<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1999
THIS INFORMATION IS NOT COMPLETE AND MAY BE CHANGED. THIS PROSPECTUS SUPPLEMENT
IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 1, 1998)
[LOGO]
3,000,000 SHARES
NIAGARA MOHAWK POWER CORPORATION
FIXEDADJUSTABLE RATE
CUMULATIVE PREFERRED STOCK, SERIES D
($50 LIQUIDATION PREFERENCE)
------------------
Dividends on the Series D Preferred Stock are payable quarterly at an annual
rate of % through December 31, 2004. After December 31, 2004, dividends on the
Series D Preferred Stock are payable quarterly at an annual rate of %, plus
the highest of the following rates, which will be determined in advance of each
quarter:
- the Treasury Bill Rate
- the Ten Year Constant Maturity Rate
- the Thirty Year Constant Maturity Rate
Dividends are payable on March 31, June 30, September 30 and December 31 of
each year. The annual dividend rate will not be less than % or greater than
%. The amount of dividends payable will be adjusted if the Internal Revenue
Code is amended to change the dividends received deduction. See "Description of
Series D Preferred Stock" in this prospectus supplement for more information.
--------------------------
We may redeem all or part of the Series D Preferred Stock at any time on or
after December 31, 2004, at our option, at $50 per share plus accrued dividends.
Application will be made to list the Series D Preferred Stock on the New York
Stock Exchange under the ticker symbol "NMKprN". If approved for listing, we
expect trading of the Series D Preferred Stock on the New York Stock Exchange to
begin within 30 days after they are first delivered to purchasers.
INVESTING IN THE SHARES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE S-5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE RELATED PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discount....................................... $ $
Proceeds to Niagara Mohawk Power Corporation (before
expenses)................................................. $ $
</TABLE>
Dividends on the shares will accrue from November , 1999 to the date of
delivery.
--------------------------
The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about
November , 1999.
--------------------------
SALOMON SMITH BARNEY
DONALDSON, LUFKIN & JENRETTE
PAINEWEBBER INCORPORATED
BANC ONE CAPITAL MARKETS, INC.
ROBERT W. BAIRD & CO.
November , 1999
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS SUPPLEMENT.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PROSPECTUS SUPPLEMENT
Niagara Mohawk Power Corporation............................ S-3
Recent Developments......................................... S-3
Forward-looking Information................................. S-4
Risk Factors................................................ S-5
Selected Consolidated Financial Information................. S-8
Use of Proceeds............................................. S-11
Capitalization.............................................. S-11
Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends........................................... S-12
Description of Series D Preferred Stock..................... S-13
United States Taxation...................................... S-19
Underwriting................................................ S-22
Validity of the Series D Preferred Stock.................... S-23
Where You Can Find More Information......................... S-23
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Information by Reference........... 2
The Company................................................. 2
Ratio of Earnings to Fixed Charges.......................... 3
Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends........................................... 3
Application of Proceeds..................................... 3
Description of New Bonds.................................... 4
Description of New Preferred Stock.......................... 8
Description of Additional Common Stock...................... 10
Plan of Distribution........................................ 12
Legal Opinions and Experts.................................. 13
</TABLE>
S-2
<PAGE>
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE MORE
DETAILED INFORMATION AND THE FINANCIAL STATEMENTS, INCLUDING THE ACCOMPANYING
NOTES, APPEARING ELSEWHERE (OR INCORPORATED BY REFERENCE) IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. YOU ARE ENCOURAGED TO READ THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS
INCORPORATED BY REFERENCE IN THEM.
NIAGARA MOHAWK POWER CORPORATION
We were organized in 1937 under the laws of New York State and are engaged
principally in the regulated energy delivery business in New York State. We
provide electric service, and we sell, distribute and transport natural gas, to
over 1,600,000 electric and 560,000 gas customers in areas of central, northern
and western New York State.
On March 18, 1999, we were reorganized into a holding company structure in
accordance with the Agreement and Plan of Exchange between Niagara Mohawk
Holdings, Inc. and us. Our outstanding common stock was exchanged on a
share-for-share basis for Holdings' common stock. Our debt and preferred stock
were not exchanged as part of the share exchange and continue as our
obligations. See "Where You Can Find More Information" for how you can find more
information about the reorganization and about us.
RECENT DEVELOPMENTS
The electricity generation business is becoming deregulated. A key component
in our PowerChoice agreement to lower average electricity prices and provide
customer choice is the divestiture of our generation assets.
On June 24, 1999, we announced an agreement to sell our nuclear assets to
AmerGen Energy Company, LLC, which we will refer to as "AmerGen," a joint
venture of PECO Energy Company and British Energy, for approximately
$135 million. This amount is subject to price adjustments which depend on the
time of closing. As a condition of the transaction, we will pre-fund our nuclear
decommissioning trust funds at the closing to a predetermined amount, which
amount is contingent upon rulings from the Internal Revenue Service. The trust
funds will be transferred to AmerGen at the closing and AmerGen will assume full
responsibility for the decommissioning of Nine Mile Point Unit 1 and our
ownership share of Nine Mile Point Unit 2. We estimate that we will be required
to make additional contributions to the decommissioning trust funds in the range
of $80 to $120 million. We estimate our net loss from the sale of the nuclear
generation assets to be in the range of $1,800 to $1,850 million. We have
petitioned the New York State Public Service Commission, which we will refer to
as the "PSC," for approval to defer this net loss for future recovery, which
approval is a condition of the closing of the sale of the nuclear assets.
Accordingly, we would record a regulatory asset for the amount of the actual net
loss upon the closing of the sale. The recording of the regulatory asset will
depend on an assessment by us that the amounts are probable of future recovery
in rates and that the rates ultimately approved by the PSC can be charged to and
collected from customers without unanticipated reduction in demand.
In May 1999, we entered into an agreement with Central Hudson to sell our
interest in the Roseton plant to Central Hudson at approximately net book value
by July 1, 2002, if the interest has not been previously sold, subject to
regulatory approval. On June 11, 1999, we completed the sale of our two
coal-fired generation plants to NRG Energy, Inc. for $355 million. On July 29,
1999, we completed the sale of our hydroelectric generation assets to Orion
Power Holding, Inc. for $425 million. On October 6, 1999, we announced an
agreement to sell our Albany oil- and gas-fired generation plant to PSEG Power
LLC for $47.5 million and we expect to complete the sale transaction in the
first quarter of 2000. On October 22, 1999, we completed the sale of our oil-
and gas-fired generation plant in Oswego to NRG Energy, Inc. for $80 million.
S-3
<PAGE>
FORWARD-LOOKING INFORMATION
This prospectus supplement, the prospectus that accompanies it and the
documents that are incorporated by reference in them contain statements that are
not exclusively statements of historical fact. These statements are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995.
You can find many of these statements by looking for words such as
"believe," "expect," "anticipate," "estimate," or similar expressions. These
forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements
expressed or implied by us in those statements. The risks and uncertainties
include those risks and uncertainties identified, among other places, under the
headings "Risk Factors" in this prospectus supplement, in the accompanying
prospectus and in the documents that are incorporated by reference in them.
These statements include our statements regarding the following:
- the impact of our substantial leverage on our future competitiveness
- the potential for decreased sales due to the ability of our current
customers to obtain electricity from other sources
- general economic conditions in our service area
- liability related to the ownership and operation of nuclear facilities
- the impact of government regulation
- the impact of the Master Restructuring Agreement, which we will refer to
as the "MRA", on our reported earnings
- the impact of environmental laws on our operations
- our ability to recover in our rates all of our regulatory assets, as well
as challenges to our ability to collect exit fees from customers who
attempt to bypass our system
Because forward-looking statements are subject to risks and uncertainties,
actual results may differ materially from those expressed or implied by such
statements. You are cautioned not to place undue reliance on such statements.
The cautionary statements contained or referred to in this section should be
considered in connection with any subsequent written or oral forward-looking
statements that we or persons acting on our behalf may issue. We undertake no
obligation to review or confirm analysts' expectations or estimates or to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this prospectus supplement or to
reflect the occurrence of unanticipated events.
S-4
<PAGE>
RISK FACTORS
WE ARE SUBSTANTIALLY LEVERAGED AND, ACCORDINGLY, HAVE LIMITED FINANCIAL
FLEXIBILITY
We have substantial leverage and significant debt service obligations. As of
September 30, 1999, we have outstanding approximately $5.4 billion of senior
indebtedness, consisting primarily of $2.4 billion of First Mortgage Bonds,
which are secured by a lien on substantially all of our utility property,
$529.0 million of borrowings under our senior bank facility, which are secured
with First Mortgage Bonds, and $2.5 billion of senior unsecured debt. We also
have available additional borrowings of $275.0 million under our senior bank
facility and, under the financial covenants set forth in the indenture governing
the senior unsecured debt we issued in June 1998, we have the ability to incur
an additional $60 million of secured indebtedness.
The degree to which we are leveraged could have important consequences to
you, including the following:
- our substantial leverage may place us at a competitive disadvantage,
hinder our ability to adjust rapidly to changing market conditions, and
make us more vulnerable in the event of a downturn in general economic
conditions or our business; and
- our ability to obtain additional financing for working capital, capital
expenditures, acquisitions or other corporate purposes will be limited in
the future.
DECREASED SALES AND AN ECONOMIC DOWNTURN IN OUR SERVICE AREA MAY ADVERSELY
AFFECT OUR ELECTRIC REVENUES AND PROFITABILITY
Under our regulatory agreement with the PSC, we have established rates
intended to create sufficient cash flow to at least cover our operating
expenses, satisfy our fixed obligations and recover allowable stranded costs.
Our rate design is based on estimates of future electricity usage and the number
of customers connected to our distribution system. The level of electric
revenues can be adversely affected by lower than projected sales to retail
customers and by customer bypass of the system. Economic conditions in our
service area could result in lower sales due to the relocation of customers.
Because of the relatively high cost of our electricity, customers could seek to
bypass our distribution system through self-generation or to replace us with a
municipal or other utility. Our regulatory agreement requires, with limited
exceptions, the payment of an exit fee or access charge in these circumstances.
Several affected customers and competitors have said they may challenge our
right to collect these fees, or the appropriate level of these fees. The Village
of Lakewood is seeking to avoid the payment of exit fees and has initiated
proceedings at the Federal Energy Regulatory Commission and the PSC. There can
be no assurance that we would prevail in this or other proceedings. If revenues
are significantly lower than those anticipated in our rate design, our
profitability could be materially and adversely affected.
WE MAY INCUR SUBSTANTIAL LIABILITY FROM OUR OWNERSHIP AND OPERATION OF NUCLEAR
FACILITIES
Although we have entered into an agreement to sell our interests in our two
nuclear power plants, the agreement is subject to a number of contingencies and
we cannot be sure it will close. Risks of substantial liability arise from the
ownership and operation of nuclear facilities, including, among others,
mechanical or structural problems at a nuclear facility, the storage, handling
and disposal of radioactive materials, limitations on the amounts and types of
insurance coverages commercially available and uncertainties with respect to the
technological and financial aspects of decommissioning nuclear facilities at the
end of their useful lives. Unit 1 at our Nine Mile Point nuclear facility is one
of the oldest in operation in the United States, having commenced operations in
1969. On September 24, 1999, we announced that we have begun a comprehensive
program to enhance the operating performance of our two nuclear plants, Unit 1
and Unit 2. Recent internal and external performance
S-5
<PAGE>
reviews, including a review by the Nuclear Regulatory Commission, outline the
need for operational improvements. We intend to increase management observation
and monitoring of control room activities and increase oversight by plant
managers of maintenance and surveillance activities to ensure integration of all
site work. In addition, the Nuclear Regulatory Commission will continue to
monitor and assess activities at the two plants. We expect to spend
approximately $0.4 million in expense during the remainder of 1999 for this
performance improvement program and have budgeted an additional $9.4 million in
expense and $7.9 million for capital improvements for the 12 months ending
December 31, 2000. The amounts spent during 2000 could be less, depending on the
timing of the sale of the Unit 1 and Unit 2.
In the event of an extended outage of either Unit 1 or Unit 2 at Nine Mile
Point, we would be required to purchase power in the open market to replace the
power normally produced by these facilities. Such purchases would subject us to
the risk of increased energy prices and, depending on the length of the outage
and the level of market prices, could have a material adverse effect on our cash
flow. Under our regulatory agreement, we are not entitled to pass along these
increased costs to customers in the form of higher electric rates. If the
facilities were to have material problems with their physical condition, it
could affect their sale and if so, we would then evaluate the economic
justification of continuing to operate the facilities. The PSC can review the
prudence of our decision to close a facility to determine whether we should be
allowed to recover its incremental costs, including replacement power costs.
These costs would likely be significant to us.
WE ARE SUBJECT TO EXTENSIVE REGULATION OF OUR BUSINESS BY THE PSC AND THE
FEDERAL GOVERNMENT
We are subject to extensive regulation by the PSC. While the most material
aspects of our rate structure for the next four years have been established, the
PSC is likely to continue to assess competitive consequences in considering
future rate increases even in the event that we experience revenue shortfalls or
increased expenses. In addition, many aspects of our operations, including our
electric transmission and distribution systems, the operation and maintenance of
our nuclear facilities, our gas distribution operations and the issuance of our
securities will continue to be subject to extensive regulation by both the
federal government and the PSC. Changes in these regulations or in their
application to us could adversely affect our business and financial condition.
Further, uncertainty exists regarding the ultimate impact on us as the electric
industry is further deregulated and electricity suppliers gain open access to
our retail customers.
THE MASTER RESTRUCTURING AGREEMENT ADVERSELY AFFECTS OUR REPORTED EARNINGS
Because of the regulatory accounting treatment afforded the Master
Restructuring Agreement, which we completed in June 1998, our reported net
income has, as anticipated, been significantly depressed. The $4 billion of
compensation paid to the independent power producers pursuant to the Master
Restructuring Agreement was recorded as a regulatory asset and is being
amortized over ten years and the additional interest charges and amortization of
debt issuance costs associated with our offering in June 1998 of $3.45 billion
of debt in order to pay the independent power producers has increased our
interest expense. The recovery of these significant costs through our prices
puts continued pressure on us to absorb any increases in operating costs in
order to maintain or reduce our prices and thereby improve our competitive
position. Also our electric revenues declined by approximately $99.6 million
over the twelve months ended September 30, 1999, in part due to rate reductions
under our regulatory agreement but also due to declining sales in our service
territory.
OUR OPERATIONS ARE SUBJECT TO A WIDE RANGE OF ENVIRONMENTAL LAWS
We and our operations are subject to a wide range of environmental laws and
regulations relating to, among other matters, air emissions, wastewater
discharges, landfill operations and hazardous waste management. Compliance with
these laws and regulations is an important factor in our business. We
S-6
<PAGE>
are currently conducting a program to remediate, as necessary, in order to meet
current environmental standards, certain properties associated with our former
gas manufacturing process and other properties which we have learned may be
contaminated with industrial waste, as well as investigating identified
industrial waste sites as to which it may be determined that we contributed
waste. We have also been advised that various federal, state or local agencies
believe certain properties require investigation and have prioritized the sites
based on available information in order to enhance the management of
investigation and remediation, if necessary. In addition, we have been asked by
the New York State Department of Environmental Conservation to identify
additional sites to determine whether other investigation and remediation is
required. We believe it is probable that we will continue to recover
environmental compliance and remediation costs in our rates, and we have
recorded a regulatory asset for recovery of these costs. However, additional
expenses, associated with remedial costs or compliance with proposed and future
environmental laws and regulations may have a material adverse effect on our
future operations and financial condition.
DISCONTINUING THE APPLICATION OF CERTAIN ACCOUNTING PRINCIPLES COULD ADVERSELY
AFFECT US
We continue to apply the accounting principles set forth in Statement of
Financial Accounting Standards No. 71, which we will refer to as "SFAS No. 71",
to our electric transmission and distribution, nuclear and gas operations, based
on the terms of our regulatory agreement. SFAS No. 71 permits a utility to defer
certain costs which would otherwise be expensed when authorized to do so by the
relevant regulatory authorities. As of September 30, 1999, we had $5.3 billion
of regulatory assets associated with our electric business. In the event that we
determine, either as a result of lower than expected revenues or higher than
expected costs, that our regulatory assets were not in fact recoverable, we
could no longer apply the principles of SFAS No. 71 and would be required to
record a non-cash charge against income in the amount of the remaining
unamortized regulatory assets. The resulting charge would be material to our
financial condition and adversely affect our ability to pay dividends.
S-7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table contains certain consolidated financial information
about us for the periods presented. The financial information below for each of
the five years ended December 31, 1998 has been derived from our audited
financial statements and should be read in conjunction with the financial
statements, including the related notes, which are included in our Annual Report
on Form 10-K for each of the respective years. The selected consolidated
financial information as of and for the nine months ended September 30, 1998 and
1999 has been derived from our unaudited consolidated financial statements,
which in the opinion of our management reflect all adjustments (consisting only
of normal recurring adjustments) necessary to present fairly, in accordance with
generally accepted accounting principles, the information contained therein.
These unaudited financial statements are included in our Quarterly Reports on
Form 10-Q for the nine months ended September 30, 1998 and 1999. See "Where You
Can Find More Information" in this prospectus supplement.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------- -------------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Operating revenues:
Electric............................ $3,528,987 $3,335,548 $3,308,979 $3,309,441 $ 3,261,144 $ 2,506,048 $ 2,451,220
Gas................................. 623,191 581,790 681,674 656,963 565,229 433,893 442,558
---------- ---------- ---------- ---------- ----------- ----------- -----------
4,152,178 3,917,338 3,990,653 3,966,404 3,826,373 2,939,941 2,893,778
---------- ---------- ---------- ---------- ----------- ----------- -----------
Operating expenses:
Fuel for electric generation........ 219,849 165,929 181,486 179,455 239,982 178,433 157,183
Electricity purchased............... 1,107,133 1,137,937 1,182,892 1,236,108 1,001,991 866,677 575,786
Gas purchased....................... 315,714 276,232 370,040 345,610 272,141 216,372 198,432
Other operation and maintenance..... 957,377 817,897 928,224 835,282 937,798 697,787 641,924
Employee reduction program.......... 196,625 -- -- -- -- -- --
PowerChoice Charge.................. -- -- -- -- 263,227 263,227 --
Amortization of MRA Regulatory
Asset............................. -- -- -- -- 128,833 32,184 289,874
Depreciation and amortization....... 308,351 317,831 329,827 339,641 355,417 264,540 268,255
Other taxes......................... 496,922 517,478 475,846 471,469 459,961 356,961 326,570
---------- ---------- ---------- ---------- ----------- ----------- -----------
3,601,971 3,233,304 3,468,315 3,407,565 3,659,350 2,876,181 2,458,024
---------- ---------- ---------- ---------- ----------- ----------- -----------
Operating income.................... 550,207 684,034 522,338 558,839 167,023 63,760 435,754
Other income (deductions)........... 17,204 3,069 35,943 24,997 42,602 47,620 (2,967)
---------- ---------- ---------- ---------- ----------- ----------- -----------
Income before interest charges...... 567,411 687,103 558,281 583,836 209,625 111,380 432,787
Interest charges.................... 278,958 279,674 278,033 273,906 397,178 265,109 377,896
---------- ---------- ---------- ---------- ----------- ----------- -----------
Income (loss) before federal and
foreign income taxes.............. 288,453 407,429 280,248 309,930 (187,553) (153,729) 54,891
Federal and foreign income taxes.... 111,469 159,393 102,494 126,595 (66,728) (50,337) 22,337
---------- ---------- ---------- ---------- ----------- ----------- -----------
Income (loss) before extraordinary
item.............................. 176,984 248,036 177,754 183,335 (120,825) (103,392) 32,554
Extraordinary item.................. -- -- (67,364) -- -- -- (23,804)
---------- ---------- ---------- ---------- ----------- ----------- -----------
Net income (loss)................... 176,984 248,036 110,390 183,335 (120,825) (103,392) 8,750
Dividends on preferred stock........ 33,673 39,596 38,281 37,397 36,555 27,531 27,039
---------- ---------- ---------- ---------- ----------- ----------- -----------
Balance available for common
stock............................. $ 143,311 $ 208,440 $ 72,109 $ 145,938 $ (157,380) $ (130,923) $ (18,289)
========== ========== ========== ========== =========== =========== ===========
CASH FLOWS PROVIDED BY /(USED IN):
Operating Activities................ $ 597,221 $ 700,005 $ 700,402 $ 537,575 $(3,240,455) $(3,269,838) $ 617,514
Investing Activities................ (520,973) (277,004) (331,611) (393,971) (447,091) (332,517) 638,857
Financing Activities................ (106,269) (363,856) (196,868) (90,770) 3,482,312 3,491,069 (1,326,992)
OTHER OPERATING DATA:
EBITDA (1).......................... $1,029,900 $ 929,100 $ 957,500 $ 961,500 $ 990,500 $ 720,300 $ 991,300
Net Cash interest (2)............... 261,700 260,500 244,500 226,900 345,500 231,400 311,700
Capital expenditures(3)............. 490,124 345,804 352,049 290,757 392,200 290,124 199,686
Ratio of EBITDA to net cash
interest(4)....................... 3.9x 3.6x 3.9x 4.2x 2.9x 3.1x 3.2x
Ratio of earnings to fixed
charges(5)........................ 1.9x 2.3x 1.6x 2.0x 0.6x 0.6x 1.0x
</TABLE>
S-8
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
--------------------------------------------------------------- -------------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF
PERIOD):
Net utility plant................... $7,035,643 $7,007,853 $6,957,615 $6,868,044 $ 6,877,959 $ 6,869,833 $ 6,182,099
Total Assets........................ 9,649,816 9,477,869 9,427,635 9,584,141 13,861,187 13,341,330 12,734,985
Total long term debt, including
current portion................... 3,375,845 3,647,478 3,525,963 3,484,476 6,729,465 6,721,005 5,656,465
Preferred stock, including current
portion........................... 556,950 546,000 535,600 526,730 516,610 516,610 508,990
Common stockholder's equity......... $2,462,398 $2,513,952 $2,585,572 $2,727,527 $ 3,170,142 $ 3,196,779 $ 2,965,579
</TABLE>
- ------------------------------
(1) EBITDA represents a non-GAAP measure of cash flow which is calculated as:
earnings before interest charges, interest income, income taxes,
depreciation and amortization, amortization of nuclear fuel, allowance for
funds used during construction, MRA regulatory asset amortization, and
extraordinary items. EBITDA is presented to provide additional information
about our ability to meet requirements for preferred and debt service and
capital spending. EBITDA should not be considered an alternative to net
income as an indicator of operating performance or an alternative to cash
flows as a measure of liquidity.
(2) Net cash interest reflects interest charges plus allowance for funds used
during construction less the non-cash impact of the net amortization of
discount on long-term debt and interest accrued on the Nuclear Waste Policy
Act disposal liability less interest income.
(3) Capital expenditures consist of amounts for our construction program related
to utility operations including the amounts incurred by us to comply with
the Clean Air Act and other environmental requirements.
(4) For purposes of determining the ratio of EBITDA to net cash interest, EBITDA
and net cash interest are calculated as described above in notes (1) and
(2). The ratio of EBITDA to net cash interest is presented to provide
additional information about our ability to meet future requirements for
preferred stock and debt service. See the Consolidated Statements of Cash
Flows incorporated by reference in this prospectus supplement.
(5) For purposes of determining the ratio of earnings to fixed charges
requirements, (i) earnings consist of income before federal and foreign
income taxes plus fixed charges and (ii) fixed charges consist of interest
charges on all indebtedness, including the portion of rental expense that is
representative of the interest factor. The ratios for the September periods
were calculated using data for the twelve month period then ended.
S-9
<PAGE>
In 1998, we implemented two related agreements which provided for the
fundamental restructuring of our financial condition: the PowerChoice Agreement
and the Master Restructuring Agreement. In exchange for cash and shares of our
common stock, worth approximately $4 billion in the aggregate, 14 independent
power producers agreed to terminate, restate or amend 27 power purchase
agreements, which represented in excess of 75% of our estimated above-market
power purchase obligation at the time. We financed the cash portion of this
transaction by issuing senior unsecured debt totalling approximately
$3.45 billion and approximately $300 million of common stock. We have since
retired approximately $1.1 billion of indebtedness and we have received
regulatory approval to commence an $800 million repurchase program of our
holding company's common shares over a six-year period and the holding company's
board has approved the repurchase of 20 million common shares through
December 31, 2001.
Under the PowerChoice Agreement, which also contains provisions lowering our
rates during a three-year phase-in period that will reduce annual electric
revenue by approximately 3% once fully phased in, we established a regulatory
asset of approximately $4 billion related to the MRA payment that will be
amortized over a period not to exceed ten years. Our rates under PowerChoice
have been designed to permit recovery of the MRA regulatory asset. In approving
PowerChoice, the regulators limited the estimated value of the MRA regulatory
asset that could be recovered, which resulted in an after-tax charge to the
second quarter of 1998 earnings of $171 million upon the closing of the MRA. The
PowerChoice Agreement also required us to divest our fossil and hydro generation
facilities, the progress of which is described under "Recent Developments".
The effect of these transactions is generally to reduce our revenues while
lowering our cash operating costs, on a net basis, to a greater extent,
resulting in increased operating cash flow. As a result of these transactions,
our financial results for any particular period are not comparable to those
results for any other period.
S-10
<PAGE>
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the Series D Preferred
Stock to redeem our 9 1/2% Series preferred stock.
CAPITALIZATION
The following table sets forth our capitalization at September 30, 1999,
both on an actual basis and to give effect to the offering and the application
of the estimated net proceeds therefrom to the redemption of our existing 9 1/2%
Series preferred stock.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
1999
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
COMMON STOCKHOLDERS' EQUITY:
Common stock par value $1.00 per share, 250,000,000 shares
authorized 187,364,863 shares issued.................... $ 187,365
Capital stock premium and expense......................... 2,362,617
Accumulated other comprehensive income.................... (3,970)
Retained earnings......................................... 419,567
----------
2,965,579
CUMULATIVE PREFERRED STOCK:
Cumulative preferred stock, par value $100 per share,
3,400,000 shares authorized:
Mandatorily redeemable. Issued and outstanding 186,000
shares................................................ 18,600
Non-redeemable. Issued and outstanding 2,100,000
shares................................................ 210,000
Cumulative preferred stock, par value $25 per share,
19,600,000 shares authorized:
Mandatorily redeemable. Issued and outstanding 2,015,602
shares................................................ 50,390
Non-redeemable. Issued and outstanding 9,200,000 shares
prior to the offering and redemption, and 6,200,000
shares after the offering and redemption.............. 230,000
----------
Total preferred stock................................. 508,990
Less preferred stock due within one year.............. 7,620
----------
501,370
----------
Preference stock, par value $25 per share, 8,000,000
shares authorized.
None issued and outstanding............................. --
LONG-TERM DEBT:
Long-term debt............................................ 5,656,465
Less long-term debt due in one year..................... 273,621
----------
Total long-term debt...................................... 5,382,844
==========
Total capitalization.................................... $8,849,793
==========
</TABLE>
S-11
<PAGE>
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth our ratio of earnings to combined fixed
charges and preferred stock dividends for the periods indicated.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
SEPTEMBER 30,
------------------------------
YEAR ENDED PRO
DECEMBER 31, ACTUAL FORMA(1)
---------------------------------------------------- ------------------- --------
1994 1995 1996 1997 1998 1998 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated ratio of earnings to
combined fixed charges and preferred
stock dividends(2)..................... 1.6x 1.9x 1.3x 1.7x 0.5x 0.6x 0.9x 0.9x
</TABLE>
- ------------------------
(1) Reflects the issuance of the FixedAdjustable Rate Cumulative Preferred
Stock, Series D and the redemption of the 9 1/2% Series preferred stock.
(2) Our combined fixed charges and preferred stock dividends exceeded our
consolidated earnings by $51.6 million and $169.0 million during the twelve
months ended September 30, 1999 and 1998, respectively, and $224.1 million
during the year ended December 31, 1998.
<TABLE>
<CAPTION>
Earnings consist of:
<S> <C>
- - Net income
PLUS
- - Federal and foreign taxes based on income or profits
PLUS
- - Fixed charges
Fixed charges consist of:
- - Interest charges
PLUS
- - A portion of rental expenses which we believe is
representative of the interest factor.
PLUS
- - Preferred stock dividend requirements. We have increased
these requirements by an amount representing the pre-tax
earnings necessary to cover these requirements
</TABLE>
S-12
<PAGE>
DESCRIPTION OF SERIES D PREFERRED STOCK
THE FIXEDADJUSTABLE RATE CUMULATIVE PREFERRED STOCK, SERIES D THAT WE ARE
OFFERING IS A SERIES OF OUR $25 PAR VALUE PREFERRED STOCK, WHICH SERIES HAS A
$50 LIQUIDATION PREFERENCE. A DESCRIPTION OF CERTAIN PROVISIONS OF THE SERIES D
PREFERRED STOCK IS SET FORTH BELOW. THIS DESCRIPTION SUPPLEMENTS THE DESCRIPTION
OF THE GENERAL TERMS AND PROVISIONS OF NEW PREFERRED STOCK SET FORTH IN THE
ACCOMPANYING PROSPECTUS.
The Series D Preferred Stock is a single series consisting of 3,000,000
shares. The holders of Series D Preferred Stock will have no preemptive rights.
The Series D Preferred Stock will not be convertible into shares of our common
stock. The Series D Preferred Stock will be fully paid and nonassessable.
The Series D Preferred Stock will rank on a parity with each other
outstanding series of preferred and preference stock as to payment of dividends
and distribution of assets upon our dissolution, liquidation or winding up. The
Series D Preferred Stock, together with the other series of preferred and
preference stock, will rank prior to our common stock as to the payment of
dividends and distribution of assets upon our dissolution, liquidation or
winding up.
DIVIDENDS
Cumulative cash dividends will be payable on each share of Series D
Preferred Stock when, as and if declared by our Board of Directors out of our
assets legally available therefor.
The initial dividend for the dividend period from , 1999 to
December 31, 1999 will be $ per share and will be payable as, if and when
declared by our Board of Directors, on December 31, 1999. Thereafter, dividends
on the Series D Preferred Stock will be payable quarterly, as, if and when
declared by our Board of Directors, on March 31, June 30, September 30 and
December 31 of each year (each a "Dividend Payment Date") at the annual rate of
% or $ per share through December 31, 2004.
After December 31, 2004, dividends on the Series D Preferred Stock will be
payable on each Dividend Payment Date, as, if and when declared by our Board of
Directors, at the Applicable Rate from time to time in effect. The Applicable
Rate per annum for each dividend period beginning after December 31, 2004 is
described below under "Adjustable Rate Dividends."
If a Dividend Payment Date is not a business day, dividends (if declared)
will be paid on the next business day, without interest. Dividends will be
payable to holders of record as they appear on our stock books on the record
date fixed by our Board of Directors, which will not be more than 60 days or
less than 10 days before the payment date thereof.
Dividends on the Series D Preferred Stock will be cumulative and rights will
accrue to the holders of the Series D Preferred Stock if we fail to declare one
or more dividends on the Series D Preferred Stock in any amount, whether or not
our earnings or financial condition were sufficient to pay those dividends in
whole or in part.
ADJUSTABLE RATE DIVIDENDS. The "Applicable Rate" per annum for each
dividend period beginning after December 31, 2004 will be equal to % plus the
highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Thirty Year Constant Maturity Rate for such dividend period. However, the
Applicable Rate will not be less than % or greater than % except as
provided below.
If we determine in good faith that for any reason:
- any one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or
the Thirty Year Constant Maturity Rate cannot be determined for any
dividend period, then the Applicable Rate for that dividend period will be
based on the higher of the other two rates;
S-13
<PAGE>
- only one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or
the Thirty Year Constant Maturity Rate can be determined for any dividend
period, then the Applicable Rate for that dividend period will be based on
the rate that can be determined; or
- none of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the
Thirty Year Constant Maturity Rate can be determined for any dividend
period, then the Applicable Rate for the preceding dividend period will
continue to apply.
TREASURY BILL RATE. The "Treasury Bill Rate" will be the arithmetic average
of the two most recent weekly per annum market discount rates (or the one weekly
per annum market discount rate, if only one such rate is published during the
relevant Calendar Period (as defined below)) for three-month U.S. Treasury
bills, as published weekly by the Federal Reserve Board during the Calendar
Period immediately preceding the last ten calendar days preceding the dividend
period for which the dividend rate on the Series D Preferred Stock is being
determined, except as described below.
If the Federal Reserve Board does not publish such a weekly per annum market
discount rate during any such Calendar Period, then the Treasury Bill Rate for
that dividend period will be the arithmetic average of the two most recent
weekly per annum market discount rates (or the one weekly per annum market
discount rate, if only one such rate is published during the relevant Calendar
Period) for three-month U.S. Treasury bills, as published weekly during that
Calendar Period by any Federal Reserve Bank or U.S. Government department or
agency that we select.
If a per annum market discount rate for three-month U.S. Treasury bills is
not published by the Federal Reserve Board or by any Federal Reserve Bank or
U.S. Government department or agency during such Calendar Period, then the
Treasury Bill Rate for that dividend period will be the arithmetic average of
the two most recent weekly per annum market discount rates (or the one weekly
per annum market discount rate, if only one such rate is published during the
relevant Calendar Period) for all of the U.S. Treasury bills then having
remaining maturities of not less than 80 nor more than 100 days, as published
during such Calendar Period by the Federal Reserve Board, or if the Federal
Reserve Board does not publish such rates, by any Federal Reserve Bank or U.S.
Government department or agency that we select.
If we determine in good faith that for any reason no such U.S. Treasury Bill
Rates are published as provided above during that Calendar Period, then the
Treasury Bill Rate for that dividend period will be the arithmetic average of
the per annum market discount rates based upon the closing bids during that
Calendar Period for each of the issues of marketable non-interest-bearing U.S.
Treasury securities with a remaining maturity of not less than 80 nor more than
100 days from the date of each such quotation, as chosen and quoted daily for
each business day in New York City (or less frequently if daily quotations are
not generally available) to us by at least three recognized dealers in U.S.
Government securities that we select.
If we determine in good faith that for any reason we cannot determine the
Treasury Bill Rate for any dividend period as provided above, then the Treasury
Bill Rate for that dividend period will be the arithmetic average of the per
annum market discount rates based upon the closing bids during that Calendar
Period for each of the issues of marketable interest-bearing U.S. Treasury
securities with a remaining maturity of not less than 80 nor more than
100 days, as chosen and quoted daily for each business day in New York City (or
less frequently if daily quotations are not generally available) to us by at
least three recognized dealers in U.S. Government securities that we select.
TEN YEAR CONSTANT MATURITY RATE. The "Ten Year Constant Maturity Rate" will
be the arithmetic average of the two most recent weekly per annum Ten Year
Average Yields (as defined below) (or the one weekly per annum Ten Year Average
Yield, if only one such yield is published during the relevant Calendar Period),
as published weekly by the Federal Reserve Board during the Calender Period
S-14
<PAGE>
immediately preceding the last ten calendar days preceding the dividend period
for which the dividend rate on the Series D Preferred Stock is being determined,
except as described below.
If the Federal Reserve Board does not publish such weekly per annum Ten Year
Average Yields during any such Calendar Period, then the Ten Year Constant
Maturity Rate for that dividend period will be the arithmetic average of the two
most recent weekly per annum Ten Year Average Yields (or the one weekly per
annum Ten Year Average Yield, if only one such yield is published during the
relevant Calendar Period), as published weekly during that Calendar Period by
any Federal Reserve Bank or by any U.S. Government department or agency that we
select.
If a per annum Ten Year Average Yield is not published by the Federal
Reserve Board or by any Federal Reserve Bank or U.S. Government department or
agency during such Calendar Period, then the Ten Year Constant Maturity Rate for
that dividend period will be the arithmetic average of the two most recent
weekly per annum average yields to maturity (or the one weekly per annum average
yield to maturity, if only one such yield is published during the relevant
Calendar Period) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities (as defined below)) then
having remaining maturities of not less than eight nor more than twelve years,
as published during that Calendar Period by the Federal Reserve Board or, if the
Federal Reserve Board does not publish such yields, by any Federal Reserve Bank
or U.S. Government department or agency that we select.
If we determine in good faith that for any reason we cannot determine the
Ten Year Constant Maturity Rate for that dividend period as provided above, then
the Ten Year Constant Maturity Rate for that dividend period will be the
arithmetic average of the per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than eight nor more than
twelve years from the date of each such quotation, as chosen and quoted daily
for each business day in New York City (or less frequently if daily quotations
are not generally available) to us by at least three recognized dealers in U.S.
Government securities that we select.
THIRTY YEAR CONSTANT MATURITY RATE. The "Thirty Year Constant Maturity
Rate" will be the arithmetic average of the two most recent weekly per annum
Thirty Year Average Yields (as defined below) (or the one weekly per annum
Thirty Year Average Yield, if only one such yield is published during the
relevant Calendar Period), as published weekly by the Federal Reserve Board
during the Calendar Period immediately preceding the last ten calendar days
preceding the dividend period for which the dividend rate on the Series D
Preferred Stock is being determined, except as described below.
If the Federal Reserve Board does not publish such a weekly per annum Thirty
Year Average Yield during any such Calendar Period, then the Thirty Year
Constant Maturity Rate for that dividend period will be the arithmetic average
of the two most recent weekly per annum Thirty Year Average Yields (or the one
weekly per annum Thirty Year Average Yield, if only one such yield is published
during the relevant Calendar Period), as published weekly during such Calendar
Period by any Federal Reserve Bank or U.S. Government department or agency that
we select.
If a per annum Thirty Year Average Yield is not published by the Federal
Reserve Board or by any Federal Reserve Bank or U.S. Government department or
agency during such Calendar Period, then the Thirty Year Constant Maturity Rate
for that dividend period will be arithmetic average of the two most recent
weekly per annum average yields to maturity (or the one weekly per annum average
yield to maturity, if only one such yield is published during the relevant
Calendar Period) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) than having remaining
maturities of not less than twenty-eight nor more than thirty years, as
published during that Calendar Period by the Federal Reserve Board or, if the
Federal Reserve Board does not
S-15
<PAGE>
publish such yields, by any Federal Reserve Bank or U.S. Government department
or agency that we select.
If we determine in good faith that for any reason we cannot determine the
Thirty Year Constant Maturity Rate for any dividend period as provided above,
then the Thirty Year Constant Maturity Rate for that dividend period will be the
arithmetic average of the per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than twenty-eight nor
more than thirty years from the date of each such quotation, as chosen and
quoted daily for each business day in New York City (or less frequently if daily
quotations are not generally available) to us by at least three recognized
dealers in U.S. Government securities that we select.
ROUNDING. The Treasury Bill Rate, the Ten Year Constant Maturity Rate and
the Thirty Year Constant Maturity Rate will each be rounded to the nearest five
hundredths of a percent.
CALCULATION AND NOTICE OF APPLICABLE RATE. We will calculate the Applicable
Rate with respect to each dividend period beginning after December 31, 2004. We
will cause notice of the Applicable Rate for the next dividend period to be sent
with each dividend payment to the holders of Series D Preferred Stock.
CERTAIN DEFINITIONS. As used above:
- the term "Calendar Period" means a period of fourteen calendar days;
- the term "Special Securities" means securities which can, at the option of
the holder, be surrendered at face value in payment of any Federal estate
tax, or which provide tax benefits to the holder and are priced to reflect
those tax benefits, or which were originally issued at a deep or
substantial discount;
- the term "Ten Year Average Yield" means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of ten years); and
- the term "Thirty Year Average Yield" means the average yield to maturity
for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of thirty years).
CHANGES IN THE DIVIDENDS RECEIVED PERCENTAGE. If the Internal Revenue Code
(which we refer to as the "Code") is amended, within 18 months of the original
issuance of the Series D Preferred Stock, to change the percentage of the
dividends received deduction (currently 70%), which we refer to as the
"Dividends Received Percentage," the amount of each dividend paid on or after
the date of such change will be adjusted pursuant to the following formula:
<TABLE>
<S> <C> <C> <C>
1-[.35 (l-.70)]
A = DP X [ ------------------- ]
1-[.35 (l-DRP)]
</TABLE>
where
A = the amount to be paid;
DP = the dividend payable before the adjustment; and
DRP = the Dividends Received Percentage applicable to the dividend in
question. If the applicable Dividends Received Percentage is less than 50%, the
DRP shall equal 0.50.
S-16
<PAGE>
We will round the result of the application of this formula to the nearest
cent. No amendment to the Code, other than a change in the percentage of the
dividends received deduction, will give rise to an adjustment.
Notwithstanding the foregoing provisions, there will be no adjustment to the
dividend payable if we receive either an unqualified opinion of a nationally
recognized independent tax counsel or a private letter ruling or similar form of
authorization from the IRS to the effect that the amendment does not apply to
dividends payable on the Series D Preferred Stock. Any such opinion must be
based upon a specific exception in the legislation amending the Dividends
Received Percentage or upon a published pronouncement of the IRS addressing such
legislation. Unless the context otherwise requires, references to dividends in
this prospectus supplement will mean dividends as adjusted by the formula
described above. Our calculation of the dividends payable, as so adjusted and as
certified by our independent auditors, will be final and not subject to review.
If any amendment to the Code which reduces the Dividends Received Percentage
is enacted after a record date and before the next Dividend Payment Date, we
will not increase the amount of the dividends payable on such Dividend Payment
Date. We will, instead, pay any additional dividend (if declared) which would
have been payable on such Dividend Payment Date (after application of the
formula described above), on the next succeeding Dividend Payment Date.
In addition, if any amendment to the Code reduces the Dividends Received
Percentage and such reduction retroactively applies to a Dividend Payment Date
as to which we previously paid dividends on the Series D Preferred Stock (each
an "Affected Dividend Payment Date"), we will pay (if declared) additional
dividends on the next succeeding Dividend Payment Date. The amount of these
additional dividends will be the sum of the additional dividends which would
have been payable on each Affected Dividend Payment Date after application of
the formula described above. If an amendment to the Code discussed in this
paragraph takes effect after any dividend payable on the Dividend Payment Date
next succeeding such amendment has been declared, we will pay these additional
dividends on the second succeeding Dividend Payment Date.
Notwithstanding the foregoing, we will not pay additional dividends pursuant
to the immediately preceding paragraph if any amendment to the Code which
retroactively reduces the Dividends Received Percentage is enacted more than
18 months after we issue the Series D Preferred Stock, or if, prior to the
expiration of such 18-month period, such amendment would not result in an
adjustment due to our having received either an opinion of counsel or tax ruling
as discussed above. We will make only one payment of additional dividends
pursuant to the immediately preceding paragraph.
If the dividends payable per share of the Series D Preferred Stock will be
adjusted pursuant to the formula or a retroactive reduction of the Dividends
Received Percentage discussed above, we will cause notice of each such
adjustment and, if applicable, any additional dividends to be paid as a result
of a retroactive reduction of the Dividends Received Percentage to be sent to
the holders of the Series D Preferred Stock with the payment of dividends on the
next Dividend Payment Date after the date of such adjustment.
LIQUIDATION PREFERENCE
In the event of our voluntary or involuntary liquidation, dissolution or
winding up, the holders of shares of Series D Preferred Stock will be entitled
to receive out of our assets available for distribution to stockholders, before
any distribution of assets is made on our Common Stock or any other class or
series of our stock ranking junior to the Series D Preferred Stock upon
liquidation, liquidating distributions in the amount of $50 per share, plus an
amount equal to the sum of all accrued and unpaid dividends and any additional
dividends described above.
S-17
<PAGE>
VOTING RIGHTS
The holders of shares of Series D Preferred Stock will not be entitled to
vote, except as set forth in the accompanying prospectus or as expressly
required by applicable law.
REDEMPTION
Prior to December 31, 2004, the Series D Preferred Stock is not redeemable.
On or after such date, shares of Series D Preferred Stock will be redeemable, in
whole or in part, at our option, at any time upon not less than thirty nor more
than sixty days' notice, at $50 per share, plus accrued dividends, if any. If
fewer than all the outstanding shares of Series D Preferred Stock are to be
redeemed, we will select those to be redeemed by lot or pro rata or by any other
method as may be determined by our Board of Directors to be equitable.
In addition, if the holders of the shares of the Series D Preferred Stock
are entitled by applicable law to vote upon or consent to our merger or
consolidation, and if we offer to purchase all of the outstanding shares of the
Series D Preferred Stock (the "Offer"), then each holder of Series D Preferred
Stock which does not sell its shares of Series D Preferred Stock pursuant to the
Offer shall be deemed irrevocably to have voted or consented all shares of
Series D Preferred Stock owned by such holder in favor of our merger or
consolidation without any further action by the holder. The Offer shall be at a
price of $ per share, together with accrued dividends, if any. The Offer
must remain open for acceptance for a period of at least 30 days.
Holders of Series D Preferred Stock will have no right to require redemption
of the Series D Preferred Stock.
The Series D Preferred Stock is not subject to any mandatory redemption,
sinking fund or other similar provisions.
CONSENT OF PREFERRED STOCKHOLDERS
In connection with the financing under the Master Restructuring Agreement,
and in accordance with the provisions of our Certificate of Incorporation, as
amended, the holders of a majority of the votes of the Preferred Stock then
outstanding executed consents in 1997 consenting to the issuance by the Company
of unsecured indebtedness above the then-existing limit of approximately
$700 million by up to an additional $5 billion.
TRANSFER AGENT AND REGISTRAR
The Bank of New York will be the transfer agent and registrar for the
Series D Preferred Stock.
S-18
<PAGE>
UNITED STATES TAXATION
This section describes the material United States federal income tax
consequences of owning and disposing of shares of the Series D Preferred Stock
(the "Shares") we are offering. It represents the opinion of our counsel,
Sullivan & Cromwell. It applies to you only if you acquire Shares in the
offering and you hold your Shares as capital assets for tax purposes. If you are
a member of a class of holders subject to special rules, such as:
- a dealer in securities or currencies,
- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings,
- a bank,
- a life insurance company,
- a tax-exempt organization,
- a person liable for the alternative minimum tax,
- a person that owns Shares as part of a straddle or of a hedging or
conversion transaction for tax purposes, or
- a person whose functional currency for tax purposes is not the U.S.
dollar, this section does not apply to you.
This section is based on the Internal Revenue Code of 1986, as amended (the
"Code"), its legislative history, existing and proposed regulations under the
Code, published rulings and court decisions, all as currently in effect. These
laws are subject to change, possibly on a retroactive basis.
This discussion applies to you only if you are a United States holder. You
are a United States holder if you are a beneficial owner of Shares and you are:
- a citizen or resident of the United States,
- a domestic corporation,
- an estate whose income is subject to United States federal income tax
regardless of its source, or
- a trust if a United States court can exercise primary supervision over the
trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE UNITED STATES
FEDERAL, STATE AND LOCAL, AS WELL AS ANY FOREIGN AND OTHER TAX CONSEQUENCES OF
PURCHASE, OWNERSHIP AND DISPOSITION OF THESE SHARES IN YOUR PARTICULAR
CIRCUMSTANCES.
DIVIDENDS
Distributions out of our current or accumulated earnings and profits, as
determined for United States federal income tax purposes, will constitute
dividends that are includible as ordinary income in your income when actually or
constructively received. Distributions in excess of our current and accumulated
earnings or profits will be applied against, and reduce, your adjusted basis in
the Shares. To the extent a distribution would reduce the adjusted basis below
zero, the distribution is generally treated as gain from the sale or exchange of
property described below under "--Redemption, Sale or Other Disposition."
S-19
<PAGE>
DIVIDENDS-RECEIVED DEDUCTION
If you are a corporate United States holder otherwise entitled to the
70 percent dividends-received deduction under Section 243 of the Code (the
"DRD"), you will be entitled to the DRD with respect to distributions on Shares
to the extent they constitute dividends. However, you are entitled to the DRD
only if:
- you are not under an obligation to make related payments with respect to
positions in substantially similar or related property, such as payments
pursuant to a short sale of your Shares, and
- you have a holding period for your Shares either (i) for more than
90 days during a 180-day period beginning 90 days before the ex-dividend
date for which you are claiming the DRD, in the case of a dividend payment
that is attributable to a period or periods of a total of more than
366 days; or (ii) for more than 45 days during a 90-day period beginning
45 days before such an ex-dividend date in the case of a dividend payment
that is attributable to a period or periods of no more than 366 days.
Your holding period for Shares excludes days during which you:
- have an option to sell substantially identical stock or securities,
- are under a contractual obligation to sell such stock or securities,
- have entered, but not closed, a short sale of such stock or securities,
- are the grantor of an option to buy such stock or securities, or
- have otherwise reduced your risk of loss on the Shares by holding
positions with respect to substantially similar or related property.
The DRD is reduced, possibly in its entirety, by the portion of the dividend
otherwise eligible for the DRD that corresponds to the portion of any of your
indebtedness that is attributable to your holding of Shares. Furthermore, if you
have no net operating loss for a given taxable year, you may have to limit your
aggregate DRD for such a year.
EXTRAORDINARY DIVIDENDS
If you are a corporate United States holder, you are generally required to
reduce your adjusted basis in the Shares to the extent of the untaxed portion of
any "extraordinary dividend". Dividends are extraordinary dividends if, in the
aggregate:
- they have ex-dividend dates within a period of 85 consecutive days of each
other and, in the aggregate, exceed 5 percent of your adjusted basis in
the Shares or of the Shares' fair market value, or
- they have ex-dividend dates within one year of each other and, in the
aggregate, exceed 20 percent of your adjusted basis in the Shares or of
the Shares' fair market value.
However, if you have a holding period for your Shares of more than two years at
the date of the dividend's announcement, you generally are not subject to this
rule.
Extraordinary dividends further include any amount distributed in certain
redemptions that are treated as a dividend, if the redemption is non-pro rata
with respect to all stockholders or in partial liquidation of the issuer.
S-20
<PAGE>
REDEMPTION, SALE OR OTHER DISPOSITION
If you sell or otherwise dispose of your Shares, including upon a redemption
of Shares, you will generally recognize capital gain or loss equal to the
difference between the value of the amount of cash plus the fair market value of
any property you receive and your tax basis in your Shares. If you are a
noncorporate holder and have a holding period for your Shares of more than one
year, any such capital gain will generally be taxed at a maximum rate of
20 percent.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, dividend payments, or other taxable distributions, made to you
with respect to your Shares, as well as proceeds from the sale of your shares
will be subject to information reporting requirements, and will also be subject
to backup withholding at a rate of 31 percent if you are a noncorporate holder
and you:
- fail to provide an accurate taxpayer identification number,
- are notified by the Internal Revenue Service that you have failed to
report all interest or dividends required to be shown on your federal
income tax returns, or
- in certain circumstances, fail to comply with applicable certification
requirements.
You generally may obtain a refund of any amounts withheld under the backup
withholding rules that exceed your income tax liability by filing a refund claim
with the Internal Revenue Service.
S-21
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to such underwriter, the number of shares
of Series D Preferred Stock set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ---- ---------
<S> <C>
Salomon Smith Barney Inc....................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
PaineWebber Incorporated....................................
Banc One Capital Markets, Inc...............................
Robert W. Baird & Co., Incorporated.........................
---------
Total..................................................... 3,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of Series D Preferred Stock included in this
offering are subject to approval of certain legal matters by counsel and to
certain other conditions. The underwriters are obligated to purchase all the
shares if they purchase any of the shares.
The underwriters, for whom Salomon Smith Barney Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, PaineWebber Incorporated, Banc One Capital
Markets, Inc. and Robert W. Baird & Co., Incorporated are acting as
representatives, proposed to offer some of the shares of Series D Preferred
Stock directly to the public at the public offering price set forth on the cover
page of this prospectus supplement and some of the shares to certain dealers at
the public offering price less a concession not in excess of % per share. The
underwriters may allow, and such dealers may reallow a concession not in excess
of % per share on sales to certain other dealers. After the initial offering
of the Series D Preferred Stock to the public, the public offering price and
such concessions may be changed by the representatives.
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us in connection with this offering.
<TABLE>
<CAPTION>
PAID BY NIAGARA MOHAWK
POWER CORPORATION
----------------------
<S> <C>
Per share.............................................. $
Total.................................................. $
</TABLE>
The shares of Series D Preferred Stock are new securities with no
established trading market. Application will be made to list the Series D
Preferred Stock on the New York Stock Exchange. If the listing is approved,
trading of the Series D Preferred Stock on the New York Stock Exchange is
expected to commence within a 30-day period after the initial delivery of the
Series D Preferred Stock to purchasers.
The underwriters have advised us that they intend to make a market in the
Series D Preferred Stock. However, they are not obligated to do so and any
market making activities with respect to the Series D Preferred Stock may be
discontinued at any time without notice. Accordingly, no assurance can be given
as to the liquidity of or the trading market for the Series D Preferred Stock.
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of Series D Preferred Stock in the
open market. These transactions may include over-allotment, syndicate covering
transactions and stabilizing transactions. Over-allotment involves syndicate
sales of Series D Preferred Stock in excess of the number of shares to be
purchased
S-22
<PAGE>
by the underwriters in the offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the shares of Series D
Preferred Stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Stabilizing transactions consist of
certain bids or purchases of shares of Series D Preferred Stock made for the
purpose of preventing or retarding a decline in the market price of the shares
while the offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.
Any of these activities may cause the price of the shares of Series D
Preferred Stock to be higher than the price that otherwise would exist in the
open market in the absence of such transactions. These transactions may be
effected in the over-the-counter market or otherwise and, if commenced, may be
discontinued at any time.
In addition to underwriting discounts, we estimate that our total expenses
of the offering will be approximately $ . The underwriters will reimburse us
for $ of these expenses.
The representatives have performed certain investment banking and advisory
services for us from time to time for which they have received customary fees
and expenses. The representatives may, from time to time, engage in transactions
with and perform services for us in the ordinary course of their business.
Certain of the underwriters and/or their affiliates provide or may provide
commercial and/or investment banking services to us and our affiliates in the
ordinary course of business.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
VALIDITY OF THE SERIES D PREFERRED STOCK
The validity of the Series D Preferred Stock will be passed upon for us by
Sullivan & Cromwell, New York, New York, our counsel, and for the underwriters
by Davis Polk & Wardwell, New York, New York, counsel for the several
underwriters.
WHERE YOU CAN FIND MORE INFORMATION
THIS SECTION REPLACES THE SECTION ENTITLED "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE" IN THE ACCOMPANYING PROSPECTUS.
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any documents that we file at:
- SEC Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549;
- Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2411; or
- Seven World Trade Center
Suite 1300
New York, New York 10048.
S-23
<PAGE>
You may also obtain copies of these documents at prescribed rates from the
Public Reference Section of the SEC at its Washington address.
Please call the SEC at 1-800-SEC-0330 for further information.
Our filings are also available to the public through:
- The SEC web site at http://www.sec.gov
- The New York Stock Exchange
20 Broad Street
New York, New York 10005
Application will be made to list the Series D Preferred Stock on the New
York Stock Exchange.
The SEC allows us to "incorporate by reference" the information we file with
the SEC, which information incorporated by reference is considered to be part of
this prospectus supplement and the accompanying prospectus, and later
information that we file with the SEC will automatically update and supersede
that information as well as the information included in this prospectus
supplement and the accompanying prospectus. We incorporate by reference the
documents listed in the box below and any future filings made with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 filed
prior to the termination of this offering.
Annual Report on Form 10-K for the year ended December 31, 1998.
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999, June 30,
1999, and
September 30, 1999.
Current Reports on Form 8-K filed January 28, 1999, March 18, 1999, April 5,
1999, June 25, 1999, August 2, 1999, October 12, 1999 and October 29, 1999.
We will provide without charge a copy of these filings, other than any
exhibits unless the exhibits are specifically incorporated by reference into
this prospectus supplement and the accompanying prospectus. You may request your
copy by writing or telephoning us at the following address:
Leon T. Mazur
Director, Investor Relations
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
(315) 428-5876
S-24
<PAGE>
PROSPECTUS
June 1, 1998
$1,160,000,000
NIAGARA MOHAWK POWER CORPORATION
FIRST MORTGAGE BONDS
PREFERRED STOCK ($25 PAR VALUE)
PREFERRED STOCK ($100 PAR VALUE) AND/OR
COMMON STOCK ($1 PAR VALUE)
---------------------
Niagara Mohawk Power Corporation (the "Company") from time to time may offer
its First Mortgage Bonds (the "New Bonds"), its Preferred Stock ($25 par value),
its Preferred Stock ($100 par value) (collectively the "New Preferred Stock")
and its Common Stock ($1 par value) (the "Additional Common Stock" and, together
with the New Bonds and the New Preferred Stock, the "Securities") at prices and
on terms to be determined at the time of sale. The Securities offered pursuant
to this Prospectus may be issued in one or more series or issuances and will be
limited to an aggregate public offering amounting to $1,160,000,000.
For each offering of Securities for which this Prospectus is being
delivered, there will be an accompanying Prospectus Supplement (the "Prospectus
Supplement") that sets forth, with respect to New Bonds, the specific series
designation, aggregate principal amount, rate (or method of calculation) and
time of payment of interest, maturity, any redemption terms, credit enhancement,
if any, and other specific terms, if any, of the series of New Bonds in respect
of which this Prospectus is being delivered; with respect to New Preferred
Stock, the number of shares, the specific title and par value, any dividend,
liquidation or redemption terms, the dividend payment dates and other specific
terms, if any, of the series of New Preferred Stock in respect of which this
Prospectus is being delivered; and with respect to Additional Common Stock, the
number of shares and the other specific terms, if any, of the offering thereof
in respect of which this Prospectus is being delivered. See "Description of New
Bonds," "Description of New Preferred Stock," and "Description of Additional
Common Stock."
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol NMK.
The Company may sell the Securities through underwriters, through dealers,
directly to one or more institutional purchasers or through agents. If any
underwriters, dealers or agents are involved in any sale of the Securities in
respect of which this Prospectus is being delivered, the Prospectus Supplement
will set forth the terms of the offering of the Securities offered thereby,
including the name or names of any underwriters, dealers or agents, the purchase
price of such Securities and the proceeds to the Company from such sale, any
underwriting discounts and other items constituting underwriters' compensation
and any initial public offering price and any discounts or concessions allowed
or reallowed or paid to dealers. See "Plan of Distribution."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
periodic reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, New York, New York 10048
and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such materials may be obtained from the Public Reference
Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the prescribed rates. The Commission maintains a
website (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The Common Stock of the Company is listed on the New York
Stock Exchange, 20 Broad Street, New York, New York 10005, where reports and
other information concerning the Company may be inspected.
Additional information regarding the Company and the securities offered
hereby is contained in the Registration Statement on Form S-3 and the exhibits
thereto (the "Registration Statement") filed with the Commission under the
Securities Act. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is made to the Registration Statement, which may be inspected without
charge at, and copies of which may be obtained at prescribed rates from the
Commission at, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the following
documents heretofore filed with the Commission pursuant to the 1934 Act:
1. The Company's Annual Report on Form 10-K/A for the year ended
December 31, 1997.
2. The Company's Current Report on Form 8-K dated February 11, 1998.
3. The Company's Quarterly Report on Form 10-Q/A for the quarterly period
ended March 31, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in an incorporated
document shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed incorporated document modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Prospectus. Requests for such copies should be directed to
Mr. Leon T. Mazur, Manager--Investor Relations, Niagara Mohawk Power
Corporation, 300 Erie Boulevard West, Syracuse, New York 13202, telephone
number: (315) 474-1511.
THE COMPANY
The Company is engaged in the generation, purchase, transmission,
distribution and sale of electricity and the purchase, distribution, sale and
transportation of natural gas in New York State. The Company provides electric
service to its customers in areas of central, northern and western New York
having a total population of approximately 3.5 million, including the cities of
Buffalo, Syracuse, Albany, Utica, Schenectady, Niagara Falls, Watertown and
Troy. The Company sells, distributes and transports natural gas in areas
2
<PAGE>
of central, northern and eastern New York contained within the Company's
electric service territory having a total population of approximately 1.7
million. The Company owns or has a significant ownership interest in seven
principal fossil and nuclear electric generating facilities and a total capacity
of approximately 5,299 megawatts of electricity. The Company's principal
executive offices are located at 300 Erie Boulevard West, Syracuse, New York
13202 and its telephone number is (315) 474-1511.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratio of earnings to fixed
charges for the periods indicated:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
1.7x 2.0x 1.6x 2.3x 1.9x 2.3x
</TABLE>
For the purpose of computing the historical ratio of earnings to fixed
charges in the above table, earnings consist of net income plus federal and
foreign taxes based on income or profits, and fixed charges. Fixed charges
consist of interest charges plus a portion of rentals which is deemed
representative of the interest factor.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
1.4x 1.7x 1.3x 1.9x 1.6x 2.0x
</TABLE>
For the purpose of computing the historical ratio of earnings to combined
fixed charges and preferred stock dividends in the above table, earnings consist
of net income plus Federal and foreign taxes based on income or profits, and
fixed charges. Fixed charges consist of interest charges and preferred stock
dividend requirements of subsidiaries plus a portion of rentals which is deemed
representative of the interest factor. Preferred Stock dividends have been
increased by an amount representing the pre-tax earnings required to cover such
dividends.
APPLICATION OF PROCEEDS
The proceeds to the Company from the sale of the Securities will be used to
finance the Company's construction program, to refund existing long-term debt
and preferred stock, to reduce short-term debt and for other corporate purposes.
See the Prospectus Supplement for a description of the Company's construction
program and its proposed refunding of long-term debt and preferred stock and
reduction of short-term debt and to fund the Company's obligations under the
Master Restructuring Agreement dated July 9, 1997, as amended, among the Company
and 14 independent power producers.
3
<PAGE>
DESCRIPTION OF NEW BONDS
The New Bonds are to be issued under a mortgage indenture between the
Company and Marine Midland Bank, N.A., as Trustee (the "Trustee"), dated as of
October 1, 1937, as heretofore supplemented and amended and as to be
supplemented by a separate supplemental indenture (the "Supplemental Indenture")
creating each series of New Bonds to be offered under this Prospectus and the
accompanying Prospectus Supplement. The Mortgage Trust Indenture dated as of
October 1, 1937 between the Company and the Trustee (the "Mortgage"), including
the form of the Supplemental Indenture, has been filed or incorporated by
reference as an exhibit to the registration statement. The following brief
summaries of certain provisions contained in the Mortgage do not purport to be
complete, use certain capitalized terms (not otherwise defined herein) defined
in the Mortgage, and are qualified in their entirety by express reference to the
cited provisions of the Mortgage.
TERMS OF NEW BONDS
Reference is made to the Prospectus Supplement which accompanies this
Prospectus for the following terms and other information with respect to the New
Bonds being offered thereby: (1) the designation and aggregate principal amount
of such New Bonds; (2) the date on which such New Bonds will mature; (3) the
rate per annum at which such New Bonds will bear interest and the date from
which such interest shall accrue; (4) the dates on which such interest will be
payable; and (5) any redemption terms or other specific terms applicable to the
New Bonds. The New Bonds will be issued only in the form of registered Bonds
without coupons in denominations of $1,000 and multiples thereof. The New Bonds
may be exchanged for Bonds of the same series without service charge.
(SUPPLEMENTAL INDENTURE, PART I.)
SECURITY
The New Bonds, when issued, are to be secured by the Mortgage, which, in the
opinion of counsel, will constitute a direct lien on substantially all gas and
electric properties presently owned by the Company and used or useful in the
operation of the Company's properties as an integrated system, together with all
rights appertaining thereto. The Mortgage provides that substantially all
after-acquired property of such character shall become subject to the lien
thereof (except, unless the Company elects otherwise, those acquired through
merger or consolidation or through purchase of all or substantially all the
properties of any other corporation).
There are expressly reserved from the lien of the Mortgage: (1) revenues and
profits of the Mortgaged Property, cash (except cash deposited with the
Trustee), book accounts, bills and notes, materials or supplies, merchandise and
other property held for sale or resale in the usual course of business, except
to the extent permitted by law in the event of a completed default followed by
the Trustee or a receiver or trustee entering upon or taking possession of the
Mortgaged Property; (2) securities and contracts; and (3) all oil, gas and other
minerals, together with the right to remove the same.
The lien of the Mortgage is subject to (1) liens for taxes and assessments
not due and payable or being contested in good faith; (2) obligations to public
authorities as to any franchise, consent, grant, license or permit; (3) various
easements, contracts and other outstanding rights; (4) leases and other rights
of tenants and of licensees; and (5) liens on property acquired for transmission
or distribution systems or right-of-way purposes, securing indebtedness neither
assumed by the Company nor on which it customarily pays interest charges.
(GRANTING CLAUSES OF MORTGAGE.)
In the opinion of counsel, the New Bonds will rank PARI PASSU with the other
Mortgage Bonds of the Company.
The title to certain of the properties of the Company is subject to rights
and claims of parties in possession not disclosed of record, any facts which
accurate surveys would disclose, the effect of zoning ordinances, the lien of
any unpaid taxes or assessments, rights of the public in the use of streets,
roads and waterways abutting on or extending through parts of said lands,
leases, covenants, easements, liens and
4
<PAGE>
rights of various types (including mineral and gas rights), and other types of
encumbrances, none of which materially interferes with the operations of the
Company and its subsidiaries.
CREDIT ENHANCEMENT
If any series of New Bonds is entitled to the benefits of a surety bond or
other form of credit enhancement, information with respect thereto will be set
forth in a Prospectus Supplement.
ISSUE OF ADDITIONAL BONDS
The Mortgage provides that no securities may be created by the Company which
will rank ahead of the New Bonds as to security. However, the Company may, with
stated exceptions, acquire property subject to prior liens and may mortgage
after-acquired property which is not subject to the lien of the Mortgage.
Additional Bonds may be issued under the Mortgage in an unlimited amount which
will, as to security, rank PARI PASSU with the New Bonds, but only as follows
(MORTGAGE, ARTICLE FOURTH):
1. Bonds may be issued in a principal amount equal to 60% of the Cost
(as defined) to the Company of Additional Property (as defined), after
specified deductions for Additional Property theretofore made the basis of
authentication of Bonds, withdrawal of cash, release of property or other
action under the Mortgage (including compliance with the debt retirement and
maintenance funds) and for prior liens thereon.
2. Bonds of a like principal amount may, subject to certain limitations,
be issued in exchange for Bonds outstanding under the Mortgage or in
substitution for Bonds previously authenticated and delivered under the
Mortgage and retired.
3. Bonds may be issued in a principal amount equal to cash deposited
with the Trustee. Such cash may be withdrawn, subject to certain
limitations, in lieu of Bonds to which the Company may then be entitled
under the Mortgage, or may be applied to the purchase, payment or redemption
of prior lien bonds or Bonds issued under the Mortgage.
The New Bonds will be issued on the basis of Additional Property and/or
purchases, retirements or sinking fund payments of the Bonds pursuant to
paragraphs 1 and 2 above.
Bonds may not be issued in the circumstances described in paragraphs 1 and 3
above unless the Net Earnings Available for Interest Charges (defined as the
amount by which gross income for the applicable period, computed in accordance
with the Uniform Systems of Accounts for Electric and Gas Corporations
prescribed by the PSC, excluding gains from dispositions of capital assets,
exceeds expenses and other proper income charges for such period including
depreciation, obsolescence and amortization, but excluding (i) losses from
dispositions of capital assets, (ii) interest on Funded Indebtedness (as
hereinafter defined), (iii) income taxes and (iv) the effect of any increase or
decrease in income or surplus due to readjustments of property accounts on
properties existing on January 1, 1938 or changes in depreciation reserves on
properties for any period before January 1, 1944, and with the proviso that if
gross non-operating income exceeds 15% of the net earnings computed as provided
above, such excess shall be deducted from net earnings and only the balance
thereof shall be Net Earnings Available for Interest Charges) during any 12
consecutive months out of the 15 preceding months shall have been equal to at
least 1.75 times the then interest charges for one year on Funded Indebtedness
(defined to include the Bonds then to be issued and other bonds of, or assumed
by, the Company secured by liens on any property owned by the Company).
(MORTGAGE, ARTICLE FIRST, SECTION 1(Q); ARTICLE FOURTH SECTION 6, SECTION 8.)
RELEASES OF PROPERTY
Subject to certain limitations, the Company, without notice to Bondholders,
may obtain the release from the lien of the Mortgage of property (other than
cash and certain prior lien bonds) sold, exchanged, contracted to be sold or
exchanged, condemned, taken or expropriated. Any property (other than cash or
securities) received by the Company upon the release of Mortgaged Property shall
be subject to the lien of the Mortgage, and any cash or securities so received
shall, unless otherwise disposed of pursuant to some
5
<PAGE>
prior lien, become part of the security for the Bonds issued under the Mortgage.
Any moneys received by the Trustee as principal of obligations held by it
subject to the Mortgage or as proceeds of released property shall at the
Company's request be used to reimburse the Company for retirement of Bonds and
certain prior lien bonds, or to pay, purchase or redeem the same. Such cash
shall also on request be delivered to the Company in an amount equal to 166 2/3%
of the principal amount of Bonds which could have been issued under the Mortgage
in respect of Additional Property and as to which the Company forgoes the right
to issue such Bonds in exchange for the Trustee's release to it of such cash. In
the ordinary course of business and otherwise, the Company regularly obtains
from the Trustee the release of various properties from the lien of the
Mortgage. In the case of exchanges of property, no exchange shall be made if the
Funded Indebtedness of the Company is thereby increased. (MORTGAGE, ARTICLES
SIXTH AND SEVENTH.)
MAINTENANCE FUND PROVISIONS
The Company is required, within 90 days after the close of each fiscal year,
to (a) certify the Cost of Additional Property; (b) deposit with the Trustee
cash, Bonds or certain prior lien bonds; or (c) waive its right to the
authentication and delivery of the principal amount of Bonds to which it is then
entitled under the Mortgage, to the extent that the aggregate amount of
expenditures for maintenance, repairs, renewals and replacements for the period
commencing January 1, 1977 is less than the sum of 2.25% of the depreciable
property (as defined) of the Company on January 1 of each year during such
period. (MORTGAGE, ARTICLE FIFTH, SECTION 22.)
RESTRICTION OF COMMON STOCK DIVIDENDS
To the extent that the aggregate amount of expenditures for maintenance and
repairs, plus the aggregate amount credited to depreciation, retirements and
other like reserves, for the period commencing January 1, 1977 is less than the
sum of 2.25% of the depreciable property of the Company on January 1 of each
year during such period, an equivalent amount of surplus of the Company must be
reserved and held unavailable for distribution as a dividend on the common stock
of the Company. (MORTGAGE, ARTICLE FIFTH, SECTION 23.)
MODIFICATION OF MORTGAGE
The Mortgage may be modified without action by or notice to the holders of
Bonds by supplemental indenture between the Company and the Trustee, for
purposes which are not inconsistent with the terms of the Mortgage and which
shall not impair the security thereof, including corrections of property
descriptions, modifications of the Mortgage or form of bonds and coupons to
facilitate stock exchange listing requirements, or the curing of ambiguities or
manifest errors in the Mortgage. (MORTGAGE, ARTICLE TWELFTH, SECTION 1.)
The holders of 66 2/3% of the outstanding Bonds affected (exclusive of Bonds
owned by the Company or any affiliate) may by consent effect any amendment,
repeal, or modification of the Mortgage which shall not (1) alter or impair the
Company's obligation to pay the principal and interest on any Bond at the time
and place and at the rate and in the currency prescribed therein; (2) permit the
creation by the Company of any mortgage, or lien in the nature of a mortgage,
ranking prior to or PARI PASSU with the lien of the Mortgage; (3) alter
adversely to the Bondholders the character of the lien of the Mortgage;
(4) affect the Trustee without its consent; or (5) permit a reduction of the
percentage required for any change or modification of the Mortgage. (MORTGAGE,
ARTICLE TWELFTH, SECTION 2.) The Supplemental Indenture creating the New Bonds
reserves to the Company the right to amend the Indenture to provide for using
written consents, in addition to the existing provisions for bondholder
meetings, as a means of supplementing or amending the Indenture, but subject to
the restrictions contained in the preceding sentence. (SUPPLEMENTAL INDENTURE,
PART III.)
6
<PAGE>
EVENTS OF DEFAULT AND NOTICE THEREOF
The Mortgage provides that each of the following shall be a "default"
thereunder: (a) default in payment of the principal on any Bond when due;
(b) default in the payment of interest on any Bond continuing for 60 days;
(c) default in the observance by the Company of any other agreement in the
Mortgage continuing unremedied for 90 days after written notice thereof to the
Company by the Trustee, unless the Company shall have commenced and be
continuing proceedings to remedy such default--the notice of such default may be
given by the Trustee in its discretion, and shall be given upon the written
request of the holders of a majority in principal amount of the Bonds; (d)(1)
adjudication of the Company as a bankrupt by decree of a court of competent
jurisdiction, or (2) the approval by order of a petition or answer seeking
reorganization or readjustment of the Company under the Federal bankruptcy laws
or other Federal or state statute, or (3) the appointment by court order
(unstayed and in effect for 60 days) of a trustee in bankruptcy or a receiver of
substantially all of the property of the Company or of any part of the property
of the Company subject to the lien of the Mortgage; or (e)(1) the filing by the
Company of a petition in voluntary bankruptcy, or (2) the making by the Company
of an assignment for the benefit of creditors, or (3) the consent by the Company
to the appointment of a receiver of any part of its property, or (4) the filing
by the Company of a petition seeking reorganization or readjustment under the
Federal bankruptcy laws or other Federal or state statute, or (5) the filing by
the Company of a petition to take advantage of any debtors' act. (MORTGAGE,
ARTICLE NINTH, SECTION 1). Prior to exercising the powers conferred upon it to
enforce the provisions of the Mortgage, the Trustee is entitled to be provided
with indemnity satisfactory to it. (MORTGAGE, ARTICLE NINTH, SECTION 5.)
The Trustee shall, within 90 days after occurrence of any default (exclusive
of any periods of grace provided in the definitions of defaults), give to the
holders of Bonds issued under the Mortgage (in the manner provided in the
Mortgage) notice of all defaults known to the Trustee, unless such defaults
shall have been cured. In cases of default referred to in (b) and (c) above,
such notice shall not be given until at least 60 days after the occurrence of
such default. Except in the case of default in payment of principal or interest,
or in the payment of any installment upon any retirement, improvement, sinking
or purchase fund, the Trustee shall be protected in withholding such notice if
and so long as the Board of Directors, Executive Committee, Trust Committee of
directors or responsible officers of the Trustee in good faith determine that
the withholding of such notice is in the interest of the holders of the Bonds.
(MORTGAGE, ARTICLE NINTH, SECTION 18.)
The Mortgage does not contain a requirement for periodic certification as to
the absence of default or compliance with the terms of the Mortgage; however, it
is a condition to the issuance of additional Bonds (including the New Bonds)
pursuant to Article Fourth of the Mortgage that the Company not be in default
with respect to the performance or observance of any covenant or agreement
contained in the Mortgage.
7
<PAGE>
DESCRIPTION OF NEW PREFERRED STOCK
The New Preferred Stock will be fully paid and nonassessable. The Transfer
Agent is The Bank of New York, One Wall Street, New York, New York 10005. The
Company acts as dividend disbursing agent and maintains stockholder records.
The Company's Certificate of Incorporation, as amended (the "Charter") at
present authorizes four classes of capital Stock: Preferred Stock $25 par value,
Preferred Stock, $100 par value, Preference Stock, $25 par value, and Common
Stock, $1 par value. As of March 31, 1998 (i) 3,400,000 shares of the Preferred
Stock, $100 par value, were authorized and 2,322,000 shares were outstanding;
(ii) 19,600,000 shares of the Preferred Stock, $25 par value, were authorized
and 11,701,204 shares were outstanding; (iii) 8,000,000 shares of Preference
Stock, $25 par value, were authorized and no shares were outstanding; and (iv)
185,000,000 shares of the Common Stock, $1 par value, were authorized, and
144,419,351 shares were outstanding. The Preferred Stock ranks prior to the
Common Stock and Preference Stock with respect to the payment of dividends,
mandatory redemption and liquidation.
The following brief summaries of certain provisions contained in the Charter
and in the form of Certificate of Amendment to the Charter relating to the New
Preferred Stock (copies of which are filed as exhibits to the Registration
Statement or incorporated by reference) do not purport to be complete, use
certain capitalized terms (not otherwise defined herein) defined in the Charter
and in the form of Certificate of Amendment to the Charter and are qualified in
their entirety by express reference to the cited provisions of the Charter and
in the form of Certificate of Amendment to the Charter.
DIVIDENDS AND DIVIDEND RIGHTS
Dividends on the New Preferred Stock are cumulative from the date fixed by
the Board of Directors and will be payable, when and as declared by the Board of
Directors out of funds legally available therefor, at the annual rate set forth
on the cover page of the Prospectus Supplement. Payment of dividends on the
Preferred Stock is not restricted by the Company's Mortgage or any other
agreement of the Company. If dividends on any series of Preferred Stock are not
paid in full, the holders of shares of all series of Preferred Stock then
outstanding will be entitled to share ratably in the amounts available for
payment.
SINKING FUND, REDEMPTION AND LIQUIDATION
Reference is made to the Prospectus Supplement which accompanies this
Prospectus for any sinking fund, redemption terms, liquidation rights or other
specific terms applicable to the New Preferred Stock.
VOTING RIGHTS
Except as indicated below or provided by statute, the New Preferred Stock
has no voting rights. Holders of Preferred Stock, $25 par value, are entitled to
one-quarter vote per share, and holders of Preferred Stock, $100 par value, are
entitled to one vote per share. At any time when dividends payable on the
Preferred Stock are in default in an aggregate amount equivalent to four full
quarterly dividends on all shares of Preferred Stock then outstanding and
thereafter until all dividends thereon are paid or declared and set aside for
payment, the holders of the Preferred Stock are entitled, voting as a class and
regardless of series, to elect a majority of the Board of Directors as then
constituted. Consent of the holders of two-thirds of the votes of the then
outstanding Preferred Stock is required prior to the taking of certain corporate
action by the Company or its subsidiaries, including (in addition to
restrictions upon the issuance or sale of preferred stock of a subsidiary)
(1) payments or distributions out of capital or capital surplus (other than
dividends payable in stock ranking junior to the Preferred Stock) to any holder
of any stock ranking junior to the Preferred Stock; (2) payment of any Common
Stock dividend (as defined) if (a) the Common Stock dividends during a
prescribed 12-month period would exceed 75% of the net income applicable to the
Common Stock (as defined) for a related 12-month period and the pro forma stock
equity junior to the Preferred Stock (as defined) would be less than 25% of the
Company's pro forma total capitalization, each determined as of the end of such
related 12-month period, or if (b) such Common
8
<PAGE>
Stock dividends would exceed 50% of such income and such pro forma stock equity
junior to the Preferred Stock would be less than 20% of the Company's pro forma
total capitalization, each determined as of the end of such related 12-month
period; (3) creation or authorization of any stock ranking prior to the
Preferred Stock with respect to the payment of dividends or upon dissolution,
liquidation or winding up of the Company, whether voluntary or involuntary, or
any obligation or security convertible into shares of any such stock; (4)
amendment, alteration, change or repeal of any of the express terms of the
Preferred Stock so as to affect the holders thereof adversely; and (5) issuance
of any shares of any series of Preferred Stock or shares ranking on a parity
with them, unless such shares are issued in connection with the redemption of,
or in exchange for, at least an equal number of outstanding shares of another
series of Preferred Stock, or unless (x) the pro forma annual interest
requirements on all indebtedness of the Company and its subsidiaries and the
annual dividend requirements on the Preferred Stock and any stock of the Company
ranking prior to or on a parity with the Preferred Stock are covered at least
one and one-half times by consolidated income (as defined) for any 12
consecutive months within the 15 calendar months immediately preceding the month
within which such issuance is authorized by the Board of Directors, and (y) the
stock equity junior to the Preferred Stock at a specified date prior to such
issuance was not less than the voluntary liquidation value of the Preferred
Stock determined at the same date. No outstanding series of Preferred Stock may
be classified or reclassified so as to affect adversely the holders of any
series of Preferred Stock without the consent of the holders of two-thirds of
the total number of shares of each such series then outstanding so affected.
Consent of the holders of a majority of the votes of the then outstanding
Preferred Stock is required prior to the taking of certain other corporate
action by the Company, including (1) issuing or assuming, or permitting any
wholly-owned subsidiary (as defined) to issue or assume, unsecured indebtedness
(for purposes other than the refunding of outstanding securities or the
redemption or other retirement of outstanding Preferred Stock of the Company or
preferred stock of such wholly-owned subsidiary) if the total principal amount
of all unsecured indebtedness of the Company and its wholly-owned subsidiaries
on a PRO FORMA basis would then exceed 10% of the aggregate of total
consolidated surplus and secured indebtedness of the Company and its
wholly-owned subsidiaries and the capital of the Company (in which connection
reference is made to an existing consent which increased such amount by $50
million as discussed under the heading "Consent of Preferred Stockholders"
below); (2) permitting any majority-owned subsidiary (as defined) to issue or
assume unsecured indebtedness for purposes other than the refunding of
outstanding securities or the redemption or other retirement of outstanding
shares of preferred stock of such subsidiary if the total principal amount of
its unsecured indebtedness on a PRO FORMA basis would then exceed 10% of the
aggregate of its surplus, capital and secured indebtedness; and
(3) consolidating under the laws of the State of New York with or into any other
corporation unless such consolidation or the issuance of the securities to be
issued in connection therewith has been ordered, approved or permitted by the
Commission under the provisions of the Public Utility Holding Company Act of
1935.
CONSENT OF PREFERRED STOCKHOLDERS
In accordance with the provisions of the Charter, the holders of a majority
of the votes of the Preferred Stock then outstanding adopted a resolution at a
meeting held December 5, 1956 consenting to the issuance by the Company of
unsecured indebtedness at any one time outstanding in a total principal amount
not exceeding 10% of the aggregate of total consolidated surplus and secured
indebtedness of the Company and its wholly-owned subsidiaries and the capital of
the Company plus $50,000,000.
OTHER RIGHTS
The holders of record of the New Preferred Stock are eligible to participate
in the Company's Dividend Reinvestment and Common Stock Purchase Plan. The
holders of the Preferred Stock have no preemptive rights.
9
<PAGE>
DESCRIPTION OF ADDITIONAL COMMON STOCK
The outstanding shares of Common Stock of the Company are, and the
Additional Common Stock will be, fully paid and nonassessable and listed on the
New York Stock Exchange. The Transfer Agent is The Bank of New York, One Wall
Street, New York, New York 10005. The Company acts as dividend disbursing agent
and maintains stockholder records.
The following brief summaries of certain provisions contained in the
Mortgage and the Charter (copies of which are filed as exhibits to the
Registration Statement or incorporated by reference) relating to the Additional
Common Stock do not purport to be complete, use certain capitalized terms (not
otherwise defined herein) defined in the Mortgage and in the Charter and are
qualified in their entirety by express reference to the Mortgage and the
Charter.
DIVIDEND RIGHTS
After payment or setting aside for payment of cumulative dividends on all
outstanding issues of Preferred and Preference Stock, the holders of Common
Stock are entitled to dividends when and as declared by the Board of Directors
out of funds legally available therefor.
Consent of the holders of two-thirds of the votes of the then outstanding
Preferred Stock is required prior to the taking of certain corporate action by
the Company or its subsidiaries, including (1) payments or distributions out of
capital or capital surplus (other than dividends payable in stock ranking junior
to the Preferred Stock) to any holder of any stock ranking junior to the
Preferred Stock, and (2) payment of any Common Stock dividend (which includes
purchases or acquisitions of and distributions or dividends on Common Stock,
other than dividends payable on Common Stock), if (a) the Common Stock dividends
during a prescribed 12-month period would exceed 75% of the net income
applicable to the Common Stock (as defined in the Charter) for a related
12-month period and the PRO FORMA stock equity junior to the Preferred Stock (as
defined in the Charter) would be less than 25% of the Company's PRO FORMA total
capitalization (as defined in the Charter), each determined as of the end of
such related 12-month period, or if (b) such Common Stock dividends would exceed
50 % of such income and such PRO FORMA stock equity junior to the Preferred
Stock would be less than 20% of the Company's total PRO FORMA capitalization,
each determined as of the end of such related 12-month period. No approval of
the holders of Preference Stock is required prior to the taking of comparable
corporate action.
The Mortgage provides that surplus of the Company shall be reserved and held
unavailable for the payment of dividends on Common Stock to the extent that the
aggregate amount of expenditures for maintenance and repairs, plus the aggregate
amount credited to depreciation, retirements and other like reserves, for the
period commencing January 1, 1977 is less than the sum of 2.25 % of the
depreciable property of the Common on January 1 of each year during such period.
Such provisions have never to date restricted the Company's surplus.
LIQUIDATION RIGHTS
Upon any dissolution, liquidation or winding up of the Company, the holders
of the Common Stock are entitled to receive PRO RATA all of the Company's assets
available for distribution to its stockholders after payment of the full
preferential amounts to which holders of stock (including Preferred and
Preference Stock) having priority over the Common Stock are entitled.
VOTING RIGHTS
The holders of the Common Stock are entitled to one vote per share. Holders
of the Company's Common Stock do not have cumulative voting rights with respect
to the election of Directors. Whenever dividends payable on Preferred Stock are
in default in an aggregate amount equivalent to four full quarterly dividends on
all shares of Preferred Stock then outstanding and thereafter until all
dividends thereon are paid or declared and set aside for payment, the holders of
the Preferred Stock are entitled to elect a majority of the Board of Directors
as then constituted. Whenever dividends payable on Preference
10
<PAGE>
Stock are in default in an aggregate amount equivalent to six full quarterly
dividends on all shares of Preference Stock then outstanding and thereafter
until all dividends thereon are paid or declared and set aside for payment, the
holders of the Preference Stock are entitled to elect two members of the Board
of Directors as then constituted. No such dividends are now in default.
The Charter contains a "fair price" provision which (i) requires the
approval of the holders of at least 75% of the combined voting power of the then
outstanding shares of the Voting Stock (all outstanding shares of capital stock
of all classes and series of the Company entitled to vote generally in the
election of directors of the Company), voting as a single class (including at
least two-thirds of the combined voting power of the outstanding shares of
Voting Stock held by shareholders other than an Interested Shareholder, as
defined in the Charter), for certain business combinations involving the Company
and any Interested Shareholder, unless (x) the business combination is approved
by a majority of Disinterested Directors (as defined in the Charter) or (y)
certain minimum price and procedural criteria are met and (ii) requires the
affirmative vote of at least 80% of the combined voting power of the Voting
Stock, voting as a single class (including at least two-thirds of the combined
voting power of the outstanding shares of Voting Stock held by shareholders
other than an Interested Shareholder), to alter, amend or repeal the "fair
price" provision or to adopt any provision inconsistent with the "fair price"
provision.
The Charter also provides for the classification of Directors, with
three-year staggered terms, and a requirement of an affirmative vote of 80% of
the outstanding shares of Voting Stock, voting together as a single class, is
required to alter, amend or repeal the provisions relating to the size and
classification of the Board of Directors and the removal of members from, and
the filling of vacancies on, the Board of Directors.
The Charter further provides that an affirmative vote of 80% of the
outstanding shares of Voting Stock, voting together as a single class, is
required to alter, amend or repeal the provisions eliminating cumulative voting
with respect to the election of Directors by the holders of Common Stock.
OTHER RIGHTS
The holders of record of the Common Stock are eligible to participate in the
Company's Dividend Reinvestment and Common Stock Purchase Plan. The holders of
the Common Stock have no preemptive rights.
11
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell the Securities (i) through underwriters; (ii) through
dealers; (iii) directly to one or more institutional purchasers; or
(iv) through agents. The Prospectus Supplement sets forth the terms of the
offering of the Securities offered thereby, including the name or names of any
underwriters, dealers or agents, the purchase price of such Securities and the
proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time. Only firms named
in the Prospectus Supplement are deemed to be underwriters, dealers or agents in
connection with the Securities offered thereby.
If underwriters are used in the sale, the Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The Securities may be
offered to the public either through underwriting syndicates represented by one
or more managing underwriters or directly by one or more of such firms. Unless
otherwise set forth in the Prospectus Supplement, the obligations of the
underwriters to purchase the Securities offered thereby will be subject to
certain conditions precedent, and the underwriters will be obligated to purchase
all such Securities if any are purchased.
Securities may be sold directly by the Company or through any firm
designated by the Company from time to time, acting as principal or as agent.
The Prospectus Supplement sets forth the name of any dealer or agent involved in
the offer or sale of the Securities in respect of which the Prospectus
Supplement is delivered and the price payable to the Company by such dealer or
any commissions payable by the Company to such agent. Unless otherwise indicated
in the Prospectus Supplement, any such agent is acting on a best-efforts basis
for the period of its appointment.
Underwriters, dealers and agents may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribution with respect to payments which the underwriters, dealers or
agents may be required to make in respect thereof. Underwriters, dealers and
agents may engage in transactions with or perform services for the Company in
the ordinary course of business.
12
<PAGE>
LEGAL OPINIONS AND EXPERTS
The legality of the Securities will be passed upon for the Company by
Sullivan & Cromwell.
The financial statements incorporated in this Prospectus by reference to the
Company's Annual Report on Form 10-K/A for the year ended December 31, 1997 have
been so incorporated in reliance on the report of Price Waterhouse, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
With respect to the unaudited consolidated financial information of the
Company for the three-month periods ended March 31, 1998 and 1997, incorporated
by reference in this Prospectus, the Company's independent accountants, Price
Waterhouse, reported that they have applied limited procedures in accordance
with professional standards for a review of such information. However, their
report dated May 14, 1998, except note 3 (third paragraph) and note 4, as to
which the date is May 29, 1998, states that they did not audit and they do not
express an opinion on that unaudited consolidated financial information. Price
Waterhouse 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, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
Price Waterhouse is not subject to the liability provisions of Section 1 of the
Securities Act of 1933 for their report on the unaudited consolidated financial
information because that report is not a "report" or a "Part" of the
Registration Statement prepared or certified by Price Waterhouse within the
meaning of Sections 7 and 11 of the Act.
13
<PAGE>
- ------------------------------------------------------------
- ------------------------------------------------------------
3,000,000 SHARES
NIAGARA MOHAWK POWER CORPORATION
FIXEDADJUSTABLE RATE
CUMULATIVE PREFERRED STOCK, SERIES D
($50 LIQUIDATION PREFERENCE)
[LOGO]
----------------
PROSPECTUS SUPPLEMENT
NOVEMBER , 1999
------------------------
SALOMON SMITH BARNEY
DONALDSON, LUFKIN & JENRETTE
PAINEWEBBER INCORPORATED
BANC ONE CAPITAL MARKETS, INC.
ROBERT W. BAIRD & CO.
- ------------------------------------------------------------
- ------------------------------------------------------------
