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, 1997
- ---------------------------------------------
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
- ------------------ ----------
(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, 1997 -
144,419,351<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
FORM 10-Q - For the Quarter Ended June 30, 1997
INDEX
- -----
PART I. FINANCIAL INFORMATION
Glossary of Terms
Item 1. Financial Statements.
a) Consolidated Statements of Income -
Three Months and Six Months ended
June 30, 1997 and 1996
b) Consolidated Balance Sheets - June 30,
1997 and December 31, 1996
c) Consolidated Statements of Cash Flows -
Six Months ended June 30, 1997 and 1996
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 4. Submission of Matters to a Vote of Security
Holders.
Item 5. Other Events.
Item 6. Exhibits and Reports on Form 8-K.
Signature
Exhibit Index
<PAGE>
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NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
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GLOSSARY OF TERMS
- -----------------
TERM DEFINITION
- ---- ----------
Dth Dekatherms
FAC Fuel Adjustment Clause
FERC Federal Energy Regulatory Commission
GAAP Generally Accepted Accounting Principles
GRT New York State Gross Receipts Tax
GWh Gigawatt-hours
IPP Independent Power Producer
KWh Kilowatt-hours
MWs Megawatts
MRA Master Restructuring Agreement
NRC Nuclear Regulatory Commission
NYPA New York Power Authority
PPA Power Purchase Agreement
PRP Potentially Responsible Party
PSC New York State Public Service Commission
QF Qualifying Facility
SFAS Statement of Financial Accounting Standards No. 71
No. 71 "Accounting for the Effects of Certain Types of
Regulation"
SFAS Statement of Financial Accounting Standards No. 101
No. 101 "Regulated Enterprises - Accounting for the
Discontinuation of Application of FASB Statement No.
71"
<PAGE>
SFAS Statement of Financial Accounting Standards No. 121
No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of"
SFAS Statement of Financial Accounting Standards No. 128
No. 128 "Earnings per Share"
Unit 1 Nine Mile Point Nuclear Station Unit No. 1
Unit 2 Nine Mile Point Nuclear Station Unit No. 2<PAGE>
<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION
- -----------------------------
ITEM 1. FINANCIAL STATEMENTS.
- -----------------------------
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)
- -----------------------------------------------
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
1997 1996
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(In thousands of dollars)
<S> <C> <C>
OPERATING REVENUES:
Electric $ 804,537 $ 804,457
Gas 141,161 156,314
---------- ----------
945,698 960,771
---------- ----------
OPERATING EXPENSES:
Fuel for electric generation 35,192 36,937
Electricity purchased 316,998 301,057
Gas purchased 62,924 80,557
Other operation and maintenance
expense 199,792 200,343
Depreciation and amortization 84,799 82,142
Federal and foreign income taxes 28,032 29,392
Other taxes 115,289 116,980
---------- ----------
843,026 847,408
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OPERATING INCOME 102,672 113,363
---------- ----------<PAGE>
<PAGE>
OTHER INCOME AND (DEDUCTIONS):
Allowance for other funds used
during construction 1,197 794
Federal and foreign income taxes 1,150 857
Other items (net) 5,072 6,731
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7,419 8,382
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INCOME BEFORE INTEREST CHARGES 110,091 121,745
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INTEREST CHARGES:
Interest on long-term debt 68,929 68,597
Other interest 1,405 789
Allowance for borrowed funds used
during construction (992) (633)
---------- ----------
69,342 68,753
---------- ----------
NET INCOME 40,749 52,992
Dividends on preferred stock 9,409 9,532
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BALANCE AVAILABLE FOR COMMON STOCK $ 31,340 $ 43,460
========== ==========
Average number of shares of common
stock outstanding (in thousands) 144,391 144,337
Balance available per average
share of common stock $ .22 $ .30
<PAGE>
<PAGE>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
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(In thousands of dollars)
OPERATING REVENUES:
Electric $1,681,906 $1,655,594
Gas 427,624 468,240
---------- ----------
2,109,530 2,123,834
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OPERATING EXPENSES:
Fuel for electric generation 72,657 86,501
Electricity purchased 645,801 588,365
Gas purchased 211,555 270,552
Other operation and maintenance
expense 406,457 409,365
Depreciation and amortization 169,021 164,206
Federal and foreign income taxes 100,671 86,015
Other taxes 241,398 247,458
---------- ----------
1,847,560 1,852,462
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OPERATING INCOME 261,970 271,372
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<PAGE>
OTHER INCOME AND (DEDUCTIONS):
Allowance for other funds used
during construction 2,636 1,202
Federal and foreign income taxes 5,312 4,661
Other items (net) 10,733 9,183
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18,681 15,046
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INCOME BEFORE INTEREST CHARGES 280,651 286,418
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INTEREST CHARGES:
Interest on long-term debt 136,889 136,788
Other interest 2,173 2,171
Allowance for borrowed funds used
during construction (2,182) (1,655)
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136,880 137,304
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NET INCOME 143,771 149,114
Dividends on preferred stock 18,808 19,151
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BALANCE AVAILABLE FOR COMMON STOCK $ 124,963 $ 129,963
========== ==========
Average number of shares of common
stock outstanding (in thousands) 144,390 144,335
Balance available per average
share of common stock $ .87 $ .90
/TABLE
<PAGE>
<PAGE>
<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- ---------------------------
<CAPTION>
ASSETS
- ------ JUNE 30, 1997
(UNAUDITED) DECEMBER 31, 1996
------------- -----------------
(In thousands of dollars)
<S> <C> <C>
UTILITY PLANT:
Electric plant $ 8,700,438 $ 8,611,419
Nuclear fuel 575,751 573,041
Gas plant 1,097,246 1,082,298
Common plant 312,558 292,591
Construction work in progress 259,280 279,992
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Total utility plant 10,945,273 10,839,341
Less-Accumulated depreciation and
amortization 4,056,261 3,881,726
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Net utility plant 6,889,012 6,957,615
---------- ----------
OTHER PROPERTY AND INVESTMENTS 238,837 257,145
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<PAGE>
<PAGE>
CURRENT ASSETS:
Cash, including temporary cash investments
of $576,694 and $223,829, respectively 602,246 325,398
Accounts receivable (less allowance for
doubtful accounts of $69,000 and $52,100,
respectively) 311,961 373,305
Materials and supplies, at average cost:
Coal and oil for production of electricity 18,919 20,788
Gas storage 23,687 43,431
Other 119,993 120,914
Prepaid taxes 57,428 11,976
Other 28,549 25,329
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1,162,783 921,141
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REGULATORY ASSETS (NOTE 3):
Regulatory tax asset 387,376 390,994
Deferred finance charges 239,880 239,880
Deferred environmental restoration costs (Note 2) 225,000 225,000
Unamortized debt expense 61,296 65,993
Postretirement benefits other than pensions 58,345 60,482
Other 189,188 206,352
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1,161,085 1,188,701
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OTHER ASSETS 71,482 77,428
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$ 9,523,199 $ 9,402,030
========== ==========
The accompanying notes are an integral part of these financial statements
/TABLE
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<PAGE>
<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- ---------------------------
CAPITALIZATION AND LIABILITIES
- ------------------------------
<CAPTION>
JUNE 30, 1997
(UNAUDITED) DECEMBER 31, 1996
------------- -----------------
(In thousands of dollars)
<S> <C> <C>
CAPITALIZATION:
COMMON STOCKHOLDERS' EQUITY:
Common stock - $1 par value; authorized
185,000,000 shares; issued 144,390,619 and
144,365,214 shares, respectively $ 144,391 $ 144,365
Capital stock premium and expense 1,783,239 1,783,725
Retained earnings 782,445 657,482
---------- ----------
2,710,075 2,585,572
---------- ----------
<PAGE>
<PAGE>
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
222,000 and 240,000 shares, respectively 20,400 22,200
CUMULATIVE PREFERRED STOCK, AUTHORIZED 19,600,000
SHARES, $25 PAR VALUE:
Non-redeemable (optionally redeemable),
issued 9,200,000 shares 230,000 230,000
Redeemable (mandatorily redeemable), issued
2,764,005 and 2,864,005 shares,
respectively 62,030 64,530
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522,430 526,730
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Long-term debt 3,476,156 3,477,879
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TOTAL CAPITALIZATION 6,708,661 6,590,181
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<PAGE>
<PAGE>
CURRENT LIABILITIES:
Long-term debt due within one year 48,054 48,084
Sinking fund requirements on redeemable
preferred stock 8,870 8,870
Accounts payable 181,624 271,830
Payable on outstanding bank checks 20,913 32,008
Customers' deposits 16,415 15,505
Accrued taxes 91,496 4,216
Accrued interest 63,671 63,252
Accrued vacation pay 36,484 36,436
Other 53,874 52,455
---------- ----------
521,401 532,656
---------- ----------
REGULATORY LIABILITIES (NOTE 3):
Deferred finance charges 239,880 239,880
---------- ----------
OTHER LIABILITIES:
Accumulated deferred income taxes 1,359,476 1,331,913
Employee pension and other benefits 241,028 238,688
Deferred pension settlement gain 15,853 19,269
Unbilled revenues 19,981 49,881
Other 191,919 174,562
---------- ----------
1,828,257 1,814,313
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COMMITMENTS AND CONTINGENCIES (NOTES 2 AND 3):
Liability for environmental restoration 225,000 225,000
---------- ----------
$9,523,199 $9,402,030
========== ==========
The accompanying notes are an integral part of these financial statements
/TABLE
<PAGE>
<PAGE>
<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,
1997 1996
------------- ------------
(In thousands of dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 143,771 $ 149,114
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 169,021 164,206
Amortization of nuclear fuel 12,944 21,058
Provision for deferred income taxes 31,181 22,442
Decrease in net accounts receivable 31,444 38,490
Decrease in materials and supplies 22,166 13,067
Decrease in accounts payable and accrued expenses (80,179) (58,728)
Increase in accrued interest and taxes 87,699 62,459
Changes in other assets and liabilities 12,558 11,206
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 430,605 423,314
---------- ----------
<PAGE>
<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction additions (115,825) (115,986)
Nuclear fuel (2,710) (6,346)
---------- ----------
Acquisition of utility plant (118,535) (122,332)
Decrease in materials and supplies related
to construction 368 2,232
Decrease in accounts payable and accrued
expenses related to construction (20,045) (14,682)
Decrease in other investments 5,012 24,919
Other 5,538 (7,629)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (127,662) (117,492)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt - 105,000
Net change in revolving credit agreements - (170,000)
Reductions of preferred stock (4,300) (6,800)
Reductions in long-term debt (3,300) (29,341)
Dividends paid (18,808) (19,151)
Other 313 (487)
---------- ---------
NET CASH USED IN FINANCING ACTIVITIES (26,095) (120,779)
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NET INCREASE IN CASH 276,848 185,043
Cash at beginning of period 325,398 153,475
---------- ----------
CASH AT END OF PERIOD $ 602,246 $ 338,518
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $138,954 $141,743
Income taxes paid $47,116 $52,219
The accompanying notes are an integral part of these financial statements
/TABLE
<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Niagara Mohawk Power Corporation and subsidiary companies
(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 1997 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, 1996, 1995 and 1994 included in the Company's
1996 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, 1997, should not be
taken as an indication of earnings for all or any part of
the balance of the year.
At December 31, 1996, the Company discontinued application
of regulatory accounting principles to the Company's fossil
and hydro generation business. Accordingly, existing
regulatory assets related to this business, amounting to
approximately $103.6 million ($67.4 million after tax or 47
cents per share) were charged against 1996 income as an
extraordinary non-cash charge.
In February 1997, the Financial Accounting Standards Board
issued SFAS No. 128. SFAS No. 128 establishes standards
for computing and presenting earnings per share ("EPS") and
applies to companies with publicly held common stock. SFAS
No. 128 replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the
income statements for all entities with complex capital
structures. In compliance with the requirements of this
standard, the Company will adopt SFAS No. 128 in the fourth
quarter of 1997. The Company does not expect that the
adoption of SFAS No. 128 will have a significant impact on
the reporting of EPS for the Company. However, the MRA
entered into by the Company on July 9, 1997 to terminate,
restate or amend IPP contracts is expected to result in the
issuance of 46 million shares of common stock, representing
approximately 25% of the anticipated fully-diluted
outstanding common shares. These shares will be issued
upon the closing of the MRA, which is contingent upon
regulatory and other approvals.
Certain amounts have been reclassified on the accompanying
Consolidated Financial Statements to conform with the 1997
presentation.
NOTE 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 89 sites with which it
has been or may be associated, including 45 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 will be initiated where
appropriate. 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 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 United States
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
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 in the amount of $225 million,
which is reflected in the Company's Consolidated Balance
Sheets at June 30, 1997 and December 31, 1996. This
liability represents 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 $850 million, including approximately $340
million in the unlikely event the Company is required to
assume 100% responsibility at non-owned sites. In
addition, the Company has recorded a regulatory asset
representing the remediation obligations to be recovered
from ratepayers.
Where appropriate, 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 has
settled some of these claims and continues to pursue
others, but is unable to predict what the final ratemaking
disposition will be.
TAX ASSESSMENTS: (See Form 10-Q for the quarter ended
March 31, 1997, Part I, Item 1. Financial Statements -
"Note 2. Contingencies - Tax assessments.")
The Internal Revenue Service ("IRS") has conducted an
examination of the Company's federal income tax returns for
the years 1989 and 1990 and issued a Revenue Agents'
Report. The IRS has raised an issue concerning the
deductibility of payments made to IPPs in accordance with
certain contracts that include a provision for a tracking
account. A tracking account represents amounts that these
mandated contracts required the Company to pay IPPs in
excess of the Company's avoided costs, including a carrying
charge. The IRS proposes to disallow a current deduction
for amounts paid in excess of the avoided costs of the
Company. Although the Company believes that any such
disallowances for the years 1989 and 1990 will not have a
material impact on its financial position or results of
operations, it believes that a disallowance for these
above-market payments for the years subsequent to 1990
could have a material adverse affect on its cash flows. To
the extent that contracts involving tracking accounts are
terminated or restated or amended under the MRA with IPPs
as described in Note 3, then it is possible that the
effects of any proposed disallowance would be mitigated.
The Company is vigorously defending its position on this
issue. The IRS has commenced its examination of the
Company's federal income tax returns for the years 1991
through 1993.
LITIGATION: 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 PPA
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 PPA 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. This one breach of contract claim was remanded to
the NYS Supreme Court for further consideration. Discovery
on this one breach of contract claim is currently in
progress.
The Company is unable to predict the ultimate disposition
of this lawsuit. However, the Company believes it has
meritorious defenses and intends to defend this lawsuit
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 this lawsuit has been made in the
Company's financial statements.
NOTE 3. RATE AND REGULATORY ISSUES AND CONTINGENCIES.
The Company's financial statements conform to GAAP, as
applied to regulated public utilities and reflect the
application of SFAS No. 71. As discussed in Note 1, the
Company discontinued application of regulatory accounting
principles to the Company's fossil and hydro generation
business. Substantively, SFAS No. 71 permits a public
utility regulated on a cost-of-service basis to defer
certain costs when authorized to do so by the regulator
which would otherwise be charged to expense. These
deferred costs are known as regulatory assets, which in the
case of the Company are approximately $921 million, net of
approximately $240 million of regulatory liabilities at
June 30, 1997. These regulatory assets are probable of
recovery. The portion of the $921 million which has been
allocated to the nuclear generation and electric
transmission and distribution business is approximately
$775 million, which is net of approximately $240 million of
regulatory liabilities. Regulatory assets allocated to the
rate-regulated gas distribution business are $146 million.
Generally, regulatory assets and liabilities were allocated
to the portion of the business that incurred the underlying
transaction that resulted in the recognition of the
regulatory asset or liability. The allocation methods used
between electric and gas are consistent with those used in
prior regulatory proceedings.
The Company has concluded that the termination or
restructuring of IPP contracts and implementation of
PowerChoice, or a similar proposal, is the probable outcome
of negotiations that have taken place since the PowerChoice
announcement. Under PowerChoice, the separated non-nuclear
generation business would no longer be rate-regulated on a
cost-of-service basis and, accordingly, regulatory assets
related to the non-nuclear power generation business,
amounting to approximately $103.6 million ($67.4 million
after tax or 47 cents per share) at December 31, 1996, were
charged against income as an extraordinary non-cash charge.
Of the remaining electric business, under PowerChoice, the
Company expects that its nuclear generation and electric
transmission and distribution business would continue to be
rate-regulated on a cost-of-service basis and, accordingly,
the Company would continue to apply SFAS No. 71 to these
businesses.
PowerChoice and the termination or restructuring costs of
IPP contracts would result in rates that reflect reduced or
stable costs that the Company believes would meet the
Governor's stated economic objectives as to energy prices
in New York State as well as the PSC's objectives (see Form
10-K for fiscal year ended December 31, 1996, Part II, Item
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "PSC Competitive
Opportunities Proceeding - Electric"). Therefore, the
Company expects the PSC would continue to apply the concept
of cost-of-service based rates to the nuclear generation
and transmission and distribution business. The Company
expects that these cost-of-service based rates could be
charged to and collected from customers without causing
unanticipated reduction in demand. The Company proposes,
and believes it is probable that the PSC would approve,
deferral and recovery of the termination or restructuring
costs of IPP contracts over a period not to exceed ten
years. To the extent that deferral of the termination or
restructuring cost would not be approved by the PSC and the
Company determines, nonetheless, to effectuate the
termination or restructuring, that amount would be charged
to expense, which could have a material adverse effect on
the financial condition, and in the year of the write-off,
the results of operations of the Company. Furthermore, the
Company does not expect the PSC to provide a specific
return on the regulatory asset associated with IPP
termination or restructuring costs. SFAS No. 71 does not
require the Company to earn a return on regulatory assets
in assessing its applicability. The Company believes that
the prices it would charge for electric service, assuming
no reduction in demand, including a non-bypassable
transition charge, over the ten-year period would be
sufficient to recover the regulatory asset for the
termination or restructuring costs of IPP contracts and
provide recovery of and a return on the remainder of its
regulated assets, as appropriate. The Company expects that
the reported amounts of future net income would be
adversely affected by a lack of a return on the regulatory
asset associated with the IPP termination or restructuring
and the expected lower returns of the unregulated non-
nuclear generating business. In the year of implementation
of PowerChoice, it is likely that the Company will have a
nominal amount of either net income or a loss.
The Company has been made aware of a request by the SEC
Chief Accountant to the Public Utilities Committee of the
American Institute of Certified Public Accountants to
develop guidance on applying SFAS No. 101. The Emerging
Issues Task Force ("EITF") reached a consensus on Issue No.
97-4 "Deregulation of the Pricing of Electricity-Issues
Related to the Application of SFAS No. 71 and SFAS No. 101"
in July 1997. The Task Force reached the following
conclusions: (1) the future recognition of regulatory
assets for the portion of the business that no longer
qualifies for application of SFAS No. 71 depends on the
regulators' treatment of the recovery of those costs and
other stranded assets from cash flows of other aspects of
the business still considered to be regulated and (2) a
utility should discontinue the application of SFAS No. 71
when the legislative and regulatory plan has been enacted,
including transition plans to a competitive environment and
the handling of stranded costs subject to future rate
recovery. The Company does not believe that the
conclusions reached in this EITF will have a significant
impact on its current accounting and disclosure of SFAS No.
71 for the Company.
With the probable implementation of PowerChoice,
specifically the separation of non-nuclear generation as an
entity that would no longer be cost-of-service regulated,
the Company is required to assess the carrying amounts of
its long-lived assets in accordance with SFAS No. 121.
SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles held and used by an entity be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset
may not be recoverable. In performing the review for
recoverability, the Company is required to estimate future
undiscounted cash flows expected to result from the use of
the asset and its eventual disposition. The Company has
determined that there is no impairment of its non-nuclear
generating assets. In certain instances, the Company has
considered opportunities to invest in changes in fuel
sources that are technologically available to improve cash
flow. In one instance, the Company has considered the
value of relocating a unit to a region where demand is
greater. To the extent an impairment loss could not be
otherwise avoided, the Company believes it would be able to
recover the loss through the non-bypassable transition fee
proposed in PowerChoice. In reaching conclusions as to
impairment of non-nuclear generating assets, the Company
must make significant estimates and judgments as to the
future price of electricity, capacity factors and cost of
operation of each of its generating units and, where
necessary, the fair market value of each unit. As
PowerChoice is implemented and generation markets become
open to competition, these estimates and judgments may
change. An update of the SFAS No. 121 assessment must be
prepared when conditions occur which in the opinion of
management may have impaired the value of these assets.
As described in Form 10-K for fiscal year ended December
31, 1996, 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" and Form 8-K dated July 9,
1997, Item 5. Other Events, the conclusion of the
termination or restatement or amendment of IPP contracts,
and closing of the financing necessary to implement such
termination or restatement or amendment, as well as
implementation of PowerChoice, is subject to a number of
contingencies. In the event the Company is unable to
successfully bring these events to conclusion, it would
pursue a traditional rate request. However,
notwithstanding such a rate request, it is likely that
application of SFAS No. 71 would be discontinued. The
resulting after-tax charges against income, based on
regulatory assets and liabilities associated with the
nuclear generation and transmission and distribution
businesses as of June 30, 1997, would be approximately $504
million or $3.49 per share. Various requirements under
applicable law and regulations and under corporate
instruments, including those with respect to issuance of
debt and equity securities, payment of common and preferred
dividends, the continued availability of the Company's
senior debt facility and certain types of transfers of
assets could be adversely impacted by any such write-downs.
<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, 1997 and the unaudited
Consolidated Statements of Income for the three-month and six-
month periods ended June 30, 1997 and 1996 and the unaudited
Consolidated Statements of Cash Flows for the six-months ended
June 30, 1997 and 1996. 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 7, 1997
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, 1997, and the related condensed consolidated statements of
income for the three-month and six-month periods ended June 30,
1997 and 1996 and of cash flows for the six months ended June 30,
1997 and 1996. 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 previously audited in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December
31, 1996, and the related consolidated statements of income, of
retained earnings and of cash flows for the year then ended (not
presented herein), and in our report dated March 13, 1997, we
expressed an unqualified opinion (containing explanatory
paragraphs with respect to the Company's application of Statement
of Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation" [SFAS No. 71] for its
nuclear generation, electric transmission and distribution and
gas businesses and discontinuation of SFAS No. 71 for its non-
nuclear generation business in 1996). In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1996, is fairly stated, in all
material respects, in relation to the consolidated balance sheet
<PAGE>
To the Stockholders and
Board of Directors
August 7, 1997
Page 2
from which it has been derived.
As discussed in Note 3, the Company believes that it continues to
meet the requirements for application of SFAS No. 71 for its
nuclear generation, electric transmission and distribution and
gas businesses. In the event that the Company is unable to
complete the termination or restructuring of independent power
producer contracts and implement PowerChoice, this conclusion
could change in 1997 and beyond, resulting in material adverse
effects on the Company's financial condition and results of
operations.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
FINANCIAL CHALLENGES
The Company faces significant challenges in its efforts to
maintain its financial condition in the face of expanding
competition. While utilities across the nation must address
these concerns to varying degrees, the Company believes that it
is more financially vulnerable because of its large industrial
customer base, an oversupply of high-cost mandated power
purchases from IPPs, an excess supply of wholesale power at
relatively low prices, a high tax burden, a stagnant economy in
the Company's service territory and significant investments in
nuclear plants. Moreover, solving the problems the Company
faces, including the implementation of PowerChoice, requires the
cooperation and agreement of third parties outside the Company's
control and, thus, limits the options available to solve those
problems and keep the Company financially viable.
MASTER RESTRUCTURING AGREEMENT WITH 16 IPPS TO TERMINATE,
RESTATE OR AMEND 29 CONTRACTS AND REVISED POWERCHOICE PROPOSAL
On July 9, 1997, the Company entered into the MRA with 16 IPPs
who have 29 power purchase agreements with the Company. Pursuant
to the MRA, such power purchase agreements will be terminated,
restated or amended, in exchange for an aggregate of
$3,555,000,000 in cash, $50,000,000 in short term notes or cash
(at the Company's option), 46 million shares of the Company's
common stock and certain fixed price swap contracts. (See
Exhibit 99.3 of Form 8-K, filed July 10, 1997 for a schedule
setting forth the quantities and prices for the restated or
amended contracts.) The closing of the MRA is conditioned upon,
among other things, the Company and the IPPs negotiating their
individual restated and amended contracts, the receipt of all
regulatory approvals, the receipt of all consents by third
parties necessary for the transactions contemplated by the MRA
(including the termination of the existing power purchase
contracts and the termination or amendment of all related third
party agreements), the IPPs entering into new third party
arrangements which will enable each IPP to restructure its
projects on a reasonably satisfactory economic basis, the Company
having completed all necessary financing arrangements and the
Company and the IPPs having received all necessary approvals from
their respective boards of directors, shareholders and partners.
While one or more IPPs may under certain circumstances terminate
the MRA with respect to itself, the Company's obligation to close
the MRA is subject to its determination that as a result of any
such terminations the benefits anticipated to be received by the
Company pursuant to the MRA have not been materially and
adversely affected. The foregoing is qualified in its entirety
by the text of the MRA, a copy of which was filed as Exhibit
10.28 in the Company's Form 8-K, on July 10, 1997.
The MRA formalizes an agreement in principle announced March 10
between the Company and 19 developers representing 44 contracts.
Since then, the Company withdrew its offer with respect to a
subgroup of three developers representing 15 hydro contracts.
Because the agreement in principle called for the subgroup to be
compensated solely through restructured contracts, their
departure will not change the amount of cash and stock in the
overall agreement, nor will it materially impact the cost
reductions associated with the agreement. The Company hopes to
achieve settlements with the subgroup separately.
On July 23, 1997, the Company filed with the PSC an updated offer
of settlement to its PowerChoice proposal which incorporates the
terms of the MRA. The Company is unable to predict the outcome
of this matter.
PSC COMPETITIVE OPPORTUNITIES PROCEEDING - ELECTRIC
(See Form 10-K for fiscal year ended December 31, 1996, Part II,
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "PSC Competitive
Opportunities Proceeding - Electric" and Form 10-Q for the
quarter ended March 31, 1997, Part I, Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations - "PSC Competitive Opportunities Proceeding -
Electric.")
On May 19, 1997, the PSC issued an Order establishing regulatory
policies for the provision of retail energy services. The Order
establishes eligibility requirements for Energy Service
Companies; provides for certain consumer protections; requires
certain provisions to be reflected in the utilities retail access
tariffs; and establishes, for now, the responsibility of the
utility to be the provider of last resort.
On June 10, 1997, the PSC ordered a multi-utility, retail access
pilot program that will allow qualified farmers and food
processors to shop for electricity and other energy services.
The PSC required utilities to adjust the current delivery rates
for farmers and food processors, which should result in a rate
reduction of about 10 percent for farmers and 3 percent to 8
percent for food processors. The PSC is requiring the Company to
initiate delivery under this program by no later than November 1,
1997.
The Company estimates that it could lose $4 million revenues a
year from these rate discounts. The Company will have an
opportunity to try to recover the money from ratepayers when it
negotiates its PowerChoice restructuring agreement with state
regulators. (See Form 10-K for fiscal year ended December 31,
1996, Part II, Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - "PowerChoice
Proposal.")
On August 1, 1997, the Company filed its revised proposal with
the PSC for its compliance with the farm and food processor
retail pilot program. The revised proposal is designed to meet
the November 1, 1997 deadline and includes the discounts required
by the order.
PSC PROPOSAL OF NEW IPP OPERATING AND PPA MANAGEMENT PROCEDURES
(See Form 10-K for fiscal year ended December 31, 1996, Part II,
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "PSC Proposal of New IPP
Operating and PPA Management Procedures.")
CURTAILMENT: On May 20, 1997, the PSC addressed the procedures
under which a utility, including the Company, may legally curtail
purchases from IPPs that are QFs, unless curtailment is
specifically prohibited by contract. Curtailment is allowed by a
FERC rule, under certain operational circumstances when purchases
from the QFs will exceed the costs the utility would incur if it
generated the power itself. Advance notice must be provided to
the QF along with the reasons for such curtailment, which are
subject to verification by the PSC either before or after
curtailment.
The PSC stated that the Public Utilities Regulatory Policies Act
which encouraged generation by IPPs was supposed to be revenue-
neutral. However, they noted that this hasn't been the situation
in New York State and ratepayers have been unduly burdened
because of their lack of specific curtailment procedures.
Based on the Company's review of the PSC's statements, a decision
to permit curtailment could affect most of the 155 contracts
(except those in the MRA) that the Company has with IPPs. The
Company is unable to determine the affect of these statements
until such a time as there is a final order.
However, it is not likely to affect the Company's MRA to
terminate, restate or amend 29 contracts with 16 IPPs, which
represent more than 80% of the Company's over-market purchased
power obligations, as described previously.
REDUCTION OF GRT
On August 4, 1997, the State Legislature passed a state budget,
which includes a reduction of the GRT over three years. The
reduction of the GRT for the New York State energy and
telecommunications utilities is as follows: the first reduction
of $28 million is scheduled to take effect during the 1998-1999
budget; $109 million in 1999-2000; $473.5 million in 2000-2001;
and $440 million in 2001-2002. For gas and electric utilities,
the tax imposed on gross income will be reduced from 3.5% to
3.25% on October 1, 1998, and from 3.25% to 2.5% on January 1,
2000. The state tax imposed on gross earnings will remain
unchanged at .75%, bringing the total GRT to 3.25% -- a full
percentage point lower than today's level of 4.25%. The savings
from the reduction of the GRT will be passed on to the Company's
customers.
The Company believes that further tax relief is needed to relieve
the Company's customers of high energy costs and to improve New
York State's competitive position as the industry moves toward a
competitive marketplace.
POWER FOR JOBS PROGRAM
(See Form 10-K for fiscal year ended December 31, 1996, Part II,
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Governor Pataki's Proposed
Legislation.")
On July 15, 1997, the "Power for Jobs Program" was passed by the
state legislature, which will allocate 400 MWs of low-cost power
to eligible businesses for job retention and development
purposes. Half of the 400 MWs will be obtained from NYPA and the
other half through a competitive bid process, which is open not
only to investor-owned utilities but also to any supplier. The
program will be paid for through a credit against the GRT and a
contribution from NYPA. This will be a three year program (with
contracts up to three years in length) that will result in as
much as 50 percent electric rate reductions for eligible
businesses.
FINANCING PLANS AND FINANCIAL POSITION
(See Form 10-K for the fiscal year ended December 31, 1996, Part
II, Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Financial Position,
Liquidity and Capital Resources.")
On July 14, 1997, Standard & Poor's (S&P) raised its ratings on
the Company's corporate credit and its senior secured debt to BB
from BB-; senior unsecured debt to B+ from B; and its preferred
stock to B from B-. S&P stated that these ratings remain on
CreditWatch with positive implications. The upgrade followed the
Company's July 9, 1997, announcement that it had entered into the
MRA. S&P stated that the execution of the MRA represents a
critical step in the process of returning the Company to
financial stability.
In addition, S&P stated that these ratings remain on CreditWatch
in anticipation of the PSC's review later this year of the
Company's revised PowerChoice restructuring proposal, which was
filed on July 23, 1997. S&P also stated that it will conclude
its review of the Company once regulatory approval is obtained.
Subject to the conditions of the approval, if any, S&P will
determine whether the corporate credit rating should be raised
one-notch to BB+.
On July 16, 1997, Moody's Investors Service (Moody's) stated that
the rating outlook for the Company could turn positive if the PSC
approves the MRA mentioned above. In addition, Moody's stated
that it expects the PSC, which was instrumental in promoting IPP
power in New York State, to favorably review the Company's
restructuring proposal.
UNIT 1 REFUELING AND MAINTENANCE OUTAGE
(See Form 10-Q for the quarter ended March 31, 1997, Part I, Item
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - "Unit 1 Refueling and Maintenance
Outage.")
RESULTS OF OPERATIONS
The following discussion presents the material changes in results
of operations for the three months and six months ended June 30,
1997 in comparison to the same periods in 1996. 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.
THREE MONTHS ENDED JUNE 30, 1997 VERSUS THREE MONTHS ENDED JUNE
30, 1996
Earnings for the second quarter 1997 were $31.3 million or 22
cents per share, as compared with $43.5 million or 30 cents per
share in the second quarter of 1996. Earnings for the second
quarter were lower due to several factors, including lower sales
of electricity and natural gas, higher IPP capacity costs, higher
electric customer discounts, and higher electric fuel costs that
will be recovered next quarter through the fuel adjustment
clause.
ELECTRIC REVENUES
Electric revenues were $804.5 million in the second quarter of
both 1997 and 1996. FAC revenues increased $12.6 million,
primarily as a result of the Company's increased payments to the
IPPs recovered through the FAC, offset by a decrease in sales to
other electric utilities of $9.9 million and a decrease in volume
and mix of sales to ultimate customers of $2.7 million.
<PAGE>
<PAGE>
ELECTRIC SALES
Electric sales to ultimate consumers were approximately 8.0
billion KWh in the second quarter of 1997, a 0.7% decrease from
1996. After adjusting for the effects of weather, sales to
ultimate consumers decreased 0.2%. Sales for resale decreased
597 million KWh (38.6%) resulting in a net decrease in total
electric sales of 724 million KWh (7.5%).
Electric fuel and purchased power costs increased $14.2 million
or 4.2%. This increase is the result of a $12.7 million
increase in actual purchased power costs (including a $10.6
million or 3.9% increase in payments to IPPs), a $4.1 million
increase in costs deferred and recovered through the operation of
the FAC, partially offset by a $2.6 million decrease in actual
fuel costs. The decrease in fuel costs reflects a 16.3% decrease
in Company generation, which includes the outage at Unit 1.
GAS REVENUES
Gas revenues decreased $15.2 million or 9.7% in the second
quarter of 1997 from the comparable period in 1996 as set forth
in the table below:
Sales to ultimate consumers $ (9.2) million
Purchased gas adjustment clause revenues (2.5)
Spot market sales (2.1)
Change in base rates (1.4)
-------
$(15.2) million
=======
GAS SALES
Gas sales to ultimate consumers decreased 0.3 million Dth or 1.7%
from the second quarter of 1996. After adjusting for the effects
of weather, sales to ultimate consumers increased 1.3%. 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 increased. In addition, changes in purchased
gas adjustment clause revenues are generally margin-neutral.
The total cost of gas included in expense decreased $17.6 million
or 21.9%. This was the result of a $1.9 million decrease in
purchases for spot market sales, a $5.8 million decrease in
purchased gas costs and certain other items recognized and
recovered through the purchased gas adjustment clause, and a
30.8% decrease in the average cost per Dth purchased ($21.9
million), partially offset by a 3.0 million increase in Dth
purchased and withdrawn from storage for ultimate consumer sales
($12.0 million). The Company's net cost per Dth sold, as charged
to expense and excluding spot market purchases, decreased to an
average of $3.46 in the second quarter of 1997 from $5.24 in
1996, the comparable period.
SIX MONTHS ENDED JUNE 30, 1997 VERSUS SIX MONTHS ENDED JUNE 30,
1996
Earnings for the first six months of 1997 were $125.0 million or
87 cents per share, as compared with $130.0 million or 90 cents
per share in 1996. Earnings for the first six months of 1997
were lower primarily as a result of lower electric and natural
gas sales that occurred as a result of the warmer weather. In
addition, earnings were negatively impacted by higher electric
customer discounts, absorption of fuel costs in accordance with
FAC partial pass-through mechanism, and an increase in bad debt
expense which collectively reduced earnings by 8 cents per share.
This was partially offset by the restructuring of gas rates and
the timing of the recognition of interstate gas pipeline
transportation cost under the new multi-year gas rate settlement
agreement, which added 7 cents per share.
ELECTRIC REVENUES
Electric revenues for the first six months of 1997 increased
$26.3 million or 1.6% from the comparable period in 1996. FAC
revenues increased $47.7 million, primarily as a result of the
Company's increased payments to the IPPs recovered through the
FAC, offset by a decrease in revenues from sales to other
electric utilities of $14.1 million and a decrease in volume and
mix of sales to ultimate customers of $7.3 million.
ELECTRIC SALES
Electric sales to ultimate consumers were approximately 16.8
billion KWh in the first six months of 1997, a 1.2% decrease from
the same period in 1996 primarily as a result of warmer weather.
After adjusting for the effects of weather, sales to ultimate
consumers would have increased 0.4%. Sales for resale decreased
606 million KWh (22.1%), resulting in a net decrease in total
electric sales of 1,016 million KWh (5.1%).
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
ELECTRIC REVENUES (Thousands) SALES (GWh)
---------------------------------- --------------------------
% %
1997 1996 Change 1997 1996 Change
<S> <C> <C> <C> <C> <C> <C>
Residential $ 648,347 $ 657,485 (1.4) 5,226 5,402 (3.3)
Commercial 616,722 610,595 1.0 5,738 5,789 (0.9)
Industrial 263,818 256,409 2.9 3,513 3,553 (1.1)
Industrial - Special 30,747 29,083 5.7 2,206 2,150 2.6
Other 26,981 25,770 4.7 114 113 0.9
--------- ---------- ------ ------ ------ -----
Total to Ultimate
Consumers 1,586,615 1,579,342 0.5 16,797 17,007 (1.2)
Other Electric Systems 43,495 57,641 (24.5) 2,134 2,740 (22.1)
Miscellaneous/Subsidiary 51,796 18,611 178.3 - 200 (100.0)
---------- --------- ------ ----- ------ -----
TOTAL $1,681,906 $1,655,594 1.6 18,931 19,947 (5.1)
========== ========= ====== ====== ====== =====
/TABLE
<PAGE>
<PAGE>
As indicated in the table below, internal generation decreased in
1997, principally due to the outage at Unit 1.
The Company's management of its IPP power supply generally
divides the projects into three groups: hydroelectric, "must run"
cogeneration and schedulable cogeneration projects.
Due to high precipitation and spring run-off levels so far this
year, hydroelectric IPP projects produced and delivered an
increase of 17 GWh or 1.7% under PPAs resulting in increased
payments to those IPPs of $5.6 million.
A substantial portion of the Company's portfolio of IPP projects
operate on a "must run" basis. This means that they tend to run
at maximum production levels regardless of the need or economic
value of the electricity produced. Must run IPPs produced and
delivered an increase of 182 GWh or 4.3% under PPAs resulting in
increased payments to those IPPs of $17.2 million, in part due to
escalating contract rates.
Quantities from schedulable cogeneration IPPs increased 186 GWh
or 13.7%. Payments to schedulable IPPs increased $11.2 million,
in part due to escalating contract rates. The terms of these
PPAs allow the Company to schedule, given specified constraints,
energy deliveries from the facilities and then pay for the energy
delivered. The Company is also required to make fixed payments,
so long as the IPP plants are available for service. (See Form
10-K for the fiscal year ended December 31, 1996, Part II, Item
8. Notes to Consolidated Financial Statements - "Note 9.
Commitments and Contingencies - Long-term Contracts for the
Purchase of Electric Power.")
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
GWh Cost Cents/KWh
-------------------------- ------------------------- ----------
(Millions)
FUEL FOR ELECTRIC GENERATION:
% %
1997 1996 Change 1997 1996 Change 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Coal 3,401 3,507 (3.0) $48.0 $49.6 (3.2) 1.4 1.4
Oil 106 269 (60.6) 6.3 11.4 (44.7) 5.9 4.2
Natural Gas 176 50 252.0 3.2 2.2 45.5 1.8 4.4
Nuclear 3,251 4,506 (27.9) 15.8 25.3 (37.6) 0.5 0.6
Hydro 1,889 2,156 (12.4) - - - - -
----- ------ ---- ---- ---- ---- --- ---
8,823 10,488 (15.9) 73.3 88.5 (17.2) 0.8 0.8
----- ------ ---- ---- ---- ---- --- ---
ELECTRICITY PURCHASED:
IPPs:
Capacity - - - 112.9 106.5 6.0 - -
Energy and
taxes 7,053 6,668 5.8 465.5 437.9 6.3 6.6 6.6
------ ------ ---- ----- ----- ---- --- ---
Total IPP
purchases 7,053 6,668 5.8 578.4 544.4 6.3 8.2 8.2
Other 4,632 4,551 1.8 62.4 61.4 1.6 1.4 1.4
------ ------ ---- ----- ----- ---- --- ---
11,685 11,219 4.2 640.8 605.8 5.8 5.5 5.4
------ ------ ---- ----- ----- ---- --- ---
TOTAL SUPPLY 20,508 21,707 (5.5) 714.1 694.3 2.9 3.5 3.2
------ ------ ---- ----- ----- ---- --- ---
<PAGE>
<PAGE>
Fuel adjustment
clause - - - 4.4 (19.4) 122.7 - -
Losses/Company
use 1,577 1,760 (10.4) - - - - -
------ ------ ---- ----- ----- ----- ---- ----
Sales 18,931 19,947 (5.1) $718.5 $674.9 6.5 3.8 3.4
====== ====== ==== ===== ===== ===== ==== ====
/TABLE
<PAGE>
<PAGE>
GAS REVENUES
Gas revenues decreased $40.6 million or 8.7% in the first six
months of 1997 from the comparable period in 1996 as set forth in
the table below:
Sales to ultimate consumers $(41.5) million
Spot market sales (22.9)
Change in base rates (4.1)
Purchased gas adjustment clause revenues 27.9
-------
$(40.6) million
=======
GAS SALES
Gas sales to ultimate consumers for the first six months of 1997
decreased 6.1 million Dth or 9.9% from 1996. After adjusting for
the effects of weather, sales to ultimate consumers decreased
1.3%. 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. In addition, changes in
purchased gas adjustment clause revenues are generally margin-
neutral.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
GAS REVENUES (Thousands) SALES (Thousands of Dth)
------------------------------- -----------------------------
% %
1997 1996 Change 1997 1996 Change
<S> <C> <C> <C> <C> <C> <C>
Residential $285,246 $291,938 (2.3) 39,165 41,593 (5.8)
Commercial 102,342 116,252 (12.0) 15,518 18,261 (15.0)
Industrial 4,819 9,680 (50.2) 1,047 1,975 (47.0)
-------- -------- --------- ------- ------- -------
Total to Ultimate
Consumers 392,407 417,870 (6.1) 55,730 61,829 (9.9)
Transportation of
Customer-Owned Gas 28,037 25,448 10.2 77,287 63,255 22.2
Spot Market Sales 5,482 28,369 (80.7) 2,737 7,023 (61.0)
Miscellaneous 1,698 (3,447) (149.3) 13 17 (23.5)
---------- ------- --------- ------- ------- -------
Total to System
Core Customers $427,624 $468,240 (8.7) 135,767 132,124 2.8
========= ======== ========= ======= ======= =======
/TABLE
<PAGE>
<PAGE>
The total cost of gas included in expense decreased $59.0 million
or 21.8%. This was the result of a 3.5 million decrease in Dth
purchased and withdrawn from storage for ultimate consumer sales
($11.5 million), a $17.1 million decrease in Dth purchased for
spot market sales, and a $31.0 million decrease in purchased gas
costs and certain other items recognized and recovered through
the purchased gas adjustment clause, partially offset by a $0.6
million increase in the average cost per Dth purchased. The
Company's net cost per Dth sold, as charged to expense and
excluding spot market purchases, decreased to an average of $3.71
in the first six months of 1997 from $4.19 in 1996, the
comparable period.
BAD DEBT EXPENSE for the first six months of 1997 was $32.5
million as compared with $27.3 million in 1996. The increase in
bad debt expense reflects the implementation of the risk
assessment methodology in the third quarter of 1996, which puts
more emphasis on past-due balances. Previously, the Company
followed regulatory practice and consequently focused on final
billed accounts only (typically accounts that are no longer
active). As a result, bad debt expense will vary more directly
with revenues, which are seasonal.
The increase in federal and foreign income taxes (net) of
approximately $14.0 million was primarily due to the timing of
the recognition of tax expense.
Other taxes decreased by $6.1 million primarily as a result of
lower real estate taxes.<PAGE>
<PAGE>
PART II. OTHER INFORMATION
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
ITEM 1. LEGAL PROCEEDINGS.
(See Form 10-K for fiscal year ended December 31, 1996, Part
I, Item 3. Legal Proceedings and Form 10-Q for the quarter
ended March 31, 1997, Part II, Item 1. Legal Proceedings -
"Norcon Litigation.")
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's annual meeting of shareholders on May 6,
1997, (1) the election of Directors was as follows:
WITHHELD
FOR AUTHORITY
Lawrence Burkhardt, III 114,771,529 7,584,160
Douglas M. Costle 115,100,707 7,254,982
Donald B. Riefler 115,147,017 7,208,672
Stephen B. Schwartz 115,043,524 7,312,165
(2) A shareholder proposal relating to the Company's
endorsement of the Coalition for Environmentally Responsible
Economies Principles as part of its commitment to be publicly
accountable for its environmental impact was rejected by a
vote of 17,577,749 for, 74,153,746 against, 8,791,238
abstentions, and 21,832,956 broker non-votes.
(3) A shareholder proposal relating to the recommendation,
with respect to future contract obligations, that when a
dividend is cut, no salaries will be increased or any stock
options allowed to executives or directors until the dividend
is restored to its original amount before the cut, was
rejected by a vote of 21,002,320 for, 74,565,793 against,
4,954,620 abstentions, and 21,832,956 broker non-votes.
<PAGE>
<PAGE>
ITEM 5. OTHER EVENTS.
(See Form 10-K for fiscal year ended December 31, 1996, Part I,
Item 1. Business - "New York Power Authority.")
On May 23, 1997, the Company signed an agreement with NYPA and
the PSC that allows NYPA's current industrial customers to
continue to receive their power allocations from the James A.
FitzPatrick plant. The agreement also protects the Company's
remaining customers by generally requiring the reimbursement of
stranded costs on any NYPA sales above current levels. In
addition, the Company's termination of its purchases of
FitzPatrick power for its system use took effect May 24, 1997.
The settlement enables the State of New York to continue to use
NYPA's electricity to keep and create jobs and investment in New
York State while protecting the financial interests of the
Company. This agreement will also terminate litigation pending
on the dispute before the PSC and the FERC.
Approval of this settlement agreement is currently pending
before the FERC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 10-1 - NMPC Officers' Long Term Incentive
Compensation Plan - Plan Document.
Exhibit 10-2 - CEO Award Plan.
Exhibit 10-3 - Amendment to Employment Agreement between
NMPC and David J. Arrington, Albert J. Budney, Jr., William
E. Davis, Darlene D. Kerr, Gary J. Lavine, John W. Powers
and B. Ralph Sylvia, dated June 9, 1997.
Exhibit 11 - Computation of the Average Number of Shares of
Common Stock Outstanding for the Three Months and Six
Months Ended June 30, 1997 and 1996.
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, 1997.
Exhibit 15 - Accountants' Acknowledgement Letter.
Exhibit 27 - Financial Data Schedule.
In accordance with Paragraph 4(iii) of Item 601(b) of
Regulation S-K, the Company agrees to furnish to the
Securities and Exchange Commission, upon request, a copy of
the agreements comprising the $804 million senior debt
facility that the Company completed with a bank group
during March 1996. The total amount of long-term debt
authorized under such agreement does not exceed 10 percent
of the total consolidated assets of the Company and its
subsidiaries.
(b) Reports on Form 8-K:
Form 8-K Reporting Date - July 9, 1997
Item reported - Item 5. Other Events.
Registrant filed information concerning the MRA.
<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
SIGNATURE
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 12, 1997 By /s/ Steven W. Tasker
____________________________
Steven W. Tasker
Vice President-Controller and
Principal Accounting Officer
<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10-1 NMPC Officers' Long Term Incentive Compensation Plan -
Plan Document.
10-2 CEO Award Plan.
10-3 Amendment to Employment Agreement between NMPC and
David J. Arrington, Albert J. Budney, Jr., William E.
Davis, Darlene D. Kerr, Gary J. Lavine, John W. Powers
and B. Ralph Sylvia, dated June 9, 1997.
11 Computation of the Average Number of Shares of Common
Stock Outstanding for the Three Months and Six Months
Ended June 30, 1997 and 1996.
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, 1997.
15 Accountants' Acknowledgement Letter.
27 Financial Data Schedule.<PAGE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION EXHIBIT 10-1
LONG TERM INCENTIVE PLAN
Article 1. Establishment, Purpose and Duration
1.1 Establishment of the Plan. Niagara Mohawk Power
Corporation, a New York corporation (hereinafter referred to as the
"Company"), hereby establishes an incentive compensation plan to be
known as the "Niagara Mohawk Power Corporation Long Term Incentive
Plan" (hereinafter referred to as the "Plan"), as set forth in this
document. The Plan permits the grant of SAR's, Stock Units and
Dividend Equivalents, as defined herein.
The Plan became effective as of September 25, 1996 (the
"Effective Date"). This amendment and reinstatement of the Plan
shall become effective as of June 10, 1997 and shall remain in
effect as provided in Section 1.3 herein.
1.2 Purpose of the Plan. The purpose of the Plan is to
promote the success and enhance the value of the Company through
the retention and continued motivation of Participants, focusing
their efforts toward the execution of business strategies directed
toward improving financial returns to shareholders.
1.3 Duration of the Plan. The Plan shall commence on the
Effective Date, as described in Section 1.1 herein, and shall
remain in effect, subject to the right of the Board of Directors to
terminate the Plan at any time pursuant to Article 14 herein, until
September 24, 2006. The applicable terms of the Plan and any terms
and conditions applicable to SARs or Stock Units, including any
deferral elections, granted prior to such date shall survive the
termination of the Plan.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the
meanings set forth below and, when such meaning is intended, the
initial letter of the word is capitalized:
2.1 "Award" means, individually or collectively, a grant
under the Plan of SARs or Stock Units.
2.2 "Award Agreement" means an agreement entered into by each
Participant and the Company, setting forth the terms and provisions
applicable to an Award granted to a Participant under the Plan.
2.3 "Base Value" of an SAR shall have the meaning set forth
in Section 6.2 herein.
2.4 "Board" or "Board of Directors" means the Board of
Directors of the Company.
2.5 "Cause" means: (i) a material default or other material
breach by a Participant of his obligations under any Employment
Agreement he may have with the Company, (ii) failure by a
Participant diligently and competently to perform his duties under
any Employment Agreement he may have with the Company, or
otherwise, or (iii) misconduct, dishonesty, insubordination or
other act by a Participant detrimental to the good will of the
Company or damaging the Company's relationships with its customers,
suppliers or employees. "Cause" shall be determined in good faith
by the Committee.
2.6 "Change in Control" of the Company shall be deemed to
have occurred as of the first day that any one or more of the
following conditions shall have been satisfied:
(1) The acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then
outstanding Shares of the Company or (ii) the combined
voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall
not constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii)
any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company or (iv) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation,
if, following such reorganization, merger or
consolidation, the conditions described in clauses (i),
(ii) and (iii) of subparagraph (3) below are satisfied;
or
(2) Individuals who, as of the date hereof, constitute the
Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs
as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case,
unless, following such reorganization, merger or
consolidation, (i) more than 75 % of, respectively, the
then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of directors
are then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the
Outstanding Shares and Outstanding Company Voting
Securities immediately prior to such reorganization,
merger or consolidation, in substantially the same
proportions as their ownership immediately prior to such
reorganization, merger or consolidation, of the
Outstanding Shares and Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding
the Company, any employee benefit plan (or related trust)
of the Company or such corporation resulting from such
reorganization, merger or consolidation and any Person
beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 20% or more of the Outstanding Shares or
Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common
stock of the corporation resulting from such
reorganization, merger or consolidation or the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the
election of directors and (iii) at least a majority of
the members of the board of directors of the corporation
resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the
time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(4) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or
(ii) the sale or other disposition of all or
substantially all of the assets of the Company, other
than to a corporation, with respect to which following
such sale or other disposition, (A) more than 75% of,
respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the
then outstanding voting securities of such corporation
entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the
Outstanding Shares and Outstanding Company Voting
Securities immediately prior to such sale or other
disposition in substantially the same proportion as their
ownership immediately prior to such sale or other
disposition of the Outstanding Shares and Outstanding
Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit
plan (or related trust) of the Company or such
corporation and any Person beneficially owning,
immediately prior to such sale or other disposition,
directly or indirectly, 20% or more of the Outstanding
Shares or Outstanding Company Voting Securities, as the
case may be) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding shares
of common stock of such corporation and the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the
election of directors and (C) at least a majority of the
members of the board of directors of such corporation
were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of
the Company;
provided, however, that the implementation of the corporate
restructuring contemplated by the Company's PowerChoice proposal
filed with the New York Public Service Commission on October 6,
1995, or any substantially similar corporate restructuring (as
determined by the Committee) shall not be deemed to be a "Change in
Control".
2.7 "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
2.8 "Committee" means the committee, as specified in Article
3, appointed by the Board to administer the Plan with respect to
grants of Awards.
2.9 "Company" means Niagara Mohawk Power Corporation, a
New York corporation, or any successor thereto as provided in
Article 16 herein.
2.10 "Director" means any individual who is a member of the
Board of Directors of the Company.
2.11 "Disability" shall have the meaning ascribed to such term
under Section 22(e)(3) of the Code.
2.12 "Dividend Equivalent" means, with respect to Shares
underlying a Stock Unit, an amount equal to all cash and stock
dividends declared on an equal number of outstanding Shares on all
common stock dividend payment dates occurring during the Vesting
Period.
2.13 "Eligible Employee" means an Employee who is eligible to
participate in the Plan, as set forth in Section 5.1 herein.
2.14 "Employee" means any full-time employee of the Company,
who is not covered by any collective bargaining agreement to which
the Company is a party. Directors who are not otherwise employed by
the Company shall not be considered Employees under the Plan. For
purposes of the Plan, transfer of employment of a Participant from
the Company to any one of its Subsidiaries shall not be deemed a
termination of employment.
2.15 "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor act thereto.
2.16 "Exercise Period" means the period during which an SAR is
exercisable, as set forth in the related Award Agreement.
2.17 "Fair Market Value" means the average of the daily
opening and closing sale prices as reported in the consolidated
transaction reporting system.
2.18 "Participant" means an Employee of the Company who has
outstanding an Award granted under the Plan.
2.19 "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act, as used in Sections 13(d) and
14(d) thereof, including usage in the definition of a "group" in
Section 13(d) thereof.
2.20 "Retirement" means (i) ascribed to such term in the tax-qualified
defined benefit pension plan maintained by the Company for the benefit of
some or all of its non-represented employees and
(ii) retirement from the Company or its subsidiaries with the
approval of the Committee.
2.21 "Shares" means the shares of common stock of the Company,
par value $1.
2.22 "Stock Appreciation Right" or "SAR" means a right,
designated as an SAR, to receive a payment on the day the right is
exercised, pursuant to the terms of Article 6 herein. Each SAR
shall be denominated in terms of one Share.
2.23 "Stock Unit" means a right, designated as a Stock Unit,
to receive a payment as soon as practicable following the last day
of a Vesting Period, pursuant to the terms of Article 7 herein.
Each Stock Unit shall be denominated in terms of one Share.
2.24 "Subsidiary" means any corporation that is a "subsidiary
corporation" of the Company as that term is defined in Section
424(f) of the Code.
2.25 "Valuation Period" means the 12 trading day period ending
on and including the relevant date.
2.26 "Vesting Period" means the period during which Stock
Units are not yet payable, as set forth in the related Award
Agreement.
Article 3. Administration
3.1 The Committee. The Plan shall be administered by the
Compensation and Succession Committee of the Board, or by any other
Committee appointed by the Board consisting of not less than two
(2) non-employee Directors. The members of the Committee shall be
appointed from time to time by, and shall serve at the discretion
of, the Board of Directors.
3.2 Authority of the Committee. The Committee shall have
full power except as limited by law, the Articles of Incorporation
and the Bylaws of the Company, subject to such other restricting
limitations or directions as may be imposed by the Board and
subject to the provisions herein, to determine the size and types
of Awards; to determine the terms and conditions of such Awards in
a manner consistent with the Plan; to construe and interpret the
Plan and any agreement or instrument entered into under the Plan;
to establish, amend or waive rules and regulations for the Plan's
administration; and (subject to the provisions of Article 14
herein) to amend the terms and conditions of any outstanding Award.
Further, the Committee shall make all other determinations that may
be necessary or advisable for the administration of the Plan. As
permitted by law, the Committee may delegate its authorities as
identified hereunder.
3.3 Decisions Binding. All determinations and decisions made
by the Committee pursuant to the provisions of the Plan and all
related orders or resolutions of the Board shall be final,
conclusive and binding on all persons, including the Company, its
shareholders, Employees, Participants and their estates and
beneficiaries.
3.4 Costs. The Company shall pay all costs of administration
of the Plan.
Article 4. Adjustments in Authorized Shares
In the event of any merger, reorganization consolidation,
recapitalization, separation, liquidation, stock dividend, split-up, share
combination or other change in the corporate structure of
the Company affecting the Shares, such adjustment shall be made in
the number of SARs and Stock Units that may be granted under the
Plan, and in the number and/or price of outstanding Awards granted
under the Plan, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; provided, however, that the
number of SARs and Stock Units subject to an Award shall always be
a whole number.
Article 5. Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in the Plan
include all key Employees of the Company, as determined by the
Committee.
5.2 Actual Participation. Subject to the provisions of the
Plan, the Committee may, from time to time, select from all
eligible Employees those to whom Awards shall be granted and shall
determine the nature and amount of each Award.
Article 6. Stock Appreciation Rights
6.1 Grant of SARs. Subject to the terms and conditions of
the Plan, SARs may be granted to Eligible Employees at any time and
from time to time, as shall be determined by the Committee.
The Committee shall have complete discretion in determining
the number of SARs granted to each Participant (subject to Article
4 herein) and, consistent with the provisions of the Plan, in
determining the terms and conditions pertaining to such SARs.
6.2 Base Value. The Base Value of an SAR shall equal the
Fair Market Value of a Share determined for the 12 trading day
period immediately preceding the date of the grant, or for such
other period as the Compensation Committee, in its sole discretion,
shall determine at the time of grant.
6.3 Exercise and Payment of SARs. A Participant may exercise
an SAR at any time during the Exercise Period. SARs shall be
exercised by the delivery of a written notice of exercise to the
Company, setting forth the number of SARs being exercised. Upon
exercise of an SAR, a Participant shall be entitled to receive
payment in cash from the Company in an amount equal to the product
of:
(a) the excess of (i) the Fair Market Value of a Share on the
date of exercise over (ii) the Base Value of the SAR,
multiplied by
(b) the number of Shares with respect to which the SAR is
exercised.
6.4 SAR Award Agreement. Each SAR grant shall be evidenced
by an Award Agreement that shall specify the number of SARs
granted, the Base Value, the Exercise Period, the expiration date
and such other provisions as the Committee shall determine.
6.5 Lapse of SARs. Subject to the provisions of Article 9,
an SAR will lapse upon the earlier of (i) ten (l0) years from the
date of grant and (ii) the expiration of the Exercise Period as set
forth in the grant.
Article 7. Stock Units
7. 1 Grant of Stock Units. Subject to the terms and
conditions of the Plan, Stock Units may be granted to Eligible
Employees at any time and from time to time, as shall be determined
by the Committee.
The Committee shall have complete discretion in determining
the number of Stock Units granted to each Participant (subject to
Article 4 herein) and, consistent with the provisions of the Plan,
in determining the terms and conditions pertaining to such Stock
Units.
7.2 Vesting of Stock Units. The Vesting Period of Stock
Units granted under the Plan shall be determined by the Committee,
in its sole discretion, as set forth in the related Award
Agreement.
7.3 Payment of Stock Units. After the applicable Vesting
Period has ended, the holder of Stock Units shall be entitled to
receive, for each Stock Unit held, payment in cash from the
Company in an amount equal to the Fair Market Value of one Share
determined as of the Valuation Period ending on the last day of the
Vesting Period. Payment shall be made as soon as practicable
following the last day of the Vesting Period.
7.4 Stock Unit Award Agreement. Each Stock Unit grant shall
be evidenced by an Award Agreement that shall specify the number of
Stock Units granted, the Vesting Period and such other provisions
as the Committee shall determine.
Article 8. Dividend Equivalents
Simultaneously with the grant of Stock Units, the Participant
shall be granted Dividend Equivalents, to be credited to a
bookkeeping entry account, on each common stock dividend payment
date with respect to the Shares subject to such Award. In the case
of cash dividends, the number of Dividend Equivalents credited on
each common stock dividend payment date shall equal the number of
Shares (including fractional Shares) that could be purchased on the
dividend payment date, based on the average of the opening and
closing sale price, as reported in the consolidated transaction
reporting system on that date, with cash dividends that would have
been paid on Awards of Stock Units and on Dividend Equivalents
previously credited to such bookkeeping entry account, if such
Stock Units or Dividend Equivalents were Shares. In the case of
stock dividends, the number of Dividend Equivalents credited on
each stock dividend payment date shall be equal to the number of
Shares (including fractional Shares) that would have been issued as
a stock dividend in respect of the Participant's Stock Units and on
Dividend Equivalents previously credited to such bookkeeping entry
account, if such Stock Units or Dividend Equivalents were Shares.
Participants shall receive cash payment from the Company of
the Fair Market Value of the Dividend Equivalents, if and when they
receive payment of the related Stock Units, the Fair Market Value
of such Dividend Equivalents to be determined in the same manner as
for the related Stock Units.
The Committee may, in its discretion, establish such rules and
procedures governing the crediting of Dividend Equivalents,
including timing and payment contingencies that apply to the
Dividend Equivalents, as the Committee deems necessary or
appropriate in order to comply with applicable law.
Article 9. Termination of Employment; Transferability
9.1 Disability; Involuntary Termination. In the event the
employment of a Participant is terminated by reason of Disability
or involuntarily by the Company (other than for Cause):
(i)during a Vesting Period for Stock Units, the Participant
shall receive a full payout of the Stock Units and related Dividend
Equivalents, as and when provided in Section 7.3 herein;
(ii)before the Exercise Period commences for SARs subject to
an Award, such SARs may be exercised in full at any time during the
one year period commencing on the day the Exercise Period begins;
and
(iii)during the Exercise Period for SARs, but before exercise,
such SARs may be exercised in full at any time during the one year
period after such termination, but in no event after the Exercise
Period for such SARs has expired.
9.2 Death. In the event the employment of a Participant is
terminated by reason of death:
(i) during the Vesting Period for Stock Units, the
Participant's beneficiary or estate shall receive a full
payout of the Stock Units and related Dividend
Equivalents. The payout shall be made promptly based on
the Fair Market Value of a Share on the date of death;
and
(ii) before the Exercise Period commences for SARs subject to
an Award or during the Exercise Period, but before
exercise, the Participant's beneficiary or estate shall
receive a full payout of all SARs subject to an Award, to
the extent the Fair Market Value of a Share exceeds the
Base Value of the SAR on the date of death.
9.3 Corporate Restructuring. In the event (i) the corporate
restructuring as contemplated by the Company's PowerChoice proposal
filed with the New York Public Service Commission on October 6,
1995, or any substantially similar corporate restructuring
(determined by the Committee), is implemented and (ii) the
employment of a Participant with the Company is terminated (other
than for Cause), then with respect to Awards granted prior to
implementation of the restructuring,
(i) during a Vesting Period for Stock Units, the Participant
shall receive a full payout of Stock Units and related
Dividend Equivalents, as and when provided in Section 7.3
herein;
(ii) before the Exercise Period commences for SARs subject to
an Award, such SARs may be exercised in full at any time
during the one year period commencing on the day the
Exercise Period begins; and
(iii)during the Exercise Period for SARs, but before exercise,
such SARs may be exercised in full at any time during the one year
period after such termination, but in no event after the Exercise
Period for such SARs has expired.
9.4 Retirement. In the event the employment of a Participant
is terminated by reason of Retirement:
(i)during a Vesting Period for Stock Units, the Participant
shall receive a prorated payout of the Stock Units and related
Dividend Equivalents. The prorated payout shall be determined by
the Committee, shall be based upon the length of time that the
Participant held the Stock Units during the Vesting Period and
shall be made as and when provided in Section 7.3 herein;
(ii)before the Exercise Period commences for SARs subject to
an Award, the number of SARs subject to an Award shall be prorated
by the Committee, based upon the length of time that the
Participant held the SARs before Retirement; after the Exercise
Period commences, the prorated SARs may be exercised at any time in
full or in part from time to time during the Exercise Period, and
(iii)during the Exercise Period for SARs, but before exercise,
such SARs may be exercised at any time in full or in part from time
to time during the Exercise Period.
Other than as set forth in Article 13, in the event that a
Participant's employment terminates for any reason other than as
set forth in Sections 9.l, 9.2, 9.3 and 9.4, above, all Stock
Units, SARs and Dividend Equivalents shall be forfeited by the
Participant to the Company .
9.5 Nontransferability of Awards. Notwithstanding the
foregoing, the Committee may in its discretion authorize a
participant to transfer all or a portion of any award to the
participant's family members on such terms prescribed by the
Committee. No Award granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all Awards granted to a Participant under
the Plan shall be exercisable/payable during his or her lifetime
only by or to such Participant or his or her legal representative.
9.6 Right of Committee. Subject to the provisions of Section
14.2 herein, all provisions in this Article 9 are subject to the
Committee's right, at any time, to make such other determinations
as it may choose, in its sole discretion. Furthermore, should more
than one section of Article 9 and/or Article 13 apply to a
situation, the Committee shall have the right, in its sole
discretion, to determine which section and/or article to apply.
Article 10. Beneficiary Designation
Each Participant under the Plan may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in
case of his death before he receives any or all of such benefit.
Each such designation shall revoke all prior designations by the
same Participant, shall be in a form prescribed by the Committee,
and will be effective only when filed by the Participant in writing
with the Committee during the Participant's lifetime. In the
absence of any such designation , benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
The spouse of a married Participant domiciled in a community
property jurisdiction shall join in any designation of beneficiary
or beneficiaries other than the spouse.
Article 11. Deferrals
The Committee may permit a Participant to defer such Participant's
receipt of the payment of cash that would otherwise be due to such
Participant. If any such deferral election is permitted, the
Committee shall, in its sole discretion, establish such rules and
procedures as it deems necessary or desirable for such payment
deferrals.
Article 12. Rights of Employees
12.1 Employment. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any
Participant's employment at any time, for any reason or no reason,
in the Company's sole discretion, nor confer upon any Participant
any right to continue in the employ of the Company.
12.2 Participation. No Employee shall have the right to be
selected to receive an Award under the Plan, or, having been so
selected, to be selected to receive a future Award.
Article 13. Change in Control
Upon the occurrence of a Change in Control, as defined herein,
unless otherwise specifically prohibited by the terms of Article 17
herein:
(a) Any and all SARs granted hereunder shall be deemed to have
been exercised on the date such Change in Control occurs;
(b) Any Vesting Period with respect to Stock Units shall be
deemed to have expired, and there shall be paid out in cash to
Participants within thirty (30) days following the effective date
of the Change in Control the cash payment due with respect to such
Stock Units and related Dividend Equivalents, with a Valuation
Period ending on the effective date of the Change in Control.
Article 14. Amendment, Modification and Termination
14.1 Amendment. Modification and Termination. The Board may, at
any time and from time to time, alter, amend, suspend or terminate
the Plan in whole or in part.
14.2 Awards Previously Granted. No termination, amendment or
modification of the Plan shall adversely affect in any material way
any Award previously granted under the Plan, without the written
consent of the Participant holding such Award, unless such
termination, modification or amendment is required by applicable
law.
Article 15. Tax Withholding
The Company shall have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, state and local taxes
(including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising out of or as a
result of an Award made under the Plan.
Article 16. Successors
All obligations of the Company under the Plan, with respect to
Awards granted hereunder shall be binding on any successor to the
Company, whether the existence of such successor is the result of
a direct or indirect purchase, merger, consolidation or otherwise,
of all or substantially all of the business and/or assets of the
Company.
Article 17. Legal Construction
17.1 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the
feminine, the plural shall include the singular and the singular
shall include the plural.
17.2 Severability. In the event any provision of the Plan shall
be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.
17.3 Requirements of Law. The granting of Awards under the Plan
shall be subject to all applicable laws, rules and regulations, and
to such approvals by any governmental agencies or national
securities exchanges as may be required.
17.4 Governing Law. To the extent not preempted by Federal law,
the Plan, and all agreements hereunder, shall be construed in
accordance with, and governed by, the laws of the State of New
York, without regard to conflicts of law provisions.
NIAGARA MOHAWK POWER CORPORATION EXHIBIT 10-2
CEO SPECIAL AWARD PLAN
Article 1. Establishment, Purpose and Duration
1.1 Establishment of the Plan. Niagara Mohawk Power
Corporation, a New York corporation (hereinafter referred to as the
"Company"), hereby amends and restates the Niagara Mohawk Power
Corporation CEO Special Award Plan (hereinafter referred to as the
"Plan"), as set forth in this document. The amendment and
restatement of the Plan shall become effective as of June 10, 1997
(the "Effective Date").
1.2 Purpose of the Plan. The purpose of the Plan is to
promote the success and enhance the value of the Company through
awards to Participants which recognize contributions to a
successful initiative which results in a major positive impact on
the Company.
1.3 Duration of the Plan. The amendment and restatement of
the Plan shall commence on the Effective Date and shall remain in
effect, subject to the right of the Board of Directors to terminate
the Plan at any time pursuant to Article 14 herein, until June 9,
2007. The applicable terms of the Plan and any terms and
conditions applicable to any Awards granted prior to such date
shall survive the termination of the Plan.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the
meanings set forth below and, when such meaning is intended, the
initial letter of the word is capitalized:
2.1 "Award" means, individually or collectively, a grant
under the Plan of SARs, Stock Units or cash.
2.2 "Award Agreement" means an agreement entered into by each
Participant and the Company setting forth the terms and provisions
applicable to an Award granted under the Plan.
2.3 "Base Value" of an SAR means the Fair Market Value of one
Share determined for such period as the Committee shall determine
at the time of grant.
2.4 "Board" or "Board of Directors" means the Board of
Directors of the Company.
2.5 "Cause" means: (i) a material default or other material
breach by a Participant of his obligations under any Employment
Agreement he may have with the Company, (ii) failure by a
Participant diligently and competently to perform his duties with
the Company, (iii) misconduct, dishonesty, insubordination or other
act by a Participant detrimental to the good will of the Company or
damaging the Company's relationships with its customers, suppliers
or employees. "Cause" shall be determined in good faith by the
Committee.
2.6 "Change in Control" of the Company shall be deemed to
have occurred as of the first day that any one or more of the
following conditions shall have been satisfied:
(1) The acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then
outstanding Shares of the Company or (ii) the combined
voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall
not constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii)
any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled
by the Company or (iv) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation,
if, following such reorganization, merger or
consolidation, the conditions described in clauses (i),
(ii) and (iii) of subparagraph (3) below are satisfied;
or
(2) Individuals who, as of the Effective Date, constitute the
Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a
director subsequent to the Effective Date whose election,
or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs
as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board; or
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case,
unless, following such reorganization, merger or
consolidation, (i) more than 75% of, respectively, the
then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of directors
are then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities
who were the beneficial owners, respectively of the
Outstanding Shares and Outstanding Company Voting
Securities immediately prior to such reorganization,
merger or consolidation, in substantially the same
proportions as their ownership immediately prior to such
reorganization, merger or consolidation, of the
Outstanding Shares and Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding
the Company, any employee benefit plan (or related trust)
of the Company or such corporation resulting from such
reorganization, merger or consolidation and any Pension
beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 20% or more of the Outstanding Shares or
Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common
stock of the corporation or the combined voting power of
the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (iii) at least a majority of the members of
the board of directors of the corporation resulting from
such reorganization, merger or consolidation were members
of the Incumbent Board at the time of the execution of
the initial agreement providing for such reorganization,
merger or consolidation; or
(4) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or
(ii) the sale or other disposition of all or
substantially all of the assets of the Company, other
than to a corporation, with respect to which following
such sale or other disposition, (A) more than 75% of,
respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the
then outstanding voting securities of such corporation
entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the
Outstanding Shares and the Outstanding Company Voting
Securities immediately prior to such sale or other
disposition in substantially the same proportion as their
ownership immediately prior to such sale or other
disposition of the Outstanding Shares and Outstanding
Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit
plan (or related trust) of the Company or such
corporation and any Person beneficially owning,
immediately prior to such sale or other disposition,
directly or indirectly, 20% or more of the Outstanding
Shares or Outstanding Company Voting Securities, as the
case may be) beneficially owns, directly or indirectly,
20% or more of, respectively the then outstanding shares
of common stock of such corporation and the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the
election of directors and (C) at least a majority of the
members of the board of directors of such corporation
were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of
the Company;
provided, however, that the implementation of the corporate
restructuring contemplated by the Company's PowerChoice proposal
filed with the New York Public Service Commission on October 6,
1995, or any substantially similar corporate restructuring (as
determined by the Committee) shall not be deemed to be a "Change in
Control".
2.7 "Committee" means the committee, as specified in
Article 3, appointed by the Board to administer the Plan.
2.8 "Company" means Niagara Mohawk Power Corporation, a New
York corporation, or any successor thereto as provided in
Article 16 herein.
2.9 "Dividend Equivalent" means, with respect to Shares
underlying a Stock Unit, an amount equal to all cash and stock
dividends declared on an equal number of outstanding Shares on all
common stock dividend payment dates occurring during the Vesting
Period.
2.10 "Eligible Employee" means an Employee who is eligible to
participate in the Plan, as set forth in Section 4.1 herein.
2.11 "Employee" means any full-time employee of the Company or
one of its subsidiaries who is not covered by any collective
bargaining agreement to which the Company or such subsidiary is a
party.
2.12 "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor act thereto.
2.13 "Exercise Period" means the period during which an SAR is
exercisable, as set forth in the related Award Agreement.
2.14 "Fair Market Value" means the average of the daily
opening and closing sale prices as reported in the consolidated
transaction reporting system.
2.15 "Participant" means an Employee who has an outstanding
Award granted under the Plan.
2.16 "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act, as used in Sections 13(d) and
14(d) thereof, including usage in the definition of a "group" in
Section 13(d) thereof.
2.17 "Shares" means the shares of common stock of the Company,
par value $1.
2.18 "Stock Appreciation Right" or "SAR" means a right,
designated as an SAR, to receive a payment on the day the right is
exercised, pursuant to the terms of Article 5 herein. Each SAR
shall be denominated in terms of one Share.
2.19 "Stock Unit" means a right, designated as a Stock Unit,
to receive a payment as soon as practicable following the last day
of a Vesting Period, pursuant to the terms of Article 6 herein.
Each Stock Unit shall be denominated in terms of one Share.
2.20 "Vesting Period" means the period during which Stock
Units are not yet payable, as set forth in the related Award
Agreement.
Article 3. Administration
3.1 The Committee. The Plan shall be administered by the
Compensation and Succession Committee of the Board, or by any other
Committee appointed by the Board consisting of not less than two
(2) members of the Board who are "non-employee directors" within
the meaning of Rule 16b-3 under the Exchange Act. The members of
the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board.
3.2 Authority of the Committee. The Committee shall have
full power except as limited by law, the Articles of Incorporation
and the Bylaws of the Company, subject to such other restricting
limitations or directions as may be imposed by the Board and the
provisions of the Plan, to determine the amounts and types of
Awards; to determine the terms and conditions of such Awards; to
construe and interpret the Plan and any agreement or instrument
entered into under the Plan; to establish, amend or waive rules and
regulations for the Plan's administration; and to amend the terms
and conditions of any outstanding Award. Further, the Committee
shall make all other determinations that may be necessary or
advisable for the administration of the Plan. As permitted by law,
the Committee may delegate its authorities as identified hereunder.
3.3 Decisions Binding. All determinations and decisions made
by the Committee pursuant to the provisions of the Plan and all
related orders or resolutions of the Board shall be final,
conclusive and binding on all persons, including the Company, its
shareholders, Employees, Participants and their estates and
beneficiaries.
3.4 Costs. The Company shall pay all costs of administration
of the Plan.
Article 4. Eligibility and Participation
4.1 Eligibility. All officers of the Company and other key
Employees, as determined by the Committee, are eligible to
participate in the Plan.
4.2 Actual Participation. The Committee may, from time to
time, select which Eligible Employees shall be granted Awards and
shall determine the type and amount of each Award.
Article 5. Stock Appreciation Rights
5.1 Grants. SARs may be granted to Eligible Employees at any
time and from time to time by the Committee, which shall have
complete discretion in determining the number of SARs granted, the
Exercise Period of such SARs and the other terms and conditions
pertaining to such SARs.
5.2 Exercise and Payment. A Participant may exercise an SAR
at any time during the Exercise Period by the delivery of a written
notice of exercise to the Company, setting forth the number of SARs
being exercised. Upon exercise of an SAR, a Participant shall be
entitled to receive payment in cash from the Company in an amount
equal to the excess of (i) the Fair Market Value of one Share on
the date of exercise over (ii) the Base Value of the SAR.
5.3 Award Agreement. Each SAR grant shall be evidenced by an
Award Agreement that shall specify the number of SARs granted, the
Base Value, the Exercise Period, the expiration date and such other
provisions as the Committee shall determine.
Article 6. Stock Units
6.1 Grant. Stock Units may be granted to Eligible Employees
at any time and from time to time by the Committee, which shall
have complete discretion in determining the number of Stock Units
granted, the Vesting Period of such Stock Units and the other terms
and conditions pertaining to such Stock Units.
6.2 Payment. After the applicable Vesting Period has ended,
the holder of Stock Units shall be entitled to receive, for each
Stock Unit held, payment in cash from the Company in an amount
equal to the Fair Market Value of one Share on the last day of the
Vesting Period. Payment shall be made as soon as practicable
following the last business day of the Vesting Period.
6.3 Award Agreement. Each Stock Unit grant shall be
evidenced by an Award Agreement that shall specify the number of
Stock Units granted, the Vesting Period and such other provisions
as the Committee shall determine.
Article 7. Dividend Equivalents
Simultaneously with the grant of Stock Units, the Committee
may grant the Participant Dividend Equivalents, to be credited to a
bookkeeping entry account, on each common stock dividend payment
date with respect to the Shares subject to such Award. In the case
of cash dividends, the number of Dividend Equivalents credited on
each common stock dividend payment date shall equal the number of
Shares (including fractional Shares) that could be purchased on the
dividend payment date, based on the average of the opening and
closing sale price, as reported in the consolidated transaction
reporting system on that date, with cash dividends that would have
been paid on Awards of Stock Units and on Dividend Equivalents
previously credited to such bookkeeping entry account, if such
Stock Units or Dividend Equivalents were Shares. In the case of
stock dividends, the number of Dividend Equivalents credited on
each stock dividend payment date shall be equal to the number of
Shares (including fractional Shares) that would have been issued as
a stock dividend in respect of the Participant's Stock Units and on
Dividend Equivalents previously credited to such bookkeeping entry
account, if such Stock Units or Dividend Equivalents were Shares.
Participants shall receive cash payment from the Company of
the Fair Market Value of the Dividend Equivalents, if and when they
receive payment of the related Stock Units, the Fair Market Value
of such Dividend Equivalents to be determined in the same manner as
for the related Stock Units.
The Committee may, in its discretion, establish such rules and
procedures governing the crediting of Dividend Equivalents,
including timing and payment contingencies that apply to the
Dividend Equivalents, as the Committee deems necessary or
appropriate in order to comply with applicable law.
Article 8. Cash Awards
The Committee may, at any time and from time to time, make an
Award to an Eligible Employee payable in the form of a lump sum in
cash in such amount as determined by the Committee. Each such
Award shall be payable at such time as the Committee shall
determine and, if applicable, as evidenced by an Award Agreement
that shall specify such provisions as the Committee shall
determine.
Article 9. Beneficiary Designation; Nontransferability of
Awards
9.1 Designation of Beneficiary. Each Participant under the
Plan may, from time to time, name any beneficiary or beneficiaries
(who may be named contingently or successively) to whom any benefit
under the Plan is to be paid in case of his death before he
receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in
a form prescribed by the Committee, and will be effective only when
filed by the Participant in writing with the Committee during the
Participant's lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.
9.2 Nontransferability of Awards. No Award granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, all Awards granted to a
Participant under the Plan shall be exercisable/payable during his
or her lifetime only by or to such Participant or his or her legal
representative. Notwithstanding the foregoing, the Committee may
in its discretion authorize a participant to transfer all or a
portion of any award to the participant's family members on such
terms prescribed by the Committee.
Article 10. Deferrals
The Committee may permit a Participant to defer such
Participant's receipt of the payment of cash that would otherwise
be due to such Participant. If any such deferral election is
permitted, the Committee shall, in its sole discretion, establish
such rules and procedures as it deems necessary or desirable for
such payment deferrals.
Article 11. Adjustments in Awards
In the event of any merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, split-up, share
combination or other change in the corporate structure of
the Company affecting the Shares, such adjustment shall be made to
the number of SARs and Stock Units under outstanding Awards granted
under the Plan and the Base Value of SARs, as may be determined to
be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights; provided,
however, that the number of SARs and Stock Units subject to an
Award shall always be a whole number.
Article 12. No Rights of Employees
12.1 Employment. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any
Participant's employment at any time, for any reason or no reason,
in the Company's sole discretion, nor confer upon any Participant
any right to continue in the employ of the Company.
12.2 Awards. No Employee shall have the right to be selected
to receive an Award under the Plan, or, having been so selected, to
be selected to receive a future Award.
Article 13. Corporate Restructuring; Change in Control
13.1 Corporate Restructuring. In the event (i) the corporate
restructuring as contemplated by the Company's PowerChoice proposal
filed with the New York Public Service Commission on October 6,
1995, or any substantially similar corporate restructuring
(determined by the Committee), is implemented and (ii) the
employment of a Participant with the Company is terminated (other
than for Cause), then with respect to Awards granted prior to
implementation of the restructuring,
(a) during a Vesting Period for Stock Units, the Participant
shall receive a full payout of Stock Units and related
Dividend Equivalents, as and when provided in Article 7;
(b) before the Exercise Period commences for SARs subject to
an Award, such SARs may be exercised in full at any time
during the one year period commencing on the day the
Exercise Period begins;
(c) during the Exercise Period for SARs, but before exercise,
such SARs may be exercised in full at any time during the
one year period after such termination, but in no event
after the Exercise Period for such SARs has expired; and
(d) all outstanding cash Awards shall be paid in full within
30 days following termination.
13.2 Change in Control. Upon the occurrence of a Change in
Control:
(a) Any and all SARs granted hereunder shall be deemed to
have been exercised on the date such Change in Control
occurs;
(b) Any Vesting Period with respect to Stock Units shall be
deemed to have expired, and there shall be paid out in
cash to Participants within thirty (30) days following
the effective date of the Change in Control the cash
payment due with respect to such Stock Units and related
Dividend Equivalents based on the Fair Market Value of
one Share on the effective date of the Change in Control;
and
(c) All outstanding cash Awards shall be paid in full within
30 days following the effective date of the Change in
Control.
Article 14. Amendment, Modification and Termination
14.1 Amendment, Modification and Termination. The Board may,
at any time and from time to time, alter, amend, suspend or
terminate the Plan in whole or in part.
14.2 Awards Previously Granted. No termination, amendment or
modification of the Plan shall adversely affect in any material way
any Award previously granted under the Plan, without the written
consent of the Participant holding such Award, unless such
termination, modification or amendment is required by applicable
law.
Article 15. Tax Withholding
The Company shall have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, state and local income and
employment taxes required by law to be withheld with respect to any
taxable event arising out of or as a result of an Award made under
the Plan.
Article 16. Successors
All obligations of the Company under the Plan, with respect to
Awards granted hereunder shall be binding on any successor to the
Company, whether the existence of such successor is the result of a
direct or indirect purchase, merger, consolidation or otherwise, of
all or substantially all of the business and/or assets of the
Company.
Article 17. Legal Construction
17.1 Gender and Number. Except where otherwise indicated by
the context, any masculine term used herein also shall include the
feminine, the plural shall include the singular and the singular
shall include the plural.
17.2 Severability. In the event any provision of the Plan
shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.
17.3 Requirements of Law. The granting of Awards under the
Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
17.4 Governing Law. To the extent not preempted by Federal
law, the Plan, and all agreements hereunder, shall be construed in
accordance with, and governed by, the laws of the State of New
York, without regard to conflicts of law provisions.
AMENDMENT TO EXHIBIT 10-3
EMPLOYMENT AGREEMENT
Agreement made as of the 9th day of June, 1997, between NIAGARA MOHAWK
POWER CORPORATION (the "Company") and William E. Davis (the "Executive").
WHEREAS, the Company and the Executive have entered into an
Agreement made as of December 20, 1996 (the "Employment Agreement")
with respect to the terms and conditions of the Executive's
employment; and
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement in a certain respect.
NOW, THEREFORE, the Company and the Executive hereby agree
that the Employment Agreement is amended by the addition of the
following at the end of Section 4 thereof:
l. Notwithstanding anything contained in this Section 4
to the contrary, upon termination of the Executive's employment
after completion of eight (8) years of continuous service with the
Company (as determined pursuant to the SERP), the Executive and his
eligible dependents shall be entitled to receive medical,
prescription drug, dental and hospitalization benefits equal to
those provided by the Company to the Executive on March 26, 1997
for the remainder of the Executive's life, the cost of which shall
be paid in full by the Company (if applicable, on the same after-tax basis to
the executive as if the Executive had continued participation in the
Company's employee benefit plans providing such benefits). If the Executive
is less than age 55 at the date of such termination of employment, the
Executive shall be entitled to receive such benefits upon attaining age 55
and prior thereto the Executive, if applicable, shall be entitled to the
medical, prescription drug, dental and hospitalization benefits provided by
paragraphs 4f or g above.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
NIAGARA MOHAWK POWER CORPORATION
______________________________
William E. Davis
By:_______________________________________
David J. Arrington
Senior Vice President - Human Resources
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
Agreement made as of the 9th day of June, 1997, between NIAGARA MOHAWK
POWER CORPORATION (the "Company") and Albert J. Budney, Jr. (the "Executive").
WHEREAS, the Company and the Executive have entered into an
Agreement made as of December 20, 1996 (the "Employment Agreement")
with respect to the terms and conditions of the Executive's
employment; and
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement in a certain respect.
NOW, THEREFORE, the Company and the Executive hereby agree
that the Employment Agreement is amended by the addition of the
following at the end of Section 4 thereof:
l. Notwithstanding anything contained in this Section 4
to the contrary, upon termination of the Executive's employment
after completion of eight (8) years of continuous service with the
Company (as determined pursuant to the SERP), the Executive and his
eligible dependents shall be entitled to receive medical,
prescription drug, dental and hospitalization benefits equal to
those provided by the Company to the Executive on March 26, 1997
for the remainder of the Executive's life, the cost of which shall
be paid in full by the Company (if applicable, on the same after-tax basis to
the executive as if the Executive had continued participation in the Company's
employee benefit plans providing such benefits). If the Executive is less than
age 55 at the date of such termination of employment, the Executive shall be
entitled to receive such benefits upon attaining age 55 and prior thereto
the Executive, if applicable, shall be entitled to the medical,
prescription drug, dental and hospitalization benefits provided by
paragraphs 4f or g above.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
NIAGARA MOHAWK POWER CORPORATION
______________________________
Albert J. Budney, Jr.
By:_______________________________________
David J. Arrington
Senior Vice President - Human Resources
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
Agreement made as of the 9th day of June, 1997, between NIAGARA MOHAWK
POWER CORPORATION (the "Company") and B. Ralph Sylvia (the "Executive").
WHEREAS, the Company and the Executive have entered into an
Agreement made as of December 20, 1996 (the "Employment Agreement")
with respect to the terms and conditions of the Executive's
employment; and
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement in a certain respect.
NOW, THEREFORE, the Company and the Executive hereby agree
that the Employment Agreement is amended by the addition of the
following at the end of Section 4 thereof:
l. Notwithstanding anything contained in this Section 4
to the contrary, upon termination of the Executive's employment
after completion of eight (8) years of continuous service with the
Company (as determined pursuant to the SERP), the Executive and his
eligible dependents shall be entitled to receive medical,
prescription drug, dental and hospitalization benefits equal to
those provided by the Company to the Executive on March 26, 1997
for the remainder of the Executive's life, the cost of which shall
be paid in full by the Company (if applicable, on the same after-tax basis to
the executive as if the Executive had continued participation in the Company's
employee benefit plans providing such benefits). If the Executive is less than
age 55 at the date of such termination of employment, the Executive shall be
entitled to receive such benefits upon attaining age 55 and prior thereto
the Executive, if applicable, shall be entitled to the medical,
prescription drug, dental and hospitalization benefits provided by
paragraphs 4f or g above.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
NIAGARA MOHAWK POWER CORPORATION
______________________________
B. Ralph Sylvia
By:_______________________________________
David J. Arrington
Senior Vice President - Human Resources
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
Agreement made as of the 9th day of June, 1997, between NIAGARA MOHAWK
POWER CORPORATION (the "Company") and David J. Arrington (the "Executive").
WHEREAS, the Company and the Executive have entered into an
Agreement made as of December 20, 1996 (the "Employment Agreement")
with respect to the terms and conditions of the Executive's
employment; and
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement in a certain respect.
NOW, THEREFORE, the Company and the Executive hereby agree
that the Employment Agreement is amended by the addition of the
following at the end of Section 4 thereof:
l. Notwithstanding anything contained in this Section 4
to the contrary, upon termination of the Executive's employment
after completion of eight (8) years of continuous service with the
Company (as determined pursuant to the SERP), the Executive and his
eligible dependents shall be entitled to receive medical,
prescription drug, dental and hospitalization benefits equal to
those provided by the Company to the Executive on March 26, 1997
for the remainder of the Executive's life, the cost of which shall
be paid in full by the Company (if applicable, on the same after-tax basis to
the executive as if the Executive had continued participation in the Company's
employee benefit plans providing such benefits). If the Executive is less than
age 55 at the date of such termination of employment, the Executive shall be
entitled o receive such benefits upon attaining age 55 and prior thereto
the Executive, if applicable, shall be entitled to the medical,
prescription drug, dental and hospitalization benefits provided by
paragraphs 4f or g above.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
NIAGARA MOHAWK POWER CORPORATION
______________________________
David J. Arrington
By:_______________________________________
William E. Davis
Chief Executive Officer
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
Agreement made as of the 9th day of June, 1997, between NIAGARA MOHAWK
POWER CORPORATION (the "Company") and Gary J. Lavine (the "Executive").
WHEREAS, the Company and the Executive have entered into an
Agreement made as of December 20, 1996 (the "Employment Agreement")
with respect to the terms and conditions of the Executive's
employment; and
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement in a certain respect.
NOW, THEREFORE, the Company and the Executive hereby agree
that the Employment Agreement is amended by the addition of the
following at the end of Section 4 thereof:
l. Notwithstanding anything contained in this Section 4
to the contrary, upon termination of the Executive's employment
after completion of eight (8) years of continuous service with the
Company (as determined pursuant to the SERP), the Executive and his
eligible dependents shall be entitled to receive medical,
prescription drug, dental and hospitalization benefits equal to
those provided by the Company to the Executive on March 26, 1997
for the remainder of the Executive's life, the cost of which shall
be paid in full by the Company (if applicable, on the same after-tax basis to
the executive as if the Executive had continued participation in the Company's
employee benefit plans providing such benefits). If the Executive is less
than age 55 at the date of such termination of employment, the Executive shall
be entitled to receive such benefits upon attaining age 55 and prior thereto
the Executive, if applicable, shall be entitled to the medical,
prescription drug, dental and hospitalization benefits provided by
paragraphs 4f or g above.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
NIAGARA MOHAWK POWER CORPORATION
______________________________
Gary J. Lavine
By:_______________________________________
David J. Arrington
Senior Vice President - Human Resources
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
Agreement made as of the 9th day of June, 1997, between NIAGARA MOHAWK
POWER CORPORATION (the "Company") and Darlene D. Kerr (the "Executive").
WHEREAS, the Company and the Executive have entered into an
Agreement made as of December 20, 1996 (the "Employment Agreement")
with respect to the terms and conditions of the Executive's
employment; and
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement in a certain respect.
NOW, THEREFORE, the Company and the Executive hereby agree
that the Employment Agreement is amended by the addition of the
following at the end of Section 4 thereof:
l. Notwithstanding anything contained in this Section 4
to the contrary, upon termination of the Executive's employment
after completion of eight (8) years of continuous service with the
Company (as determined pursuant to the SERP), the Executive and his
eligible dependents shall be entitled to receive medical,
prescription drug, dental and hospitalization benefits equal to
those provided by the Company to the Executive on March 26, 1997
for the remainder of the Executive's life, the cost of which shall
be paid in full by the Company (if applicable, on the same after-tax basis to
the executive as if the Executive had continued participation in the Company's
employee benefit plans providing such benefits). If the Executive is less than
age 55 at the date of such termination of employment, the Executive shall be
entitled to receive such benefits upon attaining age 55 and prior thereto
the Executive, if applicable, shall be entitled to the medical,
prescription drug, dental and hospitalization benefits provided by
paragraphs 4f or g above.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
NIAGARA MOHAWK POWER CORPORATION
______________________________
Darlene D. Kerr
By:_______________________________________
David J. Arrington
Senior Vice President - Human Resources
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
Agreement made as of the 9th day of June, 1997, between NIAGARA MOHAWK
POWER CORPORATION (the "Company") and John W. Powers (the "Executive").
WHEREAS, the Company and the Executive have entered into an
Agreement made as of December 20, 1996 (the "Employment Agreement")
with respect to the terms and conditions of the Executive's
employment; and
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement in a certain respect.
NOW, THEREFORE, the Company and the Executive hereby agree
that the Employment Agreement is amended by the addition of the
following at the end of Section 4 thereof:
l. Notwithstanding anything contained in this Section 4
to the contrary, upon termination of the Executive's employment
after completion of eight (8) years of continuous service with the
Company (as determined pursuant to the SERP), the Executive and his
eligible dependents shall be entitled to receive medical,
prescription drug, dental and hospitalization benefits equal to
those provided by the Company to the Executive on March 26, 1997
for the remainder of the Executive's life, the cost of which shall
be paid in full by the Company (if applicable, on the same after-tax basis to
the executive as if the Executive had continued participation in the Company's
employee benefit plans providing such benefits). If the Executive is less
than age 55 at the date of such termination of employment, the Executive shall
be entitled to receive such benefits upon attaining age 55 and prior thereto
the Executive, if applicable, shall be entitled to the medical,
prescription drug, dental and hospitalization benefits provided by
paragraphs 4f or g above.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
NIAGARA MOHAWK POWER CORPORATION
______________________________
John W. Powers
By:_______________________________________
David J. Arrington
Senior Vice President - Human Resources
<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 and Six Months Ended June 30, 1997 and 1996
(4)
Average Number
of Shares
Outstanding As
Shown on
Consolidated
Statement
(1) (2) (3) of Income
Shares of Number Share (3 divided by
Common of Days Days number of Days
Stock Outstanding (2 x 1) in Period)
--------- ----------- ------- ---------------
FOR THE THREE MONTHS
ENDED JUNE 30: <C> <C> <C> <C>
<S>
APRIL 1 - JUNE 30, 1997 144,390,619 91 13,139,546,329 144,390,619
=========== ============== ===========
April 1 - June 30, 1996 144,332,855 91 13,134,289,805
Shares issued -
Acquisition - Syracuse
Suburban Gas Company, Inc. -
June 11 16,984 20 339,680
----------- --------------
144,349,839 13,134,629,485 144,336,588
=========== ============== ===========
<PAGE>
<PAGE>
FOR THE SIX MONTHS
ENDED JUNE 30:
JANUARY 1 - JUNE 30, 1997 144,365,214 181 26,130,103,734
SHARES ISSUED AT VARIOUS
TIMES DURING THE PERIOD -
ACQUISITION - SYRACUSE
SUBURBAN GAS COMPANY, INC. -
JANUARY 6 25,405 176 4,471,280
----------- --------------
144,390,619 26,134,575,014 144,389,917
=========== ============== ===========
January 1 - June 30, 1996 144,332,123 182 26,268,446,386
Shares issued at various
times during the period -
Acquisition - Syracuse
Suburban Gas Company, Inc. 17,716 * 447,284
----------- --------------
144,349,839 26,268,893,670 144,334,581
=========== ============== ===========
NOTE: Earnings per share calculated on both a primary and fully diluted basis are the
same due to the effects of rounding.
* Number of days outstanding not shown as shares represent an accumulation of weekly
and monthly issues throughout the period. Share days for shares issued are based on
the total number of days each share was outstanding during the period.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
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, 1997 (in thousands of dollars).
<S> <C>
A. Net Income (a) $105,047
B. Taxes Based on Income or Profits 80,226
-------
C. Earnings, Before Income Taxes 185,273
D. Fixed Charges (b) 308,360
-------
E. Earnings Before Income Taxes and
Fixed Charges 493,633
F. Allowance for Funds Used During
Construction (AFC) 9,316
-------
G. Earnings Before Income Taxes and
Fixed Charges without AFC $484,317
=======
<PAGE>
<PAGE>
PREFERRED DIVIDEND FACTOR:
H. Preferred Dividend Requirements $ 37,938
-------
I. Ratio of Pre-tax Income to Net Income (C/A) 1.764
-------
J. Preferred Dividend Factor (HxI) $ 66,923
K. Fixed Charges as Above (D) 308,360
-------
L. Fixed Charges and Preferred Dividends
Combined $375,283
=======
M. Ratio of Earnings to Fixed Charges (E/D) 1.60
=======
N. Ratio of Earnings to Fixed Charges
without AFC (G/D) 1.57
=======
O. Ratio of Earnings to Fixed Charges and
Preferred Dividends Combined (E/L) 1.32
=======
(a) Includes the extraordinary item of $67,364 recorded in
December 1996 for the discontinuance of regulatory
accounting principles, net of income taxes of $36,273.
(b) Includes a portion of rentals deemed representative of the
interest factor ($26,534).
/TABLE
<PAGE>
<PAGE>
EXHIBIT 15
- ----------
August 7, 1997
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 7, 1997 (issued pursuant to the
provisions of Statement on Auditing Standards No. 71) in the
Registration Statements on Form S-8 (Nos. 33-36189, 33-42771 and
333-13781) and in the Prospectus constituting part of the
Registration Statements on Form S-3 (Nos. 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
- ------------------------
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-31-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6889012
<OTHER-PROPERTY-AND-INVEST> 238837
<TOTAL-CURRENT-ASSETS> 1162783
<TOTAL-DEFERRED-CHARGES> 1161085
<OTHER-ASSETS> 71482
<TOTAL-ASSETS> 9523199
<COMMON> 144391
<CAPITAL-SURPLUS-PAID-IN> 1783239
<RETAINED-EARNINGS> 782445
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2710075
82430
440000
<LONG-TERM-DEBT-NET> 3476156
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 48054
8870
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2757614
<TOT-CAPITALIZATION-AND-LIAB> 9523199
<GROSS-OPERATING-REVENUE> 2109530
<INCOME-TAX-EXPENSE> 100671
<OTHER-OPERATING-EXPENSES> 1746889
<TOTAL-OPERATING-EXPENSES> 1847560
<OPERATING-INCOME-LOSS> 261970
<OTHER-INCOME-NET> 18681
<INCOME-BEFORE-INTEREST-EXPEN> 280651
<TOTAL-INTEREST-EXPENSE> 136880
<NET-INCOME> 143771
18808
<EARNINGS-AVAILABLE-FOR-COMM> 124963
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 430605
<EPS-PRIMARY> .87
<EPS-DILUTED> 0
</TABLE>
