[Federal Register Volume 70, Number 70 (Wednesday, April 13, 2005)]
[Notices]
[Pages 19530-19534]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1748]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27957; International Series Release No. 1284]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

April 7, 2005.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission pursuant to provisions of the Act and rules 
promulgated under the Act. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendment(s) is/are available for public 
inspection through the Commission's Branch of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by May 2, 2005, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, and serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in the case of an attorney at law, 
by certificate) should be filed with the request. Any request for 
hearing should identify specifically the issues of facts or law that 
are disputed. A person who so requests will be notified of any hearing, 
if ordered, and will receive a copy of any notice or order issued in 
the matter. After May 2, 2005, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Scottish Power plc and Dornoch International Insurance Limited (70-
10261)

    Scottish Power plc (``ScottishPower''), a foreign registered 
holding company, 1 Atlantic Quay, Glasgow G2 8SP, Scotland, UK, and 
Dornoch International Insurance Limited (``DIIL''), 38/39 Fitzwilliam 
Square, Dublin 2, Ireland, a new captive insurance company subsidiary 
of ScottishPower, (collectively, ``Applicants''), have filed an 
application-declaration, as amended (``Application''), under sections 
12(b), 13(b), and 33(c) of the Act and rules 45, 54, 89, 90 and 91 
under the Act.
    ScottishPower Investments Limited (``ScottishPower Investments'') 
is the direct parent of ScottishPower Insurance Limited (``SPIL''), an 
indirect insurance company subsidiary of ScottishPower. ScottishPower 
Investments is a wholly-owned direct subsidiary of ScottishPower UK, 
plc (``SPUK''), a foreign utility subsidiary of ScottishPower. SPIL 
operates as an insurance company domiciled in the Isle of Man and 
serves as a captive insurer for the UK-based members of the 
ScottishPower system. SPIL currently is authorized to provide property 
damage, general liability, employer's liability, motor own damage, and 
motor liability insurance. DIIL is also a wholly-owned direct 
subsidiary of ScottishPower Investments.\1\
---------------------------------------------------------------------------

    \1\ DIIL was originally incorporated as Dornoch Risk 
International Limited (``DRIL'') on June 30, 2004. DRIL changed its 
name to DIIL by resolution at its December 10, 2004 board meeting 
and this was effected by the Irish Registrar of Companies on Jan. 
20, 2005.
---------------------------------------------------------------------------

    Applicants are seeking approval to operate DIIL. DIIL will assume 
the insurance duties currently performed by SPIL on behalf of 
ScottishPower and also begin to provide insurance services to 
PacifiCorp, the U.S.-based public utility subsidiary of the 
ScottishPower system.
    On an annual basis, ScottishPower system companies spend 
approximately $40 million for the purchase of commercial insurance and 
related services. Under the current insurance program, system companies 
maintain commercial insurance policies with underlying deductibles of 
$1 million per event for general liability coverage and $7.5 million 
for property coverage. Losses below these deductibles are self-insured 
by system companies whereas losses in excess of these deductibles are 
paid by the commercial insurance. ScottishPower may from time to time 
choose to purchase commercial insurance in place of, or to reduce, the 
deductible or self-insurance to meet their strategic goals and 
objectives. Commercial premiums and the deductibles and self-insured 
retained risks are then allocated to subsidiaries owning a given risk 
based on such factors as number of automobiles, payroll, revenues, 
total property values, product throughput, as well as loss history.
    ScottishPower intends that SPIL would eventually be dissolved after 
DIIL operates for approximately one year. DIIL intends to provide 
property damage and liability insurance coverage of all or significant 
portions of the deductibles in many of PacifiCorp's current insurance 
policies, and to provide coverage for activities which the commercial 
insurance industry carriers will no longer provide, e.g., overhead 
distribution and transmission line property damage insurance.
    Premiums for the proposed expansion of the insurance program for 
the first year were determined to equal the aggregate losses for system 
companies plus administrative expenses. Aggregate losses for general 
liability were estimated using actuarial methods.
    DIIL would continue to analyze the commercial insurance bought by 
the ScottishPower system companies, and coordinate the coverage it 
provides to minimize the risk of loss to the system. Supplementing its 
primary role of underwriting system retained risk, DIIL may also 
replace or reduce certain insurance sold to ScottishPower system 
companies by traditional insurance providers in the areas of property 
damage and general liability. An actuarial analysis will be performed 
to determine the proper premiums consistent with methods used to 
determine the retained risk premium. To the extent traditional 
insurance programs are reduced, DIIL may attempt to obtain equal levels 
of loss protection and coverage in the reinsurance market. Applicants 
state that DIIL will apply stringent credit standards to all 
reinsurance counterparties.

[[Page 19531]]

    DIIL will not be operated to generate profits beyond what is 
necessary to maintain adequate reserves. To the extent that premiums 
and interest earned exceed current claims and expenses, an appropriate 
reserve would be accumulated to respond in years when claims and 
expenses exceed premiums. To the extent that losses over the long term 
are lower than projected, DIIL could correspondingly lower premiums, 
thereby reducing the premium expenses that would otherwise by paid to 
DIIL.
    ScottishPower would make an initial equity contribution to DIIL of 
approximately $40-60 million. Beyond the initial equity contribution 
and funding of DIIL, ScottishPower may provide any subsequently 
required capital contributions through additional equity and or debt 
purchases exempt from the Act. PacifiCorp is not being asked to provide 
any capital for DIIL's operations. DIIL would set premiums and operate 
pursuant to rules 90 and 91 under the Act. Premium costs would closely 
track loss experience and be sufficient to cover DIIL's underwriting 
costs and future claim payments. The returns from the investment of 
this capital would be used to pay for DIIL's operating costs and can be 
used to reduce future premium costs.
    Applicants maintain that with maturation DIIL may also be able to 
provide coverage to a wider number of PacifiCorp activities beyond 
property damage and general liability. For example, DIIL may seek to 
provide Workers Compensation coverage. ScottishPower requests a 
reservation of jurisdiction over the underwriting of additional 
insurance activities, i.e., other than for property damage and general 
liability, pending completion of the record.
    DIIL will be domiciled in Dublin, Ireland and managed by a 
professional captive management company, Aon Insurance Managers 
(Dublin) Ltd, which will perform all the management and administrative 
services for DIIL. Aon Insurance Managers (Dublin) Ltd is a wholly-
owned indirect subsidiary of insurance broker Aon Corporation and is 
not an affiliate of PacifiCorp or ScottishPower. DIIL would be licensed 
by the Irish Financial Services Regulatory Authority (``IFSRA''). To 
receive this license, DIIL has had to meet numerous IFSRA standards 
including submission of a satisfactory business plan, financial 
projections, risk management measures and corporate governance 
standards. DIIL must also meet numerous ongoing IFSRA standards to 
continue in good standing, including the meeting of established 
solvency margin, technical reserves and annual audit of financial 
results requirements.

PNM Resources, Inc., et al. (70-10285)

    PNM Resources, Inc. (``PNM Resources''), Alvarado Square, 
Albuquerque, NM 87158, a registered holding company, Cascade 
Investment, L.L.C. (``Cascade''), 2365 Carillon Point, Kirkland, WA 
98033, a limited liability company formed under the laws of the State 
of Washington, and William H. Gates III (``Mr. Gates''), One Microsoft 
Way, Redmond, WA 98052, Cascade's sole member (collectively, 
``Applicants''), have filed an application-declaration 
(``Application'') under sections 6(a), 7, 9(a)(1), 9(a)(2), 10, 11, 
12(e) and 13(b) of the Act and rules 51, 54, 62-65, 90 and 91 under the 
Act.
    PNM Resources proposes to acquire all of the outstanding voting 
securities of TNP Enterprises, Inc. (``TNP Enterprises''), a public 
utility holding company claiming exemption by rule 2 under the Act (the 
acquisition is referred to as the ``Transaction''). TNP Enterprises has 
subsidiary electric utility operations in Texas and New Mexico 
conducted by Texas-New Mexico Power Company (``TNMP''), its public 
utility subsidiary. Further, as described below Cascade currently owns 
about 8.68% of the outstanding common stock of PNM Resources. As a 
result of this preexisting stock ownership, Cascade and Mr. Gates will 
indirectly acquire 5% or more of the outstanding voting securities of 
TNMP in the Transaction. Accordingly, Cascade and Mr. Gates also seek 
approval under Sections 9(a)(2) and 10 of the Act for their 
participation in the Transaction.\2\
---------------------------------------------------------------------------

    \2\ A notice in this matter was previously issued by the 
Commission concerning PNM Resources' proposal to amend its restated 
articles of incorporation (``Amendment''). In the same release, the 
Commission also issued an order authorizing PNM Resources to solicit 
proxies relating to the Amendment. PNM Resurces, Inc., Holding Co. 
Act Release No. 27954 (March 30, 2005).
---------------------------------------------------------------------------

I. Parties to the Transaction

A. PNM Resources and Its Subsidiaries
    PNM Resources became an exempt public utility holding company on 
December 31, 2001, and conducts its operations consistent with the 
order of the New Mexico Public Regulation Commission (``NMPRC'') which 
authorized the holding company structure. Except for certain corporate 
support services provided to its subsidiaries at cost pursuant to that 
order, PNM Resources conducts no business operations other than as a 
holding company. PNMR Services Company (``Services'') is a subsidiary 
service company, which provides services at cost to the subsidiaries of 
PNM Resources. PNM Resources filed a notice of registration under the 
Act on December 30, 2004, and transferred its service functions to 
Services on January 1, 2005. PNM Resources reported operating revenues 
of $1,604,792,000 and operating income of $112,898,000, for the year 
ended December 31, 2004; PNM Resources had assets of $3,487,635,000 as 
of December 31, 2004.
    PNM Resources' only public utility company subsidiary is Public 
Service Company of New Mexico (``PNM''), a New Mexico corporation. PNM 
is an electric and gas public utility company. It is engaged in the 
generation, transmission, and distribution of electric energy at retail 
in the State of New Mexico and makes sales for resale (``wholesale'' 
sales) of electricity in interstate commerce. PNM is also engaged in 
the distribution of natural gas in the State of New Mexico, which 
includes some off-system wholesale sales of natural gas. PNM had 
electric revenues for 2004 of $558,412,000, excluding wholesale sales. 
Its 2004 electric wholesale sales were $554,634,000; natural gas 
operating revenues for 2004 were $490,921,000.
    Through two of its subsidiaries, Luna Power Company LLC, a Delaware 
limited liability company, and PNMR Development & Management 
Corporation, a New Mexico corporation, PNM Resources owns a one-third 
interest in the Luna Energy power generation facility under development 
near Deming, New Mexico. When complete the project will consist of a 
570 MW combined cycle gas-fired generating plant.
    PNM Resources' current nonutility activities are conducted through 
Avistar, Inc. (``Avistar''), a company engaged solely in developing and 
marketing power system technologies. PNM Resources has the following 
inactive direct nonutility subsidiaries: EIP Refunding Corporation, PNM 
Electric & Gas Services, Inc., Sunbelt Mining Co. Inc., Sunterra Gas 
Gathering Company, and Sunterra Gas Processing Company. PNM Resources 
also has the following indirect inactive nonutility subsidiaries: Gas 
Company of New Mexico (directly owned by Sunbelt Mining Co. Inc.), 
Meadows Resources, Inc. (directly owned by PNM) and its subsidiaries, 
Bellamah Associates, Ltd., Bellamah Community Development, Bellamah 
Holding Company, Bellamah Investors Ltd., MCB Financial Group and 
Republic Holding Company. PNM also factors its receivables through a

[[Page 19532]]

financing subsidiary, PNM Receivables Corporation, but does not offer 
the service to non-affiliates.
    PNM is subject to the jurisdiction of the NMPRC with respect to its 
retail electric and gas rates, service, accounting, issuance of 
securities, construction of major new generation and transmission 
facilities and other matters regarding retail utility services provided 
in New Mexico. PNM's principal business segments are wholesale 
operations and utility operations. Utility operations include Electric 
Services (``Electric''), Transmission Services (``Transmission'') and 
Gas Services (``Gas''). In addition, PNM owns Merchant Plant 
(authorized power generation facilities that are not certified by the 
NMPRC to provide service to New Mexico retail customers and thus are 
not included in rate base) that is subject to a settlement agreement 
approved by the NMPRC, described below. PNM serves approximately 
471,000 natural gas customers and 413,000 electric customers in New 
Mexico.
    PNM's wholesale operations consist of the generation and sale of 
electricity into the wholesale market based on three product lines that 
include long-term contracts, forward sales and short-term sales. The 
source of these sales is supply created by selling energy not needed at 
the time by retail customers as well as the capacity of PNM's 
generating plant investment excluded from retail rates. The ``regulated 
generation'' (generation in rate base), ``unregulated generation'' 
(certain generation excluded from rate base) and ``Merchant Plant'' 
(including certain generation excluded from rate base) are jointly 
dispatched.
    Electric consists of the distribution and generation of electricity 
for retail electric customers in New Mexico. PNM provides retail 
electric service to a large area of north central New Mexico, including 
the cities of Albuquerque and Santa Fe, and certain other areas of New 
Mexico. PNM owns or leases generation located in the States of Arizona 
and New Mexico within the Western Electricity Coordinating Council 
(``WECC'') \3\ region, a National Electric Reliability Council region 
including much of the Western United States and portions of Canada and 
Mexico. PNM is also interconnected with the Southwest Power Pool. PNM 
experienced a peak electrical demand on its system of 1655 MW in 2004. 
PNM owns or leases 1729 MW of generating capacity. Additional capacity 
is purchased from third parties under certain power purchase agreements 
that may be accounted for as leases, for a total of 2417 MW available 
capacity.
---------------------------------------------------------------------------

    \3\ The WECC was formed on April 18, 2002 by the merger of the 
Western Systems Coordinating Council, the Southwest Regional 
Transmission Council and the Western Regional Transmission 
Association. It coordinates and supports electric system reliability 
and open power transmission access throughout its service area, 
encompassing 1.8 million square miles.
---------------------------------------------------------------------------

    Transmission consists of the transmission of electricity over 
transmission lines owned or leased by PNM, interconnected with other 
utilities in New Mexico and south and east into Texas, west into 
Arizona and north into Colorado and Utah. PNM owns or leases 
approximately 2,900 circuit miles of transmission lines. PNM owns and 
operates in excess of 8400 miles of distribution lines excluding street 
lighting in New Mexico.
    The PNM Gas segment includes the transportation and distribution of 
natural gas to end users, including end users in most of the major 
communities in New Mexico, including two of New Mexico's three largest 
metropolitan areas, Albuquerque and Santa Fe. The Gas Segment operates 
as an integrated system and includes approximately 11,840 miles of 
natural gas distribution lines.
    Applicants state that the Merchant Plant owned by PNM constitutes 
utility assets within the meaning of the Act,\4\ and will be available 
through joint dispatch to support service to the retail customers of 
PNM. PNM's Merchant Plant activities are governed by a Global Electric 
Settlement Agreement (``Global Settlement'') that was entered into on 
October 10, 2002, among PNM, the NMPRC staff, the New Mexico Attorney 
General, and other consumer groups.\5\
---------------------------------------------------------------------------

    \4\ PNM Resources to date has no aggregate investment in any 
exempt wholesale generators or foreign utility companies''), as 
defined in sections 32 and 33 of the Act, respectively. Applicants 
state that in PNM Resources, Inc., Holding Co. Act Release No. 27934 
(December 30, 2004) (``December Order''), the Commission found the 
electric utility assets of PNM to constituted an integrated system.
    \5\ The Global Settlement provides for, among other things, the 
following: (1) Joint support for the repeal of a majority of the New 
Mexico Electric Utility Industry Restructuring Act of 1999; (2) 
PNM's retail electric rates through 2007; (3) generation resources 
for retail loads; and (4) PNM's participation and financing of 
Merchant Plant activities and the eventual transfer of Merchant 
Plant out of PNM.
---------------------------------------------------------------------------

B. TNP Enterprises and Its Subsidiaries
    TNP Enterprises was organized as a holding company in 1983 and 
transacts business through its subsidiaries. On April 7, 2000, under an 
Agreement and Plan of Merger among TNP Enterprises, ST Acquisition 
Corp. (``ST Corp.'') and SW Acquisition, the parent of ST Corp., ST 
Corp. merged with and into TNP Enterprises (the ``Merger''). TNP 
Enterprises is the surviving corporation in the Merger, and is wholly-
owned by SW Acquisition.
    TNP Enterprises' principal operations are conducted through two 
wholly-owned subsidiaries: Texas-New Mexico Power Company (``TNMP'') 
and First Choice Power Special Purpose, L.P.\6\ TNMP is a state 
regulated utility operating in Texas and New Mexico. In Texas, TNMP 
provides regulated transmission and distribution services under 
legislation that established retail competition in Texas. For the years 
ending December 31, 2004, TNP reported operating revenues were 
$718,880,000 and operating income of $109,216,000; TNP Enterprises 
reported assets of $1,291,937,000 as of December 31, 2004.
---------------------------------------------------------------------------

    \6\ First Choice Power Special Purpose, L.P. is a bankruptcy 
remote special purpose entity certificated retail electric provider 
(``REP'') in Texas to which the original REP certificate of First 
Choice Power, Inc. and its price to beat customers were transferred 
under the order of the Public Utility Commission of Texas. A new 
certicate was granted to First Choice Power, Inc., which is now 
First Choice Power, L.P., also a direct subsidiary of TNP 
Enterprises. These entities are collectively referred to as ``First 
Choice.''
---------------------------------------------------------------------------

    In New Mexico, TNMP provides electricity service that includes 
transmitting, distributing, purchasing, and selling electricity to its 
New Mexico customers. The TNMP utility assets located in New Mexico are 
connected with the PNM system and operate as a sub-area of the PNM 
control area. Wholesale power transactions involving the TNMP New 
Mexico assets are scheduled through PNM's control center.
    TNMP's Texas operations lie entirely within the Electric 
Reliability Council of Texas (``ERCOT'') region. ERCOT is the 
independent system operator that is responsible for maintaining 
reliable operations of the bulk electric power supply system in the 
ERCOT region, which is located entirely within Texas and serves about 
85% of the electrical load in Texas. First Choice was organized in 2000 
to act as TNMP's affiliated retail electric provider, as required by 
the Texas restructuring legislation that requires competitive access to 
electricity supplies.
    TNMP has two inactive subsidiaries: Texas Generating Company, LP 
(``TGC''), a Texas limited partnership, and Texas Generating Company 
II, LLC (``TGC II''), a Texas limited liability company. TNMP formed 
TGC and TGC II as Texas corporations to finance construction of TNP 
One, formerly its sole generation facility. Until May 2001, TNMP owned 
TNP One together with TGC and TGC II. At that time, TNMP converted TGC 
and TGC II to their

[[Page 19533]]

present forms and consolidated the ownership of TNP One into TGC to 
comply with restructuring legislation. Neither TNMP nor TNP Enterprises 
any longer owns, directly or indirectly, any interest in generating 
plants. PNM Resources proposes to retain these subsidiaries in their 
present inactive status. TNP Enterprises reported a net loss for 
calendar year 2004 of $75,603 and negative shareholder equity of 
$29,680,000.
    Effective January 1, 2002, Texas restructuring legislation 
established retail competition in the Texas electricity market. Prior 
to January 1, 2002, TNMP operated as an electric utility in Texas, 
generating, transmitting and distributing electricity to customers in 
its Texas service territory. As required by the Texas restructuring 
legislation, and in accordance with a plan approved by the Public 
Utility Commission of Texas (``PUCT''), TNMP separated its Texas 
utility operations into three components:

    Retail Sales Activities. First Choice assumed the activities 
related to the sale of electricity to retail customers in Texas, 
and, on January 1, 2002, TNMP's customers became customers of First 
Choice, unless they chose a different retail electric provider. 
First Choice and other retail electric providers now perform all 
activities with Texas retail customers, including acquiring new 
customers, setting up accounts, billing customers, acquiring power 
for resale to customers, handling customer inquiries and complaints, 
and acting as a liaison between the transmission and distribution 
companies and the retail customers.
    Power Transmission and Distribution. TNMP continues to operate 
its regulated transmission and distribution business in Texas.
    Power Generation. TGC became the unregulated entity performing 
TNMP's generation activities in Texas. However, in October 2002, 
TNMP and TGC sold TNP One to Sempra Energy Resources. As a result of 
the sale, TGC and TGC II neither own property nor engage in any 
operating activities, and neither TNMP nor any of its affiliates are 
currently in the power generation business.

    TNMP serves smaller-to medium-sized communities. TNMP provides 
electric service, either directly or through retail electric providers, 
to approximately 256,000 customers in 85 Texas and New Mexico 
municipalities and adjacent rural areas. Only three of the 85 
communities in TNMP's service territory have populations exceeding 
50,000. TNMP's service territory is organized into two operating areas: 
Texas and New Mexico. In most areas that TNMP serves, it is the 
exclusive provider of transmission and distribution services. First 
Choice had approximately 219,000 customers in Texas as of December 31, 
2004.
    TNP Enterprises also wholly-owns several small subsidiaries which 
are inactive: TNP Technologies, LLC (a Texas limited liability company 
for real property acquisition in New Mexico); TNP Operating Company 
(inactive Texas corporation for real property acquisition in Texas and 
New Mexico); Facility Works, Inc. (inactive Texas corporation formerly 
engaged in heating, ventilating, and air conditioning service); TNP 
Enterprises-Magnus, L.L.C. (inactive Texas limited liability company 
intended for exempt business development). Applicants propose to retain 
these subsidiaries as inactive subsidiaries solely for winding up their 
affairs, absent further Commission authorization.
C. Cascade
    Cascade is a limited liability company formed under the laws of the 
State of Washington. Mr. Gates is Cascade's sole member. Cascade was 
formed in 1995 to make and hold certain investment securities for Mr. 
Gates. Cascade invests in and holds the securities of numerous publicly 
and privately held companies; it does not conduct any business 
operations of its own.
    By order dated July 17, 2001 (Holding Co. Act Release No. 27427) 
(the ``Cascade Order''), the Commission authorized Cascade and Mr. 
Gates to acquire 5% or more (but less than 10%) of the outstanding 
voting securities of three public utility or holding companies: PNM 
Resources, Otter Tail Corporation (``Otter Tail''), which provides 
electric service in portions of Minnesota, North Dakota and South 
Dakota, and Avista Corporation (``Avista''), which provides electric 
and gas service in portions of Washington, Idaho, Oregon and 
California. Cascade currently holds 5,541,150 shares (or approximately 
8.68%) of the outstanding common stock of PNM Resources and 2,389,299 
shares (or approximately 8.2 %) of the outstanding common stock of 
Otter Tail. Subsequent to the issuance of the Cascade Order, Cascade 
reduced its ownership interest in Avista's common stock to below 5% of 
the total outstanding and is therefore no longer an ``affiliate'' of 
Avista.
    In connection with the proposed Transaction, Cascade has agreed to 
purchase $100 million in equity-linked securities of PNM Resources to 
enable PNM Resources to finance a portion of the purchase price for TNP 
Enterprises. Applicants state that Cascade and Mr. Gates are joined as 
Applicants in this Application because they will indirectly acquire 5% 
or more of the voting securities of TNP Enterprises by virtue of 
Cascade's existing ownership of common stock in PNM Resources. 
Applicants state that in all other respects, the terms and conditions 
of the Cascade Order will remain in effect and undisturbed.

II. Requested Authority

A. TNP Acquisition
    PNM Resources and SW Acquisition, L.P. (``SW Acquisition''),\7\ the 
holder of all of the shares of common stock (no par value per share) of 
TNP Enterprises, entered into a stock purchase agreement (``SPA'') 
dated as of July 24, 2004. Pursuant to the SPA, PNM Resources agreed to 
purchase an aggregate of 100 shares of common stock, no par value per 
share, of TNP Enterprises. These shares constitute all of the issued 
and outstanding shares of common stock of TNP Enterprises. The closing 
of the Transaction will occur on the third business day following the 
receipt of all regulatory approvals and the satisfaction of other 
conditions precedent.
---------------------------------------------------------------------------

    \7\ SW Acquisition is a Texas limited partnership that presently 
holds 100% of the voting securities of TNP Enterprises. The General 
Partner of SW Acquisition is SWI Acquisition G.P., L.P. SWI 
Acquisition G.P., L.P. is comprised of Laurel Hill Capital Partners, 
LLC and SWI II Acquisition, L.C. The Limited Partners of SW 
Acquisition are: Caravellel Investment Fund, LLC, CIBC WG Argosy 
Merchant Fund 2, LLC, Co-Investment Merchant Fund 3, LLC, 
Continental Casualty Company, Laurel Hill Capital Partners, LLC, 
Carlyle High Yield Partners, LP, 75 Wall Street Associates, LLC, 
Dresdner Kleinwort Capital Partners 2001, L.P., American Securities 
Partners II, LP, and American Securities Partners II(B), LP. These 
entities own all of the beneficial equity interest in TNP 
Enterprises. The general partner and the limited partners have 
approved the proposed acquisition, including the compensation that 
TNP Enterprises' shareholders will receive as a result of the 
acquisition.
---------------------------------------------------------------------------

    The aggregate purchase price that PNM Resources is to pay to 
acquire the TNP Enterprises stock held by SW Acquisition, consisting of 
all the voting securities of TNP Enterprises, is $189,100,000, subject 
to certain adjustments specified in the SPA. The purchase price that 
PNM Resources will pay to SW Acquisition will comprise (i) a cash 
amount equal to 50% of the purchase price and (ii) a number of shares 
of common stock, no par value, of PNM Resources by the Per Share Amount 
(the Per Share Amount is $20.20, subject to certain conditions). No 
later than five business days prior to the closing, the chief financial 
officer of TNP Enterprises will deliver to PNM Resources a written 
statement of the estimated purchase price including all adjustments. It 
is estimated that the PNM Resources common stock acquired by SW 
Acquisition will equal 4.7 million newly issued shares, or 6% of

[[Page 19534]]

the outstanding voting securities of PNM Resources, which will be held 
by SW Acquisition in a purely custodial role pending imminent 
distribution to its constituent partners. Pursuant to the SW 
Acquisition limited partnership agreement, the consideration for the 
sale, including the common stock received, will be divided 
proportionally in accordance with each partners' economic interest. The 
largest interests, those of Continental Casualty Company and CIBC WG 
Argosy Merchant Fund 2, L.L.C., account for 35% and 21.93% of the PNM 
Resources shares received as consideration, respectively. As a result, 
following the closing of the Transaction, no partner in SW Acquisition 
will own, with power to vote, 5% or more of the voting securities of 
PNM Resources.
    In order to finance a portion of the acquisition cost, PNM 
Resources will issue and sell 4,000,000 units of its 6.625% Hybrid 
Income Term Security Units (the ``Units'') to Cascade Investment, 
L.L.C. (``Cascade''), a limited liability company formed under the laws 
of the State of Washington, in consideration for $100,000,000. Each 
Unit will have a stated amount of $25.00. The proceeds of the sale of 
the Units will be used by PNM Resources to finance a portion of the 
cash consideration paid in the Transaction and for refinancing the debt 
and preferred securities of TNP Enterprises. The Units will be sold 
pursuant to the terms of a Unit Purchase Agreement, dated August 13, 
2004, between PNM Resources and Cascade (the ``UPA'').
B. Post-Transaction Operations
    In the December Order, the Commission authorized PNM Resources to 
issue various types of equity and debt securities, including equity-
linked securities in the form of stock purchase units. The financing 
plan that provided the basis for the authority extended by the 
Commission in the December Order included the acquisition of TNP 
Enterprises and no new financing authorizations are required.
    PNM Resources plans to retain TNP Enterprises; however, TNP 
Enterprises will exist only as a conduit, with no active operations or 
financial obligations, and will retain no personnel or operational 
authority. PNM Resources also proposes to include TNP Enterprises, TNMP 
and First Choice as client companies of PNMR Services, a subsidiary 
service company that provides the following support services: 
Accounting, Audit, Business Ethics and Compliance, Business Excellence 
(including Business Process Improvement), Corporate Communications, 
Community Affairs, Corporate Governance, Economic Development, 
Environmental Management, Environmental Policy, Executive Management, 
General Services, Governmental Regulations, Health and Safety, Human 
Resources, Information Technology, Investor Relations, Legal, 
Organization Development, Purchasing, Regulatory Affairs, Risk 
Management, and Treasury.
    PNM Resources will integrate the support services functions that 
currently exist at TNMP into Services. Applicants state that the 
consolidation of the support services functions into Services is 
expected to result in reduced costs for the affiliate companies through 
reductions in corporate and headquarters staffing, reduced corporate 
and administrative programs, and purchasing savings through economies 
of scale. Services will also establish common processes and systems and 
centralized expertise.
    Under the program of restructuring implemented by the State of 
Texas pertaining to the ERCOT System of TNP Enterprises, affiliates of 
TNMP are able to access certain shared services, such as billing, 
accounting, and payroll systems. Applicants propose to maintain these 
arrangements in place where such is consistent with economical 
operations and to comply with both state and Federal Energy Regulatory 
Commission affiliate transaction regulation and the applicable rules of 
the Commission, including rules 90 and 91.
    First Choice is a firm engaged in domestic energy marketing and 
Avistar is a firm engaged in the domestic marketing of energy 
technologies. Applicants maintain that First Choice qualifies as an 
energy-related company under rule 58 under the Act. PNM Resources 
proposes to retain FirstChoice. PNM Resources also proposes to retain 
the nonutility subsidiaries of TNP Enterprises which are currently 
inactive. PNM Resources also proposes to retain a limited partnership 
interest in National Corporate Tax Credit Fund XII, an investment 
qualifying for low income housing tax credits.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1748 Filed 4-12-05; 8:45 am]
BILLING CODE 8010-01-P