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NIAGARA MOHAWK POWER CORPORATION
300 ERIE BOULEVARD WEST, SYRACUSE, NEW YORK 13202
To the Shareholders of
Niagara Mohawk Power Corporation
You are cordially invited to attend the Annual Meeting of your
Corporation to be held at 10:30 a.m. on Tuesday, May 3, 1994 at the
ONONDAGA COUNTY CONVENTION CENTER, 800 SOUTH STATE STREET,
SYRACUSE, NEW YORK 13202-3017.
Please note that in addition to electing directors,
shareholders will be asked to consider and approve a proposal to
amend the Corporation's Certificate of Incorporation to authorize
an additional 35,000,000 shares of Common Stock. Approval of this
proposal will enable the Corporation to continue the permanent
equity financing necessary to improve the Corporation's capital
structure and sustain its current construction program and future
growth. The Corporation has also received for shareholder
consideration an advisory proposal under which the Corporation
would prepare a report on carbon dioxide emissions and related
regulations.
For the reasons set forth in detail in the proxy statement,
which you are uged to read, your Board of Directors has unanimously
approved and recommends you vote FOR Proposals 1 and 2 and AGAINST
Proposal 3.
It is earnestly requested that you sign, date and mail your
proxy card whether or not you plan to attend the Annual Meeting.
Last year, proxies were received from over 62,000 shareholders
representing 87% of the outstanding stock. We are hopeful that an
equally fine response will be forthcoming this year.
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Prompt return of your voted proxy card will reduce the cost of
further mailings and other follow-up work. You may revoke your
voted proxy at any time prior to the meeting or vote in person if
you attend the meeting.
We are grateful for your assistance and express our
appreciation in advance.
Sincerely yours,
William E. Davis
Chairman of the Board and Chief
Executive Officer
March 28, 1994
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NOTICE OF ANNUAL MEETING
Please take notice that the Annual Meeting of Shareholders of
Niagara Mohawk Power Corporation will be held at the Onondaga
County Convention Center, 800 South State Street, Syracuse, New
York 13202-3017 on Tuesday, May 3, 1994 at 10:30 a.m. for the
following purposes:
(1) To elect five directors to serve in Class III for a term
expiring at the 1997 Annual Meeting;
(2) To act upon the proposal to amend the Corporation's
Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 150,000,000 shares
to 185,000,000 shares;
(3) To consider and act upon a shareholder proposal relating
to a company report on carbon dioxide and emissions and
related regulations; and
(4) To transact such other business as may be properly
brought before the meeting or any adjournment thereof.
Shareholders entitled to vote at the meeting are the holders
of the Common Stock of record at the close of business on March
15, 1994.
By order of the Board of Directors
Harold J. Bogan
Secretary
Dated: March 28, 1994
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PROXY STATEMENT
Niagara Mohawk Power Corporation
300 Erie Boulevard West, Syracuse, New York 13202
The accompanying proxy is solicited by the Board of Directors
and is revocable at any time before it is exercised. The expenses
incurred in connection with this solicitation will be borne by the
Corporation. The firm of D. F. King & Co., Inc., New York, New
York, has been engaged to aid in the solicitation of proxies for a
fee of $10,500. Directors, officers or employees of the
Corporation may solicit proxies in person, by telephone or by mail
but without extra compensation. Upon request, brokerage houses or
other nominees or fiduciaries will be reimbursed by the Corporation
for the expense of forwarding proxy material to beneficial owners
of stock.
The Annual Report for 1993 was mailed to shareholders starting
on or about March 21. This proxy statement and form of proxy are
first being sent or given to the holders of Common Stock on or
about March 28, 1994.
As of the close of business on March 15, 1994, the record date
for the Annual Meeting of Shareholders, there were 142,596,892
shares of Common Stock issued and outstanding. Holders of Common
Stock on the record date are entitled to one vote for each share
held and may not cumulate their votes for the election of
directors. A plurality of the votes cast at the meeting is
required for the election of Directors. An affirmative vote of a
majority of the votes cast at the meeting is required for
approval of all other items submitted to the shareholders for
their consideration. An automated system administered by the
Corporation's Inspectors of Election tabulates the votes.
Abstentions and proxies returned by brokers as "non-votes" for any
item will not be counted as voting with respect to such item, but
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are counted in the number of shares present in person or
represented by proxy for purposes of determining whether a quorum
is present.
(1). PROPOSAL TO ELECT FIVE CLASS III DIRECTORS
The Corporation's Certificate of Incorporation, as amended,
provides for classification of the Directors into three classes,
composed of as nearly equal a number of Directors as possible. One
class of Directors is elected at each Annual Meeting of
Shareholders to hold office for a term expiring at the third
Annual Meeting of Shareholders after such election. Of the
directors identified below, five are nominees for election as
Class III Directors for a term expiring at the 1997 Annual
Meeting. All nominees are members of the present Board of
Directors.
Unless otherwise instructed, proxies received in response to
this solicitation will be voted in favor of the election of the
persons nominated to the class of directors identified below. If
any of them should be unable to serve, the proxy may be voted with
the discretionary authority for a substitute. The management has
no reason to believe that any nominee will become unavailable to
serve.
As applicable to each nominee and continuing Director, the
name, age as of April 1, 1994, principal occupation, business
experience for the last five years or more, other directorships and
the year in which first elected a Director, are set forth below.
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BUSINESS BACKGROUND OF NOMINEES AND DIRECTORS
NOMINEES FOR CLASS III DIRECTORS - TERMS EXPIRING IN 1997
LAWRENCE BURKHARDT, III
[PHOTO] Lawrence Burkhardt, III, age 61, is an
independent consultant with the Atlas
Consulting Group. Prior to his retirement in
1990, Mr. Burkhardt was employed by the
Corporation and served as Executive Vice
President of Nuclear Operations. Mr. Burkhardt
was elected to the Board of Directors on
October 21, 1988 and contracted to become an
employee of the Corporation for a two-year
period ending on November 15, 1990.
Previously, he served with and retired from
the U.S. Navy in 1986 as a Rear Admiral with 32
years service. Between 1986 and 1988, Mr.
Burkhardt served as a consultant to the
nuclear power industry. Mr. Burkhardt is a
director of Management Analysis Company.
Mr. Burkhardt has been a director of this
Corporation since 1988.
DOUGLAS M. COSTLE
[PHOTO] Douglas M. Costle, age 54, is a Distinguished
Senior Fellow of the Institute for Sustainable
Communities in Montpelier, Vt. Mr. Costle
served as Dean of the Vermont Law School in
South Royalton, Vermont from 1987 until 1991.
Prior to that and from 1981, he served as
counsel to the law firms of Wald, Harkrader and
Ross, Washington, D.C. and Updike, Kelly and
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Spellacy, P.C., Hartford, Connecticut and was
the Chairman of the Executive Committee and
co-founder of the Environmental Testing and
Certification Corporation, a national
laboratory that tests chemical wastes. From
1976 to 1981, he was Administrator of the U.S.
Environmental Protection Agency. Mr. Costle is
a director of Air and Water Technologies
Corporation and Freedom Funds, a family of
mutual funds under the management of The John
Hancock Company.
Mr. Costle has been a director of this
Corporation since 1991.
DONALD B. RIEFLER
[PHOTO] Donald B. Riefler, age 66, is self-employed as
a Financial Market Consultant, an advisor to
J. P. Morgan, Florida FSB and a director of
Bank of Tokyo Trust Company and Liberty
Brokerage Inc. Prior to his retirement in
1991, Mr. Riefler was Chairman of the Market
Risk Committee for J. P. Morgan & Co.
Incorporated and Morgan Guaranty Trust Company
of New York where he had served in various
capacities since 1952.
Mr. Riefler has been a director of this
Corporation since 1978.
STEPHEN B. SCHWARTZ
[PHOTO] Stephen B. Schwartz, age 59, retired in 1992,
as Senior Vice President, Market-Driven Quality
of International Business Machines Corporation.
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Mr. Schwartz joined IBM in 1957 and was elected
Senior Vice President in 1990. Prior to that
and from 1978 he served as an officer in a wide
variety of sales, development, manufacturing,
staff and general management positions. Mr.
Schwartz is a director of Western Digital
Corporation and Integrated Surgical Systems and
serves as a management consultant in the area
of organization revitalization.
Mr. Schwartz has been a director of this
Corporation since 1992.
JOHN G. WICK
[PHOTO] John G. Wick, age 69, became as of counsel to
Falk & Siemer, Buffalo, N.Y., Attorneys-at-Law
effective January 1, 1994. Mr. Wick had been a
partner since 1985 and has engaged in the
practice of law since 1981. Prior to that and
from 1964 he was associated with Merchants
Insurance Group until his retirement as
President and Chief Executive Officer.
Mr. Wick has been a director of this
Corporation since 1976.
CONTINUING CLASS I DIRECTORS - TERMS EXPIRING IN 1995
EDMUND M. DAVIS
[PHOTO] Edmund M. Davis, age 64, is a Partner of
Hiscock & Barclay, Syracuse, N.Y.,
Attorneys-at-Law. Mr. Davis has been
associated with the law firm since 1957. Mr.
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Davis is a trustee of Clarkson University and
a member of the Central Region Board of
Directors of Marine Midland Bank, N.A.
Mr. Davis has been a director of this
Corporation since 1970.
JOHN M. ENDRIES
[PHOTO] John M. Endries, age 51, was elected President
of the Corporation effective June 1, 1988. Mr.
Endries has been an employee of the
Corporation since 1973, serving as Vice
President and Controller until 1980, and as
Senior Vice President until 1987 when he was
elected Executive Vice President. Mr. Endries
is a director of HYDRA-CO Enterprises, Inc.
and Opinac Energy Corporation, both of which
are wholly-owned subsidiaries of the
Corporation. Mr. Endries is also a director of
Marine Midland Banks, Inc.; Marine Midland
Bank; Utilities Mutual Insurance Company;
Crouse Irving Memorial Hospital Foundation; The
Greater Syracuse Chamber of Commerce; and
Hiawatha Council of Boy Scouts of America.
Mr. Endries has been a director of this
Corporation since 1988.
JOHN G. HAEHL, JR.
[PHOTO] John G. Haehl, Jr., age 71, retired as Chairman
of the Board and Chief Executive Officer of the
Corporation. Mr. Haehl joined the Corporation
in 1961 as Assistant to the Vice President and
Controller, was elected President and Chief
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Executive Officer in 1973 and from 1980 until
his retirement in 1988 served as Chairman and
Chief Executive Officer. Mr. Haehl is a
director of Opinac Energy Corporation and
Canadian Niagara Power Company, both of which
are wholly-owned subsidiaries of the
Corporation. Mr. Haehl is also a director of
Utica Mutual Insurance Company and is an
honorary trustee of Syracuse University.
Mr. Haehl has been a director of this
Corporation since 1970.
DR. BONNIE GUITON HILL
[PHOTO] Bonnie Guiton Hill, age 52, is the Dean and
Professor of Commerce of the McIntire School of
Commerce at the University of Virginia. Prior
to assuming her present position in 1992, Dr.
Hill was the Secretary of State and Consumer
Services Agency for the State of
California. She has served two U.S. Presidents
in three separate appointments, the most recent
being as a special advisor for Consumer Affairs
and as Director of the United States Office Of
Consumer Affairs. From 1987 to 1989, she
served in the Department of Education as an
Assistant Secretary for Vocational and Adult
Education. Prior to that and from 1984 she
served as Vice Chairperson of the U.S. Postal
Rate Commission. Dr. Hill is a director of
Hershey Foods Corporation, Louisiana-Pacific
Corporation, and National Environmental
Education and Training Foundation.
Dr. Hill has been a director of this
Corporation since 1991.
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HENRY A. PANASCI, JR.
[PHOTO] Henry A. Panasci, Jr., age 65, is Chairman and
Chief Executive Officer of Fay's Incorporated.
Mr. Panasci has held his present position since
1976. Prior to that he co-founded Fay's Drug
Co., Inc. with his father in 1958 and was
elected president in 1966. Mr. Panasci is a
trustee of Syracuse University.
Mr. Panasci has been a director of this
Corporation since 1988.
CONTINUING CLASS II DIRECTORS - TERMS EXPIRING IN 1996
WILLIAM F. ALLYN
[PHOTO] William F. Allyn, age 58, is President of Welch
Allyn, Inc., Skaneateles Falls, N.Y. Mr. Allyn
joined Welch Allyn, Inc. in 1962 and was
elected to his present position in 1980. Mr.
Allyn is a director of ONBANCorp., Inc. and
Oneida Limited; a trustee of Syracuse
University; and an overseer of Thayer School of
Engineering, Dartmouth College and the Schools
of Engineering at the University of Rochester
and Syracuse University.
Mr. Allyn has been a director of this
Corporation since 1988.
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WILLIAM E. DAVIS
[PHOTO] William E. Davis, age 52, was elected Chairman
of the Board and Chief Executive Officer in
1993. Mr. Davis joined the Corporation in
1990 as Vice President-Corporate Planning, was
elected Senior Vice President in April 1992,
serving in that capacity until elected
Vice-Chairman of the Board of the Corporation
in November 1992. Prior to that, Mr. Davis was
executive deputy commissioner of the New York
State Energy Office. Mr. Davis has also held
positions with the New York State Department of
Commerce, and General Public Utilities Corp. in
Parsippany, New Jersey.
Mr. Davis has been a director of this
Corporation since 1992.
WILLIAM J. DONLON
[PHOTO] William J. Donlon, age 64, retired in 1993 as
Chairman of the Board and Chief Executive
Officer of the Corporation with 45 years
service as an active employee. Mr. Donlon is a
director of Opinac Energy Corporation and
Canadian Niagara Power Company, both of which
are wholly-owned subsidiaries of the
Corporation. He is also a director of
Metropolitan Development Association of
Syracuse, Utilities Mutual Insurance Company
and ONBANCorp., Inc.; and a trustee of Siena
College and Syracuse University.
Mr. Donlon has been a director of this
Corporation since 1980.
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EDWARD W. DUFFY
[PHOTO] Edward W. Duffy, age 67, retired in 1983 as
Chairman of the Board and Chief Executive
Officer of Marine Midland Banks, Inc. Mr.
Duffy's association with the Marine Midland
Bank system began in 1952. Mr. Duffy is a
director of Columbus McKinnon Corporation;
Oneida Limited; Utica Mutual Insurance Company;
Utica National Insurance Group and W.R. Grace &
Co. Mr. Duffy retired as a director of Marine
Midland Bank on September 1, 1993.
Mr. Duffy has been a director of this
Corporation since 1973.
DR. PATTI McGILL PETERSON
[PHOTO] Patti McGill Peterson, age 50, is President of
St. Lawrence University, Canton, N.Y. Dr.
Peterson has held her present position since
1987. She was President of Wells College from
1980 until she joined St. Lawrence University
as President. Prior to that she was Vice
President of Academic Services and Planning at
the State University of New York at Oswego.
Dr. Peterson is a director of John Hancock
Advisors, Inc. and Security Mutual Life
Insurance Company and is a trustee of Northwood
School, Consortium for Independent Colleges and
Universities, Association of American Colleges,
and The Nelson A. Rockefeller Institute of
Government. Dr. Peterson is also a member of
the American Council on Education's Commission
on National Challenges in Higher Education.
Dr. Peterson has been a director of this
Corporation since 1988.
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BOARD OF DIRECTORS AND COMMITTEES
Meetings and Attendance
During 1993 nine meetings of the Corporation's Board of
Directors (the "Board of Directors" or the "Board") were held.
Each Director serving in fiscal year ended December 31, 1993
attended 75% or more of the combined total of meetings of the Board
of Directors and the Committees on which he or she served. There
are six standing Committees of the Board, namely, the Audit
Committee, the Compensation and Succession Committee, the Committee
on Corporate Public Policy and Environmental Affairs, the Executive
Committee, the Finance Committee and the Nuclear Oversight
Committee. The Board does not have a standing Nominating Committee
to nominate candidates for Board membership, but functions as a
committee of the whole. Any nomination may be made from the floor
by any shareholder who has made a written request to the
Corporation to have such nomination considered at the annual
meeting. Information with respect to the Audit Committee and the
Compensation and Succession Committee is set forth below.
Audit Committee
The Audit Committee consisting of John G. Wick, Chairperson,
William F. Allyn, Bonnie Guiton Hill, Patti McGill Peterson and
Donald B. Riefler, met five times in 1993. Duties performed by
the Audit Committee include: meeting with the independent
accountants, internal auditors and certain personnel of the
Corporation to discuss the planned scope of their examinations and
the adequacy of internal controls and reporting; reviewing the
results of the annual examination of the consolidated financial
statements and periodic internal audit examinations; reviewing the
services and fees of the Corporation's independent accountants;
authorizing and participating in special projects and studies; and
performing any other duties or functions deemed appropriate by the
Board.
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Compensation and Succession Committee
The Compensation and Succession Committee, consisting of
Edward W. Duffy, Chairperson, William F. Allyn, Edmund M. Davis,
Henry A. Panasci, Jr. and Stephen B. Schwartz, met eight times
during 1993. The Committee reviews the annual and incentive
compensation of the elected officers of the Corporation, the
Corporation's pension and savings fund plans, and officer
development and succession plans, and makes recommendations to the
Board of Directors with respect to these matters; reviews reports
regarding assets held by the Trustee for the Corporation's Pension
Plan and meets at regular intervals with the Plan's Investment
Managers to review earnings on assets held in the Trust fund;
selects and appoints investment managers and investment advisors
and recommends to the Board of Directors continuation or
replacement of the Trustee for the Plan; and meets with the
Corporation's actuarial advisor to review the advisor's annual
reports and progress toward funding the Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors William F. Allyn, Edward W. Duffy, Edmund M. Davis,
Henry A. Panasci, Jr. and Stephen B. Schwartz are members of the
Compensation and Succession Committee, all of whom are non-employee
directors.
Edmund M. Davis is a partner with the law firm of Hiscock and
Barclay. William J. Donlon's son, Robert M. Donlon, is also a
partner with the firm. The Corporation retained Hiscock and
Barclay to represent the Corporation on certain litigation matters
and to provide legal counsel on corporate matters. The Corporation
paid that firm a total of $1,652,895 for services rendered during
1993.
Marine Midland Bank, of which Edward W. Duffy and John M.
Endries are Directors, has extended credit to the Corporation of
$57,000,000. During 1993, the maximum loan at Marine Midland Bank
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at any time was $28,000,000, interest on all loans was $35,939,
fees for credit facilities were $55,000 and fees for bank services
were $345,551.
Onbank and Trust of ONBANCorp., Inc. of which William F. Allyn
and William J. Donlon are Directors, has extended credit to the
Corporation of $5,000,000. During 1993, fees for the credit
facilities were $2,390.
The terms of these borrowings and credit facilities are as
favorable as those available from comparable unaffiliated sources.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows all shares of the Corporation's
Common Stock beneficially owned by each Director, the Executive
Officers named in the Summary Compensation Table below and by all
Directors and Executive Officers as a group.
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Beneficial
Ownership(a)
William F. Allyn .................... 1,000
Lawrence Burkhardt, III ............. 374
Douglas M. Costle ................... 500
Edmund M. Davis ..................... 2,274
William E. Davis .................... 830(b)
William J. Donlon ................... 15,945(b)
Edward W. Duffy ..................... 3,234
John M. Endries ..................... 9,570(b)
John G. Haehl, Jr. .................. 37,307(c)
Bonnie Guiton Hill .................. 200
Henry A. Panasci, Jr. ............... 3,500(d)
Patti McGill Peterson ............... 200
Donald B. Riefler ................... 1,000
Stephen B. Schwartz ................. 500
John G. Wick ........................ 1,131
B. Ralph Sylvia ..................... 2,672(b)
John P. Hennessey ................... 1,496(b)
John W. Powers ...................... 11,110(b)
All Directors and
Executive Officers as a group (25). 127,091
_______________
(a) Based on information furnished to the Corporation by
the Directors and Executive Officers. In each instance the
number indicated represents shares of Common Stock
beneficially owned as of December 31, 1993. As of such date,
no Director or Executive Officer individually owned more than
.03 percent of the Corporation's Common Stock issued and
outstanding and all such persons as a group owned less than
.09 percent of such Common Stock. None of the Directors or
Executive Officers beneficially owned any of the Corporation's
Preferred Stock.
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(b) Includes shares of Common Stock credited under the Employee
Savings Fund Plan as of December 31, 1993.
(c) Includes shares of Common Stock owned by a member or members
of immediate family, as to which beneficial ownership
is disclaimed.
(d) Includes shares of Common Stock held by an estate of which the
named person is co-executor.
BOARD OF DIRECTORS' COMPENSATION AND SUCCESSION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Succession Committee of the Board of
Directors (the "Committee") is composed entirely of non-employee
directors. The Committee has responsibility for approving officer
salary increases and for the administration of the Corporation's
annual officer incentive compensation plan, performance share unit
plan, and stock option plan. The Committee operates on behalf of
the Board of Directors which has final approval responsibility for
officer compensation determinations.
This Committee report describes Niagara Mohawk Power
Corporation's officer compensation program strategy, the components
of the program, and the manner in which 1993 compensation
determinations were made for the Corporation's Chairman of the
Board and Chief Executive Officer, Mr. William E. Davis, and the
other four officers (collectively referred to as the Executive
Officers) whose 1993 compensation is disclosed in the Summary
Compensation Table of this Proxy Statement.
Base Salary
The Committee seeks to ensure that salaries of the Executive
Officers remain competitive with levels paid to comparable
positions among 23 Northeastern investor-owned (the same companies
included in the peer group shown on the performance graph on page
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21) and other comparable revenue-sized U.S. electric and gas
utilities. The Committee believes that competitive salaries
provide the foundation of the Corporation's officer compensation
program and are essential for the Corporation to attract and retain
qualified senior officers. Each officer position has been assigned
to a competitive salary range. The Committee annually evaluates
the continued competitiveness of these ranges and approves
adjustments based on the findings of compensation survey data for
the aforementioned utilities. The Committee intends to administer
salaries within the 25th to 75th percentile of practice with
respect to comparable revenue-sized utilities. The Committee also
annually evaluates each officer's salary position within the range
to which that position has been assigned. Taking these factors
into account, the Committee independently determines the salary of
the Chief Executive Officer (CEO) and reviews recommendations
submitted by the CEO in approving the salaries of the other
Executive Officers.
Mr. Donlon retired as CEO on April 30, 1993, and Mr. Davis was
appointed CEO. At the time of his appointment, Mr. Davis' annual
salary rate was established at $420,000 as compared to a previous
annual salary rate of $300,000 which was approved at the time of
his election as Vice Chairman of the Board of the Corporation on
November 19, 1992. The salary amounts set forth on the Summary
Compensation Table following represent salary actually received by
Mr. Davis during the indicated years. The salaries of the other
four Executive Officers were increased in 1993 in the range of 2.5%
to 14.4% or an average of 8%. The Committee has been advised by
its consultant that Mr. Davis' 1993 salary approximates the median
relative to the CEOs of the 23 Northeastern utilities. The average
salaries of the other four Executive Officers approximate the 75th
percentile relative to the salaries of the other Executive
Officers in the Northeastern utility comparator group. However,
Niagara Mohawk's revenues position it within the highest quartile
(i.e., above the 75th percentile) of this utility group. Taking
into account the size of Niagara Mohawk's revenues relative
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to the revenues and salaries of these utilities, the average
salaries of the other four Niagara Mohawk Executive Officers fall
below 50th percentile levels on a revenue adjusted basis.
Annual Officer Incentive Compensation Plan (ICP)
On December 13, 1990 the Board of Directors adopted the
Corporation's officer and management incentive compensation plans.
The officer ICP is structured and administered so that a
significant component of each Executive Officer's annual cash
compensation must be earned on the basis of the Corporation's and
the officer's annual performance. 1993 incentive award
opportunities were set by the Committee at 35% of salary for Mr.
Davis, Mr. Endries, and Mr. Sylvia. Award opportunities for
Messrs. Hennessey and Powers were set at 25% of salary. The
opportunities represent the maximum ICP payment an Executive
Officer could earn with respect to 1993. ICP award opportunities
are intended to position executive officer annual compensation
(salary + ICP awards) within the 25th to 75th percentile of
comparably sized utilities practice depending on company financial,
business and support unit performance.
Payment of 1993 ICP awards was based on the following
criteria: Earnings per share ("EPS") measured against budgeted
standards; measurement of the Corporation's performance in earning
amounts under the Measured Equity Return Incentive Term ("MERIT")
provision incorporated in the multi-year rate agreement approved by
the New York State Public Service Commission ("PSC") on June 12,
1991 which affords the Corporation an opportunity to receive an
agreed upon amount of additional revenue through the rate setting
process based upon performance, as determined by the PSC, against
certain PSC approved business and service goals; and the
achievement of business unit cost management and other business
unit performance goals established at the start of the year. 29
other officers participated in the 1993 officer ICP. 3,438
management, supervisory, technical, professional, and
administrative employees participated in the Corporation's annual
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Management Incentive Compensation Plan and earned 1993 incentive
awards based on the achievement of similar performance criteria.
The payment of 1993 officer ICP and Management Incentive
Compensation Plan awards was further conditioned on the
Corporation's reporting 1993 EPS of at least $1.62, after the cost
of awards under both plans, and the maintenance of 1993 dividend
payments not less than 1992 levels.
For 1993 Mr. Davis earned an ICP award of $40,632 which
represented 10.69% of his salary received in 1993 (exclusive of
Directors fees). Mr. Endries earned an identical percentage of his
salary received (also exclusive of Directors fees). The awards for
Messrs. Davis and Endries were based on EPS vs. budget (37.32%), on
earned MERIT (41.93%) and on the consolidated strategic business
units' performance measured against unique goals (20.75%).
Although the Corporation performed well in these areas, performance
fell short of levels needed to earn maximum awards evidenced by
Messrs. Davis and Endries earning 30.5% of their maximum award
opporunities. The ICP awards earned by Messrs. Sylvia, Hennessey,
and Powers averaged 16.20% of their respective salaries. On
average, 27.86% of their awards were based on overall company
performance using the same criteria used to determine Messrs. Davis
and Endries awards, and 72.14% was based on the performance of
their respective business units evaluated relative to
pre-established criteria in the following areas: nuclear
generation plant performance, maintenance of customer service and
improved financial performance. These awards were paid on February
16, 1994.
Performance Share Unit Plan
On January 30, 1992, the Board of Directors adopted the
Performance Share Unit Plan to provide officers, and other key
employees of the Corporation and its subsidiaries, with the
opportunity to earn longer-term cash incentive awards, payable in
cash at the end of a three-year period (the "Performance Cycle"),
based on the achievement of performance results which provide
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appropriate financial returns to the Corporation's shareholders and
quality services to its customers.
In 1992 the Committee approved the grant of performance share
units ("Units") to nine executive officers for a 1992-1994
performance cycle. No Units were earned in 1993 because the three
year performance cycle beginning in 1992 will not be completed
until the end of 1994. Any Units earned will be determined at the
end of the performance cycle and related cash payments will be made
in 1995.
Early in 1993, the Committee approved the grant of 25,000
Units to Mr. Davis, 15,000 Units to Mr. Endries, 10,000 to Mr.
Sylvia, and 6,000 each to Messrs. Hennessey and Powers. Dividends
will be credited with respect to all units granted during the
performance cycle. These dividend credits will be re-invested at
the prevailing stock price thereby increasing the number of units
available to be earned during the performance cycle. The number of
1993 units that are earned will be based on (1) the Corporation's
book value to market value ratio (40% of units), (2) total
shareholder return--market appreciation plus dividends (40% of
units), and (3) the quality of service the Corporation provides its
customers (20% of units) during the 1993-1995 performance cycle
measured relative to 23 Northeastern investor-owned electric and
gas utilities. To earn all the units, the Corporation's relative
ranking on all three performance criteria would have to equal or
exceed the 75th percentile of these comparator utilities. The
earning of any Units under (1) above is predicated on the
Corporation's stock market-to-book ratio at the end of the
performance cycle at least equaling the average for the eight other
New York State utilities. The earning of any units under (2) above
is further conditioned on the Corporation's 3-year total return to
shareholders equaling the 50th percentile for the 23 comparator
utilities (which includes the New York State utilities). The cash
payment value of each unit earned will be equal to the
Corporation's average daily closing stock price during the fourth
quarter of the last year of the performance cycle.
<PAGE>
<PAGE>23
The Committee intends to make additional grants on an annual
basis. The number of units, and stock options as described below,
which are granted each year is based on an evaluation of the
long-term incentive award opportunities provided by the 23 other
Northeastern utilities. The Committee endeavors to position
long-term incentive grants in the top quartile relative to the
practices of these utilities. However, the competitiveness of
awards realized from such grants is largely dependent upon the
competitiveness of returns the Corporation generates for its
shareholders during each 3-year performance cycle.
Stock Option Plan
On May 5, 1992, the shareholders approved the Corporation's
1992 Stock Option Plan. The purpose of this plan, as stated in the
text approved by stockholders, is "to promote the interests of the
Corporation, its shareholders, and its ratepayers by ensuring
continuity of management and increased incentive on the part of
officers and other key employees of the Corporation and its
subsidiaries, responsible for major contributions with effective
management, through facilitating their acquisition of equity
interests in the Corporation."
On January 27, 1993 the Corporation granted 11,125 stock
options to Mr. Davis, 6,000 options to Mr. Endries, 5,000 options
to Mr. Sylvia, and 3,000 options each to Messrs. Hennessey and
Powers. These options become exercisable on January 26, 1996 and
expire on January 26, 2003, ten years following the date they were
granted.
Dividends are credited on all outstanding options. These
credits are regarded as having been reinvested to purchase shares
of the Corporation's stock. At the time the option is exercised,
the executive officer receives a cash payment equal to the value of
the dividend share credits.
<PAGE>
<PAGE>24
The Committee is aware of the limitations the new tax law has
placed on the tax deductibility of compensation in excess of $1
million which is earned in any year by an executive officer.
Currently none of the executive officers has earned compensation
subject to such limitations. One of the primary determinants of
deductibility is that compensation be "performance based". The
Committee believes ICP payments, performance share unit payments,
and stock option grants meet the Internal Revenue Service's
performance based criteria for 1993. Proposed regulations were
only released late last year and are not yet in final form. The
Committee will continue to monitor developments in this area.
In summary, the Compensation and Succession Committee believes
the Corporation's Executive Officer Compensation Programs are
competitive with the programs of the 23 comparator Northeastern
investor-owned electric and gas utility corporations and other
utilities of comparable revenue size. The Committee further
believes that the Officer Compensation Program is appropriately
structured and administered in a manner consistent with the
Committee's, and the Corporation's, strategy of making a
substantial component of officer total compensation dependent upon,
and directly related to, the achievement of the Corporation's
longer-term mission of becoming "the most responsive and efficient
energy services company in the Northeast" and its business
strategy of "achieving maximum value for our shareholders and our
ratepayers."
Through the combination of base salary, ICP awards,
performance share unit and stock option grants, the Committee seeks
to focus the efforts of Executive Officers toward the execution of
business strategies directed toward improving, annually and over
the longer-term, both the quality of service to customers and
financial returns for its shareholders.
<PAGE>
<PAGE>25
Edward W. Duffy, Chairperson
William F. Allyn
Edmund M. Davis
Henry A. Panasci, Jr.
Stephen B. Schwartz
EXECUTIVE COMPENSATION
The table below sets forth all compensation paid by the
Corporation and its wholly-owned subsidiaries for services rendered
in all capacities during the fiscal years ended December 31, 1993,
December 31, 1992 and December 31, 1991, to the Chairman of the
Board and Chief Executive Officer, each of the other four most
highly compensated Executive Officers of the Corporation whose
compensation exceeded $100,000, and to Mr. William J. Donlon,
former Chairman of the Board and Chief Executive Officer.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Fiscal Years 1993, 1992 and 1991
Annual Compensation Long Term
Other Compensation All Other
Fiscal Annual Compensation
Name Position Year Salary(A) Bonus(B) Compensation(C) Options(#) (D)
<S> <C> <C> <C> <C> <C> <C> <C>
W. E. Davis Chairman of the 1993 $394,045 $40,632 $65,314 11,125 $123,692
Board and Chief 1992 165,002 33,175 0 1,500 6,418
Executive Officer 1991 120,333 23,045 0 0 1,831
W. J. Donlon Chairman of the 1993 252,622 23,395 13,264 3,333 11,587
Board and Chief 1992 426,058 80,471 0 10,000 20,487
Executive Officer 1991 335,036 93,238 0 0 74,833
<PAGE>
<PAGE>26
J. M. Endries President 1993 312,805 31,184 0 6,000 12,177
1992 284,091 52,089 0 6,000 9,908
1991 237,915 63,905 0 0 49,514
B. R. Sylvia Executive Vice 1993 280,834 58,921 0 5,000 7,970
President 1992 242,050 45,678 0 3,000 6,592
Nuclear 1991 282,060 33,714 0 0 219,342
J. P. Hennessey Senior Vice 1993 204,619 20,509 0 3,000 9,587
President 1992 198,543 37,014 0 3,000 8,806
1991 182,334 38,108 0 0 5,561
J. W. Powers Senior Vice 1993 196,651 27,899 0 3,000 8,383
President 1992 190,550 29,761 0 3,000 6,541
1991 171,351 32,440 0 0 4,493
</TABLE>
(A) Includes all employee contributions to the Employee Saving
Fund Plan; for Messrs. Davis, Donlon and Endries, Directors
retainers and fees received from the Corporation; and for
Messrs. Davis, Donlon, Endries and Powers, Director fees
received from Opinac Energy Corporation.
(B) Cash bonus awards under the Annual Incentive Compensation
Plan.
(C) 1993 Other Annual Compensation for Messrs. Davis and Donlon
includes amounts reimbursed for payment of taxes.
(D) All Other Compensation for 1993 includes:
Employer contributions to the Corporation's Employee
Savings Fund Plan: Mr. Davis ($4,100), Mr. Donlon
($6,564), Mr. Endries ($6,526), Mr. Sylvia ($4,667), Mr.
Hennessey ($6,139), and Mr. Powers ($5,315); Taxable
portion of life insurance premiums: Mr. Davis ($9,190),
Mr. Donlon ($5,023), Mr. Endries ($2,945), Mr. Sylvia
($2,123), Mr. Hennessey ($3,448), and Mr. Powers
($3,068); Employer contributions to the Corporation's
Excess Benefit Plan: Mr. Davis ($2,707), Mr. Endries
<PAGE>
<PAGE>27
($2,706) and Mr. Sylvia ($1,180); and Payments under the
Corporation's Relocation Policy: Mr. Davis ($107,695).
The following table discloses, for the Chairman of the Board
and Chief Executive Officer, Mr. William E. Davis, and the other
named executives, the number and terms of options granted during
the fiscal year ended December 31, 1993.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise or Grant Date
Granted In Fiscal Base Price Expiration Present
Name Group (#) (A) Year Per Share(B) Date Value (C)
<S> <C> <C> <C> <C> <C>
W. E. Davis 11,125 14.20% $19.625 1/26/2003 $72,702
W. J. Donlon 3,333 4.25% 19.625 1/26/2003 21,781
J. M. Endries 6,000 7.66% 19.625 1/26/2003 39,210
B. R. Sylvia 5,000 6.38% 19.625 1/26/2003 32,675
J. P. Hennessey 3,000 3.83% 19.625 1/26/2003 19,605
J. W. Powers 3,000 3.83% 19.625 1/26/2003 19,605
</TABLE>
(A) The issuance of common stock pursuant to the Stock Option Plan
is subject to approval by the New York State Public Service
Commission.
<PAGE>
<PAGE>28
(B) Options become exercisable January 26, 1996.
(C) The Grant Date Present Value, is calculated using the
Black-Scholes Option Pricing Model with the following
assumptions: market price of the stock at January 27, 1993
grant date ($19.625); exercise price of options ($19.625);
stock volatility (0.1412); dividend yield (1.97%); risk free
rate (7.00%); exercise term (10 years); Black-Scholes ratio
(0.333); and Black-Scholes value ($6.535).
NOTE: The Black-Scholes values do not reflect dividend share
equivalents credited on all outstanding options which will
be paid when the associated options are exercised.
The following table summarizes exercises of options by the
Chairman of the Board and Chief Executive Officer, Mr. William E.
Davis, and the other named executives, the number of unexercised
options held by them and the spread (the difference between the
current market price of the stock and the exercise price of the
option) on those unexercised options for fiscal year ended December
31, 1993.
<PAGE>
<PAGE>29
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities
Underlying Value of
Unexercised Unexercised
Options Options
at Fiscal at Fiscal
Name Group Year-End (#) (A) Year-End (B)
<S> <C> <C>
W. E. Davis 12,625 $10,141
W. J. Donlon 13,333 23,333
J. M. Endries 12,000 16,500
B. R. Sylvia 8,000 9,500
J. P. Hennessey 6,000 8,250
J. W. Powers 6,000 8,250
</TABLE>
(A) No options were exercised or exercisable in 1993.
(B) The closing market price of the Corporation's common stock
on December 31, 1993 was $20.25.
The following table outlines the awards granted to the
Chairman of the Board and Chief Executive Officer, Mr. William E.
Davis, and the other named executives under the Corporation's
Performance Share Unit Plan, a long-term incentive plan, for
fiscal year ended December 31, 1993.
<PAGE>
<PAGE>30
<TABLE>
<CAPTION>
Long-Term Incentive Plan - Awards in Last Fiscal Year
Estimated Future Payouts
Under Non-Stock Price-Based Plans
Number Performance
of Share or Other
Units or Period Until
Other Rights Maturation Threshold Threshold Target Target Maximum Maximum
Name Group (#) Or Payout (#) ($)A (#) ($)B (#) ($)C
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. E. Davis 25,000 1996 6,250 $149,219 12,500 $329,688 25,000 $721,875
W. J. Donlon 2,777 1996 694 16,569 1,389 36,635 2,777 80,186
J. M. Endries 15,000 1996 3,750 89,531 7,500 197,813 15,000 433,125
B. R. Sylvia 10,000 1996 2,500 59,688 5,000 131,875 10,000 288,750
J. P. Hennessey 6,000 1996 1,500 35,813 3,000 79,125 6,000 173,250
J. W. Powers 6,000 1996 1,500 35,813 3,000 79,125 6,000 173,250
</TABLE>
(A) Based on the assumption of an average stock price of $23.875
during the fourth quarter of 1995.
(B) Based on the assumption of an average stock price of $26.375
during the fourth quarter of 1995, which represents the half
way point between the threshold and maximum.
(C) Based on the assumption of an average stock price of $28.875
during the fourth quarter of 1995.
All performance share units contingently granted, and all
accumulated dividend share units credited, would be earned if the
Corporation's relative ranking is at the 75th percentile or above
on all performance criteria. Please see Compensation and
Succession Committee Report above for discussion of the plan and
performance criteria.
NOTE: Values identified do not include accumulated dividend share
units.
<PAGE>
<PAGE>31
The following graph illustrates the performance of the
Corporation's cumulative total return to shareholders from the
beginning of 1989 to the end of 1993 in comparison to the Standard
& Poor's 500 Stock Index ("S&P") and a peer group of Eastern Region
Utilities. This peer group is the same as that to which the
Corporation will be compared to when measuring achievement of its
Change Vision and the Total Return to Shareholders goal of the
Performance Share Unit Plan.
The graph reflects the Corporation's performance during a
period when financial results were still adversely affected by its
nuclear operations. During 1989, the common stock dividend was
eliminated and not reinstated until 1991. Since reinstatement, the
Corporation has paid regular and increasing dividends through 1993.
Also, on June 1, 1989 the salaries of the Chairman and CEO and the
President were reduced 10% and were not restored to their prior
levels until June 1, 1991. Management still believes that the
Company is continuing to make a gradual financial recovery
evidenced by the 70.5% total return to shareholders over the
three-year period 1991-1993. This recovery is greatly influenced
by significant improvements in nuclear operations and aggressive
cost management initiatives. Executive incentive compensation
plans established in 1991 and 1992 are designed to reward officers
for improved financial results as described in the Compensation and
Succession Committee Report on Executive Compensation above.
NIAGARA MOHAWK POWER CORPORATION
Comparison of Five Year Cumulative Total Return
vs. S&P 500 and Peer Group of Eastern Region Utilities
[ILLUSTRATION OF PERFORMANCE GRAPH]
<PAGE>
<PAGE>32
DATA POINTS FOR 1988 - 1993
1988 1989 1990 1991 1992 1993
NMPC 100.00 116.18 106.07 147.21 163.94 181.08
S&P 500 100.00 131.59 127.49 166.17 178.81 196.75
PEER GROUP 100.00 130.96 125.41 161.92 185.73 202.72
<TABLE>
<CAPTION>
NOTE 1 EASTERN REGION UTILITIES:
<S> <C> <C>
Allegheny Power System Inc. DQE, Inc. Northeast Utilities
Atlantic Energy, Inc. Delmarva Power & Light Co. Orange & Rockland Utilities Inc.
Baltimore Gas & Electric Company Eastern Utilities Associates Pennsylvania Power & Light Co.
Boston Edison Company General Public Utilities Corp. Philadelphia Electric Company
Brooklyn Union Gas Company Long Island Lighting Co. Public Service Enterprise Group Inc.
Central Hudson Gas & Electric Corp. National Fuel Gas Company Rochester Gas & Electric Corp.
Central Maine Power Co. New England Electric System The United Illuminating Company
Consolidated Edison Co. of New York, Inc. New York State Electric & Gas Corp.
</TABLE>
NOTE 2
Total returns for each Eastern Region Utility were determined
in accordance with the Securities and Exchange Commission's
regulations, i.e., weighted according to each such issuer's stock
market capitalization.
<PAGE>
<PAGE>33
Retirement Benefits
The following table illustrates the maximum aggregate pension
benefit, integrated with Social Security, payable by the
Corporation under the Niagara Mohawk Pension Plan (the "Basic
Plan") and the Corporation's Supplemental Executive Retirement Plan
(the "Supplemental Plan") to an officer in specified average salary
and year-of-service classifications. Such benefit amounts have
been calculated as though each officer selected a straight life
annuity and retired on December 31, 1993 at age 65. The amount of
compensation taken into account under a tax-qualified plan is
subject to certain annual limits (adjusted for increases in the
cost of living, $235,840 in 1993 and $150,000 for 1994). This
limitation may reduce benefits payable to highly compensated
individuals.
<TABLE>
<CAPTION>
Annual Retirement Allowance
3-Year Average 10 Years 20 Years 30 Years 40 Years 45 Years
Annual Salary Service* Service Service Service Service
<C> <C> <C> <C> <C> <C>
$ 75,000 $10,215 $ 38,232 $ 38,232 $ 42,645 $ 46,395
150,000 21,090 83,232 83,232 87,270 94,770
225,000 31,965 128,232 128,232 131,895 143,145
300,000 42,840 173,232 173,232 176,520 191,520
375,000 53,715 218,232 218,232 221,145 239,895
450,000 64,590 263,232 263,232 265,770 288,270
</TABLE>
_____________
*Subject to five-year average annual salary.
<PAGE>
<PAGE>34
The credited years of service under the Basic and Supplemental
Plans for the individuals listed in the Summary Compensation Table
are Mr. Davis, 4 years; Mr. Donlon, 45 years; Mr. Endries, 21
years; Mr. Sylvia, 3 years; Mr. Hennessey, 34 years and Mr. Powers,
30 years.
The Basic Plan, a noncontributory, tax-qualified defined
benefit plan, provides all employees of the Corporation with a
minimum retirement benefit related to the highest consecutive
five-year average compensation. Compensation covered by the Basic
Plan includes only the participant's base salary or pay, subject to
the maximum annual limit noted above. Directors who are not
employees are not eligible to participate.
The Supplemental Plan is an unfunded, nonqualified,
noncontributory defined benefit plan providing additional benefits
to certain officers of the Corporation upon retirement after age 55
who have 20 or more years of employment. The Committee may grant
exceptions to these requirements. The Supplemental Plan provides
for payment monthly of an amount equal to the greater of (i) 60% of
monthly base salary averaged over the final 36 months of
employment, less benefits payable under the Basic Plan, retirement
benefits accrued during previous employment and one-half of the
maximum Social Security benefit to which the participant may be
entitled at the time of retirement, or (ii) benefits payable under
the Basic Plan without regard to the annual benefit limitations
imposed by the Internal Revenue Code.
Employee Agreements
In 1993, the Corporation entered into employment agreements
with Messrs. Davis, Endries, Sylvia, Hennessey and Powers. The
agreements have an initial three-year term, and, unless either
party gives notice to the contrary, the agreement will be extended
annually for one-year periods. The agreements provide that the
executive will be able to participate in the Corporation's
incentive compensation plans according to their terms. If at any
<PAGE>
<PAGE>35
time the executive's employment is terminated by the Corporation
without cause or, following a change in control, the executive
terminates employment for good reason (as defined in the
agreement), the executive will be entitled to a severance benefit
paid over two years in an amount equal to two times the executive's
base salary plus an amount equal to two times the greater of the
executive's (i) most recent annual incentive award or (ii) average
annual incentive award paid over the previous three years. The
employment agreements also provide that the executive's benefits
under the Corporation's Supplemental Executive Retirement Plan will
be based on the executive's salary and annual incentive award and,
further, that if the executive's employment terminates under the
conditions noted above, the executive will be deemed fully vested
under such plan. The agreements restrict under certain
circumstances the executive's ability to compete with the
Corporation and to use confidential information concerning the
Corporation. In the event of a dispute over an executive's rights
under the executive's agreement following a change in control of
the Corporation, the Corporation will pay the executive's
reasonable legal fees with respect to the dispute unless the
executive's claims are found to be frivolous.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Corporation receive an
annual retainer of $20,000 and all Directors receive $1,000 per
Board meeting attended; however, beginning January 1, 1994,
Directors who are employees will no longer receive fees for Board
meetings attended. Directors who are not employees and who chair
any of the standing Board Committees receive an additional annual
fee of $3,000 and those who serve on any of the standing Board
Committees receive $850 per Committee meeting attended. The
Corporation also reimburses its Directors for travel, lodging and
related expenses they may incur in attending Board and Committee
meetings.
<PAGE>
<PAGE>36
The Corporation has an unfunded, nonqualified retirement plan
for Directors who have not been employees of the Corporation.
Under the plan, a Director retiring at age 65 or older after ten
years of service as a Director is entitled to an annual benefit
equal to such Director's annual retainer at the time of retirement.
If a Director of such age retires after serving less than ten
years, but more than five years, such Director will receive a
pro-rated benefit based on years of service. If a Director serves
on the Board less than five years or leaves before reaching age 65,
no benefit is available.
The Corporation provides certain health and life insurance
benefits to Directors who are not employees of the Corporation.
During 1993, the following Directors received the indicated
benefits under the foregoing arrangements: Mr. Allyn ($4,785),
Mr. Burkhardt ($2,887), Mr. Costle ($4,293), Mr. Edmund Davis
($3,649), Mr. Duffy ($4,423), Dr. Hill ($584), Mr. Panasci ($164),
Dr. Peterson ($3,275), Mr. Riefler ($5,162) and Mr. Wick ($4,385).
Mr. Burkhardt received a consulting fee of $48,000 during
1993.
SECURITIES HELD BY CERTAIN BENEFICIAL OWNERS
The following table sets forth the shares of Common Stock of
the Corporation that the Corporation believes are or may be owned
as of December 31, 1993 by persons with more than five percent of
the Corporation's Common Stock.
<PAGE>
<PAGE>37
<TABLE>
<CAPTION>
Amount
and
Nature of
Beneficial Percent
Title of Class Name and Address of Beneficial Owner Ownership of Class
<S> <C> <C> <C>
Common Stock Fidelity Management Trust Company 13,370,604(1) 9.39%
82 Devonshire Street
Boston, Massachusetts 02109
Common Stock FMR Corporation 7,530,940 5.29%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
___________
(1) Fidelity Management Trust Company is Trustee of the
Corporation's Employee Savings Fund Plans for Non-Represented
Employees and Represented Employees. The Trustee will vote
all shares of Common Stock held in the Trust established for
the Plans in accordance with the directions received from the
employees participating in the Plans. The Trustee will vote
shares for which it receives no instructions in the same
proportion as it votes shares for which it receives
instructions.
(2). AUTHORIZATION OF ADDITIONAL SHARES OF COMMON STOCK
The Board of Directors has approved, and recommends that the
Corporation's shareholders adopt, the proposal to amend the
Corporation's Certificate of Incorporation (the "Charter") to
authorize an additional 35,000,000 shares of Common Stock. The
Charter currently authorizes 150,000,000 shares of Common Stock, of
which 142,596,892 shares were outstanding on March 15, 1994. The
<PAGE>
<PAGE>38
Corporation's external financing is projected for 1994 to consist
of approximately $200 million from the sales of common stock.
Authorization of the additional shares of capital stock will
enable the Corporation to continue the permanent equity financing
necessary to improve the Corporation's capital structure and
sustain its current construction program and future growth. The
Corporation expects to conduct one or more offerings of Common
Stock during 1994 and will continue to issue shares of Common Stock
under its dividend reinvestment plan and employee benefit plans.
No further action by the Corporation's shareholders is required for
issuance of the additional shares of Common Stock except to the
extent required by the rules of the New York Stock Exchange or
applicable law. The issuance of existing and additional authorized
shares of Common must be approved by the State of New York
Department of Public Service.
The additional shares of Common Stock will have the same
rights, preferences and restrictions as the shares of Common Stock
currently authorized. Holders of Common Stock do not have
preemptive rights with respect to the presently authorized but
unissued shares of Common Stock and will not have preemptive rights
with respect to the additional 35,000,000 shares of Common Stock
proposed to be authorized. The Corporation cannot predict the
prices at which the additional shares of Common Stock will be sold,
and the issuance of any additional shares of Common Stock could
result in dilution of the equity interests of existing
shareholders.
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is necessary to approve the
proposal. If the proposal is adopted, Parts A and C of Article IV
of the Corporations' Certificate of Consolidation, as amended, will
be further amended to read as follows:
<PAGE>
<PAGE>39
"IV.A. The total number of shares which the Corporation may
have is 206,000,000, of which 3,400,000 are to have a par
value of $100 each, 27,600,000 are to have a par value of $25
each and 185,000,000 are to have a par value of $1 each."
"C. The shares of the Corporation are to be classified as
follows:
3,400,000 shares are to be Preferred Stock with a
par value of $100 each;
19,600,000 shares are to be Preferred Stock with a
par value of $25 each;
8,000,000 shares are to be Preference Stock with a
par value of $25 each; and
185,000,000 shares are to be Common Stock with a
par value of $1 each."
The Board of Directors recommends that you vote FOR the
proposal to increase the number of authorized shares of Common
Stock. Your proxy will be voted for or against the proposals as
you specify thereon. If no preference is specified, your shares
will be voted in favor of the proposal.
SHAREHOLDER PROPOSALS
(3). SHAREHOLDER PROPOSAL ON CARBON DIOXIDE EMISSIONS AND
CLIMATE CHANGE
The Benedictine Sisters, 3120 W. Ashby, San Antonio, Texas
78228, who own 705 shares of the Corporation's Common Stock,
advised the Corporation that they intend to present the following
proposal at the 1994 Annual Meeting of Shareholders:
"RESOLVED: That shareholders request our Company to issue a
report, prepared at reasonable cost and omitting proprietary
information, on the potential for large capital costs to the
<PAGE>
<PAGE>40
company if standards on carbon dioxide emissions are imposed; the
projected amount of such costs; and company plans to use
alternative energy sources."
Statement of Shareholders
"Demonstrating leadership in reducing the impacts of climate
change can give the Company stability in the future, especially as
pollution control becomes stricter and power plants are targeted as
major offenders. By taking appropriate measures, our Company can
protect both its short- and long-term financial health and
shareholder value. Shareholders seeking to minimize the costs of
climate change - both to the company and to society at large -
should vote FOR this resolution putting their concern on the record
and asking for a response by our Company."
Board of Directors' Response to the Shareholder Proposal
The Corporation is extremely proud of its record as recognized
environmental leader in the utility industry in addressing the
global warming issue. The Corporation believes that, given the
substantial value of materials the Corporation has already prepared
with respect to environmental matters, such a report would be an
unnecessary expense.
The Corporation has already committed, as a part of the
Department of Energy's Climate Challenge program, to limit its
carbon dioxide (CO2) emissions voluntarily. As noted by Vice
President Gore in an October 19, 1993 speech at the White House,
Niagara Mohawk is one of only seven such public utilities in the
country that have pledged to do so. This commitment has also been
recognized on page 22 of the President's Climate Change Action Plan
release in October 1993. On November 15, 1993, William E. Davis,
Chairman and Chief Executive Officer of the Corporation testified
before the House Energy Subcommittee on Energy and Power with
respect to the Corporation's Greenhouse Warming Action Program, and
reiterated the Corporation's commitment to limit its emissions of
<PAGE>
<PAGE>41
CO2 and other greenhouse gases at or below 1990 levels by the year
2000. To date, the Corporation has already significantly reduced
its CO2 emissions from 1990 levels.
The Corporation's other "alternative energy sources" programs
are also discussed in detail in the Corporation's Greenhouse
Warming Action Program booklet and the other materials prepared by
the Corporation. The Corporation's Greenhouse Warming Action
Program, and many of the Corporation's other environmental reports
and studies are available upon request and set forth in the
Corporation's comprehensive action plan in this area.
The Proposal, requests, in part, that the report discuss "the
potential for large capital costs to the company if standards on
CO2 emissions are imposed; the projected amount of such costs."
Unfortunately, the proposal does not discuss what emission
standards it anticipates. It should be noted that the federal
government is not currently considering standards for CO2
emissions. Any such report therefore, would be necessarily vague
or uncertain. Further, standards may be imposed which do not
contemplate capital costs (e.g., a "carbon tax") or which may have
no capital cost consequences (e.g., a change of fuel mix which may
result in compliance with the new standards without capital
costs). The Corporation also believes that it would be difficult
if not impossible to attribute CO2 emission reductions to any one
set of expenditures. For example, demand side management programs,
Clean Air Act compliance, and generator "mothballing" (all parts of
the Corporation's program) all contribute to CO2 reductions, yet
none could be accurately characterized as capital having costs
associated with CO2 emission compliance.
Finally, the Corporation intends to make voluntary filings
with the Department of Energy each year that will disclose the
actions it has taken to limit its CO2 emissions and the results of
those actions during the previous year. The Corporation will make
such report available on request to shareholders. Based on this,
the Corporation believes the proposal has become substantially, if
not entirely, redundant and unnecessary.
<PAGE>
<PAGE>42
Therefore, the Board of Directors recommends that you vote
AGAINST the proposal to issue a report on carbon dioxide emissions
and the Corporation's plans to use alternative energy sources.
CHANGE TO BY-LAWS
At its meeting on June 22, 1993, the Board of Directors
amended the provisions of Section 1 of Article II of the By-Laws of
the Corporation to identify business which may properly come before
the annual meeting, the text of which is attached as Annex A to
this Proxy Statement. No shareholder approval was necessary for
this amendment.
ADDITIONAL INFORMATION
The Directors and officers of the Corporation and its
subsidiaries are insured against obligations which may be incurred
as a result of the Corporation's indemnification of its Directors
and officers. The coverage also insures the Directors and officers
against liabilities for which they may not be indemnified by the
Corporation or its subsidiaries, except a dishonest act or breach
of trust. The insurance was purchased from the National Union Fire
Insurance Company, Associated Electric & Gas Insurance Services,
Ltd., Aetna Casualty and Surety Company, Federal Insurance Company,
CNA Insurance Company and ACE Insurance Company, Ltd. for the term
from January 31, 1994 to January 30, 1995 for an aggregate premium
of $2,176,141.
INDEPENDENT ACCOUNTANTS
The Corporation has selected the independent accounting firm
of Price Waterhouse to examine the financial statements of the
Corporation and its subsidiaries for the year ended December 31,
1994. Representatives of Price Waterhouse will be present at the
meeting with the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
<PAGE>
<PAGE>43
SHAREHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 1995
Annual Meeting must be received by the Corporation on or before
November 20, 1994, to be considered for inclusion in the
Corporation's Proxy Statement and Form of Proxy relating to that
meeting.
OTHER BUSINESS
The management does not know of any matters of business other
than the foregoing to be presented at the Annual Meeting. However,
if other matters are properly brought before the meeting or any
adjournment thereof, the proxies will be voted accordingly to the
best judgment of the persons authorized thereby.
By Order of the Board of Directors,
Harold J. Bogan
Secretary
Dated: March 28, 1994
<PAGE>
<PAGE>44
DIRECTIONS TO THE ONONDAGA COUNTY CONVENTION CENTER
[MAP INSERTED HERE]
From the NYS Thruway (I 90):
Take Exit 36, Rt. 81 South to Syracuse.
Harrison Street Exit #18, right on Harrison two blocks, turn left
onto State Street, left into parking garage.
From the North:
Route 81 South to Harrison Street Exit #18.
Right on Harrison two blocks, turn left onto State Street,
left into parking garage.
From the South:
Route 81 North to Adams/Harrison Street Exit #18.
Straight one block, left onto Harrison two blocks,
turn left onto State Street, left into parking garage.
<PAGE>
<PAGE>45 [FRONT OF CARD]
[FORM OF PROXY]
Indicate your vote by marking an (X) in the appropriate boxes.
1. Election of Directors to Class III: L. Burkhardt, III, D.
Costle, D. Riefler, S. Schwartz, J. Wick
___ FOR all nominees ___ WITHHOLD AUTHORITY to vote for all
listed above nominees listed above
___ FOR all nominees listed except _____________________________
2. To amend the Corporation's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from
150,000,000 to 185,000,000 shares.
___ FOR ___ Against ___ Abstain
3. To consider and act upon a shareholder proposal relating to
Company report on carbon dioxide and emissions and related
regulations.
___ FOR ___ Against ___ Abstain
4. To transact such other business as may properly come before
the meeting.
Dated ____________________________, 1994
________________________________________
________________________________________
Signature of Shareholder(s)
(Please give your full title when signing
as attorney, trustee, executor, administrator,
or guardian, etc.)
<PAGE>
<PAGE>46 [BACK OF CARD]
Niagara Mohawk Power Corporation
Proxy Solicited by the Board of Directors for Annual Meeting
May 3, 1994
The undersigned hereby appoints William E. Davis, Edmund M. Davis,
William F. Allyn and John G. Wick and any of them, proxies of the
undersigned, with power of substitution to vote at the Annual
Meeting of Shareholders of Niagara Mohawk Power Corporation, at
Syracuse, NY, on May 3, 1994, at 10:30 A.M., and at any
adjournments thereof.
Please sign and mail promptly This proxy will be voted as
to assure your representation indicated. If no preference is
at the meeting. indicated, the shares
represented by this proxy will
be voted FOR Items 1 and 2 and
AGAINST Item 3.
Continued and to be signed and dated on the other side.
<PAGE>
ANNEX A
BY-LAWS OF NIAGARA MOHAWK POWER CORPORATION
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting: The annual meeting of the stockholders
of the corporation for the election of directors and the
transaction of such other business as may properly come before it
shall be held on the first Tuesday in May in each year. If that
day be a legal holiday in any year, the meeting shall be held on
the next day following that is not a legal holiday.
Business properly brought before any such annual meeting shall
include matters specifically set forth in the corporation's proxy
statement with respect to such meeting, matters which the Chairman
of the Board of Directors in his sole discretion causes to be
placed on the agenda of any such annual meeting and (i) any
proposal of a stockholder of this corporation and (ii) any
nomination by a stockholder of a person or persons for election as
director or directors, if such stockholder has made a written
request to this corporation to have such proposal or nomination
considered at such annual meeting, as provided herein, and further
provided that such proposal or nomination is otherwise proper for
consideration under applicable law and the certificate of
incorporation and by-laws of the corporation.
Notice of any proposal to be presented by any stockholder or
of the name of any person to be nominated by any stockholder for
election as a director of the corporation must be received by the
secretary of the corporation at its principal executive office not
less than 45 nor more than 90 days prior to the date of the annual
meeting; provided, however, that if the date of the annual meeting
is first publicly announced or disclosed (in a public filing or
otherwise) less than 55 days prior to the date of the meeting, such
notice shall be given not more than ten days after such date is
<PAGE>
first so announced or disclosed. Public notice shall be deemed to
have been given more than 55 days in advance of the annual meeting
if the corporation shall have previously disclosed, in these
by-laws or otherwise, that the annual meeting in each year is to be
held on a determinable date, unless and until the Board of
Directors determines to hold the meeting on a different date.
Any stockholder who gives notice of any such proposal shall
deliver therewith the text of the proposal to be presented and a
brief written statement of the reasons why such stockholder favors
the proposal and setting forth such stockholder's name and address,
the number and class of all shares of each class of stock of the
corporation beneficially owned by such stockholder and any material
interest of such stockholder in the proposal (other than as a
stockholder).
Any stockholder desiring to nominate any person for election
as a director of the corporation shall deliver with such notice a
statement in writing setting forth the name of the person to be
nominated, the number and class of all shares of each class of
stock of the corporation beneficially owned by such person, the
information regarding such person required by paragraphs (a), (e)
and (f) of Item 401 of Regulation S-K adopted by the Securities and
Exchange Commission (or the corresponding provisions of any
regulation subsequently adopted by the Securities and Exchange
Commission applicable to the corporation), such person's signed
consent to serve as a director of the corporation if elected, such
stockholder's name and address and the number and class of all
shares of each class of stock of the corporation beneficially owned
by such stockholder. As used herein, shares "beneficially owned"
shall mean all shares as to which such person, together with such
person's affiliates and associates (as defined in Rule 12b-2 under
the Securities Exchange Act of 1934), may be deemed to beneficially
own pursuant to Rules 13d-3 and 13d-5 under the Securities Exchange
Act of 1934, as well as all shares as to which such person,
together with such person's affiliates and associates, has the
<PAGE>43
right to become the beneficial owner pursuant to any agreement or
<PAGE>
understanding, or upon the exercise of warrants, option or rights
to convert or exchange (whether such rights are exercisable
immediately or only after the passage of time or the occurrence of
conditions).
The person presiding at the meeting in addition to making any
other determinations that may be appropriate to the conduct of the
meeting, shall determine whether such notice has been duly given
and shall direct that proposals and nominees not be considered if
such notice has not been so given.
<PAGE>
