A Securities and Exchange Commission complaint, filed on Friday, alleges that PNM lied to investors in a Investor news letter about savings associated with their replacement power plan and the likelihood of PNM's plan being accepted by the PRC. PNM's stock increased soon after the misleading letter. This article detailing the complaint was featured on the front page of the Santa Fe New Mexican.
By Steve Terrell
The New Mexican
An environmental group that opposes Public Service Company of New Mexico’s plan for the San Juan Generating Station filed a complaint Friday with the federal Securities and Exchange Commission claiming PNM published a misleading news release aimed at swaying investors.
The utility saw a slight rise in its stock value for a few days following the statement on the possible savings.
But the complaint contends if PNM had secured a coal contract with Westmoreland Coal Co., about $250 million of the $300 million in savings would occur regardless of whether PNM’s power plan was approved by the state Public Regulation Commission. “Therefore, the PNM news release is intentionally misleading, crafted to sway public and [Public Regulation Commission] sentiment,” the complaint says.
“PNM’s stock value had suffered because of uncertainties associated with its plan for replacing the lost power,” the complaint says. “So, PNM issued a materially misleading investors press release. … After the May 14th investors press release, which contained the fraudulent statements, the price of its stock immediately went up.”
The utility’s stock was $25.97 per share May 14 and did rise for a few days, to a high of $27.23 per share May 20. But since that time, the stock has gone back down. At the close of trading July 2, PNM’s stock was valued at $25.22 a share. In early January, the utility’s stock was valued at $29.61 a share.
PNM, through a spokeswoman, stood by all its public statements.
The utility’s plans for replacing generating capacity from the units to be shut down also include using nuclear power from the Palo Verde plant in Arizona, adding a plant fueled by natural gas, and adding some solar power. The Public Regulation Commission is expected to act on the plan sometime after Aug. 1.
PNM is seeking to add 132 megawatts of power in 2018 from San Juan’s Unit 4 to make up for some of the power that will be lost when the utility shuts down two of the units at the plant as planned in 2017. According to the complaint, this would save PNM customers about $50 million between 2018 and 2021. That $50 million represents the only savings that hinge on the PRC’s approval, New Energy Economy’s complaint says.
The complaint pointed out that the agreement between PNM and the Colorado-based Westmoreland Coal Co. was not a binding coal contract. Conflating the “ ‘executed letter agreement’ with a binding contract purposefully confused those who read the news release,” the complaint said.
PNM earlier this week submitted to the PRC a coal supply agreement with Westmoreland, as well as a purchase and sale agreement between Westmoreland and BHP Billiton for the San Juan Mine, which would supply coal to the San Juan plant.
As New Energy Economy has from the beginning, in its complaint it challenges PNM’s contention that the utility’s is the “lowest cost alternative” for energy. The complaint also disputes whether PNM’s plan was approved by the state Environmental Improvement Board and the U.S. Environmental Protection Agency, saying the current replacement power plan was never before either of those bodies.
In a statement issued in response to the SEC complaint, PNM said it “strongly stands behind its disclosures and its statements to the public, our shareholders and our regulators and intends to vigorously defend against the claims. Our priority is to achieve best possible outcome for our customers, and this action by New Energy Economy should not divert attention away from the fact that the PNM plan is the best path forward.”