995. TNP will operate, and maintain all Interconnection Facilities in accordance with TNP's Specification of Qualifying Facility Interconnection and Safety Requirements included as Exhibit C attached hereto, and perform all work necessary to economically, reliably and safely connect Qualifying Facility to the Point of Delivery. The One-Line Diagram, provided as Appendix B attached hereto, details the Interconnection facilities and the Point of Delivery. An estimate of all costs to construct the Interconnection Facilities is included in the attached Appendix A. TNP shall own and maintain all Interconnection Facilities. 10.2 UCC shall comply with all reasonable TNP requirements as to: (i) the design, installation, purchase, operation and maintenance of all equipment necessary to connect UCC's Qualifying Facility to TNP's system and (ii) the protection of TNP's system, employees and customers from damage or injury arising out of or in connection with operation of Qualifying Facility. 10.3 TNP shall have the right to review the specifications for the Facility, including, without limitation, improvements, additions, modifications, replacements or other changes to equipment, electrical drawings and one-line diagrams, provided however that for the purpose of this Section 10.3 only, the definition of Facility shall exclude equipment that consumes process steam or thermal energy produced by the Facility and/or equipment that produces fuel resources for the facility. TNP's review of UCC's specifications, drawings and one-line diagrams shall not be construed as confirming or endorsing the design of such Facilities, or as a warranty of the safety, durability or reliability thereof. 10.4 TNP shall evaluate, design, install, own, operate and maintain all Special Facilities and perform all work necessary to economically, reliably and safely connect TNP's existing system to UCC's Facility at the Point of Delivery in order to accept and meter the electrical output of the Qualifying Facility sold hereunder. 10.5 UCC shall furnish, install and maintain clearly labeled load-break disconnect switch(es) approved by TNP in a visible, outside, readily-accessible location for the purpose of isolating the Qualifying Facility's generation from the TNP system. Such disconnect switch(es) must be of a securable type and capable of disconnecting the Qualifying Facility's generator from TNP's electrical system without interruption to other types of services provided to the QF by TNP. UCC shall provide a drawing as part of Appendix B showing the exact location of the disconnect switch(es). Ingress and egress to the disconnect switch(es) shall be provided to TNP personnel at all times by UCC. 10.6 TNP or its designated representative shall have the right to monitor the construction, start-up and testing of the equipment related to the generation, control and transmission of Capacity and Energy by the Qualifying Facility at such times as may be reasonably agreed upon by the parties, and UCC shall comply with all reasonable requests of TNP relating thereto. TNP's review and monitoring shall not be construed as confirming or endorsing the scheduling, construction, start-up or testing of UCC's equipment, or as a warranty of its safety, durability, or reliability. 10.7 The parties recognize that from time to time certain improvements, additions or other changes in the Interconnection Facilities and/or Special Facilities may be required by TNP for the economical, reliable and safe operation of the Qualifying Facility in parallel with TNP's system. Such changes shall be made at TNP's expense. 10.8 The parties recognize that from time to time certain modifications, additions, replacements or other changes ("System Modifications") in TNP's transmission and distribution system may be necessary to economically, reliably and safely integrate UCC's Qualifying Facility and the qualifying facilities of other cogenerators into TNP's system. These modifications, additions, and replacements shall be made at TNP's expense. if any System Modification is required to integrate the Qualifying Facility, TNP shall design, install, own, operate and maintain such System Modifications. XI. METERING 11.1 UCC shall supply at its own expense, a suitable location acceptable to TNP for all meters and associated equipment. 11.2 TNP shall maintain at its expense all necessary meters and associated equipment (including, without limitation, generation metering and telemetering equipment) utilized for measuring Energy deliveries and for determining TNP's payments to UCC. 11.3 UCC shall permit TNP employees to enter upon its premises at any reasonable time for the purpose of inspecting and/or testing or witnessing the testing of the accuracy of the metering equipment. TNP agrees to abide by UCC's Health Safety and Environmental requirements while on UCC's plant site. 11.4 TNP's meters and associated current transformers installed pursuant to this Agreement shall be tested by TNP, at TNP's expense, at least once each year and at any reasonable time upon requests by either party, at TNP's expense. UCC shall be afforded an opportunity to be present during all testing and shall be furnished 'all testing results on a timely basis if requested. 11.5 If the meter test(s) conducted under Section 11.4 above results in an inaccuracy in measurement of Energy in excess of one percent (1%), any affected meter(s) shall be recalibrated to within 1% accuracy and payments hereunder shall be retroactively adjusted for (i) the actual period during which inaccurate measurements were made, if the period can be determined, or if not, (ii) the period immediately preceding the test of the meter equal to one-half the time from the date of the last previous test of the meter, but not exceeding six (6) months. 11.6 If, for any reason, any meter(s), or metering equipment is out of service or out of repair, so that the amount of Energy delivered cannot be ascertained or computed from the readings thereof, the Energy delivered during the period of such outage shall be estimated and agreed upon by the parties hereto upon the basis of the best data available. XII. PAYMENT AND BILLING 12.1 Energy delivered and Capacity made available shall be calculated in accordance with the information collected by metering as defined in Section XI. 12.2 The monthly payment to UCC consists of two (2) components: Energy and Capacity. The total payment to UCC equals the sum of the two (2) components. Payment = Energy Payment + Capacity Payment = EP + CP 12.3 For each kilowatt hour of Energy delivered to TNP, TNP shall pay UCC an energy payment actually avoided. The payment is described by the following formula: EP = KWH * ER where EP = monthly energy payment KWH = the kilowatt hours delivered to TNP for a month, provided that such deliveries do not exceed the amounts scheduled by TNP or amounts required by TNP. ER = 99% of the energy cost that TNP actually avoided purchasing from TNP's energy supplier during the billing period as a result of energy deliveries made hereunder. This is calculated in $/KWH to a precision of six (6) decimal places using conventional rounding, 12.4 TNP shall pay UCC a Capacity Payment as described by the following formula: CP = (CC * $5.75/KW) + (AC * ADR) where CP = Monthly Capacity Payment CC = Contract Capacity AC = Avoided Capacity is the monthly capacity that TNP actually avoids establishing on a wholesale tariff from TNP's supplier serving the Texas City area. This kW amount is determined by taking the total capacity load of the Qualifying Facility at the time of TNP's peak on the wholesale supplier and subtracting out the Internal Usage Capacity at that time. ADR = (WCR * 95%) where ADR = Avoided Demand Rate WCR = Wholesale Capacity Rate is the rate expressed in $/kW (kVa) charged by the wholesale supplier in the Texas city area. 12.5 TNP shall read UCC's meter monthly at such time as the Parties shall agree TNP shall send a statement and make a payment on or before the 20th day after the meter is read subject to the condition that UCC shall make its payment to TNP for electrical service during the corresponding period on the same day as TNP's payment to UCC hereunder. The billing statement will show the hourly kilowatt-hours of Energy delivered at the Point of Delivery, the total kilowatt-hours delivered, the duration of the billing period (in clock hours), the Contract Capacity, the monthly capacity, UCC's Internal Capacity Usage, the total amount due UCC and, upon request, any other data reasonably pertinent to the calculation of the Energy Payment and Capacity Payment. 12.6 Any payments required or authorized herein shall be deemed given when made in writing and delivered or mailed with sufficient postage to the following addresses of the parties: (a) If to UCC: (i) to - Union Carbide Corporation Sammie Lehman 3301 5th Avenue South P.O. Box 471 Texas City, Texas 77592-0471 (b) If to TNP: (i) to - Texas-New Mexico Power Company Manager - Customer Accounting 4100 International Plaza Fort Worth, TX 76109 OR P.O. Box 2943 Fort Worth, TX 76113 12.7 Any service that UCC requests from TNP will be provided to UCC according to the applicable TNP tariff on file with the PUCT. XIII. INSURANCE 13.1 During the term of this Agreement, UCC shall procure, pay premiums for and maintain in full force and effect the insurance coverage's described below for its own benefit: 1. (a) Worker's Compensation Insurance as required by the laws of the State of Texas, and (b) Employer's Liability with limits of not less than $100,000 each accident, both to include any other statutory or federal coverage if applicable; and 2. Comprehensive General Liability Insurance,, including coverage for (a) premises/operations, (b) independent contractor, (c) products and completed operation, (d) broad form contractual liability, (e) broad form property damage and, (f) explosion, collapse and underground damage exclusion deletion, all with limits of not less than $1,000,0000 each occurrence, $1,000,000 aggregate for bodily injury and with limits of not less than $500,000 each occurrence, $500,000 aggregate for property damage; and 3. Excess umbrella Liability Insurance with limits of not less than $10,000,000 each accident or occurrence and $10,000,000 annual aggregate, in excess of the underlying limits and terms as set forth in this Section 13.1. 13.2 Each insurance policy provided by UCC shall include the following: 1. At least thirty (30) days' prior written notice of cancellation or material change will be provided to TNP hereto. 2. A waiver of subrogation in favor of TNP, its affiliated entities and their officers, directors, agents, subcontractors and employees. 13.3 UCC shall provide certificates of insurance evidencing the insurance coverage's required to be maintained prior t@ execution of this Agreement. 13.4 Upon mutual agreement of the parties, not to be unreasonably withheld, UCC may provide adequate self insurance in lieu of the requirements set forth in Section 13.1 through 13.3. XIV. LIABILITY, NONCOMPLIANCE AND GUARANTEES 14.1 Neither party shall hold the other party (including its corporate affiliates, parent, subsidiaries, directors, officers, employees and agents) liable for any claims, losses, costs and expenses of any kind or character (including, without limitation, loss of earnings and attorneys' fees) on account of damage to property of TNP or UCC in any way occurring incident to, arising out of, or in connection with a party's performance under this Agreement. 14.2 TNP and UCC shall each be responsible for the safe installation, repair and condition of their respective lines and appurtenances on their respective sides of the Point of Delivery. TNP and UCC will each protect and indemnify the other (including its corporate affiliates, parent, subsidiaries, directors, officers, employees and agents) from and against any liability or loss (including reasonable expenses and attorneys I fees) because of bodily injury or property damage to a third party arising out of TNP's or UCC's respective responsibilities as stated herein; except that neither shall be obligated to indemnify the other for injury or damage (a) caused solely by the negligence of the other or, (b) caused by an employee of the party seeking indemnity, tampering with or attempting to repair or maintain any facilities of the party from whom indemnity is sought, or, (c) to the extent caused @y the concurrent negligence of the other party. 14.3 An undertaking by one party to the other party under any provision of this Agreement shall not constitute the dedication of such party's system or any portion thereof to the public or to the other party and any such undertaking shall cease upon termination of the party's obligations herein. 14.4 In performing under this Agreement, each party relative to the other, shall operate as or have the status of an independent contractor and shall not act as or be an agent, servant, or employee of the other party. 14.5 The parties shall negotiate the terms and conditions under which TNP will be provided the opportunity to acquire the Facility installation before the installation is offered to another purchaser in the event of its abandonment. 14.6 Under no circumstances shall either party, or their respective affiliates, directors, officers, employees and agents, or any of them, be liable to the other party for any indirect, special or consequential damages. 14.7 Any waiver at any time by either party of its rights with respect to a default under this Agreement, or with respect to any other matters arising in connection with this Agreement, shall not be deemed waiver with respect to any subsequent default or other matter. 14.8 This Section XIV shall survive termination of this Agreement for a period of two (2) years after the effective date of termination. XV. TAXES 15.1 All present or future federal, state, municipal or other lawful taxes applicable by reason of the sale of Energy or Contract Capacity shall be paid by UCC. XVI. CHOICE OF LAW 16.1 This Agreement shall be interpreted, construed under and governed by the laws of the State of Texas or the laws of the United States, as applicable. The parties hereby submit to the jurisdiction of courts located in, and venue is hereby stipulated in Travis County, Texas. XVII. MISCELLANEOUS PROVISIONS 17.1 Neither party shall assign this Agreement or any portion thereof without the prior written consent of the other party which consent shall not be unreasonably withheld, provided, however, such consent shall, not be required prior to an assignment to a parent, subsidiary or affiliated corporation; but provided, further that: (i) any assignee shall expressly assume assignor's obligations hereunder; (ii) no such assignment shall impair any security given by UCC hereunder; and (iii) unless expressly agreed by the other party in writing, no assignment, whether or not consented to, shall relieve the assignor of its obligations hereunder in the event its assignee fails to perform. 17.2 The failure of either party to insist in any one or more instances upon strict performance of any provisions of this Agreement, or take advantage of any of its rights hereunder, shall not be construed as a waiver of any such provisions or the relinquishment of any such right or any other right hereunder, which shall remain in full force and effect. 17.3 The headings contained in this Agreement are used solely for convenience and do not constitute a part of the agreement between the parties hereto, nor should they be used to aid in any manner in the construction of this Agreement. 17.4 Neither party is to make an announcement or release information concerning this agreement unless; (i) such announcement or release has been submitted to and approved in writing by the other party or; (ii) such information is released in order to comply with any statutes, laws, regulations, or orders issued by any authority legally empowered to compel compliance or having jurisdiction over either party to this Agreement. 17.5 Each party shall designate, by written notice to the other party, a representative who is authorized to act in its behalf in the implementation and administration of this Agreement provided that the Authorized Representative shall have no authority to modify any of the provisions of this Agreement. Either party may at any time change the designation of its Authorized Representative by written notice to the other party. 17.6 This Agreement and any amendments agreed to by both TNP and UCC hereto, shall at all times be subject to such changes or modifications as shall be ordered from time to time by any regulatory authority or court having jurisdiction to require such changes or modification including, without limitation, all successor tariffs and schedules to the tariffs and schedules which apply to this Agreement at the time of its execution. 17.7 This Agreement sets forth the entire understanding and agreement between the parties hereto and supersedes and replaces any prior understandings, warranties, representations, agreement or statements (written or oral) of intent relating to the subject of this Agreement. Any modification or other alteration of this Agreement by the parties shall be effective only if set forth in writing as an amendment hereto and signed by both parties. XVIII. NOTICES 18.1 Except as otherwise provided herein, notices, demands or requests required or authorized herein shall be deemed given when made in writing and delivered or mailed with sufficient postage to the following addresses of the parties: (a) If to UCC: (i) to Union Carbide corporation Attn: Colleen Robisheaux P.O. Box 471 3301 5th Avenue South Texas City, Texas 77592-0471 (b) If to TNP: (i) to Texas-New Mexico Power Company Attn: Assistant Vice President Resource Acquisition 4100 International Plaza Fort Worth, TX 76109 OR (P. 0. Box 2943 Fort Worth, TX 76113) 18.2 The names, titles, and addresses of either party designated in this Section XVIII may be changed by written notification to the other party. Notices during a system emergency or operational circumstances may be made in person or by telephone in accordance with Appendix D. XIX. STANDBY POWER: 19.1 For the purposes of this Agreement, Standby Power shall mean capacity and energy as applicable, not to exceed the level of Contract Capacity, necessary for TNP's system which cannot be supplied from UCC's resources due to outages of UCC's generation or failure of Qualifying Facility to deliver Capacity and Energy as provided for in this Agreement. 19.2 In order to qualify for Scheduled Maintenance Service, UCC will meet the following conditions: .1 UCC will submit written notice to TNP at least 50 days prior to the date UCC intends to do Scheduled Maintenance Service. .2 UCC shall be limited to a maximum of six (6) periods of scheduled maintenance which may not, in the aggregate, include more than 60 days in a calendar year and must be scheduled, with TNP's approval, far the months of January, February, March, April, November, and/or December or at such other times and/or for such other periods as may be mutually acceptable. 19.4 During periods of Forced Outage or failure of UCC's power production equipment, TNP will obtain Standby Power for a maximum of two (2) consecutive months. Should the outage period exceed two (2)/'months, UCC must provide in writing to TNP's satisfaction, a detailed description of the events causing the Forced outage, at which time TNP will determine what further arrangements may be necessary. 19.5 During periods of Forced Outage of UCC's Facility, UCC will be billed for Internal Usage in the amount, if any, that TNP's energy cost (per Section 12.3 of this Agreement) is greater than the energy charge that TNP incurs to replace it. TNP will credit its monthly purchase power bill from UCC to reflect this charge. 19.6 It is understood by the parties hereto that TNP may be unable to obtain Standby Power for the full term of this contract. The parties also recognize that TNP's ability to secure Standby Power for the Qualifying Facility is solely dependent upon the availability from other suppliers. TNP agrees PAGE 4 1 that it will deliver notice to UCC when its standby supplier has given TNP notice of intention to cancel standby service with TNP. Such notice to UCC shall be given within two weeks of the time notice from the supplier is received by TNP. The notice to UCC shall be written, and contain, at a minimum, information sufficient to inform UCC of the date upon which the standby service to TNP will cease. 19.7 UCC must submit to TNP records showing, to TNP's satisfaction, what part of UCC's metered Ova in any month was due to Standby Power, for either Maintenance and/or Back-up service. These records must include an hourly profile of the Standby Ova. UCC must notify TNP in writing within forty-eight (48) hours of each start of and end of a period of using standby power, whether for maintenance or back-up service. 19.8 Qualifying Facility taking Standby Power on a stand-alone basis need not submit hourly profiles. 19.9 Qualifying Facility taking Standby Power in conjunction with other service, where KWH usage for Standby Power cannot be determined from metered information, the KWH usage will be based on the schedule of Standby Ova which will be assumed to be taken at the average power factor of the total load at that time. 19.10Standby Power provided by TNP to UCC under this contract, is subject to the term of this agreement. XX. FORCE MAJEURE 20.1 The term force majeure, as used herein, means causes beyond the reasonable control of, and without the fault or negligence of the party claiming force majeure, including, without limitation, acts of God, sudden actions of the elements, such as floods, hurricanes or tornadoes, and action by federal, state, municipal or any other government or agency, sabotage, war or riots. 1. The term force majeure does not include any full or partial curtailment in the electric output of the Facility which is caused by or arises from the act or acts of any third party including, without limitation, any vendor or supplier of UCC, unless such act or acts is itself excused by reason of force majeure. 2. The term force majeure does not include any full or partial curtailment in the electric output of the Facility that is caused by or arises from a mechanical or equipment breakdown, unless such breakdown is caused by acts of God, sudden actions of the elements such as floods, hurricanes or tornadoes, sabotage, war or riots. 3. The term force majeure does not include changes in market conditions that affect the cost of UCC's supply of fuel or alternate supplies of fuel or that affect demand for UCC's products. 20.2 If either party because of force majeure is rendered wholly or partly unable to perform any of its obligations under this Agreement (including, without limitation, as to the Qualifying Facility, the obligations of the Qualifying Facility set forth in Section 6.2 hereof), that party shall be excused from whatever performance is affected by the force majeure to the extent so affected provided that: .1 The non-performing party, within two (2) weeks after the occurrence of the force majeure, gives the other party written notice describing the particulars of the occurrence. .2 The suspension of performance is of no greater scope and of no longer duration than is required by the force majeure. .3 The non-performing party uses its best reasonable efforts to remedy its inability to perform. .4 When the non-performing party is able to resume performance of its obligations under this Agreement, that party shall give the other party written notice to that effect. 20.3 Force majeure conditions shall be reflected in the Capacity Payment in accordance with Section XII hereof. 20.4 Except as otherwise provided, a Forced Outage does not relieve either party of any of its obligations under this Agreement. XXI. ENTIRETY 21.1 This Agreement is intended by the parties as the final expression of their agreement and is intended also as a complete and exclusive statement of the terms of their agreement with respect to the Energy and Capacity sold and purchased and the construction, operation and maintenance of the Interconnection Facilities that are required to provide a means for the transfer of power and energy generated by the Qualifying Facility to TNP's electrical system. All prior written or oral understandings, offers or other communications of every kind pertaining to the sale of Energy and Capacity hereunder to TNP by UCC are hereby abrogated and withdrawn. TS 22.1 This Agreement may be amended only in writing and upon mutual agreement of the parties. Any amendment hereafter made by mutual agreement of the parties shall not be effective unless and until approved by the PUCT. XXIII. COUNTERPARTS 23.1 This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which shall together constitute one and the same Agreement. XXIV. REMEDIES CUMULATIVE AND CONCURRENT 24.1 The duties, covenants, conditions, obligations and warranties of the Parties as provided in this Agreement are the joint and several obligations of the Parties and the successors and transferees of the Parties. 24.2 No right or remedy of either Party as provided in this Agreement or the schedules, rules and regulations of TNP is exclusive; every right or remedy of either Party as provided in this Agreement or the schedules, rules and regulations of TNP will be cumulative and concurrent, with every other right or remedy, now or subsequently existing, as provided in this Agreement or the schedules, rules or regulations of TNP, at law, in equity or by statute or regulation. Every right or remedy of either party may be pursued separately, successively or together against either Party, or against the successors or assigns of either Party or any one or more of them, in the sole and absolute discretion of either Party, and may be exercised as often as occasion for the pursuit arises and from time to time as either Party may deem expedient, in the sole and absolute discretion of either Party. XXV. SIGNATURE CLAUSE 25.1 The signatories hereto represent that they have been appropriately authorized to enter into this Agreement on behalf of the party for whom they sign. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed this the 30th day of December, 1994, in multiple counterparts. Attest: _______________________________ ______________________________ By:_______________________________ Secretary Title:_______________________________ Date:________________________________ Attest: TEXAS-NEW MEXICO POWER COMPANY ______________________________ By:_________________________________ Assistant Secretary Assistant Vice President - Title: Resource Acquisition & Management Date:________________________________ EX-10 5 TNP LETTERHEAD August 16, 1996 Mr. Tim Soles Amoco Corporation Worldwide Engineering & Construction 3700 Bay Area Boulevard Mail Code 4365 Houston, Texas 77058 Re: Letter Agreement for the Purchase and Sale of Energy Between Texas-New Mexico Power Company & Amoco Chemical Company & Amoco Oil Company Dear Mr. Soles: This letter agreement is hereby entered into by Texas-New Mexico Power Company (TNP), Amoco Oil Company (AOC) and Amoco Chemical Company (ACC), also known collectively herein as Amoco, in order to achieve mutual intents of (1) lowering AOC's and ACC's electrical costs on an annual basis, (2) providing electric service for the total AOC and ACC loads and (3) providing dynamic scheduling capability for Amoco to make excess electrical energy sales to Houston Lighting & Power (HL&P). This letter agreement shall become effective as of May 1, 1996 and continue through an initial term of September 30, 1996. The agreement will continue on a monthly basis after its initial term has expired unless any party to the agreement gives 30 days written notice of intent to terminate the agreement. This letter agreement shall supersede and replace in their entirety all prior Conjunctive Billing Agreements. Furthermore, TNP shall retroactively adjust billing to AOC and ACC under the terms of this letter agreement to the effective date of this agreement. This letter agreement shall become effective retroactive to May 1, 1996 upon execution, however the parties recognize that a new tariff with the City of Texas City must be approved by the City of Texas City in order to implement the pricing on TNP's power purchase and sale from/to Amoco. TNP will work diligently to seek approval from the City. If TNP fails to obtain approval of this tariff, then Amoco will be billed according to the Agreement For Consolidating Of Metering And Billing Of Electrical Service in effect prior to the execution of this letter agreement. Sale/Purchase of AOC and ACC's Internal Energy Production and Consumption TNP agrees to purchase monthly all of ACC's metered generation of electrical energy and a fixed (215,000 kW @ 85% Capacity Factor) monthly amount of AOC's electrical energy production at a price of $0.0175 per kilowatt-hour (kWh). In addition, TNP agrees to purchase from AOC the net monthly metered energy exported by AOC to TNP that can be used to supply ACC with any electrical energy purchase requirements above ACC's own metered generated electrical energy at a price of $0.0175 per kWh. Amoco agrees to purchase that same amount of electrical energy to serve the AOC and ACC internal energy requirements at a price of $0.01975 per kWh. The $0.01975 per kWh includes $0.00225 per kWh tariff fees that must be approved by the City of Texas City. AOC/ACC Energy Purchases Above Their Combined Internal Generation If for any reason during the billing month should Amoco not actually produce an amount of electrical energy that is at least equal to Amoco's actual internal energy load, then TNP shall be obligated to provide this energy difference at a total price of $0.0275 per kWh. There will be no demand charges associated with any power sales to AOC or ACC or power purchases by TNP. TNP will provide all maintenance energy replacement service to both AOC and ACC similar to that as referenced in the ACC Agreement for Standby Service dated August 1, 1987 and the AOC Agreement for Standby Service dated July 1, 1987. TNP agrees to use its best efforts to obtain the lowest priced maintenance energy replacement service to both AOC and ACC. As outlined in the aforementioned agreements for maintenance energy replacement service, AOC and/or ACC each agree to provide TNP with at least 50 days written notice prior to the date maintenance energy replacement service is required and schedule no more than 6 periods each of maintenance service during a calendar year with TNP approval, for an aggregate of 60 days each. The maintenance energy replacement service cost will be no more than $0.0275 per kWh. There will be no reservation or demand charges associated with TNP providing the maintenance energy replacement service to AOC and ACC. It is the intent of TNP and Amoco that in the future, Amoco may elect to purchase any or all of the electrical energy for internal load that is not met by the TNP purchase of Amoco generation, including maintenance energy replacement service, from other sources than TNP. Sale of AOC and ACC Excess Energy to HL&P Excess electrical energy shall be defined as AOC's and ACC's combined metered electrical energy outputs to TNP less any internal needs as measured by TNP's metered electrical energy inputs to AOC and ACC. Excess electrical energy shall be scheduled for delivery to the HL&P control area through TNP's control area by the use of a Dynamic Schedule (as that term is used in the ERCOT Operating Guides). The integrated amount of power delivered in each hour shall be considered the energy scheduled for that hour. HL&P will integrate the Dynamic Schedule signals provided by TNP hourly. In performing the hourly integration, HL&P will formulate by truncations to whole Megawatt hours (MWhs) such that any remaining kWhs in a MWh will be carried forward to the next MWh. During those periods (if any) when any party to this letter agreement experiences a communication failure in its dynamic signals, the last value received by HL&P will be retained. During the telemetry downtime and as soon as mutually acceptable arrangements can be made between Amoco, TNP and HL&P, the transaction will be administered through the use of static schedules prepared by Amoco and delivered to TNP and HL&P. In the event excess electrical energy scheduled by Amoco for delivery to the HL&P control area can not be delivered with a Dynamic Schedule, a static schedule will be used. TNP agrees to coordinate with Amoco the static scheduling of excess electrical energy for sale to HL&P. TNP on behalf of Amoco will schedule the excess electrical energy for sale to HL&P on a hourly basis as close as it reasonably can in order to match the production of excess electrical energy. Doing such will allow TNP to mitigate the quantity of electrical energy which TNP will be required to provide on behalf of Amoco in order to match the schedule of excess electrical energy sales by Amoco to HL&P and to mitigate the quantity of excess electrical energy which will be purchased by TNP due to production of excess electrical energy exceeding the schedule of excess electrical energy sales submitted to HL&P. Should TNP be required to provide electrical energy on behalf of Amoco to meet the schedule for excess electrical energy sales to HL&P, then the charge to Amoco shall be TNP's actual incremental energy cost. If TNP is required to purchase production of excess electrical energy that exceeds the schedule of excess electrical energy sales submitted to HL&P, then Amoco shall be compensated at TNP's actual decremental energy cost. Other & Miscellaneous Exhibit A describes the accounting methodology that will be used under this letter agreement and Exhibit B shows a sample billing of the AOC and ACC May and June's billings under this letter agreement. These exhibits are intended to demonstrate the principles of this letter agreement and the effect on the AOC and ACC electrical energy costs. This letter agreement is considered confidential and should not be publicized for any reason other than that necessary to seek tariff approval. Billing shall be consolidated and include sufficient detail for Amoco to internally disburse costs and savings amongst AOC and ACC. Stranded Cost Recovery In further consideration of the mutual benefits to be derived from this letter agreement, TNP agrees that it will not seek recovery of stranded investment costs as a result of this letter agreement. It is not the intent of the parties that the structure of this letter agreement and the purchase and sale of electrical energy should create any incremental liability for such stranded costs by AOC and ACC. However, if as a result of this agreement, any stranded costs are imposed on AOC or ACC by any current or future applicable law, tariff, rule, regulation or order of any legislative or regulatory body to pay for stranded costs attributable to deregulation of TNP, HL&P, or any other utility, it is agreed that TNP will, to the extent legally possible, reimburse or credit AOC or ACC, as applicable, for any such stranded costs imposed on AOC or ACC as a result of this agreement. Further, in such event, the parties agree that they will immediately restructure this letter agreement, or any successor agreement, to alleviate or minimize such exposure. Continued Discussions The parties also agree to continue to negotiate in good faith toward the execution of a mutually acceptable long term agreement. Signature Clause The signatories hereto represent that they have been appropriately authorized to enter into this Agreement on behalf of the party for whom each signs. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed this ______ day of ______________, 1996 in multiple counterparts. AMOCO CHEMICAL COMPANY By: _______________________________________ Title: _______________________________________ Date: _______________________________________ AMOCO OIL COMPANY By: _______________________________________ Title: _______________________________________ Date: _______________________________________ TEXAS-NEW MEXICO POWER COMPANY By: _______________________________________ Title: _______________________________________ Date: _______________________________________ EX-10 6 Page 1 Incentive Compensation Award Agreement for Short- and Long-Term Awards This Agreement is dated and effective as of January 1, 1997, and is between ___________________________________ ("Participant"), Texas-New Mexico Power Company (the "Company") and TNP Enterprises, Inc. ("TNPE"). RECITALS A Committee appointed by and having full authority to act on behalf of the Board of Directors of the Company and TNPE, respectively, (collectively, the "Compensation Committee") adopted the following incentive compensation plans: A. Texas-New Mexico Power Company Management Short-Term Incentive Plan ("Management Plan"); and B. TNP Enterprises, Inc. Equity Incentive Plan ("Equity Plan"). On April 28, 1995, the Shareholders approved the adoption by the Board of Directors of the Equity Plan. The Management Plan provides for the payment of cash if certain incentive goals are achieved. The Equity Plan provides for the delivery of stock options, stock, and performance units upon the achievement of certain incentive goals which may be short-term and/or long-term goals. On January 20, 1997, the Compensation Committee (the "Committee") established the performance goals to be achieved in order to earn incentive compensation under the plans. The Participant has been selected to receive awards under each plan subject to the terms of each applicable plan and the Participant signing this Award Agreement. The Participant and the Company agree that this Agreement does not affect Participant's status as an employee at will and further agree that either party may terminate Participant's employment at any time with or without cause. The Committee reserves, in its sole discretion, the right to interpret the terms and conditions of any award and this agreement and to resolve any disagreements or disputes concerning this Award Agreement and any decision is binding upon all parties. In consideration of the Recitals and mutual covenants and agreements below, the Participant and the Company desire to and by their respective signatures do hereby agree to the terms and conditions set forth below. AGREEMENT SHORT-TERM AWARDS Short-Term Cash Award: Participant is hereby awarded _____% of the control point established for Participant's salary range as of the beginning of each plan year as a cash award subject to the 1997 short-term goals for the Management Plan being met as such goals are set forth on Exhibit A attached hereto and made a part hereof for all purposes. Such award may be adjusted between 50% and 150% on a straight line basis depending upon where the performance related to each goal occurs within the range established for each goal. No award payment will be made for performance below the established minimum for each goal set forth in Exhibit A. The cash award shall be paid no later than March 15th following the end of the plan year. The parties agree that no portion of the cash award is due or payable regardless of whether any Corporate Operational Goal or Departmental/Individual Goals are met unless the minimum Corporate Financial Goal is met. Further, the Committee reserves the right to make year-end adjustments which may account for any unusual or unforeseen events that impact the attainability of any goal. Short-Term Stock Award: Participant is hereby awarded _____% of the control point established for Participant's salary range as of the beginning of the plan year as a stock award subject to the 1997 goals being met as such goals are set forth on Exhibit A. Such award may be adjusted between 50% and 150% on a straight line basis depending upon where the performance related to each goal occurs within the range established for each goal. No award payment will be made for performance below the established minimum for each goal set forth in Exhibit A. The stock award shall be paid no later than March 15th following the end of the plan year. The parties agree that no portion of the stock award is due or payable regardless of whether any Corporate Operational Goal or Departmental/Individual Goals are met unless the minimum Corporate Financial Goal is met. Further, the Committee reserves the right to make year-end adjustments which may account for any unusual or unforeseen events that impact the attainability of any goal. Restrictions on Sale of Stock: Participant agrees that the short-term stock award is restricted from being sold for a two-year period following the end of ____________________ (the "Restriction Period"). Participant agrees that any stock issued as a short-term stock award will bear a legend stating any applicable restrictions. Participant further agrees that such stock award is forfeited and of no effect in the event that Participant attempts to sell such stock during the Restriction Period. Notwithstanding the foregoing, all restrictions on the sale of the stock lapse and said stock may be freely sold or transferred if during the Restriction Period one of the following should occur: a. Participant's employment should be terminated for any reason other than cause. b. A Change of Control should occur as that term is defined in the Equity Plan. (Participant should be cognizant of Rule 16(b) to the extent it may apply.) Allocation of Awards: Participant agrees that total amounts awarded under the cash and stock awards will be allocated among the Corporate Financial Goal, Corporate Operational Goals, and Departmental/Individual Performance Goals applicable to such Participant as is set forth in Exhibit B. Participant agrees that to the extent any amount of the total award is allocated to the Departmental/Individual Performance Goals, such amount will be due and payable only to the extent the performance of the Participant, as determined by the officer executing this Agreement on behalf of the Company in such officer's sole discretion (or, if Participant is the Chief Executive Officer, then as determined by the Committee in its sole discretion), falls within the Performance Rating range set forth in Exhibit C which is attached hereto and made a part hereof for all purposes. LONG-TERM AWARD Long-Term Stock Award: Participant is hereby awarded _____% of the control point established for Participant's salary range as of the beginning of the long-term plan cycle as a stock award subject to the 1997 long-term plan cycle award opportunities established for the Equity Plan being met as such goals are set forth on Exhibit D which is attached hereto and made a part hereof for all purposes. Such award may be adjusted between 50% and 150% on a straight line basis, depending upon where the performance related to each goal occurs within the range established for each goal. No award payment will be made for performance below the established minimum for each goal set forth in Exhibit D. Any stock award earned shall be paid no later than March 15th following the end of the 1997 long-term plan cycle. The 1997 Plan year cycle will be a period of three years beginning January 1, 1997. Allocation of Award: Participant agrees that the total amount awarded under the Equity Plan will be allocated 50% to the goal established for Total Shareholder Return in comparison to the S&P 500, and 50% to the goal established for Total Shareholder Return in comparison to the S&P Electrical Utility Group. The amounts allocated to each set of goals will be due and payable only to the extent each such goal shall be met as set forth in Exhibit D. GENERAL TERMS Dividend Equivalents: Participant shall have the right to receive, at the time any stock awards are paid, cash in an amount equal in value to the dividends declared on each Share on each record date occurring during the applicable performance period established for each plan. Dividend equivalents will not include any dividends on the dividend equivalents accrued during the applicable performance periods. Pro-Ration of Awards: If a Participant's employment is terminated due to retirement, death, or disability during a plan year or the 1997 long-term performance cycle, any award earned shall be prorated based on the number of months of participation within the plan year or long-term plan cycle. The prorated award will be based upon performance determined at year or cycle end and will be paid at the same time as all other awards are paid from each of the plans under which awards are made. Termination of Employment: If employment is terminated for any reason other than retirement, death, or disability, any award opportunity granted under either plan shall be forfeited, provided that the Committee may waive such forfeiture upon the CEO's recommendation. Valuation of Shares: Shares issued under the Equity Plan pursuant to having been earned under the plan and the terms of this Agreement shall be valued by averaging the high and low prices of the stock on the first and last trading days of the plan performance period (the "Share Value"). The Share Value shall be applied to the dollar value of the award to arrive at the equivalent number of shares awarded. The awarded shares shall be adjusted for the average of the high and low stock price on the last trading day of the plan year. Tax Treatment: Payments are taxable to the participant in the year of receipt. The Company will have the right to deduct any federal, state, or local taxes required by law to be withheld. In regard to any stock award made hereunder a Participant, at Participant's option, may elect to have the Company withhold sufficient stock to pay the taxes then due on such stock award. Provisions Consistent with Plan: This Agreement shall be construed consistent with the provisions of the applicable plan under which any award may be made. Where matters are not addressed in this Award Agreement, but are addressed in the Management Plan or Equity Plan, then such terms are deemed a part of this Award Agreement and shall apply equally to all awards granted herein, except for where such terms obviously apply solely to one of the plans. If there is a conflict between the provisions of this Agreement and such plan, the provisions of the applicable plan control. Unless otherwise noted to the contrary, the definition of terms in each Plan also apply in this Agreement. Attorney Fees: In the event either party is required to bring a cause of action against the other to enforce the terms of this Agreement, then such party, to the extent such party is successful in such action, shall be entitled to reasonable attorney fees. Governing Law: This Agreement shall be governed by the laws of the State of Texas. Venue for any cause of action shall be Tarrant County, Texas. Texas-New Mexico Power Company Participant: By: ____________________ By: ____________________ TNP Enterprises, Inc. Participant By:_____________________ By:_____________________
EXHIBIT A TNP ENTERPRISES, INC. TEXAS-NEW MEXICO POWER COMPANY Short-Term Incentive Corporate Goals 1997 Goals Measurement Objective Minimum Target Maximum ___________ _________ _______ ______ _______ Financial 1. Cash Value Added Improve Financial 4.05 4.40 4.75 Condition Corporate Threshold 4.05 Opeational 2. Customer Satisfaction Rating Improve Customer 79 82 85 (Use CSI instead of overall Service favorability in 1997) 3. O&M Costs/KWH Sales ((cent)KWH) Reduce Operating Costs 4.15 3.95 3.75 4. Equivalent Forced Outage Rate (Moved Improve TNP One's to Plant Specific Goals in 1997) Reliability 4.7 4.5 4.3 5. Injury Frequency Ratio Reduce Employee 5.05 4.44 3.82 Accidents 49 43 37 6. System Reliability A) Average Minutes of Outage per Reduce Outage Time 86 76 66 customer B) Average Number of Outages per Reduce No. of customer Customers Interrupted 1.40 1.25 1.10
EXHIBIT B
TEXAS-NEW MEXICO POWER COMPANY Short-Term Incentive Plan Weighting of 1997 Goals for Texas-New Mexico Power Company Participants Corporate Financial Corporate Operational Cash Customer O&M Avg. Avg. Value Satisfaction Costs/per Minutes of Number of Departmental/ Added Rating KWH IFR Outage Outages EFOR Individual Total -------- ---------- --------- ------- --------- --------- ------ ------------ -------- CEO 60 5 5 5 5 5 5 10 100% - --- SR VP CCO 60 10 5 5 5 5 10 100% RCOs 50 5 5 5 2.5 2.5 30 100% Key Employees 50 5 5 5 2.5 2.5 30 100% SR VP Power Resources 60 5 5 5 25 100% Asst. Res. Acq. 60 5 5 30 100% Asst. VP Ind. Mkt. 60 5 5 30 100% Key Participants 60 5 5 30 100% Plant Mgr. & Key Participants 60 5 5 * 30 100% SR VP CFO 60 5 5 30 100% Controller 60 5 5 30 100% Treasurer 60 5 5 30 100% Key Employees 60 5 5 30 100% SR VP Corporate Relations 60 5 5 5 25 100% VP HR 60 5 5 5 25 100% Sec Gen Counsel 60 5 5 30 100% Key Employees 60 5 5 30 100% * 1/3 of TNP One's Departmental Goal will be EFOR.
EXHIBIT C
DEPARTMENTAL/INDIVIDUAL PERFORMANCE TARGET GOALS Individual Performance Performance Rating as a % of Target Award 4 - Greatly exceeded expectations for objective(s) 150% (maximum) 3 - Exceeded expectations for objective(s) 125% 2 - Achieved expectations for objective(s) (target) 100% 1 - Almost achieved expectations for objective(s) 50% (minimum) 0 - Improvement needed, failed to meet objective(s) 0%
EXHIBIT D LONG-TERM STOCK AWARD GOALS Total Shareholder Return Payout on the basis of matrix reflecting total shareholder return in relation to each of the S&P 500 and the S&P Electric Utility Index. TSR to S&P 500 (50% weighting) Performance Ranking % of Target Shares Earned Maximum =>75th percentile 150% Target =>55th percentile 100% Minimum =>35th percentile 50% Below Minimum <=35th percentile 0% TSR to S&P Electric Utility Index (50% weighting) Performance Ranking % of Target Shares Earned Maximum =>75th percentile 150% Target =>55th percentile 100% Minimum =>35th percentile 50% Below Minimum <=35th percentile 0% SCHEDULE OF AWARD AGREEMENTS Employee Position - -------------------------------------------------------------------------------- 1. Kevern Joyce Chairman President & CEO 2. Jack Chambers Sr VP & Chief Customer Officer 3. Manjit Cheema Sr VP & Chief Financial Officer 4. John Edwards Sr VP - Corporate Relations 5. Ralph Johnson Sr VP - Power Resources 6. Doug Hobbs VP - Business Development 7. Allan Davis VP - Regional Customer Officer 8. Larry Dillon VP - Regional Customer Officer 9. Melissa Davis VP - Regional Customer Officer 10. Dennis Cash VP - Human Resources 1. Mike Blanchard Corporate Secretary & General Counsel 12. John Montgomery President (Facility Works) 13. Pat Bridges Treasurer 14. Scott Forbes Controller 15. Randy Ownby Asst. VP - Resource Acquisition 16. Larry Gunderson Director Regulatory & Governmental Affairs 17. Mark Wilson Plant Manager 18. Mark Coulson Asst VP - Industrial Marketing 19. Cathy Means Director - Information Services EX-27 7
UT 0000741612 TNP ENTERPRISES, INC. 1000 12-MOS DEC-31-1996 DEC-31-1996 PER-BOOK 933,939 3,927 38,123 30,795 0 1,006,784 183,771 0 94,703 278,474 0 3,420 533,964 0 0 0 138 0 0 0 190,788 1,006,784 502,737 10,333 398,527 408,860 93,877 (1,461) 92,416 69,363 23,053 167 22,886 10,700 64,654 65,201 1.98 1.98
EX-27 8
UT 0000022767 TEXAS-NEW MEXICO POWER CO. 1,000 12-MOS DEC-31-1996 DEC-31-1996 PER-BOOK 933,939 1,884 34,213 32,121 0 1,002,157 107 222,133 65,308 287,548 0 3,420 533,800 0 0 0 100 0 0 0 177,289 1,002,157 502,737 10,333 389,527 408,860 93,877 2,348 96,225 69,363 26,862 167 26,695 10,700 64,654 69,313 0 0
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