SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/ Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/X/ Soliciting Material Pursuant to Rule 14a-12
WESTERN RESOURCES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box): /X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it is determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing or which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
[THIS FILING CONSISTS OF A JOINT PRESS RELEASE, COMPANY FACT SHEETS, SUGGESTED
SPEAKING POINTS FOR MR. D.C. WITTIG, AN EMPLOYEE UPDATE, A JOINT LETTER TO
EMPLOYEES AND QUESTIONS AND ANSWERS TO SHAREHOLDERS]
[WESTERN RESOURCES AND PNM JOINT PRESS RELEASE DATED NOVEMBER 9, 2000]
[PNM LOGO] [WESTERN RESOURCES LOGO]
PNM TO PURCHASE THE ELECTRIC
UTILITY OPERATIONS OF WESTERN RESOURCES
Transaction Creates Leading Multi-Regional Energy Company
Albuquerque, New Mexico and Topeka, Kansas, November 9, 2000 - Public Service
Company of New Mexico (NYSE:PNM) ("PNM") and Western Resources (NYSE:WR) today
announced that both companies' boards of directors have approved an agreement
under which PNM will acquire the Western Resources electric utility operations
in a tax-free, stock-for-stock transaction.
Under the terms of the agreement, PNM and Western Resources, whose utility
operations consist of its KPL division and KGE subsidiary, will both become
subsidiaries of a new holding company to be named at a future date. Prior to the
consummation of this combination, Western Resources will reorganize all of its
non-utility assets, including its 85 percent stake in Protection One and its 45
percent investment in ONEOK, into Westar Industries which will be spun off to
its shareholders.
The new holding company will issue 55 million of its shares, subject to
adjustment, to Western Resources' shareholders and Westar Industries. Before any
adjustments, the new company will have approximately 95 million shares
outstanding, of which approximately 42.1 percent will be owned by former PNM
shareholders and 57.9 percent will be owned by former Western Resources
shareholders and Westar Industries. Western Industries will receive a portion of
such shares in repayment of a $234 million obligation currently owed by Western
Resources to Westar Industries.
Based on PNM's average closing price over the last ten days of $27.325 per
share, the indicated equity value of the transaction is approximately $1.503
billion, including conversion of the Westar Industries obligation. In addition,
the new holding company will assume approximately $2.939 billion of existing
Western Resources' debt, giving the transaction an aggregate enterprise value of
approximately $4.442 billion. The new holding company will have a total
enterprise value of approximately $6.5 billion ($2.6 billion in equity; $3.9
billion in debt and preferred stock). The transaction will be accounted for as a
purchase and is anticipated to be immediately accretive to PNM's earnings per
share and cash flow.
The companies expect the transaction to be completed within the next 12 to 15
months. The new holding company will serve over one million retail electric
customers and 400,000 retail gas customers in New Mexico and Kansas and will
have generating capacity of more than 7,000 megawatts. The transaction will also
make the new company a leading energy supplier in the Western and Midwestern
wholesale markets.
Western Resources' trading presence in six Midwestern power pools provides
opportunities for PNM to bring its 15 years of successful power marketing
experience and niche product development to new customers. PNM marketers,
working together with the experienced power trading group at Western Resources,
expect to realize an enhanced position in the wholesale power market.
Jeffry E. Sterba, chairman, president and chief executive officer of PNM, said,
"This strategic transaction will give us the scale and scope to raise our
profile in the emerging energy marketplace and aggressively seize new
opportunities in power generation and the wholesale market.
"By joining forces with Western Resources, we will surpass our stated goal of
doubling our generation capacity and tripling our power sales more than three
years ahead of schedule. The addition of Western Resources' low-cost,
high-capacity generation facilities will quadruple our current production
capabilities, giving us a competitive edge in both power plant operations and
wholesale electric sales. The addition of Western Resources' service
territories, which encompass well-populated, fast-growing areas with a balance
of residential, commercial and industrial customers, diversifies our business
and geographic base and enhances the predictability of our earnings," Sterba
continued.
"This transaction will also enable us to realize a number of important financial
improvements, including a broader, more predictable cash flow, solid revenues
and earnings growth, improved access to capital, increased market capitalization
and public market float and cost efficiencies. A key priority for our management
team will be the continuation of our company's successful debt reduction effort.
Over the past seven years, we have reduced PNM's debt to capital ratio from 72
percent to less than 55 percent, and we will maintain our balance sheet
integrity after the transaction is completed. We are committed to deleveraging
the combined company.
"We believe the combination of these strategic, operational and financial
benefits will help position us to become a leading multi-regional energy
provider while creating substantial value for shareholders, tangible
opportunities and progress for our employees, and stable rates for our
customers. By drawing on the best practices, expertise and talent that exist
within both of our organizations, we are also confident that the new company
will be able to deliver excellent customer service support and product and
service innovation. At the local level, we intend to continue the strong
traditions of both companies for supporting local communities through charitable
contributions and through the volunteerism of employees," Sterba concluded.
David C. Wittig, chairman, president and chief executive officer of Western
Resources, said, "We evaluated potential partners across a broad range of
criteria, including financial flexibility, proven management skills, superior
operating and technological capabilities, excellent customer service, and a
track record for fair dealing on regulatory issues. We are confident that PNM's
experience, long-term growth strategy and unique geographic position will result
in benefits for shareholders and opportunities for our customers, employees and
the communities we serve. The creation of a separately traded Westar Industries
allows the potential of Western Resources' unregulated ownership in Protection
One, Protection One Europe, ONEOK and other investments to be more directly
realized by shareholders."
The rationale for this transaction is the acceleration of PNM's proven growth
strategy, consistent with its targeted 10 percent annual average earnings
growth. PNM expects only modest cost savings and does not have a present
intention to have involuntary workforce reductions as a result of the
transaction. The new holding company will seek to minimize any workforce effects
through reduced hiring, attrition, and other appropriate measures. All existing
labor agreements will be honored.
In the transaction, each PNM share will be exchanged on a one-for-one basis for
shares in the new holding company. Each Western Resources share will be
exchanged for a fraction of a share of the new company. This exchange ratio will
be finalized at closing, depending on the impact of certain adjustments to the
transaction consideration. Since Western Resources and Westar Industries remain
committed to reducing Western Resources' net debt balance prior to consummation
of the transaction, they have agreed with PNM on a mechanism to adjust the
transaction consideration based on additional equity contributions. Under this
mechanism, Western Resources could undertake certain activities not affecting
the utility operations to reduce the net debt balance. The effect of such
activities would be to increase the number of new holding company shares to be
issued to all Western Resources shareholders (including Westar Industries) in
the transaction. In addition, Westar Industries has the option of making
additional equity infusions into Western Resources that will be used to reduce
its net debt balance prior to closing. Up to $407 million of such equity
infusions may be used to purchase additional new holding company common and
convertible preferred stock.
At closing, Sterba will become chairman, president and chief executive officer
of the new holding company, and Wittig will become chairman, president and chief
executive officer of Westar Industries. The Board of Directors of the new
company will consist of six current PNM board members and three additional
directors, two of whom will be selected by PNM from a pool of candidates
nominated by Western Resources, and one of whom will be nominated by Westar
Industries. The new holding company will be headquartered in New Mexico.
Headquarters for the Kansas utilities will remain in Topeka, Kansas.
Shareholders of the new holding company will receive PNM's dividend. PNM's
current annual dividend is $.80 per share.
The successful spin-off of Westar Industries from Western Resources is required
prior to the consummation of the transaction. The transaction is also
conditioned upon, among other things, approvals from both companies'
shareholders and customary regulatory approvals, including from the Kansas
Corporation Commission, the New Mexico Public Regulation Commission, Securities
and Exchange Commission, the Nuclear Regulatory Commission, and the Federal
Energy Regulatory Commission. The new holding company expects to register as a
holding company with the Securities and Exchange Commission under the Public
Utility Holding Company Act of 1935.
J.P. Morgan & Co. Incorporated acted as financial advisor, and Winthrop,
Stimson, Putnam & Roberts and Keleher & McLeod, PA acted as legal counsel to
PNM. Chase Securities Inc. and Salomon Smith Barney acted as financial advisors,
and LeBoeuf, Lamb, Greene & MacRae, LLP acted as legal counsel to Western
Resources.
About PNM
More than 1.3 million people in New Mexico rely on PNM for the delivery of
electric power and natural gas service to their homes and businesses. PNM's
1,521megawatts of generation capacity includes power from coal, nuclear and
natural gas-fired plants. Selling electricity to other utilities is the
fastest-growing part of the company's business. In 1999, wholesale power sales
accounted for nearly a third of PNM's total operating revenues. Through Avistar,
PNM's wholly-owned subsidiary, PNM is engaged in energy management and advanced
metering services, as well as assisting in the development of a new,
Internet-based energy auction system. In 1999, PNM was featured in a leading
industry publication as one of the five most technologically innovative
utilities in the nation. The company's commitment to diversity also led Fortune
magazine to rank PNM in the top ten on its list of the best employers for
minorities in the U.S. For more information, visit the company's website at
www.pnm.com.
About Western Resources
Western Resources is a consumer services company with interests in monitored
services and energy. The company's assets include security company holdings
through ownership of Protection One and Protection One Europe, which have more
than 1.6 million security customers. Its utilities, KPL and KGE, provide
electric service to approximately 634,000 customers in Kansas. Through its
ownership in ONEOK, a Tulsa-based natural gas company, Western Resources has a
45 percent interest in one of the largest natural gas distribution companies in
the nation, serving more than 1.4 million customers. For more information, visit
the company's website at www.wr.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This press release contains forward looking statements within the meaning of the
"safe harbor" provisions of the United States Private Securities Litigation
Reform Act of 1995. Investors are cautioned that such forward-looking statements
with respect to revenues, earnings, performance, strategies, prospects and other
aspects of the businesses of PNM and Western Resources and with respect to the
benefits of the transaction are based on current expectations that are subject
to risk and uncertainties. Such statements are based upon the current beliefs
and expectations of the management of PNM and Western Resources. A number of
factors could cause actual results or outcomes to differ materially from those
indicated by such forward looking statements. These factors include, but are not
limited to, risks and uncertainties relating to: the possibility that
shareholders of PNM and/or Western Resources will not approve the transaction,
the risks that the businesses will not be integrated successfully, the risk that
the benefits of the transaction may not be fully realized or may take longer to
realize than expected, disruption from the transaction making it more difficult
to maintain relationships with clients, employees, suppliers or other third
parties, conditions in the financial markets relevant to the proposed
transaction, the receipt of regulatory and other approvals of the transaction,
that future circumstances could cause business decisions or accounting treatment
to be decided differently than now intended, changes in laws or regulations,
changing governmental policies and regulatory actions with respect to allowed
rates of return on equity and equity ratio limits, industry and rate structure,
stranded cost recovery, operation of nuclear power facilities, acquisition,
disposal, depreciation and amortization of assets and facilities, operation and
construction of plant facilities, recovery of fuel and purchased power costs,
decommissioning costs, present or prospective wholesale and retail competition
(including retail wheeling and transmission costs), political and economic
risks, changes in and compliance with environmental and safety laws and
policies, weather conditions (including natural disasters such as tornadoes),
population growth rates and demographic patterns, competition for retail and
wholesale customers, availability, pricing and transportation of fuel and other
energy commodities, market demand for energy from plants or facilities, changes
in tax rates or policies or in rates of inflation or in accounting standards,
unanticipated delays or changes in costs for capital projects, unanticipated
changes in operating expenses and capital expenditures, capital market
conditions, competition for new energy development opportunities and legal and
administrative proceedings (whether civil, such as environmental, or criminal)
and settlements, the outcome of Protection One accounting issues reviewed by the
SEC staff as disclosed in previous Western Resources SEC filings, the impact of
Protection One's financial condition on Western Resources' consolidated results,
and other factors. PNM and Western Resources disclaim any obligation to update
any forward-looking statements as a result of developments occurring after the
date of this news release. Readers are referred to PNM's and Western Resources'
most recent reports filed with the Securities and Exchange Commission.
Additional Information
In connection with the proposed transaction, PNM and Western Resources will file
a joint proxy statement/prospectus with the Securities and Exchange Commission.
INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of
the joint proxy statement/prospectus (when available) and other documents filed
by PNM and Western Resources with the SEC at the SEC's web site at
http://www.sec.gov. Free copies of the joint proxy statement/prospectus, when
available, and each company's other filings with the SEC may also be obtained
from the respective companies. Free copies of PNM's filings may be obtained by
directing a request to PNM, Alvarado Square, Albuquerque, New Mexico 87158.
Phone (800) 545-4425. Free copies of Western Resources' filings may be obtained
by directing a request to Western Resources, P.O. Box 889, Topeka, Kansas
66601-0889. Phone: (800) 527-2495.
Participants in Solicitation
PNM, Western Resources and certain of their respective directors, executive
officers and other members of their management and employees, each of whom may
be considered participants in this transaction under applicable securities laws,
may be soliciting proxies from their respective stockholders in favor of the
transaction. Information concerning PNM's directors and executive officers
participating in the solicitation is set forth in PNM's Annual Report on Form
10-K filed with the Commission on March 9, 2000 and information concerning
Western Resources' directors and executive officers participating in the
solicitation is set forth in Western Resources' Annual Report on Form 10-K filed
with the Commission on March 29, 2000 and amended on April 3, 2000. Certain
directors and executive officers of PNM and Western Resources may have direct or
indirect interests in the transaction due to securities holdings, vesting of
options, and rights to severance payments if their employment is terminated
following the transaction. In addition, directors and officers, after the
transaction, will be indemnified by PNM and Western Resources, and benefit from
insurance coverage for liabilities that may arise from their service as
directors and officers of PNM or Western Resources prior to the transaction.
Additional information regarding PNM's and Western Resources' respective
participants in the solicitation will be contained in the joint proxy
statement/prospectus.
PNM Teleconference and Webcast Information:
There will be a teleconference today at 9:00 a.m. (EST) to discuss the
transaction. It can be monitored via the World Wide Web at
www.dealinfo.com/PNM-WR or www.pnm.com or by dialing (212) 896-6168.
International callers may dial (212) 676-5069. A rebroadcast will be available
beginning 11:00 AM today through December 4, 2000 by dialing 1-800-633-8284.
International callers may dial (858) 812-6440. The reservation number for the
rebroadcast is 16865318. Real Network's Real Player or Microsoft Media Player is
required to access the webcast. They can be downloaded from www.real.com or
www.microsoft.com/windows/mediaplayer.
Satellite Uplink for PNM B-roll:
Thursday, November 9, 2000 Thursday, November 9, 2000
9:00 a.m. - 9:30 a.m. (EST) 1:00 p.m. - 1:30 p.m. (EST)
Telstar 5 Transponder 16 C-band Telstar 6 Transponder 9 C-band
Downlink Frequency 4020 Horizontal Downlink Frequency 3880 Vertical
Contacts:
PNM Western Resources
Investors: Investors:
Barbara Barsky Carl Ricketts
(505) 241-2662 (785) 575-8427
bbarsky@pnm.com investor@wr.com
Debra Randall Media:
(505) 241-2649 Kim Gronniger
drandal@pnm.com (785) 575-1927
kim_gronniger@wr.com
Media:
Bob Hagan
(505) 241-2621
rhagan@pnm.com
Crystal McClernon
(505) 241-4831
cmccler@pnm.com
# # #
[COMPANY FACT SHEETS]
Transaction Overview
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o PNM and Western Resources will become subsidiaries of a
new holding company to be named at a future date
Terms: o Tax-free, stock-for-stock transaction
o Combination will be preceded by Western Resources' spin
off of Westar Industries (which will own Western
Resources' non-utility assets) to Western Resources
shareholders
o The new holding company will issue 55 million shares to
Western Resources shareholders and Westar Industries
o Each Western Resources share will be converted into a
fraction of a share (to be determined at closing) in
the new holding company; each PNM share will be
converted into one new holding company share
o Equity value of transaction is approximately $1.503
billion (based on PNM's average closing price over the
last ten days of $27.325)
o The new holding company will also assume approximately
$2.939 billion of existing Western Resources debt o
Approximately 42% of the new holding company to be
owned by former PNM shareholders; approximately 58% to
be owned by former Western Resources shareholders and
Westar Industries
o Additional consideration paid to Western Resources
shareholders (including Westar Industries) in exchange
for additional equity contributions to reduce net debt
at Western Resources pre-close
o Transaction will be accounted for as a purchase
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Combined Company o Total enterprise value of approximately $6.6 billion
Financials ($2.7 billion in equity; $3.9 billion in debt and
preferred stock)
o Expected to be immediately accretive to earnings per
share and cash flow
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Dividend: o Shareholders of the combined company will receive PNM's
dividend. PNM's current annual dividend is $.80 per
share
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Transaction o Combined company will serve over one million retail
Benefits: electric customers and 400,000 retail gas customers in
two states and will have generating capacity of more
than 7,000 megawatts
o Quadruples PNM's current production capabilities
o Diversifies combined company's business mix and
geographic base through addition of Western Resources'
customers
o Provides a broader, more predictable cash flow; solid
revenues and potential earnings growth; improved access
to capital; and increased market capitalization and
public market float
o Opportunities for PNM to bring its 15 years of
successful power marketing experience and niche product
development to new customers
o Sharing of best practices across both organizations
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o At closing, Jeffry Sterba will become chairman,
president and CEO of the new holding company; David
Wittig will become chairman, president and CEO of
Westar Industries
Management & o The new holding company's board will consist of six
Board: current PNM board members and three additional
directors (two selected by PNM from a pool of Western
Resources' candidates; one nominated by Westar
Industries)
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o Successful spin-off of Westar Industries from Western
Resources required
Approval Process: o Approval by shareholders of both companies
o Customary regulatory approvals, including from the
Kansas Corporation Commission, the New Mexico Public
Regulation Commission, Securities and Exchange
Commission, the Nuclear Regulatory Commission, and the
Federal Energy Regulatory Commission
o The new holding company expects to register as a
holding company with the SEC under the '35 Act o
Transaction is expected to be completed within 12 to 15
months
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o Corporate headquarters will be located in New Mexico
Headquarters: o Headquarters for Kansas utilities will be maintained in
Topeka, Kansas
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[Western Resources logo]
Fact Sheet
CUSTOMERS As of December 31, 1999
Retail Electric:
Total: 627,949 (residential: 544,051; commercial: 78,663; industrial: 5,235)
Serves: 399 communities in Kansas
Wholesale customers: includes 63 municipalities and four rural electric
cooperatives
KPL electric customers: 330,209; KGE electric customers: 297,738
Service Territory: approximately 11,300 square miles
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ELECTRIC PROFILE ELECTRIC STATISTICS
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Financial Data 12-month sales....................23,221 million kwh
Operating Revenues.........................$1.4 billion Average annual residential usage..........10,203 kwh
Miles of electric line:
Assets.............................................$4.2
billion Transmission...................................6,300
Distribution..................................20,813
Employee Data Generating system capacity..................5,458 mw
Number of employees...............................2,390 Summer peak system net load.............4,372 net mw
Electric Generating Capacity:
62% coal 10% uranium 28% natural gas/other
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[GRAPHIC OMITTED]
Western Resources, Inc.
818 Kansas Avenue, P.O. Box 889
Topeka, Kansas 66601-0889
www.wr.com
[Western Resources logo]
At a Glance . . .
Western Resources (NYSE: WR) is a consumer services company with
interests in monitored services and energy. The company has total assets of
about $8 billion, including security company holdings through ownership of
Protection One (NYSE: POI) and Protection One Europe, which have more than 1.6
million security customers.
Its utilities, KPL and KGE, provide electric service to approximately
628,000 (December 31, 1999) customers in Kansas. Through its ownership in ONEOK,
Inc. (NYSE: OKE), a Tulsa-based natural gas company, Western Resources has a 45
percent interest in one of the largest natural gas distribution companies in the
nation, serving more than 1.4 million customers.
WESTERN RESOURCES FOUNDATION
The Western Resources Foundation was established in 1990 and supports
community and civic projects, higher education, environmental education,
children, youth and senior projects.
Since its inception, the Foundation has awarded approximately $10.6
million to civic and charitable causes within the company's service territory.
WESTERN RESOURCES GREEN TEAM
The Western Resources Green Team, comprising more than 600 employees on
a voluntary basis, develops environmental initiatives through a variety of
hands-on projects. The Green Team tackles wildlife programs, renewable energy
programs, environmental education and habitat programs and has worked on
alternative motor fuel programs.
Projects include:
o Constructing injured Raptor rehabilitation pens from recycled utility poles
o Maintaining the largest Golden Eagle reintroduction program in the United
States
o Erecting and monitoring nesting boxes at company facilities for endangered
Peregrine Falcons (The first Peregrine chicks born in Kansas in this
century were hatched in a Topeka nesting box in 1994.)
o Introducing the Osprey to Kansas reservoirs
o Creating solar battery rechargers for utility trailers
o Establishing a prairie dog colony on 50 acres at the Hutchinson power plant
as a part of an outdoor, prairie ecology classroom
o Creating wetlands at Elk City Wildlife Area, Tuttle Creek Reservoir, Wolf
Creek Generating Station and numerous substation sites throughout our
service territory.
The Green Team has participated in more than 400 projects and received
more than 40 national and regional awards.
COMMUNITY PARTNERS
Community Partners is a volunteer program for active and retired
Western Resources employees, to recognize and reward individuals who volunteer
time, energy and talents to the communities we serve.
The goal of Community Partners is to help local agencies, organizations
and individuals improve the quality of life in our community, while creating a
sense of leadership and pride.
Community Partners appreciates and acknowledges the volunteer efforts
of participants, contributing money to many of the organizations they
collectively serve.
[Westar Industries logo]
Fact Sheet
WESTAR INDUSTRIES
Background Information:
Western Resources made a preliminary filing with the Securities and Exchange
Commission in October for an initial public offering for 10 percent of Westar
Industries, which primarily will hold Western Resources' non-regulated assets,
including interests in Protection One (NYSE: POI), Protection One Europe, ONEOK
(NYSE: OKE), other investments and an interest in the new combined company with
Public Service Company of New Mexico (PNM).
David C. Wittig, chairman, president and chief executive officer of Western
Resources, will be the chairman, president and chief executive officer of Westar
Industries. Westar Industries is expected to be traded on the New York Stock
Exchange, and its headquarters will remain in Topeka, Kansas.
- ------------------------------------------------------------ ---------------------------------------------------------
SEPARATION BENEFITS
- ------------------------------------------------------------ ---------------------------------------------------------
By separating Westar Industries from the utility The company provides monitored security services to
companies, Western Resources will be able to: approximately 1.6 million customers through its
ownership of Protection One Europe and 85 percent
o Use the proceeds from the initial public offering ownership interest in Protection One. Through its
to pay down debt at the utility ownership in ONEOK, a Tulsa-based natural gas company,
Westar Industries has a 45 percent interest in one of
o Establish a market value for Westar Industries the the largest natural gas distribution companies in
largest natural gas distribution companies the nation.
in the nation.
"These holdings in conjunction with other investments and
o Allow investors to better evaluate the an interest in the new combined company announced
unregulated businesses with PNM today will offer Western Resources'shareholders
additional value and provide attractive opportunities
for other investors," said Wittig.
- ------------------------------------------------------------ ---------------------------------------------------------
Public Service Company of New Mexico [PNM LOGO]
Fact Sheet
Overview
Public Service Company of New Mexico (NYSE: PNM), the largest investor-owned
utility in New Mexico, operates a combined electric and gas utility serving
approximately 1.3 million people across the state and sells power on the
wholesale market. In operation since 1917, PNM is the eighth largest private
employer in New Mexico - and provides electricity to more than 360,000 customers
and natural gas to more than 425,000 customers. Its wholly-owned subsidiary,
Avistar, operates an advanced meter servicing business in California and Nevada
and provides energy and water management solutions for government and
institutional clients in the southwestern United States. Avistar is also
assisting e-commerce provider AMDAX.com in launching an Internet-based energy
auction system.
Generating Power and Sources
Electric
|X| PNM owns all or part of five electric generation plants for a total
capacity of 1,521 MW. In 1999, PNM had a net peak load of 1,291 MW
|X| PNM's electric generation by fuel class in 1999 was 67 percent coal, 31
percent nuclear and two percent gas and oil
|X| PNM owns about 47 percent of the San Juan Generating Station, a coal-fired
plant near Farmington, NM; 13 percent of the coal-fired Four Corners Power
Plant near Farmington; 10 percent of the Palo Verde Nuclear Generating
Station near Phoenix; and 100 percent of two natural gas-fired plants: the
154-MW Reeves Generating Station, in Albuquerque, and the 20-MW Las Vegas
Station, in Las Vegas, NM
|X| To meet the growing energy needs of the middle Rio Grande area, PNM
purchases 132 MW from Delta Person, a gas turbine generating unit in
Albuquerque that went on-line in 2000.
|X| PNM owns and maintains more than 2,000 miles of high-voltage electric
transmission lines and 11,000 miles of distribution lines
Gas
|X| PNM owns and maintains more than 1,300 miles of gas transmission pipelines
and 8,000 miles of gas distribution pipelines
|X| PNM's Star Lake Compression Station west of Cuba, NM, provides the pressure
to transport gas throughout the state
|X| Electric and gas control centers are located in Albuquerque
PNM and the Environment
PNM's new emission control system at San Juan Generating Station reduces sulfur
dioxide emissions and wastewater while using 30 MW less energy than the process
the company used previously. In April 2000, PNM donated 188 acres of canyon land
on Santa Fe's east side to The Nature Conservancy of New Mexico - a donation
that will preserve an important part of the city's watershed for generations to
come. The land, owned by PNM for more than 80 years, is estimated to be worth
$4.3 million. PNM produces an Environmental Annual Report every year, which is
posted on the company website at www.pnm.com.
PNM's Commitment to New Mexico
PNM invests more than $100 million every year on improvements to its electric
and gas systems. On an annual basis, the company purchases more than $35 million
of New Mexico gas and $110 million of New Mexico coal. It also spends more than
$200 million for other New Mexico goods and services. According to a 1997
University of New Mexico study, PNM's economic impact on New Mexico creates
9,988 jobs (including 2,751 PNM jobs) and personal income of $363 million. The
company donates or contributes more than $1.5 million a year to non-profit,
business and community organizations, and its employees volunteer more than
50,000 hours each year in their communities.
Financial Highlights
2000 to-date
|X| On October 18, PNM reported third quarter earnings of 97 cents per share
and net earnings of $86.9 million on total operating revenues of $1.15
billion
|X| PNM wholesale power revenues totaled $279.5 million in the third quarter,
an increase of nearly 86 percent over the same period last year
|X| PNM is buying back $35 million of its common stock through the end of the
first quarter of 2001
1999 year-end
|X| PNM earned $83.2 million, or $2.01 per share, on total operating revenues
of $1.2 billion. This represented an increase of two percent over the
previous year
|X| The stock price per share in 1999 included a high of $21.50, a low of
$14.84 and a close at year-end of $16.25
|X| Wholesale power sales totaled 17.9 million MWH, accounting for nearly a
third of PNM's total operating revenues
|X| PNM bought back about 2 million shares of common stock
Over the last decade, PNM retired or refinanced more than $1 billion in
long-term debt.
PNM Executive Team
o Jeffry E. Sterba, Chairman, President and Chief Executive Officer
o William J. Real, Executive Vice President, Energy Services and
Power Production
o Roger G. Flynn, Executive Vice President, Gas and Electric Services
o Max H. Maerki, Senior Vice President and Chief Financial Officer
PNM Corporation
- -------------------------- -----------------------------------------------------
Corporate Offices Investor Relations
414 Silver SW Barbara Barsky, Senior Vice President, Planning and
Alvarado Square Investor Services
Albuquerque, NM 87103 Tel: (505) 241-2662; bbarsky@pnm.com
Phone: (505) 241-2700 Media Relations
www.pnm.com Tel: (505) 241-4831
-----------
- -------------------------- -----------------------------------------------------
[SUGGESTED SPEAKING POINTS FOR MR. D.C. WITTING]
Suggested Speaking Points
for David C. Wittig
Announcement of
Western Resources/PNM Utility Alliance
MEDIA News Conference
November 9, 2000
Good afternoon and thank you for joining us.
I'm David Wittig, chairman, president and CEO of Western Resources. Joining
me today is Jeff Sterba, chairman, president, and CEO of Public Service Company
of New Mexico.
We announced last spring our intention to find a partner for our
utility operations to facilitate growth in terms of shareholder value and
generation capacity to better serve customers and position the company for
deregulation.
We also indicated that we would work diligently to find a partner that
would be committed to employees, customers, shareholders, retirees and the many
communities Western Resources serves not only through the delivery of reliable
electric service but also through charitable contributions and environmental
stewardship.
In PNM, we have found that partner. A progressive company based in
Albuquerque, New Mexico, PNM has a comparable corporate philosophy with regard
to power generation and wholesale marketing, a solid understanding of business
energy concerns, a charitable foundation, a strong environmental program and a
commitment to diversity.
The new company will be headquartered in Albuquerque, but the Kansas
utility headquarters will remain in Topeka. Western Resources and PNM
shareholders will need to approve the merger, as will the Kansas Corporation
Commission, the New
Mexico Public Regulatory Commission, the Nuclear Regulatory Commission, the
Securities and Exchange Commission and the Federal Energy Regulatory Commission.
The entire approval process is expected to be completed in 12 to 15 months.
Upon completion, Jeff Sterba will be chairman, president and CEO of the
combined company, and I will be chairman, president and chief executive officer
of Westar Industries, a company comprising our interests in Protection One,
ONEOK and other unregulated investments.
The merger brings together two companies with decades of experience in
successfully serving the needs of industrial and retail customers. The merged
company will offer competitive rates coupled with high-quality service and
proven reliability.
Three important objectives emerge from this alliance with PNM:
1. Size Gives Strength
o A larger, energy-focused company provides an opportunity to grow value
for shareholders; o Employees benefit from a stronger company that can
provide professional development opportunities; o A larger energy
company positions PNM as a stronger player in a competitive arena.
2. Scope Gives Depth
o Both companies bring diverse skills and talents to the table: o PNM's
working knowledge of competition and wholesale generation; o Western
Resources' shared services and wholesale generation.
o Both are well-run utilities with a focus on delivering exceptional
customer service, shareholder value and being a good place for their
employees to work. And, the third key element is the --
3. Potential for the Future
o The partnership is a solid platform for growth, enabling the utility
company to continue its strategy to be a competitive force in the
energy industry;
o Two management teams well-versed in utility operations bring together
best practices - ultimately providing shareholders with value,
customers with exceptional service and employees with additional
opportunities.
As I mentioned earlier, we worked diligently to find a partner that would
be committed to our employees, customers, shareholders, retirees and the
communities we serve. I believe that has been accomplished and we look forward
to moving ahead with our new partner.
Now, it is my pleasure to introduce to you Jeff Sterba.
[EMPLOYEE UPDATE]
Post or Distribute Immediately
November 9, 2000
WESTERN RESOURCES AND THE PUBLIC SERVICE COMPANY OF NEW MEXICO
ANNOUNCE UTILITY MERGER
Western Resources has reached an agreement with the Public Service Company
of New Mexico (PNM) to merge its utility operations with PNM.
When this process began last spring, we announced we would be looking for a
partner that held the same business philosophies as Western Resources, a company
comm itted to its employees, customers, shareholders and communities.
Potentialpartners were evaluated across a broad range of criteria
including:
-Financial flexibility
-Proven management skills
-Superior operating and technological capabilities
-Excellent customer service
The decision was also based on comparable corporate philosophies:
-Power generation and wholesale marketing
-Sound understanding of business energy concerns
-Charitable giving
-Solid environmental program
-Commitment to diversity
PNM, a progressive company based in Albuquerque, New Mexico, met this
criteria.
The highlights of the agreement are:
-PNM will acquire the electric utility operations, KPL and KGE, in a
tax-free, stock-for-stock transaction.
-PNM and Western Resources utility operations both become subsidiaries of a
new holding company.
-The new holding company will be headquartered in New Mexico, and the
headquarters for the Kansas utilities will remain in Topeka.
-Before the merger, Western Resources will spin-off to its shareholders all
of its non-utility assets (Protection One, Protection One Europe, ONEOK and
other investments) into Westar Industries.
(Continued)
Employee Update - Utility Merger, Page 2
Western Resources and PNM shareholders will need to approve the merger, as
will the KCC, the New Mexico Public Regulatory Commission, the SEC, the NRC and
FERC.
Jeff Sterba, chairman, president and CEO of PNM, will become chairman,
president and CEO of the new holding company. David C. Witti g will become
chairman, president and CEO of Westar Industries.
Bill Real, executive vice president of power production and energy services
for PNM, will head up the transition team for PNM. Bill has Kansas ties - he is
a graduate of Seaman High School in Topeka and the University of Kansas.
Employees will be informed as we move through the transition process,
regulatory approvals and other events pertaining to this merger. Stay tuned to
Employee Updates, synergy and other special announcements as we travel this path
together.
[A JOINT LETTER TO EMPLOYEES]
[PNM LOGO] [WESTERN RESOURCES LOGO]
November 9, 2000
Dear Western Resources Employee:
We hope that you are as excited as we are about the announcement that PNM, a New
Mexico-based electric and gas utility, and Western Resources have signed a
definitive agreement for PNM to merge with Western Resources' utility
operations. This is great news for employees of PNM and Western Resources, for
our customers, our shareholders and our communities.
The new combined company will have the scale and scope to compete and succeed in
the evolving energy marketplace with: o more than 1 million retail electric
customers in New Mexico and Kansas and 400,000 retail gas customers, o a
generating capacity of more than 7,000 megawatts and o a combined work force of
nearly 5,000 employees.
The new company, which will be named at a later date, will be headquartered in
New Mexico. The Kansas utility operations will remain headquartered in Topeka.
From PNM's perspective, this merger is about growth. We strongly believe that,
together, PNM and Western Resources will be able to deliver tangible benefits to
you, as well as to customers and shareholders - beyond what either company could
provide on a stand-alone basis. The company has no present intention to have
involuntary work force reductions as a result of the transaction.
Western Resources and PNM shareholders will need to approve the merger, as will
several regulating bodies. The entire approval process is expected to be
complete within 12 to 15 months. Upon completion, Jeff Sterba will be chairman,
president and CEO of the combined company. David Wittig will be chairman,
president and CEO of Westar Industries, a company comprising Protection One,
ONEOK and other unregulated investments, which will be separated from Western
Resources at the close of the sale.
For Western Resources' employees, special meetings will be conducted today at
the Topeka Performing Arts Center and at the company's headquarters to provide
you more information and an opportunity to meet members of PNM's senior
management. Bill Real, PNM executive vice president for Power Production and
Energy Services, will be heading integration efforts as we move forward and will
be available later this morning to share more information about PNM and its
plans.
To hear more about our exciting new future, please dial in for a recorded
message from Jeff Sterba. The number to call is 1-888-203-1112 (pass code
552883). To see a webcast of the message, you can visit this link:
http://www.vcall.com/NASApp/Vcall/EventPage?ID=53240. The phone message and the
webcast will be available until 5 p.m. on Monday, Nov. 13.
Sincerely,
/s/ /s/
Jeffry E. Sterba David C. Wittig
PNM Chairman, President and CEO Western Resources Chairman, President and CEO
[QUESTIONS AND ANSWERS TO SHAREHOLDERS]
Questions and Answers
If I am a Western Resources shareholder, what can I expect to have after the
transaction?
At the close of the transaction, for each share of Western Resources stock you
own, you will receive a fractional share of stock in a new utility, which will
be formed from the merger of Western Resources and PNM. You will also receive a
fractional share of Westar Industries, which will be distributed to you at
transaction close.
When will the shareholders vote on the transaction?
Shareholders are expected to vote on the transaction next spring.
What action is required of shareholders now?
Shareholders are not required to take any action before the shareholder meetings
are scheduled.
What is the dividend for the new company? For Westar Industries?
Shareholders of the combined company after the closing will receive PNM's
dividend. PNM's current dividend is $.80 per share. Westar Industries is not
expected to pay a dividend.
What happens to employee benefits?
The integration team will review best practices at both companies, including
benefit plans, to create a competitive package for employees. Benefit plans will
remain the same for at least two years following the merger.
When will the deal close?
The entire approval process is expected to be completed within 12-15 months.
What approvals are needed?
Western Resources and PNM shareholders will need to approve the merger, as will
the Kansas Corporation Commission, the New Mexico Public Regulatory Commission,
the Federal Energy Regulatory Commission, the Securities and Exchange Commission
and the Nuclear Regulatory Commission.
What happens to the management of the company?
Upon completion of the deal, Jeff Sterba will be chairman, president and CEO of
the combined company, and David C. Wittig will be chairman, president and chief
executive officer of Westar Industries, which has our interests in Protection
One, ONEOK and other investments and will have an interest in the new combined
company.
Will KGE and KPL merge into one operating company as a result of this
transaction?
At this point, no plans have been made to alter the current organizational
structures of KGE and KPL.
What facets of the business will be based in Wichita?
At this time, no plans have been made to alter business operations already
established in Wichita.
Which parts of Western Resources' businesses are affected?
PNM will acquire Western Resources' utility operations. Westar Industries will
include the non-utility assets, including its 85 percent stake in Protection
One, its interest in ONEOK, other investments and an interest in the new
combined company, which will be split off to shareholders at the time of the
merger.
How will PNM's merger with Western Resources' utility operations affect rates?
Western Resources will file a rate case on Nov. 27, 2000, and the Kansas
Corporation Commission will review the company's data and input from other
sources to determine whether rates will increase, decrease or remain the same
for KPL and KGE. The Kansas Corporation Commission should complete the rate case
review by July 2001.
How will customers be affected by the transaction?
Customers should continue to receive safe and reliable electric service and
should benefit from technological innovations derived through the merger with
PNM. In 1999, PNM was featured in a leading industry publication as one of the
five most technologically innovative utilities in the nation.
What are PNM's rates?
PNM's residential rates in 1999 were 7.7 cents/kwh.
What about the company's Shared Services division? Will it be retained or will
those jobs be lost?
PNM has a similar Shared Services structure and understands the cost savings and
efficiencies that can be achieved through such arrangements. At this time, no
plans have been made to alter Western Resources' Shared Services structure. The
Shared Services agreement with Protection One may be terminated two years after
the closing unless otherwise extended.
Will there be layoffs when the deal is closed? How many jobs will be lost and at
which locations?
While the combined company will seek sensible cost savings, it has no intention
to have involuntary work force reductions as a result of the transaction.
Will Westar Industries retain an investment in the new company as part of the
arrangement?
Yes. Westar Industries will have an ownership interest in the combined company
following the conversion of certain intercompany obligations prior to
consummation of the transaction. In addition, Westar Industries has the option
of making additional equity infusions into Western Resources that will be used
to reduce its net debt balance prior to closing. Up to $407 million of such
equity infusions may be used to purchase additional new holding company common
and convertible preferred stock.
Will Western Resources have representation on the new company's board of
directors?
Yes. The board of directors for the new company will comprise six current PNM
board members and three additional directors, two of whom will be selected by
PNM from a pool of candidates nominated by Western Resources and one person
nominated by Westar Industries.
Why did Western Resources choose PNM as a partner?
o Growth opportunities
o Comparable corporate philosophy with regard to power generation and
wholesale marketing
o Charitable commitment to communities
o Strong environmental stewardship
o Commitment to diversity
Who were the other bidders?
The negotiations between Western Resources and interested parties were
confidential exchanges. PNM fulfilled the criteria Western Resources initially
set forth in looking for a partner, and the company is pleased with the
agreement reached with PNM.
Where will the new company be housed?
The new holding company will be located in Albuquerque, New Mexico. The Kansas
utility operations will remain in Topeka, as will Westar Industries.
What is the timetable for integration? How will the system work?
Bill Real, PNM executive vice president of energy services and power production,
will lead the PNM integration team, which will be established in the coming
weeks. The teams will be made up of representatives of both companies. The
completion date is estimated to be within 12 to 15 months, pending regulatory
approvals.
When will the Western Resources' board of directors vote to pursue the
transaction?
The Western Resources and PNM boards of directors voted unanimously to approve
the transactions on Nov. 8.
What will be the status of the Western Resources' board of directors once the
transaction is completed?
PNM will select the members of the Western Resources board of directors
following the closing. The new holding company and Westar Industries will both
have separate boards of directors.
********************************************************************************
Western Resources will be filing a proxy statement and other relevant documents
concerning the merger with the United States Securities and Exchange Commission
(the "SEC"). WE URGE INVESTORS TO READ THE PROXY STATEMENT AND ANY OTHER
RELEVANT DOCUMENTS TO BE FILED WITH THE SEC, BECAUSE THEY CONTAIN IMPORTANT
INFORMATION. Investors will be able to obtain the documents free of charge at
the SEC's website, http://www.sec.gov or at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. In addition, documents filed
with the SEC by Western Resources will be available free of charge by contacting
Western Resources at the following address and telephone number: Carl A.
Ricketts, Vice President, Investor Relations, Western Resources, Inc., 818 South
Kansas Avenue, Topeka, KS 66612, telephone: 785-575-8424, fax: 785-575-1774,
e-mail: Carl_A_Ricketts@wr.com. Documents filed with the SEC by PNM can be
obtained by contacting PNM at the following address and telephone number:
Barbara L. Barsky, Senior Vice President, Planning and Investor Services,
telephone: 505-241-2662, fax: 505-241-2368, e-mail: bbarsky@pnm.com.
PLEASE READ THE PROXY STATEMENT CAREFULLY BEFORE MAKING A DECISION CONCERNING
THE MERGER.
This document does not constitute a solicitation by Western Resources or its
board of directors of any approval or action of its shareholders. Western
Resources and its board of directors will be soliciting proxies from Western
Resources shareholders in favor of the merger. You can obtain information about
Western Resources' directors and officers and their beneficial interests in
Western Resources' common stock from the SEC's website, http://www.sec.gov, and
Western Resources' website, http://www.wr.com. Updated information with respect
to the security holdings of these individuals, and their interests in the
transaction and the solicitation, will be included in the final proxy statement
to be filed with the SEC.
CAUTIONARY STATEMENT -- Certain information in this document concerning the
transaction with PNM is forward-looking, including statements regarding the
consideration per share that Western Resources' shareholders are projected to
receive from the transaction and Western Resources' expectation as to the
closing date of the transaction. Forward-looking information is based on
management's estimates, assumptions and projections, and is subject to
significant uncertainties, many of which are beyond Western Resources' control.
Important risk factors could cause the actual future results to differ
materially from those currently estimated by management. Risk factors that could
materially affect statements made concerning the PNM transaction include, but
are not limited to: the timely receipt of necessary shareholder, regulatory and
other consents and approvals needed to complete the transaction, which could be
delayed for a variety of reasons related or not related to the transaction
itself; the fulfillment of all of the closing conditions specified in the
transaction documents; the dollar equivalent of the market price of PNM ordinary
shares; and other factors described from time to time in the reports filed be
Western Resources under the Exchange Act.
