UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
________________________________________
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 1-4566
THE MONTANA POWER COMPANY
(Exact name of registrant as specified in its charter)
Montana 81-0170530
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
40 East Broadway, Butte, Montana 59701-9394
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (406) 723-5421
________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
On November 4, 1994, the Company had 53,546,186 shares of common stock
outstanding.
<PAGE>
PART I
FINANCIAL STATEMENTS
THE MONTANA POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
A S S E T S
September 30, December 31,
1994 1993
Thousands of Dollars
<S> <C> <C>
PLANT AND PROPERTY IN SERVICE:
UTILITY PLANT (includes $74,281 and $38,966
plant under construction)
Electric. . . . . . . . . . . . . . . . . . . . . . . . $ 1,583,402 $ 1,514,472
Natural gas . . . . . . . . . . . . . . . . . . . . . . 445,028 428,956
2,028,430 1,943,428
Less - accumulated depreciation and depletion . . . . . . 606,349 572,141
1,422,081 1,371,287
ENTECH PROPERTY (includes $2,690 and $2,446
property under construction). . . . . . . . . . . . . . 534,693 526,692
Less - accumulated depreciation and depletion . . . . . . 194,701 182,129
339,992 344,563
INDEPENDENT POWER GROUP PROPERTY (includes $560 and
$84 property under construction). . . . . . . . . . . . 69,855 70,198
Less - accumulated depreciation . . . . . . . . . . . . . 17,094 16,822
52,761 53,376
1,814,834 1,769,226
MISCELLANEOUS INVESTMENTS (at cost):
Miscellaneous special funds . . . . . . . . . . . . . . . 8,883 7,811
Investment in cogeneration projects . . . . . . . . . . . 52,669 45,494
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 51,362 51,492
112,914 104,797
CURRENT ASSETS:
Cash and temporary cash investments . . . . . . . . . . . 9,910 11,604
Accounts receivable . . . . . . . . . . . . . . . . . . . 126,704 158,352
Materials and supplies (principally at average cost). . . 46,871 42,728
Prepayments and other assets. . . . . . . . . . . . . . . 59,906 44,425
243,391 257,109
DEFERRED CHARGES:
Advanced coal royalties . . . . . . . . . . . . . . . . . 22,535 20,905
Costs deferred to future operating periods. . . . . . . . 196,116 185,151
Other deferred charges. . . . . . . . . . . . . . . . . . 43,802 48,839
262,453 254,895
$ 2,433,592 $ 2,386,027
The accompanying notes are an integral part of these statements.
<PAGE>
THE MONTANA POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
L I A B I L I T I E S
September 30, December 31,
1994 1993
Thousands of Dollars
CAPITALIZATION:
Common shareholders' equity:
Common stock (120,000,000 shares
authorized; 53,333,649 and
52,498,896 shares issued) . . . . . . . . . . . . . . $ 661,706 $ 642,926
Retained earnings and other shareholders' equity. . . . 301,037 302,725
Unallocated Stock held by Trustee for Deferred
Savings and Employee Stock Ownership Plan . . . . . . (33,064) (34,419)
929,679 911,232
Preferred stock . . . . . . . . . . . . . . . . . . . . . 101,416 101,419
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 576,006 571,870
1,607,101 1,584,521
CURRENT LIABILITIES:
Short-term borrowing. . . . . . . . . . . . . . . . . . . 59,782 68,865
Long-term debt - portion due within one year. . . . . . . 25,810 26,199
Dividends payable . . . . . . . . . . . . . . . . . . . . 23,155 22,835
Income taxes. . . . . . . . . . . . . . . . . . . . . . . (6,816) 4,927
Other taxes . . . . . . . . . . . . . . . . . . . . . . . 58,301 43,743
Accounts payable. . . . . . . . . . . . . . . . . . . . . 45,410 55,794
Interest accrued. . . . . . . . . . . . . . . . . . . . . 13,606 11,942
Accrued lease payments. . . . . . . . . . . . . . . . . . 8,056
Other current liabilities . . . . . . . . . . . . . . . . 95,080 79,162
322,384 313,467
DEFERRED CREDITS:
Deferred income taxes . . . . . . . . . . . . . . . . . . 321,700 309,780
Investment tax credit . . . . . . . . . . . . . . . . . . 49,141 50,476
Accrued mining reclamation costs. . . . . . . . . . . . . 107,177 101,817
Other deferred credits. . . . . . . . . . . . . . . . . . 26,089 25,966
504,107 488,039
CONTINGENCIES AND COMMITMENTS (Note 2)
$ 2,433,592 $ 2,386,027
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
THE MONTANA POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, September 30,
1994 1993
Thousands of Dollars
<S> <C> <C>
UTILITY OPERATIONS:
Operating Revenues:
Electric. . . . . . . . . . . . . . . . . . . . . . . . $ 304,797 $ 301,261
Natural gas . . . . . . . . . . . . . . . . . . . . . . 69,481 74,611
374,278 375,872
Operating Expenses and Taxes:
Operation . . . . . . . . . . . . . . . . . . . . . . . 155,351 149,782
Purchased gas . . . . . . . . . . . . . . . . . . . . . 12,155 18,218
Fuel for electric generation. . . . . . . . . . . . . . 26,262 23,700
Maintenance . . . . . . . . . . . . . . . . . . . . . . 30,674 31,085
Depreciation and depletion. . . . . . . . . . . . . . . 36,041 34,536
Taxes - other than income taxes . . . . . . . . . . . . 41,695 38,474
Income taxes. . . . . . . . . . . . . . . . . . . . . . 15,195 17,602
317,373 313,397
Operating Income. . . . . . . . . . . . . . . . . . . . . 56,905 62,475
Other Income and Expenses:
Interest, dividend income and other . . . . . . . . . . 2,801 489
Income taxes applicable to other. . . . . . . . . . . . 33 77
2,834 566
Interest Charges:
Interest on long-term debt. . . . . . . . . . . . . . . 30,387 33,314
Other interest. . . . . . . . . . . . . . . . . . . . . 1,786 1,623
32,173 34,937
Income from Utility Operations. . . . . . . . . . . . . 27,566 28,104
ENTECH OPERATIONS:
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . 310,338 301,848
Costs and Expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . 176,930 179,163
Taxes - other than income taxes . . . . . . . . . . . . 30,570 28,035
Depreciation and depletion. . . . . . . . . . . . . . . 24,790 23,633
Selling, general and administrative . . . . . . . . . . 31,363 28,233
Interest. . . . . . . . . . . . . . . . . . . . . . . . 1,192 1,776
Other income - net. . . . . . . . . . . . . . . . . . . (553) 1,025
Income taxes. . . . . . . . . . . . . . . . . . . . . . 12,053 10,350
276,345 272,215
Income from Entech Operations . . . . . . . . . . . . . 33,993 29,633
INDEPENDENT POWER GROUP OPERATIONS:
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . 96,032 91,046
Expenses (including interest and income taxes). . . . . . 89,423 91,697
Income (Loss) from Independent Power Group Operations . 6,609 (651)
CONSOLIDATED NET INCOME . . . . . . . . . . . . . . . . . . 68,168 57,086
DIVIDENDS ON PREFERRED STOCK. . . . . . . . . . . . . . . . 5,420 2,842
NET INCOME AVAILABLE FOR COMMON STOCK . . . . . . . . . . . $ 62,748 $ 54,244
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (000) . . . . . 53,000 51,918
NET INCOME PER SHARE OF COMMON STOCK. . . . . . . . . . . . $ 1.18 $ 1.04
DIVIDENDS DECLARED ON COMMON STOCK, PER SHARE . . . . . . . $ 1.200 $ 1.185
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
THE MONTANA POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
For the Three Months Ended
September 30, September 30,
1994 1993
Thousands of Dollars
<S> <C> <C>
UTILITY OPERATIONS:
Operating Revenues:
Electric. . . . . . . . . . . . . . . . . . . . . . . . $ 96,913 $ 92,888
Natural gas . . . . . . . . . . . . . . . . . . . . . . 13,301 14,079
110,214 106,967
Operating Expenses and Taxes:
Operation . . . . . . . . . . . . . . . . . . . . . . . 53,715 44,658
Purchased gas . . . . . . . . . . . . . . . . . . . . . 1,496 2,474
Fuel for electric generation. . . . . . . . . . . . . . 9,792 9,477
Maintenance . . . . . . . . . . . . . . . . . . . . . . 10,745 11,211
Depreciation and depletion. . . . . . . . . . . . . . . 12,000 11,507
Taxes - other than income taxes . . . . . . . . . . . . 13,797 13,030
Income taxes. . . . . . . . . . . . . . . . . . . . . . (1,174) 1,124
100,371 93,481
Operating Income. . . . . . . . . . . . . . . . . . . . . 9,843 13,486
Other Income and Expenses:
Interest, dividend income and other . . . . . . . . . . 1,173 (112)
Income taxes applicable to other. . . . . . . . . . . . 42 71
1,215 (41)
Interest Charges:
Interest on long-term debt. . . . . . . . . . . . . . . 10,020 11,146
Other interest. . . . . . . . . . . . . . . . . . . . . 908 661
10,928 11,807
Income (Loss) from Utility Operations . . . . . . . . . 130 1,638
ENTECH OPERATIONS:
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . 108,492 111,075
Costs and Expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . 62,733 66,405
Taxes - other than income taxes . . . . . . . . . . . . 10,588 10,962
Depreciation and depletion. . . . . . . . . . . . . . . 8,012 7,870
Selling, general and administrative . . . . . . . . . . 10,889 8,944
Interest. . . . . . . . . . . . . . . . . . . . . . . . 527 528
Other income - net. . . . . . . . . . . . . . . . . . . (1,148) 1,127
Income taxes. . . . . . . . . . . . . . . . . . . . . . 4,498 4,025
96,099 99,861
Income from Entech Operations . . . . . . . . . . . . . 12,393 11,214
INDEPENDENT POWER GROUP OPERATIONS:
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . 30,322 29,361
Expenses (including interest and income taxes). . . . . . 24,564 30,157
Income (Loss) from Independent Power Group Operations . 5,758 (796)
CONSOLIDATED NET INCOME . . . . . . . . . . . . . . . . . . 18,281 12,056
DIVIDENDS ON PREFERRED STOCK. . . . . . . . . . . . . . . . 1,807 947
NET INCOME AVAILABLE FOR COMMON STOCK . . . . . . . . . . . $ 16,474 $ 11,109
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (000) . . . . . 53,250 52,162
NET INCOME PER SHARE OF COMMON STOCK. . . . . . . . . . . . $ 0.31 $ 0.21
DIVIDENDS DECLARED ON COMMON STOCK, PER SHARE . . . . . . . $ 0.400 $ 0.395
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
THE MONTANA POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, September 30,
1994 1993
Thousands of Dollars
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 68,168 $ 57,086
Noncash charges (credits) to net income:
Depreciation and depletion . . . . . . . . . . . . . 62,482 60,589
Mining reclamation costs expensed. . . . . . . . . . 12,650 12,674
Deferred income taxes. . . . . . . . . . . . . . . . 6,332 8,038
Amortization of loss on long-term sale
of power . . . . . . . . . . . . . . . . . . . . . (3,170) (3,939)
Other - net. . . . . . . . . . . . . . . . . . . . . 19,058 19,061
Changes in other assets and liabilities. . . . . . . . (1,157) (12,466)
Accounts receivable. . . . . . . . . . . . . . . . . . 31,648 25,369
Materials and supplies . . . . . . . . . . . . . . . . (4,143) (3,581)
Accounts payable . . . . . . . . . . . . . . . . . . . (10,384) (1,849)
Payment of mining reclamation costs. . . . . . . . . . (7,290) (6,103)
Net Cash Flows from Operating Activities . . . . . . 174,194 154,879
NET CASH FLOWS FROM INVESTING ACTIVITIES:
Miscellaneous special funds. . . . . . . . . . . . . . (1,072) 9,082
Gross additions to property and plant. . . . . . . . . (130,103) (112,385)
Investments in other operations. . . . . . . . . . . . (2,408) (1,764)
Sales of property. . . . . . . . . . . . . . . . . . . 15,418 10,195
Additional investments . . . . . . . . . . . . . . . . (240) 1,866
Net Cash Flows from Investing Activities . . . . . . (118,405) (93,006)
NET CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock. . . . . . . . . . . . . . . . . 18,750 18,310
Issuance of long-term debt . . . . . . . . . . . . . . 23,758 181,150
Retirement of long-term debt . . . . . . . . . . . . . (20,644) (206,699)
Short-term debt. . . . . . . . . . . . . . . . . . . . (9,082) 17,930
Note payable cogeneration project. . . . . . . . . . . (1,311) (6,716)
Dividends on common and preferred stock. . . . . . . . (68,954) (64,225)
Net Cash Flows from Financing Activities . . . . . . (57,483) (60,250)
Net Cash Flows . . . . . . . . . . . . . . . . . . (1,694) 1,623
Cash and cash equivalents at beginning of period . . . . 11,604 8,879
Cash and cash equivalents at end of period . . . . . . . $ 9,910 $ 10,502
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During Nine Months For:
Income taxes . . . . . . . . . . . . . . . . . . . . $ 35,472 $ 36,106
Interest . . . . . . . . . . . . . . . . . . . . . . 32,189 39,285
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements of the Company for the interim
periods ended September 30, 1994 and 1993 are unaudited but, in the opinion of
management, reflect all adjustments, consisting only of normal recurring
accruals, necessary for a fair statement of the results of operations for
those interim periods. The results of operations for the interim periods are
not necessarily indicative of the results to be expected for the full year.
These financial statements do not contain the detail or footnote disclosure
concerning accounting policies and other matters which would be included in
full fiscal year financial statements; therefore, they should be read in
conjunction with the Company's audited financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1993.
Certain reclassifications have been made to the prior year amounts to
make them comparable to the 1994 presentation. These changes had no impact on
previously reported results of operations or shareholders' equity.
NOTE 1. INTERCOMPANY TRANSACTIONS:
<TABLE>
The Utility and the Independent Power Group (IPG) purchase coal from a
subsidiary of Entech. The Utility sells electricity to the IPG and the IPG
sells electricity to the Utility. These intercompany transactions are
included in the Consolidated Statement of Income as revenues and expenses and
were as follows:
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30, September 30, September 30,
1994 1993 1994 1993
Thousands of Dollars Thousand of Dollars
<S> <C> <C> <C> <C>
Coal sales to:
Utility . . . $21,278 $21,528 $ 7,507 $ 8,540
IPG . . . . . 9,014 6,931 3,085 3,240
Electric sales:
Utility sales
to IPG. . . $ 1,122 $ 2,330 $ 478 $ 445
IPG sales to
Utility . . 1,312 1,351 179 442
</TABLE>
NOTE 2. CONTINGENCIES AND COMMITMENTS:
In 1990, the Company filed with the Federal Energy Regulatory
Commission (FERC) a plan to mitigate damages to, and to manage fish and
wildlife habitat impacted by the operation of the Kerr Hydroelectric Project.
The Plan was prepared pursuant to a joint license issued by the FERC to the
Company and the Confederated Salish and Kootenai Tribes (Tribes). It consists
of a one-time payment by the Company of $15,418,000 and annual payments of
$965,000 allocated between the Tribes and various groups. The annual payments
will be adjusted annually on the basis of the Consumer Price Index.
Additionally, the Secretary of Interior may impose certain conditions
pertaining to fish and wildlife. As part of its review, the FERC, on May 31,
1994, issued a draft environmental assessment of the impacts associated with
the operation of Kerr and scoping meetings for public comment were held in
Montana by the FERC staff in July and September. Interested parties have
until November 15, 1994 to comment. Thereafter, FERC is expected to issue a
draft environmental impact statement later this year with a comment period.
While it cannot predict when or in what form the Plan finally will be
approved, the Company expects that the cost of mitigation measures will be
recovered through rates and will not have a materially adverse effect on the
Company's financial condition or results of operations.
In November 1992, the Company filed with FERC its application to
relicense nine Madison and Missouri River hydroelectric facilities with
electric generating capacity totaling 292 megawatts. The application, in
preparation since 1989, proposes an additional 74 megawatts of generation.
The total capital investment of relicensing, including physical improvements,
environmental protection, mitigation and enhancement measures, is estimated at
$167,600,000. Additional costs for operational changes, as well as annual
payments for environmental protection, mitigation and enhancement, are
estimated to be about $5,400,000 per year. The Company expects that the
relicensing costs will be recovered through rates and will not have a
materially adverse effect on the Company's financial condition or results of
operations.
Property owners in the original townsite area of Colstrip, Montana have
made claims against the Company and the other owners of the Colstrip
Generating Units for property damages allegedly resulting from soil-related
subsidence. Some claims have been denied, and the Company has initiated
efforts to settle others. The Company believes that the resolution of these
claims will not have a materially adverse effect on the Company's financial
condition or results of operations.
The coal supply agreement for Colstrip Units 1 and 2 provides for
periodic price redetermination over the life of the contract. The first date
under the contract that a price redetermination could have occurred was
August 1, 1991. Negotiations to redetermine the coal price have been
unsuccessful and an arbitration hearing has been rescheduled to commence in
January, 1995. A decision is expected in the first quarter of 1995. Through
September 30, 1994, 8,846,000 tons, of which 4,427,000 tons were delivered to
the Company, are subject to a redetermined price. The price change, if any,
from this arbitration is not expected to have a materially adverse effect on
the Company's financial condition or results of operations.
The Entech Oil Division has agreed to supply 140 Bcf of natural gas to
four cogeneration facilities through mid-2011. The Oil Division has
sufficient proven, developed and undeveloped reserves, and controls related
sales of production sufficient to supply all of the remaining natural gas
required by these agreements.
<PAGE>
NOTE 3. RATE MATTERS:
The Montana Public Service Commission (MPSC) issued an order approving
electric and natural gas rate increases for the Company totaling $13,500,000
annually effective April 28, 1994. In October 1993, $12,800,000 of annual
increases were included in rates on an interim basis. In its updated
application, the Company had requested general rate increases of
$37,600,000 annually for electricity and natural gas based upon a 12.25%
return on common equity.
The MPSC allowed the Company a $7,800,000 annual electric rate increase,
down from the interim increase of $8,800,000 and an annual natural gas rate
increase of $5,700,000, up from the interim increase of $4,000,000.
The order reduced the Company's authorized return on common equity from
12.1% to 11.0% for both the electric and natural gas utilities. Of the
$24,100,000 difference between the requested amount and allowed increases,
$11,100,000 is attributable to the lower return on common equity. Another
$7,000,000 of the difference is attributable to the disallowance of certain
fuel expense on coal sales from the Company's subsidiary, Western Energy
Company (WECo), to the Utility Division. The remaining differences relate
primarily to the denial of the Company's request to amortize ratably the
reversal of previously flowed through tax timing differences and does not
affect net income.
On June 17, 1994, the Company filed a complaint requesting the District
Court, Butte-Silver Bow County, to set aside that portion of the MPSC's
decision which disallows a portion of the fuel expense. The Company believes
that MPSC's action was based upon an arbitrary application of a rate of return
methodology. Oral argument is scheduled for November 17, 1994 and a decision
at the district court level is expected before the end of the year.
On August 22, 1994, the Company filed an electric rate increase request
of $30,600,000 in annual revenues based upon a 12.5% return on common equity
and continues to seek a market price approach for the coal expense issue.
Hearings on this case have been set for March of 1995 and a final decision is
expected by June 1995. The Company's interim rate increase request of
$16,700,000 will be considered by the MPSC in the fourth quarter of 1994.
NOTE 4. LONG-TERM DEBT:
In January 1994, the Company sold $5,000,000 of Secured Medium-Term
Notes, 7.25% series due 2024. The proceeds were used to repay short-term debt
incurred to complete the refinancing of $80,000,000 of the 10% and 10-1/8%
series Pollution Control Revenue Bonds in December 1993.
In June 1994, the Company sold $20,000,000 of Secured Medium-Term Notes,
7.2% series due 2000, the proceeds of which were used to retire other
long-term debt.
In November 1994, the Company sold $10,000,000 of Secured Medium-Term
Notes, 7.6% series due 1997 and $10,000,000 of Secured Medium-Term Notes,
7.85% series due 1998, the proceeds of which will be used to retire three
series of Secured Medium-Term Notes, $9,000,000 of the 8.78% series due
November 1994, $5,000,000 of the 8.78% series due December 1994 and $5,000,000
of the 8.57% series due December 1994.
NOTE 5. POSTEMPLOYMENT BENEFITS:
On January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions" (SFAS No. 106). SFAS No. 106 requires the
accrual of the expected cost of these postretirement benefits (OPEB's) during
the employees' years of service rather than when the costs are paid.
In its April 28, 1994 Order, the MPSC allowed the Company to include in
rates the full OPEB cost on the accrual basis provided by SFAS No. 106,
including the amortization of the amounts previously deferred under an MPSC
Accounting Order from January 1, 1993 to April 27, 1994. Consequently, as of
April 28, 1994, the Company commenced recognition of these utility
postretirement benefits in expense in accordance with SFAS No. 106. The
incremental increase in 1994 consolidated expenses due to the utility SFAS
No. 106 expense recognition is estimated to be $900,000.
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," (SFAS No. 112) with respect to disability related benefits up to
age 65. SFAS No. 112 requires the accrual of a liability or loss contingency
for the estimated obligation for postemployment benefits. At December 31,
1993, the postemployment benefit liability for regulated utility operations
was estimated to be $9,300,000, of which $2,400,000 had been accrued and
included in rates. The remaining $6,900,000 was recorded in 1994 as a
deferred charge and will be expensed and included in rates over the next 10
years. The estimated December 31, 1993 postemployment benefit liability of
$1,300,000 for non-utility operations has been charged to income in 1994. The
Company is no longer self-insured for disability-related benefits resulting
from claims occurring after December 31, 1993, therefore, SFAS No. 112 will
not apply to benefits after that date.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with the management's
discussion included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
RESULTS OF OPERATIONS
The following discussion presents significant events or trends which
have had an effect on the operations of the Company or which are expected to
have an impact on operating results in the future.
Nine Months Ended September 30, 1994 and 1993:
Net Income Per Share of Common Stock
For comparative purposes, the following table shows the breakdown of
consolidated net income per share.
Nine Months Ended
September 30,
1994 1993
Utility Operations $ 0.42 $ 0.48
Entech 0.64 0.57
Independent Power Group 0.12 (0.01)
Consolidated $ 1.18 $ 1.04
Year-to-date consolidated net income increased due to higher earnings by
the Independent Power Group (IPG) from operating cogeneration projects,
project development activities, a non-recurring gain on the sale of a 50%
interest in North American Energy Services Company and higher earnings from
the non-utility Colstrip 4 generating unit. Consolidated net income also
increased due to higher Entech coal sales. Utility income for the period was
negatively impacted by the effects of warmer weather on natural gas sales,
increased power supply costs and less favorable electric wholesale market
conditions, but was positively impacted by increased industrial and irrigation
loads as well as rate increases and customer growth.
<PAGE>
Utility Operations
The following table shows changes from the previous year, in millions of
dollars, in utility revenues with the related percentage changes in volumes
sold and prices received:
Electric
General Business - revenue. . . . . . . . $ 10
- volume . . . . . . . . 4%
- price/kWh. . . . . . . 1%
Other Utilities - revenue. . . . . . . . $ (7)
- volume . . . . . . . . (8%)
- price/kWh. . . . . . . (4%)
Natural Gas
General Business - revenue. . . . . . . . $ (6)
- volume . . . . . . . . (15%)
- price/Mcf. . . . . . . 8%
Other Utilities - revenue. . . . . . . . $ (3)
- volume . . . . . . . . (74%)
- price/Mcf. . . . . . . (24%)
Transportation - revenue. . . . . . . . $ 3
- volume . . . . . . . . 24%
- price/Mcf. . . . . . . 55%
Operating Revenues
Electric revenues from general business customers increased $10,300,000
including an increase of $5,600,000 in revenues from industrial customers.
Industrial revenues increased primarily as a result of customers installing
additional equipment and due to increased demand for irrigation resulting from
the dry weather conditions particularly in the third quarter. Revenues also
increased as a result of growth in the numbers of residential and commercial
customers and higher rates.
Electric revenues from sales to other utilities decreased due to the
return to near-normal electric wholesale market conditions compared with much
better than average market conditions experienced in the first nine months of
1993.
Natural gas revenues decreased $5,100,000. The revenue decrease
resulting from a 12% reduction in volumes sold to residential and commercial
customers due to warmer weather was partially offset by increases resulting
from higher rates and growth in the number of customers. Volumes sold to
industrial, government and municipal customers decreased 57% reducing revenues
$3,100,000. This decline results from the switch of eligible customers
(noncore customers) from full-service to transportation service only and is
offset by revenues from transportation fees and lower purchased gas costs.
Natural gas sales to other utilities decreased 74% due to switching by
some customers from full-service to transportation service only resulting in a
$3,100,000 reduction in revenues. As previously discussed, this reduction is
offset by transportation fees and lower gas purchase costs.
Other natural gas revenues increased $3,600,000 due to a $3,100,000
increase in transportation revenues resulting from increases in volumes
transported and average price.
Operating Expenses and Taxes
The following table shows the Company's sources of electricity and power
supply expenses (Operation, Fuel for electric generation and Maintenance) for
the nine months ended September 30, 1994 and 1993.
1994 1993
Sources MWH
Hydroelectric. . . . . . . . . . . . . . 2,315,336 2,576,733
Steam. . . . . . . . . . . . . . . . . . 3,529,968 3,267,261
Purchases. . . . . . . . . . . . . . . . 2,147,904 2,175,934
Total Power Supply . . . . . . . . 7,993,208 8,019,928
Thousands of Dollars
Hydroelectric (including
maintenance) . . . . . . . . . . . . . $ 13,518 $ 13,182
Steam (including fuel and
maintenance) . . . . . . . . . . . . . 46,803 44,203
Purchases. . . . . . . . . . . . . . . . 67,472 66,446
Total Power Supply
Expenses . . . . . . . . . . . . $ 127,793 $ 123,831
Cents Per Kilowatt-Hour. . . . . . 1.599 1.544
The Company's steam generation and related fuel expense increased as a
result of improved performance at the Colstrip units which experienced outages
in 1993. The increased steam generation and a less favorable electric
wholesale market for sales to other utilities offset the 10% decrease in
hydroelectric generation resulting from dry weather conditions, therefore,
purchased power requirements were consistent with the prior year. A 3% higher
average price increased purchase power expense $1,000,000.
Other operation expenses increased $4,200,000 due primarily to the cost
of settling Colstrip housing damage claims, additional post-retirement benefit
costs and increased pension costs.
Purchased gas expense decreased $6,100,000 as a result of a 20% decrease
in volumes of gas due to the warmer weather and customers switching to
transportation service and as a result of the balancing of deferred gas
accounting procedures which do not affect net income.
The $1,500,000 increase in depreciation and depletion expense is the
result of depreciation of additional plant and equipment.
Taxes - other than income taxes increased $3,200,000 primarily due to
increased property taxes resulting from higher mill levies and property
additions.
Other Income and Expenses:
The $2,300,000 increase in interest and dividend income and other is
primarily a result of an increase in the equity portion of AFUDC and a
nonrecurring increase in investment income.
Interest Charges:
The $2,900,000 decrease in interest on long-term debt is primarily a
result of refinancing of debt at lower interest rates.
Entech Operations
The following table shows the change from the previous year, in millions
of dollars, in the various classifications of revenues of Entech's units with
the related percentage changes in volumes sold and prices received:
Coal Revenue . . . . . . . . . . . . . . . $ 28
Volume . . . . . . . . . . . . . . . 14%
Price/ton. . . . . . . . . . . . . . 1%
Oil Revenue. . . . . . . . . . . . . . . . $ (6)
Volume . . . . . . . . . . . . . . . (17%)
Price/bbl. . . . . . . . . . . . . . (15%)
Natural Gas Revenue. . . . . . . . . . . . $ 1
Volume . . . . . . . . . . . . . . . 10%
Price/Mcf. . . . . . . . . . . . . . (3%)
Natural Gas Marketing Revenue. . . . . . . $(14)
Other Operations - Revenue . . . . . . . . $ (1)
<PAGE>
Revenues:
Coal revenues at the Rosebud Mine increased $12,800,000 due to higher
volumes sold to Colstrip Units 3 and 4, the SynCoal demonstration plant, and
sales under short-term agreements. In addition, coal revenues increased
$2,000,000 from a combination of brokered coal sales and coal transportation
fees. At the Jewett Mine, coal revenues increased $800,000 from a combination
of higher volumes sold to the mine-mouth power plant mostly offset by lower
fees received due to mining more of the customer's coal and less of the
Company's coal in 1994. Increased revenues of $12,800,000 at the Golden Eagle
Mine were the result of higher volumes sold and higher market prices received
to supply coal for a short-term contract and spot market sales.
The Golden Eagle Mine began delivering coal in July 1994 under a long-
term contract which provides for delivery of up to 1,200,000 tons of coal per
year. Total sales from the Golden Eagle Mine during 1994 were projected to be
1,600,000 tons. However, unexpected production problems with the coal
preparation plant lowered the amount of expected coal sales this year to
approximately 1,100,000 tons. The production problems will have the effect of
decreasing annual revenues from the Mine by approximately $12,000,000.
Management expects to resolve the problems in 1995.
Oil revenues decreased $5,800,000 from both lower volumes sold due to
normal declining production and lower market prices received. Natural gas
revenues increased $1,100,000 from higher volumes sold in both U.S. and Canada
as a result of development drilling that occurred during 1993. Natural gas
marketing revenues decreased $14,000,000 due to the expiration of a short-term
supply contract in 1993 and the timing of purchases by a cogeneration
facility.
Other Entech operations revenues decreased $1,200,000 principally due to
the sale of the waste management operations in May 1993.
Cost and Expenses:
Cost of sales decreased approximately $2,200,000. This amount is
comprised of $14,700,000 decreased costs of natural gas purchased for resale
and by $1,600,000 decreased costs from the sale of the waste management
operation, partially offset by $14,100,000 increased coal production costs at
the Golden Eagle and Rosebud Mines due to higher coal volumes sold. Increased
revenues from higher volumes of coal sold caused the increase in taxes - other
than income taxes, which are based upon revenues. Selling, general and
administrative expenses increased $3,100,000 from the implementation of two
accounting pronouncements pertaining to employee benefits and from higher
legal fees incurred relating to leasehold interest litigation. The decrease
in interest expense is due to lower levels of outstanding debt. Other
income - net increased due to the termination in December 1993 of the
Company's interest in a natural gas marketing joint venture that lost
$2,700,000 during 1993. Other joint venture losses during 1994 totaled
$600,000. The Company also recognized $700,000 of net gains in 1994 from the
sale of non-strategic assets. In addition, the sale of the waste management
operations in 1993 reduced other income - net by $1,200,000. Income taxes
increased due to higher effective tax rates and higher pretax net income.
Independent Power Group Operations
Independent Power Group (IPG) revenues increased $5,000,000 due
primarily to increases in project development revenues and Colstrip 4 revenues
from long-term sales which were partially offset by the decrease resulting
from the sale of 50% of North American Energy Services Company (NAES) on
August 1, 1994. As a result of the sale, NAES, which was previously
consolidated will be included in IPG operations on the equity basis as of the
sale date.
IPG expenses decreased $2,300,000 due primarily to decreases resulting
from the sale of 50% of NAES and the non-recurring gain on the sale which is
included in other-net and offsets expenses. These decreases were offset by
increases in fuel for electric generation expense, income taxes and
cogeneration project development expense.
Three Months Ended September 30, 1994 and 1993:
Net Income Per Share of Common Stock
For comparative purposes, the following table shows the breakdown of
consolidated net income per share.
Three Months Ended
September 30,
1994 1993
Utility Operations $ (0.03) $ 0.01
Entech 0.23 0.22
Independent Power Group 0.11 (0.02)
Consolidated $ 0.31 $ 0.21
Consolidated net income for the quarter was affected by the same factors
as presented in the nine-month discussion.
Utility Operations
The following table shows changes from the previous year, in millions of
dollars, in utility revenues with the related percentage changes in volumes
sold and prices received:
Electric
General Business - revenue. . . . . . . . $ 6
- volume . . . . . . . . 8%
- price/kWh. . . . . . . -
Other Utilities - revenue. . . . . . . . $ (1)
- volume . . . . . . . . (11%)
- price/kWh. . . . . . . (6%)
<PAGE>
Natural Gas
General Business - revenue. . . . . . . . $ (2)
- volume . . . . . . . . (27%)
- price/Mcf. . . . . . . 14%
Other Utilities - revenue. . . . . . . . $ -
- volume . . . . . . . . (2%)
- price/Mcf. . . . . . . (58%)
Transportation - revenue. . . . . . . . $ 1
- volume . . . . . . . . 10%
- price/Mcf. . . . . . . 103%
Operating Revenues
Electric revenues from general business customers increased $5,600,000
primarily as a result of a $2,700,000 increase in revenues from industrial
customers due to increased irrigation loads and equipment installations as
presented in the nine-month discussion and as a result of customer growth.
Electric revenues from sales to other utilities decreased $600,000 due
to an 11% reduction in volumes sold. The decrease resulted primarily from the
return to near-normal electric wholesale market conditions as presented in the
nine-month discussion and a decrease in hydroelectric generation in the third
quarter of 1994.
Warmer weather and customers switching from full-service to
transportation service decreased natural gas revenues $3,700,000. The
decrease was mostly offset by increases resulting from customer growth, rate
increases and increased transportation revenues.
<PAGE>
Operating Expenses and Taxes
The following table shows the Company's sources of electricity and power
supply expenses (Operation, Fuel for electric generation and Maintenance) for
the three months ended September 30, 1994 and 1993.
1994 1993
Sources MWH
Hydroelectric. . . . . . . . . . . . . . 536,920 918,002
Steam. . . . . . . . . . . . . . . . . . 1,306,358 1,330,483
Purchases. . . . . . . . . . . . . . . . 834,025 394,361
Total Power Supply . . . . . . . . 2,677,303 2,642,846
Thousands of Dollars
Hydroelectric (including
maintenance) . . . . . . . . . . . . . $ 4,516 $ 4,576
Steam (including fuel and
maintenance) . . . . . . . . . . . . . 16,727 16,506
Purchases. . . . . . . . . . . . . . . . 24,757 16,524
Total Power Supply
Expenses . . . . . . . . . . . . $ 46,000 $ 37,606
Cents Per Kilowatt-Hour. . . . . . 1.718 1.423
The decrease in the Company's hydroelectric generation, due to
significantly reduced streamflows, resulted in increased purchased power
requirements to meet system demand.
Other operation expenses increased $1,000,000 due primarily to increased
post-retirement benefit costs and the cost of settling Colstrip housing damage
claims.
Purchased gas expense decreased $1,000,000 as a result of a 19% decrease
in volumes of gas due to the warmer weather and customers switching to
transportation service and as a result of the balancing of deferred gas
accounting procedures which do not affect net income.
Other Income and Expenses:
The $1,300,000 increase in interest and dividend income and other is
primarily a result of an increase in the equity portion of AFUDC and a
non-recurring increase in investment income.
Interest Charges:
The $1,100,000 decrease in interest on long-term debt is primarily a
result of refinancing of debt at lower interest rates.
<PAGE>
Entech Operations
The following table shows the change from the previous year, in millions
of dollars, in the various classifications of revenues of Entech's units with
the related percentage changes in volumes sold and prices received:
Coal Revenue . . . . . . . . . . . . . . . $ 1
Volume . . . . . . . . . . . . . . . 1%
Price/ton. . . . . . . . . . . . . . 1%
Oil Revenue. . . . . . . . . . . . . . . . $ (1)
Volume . . . . . . . . . . . . . . . (21%)
Price/bbl. . . . . . . . . . . . . . 7%
Natural Gas Revenue. . . . . . . . . . . . $ -
Volume . . . . . . . . . . . . . . . 17%
Price/Mcf. . . . . . . . . . . . . . (7%)
Natural Gas Marketing Revenue. . . . . . . $ (4)
Other Operations - Revenue . . . . . . . . $ 1
Revenues:
Coal revenues at the Golden Eagle Mine increased $3,200,000 from higher
volumes sold and higher market prices received to supply coal for a short-term
contract and spot market sales. At the Rosebud Mine, coal revenues decreased
$2,200,000 as a result of lower volumes sold to two midwestern customers. One
of these customers will take approximately 136,000 less tons than budgeted for
the year because of a railroad strike during the quarter. The other customer
changed the timing of its purchases and is expected to take the full amount of
tons by year-end.
Oil revenues decreased $1,000,000 and natural gas marketing revenues
decreased $3,600,000 for the same reasons mentioned in the nine-month
discussion.
Revenues from Entech's other operations increased $1,000,000 from
telecommunications operations due to customer growth.
Costs and Expenses:
Costs of sales decreased approximately $3,600,000. This amount is
comprised of $5,100,000 decreased costs of natural gas purchased for resale
partially offset by $800,000 increased costs from telecommunications
operations and a net $700,000 increased coal costs. The increased coal costs
resulted from higher volumes sold at the Golden Eagle Mine mostly offset by
reduced costs at the Rosebud Mine resulting from lower mining costs incurred
and lower volumes sold. Selling, general and administrative expenses
increased due to higher legal fees incurred relating to leasehold interest
litigation and to a one-time workers' compensation adjustment in 1994. Other
income - net increased $1,400,000 from gains realized from the sale of non-
strategic assets plus $900,000 from joint venture losses incurred in the prior
year. Income taxes expense increased for the same reasons mentioned in the
nine-month discussion.
Independent Power Group Operations
The $1,000,000 increase in IPG revenues resulted from increases in
project development revenues and Colstrip 4 revenues from long-term sales
which were mostly offset by the decrease resulting from the sale of 50% of
NAES as presented in the nine-month discussion.
The $5,600,000 decrease in IPG expenses resulted from the sale of 50% of
NAES and the non-recurring gain on the sale as presented in the nine-month
discussion. The decreases were partially offset by increases in project
development expenses and income tax expense.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements, long-term debt maturities and
sources of funds for the period 1994-1998 have been discussed in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993. During the
first nine months of 1994, $93,000,000 was expended for the Utility
construction program, $29,500,000 for Entech capital expenditures and
$6,600,000 for IPG capital expenditures. Total 1994 capital expenditures for
the Utility have been reduced to approximately $133,000,000 from $144,000,000
due primarily to the deferral of items beyond 1994.
During the first quarter of 1994, the Company sold $5,000,000 of Secured
Medium-Term Notes, 7.25% series due 2024. The proceeds were used to repay
short-term debt incurred to complete the refinancing of $80,000,000 of the 10%
and 10-1/8% series Pollution Control Revenue Bonds in December 1993.
In June 1994, the Company sold $20,000,000 of Secured Medium-Term Notes,
7.2% series due 2000, the proceeds of which were used to retire other
long-term debt.
In November 1994, the Company sold $10,000,000 of Secured Medium-Term
Notes, 7.6% series due 1997 and $10,000,000 of Secured Medium-Term Notes,
7.85% series due 1998, the proceeds of which will be used to retire three
series of Secured Medium-Term Notes, $9,000,000 of the 8.78% series due
November 1994, $5,000,000 of the 8.78% series due December 1994 and $5,000,000
of the 8.57% series due December 1994.
The Company's Mortgage and Deed of Trust contains certain restrictions
upon the issuance of additional First Mortgage Bonds. At September 30, 1994,
after taking into account the November sale of Secured Medium-Term Notes
discussed above, the unfunded net property additions and retired bonds test,
which is the most restrictive test, would have permitted the issuance of
approximately $497,000,000 additional First Mortgage Bonds. There are no
material restrictions upon issuance of unsecured debt or preferred stock in
the Company's Restated Articles of Incorporation, its Mortgage and Deed of
Trust or its Sinking Fund Debenture Agreement.
SEC RATIO OF EARNINGS TO FIXED CHARGES
For the twelve months ended September 30, 1994, the Company's ratio of
earnings to fixed charges was 3.15 times. Fixed charges include interest, the
implicit interest of the Colstrip Unit 4 rentals and one-third of all other
rental payments.
<PAGE>
PART II
Other Information
ITEM 5. Other Information
As a result of the disposition by Morgan Guaranty Trust
Company of New York of its corporate trust business, Morgan
Guaranty has resigned as Corporate Trustee under the Company's
Mortgage and Deed of Trust pursuant to which its First Mortgage
Bonds, including its Secured Medium-Term Notes, have been issued,
and was replaced by The Bank of New York, 101 Barclay Street, New
York, New York 10286, effective as of the close of business on
August 5, 1994.
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit 4(s) Eighteenth Supplemental Indenture to the
Mortgage and Deed of Trust
Exhibit 12 Computation of ratio of earnings to fixed
charges for the twelve months ended September
30, 1994.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None
<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 thereunto duly authorized.
THE MONTANA POWER COMPANY
(Registrant)
/s/ J. P. Pederson
J. P. Pederson
Vice President and Chief
Financial Officer
Date: November 14, 1994
<PAGE>
EXHIBIT INDEX
Exhibit 4(s)
Eighteenth Supplemental Indenture
to the Mortgage and Deed of Trust
Exhibit 12
Computation of ratio of earnings
to fixed charges for
the twelve months ended September 30, 1994
Exhibit 27
Financial Data Schedule
THE MONTANA POWER COMPANY
TO
THE BANK OF NEW YORK
AND
W. T. CUNNINGHAM
As Trustees under The Montana
Power Company's Mortgage and
Deed of Trust, dated as of
October 1, 1945
EIGHTEENTH SUPPLEMENTAL INDENTURE
Providing, among other things, for
the succession of The Bank of New York,
to Morgan Guaranty Trust Company of New York,
as the Corporate Trustee, and of W. T. Cunningham
to P. J. Crowley, as the Co-Trustee, under such Mortgage and
Deed of Trust and the amendment of Section 101 thereof.
<PAGE>
EIGHTEENTH SUPPLEMENTAL INDENTURE
EIGHTEENTH SUPPLEMENTAL INDENTURE, dated as of August 5,
1994, between THE MONTANA POWER COMPANY, a corporation of the
State of Montana (successor by merger to The Montana Power
Company, a corporation of the State of New Jersey), whose post
office address is 40 East Broadway, Butte, Montana, 59701
(hereinafter sometimes called the Company), and THE BANK OF NEW
YORK, a corporation of the State of New York, whose principal
corporate trust office is located at 101 Barclay Street, New
York, New York, 10286, which hereby is appointed successor
Corporate Trustee to MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
and W. T. CUNNINGHAM, whose post office address is 3 Arlington
Drive, Denville, New Jersey, 07834, who hereby is appointed
successor Co-Trustee to P.J. CROWLEY (the successor Corporate
Trustee and the successor Co-Trustee being hereinafter together
sometimes called the Trustees), as successor Trustees under the
Mortgage and Deed of Trust, dated as of October 1, 1945 (such
Mortgage and Deed of Trust, as executed and delivered and as
thereafter from time to time amended and supplemented being
hereinafter referred to as the Mortgage), which Mortgage was
executed and delivered by The Montana Power Company, a
corporation of the State of New Jersey (hereinafter sometimes
called the Company--New Jersey) to Guaranty Trust Company of New
York and Arthur E. Burke, to secure the payment of bonds issued
or to be issued under and in accordance with the provisions of
the Mortgage, reference to which Mortgage is hereby made, this
instrument (hereinafter called the Eighteenth Supplemental
Indenture) being supplemental thereto;
WHEREAS, the Mortgage was or is to be recorded in the
official records of various counties in the states of Montana and
Wyoming, which counties include or will include all counties in
which this Eighteenth Supplemental Indenture is to be recorded;
and
WHEREAS, by the Mortgage, the Company--New Jersey covenanted
that it would execute and deliver such supplemental indenture or
indentures and such further instruments and do such further acts
as might be necessary or proper to carry out more effectually the
purposes of the Mortgage and to make subject to the lien of the
Mortgage any property thereafter acquired, made or constructed
and intended to be subject to the lien thereof; and
WHEREAS, the Company--New Jersey executed and delivered to
the Trustees its First Supplemental Indenture, dated as of May 1,
1954 (hereinafter called the First Supplemental Indenture); its
Second Supplemental Indenture, dated as of April 1, 1959
(hereinafter called the Second Supplemental Indenture); and
WHEREAS, the Company--New Jersey was merged into the Company
on November 30, 1961, and to evidence the succession of the
Company to the Company--New Jersey and the assumption by the
Company of the covenants and conditions of the Company--New
Jersey in the bonds and in the Mortgage contained and to enable
the Company to have and exercise the powers and rights of the
Company--New Jersey under the Mortgage in accordance with the
terms thereof, the Company executed and delivered to the Trustees
its Third Supplemental Indenture, dated as of November 30, 1961
(hereinafter called the Third Supplemental Indenture); and
WHEREAS, the Company executed and delivered to the Trustees
its Fourth Supplemental Indenture, dated as of April 1, 1970
(hereinafter called the Fourth Supplemental Indenture); its Fifth
Supplemental Indenture, dated as of April 1, 1971 (hereinafter
called the Fifth Supplemental Indenture); its Sixth Supplemental
Indenture, dated as of March 1, 1974 (hereinafter called the
Sixth Supplemental Indenture); its Seventh Supplemental Inden-
ture, dated as of December 1, 1974 (hereinafter called the
Seventh Supplemental Indenture); its Eighth Supplemental
Indenture, dated as of July 1, 1975 (hereinafter called the
Eighth Supplemental Indenture); its Ninth Supplemental
Indenture, dated as of December 1, 1975 (hereinafter called the
Ninth Supplemental Indenture); its Tenth Supplemental Indenture,
dated as of January 1, 1979 (hereinafter called the Tenth
Supplemental Indenture); its Eleventh Supplemental Indenture,
dated as of October 1, 1983 (hereinafter called the Eleventh
Supplemental Indenture); its Twelfth Supplemental Indenture,
dated as of January 1, 1984 (hereinafter called the Twelfth
Supplemental Indenture); its Thirteenth Supplemental Indenture,
dated as of December 1, 1991 (hereinafter called the Thirteenth
Supplemental Indenture); its Fourteenth Supplemental Indenture,
dated as of January 1, 1993 (hereinafter called the Fourteenth
Supplemental Indenture); its Fifteenth Supplemental Indenture,
dated as of March 1, 1993 (hereinafter called the Fifteenth
Supplemental Indenture); its Sixteenth Supplemental Indenture,
dated as of May 1, 1993 (hereinafter called the Sixteenth
Supplemental Indenture) and its Seventeenth Supplemental
Indenture, dated as of December 1, 1993 (hereinafter called the
Seventeenth Supplemental Indenture); and
WHEREAS, the First, Second, Third, Fourth, Fifth, Sixth,
Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth,
Fourteenth, Fifteenth, Sixteenth and Seventeenth Supplemental In-
dentures were or are to be recorded in the official records of
various counties in the states of Montana and Wyoming, which
counties include or will include all counties in which this
Eighteenth Supplemental Indenture is to be recorded; and
WHEREAS, an instrument dated March 15, 1955 was executed by
the Company--New Jersey appointing Karl R. Henrich as Co-Trustee
in succession to said Arthur E. Burke, resigned, under the
Mortgage and by Karl R. Henrich accepting the appointment as Co-
Trustee under the Mortgage in succession to said Arthur E. Burke,
which instrument was recorded in various counties in the states
of Montana, Idaho and Wyoming; and
WHEREAS, an instrument dated June 29, 1962 was executed by
the Company appointing H. H. Gould as Co-Trustee in succession to
said Karl R. Henrich, resigned, under the Mortgage and by H. H.
Gould accepting the appointment as Co-Trustee under the Mortgage
in succession to said Karl R. Henrich, which instrument was
recorded in various counties in the states of Montana, Idaho and
Wyoming; and
WHEREAS, an instrument dated June 22, 1973 was executed by
the Company appointing R. Amundsen as Co-Trustee in succession to
said H. H. Gould, resigned, under the Mortgage and by R. Amundsen
accepting the appointment as Co-Trustee under the Mortgage in
succession to said H. H. Gould, which instrument was recorded in
various counties in the states of Montana, Idaho and Wyoming; and
WHEREAS, an instrument dated July 1, 1986 was executed by
the Company appointing P.J. Crowley as Co-Trustee in succession
to said R. Amundsen, resigned, under the Mortgage and by P. J.
Crowley accepting the appointment as Co-Trustee under the
Mortgage in succession to said R. Amundsen, which instrument was
recorded in various counties in the states of Montana, Idaho and
Wyoming; and
WHEREAS, in addition to the property described in the
Mortgage, the Company has acquired certain other property, rights
and interests in property; and
WHEREAS, the Company--New Jersey or the Company has
heretofore issued, in accordance with the provisions of the
Mortgage, the following series of First Mortgage Bonds:
<TABLE>
<CAPTION>
Principal Principal
Amount Amount
Series Issued Outstanding
<S> <C> <C>
2-7/8% Series due 1975. . . . . . . . . . . . $40,000,000 NONE
3-1/8% Series due 1984. . . . . . . . . . . . 6,000,000 NONE
4-1/2% Series due 1989. . . . . . . . . . . . 15,000,000 NONE
8-1/4% Series due 1974. . . . . . . . . . . . 30,000,000 NONE
7-1/2% Series due 2001 (Fifth). . . . . . . . 25,000,000 $25,000,000
8-5/8% Series due 2004. . . . . . . . . . . . 60,000,000 NONE
8-3/4% Series due 1981. . . . . . . . . . . . 30,000,000 NONE
9.60% Series due 2005 . . . . . . . . . . . . 35,000,000 NONE
9.70% Series due 2005 . . . . . . . . . . . . 65,000,000 NONE
9-7/8% Series due 2009. . . . . . . . . . . . 50,000,000 NONE
11-3/4% Series due 1993 . . . . . . . . . . . 75,000,000 NONE
10/10-1/8% Series due 2004/2014 . . . . . . . 80,000,000 NONE
8-1/8% Series due 2014. . . . . . . . . . . . 41,200,000 NONE
7.70% Series due 1999 (Fourteenth). . . . . . 55,000,000 55,000,000
8-1/4% Series due 2007 (Fifteenth). . . . . . 55,000,000 55,000,000
8.95% Series due 2022 (Sixteenth) . . . . . . 50,000,000 50,000,000
Secured Medium-Term Notes (Seventeenth) . . . 68,000,000 68,000,000
7% Series due 2005 (Eighteenth) . . . . . . . 50,000,000 50,000,000
6-1/8% Series due 2023 (Nineteenth) . . . . . 90,205,000 90,205,000
5.90% Series due 2023 (Twentieth) . . . . . . 80,000,000 80,000,000
</TABLE>
which bonds are also hereinafter sometimes called bonds of the
First through Twentieth Series, respectively; and
WHEREAS, Section 120 of the Mortgage provides, among other
things, that any power, privilege or right expressly or impliedly
reserved to or in any way conferred upon the Company by any
provision of the Mortgage, whether such power, privilege or right
is in any way restricted or is unrestricted, may be in whole or
in part waived or surrendered or subjected to any restriction if
at the time unrestricted or to additional restriction if already
restricted, and the Company may enter into any further covenants,
limitations or restrictions for the benefit of any one or more
series of bonds issued thereunder, or the Company may cure any
ambiguity contained therein or in any supplemental indenture or
may (in lieu of establishment by Resolution as provided in
Section 8 of the Mortgage) establish the terms and provisions of
any series of bonds other than said First Series, by an in-
strument in writing executed and acknowledged by the Company in
such manner as would be necessary to entitle a conveyance of real
estate to record in all of the states in which any property at
the time subject to the lien of the Mortgage shall be situated;
and
WHEREAS, Section 101 of the Mortgage provides that any
Trustee may resign at any time by giving written notice thereof
to the Company and publishing notice thereof in the manner set
forth in such Section; and
WHEREAS, Morgan Guaranty Trust Company of New York has given
written notice to the Company that it has resigned as Corporate
Trustee under the Mortgage, such resignation to take effect at
the close of business on August 5, 1994, unless previously a
successor Corporate Trustee shall have been appointed as provided
in the Mortgage, in which event such resignation shall take
effect immediately upon the appointment of such successor
Corporate Trustee; and
WHEREAS, P.J. Crowley has given written notice to the
Company that he has resigned as Co-Trustee under the Mortgage,
such resignation to take effect at the close of business on
August 5, 1994, unless previously a successor Co-Trustee shall
have been appointed as provided in the Mortgage, in which event
such resignation shall take effect immediately upon the
appointment of such successor Co-Trustee; and
WHEREAS, Section 102 of the Mortgage provides that the
Company, pursuant to the order of its Board of Directors, may
appoint a successor Trustee if a Trustee shall resign; and
WHEREAS, the Company desires that The Bank of New York and
W.T. Cunningham act as successor Corporate Trustee and Co-
Trustee, respectively, under the Mortgage; and
WHEREAS, The Bank of New York and W.T. Cunningham are
eligible and qualified to serve as Corporate Trustee and Co-
Trustee, respectively, under the Mortgage, in compliance with
Sections 35, 88 and 99 of the Mortgage, and are willing to accept
such appointment as successor Trustees; and
WHEREAS, The Company has agreed to publish notice of such
appointment as provided in Section 102 of the Mortgage;
WHEREAS, the Company now desires (pursuant to the provisions
of Section 120 of the Mortgage) to add to its covenants and
agreements contained in the Mortgage certain other covenants and
agreements to be observed by it and to alter and amend in certain
respects the covenants and provisions contained in the Mortgage;
and
WHEREAS, the execution and delivery by the Company of this
Eighteenth Supplemental Indenture have been duly authorized by
the Board of Directors of the Company by appropriate Resolutions
of said Board of Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That, pursuant
to Section 102 of the Mortgage and by order of its Board of
Directors, the Company hereby appoints The Bank of New York as
successor Corporate Trustee under the Mortgage, subject to the
conditions of Article XVII thereof, effective at the close of
business on August 5, 1994;
That The Bank of New York, a bank or trust company having
its principal office and place of business in the Borough of
Manhattan, The City of New York, hereby accepts its appointment
by the Company as successor Corporate Trustee under the Mortgage;
That, pursuant to Section 102 of the Mortgage and by order
of its Board of Directors, the Company hereby appoints W.T.
Cunningham as successor Co-Trustee under the Mortgage, subject to
the conditions in Article XVII thereof, effective at the close of
business on August 5, 1994;
That the undersigned, W.T. Cunningham, a citizen of the
United States of America, hereby accepts his appointment by the
Company as successor Co-Trustee under the Mortgage;
That the Company will proceed with the publication of the
notice of appointment as provided in Section 102 of the Mortgage
in substantially the following form:
THE MONTANA POWER COMPANY
Mortgage and Deed of Trust, dated as of October 1, 1945,
as amended and supplemented
NOTICE OF APPOINTMENT OF SUCCESSOR CORPORATE TRUSTEE
AND SUCCESSOR CO-TRUSTEE
NOTICE IS HEREBY GIVEN, pursuant to Section 102 of the
above-mentioned Mortgage, that The Montana Power Company has
appointed The Bank of New York and W. T. Cunningham,
respectively, as successor Corporate Trustee and successor Co-
Trustee under the Mortgage, and that The Bank of New York and
W.T. Cunningham have accepted such appointments, effective at the
close of business on August 5, 1994.
THE MONTANA POWER COMPANY
August 5, 1994
That the Company, in consideration of the premises and of
$1.00 to it duly paid by the Trustees at or before the ensealing
and delivery of these presents, the receipt whereof is hereby
acknowledged, and in further evidence of assurance of the estate,
title and rights of the Trustees and in order further to secure
the payment of both the principal of and interest and premium, if
any, on the bonds from time to time issued under the Mortgage,
according to their tenor and effect and the performance of all
the provisions of the Mortgage (including any modification made
as in the Mortgage provided) and of said bonds, and to confirm
the lien of the Mortgage on certain after-acquired property,
hereby grants, bargains, sells, releases, conveys, assigns,
transfers, mortgages, pledges, sets over and confirms (subject,
however, to Excepted Encumbrances as defined in Section 6 of the
Mortgage) unto W.T. Cunningham, who has been appointed successor
Co-Trustee as hereinabove provided, and (to the extent of its
legal capacity to hold the same for the purposes hereof) to The
Bank of New York, which has been appointed successor Corporate
Trustee as hereinabove provided, as Trustees under the Mortgage,
and to their successor or successors in said trust, and to said
Trustees and their successors and assigns forever, all property,
real, personal and mixed, of the kind or nature specifically
mentioned in the Mortgage, or of any other kind or nature
(whether or not located in the State of Montana), acquired by the
Company after the date of the execution and delivery of the Mort-
gage, as heretofore supplemented (except any herein or in the
Mortgage, as heretofore supplemented, expressly excepted), now
owned or, subject to the provisions of subsection (I) of
Section 87 of the Mortgage, hereafter acquired by the Company (by
purchase, consolidation, merger, donation, construction, erection
or in any other way) and wheresoever situated, including (without
in anywise limiting or impairing by the enumeration of the same
the scope and intent of the foregoing or of any general
description contained in the Mortgage) all lands, power sites,
flowage rights, water rights, water locations, water appro-
priations, ditches, flumes, reservoirs, reservoir sites, canals,
raceways, dams, dam sites, aqueducts, and all other rights or
means for appropriating, conveying, storing and supplying water;
all rights of way and roads; all plants for the generation of
electricity by steam, water and/or other power; all powerhouses,
gas plants, street lighting systems, standards and other
equipment incidental thereto, telephone, radio and television
systems, air-conditioning systems and equipment incidental
thereto, water works, water systems, steam heat and hot water
plants, substations, lines, service and supply systems, bridges,
culverts, tracks, ice or refrigeration plants and equipment,
offices, buildings and other structures and the equipment
thereof; all machinery, engines, boilers, dynamos, electric, gas
and other machines, regulators, meters, transformers, generators,
motors, electrical, gas and mechanical appliances, conduits,
cables, water, steam heat, gas or other pipes, gas mains and
pipes, service pipes, fittings, valves and connections, pole and
transmission lines, wires, cables, tools, implements, apparatus,
furniture and chattels; all franchises, consents or permits; all
lines for the transmission and distribution of electric current,
gas, steam heat or water for any purpose including towers, poles,
wires, cables, pipes, conduits, ducts and all apparatus for use
in connection therewith; all real estate, lands, easements,
servitudes, licenses, permits, franchises, privileges, rights of
way and other rights in or relating to real estate or the
occupancy of the same and (except as herein or in the Mortgage
expressly excepted) all the right, title and interest of the
Company in and to all other property of any kind or nature
appertaining to and/or used and/or occupied and/or enjoyed in
connection with any property hereinbefore or in the Mortgage
described.
TOGETHER with all and singular the tenements, hereditaments,
prescriptions, servitudes and appurtenances belonging or in
anywise appertaining to the aforesaid property or any part
thereof, with the reversion and reversions, remainder and
remainders and (subject to the provisions of Section 57 of the
Mortgage) the tolls, rents, revenues, issues, earnings, income,
product and profits thereof, and all the estate, right, title and
interest and claim whatsoever, at law as well as in equity, which
the Company now has or may hereafter acquire in and to the
aforesaid property and franchises and every part and parcel
thereof.
IT IS HEREBY AGREED by the Company that, subject to the
provisions of subsection (I) of Section 87 of the Mortgage, all
the property, rights, and franchises acquired by the Company (by
purchase, consolidation, merger, donation, construction, erection
or in any other way) after the date hereof, except any herein or
in the Mortgage expressly excepted, shall be and are as fully
granted and conveyed hereby and as fully embraced within the lien
hereof and the lien of the Mortgage as if such property, rights
and franchises were now owned by the Company and were specifi-
cally described herein and conveyed hereby.
PROVIDED that the following are not and are not intended to
be now or hereafter granted, bargained, sold, released, conveyed,
assigned, transferred, mortgaged, hypothecated, affected,
pledged, set over or confirmed hereunder and are hereby expressly
excepted from the lien and operation of the Mortgage, namely:
(1) cash, shares of stock, bonds, notes and other obligations and
other securities not specifically pledged, paid, deposited,
delivered or held under the Mortgage or covenanted so to be;
(2) merchandise, equipment, apparatus, materials or supplies held
for the purpose of sale or other disposition in the usual course
of business; fuel, oil and similar materials and supplies
consumable in the operation of any of the properties of the
Company; all aircraft, tractors, rolling stock, trolley coaches,
buses, motor coaches, automobiles, motor trucks, and other
vehicles and materials and supplies held for the purpose of
repairing or replacing (in whole or part) any of the same;
(3) bills, notes and accounts receivable, judgments, demands and
choses in action, and all contracts, leases and operating
agreements not specifically pledged under the Mortgage or cove-
nanted so to be; the Company's contractual rights or other
interest in or with respect to tires not owned by the Company;
(4) the last day of the term of any lease or leasehold which may
be or become subject to the lien of the Mortgage; (5) electric
energy, gas, steam, water, ice, and other materials or products
generated, manufactured, produced, purchased or acquired by the
Company for sale, distribution or use in the ordinary course of
its business; all timber, minerals, mineral rights and royalties
and all Gas and Oil Production Property, as defined in Section 4
of the Mortgage; (6) the Company's franchise to be a corporation;
and (7) any property heretofore released pursuant to any
provisions of the Mortgage and not heretofore disposed of by the
Company; provided, however, that the property and rights
expressly excepted from the lien and operation of the Mortgage in
the above subdivisions (2) and (3) shall (to the extent permitted
by law) cease to be so excepted in the event and as of the date
that either or both of the Trustees or a receiver or trustee
shall enter upon and take possession of the Mortgaged and Pledged
Property in the manner provided in Article XIII of the Mortgage
by reason of the occurrence of a Default as defined in Section 65
thereof.
TO HAVE AND TO HOLD all such properties, real, personal and
mixed, granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged, set over or confirmed by the
Company as aforesaid, or intended so to be, unto W.T. CUNNINGHAM
and (to the extent of its legal capacity to hold the same for the
purposes hereof) unto THE BANK OF NEW YORK, as Trustees and their
successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the
same terms, trusts and conditions and subject to and with the
same provisos and covenants as are set forth in the Mortgage,
this Eighteenth Supplemental Indenture being supplemental
thereto.
AND IT IS HEREBY COVENANTED by the Company that all the
terms, conditions, provisos, covenants and provisions contained
in the Mortgage shall affect and apply to the property
hereinbefore described and conveyed and to the estate, rights,
obligations and duties of the Company and the Trustees and the
beneficiaries of the trust with respect to said property, and to
the Trustees and their successors as Trustees of said property in
the same manner and with the same effect as if the said property
had been owned at the time of the execution of said Mortgage and
Deed of Trust, and had been specifically and at length described
in and conveyed to the Trustees, by said Mortgage and Deed of
Trust as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the
Trustees and their successors in said trust under the Mortgage,
as follows:
ARTICLE I.
Amendment of Section 101 of the Mortgage
Section A. The second paragraph of Section 101 of the
Mortgage hereby is amended by adding a new sentence at the end
thereof to read as follows:
"In the absence of a Default or the occurrence of an
event which, after notice, the passage of time, or
both, would constitute a Default, any Trustee
theretofore appointed by the Company as provided in
Section 102 hereof also may be removed at any time by
an instrument in writing executed by order of its Board
of Directors, duly acknowledged by its President or a
Vice President and filed with such Trustee. Should any
Trustee be so removed by the order of the Board of
Directors, the Company shall publish notice thereof in
the manner hereinabove provided in this Section 101."
ARTICLE II.
Miscellaneous Provisions
Section 2. Subject to the amendments provided for in this
Eighteenth Supplemental Indenture, the terms defined in the
Mortgage shall, for all purposes of this Eighteenth Supplemental
Indenture, have the meaning specified in the Mortgage.
Section 3. The Trustees hereby accept the trusts herein
declared, provided, created or supplemented and agree to perform
the same upon the terms and conditions herein and in the Mortgage
set forth and upon the following terms and conditions:
The Trustees shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of
this Eighteenth Supplemental Indenture or for or in respect of
the recitals contained herein, all of which recitals are made by
the Company solely. In general, each and every term and
condition contained in Article XVII of the Mortgage shall apply
to and form part of this Eighteenth Supplemental Indenture with
the same force and effect as if the same were herein set forth in
full with such omissions, variations and insertions, if any, as
may be appropriate to make the same conform to the provisions of
this Eighteenth Supplemental Indenture.
Section 4. Whenever in this Eighteenth Supplemental
Indenture any of the parties hereto is named or referred to, this
shall, subject to the provisions of Articles XVI and XVII of the
Mortgage, be deemed to include the successors and assigns of such
party, and all the covenants and agreements in this Eighteenth
Supplemental Indenture contained by or on behalf of the Company,
or by or on behalf of the Trustees shall, subject as aforesaid,
bind and inure to the respective benefits of the respective suc-
cessors and assigns of such parties, whether so expressed or not.
Section 5. Nothing in this Eighteenth Supplemental
Indenture, expressed or implied, is intended, or shall be
construed, to confer upon, or to give to, any person, firm or
corporation, other than the parties hereto and the holders of the
bonds and coupons Outstanding under the Mortgage, any right,
remedy or claim under or by reason of this Eighteenth
Supplemental Indenture or any covenant, condition, stipulation,
promise or agreement hereof, and all the covenants, conditions,
stipulations, promises and agreements in this Eighteenth
Supplemental Indenture contained by or on behalf of the Company
shall be for the sole and exclusive benefit of the parties
hereto, and of the holders of the bonds and coupons Outstanding
under the Mortgage.
Section 6. This Eighteenth Supplemental Indenture shall be
executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same
instrument.<PAGE>
IN WITNESS WHEREOF, THE MONTANA POWER COMPANY has caused its
corporate name to be hereunto affixed, and this instrument to be
signed and sealed by its President or one of its Vice Presidents,
and its corporate seal to be attested by its Secretary or one of
its Assistant Secretaries for and in its behalf, and THE BANK OF
NEW YORK, in token of its acceptance of the trust hereby created,
has caused its corporate name to be hereunto affixed, and this
instrument to be signed and sealed by one of its Vice Presidents
or one of its Assistant Vice Presidents, and its corporate seal
to be attested by one of its Assistant Vice Presidents, Assistant
Secretaries or Assistant Treasurers, and W.T. CUNNINGHAM, for all
like purposes, has hereunto set his hand and affixed his seal, as
of the day and year first above written.
THE MONTANA POWER COMPANY
By: /s/ J.P. Pederson
Vice President
Attest:
/s/ R.M. Ralph
Assistant Secretary
Executed, sealed and delivered by
THE MONTANA POWER COMPANY in the presence of:
/s/ W.C. Verbael
/s/ L.J. O'Farrell
<PAGE>
THE BANK OF NEW YORK,
as successor Corporate Trustee
BY: /s/ David G. Sampson
Vice President
Attest:
/s/ Alfia Monastra
Assistant Treasurer
/s/ W.T. Cunningham [L.S.]
W.T. CUNNINGHAM, as successor
Co-Trustee
Executed, sealed and delivered
by THE BANK OF NEW YORK and
W.T. CUNNINGHAM in the presence of:
/s/ Helen M. Cotiaux
/s/ Robert F. McIntyre
<PAGE>
STATE OF MONTANA )
) ss.:
COUNTY OF SILVER BOW )
On this 5th day of August, in the year 1994, before me,
Susan Hawke, a Notary Public in and for the State of Montana,
personally came and appeared J.P. Pederson, to me known and known
to me to be a Vice President of THE MONTANA POWER COMPANY, the
corporation that executed the within instrument, and acknowledged
to me that such corporation executed the same, and being by me
duly sworn, did depose and say that he resides at 1829 Utah
Avenue, Butte, Montana; that he is a Vice President of THE
MONTANA POWER COMPANY, the corporation described in and which
executed the within and above instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation, and that he signed his name
thereto by like order.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed my official seal the day and year in this certificate
first above written.
/s/ Susan Hawke
Susan Hawke
Notary Public, State of Montana
Residing at Butte, Montana
My Commission Expires June 1, 1996
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 5th day of August, 1994, before me, W. Cassels, a
Notary Public in and for the State of New York, personally came
and appeared David G. Sampson, to me known and known to me to be
a Vice President of THE BANK OF NEW YORK, the corporation that
executed the within instrument, and acknowledged to me that such
corporation executed the same, and, being by me duly sworn, did
depose and say that he resides at 220 Hulls Hill Rd., Southbury,
Connecticut; that he is a Vice President of THE BANK OF NEW YORK,
the corporation described in and which executed the within and
above instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of
said corporation, and that he signed his name thereto by like
authority.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed my official seal the day and year in this certificate
first above written.
/s/ W. J. Cassels
WILLIAM J. CASSELS
Notary Public, State of New York
No. 01CA5027729
Qualified in Bronx County
Certificate Filed in New York
County
Commission Expires May 16, 1996
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 5th day of August, in the year 1994, before me,
W. Cassels, a Notary Public in and for the State of New York,
personally came and appeared W.T. CUNNINGHAM, known to me to be
one of the persons described in and who executed the within
instrument, and whose name is subscribed thereto, and
acknowledged to me that he executed the same.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed my official seal the day and year in this certificate
first above written.
/s/ W. J. Cassels
WILLIAM J. CASSELS
Notary Public, State of New York
No. 01CA5027729
Qualified in Bronx County
Certificate Filed in New York
County
Commission Expires May 16, 1996
EXHIBIT 12
THE MONTANA POWER COMPANY
Computation of Ratio of Earnings to Fixed Charges
(Dollars in Thousands)
Twelve Months
Ended
September 30, 1994
------------------
Net Income $121,869
Income Taxes 56,860
----------
$178,729
----------
Fixed Charges:
Interest $ 45,003
Amortization of Debt Discount,
Expense and Premium 1,696
Rentals 36,528
----------
$ 83,227
----------
Earnings Before Income Taxes
and Fixed Charges $261,956
==========
Ratio of Earnings to Fixed Charges 3.15 X
==========
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT 9/30/94, THE CONSOLIDATED INCOME STATEMENT AND
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 9 MONTHS ENDED 9/30/94 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1422081
<OTHER-PROPERTY-AND-INVEST> 505667
<TOTAL-CURRENT-ASSETS> 243391
<TOTAL-DEFERRED-CHARGES> 262453
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2433592
<COMMON> 661706
<CAPITAL-SURPLUS-PAID-IN> 2450
<RETAINED-EARNINGS> 265523
<TOTAL-COMMON-STOCKHOLDERS-EQ> 929679
0
101416
<LONG-TERM-DEBT-NET> 576006
<SHORT-TERM-NOTES> 59782
<LONG-TERM-NOTES-PAYABLE> 5827
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 25810
0
<CAPITAL-LEASE-OBLIGATIONS> 770
<LEASES-CURRENT> 717
<OTHER-ITEMS-CAPITAL-AND-LIAB> 733585
<TOT-CAPITALIZATION-AND-LIAB> 2433592
<GROSS-OPERATING-REVENUE> 780648
<INCOME-TAX-EXPENSE> 31028
<OTHER-OPERATING-EXPENSES> 650893
<TOTAL-OPERATING-EXPENSES> 681921
<OPERATING-INCOME-LOSS> 98727
<OTHER-INCOME-NET> 2834
<INCOME-BEFORE-INTEREST-EXPEN> 101561
<TOTAL-INTEREST-EXPENSE> 33393
<NET-INCOME> 68168
5420
<EARNINGS-AVAILABLE-FOR-COMM> 62748
<COMMON-STOCK-DIVIDENDS> 63534
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 174194
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
