SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
June 30, 1998
For the quarterly period ended. . . . . . . .. . . . . . . . . .
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from. . . . . . . .to. . . . . . . . .
1-14766
Commission file number. . . . . . . . . . . .. . . . . . . . . .
Energy East Corporation
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Exact name of registrant as specified in its charter)
New York 14-1798693
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 12904, Albany, NY 12212-2904
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(Address of principal executive offices) (Zip Code)
518-434-3049
Registrant's telephone number, including area code . . . . . . .
N/A
. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [ ]
The number of shares of common stock (par value $.01 per
share) outstanding as of July 31, 1998 was 63,807,477.
<PAGE>
TABLE OF CONTENTS
PART I
Page
Item 1. Financial Statements . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
(a) Liquidity and Capital Resources . . . . . 7
(b) Results of Operations . . . . . . . . . . 10
PART II
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. . . . . . . . . . . . . . . . . 15
(b) Reports on Form 8-K . . . . . . . . . . . 15
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Energy East Corporation
Consolidated Statements of Income - (Unaudited)
Three Months Six Months
Periods Ended June 30 1998 1997 1998 1997
(Thousands, except per share amounts)
Operating Revenues
Electric . . . . . . . . . . . . . . $485,877 $411,453 $991,465 $862,723
Natural gas. . . . . . . . . . . . . 54,535 58,917 176,179 195,784
------- ------- --------- ---------
Total Operating Revenues. . . . . 540,412 470,370 1,167,644 1,058,507
------- ------- --------- ---------
Operating Expenses
Fuel used in electric generation . . 55,080 52,706 114,172 112,689
Electricity purchased. . . . . . . . 164,355 98,247 310,566 191,459
Natural gas purchased. . . . . . . . 31,251 28,462 88,388 88,869
Other operating expenses . . . . . . 73,998 80,967 147,166 160,528
Maintenance. . . . . . . . . . . . . 27,748 30,550 59,697 54,467
Depreciation and amortization. . . . 47,619 48,027 95,214 96,316
Other taxes. . . . . . . . . . . . . 50,556 48,668 105,495 103,909
------- ------- --------- ---------
Total Operating Expenses. . . . . 450,607 387,627 920,698 808,237
------- ------- --------- ---------
Operating Income. . . . . . . . . . . 89,805 82,743 246,946 250,270
Other Income and Deductions . . . . . 2,151 4,578 4,873 9,346
Interest Charges, Net . . . . . . . . 30,289 29,882 60,924 60,508
Preferred Stock Dividends of
Subsidiary.. . . . . . . . . . . . . 2,260 2,352 4,529 4,667
------- ------- --------- ---------
Income Before Federal Income Taxes. . 55,105 45,931 176,620 175,749
Federal Income Taxes. . . . . . . . . 25,752 22,008 71,096 72,164
------- ------- --------- ---------
Net Income. . . . . . . . . . . . . . $29,353 $23,923 $105,524 $103,585
======= ======= ========= =========
Earnings Per Share, basic and diluted $.46 $.35 $1.61 $1.51
Dividends Per Share . . . . . . . . . $.40 $.35 $.75 $.70
Average Shares Outstanding. . . . . . 64,349 68,279 65,373 68,813
The notes on page 6 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Balance Sheets - (Unaudited)
June 30, Dec. 31,
1998 1997
(Thousands)
Assets
Current Assets
Cash and cash equivalents. . . . . . . . . . . . . . . $59,642 $8,168
Special deposits . . . . . . . . . . . . . . . . . . . 3,008 3,170
Accounts receivable, net . . . . . . . . . . . . . . . 150,887 189,008
Fuel, at average cost. . . . . . . . . . . . . . . . . 39,959 43,706
Materials and supplies, at average cost. . . . . . . . 40,559 41,561
Prepayments. . . . . . . . . . . . . . . . . . . . . . 77,494 68,452
Accumulated deferred federal income
tax benefits, net. . . . . . . . . . . . . . . . . . 13,963 2,148
---------- ----------
Total Current Assets. . . . . . . . . . . . . . . . 385,512 356,213
Utility Plant, at Original Cost
Electric . . . . . . . . . . . . . . . . . . . . . . . 5,272,753 5,234,725
Natural gas. . . . . . . . . . . . . . . . . . . . . . 583,211 576,683
Common . . . . . . . . . . . . . . . . . . . . . . . . 142,905 152,034
---------- ----------
5,998,869 5,963,442
Less accumulated depreciation. . . . . . . . . . . . . 2,147,579 2,093,274
---------- ----------
Net Utility Plant in Service. . . . . . . . . . . . 3,851,290 3,870,168
Construction work in progress. . . . . . . . . . . . . 53,383 52,104
---------- ----------
Total Utility Plant . . . . . . . . . . . . . . . . 3,904,673 3,922,272
Other Property and Investments, Net . . . . . . . . . . 123,500 143,449
Regulatory and Other Assets
Regulatory assets
Unfunded future federal income taxes. . . . . . . . . 190,242 243,129
Unamortized debt expense. . . . . . . . . . . . . . . 73,974 76,418
Demand-side management program costs. . . . . . . . . 64,466 64,466
Environmental remediation costs . . . . . . . . . . . 62,500 82,900
Other . . . . . . . . . . . . . . . . . . . . . . . . 132,549 113,637
---------- ----------
Total regulatory assets. . . . . . . . . . . . . . . . 523,731 580,550
Other assets . . . . . . . . . . . . . . . . . . . . . 35,643 26,197
---------- ----------
Total Regulatory and Other Assets . . . . . . . . . 559,374 606,747
---------- ----------
Total Assets. . . . . . . . . . . . . . . . . . . . $4,973,059 $5,028,681
========== ==========
The notes on page 6 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Balance Sheets - (Unaudited)
June 30, Dec. 31,
Liabilities 1998 1997
(Thousands)
Current Liabilities
Current portion of long-term debt. . . . . . . . . . . $7,321 $38,240
Current portion of preferred stock . . . . . . . . . . 30,000 -
Commercial paper . . . . . . . . . . . . . . . . . . . 70,000 58,000
Accounts payable and accrued liabilities . . . . . . . 142,031 124,981
Interest accrued . . . . . . . . . . . . . . . . . . . 19,658 20,500
Taxes accrued. . . . . . . . . . . . . . . . . . . . . 38,842 6,146
Other. . . . . . . . . . . . . . . . . . . . . . . . . 60,002 79,631
---------- ----------
Total Current Liabilities. . . . . . . . . . . . . . 367,854 327,498
Regulatory and Other Liabilities
Regulatory liabilities
Deferred income taxes . . . . . . . . . . . . . . . . 101,499 81,986
Deferred income taxes - unfunded future federal
income taxes . . . . . . . . . . . . . . . . . . . . 74,428 99,126
Other . . . . . . . . . . . . . . . . . . . . . . . . 41,067 79,709
---------- ----------
Total regulatory liabilities . . . . . . . . . . . . . 216,994 260,821
Other liabilities
Deferred income taxes . . . . . . . . . . . . . . . . 780,207 753,722
Other postretirement benefits . . . . . . . . . . . . 130,263 117,760
Environmental remediation costs . . . . . . . . . . . 82,500 82,900
Other . . . . . . . . . . . . . . . . . . . . . . . . 81,953 73,021
---------- ---------
Total other liabilities. . . . . . . . . . . . . . . . 1,074,923 1,027,403
Long-term debt . . . . . . . . . . . . . . . . . . . . 1,459,113 1,450,224
---------- ----------
Total Liabilities . . . . . . . . . . . . . . . . . 3,118,884 3,065,946
Commitments - -
Preferred Stock of Subsidiary
Preferred stock redeemable solely at the
option of subsidiary . . . . . . . . . . . . . . . . 104,440 134,440
Preferred stock subject to mandatory
redemption requirements. . . . . . . . . . . . . . . 25,000 25,000
Common Stock Equity
Common stock (Par value of $.01 and $6.66 2/3 at
June 30, 1998 and December 31, 1997, respectively) . 640 462,250
Capital in excess of par value. . . . . . . . . . . . 1,099,159 811,648
Retained earnings . . . . . . . . . . . . . . . . . . 624,936 568,844
Treasury stock. . . . . . . . . . . . . . . . . . . . - (39,447)
---------- ----------
Total Common Stock Equity . . . . . . . . . . . . . 1,724,735 1,803,295
---------- ----------
Total Liabilities and Stockholders' Equity . . . . $4,973,059 $5,028,681
========== ==========
The notes on page 6 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Statements of Cash Flows - (Unaudited)
Six Months
Periods Ended June 30 1998 1997
(Thousands)
Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . $105,524 $103,585
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization. . . . . . . . . . 95,214 96,316
Federal income taxes and investment tax credits
deferred, net. . . . . . . . . . . . . . . . . (4,445) (23,381)
Changes in current operating assets and liabilities
Accounts receivable . . . . . . . . . . . . . . 38,121 53,485
Inventory. . . . . . . . . . . . . . . . . . . . 4,749 957
Accounts payable and accrued liabilities . . . . 17,050 (28,658)
Taxes accrued. . . . . . . . . . . . . . . . . . 32,696 42,825
Other, net . . . . . . . . . . . . . . . . . . . . 6,879 27,146
------- -------
Net Cash Provided by Operating Activities . . . 295,788 272,275
------- -------
Investing Activities
Utility plant capital expenditures . . . . . . . . (76,619) (55,842)
Proceeds from governmental and other sources . . . 316 911
Expenditures for other property and investments. . 25,200 (804)
------- -------
Net Cash Used in Investing Activities . . . . . (51,103) (55,735)
------- -------
Financing Activities
Repurchase of common stock . . . . . . . . . . . . (135,359) (7,254)
Purchase of treasury stock . . . . . . . . . . . . - (39,565)
Repayments of first mortgage bonds . . . . . . . . (30,000) (48,000)
Changes in funds set aside for first
mortgage bond repayments . . . . . . . . . . . . - 25,000
Long-term notes, net . . . . . . . . . . . . . . . 9,580 (1,667)
Commercial paper, net. . . . . . . . . . . . . . . 12,000 (91,500)
Dividends on common stock. . . . . . . . . . . . . (49,432) (48,385)
------- -------
Net Cash Used in Financing Activities . . . . . (193,211) (211,371)
------- -------
Net Increase in Cash and Cash Equivalents . . . . . 51,474 5,169
Cash and Cash Equivalents, Beginning of Period. . . 8,168 8,253
------- -------
Cash and Cash Equivalents, End of Period. . . . . . $59,642 $13,422
======= =======
Supplemental Disclosure of Cash Flows Information
Cash paid during the period
Interest, net of amounts capitalized. . . . . . . $52,553 $55,230
Income taxes. . . . . . . . . . . . . . . . . . . $37,346 $53,661
The notes on page 6 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
Energy East Corporation
Consolidated Statements of Retained Earnings - (Unaudited)
Six Months
Periods ended June 30 1998 1997
(Thousands)
Balance, beginning of period. . . . . . . . . . $568,844 $489,129
Add net income. . . . . . . . . . . . . . . . . 105,524 103,585
Deduct dividends on common stock. . . . . . . . 49,432 48,244
-------- --------
Balance, end of period. . . . . . . . . . . . . $624,936 $544,470
======== ========
The notes on page 6 are an integral part of the financial statements.
<PAGE>
Item 1. Financial Statements (Cont'd)
Note 1. Holding Company Formation
On May 1, 1998, New York State Electric & Gas Corporation
(NYSEG) was reorganized into a holding company structure pursuant
to an Agreement and Plan of Share Exchange between NYSEG and
Energy East Corporation (Energy East or company). NYSEG's
outstanding common stock was exchanged on a share-for-share basis
for Energy East's common stock and Energy East became the parent
of NYSEG. Energy East's common stock is listed on the New York
Stock Exchange under the symbol NEG. NYSEG's common stock was
delisted from the New York Stock Exchange. The preferred stock
and debt of NYSEG were not exchanged and remain securities of
NYSEG.
Note 2. Principles of Consolidation
Energy East's 1997 and 1998 consolidated financial
statements include the company's subsidiaries, NYSEG, NGE
Generation, Inc. (GenSub) and NGE Enterprises, Inc. (NGE
Enterprises).
Note 3. Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements
reflect all adjustments which are, in the opinion of management,
necessary for a fair presentation of the company's consolidated
results for the interim periods. All such adjustments, other
than those related to the reorganization into the holding company
structure noted above, are of a normal recurring nature. The
unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
contained in NYSEG's annual report for the year ended December
31, 1997. Due to the seasonal nature of the company's
operations, financial results for interim periods are not neces-
sarily indicative of trends for a twelve-month period.
Note 4. Reclassifications
Certain amounts have been reclassified on the consolidated
financial statements to conform with the 1998 presentation.
<PAGE>
Item 2. Management's discussion and analysis of financial
condition and results of operations
(a) Liquidity and Capital Resources
Competitive Conditions (See NYSEG's Form 10-K for the fiscal year
ended December 31, 1997, Item 7 - Liquidity and Capital Resources
- - Competitive Conditions - Electric Industry, Natural Gas
Industry and Accounting Issues; and NYSEG's Form 10-Q for the
quarter ended March 31, 1998, Item 2(a) - Liquidity and Capital
Resources - Competitive Conditions - Electric Industry and
Natural Gas Industry.)
Holding Company Structure
On May 1, 1998, Energy East became the parent of NYSEG.
Subsidiaries of the company include NYSEG, GenSub and NGE
Enterprises. NYSEG is a regulated utility transmitting and
delivering electricity, transporting and delivering natural gas,
and generating electricity from its nuclear and hydroelectric
stations. GenSub produces electricity from seven coal-fired
stations. NGE Enterprises, a holding company, has subsidiaries
that provide energy services.
Electric Industry
Generation Business: All of GenSub's generating units are in
service for the summer peak load period, including the two units,
with a total generating capacity of 92 megawatts, that were
placed on long-term cold standby in 1995 and 1996.
NYSEG put GenSub's seven coal-fired generating stations and
associated assets and liabilities up for auction earlier this
year. NYSEG and GenSub accepted offers totaling $1.85 billion
from The AES Corporation and Edison Mission Energy in August
1998, for the generation assets. The contract with The AES
Corporation is for the purchase of the generation assets in New
York State, and the contract with Edison Mission Energy is for
the purchase of the Homer City Generating Station in
Pennsylvania. The total sales price provides full recovery of
the net book value of the generation assets. There are a number
of items such as depreciation, book value of inventories and
taxes that between now and the date of the closing will affect
the financial statements as NYSEG and GenSub continue to
precisely define the specific costs of the items included in the
transactions. Pursuant to NYSEG's restructuring plan approved by
the Public Service Commission of the State of New York (PSC) in
January 1998 all proceeds, net of taxes and transaction costs, in
excess of the net book value of the generation assets, less
funded deferred taxes, will be used to write down NYSEG's 18%
investment in Nine Mile Point nuclear generating unit No. 2.
This transaction, including the writeoff and writedown at
NYSEG of the coal-fired and nuclear generation assets, and
corresponding common stock equity, will not adversely affect the
financial condition of Energy East or any of its subsidiaries.
For regulatory purposes, any reduction in NYSEG's common stock
equity balance resulting from such writeoff and writedown of the
generation assets, or the repurchase of common stock, is
eliminated before NYSEG's electric return on equity is calculated
in accordance with the 12% earnings cap approved by the PSC in
January 1998 in NYSEG's restructuring plan.
NYSEG and GenSub will file with the appropriate regulatory
bodies seeking approval of the sales, and the sales are expected
to close early next year. Energy East plans to use the proceeds
from the sales to repurchase common stock and expand its energy
distribution system throughout the Northeast.
FERC Orders 888 and 889: The Federal Energy Regulatory
Commission (FERC) issued Orders 888 and 889 in April 1996,
adopting rules to facilitate the development of competitive
wholesale electricity markets by opening up transmission services
and to address the resulting stranded costs. In subsequent orders
the FERC generally affirmed Orders 888 and 889. Various parties,
including NYSEG, have filed petitions for review of these orders
with the United States Courts of Appeals in various circuits.
The FERC accepted, in February 1997, a compliance filing of
the New York Power Pool (NYPP), of which NYSEG is a member, in
response to Order 888. NYPP members submitted additional filings
to the FERC in 1997 proposing the restructuring of the NYPP by
establishing an Independent System Operator (NYISO), a Power
Exchange and a New York State Reliability Council (NYSRC). The
FERC approved the formation of the NYISO and NYSRC in June 1998
and indicated that it would later rule on the rates, terms and
conditions of service to be implemented by the NYISO under the
NYISO tariff. These additional FERC rulings are needed before the
NYISO, NYSRC and the restructured market can commence operation.
The company is unable to predict the outcome that the remaining
FERC proceedings will have on the NYISO and their ultimate effect
on the company's financial position or results of operations.
Natural Gas Industry
Joint Venture with Central Maine Power Company: The Maine Public
Utilities Commission approved the joint venture's application to
provide natural gas service to the Augusta, Bangor, Bath-
Brunswick, Bethel, Waterville and Windham communities. The joint
venture's plans have been developed to coincide with the
construction schedules of two pipelines from Canada, with initial
service to customers anticipated by the end of 1998.
NYSEG's Natural Gas Rate Settlement Agreement: NYSEG filed a
natural gas rate settlement agreement with the Public Service
Commission of the State of New York (PSC) on May 26, 1998.
Subject to final approval by the PSC, this settlement agreement
will reduce prices for most customers. The settlement agreement
is expected to become effective September 1, 1998 and continue
through August 31, 2002.
<PAGE>
The settlement agreement provides for a reduction of $26.9
million, or 2.2%, in NYSEG's natural gas revenues over the term
of the agreement. An earnings sharing mechanism in the settlement
agreement provides that any excess of the average earned equity
returns, as determined for the first 24 months of the agreement
and then for the remaining term of the agreement, will be shared
equally between customers and shareholders. If NYSEG's gas-
related equity ratio is 48% or higher, the average earned equity
return sharing threshold will be 13%. If the gas-related equity
ratio is below 48%, the average earned equity return sharing
threshold will be 12.5%.
Investing Activities
Capital expenditures for the first six months of 1998 were
$77 million. The company estimates its capital expenditures for
1998 will be about $150 million, primarily for extension of
service and necessary improvements to existing facilities. These
expenditures are expected to be financed entirely with internally
generated funds.
Financing Activities
During the second quarter of 1998 the company repurchased
500,100 shares of common stock as part of its common stock
repurchase program.
In July 1998 NYSEG redeemed, at a premium, $30 million of
6.48% preferred stock.
Forward-Looking Statements
This Form 10-Q quarterly report includes certain forward-
looking statements that are based upon management's current
expectations and information currently available. Whenever used
in this report, the words "estimate," "expect," or similar
expressions are intended to identify forward-looking statements.
In addition to the assumptions and other factors referred to
specifically in connection with such statements, factors that
could cause actual results to differ materially from those
contemplated in any forward-looking statements include, among
others, regulatory developments; the rapidly changing and
increasingly competitive electric and natural gas utility
markets; the ability to obtain adequate and timely rate relief;
cost recovery, including the potential effect of stranded costs;
legal or administrative proceedings; business conditions;
technological developments; changes in the cost or availability
of capital; labor developments; nuclear or environmental
incidents; factors affecting the utility industry in general,
such as deregulation and unbundling of energy services; weather
conditions; changes in fuel supply or cost; and other
considerations that may be disclosed from time to time in the
company's publicly disseminated documents and filings. The
company undertakes no obligation to update publicly any forward-
looking statements, whether as a result of new information,
future events or otherwise.
<PAGE>
(b) Results of Operations
Three Months Ended June 30,
1998 1997 Change
(Thousands, except per share amounts)
Total Operating Revenues $540,412 $470,370 15%
Operating Income $89,805 $82,743 9%
Net Income $29,353 $23,923 23%
Average Shares Outstanding 64,349 68,279 (6%)
Earnings Per Share,
basic and diluted $.46 $.35 31%
Dividends Per Share $.40 $.35 14%
Earnings per share for the second quarter of 1998 improved
primarily due to cost control efforts, higher electric deliveries
and a reduction in the number of common shares outstanding,
partially offset by lower natural gas retail deliveries due to
warmer weather.
Six Months Ended June 30,
1998 1997 Change
(Thousands, except per share amounts)
Total Operating Revenues $1,167,644 $1,058,507 10%
Operating Income $246,946 $250,270 (1%)
Net Income $105,524 $103,585 2%
Average Shares Outstanding 65,373 68,813 (5%)
Earnings Per Share,
basic and diluted $1.61 $1.51 7%
Dividends Per Share $.75 $.70 7%
Earnings per share increased for the six months primarily
due to cost control efforts, a reduction in the number of common
shares outstanding and higher electric wholesale deliveries.
Those increases were partially offset by lower electric and
natural gas retail deliveries primarily because of unusually warm
weather during the heating season in the first quarter of this
year.
<PAGE>
Operating Results by Business Segment
Electric Three Months Ended June 30,
1998 1997 Change
(Thousands)
Retail Deliveries-
Megawatt-hours 3,130 3,071 2%
Operating Revenues $485,877 $411,453 18%
Operating Expenses $394,262 $334,939 18%
Operating Income $91,615 $76,514 20%
Operating revenues increased $74 million due to higher
electric wholesale deliveries of $71 million and higher electric
retail deliveries of $3 million.
The $59 million increase in operating expenses was primarily
due to a $67 million increase in electricity purchased for
wholesale deliveries, partially offset by a $1 million decrease
in electricity purchased for retail deliveries and a $10 million
decrease in various operating and maintenance costs.
Six Months Ended June 30,
1998 1997 Change
(Thousands)
Retail Deliveries-
Megawatt-hours 6,520 6,563 (1%)
Operating Revenues $991,465 $862,723 15%
Operating Expenses $778,584 $666,908 17%
Operating Income $212,881 $195,815 9%
Electric retail deliveries decreased primarily because of
unusually warm weather during the heating season in the first
quarter of this year.
The $129 million increase in operating revenues was
primarily due to a $134 million increase in wholesale deliveries,
partially offset by an $11 million decrease in retail deliveries.
Operating expenses for the six months increased $112 million
primarily due to a $123 million increase in electricity purchased
for wholesale deliveries, partially offset by a $4 million
decrease in electricity purchased for retail deliveries and a $9
million decrease in various operating and maintenance costs.
<PAGE>
Natural Gas Three Months Ended June 30,
1998 1997 Change
(Thousands)
Retail Deliveries-
Dekatherms 9,305 10,889 (15%)
Operating Revenues $54,535 $58,917 (7%)
Operating Expenses $56,345 $52,688 7%
Operating Income ($1,810) $6,229 (129%)
Natural gas retail deliveries decreased because of warmer
weather this quarter.
The $4 million decrease in natural gas operating revenues
was primarily due to lower retail deliveries that reduced
revenues $13 million, partially offset by increases of $3 million
and $2 million in wholesale sales and other revenues,
respectively, and a more favorable sales mix that added $4
million to revenues.
Natural gas operating expenses increased $4 million for the
quarter primarily due to a $3 million increase in natural gas
purchased.
Six Months Ended June 30,
1998 1997 Change
(Thousands)
Retail Deliveries-
Dekatherms 30,584 34,308 (11%)
Operating Revenues $176,179 $195,784 (10%)
Operating Expenses $142,114 $141,329 1%
Operating Income $34,065 $54,455 (37%)
Natural gas operating revenues decreased $20 million for the
six months. Revenues were reduced $30 million by lower retail
deliveries, primarily due to warmer weather. That decrease was
partially offset by increases of $5 million and $2 million in
wholesale sales and other revenues, respectively, and a more
favorable sales mix that added $4 million to revenues.
<PAGE>
PART II - OTHER INFORM ATION
Item 1. Legal Proceedings
(a) By letter dated April 20, 1992, the Environmental Protection
Agency (EPA) notified NYSEG that it had been identified as a
potentially responsible party (PRP) at the Bern Metal Removal
Site (Bern Metal Site) in Buffalo, New York. Six other PRPs have
been identified by the EPA. The EPA has taken response actions at
the Bern Metal Site, including investigation, excavation, and
removal of drums and contaminated soil, and implementation of
measures to prevent surface water run-off. The EPA demanded that
NYSEG reimburse the EPA Hazardous Substances Superfund $2 million
in response costs incurred to date by the EPA, with interest
accruing from the date of the demand. In September 1995 NYSEG and
the EPA reached an agreement on a consent order under which NYSEG
would pay the sum of $10,000 in return for a covenant by the EPA
not to sue NYSEG for the EPA's response costs, and to protect
NYSEG from claims of contribution by other PRPs for such costs
incurred to date. The consent order was approved and in July 1998
NYSEG paid $10,000 to the EPA. (See NYSEG's Form 10-K for the
fiscal year ended December 31, 1997, Item 3. Legal Proceedings.)
(b) On May 22, 1998, NYSEG, along with fifteen other parties,
received a special notice pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980
(CERCLA) from the EPA, asking whether the recipients wished to
voluntarily finance or perform the remedial design and remedial
action at the Rosen Brothers Site in the City of Cortland, New
York. The estimated total present-worth cost of the selected
remedy is $3,140,000. The EPA also requested reimbursement of
past costs at the site of approximately $692,000, plus interest.
Pursuant to the special notice procedures of CERCLA, NYSEG, along
with certain other parties that received the special notice,
submitted a "good faith offer" on July 21, 1998, to voluntarily
contribute to the cost of the remedial design and remedial
action. NYSEG has entered into discussions with the other PRPs at
the site in an attempt to reach an agreement concerning
allocation of costs. Such discussions are proceeding under the
supervision of an alternative dispute resolution specialist
retained by the EPA. (See NYSEG's Form 10-K for the fiscal year
ended December 31, 1997, Item 3. Legal Proceedings.)
<PAGE>
(c) NYSEG, on June 15, 1998, commenced an action in the New York
State Supreme Court, Tompkins County against Niagara Mohawk Power
Corporation (NiMo) seeking an order enjoining NiMo from
transferring operating responsibility for the Nine Mile Point
nuclear generating unit No. 2 (NMP2) to the New York Nuclear
Operating Company (NYNOC) without NYSEG's consent. NYSEG has an
undivided 18% interest in NMP2, which is operated by NiMo.
Ownership of NMP2 is shared with NiMo 41%, Long Island Power
Authority 18%, Rochester Gas and Electric Corporation 14% and
Central Hudson Gas & Electric Corporation 9%. The lawsuit also
seeks to recover damages for funds used by NiMo to promote the
establishment of NYNOC and the transfer of operating
responsibility for NMP2 to NYNOC. NYNOC was established for the
purpose of assuming operation of all of the nuclear generating
units in New York State. NYSEG believes that the establishment of
NYNOC will not result in either improved operational performance
or reduced costs sufficient to offset the development and
implementation expenses likely to be incurred by its creation. On
July 7, 1998, NYSEG served an amended complaint on NiMo alleging
that NiMo had breached its fiduciary obligation to NYSEG by
engaging in negotiations with a third party for the sale of NMP2,
including NYSEG's share, without advising NYSEG of those
negotiations, or allowing it to participate in the negotiations,
and by NiMo conducting the negotiations in a manner designed to
limit the interest of the third party in purchasing NMP2.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index.
(b) Reports on Form 8-K
A report on Form 8-K dated May 1, 1998, was filed to report
certain information under Item 5, "Other Events" and Item 7,
"Financial Statements and Exhibits."
Signature
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ENERGY EAST CORPORATION
(Registrant)
By Wesley W. von Schack
Wesley W. von Schack
Chairman and Chief Financial Officer
Date: August 13, 1998
<PAGE>
EXHIBIT INDEX
(a)(1) The following exhibits are delivered with this report:
Exhibit No.
3-1 - By-Laws of the Company as amended June 5, 1998.
(A)10-1 - 1997 Stock Option Plan Amendment No. 1.
(A)10-2 - Non-Statutory Stock Option Award Agreement Amendment
No.1.
27 - Financial Data Schedule.
(a)(2) The follow exhibit is incorporated herein by reference:
Exhibit No. Filed in As Exhibit No.
(A)10-3 - Amended and Restated Employment Agreement
for W. W. von Schack - New York State
Electric & Gas Corporation's Form 10-Q
for the quarter ended June 30, 1998 -
File No. 1-3103-2. 10-52
(A)10-4 - Amended and Restated Employment Agreement
for M. I. German - New York State Electric
& Gas Corporation's Form 10-Q for the
quarter ended June 30, 1998 - File No.
1-3103-2. 10-53
(A)10-5 - Amended and Restated Employment Agreement
for K. M. Jasinski - New York State Electric
& Gas Corporation's Form 10-Q for the
quarter ended June 30, 1998 - File No.
1-3103-2. 10-54
(A) Management contract or compensatory plan or arrangement.
EXHIBIT 3-1
________________________________________________
________________________________________________
ENERGY EAST CORPORATION
____________
B Y - L A W S
As Amended
June 5, 1998
________________________________________________
________________________________________________
<PAGE>
- -ENERGY EAST CORPORATION
_______
BY-LAWS
_______
STOCKHOLDERS' MEETINGS
1. All meetings of the stockholders shall be held at the
principal office of the Corporation, or at such other location as
shall be stated in the notice of the meeting, except when otherwise
expressly provided by statute. All meetings of stockholders shall
be presided over by the Chairman or by the President or a Vice
President except when by statute the election of a presiding officer
is required.
2. The annual meeting of stockholders shall be held at such
date and time as shall be stated in the notice of the meeting, at
which the stockholders entitled to vote shall elect directors, and
transact such other business as may properly be brought before the
meeting.
3. The holders of a majority of the votes of shares entitled
to vote thereat, without regard to class or series, present in
person or by proxy, shall be requisite for, and shall constitute a
quorum at all meetings of the stockholders for the transaction of
business except as otherwise expressly provided by statute, by the
Certificate of Incorporation or by these By-Laws. If, however, the
holders of a majority of such votes shall not be present or
<PAGE>
represented by proxy at any such meeting, the stockholders entitled
to vote thereat, present in person or by proxy, shall have power, by
a majority vote of those votes present or represented, to adjourn
the meeting from time to time, without notice other than
announcement at the meeting, until the holders of the amount of
votes requisite to constitute a quorum shall be present in person or
by proxy. At any adjourned meeting at which a quorum shall be
present, in person or by proxy, any business may be transacted which
might have been transacted at the meeting as originally noticed.
4. At each meeting of stockholders each holder of record of
shares of capital stock then entitled to vote shall be entitled to
vote in person, or by proxy appointed by such stockholder or by his
duly authorized attorney; but no proxy shall be valid after the
expiration of eleven months from the date thereof unless otherwise
provided in the proxy. Except as otherwise provided by statute or
by the Certificate of Incorporation each holder of record of shares
of capital stock entitled to vote at any meeting of stockholders
shall be entitled to one vote for every share of capital stock
standing in his name on the books of the Corporation. All elections
shall be determined by a plurality vote. The vote for directors
shall be by ballot.
<PAGE>
5. A list of stockholders as of the record date, certified by
the corporate officer responsible for its preparation or by a
transfer agent, shall be produced at any meeting of stockholders
upon the request thereat or prior thereto of any stockholder. If
the right to vote at any meeting is challenged, the inspectors of
election, or person presiding thereat, shall require such list of
stockholders to be produced as evidence of the right of the persons
challenged to vote at such meeting, and all persons who appear from
such list to be stockholders entitled to vote thereat may vote at
such meeting.
6. Except as may be otherwise provided in the Certificate of
Incorporation, only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors of
the Corporation. Nominations of persons for election to the Board
of Directors may be made at any annual meeting of stockholders, or
at any special meeting of stockholders called for the purpose of
electing directors, (a) by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (b) by any
stockholder of the Corporation (i) who is a stockholder of record on
the date of the giving of the notice provided for in this By-Law and
on the record date for the determination of stockholders entitled to
vote at such meeting and (ii) who complies with the notice
procedures set forth in this By-Law.
<PAGE>
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have
given timely notice thereof in proper written form to the Secretary
of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive
offices of the Corporation (a) in the case of an annual meeting, not
less than sixty (60) days nor more than ninety (90) days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual
meeting is called for a date that is not within thirty (30) days
before or after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such
notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever
first occurs; and (b) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later
than the close of business on the tenth (10th) day following the day
on which notice of the date of the special meeting was mailed or
public disclosure of the date of the special meeting was made,
whichever first occurs.
<PAGE>
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder
proposes to nominate for election as a director (i) the name, age,
business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class or
series and number of shares of capital stock of the Corporation
which are owned beneficially or of record by the person and (iv) any
other information relating to the person that would be required to
be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the
class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such
stockholder, (iii) a description of all arrangements or under-
standings between such stockholder and each proposed nominee and any
other person or persons (including their names) pursuant to which
the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or
by proxy at the meeting to nominate the person(s) named in its
notice and (v) any other information relating to such stockholder
that would be required to be disclosed in a proxy statement or other
<PAGE>
filings required to be made in connection with solicitations of
proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder.
Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a
director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set
forth in this By-Law. If the chairman of the meeting determines
that a nomination was not made in accordance with the foregoing
procedures, the chairman shall declare to the meeting that the
nomination was defective and such defective nomination shall be
disregarded.
7. No business may be transacted at an annual meeting of
stockholders, other than business that is either (a) specified in
the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the annual
meeting by or at the direction of the Board of Directors (or any
duly authorized committee thereof) or (c) otherwise properly brought
before the annual meeting by any stockholder of the Corporation (i)
who is a stockholder of record on the date of the giving of the
notice provided for in this By-Law and on the record date for the
<PAGE>
determination of stockholders entitled to vote at such annual
meeting and (ii) who complies with the notice procedures set forth
in this By-Law.
In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder,
such stockholder must have given timely notice thereof in proper
written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive
offices of the Corporation not less than sixty (60) days nor more
than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided,
however, that in the event that the annual meeting is called for a
date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely
must be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of the date
of the annual meeting was mailed or such public disclosure of the
date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes
to bring before the annual meeting (i) a brief description of the
business desired to be brought before the annual meeting and the
reasons for conducting such business at the annual meeting, (ii) the
<PAGE>
name and record address of such stockholder, (iii) the class or
series and number of shares of capital stock of the Corporation
which are owned beneficially or of record by such stockholder, (iv)
a description of all arrangements or understandings between such
stockholder and any other person or persons (including their names)
in connection with the proposal of such business by such stockholder
and any material interest of such stockholder in such business and
(v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business
before the meeting.
No business shall be conducted at the annual meeting of stock-
holders except business brought before the annual meeting in
accordance with the procedures set forth in this By-Law. If the
chairman of the annual meeting determines that business was not
properly brought before the annual meeting in accordance with the
foregoing procedures, the chairman shall declare to the meeting that
the business was not properly brought before the meeting and such
business shall not be transacted.
8. Special meetings of the stockholders for any purpose or
purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by notice given by or
at the direction of the Chairman or the President, and shall be
called by notice given by or at the direction of the Chairman,
<PAGE>
the President or the Secretary at the request in writing of a
majority of the Board of Directors or at the request in writing
of the holders of a majority of the votes of shares of common
stock issued and outstanding. Such request shall state the
purpose or purposes of the proposed meetings. No other person or
persons may call or request special meetings of the stockholders.
No business may be transacted at a special meeting of
the stockholders, other than business that is either (a)
specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Chairman, the President or
the Secretary or (b) otherwise properly brought before the
special meeting by or at the direction of the Board of Directors.
9. Notice of every meeting of stockholders, setting forth the
time, place and purpose or purposes thereof, shall be mailed, not
less than ten nor more than sixty days prior to such meetings to all
stockholders (at their respective addresses appearing on the books
of the Corporation unless the stockholder shall have filed with the
Secretary of the Corporation a written request that notices intended
for him be mailed to some other address, in which case the notice
shall be mailed to the address designated in such request) entitled
to vote at such meeting, of record as of a date fixed by the Board
of Directors, not more than sixty days in advance of such meeting,
<PAGE>
for determining the stockholders entitled to notice of and to vote
at such meeting, unless and except to the extent that such notice
shall have been waived in writing either before or after the holding
of such meeting by stockholders entitled to notice thereof and to
vote thereat.
DIRECTORS
10. The property and business of the Corporation shall be
managed under the direction of its Board of Directors. Directors
need not be stockholders. Directors shall be elected at the annual
meeting of the stockholders, or, if no such election shall be held,
at a meeting called and held in accordance with the statutes of the
State of New York. Each director shall be elected to hold office
until the expiration of the term for which he is elected, and
thereafter until a successor shall be elected and shall qualify.
A majority of the entire Board of Directors, at any regular or
special meeting, may fix the number of directors and, in the case of
an increase in such number, shall thereupon elect the additional
directors. No decrease in the number of directors shall shorten the
term of any incumbent director. Except as otherwise provided by
statute, at any meeting of the stockholders, the holders of a
majority of the votes of shares of common stock issued and
outstanding, voting separately as a class, may remove at any time,
for cause only, any director. Directors shall not be removed
without cause by the stockholders, except in the case of a director
<PAGE>
elected by the holders of any class or series of stock (other than
the common stock), now or hereafter authorized, voting separately as
a class or series, when so entitled by the provisions of the
Certificate of Incorporation applicable thereto.
No director who shall have attained the age of 70 shall stand
for re-election as a director.
MEETINGS OF THE BOARD
11. The first meeting of the Board of Directors held after the
annual meeting of stockholders at which directors shall have been
elected shall be held for the purpose of organization, the election
of officers, and the transaction of any other business which may
come before the meeting.
12. Regular meetings of the Board may be held without notice,
except as otherwise provided by these By-Laws, at such time and
place as shall from time to time be designated by the Board.
13. Special meetings of the Board may be called by the
Chairman or by the President or a Vice President or any two
directors and may be held at the time and place designated in the
call and notice of the meeting. The Secretary or other officer
performing his duties shall give notice either personally or by mail
or telegram at least twenty-four hours before the meeting. Meetings
may be held at any time and place without notice if all the
directors are present or if those not present waive notice in
writing either before or after the meeting.
14. At all meetings of the Board one-third of the total number
of directors shall be requisite for and shall constitute a quorum
for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be
the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of
Incorporation or by these By-Laws.
15. Any regular or special meeting may be adjourned to any
other time at the same or any other place by a majority of the
directors present at the meeting, whether or not a quorum shall be
present at such meeting, and no notice of the adjourned meeting
shall be required other than announcement at the meeting.
COMPENSATION OF DIRECTORS
16. Directors, other than salaried officers or employees of
the Corporation or of any affiliated company, shall receive
compensation for their services as directors in such form and
amounts and at such times as may be prescribed from time to time by
the Board of Directors. All directors shall be reimbursed for their
reasonable expenses, if any, for attendance at each regular or
special meeting of the Board of Directors. Nothing herein contained
shall be construed to preclude any director from receiving non-cash
compensation for serving as a director or from serving the
Corporation in any other capacity and receiving compensation
therefor.
17. Members of the Executive Committee other than salaried
officers or employees of the Corporation or of any affiliated
company, shall receive compensation for their services on that
committee in such form and amounts and at such times as may be
prescribed from time to time by the Board of Directors.
Members of special or standing committees, including the
Executive Committee, shall be allowed such additional compensation
and reimbursement for expenses as may be fixed by the Board of
Directors.
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
18. The Board of Directors may by vote of a majority of the
whole Board designate three or more of their number to constitute an
Executive Committee to hold office for such period as the Board
shall determine. The Chairman and the President shall each be a
member of the Executive Committee. The Board of Directors may
likewise designate one or more alternate members who shall serve on
the Executive Committee in the absence or disqualification of any
regular member or members of such Committee. When a regular or
alternate member of the Executive Committee ceases to be a director
he shall automatically cease to be such regular or alternate member
of the Executive Committee. Such Executive Committee shall, between
meetings of the Board, have all the powers of the Board of Directors
in the management of the business and affairs of the Corporation,
except that no such committee shall have authority as to: the
<PAGE>
submission to stockholders of any action that needs stockholders'
authorization under the Business Corporation Law; the filling of
vacancies in the Board of Directors or in any committee; the fixing
of compensation of the directors for serving on the Board or on any
committee; the amendment or repeal of the By-Laws, or the adoption
of new By-Laws; or the amendment or repeal of any resolution of the
Board which by its terms shall not be so amendable or repealable.
The Executive Committee shall cause to be kept regular minutes
of its proceedings, which may be transcribed in the regular minute
book of the Corporation, and all such proceedings shall be reported
to the Board of Directors at its next succeeding meeting, and shall
be subject to revision or alteration by the Board, provided that no
rights of third persons shall be affected by such revision or
alteration. A majority of the Executive Committee shall constitute
a quorum at any meeting. The act of a majority of the Executive
Committee present at any meeting at which there is a quorum shall be
the act of the Executive Committee. The Board of Directors may by
vote of a majority thereof fill any vacancies in the Executive
Committee. The Executive Committee may, from time to time, subject
to the approval of the Board of Directors, prescribe rules and
regulations for the calling and conduct of meetings of the
Committee, and other matters relating to its procedure and the
exercise of its powers.
<PAGE>
19. In addition to having the power to designate an Executive
Committee, the Board of Directors may by vote of a majority of the
whole Board designate other committees, whether special or standing,
each to consist of three or more of their number, to hold office for
such period as the Board shall determine. With respect to each such
other committee, the Board of Directors may likewise designate one
or more alternate members who shall serve in the absence or
disqualification of any regular member or members of such other
committee. When a regular or alternate member of such other
committee ceases to be a director he shall automatically cease to be
a regular or alternate member of such other committee. Each such
other committee shall have authority only to the extent provided by
the Board of Directors, except that no such other committee shall
have authority as to: the submission to stockholders of any action
that needs stockholders' authorization under the Business
Corporation Law; the filling of vacancies in the Board of Directors
or in any committee; the fixing of compensation of the directors for
serving on the Board or on any committee; the amendment or repeal of
the By-Laws, or the adoption of new By-Laws; or the amendment or
repeal of any resolution of the Board which by its terms shall not
be so amendable or repealable. A majority of each such other
committee shall constitute a quorum at any meeting thereof. The act
of a majority of each such other committee present at any meeting
thereof at which there is a quorum shall be the act of such other
<PAGE>
committee. The Board of Directors may by vote of a majority thereof
fill any vacancies in each such other committee.
OFFICERS
20. The officers of the Corporation shall be chosen by the
Board of Directors. The officers shall be a Chairman, one or more
Assistants to the Chairman, a President, one or more Assistants to
the President, one or more Vice Presidents, one or more Assistant
Vice Presidents, a Secretary, one or more Assistant Secretaries, a
Treasurer, one or more Assistant Treasurers, a Controller, one or
more Assistant Controllers, and such other officers as the Board may
from time to time choose and appoint.
21. The Board of Directors, at its first meeting after the
election of directors by the stockholders, shall choose a Chairman
and a President from among their own number, and a Secretary, and
may choose a Treasurer and a Controller, and such Assistants to the
Chairman, Assistants to the President, Vice Presidents, Assistant
Vice Presidents, Assistant Secretaries, Assistant Treasurers and
Assistant Controllers, as it shall deem necessary, none of whom need
be members of the Board.
22. The Board may appoint such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms,
and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
23. The salary or other compensation of the officers of the
Corporation shall be fixed by the Board of Directors. The salary
or other compensation of all other employees shall, in the absence
of any action by the Board be fixed by the Chairman or the President
or by such other officers or executives as shall be designated by
the Chairman or the President.
24. The officers of the Corporation shall hold office until
the first meeting of the Board of Directors after the next
succeeding annual meeting of stockholders and until their successors
are chosen and qualify in their stead. Any officer or agent elected
or appointed by the Board of Directors may be removed at any time,
with or without cause, by the affirmative vote of a majority of the
whole Board of Directors. Any other employee or agent of the
Corporation may be removed at any time, with or without cause, by
the affirmative vote of a majority of the whole Board of Directors
or, in the absence of any action by the Board, by the Chairman or
the President or by such other officers or executives as shall have
been designated by the Chairman or the President.
CHAIRMAN
25. The Chairman shall be the chief executive officer of the
Corporation and shall, when present, preside at all meetings of the
Board of Directors and of the stockholders, except as otherwise by
law provided. He may sign in the name of and on behalf of the
<PAGE>
Corporation, certificates of stock, notes, and any and all
contracts, agreements and other instruments of a contractual nature
pertaining to matters which arise in the normal conduct and ordinary
course of business of the Corporation. He shall be a member of the
Executive Committee and of all standing committees except the
Executive Compensation and Succession Committee, the Audit Committee
and the Nominating Committee. He shall also generally have the
powers and perform the duties which appertain to the office.
The Assistants to the Chairman shall assist the Chairman in the
performance of his duties and exercise and perform such other powers
and duties as may be conferred or required by the Board.
PRESIDENT
26. The President shall, when present in the absence of the
Chairman, preside at all meetings of the Board of Directors and of
the stockholders, except as otherwise by law provided. He may sign
in the name of and on behalf of the Corporation, certificates of
stock, notes, and any and all contracts, agreements and other
instruments of a contractual nature pertaining to matters which
arise in the normal conduct and ordinary course of business of the
Corporation. He shall be a member of the Executive Committee and
of all standing committees except the Executive Compensation and
Succession Committee, the Audit Committee and the Nominating
Committee. He shall also generally have the powers and perform the
duties which appertain to the office.
<PAGE>
The Assistants to the President shall assist the President in
the performance of his duties and exercise and perform such other
powers and duties as may be conferred or required by the Board.
VICE PRESIDENT
27. A Vice President may sign, in the name of and on behalf of
the Corporation, certificates of stock, notes and any and all
contracts, agreements and other instruments of a contractual nature
pertaining to matters which arise in the normal conduct and ordinary
course of business, and shall perform such other duties as the Board
of Directors may prescribe.
If there be more than one Vice President, the Board of
Directors may designate one or more Vice Presidents as Executive
Vice Presidents who shall have general supervision, direction and
control of the business and affairs of the Corporation in the
absence or disability of the Chairman and the President, and may
designate one or more Vice Presidents as Senior Vice Presidents who
shall have general supervision, direction and control of the
business and affairs of the Corporation in the absence or disability
of the Chairman and the President and the Executive Vice Presidents.
A Vice President who has not been designated as Executive Vice
President or as Senior Vice President shall have general super-
vision, direction and control of the business and affairs of the
Corporation in the absence or disability of the Chairman and the
President, and the Executive Vice Presidents and the Senior Vice
Presidents.
The Assistant Vice Presidents shall assist the Vice Presidents
in the performance of their duties and exercise and perform such
other powers and duties as may be conferred or required by the
Board.
SECRETARY
28. The Secretary shall attend all sessions of the Board and
all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose;
and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of
Directors. He shall be sworn to the faithful discharge of his duty.
Any records kept by him shall be the property of the Corporation and
shall be restored to the Corporation in case of his death,
resignation, retirement or removal from office.
He shall be the custodian of the seal of the Corporation and,
when authorized by the Board of Directors or by the Chairman, the
President or a Vice President, shall affix the seal to all
instruments requiring it and shall attest the seal and/or the
execution of such instruments, as required. He shall have control
of the stock ledger, stock certificate book and minute books of the
Corporation and its committees, and other formal records and
documents relating to the corporate affairs of the Corporation.
<PAGE>
The Assistant Secretary or Assistant Secretaries shall assist
the Secretary in the performance of his duties, exercise and perform
his powers and duties in his absence or disability, and such powers
and duties as may be conferred or required by the Board.
TREASURER
29. (a) The Treasurer shall have the custody of the corporate
funds and securities and shall deposit all moneys, and other
valuable effects in the name and to the credit of the Corporation,
in such depositories as may be designated by the Board of Directors.
(b) He shall disburse the funds of the Corporation in
such manner as may be ordered by the Board, taking proper vouchers
for such disbursements, and shall render to the Chairman, the
President and directors, at the regular meetings of the Board, or
whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation.
(c) He shall give the Corporation a bond if required by
the Board of Directors in a sum, and with one or more sureties
satisfactory to the Board, for the faithful performance of the
duties of his office, and for the restoration of the Corporation, in
case of his death, resignation, retirement or removal from office,
of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the
Corporation.
<PAGE>
The Assistant Treasurer or Assistant Treasurers shall assist
the Treasurer in the performance of his duties, exercise and perform
his powers and duties in his absence or disability, and such powers
and duties as may be conferred or required by the Board.
CONTROLLER
30. The Controller of the Corporation shall have full control
of all the books of account of the Corporation and keep a true and
accurate record of all property owned by it, of its debts and of its
revenues and expenses and shall keep all accounting records of the
Corporation.
The Assistant Controller or Assistant Controllers shall assist
the Controller in the performance of his duties, exercise and
perform his powers and duties in his absence or disability, and such
powers and duties as may be conferred or required by the Board.
VACANCIES
31. If the office of any director becomes vacant by reason of
death, resignation, removal or disability, or any other cause, the
directors then in office, except as otherwise provided in the
Certificate of Incorporation, although less than a quorum, by a
majority vote, may choose a successor or successors, who shall hold
office until the next annual meeting of stockholders, and thereafter
until a successor or successors shall be elected and shall qualify.
If the office of any officer of the Corporation shall become vacant
<PAGE>
for any reason, the Board, by a majority vote of those present at
any meeting at which a quorum is present, may choose a successor or
successors who shall hold office for the unexpired term in respect
of which such vacancy occurred.
RESIGNATIONS
32. Any officer or any director of the Corporation may resign
at any time, such resignation to be made in writing and to take
effect from the time of its receipt by the Corporation, unless some
time be fixed in the resignation, and then from that time.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
33. The Corporation shall fully indemnify to the extent not
prohibited by law any person made, or threatened to be made, a party
to an action or proceeding, whether civil or criminal, including an
investigative, administrative, legislative or other proceeding, and
including an action by or in the right of the Corporation or any
other corporation of any type or kind, domestic or foreign, or any
partnership, joint venture, trust, employee benefit plan or other
enterprise, by reason of the fact that he, his testator or
intestate, (i) is or was a director, officer, or employee of the
Corporation or (ii) is or was serving at the request of the
Corporation, as a director, officer, or in any other capacity, any
other corporation of any type or kind, domestic or foreign, or any
partnership, joint venture, trust, employee benefit plan or other
<PAGE>
enterprise, against any and all judgments, fines, amounts paid in
settlement and expenses, including attorneys' fees, actually and
reasonably incurred as a result of or in connection with any such
action or proceeding or any appeal therein, except as provided in
the next paragraph.
No indemnification shall be made to or on behalf of any
director, officer, or employee if a judgment or other final
adjudication adverse to the director, officer, or employee
establishes that his acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained in fact
a financial profit or other advantage to which he was not legally
entitled.
Except in the case of an action or proceeding against a
director, officer, or employee specifically approved by the Board of
Directors, the Corporation shall pay expenses incurred by or on
behalf of such a person in defending such a civil or criminal action
or proceeding (including appeals) in advance of the final
disposition of such action or proceeding. Such payments shall be
made promptly upon receipt by the Corporation, from time to time,
of a written demand of such person for such advancement, together
with an undertaking by or on behalf of such person to repay any
expenses so advanced to the extent that the person receiving the
advancement is ultimately found not to be entitled to
indemnification for such expenses.
The rights to indemnification and advancement of defense
expenses granted by or pursuant to this By-Law (i) shall not limit
or exclude, but shall be in addition to, any other rights which may
be granted by or pursuant to any statute, certificate of
incorporation, by-law, resolution or agreement, (ii) shall be deemed
to constitute contractual obligations of the Corporation to any
director, officer, or employee who serves in such capacity at any
time while this By-Law is in effect, (iii) are intended to be
retroactive and shall be available with respect to events occurring
prior to the adoption of this By-Law and (iv) shall continue to
exist after the repeal or modification hereof with respect to events
occurring prior thereto. It is the intent of this By-Law to require
the Corporation to indemnify the persons referred to herein for the
aforementioned judgments, fines, amounts paid in settlement and
expenses, including attorneys' fees, in each and every circumstance
in which such indemnification could lawfully be permitted by an
express provision of a by-law, and the indemnification required by
this By-Law shall not be limited by the absence of an express
recital of such circumstances.
The Corporation may, with the approval of the Board of
Directors, enter into an agreement with any person who is, or is
about to become, a director, officer, or employee of the
Corporation, or who is serving, or is about to serve, at the request
of the Corporation, as a director, officer, or in any other
<PAGE>
capacity, any other corporation of any type or kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit
plan or other enterprise, which agreement may provide for
indemnification of such person and advancement of defense expenses
to such person upon such terms, and to the extent, not prohibited by
law.
STOCK OF OTHER CORPORATIONS
34. The Board of Directors shall have the right to authorize
any officer or other person on behalf of the Corporation to attend,
act and vote at meetings of the stockholders of any corporation in
which the Corporation shall hold stock, and to exercise thereat any
and all the rights and powers incident to the ownership of such
stock and to execute waivers of notice of such meetings and calls
therefor; and authority may be given to exercise the same either on
one or more designated occasions, or generally on all occasions
until revoked by the Board. In the event that the Board shall fail
to give such authority, such authority may be exercised by the
Chairman or the President in person or by proxy appointed by him on
behalf of the Corporation.
CERTIFICATES OF STOCK
35. Stock of the Corporation may be in certificated or
uncertificated form. Stock of the Corporation represented by
certificates shall be numbered and shall be entered in the books of
the Corporation as the certificates are issued. The certificates
shall exhibit the holder's name and number of shares and shall be
signed by the Chairman, President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, and the seal of the Corporation shall be affixed thereto.
Where any such certificates of stock are signed by a transfer agent
and by a registrar, the signatures of the Chairman, President or a
Vice President and the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary upon any such certificates, if
authorized by the Board of Directors, may be made by engraving,
lithographing or printing thereon a facsimile of such signatures, in
lieu of actual signatures, and such facsimile signatures so
engraved, lithographed or printed thereon shall have the same force
and effect as if such officers had actually signed the same.
In case any officer who has signed, or whose facsimile
signature has been affixed to, any such certificate shall cease to
be such officer before such certificate shall have been delivered by
the Corporation, such certificate may nevertheless be issued and
delivered as though the person who signed such certificate, or whose
facsimile signature has been affixed thereto, had not ceased to be
such officer of the Corporation.
To the extent permitted by law, some or all of any or all
classes and series of stock of the Corporation may be uncertificated
stock, provided that no stock represented by a certificate shall be
registered on the books of the Corporation as uncertificated stock
until such certificate is surrendered to the Corporation.
TRANSFERS OF STOCK
36. Transfers of certificated stock shall be made on the books
of the Corporation only upon the request of the person named in the
certificate or by attorney, lawfully constituted in writing, and
upon surrender of the certificate therefor.
Transfers of uncertificated stock shall be made on the books of
the Corporation only upon the request of the holder of record of
such uncertificated stock or by attorney, lawfully constituted in
writing, and upon receipt by the Corporation of a written
instruction signed by the holder of record of such uncertificated
stock or by such attorney requesting that the transfer of such
uncertificated stock be registered on the books of the Corporation.
FIXING OF RECORD DATE
37. The Board of Directors is hereby authorized to fix a day
and hour not exceeding sixty (60) days (and in the case of a meeting
not less than ten (10) days) preceding the date of any meeting of
stockholders or the date fixed for the payment of any dividend or
for the delivery of evidences of rights, as a record time for the
<PAGE>
determination of the stockholders entitled to notice of and to vote
at any such meeting or entitled to receive any such dividend or
rights, as the case may be; and all persons who are holders of
record of voting stock at such time, and no others, shall be
entitled to notice of and to vote at such meeting, and only
stockholders of record at any time so fixed shall be entitled to
receive any such dividend or rights; and the stock transfer books
shall not be closed during any such period.
REGISTERED STOCKHOLDERS
38. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof
and accordingly shall not be bound to recognize any equitable or
other claim to, or interest in, such share on the part of any other
person, whether or not it shall have express or other notice
thereof, save as expressly provided by the statutes of the State of
New York.
INSPECTION OF BOOKS
39. The Board of Directors shall have power to determine
whether and to what extent, and at what time and places and under
what conditions and regulations, the accounts and books of the
Corporation (other than the books required by statute to be open to
the inspection of stockholders), or any of them, shall be open to
the inspection of stockholders, and no stockholders shall have any
<PAGE>
right to inspect any account or book or document of the Corporation,
except as such right may be conferred by the statutes of the State
of New York or by resolution of the directors or of the
stockholders.
CHECKS, NOTES, BONDS AND OTHER INSTRUMENTS
40. All checks or demands for money and notes of the
Corporation shall be signed by such person or persons (who may but
need not be an officer or officers of the Corporation) as may be
authorized by these By-Laws or as the Board of Directors may from
time to time designate, either directly or through such officers of
the Corporation as shall, by resolution of the Board of Directors,
be authorized to designate such person or persons. If authorized by
the Board of Directors, the signatures of such persons, or any of
them, upon any checks for the payment of money may be made by
engraving, lithographing or printing thereon a facsimile of such
signatures, in lieu of actual signatures, and such facsimile
signatures so engraved, lithographed or printed thereon shall have
the same force and effect as if such persons had actually signed the
same.
All bonds, mortgages and other instruments requiring a seal
shall be executed on behalf of the Corporation by the Chairman or
the President or a Vice President, and the seal of the Corporation
shall be thereunto affixed by the Secretary or an Assistant
Secretary who shall, when required, attest the seal and/or the
<PAGE>
execution of said instruments. If authorized by the Board of
Directors, the signatures of the Chairman or the President or a Vice
President and the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer upon any engraved, lithographed
or printed bonds, debentures, notes or other instruments may be made
by engraving, lithographing or printing thereon a facsimile of such
signatures, in lieu of actual signatures, and such facsimile signa-
tures so engraved, lithographed or printed thereon shall have the
same force and effect as if such officers had actually signed the
same.
In case any officer who has signed any such bonds, debentures,
notes or other instruments shall cease to be such officer before
such bonds, debentures, notes or other instruments shall have been
delivered by the Corporation, such bonds, debentures, notes or other
instruments may nevertheless be adopted by the Corporation and be
issued and delivered as though the person who signed the same had
not ceased to be such officer of the Corporation.
NOTICES
41. Whenever under the provisions of these By-Laws notice is
required to be given to any director, officer or stockholder, it
shall not be construed to require personal notice, but such notice
may be given in writing, by mail, by depositing a copy of the same
in a post office, letter box or mail chute, maintained by the Post
Office Department, in a postpaid sealed wrapper, addressed to such
<PAGE>
stockholder, officer or director, at his address as the same appears
on the books of the Corporation.
A stockholder, director or officer may waive in writing any
notice required to be given to him under these By-Laws.
INSPECTORS
42. Preceding each meeting of the stockholders, the Board of
Directors shall appoint two inspectors to act at such meeting or any
adjournment or adjournments thereof as inspectors. In the event
that such inspectors shall not be so appointed, or if any inspector
shall refuse to serve, or neglect to attend the meeting or his
office become vacant, the person presiding at the meeting shall
appoint an inspector in his place. The inspectors appointed to act
at any meeting of the stockholders shall, before entering upon the
discharge of their duties, be sworn to faithfully execute the duties
of inspector at such meeting with strict impartiality, and according
to the best of their ability, and the oaths so taken shall be
subscribed by them and delivered to the Secretary of the meeting
with a certificate of the result of the vote taken thereat.
AMENDMENTS
43. These By-Laws may be altered, amended or repealed, or new
By-Laws may be adopted, by the affirmative vote of the stockholders
entitled to cast a majority of the votes entitled to be cast, or by
the affirmative vote of a majority of the Board of Directors at any
<PAGE>
meeting duly held as provided above; provided that any alteration,
amendment or repeal of, or the adoption of any provision
inconsistent with, By-Laws 6, 7, 8, 10 or 43, if by action of the
stockholders, shall be only upon the affirmative vote of the
stockholders entitled to cast three-fourths of the votes entitled to
be cast.
EXHIBIT 10-1
AMENDMENT NO. 1
to
1997 STOCK OPTION PLAN
of
ENERGY EAST CORPORATION
(formerly of New York State Electric & Gas Corporation)
<PAGE>
The 1997 Stock Option Plan (the "Plan") of Energy East
Corporation (formerly of New York State Electric & Gas
Corporation), effective May 21, 1997, is hereby amended as
follows:
1. Effective May 1, 1998, all references to "New York
State Electric & Gas Corporation" wherever they
appear in the Plan are amended to read "Energy
East Corporation".
2. Article V, Section A of the Plan is amended by
adding the following words after the word "shares"
at the end of the first sentence thereof:
(including shares of Common Stock of New York
State Electric & Gas Corporation ("NYSEG") granted
pursuant to the Plan)".
3. Article V, Section B of the Plan is amended by
adding the following words after the word "Stock"
at the end of the first sentence thereof:
(including shares of Common Stock of NYSEG granted
pursuant to the Plan)".
EXHIBIT 10-2
FIRST AMENDMENT TO NON-STATUTORY STOCK OPTION AWARD AGREEMENT
THIS FIRST AMENDMENT TO NON-STATUTORY STOCK OPTION AWARD
AGREEMENT ("First Amendment") dated as of May 1, 1998, is made
and entered into by and between Energy East Corporation, a New
York corporation (the "Company") and ______________________ (the
"Optionee") amending certain provisions of the Non-Statutory
Stock Option Award Agreement, dated May 21, 1997 ("Award
Agreement"), by and between New York State Electric & Gas
Corporation ("NYSEG") and the Optionee.
WHEREAS, the Award Agreement reflects the terms and
conditions of certain Awards (as defined in the Award Agreement)
made by NYSEG pursuant to NYSEG's 1997 Stock Option Plan
("Plan").
WHEREAS, pursuant to an Agreement and Plan of Share Exchange
between NYSEG and the Company, at the effective time (the
"Effective Time") of the share exchange pursuant to such
Agreement and Plan of Share Exchange, any rights or options under
the Plan shall be converted, without further action by the holder
thereof, into and become a right or option to purchase an
equivalent number of shares of Common Stock of the Company at the
same price per share, and upon the same terms and subject to the
same conditions, as applicable immediately prior to the Effective
Time.
WHEREAS, effective May 1, 1998, the Plan was amended to
reflect the assumption of the Plan by the Company.
WHEREAS, the parties hereto wish to amend the Award
Agreement to reflect the amended Plan and the conversion of the
Awards previously issued and outstanding under the Plan to Awards
relating to an equivalent number of Common Stock of the Company
upon the same terms and conditions.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Award Agreement is hereby amended by changing the
references to "the Company" or "New York State Electric & Gas
Corporation" wherever they appear in the Award Agreement to
"Energy East Corporation", except as otherwise provided herein.
2. The second sentence of Section 1 of the Award Agreement
is hereby amended by replacing the parenthetical "($6.66 2/3 Par
Value)" with "($.01 Par Value)".
3. The Award Agreement is hereby amended by changing the
references to "the Company" wherever they appear in Sections 11
and 13 to "any of Energy East Corporation and its affiliates."
<PAGE>
4. Notices to the Company shall be sent to:
Corporate Secretary
Energy East Corporation
4500 Vestal Parkway East
Binghamton, New York 13902
5. This Amendment is effective as of May 1, 1998.
6. Except as expressly modified hereby, the terms and
conditions of the Award Agreement remain in full force and
effect.
IN WITNESS WHEREOF, the parties have caused this First
Amendment to be duly executed and delivered as of the date first
above written.
ENERGY EAST CORPORATION
By:
(Optionee)
Title:
<TABLE> <S> <C>
<ARTICLE> UT EXHIBIT 27
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S FINANCIAL STATEMENTS INCLUDED IN ITS FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,904,673
<OTHER-PROPERTY-AND-INVEST> 123,500
<TOTAL-CURRENT-ASSETS> 385,512
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 559,374
<TOTAL-ASSETS> 4,973,059
<COMMON> 640
<CAPITAL-SURPLUS-PAID-IN> 1,099,159
<RETAINED-EARNINGS> 624,936
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,724,735
25,000
104,440
<LONG-TERM-DEBT-NET> 1,459,113
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 70,000
<LONG-TERM-DEBT-CURRENT-PORT> 7,321
30,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,552,450
<TOT-CAPITALIZATION-AND-LIAB> 4,973,059
<GROSS-OPERATING-REVENUE> 1,167,644
<INCOME-TAX-EXPENSE> 71,096
<OTHER-OPERATING-EXPENSES> 147,166
<TOTAL-OPERATING-EXPENSES> 920,698
<OPERATING-INCOME-LOSS> 246,946
<OTHER-INCOME-NET> (4,873)
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 60,924
<NET-INCOME> 105,524
4,529
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 49,432
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 295,788
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.61
</TABLE>
