-----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, L7RurdYDM8c54ywOE0eST6BrRawkNLawJoX3wFtVtHYG9ABxgaM9W2atMytQJmur Qhcqx4nCT/CSVgnWKDVDtQ== 0000081023-95-000013.txt : 19951103 0000081023-95-000013.hdr.sgml : 19951103 ACCESSION NUMBER: 0000081023-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951102 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE CO OF NEW MEXICO CENTRAL INDEX KEY: 0000081023 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 850019030 STATE OF INCORPORATION: NM FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06986 FILM NUMBER: 95586576 BUSINESS ADDRESS: STREET 1: ALVARADO SQUARE, MS2706 CITY: ALBUQUERQUE STATE: NM ZIP: 87158 BUSINESS PHONE: 5058482700 10-Q 1 FINAL 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-6986 PUBLIC SERVICE COMPANY OF NEW MEXICO (Exact name of registrant as specified in its charter) New Mexico 85-0019030 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Alvarado Square, Albuquerque, New Mexico 87158 (Address of principal executive offices) (Zip Code) (505) 241-2700 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) 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 APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock--$5.00 par value 41,774,083 shares Class Outstanding at November 1, 1995 PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION: Report of Independent Public Accountants 3 ITEM 1. FINANCIAL STATEMENTS Consolidated Statements of Earnings-- Three Months and Nine Months Ended September 30, 1995 and 1994 4 Consolidated Balance Sheets-- September 30, 1995 and December 31, 1994 5 Consolidated Statements of Cash Flows-- Nine Months Ended September 30, 1995 and 1994 6 Notes to Consolidated Financial Statements 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 PART II. OTHER INFORMATION: ITEM 1. LEGAL PROCEEDINGS 17 ITEM 5. OTHER INFORMATION 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18 Signature 19 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Public Service Company of New Mexico: We have reviewed the accompanying condensed consolidated balance sheet of Public Service Company of New Mexico (a New Mexico corporation) and subsidiaries as of September 30, 1995, and the related condensed consolidated statements of earnings for the three-month and nine-month periods ended September 30, 1995 and 1994, and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 1995 and 1994. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Public Service Company of New Mexico and subsidiaries as of December 31, 1994 (not presented herein), and, in our report dated February 23, 1995, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1994, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Albuquerque, New Mexico November 1, 1995 ITEM 1. FINANCIAL STATEMENTS PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
Three Months Ended Nine Months Ended September 30 September 30 ------------------ ----------------- 1995 1994 1995 1994 ---- ---- ---- ---- (In thousands except per share amounts) Operating revenues: Electric $168,115 $175,024 $446,421 $473,548 Gas 27,410 39,291 164,736 199,669 Water 61 4,402 6,196 10,567 -------- -------- -------- -------- Total operating revenues 195,586 218,717 617,353 683,784 -------- -------- -------- -------- Operating expenses: Fuel and purchased power 40,980 41,413 105,769 105,649 Gas purchased for resale 7,480 12,756 71,476 98,460 Other operation and maintenance 71,641 75,973 230,889 238,498 Depreciation and amortization 19,767 19,047 61,019 55,300 Taxes, other than income taxes 8,321 10,383 26,859 30,015 Income taxes 12,663 15,539 27,852 37,435 -------- -------- -------- -------- Total operating expenses 160,852 175,111 523,864 565,357 -------- -------- -------- -------- Operating income 34,734 43,606 93,489 118,427 -------- -------- -------- -------- Other income and deductions, net of taxes: 7,510 (4,557) 22,203 113 -------- -------- -------- -------- Income before interest charges 42,244 39,049 115,692 118,540 -------- -------- -------- -------- Interest charges: Interest on long-term debt 12,215 15,978 40,606 49,460 Other interest charges 1,060 1,368 4,514 4,186 Allowance for borrowed funds used during construction - (86) - (246) -------- -------- -------- -------- Net interest charges 13,275 17,260 45,120 53,400 -------- -------- -------- -------- Net earnings 28,969 21,789 70,572 65,140 Preferred stock dividend requirements 495 1,538 3,567 4,895 -------- -------- -------- -------- Net earnings applicable to common stock $ 28,474 $ 20,251 $ 67,005 $ 60,245 ======== ======== ======== ======== Average shares of common stock outstanding 41,774 41,774 41,774 41,774 ======== ======== ======== ======== Net earnings per share of common stock $ 0.68 $ 0.48 $ 1.60 $ 1.44 ======== ======== ======== ======== Dividends paid per share of common stock $ - $ - $ - $ - ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements. /TABLE PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1995 1994 ------------ ----------- (Unaudited) (In thousands) ASSETS Utility plant $2,459,733 $2,587,592 Accumulated provision for depreciation and amortization (887,767) (890,905) ---------- ---------- Net utility plant 1,571,966 1,696,687 ---------- ---------- Other property and investments 33,594 34,523 ---------- ---------- Current assets: Cash 21,658 21,029 Temporary investments, at cost 76,314 74,521 Receivables 97,944 129,048 Income taxes receivable - 4,182 Fuel, materials and supplies 45,366 51,068 Gas in underground storage 8,249 8,744 Other current assets 8,321 9,549 ---------- ---------- Total current assets 257,852 298,141 ---------- ---------- Deferred charges 136,741 173,914 ---------- ---------- $2,000,153 $2,203,265 ========== ========== CAPITALIZATION AND LIABILITIES Capitalization: Common stock equity: Common stock $ 208,870 $ 208,870 Additional paid-in capital 470,416 469,648 Excess pension liability, net of tax (1,106) (1,106) Retained earnings (deficit) since January 1, 1989 20,400 (46,006) ---------- ---------- Total common stock equity 698,580 631,406 Cumulative preferred stock: Without mandatory redemption requirements 12,800 59,000 With mandatory redemption requirements - 17,975 Long-term debt, less current maturities 728,865 752,063 ---------- ---------- Total capitalization 1,440,245 1,460,444 ---------- ---------- Current liabilities: Short-term debt - - Accounts payable 58,244 105,213 Current maturities of long-term debt 105 148,532 Accrued interest and taxes 73,440 28,073 Other current liabilities 39,992 43,662 ---------- ---------- Total current liabilities 171,781 325,480 ---------- ---------- Deferred credits 388,127 417,341 ---------- ---------- $2,000,153 $2,203,265 ========== ========== The accompanying notes are an integral part of these financial statements. /TABLE PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30 ----------------- 1995 1994 ---- ---- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $70,572 $65,140 Adjustments to reconcile net earnings to net cash flows from operating activities: Depreciation and amortization 73,429 67,229 Gain on sale of plant and property (39,055) (6,576) Reserves for bad debts - 526 Accumulated deferred investment tax credit (3,866) (6,084) Accumulated deferred income tax (36,450) (2,226) Changes in certain assets and liabilities: Receivables 35,285 39,855 Fuel, materials and supplies (29,871) (2,394) Deferred charges 10,754 4,869 Accounts payable (46,990) (46,422) Accrued interest and taxes 45,366 28,378 Deferred credits 24,384 (10,624) Other 4,043 3,268 Other, net 6,927 9,937 ------- ------- Net cash flows from operating activities 114,528 144,876 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Utility plant additions (76,884) (80,122) Utility plant sales 205,968 39,562 Other property additions (26) (1,715) Temporary investments, net (1,793) (19,080) ------- ------- Net cash flows from investing activities 127,265 (61,355) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Redemptions of PV lease obligation bonds (132,663) - Redemptions and repurchases of preferred stock (64,175) (7,384) Redemption of first mortgage bonds - (45,000) Bond redemption premium and costs (373) (2,418) Proceeds from asset securitization 18,758 - Repayments of other long-term debt (57,768) (27,292) Net increase in short-term debt - - Dividends paid (4,943) (5,081) ------- ------- Net cash flows from financing activities (241,164) (87,175) ------- ------- Increase (decrease) in cash 629 (3,654) Cash at beginning of period 21,029 20,510 ------- ------- Cash at end of period $21,658 $16,856 ======= ======= SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $46,423 $56,104 ======= ======= Income taxes paid $38,205 $ 7,000 ======= ======= The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) General Accounting Policy In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair presentation of the consolidated financial statements. The accounting policies followed by Public Service Company of New Mexico (the "Company") are set forth in note (1) of notes to the Company's consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994 Form 10-K") filed with the Securities and Exchange Commission. (2) Palo Verde Nuclear Generating Station ("PVNGS") Lease Obligation Bonds ("LOBs") Redemption On March 8, 1995, $121 million of PVNGS LOBs were retired. The retired LOBs consisted of $58 million of 10.30% LOBs due 2014 retired at a price of 100% of par and $63 million of 10.15% LOBs due 2016 retired at a price of 97.8% of par. Additionally, $4.4 million and $4.8 million of LOBs due 1996 and 1997 at interest rates of 9.125% and 8.95%, respectively, were retired at par on March 22, 1995. In connection with the LOB retirements, $65 million was borrowed under the Company's liquidity arrangements and $19 million was obtained under the securitization facility related to amounts being recovered from gas customers relating to certain gas contract settlements. In July 1995, the Company repaid the borrowings with proceeds from asset sales. In conjunction with these retirements, the Company wrote off $1.5 million of net costs related to these transactions. The retirement of the LOBs, which were the Company's highest cost debt, will save the Company approximately $11 million annually in interest expense over the next five years. (3) Sale of Certain Gas Assets In February 1994, an agreement was reached with Williams Gas Processing- Blanco, Inc. ("Williams") for the sale of substantially all of the gas gathering and processing assets of the Company and its gas subsidiaries. On June 30, 1995, the sale was consummated. The Company and its gas subsidiaries received approximately $154.1 million from Williams and recorded an after-tax gain of $12.8 million, or $.31 per share. (4) Sale of Sangre de Cristo Water Company ("SDCW") In February 1994, the Company and the City of Santa Fe (the "City") entered into a purchase and sale agreement for the Company's water division. On July 3, 1995, the sale was consummated. The Company received $51.9 million (exclusive of current assets netted against current liabilities) from the sale of assets and recorded an after-tax gain of $6.8 million, or $.16 per share, in the third quarter of 1995. As a part of the sales agreement, the Company will continue to operate the water utility for up to four years for a fee under a contract with the City. (5) Cumulative Preferred Stock On August 7, 1995, the Company redeemed, at par, all of its 8.48% Series, 8.80% Series and 8.75% Series of cumulative preferred stock outstanding as of July 6, 1995. The redemption price of $64 million included accrued dividends through the redemption date. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's 1994 Form 10-K PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" discussed management's assessment of the Company's financial condition, results of operations and other issues facing the Company. The following discussion supplements the 1994 Form 10-K discussion and should be read in conjunction with the consolidated financial statements presented herein and in the 1994 Form 10-K. LIQUIDITY AND CAPITAL RESOURCES During the nine month period ended September 30, 1995, the Company generated $114.5 million from operating activities and received proceeds of $206 million from the sales of certain gas gathering and gas processing assets and from the sale of the Company's water division. The Company's construction expenditures for the nine months ended September 30, 1995 were $76.9 million. The Company anticipates it will spend approximately $22.1 million during the remainder of 1995 for additional construction expenditures. The Company's construction expenditures have been and are expected to be met primarily through internally-generated cash. However, to cover differences in the amounts and timing of cash generation and cash requirements, the Company utilizes short-term borrowings under its liquidity arrangements, which consist of a $100 million secured revolving credit facility, a $40 million credit facility collateralized by the Company's electric customer accounts receivable and $11 million in local lines of credit. As previously reported, the Company's secured revolving credit facility was amended in June 1995. The amended credit facility (the "Facility") contains improved pricing, a three-year term and some covenant changes. The maximum allowed ratio of the Company's total debt to total capitalization under the Facility is 70%. As of September 30, 1995, such ratio was 65.4%. During the first nine months of 1995, the Company retired $132.7 million of PVNGS LOBs, $57.8 million of other long-term debt (which included the balance outstanding from the August 1993 securitization of amounts being recovered from gas customers relating to certain gas contract settlements) and $64 million of preferred stock. In addition, as of September 30, 1995, the Company had no short-term borrowings and had cash and temporary investments of $98 million. The Company continues to evaluate its investment and debt retirement options to optimize its financing strategy and earnings potential. Credit Rating Fitch Investors Service, Inc. ("Fitch") recently upgraded the Company's first mortgage bonds, secured facilities bonds, LOBs, and preferred stock. However, all of the Company's securities are still rated below investment grade by the major rating agencies, including Fitch. In its report, Fitch stated that the higher ratings reflect "the Company's successful restructuring program, improved operating and financial performance, and favorable regulatory developments, while still recognizing its high debt leverage, heavy reliance on the wholesale power market, comparatively high rates, nuclear generating/asset concentration risk and limited financial and operating flexibility". RESULTS OF OPERATIONS Operating income from the resources excluded from New Mexico Public Utility Commission ("NMPUC") jurisdictional rates increased $2.6 million for the nine months ended September 30, 1995 over the corresponding period a year ago. Such increase resulted from lower 1995 PVNGS operation and maintenance ("O&M") expenses partially offset by lower gross margin as a result of poor wholesale power market conditions. However, net earnings from such excluded resources decreased $2.7 million for the nine months ended September 30, 1995 as a result of the June 1994 gain from the sale of generating facilities to Utah Associated Municipal Power Systems ("UAMPS"). This gain was partially offset by reduced 1995 interest expense due to certain long-term debt retirements. Operating results for the excluded resources for all these periods reflect the allocation of interest charges based on average investment in excluded net utility plant as a percent of total utility plant for the period. Selected financial information for the excluded resources is shown below: Three Months Ended Nine Months Ended September 30 September 30 1995 1994 1995 1994 (In thousands) Operating revenues $ 10,035 $ 10,729 $ 27,209 $ 30,233 Operating income $ 1,562 $ 1,422 $ 3,406 $ 760 Net earnings (loss) $ 441 $ 67 $ (533) $ 2,156 Net utility plant at end of period $132,683 $131,413 $132,683 $131,413 Electric gross margin (operating revenues less fuel and purchased power expense) decreased $6.5 million and $27.2 million for the quarter and nine months ended September 30, 1995, respectively, from the corresponding periods a year ago. These decreases were attributable to: (i) the retail rate reduction implemented in late 1994; (ii) a difference between the estimated unbilled revenues reported in the fourth quarter of 1993 and actual revenues recorded in the first quarter of 1994; and (iii) reduced off-system sales margin as a result of the expiration of three sales contracts and generally poor wholesale power market conditions. Partially offsetting such decreases was the increase in retail revenues (net of the effect of the retail rate reduction) resulting from increased load growth. Gas gross margin (gas operating revenues less gas purchased for resale) decreased $6.6 million and $7.9 million for the quarter and nine months ended September 30, 1995, respectively, from the corresponding periods a year ago due to a decrease in gas deliveries resulting from warmer than normal weather in the first quarter of 1995 and reduced margin due to the sale of the gas gathering and processing assets. Water revenues decreased $4.3 million and $4.4 million for the quarter and nine months ended September 30, 1995, respectively, from the corresponding periods a year ago due to the sale of the Company's water division in July 1995. Other O&M expenses decreased $4.3 million for the quarter from the corresponding period a year ago due to a decrease in injuries and damages expense of $2.9 million as a result of the recording of workers' compensation liability in the third quarter of 1994, a decrease in gas production and products extraction expense of $2.8 million resulting from the gas assets sale in June 1995, lower office supplies and expenses of $1.6 million as a result of a decrease in temporary office labor and postage expense and a decrease in water O&M expense of $1.0 million resulting from the sale of the Company's water division in July 1995. Such decreases were offset by higher employee benefit expense of $1.7 million caused by the retroactive deferral of the gas operation's retiree health care cost for regulatory purposes recorded in the third quarter of 1994, higher administration and general ("A&G") labor expense of $1.3 million and higher outside services expense of $.9 million. Other O&M expenses for the nine months ended September 30, 1995 decreased $7.6 million from the corresponding period a year ago due to a decrease in San Juan Generating Station ("SJGS") O&M expenses of $3.5 million resulting from two scheduled outages in 1994, decreased PVNGS O&M expenses of $2.3 million as a result of a reduction in scheduled maintenance outage hours and lower property taxes in the current period and decreased Four Corners Generating Station ("Four Corners") O&M expenses of $1.6 million resulting from scheduled outages in 1994. Also, contributing to the decrease in the current period was a decrease in injuries and damages expense of $3.2 million as a result of the recording of workers' compensation liability in the third quarter of 1994, a decrease in gas production and products extraction expense of $2.8 million resulting from the gas assets sale in June 1995, lower office supplies and expenses of $2.6 million as a result of a decrease in temporary office labor and postage expense and a decrease in water O&M expense of $.8 million resulting from the sale of the Company's water division in July 1995. Such decreases were offset by higher production O&M expenses for the gas and oil-fired units of $2.9 million resulting from the maintenance outages in 1995, higher transmission expense of $1.1 million due to higher wheeling and maintenance expense, higher employee benefit expense of $2.5 million caused by the retroactive deferral of the gas operation's retiree health care costs for regulatory purposes recorded in the third quarter of 1994, higher A&G labor expense of $2.1 million and higher outside services expense of $1.2 million. Depreciation and amortization expenses increased $.7 million and $5.7 million for the quarter and nine months ended September 30, 1995, respectively, from the corresponding periods a year ago as a result of implementing the new depreciation rates approved by the NMPUC. Operating income taxes for the quarter and nine months ended September 30, 1995 decreased $2.9 million and $9.6 million, respectively, from the corresponding periods a year ago due primarily to decreased pre-tax earnings for the current periods. Other income and deductions, net of taxes, for the quarter and nine months ended September 30, 1995 increased $12.1 million and $22.1 million, respectively, over the corresponding periods a year ago. Significant items, net of taxes, for the quarter included the following: (i) the gain of $6.8 million from the sale of the Company's water division; (ii) an additional provision for legal expenses of $1.8 million in the third quarter of 1994; and (iii) an additional 1994 third quarter write-off of $1.8 million relating to the gas take-or-pay settlement payments which are not recoverable through rates. Significant year-to-date items, net of taxes, include the above items as well as the following: (i) the gain of $12.8 million from the gas assets sale; (ii) an after-tax accrual of $2.6 million of income pertaining to the carrying costs related to gas take-or-pay settlement amounts; (iii) income of $1.4 million related to adjusting reclamation reserves for certain mining operations; and (iv) establishing a 1994 regulatory reserve of $1.2 million. Offsetting such increases were the following: (i) the gain of $4.4 million from the sale of generating facilities to UAMPS in 1994; (ii) the tax benefit of $1.7 million related to sharing the UAMPS gain with jurisdictional customers; (iii) an additional 1995 regulatory reserve of $1.5 million; and (iv) an after-tax write off of debt retirement costs of $.9 million. Net interest charges decreased $4.0 million and $8.3 million for the quarter and nine months ended September 30, 1995, respectively, from the corresponding periods a year ago. This was due to the retirement of $130 million of PVNGS LOBs in March 1995 and the retirement of $45 million of first mortgage bonds in April 1994. Preferred stock dividend requirements decreased $1.0 million and $1.3 million for the quarter and nine months ended September 30, 1995, respectively, from the corresponding periods a year ago as a result of the retirement of preferred stock in August 1995. OTHER ISSUES FACING THE COMPANY Transmission Issues Transmission Right-of-Way As previously reported, the Company has easements for right-of-way with the Navajo Nation for portions of several transmission lines that deliver the Company's generation resources to the Albuquerque metropolitan area. One grant of easement for approximately 4.2 miles of right-of-way for two parallel 345 Kv transmission lines expired in January 1993. Prior to expiration, the Company had unsuccessfully attempted to renew the grant. (See PART II, ITEM 7.-- "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE COMPANY-- TRANSMISSION ISSUES--Transmission Right-of-Way" in the 1994 Form 10-K.) The Navajo Nation and the Company continue to discuss settlement of various right-of-way issues. The parties currently have no date by which they expect to enter into a new agreement. The Company currently cannot predict the results of these discussions; however, the Company believes that resolution of this issue will not have a material adverse impact on the Company's financial condition or results of operations. Transmission Disputes The Company receives approximately $14.0 million annually for the provision of firm transmission service to several customers. Most of these customers, through various actions, have initiated formal Federal Energy Regulatory Commission ("FERC") investigations into the transmission service billing units and transmission rates charged by the Company. If these various allegations and requested rate reductions are approved by the FERC, the Company's revenues for transmission services could be reduced by as much as $9.0 million annually. The Company has responded to these allegations and has requested that the FERC dismiss the complaints. The Company is currently awaiting the FERC decision. The Company is not able to predict the outcome of this issue but does not anticipate any material adverse impact on the Company's financial condition or results of operations. SJGS Water Supply As previously reported, the Company has initiated a process to renew and extend its Federal water contract for 16,200 acre feet of water per year for SJGS. (See PART I, ITEM 1.--"BUSINESS--ELECTRIC OPERATIONS--Fuel and Water Supply" in the 1994 Form 10-K.) During the process of conducting an environmental assessment, the Company received numerous objections, primarily from various Indian tribes in the Four Corners area, including the Navajo Nation. The objections relate primarily to the potential impact of the Company's contract renewal on proposed and existing uses of the San Juan River or its tributaries by the various tribes. The Company is currently investigating these objections and will respond to them as part of the environmental assessment. In connection with the contract renewal process, a Section 7 consultation under the Endangered Species Act of 1973 is being conducted. The consultation will involve a review of potential impacts of the Company's depletion of the 16,200 acre feet of water from the San Juan River on two endangered fish species. The Company is currently unable to predict the outcome of these matters. Environmental Issues The Company has evaluated the potential impacts of the following environmental issues and believes, after consideration of established reserves, that the ultimate outcome of these environmental issues will not have a material adverse effect on the Company's financial condition or results of operations. Santa Fe Station As previously reported, the New Mexico Environment Department ("NMED") has been conducting an investigation of the groundwater contamination detected beneath the Santa Fe Station site to determine the source of the contamination under a settlement agreement between the Company and the NMED. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- OTHER ISSUES FACING THE COMPANY--ENVIRONMENTAL ISSUES--Electric Operations--Santa Fe Station" in the 1994 Form 10-K.) A minimum site assessment ("MSA") has been conducted at the site under the settlement agreement. The final results are not yet available and sampling results are currently being reviewed. The Company is awaiting the final report on the MSA. Preliminary results indicate that the Santa Fe station site does not appear to have been a source of gasoline contamination. The Company is unable to predict the ultimate outcome of the investigation or action by the NMED. Albuquerque Electric Service Center Recent trenching work at the Company's Albuquerque Electric Service Center revealed oil contaminated soil in an area of the service center used for storage of used oil in drums. The trenched area bisects a small portion of the storage area, indicating that potentially the entire area could be underlain with contaminated soil. The Company has requested a laboratory analysis on the soil to determine the type of contamination. The Company may be required to assess soil and groundwater for contamination as well as remediate extensive soil in the area. The Company currently cannot predict the outcome of the analysis, to what extent the soil has been contaminated or the costs of the remediation, if any. In addition, a leaking fuel line, which has been replaced, caused soil and groundwater contamination in the vicinity of the leak with fuel constituents. The Company has proposed a quarterly sampling plan to the NMED for the site. The NMED has concerns regarding the placement of monitoring wells and the relatively high levels of residual contamination remaining in the soil at the site. Based on analysis of the groundwater sampling recently completed, the NMED may require an additional monitoring well and soil remediation work at the site. City Election On October 3, 1995, the City of Albuquerque held a municipal election. As expected, a bill regarding possible municipalization of the Company's electric distribution system was excluded from the ballot. Groups consisting of Concerned Citizens, United We Stand America and Coalition for Lower Electric Rates had indicated that they would take this matter to a special election if the bill was excluded from the October 3 ballot. A significant number of signatures is required in order to force a special election. The Company is unable to predict whether or not there will be a special election. El Paso Electric Company ("El Paso") As previously reported, El Paso, one of the joint owners of PVNGS and Four Corners, has been operating under Chapter 11 of the Bankruptcy Code since 1992. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE COMPANY--EL PASO ELECTRIC COMPANY BANKRUPTCY" in the 1994 Form 10-K.) On September 29, 1995, El Paso filed with the bankruptcy court a revised plan whereby, among other things, certain issues will be resolved, and El Paso will assume the joint facilities operating agreements. The Company is unable to predict whether or not the revised plan will be approved. Gas Services Business Unit ("Gas Services") Rate Case On August 28, 1995, Gas Services filed a request with the NMPUC for a $13.3 million increase in its annual retail natural gas sales and transportation rates. On October 5, 1995, the NMPUC issued a procedural order on the Company's application for the rate increase and ordered public hearings to be held beginning February 19, 1996. At this time, the Company is unable to predict the ultimate outcome of the hearings. Non-Utility Subsidiaries As previously reported, as part of the Company's strategic plan, the Company internally restructured its operations into four separate business units, each targeted at a specific segment of its customer base. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OVERVIEW--Strategic Plan" in the 1994 Form 10-K.) On December 30, 1994, the Company filed a petition for declaratory order with the NMPUC. In the petition, the Company requested, among other things, a declaratory order that its corporate reorganization into four main business units was in compliance with NMPUC regulations and previous orders and otherwise lawful. Subsequently, on June 23, 1995, the Company filed an application for authorization for the creation of three wholly-owned subsidiaries to: (i) manage and operate water and wastewater systems; (ii) pursue energy marketing, alternative fuel vehicle services and energy management services; and (iii) pursue utility management services and related energy management services for federal installations and large commercial customers. The Company sought approval to invest a maximum of $50 million in the three subsidiaries over time and to enter into reciprocal loan agreements for up to $30 million with these subsidiaries. On September 30, 1995, the NMPUC Staff ("Staff") filed a motion for order of partial dismissal, seeking denial of the Company's application to form the new subsidiaries. The Staff argued that the New Mexico Public Utility Act ("NMPUA") should be read as requiring investment in non-utility activities to come solely from retained earnings and, since the Company's level of retained earnings is insufficient to support the level of investment requested, the application should be denied. The Staff also suggested that, because of the Company's quasi-reorganization in 1989, the Company should be required to have a minimum of $201 million in retained earnings prior to allowing any investment in non-utility activities. The New Mexico Attorney General and New Mexico Industrial Energy Consumers ("NMIEC") support the Staff's motion, although NMIEC does not oppose the Company's request for the formation of the water service subsidiary. On October 24, 1995, the Company filed its response to Staff's motion, arguing that Staff was misinterpreting the NMPUA and misconstruing the purposes of retained earnings since investment in these subsidiaries would come from available cash. The Company intends to vigorously oppose attempts to prevent the Company from expanding its business within the confines of energy and utility-related activities and believes Staff's motion to be without merit. The Company cannot predict, however, the ultimate outcome of this matter. Although the Company does not believe that an adverse outcome will materially impact the Company's results of operations and financial condition, such an outcome will hinder the Company's ability to effectively participate in the emerging competitive energy services marketplace. PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Four Corners The Company owns a 13.0% ownership interest in Units 4 and 5 of Four Corners located in northwestern New Mexico on land leased from the Navajo Nation. Arizona Public Service Company is the operating agent. In July 1995, the Navajo Nation enacted the Navajo Nation Air Pollution Prevention and Control Act, the Navajo Nation Safe Drinking Water Act and the Navajo Nation Pesticide Act (collectively, the "Acts"). By letter dated October 12, 1995, the Four Corners participants requested the United States Secretary of the Interior (the "Secretary") to resolve their dispute with the Navajo Nation regarding whether or not the Acts apply to operation of Four Corners. The Four Corners participants subsequently filed a lawsuit in the District Court of the Navajo Nation (the "Court"), Window Rock District, seeking, among other things, a declaratory judgment that: (i) the Four Corners leases and Federal easements preclude the application of the Acts to the operation of Four Corners; and (ii) the Navajo Nation and its agencies and courts lack adjudicatory jurisdiction to determine the enforceability of the Acts as applied to Four Corners. On October 18, 1995, the Navajo Nation and the Four Corners participants agreed to indefinitely stay the proceedings referenced above so that the parties may attempt to resolve the dispute without litigation, and have requested that the Secretary and the Court stay these proceedings. The Company is unable to predict the outcome of this matter. Archaeological Resources Protection Act As previously reported, in June 1994, a Company line crew used a bulldozer to blade an access road to electric transmission towers on U.S. Forest Service land. The Company became aware after the incident that it did not have permission from the U.S. Forest Service, as well as other necessary permits. (See PART I, ITEM 3.-- "LEGAL PROCEEDINGS--OTHER PROCEEDINGS-- Archaeological Resources Protection Act" in the 1994 Form 10-K.) The Company and the civil division of the U.S. Attorney's Office have now entered into a settlement agreement. The agreement provides that the U.S. Attorney's Office waives its right to bring any civil action for damages against the Company as a result of the incident, including an action for trespass or for violation of the Archaeological Resources Protection Act of 1979. In exchange, the Company has agreed to pay for restoration and repair of archaeological sites that were disturbed and to reimburse the U.S. Forest Service for its expenses incurred for the incident. The Company had already paid for the reclamation of the surface areas outside the archaeological sites and the archaeological site damage assessment. The resolution of this matter has not had a material adverse effect on the Company's financial condition or results of operations. Air Permits Sunterra Gas Processing Company, a wholly-owned subsidiary of the Company, submitted an air permit modification application for the Kutz Canyon Gas Processing Plant ("Kutz") in the first quarter of 1995. (See PART II, ITEM 7.--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--OTHER ISSUES FACING THE COMPANY--ENVIRONMENTAL ISSUES--Gas Operations--Air Permits" in the 1994 Form 10-K.) On October 30, 1995, the Company received a Notice of Violation from the NMED with specified corrective actions. Within thirty days, the NMED will propose a settlement. The Company is not able to predict the outcome of this issue but does not anticipate a material adverse impact on the Company's financial condition or results of operations. ITEM 5. OTHER INFORMATION Natural Gas Supply As previously reported, Meridian Oil Inc. and its related or affiliated companies, Southland Royalty Company, Meridian Oil Production Inc. and Unicon Producing Company (collectively "Meridian") asserted claims regarding the allocation of natural gas liquids and measurement of gas under gathering, processing and transportation agreements against the Company and Sunterra Gas Gathering Company and Sunterra Gas Processing Company, wholly-owned subsidiaries of the Company, as a result of periodic audits since 1990. (See PART 1, ITEM 1.-- "BUSINESS--NATURAL GAS OPERATIONS--Natural Gas Supply" in the 1994 Form 10-K.) The Company responded, and as expected, the claims have been resolved at no material cost to the Company. Other Natural Gas Matters As previously reported, Gas Services filed a Purchased Gas Adjustment Clause ("PGAC") continuation filing regarding how its composite gas procurement strategy would be affected by the sale of its gas gathering and gas processing assets. The principal unresolved issues in the case were whether gas supply reservation fees paid to certain gas suppliers are recoverable through the PGAC. (See PART I, ITEM 1.--"BUSINESS--RATES AND REGULATION-- Other Natural Gas Matters" in the 1994 Form 10-K.) On October 26, 1995, the hearing examiner issued his recommended decision approving the continuation of Gas Services' PGAC. The hearing examiner also recommended that gas reservation fees paid to certain gas suppliers not be recoverable through the PGAC; however, the decision stated that Gas Services may attempt to recover such costs in a general rate proceeding. Gas Services filed for the recovery of such reservation fees in its general rate case filed August 28, 1995. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 10.60.2 Amendment No. 2 dated as of October 1, 1995, to the Reimbursement Agreement dated as of November 1, 1992 between Public Service Company of New Mexico and Canadian Imperial Bank of Commerce, New York Agency. 15.0 Letter Re Unaudited Interim Financial Information 27 Financial Data Schedule b. Reports on Form 8-K: None, other than the previously filed Form 8-K described in the Form 10-Q for the period ended June 30, 1995 already reported. Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PUBLIC SERVICE COMPANY OF NEW MEXICO (Registrant) Date: November 1, 1995 /s/ Donna M. Burnett ----------------------------------- Donna M. Burnett Corporate Controller and Chief Accounting Officer (Officer duly authorized to sign this report) EX-27 2 FDS SCHEDULE
UT This schedule contains summary financial information extracted from the Company's Consolidated Statements of Earnings, Consolidated Balance Sheets and Consolidated Statements of Cash Flows for the period ended September 30, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 US DOLLARS 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 1 PER-BOOK 1,571,966 33,594 257,852 136,741 0 2,000,153 208,870 469,310 20,400 698,580 0 12,800 728,865 0 0 0 105 0 0 0 559,803 2,000,153 617,353 46,127 496,012 523,864 93,489 22,203 115,692 45,120 70,572 3,567 67,005 0 39,043 114,528 1.60 0
EX-15 3 AUDITORS REPORT ARTHUR ANDERSEN ARTHUR ANDERSEN LLP Arthur Andersen LLP November 1, 1995 Suite 400 6501 Americas Parkway NE Albuquerque, NM 87110-5372 505 889-4700 Public Service Company of New Mexico Alvarado Square Albuquerque, NM 87158 Gentlemen: We are aware that Public Service Company of New Mexico has incorporated by reference in its Registration Statement No. 33- 65418 its Form 10-Q for the quarter ended September 30, 1995, which includes our report dated November 1, 1995 covering the unaudited interim financial information contain therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statement prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, /s/ Arthur Andersen LLP - --------------------------------- Arthur Andersen LLP EX-10 4 EXHIBIT 10-60-2 [EXECUTION COPY] AMENDMENT No. 2 dated as of October 1, 1995 to the REIMBURSEMENT AGREEMENT dated as of November 1, 1992 between PUBLIC SERVICE COMPANY OF NEW MEXICO and CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY relating to Pollution Control Revenue Refunding Bonds, 1992 Series A (Public Service Company of New Mexico Palo Verde Project) AMENDMENT NO. 2 to the REIMBURSEMENT AGREEMENT THIS AMENDMENT NO. 2 (this "AMENDMENT"), dated as of October 1, 1995, to the Reimbursement Agreement, dated as of November 1, 1992 (as heretofore amended, the "EXISTING REIMBURSEMENT AGREEMENT"), between PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation (the "Company"), and CANADIAN IMPERIAL OF COMMERCE, acting through its New York Agency (the "Bank"), W I T N E S S E T H: WHEREAS, the Existing Reimbursement Agreement was executed by the Company and the Bank in connection with the issuance by the Bank of the Letter of Credit for the benefit of the Trustee in support of the Bonds, and was amended pursuant to Amendment No. 1, dated as of July 1, 1994; WHEREAS, the Company desires, and the Bank is willing on the terms and subject to the conditions hereinafter set forth, to amend certain fee provisions of the Existing Reimbursement Agreement and to extend the maturity of the Letter of Credit; NOW, THEREFORE, in consideration, of the premises and the mutual agreements herein contained, the Company and the Bank hereby agree as follows: SECTION 1. CERTAIN DEFINITIONS. The following terms whether or not underscored) when used in this Amendment shall have the following meanings: "AMENDED REIMBURSEMENT AGREEMENT" means the Existing Reimbursement Agreement as amended by this Amendment. "AMENDMENT" is defined in the PREAMBLE. "BANK" is defined in the PREAMBLE. "COMPANY" is defined in the PREAMBLE. "EFFECTIVE DATE" is defined in SECTION 4. "EXISTING REIMBURSEMENT AGREEMENT" is defined in the PREAMBLE. SECTION 2. OTHER DEFINITIONS. Terms for which meanings are provided in the Existing Reimbursement Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendment with such meanings. SECTION 3. AMENDMENTS TO EXISTING REIMBURSEMENT AGREEMENT. Effective on the Effective Date, the Existing Reimbursement Agreement is hereby amended in accordance with this Section 3. Except as expressly so amended, the Existing Reimbursement Agreement shall continue in full force and effect in accordance with its terms. SECTION 3.1. Section 1 (Definitions). Section 1 of the Existing Reimbursement Agreement is hereby amended by amending and restating in their entirety the definition of "Credit Agreement" and the definition of "Scheduled Termination Date" as follows: "'CREDIT AGREEMENT' means the U.S.$100,000,000 Revolving Credit Agreement, dated as of December 14, 1993, among the Company, as borrower, Chemical Bank and Citibank N.A., as co-agents thereunder, and the banks named therein, as amended by Amendment No. 1, dated as of June 7, 1995." "'SCHEDULED TERMINATION DATE' means November 26, 1998.". SECTION 3.2. SECTION 8 (FEES). CLAUSE (A) of Section 8 of the Existing Reimbursement Agreement is hereby amended by deleting SUBCLAUSES (I) through (V) thereof and replacing them with the following SUBCLAUSES (I) through (IV): "(i) If the Bond Rating of Moody's or S&P is Baa3 or BBB-, respectively, or higher, the Letter of Credit Fee shall be .75%. (ii) During such times as SUBCLAUSE (A)(I) of this SECTION 8 is not applicable and the Bond Rating of Moody's or S&P is at least Bal or BB+, respectively, the Letter of Credit Fee shall be .85%. (iii) During such times as SUBCLAUSES (A)(I) and (A)(II) of this SECTION 8 are not applicable and the Bond Rating of Moody's or S&P is at least Ba2 or BB, respectively, the Letter of Credit Fee shall be 1.15%. (iv) In all other cases, the Letter of Credit Fee shall be 1.40%." SECTION 3.3. SECTION 16 (COVENANTS). A new CLAUSE (l) is hereby added to SECTION 16 of the Existing Reimbursement Agreement to read as follows: "(k) NO SURRENDER OF FIRST MORTGAGE BONDS. Notwithstanding any provision contained in clause (b) of Section 14.11 of the Indenture to the contrary, the Company hereby agrees not to request the Trustee to release to the Company any amount of the First Mortgage Bonds (or Corresponding Securities, as the case may be) and not to accept any amount of the First Mortgage Bonds (or Corresponding Securities, as the case may be) so released." SECTION 3.4. Section 17 (Events of Default). Clause (c)(i) of SECTION 17 of the Existing Reimbursement Agreement is amended and restated in its entirety to read as follows: "(i) the Company shall default in the observance or performance of any covenant incorporated in clause (a) of SECTION 16 by reference to Section 5.01(h) or 5.02(i) of the Credit Agreement, or contained in clause (b)(iii) or (l) of Section 16;" SECTION 4. EFFECTIVE DATE. When all of the conditions set forth in this SECTION 4 have been satisfied, this Amendment shall become effective as of October 1, 1995 (the "EFFECTIVE Date") and thereafter shall be known, and may be referred to, as "Amendment No. 2 to the Reimbursement Agreement". SECTION 4.1. EXECUTION OF COUNTERPARTS OF THIS AMENDMENT. The Bank shall have received executed counterparts of this Amendment duly executed on behalf of the Company. SECTION 4.2. EXECUTION OF AMENDMENT TO LETTER OF CREDIT. The Bank shall have delivered to the Trustee an executed copy of the notice of amendment to the Letter of Credit, substantially in the form of Exhibit A hereto. SECTION 4.3. UP-FRONT EXTENSION Fee. The Bank shall have received a non-refundable up-front extension fee computed at a rate of .10% of the Letter of Credit Amount on the Effective Date. SECTION 4.4. OPINION OF SPECIAL Counsel. The Bank shall have received the opinion of Keleher & McLeod, P.A., special counsel to the Company, substantially in the form of EXHIBIT B attached hereto. SECTION 4.5. REPRESENTATIONS AND WARRANTIES; NO DEFAULT OR EVENT OF DEFAULT. On the Effective Date, (a) the representations and warranties contained in SECTION 15 of the Reimbursement Agreement and each of the other Related Documents shall be true and correct on and as of the Effective Date as though made on such date, and the Bank shall have received a certificate signed by an Authorized Officer of the Company, dated the Effective Date, to that effect; and (b) no Default or Event of Default shall have occurred and be continuing, or would result from the execution and delivery of this Amendment, and the Bank shall have received a certificate signed by an Authorized Officer of the Company, dated as of the Effective Date, to that effect. SECTION 4.6. RESOLUTIONS. The Bank shall have received certified copies of the resolutions of the Board of Directors of the Borrower approving this Amendment, and of all documents evidencing other necessary corporate action and governmental approvals permitting the extension of the Scheduled Termination Date of the Letter of Credit, with respect to this Amendment and the other documents to be delivered hereunder. SECTION 4.7. SUPPLEMENTAL INDENTURES. The Bank shall have received copies of the forty-third and forty-fourth supplemental indentures to the First Mortgage Bond Indenture delivered in connection with the effectiveness of Amendment No. 1 to the Credit Agreement. SECTION 4.8. LEGAL DETAILS, ETC. The Bank and its counsel shall have received all information, and such counterpart originals or such certified or other copies of such materials, as the Bank or its counsel may reasonably request, and all legal matters incident to the transactions contemplated by this Amendment shall be satisfactory to the Bank and its counsel. All documents executed or submitted pursuant hereto or in connection herewith shall be satisfactory in form and substance to the Bank and its counsel. SECTION 5. REFERENCES. References in the Existing Reimbursement Agreement shall hereinafter be deemed to be references to the Amended Reimbursement Agreement. SECTION 6. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, subject to SECTION 30 of the Amended Reimbursement Agreement. SECTION 7. FULL FORCE AND EFFECT. Except as expressly amended hereby, all of the representations, warranties, terms, covenants, and conditions of the Existing Reimbursement Agreement and each other Related Document shall remain unchanged and shall remain in full force and effect in accordance with their respective terms. The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be an amendment or consent to or modification of any other term or provision of the Existing Reimbursement Agreement or of any term or provision of any other Related Document or of any transaction or further or future action on the part of the Company which would require the consent of the Bank under the Existing Reimbursement Agreement. SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. SECTION 9. COUNTERPARTS. This Amendment may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto were upon the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to the Reimbursement Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. PUBLIC SERVICE COMPANY OF NEW MEXICO By /s/ Max H. Maerki -------------------------- Title: Senior Vice President and Chief Financial Officer CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY By /s/ Joel W. Peterson -------------------------- Title: Authorized Signatory -----END PRIVACY-ENHANCED MESSAGE-----