UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 18, 1998
THE MONTANA POWER COMPANY
(Exact name of registrant as specified in its charter)
Montana 1-4566 81-0170530
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
40 East Broadway, Butte, Montana 59701
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (406) 723-5421
Exhibit Index is found on page 3.
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ITEM 7. Exhibits.
99 Press Release - "Montana Power and Houston Industries Settle Coal
Contract Dispute"
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 hereunto duly authorized.
THE MONTANA POWER COMPANY
(Registrant)
By /s/ J. P. Pederson
J. P. Pederson
Vice President and Chief
Financial and Information Officer
Dated: December 30, 1998
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<PAGE> Exhibit Index
Exhibit Page
99 Montana Power and Houston Industries Settle Coal Contract
Dispute 4
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<PAGE> EXHIBIT 99
NEWS Montana Power
40 East Broadway, Butte, MT 59701 Contacts: Linda McGillen 406/496-5211
Cort Freeman 406/497-2368
http://www.mtpower.com
December 18, 1998
MONTANA POWER AND HOUSTON INDUSTRIES SETTLE COAL CONTRACT DISPUTE
BUTTE -- The Montana Power Co. (NYSE:MTP) announced today resolution of
a long-standing dispute with Houston Industries Inc. over the price of lignite
and other matters regarding the Jewett, Texas mine operated by Northwestern
Resources Co.
The Jewett Mine's lignite fuels Houston Industries Wholesale Energy
Group's twin 820-megawatt Limestone Electric Generating Station. Northwestern
Resources Co. (NWR) is a wholly owned coal-mining subsidiary of Montana Power,
based in Butte. The Wholesale Energy Group is responsible for operation of all
Houston Industries' electric generation facilities.
Paul Gatzemeier, vice president of Montana Power's Coal Operations, said
the settlement provides stable earnings for NWR, creates a shared purpose with
Houston Industries to make sure the Limestone station remains a low-cost
producer of electricity, and allows for a Texas resource to continue to fuel a
Texas generating station.
"We're pleased to have this litigation behind us because our history has
been one of cooperation at many levels with Houston Industries," Gatzemeier
said. "We believe that by working together, the Limestone station can compete
very effectively in a rapidly emerging, more competitive electric industry,"
he added.
The dispute between the two companies revolved around the price of
lignite and whether other fuels could be substituted for lignite. The Houston-
based energy firm had claimed that NWR was earning an unreasonable profit on
the sale of lignite and that changed circumstances had triggered a gross
inequity clause in the lignite supply agreement (LSA) requiring the parties to
renegotiate new, lower fees. Houston Industries also claimed it was entitled
under the LSA to purchase fuels for the Limestone plant other than lignite,
and if lignite were discontinued, there was no obligation to pay any fees to
NWR.
Northwestern Resources claimed that Houston Industries had an obligation
to purchase all fuel requirements for the Limestone station from NWR and was
entitled to a declaration to that effect. The Jewett Mine is adjacent to the
Limestone plants, making it a mine mouth fuel source.
A year ago a Harris County (Texas) District Court jury denied Houston
Industries' claims regarding changed circumstances and NWR's alleged
obligations to negotiate reduced fees. As a result, current pricing under the
terms of the agreement remained unchanged. Houston Industries appealed this
verdict.
Before the lengthy jury trial began on October 20, 1997, the presiding
judge concluded that, as a matter of law, Houston Industries had the right to
purchase fuel other than lignite for the Limestone plant without obligation to
Northwestern Resources. NWR appealed this summary judgment.
With this announced agreement, the results of the trial and the judge's
ruling stand.
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<PAGE>
Dick Cromer, executive vice president and chief operating officer of
Montana Power's Energy Supply Division, said that nothing really changes with
the LSA for the next several years. "Thereafter, Jewett Mine lignite will be
priced in the competitive marketplace. While we can't predict future markets,
we are confident we can compete successfully in this environment," he said.
According to Cromer, if the market value of fuel stays flat when the
agreement is fully implemented after four years, then the competitive-pricing
structure could result in a reduction of Northwestern's pretax net income by
some 27 percent, or $7 million annually, going from $26 million to $19
million.
NWR can mitigate for this through efficiency measures, the cost-savings
of which will flow to NWR. The settlement agreement also has mechanisms to
limit financial exposure for both parties. For competitive reasons, the exact
terms of the settlement remain confidential.
Forward-Looking Information is Subject to Risk and Uncertainty
This release contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements should be read with the cautionary statements and important factors
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 at Item 7, "Management's Discussion and Analysis of
Financial Conditions and Results of Operations - Safe Harbor for Forward-
Looking Statements." Forward-looking statements are all statements other than
statements of historical fact, including without limitation those that are
identified by the use of the words "expects", "believes," "anticipates" and
similar expressions.
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