SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 10, 1997
NIAGARA MOHAWK POWER CORPORATION
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(Exact Name of Registrant as specified in its charter)
New York 1-2987 15-026555
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
300 Erie Boulevard West, Syracuse, NY 13202
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(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 315-474-1511
Not Applicable
(Former Name or Former Address,
if changed Since Last Report)
<PAGE>
Item 5. Other Events
The Company announced on March 10, 1997 an agreement in principle to restructure
or terminate 44 power purchase contracts. The agreement in principle
contemplates that Niagara Mohawk would pay the counterparties to these contracts
approximately $3.6 billion in cash and/or debt securities and 46 million common
shares, representing approximately 25 percent of the anticipated fully diluted
common shares. In addition, Niagara Mohawk would enter into new agreements that
would further compensate these counterparties and hedge specified amounts of
power at specified prices (subject in certain cases to adjustment for changes in
gas or other indices). The contracts may be in the form of fixed financial and
physical agreements, options, indexed financial instruments, or a combination
thereof. Set forth below is a schedule of possible quantities and prices to be
reflected in such contracts.
HYDRO COAL AND WASTE** GAS**
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QUANTITY PRICE/ QUANTITY PRICE/ QUANTITY PRICE/
YEAR (GWH) MWH* (GWH) MWH (GWH) MWH
- ------ --------- --------- --------- ------- ----------- --------
1 875 $86 - $98 353 $ 28 4,630 $ 46
2 875 88 - 100 353 28 4,640 46
3 875 93 - 101 353 29 4,640 47
4 875 94 - 103 353 30 4,690 44
5 875 96 - 102 353 31 4,731 46
6 875 97 - 113 353 32 7,736 49
7 875 99 - 115 353 33 7,755 52
8 875 99 - 116 353 34 7,766 53
9 875 100 - 119 353 35 7,778 55
10 875 86 - 121 353 36 7,787 57
11 875 86 - 123 353 37 8,000 62
12 875 87 - 124 353 38 8,000 64
13 875 86 - 126 353 39 -- --
14 875 89 - 126 353 41 -- --
15 875 90 - 117 353 42 -- --
16 802 101 - 122 353 43 -- --
17 802 104 - 124 176 45 -- --
18 802 115 - 125 -- -- -- --
19 802 115 - 127 -- -- -- --
20 802 114 - 129 -- -- -- --
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* Prices subject to final negotiation.
** May be subject to adjustment in certain cases for changes in gas or other
indices.
A press release describing the terms of the agreement in concept (and various
conditions thereto) is filed as an exhibit hereto, and is incorporated hereto
by reference.
Item 7. Financial Statements and Exhibits
99.1 Press Release dated March 10, 1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, hereto duly authorized.
NIAGARA MOHAWK POWER CORPORATION
By /s/ Steven W. Tasker
Name: Steven W. Tasker
Title: Vice President-Controller
Date: March 10, 1997
<PAGE>
Exhibit Index
Exhibit No. Description
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99.1 Press Release dated March 10, 1997.
Exhibit 99.1
Media Inquiries: Nicholas J. Ashooh 315/428-6922
Kerry P. Burns 315/428-5266
Financial Inquiries: Leon T. Mazur 315/428-5876
NIAGARA MOHAWK, INDEPENDENT POWER PRODUCERS AGREE IN
PRINCIPLE TO RESOLVE ABOVE-MARKET POWER CONTRACTS
Proposal Includes Cash, Debt Securities And Equity; Would Reduce Prices
For All Customer Classes, Ease Transition To Competition; Details Still
To Be Negotiated
SYRACUSE, March 10 -- Niagara Mohawk Power Corp. (NYSE:NMK) and 19
independent power producers today jointly announced an agreement in
principle to restructure or terminate 44 power purchase contracts.
These contracts represent more than 90 percent of Niagara Mohawk's
above-market power costs under all existing IPP contracts.
The agreement contemplates that Niagara Mohawk would restructure or
terminate the 44 power contracts in exchange for approximately $3.6
billion in cash and/or debt securities, and 46 million common shares,
representing approximately 25 percent of the anticipated fully diluted
outstanding common shares. The new debt will be subordinate to existing
first mortgage bonds.
In addition, Niagara Mohawk and the IPPs would enter into new
agreements that would compensate the IPPs and hedge the prices for
specified amounts of power. Additional information on possible terms
for these agreements is being filed today with the Securities and
Exchange Commission. Niagara Mohawk estimates it will realize savings
of up to $5 billion, in nominal dollars, over 15 years, with those
savings occurring in the second half of that period.
Under the agreement, electricity prices for all customer classes would
be reduced, with larger reductions allocated to large commercial and
industrial customers to retain and attract jobs in upstate New York.
Other state actions, such as passage of the Ratepayer Relief Act or
cuts in utility taxes, would produce further savings for residential
and commercial customers.
William E. Davis, Niagara Mohawk's chairman and chief executive
officer, and Joseph P. Kearney, president and CEO of U.S. Generating
Co., one of the lead negotiators for the IPPs, both called the
agreement in principle a critical step toward resolving the independent
power issue.
-MORE-
<PAGE>
"Although we have a lot more work to do, we now have an agreement that
should allow us to deliver meaningful rate relief to customers while
arresting Niagara Mohawk's financial decline," Davis said. "We also
have a road map for rebuilding shareholder value and for positioning
Niagra Mohawk to compete successfully in the new competitive
electricity market."
Kearney said "The agreement builds momentum toward competition and
choice." Kenneth A. Buckfire, the Wasserstein Perella & Co., investment
banker advising the IPPs, said, "This agreement represents a consensus
of all 19 IPPs supporting an equitable settlement of the power
contracts and restoring financial health to Niagara Mohawk, their key
customer."
Carol Murphy, executive director of the Independent Power Producers of
New York said, "New York's independent power producers look forward to
a strong energy partnership with Niagara Mohawk." All parties thanked
the office of N.Y. Gov. George Pataki and Public Service Commission
Chairman John O'Mara for their support and guidance during
negotiations.
The parties cautioned that there are still important issues that must
be resolved including negotiations with each IPP of specific terms of
the new price-hedging agreements that may be executed. Final resolution
will also require execution of binding agreements; approval of Niagara
Mohawk shareholders; New York Public Service Commission approval of
both the agreement and an acceptable long-term rate structure; other
state and federal approvals; successful completion of all financing
transactions on reasonable terms; the resolution of all tax issues and
obtaining required amendments or waivers under existing credit
agreements and third-party contracts.
The parties said they will begin negotiating remaining details
immediately with a goal of presenting a final agreement to the New York
PSC for approval. The parties will seek required financing following
PSC approval and expect to close the transaction by year-end 1997.
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