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Industry News

Western Resources to Exit Utility Business

LCG, Nov. 9, 2000--If at the end of the electric deregulation battles there is a tomb for the unknown soldier it will be that of Western Resources Inc.

The Topeka, Kans.-based company, as recently as four years ago an aggressive pursuer of growth through acquisition of electric utilities, announced this morning that it will sell its electric and natural gas operations to Public Service Co. of New Mexico and rename what's left over Westar Industries.

The deal is valued at more than $4.4 billion, including debt. A new, as yet unnamed holding company will own both PNM and Western Resources' utility operations, which consist mostly of Kansas Power & Light Co. of Topeka and Kansas Gas & Electric Co. of Wichita.

Prior to the close of the transaction, Western Resources will reorganize its non-utility businesses into a new company, Westar, which will be spun off to Western Resources shareholders. Westar's principal assets will be its 85 percent interest in Protection One, the home security business that has brought Western Resources to its knees, and its 45 percent investment in Oneok Inc., the Oklahoma gas company.

The new holding company will issue 55 million of its shares, subject to adjustment, to WesternResources' shareholders and Westar Industries. Before any adjustments, the new company will haveapproximately 95 million shares outstanding, of which approximately 42.1 percent will be owned byformer PNM shareholders and 57.9 percent will be owned by former Western Resources shareholdersand Westar Industries.

Based on PNM's average closing price on the New York Stock Exchange over the past 10 days, the equity portion of the transaction works out to about $1.5 billion. The new holding company will assume around $2.9 billion of Western Resources debt.

The companies said they expected to close the transaction in a year to 15 months. The new company will serve over one million retail electric customers and 400,000 retail gas customersin New Mexico and Kansas and will have generating capacity of more than 7,000 megawatts. Thetransaction also will make the new company a leading energy supplier in the Western and Midwesternwholesale markets, they said.

PNM's chief executive, Jeff Sterba, said in the joint statement "By joining forces with Western Resources, we will surpass our stated goal of doubling our generation capacity and tripling our power sales more than three years ahead of schedule." He added "This transaction will also enable us to realize a number of important financial improvements, including a broader, more predictable cash flow, solid revenues and earnings growth, improved access to capital, increased market capitalization and public market float and cost efficiencies."

Sterba will be chairman, president and chief executive of the new holding company, which will be headquartered in Albuquerque, PNM's present home. Western's chief, David Wittig, will be chairman, president and chief executive of Westar.

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