Colorado Power Company to Merge With Texas Utility

Colorado’s electric utility announced plans Wednesday to merge with a nearby power company in a deal expected to push more cost-conscious electric companies into mergers.

Public Service Co. of Colorado is paying about $1.26 billion worth of stock to merge with Southwestern Public Service Co. of Texas. The combined company would serve Colorado, Texas, New Mexico, Wyoming, Oklahoma and Kansas.

The jobs of 550 to 600 workers, or 8% of the combined work force of 7,000, are expected to be eliminated to cut costs.

Big industrial electricity users are now allowed to shop around for power, breaking the monopoly of local utilities.

“Utility companies across the country are trying to reduce costs so prices are attractive . . .,” Public Service Colorado Chairman Del Hock said at a news conference. “We have concluded that bigger is better in an increasingly competitive marketplace.”

Just last week Union Electric Co. in St. Louis announced a deal to merge with Central Illinois Public Service Co.

“The merger announcement is just an indication that some of the healthier companies, the more competitive companies, are getting together” said Doug Fischer, utility analyst at A.G. Edwards. “That’s going to put more pressure on the rest of the companies in the industry to consolidate.”

After the merger is completed, the companies expect to save about $770 million in the first 10 years by sharing generating capacity, eliminating duplication and negotiating for lower prices, Hock said.

The new company, which has yet to be named, will cover one of the largest geographic areas in the country, with 2.4 million electric and natural gas customers in six states and estimated annual revenue of about $3 billion.

The merger is expected to be completed in 1997, pending approval of both companies’ shareholders and regulatory authorities.

Based on the number of common shares outstanding, PSC shareholders will own 61.9% of the common equity of the new company, while SPS shareholders will own 38.1%. The new company will be headquartered in Denver.

SPS closed up $1 on Wednesday at $30.375. PSC gained 87.5 cents to close at $32.375 on the New York Stock Exchange.