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SOUTHWESTERN PUBLIC SERVICE COMPANY ANNOUNCES $2.2 BILLION PROPOSAL TO ACQUIRE EL PASO ELECTRIC

 AMARILLO, Texas, July 1 /PRNewswire/ -- Southwestern Public Service Company (NYSE: SPS) -- in connection with negotiations with representatives of holders of Palo Verde Lease Debt, the largest single class of creditors with claims of about $700 million -- today announced a proposal to acquire the bankrupt El Paso Electric Company (NASDAQ-NMS: ELPAQ) through a plan of reorganization with an approximate value of $2.2 billion. It is believed the SPS proposal would provide the best overall transaction for EPE's creditors and other constituents.
 "The natural fit of an SPS and EPE business combination has allowed us to make this strong proposal," said SPS Chairman Bill D. Helton. "SPS and EPE already are electrically interconnected. In addition, the agreement would be accomplished by merging SPS and EPE, with EPE becoming the EL Paso Division of the new SPS, thereby taking advantage of important synergies."
 Under the proposal -- which is subject to change as negotiations continue -- SPS would offer $706 million in cash, $464 million in new SPS First Mortgage Bonds, $218 million in new SPS common stock, $204 million of Pollution Control Bonds and other debt, and $593 million as the present value of renegotiated Palo Verde leases. The various constituent groups would receive recoveries as follows:
 -- Secured creditors would receive 100 percent of their claims, plus unpaid interest and interest on interest, totaling $913 million. In this group, EPE First and Second Mortgage Bondholders would receive new SPS First Mortgage Bonds and cash totaling $499 million. Other secured creditors would receive cash and secured debt totaling $414 million.
 -- Priority claims would receive 100 percent of their allowed claims, to be paid in cash totaling $45 million.
 -- Unsecured creditors would receive 98 percent of their allowed claims, plus carrying costs. Consideration of $418 million would be paid as follows: $274 million in cash, $104 million in SPS common stock and $40 million in Pollution Control Bonds and other debt.
 -- Palo Verde lease debt would be paid at 98 percent of its face value, plus carrying costs. Consideration of $741 million would be paid as follows: $593 million as the present value of renegotiated Palo Verde leases, $52 million in SPS common stock, and $96 million in cash.
 -- Preferred shareholders would receive 80 percent of par value, plus carrying costs, representing the only distribution to equity holders. Consideration of $68 million would be paid as follows: $63 million in SPS common stock and $5 million in cash for carrying costs.
 "We believe our proposal is superior to other alternatives because of the quality of the recoveries," Helton said. "In addition, SPS is in a very strong position to obtain regulatory approval and deliver recoveries to creditors on a timely basis."
 SPS's proposal is contingent upon the bankruptcy court's permission to file the proposed plan and thereafter -- among other things -- upon the approvals of EPE's creditors, the approval of the bankruptcy court, the receipt of federal and state regulatory approvals and the approval of SPS's shareholders. Until such approvals are obtained, the proposal is subject to change or withdrawal by the company.
 SPS has requested the federal bankruptcy court in Austin, Texas, to allow it to file a plan of reorganization. The court is considering the request. Central & South West Corporation, a utility holding company in Dallas, Texas, has filed a competing plan in concert with present EPE management.
 Under the SPS plan, customer rates in EPE's Texas service area would increase less than half the amount proposed by CSW/EPE through 2001.
 SPS has reached a rate stipulation agreement with the staff of the Public Utility Commission of Texas and the state's Office of Public Utility Counsel for the proposed initial increase. The PUCT staff and OPUC have agreed to recommend the increase and the proposed merger to the Public Utility Commission as being in the public interest.
 CSW/EPE have been unable to reach a rate agreement with any regulatory entities, Helton noted.
 For SPS, the acquisition provides important growth opportunities, Helton said.
 "Kilowatt-hour sales are growing at a faster rate in the EPE service area compared with the area we already serve," he said. "The acquisition would also increase our access to important wholesale markets in the West and provide direct access to Mexico. Moreover, the acquisition would diversify our customer mix, helping to smooth out bumps in the economy. The EPE area has a larger residential base, while the present SPS area has a larger industrial and agricultural base."
 Southwestern Public Service Company serves a population of more than one million in 96 communities in eastern and southeastern New Mexico, the South Plains and Panhandle of Texas, the Oklahoma Panhandle and southwestern Kansas. El Paso Electric Company serves a population of about 750,000 in El Paso and an area of the Rio Grande Valley in West Texas, and in southern New Mexico, including the city of Las Cruces.
 -0- 7/1/93
 /CONTACT: Phil Roth, public information supervisor, (media), 806-378-2120, or Jim Steinhilper, group manager of finance, (investors), 806-378-2843, both of Southwestern Public Service Company/
 (SPS ELPAQ)


CO: Southwestern Public Service Company; El Paso Electric Company ST: Texas IN: UTI SU:

TM -- NY106 -- 8006 07/01/93 20:07 EDT
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Publication:PR Newswire
Date:Jul 1, 1993
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