Topeka — Public Service Company of New Mexico announced Tuesday that it has terminated its $4.4 billion merger agreement with Western Resources Inc.
Patrick Ortiz, PNM's senior vice president, said the deal announced in November 2000 could not be completed as originally designed. PNM's board of directors voted Monday to terminate the agreement.
"Regulatory rulings in Kansas, including one declaring a necessary condition of the transaction to be unlawful, and actions and failures by Western which are inconsistent with the terms of the agreement made it necessary for PNM to take this action," Ortiz wrote in a letter to Western officials.
Western officials did not return calls for comment Tuesday.
Ortiz cited several rulings by the Kansas Corporation Commission as factors working against the merger. Among them: In July, the commission rejected Western's request for a $151 million rate increase and instead ordered the company to cut its rates by $15.6 million.
Ortiz said that even if the commission's rulings were reversed on appeal, it would have been impossible to obtain the necessary regulatory approval in Kansas or New Mexico by Dec. 31, 2002, the deadline in the merger agreement.
Merger talks stalled following the commission's rulings, and PNM sued Western on Oct. 12 in New York state court. PNM accuses Western of trying to force it to complete the merger under the original terms, even though regulators declared those terms not in the public interest.
Western, which provides electricity to about 636,000 Kansas customers through its KPL and KGE subsidiaries, filed its own lawsuit Nov. 20, seeking $650 million.
Walker Hendrix, consumer counsel for the Citizens' Utility Ratepayers Board in Kansas, said Western officials hoped the merger would let them jettison some of Western's nearly $2 billion debt and still control its nonregulated interests.
"The failure of the PNM merger, and what the commission would agree to, makes it more difficult for Western to put together future mergers or acquisitions of the utility itself," Hendrix said.
Brian Youngberg, an analyst with Edward Jones in St. Louis, said Western remained an unattractive investment for investors and potential suitors.
Shares of Western closed Tuesday at $17.11, down 20 cents, on the New York Stock Exchange. PNM shares were down 2 cents to $28.20.
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