PNM to Buy Electric Utilitity Operations of Western Resources

PNM to Buy Electric Utility Operations of Western Resources

Public Service Company of New Mexico and Western Resources said that both
companies' boards of directors approved an agreement under which PNM will
acquire the Western Resources electric utility operations in a tax-free,
stock-for-stock transaction. Under terms of the agreement, PNM and Western
Resources, whose utility operations consist of its KPL division and KGE
subsidiary, will both become subsidiaries of a new holding company to be n
named at a future date. Prior to the consummation of this combination,
Western Resources will reorganize all of its non-utility assets, including
its 85% stake in Protection One and its 45% investment in ONEOK, into
Westar Industries which will be spun off to its shareholders.

Based on PNM's average closing price over the last 10 days, the indicated
equity value of the transaction is approximately $1.503 billion, including
conversion of the Westar Industries obligation. In addition, the new
holding company will assume approximately $2.939 billion of existing Western
Resources' debt, giving the transaction an aggregate enterprise value of
approximately $4.442 billion. The new holding company will have a total
enterprise value of approximately $6.5 billion ($2.6 billion in equity; $3.9
billion in debt and preferred stock). The transaction will be accounted for
as a purchase and is anticipated to be immediately accretive to PNM's
earnings per share and cash flow.