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 June 30, 1995
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-2987.
NIAGARA MOHAWK POWER CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
State of New York 15-0265555
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Erie Boulevard West Syracuse, New York 13202
(Address of principal executive offices) (Zip Code)
(315) 474-1511
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock, $1 par value, outstanding
at July 31, 1995 - 144,330,482<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
FORM 10-Q - For The Quarter Ended June 30, 1995
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
a) Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 1995 and 1994
b) Consolidated Balance Sheets - June 30,
1995 and December 31, 1994
c) Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994
d) Notes to Consolidated Financial Statements
e) Review by Independent Accountants
f) Independent Accountants' Report on the
Limited Review of the Interim Financial
Information
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 5. Other Events.
Item 6. Exhibits and Reports on Form 8-K.
Signature
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<TABLE>
PART 1. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS.
-----------------------------
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
1995 1994
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(In thousands of dollars)
<S> <C> <C>
OPERATING REVENUES:
Electric $ 811,565 $ 846,856
Gas 127,251 132,844
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938,816 979,700
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OPERATING EXPENSES:
Operation:
Fuel for electric generation 22,246 52,647
Electricity purchased 304,221 269,770
Gas purchased 57,178 65,098
Other operation expense 141,468 174,024
Maintenance 50,888 46,491
Depreciation and amortization 79,148 76,942
Federal and foreign income taxes 30,312 44,982
Other taxes 131,370 119,122
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816,831 849,076
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<PAGE>
OPERATING INCOME 121,985 130,624
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OTHER INCOME AND (DEDUCTIONS):
Allowance for other funds used
during construction 312 893
Federal and foreign income taxes 1,207 2,132
Other items (net) 2,397 3,434
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3,916 6,459
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INCOME BEFORE INTEREST CHARGES 125,901 137,083
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INTEREST CHARGES:
Interest on long-term debt 66,020 67,277
Other interest 7,445 4,136
Allowance for borrowed funds used
during construction (2,049) (1,889)
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71,416 69,524
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NET INCOME 54,485 67,559
Dividends on preferred stock 10,046 7,072
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BALANCE AVAILABLE FOR COMMON STOCK $ 44,439 $ 60,487
========== ==========
Average number of shares of common
stock outstanding (in thousands) 144,330 142,912
Balance available per average
share of common stock $ .31 $ .42
Dividends paid per share of common
stock $ .28 $ .28
/TABLE
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<TABLE>
PART 1. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS.
-----------------------------
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1995 1994
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(In thousands of dollars)
<S> <C> <C>
OPERATING REVENUES:
Electric $1,693,485 $1,780,573
Gas 370,144 434,685
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2,063,629 2,215,258
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OPERATING EXPENSES:
Operation:
Fuel for electric generation 61,524 114,772
Electricity purchased 596,220 545,130
Gas purchased 183,657 240,182
Other operation expense 296,282 346,708
Maintenance 95,654 93,984
Depreciation and amortization 157,464 152,348
Federal and foreign income taxes 108,684 133,286
Other taxes 263,754 254,876
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1,763,239 1,881,286
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<PAGE>
<PAGE>
OPERATING INCOME 300,390 333,972
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OTHER INCOME AND (DEDUCTIONS):
Allowance for other funds used
during construction 312 1,658
Federal and foreign income taxes (7,598) 4,472
Other items (net) 18,472 6,400
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11,186 12,530
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INCOME BEFORE INTEREST CHARGES 311,576 346,502
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INTEREST CHARGES:
Interest on long-term debt 129,369 135,861
Other interest 14,577 8,121
Allowance for borrowed funds used
during construction (5,591) (3,503)
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138,355 140,479
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NET INCOME 173,221 206,023
Dividends on preferred stock 20,261 14,088
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BALANCE AVAILABLE FOR COMMON STOCK $ 152,960 $ 191,935
========== ==========
Average number of shares of common
stock outstanding (in thousands) 144,327 142,706
Balance available per average
share of common stock $ 1.06 $ 1.34
Dividends paid per share of common
stock $ .56 $ .53
/TABLE
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<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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CONSOLIDATED BALANCE SHEETS
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ASSETS
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<CAPTION>
JUNE 30,
1995 DECEMBER 31,
(UNAUDITED) 1994
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(In thousands of dollars)
<S> <C> <C>
UTILITY PLANT:
Electric plant $ 8,391,558 $ 8,285,263
Nuclear fuel 512,863 504,320
Gas plant 948,922 922,459
Common plant 263,589 291,962
Construction work in progress 393,092 481,335
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Total Utility Plant 10,510,024 10,485,339
Less-Accumulated depreciation and
amortization 3,494,537 3,449,696
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Net Utility Plant 7,015,487 7,035,643
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OTHER PROPERTY AND INVESTMENTS 159,059 224,039
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<PAGE>
CURRENT ASSETS:
Cash, including temporary cash investments
of $83,088 and $50,052, respectively 106,149 94,330
Accounts receivable (less-allowance for
doubtful accounts of $3,600) 304,609 317,282
Unbilled revenues 179,500 196,700
Electric margin recoverable 36,796 66,796
Materials and supplies, at average cost:
Coal and oil for production of electricity 25,070 31,652
Gas storage 26,167 30,931
Other 145,882 150,186
Prepaid taxes 64,664 43,249
Other 44,997 45,189
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933,834 976,315
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REGULATORY AND OTHER ASSETS:
Unamortized debt expense 148,842 153,047
Deferred recoverable energy costs 7,349 62,884
Deferred finance charges 239,880 239,880
Income taxes recoverable 465,109 465,109
Recoverable environmental restoration costs 238,034 240,000
Other 252,184 252,522
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1,351,398 1,413,442
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$ 9,459,778 $ 9,649,439
=========== ===========
/TABLE
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<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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CONSOLIDATED BALANCE SHEETS
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CAPITALIZATION AND LIABILITIES
------------------------------
<CAPTION>
JUNE 30,1995 DECEMBER 31,
(UNAUDITED) 1994
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(In thousands of dollars)
<S> <C> <C>
CAPITALIZATION:
COMMON STOCKHOLDERS' EQUITY:
Common stock - $1 par value; authorized
185,000,000 shares; issued 144,330,482 and
144,311,466 shares, respectively $ 144,330 $ 144,311
Capital stock premium and expense 1,782,838 1,779,504
Retained earnings 610,718 538,583
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2,537,886 2,462,398
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CUMULATIVE PREFERRED STOCK, AUTHORIZED 3,400,000
SHARES, $100 PAR VALUE:
Non-redeemable (optionally redeemable),
issued 2,100,000 shares 210,000 210,000
Redeemable (mandatorily redeemable), issued
258,000 and 276,000 shares, respectively 24,000 25,800
CUMULATIVE PREFERRED STOCK, AUTHORIZED 19,600,000
SHARES, $25 PAR VALUE:
Non-redeemable (optionally redeemable),
issued 3,200,000 shares 80,000 80,000
Redeemable (mandatorily redeemable), issued
9,274,005 and 9,574,005 shares, respectively 227,700 230,200
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541,700 546,000
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<PAGE>
<PAGE>
Long-term debt 3,455,933 3,297,874
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Total Capitalization 6,535,519 6,306,272
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CURRENT LIABILITIES:
Short-term debt 110,000 416,750
Long-term debt due within one year 72,210 77,971
Sinking fund requirements on redeemable
preferred stock 5,950 10,950
Accounts payable 195,083 277,782
Payable on outstanding bank checks 26,427 64,133
Customers' deposits 14,385 14,562
Accrued taxes 92,277 43,358
Accrued interest 64,237 63,639
Accrued vacation pay 36,348 36,550
Other 75,833 77,818
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692,750 1,083,513
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REGULATORY AND OTHER LIABILITIES:
Accumulated deferred income taxes 1,331,275 1,258,463
Deferred finance charges 239,880 239,880
Employee pension and other benefits 242,341 235,741
Unbilled revenues 27,179 93,668
Deferred pension settlement gain 42,602 50,261
Other 108,232 141,641
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1,991,509 2,019,654
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COMMITMENTS AND CONTINGENCIES (NOTE 2):
Liability for environmental restoration 240,000 240,000
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$ 9,459,778 $9,649,439
========== ==========
/TABLE
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<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
INCREASE (DECREASE) IN CASH (UNAUDITED)
----------------------------------------
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1995 1994
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(In thousands of dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 173,221 $ 206,023
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 157,464 152,348
Amortization of nuclear fuel 12,727 19,366
Provision for deferred Federal income taxes 60,126 42,964
Electric margin recoverable 30,000 (13,754)
Gain on sale of subsidiary (8,901) -
Deferred recoverable energy costs 55,535 39,708
Amortization of nuclear replacement power cost
disallowance - (11,540)
Unbilled revenues (49,289) -
(Increase) decrease in net accounts receivable 12,673 (37,885)
Decrease in materials and supplies 13,928 12,466
Decrease in accounts payable and accrued expenses (86,933) (91,773)
Increase in accrued interest and taxes 49,517 77,206
Changes in other assets and liabilities (49,470) (5,384)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 370,598 389,745
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<PAGE>
<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction additions (149,698) (165,125)
Nuclear Fuel (8,543) 991
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Acquisition of utility plant (158,241) (164,134)
(Increase) decrease in materials and supplies
related to construction 1,722 (370)
Decrease in accounts payable and accrued
expenses related to construction (21,733) (22,943)
Net proceeds from sale of subsidiary 161,087 -
Increase in other investments (72,079) (33,188)
Other 2,973 (8,941)
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NET CASH USED IN
INVESTING ACTIVITIES (86,271) (229,576)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock 284 15,386
Redemption of preferred stock (9,300) (14,300)
Issuance of long-term debt 275,000 210,000
Reductions in long-term debt (15,000) (218,914)
Net change in short-term debt (405,750) (44,015)
Dividends paid (101,086) (89,675)
Other (16,656) (9,571)
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NET CASH USED IN FINANCING ACTIVITIES (272,508) (151,089)
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NET INCREASE IN CASH 11,819 9,080
Cash at Beginning of Period 94,330 124,351
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CASH AT END OF PERIOD $ 106,149 $ 133,431
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 146,118 $ 149,087
Income taxes paid $ 29,997 $ 63,720
</TABLE>
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NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company, in the opinion of management, has included
adjustments (which include normal recurring adjustments)
necessary for a fair statement of the results of operations
for the interim periods presented. The consolidated
financial statements for 1995 are subject to adjustment at
the end of the year when they will be audited by
independent accountants. The consolidated financial
statements and notes thereto should be read in conjunction
with the financial statements and notes for the years ended
December 31, 1994, 1993 and 1992 included in the Company's
1994 Annual Report to Shareholders on Form 10-K.
The Company's electric sales tend to be substantially
higher in summer and winter months as related to weather
patterns in its service territory; gas sales tend to peak
in the winter. Notwithstanding other factors, the
Company's quarterly net income will generally fluctuate
accordingly. Therefore, the earnings for the three-month
and six-month periods ended June 30, 1995, should not be
taken as an indication of earnings for all or any part of
the balance of the year.
2. Contingencies.
ENVIRONMENTAL ISSUES: The public utility industry
typically utilizes and/or generates in its operations a
broad range of potentially hazardous wastes and by-
products. The Company believes it is handling identified
wastes and by-products in a manner consistent with Federal,
state and local requirements and has implemented an
environmental audit program to identify any potential areas
of concern and assure compliance with such requirements.
The Company is also currently conducting a program to
investigate and restore, as necessary to meet current
environmental standards, certain properties associated with
its former gas manufacturing process and other properties
which the Company has learned may be contaminated with
industrial waste, as well as investigating identified
industrial waste sites as to which it may be determined
that the Company contributed. The Company has also been
advised that various Federal, state or local agencies
believe certain properties require investigation and has
prioritized the sites based on available information in
order to enhance the management of investigation and
remediation, if necessary.
The Company is currently aware of 90 sites with which it
has been or may be associated, including 47 which are
Company-owned. With respect to non-owned sites, the
Company may be required to contribute some proportionate
share of remedial costs.
Investigations at each of the Company-owned sites are
designed to (1) determine if environmental contamination
problems exist, (2) if necessary, determine the appropriate
remedial actions required for site restoration and (3)
where appropriate, identify other parties who should bear
some or all of the cost of remediation. Legal action
against such other parties, if necessary, will be
initiated. After site investigations are completed, the
Company expects to determine site-specific remedial actions
and to estimate the attendant costs for restoration.
However, since technologies are still developing and the
Company has not yet undertaken full-scale remedial actions
at any identified sites, nor have any detailed remedial
designs been prepared or submitted to appropriate
regulatory agencies, the ultimate cost of remedial actions
may change substantially.
Estimates of the cost of remediation and post-remedial
monitoring are based upon a variety of factors, including
identified or potential contaminants, location, size and
use of the site, proximity to sensitive resources, status
of regulatory investigation and knowledge of activities at
similarly situated sites, and the Environmental Protection
Agency figure for average cost to remediate a site. Actual
Company expenditures are dependent upon the total cost of
investigation and remediation and the ultimate
determination of the Company's share of responsibility for
such costs, as well as the financial viability of other
identified responsible parties since clean-up obligations
are joint and several. The Company has denied any
responsibility in certain of these Potentially Responsible
Party (PRP) sites and is contesting liability accordingly.
As a consequence of site characterizations and assessments
completed to date and negotiations with PRP's, the Company
has accrued a liability of $240 million, representing the
low end of the range of its share of the estimated cost for
investigation and remediation. The potential high end of
the range is presently estimated at approximately $1
billion, including approximately $500 million assuming the
unlikely event the Company is required to assume 100%
responsibility at non-owned sites.
In the Company's 1995 rate order, costs incurred during
1995 for the investigation and restoration of Company-owned
sites and sites with which it is associated will be subject
to 80%/20% (ratepayer/Company) sharing (see Item 2.,
Management's Discussion and Analysis of Financial Condition
and Results of Operations - "1995 Rate Order"). In 1995,
the Company estimates it will incur $13.5 million of such
costs, resulting in a potential disallowance of
approximately $2.7 million (before tax), which the Company
has accrued as a loss in Other items (net) on the
Consolidated Statements of Income. The accrued loss will
be subject to adjustment based on actual expenditures made
in 1995. The Public Service Commission of the State of New
York (PSC) stated in its order that the decision to require
sharing will be revisited for 1996 and beyond in multi-year
rate negotiations. Accordingly, if the 80%/20% (ratepayer/
Company) sharing were to continue to be applied to rate
years beyond 1995, the Company would be required to write
off 20% of its regulatory asset associated with
environmental restoration costs. A generic PSC study of
this matter is in process, the results of which are
expected to be available for consideration in the Company's
multi-year rate negotiations. At this time the Company is
unable to predict the outcome of the study. The Company
has recorded a regulatory asset representing the
remediation obligations to be recovered from ratepayers.
The Company has provided notices of insurance claims to
carriers with respect to the investigation and remediation
costs for manufactured gas plant, industrial waste sites
and sites for which the Company has been identified as a
PRP. The Company is unable to predict whether such
insurance claims will be successful.
TAX ASSESSMENTS: The Internal Revenue Service (IRS) has
conducted an examination of the Company's Federal income
tax returns for the years 1987 and 1988 and has submitted a
Revenue Agents' Report to the Company. The IRS has
proposed various adjustments to the Company's federal
income tax liability for these years which could increase
Federal income tax liability by approximately $80 million,
before assessment of penalties and interest. Included in
these proposed adjustments are several significant issues
involving Nine Mile Point Nuclear Station Unit No. 2 (Unit
2). The Company is vigorously defending its position on
each of the issues, and submitted a protest to the IRS in
1993. Pursuant to the Unit 2 settlement entered into with
the PSC in 1990, to the extent the IRS is able to sustain
adjustments, the Company will be required to absorb a
portion of any assessment. The Company believes any such
disallowance will not have a material impact on its
financial position or results of operations. The Company
is currently attempting to negotiate a settlement of these
issues with the Appeals Division of the IRS.
LITIGATION: The Company is unable to predict the ultimate
disposition of the lawsuits referred to below. However,
the Company believes it has meritorious defenses and
intends to defend these lawsuits vigorously, but can
neither provide any judgment regarding the likely outcome
nor provide any estimate or range of possible loss.
Accordingly, no provision for liability, if any, that may
result from these lawsuits has been made in the Company's
financial statements.
(a) In March 1993, Inter-Power of New York, Inc. (Inter-
Power), filed a complaint against the Company and
certain of its officers and employees in the Supreme
Court of the State of New York, Albany County (NYS
Supreme Court). Inter-Power alleged, among other
matters, fraud, negligent misrepresentation and breach
of contract in connection with the Company's alleged
termination of a power purchase agreement in January
1993. The plaintiff sought enforcement of the
original contract or compensatory and punitive damages
in an aggregate amount that would not exceed $1
billion, excluding pre-judgment interest.
In early 1994, the NYS Supreme Court dismissed two of
the plaintiff's claims; this dismissal was upheld by
the Appellate Division, Third Department of the NYS
Supreme Court. Subsequently, the NYS Supreme Court
granted the Company's motion for summary judgment on
the remaining causes of action in Inter-Power's
complaint. In August 1994, Inter-Power appealed this
decision and on July 27, 1995, the Appellate Division,
Third Department affirmed the granting of summary
judgment as to all counts, except for one dealing with
an alleged breach of the power purchase agreement
relating to the Company's having declared the
agreement null and void on the grounds that Inter-
Power had failed to provide it with information
regarding its fuel supply in a timely fashion. The
Company is currently evaluating its options for review
of the court's reversal of summary judgment related to
this alleged breach.
(b) In November 1993, Fourth Branch Associates
Mechanicville (Fourth Branch) filed an action against
the Company and several of its officers and employees
in the NYS Supreme Court, seeking compensatory damages
of $50 million, punitive damages of $100 million and
injunctive and other related relief. The lawsuit
grows out of the Company's termination of a contract
for Fourth Branch to operate and maintain a
hydroelectric plant the Company owns in the Town of
Halfmoon, New York. Fourth Branch's complaint also
alleges claims based on the inability of Fourth Branch
and the Company to agree on terms for the purchase of
power from a new facility that Fourth Branch hoped to
construct at the Mechanicville site. In January 1994,
the Company filed a motion to dismiss Fourth Branch's
complaint. This motion has yet to be decided. Fourth
Branch has filed for protection under Chapter 11 of
the Bankruptcy Code in the Bankruptcy Court for the
Northern District of New York.
(c) On June 8, 1994, Medina Power Company (Medina) filed a
lawsuit against the Company in the U.S. District Court
for the Western District of New York. Medina alleges,
among other claims, that the Company violated various
New York State antitrust laws in connection with a
contract that the Company has with Medina. On July
11, 1995 Medina amended its complaint and is now
seeking unspecified damages.
The Company had previously entered into a contract
with Medina, an unregulated generator, for the
purchase of electricity. The contract requires Medina
to be a qualifying facility (QF) under federal law or
face a contractual penalty. Having come on-line
without a steam host, Medina did not meet this QF
requirement, subjecting it to a 15% rate reduction.
The Company advised Medina that it had exercised its
contract right and reduced the rate accordingly. The
Company believes Medina's lawsuit is without merit,
but cannot predict the outcome of this action.
(d) The Company is involved in a number of court cases
regarding the price of energy it is required to
purchase in excess of contract levels from certain
unregulated generators ("overgeneration"). The
Company has paid the unregulated generators based on
its short-run avoided cost (under Service Class No. 6)
for all such overgeneration rather than the price
which the unregulated generators contend is applicable
under the contracts. The Company cannot predict the
outcome of these actions, but will continue to
aggressively press its position.
3. Rate and Regulatory Issues and Contingencies.
(See Item 2., Management's Discussion and Analysis of
Financial Condition and Results of Operations - "1995 Rate
Order" and "Multi-Year Electric Rate Proceeding.")
In accordance with Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation," (SFAS No. 71), the Company's
financial statements reflect assets and costs based on
ratemaking conventions, as approved by the PSC and the
Federal Energy Regulatory Commission (FERC). Certain
expenses and credits, normally reflected in income as
incurred, are only recognized when included in rates and
recovered from or refunded to customers. Virtually all
costs of this nature which were determined by the
regulators to have been prudently incurred have been and
continue to be recoverable through rates in the course of
normal ratemaking procedures and the Company believes that
the items currently deferred on its consolidated balance
sheet should be afforded similar treatment.
Continued accounting under SFAS No. 71 requires, among
other things, that rates be designed to recover specific
costs of providing regulated services and products and that
it be reasonable to assume that rates are set at levels
that will recover a utility's costs and can be charged to
and collected from customers. When a utility determines it
can no longer apply the provisions of SFAS No. 71 to all or
a part of its operations, it must eliminate from its
balance sheet the effects of actions of regulators that had
been recorded previously as assets and liabilities pursuant
to SFAS No. 71, but which would have not been so accounted
for by enterprises in general.
The PSC's April 21, 1995 Order (1995 rate order)
contemplates no change in this approach to such reporting.
While still part of the ongoing multi-year electric rate
proceeding (Proceeding), neither the Company's price cap
proposal nor the PSC Staff's proposal to transition the
Company's rates from being cost-based to market-based is
expected to be approved by the PSC, although the final rate
agreement could incorporate components from one or both
proposals. Rather, with respect to the
Proceeding, the 1995 rate order directed the
parties to the Proceeding to address a broad spectrum of
issues that are raised as New York State and the nation
move from energy markets that are highly regulated to
markets that are governed by increasing competition and
market forces. The parties to the Proceeding have begun
discussions on these issues (See Item 2., Management's
Discussion and Analysis of Financial Condition and Results
of Operations - "Multi-Year Electric Rate Proceeding"). It
is not clear what the outcome of the Proceeding will be or
whether any material change in the current form of
regulation to which the Company is subject will be
implemented. The Company believes, at this time, that the
provisions of SFAS No. 71 are still applicable to
its operations. However, the final outcome of the
Proceeding could result in the application of SFAS No. 71
being discontinued with respect to all or a portion of the
Company's electric business. Such an outcome could have a
material adverse effect on the Company's results of
operations and financial condition.
In March 1995, the Financial Accounting Standards
Boardissued Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" (SFAS No.
121). SFAS No. 121 requires companies, including
utilities, to assess the need to recognize a loss whenever
events or circumstances occur which indicate that the
carrying amount of an asset may not be fully recoverable.
An impairment loss would be recognized if the sum of the
future undiscounted net cash flows expected to be generated
by an asset is less than its book value. SFAS No. 121 also
amends SFAS No. 71 to require write-off of a regulatory
asset if it is no longer probable that future revenues will
recover the cost of the asset.
SFAS No. 121, which is applicable in 1996, may have
consequences to a number of utilities, including the
Company, which are facing growing competitive threats that
may erode future prices, and which have relatively high-
cost nuclear generating assets and unregulated generator
contracts. In the context of the Company's recently issued
1995 rate order, the Company believes the effects of
adoption of SFAS No. 121 to be immaterial. While the
Company has not yet fully assessed the financial
consequences of applying the provisions of SFAS No. 121,
its application could have a material adverse effect on the
Company's results of operations and financial condition if
rates established in the future are no longer cost-based or
if management can no longer conclude that existing
regulatory assets are probable of recovery.
On March 29, 1995, the FERC issued a Notice of Proposed
Rulemaking (NOPR) on Open Access Non-Discriminatory
Transmission Services by Public Utilities and Transmitting
Utilities and a supplemental NOPR on Recovery of Stranded
Costs. Responding to competitive pressures in the industry
and changes in statutes applicable to the industry, the
FERC seeks to encourage lower electricity rates by
structuring an orderly transition to a competitive
wholesale power market. To accomplish this goal, the NOPR
seeks to ensure non-discriminatory access to the
transmission system grid for all wholesale buyers and
sellers of electric energy in interstate commerce, and to
address the transition costs associated with open
transmission access. Thus, a final rule would define the
non-discriminatory terms and conditions under which
unregulated generators, neighboring utilities, and other
suppliers could gain access to a utility's transmission
grid to deliver power to wholesale customers such as
municipal distribution systems, rural electric
cooperatives, or other utilities.
In a supplemental NOPR on stranded costs, the FERC has
promulgated the principle that utilities are entitled to
full recovery of "legitimate, prudent, and verifiable"
stranded costs at both the state and federal level. The
NOPR also concludes that the FERC should be the principal
forum for addressing the recovery of stranded costs due to
potential municipalization or similar situations where
former retail customers become wholesale customers, as well
as for wholesale stranded costs. With respect to stranded
costs that result from retail wheeling, the FERC proposes
that state regulatory authorities assume responsibility,
except in the narrow circumstance where state regulatory
authorities lack the authority to address the recovery of
such costs.
The FERC continues to seek comments with respect to the
complex issues raised by power pools. The New York Power
Pool (NYPP), of which the Company is a member, is actively
evaluating the effect of wholesale competition and the NOPR
on NYPP operations and pricing policies. While changes to
existing NYPP arrangements are expected, the extent and
nature of these changes and their possible effects on the
Company are uncertain.
Comments on the NOPR were due August 7, 1995. The Company
responded, both individually and as a member of several
utility groups, in support of the FERC's position with
respect to the recovery of stranded costs occasioned by
both wholesale and retail wheeling, but has urged the FERC
not to abdicate its responsibility for retail stranded
costs. It is anticipated that a final rule could take
effect in early 1996. However, the Company cannot predict
the outcome of this matter or its effects on the Company's
results of operations or financial condition.
<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
REVIEW BY INDEPENDENT ACCOUNTANTS
The Company's independent accountants, Price Waterhouse LLP, have
made limited reviews (based on procedures adopted by the American
Institute of Certified Public Accountants) of the unaudited
Consolidated Balance Sheet of Niagara Mohawk Power Corporation
and Subsidiary Companies as of June 30, 1995 and the unaudited
Consolidated Statements of Income for the three-month and six-
month periods ended June 30, 1995 and 1994 and the unaudited
Consolidated Statements of Cash Flows for the six-months ended
June 30, 1995 and 1994. The accountants' report regarding their
limited reviews of the Form 10-Q of Niagara Mohawk Power
Corporation and its subsidiaries appears on the next page. That
report does not express an opinion on the interim unaudited
consolidated financial information. Price Waterhouse LLP has not
carried out any significant or additional audit tests beyond
those which would have been necessary if their report had not
been included. Accordingly, such report is not a "report" or
"part of the Registration Statement" within the meaning of
Sections 7 and 11 of the Securities Act of 1933 and the liability
provisions of Section 11 of such Act do not apply.<PAGE>
<PAGE>
PRICE WATERHOUSE LLP
ONE MONY PLAZA
SYRACUSE NY 13202
TELEPHONE 315-474-6571
REPORT OF INDEPENDENT ACCOUNTANTS
August 11, 1995
To the Stockholders and Board of Directors of
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse NY 13202
We have reviewed the condensed consolidated balance sheet of
Niagara Mohawk Power Corporation and its subsidiaries as of June
30, 1995, and the related condensed consolidated statements of
income for the three-month and six-month periods ended June 30,
1995 and 1994 and of cash flows for the six months ended June 30,
1995 and 1994. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet at December
31, 1994, and the related consolidated statements of income,
retained earnings and cash flows for the year then ended (not
presented herein); and in our report dated February 1, 1995, we
expressed an unqualified opinion (containing an explanatory
paragraph relating to the Company's involvement as a defendant in
lawsuits relating to actions with respect to certain purchased
power contracts and an explanatory paragraph with respect to the
Company's multi-year electric rate proceeding) on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1994 is fairly stated, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.
As discussed in Note 3, the Company and the parties to its multi-
year electric rate proceedings have begun discussions which could
result in material changes in the current form of regulation to
which the Company is subject. While the Company believes the
provisions of the Statement of Financial Accounting Standards No.
71, "Accounting for the Effects of Certain Types of Regulation"
(SFAS No. 71), continue to apply under current regulation, the
outcome of the multi-year electric rate proceedings could result
in the application of SFAS No. 71 being discontinued with respect
to all or a portion of the Company's electric business. Such an
outcome could have a material adverse effect on the Company's
results of operations and financial condition. Because the
outcome of these matters cannot be predicted, the accompanying
financial statements do not include any adjustments that might
result from the resolution of these proceedings.
/s/ Price Waterhouse LLP
------------------------
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
1995 RATE ORDER
(See Note 3 of Notes to the Consolidated Financial Statements -
"Rate and Regulatory Issues and Contingencies," and Form 10-K for
fiscal year ended December 31, 1994, Item 1. Business - "1995
Five-Year Rate Plan.")
Through its Brief Opposing Exceptions dated March 2, 1995, the
Company had requested an increase in 1995 electric revenues of
approximately $110 million (3.5%) and an increase in 1995 gas
revenues of $16.4 million (2.7%).
On April 21, 1995, the Company received a rate decision (1995
rate order) from the PSC which approved an approximately $47
million increase in electric revenues and a $4.9 million increase
in gas revenues. The expected bill impact to customers is a 1.5%
increase for electric (a 3.4% increase for residential and a 1.6%
decrease for large industrial) and an 0.8% increase for gas. A
full opinion explaining the bases for determinations and
conclusions in the 1995 rate order is expected to be issued by
the PSC during the third quarter.
The 1995 rate order allows the Company to retain its fuel
adjustment clause mechanism, but the electric revenue adjustment
mechanism (NERAM), which permitted the Company to recover revenue
shortfalls during future periods, was discontinued (See "Results
of Operations").
The 1995 rate order includes performance-based penalties related
to customer service quality and demand-side management programs.
Further, the 1995 rate order allocates to ratepayers all of the
$58.4 million of savings associated with the Company's 1994
voluntary employee reduction program. This allocation of
savings, in combination with other adjustments made by the PSC,
puts considerable pressure on the Company's 1995 earnings levels.
In addition, the 1995 rate order established an 80%/20%
(ratepayer/Company) sharing related to costs incurred during 1995
for the investigation and restoration of Company-owned sites
(SIR) and sites with which it is associated. (See Note 2 of
Notes to the Consolidated Financial Statements - Contingencies -
"Environmental issues.")
Although the 1995 rate order establishes allowed returns on
equity of 11.0% in the electric case and 11.4% in the gas case,
the Company's original analysis of the 1995 rate order
anticipated that its overall return on equity in 1995, including
the impact related to the elimination of the NERAM, expected
Measured Equity Return Incentive Term (MERIT) awards and Nine
Mile Point Nuclear Station Unit No. 1 (Unit 1) performance
incentive, would range between 8.5% and 9.5%. However, due to
even weaker sales experienced in the first half of 1995 than
previously anticipated and the potential earnings effect of the
costs to repair damage from the July 1995 storm (See Results of
Operations - "Six Months Ended June 30, 1995 versus Six Months
Ended June 30, 1994"), the Company now believes that it will be
extremely difficult for it to achieve equity
returns in this range.
The 1995 rate order also addresses the Company's multi-year
electric rate proceeding, which is discussed below.
On May 22, 1995, the Company filed a Request for Rehearing and
Clarification concerning ten issues addressed in the 1995 rate
order, including reconsideration by the Commission of the 80%/20%
ratepayer/Company sharing of SIR costs in 1995 (See Note 2 of the
Notes to the Consolidated Financial Statements - Contingencies -
"Environmental issues"), and reserving the right to file requests
for rehearing or clarification within 30 days of issuance of the
full opinion. Subsequently, the PSC notified the Company that
the statute of limitations for filing petitions for rehearing or
clarification of the Commission's determination will be deemed to
run from the date of issuance of the full opinion. Therefore,
the PSC informed the Company, no responses to the Company's
petition are warranted at this time.
MULTI-YEAR ELECTRIC RATE PROCEEDING
With respect to the Proceeding, the PSC's 1995 rate order
directed the Company and other parties to address a broad
spectrum of issues that are raised as New York State and the
nation move from energy markets that are highly regulated to
markets that are increasingly governed by competition and market
forces. To this end, the parties to the Proceeding have agreed
to engage in a series of exploratory discussions and
presentations to address the many issues raised by a possible
change in regulation of this magnitude. These issues include,
among others, how to address the Company's excessive generation
cost burden (both owned generation and unregulated generator
contracts), rate levels, potential elimination of the fuel-
adjustment clause (FAC), maintenance of the Company's investment-
grade bond credit ratings, burdens of social programs and other
social costs presently included in rates, and industry and
company restructuring alternatives also being contemplated in
another PSC proceeding (denominated as Competitive Opportunities
II) and elsewhere.
It is not clear what effect the Proceeding will have or whether
any material change in the current form of regulation to which
the Company is subject will be implemented. However, the
experience of deregulation in other industries does suggest that
once competitive forces are unleashed, change may occur very
rapidly. In addition, the Pataki administration has called for
reduction of the current high energy costs in New York State.
Company studies currently are under way on policy and financial
bases with a view to formulating and filing a comprehensive
proposal in the Fall of 1995, that would be responsive to the
direction of the PSC's 1995 rate order. The
proposal would necessarily be conditional on the Company
achieving a sufficient number of its own goals to protect
shareholder investment as fully as practicable. Nevertheless,
the Company cannot predict the ultimate outcome of any such
proposal or its effect on security holders.
The nature of the problems that the Company faces in an increasingly
competitive electric energy market (e.g., overmarket unregulated
generator payments, disproportionate local tax burdens, the dormant economy
in the Company's service territory, and political and regulatory
pressures that hinder the recovery of the Company's
other costs), requires the cooperation and agreement of third
parties (e.g. government, suppliers and customers) outside the
Company's control and, thus, limits the options available to solve
those problems and keep the Company financially viable. Reduction or
cessation of dividends on common and preferred stock, restructuring
of payments to unregulated generators, and ultimately
even more severe actions may become necessary in the absence of
solutions to the current set of problems.
COMMON STOCK DIVIDEND
(See Form 10-K for fiscal year ended December 31, 1994, Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations - "Changing Competitive Environment.")
On July 27, 1995, the Board of Directors authorized a common
stock dividend of 28 cents per share, payable on August 31, 1995
to shareholders of record on August 7, 1995. In making future
dividend decisions, the Company must evaluate, along with
standard business considerations, the progress of the multi-year
phase (See "Multi-Year Electric Rate Proceeding.") of the 1995
rate order mentioned previously, the increasing degree of
competitive and political pressure on its prices and the
Company's future earnings potential.
UNREGULATED GENERATORS
(See Form 10-K for fiscal year ended December 31, 1994, Item 1.
Business - "Unregulated Generators.")
In recent years, a leading factor in the increases in customer
bills and the deterioration of the Company's competitive position
has been the requirement to purchase power from unregulated
generators at prices in excess of the Company's internal cost of
production and in volumes greater than the Company's needs.
For the three months and six months ended June 30, 1995,
unregulated generator purchases were approximately $237 million
and $502 million, respectively, compared to approximately $243
million and $478 million, respectively, for the same periods in
1994. For the three months and six months ended June 30, 1995,
unregulated generator purchases provided about one-third of the
Company's power supply while constituting about three-fourths of
the Company's fuel and purchased power costs.
On January 11, 1995, FERC issued an order in a case involving
Connecticut Light & Power (CL&P) that Public Utility Regulatory
Policy Act forbids the states from requiring utilities to pay
more than avoided cost to qualifying facilities (QFs) for
electric power. FERC, however, also ruled that it would not
invalidate any pre-existing contracts, but only would apply its
ruling prospectively or to contracts that were subject to a
pending challenge (instituted at the time of signing) by a
utility. On the same day, FERC issued an order that an ongoing
challenge by the Company to the New York Law requiring utilities
to pay QFs a minimum of six cents for electric power (the Six
Cent Law) was moot in light of amendment of that law in 1992 to
prohibit future power purchase contracts requiring the utility to
pay more than its avoided cost. This latter proceeding had been
initiated in 1987. In April 1988, FERC had ruled in the
Company's favor, finding that the states could not impose rates
exceeding avoided cost for purchases from QFs, but then stayed
that decision in light of a rulemaking it was instituting to
address the issue. That rulemaking was never completed.
On February 10, 1995, the Company filed a petition for rehearing
of both orders. The Company argued, among other things, that
Federal law requires FERC to apply the ruling in CL&P in all
pending cases, including its case involving the Six Cent Law, and
that it is entitled to the opportunity, either at FERC or in the
courts, to demonstrate that pre-existing power purchase contracts
resulting from the Six Cent Law should be invalidated. The
Company argued further that amendment of the Six Cent Law did not
render the proceeding addressing that law moot because the
amendment perpetuated and, in some instances, expanded the
Company's obligation to purchase power from QFs at rates above
avoided cost. On April 12, 1995, FERC denied the Company's
petitions. On April 21, 1995, the Company filed with the U.S.
Court of Appeals for the District of Columbia its petitions for
review of FERC's denials of its petitions for rehearing, which
FERC and other parties moved to dismiss for lack of jurisdiction.
These motions remain pending. On May 11, 1995, the Company filed
complaints in the U.S. District Court for the Northern District
of New York against the FERC and the PSC, contending that the
FERC unlawfully ruled that its decision in CL&P does not apply to
purchases of power under existing agreements. The PSC was named
in this complaint on the basis that its policies compelled the
Company to enter into the above market value agreements. In July
1995, various parties to these actions, including the FERC and
the PSC, moved to dismiss this case. Those motions remain
pending.
During April 1995, FERC also ruled against New York State
Electric and Gas Corp. (NYSEG) in a case involving contracts with
unregulated generators, despite NYSEG's position that the
unregulated generators' rates exceeded avoided costs. The PSC
supported NYSEG in the case, in which the utility sought to
revise long-term contracts signed in 1990 to buy up to 417
megawatts from two unregulated generators. NYSEG argued that the
costs it used to calculate the rates were no longer valid because
cheaper power was now available and the excess contract prices
impose a harsh burden on its electric customers. On May 11,
1995, NYSEG requested rehearing of the FERC's ruling which was
subsequently denied.
Despite the lengthy and multi-faceted campaign that the Company
has mounted with respect to unregulated generator contracts
over the past five years, the courts and regulatory agencies with
whom the Company's complaints have been lodged have provided little
relief. (See Form 10-K for fiscal year ended December 31, 1994,
Item 3., Legal Proceedings). For the most part, these bodies have
either rejected the Company's position or postponed addressing the
merits of the cases in question. This delay has not relieved the Company
or its ratepayers of the substantial burden of these contracts.
Although the Company will continue with its challenges, there can
be no assurance that any success will be achieved or, if it is
achieved, that it will occur in the next several years.
FINANCING PLANS AND FINANCIAL POSITION
(See "Multi-Year Electric Rate Proceeding" and "Common Stock
Dividend.")
The Company's capital structure continues to be weak, and the
Company's ability to issue more common stock to improve its
capital structure is limited by the uncertainties that have
depressed its stock price. The Company would not likely pursue a
new issue offering unless the common stock price was closer to
book value. External financing is projected to consist of
approximately $400 to $600 million of debt securities in 1995,
which includes $275 million of First Mortgage Bonds issued during
May 1995. The Company continues to investigate options to reduce
its embedded cost of long-term debt by taking advantage of
current lower interest rates. The availability of cash provided
by operations to fund the Company's anticipated construction
program for 1996-1999 is substantially dependent upon the outcome
of the multi-year electric rate proceeding. The Company believes
that it will spend somewhat less than its original estimate of
$380 million for its 1995 construction program. For the six
months ended June 30, 1995, the Company had incurred
approximately $164.4 million for construction additions,
including overheads capitalized, nuclear fuel and allowance for
funds used during construction. External financing plans are
subject to periodic revision as underlying assumptions are
changed to reflect developments, market conditions and, most
importantly, the Company's rate proceedings. The ultimate level
of financing during this four-year period will reflect, among
other things, the extent and timing of rate relief, levels of
dividend payments, the Company's competitive positioning and the
extent to which competition penetrates the Company's markets,
uncertain energy demand due to the weather and economic
conditions and capital expenditures relating to distribution and
transmission load reliability projects, as well as continued
expansion of the gas business. The apparent softening of the
economy in the Company's service territory and the associated
decline in sales is significantly increasing the uncertainty of
its future financing program.
The Company believes that traditionally available sources of
financing should be sufficient to satisfy the Company's external
financing needs during the period 1995 through 1999, depending on
the outcome of the multi-year electric rate proceeding, current
sales trends and the extent to which competition is permitted to
enter into the Company's electric sales market. On
August 1, 1995, the Company could issue an additional $2,102
million aggregate principal amount of First Mortgage Bonds. This
includes approximately $1,311 million from retired bonds without
regard to an interest coverage test and approximately $791
million supported by additional property currently certified and
available, assuming an 8.5% interest rate, under the applicable
tests set forth in the Company's mortgage trust indenture. The
Company also has $200 million of Preference Stock authorized for
sale. Under its Charter, the Company is restricted from issuing
preferred stock at August 1, 1995, due to insufficient earnings
coverage ratios. The Company's Charter restricts the amount of
unsecured indebtedness that may be incurred by the Company to 10%
of consolidated capitalization plus $50 million. The Company has
not reached this restrictive limit.
On May 10, 1995, Moody's Investors Service (Moody's) downgraded
the Company's rating on secured debt from Baa2 to Baa3. This
action changed the Company's security rating on secured debt to
the lowest investment grade rating. The security rating on
preferred stock was changed from baa3 to ba1, which changed the
Company's security rating on preferred stock from the lowest
investment grade rating to a below investment grade rating. The
commercial paper rating was changed from P-2 to P-3. Moody's
cited, among other things, the impact of the Company's high-cost
structure (namely, unregulated generator obligations and taxes)
on its competitive profile which, coupled with a stagnant service
territory economy and excess capacity in the region, limited
sales growth and financial improvement. Moody's also indicated
that the rating outlook remains negative. Moody's recently released
a study that concludes that the electric industry may face substantial
losses related to making the transition to a deregulated market
(See Note 3 of Notes to the Consolidated Financial Statements -
"Rate and Regulatory Issues and Contingencies").
On May 12, 1995, Standard and Poors (S&P) affirmed its security
ratings on the Company's securities, which are comparable to
Moody's revised ratings. However, S&P removed the Company from
its "CreditWatch" list in light of recent positive regulatory
actions in New York state. S&P cited similar concerns to those
expressed by Moody's in retaining a negative rating outlook for
the Company's securities. Any reduction of the Company's debt
ratings to below investment grade levels would adversely affect
the cost and possibly affect availability of capital to the Company.
Among the effects which may occur would be a requirement by banks to
provide security (in the form of First Mortgage Bonds) to
collateralize revolving credit facilities and letters of credit
securing low-cost, tax-exempt financing. These facilities
currently aggregate approximately $575 million.
Cash flows to meet the Company's requirements for the first six
months of 1995 and 1994 are reported in the Consolidated
Statements of Cash Flows on Page 6. The Company received
approximately $207 million in January 1995 related to the sale of
the Company's subsidiary, HYDRA-CO Enterprises, Inc. (HYDRA-CO),
which was used to repay short-term debt.
Ordinarily, construction-related short-term borrowings are
refunded with long-term securities on a periodic basis. This
approach generally results in the Company showing a working
capital deficit. Working capital deficits may also be
temporarily created as a result of the seasonal nature of the
Company's operations as well as timing differences between the
collection of customer receivables and the payment of fuel and
purchased power costs. Recently the Company has experienced a
deterioration in its collections as compared to prior years'
experience. However, the Company has sufficient borrowing
capacity to fund such deficits as necessary.
RESULTS OF OPERATIONS
The following discussion presents the material changes in results
of operations for the three months and six months ended June 30,
1995 in comparison to the same periods in 1994. The Company's
results of operations reflect the seasonal nature of its
business, with peak electric loads in summer and winter periods.
Gas sales peak principally in the winter. The earnings for the
three months and six months periods should not be taken as an
indication of earnings for all or any part of the balance of the
year.
<PAGE>
THREE MONTHS ENDED JUNE 30, 1995 VERSUS THREE MONTHS ENDED JUNE
30, 1994
Earnings for the second quarter were $44.4 million or 31 cents
per share, as compared with $60.5 million or 42 cents per share
in 1994. Earnings for the second quarter of 1995 were impacted
by lower sales of both electricity and natural gas due in part to
warmer-than-normal weather early in the quarter and continuing
weak economic conditions in upstate New York. As of January
1995, NERAM was discontinued (See "1995 Rate Order"). Second
quarter 1994 earnings included $28.5 million of electric margin
recorded under this mechanism.
As shown in the table below, electric revenues, including
revenues recorded to reflect the 1995 rate order retroactive to
January 1, 1995, decreased $35.3 million or 4.2% from 1994.
Unbilled revenues (which are non-cash revenues) of $23.4 million
were recorded in 1995, including $6.2 million of retroactive
revenues mentioned above. Revenues of $9.4 million were recorded
in the second quarter of 1995 for incentives earned under the
Unit 1 operating incentive sharing mechanism established in the
1991 Financial Recovery Agreement which provided that actual
performance of Unit 1 for its next two fuel cycles be compared to
a capacity factor target of 61.26%. The amount recorded
represents the Company's portion of a sharing, between customers
and shareholders, of power costs avoided for performance above
61.26%. Revenues of $7.7 million related to electric were
recorded in the second quarter of 1994 in accordance with the
MERIT allowance for 1993. No revenues were recorded related to
MERIT in the second quarter of 1995, pending completion of the
PSC's evaluation of MERIT claimed for 1995. In addition, there
was a decrease in demand-side management (DSM) costs due to a
reduction in the Company's DSM cost rebate program. Sales to
other electric systems and sales to ultimate consumers reflect
weather-related reduced demand along with the continued stagnant
economy and more competitive pricing due to excess supply.
Amortization of unbilled revenues $ 23.4 million
Increase in base rates 13.0
Unit 1 incentive surcharge 9.4
DSM revenues (5.2)
MERIT revenues (7.7)
Sales to ultimate consumers (12.9)
Sales to other electric systems (26.8)
NERAM revenues (28.5)
------
$(35.3) million
=======
Electric kilowatt-hour (kwh) sales to ultimate consumers were
approximately 7.9 billion in the second quarter of 1995, a 1.7%
decrease from the same period in 1994. After adjusting for the
effects of weather, sales to ultimate consumers decreased 1.1%.
Sales for resale decreased 1.4 billion kwhs (64.0%) resulting in
a net decrease in total electric kwh sales of 1.5 billion
(15.1%). Sales for resale generally result in low margin
contribution to the Company due to regulatory sharing mechanisms
and relatively low prices caused by excess supply.
Electric fuel and purchased power costs increased $3.9 million or
1.2%. This increase is the result of a $17.5 million net
increase in costs deferred and recovered through the operation of
the FAC, offset by a $10.8 million decrease in actual costs and a
$2.8 million decrease in actual purchased power costs, each of
which is attributable to reduced sales demand. The decrease in
fuel costs reflects a 20.4% decrease in Company generation due to
unregulated generator purchase requirements and lower demand,
which reduced the operation of the Company's fossil plants during
the second quarter of 1995, even after taking into account the
Unit No. 2 refueling and maintenance outage referred to below.
On February 8, 1995, Unit 1 was taken out of service for a
planned refueling and maintenance outage and returned to service
on April 4, 1995. Its next refueling and maintenance outage is
scheduled to begin in February 1997. On April 8, 1995, Unit 2
was taken out of service for a planned refueling and maintenance
outage and returned to service on June 2, 1995. Its next
refueling outage is scheduled for Fall 1996.
Gas revenues decreased $5.6 million or 4.2% in the second quarter
of 1995 from the comparable period in 1994 as set forth in the
table below:
Transportation of customer-owned gas $ 2.8 million
Miscellaneous operating revenues .9
Purchased gas adjustment clause revenues (4.0)
Sales to ultimate consumers (5.3)
--------
$(5.6) million
=======
Due to milder weather in 1995, gas sales to ultimate consumers
decreased 1.1 million dekatherms (dth) or 6.2% from 1994. After
adjusting for the effects of weather, sales to ultimate consumers
increased 1.2%. Transportation of customer-owned gas increased
13.6 million dth (68.6%) and was primarily caused by Sithe
Independence Power Partners, Inc. gas-fired generating project
coming on-line in the Company's service territory.
The total cost of gas included in expense decreased 12.2%
primarily as a result of a 12.8% decrease in the average cost per
dth purchased ($7.3 million) and a $1.0 million decrease in
purchased gas costs and certain other items recognized and
recovered through the purchased gas adjustment clause (GAC). The
Company's net cost per dth sold, as charged to expense, decreased
to $4.30 in the second quarter of 1995 from $4.93 in the same
period in 1994.
Other operation expense decreased $32.6 million as anticipated
under the Company's cost reduction effort.
Maintenance expense increased $4.4 million in the second quarter
of 1995 from the comparable period in 1994 primarily as a result
of an increase of approximately $10.1 million due to the Unit 2
refueling outage in the second quarter of 1995, offset by the
Company's cost reduction effort.
Federal income taxes (net) decreased by approximately $14.7
million primarily due to a decrease in pre-tax income.
Other taxes increased by approximately $12.2 million primarily
due to further increases in real estate taxes of approximately
$12.6 million.
SIX MONTHS ENDED JUNE 30, 1995 VERSUS SIX MONTHS ENDED JUNE 30,
1994
Earnings for the first six months were $153.0 million or $1.06
per share, including the gain of approximately $9 million on the
sale of HYDRA-CO, as compared with $191.9 million or $1.34 per
share in 1994. Earnings were also impacted by lower sales of
electricity and natural gas due in part to warmer-than-normal
weather. As of January 1995, NERAM was discontinued (See "1995
Rate Order"). Earnings for the first six months of 1994 included
$39.2 million of electric margin recorded under this mechanism.
As shown in the table below, electric revenues, including
revenues recorded to reflect the 1995 rate order retroactive to
January 1, 1995, decreased $87.1 million or 4.9% from 1994.
Unbilled revenues (which are non-cash revenues) of $49.8 million
were recorded in 1995, including $32.6 million of retroactive
revenues mentioned above. The increase in DSM revenues relates
to a one-time, non-cash adjustment of prior years' DSM incentive
revenues. Revenues of $9.4 million were recorded in 1995 in
accordance with the Unit 1 operating incentive sharing mechanism
mentioned previously. Revenues of $8.4 million, which includes
$7.7 million related to electric were recorded in the second
quarter of 1994 in accordance with the MERIT allowance for 1993.
No revenues were recorded related to MERIT in the second quarter
of 1995. Sales to other electric systems and sales to ultimate
consumers reflect weather-related reduced demand and the
continued stagnant economy, as well as more competitive pricing
caused by excess supply.
<PAGE>
Amortization of unbilled revenues $ 49.8 million
Increase in base rates 13.0
DSM revenues 10.2
Unit 1 incentive surcharge 9.4
MERIT revenues (7.7)
NERAM revenues (39.2)
Sales to other electric systems (53.4)
Sales to ultimate consumers (69.2)
-------
$(87.1) million
=======
As detailed in the table below, electric kwh sales to ultimate
consumers were approximately 16.8 billion in 1995, a 3.9%
decrease from the same period in 1994 primarily as a result of
warmer-than-normal weather. After adjusting for the effects of
weather, sales to ultimate consumers would have decreased 1.8%.
Sales for resale decreased 2,240 million kwhs (55.6%) resulting
in a net decrease in total electric kwh sales of 2,925 million
(13.6%).
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
ELECTRIC REVENUES (Thousands) SALES (GwHrs)
---------------------------------- --------------------------
% %
1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Residential $ 624,505 $ 662,225 ( 5.7) 5,265 5,683 ( 7.4)
Commercial 621,326 641,065 ( 3.1) 5,773 6,055 ( 4.7)
Industrial 268,592 288,104 ( 6.8) 3,557 3,653 ( 2.6)
Industrial - Special 28,388 24,524 15.8 2,067 1,955 5.7
Municipal 24,838 24,875 (0.1) 103 104 ( 1.0)
--------- ---------- ------ ------ ------ ------
Total to Ultimate
Consumers 1,567,649 1,640,793 ( 4.5) 16,765 17,450 ( 3.9)
Other Electric Systems 40,662 94,061 (56.8) 1,789 4,029 (55.6)
Miscellaneous 85,174 45,719 86.3 - - -
---------- --------- ------ ----- ------- ------
TOTAL $1,693,485 $1,780,573 ( 4.9) 18,554 21,479 (13.6)
========== ========= ====== ====== ====== ======
</TABLE>
<PAGE>
<PAGE>
Electric fuel and purchased power costs decreased $2.3 million or
.4%. This decrease is the result of a decrease in actual fuel
costs of $29.2 million, offset by an $11.4 million net increase
in costs deferred and recovered through the operation of the FAC
and a $15.5 million increase in actual purchased power costs
(including increased payments to unregulated generators of $23.4
million or 4.9%). The decrease in fuel costs reflects a 20.8%
decrease in Company generation due to greater unregulated
generator purchase requirements and reduced demand, which reduced
the need to operate the fossil plants during the first six months
of 1995, even after taking into account the 1995 Unit 1 and Unit
2 refueling and maintenance outages, mentioned previously.
Gas revenues decreased $64.5 million or 14.9% in 1995 from the
comparable period in 1994 as set forth in the table below:
Transportation of customer-owned gas $ 5.5 million
Miscellaneous operating revenues .6
Spot market sales (3.4)
Purchased gas adjustment clause revenues (16.0)
Sales to ultimate consumers (51.2)
--------
$(64.5) million
========
Due to warmer-than-normal weather in 1995, gas sales to ultimate
consumers decreased 8.9 million dth or 14.3% from 1994. After
adjusting for the effects of weather, sales to ultimate consumers
decreased .4%. Transportation of customer-owned gas increased
30.7 million dth (72.9%) and was primarily caused by Sithe
Independence Power Partners, Inc. gas-fired generating project
coming on-line in the Company's service territory. Spot market
sales (sales for resale), which are generally from the higher
priced gas available to the Company and therefore yield margins
that are substantially lower than traditional sales to ultimate
consumers, also decreased.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
GAS REVENUES (Thousands) SALES (Thousands of Dth)
------------------------------- -------------------------------
% %
1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Residential $242,830 $287,588 (15.6) 36,111 42,230 (14.5)
Commercial 94,854 114,234 (17.0) 15,900 18,303 (13.1)
Industrial 6,548 9,484 (31.0) 1,501 1,873 (19.9)
-------- -------- --------- ------- ------- ------
Total to Ultimate
Consumers 344,232 411,306 (16.3) 53,512 62,406 (14.3)
Other Gas Systems 625 763 (18.1) 135 159 (15.1)
Transportation of
Customer-Owned Gas 24,179 18,677 29.5 72,793 42,092 72.9
Spot Market Sales 551 3,989 (86.2) 272 1,349 (79.8)
Miscellaneous 557 (50) (1214.0) - - -
---------- ------- --------- ------- ------- ------
Total to System
Core Customers $370,144 $434,685 (14.8) 126,712 106,006 19.5
========= ======== ========= ======= ======= ======
</TABLE>
<PAGE>
<PAGE>
The total cost of gas included in expense decreased 23.5%. This
was the result of an 8.3 million decrease in dth purchased and
withdrawn from storage for ultimate consumer sales ($27.8
million) and a 1.1 million decrease in dth purchased for spot
market sales, coupled with a 13.5% decrease in the average cost
per dth purchased ($22.9 million) and a $2.9 million decrease in
purchased gas costs and certain other items recognized and
recovered through the purchased GAC. The Company's net cost per
dth sold, as charged to expense and excluding spot market
purchases, decreased to $3.60 in the first six months of 1995
from $3.99 in the same period in 1994.
Other operation expense decreased $50.4 million as anticipated
under the Company's cost reduction effort, offset by an increase
in costs of approximately $4.5 million from the Unit 1 and Unit 2
refueling and maintenance outages.
Maintenance expense increased by $1.7 million primarily as the
result of an increase of approximately $15.7 million due to the
Unit 1 and Unit 2 refueling and maintenance outages, offset by
the Company's cost reduction effort.
Other items (net) increased by $12.1 million in the first six
months of 1995 from the comparable period in 1994, primarily due
to the sale of HYDRA-CO ($21.6 million). The after-tax gain on
the sale of HYDRA-CO was approximately $8.9 million.
Federal income taxes (net) decreased by approximately $24.6
million primarily due to a decrease in pre-tax income, partially
offset by the increase related to the sale of HYDRA-CO ($12.7
million).
Other taxes increased by approximately $8.9 million primarily due
to further increases of real estate taxes of approximately $14.0
million, partially offset by approximately $4.1 million in
payroll taxes due to a decrease in employees.
As evidenced by the results of the first six months of 1995, the
combination of the elimination of NERAM, and further weakening in
sales, as well as the anticipated offering by the Company of
approximately $23 million of customer discounts in excess of the
approximately $42 million reflected in rates in 1995, has affected,
and will continue to negatively affect, the Company's revenues and
earnings for 1995. The Company expects the trend of weak sales to
continue in the near term, particularly in light of the softening
of economic expectations in the Company's service territory. In addition,
the Company experienced extraordinary storm damage in July 1995,
with total restoration costs currently estimated to be $21 million, which
includes a capitalized amount of approximately 20% relating to
reconstruction of facilities destroyed by the storm. The Company
plans to file a petition with the PSC which requests deferral
accounting treatment, with future recovery, of the incremental,
non-capital costs associated with the storm. These types of
extraordinary costs have previously been recoverable in rates.
Depending on the regulatory treatment allowed, these storm costs
may put added pressure on the Company's earnings for 1995.
<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
PART II
ITEM 1. LEGAL PROCEEDINGS.
1. On June 22, 1993, the Company and twenty other industrial
entities and the owner/operator of the Pfohl Brothers
Landfill near Buffalo, New York, were sued in New York
Supreme Court, Erie County, by a group of residents living
in the vicinity of the landfill seeking compensation and
damages for economic loss and property damages claimed to
have resulted from contamination emanating from the
landfill. In addition, since January 18, 1995, the Company
has been named as a defendant in a series of toxic tort
actions filed in federal and state courts in the Buffalo
area. The suits allege exposure on the part of the
plaintiffs to toxic chemicals emanating from the Pfohl
Brothers Landfill, resulting in the alleged causation of
cancer in each of the plaintiffs. The plaintiffs seek
compensatory and punitive damages. The Company was
notified by the New York State Department of Environmental
Conservation in 1986 of its status as a potentially
responsible party (PRP) in connection with the
contamination of this landfill, but has not taken an active
role in the remediation process because of the existence of
minimal evidence that hazardous substances generated by the
Company were disposed there. It has been alleged, however,
that another defendant (Downing Container Division of Waste
Mgt. of N.Y.) transported waste materials to the landfill
from the Company's Dewey Avenue Service Center during the
1960's. Therefore, in July 1995, the Company elected to
become a member of the Steering Committee consisting of
identified PRPs, and thereby participate in the development
of an appropriate remedial action for the site and working
to achieve an equitable allocation of liability among
responsible parties. To date, no governmental action has
been taken against the Company as a PRP. The Company has
undertaken to establish defenses to the allegations in
these lawsuits, and is investigating its alleged connection
to the landfill to determine an appropriate level of
participation in the ongoing voluntary remedial program
conducted by the Steering Committee. The Company is unable
to predict the ultimate outcome of these proceedings.
ITEM 5. OTHER EVENTS.
1. SEC Recommends Repeal of the Public Utility Holding Company
Act of 1935 (PUHCA)
In June 1995, the Securities and Exchange Commission (SEC)
released its report regarding the future of PUHCA, which
included three alternative legislative recommendations as
well as administrative recommendations for implementation
by the SEC pending legislative reform.
The legislative recommendation that the SEC strongly
endorsed was the conditional Congressional repeal of PUHCA
with an adequate transition period for Congress to enact
legislation to continue federal protection of consumers.
The SEC proposed a one-year transition period to protect
the validity of existing contracts and activities of
registered holding company systems. The administrative
recommendations called for the modernization and
simplification of regulation in an effort to reduce the
inherent delays in the current administration of PUHCA and
minimize regulatory overlap while continuing to protect the
interests of consumers and investors. Some of the
recommendations included the adoption of rule amendments to
broaden the exemptions for routine financings and
liberalization of the treatment of non-exempt financings,
and the withdrawal of a current rulemaking proposal
applying a lower of cost or market standard to affiliate
services, sales and construction contracts.
While the Company is exempt from most provisions of PUHCA,
if adopted, these recommendations could increase
competitive pressures on the Company and permit formation
of interstate electric systems on a much broader scale than
is now permitted.
2. Proposed Restructuring Plans
On May 24, 1995, the California Public Utilities Commission
(CPUC) released two alternative proposals to restructure
the California electric industry. The CPUC plans to
issue its final policy decision, including an
implementation schedule, in 90 days.
In the first alternative proposal, direct access would work
through a voluntary wholesale pool with retail competition
through bilateral contracts. The second alternative
proposal would allow customers to gain direct access by
entering into individual agreements with power producers.
In addition, on May 26, 1995, a coalition of utilities and
special interest groups filed a set of interdependent
principles (Revised Principles) with the Massachusetts
Commission to guide the transition to increased competition
and greater choice by customers in the electric utility
industry.
A number of other states are also addressing similar
issues.
The Company is unable to predict how this activity may
affect New York State regulation, although similar
restructuring scenarios are being studied by the PSC in the
Competitive Opportunities Proceeding and the Proceeding
(See Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations - "Multi-Year
Electric Rate Proceeding.")
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 4 (87) - Supplemental Indenture dated as of May 1,
1995, supplemental to Exhibit 4(1) of Form 10-K filed for
the fiscal year ended December 31, 1994.
Exhibit 11 - Computation of the Average Number of Shares
of Common Stock Outstanding for the Three Months and Six
Months Ended June 30, 1995 and 1994.
Exhibit 12 - Statement Showing Computations of Ratio of
Earnings to Fixed Charges, Ratio of Earnings to Fixed
Charges without AFC and Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends for the Twelve Months Ended
June 30, 1995.
Exhibit 15 - Accountants' Acknowledgement Letter.
Exhibit 27 - Financial Data Schedule.
(b) Report on Form 8-K:
No reports on Form 8-K were filed during the quarter for
which this report is filed.
<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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.
NIAGARA MOHAWK POWER CORPORATION
(Registrant)
Date: August 14, 1995 By /s/ Steven W. Tasker
Steven W. Tasker
Vice President-Controller and
Principal Accounting Officer,
in his respective capacities
as such
<PAGE>
EXHIBIT 4 (87)
[CONFORMED COPY]
_________________________________________________________________
NIAGARA MOHAWK POWER CORPORATION
to
MARINE MIDLAND BANK, as Trustee
____________________
SUPPLEMENTAL INDENTURE
Dated as of May 1, 1995
Providing for creation of $275,000,000
principal amount of First Mortgage Bonds,
7 3/4% Series due May 15, 2006
_________________________________________________________________
<PAGE>
TABLE OF CONTENTS
PARTIES
RECITALS
CONSIDERATION
PART I. CREATION OF A SERIES OF FIRST MORTGAGE BONDS,
7 3/4% SERIES DUE MAY 15, 2006
[FORM OF FACE OF DEFINITIVE BOND OF THE EIGHTIETH
SERIES]
[FORM OF TRUSTEE'S CERTIFICATE]
[FORM OF REVERSE OF DEFINITIVE BOND
OF THE EIGHTIETH SERIES]
PART II. MAINTENANCE FUND PROVISIONS AND
RESTRICTIONS AS TO DIVIDENDS
PART III. FUTURE AMENDMENTS OF INDENTURE
PART IV. THE TRUSTEE
PART V. MISCELLANEOUS PROVISIONS
TESTIMONIUM
SIGNATURES
ACKNOWLEDGMENTS
_______________
This Table of Contents does not constitute part of the
supplemental indenture or have any bearing upon the
interpretation of any of its terms and provisions.
<PAGE>
<PAGE>
SUPPLEMENTAL INDENTURE dated as of May 1, 1995, made by and
between NIAGARA MOHAWK POWER CORPORATION, a corporation duly
organized and existing under the laws of the State of New York,
having its principal place of business (residence) at No. 300
Erie Boulevard West, Syracuse, New York (hereinafter sometimes
referred to as the "Company"), party of the first part, and
MARINE MIDLAND BANK (successor to Marine Midland Bank, N.A., a
national banking association and, in turn, successor to Marine
Midland Bank, a corporation duly organized and existing under the
laws of the State of New York, formerly named the Marine Midland
Trust Company of New York, Marine Midland Grace Trust Company of
New York and Marine Midland Bank -- New York), a banking
corporation and trust company duly organized and existing under
the laws of the State of New York, having its principal corporate
trust office at 140 Broadway, New York, New York (hereinafter
sometimes referred to as the "Trustee"), as Trustee under the
Mortgage Trust Indenture hereinafter mentioned, party of the
second part.
WHEREAS, the Company (formerly Central New York Power
Corporation) has heretofore executed and delivered to the Trustee
its Mortgage Trust Indenture dated as of October 1, 1937
(hereinafter referred to as the "Original Indenture") and
indentures supplemental thereto dated as of December 1, 1938, as
of April 15, 1939, as of July 1, 1940, as of January 1, 1942, as
of October 1, 1944, as of June 1, 1945, as of August 17, 1948, as
of December 31, 1949, as of January 1, 1950, as of October 1,
1950, as of October 19, 1950, as of December 1, 1951, as of
February 1, 1953, as of February 20, 1953, as of October 1, 1953,
as of August 1, 1954, as of April 25, 1956, as of May 1, 1956, as
of September 1, 1957, as of June 1, 1958, as of March 15, 1960,
as of April 1, 1960, as of November 1, 1961, as of December 1,
1964, as of October 1, 1966, as of July 15, 1967, as of August 1,
1967, as of August 1, 1968, as of December 1, 1969, as of
February 1, 1971, as of February 1, 1972, as of August 1, 1972,
as of December 1, 1973, as of October 1, 1974, as of March 1,
1975, as of August 1, 1975, as of March 15, 1977, as of August 1,
1977, as of December 1, 1977, as of March 1, 1978, as of December
1, 1978, as of September 1, 1979, as of October 1, 1979, as of
June 15, 1980, as of September 1, 1980, as of March 1, 1981, as
of August 1, 1981, as of March 1, 1982, as of April 1, 1982, as
of June 1, 1982, as of August 1, 1982, as of November 1, 1982, as
of March 1, 1983, as of May 1, 1983, as of June 1, 1983, as of
March 1, 1984, as of May 1, 1984, as of July 1, 1984, as of
October 1, 1984, as of January 1, 1985, as of February 1, 1985,
as of February 15, 1985, as of November 1, 1985, as of June 1,
1986, as of August 1, 1986, as of October 1, 1986, as of November
1, 1986, as of July 1, 1987, as of May 1, 1988, as of February 1,
1989, as of April 1, 1989, as of October 1, 1989, as of June 1,
1990, as of November 1, 1990, as of March 1, 1991, as of October
1, 1991, as of April 1, 1992, as of June 1, 1992, as of July 1,
1992, as of August 1, 1992, as of April 1, 1993, as of July 1,
1993, as of September 1, 1993, as of March 1, 1994 and as of July
1, 1994 (said Original Indenture, together with all instruments
stated to be supplemental thereto to which the Trustee has
heretofore been or shall hereafter be a party, including said
enumerated Supplemental Indentures and this Supplemental
Indenture, being herein referred to as the "Indenture"); and
WHEREAS, the Indenture provides in Section 1 of Article
Twelfth thereof that without any action or consent by, or notice
to, the holders of any of the Bonds, the Company and the Trustee,
from time to time and at any time, may enter into such indentures
supplemental to the Original Indenture as shall be by them deemed
necessary or desirable for the purpose of establishing the form,
terms, provisions and conditions of a particular series of Bonds,
and of providing the terms and conditions of redemption of Bonds
of such series, or for a retirement fund or other fund for such
series, or for any other purpose not inconsistent with the terms
of the Indenture and which shall not impair the security of the
same; and
WHEREAS, the Company desires to enter into this indenture
supplemental to the Original Indenture with the Trustee for the
purpose of establishing the form, terms, provisions and
conditions of a new series of Bonds under the Indenture and for
the purpose of providing the terms and conditions of redemption
of the Bonds of such new series, and for a maintenance fund, all
as determined by resolution or resolutions of the Board of
Directors of the Company; and
WHEREAS, the Company in the exercise of the authority and
power reserved to it under and by virtue of the provisions of the
Indenture and pursuant to appropriate resolutions of its Board of
Directors has duly resolved and determined to make, execute and
deliver to the Trustee a supplemental indenture in the form
hereof and for the purposes herein provided; and
WHEREAS, all conditions and requirements necessary to make
this Supplemental Indenture a valid, binding and legal instrument
in accordance with its terms have been performed and fulfilled
and the execution and delivery hereof have been in all respects
duly authorized;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE
W I T N E S S E T H:
That for and in consideration of the premises and of the
purchase or acceptance of the Bonds by those who shall hold the
same from time to time and of the sum of One Dollar to the
Company duly paid by the Trustee at or before the execution and
delivery of this Supplemental Indenture and for other good and
valuable consideration, the receipt whereof is hereby
acknowledged, the Company does hereby covenant and agree with the
Trustee for the benefit of the holders of the Bonds, or any of
them, issued or to be issued under the Indenture, as follows:
PART I.
CREATION OF A SERIES OF FIRST MORTGAGE BONDS,
7 3/4% SERIES DUE MAY 15, 2006
SECTION 1. The Company hereby creates and establishes a new
series of Bonds to be issued under and secured by the Indenture
to be designated "First Mortgage Bonds, 7 3/4% Series due May 15,
2006" (hereinafter sometimes referred to as the "Bonds of the
Eightieth Series").
The permitted principal amount of the Bonds of the Eightieth
Series which may be executed by the Company and authenticated by
the Trustee is limited so that at no time shall there be
authenticated, delivered or outstanding under the Indenture Bonds
of the Eightieth Series for a principal amount exceeding
$275,000,000, except that Bonds of the Eightieth Series may
always be issued as provided in Section 2 of Article Fourth of
the Indenture.
Upon the execution of this Supplemental Indenture, the
Company may execute and deliver to the Trustee from time to time
not in excess of $275,000,000 aggregate principal amount of Bonds
of the Eightieth Series, and thereupon the Trustee, without
awaiting the filing or recording of this Supplemental Indenture
but upon receipt of specified evidence of due compliance by the
Company with the applicable provisions of the Indenture, shall
authenticate the said $275,000,000 principal amount of Bonds of
the Eightieth Series and deliver the same upon the written order
of the Company signed in its name by its President or one of its
Vice Presidents or its Treasurer or an Assistant Treasurer.
SECTION 2. The Bonds of the Eightieth Series shall mature
according to their terms on May 15, 2006 and, in the case of the
initial authentication of the Bonds of the Eightieth Series,
shall be dated May 15, 1995 and shall bear interest from such
date at the rate per annum specified in the designation of such
series, payable semi-annually on May 15 and November 15 in each
year (computed on the basis of a 360-day year of twelve 30-day
months). Definitive Bonds of said series shall be registered
Bonds without coupons and shall be issued in denominations of
$1,000 and multiples thereof.
Subsequent to the initial authentication of the Bonds of the
Eightieth Series, each Bond of the Eightieth Series shall be
dated as of the date of its authentication, and shall bear
interest from the May 15 or November 15, as the case may be, next
preceding the date of such Bond to which interest has been paid
or provided for (unless the date of such Bond is a May 15 or a
November 15 to which interest has been paid or provided for, in
which case such Bond shall bear interest from its date, or unless
the date of such Bond is prior to the payment of any interest on
the Bonds of the Eightieth Series, in which case such Bond shall
bear interest from May 15, 1995). However, so long as there is
no existing default in the payment of interest on the Bonds of
the Eightieth Series, any such Bond authenticated by the Trustee
after the close of business on the record date (as hereinafter in
this Section 2 defined) for any interest payment date and prior
to such interest payment date shall be dated the date of its
authentication, but shall bear interest from such interest
payment date; provided, however, that if and to the extent the
Company shall default in the payment of interest on such interest
payment date, then such Bond shall bear interest from the May 15
or November 15, as the case may be, next preceding the date of
such Bond to which interest has previously been paid or made
available for payment on the outstanding Bonds of the Eightieth
Series or, if no interest has been paid on such Bonds, from May
15, 1995.
The interest payable on any interest payment date shall be
paid to the persons in whose names the Bonds of the Eightieth
Series were registered at the close of business on the record
date for such payment of interest notwithstanding any
cancellation of Bonds of the Eightieth Series upon any
registration of transfer or exchange thereof between such record
date and such interest payment date; except that if the Company
shall default in the payment of any interest due on such interest
payment date such defaulted interest shall be paid to the persons
in whose names Bonds of the Eightieth Series are registered
either at the close of business on the date preceding the date of
payment of such defaulted interest or on a subsequent record date
fixed for the payment of such defaulted interest by notice given
by mail by or on behalf of the Company to holders of Bonds of the
Eightieth Series not less than ten days preceding such subsequent
record date. The term "record date" as used herein shall mean,
with respect to a regular semiannual interest payment date, the
close of business on the last day of the calendar month next
preceding such interest payment date or, if such last day shall
be a day on which banking institutions in The City of New York
are authorized by law to close, the next preceding day which
shall not be a day on which such institutions are so authorized
to close or, in the case of defaulted interest, the close of
business on any subsequent record date established as provided
above.
All of the Bonds of the Eightieth Series shall be executed
in the name and on behalf of the Company by a facsimile of the
signature (or manual signature) of its President or a Vice
President, and imprinted with its corporate seal (or a facsimile
thereof), attested by a facsimile of the signature (or manual
signature) of its Secretary or an Assistant Secretary.
Bonds of the Eightieth Series shall be lettered "RU" and
numbered consecutively from RU-1 upwards, or shall bear such
other letters as may be provided therefor by the Board of
Directors of the Company.
Both principal of and interest on the Bonds of the Eightieth
Series shall be payable at the office of the Trustee, which in
the case of Marine Midland Bank, shall be its corporate trust
office in the Borough of Manhattan, The City of New York, State
of New York, or at such other office or agency in the Borough of
Manhattan, The City of New York, State of New York, as shall be
maintained by the Company for such purpose, in such coin or
currency of the United States of America as at the time of
payment shall be legal tender for public and private debts.
SECTION 3. The Company shall not have the right to redeem
the outstanding Bonds of the Eightieth Series, either as a whole
or in part, on any date prior to maturity.
The Bonds of the Eightieth Series are also not subject to
redemption, either as a whole or in part, by operation of any
sinking fund, debt retirement fund or the maintenance fund
referred to in Part II hereof.
SECTION 4. The registered owner (or assigns) of any Bond of
the Eightieth Series may at any time surrender the same at the
corporate trust office of the Trustee, or at any other office or
agency of the Trustee or the Company maintained for such purpose,
and with instruments of transfer satisfactory to the Trustee, and
subject to the terms, conditions and limitations specified in the
Indenture, shall be entitled to receive in exchange therefor an
equal principal amount of Bonds of said series of other
authorized denominations; and the Company will provide, and the
Trustee shall authenticate and deliver, the Bonds necessary to
make such exchange. The provisions of Section 12 of Article
Second of the Original Indenture to the contrary notwithstanding,
no payment of a service charge shall be required for any exchange
or registration of transfer, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto.
SECTION 5. The definitive Bonds of the Eightieth Series,
and the Trustee's Certificate to be inscribed on all Bonds of
said series, are to be substantially in the forms following,
respectively:
[FORM OF FACE OF DEFINITIVE BOND OF THE EIGHTIETH SERIES]
No. RU $____
<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION
FIRST MORTGAGE BOND
7 3/4% SERIES DUE MAY 15, 2006
NIAGARA MOHAWK POWER CORPORATION, a New York corporation
(herein called the "Company"), for value received, hereby
promises to pay to , or registered assigns, the
principal sum of Dollars on
May 15, 2006, and to pay interest from May 15, 1995 or from the
May 15 or November 15, as the case may be, next preceding the
date of this Bond to which interest has been paid or provided for
on such principal sum at the rate per annum specified in the
title of this Bond semi-annually on May 15 and November 15, in
each year (computed on the basis of a 360-day year of twelve 30-
day months), until payment of such principal sum has been made or
duly provided for, to the registered owner hereof as of the close
of business on the last day of the month next preceding the month
in which an interest payment is due, except as otherwise provided
on the reverse hereof or in the Indenture.
Both principal of and interest on this Bond are payable at
the corporate trust office of the Trustee hereinafter named, in
the Borough of Manhattan, City and State of New York, or at such
other office or agency in said Borough as shall be maintained by
the Company for such purpose, in such coin or currency of the
United States of America as at the time of payment shall be legal
tender for public and private debts.
Reference is made to the further provisions of this Bond set
forth on the reverse hereof, which for all purposes have the same
effect as though fully set forth at this place.
This Bond shall not be valid or obligatory for any purpose
until authenticated by the execution by the Trustee of the
certificate inscribed hereon.
IN WITNESS WHEREOF, the Company has caused this Bond to be
executed in its corporate name by a facsimile of the signature
(or manual signature) of its President or a Vice President and
imprinted with its corporate seal (or a facsimile thereof),
attested by a facsimile of the signature (or manual signature) of
its Secretary or an Assistant Secretary.
Dated: NIAGARA MOHAWK POWER
CORPORATION
By_______________________
President
Attest:
________________________
Secretary
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE]
This is one of the Bonds of the Series designated above
described in the within-mentioned Indenture.
MARINE MIDLAND BANK
as Trustee
By_________________________
Authorized Officer
<PAGE>
<PAGE>
[FORM OF REVERSE OF DEFINITIVE BOND
OF THE EIGHTIETH SERIES]
This Bond is one of a duly authorized issue of Bonds of the
Company, of an unlimited (except as provided in the Indenture
hereinafter mentioned) permitted principal amount, all issued or
to be issued in one or more series (the Bonds of the series of
which this Bond is a part being herein called the "Bonds of the
Eightieth Series"), all of the Bonds of all series being issued
or to be issued under and, irrespective of the time of issue, all
equally secured by a Mortgage Trust Indenture (herein, with all
instruments stated to be supplemental thereto to which the
Trustee hereinafter named is or shall be a party, called the
"Indenture"), dated as of October 1, 1937, to Marine Midland Bank
(successor to Marine Midland Bank, N.A., a national banking
association and, in turn, successor to Marine Midland Bank, a
corporation duly organized and existing under the laws of the
State of New York, formerly named the Marine Midland Trust
Company of New York, Marine Midland Grace Trust Company of New
York and Marine Midland Bank -- New York and hereinafter, with
its successors as defined in the Indenture, referred to as the
"Trustee"), to which Indenture, an executed counterpart of which
is on file with the Trustee, reference is hereby made for a
description of the property mortgaged and pledged to the Trustee,
and for a statement of the nature and extent of the security, the
rights of the holders of the Bonds with respect to such security,
and the terms and conditions upon which said Bonds are or are to
be issued and secured; but neither the foregoing reference to the
Indenture, nor any provision of this Bond or of the Indenture,
shall affect or impair the obligation of the Company, which is
absolute and unconditional, to pay, at the stated or accelerated
maturities herein provided, the principal of, and premium, if
any, and interest on this Bond as herein provided.
The Indenture and the rights and obligations of the Company
and of the holders of the Bonds thereunder may be changed or
modified at any time upon the consent and approval of the Company
and of the holders of 66-2/3 per cent in principal amount of the
Bonds then outstanding affected by such change or modification,
given as provided in the Indenture, and in the manner and subject
to the limitations therein set forth; provided, that no such
change or modification shall (a) alter or impair the obligation
of the Company to pay the principal of, and premium, if any, and
interest on any Bond at the time and place and at the rate and in
the currency provided therein, without the consent of the holder
of such Bond, (b) permit the creation by the Company of any
mortgage, or lien in the nature of a mortgage, ranking prior to
or pari passu with the lien of the Indenture, or alter adversely
to the Bondholders the character of the lien of the Indenture,
except as in the Indenture otherwise expressly provided, unless
the creation of such mortgage or lien, or such alteration of the
lien of the Indenture, be consented to by the holders of all
outstanding Bonds, (c) affect the Trustee unless consented to by
the Trustee or (d) permit a reduction of the percentage required
for any change or modification of the Indenture, without the
consent of the holders of all outstanding Bonds.
The principal of this Bond together with accrued interest
thereon may be declared, or may become, due and payable before
maturity in certain events, on the conditions, in the manner and
with the effect set forth in the Indenture.
Subsequent to the initial authentication of the Bonds of the
Eightieth Series, each Bond of the Eightieth Series shall be
dated as of the date of its authentication, and shall bear
interest from the May 15 or November 15, as the case may be, next
preceding the date of such Bond to which interest has been paid
or provided for (unless the date of such Bond is on a May 15 or a
November 15 to which interest has been paid or provided for, in
which case such Bond shall bear interest from its date, or unless
the date of such Bond is prior to the payment of any interest on
the Bonds of the Eightieth Series, in which case such Bond shall
bear interest from May 15, 1995). However, so long as there is
no existing default in the payment of interest on the Bonds of
the Eightieth Series, any such Bond authenticated by the Trustee
after the close of business on the record date for any interest
payment date and prior to such interest payment date shall be
dated the date of its authentication, but shall bear interest
from such interest payment date; provided, however, that if and
to the extent that the Company shall default in the payment of
interest on such interest payment date, then such Bond shall bear
interest from the May 15 or November 15, as the case may be, next
preceding the date of such Bond to which interest has previously
been paid or made available for payment on the outstanding Bonds
of the Eightieth Series or, if no interest has been paid on such
Bonds, from May 15, 1995.
The Bonds of the Eightieth Series are entitled to the
benefit of a maintenance fund referred to in Part II of the
Supplemental Indenture creating the Bonds of the Eightieth
Series. The Bonds of the Eightieth Series may not be redeemed at
the option of the Company, either as a whole or in part, and are
not subject to redemption, either as a whole or in part, by
operation of any sinking fund, debt retirement fund or the
maintenance fund referred to in Part II of the Supplemental
Indenture creating the Bonds of the Eightieth Series.
No recourse shall be had for the payment of any part of
principal of, or interest on, this Bond or for any claim based
hereon or thereon, or otherwise in any manner with respect
hereto, or with respect to the Indenture, to or against any
incorporator or any past, present or future stockholder, officer
or director of the Company or of any successor corporation,
either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or
other provision of law, or by the enforcement of any assessment
or penalty, or otherwise, all such liability being expressly
waived and released by the acceptance of this Bond and as part of
the consideration for the issue hereof, as provided in the
Indenture.
Registration of transfer of this Bond may be made by the
registered owner (or assigns) in person or by duly authorized
attorney, at the corporate trust office of the Trustee, or at
such other offices or agencies of the Trustee or the Company as
shall be maintained for such purpose, upon the surrender of this
Bond, and thereupon a new Bond or Bonds of authorized
denominations of the same series for a like aggregate principal
amount will be issued to the registered transferee, all in the
manner and subject to the terms, conditions and limitations
specified in the Indenture. No service charge shall be made for
any exchange or registration of transfer, but the Company may
require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto. The
Company and the Trustee may deem and treat the person in whose
name this Bond is registered as the absolute owner hereof for the
purpose of receiving payment of or on account of the principal
and interest due hereon (subject to the provisions of the first
paragraph of this Bond), and for all other purposes, and neither
the Company, the Trustee nor any paying agent or agency shall be
affected by any notice to the contrary, whether this Bond or
interest shall be overdue or not.
PART II.
MAINTENANCE FUND PROVISIONS AND
RESTRICTIONS AS TO DIVIDENDS
SECTION 1. The Company covenants that so long as any of the
Bonds of the Eightieth Series shall be outstanding, it will
comply with the provisions of Section 22 (providing for a
maintenance fund for the benefit of Bonds issued under the
Indenture) and Section 23 (providing for certain restrictions on
the payment of dividends) of Article Fifth of the Indenture as
added by the Supplemental Indenture dated as of March 1, 1978.
PART III.
FUTURE AMENDMENTS OF INDENTURE
SECTION 1. The Company reserves the right, without any
consent or other action by holders of the Bonds of the Eightieth
Series or of any subsequently created series, to amend at any
time Article Fourth of the Indenture, as it may heretofore,
hereby and hereafter be or have been supplemented and amended, as
follows:
(A) by deleting the provisions of subparagraph
1(b) of Paragraph F of Section 6 of Article Fourth
thereof, of subparagraph 1(b) of Paragraph E of Section
7 of Article Fourth thereof and of subsection 1(b) of
Section 8 of Article Fourth thereof;
(B) by restating Paragraph A of Section 7 of
Article Fourth of the Indenture so that, as so
restated, it shall be and read as follows:
"A. The Bonds, Underlying Mortgage Obligations and
Constituent Corporation Bonds, if any, for which Bonds are
then to be issued under this Section 7, shall not previously
have been made the basis for the issuance of Bonds or for
the withdrawal of money under any provision of this
Indenture, or retired out of moneys paid out by the Trustee
under the provisions of Section 9 of this Article Fourth or
Section 2 of Article Seventh hereof, or retired with moneys
deposited under an Underlying Mortgage or Constituent
Corporation Mortgage and representing the proceeds of any
insurance on the Mortgaged Property or of any part of the
Mortgaged Property which shall have been released from the
lien of this Indenture, or used as the basis for a credit
under Section 4 of Article Third of this Indenture.";
and
(C) by restating subsection (a) of subparagraph 3
of Paragraph E of Section 7 of Article Fourth of the
Indenture so that, as so restated, it shall be and read
as follows:
"(a) That the Bonds, Underlying Mortgage
Obligations and Constituent Corporation Bonds, if any,
for which Bonds are then to be issued under this
Section 7, had not been made the basis for the issuance
of Bonds or for the withdrawal of money under any
provision of this Indenture, and had not been retired
out of moneys paid out by the Trustee under the
provisions of Section 9 of this Article Fourth or
Section 2 of Article Seventh hereof, or retired with
moneys deposited under an Underlying Mortgage or
Constituent Corporation Mortgage and representing the
proceeds of any insurance on the Mortgaged Property or
of any part of the Mortgaged Property which shall have
been released from the lien of this Indenture, and had
not been used as the basis for a credit under Section 4
of Article Third of this Indenture."
SECTION 2. The Company reserves the right, without any
consent or other action by holders of the Bonds of the Eightieth
Series or of any subsequently created series, to amend at any
time Article Ninth of the Indenture, as it may heretofore, hereby
and hereafter be or have been supplemented and amended, by adding
the following Section 19 at the end of said Article Ninth:
"SECTION 19. All parties to this Indenture agree, and
each holder of Bonds by his acceptance thereof shall be
deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of
any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the
costs of such suit, and that such court may in its
discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant
in such suit, having due regard to the merits and good
faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not
apply to any suit instituted by the Trustee, to any
suit instituted by any holder, or group of holders, of
more than 10% in aggregate principal amount of the
Bonds outstanding, or to any suit instituted by any
holder of Bonds for the enforcement of the payment of
the principal of (or premium, if any) or interest on
any Bond on or after the maturity date expressed in
such Bond."
SECTION 3. The Company reserves the right, without any
consent or other action by holders of the Bonds of the Eightieth
Series or of any subsequently created series, to amend at any
time Article Eleventh of the Indenture, as it may heretofore,
hereby and hereafter be or have been supplemented and amended, by
amending the first paragraph of Section 2 thereof so that, as so
amended, it shall be and read as follows:
"SECTION 2. Anything herein contained to the
contrary notwithstanding, any moneys at any time
deposited with the Trustee pursuant to the provisions
hereof for the payment of the principal, premium or
interest of or upon any Bond or interest coupon and
remaining unclaimed for three (3) years after the date
upon which such payment shall have become due shall,
upon the request of the Company, be repaid to it by the
Trustee; provided, that, before being required to make
any such repayment, the Trustee may, at the expense of
the Company, cause to be published, once a week for
four (4) successive calendar weeks, in a daily
newspaper, printed in the English language, published
and of general circulation in the Borough of Manhattan,
The City of New York, State of New York, and in a daily
newspaper, printed in the English language, published
and of general circulation in each of the other cities
(if any) in which such principal, premium or interest,
as the case may be, was payable in accordance with the
terms of the Bond or interest coupon with respect to
which such moneys were deposited, notice that the said
moneys have not been claimed, and that after a date
named in such notice, the balance of such moneys then
unclaimed will be repaid to the Company."
SECTION 4. The Company reserves the right, without any
consent or other action by holders of the Bonds of the Eightieth
Series or of any subsequently created series, to amend at any
time Article Twelfth of the Indenture, as it may heretofore,
hereby and hereafter be or have been supplemented and amended, by
amending Paragraph A of Section 2 of Article Twelfth of the
Indenture by the addition of the following:
"The Trustee may, and, upon written request of the
Company or of the holders of a majority in principal
amount of the Bonds outstanding, shall, fix a day, not
less than ten (10) days prior to the date of first
publication of notice of such meeting, as a record date
for the determination of holders of Registered Bonds
without coupons, and of Coupon Bonds registered as to
principal (otherwise than to bearer), entitled to
notice of and to vote at such meeting and any
adjournment thereof, and only such registered holders
who shall have been such on the date so fixed shall be
entitled to notice of and to vote such Bonds at such
meeting, and the Registered Bonds without coupons, and
the Coupon Bonds registered as to principal (otherwise
than to bearer), on such record date may be voted at
such meeting and any adjournment thereof only by the
persons who shall have been registered holders of such
Bonds on such record date or their proxies,
notwithstanding any registration of transfer of any
such Bonds on the books of the Company after such date.
If any Registered Bonds without coupons shall be
transferred or shall be exchanged for Coupon Bonds
after such record date, or if any Coupon Bonds
registered as to principal (otherwise than to bearer)
on such record date shall thereafter be registered to
bearer, a suitable notation shall be made upon such
Bonds at the time of registration of transfer from such
registered holder's name or exchange, as the case may
be, to record the fact that the registered holder of
such Bonds on said record date or his proxies shall be
the only persons entitled to vote such Bonds at the
meeting. If any Coupon Bond not registered as to
principal upon such record date is thereafter so
registered (otherwise than to bearer) or is thereafter
exchanged for a Registered Bond, the first registered
holder in whose name such Bond shall be so registered
shall be deemed to have been the registered holder of
such Bond on the record date for the purposes of this
section, and upon such registration or exchange a
notice of such meeting shall be delivered to such
registered holder. In any case where a record date is
fixed as aforesaid, the list of Bondholders referred to
in Paragraph B of this Section 2 shall be based upon
the holdings of Bonds on such record date, but shall
also include the holder of Coupon Bonds registered as
to principal (otherwise than to bearer) after such
record date and prior to such meeting and the holders
of Registered Bonds received in exchange for Coupon
Bonds after such record date and prior to such
meeting."
SECTION 5. The Company reserves the right, without any
consent or other action by holders of the Bonds of the Eightieth
Series or of any subsequently created series, to amend at any
time Article Twelfth of the Indenture, as it may heretofore,
hereby and hereafter be or have been supplemented and amended, by
adding the following Paragraph G to Section 2 thereof:
"G. Whenever the Company shall deliver to the
Trustee an instrument or instruments executed by
holders of at least sixty-six and two-thirds per centum
(66-2/3%) in aggregate principal amount of the Bonds
affected and outstanding at the time of such delivery,
consenting to the substance of a proposed modification
or amendment to the provisions hereof, thereupon the
Trustee shall execute a supplemental indenture in
substantially the form provided for by or in such
instrument or instruments, and no holder of any Bond
shall have any right or interest to object to the
execution of said supplemental indenture or to object
to any of the terms or provisions therein contained, or
the operation thereof, or in any manner to question the
propriety of the execution thereof, or to enjoin or
restrain the Trustee or the Company from executing the
same or from taking any action pursuant to the
provisions thereof, provided that, in lieu of an
instrument or instruments executed by holders of Bonds,
the consent of the holders of any series of Bonds to
any such proposed modification or amendment may be set
forth in and evidenced by the supplemental indenture
establishing the terms and provisions of such series;
and provided further that no such change or
modification shall (a) alter or impair the obligation
of the Company to pay the principal and interest on any
Bond outstanding at the time and place and at the rate
and in the currency prescribed therein, without the
consent of the holder of such Bond, (b) permit the
creation by the Company of any mortgage, or lien in the
nature of a mortgage, ranking prior to or pari passu
with the lien of the Indenture, or alter adversely to
the Bondholders the character of the lien of the
Indenture, except as in the Indenture otherwise
expressly provided, unless the creation of such
mortgage or lien, or such alteration of the lien of the
Indenture, be consented to by the holders of all
outstanding Bonds, (c) affect the Trustee unless
consented to by the Trustee or (d) permit a reduction
of the percentage required for any change or
modification of the Indenture, without the consent of
the holders of all outstanding Bonds.
It shall not be necessary for any consent of
Bondholders under this Section to approve the
particular form of any proposed supplemental indenture,
but it shall be sufficient if such consent approves the
substances of the matters to which such consent
relates. Any consent executed and delivered by any
Bondholder shall be binding upon all future holders of
Bonds held by such Bondholder at the time of execution
of such consent, including without limitation any Bonds
issued in substitution or exchange therefor, whether
upon transfer or otherwise."
SECTION 6. The Company reserves the right, without any
consent or other action by holders of the Bonds of the Eightieth
Series or of any subsequently created series, to amend at any
time Article Thirteenth of the Indenture, as it may heretofore,
hereby and hereafter be or have been supplemented and amended, by
amending the first paragraph of Section 1 thereof so that, as so
amended, it shall be and read as follows:
"SECTION 1. Any demand, consent, waiver, request,
notice or other instrument in writing required or
provided by this Indenture to be signed or executed by
the holders of any Bonds may be in any number of
concurrent writings of similar tenor, and may be signed
or executed by such holders in person or by attorney
appointed in writing.
The fact and date of the execution by any person
of any such instrument, or of the writing appointing
any such attorney, and of the ownership by any person
of any Bonds, may be proved in any manner deemed
sufficient by the Trustee, and such proof shall be
conclusive in favor of the Trustee and the Company.
Without limiting the generality of the foregoing
paragraph:
A. The signature on a proxy, consent or other such
instrument or writing, if believed by the Trustee to be
genuine, shall be sufficient to establish the fact of
the execution thereof.
B. The fact of the ownership of any Coupon Bond
which shall not at the time be registered as to
principal or shall be registered to bearer, and the
denomination and serial number of such Bond and the
date of holding the same, may be proved by a
certificate executed by any trust company, bank, banker
or other depositary (wherever situated), showing that
at the date therein mentioned the person named in such
certificate had on deposit with such depositary the
Bond described in such certificate. For all purposes of
this Indenture and of any proceedings pursuant hereto
for the enforcement hereof or otherwise, to the extent
permitted by the provisions of Section 4 of Article
Tenth, such person shall be deemed to continue to be
the owner of such Bond until the Trustee shall have
received notice in writing to the contrary. The
ownership of any Registered Bond or of any Coupon Bond
which shall at the time be registered as to principal
(otherwise than to bearer) shall be proved by the
register of Bonds maintained for such purpose."
SECTION 7. The Company reserves the right, without any
consent or other action by holders of the Bonds of the Eightieth
Series or of any subsequently created series, to amend at any
time Article Fourth of the Indenture, as it may heretofore,
hereby and hereafter be or have been supplemented and amended, by
amending subparagraph (3) of Paragraph E of Section 9 thereof so
that, as so amended, it shall be and read as follows:
"(3) A statement, in form satisfactory to the
Trustee, signed by the President or a Vice President
and the Treasurer or an Assistant Treasurer of the
Company, and verified on information and belief by one
of such officers not more than sixty (60) days prior to
the receipt thereof by the Trustee, certifying (a) that
the Bonds so delivered had previously been actually
negotiated by the Company for value; (b) that the
Company had bona fide purchased or contracted to
purchase the said Bonds, Underlying Mortgage
Obligations and Constituent Corporation Bonds at prices
(inclusive of accrued interest) to be set forth in the
statement, and that such prices were not in excess of
115% of the principal amount of said Bonds, Underlying
Mortgage Obligations and Constituent Corporation Bonds;
(c) that the Company is not, so far as known to the
officers signing such statement, in default with
respect to the performance or observance of any
covenant or agreement contained in this Indenture; and
(d) that it is not then necessary to retire the
Underlying Mortgage Obligations to be purchased to
eliminate any excess of the nature described in
Paragraph D of Section 7 hereof."
SECTION 8. The Company reserves the right, without any
consent or other action by holders of the Bonds of the Eightieth
Series or of any subsequently created series, to amend at any
time Article Seventh of the Indenture, as it may heretofore,
hereby and hereafter be or have been supplemented and amended, by
amending Paragraph E of Section 2 thereof so that, as so amended,
it shall be and read as follows:
"E. To the purchase of Bonds of any series issued
and outstanding hereunder or of Underlying Mortgage
Obligations or of Constituent Corporation Bonds at not
in excess of 115% of the principal amount thereof, in
accordance with the provisions of Paragraph E of
Section 9 of Article Fourth."
PART IV.
THE TRUSTEE
SECTION 1. The Trustee hereby accepts the trusts hereby
declared and provided, and agrees to perform the same upon the
terms and conditions set forth in the Original Indenture and in
the indentures supplemental thereto including this Supplemental
Indenture and upon the following terms and conditions:
The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of
this Supplemental Indenture, or for or in respect of the recitals
contained herein, all of which recitals are made by the Company
solely. To the extent permitted by the provisions of Section 4
of Article Tenth of the Indenture, the Trustee shall not be
answerable or accountable for anything whatsoever in connection
with this Supplemental Indenture except for its own wilful
misconduct or negligence.
PART V.
MISCELLANEOUS PROVISIONS
SECTION 1. This Supplemental Indenture shall, pursuant to
the provisions of Section 4 of Article Twelfth of the Indenture,
hereafter form a part of the Indenture; and all the terms and
conditions contained in this Supplemental Indenture as to any
provision authorized to be contained herein shall be and be
deemed to be part of the terms and conditions of the Indenture
for any and all purposes. Except as expressly amended and
supplemented by this Supplemental Indenture, the Indenture is
hereby ratified and confirmed in all respects.
SECTION 2. This Supplemental Indenture may be
simultaneously executed in any number of counterparts, and each
of such counterparts shall for all purposes be deemed to be an
original and shall remain in full force and effect, and all such
counterparts shall together constitute but one and the same
instrument.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be executed in their respective
corporate names by their respective officers thereunto duly
authorized, and their respective corporate seals to be hereto
attached and to be duly attested, all as of the day and year
first above written.
NIAGARA MOHAWK POWER
CORPORATION
[CORPORATE SEAL]
By /s/ Arthur W. Roos
Vice President-Treasurer
Attest:
/s/ John J. Hennigan
Assistant Secretary
MARINE MIDLAND BANK
[CORPORATE SEAL] By /s/ Metin Caner
Assistant Vice President
Attest:
/s/ Frank J. Godino
Corporate Trust Officer
<PAGE>
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF ONONDAGA )
On this 19th day of May, 1995, before me personally
came ARTHUR W. ROOS, to me personally known, who, being by me
duly sworn, did depose and say that he resides at 4573 Stoneledge
Lane, Manlius, New York 13104; that he is the Vice President-
Treasurer of NIAGARA MOHAWK POWER CORPORATION, the corporation
described in and which executed the 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.
/s/ Ingrid E. Clark
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 18th day of May, 1995, before me personally
came METIN CANER to me personally known, who, being by me duly
sworn, did depose and say that he resides at 2350 Broadway, New
York, New York 10024; that he is an Assistant Vice President of
MARINE MIDLAND BANK the corporation described in and which
executed the 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.
/s/ Marcia Markowski
Notary Public
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
---------------------------------------------------------
Computation of the Average Number of Shares of Common Stock Outstanding
For the Three Months and Six Months Ended June 30, 1995 and 1994
(4)
Average Number
of Shares
Outstanding as
Shown on
Consolidated
Statement
(1) (2) (3) of Income
Shares of Number of Share (3 divided by
Common Days Days Number of Days
Stock Outstanding (2 X 1) in Period)
------------- ----------- ----------- ---------------
FOR THE THREE MONTHS ENDED JUNE 30;
<S> <C> <C> <C> <C>
APRIL 1 - JUNE 30, 1995 144,330,482 91 13,134,073,862 144,330,482
=========== ============== ===========
APRIL 1 - JUNE 30, 1994 142,706,358 91 12,986,278,578
SHARES SOLD AT VARIOUS
TIMES DURING THE PERIOD -
DIVIDEND REINVESTMENT PLAN 242,046 *<F1> 7,384,913
EMPLOYEE SAVINGS FUND PLAN 368,400 *<F1> 11,337,500
----------- --------------
143,316,804 13,005,000,991 142,912,099
=========== ============== ===========
<PAGE>
<PAGE>
FOR THE SIX MONTHS ENDED JUNE 30:
JANUARY 1 - JUNE 30, 1995 144,311,466 181 26,120,375,346
SHARES SOLD AT VARIOUS
TIMES DURING THE PERIOD -
DIVIDEND REINVESTMENT PLAN 19,016 *<F1> 2,871,416
----------- --------------
144,330,482 26,123,246,762 144,327,330
=========== ============== ===========
JANUARY 1 - JUNE 30, 1994 142,427,057 181 25,779,297,317
SHARES SOLD AT VARIOUS
TIMES DURING THE PERIOD -
DIVIDEND REINVESTMENT PLAN 421,347 *<F1> 29,392,338
EMPLOYEE SAVINGS FUND PLAN 468,400 *<F1> 21,137,500
----------- --------------
143,316,804 25,829,827,155 142,706,227
=========== ============== ===========
NOTE: Earnings per share calculated on both a primary and fully diluted basis are the same due
to the effects of rounding.
<FN>
<F1>* Number of days outstanding not shown as shares represent an accumulation of weekly and
monthly sales throughout the quarter. Share days for shares sold are based on the total
number of days each share was outstanding during the quarter.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 12
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
---------------------------------------------------------
<CAPTION>
Statement Showing Computation of Ratio of Earnings to Fixed
Charges, Ratio of Earnings to Fixed Charges without AFC and
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
for the Twelve Months Ended June 30, 1995 (In thousands of
dollars)
<S> <C>
A. Net Income $ 144,182
B. Taxes Based on Income or Profits 98,937
---------
C. Earnings, Before Income Taxes 243,119
D. Fixed Charges (a) 315,114
---------
E. Earnings Before Income Taxes and
Fixed Charges 558,233
F. Allowance for Funds Used During
Construction (AFC) 9,821
---------
G. Earnings Before Income Taxes and
Fixed Charges without AFC $ 548,412
=========
<PAGE>
<PAGE>
PREFERRED DIVIDEND FACTOR:
H. Preferred Dividend Requirements $ 39,846
---------
I. Ratio of Pre-tax Income to Net
Income (C/A) 1.686
---------
J. Preferred Dividend Factor (HxI) $ 67,180
K. Fixed Charges as Above (D) 315,114
---------
L. Fixed Charges and Preferred Dividends
Combined $ 382,294
=========
M. Ratio of Earnings to Fixed
Charges (E/D) 1.77
=========
N. Ratio of Earnings to Fixed Charges
without AFC (G/D) 1.74
=========
O. Ratio of Earnings to Fixed Charges
and Preferred Dividends Combined (E/L) 1.46
=========
(a) Includes a portion of rentals deemed representative of the
interest factor ($29,272).
/TABLE
<PAGE>
<PAGE>
EXHIBIT 15
----------
August 11, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Niagara Mohawk Power Corporation has included
our report dated August 11, 1995 (issued pursuant to the
provisions of Statement on Auditing Standards No. 71) in the
Registration Statements on Form S-8 (Nos. 33-36189, 33-42720, 33-
42721, 33-42771 and 33-54829) and in the Prospectus constituting
part of the Registration Statements on Form S-3 (Nos. 33-45898,
33-50703, 33-51073, 33-54827 and 33-55546). We are also aware of
our responsibilities under the Securities Act of 1933.
Yours very truly,
/s/ Price Waterhouse LLP
------------------------
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED
STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 7015487
<OTHER-PROPERTY-AND-INVEST> 159059
<TOTAL-CURRENT-ASSETS> 933834
<TOTAL-DEFERRED-CHARGES> 1351398
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 9459778
<COMMON> 144330
<CAPITAL-SURPLUS-PAID-IN> 1782838
<RETAINED-EARNINGS> 610718
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2537886
251700
290000
<LONG-TERM-DEBT-NET> 3455933
<SHORT-TERM-NOTES> 110000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 72210
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2742049
<TOT-CAPITALIZATION-AND-LIAB> 9459778
<GROSS-OPERATING-REVENUE> 2063629
<INCOME-TAX-EXPENSE> 108684
<OTHER-OPERATING-EXPENSES> 1654555
<TOTAL-OPERATING-EXPENSES> 1763239
<OPERATING-INCOME-LOSS> 300390
<OTHER-INCOME-NET> 11186
<INCOME-BEFORE-INTEREST-EXPEN> 311576
<TOTAL-INTEREST-EXPENSE> 138355
<NET-INCOME> 173221
20261
<EARNINGS-AVAILABLE-FOR-COMM> 152960
<COMMON-STOCK-DIVIDENDS> 80825
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 370598
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 0
</TABLE>
