<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended.............September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from............to...................
Commission file number...................................1-3268
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 14-0555980
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
284 SOUTH AVENUE, POUGHKEEPSIE NEW YORK 12601-4879
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (914) 452-2000
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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date. Common stock, par value $5.00 per share; 17,163,503 shares
outstanding as of September 30, 1994.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1994
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Consolidated Statement of Income -
Three Months Ended September 30, 1994 and 1993 1-2
Consolidated Statement of Income -
Nine Months Ended September 30, 1994 and 1993 3-4
Consolidated Balance Sheet - September 30, 1994
and December 31, 1993 5-6
Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1994 and 1993 7-8
Notes to Consolidated Financial Statements 9-10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-17
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 18-21
Item 5 - Other Information 21-25
Item 6 - Exhibits and Reports on Form 8-K 25
Signatures 26
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
For the 3 Months Ended
September 30,
1994 1993
(Thousands of Dollars)
Operating Revenues
Electric $ 103,315 $ 105,672
Gas 10,963 10,021
Total - own territory 114,278 115,693
Revenues from electric sales
to other utilities 1,813 4,383
116,091 120,076
Operating Expenses
Operation:
Fuel used in electric generation 16,922 18,548
Purchased electricity 10,571 13,430
Purchased natural gas 5,793 5,134
Other expenses of operation 24,827 24,401
Maintenance 7,274 8,965
Depreciation and amortization 10,149 10,392
Taxes, other than income tax 16,370 16,267
Federal income tax 2,804 2,867
Deferred income tax 3,841 3,004
98,551 103,008
Operating Income 17,540 17,068
Other Income and Deductions
Allowance for equity funds
used during construction 242 182
Federal income tax 311 225
Deferred income tax (71) 76
Other - net 1,865 961
2,347 1,444
Income Before Interest Charges 19,887 18,512
Interest Charges
Interest on mortgage bonds 4,893 5,687
Interest on other long-term debt 1,979 1,550
Other interest 328 298
Allowance for borrowed funds
used during construction (151) (171)
Amortization of premium and
expense on debt 404 561
7,453 7,925
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
For the 3 Months Ended
September 30,
1994 1993
(Thousands of Dollars)
Net Income 12,434 10,587
Dividends Declared on
Preferred Stock 1,282 1,323
Income Available for Common Stock 11,152 9,264
Dividends Declared on
Common Stock 8,925 8,700
Balance Retained in the Business $ 2,227 $ 564
Common Stock:
Average Shares Outstanding (000s) 17,138 16,875
Earnings Per Share $ .65 $ .55
Dividends Declared $ .52 $.515
See Notes to Consolidated Financial Statements.
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
For the 9 Months Ended
September 30,
1994 1993
(Thousands of Dollars)
Operating Revenues
Electric $ 305,600 $ 311,950
Gas 81,012 70,008
Total - own territory 386,612 381,958
Revenues from electric sales
to other utilities 9,529 9,234
396,141 391,192
Operating Expenses
Operation:
Fuel used in electric generation 54,464 55,116
Purchased electricity 32,365 37,140
Purchased natural gas 44,958 37,363
Other expenses of operation 75,092 72,547
Maintenance 24,263 25,653
Depreciation and amortization 30,386 31,175
Taxes, other than income tax 50,381 48,917
Federal income tax 17,379 16,290
Deferred income tax 6,639 5,958
335,927 330,159
Operating Income 60,214 61,033
Other Income and Deductions
Allowance for equity funds
used during construction 668 480
Federal income tax 1,142 525
Deferred income tax (164) 259
Other - net 4,975 3,269
6,621 4,533
Income Before Interest Charges 66,835 65,566
Interest Charges
Interest on mortgage bonds 15,409 17,009
Interest on other long-term debt 5,699 4,626
Interest on short-term debt - 13
Other interest 1,135 831
Allowance for borrowed funds
used during construction (415) (450)
Amortization of premium and
expense on debt 1,579 1,652
23,407 23,681
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
For the 9 Months Ended
September 30,
1994 1993
(Thousands of Dollars)
Net Income 43,428 41,885
Dividends Declared on
Preferred Stock 3,844 4,022
Income Available for Common Stock 39,584 37,863
Dividends Declared on
Common Stock 26,577 25,766
Balance Retained in the Business $ 13,007 $ 12,097
Common Stock:
Average Shares Outstanding (000s) 17,065 16,657
Earnings Per Share $ 2.32 $ 2.27
Dividends Declared $1.555 $ 1.53
See Notes to Consolidated Financial Statements.
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
September 30, 1994 December 31, 1993
(Thousands of Dollars)
ASSETS
Utility Plant
Electric $1,106,822 $1,083,491
Gas 131,552 128,093
Common 80,779 80,485
Nuclear fuel 29,062 28,199
1,348,215 1,320,268
Less: Accumulated depreciation 455,893 427,504
Nuclear fuel amortization 22,934 20,646
869,388 872,118
Construction work in progress 51,034 42,741
920,422 914,859
Other Property and
Investments 10,868 8,465
Current Assets
Cash and temporary cash
investments 17,010 27,172
Special deposits 644 458
Accounts receivable from
customers-net 38,009 46,452
Accrued unbilled utility
revenues 9,966 16,931
Other receivables 2,673 2,255
Materials and supplies, at
average cost 30,912 35,417
Prepaid taxes and other
prepayments 19,818 10,910
119,032 139,595
Deferred Charges
Income taxes recoverable 72,949 71,121
Deferred finance charges
approved for amortization 37,010 37,868
Deferred finance charges -
Nine Mile 2 Plant 35,181 35,181
Unamortized debt expense 11,223 12,707
Deferred energy efficiency
costs 9,415 10,316
Deferred gas costs 8,114 10,239
Deferred vacation 3,888 3,643
Other 18,244 20,246
196,024 201,321
Accumulated Deferred Income Tax 62,624 63,995
$1,308,970 $1,328,235
See Notes to Consolidated Financial Statements.
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
September 30, 1994 December 31, 1993
(Thousands of Dollars)
LIABILITIES
Capitalization
Common Stock Equity
Common stock, 30,000,000
authorized; shares out-
standing ($5 par value):
1994 - 17,163,503
1993 - 16,953,147 $ 85,818 $ 84,766
Paid-in capital 275,756 270,848
Retained earnings 82,030 69,023
Capital stock expense (6,793) (6,791)
Unrealized gain on investments 801 -
437,612 417,846
Cumulative Preferred Stock
Not subject to mandatory
redemption 46,030 46,030
Subject to mandatory
redemption 35,000 35,000
81,030 81,030
Long-term Debt 391,757 391,810
910,399 890,686
Current Liabilities
Current maturities
of long-term debt 1,038 51,019
Accounts payable 24,971 28,554
Accrued taxes 6,498 249
Accrued interest 10,684 6,361
Dividends payable 10,207 9,906
Accrued vacation 4,081 3,836
Customer deposits 3,554 3,452
Other 4,452 4,716
65,485 108,093
Deferred Credits and Other
Liabilities
Income taxes refundable 28,600 28,935
Deferred finance charges -
Nine Mile 2 Plant 35,181 35,181
Deferred finance charges approved
for amortization 750 5,250
Accrued pension costs 10,212 11,733
Deferred unbilled gas revenues 549 5,814
Deferred Nine Mile 2 Plant
litigation proceeds 1,358 3,695
Other 16,632 7,069
93,282 97,677
Accumulated Deferred Income Tax 239,804 231,779
$1,308,970 $1,328,235
See Notes to Consolidated Financial Statements.
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 9 Months Ended
September 30,
1994 1993
(Thousands of Dollars)
Operating Activities
Net Income......................... $43,428 $41,885
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, amortization and
nuclear fuel amortization....... 33,640 34,942
Deferred income taxes, net....... 6,803 5,699
Allowance for equity funds used
during construction............. (668) (480)
Nine Mile 2 Plant deferred
finance charges, net............ (3,642) (1,682)
Provision for uncollectibles..... 2,661 2,350
Accrued pension costs............ (1,521) (1,921)
Gain on sale of long-term
investments..................... - (670)
Deferred gas costs............... 2,125 2,381
Other - net...................... 5,826 (838)
Changes in current assets and
liabilities, net:
Accounts receivable and unbilled
utility revenues................ 12,329 13,970
Materials and supplies........... 4,505 3,054
Special deposits, prepaid taxes
and other prepayments........... (9,094) (7,153)
Accounts payable................. (3,583) 372
Accrued taxes and interest....... 10,572 6,108
Other current liabilities........ 83 611
Net cash provided by operating
activities........................ 103,464 98,628
Investing Activities
Additions to plant................. (43,164) (41,260)
Allowance for equity funds used
during construction............... 668 480
Net additions to plant............. (42,496) (40,780)
Investment activity of
subsidiaries...................... 14 (149)
Insurance recovery................. 6,532 -
Plant retirements, cost of removal
and other......................... (2,458) (1,576)
Nine Mile 2 Plant decommissioning
trust fund........................ (873) (657)
Proceeds from sale of long-term
investments....................... - 2,212
Net cash used in investing
activities........................ (39,281) (40,950)
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 9 Months Ended
September 30,
1994 1993
(Thousands of Dollars)
Financing Activities
Proceeds from issuance of:
Long-term debt................. - 21,316
Common stock................... 5,960 28,250
Net repayments of short-term debt. - (15,000)
Retirement and redemption of
long-term debt and preferred
stock........................... (50,119) (21,992)
Dividends paid on preferred and
common stock.................... (30,121) (29,138)
Issuance and redemption costs.... (65) (1,263)
Net cash used in financing
activities....................... (74,345) (17,827)
Net change in Cash and Cash
Equivalents......................... (10,162) 39,851
Cash and Cash Equivalents -
Beginning Year...................... 27,172 11,258
Cash and Cash Equivalents -
End of Period....................... $17,010 $51,109
Supplemental Disclosure of
Cash Flow Information
Interest paid (net of amounts
capitalized)..................... $17,158 $19,069
Federal income tax paid........... 9,300 9,400
See Notes to Consolidated Financial Statements.
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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
Notes to Consolidated Financial Statements
1. General
The accompanying consolidated financial statements of
Central Hudson Gas & Electric Corporation (herein the Registrant
or the Company) are unaudited but, in the opinion of management,
reflect adjustments (which include only normal recurring
adjustments) necessary for a fair statement of the results for
the interim periods presented. These condensed unaudited
quarterly consolidated financial statements do not contain the
detail or footnote disclosure concerning accounting policies and
other matters which would be included in annual consolidated
financial statements and, accordingly, should be read in
conjunction with the audited consolidated financial statements
(including the notes thereto) included in the Company's Annual
Report, on Form 10-K, for the year ended December 31, 1993 (10-K
Report). Due to the seasonal nature of the Company's operations,
financial results for interim periods are not necessarily
indicative of trends for a twelve-month period.
2. Postemployment Benefits
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" (SFAS 112) issued by the Financial
Accounting Standards Board (FASB). SFAS 112 requires a change in
the method of accounting for these benefits from the pay-as-you-
go method to an accrual method.
The adoption of SFAS 112 resulted in the recording of an
unfunded postemployment benefit obligation of $639,000. In
accordance with the Opinion and Order Determining Revenue
Requirement and Rate Design of the Public Service Commission of
the State of New York (PSC) issued and effective February 11,
1994, the Company recorded a corresponding regulatory asset
representing the future recoverability of this cost.
Accordingly, the adoption of SFAS 112 did not have an impact on
the Company's results of operations.
3. Financial Instruments
Effective January 1, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115) issued by the FASB. The adoption of SFAS
115 resulted in the recording of an unrealized net holding gain
as an adjustment to common stock equity. This unrealized net
holding gain represents the amount by which the market value of
an investment that the Company maintains in an insurance company
exceeds its cost, net of tax effects. This investment, which is
classified as "available-for-sale" under SFAS 115, had a cost and
market value at September 30, 1994 of $775,000 and $2,008,000,
respectively, and a resulting unrealized net holding gain of
$801,000. Common stock equity will be adjusted to reflect
periodic changes in the market value of this investment. A
realized gain or loss would be recorded in the Consolidated
Statement of Income upon sale or other disposition of this
investment.
4. Commitments and Contingencies
The Company faces a number of contingencies which arise
during the normal course of business and which have been
discussed in Note 9 (entitled "Commitments and Contingencies") to
the consolidated financial statements included in the Company's
10-K Report. Except as may be disclosed in Part II of this
Quarterly Report, on Form 10-Q, for the quarterly period ended
September 30, 1994, the Quarterly Report, on Form 10-Q, for the
quarterly period ended June 30, 1994, and the Quarterly Report,
on Form 10-Q, for the quarterly period ended March 31, 1994, and
in any Current Report, on Form 8-K, filed in 1994, there have
been no material changes in the subject matters discussed in said
Note 9.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
For the nine months ended September 30, 1994, cash expenditures
related to the construction program of the Company amounted to
$42.1 million. The amount shown on the Consolidated Statement
of Cash Flows for "Net additions to plant" of $42.5 million
includes the debt portion of the allowance for funds used during
construction of $415,000. The cash requirements for such
expenditures were funded from internal sources and proceeds of
$6.0 million from the issuance of 210,356 shares of common stock
under the Company's Automatic Dividend Reinvestment and Stock
Purchase Plan and the Company's Customer Stock Purchase Plan.
On September 1, 1994, the Company paid at maturity $50 million of
the Company's First Mortgage Bonds, 8 1/8% series due 1994. The
associated cash requirements were financed from internal funds.
The financing activity discussed in the preceeding paragraphs
resulted in an increase in the common equity ratio from 44.4% at
December 31, 1993 to 48.0% at September 30, 1994 and the book
value of common stock from $24.65 at December 31, 1993 to $25.50
per share at September 30, 1994.
During the third quarter, the Company received $6.5 million from
an insurance recovery of reconstruction costs of the Roseton
Electric Generating Station (which facility is described in Part
I, Item 2 of the 10-K Report under the caption "Properties -
Electric - Roseton Plant") ("Roseton Plant") after a fire
damaged such plant in March 1993.
Settlements of $5.1 million with various pipeline companies,
approved by the Federal Energy Regulatory Commission, were
received in the second and third quarters of 1994. These
settlements will be refunded to the Company's gas customers,
primarily over the next twelve months.
On October 7, 1994, the Company received $1.6 million as
settlement proceeds from Seaboard Surety Company ("Seaboard") on
a legal action commenced against Seaboard in March 1994. The
Company commenced the lawsuit against Seaboard to recover on a
performance bond obtained by Great Plains Pipeline Construction,
Inc. ("Great Plains") on behalf of the Company. Great Plains
failed to perform the contract it had with the Company to bore a
hole and install a natural gas pipeline under the Hudson River
and, subsequently, went into involuntary bankruptcy proceedings.
Due to Great Plains failure to perform the contract in March
1992, the Company was forced to incurr additional costs to
complete the pipeline installation using other contractors.
Great Plains was not party to the settlement between the Company
and Seaboard.
At September 30, 1994, the Company had no short-term debt
outstanding, $10.5 million invested in short-term securities,
and $52.0 million of short-term credit available.
RESULTS OF OPERATIONS
The following tables report the variation in the results of
operations for the three months and nine months ended September
30, 1994 compared to the same periods for 1993:
3 MONTHS ENDED SEPTEMBER 30,
INCREASE
1994 1993 (DECREASE)
(Thousands of Dollars)
Operating Revenues $116,091 $120,076 $(3,985)
Operating Expenses 98,551 103,008 (4,457)
Operating Income 17,540 17,068 472
Other Income & Deductions 2,347 1,444 903
Income before Interest Charges 19,887 18,512 1,375
Interest Charges 7,453 7,925 (472)
Net Income 12,434 10,587 1,847
Dividends Declared on
Preferred Stock 1,282 1,323 (41)
Income Available for Common Stock $ 11,152 $ 9,264 $ 1,888
9 MONTHS ENDED SEPTEMBER 30,
INCREASE
1994 1993 (DECREASE)
(Thousands of Dollars)
Operating Revenues $396,141 $391,192 $ 4,949
Operating Expenses 335,927 330,159 5,768
Operating Income 60,214 61,033 (819)
Other Income & Deductions 6,621 4,533 2,088
Income before Interest Charges 66,835 65,566 1,269
Interest Charges 23,407 23,681 (274)
Net Income 43,428 41,885 1,543
Dividends Declared on
Preferred Stock 3,844 4,022 (178)
Income Available for Common Stock $ 39,584 $ 37,863 $ 1,721
EARNINGS
Earnings per share of common stock were $.65 for the third
quarter of 1994, as compared to $.55 for the third quarter of
1993, an increase of 18%. Earnings per share of common stock
were $2.32 for the nine months ended September 30, 1994, as
compared to $2.27 for the nine months ended September 30, 1993,
an increase of 2%.
The increase in earnings per share for the quarter ended
September 30, 1994 resulted primarily from decreased operation
and maintenance costs and interest charges in 1994. The
decrease in operation and maintenance costs was due primarily to
decreased maintenance costs of the Company's electric generating
plants in the third quarter of 1994 and higher legal costs in
1993. The increase in earnings per share for the nine months
ended September 30, 1994 was attributable primarily to decreased
maintenance costs on the Company's electric generating plants
and higher revenues from increased gas sales to commercial and
residential customers, which were partially offset by higher
payroll costs, reduced earnings from the PSC incentive program
related to energy efficiency, and the inclusion in 1993 earnings
of the gain from the sale of long-term investments.
OPERATING REVENUES
Operating revenues decreased $4.0 million (3%) for the third
quarter of 1994 as compared to the third quarter of 1993 and
increased $4.9 million (1%) for the nine months ended September
30, 1994 as compared to the nine months ended September 30,
1993. Details of these revenue changes by electric and gas
departments are as follows:
INCREASE (DECREASE) FROM PRIOR PERIOD
THIRD QUARTER NINE MONTHS
Electric Gas Electric Gas
(Thousands of Dollars)
Customer Sales $ (961) $ 279 * $(3,159) $ 4,329 *
Increases in Base
Rates 1,327 - 3,860 -
Sales to Other
Utilities (2,570) - 295 -
Fuel and Gas Cost
Adjustment (1,392) 576 (5,954) 7,094
Deferred Revenues (1,351) 6 (1,278) (482)
Miscellaneous 20 81** 181 63 **
$(4,927) $ 942 $(6,055) $11,004
*Both firm and interruptible revenues.
**Includes revenues from transportation of customer-owned gas.
Revenues collected under the electric fuel and gas cost
adjustment clauses do not affect earnings since they are offset
in fuel costs, with the exception of revenues collected
pursuant to incentive mechanisms.
SALES
Total kilowatt-hour sales of electricity within the Company's
service territory decreased 2%, while firm sales of natural gas
decreased 3%, for the third quarter of 1994 as compared to the
third quarter of 1993. For the nine months ended September 30,
1994, electric sales decreased 2% and firm gas sales increased
9% compared to last year. Changes in sales from last year by
major customer classifications are set forth below:
INCREASE (DECREASE) FROM PRIOR PERIOD
THIRD QUARTER NINE MONTHS
Electric Gas Electric Gas
Residential 4% - 3% 7%
Commercial 1 5% 3 13
Industrial (9) (5) (13) 1
Interruptible N/A 31 N/A 13
Transportation of
Customer-owned
Gas N/A 72 N/A (19)
Billing degree days were 2% lower for the quarter ended
September 30, 1994 and 5% higher for the nine months ended
September 30, 1994.
Sales of electricity to residential customers in the third
quarter of 1994 increased 4% from the comparable prior year
period due primarily to an increase in usage per customer.
Commercial sales in the third quarter of 1994 increased 1% as
compared to last year resulting primarily from an increase in
usage per customer. Electric sales to industrial customers
decreased 9% due primarily to a decline in usage by
International Business Machines Corporation (IBM), which is the
Company's largest customer.
For a description of the continuing downsizing and employee
reduction program of IBM in the Company's service territory,
reference is made to Part I, Item 1 of the 10-K Report, under
the caption "Electric Sales to IBM". Reports published, on or
about July 27, 1994, indicated that IBM would close its
mainframe facility located in the Company's service territory
in Kingston, New York at the end of 1995, and would relocate
1,500 workers to a similar plant located in the Company's
service territory in Poughkeepsie, New York. Based on
published reports, the Company does not believe that this
action will have a material effect on its electric revenues.
For the nine months ended September 30, 1994, sales of
electricity to residential customers increased 3%, resulting
primarily from an increase in usage per customer. Sales to
commercial customers increased 3% due to the combined effect of
a 2% increase in usage per customer and a 1% increase in the
number of customers. Electric sales to industrial customers
decreased 13% due primarily to a decline in usage by IBM.
Sales of gas to residential customers for the third quarter of
1994 remained stable compared to 1993. Sales of gas to
commercial customers for the third quarter of 1994 increased 5%
resulting from the combined effect of a 3% increase in usage
per customer and a 2% increase in the number of customers.
Firm gas sales to industrial customers decreased 5% for the
third quarter of 1994 due primarily to the shift a large
industrial customer from firm service to transportation gas
service, which had a minor effect on net income.
For the nine months ended September 30, 1994, residential gas
sales increased 7%, resulting primarily from an increase in
usage per customer. Commercial gas sales increased 13% due to
the combined effect of an 11% increase in usage per customer
and a 2% increase in the number of customers. These increases
in usage for residential and commercial customers for the nine-
month period primarily result from 1994 degree days increasing
5% when compared to the same period in 1993. Firm gas sales to
industrial customers increased 1% for the nine months ended
September 30, 1994.
Interruptible gas sales increased 31%, in the third quarter of
1994 and 13% for the nine months ended September 30, 1994, due
primarily to the increase in the amount of natural gas sold to
the other cotenants for use as a boiler fuel at the Roseton
Plant. The increase for the nine months ended September 30,
1994 was partially offset by decreased usage by IBM.
Transportation gas volumes increased 72% and decreased 19% for
the quarter and nine months ended September 30, 1994,
respectively. For the third quarter, the increase was
attributed primarily to the increased transportation service
supplied to a large industrial customer and the transfer of
another large industrial customer to transportation gas service
from firm gas service. The decrease for the nine months ended
September 30, 1994 resulted from the interruption of
transportation service for approximately 35 days, in the first
quarter of 1994, in order to meet the high firm demand caused
by cold weather.
OPERATING EXPENSES
The following table reports the variation in the operating
expenses for the three months and nine months ended September
30, 1994 compared to the same periods for the prior year:
INCREASE (DECREASE) FROM PRIOR PERIOD
THIRD QUARTER NINE MONTHS
Amount Percent Amount Percent
(Dollars in Thousands)
Fuel and Purchased
Electricity $(4,485) (14)% $(5,427) (6)%
Purchased Natural Gas 659 13 7,595 20
Other Expenses of
Operation 539 3 3,001 5
Maintenance (1,751) (21) (2,071) (9)
Nine Mile 2 Plant Operation
and Maintenance (53) (1) 225 2
Depreciation and Amortiza-
tion (243) (2) (789) (3)
Taxes, Other than
Federal Income Tax 103 1 1,464 3
Federal and Deferred Income
Tax 774 13 1,770 8
Total $(4,457) (4)% $ 5,768 2%
The cost of fuel and purchased electricity decreased $4.5 million
(14%) for the third quarter of 1994 and $5.4 million (6%) for
the nine months ended September 30, 1994. The cost reductions
for both periods were due primarily to lower electric sales and
an overall lower cost mix of electric generation and purchased
electricity in 1994, driven by decreased fuel prices.
Purchased natural gas costs increased $659,000 (13%) for the
third quarter of 1994 and $7.6 million (20%) for the nine
months ended September 30, 1994 primarily to meet the needs of
increased sales in both periods.
Other expenses of operation increased $539,000 (3%) for the
third quarter of 1994 and $3.0 million (5%) for the nine months
ended September 30, 1994. The increases for both periods were
related primarily to an increase in payroll costs and employee
benefits. The third quarter was further impacted by a $225,000
increase in the provision for uncollectible customer accounts
in 1994. These increases were partially offset by higher legal
costs in 1993.
Maintenance expenses decreased $1.8 million (21%) for the third
quarter of 1994 and $2.1 million (9%) for the nine months ended
September 30, 1994. The decrease in the third quarter was due
primarily to the major overhaul of Unit 3 of the Danskammer
Electric Generating Plant (Danskammer Plant, as described in
Part I, Item 2 of the 10-K Report, under the caption "Electric
- General") in 1993 with no comparable overhaul in the same
quarter of 1994. This decrease was partially offset by an
increase in electric distribution costs caused primarily by
various thunderstorms during the quarter. For the nine months
ended September 30, 1994, the decrease was attributed primarily
to the higher costs incurred in 1993 for the scheduled major
overhaul of Units 3 and 4 of the Danskammer Plant as compared
to the costs incurred in 1994 for the overhaul of Unit 4 of the
Danskammer Plant. These decreased costs for the nine month
period were partially offset by increased costs related to the
gas distribution and transmission systems, incurred primarily
to repair damage caused by the extremely cold weather in the
first quarter of 1994.
Depreciation and amortization expense decreased $243,000 (2%) for
the third quarter of 1994 and $789,000 (3%) for the nine months
ended September 30, 1994, resulting primarily from a PSC
approved reduction in depreciation rates.
Taxes, other than income tax, increased $103,000 (1%) for the
third quarter of 1994 and $1.5 million (3%) for the nine months
ended September 30, 1994 due primarily to increased property
and payroll taxes.
Federal income taxes increased $774,000 (13%) for the third
quarter of 1994 and $1.8 million (8%) for the nine months ended
September 30, 1994. The increases for both periods resulted
primarily from an increase in pre-tax income and the increase
in the federal income tax rate in 1993 from 34% to 35%.
OTHER INCOME AND DEDUCTIONS, INTEREST CHARGES AND PREFERRED
DIVIDENDS
Other income and deductions increased $903,000 (63%) for the
third quarter of 1994 and $2.1 million (46%) for the nine
months ended September 30, 1994 due primarily to an increase
in the amortization to income of Mirror CWIP (described in the
section "Notes to Consolidated Financial Statements" of the
Company's 1993 Annual Report under the caption "Allowance for
Funds Used During Construction") related to the Nine Mile 2
Plant and a decrease in the deferral of revenues associated
with the Company's variable interest rate notes. In addition,
the increase for the nine-month period included an increase in
interest earned on temporary cash investments. These favorable
variations for both periods were partially offset by a decrease
in Demand Side Management Equity Incentives. The increase for
the nine months ended September 30, 1994 was also partially
offset by the 1993 gain from the sale of long-term investments
and the shareholders' contribution in 1994 for a gas system
replacement program and employee training center in accordance
with the settlement agreement with the PSC arising from the
"Catskill Incident" (reference is made to the Company's Current
Report, on Form 8-K, dated January 24, 1994, for further
details of such settlement agreement).
Total interest charges (excluding allowance for funds used during
construction) decreased $492,000 (6%) for the third quarter of
1994 and $309,000 (1%) for the nine months ended September 30,
1994, resulting primarily from the payment at maturity of $50
million of the Company's First Mortgage Bonds, 8 1/8% series
due 1994.
Preferred Stock Dividends were $41,000 (3%) less for the third
quarter of 1994 and $178,000 (4%) less for the nine months
ended September 30, 1994 than the comparable periods of the
prior year due to the optional redemption in 1993 of all of the
Company's outstanding shares of its 8.40% Cumulative Preferred
Stock and its Adjustable Rate Cumulative Preferred Stock,
Series A. These series were replaced with two series of lower
rate serial preferred stock, the 6.80% Redeemable Cumulative
Preferred Stock and the 6.20% Redeemable Cumulative Preferred
Stock.
COMMON STOCK DIVIDENDS
Reference is made to the caption "Common Stock Dividends and
Price Ranges" contained in Management's Discussion and Analysis
of Financial Condition and Results of Operations contained in
Exhibit 13 to the 10-K Report, and which was incorporated by
reference in Part II, Item 5 of the Company's 10-K Report, for
a discussion of the Company's dividend policies. On September
23, 1994, the Board of Directors of the Company declared a
quarterly dividend of $.52 per share, payable November 1, 1994
to shareholders of record as of October 11, 1994.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
1. Asbestos Litigation. Reference is made to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1993 ("10-K Report") and to the caption "Asbestos Litigation" in
Part I, Item 3 (Legal Proceedings) thereof for a discussion of
the litigation regarding asbestos currently pending against
Registrant.
Since 1987, the Registrant, along with many other parties,
has been a defendant or third-party defendant in a total of 522
asbestos lawsuits commenced in New York State and federal courts.
Of such 522 asbestos lawsuits that had been brought against
Registrant, only 266 remain pending, as of October 19, 1994, as a
result of the following: (1) the Registrant negotiated voluntary
dismissals in 26 cases and won summary judgement dismissals in 9
cases; (2) 116 third-party claims were extinguished with respect
to the Company when the third-party plaintiff, Owens-Corning
Fiberglas ("OCF") settled the cases with the plaintiffs; and (3)
Registrant settled 105 cases for an amount that in the aggregate
is not material to the Registrant's financial position.
By complaints, dated July 14, 1994, August 31, 1994 and
October 17, 1994, the Registrant was made a defendant in 35 new
cases, all filed in the New York State Supreme Court, County of
New York. As of October 19, 1994, 264 cases were pending against
the Registrant in New York State Supreme Court, County of New
York and two (2) cases were pending against Registrant in the
United States District Court for the Southern District of New
York. Two hundred and fifty-six (256) of these plaintiffs seek
$10,000,000 in compensatory damages, plus punitive damages, seven
(7) plaintiffs seek $10,500,000 in compensatory damages, plus
punitive damages, one (1) plaintiff seeks $27,000,000 in
compensatory damages, plus punitive damages, one (1) plaintiff
seeks $70,000,000 in compensatory damages, plus punitive damages,
and, in one (1) case, in which the Registrant was joined as a
third-party defendant by OCF, the complaint alleges that the
Registrant is responsible to OCF for the amount of any recovery
obtained by plaintiff against OCF in the lawsuit.
In summary, as of October 19, 1994, the Registrant is a
defendant or third-party defendant in 266 asbestos lawsuits.
Although the Registrant is presently unable to assess the
validity of these 266 lawsuits, based on information known to the
Registrant at this time, including its experience in settling
asbestos cases and in obtaining dismissals of asbestos cases, the
Registrant believes that the costs to be incurred in connection
with these lawsuits will not have a material adverse effect on
the Registrant's financial position. However, if the Registrant
were ultimately held liable under these lawsuits and insurance
coverage were not available, the cost thereof could have a
material adverse effect (a reasonable estimate of which cannot be
made at this time) on the financial condition of the Registrant
if the Registrant could not recover all or a substantial portion
thereof in rates. Registrant's insurance does not extend to
punitive damages.
2. IBM Litigation. Reference is made to Part I, Item 3 of
Registrant's 10-K Report, under the caption "Legal Proceedings -
IBM Litigation" for a description of a lawsuit filed by
International Business Machines Corporation ("IBM") against
Registrant and other unnamed defendants in the Supreme Court of
the State of New York, Dutchess County, relating to allegations
of negligence, gross negligence and breach of contract on the
part of the defendants that resulted in a power outage and
electrical loss whereby IBM alleged it sustained damages of
$470,740.
By agreement, dated as of September 12, 1994, IBM and
Registrant agreed to discontinue such action, without admission
by either party of liability or wrongdoing. Registrant paid
$150,000 to IBM under the terms of such agreement. A stipulation
discontinuing such action was filed in the Dutchess County
Clerk's Office on September 30, 1994.
3. Environmental Claims. By letter, dated September 15,
1994, the City Manager of the City of Newburgh, New York
("City"), notified the Registrant that the City, while excavating
in connection with improvements to its wastewater treatment
plant, had encountered contamination (a tar-like substance) at
its site. The City Manager stated that the contamination may
have migrated from a nearby site owned by Registrant and formerly
used as a coal gas manufacturing plant. Preliminary tests reveal
that samples of the substance taken from the City's site and from
Registrant's property are chemically similar.
By letter, dated September 23, 1994, Registrant notified the
New York State Department of Environmental Conservation
("NYSDEC") that there had been a potential release from Regis-
trant's site of a tar-like substance. The Registrant has since
submitted a proposed plan to NYSDEC for further investigation of
the site. The City has suspended construction of the wastewater
treatment plant until more information becomes available about
the nature of the contamination of the site. The City has orally
informed Registrant that it is incurring damages as the result of
the interruption of work at its facility and that it intends to
hold Registrant responsible for such damages, together with the
costs incurred in cleaning up the City's site. Registrant has
offered to work with the City to develop measures that can allow
construction of such improvements to proceed. Based on
Registrant's experience, Registrant believes that implementation
of such measures would not have a material impact on the cost or
schedule of such improvements.
The Registrant has put its primary liability insurer on
notice of this situation.
The Registrant is unable to predict the outcome of this
matter and the ultimate financial impact, if any, on the
Registrant.
4. Wappingers Falls Incident. Reference is made to Part I,
Item 1 of Registrant's 10-K Report and to the caption "Business -
Other Matters - Gas Service Incident" for a description of an
incident that occurred in the Village of Wappingers Falls, New
York on February 12, 1994 in Registrant's service territory.
Registrant, on October 17, 1994, publicly stated that an
investigation it had undertaken had not yet determined what
caused the first explosion, which destroyed a residence, but that
a reconstruction of the sequence of events indicates that the
explosion in the residence was not caused by natural gas. The
investigation also indicates that the force of this initial
explosion, in combination with deep frost conditions, caused a
weld in a natural gas pipeline of the Registrant to crack.
Registrant is continuing its investigation and has not reached a
conclusion with respect to the second explosion, which destroyed
a commercial building. Registrant has not ruled out the
possibility that natural gas escaping from the cracked natural
gas pipeline was involved in the second explosion.
The results of an investigation regarding the incident that
is being conducted by the Public Service Commission of the State
of New York ("PSC") are expected to be made public in November
1994.
As of October 28, 1994, two lawsuits have been commenced
against Registrant alleging personal injuries and/or property
damage arising out of such incident, as follows:
(i) On October 13, 1994, Registrant was served with
a summons and complaint in an action brought by
Edward Baecher d/b/a NTC Auto Body against
Registrant, the Town of Wappingers Falls, the
Village of Wappingers Falls, and the Wappingers
Falls Fire Department. Four causes of action
are recited in the complaint, one of which
relates to the Registrant. This cause of action
alleges that because of Registrant's negligence
in the construction, maintenance and
improvements of its facilities near the
plaintiff's commercial establishment at 33
Market Street in Wappingers Falls, an explosion
resulted that destroyed the building and its
contents. Plaintiff, who owns the business
only, but not the building, at 33 Market Street,
seeks recovery from the Registrant of
compensatory and punitive damages in the sum of
$1,000,000, plus interest, costs and
disbursements.
(ii) On August 31, 1994, Registrant was
served with a summons and complaint in
an action brought by John DeLorenzo
against Registrant and the Village of
Wappingers Falls. The plaintiff alleges
that because of the negligence of
defendants in causing and/or permitting
natural gas to leak into plaintiff's
home, an explosion resulted, which
destroyed plaintiff's residence and its
contents at 14 Franklin Street in the
Village of Wappingers Falls, and which
caused bodily injuries to the Plaintiff.
Plaintiff seeks damages for these losses
and injuries, which damages are
unspecified in the complaint.
Registrant is investigating these claims and presently has
insufficient information on which to predict their outcome.
Registrant believes that it has adequate insurance to cover any
compensatory damages that might be awarded. Registrant's insur-
ance, however, does not extend to punitive damages. At this
time, Registrant can make no prediction as to any other litiga-
tion which may arise out of this incident.
Item 5. Other Information
1. Roseton Steam Electric Generating Station ("Roseton
Plant"). Reference is made to Item 5 of Registrant's Current
Report, on Form 8-K, dated April 21, 1994, under the caption
"Other Events - Roseton Steam Electric Generating Station" for a
description of the Letter of Understanding between Niagara Mohawk
Power Corporation ("Niagara Mohawk") and the Registrant relating
to the cancellation of an agreement on the part of Registrant to
purchase Niagara Mohawk's interest in the Roseton Plant ("Roseton
Buy-Back Agreement"), and the joint motion made by Niagara Mohawk
and Registrant to close the proceeding before the PSC for
approval of such agreement. Cancellation of this Agreement will
result in annual savings to the Registrant of approximately $7
million in capital costs over the period 1994 through 2003.
Effective August 18, 1994, the PSC approved the motion of
Niagara Mohawk and Registrant to close the approval proceeding.
2. Competition. There are a number of emerging state and
federal regulatory developments and possible structural changes
in the electric and gas industries relating to competition and
deregulation; however, at this early stage it is not possible to
predict the outcome of these changes or the effect on the utility
industry. In this regard, reference is made to Part I, Item 1 of
Registrant's 10-K Report, and to the subcaption "Business - Other
Matters - Competition".
New York - Electric: In March of 1993, the PSC
initiated a proceeding to address numerous issues related to
competition in the energy markets in New York State. Two phases
of this proceeding have been established to address the issues to
be considered in the proceeding. Registrant has been actively
involved in both phases.
Phase I of such proceeding, which was completed in the
summer of 1994, resulted in the approval by the PSC of "flexible
rates" that would allow electric utility companies to negotiate
individual contracts with certain large industrial and commercial
customers to provide electricity at prices lower than currently
offered. Flexible rates could help utilities retain large
customers in an increasingly competitive environment. Under the
flexible rate guidelines, residential and small customers and
utility shareholders would share the burden of revenue losses
which result from discounts to larger customers. To date,
Registrant has not offered such flexible rates to any of its
customers.
Phase II of such proceeding, which is now underway, has an
overall objective of identifying regulatory and ratemaking
practices that will assist in the transition to a more competi-
tive electric industry designed to increase efficiency in the
provision of electricity while maintaining safety, environmental,
affordability and service priority goals. To achieve this
objective, Phase II will establish general principles to form the
basis for the development of a framework toward a more
competitive electric marketplace. Phase II will also examine
issues relating to the establishment of a fully efficient
wholesale electric market, including whether divestiture of
generating assets by the provider of transmission and distribu-
tion services would enhance the transition to a competitive
wholesale market. Issues relating to retail competition also
will be examined. Registrant can make no prediction as to the
outcome of Phase II of this proceeding or when such Phase II will
be concluded.
New York - Natural Gas: In October, 1993, the PSC
initiated a proceeding to address issues associated with the
restructuring of the emerging competitive natural gas market, a
process which had been set in motion by Order 636 of the Federal
Energy Regulatory Commission, which requires pipeline gas
suppliers to separate natural gas sales service from
transportation and storage service, and which allows local
distribution companies ("LDCs") such as Registrant and other end
users open access to the interstate pipeline system for the
purpose of transporting their gas from gas producing areas to the
customer. (For a discussion of such Order, reference should be
made to the caption "Natural Gas Supply" in Note 9 to
Registrant's 1993 Financial Statements, which are Exhibit 13 to
Registrant's 10-K Report, and which are incorporated therein by
reference.) This PSC proceeding examines such issues to
determine how best to implement changes in the services provided
by the LDCs' segment of the gas industry, so that the benefits of
the increased competition fostered by federal actions are fully
realized by customers. Registrant can make no prediction as to
the outcome of this proceeding or when such proceeding will be
concluded.
Registrant's Response: In response to the competitive
forces and potential regulatory changes which are faced by
Registrant, Registrant has from time to time considered, and,
expects to continue to consider, various strategies designed to
enhance its competitive position and to increase its ability to
adapt to any anticipated changes in its business. Registrant's
goal is to be "the energy supplier of competitive choice to its
customers", and it has or intends to satisfy such goal by
implementing appropriate cost-reduction measures, such as: the
cancellation of the Roseton Buy-Back Agreement; the satisfaction
of a portion of its power requirements with purchases of lower-
cost electricity from energy providers outside Registrant's
service territory; the operation of certain of its generating
units on alternating six-month intervals and/or the placement of
certain of its generating units on "ready-reserve" and reduction
of its work force through attrition.
3. Economic Development Power-Competition.
Reference is made to Part II, Item 5 of Registrant's
Quarterly Report on Form 10-Q for the period ended June 30, 1994,
and to the caption "Economic Development Power - Competition"
thereof for a discussion of Registrant's June, 1994 filing of a
proposed economic development electric rate discount. Effective
October 1, 1994, such rate was approved by the PSC. This rate
will enable the Registrant to provide to eligible new and
existing industrial and commercial customers a discount of 25% on
current rates for six years, followed by a four-year period of
reduction in the discount back to the tariff rates. Customers
must apply for the discount by October 1, 1999.
4. Electric Utility Securities.
Recent declines in the prices of electric utility
securities, including Registrant's, have been attributed to the
increase in interest rates during the past year, and the
financial community's concern about the effects on electric
utilities of increasing competitive pressures on the industry.
In addition, the price of electric utility securities in New York
State, including the Registrant's securities, has been affected
by the financial community's concern about the regulatory
environment in New York State, due to the recent adverse
testimony filed by the Staff of the PSC in the pending rate cases
of Niagara Mohawk and Consolidated Edison Company of New York,
Inc.
5. Other Matters.
(a) Municipalization. Reference is made to Part I, Item 1
of Registrant's 10-K Report, under the caption "Business - Other
Matters - Municipal Utilities" for a discussion of the powers of
municipalities to acquire, through purchase or condemnation, all
or a portion of the public utility service of any public utility
company. Although the threat of municipalization is not new,
either to Registrant or to other utilities across the country,
the current and projected excess supply of electricity in the
Northeastern United States and in Canada has significantly
depressed wholesale prices, and which could cause such
municipalization efforts to intensify. Registrant is not aware
of any municipalization efforts in its franchise area.
(b) Proposed Acquisition of Long Island Lighting Company
("LILCO"). Recently, New York Governor Mario Cuomo announced a
tentative proposal by which LILCO would be purchased by the State
of New York for $21.50 a share in an estimated $9 billion
transaction, with the Power Authority of the State of New York
("PASNY") and/or the Long Island Power Authority ("LIPA")
assuming responsibility for LILCO's operations. Governor Cuomo
has indicated that a central purpose of this proposal would be
the lowering of rates for LILCO's customers. Rates would be able
to be lowered, it has been reasoned, because PASNY and LIPA would
have to pay neither common stock dividends nor income taxes and
would be able to issue debt at a lower cost of capital (i.e.,
tax-exempt debt). Registrant can make no prediction as to
whether this proposal will be formalized, and whether, in fact,
the takeover will be consummated. Published reports indicate
that the proposed purchase is subject to numerous financial,
political and regulatory contingencies. Registrant is also
unable to predict what effect, if any, State ownership of LILCO's
properties would have on the operations of Registrant,
particularly in view of the increased competition in the utility
industry and in view of LILCO's co-ownership, along with
Registrant and three other co-owners, of the Nine Mile Point 2
Nuclear Generating Station (described in Part I, Item 2 of
Registrant's 10-K Report, under the caption "Electric - Nine Mile
2 Plant").
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following exhibits are furnished in
accordance with the provisions of Item 601 of Regulation S-K:
Exhibit No.
Regulation S-K
Item 601
Designation Exhibit Description
(10) -- Material Contracts
(i) 100 -- Third Amendment, dated as of November 1, 1994,
to the Agreement for the Sale and Purchase of
Coal, dated as of January 1, 1987, among
Registrant, Kentucky Carbon Corporation and The
Carbon Fuel Sales Company (Exhibit (10)(i)(40)
to Registrant's 10-K Report), as amended.
[Certain portions of said amendment setting
forth or relating to pricing provisions are
omitted and filed separately with the Securities
and Exchange Commission pursuant to a request
for confidential treatment under the rules of
said Commission.]
(ii) 101 -- Agreement of Assignment, Assumption, Consent and
Release, entered into as of July 1, 1994 by and
among Global Petroleum Corporation, Montello Oil
Corporation, and Registrant for itself and as
Agent for Consolidated Edison Company of New
York, Inc., and Niagara Mohawk Power Corporation
for the Roseton Electric Generating Station,
relating to a Fuel Supply Contract, effective
September 1, 1992 (Exhibit (10)(i)81 to
Registrant's 10-K Report), as amended.
12-- Statement Showing Computation of the Ratio of Earnings to
Fixed Charges and the Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
27-- Financial Data Schedule, pursuant to Item 601(c) of
Regulation S-K.
(b) Reports on Form 8-K. Registrant did not file any
Current Reports on Form 8-K during the quarter for which this
Quarterly Report on Form 10-Q is filed.
<PAGE>
SIGNATURES
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 hereunder duly authorized.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
(Registrant)
By: (SGD.) JOHN F. DRAIN
John F. Drain,
Vice President - Finance and Controller
Authorized Officer and Principal
Financial Officer
Dated: November 4, 1994
<\PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED
STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $920,422
<OTHER-PROPERTY-AND-INVEST> $10,868
<TOTAL-CURRENT-ASSETS> $119,032
<TOTAL-DEFERRED-CHARGES> $196,024
<OTHER-ASSETS> $62,624
<TOTAL-ASSETS> $1,308,970
<COMMON> $85,818
<CAPITAL-SURPLUS-PAID-IN> $268,963
<RETAINED-EARNINGS> $82,831
<TOTAL-COMMON-STOCKHOLDERS-EQ> $437,612
$35,000
$46,030
<LONG-TERM-DEBT-NET> $391,757
<SHORT-TERM-NOTES> $0
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $1,038
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $397,533
<TOT-CAPITALIZATION-AND-LIAB> $1,308,970
<GROSS-OPERATING-REVENUE> $396,141
<INCOME-TAX-EXPENSE> $24,018
<OTHER-OPERATING-EXPENSES> $311,909
<TOTAL-OPERATING-EXPENSES> $335,927
<OPERATING-INCOME-LOSS> $60,214
<OTHER-INCOME-NET> $6,621
<INCOME-BEFORE-INTEREST-EXPEN> $66,835
<TOTAL-INTEREST-EXPENSE> $23,407
<NET-INCOME> $43,428
$3,844
<EARNINGS-AVAILABLE-FOR-COMM> $39,584
<COMMON-STOCK-DIVIDENDS> $26,577
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $103,464
<EPS-PRIMARY> $2.32
<EPS-DILUTED> $0
</TABLE>
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
1994
3 Months 9 Months 12 Months
<CAPTION> Ended Ended Ended Year Ended December 31,
<S> Sept. 30 Sept. 30 Sept. 30 1993 1992 1991 1990 1989
Earnings: <C> <C> <C> <C> <C> <C> <C> <C>
A. Net Income $12,434 $ 43,428 $ 51,933 $ 50,390 $ 47,688 $ 42,941 $ 41,035 $ 39,117
B. Federal Income Tax 6,405 23,040 28,735 27,158 24,363 21,361 20,374 18,918
C. Earnings before Income Taxes $18,839 $ 66,468 $ 80,668 $ 77,548 $ 72,051 $ 64,302 $ 61,409 $ 58,035
D. Total Fixed Charges 1 7,999 25,004 33,580 33,820 34,888 37,737 42,906 43,523
E. Total Earnings $26,838 $ 91,472 $114,248 $111,368 $106,939 $102,039 $104,315 $101,558
Preferred Dividend Requirements:
F. Allowance for Preferred Stock
Dividends Under IRC Sec 247 $ 1,282 $ 3,844 $ 5,384 $ 5,562 $ 5,544 $ 5,659 $ 5,681 $ 5,698
G. Less Allowable Dividend Deduction 132 396 528 528 544 544 544 544
H. Net Subject to Gross-up 1,150 3,448 4,856 5,034 5,000 5,115 5,137 5,154
I. Ratio of Earnings before Income
Taxes to Net Income (C/A) 1.515 1.531 1.553 1.539 1.511 1.497 1.497 1.484
J. Pref. Dividend (Pre-tax) (HxI) 1,742 5,279 7,541 7,747 7,555 7,657 7,690 7,649
K. Plus Allowable Dividend Deduction 132 396 528 528 544 544 544 544
L. Preferred Dividend Factor 1,874 5,675 8,069 8,275 8,099 8,201 8,234 8,193
M. Fixed Charges (D) 7,999 25,004 33,580 33,820 34,888 37,737 42,906 43,523
N. Total Fixed Charges
and Preferred Dividends $ 9,873 $ 30,679 $ 41,649 $ 42,095 $ 42,987 $ 45,938 $ 51,140 $ 51,716
O. Ratio of Earnings to Fixed
Charges (E/D) 3.36 3.66 3.40 3.29 3.07 2.70 2.43 2.33
P. Ratio of Earnings to Fixed Charges
and Preferred Dividends (E/N) 2.72 2.98 2.74 2.65 2.49 2.22 2.04 1.96
<FN> 1 Includes a portion of rent expense deemed to be representive of the interest factor.
</TABLE>
</PAGE>
<PAGE>
EXHIBIT (10)(i) 100
THIRD AMENDMENT TO THE
AGREEMENT FOR THE SALE AND PURCHASE OF COAL
THIS THIRD AMENDMENT ("AMENDMENT"), dated as of
November 1, 1994 TO THAT AGREEMENT ("AGREEMENT") FOR THE SALE AND
PURCHASE OF COAL made and entered into as of the 1st day of
January 1987 by and between CENTRAL HUDSON GAS & ELECTRIC
CORPORATION, (hereinafter referred to as "BUYER") and KENTUCKY
CARBON CORPORATION (hereinafter referred to as "SELLER" or
"PRODUCER") and THE CARBON FUEL SALES COMPANY (hereinafter
referred to as "SALES AGENT") and as later assigned by "SELLER"
and "PRODUCER" with the consent of "BUYER" to MASSEY COAL SALES
COMPANY ("ASSIGNEE").
WITNESSETH:
WHEREAS, Article I of the AGREEMENT provides that
beginning July 1, 1991, and six months prior to the end of each
contract year thereafter, BUYER, SALES AGENT and SELLER shall
commence good faith negotiations with respect to quantity,
quality and price of coal for the next Contract Year; and
WHEREAS, the ASSIGNEE assumed the contractual
responsibilities of SALES AGENT and SELLER pursuant to an AGREE-
MENT OF ASSIGNMENT, ASSUMPTION, CONSENT AND RELEASE dated
February 29, 1992, by and among BUYER, SALES AGENT and SELLER
(collectively referred to as "ASSIGNOR") and ASSIGNEE; and
WHEREAS, notice was duly given and BUYER and ASSIGNEE
entered into good faith negotiations; and
WHEREAS, after completion of good faith negotiations,
BUYER and ASSIGNEE desire to amend the AGREEMENT to provide for a
replacement pricing mechanism for coal sold and bought thereunder
and to revise certain other AGREEMENT provisions; and
WHEREAS, THIS SECOND AMENDMENT replaces the FIRST
AMENDMENT TO THE AGREEMENT FOR THE SALE AND PURCHASE OF COAL,
dated November 1, 1991 in its entirety, effective January 1,
1994;
WHEREAS, THIS THIRD AMENDMENT replaces the SECOND
AMENDMENT TO THE AGREEMENT FOR THE SALE AND PURCHASE OF COAL,
dated November 1, 1993 in its entirety, effective January 1,
1995.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants set forth herein, the parties hereto agree
as follows:
1. For only the Contract Year occurring during the
calendar year 1995, Article II (Deliveries), Article III
(Specifications and Quality and Weight), Article IV (Payment),
Article V (Base Price) and Article VII (Adjustment in Current
Base Price for Quality) of the AGREEMENT shall be respectively
amended in their entirety to read as follows:
"ARTICLE II
DELIVERIES
Section 1. QUANTITIES/DELIVERY SCHEDULE: Except as
provided for below, the quantity of coal sold and purchased
hereunder shall be a firm tonnage of no less than 240,000 tons
per year ("Firm Tonnage"). In addition, there will be 120,000
tons per year called incremental tonnage ("Incremental Tonnage")
which will be sold and purchased hereunder provided that the
delivered cost per million Btu's of oil, natural gas or spot coal
usable at BUYER's Danskammer Point Plant ("Danskammer Plant" or
"BUYER's Plant") exceeds the then-applicable delivered Current
Base Price of coal in delivered cost per million Btu's.
The ASSIGNEE will assume that three trains of approxi-
mately 10,000 tons each will be loaded for shipment each month.
Two of those trains will be Firm Tonnage and one will be
Incremental Tonnage. The BUYER must indicate to the ASSIGNEE not
later than the 22nd of the month preceding each proposed
Incremental Tonnage shipment if the then-current delivered price
of oil, natural gas or spot coal to the Danskammer Plant is below
the delivered Current Base Price of coal. If such written notice
is not received by the ASSIGNEE by the 22nd then three trains
will be shipped the next month at the then-Current Base Price.
In the event such a written notice is received, and the ASSIGNEE
wishes to match the then-current price of oil, natural gas or
spot coal as so delivered, the ASSIGNEE must notify the BUYER of
the same in writing not later than the last working day of that
month. In the event that such notification is given then, the
coal will be shipped as scheduled, with the Incremental Tonnage
at the matched price and the Firm Tonnage at the then-Current
Base Price. If the written notice to match the price is not
received by the BUYER by the last working day of the month, the
Incremental Tonnage train will not be shipped as scheduled. The
ASSIGNEE reserves the right to re-offer any unshipped Incremental
Tonnage to the BUYER at another time in the ensuing 12 months
(commencing with the month during which the unshipped Incremental
Tonnage would otherwise have been shipped) at the then-Current
Base Price. In each such instance, BUYER will then have the
option to accept that Incremental Tonnage or permanently cancel
that Incremental Tonnage. The delivered coal cost, the delivered
oil cost, the delivered natural gas cost and the delivered spot
coal cost shall be determined as shown on Exhibit No. 1.
Section 2. LIMITATIONS ON QUANTITIES: Notwith-
standing any of the above, BUYER will not be obligated to
purchase Firm and Incremental Tonnage coal from ASSIGNEE under
this AGREEMENT if BUYER is unable to utilize such coal because
the Danskammer Plant is not in "economic dispatch". If, because
of economic reasons, the Danskammer Plant does not then require
all coal contracted for under all then-existing contracts, BUYER
shall notify ASSIGNEE in writing and BUYER will reduce the
tonnage taken from all such contract suppliers on a proportional
basis. The tonnage taken from each such contract supplier will
be in proportion to the annual Firm Tonnage in each such
contract. In the event that contract shipments are so reduced,
BUYER will take no spot coal during the period of reduction.
Following said period of reduction, BUYER will elect either to
increase shipments or to extend the Initial Term of this AGREE-
MENT until such deferred Firm and Incremental Tonnage has been
shipped in the total quantities provided for in this AGREEMENT.
The prices for the tonnage then shipped will be the prices in
effect at time of shipment. In the event the Initial Term is so
extended, the term of this AGREEMENT shall be extended for the
same number of days that the Initial Term was so extended and the
beginning and end of each Contract Year following such an
extension of the Initial Term shall be respectively set back for
the same number of days that the Initial Term was so extended and
the "Contract Year" shall be adjusted accordingly.
Section 3. DELIVERY SCHEDULE LIMITATIONS: All Firm
Tonnage necessary to meet the 20,000 tons per month schedule will
be delivered before any Incremental Tonnage is delivered. Both
Firm Tonnage and Incremental Tonnage can be delivered during the
same month, but ASSIGNEE will not be obligated to deliver more
than four (4) 10,000 ton shipments of coal during any one month,
unless otherwise mutually agreed. There shall be a minimum of
seven (7) calendar days between shipment releases from the
Operations unless otherwise mutually agreed.
Section 4. PASSAGE OF TITLE: The coal sold and
delivered to BUYER hereunder is f.o.b. railway car at the Opera-
tions; and, title to and risk of loss of the coal supplied
hereunder shall pass to BUYER when ASSIGNEE completes loading
coal and tenders the loaded cars to the carrier for destination
to BUYER's Plant.
Section 5. INITIAL QUALITY NOTIFICATION: The
parties recognize the need to know the quality of the coal prior
to receipt of the shipment at the Danskammer Plant. Therefore,
the coal shall be sampled as it is loaded into railway cars and
analyzed by an independent laboratory acceptable to BUYER and
ASSIGNEE within 48 hours after the coal is loaded, who shall
notify BUYER and ASSIGNEE by telephone, telegram, or facsimile of
the average "as received" analytical results of each shipment.
Section 6. SHIPPING NOTICE: For each shipment of
coal hereunder, ASSIGNEE shall promptly mail to BUYER's Plant and
to Financial Records Section, Central Hudson Gas & Electric
Corporation, 284 South Avenue, Poughkeepsie, New York 12601-4879,
a shipping notice showing weight, type of car and number of each
railway car contained in the shipment, shipping date and origin
mine.
Section 7. RAILROAD: Except as otherwise expressly
provided herein, ASSIGNEE shall deliver coal sold and purchased
hereunder in accordance with the contract between BUYER and
railroad and the applicable railroad tariff provisions all as
specified in Exhibit 2 - RAILROAD PROVISIONS, attached hereto and
made a part hereof. BUYER shall be responsible for providing any
applicable amendments or revisions to said railroad tariff
provisions to ASSIGNEE.
BUYER shall cooperate with ASSIGNEE in its scheduling
of work at its Operations, shall be responsible for arranging and
coordinating with the railroad (also referred to herein as
"carrier") the arrival of rail cars for loading. BUYER shall pay
carrier for all rail transportation charges for coal purchased
from ASSIGNEE under this AGREEMENT, except as provided for in the
remainder of this Section 7.
ASSIGNEE will pay all additional freight charges,
required by BUYER's rail transportation agreements or the
applicable railroad tariffs, on coal delivered hereunder that are
a result of ASSIGNEE's failure to deliver the quantity of coal as
scheduled by BUYER, in accordance with this AGREEMENT unless the
tonnage deficiency is excused by other provisions of this
AGREEMENT.
BUYER shall be responsible for payment of any and all
increased freight charges which result solely from or on account
of the coal being shipped to more than one destination.
ASSIGNEE shall pay all additional freight charges,
required by the applicable railroad tariffs or BUYER's rail
transportation agreements on coal delivered hereunder that are a
result of ASSIGNEE's failure to notify the railroad, in writing,
in accordance with the applicable railroad tariffs or BUYER's
rail transportation agreement, of ASSIGNEE's inability to make
shipment as scheduled.
ASSIGNEE shall pay all detention and switching charges
at ASSIGNEE's Operations resulting from ASSIGNEE's failure to
load and ship the coal in accordance with the applicable railroad
tariffs or BUYER's rail transportation agreement. ASSIGNEE shall
load coal so as to permit loading of 10,000-ton trains within a
24-hour period.
ASSIGNEE shall pay all charges resulting from
overloading or underloading cars in accordance with the
applicable tariffs or BUYER's rail transportation agreement.
<PAGE>
ARTICLE III
SPECIFICATIONS & QUALITY & WEIGHT
Section 1. ORIGIN: The coal shall be from the
Sidney Pond Creek Seam or other such seams as approved and con-
firmed in writing by BUYER and which meets the specifications
herein. Deliveries shall originate from ASSIGNEE's Sidney Mine
unless other arrangements are made and confirmed in writing with
BUYER to deliver coal from another facility.
Section 2. QUALITY SPECIFICATIONS: The quality of
coal sold and purchased hereunder shall meet the following
specifications:
ASTM
EXPECTED MINIMUM MAXIMUM METHOD
As Received:
Moisture % 6.1 4 10 D3173
Volatiles % 34.9 30 36 D3175
Fixed Carbon % 51 47 60 D3172
Ash % 8.0 -- 10 D3174
Btu/LB. 13,000 12,500 -- D3286
Sulphur % 0.66 0.47 0.70 D3177/4239
SO2 (LBS./MMBTU) 1.0 -- 1.1 Calculated
Grind (HGI) 52 48 60 D409-85
Sidney Pond Creek Only 42 40 -- D409-85
Ash Fusion (I.D., F) 2,700 2,300 D1587
This coal shall be free of extraneous material and
shall have a maximum top size of two inches.
Section 3(a). BUYER'S REMEDIES RELATED TO QUALITY
SPECIFICATIONS: In lieu of any other remedies related to
ASSIGNEE's failure to meet the quality specifications provided
for herein, except for the price adjustments for quality provided
for in Article VII herein, BUYER shall have the rights and
remedies described in this Section 3 upon ASSIGNEE's failure to
deliver coal in accordance with the specifications set forth in
Sections 2 and 3 of this Article III.
(b). BUYER'S RIGHT TO REJECT INDIVIDUAL
SHIPMENTS: BUYER's ability to use the coal being dependent on
the coal meeting the specifications set forth above, it is agreed
that BUYER shall have the right to reject any and all shipments
which fail to meet any of the individual shipment rejection
limits shown below:
<PAGE>
INDIVIDUAL SHIPMENT REJECTION LIMITS
Sulphur 0.7% Maximum
Volatiles 25% Minimum
Ash Fusion (I.D.) 2,300 F Minimum
Grind (HGI) 47 Minimum
Sidney Pond Creek Only 39 Minimum
Btu 12,500 Minimum
SO2 (LBS./MMBTU) 1.1 Maximum
ASSIGNEE shall pay all freight, diversion, demurrage,
testing and other expenses in connection with any such rejected
shipment, or shipment found by ASSIGNEE to be non-conforming,
unless such shipment is accepted by BUYER. Furthermore, ASSIGNEE
certifies that it will not make any shipment shown by sampling
and analyses (as provided in Article IX) to exceed the Maximum
allowable Sulphur levels or to be below the Minimum acceptable
Btu level.
(c). BUYER'S RIGHT TO SUSPEND OR HAVE PRICE
ADJUSTMENTS FOR MOISTURE/ASH LIMITATIONS: In addition to the
limits for individual shipments shown in Section 3(b) above, the
delivered coal must meet the following weighted average specifi-
cations for each six (6) consecutive shipments (first through
sixth, seventh through twelfth, thirteenth through eighteenth,
and so on):
SIX CONSECUTIVE SHIPMENTS LIMITS
Ash 10% Maximum
Moisture 10% Maximum
If the weighted average ash or moisture quality of coal
in a series of six (6) consecutive shipments delivered hereunder,
as determined by sampling and analysis, does not meet the above
Six Consecutive Shipments Limits, BUYER shall have the right to
suspend further shipments under this AGREEMENT or to have the
Current Base Price for such coal adjusted all in accordance with
the following:
(i) BUYER'S RIGHT TO SUSPEND: In the event
six consecutive shipments do not so meet said Six Consecutive
Shipments Limits, BUYER shall thereupon have the right to suspend
shipments under this AGREEMENT until ASSIGNEE has furnished
reasonable assurance to BUYER in writing that the deviation from
such limits or specifications can and will be corrected. If
ASSIGNEE fails to promptly furnish reasonable assurance that such
correction can and will be made within 60 days after BUYER's
suspension of shipments (or within such longer period as shall be
reasonably requested by ASSIGNEE and agreed to in writing by
BUYER), or if corrections are not made within such 60-day period
(or such longer period agreed to by BUYER), BUYER shall have the
right at any time thereafter to terminate this AGREEMENT by
giving written notice of such termination to ASSIGNEE, and
thereupon BUYER shall stand discharged of any and all further
obligations or liability under the terms of this AGREEMENT or as
a result of such termination without waiver of any rights that
BUYER may have under this AGREEMENT. If BUYER, after having
suspended shipments for a period of 180 days, has not elected to
terminate this AGREEMENT, then ASSIGNEE shall have the option of
terminating this AGREEMENT by giving BUYER written notice of such
termination within 60 days after the expiration of such 180-day
period;
(ii) BUYER'S RIGHT TO PRICE ADJUSTMENT: In
the event six consecutive shipments do not meet the Six Consecu-
tive Shipments Limits, as an alternative to suspending shipments
as provided for above, BUYER may cause ASSIGNEE to adjust Current
Base Price for such coal (in addition to any adjustment for
quality as provided in Article VII) for such failure of the
delivered coal to meet the Six Consecutive Shipments Limits, as
follows:
(1) For each one percent the ash of such
coal exceeds the Six Consecutive Shipments Limits,
the Current Base Price, adjusted, to be paid
ASSIGNEE by BUYER for such shipment shall be
reduced by one dollar ($1.00), fractions pro rata;
and also
(2) For each one percent the moisture of
such coal exceeds the Six Consecutive Shipments
Limits, the Current Base Price, adjusted, to be
paid ASSIGNEE by BUYER for such shipments shall be
reduced by one dollar ($1.00), fractions pro rata.
The analyses obtained in accordance with Article IX,
with respect to moisture and ash, shall be the analyses upon
which rejection of shipments, as provided in Section 3(b) above
and application of Current Base Price adjustments or suspension
of shipments, as provided in this Section 3(c), is based.
Sampling and analyses shall be in accordance with ASTM standards
and tolerances.
(iii) EFFECT OF TERMINATION: In the event
that BUYER exercises its right to terminate this AGREEMENT
pursuant to above Section 3(c)(i), or ASSIGNEE exercises its
right to terminate this AGREEMENT under said Section, neither
party shall have any further obligations or liabilities hereunder
from and after the effective date of such termination, provided,
however, that such termination shall not affect the rights or
obligations of the parties which accrued prior to the effective
date of termination.
(d). GRIND LIMITATIONS: In addition to the
limits for individual shipments shown in Section 3(b) above and
the Limitations for Six Consecutive Shipments shown in Section
3(c) above, the delivered coal must meet the following weighted
average specifications for each three consecutive shipments
(first through third, fourth through sixth, seventh through
ninth, and so on):
THREE CONSECUTIVE SHIPMENTS LIMITS
Grind (HGI) 48 Minimum
Sidney Pond Creek Only 40 Minimum
If the average grind of coal in a series of three (3)
consecutive shipments delivered hereunder, as determined by
sampling and analysis, does not meet the above Three Consecutive
Shipments Limits, BUYER shall have the right to reject any of the
immediately following three (3) consecutive shipments in the
event that such shipment does not meet said Minimum Grind (HGI)
limitation. The basis of any such rejection shall be the
averaged results of 3 different independent laboratories as
provided for in Article IX.
Section 4. ASSIGNEE'S DUTY OF CARE: ASSIGNEE
shall, at all times, exercise reasonable care and diligence in
its efforts to ship to BUYER coal which conforms to the
specifications set forth in above Section 2 and 3. Nothing in
this Article III shall be construed to relieve ASSIGNEE of its
obligation to conduct its mining and coal cleaning operations in
a competent manner, consistent with good industry practices, so
as to produce coal which will meet the specifications set forth
above.
Section 5. WEIGHT MEASUREMENT: The weight of coal
sold hereunder shall be determined on BUYER's scales at the
Danskammer Plant, which scales shall be maintained and certified
in accordance with the provisions of Exhibit No. 3. If such
scales are inoperative at the time of any coal delivery, the
weight of coal shall be the weight upon which BUYER bases its
payment to the railroad.
ARTICLE IV
PAYMENT
Section 1. PRICE: For coal delivered and accepted,
BUYER shall pay ASSIGNEE the Current Base Price herein provided
by cash or check in United States Funds for all coal delivered,
and accepted hereunder.
Section 2. SUBMISSION OF WEIGHT TO ASSIGNEE: BUYER
shall submit to ASSIGNEE the certified weights within five (5)
working days after the certified weights become available.
Section 3: INVOICE: Thereafter, an invoice for any
adjustments for quality as hereinafter defined, and all coal
shipped based on certified weights will be submitted by the
ASSIGNEE to the BUYER. The coal shipped will be invoiced at the
Current Base Price (hereinafter defined).
Section 4: PAYMENT: BUYER shall make payment to
ASSIGNEE within thirty (30) calendar days from shipment of the
coal from the Operations. There shall be no discounts.
Payment to ASSIGNEE shall be made by check, as follows:
Massey Coal Sales Company
P.O. Box 26765
Richmond, Virginia 23261
The above address may be changed by ASSIGNEE upon written notice
to BUYER.
ARTICLE V
CURRENT BASE PRICE
Section 1: The Current Base Price for Firm Tonnage
and Incremental Tonnage for the Contract Year 1995 shall be
$xxxxx (U.S. Dollars) per net ton, except as otherwise provided
in THIS THIRD AMENDMENT, f.o.b. railcar at ASSIGNEE's loading
facility.
Section 2. The Current Base Price shall be subject
to adjustment for BTU Value and Ash Value as provided for herein.
Section 3. At BUYER's Option, the Current Base
Price for Firm Tonnage and Incremental Tonnage for the Contract
Year 1996 shall be $xxxxx (U. S. Dollars) per net ton, except as
otherwise provided in THIS THIRD AMENDMENT, f.o.b. railcar at
ASSIGNEE's loading facility. If this Option is not exercised by
BUYER prior to June 30, 1995, good faith negotiations will
commence as provided for in Article I.
ARTICLE VII
ADJUSTMENT IN CURRENT BASE PRICE FOR QUALITY
Section 1. BTU VALUE: The Current Base Price and
matching incremental price to be paid to ASSIGNEE by BUYER is
based upon coal with 13,000 BTU/LB heat content (BTU Value) for
each ton of coal in each shipment. The BTU Value of the coal
sold hereunder may vary, and the price for such coal shall be
adjusted to compensate for variations in BTU Value, as described
below.
Section 2. ADJUSTMENTS FOR BTU VALUE: If the BTU
Value of the coal shipment is between 12,850 BTU/LB and 13,150
BTU/LB, there will be no adjustment for BTU Value variation. If
the BTU Value is less than 12,850 BTU/LB or greater than 13,150
BTU/LB, the price for a shipment shall be adjusted, based upon
variations from the 13,000 BTU/LB BTU Value, as follows:
(a) For a coal shipment with a BTU Value greater than
13,150 BTU/LB, a premium shall be paid by BUYER to ASSIGNEE at
the rate of xxxxx/100 BTU/LB, fractions pro rata; or
(b) For a coal shipment with a BTU Value less than
12,850 BTU/LB, a penalty shall be deducted from the Current Base
Price at the rate of xxxxx/100 BTU/LB, fractions pro rata.
(c) If the weighted average BTU Value for all
shipments shipped in any one month, excluding the BTU Value on
shipments on which a penalty was previously applied, is less than
12,900 BTU/LB, then the Current Base Price as applied to such
shipments, excluding shipments on which a penalty was previously
applied, shall be retroactively reduced at the rate of xxxxx/100
BTU/LB, fractions pro rata.
Exhibit No. 5 illustrates adjustments for BTU Value to
the Current Base Price.
Section 3. ASH VALUE: The Current Base Price and
matching incremental price to be paid to ASSIGNEE by BUYER is
based upon coal with an ash content ("Ash Value") of eight
percent (8%) by weight of the "as received" analysis for the coal
in each shipment. The Ash Value of the coal sold hereunder may
vary and the price shall be adjusted to compensate for variations
as described below.
Section 4. ADJUSTMENT FOR ASH VALUE: If the Ash
Value of the coal shipment is between 7.5% and 8.5%, there will
be no adjustment for ash content. If the Ash Value is less than
7.5% or greater than 8.5% the price for a shipment shall be
adjusted, based upon variations from 8% as follows:
(a) For a coal shipment with an Ash Value less than
7.5%, a premium of $xxxxx per ton shall be paid to ASSIGNEE for
each .1% Ash Value variation below 8.0%.
(b) For a coal shipment with an Ash Value greater than
8.5%, a penalty of $xxxxx shall be deducted from the price for
each .1% Ash Value variation in excess of 8.0%."
2. Commencing on January 1, 1996 and continuing for
the remaining term of this AGREEMENT, Articles II, III, IV, V and
VII of the AGREEMENT shall respectively read as they are set
forth in the AGREEMENT and not how they are set forth in the
SECOND or THIRD AMENDMENT unless otherwise agreed upon by the
parties hereto.
3. For only the Contract Year occurring during the
calendar year 1995, Article VI (Base Price Adjustment) shall have
no force and effect and, for that Contract Year, be deemed
deleted in its entirety from the AGREEMENT. Commencing on
January 1, 1996 and continuing for the remaining term of the
AGREEMENT, Article VI of the AGREEMENT shall be in full force and
effect as it is set forth in the AGREEMENT unless otherwise
agreed upon by the parties hereto.
4. Except as may be amended herein, all terms and
conditions of the AGREEMENT shall remain in full force and effect
as of the date of this THIRD AMENDMENT. The addresses of the
parties hereto are as set forth in the AGREEMENT.
5. All terms defined in the AGREEMENT shall have the
same meaning in the THIRD AMENDMENT unless otherwise defined
herein.
6. For only the Contract Year occurring during the
calendar year 1995, Exhibit 1 (Calculations of Delivered Fuel
Costs) and Exhibit 5 (Examples of Adjustments to Current Base
Prices for Quality) to the AGREEMENT shall be respectively
amended in their entirety to read in the form attached to the
THIRD AMENDMENT.
7. Commencing on January 1, 1996 and continuing for
the remaining term of this AGREEMENT, Exhibits 1 and 5 to the
AGREEMENT shall respectively read as they are set forth in the
Exhibits to the AGREEMENT and not as they are set forth in the
Exhibits to the SECOND or THIRD AMENDMENT.
8. For only the contract year occurring during the
Calendar Year 1995, Exhibit 6, attached hereto, shall be an
Exhibit to the AGREEMENT. Commencing on January 1, 1996 Exhibit
6 shall be deemed to be of no further force and effect unless
otherwise agreed upon by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this
AGREEMENT to be executed in its behalf by its proper officer
thereunder duly authorized, all as of the day and year first
above written.
BUYER: CENTRAL HUDSON GAS & ELECTRIC CORPORATION
BY:
PAUL J. GANCI
ITS: PRESIDENT AND CHIEF OPERATING OFFICER
ASSIGNEE: MASSEY COAL SALES COMPANY
BY:
THOMAS M. MCQUADE
ITS: SENIOR VICE PRESIDENT OF SALES
<PAGE>
"EXHIBIT NO. 1
CALCULATIONS OF DELIVERED FUEL COSTS
"Delivered Current Coal Price" shall be the
Current Base Price + the combined Norfolk Southern and Conrail
contract freight charge expressed in cents per million Btu's
based on a 13,000 Btu/Lb "as received" heat content.
"Delivered Current Oil Price" shall be the net
price (including discounts and allowances) to the BUYER under
firm term contract(s) for the supply of Number Six (6) Residual
Fuel to the Danskammer Generating Station of the maximum sulfur
content of fuel oil (currently 1.0%) permitted to be burned in
Danskammer Units 3 and 4 plus all applicable State, Federal or
other taxes and fees required to be paid by BUYER in connection
with such deliveries of number six Fuel Oil to Danskammer
expressed in cents per million Btu's based on 150,000 Btu per
gallon as received heat content.
"Delivered Current Gas Price" shall be the price
to the BUYER of natural gas dispatched to the Danskammer
Generating Station to be burned in Units 3 and 4 plus an
efficiency loss of 5% expressed in cents per million Btu's.
"Delivered Current Spot Coal Price" shall be the
price to the BUYER for spot coal, having the same specifications
as provided in the Contract, delivered to the Danskammer
Generating Station to be burned in Units 3 and 4 expressed in
cents per million Btu's.
EXHIBIT NO. 1
EXAMPLE IV
DELIVERED CURRENT COAL PRICE
Assume the Current Base Price of Coal ($29.00 net per ton) +
freight charges
(Assume $23.00 net per ton for this example) divided by
13,000 Btu x 2,000 Lbs
(----------------------) = $52.00 per ton divided by 26 =
1,000,000 200 cents per Mmbtu.
DELIVERED CURRENT OIL PRICE
Assume the net price of oil delivered ($12.90 per Bbl) + New York
State Gross Receipts Tax ($0.37 per Bbl) = $13.27 = per Bbl
150,000 Btu x 42 Gas
$13.27 divided by (--------------------) = $13.27 divided by 6.3
1,000,000 = 210 cents per Mmbtu.
DELIVERED CURRENT GAS PRICE
Assume the dispatch price of natural gas (220 cents per Mmbtu.) +
efficiency loss 5% = 220 x 1.05 = 231 cents per Mmbtu.
DELIVERED CURRENT SPOT COAL PRICE
Assume the spot price for coal is $28.00 net per ton and the
freight charge is $21.00 net per ton.
13,000 x 2,000 Lbs 49 per ton
$49.00/ton divided by ----------------- = ---------- =
1,000,000 26 188 cents
per Mmbtu.
Therefore the Delivered Current Spot Coal Price is the
Lowest delivered price of the three fuels. The Delivered Current
Coal Price would have to be reduced to equal the Delivered
Current Spot Coal Price of 188 cents per Mmbtu. in order to ship
the incremental tonnage train. The BUYER must indicate to the
ASSIGNEE not later than the 22nd of the month preceding each
proposed incremental tonnage shipment if the then-Delivered
Current Price of oil, natural gas or spot coal is below the
Delivered Current Price of Coal.
<PAGE>
EXHIBIT NO. 5
EXAMPLES OF ADJUSTMENTS TO CURRENT BASE PRICES FOR QUALITY
PREMIUMS - xxxxx/100 Btu/Lb in excess of 13,000 Btu/Lb, fractions
pro rata, on a shipment.
1. Shipment Btu value is 13,050 Btu/Lb. Btu Value falls
within 12,850 to 13,150 Btu/Lb range and, therefore, no
premiums are due to ASSIGNEE.
2. Shipment Btu Value is 13,200 Btu/Lb. Premium due is:
13,200 Btu/Lb - 13,000 Btu/Lb = 200 Btu/Lb x
xxxxx/100 Btu/Lb = $xxxxx/Ton.
3. Shipment Btu Value is 13,300 Btu/Lb. Premium due is:
13,300 Btu/Lb - 13,000 Btu/Lb = 300 Btu/Lb x
xxxxx/100 Btu/Lb = $xxxxx/Ton.
PENALTIES - xxxxx/100 Btu/Lb in deficit of 13,000 Btu/Lb,
fractions pro rata, on a shipment.
1. Shipment Btu Value is 12,950 Btu/Lb. Btu Value falls
within 12,850 to 13,150 Btu/Lb range and, therefore, no
penalties are charged to ASSIGNEE.
2. Shipment Btu Value is 12,700 Btu/Lb. Penalty charged
is:
13,000 Btu/Lb - 12,700 Btu/Lb = 300 Btu/Lb x
xxxxx/100 Btu/Lb = $xxxxx/Ton.
3. Shipment Btu Value is 12,750 Btu/Lb. Penalty charged
is:
13,000 Btu/Lb - 12,750 Btu/Lb = 250 Btu/Lb x
xxxxx/100 Btu/Lb = $xxxxx/Ton.
4. Average Btu Value for January shipments is 12,850
Btu/Lb. Average Btu Value falls under 12,900. Penalty
charged is:
13,000 Btu/Lb - 12,850 Btu/Lb = 150 Btu/Lb x
xxxxx/100 Btu/Lb = $xxxxx/Ton
on all January shipments not previously penalized.
<PAGE>
EXHIBIT NO. 6
EXAMPLES OF ADJUSTMENT TO BASE PRICE FOR ASH VALUE
1. If shipment ash value falls within 7.5% to 8.5% range
no premium or penalty is incurred.
2. If shipment ash value is 6.9% the premium due is 8.00%
- 6.9% = 11 (tenths) x $xxxxx (ash value per .1%) =
$xxxxx.
Therefore, each ton of coal will receive a premium
of $xxxxx added to the base price.
3. If shipment ash value is 8.8% the penalty due is 8.8% -
8% = 8 (tenths) x $xxxxx (ash value per .1%) = $xxxxx.
Therefore, each ton of coal will receive a penalty
of $xxxxx deducted from the base price."
</PAGE>
<PAGE>
EXHIBIT (10)(ii) 101
June 28, 1994
AGREEMENT OF
ASSIGNMENT, ASSUMPTION,
CONSENT AND RELEASE
THIS AGREEMENT OF ASSIGNMENT, ASSUMPTION, CONSENT AND
RELEASE ("ASSIGNMENT") entered into as of July 1, 1994 by and
among Global Petroleum Corp., a Massachusetts Corporation having
a principal address of 800 South Street, Waltham, Massachusetts
02254, ("Assignor"), Montello Oil Corporation, a New Jersey
Corporation having a principal address of 800 South Street,
Waltham, Massachusetts 02254, ("Assignee"), and Central Hudson
Gas & Electric Corporation, a New York Corporation having a
principal address of 284 South Avenue, Poughkeepsie, New York
12601, for Itself and As Agent for Consolidated Edison Company of
New York, Inc., a New York Corporation having a principal address
of 4 Irving Place, New York, New York 10003, and Niagara Mohawk
Power Corporation, a New York Corporation having a principal
address of 300 Erie Boulevard West, Syracuse, New York 13202,
(collectively defined herein as "Buyer").
Witnesseth:
WHEREAS, Assignor and Buyer entered into a Fuel Supply
Contract, effective September 1, 1992 and amended by a First
Amendment thereto, effective November 1, 1993 and a Second
Amendment thereto, effective September 1, 1994 ("Agreement"); and
WHEREAS, Assignor desires to assign its rights and
obligations under the Agreement to Assignee and Assignee desires
to assume Assignor's rights and obligations under the Agreement;
and
WHEREAS, Buyer is willing to consent to such assignment
and assumption as required under Section 18.0 of the Agreement.
NOW, THEREFORE, in consideration of the sum of Ten
Dollars and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties
agree as follows:
1. Assignment: Effective at midnight on June 30,
1994 ("Effective Date"), the Assignor hereby assigns to the
Assignee all its right, title, interest and obligations in the
Agreement attached hereto and made a part hereof.
2. Assumption: As of the Effective Date, the
Assignee hereby assumes the performance of each and every
covenant in the Agreement.
3. Consent: Buyer hereby consents to Assignor
assigning the Agreement to Assignee as of the Effective Date.
4. Release: Assignor and Buyer each hereby
releases and discharges the other from any and all obligations,
liabilities and/or duties under the Agreement, except such as are
a result of performance or non-performance of the Agreement prior
to the Effective Date or which result from events occurring prior
to the Effective Date which give rise to or result in any
obligations, liabilities and/or duties on the part of the
Assignor or Buyer under the Agreement, and except as otherwise
noted herein.
5. Guarantee: In the event that Assignee is now in
default or later defaults with respect to any obligation assumed
hereunder by Assignee, Assignor hereby guarantees the performance
of such obligation to Buyer, as more fully provided for in the
Guaranty of Assignor attached hereto and incorporated by
reference herein.
6. Indemnification: Assignor and/or Assignee shall
indemnify, defend (at the option of the Buyer), and hold Buyer
and its agents, employees and directors harmless from and against
any and all liabilities, losses, damages, injuries, suits,
charges, costs, expenses, claims, demands, reasonable legal fees,
and causes of action of every kind and character arising out of
or alleged to have arisen out of any action or inaction by
Assignor and/or Assignee related to this Assignment.
7. Warranties and Representations:
A. Buyer represents and warrants to the other
parties that:
(i) Buyer has the power to consent to
the assignment by Assignor to
Assignee, release of Assignor and to
execute this Assignment, Assumption,
Consent and Release Agreement.
(ii) The execution, delivery and
performance by the Buyer of this
Assignment are within Buyer's
powers, have been duly authorized by
all necessary action, require no
action by or in respect of any
governmental body, agency or
official and do not contravene, or
constitute a default under, any
provision of applicable law or
regulation or of Buyer's certificate
of incorporation or bylaws or any
agreement, judgment, injunction,
order, decree or other instrument
binding upon them.
B. Assignor represents and warrants to the other
parties that:
(i) Assignor has the power to execute
and deliver this Assignment,
Assumption, Consent and Release
Agreement; and
(ii) The execution, delivery and
performance by the Assignor of this
Assignment are within Assignor's
powers, have been duly authorized by
all necessary action, require not
action by or in respect of, or
filing with, any governmental body,
agency or official and do not
contravene, or constitute a default
under, any provision of applicable
law or regulation or of Assignor's
certificate of incorporation or
bylaws or any agreement, judgment,
injunction, order, decree of other
instrument binding upon either of
them.
C. The Assignee represents and warrants to the
other parties:
(i) Assignee is duly organized, validly
existing and in good standing under
the laws of the State of New Jersey
and has the power to carry on its
business now conducted and to
execute and deliver this Assignment
and to consummate the transactions
contemplated hereby;
(ii) This Assignment is the legal, valid
and binding obligation of Assignee,
enforceable in accordance with its
terms, except as the enforceability
thereof may be limited by
bankruptcy, insolvency,
reorganization, moratorium or
similar law affecting the
enforcement of creditor's rights in
general and by general principles of
equity; and
(iii) The execution, delivery and
performance by the Assignee of this
Assignment, and the consumption of
the transactions contemplated
hereby, are within the Assignees'
powers, have been duly authorized by
all necessary action, require no
action by or in respect of, or
filing with, any governmental body,
agency or officials (except the
Securities and Exchange Commission,
with respect to Buyer's obligations
under the Securities Exchange Act of
1934) and do not contravene, or
constitute a default under, any
provision of applicable law or
regulation or of Assignee's charter,
certificate of incorporation or
bylaws or any agreement, judgment,
injunction, order, decree or other
instrument binding upon the
Assignee.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed, delivered and sealed by an officer of
such corporation, thereunto duly authorized all effective as of
the Effective Date.
GLOBAL PETROLEUM CORP.
By:_______________________________________
ALFRED SLIFKA
Its: President
MONTELLO OIL CORPORATION
By:_______________________________________
ALFRED SLIFKA
Its: President
CENTRAL HUDSON GAS & ELECTRIC
CORPORATION for Itself and as Agent
for Consolidation Edison Company of
New York, Inc. and Niagara Mohawk
Power Corporation
By:_______________________________________
PAUL J. GANCI
Its: President and Chief Operating Officer
<PAGE>
June 28, 1994
GUARANTY
ANNEXED TO AND FORMING A PART OF THAT CERTAIN AGREEMENT
OF ASSIGNMENT, ASSUMPTION, CONSENT AND RELEASE ("ASSIGNMENT")
entered into as of July 1, 1994 by and among Global Petroleum
Corp., a Massachusetts Corporation having a principal address of
800 South Street, Waltham, Massachusetts 02254 ("Assignor"), and
Montello Oil Corporation, a New Jersey Corporation having a
principal address of 800 South Street, Waltham, Massachusetts
02254, and Central Hudson Gas & Electric Corporation, a New York
Corporation having a principal address of 284 South Avenue,
Poughkeepsie, New York 12601, for Itself and As Agent for
Consolidated Edison Company of New York, Inc. having a principal
address of 4 Irving Place, New York, New York 10003, a New York
Corporation and Niagara Mohawk Power Corporation having a
principal address of 300 Erie Boulevard West, Syracuse, New York
13202, a New York Corporation (collectively defined herein as
"Buyer").
A. The undersigned does hereby guarantee the full, faithful and
timely performance by Assignee of all of the covenants and
other obligations of Assignee under or pursuant to the
Assignment. If Assignee shall default at any time beyond
any applicable notice and grace period in the performance of
any of the other covenants and obligations of Assignee,
under or pursuant to the Assignment, then the undersigned,
at its sole expense, shall on demand of Buyer fully and
promptly and well and truly, pay all sums, costs and charges
to be paid by Assignee, and perform all the other covenants
and obligations to be performed by Assignee, under or
pursuant to the Assignment, and in addition shall on Buyer's
demand pay to Buyer any and all sums due to Buyer, including
(without limitation) all interest on past due obligations of
Assignee, costs advanced by Buyer, and damages and all
expenses (including reasonable attorneys' fees and
litigation costs), that may arise in consequence of
Assignee's default. The undersigned hereby waives all
requirements of notice of the acceptance of this Guaranty
and all requirements of notice of breach or nonperformance
by Assignee.
B. The undersigned waives any right to require Buyer to proceed
against Assignee or pursue any other remedy in Buyer's power
whatsoever, any right to complain of delay in the
enforcement of Buyer's rights under the assigned contract,
and any demand by Buyer and/or prior action by Buyer of any
nature whatsoever against Assignee, or otherwise.
C. This Guaranty shall remain and continue in full force and
effect and shall not be discharged in whole or in part
notwithstanding (whether prior or subsequent to the
execution hereof) any alteration, modification, amendment or
assignment of, the Assignment. Without limiting the
foregoing, this Guaranty shall be applicable to any
obligations of Assignee arising in connection with a
termination of the Assignment. The undersigned hereby
waives notices of any of the foregoing, and agrees that the
liability of the undersigned hereunder shall be based upon
the obligations of Assignee set forth in the Assignment as
the same may be altered, renewed, extended, modified,
amended or assigned.
D. The undersigned's obligations hereunder shall remain fully
binding although Buyer may have waived one or more defaults
by Assignee, extended the time of performance by Assignee,
and/or released Assignee from the performance of its
obligations under the Assignment or terminated the
Assignment.
E. This Guaranty shall remain in full force and effect
notwithstanding the institution by or against Assignee, of
bankruptcy, reorganization, readjustment, receivership or
insolvency proceedings of any nature.
F. This Guaranty shall be applicable to and binding upon the
successors and assigns of Buyer, Assignee and the
undersigned. Buyer may, without notice, assign this
Guaranty in whole or in part.
G. In the event that Buyer should institute any suit against
the undersigned for violation of or to enforce any of the
covenants or conditions of this Guaranty or to enforce any
right of Buyer hereunder, or should the undersigned
institute any suit against Buyer arising out of or in
connection with this Guaranty, or should either party
institute a suit against the other for a declaration of
rights hereunder, or should either party intervene in any
suit in which the other is a party, to enforce or protect
its interest or rights hereunder, the prevailing party in
any such suit shall be entitled to the fees of its
attorney(s) in the reasonable amount thereof, to be
determined by the court and taxed as a part of the costs
therein.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Guaranty this 28 day of Sept., 1994.
WITNESSES: Global Petroleum Corp.
_____________________ By:
FRANCIS SEARS ALFRED SLIFKA
_____________________ Its: PRESIDENT
<PAGE>
CORPORATE ACKNOWLEDGMENT
STATE OF MASSACHUSETTS
COUNTY OF MIDDLESEX
On this 28 day of Sept., 1994 before me personally appeared
Alfred Slifka to me personally known, who, being by me duly
sworn, did say that he is the President of the Global Petroleum
Corp., the corporation named in and which executed the within
instrument, and that the seal affixed to said instrument is the
corporate seal of said corporation, and that said instrument was
signed and sealed in behalf of said corporation by authority of
its board of directors; and said Alfred Slifka knowledged before
me said instrument to be the free act and deed of said
corporation.
Paul J. Casey
Notary Public, County,
My commission expires:
</PAGE>
