SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
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(Amendment Number One)
(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
OR
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition
period from ______ to ______
Commission file number 1-2987
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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 (I.R.S. Employer
of 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
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Securities registered pursuant to Section 12(b) of the
Act:
(Each class is registered on the New York Stock Exchange)
Title of each class
Common Stock ($1 par value)
Preferred Stock ($100 par Preferred Stock ($25 par
value-cumulative): value-cumulative):
3.40% Series 4.10% Series 6.10% Series 9.50% Series
3.60% Series 4.85% Series 7.72% Series Adjustable Rate -
3.90% Series 5.25% Series Series A & Series C
Securities registered pursuant to Section 12(g) of the Act: None
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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 by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K / X /
State the aggregate market value of the voting stock held by non-
affiliates of the registrant.
Approximately $1,227,000,000 at March 18, 1997.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable
date.
Common stock $1 par value, outstanding at March 18, 1997:
144,390,619.
Documents incorporated by reference:
Definitive Proxy Statement in connection with annual meeting of
stockholders to be held May 6, 1997 incorporated in Part III to
the extent described therein.
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ITEM 3. LEGAL PROCEEDINGS.
For a detailed discussion of additional legal proceedings, see
Part II, Item 8. Financial Statements and Supplementary Data -
"Note 9. Commitments and Contingencies - Tax Assessments, -
Litigation and - Environmental Contingencies." See also Item 1.
Business - "Environmental Matters - Solid/Hazardous Waste," and
Part II, Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Announced Agreement-in-
Principle to Terminate or Restructure 44 IPP Contracts." The
Company is unable to predict the ultimate disposition of the
matters referred to below in (2), (3) and (4). For a discussion of
the uncertainty regarding the Company's ability to recover these
types of expenditures in rates, see Part II, Item 8. Financial
Statements and Supplementary Data - "Note 2. Rate and Regulatory
Issues and Contingencies."
1. On July 21, 1988, the Company became a defendant in an
ongoing Superfund lawsuit in Federal District Court,
Northern District of New York (Federal District Court)
brought by the Federal Government. This suit involves
PCB oil contamination at the York Oil Site in Moira, New
York. Waste oil was transported to the site during the
1960's and 1970's by contractors of Peirce Oil Company
(owners/operators of the site) who picked up waste oil at
locations throughout Central New York, allegedly
including one or more Company facilities.
The government issued a final settlement demand upon the
Company in February 1994, including a settlement figure
which was rejected by the Company. The government
subsequently filed a complaint against a group of PRPs,
including the Company, who subsequently filed third and
fourth-party actions against additional parties.
Settlement of the litigation occurred in July 1996; the
government lodged a Consent Decree with the Federal
District Court in November 1996 embodying the settlement
terms. The Company's allocated share of liability as a
result of this settlement was immaterial to the results
of operations and financial condition of the Company.
2. 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
damage claimed to have resulted from contamination
associated with 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 in
the amount of approximately $60 million. The Company has
filed answers responding to the claims put forth in the
existing suits, denying liability for any of the claimed
damages. The Company is participating in joint defense
efforts among the defendants during the initial stage of
these suits, and intends to vigorously defend against
these claims. The Company is unable to predict the
ultimate outcome of these proceedings. Regarding the
Company's alleged association with conditions at the
landfill, notification was received from the DEC in 1986
of its status as a PRP. The Company at that time elected
not to take an active role in the remediation process
because only minimal evidence existed that hazardous
substances generated by the Company were disposed at the
Pfohl Brothers Landfill. It has since 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 a
Steering Committee made up of a group of identified PRPs,
thereby participating in the development of an
appropriate remedial action for the site while 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
continues to investigate the extent of its alleged
connection to the landfill to allow for a reasonable
allocation of cost liability.
3. On October 23, 1992, the Company petitioned the PSC to
order IPPs to post letters of credit or other firm
security to protect ratepayers' interests in advance
payments made in prior years to these generators. The
PSC dismissed the original petition without prejudice.
In December 1995, the Company filed a petition with the
PSC similar to the one that the Company filed in October
1992. The Company cannot predict the outcome of this
action. However, in August 1996, the PSC proposed to
examine the circumstances under which a utility,
including the Company, should be allowed to demand
security from IPPs to ensure the repayment of advance
payments made under their purchased power contracts. See
Part II, Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - "Other
Federal and State Regulatory Initiatives - PSC Proposal
of New IPP Operating and PPA Management Procedures."
On February 4, 1994, the Company notified the owners of
nine projects with contracts that provide for front-end
loaded payments of the Company's demand for adequate
assurance that the owners will perform all of their
future repayment obligations, including the obligation to
deliver electricity in the future at prices below the
Company's avoided cost as required by agreements and the
repayment of any advance payment which remains
outstanding at the end of the contract. The projects at
issue total 426 MWs. The Company's demand is based on
its assessment of the amount of advance payment to be
accumulated under the terms of the contracts, future
avoided costs and future operating costs for the
projects. The Company has received the following
responses to these notifications:
On March 4, 1994, Encogen Four Partners, L.P. (Encogen)
filed a complaint in the United States District Court for
the Southern District of New York (U.S. District Court)
alleging breach of contract and prima facie tort by the
Company. Encogen seeks compensatory damages of
approximately $1 million and unspecified punitive
damages. In addition, Encogen seeks a declaratory
judgment that the Company is not entitled to assurance of
future performance from Encogen. On April 4, 1994, the
Company filed its answer and counterclaim for declaratory
judgment relating to the Company's exercise of its right
to demand adequate assurance. Encogen has amended its
complaint, rescinded its prima facie tort claim, and
filed a motion of judgment on the pleadings. On February
6, 1996, the U.S. District Court granted Encogen's motion
for judgment on the pleadings and ruled that under New
York law, the Company did not have the right to demand
adequate assurances of future performance. In addition,
the U.S. District Court did not award any damages. The
Company has appealed this decision.
On March 4, 1994, Sterling Power Partners, L.P.
(Sterling), Seneca Power Partners, L.P., Power City
Partners, L.P. and AG-Energy, L.P. filed a complaint in
the Supreme Court of the State of New York, County of New
York seeking a declaratory judgment that: (a) the
Company does not have any legal right to demand assurance
of plaintiffs' future performance; (b) even if such a
right existed, the Company lacks reasonable insecurity as
to plaintiffs' future performance; (c) the specific forms
of assurances sought by the Company are unreasonable and
(d) if the Company is entitled to any form of assurances,
plaintiffs have provided adequate assurances. On April
4, 1994, the Company filed its answer and counterclaim
for declaratory judgment relating to the Company's
exercise of its right to demand adequate assurance. On
October 5, 1994, Sterling moved for summary judgment and
the Company opposed and cross moved for summary judgment.
On February 16, 1996, Sterling supplemented its motion,
claiming that the February 6, 1996 ruling in the Encogen
case is dispositive. On February 29, 1996, the New York
State Supreme Court granted Sterling's motion for summary
judgment and ruled that under New York law, the Company
did not have the right to demand adequate assurances of
future performance. The Company has appealed this
decision.
On March 7, 1994, NorCon Power Partners, L.P. (NorCon)
filed a complaint in the U.S. District Court seeking to
enjoin the Company from terminating a power purchase
agreement between the parties and seeking a declaratory
judgment that the Company has no right to demand
additional security or other assurances of NorCon's
future performance under the power purchase agreement.
NorCon sought a temporary restraining order against the
Company to prevent the Company from taking any action on
its February 4 letter. On March 14, 1994, the Court
entered the interim relief sought by NorCon. On April 4,
1994, the Company filed its answer and counterclaim for
declaratory judgment relating to the Company's exercise
of its right to demand adequate assurance. On November
2, 1994, NorCon filed for summary judgment. On February
6, 1996, the U.S. District Court granted NorCon's motion
for summary judgment and ruled that under New York law,
the Company did not have the right to demand adequate
assurances of future performance. The Company has
appealed this decision.
While the Company will continue to press for adequate
assurance that the owners of these projects will honor
their repayment obligations, the Company can neither
provide any judgement regarding the likely outcome nor
any estimate or range of possible loss or reduction of
exposure in these cases. Accordingly, no provision for
liability, if any, that may result from any of these
suits has been made in the Company's financial
statements. It is possible that some of these
litigations will be settled as a result of the agreement-
in-principle that the Company recently entered into with
the IPPs (see "Announced Agreement-In-Principle to
Terminate or Restructure 44 IPP Contracts").
4. 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. By order dated November 7, 1995, the
Court granted the Company's motion to dismiss the
complaint in its entirety. Fourth Branch filed an appeal
from the Court's order. On January 30, 1997, the
Appellate Division modified the November 7, 1995 court
decision by reversing the dismissal of the fourth and
fifth causes of action set forth in Fourth Branch's
complaint.
The Company and Fourth Branch had also entered into
negotiations under a FERC mediation process. As a result
of these negotiations, the Company had proposed to sell
the hydroelectric plant to Fourth Branch for an amount
which would not be material. In addition, the proposal
included a provision that would require the
discontinuance of all litigation between the parties.
Attempts to implement this proposal have been
unsuccessful and the Company has informed FERC that its
participation in the mediation efforts has been
concluded. On January 14, 1997, the FERC Administrative
Law Judge issued a report to FERC recommending that the
mediation proceeding be terminated, leaving outstanding
a Fourth Branch complaint to FERC that alleges anti-
competitive conduct by the Company. The Company has made
a motion to dismiss Fourth Branch's antitrust complaint
before the FERC, which motion was opposed by Fourth
Branch. A decision from FERC on this matter is pending.
The Company is unable to predict the ultimate disposition
of the lawsuit referred to above. However, the Company
believes it has meritorious defenses and intends to
defend this lawsuit vigorously. No provision for
liability, if any, that may result from this lawsuit has
been made in the Company's financial statements.<PAGE>
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SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) 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: May 1, 1997 By /s/ Steven W. Tasker
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Steven W. Tasker
Vice President-Controller
and Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates
indicated.
