Milbank Closes $1 Billion Utility Deal

June 7, 2005

SEC Approves PNM Resources’ Acquisition of TNP Enterprises

NEW YORK, NY, June 7th, 2005 – Furthering the consolidation of the U.S. power industry, the Securities and Exchange Commission (SEC) has approved the $1 billion acquisition of TNP Enterprises, Inc. by PNM Resources Inc., permitting the deal to close this week. The SEC’s approval was the final regulatory consent needed to complete the transaction, which was announced in July 2004. The international law firm Milbank, Tweed, Hadley & McCloy LLP, led by partners M. Douglas Dunn and Roland Hlawaty, represented the private equity group comprising, among others, Laurel Hill Capital Partners, led by William Catacosinos, the former CEO of Long Island Lighting Co., Trimaran Capital Partners, Continental Casualty Company, American Securities Capital Partners, Carlyle High Yield Partners and Dresdner Kleinwort Capital Partners in negotiating, structuring and closing the transaction.

Doug Dunn, partner and co-chair of Milbank’s Power & Energy Group and long-time lawyer to TNP Enterprises, noted, “This transaction shows that private equity can be a source of capital for companies that may be overlooked by Wall Street industry analysts. This is a “win-win-win” for the customers of TNP, the private equity investors, and PNM shareholders, for whom this transaction is accretive. Similar to Scottish Power’s recent $9.4 billion sale of PacifiCorp to MidAmerican Energy Holdings, Co., the merger is indicative of a move towards consolidation into super-regional players in the utility industry.” Dunn previously led the Milbank team representing the private investor group in negotiating and structuring the leveraged buyout of TNP and its subsidiary Texas-New Mexico Power Co., the first LBO of a public electric utility.

Milbank’s Roland Hlawaty, partner in the firm’s Global Corporate Group with particular expertise in structuring private equity investment vehicles, added, “In the short term, the merger of these two southwestern U.S. utilities is anticipated to generate significant pre-tax savings. Over the longer term, higher earnings are expected to result from the synergy created by the merger.”

About the companies involved in the transaction:

TNP Enterprises, Inc., headquartered in Fort Worth, Texas, comprises Texas-New Mexico Power (TNMP), a regulated utility company that transmits and distributes electricity to 49,000 customers in southern New Mexico and 207,000 customers in Texas. First Choice Power, a nonregulated subsidiary which competes in the Texas retail electric supply market.

PNM Resources Inc. (NYSE: PNM) is an energy holding company based in Albuquerque, New Mexico. Public Service Company of New Mexico (PNM), its utility subsidiary, is the state’s largest electricity and natural gas provider serving approximately 471,000 natural gas customers and 413,000 electric customers throughout New Mexico. The company also sells power on the wholesale market in the Western U.S. In addition, PNM Resources is the parent company of Avistar Inc., an energy industry –solutions company.

The Milbank team representing TNP Enterprises was led by partners Doug Dunn, Roland HlawatyDale Ponikvar (Tax), Lewis Putman (Environmental), of counsel Orlan Johnson and Steve Kramer, and associates David Schwartz and Carla Urquhart.

About Milbank

Milbank’s Power & Energy Group combines the expertise in corporate transactions with specialized regulatory skills required for developing and implementing successful strategies essential to compete in today’s complex and dynamic infrastructure industry. The Group’s ability to structure around regulatory impediments has allowed private equity investors to participate in the sector. In 2004 the group was involved in more than $21 billion of deals closed, 8 of which were recognized as deals of the year by various publications. Milbank’s Power & Energy lawyers were involved in some of the major industry consolidations of the 1990s, including most of the cross-border transactions, all of the utility bankruptcy reorganizations, as well as diversifications into other industries and reorganizations of generating transmission and distribution assets. The firm is widely recognized as a leader in global project financings, including foreign power projects and infrastructure financings as well as both inbound and outbound cross-border acquisitions.
At the forefront of the utility industry, Milbank’s Power & Energy group has been involved in a number of “first of its kind” transactions, advising on the full range of issues that occur in strategic combinations from “takeover know-how” and regulatory expertise to tax, financing and bankruptcy and litigation matters.

Notable representations include:

  • The lenders in a non-recourse $500 million bridge financing for Brascan Corporation of Canada to fund its $874 million purchase of power generating stations from Reliant Energy, Inc. The deal, which came to market without a single contract or parent guarantee, was named by Euromoney’s Project Finance magazine as the “NORTH AMERICA MERCHANT POWER DEAL OF THE YEAR” for 2004.
  • The official creditors committees in the Enron and Pacific Gas & Electric bankruptcies.

Milbank, Tweed, Hadley & McCloy LLP is a global law firm headquartered in New York, with offices in Washington, DC, Los Angeles, Palo Alto, London, Frankfurt, Munich, Tokyo, Hong Kong and Singapore. Milbank is a recognized leader in mergers and acquisitions, capital markets and corporate finance, project finance, acquisition finance and other major fields of legal practice. Milbank has English, German and U.S. law capabilities, and provides a full range of services to many of the world’s leading financial, industrial and commercial enterprises, as well as governments, institutions and individuals.